Health Care Bill - H.R. 4872 - Reconciliation Act of 2010



March 18, 2010

Health Care Bill Summary - by OpenCongress: this is the full text of H.R. 4872, the Reconciliation Act of 2010. This bill would amend the Senate version of the health care reform bill to bring its provisions more in line with the House version.


This is a budget reconciliation bill, resulting from instructions that were included in Congress' 2010 budget plan. Under the rules, debate of this bill would be limited to 20 hours in the Senate, meaning no filibuster, and amendments would be severely limited. The House is expected to vote on this bill on Sunday 3/21/10. The roll call is predicted to be very tight, likely coming down to a single vote.


Apologies that the formatting of the bill text on this page is a bit messy — because Congress does not publish official info in ways that are compliant with the Eight Principles of Open Government Data, the OpenCongress team was obligated to manually assemble the HTML web code from the original .pdf document. We're working now to make this bill text work like other bills on the site, so you'll be able to permalink and comment on individual sections of bill text. For a summary of the Reconciliation Bill and ongoing news and blog coverage, see our Blog, follow us on Twitter, and let us know what you think by writing us with your questions and comments :: .

AMENDMENT IN THE NATURE OF A SUBSTITUTE

TO

H.R. 4872, AS REPORTED

Strike all after the enacting clause and insert the

following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.--This Act may be cited as the

“Health Care and Education Affordability Reconciliation

Act of 2010”.

(b) TABLE OF CONTENTS.--The table of contents of

this Act is as follows:

Sec. 1. Short title; table of contents.

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

Subtitle A--Coverage

Sec. 1001. Affordability.

Sec. 1002. Individual responsibility.

Sec. 1003. Employer responsibility.

Sec. 1004. Income definitions.

Sec. 1005. Implementation funding.

Subtitle B--Medicare

Sec. 1101. Closing the medicare prescription drug “donut hole”.

Sec. 1102. Medicare Advantage payments.

Sec. 1103. Savings from limits on MA plan administrative costs.

Sec. 1104. Disproportionate share hospital (DSH) payments.

Sec. 1105. Market basket updates.

Sec. 1106. Physician ownership-referral.

Sec. 1107. Payment for imaging services.

Subtitle C--Medicaid

Sec. 1201. Federal funding for States.

Sec. 1202. Payments to primary care physicians.

Sec. 1203. Disproportionate share hospital payments.

Sec. 1204. Funding for the territories.

Sec. 1205. Delay in Community First Choice option.

Sec. 1206. Drug rebates for new formulations of existing drugs.

Subtitle D--Reducing Fraud, Waste, and Abuse

Sec. 1301. Community mental health centers.

Sec. 1302. Medicare prepayment medical review limitations .

Sec. 1303. CMS­IRS data match to identify fraudulent providers.

Sec. 1304. Funding to fight fraud, waste, and abuse.

Sec. 1305. 90-day period of enhanced oversight for initial claims of DME sup-

pliers.

Subtitle E--Provisions Relating to Revenue

Sec. 1401. High-cost plan excise tax.

Sec. 1402. Medicare tax.

Sec. 1403. Delay of limitation on health flexible spending arrangements under

cafeteria plans.

Sec. 1404. Brand name pharmaceuticals.

Sec. 1405. Excise tax on medical device manufacturers.

Sec. 1406. Health insurance providers.

Sec. 1407. Delay of elimination of deduction for expenses allocable to medicare

part D subsidy.

Sec. 1408. Elimination of unintended application of cellulosic biofuel producer

credit.

Sec. 1409. Codification of economic substance doctrine and penalties.

Sec. 1410. Time for payment of corporate estimated taxes.

Sec. 1411. No impact on Social Security trust funds.

Subtitle F--Other Provisions

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

TITLE II--EDUCATION AND HEALTH

Subtitle A--Education

Sec. 2001. Short title; references.

PART I--INVESTING IN STUDENTS AND FAMILIES

Sec. 2101. Federal Pell Grants.

Sec. 2102. Student financial assistance.

Sec. 2103. College access challenge grant program.

Sec. 2104. Investment in historically black colleges and universities and minor-

ity-serving institutions.

PART II--STUDENT LOAN REFORM

Sec. 2201. Termination of Federal Family Education Loan appropriations.

Sec. 2202. Termination of Federal loan insurance program.

Sec. 2203. Termination of applicable interest rates.

Sec. 2204. Termination of Federal payments to reduce student interest costs.

Sec. 2205. Termination of FFEL PLUS Loans.

Sec. 2206. Federal Consolidation Loans.

Sec. 2207. Termination of Unsubsidized Stafford Loans for middle-income bor-

rowers.

Sec. 2208. Termination of special allowances.

Sec. 2209. Origination of Direct Loans at institutions outside the United

States.

Sec. 2210. Conforming amendments.

Sec. 2211. Terms and conditions of loans.

Sec. 2212. Contracts; mandatory funds.

Sec. 2213. Agreements with State-owned banks.

Sec. 2214. Income-based repayment.

Subtitle B--Health

Sec. 2301. Insurance reforms.

Sec. 2302. Drugs purchased by covered entities.

Sec. 2303. Community health centers.

TITLE I--COVERAGE, MEDICARE,

MEDICAID, AND REVENUES

Subtitle A--Coverage

SEC. 1001. AFFORDABILITY.

(a) PREMIUM TAX CREDITS.--Section 36B of the In-

ternal Revenue Code of 1986, as added by section 1401

of the Patient Protection and Affordable Care Act and

amended by section 10105 of such Act, is amended--

(1) in subsection (b)(3)(A)--

(A) in clause (i), by striking “with respect

to any taxpayer” and all that follows up to the

end period and inserting “for any taxable year

shall be the percentage such that the applicable

percentage for any taxpayer whose household

income is within an income tier specified in the

following table shall increase, on a sliding scale

in a linear manner, from the initial premium

percentage to the final premium percentage

specified in such table for such income tier:

“In the case of household in-

come (expressed as a percent of

poverty line) within the fol-

lowing income tier:

The initial premium

percentage is--

The final premium

percentage is--

Up to 133%

2.0%

2.0%

133% up to 150%

3.0%

4.0%

150% up to 200%

4.0%

6.3%

200% up to 250%

6.3%

8.05%

250% up to 300%

8.05%

9.5%

300% up to 400%

9.5%

9.5%”; and

(B) by striking clauses (ii) and (iii), and

inserting the following:

“(ii) INDEXING.--

“(I) IN GENERAL.--Subject to

subclause (II), in the case of taxable

years beginning in any calendar year

after 2014, the initial and final appli-

cable percentages under clause (i) (as

in effect for the preceding calendar

year after application of this clause)

shall be adjusted to reflect the excess

of the rate of premium growth for the

preceding calendar year over the rate

of income growth for the preceding

calendar year.

“(II)

ADDITIONAL

ADJUST

-

MENT

.--Except as provided in sub-

clause (III), in the case of any cal-

endar year after 2018, the percent-

ages described in subclause (I) shall,

in addition to the adjustment under

subclause (I), be adjusted to reflect

the excess (if any) of the rate of pre-

mium growth estimated under sub-

clause (I) for the preceding calendar

year over the rate of growth in the

consumer price index for the pre-

ceding calendar year.

“(III) FAILSAFE.--Subclause (II)

shall apply for any calendar year only

if the aggregate amount of premium

tax credits under this section and

cost-sharing reductions under section

1402 of the Patient Protection and

Affordable Care Act for the preceding

calendar

year

exceeds

an

amount

equal to 0.504 percent of the gross

domestic product for the preceding

calendar year.”; and

(2) in subsection (c)(2)(C)--

(A) by striking “9.8 percent” in clauses

(i)(II) and (iv) and inserting “9.5 percent”, and

(B) by striking “(b)(3)(A)(iii)” in clause

(iv) and inserting “(b)(3)(A)(ii)”.

