[United States Statutes at Large, Volume 124, 111th Congress, 2nd Session]
[From the U.S. Government Printing Office, www.gpo.gov]


Public Law 111-148
111th Congress

An Act


 
Entitled The Patient Protection and Affordable Care Act. <>

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <>

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short <> Title.--This Act may be cited
as the ``Patient Protection and Affordable Care Act''.

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

Sec. 1. Short title; table of contents.

TITLE I--QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS

Subtitle A--Immediate Improvements in Health Care Coverage for All
Americans

Sec. 1001. Amendments to the Public Health Service Act.

``PART A--Individual and Group Market Reforms

``subpart ii--improving coverage

``Sec. 2711. No lifetime or annual limits.
``Sec. 2712. Prohibition on rescissions.
``Sec. 2713. Coverage of preventive health services.
``Sec. 2714. Extension of dependent coverage.
``Sec. 2715. Development and utilization of uniform explanation
of coverage documents and standardized
definitions.
``Sec. 2716. Prohibition of discrimination based on salary.
``Sec. 2717. Ensuring the quality of care.
``Sec. 2718. Bringing down the cost of health care coverage.
``Sec. 2719. Appeals process.
Sec. 1002. Health insurance consumer information.
Sec. 1003. Ensuring that consumers get value for their dollars.
Sec. 1004. Effective dates.

Subtitle B--Immediate Actions to Preserve and Expand Coverage

Sec. 1101. Immediate access to insurance for uninsured individuals with
a preexisting condition.
Sec. 1102. Reinsurance for early retirees.
Sec. 1103. Immediate information that allows consumers to identify
affordable coverage options.
Sec. 1104. Administrative simplification.
Sec. 1105. Effective date.

Subtitle C--Quality Health Insurance Coverage for All Americans

PART I--Health Insurance Market Reforms

Sec. 1201. Amendment to the Public Health Service Act.

``subpart i--general reform

``Sec. 2704. Prohibition of preexisting condition exclusions or
other discrimination based on health status.
``Sec. 2701. Fair health insurance premiums.
``Sec. 2702. Guaranteed availability of coverage.

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``Sec. 2703. Guaranteed renewability of coverage.
``Sec. 2705. Prohibiting discrimination against individual
participants and beneficiaries based on
health status.
``Sec. 2706. Non-discrimination in health care.
``Sec. 2707. Comprehensive health insurance coverage.
``Sec. 2708. Prohibition on excessive waiting periods.

PART II--Other Provisions

Sec. 1251. Preservation of right to maintain existing coverage.
Sec. 1252. Rating reforms must apply uniformly to all health insurance
issuers and group health plans.
Sec. 1253. Effective dates.

Subtitle D--Available Coverage Choices for All Americans

PART I--Establishment of Qualified Health Plans

Sec. 1301. Qualified health plan defined.
Sec. 1302. Essential health benefits requirements.
Sec. 1303. Special rules.
Sec. 1304. Related definitions.

PART II--Consumer Choices and Insurance Competition Through Health
Benefit Exchanges

Sec. 1311. Affordable choices of health benefit plans.
Sec. 1312. Consumer choice.
Sec. 1313. Financial integrity.

PART III--State Flexibility Relating to Exchanges

Sec. 1321. State flexibility in operation and enforcement of Exchanges
and related requirements.
Sec. 1322. Federal program to assist establishment and operation of
nonprofit, member-run health insurance issuers.
Sec. 1323. Community health insurance option.
Sec. 1324. Level playing field.

PART IV--State Flexibility to Establish Alternative Programs

Sec. 1331. State flexibility to establish basic health programs for low-
income individuals not eligible for Medicaid.
Sec. 1332. Waiver for State innovation.
Sec. 1333. Provisions relating to offering of plans in more than one
State.

PART V--Reinsurance and Risk Adjustment

Sec. 1341. Transitional reinsurance program for individual and small
group markets in each State.
Sec. 1342. Establishment of risk corridors for plans in individual and
small group markets.
Sec. 1343. Risk adjustment.

Subtitle E--Affordable Coverage Choices for All Americans

PART I--Premium Tax Credits and Cost-sharing Reductions

subpart a--premium tax credits and cost-sharing reductions

Sec. 1401. Refundable tax credit providing premium assistance for
coverage under a qualified health plan.
Sec. 1402. Reduced cost-sharing for individuals enrolling in qualified
health plans.

subpart b--eligibility determinations

Sec. 1411. Procedures for determining eligibility for Exchange
participation, premium tax credits and reduced cost-sharing,
and individual responsibility exemptions.
Sec. 1412. Advance determination and payment of premium tax credits and
cost-sharing reductions.
Sec. 1413. Streamlining of procedures for enrollment through an exchange
and State Medicaid, CHIP, and health subsidy programs.
Sec. 1414. Disclosures to carry out eligibility requirements for certain
programs.
Sec. 1415. Premium tax credit and cost-sharing reduction payments
disregarded for Federal and Federally-assisted programs.

PART II--Small Business Tax Credit

Sec. 1421. Credit for employee health insurance expenses of small
businesses.

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Subtitle F--Shared Responsibility for Health Care

PART I--Individual Responsibility

Sec. 1501. Requirement to maintain minimum essential coverage.
Sec. 1502. Reporting of health insurance coverage.

PART II--Employer Responsibilities

Sec. 1511. Automatic enrollment for employees of large employers.
Sec. 1512. Employer requirement to inform employees of coverage options.
Sec. 1513. Shared responsibility for employers.
Sec. 1514. Reporting of employer health insurance coverage.
Sec. 1515. Offering of Exchange-participating qualified health plans
through cafeteria plans.

Subtitle G--Miscellaneous Provisions

Sec. 1551. Definitions.
Sec. 1552. Transparency in government.
Sec. 1553. Prohibition against discrimination on assisted suicide.
Sec. 1554. Access to therapies.
Sec. 1555. Freedom not to participate in Federal health insurance
programs.
Sec. 1556. Equity for certain eligible survivors.
Sec. 1557. Nondiscrimination.
Sec. 1558. Protections for employees.
Sec. 1559. Oversight.
Sec. 1560. Rules of construction.
Sec. 1561. Health information technology enrollment standards and
protocols.
Sec. 1562. Conforming amendments.
Sec. 1563. Sense of the Senate promoting fiscal responsibility.

TITLE II--ROLE OF PUBLIC PROGRAMS

Subtitle A--Improved Access to Medicaid

Sec. 2001. Medicaid coverage for the lowest income populations.
Sec. 2002. Income eligibility for nonelderly determined using modified
gross income.
Sec. 2003. Requirement to offer premium assistance for employer-
sponsored insurance.
Sec. 2004. Medicaid coverage for former foster care children.
Sec. 2005. Payments to territories.
Sec. 2006. Special adjustment to FMAP determination for certain States
recovering from a major disaster.
Sec. 2007. Medicaid Improvement Fund rescission.

Subtitle B--Enhanced Support for the Children's Health Insurance Program

Sec. 2101. Additional federal financial participation for CHIP.
Sec. 2102. Technical corrections.

Subtitle C--Medicaid and CHIP Enrollment Simplification

Sec. 2201. Enrollment Simplification and coordination with State Health
Insurance Exchanges.
Sec. 2202. Permitting hospitals to make presumptive eligibility
determinations for all Medicaid eligible populations.

Subtitle D--Improvements to Medicaid Services

Sec. 2301. Coverage for freestanding birth center services.
Sec. 2302. Concurrent care for children.
Sec. 2303. State eligibility option for family planning services.
Sec. 2304. Clarification of definition of medical assistance.

Subtitle E--New Options for States to Provide Long-Term Services and
Supports

Sec. 2401. Community First Choice Option.
Sec. 2402. Removal of barriers to providing home and community-based
services.
Sec. 2403. Money Follows the Person Rebalancing Demonstration.
Sec. 2404. Protection for recipients of home and community-based
services against spousal impoverishment.
Sec. 2405. Funding to expand State Aging and Disability Resource
Centers.
Sec. 2406. Sense of the Senate regarding long-term care.

Subtitle F--Medicaid Prescription Drug Coverage

Sec. 2501. Prescription drug rebates.

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Sec. 2502. Elimination of exclusion of coverage of certain drugs.
Sec. 2503. Providing adequate pharmacy reimbursement.

Subtitle G--Medicaid Disproportionate Share Hospital (DSH) Payments

Sec. 2551. Disproportionate share hospital payments.

Subtitle H--Improved Coordination for Dual Eligible Beneficiaries

Sec. 2601. 5-year period for demonstration projects.
Sec. 2602. Providing Federal coverage and payment coordination for dual
eligible beneficiaries.

Subtitle I--Improving the Quality of Medicaid for Patients and Providers

Sec. 2701. Adult health quality measures.
Sec. 2702. Payment Adjustment for Health Care-Acquired Conditions.
Sec. 2703. State option to provide health homes for enrollees with
chronic conditions.
Sec. 2704. Demonstration project to evaluate integrated care around a
hospitalization.
Sec. 2705. Medicaid Global Payment System Demonstration Project.
Sec. 2706. Pediatric Accountable Care Organization Demonstration
Project.
Sec. 2707. Medicaid emergency psychiatric demonstration project.

Subtitle J--Improvements to the Medicaid and CHIP Payment and Access
Commission (MACPAC)

Sec. 2801. MACPAC assessment of policies affecting all Medicaid
beneficiaries.

Subtitle K--Protections for American Indians and Alaska Natives

Sec. 2901. Special rules relating to Indians.
Sec. 2902. Elimination of sunset for reimbursement for all medicare part
B services furnished by certain indian hospitals and clinics.

Subtitle L--Maternal and Child Health Services

Sec. 2951. Maternal, infant, and early childhood home visiting programs.
Sec. 2952. Support, education, and research for postpartum depression.
Sec. 2953. Personal responsibility education.
Sec. 2954. Restoration of funding for abstinence education.
Sec. 2955. Inclusion of information about the importance of having a
health care power of attorney in transition planning for
children aging out of foster care and independent living
programs.

TITLE III--IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE

Subtitle A--Transforming the Health Care Delivery System

PART I--Linking Payment to Quality Outcomes Under the Medicare Program

Sec. 3001. Hospital Value-Based purchasing program.
Sec. 3002. Improvements to the physician quality reporting system.
Sec. 3003. Improvements to the physician feedback program.
Sec. 3004. Quality reporting for long-term care hospitals, inpatient
rehabilitation hospitals, and hospice programs.
Sec. 3005. Quality reporting for PPS-exempt cancer hospitals.
Sec. 3006. Plans for a Value-Based purchasing program for skilled
nursing facilities and home health agencies.
Sec. 3007. Value-based payment modifier under the physician fee
schedule.
Sec. 3008. Payment adjustment for conditions acquired in hospitals.

PART II--National Strategy to Improve Health Care Quality

Sec. 3011. National strategy.
Sec. 3012. Interagency Working Group on Health Care Quality.
Sec. 3013. Quality measure development.
Sec. 3014. Quality measurement.
Sec. 3015. Data collection; public reporting.

PART III--Encouraging Development of New Patient Care Models

Sec. 3021. Establishment of Center for Medicare and Medicaid Innovation
within CMS.
Sec. 3022. Medicare shared savings program.
Sec. 3023. National pilot program on payment bundling.
Sec. 3024. Independence at home demonstration program.
Sec. 3025. Hospital readmissions reduction program.

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Sec. 3026. Community-Based Care Transitions Program.
Sec. 3027. Extension of gainsharing demonstration.

Subtitle B--Improving Medicare for Patients and Providers

PART I--Ensuring Beneficiary Access to Physician Care and Other Services

Sec. 3101. Increase in the physician payment update.
Sec. 3102. Extension of the work geographic index floor and revisions to
the practice expense geographic adjustment under the Medicare
physician fee schedule.
Sec. 3103. Extension of exceptions process for Medicare therapy caps.
Sec. 3104. Extension of payment for technical component of certain
physician pathology services.
Sec. 3105. Extension of ambulance add-ons.
Sec. 3106. Extension of certain payment rules for long-term care
hospital services and of moratorium on the establishment of
certain hospitals and facilities.
Sec. 3107. Extension of physician fee schedule mental health add-on.
Sec. 3108. Permitting physician assistants to order post-Hospital
extended care services.
Sec. 3109. Exemption of certain pharmacies from accreditation
requirements.
Sec. 3110. Part B special enrollment period for disabled TRICARE
beneficiaries.
Sec. 3111. Payment for bone density tests.
Sec. 3112. Revision to the Medicare Improvement Fund.
Sec. 3113. Treatment of certain complex diagnostic laboratory tests.
Sec. 3114. Improved access for certified nurse-midwife services.

PART II--Rural Protections

Sec. 3121. Extension of outpatient hold harmless provision.
Sec. 3122. Extension of Medicare reasonable costs payments for certain
clinical diagnostic laboratory tests furnished to hospital
patients in certain rural areas.
Sec. 3123. Extension of the Rural Community Hospital Demonstration
Program.
Sec. 3124. Extension of the Medicare-dependent hospital (MDH) program.
Sec. 3125. Temporary improvements to the Medicare inpatient hospital
payment adjustment for low-volume hospitals.
Sec. 3126. Improvements to the demonstration project on community health
integration models in certain rural counties.
Sec. 3127. MedPAC study on adequacy of Medicare payments for health care
providers serving in rural areas.
Sec. 3128. Technical correction related to critical access hospital
services.
Sec. 3129. Extension of and revisions to Medicare rural hospital
flexibility program.

PART III--Improving Payment Accuracy

Sec. 3131. Payment adjustments for home health care.
Sec. 3132. Hospice reform.
Sec. 3133. Improvement to medicare disproportionate share hospital (DSH)
payments.
Sec. 3134. Misvalued codes under the physician fee schedule.
Sec. 3135. Modification of equipment utilization factor for advanced
imaging services.
Sec. 3136. Revision of payment for power-driven wheelchairs.
Sec. 3137. Hospital wage index improvement.
Sec. 3138. Treatment of certain cancer hospitals.
Sec. 3139. Payment for biosimilar biological products.
Sec. 3140. Medicare hospice concurrent care demonstration program.
Sec. 3141. Application of budget neutrality on a national basis in the
calculation of the Medicare hospital wage index floor.
Sec. 3142. HHS study on urban Medicare-dependent hospitals.
Sec. 3143. Protecting home health benefits.

Subtitle C--Provisions Relating to Part C

Sec. 3201. Medicare Advantage payment.
Sec. 3202. Benefit protection and simplification.
Sec. 3203. Application of coding intensity adjustment during MA payment
transition.
Sec. 3204. Simplification of annual beneficiary election periods.
Sec. 3205. Extension for specialized MA plans for special needs
individuals.
Sec. 3206. Extension of reasonable cost contracts.
Sec. 3207. Technical correction to MA private fee-for-service plans.
Sec. 3208. Making senior housing facility demonstration permanent.

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Sec. 3209. Authority to deny plan bids.
Sec. 3210. Development of new standards for certain Medigap plans.

Subtitle D--Medicare Part D Improvements for Prescription Drug Plans and
MA-PD Plans

Sec. 3301. Medicare coverage gap discount program.
Sec. 3302. Improvement in determination of Medicare part D low-income
benchmark premium.
Sec. 3303. Voluntary de minimis policy for subsidy eligible individuals
under prescription drug plans and MA-PD plans.
Sec. 3304. Special rule for widows and widowers regarding eligibility
for low-income assistance.
Sec. 3305. Improved information for subsidy eligible individuals
reassigned to prescription drug plans and MA-PD plans.
Sec. 3306. Funding outreach and assistance for low-income programs.
Sec. 3307. Improving formulary requirements for prescription drug plans
and MA-PD plans with respect to certain categories or classes
of drugs.
Sec. 3308. Reducing part D premium subsidy for high-income
beneficiaries.
Sec. 3309. Elimination of cost sharing for certain dual eligible
individuals.
Sec. 3310. Reducing wasteful dispensing of outpatient prescription drugs
in long-term care facilities under prescription drug plans
and MA-PD plans.
Sec. 3311. Improved Medicare prescription drug plan and MA-PD plan
complaint system.
Sec. 3312. Uniform exceptions and appeals process for prescription drug
plans and MA-PD plans.
Sec. 3313. Office of the Inspector General studies and reports.
Sec. 3314. Including costs incurred by AIDS drug assistance programs and
Indian Health Service in providing prescription drugs toward
the annual out-of-pocket threshold under part D.
Sec. 3315. Immediate reduction in coverage gap in 2010.

Subtitle E--Ensuring Medicare Sustainability

Sec. 3401. Revision of certain market basket updates and incorporation
of productivity improvements into market basket updates that
do not already incorporate such improvements.
Sec. 3402. Temporary adjustment to the calculation of part B premiums.
Sec. 3403. Independent Medicare Advisory Board.

Subtitle F--Health Care Quality Improvements

Sec. 3501. Health care delivery system research; Quality improvement
technical assistance.
Sec. 3502. Establishing community health teams to support the patient-
centered medical home.
Sec. 3503. Medication management services in treatment of chronic
disease.
Sec. 3504. Design and implementation of regionalized systems for
emergency care.
Sec. 3505. Trauma care centers and service availability.
Sec. 3506. Program to facilitate shared decisionmaking.
Sec. 3507. Presentation of prescription drug benefit and risk
information.
Sec. 3508. Demonstration program to integrate quality improvement and
patient safety training into clinical education of health
professionals.
Sec. 3509. Improving women's health.
Sec. 3510. Patient navigator program.
Sec. 3511. Authorization of appropriations.

Subtitle G--Protecting and Improving Guaranteed Medicare Benefits

Sec. 3601. Protecting and improving guaranteed Medicare benefits.
Sec. 3602. No cuts in guaranteed benefits.

TITLE IV--PREVENTION OF CHRONIC DISEASE AND IMPROVING PUBLIC HEALTH

Subtitle A--Modernizing Disease Prevention and Public Health Systems

Sec. 4001. National Prevention, Health Promotion and Public Health
Council.
Sec. 4002. Prevention and Public Health Fund.
Sec. 4003. Clinical and community preventive services.
Sec. 4004. Education and outreach campaign regarding preventive
benefits.

Subtitle B--Increasing Access to Clinical Preventive Services

Sec. 4101. School-based health centers.
Sec. 4102. Oral healthcare prevention activities.

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Sec. 4103. Medicare coverage of annual wellness visit providing a
personalized prevention plan.
Sec. 4104. Removal of barriers to preventive services in Medicare.
Sec. 4105. Evidence-based coverage of preventive services in Medicare.
Sec. 4106. Improving access to preventive services for eligible adults
in Medicaid.
Sec. 4107. Coverage of comprehensive tobacco cessation services for
pregnant women in Medicaid.
Sec. 4108. Incentives for prevention of chronic diseases in medicaid.

Subtitle C--Creating Healthier Communities

Sec. 4201. Community transformation grants.
Sec. 4202. Healthy aging, living well; evaluation of community-based
prevention and wellness programs for Medicare beneficiaries.
Sec. 4203. Removing barriers and improving access to wellness for
individuals with disabilities.
Sec. 4204. Immunizations.
Sec. 4205. Nutrition labeling of standard menu items at chain
restaurants.
Sec. 4206. Demonstration project concerning individualized wellness
plan.
Sec. 4207. Reasonable break time for nursing mothers.

Subtitle D--Support for Prevention and Public Health Innovation

Sec. 4301. Research on optimizing the delivery of public health
services.
Sec. 4302. Understanding health disparities: data collection and
analysis.
Sec. 4303. CDC and employer-based wellness programs.
Sec. 4304. Epidemiology-Laboratory Capacity Grants.
Sec. 4305. Advancing research and treatment for pain care management.
Sec. 4306. Funding for Childhood Obesity Demonstration Project.

Subtitle E--Miscellaneous Provisions

Sec. 4401. Sense of the Senate concerning CBO scoring.
Sec. 4402. Effectiveness of Federal health and wellness initiatives.

TITLE V--HEALTH CARE WORKFORCE

Subtitle A--Purpose and Definitions

Sec. 5001. Purpose.
Sec. 5002. Definitions.

Subtitle B--Innovations in the Health Care Workforce

Sec. 5101. National health care workforce commission.
Sec. 5102. State health care workforce development grants.
Sec. 5103. Health care workforce assessment.

Subtitle C--Increasing the Supply of the Health Care Workforce

Sec. 5201. Federally supported student loan funds.
Sec. 5202. Nursing student loan program.
Sec. 5203. Health care workforce loan repayment programs.
Sec. 5204. Public health workforce recruitment and retention programs.
Sec. 5205. Allied health workforce recruitment and retention programs.
Sec. 5206. Grants for State and local programs.
Sec. 5207. Funding for National Health Service Corps.
Sec. 5208. Nurse-managed health clinics.
Sec. 5209. Elimination of cap on commissioned corps.
Sec. 5210. Establishing a Ready Reserve Corps.

Subtitle D--Enhancing Health Care Workforce Education and Training

Sec. 5301. Training in family medicine, general internal medicine,
general pediatrics, and physician assistantship.
Sec. 5302. Training opportunities for direct care workers.
Sec. 5303. Training in general, pediatric, and public health dentistry.
Sec. 5304. Alternative dental health care providers demonstration
project.
Sec. 5305. Geriatric education and training; career awards;
comprehensive geriatric education.
Sec. 5306. Mental and behavioral health education and training grants.
Sec. 5307. Cultural competency, prevention, and public health and
individuals with disabilities training.
Sec. 5308. Advanced nursing education grants.
Sec. 5309. Nurse education, practice, and retention grants.
Sec. 5310. Loan repayment and scholarship program.
Sec. 5311. Nurse faculty loan program.

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Sec. 5312. Authorization of appropriations for parts B through D of
title VIII.
Sec. 5313. Grants to promote the community health workforce.
Sec. 5314. Fellowship training in public health.
Sec. 5315. United States Public Health Sciences Track.

Subtitle E--Supporting the Existing Health Care Workforce

Sec. 5401. Centers of excellence.
Sec. 5402. Health care professionals training for diversity.
Sec. 5403. Interdisciplinary, community-based linkages.
Sec. 5404. Workforce diversity grants.
Sec. 5405. Primary care extension program.

Subtitle F--Strengthening Primary Care and Other Workforce Improvements

Sec. 5501. Expanding access to primary care services and general surgery
services.
Sec. 5502. Medicare Federally qualified health center improvements.
Sec. 5503. Distribution of additional residency positions.
Sec. 5504. Counting resident time in nonprovider settings.
Sec. 5505. Rules for counting resident time for didactic and scholarly
activities and other activities.
Sec. 5506. Preservation of resident cap positions from closed hospitals.
Sec. 5507. Demonstration projects To address health professions
workforce needs; extension of family-to-family health
information centers.
Sec. 5508. Increasing teaching capacity.
Sec. 5509. Graduate nurse education demonstration.

Subtitle G--Improving Access to Health Care Services

Sec. 5601. Spending for Federally Qualified Health Centers (FQHCs).
Sec. 5602. Negotiated rulemaking for development of methodology and
criteria for designating medically underserved populations
and health professions shortage areas.
Sec. 5603. Reauthorization of the Wakefield Emergency Medical Services
for Children Program.
Sec. 5604. Co-locating primary and specialty care in community-based
mental health settings.
Sec. 5605. Key National indicators.

Subtitle H--General Provisions

Sec. 5701. Reports.

TITLE VI--TRANSPARENCY AND PROGRAM INTEGRITY

Subtitle A--Physician Ownership and Other Transparency

Sec. 6001. Limitation on Medicare exception to the prohibition on
certain physician referrals for hospitals.
Sec. 6002. Transparency reports and reporting of physician ownership or
investment interests.
Sec. 6003. Disclosure requirements for in-office ancillary services
exception to the prohibition on physician self-referral for
certain imaging services.
Sec. 6004. Prescription drug sample transparency.
Sec. 6005. Pharmacy benefit managers transparency requirements.

Subtitle B--Nursing Home Transparency and Improvement

PART I--Improving Transparency of Information

Sec. 6101. Required disclosure of ownership and additional disclosable
parties information.
Sec. 6102. Accountability requirements for skilled nursing facilities
and nursing facilities.
Sec. 6103. Nursing home compare Medicare website.
Sec. 6104. Reporting of expenditures.
Sec. 6105. Standardized complaint form.
Sec. 6106. Ensuring staffing accountability.
Sec. 6107. GAO study and report on Five-Star Quality Rating System.

PART II--Targeting Enforcement

Sec. 6111. Civil money penalties.
Sec. 6112. National independent monitor demonstration project.
Sec. 6113. Notification of facility closure.
Sec. 6114. National demonstration projects on culture change and use of
information technology in nursing homes.

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PART III--Improving Staff Training

Sec. 6121. Dementia and abuse prevention training.

Subtitle C--Nationwide Program for National and State Background Checks
on Direct Patient Access Employees of Long-term Care Facilities and
Providers

Sec. 6201. Nationwide program for National and State background checks
on direct patient access employees of long-term care
facilities and providers.

Subtitle D--Patient-Centered Outcomes Research

Sec. 6301. Patient-Centered Outcomes Research.
Sec. 6302. Federal coordinating council for comparative effectiveness
research.

Subtitle E--Medicare, Medicaid, and CHIP Program Integrity Provisions

Sec. 6401. Provider screening and other enrollment requirements under
Medicare, Medicaid, and CHIP.
Sec. 6402. Enhanced Medicare and Medicaid program integrity provisions.
Sec. 6403. Elimination of duplication between the Healthcare Integrity
and Protection Data Bank and the National Practitioner Data
Bank.
Sec. 6404. Maximum period for submission of Medicare claims reduced to
not more than 12 months.
Sec. 6405. Physicians who order items or services required to be
Medicare enrolled physicians or eligible professionals.
Sec. 6406. Requirement for physicians to provide documentation on
referrals to programs at high risk of waste and abuse.
Sec. 6407. Face to face encounter with patient required before
physicians may certify eligibility for home health services
or durable medical equipment under Medicare.
Sec. 6408. Enhanced penalties.
Sec. 6409. Medicare self-referral disclosure protocol.
Sec. 6410. Adjustments to the Medicare durable medical equipment,
prosthetics, orthotics, and supplies competitive acquisition
program.
Sec. 6411. Expansion of the Recovery Audit Contractor (RAC) program.

Subtitle F--Additional Medicaid Program Integrity Provisions

Sec. 6501. Termination of provider participation under Medicaid if
terminated under Medicare or other State plan.
Sec. 6502. Medicaid exclusion from participation relating to certain
ownership, control, and management affiliations.
Sec. 6503. Billing agents, clearinghouses, or other alternate payees
required to register under Medicaid.
Sec. 6504. Requirement to report expanded set of data elements under
MMIS to detect fraud and abuse.
Sec. 6505. Prohibition on payments to institutions or entities located
outside of the United States.
Sec. 6506. Overpayments.
Sec. 6507. Mandatory State use of national correct coding initiative.
Sec. 6508. General effective date.

Subtitle G--Additional Program Integrity Provisions

Sec. 6601. Prohibition on false statements and representations.
Sec. 6602. Clarifying definition.
Sec. 6603. Development of model uniform report form.
Sec. 6604. Applicability of State law to combat fraud and abuse.
Sec. 6605. Enabling the Department of Labor to issue administrative
summary cease and desist orders and summary seizures orders
against plans that are in financially hazardous condition.
Sec. 6606. MEWA plan registration with Department of Labor.
Sec. 6607. Permitting evidentiary privilege and confidential
communications.

Subtitle H--Elder Justice Act

Sec. 6701. Short title of subtitle.
Sec. 6702. Definitions.
Sec. 6703. Elder Justice.

Subtitle I--Sense of the Senate Regarding Medical Malpractice

Sec. 6801. Sense of the Senate regarding medical malpractice.

TITLE VII--IMPROVING ACCESS TO INNOVATIVE MEDICAL THERAPIES

Subtitle A--Biologics Price Competition and Innovation

Sec. 7001. Short title.

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Sec. 7002. Approval pathway for biosimilar biological products.
Sec. 7003. Savings.

Subtitle B--More Affordable Medicines for Children and Underserved
Communities

Sec. 7101. Expanded participation in 340B program.
Sec. 7102. Improvements to 340B program integrity.
Sec. 7103. GAO study to make recommendations on improving the 340B
program.

TITLE VIII--CLASS ACT

Sec. 8001. Short title of title.
Sec. 8002. Establishment of national voluntary insurance program for
purchasing community living assistance services and support.

TITLE IX--REVENUE PROVISIONS

Subtitle A--Revenue Offset Provisions

Sec. 9001. Excise tax on high cost employer-sponsored health coverage.
Sec. 9002. Inclusion of cost of employer-sponsored health coverage on W-
2.
Sec. 9003. Distributions for medicine qualified only if for prescribed
drug or insulin.
Sec. 9004. Increase in additional tax on distributions from HSAs and
Archer MSAs not used for qualified medical expenses.
Sec. 9005. Limitation on health flexible spending arrangements under
cafeteria plans.
Sec. 9006. Expansion of information reporting requirements.
Sec. 9007. Additional requirements for charitable hospitals.
Sec. 9008. Imposition of annual fee on branded prescription
pharmaceutical manufacturers and importers.
Sec. 9009. Imposition of annual fee on medical device manufacturers and
importers.
Sec. 9010. Imposition of annual fee on health insurance providers.
Sec. 9011. Study and report of effect on veterans health care.
Sec. 9012. Elimination of deduction for expenses allocable to Medicare
Part D subsidy.
Sec. 9013. Modification of itemized deduction for medical expenses.
Sec. 9014. Limitation on excessive remuneration paid by certain health
insurance providers.
Sec. 9015. Additional hospital insurance tax on high-income taxpayers.
Sec. 9016. Modification of section 833 treatment of certain health
organizations.
Sec. 9017. Excise tax on elective cosmetic medical procedures.

Subtitle B--Other Provisions

Sec. 9021. Exclusion of health benefits provided by Indian tribal
governments.
Sec. 9022. Establishment of simple cafeteria plans for small businesses.
Sec. 9023. Qualifying therapeutic discovery project credit.

TITLE X--STRENGTHENING QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS

Subtitle A--Provisions Relating to Title I

Sec. 10101. Amendments to subtitle A.
Sec. 10102. Amendments to subtitle B.
Sec. 10103. Amendments to subtitle C.
Sec. 10104. Amendments to subtitle D.
Sec. 10105. Amendments to subtitle E.
Sec. 10106. Amendments to subtitle F.
Sec. 10107. Amendments to subtitle G.
Sec. 10108. Free choice vouchers.
Sec. 10109. Development of standards for financial and administrative
transactions.

Subtitle B--Provisions Relating to Title II

PART I--Medicaid and CHIP

Sec. 10201. Amendments to the Social Security Act and title II of this
Act.
Sec. 10202. Incentives for States to offer home and community-based
services as a long-term care alternative to nursing homes.
Sec. 10203. Extension of funding for CHIP through fiscal year 2015 and
other CHIP-related provisions.

PART II--Support for Pregnant and Parenting Teens and Women

Sec. 10211. Definitions.

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Sec. 10212. Establishment of pregnancy assistance fund.
Sec. 10213. Permissible uses of Fund.
Sec. 10214. Appropriations.

PART III--Indian Health Care Improvement

Sec. 10221. Indian health care improvement.

Subtitle C--Provisions Relating to Title III

Sec. 10301. Plans for a Value-Based purchasing program for ambulatory
surgical centers.
Sec. 10302. Revision to national strategy for quality improvement in
health care.
Sec. 10303. Development of outcome measures.
Sec. 10304. Selection of efficiency measures.
Sec. 10305. Data collection; public reporting.
Sec. 10306. Improvements under the Center for Medicare and Medicaid
Innovation.
Sec. 10307. Improvements to the Medicare shared savings program.
Sec. 10308. Revisions to national pilot program on payment bundling.
Sec. 10309. Revisions to hospital readmissions reduction program.
Sec. 10310. Repeal of physician payment update.
Sec. 10311. Revisions to extension of ambulance add-ons.
Sec. 10312. Certain payment rules for long-term care hospital services
and moratorium on the establishment of certain hospitals and
facilities.
Sec. 10313. Revisions to the extension for the rural community hospital
demonstration program.
Sec. 10314. Adjustment to low-volume hospital provision.
Sec. 10315. Revisions to home health care provisions.
Sec. 10316. Medicare DSH.
Sec. 10317. Revisions to extension of section 508 hospital provisions.
Sec. 10318. Revisions to transitional extra benefits under Medicare
Advantage.
Sec. 10319. Revisions to market basket adjustments.
Sec. 10320. Expansion of the scope of, and additional improvements to,
the Independent Medicare Advisory Board.
Sec. 10321. Revision to community health teams.
Sec. 10322. Quality reporting for psychiatric hospitals.
Sec. 10323. Medicare coverage for individuals exposed to environmental
health hazards.
Sec. 10324. Protections for frontier States.
Sec. 10325. Revision to skilled nursing facility prospective payment
system.
Sec. 10326. Pilot testing pay-for-performance programs for certain
Medicare providers.
Sec. 10327. Improvements to the physician quality reporting system.
Sec. 10328. Improvement in part D medication therapy management (MTM)
programs.
Sec. 10329. Developing methodology to assess health plan value.
Sec. 10330. Modernizing computer and data systems of the Centers for
Medicare & Medicaid services to support improvements in care
delivery.
Sec. 10331. Public reporting of performance information.
Sec. 10332. Availability of medicare data for performance measurement.
Sec. 10333. Community-based collaborative care networks.
Sec. 10334. Minority health.
Sec. 10335. Technical correction to the hospital value-based purchasing
program.
Sec. 10336. GAO study and report on Medicare beneficiary access to high-
quality dialysis services.

Subtitle D--Provisions Relating to Title IV

Sec. 10401. Amendments to subtitle A.
Sec. 10402. Amendments to subtitle B.
Sec. 10403. Amendments to subtitle C.
Sec. 10404. Amendments to subtitle D.
Sec. 10405. Amendments to subtitle E.
Sec. 10406. Amendment relating to waiving coinsurance for preventive
services.
Sec. 10407. Better diabetes care.
Sec. 10408. Grants for small businesses to provide comprehensive
workplace wellness programs.
Sec. 10409. Cures Acceleration Network.
Sec. 10410. Centers of Excellence for Depression.
Sec. 10411. Programs relating to congenital heart disease.
Sec. 10412. Automated Defibrillation in Adam's Memory Act.
Sec. 10413. Young women's breast health awareness and support of young
women diagnosed with breast cancer.

Subtitle E--Provisions Relating to Title V

Sec. 10501. Amendments to the Public Health Service Act, the Social
Security Act, and title V of this Act.

[[Page 130]]

Sec. 10502. Infrastructure to Expand Access to Care.
Sec. 10503. Community Health Centers and the National Health Service
Corps Fund.
Sec. 10504. Demonstration project to provide access to affordable care.

Subtitle F--Provisions Relating to Title VI

Sec. 10601. Revisions to limitation on medicare exception to the
prohibition on certain physician referrals for hospitals.
Sec. 10602. Clarifications to patient-centered outcomes research.
Sec. 10603. Striking provisions relating to individual provider
application fees.
Sec. 10604. Technical correction to section 6405.
Sec. 10605. Certain other providers permitted to conduct face to face
encounter for home health services.
Sec. 10606. Health care fraud enforcement.
Sec. 10607. State demonstration programs to evaluate alternatives to
current medical tort litigation.
Sec. 10608. Extension of medical malpractice coverage to free clinics.
Sec. 10609. Labeling changes.

Subtitle G--Provisions Relating to Title VIII

Sec. 10801. Provisions relating to title VIII.

Subtitle H--Provisions Relating to Title IX

Sec. 10901. Modifications to excise tax on high cost employer-sponsored
health coverage.
Sec. 10902. Inflation adjustment of limitation on health flexible
spending arrangements under cafeteria plans.
Sec. 10903. Modification of limitation on charges by charitable
hospitals.
Sec. 10904. Modification of annual fee on medical device manufacturers
and importers.
Sec. 10905. Modification of annual fee on health insurance providers.
Sec. 10906. Modifications to additional hospital insurance tax on high-
income taxpayers.
Sec. 10907. Excise tax on indoor tanning services in lieu of elective
cosmetic medical procedures.
Sec. 10908. Exclusion for assistance provided to participants in State
student loan repayment programs for certain health
professionals.
Sec. 10909. Expansion of adoption credit and adoption assistance
programs.

TITLE I--QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS

Subtitle A--Immediate Improvements in Health Care Coverage for All
Americans

SEC. 1001. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT.

Part A of title XXVII of the Public Health Service Act (42 U.S.C.
300gg et seq.) is amended--
(1) by striking the part heading and inserting the
following:

``PART A--INDIVIDUAL AND GROUP MARKET REFORMS'';

(2) by redesignating sections 2704 through 2707 <> as sections 2725
through 2728, respectively;
(3) by redesignating sections 2711 through 2713 <> as sections 2731 through
2733, respectively;
(4) by redesignating sections 2721 through 2723 <> as sections 2735 through 2737,
respectively; and
(5) by inserting after section 2702, the following:

[[Page 131]]

``Subpart II--Improving Coverage

``SEC. 2711. <> NO LIFETIME OR ANNUAL LIMITS.

``(a) In General.--A group health plan and a health insurance issuer
offering group or individual health insurance coverage may not
establish--
``(1) lifetime limits on the dollar value of benefits for
any participant or beneficiary; or
``(2) unreasonable annual limits (within the meaning of
section 223 of the Internal Revenue Code of 1986) on the dollar
value of benefits for any participant or beneficiary.

``(b) Per Beneficiary Limits.--Subsection (a) shall not be construed
to prevent a group health plan or health insurance coverage that is not
required to provide essential health benefits under section 1302(b) of
the Patient Protection and Affordable Care Act from placing annual or
lifetime per beneficiary limits on specific covered benefits to the
extent that such limits are otherwise permitted under Federal or State
law.

``SEC. 2712. <> PROHIBITION ON RESCISSIONS.

``A group health plan and a health insurance issuer offering group
or individual health insurance coverage shall not rescind such plan or
coverage with respect to an enrollee once the enrollee is covered under
such plan or coverage involved, except that this section shall not apply
to a covered individual who has performed an act or practice that
constitutes fraud or makes an intentional misrepresentation of material
fact as prohibited by the terms of the plan or coverage. Such plan or
coverage may not be cancelled except with prior notice to the enrollee,
and only as permitted under section 2702(c) or 2742(b).

``SEC. 2713. <> COVERAGE OF PREVENTIVE HEALTH
SERVICES.

``(a) In General.--A group health plan and a health insurance issuer
offering group or individual health insurance coverage shall, at a
minimum provide coverage for and shall not impose any cost sharing
requirements for--
``(1) evidence-based items or services that have in effect a
rating of `A' or `B' in the current recommendations of the
United States Preventive Services Task Force;
``(2) immunizations that have in effect a recommendation
from the Advisory Committee on Immunization Practices of the
Centers for Disease Control and Prevention with respect to the
individual involved; and
``(3) with respect to infants, children, and adolescents,
evidence-informed preventive care and screenings provided for in
the comprehensive guidelines supported by the Health Resources
and Services Administration.
``(4) with respect to women, such additional preventive care
and screenings not described in paragraph (1) as provided for in
comprehensive guidelines supported by the Health Resources and
Services Administration for purposes of this paragraph.
``(5) for the purposes of this Act, and for the purposes of
any other provision of law, the current recommendations of the
United States Preventive Service Task Force regarding breast
cancer screening, mammography, and prevention shall

[[Page 132]]

be considered the most current other than those issued in or
around November 2009.

Nothing in this subsection shall be construed to prohibit a plan or
issuer from providing coverage for services in addition to those
recommended by United States Preventive Services Task Force or to deny
coverage for services that are not recommended by such Task Force.
``(b) Interval.--
``(1) In general.--The Secretary shall establish a minimum
interval between the date on which a recommendation described in
subsection (a)(1) or (a)(2) or a guideline under subsection
(a)(3) is issued and the plan year with respect to which the
requirement described in subsection (a) is effective with
respect to the service described in such recommendation or
guideline.
``(2) Minimum.--The interval described in paragraph (1)
shall not be less than 1 year.

``(c) Value-based Insurance Design.--The Secretary may develop
guidelines to permit a group health plan and a health insurance issuer
offering group or individual health insurance coverage to utilize value-
based insurance designs.

``SEC. 2714. <> EXTENSION OF DEPENDENT COVERAGE.

``(a) In General.--A group health plan and a health insurance issuer
offering group or individual health insurance coverage that provides
dependent coverage of children shall continue to make such coverage
available for an adult child (who is not married) until the child turns
26 years of age. Nothing in this section shall require a health plan or
a health insurance issuer described in the preceding sentence to make
coverage available for a child of a child receiving dependent coverage.
``(b) Regulations.--The Secretary shall promulgate regulations to
define the dependents to which coverage shall be made available under
subsection (a).
``(c) Rule of Construction.--Nothing in this section shall be
construed to modify the definition of `dependent' as used in the
Internal Revenue Code of 1986 with respect to the tax treatment of the
cost of coverage.

``SEC. 2715. <> DEVELOPMENT AND UTILIZATION OF
UNIFORM EXPLANATION OF COVERAGE DOCUMENTS AND STANDARDIZED
DEFINITIONS.

``(a) In <> General.--Not later than 12 months
after the date of enactment of the Patient Protection and Affordable
Care Act, the Secretary shall develop standards for use by a group
health plan and a health insurance issuer offering group or individual
health insurance coverage, in compiling and providing to enrollees a
summary of benefits and coverage explanation that accurately describes
the benefits and coverage under the applicable plan or coverage. In
developing such standards, the Secretary shall consult with the National
Association of Insurance Commissioners (referred to in this section as
the `NAIC'), a working group composed of representatives of health
insurance-related consumer advocacy organizations, health insurance
issuers, health care professionals, patient advocates including those
representing individuals with limited English proficiency, and other
qualified individuals.

``(b) Requirements.--The standards for the summary of benefits and
coverage developed under subsection (a) shall provide for the following:

[[Page 133]]

``(1) Appearance.--The standards shall ensure that the
summary of benefits and coverage is presented in a uniform
format that does not exceed 4 pages in length and does not
include print smaller than 12-point font.
``(2) Language.--The standards shall ensure that the summary
is presented in a culturally and linguistically appropriate
manner and utilizes terminology understandable by the average
plan enrollee.
``(3) Contents.--The standards shall ensure that the summary
of benefits and coverage includes--
``(A) uniform definitions of standard insurance
terms and medical terms (consistent with subsection (g))
so that consumers may compare health insurance coverage
and understand the terms of coverage (or exception to
such coverage);
``(B) a description of the coverage, including cost
sharing for--
``(i) each of the categories of the essential
health benefits described in subparagraphs (A)
through (J) of section 1302(b)(1) of the Patient
Protection and Affordable Care Act; and
``(ii) other benefits, as identified by the
Secretary;
``(C) the exceptions, reductions, and limitations on
coverage;
``(D) the cost-sharing provisions, including
deductible, coinsurance, and co-payment obligations;
``(E) the renewability and continuation of coverage
provisions;
``(F) a coverage facts label that includes examples
to illustrate common benefits scenarios, including
pregnancy and serious or chronic medical conditions and
related cost sharing, such scenarios to be based on
recognized clinical practice guidelines;
``(G) a statement of whether the plan or coverage--
``(i) provides minimum essential coverage (as
defined under section 5000A(f) of the Internal
Revenue Code 1986); and
``(ii) ensures that the plan or coverage share
of the total allowed costs of benefits provided
under the plan or coverage is not less than 60
percent of such costs;
``(H) a statement that the outline is a summary of
the policy or certificate and that the coverage document
itself should be consulted to determine the governing
contractual provisions; and
``(I) a contact number for the consumer to call with
additional questions and an Internet web address where a
copy of the actual individual coverage policy or group
certificate of coverage can be reviewed and obtained.

``(c) Periodic Review and Updating.--The Secretary shall
periodically review and update, as appropriate, the standards developed
under this section.
``(d) Requirement To Provide.--
``(1) In general.--Not later <> than 24
months after the date of enactment of the Patient Protection and
Affordable Care Act, each entity described in paragraph (3)
shall provide, prior

[[Page 134]]

to any enrollment restriction, a summary of benefits and
coverage explanation pursuant    to the standards developed by
the Secretary under subsection (a) to--
``(A) an applicant at the time of application;
``(B) an enrollee prior to the time of enrollment or
reenrollment, as applicable; and
``(C) a policyholder or certificate holder at the
time of issuance of the policy or delivery of the
certificate.
``(2) Compliance.--An entity described in paragraph (3) is
deemed to be in compliance with this section if the summary of
benefits and coverage described in subsection (a) is provided in
paper or electronic form.
``(3) Entities in general.--An entity described in this
paragraph is--
``(A) a health insurance issuer (including a group
health plan that is not a self-insured plan) offering
health insurance coverage within the United States; or
``(B) in the case of a self-insured group health
plan, the plan sponsor or designated administrator of
the plan (as such terms are defined in section 3(16) of
the Employee Retirement Income Security Act of 1974).
``(4) Notice <> of modifications.--If a
group health plan or health insurance issuer makes any material
modification in any of the terms of the plan or coverage
involved (as defined for purposes of section 102 of the Employee
Retirement Income Security Act of 1974) that is not reflected in
the most recently provided summary of benefits and coverage, the
plan or issuer shall provide notice of such modification to
enrollees not later than 60 days prior to the date on which such
modification will become effective.

``(e) Preemption.--The standards developed under subsection (a)
shall preempt any related State standards that require a summary of
benefits and coverage that provides less information to consumers than
that required to be provided under this section, as determined by the
Secretary.
``(f) Failure To Provide.--An entity <> described in
subsection (d)(3) that willfully fails to provide the information
required under this section shall be subject to a fine of not more than
$1,000 for each such failure. Such failure with respect to each enrollee
shall constitute a separate offense for purposes of this subsection.

``(g) Development of Standard Definitions.--
``(1) In general.--The
Secretary <> shall, by regulation, provide
for the development of standards for the definitions of terms
used in health insurance coverage, including the insurance-
related terms described in paragraph (2) and the medical terms
described in paragraph (3).
``(2) Insurance-related terms.--The insurance-related terms
described in this paragraph are premium, deductible, co-
insurance, co-payment, out-of-pocket limit, preferred provider,
non-preferred provider, out-of-network co-payments, UCR (usual,
customary and reasonable) fees, excluded services, grievance and
appeals, and such other terms as the Secretary determines are
important to define so that consumers may compare health
insurance coverage and understand the terms of their coverage.

[[Page 135]]

``(3) Medical terms.--The medical terms described in this
paragraph are hospitalization, hospital outpatient care,
emergency room care, physician services, prescription drug
coverage, durable medical equipment, home health care, skilled
nursing care, rehabilitation services, hospice services,
emergency medical transportation, and such other terms as the
Secretary determines are important to define so that consumers
may compare the medical benefits offered by health insurance and
understand the extent of those medical benefits (or exceptions
to those benefits).

``SEC. 2716. <> PROHIBITION OF DISCRIMINATION
BASED ON SALARY.

``(a) In General.--The plan sponsor of a group health plan (other
than a self-insured plan) may not establish rules relating to the health
insurance coverage eligibility (including continued eligibility) of any
full-time employee under the terms of the plan that are based on the
total hourly or annual salary of the employee or otherwise establish
eligibility rules that have the effect of discriminating in favor of
higher wage employees.
``(b) Limitation.--Subsection (a) shall not be construed to prohibit
a plan sponsor from establishing contribution requirements for
enrollment in the plan or coverage that provide for the payment by
employees with lower hourly or annual compensation of a lower dollar or
percentage contribution than the payment required of similarly situated
employees with a higher hourly or annual compensation.

``SEC. 2717. <> ENSURING THE QUALITY OF CARE.

``(a) Quality Reporting.--
``(1) In general.--Not later than 2 years after the date of
enactment of the Patient Protection and Affordable Care Act, the
Secretary, in consultation with experts in health care quality
and stakeholders, shall develop reporting requirements for use
by a group health plan, and a health insurance issuer offering
group or individual health insurance coverage, with respect to
plan or coverage benefits and health care provider reimbursement
structures that--
``(A) improve health outcomes through the
implementation of activities such as quality reporting,
effective case management, care coordination, chronic
disease management, and medication and care compliance
initiatives, including through the use of the medical
homes model as defined for purposes of section 3602 of
the Patient Protection and Affordable Care Act, for
treatment or services under the plan or coverage;
``(B) implement activities to prevent hospital
readmissions through a comprehensive program for
hospital discharge that includes patient-centered
education and counseling, comprehensive discharge
planning, and post discharge reinforcement by an
appropriate health care professional;
``(C) implement activities to improve patient safety
and reduce medical errors through the appropriate use of
best clinical practices, evidence based medicine, and
health information technology under the plan or
coverage; and
``(D) implement wellness and health promotion
activities.
``(2) Reporting requirements.--

[[Page 136]]

``(A) In general.--A group health plan and a health
insurance issuer offering group or individual health
insurance coverage shall annually submit to the
Secretary, and to enrollees under the plan or coverage,
a report on whether the benefits under the plan or
coverage satisfy the elements described in subparagraphs
(A) through (D) of paragraph (1).
``(B) Timing of reports.--A report under
subparagraph (A) shall be made available to an enrollee
under the plan or coverage during each open enrollment
period.
``(C) Availability of reports.--The Secretary shall
make reports submitted under subparagraph (A) available
to the public through an Internet website.
``(D) Penalties.--In developing the reporting
requirements under paragraph (1), the Secretary may
develop and impose appropriate penalties for non-
compliance with such requirements.
``(E) Exceptions.--In developing the reporting
requirements under paragraph (1), the Secretary may
provide for exceptions to such requirements for group
health plans and health insurance issuers that
substantially meet the goals of this section.

``(b) Wellness and Prevention Programs.--For purposes of subsection
(a)(1)(D), wellness and health promotion activities may include
personalized wellness and prevention services, which are coordinated,
maintained or delivered by a health care provider, a wellness and
prevention plan manager, or a health, wellness or prevention services
organization that conducts health risk assessments or offers ongoing
face-to-face, telephonic or web-based intervention efforts for each of
the program's participants, and which may include the following wellness
and prevention efforts:
``(1) Smoking cessation.
``(2) Weight management.
``(3) Stress management.
``(4) Physical fitness.
``(5) Nutrition.
``(6) Heart disease prevention.
``(7) Healthy lifestyle support.
``(8) Diabetes prevention.

``(c) Regulations.--Not <> later than 2 years after
the date of enactment of the Patient Protection and Affordable Care Act,
the Secretary shall promulgate regulations that provide criteria for
determining whether a reimbursement structure is described in subsection
(a).

``(d) Study and Report.--Not later than 180 days after the date on
which regulations are promulgated under subsection (c), the Government
Accountability Office shall review such regulations and conduct a study
and submit to the Committee on Health, Education, Labor, and Pensions of
the Senate and the Committee on Energy and Commerce of the House of
Representatives a report regarding the impact the activities under this
section have had on the quality and cost of health care.

``SEC. 2718. BRINGING <> DOWN THE COST OF HEALTH
CARE COVERAGE.

``(a) Clear <> Accounting for Costs.--A health
insurance issuer offering group or individual health insurance coverage
shall, with

[[Page 137]]

respect to each plan year, submit to the Secretary a report concerning
the percentage of total premium revenue that such coverage expends--
``(1) on reimbursement for clinical services provided to
enrollees under such coverage;
``(2) for activities that improve health care quality; and
``(3) on all other non-claims costs, including an
explanation of the nature of such costs, and excluding State
taxes and licensing or regulatory fees.

The <> Secretary shall make
reports received under this section available to the public on the
Internet website of the Department of Health and Human Services.

``(b) Ensuring That Consumers Receive Value for Their Premium
Payments.--
``(1) Requirement to provide value for premium payments.--A
health insurance issuer offering group or individual health
insurance coverage shall, with respect to each plan year,
provide an annual rebate to each enrollee under such coverage,
on a pro rata basis, in an amount that is equal to the amount by
which premium revenue expended by the issuer on activities
described in subsection (a)(3) exceeds--
``(A) with respect to a health insurance issuer
offering coverage in the group market, 20 percent, or
such lower percentage as a State may by regulation
determine; or
``(B) with respect to a health insurance issuer
offering coverage in the individual market, 25 percent,
or such lower percentage as a State may by regulation
determine, except that such percentage shall be adjusted
to the extent the Secretary determines that the
application of such percentage with a State may
destabilize the existing individual market in such
State.
``(2) Consideration in setting percentages.--In determining
the percentages under paragraph (1), a State shall seek to
ensure adequate participation by health insurance issuers,
competition in the health insurance market in the State, and
value for consumers so that premiums are used for clinical
services and quality improvements.
``(3) Termination.--The provisions of this subsection shall
have no force or effect after December 31, 2013.

``(c) Standard Hospital Charges.--Each hospital operating within the
United States shall for each year establish (and update) and make public
(in accordance with guidelines developed by the Secretary) a list of the
hospital's standard charges for items and services provided by the
hospital, including for diagnosis-related groups established under
section 1886(d)(4) of the Social Security Act.
``(d) Definitions.--The Secretary, in consultation with the National
Association of Insurance Commissions, shall establish uniform
definitions for the activities reported under subsection (a).

``SEC. 2719. <> APPEALS PROCESS.

``A group health plan and a health insurance issuer offering group
or individual health insurance coverage shall implement an effective
appeals process for appeals of coverage determinations and claims, under
which the plan or issuer shall, at a minimum--
``(1) have in effect an internal claims appeal process;

[[Page 138]]

``(2) provide <> notice to enrollees,
in a culturally and linguistically appropriate manner, of
available internal and external appeals processes, and the
availability of any applicable office of health insurance
consumer assistance or ombudsman established under section 2793
to assist such enrollees with the appeals processes;
``(3) allow an enrollee to review their file, to present
evidence and testimony as part of the appeals process, and to
receive continued coverage pending the outcome of the appeals
process; and
``(4) provide an external review process for such plans and
issuers that, at a minimum, includes the consumer protections
set forth in the Uniform External Review Model Act promulgated
by the National Association of Insurance Commissioners and is
binding on such plans.''.

SEC. 1002. HEALTH INSURANCE CONSUMER INFORMATION.

Part C of title XXVII of the Public Health Service Act (42 U.S.C.
300gg-91 et seq.) is amended by adding at the end the following:

``SEC. 2793. <> HEALTH INSURANCE CONSUMER
INFORMATION.

``(a) In <> General.--The Secretary shall award
grants to States to enable such States (or the Exchanges operating in
such States) to establish, expand, or provide support for--
``(1) offices of health insurance consumer assistance; or
``(2) health insurance ombudsman programs.

``(b) Eligibility.--
``(1) In general.--To be eligible to receive a grant, a
State shall designate an independent office of health insurance
consumer assistance, or an ombudsman, that, directly or in
coordination with State health insurance regulators and consumer
assistance organizations, receives and responds to inquiries and
complaints concerning health insurance coverage with respect to
Federal health insurance requirements and under State law.
``(2) Criteria.--A State that receives a grant under this
section shall comply with criteria established by the Secretary
for carrying out activities under such grant.

``(c) Duties.--The office of health insurance consumer assistance or
health insurance ombudsman shall--
``(1) assist with the filing of complaints and appeals,
including filing appeals with the internal appeal or grievance
process of the group health plan or health insurance issuer
involved and providing information about the external appeal
process;
``(2) collect, track, and quantify problems and inquiries
encountered by consumers;
``(3) educate consumers on their rights and responsibilities
with respect to group health plans and health insurance
coverage;
``(4) assist consumers with enrollment in a group health
plan or health insurance coverage by providing information,
referral, and assistance; and
``(5) resolve problems with obtaining premium tax credits
under section 36B of the Internal Revenue Code of 1986.

[[Page 139]]

``(d) Data Collection.--As a condition of receiving a grant under
subsection (a), an office of health insurance consumer assistance or
ombudsman program shall be required to collect and report data to the
Secretary on the types of problems and inquiries encountered by
consumers. The Secretary shall utilize such data to identify areas where
more enforcement action is necessary and shall share such information
with State insurance regulators, the Secretary of Labor, and the
Secretary of the Treasury for use in the enforcement activities of such
agencies.
``(e) Funding.--
``(1) Initial funding.--There is hereby appropriated to the
Secretary, out of any funds in the Treasury not otherwise
appropriated, $30,000,000 for the first fiscal year for which
this section applies to carry out this section. Such amount
shall remain available without fiscal year limitation.
``(2) Authorization for subsequent years.--There is
authorized to be appropriated to the Secretary for each fiscal
year following the fiscal year described in paragraph (1), such
sums as may be necessary to carry out this section.''.

SEC. 1003. ENSURING THAT CONSUMERS GET VALUE FOR THEIR DOLLARS.

Part C of title XXVII of the Public Health Service Act (42 U.S.C.
300gg-91 et seq.), as amended by section 1002, is further amended by
adding at the end the following:

``SEC. 2794. <> ENSURING THAT CONSUMERS GET
VALUE FOR THEIR DOLLARS.

``(a) Initial Premium Review Process.--
``(1) In <> general.--The Secretary,
in conjunction with States, shall establish a process for the
annual review, beginning with the 2010 plan year and subject to
subsection (b)(2)(A), of unreasonable increases in premiums for
health insurance coverage.
``(2) Justification and disclosure.--The process established
under paragraph (1) shall require health insurance issuers to
submit to the Secretary and the relevant State a justification
for an unreasonable premium increase prior to the implementation
of the <> increase. Such issuers shall
prominently post such information on their Internet websites.
The Secretary shall ensure the public disclosure of information
on such increases and justifications for all health insurance
issuers.

``(b) Continuing Premium Review Process.--
``(1) Informing secretary of premium increase patterns.--As
a condition of receiving a grant under subsection (c)(1), a
State, through its Commissioner of Insurance, shall--
``(A) provide the Secretary with information about
trends in premium increases in health insurance coverage
in premium rating areas in the State; and
``(B) make recommendations, as appropriate, to the
State Exchange about whether particular health insurance
issuers should be excluded from participation in the
Exchange based on a pattern or practice of excessive or
unjustified premium increases.
``(2) Monitoring by secretary of premium increases.--
``(A) In general.--Beginning <> with plan years beginning in 2014, the
Secretary, in conjunction with the States

[[Page 140]]

and consistent with the provisions of subsection (a)(2),
shall monitor premium increases of health insurance
coverage offered through an Exchange and outside of an
Exchange.
``(B) Consideration in opening exchange.--In
determining under section 1312(f)(2)(B) of the Patient
Protection and Affordable Care Act whether to offer
qualified health plans in the large group market through
an Exchange, the State shall take into account any
excess of premium growth outside of the Exchange as
compared to the rate of such growth inside the Exchange.

``(c) Grants in Support of Process.--
``(1) Premium review grants during 2010 through 2014.--The
Secretary shall carry out a program to award grants to States
during the 5-year period beginning with fiscal year 2010 to
assist such States in carrying out subsection (a), including--
``(A) in reviewing and, if appropriate under State
law, approving premium increases for health insurance
coverage; and
``(B) in providing information and recommendations
to the Secretary under subsection (b)(1).
``(2) Funding.--
``(A) In general.--Out of all funds in the Treasury
not otherwise appropriated, there are appropriated to
the Secretary $250,000,000, to be available for
expenditure for grants under paragraph (1) and
subparagraph (B).
``(B) Further availability for insurance reform and
consumer protection.--If the amounts appropriated under
subparagraph (A) are not fully obligated under grants
under paragraph (1) by the end of fiscal year 2014, any
remaining funds shall remain available to the Secretary
for grants to States for planning and implementing the
insurance reforms and consumer protections under part A.
``(C) Allocation.--The Secretary shall establish a
formula for determining the amount of any grant to a
State under this subsection. Under such formula--
``(i) the Secretary shall consider the number
of plans of health insurance coverage offered in
each State and the population of the State; and
``(ii) no State qualifying for a grant under
paragraph (1) shall receive less than $1,000,000,
or more than $5,000,000 for a grant year.''.

SEC. 1004. <> EFFECTIVE DATES.

(a) In General.--Except as provided for in subsection (b), this
subtitle (and the amendments made by this subtitle) shall become
effective for plan years beginning on or after the date that is 6 months
after the date of enactment of this Act, except that the amendments made
by sections 1002 and 1003 shall become effective for fiscal years
beginning with fiscal year 2010.
(b) Special Rule.--The amendments made by sections 1002 and 1003
shall take effect on the date of enactment of this Act.

[[Page 141]]

Subtitle B--Immediate Actions to Preserve and Expand Coverage

SEC. 1101. IMMEDIATE <> ACCESS TO INSURANCE FOR
UNINSURED INDIVIDUALS WITH A PREEXISTING CONDITION.

(a) In General.--Not <> later than 90
days after the date of enactment of this Act, the Secretary shall
establish a temporary high risk health insurance pool program to provide
health insurance coverage for eligible individuals during the period
beginning on the date on which such program is established and ending on
January 1, 2014.

(b) Administration.--
(1) In general.--The Secretary may carry out the program
under this section directly or through contracts to eligible
entities.
(2) Eligible entities.--To be eligible for a contract under
paragraph (1), an entity shall--
(A) be a State or nonprofit private entity;
(B) submit to the Secretary an application at such
time, in such manner, and containing such information as
the Secretary may require; and
(C) agree to utilize contract funding to establish
and administer a qualified high risk pool for eligible
individuals.
(3) Maintenance of effort.--To be eligible to enter into a
contract with the Secretary under this subsection, a State shall
agree not to reduce the annual amount the State expended for the
operation of one or more State high risk pools during the year
preceding the year in which such contract is entered into.

(c) Qualified High Risk Pool.--
(1) In general.--Amounts made available under this section
shall be used to establish a qualified high risk pool that meets
the requirements of paragraph (2).
(2) Requirements.--A qualified high risk pool meets the
requirements of this paragraph if such pool--
(A) provides to all eligible individuals health
insurance coverage that does not impose any preexisting
condition exclusion with respect to such coverage;
(B) provides health insurance coverage--
(i) in which the issuer's share of the total
allowed costs of benefits provided under such
coverage is not less than 65 percent of such
costs; and
(ii) that has an out of pocket limit not
greater than the applicable amount described in
section 223(c)(2) of the Internal Revenue Code of
1986 for the year involved, except that the
Secretary may modify such limit if necessary to
ensure the pool meets the actuarial value limit
under clause (i);
(C) ensures that with respect to the premium rate
charged for health insurance coverage offered to
eligible individuals through the high risk pool, such
rate shall--
(i) except as provided in clause (ii), vary
only as provided for under section 2701 of the
Public Health Service Act (as amended by this Act
and notwithstanding the date on which such
amendments take effect);

[[Page 142]]

(ii) vary on the basis of age by a factor of
not greater than 4 to 1; and
(iii) be established at a standard rate for a
standard population; and
(D) meets any other requirements determined
appropriate by the Secretary.

(d) Eligible Individual.--An individual shall be deemed to be an
eligible individual for purposes of this section if such individual--
(1) is a citizen or national of the United States or is
lawfully present in the United States (as determined in
accordance with section 1411);
(2) has not been covered under creditable coverage (as
defined in section 2701(c)(1) of the Public Health Service Act
as in effect on the date of enactment of this Act) during the 6-
month period prior to the date on which such individual is
applying for coverage through the high risk pool; and
(3) has a pre-existing condition, as determined in a manner
consistent with guidance issued by the Secretary.

(e) Protection Against Dumping Risk by Insurers.--
(1) In general.--The <> Secretary shall
establish criteria for determining whether health insurance
issuers and employment-based health plans have discouraged an
individual from remaining enrolled in prior coverage based on
that individual's health status.
(2) Sanctions.--An issuer or employment-based health plan
shall be responsible for reimbursing the program under this
section for the medical expenses incurred by the program for an
individual who, based on criteria established by the Secretary,
the Secretary finds was encouraged by the issuer to disenroll
from health benefits coverage prior to enrolling in coverage
through the program. The criteria shall include at least the
following circumstances:
(A) In the case of prior coverage obtained through
an employer, the provision by the employer, group health
plan, or the issuer of money or other financial
consideration for disenrolling from the coverage.
(B) In the case of prior coverage obtained directly
from an issuer or under an employment-based health
plan--
(i) the provision by the issuer or plan of
money or other financial consideration for
disenrolling from the coverage; or
(ii) in the case of an individual whose
premium for the prior coverage exceeded the
premium required by the program (adjusted based on
the age factors applied to the prior coverage)--
(I) the prior coverage is a policy
that is no longer being actively
marketed (as defined by the Secretary)
by the issuer; or
(II) the prior coverage is a policy
for which duration of coverage form
issue or health status are factors that
can be considered in determining
premiums at renewal.
(3) Construction.--Nothing in this subsection shall be
construed as constituting exclusive remedies for violations of
criteria established under paragraph (1) or as preventing States

[[Page 143]]

from applying or enforcing such paragraph or other provisions
under law with respect to health insurance issuers.

(f) Oversight.--The Secretary shall establish--
(1) an appeals process to enable individuals to appeal a
determination under this section; and
(2) procedures to protect against waste, fraud, and abuse.

(g) Funding; Termination of Authority.--
(1) In general.--There is appropriated to the Secretary, out
of any moneys in the Treasury not otherwise appropriated,
$5,000,000,000 to pay claims against (and the administrative
costs of) the high risk pool under this section that are in
excess of the amount of premiums collected from eligible
individuals enrolled in the high risk pool. Such funds shall be
available without fiscal year limitation.
(2) Insufficient funds.--If the Secretary estimates for any
fiscal year that the aggregate amounts available for the payment
of the expenses of the high risk pool will be less than the
actual amount of such expenses, the Secretary shall make such
adjustments as are necessary to eliminate such deficit.
(3) Termination of authority.--
(A) In general.--Except as provided in subparagraph
(B), coverage of eligible individuals under a high risk
pool in a State shall terminate on January 1, 2014.
(B) Transition <> to exchange.--
The Secretary shall develop procedures to provide for
the transition of eligible individuals enrolled in
health insurance coverage offered through a high risk
pool established under this section into qualified
health plans offered through an Exchange. Such
procedures shall ensure that there is no lapse in
coverage with respect to the individual and may extend
coverage after the termination of the risk pool
involved, if the Secretary determines necessary to avoid
such a lapse.
(4) Limitations.--The Secretary has the authority to stop
taking applications for participation in the program under this
section to comply with the funding limitation provided for in
paragraph (1).
(5) Relation to state laws.--The standards established under
this section shall supersede any State law or regulation (other
than State licensing laws or State laws relating to plan
solvency) with respect to qualified high risk pools which are
established in accordance with this section.

SEC. 1102. <> REINSURANCE FOR EARLY RETIREES.

(a) Administration.--
(1) In general.--Not <> later
than 90 days after the date of enactment of this Act, the
Secretary shall establish a temporary reinsurance program to
provide reimbursement to participating employment-based plans
for a portion of the cost of providing health insurance coverage
to early retirees (and to the eligible spouses, surviving
spouses, and dependents of such retirees) during the period
beginning on the date on which such program is established and
ending on January 1, 2014.
(2) Reference.--In this section:
(A) Health benefits.--The term ``health benefits''
means medical, surgical, hospital, prescription drug,
and such other benefits as shall be determined by the
Secretary,

[[Page 144]]

whether self-funded, or delivered through the purchase
of insurance or otherwise.
(B) Employment-based plan.--The term ``employment-
based plan'' means a group health benefits plan that--
(i) is--
(I) maintained by one or more
current or former employers (including
without limitation any State or local
government or political subdivision
thereof), employee organization, a
voluntary employees' beneficiary
association, or a committee or board of
individuals appointed to administer such
plan; or
(II) a multiemployer plan (as
defined in section 3(37) of the Employee
Retirement Income Security Act of 1974);
and
(ii) provides health benefits to early
retirees.
(C) Early retirees.--The term ``early retirees''
means individuals who are age 55 and older but are not
eligible for coverage under title XVIII of the Social
Security Act, and who are not active employees of an
employer maintaining, or currently contributing to, the
employment-based plan or of any employer that has made
substantial contributions to fund such plan.

(b) Participation.--
(1) Employment-based plan eligibility.--A participating
employment-based plan is an employment-based plan that--
(A) meets the requirements of paragraph (2) with
respect to health benefits provided under the plan; and
(B) submits to the Secretary an application for
participation in the program, at such time, in such
manner, and containing such information as the Secretary
shall require.
(2) Employment-based health benefits.--An employment-based
plan meets the requirements of this paragraph if the plan--
(A) implements programs and procedures to generate
cost-savings with respect to participants with chronic
and high-cost conditions;
(B) provides documentation of the actual cost of
medical claims involved; and
(C) is certified <> by the
Secretary.

(c) Payments.--
(1) Submission of claims.--
(A) In general.--A participating employment-based
plan shall submit claims for reimbursement to the
Secretary which shall contain documentation of the
actual costs of the items and services for which each
claim is being submitted.
(B) Basis for claims.--Claims submitted under
subparagraph (A) shall be based on the actual amount
expended by the participating employment-based plan
involved within the plan year for the health benefits
provided to an early retiree or the spouse, surviving
spouse, or dependent of such retiree. In determining the
amount of a claim for purposes of this subsection, the
participating

[[Page 145]]

employment-based plan shall take into account any
negotiated price concessions (such as discounts, direct
or indirect subsidies, rebates, and direct or indirect
remunerations) obtained by such plan with respect to
such health benefit. For purposes of determining the
amount of any such claim, the costs paid by the early
retiree or the retiree's spouse, surviving spouse, or
dependent in the form of deductibles, co-payments, or
co-insurance shall be included in the amounts paid by
the participating employment-based plan.
(2) Program payments.--If the Secretary determines that a
participating employment-based plan has submitted a valid claim
under paragraph (1), the Secretary shall reimburse such plan for
80 percent of that portion of the costs attributable to such
claim that exceed $15,000, subject to the limits contained in
paragraph (3).
(3) Limit.--To be eligible for reimbursement under the
program, a claim submitted by a participating employment-based
plan shall not be less than $15,000 nor greater than $90,000.
Such amounts shall be adjusted each fiscal year based on the
percentage increase in the Medical Care Component of the
Consumer Price Index for all urban consumers (rounded to the
nearest multiple of $1,000) for the year involved.
(4) Use of payments.--Amounts paid to a participating
employment-based plan under this subsection shall be used to
lower costs for the plan. Such payments may be used to reduce
premium costs for an entity described in subsection (a)(2)(B)(i)
or to reduce premium contributions, co-payments, deductibles,
co-insurance, or other out-of-pocket costs for plan
participants. Such payments shall not be used as general
revenues for an entity described in subsection (a)(2)(B)(i). The
Secretary shall develop a mechanism to monitor the appropriate
use of such payments by such entities.
(5) Payments not treated as income.--Payments received under
this subsection shall not be included in determining the gross
income of an entity described in subsection (a)(2)(B)(i) that is
maintaining or currently contributing to a participating
employment-based plan.
(6) Appeals.--The Secretary shall establish--
(A) an appeals process to permit participating
employment-based plans to appeal a determination of the
Secretary with respect to claims submitted under this
section; and
(B) procedures to protect against fraud, waste, and
abuse under the program.

(d) Audits.--The Secretary shall conduct annual audits of claims
data submitted by participating employment-based plans under this
section to ensure that such plans are in compliance with the
requirements of this section.
(e) Funding.--There is appropriated to the Secretary, out of any
moneys in the Treasury not otherwise appropriated, $5,000,000,000 to
carry out the program under this section. Such funds shall be available
without fiscal year limitation.
(f) Limitation.--The Secretary has the authority to stop taking
applications for participation in the program based on the availability
of funding under subsection (e).

[[Page 146]]

SEC. 1103. IMMEDIATE <> INFORMATION THAT
ALLOWS CONSUMERS TO IDENTIFY AFFORDABLE COVERAGE OPTIONS.

(a) Internet Portal to Affordable Coverage Options.--
(1) Immediate establishment.--Not later than July 1, 2010,
the Secretary, in consultation with the States, shall establish
a mechanism, including an Internet website, through which a
resident of any State may identify affordable health insurance
coverage options in that State.
(2) Connecting to affordable coverage.--An Internet website
established under paragraph (1) shall, to the extent
practicable, provide ways for residents of any State to receive
information on at least the following coverage options:
(A) Health insurance coverage offered by health
insurance issuers, other than coverage that provides
reimbursement only for the treatment or mitigation of--
(i) a single disease or condition; or
(ii) an unreasonably limited set of diseases
or conditions (as determined by the Secretary);
(B) Medicaid coverage under title XIX of the Social
Security Act.
(C) Coverage under title XXI of the Social Security
Act.
(D) A State health benefits high risk pool, to the
extent that such high risk pool is offered in such
State; and
(E) Coverage under a high risk pool under section
1101.

(b) Enhancing Comparative Purchasing Options.--
(1) In general.--Not later <> than 60 days after the date of enactment of this Act,
the Secretary shall develop a standardized format to be used for
the presentation of information relating to the coverage options
described in subsection (a)(2). Such format shall, at a minimum,
require the inclusion of information on the percentage of total
premium revenue expended on nonclinical costs (as reported under
section 2718(a) of the Public Health Service Act), eligibility,
availability, premium rates, and cost sharing with respect to
such coverage options and be consistent with the standards
adopted for the uniform explanation of coverage as provided for
in section 2715 of the Public Health Service Act.
(2) Use of format.--The Secretary shall utilize the format
developed under paragraph (1) in compiling information
concerning coverage options on the Internet website established
under subsection (a).

(c) Authority To Contract.--The Secretary may carry out this section
through contracts entered into with qualified entities.

SEC. 1104. ADMINISTRATIVE SIMPLIFICATION.

(a) Purpose of Administrative Simplification.--Section 261 of the
Health Insurance Portability and Accountability Act of 1996 (42 U.S.C.
1320d note) is amended--
(1) by inserting ``uniform'' before ``standards''; and
(2) by inserting ``and to reduce the clerical burden on
patients, health care providers, and health plans'' before the
period at the end.

(b) Operating Rules for Health Information Transactions.--

[[Page 147]]

(1) Definition of operating rules.--Section 1171 of the
Social Security Act (42 U.S.C. 1320d) is amended by adding at
the end the following:
``(9) Operating rules.--The term `operating rules' means the
necessary business rules and guidelines for the electronic
exchange of information that are not defined by a standard or
its implementation specifications as adopted for purposes of
this part.''.
(2) Transaction standards; operating rules and compliance.--
Section 1173 of the Social Security Act (42 U.S.C. 1320d-2) is
amended--
(A) in subsection (a)(2), by adding at the end the
following new subparagraph:
``(J) Electronic funds transfers.'';
(B) in subsection (a), by adding at the end the
following new paragraph:
``(4) Requirements for financial and administrative
transactions.--
``(A) In general.--The standards and associated
operating rules adopted by the Secretary shall--
``(i) to the extent feasible and appropriate,
enable determination of an individual's
eligibility and financial responsibility for
specific services prior to or at the point of
care;
``(ii) be comprehensive, requiring minimal
augmentation by paper or other communications;
``(iii) provide for timely acknowledgment,
response, and status reporting that supports a
transparent claims and denial management process
(including adjudication and appeals); and
``(iv) describe all data elements (including
reason and remark codes) in unambiguous terms,
require that such data elements be required or
conditioned upon set values in other fields, and
prohibit additional conditions (except where
necessary to implement State or Federal law, or to
protect against fraud and abuse).
``(B) Reduction of clerical burden.--In adopting
standards and operating rules for the transactions
referred to under paragraph (1), the Secretary shall
seek to reduce the number and complexity of forms
(including paper and electronic forms) and data entry
required by patients and providers.''; and
(C) by adding at the end the following new
subsections:

``(g) Operating Rules.--
``(1) In general.--The Secretary shall adopt a single set of
operating rules for each transaction referred to under
subsection (a)(1) with the goal of creating as much uniformity
in the implementation of the electronic standards as possible.
Such operating rules shall be consensus-based and reflect the
necessary business rules affecting health plans and health care
providers and the manner in which they operate pursuant to
standards issued under Health Insurance Portability and
Accountability Act of 1996.
``(2) Operating rules development.--In adopting operating
rules under this subsection, the Secretary shall consider
recommendations for operating rules developed by a qualified
nonprofit entity that meets the following requirements:

[[Page 148]]

``(A) The entity focuses its mission on
administrative simplification.
``(B) The entity demonstrates a multi-stakeholder
and consensus-based process for development of operating
rules, including representation by or participation from
health plans, health care providers, vendors, relevant
Federal agencies, and other standard development
organizations.
``(C) The entity has a public set of guiding
principles that ensure the operating rules and process
are open and transparent, and supports nondiscrimination
and conflict of interest policies that demonstrate a
commitment to open, fair, and nondiscriminatory
practices.
``(D) The entity builds on the transaction standards
issued under Health Insurance Portability and
Accountability Act of 1996.
``(E) The entity allows for public review and
updates of the operating rules.
``(3) Review and recommendations.--The National Committee on
Vital and Health Statistics shall--
``(A) advise the Secretary as to whether a nonprofit
entity meets the requirements under paragraph (2);
``(B) review the operating rules developed and
recommended by such nonprofit entity;
``(C) determine whether such operating rules
represent a consensus view of the health care
stakeholders and are consistent with and do not conflict
with other existing standards;
``(D) evaluate whether such operating rules are
consistent with electronic standards adopted for health
information technology; and
``(E) submit to the Secretary a recommendation as to
whether the Secretary should adopt such operating rules.
``(4) Implementation.--
``(A) In general.--
The <> Secretary shall adopt
operating rules under this subsection, by regulation in
accordance with subparagraph (C), following
consideration of the operating rules developed by the
non-profit entity described in paragraph (2) and the
recommendation submitted by the National Committee on
Vital and Health Statistics under paragraph (3)(E) and
having ensured consultation with providers.
``(B) Adoption <> requirements;
effective dates.--
``(i) Eligibility for a health plan and health
claim status.--The set of operating rules for
eligibility for a health plan and health claim
status transactions shall be adopted not later
than July 1, 2011, in a manner ensuring that such
operating rules are effective not later than
January 1, 2013, and may allow for the use of a
machine readable identification card.
``(ii) Electronic funds transfers and health
care payment and remittance advice.--The set of
operating rules for electronic funds transfers and
health care payment and remittance advice
transactions shall--
``(I) allow for automated
reconciliation of the electronic payment
with the remittance advice; and

[[Page 149]]

``(II) be adopted not later than
July 1, 2012, in a manner ensuring that
such operating rules are effective not
later than January 1, 2014.
``(iii) Health claims or equivalent encounter
information, enrollment and disenrollment in a
health plan, health plan premium payments,
referral certification and authorization.--The set
of operating rules for health claims or equivalent
encounter information, enrollment and
disenrollment in a health plan, health plan
premium payments, and referral certification and
authorization transactions shall be adopted not
later than July 1, 2014, in a manner ensuring that
such operating rules are effective not later than
January 1, 2016.
``(C) Expedited rulemaking.--The Secretary shall
promulgate an interim final rule applying any standard
or operating rule recommended by the National Committee
on Vital and Health Statistics pursuant to paragraph
(3). The Secretary <> shall
accept and consider public comments on any interim final
rule published under this subparagraph for 60 days after
the date of such publication.

``(h) Compliance.--
``(1) Health <> plan certification.--
``(A) Eligibility for a health plan, health claim
status, electronic funds transfers, health care payment
and remittance advice.--
Not <> later than December 31,
2013, a health plan shall file a statement with the
Secretary, in such form as the Secretary may require,
certifying that the data and information systems for
such plan are in compliance with any applicable
standards (as described under paragraph (7) of section
1171) and associated operating rules (as described under
paragraph (9) of such section) for electronic funds
transfers, eligibility for a health plan, health claim
status, and health care payment and remittance advice,
respectively.
``(B) Health claims or equivalent encounter
information, enrollment and disenrollment in a health
plan, health plan premium payments, health claims
attachments, referral certification and authorization.--
Not later than December 31, 2015, a health plan shall
file a statement with the Secretary, in such form as the
Secretary may require, certifying that the data and
information systems for such plan are in compliance with
any applicable standards and associated operating rules
for health claims or equivalent encounter information,
enrollment and disenrollment in a health plan, health
plan premium payments, health claims attachments, and
referral certification and authorization, respectively.
A health plan shall provide the same level of
documentation to certify compliance with such
transactions as is required to certify compliance with
the transactions specified in subparagraph (A).
``(2) Documentation of compliance.--A health plan shall
provide the Secretary, in such form as the Secretary may
require, with adequate documentation of compliance with the
standards and operating rules described under paragraph (1). A
health plan shall not be considered to have provided adequate

[[Page 150]]

documentation and shall not be certified as being in compliance
with such standards, unless the health plan--
``(A) demonstrates to the Secretary that the plan
conducts the electronic transactions specified in
paragraph (1) in a manner that fully complies with the
regulations of the Secretary; and
``(B) provides documentation showing that the plan
has completed end-to-end testing for such transactions
with their partners, such as hospitals and physicians.
``(3) Service contracts.--A health plan shall be required to
ensure that any entities that provide services pursuant to a
contract with such health plan shall comply with any applicable
certification and compliance requirements (and provide the
Secretary with adequate documentation of such compliance) under
this subsection.
``(4) Certification by outside entity.--The Secretary may
designate independent, outside entities to certify that a health
plan has complied with the requirements under this subsection,
provided that the certification standards employed by such
entities are in accordance with any standards or operating rules
issued by the Secretary.
``(5) Compliance with revised standards and operating
rules.--
``(A) In general.--A <> health
plan (including entities described under paragraph (3))
shall file a statement with the Secretary, in such form
as the Secretary may require, certifying that the data
and information systems for such plan are in compliance
with any applicable revised standards and associated
operating rules under this subsection for any interim
final rule promulgated by the Secretary under subsection
(i) that--
``(i) amends any standard or operating rule
described under paragraph (1) of this subsection;
or
``(ii) establishes a standard (as described
under subsection (a)(1)(B)) or associated
operating rules (as described under subsection
(i)(5)) for any other financial and administrative
transactions.
``(B) Date of compliance.--A health plan shall
comply with such requirements not later than the
effective date of the applicable standard or operating
rule.
``(6) Audits of health plans.--The Secretary shall conduct
periodic audits to ensure that health plans (including entities
described under paragraph (3)) are in compliance with any
standards and operating rules that are described under paragraph
(1) or subsection (i)(5).

``(i) Review <> and Amendment of Standards and
Operating Rules.--
``(1) Establishment.--Not later than January 1, 2014, the
Secretary shall establish a review committee (as described under
paragraph (4)).
``(2) Evaluations and reports.--
``(A) Hearings.--Not later than April 1, 2014, and
not less than biennially thereafter, the Secretary,
acting through the review committee, shall conduct
hearings to evaluate and review the adopted standards
and operating rules established under this section.

[[Page 151]]

``(B) Report.--Not later than July 1, 2014, and not
less than biennially thereafter, the review committee
shall provide recommendations for updating and improving
such standards and operating rules. The review committee
shall recommend a single set of operating rules per
transaction standard and maintain the goal of creating
as much uniformity as possible in the implementation of
the electronic standards.
``(3) Interim final rulemaking.--
``(A) In general.--Any recommendations to amend
adopted standards and operating rules that have been
approved by the review committee and reported to the
Secretary under paragraph (2)(B) shall be adopted by the
Secretary through promulgation of an interim final rule
not later than 90 days after receipt of the committee's
report.
``(B) Public comment.--
``(i) Public comment period.--The Secretary
shall accept and consider public comments on any
interim final rule published under this paragraph
for 60 days after the date of such publication.
``(ii) Effective date.--The effective date of
any amendment to existing standards or operating
rules that is adopted through an interim final
rule published under this paragraph shall be 25
months following the close of such public comment
period.
``(4) Review committee.--
``(A) Definition.--For the purposes of this
subsection, the term `review committee' means a
committee chartered by or within the Department of
Health and Human services that has been designated by
the Secretary to carry out this subsection, including--
``(i) the National Committee on Vital and
Health Statistics; or
``(ii) any appropriate committee as determined
by the Secretary.
``(B) Coordination of hit standards.--In developing
recommendations under this subsection, the review
committee shall ensure coordination, as appropriate,
with the standards that support the certified electronic
health record technology approved by the Office of the
National Coordinator for Health Information Technology.
``(5) Operating rules for other standards adopted by the
secretary.--The Secretary shall adopt a single set of operating
rules (pursuant to the process described under subsection (g))
for any transaction for which a standard had been adopted
pursuant to subsection (a)(1)(B).

``(j) Penalties.--
``(1) Penalty fee.--
``(A) In general.--Not <> later
than April 1, 2014, and annually thereafter, the
Secretary shall assess a penalty fee (as determined
under subparagraph (B)) against a health plan that has
failed to meet the requirements under subsection (h)
with respect to certification and documentation of
compliance with--
``(i) the standards and associated operating
rules described under paragraph (1) of such
subsection; and

[[Page 152]]

``(ii) a standard (as described under
subsection (a)(1)(B)) and associated operating
rules (as described under subsection (i)(5)) for
any other financial and administrative
transactions.
``(B) Fee amount.--Subject to subparagraphs (C),
(D), and (E), the Secretary shall assess a penalty fee
against a health plan in the amount of $1 per covered
life until certification is complete. The penalty shall
be assessed per person covered by the plan for which its
data systems for major medical policies are not in
compliance and shall be imposed against the health plan
for each day that the plan is not in compliance with the
requirements under subsection (h).
``(C) Additional penalty for misrepresentation.--A
health plan that knowingly provides inaccurate or
incomplete information in a statement of certification
or documentation of compliance under subsection (h)
shall be subject to a penalty fee that is double the
amount that would otherwise be imposed under this
subsection.
``(D) Annual fee increase.--The amount of the
penalty fee imposed under this subsection shall be
increased on an annual basis by the annual percentage
increase in total national health care expenditures, as
determined by the Secretary.
``(E) Penalty limit.--A penalty fee assessed against
a health plan under this subsection shall not exceed, on
an annual basis--
``(i) an amount equal to $20 per covered life
under such plan; or
``(ii) an amount equal to $40 per covered life
under the plan if such plan has knowingly provided
inaccurate or incomplete information (as described
under subparagraph (C)).
``(F) Determination of covered individuals.--The
Secretary shall determine the number of covered lives
under a health plan based upon the most recent
statements and filings that have been submitted by such
plan to the Securities and Exchange Commission.
``(2) Notice and dispute procedure.--The Secretary shall
establish a procedure for assessment of penalty fees under this
subsection that provides a health plan with reasonable notice
and a dispute resolution procedure prior to provision of a
notice of assessment by the Secretary of the Treasury (as
described under paragraph (4)(B)).
``(3) Penalty fee report.--Not later than May 1, 2014, and
annually thereafter, the Secretary shall provide the Secretary
of the Treasury with a report identifying those health plans
that have been assessed a penalty fee under this subsection.
``(4) Collection of penalty fee.--
``(A) In general.--The Secretary of the Treasury,
acting through the Financial Management Service, shall
administer the collection of penalty fees from health
plans that have been identified by the Secretary in the
penalty fee report provided under paragraph (3).
``(B) Notice.--Not <> later than
August 1, 2014, and annually thereafter, the Secretary
of the Treasury shall

[[Page 153]]

provide notice to each health plan that has been
assessed a penalty fee by the Secretary under this
subsection. Such notice shall include the amount of the
penalty fee assessed by the Secretary and the due date
for payment of such fee to the Secretary of the Treasury
(as described in subparagraph (C)).
``(C) Payment due date.--Payment by a health plan
for a penalty fee assessed under this subsection shall
be made to the Secretary of the Treasury not later than
November 1, 2014, and annually thereafter.
``(D) Unpaid penalty fees.--Any amount of a penalty
fee assessed against a health plan under this subsection
for which payment has not been made by the due date
provided under subparagraph (C) shall be--
``(i) increased by the interest accrued on
such amount, as determined pursuant to the
underpayment rate established under section 6621
of the Internal Revenue Code of 1986; and
``(ii) treated as a past-due, legally
enforceable debt owed to a Federal agency for
purposes of section 6402(d) of the Internal
Revenue Code of 1986.
``(E) Administrative fees.--Any fee charged or
allocated for collection activities conducted by the
Financial Management Service will be passed on to a
health plan on a pro-rata basis and added to any penalty
fee collected from the plan.''.

(c) Promulgation <> of Rules.--
(1) Unique health plan identifier.--The Secretary shall
promulgate a final rule to establish a unique health plan
identifier (as described in section 1173(b) of the Social
Security Act (42 U.S.C. 1320d-2(b))) based on the input of the
National Committee on Vital and Health <> Statistics. The Secretary may do so on an interim final
basis and such rule shall be effective not later than October 1,
2012.
(2) Electronic funds transfer.--The Secretary shall
promulgate a final rule to establish a standard for electronic
funds transfers (as described in section 1173(a)(2)(J) of the
Social Security Act, as added by subsection
(b)(2)(A)). <> The Secretary
may do so on an interim final basis and shall adopt such
standard not later than January 1, 2012, in a manner ensuring
that such standard is effective not later than January 1, 2014.
(3) Health claims attachments.--The Secretary shall
promulgate a final rule to establish a transaction standard and
a single set of associated operating rules for health claims
attachments (as described in section 1173(a)(2)(B) of the Social
Security Act (42 U.S.C. 1320d-2(a)(2)(B))) that is consistent
with the X12 Version 5010
transaction <> standards. The
Secretary may do so on an interim final basis and shall adopt a
transaction standard and a single set of associated operating
rules not later than January 1, 2014, in a manner ensuring that
such standard is effective not later than January 1, 2016.

(d) Expansion of Electronic Transactions in Medicare.--Section
1862(a) of the Social Security Act (42 U.S.C. 1395y(a)) is amended--
(1) in paragraph (23), by striking the ``or'' at the end;

[[Page 154]]

(2) in paragraph (24), by striking the period and inserting
``; or''; and
(3) by inserting after paragraph (24) the following new
paragraph:
``(25) not later than January 1, 2014, for which the payment
is other than by electronic funds transfer (EFT) or an
electronic remittance in a form as specified in ASC X12 835
Health Care Payment and Remittance Advice or subsequent
standard.''.

SEC. 1105. <> EFFECTIVE DATE.

This subtitle shall take effect on the date of enactment of this
Act.

Subtitle C--Quality Health Insurance Coverage for All Americans

PART I--HEALTH INSURANCE MARKET REFORMS

SEC. 1201. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT.

Part A of title XXVII of the Public Health Service Act (42 U.S.C.
300gg et seq.), as amended by section 1001, is further amended--
(1) by striking the heading for subpart 1 and inserting the
following:

``Subpart I--General Reform'';

(2)(A) in section 2701 (42 U.S.C. 300gg), by striking the
section heading and subsection (a) and inserting the following:

``SEC. 2704. PROHIBITION OF PREEXISTING CONDITION EXCLUSIONS OR OTHER
DISCRIMINATION BASED ON HEALTH STATUS.

``(a) In General.--A group health plan and a health insurance issuer
offering group or individual health insurance coverage may not impose
any preexisting condition exclusion with respect to such plan or
coverage.''; and
(B) by <> transferring such section
(as amended by subparagraph (A)) so as to appear after the
section 2703 added by paragraph (4);
(3)(A) in <> section 2702
(42 U.S.C. 300gg-1)--
(i) by striking the section heading and all that
follows through subsection (a);
(ii) in subsection (b)--
(I) by striking ``health insurance issuer
offering health insurance coverage in connection
with a group health plan'' each place that such
appears and inserting ``health insurance issuer
offering group or individual health insurance
coverage''; and
(II) in paragraph (2)(A)--
(aa) by inserting ``or individual''
after ``employer''; and
(bb) by inserting ``or individual
health coverage, as the case may be''
before the semicolon; and
(iii) in subsection (e)--

[[Page 155]]

(I) by striking ``(a)(1)(F)'' and inserting
``(a)(6)'';
(II) by striking ``2701'' and inserting
``2704''; and
(III) by striking ``2721(a)'' and inserting
``2735(a)''; and
(B) by transferring such section (as amended by
subparagraph (A)) to appear after section 2705(a) as
added by paragraph (4); and
(4) by inserting after the subpart heading (as added by
paragraph (1)) the following:

``SEC. 2701. FAIR <> HEALTH INSURANCE PREMIUMS.

``(a) Prohibiting Discriminatory Premium Rates.--
``(1) In general.--With respect to the premium rate charged
by a health insurance issuer for health insurance coverage
offered in the individual or small group market--
``(A) such rate shall vary with respect to the
particular plan or coverage involved only by--
``(i) whether such plan or coverage covers an
individual or family;
``(ii) rating area, as established in
accordance with paragraph (2);
``(iii) age, except that such rate shall not
vary by more than 3 to 1 for adults (consistent
with section 2707(c)); and
``(iv) tobacco use, except that such rate
shall not vary by more than 1.5 to 1; and
``(B) such rate shall not vary with respect to the
particular plan or coverage involved by any other factor
not described in subparagraph (A).
``(2) Rating area.--
``(A) In general.--Each State shall establish 1 or
more rating areas within that State for purposes of
applying the requirements of this title.
``(B) Secretarial review.--The Secretary shall
review the rating areas established by each State under
subparagraph (A) to ensure the adequacy of such areas
for purposes of carrying out the requirements of this
title. If the Secretary determines a State's rating
areas are not adequate, or that a State does not
establish such areas, the Secretary may establish rating
areas for that State.
``(3) Permissible <> age bands.--The
Secretary, in consultation with the National Association of
Insurance Commissioners, shall define the permissible age bands
for rating purposes under paragraph (1)(A)(iii).
``(4) Application of variations based on age or tobacco
use.--With respect to family coverage under a group health plan
or health insurance coverage, the rating variations permitted
under clauses (iii) and (iv) of paragraph (1)(A) shall be
applied based on the portion of the premium that is attributable
to each family member covered under the plan or coverage.
``(5) Special rule for large group market.--If a State
permits health insurance issuers that offer coverage in the
large group market in the State to offer such coverage through
the State Exchange (as provided for under section 1312(f)(2)(B)

[[Page 156]]

of the Patient Protection and Affordable Care Act), the
provisions of this subsection shall apply to all coverage
offered in such market in the State.

``SEC. 2702. GUARANTEED <> AVAILABILITY OF
COVERAGE.

``(a) Guaranteed Issuance of Coverage in the Individual and Group
Market.--Subject to subsections (b) through (e), each health insurance
issuer that offers health insurance coverage in the individual or group
market in a State must accept every employer and individual in the State
that applies for such coverage.
``(b) Enrollment.--
``(1) Restriction.--A health insurance issuer described in
subsection (a) may restrict enrollment in coverage described in
such subsection to open or special enrollment periods.
``(2) Establishment.--A health insurance issuer described in
subsection (a) shall, in accordance with the regulations
promulgated under paragraph (3), establish special enrollment
periods for qualifying events (under section 603 of the Employee
Retirement Income Security Act of 1974).
``(3) Regulations.--The Secretary shall promulgate
regulations with respect to enrollment periods under paragraphs
(1) and (2).

``SEC. 2703. GUARANTEED <> RENEWABILITY OF
COVERAGE.

``(a) In General.--Except as provided in this section, if a health
insurance issuer offers health insurance coverage in the individual or
group market, the issuer must renew or continue in force such coverage
at the option of the plan sponsor or the individual, as applicable.

``SEC. 2705. PROHIBITING <> DISCRIMINATION
AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON
HEALTH STATUS.

``(a) In General.--A group health plan and a health insurance issuer
offering group or individual health insurance coverage may not establish
rules for eligibility (including continued eligibility) of any
individual to enroll under the terms of the plan or coverage based on
any of the following health status-related factors in relation to the
individual or a dependent of the individual:
``(1) Health status.
``(2) Medical condition (including both physical and mental
illnesses).
``(3) Claims experience.
``(4) Receipt of health care.
``(5) Medical history.
``(6) Genetic information.
``(7) Evidence of insurability (including conditions arising
out of acts of domestic violence).
``(8) Disability.
``(9) Any other health status-related factor determined
appropriate by the Secretary.

``(j) Programs of Health Promotion or Disease Prevention.--
``(1) General provisions.--
``(A) General rule.--For purposes of subsection
(b)(2)(B), a program of health promotion or disease
prevention (referred to in this subsection as a
`wellness program') shall be a program offered by an
employer that is designed

[[Page 157]]

to promote health or prevent disease that meets the
applicable requirements of this subsection.
``(B) No conditions based on health status factor.--
If none of the conditions for obtaining a premium
discount or rebate or other reward for participation in
a wellness program is based on an individual satisfying
a standard that is related to a health status factor,
such wellness program shall not violate this section if
participation in the program is made available to all
similarly situated individuals and the requirements of
paragraph (2) are complied with.
``(C) Conditions based on health status factor.--If
any of the conditions for obtaining a premium discount
or rebate or other reward for participation in a
wellness program is based on an individual satisfying a
standard that is related to a health status factor, such
wellness program shall not violate this section if the
requirements of paragraph (3) are complied with.
``(2) Wellness programs not subject to requirements.--If
none of the conditions for obtaining a premium discount or
rebate or other reward under a wellness program as described in
paragraph (1)(B) are based on an individual satisfying a
standard that is related to a health status factor (or if such a
wellness program does not provide such a reward), the wellness
program shall not violate this section if participation in the
program is made available to all similarly situated individuals.
The following programs shall not have to comply with the
requirements of paragraph (3) if participation in the program is
made available to all similarly situated individuals:
``(A) A program that reimburses all or part of the
cost for memberships in a fitness center.
``(B) A diagnostic testing program that provides a
reward for participation and does not base any part of
the reward on outcomes.
``(C) A program that encourages preventive care
related to a health condition through the waiver of the
copayment or deductible requirement under group health
plan for the costs of certain items or services related
to a health condition (such as prenatal care or well-
baby visits).
``(D) A program that reimburses individuals for the
costs of smoking cessation programs without regard to
whether the individual quits smoking.
``(E) A program that provides a reward to
individuals for attending a periodic health education
seminar.
``(3) Wellness programs subject to requirements.--If any of
the conditions for obtaining a premium discount, rebate, or
reward under a wellness program as described in paragraph (1)(C)
is based on an individual satisfying a standard that is related
to a health status factor, the wellness program shall not
violate this section if the following requirements are complied
with:
``(A) The reward for the wellness program, together
with the reward for other wellness programs with respect
to the plan that requires satisfaction of a standard
related to a health status factor, shall not exceed 30
percent of the cost of employee-only coverage under the
plan. If, in

[[Page 158]]

addition to employees or individuals, any class of
dependents (such as spouses or spouses and dependent
children) may participate fully in the wellness program,
such reward shall not exceed 30 percent of the cost of
the coverage in which an employee or individual and any
dependents are enrolled. For purposes of this paragraph,
the cost of coverage shall be determined based on the
total amount of employer and employee contributions for
the benefit package under which the employee is (or the
employee and any dependents are) receiving coverage. A
reward may be in the form of a discount or rebate of a
premium or contribution, a waiver of all or part of a
cost-sharing mechanism (such as deductibles, copayments,
or coinsurance), the absence of a surcharge, or the
value of a benefit that would otherwise not be provided
under the plan. The Secretaries of Labor, Health and
Human Services, and the Treasury may increase the reward
available under this subparagraph to up to 50 percent of
the cost of coverage if the Secretaries determine that
such an increase is appropriate.
``(B) The wellness program shall be reasonably
designed to promote health or prevent disease. A program
complies with the preceding sentence if the program has
a reasonable chance of improving the health of, or
preventing disease in, participating individuals and it
is not overly burdensome, is not a subterfuge for
discriminating based on a health status factor, and is
not highly suspect in the method chosen to promote
health or prevent disease.
``(C) The plan shall give individuals eligible for
the program the opportunity to qualify for the reward
under the program at least once each year.
``(D) The full reward under the wellness program
shall be made available to all similarly situated
individuals. For such purpose, among other things:
``(i) The reward is not available to all
similarly situated individuals for a period unless
the wellness program allows--
``(I) for a reasonable alternative
standard (or waiver of the otherwise
applicable standard) for obtaining the
reward for any individual for whom, for
that period, it is unreasonably
difficult due to a medical condition to
satisfy the otherwise applicable
standard; and
``(II) for a reasonable alternative
standard (or waiver of the otherwise
applicable standard) for obtaining the
reward for any individual for whom, for
that period, it is medically inadvisable
to attempt to satisfy the otherwise
applicable standard.
``(ii) If reasonable under the circumstances,
the plan or issuer may seek verification, such as
a statement from an individual's physician, that a
health status factor makes it unreasonably
difficult or medically inadvisable for the
individual to satisfy or attempt to satisfy the
otherwise applicable standard.

[[Page 159]]

``(E) The plan or issuer involved shall disclose in
all plan materials describing the terms of the wellness
program the availability of a reasonable alternative
standard (or the possibility of waiver of the otherwise
applicable standard) required under subparagraph (D). If
plan materials disclose that such a program is
available, without describing its terms, the disclosure
under this subparagraph shall not be required.

``(k) Existing Programs.--Nothing in this section shall prohibit a
program of health promotion or disease prevention that was established
prior to the date of enactment of this section and applied with all
applicable regulations, and that is operating on such date, from
continuing to be carried out for as long as such regulations remain in
effect.
``(l) Wellness Program Demonstration Project.--
``(1) In general.--Not <> later than July
1, 2014, the Secretary, in consultation with the Secretary of
the Treasury and the Secretary of Labor, shall establish a 10-
State demonstration project under which participating States
shall apply the provisions of subsection (j) to programs of
health promotion offered by a health insurance issuer that
offers health insurance coverage in the individual market in
such State.
``(2) Expansion of demonstration <> project.--If the Secretary, in consultation with the
Secretary of the Treasury and the Secretary of Labor, determines
that the demonstration project described in paragraph (1) is
effective, such Secretaries may, beginning on July 1, 2017
expand such demonstration project to include additional
participating States.
``(3) Requirements.--
``(A) Maintenance of coverage.--The Secretary, in
consultation with the Secretary of the Treasury and the
Secretary of Labor, shall not approve the participation
of a State in the demonstration project under this
section unless the Secretaries determine that the
State's project is designed in a manner that--
``(i) will not result in any decrease in
coverage; and
``(ii) will not increase the cost to the
Federal Government in providing credits under
section 36B of the Internal Revenue Code of 1986
or cost-sharing assistance under section 1402 of
the Patient Protection and Affordable Care Act.
``(B) Other requirements.--States that participate
in the demonstration project under this subsection--
``(i) may permit premium discounts or rebates
or the modification of otherwise applicable
copayments or deductibles for adherence to, or
participation in, a reasonably designed program of
health promotion and disease prevention;
``(ii) shall ensure that requirements of
consumer protection are met in programs of health
promotion in the individual market;
``(iii) shall require verification from health
insurance issuers that offer health insurance
coverage in the individual market of such State
that premium discounts--

[[Page 160]]

``(I) do not create undue burdens
for individuals insured in the
individual market;
``(II) do not lead to cost shifting;
and
``(III) are not a subterfuge for
discrimination;
``(iv) shall ensure that consumer data is
protected in accordance with the requirements of
section 264(c) of the Health Insurance Portability
and Accountability Act of 1996 (42 U.S.C. 1320d-2
note); and
``(v) shall ensure and demonstrate to the
satisfaction of the Secretary that the discounts
or other rewards provided under the project
reflect the expected level of participation in the
wellness program involved and the anticipated
effect the program will have on utilization or
medical claim costs.

``(m) Report.--
``(1) In general.--Not later than 3 years after the date of
enactment of the Patient Protection and Affordable Care Act, the
Secretary, in consultation with the Secretary of the Treasury
and the Secretary of Labor, shall submit a report to the
appropriate committees of Congress concerning--
``(A) the effectiveness of wellness programs (as
defined in subsection (j)) in promoting health and
preventing disease;
``(B) the impact of such wellness programs on the
access to care and affordability of coverage for
participants and non-participants of such programs;
``(C) the impact of premium-based and cost-sharing
incentives on participant behavior and the role of such
programs in changing behavior; and
``(D) the effectiveness of different types of
rewards.
``(2) Data collection.--In preparing the report described in
paragraph (1), the Secretaries shall gather relevant information
from employers who provide employees with access to wellness
programs, including State and Federal agencies.

``(n) Regulations.--Nothing in this section shall be construed as
prohibiting the Secretaries of Labor, Health and Human Services, or the
Treasury from promulgating regulations in connection with this section.

``SEC. 2706. NON-DISCRIMINATION <> IN HEALTH
CARE.

``(a) Providers.--A group health plan and a health insurance issuer
offering group or individual health insurance coverage shall not
discriminate with respect to participation under the plan or coverage
against any health care provider who is acting within the scope of that
provider's license or certification under applicable State law. This
section shall not require that a group health plan or health insurance
issuer contract with any health care provider willing to abide by the
terms and conditions for participation established by the plan or
issuer. Nothing in this section shall be construed as preventing a group
health plan, a health insurance issuer, or the Secretary from
establishing varying reimbursement rates based on quality or performance
measures.
``(b) Individuals.--The <> provisions of
section 1558 of the Patient Protection and Affordable Care Act (relating
to non-discrimination) shall apply with respect to a group health plan
or health insurance issuer offering group or individual health insurance
coverage.

[[Page 161]]

``SEC. 2707. COMPREHENSIVE <> HEALTH INSURANCE
COVERAGE.

``(a) Coverage for Essential Health Benefits Package.--A health
insurance issuer that offers health insurance coverage in the individual
or small group market shall ensure that such coverage includes the
essential health benefits package required under section 1302(a) of the
Patient Protection and Affordable Care Act.
``(b) Cost-sharing Under Group Health Plans.--A group health plan
shall ensure that any annual cost-sharing imposed under the plan does
not exceed the limitations provided for under paragraphs (1) and (2) of
section 1302(c).
``(c) Child-only Plans.--If a health insurance issuer offers health
insurance coverage in any level of coverage specified under section
1302(d) of the Patient Protection and Affordable Care Act, the issuer
shall also offer such coverage in that level as a plan in which the only
enrollees are individuals who, as of the beginning of a plan year, have
not attained the age of 21.
``(d) Dental Only.--This section shall not apply to a plan described
in section 1302(d)(2)(B)(ii)(I).

``SEC. 2708. PROHIBITION <> ON EXCESSIVE WAITING
PERIODS.

``A group health plan and a health insurance issuer offering group
or individual health insurance coverage shall not apply any waiting
period (as defined in section 2704(b)(4)) that exceeds 90 days.''.

PART II--OTHER PROVISIONS

SEC. 1251. PRESERVATION <> OF RIGHT TO MAINTAIN
EXISTING COVERAGE.

(a) No Changes to Existing Coverage.--
(1) In general.--Nothing in this Act (or an amendment made
by this Act) shall be construed to require that an individual
terminate coverage under a group health plan or health insurance
coverage in which such individual was enrolled on the date of
enactment of this Act.
(2) Continuation of coverage.--With respect to a group
health plan or health insurance coverage in which an individual
was enrolled on the date of enactment of this Act, this subtitle
and subtitle A (and the amendments made by such subtitles) shall
not apply to such plan or coverage, regardless of whether the
individual renews such coverage after such date of enactment.

(b) Allowance for Family Members To Join Current Coverage.--With
respect to a group health plan or health insurance coverage in which an
individual was enrolled on the date of enactment of this Act and which
is renewed after such date, family members of such individual shall be
permitted to enroll in such plan or coverage if such enrollment is
permitted under the terms of the plan in effect as of such date of
enactment.
(c) Allowance for New Employees To Join Current Plan.--A group
health plan that provides coverage on the date of enactment of this Act
may provide for the enrolling of new employees (and their families) in
such plan, and this subtitle and subtitle A (and the amendments made by
such subtitles) shall not apply with respect to such plan and such new
employees (and their families).

[[Page 162]]

(d) Effect on Collective Bargaining Agreements.--In the case of
health insurance coverage maintained pursuant to one or more collective
bargaining agreements between employee representatives and one or more
employers that was ratified before the date of enactment of this Act,
the provisions of this subtitle and subtitle A (and the amendments made
by such subtitles) shall not apply until the date on which the last of
the collective bargaining agreements relating to the coverage
terminates. Any coverage amendment made pursuant to a collective
bargaining agreement relating to the coverage which amends the coverage
solely to conform to any requirement added by this subtitle or subtitle
A (or amendments) shall not be treated as a termination of such
collective bargaining agreement.
(e) Definition.--In this title, the term ``grandfathered health
plan'' means any group health plan or health insurance coverage to which
this section applies.

SEC. 1252. RATING REFORMS <> MUST APPLY UNIFORMLY
TO ALL HEALTH INSURANCE ISSUERS AND GROUP HEALTH PLANS.

