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Text of the Health Care and Education Reconciliation Act of 2010

This bill was enacted after being signed by the President on March 30, 2010. The text of the bill below is as of Mar 17, 2010 (Reported by House Committee).

This is not the latest text of this bill.

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Union Calendar No. 256

111th CONGRESS

2d Session

H. R. 4872

IN THE HOUSE OF REPRESENTATIVES

March 17, 2010

from the Committee on the Budget, reported the following bill; which was committed to the Committee of the Whole House on the State of the Union and ordered to be printed

A BILL

To provide for reconciliation pursuant to section 202 of the concurrent resolution on the budget for fiscal year 2010.

1.

Short title

This Act may be cited as the Reconciliation Act of 2010.

2.

Table of contents

The table of divisions is as follows:

Division I—House Committee on Ways and Means: Health Care Reform

Division II—House Committee on Education and Labor: Health Care Reform

Division III—House Committee on Education and Labor: Investing in Education

I

Committee on Ways and Means: Health Care Reform

1.

Short title; table of subdivisions, titles, and subtitles

(a)

Short title

This division may be cited as the America’s Affordable Health Choices Act of 2009.

(b)

Table of subdivisions, titles, and subtitles

This division is divided into subdivisions, titles, and subtitles as follows:

Subdivision A—Affordable Health Care Choices

Title I—Protections and Standards for Qualified Health Benefits Plans

Subtitle A—General Standards

Subtitle B—Standards Guaranteeing Access to Affordable Coverage

Subtitle C—Standards Guaranteeing Access to Essential Benefits

Subtitle D—Additional Consumer Protections

Subtitle E—Governance

Subtitle F—Relation to other requirements; Miscellaneous

Subtitle G—Early Investments

Title II—Health Insurance Exchange and Related Provisions

Subtitle A—Health Insurance Exchange

Subtitle B—Public health insurance option

Subtitle C—Individual Affordability Credits

Title III—Shared responsibility

Subtitle A—Individual responsibility

Subtitle B—Employer Responsibility

Title IV—Amendments to Internal Revenue Code of 1986

Subtitle A—Shared responsibility

Subtitle B—Credit for small business employee health coverage expenses

Subtitle C—Disclosures to carry out health insurance exchange subsidies

Subtitle D—Other revenue provisions

Subdivision B—Medicare and Medicaid Improvements

Title I—Improving Health Care Value

Subtitle A—Provisions related to Medicare part A

Subtitle B—Provisions Related to Part B

Subtitle C—Provisions Related to Medicare Parts A and B

Subtitle D—Medicare Advantage Reforms

Subtitle E—Improvements to Medicare Part D

Subtitle F—Medicare Rural Access Protections

Title II—Medicare Beneficiary Improvements

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

Subtitle B—Reducing Health Disparities

Subtitle C—Miscellaneous Improvements

Title III—Promoting Primary Care, Mental Health Services, and Coordinated Care

Title IV—Quality

Subtitle A—Comparative Effectiveness Research

Subtitle B—Nursing Home Transparency

Subtitle C—Quality Measurements

Subtitle D—Physician Payments Sunshine Provision

Subtitle E—Public Reporting on Health Care-Associated Infections

Title V—Medicare Graduate Medical Education

Title VI—Program Integrity

Subtitle A—Increased funding to fight waste, fraud, and abuse

Subtitle B—Enhanced penalties for fraud and abuse

Subtitle C—Enhanced Program and Provider Protections

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

Title VII—Medicaid and CHIP

Subtitle A—Medicaid and Health Reform

Subtitle B—Prevention

Subtitle C—Access

Subtitle D—Coverage

Subtitle E—Financing

Subtitle F—Waste, Fraud, and Abuse

Subtitle G—Puerto Rico and the Territories

Subtitle H—Miscellaneous

Title VIII—Revenue-related provisions

Title IX—Miscellaneous Provisions

Subdivision C—Public Health and Workforce Development

Title I—Community Health Centers

Title II—Workforce

Subtitle A—Primary care workforce

Subtitle B—Nursing workforce

Subtitle C—Public Health Workforce

Subtitle D—Adapting workforce to evolving health system needs

Title III—Prevention and Wellness

Title IV—Quality and Surveillance

Title V—Other provisions

Subtitle A—Drug discount for rural and other hospitals

Subtitle B—School-Based health clinics

Subtitle C—National medical device registry

Subtitle D—Grants for comprehensive programs To provide education to nurses and create a pipeline to nursing

Subtitle E—States failing To adhere to certain employment obligations

A

Affordable Health Care Choices

100.

Purpose; table of contents of subdivision; general definitions

(a)

Purpose

(1)

In general

The purpose of this subdivision is to provide affordable, quality health care for all Americans and reduce the growth in health care spending.

(2)

Building on current system

This subdivision achieves this purpose by building on what works in today’s health care system, while repairing the aspects that are broken.

(3)

Insurance reforms

This subdivision—

(A)

enacts strong insurance market reforms;

(B)

creates a new Health Insurance Exchange, with a public health insurance option alongside private plans;

(C)

includes sliding scale affordability credits; and

(D)

initiates shared responsibility among workers, employers, and the government;

so that all Americans have coverage of essential health benefits.
(4)

Health delivery reform

This subdivision institutes health delivery system reforms both to increase quality and to reduce growth in health spending so that health care becomes more affordable for businesses, families, and government.

(b)

Table of contents of subdivision

The table of contents of this subdivision is as follows:

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

Title I—Protections and Standards for Qualified Health Benefits Plans

Subtitle A—General Standards

Sec. 101. Requirements reforming health insurance marketplace.

Sec. 102. Protecting the choice to keep current coverage.

Subtitle B—Standards Guaranteeing Access to Affordable Coverage

Sec. 111. Prohibiting pre-existing condition exclusions.

Sec. 112. Guaranteed issue and renewal for insured plans.

Sec. 113. Insurance rating rules.

Sec. 114. Nondiscrimination in benefits; parity in mental health and substance abuse disorder benefits.

Sec. 115. Ensuring adequacy of provider networks.

Sec. 116. Ensuring value and lower premiums.

Subtitle C—Standards Guaranteeing Access to Essential Benefits

Sec. 121. Coverage of essential benefits package.

Sec. 122. Essential benefits package defined.

Sec. 123. Health Benefits Advisory Committee.

Sec. 124. Process for adoption of recommendations; adoption of benefit standards.

Subtitle D—Additional Consumer Protections

Sec. 131. Requiring fair marketing practices by health insurers.

Sec. 132. Requiring fair grievance and appeals mechanisms.

Sec. 133. Requiring information transparency and plan disclosure.

Sec. 134. Application to qualified health benefits plans not offered through the Health Insurance Exchange.

Sec. 135. Timely payment of claims.

Sec. 136. Standardized rules for coordination and subrogation of benefits.

Sec. 137. Application of administrative simplification.

Subtitle E—Governance

Sec. 141. Health Choices Administration; Health Choices Commissioner.

Sec. 142. Duties and authority of Commissioner.

Sec. 143. Consultation and coordination.

Sec. 144.  Health Insurance Ombudsman.

Subtitle F—Relation to other requirements; Miscellaneous

Sec. 151. Relation to other requirements.

Sec. 152. Prohibiting discrimination in health care.

Sec. 153. Whistleblower protection.

Sec. 154. Construction regarding collective bargaining.

Sec. 155. Severability.

Subtitle G—Early Investments

Sec. 161. Ensuring value and lower premiums.

Sec. 162. Ending health insurance rescission abuse.

Sec. 163. Administrative simplification.

Sec. 164. Reinsurance program for retirees.

Title II—Health Insurance Exchange and Related Provisions

Subtitle A—Health Insurance Exchange

Sec. 201. Establishment of Health Insurance Exchange; outline of duties; definitions.

Sec. 202. Exchange-eligible individuals and employers.

Sec. 203. Benefits package levels.

Sec. 204. Contracts for the offering of Exchange-participating health benefits plans.

Sec. 205. Outreach and enrollment of Exchange-eligible individuals and employers in Exchange-participating health benefits plan.

Sec. 206. Other functions.

Sec. 207. Health Insurance Exchange Trust Fund.

Sec. 208. Optional operation of State-based health insurance exchanges.

Subtitle B—Public health insurance option

Sec. 221. Establishment and administration of a public health insurance option as an Exchange-qualified health benefits plan.

Sec. 222. Premiums and financing.

Sec. 223. Payment rates for items and services.

Sec. 224. Modernized payment initiatives and delivery system reform.

Sec. 225. Provider participation.

Sec. 226. Application of fraud and abuse provisions.

Subtitle C—Individual Affordability Credits

Sec. 241. Availability through Health Insurance Exchange.

Sec. 242. Affordable credit eligible individual.

Sec. 243. Affordable premium credit.

Sec. 244. Affordability cost-sharing credit.

Sec. 245. Income determinations.

Sec. 246. No Federal payment for undocumented aliens.

Title III—Shared responsibility

Subtitle A—Individual responsibility

Sec. 301. Individual responsibility.

Subtitle B—Employer Responsibility

Part 1—Health coverage participation requirements

Sec. 311. Health coverage participation requirements.

Sec. 312. Employer responsibility to contribute towards employee and dependent coverage.

Sec. 313. Employer contributions in lieu of coverage.

Sec. 314. Authority related to improper steering.

Part 2—Satisfaction of Health Coverage Participation Requirements

Sec. 321. Satisfaction of health coverage participation requirements under the Employee Retirement Income Security Act of 1974.

Sec. 322. Satisfaction of health coverage participation requirements under the Internal Revenue Code of 1986.

Sec. 323. Satisfaction of health coverage participation requirements under the Public Health Service Act.

Sec. 324. Additional rules relating to health coverage participation requirements.

Title IV—Amendments to Internal Revenue Code of 1986

Subtitle A—Shared responsibility

Part 1—Individual responsibility

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

Part 2—Employer Responsibility

Sec. 411. Election to satisfy health coverage participation requirements.

Sec. 412. Responsibilities of nonelecting employers.

Subtitle B—Credit for small business employee health coverage expenses

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

Subtitle C—Disclosures to carry out health insurance exchange subsidies

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

Subtitle D—Other revenue provisions

Part 1—General provisions

Sec. 441. Surcharge on high income individuals.

Sec. 442. Distributions for medicine qualified only if for prescribed drug or insulin.

Sec. 443. Delay in application of worldwide allocation of interest.

Part 2—Prevention of tax avoidance

Sec. 451. Limitation on treaty benefits for certain deductible payments.