(b) COST SHARING.--Section 1402(c) of the Patient

Protection and Affordable Care Act is amended--

(1) in paragraph (1)(B)(i)--

(A) in subclause (I), by striking “90” and

inserting “94”;

(B) in subclause (II)--

(i) by striking “80” and inserting

“87”; and

(ii) by striking “and”; and

(C) by striking subclause (III) and insert-

ing the following:

“(III) 73 percent in the case of

an eligible insured whose household

income is more than 200 percent but

not more than 250 percent of the pov-

erty line for a family of the size in-

volved; and

“(IV) 70 percent in the case of

an eligible insured whose household

income is more than 250 percent but

not more than 400 percent of the pov-

erty line for a family of the size in-

volved.”; and

(2) in paragraph (2)--

(A) in subparagraph (A)--

(i) by striking “90” and inserting

“94”; and

(ii) by striking “and”;

(B) in subparagraph (B)--

(i) by striking “80” and inserting

“87”; and

(ii) by striking the period and insert-

ing “; and”; and

(C) by inserting after subparagraph (B)

the following new subparagraph:

“(C) in the case of an eligible insured

whose household income is more than 200 per-

cent but not more than 250 percent of the pov-

erty line for a family of the size involved, in-

crease the plan's share of the total allowed

costs of benefits provided under the plan to 73

percent of such costs.”.

SEC. 1002. INpIDUAL RESPONSIBILITY.

(a) AMOUNTS.--Section 5000A(c) of the Internal

Revenue Code of 1986, as added by section 1501(b) of

the Patient Protection and Affordable Care Act and

amended by section 10106 of such Act, is amended--

(1) in paragraph (2)(B)--

(A) in the matter preceding clause (i),

by--

(i) inserting “the excess of” before

“the taxpayer's household income”; and

(ii) inserting “for the taxable year

over the amount of gross income specified

in section 6012(a)(1) with respect to the

taxpayer” before “for the taxable year”;

(B) in clause (i), by striking “0.5” and in-

serting “1.0”;

(C) in clause (ii), by striking “1.0” and in-

serting “2.0”; and

(D) in clause (iii), by striking “2.0” and

inserting “2.5”; and

(2) in paragraph (3)--

(A)

in

subparagraph

(A),

by

striking

“$750” and inserting “$695”;

(B)

in

subparagraph

(B),

by

striking

“$495” and inserting “$325”; and

(C) in subparagraph (D)--

(i) in the matter preceding clause (i),

by striking “$750” and inserting “$695”;

and

(ii) in clause (i), by striking “$750”

and inserting “$695”.

(b) THRESHOLD.--Section 5000A of such Code, as

so added and amended, is amended--

(1) by striking subsection (c)(4)(D); and

(2) in subsection (e)(2)--

(A) by striking “UNDER 100 PERCENT OF

POVERTY LINE

” and inserting “BELOW FILING

THRESHOLD

”; and

(B) by striking all that follows &ldquopx;less than”

and inserting “the amount of gross income

specified in section 6012(a)(1) with respect to

the taxpayer.”.

SEC. 1003. EMPLOYER RESPONSIBILITY.

(a) PAYMENT CALCULATION.--Subparagraph (D) of

subsection (d)(2) of section 4980H of the Internal Rev-

enue Code of 1986, as added by section 1513 of the Pa-

tient Protection and Affordable Care Act and amended by

section 10106 of such Act, is amended to read as follows:

“(D) APPLICATION OF EMPLOYER SIZE TO

ASSESSABLE PENALTIES

.--

“(i) IN GENERAL.--The number of in-

dividuals employed by an applicable large

employer as full-time employees during any

month shall be reduced by 30 solely for

purposes of calculating--

“(I)

the

assessable

payment

under subsection (a), or

“(II) the overall limitation under

subsection (b)(2).

“(ii) AGGREGATION.--In the case of

persons treated as 1 employer under sub-

paragraph (C)(i), only 1 reduction under

subclause (I) or (II) shall be allowed with

respect to such persons and such reduction

shall be allocated among such persons rat-

ably on the basis of the number of full-

time employees employed by each such per-

son.”.

(b)

APPLICABLE

PAYMENT

AMOUNT.--Section

4980H of such Code, as so added and amended, is amend-

ed--

(1)

in

the

flush

text

following

subsection

(c)(1)(B), by striking “400 percent of the applicable

payment amount” and inserting “an amount equal

to 1/12 of $3,000”;

(2) in subsection (d)(1), by striking “$750”

and inserting “$2,000”; and

(3) in subsection (d)(5)(A), in the matter pre-

ceding clause (i), by striking “subsection (b)(2) and

(d)(1)” and inserting “subsection (b) and paragraph

(1)”.

(c) COUNTING PART-TIME WORKERS IN SETTING

THE

THRESHOLD FOR EMPLOYER RESPONSIBILITY.--

Section 4980H(d)(2) of such Code, as so added and

amended and as amended by subsection (a), is amended

by adding at the end the following new subparagraph:

“(E) FULL-TIME EQUIVALENTS TREATED

AS

FULL

-TIME EMPLOYEES.--Solely for pur-

poses of determining whether an employer is an

applicable large employer under this paragraph,

an employer shall, in addition to the number of

full-time employees for any month otherwise de-

termined, include for such month a number of

full-time employees determined by dividing the

aggregate number of hours of service of employ-

ees who are not full-time employees for the

month by 120.”.

(d) ELIMINATING WAITING PERIOD ASSESSMENT.--

Section 4980H of such Code, as so added and amended

and as amended by the preceding subsections, is amended

by striking subsection (b) and redesignating subsections

(c), (d), and (e) as subsections (b), (c), and (d), respec-

tively.

SEC. 1004. INCOME DEFINITIONS.

(a) MODIFIED ADJUSTED GROSS INCOME.--

(1) IN GENERAL.--The following provisions of

the Internal Revenue Code of 1986 are each amend-

ed by striking “modified gross” each place it ap-

pears and inserting “modified adjusted gross”:

(A)

Clauses

(i)

and

(ii)

of

section

36B(d)(2)(A), as added by section 1401 of the

Patient Protection and Affordable Care Act.

(B) Section 6103(l)(21)(A)(iv), as added

by section 1414 of such Act.

(C)

Clauses

(i)

and

(ii)

of

section

5000A(c)(4), as added by section 1501(b) of

such Act.

(2) DEFINITION.--

(A) Section 36B(d)(2)(B) of such Code, as

so added, is amended to read as follows:

“(B)

MODIFIED

ADJUSTED

GROSS

IN

-

COME

.--The term `modified adjusted gross in-

come' means adjusted gross income increased

by--

“(i) any amount excluded from gross

income under section 911, and

“(ii) any amount of interest received

or accrued by the taxpayer during the tax-

able year which is exempt from tax.”.

(B) Section 5000A(c)(4)(C) of such Code,

as so added, is amended to read as follows:

“(C)

MODIFIED

ADJUSTED

GROSS

IN

-

COME

.--The term `modified adjusted gross in-

come' means adjusted gross income increased

by--

“(i) any amount excluded from gross

income under section 911, and

“(ii) any amount of interest received

or accrued by the taxpayer during the tax-

able year which is exempt from tax.”.

(b) MODIFIED ADJUSTED GROSS INCOME DEFINI-

TION

.--

(1) MEDICAID.--Section 1902 of the Social Se-

curity Act (42 U.S.C. 1396a) is amended by striking

“modified gross income” each place it appears in the

text and headings of the following provisions and in-

serting “modified adjusted gross income”:

(A) Paragraph (14) of subsection (e), as

added by section 2002(a) of the Patient Protec-

tion and Affordable Care Act.

(B) Subsection (gg)(4)(A), as added by

section 2001(b) of such Act.

(2) CHIP.--

(A) STATE PLAN REQUIREMENTS.--Section

2102(b)(1)(B)(v) of the Social Security Act (42

U.S.C. 1397bb(b)(1)(B)(v)), as added by sec-

tion 2101(d)(1) of the Patient Protection and

Affordable Care Act, is amended by striking

“modified gross income” and inserting “modi-

fied adjusted gross income”.

(B)

PLAN

ADMINISTRATION

.--Section

2107(e)(1)(E) of the Social Security Act (42

U.S.C. 1397gg(e)(1)(E)), as added by section

2101(d)(2) of the Patient Protection and Af-

fordable Care Act, is amended by striking

“modified gross income” and inserting “modi-

fied adjusted gross income”.