Any standard or requirement adopted by a State pursuant to this
title, or any amendment made by this title, shall be applied uniformly
to all health plans in each insurance market to which the standard and
requirements apply. The preceding sentence shall also apply to a State
standard or requirement relating to the standard or requirement required
by this title (or any such amendment) that is not the same as the
standard or requirement but that is not preempted under section 1321(d).

SEC. 1253. <> EFFECTIVE DATES.

This subtitle (and the amendments made by this subtitle) shall
become effective for plan years beginning on or after January 1, 2014.

Subtitle D--Available Coverage Choices for All Americans

PART I--ESTABLISHMENT OF QUALIFIED HEALTH PLANS

SEC. 1301. QUALIFIED <> HEALTH PLAN DEFINED.

(a) Qualified Health Plan.--In this title:
(1) In general.--The term ``qualified health plan'' means a
health plan that--
(A) has in effect a certification (which may include
a seal or other indication of approval) that such plan
meets the criteria for certification described in
section 1311(c) issued or recognized by each Exchange
through which such plan is offered;
(B) provides the essential health benefits package
described in section 1302(a); and
(C) is offered by a health insurance issuer that--
(i) is licensed and in good standing to offer
health insurance coverage in each State in which
such issuer offers health insurance coverage under
this title;

[[Page 163]]

(ii) agrees to offer at least one qualified
health plan in the silver level and at least one
plan in the gold level in each such Exchange;
(iii) agrees to charge the same premium rate
for each qualified health plan of the issuer
without regard to whether the plan is offered
through an Exchange or whether the plan is offered
directly from the issuer or through an agent; and
(iv) complies with the regulations developed
by the Secretary under section 1311(d) and such
other requirements as an applicable Exchange may
establish.
(2) Inclusion of co-op plans and community health insurance
option.--Any reference in this title to a qualified health plan
shall be deemed to include a qualified health plan offered
through the CO-OP program under section 1322 or a community
health insurance option under section 1323, unless specifically
provided for otherwise.

(b) Terms Relating to Health Plans.--In this title:
(1) Health plan.--
(A) In general.--The term ``health plan'' means
health insurance coverage and a group health plan.
(B) Exception for self-insured plans and mewas.--
Except to the extent specifically provided by this
title, the term ``health plan'' shall not include a
group health plan or multiple employer welfare
arrangement to the extent the plan or arrangement is not
subject to State insurance regulation under section 514
of the Employee Retirement Income Security Act of 1974.
(2) Health insurance coverage and issuer.--The terms
``health insurance coverage'' and ``health insurance issuer''
have the meanings given such terms by section 2791(b) of the
Public Health Service Act.
(3) Group health plan.--The term ``group health plan'' has
the meaning given such term by section 2791(a) of the Public
Health Service Act.

SEC. 1302. ESSENTIAL <> HEALTH BENEFITS
REQUIREMENTS.

(a) Essential Health Benefits Package.--In this title, the term
``essential health benefits package'' means, with respect to any health
plan, coverage that--
(1) provides for the essential health benefits defined by
the Secretary under subsection (b);
(2) limits cost-sharing for such coverage in accordance with
subsection (c); and
(3) subject to subsection (e), provides either the bronze,
silver, gold, or platinum level of coverage described in
subsection (d).

(b) Essential Health Benefits.--
(1) In general.--Subject to paragraph (2), the Secretary
shall define the essential health benefits, except that such
benefits shall include at least the following general categories
and the items and services covered within the categories:
(A) Ambulatory patient services.
(B) Emergency services.
(C) Hospitalization.
(D) Maternity and newborn care.

[[Page 164]]

(E) Mental health and substance use disorder
services, including behavioral health treatment.
(F) Prescription drugs.
(G) Rehabilitative and habilitative services and
devices.
(H) Laboratory services.
(I) Preventive and wellness services and chronic
disease management.
(J) Pediatric services, including oral and vision
care.
(2) Limitation.--
(A) In general.--
The <> Secretary shall ensure that
the scope of the essential health benefits under
paragraph (1) is equal to the scope of benefits provided
under a typical employer plan, as determined by the
Secretary. To <> inform this
determination, the Secretary of Labor shall conduct a
survey of employer-sponsored coverage to determine the
benefits typically covered by employers, including
multiemployer plans, and provide a report on such survey
to the Secretary.
(B) Certification.--In <> defining
the essential health benefits described in paragraph
(1), and in revising the benefits under paragraph
(4)(H), the Secretary shall submit a report to the
appropriate committees of Congress containing a
certification from the Chief Actuary of the Centers for
Medicare & Medicaid Services that such essential health
benefits meet the limitation described in paragraph (2).
(3) Notice and hearing.--In defining the essential health
benefits described in paragraph (1), and in revising the
benefits under paragraph (4)(H), the Secretary shall provide
notice and an opportunity for public comment.
(4) Required elements for consideration.--In defining the
essential health benefits under paragraph (1), the Secretary
shall--
(A) ensure that such essential health benefits
reflect an appropriate balance among the categories
described in such subsection, so that benefits are not
unduly weighted toward any category;
(B) not make coverage decisions, determine
reimbursement rates, establish incentive programs, or
design benefits in ways that discriminate against
individuals because of their age, disability, or
expected length of life;
(C) take into account the health care needs of
diverse segments of the population, including women,
children, persons with disabilities, and other groups;
(D) ensure that health benefits established as
essential not be subject to denial to individuals
against their wishes on the basis of the individuals'
age or expected length of life or of the individuals'
present or predicted disability, degree of medical
dependency, or quality of life;
(E) provide that a qualified health plan shall not
be treated as providing coverage for the essential
health benefits described in paragraph (1) unless the
plan provides that--
(i) coverage for emergency department services
will be provided without imposing any requirement
under the plan for prior authorization of services
or any limitation on coverage where the provider
of services does not have a contractual
relationship with the plan

[[Page 165]]

for the providing of services that is more
restrictive than the requirements or limitations
that apply to emergency department services
received from providers who do have such a
contractual relationship with the plan; and
(ii) if such services are provided out-of-
network, the cost-sharing requirement (expressed
as a copayment amount or coinsurance rate) is the
same requirement that would apply if such services
were provided in-network;
(F) provide that if a plan described in section
1311(b)(2)(B)(ii) (relating to stand-alone dental
benefits plans) is offered through an Exchange, another
health plan offered through such Exchange shall not fail
to be treated as a qualified health plan solely because
the plan does not offer coverage of benefits offered
through the stand-alone plan that are otherwise required
under paragraph (1)(J); and
(G) periodically review the essential health
benefits under paragraph (1), and provide a report to
Congress and the public that contains--
(i) an assessment of whether enrollees are
facing any difficulty accessing needed services
for reasons of coverage or cost;
(ii) an assessment of whether the essential
health benefits needs to be modified or updated to
account for changes in medical evidence or
scientific advancement;
(iii) information on how the essential health
benefits will be modified to address any such gaps
in access or changes in the evidence base;
(iv) an assessment of the potential of
additional or expanded benefits to increase costs
and the interactions between the addition or
expansion of benefits and reductions in existing
benefits to meet actuarial limitations described
in paragraph (2); and
(H) periodically update the essential health
benefits under paragraph (1) to address any gaps in
access to coverage or changes in the evidence base the
Secretary identifies in the review conducted under
subparagraph (G).
(5) Rule of construction.--Nothing in this title shall be
construed to prohibit a health plan from providing benefits in
excess of the essential health benefits described in this
subsection.

(c) Requirements Relating to Cost-Sharing.--
(1) Annual limitation on cost-sharing.--
(A) 2014.--The cost-sharing incurred under a health
plan with respect to self-only coverage or coverage
other than self-only coverage for a plan year beginning
in 2014 shall not exceed the dollar amounts in effect
under section 223(c)(2)(A)(ii) of the Internal Revenue
Code of 1986 for self-only and family coverage,
respectively, for taxable years beginning in 2014.
(B) 2015 and later.--In the case of any plan year
beginning in a calendar year after 2014, the limitation
under this paragraph shall--

[[Page 166]]

(i) in the case of self-only coverage, be
equal to the dollar amount under subparagraph (A)
for self-only coverage for plan years beginning in
2014, increased by an amount equal to the product
of that amount and the premium adjustment
percentage under paragraph (4) for the calendar
year; and
(ii) in the case of other coverage, twice the
amount in effect under clause (i).
If the amount of any increase under clause (i) is not a
multiple of $50, such increase shall be rounded to the
next lowest multiple of $50.
(2) Annual limitation on deductibles for employer-sponsored
plans.--
(A) In general.--In the case of a health plan
offered in the small group market, the deductible under
the plan shall not exceed--
(i) $2,000 in the case of a plan covering a
single individual; and
(ii) $4,000 in the case of any other plan.
The amounts under clauses (i) and (ii) may be increased
by the maximum amount of reimbursement which is
reasonably available to a participant under a flexible
spending arrangement described in section 106(c)(2) of
the Internal Revenue Code of 1986 (determined without
regard to any salary reduction arrangement).
(B) Indexing of limits.--In the case of any plan
year beginning in a calendar year after 2014--
(i) the dollar amount under subparagraph
(A)(i) shall be increased by an amount equal to
the product of that amount and the premium
adjustment percentage under paragraph (4) for the
calendar year; and
(ii) the dollar amount under subparagraph
(A)(ii) shall be increased to an amount equal to
twice the amount in effect under subparagraph
(A)(i) for plan years beginning in the calendar
year, determined after application of clause (i).
If the amount of any increase under clause (i) is not a
multiple of $50, such increase shall be rounded to the
next lowest multiple of $50.
(C) Actuarial value.--The limitation under this
paragraph shall be applied in such a manner so as to not
affect the actuarial value of any health plan, including
a plan in the bronze level.
(D) Coordination with preventive limits.--Nothing in
this paragraph shall be construed to allow a plan to
have a deductible under the plan apply to benefits
described in section 2713 of the Public Health Service
Act.
(3) Cost-sharing.--In this title--
(A) In general.--The term ``cost-sharing''
includes--
(i) deductibles, coinsurance, copayments, or
similar charges; and
(ii) any other expenditure required of an
insured individual which is a qualified medical
expense (within the meaning of section 223(d)(2)
of the Internal Revenue Code of 1986) with respect
to essential health benefits covered under the
plan.

[[Page 167]]

(B) Exceptions.--Such term does not include
premiums, balance billing amounts for non-network
providers, or spending for non-covered services.
(4) Premium <> adjustment
percentage.--For purposes of paragraphs (1)(B)(i) and (2)(B)(i),
the premium adjustment percentage for any calendar year is the
percentage (if any) by which the average per capita premium for
health insurance coverage in the United States for the preceding
calendar year (as estimated by the Secretary no later than
October 1 of such preceding calendar year) exceeds such average
per capita premium for 2013 (as determined by the Secretary).

(d) Levels of Coverage.--
(1) Levels of coverage defined.--The levels of coverage
described in this subsection are as follows:
(A) Bronze level.--A plan in the bronze level shall
provide a level of coverage that is designed to provide
benefits that are actuarially equivalent to 60 percent
of the full actuarial value of the benefits provided
under the plan.
(B) Silver level.--A plan in the silver level shall
provide a level of coverage that is designed to provide
benefits that are actuarially equivalent to 70 percent
of the full actuarial value of the benefits provided
under the plan.
(C) Gold level.--A plan in the gold level shall
provide a level of coverage that is designed to provide
benefits that are actuarially equivalent to 80 percent
of the full actuarial value of the benefits provided
under the plan.
(D) Platinum level.--A plan in the platinum level
shall provide a level of coverage that is designed to
provide benefits that are actuarially equivalent to 90
percent of the full actuarial value of the benefits
provided under the plan.
(2) Actuarial value.--
(A) In general.--Under regulations issued by the
Secretary, the level of coverage of a plan shall be
determined on the basis that the essential health
benefits described in subsection (b) shall be provided
to a standard population (and without regard to the
population the plan may actually provide benefits to).
(B) Employer contributions.--The Secretary may issue
regulations under which employer contributions to a
health savings account (within the meaning of section
223 of the Internal Revenue Code of 1986) may be taken
into account in determining the level of coverage for a
plan of the employer.
(C) Application.--In determining under this title,
the Public Health Service Act, or the Internal Revenue
Code of 1986 the percentage of the total allowed costs
of benefits provided under a group health plan or health
insurance coverage that are provided by such plan or
coverage, the rules contained in the regulations under
this paragraph shall apply.
(3) Allowable variance.-- <> The
Secretary shall develop guidelines to provide for a de minimis
variation in the actuarial valuations used in determining the
level of coverage of a plan to account for differences in
actuarial estimates.

[[Page 168]]

(4) Plan reference.--In this title, any reference to a
bronze, silver, gold, or platinum plan shall be treated as a
reference to a qualified health plan providing a bronze, silver,
gold, or platinum level of coverage, as the case may be.

(e) Catastrophic Plan.--
(1) In general.--A health plan not providing a bronze,
silver, gold, or platinum level of coverage shall be treated as
meeting the requirements of subsection (d) with respect to any
plan year if--
(A) the only individuals who are eligible to enroll
in the plan are individuals described in paragraph (2);
and
(B) the plan provides--
(i) except as provided in clause (ii), the
essential health benefits determined under
subsection (b), except that the plan provides no
benefits for any plan year until the individual
has incurred cost-sharing expenses in an amount
equal to the annual limitation in effect under
subsection (c)(1) for the plan year (except as
provided for in section 2713); and
(ii) coverage for at least three primary care
visits.
(2) Individuals eligible for enrollment.--An individual is
described in this paragraph for any plan year if the
individual--
(A) has not attained the age of 30 before the
beginning of the plan year; or
(B) has a certification in effect for any plan year
under this title that the individual is exempt from the
requirement under section 5000A of the Internal Revenue
Code of 1986 by reason of--
(i) section 5000A(e)(1) of such Code (relating
to individuals without affordable coverage); or
(ii) section 5000A(e)(5) of such Code
(relating to individuals with hardships).
(3) Restriction to individual market.--If a health insurance
issuer offers a health plan described in this subsection, the
issuer may only offer the plan in the individual market.

(f) Child-only Plans.--If a qualified health plan is offered through
the Exchange in any level of coverage specified under subsection (d),
the issuer shall also offer that plan through the Exchange in that level
as a plan in which the only enrollees are individuals who, as of the
beginning of a plan year, have not attained the age of 21, and such plan
shall be treated as a qualified health plan.

SEC. 1303. <> SPECIAL RULES.

(a) Special Rules Relating to Coverage of Abortion Services.--
(1) Voluntary choice of coverage of abortion services.--
(A) In general.--Notwithstanding any other provision
of this title (or any amendment made by this title), and
subject to subparagraphs (C) and (D)--
(i) nothing in this title (or any amendment
made by this title), shall be construed to require
a qualified health plan to provide coverage of
services described in subparagraph (B)(i) or
(B)(ii) as part of its essential health benefits
for any plan year; and

[[Page 169]]

(ii) <> the issuer of a
qualified health plan shall determine whether or
not the plan provides coverage of services
described in subparagraph (B)(i) or (B)(ii) as
part of such benefits for the plan year.
(B) Abortion services.--
(i) Abortions for which public funding is
prohibited.--The services described in this clause
are abortions for which the expenditure of Federal
funds appropriated for the Department of Health
and Human Services is not permitted, based on the
law as in effect as of the date that is 6 months
before the beginning of the plan year involved.
(ii) Abortions for which public funding is
allowed.--The services described in this clause
are abortions for which the expenditure of Federal
funds appropriated for the Department of Health
and Human Services is permitted, based on the law
as in effect as of the date that is 6 months
before the beginning of the plan year involved.
(C) Prohibition on federal funds for abortion
services in community health insurance option.--
(i) Determination by secretary.--The Secretary
may not determine, in accordance with subparagraph
(A)(ii), that the community health insurance
option established under section 1323 shall
provide coverage of services described in
subparagraph (B)(i) as part of benefits for the
plan year unless the Secretary--
(I) assures compliance with the
requirements of paragraph (2);
(II) assures, in accordance with
applicable provisions of generally
accepted accounting requirements,
circulars on funds management of the
Office of Management and Budget, and
guidance on accounting of the Government
Accountability Office, that no Federal
funds are used for such coverage; and
(III) notwithstanding section
1323(e)(1)(C) or any other provision of
this title, takes all necessary steps to
assure that the United States does not
bear the insurance risk for a community
health insurance option's coverage of
services described in subparagraph
(B)(i).
(ii) State requirement.--If a State requires,
in addition to the essential health benefits
required under section 1323(b)(3) (A), coverage of
services described in subparagraph (B)(i) for
enrollees of a community health insurance option
offered in such State, the State shall assure that
no funds flowing through or from the community
health insurance option, and no other Federal
funds, pay or defray the cost of providing
coverage of services described in subparagraph
(B)(i). The United States shall not bear the
insurance risk for a State's required coverage of
services described in subparagraph (B)(i).
(iii) Exceptions.--Nothing in this
subparagraph shall apply to coverage of services
described in subparagraph (B)(ii) by the community
health insurance

[[Page 170]]

option. Services described in subparagraph (B)(ii)
shall be covered to the same extent as such
services are covered under title XIX of the Social
Security Act.
(D) Assured availability of varied coverage through
exchanges.--
(i) In general.--The Secretary shall assure
that with respect to qualified health plans
offered in any Exchange established pursuant to
this title--
(I) there is at least one such plan
that provides coverage of services
described in clauses (i) and (ii) of
subparagraph (B); and
(II) there is at least one such plan
that does not provide coverage of
services described in subparagraph
(B)(i).
(ii) Special rules.--For purposes of clause
(i)--
(I) a plan shall be treated as
described in clause (i)(II) if the plan
does not provide coverage of services
described in either subparagraph (B)(i)
or (B)(ii); and
(II) if a State has one Exchange
covering more than 1 insurance market,
the Secretary shall meet the
requirements of clause (i) separately
with respect to each such market.
(2) Prohibition on the use of federal funds.--
(A) In general.--If a qualified health plan provides
coverage of services described in paragraph (1)(B)(i),
the issuer of the plan shall not use any amount
attributable to any of the following for purposes of
paying for such services:
(i) The credit under section 36B of the
Internal Revenue Code of 1986 (and the amount (if
any) of the advance payment of the credit under
section 1412 of the Patient Protection and
Affordable Care Act).
(ii) Any cost-sharing reduction under section
1402 of thePatient Protection and Affordable Care
Act (and the amount (if any) of the advance
payment of the reduction under section 1412 of the
Patient Protection and Affordable Care Act).
(B) Segregation of funds.--In the case of a plan to
which subparagraph (A) applies, the issuer of the plan
shall, out of amounts not described in subparagraph (A),
segregate an amount equal to the actuarial amounts
determined under subparagraph (C) for all enrollees from
the amounts described in subparagraph (A).
(C) <>  Actuarial value of
optional service coverage.--
(i) In general.--The Secretary shall estimate
the basic per enrollee, per month cost, determined
on an average actuarial basis, for including
coverage under a qualified health plan of the
services described in paragraph (1)(B)(i).
(ii) Considerations.--In making such estimate,
the Secretary--
(I) may take into account the impact
on overall costs of the inclusion of
such coverage, but may not take into
account any cost reduction estimated

[[Page 171]]

to result from such services, including
prenatal care, delivery, or postnatal
care;
(II) shall estimate such costs as if
such coverage were included for the
entire population covered; and
(III) may not estimate such a cost
at less than $1 per enrollee, per month.
(3) Provider conscience protections.--
<> No individual health care provider or
health care facility may be discriminated against because of a
willingness or an unwillingness, if doing so is contrary to the
religious or moral beliefs of the provider or facility, to
provide, pay for, provide coverage of, or refer for abortions.

(b) Application of State and Federal Laws Regarding Abortion.--
(1) No preemption of state laws regarding abortion.--Nothing
in this Act shall be construed to preempt or otherwise have any
effect on State laws regarding the prohibition of (or
requirement of) coverage, funding, or procedural requirements on
abortions, including parental notification or consent for the
performance of an abortion on a minor.
(2) No effect on federal laws regarding abortion.--
(A) In general.--Nothing in this Act shall be
construed to have any effect on Federal laws regarding--
(i) conscience protection;
(ii) willingness or refusal to provide
abortion; and
(iii) discrimination on the basis of the
willingness or refusal to provide, pay for, cover,
or refer for abortion or to provide or participate
in training to provide abortion.
(3) No effect on federal civil rights law.--Nothing in this
subsection shall alter the rights and obligations of employees
and employers under title VII of the Civil Rights Act of 1964.

(c) Application of Emergency Services Laws.--Nothing in this Act
shall be construed to relieve any health care provider from providing
emergency services as required by State or Federal law, including
section 1867 of the Social Security Act (popularly known as ``EMTALA'').

SEC. 1304. <> RELATED DEFINITIONS.

(a) Definitions Relating to Markets.--In this title:
(1) Group market.--The term ``group market'' means the
health insurance market under which individuals obtain health
insurance coverage (directly or through any arrangement) on
behalf of themselves (and their dependents) through a group
health plan maintained by an employer.
(2) Individual market.--The term ``individual market'' means
the market for health insurance coverage offered to individuals
other than in connection with a group health plan.
(3) Large and small group markets.--The terms ``large group
market'' and ``small group market'' mean the health insurance
market under which individuals obtain health insurance coverage
(directly or through any arrangement) on behalf of themselves
(and their dependents) through a group health plan maintained by
a large employer (as defined in subsection

[[Page 172]]

(b)(1)) or by a small employer (as defined in subsection
(b)(2)), respectively.

(b) Employers.--In this title:
(1) Large employer.--The term ``large employer'' means, in
connection with a group health plan with respect to a calendar
year and a plan year, an employer who employed an average of at
least 101 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first
day of the plan year.
(2) Small employer.--The term ``small employer'' means, in
connection with a group health plan with respect to a calendar
year and a plan year, an employer who employed an average of at
least 1 but not more than 100 employees on business days during
the preceding calendar year and who employs at least 1 employee
on the first day of the plan year.
(3) State option to treat 50 employees as small.--In the
case of plan years beginning before January 1, 2016, a State may
elect to apply this subsection by substituting ``51 employees''
for ``101 employees'' in paragraph (1) and by substituting ``50
employees'' for ``100 employees'' in paragraph (2).
(4) Rules for determining employer size.--For purposes of
this subsection--
(A) Application of aggregation rule for employers.--
All persons treated as a single employer under
subsection (b), (c), (m), or (o) of section 414 of the
Internal Revenue Code of 1986 shall be treated as 1
employer.
(B) Employers not in existence in preceding year.--
In the case of an employer which was not in existence
throughout the preceding calendar year, the
determination of whether such employer is a small or
large employer shall be based on the average number of
employees that it is reasonably expected such employer
will employ on business days in the current calendar
year.
(C) Predecessors.--Any reference in this subsection
to an employer shall include a reference to any
predecessor of such employer.
(D) Continuation of participation for growing small
employers.--If--
(i) a qualified employer that is a small
employer makes enrollment in qualified health
plans offered in the small group market available
to its employees through an Exchange; and
(ii) the employer ceases to be a small
employer by reason of an increase in the number of
employees of such employer;
<> the employer shall continue to be
treated as a small employer for purposes of this
subtitle for the period beginning with the increase and
ending with the first day on which the employer does not
make such enrollment available to its employees.

(c) Secretary.--In this title, the term ``Secretary'' means the
Secretary of Health and Human Services.
(d) State.--In this title, the term ``State'' means each of the 50
States and the District of Columbia.

[[Page 173]]

PART II--CONSUMER CHOICES AND INSURANCE COMPETITION THROUGH HEALTH
BENEFIT EXCHANGES

SEC. 1311. <> AFFORDABLE CHOICES OF HEALTH BENEFIT
PLANS.

(a) Assistance to States to Establish American Health Benefit
Exchanges.--
(1) Planning and establishment grants.--
<> There shall be appropriated to the
Secretary, out of any moneys in the Treasury not otherwise
appropriated, an amount necessary to enable the Secretary to
make awards, not later than 1 year after the date of enactment
of this Act, to States in the amount specified in paragraph (2)
for the uses described in paragraph (3).
(2) Amount specified.-- <> For each
fiscal year, the Secretary shall determine the total amount that
the Secretary will make available to each State for grants under
this subsection.
(3) Use of funds.--A State shall use amounts awarded under
this subsection for activities (including planning activities)
related to establishing an American Health Benefit Exchange, as
described in subsection (b).
(4) Renewability of grant.--
(A) In general.--Subject to subsection (d)(4), the
Secretary may renew a grant awarded under paragraph (1)
if the State recipient of such grant--
(i) is making progress, as determined by the
Secretary, toward--
(I) establishing an Exchange; and
(II) implementing the reforms
described in subtitles A and C (and the
amendments made by such subtitles); and
(ii) is meeting such other benchmarks as the
Secretary may establish.
(B) Limitation.--No <> grant shall
be awarded under this subsection after January 1, 2015.
(5) Technical assistance to facilitate participation in shop
exchanges.--The Secretary shall provide technical assistance to
States to facilitate the participation of qualified small
businesses in such States in SHOP Exchanges.

(b) American Health Benefit Exchanges.--
(1) In general.--
Each <> State shall, not later
than January 1, 2014, establish an American Health Benefit
Exchange (referred to in this title as an ``Exchange'') for the
State that--
(A) facilitates the purchase of qualified health
plans;
(B) provides for the establishment of a Small
Business Health Options Program (in this title referred
to as a ``SHOP Exchange'') that is designed to assist
qualified employers in the State who are small employers
in facilitating the enrollment of their employees in
qualified health plans offered in the small group market
in the State; and
(C) meets the requirements of subsection (d).
(2) Merger of individual and shop exchanges.--A State may
elect to provide only one Exchange in the State for providing
both Exchange and SHOP Exchange services to both qualified
individuals and qualified small employers, but only

[[Page 174]]

if the Exchange has adequate resources to assist such
individuals and employers.

(c) Responsibilities of the Secretary.--
(1) In general.--The <> Secretary shall,
by regulation, establish criteria for the certification of
health plans as qualified health plans. Such criteria shall
require that, to be certified, a plan shall, at a minimum--
(A) meet marketing requirements, and not employ
marketing practices or benefit designs that have the
effect of discouraging the enrollment in such plan by
individuals with significant health needs;
(B) ensure a sufficient choice of providers (in a
manner consistent with applicable network adequacy
provisions under section 2702(c) of the Public Health
Service Act), and provide information to enrollees and
prospective enrollees on the availability of in-network
and out-of-network providers;
(C) include within health insurance plan networks
those essential community providers, where available,
that serve predominately low-income, medically-
underserved individuals, such as health care providers
defined in section 340B(a)(4) of the Public Health
Service Act and providers described in section
1927(c)(1)(D)(i)(IV) of the Social Security Act as set
forth by section 221 of Public Law 111-8, except that
nothing in this subparagraph shall be construed to
require any health plan to provide coverage for any
specific medical procedure;
(D)(i) be accredited with respect to local
performance on clinical quality measures such as the
Healthcare Effectiveness Data and Information Set,
patient experience ratings on a standardized Consumer
Assessment of Healthcare Providers and Systems survey,
as well as consumer access, utilization management,
quality assurance, provider credentialing, complaints
and appeals, network adequacy and access, and patient
information programs by any entity recognized by the
Secretary for the accreditation of health insurance
issuers or plans (so long as any such entity has
transparent and rigorous methodological and scoring
criteria); or
(ii) receive such accreditation within a period
established by an Exchange for such accreditation that
is applicable to all qualified health plans;
(E) implement a quality improvement strategy
described in subsection (g)(1);
(F) utilize a uniform enrollment form that qualified
individuals and qualified employers may use (either
electronically or on paper) in enrolling in qualified
health plans offered through such Exchange, and that
takes into account criteria that the National
Association of Insurance Commissioners develops and
submits to the Secretary;
(G) utilize the standard format established for
presenting health benefits plan options; and
(H) provide information to enrollees and prospective
enrollees, and to each Exchange in which the plan is
offered, on any quality measures for health plan
performance endorsed under section 399JJ of the Public
Health Service Act, as applicable.

[[Page 175]]

(2) Rule of construction.-- <> Nothing in
paragraph (1)(C) shall be construed to require a qualified
health plan to contract with a provider described in such
paragraph if such provider refuses to accept the generally
applicable payment rates of such plan.
(3) Rating system.--The Secretary shall develop a rating
system that would rate qualified health plans offered through an
Exchange in each benefits level on the basis of the relative
quality and price. The Exchange shall include the quality rating
in the information provided to individuals and employers through
the Internet portal established under paragraph (4).
(4) Enrollee satisfaction system.--The Secretary shall
develop an enrollee satisfaction survey system that would
evaluate the level of enrollee satisfaction with qualified
health plans offered through an Exchange, for each such
qualified health plan that had more than 500 enrollees in the
previous year. The Exchange shall include enrollee satisfaction
information in the information provided to individuals and
employers through the Internet portal established under
paragraph (5) in a manner that allows individuals to easily
compare enrollee satisfaction levels between comparable plans.
(5) Internet portals.--The Secretary shall--
(A) continue to operate, maintain, and update the
Internet portal developed under section 1103(a) and to
assist States in developing and maintaining their own
such portal; and
(B) make available for use by Exchanges a model
template for an Internet portal that may be used to
direct qualified individuals and qualified employers to
qualified health plans, to assist such individuals and
employers in determining whether they are eligible to
participate in an Exchange or eligible for a premium tax
credit or cost-sharing reduction, and to present
standardized information (including quality ratings)
regarding qualified health plans offered through an
Exchange to assist consumers in making easy health
insurance choices.
Such template shall include, with respect to each qualified
health plan offered through the Exchange in each rating area,
access to the uniform outline of coverage the plan is required
to provide under section 2716 of the Public Health Service Act
and to a copy of the plan's written policy.
(6) Enrollment periods.--The Secretary shall require an
Exchange to provide for--
(A) <> an initial open
enrollment, as determined by the Secretary (such
determination to be made not later than July 1, 2012);
(B) <> annual open enrollment
periods, as determined by the Secretary for calendar
years after the initial enrollment period;
(C) special enrollment periods specified in section
9801 of the Internal Revenue Code of 1986 and other
special enrollment periods under circumstances similar
to such periods under part D of title XVIII of the
Social Security Act; and
(D) <> special monthly
enrollment periods for Indians (as defined in section 4
of the Indian Health Care Improvement Act).

[[Page 176]]

(d) Requirements.--
(1) In general.--An Exchange shall be a governmental agency
or nonprofit entity that is established by a State.
(2) Offering of coverage.--
(A) In general.--An Exchange shall make available
qualified health plans to qualified individuals and
qualified employers.
(B) Limitation.--
(i) In general.--An Exchange may not make
available any health plan that is not a qualified
health plan.
(ii) Offering of stand-alone dental
benefits.--Each Exchange within a State shall
allow an issuer of a plan that only provides
limited scope dental benefits meeting the
requirements of section 9832(c)(2)(A) of the
Internal Revenue Code of 1986 to offer the plan
through the Exchange (either separately or in
conjunction with a qualified health plan) if the
plan provides pediatric dental benefits meeting
the requirements of section 1302(b)(1)(J)).
(3) Rules relating to additional required benefits.--
(A) In general.--Except as provided in subparagraph
(B), an Exchange may make available a qualified health
plan notwithstanding any provision of law that may
require benefits other than the essential health
benefits specified under section 1302(b).
(B) States may require additional benefits.--
(i) In general.--Subject to the requirements
of clause (ii), a State may require that a
qualified health plan offered in such State offer
benefits in addition to the essential health
benefits specified under section 1302(b).
(ii) State must assume cost.--
A <> State shall make payments to
or on behalf of an individual eligible for the
premium tax credit under section 36B of the
Internal Revenue Code of 1986 and any cost-sharing
reduction under section 1402 to defray the cost to
the individual of any additional benefits
described in clause (i) which are not eligible for
such credit or reduction under section
36B(b)(3)(D) of such Code and section 1402(c)(4).
(4) Functions.--An Exchange shall, at a minimum--
(A) <> implement procedures for
the certification, recertification, and decertification,
consistent with guidelines developed by the Secretary
under subsection (c), of health plans as qualified
health plans;
(B) <> provide for the operation of
a toll-free telephone hotline to respond to requests for
assistance;
(C) <> maintain an Internet website
through which enrollees and prospective enrollees of
qualified health plans may obtain standardized
comparative information on such plans;
(D) assign a rating to each qualified health plan
offered through such Exchange in accordance with the
criteria developed by the Secretary under subsection
(c)(3);
(E) utilize a standardized format for presenting
health benefits plan options in the Exchange, including
the use

[[Page 177]]

of the uniform outline of coverage established under
section 2715 of the Public Health Service Act;
(F) in accordance with section 1413, inform
individuals of eligibility requirements for the medicaid
program under title XIX of the Social Security Act, the
CHIP program under title XXI of such Act, or any
applicable State or local public program and if through
screening of the application by the Exchange, the
Exchange determines that such individuals are eligible
for any such program, enroll such individuals in such
program;
(G) establish and make available by electronic means
a calculator to determine the actual cost of coverage
after the application of any premium tax credit under
section 36B of the Internal Revenue Code of 1986 and any
cost-sharing reduction under section 1402;
(H) <> subject to section
1411, grant a certification attesting that, for purposes
of the individual responsibility penalty under section
5000A of the Internal Revenue Code of 1986, an
individual is exempt from the individual requirement or
from the penalty imposed by such section because--
(i) there is no affordable qualified health
plan available through the Exchange, or the
individual's employer, covering the individual; or
(ii) the individual meets the requirements for
any other such exemption from the individual
responsibility requirement or penalty;
(I) transfer to the Secretary of the Treasury--
(i) <> a list of the individuals
who are issued a certification under subparagraph
(H), including the name and taxpayer
identification number of each individual;
(ii) the name and taxpayer identification
number of each individual who was an employee of
an employer but who was determined to be eligible
for the premium tax credit under section 36B of
the Internal Revenue Code of 1986 because--
(I) the employer did not provide
minimum essential coverage; or
(II) the employer provided such
minimum essential coverage but it was
determined under section 36B(c)(2)(C) of
such Code to either be unaffordable to
the employee or not provide the required
minimum actuarial value; and
(iii) the name and taxpayer identification
number of each individual who notifies the
Exchange under section 1411(b)(4) that they have
changed employers and of each individual who
ceases coverage under a qualified health plan
during a plan year (and the effective date of such
cessation);
(J) provide to each employer the name of each
employee of the employer described in subparagraph
(I)(ii) who ceases coverage under a qualified health
plan during a plan year (and the effective date of such
cessation); and
(K) establish the Navigator program described in
subsection (i).
(5) Funding limitations.--

[[Page 178]]

(A) No federal funds for continued
operations. <> --In establishing
an Exchange under this section, the State shall ensure
that such Exchange is self-sustaining beginning on
January 1, 2015, including allowing the Exchange to
charge assessments or user fees to participating health
insurance issuers, or to otherwise generate funding, to
support its operations.
(B) Prohibiting wasteful use of funds.--In carrying
out activities under this subsection, an Exchange shall
not utilize any funds intended for the administrative
and operational expenses of the Exchange for staff
retreats, promotional giveaways, excessive executive
compensation, or promotion of Federal or State
legislative and regulatory modifications.
(6) Consultation.--An Exchange shall consult with
stakeholders relevant to carrying out the activities under this
section, including--
(A) health care consumers who are enrollees in
qualified health plans;
(B) individuals and entities with experience in
facilitating enrollment in qualified health plans;
(C) representatives of small businesses and self-
employed individuals;
(D) State Medicaid offices; and
(E) advocates for enrolling hard to reach
populations.
(7) Publication of costs.-- <> An Exchange
shall publish the average costs of licensing, regulatory fees,
and any other payments required by the Exchange, and the
administrative costs of such Exchange, on an Internet website to
educate consumers on such costs. Such information shall also
include monies lost to waste, fraud, and abuse.

(e) Certification.--
(1) In general.--An Exchange may certify a health plan as a
qualified health plan if--
(A) such health plan meets the requirements for
certification as promulgated by the Secretary under
subsection (c)(1); and
(B) <> the Exchange determines
that making available such health plan through such
Exchange is in the interests of qualified individuals
and qualified employers in the State or States in which
such Exchange operates, except that the Exchange may not
exclude a health plan--
(i) on the basis that such plan is a fee-for-
service plan;
(ii) through the imposition of premium price
controls; or
(iii) on the basis that the plan provides
treatments necessary to prevent patients' deaths
in circumstances the Exchange determines are
inappropriate or too costly.
(2) Premium considerations.--The Exchange shall require
health plans seeking certification as qualified health plans to
submit a justification for any premium increase prior to
implementation of the increase. <> Such plans
shall prominently post such information on their websites. The
Exchange may take this information, and the information and the
recommendations provided to the Exchange by the State under

[[Page 179]]

section 2794(b)(1) of the Public Health Service Act (relating to
patterns or practices of excessive or unjustified premium
increases), into consideration when determining whether to make
such health plan available through the Exchange. The Exchange
shall take into account any excess of premium growth outside the
Exchange as compared to the rate of such growth inside the
Exchange, including information reported by the States.

(f) Flexibility.--
(1) Regional or other interstate exchanges.--An Exchange may
operate in more than one State if--
(A) each State in which such Exchange operates
permits such operation; and
(B) the Secretary approves such regional or
interstate Exchange.
(2) Subsidiary exchanges.--A State may establish one or more
subsidiary Exchanges if--
(A) each such Exchange serves a geographically
distinct area; and
(B) the area served by each such Exchange is at
least as large as a rating area described in section
2701(a) of the Public Health Service Act.
(3) Authority to contract.--
(A) In general.--A State may elect to authorize an
Exchange established by the State under this section to
enter into an agreement with an eligible entity to carry
out 1 or more responsibilities of the Exchange.
(B) Eligible entity. <> --In this
paragraph, the term ``eligible entity'' means--
(i) a person--
(I) incorporated under, and subject
to the laws of, 1 or more States;
(II) that has demonstrated
experience on a State or regional basis
in the individual and small group health
insurance markets and in benefits
coverage; and
(III) that is not a health insurance
issuer or that is treated under
subsection (a) or (b) of section 52 of
the Internal Revenue Code of 1986 as a
member of the same controlled group of
corporations (or under common control
with) as a health insurance issuer; or
(ii) the State medicaid agency under title XIX
of the Social Security Act.

(g) Rewarding Quality Through Market-Based Incentives.--
(1) Strategy described.--A strategy described in this
paragraph is a payment structure that provides increased
reimbursement or other incentives for--
(A) improving health outcomes through the
implementation of activities that shall include quality
reporting, effective case management, care coordination,
chronic disease management, medication and care
compliance initiatives, including through the use of the
medical home model, for treatment or services under the
plan or coverage;

[[Page 180]]

(B) the implementation of activities to prevent
hospital readmissions through a comprehensive program
for hospital discharge that includes patient-centered
education and counseling, comprehensive discharge
planning, and post discharge reinforcement by an
appropriate health care professional;
(C) the implementation of activities to improve
patient safety and reduce medical errors through the
appropriate use of best clinical practices, evidence
based medicine, and health information technology under
the plan or coverage; and
(D) the implementation of wellness and health
promotion activities.
(2) Guidelines.--The Secretary, in consultation with experts
in health care quality and stakeholders, shall develop
guidelines concerning the matters described in paragraph (1).
(3) Requirements.-- <> The guidelines
developed under paragraph (2) shall require the periodic
reporting to the applicable Exchange of the activities that a
qualified health plan has conducted to implement a strategy
described in paragraph (1).

(h) Quality Improvement.--
(1) Enhancing patient safety.-- <> Beginning on January 1, 2015, a qualified health plan
may contract with--
(A) a hospital with greater than 50 beds only if
such hospital--
(i) utilizes a patient safety evaluation
system as described in part C of title IX of the
Public Health Service Act; and
(ii) implements a mechanism to ensure that
each patient receives a comprehensive program for
hospital discharge that includes patient-centered
education and counseling, comprehensive discharge
planning, and post discharge reinforcement by an
appropriate health care professional; or
(B) a health care provider only if such provider
implements such mechanisms to improve health care
quality as the Secretary may by regulation require.
(2) Exceptions.--The Secretary may establish reasonable
exceptions to the requirements described in paragraph (1).
(3) Adjustment.--The Secretary may by regulation adjust the
number of beds described in paragraph (1)(A).

(i) Navigators.--
(1) <>  In general.--An Exchange shall
establish a program under which it awards grants to entities
described in paragraph (2) to carry out the duties described in
paragraph (3).
(2) Eligibility.--
(A) In general.--To be eligible to receive a grant
under paragraph (1), an entity shall demonstrate to the
Exchange involved that the entity has existing
relationships, or could readily establish relationships,
with employers and employees, consumers (including
uninsured and underinsured consumers), or self-employed
individuals likely to be qualified to enroll in a
qualified health plan.
(B) Types.--Entities described in subparagraph (A)
may include trade, industry, and professional
associations, commercial fishing industry organizations,
ranching and farming organizations, community and
consumer-focused

[[Page 181]]

nonprofit groups, chambers of commerce, unions, small
business development centers, other licensed insurance
agents and brokers, and other entities that--
(i) are capable of carrying out the duties
described in paragraph (3);
(ii) meet the standards described in paragraph
(4); and
(iii) provide information consistent with the
standards developed under paragraph (5).
(3) Duties.--An entity that serves as a navigator under a
grant under this subsection shall--
(A) conduct public education activities to raise
awareness of the availability of qualified health plans;
(B) distribute fair and impartial information
concerning enrollment in qualified health plans, and the
availability of premium tax credits under section 36B of
the Internal Revenue Code of 1986 and cost-sharing
reductions under section 1402;
(C) facilitate enrollment in qualified health plans;
(D) provide referrals to any applicable office of
health insurance consumer assistance or health insurance
ombudsman established under section 2793 of the Public
Health Service Act, or any other appropriate State
agency or agencies, for any enrollee with a grievance,
complaint, or question regarding their health plan,
coverage, or a determination under such plan or
coverage; and
(E) provide information in a manner that is
culturally and linguistically appropriate to the needs
of the population being served by the Exchange or
Exchanges.
(4) Standards.--
(A) In general.--The Secretary shall establish
standards for navigators under this subsection,
including provisions to ensure that any private or
public entity that is selected as a navigator is
qualified, and licensed if appropriate, to engage in the
navigator activities described in this subsection and to
avoid conflicts of interest. Under such standards, a
navigator shall not--
(i) be a health insurance issuer; or
(ii) receive any consideration directly or
indirectly from any health insurance issuer in
connection with the enrollment of any qualified
individuals or employees of a qualified employer
in a qualified health plan.
(5) Fair and impartial information and services.--
<> The Secretary, in collaboration with
States, shall develop standards to ensure that information made
available by navigators is fair, accurate, and impartial.
(6) Funding.--Grants under this subsection shall be made
from the operational funds of the Exchange and not Federal funds
received by the State to establish the Exchange.

(j) Applicability of Mental Health Parity.--Section 2726 of the
Public Health Service Act shall apply to qualified health plans in the
same manner and to the same extent as such section applies to health
insurance issuers and group health plans.
(k) Conflict.--An Exchange may not establish rules that conflict
with or prevent the application of regulations promulgated by the
Secretary under this subtitle.

[[Page 182]]

SEC. 1312. <>  CONSUMER CHOICE.

(a) Choice.--
(1) Qualified individuals.--A qualified individual may
enroll in any qualified health plan available to such
individual.
(2) Qualified employers.--
(A) Employer may specify level.--A qualified
employer may provide support for coverage of employees
under a qualified health plan by selecting any level of
coverage under section 1302(d) to be made available to
employees through an Exchange.
(B) Employee may choose plans within a level.--Each
employee of a qualified employer that elects a level of
coverage under subparagraph (A) may choose to enroll in
a qualified health plan that offers coverage at that
level.

(b) Payment of Premiums by Qualified Individuals.--A qualified
individual enrolled in any qualified health plan may pay any applicable
premium owed by such individual to the health insurance issuer issuing
such qualified health plan.
(c) Single Risk Pool.--
(1) Individual market.--A health insurance issuer shall
consider all enrollees in all health plans (other than
grandfathered health plans) offered by such issuer in the
individual market, including those enrollees who do not enroll
in such plans through the Exchange, to be members of a single
risk pool.
(2) Small group market.--A health insurance issuer shall
consider all enrollees in all health plans (other than
grandfathered health plans) offered by such issuer in the small
group market, including those enrollees who do not enroll in
such plans through the Exchange, to be members of a single risk
pool.
(3) Merger of markets.--A State may require the individual
and small group insurance markets within a State to be merged if
the State determines appropriate.
(4) State law.--A State law requiring grandfathered health
plans to be included in a pool described in paragraph (1) or (2)
shall not apply.

(d) Empowering Consumer Choice.--
(1) Continued operation of market outside exchanges.--
Nothing in this title shall be construed to prohibit--
(A) a health insurance issuer from offering outside
of an Exchange a health plan to a qualified individual
or qualified employer; and
(B) a qualified individual from enrolling in, or a
qualified employer from selecting for its employees, a
health plan offered outside of an Exchange.
(2) Continued operation of state benefit requirements.--
Nothing in this title shall be construed to terminate, abridge,
or limit the operation of any requirement under State law with
respect to any policy or plan that is offered outside of an
Exchange to offer benefits.
(3) Voluntary nature of an exchange.--
(A) Choice to enroll or not to enroll.--Nothing in
this title shall be construed to restrict the choice of

[[Page 183]]

a qualified individual to enroll or not to enroll in a
qualified health plan or to participate in an Exchange.
(B) Prohibition against compelled enrollment.--
Nothing in this title shall be construed to compel an
individual to enroll in a qualified health plan or to
participate in an Exchange.
(C) Individuals allowed to enroll in any plan.--A
qualified individual may enroll in any qualified health
plan, except that in the case of a catastrophic plan
described in section 1302(e), a qualified individual may
enroll in the plan only if the individual is eligible to
enroll in the plan under section 1302(e)(2).
(D) Members of congress in the exchange.--
(i) Requirement.--Notwithstanding any other
provision of law, after the effective date of this
subtitle, the only health plans that the Federal
Government may make available to Members of
Congress and congressional staff with respect to
their service as a Member of Congress or
congressional staff shall be health plans that
are--
(I) created under this Act (or an
amendment made by this Act); or
(II) offered through an Exchange
established under this Act (or an
amendment made by this Act).
(ii) Definitions.--In this section:
(I) Member of congress.--The term
``Member of Congress'' means any member
of the House of Representatives or the
Senate.
(II) Congressional staff.--The term
``congressional staff'' means all full-
time and part-time employees employed by
the official office of a Member of
Congress, whether in Washington, DC or
outside of Washington, DC.
(4) No penalty for transferring to minimum essential
coverage outside exchange.--An Exchange, or a qualified health
plan offered through an Exchange, shall not impose any penalty
or other fee on an individual who cancels enrollment in a plan
because the individual becomes eligible for minimum essential
coverage (as defined in section 5000A(f) of the Internal Revenue
Code of 1986 without regard to paragraph (1)(C) or (D) thereof)
or such coverage becomes affordable (within the meaning of
section 36B(c)(2)(C) of such Code).

(e) Enrollment Through Agents or Brokers. <> --
The Secretary shall establish procedures under which a State may allow
agents or brokers--
(1) to enroll individuals in any qualified health plans in
the individual or small group market as soon as the plan is
offered through an Exchange in the State; and
(2) to assist individuals in applying for premium tax
credits and cost-sharing reductions for plans sold through an
Exchange.

Such procedures may include the establishment of rate schedules for
broker commissions paid by health benefits plans offered through an
exchange.
(f) Qualified Individuals and Employers; Access Limited to Citizens
and Lawful Residents.--
(1) Qualified individuals.--In this title:

[[Page 184]]

(A) In general. <> --The term
``qualified individual'' means, with respect to an
Exchange, an individual who--
(i) is seeking to enroll in a qualified health
plan in the individual market offered through the
Exchange; and
(ii) resides in the State that established the
Exchange (except with respect to territorial
agreements under section 1312(f)).
(B) Incarcerated individuals excluded.--An
individual shall not be treated as a qualified
individual if, at the time of enrollment, the individual
is incarcerated, other than incarceration pending the
disposition of charges.
(2) Qualified employer.--In this title:
(A) In general. <> --The term
``qualified employer'' means a small employer that
elects to make all full-time employees of such employer
eligible for 1 or more qualified health plans offered in
the small group market through an Exchange that offers
qualified health plans.
(B) Extension to large groups.--
(i) In general. <> --
Beginning in 2017, each State may allow issuers of
health insurance coverage in the large group
market in the State to offer qualified health
plans in such market through an Exchange. Nothing
in this subparagraph shall be construed as
requiring the issuer to offer such plans through
an Exchange.
(ii) Large employers eligible.--If a State
under clause (i) allows issuers to offer qualified
health plans in the large group market through an
Exchange, the term ``qualified employer'' shall
include a large employer that elects to make all
full-time employees of such employer eligible for
1 or more qualified health plans offered in the
large group market through the Exchange.
(3) Access limited to lawful residents.--If an individual is
not, or is not reasonably expected to be for the entire period
for which enrollment is sought, a citizen or national of the
United States or an alien lawfully present in the United States,
the individual shall not be treated as a qualified individual
and may not be covered under a qualified health plan in the
individual market that is offered through an Exchange.

SEC. 1313. <> FINANCIAL INTEGRITY.

(a) Accounting for Expenditures.--
(1) In general.-- <> An Exchange
shall keep an accurate accounting of all activities, receipts,
and expenditures and shall annually submit to the Secretary a
report concerning such accountings.
(2) Investigations.--The Secretary, in coordination with the
Inspector General of the Department of Health and Human
Services, may investigate the affairs of an Exchange, may
examine the properties and records of an Exchange, and may
require periodic reports in relation to activities undertaken by
an Exchange. An Exchange shall fully cooperate in any
investigation conducted under this paragraph.
(3) Audits.-- <> An Exchange shall be
subject to annual audits by the Secretary.

[[Page 185]]

(4) Pattern of abuse.-- <> If the
Secretary determines that an Exchange or a State has engaged in
serious misconduct with respect to compliance with the
requirements of, or carrying out of activities required under,
this title, the Secretary may rescind from payments otherwise
due to such State involved under this or any other Act
administered by the Secretary an amount not to exceed 1 percent
of such payments per year until corrective actions are taken by
the State that are determined to be adequate by the Secretary.
(5) Protections against fraud and abuse.--With respect to
activities carried out under this title, the Secretary shall
provide for the efficient and non-discriminatory administration
of Exchange activities and implement any measure or procedure
that--
(A) the Secretary determines is appropriate to
reduce fraud and abuse in the administration of this
title; and
(B) the Secretary has authority to implement under
this title or any other Act.
(6) Application of the false claims act.--
(A) In general.--Payments made by, through, or in
connection with an Exchange are subject to the False
Claims Act (31 U.S.C. 3729 et seq.) if those payments
include any Federal funds. Compliance with the
requirements of this Act concerning eligibility for a
health insurance issuer to participate in the Exchange
shall be a material condition of an issuer's entitlement
to receive payments, including payments of premium tax
credits and cost-sharing reductions, through the
Exchange.
(B) Damages <> .--Notwithstanding
paragraph (1) of section 3729(a) of title 31, United
States Code, and subject to paragraph (2) of such
section, the civil penalty assessed under the False
Claims Act on any person found liable under such Act as
described in subparagraph (A) shall be increased by not
less than 3 times and not more than 6 times the amount
of damages which the Government sustains because of the
act of that person.

(b) GAO Oversight. <> --Not later than 5
years after the first date on which Exchanges are required to be
operational under this title, the Comptroller General shall conduct an
ongoing study of Exchange activities and the enrollees in qualified
health plans offered through Exchanges. Such study shall review--
(1) the operations and administration of Exchanges,
including surveys and reports of qualified health plans offered
through Exchanges and on the experience of such plans (including
data on enrollees in Exchanges and individuals purchasing health
insurance coverage outside of Exchanges), the expenses of
Exchanges, claims statistics relating to qualified health plans,
complaints data relating to such plans, and the manner in which
Exchanges meet their goals;
(2) any significant observations regarding the utilization
and adoption of Exchanges;
(3) where appropriate, recommendations for improvements in
the operations or policies of Exchanges; and
(4) how many physicians, by area and specialty, are not
taking or accepting new patients enrolled in Federal Government
health care programs, and the adequacy of provider networks of
Federal Government health care programs.

[[Page 186]]

PART III--STATE FLEXIBILITY RELATING TO EXCHANGES

SEC. 1321. <> STATE FLEXIBILITY IN OPERATION AND
ENFORCEMENT OF EXCHANGES AND RELATED REQUIREMENTS.

(a) Establishment of Standards.--
(1) In general.-- <> The Secretary
shall, as soon as practicable after the date of enactment of
this Act, issue regulations setting standards for meeting the
requirements under this title, and the amendments made by this
title, with respect to--
(A) the establishment and operation of Exchanges
(including SHOP Exchanges);
(B) the offering of qualified health plans through
such Exchanges;
(C) the establishment of the reinsurance and risk
adjustment programs under part V; and
(D) such other requirements as the Secretary
determines appropriate.
The preceding sentence shall not apply to standards for
requirements under subtitles A and C (and the amendments made by
such subtitles) for which the Secretary issues regulations under
the Public Health Service Act.
(2) Consultation.--In issuing the regulations under
paragraph (1), the Secretary shall consult with the National
Association of Insurance Commissioners and its members and with
health insurance issuers, consumer organizations, and such other
individuals as the Secretary selects in a manner designed to
ensure balanced representation among interested parties.

(b) State Action <> .--Each State that elects, at
such time and in such manner as the Secretary may prescribe, to apply
the requirements described in subsection (a) shall, not later than
January 1, 2014, adopt and have in effect--
(1) the Federal standards established under subsection (a);
or
(2) a State law or regulation that the Secretary determines
implements the standards within the State.

(c) Failure To Establish Exchange or Implement Requirements.--
(1) In general.--If--
(A) a State is not an electing State under
subsection (b); or
(B) <> the Secretary
determines, on or before January 1, 2013, that an
electing State--
(i) will not have any required Exchange
operational by January 1, 2014; or
(ii) has not taken the actions the Secretary
determines necessary to implement--
(I) the other requirements set forth
in the standards under subsection (a);
or
(II) the requirements set forth in
subtitles A and C and the amendments
made by such subtitles;
the Secretary shall (directly or through agreement with a not-
for-profit entity) establish and operate such Exchange within
the State and the Secretary shall take such actions as are
necessary to implement such other requirements.

[[Page 187]]

(2) Enforcement authority.-- <> The
provisions of section 2736(b) of the Public Health Services Act
shall apply to the enforcement under paragraph (1) of
requirements of subsection (a)(1) (without regard to any
limitation on the application of those provisions to group
health plans).

(d) No Interference With State Regulatory Authority.--Nothing in
this title shall be construed to preempt any State law that does not
prevent the application of the provisions of this title.
(e) Presumption for Certain State-Operated Exchanges.--
(1) In general.-- <> In the case of a
State operating an Exchange before January 1, 2010, and which
has insured a percentage of its population not less than the
percentage of the population projected to be covered nationally
after the implementation of this Act, that seeks to operate an
Exchange under this section, the Secretary shall presume that
such Exchange meets the standards under this section unless the
Secretary determines, after completion of the process
established under paragraph (2), that the Exchange does not
comply with such standards.
(2) Process.--The Secretary shall establish a process to
work with a State described in paragraph (1) to provide
assistance necessary to assist the State's Exchange in coming
into compliance with the standards for approval under this
section.

SEC. 1322. <> FEDERAL PROGRAM TO ASSIST
ESTABLISHMENT AND OPERATION OF NONPROFIT, MEMBER-RUN HEALTH
INSURANCE ISSUERS.

(a) Establishment of Program.--
(1) In general.--The Secretary shall establish a program to
carry out the purposes of this section to be known as the
Consumer Operated and Oriented Plan (CO-OP) program.
(2) Purpose.--It is the purpose of the CO-OP program to
foster the creation of qualified nonprofit health insurance
issuers to offer qualified health plans in the individual and
small group markets in the States in which the issuers are
licensed to offer such plans.

(b) Loans and Grants Under the CO-OP Program.--
(1) In general.--The Secretary shall provide through the CO-
OP program for the awarding to persons applying to become
qualified nonprofit health insurance issuers of--
(A) loans to provide assistance to such person in
meeting its start-up costs; and
(B) grants to provide assistance to such person in
meeting any solvency requirements of States in which the
person seeks to be licensed to issue qualified health
plans.
(2) Requirements for awarding loans and grants.--
(A) In general.--In awarding loans and grants under
the CO-OP program, the Secretary shall--
(i) take into account the recommendations of
the advisory board established under paragraph
(3);
(ii) give priority to applicants that will
offer qualified health plans on a Statewide basis,
will utilize integrated care models, and have
significant private support; and
(iii) ensure that there is sufficient funding
to establish at least 1 qualified nonprofit health
insurance

[[Page 188]]

issuer in each State, except that nothing in this
clause shall prohibit the Secretary from funding
the establishment of multiple qualified nonprofit
health insurance issuers in any State if the
funding is sufficient to do so.
(B) States without issuers in program.--If no health
insurance issuer applies to be a qualified nonprofit
health insurance issuer within a State, the Secretary
may use amounts appropriated under this section for the
awarding of grants to encourage the establishment of a
qualified nonprofit health insurance issuer within the
State or the expansion of a qualified nonprofit health
insurance issuer from another State to the State.
(C) Agreement.--
(i) In general.--The Secretary shall require
any person receiving a loan or grant under the CO-
OP program to enter into an agreement with the
Secretary which requires such person to meet (and
to continue to meet)--
(I) any requirement under this
section for such person to be treated as
a qualified nonprofit health insurance
issuer; and
(II) any requirements contained in
the agreement for such person to receive
such loan or grant.
(ii) Restrictions on use of federal funds.--
The agreement shall include a requirement that no
portion of the funds made available by any loan or
grant under this section may be used--
(I) <> for carrying
on propaganda, or otherwise attempting,
to influence legislation; or
(II) for marketing.
Nothing in this clause shall be construed to allow
a person to take any action prohibited by section
501(c)(29) of the Internal Revenue Code of 1986.
(iii) Failure to meet
requirements <> .--
If the Secretary determines that a person has
failed to meet any requirement described in clause
(i) or (ii) and has failed to correct such failure
within a reasonable period of time of when the
person first knows (or reasonably should have
known) of such failure, such person shall repay to
the Secretary an amount equal to the sum of--
(I) 110 percent of the aggregate
amount of loans and grants received
under this section; plus
(II) interest on the aggregate
amount of loans and grants received
under this section for the period the
loans or grants were outstanding.
<> The Secretary shall notify
the Secretary of the Treasury of any determination
under this section of a failure that results in
the termination of an issuer's tax-exempt status
under section 501(c)(29) of such Code.
(D) Time for awarding loans and
grants. <> --The Secretary shall not
later than July 1, 2013, award the loans and grants
under the CO-OP program and begin the distribution of
amounts awarded under such loans and grants.
(3) <>  Advisory board.--

[[Page 189]]

(A) In general.--The advisory board under this
paragraph shall consist of 15 members appointed by the
Comptroller General of the United States from among
individuals with qualifications described in section
1805(c)(2) of the Social Security Act.
(B) Rules relating to appointments.--
(i) Standards.--Any individual appointed under
subparagraph (A) shall meet ethics and conflict of
interest standards protecting against insurance
industry involvement and interference.
(ii) Original
appointments. <> --The original
appointment of board members under subparagraph
(A)(ii) shall be made no later than 3 months after
the date of enactment of this Act.
(C) Vacancy.--Any vacancy on the advisory board
shall be filled in the same manner as the original
appointment.
(D) Pay and reimbursement.--
(i) No compensation for members of advisory
board.--Except as provided in clause (ii), a
member of the advisory board may not receive pay,
allowances, or benefits by reason of their service
on the board.
(ii) Travel expenses.--Each member shall
receive travel expenses, including per diem in
lieu of subsistence under subchapter I of chapter
57 of title 5, United States Code.
(E) Application of faca.--The Federal Advisory
Committee Act (5 U.S.C. App.) shall apply to the
advisory board, except that section 14 of such Act shall
not apply.
(F) Termination.--The advisory board shall terminate
on the earlier of the date that it completes its duties
under this section or December 31, 2015.

(c) Qualified Nonprofit Health Insurance Issuer.--For purposes of
this section--
(1) In general.-- <> The term ``qualified
nonprofit health insurance issuer'' means a health insurance
issuer that is an organization--
(A) that is organized under State law as a
nonprofit, member corporation;
(B) substantially all of the activities of which
consist of the issuance of qualified health plans in the
individual and small group markets in each State in
which it is licensed to issue such plans; and
(C) that meets the other requirements of this
subsection.
(2) Certain organizations prohibited.--An organization shall
not be treated as a qualified nonprofit health insurance issuer
if--
(A) the organization or a related entity (or any
predecessor of either) was a health insurance issuer on
July 16, 2009; or
(B) the organization is sponsored by a State or
local government, any political subdivision thereof, or
any instrumentality of such government or political
subdivision.
(3) Governance requirements.--An organization shall not be
treated as a qualified nonprofit health insurance issuer
unless--

[[Page 190]]

(A) the governance of the organization is subject to
a majority vote of its members;
(B) its governing documents incorporate ethics and
conflict of interest standards protecting against
insurance industry involvement and interference; and
(C) as provided in regulations promulgated by the
Secretary, the organization is required to operate with
a strong consumer focus, including timeliness,
responsiveness, and accountability to members.
(4) Profits inure to benefit of members.--An organization
shall not be treated as a qualified nonprofit health insurance
issuer unless any profits made by the organization are required
to be used to lower premiums, to improve benefits, or for other
programs intended to improve the quality of health care
delivered to its members.
(5) Compliance with state insurance laws.--An organization
shall not be treated as a qualified nonprofit health insurance
issuer unless the organization meets all the requirements that
other issuers of qualified health plans are required to meet in
any State where the issuer offers a qualified health plan,
including solvency and licensure requirements, rules on payments
to providers, and compliance with network adequacy rules, rate
and form filing rules, any applicable State premium assessments
and any other State law described in section 1324(b).
(6) Coordination with state insurance reforms.--An
organization shall not be treated as a qualified nonprofit
health insurance issuer unless the organization does not offer a
health plan in a State until that State has in effect (or the
Secretary has implemented for the State) the market reforms
required by part A of title XXVII of the Public Health Service
Act (as amended by subtitles A and C of this Act).

(d) Establishment of Private Purchasing Council.--
(1) In general.--Qualified nonprofit health insurance
issuers participating in the CO-OP program under this section
may establish a private purchasing council to enter into
collective purchasing arrangements for items and services that
increase administrative and other cost efficiencies, including
claims administration, administrative services, health
information technology, and actuarial services.
(2) Council may not set payment rates.--The private
purchasing council established under paragraph (1) shall not set
payment rates for health care facilities or providers
participating in health insurance coverage provided by qualified
nonprofit health insurance issuers.
(3) Continued application of antitrust laws.--
(A) In general.--Nothing in this section shall be
construed to limit the application of the antitrust laws
to any private purchasing council (whether or not
established under this subsection) or to any qualified
nonprofit health insurance issuer participating in such
a council.
(B) Antitrust laws.--For purposes of this
subparagraph, the term ``antitrust laws'' has the
meaning given the term in subsection (a) of the first
section of the Clayton Act (15 U.S.C. 12(a)). Such term
also includes section 5 of the Federal Trade Commission
Act (15 U.S.C. 45) to

[[Page 191]]

the extent that such section 5 applies to unfair methods
of competition.

(e) Limitation on Participation.--No representative of any Federal,
State, or local government (or of any political subdivision or
instrumentality thereof), and no representative of a person described in
subsection (c)(2)(A), may serve on the board of directors of a qualified
nonprofit health insurance issuer or with a private purchasing council
established under subsection (d).
(f) Limitations on Secretary.--
(1) In general.--The Secretary shall not--
(A) participate in any negotiations between 1 or
more qualified nonprofit health insurance issuers (or a
private purchasing council established under subsection
(d)) and any health care facilities or providers,
including any drug manufacturer, pharmacy, or hospital;
and
(B) establish or maintain a price structure for
reimbursement of any health benefits covered by such
issuers.
(2) Competition.--Nothing in this section shall be construed
as authorizing the Secretary to interfere with the competitive
nature of providing health benefits through qualified nonprofit
health insurance issuers.

(g) Appropriations.--There are hereby appropriated, out of any funds
in the Treasury not otherwise appropriated, $6,000,000,000 to carry out
this section.
(h) Tax Exemption for Qualified Nonprofit Health Insurance Issuer.--
(1) In general.--Section 501(c) of the Internal Revenue Code
of 1986 <>  (relating to list of exempt
organizations) is amended by adding at the end the following:
``(29) CO-OP health insurance issuers.--
``(A) In general.--A qualified nonprofit health
insurance issuer (within the meaning of section 1322 of
the Patient Protection and Affordable Care Act) which
has received a loan or grant under the CO-OP program
under such section, but only with respect to periods for
which the issuer is in compliance with the requirements
of such section and any agreement with respect to the
loan or grant.
``(B) Conditions for
exemption <> .--Subparagraph (A)
shall apply to an organization only if--
``(i) <> the organization has
given notice to the Secretary, in such manner as
the Secretary may by regulations prescribe, that
it is applying for recognition of its status under
this paragraph,
``(ii) except as provided in section
1322(c)(4) of the Patient Protection and
Affordable Care Act, no part of the net earnings
of which inures to the benefit of any private
shareholder or individual,
``(iii) <> no substantial
part of the activities of which is carrying on
propaganda, or otherwise attempting, to influence
legislation, and
``(iv) the organization 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.''.

[[Page 192]]

(2) Additional reporting requirement.--Section 6033 of such
Code (relating to returns by exempt organizations) is amended by
redesignating subsection (m) as subsection (n) and by inserting
after subsection (l) the following:

``(m) Additional Information Required From CO-OP Insurers.--An
organization described in section 501(c)(29) shall include on the return
required under subsection (a) the following information:
``(1) The amount of the reserves required by each State in
which the organization is licensed to issue qualified health
plans.
``(2) The amount of reserves on hand.''.
(3) Application of tax on excess benefit transactions.--
Section 4958(e)(1) of such Code (defining applicable tax-exempt
organization) is amended by striking ``paragraph (3) or (4)''
and inserting ``paragraph (3), (4), or (29)''.

(i) GAO Study and Report.--
(1) Study.--The Comptroller General of the General
Accountability Office shall conduct an ongoing study on
competition and market concentration in the health insurance
market in the United States after the implementation of the
reforms in such market under the provisions of, and the
amendments made by, this Act. Such study shall include an
analysis of new issuers of health insurance in such market.
(2) Report.-- <> The Comptroller
General shall, not later than December 31 of each even-numbered
year (beginning with 2014), report to the appropriate committees
of the Congress the results of the study conducted under
paragraph (1), including any recommendations for administrative
or legislative changes the Comptroller General determines
necessary or appropriate to increase competition in the health
insurance market.

SEC. 1323. <> COMMUNITY HEALTH INSURANCE OPTION.

(a) Voluntary Nature.--
(1) No requirement for health care providers to
participate.--Nothing in this section shall be construed to
require a health care provider to participate in a community
health insurance option, or to impose any penalty for non-
participation.
(2) No requirement for individuals to join.--Nothing in this
section shall be construed to require an individual to
participate in a community health insurance option, or to impose
any penalty for non-participation.
(3) State opt out.--
(A) In general.--A State may elect to prohibit
Exchanges in such State from offering a community health
insurance option if such State enacts a law to provide
for such prohibition.
(B) Termination of opt out.--A State may repeal a
law described in subparagraph (A) and provide for the
offering of such an option through the Exchange.

(b) Establishment of Community Health Insurance Option.--
(1) Establishment.--The Secretary shall establish a
community health insurance option to offer, through the
Exchanges established under this title (other than Exchanges

[[Page 193]]

in States that elect to opt out as provided for in subsection
(a)(3)), health care coverage that provides value, choice,
competition, and stability of affordable, high quality coverage
throughout the United States.
(2) Community health insurance option.--
<> In this section, the term ``community
health insurance option'' means health insurance coverage that--
(A) except as specifically provided for in this
section, complies with the requirements for being a
qualified health plan;
(B) provides high value for the premium charged;
(C) reduces administrative costs and promotes
administrative simplification for beneficiaries;
(D) promotes high quality clinical care;
(E) provides high quality customer service to
beneficiaries;
(F) offers a sufficient choice of providers; and
(G) complies with State laws (if any), except as
otherwise provided for in this title, relating to the
laws described in section 1324(b).
(3) Essential health benefits.--
(A) General rule.--Except as provided in
subparagraph (B), a community health insurance option
offered under this section shall provide coverage only
for the essential health benefits described in section
1302(b).
(B) States may offer additional benefits.--Nothing
in this section shall preclude a State from requiring
that benefits in addition to the essential health
benefits required under subparagraph (A) be provided to
enrollees of a community health insurance option offered
in such State.
(C) Credits.--
(i) In general.--An individual enrolled in a
community health insurance option under this
section shall be eligible for credits under
section 36B of the Internal Revenue Code of 1986
in the same manner as an individual who is
enrolled in a qualified health plan.
(ii) No additional federal cost.--A
requirement by a State under subparagraph (B) that
benefits in addition to the essential health
benefits required under subparagraph (A) be
provided to enrollees of a community health
insurance option shall not affect the amount of a
premium tax credit provided under section 36B of
the Internal Revenue Code of 1986 with respect to
such plan.
(D) State must assume cost <> .--A
State shall make payments to or on behalf of an eligible
individual to defray the cost of any additional benefits
described in subparagraph (B).
(E) Ensuring access to all services.--Nothing in
this Act shall prohibit an individual enrolled in a
community health insurance option from paying out-of-
pocket the full cost of any item or service not included
as an essential health benefit or otherwise covered as a
benefit by a health plan. Nothing in subparagraph (B)
shall prohibit any type of medical provider from
accepting an out-of-pocket payment from an individual
enrolled in a community health

[[Page 194]]

insurance option for a service otherwise not included as
an essential health benefit.
(F) Protecting access to end of life care.--A
community health insurance option offered under this
section shall be prohibited from limiting access to end
of life care.
(4) Cost sharing.--A community health insurance option shall
offer coverage at each of the levels of coverage described in
section 1302(d).
(5) Premiums.--
(A) Premiums sufficient to cover costs.--The
Secretary shall establish geographically adjusted
premium rates in an amount sufficient to cover expected
costs (including claims and administrative costs) using
methods in general use by qualified health plans.
(B) Applicable rules.--The provisions of title XXVII
of the Public Health Service Act relating to premiums
shall apply to community health insurance options under
this section, including modified community rating
provisions under section 2701 of such Act.
(C) Collection of data.--The Secretary shall collect
data as necessary to set premium rates under
subparagraph (A).
(D) National pooling.--Notwithstanding any other
provision of law, the Secretary may treat all enrollees
in community health insurance options as members of a
single pool.
(E) Contingency margin.--In establishing premium
rates under subparagraph (A), the Secretary shall
include an appropriate amount for a contingency margin.
(6) Reimbursement rates.--
(A) Negotiated rates.--The Secretary shall negotiate
rates for the reimbursement of health care providers for
benefits covered under a community health insurance
option.
(B) Limitation.--The rates described in subparagraph
(A) shall not be higher, in aggregate, than the average
reimbursement rates paid by health insurance issuers
offering qualified health plans through the Exchange.
(C) Innovation.--Subject to the limits contained in
subparagraph (A), a State Advisory Council established
or designated under subsection (d) may develop or
encourage the use of innovative payment policies that
promote quality, efficiency and savings to consumers.
(7) Solvency and consumer protection.--
(A) <>  Solvency.--The Secretary
shall establish a Federal solvency standard to be
applied with respect to a community health insurance
option. A community health insurance option shall also
be subject to the solvency standard of each State in
which such community health insurance option is offered.
(B) Minimum required.--In establishing the standard
described under subparagraph (A), the Secretary shall
require a reserve fund that shall be equal to at least
the dollar value of the incurred but not reported claims
of a community health insurance option.

[[Page 195]]

(C) Consumer
protections <> .--The consumer
protection laws of a State shall apply to a community
health insurance option.
(8) Requirements established in partnership with insurance
commissioners.--
(A) In general.--The Secretary, in collaboration
with the National Association of Insurance Commissioners
(in this paragraph referred to as the ``NAIC''), may
promulgate regulations to establish additional
requirements for a community health insurance option.
(B) Applicability <> .--Any
requirement promulgated under subparagraph (A) shall be
applicable to such option beginning 90 days after the
date on which the regulation involved becomes final.

(c) Start-up Fund.--
(1) Establishment of fund.--
(A) In general.--There is established in the
Treasury of the United States a trust fund to be known
as the ``Health Benefit Plan Start-Up Fund'' (referred
to in this section as the ``Start-Up Fund''), that shall
consist of such amounts as may be appropriated or
credited to the Start-Up Fund as provided for in this
subsection to provide loans for the initial operations
of a community health insurance option. Such amounts
shall remain available until expended.
(B) Funding.--There is hereby appropriated to the
Start-Up Fund, out of any moneys in the Treasury not
otherwise appropriated an amount requested by the
Secretary of Health and Human Services as necessary to--
(i) pay the start-up costs associated with the
initial operations of a community health insurance
option; and
(ii) pay the costs of making payments on
claims submitted during the period that is not
more than 90 days from the date on which such
option is offered.
(2) Use of start-up fund.--The Secretary shall use amounts
contained in the Start-Up Fund to make payments (subject to the
repayment requirements in paragraph (4)) for the purposes
described in paragraph (1)(B).
(3) Pass through of rebates.--The Secretary may establish
procedures for reducing the amount of payments to a contracting
administrator to take into account any rebates or price
concessions.
(4) Repayment.--
(A) <>  In general.--A community
health insurance option shall be required to repay the
Secretary of the Treasury (on such terms as the
Secretary may require) for any payments made under
paragraph (1)(B) by the date that is not later than 9
years after the date on which the payment is made. The
Secretary may require the payment of interest with
respect to such repayments at rates that do not exceed
the market interest rate (as determined by the
Secretary).
(B) Sanctions in case of for-profit conversion.--In
any case in which the Secretary enters into a contract
with a qualified entity for the offering of a community
health insurance option and such entity is determined to

[[Page 196]]

be a for-profit entity by the Secretary, such entity
shall be--
(i) immediately liable to the Secretary for
any payments received by such entity from the
Start-Up Fund; and
(ii) permanently ineligible to offer a
qualified health plan.

(d) State Advisory Council.--
(1) Establishment.--A State (other than a State that elects
to opt out as provided for in subsection (a)(3)) shall establish
or designate a public or non-profit private entity to serve as
the State Advisory Council to provide recommendations to the
Secretary on the operations and policies of a community health
insurance option in the State. Such Council shall provide
recommendations on at least the following:
(A) policies and procedures to integrate quality
improvement and cost containment mechanisms into the
health care delivery system;
(B) mechanisms to facilitate public awareness of the
availability of a community health insurance option; and
(C) alternative payment structures under a community
health insurance option for health care providers that
encourage quality improvement and cost control.
(2) Members.--The members of the State Advisory Council
shall be representatives of the public and shall include health
care consumers and providers.
(3) Applicability of recommendations.--The Secretary may
apply the recommendations of a State Advisory Council to a
community health insurance option in that State, in any other
State, or in all States.

(e) Authority To Contract; Terms of Contract.--
(1) Authority.--
(A) In general.--The Secretary may enter into a
contract or contracts with one or more qualified
entities for the purpose of performing administrative
functions (including functions described in subsection
(a)(4) of section 1874A of the Social Security Act) with
respect to a community health insurance option in the
same manner as the Secretary may enter into contracts
under subsection (a)(1) of such section. The Secretary
shall have the same authority with respect to a
community health insurance option under this section as
the Secretary has under subsections (a)(1) and (b) of
section 1874A of the Social Security Act with respect to
title XVIII of such Act.
(B) Requirements apply.--If the Secretary enters
into a contract with a qualified entity to offer a
community health insurance option, under such contract
such entity--
(i) shall meet the criteria established under
paragraph (2); and
(ii) <> shall receive an
administrative fee under paragraph (7).
(C) Limitation.--Contracts under this subsection
shall not involve the transfer of insurance risk to the
contracting administrator.
(D) Reference.--An entity with which the Secretary
has entered into a contract under this paragraph shall
be referred to as a ``contracting administrator''.

[[Page 197]]

(2) Qualified entity.--To be qualified to be selected by the
Secretary to offer a community health insurance option, an
entity shall--
(A) meet the criteria established under section
1874A(a)(2) of the Social Security Act;
(B) be a nonprofit entity for purposes of offering
such option;
(C) meet the solvency standards applicable under
subsection (b)(7);
(D) be eligible to offer health insurance or health
benefits coverage;
(E) meet quality standards specified by the
Secretary;
(F) have in place effective procedures to control
fraud, abuse, and waste; and
(G) meet such other requirements as the Secretary
may impose.
Procedures described under subparagraph (F) shall include the
implementation of procedures to use beneficiary identifiers to
identify individuals entitled to benefits so that such an
individual's social security account number is not used, and
shall also include procedures for the use of technology
(including front-end, prepayment intelligent data-matching
technology similar to that used by hedge funds, investment
funds, and banks) to provide real-time data analysis of claims
for payment under this title to identify and investigate unusual
billing or order practices under this title that could indicate
fraud or abuse.
(3) Term.--A contract provided for under paragraph (1) shall
be for a term of at least 5 years but not more than 10 years, as
determined by the Secretary. At the end of each such term, the
Secretary shall conduct a competitive bidding process for the
purposes of renewing existing contracts or selecting new
qualified entities with which to enter into contracts under such
paragraph.
(4) <>  Limitation.--A contract may
not be renewed under this subsection unless the Secretary
determines that the contracting administrator has met
performance requirements established by the Secretary in the
areas described in paragraph (7)(B).
(5) Audits.--The Inspector General shall conduct periodic
audits with respect to contracting administrators under this
subsection to ensure that the administrator involved is in
compliance with this section.
(6) Revocation.-- <> A contract awarded
under this subsection shall be revoked by the Secretary, upon
the recommendation of the Inspector General, only after notice
to the contracting administrator involved and an opportunity for
a hearing. The Secretary may revoke such contract if the
Secretary determines that such administrator has engaged in
fraud, deception, waste, abuse of power, negligence,
mismanagement of taxpayer dollars, or gross mismanagement. An
entity that has had a contract revoked under this paragraph
shall not be qualified to enter into a subsequent contract under
this subsection.
(7) Fee for administration.--
(A) In general.--The Secretary shall pay the
contracting administrator a fee for the management,
administration, and delivery of the benefits under this
section.

[[Page 198]]

(B) Requirement for high quality administration.--
The Secretary may increase the fee described in
subparagraph (A) by not more than 10 percent, or reduce
the fee described in subparagraph (A) by not more than
50 percent, based on the extent to which the contracting
administrator, in the determination of the Secretary,
meets performance requirements established by the
Secretary, in at least the following areas:
(i) Maintaining low premium costs and low cost
sharing requirements, provided that such
requirements are consistent with section 1302.
(ii) Reducing administrative costs and
promoting administrative simplification for
beneficiaries.
(iii) Promoting high quality clinical care.
(iv) Providing high quality customer service
to beneficiaries.
(C) Non-renewal.--The Secretary may not renew a
contract to offer a community health insurance option
under this section with any contracting entity that has
been assessed more than one reduction under subparagraph
(B) during the contract period.
(8) Limitation.--Notwithstanding the terms of a contract
under this subsection, the Secretary shall negotiate the
reimbursement rates for purposes of subsection (b)(6).

(f) Report by HHS and Insolvency Warnings.--
(1) In general.--On an annual basis, the Secretary shall
conduct a study on the solvency of a community health insurance
option and submit to Congress a report describing the results of
such study.
(2) Result.--If, in any year, the result of the study under
paragraph (1) is that a community health insurance option is
insolvent, such result shall be treated as a community health
insurance option solvency warning.
(3) Submission of plan and procedure.--
(A) In general <> .--If
there is a community health insurance option solvency
warning under paragraph (2) made in a year, the
President shall submit to Congress, within the 15-day
period beginning on the date of the budget submission to
Congress under section 1105(a) of title 31, United
States Code, for the succeeding year, proposed
legislation to respond to such warning.
(B) Procedure.--In the case of a legislative
proposal submitted by the President pursuant to
subparagraph (A), such proposal shall be considered by
Congress using the same procedures described under
sections 803 and 804 of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 that shall be
used for a medicare funding warning.

(g) Marketing Parity.--In a facility controlled by the Federal
Government, or by a State, where marketing or promotional materials
related to a community health insurance option are made available to the
public, making available marketing or promotional materials relating to
private health insurance plans shall not be prohibited. Such materials
include informational pamphlets, guidebooks, enrollment forms, or other
materials determined reasonable for display.

[[Page 199]]

(h) Authorization of Appropriations.--There is authorized to be
appropriated such sums as may be necessary to carry out this section.

SEC. 1324. <>  LEVEL PLAYING FIELD.

(a) In General.--Notwithstanding any other provision of law, any
health insurance coverage offered by a private health insurance issuer
shall not be subject to any Federal or State law described in subsection
(b) if a qualified health plan offered under the Consumer Operated and
Oriented Plan program under section 1322, a community health insurance
option under section 1323, or a nationwide qualified health plan under
section 1333(b), is not subject to such law.
(b) Laws Described.--The Federal and State laws described in this
subsection are those Federal and State laws relating to--
(1) guaranteed renewal;
(2) rating;
(3) preexisting conditions;
(4) non-discrimination;
(5) quality improvement and reporting;
(6) fraud and abuse;
(7) solvency and financial requirements;
(8) market conduct;
(9) prompt payment;
(10) appeals and grievances;
(11) privacy and confidentiality;
(12) licensure; and
(13) benefit plan material or information.

PART IV--STATE FLEXIBILITY TO ESTABLISH ALTERNATIVE PROGRAMS

SEC. 1331. <> STATE FLEXIBILITY TO ESTABLISH BASIC
HEALTH PROGRAMS FOR LOW-INCOME INDIVIDUALS NOT ELIGIBLE FOR
MEDICAID.

(a) Establishment of Program.--
(1) In general.--The Secretary shall establish a basic
health program meeting the requirements of this section under
which a State may enter into contracts to offer 1 or more
standard health plans providing at least the essential health
benefits described in section 1302(b) to eligible individuals in
lieu of offering such individuals coverage through an Exchange.
(2) Certifications as to benefit coverage and costs.--Such
program shall provide that a State may not establish a basic
health program under this section unless the State establishes
to the satisfaction of the Secretary, and the Secretary
certifies, that--
(A) in the case of an eligible individual enrolled
in a standard health plan offered through the program,
the State provides--
(i) that the amount of the monthly premium an
eligible individual is required to pay for
coverage under the standard health plan for the
individual and the individual's dependents does
not exceed the amount of the monthly premium that
the eligible individual would have been required
to pay (in the rating area in which the individual
resides) if the individual had

[[Page 200]]

enrolled in the applicable second lowest cost
silver plan (as defined in section 36B(b)(3)(B) of
the Internal Revenue Code of 1986) offered to the
individual through an Exchange; and
(ii) that the cost-sharing an eligible
individual is required to pay under the standard
health plan does not exceed--
(I) the cost-sharing required under
a platinum plan in the case of an
eligible individual with household
income not in excess of 150 percent of
the poverty line for the size of the
family involved; and
(II) the cost-sharing required under
a gold plan in the case of an eligible
individual not described in subclause
(I); and
(B) the benefits provided under the standard health
plans offered through the program cover at least the
essential health benefits described in section 1302(b).
For purposes of subparagraph (A)(i), the amount of the monthly
premium an individual is required to pay under either the
standard health plan or the applicable second lowest cost silver
plan shall be determined after reduction for any premium tax
credits and cost-sharing reductions allowable with respect to
either plan.

(b) Standard Health Plan. <> --In this section,
the term ``standard heath plan'' means a health benefits plan that the
State contracts with under this section--
(1) under which the only individuals eligible to enroll are
eligible individuals;
(2) that provides at least the essential health benefits
described in section 1302(b); and
(3) in the case of a plan that provides health insurance
coverage offered by a health insurance issuer, that has a
medical loss ratio of at least 85 percent.

(c) Contracting Process.--
(1) In general.--A State basic health program shall
establish a competitive process for entering into contracts with
standard health plans under subsection (a), including
negotiation of premiums and cost-sharing and negotiation of
benefits in addition to the essential health benefits described
in section 1302(b).
(2) Specific items to be considered.--A State shall, as part
of its competitive process under paragraph (1), include at least
the following:
(A) Innovation.--Negotiation with offerors of a
standard health plan for the inclusion of innovative
features in the plan, including--
(i) care coordination and care management for
enrollees, especially for those with chronic
health conditions;
(ii) incentives for use of preventive
services; and
(iii) the establishment of relationships
between providers and patients that maximize
patient involvement in health care decision-
making, including providing incentives for
appropriate utilization under the plan.

[[Page 201]]

(B) Health and resource differences.--Consideration
of, and the making of suitable allowances for,
differences in health care needs of enrollees and
differences in local availability of, and access to,
health care providers. Nothing in this subparagraph
shall be construed as allowing discrimination on the
basis of pre-existing conditions or other health status-
related factors.
(C) Managed care.--Contracting with managed care
systems, or with systems that offer as many of the
attributes of managed care as are feasible in the local
health care market.
(D) Performance measures.--Establishing specific
performance measures and standards for issuers of
standard health plans that focus on quality of care and
improved health outcomes, requiring such plans to report
to the State with respect to the measures and standards,
and making the performance and quality information
available to enrollees in a useful form.
(3) Enhanced availability.--
(A) Multiple plans.--A State shall, to the maximum
extent feasible, seek to make multiple standard health
plans available to eligible individuals within a State
to ensure individuals have a choice of such plans.
(B) Regional compacts.--A State may negotiate a
regional compact with other States to include coverage
of eligible individuals in all such States in agreements
with issuers of standard health plans.
(4) Coordination with other state programs.--A State shall
seek to coordinate the administration of, and provision of
benefits under, its program under this section with the State
medicaid program under title XIX of the Social Security Act, the
State child health plan under title XXI of such Act, and other
State-administered health programs to maximize the efficiency of
such programs and to improve the continuity of care.

(d) Transfer of Funds to States.--
(1) <>  In general.--If the Secretary
determines that a State electing the application of this section
meets the requirements of the program established under
subsection (a), the Secretary shall transfer to the State for
each fiscal year for which 1 or more standard health plans are
operating within the State the amount determined under paragraph
(3).
(2) Use of funds.--A State shall establish a trust for the
deposit of the amounts received under paragraph (1) and amounts
in the trust fund shall only be used to reduce the premiums and
cost-sharing of, or to provide additional benefits for, eligible
individuals enrolled in standard health plans within the State.
Amounts in the trust fund, and expenditures of such amounts,
shall not be included in determining the amount of any non-
Federal funds for purposes of meeting any matching or
expenditure requirement of any federally-funded program.
(3) Amount of payment.--
(A) Secretarial determination.--
(i) In general.--The amount determined under
this paragraph for any fiscal year is the amount
the Secretary determines is equal to 85 percent of
the premium tax credits under section 36B of the
Internal

[[Page 202]]

Revenue Code of 1986, and the cost-sharing
reductions under section 1402, that would have
been provided for the fiscal year to eligible
individuals enrolled in standard health plans in
the State if such eligible individuals were
allowed to enroll in qualified health plans
through an Exchange established under this
subtitle.
(ii) Specific requirements.--The Secretary
shall make the determination under clause (i) on a
per enrollee basis and shall take into account all
relevant factors necessary to determine the value
of the premium tax credits and cost-sharing
reductions that would have been provided to
eligible individuals described in clause (i),
including the age and income of the enrollee,
whether the enrollment is for self-only or family
coverage, geographic differences in average
spending for health care across rating areas, the
health status of the enrollee for purposes of
determining risk adjustment payments and
reinsurance payments that would have been made if
the enrollee had enrolled in a qualified health
plan through an Exchange, and whether any
reconciliation of the credit or cost-sharing
reductions would have occurred if the enrollee had
been so enrolled. This determination shall take
into consideration the experience of other States
with respect to participation in an Exchange and
such credits and reductions provided to residents
of the other States, with a special focus on
enrollees with income below 200 percent of
poverty.
(iii) Certification.--The Chief Actuary of the
Centers for Medicare & Medicaid Services, in
consultation with the Office of Tax Analysis of
the Department of the Treasury, shall certify
whether the methodology used to make
determinations under this subparagraph, and such
determinations, meet the requirements of clause
(ii). Such certifications shall be based on
sufficient data from the State and from comparable
States about their experience with programs
created by this Act.
(B) Corrections.--The Secretary shall adjust the
payment for any fiscal year to reflect any error in the
determinations under subparagraph (A) for any preceding
fiscal year.
(4) Application of special rules.--The provisions of section
1303 shall apply to a State basic health program, and to
standard health plans offered through such program, in the same
manner as such rules apply to qualified health plans.

(e) Eligible Individual.--
(1) <>  In general.--In this section, the
term ``eligible individual'' means, with respect to any State,
an individual--
(A) who a resident of the State who is not eligible
to enroll in the State's medicaid program under title
XIX of the Social Security Act for benefits that at a
minimum consist of the essential health benefits
described in section 1302(b);

[[Page 203]]

(B) whose household income exceeds 133 percent but
does not exceed 200 percent of the poverty line for the
size of the family involved;
(C) who is not eligible for minimum essential
coverage (as defined in section 5000A(f) of the Internal
Revenue Code of 1986) or is eligible for an employer-
sponsored plan that is not affordable coverage (as
determined under section 5000A(e)(2) of such Code); and
(D) who has not attained age 65 as of the beginning
of the plan year.
Such term shall not include any individual who is not a
qualified individual under section 1312 who is eligible to be
covered by a qualified health plan offered through an Exchange.
(2) Eligible individuals may not use exchange.--An eligible
individual shall not be treated as a qualified individual under
section 1312 eligible for enrollment in a qualified health plan
offered through an Exchange established under section 1311.

(f) Secretarial Oversight <> .--The Secretary shall
each year conduct a review of each State program to ensure compliance
with the requirements of this section, including ensuring that the State
program meets--
(1) eligibility verification requirements for participation
in the program;
(2) the requirements for use of Federal funds received by
the program; and
(3) the quality and performance standards under this
section.

(g) Standard Health Plan Offerors.--A State may provide that persons
eligible to offer standard health plans under a basic health program
established under this section may include a licensed health maintenance
organization, a licensed health insurance insurer, or a network of
health care providers established to offer services under the program.
(h) Definitions.--Any term used in this section which is also used
in section 36B of the Internal Revenue Code of 1986 shall have the
meaning given such term by such section.

SEC. 1332. <>  WAIVER FOR STATE INNOVATION.

(a) Application.--
(1) <>  In general.--A State may
apply to the Secretary for the waiver of all or any requirements
described in paragraph (2) with respect to health insurance
coverage within that State for plan years beginning on or after
January 1, 2017. Such application shall--
(A) be filed at such time and in such manner as the
Secretary may require;
(B) contain such information as the Secretary may
require, including--
(i) a comprehensive description of the State
legislation and program to implement a plan
meeting the requirements for a waiver under this
section; and
(ii) a 10-year budget plan for such plan that
is budget neutral for the Federal Government; and
(C) provide an assurance that the State has enacted
the law described in subsection (b)(2).

[[Page 204]]

(2) Requirements.-- <> The
requirements described in this paragraph with respect to health
insurance coverage within the State for plan years beginning on
or after January 1, 2014, are as follows:
(A) Part I of subtitle D.
(B) Part II of subtitle D.
(C) Section 1402.
(D) Sections 36B, 4980H, and 5000A of the Internal
Revenue Code of 1986.
(3) Pass through of funding.--With respect to a State waiver
under paragraph (1), under which, due to the structure of the
State plan, individuals and small employers in the State would
not qualify for the premium tax credits, cost-sharing
reductions, or small business credits under sections 36B of the
Internal Revenue Code of 1986 or under part I of subtitle E for
which they would otherwise be eligible, the Secretary shall
provide for an alternative means by which the aggregate amount
of such credits or reductions that would have been paid on
behalf of participants in the Exchanges established under this
title had the State not received such waiver, shall be paid to
the State for purposes of implementing the State plan under the
waiver. Such amount shall be determined annually by the
Secretary, taking into consideration the experience of other
States with respect to participation in an Exchange and credits
and reductions provided under such provisions to residents of
the other States.
(4) Waiver consideration and transparency.--
(A) In general.--An application for a waiver under
this section shall be considered by the Secretary in
accordance with the regulations described in
subparagraph (B).
(B) Regulations <> .--Not later
than 180 days after the date of enactment of this Act,
the Secretary shall promulgate regulations relating to
waivers under this section that provide--
(i) a process for public notice and comment at
the State level, including public hearings,
sufficient to ensure a meaningful level of public
input;
(ii) a process for the submission of an
application that ensures the disclosure of--
(I) the provisions of law that the
State involved seeks to waive; and
(II) the specific plans of the State
to ensure that the waiver will be in
compliance with subsection (b);
(iii) a process for providing public notice
and comment after the application is received by
the Secretary, that is sufficient to ensure a
meaningful level of public input and that does not
impose requirements that are in addition to, or
duplicative of, requirements imposed under the
Administrative Procedures Act, or requirements
that are unreasonable or unnecessarily burdensome
with respect to State compliance;
(iv) a process for the submission to the
Secretary of periodic reports by the State
concerning the implementation of the program under
the waiver; and
(v) a process for the periodic evaluation by
the Secretary of the program under the waiver.

[[Page 205]]

(C) Report.--The Secretary shall annually report to
Congress concerning actions taken by the Secretary with
respect to applications for waivers under this section.
(5) Coordinated waiver process.--The Secretary shall develop
a process for coordinating and consolidating the State waiver
processes applicable under the provisions of this section, and
the existing waiver processes applicable under titles XVIII,
XIX, and XXI of the Social Security Act, and any other Federal
law relating to the provision of health care items or services.
Such process shall permit a State to submit a single application
for a waiver under any or all of such provisions.
(6) Definition.--In this section, the term ``Secretary''
means--
(A) the Secretary of Health and Human Services with
respect to waivers relating to the provisions described
in subparagraph (A) through (C) of paragraph (2); and
(B) the Secretary of the Treasury with respect to
waivers relating to the provisions described in
paragraph (2)(D).

(b) Granting of Waivers.--
(1) In general.--The Secretary may grant a request for a
waiver under subsection (a)(1) only if the Secretary determines
that the State plan--
(A) will provide coverage that is at least as
comprehensive as the coverage defined in section 1302(b)
and offered through Exchanges established under this
title as certified by Office of the Actuary of the
Centers for Medicare & Medicaid Services based on
sufficient data from the State and from comparable
States about their experience with programs created by
this Act and the provisions of this Act that would be
waived;
(B) will provide coverage and cost sharing
protections against excessive out-of-pocket spending
that are at least as affordable as the provisions of
this title would provide;
(C) will provide coverage to at least a comparable
number of its residents as the provisions of this title
would provide; and
(D) will not increase the Federal deficit.
(2) Requirement to enact a law.--
(A) In general.--A law described in this paragraph
is a State law that provides for State actions under a
waiver under this section, including the implementation
of the State plan under subsection (a)(1)(B).
(B) Termination of opt out.--A State may repeal a
law described in subparagraph (A) and terminate the
authority provided under the waiver with respect to the
State.

(c) Scope of Waiver.--
(1) <>  In general.--The Secretary
shall determine the scope of a waiver of a requirement described
in subsection (a)(2) granted to a State under subsection (a)(1).
(2) Limitation.--The Secretary may not waive under this
section any Federal law or requirement that is not within the
authority of the Secretary.

(d) Determinations by Secretary.--
(1) Time for determination.-- <> The
Secretary shall make a determination under subsection (a)(1) not
later than 180

[[Page 206]]

days after the receipt of an application from a State under such
subsection.
(2) Effect of determination.-- <>
(A) Granting of waivers.--If the Secretary
determines to grant a waiver under subsection (a)(1),
the Secretary shall notify the State involved of such
determination and the terms and effectiveness of such
waiver.
(B) Denial of waiver.--If the Secretary determines a
waiver should not be granted under subsection (a)(1),
the Secretary shall notify the State involved, and the
appropriate committees of Congress of such determination
and the reasons therefore.

(e) <>  Term of Waiver.--No waiver
under this section may extend over a period of longer than 5 years
unless the State requests continuation of such waiver, and such request
shall be deemed granted unless the Secretary, within 90 days after the
date of its submission to the Secretary, either denies such request in
writing or informs the State in writing with respect to any additional
information which is needed in order to make a final determination with
respect to the request.

SEC. 1333. <>  PROVISIONS RELATING TO OFFERING OF
PLANS IN MORE THAN ONE STATE.

(a) Health Care Choice Compacts.--
(1) In general.-- <> Not later
than July 1, 2013, the Secretary shall, in consultation with the
National Association of Insurance Commissioners, issue
regulations for the creation of health care choice compacts
under which 2 or more States may enter into an agreement under
which--
(A) 1 or more qualified health plans could be
offered in the individual markets in all such States
but, except as provided in subparagraph (B), only be
subject to the laws and regulations of the State in
which the plan was written or issued;
(B) the issuer of any qualified health plan to which
the compact applies--
(i) would continue to be subject to market
conduct, unfair trade practices, network adequacy,
and consumer protection standards (including
standards relating to rating), including
addressing disputes as to the performance of the
contract, of the State in which the purchaser
resides;
(ii) would be required to be licensed in each
State in which it offers the plan under the
compact or to submit to the jurisdiction of each
such State with regard to the standards described
in clause (i) (including allowing access to
records as if the insurer were licensed in the
State); and
(iii) <> must clearly
notify consumers that the policy may not be
subject to all the laws and regulations of the
State in which the purchaser resides.
(2) State authority.--A State may not enter into an
agreement under this subsection unless the State enacts a law
after the date of the enactment of this title that specifically
authorizes the State to enter into such agreements.
(3) Approval of compacts.--The Secretary may approve
interstate health care choice compacts under paragraph (1)

[[Page 207]]

only if the Secretary determines that such health care choice
compact--
(A) will provide coverage that is at least as
comprehensive as the coverage defined in section 1302(b)
and offered through Exchanges established under this
title;
(B) will provide coverage and cost sharing
protections against excessive out-of-pocket spending
that are at least as affordable as the provisions of
this title would provide;
(C) will provide coverage to at least a comparable
number of its residents as the provisions of this title
would provide;
(D) will not increase the Federal deficit; and
(E) will not weaken enforcement of laws and
regulations described in paragraph (1)(B)(i) in any
State that is included in such compact.
(4) Effective date.--A health care choice compact described
in paragraph (1) shall not take effect before January 1, 2016.

(b) Authority for Nationwide Plans.--
(1) In general.--Except as provided in paragraph (2), if an
issuer (including a group of health insurance issuers affiliated
either by common ownership and control or by the common use of a
nationally licensed service mark) of a qualified health plan in
the individual or small group market meets the requirements of
this subsection (in this subsection a ``nationwide qualified
health plan'')--
(A) the issuer of the plan may offer the nationwide
qualified health plan in the individual or small group
market in more than 1 State; and
(B) <> with respect to State
laws mandating benefit coverage by a health plan, only
the State laws of the State in which such plan is
written or issued shall apply to the nationwide
qualified health plan.
(2) State opt-out.--A State may, by specific reference in a
law enacted after the date of enactment of this title, provide
that this subsection shall not apply to that State. Such opt-out
shall be effective until such time as the State by law revokes
it.
(3) Plan requirements.--An issuer meets the requirements of
this subsection with respect to a nationwide qualified health
plan if, in the determination of the Secretary--
(A) the plan offers a benefits package that is
uniform in each State in which the plan is offered and
meets the requirements set forth in paragraphs (4)
through (6);
(B) the issuer is licensed in each State in which it
offers the plan and is subject to all requirements of
State law not inconsistent with this section, including
but not limited to, the standards and requirements that
a State imposes that do not prevent the application of a
requirement of part A of title XXVII of the Public
Health Service Act or a requirement of this title;
(C) the issuer meets all requirements of this title
with respect to a qualified health plan, including the
requirement to offer the silver and gold levels of the
plan in each Exchange in the State for the market in
which the plan is offered;

[[Page 208]]

(D) the issuer determines the premiums for the plan
in any State on the basis of the rating rules in effect
in that State for the rating areas in which it is
offered;
(E) the issuer offers the nationwide qualified
health plan in at least 60 percent of the participating
States in the first year in which the plan is offered,
65 percent of such States in the second year, 70 percent
of such States in the third year, 75 percent of such
States in the fourth year, and 80 percent of such States
in the fifth and subsequent years;
(F) the issuer shall offer the plan in participating
States across the country, in all geographic regions,
and in all States that have adopted adjusted community
rating before the date of enactment of this Act; and
(G) the issuer clearly notifies consumers that the
policy may not contain some benefits otherwise mandated
for plans in the State in which the purchaser resides
and provides a detailed statement of the benefits
offered and the benefit differences in that State, in
accordance with rules promulgated by the Secretary.
(4) <>  Form review for nationwide plans.--
Notwithstanding any contrary provision of State law, at least 3
months before any nationwide qualified health plan is offered,
the issuer shall file all nationwide qualified health plan forms
with the regulator in each participating State in which the plan
will be offered. An issuer may appeal the disapproval of a
nationwide qualified health plan form to the Secretary.
(5) Applicable rules.--The Secretary shall, in consultation
with the National Association of Insurance Commissioners, issue
rules for the offering of nationwide qualified health plans
under this subsection. Nationwide qualified health plans may be
offered only after such rules have taken effect.
(6) Coverage.--The Secretary shall provide that the health
benefits coverage provided to an individual through a nationwide
qualified health plan under this subsection shall include at
least the essential benefits package described in section 1302.
(7) State law mandating benefit coverage by a health
benefits plan.--For the purposes of this subsection, a State law
mandating benefit coverage by a health plan is a law that
mandates health insurance coverage or the offer of health
insurance coverage for specific health services or specific
diseases. A law that mandates health insurance coverage or
reimbursement for services provided by certain classes of
providers of health care services, or a law that mandates that
certain classes of individuals must be covered as a group or as
dependents, is not a State law mandating benefit coverage by a
health benefits plan.

PART V--REINSURANCE AND RISK ADJUSTMENT

SEC. 1341. <>  TRANSITIONAL REINSURANCE PROGRAM FOR
INDIVIDUAL AND SMALL GROUP MARKETS IN EACH STATE.

(a) In General <> .--Each State shall, not later
than January 1, 2014--

[[Page 209]]

(1) include in the Federal standards or State law or
regulation the State adopts and has in effect under section
1321(b) the provisions described in subsection (b); and
(2) <> establish (or enter into a contract
with) 1 or more applicable reinsurance entities to carry out the
reinsurance program under this section.

(b) Model Regulation.--
(1) In general.--In establishing the Federal standards under
section 1321(a), the Secretary, in consultation with the
National Association of Insurance Commissioners (the ``NAIC''),
shall include provisions that enable States to establish and
maintain a program under which--
(A) <> health
insurance issuers, and third party administrators on
behalf of group health plans, are required to make
payments to an applicable reinsurance entity for any
plan year beginning in the 3-year period beginning
January 1, 2014 (as specified in paragraph (3); and
(B) the applicable reinsurance entity collects
payments under subparagraph (A) and uses amounts so
collected to make reinsurance payments to health
insurance issuers described in subparagraph (A) that
cover high risk individuals in the individual market
(excluding grandfathered health plans) for any plan year
beginning in such 3-year period.
(2) High-risk individual; payment amounts.--The Secretary
shall include the following in the provisions under paragraph
(1):
(A) Determination of high-risk individuals.--The
method by which individuals will be identified as high
risk individuals for purposes of the reinsurance program
established under this section. Such method shall
provide for identification of individuals as high-risk
individuals on the basis of--
(i) a list of at least 50 but not more than
100 medical conditions that are identified as
high-risk conditions and that may be based on the
identification of diagnostic and procedure codes
that are indicative of individuals with pre-
existing, high-risk conditions; or
(ii) any other comparable objective method of
identification recommended by the American Academy
of Actuaries.
(B) Payment amount.--The formula for determining the
amount of payments that will be paid to health insurance
issuers described in paragraph (1)(A) that insure high-
risk individuals. Such formula shall provide for the
equitable allocation of available funds through
reconciliation and may be designed--
(i) to provide a schedule of payments that
specifies the amount that will be paid for each of
the conditions identified under subparagraph (A);
or
(ii) to use any other comparable method for
determining payment amounts that is recommended by
the American Academy of Actuaries and that
encourages the use of care coordination and care
management programs for high risk conditions.
(3) Determination of required contributions.--

[[Page 210]]

(A) In general <> .--The Secretary shall include in the
provisions under paragraph (1) the method for
determining the amount each health insurance issuer and
group health plan described in paragraph (1)(A)
contributing to the reinsurance program under this
section is required to contribute under such paragraph
for each plan year beginning in the 36-month period
beginning January 1, 2014. The contribution amount for
any plan year may be based on the percentage of revenue
of each issuer and the total costs of providing benefits
to enrollees in self-insured plans or on a specified
amount per enrollee and may be required to be paid in
advance or periodically throughout the plan year.
(B) Specific requirements.--The method under this
paragraph shall be designed so that--
(i) the contribution amount for each issuer
proportionally reflects each issuer's fully
insured commercial book of business for all major
medical products and the total value of all fees
charged by the issuer and the costs of coverage
administered by the issuer as a third party
administrator;
(ii) the contribution amount can include an
additional amount to fund the administrative
expenses of the applicable reinsurance entity;
(iii) the aggregate contribution amounts for
all States shall, based on the best estimates of
the NAIC and without regard to amounts described
in clause (ii), equal $10,000,000,000 for plan
years beginning in 2014, $6,000,000,000 for plan
years beginning 2015, and $4,000,000,000 for plan
years beginning in 2016; and
(iv) in addition to the aggregate contribution
amounts under clause (iii), each issuer's
contribution amount for any calendar year under
clause (iii) reflects its proportionate share of
an additional $2,000,000,000 for 2014, an
additional $2,000,000,000 for 2015, and an
additional $1,000,000,000 for 2016.
Nothing in this subparagraph shall be construed to
preclude a State from collecting additional amounts from
issuers on a voluntary basis.
(4) Expenditure of funds.--The provisions under paragraph
(1) shall provide that--
(A) the contribution amounts collected for any
calendar year may be allocated and used in any of the
three calendar years for which amounts are collected
based on the reinsurance needs of a particular period or
to reflect experience in a prior period; and
(B) <> amounts
remaining unexpended as of December, 2016, may be used
to make payments under any reinsurance program of a
State in the individual market in effect in the 2-year
period beginning on January 1, 2017.
Notwithstanding the preceding sentence, any contribution amounts
described in paragraph (3)(B)(iv) shall be deposited into the
general fund of the Treasury of the United States and may not be
used for the program established under this section.

[[Page 211]]

(c) Applicable Reinsurance Entity.--For purposes of this section--
(1) In general.-- <> The term
``applicable reinsurance entity'' means a not-for-profit
organization--
(A) the purpose of which is to help stabilize
premiums for coverage in the individual and small group
markets in a State during the first 3 years of operation
of an Exchange for such markets within the State when
the risk of adverse selection related to new rating
rules and market changes is greatest; and
(B) the duties of which shall be to carry out the
reinsurance program under this section by coordinating
the funding and operation of the risk-spreading
mechanisms designed to implement the reinsurance
program.
(2) State discretion.--A State may have more than 1
applicable reinsurance entity to carry out the reinsurance
program under this section within the State and 2 or more States
may enter into agreements to provide for an applicable
reinsurance entity to carry out such program in all such States.
(3) Entities are tax-exempt.--An applicable reinsurance
entity established under this section shall be exempt from
taxation under chapter 1 of the Internal Revenue Code of 1986.
The preceding sentence shall not apply to the tax imposed by
section 511 such Code (relating to tax on unrelated business
taxable income of an exempt organization).

(d) Coordination With State High-risk Pools.--The State shall
eliminate or modify any State high-risk pool to the extent necessary to
carry out the reinsurance program established under this section. The
State may coordinate the State high-risk pool with such program to the
extent not inconsistent with the provisions of this section.

SEC. 1342. <> ESTABLISHMENT OF RISK CORRIDORS FOR
PLANS IN INDIVIDUAL AND SMALL GROUP MARKETS.