Sec. 452. Codification of economic substance doctrine.

Sec. 453. Penalties for underpayments.

Part 3—Parity in health benefits

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

(c)

General definitions

Except as otherwise provided, in this subdivision:

(1)

Acceptable coverage

The term acceptable coverage has the meaning given such term in section 202(d)(2).

(2)

Basic plan

The term basic plan has the meaning given such term in section 203(c).

(3)

Commissioner

The term Commissioner means the Health Choices Commissioner established under section 141.

(4)

Cost-sharing

The term cost-sharing includes deductibles, coinsurance, copayments, and similar charges but does not include premiums or any network payment differential for covered services or spending for non-covered services.

(5)

Dependent

The term dependent has the meaning given such term by the Commissioner and includes a spouse.

(6)

Employment-based health plan

The term employment-based health plan

(A)

means a group health plan (as defined in section 733(a)(1) of the Employee Retirement Income Security Act of 1974); and

(B)

includes such a plan that is the following:

(i)

Federal, state, and tribal governmental plans

A governmental plan (as defined in section 3(32) of the Employee Retirement Income Security Act of 1974), including a health benefits plan offered under chapter 89 of title 5, United States Code.

(ii)

Church plans

A church plan (as defined in section 3(33) of the Employee Retirement Income Security Act of 1974).

(7)

Enhanced plan

The term enhanced plan has the meaning given such term in section 203(c).

(8)

Essential benefits package

The term essential benefits package is defined in section 122(a).

(9)

Family

The term family means an individual and includes the individual’s dependents.

(10)

Federal poverty level; FPL

The terms Federal poverty level and FPL have the meaning given the term poverty line in section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2)), including any revision required by such section.

(11)

Health benefits plan

The terms health benefits plan means health insurance coverage and an employment-based health plan and includes the public health insurance option.

(12)

Health insurance coverage; health insurance issuer

The terms health insurance coverage and health insurance issuer have the meanings given such terms in section 2791 of the Public Health Service Act.

(13)

Health Insurance Exchange

The term Health Insurance Exchange means the Health Insurance Exchange established under section 201.

(14)

Medicaid

The term Medicaid means a State plan under title XIX of the Social Security Act (whether or not the plan is operating under a waiver under section 1115 of such Act).

(15)

Medicare

The term Medicare means the health insurance programs under title XVIII of the Social Security Act.

(16)

Plan sponsor

The term plan sponsor has the meaning given such term in section 3(16)(B) of the Employee Retirement Income Security Act of 1974.

(17)

Plan year

The term plan year means—

(A)

with respect to an employment-based health plan, a plan year as specified under such plan; or

(B)

with respect to a health benefits plan other than an employment-based health plan, a 12-month period as specified by the Commissioner.

(18)

Premium plan; premium-plus plan

The terms premium plan and premium-plus plan have the meanings given such terms in section 203(c).

(19)

QHBP offering entity

The terms QHBP offering entity means, with respect to a health benefits plan that is—

(A)

a group health plan (as defined, subject to subsection (d), in section 733(a)(1) of the Employee Retirement Income Security Act of 1974), the plan sponsor in relation to such group health plan, except that, in the case of a plan maintained jointly by 1 or more employers and 1 or more employee organizations and with respect to which an employer is the primary source of financing, such term means such employer;

(B)

health insurance coverage, the health insurance issuer offering the coverage;

(C)

the public health insurance option, the Secretary of Health and Human Services;

(D)

a non-Federal governmental plan (as defined in section 2791(d) of the Public Health Service Act), the State or political subdivision of a State (or agency or instrumentality of such State or subdivision) which establishes or maintains such plan; or

(E)

a Federal governmental plan (as defined in section 2791(d) of the Public Health Service Act), the appropriate Federal official.

(20)

Qualified health benefits plan

The term qualified health benefits plan means a health benefits plan that meets the requirements for such a plan under title I and includes the public health insurance option.

(21)

Public health insurance option

The term public health insurance option means the public health insurance option as provided under subtitle B of title II.

(22)

Service area; premium rating area

The terms service area and premium rating area mean with respect to health insurance coverage—

(A)

offered other than through the Health Insurance Exchange, such an area as established by the QHBP offering entity of such coverage in accordance with applicable State law; and

(B)

offered through the Health Insurance Exchange, such an area as established by such entity in accordance with applicable State law and applicable rules of the Commissioner for Exchange-participating health benefits plans.

(23)

State

The term State means the 50 States and the District of Columbia.

(24)

State Medicaid agency

The term State Medicaid agency means, with respect to a Medicaid plan, the single State agency responsible for administering such plan under title XIX of the Social Security Act.

(25)

Y1, Y2, etc.

The terms Y1 , Y2, Y3, Y4, Y5, and similar subsequently numbered terms, mean 2013 and subsequent years, respectively.

I

Protections and Standards for Qualified Health Benefits Plans

A

General Standards

101.

Requirements reforming health insurance marketplace

(a)

Purpose

The purpose of this title is to establish standards to ensure that new health insurance coverage and employment-based health plans that are offered meet standards guaranteeing access to affordable coverage, essential benefits, and other consumer protections.

(b)

Requirements for qualified health benefits plans

On or after the first day of Y1, a health benefits plan shall not be a qualified health benefits plan under this subdivision unless the plan meets the applicable requirements of the following subtitles for the type of plan and plan year involved:

(1)

Subtitle B (relating to affordable coverage).

(2)

Subtitle C (relating to essential benefits).

(3)

Subtitle D (relating to consumer protection).

(c)

Terminology

In this subdivision:

(1)

Enrollment in employment-based health plans

An individual shall be treated as being enrolled in an employment-based health plan if the individual is a participant or beneficiary (as such terms are defined in section 3(7) and 3(8), respectively, of the Employee Retirement Income Security Act of 1974) in such plan.

(2)

Individual and group health insurance coverage

The terms individual health insurance coverage and group health insurance coverage mean health insurance coverage offered in the individual market or large or small group market, respectively, as defined in section 2791 of the Public Health Service Act.

102.

Protecting the choice to keep current coverage

(a)

Grandfathered health insurance coverage defined

Subject to the succeeding provisions of this section, for purposes of establishing acceptable coverage under this subdivision, the term grandfathered health insurance coverage means individual health insurance coverage that is offered and in force and effect before the first day of Y1 if the following conditions are met:

(1)

Limitation on new enrollment

(A)

In general

Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1.

(B)

Dependent coverage permitted

Subparagraph (A) shall not affect the subsequent enrollment of a dependent of an individual who is covered as of such first day.

(2)

Limitation on changes in terms or conditions

Subject to paragraph (3) and except as required by law, the issuer does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before the first day of Y1.

(3)

Restrictions on premium increases

The issuer cannot vary the percentage increase in the premium for a risk group of enrollees in specific grandfathered health insurance coverage without changing the premium for all enrollees in the same risk group at the same rate, as specified by the Commissioner.

(b)

Grace period for current employment-based health plans

(1)

Grace period

(A)

In general

The Commissioner shall establish a grace period whereby, for plan years beginning after the end of the 5-year period beginning with Y1, an employment-based health plan in operation as of the day before the first day of Y1 must meet the same requirements as apply to a qualified health benefits plan under section 101, including the essential benefit package requirement under section 121.

(B)

Exception for limited benefits plans

Subparagraph (A) shall not apply to an employment-based health plan in which the coverage consists only of one or more of the following:

(i)

Any coverage described in section 3001(a)(1)(B)(ii)(IV) of division B of the American Recovery and Reinvestment Act of 2009 (PL 111–5).

(ii)

Excepted benefits (as defined in section 733(c) of the Employee Retirement Income Security Act of 1974), including coverage under a specified disease or illness policy described in paragraph (3)(A) of such section.

(iii)

Such other limited benefits as the Commissioner may specify.

In no case shall an employment-based health plan in which the coverage consists only of one or more of the coverage or benefits described in clauses (i) through (iii) be treated as acceptable coverage under this subdivision
(2)

Transitional treatment as acceptable coverage

During the grace period specified in paragraph (1)(A), an employment-based health plan that is described in such paragraph shall be treated as acceptable coverage under this subdivision.

(c)

Limitation on individual health insurance coverage

(1)

In general

Individual health insurance coverage that is not grandfathered health insurance coverage under subsection (a) may only be offered on or after the first day of Y1 as an Exchange-participating health benefits plan.

(2)

Separate, excepted coverage permitted

Excepted benefits (as defined in section 2791(c) of the Public Health Service Act) are not included within the definition of health insurance coverage. Nothing in paragraph (1) shall prevent the offering, other than through the Health Insurance Exchange, of excepted benefits so long as it is offered and priced separately from health insurance coverage.

B

Standards Guaranteeing Access to Affordable Coverage

111.

Prohibiting pre-existing condition exclusions

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

112.

Guaranteed issue and renewal for insured plans

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

113.

Insurance rating rules

(a)

In general

The premium rate charged for an insured qualified health benefits plan may not vary except as follows:

(1)

Limited age variation permitted

By age (within such age categories as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1.

(2)

By area

By premium rating area (as permitted by State insurance regulators or, in the case of Exchange-participating health benefits plans, as specified by the Commissioner in consultation with such regulators).

(3)

By family enrollment

By family enrollment (such as variations within categories and compositions of families) so long as the ratio of the premium for family enrollment (or enrollments) to the premium for individual enrollment is uniform, as specified under State law and consistent with rules of the Commissioner.

(b)

Study and reports

(1)

Study

The Commissioner, in coordination with the Secretary of Health and Human Services and the Secretary of Labor, shall conduct a study of the large group insured and self-insured employer health care markets. Such study shall examine the following:

(A)

The types of employers by key characteristics, including size, that purchase insured products versus those that self-insure.

(B)

The similarities and differences between typical insured and self-insured health plans.

(C)

The financial solvency and capital reserve levels of employers that self-insure by employer size.

(D)

The risk of self-insured employers not being able to pay obligations or otherwise becoming financially insolvent.

(E)

The extent to which rating rules are likely to cause adverse selection in the large group market or to encourage small and mid size employers to self-insure

(2)

Reports

Not later than 18 months after the date of the enactment of this Act, the Commissioner shall submit to Congress and the applicable agencies a report on the study conducted under paragraph (1). Such report shall include any recommendations the Commissioner deems appropriate to ensure that the law does not provide incentives for small and mid-size employers to self-insure or create adverse selection in the risk pools of large group insurers and self-insured employers. Not later than 18 months after the first day of Y1, the Commissioner shall submit to Congress and the applicable agencies an updated report on such study, including updates on such recommendations.