(c) NO EXCESS PAYMENTS.--Section 36B(f) of the

Internal Revenue Code of 1986, as added by section

1401(a) of the Patient Protection and Affordable Care

Act, is amended by adding at the end the following new

paragraph:

“(3) INFORMATION REQUIREMENT.--Each Ex-

change (and any other person specified by the Sec-

retary) shall provide the following information to the

Secretary and to the taxpayer with respect to any

health plan provided through the Exchange:

“(A) The level of coverage described in sec-

tion 1302(d) of the Patient Protection and Af-

fordable Care Act and the period such coverage

was in effect.

“(B) The total premium for the coverage

without regard to the credit under this section

or cost-sharing reductions under section 1402

of such Act.

“(C) The aggregate amount of any ad-

vance payment of such credit or reductions

under section 1412 of such Act.

“(D) The name, address, and TIN of the

primary insured and the name and TIN of each

other individual obtaining coverage under the

policy.

“(E) Any information provided to the Ex-

change, including any change of circumstances,

necessary to determine eligibility for, and the

amount of, such credit.

“(F) Any other similar information nec-

essary to carry out this subsection and deter-

mine whether a taxpayer has received excess

advance payments.”.

(d) ADULT DEPENDENTS.--

(1) EXCLUSION OF AMOUNTS EXPENDED FOR

MEDICAL

CARE

.--The

first

sentence

of

section

105(b) of the Internal Revenue Code of 1986 (relat-

ing to amounts expended for medical care) is amend-

ed--

(A) by striking “and his dependents” and

inserting “his dependents”; and

(B) by inserting before the period the fol-

lowing: “, and any child (as defined in section

152(f)(1)) of the taxpayer who as of the end of

the taxable year has not attained age 27”.

(2) SELF-EMPLOYED HEALTH INSURANCE DE-

DUCTION

.--Section

162(l)(1)

of

such

Code

is

amended to read as follows:

“(1) ALLOWANCE OF DEDUCTION.--In the case

of a taxpayer who is an employee within the mean-

ing of section 401(c)(1), there shall be allowed as a

deduction under this section an amount equal to the

amount paid during the taxable year for insurance

which constitutes medical care for--

“(A) the taxpayer,

“(B) the taxpayer's spouse,

“(C) the taxpayer's dependents, and

“(D) any child (as defined in section

152(f)(1)) of the taxpayer who as of the end of

the taxable year has not attained age 27.”.

(3) CONFORMING AMENDMENTS.--

(A) INTERNAL REVENUE CODE.--Section

162(l)(2)(B) of such Code is amended by in-

serting “, or any dependent, or individual de-

scribed in subparagraph (D) of paragraph (1)

with respect to,” after “spouse of”.

(B) PUBLIC HEALTH SERVICE ACT.--Sec-

tion 2714 of the Public Health Service Act, as

added by section 1001(5) of the Patient Protec-

tion and Affordable Care Act, is amended by

striking subsection (c).

(4) SICK AND ACCIDENT BENEFITS PROVIDED

TO MEMBERS OF A VOLUNTARY EMPLOYEES

' BENE-

FICIARY ASSOCIATION AND THEIR DEPENDENTS

.--

Section 501(c)(9) of such Code is amended by add-

ing at the end the following new sentence: “For pur-

poses of providing for the payment of sick and acci-

dent benefits to members of such an association and

their dependents, the term `dependent' shall include

any individual who is a child (as defined in section

152(f)(1)) of a member who as of the end of the cal-

endar year has not attained age 27.”.

(5) MEDICAL AND OTHER BENEFITS FOR RE-

TIRED EMPLOYEES

.--Section 401(h) of such Code is

amended by adding at the end the following: “For

purposes of this subsection, the term `dependent'

shall include any individual who is a child (as de-

fined in section 152(f)(1)) of a retired employee who

as of the end of the calendar year has not attained

age 27.”.

(e) FIVE PERCENT INCOME DISREGARD FOR CER-

TAIN

INpIDUALS.--Section 1902(e)(14) of the Social

Security Act (42 U.S.C. 1396a(e)(14)), as amended by

subsection (b)(1), is further amended--

(1) in subparagraph (B), by striking “No type”

and inserting “Subject to subparagraph (I), no

type”; and

(2) by adding at the end the following new sub-

paragraph:

“(I) TREATMENT OF PORTION OF MODI-

FIED ADJUSTED GROSS INCOME

.--For purposes

of determining the income eligibility of an indi-

vidual for medical assistance whose eligibility is

determined based on the application of modified

adjusted gross income under subparagraph (A),

the State shall--

“(i) determine the dollar equivalent of

the difference between the upper income

limit on eligibility for such an individual

(expressed as a percentage of the poverty

line) and such upper income limit in-

creased by 5 percentage points; and

“(ii) notwithstanding the requirement

in subparagraph (A) with respect to use of

modified adjusted gross income, utilize as

the applicable income of such individual, in

determining such income eligibility, an

amount equal to the modified adjusted

gross income applicable to such individual

reduced

by

such

dollar

equivalent

amount.”.

SEC. 1005. IMPLEMENTATION FUNDING.

(a) IN GENERAL.--There is hereby established a

Health Insurance Reform Implementation Fund (referred

to in this section as the “Fund”) within the Department

of Health and Human Services to carry out the Patient

Protection and Affordable Care Act and this Act (and the

amendments made by such Acts).

(b) FUNDING.--There is appropriated to the Fund,

out of any funds in the Treasury not otherwise appro-

priated, $1,000,000,000 for Federal administrative ex-

penses to carry out such Act (and the amendments made

by such Acts).

Subtitle B--Medicare

SEC. 1101. CLOSING THE MEDICARE PRESCRIPTION DRUG

“DONUT HOLE”.

(a) COVERAGE GAP REBATE FOR 2010.--

(1) IN GENERAL.--Section 1860D­42 of the

Social Security Act (42 U.S.C. 1395w­152) is

amended by adding at the end the following new

subsection:

“(c) COVERAGE GAP REBATE FOR 2010.--

“(1) IN GENERAL.--In the case of an individual

described in subparagraphs (A) through (D) of sec-

tion 1860D­14A(g)(1) who as of the last day of a

calendar quarter in 2010 has incurred costs for cov-

ered part D drugs so that the individual has exceed-

ed the initial coverage limit under section 1860D­

2(b)(3) for 2010, the Secretary shall provide for

payment from the Medicare Prescription Drug Ac-

count of $250 to the individual by not later than the

15th day of the third month following the end of

such quarter.

“(2) LIMITATION.--The Secretary shall provide

only 1 payment under this subsection with respect to

any individual.”.

(2) REPEAL OF PROVISION.--Section 3315 of

the Patient Protection and Affordable Care Act (in-

cluding the amendments made by such section) is re-

pealed, and any provision of law amended or re-

pealed by such sections is hereby restored or revived

as if such section had not been enacted into law.

(b) CLOSING THE DONUT HOLE.--Part D of title

XVIII of the Social Security Act (42 U.S.C. 1395w­101

et seq.), as amended by section 3301 of the Patient Pro-

tection and Affordable Care Act, is further amended--

(1) in section 1860D­43--

(A) in subsection (b), by striking “July 1,

2010” and inserting “January 1, 2011”; and

(B) in subsection (c)(2), by striking “July

1, 2010, and ending on December 31, 2010,”

and inserting “January 1, 2011, and December

31, 2011,”;

(2) in section 1860D­14A--

(A) in subsection (a)--

(i) by striking “July 1, 2010” and in-

serting “January 1, 2011”; and

(ii) by striking “April 1, 2010” and

inserting “180 days after the date of the

enactment of this section”;

(B) in subsection (b)(1)(C)--

(i) in the heading, by striking “2010

AND

”;

(ii) by striking “July 1, 2010” and in-

serting “January 1, 2011”; and

(iii) by striking “May 1, 2010” and

inserting “not later than 30 days after the

date of the establishment of a model agree-

ment under subsection (a)”;

(C) in subsection (c)--

(i) in paragraph (1)(A)(iii), by strik-

ing “July 1, 2010, and ending on Decem-

ber 31, 2011” and inserting “January 1,

2011, and ending on December 31, 2011”;

and

(ii) in paragraph (2), by striking

“2010” and inserting “2011”;