(a) In General.--The Secretary shall establish and administer a
program of risk corridors for calendar years 2014, 2015, and 2016 under
which a qualified health plan offered in the individual or small group
market shall participate in a payment adjustment system based on the
ratio of the allowable costs of the plan to the plan's aggregate
premiums. Such program shall be based on the program for regional
participating provider organizations under part D of title XVIII of the
Social Security Act.
(b) Payment Methodology.--
(1) Payments out.--The Secretary shall provide under the
program established under subsection (a) that if--
(A) a participating plan's allowable costs for any
plan year are more than 103 percent but not more than
108 percent of the target amount, the Secretary shall
pay to the plan an amount equal to 50 percent of the
target amount in excess of 103 percent of the target
amount; and
(B) a participating plan's allowable costs for any
plan year are more than 108 percent of the target
amount, the Secretary shall pay to the plan an amount
equal to the sum of 2.5 percent of the target amount
plus 80 percent of allowable costs in excess of 108
percent of the target amount.

[[Page 212]]

(2) Payments in.--The Secretary shall provide under the
program established under subsection (a) that if--
(A) a participating plan's allowable costs for any
plan year are less than 97 percent but not less than 92
percent of the target amount, the plan shall pay to the
Secretary an amount equal to 50 percent of the excess of
97 percent of the target amount over the allowable
costs; and
(B) a participating plan's allowable costs for any
plan year are less than 92 percent of the target amount,
the plan shall pay to the Secretary an amount equal to
the sum of 2.5 percent of the target amount plus 80
percent of the excess of 92 percent of the target amount
over the allowable costs.

(c) Definitions.--In this section:
(1) Allowable costs.--
(A) In general.--The amount of allowable costs of a
plan for any year is an amount equal to the total costs
(other than administrative costs) of the plan in
providing benefits covered by the plan.
(B) Reduction for risk adjustment and reinsurance
payments.--Allowable costs shall reduced by any risk
adjustment and reinsurance payments received under
section 1341 and 1343.
(2) Target amount.--The target amount of a plan for any year
is an amount equal to the total premiums (including any premium
subsidies under any governmental program), reduced by the
administrative costs of the plan.

SEC. 1343. <> RISK ADJUSTMENT.

(a) In General.--
(1) Low actuarial risk plans.--Using the criteria and
methods developed under subsection (b), each State shall assess
a charge on health plans and health insurance issuers (with
respect to health insurance coverage) described in subsection
(c) if the actuarial risk of the enrollees of such plans or
coverage for a year is less than the average actuarial risk of
all enrollees in all plans or coverage in such State for such
year that are not self-insured group health plans (which are
subject to the provisions of the Employee Retirement Income
Security Act of 1974).
(2) High actuarial risk plans.--Using the criteria and
methods developed under subsection (b), each State shall provide
a payment to health plans and health insurance issuers (with
respect to health insurance coverage) described in subsection
(c) if the actuarial risk of the enrollees of such plans or
coverage for a year is greater than the average actuarial risk
of all enrollees in all plans and coverage in such State for
such year that are not self-insured group health plans (which
are subject to the provisions of the Employee Retirement Income
Security Act of 1974).

(b) Criteria and Methods.--The Secretary, in consultation with
States, shall establish criteria and methods to be used in carrying out
the risk adjustment activities under this section. The Secretary may
utilize criteria and methods similar to the criteria and methods
utilized under part C or D of title XVIII of the Social Security Act.
Such criteria and methods shall be included

[[Page 213]]

in the standards and requirements the Secretary prescribes under section
1321.
(c) Scope.--A health plan or a health insurance issuer is described
in this subsection if such health plan or health insurance issuer
provides coverage in the individual or small group market within the
State. This subsection shall not apply to a grandfathered health plan or
the issuer of a grandfathered health plan with respect to that plan.

Subtitle E--Affordable Coverage Choices for All Americans

PART I--PREMIUM TAX CREDITS AND COST-SHARING REDUCTIONS

Subpart A--Premium Tax Credits and Cost-sharing Reductions

SEC. 1401. REFUNDABLE TAX CREDIT PROVIDING PREMIUM ASSISTANCE FOR
COVERAGE UNDER A QUALIFIED HEALTH PLAN.

(a) In General.--Subpart C of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to refundable credits) is
amended by inserting after section 36A the following new section:

``SEC. 36B. <>  REFUNDABLE CREDIT FOR COVERAGE UNDER A
QUALIFIED HEALTH PLAN.

``(a) In General.--In the case of an applicable taxpayer, there
shall be allowed as a credit against the tax imposed by this subtitle
for any taxable year an amount equal to the premium assistance credit
amount of the taxpayer for the taxable year.
``(b) Premium Assistance Credit Amount.--For purposes of this
section--
``(1) In general.-- <> The term `premium
assistance credit amount' means, with respect to any taxable
year, the sum of the premium assistance amounts determined under
paragraph (2) with respect to all coverage months of the
taxpayer occurring during the taxable year.
``(2) Premium assistance amount.--The premium assistance
amount determined under this subsection with respect to any
coverage month is the amount equal to the lesser of--
``(A) the monthly premiums for such month for 1 or
more qualified health plans offered in the individual
market within a State which cover the taxpayer, the
taxpayer's spouse, or any dependent (as defined in
section 152) of the taxpayer and which were enrolled in
through an Exchange established by the State under 1311
of the Patient Protection and Affordable Care Act, or
``(B) the excess (if any) of--
``(i) the adjusted monthly premium for such
month for the applicable second lowest cost silver
plan with respect to the taxpayer, over

[[Page 214]]

``(ii) an amount equal to 1/12 of the product
of the applicable percentage and the taxpayer's
household income for the taxable year.
``(3) Other terms and rules relating to premium assistance
amounts.--For purposes of paragraph (2)--
``(A) Applicable percentage.--
``(i) In general.--Except as provided in
clause (ii), the applicable percentage with
respect to any taxpayer for any taxable year is
equal to 2.8 percent, increased by the number of
percentage points (not greater than 7) which bears
the same ratio to 7 percentage points as--
``(I) the taxpayer's household
income for the taxable year in excess of
100 percent of the poverty line for a
family of the size involved, bears to
``(II) an amount equal to 200
percent of the poverty line for a family
of the size involved.
``(ii) Special rule for taxpayers under 133
percent of poverty line.--If a taxpayer's
household income for the taxable year is in excess
of 100 percent, but not more than 133 percent, of
the poverty line for a family of the size
involved, the taxpayer's applicable percentage
shall be 2 percent.
``(iii) Indexing.--In the case of taxable
years beginning in any calendar year after 2014,
the Secretary shall adjust the initial and final
applicable percentages under clause (i), and the 2
percent under clause (ii), for the calendar year
to reflect the excess of the rate of premium
growth between the preceding calendar year and
2013 over the rate of income growth for such
period.
``(B) Applicable second lowest cost silver plan.--
The applicable second lowest cost silver plan with
respect to any applicable taxpayer is the second lowest
cost silver plan of the individual market in the rating
area in which the taxpayer resides which--
``(i) is offered through the same Exchange
through which the qualified health plans taken
into account under paragraph (2)(A) were offered,
and
``(ii) provides--
``(I) self-only coverage in the case
of an applicable taxpayer--
``(aa) whose tax for the
taxable year is determined under
section 1(c) (relating to
unmarried individuals other than
surviving spouses and heads of
households) and who is not
allowed a deduction under
section 151 for the taxable year
with respect to a dependent, or
``(bb) who is not described
in item (aa) but who purchases
only self-only coverage, and
``(II) family coverage in the case
of any other applicable taxpayer.
If a taxpayer files a joint return and no credit is
allowed under this section with respect to 1 of the
spouses by reason of subsection (e), the taxpayer shall
be treated as described in clause (ii)(I) unless a
deduction is allowed

[[Page 215]]

under section 151 for the taxable year with respect to a
dependent other than either spouse and subsection (e)
does not apply to the dependent.
``(C) Adjusted monthly premium.--The adjusted
monthly premium for an applicable second lowest cost
silver plan is the monthly premium which would have been
charged (for the rating area with respect to which the
premiums under paragraph (2)(A) were determined) for the
plan if each individual covered under a qualified health
plan taken into account under paragraph (2)(A) were
covered by such silver plan and the premium was adjusted
only for the age of each such individual in the manner
allowed under section 2701 of the Public Health Service
Act. In the case of a State participating in the
wellness discount demonstration project under section
2705(d) of the Public Health Service Act, the adjusted
monthly premium shall be determined without regard to
any premium discount or rebate under such project.
``(D) Additional benefits.--If--
``(i) a qualified health plan under section
1302(b)(5) of the Patient Protection and
Affordable Care Act offers benefits in addition to
the essential health benefits required to be
provided by the plan, or
``(ii) a State requires a qualified health
plan under section 1311(d)(3)(B) of such Act to
cover benefits in addition to the essential health
benefits required to be provided by the plan,
the portion of the premium for the plan properly
allocable (under rules prescribed by the Secretary of
Health and Human Services) to such additional benefits
shall not be taken into account in determining either
the monthly premium or the adjusted monthly premium
under paragraph (2).
``(E) Special rule for pediatric dental coverage.--
For purposes of determining the amount of any monthly
premium, if an individual enrolls in both a qualified
health plan and a plan described in section
1311(d)(2)(B)(ii)(I) of the Patient Protection and
Affordable Care Act for any plan year, the portion of
the premium for the plan described in such section that
(under regulations prescribed by the Secretary) is
properly allocable to pediatric dental benefits which
are included in the essential health benefits required
to be provided by a qualified health plan under section
1302(b)(1)(J) of such Act shall be treated as a premium
payable for a qualified health plan.

``(c) Definition and Rules Relating to Applicable Taxpayers,
Coverage Months, and Qualified Health Plan.--For purposes of this
section--
``(1) Applicable taxpayer.--
``(A) In general.--The term `applicable taxpayer'
means, with respect to any taxable year, a taxpayer
whose household income for the taxable year exceeds 100
percent but does not exceed 400 percent of an amount
equal to the poverty line for a family of the size
involved.
``(B) Special rule for certain individuals lawfully
present in the united states.--If--

[[Page 216]]

``(i) a taxpayer has a household income which
is not greater than 100 percent of an amount equal
to the poverty line for a family of the size
involved, and
``(ii) the taxpayer is an alien lawfully
present in the United States, but is not eligible
for the medicaid program under title XIX of the
Social Security Act by reason of such alien
status,
the taxpayer shall, for purposes of the credit under
this section, be treated as an applicable taxpayer with
a household income which is equal to 100 percent of the
poverty line for a family of the size involved.
``(C) Married couples must file joint return.--If
the taxpayer is married (within the meaning of section
7703) at the close of the taxable year, the taxpayer
shall be treated as an applicable taxpayer only if the
taxpayer and the taxpayer's spouse file a joint return
for the taxable year.
``(D) Denial of credit to dependents.--No credit
shall be allowed under this section to any individual
with respect to whom a deduction under section 151 is
allowable to another taxpayer for a taxable year
beginning in the calendar year in which such
individual's taxable year begins.
``(2) Coverage month.--For purposes of this subsection--
``(A) In general.--The term `coverage month' means,
with respect to an applicable taxpayer, any month if--
``(i) as of the first day of such month the
taxpayer, the taxpayer's spouse, or any dependent
of the taxpayer is covered by a qualified health
plan described in subsection (b)(2)(A) that was
enrolled in through an Exchange established by the
State under section 1311 of the Patient Protection
and Affordable Care Act, and
``(ii) the premium for coverage under such
plan for such month is paid by the taxpayer (or
through advance payment of the credit under
subsection (a) under section 1412 of the Patient
Protection and Affordable Care Act).
``(B) Exception for minimum essential coverage.--
``(i) In general.--The term `coverage month'
shall not include any month with respect to an
individual if for such month the individual is
eligible for minimum essential coverage other than
eligibility for coverage described in section
5000A(f)(1)(C) (relating to coverage in the
individual market).
``(ii) Minimum essential coverage.--The term
`minimum essential coverage' has the meaning given
such term by section 5000A(f).
``(C) Special rule for employer-sponsored minimum
essential coverage.--For purposes of subparagraph (B)--
``(i) Coverage must be affordable.--Except as
provided in clause (iii), an employee shall not be
treated as eligible for minimum essential coverage
if such coverage--
``(I) consists of an eligible
employer-sponsored plan (as defined in
section 5000A(f)(2)), and
``(II) the employee's required
contribution (within the meaning of
section 5000A(e)(1)(B)) with

[[Page 217]]

respect to the plan exceeds 9.8 percent
of the applicable taxpayer's household
income.
<> This clause shall also
apply to an individual who is eligible to enroll
in the plan by reason of a relationship the
individual bears to the employee.
``(ii) Coverage must provide minimum value.--
Except as provided in clause (iii), an employee
shall not be treated as eligible for minimum
essential coverage if such coverage consists of an
eligible employer-sponsored plan (as defined in
section 5000A(f)(2)) and the plan's share of the
total allowed costs of benefits provided under the
plan is less than 60 percent of such costs.
``(iii) Employee or family must not be covered
under employer plan.--Clauses (i) and (ii) shall
not apply if the employee (or any individual
described in the last sentence of clause (i)) is
covered under the eligible employer-sponsored plan
or the grandfathered health plan.
``(iv) Indexing.--In the case of plan years
beginning in any calendar year after 2014, the
Secretary shall adjust the 9.8 percent under
clause (i)(II) in the same manner as the
percentages are adjusted under subsection
(b)(3)(A)(ii).
``(3) Definitions and other rules.--
``(A) Qualified health plan.--The term `qualified
health plan' has the meaning given such term by section
1301(a) of the Patient Protection and Affordable Care
Act, except that such term shall not include a qualified
health plan which is a catastrophic plan described in
section 1302(e) of such Act.
``(B) Grandfathered health plan.--The term
`grandfathered health plan' has the meaning given such
term by section 1251 of the Patient Protection and
Affordable Care Act.

``(d) Terms Relating to Income and Families.--For purposes of this
section--
``(1) Family size.--The family size involved with respect to
any taxpayer shall be equal to the number of individuals for
whom the taxpayer is allowed a deduction under section 151
(relating to allowance of deduction for personal exemptions) for
the taxable year.
``(2) Household income.--
``(A) Household income.--The term `household income'
means, with respect to any taxpayer, an amount equal to
the sum of--
``(i) the modified gross income of the
taxpayer, plus
``(ii) the aggregate modified gross incomes of
all other individuals who--
``(I) were taken into account in
determining the taxpayer's family size
under paragraph (1), and
``(II) were required to file a
return of tax imposed by section 1 for
the taxable year.
``(B) Modified gross income.--The term `modified
gross income' means gross income--

[[Page 218]]

``(i) decreased by the amount of any deduction
allowable under paragraph (1), (3), (4), or (10)
of section 62(a),
``(ii) increased by the amount of interest
received or accrued during the taxable year which
is exempt from tax imposed by this chapter, and
``(iii) determined without regard to sections
911, 931, and 933.
``(3) Poverty line.--
``(A) In general.--The term `poverty line' has the
meaning given that term in section 2110(c)(5) of the
Social Security Act (42 U.S.C. 1397jj(c)(5)).
``(B) Poverty line used.--In the case of any
qualified health plan offered through an Exchange for
coverage during a taxable year beginning in a calendar
year, the poverty line used shall be the most recently
published poverty line as of the 1st day of the regular
enrollment period for coverage during such calendar
year.

``(e) Rules for Individuals Not Lawfully Present.--
``(1) In general.--If 1 or more individuals for whom a
taxpayer is allowed a deduction under section 151 (relating to
allowance of deduction for personal exemptions) for the taxable
year (including the taxpayer or his spouse) are individuals who
are not lawfully present--
``(A) the aggregate amount of premiums otherwise
taken into account under clauses (i) and (ii) of
subsection (b)(2)(A) shall be reduced by the portion (if
any) of such premiums which is attributable to such
individuals, and
``(B) for purposes of applying this section, the
determination as to what percentage a taxpayer's
household income bears to the poverty level for a family
of the size involved shall be made under one of the
following methods:
``(i) A method under which--
``(I) the taxpayer's family size is
determined by not taking such
individuals into account, and
``(II) the taxpayer's household
income is equal to the product of the
taxpayer's household income (determined
without regard to this subsection) and a
fraction--
``(aa) the numerator of
which is the poverty line for
the taxpayer's family size
determined after application of
subclause (I), and
``(bb) the denominator of
which is the poverty line for
the taxpayer's family size
determined without regard to
subclause (I).
``(ii) A comparable method reaching the same
result as the method under clause (i).
``(2) Lawfully present.--For purposes of this section, an
individual shall be treated as lawfully present only if the
individual is, and is reasonably expected to be for the entire
period of enrollment for which the credit under this section is
being claimed, a citizen or national of the United States or an
alien lawfully present in the United States.
``(3) Secretarial authority.-- <> The
Secretary of Health and Human Services, in consultation with the
Secretary, shall prescribe rules setting forth the methods by
which calculations of family size and household income are made
for purposes

[[Page 219]]

of this subsection. Such rules shall be designed to ensure that
the least burden is placed on individuals enrolling in qualified
health plans through an Exchange and taxpayers eligible for the
credit allowable under this section.

``(f) Reconciliation of Credit and Advance Credit.--
``(1) In general.--The amount of the credit allowed under
this section for any taxable year shall be reduced (but not
below zero) by the amount of any advance payment of such credit
under section 1412 of the Patient Protection and Affordable Care
Act.
``(2) Excess advance payments.--
``(A) In general.--If the advance payments to a
taxpayer under section 1412 of the Patient Protection
and Affordable Care Act for a taxable year exceed the
credit allowed by this section (determined without
regard to paragraph (1)), the tax imposed by this
chapter for the taxable year shall be increased by the
amount of such excess.
``(B) Limitation on increase where income less than
400 percent of poverty line.--
``(i) In general.--In the case of an
applicable taxpayer whose household income is less
than 400 percent of the poverty line for the size
of the family involved for the taxable year, the
amount of the increase under subparagraph (A)
shall in no event exceed $400 ($250 in the case of
a taxpayer whose tax is determined under section
1(c) for the taxable year).
``(ii) Indexing of amount.--In the case of any
calendar year beginning after 2014, each of the
dollar amounts under clause (i) shall be increased
by an amount equal to--
``(I) such dollar amount, multiplied
by
``(II) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year, determined by
substituting `calendar year 2013' for
`calendar year 1992' in subparagraph (B)
thereof.
If the amount of any increase under clause (i) is
not a multiple of $50, such increase shall be
rounded to the next lowest multiple of $50.

``(g) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the provisions of this section,
including regulations which provide for--
``(1) the coordination of the credit allowed under this
section with the program for advance payment of the credit under
section 1412 of the Patient Protection and Affordable Care Act,
and
``(2) the application of subsection (f) where the filing
status of the taxpayer for a taxable year is different from such
status used for determining the advance payment of the
credit.''.

(b) Disallowance of Deduction.--Section 280C of the Internal Revenue
Code of 1986 <>  is amended by adding at the end the
following new subsection:

``(g) Credit for Health Insurance Premiums.--No deduction shall be
allowed for the portion of the premiums paid by the taxpayer for
coverage of 1 or more individuals under a qualified health plan which is
equal to the amount of the credit determined for the taxable year under
section 36B(a) with respect to such premiums.''.

[[Page 220]]

(c) Study on Affordable Coverage.--
(1) Study and report.--
(A) In general.--Not later than 5 years after the
date of the enactment of this Act, the Comptroller
General shall conduct a study on the affordability of
health insurance coverage, including--
(i) the impact of the tax credit for qualified
health insurance coverage of individuals under
section 36B of the Internal Revenue Code of 1986
and the tax credit for employee health insurance
expenses of small employers under section 45R of
such Code on maintaining and expanding the health
insurance coverage of individuals;
(ii) the availability of affordable health
benefits plans, including a study of whether the
percentage of household income used for purposes
of section 36B(c)(2)(C) of the Internal Revenue
Code of 1986 (as added by this section) is the
appropriate level for determining whether
employer-provided coverage is affordable for an
employee and whether such level may be lowered
without significantly increasing the costs to the
Federal Government and reducing employer-provided
coverage; and
(iii) the ability of individuals to maintain
essential health benefits coverage (as defined in
section 5000A(f) of the Internal Revenue Code of
1986).
(B) Report.--The Comptroller General shall submit to
the appropriate committees of Congress a report on the
study conducted under subparagraph (A), together with
legislative recommendations relating to the matters
studied under such subparagraph.
(2) Appropriate committees of congress.--In this subsection,
the term ``appropriate committees of Congress'' means the
Committee on Ways and Means, the Committee on Education and
Labor, and the Committee on Energy and Commerce of the House of
Representatives and the Committee on Finance and the Committee
on Health, Education, Labor and Pensions of the Senate.

(d) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting ``36B,'' after ``36A,''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of the Internal Revenue Code of 1986
is amended by inserting after the item relating to section 36A
the following new item:

``Sec. 36B. Refundable credit for coverage under a qualified health
plan.''.

(e) <>  Effective Date.--The amendments made
by this section shall apply to taxable years ending after December 31,
2013.

SEC. 1402. <> REDUCED COST-SHARING FOR INDIVIDUALS
ENROLLING IN QUALIFIED HEALTH PLANS.

(a) In General.--In the case of an eligible insured enrolled in a
qualified health plan--
(1) <>  the Secretary shall notify the
issuer of the plan of such eligibility; and
(2) the issuer shall reduce the cost-sharing under the plan
at the level and in the manner specified in subsection (c).

[[Page 221]]

(b) Eligible Insured.--In this section, the term ``eligible
insured'' means an individual--
(1) who enrolls in a qualified health plan in the silver
level of coverage in the individual market offered through an
Exchange; and
(2) whose household income exceeds 100 percent but does not
exceed 400 percent of the poverty line for a family of the size
involved.

In the case of an individual described in section 36B(c)(1)(B) of the
Internal Revenue Code of 1986, the individual shall be treated as having
household income equal to 100 percent for purposes of applying this
section.
(c) Determination of Reduction in Cost-sharing.--
(1) Reduction in out-of-pocket limit.--
(A) In general.--The reduction in cost-sharing under
this subsection shall first be achieved by reducing the
applicable out-of pocket limit under section 1302(c)(1)
in the case of--
(i) an eligible insured whose household income
is more than 100 percent but not more than 200
percent of the poverty line for a family of the
size involved, by two-thirds;
(ii) an eligible insured whose household
income is more than 200 percent but not more than
300 percent of the poverty line for a family of
the size involved, by one-half; and
(iii) an eligible insured whose household
income is more than 300 percent but not more than
400 percent of the poverty line for a family of
the size involved, by one-third.
(B) Coordination with actuarial value limits.--
(i) In general.--The Secretary shall ensure
the reduction under this paragraph shall not
result in an increase in the plan's share of the
total allowed costs of benefits provided under the
plan above--
(I) 90 percent in the case of an
eligible insured described in paragraph
(2)(A);
(II) 80 percent in the case of an
eligible insured described in paragraph
(2)(B); and
(III) 70 percent in the case of an
eligible insured described in clause
(ii) or (iii) of subparagraph (A).
(ii) Adjustment.--The Secretary shall adjust
the out-of pocket limits under paragraph (1) if
necessary to ensure that such limits do not cause
the respective actuarial values to exceed the
levels specified in clause (i).
(2) Additional reduction for lower income insureds.--
The <> Secretary shall establish procedures
under which the issuer of a qualified health plan to which this
section applies shall further reduce cost-sharing under the plan
in a manner sufficient to--
(A) in the case of an eligible insured whose
household income is not less than 100 percent but not
more than 150 percent of the poverty line for a family
of the size involved, increase the plan's share of the
total allowed

[[Page 222]]

costs of benefits provided under the plan to 90 percent
of such costs; and
(B) in the case of an eligible insured whose
household income is more than 150 percent but not more
than 200 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 80
percent of such costs.
(3) Methods for reducing cost-sharing.--
(A) <>  In general.--An issuer
of a qualified health plan making reductions under this
subsection shall notify the Secretary of such reductions
and the Secretary shall make periodic and timely
payments to the issuer equal to the value of the
reductions.
(B) Capitated payments.--The Secretary may establish
a capitated payment system to carry out the payment of
cost-sharing reductions under this section. Any such
system shall take into account the value of the
reductions and make appropriate risk adjustments to such
payments.
(4) Additional benefits.--If a qualified health plan under
section 1302(b)(5) offers benefits in addition to the essential
health benefits required to be provided by the plan, or a State
requires a qualified health plan under section 1311(d)(3)(B) to
cover benefits in addition to the essential health benefits
required to be provided by the plan, the reductions in cost-
sharing under this section shall not apply to such additional
benefits.
(5) Special rule for pediatric dental plans.--If an
individual enrolls in both a qualified health plan and a plan
described in section 1311(d)(2)(B)(ii)(I) for any plan year,
subsection (a) shall not apply to that portion of any reduction
in cost-sharing under subsection (c) that (under regulations
prescribed by the Secretary) is properly allocable to pediatric
dental benefits which are included in the essential health
benefits required to be provided by a qualified health plan
under section 1302(b)(1)(J).

(d) Special Rules for Indians.--
(1) Indians under 300 percent of poverty.--If an individual
enrolled in any qualified health plan in the individual market
through an Exchange is an Indian (as defined in section 4(d) of
the Indian Self-Determination and Education Assistance Act (25
U.S.C. 450b(d))) whose household income is not more than 300
percent of the poverty line for a family of the size involved,
then, for purposes of this section--
(A) such individual shall be treated as an eligible
insured; and
(B) the issuer of the plan shall eliminate any cost-
sharing under the plan.
(2) Items or services furnished through indian health
providers.--If an Indian (as so defined) enrolled in a qualified
health plan is furnished an item or service directly by the
Indian Health Service, an Indian Tribe, Tribal Organization, or
Urban Indian Organization or through referral under contract
health services--
(A) no cost-sharing under the plan shall be imposed
under the plan for such item or service; and
(B) the issuer of the plan shall not reduce the
payment to any such entity for such item or service by
the amount

[[Page 223]]

of any cost-sharing that would be due from the Indian
but for subparagraph (A).
(3) Payment.--The Secretary shall pay to the issuer of a
qualified health plan the amount necessary to reflect the
increase in actuarial value of the plan required by reason of
this subsection.

(e) Rules for Individuals Not Lawfully Present.--
(1) In general.--If an individual who is an eligible insured
is not lawfully present--
(A) no cost-sharing reduction under this section
shall apply with respect to the individual; and
(B) for purposes of applying this section, the
determination as to what percentage a taxpayer's
household income bears to the poverty level for a family
of the size involved shall be made under one of the
following methods:
(i) A method under which--
(I) the taxpayer's family size is
determined by not taking such
individuals into account, and
(II) the taxpayer's household income
is equal to the product of the
taxpayer's household income (determined
without regard to this subsection) and a
fraction--
(aa) the numerator of which
is the poverty line for the
taxpayer's family size
determined after application of
subclause (I), and
(bb) the denominator of
which is the poverty line for
the taxpayer's family size
determined without regard to
subclause (I).
(ii) A comparable method reaching the same
result as the method under clause (i).
(2) Lawfully present.--For purposes of this section, an
individual shall be treated as lawfully present only if the
individual is, and is reasonably expected to be for the entire
period of enrollment for which the cost-sharing reduction under
this section is being claimed, a citizen or national of the
United States or an alien lawfully present in the United States.
(3) <>  Secretarial authority.--The
Secretary, in consultation with the Secretary of the Treasury,
shall prescribe rules setting forth the methods by which
calculations of family size and household income are made for
purposes of this subsection. Such rules shall be designed to
ensure that the least burden is placed on individuals enrolling
in qualified health plans through an Exchange and taxpayers
eligible for the credit allowable under this section.

(f) Definitions and Special Rules.--In this section:
(1) In general.--Any term used in this section which is also
used in section 36B of the Internal Revenue Code of 1986 shall
have the meaning given such term by such section.
(2) Limitations on reduction.--No cost-sharing reduction
shall be allowed under this section with respect to coverage for
any month unless the month is a coverage month with respect to
which a credit is allowed to the insured (or an applicable
taxpayer on behalf of the insured) under section 36B of such
Code.
(3) Data used for eligibility.--Any determination under this
section shall be made on the basis of the taxable year for which
the advance determination is made under section

[[Page 224]]

1412 and not the taxable year for which the credit under section
36B of such Code is allowed.

Subpart B--Eligibility Determinations

SEC. 1411. <> PROCEDURES FOR DETERMINING
ELIGIBILITY FOR EXCHANGE PARTICIPATION, PREMIUM TAX CREDITS
AND REDUCED COST-SHARING, AND INDIVIDUAL RESPONSIBILITY
EXEMPTIONS.

(a) Establishment of Program.--The Secretary shall establish a
program meeting the requirements of this section for determining--
(1) whether an individual who is to be covered in the
individual market by a qualified health plan offered through an
Exchange, or who is claiming a premium tax credit or reduced
cost-sharing, meets the requirements of sections 1312(f)(3),
1402(e), and 1412(d) of this title and section 36B(e) of the
Internal Revenue Code of 1986 that the individual be a citizen
or national of the United States or an alien lawfully present in
the United States;
(2) in the case of an individual claiming a premium tax
credit or reduced cost-sharing under section 36B of such Code or
section 1402--
(A) whether the individual meets the income and
coverage requirements of such sections; and
(B) the amount of the tax credit or reduced cost-
sharing;
(3) whether an individual's coverage under an employer-
sponsored health benefits plan is treated as unaffordable under
sections 36B(c)(2)(C) and 5000A(e)(2); and
(4) whether to grant a certification under section
1311(d)(4)(H) attesting that, for purposes of the individual
responsibility requirement under section 5000A of the Internal
Revenue Code of 1986, an individual is entitled to an exemption
from either the individual responsibility requirement or the
penalty imposed by such section.

(b) Information Required To Be Provided by Applicants.--
(1) In general.--An applicant for enrollment in a qualified
health plan offered through an Exchange in the individual market
shall provide--
(A) the name, address, and date of birth of each
individual who is to be covered by the plan (in this
subsection referred to as an ``enrollee''); and
(B) the information required by any of the following
paragraphs that is applicable to an enrollee.
(2) Citizenship or immigration status.--The following
information shall be provided with respect to every enrollee:
(A) In the case of an enrollee whose eligibility is
based on an attestation of citizenship of the enrollee,
the enrollee's social security number.
(B) In the case of an individual whose eligibility
is based on an attestation of the enrollee's immigration
status, the enrollee's social security number (if
applicable) and such identifying information with
respect to the enrollee's immigration status as the
Secretary, after consultation with the Secretary of
Homeland Security, determines appropriate.

[[Page 225]]

(3) Eligibility and amount of tax credit or reduced cost-
sharing.--In the case of an enrollee with respect to whom a
premium tax credit or reduced cost-sharing under section 36B of
such Code or section 1402 is being claimed, the following
information:
(A) Information regarding income and family size.--
The information described in section 6103(l)(21) for the
taxable year ending with or within the second calendar
year preceding the calendar year in which the plan year
begins.
(B) Changes in circumstances.--The information
described in section 1412(b)(2), including information
with respect to individuals who were not required to
file an income tax return for the taxable year described
in subparagraph (A) or individuals who experienced
changes in marital status or family size or significant
reductions in income.
(4) Employer-sponsored coverage.--In the case of an enrollee
with respect to whom eligibility for a premium tax credit under
section 36B of such Code or cost-sharing reduction under section
1402 is being established on the basis that the enrollee's (or
related individual's) employer is not treated under section
36B(c)(2)(C) of such Code as providing minimum essential
coverage or affordable minimum essential coverage, the following
information:
(A) The name, address, and employer identification
number (if available) of the employer.
(B) Whether the enrollee or individual is a full-
time employee and whether the employer provides such
minimum essential coverage.
(C) If the employer provides such minimum essential
coverage, the lowest cost option for the enrollee's or
individual's enrollment status and the enrollee's or
individual's required contribution (within the meaning
of section 5000A(e)(1)(B) of such Code) under the
employer-sponsored plan.
(D) If an enrollee claims an employer's minimum
essential coverage is unaffordable, the information
described in paragraph (3).
If an enrollee changes employment or obtains additional
employment while enrolled in a qualified health plan for which
such credit or reduction is allowed, the enrollee shall notify
the Exchange of such change or additional employment and provide
the information described in this paragraph with respect to the
new employer.
(5) Exemptions from individual responsibility
requirements.--In the case of an individual who is seeking an
exemption certificate under section 1311(d)(4)(H) from any
requirement or penalty imposed by section 5000A, the following
information:
(A) In the case of an individual seeking exemption
based on the individual's status as a member of an
exempt religious sect or division, as a member of a
health care sharing ministry, as an Indian, or as an
individual eligible for a hardship exemption, such
information as the Secretary shall prescribe.

[[Page 226]]

(B) In the case of an individual seeking exemption
based on the lack of affordable coverage or the
individual's status as a taxpayer with household income
less than 100 percent of the poverty line, the
information described in paragraphs (3) and (4), as
applicable.

(c) Verification of Information Contained in Records of Specific
Federal Officials.--
(1) Information transferred to secretary.--An Exchange shall
submit the information provided by an applicant under subsection
(b) to the Secretary for verification in accordance with the
requirements of this subsection and subsection (d).
(2) Citizenship or immigration status.--
(A) Commissioner of social security.--The Secretary
shall submit to the Commissioner of Social Security the
following information for a determination as to whether
the information provided is consistent with the
information in the records of the Commissioner:
(i) The name, date of birth, and social
security number of each individual for whom such
information was provided under subsection (b)(2).
(ii) The attestation of an individual that the
individual is a citizen.
(B) Secretary of homeland security.--
(i) <>  In general.--In the
case of an individual--
(I) who attests that the individual
is an alien lawfully present in the
United States; or
(II) who attests that the individual
is a citizen but with respect to whom
the Commissioner of Social Security has
notified the Secretary under subsection
(e)(3) that the attestation is
inconsistent with information in the
records maintained by the Commissioner;
the Secretary shall submit to the Secretary of
Homeland Security the information described in
clause (ii) for a determination as to whether the
information provided is consistent with the
information in the records of the Secretary of
Homeland Security.
(ii) Information.--The information described
in clause (ii) is the following:
(I) The name, date of birth, and any
identifying information with respect to
the individual's immigration status
provided under subsection (b)(2).
(II) The attestation that the
individual is an alien lawfully present
in the United States or in the case of
an individual described in clause
(i)(II), the attestation that the
individual is a citizen.
(3) Eligibility for tax credit and cost-sharing reduction.--
The Secretary shall submit the information described in
subsection (b)(3)(A) provided under paragraph (3), (4), or (5)
of subsection (b) to the Secretary of the Treasury for
verification of household income and family size for purposes of
eligibility.
(4) Methods.--
(A) <>  In general.--
The Secretary, in consultation with the Secretary of the
Treasury, the Secretary of Homeland

[[Page 227]]

Security, and the Commissioner of Social Security, shall
provide that verifications and determinations under this
subsection shall be done--
(i) through use of an on-line system or
otherwise for the electronic submission of, and
response to, the information submitted under this
subsection with respect to an applicant; or
(ii) by determining the consistency of the
information submitted with the information
maintained in the records of the Secretary of the
Treasury, the Secretary of Homeland Security, or
the Commissioner of Social Security through such
other method as is approved by the Secretary.
(B) Flexibility.--The Secretary may modify the
methods used under the program established by this
section for the Exchange and verification of information
if the Secretary determines such modifications would
reduce the administrative costs and burdens on the
applicant, including allowing an applicant to request
the Secretary of the Treasury to provide the information
described in paragraph (3) directly to the Exchange or
to the Secretary. The Secretary shall not make any such
modification unless the Secretary determines that any
applicable requirements under this section and section
6103 of the Internal Revenue Code of 1986 with respect
to the confidentiality, disclosure, maintenance, or use
of information will be met.

(d) Verification by Secretary.--In the case of information provided
under subsection (b) that is not required under subsection (c) to be
submitted to another person for verification, the Secretary shall verify
the accuracy of such information in such manner as the Secretary
determines appropriate, including delegating responsibility for
verification to the Exchange.
(e) Actions Relating to Verification.--
(1) In general.--Each person to whom the Secretary provided
information under subsection (c) shall report to the Secretary
under the method established under subsection (c)(4) the results
of its verification and the Secretary shall notify the Exchange
of such results. <> Each person to whom the
Secretary provided information under subsection (d) shall report
to the Secretary in such manner as the Secretary determines
appropriate.
(2) Verification.--
(A) Eligibility for enrollment and premium tax
credits and cost-sharing reductions.--If information
provided by an applicant under paragraphs (1), (2), (3),
and (4) of subsection (b) is verified under subsections
(c) and (d)--
(i) the individual's eligibility to enroll
through the Exchange and to apply for premium tax
credits and cost-sharing reductions shall be
satisfied; and
(ii) <>  the Secretary
shall, if applicable, notify the Secretary of the
Treasury under section 1412(c) of the amount of
any advance payment to be made.
(B) Exemption from individual responsibility.--If
information provided by an applicant under subsection
(b)(5) is verified under subsections (c) and (d), the
Secretary

[[Page 228]]

shall issue the certification of exemption described in
section 1311(d)(4)(H).
(3) Inconsistencies involving attestation of citizenship or
lawful presence.--If the information provided by any applicant
under subsection (b)(2) is inconsistent with information in the
records maintained by the Commissioner of Social Security or
Secretary of Homeland Security, whichever is applicable, the
applicant's eligibility will be determined in the same manner as
an individual's eligibility under the medicaid program is
determined under section 1902(ee) of the Social Security Act (as
in effect on January 1, 2010).
(4) <>  Inconsistencies involving
other information.--
(A) In general.--If the information provided by an
applicant under subsection (b) (other than subsection
(b)(2)) is inconsistent with information in the records
maintained by persons under subsection (c) or is not
verified under subsection (d), the Secretary shall
notify the Exchange and the Exchange shall take the
following actions:
(i) Reasonable effort.--The Exchange shall
make a reasonable effort to identify and address
the causes of such inconsistency, including
through typographical or other clerical errors, by
contacting the applicant to confirm the accuracy
of the information, and by taking such additional
actions as the Secretary, through regulation or
other guidance, may identify.
(ii) Notice and opportunity to correct.--In
the case the inconsistency or inability to verify
is not resolved under subparagraph (A), the
Exchange shall--
(I) notify the applicant of such
fact;
(II) <>  provide
the applicant an opportunity to either
present satisfactory documentary
evidence or resolve the inconsistency
with the person verifying the
information under subsection (c) or (d)
during the 90-day period beginning the
date on which the notice required under
subclause (I) is sent to the applicant.
The Secretary may extend the 90-day period under
subclause (II) for enrollments occurring during
2014.
(B) Specific actions not involving citizenship or
lawful presence.--
(i) In general.--Except as provided in
paragraph (3), the Exchange shall, during any
period before the close of the period under
subparagraph (A)(ii)(II), make any determination
under paragraphs (2), (3), and (4) of subsection
(a) on the basis of the information contained on
the application.
(ii) Eligibility or amount of credit or
reduction.--If an inconsistency involving the
eligibility for, or amount of, any premium tax
credit or cost-sharing reduction is unresolved
under this subsection as of the close of the
period under subparagraph (A)(ii)(II), the
Exchange shall notify the applicant of the amount
(if any) of the credit or reduction that is
determined on the basis of the records maintained
by persons under subsection (c).
(iii) Employer affordability.--If the
Secretary notifies an Exchange that an enrollee is
eligible for

[[Page 229]]

a premium tax credit under section 36B of such
Code or cost-sharing reduction under section 1402
because the enrollee's (or related individual's)
employer does not provide minimum essential
coverage through an employer-sponsored plan or
that the employer does provide that coverage but
it is not affordable coverage, the Exchange shall
notify the employer of such fact and that the
employer may be liable for the payment assessed
under section 4980H of such Code.
(iv) Exemption.--In any case where the
inconsistency involving, or inability to verify,
information provided under subsection (b)(5) is
not resolved as of the close of the period under
subparagraph (A)(ii)(II), the Exchange shall
notify an applicant that no certification of
exemption from any requirement or payment under
section 5000A of such Code will be issued.
(C) Appeals process.--The Exchange shall also notify
each person receiving notice under this paragraph of the
appeals processes established under subsection (f).

(f) Appeals and Redeterminations.--
(1) <>  In general.--The Secretary, in
consultation with the Secretary of the Treasury, the Secretary
of Homeland Security, and the Commissioner of Social Security,
shall establish procedures by which the Secretary or one of such
other Federal officers--
(A) hears and makes decisions with respect to
appeals of any determination under subsection (e); and
(B) redetermines eligibility on a periodic basis in
appropriate circumstances.
(2) Employer liability.--
(A) In general.--The Secretary shall establish a
separate appeals process for employers who are notified
under subsection (e)(4)(C) that the employer may be
liable for a tax imposed by section 4980H of the
Internal Revenue Code of 1986 with respect to an
employee because of a determination that the employer
does not provide minimum essential coverage through an
employer-sponsored plan or that the employer does
provide that coverage but it is not affordable coverage
with respect to an employee. Such process shall provide
an employer the opportunity to--
(i) present information to the Exchange for
review of the determination either by the Exchange
or the person making the determination, including
evidence of the employer-sponsored plan and
employer contributions to the plan; and
(ii) have access to the data used to make the
determination to the extent allowable by law.
Such process shall be in addition to any rights of
appeal the employer may have under subtitle F of such
Code.
(B) Confidentiality.--Notwithstanding any provision
of this title (or the amendments made by this title) or
section 6103 of the Internal Revenue Code of 1986, an
employer shall not be entitled to any taxpayer return
information with respect to an employee for purposes of
determining whether the employer is subject to the
penalty under section 4980H of such Code with respect to
the employee, except that--

[[Page 230]]

(i) the employer may be notified as to the
name of an employee and whether or not the
employee's income is above or below the threshold
by which the affordability of an employer's health
insurance coverage is measured; and
(ii) this subparagraph shall not apply to an
employee who provides a waiver (at such time and
in such manner as the Secretary may prescribe)
authorizing an employer to have access to the
employee's taxpayer return information.

(g) Confidentiality of Applicant Information.--
(1) In general.--An applicant for insurance coverage or for
a premium tax credit or cost-sharing reduction shall be required
to provide only the information strictly necessary to
authenticate identity, determine eligibility, and determine the
amount of the credit or reduction.
(2) Receipt of information.--Any person who receives
information provided by an applicant under subsection (b)
(whether directly or by another person at the request of the
applicant), or receives information from a Federal agency under
subsection (c), (d), or (e), shall--
(A) use the information only for the purposes of,
and to the extent necessary in, ensuring the efficient
operation of the Exchange, including verifying the
eligibility of an individual to enroll through an
Exchange or to claim a premium tax credit or cost-
sharing reduction or the amount of the credit or
reduction; and
(B) not disclose the information to any other person
except as provided in this section.

(h) Penalties.--
(1) False or fraudulent information.--
(A) Civil penalty.--
(i) In general.--If--
(I) any person fails to provides
correct information under subsection
(b); and
(II) such failure is attributable to
negligence or disregard of any rules or
regulations of the Secretary,
such person shall be subject, in addition to any
other penalties that may be prescribed by law, to
a civil penalty of not more than $25,000 with
respect to any failures involving an application
for a plan year. For purposes of this
subparagraph, the terms ``negligence'' and
``disregard'' shall have the same meanings as when
used in section 6662 of the Internal Revenue Code
of 1986.
(ii) Reasonable cause exception.--No penalty
shall be imposed under clause (i) if the Secretary
determines that there was a reasonable cause for
the failure and that the person acted in good
faith.
(B) Knowing and willful violations.--Any person who
knowingly and willfully provides false or fraudulent
information under subsection (b) shall be subject, in
addition to any other penalties that may be prescribed
by law, to a civil penalty of not more than $250,000.

[[Page 231]]

(2) Improper use or disclosure of information.--Any person
who knowingly and willfully uses or discloses information in
violation of subsection (g) shall be subject, in addition to any
other penalties that may be prescribed by law, to a civil
penalty of not more than $25,000.
(3) Limitations on liens and levies.--The Secretary (or, if
applicable, the Attorney General of the United States) shall
not--
(A) file notice of lien with respect to any property
of a person by reason of any failure to pay the penalty
imposed by this subsection; or
(B) levy on any such property with respect to such
failure.

(i) Study of Administration of Employer Responsibility.--
(1) In general.--The Secretary of Health and Human Services
shall, in consultation with the Secretary of the Treasury,
conduct a study of the procedures that are necessary to ensure
that in the administration of this title and section 4980H of
the Internal Revenue Code of 1986 (as added by section 1513)
that the following rights are protected:
(A) The rights of employees to preserve their right
to confidentiality of their taxpayer return information
and their right to enroll in a qualified health plan
through an Exchange if an employer does not provide
affordable coverage.
(B) The rights of employers to adequate due process
and access to information necessary to accurately
determine any payment assessed on employers.
(2) Report.--Not later than January 1, 2013, the Secretary
of Health and Human Services shall report the results of the
study conducted under paragraph (1), including any
recommendations for legislative changes, to the Committees on
Finance and Health, Education, Labor and Pensions of the Senate
and the Committees of Education and Labor and Ways and Means of
the House of Representatives.

SEC. 1412. <>  ADVANCE DETERMINATION AND PAYMENT OF
PREMIUM TAX CREDITS AND COST-SHARING REDUCTIONS.

(a) In General.--The Secretary, in consultation with the Secretary
of the Treasury, shall establish a program under which--
(1) upon request of an Exchange, advance determinations are
made under section 1411 with respect to the income eligibility
of individuals enrolling in a qualified health plan in the
individual market through the Exchange for the premium tax
credit allowable under section 36B of the Internal Revenue Code
of 1986 and the cost-sharing reductions under section 1402;
(2) <>  the Secretary notifies--
(A) the Exchange and the Secretary of the Treasury
of the advance determinations; and
(B) the Secretary of the Treasury of the name and
employer identification number of each employer with
respect to whom 1 or more employee of the employer were
determined to be eligible for the premium tax credit
under section 36B of the Internal Revenue Code of 1986
and the cost-sharing reductions under section 1402
because--

[[Page 232]]

(i) the employer did not provide minimum
essential coverage; or
(ii) the employer provided such minimum
essential coverage but it was determined under
section 36B(c)(2)(C) of such Code to either be
unaffordable to the employee or not provide the
required minimum actuarial value; and
(3) the Secretary of the Treasury makes advance payments of
such credit or reductions to the issuers of the qualified health
plans in order to reduce the premiums payable by individuals
eligible for such credit.

(b) Advance Determinations.--
(1) In general.--The Secretary shall provide under the
program established under subsection (a) that advance
determination of eligibility with respect to any individual
shall be made--
(A) during the annual open enrollment period
applicable to the individual (or such other enrollment
period as may be specified by the Secretary); and
(B) on the basis of the individual's household
income for the most recent taxable year for which the
Secretary, after consultation with the Secretary of the
Treasury, determines information is available.
(2) Changes in circumstances.--The Secretary shall provide
procedures for making advance determinations on the basis of
information other than that described in paragraph (1)(B) in
cases where information included with an application form
demonstrates substantial changes in income, changes in family
size or other household circumstances, change in filing status,
the filing of an application for unemployment benefits, or other
significant changes affecting eligibility, including--
(A) allowing an individual claiming a decrease of 20
percent or more in income, or filing an application for
unemployment benefits, to have eligibility for the
credit determined on the basis of household income for a
later period or on the basis of the individual's
estimate of such income for the taxable year; and
(B) the determination of household income in cases
where the taxpayer was not required to file a return of
tax imposed by this chapter for the second preceding
taxable year.

(c) <>  Payment of Premium Tax Credits and
Cost-sharing Reductions.--
(1) In general.--The Secretary shall notify the Secretary of
the Treasury and the Exchange through which the individual is
enrolling of the advance determination under section 1411.
(2) Premium tax credit.--
(A) In general.--The Secretary of the Treasury shall
make the advance payment under this section of any
premium tax credit allowed under section 36B of the
Internal Revenue Code of 1986 to the issuer of a
qualified health plan on a monthly basis (or such other
periodic basis as the Secretary may provide).
(B) Issuer responsibilities.--An issuer of a
qualified health plan receiving an advance payment with
respect to an individual enrolled in the plan shall--

[[Page 233]]

(i) reduce the premium charged the insured for
any period by the amount of the advance payment
for the period;
(ii) notify the Exchange and the Secretary of
such reduction;
(iii) include with each billing statement the
amount by which the premium for the plan has been
reduced by reason of the advance payment; and
(iv) in the case of any nonpayment of premiums
by the insured--
(I) notify the Secretary of such
nonpayment; and
(II) allow a 3-month grace period
for nonpayment of premiums before
discontinuing coverage.
(3) Cost-sharing reductions.--The Secretary shall also
notify the Secretary of the Treasury and the Exchange under
paragraph (1) if an advance payment of the cost-sharing
reductions under section 1402 is to be made to the issuer of any
qualified health plan with respect to any individual enrolled in
the plan. The Secretary of the Treasury shall make such advance
payment at such time and in such amount as the Secretary
specifies in the notice.

(d) No Federal Payments for Individuals Not Lawfully Present.--
Nothing in this subtitle or the amendments made by this subtitle allows
Federal payments, credits, or cost-sharing reductions for individuals
who are not lawfully present in the United States.
(e) State Flexibility.--Nothing in this subtitle or the amendments
made by this subtitle shall be construed to prohibit a State from making
payments to or on behalf of an individual for coverage under a qualified
health plan offered through an Exchange that are in addition to any
credits or cost-sharing reductions allowable to the individual under
this subtitle and such amendments.

SEC. 1413. <>  STREAMLINING OF PROCEDURES FOR
ENROLLMENT THROUGH AN EXCHANGE AND STATE MEDICAID, CHIP, AND
HEALTH SUBSIDY PROGRAMS.

(a) In General.--The Secretary shall establish a system meeting the
requirements of this section under which residents of each State may
apply for enrollment in, receive a determination of eligibility for
participation in, and continue participation in, applicable State health
subsidy programs. Such system shall ensure that if an individual
applying to an Exchange is found through screening to be eligible for
medical assistance under the State medicaid plan under title XIX, or
eligible for enrollment under a State children's health insurance
program (CHIP) under title XXI of such Act, the individual is enrolled
for assistance under such plan or program.
(b) Requirements Relating to Forms and Notice.--
(1) Requirements relating to forms.--
(A) In general.--The Secretary shall develop and
provide to each State a single, streamlined form that--
(i) may be used to apply for all applicable
State health subsidy programs within the State;
(ii) may be filed online, in person, by mail,
or by telephone;

[[Page 234]]

(iii) may be filed with an Exchange or with
State officials operating one of the other
applicable State health subsidy programs; and
(iv) is structured to maximize an applicant's
ability to complete the form satisfactorily,
taking into account the characteristics of
individuals who qualify for applicable State
health subsidy programs.
(B) State authority to establish form.--A State may
develop and use its own single, streamlined form as an
alternative to the form developed under subparagraph (A)
if the alternative form is consistent with standards
promulgated by the Secretary under this section.
(C) Supplemental eligibility forms.--The Secretary
may allow a State to use a supplemental or alternative
form in the case of individuals who apply for
eligibility that is not determined on the basis of the
household income (as defined in section 36B of the
Internal Revenue Code of 1986).
(2) Notice.--The Secretary shall provide that an applicant
filing a form under paragraph (1) shall receive notice of
eligibility for an applicable State health subsidy program
without any need to provide additional information or paperwork
unless such information or paperwork is specifically required by
law when information provided on the form is inconsistent with
data used for the electronic verification under paragraph (3) or
is otherwise insufficient to determine eligibility.

(c) Requirements Relating to Eligibility Based on Data Exchanges.--
(1) Development of secure interfaces.--Each State shall
develop for all applicable State health subsidy programs a
secure, electronic interface allowing an exchange of data
(including information contained in the application forms
described in subsection (b)) that allows a determination of
eligibility for all such programs based on a single application.
Such interface shall be compatible with the method established
for data verification under section 1411(c)(4).
(2) Data matching program.--Each applicable State health
subsidy program shall participate in a data matching arrangement
for determining eligibility for participation in the program
under paragraph (3) that--
(A) provides access to data described in paragraph
(3);
(B) applies only to individuals who--
(i) receive assistance from an applicable
State health subsidy program; or
(ii) apply for such assistance--
(I) by filing a form described in
subsection (b); or
(II) by requesting a determination
of eligibility and authorizing
disclosure of the information described
in paragraph (3) to applicable State
health coverage subsidy programs for
purposes of determining and establishing
eligibility; and
(C) consistent with standards promulgated by the
Secretary, including the privacy and data security
safeguards described in section 1942 of the Social
Security Act or that are otherwise applicable to such
programs.

[[Page 235]]

(3) Determination of eligibility.--
(A) In general.--Each applicable State health
subsidy program shall, to the maximum extent
practicable--
(i) establish, verify, and update eligibility
for participation in the program using the data
matching arrangement under paragraph (2); and
(ii) determine such eligibility on the basis
of reliable, third party data, including
information described in sections 1137, 453(i),
and 1942(a) of the Social Security Act, obtained
through such arrangement.
(B) Exception.--This paragraph shall not apply in
circumstances with respect to which the Secretary
determines that the administrative and other costs of
use of the data matching arrangement under paragraph (2)
outweigh its expected gains in accuracy, efficiency, and
program participation.
(4) Secretarial standards.--The Secretary shall, after
consultation with persons in possession of the data to be
matched and representatives of applicable State health subsidy
programs, promulgate standards governing the timing, contents,
and procedures for data matching described in this subsection.
Such standards shall take into account administrative and other
costs and the value of data matching to the establishment,
verification, and updating of eligibility for applicable State
health subsidy programs.

(d) Administrative Authority.--
(1) Agreements.--Subject to section 1411 and section
6103(l)(21) of the Internal Revenue Code of 1986 and any other
requirement providing safeguards of privacy and data integrity,
the Secretary may establish model agreements, and enter into
agreements, for the sharing of data under this section.
(2) Authority of exchange to contract out.--Nothing in this
section shall be construed to--
(A) prohibit contractual arrangements through which
a State medicaid agency determines eligibility for all
applicable State health subsidy programs, but only if
such agency complies with the Secretary's requirements
ensuring reduced administrative costs, eligibility
errors, and disruptions in coverage; or
(B) change any requirement under title XIX that
eligibility for participation in a State's medicaid
program must be determined by a public agency.

(e) Applicable State Health Subsidy Program.--In this section, the
term ``applicable State health subsidy program'' means--
(1) the program under this title for the enrollment in
qualified health plans offered through an Exchange, including
the premium tax credits under section 36B of the Internal
Revenue Code of 1986 and cost-sharing reductions under section
1402;
(2) a State medicaid program under title XIX of the Social
Security Act;
(3) a State children's health insurance program (CHIP) under
title XXI of such Act; and
(4) a State program under section 1331 establishing
qualified basic health plans.

[[Page 236]]

SEC. 1414. DISCLOSURES TO CARRY OUT ELIGIBILITY REQUIREMENTS FOR CERTAIN
PROGRAMS.

(a) Disclosure of Taxpayer Return Information and Social Security
Numbers.--
(1) Taxpayer return information.--Subsection (l) of section
6103 of the Internal Revenue Code of 1986 <> is amended by adding at the end the following new
paragraph:
``(21) Disclosure of return information to carry out
eligibility requirements for certain programs.--
``(A) In general.--The Secretary, upon written
request from the Secretary of Health and Human Services,
shall disclose to officers, employees, and contractors
of the Department of Health and Human Services return
information of any taxpayer whose income is relevant in
determining any premium tax credit under section 36B or
any cost-sharing reduction under section 1402 of the
Patient Protection and Affordable Care Act or
eligibility for participation in a State medicaid
program under title XIX of the Social Security Act, a
State's children's health insurance program under title
XXI of the Social Security Act, or a basic health
program under section 1331 of Patient Protection and
Affordable Care Act. Such return information shall be
limited to--
``(i) taxpayer identity information with
respect to such taxpayer,
``(ii) the filing status of such taxpayer,
``(iii) the number of individuals for whom a
deduction is allowed under section 151 with
respect to the taxpayer (including the taxpayer
and the taxpayer's spouse),
``(iv) the modified gross income (as defined
in section 36B) of such taxpayer and each of the
other individuals included under clause (iii) who
are required to file a return of tax imposed by
chapter 1 for the taxable year,
``(v) such other information as is prescribed
by the Secretary by regulation as might indicate
whether the taxpayer is eligible for such credit
or reduction (and the amount thereof), and
``(vi) the taxable year with respect to which
the preceding information relates or, if
applicable, the fact that such information is not
available.
``(B) Information to exchange and state agencies.--
The Secretary of Health and Human Services may disclose
to an Exchange established under the Patient Protection
and Affordable Care Act or its contractors, or to a
State agency administering a State program described in
subparagraph (A) or its contractors, any inconsistency
between the information provided by the Exchange or
State agency to the Secretary and the information
provided to the Secretary under subparagraph (A).
``(C) Restriction on use of disclosed information.--
Return information disclosed under subparagraph (A) or
(B) may be used by officers, employees, and contractors
of the Department of Health and Human Services, an
Exchange, or a State agency only for the purposes of,
and to the extent necessary in--

[[Page 237]]

``(i) establishing eligibility for
participation in the Exchange, and verifying the
appropriate amount of, any credit or reduction
described in subparagraph (A),
``(ii) determining eligibility for
participation in the State programs described in
subparagraph (A).''.
(2) Social security numbers.--Section 205(c)(2)(C) of the
Social Security Act <>  is amended by adding
at the end the following new clause:
``(x) The Secretary of Health and Human
Services, and the Exchanges established under
section 1311 of the Patient Protection and
Affordable Care Act, are authorized to collect and
use the names and social security account numbers
of individuals as required to administer the
provisions of, and the amendments made by, the
such Act.''.

(b) Confidentiality and Disclosure.--Paragraph (3) of section
6103(a) of such Code <>  is amended by striking ``or
(20)'' and inserting ``(20), or (21)''.

(c) Procedures and Recordkeeping Related to Disclosures.--Paragraph
(4) of section 6103(p) of such Code is amended--
(1) by inserting ``, or any entity described in subsection
(l)(21),'' after ``or (20)'' in the matter preceding
subparagraph (A),
(2) by inserting ``or any entity described in subsection
(l)(21),'' after ``or (o)(1)(A)'' in subparagraph (F)(ii), and
(3) by inserting ``or any entity described in subsection
(l)(21),'' after ``or (20)'' both places it appears in the
matter after subparagraph (F).

(d) Unauthorized Disclosure or Inspection.--Paragraph (2) of section
7213(a) of such Code is amended by striking ``or (20)'' and inserting
``(20), or (21)''.

SEC. 1415. <>  PREMIUM TAX CREDIT AND COST-SHARING
REDUCTION PAYMENTS DISREGARDED FOR FEDERAL AND FEDERALLY-
ASSISTED PROGRAMS.

For purposes of determining the eligibility of any individual for
benefits or assistance, or the amount or extent of benefits or
assistance, under any Federal program or under any State or local
program financed in whole or in part with Federal funds--
(1) any credit or refund allowed or made to any individual
by reason of section 36B of the Internal Revenue Code of 1986
(as added by section 1401) shall not be taken into account as
income and shall not be taken into account as resources for the
month of receipt and the following 2 months; and
(2) any cost-sharing reduction payment or advance payment of
the credit allowed under such section 36B that is made under
section 1402 or 1412 shall be treated as made to the qualified
health plan in which an individual is enrolled and not to that
individual.

PART II--SMALL BUSINESS TAX CREDIT

SEC. 1421. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES OF SMALL
BUSINESSES.

(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business-

[[Page 238]]

related credits) is amended by inserting after section 45Q the
following:

``SEC. 45R. <>  EMPLOYEE HEALTH INSURANCE EXPENSES OF
SMALL EMPLOYERS.

``(a) General Rule.--For purposes of section 38, in the case of an
eligible small employer, the small employer health insurance credit
determined under this section for any taxable year in the credit period
is the amount determined under subsection (b).
``(b) Health Insurance Credit Amount.--Subject to subsection (c),
the amount determined under this subsection with respect to any eligible
small employer is equal to 50 percent (35 percent in the case of a tax-
exempt eligible small employer) of the lesser of--
``(1) the aggregate amount of nonelective contributions the
employer made on behalf of its employees during the taxable year
under the arrangement described in subsection (d)(4) for
premiums for qualified health plans offered by the employer to
its employees through an Exchange, or
``(2) the aggregate amount of nonelective contributions
which the employer would have made during the taxable year under
the arrangement if each employee taken into account under
paragraph (1) had enrolled in a qualified health plan which had
a premium equal to the average premium (as determined by the
Secretary of Health and Human Services) for the small group
market in the rating area in which the employee enrolls for
coverage.

``(c) Phaseout of Credit Amount Based on Number of Employees and
Average Wages.--The amount of the credit determined under subsection (b)
without regard to this subsection shall be reduced (but not below zero)
by the sum of the following amounts:
``(1) Such amount multiplied by a fraction the numerator of
which is the total number of full-time equivalent employees of
the employer in excess of 10 and the denominator of which is 15.
``(2) Such amount multiplied by a fraction the numerator of
which is the average annual wages of the employer in excess of
the dollar amount in effect under subsection (d)(3)(B) and the
denominator of which is such dollar amount.

``(d) Eligible Small Employer.--For purposes of this section--
``(1) In general.--The term `eligible small employer' means,
with respect to any taxable year, an employer--
``(A) which has no more than 25 full-time equivalent
employees for the taxable year,
``(B) the average annual wages of which do not
exceed an amount equal to twice the dollar amount in
effect under paragraph (3)(B) for the taxable year, and
``(C) which has in effect an arrangement described
in paragraph (4).
``(2) Full-time equivalent employees.--
``(A) In general.--The term `full-time equivalent
employees' means a number of employees equal to the
number determined by dividing--
``(i) the total number of hours of service for
which wages were paid by the employer to employees
during the taxable year, by
``(ii) 2,080.

[[Page 239]]

Such number shall be rounded to the next lowest whole
number if not otherwise a whole number.
``(B) Excess hours not counted.--If an employee
works in excess of 2,080 hours of service during any
taxable year, such excess shall not be taken into
account under subparagraph (A).
``(C) <>  Hours of service.--The
Secretary, in consultation with the Secretary of Labor,
shall prescribe such regulations, rules, and guidance as
may be necessary to determine the hours of service of an
employee, including rules for the application of this
paragraph to employees who are not compensated on an
hourly basis.
``(3) Average annual wages.--
``(A) In general.--The average annual wages of an
eligible small employer for any taxable year is the
amount determined by dividing--
``(i) the aggregate amount of wages which were
paid by the employer to employees during the
taxable year, by
``(ii) the number of full-time equivalent
employees of the employee determined under
paragraph (2) for the taxable year.
Such amount shall be rounded to the next lowest multiple
of $1,000 if not otherwise such a multiple.
``(B) Dollar amount.--For purposes of paragraph
(1)(B)--
``(i) 2011, 2012, and 2013.--The dollar amount
in effect under this paragraph for taxable years
beginning in 2011, 2012, or 2013 is $20,000.
``(ii) Subsequent years.--In the case of a
taxable year beginning in a calendar year after
2013, the dollar amount in effect under this
paragraph shall be equal to $20,000, multiplied by
the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year, determined
by substituting `calendar year 2012' for `calendar
year 1992' in subparagraph (B) thereof.
``(4) Contribution arrangement.--An arrangement is described
in this paragraph if it requires an eligible small employer to
make a nonelective contribution on behalf of each employee who
enrolls in a qualified health plan offered to employees by the
employer through an exchange in an amount equal to a uniform
percentage (not less than 50 percent) of the premium cost of the
qualified health plan.
``(5) Seasonal worker hours and wages not counted.--For
purposes of this subsection--
``(A) In general.--The number of hours of service
worked by, and wages paid to, a seasonal worker of an
employer shall not be taken into account in determining
the full-time equivalent employees and average annual
wages of the employer unless the worker works for the
employer on more than 120 days during the taxable year.
``(B) Definition of seasonal worker.--The term
`seasonal worker' means a worker who performs labor or
services on a seasonal basis as defined by the Secretary
of Labor, including workers covered by section
500.20(s)(1) of title 29, Code of Federal Regulations
and retail workers employed exclusively during holiday
seasons.

[[Page 240]]

``(e) Other Rules and Definitions.--For purposes of this section--
``(1) Employee.--
``(A) Certain employees excluded.--The term
`employee' shall not include--
``(i) an employee within the meaning of
section 401(c)(1),
``(ii) any 2-percent shareholder (as defined
in section 1372(b)) of an eligible small business
which is an S corporation,
``(iii) any 5-percent owner (as defined in
section 416(i)(1)(B)(i)) of an eligible small
business, or
``(iv) any individual who bears any of the
relationships described in subparagraphs (A)
through (G) of section 152(d)(2) to, or is a
dependent described in section 152(d)(2)(H) of, an
individual described in clause (i), (ii), or
(iii).
``(B) Leased employees.--The term `employee' shall
include a leased employee within the meaning of section
414(n).
``(2) Credit period.--The term `credit period' means, with
respect to any eligible small employer, the 2-consecutive-
taxable year period beginning with the 1st taxable year in which
the employer (or any predecessor) offers 1 or more qualified
health plans to its employees through an Exchange.
``(3) Nonelective contribution.--The term `nonelective
contribution' means an employer contribution other than an
employer contribution pursuant to a salary reduction
arrangement.
``(4) Wages.--The term `wages' has the meaning given such
term by section 3121(a) (determined without regard to any dollar
limitation contained in such section).
``(5) Aggregation and other rules made applicable.--
``(A) Aggregation rules.--All employers treated as a
single employer under subsection (b), (c), (m), or (o)
of section 414 shall be treated as a single employer for
purposes of this section.
``(B) <>  Other rules.--Rules
similar to the rules of subsections (c), (d), and (e) of
section 52 shall apply.

``(f) Credit Made Available to Tax-exempt Eligible Small
Employers.--
``(1) In general.--In the case of a tax-exempt eligible
small employer, there shall be treated as a credit allowable
under subpart C (and not allowable under this subpart) the
lesser of--
``(A) the amount of the credit determined under this
section with respect to such employer, or
``(B) the amount of the payroll taxes of the
employer during the calendar year in which the taxable
year begins.
``(2) Tax-exempt eligible small employer.--For purposes of
this section, the term `tax-exempt eligible small employer'
means an eligible small employer which is any organization
described in section 501(c) which is exempt from taxation under
section 501(a).
``(3) Payroll taxes.--For purposes of this subsection--
``(A) In general.--The term `payroll taxes' means--

[[Page 241]]

``(i) amounts required to be withheld from the
employees of the tax-exempt eligible small
employer under section 3401(a),
``(ii) amounts required to be withheld from
such employees under section 3101(b), and
``(iii) amounts of the taxes imposed on the
tax-exempt eligible small employer under section
3111(b).
``(B) <>  Special rule.--A
rule similar to the rule of section 24(d)(2)(C) shall
apply for purposes of subparagraph (A).

``(g) Application of Section for Calendar Years 2011, 2012, and
2013.--In the case of any taxable year beginning in 2011, 2012, or 2013,
the following modifications to this section shall apply in determining
the amount of the credit under subsection (a):
``(1) No credit period required.--The credit shall be
determined without regard to whether the taxable year is in a
credit period and for purposes of applying this section to
taxable years beginning after 2013, no credit period shall be
treated as beginning with a taxable year beginning before 2014.
``(2) Amount of credit.--The amount of the credit determined
under subsection (b) shall be determined--
``(A) by substituting `35 percent (25 percent in the
case of a tax-exempt eligible small employer)' for `50
percent (35 percent in the case of a tax-exempt eligible
small employer)',
``(B) by reference to an eligible small employer's
nonelective contributions for premiums paid for health
insurance coverage (within the meaning of section
9832(b)(1)) of an employee, and
``(C) <>  by substituting for
the average premium determined under subsection (b)(2)
the amount the Secretary of Health and Human Services
determines is the average premium for the small group
market in the State in which the employer is offering
health insurance coverage (or for such area within the
State as is specified by the Secretary).
``(3) Contribution arrangement.--An arrangement shall not
fail to meet the requirements of subsection (d)(4) solely
because it provides for the offering of insurance outside of an
Exchange.

``(h) Insurance Definitions.--Any term used in this section which is
also used in the Public Health Service Act or subtitle A of title I of
the Patient Protection and Affordable Care Act shall have the meaning
given such term by such Act or subtitle.
``(i) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the provisions of this section,
including regulations to prevent the avoidance of the 2-year limit on
the credit period through the use of successor entities and the
avoidance of the limitations under subsection (c) through the use of
multiple entities.''.
(b) Credit To Be Part of General Business Credit.--Section 38(b) of
the Internal Revenue Code of 1986 <>  (relating to
current year business credit) is amended by striking ``plus'' at the end
of paragraph (34), by striking the period at the end of paragraph (35)
and inserting ``, plus'', and by inserting after paragraph (35) the
following:

[[Page 242]]

``(36) the small employer health insurance credit determined
under section 45R.''.

(c) Credit Allowed Against Alternative Minimum Tax.--Section
38(c)(4)(B) of the Internal Revenue Code of 1986 (defining specified
credits) <>  is amended by redesignating clauses (vi),
(vii), and (viii) as clauses (vii), (viii), and (ix), respectively, and
by inserting after clause (v) the following new clause:
``(vi) the credit determined under section
45R,''.

(d) Disallowance of Deduction for Certain Expenses for Which Credit
Allowed.--
(1) In general.--Section 280C of the Internal Revenue Code
of 1986 (relating to disallowance of deduction for certain
expenses for which credit allowed), as amended by section
1401(b), is amended by adding at the end the following new
subsection:

``(h) Credit for Employee Health Insurance Expenses of Small
Employers.--No deduction shall be allowed for that portion of the
premiums for qualified health plans (as defined in section 1301(a) of
the Patient Protection and Affordable Care Act), or for health insurance
coverage in the case of taxable years beginning in 2011, 2012, or 2013,
paid by an employer which is equal to the amount of the credit
determined under section 45R(a) with respect to the premiums.''.
(2) Deduction for expiring credits.--Section 196(c) of such
Code is amended by striking ``and'' at the end of paragraph
(12), by striking the period at the end of paragraph (13) and
inserting ``, and'', and by adding at the end the following new
paragraph:
``(14) the small employer health insurance credit determined
under section 45R(a).''.

(e) Clerical Amendment.--The table of sections for subpart D of part
IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is
amended by adding at the end the following:

``Sec. 45R. Employee health insurance expenses of small employers.''.

(f) <>  Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning
after December 31, 2010.
(2) Minimum tax.--The amendments made by subsection (c)
shall apply to credits determined under section 45R of the
Internal Revenue Code of 1986 in taxable years beginning after
December 31, 2010, and to carrybacks of such credits.

Subtitle F--Shared Responsibility for Health Care

PART I--INDIVIDUAL RESPONSIBILITY

SEC. 1501. <>  REQUIREMENT TO MAINTAIN MINIMUM
ESSENTIAL COVERAGE.

(a) Findings.--Congress makes the following findings:
(1) In general.--The individual responsibility requirement
provided for in this section (in this subsection referred to as
the ``requirement'') is commercial and economic in nature, and
substantially affects interstate commerce, as a result of the
effects described in paragraph (2).

[[Page 243]]

(2) Effects on the national economy and interstate
commerce.--The effects described in this paragraph are the
following:
(A) The requirement regulates activity that is
commercial and economic in nature: economic and
financial decisions about how and when health care is
paid for, and when health insurance is purchased.
(B) Health insurance and health care services are a
significant part of the national economy. National
health spending is projected to increase from
$2,500,000,000,000, or 17.6 percent of the economy, in
2009 to $4,700,000,000,000 in 2019. Private health
insurance spending is projected to be $854,000,000,000
in 2009, and pays for medical supplies, drugs, and
equipment that are shipped in interstate commerce. Since
most health insurance is sold by national or regional
health insurance companies, health insurance is sold in
interstate commerce and claims payments flow through
interstate commerce.
(C) The requirement, together with the other
provisions of this Act, will add millions of new
consumers to the health insurance market, increasing the
supply of, and demand for, health care services.
According to the Congressional Budget Office, the
requirement will increase the number and share of
Americans who are insured.
(D) The requirement achieves near-universal coverage
by building upon and strengthening the private employer-
based health insurance system, which covers 176,000,000
Americans nationwide. In Massachusetts, a similar
requirement has strengthened private employer-based
coverage: despite the economic downturn, the number of
workers offered employer-based coverage has actually
increased.
(E) Half of all personal bankruptcies are caused in
part by medical expenses. By significantly increasing
health insurance coverage, the requirement, together
with the other provisions of this Act, will improve
financial security for families.
(F) Under the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1001 et seq.), the Public Health
Service Act (42 U.S.C. 201 et seq.), and this Act, the
Federal Government has a significant role in regulating
health insurance which is in interstate commerce.
(G) Under sections 2704 and 2705 of the Public
Health Service Act (as added by section 1201 of this
Act), if there were no requirement, many individuals
would wait to purchase health insurance until they
needed care. By significantly increasing health
insurance coverage, the requirement, together with the
other provisions of this Act, will minimize this adverse
selection and broaden the health insurance risk pool to
include healthy individuals, which will lower health
insurance premiums. The requirement is essential to
creating effective health insurance markets in which
improved health insurance products that are guaranteed
issue and do not exclude coverage of pre-existing
conditions can be sold.
(H) Administrative costs for private health
insurance, which were $90,000,000,000 in 2006, are 26 to
30 percent of premiums in the current individual and
small group

[[Page 244]]

markets. By significantly increasing health insurance
coverage and the size of purchasing pools, which will
increase economies of scale, the requirement, together
with the other provisions of this Act, will
significantly reduce administrative costs and lower
health insurance premiums. The requirement is essential
to creating effective health insurance markets that do
not require underwriting and eliminate its associated
administrative costs.
(3) Supreme court ruling.--In United States v. South-Eastern
Underwriters Association (322 U.S. 533 (1944)), the Supreme
Court of the United States ruled that insurance is interstate
commerce subject to Federal regulation.

(b) In General.--Subtitle D of the Internal Revenue Code of 1986 is
amended by adding at the end the following new chapter:

``CHAPTER 48--MAINTENANCE OF MINIMUM ESSENTIAL COVERAGE

``Sec. 5000A. Requirement to maintain minimum essential coverage.

``SEC. 5000A. <>  REQUIREMENT TO MAINTAIN MINIMUM
ESSENTIAL COVERAGE.

``(a) Requirement To Maintain Minimum Essential Coverage.--An
applicable individual shall for each month beginning after 2013 ensure
that the individual, and any dependent of the individual who is an
applicable individual, is covered under minimum essential coverage for
such month.
``(b) Shared Responsibility Payment.--
``(1) In general.-- <> If an applicable
individual fails to meet the requirement of subsection (a) for 1
or more months during any calendar year beginning after 2013,
then, except as provided in subsection (d), there is hereby
imposed a penalty with respect to the individual in the amount
determined under subsection (c).
``(2) Inclusion with return.--Any penalty imposed by this
section with respect to any month shall be included with a
taxpayer's return under chapter 1 for the taxable year which
includes such month.
``(3) Payment of penalty.--If an individual with respect to
whom a penalty is imposed by this section for any month--
``(A) is a dependent (as defined in section 152) of
another taxpayer for the other taxpayer's taxable year
including such month, such other taxpayer shall be
liable for such penalty, or
``(B) files a joint return for the taxable year
including such month, such individual and the spouse of
such individual shall be jointly liable for such
penalty.

``(c) Amount of Penalty.--
``(1) In general.--The penalty determined under this
subsection for any month with respect to any individual is an
amount equal to \1/12\ of the applicable dollar amount for the
calendar year.
``(2) Dollar limitation.--The amount of the penalty imposed
by this section on any taxpayer for any taxable year with
respect to all individuals for whom the taxpayer is liable under
subsection (b)(3) shall not exceed an amount equal to 300
percent the applicable dollar amount (determined without

[[Page 245]]

regard to paragraph (3)(C)) for the calendar year with or within
which the taxable year ends.
``(3) Applicable dollar amount.--For purposes of paragraph
(1)--
``(A) In general.--Except as provided in
subparagraphs (B) and (C), the applicable dollar amount
is $750.
``(B) Phase in.--The applicable dollar amount is $95
for 2014 and $350 for 2015.
``(C) Special rule for individuals under age 18.--If
an applicable individual has not attained the age of 18
as of the beginning of a month, the applicable dollar
amount with respect to such individual for the month
shall be equal to one-half of the applicable dollar
amount for the calendar year in which the month occurs.
``(D) Indexing of amount.--In the case of any
calendar year beginning after 2016, the applicable
dollar amount shall be equal to $750, increased by an
amount equal to--
``(i) $750, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the calendar
year, determined by substituting `calendar year
2015' for `calendar year 1992' in subparagraph (B)
thereof.
If the amount of any increase under clause (i) is not a
multiple of $50, such increase shall be rounded to the
next lowest multiple of $50.
``(4) Terms relating to income and families.--For purposes
of this section--
``(A) Family size.--The family size involved with
respect to any taxpayer shall be equal to the number of
individuals for whom the taxpayer is allowed a deduction
under section 151 (relating to allowance of deduction
for personal exemptions) for the taxable year.
``(B) Household income.--The term `household income'
means, with respect to any taxpayer for any taxable
year, an amount equal to the sum of--
``(i) the modified gross income of the
taxpayer, plus
``(ii) the aggregate modified gross incomes of
all other individuals who--
``(I) were taken into account in
determining the taxpayer's family size
under paragraph (1), and
``(II) were required to file a
return of tax imposed by section 1 for
the taxable year.
``(C) Modified gross income.--The term `modified
gross income' means gross income--
``(i) decreased by the amount of any deduction
allowable under paragraph (1), (3), (4), or (10)
of section 62(a),
``(ii) increased by the amount of interest
received or accrued during the taxable year which
is exempt from tax imposed by this chapter, and
``(iii) determined without regard to sections
911, 931, and 933.
``(D) Poverty line.--

[[Page 246]]

``(i) In general.--The term `poverty line' has
the meaning given that term in section 2110(c)(5)
of the Social Security Act (42 U.S.C.
1397jj(c)(5)).
``(ii) Poverty line used.--In the case of any
taxable year ending with or within a calendar
year, the poverty line used shall be the most
recently published poverty line as of the 1st day
of such calendar year.

``(d) Applicable Individual.--For purposes of this section--
``(1) In general.--The term `applicable individual' means,
with respect to any month, an individual other than an
individual described in paragraph (2), (3), or (4).
``(2) Religious exemptions.--
``(A) Religious conscience exemption.--Such term
shall not include any individual for any month if such
individual has in effect an exemption under section
1311(d)(4)(H) of the Patient Protection and Affordable
Care Act which certifies that such individual is a
member of a recognized religious sect or division
thereof described in section 1402(g)(1) and an adherent
of established tenets or teachings of such sect or
division as described in such section.
``(B) Health care sharing ministry.--
``(i) In general.--Such term shall not include
any individual for any month if such individual is
a member of a health care sharing ministry for the
month.
``(ii) Health care sharing ministry.--The term
`health care sharing ministry' means an
organization--
``(I) which is described in section
501(c)(3) and is exempt from taxation
under section 501(a),
``(II) members of which share a
common set of ethical or religious
beliefs and share medical expenses among
members in accordance with those beliefs
and without regard to the State in which
a member resides or is employed,
``(III) members of which retain
membership even after they develop a
medical condition,
``(IV) which (or a predecessor of
which) has been in existence at all
times since December 31, 1999, and
medical expenses of its members have
been shared continuously and without
interruption since at least December 31,
1999, and
``(V) which conducts an annual audit
which is performed by an independent
certified public accounting firm in
accordance with generally accepted
accounting principles and which is made
available to the public upon request.
``(3) Individuals not lawfully present.--Such term shall not
include an individual for any month if for the month the
individual is not a citizen or national of the United States or
an alien lawfully present in the United States.
``(4) Incarcerated individuals.--Such term shall not include
an individual for any month if for the month the individual is
incarcerated, other than incarceration pending the disposition
of charges.

``(e) Exemptions.--No penalty shall be imposed under subsection (a)
with respect to--
``(1) Individuals who cannot afford coverage.--

[[Page 247]]

``(A) In general.--Any applicable individual for any
month if the applicable individual's required
contribution (determined on an annual basis) for
coverage for the month exceeds 8 percent of such
individual's household income for the taxable year
described in section 1412(b)(1)(B) of the Patient
Protection and Affordable Care Act. For purposes of
applying this subparagraph, the taxpayer's household
income shall be increased by any exclusion from gross
income for any portion of the required contribution made
through a salary reduction arrangement.
``(B) <>  Required
contribution.--For purposes of this paragraph, the term
`required contribution' means--
``(i) in the case of an individual eligible to
purchase minimum essential coverage consisting of
coverage through an eligible-employer-sponsored
plan, the portion of the annual premium which
would be paid by the individual (without regard to
whether paid through salary reduction or
otherwise) for self-only coverage, or
``(ii) in the case of an individual eligible
only to purchase minimum essential coverage
described in subsection (f)(1)(C), the annual
premium for the lowest cost bronze plan available
in the individual market through the Exchange in
the State in the rating area in which the
individual resides (without regard to whether the
individual purchased a qualified health plan
through the Exchange), reduced by the amount of
the credit allowable under section 36B for the
taxable year (determined as if the individual was
covered by a qualified health plan offered through
the Exchange for the entire taxable year).
``(C) Special rules for individuals related to
employees.--For purposes of subparagraph (B)(i), if an
applicable individual is eligible for minimum essential
coverage through an employer by reason of a relationship
to an employee, the determination shall be made by
reference to the affordability of the coverage to the
employee.
``(D) <>
Indexing.--In the case of plan years beginning in any
calendar year after 2014, subparagraph (A) shall be
applied by substituting for `8 percent' the percentage
the Secretary of Health and Human Services determines
reflects the excess of the rate of premium growth
between the preceding calendar year and 2013 over the
rate of income growth for such period.
``(2) Taxpayers with income under 100 percent of poverty
line.--Any applicable individual for any month during a calendar
year if the individual's household income for the taxable year
described in section 1412(b)(1)(B) of the Patient Protection and
Affordable Care Act is less than 100 percent of the poverty line
for the size of the family involved (determined in the same
manner as under subsection (b)(4)).
``(3) Members of indian tribes.--Any applicable individual
for any month during which the individual is a member of an
Indian tribe (as defined in section 45A(c)(6)).
``(4) Months during short coverage gaps.--
``(A) In general.--Any month the last day of which
occurred during a period in which the applicable
individual

[[Page 248]]

was not covered by minimum essential coverage for a
continuous period of less than 3 months.
``(B) <>  Special rules.--For
purposes of applying this paragraph--
``(i) the length of a continuous period shall
be determined without regard to the calendar years
in which months in such period occur,
``(ii) if a continuous period is greater than
the period allowed under subparagraph (A), no
exception shall be provided under this paragraph
for any month in the period, and
``(iii) if there is more than 1 continuous
period described in subparagraph (A) covering
months in a calendar year, the exception provided
by this paragraph shall only apply to months in
the first of such periods.
The Secretary shall prescribe rules for the collection
of the penalty imposed by this section in cases where
continuous periods include months in more than 1 taxable
year.
``(5) Hardships.--Any applicable individual who for any
month is determined by the Secretary of Health and Human
Services under section 1311(d)(4)(H) to have suffered a hardship
with respect to the capability to obtain coverage under a
qualified health plan.

``(f) Minimum Essential Coverage.--For purposes of this section--
``(1) <>  In general.--The term `minimum
essential coverage' means any of the following:
``(A) Government sponsored programs.--Coverage
under--
``(i) the Medicare program under part A of
title XVIII of the Social Security Act,
``(ii) the Medicaid program under title XIX of
the Social Security Act,
``(iii) the CHIP program under title XXI of
the Social Security Act,
``(iv) the TRICARE for Life program,
``(v) the veteran's health care program under
chapter 17 of title 38, United States Code, or
``(vi) a health plan under section 2504(e) of
title 22, United States Code (relating to Peace
Corps volunteers).
``(B) Employer-sponsored plan.--Coverage under an
eligible employer-sponsored plan.
``(C) Plans in the individual market.--Coverage
under a health plan offered in the individual market
within a State.
``(D) Grandfathered health plan.--Coverage under a
grandfathered health plan.
``(E) Other coverage.--Such other health benefits
coverage, such as a State health benefits risk pool, as
the Secretary of Health and Human Services, in
coordination with the Secretary, recognizes for purposes
of this subsection.
``(2) Eligible employer-sponsored plan.--The term `eligible
employer-sponsored plan' means, with respect to any

[[Page 249]]

employee, a group health plan or group health insurance coverage
offered by an employer to the employee which is--
``(A) a governmental plan (within the meaning of
section 2791(d)(8) of the Public Health Service Act), or
``(B) any other plan or coverage offered in the
small or large group market within a State.
Such term shall include a grandfathered health plan described in
paragraph (1)(D) offered in a group market.
``(3) Excepted benefits not treated as minimum essential
coverage.--The term `minimum essential coverage' shall not
include health insurance coverage which consists of coverage of
excepted benefits--
``(A) described in paragraph (1) of subsection (c)
of section 2791 of the Public Health Service Act; or
``(B) described in paragraph (2), (3), or (4) of
such subsection if the benefits are provided under a
separate policy, certificate, or contract of insurance.
``(4) Individuals residing outside united states or
residents of territories.--Any applicable individual shall be
treated as having minimum essential coverage for any month--
``(A) if such month occurs during any period
described in subparagraph (A) or (B) of section
911(d)(1) which is applicable to the individual, or
``(B) if such individual is a bona fide resident of
any possession of the United States (as determined under
section 937(a)) for such month.
``(5) Insurance-related terms.--Any term used in this
section which is also used in title I of the Patient Protection
and Affordable Care Act shall have the same meaning as when used
in such title.

``(g) Administration and Procedure.--
``(1) In general.--The penalty provided by this section
shall be paid upon notice and demand by the Secretary, and
except as provided in paragraph (2), shall be assessed and
collected in the same manner as an assessable penalty under
subchapter B of chapter 68.
``(2) Special rules.--Notwithstanding any other provision of
law--
``(A) Waiver of criminal penalties.--In the case of
any failure by a taxpayer to timely pay any penalty
imposed by this section, such taxpayer shall not be
subject to any criminal prosecution or penalty with
respect to such failure.
``(B) Limitations on liens and levies.--The
Secretary shall not--
``(i) file notice of lien with respect to any
property of a taxpayer by reason of any failure to
pay the penalty imposed by this section, or
``(ii) levy on any such property with respect
to such failure.''.

(c) Clerical Amendment.--The table of chapters for subtitle D of the
Internal Revenue Code of 1986 is amended by inserting after the item
relating to chapter 47 the following new item:

``Chapter 48--Maintenance of Minimum Essential Coverage.''.

(d) <>  Effective Date.--The amendments
made by this section shall apply to taxable years ending after December
31, 2013.

[[Page 250]]

SEC. 1502. REPORTING OF HEALTH INSURANCE COVERAGE.

(a) In General.--Part III of subchapter A of chapter 61 of the
Internal Revenue Code of 1986 is amended by inserting after subpart C
the following new subpart:

``Subpart D--Information Regarding Health Insurance Coverage

``Sec. 6055. Reporting of health insurance coverage.

``SEC. 6055. <> REPORTING OF HEALTH INSURANCE
COVERAGE.

``(a) In General.--Every person who provides minimum essential
coverage to an individual during a calendar year shall, at such time as
the Secretary may prescribe, make a return described in subsection (b).
``(b) Form and Manner of Return.--
``(1) In general.--A return is described in this subsection
if such return--
``(A) is in such form as the Secretary may
prescribe, and
``(B) contains--
``(i) the name, address and TIN of the primary
insured and the name and TIN of each other
individual obtaining coverage under the policy,
``(ii) the dates during which such individual
was covered under minimum essential coverage
during the calendar year,
``(iii) in the case of minimum essential
coverage which consists of health insurance
coverage, information concerning--
``(I) whether or not the coverage is
a qualified health plan offered through
an Exchange established under section
1311 of the Patient Protection and
Affordable Care Act, and
``(II) in the case of a qualified
health plan, the amount (if any) of any
advance payment under section 1412 of
the Patient Protection and Affordable
Care Act of any cost-sharing reduction
under section 1402 of such Act or of any
premium tax credit under section 36B
with respect to such coverage, and
``(iv) such other information as the Secretary
may require.
``(2) Information relating to employer-provided coverage.--
If minimum essential coverage provided to an individual under
subsection (a) consists of health insurance coverage of a health
insurance issuer provided through a group health plan of an
employer, a return described in this subsection shall include--
``(A) the name, address, and employer identification
number of the employer maintaining the plan,
``(B) the portion of the premium (if any) required
to be paid by the employer, and
``(C) if the health insurance coverage is a
qualified health plan in the small group market offered
through an Exchange, such other information as the
Secretary may require for administration of the credit
under section 45R

[[Page 251]]

(relating to credit for employee health insurance
expenses of small employers).

``(c) Statements To Be Furnished to Individuals With Respect to Whom
Information Is Reported.--
``(1) In general.--Every person required to make a return
under subsection (a) shall furnish to each individual whose name
is required to be set forth in such return a written statement
showing--
``(A) the name and address of the person required to
make such return and the phone number of the information
contact for such person, and
``(B) the information required to be shown on the
return with respect to such individual.
``(2) Time for furnishing statements.--The written statement
required under paragraph (1) shall be furnished on or before
January 31 of the year following the calendar year for which the
return under subsection (a) was required to be made.

``(d) Coverage Provided by Governmental Units.--In the case of
coverage provided by any governmental unit or any agency or
instrumentality thereof, the officer or employee who enters into the
agreement to provide such coverage (or the person appropriately
designated for purposes of this section) shall make the returns and
statements required by this section.
``(e) Minimum Essential Coverage.--For purposes of this section, the
term `minimum essential coverage' has the meaning given such term by
section 5000A(f).''.
(b) Assessable Penalties.--
(1) Subparagraph (B) of section 6724(d)(1) of the Internal
Revenue Code of 1986 <>  (relating to
definitions) is amended by striking ``or'' at the end of clause
(xxii), by striking ``and'' at the end of clause (xxiii) and
inserting ``or'', and by inserting after clause (xxiii) the
following new clause:
``(xxiv) section 6055 (relating to returns
relating to information regarding health insurance
coverage), and''.
(2) Paragraph (2) of section 6724(d) of such Code is amended
by striking ``or'' at the end of subparagraph (EE), by striking
the period at the end of subparagraph (FF) and inserting ``,
or'' and by inserting after subparagraph (FF) the following new
subparagraph:
``(GG) section 6055(c) (relating to statements
relating to information regarding health insurance
coverage).''.

(c) Notification of Nonenrollment.-- <> Not later than June 30 of each year, the Secretary of the
Treasury, acting through the Internal Revenue Service and in
consultation with the Secretary of Health and Human Services, shall send
a notification to each individual who files an individual income tax
return and who is not enrolled in minimum essential coverage (as defined
in section 5000A of the Internal Revenue Code of 1986). Such
notification shall contain information on the services available through
the Exchange operating in the State in which such individual resides.

(d) Conforming Amendment.--The table of subparts for part III of
subchapter A of chapter 61 of such Code is amended by inserting after
the item relating to subpart C the following new item:

[[Page 252]]

``subpart d--information regarding health insurance coverage''.

(e) <>  Effective Date.--The amendments
made by this section shall apply to calendar years beginning after 2013.

PART II--EMPLOYER RESPONSIBILITIES

SEC. 1511. AUTOMATIC ENROLLMENT FOR EMPLOYEES OF LARGE EMPLOYERS.

The Fair Labor Standards Act of 1938 is amended by inserting after
section 18 (29 U.S.C. 218) the following:

``SEC. 18A. <>  AUTOMATIC ENROLLMENT FOR EMPLOYEES
OF LARGE EMPLOYERS.

``In accordance with regulations promulgated by the Secretary, an
employer to which this Act applies that has more than 200 full-time
employees and that offers employees enrollment in 1 or more health
benefits plans shall automatically enroll new full-time employees in one
of the plans offered (subject to any waiting period authorized by law)
and to continue the enrollment of current employees in a health benefits
plan offered through the employer. Any automatic enrollment program
shall include adequate notice and the opportunity for an employee to opt
out of any coverage the individual or employee were automatically
enrolled in. Nothing in this section shall be construed to supersede any
State law which establishes, implements, or continues in effect any
standard or requirement relating to employers in connection with payroll
except to the extent that such standard or requirement prevents an
employer from instituting the automatic enrollment program under this
section.''.

SEC. 1512. EMPLOYER REQUIREMENT TO INFORM EMPLOYEES OF COVERAGE OPTIONS.

The Fair Labor Standards Act of 1938 is amended by inserting after
section 18A (as added by section 1513) the following:

``SEC. 18B. <>  NOTICE TO EMPLOYEES.

``(a) In General.-- <> In accordance with
regulations promulgated by the Secretary, an employer to which this Act
applies, shall provide to each employee at the time of hiring (or with
respect to current employees, not later than March 1, 2013), written
notice--
``(1) informing the employee of the existence of an
Exchange, including a description of the services provided by
such Exchange, and the manner in which the employee may contact
the Exchange to request assistance;
``(2) if the employer plan's share of the total allowed
costs of benefits provided under the plan is less than 60
percent of such costs, that the employee may be eligible for a
premium tax credit under section 36B of the Internal Revenue
Code of 1986 and a cost sharing reduction under section 1402 of
the Patient Protection and Affordable Care Act if the employee
purchases a qualified health plan through the Exchange; and
``(3) if the employee purchases a qualified health plan
through the Exchange, the employee will lose the employer
contribution (if any) to any health benefits plan offered by the
employer and that all or a portion of such contribution may be
excludable from income for Federal income tax purposes.

[[Page 253]]

``(b) Effective Date.--Subsection (a) shall take effect with respect
to employers in a State beginning on March 1, 2013.''.

SEC. 1513. SHARED RESPONSIBILITY FOR EMPLOYERS.

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

``SEC. 4980H. <>  SHARED RESPONSIBILITY FOR
EMPLOYERS REGARDING HEALTH COVERAGE.

``(a) Large Employers Not Offering Health Coverage.--If--
``(1) any applicable large employer fails to offer to its
full-time employees (and their dependents) the opportunity to
enroll in minimum essential coverage under an eligible employer-
sponsored plan (as defined in section 5000A(f)(2)) for any
month, and
``(2) at least one full-time employee of the applicable
large employer has been certified to the employer under section
1411 of the Patient Protection and Affordable Care Act as having
enrolled for such month in a qualified health plan with respect
to which an applicable premium tax credit or cost-sharing
reduction is allowed or paid with respect to the employee,

then there is hereby imposed on the employer an assessable payment equal
to the product of the applicable payment amount and the number of
individuals employed by the employer as full-time employees during such
month.
``(b) Large Employers With Waiting Periods Exceeding 30 Days.--
``(1) In general.--In the case of any applicable large
employer which requires an extended waiting period to enroll in
any minimum essential coverage under an employer-sponsored plan
(as defined in section 5000A(f)(2)), there is hereby imposed on
the employer an assessable payment, in the amount specified in
paragraph (2), for each full-time employee of the employer to
whom the extended waiting period applies.
``(2) Amount.--For purposes of paragraph (1), the amount
specified in this paragraph for a full-time employee is--
``(A) in the case of an extended waiting period
which exceeds 30 days but does not exceed 60 days, $400,
and
``(B) in the case of an extended waiting period
which exceeds 60 days, $600.
``(3) Extended waiting period.--The term `extended waiting
period' means any waiting period (as defined in section
2701(b)(4) of the Public Health Service Act) which exceeds 30
days.

``(c) Large Employers Offering Coverage With Employees Who Qualify
for Premium Tax Credits or Cost-sharing Reductions.--
``(1) In general.--If--
``(A) an applicable large employer offers to its
full-time employees (and their dependents) the
opportunity to enroll in minimum essential coverage
under an eligible employer-sponsored plan (as defined in
section 5000A(f)(2)) for any month, and
``(B) 1 or more full-time employees of the
applicable large employer has been certified to the
employer under section 1411 of the Patient Protection
and Affordable Care Act as having enrolled for such
month in a qualified health

[[Page 254]]

plan with respect to which an applicable premium tax
credit or cost-sharing reduction is allowed or paid with
respect to the employee,
then there is hereby imposed on the employer an assessable
payment equal to the product of the number of full-time
employees of the applicable large employer described in
subparagraph (B) for such month and 400 percent of the
applicable payment amount.
``(2) Overall limitation.--The aggregate amount of tax
determined under paragraph (1) with respect to all employees of
an applicable large employer for any month shall not exceed the
product of the applicable payment amount and the number of
individuals employed by the employer as full-time employees
during such month.

``(d) Definitions and Special Rules.--For purposes of this section--
``(1) Applicable payment amount.--The term `applicable
payment amount' means, with respect to any month, \1/12\ of
$750.
``(2) Applicable large employer.--
``(A) In general.--The term `applicable large
employer' means, with respect to a calendar year, an
employer who employed an average of at least 50 full-
time employees on business days during the preceding
calendar year.
``(B) Exemption for certain employers.--
``(i) In general.--An employer shall not be
considered to employ more than 50 full-time
employees if--
``(I) the employer's workforce
exceeds 50 full-time employees for 120
days or fewer during the calendar year,
and
``(II) the employees in excess of 50
employed during such 120-day period were
seasonal workers.
``(ii) Definition of seasonal workers.--The
term `seasonal worker' means a worker who performs
labor or services on a seasonal basis as defined
by the Secretary of Labor, including workers
covered by section 500.20(s)(1) of title 29, Code
of Federal Regulations and retail workers employed
exclusively during holiday seasons.
``(C) Rules for determining employer size.--For
purposes of this paragraph--
``(i) Application of aggregation rule for
employers.--All persons treated as a single
employer under subsection (b), (c), (m), or (o) of
section 414 of the Internal Revenue Code of 1986
shall be treated as 1 employer.
``(ii) Employers not in existence in preceding
year.--In the case of an employer which was not in
existence throughout the preceding calendar year,
the determination of whether such employer is an
applicable large employer shall be based on the
average number of employees that it is reasonably
expected such employer will employ on business
days in the current calendar year.
``(iii) Predecessors.--Any reference in this
subsection to an employer shall include a
reference to any predecessor of such employer.

[[Page 255]]

``(3) Applicable premium tax credit and cost-sharing
reduction.--The term `applicable premium tax credit and cost-
sharing reduction' means--
``(A) any premium tax credit allowed under section
36B,
``(B) any cost-sharing reduction under section 1402
of the Patient Protection and Affordable Care Act, and
``(C) any advance payment of such credit or
reduction under section 1412 of such Act.
``(4) Full-time employee.--
``(A) In general.--The term `full-time employee'
means an employee who is employed on average at least 30
hours of service per week.
``(B) Hours of service.--
<> The Secretary, in
consultation with the Secretary of Labor, shall
prescribe such regulations, rules, and guidance as may
be necessary to determine the hours of service of an
employee, including rules for the application of this
paragraph to employees who are not compensated on an
hourly basis.
``(5) Inflation adjustment.--
``(A) In general.--In the case of any calendar year
after 2014, each of the dollar amounts in subsection
(b)(2) and (d)(1) shall be increased by an amount equal
to the product of--
``(i) such dollar amount, and
``(ii) the premium adjustment percentage (as
defined in section 1302(c)(4) of the Patient
Protection and Affordable Care Act) for the
calendar year.
``(B) Rounding.--If the amount of any increase under
subparagraph (A) is not a multiple of $10, such increase
shall be rounded to the next lowest multiple of $10.
``(6) Other definitions.--Any term used in this section
which is also used in the Patient Protection and Affordable Care
Act shall have the same meaning as when used in such Act.
``(7) Tax nondeductible.--For denial of deduction for the
tax imposed by this section, see section 275(a)(6).

``(e) Administration and Procedure.--
``(1) In general.--Any assessable payment provided by this
section shall be paid upon notice and demand by the Secretary,
and shall be assessed and collected in the same manner as an
assessable penalty under subchapter B of chapter 68.
``(2) Time for payment.--The Secretary may provide for the
payment of any assessable payment provided by this section on an
annual, monthly, or other periodic basis as the Secretary may
prescribe.
``(3) Coordination with credits, etc..--
<> The Secretary shall prescribe
rules, regulations, or guidance for the repayment of any
assessable payment (including interest) if such payment is based
on the allowance or payment of an applicable premium tax credit
or cost-sharing reduction with respect to an employee, such
allowance or payment is subsequently disallowed, and the
assessable payment would not have been required to be made but
for such allowance or payment.''.

[[Page 256]]

(b) Clerical Amendment.--The table of sections for chapter 43 of
such Code is amended by adding at the end the following new item:

``Sec. 4980H. Shared responsibility for employers regarding health
coverage.''.

(c) Study and Report of Effect of Tax on Workers' Wages.--
(1) In general.--The Secretary of Labor shall conduct a
study to determine whether employees' wages are reduced by
reason of the application of the assessable payments under
section 4980H of the Internal Revenue Code of 1986 (as added by
the amendments made by this section). <>
The Secretary shall make such determination on the basis of the
National Compensation Survey published by the Bureau of Labor
Statistics.
(2) Report.--The Secretary shall report the results of the
study under paragraph (1) to the Committee on Ways and Means of
the House of Representatives and to the Committee on Finance of
the Senate.

(d) <>  Effective Date.--The amendments
made by this section shall apply to months beginning after December 31,
2013.

SEC. 1514. REPORTING OF EMPLOYER HEALTH INSURANCE COVERAGE.

(a) In General.--Subpart D of part III of subchapter A of chapter 61
of the Internal Revenue Code of 1986, as added by section 1502, is
amended by inserting after section 6055 the following new section:

``SEC. 6056. <>  LARGE EMPLOYERS REQUIRED TO REPORT
ON HEALTH INSURANCE COVERAGE.

``(a) In General.--Every applicable large employer required to meet
the requirements of section 4980H with respect to its full-time
employees during a calendar year shall, at such time as the Secretary
may prescribe, make a return described in subsection (b).
``(b) Form and Manner of Return.--A return is described in this
subsection if such return--
``(1) is in such form as the Secretary may prescribe, and
``(2) contains--
``(A) the name, date, and employer identification
number of the employer,
``(B) a certification as to whether the employer
offers to its full-time employees (and their dependents)
the opportunity to enroll in minimum essential coverage
under an eligible employer-sponsored plan (as defined in
section 5000A(f)(2)),
``(C) <>  if the employer
certifies that the employer did offer to its full-time
employees (and their dependents) the opportunity to so
enroll--
``(i) the length of any waiting period (as
defined in section 2701(b)(4) of the Public Health
Service Act) with respect to such coverage,
``(ii) the months during the calendar year for
which coverage under the plan was available,
``(iii) the monthly premium for the lowest
cost option in each of the enrollment categories
under the plan, and
``(iv) the applicable large employer's share
of the total allowed costs of benefits provided
under the plan,

[[Page 257]]

``(D) the number of full-time employees for each
month during the calendar year,
``(E) the name, address, and TIN of each full-time
employee during the calendar year and the months (if
any) during which such employee (and any dependents)
were covered under any such health benefits plans, and
``(F) such other information as the Secretary may
require.

``(c) Statements To Be Furnished to Individuals With Respect to Whom
Information Is Reported.--
``(1) In general.--Every person required to make a return
under subsection (a) shall furnish to each full-time employee
whose name is required to be set forth in such return under
subsection (b)(2)(E) a written statement showing--
``(A) the name and address of the person required to
make such return and the phone number of the information
contact for such person, and
``(B) the information required to be shown on the
return with respect to such individual.
``(2) Time for furnishing statements.--The written statement
required under paragraph (1) shall be furnished on or before
January 31 of the year following the calendar year for which the
return under subsection (a) was required to be made.

``(d) Coordination With Other Requirements.--To the maximum extent
feasible, the Secretary may provide that--
``(1) any return or statement required to be provided under
this section may be provided as part of any return or statement
required under section 6051 or 6055, and
``(2) in the case of an applicable large employer offering
health insurance coverage of a health insurance issuer, the
employer may enter into an agreement with the issuer to include
information required under this section with the return and
statement required to be provided by the issuer under section
6055.

``(e) Coverage Provided by Governmental Units.--In the case of any
applicable large employer which is a governmental unit or any agency or
instrumentality thereof, the person appropriately designated for
purposes of this section shall make the returns and statements required
by this section.
``(f) Definitions.--For purposes of this section, any term used in
this section which is also used in section 4980H shall have the meaning
given such term by section 4980H.''.
(b) Assessable Penalties.--
(1) Subparagraph (B) of section 6724(d)(1) of the Internal
Revenue Code of 1986 (relating to definitions), as amended by
section 1502, <>  is amended by striking
``or'' at the end of clause (xxiii), by striking ``and'' at the
end of clause (xxiv) and inserting ``or'', and by inserting
after clause (xxiv) the following new clause:
``(xxv) section 6056 (relating to returns
relating to large employers required to report on
health insurance coverage), and''.
(2) Paragraph (2) of section 6724(d) of such Code, as so
amended, is amended by striking ``or'' at the end of
subparagraph (FF), by striking the period at the end of
subparagraph

[[Page 258]]

(GG) and inserting ``, or'' and by inserting after subparagraph
(GG) the following new subparagraph:
``(HH) section 6056(c) (relating to statements
relating to large employers required to report on health
insurance coverage).''.

(c) Conforming Amendment.--The table of sections for subpart D of
part III of subchapter A of chapter 61 of such Code, as added by section
1502, is amended by adding at the end the following new item:

``Sec. 6056. Large employers required to report on health insurance
coverage.''.

(d) <>  Effective Date.--The amendments
made by this section shall apply to periods beginning after December 31,
2013.

SEC. 1515. OFFERING OF EXCHANGE-PARTICIPATING QUALIFIED HEALTH PLANS
THROUGH CAFETERIA PLANS.

(a) In General.--Subsection (f) of section 125 of the Internal
Revenue Code of 1986 <>  is amended by adding at the
end the following new paragraph:
``(3) Certain exchange-participating qualified health plans
not qualified.--
``(A) In general.--The term `qualified benefit'
shall not include any qualified health plan (as defined
in section 1301(a) of the Patient Protection and
Affordable Care Act) offered through an Exchange
established under section 1311 of such Act.
``(B) Exception for exchange-eligible employers.--
Subparagraph (A) shall not apply with respect to any
employee if such employee's employer is a qualified
employer (as defined in section 1312(f)(2) of the
Patient Protection and Affordable Care Act) offering the
employee the opportunity to enroll through such an
Exchange in a qualified health plan in a group
market.''.

(b) Conforming Amendments.--Subsection (f) of section 125 of such
Code is amended--
(1) by striking ``For purposes of this section, the term''
and inserting ``For purposes of this section--

``(1) In General.--The term'', and
(2) by striking ``Such term shall not include'' and
inserting the following:
``(2) Long-term care insurance not qualified.--The term
`qualified benefit' shall not include''.

(c) <>  Effective Date.--The amendments made
by this section shall apply to taxable years beginning after December
31, 2013.

Subtitle G--Miscellaneous Provisions

SEC. 1551. <>  DEFINITIONS.

Unless specifically provided for otherwise, the definitions
contained in section 2791 of the Public Health Service Act (42 U.S.C.
300gg-91) shall apply with respect to this title.

SEC. 1552. <>  TRANSPARENCY IN GOVERNMENT.

<> Not later than 30 days after the
date of enactment of this Act, the Secretary of Health and Human
Services shall publish on the Internet website of the Department of
Health and Human Services, a list of all of the authorities provided to
the Secretary under this Act (and the amendments made by this Act).

[[Page 259]]

SEC. 1553. <>  PROHIBITION AGAINST DISCRIMINATION
ON ASSISTED SUICIDE.

(a) In General.--The Federal Government, and any State or local
government or health care provider that receives Federal financial
assistance under this Act (or under an amendment made by this Act) or
any health plan created under this Act (or under an amendment made by
this Act), may not subject an individual or institutional health care
entity to discrimination on the basis that the entity does not provide
any health care item or service furnished for the purpose of causing, or
for the purpose of assisting in causing, the death of any individual,
such as by assisted suicide, euthanasia, or mercy killing.
(b) Definition.--In this section, the term ``health care entity''
includes an individual physician or other health care professional, a
hospital, a provider-sponsored organization, a health maintenance
organization, a health insurance plan, or any other kind of health care
facility, organization, or plan.
(c) Construction and Treatment of Certain Services.--Nothing in
subsection (a) shall be construed to apply to, or to affect, any
limitation relating to--
(1) the withholding or withdrawing of medical treatment or
medical care;
(2) the withholding or withdrawing of nutrition or
hydration;
(3) <>  abortion; or
(4) the use of an item, good, benefit, or service furnished
for the purpose of alleviating pain or discomfort, even if such
use may increase the risk of death, so long as such item, good,
benefit, or service is not also furnished for the purpose of
causing, or the purpose of assisting in causing, death, for any
reason.