114.

Nondiscrimination in benefits; parity in mental health and substance abuse disorder benefits

(a)

Nondiscrimination in benefits

A qualified health benefits plan shall comply with standards established by the Commissioner to prohibit discrimination in health benefits or benefit structures for qualifying health benefits plans, building from sections 702 of Employee Retirement Income Security Act of 1974, 2702 of the Public Health Service Act, and section 9802 of the Internal Revenue Code of 1986.

(b)

Parity in mental health and substance abuse disorder benefits

To the extent such provisions are not superceded by or inconsistent with subtitle C, the provisions of section 2705 (other than subsections (a)(1), (a)(2), and (c)) of section 2705 of the Public Health Service Act shall apply to a qualified health benefits plan, regardless of whether it is offered in the individual or group market, in the same manner as such provisions apply to health insurance coverage offered in the large group market.

115.

Ensuring adequacy of provider networks

(a)

In general

A qualified health benefits plan that uses a provider network for items and services shall meet such standards respecting provider networks as the Commissioner may establish to assure the adequacy of such networks in ensuring enrollee access to such items and services and transparency in the cost-sharing differentials between in-network coverage and out-of-network coverage.

(b)

Provider network defined

In this subdivision, the term provider network means the providers with respect to which covered benefits, treatments, and services are available under a health benefits plan.

116.

Ensuring value and lower premiums

(a)

In general

A qualified health benefits plan shall meet a medical loss ratio as defined by the Commissioner. For any plan year in which the qualified health benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment sufficient to meet such loss ratio.

(b)

Building on interim rules

In implementing subsection (a), the Commissioner shall build on the definition and methodology developed by the Secretary of Health and Human Services under the amendments made by section 161 for determining how to calculate the medical loss ratio. Such methodology shall be set at the highest level medical loss ratio possible that is designed to ensure adequate participation by QHBP offering entities, competition in the health insurance market in and out of the Health Insurance Exchange, and value for consumers so that their premiums are used for services.

C

Standards Guaranteeing Access to Essential Benefits

121.

Coverage of essential benefits package

(a)

In general

A qualified health benefits plan shall provide coverage that at least meets the benefit standards adopted under section 124 for the essential benefits package described in section 122 for the plan year involved.

(b)

Choice of coverage

(1)

Non-exchange-participating health benefits plans

In the case of a qualified health benefits plan that is not an Exchange-participating health benefits plan, such plan may offer such coverage in addition to the essential benefits package as the QHBP offering entity may specify.

(2)

Exchange-participating health benefits plans

In the case of an Exchange-participating health benefits plan, such plan is required under section 203 to provide specified levels of benefits and, in the case of a plan offering a premium-plus level of benefits, provide additional benefits.

(3)

Continuation of offering of separate excepted benefits coverage

Nothing in this subdivision shall be construed as affecting the offering of health benefits in the form of excepted benefits (described in section 102(b)(1)(B)(ii)) if such benefits are offered under a separate policy, contract, or certificate of insurance.

(c)

No restrictions on coverage unrelated to clinical appropriateness

A qualified health benefits plan may not impose any restriction (other than cost-sharing) unrelated to clinical appropriateness on the coverage of the health care items and services.

122.

Essential benefits package defined

(a)

In general

In this subdivision, the term essential benefits package means health benefits coverage, consistent with standards adopted under section 124 to ensure the provision of quality health care and financial security, that—

(1)

provides payment for the items and services described in subsection (b) in accordance with generally accepted standards of medical or other appropriate clinical or professional practice;

(2)

limits cost-sharing for such covered health care items and services in accordance with such benefit standards, consistent with subsection (c);

(3)

does not impose any annual or lifetime limit on the coverage of covered health care items and services;

(4)

complies with section 115(a) (relating to network adequacy); and

(5)

is equivalent, as certified by Office of the Actuary of the Centers for Medicare & Medicaid Services, to the average prevailing employer-sponsored coverage.

(b)

Minimum services to be covered

The items and services described in this subsection are the following:

(1)

Hospitalization.

(2)

Outpatient hospital and outpatient clinic services, including emergency department services.

(3)

Professional services of physicians and other health professionals.

(4)

Such services, equipment, and supplies incident to the services of a physician’s or a health professional’s delivery of care in institutional settings, physician offices, patients’ homes or place of residence, or other settings, as appropriate.

(5)

Prescription drugs.

(6)

Rehabilitative and habilitative services.

(7)

Mental health and substance use disorder services.

(8)

Preventive services, including those services recommended with a grade of A or B by the Task Force on Clinical Preventive Services and those vaccines recommended for use by the Director of the Centers for Disease Control and Prevention.

(9)

Maternity care.

(10)

Well baby and well child care and oral health, vision, and hearing services, equipment, and supplies at least for children under 21 years of age.

(c)

Requirements relating to cost-sharing and minimum actuarial value

(1)

No cost-sharing for preventive services

There shall be no cost-sharing under the essential benefits package for preventive items and services (as specified under the benefit standards), including well baby and well child care.

(2)

Annual limitation

(A)

Annual limitation

The cost-sharing incurred under the essential benefits package with respect to an individual (or family) for a year does not exceed the applicable level specified in subparagraph (B).

(B)

Applicable level

The applicable level specified in this subparagraph for Y1 is $5,000 for an individual and $10,000 for a family. Such levels shall be increased (rounded to the nearest $100) for each subsequent year by the annual percentage increase in the Consumer Price Index (United States city average) applicable to such year.

(C)

Use of copayments

In establishing cost-sharing levels for basic, enhanced, and premium plans under this subsection, the Secretary shall, to the maximum extent possible, use only copayments and not coinsurance.

(3)

Minimum actuarial value

(A)

In general

The cost-sharing under the essential benefits package shall be designed to provide a level of coverage that is designed to provide benefits that are actuarially equivalent to approximately 70 percent of the full actuarial value of the benefits provided under the reference benefits package described in subparagraph (B).

(B)

Reference benefits package described

The reference benefits package described in this subparagraph is the essential benefits package if there were no cost-sharing imposed.

123.

Health Benefits Advisory Committee

(a)

Establishment

(1)

In general

There is established a private-public advisory committee which shall be a panel of medical and other experts to be known as the Health Benefits Advisory Committee to recommend covered benefits and essential, enhanced, and premium plans.

(2)

Chair

The Surgeon General shall be a member and the chair of the Health Benefits Advisory Committee.

(3)

Membership

The Health Benefits Advisory Committee shall be composed of the following members, in addition to the Surgeon General:

(A)

9 members who are not Federal employees or officers and who are appointed by the President.

(B)

9 members who are not Federal employees or officers and who are appointed by the Comptroller General of the United States in a manner similar to the manner in which the Comptroller General appoints members to the Medicare Payment Advisory Commission under section 1805(c) of the Social Security Act.

(C)

Such even number of members (not to exceed 8) who are Federal employees and officers, as the President may appoint.

Such initial appointments shall be made not later than 60 days after the date of the enactment of this Act.
(4)

Terms

Each member of the Health Benefits Advisory Committee shall serve a 3-year term on the Committee, except that the terms of the initial members shall be adjusted in order to provide for a staggered term of appointment for all such members.

(5)

Participation

The membership of the Health Benefits Advisory Committee shall at least reflect providers, consumer representatives, employers, labor, health insurance issuers, experts in health care financing and delivery, experts in racial and ethnic disparities, experts in care for those with disabilities, representatives of relevant governmental agencies. and at least one practicing physician or other health professional and an expert on children’s health and shall represent a balance among various sectors of the health care system so that no single sector unduly influences the recommendations of such Committee.

(b)

Duties

(1)

Recommendations on benefit standards

The Health Benefits Advisory Committee shall recommend to the Secretary of Health and Human Services (in this subtitle referred to as the Secretary) benefit standards (as defined in paragraph (4)), and periodic updates to such standards. In developing such recommendations, the Committee shall take into account innovation in health care and consider how such standards could reduce health disparities.

(2)

Deadline

The Health Benefits Advisory Committee shall recommend initial benefit standards to the Secretary not later than 1 year after the date of the enactment of this Act.

(3)

Public input

The Health Benefits Advisory Committee shall allow for public input as a part of developing recommendations under this subsection.

(4)

Benefit standards defined

In this subtitle, the term benefit standards means standards respecting—

(A)

the essential benefits package described in section 122, including categories of covered treatments, items and services within benefit classes, and cost-sharing; and

(B)

the cost-sharing levels for enhanced plans and premium plans (as provided under section 203(c)) consistent with paragraph (5).

(5)

Levels of cost-sharing for enhanced and premium plans

(A)

Enhanced plan

The level of cost-sharing for enhanced plans shall be designed so that such plans have benefits that are actuarially equivalent to approximately 85 percent of the actuarial value of the benefits provided under the reference benefits package described in section 122(c)(3)(B).

(B)

Premium plan

The level of cost-sharing for premium plans shall be designed so that such plans have benefits that are actuarially equivalent to approximately 95 percent of the actuarial value of the benefits provided under the reference benefits package described in section 122(c)(3)(B).

(c)

Operations

(1)

Per diem pay

Each member of the Health Benefits Advisory Committee shall receive travel expenses, including per diem in accordance with applicable provisions under subchapter I of chapter 57 of title 5, United States Code, and shall otherwise serve without additional pay.

(2)

Members not treated as Federal employees

Members of the Health Benefits Advisory Committee shall not be considered employees of the Federal government solely by reason of any service on the Committee.

(3)

Application of FACA

The Federal Advisory Committee Act (5 U.S.C. App.), other than section 14, shall apply to the Health Benefits Advisory Committee.

(d)

Publication

The Secretary shall provide for publication in the Federal Register and the posting on the Internet website of the Department of Health and Human Services of all recommendations made by the Health Benefits Advisory Committee under this section.

124.

Process for adoption of recommendations; adoption of benefit standards

(a)

Process for Adoption of Recommendations

(1)

Review of recommended standards

Not later than 45 days after the date of receipt of benefit standards recommended under section 123 (including such standards as modified under paragraph (2)(B)), the Secretary shall review such standards and shall determine whether to propose adoption of such standards as a package.

(2)

Determination to adopt standards

If the Secretary determines—

(A)

to propose adoption of benefit standards so recommended as a package, the Secretary shall, by regulation under section 553 of title 5, United States Code, propose adoption such standards; or

(B)

not to propose adoption of such standards as a package, the Secretary shall notify the Health Benefits Advisory Committee in writing of such determination and the reasons for not proposing the adoption of such recommendation and provide the Committee with a further opportunity to modify its previous recommendations and submit new recommendations to the Secretary on a timely basis.