(D) in subsection (d)(2)(B), by striking

“July 1, 2010, and ending on December 31,

2010” and inserting “January 1, 2011, and

ending on December 31, 2011”; and

(E) in subsection (g)(1)--

(i) in the matter before subparagraph

(A), by striking “an applicable drug” and

inserting “a covered part D drug”;

(ii) by adding “and” at the end of

subparagraph (C);

(iii) by striking subparagraph (D);

and

(iv) by redesignating subparagraph

(E) as subparagraph (D); and

(3) in section 1860D­2(b) --

(A) in paragraph (2)(A), by striking “The

coverage” and inserting “Subject to subpara-

graphs (C) and (D), the coverage”;

(B) in paragraph (2)(B), by striking “sub-

paragraph (A)(ii)” and inserting “subpara-

graphs (A)(ii), (C), and (D)”;

(C) by adding at the end of paragraph (2)

the following new subparagraphs:

“(C) COVERAGE FOR GENERIC DRUGS IN

COVERAGE GAP

.--

“(i) IN GENERAL.--Except as pro-

vided in paragraph (4), the coverage for an

applicable beneficiary (as defined in section

1860D­14A(g)(1)) has coinsurance (for

costs above the initial coverage limit under

paragraph (3) and below the out-of-pocket

threshold) for covered part D drugs that

are not applicable drugs under section

1860D­14A(g)(2) that is--

“(I) equal to the generic-gap co-

insurance

percentage

(specified

in

clause (ii)) for the year, or

“(II)

actuarially

equivalent

(using processes and methods estab-

lished under section 1860D­11(c)) to

an average expected payment of such

percentage of such costs for covered

part D drugs that are not applicable

drugs

under

section

1860D­

14A(g)(2).

“(ii)

GENERIC-GAP

COINSURANCE

PERCENTAGE

.--The generic-gap coinsur-

ance percentage specified in this clause

for--

“(I) 2011 is 93 percent;

“(II) 2012 and each succeeding

year before 2020 is the generic-gap

coinsurance

percentage

under

this

clause for the previous year decreased

by 7 percentage points; and

“(III) 2020 and each subsequent

year is 25 percent.

“(D) COVERAGE FOR APPLICABLE DRUGS

IN COVERAGE GAP

.--

“(i) IN GENERAL.--Except as pro-

vided in paragraph (4), the coverage for an

applicable beneficiary (as defined in section

1860D­14A(g)(1)) has coinsurance (for

costs above the initial coverage limit under

paragraph (3) and below the out-of-pocket

threshold) for the negotiated price (as de-

fined in section 1860D­14A(g)(6)) of cov-

ered part D drugs that are applicable

drugs under section 1860D­14A(g)(2) that

is--

“(I) equal to the difference be-

tween the applicable gap percentage

(specified in clause (ii) for the year)

and the discount percentage specified

in section 1860D­14A(g)(4)(A) for

such applicable drugs, or

“(II)

actuarially

equivalent

(using processes and methods estab-

lished under section 1860D­11(c)) to

an average expected payment of such

percentage of such costs, for covered

part D drugs that are applicable

drugs

under

section

1860D­

14A(g)(2).

“(ii)

APPLICABLE

GAP

PERCENT

-

AGE

.--The applicable gap percentage spec-

ified in this clause for--

“(I) 2013 and 2014 is 97.5 per-

cent;

“(II) 2015 and 2016 is 95 per-

cent;

“(III) 2017 is 90 percent;

“(IV) 2018 is 85 percent;

“(V) 2019 is 80 percent; and

“(VI) 2020 and each subsequent

year is 75 percent.”;

(D) in paragraph (3)(A), as restored under

subsection (a)(2), by striking “paragraph (4)”

and inserting “paragraphs (2)(C), (2)(D), and

(4)”;

(E) in paragraph (4)(E), by inserting be-

fore the period at the end the following: “, ex-

cept that incurred costs shall not include the

portion of the negotiated price that represents

the reduction in coinsurance resulting from the

application of paragraph (2)(D)”; and

(4) in section 1860D­22(a)(2)(A), by inserting

before the period at the end the following: “, not

taking into account the value of any discount or cov-

erage provided during the gap in prescription drug

coverage that occurs between the initial coverage

limit under section 1860D­2(b)(3) during the year

and the out-of-pocket threshold specified in section

1860D­2(b)(4)(B)”.

(c) CONFORMING AMENDMENT TO AMP UNDER

MEDICAID.--Section 1927(k)(1)(B)(i) of the Social Secu-

rity Act (42 U.S.C. 1396r­8(k)(1)(B)(i)), as amended by

section 2503(a)(2)(B) of the Patient Protection and Af-

fordable Care Act, is amended--

(1) by striking “and” at the end of subclause

(III);

(2) by striking the period at the end of sub-

clause (IV); and

(3) by adding at the end the following new sub-

clause:

“(V) discounts provided by man-

ufacturers

under

section

1860D­

14A.”.

SEC. 1102. MEDICARE ADVANTAGE PAYMENTS.

(a) REPEAL.--Effective as if included in the enact-

ment of the Patient Protection and Affordable Care Act,

sections 3201 and 3203 of such Act (and the amendments

made by such sections) are repealed.

(b) PHASE-IN OF MODIFIED BENCHMARKS.--Section

1853 of the Social Security Act (42 U.S.C. 1395w­23)

is amended--

(1) in subsection (j)(1)(A), by striking “(or, be-

ginning with 2007, 1/12 of the applicable amount de-

termined under subsection (k)(1)) for the area for

the year” and inserting “ for the area for the year

(or, for 2007, 2008, 2009, and 2010, 1/12 of the ap-

plicable amount determined under subsection (k)(1)

for the area for the year; for 2011, 1/12 of the appli-

cable amount determined under subsection (k)(1) for

the area for 2010; and, beginning with 2012, 1/12 of

the blended benchmark amount determined under

subsection (n)(1) for the area for the year)”; and

(2) by adding at the end the following new sub-

section:

“(n) DETERMINATION OF BLENDED BENCHMARK

AMOUNT.--

“(1) IN GENERAL.--For purposes of subsection

(j), subject to paragraphs (3), (4), and (5), the term

`blended benchmark amount' means for an area--

“(A) for 2012 the sum of--

“(i) 1/2 of the applicable amount for

the area and year; and

“(ii) 1/2 of the amount specified in

paragraph (2)(A) for the area and year;

and

“(B) for a subsequent year the amount

specified in paragraph (2)(A) for the area and

year.

“(2) SPECIFIED AMOUNT.--

“(A) IN GENERAL.--The amount specified

in this subparagraph for an area and year is

the product of--

“(i) the base payment amount speci-

fied in subparagraph (E) for the area and

year adjusted to take into account the

phase-out in the indirect costs of medical

education from capitation rates described

in subsection (k)(4); and

“(ii) the applicable percentage for the

area for the year specified under subpara-

graph (B).

“(B) APPLICABLE PERCENTAGE.--Subject

to subparagraph (D), the applicable percentage

specified in this subparagraph for an area for

a year in the case of an area that is ranked--

“(i) in the highest quartile under sub-

paragraph (C) for the previous year is 95

percent;

“(ii) in the second highest quartile

under such subparagraph for the previous

year is 100 percent;

“(iii) in the third highest quartile

under such subparagraph for the previous

year is 107.5 percent; or

“(iv) in the lowest quartile under such

subparagraph for the previous year is 115

percent.

“(C) PERIODIC RANKING.--For purposes

of this paragraph in the case of an area lo-

cated--

“(i) in 1 of the 50 States or the Dis-

trict of Columbia, the Secretary shall rank

such area in each year specified under sub-

section (c)(1)(D)(ii) based upon the level

of the amount specified in subparagraph

(A)(i) for such areas; or

“(ii) in a territory, the Secretary shall

rank such areas in each such year based

upon the level of the amount specified in

subparagraph (A)(i) for such area relative

to quartile rankings computed under clause

(i).