(d) Administration.--The Office for Civil Rights of the Department
of Health and Human Services is designated to receive complaints of
discrimination based on this section.

SEC. 1554. <>  ACCESS TO THERAPIES.

Notwithstanding any other provision of this Act, the Secretary of
Health and Human Services shall not promulgate any regulation that--
(1) creates any unreasonable barriers to the ability of
individuals to obtain appropriate medical care;
(2) impedes timely access to health care services;
(3) interferes with communications regarding a full range of
treatment options between the patient and the provider;
(4) restricts the ability of health care providers to
provide full disclosure of all relevant information to patients
making health care decisions;
(5) violates the principles of informed consent and the
ethical standards of health care professionals; or
(6) limits the availability of health care treatment for the
full duration of a patient's medical needs.

[[Page 260]]

SEC. 1555. <>  FREEDOM NOT TO PARTICIPATE IN
FEDERAL HEALTH INSURANCE PROGRAMS.

No individual, company, business, nonprofit entity, or health
insurance issuer offering group or individual health insurance coverage
shall be required to participate in any Federal health insurance program
created under this Act (or any amendments made by this Act), or in any
Federal health insurance program expanded by this Act (or any such
amendments), and there shall be no penalty or fine imposed upon any such
issuer for choosing not to participate in such programs.

SEC. 1556. EQUITY FOR CERTAIN ELIGIBLE SURVIVORS.

(a) Rebuttable Presumption.--Section 411(c)(4) of the Black Lung
Benefits Act (30 U.S.C. 921(c)(4)) is amended by striking the last
sentence.
(b) Continuation of Benefits.--Section 422(l) of the Black Lung
Benefits Act (30 U.S.C. 932(l)) is amended by striking ``, except with
respect to a claim filed under this part on or after the effective date
of the Black Lung Benefits Amendments of 1981''.
(c) <>  Effective Date.--The
amendments made by this section shall apply with respect to claims filed
under part B or part C of the Black Lung Benefits Act (30 U.S.C. 921 et
seq., 931 et seq.) after January 1, 2005, that are pending on or after
the date of enactment of this Act.

SEC. 1557. <>  NONDISCRIMINATION.

(a) In General.--Except as otherwise provided for in this title (or
an amendment made by this title), an individual shall not, on the ground
prohibited under title VI of the Civil Rights Act of 1964 (42 U.S.C.
2000d et seq.), title IX of the Education Amendments of 1972 (20 U.S.C.
1681 et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6101 et
seq.), or section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794),
be excluded from participation in, be denied the benefits of, or be
subjected to discrimination under, any health program or activity, any
part of which is receiving Federal financial assistance, including
credits, subsidies, or contracts of insurance, or under any program or
activity that is administered by an Executive Agency or any entity
established under this title (or amendments). <>
The enforcement mechanisms provided for and available under such title
VI, title IX, section 504, or such Age Discrimination Act shall apply
for purposes of violations of this subsection.

(b) Continued Application of Laws.--Nothing in this title (or an
amendment made by this title) shall be construed to invalidate or limit
the rights, remedies, procedures, or legal standards available to
individuals aggrieved under title VI of the Civil Rights Act of 1964 (42
U.S.C. 2000d et seq.), title VII of the Civil Rights Act of 1964 (42
U.S.C. 2000e et seq.), title IX of the Education Amendments of 1972 (20
U.S.C. 1681 et seq.), section 504 of the Rehabilitation Act of 1973 (29
U.S.C. 794), or the Age Discrimination Act of 1975 (42 U.S.C. 611 et
seq.), or to supersede State laws that provide additional protections
against discrimination on any basis described in subsection (a).
(c) Regulations.--The Secretary may promulgate regulations to
implement this section.

[[Page 261]]

SEC. 1558. PROTECTIONS FOR EMPLOYEES.

The Fair Labor Standards Act of 1938 is amended by inserting after
section 18B (as added by section 1512) the following:

``SEC. 18C. <>  PROTECTIONS FOR EMPLOYEES.

``(a) Prohibition.--No employer shall discharge or in any manner
discriminate against any employee with respect to his or her
compensation, terms, conditions, or other privileges of employment
because the employee (or an individual acting at the request of the
employee) has--
``(1) received a credit under section 36B of the Internal
Revenue Code of 1986 or a subsidy under section 1402 of this
Act;
``(2) provided, caused to be provided, or is about to
provide or cause to be provided to the employer, the Federal
Government, or the attorney general of a State information
relating to any violation of, or any act or omission the
employee reasonably believes to be a violation of, any provision
of this title (or an amendment made by this title);
``(3) testified or is about to testify in a proceeding
concerning such violation;
``(4) assisted or participated, or is about to assist or
participate, in such a proceeding; or
``(5) objected to, or refused to participate in, any
activity, policy, practice, or assigned task that the employee
(or other such person) reasonably believed to be in violation of
any provision of this title (or amendment), or any order, rule,
regulation, standard, or ban under this title (or amendment).

``(b) Complaint Procedure.--
``(1) In general.--An employee who believes that he or she
has been discharged or otherwise discriminated against by any
employer in violation of this section may seek relief in
accordance with the procedures, notifications, burdens of proof,
remedies, and statutes of limitation set forth in section
2087(b) of title 15, United States Code.
``(2) No limitation on rights.--Nothing in this section
shall be deemed to diminish the rights, privileges, or remedies
of any employee under any Federal or State law or under any
collective bargaining agreement. The rights and remedies in this
section may not be waived by any agreement, policy, form, or
condition of employment.''.

SEC. 1559. <>  OVERSIGHT.

The Inspector General of the Department of Health and Human Services
shall have oversight authority with respect to the administration and
implementation of this title as it relates to such Department.

SEC. 1560. <>  RULES OF CONSTRUCTION.

(a) No Effect on Antitrust Laws.--Nothing in this title (or an
amendment made by this title) shall be construed to modify, impair, or
supersede the operation of any of the antitrust laws. For the purposes
of this section, the term ``antitrust laws'' has the meaning given such
term in subsection (a) of the first section of the Clayton Act, except
that such term includes section 5 of the Federal Trade Commission Act to
the extent that such section 5 applies to unfair methods of competition.

[[Page 262]]

(b) Rule of Construction Regarding Hawaii's Prepaid Health Care
Act.--Nothing in this title (or an amendment made by this title) shall
be construed to modify or limit the application of the exemption for
Hawaii's Prepaid Health Care Act (Haw. Rev. Stat. Sec. Sec.  393-1 et
seq.) as provided for under section 514(b)(5) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1144(b)(5)).
(c) Student Health Insurance Plans.--Nothing in this title (or an
amendment made by this title) shall be construed to prohibit an
institution of higher education (as such term is defined for purposes of
the Higher Education Act of 1965) from offering a student health
insurance plan, to the extent that such requirement is otherwise
permitted under applicable Federal, State or local law.
(d) No Effect on Existing Requirements.--Nothing in this title (or
an amendment made by this title, unless specified by direct statutory
reference) shall be construed to modify any existing Federal requirement
concerning the State agency responsible for determining eligibility for
programs identified in section 1413.

SEC. 1561. HEALTH INFORMATION TECHNOLOGY ENROLLMENT STANDARDS AND
PROTOCOLS.

Title XXX of the Public Health Service Act (42 U.S.C. 300jj et seq.)
is amended by adding at the end the following:

``Subtitle C--Other Provisions

``SEC. 3021. <>  HEALTH INFORMATION TECHNOLOGY
ENROLLMENT STANDARDS AND PROTOCOLS.

``(a) In General.--
``(1) Standards and protocols.--
<> Not later than 180 days after
the date of enactment of this title, the Secretary, in
consultation with the HIT Policy Committee and the HIT Standards
Committee, shall develop interoperable and secure standards and
protocols that facilitate enrollment of individuals in Federal
and State health and human services programs, as determined by
the Secretary.
``(2) Methods.--The Secretary shall facilitate enrollment in
such programs through methods determined appropriate by the
Secretary, which shall include providing individuals and third
parties authorized by such individuals and their designees
notification of eligibility and verification of eligibility
required under such programs.

``(b) Content.--The standards and protocols for electronic
enrollment in the Federal and State programs described in subsection (a)
shall allow for the following:
``(1) Electronic matching against existing Federal and State
data, including vital records, employment history, enrollment
systems, tax records, and other data determined appropriate by
the Secretary to serve as evidence of eligibility and in lieu of
paper-based documentation.
``(2) Simplification and submission of electronic
documentation, digitization of documents, and systems
verification of eligibility.
``(3) Reuse of stored eligibility information (including
documentation) to assist with retention of eligible individuals.

[[Page 263]]

``(4) Capability for individuals to apply, recertify and
manage their eligibility information online, including at home,
at points of service, and other community-based locations.
``(5) Ability to expand the enrollment system to integrate
new programs, rules, and functionalities, to operate at
increased volume, and to apply streamlined verification and
eligibility processes to other Federal and State programs, as
appropriate.
``(6) Notification of eligibility, recertification, and
other needed communication regarding eligibility, which may
include communication via email and cellular phones.
``(7) Other functionalities necessary to provide eligibles
with streamlined enrollment process.

``(c) Approval and Notification.--With respect to any standard or
protocol developed under subsection (a) that has been approved by the
HIT Policy Committee and the HIT Standards Committee, the Secretary--
``(1) shall notify States of such standards or protocols;
and
``(2) may require, as a condition of receiving Federal funds
for the health information technology investments, that States
or other entities incorporate such standards and protocols into
such investments.

``(d) Grants for Implementation of Appropriate Enrollment HIT.--
``(1) In general.--The Secretary shall award grant to
eligible entities to develop new, and adapt existing, technology
systems to implement the HIT enrollment standards and protocols
developed under subsection (a) (referred to in this subsection
as `appropriate HIT technology').
``(2) Eligible entities.--To be eligible for a grant under
this subsection, an entity shall--
``(A) be a State, political subdivision of a State,
or a local governmental entity; and
``(B) submit to the Secretary an application at such
time, in such manner, and containing--
``(i) a plan to adopt and implement
appropriate enrollment technology that includes--
``(I) proposed reduction in
maintenance costs of technology systems;
``(II) elimination or updating of
legacy systems; and
``(III) demonstrated collaboration
with other entities that may receive a
grant under this section that are
located in the same State, political
subdivision, or locality;
``(ii) an assurance that the entity will share
such appropriate enrollment technology in
accordance with paragraph (4); and
``(iii) such other information as the
Secretary may require.
``(3) Sharing.--
``(A) In general.--The Secretary shall ensure that
appropriate enrollment HIT adopted under grants under
this subsection is made available to other qualified
State, qualified political subdivisions of a State, or
other appropriate qualified entities (as described in
subparagraph (B)) at no cost.

[[Page 264]]

``(B) Qualified entities.--The Secretary shall
determine what entities are qualified to receive
enrollment HIT under subparagraph (A), taking into
consideration the recommendations of the HIT Policy
Committee and the HIT Standards Committee.''.

SEC. 1562. CONFORMING AMENDMENTS.

(a) Applicability.--Section 2735 of the Public Health Service Act
(42 U.S.C. 300gg-21), as so redesignated by section 1001(4), is
amended--
(1) by striking subsection (a);
(2) in subsection (b)--
(A) in paragraph (1), by striking ``1 through 3''
and inserting ``1 and 2''; and
(B) in paragraph (2)--
(i) in subparagraph (A), by striking
``subparagraph (D)'' and inserting ``subparagraph
(D) or (E)'';
(ii) by striking ``1 through 3'' and inserting
``1 and 2''; and
(iii) by adding at the end the following:
``(E) Election not applicable.--The election
described in subparagraph (A) shall not be available
with respect to the provisions of subpart 1.'';
(3) in subsection (c), by striking ``1 through 3 shall not
apply to any group'' and inserting ``1 and 2 shall not apply to
any individual coverage or any group''; and
(4) in subsection (d)--
(A) in paragraph (1), by striking ``1 through 3
shall not apply to any group'' and inserting ``1 and 2
shall not apply to any individual coverage or any
group'';
(B) in paragraph (2)--
(i) in the matter preceding subparagraph (A),
by striking ``1 through 3 shall not apply to any
group'' and inserting ``1 and 2 shall not apply to
any individual coverage or any group''; and
(ii) in subparagraph (C), by inserting ``or,
with respect to individual coverage, under any
health insurance coverage maintained by the same
health insurance issuer''; and
(C) in paragraph (3), by striking ``any group'' and
inserting ``any individual coverage or any group''.

(b) Definitions.--Section 2791(d) of the Public Health Service Act
(42 U.S.C. 300gg-91(d)) is amended by adding at the end the following:
``(20) Qualified health plan.--The term `qualified health
plan' has the meaning given such term in section 1301(a) of the
Patient Protection and Affordable Care Act.
``(21) Exchange.--The term `Exchange' means an American
Health Benefit Exchange established under section 1311 of the
Patient Protection and Affordable Care Act.''.

(c) Technical and Conforming Amendments.--Title XXVII of the Public
Health Service Act (42 U.S.C. 300gg et seq.) is amended--
(1) in section 2704 <> (42 U.S.C.
300gg), as so redesignated by section 1201(2)--
(A) in subsection (c)--

[[Page 265]]

(i) in paragraph (2), by striking ``group
health plan'' each place that such term appears
and inserting ``group or individual health plan'';
and
(ii) in paragraph (3)--
(I) by striking ``group health
insurance'' each place that such term
appears and inserting ``group or
individual health insurance''; and
(II) in subparagraph (D), by
striking ``small or large'' and
inserting ``individual or group'';
(B) in subsection (d), by striking ``group health
insurance'' each place that such term appears and
inserting ``group or individual health insurance''; and
(C) in subsection (e)(1)(A), by striking ``group
health insurance'' and inserting ``group or individual
health insurance'';
(2) by striking the second heading for subpart 2 of part A
(relating to other requirements);
(3) in section 2725 <>  (42 U.S.C.
300gg-4), as so redesignated by section 1001(2)--
(A) in subsection (a), by striking ``health
insurance issuer offering group health insurance
coverage'' and inserting ``health insurance issuer
offering group or individual health insurance
coverage'';
(B) in subsection (b)--
(i) by striking ``health insurance issuer
offering group health insurance coverage in
connection with a group health plan'' in the
matter preceding paragraph (1) and inserting
``health insurance issuer offering group or
individual health insurance coverage''; and
(ii) in paragraph (1), by striking ``plan''
and inserting ``plan or coverage'';
(C) in subsection (c)--
(i) in paragraph (2), by striking ``group
health insurance coverage offered by a health
insurance issuer'' and inserting ``health
insurance issuer offering group or individual
health insurance coverage''; and
(ii) in paragraph (3), by striking ``issuer''
and inserting ``health insurance issuer''; and
(D) in subsection (e), by striking ``health
insurance issuer offering group health insurance
coverage'' and inserting ``health insurance issuer
offering group or individual health insurance
coverage'';
(4) in section 2726 <>  (42 U.S.C.
300gg-5), as so redesignated by section 1001(2)--
(A) in subsection (a), by striking ``(or health
insurance coverage offered in connection with such a
plan)'' each place that such term appears and inserting
``or a health insurance issuer offering group or
individual health insurance coverage'';
(B) in subsection (b), by striking ``(or health
insurance coverage offered in connection with such a
plan)'' each place that such term appears and inserting
``or a health insurance issuer offering group or
individual health insurance coverage''; and
(C) in subsection (c)--

[[Page 266]]

(i) in paragraph (1), by striking ``(and group
health insurance coverage offered in connection
with a group health plan)'' and inserting ``and a
health insurance issuer offering group or
individual health insurance coverage'';
(ii) in paragraph (2), by striking ``(or
health insurance coverage offered in connection
with such a plan)'' each place that such term
appears and inserting ``or a health insurance
issuer offering group or individual health
insurance coverage'';
(5) in section 2727 <> (42 U.S.C.
300gg-6), as so redesignated by section 1001(2), by striking
``health insurance issuers providing health insurance coverage
in connection with group health plans'' and inserting ``and
health insurance issuers offering group or individual health
insurance coverage'';
(6) in section 2728 <> (42 U.S.C.
300gg-7), as so redesignated by section 1001(2)--
(A) in subsection (a), by striking ``health
insurance coverage offered in connection with such
plan'' and inserting ``individual health insurance
coverage'';
(B) in subsection (b)--
(i) in paragraph (1), by striking ``or a
health insurance issuer that provides health
insurance coverage in connection with a group
health plan'' and inserting ``or a health
insurance issuer that offers group or individual
health insurance coverage'';
(ii) in paragraph (2), by striking ``health
insurance coverage offered in connection with the
plan'' and inserting ``individual health insurance
coverage''; and
(iii) in paragraph (3), by striking ``health
insurance coverage offered by an issuer in
connection with such plan'' and inserting
``individual health insurance coverage'';
(C) in subsection (c), by striking ``health
insurance issuer providing health insurance coverage in
connection with a group health plan'' and inserting
``health insurance issuer that offers group or
individual health insurance coverage''; and
(D) in subsection (e)(1), by striking ``health
insurance coverage offered in connection with such a
plan'' and inserting ``individual health insurance
coverage'';
(7) by striking the heading for subpart 3;
(8) in section 2731 <> (42 U.S.C.
300gg-11), as so redesignated by section 1001(3)--
(A) by striking the section heading and all that
follows through subsection (b);
(B) in subsection (c)--
(i) in paragraph (1)--
(I) in the matter preceding
subparagraph (A), by striking ``small
group'' and inserting ``group and
individual''; and
(II) in subparagraph (B)--
(aa) in the matter preceding
clause (i), by inserting ``and
individuals'' after
``employers'';

[[Page 267]]

(bb) in clause (i), by
inserting ``or any additional
individuals'' after ``additional
groups''; and
(cc) in clause (ii), by
striking ``without regard to the
claims experience of those
employers and their employees
(and their dependents) or any
health status-related factor
relating to such'' and inserting
``and individuals without regard
to the claims experience of
those individuals, employers and
their employees (and their
dependents) or any health
status-related factor relating
to such individuals''; and
(ii) in paragraph (2), by striking ``small
group'' and inserting ``group or individual'';
(C) in subsection (d)--
(i) by striking ``small group'' each place
that such appears and inserting ``group or
individual''; and
(ii) in paragraph (1)(B)--
(I) by striking ``all employers''
and inserting ``all employers and
individuals'';
(II) by striking ``those employers''
and inserting ``those individuals,
employers''; and
(III) by striking ``such employees''
and inserting ``such individuals,
employees'';
(D) by striking subsection (e);
(E) by striking subsection (f); and
(F) by transferring such section (as amended by this
paragraph) to appear at the end of section 2702 (as
added by section 1001(4));
(9) in section 2732 <> (42 U.S.C.
300gg-12), as so redesignated by section 1001(3)--
(A) by striking the section heading and all that
follows through subsection (a);
(B) in subsection (b)--
(i) in the matter preceding paragraph (1), by
striking ``group health plan in the small or large
group market'' and inserting ``health insurance
coverage offered in the group or individual
market'';
(ii) in paragraph (1), by inserting ``, or
individual, as applicable,'' after ``plan
sponsor'';
(iii) in paragraph (2), by inserting ``, or
individual, as applicable,'' after ``plan
sponsor''; and
(iv) by striking paragraph (3) and inserting
the following:
``(3) Violation of participation or contribution rates.--In
the case of a group health plan, the plan sponsor has failed to
comply with a material plan provision relating to employer
contribution or group participation rules, pursuant to
applicable State law.'';
(C) in subsection (c)--
(i) in paragraph (1)--
(I) in the matter preceding
subparagraph (A), by striking ``group
health insurance coverage offered in the
small or large group market'' and
inserting ``group or individual health
insurance coverage'';

[[Page 268]]

(II) in subparagraph (A), by
inserting ``or individual, as
applicable,'' after ``plan sponsor'';
(III) in subparagraph (B)--
(aa) by inserting ``or
individual, as applicable,''
after ``plan sponsor''; and
(bb) by inserting ``or
individual health insurance
coverage''; and
(IV) in subparagraph (C), by
inserting ``or individuals, as
applicable,'' after ``those sponsors'';
and
(ii) in paragraph (2)(A)--
(I) in the matter preceding clause
(i), by striking ``small group market or
the large group market, or both
markets,'' and inserting ``individual or
group market, or all markets,''; and
(II) in clause (i), by inserting
``or individual, as applicable,'' after
``plan sponsor''; and
(D) by transferring such section (as amended by this
paragraph) to appear at the end of section 2703 (as
added by section 1001(4));
(10) in section 2733 <>  (42 U.S.C.
300gg-13), as so redesignated by section 1001(4)--
(A) in subsection (a)--
(i) in the matter preceding paragraph (1), by
striking ``small employer'' and inserting ``small
employer or an individual'';
(ii) in paragraph (1), by inserting ``, or
individual, as applicable,'' after ``employer''
each place that such appears; and
(iii) in paragraph (2), by striking ``small
employer'' and inserting ``employer, or
individual, as applicable,'';
(B) in subsection (b)--
(i) in paragraph (1)--
(I) in the matter preceding
subparagraph (A), by striking ``small
employer'' and inserting ``employer, or
individual, as applicable,'';
(II) in subparagraph (A), by adding
``and'' at the end;
(III) by striking subparagraphs (B)
and (C); and
(IV) in subparagraph (D)--
(aa) by inserting ``, or
individual, as applicable,''
after ``employer''; and
(bb) by redesignating such
subparagraph as subparagraph
(B);
(ii) in paragraph (2)--
(I) by striking ``small employers''
each place that such term appears and
inserting ``employers, or individuals,
as applicable,''; and
(II) by striking ``small employer''
and inserting ``employer, or individual,
as applicable,''; and
(C) by redesignating such section (as amended by
this paragraph) as section 2709 and transferring such
section to appear after section 2708 (as added by
section 1001(5));
(11) by redesignating subpart 4 as subpart 2;
(12) in section 2735 (42 U.S.C. 300gg-21), as so
redesignated by section 1001(4)--

[[Page 269]]

(A) by striking subsection (a);
(B) by striking ``subparts 1 through 3'' each place
that such appears and inserting ``subpart 1'';
(C) by redesignating subsections (b) through (e) as
subsections (a) through (d), respectively; and
(D) by redesignating such section (as amended by
this paragraph) <>  as section
2722;
(13) in section 2736 (42 U.S.C. 300gg-22), as so
redesignated by section 1001(4)--
(A) in subsection (a)--
(i) in paragraph (1), by striking ``small or
large group markets'' and inserting ``individual
or group market''; and
(ii) in paragraph (2), by inserting ``or
individual health insurance coverage'' after
``group health plans'';
(B) in subsection (b)(1)(B), by inserting
``individual health insurance coverage or'' after
``respect to''; and
(C) by redesignating such section (as amended by
this paragraph) <>  as section
2723;
(14) in section 2737(a)(1) (42 U.S.C. 300gg-23), as so
redesignated by section 1001(4)--
(A) by inserting ``individual or'' before ``group
health insurance''; and
(B) by redesignating such section(as amended by this
paragraph) <>  as section 2724;
(15) in section 2762 (42 U.S.C. 300gg-62)--
(A) in the section heading by inserting ``and
application'' before the period; and
(B) by adding at the end the following:

``(c) Application of Part A Provisions.--
``(1) In general.--The provisions of part A shall apply to
health insurance issuers providing health insurance coverage in
the individual market in a State as provided for in such part.
``(2) Clarification.--To the extent that any provision of
this part conflicts with a provision of part A with respect to
health insurance issuers providing health insurance coverage in
the individual market in a State, the provisions of such part A
shall apply.''; and
(16) in section 2791(e) (42 U.S.C. 300gg-91(e))--
(A) in paragraph (2), by striking ``51'' and
inserting ``101''; and
(B) in paragraph (4)--
(i) by striking ``at least 2'' each place that
such appears and inserting ``at least 1''; and
(ii) by striking ``50'' and inserting ``100''.

(d) <>  Application.--Notwithstanding any other
provision of the Patient Protection and Affordable Care Act, nothing in
such Act (or an amendment made by such Act) shall be construed to--
(1) prohibit (or authorize the Secretary of Health and Human
Services to promulgate regulations that prohibit) a group health
plan or health insurance issuer from carrying out utilization
management techniques that are commonly used as of the date of
enactment of this Act; or
(2) restrict the application of the amendments made by this
subtitle.

[[Page 270]]

(e) Technical Amendment to the Employee Retirement Income Security
Act of 1974.--Subpart B of part 7 of subtitle A of title I of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1181 et.
seq.) is amended, by adding at the end the following:

``SEC. 715. <> ADDITIONAL MARKET
REFORMS.

``(a) General Rule.--Except as provided in subsection (b)--
``(1) the provisions of part A of title XXVII of the Public
Health Service Act (as amended by the Patient Protection and
Affordable Care Act) shall apply to group health plans, and
health insurance issuers providing health insurance coverage in
connection with group health plans, as if included in this
subpart; and
``(2) to the extent that any provision of this part
conflicts with a provision of such part A with respect to group
health plans, or health insurance issuers providing health
insurance coverage in connection with group health plans, the
provisions of such part A shall apply.

``(b) Exception.--Notwithstanding subsection (a), the provisions of
sections 2716 and 2718 of title XXVII of the Public Health Service Act
(as amended by the Patient Protection and Affordable Care Act) shall not
apply with respect to self-insured group health plans, and the
provisions of this part shall continue to apply to such plans as if such
sections of the Public Health Service Act (as so amended) had not been
enacted.''.
(f) Technical Amendment to the Internal Revenue Code of 1986.--
Subchapter B of chapter 100 of the Internal Revenue Code of 1986 is
amended by adding at the end the following:

``SEC. 9815. <> ADDITIONAL MARKET
REFORMS.

``(a) General Rule.--Except as provided in subsection (b)--
``(1) the provisions of part A of title XXVII of the Public
Health Service Act (as amended by the Patient Protection and
Affordable Care Act) shall apply to group health plans, and
health insurance issuers providing health insurance coverage in
connection with group health plans, as if included in this
subchapter; and
``(2) to the extent that any provision of this subchapter
conflicts with a provision of such part A with respect to group
health plans, or health insurance issuers providing health
insurance coverage in connection with group health plans, the
provisions of such part A shall apply.

``(b) Exception.--Notwithstanding subsection (a), the provisions of
sections 2716 and 2718 of title XXVII of the Public Health Service Act
(as amended by the Patient Protection and Affordable Care Act) shall not
apply with respect to self-insured group health plans, and the
provisions of this subchapter shall continue to apply to such plans as
if such sections of the Public Health Service Act (as so amended) had
not been enacted.''.

SEC. 1563. SENSE OF THE SENATE PROMOTING FISCAL RESPONSIBILITY.

(a) Findings.--The Senate makes the following findings:
(1) Based on Congressional Budget Office (CBO) estimates,
this Act will reduce the Federal deficit between 2010 and 2019.
(2) CBO projects this Act will continue to reduce budget
deficits after 2019.

[[Page 271]]

(3) Based on CBO estimates, this Act will extend the
solvency of the Medicare HI Trust Fund.
(4) This Act will increase the surplus in the Social
Security Trust Fund, which should be reserved to strengthen the
finances of Social Security.
(5) The initial net savings generated by the Community
Living Assistance Services and Supports (CLASS) program are
necessary to ensure the long-term solvency of that program.

(b) Sense of the Senate.--It is the sense of the Senate that--
(1) the additional surplus in the Social Security Trust Fund
generated by this Act should be reserved for Social Security and
not spent in this Act for other purposes; and
(2) the net savings generated by the CLASS program should be
reserved for the CLASS program and not spent in this Act for
other purposes.

TITLE II--ROLE OF PUBLIC PROGRAMS

Subtitle A--Improved Access to Medicaid

SEC. 2001. MEDICAID COVERAGE FOR THE LOWEST INCOME POPULATIONS.

(a) Coverage for Individuals With Income at or Below 133 Percent of
the Poverty Line.--
(1) Beginning 2014.-- <> Section
1902(a)(10)(A)(i) of the Social Security Act (42 U.S.C. 1396a)
is amended--
(A) by striking ``or'' at the end of subclause (VI);
(B) by adding ``or'' at the end of subclause (VII);
and
(C) by inserting after subclause (VII) the
following:
``(VIII) beginning January 1, 2014,
who are under 65 years of age, not
pregnant, not entitled to, or enrolled
for, benefits under part A of title
XVIII, or enrolled for benefits under
part B of title XVIII, and are not
described in a previous subclause of
this clause, and whose income (as
determined under subsection (e)(14))
does not exceed 133 percent of the
poverty line (as defined in section
2110(c)(5)) applicable to a family of
the size involved, subject to subsection
(k);''.
(2) Provision of at least minimum essential coverage.--
(A) In general.--Section 1902 of such Act (42 U.S.C.
1396a) is amended by inserting after subsection (j) the
following:

``(k)(1) The medical assistance provided to an individual described
in subclause (VIII) of subsection (a)(10)(A)(i) shall consist of
benchmark coverage described in section 1937(b)(1) or benchmark
equivalent coverage described in section 1937(b)(2). Such medical
assistance shall be provided subject to the requirements of section
1937, without regard to whether a State otherwise has elected the option
to provide medical assistance through coverage under that section,
unless an individual described in subclause (VIII) of subsection
(a)(10)(A)(i) is also an individual for whom, under subparagraph (B) of
section 1937(a)(2), the State may not require enrollment in benchmark
coverage described in subsection (b)(1)

[[Page 272]]

of section 1937 or benchmark equivalent coverage described in subsection
(b)(2) of that section.''.
(B) Conforming amendment.--Section 1903(i) of the
Social Security Act, as amended by section
6402(c), <>  is amended--
(i) in paragraph (24), by striking ``or'' at
the end;
(ii) in paragraph (25), by striking the period
and inserting ``; or''; and
(iii) by adding at the end the following:
``(26) with respect to any amounts expended for medical
assistance for individuals described in subclause (VIII) of
subsection (a)(10)(A)(i) other than medical assistance provided
through benchmark coverage described in section 1937(b)(1) or
benchmark equivalent coverage described in section
1937(b)(2).''.
(3) Federal funding for cost of covering newly eligible
individuals.--Section 1905 of the Social Security Act (42 U.S.C.
1396d), is amended--
(A) in subsection (b), in the first sentence, by
inserting ``subsection (y) and'' before ``section
1933(d)''; and
(B) by adding at the end the following new
subsection:

``(y) Increased FMAP for Medical Assistance for Newly Eligible
Mandatory Individuals.--
``(1) <>  Amount of increase.--
``(A) 100 percent fmap.--During the period that
begins on January 1, 2014, and ends on December 31,
2016, notwithstanding subsection (b), the Federal
medical assistance percentage determined for a State
that is one of the 50 States or the District of Columbia
for each fiscal year occurring during that period with
respect to amounts expended for medical assistance for
newly eligible individuals described in subclause (VIII)
of section 1902(a)(10)(A)(i) shall be equal to 100
percent.
``(B) 2017 and 2018.--
``(i) In general.--During the period that
begins on January 1, 2017, and ends on December
31, 2018, notwithstanding subsection (b) and
subject to subparagraph (D), the Federal medical
assistance percentage determined for a State that
is one of the 50 States or the District of
Columbia for each fiscal year occurring during
that period with respect to amounts expended for
medical assistance for newly eligible individuals
described in subclause (VIII) of section
1902(a)(10)(A)(i), shall be increased by the
applicable percentage point increase specified in
clause (ii) for the quarter and the State.
``(ii) Applicable percentage point increase.--
``(I) In general.--For purposes of
clause (i), the applicable percentage
point increase for a quarter is the
following:

[[Page 273]]




------------------------------------------------------------------------
If the State is an    If the State is not an
``For any fiscal year     expansion State, the    expansion State, the
quarter occurring in    applicable percentage    applicable percentage
the calendar year:       point increase is:      point increase is:
------------------------------------------------------------------------
2017                     30.3                     34.3
------------------------------------------------------------------------
2018                     31.3                     33.3
------------------------------------------------------------------------

``(II) Expansion state defined.--For
purposes of the table in subclause (I),
a State is an expansion State if, on the
date of the enactment of the Patient
Protection and Affordable Care Act, the
State offers health benefits coverage
statewide to parents and nonpregnant,
childless adults whose income is at
least 100 percent of the poverty line,
that is not dependent on access to
employer coverage, employer
contribution, or employment and is not
limited to premium assistance, hospital-
only benefits, a high deductible health
plan, or alternative benefits under a
demonstration program authorized under
section 1938. A State that offers health
benefits coverage to only parents or
only nonpregnant childless adults
described in the preceding sentence
shall not be considered to be an
expansion State.
``(C) 2019 and succeeding years. <> --Beginning January 1, 2019, notwithstanding
subsection (b) but subject to subparagraph (D), the
Federal medical assistance percentage determined for a
State that is one of the 50 States or the District of
Columbia for each fiscal year quarter occurring during
that period with respect to amounts expended for medical
assistance for newly eligible individuals described in
subclause (VIII) of section 1902(a)(10)(A)(i), shall be
increased by 32.3 percentage points.
``(D) Limitation.--The Federal medical assistance
percentage determined for a State under subparagraph (B)
or (C) shall in no case be more than 95 percent.
``(2) Definitions.--In this subsection:
``(A) Newly eligible.--The term `newly eligible'
means, with respect to an individual described in
subclause (VIII) of section 1902(a)(10)(A)(i), an
individual who is not under 19 years of age (or such
higher age as the State may have elected) and who, on
the date of enactment of the Patient Protection and
Affordable Care Act, is not eligible under the State
plan or under a waiver of the plan for full benefits or
for benchmark coverage described in subparagraph (A),
(B), or (C) of section 1937(b)(1) or benchmark
equivalent coverage described in section 1937(b)(2) that
has an aggregate actuarial value that is at least
actuarially equivalent to benchmark coverage described
in subparagraph (A), (B), or (C) of section 1937(b)(1),
or is eligible but not enrolled (or is on a waiting
list) for such benefits or coverage through a waiver
under the plan that has a capped or limited enrollment
that is full.

[[Page 274]]

``(B) Full benefits.--The term `full benefits'
means, with respect to an individual, medical assistance
for all services covered under the State plan under this
title that is not less in amount, duration, or scope, or
is determined by the Secretary to be substantially
equivalent, to the medical assistance available for an
individual described in section 1902(a)(10)(A)(i).''.
(4) State options to offer coverage earlier and presumptive
eligibility; children required to have coverage for parents to
be eligible.--
(A) In general.--Subsection (k) of section 1902 of
the Social Security Act (as added by paragraph
(2)), <>  is amended by inserting
after paragraph (1) the following:

``(2) <>  Beginning with the
first day of any fiscal year quarter that begins on or after January 1,
2011, and before January 1, 2014, a State may elect through a State plan
amendment to provide medical assistance to individuals who would be
described in subclause (VIII) of subsection (a)(10)(A)(i) if that
subclause were effective before January 1, 2014. A State may elect to
phase-in the extension of eligibility for medical assistance to such
individuals based on income, so long as the State does not extend such
eligibility to individuals described in such subclause with higher
income before making individuals described in such subclause with lower
income eligible for medical assistance.

``(3) If an individual described in subclause (VIII) of subsection
(a)(10)(A)(i) is the parent of a child who is under 19 years of age (or
such higher age as the State may have elected) who is eligible for
medical assistance under the State plan or under a waiver of such plan
(under that subclause or under a State plan amendment under paragraph
(2), the individual may not be enrolled under the State plan unless the
individual's child is enrolled under the State plan or under a waiver of
the plan or is enrolled in other health insurance coverage. For purposes
of the preceding sentence, the term `parent' includes an individual
treated as a caretaker relative for purposes of carrying out section
1931.''.
(B) Presumptive eligibility.--Section 1920 of the
Social Security Act (42 U.S.C. 1396r-1) is amended by
adding at the end the following:

``(e) <>  If the State has elected the option to
provide a presumptive eligibility period under this section or section
1920A, the State may elect to provide a presumptive eligibility period
(as defined in subsection (b)(1)) for individuals who are eligible for
medical assistance under clause (i)(VIII) of subsection (a)(10)(A) or
section 1931 in the same manner as the State provides for such a period
under this section or section 1920A, subject to such guidance as the
Secretary shall establish.''.
(5) Conforming amendments.--
(A) Section 1902(a)(10) of such Act (42 U.S.C.
1396a(a)(10)) is amended in the matter following
subparagraph (G), by striking ``and (XIV)'' and
inserting ``(XIV)'' and by inserting ``and (XV) the
medical assistance made available to an individual
described in subparagraph (A)(i)(VIII) shall be limited
to medical assistance described in subsection (k)(1)''
before the semicolon.
(B) Section 1902(l)(2)(C) of such Act (42 U.S.C.
1396a(l)(2)(C)) is amended by striking ``100'' and
inserting ``133''.

[[Page 275]]

(C) Section 1905(a) of such Act (42 U.S.C. 1396d(a))
is amended in the matter preceding paragraph (1)--
(i) by striking ``or'' at the end of clause
(xii);
(ii) by inserting ``or'' at the end of clause
(xiii); and
(iii) by inserting after clause (xiii) the
following:
``(xiv) individuals described in section
1902(a)(10)(A)(i)(VIII),''.
(D) Section 1903(f)(4) of such Act (42 U.S.C.
1396b(f)(4)) is amended by inserting
``1902(a)(10)(A)(i)(VIII),'' after
``1902(a)(10)(A)(i)(VII),''.
(E) Section 1937(a)(1)(B) of such Act (42 U.S.C.
1396u-7(a)(1)(B)) is amended by inserting ``subclause
(VIII) of section 1902(a)(10)(A)(i) or under'' after
``eligible under''.

(b) Maintenance of Medicaid Income Eligibility.--Section 1902 of the
Social Security Act (42 U.S.C. 1396a) is amended--
(1) in subsection (a)--
(A) by striking ``and'' at the end of paragraph
(72);
(B) by striking the period at the end of paragraph
(73) and inserting ``; and''; and
(C) by inserting after paragraph (73) the following
new paragraph:
``(74) provide for maintenance of effort under the State
plan or under any waiver of the plan in accordance with
subsection (gg).''; and
(2) by adding at the end the following new subsection:

``(gg) Maintenance of Effort.--
``(1) General requirement to maintain eligibility standards
until state exchange is fully operational.--Subject <>  to the succeeding paragraphs of this
subsection, during the period that begins on the date of
enactment of the Patient Protection and Affordable Care Act and
ends on the date on which the Secretary determines that an
Exchange established by the State under section 1311 of the
Patient Protection and Affordable Care Act is fully operational,
as a condition for receiving any Federal payments under section
1903(a) for calendar quarters occurring during such period, a
State shall not have in effect eligibility standards,
methodologies, or procedures under the State plan under this
title or under any waiver of such plan that is in effect during
that period, that are more restrictive than the eligibility
standards, methodologies, or procedures, respectively, under the
plan or waiver that are in effect on the date of enactment of
the Patient Protection and Affordable Care Act.
``(2) Continuation of eligibility standards for children
until october 1, 2019.-- <> The
requirement under paragraph (1) shall continue to apply to a
State through September 30, 2019, with respect to the
eligibility standards, methodologies, and procedures under the
State plan under this title or under any waiver of such plan
that are applicable to determining the eligibility for medical
assistance of any child who is under 19 years of age (or such
higher age as the State may have elected).
``(3) Nonapplication.-- <> During the period that begins
on January 1, 2011, and ends on December 31, 2013, the
requirement under paragraph (1) shall not apply to a State with
respect to nonpregnant, nondisabled adults who are eligible

[[Page 276]]

for medical assistance under the State plan or under a waiver of
the plan at the option of the State and whose income exceeds 133
percent of the poverty line (as defined in section 2110(c)(5))
applicable to a family of the size involved if, on or after
December 31, 2010, the State certifies to the Secretary that,
with respect to the State fiscal year during which the
certification is made, the State has a budget deficit, or with
respect to the succeeding State fiscal year, the State is
projected to have a budget deficit. Upon submission of such a
certification to the Secretary, the requirement under paragraph
(1) shall not apply to the State with respect to any remaining
portion of the period described in the preceding sentence.
``(4) Determination of compliance.--
``(A) States shall apply modified gross income.--A
State's determination of income in accordance with
subsection (e)(14) shall not be considered to be
eligibility standards, methodologies, or procedures that
are more restrictive than the standards, methodologies,
or procedures in effect under the State plan or under a
waiver of the plan on the date of enactment of the
Patient Protection and Affordable Care Act for purposes
of determining compliance with the requirements of
paragraph (1), (2), or (3).
``(B) States may expand eligibility or move waivered
populations into coverage under the state plan.--With
respect to any period applicable under paragraph (1),
(2), or (3), a State that applies eligibility standards,
methodologies, or procedures under the State plan under
this title or under any waiver of the plan that are less
restrictive than the eligibility standards,
methodologies, or procedures, applied under the State
plan or under a waiver of the plan on the date of
enactment of the Patient Protection and Affordable Care
Act, or that makes individuals who, on such date of
enactment, are eligible for medical assistance under a
waiver of the State plan, after such date of enactment
eligible for medical assistance through a State plan
amendment with an income eligibility level that is not
less than the income eligibility level that applied
under the waiver, or as a result of the application of
subclause (VIII) of section 1902(a)(10)(A)(i), shall not
be considered to have in effect eligibility standards,
methodologies, or procedures that are more restrictive
than the standards, methodologies, or procedures in
effect under the State plan or under a waiver of the
plan on the date of enactment of the Patient Protection
and Affordable Care Act for purposes of determining
compliance with the requirements of paragraph (1), (2),
or (3).''.

(c) Medicaid Benchmark Benefits Must Consist of at Least Minimum
Essential Coverage.--Section 1937(b) of such Act (42 U.S.C. 1396u-7(b))
is amended--
(1) in paragraph (1), in the matter preceding subparagraph
(A), by inserting ``subject to paragraphs (5) and (6),'' before
``each'';
(2) in paragraph (2)--
(A) in the matter preceding subparagraph (A), by
inserting ``subject to paragraphs (5) and (6)'' after
``subsection (a)(1),'';

[[Page 277]]

(B) in subparagraph (A)--
(i) by redesignating clauses (iv) and (v) as
clauses (vi) and (vii), respectively; and
(ii) by inserting after clause (iii), the
following:
``(iv) Coverage of prescription drugs.
``(v) Mental health services.''; and
(C) in subparagraph (C)--
(i) by striking clauses (i) and (ii); and
(ii) by redesignating clauses (iii) and (iv)
as clauses (i) and (ii), respectively; and
(3) by adding at the end the following new paragraphs:
``(5) Minimum standards.-- <> Effective January 1, 2014, any benchmark benefit package
under paragraph (1) or benchmark equivalent coverage under
paragraph (2) must provide at least essential health benefits as
described in section 1302(b) of the Patient Protection and
Affordable Care Act.
``(6) Mental health services parity.--
``(A) In general.--In the case of any benchmark
benefit package under paragraph (1) or benchmark
equivalent coverage under paragraph (2) that is offered
by an entity that is not a medicaid managed care
organization and that provides both medical and surgical
benefits and mental health or substance use disorder
benefits, the entity shall ensure that the financial
requirements and treatment limitations applicable to
such mental health or substance use disorder benefits
comply with the requirements of section 2705(a) of the
Public Health Service Act in the same manner as such
requirements apply to a group health plan.
``(B) Deemed compliance.--Coverage provided with
respect to an individual described in section
1905(a)(4)(B) and covered under the State plan under
section 1902(a)(10)(A) of the services described in
section 1905(a)(4)(B) (relating to early and periodic
screening, diagnostic, and treatment services defined in
section 1905(r)) and provided in accordance with section
1902(a)(43), shall be deemed to satisfy the requirements
of subparagraph (A).''.

(d) Annual Reports on Medicaid Enrollment.--
(1) State reports.--Section 1902(a) of the Social Security
Act (42 U.S.C. 1396a(a)), as amended by subsection (b), is
amended--
(A) by striking ``and'' at the end of paragraph
(73);
(B) by striking the period at the end of paragraph
(74) and inserting ``; and''; and
(C) by inserting after paragraph (74) the following
new paragraph:
``(75) <>  provide that, beginning
January 2015, and annually thereafter, the State shall submit a
report to the Secretary that contains--
``(A) the total number of enrolled and newly
enrolled individuals in the State plan or under a waiver
of the plan for the fiscal year ending on September 30
of the preceding calendar year, disaggregated by
population, including children, parents, nonpregnant
childless adults, disabled individuals, elderly
individuals, and such other

[[Page 278]]

categories or sub-categories of individuals eligible for
medical assistance under the State plan or under a
waiver of the plan as the Secretary may require;
``(B) a description, which may be specified by
population, of the outreach and enrollment processes
used by the State during such fiscal year; and
``(C) any other data reporting determined necessary
by the Secretary to monitor enrollment and retention of
individuals eligible for medical assistance under the
State plan or under a waiver of the plan.''.
(2) Reports to congress.-- <> Beginning April 2015, and annually thereafter, the
Secretary of Health and Human Services shall submit a report to
the appropriate committees of Congress on the total enrollment
and new enrollment in Medicaid for the fiscal year ending on
September 30 of the preceding calendar year on a national and
State-by-State basis, and shall include in each such report such
recommendations for administrative or legislative changes to
improve enrollment in the Medicaid program as the Secretary
determines appropriate.

(e) State Option for Coverage for Individuals With Income That
Exceeds 133 Percent of the Poverty Line.--
(1) Coverage as optional categorically needy group.--Section
1902 of the Social Security Act (42 U.S.C. 1396a) is amended--
(A) in subsection (a)(10)(A)(ii)--
(i) in subclause (XVIII), by striking ``or''
at the end;
(ii) in subclause (XIX), by adding ``or'' at
the end; and
(iii) by adding at the end the following new
subclause:
``(XX) <> beginning January 1, 2014, who
are under 65 years of age and are not
described in or enrolled under a
previous subclause of this clause, and
whose income (as determined under
subsection (e)(14)) exceeds 133 percent
of the poverty line (as defined in
section 2110(c)(5)) applicable to a
family of the size involved but does not
exceed the highest income eligibility
level established under the State plan
or under a waiver of the plan, subject
to subsection (hh);'' and
(B) by adding at the end the following new
subsection:

``(hh)(1) A State may elect to phase-in the extension of eligibility
for medical assistance to individuals described in subclause (XX) of
subsection (a)(10)(A)(ii) based on the categorical group (including
nonpregnant childless adults) or income, so long as the State does not
extend such eligibility to individuals described in such subclause with
higher income before making individuals described in such subclause with
lower income eligible for medical assistance.
``(2) If an individual described in subclause (XX) of subsection
(a)(10)(A)(ii) is the parent of a child who is under 19 years of age (or
such higher age as the State may have elected) who is eligible for
medical assistance under the State plan or under a waiver of such plan,
the individual may not be enrolled under the State plan unless the
individual's child is enrolled under the State plan or under a waiver of
the plan or is enrolled in other health insurance coverage. For purposes
of the preceding sentence,

[[Page 279]]

the term `parent' includes an individual treated as a caretaker relative
for purposes of carrying out section 1931.''.
(2) Conforming amendments.--
(A) Section 1905(a) of such Act (42 U.S.C.
1396d(a)), as amended by subsection (a)(5)(C), is
amended in the matter preceding paragraph (1)--
(i) by striking ``or'' at the end of clause
(xiii);
(ii) by inserting ``or'' at the end of clause
(xiv); and
(iii) by inserting after clause (xiv) the
following:
``(xv) individuals described in section
1902(a)(10)(A)(ii)(XX),''.
(B) Section 1903(f)(4) of such Act (42 U.S.C.
1396b(f)(4)) is amended by inserting
``1902(a)(10)(A)(ii)(XX),'' after
``1902(a)(10)(A)(ii)(XIX),''.
(C) Section 1920(e) of such Act (42 U.S.C. 1396r-
1(e)), as added by subsection (a)(4)(B), is amended by
inserting ``or clause (ii)(XX)'' after ``clause
(i)(VIII)''.

SEC. 2002. INCOME ELIGIBILITY FOR NONELDERLY DETERMINED USING MODIFIED
GROSS INCOME.

(a) In General.--Section 1902(e) of the Social Security Act (42
U.S.C. 1396a(e)) is amended by adding at the end the following:
``(14) Income determined using modified gross income.--
``(A) In general.--Notwithstanding subsection (r) or
any other provision of this title, except as provided in
subparagraph (D), for purposes of determining income
eligibility for medical assistance under the State plan
or under any waiver of such plan and for any other
purpose applicable under the plan or waiver for which a
determination of income is required, including with
respect to the imposition of premiums and cost-sharing,
a State shall use the modified gross income of an
individual and, in the case of an individual in a family
greater than 1, the household income of such family. A
State shall establish income eligibility thresholds for
populations to be eligible for medical assistance under
the State plan or a waiver of the plan using modified
gross income and household income that are not less than
the effective income eligibility levels that applied
under the State plan or waiver on the date of enactment
of the Patient Protection and Affordable Care Act. For
purposes of complying with the maintenance of effort
requirements under subsection (gg) during the transition
to modified gross income and household income, a State
shall, working with the Secretary, establish an
equivalent income test that ensures individuals eligible
for medical assistance under the State plan or under a
waiver of the plan on the date of enactment of the
Patient Protection and Affordable Care Act, do not lose
coverage under the State plan or under a waiver of the
plan. <> The Secretary may
waive such provisions of this title and title XXI as are
necessary to ensure that States establish income and
eligibility determination systems that protect
beneficiaries.
``(B) No income or expense disregards.--No type of
expense, block, or other income disregard shall be
applied

[[Page 280]]

by a State to determine income eligibility for medical
assistance under the State plan or under any waiver of
such plan or for any other purpose applicable under the
plan or waiver for which a determination of income is
required.
``(C) No assets test.--A State shall not apply any
assets or resources test for purposes of determining
eligibility for medical assistance under the State plan
or under a waiver of the plan.
``(D) Exceptions.--
``(i) Individuals eligible because of other
aid or assistance, elderly individuals, medically
needy individuals, and individuals eligible for
medicare cost-sharing.--Subparagraphs (A), (B),
and (C) shall not apply to the determination of
eligibility under the State plan or under a waiver
for medical assistance for the following:
``(I) Individuals who are eligible
for medical assistance under the State
plan or under a waiver of the plan on a
basis that does not require a
determination of income by the State
agency administering the State plan or
waiver, including as a result of
eligibility for, or receipt of, other
Federal or State aid or assistance,
individuals who are eligible on the
basis of receiving (or being treated as
if receiving) supplemental security
income benefits under title XVI, and
individuals who are eligible as a result
of being or being deemed to be a child
in foster care under the responsibility
of the State.
``(II) Individuals who have attained
age 65.
``(III) Individuals who qualify for
medical assistance under the State plan
or under any waiver of such plan on the
basis of being blind or disabled (or
being treated as being blind or
disabled) without regard to whether the
individual is eligible for supplemental
security income benefits under title XVI
on the basis of being blind or disabled
and including an individual who is
eligible for medical assistance on the
basis of section 1902(e)(3).
``(IV) Individuals described in
subsection (a)(10)(C).
``(V) Individuals described in any
clause of subsection (a)(10)(E).
``(ii) Express lane agency findings.--In the
case of a State that elects the Express Lane
option under paragraph (13), notwithstanding
subparagraphs (A), (B), and (C), the State may
rely on a finding made by an Express Lane agency
in accordance with that paragraph relating to the
income of an individual for purposes of
determining the individual's eligibility for
medical assistance under the State plan or under a
waiver of the plan.
``(iii) Medicare prescription drug subsidies
determinations.--Subparagraphs (A), (B), and (C)
shall not apply to any determinations of
eligibility for premium and cost-sharing subsidies
under and in

[[Page 281]]

accordance with section 1860D-14 made by the State
pursuant to section 1935(a)(2).
``(iv) Long-term care.--Subparagraphs (A),
(B), and (C) shall not apply to any determinations
of eligibility of individuals for purposes of
medical assistance for nursing facility services,
a level of care in any institution equivalent to
that of nursing facility services, home or
community-based services furnished under a waiver
or State plan amendment under section 1915 or a
waiver under section 1115, and services described
in section 1917(c)(1)(C)(ii).
``(v) Grandfather of current enrollees until
date of next regular redetermination.--An
individual who, on January 1, 2014, is enrolled in
the State plan or under a waiver of the plan and
who would be determined ineligible for medical
assistance solely because of the application of
the modified gross income or household income
standard described in subparagraph (A), shall
remain eligible for medical assistance under the
State plan or waiver (and subject to the same
premiums and cost-sharing as applied to the
individual on that date) through March 31, 2014,
or the date on which the individual's next
regularly scheduled redetermination of eligibility
is to occur, whichever is later.
``(E) Transition planning and oversight.--
<> Each State shall submit to the
Secretary for the Secretary's approval the income
eligibility thresholds proposed to be established using
modified gross income and household income, the
methodologies and procedures to be used to determine
income eligibility using modified gross income and
household income and, if applicable, a State plan
amendment establishing an optional eligibility category
under subsection (a)(10)(A)(ii)(XX). To the extent
practicable, the State shall use the same methodologies
and procedures for purposes of making such
determinations as the State used on the date of
enactment of the Patient Protection and Affordable Care
Act. The Secretary shall ensure that the income
eligibility thresholds proposed to be established using
modified gross income and household income, including
under the eligibility category established under
subsection (a)(10)(A)(ii)(XX), and the methodologies and
procedures proposed to be used to determine income
eligibility, will not result in children who would have
been eligible for medical assistance under the State
plan or under a waiver of the plan on the date of
enactment of the Patient Protection and Affordable Care
Act no longer being eligible for such assistance.
``(F) Limitation on secretarial authority.--The
Secretary shall not waive compliance with the
requirements of this paragraph except to the extent
necessary to permit a State to coordinate eligibility
requirements for dual eligible individuals (as defined
in section 1915(h)(2)(B)) under the State plan or under
a waiver of the plan and under title XVIII and
individuals who require the level of care provided in a
hospital, a nursing facility, or an intermediate care
facility for the mentally retarded.

[[Page 282]]

``(G) Definitions of modified gross income and
household income.--In this paragraph, the terms
`modified gross income' and `household income' have the
meanings given such terms in section 36B(d)(2) of the
Internal Revenue Code of 1986.
``(H) Continued application of medicaid rules
regarding point-in-time income and sources of income.--
The requirement under this paragraph for States to use
modified gross income and household income to determine
income eligibility for medical assistance under the
State plan or under any waiver of such plan and for any
other purpose applicable under the plan or waiver for
which a determination of income is required shall not be
construed as affecting or limiting the application of--
``(i) the requirement under this title and
under the State plan or a waiver of the plan to
determine an individual's income as of the point
in time at which an application for medical
assistance under the State plan or a waiver of the
plan is processed; or
``(ii) any rules established under this title
or under the State plan or a waiver of the plan
regarding sources of countable income.''.

(b) Conforming Amendment.--Section 1902(a)(17) of such Act (42
U.S.C. 1396a(a)(17)) is amended by inserting ``(e)(14),'' before
``(l)(3)''.
(c) <>  Effective Date.--The amendments
made by subsections (a) and (b) take effect on January 1, 2014.

SEC. 2003. REQUIREMENT TO OFFER PREMIUM ASSISTANCE FOR EMPLOYER-
SPONSORED INSURANCE.

(a) In General.--Section 1906A of such Act (42 U.S.C. 1396e-1) is
amended--
(1) in subsection (a)--
(A) by striking ``may elect to'' and inserting
``shall'';
(B) by striking ``under age 19''; and
(C) by inserting ``, in the case of an individual
under age 19,'' after ``(and'';
(2) in subsection (c), in the first sentence, by striking
``under age 19''; and
(3) in subsection (d)--
(A) in paragraph (2)--
(i) in the first sentence, by striking ``under
age 19''; and
(ii) by striking the third sentence and
inserting ``A State may not require, as a
condition of an individual (or the individual's
parent) being or remaining eligible for medical
assistance under this title, that the individual
(or the individual's parent) apply for enrollment
in qualified employer-sponsored coverage under
this section.''; and
(B) in paragraph (3), by striking ``the parent of an
individual under age 19'' and inserting ``an individual
(or the parent of an individual)''; and
(4) in subsection (e), by striking ``under age 19'' each
place it appears.

[[Page 283]]

(b) Conforming Amendment.--The heading for section 1906A of such Act
(42 U.S.C. 1396e-1) is amended by striking ``option for children''.
(c) <>  Effective Date.--The amendments
made by this section take effect on January 1, 2014.

SEC. 2004. MEDICAID COVERAGE FOR FORMER FOSTER CARE CHILDREN.

(a) In General.--Section 1902(a)(10)(A)(i) of the Social Security
Act (42 U.S.C. 1396a), as amended by section 2001(a)(1), is amended--
(1) by striking ``or'' at the end of subclause (VII);
(2) by adding ``or'' at the end of subclause (VIII); and
(3) by inserting after subclause (VIII) the following:
``(IX) who were in foster care under
the responsibility of a State for more
than 6 months (whether or not
consecutive) but are no longer in such
care, who are not described in any of
subclauses (I) through (VII) of this
clause, and who are under 25 years of
age;''.

(b) Option To Provide Presumptive Eligibility.--Section 1920(e) of
such Act (42 U.S.C. 1396r-1(e)), as added by section 2001(a)(4)(B) and
amended by section 2001(e)(2)(C), is amended by inserting ``, clause
(i)(IX),'' after ``clause (i)(VIII)''.
(c) Conforming Amendments.--
(1) Section 1903(f)(4) of such Act (42 U.S.C. 1396b(f)(4)),
as amended by section 2001(a)(5)(D), is amended by inserting
``1902(a)(10)(A)(i)(IX),'' after ``1902(a)(10)(A)(i)(VIII),''.
(2) Section 1937(a)(2)(B)(viii) of such Act (42 U.S.C.
1396u-7(a)(2)(B)(viii)) is amended by inserting ``, or the
individual qualifies for medical assistance on the basis of
section 1902(a)(10)(A)(i)(IX)'' before the period.

(d) <>  Effective Date.--The amendments
made by this section take effect on January 1, 2019.

SEC. 2005. PAYMENTS TO TERRITORIES.

(a) Increase in Limit on Payments.--Section 1108(g) of the Social
Security Act (42 U.S.C. 1308(g)) is amended--
(1) in paragraph (2), in the matter preceding subparagraph
(A), by striking ``paragraph (3)'' and inserting ``paragraphs
(3) and (5)'';
(2) in paragraph (4), by striking ``and (3)'' and inserting
``(3), and (4)''; and
(3) by adding at the end the following paragraph:
``(5) Fiscal year 2011 and thereafter.--The amounts
otherwise determined under this subsection for Puerto Rico, the
Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa for the second, third, and fourth quarters of fiscal year
2011, and for each fiscal year after fiscal year 2011 (after the
application of subsection (f) and the preceding paragraphs of
this subsection), shall be increased by 30 percent.''.

(b) Disregard of Payments for Mandatory Expanded Enrollment.--
Section 1108(g)(4) of such Act (42 U.S.C. 1308(g)(4)) is amended--
(1) by striking ``to fiscal years beginning'' and inserting
``to--
``(A) fiscal years beginning'';

[[Page 284]]

(2) by striking the period at the end and inserting ``;
and''; and
(3) by adding at the end the following:
``(B) fiscal years beginning with fiscal year 2014,
payments made to Puerto Rico, the Virgin Islands, Guam,
the Northern Mariana Islands, or American Samoa with
respect to amounts expended for medical assistance for
newly eligible (as defined in section 1905(y)(2))
nonpregnant childless adults who are eligible under
subclause (VIII) of section 1902(a)(10)(A)(i) and whose
income (as determined under section 1902(e)(14)) does
not exceed (in the case of each such commonwealth and
territory respectively) the income eligibility level in
effect for that population under title XIX or under a
waiver on the date of enactment of the Patient
Protection and Affordable Care Act, shall not be taken
into account in applying subsection (f) (as increased in
accordance with paragraphs (1), (2), (3), and (5) of
this subsection) to such commonwealth or territory for
such fiscal year.''.

(c) Increased FMAP.--
(1) In general.--The first sentence of section 1905(b) of
the Social Security Act (42 U.S.C. 1396d(b)) is amended by
striking ``shall be 50 per centum'' and inserting ``shall be 55
percent''.
(2) <>  Effective date.--The
amendment made by paragraph (1) takes effect on January 1, 2011.

SEC. 2006. SPECIAL ADJUSTMENT TO FMAP DETERMINATION FOR CERTAIN STATES
RECOVERING FROM A MAJOR DISASTER.

Section 1905 of the Social Security Act (42 U.S.C. 1396d), as
amended by sections 2001(a)(3) and 2001(b)(2), is amended--
(1) in subsection (b), in the first sentence, by striking
``subsection (y)'' and inserting ``subsections (y) and (aa)'';
and
(2) by adding at the end the following new subsection:

``(aa)(1) <> Notwithstanding subsection (b),
beginning January 1, 2011, the Federal medical assistance percentage for
a fiscal year for a disaster-recovery FMAP adjustment State shall be
equal to the following:
``(A) In the case of the first fiscal year (or part of a
fiscal year) for which this subsection applies to the State, the
Federal medical assistance percentage determined for the fiscal
year without regard to this subsection and subsection (y),
increased by 50 percent of the number of percentage points by
which the Federal medical assistance percentage determined for
the State for the fiscal year without regard to this subsection
and subsection (y), is less than the Federal medical assistance
percentage determined for the State for the preceding fiscal
year after the application of only subsection (a) of section
5001 of Public Law 111-5 (if applicable to the preceding fiscal
year) and without regard to this subsection, subsection (y), and
subsections (b) and (c) of section 5001 of Public Law 111-5.
``(B) In the case of the second or any succeeding fiscal
year for which this subsection applies to the State, the Federal
medical assistance percentage determined for the preceding
fiscal year under this subsection for the State, increased by 25
percent of the number of percentage points by which the Federal
medical assistance percentage determined for the State

[[Page 285]]

for the fiscal year without regard to this subsection and
subsection (y), is less than the Federal medical assistance
percentage determined for the State for the preceding fiscal
year under this subsection.

``(2) <>  In this subsection, the term `disaster-
recovery FMAP adjustment State' means a State that is one of the 50
States or the District of Columbia, for which, at any time during the
preceding 7 fiscal years, the President has declared a major disaster
under section 401 of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act and determined as a result of such disaster
that every county or parish in the State warrant individual and public
assistance or public assistance from the Federal Government under such
Act and for which--
``(A) in the case of the first fiscal year (or part of a
fiscal year) for which this subsection applies to the State, the
Federal medical assistance percentage determined for the State
for the fiscal year without regard to this subsection and
subsection (y), is less than the Federal medical assistance
percentage determined for the State for the preceding fiscal
year after the application of only subsection (a) of section
5001 of Public Law 111-5 (if applicable to the preceding fiscal
year) and without regard to this subsection, subsection (y), and
subsections (b) and (c) of section 5001 of Public Law 111-5, by
at least 3 percentage points; and
``(B) in the case of the second or any succeeding fiscal
year for which this subsection applies to the State, the Federal
medical assistance percentage determined for the State for the
fiscal year without regard to this subsection and subsection
(y), is less than the Federal medical assistance percentage
determined for the State for the preceding fiscal year under
this subsection by at least 3 percentage points.

``(3) <>  The Federal medical assistance
percentage determined for a disaster-recovery FMAP adjustment State
under paragraph (1) shall apply for purposes of this title (other than
with respect to disproportionate share hospital payments described in
section 1923 and payments under this title that are based on the
enhanced FMAP described in 2105(b)) and shall not apply with respect to
payments under title IV (other than under part E of title IV) or
payments under title XXI.''.

SEC. 2007. MEDICAID IMPROVEMENT FUND RESCISSION.

(a) Rescission.--Any amounts available to the Medicaid Improvement
Fund established under section 1941 of the Social Security Act (42
U.S.C. 1396w-1) for any of fiscal years 2014 through 2018 that are
available for expenditure from the Fund and that are not so obligated as
of the date of the enactment of this Act are rescinded.
(b) Conforming Amendments.--Section 1941(b)(1) of the Social
Security Act (42 U.S.C. 1396w-1(b)(1)) is amended--
(1) in subparagraph (A), by striking ``$100,000,000'' and
inserting ``$0''; and
(2) in subparagraph (B), by striking ``$150,000,000'' and
inserting ``$0''.

[[Page 286]]

Subtitle B--Enhanced Support for the Children's Health Insurance Program

SEC. 2101. ADDITIONAL FEDERAL FINANCIAL PARTICIPATION FOR CHIP.

(a) In General.-- <> Section 2105(b) of the
Social Security Act (42 U.S.C. 1397ee(b)) is amended by adding at the
end the following: ``Notwithstanding the preceding sentence, during the
period that begins on October 1, 2013, and ends on September 30, 2019,
the enhanced FMAP determined for a State for a fiscal year (or for any
portion of a fiscal year occurring during such period) shall be
increased by 23 percentage points, but in no case shall exceed 100
percent. The increase in the enhanced FMAP under the preceding sentence
shall not apply with respect to determining the payment to a State under
subsection (a)(1) for expenditures described in subparagraph (D)(iv),
paragraphs (8), (9), (11) of subsection (c), or clause (4) of the first
sentence of section 1905(b).''.

(b) Maintenance of Effort.--
(1) In general.--Section 2105(d) of the Social Security Act
(42 U.S.C. 1397ee(d)) is amended by adding at the end the
following:
``(3) Continuation of eligibility standards for children
until october 1, 2019.--
``(A) In general.-- <> During
the period that begins on the date of enactment of the
Patient Protection and Affordable Care Act and ends on
September 30, 2019, a State shall not have in effect
eligibility standards, methodologies, or procedures
under its State child health plan (including any waiver
under such plan) for children (including children
provided medical assistance for which payment is made
under section 2105(a)(1)(A)) that are more restrictive
than the eligibility standards, methodologies, or
procedures, respectively, under such plan (or waiver) as
in effect on the date of enactment of that Act. The
preceding sentence shall not be construed as preventing
a State during such period from--
``(i) applying eligibility standards,
methodologies, or procedures for children under
the State child health plan or under any waiver of
the plan that are less restrictive than the
eligibility standards, methodologies, or
procedures, respectively, for children under the
plan or waiver that are in effect on the date of
enactment of such Act; or
``(ii) imposing a limitation described in
section 2112(b)(7) for a fiscal year in order to
limit expenditures under the State child health
plan to those for which Federal financial
participation is available under this section for
the fiscal year.
``(B) Assurance of exchange coverage for targeted
low-income children unable to be provided child health
assistance as a result of funding
shortfalls. <> --In the event that
allotments provided under section 2104 are insufficient
to provide coverage to all children who are eligible to
be targeted low-income children under the State child
health plan under this title, a State shall

[[Page 287]]

establish procedures to ensure that such children are
provided coverage through an Exchange established by the
State under section 1311 of the Patient Protection and
Affordable Care Act.''.
(2) Conforming amendment to title xxi medicaid maintenance
of effort.--Section 2105(d)(1) of the Social Security Act (42
U.S.C. 1397ee(d)(1)) is amended by adding before the period ``,
except as required under section 1902(e)(14)''.

(c) No Enrollment Bonus Payments for Children Enrolled After Fiscal
Year 2013.--Section 2105(a)(3)(F)(iii) of the Social Security Act (42
U.S.C. 1397ee(a)(3)(F)(iii)) is amended by inserting ``or any children
enrolled on or after October 1, 2013'' before the period.
(d) Income Eligibility Determined Using Modified Gross Income.--
(1) State plan requirement.--Section 2102(b)(1)(B) of the
Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) is amended--
(A) in clause (iii), by striking ``and'' after the
semicolon;
(B) in clause (iv), by striking the period and
inserting ``; and''; and
(C) by adding at the end the following:
``(v) <>  shall,
beginning January 1, 2014, use modified gross
income and household income (as defined in section
36B(d)(2) of the Internal Revenue Code of 1986) to
determine eligibility for child health assistance
under the State child health plan or under any
waiver of such plan and for any other purpose
applicable under the plan or waiver for which a
determination of income is required, including
with respect to the imposition of premiums and
cost-sharing, consistent with section
1902(e)(14).''.
(2) Conforming amendment.--Section 2107(e)(1) of the Social
Security Act (42 U.S.C. 1397gg(e)(1)) is amended--
(A) by redesignating subparagraphs (E) through (L)
as subparagraphs (F) through (M), respectively; and
(B) by inserting after subparagraph (D), the
following:
``(E) Section 1902(e)(14) (relating to income
determined using modified gross income and household
income).''.

(e) Application of Streamlined Enrollment System.--Section
2107(e)(1) of the Social Security Act (42 U.S.C. 1397gg(e)(1)), as
amended by subsection (d)(2), is amended by adding at the end the
following:
``(N) Section 1943(b) (relating to coordination with
State Exchanges and the State Medicaid agency).''.

(f) <>  CHIP Eligibility for Children
Ineligible for Medicaid as a Result of Elimination of Disregards.--
Notwithstanding any other provision of law, a State shall treat any
child who is determined to be ineligible for medical assistance under
the State Medicaid plan or under a waiver of the plan as a result of the
elimination of the application of an income disregard based on expense
or type of income, as required under section 1902(e)(14) of the Social
Security Act (as added by this Act), as a targeted low-income child
under section 2110(b) (unless the child is excluded under paragraph (2)
of that section) and shall provide child health assistance to the child
under the State child health plan (whether

[[Page 288]]

implemented under title XIX or XXI, or both, of the Social Security
Act).

SEC. 2102. TECHNICAL CORRECTIONS.

(a) <>  CHIPRA.--Effective
as if included in the enactment of the Children's Health Insurance
Program Reauthorization Act of 2009 (Public Law 111-3) (in this section
referred to as ``CHIPRA''):
(1) Section 2104(m) of the Social Security Act, as added by
section 102 of CHIPRA, <>  is amended--
(A) by redesignating paragraph (7) as paragraph (8);
and
(B) by inserting after paragraph (6), the following:
``(7) Adjustment of fiscal year 2010 allotments to account
for changes in projected spending for certain previously
approved expansion programs.--For purposes of recalculating the
fiscal year 2010 allotment, in the case of one of the 50 States
or the District of Columbia that has an approved State plan
amendment effective January 1, 2006, to provide child health
assistance through the provision of benefits under the State
plan under title XIX for children from birth through age 5 whose
family income does not exceed 200 percent of the poverty line,
the Secretary shall increase the allotment by an amount that
would be equal to the Federal share of expenditures that would
have been claimed at the enhanced FMAP rate rather than the
Federal medical assistance percentage matching rate for such
population.''.
(2) Section 605 of CHIPRA <>  is
amended by striking ``legal residents'' and insert ``lawfully
residing in the United States''.
(3) Subclauses (I) and (II) of paragraph (3)(C)(i) of
section 2105(a) of the Social Security Act (42 U.S.C.
1397ee(a)(3)(ii)), as added by section 104 of CHIPRA, are each
amended by striking ``, respectively''.
(4) Section 2105(a)(3)(E)(ii) of the Social Security Act (42
U.S.C. 1397ee(a)(3)(E)(ii)), as added by section 104 of CHIPRA,
is amended by striking subclause (IV).
(5) Section 2105(c)(9)(B) of the Social Security Act (42
U.S.C. 1397e(c)(9)(B)), <>  as added by
section 211(c)(1) of CHIPRA, is amended by striking ``section
1903(a)(3)(F)'' and inserting ``section 1903(a)(3)(G)''.
(6) Section 2109(b)(2)(B) of the Social Security Act (42
U.S.C. 1397ii(b)(2)(B)), as added by section 602 of CHIPRA, is
amended by striking ``the child population growth factor under
section 2104(m)(5)(B)'' and inserting ``a high-performing State
under section 2111(b)(3)(B)''.
(7) Section 2110(c)(9)(B)(v) of the Social Security Act (42
U.S.C. 1397jj(c)(9)(B)(v)), as added by section 505(b) of
CHIPRA, is amended by striking ``school or school system'' and
inserting ``local educational agency (as defined under section
9101 of the Elementary and Secondary Education Act of 1965''.
(8) Section 211(a)(1)(B) of CHIPRA <>
is amended--
(A) by striking ``is amended'' and all that follows
through ``adding'' and inserting ``is amended by
adding''; and
(B) by redesignating the new subparagraph to be
added by such section to section 1903(a)(3) of the
Social Security Act as a new subparagraph (H).

[[Page 289]]

(b) <>  ARRA.--Effective as if included
in the enactment of section 5006(a) of division B of the American
Recovery and Reinvestment Act of 2009 (Public Law 111-5), the second
sentence of section 1916A(a)(1) of the Social Security Act (42 U.S.C.
1396o-1(a)(1)) is amended by striking ``or (i)'' and inserting ``, (i),
or (j)''.

Subtitle C--Medicaid and CHIP Enrollment Simplification

SEC. 2201. ENROLLMENT SIMPLIFICATION AND COORDINATION WITH STATE HEALTH
INSURANCE EXCHANGES.

Title XIX of the Social Security Act (42 U.S.C. 1397aa et seq.) is
amended by adding at the end the following:

``SEC. 1943. <>  ENROLLMENT SIMPLIFICATION AND
COORDINATION WITH STATE HEALTH INSURANCE EXCHANGES.

``(a) Condition for Participation in Medicaid. <> --As a condition of the State plan under this title and receipt
of any Federal financial assistance under section 1903(a) for calendar
quarters beginning after January 1, 2014, a State shall ensure that the
requirements of subsection (b) is met.

``(b) Enrollment Simplification and Coordination With State Health
Insurance Exchanges and Chip.--
``(1) In general.-- <> A State shall
establish procedures for--
``(A) <>  enabling individuals,
through an Internet website that meets the requirements
of paragraph (4), to apply for medical assistance under
the State plan or under a waiver of the plan, to be
enrolled in the State plan or waiver, to renew their
enrollment in the plan or waiver, and to consent to
enrollment or reenrollment in the State plan through
electronic signature;
``(B) enrolling, without any further determination
by the State and through such website, individuals who
are identified by an Exchange established by the State
under section 1311 of the Patient Protection and
Affordable Care Act as being eligible for--
``(i) medical assistance under the State plan
or under a waiver of the plan; or
``(ii) child health assistance under the State
child health plan under title XXI;
``(C) ensuring that individuals who apply for but
are determined to be ineligible for medical assistance
under the State plan or a waiver or ineligible for child
health assistance under the State child health plan
under title XXI, are screened for eligibility for
enrollment in qualified health plans offered through
such an Exchange and, if applicable, premium assistance
for the purchase of a qualified health plan under
section 36B of the Internal Revenue Code of 1986 (and,
if applicable, advance payment of such assistance under
section 1412 of the Patient Protection and Affordable
Care Act), and, if eligible, enrolled in such a plan
without having to submit an additional or separate
application, and that such individuals receive
information regarding reduced cost-sharing for eligible
individuals under section 1402 of the Patient Protection
and Affordable

[[Page 290]]

Care Act, and any other assistance or subsidies
available for coverage obtained through the Exchange;
``(D) ensuring that the State agency responsible for
administering the State plan under this title (in this
section referred to as the `State Medicaid agency'), the
State agency responsible for administering the State
child health plan under title XXI (in this section
referred to as the `State CHIP agency') and an Exchange
established by the State under section 1311 of the
Patient Protection and Affordable Care Act utilize a
secure electronic interface sufficient to allow for a
determination of an individual's eligibility for such
medical assistance, child health assistance, or premium
assistance, and enrollment in the State plan under this
title, title XXI, or a qualified health plan, as
appropriate;
``(E) coordinating, for individuals who are enrolled
in the State plan or under a waiver of the plan and who
are also enrolled in a qualified health plan offered
through such an Exchange, and for individuals who are
enrolled in the State child health plan under title XXI
and who are also enrolled in a qualified health plan,
the provision of medical assistance or child health
assistance to such individuals with the coverage
provided under the qualified health plan in which they
are enrolled, including services described in section
1905(a)(4)(B) (relating to early and periodic screening,
diagnostic, and treatment services defined in section
1905(r)) and provided in accordance with the
requirements of section 1902(a)(43); and
``(F) conducting outreach to and enrolling
vulnerable and underserved populations eligible for
medical assistance under this title XIX or for child
health assistance under title XXI, including children,
unaccompanied homeless youth, children and youth with
special health care needs, pregnant women, racial and
ethnic minorities, rural populations, victims of abuse
or trauma, individuals with mental health or substance-
related disorders, and individuals with HIV/AIDS.
``(2) Agreements with state health insurance exchanges.--The
State Medicaid agency and the State CHIP agency may enter into
an agreement with an Exchange established by the State under
section 1311 of the Patient Protection and Affordable Care Act
under which the State Medicaid agency or State CHIP agency may
determine whether a State resident is eligible for premium
assistance for the purchase of a qualified health plan under
section 36B of the Internal Revenue Code of 1986 (and, if
applicable, advance payment of such assistance under section
1412 of the Patient Protection and Affordable Care Act), so long
as the agreement meets such conditions and requirements as the
Secretary of the Treasury may prescribe to reduce administrative
costs and the likelihood of eligibility errors and disruptions
in coverage.
``(3) Streamlined enrollment system.--The State Medicaid
agency and State CHIP agency shall participate in and comply
with the requirements for the system established under section
1413 of the Patient Protection and Affordable Care Act (relating
to streamlined procedures for enrollment through an Exchange,
Medicaid, and CHIP).

[[Page 291]]

``(4) Enrollment website requirements.--
<> The procedures established by State under
paragraph (1) shall include establishing and having in
operation, not later than January 1, 2014, an Internet website
that is linked to any website of an Exchange established by the
State under section 1311 of the Patient Protection and
Affordable Care Act and to the State CHIP agency (if different
from the State Medicaid agency) and allows an individual who is
eligible for medical assistance under the State plan or under a
waiver of the plan and who is eligible to receive premium credit
assistance for the purchase of a qualified health plan under
section 36B of the Internal Revenue Code of 1986 to compare the
benefits, premiums, and cost-sharing applicable to the
individual under the State plan or waiver with the benefits,
premiums, and cost-sharing available to the individual under a
qualified health plan offered through such an Exchange,
including, in the case of a child, the coverage that would be
provided for the child through the State plan or waiver with the
coverage that would be provided to the child through enrollment
in family coverage under that plan and as supplemental coverage
by the State under the State plan or waiver.
``(5) Continued need for assessment for home and community-
based services.--Nothing in paragraph (1) shall limit or modify
the requirement that the State assess an individual for purposes
of providing home and community-based services under the State
plan or under any waiver of such plan for individuals described
in subsection (a)(10)(A)(ii)(VI).''.

SEC. 2202. PERMITTING HOSPITALS TO MAKE PRESUMPTIVE ELIGIBILITY
DETERMINATIONS FOR ALL MEDICAID ELIGIBLE POPULATIONS.

(a) In General.--Section 1902(a)(47) of the Social Security Act (42
U.S.C. 1396a(a)(47)) is amended--
(1) by striking ``at the option of the State, provide'' and
inserting ``provide--
``(A) at the option of the State,'';
(2) by inserting ``and'' after the semicolon; and
(3) by adding at the end the following:
``(B) <>  that any hospital that
is a participating provider under the State plan may
elect to be a qualified entity for purposes of
determining, on the basis of preliminary information,
whether any individual is eligible for medical
assistance under the State plan or under a waiver of the
plan for purposes of providing the individual with
medical assistance during a presumptive eligibility
period, in the same manner, and subject to the same
requirements, as apply to the State options with respect
to populations described in section 1920, 1920A, or
1920B (but without regard to whether the State has
elected to provide for a presumptive eligibility period
under any such sections), subject to such guidance as
the Secretary shall establish;''.

(b) Conforming Amendment.--Section 1903(u)(1)(D)(v) of such Act (42
U.S.C. 1396b(u)(1)(D)v)) is amended--
(1) by striking ``or for'' and inserting ``for''; and
(2) by inserting before the period at the end the following:
``, or for medical assistance provided to an individual during a
presumptive eligibility period resulting from a determination

[[Page 292]]

of presumptive eligibility made by a hospital that elects under
section 1902(a)(47)(B) to be a qualified entity for such
purpose''.

(c) <>  Effective Date.--
The amendments made by this section take effect on January 1, 2014, and
apply to services furnished on or after that date.

Subtitle D--Improvements to Medicaid Services

SEC. 2301. COVERAGE FOR FREESTANDING BIRTH CENTER SERVICES.

(a) In General.--Section 1905 of the Social Security Act (42 U.S.C.
1396d), is amended--
(1) in subsection (a)--
(A) in paragraph (27), by striking ``and'' at the
end;
(B) by redesignating paragraph (28) as paragraph
(29); and
(C) by inserting after paragraph (27) the following
new paragraph:
``(28) freestanding birth center services (as defined in
subsection (l)(3)(A)) and other ambulatory services that are
offered by a freestanding birth center (as defined in subsection
(l)(3)(B)) and that are otherwise included in the plan; and'';
and
(2) in subsection (l), by adding at the end the following
new paragraph:

``(3)(A) <>  The term `freestanding birth center
services' means services furnished to an individual at a freestanding
birth center (as defined in subparagraph (B)) at such center.

``(B) The term `freestanding birth center' means a health facility--
``(i) that is not a hospital;
``(ii) where childbirth is planned to occur away from the
pregnant woman's residence;
``(iii) that is licensed or otherwise approved by the State
to provide prenatal labor and delivery or postpartum care and
other ambulatory services that are included in the plan; and
``(iv) that complies with such other requirements relating
to the health and safety of individuals furnished services by
the facility as the State shall establish.

``(C) <>  A State shall provide separate payments
to providers administering prenatal labor and delivery or postpartum
care in a freestanding birth center (as defined in subparagraph (B)),
such as nurse midwives and other providers of services such as birth
attendants recognized under State law, as determined appropriate by the
Secretary. For purposes of the preceding sentence, the term `birth
attendant' means an individual who is recognized or registered by the
State involved to provide health care at childbirth and who provides
such care within the scope of practice under which the individual is
legally authorized to perform such care under State law (or the State
regulatory mechanism provided by State law), regardless of whether the
individual is under the supervision of, or associated with, a physician
or other health care provider. Nothing in this subparagraph shall be
construed as changing State law requirements applicable to a birth
attendant.''.

(b) Conforming Amendment.--Section 1902(a)(10)(A) of the Social
Security Act (42 U.S.C. 1396a(a)(10)(A)), is amended in the

[[Page 293]]

matter preceding clause (i) by striking ``and (21)'' and inserting ``,
(21), and (28)''.
(c) <>  Effective Date.--
(1) In general.-- <> Except as
provided in paragraph (2), the amendments made by this section
shall take effect on the date of the enactment of this Act and
shall apply to services furnished on or after such date.
(2) Exception if state legislation required.--
<> In the case of a State plan for medical
assistance under title XIX of the Social Security Act which the
Secretary of Health and Human Services determines requires State
legislation (other than legislation appropriating funds) in
order for the plan to meet the additional requirement imposed by
the amendments made by this section, the State plan shall not be
regarded as failing to comply with the requirements of such
title solely on the basis of its failure to meet this additional
requirement before the first day of the first calendar quarter
beginning after the close of the first regular session of the
State legislature that begins after the date of the enactment of
this Act. For purposes of the previous sentence, in the case of
a State that has a 2-year legislative session, each year of such
session shall be deemed to be a separate regular session of the
State legislature.

SEC. 2302. CONCURRENT CARE FOR CHILDREN.

(a) In General.--Section 1905(o)(1) of the Social Security Act (42
U.S.C. 1396d(o)(1)) is amended--
(1) in subparagraph (A), by striking ``subparagraph (B)''
and inserting ``subparagraphs (B) and (C)''; and
(2) by adding at the end the following new subparagraph:

``(C) A voluntary election to have payment made for hospice care for
a child (as defined by the State) shall not constitute a waiver of any
rights of the child to be provided with, or to have payment made under
this title for, services that are related to the treatment of the
child's condition for which a diagnosis of terminal illness has been
made.''.
(b) Application to CHIP.--Section 2110(a)(23) of the Social Security
Act (42 U.S.C. 1397jj(a)(23)) is amended by inserting ``(concurrent, in
the case of an individual who is a child, with care related to the
treatment of the child's condition with respect to which a diagnosis of
terminal illness has been made'' after ``hospice care''.

SEC. 2303. STATE ELIGIBILITY OPTION FOR FAMILY PLANNING SERVICES.

(a) Coverage as Optional Categorically Needy Group.--
(1) In general.--Section 1902(a)(10)(A)(ii) of the Social
Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)), as amended by
section 2001(e), is amended--
(A) in subclause (XIX), by striking ``or'' at the
end;
(B) in subclause (XX), by adding ``or'' at the end;
and
(C) by adding at the end the following new
subclause:
``(XXI) who are described in
subsection (ii) (relating to individuals
who meet certain income standards);''.
(2) Group described.--Section 1902 of such Act (42 U.S.C.
1396a), as amended by section 2001(d), is amended by adding at
the end the following new subsection:

[[Page 294]]

``(ii)(1) Individuals described in this subsection are individuals--
``(A) whose income does not exceed an income
eligibility level established by the State that does not
exceed the highest income eligibility level established
under the State plan under this title (or under its
State child health plan under title XXI) for pregnant
women; and
``(B) who are not pregnant.
``(2) At the option of a State, individuals described in
this subsection may include individuals who, had individuals
applied on or before January 1, 2007, would have been made
eligible pursuant to the standards and processes imposed by that
State for benefits described in clause (XV) of the matter
following subparagraph (G) of section subsection (a)(10)
pursuant to a waiver granted under section 1115.
``(3) At the option of a State, for purposes of subsection
(a)(17)(B), in determining eligibility for services under this
subsection, the State may consider only the income of the
applicant or recipient.''.
(3) Limitation on benefits.--Section 1902(a)(10) of the
Social Security Act (42 U.S.C. 1396a(a)(10)), as amended by
section 2001(a)(5)(A), is amended in the matter following
subparagraph (G)--
(A) by striking ``and (XV)'' and inserting ``(XV)'';
and
(B) by inserting ``, and (XVI) the medical
assistance made available to an individual described in
subsection (ii) shall be limited to family planning
services and supplies described in section 1905(a)(4)(C)
including medical diagnosis and treatment services that
are provided pursuant to a family planning service in a
family planning setting'' before the semicolon.
(4) Conforming amendments.--
(A) Section 1905(a) of the Social Security Act (42
U.S.C. 1396d(a)), as amended by section 2001(e)(2)(A),
is amended in the matter preceding paragraph (1)--
(i) in clause (xiv), by striking ``or'' at the
end;
(ii) in clause (xv), by adding ``or'' at the
end; and
(iii) by inserting after clause (xv) the
following:
``(xvi) individuals described in section
1902(ii),''.
(B) Section 1903(f)(4) of such Act (42 U.S.C.
1396b(f)(4)), as amended by section 2001(e)(2)(B), is
amended by inserting ``1902(a)(10)(A)(ii)(XXI),'' after
``1902(a)(10)(A)(ii)(XX),''.

(b) Presumptive Eligibility.--
(1) In general.--Title XIX of the Social Security Act (42
U.S.C. 1396 et seq.) is amended by inserting after section 1920B
the following:


``presumptive eligibility for family planning services


``Sec. 1920C.  <>  (a) State Option.--State
plan approved under section 1902 may provide for making medical
assistance available to an individual described in section 1902(ii)
(relating to individuals who meet certain income eligibility standard)
during a presumptive eligibility period. In the case of an individual
described in section 1902(ii), such medical assistance shall be limited
to family planning services and supplies described in 1905(a)(4)(C) and,
at the State's option, medical diagnosis and treatment services that are
provided

[[Page 295]]

in conjunction with a family planning service in a family planning
setting.

``(b) Definitions.--For purposes of this section:
``(1) Presumptive eligibility period.--The term `presumptive
eligibility period' means, with respect to an individual
described in subsection (a), the period that--
``(A) begins with the date on which a qualified
entity determines, on the basis of preliminary
information, that the individual is described in section
1902(ii); and
``(B) ends with (and includes) the earlier of--
``(i) the day on which a determination is made
with respect to the eligibility of such individual
for services under the State plan; or
``(ii) in the case of such an individual who
does not file an application by the last day of
the month following the month during which the
entity makes the determination referred to in
subparagraph (A), such last day.
``(2) Qualified entity.--
``(A) In general.--Subject to subparagraph (B), the
term `qualified entity' means any entity that--
``(i) is eligible for payments under a State
plan approved under this title; and
``(ii) is determined by the State agency to be
capable of making determinations of the type
described in paragraph (1)(A).
``(B) Rule of construction.--Nothing in this
paragraph shall be construed as preventing a State from
limiting the classes of entities that may become
qualified entities in order to prevent fraud and abuse.

``(c) Administration.--
``(1) In general.--The State agency shall provide qualified
entities with--
``(A) such forms as are necessary for an application
to be made by an individual described in subsection (a)
for medical assistance under the State plan; and
``(B) information on how to assist such individuals
in completing and filing such forms.
``(2) Notification requirements.--A qualified entity that
determines under subsection (b)(1)(A) that an individual
described in subsection (a) is presumptively eligible for
medical assistance under a State plan shall--
``(A) <>  notify the State agency
of the determination within 5 working days after the
date on which determination is made; and
``(B) inform such individual at the time the
determination is made that an application for medical
assistance is required to be made by not later than the
last day of the month following the month during which
the determination is made.
``(3) Application for medical assistance.--
<> In the case of an individual described in
subsection (a) who is determined by a qualified entity to be
presumptively eligible for medical assistance under a State
plan, the individual shall apply for medical assistance by not
later than the last day of the month following the month during
which the determination is made.

[[Page 296]]

``(d) Payment.--Notwithstanding any other provision of law, medical
assistance that--
``(1) is furnished to an individual described in subsection
(a)--
``(A) during a presumptive eligibility period; and
``(B) by a entity that is eligible for payments
under the State plan; and
``(2) is included in the care and services covered by the
State plan,

shall be treated as medical assistance provided by such plan for
purposes of clause (4) of the first sentence of section 1905(b).''.
(2) Conforming amendments.--
(A) Section 1902(a)(47) of the Social Security Act
(42 U.S.C. 1396a(a)(47)), as amended by section 2202(a),
is amended--
(i) in subparagraph (A), by inserting before
the semicolon at the end the following: ``and
provide for making medical assistance available to
individuals described in subsection (a) of section
1920C during a presumptive eligibility period in
accordance with such section''; and
(ii) in subparagraph (B), by striking ``or
1920B'' and inserting ``1920B, or 1920C''.
(B) Section 1903(u)(1)(D)(v) of such Act (42 U.S.C.
1396b(u)(1)(D)(v)), as amended by section 2202(b), is
amended by inserting ``or for medical assistance
provided to an individual described in subsection (a) of
section 1920C during a presumptive eligibility period
under such section,'' after ``1920B during a presumptive
eligibility period under such section,''.

(c) Clarification of Coverage of Family Planning Services and
Supplies.--Section 1937(b) of the Social Security Act (42 U.S.C. 1396u-
7(b)), as amended by section 2001(c), is amended by adding at the end
the following:
``(7) Coverage of family planning services and supplies.--
Notwithstanding the previous provisions of this section, a State
may not provide for medical assistance through enrollment of an
individual with benchmark coverage or benchmark-equivalent
coverage under this section unless such coverage includes for
any individual described in section 1905(a)(4)(C), medical
assistance for family planning services and supplies in
accordance with such section.''.

(d) Effective Date. <> --
The amendments made by this section take effect on the date of the
enactment of this Act and shall apply to items and services furnished on
or after such date.

SEC. 2304. CLARIFICATION OF DEFINITION OF MEDICAL ASSISTANCE.

Section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) is
amended by inserting ``or the care and services themselves, or both''
before ``(if provided in or after''.

[[Page 297]]

Subtitle E--New Options for States to Provide Long-Term Services and
Supports

SEC. 2401. COMMUNITY FIRST CHOICE OPTION.

Section 1915 of the Social Security Act (42 U.S.C. 1396n) is amended
by adding at the end the following:
``(k) State Plan Option To Provide Home and Community-based
Attendant Services and Supports.--
``(1) In general.-- <> Subject to the
succeeding provisions of this subsection, beginning October 1,
2010, a State may provide through a State plan amendment for the
provision of medical assistance for home and community-based
attendant services and supports for individuals who are eligible
for medical assistance under the State plan whose income does
not exceed 150 percent of the poverty line (as defined in
section 2110(c)(5)) or, if greater, the income level applicable
for an individual who has been determined to require an
institutional level of care to be eligible for nursing facility
services under the State plan and with respect to whom there has
been a determination that, but for the provision of such
services, the individuals would require the level of care
provided in a hospital, a nursing facility, an intermediate care
facility for the mentally retarded, or an institution for mental
diseases, the cost of which could be reimbursed under the State
plan, but only if the individual chooses to receive such home
and community-based attendant services and supports, and only if
the State meets the following requirements:
``(A) Availability.--The State shall make available
home and community-based attendant services and supports
to eligible individuals, as needed, to assist in
accomplishing activities of daily living, instrumental
activities of daily living, and health-related tasks
through hands-on assistance, supervision, or cueing--
``(i) <>  under a person-
centered plan of services and supports that is
based on an assessment of functional need and that
is agreed to in writing by the individual or, as
appropriate, the individual's representative;
``(ii) in a home or community setting, which
does not include a nursing facility, institution
for mental diseases, or an intermediate care
facility for the mentally retarded;
``(iii) under an agency-provider model or
other model (as defined in paragraph (6)(C )); and
``(iv) the furnishing of which--
``(I) is selected, managed, and
dismissed by the individual, or, as
appropriate, with assistance from the
individual's representative;
``(II) is controlled, to the maximum
extent possible, by the individual or
where appropriate, the individual's
representative, regardless of who may
act as the employer of record; and
``(III) provided by an individual
who is qualified to provide such
services, including family members (as
defined by the Secretary).
``(B) Included services and supports.--In addition
to assistance in accomplishing activities of daily
living,

[[Page 298]]

instrumental activities of daily living, and health
related tasks, the home and community-based attendant
services and supports made available include--
``(i) the acquisition, maintenance, and
enhancement of skills necessary for the individual
to accomplish activities of daily living,
instrumental activities of daily living, and
health related tasks;
``(ii) back-up systems or mechanisms (such as
the use of beepers or other electronic devices) to
ensure continuity of services and supports; and
``(iii) voluntary training on how to select,
manage, and dismiss attendants.
``(C) Excluded services and supports.--Subject to
subparagraph (D), the home and community-based attendant
services and supports made available do not include--
``(i) room and board costs for the individual;
``(ii) special education and related services
provided under the Individuals with Disabilities
Education Act and vocational rehabilitation
services provided under the Rehabilitation Act of
1973;
``(iii) assistive technology devices and
assistive technology services other than those
under (1)(B)(ii);
``(iv) medical supplies and equipment; or
``(v) home modifications.
``(D) Permissible services and supports.--The home
and community-based attendant services and supports may
include--
``(i) expenditures for transition costs such
as rent and utility deposits, first month's rent
and utilities, bedding, basic kitchen supplies,
and other necessities required for an individual
to make the transition from a nursing facility,
institution for mental diseases, or intermediate
care facility for the mentally retarded to a
community-based home setting where the individual
resides; and
``(ii) expenditures relating to a need
identified in an individual's person-centered plan
of services that increase independence or
substitute for human assistance, to the extent
that expenditures would otherwise be made for the
human assistance.
``(2) Increased federal financial participation.--For
purposes of payments to a State under section 1903(a)(1), with
respect to amounts expended by the State to provide medical
assistance under the State plan for home and community-based
attendant services and supports to eligible individuals in
accordance with this subsection during a fiscal year quarter
occurring during the period described in paragraph (1), the
Federal medical assistance percentage applicable to the State
(as determined under section 1905(b)) shall be increased by 6
percentage points.
``(3) State requirements.--In order for a State plan
amendment to be approved under this subsection, the State
shall--
``(A) <>  develop and
implement such amendment in collaboration with a
Development and Implementation Council established by
the State that includes a majority of members with
disabilities, elderly individuals, and their

[[Page 299]]

representatives and consults and collaborates with such
individuals;
``(B) provide consumer controlled home and
community-based attendant services and supports to
individuals on a statewide basis, in a manner that
provides such services and supports in the most
integrated setting appropriate to the individual's
needs, and without regard to the individual's age, type
or nature of disability, severity of disability, or the
form of home and community-based attendant services and
supports that the individual requires in order to lead
an independent life;
``(C) with respect to expenditures during the first
full fiscal year in which the State plan amendment is
implemented, maintain or exceed the level of State
expenditures for medical assistance that is provided
under section 1905(a), section 1915, section 1115, or
otherwise to individuals with disabilities or elderly
individuals attributable to the preceding fiscal year;
``(D) establish and maintain a comprehensive,
continuous quality assurance system with respect to
community- based attendant services and supports that--
``(i) includes standards for agency-based and
other delivery models with respect to training,
appeals for denials and reconsideration procedures
of an individual plan, and other factors as
determined by the Secretary;
``(ii) incorporates feedback from consumers
and their representatives, disability
organizations, providers, families of disabled or
elderly individuals, members of the community, and
others and maximizes consumer independence and
consumer control;
``(iii) monitors the health and well-being of
each individual who receives home and community-
based attendant services and supports, including a
process for the mandatory reporting,
investigation, and resolution of allegations of
neglect, abuse, or exploitation in connection with
the provision of such services and supports; and
``(iv) provides information about the
provisions of the quality assurance required under
clauses (i) through (iii) to each individual
receiving such services; and
``(E) <>  collect and
report information, as determined necessary by the
Secretary, for the purposes of approving the State plan
amendment, providing Federal oversight, and conducting
an evaluation under paragraph (5)(A), including data
regarding how the State provides home and community-
based attendant services and supports and other home and
community-based services, the cost of such services and
supports, and how the State provides individuals with
disabilities who otherwise qualify for institutional
care under the State plan or under a waiver the choice
to instead receive home and community-based services in
lieu of institutional care.
``(4) Compliance with certain laws.--A State shall ensure
that, regardless of whether the State uses an agency-provider
model or other models to provide home and community-based
attendant services and supports under a State plan

[[Page 300]]

amendment under this subsection, such services and supports are
provided in accordance with the requirements of the Fair Labor
Standards Act of 1938 and applicable Federal and State laws
regarding--
``(A) withholding and payment of Federal and State
income and payroll taxes;
``(B) the provision of unemployment and workers
compensation insurance;
``(C) maintenance of general liability insurance;
and
``(D) occupational health and safety.
``(5) Evaluation, data collection, and report to congress.--
``(A) Evaluation.--The Secretary shall conduct an
evaluation of the provision of home and community-based
attendant services and supports under this subsection in
order to determine the effectiveness of the provision of
such services and supports in allowing the individuals
receiving such services and supports to lead an
independent life to the maximum extent possible; the
impact on the physical and emotional health of the
individuals who receive such services; and an
comparative analysis of the costs of services provided
under the State plan amendment under this subsection and
those provided under institutional care in a nursing
facility, institution for mental diseases, or an
intermediate care facility for the mentally retarded.
``(B) Data collection.--The State shall provide the
Secretary with the following information regarding the
provision of home and community-based attendant services
and supports under this subsection for each fiscal year
for which such services and supports are provided:
``(i) The number of individuals who are
estimated to receive home and community-based
attendant services and supports under this
subsection during the fiscal year.
``(ii) The number of individuals that received
such services and supports during the preceding
fiscal year.
``(iii) The specific number of individuals
served by type of disability, age, gender,
education level, and employment status.
``(iv) Whether the specific individuals have
been previously served under any other home and
community based services program under the State
plan or under a waiver.
``(C) Reports.--Not later than--
``(i) December 31, 2013, the Secretary shall
submit to Congress and make available to the
public an interim report on the findings of the
evaluation under subparagraph (A); and
``(ii) December 31, 2015, the Secretary shall
submit to Congress and make available to the
public a final report on the findings of the
evaluation under subparagraph (A).
``(6) Definitions.--In this subsection:
``(A) Activities of daily living.--The term
`activities of daily living' includes tasks such as
eating, toileting, grooming, dressing, bathing, and
transferring.

[[Page 301]]

``(B) Consumer controlled.--The term `consumer
controlled' means a method of selecting and providing
services and supports that allow the individual, or
where appropriate, the individual's representative,
maximum control of the home and community-based
attendant services and supports, regardless of who acts
as the employer of record.
``(C) Delivery models.--
``(i) Agency-provider model.--The term
`agency-provider model' means, with respect to the
provision of home and community-based attendant
services and supports for an individual, subject
to paragraph (4), a method of providing consumer
controlled services and supports under which
entities contract for the provision of such
services and supports.
``(ii) Other models.--The term `other models'
means, subject to paragraph (4), methods, other
than an agency-provider model, for the provision
of consumer controlled services and supports. Such
models may include the provision of vouchers,
direct cash payments, or use of a fiscal agent to
assist in obtaining services.
``(D) Health-related tasks.--The term `health-
related tasks' means specific tasks related to the needs
of an individual, which can be delegated or assigned by
licensed health-care professionals under State law to be
performed by an attendant.
``(E) Individual's representative.--The term
`individual's representative' means a parent, family
member, guardian, advocate, or other authorized
representative of an individual
``(F) Instrumental activities of daily living.--The
term `instrumental activities of daily living' includes
(but is not limited to) meal planning and preparation,
managing finances, shopping for food, clothing, and
other essential items, performing essential household
chores, communicating by phone or other media, and
traveling around and participating in the community.''.

SEC. 2402. REMOVAL OF BARRIERS TO PROVIDING HOME AND COMMUNITY-BASED
SERVICES.

(a) <>  Oversight and Assessment of the
Administration of Home and Community-based Services.--
<> The Secretary of Health and Human Services shall
promulgate regulations to ensure that all States develop service systems
that are designed to--
(1) allocate resources for services in a manner that is
responsive to the changing needs and choices of beneficiaries
receiving non-institutionally-based long-term services and
supports (including such services and supports that are provided
under programs other the State Medicaid program), and that
provides strategies for beneficiaries receiving such services to
maximize their independence, including through the use of
client-employed providers;
(2) provide the support and coordination needed for a
beneficiary in need of such services (and their family
caregivers or representative, if applicable) to design an
individualized, self-directed, community-supported life; and

[[Page 302]]

(3) improve coordination among, and the regulation of, all
providers of such services under federally and State-funded
programs in order to--
(A) achieve a more consistent administration of
policies and procedures across programs in relation to
the provision of such services; and
(B) oversee and monitor all service system functions
to assure--
(i) coordination of, and effectiveness of,
eligibility determinations and individual
assessments;
(ii) development and service monitoring of a
complaint system, a management system, a system to
qualify and monitor providers, and systems for
role-setting and individual budget determinations;
and
(iii) an adequate number of qualified direct
care workers to provide self-directed personal
assistance services.

(b) Additional State Options.--Section 1915(i) of the Social
Security Act (42 U.S.C. 1396n(i)) is amended by adding at the end the
following new paragraphs:
``(6) State option to provide home and community-based
services to individuals eligible for services under a waiver.--
``(A) In general.--A State that provides home and
community-based services in accordance with this
subsection to individuals who satisfy the needs-based
criteria for the receipt of such services established
under paragraph (1)(A) may, in addition to continuing to
provide such services to such individuals, elect to
provide home and community-based services in accordance
with the requirements of this paragraph to individuals
who are eligible for home and community-based services
under a waiver approved for the State under subsection
(c), (d), or (e) or under section 1115 to provide such
services, but only for those individuals whose income
does not exceed 300 percent of the supplemental security
income benefit rate established by section 1611(b)(1).
``(B) Application of same requirements for
individuals satisfying needs-based criteria.--Subject to
subparagraph (C), a State shall provide home and
community-based services to individuals under this
paragraph in the same manner and subject to the same
requirements as apply under the other paragraphs of this
subsection to the provision of home and community-based
services to individuals who satisfy the needs-based
criteria established under paragraph (1)(A).
``(C) Authority to offer different type, amount,
duration, or scope of home and community-based
services.--A State may offer home and community-based
services to individuals under this paragraph that differ
in type, amount, duration, or scope from the home and
community-based services offered for individuals who
satisfy the needs-based criteria established under
paragraph (1)(A), so long as such services are within
the scope of services described in paragraph (4)(B) of
subsection (c) for which the Secretary has the authority
to approve a waiver and do not include room or board.

[[Page 303]]

``(7) State option to offer home and community-based
services to specific, targeted populations.--
``(A) In general.--A State may elect in a State plan
amendment under this subsection to target the provision
of home and community-based services under this
subsection to specific populations and to differ the
type, amount, duration, or scope of such services to
such specific populations.
``(B) 5-year term.--
``(i) In general.--An election by a State
under this paragraph shall be for a period of 5
years.
``(ii) Phase-in of services and eligibility
permitted during initial 5-year period.--A State
making an election under this paragraph may,
during the first 5-year period for which the
election is made, phase-in the enrollment of
eligible individuals, or the provision of services
to such individuals, or both, so long as all
eligible individuals in the State for such
services are enrolled, and all such services are
provided, before the end of the initial 5-year
period.
``(C) Renewal. <> --An election by a
State under this paragraph may be renewed for additional
5-year terms if the Secretary determines, prior to
beginning of each such renewal period, that the State
has--
``(i) adhered to the requirements of this
subsection and paragraph in providing services
under such an election; and
``(ii) met the State's objectives with respect
to quality improvement and beneficiary
outcomes.''.

(c) Removal of Limitation on Scope of Services.--Paragraph (1) of
section 1915(i) of the Social Security Act (42 U.S.C. 1396n(i)), as
amended by subsection (a), is amended by striking ``or such other
services requested by the State as the Secretary may approve''.
(d) Optional Eligibility Category To Provide Full Medicaid Benefits
to Individuals Receiving Home and Community-based Services Under a State
Plan Amendment.--
(1) In general.--Section 1902(a)(10)(A)(ii) of the Social
Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)), as amended by
section 2304(a)(1), is amended--
(A) in subclause (XX), by striking ``or'' at the
end;
(B) in subclause (XXI), by adding ``or'' at the end;
and
(C) by inserting after subclause (XXI), the
following new subclause:
``(XXII) who are eligible for home
and community-based services under
needs-based criteria established under
paragraph (1)(A) of section 1915(i), or
who are eligible for home and community-
based services under paragraph (6) of
such section, and who will receive home
and community-based services pursuant to
a State plan amendment under such
subsection;''.
(2) Conforming amendments.--
(A) Section 1903(f)(4) of the Social Security Act
(42 U.S.C. 1396b(f)(4)), as amended by section
2304(a)(4)(B), is amended in the matter preceding
subparagraph (A),

[[Page 304]]

by inserting ``1902(a)(10)(A)(ii)(XXII),'' after
``1902(a)(10)(A)(ii)(XXI),''.
(B) Section 1905(a) of the Social Security Act (42
U.S.C. 1396d(a)), as so amended, is amended in the
matter preceding paragraph (1)--
(i) in clause (xv), by striking ``or'' at the
end;
(ii) in clause (xvi), by adding ``or'' at the
end; and
(iii) by inserting after clause (xvi) the
following new clause:
``(xvii) individuals who are eligible for home and
community-based services under needs-based criteria established
under paragraph (1)(A) of section 1915(i), or who are eligible
for home and community-based services under paragraph (6) of
such section, and who will receive home and community-based
services pursuant to a State plan amendment under such
subsection,''.

(e) Elimination of Option To Limit Number of Eligible Individuals or
Length of Period for Grandfathered Individuals if Eligibility Criteria
Is Modified.--Paragraph (1) of section 1915(i) of such Act (42 U.S.C.
1396n(i)) is amended--
(1) by striking subparagraph (C) and inserting the
following:
``(C) Projection of number of individuals to be
provided home and community-based services.--The State
submits to the Secretary, in such form and manner, and
upon such frequency as the Secretary shall specify, the
projected number of individuals to be provided home and
community-based services.''; and
(2) in subclause (II) of subparagraph (D)(ii), by striking
``to be eligible for such services for a period of at least 12
months beginning on the date the individual first received
medical assistance for such services'' and inserting ``to
continue to be eligible for such services after the effective
date of the modification and until such time as the individual
no longer meets the standard for receipt of such services under
such pre-modified criteria''.