(3)

Contingency

If, because of the application of paragraph (2)(B), the Secretary would otherwise be unable to propose initial adoption of such recommended standards by the deadline specified in subsection (b)(1), the Secretary shall, by regulation under section 553 of title 5, United States Code, propose adoption of initial benefit standards by such deadline.

(4)

Publication

The Secretary shall provide for publication in the Federal Register of all determinations made by the Secretary under this subsection.

(b)

Adoption of Standards

(1)

Initial standards

Not later than 18 months after the date of the enactment of this Act, the Secretary shall, through the rulemaking process consistent with subsection (a), adopt an initial set of benefit standards.

(2)

Periodic updating standards

Under subsection (a), the Secretary shall provide for the periodic updating of the benefit standards previously adopted under this section.

(3)

Requirement

The Secretary may not adopt any benefit standards for an essential benefits package or for level of cost-sharing that are inconsistent with the requirements for such a package or level under sections 122 and 123(b)(5).

D

Additional Consumer Protections

131.

Requiring fair marketing practices by health insurers

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

132.

Requiring fair grievance and appeals mechanisms

(a)

In general

A QHBP offering entity shall provide for timely grievance and appeals mechanisms that the Commissioner shall establish.

(b)

Internal claims and appeals process

Under a qualified health benefits plan the QHBP offering entity shall provide an internal claims and appeals process that initially incorporates the claims and appeals procedures (including urgent claims) set forth at section 2560.503–1 of title 29, Code of Federal Regulations, as published on November 21, 2000 (65 Fed. Reg. 70246) and shall update such process in accordance with any standards that the Commissioner may establish.

(c)

External review process

(1)

In general

The Commissioner shall establish an external review process (including procedures for expedited reviews of urgent claims) that provides for an impartial, independent, and de novo review of denied claims under this subdivision.

(2)

Requiring fair grievance and appeals mechanisms

A determination made, with respect to a qualified health benefits plan offered by a QHBP offering entity, under the external review process established under this subsection shall be binding on the plan and the entity.

(d)

Construction

Nothing in this section shall be construed as affecting the availability of judicial review under State law for adverse decisions under subsection (b) or (c), subject to section 151.

133.

Requiring information transparency and plan disclosure

(a)

Accurate and timely disclosure

(1)

In general

A qualified health benefits plan shall comply with standards established by the Commissioner for the accurate and timely disclosure of plan documents, plan terms and conditions, claims payment policies and practices, periodic financial disclosure, data on enrollment, data on disenrollment, data on the number of claims denials, data on rating practices, information on cost-sharing and payments with respect to any out-of-network coverage, and other information as determined appropriate by the Commissioner. The Commissioner shall require that such disclosure be provided in plain language.

(2)

Plain language

In this subsection, the term plain language means language that the intended audience, including individuals with limited English proficiency, can readily understand and use because that language is clean, concise, well-organized, and follows other best practices of plain language writing.

(3)

Guidance

The Commissioner shall develop and issue guidance on best practices of plain language writing.

(b)

Contracting reimbursement

A qualified health benefits plan shall comply with standards established by the Commissioner to ensure transparency to each health care provider relating to reimbursement arrangements between such plan and such provider.

(c)

Advance notice of plan changes

A change in a qualified health benefits plan shall not be made without such reasonable and timely advance notice to enrollees of such change.

134.

Application to qualified health benefits plans not offered through the Health Insurance Exchange

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

135.

Timely payment of claims

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

136.

Standardized rules for coordination and subrogation of benefits

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

137.

Application of administrative simplification

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

E

Governance

141.

Health Choices Administration; Health Choices Commissioner

(a)

In general

There is hereby established, as an independent agency in the executive branch of the Government, a Health Choices Administration (in this subdivision referred to as the Administration).

(b)

Commissioner

(1)

In general

The Administration shall be headed by a Health Choices Commissioner (in this subdivision referred to as the Commissioner) who shall be appointed by the President, by and with the advice and consent of the Senate.

(2)

Compensation; etc

The provisions of paragraphs (2), (5), and (7) of subsection (a) (relating to compensation, terms, general powers, rulemaking, and delegation) of section 702 of the Social Security Act (42 U.S.C. 902) shall apply to the Commissioner and the Administration in the same manner as such provisions apply to the Commissioner of Social Security and the Social Security Administration.

142.

Duties and authority of Commissioner

(a)

Duties

The Commissioner is responsible for carrying out the following functions under this subdivision:

(1)

Qualified plan standards

The establishment of qualified health benefits plan standards under this title, including the enforcement of such standards in coordination with State insurance regulators and the Secretaries of Labor and the Treasury.

(2)

Health Insurance Exchange

The establishment and operation of a Health Insurance Exchange under subtitle A of title II.

(3)

Individual affordability credits

The administration of individual affordability credits under subtitle C of title II, including determination of eligibility for such credits.

(4)

Additional functions

Such additional functions as may be specified in this subdivision.

(b)

Promoting accountability

(1)

In general

The Commissioner shall undertake activities in accordance with this subtitle to promote accountability of QHBP offering entities in meeting Federal health insurance requirements, regardless of whether such accountability is with respect to qualified health benefits plans offered through the Health Insurance Exchange or outside of such Exchange.

(2)

Compliance examination and audits

(A)

In general

The commissioner shall, in coordination with States, conduct audits of qualified health benefits plan compliance with Federal requirements.  Such audits may include random compliance audits and targeted audits in response to complaints or other suspected non-compliance.

(B)

Recoupment of costs in connection with examination and audits

The Commissioner is authorized to recoup from qualified health benefits plans reimbursement for the costs of such examinations and audit of such QHBP offering entities.

(c)

Data collection

The Commissioner shall collect data for purposes of carrying out the Commissioner’s duties, including for purposes of promoting quality and value, protecting consumers, and addressing disparities in health and health care and may share such data with the Secretary of Health and Human Services.

(d)

Sanctions authority

(1)

In general

In the case that the Commissioner determines that a QHBP offering entity violates a requirement of this title, the Commissioner may, in coordination with State insurance regulators and the Secretary of Labor, provide, in addition to any other remedies authorized by law, for any of the remedies described in paragraph (2).

(2)

Remedies

The remedies described in this paragraph, with respect to a qualified health benefits plan offered by a QHBP offering entity, are—

(A)

civil money penalties of not more than the amount that would be applicable under similar circumstances for similar violations under section 1857(g) of the Social Security Act;

(B)

suspension of enrollment of individuals under such plan after the date the Commissioner notifies the entity of a determination under paragraph (1) and until the Commissioner is satisfied that the basis for such determination has been corrected and is not likely to recur;

(C)

in the case of an Exchange-participating health benefits plan, suspension of payment to the entity under the Health Insurance Exchange for individuals enrolled in such plan after the date the Commissioner notifies the entity of a determination under paragraph (1) and until the Secretary is satisfied that the basis for such determination has been corrected and is not likely to recur; or

(D)

working with State insurance regulators to terminate plans for repeated failure by the offering entity to meet the requirements of this title.

(e)

Standard definitions of insurance and medical terms

The Commissioner shall provide for the development of standards for the definitions of terms used in health insurance coverage, including insurance-related terms.

(f)

Efficiency in administration

The Commissioner shall issue regulations for the effective and efficient administration of the Health Insurance Exchange and affordability credits under subtitle C, including, with respect to the determination of eligibility for affordability credits, the use of personnel who are employed in accordance with the requirements of title 5, United States Code, to carry out the duties of the Commissioner or, in the case of sections 208 and 241(b)(2), the use of State personnel who are employed in accordance with standards prescribed by the Office of Personnel Management pursuant to section 208 of the Intergovernmental Personnel Act of 1970 (42 U.S.C. 4728).

143.

Consultation and coordination

(a)

Consultation

In carrying out the Commissioner’s duties under this subdivision, the Commissioner, as appropriate, shall consult with at least with the following:

(1)

The National Association of Insurance Commissioners, State attorneys general, and State insurance regulators, including concerning the standards for insured qualified health benefits plans under this title and enforcement of such standards.

(2)

Appropriate State agencies, specifically concerning the administration of individual affordability credits under subtitle C of title II and the offering of Exchange-participating health benefits plans, to Medicaid eligible individuals under subtitle A of such title.

(3)

Other appropriate Federal agencies.

(4)

Indian tribes and tribal organizations.

(5)

The National Association of Insurance Commissioners for purposes of using model guidelines established by such association for purposes of subtitles B and D.

(b)

Coordination

(1)

In general

In carrying out the functions of the Commissioner, including with respect to the enforcement of the provisions of this subdivision, the Commissioner shall work in coordination with existing Federal and State entities to the maximum extent feasible consistent with this subdivision and in a manner that prevents conflicts of interest in duties and ensures effective enforcement.

(2)

Uniform standards

The Commissioner, in coordination with such entities, shall seek to achieve uniform standards that adequately protect consumers in a manner that does not unreasonably affect employers and insurers.

144.

Health Insurance Ombudsman

(a)

In general

The Commissioner shall appoint within the Health Choices Administration a Qualified Health Benefits Plan Ombudsman who shall have expertise and experience in the fields of health care and education of (and assistance to) individuals.

(b)

Duties

The Qualified Health Benefits Plan Ombudsman shall, in a linguistically appropriate manner—

(1)

receive complaints, grievances, and requests for information submitted by individuals;

(2)

provide assistance with respect to complaints, grievances, and requests referred to in paragraph (1), including—

(A)

helping individuals determine the relevant information needed to seek an appeal of a decision or determination;

(B)

assistance to such individuals with any problems arising from disenrollment from such a plan;

(C)

assistance to such individuals in choosing a qualified health benefits plan in which to enroll; and

(D)

assistance to such individuals in presenting information under subtitle C (relating to affordability credits); and

(3)

submit annual reports to Congress and the Commissioner that describe the activities of the Ombudsman and that include such recommendations for improvement in the administration of this subdivision as the Ombudsman determines appropriate. The Ombudsman shall not serve as an advocate for any increases in payments or new coverage of services, but may identify issues and problems in payment or coverage policies.

F

Relation to other requirements; Miscellaneous

151.