“(D) 1-YEAR TRANSITION FOR CHANGES IN

APPLICABLE PERCENTAGE

.--If, for a year after

2012, there is a change in the quartile in which

an area is ranked compared to the previous

year, the applicable percentage for the area in

the year shall be the average of--

“(i) the applicable percentage for the

area for the previous year; and

“(ii) the applicable percentage that

would otherwise apply for the area for the

year.

“(E) BASE PAYMENT AMOUNT.--Subject

to subparagraph (F), the base payment amount

specified in this subparagraph--

“(i) for 2012 is the amount specified

in subsection (c)(1)(D) for the area for the

year; or

“(ii) for a subsequent year that--

“(I) is not specified under sub-

section

(c)(1)(D)(ii),

is

the

base

amount specified in this subparagraph

for the area for the previous year, in-

creased by the national per capita MA

growth percentage, described in sub-

section

(c)(6)

for

that

succeeding

year, but not taking into account any

adjustment under subparagraph (C)

of such subsection for a year before

2004; and

“(II)

is

specified

under

sub-

section (c)(1)(D)(ii), is the amount

specified in subsection (c)(1)(D) for

the area for the year.

“(F) APPLICATION OF INDIRECT MEDICAL

EDUCATION

PHASE

-OUT.--The base payment

amount specified in subparagraph (E) for a

year shall be adjusted in the same manner

under paragraph (4) of subsection (k) as the

applicable amount is adjusted under such sub-

section.

“(3) ALTERNATIVE PHASE-INS.--

“(A)

4-YEAR

PHASE

-IN

FOR

CERTAIN

AREAS

.--If the difference between the applica-

ble amount (as defined in subsection (k)) for an

area for 2010 and the projected 2010 bench-

mark amount (as defined in subparagraph (C))

for the area is at least $30 but less than $50,

the blended benchmark amount for the area

is--

“(i) for 2012 the sum of--

“(I) 3/4 of the applicable amount

for the area and year; and

“(II) 1/4 of the amount specified

in paragraph (2)(A) for the area and

year;

“(ii) for 2013 the sum of--

“(I) 1/2 of the applicable amount

for the area and year; and

“(II) 1/2 of the amount specified

in paragraph (2)(A) for the area and

year;

“(iii) for 2014 the sum of--

“(I) 1/4 of the applicable amount

for the area and year; and

“(II) 3/4 of the amount specified

in paragraph (2)(A) for the area and

year; and

“(iv)

for

a

subsequent

year

the

amount specified in paragraph (2)(A) for

the area and year.

“(B)

6-YEAR

PHASE

-IN

FOR

CERTAIN

AREAS

.--If the difference between the applica-

ble amount (as defined in subsection (k)) for an

area for 2010 and the projected 2010 bench-

mark amount (as defined in subparagraph (C))

for the area is at least $50, the blended bench-

mark amount for the area is--

“(i) for 2012 the sum of--

“(I) 5/6 of the applicable amount

for the area and year; and

“(II) 1/6 of the amount specified

in paragraph (2)(A) for the area and

year;

“(ii) for 2013 the sum of--

“(I) 2/3 of the applicable amount

for the area and year; and

“(II) 1/3 of the amount specified

in paragraph (2)(A) for the area and

year;

“(iii) for 2014 the sum of--

“(I) 1/2 of the applicable amount

for the area and year; and

“(II) 1/2 of the amount specified

in paragraph (2)(A) for the area and

year;

“(iv) for 2015 the sum of--

“(I) 1/3 of the applicable amount

for the area and year; and

“(II) 2/3 of the amount specified

in paragraph (2)(A) for the area and

year; and

“(v) for 2016 the sum of--

“(I) 1/6 of the applicable amount

for the area and year; and

“(II) 5/6 of the amount specified

in paragraph (2)(A) for the area and

year; and

“(vi)

for

a

subsequent

year

the

amount specified in paragraph (2)(A) for

the area and year.

“(C)

PROJECTED

2010

BENCHMARK

AMOUNT

.--The

projected

2010

benchmark

amount described in this subparagraph for an

area is equal to the sum of--

“(i) 1/2 of the applicable amount (as

defined in subsection (k)) for the area for

2010; and

“(ii) 1/2 of the amount specified in

paragraph (2)(A) for the area for 2010 but

determined as if there were substituted for

the

applicable

percentage

specified

in

clause (ii) of such paragraph the sum of--

“(I) the applicable percent that

would be specified under subpara-

graph (B) of paragraph (2) (deter-

mined without regard to subpara-

graph (D) of such paragraph) for the

area for 2010 if any reference in such

paragraph to `the previous year' were

deemed a reference to 2010; and

“(II) the applicable percentage

increase that would apply to a quali-

fying plan in the area under sub-

section (o) as if any reference in such

subsection to 2012 were deemed a ref-

erence to 2010 and as if the deter-

mination of a qualifying county under

paragraph (3)(B) of such subsection

were made for 2010.

“(4) CAP ON BENCHMARK AMOUNT.--In no

case shall the blended benchmark amount for an

area for a year (determined taking into account sub-

section (o)) be greater than the applicable amount

that would (but for the application of this sub-

section) be determined under subsection (k)(1) for

the area for the year.

“(5) NON-APPLICATION TO PACE PLANS.--This

subsection shall not apply to payments to a PACE

program under section 1894.”.

(c)

APPLICABLE

PERCENTAGE

QUALITY

IN-

CREASES

.--Section 1853 of such Act (42 U.S.C. 1395w­

23), as amended by subsection (b), is amended--

(1) in subsection (j), by inserting “subject to

subsection (o),” after “For purposes of this part,”;

(2) in subsection (n)(2)(B), as added by sub-

section (b), by inserting “, subject to subsection (o)”

after “as follows”; and

(3) by adding at the end the following new sub-

section:

“(o)

APPLICABLE

PERCENTAGE

QUALITY

IN-

CREASES

.--

“(1) IN GENERAL.--Subject to the succeeding

paragraphs, in the case of a qualifying plan with re-

spect to a year beginning with 2012, the applicable

percentage under subsection (n)(2)(B) shall be in-

creased on a plan or contract level, as determined by

the Secretary--

“(A) for 2012, by 1.5 percentage points;

“(B) for 2013, by 3.0 percentage points;

and

“(C) for 2014 or a subsequent year, by 5.0

percentage points.

“(2) INCREASE FOR QUALIFYING PLANS IN

QUALIFYING COUNTIES

.--The increase applied under

paragraph (1) for a qualifying plan located in a

qualifying county for a year shall be doubled.

“(3)

QUALIFYING

PLANS

AND

QUALIFYING

COUNTY DEFINED

; APPLICATION OF INCREASES TO

LOW ENROLLMENT AND NEW PLANS

.--For purposes

of this subsection:

“(A) QUALIFYING PLAN.--

“(i) IN GENERAL.--The term `quali-

fying plan' means, for a year and subject

to paragraph (4), a plan that had a quality

rating under paragraph (4) of 4 stars or

higher based on the most recent data avail-

able for such year.

“(ii) APPLICATION OF INCREASES TO

LOW ENROLLMENT PLANS

.--

“(I) 2012.--For 2012, the term

`qualifying plan' includes an MA plan

that the Secretary determines is not

able to have a quality rating under

paragraph (4) because of low enroll-

ment.

“(II)

2013

AND

SUBSEQUENT

YEARS

.--For 2013 and subsequent

years, for purposes of determining

whether an MA plan with low enroll-

ment (as defined by the Secretary) is

included as a qualifying plan, the Sec-

retary shall establish a method to

apply to MA plans with low enroll-

ment (as defined by the Secretary)

the computation of quality rating and

the rating system under paragraph

(4).

“(iii) APPLICATION OF INCREASES TO

NEW PLANS

.--

“(I) IN GENERAL.--A new MA

plan that meets criteria specified by

the Secretary shall be treated as a

qualifying plan, except that in apply-

ing paragraph (1), the applicable per-

centage under subsection (n)(2)(B)

shall be increased--

“(aa) for 2012, by 1.5 per-

centage points;

“(bb) for 2013, by 2.5 per-

centage points; and

“(cc) for 2014 or a subse-

quent year, by 3.5 percentage

points.

“(II) NEW MA PLAN DEFINED.--

The term `new MA plan' means, with

respect to a year, a plan offered by an

organization or sponsor that has not

had a contract as a Medicare Advan-

tage organization in the preceding 3-

year period.