(f) Elimination of Option To Waive Statewideness; Addition of Option
To Waive Comparability.--Paragraph (3) of section 1915(i) of such Act
(42 U.S.C. 1396n(3)) is amended by striking ``1902(a)(1) (relating to
statewideness)'' and inserting ``1902(a)(10)(B) (relating to
comparability)''.
(g) <>  Effective Date.--The amendments
made by subsections (b) through (f) take effect on the first day of the
first fiscal year quarter that begins after the date of enactment of
this Act.

SEC. 2403. MONEY FOLLOWS THE PERSON REBALANCING DEMONSTRATION.

(a) Extension of Demonstration.--
(1) In general.--Section 6071(h) of the Deficit Reduction
Act of 2005 (42 U.S.C. 1396a note) is amended--
(A) in paragraph (1)(E), by striking ``fiscal year
2011'' and inserting ``each of fiscal years 2011 through
2016''; and
(B) in paragraph (2), by striking ``2011'' and
inserting ``2016''.

[[Page 305]]

(2) Evaluation.--Paragraphs (2) and (3) of section 6071(g)
of such Act is amended are each amended by striking ``2011'' and
inserting ``2016''.

(b) Reduction of Institutional Residency Period.--
(1) In general.--Section 6071(b)(2) of the Deficit Reduction
Act of 2005 (42 U.S.C. 1396a note) is amended--
(A) in subparagraph (A)(i), by striking ``, for a
period of not less than 6 months or for such longer
minimum period, not to exceed 2 years, as may be
specified by the State'' and inserting ``for a period of
not less than 90 consecutive days''; and
(B) by adding at the end the following:
``Any days that an individual resides in an institution on the
basis of having been admitted solely for purposes of receiving
short-term rehabilitative services for a period for which
payment for such services is limited under title XVIII shall not
be taken into account for purposes of determining the 90-day
period required under subparagraph (A)(i).''.
(2) <>  Effective date.--The
amendments made by this subsection take effect 30 days after the
date of enactment of this Act.

SEC. 2404. <>  PROTECTION FOR RECIPIENTS OF
HOME AND COMMUNITY-BASED SERVICES AGAINST SPOUSAL
IMPOVERISHMENT.

<> During the 5-year period that
begins on January 1, 2014, section 1924(h)(1)(A) of the Social Security
Act (42 U.S.C. 1396r-5(h)(1)(A)) shall be applied as though ``is
eligible for medical assistance for home and community-based services
provided under subsection (c), (d), or (i) of section 1915, under a
waiver approved under section 1115, or who is eligible for such medical
assistance by reason of being determined eligible under section
1902(a)(10)(C) or by reason of section 1902(f) or otherwise on the basis
of a reduction of income based on costs incurred for medical or other
remedial care, or who is eligible for medical assistance for home and
community-based attendant services and supports under section 1915(k)''
were substituted in such section for ``(at the option of the State) is
described in section 1902(a)(10)(A)(ii)(VI)''.

SEC. 2405. FUNDING TO EXPAND STATE AGING AND DISABILITY RESOURCE
CENTERS.

Out of any funds in the Treasury not otherwise appropriated, there
is appropriated to the Secretary of Health and Human Services, acting
through the Assistant Secretary for Aging, $10,000,000 for each of
fiscal years 2010 through 2014, to carry out subsections (a)(20)(B)(iii)
and (b)(8) of section 202 of the Older Americans Act of 1965 (42 U.S.C.
3012).

SEC. 2406. SENSE OF THE SENATE REGARDING LONG-TERM CARE.

(a) Findings.--The Senate makes the following findings:
(1) Nearly 2 decades have passed since Congress seriously
considered long-term care reform. The United States Bipartisan
Commission on Comprehensive Health Care, also know as the
``Pepper Commission'', released its ``Call for Action''
blueprint for health reform in September 1990. In the 20 years
since those recommendations were made, Congress has never acted
on the report.
(2) In 1999, under the United States Supreme Court's
decision in Olmstead v. L.C., 527 U.S. 581 (1999), individuals

[[Page 306]]

with disabilities have the right to choose to receive their
long-term services and supports in the community, rather than in
an institutional setting.
(3) Despite the Pepper Commission and Olmstead decision, the
long-term care provided to our Nation's elderly and disabled has
not improved. In fact, for many, it has gotten far worse.
(4) In 2007, 69 percent of Medicaid long-term care spending
for elderly individuals and adults with physical disabilities
paid for institutional services. Only 6 states spent 50 percent
or more of their Medicaid long-term care dollars on home and
community-based services for elderly individuals and adults with
physical disabilities while \1/2\ of the States spent less than
25 percent. This disparity continues even though, on average, it
is estimated that Medicaid dollars can support nearly 3 elderly
individuals and adults with physical disabilities in home and
community-based services for every individual in a nursing home.
Although every State has chosen to provide certain services
under home and community-based waivers, these services are
unevenly available within and across States, and reach a small
percentage of eligible individuals.

(b) Sense of the Senate.--It is the sense of the Senate that--
(1) during the 111th session of Congress, Congress should
address long-term services and supports in a comprehensive way
that guarantees elderly and disabled individuals the care they
need; and
(2) long term services and supports should be made available
in the community in addition to in institutions.

Subtitle F--Medicaid Prescription Drug Coverage

SEC. 2501. PRESCRIPTION DRUG REBATES.

(a) Increase in Minimum Rebate Percentage for Single Source Drugs
and Innovator Multiple Source Drugs.--
(1) In general.--Section 1927(c)(1)(B) of the Social
Security Act (42 U.S.C. 1396r-8(c)(1)(B)) is amended--
(A) in clause (i)--
(i) in subclause (IV), by striking ``and'' at
the end;
(ii) in subclause (V)--
(I) by inserting ``and before
January 1, 2010'' after ``December 31,
1995,''; and
(II) by striking the period at the
end and inserting ``; and''; and
(iii) by adding at the end the following new
subclause:
``(VI) except as provided in clause
(iii), after December 31, 2009, 23.1
percent.''; and
(B) by adding at the end the following new clause:
``(iii) Minimum rebate percentage for certain
drugs.--
``(I) In general.--In the case of a
single source drug or an innovator
multiple source drug described in
subclause (II), the minimum rebate
percentage for rebate periods specified
in clause (i)(VI) is 17.1 percent.

[[Page 307]]

``(II) Drug described.--For purposes
of subclause (I), a single source drug
or an innovator multiple source drug
described in this subclause is any of
the following drugs:
``(aa) A clotting factor for
which a separate furnishing
payment is made under section
1842(o)(5) and which is included
on a list of such factors
specified and updated regularly
by the Secretary.
``(bb) A drug approved by
the Food and Drug Administration
exclusively for pediatric
indications.''.
(2) Recapture of total savings due to increase.--Section
1927(b)(1) of such Act (42 U.S.C. 1396r-8(b)(1)) is amended by
adding at the end the following new subparagraph:
``(C) Special rule for increased minimum rebate
percentage.--
``(i) In general. <> --In
addition to the amounts applied as a reduction
under subparagraph (B), for rebate periods
beginning on or after January 1, 2010, during a
fiscal year, the Secretary shall reduce payments
to a State under section 1903(a) in the manner
specified in clause (ii), in an amount equal to
the product of--
``(I) 100 percent minus the Federal
medical assistance percentage applicable
to the rebate period for the State; and
``(II) the amounts received by the
State under such subparagraph that are
attributable (as estimated by the
Secretary based on utilization and other
data) to the increase in the minimum
rebate percentage effected by the
amendments made by subsections (a)(1),
(b), and (d) of section 2501 of the
Patient Protection and Affordable Care
Act, taking into account the additional
drugs included under the amendments made
by subsection (c) of section 2501 of
such Act.
<> The Secretary shall
adjust such payment reduction for a calendar
quarter to the extent the Secretary determines,
based upon subsequent utilization and other data,
that the reduction for such quarter was greater or
less than the amount of payment reduction that
should have been made.
``(ii) Manner of payment reduction.--The
amount of the payment reduction under clause (i)
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 Medicaid spending under section
1903(d)(2). Such a disallowance is not subject to
a reconsideration under section 1116(d).''.

(b) Increase in Rebate for Other Drugs.--Section 1927(c)(3)(B) of
such Act (42 U.S.C. 1396r-8(c)(3)(B)) is amended--
(1) in clause (i), by striking ``and'' at the end;
(2) in clause (ii)--
(A) by inserting ``and before January 1, 2010,''
after ``December 31, 1993,''; and

[[Page 308]]

(B) by striking the period and inserting ``; and'';
and
(3) by adding at the end the following new clause:
``(iii) after December 31, 2009, is 13
percent.''.

(c) Extension of Prescription Drug Discounts to Enrollees of
Medicaid Managed Care Organizations.--
(1) In general.--Section 1903(m)(2)(A) of such Act (42
U.S.C. 1396b(m)(2)(A)) is amended--
(A) in clause (xi), by striking ``and'' at the end;
(B) in clause (xii), by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following:

``(xiii) <>  such contract provides that (I) covered
outpatient drugs dispensed to individuals eligible
for medical assistance who are enrolled with the
entity shall be subject to the same rebate
required by the agreement entered into under
section 1927 as the State is subject to and that
the State shall collect such rebates from
manufacturers, (II) capitation rates paid to the
entity shall be based on actual cost experience
related to rebates and subject to the Federal
regulations requiring actuarially sound rates, and
(III) the entity shall report to the State, on
such timely and periodic basis as specified by the
Secretary in order to include in the information
submitted by the State to a manufacturer and the
Secretary under section 1927(b)(2)(A), information
on the total number of units of each dosage form
and strength and package size by National Drug
Code of each covered outpatient drug dispensed to
individuals eligible for medical assistance who
are enrolled with the entity and for which the
entity is responsible for coverage of such drug
under this subsection (other than covered
outpatient drugs that under subsection (j)(1) of
section 1927 are not subject to the requirements
of that section) and such other data as the
Secretary determines necessary to carry out this
subsection.''.
(2) Conforming amendments.--Section 1927 (42 U.S.C. 1396r-8)
is amended--
(A) in subsection (b)--
(i) in paragraph (1)(A), in the first
sentence, by inserting ``, including such drugs
dispensed to individuals enrolled with a medicaid
managed care organization if the organization is
responsible for coverage of such drugs'' before
the period; and
(ii) in paragraph (2)(A), by inserting
``including such information reported by each
medicaid managed care organization,'' after ``for
which payment was made under the plan during the
period,''; and
(B) in subsection (j), by striking paragraph (1) and
inserting the following:
``(1) Covered outpatient drugs are not subject to the
requirements of this section if such drugs are--
``(A) dispensed by health maintenance organizations,
including Medicaid managed care organizations that
contract under section 1903(m); and
``(B) subject to discounts under section 340B of the
Public Health Service Act.''.

[[Page 309]]

(d) Additional Rebate for New Formulations of Existing Drugs.--
(1) In general.--Section 1927(c)(2) of the Social Security
Act (42 U.S.C. 1396r-8(c)(2)) is amended by adding at the end
the following new subparagraph:
``(C) Treatment of new formulations.--
``(i) In general.--Except as provided in
clause (ii), in the case of a drug that is a new
formulation, such as an extended-release
formulation, of a single source drug or an
innovator multiple source drug, the rebate
obligation with respect to the drug under this
section shall be the amount computed under this
section for the new formulation of the drug or, if
greater, the product of--
``(I) the average manufacturer price
for each dosage form and strength of the
new formulation of the single source
drug or innovator multiple source drug;
``(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 new
formulation paid for under the State
plan in the rebate period (as reported
by the State).
``(ii) No application to new formulations of
orphan drugs.--Clause (i) shall not apply to a new
formulation of a covered outpatient drug that is
or has been designated under section 526 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
360bb) for a rare disease or condition, without
regard to whether the period of market exclusivity
for the drug under section 527 of such Act has
expired or the specific indication for use of the
drug.''.
(2) <>  Effective date.--The
amendment made by paragraph (1) shall apply to drugs that are
paid for by a State after December 31, 2009.

(e) Maximum Rebate Amount.--Section 1927(c)(2) of such Act (42
U.S.C. 1396r-8(c)(2)), as amended by subsection (d), is amended by
adding at the end the following new subparagraph:
``(D) Maximum rebate amount.--In no case shall the
sum of the amounts applied under paragraph (1)(A)(ii)
and this paragraph with respect to each dosage form and
strength of a single source drug or an innovator
multiple source drug for a rebate period beginning after
December 31, 2009, exceed 100 percent of the average
manufacturer price of the drug.''.

(f) Conforming Amendments.--
(1) In general.--Section 340B of the Public Health Service
Act (42 U.S.C. 256b) is amended--
(A) in subsection (a)(2)(B)(i), by striking
``1927(c)(4)'' and inserting ``1927(c)(3)''; and
(B) by striking subsection (c); and
(C) redesignating subsection (d) as subsection (c).

[[Page 310]]

(2) <>  Effective date.--The
amendments made by this subsection take effect on January 1,
2010.

SEC. 2502. ELIMINATION OF EXCLUSION OF COVERAGE OF CERTAIN DRUGS.

(a) In General.--Section 1927(d) of the Social Security Act (42
U.S.C. 1397r-8(d)) is amended--
(1) in paragraph (2)--
(A) by striking subparagraphs (E), (I), and (J),
respectively; and
(B) by redesignating subparagraphs (F), (G), (H),
and (K) as subparagraphs (E), (F), (G), and (H),
respectively; and
(2) by adding at the end the following new paragraph:
``(7) Non-excludable drugs.--The following drugs or classes
of drugs, or their medical uses, shall not be excluded from
coverage:
``(A) Agents when used to promote smoking cessation,
including agents approved by the Food and Drug
Administration under the over-the-counter monograph
process for purposes of promoting, and when used to
promote, tobacco cessation.
``(B) Barbiturates.
``(C) Benzodiazepines.''.

(b) <>  Effective Date.--The amendments
made by this section shall apply to services furnished on or after
January 1, 2014.

SEC. 2503. PROVIDING ADEQUATE PHARMACY REIMBURSEMENT.

(a) Pharmacy Reimbursement Limits.--
(1) In general.--Section 1927(e) of the Social Security Act
(42 U.S.C. 1396r-8(e)) is amended--
(A) in paragraph (4), by striking ``(or, effective
January 1, 2007, two or more)''; and
(B) by striking paragraph (5) and inserting the
following:
``(5) Use of amp in upper payment limits.--The Secretary
shall calculate the Federal upper reimbursement limit
established under paragraph (4) as no less than 175 percent of
the weighted average (determined on the basis of utilization) of
the most recently reported monthly average manufacturer prices
for pharmaceutically and therapeutically equivalent multiple
source drug products that are available for purchase by retail
community pharmacies on a nationwide basis. The Secretary shall
implement a smoothing process for average manufacturer prices.
Such process shall be similar to the smoothing process used in
determining the average sales price of a drug or biological
under section 1847A.''.
(2) Definition of amp.--Section 1927(k)(1) of such Act (42
U.S.C. 1396r-8(k)(1)) is amended--
(A) in subparagraph (A), by striking ``by'' and all
that follows through the period and inserting ``by--
``(i) wholesalers for drugs distributed to
retail community pharmacies; and
``(ii) retail community pharmacies that
purchase drugs directly from the manufacturer.'';
and
(B) by striking subparagraph (B) and inserting the
following:

[[Page 311]]

``(B) Exclusion of customary prompt pay discounts
and other payments.--
``(i) In general.--The average manufacturer
price for a covered outpatient drug shall
exclude--
``(I) customary prompt pay discounts
extended to wholesalers;
``(II) bona fide service fees paid
by manufacturers to wholesalers or
retail community pharmacies, including
(but not limited to) distribution
service fees, inventory management fees,
product stocking allowances, and fees
associated with administrative services
agreements and patient care programs
(such as medication compliance programs
and patient education programs);
``(III) reimbursement by
manufacturers for recalled, damaged,
expired, or otherwise unsalable returned
goods, including (but not limited to)
reimbursement for the cost of the goods
and any reimbursement of costs
associated with return goods handling
and processing, reverse logistics, and
drug destruction; and
``(IV) payments received from, and
rebates or discounts provided to,
pharmacy benefit managers, managed care
organizations, health maintenance
organizations, insurers, hospitals,
clinics, mail order pharmacies, long
term care providers, manufacturers, or
any other entity that does not conduct
business as a wholesaler or a retail
community pharmacy.
``(ii) Inclusion of other discounts and
payments.--Notwithstanding clause (i), any other
discounts, rebates, payments, or other financial
transactions that are received by, paid by, or
passed through to, retail community pharmacies
shall be included in the average manufacturer
price for a covered outpatient drug.''; and
(C) in subparagraph (C), by striking ``the retail
pharmacy class of trade'' and inserting ``retail
community pharmacies''.
(3) Definition of multiple source drug.--Section 1927(k)(7)
of such Act (42 U.S.C. 1396r-8(k)(7)) is amended--
(A) in subparagraph (A)(i)(III), by striking ``the
State'' and inserting ``the United States''; and
(B) in subparagraph (C)--
(i) in clause (i), by inserting ``and'' after
the semicolon;
(ii) in clause (ii), by striking ``; and'' and
inserting a period; and
(iii) by striking clause (iii).
(4) Definitions of retail community pharmacy; wholesaler.--
Section 1927(k) of such Act (42 U.S.C. 1396r-8(k)) is amended by
adding at the end the following new paragraphs:
``(10) Retail community pharmacy.--The term `retail
community pharmacy' means an independent pharmacy, a chain
pharmacy, a supermarket pharmacy, or a mass merchandiser
pharmacy that is licensed as a pharmacy by the State and that
dispenses medications to the general public at retail

[[Page 312]]

prices. Such term does not include a pharmacy that dispenses
prescription medications to patients primarily through the mail,
nursing home pharmacies, long-term care facility pharmacies,
hospital pharmacies, clinics, charitable or not-for-profit
pharmacies, government pharmacies, or pharmacy benefit managers.
``(11) Wholesaler.--The term `wholesaler' means a drug
wholesaler that is engaged in wholesale distribution of
prescription drugs to retail community pharmacies, including
(but not limited to) manufacturers, repackers, distributors,
own-label distributors, private-label distributors, jobbers,
brokers, warehouses (including manufacturer's and distributor's
warehouses, chain drug warehouses, and wholesale drug
warehouses) independent wholesale drug traders, and retail
community pharmacies that conduct wholesale distributions.''.

(b) Disclosure of Price Information to the Public.--Section
1927(b)(3) of such Act (42 U.S.C. 1396r-8(b)(3)) is amended--
(1) in subparagraph (A)--
(A) in the first sentence, by inserting after clause
(iii) the following:
``(iv) not later than 30 days after the last
day of each month of a rebate period under the
agreement, on the manufacturer's total number of
units that are used to calculate the monthly
average manufacturer price for each covered
outpatient drug;''; and
(B) in the second sentence, by inserting ``(relating
to the weighted average of the most recently reported
monthly average manufacturer prices)'' after ``(D)(v)'';
and
(2) in subparagraph (D)(v), by striking ``average
manufacturer prices'' and inserting ``the weighted average of
the most recently reported monthly average manufacturer prices
and the average retail survey price determined for each multiple
source drug in accordance with subsection (f)''.

(c) Clarification of Application of Survey of Retail Prices.--
Section 1927(f)(1) of such Act (42 U.S.C. 1396r-8(b)(1)) is amended--
(1) in subparagraph (A)(i), by inserting ``with respect to a
retail community pharmacy,'' before ``the determination''; and
(2) in subparagraph (C)(ii), by striking ``retail
pharmacies'' and inserting ``retail community pharmacies''.

(d) <>  Effective Date.--The amendments
made by this section shall take effect on the first day of the first
calendar year quarter that begins at least 180 days after the date of
enactment of this Act, without regard to whether or not final
regulations to carry out such amendments have been promulgated by such
date.

Subtitle G--Medicaid Disproportionate Share Hospital (DSH) Payments

SEC. 2551. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS.

(a) In General.--Section 1923(f) of the Social Security Act (42
U.S.C. 1396r-4(f)) is amended--
(1) in paragraph (1), by striking ``and (3)'' and inserting
``, (3), and (7)'';
(2) in paragraph (3)(A), by striking ``paragraph (6)'' and
inserting ``paragraphs (6) and (7)'';

[[Page 313]]

(3) by redesignating paragraph (7) as paragraph (8); and
(4) by inserting after paragraph (6) the following new
paragraph:
``(7) Reduction of state dsh allotments once reduction in
uninsured threshold reached.--
``(A) In general.--Subject to subparagraph (E), the
DSH allotment for a State for fiscal years beginning
with the fiscal year described in subparagraph (C) (with
respect to the State), is equal to--
``(i) in the case of the first fiscal year
described in subparagraph (C) with respect to a
State, the DSH allotment that would be determined
under this subsection for the State for the fiscal
year without application of this paragraph (but
after the application of subparagraph (D)),
reduced by the applicable percentage determined
for the State for the fiscal year under
subparagraph (B)(i); and
``(ii) in the case of any subsequent fiscal
year with respect to the State, the DSH allotment
determined under this paragraph for the State for
the preceding fiscal year, reduced by the
applicable percentage determined for the State for
the fiscal year under subparagraph (B)(ii).
``(B) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage for a State
for a fiscal year is the following:
``(i) Uninsured reduction threshold fiscal
year.--In the case of the first fiscal year
described in subparagraph (C) with respect to the
State--
``(I) if the State is a low DSH
State described in paragraph (5)(B), the
applicable percentage is equal to 25
percent; and
``(II) if the State is any other
State, the applicable percentage is 50
percent.
``(ii) Subsequent fiscal years in which the
percentage of uninsured
decreases <> .--In the case
of any fiscal year after the first fiscal year
described in subparagraph (C) with respect to a
State, if the Secretary determines on the basis of
the most recent American Community Survey of the
Bureau of the Census, that the percentage of
uncovered individuals residing in the State is
less than the percentage of such individuals
determined for the State for the preceding fiscal
year--
``(I) if the State is a low DSH
State described in paragraph (5)(B), the
applicable percentage is equal to the
product of the percentage reduction in
uncovered individuals for the fiscal
year from the preceding fiscal year and
25 percent; and
``(II) if the State is any other
State, the applicable percentage is
equal to the product of the percentage
reduction in uncovered individuals for
the fiscal year from the preceding
fiscal year and 50 percent.
``(C) Fiscal year
described. <> --For purposes of
subparagraph (A), the fiscal year described in this
subparagraph with respect to a State is the first fiscal
year that

[[Page 314]]

occurs after fiscal year 2012 for which the Secretary
determines, on the basis of the most recent American
Community Survey of the Bureau of the Census, that the
percentage of uncovered individuals residing in the
State is at least 45 percent less than the percentage of
such individuals determined for the State for fiscal
year 2009.
``(D) Exclusion of portions diverted for coverage
expansions.--For purposes of applying the applicable
percentage reduction under subparagraph (A) to the DSH
allotment for a State for a fiscal year, the DSH
allotment for a State that would be determined under
this subsection for the State for the fiscal year
without the application of this paragraph (and prior to
any such reduction) shall not include any portion of the
allotment for which the Secretary has approved the
State's diversion to the costs of providing medical
assistance or other health benefits coverage under a
waiver that is in effect on July 2009.
``(E) Minimum allotment.--In no event shall the DSH
allotment determined for a State in accordance with this
paragraph for fiscal year 2013 or any succeeding fiscal
year be less than the amount equal to 35 percent of the
DSH allotment determined for the State for fiscal year
2012 under this subsection (and after the application of
this paragraph, if applicable), increased by the
percentage change in the consumer price index for all
urban consumers (all items, U.S. city average) for each
previous fiscal year occurring before the fiscal year.
``(F) Uncovered
individuals. <> --In this paragraph,
the term `uncovered individuals' means individuals with
no health insurance coverage at any time during a year
(as determined by the Secretary based on the most recent
data available).''.

(b) <>  Effective Date.--The amendments
made by subsection (a) take effect on October 1, 2011.

Subtitle H--Improved Coordination for Dual Eligible Beneficiaries

SEC. 2601. 5-YEAR PERIOD FOR DEMONSTRATION PROJECTS.

(a) In General.--Section 1915(h) of the Social Security Act (42
U.S.C. 1396n(h)) is amended--
(1) by inserting ``(1)'' after ``(h)'';
(2) by inserting ``, or a waiver described in paragraph
(2)'' after ``(e)''; and
(3) by adding at the end the following new paragraph:

``(2)(A) <>  Notwithstanding subsections
(c)(3) and (d) (3), any waiver under subsection (b), (c), or (d), or a
waiver under section 1115, that provides medical assistance for dual
eligible individuals (including any such waivers under which non dual
eligible individuals may be enrolled in addition to dual eligible
individuals) may be conducted for a period of 5 years and, upon the
request of the State, may be extended for additional 5-year periods
unless the Secretary determines that for the previous waiver period the
conditions for the waiver have not been met or it would no longer be
cost-effective and efficient, or consistent with the purposes of this
title, to extend the waiver.

[[Page 315]]

``(B) <>  In this paragraph, the term `dual
eligible individual' means an individual who is entitled to, or enrolled
for, benefits under part A of title XVIII, or enrolled for benefits
under part B of title XVIII, and is eligible for medical assistance
under the State plan under this title or under a waiver of such plan.''.

(b) Conforming Amendments.--
(1) Section 1915 of such Act (42 U.S.C. 1396n) is amended--
(A) in subsection (b), by adding at the end the
following new sentence: ``Subsection (h)(2) shall apply
to a waiver under this subsection.'';
(B) in subsection (c)(3), in the second sentence, by
inserting ``(other than a waiver described in subsection
(h)(2))'' after ``A waiver under this subsection'';
(C) in subsection (d)(3), in the second sentence, by
inserting ``(other than a waiver described in subsection
(h)(2))'' after ``A waiver under this subsection''.
(2) Section 1115 of such Act (42 U.S.C. 1315) is amended--
(A) in subsection (e)(2), by inserting ``(5 years,
in the case of a waiver described in section
1915(h)(2))'' after ``3 years''; and
(B) in subsection (f)(6), by inserting ``(5 years,
in the case of a waiver described in section
1915(h)(2))'' after ``3 years''.

SEC. 2602. <>  PROVIDING FEDERAL COVERAGE AND
PAYMENT COORDINATION FOR DUAL ELIGIBLE BENEFICIARIES.

(a) Establishment of Federal Coordinated Health Care Office.--
(1) In general.-- <> Not later than March
1, 2010, the Secretary of Health and Human Services (in this
section referred to as the ``Secretary'') shall establish a
Federal Coordinated Health Care Office.
(2) Establishment and reporting to cms administrator.--The
Federal Coordinated Health Care Office--
(A) shall be established within the Centers for
Medicare & Medicaid Services; and
(B) <>  have as the Office a
Director who shall be appointed by, and be in direct
line of authority to, the Administrator of the Centers
for Medicare & Medicaid Services.

(b) Purpose.--The purpose of the Federal Coordinated Health Care
Office is to bring together officers and employees of the Medicare and
Medicaid programs at the Centers for Medicare & Medicaid Services in
order to--
(1) more effectively integrate benefits under the Medicare
program under title XVIII of the Social Security Act and the
Medicaid program under title XIX of such Act; and
(2) improve the coordination between the Federal Government
and States for individuals eligible for benefits under both such
programs in order to ensure that such individuals get full
access to the items and services to which they are entitled
under titles XVIII and XIX of the Social Security Act.

(c) Goals.--The goals of the Federal Coordinated Health Care Office
are as follows:
(1) Providing dual eligible individuals full access to the
benefits to which such individuals are entitled under the
Medicare and Medicaid programs.

[[Page 316]]

(2) Simplifying the processes for dual eligible individuals
to access the items and services they are entitled to under the
Medicare and Medicaid programs.
(3) Improving the quality of health care and long-term
services for dual eligible individuals.
(4) Increasing dual eligible individuals' understanding of
and satisfaction with coverage under the Medicare and Medicaid
programs.
(5) Eliminating regulatory conflicts between rules under the
Medicare and Medicaid programs.
(6) Improving care continuity and ensuring safe and
effective care transitions for dual eligible individuals.
(7) Eliminating cost-shifting between the Medicare and
Medicaid program and among related health care providers.
(8) Improving the quality of performance of providers of
services and suppliers under the Medicare and Medicaid programs.

(d) Specific Responsibilities.--The specific responsibilities of the
Federal Coordinated Health Care Office are as follows:
(1) Providing States, specialized MA plans for special needs
individuals (as defined in section 1859(b)(6) of the Social
Security Act (42 U.S.C. 1395w-28(b)(6))), physicians and other
relevant entities or individuals with the education and tools
necessary for developing programs that align benefits under the
Medicare and Medicaid programs for dual eligible individuals.
(2) Supporting State efforts to coordinate and align acute
care and long-term care services for dual eligible individuals
with other items and services furnished under the Medicare
program.
(3) Providing support for coordination of contracting and
oversight by States and the Centers for Medicare & Medicaid
Services with respect to the integration of the Medicare and
Medicaid programs in a manner that is supportive of the goals
described in paragraph (3).
(4) To consult and coordinate with the Medicare Payment
Advisory Commission established under section 1805 of the Social
Security Act (42 U.S.C. 1395b-6) and the Medicaid and CHIP
Payment and Access Commission established under section 1900 of
such Act (42 U.S.C. 1396) with respect to policies relating to
the enrollment in, and provision of, benefits to dual eligible
individuals under the Medicare program under title XVIII of the
Social Security Act and the Medicaid program under title XIX of
such Act.
(5) To study the provision of drug coverage for new full-
benefit dual eligible individuals (as defined in section
1935(c)(6) of the Social Security Act (42 U.S.C. 1396u-5(c)(6)),
as well as to monitor and report annual total expenditures,
health outcomes, and access to benefits for all dual eligible
individuals.

(e) Report.--The Secretary shall, as part of the budget transmitted
under section 1105(a) of title 31, United States Code, submit to
Congress an annual report containing recommendations for legislation
that would improve care coordination and benefits for dual eligible
individuals.
(f) Dual Eligible Defined.--In this section, the term ``dual
eligible individual'' means an individual who is entitled to, or
enrolled for, benefits under part A of title XVIII of the Social
Security Act, or enrolled for benefits under part B of title XVIII

[[Page 317]]

of such Act, and is eligible for medical assistance under a State plan
under title XIX of such Act or under a waiver of such plan.

Subtitle I--Improving the Quality of Medicaid for Patients and Providers

SEC. 2701. ADULT HEALTH QUALITY MEASURES.

Title XI of the Social Security Act (42 U.S.C. 1301 et seq.), as
amended by section 401 of the Children's Health Insurance Program
Reauthorization Act of 2009 (Public Law 111-3), is amended by inserting
after section 1139A the following new section:

``SEC. 1139B. <>  ADULT HEALTH QUALITY MEASURES.

``(a) Development of Core Set of Health Care Quality Measures for
Adults Eligible for Benefits Under Medicaid.--
The <> Secretary shall identify and publish a
recommended core set of adult health quality measures for Medicaid
eligible adults in the same manner as the Secretary identifies and
publishes a core set of child health quality measures under section
1139A, including with respect to identifying and publishing existing
adult health quality measures that are in use under public and privately
sponsored health care coverage arrangements, or that are part of
reporting systems that measure both the presence and duration of health
insurance coverage over time, that may be applicable to Medicaid
eligible adults.

``(b) Deadlines.--
``(1) Recommended measures.-- <> Not
later than January 1, 2011, the Secretary shall identify and
publish for comment a recommended core set of adult health
quality measures for Medicaid eligible adults.
``(2) Dissemination.-- <> Not later than
January 1, 2012, the Secretary shall publish an initial core set
of adult health quality measures that are applicable to Medicaid
eligible adults.
``(3) Standardized reporting.--Not later than January 1,
2013, the Secretary, in consultation with States, shall develop
a standardized format for reporting information based on the
initial core set of adult health quality measures and create
procedures to encourage States to use such measures to
voluntarily report information regarding the quality of health
care for Medicaid eligible adults.
``(4) Reports to congress.--Not later than January 1, 2014,
and every 3 years thereafter, the Secretary shall include in the
report to Congress required under section 1139A(a)(6)
information similar to the information required under that
section with respect to the measures established under this
section.
``(5) Establishment of medicaid quality measurement
program.--
``(A) In general.--Not later than 12 months after
the release of the recommended core set of adult health
quality measures under paragraph (1)), the Secretary
shall establish a Medicaid Quality Measurement Program
in the same manner as the Secretary establishes the
pediatric quality measures program under section
1139A(b). The aggregate amount awarded by the Secretary
for grants and contracts for the development, testing,
and validation of emerging

[[Page 318]]

and innovative evidence-based measures under such
program shall equal the aggregate amount awarded by the
Secretary for grants under section 1139A(b)(4)(A)
``(B) Revising, strengthening, and improving initial
core measures. <> --Beginning not
later than 24 months after the establishment of the
Medicaid Quality Measurement Program, and annually
thereafter, the Secretary shall publish recommended
changes to the initial core set of adult health quality
measures that shall reflect the results of the testing,
validation, and consensus process for the development of
adult health quality measures.

``(c) Construction.--Nothing in this section shall be construed as
supporting the restriction of coverage, under title XIX or XXI or
otherwise, to only those services that are evidence-based, or in anyway
limiting available services.
``(d) Annual State Reports Regarding State-Specific Quality of Care
Measures Applied Under Medicaid.--
``(1) Annual state reports.--Each State with a State plan or
waiver approved under title XIX shall annually report
(separately or as part of the annual report required under
section 1139A(c)), to the Secretary on the--
``(A) State-specific adult health quality measures
applied by the State under the such plan, including
measures described in subsection (a)(5); and
``(B) State-specific information on the quality of
health care furnished to Medicaid eligible adults under
such plan, including information collected through
external quality reviews of managed care organizations
under section 1932 and benchmark plans under section
1937.
``(2) Publication.-- <> Not later than September 30, 2014, and annually
thereafter, the Secretary shall collect, analyze, and make
publicly available the information reported by States under
paragraph (1).

``(e) Appropriation.--Out of any funds in the Treasury not otherwise
appropriated, there is appropriated for each of fiscal years 2010
through 2014, $60,000,000 for the purpose of carrying out this section.
Funds appropriated under this subsection shall remain available until
expended.''.

SEC. 2702. <>  PAYMENT ADJUSTMENT FOR HEALTH
CARE-ACQUIRED CONDITIONS.

(a) In General. <> --The Secretary of Health and Human Services (in this subsection
referred to as the ``Secretary'') shall identify current State practices
that prohibit payment for health care-acquired conditions and shall
incorporate the practices identified, or elements of such practices,
which the Secretary determines appropriate for application to the
Medicaid program in regulations. Such regulations shall be effective as
of July 1, 2011, and shall prohibit payments to States under section
1903 of the Social Security Act for any amounts expended for providing
medical assistance for health care-acquired conditions specified in the
regulations. The regulations shall ensure that the prohibition on
payment for health care-acquired conditions shall not result in a loss
of access to care or services for Medicaid beneficiaries.

Effective
date.

(b) Health Care-Acquired Condition. <> --In this
section. the term ``health care-acquired condition'' means a medical
condition for which an individual was diagnosed that could be identified

[[Page 319]]

by a secondary diagnostic code described in section 1886(d)(4)(D)(iv) of
the Social Security Act (42 U.S.C. 1395ww(d)(4)(D)(iv)).

(c) <> Medicare Provisions.--In carrying out
this section, the Secretary shall apply to State plans (or waivers)
under title XIX of the Social Security Act the regulations promulgated
pursuant to section 1886(d)(4)(D) of such Act (42 U.S.C.
1395ww(d)(4)(D)) relating to the prohibition of payments based on the
presence of a secondary diagnosis code specified by the Secretary in
such regulations, as appropriate for the Medicaid program. The Secretary
may exclude certain conditions identified under title XVIII of the
Social Security Act for non-payment under title XIX of such Act when the
Secretary finds the inclusion of such conditions to be inapplicable to
beneficiaries under title XIX.

SEC. 2703. STATE OPTION TO PROVIDE HEALTH HOMES FOR ENROLLEES WITH
CHRONIC CONDITIONS.

(a) State Plan Amendment.--Title XIX of the Social Security Act (42
U.S.C. 1396a et seq.), as amended by sections 2201 and 2305, is amended
by adding at the end the following new section:
``Sec. 1945. <>  State Option To Provide
Coordinated Care Through a Health Home for Individuals With Chronic
Conditions.--

``(a) <> In General.--
Notwithstanding section 1902(a)(1) (relating to statewideness), section
1902(a)(10)(B) (relating to comparability), and any other provision of
this title for which the Secretary determines it is necessary to waive
in order to implement this section, beginning January 1, 2011, a State,
at its option as a State plan amendment, may provide for medical
assistance under this title to eligible individuals with chronic
conditions who select a designated provider (as described under
subsection (h)(5)), a team of health care professionals (as described
under subsection (h)(6)) operating with such a provider, or a health
team (as described under subsection (h)(7)) as the individual's health
home for purposes of providing the individual with health home services.

``(b) Health Home Qualification Standards.--The Secretary shall
establish standards for qualification as a designated provider for the
purpose of being eligible to be a health home for purposes of this
section.
``(c) Payments.--
``(1) In general.--A State shall provide a designated
provider, a team of health care professionals operating with
such a provider, or a health team with payments for the
provision of health home services to each eligible individual
with chronic conditions that selects such provider, team of
health care professionals, or health team as the individual's
health home. Payments made to a designated provider, a team of
health care professionals operating with such a provider, or a
health team for such services shall be treated as medical
assistance for purposes of section 1903(a), except that, during
the first 8 fiscal year quarters that the State plan amendment
is in effect, the Federal medical assistance percentage
applicable to such payments shall be equal to 90 percent.
``(2) Methodology.--
``(A) In general.--The State shall specify in the
State plan amendment the methodology the State will use
for determining payment for the provision of health home
services. Such methodology for determining payment--

[[Page 320]]

``(i) may be tiered to reflect, with respect
to each eligible individual with chronic
conditions provided such services by a designated
provider, a team of health care professionals
operating with such a provider, or a health team,
as well as the severity or number of each such
individual's chronic conditions or the specific
capabilities of the provider, team of health care
professionals, or health team; and
``(ii) shall be established consistent with
section 1902(a)(30)(A).
``(B) Alternate models of payment.--The methodology
for determining payment for provision of health home
services under this section shall not be limited to a
per-member per-month basis and may provide (as proposed
by the State and subject to approval by the Secretary)
for alternate models of payment.
``(3) Planning grants.--
``(A) <> In general.--
Beginning January 1, 2011, the Secretary may award
planning grants to States for purposes of developing a
State plan amendment under this section. A planning
grant awarded to a State under this paragraph shall
remain available until expended.
``(B) State contribution.--A State awarded a
planning grant shall contribute an amount equal to the
State percentage determined under section 1905(b)
(without regard to section 5001 of Public Law 111-5) for
each fiscal year for which the grant is awarded.
``(C) Limitation.--The total amount of payments made
to States under this paragraph shall not exceed
$25,000,000.

``(d) Hospital Referrals.--A State shall include in the State plan
amendment a requirement for hospitals that are participating providers
under the State plan or a waiver of such plan to establish procedures
for referring any eligible individuals with chronic conditions who seek
or need treatment in a hospital emergency department to designated
providers.
``(e) Coordination.--A State shall consult and coordinate, as
appropriate, with the Substance Abuse and Mental Health Services
Administration in addressing issues regarding the prevention and
treatment of mental illness and substance abuse among eligible
individuals with chronic conditions.
``(f) Monitoring.--A State shall include in the State plan
amendment--
``(1) a methodology for tracking avoidable hospital
readmissions and calculating savings that result from improved
chronic care coordination and management under this section; and
``(2) a proposal for use of health information technology in
providing health home services under this section and improving
service delivery and coordination across the care continuum
(including the use of wireless patient technology to improve
coordination and management of care and patient adherence to
recommendations made by their provider).

``(g) Report on Quality Measures.--As a condition for receiving
payment for health home services provided to an eligible individual with
chronic conditions, a designated provider shall report to the State, in
accordance with such requirements as the Secretary shall specify, on all
applicable measures for determining

[[Page 321]]

the quality of such services. When appropriate and feasible, a
designated provider shall use health information technology in providing
the State with such information.
``(h) Definitions.--In this section:
``(1) Eligible individual with chronic conditions.--
``(A) In general.--Subject to subparagraph (B), the
term `eligible individual with chronic conditions' means
an individual who--
``(i) is eligible for medical assistance under
the State plan or under a waiver of such plan; and
``(ii) has at least--
``(I) 2 chronic conditions;
``(II) 1 chronic condition and is at
risk of having a second chronic
condition; or
``(III) 1 serious and persistent
mental health condition.
``(B) Rule of construction.--Nothing in this
paragraph shall prevent the Secretary from establishing
higher levels as to the number or severity of chronic or
mental health conditions for purposes of determining
eligibility for receipt of health home services under
this section.
``(2) Chronic condition.--The term `chronic condition' has
the meaning given that term by the Secretary and shall include,
but is not limited to, the following:
``(A) A mental health condition.
``(B) Substance use disorder.
``(C) Asthma.
``(D) Diabetes.
``(E) Heart disease.
``(F) Being overweight, as evidenced by having a
Body Mass Index (BMI) over 25.
``(3) Health home.--The term `health home' means a
designated provider (including a provider that operates in
coordination with a team of health care professionals) or a
health team selected by an eligible individual with chronic
conditions to provide health home services.
``(4) Health home services.--
``(A) In general.--The term `health home services'
means comprehensive and timely high-quality services
described in subparagraph (B) that are provided by a
designated provider, a team of health care professionals
operating with such a provider, or a health team.
``(B) Services described.--The services described in
this subparagraph are--
``(i) comprehensive care management;
``(ii) care coordination and health promotion;
``(iii) comprehensive transitional care,
including appropriate follow-up, from inpatient to
other settings;
``(iv) patient and family support (including
authorized representatives);
``(v) referral to community and social support
services, if relevant; and
``(vi) use of health information technology to
link services, as feasible and appropriate.
``(5) Designated provider.--The term `designated provider'
means a physician, clinical practice or clinical group practice,
rural clinic, community health center, community mental health

[[Page 322]]

center, home health agency, or any other entity or provider
(including pediatricians, gynecologists, and obstetricians) that
is determined by the State and approved by the Secretary to be
qualified to be a health home for eligible individuals with
chronic conditions on the basis of documentation evidencing that
the physician, practice, or clinic--
``(A) has the systems and infrastructure in place to
provide health home services; and
``(B) satisfies the qualification standards
established by the Secretary under subsection (b).
``(6) Team of health care professionals.--The term `team of
health care professionals' means a team of health professionals
(as described in the State plan amendment) that may--
``(A) include physicians and other professionals,
such as a nurse care coordinator, nutritionist, social
worker, behavioral health professional, or any
professionals deemed appropriate by the State; and
``(B) be free standing, virtual, or based at a
hospital, community health center, community mental
health center, rural clinic, clinical practice or
clinical group practice, academic health center, or any
entity deemed appropriate by the State and approved by
the Secretary.
``(7) Health team.--The term `health team' has the meaning
given such term for purposes of section 3502 of the Patient
Protection and Affordable Care Act.''.

(b) Evaluation.--
(1) Independent evaluation.--
(A) In general.-- <> The Secretary
shall enter into a contract with an independent entity
or organization to conduct an evaluation and assessment
of the States that have elected the option to provide
coordinated care through a health home for Medicaid
beneficiaries with chronic conditions under section 1945
of the Social Security Act (as added by subsection (a))
for the purpose of determining the effect of such option
on reducing hospital admissions, emergency room visits,
and admissions to skilled nursing facilities.
(B) Evaluation report.--Not later than January 1,
2017, the Secretary shall report to Congress on the
evaluation and assessment conducted under subparagraph
(A).
(2) <> Survey and interim
report.--
(A) In general.--Not later than January 1, 2014, the
Secretary of Health and Human Services shall survey
States that have elected the option under section 1945
of the Social Security Act (as added by subsection (a))
and report to Congress on the nature, extent, and use of
such option, particularly as it pertains to--
(i) hospital admission rates;
(ii) chronic disease management;
(iii) coordination of care for individuals
with chronic conditions;
(iv) assessment of program implementation;
(v) processes and lessons learned (as
described in subparagraph (B));
(vi) assessment of quality improvements and
clinical outcomes under such option; and

[[Page 323]]

(vii) estimates of cost savings.
(B)  Implementation reporting.--A State that has
elected the option under section 1945 of the Social
Security Act (as added by subsection (a)) shall report
to the Secretary, as necessary, on processes that have
been developed and lessons learned regarding provision
of coordinated care through a health home for Medicaid
beneficiaries with chronic conditions under such option.

SEC. 2704. <> DEMONSTRATION PROJECT TO
EVALUATE INTEGRATED CARE AROUND A HOSPITALIZATION.

(a) Authority To Conduct Project.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall
establish a demonstration project under title XIX of the Social
Security Act to evaluate the use of bundled payments for the
provision of integrated care for a Medicaid beneficiary--
(A) with respect to an episode of care that includes
a hospitalization; and
(B) for concurrent physicians services provided
during a hospitalization.
(2) Duration.--The demonstration project shall begin on
January 1, 2012, and shall end on December 31, 2016.

(b) Requirements.--The demonstration project shall be conducted in
accordance with the following:
(1) <>  The demonstration project
shall be conducted in up to 8 States, determined by the
Secretary based on consideration of the potential to lower costs
under the Medicaid program while improving care for Medicaid
beneficiaries. A State selected to participate in the
demonstration project may target the demonstration project to
particular categories of beneficiaries, beneficiaries with
particular diagnoses, or particular geographic regions of the
State, but the Secretary shall insure that, as a whole, the
demonstration project is, to the greatest extent possible,
representative of the demographic and geographic composition of
Medicaid beneficiaries nationally.
(2) The demonstration project shall focus on conditions
where there is evidence of an opportunity for providers of
services and suppliers to improve the quality of care furnished
to Medicaid beneficiaries while reducing total expenditures
under the State Medicaid programs selected to participate, as
determined by the Secretary.
(3) A State selected to participate in the demonstration
project shall specify the 1 or more episodes of care the State
proposes to address in the project, the services to be included
in the bundled payments, and the rationale for the selection of
such episodes of care and services. The Secretary may modify the
episodes of care as well as the services to be included in the
bundled payments prior to or after approving the project. The
Secretary may also vary such factors among the different States
participating in the demonstration project.
(4) The Secretary shall ensure that payments made under the
demonstration project are adjusted for severity of illness and
other characteristics of Medicaid beneficiaries within a
category or having a diagnosis targeted as part of the
demonstration project. States shall ensure that Medicaid
beneficiaries are not liable for any additional cost sharing
than

[[Page 324]]

if their care had not been subject to payment under the
demonstration project.
(5) Hospitals participating in the demonstration project
shall have or establish robust discharge planning programs to
ensure that Medicaid beneficiaries requiring post-acute care are
appropriately placed in, or have ready access to, post-acute
care settings.
(6) The Secretary and each State selected to participate in
the demonstration project shall ensure that the demonstration
project does not result in the Medicaid beneficiaries whose care
is subject to payment under the demonstration project being
provided with less items and services for which medical
assistance is provided under the State Medicaid program than the
items and services for which medical assistance would have been
provided to such beneficiaries under the State Medicaid program
in the absence of the demonstration project.

(c) Waiver of Provisions.--Notwithstanding section 1115(a) of the
Social Security Act (42 U.S.C. 1315(a)), the Secretary may waive such
provisions of titles XIX, XVIII, and XI of that Act as may be necessary
to accomplish the goals of the demonstration, ensure beneficiary access
to acute and post-acute care, and maintain quality of care.
(d) Evaluation and Report.--
(1) Data.--Each State selected to participate in the
demonstration project under this section shall provide to the
Secretary, in such form and manner as the Secretary shall
specify, relevant data necessary to monitor outcomes, costs, and
quality, and evaluate the rationales for selection of the
episodes of care and services specified by States under
subsection (b)(3).
(2) Report.--Not later than 1 year after the conclusion of
the demonstration project, the Secretary shall submit a report
to Congress on the results of the demonstration project.

SEC. 2705. <>  MEDICAID GLOBAL PAYMENT SYSTEM
DEMONSTRATION PROJECT.

(a) In General.--The Secretary of Health and Human Services
(referred to in this section as the ``Secretary'') shall, in
coordination with the Center for Medicare and Medicaid Innovation (as
established under section 1115A of the Social Security Act, as added by
section 3021 of this Act), establish the Medicaid Global Payment System
Demonstration Project under which a participating State shall adjust the
payments made to an eligible safety net hospital system or network from
a fee-for-service payment structure to a global capitated payment model.
(b) Duration and Scope.--The demonstration project conducted under
this section shall operate during a period of fiscal years 2010 through
2012. <>  The Secretary shall select not more than 5
States to participate in the demonstration project.

(c) Eligible Safety Net Hospital System or
Network. <> --For purposes of this section, the term
``eligible safety net hospital system or network'' means a large, safety
net hospital system or network (as defined by the Secretary) that
operates within a State selected by the Secretary under subsection (b).

(d) Evaluation.--
(1) Testing.--The Innovation Center shall test and evaluate
the demonstration project conducted under this section

[[Page 325]]

to examine any changes in health care quality outcomes and
spending by the eligible safety net hospital systems or
networks.
(2) Budget neutrality.--During the testing period under
paragraph (1), any budget neutrality requirements under section
1115A(b)(3) of the Social Security Act (as so added) shall not
be applicable.
(3) Modification.--During the testing period under paragraph
(1), the Secretary may, in the Secretary's discretion, modify or
terminate the demonstration project conducted under this
section.

(e) Report.--Not later than 12 months after the date of completion
of the demonstration project under this section, the Secretary shall
submit to Congress a report containing the results of the evaluation and
testing conducted under subsection (d), together with recommendations
for such legislation and administrative action as the Secretary
determines appropriate.
(f) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out this section.

SEC. 2706. <> PEDIATRIC ACCOUNTABLE CARE
ORGANIZATION DEMONSTRATION PROJECT.

(a) Authority To Conduct Demonstration.--
(1) In general.--The Secretary of Health and Human Services
(referred to in this section as the ``Secretary'') shall
establish the Pediatric Accountable Care Organization
Demonstration Project to authorize a participating State to
allow pediatric medical providers that meet specified
requirements to be recognized as an accountable care
organization for purposes of receiving incentive payments (as
described under subsection (d)), in the same manner as an
accountable care organization is recognized and provided with
incentive payments under section 1899 of the Social Security Act
(as added by section 3022).
(2) Duration.--The demonstration project shall begin on
January 1, 2012, and shall end on December 31, 2016.

(b) Application.--A State that desires to participate in the
demonstration project under this section shall submit to the Secretary
an application at such time, in such manner, and containing such
information as the Secretary may require.
(c) Requirements.--
(1) Performance guidelines.--The Secretary, in consultation
with the States and pediatric providers, shall establish
guidelines to ensure that the quality of care delivered to
individuals by a provider recognized as an accountable care
organization under this section is not less than the quality of
care that would have otherwise been provided to such
individuals.
(2) Savings requirement.--A participating State, in
consultation with the Secretary, shall establish an annual
minimal level of savings in expenditures for items and services
covered under the Medicaid program under title XIX of the Social
Security Act and the CHIP program under title XXI of such Act
that must be reached by an accountable care organization in
order for such organization to receive an incentive payment
under subsection (d).
(3) <> Minimum participation period.--A
provider desiring to be recognized as an accountable care
organization under

[[Page 326]]

the demonstration project shall enter into an agreement with the
State to participate in the project for not less than a 3-year
period.

(d) Incentive Payment.--An accountable care organization that meets
the performance guidelines established by the Secretary under subsection
(c)(1) and achieves savings greater than the annual minimal savings
level established by the State under subsection (c)(2) shall receive an
incentive payment for such year equal to a portion (as determined
appropriate by the Secretary) of the amount of such excess savings. The
Secretary may establish an annual cap on incentive payments for an
accountable care organization.
(e) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out this section.

SEC. 2707. <> MEDICAID EMERGENCY PSYCHIATRIC
DEMONSTRATION PROJECT.

(a) Authority To Conduct Demonstration Project.--The Secretary of
Health and Human Services (in this section referred to as the
``Secretary'') shall establish a demonstration project under which an
eligible State (as described in subsection (c)) shall provide payment
under the State Medicaid plan under title XIX of the Social Security Act
to an institution for mental diseases that is not publicly owned or
operated and that is subject to the requirements of section 1867 of the
Social Security Act (42 U.S.C. 1395dd) for the provision of medical
assistance available under such plan to individuals who--
(1) have attained age 21, but have not attained age 65;
(2) are eligible for medical assistance under such plan; and
(3) require such medical assistance to stabilize an
emergency medical condition.

(b) Stabilization Review.--A State shall specify in its application
described in subsection (c)(1) establish a mechanism for how it will
ensure that institutions participating in the demonstration will
determine whether or not such individuals have been stabilized (as
defined in subsection (h)(5)). <> This
mechanism shall commence before the third day of the inpatient stay.
States participating in the demonstration project may manage the
provision of services for the stabilization of medical emergency
conditions through utilization review, authorization, or management
practices, or the application of medical necessity and appropriateness
criteria applicable to behavioral health.

(c) Eligible State Defined.--
(1) In general.--An eligible State is a State that has made
an application and has been selected pursuant to paragraphs (2)
and (3).
(2) Application.--A State seeking to participate in the
demonstration project under this section shall submit to the
Secretary, at such time and in such format as the Secretary
requires, an application that includes such information,
provisions, and assurances, as the Secretary may require.
(3) Selection.--A State shall be determined eligible for the
demonstration by the Secretary on a competitive basis among
States with applications meeting the requirements of

[[Page 327]]

paragraph (1). In selecting State applications for the
demonstration project, the Secretary shall seek to achieve an
appropriate national balance in the geographic distribution of
such projects.

(d) Length of Demonstration Project.--The demonstration project
established under this section shall be conducted for a period of 3
consecutive years.
(e) Limitations on Federal Funding.--
(1) Appropriation.--
(A) In general.--Out of any funds in the Treasury
not otherwise appropriated, there is appropriated to
carry out this section, $75,000,000 for fiscal year
2011.
(B) Budget authority.--Subparagraph (A) constitutes
budget authority in advance of appropriations Act and
represents the obligation of the Federal Government to
provide for the payment of the amounts appropriated
under that subparagraph.
(2) 5-year availability.--Funds appropriated under paragraph
(1) shall remain available for obligation through December 31,
2015.
(3) Limitation on payments.--In no case may--
(A) the aggregate amount of payments made by the
Secretary to eligible States under this section exceed
$75,000,000; or
(B) payments be provided by the Secretary under this
section after December 31, 2015.
(4) Funds allocated to states.--Funds shall be allocated to
eligible States on the basis of criteria, including a State's
application and the availability of funds, as determined by the
Secretary.
(5) Payments to states.--The Secretary shall pay to each
eligible State, from its allocation under paragraph (4), an
amount each quarter equal to the Federal medical assistance
percentage of expenditures in the quarter for medical assistance
described in subsection (a). As a condition of receiving
payment, a State shall collect and report information, as
determined necessary by the Secretary, for the purposes of
providing Federal oversight and conducting an evaluation under
subsection (f)(1).

(f) Evaluation and Report to Congress.--
(1) Evaluation.--The Secretary shall conduct an evaluation
of the demonstration project in order to determine the impact on
the functioning of the health and mental health service system
and on individuals enrolled in the Medicaid program and shall
include the following:
(A) An assessment of access to inpatient mental
health services under the Medicaid program; average
lengths of inpatient stays; and emergency room visits.
(B) An assessment of discharge planning by
participating hospitals.
(C) An assessment of the impact of the demonstration
project on the costs of the full range of mental health
services (including inpatient, emergency and ambulatory
care).
(D) An analysis of the percentage of consumers with
Medicaid coverage who are admitted to inpatient
facilities as a result of the demonstration project as
compared to

[[Page 328]]

those admitted to these same facilities through other
means.
(E) A recommendation regarding whether the
demonstration project should be continued after December
31, 2013, and expanded on a national basis.
(2) Report.--Not later than December 31, 2013, the Secretary
shall submit to Congress and make available to the public a
report on the findings of the evaluation under paragraph (1).

(g) Waiver Authority.--
(1) In general.--The Secretary shall waive the limitation of
subdivision (B) following paragraph (28) of section 1905(a) of
the Social Security Act (42 U.S.C. 1396d(a)) (relating to
limitations on payments for care or services for individuals
under 65 years of age who are patients in an institution for
mental diseases) for purposes of carrying out the demonstration
project under this section.
(2) Limited other waiver authority.--The Secretary may waive
other requirements of titles XI and XIX of the Social Security
Act (including the requirements of sections 1902(a)(1) (relating
to statewideness) and 1902(1)(10)(B) (relating to
comparability)) only to extent necessary to carry out the
demonstration project under this section.

(h) Definitions.--In this section:
(1) Emergency medical condition.--The term ``emergency
medical condition'' means, with respect to an individual, an
individual who expresses suicidal or homicidal thoughts or
gestures, if determined dangerous to self or others.
(2) Federal medical assistance percentage.--The term
``Federal medical assistance percentage'' has the meaning given
that term with respect to a State under section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(3) Institution for mental diseases.--The term ``institution
for mental diseases'' has the meaning given to that term in
section 1905(i) of the Social Security Act (42 U.S.C. 1396d(i)).
(4) Medical assistance.--The term ``medical assistance'' has
the meaning given that term in section 1905(a) of the Social
Security Act (42 U.S.C. 1396d(a)).
(5) Stabilized.--The term ``stabilized'' means, with respect
to an individual, that the emergency medical condition no longer
exists with respect to the individual and the individual is no
longer dangerous to self or others.
(6) State.--The term ``State'' has the meaning given that
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).

Subtitle J--Improvements to the Medicaid and CHIP Payment and Access
Commission (MACPAC)

SEC. 2801. MACPAC ASSESSMENT OF POLICIES AFFECTING ALL MEDICAID
BENEFICIARIES.

(a) In General.--Section 1900 of the Social Security Act (42 U.S.C.
1396) is amended--
(1) in subsection (b)--

[[Page 329]]

(A) in paragraph (1)--
(i) in the paragraph heading, by inserting
``for all states'' before ``and annual''; and
(ii) in subparagraph (A), by striking
``children's'';
(iii) in subparagraph (B), by inserting ``,
the Secretary, and States'' after ``Congress'';
(iv) in subparagraph (C), by striking ``March
1'' and inserting ``March 15''; and
(v) in subparagraph (D), by striking ``June
1'' and inserting ``June 15'';
(B) in paragraph (2)--
(i) in subparagraph (A)--
(I) in clause (i)--
(aa) by inserting ``the
efficient provision of'' after
``expenditures for''; and
(bb) by striking ``hospital,
skilled nursing facility,
physician, Federally-qualified
health center, rural health
center, and other fees'' and
inserting ``payments to medical,
dental, and health
professionals, hospitals,
residential and long-term care
providers, providers of home and
community based services,
Federally-qualified health
centers and rural health
clinics, managed care entities,
and providers of other covered
items and services''; and
(II) in clause (iii), by inserting
``(including how such factors and
methodologies enable such beneficiaries
to obtain the services for which they
are eligible, affect provider supply,
and affect providers that serve a
disproportionate share of low-income and
other vulnerable populations)'' after
``beneficiaries'';
(ii) by redesignating subparagraphs (B) and
(C) as subparagraphs (F) and (H), respectively;
(iii) by inserting after subparagraph (A), the
following:
``(B) Eligibility policies.--Medicaid and CHIP
eligibility policies, including a determination of the
degree to which Federal and State policies provide
health care coverage to needy populations.
``(C) Enrollment and retention processes.--Medicaid
and CHIP enrollment and retention processes, including a
determination of the degree to which Federal and State
policies encourage the enrollment of individuals who are
eligible for such programs and screen out individuals
who are ineligible, while minimizing the share of
program expenses devoted to such processes.
``(D) Coverage policies.--Medicaid and CHIP benefit
and coverage policies, including a determination of the
degree to which Federal and State policies provide
access to the services enrollees require to improve and
maintain their health and functional status.
``(E) Quality of care.--Medicaid and CHIP policies
as they relate to the quality of care provided under
those programs, including a determination of the degree
to which Federal and State policies achieve their stated
goals and

[[Page 330]]

interact with similar goals established by other
purchasers of health care services.'';
(iv) by inserting after subparagraph (F) (as
redesignated by clause (ii) of this subparagraph),
the following:
``(G) Interactions with medicare and medicaid.--
Consistent with paragraph (11), the interaction of
policies under Medicaid and the Medicare program under
title XVIII, including with respect to how such
interactions affect access to services, payments, and
dual eligible individuals.'' and
(v) in subparagraph (H) (as so redesignated),
by inserting ``and preventive, acute, and long-
term services and supports'' after ``barriers'';
(C) by redesignating paragraphs (3) through (9) as
paragraphs (4) through (10), respectively;
(D) by inserting after paragraph (2), the following
new paragraph:
``(3) Recommendations and reports of state-specific data.--
MACPAC shall--
``(A) review national and State-specific Medicaid
and CHIP data; and
``(B) submit reports and recommendations to
Congress, the Secretary, and States based on such
reviews.'';
(E) in paragraph (4), as redesignated by
subparagraph (C), by striking ``or any other problems''
and all that follows through the period and inserting
``, as well as other factors that adversely affect, or
have the potential to adversely affect, access to care
by, or the health care status of, Medicaid and CHIP
beneficiaries. MACPAC shall include in the annual report
required under paragraph (1)(D) a description of all
such areas or problems identified with respect to the
period addressed in the report.'';
(F) in paragraph (5), as so redesignated,--
(i) in the paragraph heading, by inserting
``and regulations'' after ``reports''; and
(ii) by striking ``If'' and inserting the
following:
``(A) Certain secretarial reports.--If''; and
(iii) in the second sentence, by inserting
``and the Secretary'' after ``appropriate
committees of Congress''; and
(iv) by adding at the end the following:
``(B) Regulations.--MACPAC shall review Medicaid and
CHIP regulations and may comment through submission of a
report to the appropriate committees of Congress and the
Secretary, on any such regulations that affect access,
quality, or efficiency of health care.'';
(G) in paragraph (10), as so redesignated, by
inserting `` <> , and shall submit with
any recommendations, a report on the Federal and State-
specific budget consequences of the recommendations''
before the period; and
(H) by adding at the end the following:
``(11) Consultation and coordination with medpac.--
``(A) In general.--MACPAC shall consult with the
Medicare Payment Advisory Commission (in this paragraph
referred to as `MedPAC') established under section 1805
in carrying out its duties under this section, as
appropriate and particularly with respect to the issues
specified in

[[Page 331]]

paragraph (2) as they relate to those Medicaid
beneficiaries who are dually eligible for Medicaid and
the Medicare program under title XVIII, adult Medicaid
beneficiaries (who are not dually eligible for
Medicare), and beneficiaries under Medicare.
Responsibility for analysis of and recommendations to
change Medicare policy regarding Medicare beneficiaries,
including Medicare beneficiaries who are dually eligible
for Medicare and Medicaid, shall rest with MedPAC.
``(B) Information sharing.--MACPAC and MedPAC shall
have access to deliberations and records of the other
such entity, respectively, upon the request of the other
such entity.
``(12) Consultation with states.--MACPAC shall regularly
consult with States in carrying out its duties under this
section, including with respect to developing processes for
carrying out such duties, and shall ensure that input from
States is taken into account and represented in MACPAC's
recommendations and reports.
``(13) Coordinate and consult with the federal coordinated
health care office.--MACPAC shall coordinate and consult with
the Federal Coordinated Health Care Office established under
section 2081 of the Patient Protection and Affordable Care Act
before making any recommendations regarding dual eligible
individuals.
``(14) Programmatic oversight vested in the secretary.--
MACPAC's authority to make recommendations in accordance with
this section shall not affect, or be considered to duplicate,
the Secretary's authority to carry out Federal responsibilities
with respect to Medicaid and CHIP.'';
(2) in subsection (c)(2)--
(A) by striking subparagraphs (A) and (B) and
inserting the following:
``(A) In general.--The membership of MACPAC shall
include individuals who have had direct experience as
enrollees or parents or caregivers of enrollees in
Medicaid or CHIP and individuals with national
recognition for their expertise in Federal safety net
health programs, health finance and economics, actuarial
science, health plans and integrated delivery systems,
reimbursement for health care, health information
technology, and other providers of health services,
public health, and other related fields, who provide a
mix of different professions, broad geographic
representation, and a balance between urban and rural
representation.
``(B) Inclusion.--The membership of MACPAC shall
include (but not be limited to) physicians, dentists,
and other health professionals, employers, third-party
payers, and individuals with expertise in the delivery
of health services. Such membership shall also include
representatives of children, pregnant women, the
elderly, individuals with disabilities, caregivers, and
dual eligible individuals, current or former
representatives of State agencies responsible for
administering Medicaid, and current or former
representatives of State agencies responsible for
administering CHIP.''.

[[Page 332]]

(3) in subsection (d)(2), by inserting ``and State'' after
``Federal'';
(4) in subsection (e)(1), in the first sentence, by
inserting ``and, as a condition for receiving payments under
sections 1903(a) and 2105(a), from any State agency responsible
for administering Medicaid or CHIP,'' after ``United States'';
and
(5) in subsection (f)--
(A) in the subsection heading, by striking
``Authorization of Appropriations'' and inserting
``Funding'';
(B) in paragraph (1), by inserting ``(other than for
fiscal year 2010)'' before ``in the same manner''; and
(C) by adding at the end the following:
``(3) Funding for fiscal year 2010.--
``(A) In general.--Out of any funds in the Treasury
not otherwise appropriated, there is appropriated to
MACPAC to carry out the provisions of this section for
fiscal year 2010, $9,000,000.
``(B) Transfer of funds.--Notwithstanding section
2104(a)(13), from the amounts appropriated in such
section for fiscal year 2010, $2,000,000 is hereby
transferred and made available in such fiscal year to
MACPAC to carry out the provisions of this section.
``(4) Availability.--Amounts made available under paragraphs
(2) and (3) to MACPAC to carry out the provisions of this
section shall remain available until expended.''.

(b) Conforming MedPAC Amendments.--Section 1805(b) of the Social
Security Act (42 U.S.C. 1395b-6(b)), is amended--
(1) in paragraph (1)(C), by striking ``March 1 of each year
(beginning with 1998)'' and inserting ``March 15'';
(2) in paragraph (1)(D), by inserting ``, and (beginning
with 2012) containing an examination of the topics described in
paragraph (9), to the extent feasible'' before the period; and
(3) by adding at the end the following:
``(9) Review and annual report on medicaid and commercial
trends.--The Commission shall review and report on aggregate
trends in spending, utilization, and financial performance under
the Medicaid program under title XIX and the private market for
health care services with respect to providers for which, on an
aggregate national basis, a significant portion of revenue or
services is associated with the Medicaid program. Where
appropriate, the Commission shall conduct such review in
consultation with the Medicaid and CHIP Payment and Access
Commission established under section 1900 (in this section
referred to as `MACPAC').
``(10) Coordinate and consult with the federal coordinated
health care office.--The Commission shall coordinate and consult
with the Federal Coordinated Health Care Office established
under section 2081 of the Patient Protection and Affordable Care
Act before making any recommendations regarding dual eligible
individuals.
``(11) Interaction of medicaid and medicare.--The Commission
shall consult with MACPAC in carrying out its duties under this
section, as appropriate. Responsibility for analysis of and
recommendations to change Medicare policy regarding Medicare
beneficiaries, including Medicare beneficiaries who are dually
eligible for Medicare and Medicaid,

[[Page 333]]

shall rest with the Commission. Responsibility for analysis of
and recommendations to change Medicaid policy regarding Medicaid
beneficiaries, including Medicaid beneficiaries who are dually
eligible for Medicare and Medicaid, shall rest with MACPAC.''.

Subtitle K--Protections for American Indians and Alaska Natives

SEC. 2901. SPECIAL RULES RELATING TO INDIANS.

(a) <> No Cost-sharing for Indians With Income
at or Below 300 Percent of Poverty Enrolled in Coverage Through a State
Exchange.--For provisions prohibiting cost sharing for Indians enrolled
in any qualified health plan in the individual market through an
Exchange, see section 1402(d) of the Patient Protection and Affordable
Care Act.

(b) <> Payer of Last Resort.--Health programs
operated by the Indian Health Service, Indian tribes, tribal
organizations, and Urban Indian organizations (as those terms are
defined in section 4 of the Indian Health Care Improvement Act (25
U.S.C. 1603)) shall be the payer of last resort for services provided by
such Service, tribes, or organizations to individuals eligible for
services through such programs, notwithstanding any Federal, State, or
local law to the contrary.

(c) Facilitating Enrollment of Indians Under the Express Lane
Option.--Section 1902(e)(13)(F)(ii) of the Social Security Act (42
U.S.C. 1396a(e)(13)(F)(ii)) is amended--
(1) in the clause heading, by inserting ``and indian tribes
and tribal organizations'' after ``agencies''; and
(2) by adding at the end the following:
``(IV) The Indian Health Service, an
Indian Tribe, Tribal Organization, or
Urban Indian Organization (as defined in
section 1139(c)).''.

(d) Technical Corrections.--Section 1139(c) of the Social Security
Act (42 U.S.C. 1320b-9(c)) is amended by striking ``In this section''
and inserting ``For purposes of this section, title XIX, and title
XXI''.

SEC. 2902. ELIMINATION OF SUNSET FOR REIMBURSEMENT FOR ALL MEDICARE PART
B SERVICES FURNISHED BY CERTAIN INDIAN HOSPITALS AND
CLINICS.

(a) Reimbursement for All Medicare Part B Services Furnished by
Certain Indian Hospitals and Clinics.--Section 1880(e)(1)(A) of the
Social Security Act (42 U.S.C. 1395qq(e)(1)(A)) is amended by striking
``during the 5-year period beginning on'' and inserting ``on or after''.
(b) Effective Date.-- <> The amendments made by this section shall apply to items or
services furnished on or after January 1, 2010.

[[Page 334]]

Subtitle L--Maternal and Child Health Services

SEC. 2951. MATERNAL, INFANT, AND EARLY CHILDHOOD HOME VISITING PROGRAMS.

Title V of the Social Security Act (42 U.S.C. 701 et seq.) is
amended by adding at the end the following new section:

``SEC. 511. <> MATERNAL, INFANT, AND EARLY CHILDHOOD
HOME VISITING PROGRAMS.

``(a) Purposes.--The purposes of this section are--
``(1) to strengthen and improve the programs and activities
carried out under this title;
``(2) to improve coordination of services for at risk
communities; and
``(3) to identify and provide comprehensive services to
improve outcomes for families who reside in at risk communities.

``(b) Requirement for All States To Assess Statewide Needs and
Identify at Risk Communities.--
``(1) In general.-- <> Not later than 6
months after the date of enactment of this section, each State
shall, as a condition of receiving payments from an allotment
for the State under section 502 for fiscal year 2011, conduct a
statewide needs assessment (which shall be separate from the
statewide needs assessment required under section 505(a)) that
identifies--
``(A) communities with concentrations of--
``(i) premature birth, low-birth weight
infants, and infant mortality, including infant
death due to neglect, or other indicators of at-
risk prenatal, maternal, newborn, or child health;
``(ii) poverty;
``(iii) crime;
``(iv) domestic violence;
``(v) high rates of high-school drop-outs;
``(vi) substance abuse;
``(vii) unemployment; or
``(viii) child maltreatment;
``(B) the quality and capacity of existing programs
or initiatives for early childhood home visitation in
the State including--
``(i) the number and types of individuals and
families who are receiving services under such
programs or initiatives;
``(ii) the gaps in early childhood home
visitation in the State; and
``(iii) the extent to which such programs or
initiatives are meeting the needs of eligible
families described in subsection (k)(2); and
``(C) the State's capacity for providing substance
abuse treatment and counseling services to individuals
and families in need of such treatment or services.
``(2) Coordination with other assessments.--In conducting
the statewide needs assessment required under paragraph (1), the
State shall coordinate with, and take into account, other
appropriate needs assessments conducted by

[[Page 335]]

the State, as determined by the Secretary, including the needs
assessment required under section 505(a) (both the most recently
completed assessment and any such assessment in progress), the
communitywide strategic planning and needs assessments conducted
in accordance with section 640(g)(1)(C) of the Head Start Act,
and the inventory of current unmet needs and current community-
based and prevention-focused programs and activities to prevent
child abuse and neglect, and other family resource services
operating in the State required under section 205(3) of the
Child Abuse Prevention and Treatment Act.
``(3) Submission to the secretary.--Each State shall submit
to the Secretary, in such form and manner as the Secretary shall
require--
``(A) the results of the statewide needs assessment
required under paragraph (1); and
``(B) a description of how the State intends to
address needs identified by the assessment, particularly
with respect to communities identified under paragraph
(1)(A), which may include applying for a grant to
conduct an early childhood home visitation program in
accordance with the requirements of this section.

``(c) Grants for Early Childhood Home Visitation Programs.--
``(1) Authority to make grants.--In addition to any other
payments made under this title to a State, the Secretary shall
make grants to eligible entities to enable the entities to
deliver services under early childhood home visitation programs
that satisfy the requirements of subsection (d) to eligible
families in order to promote improvements in maternal and
prenatal health, infant health, child health and development,
parenting related to child development outcomes, school
readiness, and the socioeconomic status of such families, and
reductions in child abuse, neglect, and injuries.
``(2) Authority to use initial grant funds for planning or
implementation.--An eligible entity that receives a grant under
paragraph (1) may use a portion of the funds made available to
the entity during the first 6 months of the period for which the
grant is made for planning or implementation activities to
assist with the establishment of early childhood home visitation
programs that satisfy the requirements of subsection (d).
``(3) <> Grant duration.--The
Secretary shall determine the period of years for which a grant
is made to an eligible entity under paragraph (1).
``(4) Technical assistance.--The Secretary shall provide an
eligible entity that receives a grant under paragraph (1) with
technical assistance in administering programs or activities
conducted in whole or in part with grant funds.

``(d) Requirements.--The requirements of this subsection for an
early childhood home visitation program conducted with a grant made
under this section are as follows:
``(1) Quantifiable, measurable improvement in benchmark
areas.--
``(A) In general.--The eligible entity establishes,
subject to the approval of the Secretary, quantifiable,
measurable 3- and 5-year benchmarks for demonstrating
that the

[[Page 336]]

program results in improvements for the eligible
families participating in the program in each of the
following areas:
``(i) Improved maternal and newborn health.
``(ii) Prevention of child injuries, child
abuse, neglect, or maltreatment, and reduction of
emergency department visits.
``(iii) Improvement in school readiness and
achievement.
``(iv) Reduction in crime or domestic
violence.
``(v) Improvements in family economic self-
sufficiency.
``(vi) Improvements in the coordination and
referrals for other community resources and
supports.
``(B) Demonstration of improvements after 3 years.--
``(i) Report to the secretary.--Not later than
30 days after the end of the 3rd year in which the
eligible entity conducts the program, the entity
submits to the Secretary a report demonstrating
improvement in at least 4 of the areas specified
in subparagraph (A).
``(ii) Corrective action plan.--If the report
submitted by the eligible entity under clause (i)
fails to demonstrate improvement in at least 4 of
the areas specified in subparagraph (A), the
entity shall develop and implement a plan to
improve outcomes in each of the areas specified in
subparagraph (A), subject to approval by the
Secretary. The plan shall include provisions for
the Secretary to monitor implementation of the
plan and conduct continued oversight of the
program, including through submission by the
entity of regular reports to the Secretary.
``(iii) Technical assistance.--
``(I) In general.--The Secretary
shall provide an eligible entity
required to develop and implement an
improvement plan under clause (ii) with
technical assistance to develop and
implement the plan. The Secretary may
provide the technical assistance
directly or through grants, contracts,
or cooperative agreements.
``(II) Advisory
panel. <> --The
Secretary shall establish an advisory
panel for purposes of obtaining
recommendations regarding the technical
assistance provided to entities in
accordance with subclause (I).
``(iv) No improvement or failure to submit
report. <> --If
the Secretary determines after a period of time
specified by the Secretary that an eligible entity
implementing an improvement plan under clause (ii)
has failed to demonstrate any improvement in the
areas specified in subparagraph (A), or if the
Secretary determines that an eligible entity has
failed to submit the report required under clause
(i), the Secretary shall terminate the entity's
grant and may include any unexpended grant funds
in grants made to nonprofit organizations under
subsection (h)(2)(B).

[[Page 337]]

``(C) Final report.--Not later than December 31,
2015, the eligible entity shall submit a report to the
Secretary demonstrating improvements (if any) in each of
the areas specified in subparagraph (A).
``(2) Improvements in outcomes for individual families.--
``(A) In general.--The program is designed, with
respect to an eligible family participating in the
program, to result in the participant outcomes described
in subparagraph (B) that the eligible entity identifies
on the basis of an individualized assessment of the
family, are relevant for that family.
``(B) Participant outcomes.--The participant
outcomes described in this subparagraph are the
following:
``(i) Improvements in prenatal, maternal, and
newborn health, including improved pregnancy
outcomes
``(ii) Improvements in child health and
development, including the prevention of child
injuries and maltreatment and improvements in
cognitive, language, social-emotional, and
physical developmental indicators.
``(iii) Improvements in parenting skills.
``(iv) Improvements in school readiness and
child academic achievement.
``(v) Reductions in crime or domestic
violence.
``(vi) Improvements in family economic self-
sufficiency.
``(vii) Improvements in the coordination of
referrals for, and the provision of, other
community resources and supports for eligible
families, consistent with State child welfare
agency training.
``(3) Core components.--The program includes the following
core components:
``(A) Service delivery model or models.--
``(i) In general.--Subject to clause (ii), the
program is conducted using 1 or more of the
service delivery models described in item (aa) or
(bb) of subclause (I) or in subclause (II)
selected by the eligible entity:
``(I) The model conforms to a clear
consistent home visitation model that
has been in existence for at least 3
years and is research-based, grounded in
relevant empirically-based knowledge,
linked to program determined outcomes,
associated with a national organization
or institution of higher education that
has comprehensive home visitation
program standards that ensure high
quality service delivery and continuous
program quality improvement, and has
demonstrated significant, (and in the
case of the service delivery model
described in item (aa), sustained)
positive outcomes, as described in the
benchmark areas specified in paragraph
(1)(A) and the participant outcomes
described in paragraph (2)(B), when
evaluated using well-designed and
rigorous--

[[Page 338]]

``(aa) randomized controlled
research designs, and the
evaluation results have been
published in a peer-reviewed
journal; or
``(bb) quasi-experimental
research designs.
``(II) The model conforms to a
promising and new approach to achieving
the benchmark areas specified in
paragraph (1)(A) and the participant
outcomes described in paragraph (2)(B),
has been developed or identified by a
national organization or institution of
higher education, and will be evaluated
through well-designed and rigorous
process.
``(ii) Majority of grant funds used for
evidence-based models.--An eligible entity shall
use not more than 25 percent of the amount of the
grant paid to the entity for a fiscal year for
purposes of conducting a program using the service
delivery model described in clause (i)(II).
``(iii) Criteria for evidence of effectiveness
of models.--The Secretary shall establish criteria
for evidence of effectiveness of the service
delivery models and shall ensure that the process
for establishing the criteria is transparent and
provides the opportunity for public comment.
``(B) Additional requirements.--
``(i) The program adheres to a clear,
consistent model that satisfies the requirements
of being grounded in empirically-based knowledge
related to home visiting and linked to the
benchmark areas specified in paragraph (1)(A) and
the participant outcomes described in paragraph
(2)(B) related to the purposes of the program.
``(ii) The program employs well-trained and
competent staff, as demonstrated by education or
training, such as nurses, social workers,
educators, child development specialists, or other
well-trained and competent staff, and provides
ongoing and specific training on the model being
delivered.
``(iii) The program maintains high quality
supervision to establish home visitor
competencies.
``(iv) The program demonstrates strong
organizational capacity to implement the
activities involved.
``(v) The program establishes appropriate
linkages and referral networks to other community
resources and supports for eligible families.
``(vi) The program monitors the fidelity of
program implementation to ensure that services are
delivered pursuant to the specified model.
``(4) Priority for serving high-risk populations.--The
eligible entity gives priority to providing services under the
program to the following:
``(A) Eligible families who reside in communities in
need of such services, as identified in the statewide
needs assessment required under subsection (b)(1)(A).
``(B) Low-income eligible families.
``(C) Eligible families who are pregnant women who
have not attained age 21.

[[Page 339]]

``(D) Eligible families that have a history of child
abuse or neglect or have had interactions with child
welfare services.
``(E) Eligible families that have a history of
substance abuse or need substance abuse treatment.
``(F) Eligible families that have users of tobacco
products in the home.
``(G) Eligible families that are or have children
with low student achievement.
``(H) Eligible families with children with
developmental delays or disabilities.
``(I) Eligible families who, or that include
individuals who, are serving or formerly served in the
Armed Forces, including such families that have members
of the Armed Forces who have had multiple deployments
outside of the United States.

``(e) Application Requirements.--An eligible entity desiring a grant
under this section shall submit an application to the Secretary for
approval, in such manner as the Secretary may require, that includes the
following:
``(1) A description of the populations to be served by the
entity, including specific information regarding how the entity
will serve high risk populations described in subsection (d)(4).
``(2) An assurance that the entity will give priority to
serving low-income eligible families and eligible families who
reside in at risk communities identified in the statewide needs
assessment required under subsection (b)(1)(A).
``(3) The service delivery model or models described in
subsection (d)(3)(A) that the entity will use under the program
and the basis for the selection of the model or models.
``(4) A statement identifying how the selection of the
populations to be served and the service delivery model or
models that the entity will use under the program for such
populations is consistent with the results of the statewide
needs assessment conducted under subsection (b).
``(5) The quantifiable, measurable benchmarks established by
the State to demonstrate that the program contributes to
improvements in the areas specified in subsection (d)(1)(A).
``(6) An assurance that the entity will obtain and submit
documentation or other appropriate evidence from the
organization or entity that developed the service delivery model
or models used under the program to verify that the program is
implemented and services are delivered according to the model
specifications.
``(7) Assurances that the entity will establish procedures
to ensure that--
``(A) the participation of each eligible family in
the program is voluntary; and
``(B) services are provided to an eligible family in
accordance with the individual assessment for that
family.
``(8) Assurances that the entity will--
``(A) submit annual reports to the Secretary
regarding the program and activities carried out under
the program that include such information and data as
the Secretary shall require; and
``(B) participate in, and cooperate with, data and
information collection necessary for the evaluation
required

[[Page 340]]

under subsection (g)(2) and other research and
evaluation activities carried out under subsection
(h)(3).
``(9) A description of other State programs that include
home visitation services, including, if applicable to the State,
other programs carried out under this title with funds made
available from allotments under section 502(c), programs funded
under title IV, title II of the Child Abuse Prevention and
Treatment Act (relating to community-based grants for the
prevention of child abuse and neglect), and section 645A of the
Head Start Act (relating to Early Head Start programs).
``(10) Other information as required by the Secretary.

``(f) Maintenance of Effort.--Funds provided to an eligible entity
receiving a grant under this section shall supplement, and not supplant,
funds from other sources for early childhood home visitation programs or
initiatives.
``(g) Evaluation.--
``(1) Independent, expert advisory
panel. <> --The Secretary, in accordance
with subsection (h)(1)(A), shall appoint an independent advisory
panel consisting of experts in program evaluation and research,
education, and early childhood development--
``(A) to review, and make recommendations on, the
design and plan for the evaluation required under
paragraph (2) within 1 year after the date of enactment
of this section;
``(B) to maintain and advise the Secretary regarding
the progress of the evaluation; and
``(C) to comment, if the panel so desires, on the
report submitted under paragraph (3).
``(2) <> Authority to conduct
evaluation.--On the basis of the recommendations of the advisory
panel under paragraph (1), the Secretary shall, by grant,
contract, or interagency agreement, conduct an evaluation of the
statewide needs assessments submitted under subsection (b) and
the grants made under subsections (c) and (h)(3)(B). The
evaluation shall include--
``(A) an analysis, on a State-by-State basis, of the
results of such assessments, including indicators of
maternal and prenatal health and infant health and
mortality, and State actions in response to the
assessments; and
``(B) an assessment of <> --
``(i) the effect of early childhood home
visitation programs on child and parent outcomes,
including with respect to each of the benchmark
areas specified in subsection (d)(1)(A) and the
participant outcomes described in subsection
(d)(2)(B);
``(ii) the effectiveness of such programs on
different populations, including the extent to
which the ability of programs to improve
participant outcomes varies across programs and
populations; and
``(iii) the potential for the activities
conducted under such programs, if scaled broadly,
to improve health care practices, eliminate health
disparities, and improve health care system
quality, efficiencies, and reduce costs.

[[Page 341]]

``(3) Report.--Not later than March 31, 2015, the Secretary
shall submit a report to Congress on the results of the
evaluation conducted under paragraph (2) and shall make the
report publicly available.

``(h) Other Provisions.--
``(1) Intra-agency collaboration.--The Secretary shall
ensure that the Maternal and Child Health Bureau and the
Administration for Children and Families collaborate with
respect to carrying out this section, including with respect
to--
``(A) reviewing and analyzing the statewide needs
assessments required under subsection (b), the awarding
and oversight of grants awarded under this section, the
establishment of the advisory panels required under
subsections (d)(1)(B)(iii)(II) and (g)(1), and the
evaluation and report required under subsection (g); and
``(B) consulting with other Federal agencies with
responsibility for administering or evaluating programs
that serve eligible families to coordinate and
collaborate with respect to research related to such
programs and families, including the Office of the
Assistant Secretary for Planning and Evaluation of the
Department of Health and Human Services, the Centers for
Disease Control and Prevention, the National Institute
of Child Health and Human Development of the National
Institutes of Health, the Office of Juvenile Justice and
Delinquency Prevention of the Department of Justice, and
the Institute of Education Sciences of the Department of
Education.
``(2) <> Grants to eligible entities
that are not states.--
``(A) Indian tribes, tribal organizations, or urban
indian organizations.--The Secretary shall specify
requirements for eligible entities that are Indian
Tribes (or a consortium of Indian Tribes), Tribal
Organizations, or Urban Indian Organizations to apply
for and conduct an early childhood home visitation
program with a grant under this section. Such
requirements shall, to the greatest extent practicable,
be consistent with the requirements applicable to
eligible entities that are States and shall require an
Indian Tribe (or consortium), Tribal Organization, or
Urban Indian Organization to--
``(i) conduct a needs assessment similar to
the assessment required for all States under
subsection (b); and
``(ii) establish quantifiable, measurable 3-
and 5-year benchmarks consistent with subsection
(d)(1)(A).
``(B) Nonprofit organizations.--If, as of the
beginning of fiscal year 2012, a State has not applied
or been approved for a grant under this section, the
Secretary may use amounts appropriated under paragraph
(1) of subsection (j) that are available for expenditure
under paragraph (3) of that subsection to make a grant
to an eligible entity that is a nonprofit organization
described in subsection (k)(1)(B) to conduct an early
childhood home visitation program in the State. The
Secretary shall specify the requirements for such an
organization to apply for and conduct the program which
shall, to the greatest extent practicable, be consistent
with the requirements applicable

[[Page 342]]

to eligible entities that are States and shall require
the organization to--
``(i) carry out the program based on the needs
assessment conducted by the State under subsection
(b); and
``(ii) establish quantifiable, measurable 3-
and 5-year benchmarks consistent with subsection
(d)(1)(A).
``(3) Research and other evaluation activities.--
``(A) In general.--The Secretary shall carry out a
continuous program of research and evaluation activities
in order to increase knowledge about the implementation
and effectiveness of home visiting programs, using
random assignment designs to the maximum extent
feasible. The Secretary may carry out such activities
directly, or through grants, cooperative agreements, or
contracts.
``(B) Requirements.--The Secretary shall ensure
that--
``(i) evaluation of a specific program or
project is conducted by persons or individuals not
directly involved in the operation of such program
or project; and
``(ii) the conduct of research and evaluation
activities includes consultation with independent
researchers, State officials, and developers and
providers of home visiting programs on topics
including research design and administrative data
matching.
``(4) Report and recommendation.--Not later than December
31, 2015, the Secretary shall submit a report to Congress
regarding the programs conducted with grants under this section.
The report required under this paragraph shall include--
``(A) information regarding the extent to which
eligible entities receiving grants under this section
demonstrated improvements in each of the areas specified
in subsection (d)(1)(A);
``(B) information regarding any technical assistance
provided under subsection (d)(1)(B)(iii)(I), including
the type of any such assistance provided; and
``(C) recommendations for such legislative or
administrative action as the Secretary determines
appropriate.

``(i) Application of Other Provisions of Title.--
``(1) In general.--Except as provided in paragraph (2), the
other provisions of this title shall not apply to a grant made
under this section.
``(2) Exceptions.--The following provisions of this title
shall apply to a grant made under this section to the same
extent and in the same manner as such provisions apply to
allotments made under section 502(c):
``(A) Section 504(b)(6) (relating to prohibition on
payments to excluded individuals and entities).
``(B) Section 504(c) (relating to the use of funds
for the purchase of technical assistance).
``(C) Section 504(d) (relating to a limitation on
administrative expenditures).
``(D) Section 506 (relating to reports and audits),
but only to the extent determined by the Secretary to be
appropriate for grants made under this section.

[[Page 343]]

``(E) Section 507 (relating to penalties for false
statements).
``(F) Section 508 (relating to nondiscrimination).
``(G) Section 509(a) (relating to the administration
of the grant program).

``(j) Appropriations.--
``(1) In general.--Out of any funds in the Treasury not
otherwise appropriated, there are appropriated to the Secretary
to carry out this section--
``(A) $100,000,000 for fiscal year 2010;
``(B) $250,000,000 for fiscal year 2011;
``(C) $350,000,000 for fiscal year 2012;
``(D) $400,000,000 for fiscal year 2013; and
``(E) $400,000,000 for fiscal year 2014.
``(2) Reservations.--Of the amount appropriated under this
subsection for a fiscal year, the Secretary shall reserve--
``(A) 3 percent of such amount for purposes of
making grants to eligible entities that are Indian
Tribes (or a consortium of Indian Tribes), Tribal
Organizations, or Urban Indian Organizations; and
``(B) 3 percent of such amount for purposes of
carrying out subsections (d)(1)(B)(iii), (g), and
(h)(3).
``(3) Availability.--Funds made available to an eligible
entity under this section for a fiscal year shall remain
available for expenditure by the eligible entity through the end
of the second succeeding fiscal year after award. Any funds that
are not expended by the eligible entity during the period in
which the funds are available under the preceding sentence may
be used for grants to nonprofit organizations under subsection
(h)(2)(B).

``(k) Definitions.--In this section:
``(1) Eligible entity.--
``(A) In general.--The term `eligible entity' means
a State, an Indian Tribe, Tribal Organization, or Urban
Indian Organization, Puerto Rico, Guam, the Virgin
Islands, the Northern Mariana Islands, and American
Samoa.
``(B) Nonprofit organizations.--Only for purposes of
awarding grants under subsection (h)(2)(B), such term
shall include a nonprofit organization with an
established record of providing early childhood home
visitation programs or initiatives in a State or several
States.
``(2) Eligible family.--The term `eligible family' means--
``(A) a woman who is pregnant, and the father of the
child if the father is available; or
``(B) a parent or primary caregiver of a child,
including grandparents or other relatives of the child,
and foster parents, who are serving as the child's
primary caregiver from birth to kindergarten entry, and
including a noncustodial parent who has an ongoing
relationship with, and at times provides physical care
for, the child.
``(3) Indian tribe; tribal organization.--The terms `Indian
Tribe' and `Tribal Organization', and `Urban Indian
Organization' have the meanings given such terms in section 4 of
the Indian Health Care Improvement Act.''.

[[Page 344]]

SEC. 2952. <> SUPPORT, EDUCATION, AND RESEARCH
FOR POSTPARTUM DEPRESSION.

(a) Research on Postpartum Conditions.--
(1) Expansion and intensification of activities.--The
Secretary of Health and Human Services (in this subsection and
subsection (c) referred to as the ``Secretary'') is encouraged
to continue activities on postpartum depression or postpartum
psychosis (in this subsection and subsection (c) referred to as
``postpartum conditions''), including research to expand the
understanding of the causes of, and treatments for, postpartum
conditions. Activities under this paragraph shall include
conducting and supporting the following:
(A) Basic research concerning the etiology and
causes of the conditions.
(B) Epidemiological studies to address the frequency
and natural history of the conditions and the
differences among racial and ethnic groups with respect
to the conditions.
(C) The development of improved screening and
diagnostic techniques.
(D) Clinical research for the development and
evaluation of new treatments.
(E) Information and education programs for health
care professionals and the public, which may include a
coordinated national campaign to increase the awareness
and knowledge of postpartum conditions. Activities under
such a national campaign may--
(i) include public service announcements
through television, radio, and other means; and
(ii) focus on--
(I) raising awareness about
screening;
(II) educating new mothers and their
families about postpartum conditions to
promote earlier diagnosis and treatment;
and
(III) ensuring that such education
includes complete information concerning
postpartum conditions, including its
symptoms, methods of coping with the
illness, and treatment resources.
(2) Sense of congress regarding longitudinal study of
relative mental health consequences for women of resolving a
pregnancy.--
(A) Sense of congress.--It is the sense of Congress
that the Director of the National Institute of Mental
Health may conduct a nationally representative
longitudinal study (during the period of fiscal years
2010 through 2019) of the relative mental health
consequences for women of resolving a pregnancy
(intended and unintended) in various ways, including
carrying the pregnancy to term and parenting the child,
carrying the pregnancy to term and placing the child for
adoption, miscarriage, and having an abortion. This
study may assess the incidence, timing, magnitude, and
duration of the immediate and long-term mental health
consequences (positive or negative) of these pregnancy
outcomes.
(B) Report.--Subject to the completion of the study
under subsection (a), beginning not later than 5 years
after the date of the enactment of this Act, and
periodically

[[Page 345]]

thereafter for the duration of the study, such Director
may prepare and submit to the Congress reports on the
findings of the study.

(b) Grants To Provide Services to Individuals With a Postpartum
Condition and Their Families.--Title V of the Social Security Act (42
U.S.C. 701 et seq.), as amended by section 2951, is amended by adding at
the end the following new section:

``SEC. 512. <> SERVICES TO INDIVIDUALS WITH A
POSTPARTUM CONDITION AND THEIR FAMILIES.

``(a) In General.--In addition to any other payments made under this
title to a State, the Secretary may make grants to eligible entities for
projects for the establishment, operation, and coordination of effective
and cost-efficient systems for the delivery of essential services to
individuals with or at risk for postpartum conditions and their
families.
``(b) Certain Activities.--To the extent practicable and
appropriate, the Secretary shall ensure that projects funded under
subsection (a) provide education and services with respect to the
diagnosis and management of postpartum conditions for individuals with
or at risk for postpartum conditions and their families. The Secretary
may allow such projects to include the following:
``(1) Delivering or enhancing outpatient and home-based
health and support services, including case management and
comprehensive treatment services.
``(2) Delivering or enhancing inpatient care management
services that ensure the well-being of the mother and family and
the future development of the infant.
``(3) Improving the quality, availability, and organization
of health care and support services (including transportation
services, attendant care, homemaker services, day or respite
care, and providing counseling on financial assistance and
insurance).
``(4) Providing education about postpartum conditions to
promote earlier diagnosis and treatment. Such education may
include--
``(A) providing complete information on postpartum
conditions, symptoms, methods of coping with the
illness, and treatment resources; and
``(B) in the case of a grantee that is a State,
hospital, or birthing facility--
``(i) providing education to new mothers and
fathers, and other family members as appropriate,
concerning postpartum conditions before new
mothers leave the health facility; and
``(ii) ensuring that training programs
regarding such education are carried out at the
health facility.

``(c) Integration With Other Programs.--To the extent practicable
and appropriate, the Secretary may integrate the grant program under
this section with other grant programs carried out by the Secretary,
including the program under section 330 of the Public Health Service
Act.
``(d) Requirements.--The Secretary shall establish requirements for
grants made under this section that include a limit on the amount of
grants funds that may be used for administration, accounting, reporting,
or program oversight functions and a requirement for each eligible
entity that receives a grant to submit, for

[[Page 346]]

each grant period, a report to the Secretary that describes how grant
funds were used during such period.
``(e) Technical Assistance.--The Secretary may provide technical
assistance to entities seeking a grant under this section in order to
assist such entities in complying with the requirements of this section.
``(f) Application of Other Provisions of Title.--
``(1) In general.--Except as provided in paragraph (2), the
other provisions of this title shall not apply to a grant made
under this section.
``(2) Exceptions.--The following provisions of this title
shall apply to a grant made under this section to the same
extent and in the same manner as such provisions apply to
allotments made under section 502(c):
``(A) Section 504(b)(6) (relating to prohibition on
payments to excluded individuals and entities).
``(B) Section 504(c) (relating to the use of funds
for the purchase of technical assistance).
``(C) Section 504(d) (relating to a limitation on
administrative expenditures).
``(D) Section 506 (relating to reports and audits),
but only to the extent determined by the Secretary to be
appropriate for grants made under this section.
``(E) Section 507 (relating to penalties for false
statements).
``(F) Section 508 (relating to nondiscrimination).
``(G) Section 509(a) (relating to the administration
of the grant program).

``(g) Definitions.--In this section:
``(1) The term `eligible entity'--
``(A) means a public or nonprofit private entity;
and
``(B) includes a State or local government, public-
private partnership, recipient of a grant under section
330H of the Public Health Service Act (relating to the
Healthy Start Initiative), public or nonprofit private
hospital, community-based organization, hospice,
ambulatory care facility, community health center,
migrant health center, public housing primary care
center, or homeless health center.
``(2) The term `postpartum condition' means postpartum
depression or postpartum psychosis.''.

(c) General Provisions.--
(1) Authorization of appropriations.--To carry out this
section and the amendment made by subsection (b), there are
authorized to be appropriated, in addition to such other sums as
may be available for such purpose--
(A) $3,000,000 for fiscal year 2010; and
(B) such sums as may be necessary for fiscal years
2011 and 2012.
(2) Report by the secretary.--
(A) Study.--The Secretary shall conduct a study on
the benefits of screening for postpartum conditions.
(B) Report.--Not later than 2 years after the date
of the enactment of this Act, the Secretary shall
complete the study required by subparagraph (A) and
submit a report to the Congress on the results of such
study.

[[Page 347]]

SEC. 2953. PERSONAL RESPONSIBILITY EDUCATION.

Title V of the Social Security Act (42 U.S.C. 701 et seq.), as
amended by sections 2951 and 2952(c), is amended by adding at the end
the following:

``SEC. 513. <> PERSONAL RESPONSIBILITY EDUCATION.

``(a) Allotments to States.--
``(1) Amount.--
``(A) In general.--For the purpose described in
subsection (b), subject to the succeeding provisions of
this section, for each of fiscal years 2010 through
2014, the Secretary shall allot to each State an amount
equal to the product of--
``(i) the amount appropriated under subsection
(f) for the fiscal year and available for
allotments to States after the application of
subsection (c); and
``(ii) the State youth population percentage
determined under paragraph (2).
``(B) Minimum allotment.--
``(i) In general.--Each State allotment under
this paragraph for a fiscal year shall be at least
$250,000.
``(ii) Pro rata adjustments.--The Secretary
shall adjust on a pro rata basis the amount of the
State allotments determined under this paragraph
for a fiscal year to the extent necessary to
comply with clause (i).
``(C) Application required to access allotments.--
``(i) In general.--A State shall not be paid
from its allotment for a fiscal year unless the
State submits an application to the Secretary for
the fiscal year and the Secretary approves the
application (or requires changes to the
application that the State satisfies) and meets
such additional requirements as the Secretary may
specify.
``(ii) Requirements.--The State application
shall contain an assurance that the State has
complied with the requirements of this section in
preparing and submitting the application and shall
include the following as well as such additional
information as the Secretary may require:
``(I) Based on data from the Centers
for Disease Control and Prevention
National Center for Health Statistics,
the most recent pregnancy rates for the
State for youth ages 10 to 14 and youth
ages 15 to 19 for which data are
available, the most recent birth rates
for such youth populations in the State
for which data are available, and trends
in those rates for the most recently
preceding 5-year period for which such
data are available.
``(II) State-established goals for
reducing the pregnancy rates and birth
rates for such youth populations.
``(III) A description of the State's
plan for using the State allotments
provided under this section to achieve
such goals, especially among youth

[[Page 348]]

populations that are the most high-risk
or vulnerable for pregnancies or
otherwise have special circumstances,
including youth in foster care, homeless
youth, youth with HIV/AIDS, pregnant
youth who are under 21 years of age,
mothers who are under 21 years of age,
and youth residing in areas with high
birth rates for youth.
``(2) State youth population percentage.--
``(A) In general.--For purposes of paragraph
(1)(A)(ii), the State youth population percentage is,
with respect to a State, the proportion (expressed as a
percentage) of--
``(i) the number of individuals who have
attained age 10 but not attained age 20 in the
State; to
``(ii) the number of such individuals in all
States.
``(B) Determination of number of youth.--The number
of individuals described in clauses (i) and (ii) of
subparagraph (A) in a State shall be determined on the
basis of the most recent Bureau of the Census data.
``(3) Availability of state allotments.--Subject to
paragraph (4)(A), amounts allotted to a State pursuant to this
subsection for a fiscal year shall remain available for
expenditure by the State through the end of the second
succeeding fiscal year.
``(4) Authority to award grants from state allotments to
local organizations and entities in nonparticipating states.--
``(A) Grants from unexpended allotments.--If a State
does not submit an application under this section for
fiscal year 2010 or 2011, the State shall no longer be
eligible to submit an application to receive funds from
the amounts allotted for the State for each of fiscal
years 2010 through 2014 and such amounts shall be used
by the Secretary to award grants under this paragraph
for each of fiscal years 2012 through 2014. The
Secretary also shall use any amounts from the allotments
of States that submit applications under this section
for a fiscal year that remain unexpended as of the end
of the period in which the allotments are available for
expenditure under paragraph (3) for awarding grants
under this paragraph.
``(B) 3-year grants.--
``(i) In general.--The Secretary shall solicit
applications to award 3-year grants in each of
fiscal years 2012, 2013, and 2014 to local
organizations and entities to conduct, consistent
with subsection (b), programs and activities in
States that do not submit an application for an
allotment under this section for fiscal year 2010
or 2011.
``(ii) Faith-based organizations or
consortia.--The Secretary may solicit and award
grants under this paragraph to faith-based
organizations or consortia.
``(C) Evaluation.--An organization or entity awarded
a grant under this paragraph shall agree to participate
in a rigorous Federal evaluation.
``(5) Maintenance of effort.--No payment shall be made to a
State from the allotment determined for the State under this
subsection or to a local organization or entity awarded

[[Page 349]]

a grant under paragraph (4), if the expenditure of non-federal
funds by the State, organization, or entity for activities,
programs, or initiatives for which amounts from allotments and
grants under this subsection may be expended is less than the
amount expended by the State, organization, or entity for such
programs or initiatives for fiscal year 2009.
``(6) Data collection and reporting.--A State or local
organization or entity receiving funds under this section shall
cooperate with such requirements relating to the collection of
data and information and reporting on outcomes regarding the
programs and activities carried out with such funds, as the
Secretary shall specify.

``(b) Purpose.--
``(1) In general.--The purpose of an allotment under
subsection (a)(1) to a State is to enable the State (or, in the
case of grants made under subsection (a)(4)(B), to enable a
local organization or entity) to carry out personal
responsibility education programs consistent with this
subsection.
``(2) Personal responsibility education programs.--
``(A) <> In general.--In this
section, the term `personal responsibility education
program' means a program that is designed to educate
adolescents on--
``(i) both abstinence and contraception for
the prevention of pregnancy and sexually
transmitted infections, including HIV/AIDS,
consistent with the requirements of subparagraph
(B); and
``(ii) at least 3 of the adulthood preparation
subjects described in subparagraph (C).
``(B) Requirements.--The requirements of this
subparagraph are the following:
``(i) The program replicates evidence-based
effective programs or substantially incorporates
elements of effective programs that have been
proven on the basis of rigorous scientific
research to change behavior, which means delaying
sexual activity, increasing condom or
contraceptive use for sexually active youth, or
reducing pregnancy among youth.
``(ii) The program is medically-accurate and
complete.
``(iii) The program includes activities to
educate youth who are sexually active regarding
responsible sexual behavior with respect to both
abstinence and the use of contraception.
``(iv) The program places substantial emphasis
on both abstinence and contraception for the
prevention of pregnancy among youth and sexually
transmitted infections.
``(v) The program provides age-appropriate
information and activities.
``(vi) The information and activities carried
out under the program are provided in the cultural
context that is most appropriate for individuals
in the particular population group to which they
are directed.
``(C) Adulthood preparation subjects.--The adulthood
preparation subjects described in this subparagraph are
the following:

[[Page 350]]

``(i) Healthy relationships, such as positive
self-esteem and relationship dynamics,
friendships, dating, romantic involvement,
marriage, and family interactions.
``(ii) Adolescent development, such as the
development of healthy attitudes and values about
adolescent growth and development, body image,
racial and ethnic diversity, and other related
subjects.
``(iii) Financial literacy.
``(iv) Parent-child communication.
``(v) Educational and career success, such as
developing skills for employment preparation, job
seeking, independent living, financial self-
sufficiency, and workplace productivity.
``(vi) Healthy life skills, such as goal-
setting, decision making, negotiation,
communication and interpersonal skills, and stress
management.

``(c) Reservations of Funds.--
``(1) Grants to implement innovative strategies.--From the
amount appropriated under subsection (f) for the fiscal year,
the Secretary shall reserve $10,000,000 of such amount for
purposes of awarding grants to entities to implement innovative
youth pregnancy prevention strategies and target services to
high-risk, vulnerable, and culturally under-represented youth
populations, including youth in foster care, homeless youth,
youth with HIV/AIDS, pregnant women who are under 21 years of
age and their partners, mothers who are under 21 years of age
and their partners, and youth residing in areas with high birth
rates for youth. An entity awarded a grant under this paragraph
shall agree to participate in a rigorous Federal evaluation of
the activities carried out with grant funds.
``(2) Other reservations.--From the amount appropriated
under subsection (f) for the fiscal year that remains after the
application of paragraph (1), the Secretary shall reserve the
following amounts:
``(A) Grants for indian tribes or tribal
organizations.--The Secretary shall reserve 5 percent of
such remainder for purposes of awarding grants to Indian
tribes and tribal organizations in such manner, and
subject to such requirements, as the Secretary, in
consultation with Indian tribes and tribal
organizations, determines appropriate.
``(B) Secretarial responsibilities.--
``(i) Reservation of funds.--The Secretary
shall reserve 10 percent of such remainder for
expenditures by the Secretary for the activities
described in clauses (ii) and (iii).
``(ii) Program support.--The Secretary shall
provide, directly or through a competitive grant
process, research, training and technical
assistance, including dissemination of research
and information regarding effective and promising
practices, providing consultation and resources on
a broad array of teen pregnancy prevention
strategies, including abstinence and
contraception, and developing resources and
materials to support the activities of recipients
of grants and other State, tribal, and community
organizations working

[[Page 351]]

to reduce teen pregnancy. In carrying out such
functions, the Secretary shall collaborate with a
variety of entities that have expertise in the
prevention of teen pregnancy, HIV and sexually
transmitted infections, healthy relationships,
financial literacy, and other topics addressed
through the personal responsibility education
programs.
``(iii) Evaluation.--The Secretary shall
evaluate the programs and activities carried out
with funds made available through allotments or
grants under this section.

``(d) Administration.--
``(1) In general.--The Secretary shall administer this
section through the Assistant Secretary for the Administration
for Children and Families within the Department of Health and
Human Services.
``(2) Application of other provisions of title.--
``(A) In general.--Except as provided in
subparagraph (B), the other provisions of this title
shall not apply to allotments or grants made under this
section.
``(B) Exceptions.--The following provisions of this
title shall apply to allotments and grants made under
this section to the same extent and in the same manner
as such provisions apply to allotments made under
section 502(c):
``(i) Section 504(b)(6) (relating to
prohibition on payments to excluded individuals
and entities).
``(ii) Section 504(c) (relating to the use of
funds for the purchase of technical assistance).
``(iii) Section 504(d) (relating to a
limitation on administrative expenditures).
``(iv) Section 506 (relating to reports and
audits), but only to the extent determined by the
Secretary to be appropriate for grants made under
this section.
``(v) Section 507 (relating to penalties for
false statements).
``(vi) Section 508 (relating to
nondiscrimination).