Relation to other requirements

(a)

Coverage not offered through Exchange

(1)

In general

In the case of health insurance coverage not offered through the Health Insurance Exchange (whether or not offered in connection with an employment-based health plan), and in the case of employment-based health plans, the requirements of this title do not supercede any requirements applicable under titles XXII and XXVII of the Public Health Service Act, parts 6 and 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or State law, except insofar as such requirements prevent the application of a requirement of this subdivision, as determined by the Commissioner.

(2)

Construction

Nothing in paragraph (1) shall be construed as affecting the application of section 514 of the Employee Retirement Income Security Act of 1974.

(b)

Coverage offered through Exchange

(1)

In general

In the case of health insurance coverage offered through the Health Insurance Exchange—

(A)

the requirements of this title do not supercede any requirements (including requirements relating to genetic information nondiscrimination and mental health) applicable under title XXVII of the Public Health Service Act or under State law, except insofar as such requirements prevent the application of a requirement of this subdivision, as determined by the Commissioner; and

(B)

individual rights and remedies under State laws shall apply.

(2)

Construction

In the case of coverage described in paragraph (1), nothing in such paragraph shall be construed as preventing the application of rights and remedies under State laws with respect to any requirement referred to in paragraph (1)(A).

152.

Prohibiting discrimination in health care

(a)

In general

Except as otherwise explicitly permitted by this division and by subsequent regulations consistent with this division, all health care and related services (including insurance coverage and public health activities) covered by this division shall be provided without regard to personal characteristics extraneous to the provision of high quality health care or related services.

(b)

Implementation

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

153.

Whistleblower protection

(a)

Retaliation prohibited

No employer may discharge any employee or otherwise discriminate against any employee with respect to his compensation, terms, conditions, or other privileges of employment because the employee (or any person acting pursuant to a request of the employee)—

(1)

provided, caused to be provided, or is about to provide or cause to be provided to the employer, the Federal Government, or the attorney general of a State information relating to any violation of, or any act or omission the employee reasonably believes to be a violation of any provision of this division or any order, rule, or regulation promulgated under this division;

(2)

testified or is about to testify in a proceeding concerning such violation;

(3)

assisted or participated or is about to assist or participate in such a proceeding; or

(4)

objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any provision of this division or any order, rule, or regulation promulgated under this division.

(b)

Enforcement action

An employee covered by this section who alleges discrimination by an employer in violation of subsection (a) may bring an action governed by the rules, procedures, legal burdens of proof, and remedies set forth in section 40(b) of the Consumer Product Safety Act (15 U.S.C. 2087(b)).

(c)

Employer defined

As used in this section, the term employer means any person (including one or more individuals, partnerships, associations, corporations, trusts, professional membership organization including a certification, disciplinary, or other professional body, unincorporated organizations, nongovernmental organizations, or trustees) engaged in profit or nonprofit business or industry whose activities are governed by this division, and any agent, contractor, subcontractor, grantee, or consultant of such person.

(d)

Rule of construction

The rule of construction set forth in section 20109(h) of title 49, United States Code, shall also apply to this section.

154.

Construction regarding collective bargaining

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

155.

Severability

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

G

Early Investments

161.

Ensuring value and lower premiums

(a)

Group health insurance coverage

Title XXVII of the Public Health Service Act is amended by inserting after section 2713 the following new section:

2714.

Ensuring value and lower premiums

(a)

In general

Each health insurance issuer that offers health insurance coverage in the small or large group market shall provide that for any plan year in which the coverage has a medical loss ratio below a level specified by the Secretary, the issuer shall provide in a manner specified by the Secretary for rebates to enrollees of payment sufficient to meet such loss ratio. Such methodology shall be set at the highest level medical loss ratio possible that is designed to ensure adequate participation by issuers, competition in the health insurance market, and value for consumers so that their premiums are used for services.

(b)

Uniform definitions

The Secretary shall establish a uniform definition of medical loss ratio and methodology for determining how to calculate the medical loss ratio. Such methodology shall be designed to take into account the special circumstances of smaller plans, different types of plans, and newer plans.

.

(b)

Individual health insurance coverage

Such title is further amended by inserting after section 2753 the following new section:

2754.

Ensuring value and lower premiums

The provisions of section 2714 shall apply to health insurance coverage offered in the individual market in the same manner as such provisions apply to health insurance coverage offered in the small or large group market.

.

(c)

Immediate implementation

The amendments made by this section shall apply in the group and individual market for plan years beginning on or after January 1, 2011.

162.

Ending health insurance rescission abuse

(a)

Clarification regarding application of guaranteed renewability of individual health insurance coverage

Section 2742 of the Public Health Service Act (42 U.S.C. 300gg–42) is amended—

(1)

in its heading, by inserting and continuation in force, including prohibition of rescission, after guaranteed renewability; and

(2)

in subsection (a), by inserting , including without rescission, after continue in force.

(b)

Secretarial guidance regarding rescissions

Section 2742 of such Act (42 U.S.C. 300gg–42) is amended by adding at the end the following:

(f)

Rescission

A health insurance issuer may rescind health insurance coverage only upon clear and convincing evidence of fraud described in subsection (b)(2). The Secretary, no later than July 1, 2010, shall issue guidance implementing this requirement, including procedures for independent, external third party review.

.

(c)

Opportunity for independent, external third party review in certain cases

Subpart 1 of part B of title XXVII of such Act (42 U.S.C. 300gg–41 et seq.) is amended by adding at the end the following:

2746.

Opportunity for independent, external third party review in cases of rescission

(a)

Notice and review right

If a health insurance issuer determines to rescind health insurance coverage for an individual in the individual market, before such rescission may take effect the issuer shall provide the individual with notice of such proposed rescission and an opportunity for a review of such determination by an independent, external third party under procedures specified by the Secretary under section 2742(f).

(b)

Independent determination

If the individual requests such review by an independent, external third party of a rescission of health insurance coverage, the coverage shall remain in effect until such third party determines that the coverage may be rescinded under the guidance issued by the Secretary under section 2742(f).

.

(d)

Effective Date

The amendments made by this section shall apply on and after October 1, 2010, with respect to health insurance coverage issued before, on, or after such date.

163.

Administrative simplification

(a)

Standardizing electronic administrative transactions

(1)

In general

Part C of title XI of the Social Security Act (42 U.S.C. 1320d et seq.) is amended by inserting after section 1173 the following new section:

1173A.

Standardize electronic administrative transactions

(a)

Standards for financial and administrative transactions

(1)

In general

The Secretary shall adopt and regularly update standards consistent with the goals described in paragraph (2).

(2)

Goals for financial and administrative transactions

The goals for standards under paragraph (1) are that such standards shall—

(A)

be unique with no conflicting or redundant standards;

(B)

be authoritative, permitting no additions or constraints for electronic transactions, including companion guides;

(C)

be comprehensive, efficient and robust, requiring minimal augmentation by paper transactions or clarification by further communications;

(D)

enable the real-time (or near real-time) determination of an individual’s financial responsibility at the point of service and, to the extent possible, prior to service, including whether the individual is eligible for a specific service with a specific physician at a specific facility, which may include utilization of a machine-readable health plan beneficiary identification card;

(E)

enable, where feasible, near real-time adjudication of claims;

(F)

provide for timely acknowledgment, response, and status reporting applicable to any electronic transaction deemed appropriate by the Secretary;

(G)

describe all data elements (such as reason and remark codes) in unambiguous terms, not permit optional fields, require that data elements be either required or conditioned upon set values in other fields, and prohibit additional conditions; and

(H)

harmonize all common data elements across administrative and clinical transaction standards.

(3)

Time for adoption

Not later than 2 years after the date of implementation of the X12 Version 5010 transaction standards implemented under this part, the Secretary shall adopt standards under this section.

(4)

Requirements for specific standards

The standards under this section shall be developed, adopted, and enforced so as to—

(A)

clarify, refine, complete, and expand, as needed, the standards required under section 1173;

(B)

require paper versions of standardized transactions to comply with the same standards as to data content such that a fully compliant, equivalent electronic transaction can be populated from the data from a paper version;

(C)

enable electronic funds transfers, in order to allow automated reconciliation with the related health care payment and remittance advice;

(D)

require timely and transparent claim and denial management processes, including tracking, adjudication, and appeal processing ;

(E)

require the use of a standard electronic transaction with which health care providers may quickly and efficiently enroll with a health plan to conduct the other electronic transactions provided for in this part; and

(F)

provide for other requirements relating to administrative simplification as identified by the Secretary, in consultation with stakeholders.

(5)

Building on existing standards

In developing the standards under this section, the Secretary shall build upon existing and planned standards.

(6)

Implementation and enforcement

Not later than 6 months after the date of the enactment of this section, the Secretary shall submit to the appropriate committees of Congress a plan for the implementation and enforcement, by not later than 5 years after such date of enactment, of the standards under this section. Such plan shall include—

(A)

a process and timeframe with milestones for developing the complete set of standards;

(B)

an expedited upgrade program for continually developing and approving additions and modifications to the standards as often as annually to improve their quality and extend their functionality to meet evolving requirements in health care;

(C)

programs to provide incentives for, and ease the burden of, implementation for certain health care providers, with special consideration given to such providers serving rural or underserved areas and ensure coordination with standards, implementation specifications, and certification criteria being adopted under the HITECH Act;

(D)

programs to provide incentives for, and ease the burden of, health care providers who volunteer to participate in the process of setting standards for electronic transactions;

(E)

an estimate of total funds needed to ensure timely completion of the implementation plan; and

(F)

an enforcement process that includes timely investigation of complaints, random audits to ensure compliance, civil monetary and programmatic penalties for non-compliance consistent with existing laws and regulations, and a fair and reasonable appeals process building off of enforcement provisions under this part.

(b)

Limitations on use of data

Nothing in this section shall be construed to permit the use of information collected under this section in a manner that would adversely affect any individual.

(c)

Protection of data

The Secretary shall ensure (through the promulgation of regulations or otherwise) that all data collected pursuant to subsection (a) are—

(1)

used and disclosed in a manner that meets the HIPAA privacy and security law (as defined in section 3009(a)(2) of the Public Health Service Act), including any privacy or security standard adopted under section 3004 of such Act; and

(2)

protected from all inappropriate internal use by any entity that collects, stores, or receives the data, including use of such data in determinations of eligibility (or continued eligibility) in health plans, and from other inappropriate uses, as defined by the Secretary.

.