“(B)

QUALIFYING

COUNTY

.--The

term

`qualifying county' means, for a year, a coun-

ty--

“(i) that has an MA capitation rate

that, in 2004, was based on the amount

specified in subsection (c)(1)(B) for a Met-

ropolitan Statistical Area with a population

of more than 250,000;

“(ii) for which, as of December 2009,

of the Medicare Advantage eligible individ-

uals residing in the county at least 25 per-

cent of such individuals were enrolled in

Medicare Advantage plans; and

“(iii) that has per capita fee-for-serv-

ice spending that is lower than the na-

tional monthly per capita cost for expendi-

tures for individuals enrolled under the

original medicare fee-for-service program

for the year.

“(4) QUALITY DETERMINATIONS FOR APPLICA-

TION OF INCREASE

.--

“(A)

QUALITY

DETERMINATION

.--The

quality rating for a plan shall be determined ac-

cording to a 5-star rating system (based on the

data collected under section 1852(e)).

“(B) PLANS THAT FAILED TO REPORT.--

An MA plan which does not report data that

enables the Secretary to rate the plan for pur-

poses of this paragraph shall be counted as hav-

ing a rating of fewer than 3.5 stars.

“(5) EXCEPTION FOR PACE PLANS.--This sub-

section shall not apply to payments to a PACE pro-

gram under section 1894.”.

(4) DETERMINATION OF MEDICARE PART D

LOW

-INCOME

BENCHMARK

PREMIUM

.--Section

1860D­14(b)(2)(B)(iii) of the Social Security Act

(42 U.S.C. 1395w­114(b)(2)(B)(iii)) as amended by

section 3302 of the Patient Protection and Afford-

able Care Act, is amended by striking “, determined

without regard to any reduction in such premium as

a result of any beneficiary rebate under section

1854(b)(1)(C) or bonus payment under section

1853(n)” and inserting the following: “and deter-

mined before the application of the monthly rebate

computed under section 1854(b)(1)(C)(i) for that

plan and year involved and, in the case of a quali-

fying plan, before the application of the increase

under section 1853(o) for that plan and year in-

volved”.

(d) BENEFICIARY REBATES.--Section 1854(b)(1)(C)

of such Act (42 U.S.C. 1395w­24(b)(1)(C)), as amended

by section 3202(b) of the Patient Protection and Afford-

able Care Act, is further amended--

(1) in clause (i), by inserting “(or the applica-

ble rebate percentage specified in clause (iii) in the

case of plan years beginning on or after January 1,

2012)” after “75 percent”; and

(2) by striking clause (iii), by redesignating

clauses (iv) and (v) as clauses (vii) and (viii), respec-

tively, and by inserting after clause (ii) the following

new clauses:

“(iii) APPLICABLE REBATE PERCENT-

AGE

.--The applicable rebate percentage

specified in this clause for a plan for a

year, based on the system under section

1853(o)(4)(A), is the sum of--

“(I) the product of the old phase-

in

proportion

for

the

year

under

clause (iv) and 75 percent; and

“(II) the product of the new

phase-in proportion for the year under

clause (iv) and the final applicable re-

bate percentage under clause (v).

“(iv) OLD AND NEW PHASE-IN PRO-

PORTIONS

.--For purposes of clause (iv)--

“(I) for 2012, the old phase-in

proportion is 2/3 and the new phase-in

proportion is 1/3;

“(II) for 2013, the old phase-in

proportion is 1/3 and the new phase-in

proportion is 2/3; and

“(III) for 2014 and any subse-

quent year, the old phase-in propor-

tion is 0 and the new phase-in propor-

tion is 1.

“(v) FINAL APPLICABLE REBATE PER-

CENTAGE

.--Subject to clause (vi), the final

applicable rebate percentage under this

clause is--

“(I) in the case of a plan with a

quality rating under such system of at

least 4.5 stars, 70 percent;

“(II) in the case of a plan with

a quality rating under such system of

at least 3.5 stars and less than 4.5

stars, 65 percent; and

“(III) in the case of a plan with

a quality rating under such system of

less than 3.5 stars, 50 percent.

“(vi) TREATMENT OF LOW ENROLL-

MENT AND NEW PLANS

.--For purposes of

clause (v)--

“(I) for 2012, in the case of a

plan described in subclause (I) of sub-

section (o)(3)(A)(ii), the plan shall be

treated as having a rating of 4.5

stars; and

“(II) for 2012 or a subsequent

year, in the case of a new MA plan

(as defined under subclause (III) of

subsection

(o)(3)(A)(iii)))

that

is

treated as a qualifying plan pursuant

to subclause (I) of such subsection,

the plan shall be treated as having a

rating of 3.5 stars.”.

(e)

CODING

INTENSITY

ADJUSTMENT.--Section

1853(a)(1)(C)(ii)

of

such

Act

(42

U.S.C.

1395w­

23(a)(1)(C)(ii)) is amended--

(1) in the heading, by striking “DURING PHASE-

OUT OF BUDGET NEUTRALITY FACTOR

” and insert-

ing “OF CODING ADJUSTMENT”;

(2) in the matter before subclause (I), by strik-

ing “through 2010” and inserting “and each subse-

quent year”; and

(3) in subclause (II)--

(A) in the first sentence, by inserting “an-

nually” before “conduct an analysis”;

(B) in the second sentence--

(i) by inserting “on a timely basis”

after “are incorporated”; and

(ii) by striking “only for 2008, 2009,

and 2010” and inserting “for 2008 and

subsequent years”;

(C) in the third sentence, by inserting

“and updated as appropriate” before the period

at the end; and

(D) by adding at the end the following new

subclauses:

“(III) In calculating each year's

adjustment for 2019 and subsequent

years, the adjustment factor shall be

no less than 5.7 percent.

“(IV) Such adjustment shall be

applied to risk scores until the Sec-

retary

implements

risk

adjustment

using Medicare Advantage diagnostic,

cost, and use data.”.

(f) REPEAL OF COMPARATIVE COST ADJUSTMENT

PROGRAM.--Section 1860C­1 of the Social Security Act

(42 U.S.C. 1395w­29), as added by section 241(a) of the

Medicare Prescription Drug, Improvement, and Mod-

ernization Act of 2003 (Public Law 108­173), is repealed.

SEC. 1103. SAVINGS FROM LIMITS ON MA PLAN ADMINIS-

TRATIVE COSTS.

Section 1857(e) of the Social Security Act (42 U.S.C.

1395w­27(e)) is amended by adding at the end the fol-

lowing new paragraph:

“(4) REQUIREMENT FOR MINIMUM MEDICAL

LOSS RATIO

.--If the Secretary determines for a con-

tract year (beginning with 2014) that an MA plan

has failed to have a medical loss ratio of at least

.85--

“(A) the MA plan shall remit to the Sec-

retary an amount equal to the product of--

“(i) the total revenue of the MA plan

under this part for the contract year; and

“(ii) the difference between .85 and

the medical loss ratio;

“(B) for 3 consecutive contract years, the

Secretary shall not permit the enrollment of

new enrollees under the plan for coverage dur-

ing the second succeeding contract year; and

“(C) the Secretary shall terminate the plan

contract if the plan fails to have such a medical

loss ratio for 5 consecutive contract years.

Amounts collected pursuant to subparagraph (A)

shall be deposited into the Centers for Medicare &

Medicaid Program Management Account to be avail-

able until expended.”.

SEC. 1104. DISPROPORTIONATE SHARE HOSPITAL (DSH)

PAYMENTS.

Section 1886(r) of the Social Security Act (42 U.S.C.