``(e) Definitions.--In this section:
``(1) Age-appropriate.--The term `age-appropriate', with
respect to the information in pregnancy prevention, means
topics, messages, and teaching methods suitable to particular
ages or age groups of children and adolescents, based on
developing cognitive, emotional, and behavioral capacity typical
for the age or age group.
``(2) Medically accurate and complete.--The term `medically
accurate and complete' means verified or supported by the weight
of research conducted in compliance with accepted scientific
methods and--
``(A) published in peer-reviewed journals, where
applicable; or
``(B) comprising information that leading
professional organizations and agencies with relevant
expertise in the field recognize as accurate, objective,
and complete.
``(3) Indian tribes; tribal organizations.--The terms
`Indian tribe' and `Tribal organization' have the meanings given
such terms in section 4 of the Indian Health Care Improvement
Act (25 U.S.C. 1603)).

[[Page 352]]

``(4) Youth.--The term `youth' means an individual who has
attained age 10 but has not attained age 20.

``(f) Appropriation.--For the purpose of carrying out this section,
there is appropriated, out of any money in the Treasury not otherwise
appropriated, $75,000,000 for each of fiscal years 2010 through 2014.
Amounts appropriated under this subsection shall remain available until
expended.''.

SEC. 2954. RESTORATION OF FUNDING FOR ABSTINENCE EDUCATION.

Section 510 of the Social Security Act (42 U.S.C. 710) is amended--
(1) in subsection (a), by striking ``fiscal year 1998 and
each subsequent fiscal year'' and inserting ``each of fiscal
years 2010 through 2014''; and
(2) in subsection (d)--
(A) in the first sentence, by striking ``1998
through 2003'' and inserting ``2010 through 2014''; and
(B) in the second sentence, by inserting ``(except
that such appropriation shall be made on the date of
enactment of the Patient Protection and Affordable Care
Act in the case of fiscal year 2010)'' before the
period.

SEC. 2955. INCLUSION OF INFORMATION ABOUT THE IMPORTANCE OF HAVING A
HEALTH CARE POWER OF ATTORNEY IN TRANSITION PLANNING FOR
CHILDREN AGING OUT OF FOSTER CARE AND INDEPENDENT LIVING
PROGRAMS.

(a) Transition Planning.--Section 475(5)(H) of the Social Security
Act (42 U.S.C. 675(5)(H)) is amended by inserting ``includes information
about the importance of designating another individual to make health
care treatment decisions on behalf of the child if the child becomes
unable to participate in such decisions and the child does not have, or
does not want, a relative who would otherwise be authorized under State
law to make such decisions, and provides the child with the option to
execute a health care power of attorney, health care proxy, or other
similar document recognized under State law,'' after ``employment
services,''.
(b) Independent Living Education.--Section 477(b)(3) of such Act (42
U.S.C. 677(b)(3)) is amended by adding at the end the following:
``(K) <> A certification by
the chief executive officer of the State that the State
will ensure that an adolescent participating in the
program under this section are provided with education
about the importance of designating another individual
to make health care treatment decisions on behalf of the
adolescent if the adolescent becomes unable to
participate in such decisions and the adolescent does
not have, or does not want, a relative who would
otherwise be authorized under State law to make such
decisions, whether a health care power of attorney,
health care proxy, or other similar document is
recognized under State law, and how to execute such a
document if the adolescent wants to do so.''.

(c) Health Oversight and Coordination Plan.--Section 422(b)(15)(A)
of such Act (42 U.S.C. 622(b)(15)(A)) is amended--
(1) in clause (v), by striking ``and'' at the end; and
(2) by adding at the end the following:
``(vii) steps to ensure that the components of
the transition plan development process required
under

[[Page 353]]

section 475(5)(H) that relate to the health care
needs of children aging out of foster care,
including the requirements to include options for
health insurance, information about a health care
power of attorney, health care proxy, or other
similar document recognized under State law, and
to provide the child with the option to execute
such a document, are met; and''.

(d) <> Effective Date.--The amendments made
by this section take effect on October 1, 2010.

TITLE III--IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE

Subtitle A--Transforming the Health Care Delivery System

PART I--LINKING PAYMENT TO QUALITY OUTCOMES UNDER THE MEDICARE PROGRAM

SEC. 3001. HOSPITAL VALUE-BASED PURCHASING PROGRAM.

(a) Program.--
(1) In general.--Section 1886 of the Social Security Act (42
U.S.C. 1395ww), as amended by section 4102(a) of the HITECH Act
(Public Law 111-5), is amended by adding at the end the
following new subsection:

``(o) Hospital Value-Based Purchasing Program.--
``(1) Establishment.--
``(A) In general.--Subject to the succeeding
provisions of this subsection, the Secretary shall
establish a hospital value-based purchasing program (in
this subsection referred to as the `Program') under
which value-based incentive payments are made in a
fiscal year to hospitals that meet the performance
standards under paragraph (3) for the performance period
for such fiscal year (as established under paragraph
(4)).
``(B) Program to begin in fiscal year 2013.--The
Program shall apply to payments for discharges occurring
on or after October 1, 2012.
``(C) Applicability of program to hospitals.--
``(i) In general.--For purposes of this
subsection, subject to clause (ii), the term
`hospital' means a subsection (d) hospital (as
defined in subsection (d)(1)(B)).
``(ii) Exclusions.--The term `hospital' shall
not include, with respect to a fiscal year, a
hospital--
``(I) that is subject to the payment
reduction under subsection
(b)(3)(B)(viii)(I) for such fiscal year;
``(II) for which, during the
performance period for such fiscal year,
the Secretary has cited deficiencies
that pose immediate jeopardy to the
health or safety of patients;

[[Page 354]]

``(III) for which there are not a
minimum number (as determined by the
Secretary) of measures that apply to the
hospital for the performance period for
such fiscal year; or
``(IV) for which there are not a
minimum number (as determined by the
Secretary) of cases for the measures
that apply to the hospital for the
performance period for such fiscal year.
``(iii) Independent analysis.--For purposes of
determining the minimum numbers under subclauses
(III) and (IV) of clause (ii), the Secretary shall
have conducted an independent analysis of what
numbers are appropriate.
``(iv) Exemption.--In the case of a hospital
that is paid under section 1814(b)(3), the
Secretary may exempt such hospital from the
application of this subsection if the State which
is paid under such section submits an annual
report to the Secretary describing how a similar
program in the State for a participating hospital
or hospitals achieves or surpasses the measured
results in terms of patient health outcomes and
cost savings established under this subsection.
``(2) Measures.--
``(A) In general.--The Secretary shall select
measures for purposes of the Program. Such measures
shall be selected from the measures specified under
subsection (b)(3)(B)(viii).
``(B) Requirements.--
``(i) For fiscal year 2013.--For value-based
incentive payments made with respect to discharges
occurring during fiscal year 2013, the Secretary
shall ensure the following:
``(I) Conditions or procedures.--
Measures are selected under subparagraph
(A) that cover at least the following 5
specific conditions or procedures:
``(aa) Acute myocardial
infarction (AMI).
``(bb) Heart failure.
``(cc) Pneumonia.
``(dd) Surgeries, as
measured by the Surgical Care
Improvement Project (formerly
referred to as `Surgical
Infection Prevention' for
discharges occurring before July
2006).
``(ee) Healthcare-associated
infections, as measured by the
prevention metrics and targets
established in the HHS Action
Plan to Prevent Healthcare-
Associated Infections (or any
successor plan) of the
Department of Health and Human
Services.
``(II) HCAHPS.--Measures selected
under subparagraph (A) shall be related
to the Hospital Consumer Assessment of
Healthcare Providers and Systems survey
(HCAHPS).
``(ii) Inclusion of efficiency measures.--For
value-based incentive payments made with respect
to

[[Page 355]]

discharges occurring during fiscal year 2014 or a
subsequent fiscal year, the Secretary shall ensure
that measures selected under subparagraph (A)
include efficiency measures, including measures of
`Medicare spending per beneficiary'. Such measures
shall be adjusted for factors such as age, sex,
race, severity of illness, and other factors that
the Secretary determines appropriate.
``(C) Limitations.--
``(i) Time requirement for prior reporting and
notice.--The Secretary may not select a measure
under subparagraph (A) for use under the Program
with respect to a performance period for a fiscal
year (as established under paragraph (4)) unless
such measure has been specified under subsection
(b)(3)(B)(viii) and included on the Hospital
Compare Internet website for at least 1 year prior
to the beginning of such performance period.
``(ii) Measure not applicable unless hospital
furnishes services appropriate to the measure.--A
measure selected under subparagraph (A) shall not
apply to a hospital if such hospital does not
furnish services appropriate to such measure.
``(D) Replacing measures.--Subclause (VI) of
subsection (b)(3)(B)(viii) shall apply to measures
selected under subparagraph (A) in the same manner as
such subclause applies to measures selected under such
subsection.
``(3) Performance standards.--
``(A) Establishment.--The Secretary shall establish
performance standards with respect to measures selected
under paragraph (2) for a performance period for a
fiscal year (as established under paragraph (4)).
``(B) Achievement and improvement.--The performance
standards established under subparagraph (A) shall
include levels of achievement and improvement.
``(C) Timing.--The Secretary shall establish and
announce the performance standards under subparagraph
(A) not later than 60 days prior to the beginning of the
performance period for the fiscal year involved.
``(D) Considerations in establishing standards.--In
establishing performance standards with respect to
measures under this paragraph, the Secretary shall take
into account appropriate factors, such as--
``(i) practical experience with the measures
involved, including whether a significant
proportion of hospitals failed to meet the
performance standard during previous performance
periods;
``(ii) historical performance standards;
``(iii) improvement rates; and
``(iv) the opportunity for continued
improvement.
``(4) Performance period.--For purposes of the Program, the
Secretary shall establish the performance period for a fiscal
year. Such performance period shall begin and end prior to the
beginning of such fiscal year.
``(5) Hospital performance score.--
``(A) In general.--Subject to subparagraph (B), the
Secretary shall develop a methodology for assessing the

[[Page 356]]

total performance of each hospital based on performance
standards with respect to the measures selected under
paragraph (2) for a performance period (as established
under paragraph (4)). Using such methodology, the
Secretary shall provide for an assessment (in this
subsection referred to as the `hospital performance
score') for each hospital for each performance period.
``(B) Application.--
``(i) Appropriate distribution.--The Secretary
shall ensure that the application of the
methodology developed under subparagraph (A)
results in an appropriate distribution of value-
based incentive payments under paragraph (6) among
hospitals achieving different levels of hospital
performance scores, with hospitals achieving the
highest hospital performance scores receiving the
largest value-based incentive payments.
``(ii) Higher of achievement or improvement.--
The methodology developed under subparagraph (A)
shall provide that the hospital performance score
is determined using the higher of its achievement
or improvement score for each measure.
``(iii) Weights.--The methodology developed
under subparagraph (A) shall provide for the
assignment of weights for categories of measures
as the Secretary determines appropriate.
``(iv) No minimum performance standard.--The
Secretary shall not set a minimum performance
standard in determining the hospital performance
score for any hospital.
``(v) Reflection of measures applicable to the
hospital.--The hospital performance score for a
hospital shall reflect the measures that apply to
the hospital.
``(6) Calculation of value-based incentive payments.--
``(A) <> In general.--In the
case of a hospital that the Secretary determines meets
(or exceeds) the performance standards under paragraph
(3) for the performance period for a fiscal year (as
established under paragraph (4)), the Secretary shall
increase the base operating DRG payment amount (as
defined in paragraph (7)(D)), as determined after
application of paragraph (7)(B)(i), for a hospital for
each discharge occurring in such fiscal year by the
value-based incentive payment amount.
``(B) Value-based incentive payment amount.--The
value-based incentive payment amount for each discharge
of a hospital in a fiscal year shall be equal to the
product of--
``(i) the base operating DRG payment amount
(as defined in paragraph (7)(D)) for the discharge
for the hospital for such fiscal year; and
``(ii) the value-based incentive payment
percentage specified under subparagraph (C) for
the hospital for such fiscal year.
``(C) Value-based incentive payment percentage.--

[[Page 357]]

``(i) In general.--The Secretary shall specify
a value-based incentive payment percentage for a
hospital for a fiscal year.
``(ii) Requirements.--In specifying the value-
based incentive payment percentage for each
hospital for a fiscal year under clause (i), the
Secretary shall ensure that--
``(I) such percentage is based on
the hospital performance score of the
hospital under paragraph (5); and
``(II) the total amount of value-
based incentive payments under this
paragraph to all hospitals in such
fiscal year is equal to the total amount
available for value-based incentive
payments for such fiscal year under
paragraph (7)(A), as estimated by the
Secretary.
``(7) Funding for value-based incentive payments.--
``(A) Amount.--The total amount available for value-
based incentive payments under paragraph (6) for all
hospitals for a fiscal year shall be equal to the total
amount of reduced payments for all hospitals under
subparagraph (B) for such fiscal year, as estimated by
the Secretary.
``(B) Adjustment to payments.--
``(i) In general.--The Secretary shall reduce
the base operating DRG payment amount (as defined
in subparagraph (D)) for a hospital for each
discharge in a fiscal year (beginning with fiscal
year 2013) by an amount equal to the applicable
percent (as defined in subparagraph (C)) of the
base operating DRG payment amount for the
discharge for the hospital for such fiscal year.
The Secretary shall make such reductions for all
hospitals in the fiscal year involved, regardless
of whether or not the hospital has been determined
by the Secretary to have earned a value-based
incentive payment under paragraph (6) for such
fiscal year.
``(ii) No effect on other payments.--Payments
described in items (aa) and (bb) of subparagraph
(D)(i)(II) for a hospital shall be determined as
if this subsection had not been enacted.
``(C) Applicable percent defined.--For purposes of
subparagraph (B), the term `applicable percent' means--
``(i) with respect to fiscal year 2013, 1.0
percent;
``(ii) with respect to fiscal year 2014, 1.25
percent;
``(iii) with respect to fiscal year 2015, 1.5
percent;
``(iv) with respect to fiscal year 2016, 1.75
percent; and
``(v) with respect to fiscal year 2017 and
succeeding fiscal years, 2 percent.
``(D) Base operating drg payment amount defined.--
``(i) In general.--Except as provided in
clause (ii), in this subsection, the term `base
operating DRG payment amount' means, with respect
to a hospital for a fiscal year--
``(I) the payment amount that would
otherwise be made under subsection (d)
(determined without

[[Page 358]]

regard to subsection (q)) for a
discharge if this subsection did not
apply; reduced by
``(II) any portion of such payment
amount that is attributable to--
``(aa) payments under
paragraphs (5)(A), (5)(B),
(5)(F), and (12) of subsection
(d); and
``(bb) such other payments
under subsection (d) determined
appropriate by the Secretary.
``(ii) Special rules for certain hospitals.--
``(I) Sole community hospitals and
medicare-dependent, small rural
hospitals.--In the case of a medicare-
dependent, small rural hospital (with
respect to discharges occurring during
fiscal year 2012 and 2013) or a sole
community hospital, in applying
subparagraph (A)(i), the payment amount
that would otherwise be made under
subsection (d) shall be determined
without regard to subparagraphs (I) and
(L) of subsection (b)(3) and
subparagraphs (D) and (G) of subsection
(d)(5).
``(II) Hospitals paid under section
1814.--In the case of a hospital that is
paid under section 1814(b)(3), the term
`base operating DRG payment amount'
means the payment amount under such
section.
``(8) Announcement of net result of
adjustments. <> --Under the Program, the
Secretary shall, not later than 60 days prior to the fiscal year
involved, inform each hospital of the adjustments to payments to
the hospital for discharges occurring in such fiscal year under
paragraphs (6) and (7)(B)(i).
``(9) No effect in subsequent fiscal years.--The value-based
incentive payment under paragraph (6) and the payment reduction
under paragraph (7)(B)(i) shall each apply only with respect to
the fiscal year involved, and the Secretary shall not take into
account such value-based incentive payment or payment reduction
in making payments to a hospital under this section in a
subsequent fiscal year.
``(10) Public reporting.--
``(A) Hospital specific information.--
``(i) In general.--The Secretary shall make
information available to the public regarding the
performance of individual hospitals under the
Program, including--
``(I) the performance of the
hospital with respect to each measure
that applies to the hospital;
``(II) the performance of the
hospital with respect to each condition
or procedure; and
``(III) the hospital performance
score assessing the total performance of
the hospital.
``(ii) Opportunity to review and submit
corrections.--The Secretary shall ensure that a
hospital has the opportunity to review, and submit
corrections for, the information to be made public
with respect to the hospital under clause (i)
prior to such information being made public.

[[Page 359]]

``(iii) Website.--Such information shall be
posted on the Hospital Compare Internet website in
an easily understandable format.
``(B) Aggregate information.-- <> The Secretary shall periodically post on the
Hospital Compare Internet website aggregate information
on the Program, including--
``(i) the number of hospitals receiving value-
based incentive payments under paragraph (6) and
the range and total amount of such value-based
incentive payments; and
``(ii) the number of hospitals receiving less
than the maximum value-based incentive payment
available to the hospital for the fiscal year
involved and the range and amount of such
payments.
``(11) Implementation.--
``(A) Appeals.--The Secretary shall establish a
process by which hospitals may appeal the calculation of
a hospital's performance assessment with respect to the
performance standards established under paragraph (3)(A)
and the hospital performance score under paragraph (5).
The Secretary shall ensure that such process provides
for resolution of such appeals in a timely manner.
``(B) Limitation on review.--Except as provided in
subparagraph (A), there shall be no administrative or
judicial review under section 1869, section 1878, or
otherwise of the following:
``(i) The methodology used to determine the
amount of the value-based incentive payment under
paragraph (6) and the determination of such
amount.
``(ii) The determination of the amount of
funding available for such value-based incentive
payments under paragraph (7)(A) and the payment
reduction under paragraph (7)(B)(i).
``(iii) The establishment of the performance
standards under paragraph (3) and the performance
period under paragraph (4).
``(iv) The measures specified under subsection
(b)(3)(B)(viii) and the measures selected under
paragraph (2).
``(v) The methodology developed under
paragraph (5) that is used to calculate hospital
performance scores and the calculation of such
scores.
``(vi) The validation methodology specified in
subsection (b)(3)(B)(viii)(XI).
``(C) Consultation with small hospitals.--The
Secretary shall consult with small rural and urban
hospitals on the application of the Program to such
hospitals.
``(12) Promulgation of regulations.--The Secretary shall
promulgate regulations to carry out the Program, including the
selection of measures under paragraph (2), the methodology
developed under paragraph (5) that is used to calculate hospital
performance scores, and the methodology used to determine the
amount of value-based incentive payments under paragraph (6).''.
(2) Amendments for reporting of hospital quality
information.--Section 1886(b)(3)(B)(viii) of the Social Security
Act (42 U.S.C. 1395ww(b)(3)(B)(viii)) is amended--

[[Page 360]]

(A) in subclause (II), by adding at the end the
following sentence: ``The Secretary may require
hospitals to submit data on measures that are not used
for the determination of value-based incentive payments
under subsection (o).'';
(B) in subclause (V), by striking ``beginning with
fiscal year 2008'' and inserting ``for fiscal years 2008
through 2012'';
(C) in subclause (VII), in the first sentence, by
striking ``data submitted'' and inserting ``information
regarding measures submitted''; and
(D) by adding at the end the following new
subclauses:

``(VIII) <> Effective for payments beginning
with fiscal year 2013, with respect to quality measures for outcomes of
care, the Secretary shall provide for such risk adjustment as the
Secretary determines to be appropriate to maintain incentives for
hospitals to treat patients with severe illnesses or conditions.

``(IX)(aa) Subject to item (bb), effective for payments beginning
with fiscal year 2013, each measure specified by the Secretary under
this clause shall be endorsed by the entity with a contract under
section 1890(a).
``(bb) In the case of a specified area or medical topic determined
appropriate by the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract under section
1890(a), the Secretary may specify a measure that is not so endorsed as
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary.
``(X) To the extent practicable, the Secretary shall, with input
from consensus organizations and other stakeholders, take steps to
ensure that the measures specified by the Secretary under this clause
are coordinated and aligned with quality measures applicable to--
``(aa) physicians under section 1848(k); and
``(bb) other providers of services and suppliers under this
title.

``(XI) <> The Secretary shall establish a
process to validate measures specified under this clause as appropriate.
Such process shall include the auditing of a number of randomly selected
hospitals sufficient to ensure validity of the reporting program under
this clause as a whole and shall provide a hospital with an opportunity
to appeal the validation of measures reported by such hospital.''.
(3) Website improvements.--Section 1886(b)(3)(B) of the
Social Security Act (42 U.S.C. 1395ww(b)(3)(B)), as amended by
section 4102(b) of the HITECH Act (Public Law 111-5), is amended
by adding at the end the following new clause:

``(x)(I) <> The Secretary shall develop
standard Internet website reports tailored to meet the needs of various
stakeholders such as hospitals, patients, researchers, and policymakers.
The Secretary shall seek input from such stakeholders in determining the
type of information that is useful and the formats that best facilitate
the use of the information.

``(II) The Secretary shall modify the Hospital Compare Internet
website to make the use and navigation of that website readily available
to individuals accessing it.''.
(4) GAO study and report.--
(A) Study.--The Comptroller General of the United
States shall conduct a study on the performance of the

[[Page 361]]

hospital value-based purchasing program established
under section 1886(o) of the Social Security Act, as
added by paragraph (1). Such study shall include an
analysis of the impact of such program on--
(i) the quality of care furnished to Medicare
beneficiaries, including diverse Medicare
beneficiary populations (such as diverse in terms
of race, ethnicity, and socioeconomic status);
(ii) expenditures under the Medicare program,
including any reduced expenditures under Part A of
title XVIII of such Act that are attributable to
the improvement in the delivery of inpatient
hospital services by reason of such hospital
value-based purchasing program;
(iii) the quality performance among safety net
hospitals and any barriers such hospitals face in
meeting the performance standards applicable under
such hospital value-based purchasing program; and
(iv) the quality performance among small rural
and small urban hospitals and any barriers such
hospitals face in meeting the performance
standards applicable under such hospital value-
based purchasing program.
(B) Reports.--
(i) Interim report.--Not later than October 1,
2015, the Comptroller General of the United States
shall submit to Congress an interim report
containing the results of the study conducted
under subparagraph (A), together with
recommendations for such legislation and
administrative action as the Comptroller General
determines appropriate.
(ii) Final report.--Not later than July 1,
2017, the Comptroller General of the United States
shall submit to Congress a report containing the
results of the study conducted under subparagraph
(A), together with recommendations for such
legislation and administrative action as the
Comptroller General determines appropriate.
(5) HHS study and report.--
(A) Study.--The Secretary of Health and Human
Services shall conduct a study on the performance of the
hospital value-based purchasing program established
under section 1886(o) of the Social Security Act, as
added by paragraph (1). Such study shall include an
analysis--
(i) of ways to improve the hospital value-
based purchasing program and ways to address any
unintended consequences that may occur as a result
of such program;
(ii) of whether the hospital value-based
purchasing program resulted in lower spending
under the Medicare program under title XVIII of
such Act or other financial savings to hospitals;
(iii) the appropriateness of the Medicare
program sharing in any savings generated through
the hospital value-based purchasing program; and
(iv) any other area determined appropriate by
the Secretary.

[[Page 362]]

(B) Report.--Not later than January 1, 2016, the
Secretary of Health and Human Services shall submit to
Congress a report containing the results of the study
conducted under subparagraph (A), together with
recommendations for such legislation and administrative
action as the Secretary determines appropriate.

(b) <> Value-Based Purchasing
Demonstration Programs.--
(1) Value-based purchasing demonstration program for
inpatient critical access hospitals.--
(A) Establishment.--
(i) In general.-- <> Not
later than 2 years after the date of enactment of
this Act, the Secretary of Health and Human
Services (in this subsection referred to as the
``Secretary'') shall establish a demonstration
program under which the Secretary establishes a
value-based purchasing program under the Medicare
program under title XVIII of the Social Security
Act for critical access hospitals (as defined in
paragraph (1) of section 1861(mm) of such Act (42
U.S.C. 1395x(mm))) with respect to inpatient
critical access hospital services (as defined in
paragraph (2) of such section) in order to test
innovative methods of measuring and rewarding
quality and efficient health care furnished by
such hospitals.
(ii) Duration.--The demonstration program
under this paragraph shall be conducted for a 3-
year period.
(iii) Sites.--The Secretary shall conduct the
demonstration program under this paragraph at an
appropriate number (as determined by the
Secretary) of critical access hospitals. The
Secretary shall ensure that such hospitals are
representative of the spectrum of such hospitals
that participate in the Medicare program.
(B) Waiver authority.--The Secretary may waive such
requirements of titles XI and XVIII of the Social
Security Act as may be necessary to carry out the
demonstration program under this paragraph.
(C) Budget neutrality requirement.--In conducting
the demonstration program under this section, the
Secretary shall ensure that the aggregate payments made
by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration program
under this section was not implemented.
(D) Report.--Not later than 18 months after the
completion of the demonstration program under this
paragraph, the Secretary shall submit to Congress a
report on the demonstration program together with--
(i) recommendations on the establishment of a
permanent value-based purchasing program under the
Medicare program for critical access hospitals
with respect to inpatient critical access hospital
services; and
(ii) recommendations for such other
legislation and administrative action as the
Secretary determines appropriate.

[[Page 363]]

(2) Value-based purchasing demonstration program for
hospitals excluded from hospital value-based purchasing program
as a result of insufficient numbers of measures and cases.--
(A) Establishment.--
(i) In general.-- <> Not
later than 2 years after the date of enactment of
this Act, the Secretary shall establish a
demonstration program under which the Secretary
establishes a value-based purchasing program under
the Medicare program under title XVIII of the
Social Security Act for applicable hospitals (as
defined in clause (ii)) with respect to inpatient
hospital services (as defined in section 1861(b)
of the Social Security Act (42 U.S.C. 1395x(b)))
in order to test innovative methods of measuring
and rewarding quality and efficient health care
furnished by such hospitals.
(ii) Applicable hospital defined.--For
purposes of this paragraph, the term ``applicable
hospital'' means a hospital described in subclause
(III) or (IV) of section 1886(o)(1)(C)(ii) of the
Social Security Act, as added by subsection
(a)(1).
(iii) Duration.--The demonstration program
under this paragraph shall be conducted for a 3-
year period.
(iv) Sites.--The Secretary shall conduct the
demonstration program under this paragraph at an
appropriate number (as determined by the
Secretary) of applicable hospitals. The Secretary
shall ensure that such hospitals are
representative of the spectrum of such hospitals
that participate in the Medicare program.
(B) Waiver authority.--The Secretary may waive such
requirements of titles XI and XVIII of the Social
Security Act as may be necessary to carry out the
demonstration program under this paragraph.
(C) Budget neutrality requirement.--In conducting
the demonstration program under this section, the
Secretary shall ensure that the aggregate payments made
by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration program
under this section was not implemented.
(D) Report.--Not later than 18 months after the
completion of the demonstration program under this
paragraph, the Secretary shall submit to Congress a
report on the demonstration program together with--
(i) recommendations on the establishment of a
permanent value-based purchasing program under the
Medicare program for applicable hospitals with
respect to inpatient hospital services; and
(ii) recommendations for such other
legislation and administrative action as the
Secretary determines appropriate.

SEC. 3002. IMPROVEMENTS TO THE PHYSICIAN QUALITY REPORTING SYSTEM.

(a) Extension.--Section 1848(m) of the Social Security Act (42
U.S.C. 1395w-4(m)) is amended--

[[Page 364]]

(1) in paragraph (1)--
(A) in subparagraph (A), in the matter preceding
clause (i), by striking ``2010'' and inserting ``2014'';
and
(B) in subparagraph (B)--
(i) in clause (i), by striking ``and'' at the
end;
(ii) in clause (ii), by striking the period at
the end and inserting a semicolon; and
(iii) by adding at the end the following new
clauses:
``(iii) for 2011, 1.0 percent; and
``(iv) for 2012, 2013, and 2014, 0.5
percent.'';
(2) in paragraph (3)--
(A) in subparagraph (A), in the matter preceding
clause (i), by inserting ``(or, for purposes of
subsection (a)(8), for the quality reporting period for
the year)'' after ``reporting period''; and
(B) in subparagraph (C)(i), by inserting ``, or, for
purposes of subsection (a)(8), for a quality reporting
period for the year'' after ``(a)(5), for a reporting
period for a year'';
(3) in paragraph (5)(E)(iv), by striking ``subsection
(a)(5)(A)'' and inserting ``paragraphs (5)(A) and (8)(A) of
subsection (a)''; and
(4) in paragraph (6)(C)--
(A) in clause (i)(II), by striking ``, 2009, 2010,
and 2011'' and inserting ``and subsequent years''; and
(B) in clause (iii)--
(i) by inserting ``(a)(8)'' after ``(a)(5)'';
and
(ii) by striking ``under subparagraph (D)(iii)
of such subsection'' and inserting ``under
subsection (a)(5)(D)(iii) or the quality reporting
period under subsection (a)(8)(D)(iii),
respectively''.

(b) Incentive Payment Adjustment for Quality Reporting.--Section
1848(a) of the Social Security Act (42 U.S.C. 1395w-4(a)) is amended by
adding at the end the following new paragraph:
``(8) Incentives for quality reporting.--
``(A) Adjustment.--
``(i) In general.--With respect to covered
professional services furnished by an eligible
professional during 2015 or any subsequent year,
if the eligible professional does not
satisfactorily submit data on quality measures for
covered professional services for the quality
reporting period for the year (as determined under
subsection (m)(3)(A)), the fee schedule amount for
such services furnished by such professional
during the year (including the fee schedule amount
for purposes of determining a payment based on
such amount) shall be equal to the applicable
percent of the fee schedule amount that would
otherwise apply to such services under this
subsection (determined after application of
paragraphs (3), (5), and (7), but without regard
to this paragraph).
``(ii) Applicable percent.--For purposes of
clause (i), the term `applicable percent' means--
``(I) for 2015, 98.5 percent; and
``(II) for 2016 and each subsequent
year, 98 percent.

[[Page 365]]

``(B) Application.--
``(i) Physician reporting system rules.--
Paragraphs (5), (6), and (8) of subsection (k)
shall apply for purposes of this paragraph in the
same manner as they apply for purposes of such
subsection.
``(ii) Incentive payment validation rules.--
Clauses (ii) and (iii) of subsection (m)(5)(D)
shall apply for purposes of this paragraph in a
similar manner as they apply for purposes of such
subsection.
``(C) Definitions.--For purposes of this paragraph:
``(i) Eligible professional; covered
professional services.--The terms `eligible
professional' and `covered professional services'
have the meanings given such terms in subsection
(k)(3).
``(ii) Physician reporting system.--The term
`physician reporting system' means the system
established under subsection (k).
``(iii) Quality reporting period.--The term
`quality reporting period' means, with respect to
a year, a period specified by the Secretary.''.

(c) Maintenance of Certification Programs.--
(1) In general.--Section 1848(k)(4) of the Social Security
Act (42 U.S.C. 1395w-4(k)(4)) is amended by inserting ``or
through a Maintenance of Certification program operated by a
specialty body of the American Board of Medical Specialties that
meets the criteria for such a registry'' after ``Database)''.
(2) <> Effective date.--The
amendment made by paragraph (1) shall apply for years after
2010.

(d) Integration of Physician Quality Reporting and EHR Reporting.--
Section 1848(m) of the Social Security Act (42 U.S.C. 1395w-4(m)) is
amended by adding at the end the following new paragraph:
``(7) Integration of physician quality reporting and ehr
reporting. <> --Not later than January 1, 2012,
the Secretary shall develop a plan to integrate reporting on
quality measures under this subsection with reporting
requirements under subsection (o) relating to the meaningful use
of electronic health records. Such integration shall consist of
the following:
``(A) The selection of measures, the reporting of
which would both demonstrate--
``(i) meaningful use of an electronic health
record for purposes of subsection (o); and
``(ii) quality of care furnished to an
individual.
``(B) Such other activities as specified by the
Secretary.''.

(e) Feedback.--Section 1848(m)(5) of the Social Security Act (42
U.S.C. 1395w-4(m)(5)) is amended by adding at the end the following new
subparagraph:
``(H) Feedback.--The Secretary shall provide timely
feedback to eligible professionals on the performance of
the eligible professional with respect to satisfactorily
submitting data on quality measures under this
subsection.''.

(f) Appeals.--Such section is further amended--
(1) in subparagraph (E), by striking ``There shall'' and
inserting ``Except as provided in subparagraph (I), there
shall''; and

[[Page 366]]

(2) by adding at the end the following new subparagraph:
``(I) Informal appeals process.--
<> The Secretary shall, by not later
than January 1, 2011, establish and have in place an
informal process for eligible professionals to seek a
review of the determination that an eligible
professional did not satisfactorily submit data on
quality measures under this subsection.''.

SEC. 3003. IMPROVEMENTS TO THE PHYSICIAN FEEDBACK PROGRAM.

(a) In General.--Section 1848(n) of the Social Security Act (42
U.S.C. 1395w-4(n)) is amended--
(1) in paragraph (1)--
(A) in subparagraph (A)--
(i) by striking ``general.--The Secretary''
and inserting ``general.--
``(i) Establishment.--The Secretary'';
(ii) in clause (i), as added by clause (i), by
striking ``the `Program')'' and all that follows
through the period at the end of the second
sentence and inserting ``the `Program').''; and
(iii) by adding at the end the following new
clauses:
``(ii) Reports on resources.--The Secretary
shall use claims data under this title (and may
use other data) to provide confidential reports to
physicians (and, as determined appropriate by the
Secretary, to groups of physicians) that measure
the resources involved in furnishing care to
individuals under this title.
``(iii) Inclusion of certain information.--If
determined appropriate by the Secretary, the
Secretary may include information on the quality
of care furnished to individuals under this title
by the physician (or group of physicians) in such
reports.''; and
(B) in subparagraph (B), by striking ``subparagraph
(A)'' and inserting ``subparagraph (A)(ii)'';
(2) in paragraph (4)--
(A) in the heading, by inserting ``initial'' after
``focus''; and
(B) in the matter preceding subparagraph (A), by
inserting ``initial'' after ``focus the'';
(3) in paragraph (6), by adding at the end the following new
sentence: ``For adjustments for reports on utilization under
paragraph (9), see subparagraph (D) of such paragraph.''; and
(4) by adding at the end the following new paragraphs:
``(9) Reports on utilization.--
``(A) Development of episode grouper.--
``(i) In general.--The Secretary shall develop
an episode grouper that combines separate but
clinically related items and services into an
episode of care for an individual, as appropriate.
``(ii) Timeline for development.--The episode
grouper described in subparagraph (A) shall be
developed by not later than January 1, 2012.
``(iii) Public availability.--The Secretary
shall make the details of the episode grouper
described in subparagraph (A) available to the
public.
``(iv) Endorsement.--The Secretary shall seek
endorsement of the episode grouper described in

[[Page 367]]

subparagraph (A) by the entity with a contract
under section 1890(a).
``(B) Reports on utilization.--Effective beginning
with 2012, the Secretary shall provide reports to
physicians that compare, as determined appropriate by
the Secretary, patterns of resource use of the
individual physician to such patterns of other
physicians.
``(C) Analysis of data.--The Secretary shall, for
purposes of preparing reports under this paragraph,
establish methodologies as appropriate, such as to--
``(i) attribute episodes of care, in whole or
in part, to physicians;
``(ii) identify appropriate physicians for
purposes of comparison under subparagraph (B); and
``(iii) aggregate episodes of care attributed
to a physician under clause (i) into a composite
measure per individual.
``(D) Data adjustment.--In preparing reports under
this paragraph, the Secretary shall make appropriate
adjustments, including adjustments--
``(i) to account for differences in
socioeconomic and demographic characteristics,
ethnicity, and health status of individuals (such
as to recognize that less healthy individuals may
require more intensive interventions); and
``(ii) to eliminate the effect of geographic
adjustments in payment rates (as described in
subsection (e)).
``(E) Public availability of methodology.--The
Secretary shall make available to the public--
``(i) the methodologies established under
subparagraph (C);
``(ii) information regarding any adjustments
made to data under subparagraph (D); and
``(iii) aggregate reports with respect to
physicians.
``(F) Definition of physician.--In this paragraph:
``(i) In general.--The term `physician' has
the meaning given that term in section 1861(r)(1).
``(ii) Treatment of groups.--Such term
includes, as the Secretary determines appropriate,
a group of physicians.
``(G) Limitations on review.--There shall be no
administrative or judicial review under section 1869,
section 1878, or otherwise of the establishment of the
methodology under subparagraph (C), including the
determination of an episode of care under such
methodology.
``(10) Coordination with other value-based purchasing
reforms.--The Secretary shall coordinate the Program with the
value-based payment modifier established under subsection (p)
and, as the Secretary determines appropriate, other similar
provisions of this title.''.

(b) Conforming Amendment.--Section 1890(b) of the Social Security
Act (42 U.S.C. 1395aaa(b)) is amended by adding at the end the following
new paragraph:
``(6) Review and endorsement of episode grouper under the
physician feedback program.--The entity shall provide for the
review and, as appropriate, the endorsement of the

[[Page 368]]

episode grouper developed by the Secretary under section
1848(n)(9)(A). Such review shall be conducted on an expedited
basis.''.

SEC. 3004. QUALITY REPORTING FOR LONG-TERM CARE HOSPITALS, INPATIENT
REHABILITATION HOSPITALS, AND HOSPICE PROGRAMS.

(a) Long-term Care Hospitals.--Section 1886(m) of the Social
Security Act (42 U.S.C. 1395ww(m)), as amended by section 3401(c), is
amended by adding at the end the following new paragraph:
``(5) Quality reporting.--
``(A) Reduction in update for failure to report.--
``(i) In general.--Under the system described
in paragraph (1), for rate year 2014 and each
subsequent rate year, in the case of a long-term
care hospital that does not submit data to the
Secretary in accordance with subparagraph (C) with
respect to such a rate year, any annual update to
a standard Federal rate for discharges for the
hospital during the rate year, and after
application of paragraph (3), shall be reduced by
2 percentage points.
``(ii) Special rule.--The application of this
subparagraph may result in such annual update
being less than 0.0 for a rate year, and may
result in payment rates under the system described
in paragraph (1) for a rate year being less than
such payment rates for the preceding rate year.
``(B) Noncumulative application.--Any reduction
under subparagraph (A) shall apply only with respect to
the rate year involved and the Secretary shall not take
into account such reduction in computing the payment
amount under the system described in paragraph (1) for a
subsequent rate year.
``(C) Submission of quality data.--For rate year
2014 and each subsequent rate year, each long-term care
hospital shall submit to the Secretary data on quality
measures specified under subparagraph (D). Such data
shall be submitted in a form and manner, and at a time,
specified by the Secretary for purposes of this
subparagraph.
``(D) Quality measures.--
``(i) In general.--Subject to clause (ii), any
measure specified by the Secretary under this
subparagraph must have been endorsed by the entity
with a contract under section 1890(a).
``(ii) Exception.--In the case of a specified
area or medical topic determined appropriate by
the Secretary for which a feasible and practical
measure has not been endorsed by the entity with a
contract under section 1890(a), the Secretary may
specify a measure that is not so endorsed as long
as due consideration is given to measures that
have been endorsed or adopted by a consensus
organization identified by the Secretary.
``(iii) Time frame.--Not later than October 1,
2012, the Secretary shall publish the measures
selected under this subparagraph that will be
applicable with respect to rate year 2014.

[[Page 369]]

``(E) Public availability of data
submitted. <> --The Secretary shall
establish procedures for making data submitted under
subparagraph (C) available to the public.
Such <>  procedures shall ensure that a
long-term care hospital has the opportunity to review
the data that is to be made public with respect to the
hospital prior to such data being made
public. <> The Secretary shall
report quality measures that relate to services
furnished in inpatient settings in long-term care
hospitals on the Internet website of the Centers for
Medicare & Medicaid Services.''.

(b) Inpatient Rehabilitation Hospitals.--Section 1886(j) of the
Social Security Act (42 U.S.C. 1395ww(j)) is amended--
(1) by redesignating paragraph (7) as paragraph (8); and
(2) by inserting after paragraph (6) the following new
paragraph:
``(7) Quality reporting.--
``(A) Reduction in update for failure to report.--
``(i) In general.--For purposes of fiscal year
2014 and each subsequent fiscal year, in the case
of a rehabilitation facility that does not submit
data to the Secretary in accordance with
subparagraph (C) with respect to such a fiscal
year, after determining the increase factor
described in paragraph (3)(C), and after
application of paragraph (3)(D), the Secretary
shall reduce such increase factor for payments for
discharges occurring during such fiscal year by 2
percentage points.
``(ii) Special rule.--The application of this
subparagraph may result in the increase factor
described in paragraph (3)(C) being less than 0.0
for a fiscal year, and may result in payment rates
under this subsection for a fiscal year being less
than such payment rates for the preceding fiscal
year.
``(B) Noncumulative application.--Any reduction
under subparagraph (A) shall apply only with respect to
the fiscal year involved and the Secretary shall not
take into account such reduction in computing the
payment amount under this subsection for a subsequent
fiscal year.
``(C) Submission of quality data.--For fiscal year
2014 and each subsequent rate year, each rehabilitation
facility shall submit to the Secretary data on quality
measures specified under subparagraph (D). Such data
shall be submitted in a form and manner, and at a time,
specified by the Secretary for purposes of this
subparagraph.
``(D) Quality measures.--
``(i) In general.--Subject to clause (ii), any
measure specified by the Secretary under this
subparagraph must have been endorsed by the entity
with a contract under section 1890(a).
``(ii) Exception.--In the case of a specified
area or medical topic determined appropriate by
the Secretary for which a feasible and practical
measure has not been endorsed by the entity with a
contract under section 1890(a), the Secretary may
specify a measure that is not so endorsed as long
as due consideration is given to measures that
have been endorsed or

[[Page 370]]

adopted by a consensus organization identified by
the Secretary.
``(iii) Time frame. <> --
Not later than October 1, 2012, the Secretary
shall publish the measures selected under this
subparagraph that will be applicable with respect
to fiscal year 2014.
``(E) Public availability of data
submitted. <> --The Secretary shall
establish procedures for making data submitted under
subparagraph (C) available to the public.
Such <>  procedures shall ensure that a
rehabilitation facility has the opportunity to review
the data that is to be made public with respect to the
facility prior to such data being made
public. <>  The Secretary shall
report quality measures that relate to services
furnished in inpatient settings in rehabilitation
facilities on the Internet website of the Centers for
Medicare & Medicaid Services.''.

(c) Hospice Programs.--Section 1814(i) of the Social Security Act
(42 U.S.C. 1395f(i)) is amended--
(1) by redesignating paragraph (5) as paragraph (6); and
(2) by inserting after paragraph (4) the following new
paragraph:
``(5) Quality reporting.--
``(A) Reduction in update for failure to report.--
``(i) In general.--For purposes of fiscal year
2014 and each subsequent fiscal year, in the case
of a hospice program that does not submit data to
the Secretary in accordance with subparagraph (C)
with respect to such a fiscal year, after
determining the market basket percentage increase
under paragraph (1)(C)(ii)(VII) or paragraph
(1)(C)(iii), as applicable, and after application
of paragraph (1)(C)(iv), with respect to the
fiscal year, the Secretary shall reduce such
market basket percentage increase by 2 percentage
points.
``(ii) Special rule.--The application of this
subparagraph may result in the market basket
percentage increase under paragraph
(1)(C)(ii)(VII) or paragraph (1)(C)(iii), as
applicable, being less than 0.0 for a fiscal year,
and may result in payment rates under this
subsection for a fiscal year being less than such
payment rates for the preceding fiscal year.
``(B) Noncumulative application.--Any reduction
under subparagraph (A) shall apply only with respect to
the fiscal year involved and the Secretary shall not
take into account such reduction in computing the
payment amount under this subsection for a subsequent
fiscal year.
``(C) Submission of quality data.--For fiscal year
2014 and each subsequent fiscal year, each hospice
program shall submit to the Secretary data on quality
measures specified under subparagraph (D). Such data
shall be submitted in a form and manner, and at a time,
specified by the Secretary for purposes of this
subparagraph.
``(D) Quality measures.--
``(i) In general.--Subject to clause (ii), any
measure specified by the Secretary under this
subparagraph must have been endorsed by the entity
with a contract under section 1890(a).

[[Page 371]]

``(ii) Exception.--In the case of a specified
area or medical topic determined appropriate by
the Secretary for which a feasible and practical
measure has not been endorsed by the entity with a
contract under section 1890(a), the Secretary may
specify a measure that is not so endorsed as long
as due consideration is given to measures that
have been endorsed or adopted by a consensus
organization identified by the Secretary.
``(iii) Time frame. <> --
Not later than October 1, 2012, the Secretary
shall publish the measures selected under this
subparagraph that will be applicable with respect
to fiscal year 2014.
``(E) Public availability of data submitted.--
<> The Secretary shall establish
procedures for making data submitted under subparagraph
(C) available to the public.
Such <> procedures shall ensure that a
hospice program has the opportunity to review the data
that is to be made public with respect to the hospice
program prior to such data being made
public. <>  The Secretary shall
report quality measures that relate to hospice care
provided by hospice programs on the Internet website of
the Centers for Medicare & Medicaid Services.''.

SEC. 3005. QUALITY REPORTING FOR PPS-EXEMPT CANCER HOSPITALS.

Section 1866 of the Social Security Act (42 U.S.C. 1395cc) is
amended--
(1) in subsection (a)(1)--
(A) in subparagraph (U), by striking ``and'' at the
end;
(B) in subparagraph (V), by striking the period at
the end and inserting ``, and''; and
(C) by adding at the end the following new
subparagraph:
``(W) in the case of a hospital described in section
1886(d)(1)(B)(v), to report quality data to the
Secretary in accordance with subsection (k).''; and
(2) by adding at the end the following new subsection:

``(k) Quality Reporting by Cancer Hospitals.--
``(1) In general.--For purposes of fiscal year 2014 and each
subsequent fiscal year, a hospital described in section
1886(d)(1)(B)(v) shall submit data to the Secretary in
accordance with paragraph (2) with respect to such a fiscal
year.
``(2) Submission of quality data.--For fiscal year 2014 and
each subsequent fiscal year, each hospital described in such
section shall submit to the Secretary data on quality measures
specified under paragraph (3). Such data shall be submitted in a
form and manner, and at a time, specified by the Secretary for
purposes of this subparagraph.
``(3) Quality measures.--
``(A) In general.--Subject to subparagraph (B), any
measure specified by the Secretary under this paragraph
must have been endorsed by the entity with a contract
under section 1890(a).
``(B) Exception.--In the case of a specified area or
medical topic determined appropriate by the Secretary
for which a feasible and practical measure has not been

[[Page 372]]

endorsed by the entity with a contract under section
1890(a), the Secretary may specify a measure that is not
so endorsed as long as due consideration is given to
measures that have been endorsed or adopted by a
consensus organization identified by the Secretary.
``(C) Time frame. <> --Not later
than October 1, 2012, the Secretary shall publish the
measures selected under this paragraph that will be
applicable with respect to fiscal year 2014.
``(4) Public availability of data
submitted. <> --The Secretary shall establish
procedures for making data submitted under paragraph (4)
available to the public. <> Such procedures shall
ensure that a hospital described in section 1886(d)(1)(B)(v) has
the opportunity to review the data that is to be made public
with respect to the hospital prior to such data being made
public. <>  The Secretary shall report
quality measures of process, structure, outcome, patients'
perspective on care, efficiency, and costs of care that relate
to services furnished in such hospitals on the Internet website
of the Centers for Medicare & Medicaid Services.''.

SEC. 3006. PLANS FOR A VALUE-BASED PURCHASING PROGRAM FOR SKILLED
NURSING FACILITIES AND HOME HEALTH AGENCIES.

(a) Skilled Nursing Facilities.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall develop
a plan to implement a value-based purchasing program for
payments under the Medicare program under title XVIII of the
Social Security Act for skilled nursing facilities (as defined
in section 1819(a) of such Act (42 U.S.C. 1395i-3(a))).
(2) Details.--In developing the plan under paragraph (1),
the Secretary shall consider the following issues:
(A) The ongoing development, selection, and
modification process for measures (including under
section 1890 of the Social Security Act (42 U.S.C.
1395aaa) and section 1890A such Act, as added by section
3014), to the extent feasible and practicable, of all
dimensions of quality and efficiency in skilled nursing
facilities.
(i) In general.--Subject to clause (ii), any
measure specified by the Secretary under
subparagraph (A)(iii) must have been endorsed by
the entity with a contract under section 1890(a).
(ii) Exception.--In the case of a specified
area or medical topic determined appropriate by
the Secretary for which a feasible and practical
measure has not been endorsed by the entity with a
contract under section 1890(a), the Secretary may
specify a measure that is not so endorsed as long
as due consideration is given to measures that
have been endorsed or adopted by a consensus
organization identified by the Secretary.
(B) The reporting, collection, and validation of
quality data.
(C) The structure of value-based payment
adjustments, including the determination of thresholds
or improvements in quality that would substantiate a
payment adjustment,

[[Page 373]]

the size of such payments, and the sources of funding
for the value-based bonus payments.
(D) Methods for the public disclosure of information
on the performance of skilled nursing facilities.
(E) Any other issues determined appropriate by the
Secretary.
(3) Consultation.--In developing the plan under paragraph
(1), the Secretary shall--
(A) consult with relevant affected parties; and
(B) consider experience with such demonstrations
that the Secretary determines are relevant to the value-
based purchasing program described in paragraph (1).
(4) Report to congress.--Not later than October 1, 2011, the
Secretary shall submit to Congress a report containing the plan
developed under paragraph (1).

(b) Home Health Agencies.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall develop
a plan to implement a value-based purchasing program for
payments under the Medicare program under title XVIII of the
Social Security Act for home health agencies (as defined in
section 1861(o) of such Act (42 U.S.C. 1395x(o))).
(2) Details.--In developing the plan under paragraph (1),
the Secretary shall consider the following issues:
(A) The ongoing development, selection, and
modification process for measures (including under
section 1890 of the Social Security Act (42 U.S.C.
1395aaa) and section 1890A such Act, as added by section
3014), to the extent feasible and practicable, of all
dimensions of quality and efficiency in home health
agencies.
(B) The reporting, collection, and validation of
quality data.
(C) The structure of value-based payment
adjustments, including the determination of thresholds
or improvements in quality that would substantiate a
payment adjustment, the size of such payments, and the
sources of funding for the value-based bonus payments.
(D) Methods for the public disclosure of information
on the performance of home health agencies.
(E) Any other issues determined appropriate by the
Secretary.
(3) Consultation.--In developing the plan under paragraph
(1), the Secretary shall--
(A) consult with relevant affected parties; and
(B) consider experience with such demonstrations
that the Secretary determines are relevant to the value-
based purchasing program described in paragraph (1).
(4) Report to congress.--Not later than October 1, 2011, the
Secretary shall submit to Congress a report containing the plan
developed under paragraph (1).

SEC. 3007. VALUE-BASED PAYMENT MODIFIER UNDER THE PHYSICIAN FEE
SCHEDULE.

Section 1848 of the Social Security Act (42 U.S.C. 1395w-4) is
amended--
(1) in subsection (b)(1), by inserting ``subject to
subsection (p),'' after ``1998,''; and

[[Page 374]]

(2) by adding at the end the following new subsection:

``(p) Establishment of Value-based Payment Modifier.--
``(1) In general.--The Secretary shall establish a payment
modifier that provides for differential payment to a physician
or a group of physicians under the fee schedule established
under subsection (b) based upon the quality of care furnished
compared to cost (as determined under paragraphs (2) and (3),
respectively) during a performance period. Such payment modifier
shall be separate from the geographic adjustment factors
established under subsection (e).
``(2) Quality.--
``(A) In general.--For purposes of paragraph (1),
quality of care shall be evaluated, to the extent
practicable, based on a composite of measures of the
quality of care furnished (as established by the
Secretary under subparagraph (B)).
``(B) Measures.--
``(i) The Secretary shall establish
appropriate measures of the quality of care
furnished by a physician or group of physicians to
individuals enrolled under this part, such as
measures that reflect health outcomes. Such
measures shall be risk adjusted as determined
appropriate by the Secretary.
``(ii) The Secretary shall seek endorsement of
the measures established under this subparagraph
by the entity with a contract under section
1890(a).
``(3) Costs.--For purposes of paragraph (1), costs shall be
evaluated, to the extent practicable, based on a composite of
appropriate measures of costs established by the Secretary (such
as the composite measure under the methodology established under
subsection (n)(9)(C)(iii)) that eliminate the effect of
geographic adjustments in payment rates (as described in
subsection (e)), and take into account risk factors (such as
socioeconomic and demographic characteristics, ethnicity, and
health status of individuals (such as to recognize that less
healthy individuals may require more intensive interventions)
and other factors determined appropriate by the Secretary.
``(4) Implementation.--
``(A) Publication of measures, dates of
implementation, performance period.--
<> Not later than January 1, 2012, the
Secretary shall publish the following:
``(i) The measures of quality of care and
costs established under paragraphs (2) and (3),
respectively.
``(ii) The dates for implementation of the
payment modifier (as determined under subparagraph
(B)).
``(iii) The initial performance period (as
specified under subparagraph (B)(ii)).
``(B) Deadlines for implementation.--
``(i) Initial implementation.--Subject to the
preceding provisions of this subparagraph, the
Secretary shall begin implementing the payment
modifier established under this subsection through
the rulemaking process during 2013 for the
physician fee schedule established under
subsection (b).
``(ii) Initial performance period.--
``(I) In general.--The Secretary
shall specify an initial performance
period for application of

[[Page 375]]

the payment modifier established under
this subsection with respect to 2015.
``(II) Provision of information
during initial performance period.--
During the initial performance period,
the Secretary shall, to the extent
practicable, provide information to
physicians and groups of physicians
about the quality of care furnished by
the physician or group of physicians to
individuals enrolled under this part
compared to cost (as determined under
paragraphs (2) and (3), respectively)
with respect to the performance period.
``(iii) Application.--The Secretary shall
apply the payment modifier established under this
subsection for items and services furnished--
``(I) <>
beginning on January 1, 2015, with
respect to specific physicians and
groups of physicians the Secretary
determines appropriate; and
``(II) <>
beginning not later than January 1,
2017, with respect to all physicians and
groups of physicians.
``(C) Budget neutrality.--The payment modifier
established under this subsection shall be implemented
in a budget neutral manner.
``(5) Systems-based care.-- <> The
Secretary shall, as appropriate, apply the payment modifier
established under this subsection in a manner that promotes
systems-based care.
``(6) Consideration of special circumstances of certain
providers.--In applying the payment modifier under this
subsection, the Secretary shall, as appropriate, take into
account the special circumstances of physicians or groups of
physicians in rural areas and other underserved communities.
``(7) Application.-- <> For purposes of
the initial application of the payment modifier established
under this subsection during the period beginning on January 1,
2015, and ending on December 31, 2016, the term `physician' has
the meaning given such term in section
1861(r). <> On or after
January 1, 2017, the Secretary may apply this subsection to
eligible professionals (as defined in subsection (k)(3)(B)) as
the Secretary determines appropriate.
``(8) Definitions.--For purposes of this subsection:
``(A) Costs.--The term `costs' means expenditures
per individual as determined appropriate by the
Secretary. In making the determination under the
preceding sentence, the Secretary may take into account
the amount of growth in expenditures per individual for
a physician compared to the amount of such growth for
other physicians.
``(B) Performance period.--The term `performance
period' means a period specified by the Secretary.
``(9) Coordination with other value-based purchasing
reforms.-- <> The Secretary shall
coordinate the value-based payment modifier established under
this subsection with the Physician Feedback Program under
subsection (n) and, as the Secretary determines appropriate,
other similar provisions of this title.

[[Page 376]]

``(10) Limitations on review.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise of--
``(A) the establishment of the value-based payment
modifier under this subsection;
``(B) the evaluation of quality of care under
paragraph (2), including the establishment of
appropriate measures of the quality of care under
paragraph (2)(B);
``(C) the evaluation of costs under paragraph (3),
including the establishment of appropriate measures of
costs under such paragraph;
``(D) the dates for implementation of the value-
based payment modifier;
``(E) the specification of the initial performance
period and any other performance period under paragraphs
(4)(B)(ii) and (8)(B), respectively;
``(F) the application of the value-based payment
modifier under paragraph (7); and
``(G) the determination of costs under paragraph
(8)(A).''.

SEC. 3008. PAYMENT ADJUSTMENT FOR CONDITIONS ACQUIRED IN HOSPITALS.

(a) In General.--Section 1886 of the Social Security Act (42 U.S.C.
1395ww), as amended by section 3001, is amended by adding at the end the
following new subsection:
``(p) Adjustment to Hospital Payments for Hospital Acquired
Conditions.--
``(1) In general.--In order to provide an incentive for
applicable hospitals to reduce hospital acquired conditions
under this title, with respect to discharges from an applicable
hospital occurring during fiscal year 2015 or a subsequent
fiscal year, the amount of payment under this section or section
1814(b)(3), as applicable, for such discharges during the fiscal
year shall be equal to 99 percent of the amount of payment that
would otherwise apply to such discharges under this section or
section 1814(b)(3) (determined after the application of
subsections (o) and (q) and section 1814(l)(4) but without
regard to this subsection).
``(2) Applicable hospitals.--
``(A) <> In general.--For
purposes of this subsection, the term `applicable
hospital' means a subsection (d) hospital that meets the
criteria described in subparagraph (B).
``(B) Criteria described.--
``(i) <> In general.--
The criteria described in this subparagraph, with
respect to a subsection (d) hospital, is that the
subsection (d) hospital is in the top quartile of
all subsection (d) hospitals, relative to the
national average, of hospital acquired conditions
during the applicable period, as determined by the
Secretary.
``(ii) Risk adjustment.--In carrying out
clause (i), the Secretary shall establish and
apply an appropriate risk adjustment methodology.
``(C) Exemption. <> --In
the case of a hospital that is paid under section
1814(b)(3), the Secretary may exempt such hospital from
the application of this subsection if the State which is
paid under such section submits an

[[Page 377]]

annual report to the Secretary describing how a similar
program in the State for a participating hospital or
hospitals achieves or surpasses the measured results in
terms of patient health outcomes and cost savings
established under this subsection.
``(3) <>  Hospital acquired conditions.--
For purposes of this subsection, the term `hospital acquired
condition' means a condition identified for purposes of
subsection (d)(4)(D)(iv) and any other condition determined
appropriate by the Secretary that an individual acquires during
a stay in an applicable hospital, as determined by the
Secretary.
``(4) Applicable period.--In this subsection, the term
`applicable period' means, with respect to a fiscal year, a
period specified by the Secretary.
``(5) Reporting to hospitals.--Prior to fiscal year 2015 and
each subsequent fiscal year, the Secretary shall provide
confidential reports to applicable hospitals with respect to
hospital acquired conditions of the applicable hospital during
the applicable period.
``(6) Reporting hospital specific information.--
``(A) In general. <> --
The Secretary shall make information available to the
public regarding hospital acquired conditions of each
applicable hospital.
``(B) Opportunity to review and submit
corrections.--The Secretary shall ensure that an
applicable hospital has the opportunity to review, and
submit corrections for, the information to be made
public with respect to the hospital under subparagraph
(A) prior to such information being made public.
``(C) Website.--Such information shall be posted on
the Hospital Compare Internet website in an easily
understandable format.
``(7) Limitations on review.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise of the following:
``(A) The criteria described in paragraph (2)(A).
``(B) The specification of hospital acquired
conditions under paragraph (3).
``(C) The specification of the applicable period
under paragraph (4).
``(D) The provision of reports to applicable
hospitals under paragraph (5) and the information made
available to the public under paragraph (6).''.

(b) Study and Report on Expansion of Healthcare Acquired Conditions
Policy to Other Providers.--
(1) Study.--The Secretary of Health and Human Services shall
conduct a study on expanding the healthcare acquired conditions
policy under subsection (d)(4)(D) of section 1886 of the Social
Security Act (42 U.S.C. 1395ww) to payments made to other
facilities under the Medicare program under title XVIII of the
Social Security Act, including such payments made to inpatient
rehabilitation facilities, long-term care hospitals (as
described in subsection(d)(1)(B)(iv) of such section), hospital
outpatient departments, and other hospitals excluded from the
inpatient prospective payment system under such section, skilled
nursing facilities, ambulatory surgical centers, and health
clinics. Such study shall include an analysis of

[[Page 378]]

how such policies could impact quality of patient care, patient
safety, and spending under the Medicare program.
(2) Report.--Not later than January 1, 2012, the Secretary
shall submit to Congress a report containing the results of the
study conducted under paragraph (1), together with
recommendations for such legislation and administrative action
as the Secretary determines appropriate.

PART II--NATIONAL STRATEGY TO IMPROVE HEALTH CARE QUALITY

SEC. 3011. NATIONAL STRATEGY.

Title III of the Public Health Service Act (42 U.S.C. 241 et seq.)
is amended by adding at the end the following:

``PART S--HEALTH CARE QUALITY PROGRAMS

``Subpart I--National Strategy for Quality Improvement in Health Care

``SEC. 399HH. <> NATIONAL STRATEGY FOR QUALITY
IMPROVEMENT IN HEALTH CARE.

``(a) Establishment of National Strategy and Priorities.--
``(1) National strategy.--The Secretary, through a
transparent collaborative process, shall establish a national
strategy to improve the delivery of health care services,
patient health outcomes, and population health.
``(2) Identification of priorities.--
``(A) In general.--The Secretary shall identify
national priorities for improvement in developing the
strategy under paragraph (1).
``(B) Requirements.--The Secretary shall ensure that
priorities identified under subparagraph (A) will--
``(i) have the greatest potential for
improving the health outcomes, efficiency, and
patient-centeredness of health care for all
populations, including children and vulnerable
populations;
``(ii) identify areas in the delivery of
health care services that have the potential for
rapid improvement in the quality and efficiency of
patient care;
``(iii) address gaps in quality, efficiency,
comparative effectiveness information, and health
outcomes measures and data aggregation techniques;
``(iv) improve Federal payment policy to
emphasize quality and efficiency;
``(v) enhance the use of health care data to
improve quality, efficiency, transparency, and
outcomes;
``(vi) address the health care provided to
patients with high-cost chronic diseases;
``(vii) improve research and dissemination of
strategies and best practices to improve patient
safety and reduce medical errors, preventable
admissions and readmissions, and health care-
associated infections;
``(viii) reduce health disparities across
health disparity populations (as defined in
section 485E) and geographic areas; and

[[Page 379]]

``(ix) address other areas as determined
appropriate by the Secretary.
``(C) Considerations.--In identifying priorities
under subparagraph (A), the Secretary shall take into
consideration the recommendations submitted by the
entity with a contract under section 1890(a) of the
Social Security Act and other stakeholders.
``(D) Coordination with state agencies.--The
Secretary shall collaborate, coordinate, and consult
with State agencies responsible for administering the
Medicaid program under title XIX of the Social Security
Act and the Children's Health Insurance Program under
title XXI of such Act with respect to developing and
disseminating strategies, goals, models, and timetables
that are consistent with the national priorities
identified under subparagraph (A).

``(b) Strategic Plan.--
``(1) In general.--The national strategy shall include a
comprehensive strategic plan to achieve the priorities described
in subsection (a).
``(2) Requirements.--The strategic plan shall include
provisions for addressing, at a minimum, the following:
``(A) Coordination among agencies within the
Department, which shall include steps to minimize
duplication of efforts and utilization of common quality
measures, where available. Such common quality measures
shall be measures identified by the Secretary under
section 1139A or 1139B of the Social Security Act or
endorsed under section 1890 of such Act.
``(B) Agency-specific strategic plans to achieve
national priorities.
``(C) Establishment of annual benchmarks for each
relevant agency to achieve national priorities.
``(D) A process for regular reporting by the
agencies to the Secretary on the implementation of the
strategic plan.
``(E) Strategies to align public and private payers
with regard to quality and patient safety efforts.
``(F) Incorporating quality improvement and
measurement in the strategic plan for health information
technology required by the American Recovery and
Reinvestment Act of 2009 (Public Law 111-5).

``(c) Periodic Update of National Strategy.--The Secretary shall
update the national strategy not less than annually. Any such update
shall include a review of short- and long-term goals.
``(d) Submission and Availability of National Strategy and
Updates.--
``(1) Deadline for initial submission of national
strategy.--Not later than January 1, 2011, the Secretary shall
submit to the relevant committees of Congress the national
strategy described in subsection (a).
``(2) Updates.--
``(A) In general.--The Secretary shall submit to the
relevant committees of Congress an annual update to the
strategy described in paragraph (1).
``(B) Information submitted.--Each update submitted
under subparagraph (A) shall include--

[[Page 380]]

``(i) a review of the short- and long-term
goals of the national strategy and any gaps in
such strategy;
``(ii) an analysis of the progress, or lack of
progress, in meeting such goals and any barriers
to such progress;
``(iii) the information reported under section
1139A of the Social Security Act, consistent with
the reporting requirements of such section; and
``(iv) in the case of an update required to be
submitted on or after January 1, 2014, the
information reported under section 1139B(b)(4) of
the Social Security Act, consistent with the
reporting requirements of such section.
``(C) Satisfaction of other reporting
requirements.--Compliance with the requirements of
clauses (iii) and (iv) of subparagraph (B) shall satisfy
the reporting requirements under sections 1139A(a)(6)
and 1139B(b)(4), respectively, of the Social Security
Act.

``(e) Health Care Quality Internet Website.--
<> Not later than January 1, 2011,
the Secretary shall create an Internet website to make public
information regarding--
``(1) the national priorities for health care quality
improvement established under subsection (a)(2);
``(2) the agency-specific strategic plans for health care
quality described in subsection (b)(2)(B); and
``(3) other information, as the Secretary determines to be
appropriate.''.

SEC. 3012. <> INTERAGENCY WORKING GROUP ON
HEALTH CARE QUALITY.

(a) <> In General.--The President
shall convene a working group to be known as the Interagency Working
Group on Health Care Quality (referred to in this section as the
``Working Group'').

(b) Goals.--The goals of the Working Group shall be to achieve the
following:
(1) Collaboration, cooperation, and consultation between
Federal departments and agencies with respect to developing and
disseminating strategies, goals, models, and timetables that are
consistent with the national priorities identified under section
399HH(a)(2) of the Public Health Service Act (as added by
section 3011).
(2) Avoidance of inefficient duplication of quality
improvement efforts and resources, where practicable, and a
streamlined process for quality reporting and compliance
requirements.
(3) Assess alignment of quality efforts in the public sector
with private sector initiatives.

(c) Composition.--
(1) In general.--The Working Group shall be composed of
senior level representatives of--
(A) the Department of Health and Human Services;
(B) the Centers for Medicare & Medicaid Services;
(C) the National Institutes of Health;
(D) the Centers for Disease Control and Prevention;
(E) the Food and Drug Administration;
(F) the Health Resources and Services
Administration;
(G) the Agency for Healthcare Research and Quality;

[[Page 381]]

(H) the Office of the National Coordinator for
Health Information Technology;
(I) the Substance Abuse and Mental Health Services
Administration;
(J) the Administration for Children and Families;
(K) the Department of Commerce;
(L) the Office of Management and Budget;
(M) the United States Coast Guard;
(N) the Federal Bureau of Prisons;
(O) the National Highway Traffic Safety
Administration;
(P) the Federal Trade Commission;
(Q) the Social Security Administration;
(R) the Department of Labor;
(S) the United States Office of Personnel
Management;
(T) the Department of Defense;
(U) the Department of Education;
(V) the Department of Veterans Affairs;
(W) the Veterans Health Administration; and
(X) any other Federal agencies and departments with
activities relating to improving health care quality and
safety, as determined by the President.
(2) Chair and vice-chair.--
(A) Chair.--The Working Group shall be chaired by
the Secretary of Health and Human Services.
(B) Vice chair.--Members of the Working Group, other
than the Secretary of Health and Human Services, shall
serve as Vice Chair of the Group on a rotating basis, as
determined by the Group.

(d) Report to Congress.-- <> Not later than December 31, 2010, and annually thereafter,
the Working Group shall submit to the relevant Committees of Congress,
and make public on an Internet website, a report describing the progress
and recommendations of the Working Group in meeting the goals described
in subsection (b).

SEC. 3013. QUALITY MEASURE DEVELOPMENT.

(a) Public Health Service Act.--Title IX of the Public Health
Service Act (42 U.S.C. 299 et seq.) is amended--
(1) by redesignating part D as part E;
(2) <> by redesignating sections
931 through 938 as sections 941 through 948, respectively;
(3) in section 948(1), as so redesignated, by striking
``931'' and inserting ``941''; and
(4) by inserting after section 926 the following:

``PART D--HEALTH CARE QUALITY IMPROVEMENT

``Subpart I--Quality Measure Development

``SEC. 931. <>  QUALITY MEASURE DEVELOPMENT.

``(a) Quality Measure.-- <> In this subpart, the
term `quality measure' means a standard for measuring the performance
and improvement of population health or of health plans, providers of
services, and other clinicians in the delivery of health care services.

[[Page 382]]

``(b) Identification of Quality Measures.--
``(1) <> Identification.--The
Secretary, in consultation with the Director of the Agency for
Healthcare Research and Quality and the Administrator of the
Centers for Medicare & Medicaid Services, shall identify, not
less often than triennially, gaps where no quality measures
exist and existing quality measures that need improvement,
updating, or expansion, consistent with the national strategy
under section 399HH, to the extent available, for use in Federal
health programs. In identifying such gaps and existing quality
measures that need improvement, the Secretary shall take into
consideration--
``(A) the gaps identified by the entity with a
contract under section 1890(a) of the Social Security
Act and other stakeholders;
``(B) quality measures identified by the pediatric
quality measures program under section 1139A of the
Social Security Act; and
``(C) quality measures identified through the
Medicaid Quality Measurement Program under section 1139B
of the Social Security Act.
``(2) Publication.-- <> The Secretary shall make available to the
public on an Internet website a report on any gaps identified
under paragraph (1) and the process used to make such
identification.

``(c) Grants or Contracts for Quality Measure Development.--
``(1) In general.--The Secretary shall award grants,
contracts, or intergovernmental agreements to eligible entities
for purposes of developing, improving, updating, or expanding
quality measures identified under subsection (b).
``(2) Prioritization in the development of quality
measures.--In awarding grants, contracts, or agreements under
this subsection, the Secretary shall give priority to the
development of quality measures that allow the assessment of--
``(A) health outcomes and functional status of
patients;
``(B) the management and coordination of health care
across episodes of care and care transitions for
patients across the continuum of providers, health care
settings, and health plans;
``(C) the experience, quality, and use of
information provided to and used by patients,
caregivers, and authorized representatives to inform
decisionmaking about treatment options, including the
use of shared decisionmaking tools and preference
sensitive care (as defined in section 936);
``(D) the meaningful use of health information
technology;
``(E) the safety, effectiveness, patient-
centeredness, appropriateness, and timeliness of care;
``(F) the efficiency of care;
``(G) the equity of health services and health
disparities across health disparity populations (as
defined in section 485E) and geographic areas;
``(H) patient experience and satisfaction;
``(I) the use of innovative strategies and
methodologies identified under section 933; and

[[Page 383]]

``(J) other areas determined appropriate by the
Secretary.
``(3) Eligible entities.--To be eligible for a grant or
contract under this subsection, an entity shall--
``(A) have demonstrated expertise and capacity in
the development and evaluation of quality measures;
``(B) have adopted procedures to include in the
quality measure development process--
``(i) the views of those providers or payers
whose performance will be assessed by the measure;
and
``(ii) the views of other parties who also
will use the quality measures (such as patients,
consumers, and health care purchasers);
``(C) collaborate with the entity with a contract
under section 1890(a) of the Social Security Act and
other stakeholders, as practicable, and the Secretary so
that quality measures developed by the eligible entity
will meet the requirements to be considered for
endorsement by the entity with a contract under such
section 1890(a);
``(D) have transparent policies regarding governance
and conflicts of interest; and
``(E) submit an application to the Secretary at such
time and in such manner, as the Secretary may require.
``(4) <> Use of funds.--An entity that
receives a grant, contract, or agreement under this subsection
shall use such award to develop quality measures that meet the
following requirements:
``(A) Such measures support measures required to be
reported under the Social Security Act, where
applicable, and in support of gaps and existing quality
measures that need improvement, as described in
subsection (b)(1)(A).
``(B) Such measures support measures developed under
section 1139A of the Social Security Act and the
Medicaid Quality Measurement Program under section 1139B
of such Act, where applicable.
``(C) To the extent practicable, data on such
quality measures is able to be collected using health
information technologies.
``(D) Each quality measure is free of charge to
users of such measure.
``(E) Each quality measure is publicly available on
an Internet website.

``(d) Other Activities by the Secretary.--The Secretary may use
amounts available under this section to update and test, where
applicable, quality measures endorsed by the entity with a contract
under section 1890(a) of the Social Security Act or adopted by the
Secretary.
``(e) Coordination of Grants.--The Secretary shall ensure that
grants or contracts awarded under this section are coordinated with
grants and contracts awarded under sections 1139A(5) and 1139B(4)(A) of
the Social Security Act.''.
(b) Social Security Act.--Section 1890A of the Social Security Act,
as added by section 3014(b), is amended by adding at the end the
following new subsection:
``(e) Development of Quality Measures.--The Administrator of the
Center for Medicare & Medicaid Services shall through contracts develop
quality measures (as determined appropriate by

[[Page 384]]

the Administrator) for use under this Act. In developing such measures,
the Administrator shall consult with the Director of the Agency for
Healthcare Research and Quality.''.
(c) Funding.--There are authorized to be appropriated to the
Secretary of Health and Human Services to carry out this section,
$75,000,000 for each of fiscal years 2010 through 2014. Of the amounts
appropriated under the preceding sentence in a fiscal year, not less
than 50 percent of such amounts shall be used pursuant to subsection (e)
of section 1890A of the Social Security Act, as added by subsection (b),
with respect to programs under such Act. Amounts appropriated under this
subsection for a fiscal year shall remain available until expended.

SEC. 3014. QUALITY MEASUREMENT.

(a) New Duties for Consensus-based Entity.--
(1) Multi-stakeholder group input.--Section 1890(b) of the
Social Security Act (42 U.S.C. 1395aaa(b)), as amended by
section 3003, is amended by adding at the end the following new
paragraphs:
``(7) Convening multi-stakeholder groups.--
``(A) In general.--The entity shall convene multi-
stakeholder groups to provide input on--
``(i) the selection of quality measures
described in subparagraph (B), from among--
``(I) such measures that have been
endorsed by the entity; and
``(II) such measures that have not
been considered for endorsement by such
entity but are used or proposed to be
used by the Secretary for the collection
or reporting of quality measures; and
``(ii) national priorities (as identified
under section 399HH of the Public Health Service
Act) for improvement in population health and in
the delivery of health care services for
consideration under the national strategy
established under section 399HH of the Public
Health Service Act.
``(B) Quality measures.--
``(i) In general.--Subject to clause (ii), the
quality measures described in this subparagraph
are quality measures--
``(I) for use pursuant to sections
1814(i)(5)(D), 1833(i)(7), 1833(t)(17),
1848(k)(2)(C), 1866(k)(3),
1881(h)(2)(A)(iii), 1886(b)(3)(B)(viii),
1886(j)(7)(D), 1886(m)(5)(D),
1886(o)(2), and 1895(b)(3)(B)(v);
``(II) for use in reporting
performance information to the public;
and
``(III) for use in health care
programs other than for use under this
Act.
``(ii) Exclusion.--Data sets (such as the
outcome and assessment information set for home
health services and the minimum data set for
skilled nursing facility services) that are used
for purposes of classification systems used in
establishing payment rates under this title shall
not be quality measures described in this
subparagraph.
``(C) Requirement for transparency in process.--

[[Page 385]]

``(i) In general.--In convening multi-
stakeholder groups under subparagraph (A) with
respect to the selection of quality measures, the
entity shall provide for an open and transparent
process for the activities conducted pursuant to
such convening.
``(ii) Selection of organizations
participating in multi-stakeholder groups.--The
process described in clause (i) shall ensure that
the selection of representatives comprising such
groups provides for public nominations for, and
the opportunity for public comment on, such
selection.
``(D) Multi-stakeholder group defined.--In this
paragraph, the term `multi-stakeholder group' means,
with respect to a quality measure, a voluntary
collaborative of organizations representing a broad
group of stakeholders interested in or affected by the
use of such quality measure.
``(8) Transmission of multi-stakeholder input.--
<> Not later than February 1 of each year
(beginning with 2012), the entity shall transmit to the
Secretary the input of multi-stakeholder groups provided under
paragraph (7).''.
(2) Annual report.--Section 1890(b)(5)(A) of the Social
Security Act (42 U.S.C. 1395aaa(b)(5)(A)) is amended--
(A) in clause (ii), by striking ``and'' at the end;
(B) in clause (iii), by striking the period at the
end and inserting a semicolon; and
(C) by adding at the end the following new clauses:
``(iv) gaps in endorsed quality measures,
which shall include measures that are within
priority areas identified by the Secretary under
the national strategy established under section
399HH of the Public Health Service Act, and where
quality measures are unavailable or inadequate to
identify or address such gaps;
``(v) areas in which evidence is insufficient
to support endorsement of quality measures in
priority areas identified by the Secretary under
the national strategy established under section
399HH of the Public Health Service Act and where
targeted research may address such gaps; and
``(vi) the matters described in clauses (i)
and (ii) of paragraph (7)(A).''.

(b) Multi-stakeholder Group Input Into Selection of Quality
Measures.--Title XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.) is amended by inserting after section 1890 the following:


``quality measurement


``Sec. 1890A.  <> (a) Multi-
stakeholder Group Input Into Selection of Quality Measures.--
<> The Secretary shall establish a pre-rulemaking
process under which the following steps occur with respect to the
selection of quality measures described in section 1890(b)(7)(B):
``(1) Input.--Pursuant to section 1890(b)(7), the entity
with a contract under section 1890 shall convene multi-
stakeholder groups to provide input to the Secretary on the
selection of quality measures described in subparagraph (B) of
such paragraph.

[[Page 386]]

``(2) Public availability of measures considered for
selection.--Not later than December 1 of each year (beginning
with 2011), the Secretary shall make available to the public a
list of quality measures described in section 1890(b)(7)(B) that
the Secretary is considering under this title.
``(3) Transmission of multi-stakeholder input.--Pursuant to
section 1890(b)(8), not later than February 1 of each year
(beginning with 2012), the entity shall transmit to the
Secretary the input of multi-stakeholder groups described in
paragraph (1).
``(4) Consideration of multi-stakeholder input.--The
Secretary shall take into consideration the input from multi-
stakeholder groups described in paragraph (1) in selecting
quality measures described in section 1890(b)(7)(B) that have
been endorsed by the entity with a contract under section 1890
and measures that have not been endorsed by such entity.
``(5) Rationale for use of quality measures.--
<> The Secretary shall
publish in the Federal Register the rationale for the use of any
quality measure described in section 1890(b)(7)(B) that has not
been endorsed by the entity with a contract under section 1890.
``(6) Assessment of impact.--Not later than March 1, 2012,
and at least once every three years thereafter, the Secretary
shall--
``(A) conduct an assessment of the quality impact of
the use of endorsed measures described in section
1890(b)(7)(B); and
``(B) <> make such
assessment available to the public.

``(b) Process for Dissemination of Measures Used by the Secretary.--
``(1) In general.--The Secretary shall establish a process
for disseminating quality measures used by the Secretary. Such
process shall include the following:
``(A) The incorporation of such measures, where
applicable, in workforce programs, training curricula,
and any other means of dissemination determined
appropriate by the Secretary.
``(B) The dissemination of such quality measures
through the national strategy developed under section
399HH of the Public Health Service Act.
``(2) Existing methods.--To the extent practicable, the
Secretary shall utilize and expand existing dissemination
methods in disseminating quality measures under the process
established under paragraph (1).

``(c) Review of Quality Measures Used by the Secretary.--
``(1) In general.--The Secretary shall--
``(A) periodically (but in no case less often than
once every 3 years) review quality measures described in
section 1890(b)(7)(B); and
``(B) with respect to each such measure, determine
whether to--
``(i) maintain the use of such measure; or
``(ii) phase out such measure.
``(2) Considerations.--In conducting the review under
paragraph (1), the Secretary shall take steps to--
``(A) seek to avoid duplication of measures used;
and

[[Page 387]]

``(B) take into consideration current innovative
methodologies and strategies for quality improvement
practices in the delivery of health care services that
represent best practices for such quality improvement
and measures endorsed by the entity with a contract
under section 1890 since the previous review by the
Secretary.

``(d) Rule of Construction.--Nothing in this section shall preclude
a State from using the quality measures identified under sections 1139A
and 1139B.''.
(c) Funding.--For purposes of carrying out the amendments made by
this section, the Secretary shall provide for the transfer, from the
Federal Hospital Insurance Trust Fund under section 1817 of the Social
Security Act (42 U.S.C. 1395i) and the Federal Supplementary Medical
Insurance Trust Fund under section 1841 of such Act (42 U.S.C. 1395t),
in such proportion as the Secretary determines appropriate, of
$20,000,000, to the Centers for Medicare & Medicaid Services Program
Management Account for each of fiscal years 2010 through 2014. Amounts
transferred under the preceding sentence shall remain available until
expended.

SEC. 3015. DATA COLLECTION; PUBLIC REPORTING.

Title III of the Public Health Service Act (42 U.S.C. 241 et seq.),
as amended by section 3011, is further amended by adding at the end the
following:

``SEC. 399II. <> COLLECTION AND ANALYSIS OF DATA
FOR QUALITY AND RESOURCE USE MEASURES.

``(a) In General.--The Secretary shall collect and aggregate
consistent data on quality and resource use measures from information
systems used to support health care delivery to implement the public
reporting of performance information, as described in section 399JJ, and
may award grants or contracts for this purpose. The Secretary shall
ensure that such collection, aggregation, and analysis systems span an
increasingly broad range of patient populations, providers, and
geographic areas over time.
``(b) Grants or Contracts for Data Collection.--
``(1) In general.--The Secretary may award grants or
contracts to eligible entities to support new, or improve
existing, efforts to collect and aggregate quality and resource
use measures described under subsection (c).
``(2) Eligible entities.--To be eligible for a grant or
contract under this subsection, an entity shall--
``(A) be--
``(i) a multi-stakeholder entity that
coordinates the development of methods and
implementation plans for the consistent reporting
of summary quality and cost information;
``(ii) an entity capable of submitting such
summary data for a particular population and
providers, such as a disease registry, regional
collaboration, health plan collaboration, or other
population-wide source; or
``(iii) a Federal Indian Health Service
program or a health program operated by an Indian
tribe (as defined in section 4 of the Indian
Health Care Improvement Act);
``(B) promote the use of the systems that provide
data to improve and coordinate patient care;

[[Page 388]]

``(C) support the provision of timely, consistent
quality and resource use information to health care
providers, and other groups and organizations as
appropriate, with an opportunity for providers to
correct inaccurate measures; and
``(D) agree to report, as determined by the
Secretary, measures on quality and resource use to the
public in accordance with the public reporting process
established under section 399JJ.

``(c) Consistent Data Aggregation.-- <> The
Secretary may award grants or contracts under this section only to
entities that enable summary data that can be integrated and compared
across multiple sources. The Secretary shall provide standards for the
protection of the security and privacy of patient data.

``(d) Matching Funds.--The Secretary may not award a grant or
contract under this section to an entity unless the entity agrees that
it will make available (directly or through contributions from other
public or private entities) non-Federal contributions toward the
activities to be carried out under the grant or contract in an amount
equal to $1 for each $5 of Federal funds provided under the grant or
contract. Such non-Federal matching funds may be provided directly or
through donations from public or private entities and may be in cash or
in-kind, fairly evaluated, including plant, equipment, or services.
``(e) Authorization of Appropriations.--To carry out this section,
there are authorized to be appropriated such sums as may be necessary
for fiscal years 2010 through 2014.

``SEC. 399JJ. <> PUBLIC REPORTING OF PERFORMANCE
INFORMATION.

``(a) Development of Performance Websites.-- <> The Secretary shall make available to the public, through
standardized Internet websites, performance information summarizing data
on quality measures. Such information shall be tailored to respond to
the differing needs of hospitals and other institutional health care
providers, physicians and other clinicians, patients, consumers,
researchers, policymakers, States, and other stakeholders, as the
Secretary may specify.

``(b) Information on Conditions.--The performance information made
publicly available on an Internet website, as described in subsection
(a), shall include information regarding clinical conditions to the
extent such information is available, and the information shall, where
appropriate, be provider-specific and sufficiently disaggregated and
specific to meet the needs of patients with different clinical
conditions.
``(c) Consultation.--
``(1) In general.--In carrying out this section, the
Secretary shall consult with the entity with a contract under
section 1890(a) of the Social Security Act, and other entities,
as appropriate, to determine the type of information that is
useful to stakeholders and the format that best facilitates use
of the reports and of performance reporting Internet websites.
``(2) Consultation with stakeholders.--The entity with a
contract under section 1890(a) of the Social Security Act shall
convene multi-stakeholder groups, as described in such section,
to review the design and format of each Internet website made
available under subsection (a) and shall transmit

[[Page 389]]

to the Secretary the views of such multi-stakeholder groups with
respect to each such design and format.

``(d) Coordination.--Where appropriate, the Secretary shall
coordinate the manner in which data are presented through Internet
websites described in subsection (a) and for public reporting of other
quality measures by the Secretary, including such quality measures under
title XVIII of the Social Security Act.
``(e) Authorization of Appropriations.--To carry out this section,
there are authorized to be appropriated such sums as may be necessary
for fiscal years 2010 through 2014.''.

PART III--ENCOURAGING DEVELOPMENT OF NEW PATIENT CARE MODELS

SEC. 3021. ESTABLISHMENT OF CENTER FOR MEDICARE AND MEDICAID INNOVATION
WITHIN CMS.

(a) In General.--Title XI of the Social Security Act is amended by
inserting after section 1115 the following new section:


``center for medicare and medicaid innovation


``Sec. 1115A.  <> (a) Center for Medicare and
Medicaid Innovation Established.--
``(1) In general.--There is created within the Centers for
Medicare & Medicaid Services a Center for Medicare and Medicaid
Innovation (in this section referred to as the `CMI') to carry
out the duties described in this section. The purpose of the CMI
is to test innovative payment and service delivery models to
reduce program expenditures under the applicable titles while
preserving or enhancing the quality of care furnished to
individuals under such titles. In selecting such models, the
Secretary shall give preference to models that also improve the
coordination, quality, and efficiency of health care services
furnished to applicable individuals defined in paragraph (4)(A).
``(2) Deadline.--The Secretary shall ensure that the CMI is
carrying out the duties described in this section by not later
than January 1, 2011.
``(3) Consultation.--In carrying out the duties under this
section, the CMI shall consult representatives of relevant
Federal agencies, and clinical and analytical experts with
expertise in medicine and health care management. The CMI shall
use open door forums or other mechanisms to seek input from
interested parties.
``(4) Definitions.--In this section:
``(A) Applicable individual.--The term `applicable
individual' means--
``(i) an individual who is entitled to, or
enrolled for, benefits under part A of title XVIII
or enrolled for benefits under part B of such
title;
``(ii) an individual who is eligible for
medical assistance under title XIX, under a State
plan or waiver; or
``(iii) an individual who meets the criteria
of both clauses (i) and (ii).
``(B) Applicable title.--The term `applicable title'
means title XVIII, title XIX, or both.

[[Page 390]]

``(b) Testing of Models (Phase I).--
``(1) In general.--The CMI shall test payment and service
delivery models in accordance with selection criteria under
paragraph (2) to determine the effect of applying such models
under the applicable title (as defined in subsection (a)(4)(B))
on program expenditures under such titles and the quality of
care received by individuals receiving benefits under such
title.
``(2) Selection of models to be tested.--
``(A) <> In general.--The
Secretary shall select models to be tested from models
where the Secretary determines that there is evidence
that the model addresses a defined population for which
there are deficits in care leading to poor clinical
outcomes or potentially avoidable expenditures. The
models selected under the preceding sentence may include
the models described in subparagraph (B).
``(B) Opportunities.--The models described in this
subparagraph are the following models:
``(i) Promoting broad payment and practice
reform in primary care, including patient-centered
medical home models for high-need applicable
individuals, medical homes that address women's
unique health care needs, and models that
transition primary care practices away from fee-
for-service based reimbursement and toward
comprehensive payment or salary-based payment.
``(ii) Contracting directly with groups of
providers of services and suppliers to promote
innovative care delivery models, such as through
risk-based comprehensive payment or salary-based
payment.
``(iii) Utilizing geriatric assessments and
comprehensive care plans to coordinate the care
(including through interdisciplinary teams) of
applicable individuals with multiple chronic
conditions and at least one of the following:
``(I) An inability to perform 2 or
more activities of daily living.
``(II) Cognitive impairment,
including dementia.
``(iv) Promote care coordination between
providers of services and suppliers that
transition health care providers away from fee-
for-service based reimbursement and toward salary-
based payment.
``(v) Supporting care coordination for
chronically-ill applicable individuals at high
risk of hospitalization through a health
information technology-enabled provider network
that includes care coordinators, a chronic disease
registry, and home tele-health technology.
``(vi) Varying payment to physicians who order
advanced diagnostic imaging services (as defined
in section 1834(e)(1)(B)) according to the
physician's adherence to appropriateness criteria
for the ordering of such services, as determined
in consultation with physician specialty groups
and other relevant stakeholders.

[[Page 391]]

``(vii) Utilizing medication therapy
management services, such as those described in
section 935 of the Public Health Service Act.
``(viii) Establishing community-based health
teams to support small-practice medical homes by
assisting the primary care practitioner in chronic
care management, including patient self-
management, activities.
``(ix) Assisting applicable individuals in
making informed health care choices by paying
providers of services and suppliers for using
patient decision-support tools, including tools
that meet the standards developed and identified
under section 936(c)(2)(A) of the Public Health
Service Act, that improve applicable individual
and caregiver understanding of medical treatment
options.
``(x) Allowing States to test and evaluate
fully integrating care for dual eligible
individuals in the State, including the management
and oversight of all funds under the applicable
titles with respect to such individuals.
``(xi) Allowing States to test and evaluate
systems of all-payer payment reform for the
medical care of residents of the State, including
dual eligible individuals.
``(xii) Aligning nationally recognized,
evidence-based guidelines of cancer care with
payment incentives under title XVIII in the areas
of treatment planning and follow-up care planning
for applicable individuals described in clause (i)
or (iii) of subsection (a)(4)(A) with cancer,
including the identification of gaps in applicable
quality measures.
``(xiii) Improving post-acute care through
continuing care hospitals that offer inpatient
rehabilitation, long-term care hospitals, and home
health or skilled nursing care during an inpatient
stay and the 30 days immediately following
discharge.
``(xiv) Funding home health providers who
offer chronic care management services to
applicable individuals in cooperation with
interdisciplinary teams.
``(xv) Promoting improved quality and reduced
cost by developing a collaborative of high-
quality, low-cost health care institutions that is
responsible for--
``(I) developing, documenting, and
disseminating best practices and proven
care methods;
``(II) implementing such best
practices and proven care methods within
such institutions to demonstrate further
improvements in quality and efficiency;
and
``(III) providing assistance to
other health care institutions on how
best to employ such best practices and
proven care methods to improve health
care quality and lower costs.
``(xvi) Facilitate inpatient care, including
intensive care, of hospitalized applicable
individuals at their local hospital through the
use of electronic monitoring by specialists,
including intensivists and critical care
specialists, based at integrated health systems.

[[Page 392]]

``(xvii) Promoting greater efficiencies and
timely access to outpatient services (such as
outpatient physical therapy services) through
models that do not require a physician or other
health professional to refer the service or be
involved in establishing the plan of care for the
service, when such service is furnished by a
health professional who has the authority to
furnish the service under existing State law.
``(xviii) Establishing comprehensive payments
to Healthcare Innovation Zones, consisting of
groups of providers that include a teaching
hospital, physicians, and other clinical entities,
that, through their structure, operations, and
joint-activity deliver a full spectrum of
integrated and comprehensive health care services
to applicable individuals while also incorporating
innovative methods for the clinical training of
future health care professionals.
``(C) Additional factors for consideration.--In
selecting models for testing under subparagraph (A), the
CMI may consider the following additional factors:
``(i) Whether the model includes a regular
process for monitoring and updating patient care
plans in a manner that is consistent with the
needs and preferences of applicable individuals.
``(ii) Whether the model places the applicable
individual, including family members and other
informal caregivers of the applicable individual,
at the center of the care team of the applicable
individual.
``(iii) Whether the model provides for in-
person contact with applicable individuals.
``(iv) Whether the model utilizes technology,
such as electronic health records and patient-
based remote monitoring systems, to coordinate
care over time and across settings.
``(v) Whether the model provides for the
maintenance of a close relationship between care
coordinators, primary care practitioners,
specialist physicians, community-based
organizations, and other providers of services and
suppliers.
``(vi) Whether the model relies on a team-
based approach to interventions, such as
comprehensive care assessments, care planning, and
self-management coaching.
``(vii) Whether, under the model, providers of
services and suppliers are able to share
information with patients, caregivers, and other
providers of services and suppliers on a real time
basis.
``(3) Budget neutrality.--
``(A) Initial period.--The Secretary shall not
require, as a condition for testing a model under
paragraph (1), that the design of such model ensure that
such model is budget neutral initially with respect to
expenditures under the applicable title.
``(B) <> Termination or
modification.--The Secretary shall terminate or modify
the design and implementation of a model unless the
Secretary determines (and the Chief Actuary of the
Centers for Medicare & Medicaid Services,

[[Page 393]]

with respect to program spending under the applicable
title, certifies), after testing has begun, that the
model is expected to--
``(i) improve the quality of care (as
determined by the Administrator of the Centers for
Medicare & Medicaid Services) without increasing
spending under the applicable title;
``(ii) reduce spending under the applicable
title without reducing the quality of care; or
``(iii) improve the quality of care and reduce
spending.
Such termination may occur at any time after such
testing has begun and before completion of the testing.
``(4) Evaluation.--
``(A) In general.--The Secretary shall conduct an
evaluation of each model tested under this subsection.
Such evaluation shall include an analysis of--
``(i) the quality of care furnished under the
model, including the measurement of patient-level
outcomes and patient-centeredness criteria
determined appropriate by the Secretary; and
``(ii) the changes in spending under the
applicable titles by reason of the model.
``(B) Information.-- <> The Secretary shall make
the results of each evaluation under this paragraph
available to the public in a timely fashion and may
establish requirements for States and other entities
participating in the testing of models under this
section to collect and report information that the
Secretary determines is necessary to monitor and
evaluate such models.

``(c) <> Expansion of Models (Phase II).--
Taking into account the evaluation under subsection (b)(4), the
Secretary may, through rulemaking, expand (including implementation on a
nationwide basis) the duration and the scope of a model that is being
tested under subsection (b) or a demonstration project under section
1866C, to the extent determined appropriate by the Secretary, if--
``(1) the Secretary determines that such expansion is
expected to--
``(A) reduce spending under applicable title without
reducing the quality of care; or
``(B) improve the quality of care and reduce
spending; and
``(2) <> the Chief Actuary of the
Centers for Medicare & Medicaid Services certifies that such
expansion would reduce program spending under applicable titles.

``(d) Implementation.--
``(1) Waiver authority.--The Secretary may waive such
requirements of titles XI and XVIII and of sections 1902(a)(1),
1902(a)(13), and 1903(m)(2)(A)(iii) as may be necessary solely
for purposes of carrying out this section with respect to
testing models described in subsection (b).
``(2) Limitations on review.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise of--
``(A) the selection of models for testing or
expansion under this section;

[[Page 394]]

``(B) the selection of organizations, sites, or
participants to test those models selected;
``(C) the elements, parameters, scope, and duration
of such models for testing or dissemination;
``(D) determinations regarding budget neutrality
under subsection (b)(3);
``(E) the termination or modification of the design
and implementation of a model under subsection
(b)(3)(B); and
``(F) determinations about expansion of the duration
and scope of a model under subsection (c), including the
determination that a model is not expected to meet
criteria described in paragraph (1) or (2) of such
subsection.
``(3) Administration.--Chapter 35 of title 44, United States
Code, shall not apply to the testing and evaluation of models or
expansion of such models under this section.

``(e) Application to CHIP.--The Center may carry out activities
under this section with respect to title XXI in the same manner as
provided under this section with respect to the program under the
applicable titles.
``(f) Funding.--
``(1) In general.--There are appropriated, from amounts in
the Treasury not otherwise appropriated--
``(A) $5,000,000 for the design, implementation, and
evaluation of models under subsection (b) for fiscal
year 2010;
``(B) $10,000,000,000 for the activities initiated
under this section for the period of fiscal years 2011
through 2019; and
``(C) the amount described in subparagraph (B) for
the activities initiated under this section for each
subsequent 10-year fiscal period (beginning with the 10-
year fiscal period beginning with fiscal year 2020).
Amounts appropriated under the preceding sentence shall remain
available until expended.
``(2) Use of certain funds.--Out of amounts appropriated
under subparagraphs (B) and (C) of paragraph (1), not less than
$25,000,000 shall be made available each such fiscal year to
design, implement, and evaluate models under subsection (b).

``(g) Report to Congress.--Beginning in 2012, and not less than once
every other year thereafter, the Secretary shall submit to Congress a
report on activities under this section. Each such report shall describe
the models tested under subsection (b), including the number of
individuals described in subsection (a)(4)(A)(i) and of individuals
described in subsection (a)(4)(A)(ii) participating in such models and
payments made under applicable titles for services on behalf of such
individuals, any models chosen for expansion under subsection (c), and
the results from evaluations under subsection
(b)(4). <> In addition, each such report shall
provide such recommendations as the Secretary determines are appropriate
for legislative action to facilitate the development and expansion of
successful payment models.''.

(b) Medicaid Conforming Amendment.--Section 1902(a) of the Social
Security Act (42 U.S.C. 1396a(a)), as amended by section 8002(b), is
amended--
(1) in paragraph (81), by striking ``and'' at the end;

[[Page 395]]

(2) in paragraph (82), by striking the period at the end and
inserting ``; and''; and
(3) by inserting after paragraph (82) the following new
paragraph:
``(83) provide for implementation of the payment models
specified by the Secretary under section 1115A(c) for
implementation on a nationwide basis unless the State
demonstrates to the satisfaction of the Secretary that
implementation would not be administratively feasible or
appropriate to the health care delivery system of the State.''.

(c) Revisions to Health Care Quality Demonstration Program.--
Subsections (b) and (f) of section 1866C of the Social Security Act (42
U.S.C. 1395cc-3) are amended by striking ``5-year'' each place it
appears.

SEC. 3022. MEDICARE SHARED SAVINGS PROGRAM.

Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is
amended by adding at the end the following new section:


``shared savings program


``Sec. 1899.  <> (a) Establishment.--
``(1) In general.-- <> Not later than
January 1, 2012, the Secretary shall establish a shared savings
program (in this section referred to as the `program') that
promotes accountability for a patient population and coordinates
items and services under parts A and B, and encourages
investment in infrastructure and redesigned care processes for
high quality and efficient service delivery. Under such
program--
``(A) groups of providers of services and suppliers
meeting criteria specified by the Secretary may work
together to manage and coordinate care for Medicare fee-
for-service beneficiaries through an accountable care
organization (referred to in this section as an `ACO');
and
``(B) ACOs that meet quality performance standards
established by the Secretary are eligible to receive
payments for shared savings under subsection (d)(2).

``(b) Eligible ACOs.--
``(1) In general.--Subject to the succeeding provisions of
this subsection, as determined appropriate by the Secretary, the
following groups of providers of services and suppliers which
have established a mechanism for shared governance are eligible
to participate as ACOs under the program under this section:
``(A) ACO professionals in group practice
arrangements.
``(B) Networks of individual practices of ACO
professionals.
``(C) Partnerships or joint venture arrangements
between hospitals and ACO professionals.
``(D) Hospitals employing ACO professionals.
``(E) Such other groups of providers of services and
suppliers as the Secretary determines appropriate.
``(2) Requirements.--An ACO shall meet the following
requirements:
``(A) The ACO shall be willing to become accountable
for the quality, cost, and overall care of the Medicare
fee-for-service beneficiaries assigned to it.

[[Page 396]]

``(B) <> The ACO shall enter into
an agreement with the Secretary to participate in the
program for not less than a 3-year period (referred to
in this section as the `agreement period').
``(C) The ACO shall have a formal legal structure
that would allow the organization to receive and
distribute payments for shared savings under subsection
(d)(2) to participating providers of services and
suppliers.
``(D) The ACO shall include primary care ACO
professionals that are sufficient for the number of
Medicare fee-for-service beneficiaries assigned to the
ACO under subsection (c). At a minimum, the ACO shall
have at least 5,000 such beneficiaries assigned to it
under subsection (c) in order to be eligible to
participate in the ACO program.
``(E) The ACO shall provide the Secretary with such
information regarding ACO professionals participating in
the ACO as the Secretary determines necessary to support
the assignment of Medicare fee-for-service beneficiaries
to an ACO, the implementation of quality and other
reporting requirements under paragraph (3), and the
determination of payments for shared savings under
subsection (d)(2).
``(F) The ACO shall have in place a leadership and
management structure that includes clinical and
administrative systems.
``(G) The ACO shall define processes to promote
evidence-based medicine and patient engagement, report
on quality and cost measures, and coordinate care, such
as through the use of telehealth, remote patient
monitoring, and other such enabling technologies.
``(H) The ACO shall demonstrate to the Secretary
that it meets patient-centeredness criteria specified by
the Secretary, such as the use of patient and caregiver
assessments or the use of individualized care plans.
``(3) Quality and other reporting requirements.--
``(A) In general.-- <> The
Secretary shall determine appropriate measures to assess
the quality of care furnished by the ACO, such as
measures of--
``(i) clinical processes and outcomes;
``(ii) patient and, where practicable,
caregiver experience of care; and
``(iii) utilization (such as rates of hospital
admissions for ambulatory care sensitive
conditions).
``(B) Reporting requirements.--An ACO shall submit
data in a form and manner specified by the Secretary on
measures the Secretary determines necessary for the ACO
to report in order to evaluate the quality of care
furnished by the ACO. Such data may include care
transitions across health care settings, including
hospital discharge planning and post-hospital discharge
follow-up by ACO professionals, as the Secretary
determines appropriate.
``(C) Quality performance standards.--The Secretary
shall establish quality performance standards to assess
the quality of care furnished by ACOs. The Secretary
shall seek to improve the quality of care furnished by

[[Page 397]]

ACOs over time by specifying higher standards, new
measures, or both for purposes of assessing such quality
of care.
``(D) Other reporting requirements.--The Secretary
may, as the Secretary determines appropriate,
incorporate reporting requirements and incentive
payments related to the physician quality reporting
initiative (PQRI) under section 1848, including such
requirements and such payments related to electronic
prescribing, electronic health records, and other
similar initiatives under section 1848, and may use
alternative criteria than would otherwise apply under
such section for determining whether to make such
payments. The incentive payments described in the
preceding sentence shall not be taken into consideration
when calculating any payments otherwise made under
subsection (d).
``(4) No duplication in participation in shared savings
programs.--A provider of services or supplier that participates
in any of the following shall not be eligible to participate in
an ACO under this section:
``(A) A model tested or expanded under section 1115A
that involves shared savings under this title, or any
other program or demonstration project that involves
such shared savings.
``(B) The independence at home medical practice
pilot program under section 1866E.

``(c) Assignment of Medicare Fee-for-service Beneficiaries to
ACOs.-- <> The Secretary shall determine an
appropriate method to assign Medicare fee-for-service beneficiaries to
an ACO based on their utilization of primary care services provided
under this title by an ACO professional described in subsection
(h)(1)(A).

``(d) Payments and Treatment of Savings.--
``(1) Payments.--
``(A) In general.--Under the program, subject to
paragraph (3), payments shall continue to be made to
providers of services and suppliers participating in an
ACO under the original Medicare fee-for-service program
under parts A and B in the same manner as they would
otherwise be made except that a participating ACO is
eligible to receive payment for shared savings under
paragraph (2) if--
``(i) the ACO meets quality performance
standards established by the Secretary under
subsection (b)(3); and
``(ii) the ACO meets the requirement under
subparagraph (B)(i).
``(B) Savings requirement and benchmark.--
``(i) Determining savings.--In each year of
the agreement period, an ACO shall be eligible to
receive payment for shared savings under paragraph
(2) only if the estimated average per capita
Medicare expenditures under the ACO for Medicare
fee-for-service beneficiaries for parts A and B
services, adjusted for beneficiary
characteristics, is at least the percent specified
by the Secretary below the applicable benchmark
under clause (ii). The Secretary shall determine
the appropriate percent described in the preceding
sentence to account for normal variation in
expenditures under

[[Page 398]]

this title, based upon the number of Medicare fee-
for-service beneficiaries assigned to an ACO.
``(ii) Establish and update benchmark.--The
Secretary shall estimate a benchmark for each
agreement period for each ACO using the most
recent available 3 years of per-beneficiary
expenditures for parts A and B services for
Medicare fee-for-service beneficiaries assigned to
the ACO. Such benchmark shall be adjusted for
beneficiary characteristics and such other factors
as the Secretary determines appropriate and
updated by the projected absolute amount of growth
in national per capita expenditures for parts A
and B services under the original Medicare fee-
for-service program, as estimated by the
Secretary. Such benchmark shall be reset at the
start of each agreement period.
``(2) Payments for shared savings.--Subject to performance
with respect to the quality performance standards established by
the Secretary under subsection (b)(3), if an ACO meets the
requirements under paragraph (1), a percent (as determined
appropriate by the Secretary) of the difference between such
estimated average per capita Medicare expenditures in a year,
adjusted for beneficiary characteristics, under the ACO and such
benchmark for the ACO may be paid to the ACO as shared savings
and the remainder of such difference shall be retained by the
program under this title. <> The Secretary
shall establish limits on the total amount of shared savings
that may be paid to an ACO under this paragraph.
``(3) Monitoring avoidance of at-risk patients.--If the
Secretary determines that an ACO has taken steps to avoid
patients at risk in order to reduce the likelihood of increasing
costs to the ACO the Secretary may impose an appropriate
sanction on the ACO, including termination from the program.
``(4) Termination.--The Secretary may terminate an agreement
with an ACO if it does not meet the quality performance
standards established by the Secretary under subsection (b)(3).

``(e) Administration.--Chapter 35 of title 44, United States Code,
shall not apply to the program.
``(f) Waiver Authority.--The Secretary may waive such requirements
of sections 1128A and 1128B and title XVIII of this Act as may be
necessary to carry out the provisions of this section.
``(g) Limitations on Review.--There shall be no administrative or
judicial review under section 1869, section 1878, or otherwise of--
``(1) the specification of criteria under subsection
(a)(1)(B);
``(2) the assessment of the quality of care furnished by an
ACO and the establishment of performance standards under
subsection (b)(3);
``(3) the assignment of Medicare fee-for-service
beneficiaries to an ACO under subsection (c);
``(4) the determination of whether an ACO is eligible for
shared savings under subsection (d)(2) and the amount of such
shared savings, including the determination of the estimated
average per capita Medicare expenditures under the ACO for
Medicare fee-for-service beneficiaries assigned to the ACO and
the average benchmark for the ACO under subsection (d)(1)(B);

[[Page 399]]

``(5) the percent of shared savings specified by the
Secretary under subsection (d)(2) and any limit on the total
amount of shared savings established by the Secretary under such
subsection; and
``(6) the termination of an ACO under subsection (d)(4).

``(h) Definitions.--In this section:
``(1) ACO professional.--The term `ACO professional' means--
``(A) a physician (as defined in section
1861(r)(1)); and
``(B) a practitioner described in section
1842(b)(18)(C)(i).
``(2) Hospital.--The term `hospital' means a subsection (d)
hospital (as defined in section 1886(d)(1)(B)).
``(3) Medicare fee-for-service beneficiary.--The term
`Medicare fee-for-service beneficiary' means an individual who
is enrolled in the original Medicare fee-for-service program
under parts A and B and is not enrolled in an MA plan under part
C, an eligible organization under section 1876, or a PACE
program under section 1894.''.

SEC. 3023. NATIONAL PILOT PROGRAM ON PAYMENT BUNDLING.