(2)

Definitions

Section 1171 of such Act (42 U.S.C. 1320d) is amended—

(A)

in paragraph (7), by striking with reference to and all that follows and inserting with reference to a transaction or data element of health information in section 1173 means implementation specifications, certification criteria, operating rules, messaging formats, codes, and code sets adopted or established by the Secretary for the electronic exchange and use of information; and

(B)

by adding at the end the following new paragraph:

(9)

Operating rules

The term operating rules means business rules for using and processing transactions. Operating rules should address the following:

(A)

Requirements for data content using available and established national standards.

(B)

Infrastructure requirements that establish best practices for streamlining data flow to yield timely execution of transactions.

(C)

Policies defining the transaction related rights and responsibilities for entities that are transmitting or receiving data.

.

(3)

Conforming amendment

Section 1179(a) of such Act (42 U.S.C. 1320d–8(a)) is amended, in the matter before paragraph (1)—

(A)

by inserting on behalf of an individual after 1978); and

(B)

by inserting on behalf of an individual after for a financial institution and

(b)

Standards for claims attachments and coordination of benefits

(1)

Standard for health claims attachments

Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services shall promulgate a final rule to establish a standard for health claims attachment transaction described in section 1173(a)(2)(B) of the Social Security Act (42 U.S.C. 1320d-2(a)(2)(B)) and coordination of benefits.

(2)

Revision in processing payment transactions by financial institutions

(A)

In general

Section 1179 of the Social Security Act (42 U.S.C. 1320d–8) is amended, in the matter before paragraph (1)—

(i)

by striking or is engaged and inserting and is engaged; and

(ii)

by inserting (other than as a business associate for a covered entity) after for a financial institution.

(B)

Effective date

The amendments made by paragraph (1) shall apply to transactions occurring on or after such date (not later than 6 months after the date of the enactment of this Act) as the Secretary of Health and Human Services shall specify.

164.

Reinsurance program for retirees

(a)

Establishment

(1)

In general

Not later than 90 days after the date of the enactment of this Act, the Secretary of Health and Human Services shall establish a temporary reinsurance program (in this section referred to as the reinsurance program) to provide reimbursement to assist participating employment-based plans with the cost of providing health benefits to retirees and to eligible spouses, surviving spouses and dependents of such retirees.

(2)

Definitions

For purposes of this section:

(A)

The term eligible employment-based plan means a group health benefits plan that—

(i)

is maintained by one or more employers, former employers or employee associations, or a voluntary employees’ beneficiary association, or a committee or board of individuals appointed to administer such plan, and

(ii)

provides health benefits to retirees.

(B)

The term health benefits means medical, surgical, hospital, prescription drug, and such other benefits as shall be determined by the Secretary, whether self-funded or delivered through the purchase of insurance or otherwise.

(C)

The term participating employment-based plan means an eligible employment-based plan that is participating in the reinsurance program.

(D)

The term retiree means, with respect to a participating employment-benefit plan, an individual who—

(i)

is 55 years of age or older;

(ii)

is not eligible for coverage under title XVIII of the Social Security Act; and

(iii)

is not an active employee of an employer maintaining the plan or of any employer that makes or has made substantial contributions to fund such plan.

(E)

The term Secretary means Secretary of Health and Human Services.

(b)

Participation

To be eligible to participate in the reinsurance program, an eligible employment-based plan shall submit to the Secretary an application for participation in the program, at such time, in such manner, and containing such information as the Secretary shall require.

(c)

Payment

(1)

Submission of claims

(A)

In general

Under the reinsurance program, a participating employment-based plan shall submit claims for reimbursement to the Secretary which shall contain documentation of the actual costs of the items and services for which each claim is being submitted.

(B)

Basis for claims

Each claim submitted under subparagraph (A) shall be based on the actual amount expended by the participating employment-based plan involved within the plan year for the appropriate employment based health benefits provided to a retiree or to the spouse, surviving spouse, or dependent of a retiree. In determining the amount of any claim for purposes of this subsection, the participating employment-based plan shall take into account any negotiated price concessions (such as discounts, direct or indirect subsidies, rebates, and direct or indirect remunerations) obtained by such plan with respect to such health benefits. For purposes of calculating the amount of any claim, the costs paid by the retiree or by the spouse, surviving spouse, or dependent of the retiree in the form of deductibles, co-payments, and co-insurance shall be included along with the amounts paid by the participating employment-based plan.

(2)

Program payments and limit

If the Secretary determines that a participating employment-based plan has submitted a valid claim under paragraph (1), the Secretary shall reimburse such plan for 80 percent of that portion of the costs attributable to such claim that exceeds $15,000, but is less than $90,000. Such amounts shall be adjusted each year based on the percentage increase in the medical care component of the Consumer Price Index (rounded to the nearest multiple of $1,000) for the year involved.

(3)

Use of payments

Amounts paid to a participating employment-based plan under this subsection shall be used to lower the costs borne directly by the participants and beneficiaries for health benefits provided under such plan in the form of premiums, co-payments, deductibles, co-insurance, or other out-of-pocket costs. Such payments shall not be used to reduce the costs of an employer maintaining the participating employment-based plan. The Secretary shall develop a mechanism to monitor the appropriate use of such payments by such plans.

(4)

Appeals and program protections

The Secretary shall establish—

(A)

an appeals process to permit participating employment-based plans to appeal a determination of the Secretary with respect to claims submitted under this section; and

(B)

procedures to protect against fraud, waste, and abuse under the program.

(5)

Audits

The Secretary shall conduct annual audits of claims data submitted by participating employment-based plans under this section to ensure that they are in compliance with the requirements of this section.

(d)

Retiree Reserve Trust Fund

(1)

Establishment

(A)

In general

There is established in the Treasury of the United States a trust fund to be known as the Retiree Reserve Trust Fund (referred to in this section as the Trust Fund), that shall consist of such amounts as may be appropriated or credited to the Trust Fund as provided for in this subsection to enable the Secretary to carry out the reinsurance program. Such amounts shall remain available until expended.

(B)

Funding

There are hereby appropriated to the Trust Fund, out of any moneys in the Treasury not otherwise appropriated, an amount requested by the Secretary as necessary to carry out this section, except that the total of all such amounts requested shall not exceed $10,000,000,000.

(C)

Appropriations from the Trust Fund

(i)

In general

Amounts in the Trust Fund are appropriated to provide funding to carry out the reinsurance program and shall be used to carry out such program.

(ii)

Budgetary implications

Amounts appropriated under clause (i), and outlays flowing from such appropriations, shall not be taken into account for purposes of any budget enforcement procedures including allocations under section 302(a) and (b) of the Balanced Budget and Emergency Deficit Control Act and budget resolutions for fiscal years during which appropriations are made from the Trust Fund.

(iii)

Limitation to available funds

The Secretary has the authority to stop taking applications for participation in the program or take such other steps in reducing expenditures under the reinsurance program in order to ensure that expenditures under the reinsurance program do not exceed the funds available under this subsection.

II

Health Insurance Exchange and Related Provisions

A

Health Insurance Exchange

201.

Establishment of Health Insurance Exchange; outline of duties; definitions

(a)

Establishment

There is established within the Health Choices Administration and under the direction of the Commissioner a Health Insurance Exchange in order to facilitate access of individuals and employers, through a transparent process, to a variety of choices of affordable, quality health insurance coverage, including a public health insurance option.

(b)

Outline of duties of Commissioner

In accordance with this subtitle and in coordination with appropriate Federal and State officials as provided under section 143(b), the Commissioner shall—

(1)

under section 204 establish standards for, accept bids from, and negotiate and enter into contracts with, QHBP offering entities for the offering of health benefits plans through the Health Insurance Exchange, with different levels of benefits required under section 203, and including with respect to oversight and enforcement;

(2)

under section 205 facilitate outreach and enrollment in such plans of Exchange-eligible individuals and employers described in section 202; and

(3)

conduct such activities related to the Health Insurance Exchange as required, including establishment of a risk pooling mechanism under section 206 and consumer protections under subtitle D of title I.

(c)

Exchange-participating health benefits plan defined

In this subdivision, the term Exchange-participating health benefits plan means a qualified health benefits plan that is offered through the Health Insurance Exchange.

202.

Exchange-eligible individuals and employers

(a)

Access to coverage

In accordance with this section, all individuals are eligible to obtain coverage through enrollment in an Exchange-participating health benefits plan offered through the Health Insurance Exchange unless such individuals are enrolled in another qualified health benefits plan or other acceptable coverage.

(b)

Definitions

In this subdivision:

(1)

Exchange-eligible individual

The term Exchange-eligible individual means an individual who is eligible under this section to be enrolled through the Health Insurance Exchange in an Exchange-participating health benefits plan and, with respect to family coverage, includes dependents of such individual.

(2)

Exchange-eligible employer

The term Exchange-eligible employer means an employer that is eligible under this section to enroll through the Health Insurance Exchange employees of the employer (and their dependents) in Exchange-eligible health benefits plans.

(3)

Employment-related definitions

The terms employer, employee, full-time employee, and part-time employee have the meanings given such terms by the Commissioner for purposes of this subdivision.

(c)

Transition

Individuals and employers shall only be eligible to enroll or participate in the Health Insurance Exchange in accordance with the following transition schedule:

(1)

First year

In Y1 (as defined in section 100(c))—

(A)

individuals described in subsection (d)(1), including individuals described in paragraphs (3) and (4) of subsection (d); and

(B)

smallest employers described in subsection (e)(1).

(2)

Second year

In Y2—

(A)

individuals and employers described in paragraph (1); and

(B)

smaller employers described in subsection (e)(2).

(3)

Third and subsequent years

In Y3 and subsequent years—

(A)

individuals and employers described in paragraph (2); and

(B)

larger employers as permitted by the Commissioner under subsection (e)(3).

(d)

Individuals

(1)

Individual described

Subject to the succeeding provisions of this subsection, an individual described in this paragraph is an individual who—

(A)

is not enrolled in coverage described in subparagraphs (C) through (F) of paragraph (2); and

(B)

is not enrolled in coverage as a full-time employee (or as a dependent of such an employee) under a group health plan if the coverage and an employer contribution under the plan meet the requirements of section 312.

For purposes of subparagraph (B), in the case of an individual who is self-employed, who has at least 1 employee, and who meets the requirements of section 312, such individual shall be deemed a full-time employee described in such subparagraph.
(2)

Acceptable coverage

For purposes of this subdivision, the term acceptable coverage means any of the following:

(A)

Qualified health benefits plan coverage

Coverage under a qualified health benefits plan.

(B)

Grandfathered health insurance coverage; coverage under current group health plan

Coverage under a grandfathered health insurance coverage (as defined in subsection (a) of section 102) or under a current group health plan (described in subsection (b) of such section).