1395ww(r)), as added by section 3133 of the Patient Pro-

tection and Affordable Care Act and as amended by sec-

tion 10316 of such Act, is amended--

(1) in paragraph (1), by striking “2015” and

inserting “2014”; and

(2) in paragraph (2)--

(A) in the matter preceding subparagraph

(A), by striking “2015” and inserting “2014”;

(B) in subparagraph (B)(i)--

(i) in the heading, by inserting “2014,”

after “YEARS”;

(ii) in the matter preceding subclause

(I), by inserting “2014,” after “each of fis-

cal years”;

(iii) in subclause (I), by striking “on

such Act” and inserting “on the Health

Care and Education Affordability Rec-

onciliation Act of 2010”; and

(iv) in the matter following subclause

(II), by striking “minus 1.5 percentage

points” and inserting “minus 0.1 percent-

age points for fiscal year 2014 and minus

0.2 percentage points for each of fiscal

years 2015, 2016, and 2017”; and

(C) in subparagraph (B)(ii), in the matter

following subclause (II), by striking “and, for

each of 2018 and 2019, minus 1.5 percentage

points” and inserting “minus 0.2 percentage

points for each of fiscal years 2018 and 2019”.

SEC. 1105. MARKET BASKET UPDATES.

(a) IPPS.--Section 1886(b)(3)(B) of the Social Se-

curity Act (42 U.S.C. 1395ww(b)(3)(B)), as amended by

sections 3401(a)(4) and 10319(a) of the Patient Protec-

tion and Affordable Care Act, is amended--

(1) in clause (xii)--

(A) by placing the subclause (II) (inserted

by section 10319(a)(3) of the Patient Protec-

tion and Affordable Care Act) immediately after

subclause (I) and, in such subclause (II), by

striking “and” at the end; and

(B) by striking subclause (III) and insert-

ing the following:

“(III) for fiscal year 2014, by 0.3 percentage

point;

“(IV) for each of fiscal years 2015 and 2016,

by 0.2 percentage point; and

“(V) for each of fiscal years 2017, 2018, and

2019, by 0.75 percentage point.”; and

(2) by striking clause (xiii).

(b)

LONG-TERM

CARE

HOSPITALS.--Section

1886(m)(4) of the Social Security Act (42 U.S.C.

1395ww(m)(4)), as added by section 3401(c) of the Pa-

tient Protection and Affordable Care Act and amended by

section 10319(b) of such Act, is amended--

(1) in subparagraph (A)--

(A) in clause (iii), by striking “and” at the

end; and

(B) by striking clause (iv) and inserting

the following:

“(iv) for rate year 2014, 0.3 percent-

age point;

“(v) for each of rate years 2015 and

2016, 0.2 percentage point; and

“(vi) for each of rate years 2017,

2018, and 2019, 0.75 percentage point.”;

(2) by striking subparagraph (B); and

(3) by striking “(4) OTHER ADJUSTMENT.--”

and all that follows through “For purposes” and in-

serting “(4) OTHER ADJUSTMENT.--For purposes”

(and redesignating clauses (i) through (vi) as sub-

paragraphs (A) through (F), respectively, with ap-

propriate indentation).

(c) INPATIENT REHABILITATION FACILITIES.--Sec-

tion 1886(j)(3)(D) of the Social Security Act (42 U.S.C.

1395ww(j)(3)(D)), as added by section 3401(d)(2) of the

Patient Protection and Affordable Care Act and amended

by section 10319(c) of such Act, is amended--

(1) in clause (i)--

(A) by placing the subclause (II) (inserted

by section 10319(c)(3) of the Patient Protec-

tion and Affordable Care Act) immediately after

subclause (I) and, in such subclause (II), by

striking “and” at the end; and

(B) by striking subclause (III) and insert-

ing the following:

“(III) for fiscal year 2014, 0.3

percentage point;

“(IV) for each of fiscal years

2015 and 2016, 0.2 percentage point;

and

“(V) for each of fiscal years

2017, 2018, and 2019, 0.75 percent-

age point.”;

(2) by striking clause (ii); and

(3) by striking “(D) OTHER ADJUSTMENT.--”

and all that follows through “For purposes” and in-

serting “(D) OTHER ADJUSTMENT.--For purposes”

(and redesignating subclauses (I) through (V) as

clauses (i) through (v), respectively, with appropriate

indentation).

(d) PSYCHIATRIC HOSPITALS.--Section 1886(s)(3) of

the Social Security Act, as added by section 3401(f) of

the Patient Protection and Affordable Care Act and

amended by section 10319(e) of such Act, is amended--

(1) in subparagraph (A)--

(A) by placing the clause (ii) (inserted by

section 10319(e)(3) of the Patient Protection

and Affordable Care Act) immediately after

clause (i) and, in such clause (ii), by striking

“and” at the end; and

(B) by striking clause (iii) and inserting

the following:

“(iii) for the rate year beginning in

2014, 0.3 percentage point;

“(iv) for each of the rate years begin-

ning in 2015 and 2016, 0.2 percentage

point; and

“(v) for each of the rate years begin-

ning in 2017, 2018, and 2019, 0.75 per-

centage point.”;

(2) by striking subparagraph (B); and

(3) by striking “(3) OTHER ADJUSTMENT.--”

and all that follows through “For purposes” and in-

serting “(3) OTHER ADJUSTMENT.--For purposes”

(and redesignating clauses (i) through (v) as sub-

paragraphs (A) through (E), respectively, with ap-

propriate indentation).

(e)

OUTPATIENT

HOSPITALS.--Section

1833(t)(3)(G) of the Social Security Act (42 U.S.C.

1395l(t)(3)(G)), as added by section 3401(i)(2) of the Pa-

tient Protection and Affordable Care Act and amended by

section 10319(g) of such Act, is amended--

(1) in clause (i)--

(A) by placing the subclause (II) (inserted

by section 10319(g)(3) of the Patient Protec-

tion and Affordable Care Act) immediately after

subclause (I) and, in such subclause (II), by

striking “and” at the end; and

(B) by striking subclause (III) and insert-

ing the following:

“(III) for 2014, 0.3 percentage

point;

“(IV) for each of 2015 and 2016,

0.2 percentage point; and

“(V) for each of 2017, 2018, and

2019, 0.75 percentage point.”;

(2) by striking clause (ii); and

(3) by striking “(G) OTHER ADJUSTMENT.--”

and all that follows through “For purposes” and in-

serting “(G) OTHER ADJUSTMENT.--For purposes”

(and redesignating subclauses (I) through (V) as

clauses (i) through (v), respectively, with appropriate

indentation).

SEC. 1106. PHYSICIAN OWNERSHIP-REFERRAL.

Section 1877(i) of the Social Security Act (42 U.S.C.

1395nn(i)), as added by section 6001(a)(3) of the Patient

Protection and Affordable Care Act and as amended by

section 10601(a) of such Act, is amended--

(1) in paragraph (1)(A)(i), by striking “August

1, 2010” and inserting “December 31, 2010”; and

(2) in paragraph (3)--

(A) in subparagraph (A)(i), by striking

“an applicable hospital (as defined in subpara-

graph (E))” and inserting “a hospital that is an

applicable hospital (as defined in subparagraph

(E)) or is a high Medicaid facility described in

subparagraph (F)”;

(B) in subparagraph (C)(iii), by inserting

after “date of enactment of this subsection” the

following: “(or, in the case of a hospital that

did not have a provider agreement in effect as

of such date but does have such an agreement

in effect on December 31, 2010, the effective

date of such provider agreement)”;

(C) by redesignating subparagraphs (F)

through (H) as subparagraphs (G) through (I),

respectively; and

(D) by inserting after subparagraph (E)

the following new subparagraph:

“(F)

HIGH

MEDICAID

FACILITY

DE

-

SCRIBED

.--A high Medicaid facility described in

this subparagraph is a hospital that--

“(i) is not the sole hospital in a coun-

ty;

“(ii) with respect to each of the 3

most recent years for which data are avail-

able, has an annual percent of total inpa-

tient admissions that represent inpatient

admissions under title XIX that is esti-

mated to be greater than such percent with

respect to such admissions for any other

hospital located in the county in which the

hospital is located; and

“(iii) meets the conditions described

in subparagraph (E)(iii).”.

SEC. 1107. PAYMENT FOR IMAGING SERVICES.

Section 1848 of the Social Security Act (42 U.S.C.