Title XVIII of the Social Security Act, as amended by section 3021,
is amended by inserting after section 1886C the following new section:


``national pilot program on payment bundling


``Sec. 1866D.  <> (a) Implementation.--
``(1) In general.--The Secretary shall establish a pilot
program for integrated care during an episode of care provided
to an applicable beneficiary around a hospitalization in order
to improve the coordination, quality, and efficiency of health
care services under this title.
``(2) Definitions.--In this section:
``(A) Applicable beneficiary.--The term `applicable
beneficiary' means an individual who--
``(i) is entitled to, or enrolled for,
benefits under part A and enrolled for benefits
under part B of such title, but not enrolled under
part C or a PACE program under section 1894; and
``(ii) is admitted to a hospital for an
applicable condition.
``(B) Applicable condition.--The term `applicable
condition' means 1 or more of 8 conditions selected by
the Secretary. In selecting conditions under the
preceding sentence, the Secretary shall take into
consideration the following factors:
``(i) Whether the conditions selected include
a mix of chronic and acute conditions.
``(ii) Whether the conditions selected include
a mix of surgical and medical conditions.
``(iii) Whether a condition is one for which
there is evidence of an opportunity for providers
of services and suppliers to improve the quality
of care furnished while reducing total
expenditures under this title.
``(iv) Whether a condition has significant
variation in--
``(I) the number of readmissions;
and

[[Page 400]]

``(II) the amount of expenditures
for post-acute care spending under this
title.
``(v) Whether a condition is high-volume and
has high post-acute care expenditures under this
title.
``(vi) Which conditions the Secretary
determines are most amenable to bundling across
the spectrum of care given practice patterns under
this title.
``(C) Applicable services.--The term `applicable
services' means the following:
``(i) Acute care inpatient services.
``(ii) Physicians' services delivered in and
outside of an acute care hospital setting.
``(iii) Outpatient hospital services,
including emergency department services.
``(iv) Post-acute care services, including
home health services, skilled nursing services,
inpatient rehabilitation services, and inpatient
hospital services furnished by a long-term care
hospital.
``(v) Other services the Secretary determines
appropriate.
``(D) Episode of care.--
``(i) In general.--Subject to clause (ii), the
term `episode of care' means, with respect to an
applicable condition and an applicable
beneficiary, the period that includes--
``(I) the 3 days prior to the
admission of the applicable beneficiary
to a hospital for the applicable
condition;
``(II) the length of stay of the
applicable beneficiary in such hospital;
and
``(III) the 30 days following the
discharge of the applicable beneficiary
from such hospital.
``(ii) Establishment of period by the
secretary.--The Secretary, as appropriate, may
establish a period (other than the period
described in clause (i)) for an episode of care
under the pilot program.
``(E) Physicians' services.--The term `physicians'
services' has the meaning given such term in section
1861(q).
``(F) Pilot program.--The term `pilot program' means
the pilot program under this section.
``(G) Provider of services.--The term `provider of
services' has the meaning given such term in section
1861(u).
``(H) Readmission.--The term `readmission' has the
meaning given such term in section 1886(q)(5)(E).
``(I) Supplier.--The term `supplier' has the meaning
given such term in section 1861(d).
``(3) Deadline for implementation.--The Secretary shall
establish the pilot program not later than January 1, 2013.

``(b) Developmental Phase.--
``(1) Determination of patient assessment instrument.--The
Secretary shall determine which patient assessment instrument
(such as the Continuity Assessment Record and Evaluation (CARE)
tool) shall be used under the pilot program to evaluate the
applicable condition of an applicable beneficiary for purposes
of determining the most

[[Page 401]]

clinically appropriate site for the provision of post-acute care
to the applicable beneficiary.
``(2) Development of quality measures for an episode of care
and for post-acute care.--
``(A) In general.--The Secretary, in consultation
with the Agency for Healthcare Research and Quality and
the entity with a contract under section 1890(a) of the
Social Security Act, shall develop quality measures for
use in the pilot program--
``(i) for episodes of care; and
``(ii) for post-acute care.
``(B) Site-neutral post-acute care quality
measures.--Any quality measures developed under
subparagraph (A)(ii) shall be site-neutral.
``(C) Coordination with quality measure development
and endorsement procedures.--The Secretary shall ensure
that the development of quality measures under
subparagraph (A) is done in a manner that is consistent
with the measures developed and endorsed under section
1890 and 1890A that are applicable to all post-acute
care settings.

``(c) Details.--
``(1) Duration.--
``(A) In general.--Subject to subparagraph (B), the
pilot program shall be conducted for a period of 5
years.
``(B) Extension.-- <> The
Secretary may extend the duration of the pilot program
for providers of services and suppliers participating in
the pilot program as of the day before the end of the 5-
year period described in subparagraph (A), for a period
determined appropriate by the Secretary, if the
Secretary determines that such extension will result in
improving or not reducing the quality of patient care
and reducing spending under this title.
``(2) Participating providers of services and suppliers.--
``(A) In general.--An entity comprised of providers
of services and suppliers, including a hospital, a
physician group, a skilled nursing facility, and a home
health agency, who are otherwise participating under
this title, may submit an application to the Secretary
to provide applicable services to applicable individuals
under this section.
``(B) Requirements.--The Secretary shall develop
requirements for entities to participate in the pilot
program under this section. Such requirements shall
ensure that applicable beneficiaries have an adequate
choice of providers of services and suppliers under the
pilot program.
``(3) Payment methodology.--
``(A) In general.--
``(i) Establishment of payment methods.--The
Secretary shall develop payment methods for the
pilot program for entities participating in the
pilot program. Such payment methods may include
bundled payments and bids from entities for
episodes of care. The Secretary shall make
payments to the entity for services covered under
this section.
``(ii) No additional program expenditures.--
Payments under this section for applicable items
and

[[Page 402]]

services under this title (including payment for
services described in subparagraph (B)) for
applicable beneficiaries for a year shall be
established in a manner that does not result in
spending more for such entity for such
beneficiaries than would otherwise be expended for
such entity for such beneficiaries for such year
if the pilot program were not implemented, as
estimated by the Secretary.
``(B) Inclusion of certain services.--A payment
methodology tested under the pilot program shall include
payment for the furnishing of applicable services and
other appropriate services, such as care coordination,
medication reconciliation, discharge planning,
transitional care services, and other patient-centered
activities as determined appropriate by the Secretary.
``(C) Bundled payments.--
``(i) In general.--A bundled payment under the
pilot program shall--
``(I) be comprehensive, covering the
costs of applicable services and other
appropriate services furnished to an
individual during an episode of care (as
determined by the Secretary); and
``(II) be made to the entity which
is participating in the pilot program.
``(ii) Requirement for provision of applicable
services and other appropriate services.--
Applicable services and other appropriate services
for which payment is made under this subparagraph
shall be furnished or directed by the entity which
is participating in the pilot program.
``(D) Payment for post-acute care services after the
episode of care.-- <> The Secretary
shall establish procedures, in the case where an
applicable beneficiary requires continued post-acute
care services after the last day of the episode of care,
under which payment for such services shall be made.
``(4) Quality measures.--
``(A) In general.--The Secretary shall establish
quality measures (including quality measures of process,
outcome, and structure) related to care provided by
entities participating in the pilot program. Quality
measures established under the preceding sentence shall
include measures of the following:
``(i) Functional status improvement.
``(ii) Reducing rates of avoidable hospital
readmissions.
``(iii) Rates of discharge to the community.
``(iv) Rates of admission to an emergency room
after a hospitalization.
``(v) Incidence of health care acquired
infections.
``(vi) Efficiency measures.
``(vii) Measures of patient-centeredness of
care.
``(viii) Measures of patient perception of
care.
``(ix) Other measures, including measures of
patient outcomes, determined appropriate by the
Secretary.
``(B) Reporting on quality measures.--

[[Page 403]]

``(i) In general.--A entity shall submit data
to the Secretary on quality measures established
under subparagraph (A) during each year of the
pilot program (in a form and manner, subject to
clause (iii), specified by the Secretary).
``(ii) Submission of data through electronic
health record.--To the extent practicable, the
Secretary shall specify that data on measures be
submitted under clause (i) through the use of an
qualified electronic health record (as defined in
section 3000(13) of the Public Health Service Act
(42 U.S.C. 300jj-11(13)) in a manner specified by
the Secretary.

``(d) Waiver.--The Secretary may waive such provisions of this title
and title XI as may be necessary to carry out the pilot program.
``(e) Independent Evaluation and Reports on Pilot Program.--
``(1) Independent evaluation.--The Secretary shall conduct
an independent evaluation of the pilot program, including the
extent to which the pilot program has--
``(A) improved quality measures established under
subsection (c)(4)(A);
``(B) improved health outcomes;
``(C) improved applicable beneficiary access to
care; and
``(D) reduced spending under this title.
``(2) Reports.--
``(A) Interim report.--Not later than 2 years after
the implementation of the pilot program, the Secretary
shall submit to Congress a report on the initial results
of the independent evaluation conducted under paragraph
(1).
``(B) Final report.--Not later than 3 years after
the implementation of the pilot program, the Secretary
shall submit to Congress a report on the final results
of the independent evaluation conducted under paragraph
(1).

``(f) Consultation.--The Secretary shall consult with
representatives of small rural hospitals, including critical access
hospitals (as defined in section 1861(mm)(1)), regarding their
participation in the pilot program. Such consultation shall include
consideration of innovative methods of implementing bundled payments in
hospitals described in the preceding sentence, taking into consideration
any difficulties in doing so as a result of the low volume of services
provided by such hospitals.
``(g) Implementation Plan.--
``(1) In general.-- <> Not later than
January 1, 2016, the Secretary shall submit a plan for the
implementation of an expansion of the pilot program if the
Secretary determines that such expansion will result in
improving or not reducing the quality of patient care and
reducing spending under this title.

``(h) Administration.--Chapter 35 of title 44, United States Code,
shall not apply to the selection, testing, and evaluation of models or
the expansion of such models under this section.''.

[[Page 404]]

SEC. 3024. INDEPENDENCE AT HOME DEMONSTRATION PROGRAM.

Title XVIII of the Social Security Act is amended by inserting after
section 1866D, as inserted by section 3023, the following new section:


``independence at home medical practice demonstration program


``Sec. 1866D.  <> (a) Establishment.--
``(1) In general.--The Secretary shall conduct a
demonstration program (in this section referred to as the
`demonstration program') to test a payment incentive and service
delivery model that utilizes physician and nurse practitioner
directed home-based primary care teams designed to reduce
expenditures and improve health outcomes in the provision of
items and services under this title to applicable beneficiaries
(as defined in subsection (d)).
``(2) Requirement.--The demonstration program shall test
whether a model described in paragraph (1), which is accountable
for providing comprehensive, coordinated, continuous, and
accessible care to high-need populations at home and
coordinating health care across all treatment settings, results
in--
``(A) reducing preventable hospitalizations;
``(B) preventing hospital readmissions;
``(C) reducing emergency room visits;
``(D) improving health outcomes commensurate with
the beneficiaries' stage of chronic illness;
``(E) improving the efficiency of care, such as by
reducing duplicative diagnostic and laboratory tests;
``(F) reducing the cost of health care services
covered under this title; and
``(G) achieving beneficiary and family caregiver
satisfaction.

``(b) Independence at Home Medical Practice.--
``(1) Independence at home medical practice defined.--In
this section:
``(A) In general.--The term `independence at home
medical practice' means a legal entity that--
``(i) is comprised of an individual physician
or nurse practitioner or group of physicians and
nurse practitioners that provides care as part of
a team that includes physicians, nurses, physician
assistants, pharmacists, and other health and
social services staff as appropriate who have
experience providing home-based primary care to
applicable beneficiaries, make in-home visits, and
are available 24 hours per day, 7 days per week to
carry out plans of care that are tailored to the
individual beneficiary's chronic conditions and
designed to achieve the results in subsection (a);
``(ii) is organized at least in part for the
purpose of providing physicians' services;
``(iii) has documented experience in providing
home-based primary care services to high-cost
chronically ill beneficiaries, as determined
appropriate by the Secretary;

[[Page 405]]

``(iv) furnishes services to at least 200
applicable beneficiaries (as defined in subsection
(d)) during each year of the demonstration
program;
``(v) has entered into an agreement with the
Secretary;
``(vi) uses electronic health information
systems, remote monitoring, and mobile diagnostic
technology; and
``(vii) meets such other criteria as the
Secretary determines to be appropriate to
participate in the demonstration program.
<> The entity shall
report on quality measures (in such form, manner, and
frequency as specified by the Secretary, which may be
for the group, for providers of services and suppliers,
or both) and report to the Secretary (in a form, manner,
and frequency as specified by the Secretary) such data
as the Secretary determines appropriate to monitor and
evaluate the demonstration program.
``(B) Physician.--The term `physician' includes,
except as the Secretary may otherwise provide, any
individual who furnishes services for which payment may
be made as physicians' services and has the medical
training or experience to fulfill the physician's role
described in subparagraph (A)(i).
``(2) Participation of nurse practitioners and physician
assistants.--Nothing in this section shall be construed to
prevent a nurse practitioner or physician assistant from
participating in, or leading, a home-based primary care team as
part of an independence at home medical practice if--
``(A) all the requirements of this section are met;
``(B) the nurse practitioner or physician assistant,
as the case may be, is acting consistent with State law;
and
``(C) the nurse practitioner or physician assistant
has the medical training or experience to fulfill the
nurse practitioner or physician assistant role described
in paragraph (1)(A)(i).
``(3) Inclusion of providers and practitioners.--Nothing in
this subsection shall be construed as preventing an independence
at home medical practice from including a provider of services
or a participating practitioner described in section
1842(b)(18)(C) that is affiliated with the practice under an
arrangement structured so that such provider of services or
practitioner participates in the demonstration program and
shares in any savings under the demonstration program.
``(4) Quality and performance standards.--The Secretary
shall develop quality performance standards for independence at
home medical practices participating in the demonstration
program.

``(c) Payment Methodology.--
``(1) Establishment of target spending level.--The Secretary
shall establish an estimated annual spending target, for the
amount the Secretary estimates would have been spent in the
absence of the demonstration, for items and services

[[Page 406]]

covered under parts A and B furnished to applicable
beneficiaries for each qualifying independence at home medical
practice under this section. Such spending targets shall be
determined on a per capita basis. Such spending targets shall
include a risk corridor that takes into account normal variation
in expenditures for items and services covered under parts A and
B furnished to such beneficiaries with the size of the corridor
being related to the number of applicable beneficiaries
furnished services by each independence at home medical
practice. The spending targets may also be adjusted for other
factors as the Secretary determines appropriate.
``(2) Incentive payments.--Subject to performance on quality
measures, a qualifying independence at home medical practice is
eligible to receive an incentive payment under this section if
actual expenditures for a year for the applicable beneficiaries
it enrolls are less than the estimated spending target
established under paragraph (1) for such year. An incentive
payment for such year shall be equal to a portion (as determined
by the Secretary) of the amount by which actual expenditures
(including incentive payments under this paragraph) for
applicable beneficiaries under parts A and B for such year are
estimated to be less than 5 percent less than the estimated
spending target for such year, as determined under paragraph
(1).

``(d) Applicable Beneficiaries.--
``(1) Definition.--In this section, the term `applicable
beneficiary' means, with respect to a qualifying independence at
home medical practice, an individual who the practice has
determined--
``(A) is entitled to benefits under part A and
enrolled for benefits under part B;
``(B) is not enrolled in a Medicare Advantage plan
under part C or a PACE program under section 1894;
``(C) has 2 or more chronic illnesses, such as
congestive heart failure, diabetes, other dementias
designated by the Secretary, chronic obstructive
pulmonary disease, ischemic heart disease, stroke,
Alzheimer's Disease and neurodegenerative diseases, and
other diseases and conditions designated by the
Secretary which result in high costs under this title;
``(D) within the past 12 months has had a
nonelective hospital admission;
``(E) within the past 12 months has received acute
or subacute rehabilitation services;
``(F) has 2 or more functional dependencies
requiring the assistance of another person (such as
bathing, dressing, toileting, walking, or feeding); and
``(G) meets such other criteria as the Secretary
determines appropriate.
``(2) Patient election to participate.--
<> The Secretary shall determine an
appropriate method of ensuring that applicable beneficiaries
have agreed to enroll in an independence at home medical
practice under the demonstration program. Enrollment in the
demonstration program shall be voluntary.
``(3) Beneficiary access to services.--Nothing in this
section shall be construed as encouraging physicians or nurse

[[Page 407]]

practitioners to limit applicable beneficiary access to services
covered under this title and applicable beneficiaries shall not
be required to relinquish access to any benefit under this title
as a condition of receiving services from an independence at
home medical practice.

``(e) Implementation.--
``(1) Starting date.--The demonstration program shall begin
no later than January 1, 2012. An agreement with an independence
at home medical practice under the demonstration program may
cover not more than a 3-year period.
``(2) No physician duplication in demonstration
participation.--The Secretary shall not pay an independence at
home medical practice under this section that participates in
section 1899.
``(3) No beneficiary duplication in demonstration
participation.--The Secretary shall ensure that no applicable
beneficiary enrolled in an independence at home medical practice
under this section is participating in the programs under
section 1899.
``(4) Preference.--In approving an independence at home
medical practice, the Secretary shall give preference to
practices that are--
``(A) located in high-cost areas of the country;
``(B) have experience in furnishing health care
services to applicable beneficiaries in the home; and
``(C) use electronic medical records, health
information technology, and individualized plans of
care.
``(5) Limitation on number of practices.--In selecting
qualified independence at home medical practices to participate
under the demonstration program, the Secretary shall limit the
number of such practices so that the number of applicable
beneficiaries that may participate in the demonstration program
does not exceed 10,000.
``(6) Waiver.--The Secretary may waive such provisions of
this title and title XI as the Secretary determines necessary in
order to implement the demonstration program.
``(7) Administration.--Chapter 35 of title 44, United States
Code, shall not apply to this section.

``(f) Evaluation and Monitoring.--
``(1) In general.--The Secretary shall evaluate each
independence at home medical practice under the demonstration
program to assess whether the practice achieved the results
described in subsection (a).
``(2) Monitoring applicable beneficiaries.--The Secretary
may monitor data on expenditures and quality of services under
this title after an applicable beneficiary discontinues
receiving services under this title through a qualifying
independence at home medical practice.

``(g) Reports to Congress.--The Secretary shall conduct an
independent evaluation of the demonstration program and submit to
Congress a final report, including best practices under the
demonstration program. Such report shall include an analysis of the
demonstration program on coordination of care, expenditures under this
title, applicable beneficiary access to services, and the quality of
health care services provided to applicable beneficiaries.
``(h) Funding.--For purposes of administering and carrying out the
demonstration program, other than for payments for items

[[Page 408]]

and services furnished under this title and incentive payments under
subsection (c), in addition to funds otherwise appropriated, there shall
be transferred to the Secretary for the Center for Medicare & Medicaid
Services Program Management Account from the Federal Hospital Insurance
Trust Fund under section 1817 and the Federal Supplementary Medical
Insurance Trust Fund under section 1841 (in proportions determined
appropriate by the Secretary) $5,000,000 for each of fiscal years 2010
through 2015. Amounts transferred under this subsection for a fiscal
year shall be available until expended.
``(i) Termination.--
``(1) Mandatory termination.--The Secretary shall terminate
an agreement with an independence at home medical practice if--
``(A) the Secretary estimates or determines that
such practice will not receive an incentive payment for
the second of 2 consecutive years under the
demonstration program; or
``(B) such practice fails to meet quality standards
during any year of the demonstration program.
``(2) Permissive termination.--The Secretary may terminate
an agreement with an independence at home medical practice for
such other reasons determined appropriate by the Secretary.''.

SEC. 3025. HOSPITAL READMISSIONS REDUCTION PROGRAM.

(a) In General.--Section 1886 of the Social Security Act (42 U.S.C.
1395ww), as amended by sections 3001 and 3008, is amended by adding at
the end the following new subsection:
``(q) Hospital Readmissions Reduction Program.--
``(1) In general.--With respect to payment for discharges
from an applicable hospital (as defined in paragraph (5)(C))
occurring during a fiscal year beginning on or after October 1,
2012, in order to account for excess readmissions in the
hospital, the Secretary shall reduce the payments that would
otherwise be made to such hospital under subsection (d) (or
section 1814(b)(3), as the case may be) for such a discharge by
an amount equal to the product of--
``(A) the base operating DRG payment amount (as
defined in paragraph (2)) for the discharge; and
``(B) the adjustment factor (described in paragraph
(3)(A)) for the hospital for the fiscal year.
``(2) Base operating drg payment amount defined.--
``(A) In general.-- <> Except as
provided in subparagraph (B), in this subsection, the
term `base operating DRG payment amount' means, with
respect to a hospital for a fiscal year--
``(i) the payment amount that would otherwise
be made under subsection (d) (determined without
regard to subsection (o)) for a discharge if this
subsection did not apply; reduced by
``(ii) any portion of such payment amount that
is attributable to payments under paragraphs
(5)(A), (5)(B), (5)(F), and (12) of subsection
(d).
``(B) Special rules for certain hospitals.--
``(i) Sole community hospitals and medicare-
dependent, small rural hospitals.--In the case of

[[Page 409]]

a medicare-dependent, small rural hospital (with
respect to discharges occurring during fiscal
years 2012 and 2013) or a sole community hospital,
in applying subparagraph (A)(i), the payment
amount that would otherwise be made under
subsection (d) shall be determined without regard
to subparagraphs (I) and (L) of subsection (b)(3)
and subparagraphs (D) and (G) of subsection
(d)(5).
``(ii) Hospitals paid under section 1814.--
<> In the case of a
hospital that is paid under section 1814(b)(3),
the Secretary may exempt such hospitals provided
that States paid under such section submit an
annual report to the Secretary describing how a
similar program in the State for a participating
hospital or hospitals achieves or surpasses the
measured results in terms of patient health
outcomes and cost savings established herein with
respect to this section.
``(3) Adjustment factor.--
``(A) In general.--For purposes of paragraph (1),
the adjustment factor under this paragraph for an
applicable hospital for a fiscal year is equal to the
greater of--
``(i) the ratio described in subparagraph (B)
for the hospital for the applicable period (as
defined in paragraph (5)(D)) for such fiscal year;
or
``(ii) the floor adjustment factor specified
in subparagraph (C).
``(B) Ratio.--The ratio described in this
subparagraph for a hospital for an applicable period is
equal to 1 minus the ratio of--
``(i) the aggregate payments for excess
readmissions (as defined in paragraph (4)(A)) with
respect to an applicable hospital for the
applicable period; and
``(ii) the aggregate payments for all
discharges (as defined in paragraph (4)(B)) with
respect to such applicable hospital for such
applicable period.
``(C) Floor adjustment factor.--For purposes of
subparagraph (A), the floor adjustment factor specified
in this subparagraph for--
``(i) fiscal year 2013 is 0.99;
``(ii) fiscal year 2014 is 0.98; or
``(iii) fiscal year 2015 and subsequent fiscal
years is 0.97.
``(4) Aggregate payments, excess readmission ratio
defined.--For purposes of this subsection:
``(A) Aggregate payments for excess readmissions.--
The term `aggregate payments for excess readmissions'
means, for a hospital for an applicable period, the sum,
for applicable conditions (as defined in paragraph
(5)(A)), of the product, for each applicable condition,
of--
``(i) the base operating DRG payment amount
for such hospital for such applicable period for
such condition;
``(ii) the number of admissions for such
condition for such hospital for such applicable
period; and
``(iii) the excess readmissions ratio (as
defined in subparagraph (C)) for such hospital for
such applicable period minus 1.

[[Page 410]]

``(B) Aggregate payments for all discharges.--The
term `aggregate payments for all discharges' means, for
a hospital for an applicable period, the sum of the base
operating DRG payment amounts for all discharges for all
conditions from such hospital for such applicable
period.
``(C) Excess readmission ratio.--
``(i) In general.--Subject to clause (ii), the
term `excess readmissions ratio' means, with
respect to an applicable condition for a hospital
for an applicable period, the ratio (but not less
than 1.0) of--
``(I) the risk adjusted readmissions
based on actual readmissions, as
determined consistent with a readmission
measure methodology that has been
endorsed under paragraph (5)(A)(ii)(I),
for an applicable hospital for such
condition with respect to such
applicable period; to
``(II) the risk adjusted expected
readmissions (as determined consistent
with such a methodology) for such
hospital for such condition with respect
to such applicable period.
``(ii) Exclusion of certain readmissions.--For
purposes of clause (i), with respect to a
hospital, excess readmissions shall not include
readmissions for an applicable condition for which
there are fewer than a minimum number (as
determined by the Secretary) of discharges for
such applicable condition for the applicable
period and such hospital.
``(5) Definitions.--For purposes of this subsection:
``(A) Applicable condition.--The term `applicable
condition' means, subject to subparagraph (B), a
condition or procedure selected by the Secretary among
conditions and procedures for which--
``(i) readmissions (as defined in subparagraph
(E)) that represent conditions or procedures that
are high volume or high expenditures under this
title (or other criteria specified by the
Secretary); and
``(ii) measures of such readmissions--
``(I) have been endorsed by the
entity with a contract under section
1890(a); and
``(II) such endorsed measures have
exclusions for readmissions that are
unrelated to the prior discharge (such
as a planned readmission or transfer to
another applicable hospital).
``(B) Expansion of applicable
conditions. <> --Beginning with
fiscal year 2015, the Secretary shall, to the extent
practicable, expand the applicable conditions beyond the
3 conditions for which measures have been endorsed as
described in subparagraph (A)(ii)(I) as of the date of
the enactment of this subsection to the additional 4
conditions that have been identified by the Medicare
Payment Advisory Commission in its report to Congress in
June 2007 and to other conditions and procedures as
determined appropriate by the Secretary. In expanding
such applicable conditions, the Secretary shall seek the
endorsement described in subparagraph (A)(ii)(I) but may
apply such measures without such an endorsement in the
case of a specified area or medical topic determined
appropriate by

[[Page 411]]

the Secretary for which a feasible and practical measure
has not been endorsed by the entity with a contract
under section 1890(a) as long as due consideration is
given to measures that have been endorsed or adopted by
a consensus organization identified by the Secretary.
``(C) Applicable hospital.--The term `applicable
hospital' means a subsection (d) hospital or a hospital
that is paid under section 1814(b)(3), as the case may
be.
``(D) Applicable period.--The term `applicable
period' means, with respect to a fiscal year, such
period as the Secretary shall specify.
``(E) Readmission.--The term `readmission' means, in
the case of an individual who is discharged from an
applicable hospital, the admission of the individual to
the same or another applicable hospital within a time
period specified by the Secretary from the date of such
discharge. Insofar as the discharge relates to an
applicable condition for which there is an endorsed
measure described in subparagraph (A)(ii)(I), such time
period (such as 30 days) shall be consistent with the
time period specified for such measure.
``(6) Reporting hospital specific information.--
``(A) In general.-- <> The Secretary shall make information
available to the public regarding readmission rates of
each subsection (d) hospital under the program.
``(B) Opportunity to review and submit
corrections.--The Secretary shall ensure that a
subsection (d) hospital has the opportunity to review,
and submit corrections for, the information to be made
public with respect to the hospital under subparagraph
(A) prior to such information being made public.
``(C) Website.--Such information shall be posted on
the Hospital Compare Internet website in an easily
understandable format.
``(7) Limitations on review.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise of the following:
``(A) The determination of base operating DRG
payment amounts.
``(B) The methodology for determining the adjustment
factor under paragraph (3), including excess
readmissions ratio under paragraph (4)(C), aggregate
payments for excess readmissions under paragraph (4)(A),
and aggregate payments for all discharges under
paragraph (4)(B), and applicable periods and applicable
conditions under paragraph (5).
``(C) The measures of readmissions as described in
paragraph (5)(A)(ii).
``(8) Readmission rates for all patients.--
``(A) Calculation of readmission.--The Secretary
shall calculate readmission rates for all patients (as
defined in subparagraph (D)) for a specified hospital
(as defined in subparagraph (D)(ii)) for an applicable
condition (as defined in paragraph (5)(B)) and other
conditions deemed appropriate by the Secretary for an
applicable period (as defined in paragraph (5)(D)) in
the same manner as used to calculate such readmission
rates for hospitals with

[[Page 412]]

respect to this title and posted on the CMS Hospital
Compare website.
``(B) Posting of hospital specific all patient
readmission rates.-- <> The
Secretary shall make information on all patient
readmission rates calculated under subparagraph (A)
available on the CMS Hospital Compare website in a form
and manner determined appropriate by the Secretary. The
Secretary may also make other information determined
appropriate by the Secretary available on such website.
``(C) Hospital submission of all patient data.--
``(i) Except as provided for in clause (ii),
each specified hospital (as defined in
subparagraph (D)(ii)) shall submit to the
Secretary, in a form, manner and time specified by
the Secretary, data and information determined
necessary by the Secretary for the Secretary to
calculate the all patient readmission rates
described in subparagraph (A).
``(ii) Instead of a specified hospital
submitting to the Secretary the data and
information described in clause (i), such data and
information may be submitted to the Secretary, on
behalf of such a specified hospital, by a state or
an entity determined appropriate by the Secretary.
``(D) Definitions.--For purposes of this paragraph:
``(i) The term `all patients' means patients
who are treated on an inpatient basis and
discharged from a specified hospital (as defined
in clause (ii)).
``(ii) The term `specified hospital' means a
subsection (d) hospital, hospitals described in
clauses (i) through (v) of subsection (d)(1)(B)
and, as determined feasible and appropriate by the
Secretary, other hospitals not otherwise described
in this subparagraph.''.

(b) Quality Improvement.--Part S of title III of the Public Health
Service Act, as amended by section 3015, is further amended by adding at
the end the following:

``SEC. 399KK. <> QUALITY IMPROVEMENT PROGRAM FOR
HOSPITALS WITH A HIGH SEVERITY ADJUSTED READMISSION RATE.

``(a) Establishment.--
``(1) In general.-- <> Not later than 2
years after the date of enactment of this section, the Secretary
shall make available a program for eligible hospitals to improve
their readmission rates through the use of patient safety
organizations (as defined in section 921(4)).
``(2) Eligible hospital defined.--In this subsection, the
term `eligible hospital' means a hospital that the Secretary
determines has a high rate of risk adjusted readmissions for the
conditions described in section 1886(q)(8)(A) of the Social
Security Act and has not taken appropriate steps to reduce such
readmissions and improve patient safety as evidenced through
historically high rates of readmissions, as determined by the
Secretary.
``(3) Risk adjustment.--The Secretary shall utilize
appropriate risk adjustment measures to determine eligible
hospitals.

``(b) Report to the Secretary.-- <> As
determined appropriate by the Secretary, eligible hospitals and patient
safety organizations

[[Page 413]]

working with those hospitals shall report to the Secretary on the
processes employed by the hospital to improve readmission rates and the
impact of such processes on readmission rates.''.

SEC. 3026. <> COMMUNITY-BASED CARE
TRANSITIONS PROGRAM.

(a) In General.--The Secretary shall establish a Community-Based
Care Transitions Program under which the Secretary provides funding to
eligible entities that furnish improved care transition services to
high-risk Medicare beneficiaries.
(b) Definitions.--In this section:
(1) Eligible entity.--The term ``eligible entity'' means the
following:
(A) A subsection (d) hospital (as defined in section
1886(d)(1)(B) of the Social Security Act (42 U.S.C.
1395ww(d)(1)(B))) identified by the Secretary as having
a high readmission rate, such as under section 1886(q)
of the Social Security Act, as added by section 3025.
(B) An appropriate community-based organization that
provides care transition services under this section
across a continuum of care through arrangements with
subsection (d) hospitals (as so defined) to furnish the
services described in subsection (c)(2)(B)(i) and whose
governing body includes sufficient representation of
multiple health care stakeholders (including consumers).
(2) High-risk medicare beneficiary.--The term ``high-risk
Medicare beneficiary'' means a Medicare beneficiary who has
attained a minimum hierarchical condition category score, as
determined by the Secretary, based on a diagnosis of multiple
chronic conditions or other risk factors associated with a
hospital readmission or substandard transition into post-
hospitalization care, which may include 1 or more of the
following:
(A) Cognitive impairment.
(B) Depression.
(C) A history of multiple readmissions.
(D) Any other chronic disease or risk factor as
determined by the Secretary.
(3) Medicare beneficiary.--The term ``Medicare beneficiary''
means an individual who is entitled to benefits under part A of
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
and enrolled under part B of such title, but not enrolled under
part C of such title.
(4) Program.--The term ``program'' means the program
conducted under this section.
(5) Readmission.--The term ``readmission'' has the meaning
given such term in section 1886(q)(5)(E) of the Social Security
Act, as added by section 3025.
(6) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.

(c) Requirements.--
(1) Duration.--
(A) In general.--The program shall be conducted for
a 5-year period, beginning January 1, 2011.
(B) Expansion.--
<> The Secretary
may expand the duration and the scope of the program, to
the extent determined appropriate by the Secretary, if
the Secretary determines (and the Chief Actuary of the
Centers for Medicare & Medicaid Services, with respect
to spending under this

[[Page 414]]

title, certifies) that such expansion would reduce
spending under this title without reducing quality.
(2) Application; participation.--
(A) In general.--
(i) Application.--An eligible entity seeking
to participate in the program shall submit an
application to the Secretary at such time, in such
manner, and containing such information as the
Secretary may require.
(ii) Partnership.--If an eligible entity is a
hospital, such hospital shall enter into a
partnership with a community-based organization to
participate in the program.
(B) Intervention proposal.--Subject to subparagraph
(C), an application submitted under subparagraph (A)(i)
shall include a detailed proposal for at least 1 care
transition intervention, which may include the
following:
(i) Initiating care transition services for a
high-risk Medicare beneficiary not later than 24
hours prior to the discharge of the beneficiary
from the eligible entity.
(ii) Arranging timely post-discharge follow-up
services to the high-risk Medicare beneficiary to
provide the beneficiary (and, as appropriate, the
primary caregiver of the beneficiary) with
information regarding responding to symptoms that
may indicate additional health problems or a
deteriorating condition.
(iii) Providing the high-risk Medicare
beneficiary (and, as appropriate, the primary
caregiver of the beneficiary) with assistance to
ensure productive and timely interactions between
patients and post-acute and outpatient providers.
(iv) Assessing and actively engaging with a
high-risk Medicare beneficiary (and, as
appropriate, the primary caregiver of the
beneficiary) through the provision of self-
management support and relevant information that
is specific to the beneficiary's condition.
(v) Conducting comprehensive medication review
and management (including, if appropriate,
counseling and self-management support).
(C) Limitation.--A care transition intervention
proposed under subparagraph (B) may not include payment
for services required under the discharge planning
process described in section 1861(ee) of the Social
Security Act (42 U.S.C. 1395x(ee)).
(3) Selection.--In selecting eligible entities to
participate in the program, the Secretary shall give priority to
eligible entities that--
(A) participate in a program administered by the
Administration on Aging to provide concurrent care
transitions interventions with multiple hospitals and
practitioners; or
(B) provide services to medically underserved
populations, small communities, and rural areas.

(d) Implementation.--Notwithstanding any other provision of law, the
Secretary may implement the provisions of this section by program
instruction or otherwise.

[[Page 415]]

(e) Waiver Authority.--The Secretary may waive such requirements of
titles XI and XVIII of the Social Security Act as may be necessary to
carry out the program.
(f) Funding.--For purposes of carrying out this section, the
Secretary of Health and Human Services shall provide for the transfer,
from the Federal Hospital Insurance Trust Fund under section 1817 of the
Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary
Medical Insurance Trust Fund under section 1841 of such Act (42 U.S.C.
1395t), in such proportion as the Secretary determines appropriate, of
$500,000,000, to the Centers for Medicare & Medicaid Services Program
Management Account for the period of fiscal years 2011 through 2015.
Amounts transferred under the preceding sentence shall remain available
until expended.

SEC. 3027. EXTENSION OF GAINSHARING DEMONSTRATION.

(a) In General.--Subsection (d)(3) of section 5007 of the Deficit
Reduction Act of 2005 (Public Law 109-171) <> is amended by inserting ``(or September 30, 2011, in the case of
a demonstration project in operation as of October 1, 2008)'' after
``December 31, 2009''.

(b) Funding.--
(1) In general.--Subsection (f)(1) of such section is
amended by inserting ``and for fiscal year 2010, $1,600,000,''
after ``$6,000,000,''.
(2) Availability.--Subsection (f)(2) of such section is
amended by striking ``2010'' and inserting ``2014 or until
expended''.

(c) Reports.--
(1) Quality improvement and savings.--Subsection (e)(3) of
such section is amended by striking ``December 1, 2008'' and
inserting ``March 31, 2011''.
(2) Final report.--Subsection (e)(4) of such section is
amended by striking ``May 1, 2010'' and inserting ``March 31,
2013''.

Subtitle B--Improving Medicare for Patients and Providers

PART I--ENSURING BENEFICIARY ACCESS TO PHYSICIAN CARE AND OTHER SERVICES

SEC. 3101. INCREASE IN THE PHYSICIAN PAYMENT UPDATE.

Section 1848(d) of the Social Security Act (42 U.S.C. 1395w-4(d)) is
amended by adding at the end the following new paragraph:
``(10) Update for 2010.--
``(A) In general.--Subject to paragraphs (7)(B),
(8)(B), and (9)(B), in lieu of the update to the single
conversion factor established in paragraph (1)(C) that
would otherwise apply for 2010, the update to the single
conversion factor shall be 0.5 percent.
``(B) No effect on computation of conversion factor
for 2011 and subsequent years.--The conversion factor
under this subsection shall be computed under paragraph
(1)(A) for 2011 and subsequent years as if subparagraph
(A) had never applied.''.

[[Page 416]]

SEC. 3102. EXTENSION OF THE WORK GEOGRAPHIC INDEX FLOOR AND REVISIONS TO
THE PRACTICE EXPENSE GEOGRAPHIC ADJUSTMENT UNDER THE
MEDICARE PHYSICIAN FEE SCHEDULE.

(a) Extension of Work GPCI Floor.--Section 1848(e)(1)(E) of the
Social Security Act (42 U.S.C. 1395w-4(e)(1)(E)) is amended by striking
``before January 1, 2010'' and inserting ``before January 1, 2011''.
(b) Practice Expense Geographic Adjustment for 2010 and Subsequent
Years.--Section 1848(e)(1) of the Social Security Act ( <> 42 U.S.C. 1395w4(e)(1)) is amended--
(1) in subparagraph (A), by striking ``and (G)'' and
inserting ``(G), and (H)''; and
(2) by adding at the end the following new subparagraph:
``(H) Practice expense geographic adjustment for
2010 and subsequent years.--
``(i) For 2010.--Subject to clause (iii), for
services furnished during 2010, the employee wage
and rent portions of the practice expense
geographic index described in subparagraph (A)(i)
shall reflect \3/4\ of the difference between the
relative costs of employee wages and rents in each
of the different fee schedule areas and the
national average of such employee wages and rents.
``(ii) For 2011.--Subject to clause (iii), for
services furnished during 2011, the employee wage
and rent portions of the practice expense
geographic index described in subparagraph (A)(i)
shall reflect \1/2\ of the difference between the
relative costs of employee wages and rents in each
of the different fee schedule areas and the
national average of such employee wages and rents.
``(iii) Hold harmless.--The practice expense
portion of the geographic adjustment factor
applied in a fee schedule area for services
furnished in 2010 or 2011 shall not, as a result
of the application of clause (i) or (ii), be
reduced below the practice expense portion of the
geographic adjustment factor under subparagraph
(A)(i) (as calculated prior to the application of
such clause (i) or (ii), respectively) for such
area for such year.
``(iv) Analysis.--The Secretary shall analyze
current methods of establishing practice expense
geographic adjustments under subparagraph (A)(i)
and evaluate data that fairly and reliably
establishes distinctions in the costs of operating
a medical practice in the different fee schedule
areas. Such analysis shall include an evaluation
of the following:
``(I) The feasibility of using
actual data or reliable survey data
developed by medical organizations on
the costs of operating a medical
practice, including office rents and
non-physician staff wages, in different
fee schedule areas.
``(II) The office expense portion of
the practice expense geographic
adjustment described in subparagraph
(A)(i), including the extent to which

[[Page 417]]

types of office expenses are determined
in local markets instead of national
markets.
``(III) The weights assigned to each
of the categories within the practice
expense geographic adjustment described
in subparagraph (A)(i).
``(v) <> Revision for 2012
and subsequent years.--As a result of the analysis
described in clause (iv), the Secretary shall, not
later than January 1, 2012, make appropriate
adjustments to the practice expense geographic
adjustment described in subparagraph (A)(i) to
ensure accurate geographic adjustments across fee
schedule areas, including--
``(I) basing the office rents
component and its weight on office
expenses that vary among fee schedule
areas; and
``(II) considering a representative
range of professional and non-
professional personnel employed in a
medical office based on the use of the
American Community Survey data or other
reliable data for wage adjustments.
Such adjustments shall be made without regard to
adjustments made pursuant to clauses (i) and (ii)
and shall be made in a budget neutral manner.''.

SEC. 3103. EXTENSION OF EXCEPTIONS PROCESS FOR MEDICARE THERAPY CAPS.

Section 1833(g)(5) of the Social Security Act (42 U.S.C.
1395l(g)(5)) is amended by striking ``December 31, 2009'' and inserting
``December 31, 2010''.

SEC. 3104. EXTENSION OF PAYMENT FOR TECHNICAL COMPONENT OF CERTAIN
PHYSICIAN PATHOLOGY SERVICES.

Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (as enacted into law by section
1(a)(6) of Public Law 106-554), as amended by section 732 of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(42 U.S.C. 1395w-4 note), section 104 of division B of the Tax Relief
and Health Care Act of 2006 (42 U.S.C. 1395w-4 note), section 104 of the
Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law 110-
173), and section 136 of the Medicare Improvements for Patients and
Providers Act of 2008 (Public Law 110-275), is amended by striking ``and
2009'' and inserting ``2009, and 2010''.

SEC. 3105. EXTENSION OF AMBULANCE ADD-ONS.

(a) Ground Ambulance.--Section 1834(l)(13)(A) of the Social Security
Act (42 U.S.C. 1395m(l)(13)(A)) is amended--
(1) in the matter preceding clause (i)--
(A) by striking ``2007, and for'' and inserting
``2007, for''; and
(B) by striking ``2010'' and inserting ``2010, and
for such services furnished on or after April 1, 2010,
and before January 1, 2011,''; and
(2) in each of clauses (i) and (ii), by inserting ``, and on
or after April 1, 2010, and before January 1, 2011'' after
``January 1, 2010'' each place it appears.

(b) Air Ambulance.--Section 146(b)(1) of the Medicare Improvements
for Patients and Providers Act of 2008 <> (Public Law

[[Page 418]]

110-275) is amended by striking ``December 31, 2009'' and inserting
``December 31, 2009, and during the period beginning on April 1, 2010,
and ending on January 1, 2011''.

(c) Super Rural Ambulance.--Section 1834(l)(12)(A) of the Social
Security Act (42 U.S.C. 1395m(l)(12)(A)) is amended by striking ``2010''
and inserting ``2010, and on or after April 1, 2010, and before January
1, 2011''.

SEC. 3106. EXTENSION OF CERTAIN PAYMENT RULES FOR LONG-TERM CARE
HOSPITAL SERVICES AND OF MORATORIUM ON THE ESTABLISHMENT OF
CERTAIN HOSPITALS AND FACILITIES.

(a) Extension of Certain Payment Rules.--Section 114(c) of the
Medicare, Medicaid, and SCHIP Extension Act of 2007 (42 U.S.C. 1395ww
note), as amended by section 4302(a) of the American Recovery and
Reinvestment Act (Public Law 111-5), is further amended by striking ``3-
year period'' each place it appears and inserting ``4-year period''.
(b) Extension of Moratorium.--Section 114(d)(1) of such Act (42
U.S.C. 1395ww note), in the matter preceding subparagraph (A), is
amended by striking ``3-year period'' and inserting ``4-year period''.

SEC. 3107. EXTENSION OF PHYSICIAN FEE SCHEDULE MENTAL HEALTH ADD-ON.

Section 138(a)(1) of the Medicare Improvements for Patients and
Providers Act of 2008 (Public Law 110-275) <> is amended by striking ``December 31, 2009'' and inserting
``December 31, 2010''.

SEC. 3108. PERMITTING PHYSICIAN ASSISTANTS TO ORDER POST-HOSPITAL
EXTENDED CARE SERVICES.

(a) Ordering Post-Hospital Extended Care Services.--
(1) In general.--Section 1814(a)(2) of the Social Security
Act (42 U.S.C. 1395f(a)(2)), in the matter preceding
subparagraph (A), is amended by striking ``or clinical nurse
specialist'' and inserting ``, a clinical nurse specialist, or a
physician assistant (as those terms are defined in section
1861(aa)(5))'' after ``nurse practitioner''.
(2) Conforming amendment.--Section 1814(a) of the Social
Security Act (42 U.S.C. 1395f(a)) is amended, in the second
sentence, by striking ``or clinical nurse specialist'' and
inserting ``clinical nurse specialist, or physician assistant''
after ``nurse practitioner,''.

(b) <> Effective Date.--The amendments
made by this section shall apply to items and services furnished on or
after January 1, 2011.

SEC. 3109. EXEMPTION OF CERTAIN PHARMACIES FROM ACCREDITATION
REQUIREMENTS.

(a) In General.--Section 1834(a)(20) of the Social Security Act (42
U.S.C. 1395m(a)(20)), as added by section 154(b)(1)(A) of the Medicare
Improvements for Patients and Providers Act of 2008 (Public Law 100-
275), is amended--
(1) in subparagraph (F)(i)--
(A) by inserting ``and subparagraph (G)'' after
``clause (ii)''; and
(B) by inserting ``, except that the Secretary shall
not require a pharmacy to have submitted to the
Secretary

[[Page 419]]

such evidence of accreditation prior to January 1,
2011'' before the semicolon at the end; and
(2) by adding at the end the following new subparagraph:
``(G) Application of accreditation requirement to
certain pharmacies.--
``(i) In general.--With respect to items and
services furnished on or after January 1, 2011, in
implementing quality standards under this
paragraph--
``(I) subject to subclause (II), in
applying such standards and the
accreditation requirement of
subparagraph (F)(i) with respect to
pharmacies described in clause (ii)
furnishing such items and services, such
standards and accreditation requirement
shall not apply to such pharmacies; and
``(II) the Secretary may apply to
such pharmacies an alternative
accreditation requirement established by
the Secretary if the Secretary
determines such alternative
accreditation requirement is more
appropriate for such pharmacies.
``(ii) <> Pharmacies
described.--A pharmacy described in this clause is
a pharmacy that meets each of the following
criteria:
``(I) The total billings by the
pharmacy for such items and services
under this title are less than 5 percent
of total pharmacy sales, as determined
based on the average total pharmacy
sales for the previous 3 calendar years,
3 fiscal years, or other yearly period
specified by the Secretary.
``(II) The pharmacy has been
enrolled under section 1866(j) as a
supplier of durable medical equipment,
prosthetics, orthotics, and supplies,
has been issued (which may include the
renewal of) a provider number for at
least 5 years, and for which a final
adverse action (as defined in section
424.57(a) of title 42, Code of Federal
Regulations) has not been imposed in the
past 5 years.
``(III) The pharmacy submits to the
Secretary an attestation, in a form and
manner, and at a time, specified by the
Secretary, that the pharmacy meets the
criteria described in subclauses (I) and
(II). Such attestation shall be subject
to section 1001 of title 18, United
States Code.
``(IV) The pharmacy agrees to submit
materials as requested by the Secretary,
or during the course of an audit
conducted on a random sample of
pharmacies selected annually, to verify
that the pharmacy meets the criteria
described in subclauses (I) and (II).
Materials submitted under the preceding
sentence shall include a certification
by an accountant on behalf of the
pharmacy or the submission of tax
returns filed by the pharmacy during the
relevant periods, as requested by the
Secretary.''.

(b) <> Administration.--Notwithstanding
any other provision of law, the Secretary may implement the amendments
made by subsection (a) by program instruction or otherwise.

[[Page 420]]

(c) <> Rule of Construction.--Nothing in
the provisions of or amendments made by this section shall be construed
as affecting the application of an accreditation requirement for
pharmacies to qualify for bidding in a competitive acquisition area
under section 1847 of the Social Security Act (42 U.S.C. 1395w-3).

SEC. 3110. PART B SPECIAL ENROLLMENT PERIOD FOR DISABLED TRICARE
BENEFICIARIES.

(a) In General.--
(1) In general.--Section 1837 of the Social Security Act (42
U.S.C. 1395p) is amended by adding at the end the following new
subsection:

``(l)(1) In the case of any individual who is a covered beneficiary
(as defined in section 1072(5) of title 10, United States Code) at the
time the individual is entitled to part A under section 226(b) or
section 226A and who is eligible to enroll but who has elected not to
enroll (or to be deemed enrolled) during the individual's initial
enrollment period, there shall be a special enrollment period described
in paragraph (2).
``(2) The special enrollment period described in this paragraph,
with respect to an individual, is the 12-month period beginning on the
day after the last day of the initial enrollment period of the
individual or, if later, the 12-month period beginning with the month
the individual is notified of enrollment under this section.
``(3) In the case of an individual who enrolls during the special
enrollment period provided under paragraph (1), the coverage period
under this part shall begin on the first day of the month in which the
individual enrolls, or, at the option of the individual, the first month
after the end of the individual's initial enrollment period.
``(4) An individual may only enroll during the special enrollment
period provided under paragraph (1) one time during the individual's
lifetime.
``(5) The Secretary shall ensure that the materials relating to
coverage under this part that are provided to an individual described in
paragraph (1) prior to the individual's initial enrollment period
contain information concerning the impact of not enrolling under this
part, including the impact on health care benefits under the TRICARE
program under chapter 55 of title 10, United States Code.
``(6) The Secretary of Defense shall collaborate with the Secretary
of Health and Human Services and the Commissioner of Social Security to
provide for the accurate identification of individuals described in
paragraph (1). The Secretary of Defense shall provide such individuals
with notification with respect to this subsection. The Secretary of
Defense shall collaborate with the Secretary of Health and Human
Services and the Commissioner of Social Security to ensure appropriate
follow up pursuant to any notification provided under the preceding
sentence.''.
(2) <> Effective date.--The
amendment made by paragraph (1) shall apply to elections made
with respect to initial enrollment periods that end after the
date of the enactment of this Act.

(b) Waiver of Increase of Premium.--Section 1839(b) of the Social
Security Act (42 U.S.C. 1395r(b)) is amended by striking ``section
1837(i)(4)'' and inserting ``subsection (i)(4) or (l) of section 1837''.

[[Page 421]]

SEC. 3111. PAYMENT FOR BONE DENSITY TESTS.

(a) Payment.--
(1) In general.--Section 1848 of the Social Security Act (42
U.S.C. 1395w-4) is amended--
(A) in subsection (b)--
(i) in paragraph (4)(B), by inserting ``, and
for 2010 and 2011, dual-energy x-ray
absorptiometry services (as described in paragraph
(6))'' before the period at the end; and
(ii) by adding at the end the following new
paragraph:
``(6) Treatment of bone mass scans.--For dual-energy x-ray
absorptiometry services (identified in 2006 by HCPCS codes 76075
and 76077 (and any succeeding codes)) furnished during 2010 and
2011, instead of the payment amount that would otherwise be
determined under this section for such years, the payment amount
shall be equal to 70 percent of the product of--
``(A) the relative value for the service (as
determined in subsection (c)(2)) for 2006;
``(B) the conversion factor (established under
subsection (d)) for 2006; and
``(C) the geographic adjustment factor (established
under subsection (e)(2)) for the service for the fee
schedule area for 2010 and 2011, respectively.''; and
(B) in subsection (c)(2)(B)(iv)--
(i) in subclause (II), by striking ``and'' at
the end;
(ii) in subclause (III), by striking the
period at the end and inserting ``; and''; and
(iii) by adding at the end the following new
subclause:
``(IV) subsection (b)(6) shall not
be taken into account in applying clause
(ii)(II) for 2010 or 2011.''.
(2) <> Implementation.--
Notwithstanding any other provision of law, the Secretary may
implement the amendments made by paragraph (1) by program
instruction or otherwise.

(b) Study and Report by the Institute of Medicine.--
(1) In general.--The Secretary of Health and Human Services
is authorized to enter into an agreement with the Institute of
Medicine of the National Academies to conduct a study on the
ramifications of Medicare payment reductions for dual-energy x-
ray absorptiometry (as described in section 1848(b)(6) of the
Social Security Act, as added by subsection (a)(1)) during 2007,
2008, and 2009 on beneficiary access to bone mass density tests.
(2) Report.--An agreement entered into under paragraph (1)
shall provide for the Institute of Medicine to submit to the
Secretary and to Congress a report containing the results of the
study conducted under such paragraph.

SEC. 3112. REVISION TO THE MEDICARE IMPROVEMENT FUND.

Section 1898(b)(1)(A) of the Social Security Act (42 U.S.C. 1395iii)
is amended by striking ``$22,290,000,000'' and inserting ``$0''.

[[Page 422]]

SEC. 3113. <> TREATMENT OF CERTAIN COMPLEX
DIAGNOSTIC LABORATORY TESTS.

(a) Demonstration Project.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall conduct
a demonstration project under part B title XVIII of the Social
Security Act under which separate payments are made under such
part for complex diagnostic laboratory tests provided to
individuals under such part. Under the demonstration project,
the Secretary shall establish appropriate payment rates for such
tests.
(2) Covered complex diagnostic laboratory test defined.--In
this section, the term ``complex diagnostic laboratory test''
means a diagnostic laboratory test--
(A) that is an analysis of gene protein expression,
topographic genotyping, or a cancer chemotherapy
sensitivity assay;
(B) that is determined by the Secretary to be a
laboratory test for which there is not an alternative
test having equivalent performance characteristics;
(C) which is billed using a Health Care Procedure
Coding System (HCPCS) code other than a not otherwise
classified code under such Coding System;
(D) which is approved or cleared by the Food and
Drug Administration or is covered under title XVIII of
the Social Security Act; and
(E) is described in section 1861(s)(3) of the Social
Security Act (42 U.S.C. 1395x(s)(3)).
(3) Separate payment defined.--In this section, the term
``separate payment'' means direct payment to a laboratory
(including a hospital-based or independent laboratory) that
performs a complex diagnostic laboratory test with respect to a
specimen collected from an individual during a period in which
the individual is a patient of a hospital if the test is
performed after such period of hospitalization and if separate
payment would not otherwise be made under title XVIII of the
Social Security Act by reason of sections 1862(a)(14) and
1866(a)(1)(H)(i) of the such Act (42 U.S.C. 1395y(a)(14); 42
U.S.C. 1395cc(a)(1)(H)(i)).

(b) Duration.--Subject to subsection (c)(2), the Secretary shall
conduct the demonstration project under this section for the 2-year
period beginning on July 1, 2011.
(c) Payments and Limitation.--Payments under the demonstration
project under this section shall--
(1) be made from the Federal Supplemental Medical Insurance
Trust Fund under section 1841 of the Social Security Act (42
U.S.C. 1395t); and
(2) may not exceed $100,000,000.

(d) Report.--Not later than 2 years after the completion of the
demonstration project under this section, the Secretary shall submit to
Congress a report on the project. Such report shall include--
(1) an assessment of the impact of the demonstration project
on access to care, quality of care, health outcomes, and
expenditures under title XVIII of the Social Security Act
(including any savings under such title); and

[[Page 423]]

(2) such recommendations as the Secretary determines
appropriate.

(e) Implementation Funding.--For purposes of administering this
section (including preparing and submitting the report under subsection
(d)), the Secretary shall provide for the transfer, from the Federal
Supplemental Medical Insurance Trust Fund under section 1841 of the
Social Security Act (42 U.S.C. 1395t), to the Centers for Medicare &
Medicaid Services Program Management Account, of $5,000,000. Amounts
transferred under the preceding sentence shall remain available until
expended.

SEC. 3114. IMPROVED ACCESS FOR CERTIFIED NURSE-MIDWIFE SERVICES.

Section 1833(a)(1)(K) of the Social Security Act (42 U.S.C.
1395l(a)(1)(K)) is amended by inserting ``(or 100 percent for services
furnished on or after January 1, 2011)'' after ``1992, 65 percent''.

PART II--RURAL PROTECTIONS

SEC. 3121. EXTENSION OF OUTPATIENT HOLD HARMLESS PROVISION.

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

(b) Permitting All Sole Community Hospitals To Be Eligible for Hold
Harmless.--Section 1833(t)(7)(D)(i)(III) of the Social Security Act (42
U.S.C. 1395l(t)(7)(D)(i)(III)) is amended by adding at the end the
following new sentence: <> ``In the
case of covered OPD services furnished on or after January 1, 2010, and
before January 1, 2011, the preceding sentence shall be applied without
regard to the 100-bed limitation.''.

SEC. 3122. <> EXTENSION OF MEDICARE REASONABLE
COSTS PAYMENTS FOR CERTAIN CLINICAL DIAGNOSTIC LABORATORY
TESTS FURNISHED TO HOSPITAL PATIENTS IN CERTAIN RURAL AREAS.

Section 416(b) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (42 U.S.C. 1395l-4), as amended by section 105
of division B of the Tax Relief and Health Care Act of 2006 (42 U.S.C.
1395l note) and section 107 of the Medicare, Medicaid, and SCHIP
Extension Act of 2007 (42 U.S.C. 1395l note), is amended by inserting
``or during the 1-year period beginning on July 1, 2010'' before the
period at the end.

SEC. 3123. <> EXTENSION OF THE RURAL
COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.

(a) One-year Extension.--Section 410A of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173;
117 Stat. 2272) is amended by adding at the end the following new
subsection:
``(g) One-Year Extension of Demonstration Program.--
``(1) In general.--Subject to the succeeding provisions of
this subsection, the Secretary shall conduct the demonstration

[[Page 424]]

program under this section for an additional 1-year period (in
this section referred to as the `1-year extension period') that
begins on the date immediately following the last day of the
initial 5-year period under subsection (a)(5).
``(2) Expansion of demonstration states.--Notwithstanding
subsection (a)(2), during the 1-year extension period, the
Secretary shall expand the number of States with low population
densities determined by the Secretary under such subsection to
20. In determining which States to include in such expansion,
the Secretary shall use the same criteria and data that the
Secretary used to determine the States under such subsection for
purposes of the initial 5-year period.
``(3) Increase in maximum number of hospitals participating
in the demonstration program.--Notwithstanding subsection
(a)(4), during the 1-year extension period, not more than 30
rural community hospitals may participate in the demonstration
program under this section.
``(4) No affect on hospitals in demonstration program on
date of enactment.--In the case of a rural community hospital
that is participating in the demonstration program under this
section as of the last day of the initial 5-year period, the
Secretary shall provide for the continued participation of such
rural community hospital in the demonstration program during the
1-year extension period unless the rural community hospital
makes an election, in such form and manner as the Secretary may
specify, to discontinue such participation.''.

(b) Conforming Amendments.--Subsection (a)(5) of section 410A of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(Public Law 108-173; 117 Stat. 2272) is amended by inserting ``(in this
section referred to as the `initial 5-year period') and, as provided in
subsection (g), for the 1-year extension period'' after ``5-year
period''.
(c) Technical Amendments.--
(1) Subsection (b) of section 410A of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003
(Public Law 108-173; 117 Stat. 2272) is amended--
(A) in paragraph (1)(B)(ii), by striking ``2)'' and
inserting ``2))''; and
(B) in paragraph (2), by inserting ``cost'' before
``reporting period'' the first place such term appears
in each of subparagraphs (A) and (B).
(2) Subsection (f)(1) of section 410A of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003
(Public Law 108-173; 117 Stat. 2272) is amended--
(A) in subparagraph (A)(ii), by striking ``paragraph
(2)'' and inserting ``subparagraph (B)''; and
(B) in subparagraph (B), by striking ``paragraph
(1)(B)'' and inserting ``subparagraph (A)(ii)''.

SEC. 3124. EXTENSION OF THE MEDICARE-DEPENDENT HOSPITAL (MDH) PROGRAM.

(a) Extension of Payment Methodology.--Section 1886(d)(5)(G) of the
Social Security Act (42 U.S.C. 1395ww(d)(5)(G)) is amended--
(1) in clause (i), by striking ``October 1, 2011'' and
inserting ``October 1, 2012''; and

[[Page 425]]

(2) in clause (ii)(II), by striking ``October 1, 2011'' and
inserting ``October 1, 2012''.

(b) Conforming Amendments.--
(1) Extension of target amount.--Section 1886(b)(3)(D) of
the Social Security Act (42 U.S.C. 1395ww(b)(3)(D)) is amended--
(A) in the matter preceding clause (i), by striking
``October 1, 2011'' and inserting ``October 1, 2012'';
and
(B) in clause (iv), by striking ``through fiscal
year 2011'' and inserting ``through fiscal year 2012''.
(2) Permitting hospitals to decline reclassification.--
Section 13501(e)(2) of the Omnibus Budget Reconciliation Act of
1993 (42 U.S.C. 1395ww note) is amended by striking ``through
fiscal year 2011'' and inserting ``through fiscal year 2012''.

SEC. 3125. TEMPORARY IMPROVEMENTS TO THE MEDICARE INPATIENT HOSPITAL
PAYMENT ADJUSTMENT FOR LOW-VOLUME HOSPITALS.

Section 1886(d)(12) of the Social Security Act (42 U.S.C.
1395ww(d)(12)) is amended--
(1) in subparagraph (A), by inserting ``or (D)'' after
``subparagraph (B)'';
(2) in subparagraph (B), in the matter preceding clause (i),
by striking ``The Secretary'' and inserting ``For discharges
occurring in fiscal years 2005 through 2010 and for discharges
occurring in fiscal year 2013 and subsequent fiscal years, the
Secretary'';
(3) in subparagraph (C)(i)--
(A) by inserting ``(or, with respect to fiscal years
2011 and 2012, 15 road miles)'' after ``25 road miles'';
and
(B) by inserting ``(or, with respect to fiscal years
2011 and 2012, 1,500 discharges of individuals entitled
to, or enrolled for, benefits under part A)'' after
``800 discharges''; and
(4) by adding at the end the following new subparagraph:
``(D) Temporary applicable percentage increase.--For
discharges occurring in fiscal years 2011 and 2012, the
Secretary shall determine an applicable percentage
increase for purposes of subparagraph (A) using a
continuous linear sliding scale ranging from 25 percent
for low-volume hospitals with 200 or fewer discharges of
individuals entitled to, or enrolled for, benefits under
part A in the fiscal year to 0 percent for low-volume
hospitals with greater than 1,500 discharges of such
individuals in the fiscal year.''.

SEC. 3126. IMPROVEMENTS TO THE DEMONSTRATION PROJECT ON COMMUNITY HEALTH
INTEGRATION MODELS IN CERTAIN RURAL COUNTIES.

(a) Removal of Limitation on Number of Eligible Counties Selected.--
Subsection (d)(3) of section 123 of the Medicare Improvements for
Patients and Providers Act of 2008 (42 U.S.C. 1395i-4 note) is amended
by striking ``not more than 6''.
(b) Removal of References to Rural Health Clinic Services and
Inclusion of Physicians' Services in Scope of Demonstration Project.--
Such section 123 is amended--

[[Page 426]]

(1) in subsection (d)(4)(B)(i)(3), by striking subclause
(III); and
(2) in subsection (j)--
(A) in paragraph (8), by striking subparagraph (B)
and inserting the following:
``(B) Physicians' services (as defined in section
1861(q) of the Social Security Act (42 U.S.C.
1395x(q)).'';
(B) by striking paragraph (9); and
(C) by redesignating paragraph (10) as paragraph
(9).

SEC. 3127. MEDPAC STUDY ON ADEQUACY OF MEDICARE PAYMENTS FOR HEALTH CARE
PROVIDERS SERVING IN RURAL AREAS.

(a) Study.--The Medicare Payment Advisory Commission shall conduct a
study on the adequacy of payments for items and services furnished by
providers of services and suppliers in rural areas under the Medicare
program under title XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.). Such study shall include an analysis of--
(1) any adjustments in payments to providers of services and
suppliers that furnish items and services in rural areas;
(2) access by Medicare beneficiaries to items and services
in rural areas;
(3) the adequacy of payments to providers of services and
suppliers that furnish items and services in rural areas; and
(4) the quality of care furnished in rural areas.

(b) Report.--Not later than January 1, 2011, the Medicare Payment
Advisory Commission shall submit to Congress a report containing the
results of the study conducted under subsection (a). Such report shall
include recommendations on appropriate modifications to any adjustments
in payments to providers of services and suppliers that furnish items
and services in rural areas, together with recommendations for such
legislation and administrative action as the Medicare Payment Advisory
Commission determines appropriate.

SEC. 3128. TECHNICAL CORRECTION RELATED TO CRITICAL ACCESS HOSPITAL
SERVICES.

(a) In General.--Subsections (g)(2)(A) and (l)(8) of section 1834 of
the Social Security Act (42 U.S.C. 1395m) are each amended by inserting
``101 percent of'' before ``the reasonable costs''.
(b) <> Effective Date.--The amendments
made by subsection (a) shall take effect as if included in the enactment
of section 405(a) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2266).

SEC. 3129. EXTENSION OF AND REVISIONS TO MEDICARE RURAL HOSPITAL
FLEXIBILITY PROGRAM.

(a) Authorization.--Section 1820(j) of the Social Security Act (42
U.S.C. 1395i-4(j)) is amended--
(1) by striking ``2010, and for'' and inserting ``2010,
for''; and
(2) by inserting ``and for making grants to all States under
subsection (g), such sums as may be necessary in each of fiscal
years 2011 and 2012, to remain available until expended'' before
the period at the end.

(b) Use of Funds.--Section 1820(g)(3) of the Social Security Act (42
U.S.C. 1395i-4(g)(3)) is amended--

[[Page 427]]

(1) in subparagraph (A), by inserting ``and to assist such
hospitals in participating in delivery system reforms under the
provisions of and amendments made by the Patient Protection and
Affordable Care Act, such as value-based purchasing programs,
accountable care organizations under section 1899, the National
pilot program on payment bundling under section 1866D, and other
delivery system reform programs determined appropriate by the
Secretary'' before the period at the end; and
(2) in subparagraph (E)--
(A) by striking ``, and to offset'' and inserting
``, to offset''; and
(B) by inserting ``and to participate in delivery
system reforms under the provisions of and amendments
made by the Patient Protection and Affordable Care Act,
such as value-based purchasing programs, accountable
care organizations under section 1899, the National
pilot program on payment bundling under section 1866D,
and other delivery system reform programs determined
appropriate by the Secretary'' before the period at the
end.

(c) <> Effective Date.--The amendments
made by this section shall apply to grants made on or after January 1,
2010.

PART III--IMPROVING PAYMENT ACCURACY

SEC. 3131. PAYMENT ADJUSTMENTS FOR HOME HEALTH CARE.

(a) Rebasing Home Health Prospective Payment Amount.--
(1) In general.--Section 1895(b)(3)(A) of the Social
Security Act (42 U.S.C. 1395fff(b)(3)(A)) is amended--
(A) in clause (i)(III), by striking ``For periods''
and inserting ``Subject to clause (iii), for periods'';
and
(B) by adding at the end the following new clause:
``(iii) Adjustment for 2013 and subsequent
years.--
``(I) In general.--Subject to
subclause (II), for 2013 and subsequent
years, the amount (or amounts) that
would otherwise be applicable under
clause (i)(III) shall be adjusted by a
percentage determined appropriate by the
Secretary to reflect such factors as
changes in the number of visits in an
episode, the mix of services in an
episode, the level of intensity of
services in an episode, the average cost
of providing care per episode, and other
factors that the Secretary considers to
be relevant. In conducting the analysis
under the preceding sentence, the
Secretary may consider differences
between hospital-based and freestanding
agencies, between for-profit and
nonprofit agencies, and between the
resource costs of urban and rural
agencies. Such adjustment shall be made
before the update under subparagraph (B)
is applied for the year.
``(II) Transition.--The Secretary
shall provide for a 4-year phase-in (in
equal increments) of the adjustment
under subclause (I), with such
adjustment being fully implemented for
2016. During each year of such phase-in,
the amount of any

[[Page 428]]

adjustment under subclause (I) for the
year may not exceed 3.5 percent of the
amount (or amounts) applicable under
clause (i)(III) as of the date of
enactment of the Patient Protection and
Affordable Care Act.''.
(2) MedPAC study and report.--
(A) Study.--The Medicare Payment Advisory Commission
shall conduct a study on the implementation of the
amendments made by paragraph (1). Such study shall
include an analysis of the impact of such amendments
on--
(i) access to care;
(ii) quality outcomes;
(iii) the number of home health agencies; and
(iv) rural agencies, urban agencies, for-
profit agencies, and nonprofit agencies.
(B) Report.--Not later than January 1, 2015, the
Medicare Payment Advisory Commission shall submit to
Congress a report on the study conducted under
subparagraph (A), together with recommendations for such
legislation and administrative action as the Commission
determines appropriate.

(b) Program-specific Outlier Cap.--Section 1895(b) of the Social
Security Act (42 U.S.C. 1395fff(b)) is amended--
(1) in paragraph (3)(C), by striking ``the aggregate'' and
all that follows through the period at the end and inserting ``5
percent of the total payments estimated to be made based on the
prospective payment system under this subsection for the
period.''; and
(2) in paragraph (5)--
(A) by striking ``Outliers.--The Secretary'' and
inserting the following: ``Outliers.--
``(A) In general.--Subject to subparagraph (B), the
Secretary'';
(B) in subparagraph (A), as added by subparagraph
(A), by striking ``5 percent'' and inserting ``2.5
percent''; and
(C) by adding at the end the following new
subparagraph:
``(B) Program specific outlier cap.--The estimated
total amount of additional payments or payment
adjustments made under subparagraph (A) with respect to
a home health agency for a year (beginning with 2011)
may not exceed an amount equal to 10 percent of the
estimated total amount of payments made under this
section (without regard to this paragraph) with respect
to the home health agency for the year.''.

(c) Application of the Medicare Rural Home Health Add-on Policy.--
Section 421 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2283), as
amended by section 5201(b) of the Deficit Reduction Act of 2005 (Public
Law 109-171; 120 Stat. 46), <>  is amended--
(1) in the section heading, by striking ``one-year'' and
inserting ``temporary''; and
(2) in subsection (a)--

[[Page 429]]

(A) by striking ``, and episodes'' and inserting ``,
episodes'';
(B) by inserting ``and episodes and visits ending on
or after April 1, 2010, and before January 1, 2016,''
after ``January 1, 2007,''; and
(C) by inserting ``(or, in the case of episodes and
visits ending on or after April 1, 2010, and before
January 1, 2016, 3 percent)'' before the period at the
end.

(d) <> Study and Report on the
Development of Home Health Payment Reforms in Order To Ensure Access to
Care and Quality Services.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall conduct
a study to evaluate the costs and quality of care among
efficient home health agencies relative to other such agencies
in providing ongoing access to care and in treating Medicare
beneficiaries with varying severity levels of illness. Such
study shall include an analysis of the following:
(A) Methods to revise the home health prospective
payment system under section 1895 of the Social Security
Act (42 U.S.C. 1395fff) to more accurately account for
the costs related to patient severity of illness or to
improving beneficiary access to care, including--
(i) payment adjustments for services that may
be under- or over-valued;
(ii) necessary changes to reflect the resource
use relative to providing home health services to
low-income Medicare beneficiaries or Medicare
beneficiaries living in medically underserved
areas;
(iii) ways the outlier payment may be improved
to more accurately reflect the cost of treating
Medicare beneficiaries with high severity levels
of illness;
(iv) the role of quality of care incentives
and penalties in driving provider and patient
behavior;
(v) improvements in the application of a wage
index; and
(vi) other areas determined appropriate by the
Secretary.
(B) The validity and reliability of responses on the
OASIS instrument with particular emphasis on questions
that relate to higher payment under the home health
prospective payment system and higher outcome scores
under Home Care Compare.
(C) Additional research or payment revisions under
the home health prospective payment system that may be
necessary to set the payment rates for home health
services based on costs of high-quality and efficient
home health agencies or to improve Medicare beneficiary
access to care.
(D) A timetable for implementation of any
appropriate changes based on the analysis of the matters
described in subparagraphs (A), (B), and (C).
(E) Other areas determined appropriate by the
Secretary.
(2) Considerations.--In conducting the study under paragraph
(1), the Secretary shall consider whether certain factors

[[Page 430]]

should be used to measure patient severity of illness and access
to care, such as--
(A) population density and relative patient access
to care;
(B) variations in service costs for providing care
to individuals who are dually eligible under the
Medicare and Medicaid programs;
(C) the presence of severe or chronic diseases, as
evidenced by multiple, discontinuous home health
episodes;
(D) poverty status, as evidenced by the receipt of
Supplemental Security Income under title XVI of the
Social Security Act;
(E) the absence of caregivers;
(F) language barriers;
(G) atypical transportation costs;
(H) security costs; and
(I) other factors determined appropriate by the
Secretary.
(3) Report.--Not later than March 1, 2011, the Secretary
shall submit to Congress a report on the study conducted under
paragraph (1), together with recommendations for such
legislation and administrative action as the Secretary
determines appropriate.
(4) Consultations.--In conducting the study under paragraph
(1) and preparing the report under paragraph (3), the Secretary
shall consult with--
(A) stakeholders representing home health agencies;
(B) groups representing Medicare beneficiaries;
(C) the Medicare Payment Advisory Commission;
(D) the Inspector General of the Department of
Health and Human Services; and
(E) the Comptroller General of the United States.

SEC. 3132. HOSPICE REFORM.

(a) Hospice Care Payment Reforms.--
(1) In general.--Section 1814(i) of the Social Security Act
(42 U.S.C. 1395f(i)), as amended by section 3004(c), is
amended--
(A) by redesignating paragraph (6) as paragraph (7);
and
(B) by inserting after paragraph (5) the following
new paragraph:
``(6)(A) <> The
Secretary shall collect additional data and information as the
Secretary determines appropriate to revise payments for hospice
care under this subsection pursuant to subparagraph (D) and for
other purposes as determined appropriate by the
Secretary. <> The Secretary shall begin to
collect such data by not later than January 1, 2011.
``(B) The additional data and information to be collected
under subparagraph (A) may include data and information on--
``(i) charges and payments;
``(ii) the number of days of hospice care which are
attributable to individuals who are entitled to, or
enrolled for, benefits under part A; and
``(iii) with respect to each type of service
included in hospice care--

[[Page 431]]

``(I) the number of days of hospice care
attributable to the type of service;
``(II) the cost of the type of service; and
``(III) the amount of payment for the type of
service;
``(iv) charitable contributions and other revenue of
the hospice program;
``(v) the number of hospice visits;
``(vi) the type of practitioner providing the visit;
and
``(vii) the length of the visit and other basic
information with respect to the visit.
``(C) The Secretary may collect the additional data and
information under subparagraph (A) on cost reports, claims, or
other mechanisms as the Secretary determines to be appropriate.
``(D)(i) <> Notwithstanding the
preceding paragraphs of this subsection, not earlier than
October 1, 2013, the Secretary shall, by regulation, implement
revisions to the methodology for determining the payment rates
for routine home care and other services included in hospice
care under this part, as the Secretary determines to be
appropriate. Such revisions may be based on an analysis of data
and information collected under subparagraph (A). Such revisions
may include adjustments to per diem payments that reflect
changes in resource intensity in providing such care and
services during the course of the entire episode of hospice
care.
``(ii) Revisions in payment implemented pursuant to clause
(i) shall result in the same estimated amount of aggregate
expenditures under this title for hospice care furnished in the
fiscal year in which such revisions in payment are implemented
as would have been made under this title for such care in such
fiscal year if such revisions had not been implemented.
``(E) The Secretary shall consult with hospice programs and
the Medicare Payment Advisory Commission regarding the
additional data and information to be collected under
subparagraph (A) and the payment revisions under subparagraph
(D).''.
(2) Conforming amendments.--Section 1814(i)(1)(C) of the
Social Security Act (42 U.S.C. 1395f(i)(1)(C)) is amended--
(A) in clause (ii)--
(i) in the matter preceding subclause (I), by
inserting ``(before the first fiscal year in which
the payment revisions described in paragraph
(6)(D) are implemented)'' after ``subsequent
fiscal year''; and
(ii) in subclause (VII), by inserting
``(before the first fiscal year in which the
payment revisions described in paragraph (6)(D)
are implemented), subject to clause (iv),'' after
``subsequent fiscal year''; and
(B) by adding at the end the following new clause:
``(iii) With respect to routine home care and
other services included in hospice care furnished
during fiscal years subsequent to the first fiscal
year in which payment revisions described in
paragraph (6)(D) are implemented, the payment
rates for such care and services shall be the
payment rates in effect under this clause during
the preceding fiscal year increased by, subject to
clause (iv), the market basket percentage increase

[[Page 432]]

(as defined in section 1886(b)(3)(B)(iii)) for the
fiscal year.''.

(b) Adoption of MedPAC Hospice Program Eligibility Recertification
Recommendations.--Section 1814(a)(7) of the Social Security Act (42
U.S.C. 1395f(a)(7)) is amended--
(1) in subparagraph (B), by striking ``and'' at the end; and
(2) by adding at the end the following new subparagraph:
``(D) on and after January 1, 2011--
``(i) a hospice physician or nurse
practitioner has a face-to-face encounter with the
individual to determine continued eligibility of
the individual for hospice care prior to the
180th-day recertification and each subsequent
recertification under subparagraph (A)(ii) and
attests that such visit took place (in accordance
with procedures established by the Secretary); and
``(ii) in the case of hospice care provided an
individual for more than 180 days by a hospice
program for which the number of such cases for
such program comprises more than a percent
(specified by the Secretary) of the total number
of such cases for all programs under this title,
the hospice care provided to such individual is
medically reviewed (in accordance with procedures
established by the Secretary); and''.

SEC. 3133. IMPROVEMENT TO MEDICARE DISPROPORTIONATE SHARE HOSPITAL (DSH)
PAYMENTS.

Section 1886 of the Social Security Act (42 U.S.C. 1395ww), as
amended by sections 3001, 3008, and 3025, is amended--
(1) in subsection (d)(5)(F)(i), by striking ``For'' and
inserting ``Subject to subsection (r), for''; and
(2) by adding at the end the following new subsection:

``(r) Adjustments to Medicare DSH Payments.--
``(1) Empirically justified dsh payments.--For fiscal year
2015 and each subsequent fiscal year, instead of the amount of
disproportionate share hospital payment that would otherwise be
made under subsection (d)(5)(F) to a subsection (d) hospital for
the fiscal year, the Secretary shall pay to the subsection (d)
hospital 25 percent of such amount (which represents the
empirically justified amount for such payment, as determined by
the Medicare Payment Advisory Commission in its March 2007
Report to the Congress).
``(2) Additional payment.--In addition to the payment made
to a subsection (d) hospital under paragraph (1), for fiscal
year 2015 and each subsequent fiscal year, the Secretary shall
pay to such subsection (d) hospitals an additional amount equal
to the product of the following factors:
``(A) Factor one.--A factor equal to the difference
between--
``(i) the aggregate amount of payments that
would be made to subsection (d) hospitals under
subsection (d)(5)(F) if this subsection did not
apply for such fiscal year (as estimated by the
Secretary); and
``(ii) the aggregate amount of payments that
are made to subsection (d) hospitals under
paragraph (1) for such fiscal year (as so
estimated).
``(B) Factor two.--

[[Page 433]]

``(i) Fiscal years 2015, 2016, and 2017.--For
each of fiscal years 2015, 2016, and 2017, a
factor equal to 1 minus the percent change
(divided by 100) in the percent of individuals
under the age of 65 who are uninsured, as
determined by comparing the percent of such
individuals--
``(I) who are uninsured in 2012, the
last year before coverage expansion
under the Patient Protection and
Affordable Care Act (as calculated by
the Secretary based on the most recent
estimates available from the Director of
the Congressional Budget Office before a
vote in either House on such Act that,
if determined in the affirmative, would
clear such Act for enrollment); and
``(II) who are uninsured in the most
recent period for which data is
available (as so calculated).
``(ii) 2018 and subsequent years.--For fiscal
year 2018 and each subsequent fiscal year, a
factor equal to 1 minus the percent change
(divided by 100) in the percent of individuals who
are uninsured, as determined by comparing the
percent of individuals--
``(I) who are uninsured in 2012 (as
estimated by the Secretary, based on
data from the Census Bureau or other
sources the Secretary determines
appropriate, and certified by the Chief
Actuary of the Centers for Medicare &
Medicaid Services); and
``(II) who are uninsured in the most
recent period for which data is
available (as so estimated and
certified).
``(C) Factor three.--A factor equal to the percent,
for each subsection (d) hospital, that represents the
quotient of--
``(i) the amount of uncompensated care for
such hospital for a period selected by the
Secretary (as estimated by the Secretary, based on
appropriate data (including, in the case where the
Secretary determines that alternative data is
available which is a better proxy for the costs of
subsection (d) hospitals for treating the
uninsured, the use of such alternative data)); and
``(ii) the aggregate amount of uncompensated
care for all subsection (d) hospitals that receive
a payment under this subsection for such period
(as so estimated, based on such data).
``(3) Limitations on review.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise of the following:
``(A) Any estimate of the Secretary for purposes of
determining the factors described in paragraph (2).
``(B) Any period selected by the Secretary for such
purposes.''.

[[Page 434]]

SEC. 3134. MISVALUED CODES UNDER THE PHYSICIAN FEE SCHEDULE.

(a) In General.--Section 1848(c)(2) of the Social Security Act (42
U.S.C. 1395w-4(c)(2)) is amended by adding at the end the following new
subparagraphs:
``(K) Potentially misvalued codes.--
``(i) In general.--The Secretary shall--
``(I) periodically identify services
as being potentially misvalued using
criteria specified in clause (ii); and
``(II) review and make appropriate
adjustments to the relative values
established under this paragraph for
services identified as being potentially
misvalued under subclause (I).
``(ii) Identification of potentially misvalued
codes.--For purposes of identifying potentially
misvalued services pursuant to clause (i)(I), the
Secretary shall examine (as the Secretary
determines to be appropriate) codes (and families
of codes as appropriate) for which there has been
the fastest growth; codes (and families of codes
as appropriate) that have experienced substantial
changes in practice expenses; codes for new
technologies or services within an appropriate
period (such as 3 years) after the relative values
are initially established for such codes; multiple
codes that are frequently billed in conjunction
with furnishing a single service; codes with low
relative values, particularly those that are often
billed multiple times for a single treatment;
codes which have not been subject to review since
the implementation of the RBRVS (the so-called
`Harvard-valued codes'); and such other codes
determined to be appropriate by the Secretary.
``(iii) Review and adjustments.--
``(I) The Secretary may use existing
processes to receive recommendations on
the review and appropriate adjustment of
potentially misvalued services described
in clause (i)(II).
``(II) The Secretary may conduct
surveys, other data collection
activities, studies, or other analyses
as the Secretary determines to be
appropriate to facilitate the review and
appropriate adjustment described in
clause (i)(II).
``(III) The Secretary may use
analytic contractors to identify and
analyze services identified under clause
(i)(I), conduct surveys or collect data,
and make recommendations on the review
and appropriate adjustment of services
described in clause (i)(II).
``(IV) The Secretary may coordinate
the review and appropriate adjustment
described in clause (i)(II) with the
periodic review described in
subparagraph (B).
``(V) As part of the review and
adjustment described in clause (i)(II),
including with respect to codes with low
relative values described in clause
(ii), the Secretary may make appropriate
coding revisions (including using
existing processes

[[Page 435]]

for consideration of coding changes)
which may include consolidation of
individual services into bundled codes
for payment under the fee schedule under
subsection (b).
``(VI) The provisions of
subparagraph (B)(ii)(II) shall apply to
adjustments to relative value units made
pursuant to this subparagraph in the
same manner as such provisions apply to
adjustments under subparagraph
(B)(ii)(II).
``(L) Validating relative value units.--
``(i) In general.--The Secretary shall
establish a process to validate relative value
units under the fee schedule under subsection (b).
``(ii) Components and elements of work.--The
process described in clause (i) may include
validation of work elements (such as time, mental
effort and professional judgment, technical skill
and physical effort, and stress due to risk)
involved with furnishing a service and may include
validation of the pre-, post-, and intra-service
components of work.
``(iii) Scope of codes.--The validation of
work relative value units shall include a sampling
of codes for services that is the same as the
codes listed under subparagraph (K)(ii).
``(iv) Methods.--The Secretary may conduct the
validation under this subparagraph using methods
described in subclauses (I) through (V) of
subparagraph (K)(iii) as the Secretary determines
to be appropriate.
``(v) Adjustments.--The Secretary shall make
appropriate adjustments to the work relative value
units under the fee schedule under subsection (b).
The provisions of subparagraph (B)(ii)(II) shall
apply to adjustments to relative value units made
pursuant to this subparagraph in the same manner
as such provisions apply to adjustments under
subparagraph (B)(ii)(II).''.

(b) <> Implementation.--
(1) Administration.--
(A) Chapter 35 of title 44, United States Code and
the provisions of the Federal Advisory Committee Act (5
U.S.C. App.) shall not apply to this section or the
amendment made by this section.
(B) Notwithstanding any other provision of law, the
Secretary may implement subparagraphs (K) and (L) of
1848(c)(2) of the Social Security Act, as added by
subsection (a), by program instruction or otherwise.
(C) Section 4505(d) of the Balanced Budget Act of
1997 <>  is repealed.
(D) Except for provisions related to confidentiality
of information, the provisions of the Federal
Acquisition Regulation shall not apply to this section
or the amendment made by this section.
(2) Focusing cms resources on potentially overvalued
codes. <> --Section 1868(a) of the Social
Security Act (42 U.S.C. 1395ee(a)) is repealed.

[[Page 436]]

SEC. 3135. MODIFICATION OF EQUIPMENT UTILIZATION FACTOR FOR ADVANCED
IMAGING SERVICES.

(a) Adjustment in Practice Expense To Reflect Higher Presumed
Utilization.--Section 1848 of the Social Security Act (42 U.S.C. 1395w-
4) is amended--
(1) in subsection (b)(4)--
(A) in subparagraph (B), by striking ``subparagraph
(A)'' and inserting ``this paragraph''; and
(B) by adding at the end the following new
subparagraph:
``(C) <> Adjustment in practice
expense to reflect higher presumed utilization.--
Consistent with the methodology for computing the number
of practice expense relative value units under
subsection (c)(2)(C)(ii) with respect to advanced
diagnostic imaging services (as defined in section
1834(e)(1)(B)) furnished on or after January 1, 2010,
the Secretary shall adjust such number of units so it
reflects--
``(i) in the case of services furnished on or
after January 1, 2010, and before January 1, 2013,
a 65 percent (rather than 50 percent) presumed
rate of utilization of imaging equipment;
``(ii) in the case of services furnished on or
after January 1, 2013, and before January 1, 2014,
a 70 percent (rather than 50 percent) presumed
rate of utilization of imaging equipment; and
``(iii) in the case of services furnished on
or after January 1, 2014, a 75 percent (rather
than 50 percent) presumed rate of utilization of
imaging equipment.''; and
(2) in subsection (c)(2)(B)(v), by adding at the end the
following new subclauses:
``(III) Change in presumed
utilization level of certain advanced
diagnostic imaging services for 2010
through 2012.--Effective for fee
schedules established beginning with
2010 and ending with 2012, reduced
expenditures attributable to the
presumed rate of utilization of imaging
equipment of 65 percent under subsection
(b)(4)(C)(i) instead of a presumed rate
of utilization of such equipment of 50
percent.
``(IV) Change in presumed
utilization level of certain advanced
diagnostic imaging services for 2013.--
Effective for fee schedules established
for 2013, reduced expenditures
attributable to the presumed rate of
utilization of imaging equipment of 70
percent under subsection (b)(4)(C)(ii)
instead of a presumed rate of
utilization of such equipment of 50
percent.
``(V) Change in presumed utilization
level of certain advanced diagnostic
imaging services for 2014 and subsequent
years.--Effective for fee schedules
established beginning with 2014, reduced
expenditures attributable to the
presumed

[[Page 437]]

rate of utilization of imaging equipment
of 75 percent under subsection
(b)(4)(C)(iii) instead of a presumed
rate of utilization of such equipment of
50 percent.''.

(b) Adjustment in Technical Component ``discount'' on Single-session
Imaging to Consecutive Body Parts.--Section 1848 of the Social Security
Act (42 U.S.C. 1395w-4), as amended by subsection (a), is amended--
(1) in subsection (b)(4), by adding at the end the following
new subparagraph:
``(D) Adjustment in technical component discount on
single-session imaging involving consecutive body
parts.--For services furnished on or after July 1, 2010,
the Secretary shall increase the reduction in payments
attributable to the multiple procedure payment reduction
applicable to the technical component for imaging under
the final rule published by the Secretary in the Federal
Register on November 21, 2005 (part 405 of title 42,
Code of Federal Regulations) from 25 percent to 50
percent.''; and
(2) in subsection (c)(2)(B)(v), by adding at the end the
following new subclause:
``(VI) Additional reduced payment
for multiple imaging procedures.--
Effective for fee schedules established
beginning with 2010 (but not applied for
services furnished prior to July 1,
2010), reduced expenditures attributable
to the increase in the multiple
procedure payment reduction from 25 to
50 percent (as described in subsection
(b)(4)(D)).''.

(c) Analysis by the Chief Actuary of the Centers for Medicare &
Medicaid Services. <> --Not later than January 1, 2013, the Chief Actuary of the
Centers for Medicare & Medicaid Services shall make publicly available
an analysis of whether, for the period of 2010 through 2019, the
cumulative expenditure reductions under title XVIII of the Social
Security Act that are attributable to the adjustments under the
amendments made by this section are projected to exceed $3,000,000,000.

SEC. 3136. REVISION OF PAYMENT FOR POWER-DRIVEN WHEELCHAIRS.

(a) In General.--Section 1834(a)(7)(A) of the Social Security Act
(42 U.S.C. 1395m(a)(7)(A)) is amended--
(1) in clause (i)--
(A) in subclause (II), by inserting ``subclause
(III) and'' after ``Subject to''; and
(B) by adding at the end the following new
subclause:
``(III) Special rule for power-
driven wheelchairs.--For purposes of
payment for power-driven wheelchairs,
subclause (II) shall be applied by
substituting `15 percent' and `6
percent' for `10 percent' and `7.5
percent', respectively.''; and
(2) in clause (iii)--
(A) in the heading, by inserting ``complex,
rehabilitative'' before ``power-driven''; and
(B) by inserting ``complex, rehabilitative'' before
``power-driven''.

[[Page 438]]

(b) Technical Amendment.--Section 1834(a)(7)(C)(ii)(II) of the
Social Security Act (42 U.S.C. 1395m(a)(7)(C)(ii)(II)) is amended by
striking ``(A)(ii) or''.
(c) <> Effective Date.--
(1) <> In general.--Subject to
paragraph (2), the amendments made by subsection (a) shall take
effect on January 1, 2011, and shall apply to power-driven
wheelchairs furnished on or after such date.
(2) Application to competitive bidding.--The amendments made
by subsection (a) shall not apply to payment made for items and
services furnished pursuant to contracts entered into under
section 1847 of the Social Security Act (42 U.S.C. 1395w-3)
prior to January 1, 2011, pursuant to the implementation of
subsection (a)(1)(B)(i)(I) of such section 1847.

SEC. 3137. HOSPITAL WAGE INDEX IMPROVEMENT.

(a) Extension of Section 508 Hospital Reclassifications.--
(1) In general.--Subsection (a) of section 106 of division B
of the Tax Relief and Health Care Act of 2006 (42 U.S.C. 1395
note), as amended by section 117 of the Medicare, Medicaid, and
SCHIP Extension Act of 2007 (Public Law 110-173) and section 124
of the Medicare Improvements for Patients and Providers Act of
2008 (Public Law 110-275), <>  is
amended by striking ``September 30, 2009'' and inserting
``September 30, 2010''.
(2) <> Use of particular wage
index in fiscal year 2010.--For purposes of implementation of
the amendment made by this subsection during fiscal year 2010,
the Secretary shall use the hospital wage index that was
promulgated by the Secretary in the Federal Register on August
27, 2009 (74 Fed. Reg. 43754), and any subsequent corrections.

(b) <> Plan for Reforming the Medicare
Hospital Wage Index System.--
(1) In general. <> --Not later
than December 31, 2011, the Secretary of Health and Human
Services (in this section referred to as the ``Secretary'')
shall submit to Congress a report that includes a plan to reform
the hospital wage index system under section 1886 of the Social
Security Act.
(2) Details.--In developing the plan under paragraph (1),
the Secretary shall take into account the goals for reforming
such system set forth in the Medicare Payment Advisory
Commission June 2007 report entitled ``Report to Congress:
Promoting Greater Efficiency in Medicare'', including
establishing a new hospital compensation index system that--
(A) uses Bureau of Labor Statistics data, or other
data or methodologies, to calculate relative wages for
each geographic area involved;
(B) minimizes wage index adjustments between and
within metropolitan statistical areas and statewide
rural areas;
(C) includes methods to minimize the volatility of
wage index adjustments that result from implementation
of policy, while maintaining budget neutrality in
applying such adjustments;
(D) takes into account the effect that
implementation of the system would have on health care
providers and on each region of the country;

[[Page 439]]

(E) addresses issues related to occupational mix,
such as staffing practices and ratios, and any evidence
on the effect on quality of care or patient safety as a
result of the implementation of the system; and
(F) provides for a transition.
(3) Consultation.--In developing the plan under paragraph
(1), the Secretary shall consult with relevant affected parties.

(c) Use of Particular Criteria for Determining
Reclassifications. <> --Notwithstanding any other
provision of law, in making decisions on applications for
reclassification of a subsection (d) hospital (as defined in paragraph
(1)(B) of section 1886(d) of the Social Security Act (42 U.S.C.
1395ww(d)) for the purposes described in paragraph (10)(D)(v) of such
section for fiscal year 2011 and each subsequent fiscal year (until the
first fiscal year beginning on or after the date that is 1 year after
the Secretary of Health and Human Services submits the report to
Congress under subsection (b)), the Geographic Classification Review
Board established under paragraph (10) of such section shall use the
average hourly wage comparison criteria used in making such decisions as
of September 30, 2008. The preceding sentence shall be effected in a
budget neutral manner.

SEC. 3138. TREATMENT OF CERTAIN CANCER HOSPITALS.

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

SEC. 3139. PAYMENT FOR BIOSIMILAR BIOLOGICAL PRODUCTS.

(a) In General.--Section 1847A of the Social Security Act (42 U.S.C.
1395w-3a) is amended--
(1) in subsection (b)--
(A) in paragraph (1)--
(i) in subparagraph (A), by striking ``or'' at
the end;
(ii) in subparagraph (B), by striking the
period at the end and inserting ``; or''; and
(iii) by adding at the end the following new
subparagraph:

[[Page 440]]

``(C) in the case of a biosimilar biological product
(as defined in subsection (c)(6)(H)), the amount
determined under paragraph (8).''; and
(B) by adding at the end the following new
paragraph:
``(8) Biosimilar biological product.--The amount specified
in this paragraph for a biosimilar biological product described
in paragraph (1)(C) is the sum of--
``(A) the average sales price as determined using
the methodology described under paragraph (6) applied to
a biosimilar biological product for all National Drug
Codes assigned to such product in the same manner as
such paragraph is applied to drugs described in such
paragraph; and
``(B) 6 percent of the amount determined under
paragraph (4) for the reference biological product (as
defined in subsection (c)(6)(I)).''; and
(2) in subsection (c)(6), by adding at the end the following
new subparagraph:
``(H) Biosimilar biological product.--The term
`biosimilar biological product' means a biological
product approved under an abbreviated application for a
license of a biological product that relies in part on
data or information in an application for another
biological product licensed under section 351 of the
Public Health Service Act.
``(I) Reference biological product.--The term
`reference biological product' means the biological
product licensed under such section 351 that is referred
to in the application described in subparagraph (H) of
the biosimilar biological product.''.

(b) <> Effective Date.--
The amendments made by subsection (a) shall apply to payments for
biosimilar biological products beginning with the first day of the
second calendar quarter after enactment of legislation providing for a
biosimilar pathway (as determined by the Secretary).

SEC. 3140. <> MEDICARE HOSPICE CONCURRENT CARE
DEMONSTRATION PROGRAM.

(a) Establishment.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall
establish a Medicare Hospice Concurrent Care demonstration
program at participating hospice programs under which Medicare
beneficiaries are furnished, during the same period, hospice
care and any other items or services covered under title XVIII
of the Social Security Act (42 U.S.C. 1395 et seq.) from funds
otherwise paid under such title to such hospice programs.
(2) Duration.--The demonstration program under this section
shall be conducted for a 3-year period.
(3) Sites.--The Secretary shall select not more than 15
hospice programs at which the demonstration program under this
section shall be conducted. Such hospice programs shall be
located in urban and rural areas.

(b) Independent Evaluation and Reports.--
(1) Independent evaluation.--The Secretary shall provide for
the conduct of an independent evaluation of the demonstration
program under this section. Such independent evaluation shall
determine whether the demonstration program

[[Page 441]]

has improved patient care, quality of life, and cost-
effectiveness for Medicare beneficiaries participating in the
demonstration program.
(2) Reports.--The Secretary shall submit to Congress a
report containing the results of the evaluation conducted under
paragraph (1), together with such recommendations as the
Secretary determines appropriate.

(c) Budget Neutrality.--With respect to the 3-year period of the
demonstration program under this section, the Secretary shall ensure
that the aggregate expenditures under title XVIII for such period shall
not exceed the aggregate expenditures that would have been expended
under such title if the demonstration program under this section had not
been implemented.

SEC. 3141. <> APPLICATION OF BUDGET
NEUTRALITY ON A NATIONAL BASIS IN THE CALCULATION OF THE
MEDICARE HOSPITAL WAGE INDEX FLOOR.

In the case of discharges occurring on or after October 1, 2010, for
purposes of applying section 4410 of the Balanced Budget Act of 1997 (42
U.S.C. 1395ww note) and paragraph (h)(4) of section 412.64 of title 42,
Code of Federal Regulations, the Secretary of Health and Human Services
shall administer subsection (b) of such section 4410 and paragraph (e)
of such section 412.64 in the same manner as the Secretary administered
such subsection (b) and paragraph (e) for discharges occurring during
fiscal year 2008 (through a uniform, national adjustment to the area
wage index).

SEC. 3142. HHS STUDY ON URBAN MEDICARE-DEPENDENT HOSPITALS.

(a) Study.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall conduct
a study on the need for an additional payment for urban
Medicare-dependent hospitals for inpatient hospital services
under section 1886 of the Social Security Act (42 U.S.C.
1395ww). Such study shall include an analysis of--
(A) the Medicare inpatient margins of urban
Medicare-dependent hospitals, as compared to other
hospitals which receive 1 or more additional payments or
adjustments under such section (including those payments
or adjustments described in paragraph (2)(A)); and
(B) whether payments to medicare-dependent, small
rural hospitals under subsection (d)(5)(G) of such
section should be applied to urban Medicare-dependent
hospitals.
(2) Urban medicare-dependent hospital defined.--For purposes
of this section, the term ``urban Medicare-dependent hospital''
means a subsection (d) hospital (as defined in subsection
(d)(1)(B) of such section) that--
(A) does not receive any additional payment or
adjustment under such section, such as payments for
indirect medical education costs under subsection
(d)(5)(B) of such section, disproportionate share
payments under subsection (d)(5)(A) of such section,
payments to a rural referral center under subsection
(d)(5)(C) of such section, payments to a critical access
hospital under section 1814(l) of such Act (42 U.S.C.
1395f(l)), payments to a sole community hospital under
subsection (d)(5)(D) of such section 1886, or payments
to a medicare-dependent, small rural hospital under
subsection (d)(5)(G) of such section 1886; and

[[Page 442]]

(B) for which more than 60 percent of its inpatient
days or discharges during 2 of the 3 most recently
audited cost reporting periods for which the Secretary
has a settled cost report were attributable to
inpatients entitled to benefits under part A of title
XVIII of such Act.

(b) Report.--Not later than 9 months after the date of enactment of
this Act, the Secretary shall submit to Congress a report containing the
results of the study conducted under subsection (a), together with
recommendations for such legislation and administrative action as the
Secretary determines appropriate.

SEC. 3143. <> PROTECTING HOME HEALTH BENEFITS.

Nothing in the provisions of, or amendments made by, this Act shall
result in the reduction of guaranteed home health benefits under title
XVIII of the Social Security Act.

Subtitle C--Provisions Relating to Part C

SEC. 3201. MEDICARE ADVANTAGE PAYMENT.

(a) MA Benchmark Based on Plan's Competitive Bids.--
(1) In general.--Section 1853(j) of the Social Security Act
(42 U.S.C. 1395w-23(j)) is amended--
(A) by striking ``Amounts.--For purposes'' and
inserting ``Amounts.--
``(1) In general.--For purposes'';
(B) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively, and indenting
the subparagraphs appropriately;
(C) in subparagraph (A), as redesignated by
subparagraph (B)--
(i) by redesignating subparagraphs (A) and (B)
as clauses (i) and (ii), respectively, and
indenting the clauses appropriately; and
(ii) in clause (i), as redesignated by clause
(i), by striking ``an amount equal to'' and all
that follows through the end and inserting ``an
amount equal to--
``(I) for years before 2007, \1/12\
of the annual MA capitation rate under
section 1853(c)(1) for the area for the
year, adjusted as appropriate for the
purpose of risk adjustment;
``(II) for 2007 through 2011, \1/12\
of the applicable amount determined
under subsection (k)(1) for the area for
the year;
``(III) for 2012, the sum of--
``(aa) \2/3\ of the quotient
of--
``(AA) the applicable
amount determined under
subsection (k)(1) for the
area for the year; and
``(BB) 12; and
``(bb) \1/3\ of the MA
competitive benchmark amount
(determined under paragraph (2))
for the area for the month;
``(IV) for 2013, the sum of--
``(aa) \1/3\ of the quotient
of--

[[Page 443]]

``(AA) the applicable
amount determined under
subsection (k)(1) for the
area for the year; and
``(BB) 12; and
``(bb) \2/3\ of the MA
competitive benchmark amount (as
so determined) for the area for
the month;
``(V) for 2014, the MA competitive
benchmark amount for the area for a
month in 2013 (as so determined),
increased by the national per capita MA
growth percentage, described in
subsection (c)(6) for 2014, but not
taking into account any adjustment under
subparagraph (C) of such subsection for
a year before 2004; and
``(VI) for 2015 and each subsequent
year, the MA competitive benchmark
amount (as so determined) for the area
for the month; or'';
(iii) in clause (ii), as redesignated by
clause (i), by striking ``subparagraph (A)'' and
inserting ``clause (i)'';
(D) by adding at the end the following new
paragraphs:
``(2) Computation of ma competitive benchmark amount.--
``(A) In general.--Subject to subparagraph (B) and
paragraph (3), for months in each year (beginning with
2012) for each MA payment area the Secretary shall
compute an MA competitive benchmark amount equal to the
weighted average of the unadjusted MA statutory non-drug
monthly bid amount (as defined in section 1854(b)(2)(E))
for each MA plan in the area, with the weight for each
plan being equal to the average number of beneficiaries
enrolled under such plan in the reference month (as
defined in section 1858(f)(4), except that, in applying
such definition for purposes of this paragraph, `to
compute the MA competitive benchmark amount under
section 1853(j)(2)' shall be substituted for `to compute
the percentage specified in subparagraph (A) and other
relevant percentages under this part').
``(B) Weighting rules.--
``(i) Single plan rule.--In the case of an MA
payment area in which only a single MA plan is
being offered, the weight under subparagraph (A)
shall be equal to 1.
``(ii) Use of simple average among multiple
plans if no plans offered in previous year.--In
the case of an MA payment area in which no MA plan
was offered in the previous year and more than 1
MA plan is offered in the current year, the
Secretary shall use a simple average of the
unadjusted MA statutory non-drug monthly bid
amount (as so defined) for purposes of computing
the MA competitive benchmark amount under
subparagraph (A).
``(3) Cap on ma competitive benchmark amount.--In no case
shall the MA competitive benchmark amount for an area for a
month in a year be greater than the applicable amount

[[Page 444]]

that would (but for the application of this subsection) be
determined under subsection (k)(1) for the area for the month in
the year.''; and
(E) in subsection (k)(2)(B)(ii)(III), by striking
``(j)(1)(A)'' and inserting ``(j)(1)(A)(i)''.
(2) Conforming amendments.--
(A) Section 1853(k)(2) of the Social Security Act
(42 U.S.C. 1395w-23(k)(2)) is amended--
(i) in subparagraph (A), by striking ``through
2010'' and inserting ``and subsequent years''; and
(ii) in subparagraph (C)--
(I) in clause (iii), by striking
``and'' at the end;
(II) in clause (iv), by striking the
period at the end and inserting ``;
and''; and
(III) by adding at the end the
following new clause:
``(v) for 2011 and subsequent years, 0.00.''.
(B) Section 1854(b) of the Social Security Act (42
U.S.C. 1395w-24(b)) is amended--
(i) in paragraph (3)(B)(i), by striking
``1853(j)(1)'' and inserting ``1853(j)(1)(A)'';
and
(ii) in paragraph (4)(B)(i), by striking
``1853(j)(2)'' and inserting ``1853(j)(1)(B)''.
(C) Section 1858(f) of the Social Security
Act <> (42 U.S.C. 1395w-27(f))
is amended--
(i) in paragraph (1), by striking
``1853(j)(2)'' and inserting ``1853(j)(1)(B)'';
and
(ii) in paragraph (3)(A), by striking
``1853(j)(1)(A)'' and inserting
``1853(j)(1)(A)(i)''.
(D) Section 1860C-1(d)(1)(A) of the Social Security
Act (42 U.S.C. 1395w-29(d)(1)(A)) is amended by striking
``1853(j)(1)(A)'' and inserting ``1853(j)(1)(A)(i)''.

(b) Reduction of National Per Capita Growth Percentage for 2011.--
Section 1853(c)(6) of the Social Security Act (42 U.S.C. 1395w-23(c)(6))
is amended--
(1) in clause (v), by striking ``and'' at the end;
(2) in clause (vi)--
(A) by striking ``for a year after 2002'' and
inserting ``for 2003 through 2010''; and
(B) by striking the period at the end and inserting
a comma; and
(C) by adding at the end the following new clauses:
``(vii) for 2011, 3 percentage points; and
``(viii) for a year after 2011, 0 percentage
points.''.

(c) Enhancement of Beneficiary Rebates.--Section 1854(b)(1)(C)(i) of
the Social Security Act (42 U.S.C. 1395w-24(b)(1)(C)(i)) is amended by
inserting ``(or 100 percent in the case of plan years beginning on or
after January 1, 2014)'' after ``75 percent''.
(d) Bidding Rules.--
(1) Requirements for information
submitted. <> --Section 1854(a)(6)(A) of
the Social Security Act (42 U.S.C. 1395w-24(a)(6)(A)) is
amended, in the flush matter following clause (v), by adding at
the end the following sentence: ``Information to be submitted
under this paragraph shall be certified by a qualified member of
the American Academy of Actuaries

[[Page 445]]

and shall meet actuarial guidelines and rules established by the
Secretary under subparagraph (B)(v).''.
(2) Establishment of actuarial guidelines.--Section
1854(a)(6)(B) of the Social Security Act (42 U.S.C. 1395w-
24(a)(6)(B)) is amended--
(A) in clause (i), by striking ``(iii) and (iv)''
and inserting ``(iii), (iv), and (v)''; and
(B) by adding at the end the following new clause:
``(v) Establishment of actuarial guidelines.--
``(I) In general.--In order to
establish fair MA competitive benchmarks
under section 1853(j)(1)(A)(i), the
Secretary, acting through the Chief
Actuary of the Centers for Medicare &
Medicaid Services (in this clause
referred to as the `Chief Actuary'),
shall establish--
``(aa) actuarial guidelines
for the submission of bid
information under this
paragraph; and
``(bb) bidding rules that
are appropriate to ensure
accurate bids and fair
competition among MA plans.
``(II) Denial of bid amounts.--The
Secretary shall deny monthly bid amounts
submitted under subparagraph (A) that do
not meet the actuarial guidelines and
rules established under subclause (I).
``(III) Refusal to accept certain
bids due to misrepresentations and
failures to adequately meet
requirements. <> --In the case where the
Secretary determines that information
submitted by an MA organization under
subparagraph (A) contains consistent
misrepresentations and failures to
adequately meet requirements of the
organization, the Secretary may refuse
to accept any additional such bid
amounts from the organization for the
plan year and the Chief Actuary shall,
if the Chief Actuary determines that the
actuaries of the organization were
complicit in those misrepresentations
and failures, report those actuaries to
the Actuarial Board for Counseling and
Discipline.''.
(3) <> Effective date.--The
amendments made by this subsection shall apply to bid amounts
submitted on or after January 1, 2012.