(C)

Medicare

Coverage under part A of title XVIII of the Social Security Act.

(D)

Medicaid

Coverage for medical assistance under title XIX of the Social Security Act, excluding such coverage that is only available because of the application of subsection (u), (z), or (aa) of section 1902 of such Act

(E)

Members of the Armed Forces and dependents (including TRICARE)

Coverage under chapter 55 of title 10, United States Code, including similar coverage furnished under section 1781 of title 38 of such Code.

(F)

VA

Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code, but only if the coverage for the individual involved is determined by the Commissioner in coordination with the Secretary of Treasury to be not less than a level specified by the Commissioner and Secretary of Veteran’s Affairs, in coordination with the Secretary of Treasury, based on the individual’s priority for services as provided under section 1705(a) of such title.

(G)

Other coverage

Such other health benefits coverage, such as a State health benefits risk pool, as the Commissioner, in coordination with the Secretary of the Treasury, recognizes for purposes of this paragraph.

The Commissioner shall make determinations under this paragraph in coordination with the Secretary of the Treasury.
(3)

Treatment of certain non-traditional Medicaid eligible individuals

An individual who is a non-traditional Medicaid eligible individual (as defined in section 205(e)(4)(C)) in a State may be an Exchange-eligible individual if the individual was enrolled in a qualified health benefits plan, grandfathered health insurance coverage, or current group health plan during the 6 months before the individual became a non-traditional Medicaid eligible individual. During the period in which such an individual has chosen to enroll in an Exchange-participating health benefits plan, the individual is not also eligible for medical assistance under Medicaid.

(4)

Continuing eligibility permitted

(A)

In general

Except as provided in subparagraph (B), once an individual qualifies as an Exchange-eligible individual under this subsection (including as an employee or dependent of an employee of an Exchange-eligible employer) and enrolls under an Exchange-participating health benefits plan through the Health Insurance Exchange, the individual shall continue to be treated as an Exchange-eligible individual until the individual is no longer enrolled with an Exchange-participating health benefits plan.

(B)

Exceptions

(i)

In general

Subparagraph (A) shall not apply to an individual once the individual becomes eligible for coverage—

(I)

under part A of the Medicare program;

(II)

under the Medicaid program as a Medicaid eligible individual, except as permitted under paragraph (3) or clause (ii); or

(III)

in such other circumstances as the Commissioner may provide.

(ii)

Transition period

In the case described in clause (i)(II), the Commissioner shall permit the individual to continue treatment under subparagraph (A) until such limited time as the Commissioner determines it is administratively feasible, consistent with minimizing disruption in the individual’s access to health care.

(e)

Employers

(1)

Smallest employer

Subject to paragraph (4), smallest employers described in this paragraph are employers with 10 or fewer employees.

(2)

Smaller employers

Subject to paragraph (4), smaller employers described in this paragraph are employers that are not smallest employers described in paragraph (1) and have 20 or fewer employees.

(3)

Larger employers

(A)

In general

Beginning with Y3, the Commissioner may permit employers not described in paragraph (1) or (2) to be Exchange-eligible employers.

(B)

Phase-in

In applying subparagraph (A), the Commissioner may phase-in the application of such subparagraph based on the number of full-time employees of an employer and such other considerations as the Commissioner deems appropriate.

(4)

Continuing eligibility

Once an employer is permitted to be an Exchange-eligible employer under this subsection and enrolls employees through the Health Insurance Exchange, the employer shall continue to be treated as an Exchange-eligible employer for each subsequent plan year regardless of the number of employees involved unless and until the employer meets the requirement of section 311(a) through paragraph (1) of such section by offering a group health plan and not through offering an Exchange-participating health benefits plan.

(5)

Employer participation and contributions

(A)

Satisfaction of employer responsibility

For any year in which an employer is an Exchange-eligible employer, such employer may meet the requirements of section 312 with respect to employees of such employer by offering such employees the option of enrolling with Exchange-participating health benefits plans through the Health Insurance Exchange consistent with the provisions of subtitle B of title III.

(B)

Employee choice

Any employee offered Exchange-participating health benefits plans by the employer of such employee under subparagraph (A) may choose coverage under any such plan. That choice includes, with respect to family coverage, coverage of the dependents of such employee.

(6)

Affiliated groups

Any employer which is part of a group of employers who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated, for purposes of this subtitle, as a single employer.

(7)

Other counting rules

The Commissioner shall establish rules relating to how employees are counted for purposes of carrying out this subsection.

(f)

Special situation authority

The Commissioner shall have the authority to establish such rules as may be necessary to deal with special situations with regard to uninsured individuals and employers participating as Exchange-eligible individuals and employers, such as transition periods for individuals and employers who gain, or lose, Exchange-eligible participation status, and to establish grace periods for premium payment.

(g)

Surveys of individuals and employers

The Commissioner shall provide for periodic surveys of Exchange-eligible individuals and employers concerning satisfaction of such individuals and employers with the Health Insurance Exchange and Exchange-participating health benefits plans.

(h)

Exchange access study

(1)

In general

The Commissioner shall conduct a study of access to the Health Insurance Exchange for individuals and for employers, including individuals and employers who are not eligible and enrolled in Exchange-participating health benefits plans. The goal of the study is to determine if there are significant groups and types of individuals and employers who are not Exchange eligible individuals or employers, but who would have improved benefits and affordability if made eligible for coverage in the Exchange.

(2)

Items included in study

Such study also shall examine—

(A)

the terms, conditions, and affordability of group health coverage offered by employers and QHBP offering entities outside of the Exchange compared to Exchange-participating health benefits plans; and

(B)

the affordability-test standard for access of certain employed individuals to coverage in the Health Insurance Exchange.

(3)

Report

Not later than January 1 of Y3, in Y6, and thereafter, the Commissioner shall submit to Congress on the study conducted under this subsection and shall include in such report recommendations regarding changes in standards for Exchange eligibility for individuals and employers.

203.

Benefits package levels

(a)

In general

The Commissioner shall specify the benefits to be made available under Exchange-participating health benefits plans during each plan year, consistent with subtitle C of title I and this section.

(b)

Limitation on health benefits plans offered by offering entities

The Commissioner may not enter into a contract with a QHBP offering entity under section 204(c) for the offering of an Exchange-participating health benefits plan in a service area unless the following requirements are met:

(1)

Required offering of basic plan

The entity offers only one basic plan for such service area.

(2)

Optional offering of enhanced plan

If and only if the entity offers a basic plan for such service area, the entity may offer one enhanced plan for such area.

(3)

Optional offering of premium plan

If and only if the entity offers an enhanced plan for such service area, the entity may offer one premium plan for such area.

(4)

Optional offering of premium-plus plans

If and only if the entity offers a premium plan for such service area, the entity may offer one or more premium-plus plans for such area.

All such plans may be offered under a single contract with the Commissioner.
(c)

Specification of benefit levels for plans

(1)

In general

The Commissioner shall establish the following standards consistent with this subsection and title I:

(A)

Basic, enhanced, and premium plans

Standards for 3 levels of Exchange-participating health benefits plans: basic, enhanced, and premium (in this subdivision referred to as a basic plan, enhanced plan, and premium plan, respectively).

(B)

Premium-plus plan benefits

Standards for additional benefits that may be offered, consistent with this subsection and subtitle C of title I, under a premium plan (such a plan with additional benefits referred to in this subdivision as a premium-plus plan) .

(2)

Basic plan

(A)

In general

A basic plan shall offer the essential benefits package required under title I for a qualified health benefits plan.

(B)

Tiered cost-sharing for affordable credit eligible individuals

In the case of an affordable credit eligible individual (as defined in section 242(a)(1)) enrolled in an Exchange-participating health benefits plan, the benefits under a basic plan are modified to provide for the reduced cost-sharing for the income tier applicable to the individual under section 244(c).

(3)

Enhanced plan

An enhanced plan shall offer, in addition to the level of benefits under the basic plan, a lower level of cost-sharing as provided under title I consistent with section 123(b)(5)(A).

(4)

Premium plan

A premium plan shall offer, in addition to the level of benefits under the basic plan, a lower level of cost-sharing as provided under title I consistent with section 123(b)(5)(B).

(5)

Premium-plus plan

A premium-plus plan is a premium plan that also provides additional benefits, such as adult oral health and vision care, approved by the Commissioner. The portion of the premium that is attributable to such additional benefits shall be separately specified.

(6)

Range of permissible variation in cost-sharing

The Commissioner shall establish a permissible range of variation of cost-sharing for each basic, enhanced, and premium plan, except with respect to any benefit for which there is no cost-sharing permitted under the essential benefits package. Such variation shall permit a variation of not more than plus (or minus) 10 percent in cost-sharing with respect to each benefit category specified under section 122.

(d)

Treatment of State benefit mandates

Insofar as a State requires a health insurance issuer offering health insurance coverage to include benefits beyond the essential benefits package, such requirement shall continue to apply to an Exchange-participating health benefits plan, if the State has entered into an arrangement satisfactory to the Commissioner to reimburse the Commissioner for the amount of any net increase in affordability premium credits under subtitle C as a result of an increase in premium in basic plans as a result of application of such requirement.

204.

Contracts for the offering of Exchange-participating health benefits plans

(a)

Contracting duties

In carrying out section 201(b)(1) and consistent with this subtitle:

(1)

Offering entity and plan standards

The Commissioner shall—

(A)

establish standards necessary to implement the requirements of this title and title I for—

(i)

QHBP offering entities for the offering of an Exchange-participating health benefits plan; and

(ii)

for Exchange-participating health benefits plans; and

(B)

certify QHBP offering entities and qualified health benefits plans as meeting such standards and requirements of this title and title I for purposes of this subtitle.

(2)

Soliciting and negotiating bids; contracts

The Commissioner shall—

(A)

solicit bids from QHBP offering entities for the offering of Exchange-participating health benefits plans;

(B)

based upon a review of such bids, negotiate with such entities for the offering of such plans; and

(C)

enter into contracts with such entities for the offering of such plans through the Health Insurance Exchange under terms (consistent with this title) negotiated between the Commissioner and such entities.

(3)

FAR not applicable

The provisions of the Federal Acquisition Regulation shall not apply to contracts between the Commissioner and QHBP offering entities for the offering of Exchange-participating health benefits plans under this title.