1395w­4), as amended by section 3135(a) of the Patient

Protection and Affordable Care Act, is amended--

(1) in subsection (b)(4)--

(A) in subparagraph (B), by striking “this

paragraph” and inserting “subparagraph (A)”;

and

(B) by amending subparagraph (C) to read

as follows:

“(C) ADJUSTMENT IN IMAGING UTILIZA-

TION RATE

.--With respect to fee schedules es-

tablished for 2011 and subsequent years, in the

methodology for determining practice expense

relative value units for expensive diagnostic im-

aging equipment under the final rule published

by the Secretary in the Federal Register on No-

vember 25, 2009 (42 CFR 410, et al.), the Sec-

retary shall use a 75 percent assumption in-

stead of the utilization rates otherwise estab-

lished in such final rule.”; and

(2) in subsection (c)(2)(B)(v), by striking sub-

clauses (III), (IV), and (V) and inserting the fol-

lowing new subclause:

“(III) CHANGE IN UTILIZATION

RATE

FOR

CERTAIN

IMAGING

SERV

-

ICES

.--Effective for fee schedules es-

tablished beginning with 2011, re-

duced expenditures attributable to the

change in the utilization rate applica-

ble to 2011, as described in subsection

(b)(4)(C).”.

Subtitle C--Medicaid

SEC. 1201. FEDERAL FUNDING FOR STATES.

Section 1905 of the Social Security Act (42 U.S.C.

1396d), as amended by sections 2001(a)(3) and 10201(c)

of the Patient Protection and Affordable Care Act, is

amended--

(1) in subsection (y)--

(A) by redesignating subclause (II) of

paragraph (1)(B)(ii) as paragraph (5) of sub-

section (z) and realigning the left margins ac-

cordingly; and

(B) by striking paragraph (1) and insert-

ing the following:

“(1) AMOUNT OF INCREASE.--Notwithstanding

subsection (b), the Federal medical assistance per-

centage for a State that is one of the 50 States or

the District of Columbia, with respect to amounts

expended by such State for medical assistance for

newly eligible individuals described in subclause

(VIII) of section 1902(a)(10)(A)(i), shall be equal

to--

“(A) 100 percent for calendar quarters in

2014, 2015, and 2016;

“(B) 95 percent for calendar quarters in

2017;

“(C) 94 percent for calendar quarters in

2018;

“(D) 93 percent for calendar quarters in

2019; and

“(E) 90 percent for calendar quarters in

2020 and each year thereafter.”; and

(2) in subsection (z)--

(A) in paragraph (1), by striking “Sep-

tember 30, 2019” and inserting “December 31,

2015”

and

by

striking

“subsection

(y)(1)(B)(ii)(II)”

and

inserting

“paragraph

(3)”;

(B) by striking paragraphs (2) through (4)

and inserting the following:

“(2)(A) For calendar quarters in 2014 and

each year thereafter, the Federal medical assistance

percentage otherwise determined under subsection

(b) for an expansion State described in paragraph

(3) with respect to medical assistance for individuals

described in section 1902(a)(10)(A)(i)(VIII) who are

nonpregnant childless adults with respect to whom

the State may require enrollment in benchmark cov-

erage under section 1937 shall be equal to the per-

cent specified in subparagraph (B)(i) for such year.

“(B)(i) The percent specified in this subpara-

graph for a State for a year is equal to the Federal

medical assistance percentage (as defined in the first

sentence of subsection (b)) for the State increased

by a number of percentage points equal to the tran-

sition percentage (specified in clause (ii) for the

year) of the number of percentage points by which--

“(I) such Federal medical assistance per-

centage for the State, is less than

“(II) the percent specified in subsection

(y)(1) for the year.

“(ii) The transition percentage specified in this

clause for--

“(I) 2014 is 50 percent;

“(II) 2015 is 60 percent;

“(III) 2016 is 70 percent;

“(IV) 2017 is 80 percent;

“(V) 2018 is 90 percent; and

“(VI) 2019 and each subsequent year is

100 percent.”; and

(C) by redesignating paragraph (5) (as

added by paragraph (1)(A) of this section) as

paragraph (3), realigning the left margins to

align with paragraph (2), and striking the

heading and all that follows through “a State

is” and inserting “A State is”.

SEC. 1202. PAYMENTS TO PRIMARY CARE PHYSICIANS.

(a) IN GENERAL.--

(1)

FEE-FOR-SERVICE

PAYMENTS

.--Section

1902 of the Social Security Act (42 U.S.C. 1396a),

as amended by section 2303(a)(2) of the Patient

Protection and Affordable Care Act, is amended--

(A) in subsection (a)(13)--

(i) by striking “and” at the end of

subparagraph (A);

(ii) by adding “and” at the end of

subparagraph (B); and

(iii) by adding at the end the fol-

lowing new subparagraph:

“(C) payment for primary care services (as

defined in subsection (jj)) furnished in 2013

and 2014 by a physician with a primary spe-

cialty designation of family medicine, general

internal medicine, or pediatric medicine at a

rate not less than 100 percent of the payment

rate that applies to such services and physician

under part B of title XVIII (or, if greater, the

payment rate that would be applicable under

such part if the conversion factor under section

1848(d) for the year involved were the conver-

sion factor under such section for 2009);”; and

(B) by adding at the end the following new

subsection:

“(jj) PRIMARY CARE SERVICES DEFINED.--For pur-

poses of subsection (a)(13)(C), the term `primary care

services' means--

“(1) evaluation and management services that

are procedure codes (for services covered under title

XVIII) for services in the category designated Eval-

uation and Management in the Healthcare Common

Procedure Coding System (established by the Sec-

retary under section 1848(c)(5) as of December 31,

2009, and as subsequently modified); and

“(2) services related to immunization adminis-

tration for vaccines and toxoids for which CPT codes

90465, 90466, 90467, 90468, 90471, 90472, 90473,

or 90474 (as subsequently modified) apply under

such System.”.

(2)

UNDER

MEDICAID

MANAGED

CARE

PLANS

.--Section 1932(f) of such Act (42 U.S.C.

1396u­2(f)) is amended--

(A) in the heading, by adding at the end

the following: “; ADEQUACY OF PAYMENT FOR

PRIMARY CARE SERVICES”; and

(B) by inserting before the period at the

end the following: “and, in the case of primary

care

services

described

in

section

1902(a)(13)(C), consistent with the minimum

payment rates specified in such section (regard-

less of the manner in which such payments are

made, including in the form of capitation or

partial capitation)”.

(b) INCREASE IN PAYMENT USING INCREASED

FMAP.--Section 1905 of the Social Security Act, as

amended by section 1004(b) of this Act and section

10201(c)(6) of the Patient Protection and Affordable Care

Act, is amended by adding at the end the following new

subsection:

“(dd) INCREASED FMAP FOR ADDITIONAL EXPEND-

ITURES FOR

PRIMARY CARE SERVICES.--Notwithstanding

subsection (b), with respect to the portion of the amounts

expended for medical assistance for services described in

section 1902(a)(13)(C) furnished on or after January 1,

2013, and before January 1, 2015, that is attributable to

the amount by which the minimum payment rate required

under such section (or, by application, section 1932(f)) ex-

ceeds the payment rate applicable to such services under

the State plan as of July 1, 2009, the Federal medical

assistance percentage for a State that is one of the 50

States or the District of Columbia shall be equal to 100

percent. The preceding sentence does not prohibit the pay-

ment of Federal financial participation based on the Fed-

eral medical assistance percentage for amounts in excess

of those specified in such sentence.”.

SEC. 1203. DISPROPORTIONATE SHARE HOSPITAL PAY-

MENTS.

(a) IN GENERAL.--Section 1923(f) of the Social Se-

curity Act (42 U.S.C. 1396r­4(f)), as amended by sections

2551(a)(4) and 10201(e)(1) of the Patient Protection and

Affordable Care Act, is amended--

(1) in paragraph (6)(B)(iii), in the matter pre-

ceding subclause (I), by striking “or paragraph (7)”;

and

(2) by striking paragraph (7) and inserting the

following:

“(7) MEDICAID DSH REDUCTIONS.--

“(A) REDUCTIONS.--

“(i) IN GENERAL.--For each of fiscal

years 2014 through 2020 the Secretary

shall effect the following reductions:

“(I) REDUCTION IN DSH ALLOT-

MENTS

.--The Secretary shall reduce

DSH allotments to States in the

amount

specified

under

the

DSH

health reform methodology under sub-

paragraph (B) for the State for the

fiscal year.

“(II)