(e) MA Local Plan Service Areas.--
(1) In general.--Section 1853(d) of the Social Security Act
(42 U.S.C. 1395w-23(d)) is amended--
(A) in the subsection heading, by striking ``MA
Region'' and inserting ``MA Region; MA Local Plan
Service Area'';
(B) in paragraph (1), by striking subparagraph (A)
and inserting the following:
``(A) with respect to an MA local plan--
``(i) for years before 2012, an MA local area
(as defined in paragraph (2)); and

[[Page 446]]

``(ii) for 2012 and succeeding years, a
service area that is an entire urban or rural
area, as applicable (as described in paragraph
(5)); and''; and
(C) by adding at the end the following new
paragraph:
``(5) MA local plan service area.--For 2012 and succeeding
years, the service area for an MA local plan shall be an entire
urban or rural area in each State as follows:
``(A) Urban areas.--
``(i) In general.--Subject to clause (ii) and
subparagraphs (C) and (D), the service area for an
MA local plan in an urban area shall be the Core
Based Statistical Area (in this paragraph referred
to as a `CBSA') or, if applicable, a conceptually
similar alternative classification, as defined by
the Director of the Office of Management and
Budget.
``(ii) CBSA covering more than one state.--In
the case of a CBSA (or alternative classification)
that covers more than one State, the Secretary
shall divide the CBSA (or alternative
classification) into separate service areas with
respect to each State covered by the CBSA (or
alternative classification).
``(B) Rural areas.--Subject to subparagraphs (C) and
(D), the service area for an MA local plan in a rural
area shall be a county that does not qualify for
inclusion in a CBSA (or alternative classification), as
defined by the Director of the Office of Management and
Budget.
``(C) Refinements to service areas.--For 2015 and
succeeding years, in order to reflect actual patterns of
health care service utilization, the Secretary may
adjust the boundaries of service areas for MA local
plans in urban areas and rural areas under subparagraphs
(A) and (B), respectively, but may only do so based on
recent analyses of actual patterns of care.
``(D) Additional authority to make limited
exceptions to service area requirements for ma local
plans.--The Secretary may, in addition to any
adjustments under subparagraph (C), make limited
exceptions to service area requirements otherwise
applicable under this part for MA local plans that have
in effect (as of the date of enactment of the Patient
Protection and Affordable Care Act)--
``(i) agreements with another MA organization
or MA plan that preclude the offering of benefits
throughout an entire service area; or
``(ii) limitations in their structural
capacity to support adequate networks throughout
an entire service area as a result of the delivery
system model of the MA local plan.''.
(2) Conforming amendments.--
(A) In general.--
(i) Section 1851(b)(1) of the Social Security
Act (42 U.S.C. 1395w-21(b)(1)) is amended by
striking subparagraph (C).
(ii) Section 1853(b)(1)(B)(i) of such Act (42
U.S.C. 1395w-23(b)(1)(B)(i))--

[[Page 447]]

(I) in the matter preceding
subclause (I), by striking ``MA payment
area'' and inserting ``MA local area (as
defined in subsection (d)(2))''; and
(II) in subclause (I), by striking
``MA payment area'' and inserting ``MA
local area (as so defined)''.
(iii) Section 1853(b)(4) of such Act (42
U.S.C. 1395w-23(b)(4)) is amended by striking
``Medicare Advantage payment area'' and inserting
``MA local area (as so defined)''.
(iv) Section 1853(c)(1) of such Act (42 U.S.C.
1395w-23(c)(1)) is amended--
(I) in the matter preceding
subparagraph (A), by striking ``a
Medicare Advantage payment area that
is''; and
(II) in subparagraph (D)(i), by
striking ``MA payment area'' and
inserting ``MA local area (as defined in
subsection (d)(2))''.
(v) Section 1854 of such Act (42 U.S.C. 1395w-
24) is amended by striking subsection (h).
(B) <> Effective
date.--The amendments made by this paragraph shall take
effect on January 1, 2012.

(f) Performance Bonuses.--
(1) MA plans.--
(A) In general.--Section 1853 of the Social Security
Act (42 U.S.C. 1395w-23) is amended by adding at the end
the following new subsection:

``(n) Performance Bonuses.--
``(1) Care coordination and management performance bonus.--
``(A) In general. <> --For years beginning with 2014,
subject to subparagraph (B), in the case of an MA plan
that conducts 1 or more programs described in
subparagraph (C) with respect to the year, the Secretary
shall, in addition to any other payment provided under
this part, make monthly payments, with respect to
coverage of an individual under this part, to the MA
plan in an amount equal to the product of--
``(i) 0.5 percent of the national monthly per
capita cost for expenditures for individuals
enrolled under the original medicare fee-for-
service program for the year; and
``(ii) the total number of programs described
in clauses (i) through (ix) of subparagraph (C)
that the Secretary determines the plan is
conducting for the year under such subparagraph.
``(B) Limitation.--In no case may the total amount
of payment with respect to a year under subparagraph (A)
be greater than 2 percent of the national monthly per
capita cost for expenditures for individuals enrolled
under the original medicare fee-for-service program for
the year, as determined prior to the application of risk
adjustment under paragraph (4).
``(C) Programs described.--The following programs
are described in this paragraph:
``(i) Care management programs that--
``(I) target individuals with 1 or
more chronic conditions;

[[Page 448]]

``(II) identify gaps in care; and
``(III) facilitate improved care by
using additional resources like nurses,
nurse practitioners, and physician
assistants.
``(ii) Programs that focus on patient
education and self-management of health
conditions, including interventions that--
``(I) help manage chronic
conditions;
``(II) reduce declines in health
status; and
``(III) foster patient and provider
collaboration.
``(iii) Transitional care interventions that
focus on care provided around a hospital inpatient
episode, including programs that target post-
discharge patient care in order to reduce
unnecessary health complications and readmissions.
``(iv) Patient safety programs, including
provisions for hospital-based patient safety
programs in contracts that the Medicare Advantage
organization offering the MA plan has with
hospitals.
``(v) Financial policies that promote
systematic coordination of care by primary care
physicians across the full spectrum of specialties
and sites of care, such as medical homes,
capitation arrangements, or pay-for-performance
programs.
``(vi) Programs that address, identify, and
ameliorate health care disparities among principal
at-risk subpopulations.
``(vii) Medication therapy management programs
that are more extensive than is required under
section 1860D-4(c) (as determined by the
Secretary).
``(viii) Health information technology
programs, including clinical decision support and
other tools to facilitate data collection and
ensure patient-centered, appropriate care.
``(ix) Such other care management and
coordination programs as the Secretary determines
appropriate.
``(D) Conduct of program in urban and rural areas.--
An MA plan may conduct a program described in
subparagraph (C) in a manner appropriate for an urban or
rural area, as applicable.
``(E) Reporting of data.--Each Medicare Advantage
organization shall provide to the Secretary the
information needed to determine whether they are
eligible for a care coordination and management
performance bonus at a time and in a manner specified by
the Secretary.
``(F) Periodic auditing. <> --The
Secretary shall provide for the annual auditing of
programs described in subparagraph (C) for which an MA
plan receives a care coordination and management
performance bonus under this paragraph. The Comptroller
General shall monitor auditing activities conducted
under this subparagraph.
``(2) Quality performance bonuses.--
``(A) Quality bonus. <> --For years beginning with 2014, the
Secretary shall, in addition to any other payment
provided under this part, make monthly payments, with
respect to coverage of an individual under this part, to
an MA plan that achieves at least a 3 star rating (or

[[Page 449]]

comparable rating) on a rating system described in
subparagraph (C) in an amount equal to--
``(i) in the case of a plan that achieves a 3
star rating (or comparable rating) on such system
2 percent of the national monthly per capita cost
for expenditures for individuals enrolled under
the original medicare fee-for-service program for
the year; and
``(ii) in the case of a plan that achieves a 4
or 5 star rating (or comparable rating on such
system, 4 percent of such national monthly per
capita cost for the year.
``(B) Improved quality bonus. <> --For years beginning with 2014, in
the case of an MA plan that does not receive a quality
bonus under subparagraph (A) and is an improved quality
MA plan with respect to the year (as identified by the
Secretary), the Secretary shall, in addition to any
other payment provided under this part, make monthly
payments, with respect to coverage of an individual
under this part, to the MA plan in an amount equal to 1
percent of such national monthly per capita cost for the
year.
``(C) Use of rating system.--For purposes of
subparagraph (A), a rating system described in this
paragraph is--
``(i) a rating system that uses up to 5 stars
to rate clinical quality and enrollee satisfaction
and performance at the Medicare Advantage contract
or MA plan level; or
``(ii) such other system established by the
Secretary that provides for the determination of a
comparable quality performance rating to the
rating system described in clause (i).
``(D) Data used in determining score.--
``(i) In general.--The rating of an MA plan
under the rating system described in subparagraph
(C) with respect to a year shall be based on based
on the most recent data available.
``(ii) Plans that fail to report data.--An MA
plan which does not report data that enables the
Secretary to rate the plan for purposes of
subparagraph (A) or identify the plan for purposes
of subparagraph (B) shall be counted, for purposes
of such rating or identification, as having the
lowest plan performance rating and the lowest
percentage improvement, respectively.
``(3) Quality bonus for new and low enrollment ma plans.--
``(A) New ma plans. <> --For years beginning with 2014, in
the case of an MA plan that first submits a bid under
section 1854(a)(1)(A) for 2012 or a subsequent year,
only receives enrollments made during the coverage
election periods described in section 1851(e), and is
not able to receive a bonus under subparagraph (A) or
(B) of paragraph (2) for the year, the Secretary shall,
in addition to any other payment provided under this
part, make monthly payments, with respect to coverage of
an individual under this part, to the MA plan in an
amount equal to 2 percent of national monthly per capita
cost for expenditures for

[[Page 450]]

individuals enrolled under the original medicare fee-
for-service program for the year. In its fourth year of
operation, the MA plan shall be paid in the same manner
as other MA plans with comparable enrollment.
``(B) Low enrollment plans. <> --For years beginning with 2014,
in the case of an MA plan that has low enrollment (as
defined by the Secretary) and would not otherwise be
able to receive a bonus under subparagraph (A) or (B) of
paragraph (2) or subparagraph (A) of this paragraph for
the year (referred to in this subparagraph as a `low
enrollment plan'), the Secretary shall use a regional or
local mean of the rating of all MA plans in the region
or local area, as determined appropriate by the
Secretary, on measures used to determine whether MA
plans are eligible for a quality or an improved quality
bonus, as applicable, to determine whether the low
enrollment plan is eligible for a bonus under such a
subparagraph.
``(4) Risk adjustment.--The Secretary shall risk adjust a
performance bonus under this subsection in the same manner as
the Secretary risk adjusts beneficiary rebates described in
section 1854(b)(1)(C).
``(5) Notification.--The Secretary, in the annual
announcement required under subsection (b)(1)(B) for 2014 and
each succeeding year, shall notify the Medicare Advantage
organization of any performance bonus (including a care
coordination and management performance bonus under paragraph
(1), a quality performance bonus under paragraph (2), and a
quality bonus for new and low enrollment plans under paragraph
(3)) that the organization will receive under this subsection
with respect to the year. <> The Secretary
shall provide for the publication of the information described
in the previous sentence on the Internet website of the Centers
for Medicare & Medicaid Services.''
(B) Conforming amendment.--Section 1853(a)(1)(B) of
the Social Security Act (42 U.S.C. 1395w-23(a)(1)(B)) is
amended--
(i) in clause (i), by inserting ``and any
performance bonus under subsection (n)'' before
the period at the end; and
(ii) in clause (ii), by striking ``(G)'' and
inserting ``(G), plus the amount (if any) of any
performance bonus under subsection (n)''.
(2) Application of performance bonuses to ma regional
plans.--Section 1858 of the Social Security Act (42 U.S.C.
1395w-27a) is amended--
(A) in subsection (f)(1), by striking ``subsection
(e)'' and inserting ``subsections (e) and (i)''; and
(B) by adding at the end the following new
subsection:

``(i) Application of Performance Bonuses to MA Regional
Plans. <> --For years beginning with 2014, the
Secretary shall apply the performance bonuses under section 1853(n)
(relating to bonuses for care coordination and management, quality
performance, and new and low enrollment MA plans) to MA regional plans
in a similar manner as such performance bonuses apply to MA plans under
such subsection.''.

(g) Grandfathering Supplemental Benefits for Current Enrollees After
Implementation of Competitive Bidding.--

[[Page 451]]

Section 1853 of the Social Security Act (42 U.S.C. 1395w-23), as amended
by subsection (f), is amended by adding at the end the following new
subsection:
``(o) Grandfathering Supplemental Benefits for Current Enrolles
After Implementation of Competitive Bidding.--
``(1) Identification of areas.--The Secretary shall identify
MA local areas in which, with respect to 2009, average bids
submitted by an MA organization under section 1854(a) for MA
local plans in the area are not greater than 75 percent of the
adjusted average per capita cost for the year involved,
determined under section 1876(a)(4), for the area for
individuals who are not enrolled in an MA plan under this part
for the year, but adjusted to exclude costs attributable to
payments under section 1848(o), 1886(n), and 1886(h).
``(2) Election to provide rebates to grandfathered
enrollees.--
``(A) In general. <> --For
years beginning with 2012, each Medicare Advantage
organization offering an MA local plan in an area
identified by the Secretary under paragraph (1) may
elect to provide rebates to grandfathered enrollees
under section 1854(b)(1)(C). In the case where an MA
organization makes such an election, the monthly per
capita dollar amount of such rebates shall not exceed
the applicable amount for the year (as defined in
subparagraph (B)).
``(B) Applicable amount. <> --For
purposes of this subsection, the term `applicable
amount' means--
``(i) for 2012, the monthly per capita dollar
amount of such rebates provided to enrollees under
the MA local plan with respect to 2011; and
``(ii) for a subsequent year, 95 percent of
the amount determined under this subparagraph for
the preceding year.
``(3) Special rules for plans in identified
areas. <> --Notwithstanding any other
provision of this part, the following shall apply with respect
to each Medicare Advantage organization offering an MA local
plan in an area identified by the Secretary under paragraph (1)
that makes an election described in paragraph (2):
``(A) Payments.--The amount of the monthly payment
under this section to the Medicare Advantage
organization, with respect to coverage of a
grandfathered enrollee under this part in the area for a
month, shall be equal to--
``(i) for 2012 and 2013, the sum of--
``(I) the bid amount under section
1854(a) for the MA local plan; and
``(II) the applicable amount (as
defined in paragraph (2)(B)) for the MA
local plan for the year.
``(ii) for 2014 and subsequent years, the sum
of--
``(I) the MA competitive benchmark
amount under subsection (j)(1)(A)(i) for
the area for the month, adjusted, only
to the extent the Secretary determines
necessary, to account for induced
utilization as a result of rebates
provided to grandfathered enrollees
(except that such adjustment shall not
exceed 0.5 percent of such MA
competitive benchmark amount); and

[[Page 452]]

``(II) the applicable amount (as so
defined) for the MA local plan for the
year.
``(B) Requirement to submit bids under competitive
bidding.--The Medicare Advantage organization shall
submit a single bid amount under section 1854(a) for the
MA local plan. The Medicare Advantage organization shall
remove from such bid amount any effects of induced
demand for care that may result from the higher rebates
available to grandfathered enrollees under this
subsection.
``(C) Nonapplication of bonus payments and any other
rebates.--The Medicare Advantage organization offering
the MA local plan shall not be eligible for any bonus
payment under subsection (n) or any rebate under this
part (other than as provided under this subsection) with
respect to grandfathered enrollees.
``(D) Nonapplication of uniform bid and premium
amounts to grandfathered enrollees.--Section 1854(c)
shall not apply with respect to the MA local plan.
``(E) Nonapplication of limitation on application of
plan rebates toward payment of part b premium.--
Notwithstanding clause (iii) of section 1854(b)(1)(C),
in the case of a grandfathered enrollee, a rebate under
such section may be used for the purpose described in
clause (ii)(III) of such section.
``(F) Risk adjustment.--The Secretary shall risk
adjust rebates to grandfathered enrollees under this
subsection in the same manner as the Secretary risk
adjusts beneficiary rebates described in section
1854(b)(1)(C).
``(4) Definition of grandfathered enrollee.--In this
subsection, the term `grandfathered enrollee' means an
individual who is enrolled (effective as of the date of
enactment of this subsection) in an MA local plan in an area
that is identified by the Secretary under paragraph (1).''.

(h) Transitional Extra Benefits.--Section 1853 of the Social
Security Act (42 U.S.C. 1395w-23), as amended by subsections (f) and
(g), is amended by adding at the end the following new subsection:
``(p) Transitional Extra Benefits.--
``(1) In general. <> --For years
beginning with 2012, the Secretary shall provide transitional
rebates under section 1854(b)(1)(C) for the provision of extra
benefits (as specified by the Secretary) to enrollees described
in paragraph (2).
``(2) Enrollees described.--An enrollee described in this
paragraph is an individual who--
``(A) enrolls in an MA local plan in an applicable
area; and
``(B) experiences a significant reduction in extra
benefits described in clause (ii) of section
1854(b)(1)(C) as a result of competitive bidding under
this part (as determined by the Secretary).
``(3) Applicable areas. <> --In this
subsection, the term `applicable area' means the following:
``(A) The 2 largest metropolitan statistical areas,
if the Secretary determines that the total amount of
such extra benefits for each enrollee for the month in
those areas is greater than $100.
``(B) A county where--

[[Page 453]]

``(i) the MA area-specific non-drug monthly
benchmark amount for a month in 2011 is equal to
the legacy urban floor amount (as described in
subsection (c)(1)(B)(iii)), as determined by the
Secretary for the area for 2011;
``(ii) the percentage of Medicare Advantage
eligible beneficiaries in the county who are
enrolled in an MA plan for 2009 is greater than 30
percent (as determined by the Secretary); and
``(iii) average bids submitted by an MA
organization under section 1854(a) for MA local
plans in the county for 2011 are not greater than
the adjusted average per capita cost for the year
involved, determined under section 1876(a)(4), for
the county for individuals who are not enrolled in
an MA plan under this part for the year, but
adjusted to exclude costs attributable to payments
under section 1848(o), 1886(n), and 1886(h).
``(C) If the Secretary determines appropriate, a
county contiguous to an area or county described in
subparagraph (A) or (B), respectively.
``(4) Review of plan bids.--In the case of a bid submitted
by an MA organization under section 1854(a) for an MA local plan
in an applicable area, the Secretary shall review such bid in
order to ensure that extra benefits (as specified by the
Secretary) are provided to enrollees described in paragraph (2).
``(5) Funding. <> --The Secretary
shall provide for the transfer from the Federal Hospital
Insurance Trust Fund under section 1817 and the Federal
Supplementary Medical Insurance Trust Fund established under
section 1841, in such proportion as the Secretary determines
appropriate, of an amount not to exceed $5,000,000,000 for the
period of fiscal years 2012 through 2019 for the purpose of
providing transitional rebates under section 1854(b)(1)(C) for
the provision of extra benefits under this subsection.''.

(i) Nonapplication of Competitive Bidding and Related Provisions and
Clarification of MA Payment Area for PACE Programs.--
(1) Nonapplication of competitive bidding and related
provisions for pace programs.--Section 1894 of the Social
Security Act (42 U.S.C. 1395eee) is amended--
(A) by redesignating subsections (h) and (i) as
subsections (i) and (j), respectively;
(B) by inserting after subsection (g) the following
new subsection:

``(h) Nonapplication of Competitive Bidding and Related Provisions
Under Part C.--With respect to a PACE program under this section, the
following provisions (and regulations relating to such provisions) shall
not apply:
``(1) Section 1853(j)(1)(A)(i), relating to MA area-specific
non-drug monthly benchmark amount being based on competitive
bids.
``(2) Section 1853(d)(5), relating to the establishment of
MA local plan service areas.
``(3) Section 1853(n), relating to the payment of
performance bonuses.

[[Page 454]]

``(4) Section 1853(o), relating to grandfathering
supplemental benefits for current enrollees after implementation
of competitive bidding.
``(5) Section 1853(p), relating to transitional extra
benefits.''.
(2) Special rule for ma payment area for pace programs.--
Section 1853(d) of the Social Security Act (42 U.S.C. 1395w-
23(d)), as amended by subsection (e), is amended by adding at
the end the following new paragraph:
``(6) Special rule for ma payment area for pace
programs. <> --For years beginning with
2012, in the case of a PACE program under section 1894, the MA
payment area shall be the MA local area (as defined in paragraph
(2)).''.

SEC. 3202. BENEFIT PROTECTION AND SIMPLIFICATION.

(a) Limitation on Variation of Cost Sharing for Certain Benefits.--
(1) In general.--Section 1852(a)(1)(B) of the Social
Security Act (42 U.S.C. 1395w-22(a)(1)(B)) is amended--
(A) in clause (i), by inserting ``, subject to
clause (iii),'' after ``and B or''; and
(B) by adding at the end the following new clauses:
``(iii) Limitation on variation of cost
sharing for certain benefits.--Subject to clause
(v), cost-sharing for services described in clause
(iv) shall not exceed the cost-sharing required
for those services under parts A and B.
``(iv) Services described.--The following
services are described in this clause:
``(I) Chemotherapy administration
services.
``(II) Renal dialysis services (as
defined in section 1881(b)(14)(B)).
``(III) Skilled nursing care.
``(IV) Such other services that the
Secretary determines appropriate
(including services that the Secretary
determines require a high level of
predictability and transparency for
beneficiaries).
``(v) Exception.--In the case of services
described in clause (iv) for which there is no
cost-sharing required under parts A and B, cost-
sharing may be required for those services in
accordance with clause (i).''.
(2) <> Effective date.--The
amendments made by this subsection shall apply to plan years
beginning on or after January 1, 2011.

(b) Application of Rebates, Performance Bonuses, and Premiums.--
(1) Application of rebates.--Section 1854(b)(1)(C) of the
Social Security Act (42 U.S.C. 1395w-24(b)(1)(C)) is amended--
(A) in clause (ii), by striking ``rebate.--A
rebate'' and inserting ``rebate for plan years before
2012.--For plan years before 2012, a rebate'';
(B) by redesignating clauses (iii) and (iv) as
clauses (iv) and (v); and
(C) by inserting after clause (ii) the following new
clause:
``(iii) Form of rebate for plan year 2012 and
subsequent plan years. <> --For plan years beginning on or after
January 1, 2012, a rebate required under

[[Page 455]]

this subparagraph may not be used for the purpose
described in clause (ii)(III) and shall be
provided through the application of the amount of
the rebate in the following priority order:
``(I) First, to use the most
significant share to meaningfully reduce
cost-sharing otherwise applicable for
benefits under the original medicare
fee-for-service program under parts A
and B and for qualified prescription
drug coverage under part D, including
the reduction of any deductibles,
copayments, and maximum limitations on
out-of-pocket expenses otherwise
applicable. <> Any
reduction of maximum limitations on out-
of-pocket expenses under the preceding
sentence shall apply to all benefits
under the original medicare fee-for-
service program option. The Secretary
may provide guidance on meaningfully
reducing cost-sharing under this
subclause, except that such guidance may
not require a particular amount of cost-
sharing or reduction in cost-sharing.
``(II) Second, to use the next most
significant share to meaningfully
provide coverage of preventive and
wellness health care benefits (as
defined by the Secretary) which are not
benefits under the original medicare
fee-for-service program, such as smoking
cessation, a free flu shot, and an
annual physical examination.
``(III) Third, to use the remaining
share to meaningfully provide coverage
of other health care benefits which are
not benefits under the original medicare
fee-for-service program, such as eye
examinations and dental coverage, and
are not benefits described in subclause
(II).''.
(2) Application of performance bonuses.--Section 1853(n) of
the Social Security Act, as added by section 3201(f), is amended
by adding at the end the following new paragraph:
``(6) <> Application of performance
bonuses.--For plan years beginning on or after January 1, 2014,
any performance bonus paid to an MA plan under this subsection
shall be used for the purposes, and in the priority order,
described in subclauses (I) through (III) of section
1854(b)(1)(C)(iii).''.
(3) Application of ma monthly supplementary beneficiary
premium.--Section 1854(b)(2)(C) of the Social Security Act (42
U.S.C. 1395w-24(b)(2)(C)) is amended--
(A) by striking ``Premium.--The term'' and inserting
``premium.--
``(i) In general.--The term''; and
(B) by adding at the end the following new clause:
``(ii) Application of ma monthly supplementary
beneficiary premium. <> --
For plan years beginning on or after January 1,
2012, any MA monthly supplementary beneficiary
premium charged to an individual enrolled in an MA
plan shall be used for the purposes, and in the
priority order, described in subclauses (I)
through (III) of paragraph (1)(C)(iii).''.

[[Page 456]]

SEC. 3203. APPLICATION OF CODING INTENSITY ADJUSTMENT DURING MA PAYMENT
TRANSITION.

Section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395w-
23(a)(1)(C)) is amended by adding at the end the following new clause:
``(iii) Application of coding intensity
adjustment for 2011 and subsequent years.--
``(I) Requirement to apply in 2011
through 2013.--In order to ensure
payment accuracy, the Secretary shall
conduct an analysis of the differences
described in clause (ii)(I). The
Secretary shall ensure that the results
of such analysis are incorporated into
the risk scores for 2011, 2012, and
2013.
``(II) Authority to apply in 2014
and subsequent years.--The Secretary
may, as appropriate, incorporate the
results of such analysis into the risk
scores for 2014 and subsequent years.''.

SEC. 3204. SIMPLIFICATION OF ANNUAL BENEFICIARY ELECTION PERIODS.

(a) Annual 45-day Period for Disenrollment From MA Plans To Elect To
Receive Benefits Under the Original Medicare Fee-for-service Program.--
(1) In general.--Section 1851(e)(2)(C) of the Social
Security Act <> (42 U.S.C. 1395w-
1(e)(2)(C)) is amended to read as follows:
``(C) Annual 45-day period for disenrollment from ma
plans to elect to receive benefits under the original
medicare fee-for-service program. <> --Subject to subparagraph (D), at any time
during the first 45 days of a year (beginning with
2011), an individual who is enrolled in a Medicare
Advantage plan may change the election under subsection
(a)(1), but only with respect to coverage under the
original medicare fee-for-service program under parts A
and B, and may elect qualified prescription drug
coverage in accordance with section 1860D-1.''.
(2) <> Effective date.--The
amendment made by paragraph (1) shall apply with respect to 2011
and succeeding years.

(b) Timing of the Annual, Coordinated Election Period Under Parts C
and D.--Section 1851(e)(3)(B) of the Social Security Act <> (42 U.S.C. 1395w-1(e)(3)(B)) is amended--
(1) in clause (iii), by striking ``and'' at the end;
(2) in clause (iv)--
(A) by striking ``and succeeding years'' and
inserting ``, 2008, 2009, and 2010''; and
(B) by striking the period at the end and inserting
``; and''; and
(3) by adding at the end the following new clause:
``(v) with respect to 2012 and succeeding
years, the period beginning on October 15 and
ending on December 7 of the year before such
year.''.

[[Page 457]]

SEC. 3205. EXTENSION FOR SPECIALIZED MA PLANS FOR SPECIAL NEEDS
INDIVIDUALS.

(a) Extension of SNP Authority.--Section 1859(f)(1) of the Social
Security Act (42 U.S.C. 1395w-28(f)(1)), as amended by section 164(a) of
the Medicare Improvements for Patients and Providers Act of 2008 (Public
Law 110-275), is amended by striking ``2011'' and inserting ``2014''.
(b) Authority To Apply Frailty Adjustment Under PACE Payment
Rules.--Section 1853(a)(1)(B) of the Social Security Act (42 U.S.C.
1395w-23(a)(1)(B)) is amended by adding at the end the following new
clause:
``(iv) Authority to apply frailty adjustment
under pace payment rules for certain specialized
ma plans for special needs individuals.--
``(I) In general.--Notwithstanding
the preceding provisions of this
paragraph, for plan year 2011 and
subsequent plan years, in the case of a
plan described in subclause (II), the
Secretary may apply the payment rules
under section 1894(d) (other than
paragraph (3) of such section) rather
than the payment rules that would
otherwise apply under this part, but
only to the extent necessary to reflect
the costs of treating high
concentrations of frail individuals.
``(II) Plan described.--A plan
described in this subclause is a
specialized MA plan for special needs
individuals described in section
1859(b)(6)(B)(ii) that is fully
integrated with capitated contracts with
States for Medicaid benefits, including
long-term care, and that have similar
average levels of frailty (as determined
by the Secretary) as the PACE
program.''.

(c) Transition and Exception Regarding Restriction on Enrollment.--
Section 1859(f) of the Social Security Act (42 U.S.C. 1395w-28(f)) is
amended by adding at the end the following new paragraph:
``(6) Transition and exception regarding restriction on
enrollment.--
``(A) In general. <> --Subject to
subparagraph (C), the Secretary shall establish
procedures for the transition of applicable individuals
to--
``(i) a Medicare Advantage plan that is not a
specialized MA plan for special needs individuals
(as defined in subsection (b)(6)); or
``(ii) the original medicare fee-for-service
program under parts A and B.
``(B) Applicable
individuals. <> --For purposes of
clause (i), the term `applicable individual' means an
individual who--
``(i) is enrolled under a specialized MA plan
for special needs individuals (as defined in
subsection (b)(6)); and
``(ii) is not within the 1 or more of the
classes of special needs individuals to which
enrollment under the plan is restricted to.
``(C) Exception.--The Secretary shall provide for an
exception to the transition described in subparagraph
(A)

[[Page 458]]

for a limited period of time for individuals enrolled
under a specialized MA plan for special needs
individuals described in subsection (b)(6)(B)(ii) who
are no longer eligible for medical assistance under
title XIX.
``(D) Timeline for initial
transition. <> --The Secretary shall
ensure that applicable individuals enrolled in a
specialized MA plan for special needs individuals (as
defined in subsection (b)(6)) prior to January 1, 2010,
are transitioned to a plan or the program described in
subparagraph (A) by not later than January 1, 2013.''.

(d) Temporary Extension of Authority To Operate but No Service Area
Expansion for Dual Special Needs Plans That Do Not Meet Certain
Requirements.--Section 164(c)(2) of the Medicare Improvements for
Patients and Providers Act of 2008 (Public Law 110-275) <>  is amended by striking ``December 31, 2010'' and
inserting ``December 31, 2012''.

(e) Authority To Require Special Needs Plans Be NCQA Approved.--
Section 1859(f) of the Social Security Act (42 U.S.C. 1395w-28(f)), as
amended by subsections (a) and (c), is amended--
(1) in paragraph (2), by adding at the end the following new
subparagraph:
``(C) If applicable, the plan meets the requirement
described in paragraph (7).'';
(2) in paragraph (3), by adding at the end the following new
subparagraph:
``(E) If applicable, the plan meets the requirement
described in paragraph (7).'';
(3) in paragraph (4), by adding at the end the following new
subparagraph:
``(C) If applicable, the plan meets the requirement
described in paragraph (7).''; and
(4) by adding at the end the following new paragraph:
``(7) Authority to require special needs plans be ncqa
approved. <> --For 2012 and subsequent years,
the Secretary shall require that a Medicare Advantage
organization offering a specialized MA plan for special needs
individuals be approved by the National Committee for Quality
Assurance (based on standards established by the Secretary).''.

(f) Risk Adjustment.--Section 1853(a)(1)(C) of the Social Security
Act <> (42 U.S.C. 1395i-23(a)(1)(C)) is amended
by adding at the end the following new clause:
``(iii) Improvements to risk adjustment for
special needs individuals with chronic health
conditions.--
``(I) In general.--For 2011 and
subsequent years, for purposes of the
adjustment under clause (i) with respect
to individuals described in subclause
(II), the Secretary shall use a risk
score that reflects the known underlying
risk profile and chronic health status
of similar individuals. Such risk score
shall be used instead of the default
risk score for new enrollees in Medicare
Advantage plans that are not specialized
MA plans for special needs individuals
(as defined in section 1859(b)(6)).
``(II) Individuals described.--An
individual described in this subclause
is a special needs individual described
in subsection (b)(6)(B)(iii) who

[[Page 459]]

enrolls in a specialized MA plan for
special needs individuals on or after
January 1, 2011.
``(III) Evaluation.--For 2011 and
periodically thereafter, the Secretary
shall evaluate and revise the risk
adjustment system under this
subparagraph in order to, as accurately
as possible, account for higher medical
and care coordination costs associated
with frailty, individuals with multiple,
comorbid chronic conditions, and
individuals with a diagnosis of mental
illness, and also to account for costs
that may be associated with higher
concentrations of beneficiaries with
those conditions.
``(IV) Publication of evaluation and
revisions.--The Secretary shall publish,
as part of an announcement under
subsection (b), a description of any
evaluation conducted under subclause
(III) during the preceding year and any
revisions made under such subclause as a
result of such evaluation.''.

(g) Technical Correction.--Section 1859(f)(5) of the Social Security
Act (42 U.S.C. 1395w-28(f)(5)) is amended, in the matter preceding
subparagraph (A), by striking ``described in subsection (b)(6)(B)(i)''.

SEC. 3206. EXTENSION OF REASONABLE COST CONTRACTS.

Section 1876(h)(5)(C)(ii) of the Social Security Act (42 U.S.C.
1395mm(h)(5)(C)(ii)) is amended, in the matter preceding subclause (I),
by striking ``January 1, 2010'' and inserting ``January 1, 2013''.

SEC. 3207. <> TECHNICAL CORRECTION TO MA
PRIVATE FEE-FOR-SERVICE PLANS.

<> For plan year 2011 and subsequent plan
years, to the extent that the Secretary of Health and Human Services is
applying the 2008 service area extension waiver policy (as modified in
the April 11, 2008, Centers for Medicare & Medicaid Services' memorandum
with the subject ``2009 Employer Group Waiver-Modification of the 2008
Service Area Extension Waiver Granted to Certain MA Local Coordinated
Care Plans'') to Medicare Advantage coordinated care plans, the
Secretary shall extend the application of such waiver policy to
employers who contract directly with the Secretary as a Medicare
Advantage private fee-for-service plan under section 1857(i)(2) of the
Social Security Act (42 U.S.C. 1395w-27(i)(2)) and that had enrollment
as of October 1, 2009.

SEC. 3208. MAKING SENIOR HOUSING FACILITY DEMONSTRATION PERMANENT.

(a) In General.--Section 1859 of the Social Security Act (42 U.S.C.
1395w-28) is amended by adding at the end the following new subsection:
``(g) Special Rules for Senior Housing Facility Plans.--
``(1) In general.--In the case of a Medicare Advantage
senior housing facility plan described in paragraph (2),
notwithstanding any other provision of this part to the contrary
and in accordance with regulations of the Secretary, the service
area of such plan may be limited to a senior housing facility in
a geographic area.

[[Page 460]]

``(2) Medicare advantage senior housing facility plan
described.--For purposes of this subsection, a Medicare
Advantage senior housing facility plan is a Medicare Advantage
plan that--
``(A) restricts enrollment of individuals under this
part to individuals who reside in a continuing care
retirement community (as defined in section
1852(l)(4)(B));
``(B) provides primary care services onsite and has
a ratio of accessible physicians to beneficiaries that
the Secretary determines is adequate;
``(C) provides transportation services for
beneficiaries to specialty providers outside of the
facility; and
``(D) has participated (as of December 31, 2009) in
a demonstration project established by the Secretary
under which such a plan was offered for not less than 1
year.''.

(b) Effective Date. <> --The amendment
made by this section shall take effect on January 1, 2010, and shall
apply to plan years beginning on or after such date.

SEC. 3209. AUTHORITY TO DENY PLAN BIDS.

(a) In General.--Section 1854(a)(5) of the Social Security Act (42
U.S.C. 1395w-24(a)(5)) is amended by adding at the end the following new
subparagraph:
``(C) Rejection of bids.--
``(i) In general.--Nothing in this section
shall be construed as requiring the Secretary to
accept any or every bid submitted by an MA
organization under this subsection.
``(ii) Authority to deny bids that propose
significant increases in cost sharing or decreases
in benefits.--The Secretary may deny a bid
submitted by an MA organization for an MA plan if
it proposes significant increases in cost sharing
or decreases in benefits offered under the
plan.''.

(b) Application Under Part D.--Section 1860D-11(d) of such Act (42
U.S.C. 1395w-111(d)) is amended by adding at the end the following new
paragraph:
``(3) Rejection of bids. <> --
Paragraph (5)(C) of section 1854(a) shall apply with respect to
bids submitted by a PDP sponsor under subsection (b) in the same
manner as such paragraph applies to bids submitted by an MA
organization under such section 1854(a).''.

(c) <> Effective Date.--The amendments
made by this section shall apply to bids submitted for contract years
beginning on or after January 1, 2011.

SEC. 3210. DEVELOPMENT OF NEW STANDARDS FOR CERTAIN MEDIGAP PLANS.

(a) In General.--Section 1882 of the Social Security Act (42 U.S.C.
1395ss) is amended by adding at the end the following new subsection:
``(y) Development of New Standards for Certain Medicare Supplemental
Policies.--
``(1) In general.--The Secretary shall request the National
Association of Insurance Commissioners to review and revise the
standards for benefit packages described in paragraph (2) under
subsection (p)(1), to otherwise update standards to include
requirements for nominal cost sharing to encourage

[[Page 461]]

the use of appropriate physicians' services under part B. Such
revisions shall be based on evidence published in peer-reviewed
journals or current examples used by integrated delivery systems
and made consistent with the rules applicable under subsection
(p)(1)(E) with the reference to the `1991 NAIC Model Regulation'
deemed a reference to the NAIC Model Regulation as published in
the Federal Register on December 4, 1998, and as subsequently
updated by the National Association of Insurance Commissioners
to reflect previous changes in law and the reference to `date of
enactment of this subsection' deemed a reference to the date of
enactment of the Patient Protection and Affordable Care
Act. <> To the extent practicable, such
revision shall provide for the implementation of revised
standards for benefit packages as of January 1, 2015.
``(2) Benefit packages described.--The benefit packages
described in this paragraph are benefit packages classified as
`C' and `F'.''.

(b) Conforming Amendment.--Section 1882(o)(1) of the Social Security
Act (42 U.S.C. 1395ss(o)(1)) is amended by striking ``, and (w)'' and
inserting ``(w), and (y)''.

Subtitle D--Medicare Part D Improvements for Prescription Drug Plans and
MA-PD Plans

SEC. 3301. MEDICARE COVERAGE GAP DISCOUNT PROGRAM.

(a) Condition for Coverage of Drugs Under Part D.--Part D of Title
XVIII of the Social Security Act (42 U.S.C. 1395w-101 et seq.), is
amended by adding at the end the following new section:


``condition for coverage of drugs under this part


``Sec. 1860D-43. <>  (a) In
General.--In order for coverage to be available under this part for
covered part D drugs (as defined in section 1860D-2(e)) of a
manufacturer, the manufacturer must--
``(1) participate in the Medicare coverage gap discount
program under section 1860D-14A;
``(2) have entered into and have in effect an agreement
described in subsection (b) of such section with the Secretary;
and
``(3) have entered into and have in effect, under terms and
conditions specified by the Secretary, a contract with a third
party that the Secretary has entered into a contract with under
subsection (d)(3) of such section.

``(b) Effective Date.--Subsection (a) shall apply to covered part D
drugs dispensed under this part on or after July 1, 2010.
``(c) Authorizing Coverage for Drugs Not Covered Under Agreements.--
Subsection (a) shall not apply to the dispensing of a covered part D
drug if--
``(1) <> the Secretary has made a
determination that the availability of the drug is essential to
the health of beneficiaries under this part; or

[[Page 462]]

``(2) <> the Secretary
determines that in the period beginning on July 1, 2010, and
ending on December 31, 2010, there were extenuating
circumstances.

``(d) Definition of Manufacturer.--In this section, the term
`manufacturer' has the meaning given such term in section 1860D-
14A(g)(5).''.
(b) Medicare Coverage Gap Discount Program.--Part D of title XVIII
of the Social Security Act (42 U.S.C. 1395w-101) is amended by inserting
after section 1860D-14 the following new section:


``medicare coverage gap discount program


``Sec. 1860D-14A.  <> (a)
Establishment.--The Secretary shall establish a Medicare coverage gap
discount program (in this section referred to as the `program') by not
later than July 1, 2010. <> Under the program, the
Secretary shall enter into agreements described in subsection (b) with
manufacturers and provide for the performance of the duties described in
subsection (c)(1). The Secretary shall establish a model agreement for
use under the program by not later than April 1, 2010, in consultation
with manufacturers, and allow for comment on such model agreement.

``(b) Terms of Agreement.--
``(1) In general.--
``(A) Agreement.--An agreement under this section
shall require the manufacturer to provide applicable
beneficiaries access to discounted prices for applicable
drugs of the manufacturer.
``(B) Provision of discounted prices at the point-
of-sale.--Except as provided in subsection
(c)(1)(A)(iii), such discounted prices shall be provided
to the applicable beneficiary at the pharmacy or by the
mail order service at the point-of-sale of an applicable
drug.
``(C) <>  Timing of agreement.--
``(i) Special rule for 2010 and 2011.--In
order for an agreement with a manufacturer to be
in effect under this section with respect to the
period beginning on July 1, 2010, and ending on
December 31, 2011, the manufacturer shall enter
into such agreement not later than May 1, 2010.
``(ii) 2012 and subsequent years.--In order
for an agreement with a manufacturer to be in
effect under this section with respect to plan
year 2012 or a subsequent plan year, the
manufacturer shall enter into such agreement (or
such agreement shall be renewed under paragraph
(4)(A)) not later than January 30 of the preceding
year.
``(2) Provision of appropriate
data. <> --Each manufacturer with an
agreement in effect under this section shall collect and have
available appropriate data, as determined by the Secretary, to
ensure that it can demonstrate to the Secretary compliance with
the requirements under the program.
``(3) Compliance with requirements for administration of
program.--Each manufacturer with an agreement in effect under
this section shall comply with requirements imposed by the
Secretary or a third party with a contract under subsection
(d)(3), as applicable, for purposes of administering the

[[Page 463]]

program, including any determination under clause (i) of
subsection (c)(1)(A) or procedures established under such
subsection (c)(1)(A).
``(4) Length of agreement.--
``(A) In general. <> --An
agreement under this section shall be effective for an
initial period of not less than 18 months and shall be
automatically renewed for a period of not less than 1
year unless terminated under subparagraph (B).
``(B) Termination.--
``(i) By the secretary.--The Secretary may
provide for termination of an agreement under this
section for a knowing and willful violation of the
requirements of the agreement or other good cause
shown. <> Such termination shall
not be effective earlier than 30 days after the
date of notice to the manufacturer of such
termination. The Secretary shall provide, upon
request, a manufacturer with a hearing concerning
such a termination, and such hearing shall take
place prior to the effective date of the
termination with sufficient time for such
effective date to be repealed if the Secretary
determines appropriate.
``(ii) By a manufacturer.--A manufacturer may
terminate an agreement under this section for any
reason. Any such termination shall be effective,
with respect to a plan year--
``(I) if the termination occurs
before January 30 of a plan year, as of
the day after the end of the plan year;
and
``(II) if the termination occurs on
or after January 30 of a plan year, as
of the day after the end of the
succeeding plan year.
``(iii) Effectiveness of termination.--Any
termination under this subparagraph shall not
affect discounts for applicable drugs of the
manufacturer that are due under the agreement
before the effective date of its termination.
``(iv) Notice to third
party. <> --The Secretary shall
provide notice of such termination to a third
party with a contract under subsection (d)(3)
within not less than 30 days before the effective
date of such termination.

``(c) Duties Described and Special Rule for Supplemental Benefits.--
``(1) Duties described.--The duties described in this
subsection are the following:
``(A) Administration of
program. <> --Administering the
program, including--
``(i) <> the
determination of the amount of the discounted
price of an applicable drug of a manufacturer;
``(ii) except as provided in clause (iii), the
establishment of procedures under which discounted
prices are provided to applicable beneficiaries at
pharmacies or by mail order service at the point-
of-sale of an applicable drug;
``(iii) in the case where, during the period
beginning on July 1, 2010, and ending on December
31, 2011,

[[Page 464]]

it is not practicable to provide such discounted
prices at the point-of-sale (as described in
clause (ii)), the establishment of procedures to
provide such discounted prices as soon as
practicable after the point-of-sale;
``(iv) the establishment of procedures to
ensure that, not later than the applicable number
of calendar days after the dispensing of an
applicable drug by a pharmacy or mail order
service, the pharmacy or mail order service is
reimbursed for an amount equal to the difference
between--
``(I) the negotiated price of the
applicable drug; and
``(II) the discounted price of the
applicable drug;
``(v) the establishment of procedures to
ensure that the discounted price for an applicable
drug under this section is applied before any
coverage or financial assistance under other
health benefit plans or programs that provide
coverage or financial assistance for the purchase
or provision of prescription drug coverage on
behalf of applicable beneficiaries as the
Secretary may specify;
``(vi) the establishment of procedures to
implement the special rule for supplemental
benefits under paragraph (2); and
``(vii) providing a reasonable dispute
resolution mechanism to resolve disagreements
between manufacturers, applicable beneficiaries,
and the third party with a contract under
subsection (d)(3).
``(B) Monitoring compliance.--
``(i) In general.--The Secretary shall monitor
compliance by a manufacturer with the terms of an
agreement under this section.
``(ii) Notification.--If a third party with a
contract under subsection (d)(3) determines that
the manufacturer is not in compliance with such
agreement, the third party shall notify the
Secretary of such noncompliance for appropriate
enforcement under subsection (e).
``(C) Collection of data from prescription drug
plans and ma-pd plans.--The Secretary may collect
appropriate data from prescription drug plans and MA-PD
plans in a timeframe that allows for discounted prices
to be provided for applicable drugs under this section.
``(2) Special rule for supplemental benefits.--For plan year
2010 and each subsequent plan year, in the case where an
applicable beneficiary has supplemental benefits with respect to
applicable drugs under the prescription drug plan or MA-PD plan
that the applicable beneficiary is enrolled in, the applicable
beneficiary shall not be provided a discounted price for an
applicable drug under this section until after such supplemental
benefits have been applied with respect to the applicable drug.

``(d) Administration.--
``(1) In general.--Subject to paragraph (2), the Secretary
shall provide for the implementation of this section, including
the performance of the duties described in subsection (c)(1).

[[Page 465]]

``(2) Limitation.--
``(A) In general.--Subject to subparagraph (B), in
providing for such implementation, the Secretary shall
not receive or distribute any funds of a manufacturer
under the program.
``(B) Exception. <> --The limitation under
subparagraph (A) shall not apply to the Secretary with
respect to drugs dispensed during the period beginning
on July 1, 2010, and ending on December 31, 2010, but
only if the Secretary determines that the exception to
such limitation under this subparagraph is necessary in
order for the Secretary to begin implementation of this
section and provide applicable beneficiaries timely
access to discounted prices during such period.
``(3) Contract with third parties.--The Secretary shall
enter into a contract with 1 or more third parties to administer
the requirements established by the Secretary in order to carry
out this section. At a minimum, the contract with a third party
under the preceding sentence shall require that the third
party--
``(A) receive and transmit information between the
Secretary, manufacturers, and other individuals or
entities the Secretary determines appropriate;
``(B) receive, distribute, or facilitate the
distribution of funds of manufacturers to appropriate
individuals or entities in order to meet the obligations
of manufacturers under agreements under this section;
``(C) provide adequate and timely information to
manufacturers, consistent with the agreement with the
manufacturer under this section, as necessary for the
manufacturer to fulfill its obligations under this
section; and
``(D) permit manufacturers to conduct periodic
audits, directly or through contracts, of the data and
information used by the third party to determine
discounts for applicable drugs of the manufacturer under
the program.
``(4) Performance requirements.--The Secretary shall
establish performance requirements for a third party with a
contract under paragraph (3) and safeguards to protect the
independence and integrity of the activities carried out by the
third party under the program under this section.
``(5) Implementation.--The Secretary may implement the
program under this section by program instruction or otherwise.
``(6) Administration.--Chapter 35 of title 44, United States
Code, shall not apply to the program under this section.

``(e) Enforcement.--
``(1) Audits.--Each manufacturer with an agreement in effect
under this section shall be subject to periodic audit by the
Secretary.
``(2) Civil money penalty.--
``(A) In general. <> --The
Secretary shall impose a civil money penalty on a
manufacturer that fails to provide applicable
beneficiaries discounts for applicable drugs of the
manufacturer in accordance with such agreement for each
such failure in an amount the Secretary determines is
commensurate with the sum of--

[[Page 466]]

``(i) the amount that the manufacturer would
have paid with respect to such discounts under the
agreement, which will then be used to pay the
discounts which the manufacturer had failed to
provide; and
``(ii) 25 percent of such amount.
``(B) Application.--The provisions of section 1128A
(other than subsections (a) and (b)) shall apply to a
civil money penalty under this paragraph in the same
manner as such provisions apply to a penalty or
proceeding under section 1128A(a).

``(f) Clarification Regarding Availability of Other Covered Part D
Drugs.--Nothing in this section shall prevent an applicable beneficiary
from purchasing a covered part D drug that is not an applicable drug
(including a generic drug or a drug that is not on the formulary of the
prescription drug plan or MA-PD plan that the applicable beneficiary is
enrolled in).
``(g) Definitions.--In this section:
``(1) Applicable beneficiary.--The term `applicable
beneficiary' means an individual who, on the date of dispensing
an applicable drug--
``(A) is enrolled in a prescription drug plan or an
MA-PD plan;
``(B) is not enrolled in a qualified retiree
prescription drug plan;
``(C) is not entitled to an income-related subsidy
under section 1860D-14(a);
``(D) is not subject to a reduction in premium
subsidy under section 1839(i); and
``(E) who--
``(i) has reached or exceeded the initial
coverage limit under section 1860D-2(b)(3) during
the year; and
``(ii) has not incurred costs for covered part
D drugs in the year equal to the annual out-of-
pocket threshold specified in section 1860D-
2(b)(4)(B).
``(2) Applicable drug.--The term `applicable drug' means,
with respect to an applicable beneficiary, a covered part D
drug--
``(A) approved under a new drug application under
section 505(b) of the Federal Food, Drug, and Cosmetic
Act or, in the case of a biologic product, licensed
under section 351 of the Public Health Service Act
(other than a product licensed under subsection (k) of
such section 351); and
``(B)(i) if the PDP sponsor of the prescription drug
plan or the MA organization offering the MA-PD plan uses
a formulary, which is on the formulary of the
prescription drug plan or MA-PD plan that the applicable
beneficiary is enrolled in;
``(ii) if the PDP sponsor of the prescription drug
plan or the MA organization offering the MA-PD plan does
not use a formulary, for which benefits are available
under the prescription drug plan or MA-PD plan that the
applicable beneficiary is enrolled in; or
``(iii) is provided through an exception or appeal.
``(3) Applicable number of calendar days.--The term
`applicable number of calendar days' means--

[[Page 467]]

``(A) with respect to claims for reimbursement
submitted electronically, 14 days; and
``(B) with respect to claims for reimbursement
submitted otherwise, 30 days.
``(4) Discounted price.--
``(A) In general.--The term `discounted price' means
50 percent of the negotiated price of the applicable
drug of a manufacturer.
``(B) Clarification.--Nothing in this section shall
be construed as affecting the responsibility of an
applicable beneficiary for payment of a dispensing fee
for an applicable drug.
``(C) Special case for certain claims.--In the case
where the entire amount of the negotiated price of an
individual claim for an applicable drug with respect to
an applicable beneficiary does not fall at or above the
initial coverage limit under section 1860D-2(b)(3) and
below the annual out-of-pocket threshold specified in
section 1860D-2(b)(4)(B) for the year, the manufacturer
of the applicable drug shall provide the discounted
price under this section on only the portion of the
negotiated price of the applicable drug that falls at or
above such initial coverage limit and below such annual
out-of-pocket threshold.
``(5) Manufacturer.--The term `manufacturer' means any
entity which is engaged in the production, preparation,
propagation, compounding, conversion, or processing of
prescription drug products, either directly or indirectly by
extraction from substances of natural origin, or independently
by means of chemical synthesis, or by a combination of
extraction and chemical synthesis. Such term does not include a
wholesale distributor of drugs or a retail pharmacy licensed
under State law.
``(6) Negotiated price.--The term `negotiated price' has the
meaning given such term in section 423.100 of title 42, Code of
Federal Regulations (as in effect on the date of enactment of
this section), except that such negotiated price shall not
include any dispensing fee for the applicable drug.
``(7) Qualified retiree prescription drug plan.--The term
`qualified retiree prescription drug plan' has the meaning given
such term in section 1860D-22(a)(2).''.

(c) Inclusion in Incurred Costs.--
(1) In general.--Section 1860D-2(b)(4) of the Social
Security Act (42 U.S.C. 1395w-102(b)(4)) is amended--
(A) in subparagraph (C), in the matter preceding
clause (i), by striking ``In applying'' and inserting
``Except as provided in subparagraph (E), in applying'';
and
(B) by adding at the end the following new
subparagraph:
``(E) Inclusion of costs of applicable drugs under
medicare coverage gap discount program.--In applying
subparagraph (A), incurred costs shall include the
negotiated price (as defined in paragraph (6) of section
1860D-14A(g)) of an applicable drug (as defined in
paragraph (2) of such section) of a manufacturer that is
furnished to an applicable beneficiary (as defined in
paragraph (1) of such section) under the Medicare
coverage gap discount

[[Page 468]]

program under section 1860D-14A, regardless of whether
part of such costs were paid by a manufacturer under
such program.''.
(2) Effective date. <> --The
amendments made by this subsection shall apply to costs incurred
on or after July 1, 2010.

(d) Conforming Amendment Permitting Prescription Drug Discounts.--
(1) In general.--Section 1128B(b)(3) of the Social Security
Act (42 U.S.C. 1320a-7b(b)(3)) is amended--
(A) by striking ``and'' at the end of subparagraph
(G);
(B) in the subparagraph (H) added by section 237(d)
of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173; 117 Stat.
2213)--
(i) by moving such subparagraph 2 ems to the
left; and
(ii) by striking the period at the end and
inserting a semicolon;
(C) in the subparagraph (H) added by section 431(a)
of such Act (117 Stat. 2287)--
(i) by redesignating such subparagraph as
subparagraph (I);
(ii) by moving such subparagraph 2 ems to the
left; and
(iii) by striking the period at the end and
inserting ``; and''; and
(D) by adding at the end the following new
subparagraph:
``(J) a discount in the price of an applicable drug
(as defined in paragraph (2) of section 1860D-14A(g)) of
a manufacturer that is furnished to an applicable
beneficiary (as defined in paragraph (1) of such
section) under the Medicare coverage gap discount
program under section 1860D-14A.''.
(2) Conforming amendment to definition of best price under
medicaid.--Section 1927(c)(1)(C)(i)(VI) of the Social Security
Act (42 U.S.C. 1396r-8(c)(1)(C)(i)(VI)) is amended by inserting
``, or any discounts provided by manufacturers under the
Medicare coverage gap discount program under section 1860D-14A''
before the period at the end.
(3) <> Effective date.--The
amendments made by this subsection shall apply to drugs
dispensed on or after July 1, 2010.

SEC. 3302. IMPROVEMENT IN DETERMINATION OF MEDICARE PART D LOW-INCOME
BENCHMARK PREMIUM.

(a) In General.--Section 1860D-14(b)(2)(B)(iii) of the Social
Security Act (42 U.S.C. 1395w-114(b)(2)(B)(iii)) is amended by inserting
``, 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)'' before the period at the end.
(b) <> Effective Date.--The amendment
made by subsection (a) shall apply to premiums for months beginning on
or after January 1, 2011.

[[Page 469]]

SEC. 3303. VOLUNTARY DE MINIMIS POLICY FOR SUBSIDY ELIGIBLE INDIVIDUALS
UNDER PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

(a) In General.--Section 1860D-14(a) of the Social Security Act (42
U.S.C. 1395w-114(a)) is amended by adding at the end the following new
paragraph:
``(5) Waiver of de minimis
premiums. <> --The Secretary shall, under
procedures established by the Secretary, permit a prescription
drug plan or an MA-PD plan to waive the monthly beneficiary
premium for a subsidy eligible individual if the amount of such
premium is de minimis. If such premium is waived under the plan,
the Secretary shall not reassign subsidy eligible individuals
enrolled in the plan to other plans based on the fact that the
monthly beneficiary premium under the plan was greater than the
low-income benchmark premium amount.''.

(b) Authorizing the Secretary To Auto-enroll Subsidy Eligible
Individuals in Plans That Waive De Minimis Premiums.--Section 1860D-
1(b)(1) of the Social Security Act (42 U.S.C. 1395w-101(b)(1)) is
amended--
(1) in subparagraph (C), by inserting ``except as provided
in subparagraph (D),'' after ``shall include,''
(2) by adding at the end the following new subparagraph:
``(D) Special rule for plans that waive de minimis
premiums.--The process established under subparagraph
(A) may include, in the case of a part D eligible
individual who is a subsidy eligible individual (as
defined in section 1860D-14(a)(3)) who has failed to
enroll in a prescription drug plan or an MA-PD plan, for
the enrollment in a prescription drug plan or MA-PD plan
that has waived the monthly beneficiary premium for such
subsidy eligible individual under section 1860D-
14(a)(5). If there is more than one such plan available,
the Secretary shall enroll such an individual under the
preceding sentence on a random basis among all such
plans in the PDP region. Nothing in the previous
sentence shall prevent such an individual from declining
or changing such enrollment.''.

(c) <> Effective Date.--The amendments
made by this subsection shall apply to premiums for months, and
enrollments for plan years, beginning on or after January 1, 2011.

SEC. 3304. SPECIAL RULE FOR WIDOWS AND WIDOWERS REGARDING ELIGIBILITY
FOR LOW-INCOME ASSISTANCE.

(a) In General.--Section 1860D-14(a)(3)(B) of the Social Security
Act (42 U.S.C. 1395w-114(a)(3)(B)) is amended by adding at the end the
following new clause:
``(vi) Special rule for widows and widowers.--
Notwithstanding the preceding provisions of this
subparagraph, in the case of an individual whose
spouse dies during the effective period for a
determination or redetermination that has been
made under this subparagraph, such effective
period shall be extended through the date that is
1 year after the date on which the determination
or redetermination would (but for the application
of this clause) otherwise cease to be
effective.''.

[[Page 470]]

(b) <> Effective Date.--The amendment
made by subsection (a) shall take effect on January 1, 2011.

SEC. 3305. IMPROVED INFORMATION FOR SUBSIDY ELIGIBLE INDIVIDUALS
REASSIGNED TO PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

Section 1860D-14 of the Social Security Act (42 U.S.C. 1395w-114) is
amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following new
subsection:

``(d) Facilitation of Reassignments. <> --
Beginning not later than January 1, 2011, the Secretary shall, in the
case of a subsidy eligible individual who is enrolled in one
prescription drug plan and is subsequently reassigned by the Secretary
to a new prescription drug plan, provide the individual, within 30 days
of such reassignment, with--
``(1) information on formulary differences between the
individual's former plan and the plan to which the individual is
reassigned with respect to the individual's drug regimens; and
``(2) a description of the individual's right to request a
coverage determination, exception, or reconsideration under
section 1860D-4(g), bring an appeal under section 1860D-4(h), or
resolve a grievance under section 1860D-4(f).''.

SEC. 3306. FUNDING OUTREACH AND ASSISTANCE FOR LOW-INCOME PROGRAMS.

(a) Additional Funding for State Health Insurance Programs.--
Subsection (a)(1)(B) of section 119 of the Medicare Improvements for
Patients and Providers Act of 2008 (42 U.S.C. 1395b-3 note) is amended
by striking ``(42 U.S.C. 1395w-23(f))'' and all that follows through the
period at the end and inserting ``(42 U.S.C. 1395w-23(f)), to the
Centers for Medicare & Medicaid Services Program Management Account--
``(i) for fiscal year 2009, of $7,500,000; and
``(ii) for the period of fiscal years 2010
through 2012, of $15,000,000.
Amounts appropriated under this subparagraph shall
remain available until expended.''.

(b) Additional Funding for Area Agencies on Aging.--Subsection
(b)(1)(B) of such section 119 is amended by striking ``(42 U.S.C. 1395w-
23(f))'' and all that follows through the period at the end and
inserting ``(42 U.S.C. 1395w-23(f)), to the Administration on Aging--
``(i) for fiscal year 2009, of $7,500,000; and
``(ii) for the period of fiscal years 2010
through 2012, of $15,000,000.
Amounts appropriated under this subparagraph shall
remain available until expended.''.

(c) Additional Funding for Aging and Disability Resource Centers.--
Subsection (c)(1)(B) of such section 119 is amended by striking ``(42
U.S.C. 1395w-23(f))'' and all that follows through the period at the end
and inserting ``(42 U.S.C. 1395w-23(f)), to the Administration on
Aging--
``(i) for fiscal year 2009, of $5,000,000; and
``(ii) for the period of fiscal years 2010
through 2012, of $10,000,000.

[[Page 471]]

Amounts appropriated under this subparagraph shall
remain available until expended.''.

(d) Additional Funding for Contract With the National Center for
Benefits and Outreach Enrollment.--Subsection (d)(2) of such section 119
is amended by striking ``(42 U.S.C. 1395w-23(f))'' and all that follows
through the period at the end and inserting ``(42 U.S.C. 1395w-23(f)),
to the Administration on Aging--
``(i) for fiscal year 2009, of $5,000,000; and
``(ii) for the period of fiscal years 2010
through 2012, of $5,000,000.
Amounts appropriated under this subparagraph shall
remain available until expended.''.

(e) Secretarial Authority To Enlist Support in Conducting Certain
Outreach Activities.--Such section 119 is amended by adding at the end
the following new subsection:
``(g) Secretarial Authority To Enlist Support in Conducting Certain
Outreach Activities.--The Secretary may request that an entity awarded a
grant under this section support the conduct of outreach activities
aimed at preventing disease and promoting wellness. Notwithstanding any
other provision of this section, an entity may use a grant awarded under
this subsection to support the conduct of activities described in the
preceding sentence.''.

SEC. 3307. IMPROVING FORMULARY REQUIREMENTS FOR PRESCRIPTION DRUG PLANS
AND MA-PD PLANS WITH RESPECT TO CERTAIN CATEGORIES OR
CLASSES OF DRUGS.

(a) Improving Formulary Requirements.--Section 1860D-
4(b)(3)(G) <> of the Social Security Act is
amended to read as follows:
``(G) Required inclusion of drugs in certain
categories and classes.--
``(i) Formulary requirements.--
``(I) In general.--Subject to
subclause (II), a PDP sponsor offering a
prescription drug plan shall be required
to include all covered part D drugs in
the categories and classes identified by
the Secretary under clause (ii)(I).
``(II) Exceptions.--The Secretary
may establish exceptions that permit a
PDP sponsor offering a prescription drug
plan to exclude from its formulary a
particular covered part D drug in a
category or class that is otherwise
required to be included in the formulary
under subclause (I) (or to otherwise
limit access to such a drug, including
through prior authorization or
utilization management).
``(ii) Identification of drugs in certain
categories and classes.--
``(I) In general.--Subject to clause
(iv), the Secretary shall identify, as
appropriate, categories and classes of
drugs for which the Secretary determines
are of clinical concern.
``(II) Criteria.--The Secretary
shall use criteria established by the
Secretary in making any determination
under subclause (I).

[[Page 472]]

``(iii) <>  Implementation.--The Secretary
shall establish the criteria under clause (ii)(II)
and any exceptions under clause (i)(II) through
the promulgation of a regulation which includes a
public notice and comment period.
``(iv) Requirement for certain categories and
classes until criteria established.--Until such
time as the Secretary establishes the criteria
under clause (ii)(II) the following categories and
classes of drugs shall be identified under clause
(ii)(I):
``(I) Anticonvulsants.
``(II) Antidepressants.
``(III) Antineoplastics.
``(IV) Antipsychotics.
``(V) Antiretrovirals.
``(VI) Immunosuppressants for the
treatment of transplant rejection.''.

(b) <> Effective Date.--The amendments
made by this section shall apply to plan year 2011 and subsequent plan
years.

SEC. 3308. REDUCING PART D PREMIUM SUBSIDY FOR HIGH-INCOME
BENEFICIARIES.

(a) Income-Related Increase in Part D Premium.--
(1) In general.--Section 1860D-13(a) of the Social Security
Act (42 U.S.C. 1395w-113(a)) is amended by adding at the end the
following new paragraph:
``(7) Increase in base beneficiary premium based on
income.--
``(A) In general.--In the case of an individual
whose modified adjusted gross income exceeds the
threshold amount applicable under paragraph (2) of
section 1839(i) (including application of paragraph (5)
of such section) for the calendar year, the monthly
amount of the beneficiary premium applicable under this
section for a month after December 2010 shall be
increased by the monthly adjustment amount specified in
subparagraph (B).
``(B) Monthly adjustment amount.--The monthly
adjustment amount specified in this subparagraph for an
individual for a month in a year is equal to the product
of--
``(i) the quotient obtained by dividing--
``(I) the applicable percentage
determined under paragraph (3)(C) of
section 1839(i) (including application
of paragraph (5) of such section) for
the individual for the calendar year
reduced by 25.5 percent; by
``(II) 25.5 percent; and
``(ii) the base beneficiary premium (as
computed under paragraph (2)).
``(C) Modified adjusted gross income.--For purposes
of this paragraph, the term `modified adjusted gross
income' has the meaning given such term in subparagraph
(A) of section 1839(i)(4), determined for the taxable
year applicable under subparagraphs (B) and (C) of such
section.
``(D) Determination by commissioner of social
security.--The Commissioner of Social Security shall
make any determination necessary to carry out the
income-

[[Page 473]]

related increase in the base beneficiary premium under
this paragraph.
``(E) <> Procedures to assure
correct income-related increase in base beneficiary
premium.--
``(i) Disclosure of base beneficiary
premium.--Not later than September 15 of each year
beginning with 2010, the Secretary shall disclose
to the Commissioner of Social Security the amount
of the base beneficiary premium (as computed under
paragraph (2)) for the purpose of carrying out the
income-related increase in the base beneficiary
premium under this paragraph with respect to the
following year.
``(ii) Additional disclosure.--Not later than
October 15 of each year beginning with 2010, the
Secretary shall disclose to the Commissioner of
Social Security the following information for the
purpose of carrying out the income-related
increase in the base beneficiary premium under
this paragraph with respect to the following year:
``(I) The modified adjusted gross
income threshold applicable under
paragraph (2) of section 1839(i)
(including application of paragraph (5)
of such section).
``(II) The applicable percentage
determined under paragraph (3)(C) of
section 1839(i) (including application
of paragraph (5) of such section).
``(III) The monthly adjustment
amount specified in subparagraph (B).
``(IV) Any other information the
Commissioner of Social Security
determines necessary to carry out the
income-related increase in the base
beneficiary premium under this
paragraph.
``(F) Rule of construction.--The formula used to
determine the monthly adjustment amount specified under
subparagraph (B) shall only be used for the purpose of
determining such monthly adjustment amount under such
subparagraph.''.
(2) Collection of monthly adjustment amount.--Section 1860D-
13(c) of the Social Security Act (42 U.S.C. 1395w-113(c)) is
amended--
(A) in paragraph (1), by striking ``(2) and (3)''
and inserting ``(2), (3), and (4)''; and
(B) by adding at the end the following new
paragraph:
``(4) Collection of monthly adjustment amount.--
``(A) In general.--Notwithstanding any provision of
this subsection or section 1854(d)(2), subject to
subparagraph (B), the amount of the income-related
increase in the base beneficiary premium for an
individual for a month (as determined under subsection
(a)(7)) shall be paid through withholding from benefit
payments in the manner provided under section 1840.
``(B) Agreements.--In the case where the monthly
benefit payments of an individual that are withheld
under subparagraph (A) are insufficient to pay the
amount described in such subparagraph, the Commissioner
of Social Security shall enter into agreements with the
Secretary, the Director of the Office of Personnel
Management,

[[Page 474]]

and the Railroad Retirement Board as necessary in order
to allow other agencies to collect the amount described
in subparagraph (A) that was not withheld under such
subparagraph.''.

(b) Conforming Amendments.--
(1) Medicare.--Section 1860D-13(a)(1) of the Social Security
Act (42 U.S.C. 1395w-113(a)(1)) is amended--
(A) by redesignating subparagraph (F) as
subparagraph (G);
(B) in subparagraph (G), as redesignated by
subparagraph (A), by striking ``(D) and (E)'' and
inserting ``(D), (E), and (F)''; and
(C) by inserting after subparagraph (E) the
following new subparagraph:
``(F) Increase based on income.--The monthly
beneficiary premium shall be increased pursuant to
paragraph (7).''.
(2) <> Internal revenue code.--Section
6103(l)(20) of the Internal Revenue Code of 1986 (relating to
disclosure of return information to carry out Medicare part B
premium subsidy adjustment) is amended--
(A) in the heading, by inserting ``and part d base
beneficiary premium increase'' after ``part b premium
subsidy adjustment'';
(B) in subparagraph (A)--
(i) in the matter preceding clause (i), by
inserting ``or increase under section 1860D-
13(a)(7)'' after ``1839(i)''; and
(ii) in clause (vii), by inserting after
``subsection (i) of such section'' the following:
``or increase under section 1860D-13(a)(7) of such
Act''; and
(C) in subparagraph (B)--
(i) by striking ``Return information'' and
inserting the following:
``(i) In general.--Return information'';
(ii) by inserting ``or increase under such
section 1860D-13(a)(7)'' before the period at the
end;
(iii) as amended by clause (i), by inserting
``or for the purpose of resolving taxpayer appeals
with respect to any such premium adjustment or
increase'' before the period at the end; and
(iv) by adding at the end the following new
clause:
``(ii) Disclosure to other agencies.--
Officers, employees, and contractors of the Social
Security Administration may disclose--
``(I) the taxpayer identity
information and the amount of the
premium subsidy adjustment or premium
increase with respect to a taxpayer
described in subparagraph (A) to
officers, employees, and contractors of
the Centers for Medicare and Medicaid
Services, to the extent that such
disclosure is necessary for the
collection of the premium subsidy amount
or the increased premium amount,
``(II) the taxpayer identity
information and the amount of the
premium subsidy adjustment or the
increased premium amount with respect to

[[Page 475]]

a taxpayer described in subparagraph (A)
to officers and employees of the Office
of Personnel Management and the Railroad
Retirement Board, to the extent that
such disclosure is necessary for the
collection of the premium subsidy amount
or the increased premium amount,
``(III) return information with
respect to a taxpayer described in
subparagraph (A) to officers and
employees of the Department of Health
and Human Services to the extent
necessary to resolve administrative
appeals of such premium subsidy
adjustment or increased premium, and
``(IV) return information with
respect to a taxpayer described in
subparagraph (A) to officers and
employees of the Department of Justice
for use in judicial proceedings to the
extent necessary to carry out the
purposes described in clause (i).''.

SEC. 3309. ELIMINATION OF COST SHARING FOR CERTAIN DUAL ELIGIBLE
INDIVIDUALS.

Section 1860D-14(a)(1)(D)(i) of the Social Security Act (42 U.S.C.
1395w-114(a)(1)(D)(i)) is amended by inserting ``or, effective on a date
specified by the Secretary (but in no case earlier than January 1,
2012), who would be such an institutionalized individual or couple, if
the full-benefit dual eligible individual were not receiving services
under a home and community-based waiver authorized for a State under
section 1115 or subsection (c) or (d) of section 1915 or under a State
plan amendment under subsection (i) of such section or services provided
through enrollment in a medicaid managed care organization with a
contract under section 1903(m) or under section 1932'' after
``1902(q)(1)(B))''.

SEC. 3310. REDUCING WASTEFUL DISPENSING OF OUTPATIENT PRESCRIPTION DRUGS
IN LONG-TERM CARE FACILITIES UNDER PRESCRIPTION DRUG PLANS
AND MA-PD PLANS.

(a) In General.--Section 1860D-4(c) of the Social Security Act (42
U.S.C. 1395w-104(c)) is amended by adding at the end the following new
paragraph:
``(3) Reducing wasteful dispensing of outpatient
prescription drugs in long-term care facilities.--The Secretary
shall require PDP sponsors of prescription drug plans to utilize
specific, uniform dispensing techniques, as determined by the
Secretary, in consultation with relevant stakeholders (including
representatives of nursing facilities, residents of nursing
facilities, pharmacists, the pharmacy industry (including retail
and long-term care pharmacy), prescription drug plans, MA-PD
plans, and any other stakeholders the Secretary determines
appropriate), such as weekly, daily, or automated dose
dispensing, when dispensing covered part D drugs to enrollees
who reside in a long-term care facility in order to reduce waste
associated with 30-day fills.''.

(b) <>  Effective Date.--The amendment
made by subsection (a) shall apply to plan years beginning on or after
January 1, 2012.

SEC. 3311. <> IMPROVED MEDICARE PRESCRIPTION
DRUG PLAN AND MA-PD PLAN COMPLAINT SYSTEM.

(a) In General.--The Secretary shall develop and maintain a
complaint system, that is widely known and easy to use, to

[[Page 476]]

collect and maintain information on MA-PD plan and prescription drug
plan complaints that are received (including by telephone, letter, e-
mail, or any other means) by the Secretary (including by a regional
office of the Department of Health and Human Services, the Medicare
Beneficiary Ombudsman, a subcontractor, a carrier, a fiscal
intermediary, and a Medicare administrative contractor under section
1874A of the Social Security Act (42 U.S.C. 1395kk)) through the date on
which the complaint is resolved. The system shall be able to report and
initiate appropriate interventions and monitoring based on substantial
complaints and to guide quality improvement.
(b) Model Electronic Complaint Form.--The Secretary shall develop a
model electronic complaint form to be used for reporting plan complaints
under the system. Such form shall be prominently displayed on the front
page of the Medicare.gov Internet website and on the Internet website of
the Medicare Beneficiary Ombudsman.
(c) Annual Reports by the Secretary.--The Secretary shall submit to
Congress annual reports on the system. Such reports shall include an
analysis of the number and types of complaints reported in the system,
geographic variations in such complaints, the timeliness of agency or
plan responses to such complaints, and the resolution of such
complaints.
(d) Definitions.--In this section:
(1) MA-PD plan.--The term ``MA-PD plan'' has the meaning
given such term in section 1860D-41(a)(9) of such Act (42 U.S.C.
1395w-151(a)(9)).
(2) Prescription drug plan.--The term ``prescription drug
plan'' has the meaning given such term in section 1860D-
41(a)(14) of such Act (42 U.S.C. 1395w-151(a)(14)).
(3) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(4) System.--The term ``system'' means the plan complaint
system developed and maintained under subsection (a).

SEC. 3312. UNIFORM EXCEPTIONS AND APPEALS PROCESS FOR PRESCRIPTION DRUG
PLANS AND MA-PD PLANS.

(a) In General.--Section 1860D-4(b)(3) of the Social Security Act
(42 U.S.C. 1395w-104(b)(3)) is amended by adding at the end the
following new subparagraph:
``(H) Use of single, uniform exceptions and appeals
process.--Notwithstanding any other provision of this
part, each PDP sponsor of a prescription drug plan
shall--
``(i) use a single, uniform exceptions and
appeals process (including, to the extent the
Secretary determines feasible, a single, uniform
model form for use under such process) with
respect to the determination of prescription drug
coverage for an enrollee under the plan; and
``(ii) provide instant access to such process
by enrollees through a toll-free telephone number
and an Internet website.''.

(b) <> Effective Date.--The amendment
made by subsection (a) shall apply to exceptions and appeals on or after
January 1, 2012.

[[Page 477]]

SEC. 3313. <> OFFICE OF THE INSPECTOR
GENERAL STUDIES AND REPORTS.

(a) Study and Annual Report on Part D Formularies' Inclusion of
Drugs Commonly Used by Dual Eligibles.--
(1) Study.--The Inspector General of the Department of
Health and Human Services shall conduct a study of the extent to
which formularies used by prescription drug plans and MA-PD
plans under part D include drugs commonly used by full-benefit
dual eligible individuals (as defined in section 1935(c)(6) of
the Social Security Act (42 U.S.C. 1396u-5(c)(6))).
(2) Annual reports.--Not later than July 1 of each year
(beginning with 2011), the Inspector General shall submit to
Congress a report on the study conducted under paragraph (1),
together with such recommendations as the Inspector General
determines appropriate.

(b) Study and Report on Prescription Drug Prices Under Medicare Part
D and Medicaid.--
(1) Study.--
(A) In general.--The Inspector General of the
Department of Health and Human Services shall conduct a
study on prices for covered part D drugs under the
Medicare prescription drug program under part D of title
XVIII of the Social Security Act and for covered
outpatient drugs under title XIX. Such study shall
include the following:
(i) A comparison, with respect to the 200 most
frequently dispensed covered part D drugs under
such program and covered outpatient drugs under
such title (as determined by the Inspector General
based on volume and expenditures), of--
(I) the prices paid for covered part
D drugs by PDP sponsors of prescription
drug plans and Medicare Advantage
organizations offering MA-PD plans; and
(II) the prices paid for covered
outpatient drugs by a State plan under
title XIX.
(ii) An assessment of--
(I) the financial impact of any
discrepancies in such prices on the
Federal Government; and
(II) the financial impact of any
such discrepancies on enrollees under
part D or individuals eligible for
medical assistance under a State plan
under title XIX.
(B) Price.--For purposes of subparagraph (A), the
price of a covered part D drug or a covered outpatient
drug shall include any rebate or discount under such
program or such title, respectively, including any
negotiated price concession described in section 1860D-
2(d)(1)(B) of the Social Security Act (42 U.S.C. 1395w-
102(d)(1)(B)) or rebate under an agreement under section
1927 of the Social Security Act (42 U.S.C. 1396r-8).
(C) Authority to collect any necessary
information.--Notwithstanding any other provision of
law, the Inspector General of the Department of Health
and Human Services shall be able to collect any
information related to the prices of covered part D
drugs under such program

[[Page 478]]

and covered outpatient drugs under such title XIX
necessary to carry out the comparison under subparagraph
(A).
(2) Report.--
(A) In general.--Not later than October 1, 2011,
subject to subparagraph (B), the Inspector General shall
submit to Congress a report containing the results of
the study conducted under paragraph (1), together with
recommendations for such legislation and administrative
action as the Inspector General determines appropriate.
(B) Limitation on information contained in report.--
The report submitted under subparagraph (A) shall not
include any information that the Inspector General
determines is proprietary or is likely to negatively
impact the ability of a PDP sponsor or a State plan
under title XIX to negotiate prices for covered part D
drugs or covered outpatient drugs, respectively.
(3) Definitions.--In this section:
(A) Covered part d drug.--The term ``covered part D
drug'' has the meaning given such term in section 1860D-
2(e) of the Social Security Act (42 U.S.C. 1395w-
102(e)).
(B) Covered outpatient drug.--The term ``covered
outpatient drug'' has the meaning given such term in
section 1927(k) of such Act (42 U.S.C. 1396r(k)).
(C) MA-PD plan.--The term ``MA-PD plan'' has the
meaning given such term in section 1860D-41(a)(9) of
such Act (42 U.S.C. 1395w-151(a)(9)).
(D) Medicare advantage organization.--The term
``Medicare Advantage organization'' has the meaning
given such term in section 1859(a)(1) of such Act (42
U.S.C. 1395w-28)(a)(1)).
(E) PDP sponsor.--The term ``PDP sponsor'' has the
meaning given such term in section 1860D-41(a)(13) of
such Act (42 U.S.C. 1395w-151(a)(13)).
(F) Prescription drug plan.--The term ``prescription
drug plan'' has the meaning given such term in section
1860D-41(a)(14) of such Act (42 U.S.C. 1395w-
151(a)(14)).

SEC. 3314. INCLUDING COSTS INCURRED BY AIDS DRUG ASSISTANCE PROGRAMS AND
INDIAN HEALTH SERVICE IN PROVIDING PRESCRIPTION DRUGS TOWARD
THE ANNUAL OUT-OF-POCKET THRESHOLD UNDER PART D.

(a) In General.--Section 1860D-2(b)(4)(C) of the Social Security Act
(42 U.S.C. 1395w-102(b)(4)(C)) is amended--
(1) in clause (i), by striking ``and'' at the end;
(2) in clause (ii)--
(A) by striking ``such costs shall be treated as
incurred only if'' and inserting ``subject to clause
(iii), such costs shall be treated as incurred only
if'';
(B) by striking ``, under section 1860D-14, or under
a State Pharmaceutical Assistance Program''; and
(C) by striking the period at the end and inserting
``; and''; and
(3) by inserting after clause (ii) the following new clause:
``(iii) such costs shall be treated as
incurred and shall not be considered to be
reimbursed under clause (ii) if such costs are
borne or paid--

[[Page 479]]

``(I) under section 1860D-14;
``(II) under a State Pharmaceutical
Assistance Program;
``(III) by the Indian Health
Service, an Indian tribe or tribal
organization, or an urban Indian
organization (as defined in section 4 of
the Indian Health Care Improvement Act);
or
``(IV) under an AIDS Drug Assistance
Program under part B of title XXVI of
the Public Health Service Act.''.

(b) <> Effective Date.--The amendments
made by subsection (a) shall apply to costs incurred on or after January
1, 2011.

SEC. 3315. IMMEDIATE REDUCTION IN COVERAGE GAP IN 2010.

Section 1860D-2(b) of the Social Security Act (42 U.S.C. 1395w-
102(b)) is amended--
(1) in paragraph (3)(A), by striking ``paragraph (4)'' and
inserting ``paragraphs (4) and (7)''; and
(2) by adding at the end the following new paragraph:
``(7) Increase in initial coverage limit in 2010.--
``(A) <>  In general.--For
the plan year beginning on January 1, 2010, the initial
coverage limit described in paragraph (3)(B) otherwise
applicable shall be increased by $500.
``(B) Application.--In applying subparagraph (A)--
``(i) except as otherwise provided in this
subparagraph, there shall be no change in the
premiums, bids, or any other parameters under this
part or part C;
``(ii) costs that would be treated as incurred
costs for purposes of applying paragraph (4) but
for the application of subparagraph (A) shall
continue to be treated as incurred costs;
``(iii) <> the Secretary
shall establish procedures, which may include a
reconciliation process, to fully reimburse PDP
sponsors with respect to prescription drug plans
and MA organizations with respect to MA-PD plans
for the reduction in beneficiary cost sharing
associated with the application of subparagraph
(A);
``(iv) the Secretary shall develop an estimate
of the additional increased costs attributable to
the application of this paragraph for increased
drug utilization and financing and administrative
costs and shall use such estimate to adjust
payments to PDP sponsors with respect to
prescription drug plans under this part and MA
organizations with respect to MA-PD plans under
part C; and
``(v) <>  the Secretary
shall establish procedures for retroactive
reimbursement of part D eligible individuals who
are covered under such a plan for costs which are
incurred before the date of initial implementation
of subparagraph (A) and which would be reimbursed
under such a plan if such implementation occurred
as of January 1, 2010.
``(C) <> No
effect on subsequent years.--The increase under
subparagraph (A) shall only apply with respect to the
plan year beginning on January 1, 2010, and the initial
coverage limit for plan years beginning on or after
January

[[Page 480]]

1, 2011, shall be determined as if subparagraph (A) had
never applied.''.

Subtitle E--Ensuring Medicare Sustainability

SEC. 3401. REVISION OF CERTAIN MARKET BASKET UPDATES AND INCORPORATION
OF PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATES THAT
DO NOT ALREADY INCORPORATE SUCH IMPROVEMENTS.

(a) Inpatient Acute Hospitals.--Section 1886(b)(3)(B) of the Social
Security Act (42 U.S.C. 1395ww(b)(3)(B)), as amended by section
3001(a)(3), is further amended--
(1) in clause (i)(XX), by striking ``clause (viii)'' and
inserting ``clauses (viii), (ix), (xi), and (xii)'';
(2) in the first sentence of clause (viii), by inserting
``of such applicable percentage increase (determined without
regard to clause (ix), (xi), or (xii))'' after ``one-quarter'';
(3) in the first sentence of clause (ix)(I), by inserting
``(determined without regard to clause (viii), (xi), or (xii))''
after ``clause (i)'' the second time it appears; and
(4) by adding at the end the following new clauses:

``(xi)(I) For 2012 and each subsequent fiscal year, after
determining the applicable percentage increase described in clause (i)
and after application of clauses (viii) and (ix), such percentage
increase shall be reduced by the productivity adjustment described in
subclause (II).
``(II) The productivity adjustment described in this subclause, with
respect to a percentage, factor, or update for a fiscal year, year, cost
reporting period, or other annual period, is a productivity adjustment
equal to the 10-year moving average of changes in annual economy-wide
private nonfarm business multi-factor productivity (as projected by the
Secretary for the 10-year period ending with the applicable fiscal year,
year, cost reporting period, or other annual period).
``(III) The application of subclause (I) may result in the
applicable percentage increase described in clause (i) being less than
0.0 for a fiscal year, and may result in payment rates under this
section for a fiscal year being less than such payment rates for the
preceding fiscal year.
``(xii) After determining the applicable percentage increase
described in clause (i), and after application of clauses (viii), (ix),
and (xi), the Secretary shall reduce such applicable percentage
increase--
``(I) for each of fiscal years 2010 and 2011, by 0.25
percentage point; and
``(II) subject to clause (xiii), for each of fiscal years
2012 through 2019, by 0.2 percentage point.

The application of this clause may result in the applicable percentage
increase described in clause (i) being less than 0.0 for a fiscal year,
and may result in payment rates under this section for a fiscal year
being less than such payment rates for the preceding fiscal year.
``(xiii) <> Clause (xii) shall be applied with
respect to any of fiscal years 2014 through 2019 by substituting `0.0
percentage points' for `0.2 percentage point', if for such fiscal year--

[[Page 481]]

``(I) the excess (if any) of--
``(aa) the total percentage of the non-elderly
insured population for the preceding fiscal year (based
on the most recent estimates available from the Director
of the Congressional Budget Office before a vote in
either House on the Patient Protection and Affordable
Care Act that, if determined in the affirmative, would
clear such Act for enrollment); over
``(bb) the total percentage of the non-elderly
insured population for such preceding fiscal year (as
estimated by the Secretary); exceeds
``(II) 5 percentage points.''.

(b) Skilled Nursing Facilities.--Section 1888(e)(5)(B) of the Social
Security Act (42 U.S.C. 1395yy(e)(5)(B)) is amended--
(1) by striking ``percentage.--The term'' and inserting
``percentage.--
``(i) In general.--Subject to clause (ii), the
term''; and
(2) by adding at the end the following new clause:
``(ii) Adjustment.--For fiscal year 2012 and
each subsequent fiscal year, after determining the
percentage described in clause (i), the Secretary
shall reduce such percentage by the productivity
adjustment described in section
1886(b)(3)(B)(xi)(II). The application of the
preceding sentence may result in such percentage
being less than 0.0 for a fiscal year, and may
result in payment rates under this subsection for
a fiscal year being less than such payment rates
for the preceding fiscal year.''.

(c) Long-term Care Hospitals.--Section 1886(m) of the Social
Security Act (42 U.S.C. 1395ww(m)) is amended by adding at the end the
following new paragraphs:
``(3) Implementation for rate year 2010 and subsequent
years.--
``(A) In general.--In implementing the system
described in paragraph (1) for rate year 2010 and each
subsequent rate year, any annual update to a standard
Federal rate for discharges for the hospital during the
rate year, shall be reduced--
``(i) for rate year 2012 and each subsequent
rate year, by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II); and
``(ii) for each of rate years 2010 through
2019, by the other adjustment described in
paragraph (4).
``(B) Special rule.--The application of this
paragraph may result in such annual update being less
than 0.0 for a rate year, and may result in payment
rates under the system described in paragraph (1) for a
rate year being less than such payment rates for the
preceding rate year.
``(4) Other adjustment.--
``(A) In general.--For purposes of paragraph
(3)(A)(ii), the other adjustment described in this
paragraph is--
``(i) for each of rate years 2010 and 2011,
0.25 percentage point; and
``(ii) subject to subparagraph (B), for each
of rate years 2012 through 2019, 0.2 percentage
point.

[[Page 482]]

``(B) Reduction of other adjustment.--Subparagraph
(A)(ii) shall be applied with respect to any of rate
years 2014 through 2019 by substituting `0.0 percentage
points' for `0.2 percentage point', if for such rate
year--
``(i) the excess (if any) of--
``(I) the total percentage of the
non-elderly insured population for the
preceding rate year (based on the most
recent estimates available from the
Director of the Congressional Budget
Office before a vote in either House on
the Patient Protection and Affordable
Care Act that, if determined in the
affirmative, would clear such Act for
enrollment); over
``(II) the total percentage of the
non-elderly insured population for such
preceding rate year (as estimated by the
Secretary); exceeds
``(ii) 5 percentage points.''.

(d) Inpatient Rehabilitation Facilities.--Section 1886(j)(3) of the
Social Security Act (42 U.S.C. 1395ww(j)(3)) is amended--
(1) in subparagraph (C)--
(A) by striking ``factor.--For purposes'' and
inserting ``factor.--
``(i) In general.--For purposes'';
(B) by inserting ``subject to clause (ii)'' before
the period at the end of the first sentence of clause
(i), as added by paragraph (1); and
(C) by adding at the end the following new clause:
``(ii) Productivity and other adjustment.--
After establishing the increase factor described
in clause (i) for a fiscal year, the Secretary
shall reduce such increase factor--
``(I) for fiscal year 2012 and each
subsequent fiscal year, by the
productivity adjustment described in
section 1886(b)(3)(B)(xi)(II); and
``(II) for each of fiscal years 2010
through 2019, by the other adjustment
described in subparagraph (D).
The application of this clause may result in the
increase factor under this subparagraph being less
than 0.0 for a fiscal year, and may result in
payment rates under this subsection for a fiscal
year being less than such payment rates for the
preceding fiscal year.''; and
(2) by adding at the end the following new subparagraph:
``(D) Other adjustment.--
``(i) In general.--For purposes of
subparagraph (C)(ii)(II), the other adjustment
described in this subparagraph is--
``(I) for each of fiscal years 2010
and 2011, 0.25 percentage point; and
``(II) subject to clause (ii), for
each of fiscal years 2012 through 2019,
0.2 percentage point.
``(ii) <>  Reduction of
other adjustment.--Clause (i)(II) shall be applied
with respect to any of fiscal years 2014 through
2019 by substituting `0.0 percentage points' for
`0.2 percentage point', if for such fiscal year--

[[Page 483]]

``(I) the excess (if any) of--
``(aa) the total percentage
of the non-elderly insured
population for the preceding
fiscal year (based on the most
recent estimates available from
the Director of the
Congressional Budget Office
before a vote in either House on
the Patient Protection and
Affordable Care Act that, if
determined in the affirmative,
would clear such Act for
enrollment); over
``(bb) the total percentage
of the non-elderly insured
population for such preceding
fiscal year (as estimated by the
Secretary); exceeds
``(II) 5 percentage points.''.

(e) Home Health Agencies.--Section 1895(b)(3)(B) of the Social
Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended--
(1) in clause (ii)(V), by striking ``clause (v)'' and
inserting ``clauses (v) and (vi)''; and
(2) by adding at the end the following new clause:
``(vi) Adjustments.--After determining the
home health market basket percentage increase
under clause (iii), and after application of
clause (v), the Secretary shall reduce such
percentage--
``(I) for 2015 and each subsequent
year, by the productivity adjustment
described in section
1886(b)(3)(B)(xi)(II); and
``(II) for each of 2011 and 2012, by
1 percentage point.
The application of this clause may result in the
home health market basket percentage increase
under clause (iii) being less than 0.0 for a year,
and may result in payment rates under the system
under this subsection for a year being less than
such payment rates for the preceding year.''.

(f) Psychiatric Hospitals.--Section 1886 of the Social Security
Act, <>  as amended by sections 3001, 3008, 3025,
and 3133, is amended by adding at the end the following new subsection:

``(s) Prospective Payment for Psychiatric Hospitals.--
``(1) Reference to establishment and implementation of
system.--For provisions related to the establishment and
implementation of a prospective payment system for payments
under this title for inpatient hospital services furnished by
psychiatric hospitals (as described in clause (i) of subsection
(d)(1)(B)) and psychiatric units (as described in the matter
following clause (v) of such subsection), see section 124 of the
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999.
``(2) Implementation for rate year beginning in 2010 and
subsequent rate years.--
``(A) In general.--In implementing the system
described in paragraph (1) for the rate year beginning
in 2010 and any subsequent rate year, any update to a
base rate for days during the rate year for a
psychiatric hospital or unit, respectively, shall be
reduced--

[[Page 484]]

``(i) for the rate year beginning in 2012 and
each subsequent rate year, by the productivity
adjustment described in section
1886(b)(3)(B)(xi)(II); and
``(ii) for each of the rate years beginning in
2010 through 2019, by the other adjustment
described in paragraph (3).
``(B) Special rule.--The application of this
paragraph may result in such update being less than 0.0
for a rate year, and may result in payment rates under
the system described in paragraph (1) for a rate year
being less than such payment rates for the preceding
rate year.
``(3) Other adjustment.--
``(A) In general.--For purposes of paragraph
(2)(A)(ii), the other adjustment described in this
paragraph is--
``(i) for each of the rate years beginning in
2010 and 2011, 0.25 percentage point; and
``(ii) subject to subparagraph (B), for each
of the rate years beginning in 2012 through 2019,
0.2 percentage point.
``(B) Reduction of other adjustment.--Subparagraph
(A)(ii) shall be applied with respect to any of rate
years 2014 through 2019 by substituting `0.0 percentage
points' for `0.2 percentage point', if for such rate
year--
``(i) the excess (if any) of--
``(I) the total percentage of the
non-elderly insured population for the
preceding rate year (based on the most
recent estimates available from the
Director of the Congressional Budget
Office before a vote in either House on
the Patient Protection and Affordable
Care Act that, if determined in the
affirmative, would clear such Act for
enrollment); over
``(II) the total percentage of the
non-elderly insured population for such
preceding rate year (as estimated by the
Secretary); exceeds
``(ii) 5 percentage points.''.

(g) Hospice Care.--Section 1814(i)(1)(C) of the Social Security Act
(42 U.S.C. 1395f(i)(1)(C)), as amended by section 3132, is amended by
adding at the end the following new clauses:
``(iv) After determining the market basket percentage increase under
clause (ii)(VII) or (iii), as applicable, with respect to fiscal year
2013 and each subsequent fiscal year, the Secretary shall reduce such
percentage--
``(I) for 2013 and each subsequent fiscal year, by the
productivity adjustment described in section
1886(b)(3)(B)(xi)(II); and
``(II) subject to clause (v), for each of fiscal years 2013
through 2019, by 0.5 percentage point.

The application of this clause may result in the market basket
percentage increase under clause (ii)(VII) or (iii), as applicable,
being less than 0.0 for a fiscal year, and may result in payment rates
under this subsection for a fiscal year being less than such payment
rates for the preceding fiscal year.
``(v) <> Clause (iv)(II) shall be applied with
respect to any of fiscal years 2014 through 2019 by substituting `0.0
percentage points' for `0.5 percentage point', if for such fiscal year--
``(I) the excess (if any) of--

[[Page 485]]

``(aa) the total percentage of the non-elderly
insured population for the preceding fiscal year (based
on the most recent estimates available from the Director
of the Congressional Budget Office before a vote in
either House on the Patient Protection and Affordable
Care Act that, if determined in the affirmative, would
clear such Act for enrollment); over
``(bb) the total percentage of the non-elderly
insured population for such preceding fiscal year (as
estimated by the Secretary); exceeds
``(II) 5 percentage points.''.

(h) Dialysis.--Section 1881(b)(14)(F) of the Social Security Act (42
U.S.C. 1395rr(b)(14)(F)) is amended--
(1) in clause (i)--
(A) by inserting ``(I)'' after ``(F)(i)''
(B) in subclause (I), as inserted by subparagraph
(A)--
(i) by striking ``clause (ii)'' and inserting
``subclause (II) and clause (ii)''; and
(ii) by striking ``minus 1.0 percentage
point''; and
(C) by adding at the end the following new
subclause:

``(II) For 2012 and each subsequent year, after determining the
increase factor described in subclause (I), the Secretary shall reduce
such increase factor by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II). The application of the preceding sentence may
result in such increase factor being less than 0.0 for a year, and may
result in payment rates under the payment system under this paragraph
for a year being less than such payment rates for the preceding year.'';
and
(2) in clause (ii)(II)--
(A) by striking ``The'' and inserting ``Subject to
clause (i)(II), the''; and
(B) by striking ``clause (i) minus 1.0 percentage
point'' and inserting ``clause (i)(I)''.

(i) Outpatient Hospitals.--Section 1833(t)(3) of the Social Security
Act (42 U.S.C. 1395l(t)(3)) is amended--
(1) in subparagraph (C)(iv), by inserting ``and subparagraph
(F) of this paragraph'' after ``(17)''; and
(2) by adding at the end the following new subparagraphs:
``(F) Productivity and other adjustment.--After
determining the OPD fee schedule increase factor under
subparagraph (C)(iv), the Secretary shall reduce such
increase factor--
``(i) for 2012 and subsequent years, by the
productivity adjustment described in section
1886(b)(3)(B)(xi)(II); and
``(ii) for each of 2010 through 2019, by the
adjustment described in subparagraph (G).
The application of this subparagraph may result in the
increase factor under subparagraph (C)(iv) being less
than 0.0 for a year, and may result in payment rates
under the payment system under this subsection for a
year being less than such payment rates for the
preceding year.
``(G) Other adjustment.--
``(i) Adjustment.--For purposes of
subparagraph (F)(ii), the adjustment described in
this subparagraph is--

[[Page 486]]

``(I) for each of 2010 and 2011,
0.25 percentage point; and
``(II) subject to clause (ii), for
each of 2012 through 2019, 0.2
percentage point.
``(ii) Reduction of other adjustment.--Clause
(i)(II) shall be applied with respect to any of
2014 through 2019 by substituting `0.0 percentage
points' for `0.2 percentage point', if for such
year--
``(I) the excess (if any) of--
``(aa) the total percentage
of the non-elderly insured
population for the preceding
year (based on the most recent
estimates available from the
Director of the Congressional
Budget Office before a vote in
either House on the Patient
Protection and Affordable Care
Act that, if determined in the
affirmative, would clear such
Act for enrollment); over
``(bb) the total percentage
of the non-elderly insured
population for such preceding
year (as estimated by the
Secretary); exceeds
``(II) 5 percentage points.''.

(j) Ambulance Services.--Section 1834(l)(3) of the Social Security
Act (42 U.S.C. 1395m(l)(3)) is amended--
(1) in subparagraph (A), by striking ``and'' at the end;
(2) in subparagraph (B)--
(A) by inserting ``, subject to subparagraph (C) and
the succeeding sentence of this paragraph,'' after
``increased''; and
(B) by striking the period at the end and inserting
``; and'';
(3) by adding at the end the following new subparagraph:
``(C) for 2011 and each subsequent year, after
determining the percentage increase under subparagraph
(B) for the year, reduce such percentage increase by the
productivity adjustment described in section
1886(b)(3)(B)(xi)(II).''; and
(4) by adding at the end the following flush sentence:
``The application of subparagraph (C) may result in the
percentage increase under subparagraph (B) being less than 0.0
for a year, and may result in payment rates under the fee
schedule under this subsection for a year being less than such
payment rates for the preceding year.''.

(k) Ambulatory Surgical Center Services.--Section 1833(i)(2)(D) of
the Social Security Act (42 U.S.C. 1395l(i)(2)(D)) is amended--
(1) by redesignating clause (v) as clause (vi); and
(2) by inserting after clause (iv) the following new clause:
``(v) In implementing the system described in
clause (i) for 2011 and each subsequent year, any
annual update under such system for the year,
after application of clause (iv), shall be reduced
by the productivity adjustment described in
section 1886(b)(3)(B)(xi)(II). The application of
the preceding sentence may result in such update
being less than 0.0 for a year, and may result in
payment rates under the system described in clause
(i) for a year being less than such payment rates
for the preceding year.''.

[[Page 487]]

(l) Laboratory Services.--Section 1833(h)(2)(A) of the Social
Security Act (42 U.S.C. 1395l(h)(2)(A)) is amended--
(1) in clause (i)--
(A) by inserting ``, subject to clause (iv),'' after
``year) by''; and
(B) by striking ``through 2013'' and inserting ``and
2010''; and
(2) by adding at the end the following new clause:
``(iv) After determining the adjustment to the
fee schedules under clause (i), the Secretary
shall reduce such adjustment--
``(I) for 2011 and each subsequent
year, by the productivity adjustment
described in section
1886(b)(3)(B)(xi)(II); and
``(II) for each of 2011 through
2015, by 1.75 percentage points.
Subclause (I) shall not apply in a year where the
adjustment to the fee schedules determined under
clause (i) is 0.0 or a percentage decrease for a
year. The application of the productivity
adjustment under subclause (I) shall not result in
an adjustment to the fee schedules under clause
(i) being less than 0.0 for a year. The
application of subclause (II) may result in an
adjustment to the fee schedules under clause (i)
being less than 0.0 for a year, and may result in
payment rates for a year being less than such
payment rates for the preceding year.''.

(m) Certain Durable Medical Equipment.--Section 1834(a)(14) of the
Social Security Act (42 U.S.C. 1395m(a)(14)) is amended--
(1) in subparagraph (K)--
(A) by striking ``2011, 2012, and 2013,''; and
(B) by inserting ``and'' after the semicolon at the
end;
(2) by striking subparagraphs (L) and (M) and inserting the
following new subparagraph:
``(L) for 2011 and each subsequent year--
``(i) the percentage increase in the consumer
price index for all urban consumers (United States
city average) for the 12-month period ending with
June of the previous year, reduced by--
``(ii) the productivity adjustment described
in section 1886(b)(3)(B)(xi)(II).''; and
(3) by adding at the end the following flush sentence:
``The application of subparagraph (L)(ii) may result in the
covered item update under this paragraph being less than 0.0 for
a year, and may result in payment rates under this subsection
for a year being less than such payment rates for the preceding
year.''.

(n) Prosthetic Devices, Orthotics, and Prosthetics.--Section
1834(h)(4) of the Social Security Act (42 U.S.C. 1395m(h)(4)) is
amended--
(1) in subparagraph (A)--
(A) in clause (ix), by striking ``and'' at the end;
(B) in clause (x)--
(i) by striking ``a subsequent year'' and
inserting ``for each of 2007 through 2010''; and

[[Page 488]]

(ii) by inserting ``and'' after the semicolon
at the end;
(C) by adding at the end the following new clause:
``(xi) for 2011 and each subsequent year--
``(I) the percentage increase in the
consumer price index for all urban
consumers (United States city average)
for the 12-month period ending with June
of the previous year, reduced by--
``(II) the productivity adjustment
described in section
1886(b)(3)(B)(xi)(II).''; and
(D) by adding at the end the following flush
sentence:
``The application of subparagraph (A)(xi)(II) may result in the
applicable percentage increase under subparagraph (A) being less
than 0.0 for a year, and may result in payment rates under this
subsection for a year being less than such payment rates for the
preceding year.''.

(o) Other Items.--Section 1842(s)(1) of the Social Security Act (42
U.S.C. 1395u(s)(1)) is amended--
(1) in the first sentence, by striking ``Subject to'' and
inserting ``(A) Subject to'';
(2) by striking the second sentence and inserting the
following new subparagraph:
``(B) Any fee schedule established under this
paragraph for such item or service shall be updated--
``(i) for years before 2011--
``(I) subject to subclause (II), by
the percentage increase in the consumer
price index for all urban consumers
(United States city average) for the 12-
month period ending with June of the
preceding year; and
``(II) for items and services
described in paragraph (2)(D) for 2009,
section 1834(a)(14)(J) shall apply under
this paragraph instead of the percentage
increase otherwise applicable; and
``(ii) for 2011 and subsequent years--
``(I) the percentage increase in the
consumer price index for all urban
consumers (United States city average)
for the 12-month period ending with June
of the previous year, reduced by--
``(II) the productivity adjustment
described in section
1886(b)(3)(B)(xi)(II).''; and
(3) by adding at the end the following flush sentence:
``The application of subparagraph (B)(ii)(II) may result in the
update under this paragraph being less than 0.0 for a year, and
may result in payment rates under any fee schedule established
under this paragraph for a year being less than such payment
rates for the preceding year.''.

(p) <> No Application Prior to April 1,
2010.--Notwithstanding the preceding provisions of this section, the
amendments made by subsections (a), (c), and (d) shall not apply to
discharges occurring before April 1, 2010.

SEC. 3402. TEMPORARY ADJUSTMENT TO THE CALCULATION OF PART B PREMIUMS.

Section 1839(i) of the Social Security Act (42 U.S.C. 1395r(i)) is
amended--

[[Page 489]]

(1) in paragraph (2), in the matter preceding subparagraph
(A), by inserting ``subject to paragraph (6),'' after
``subsection,'';
(2) in paragraph (3)(A)(i), by striking ``The applicable''
and inserting ``Subject to paragraph (6), the applicable'';
(3) by redesignating paragraph (6) as paragraph (7); and
(4) by inserting after paragraph (5) the following new
paragraph:
``(6) <> Temporary adjustment to income
thresholds.--Notwithstanding any other provision of this
subsection, during the period beginning on January 1, 2011, and
ending on December 31, 2019--
``(A) the threshold amount otherwise applicable
under paragraph (2) shall be equal to such amount for
2010; and
``(B) the dollar amounts otherwise applicable under
paragraph (3)(C)(i) shall be equal to such dollar
amounts for 2010.''.

SEC. 3403. INDEPENDENT MEDICARE ADVISORY BOARD.

(a) Board.--
(1) In general.--Title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.), as amended by section 3022, is amended by
adding at the end the following new section:


``independent medicare advisory board


``Sec. 1899A.  <> (a) Establishment.--There
is established an independent board to be known as the `Independent
Medicare Advisory Board'.

``(b) Purpose.--It is the purpose of this section to, in accordance
with the following provisions of this section, reduce the per capita
rate of growth in Medicare spending--
``(1) by requiring the Chief Actuary of the Centers for
Medicare & Medicaid Services to determine in each year to which
this section applies (in this section referred to as `a
determination year') the projected per capita growth rate under
Medicare for the second year following the determination year
(in this section referred to as `an implementation year');
``(2) if the projection for the implementation year exceeds
the target growth rate for that year, by requiring the Board to
develop and submit during the first year following the
determination year (in this section referred to as `a proposal
year') a proposal containing recommendations to reduce the
Medicare per capita growth rate to the extent required by this
section; and
``(3) by requiring the Secretary to implement such proposals
unless Congress enacts legislation pursuant to this section.

``(c) Board Proposals.--
``(1) Development.--
``(A) In general.--The Board shall develop detailed
and specific proposals related to the Medicare program
in accordance with the succeeding provisions of this
section.
``(B) Advisory reports.--Beginning January 15, 2014,
the Board may develop and submit to Congress advisory
reports on matters related to the Medicare program,
regardless of whether or not the Board submitted a
proposal for such year. Such a report may, for years
prior to 2020,

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include recommendations regarding improvements to
payment systems for providers of services and suppliers
who are not otherwise subject to the scope of the
Board's recommendations in a proposal under this
section. Any advisory report submitted under this
subparagraph shall not be subject to the rules for
congressional consideration under subsection (d).
``(2) Proposals.--
``(A) Requirements.--Each proposal submitted under
this section in a proposal year shall meet each of the
following requirements:
``(i) If the Chief Actuary of the Centers for
Medicare & Medicaid Services has made a
determination under paragraph (7)(A) in the
determination year, the proposal shall include
recommendations so that the proposal as a whole
(after taking into account recommendations under
clause (v)) will result in a net reduction in
total Medicare program spending in the
implementation year that is at least equal to the
applicable savings target established under
paragraph (7)(B) for such implementation year. In
determining whether a proposal meets the
requirement of the preceding sentence, reductions
in Medicare program spending during the 3-month
period immediately preceding the implementation