(b)

Standards for QHBP offering entities to offer Exchange-participating health benefits plans

The standards established under subsection (a)(1)(A) shall require that, in order for a QHBP offering entity to offer an Exchange-participating health benefits plan, the entity must meet the following requirements:

(1)

Licensed

The entity shall be licensed to offer health insurance coverage under State law for each State in which it is offering such coverage.

(2)

Data reporting

The entity shall provide for the reporting of such information as the Commissioner may specify, including information necessary to administer the risk pooling mechanism described in section 206(b) and information to address disparities in health and health care.

(3)

Implementing affordability credits

The entity shall provide for implementation of the affordability credits provided for enrollees under subtitle C, including the reduction in cost-sharing under section 244(c).

(4)

Enrollment

The entity shall accept all enrollments under this subtitle, subject to such exceptions (such as capacity limitations) in accordance with the requirements under title I for a qualified health benefits plan. The entity shall notify the Commissioner if the entity projects or anticipates reaching such a capacity limitation that would result in a limitation in enrollment.

(5)

Risk pooling participation

The entity shall participate in such risk pooling mechanism as the Commissioner establishes under section 206(b).

(6)

Essential community providers

With respect to the basic plan offered by the entity, the entity shall contract for outpatient services with covered entities (as defined in section 340B(a)(4) of the Public Health Service Act, as in effect as of July 1, 2009). The Commissioner shall specify the extent to which and manner in which the previous sentence shall apply in the case of a basic plan with respect to which the Commissioner determines provides substantially all benefits through a health maintenance organization, as defined in section 2791(b)(3) of the Public Health Service Act.

(7)

Culturally and linguistically appropriate services and communications

The entity shall provide for culturally and linguistically appropriate communication and health services.

(8)

Additional requirements

The entity shall comply with other applicable requirements of this title, as specified by the Commissioner, which shall include standards regarding billing and collection practices for premiums and related grace periods and which may include standards to ensure that the entity does not use coercive practices to force providers not to contract with other entities offering coverage through the Health Insurance Exchange.

(c)

Contracts

(1)

Bid application

To be eligible to enter into a contract under this section, a QHBP offering entity shall submit to the Commissioner a bid at such time, in such manner, and containing such information as the Commissioner may require.

(2)

Term

Each contract with a QHBP offering entity under this section shall be for a term of not less than one year, but may be made automatically renewable from term to term in the absence of notice of termination by either party.

(3)

Enforcement of network adequacy

In the case of a health benefits plan of a QHBP offering entity that uses a provider network, the contract under this section with the entity shall provide that if—

(A)

the Commissioner determines that such provider network does not meet such standards as the Commissioner shall establish under section 115; and

(B)

an individual enrolled in such plan receives an item or service from a provider that is not within such network;

then any cost-sharing for such item or service shall be equal to the amount of such cost-sharing that would be imposed if such item or service was furnished by a provider within such network.
(4)

Oversight and enforcement responsibilities

The Commissioner shall establish processes, in coordination with State insurance regulators, to oversee, monitor, and enforce applicable requirements of this title with respect to QHBP offering entities offering Exchange-participating health benefits plans and such plans, including the marketing of such plans. Such processes shall include the following:

(A)

Grievance and complaint mechanisms

The Commissioner shall establish, in coordination with State insurance regulators, a process under which Exchange-eligible individuals and employers may file complaints concerning violations of such standards.

(B)

Enforcement

In carrying out authorities under this subdivision relating to the Health Insurance Exchange, the Commissioner may impose one or more of the intermediate sanctions described in section 142(c).

(C)

Termination

(i)

In general

The Commissioner may terminate a contract with a QHBP offering entity under this section for the offering of an Exchange-participating health benefits plan if such entity fails to comply with the applicable requirements of this title. Any determination by the Commissioner to terminate a contract shall be made in accordance with formal investigation and compliance procedures established by the Commissioner under which—

(I)

the Commissioner provides the entity with the reasonable opportunity to develop and implement a corrective action plan to correct the deficiencies that were the basis of the Commissioner’s determination; and

(II)

the Commissioner provides the entity with reasonable notice and opportunity for hearing (including the right to appeal an initial decision) before terminating the contract.

(ii)

Exception for imminent and serious risk to health

Clause (i) shall not apply if the Commissioner determines that a delay in termination, resulting from compliance with the procedures specified in such clause prior to termination, would pose an imminent and serious risk to the health of individuals enrolled under the qualified health benefits plan of the QHBP offering entity.

(D)

Construction

Nothing in this subsection shall be construed as preventing the application of other sanctions under subtitle E of title I with respect to an entity for a violation of such a requirement.

205.

Outreach and enrollment of Exchange-eligible individuals and employers in Exchange-participating health benefits plan

(a)

In general

(1)

Outreach

The Commissioner shall conduct outreach activities consistent with subsection (c), including through use of appropriate entities as described in paragraph (4) of such subsection, to inform and educate individuals and employers about the Health Insurance Exchange and Exchange-participating health benefits plan options. Such outreach shall include outreach specific to vulnerable populations, such as children, individuals with disabilities, individuals with mental illness, and individuals with other cognitive impairments.

(2)

Eligibility

The Commissioner shall make timely determinations of whether individuals and employers are Exchange-eligible individuals and employers (as defined in section 202).

(3)

Enrollment

The Commissioner shall establish and carry out an enrollment process for Exchange-eligible individuals and employers, including at community locations, in accordance with subsection (b).

(b)

Enrollment process

(1)

In general

The Commissioner shall establish a process consistent with this title for enrollments in Exchange-participating health benefits plans. Such process shall provide for enrollment through means such as the mail, by telephone, electronically, and in person.

(2)

Enrollment periods

(A)

Open enrollment period

The Commissioner shall establish an annual open enrollment period during which an Exchange-eligible individual or employer may elect to enroll in an Exchange-participating health benefits plan for the following plan year and an enrollment period for affordability credits under subtitle C. Such periods shall be during September through November of each year, or such other time that would maximize timeliness of income verification for purposes of such subtitle. The open enrollment period shall not be less than 30 days.

(B)

Special enrollment

The Commissioner shall also provide for special enrollment periods to take into account special circumstances of individuals and employers, such as an individual who—

(i)

loses acceptable coverage;

(ii)

experiences a change in marital or other dependent status;

(iii)

moves outside the service area of the Exchange-participating health benefits plan in which the individual is enrolled; or

(iv)

experiences a significant change in income.

(C)

Enrollment Information

The Commissioner shall provide for the broad dissemination of information to prospective enrollees on the enrollment process, including before each open enrollment period. In carrying out the previous sentence, the Commissioner may work with other appropriate entities to facilitate such provision of information.

(3)

Automatic enrollment for non-Medicaid eligible individuals

(A)

In general

The Commissioner shall provide for a process under which individuals who are Exchange-eligible individuals described in subparagraph (B) are automatically enrolled under an appropriate Exchange-participating health benefits plan. Such process may involve a random assignment or some other form of assignment that takes into account the health care providers used by the individual involved or such other relevant factors as the Commissioner may specify.

(B)

Subsidized individuals described

An individual described in this subparagraph is an Exchange-eligible individual who is either of the following:

(i)

Affordability credit eligible individuals

The individual—

(I)

has applied for, and been determined eligible for, affordability credits under subtitle C;

(II)

has not opted out from receiving such affordability credit; and

(III)

does not otherwise enroll in another Exchange-participating health benefits plan.

(ii)

Individuals enrolled in a terminated plan

The individual is enrolled in an Exchange-participating health benefits plan that is terminated (during or at the end of a plan year) and who does not otherwise enroll in another Exchange-participating health benefits plan.

(4)

Direct payment of premiums to plans

Under the enrollment process, individuals enrolled in an Exchange-participating health benefits plan shall pay such plans directly, and not through the Commissioner or the Health Insurance Exchange.

(c)

Coverage information and assistance

(1)

Coverage information

The Commissioner shall provide for the broad dissemination of information on Exchange-participating health benefits plans offered under this title. Such information shall be provided in a comparative manner, and shall include information on benefits, premiums, cost-sharing, quality, provider networks, and consumer satisfaction.

(2)

Consumer assistance with choice

To provide assistance to Exchange-eligible individuals and employers, the Commissioner shall—

(A)

provide for the operation of a toll-free telephone hotline to respond to requests for assistance and maintain an Internet website through which individuals may obtain information on coverage under Exchange-participating health benefits plans and file complaints;

(B)

develop and disseminate information to Exchange-eligible enrollees on their rights and responsibilities;

(C)

assist Exchange-eligible individuals in selecting Exchange-participating health benefits plans and obtaining benefits through such plans; and

(D)

ensure that the Internet website described in subparagraph (A) and the information described in subparagraph (B) is developed using plain language (as defined in section 133(a)(2)).

(3)

Use of other entities

In carrying out this subsection, the Commissioner may work with other appropriate entities to facilitate the dissemination of information under this subsection and to provide assistance as described in paragraph (2).

(d)

Special duties related to Medicaid and CHIP

(1)

Coverage for certain newborns

(A)

In general

In the case of a child born in the United States who at the time of birth is not otherwise covered under acceptable coverage, for the period of time beginning on the date of birth and ending on the date the child otherwise is covered under acceptable coverage (or, if earlier, the end of the month in which the 60-day period, beginning on the date of birth, ends), the child shall be deemed—

(i)

to be a non-traditional Medicaid eligible individual (as defined in subsection (e)(5)) for purposes of this subdivision and Medicaid; and

(ii)

to have elected to enroll in Medicaid through the application of paragraph (3).

(B)

Extended treatment as traditional Medicaid eligible individual

In the case of a child described in subparagraph (A) who at the end of the period referred to in such subparagraph is not otherwise covered under acceptable coverage, the child shall be deemed (until such time as the child obtains such coverage or the State otherwise makes a determination of the child’s eligibility for medical assistance under its Medicaid plan pursuant to section 1943(c)(1) of the Social Security Act) to be a traditional Medicaid eligible individual described in section 1902(l)(1)(B) of such Act.

(2)

CHIP transition

A child who, as of the day before the first day of Y1, is eligible for child health assistance under title XXI of the Social Security Act (including a child receiving coverage under an arrangement described in section 2101(a)(2) of such Act) is deemed as of such first day to be an Exchange-eligible individual unless the individual is a traditional Medicaid eligible individual as of such day.

(3)

Automatic enrollment of Medicaid eligible individuals into Medicaid

The Commissioner shall provide for a process under which an individual who is described in section 202(d)(3) and has not elected to enroll in an Exchange-participating health benefits plan is automatically enrolled under Medicaid.

(4)

Notifications

The Commissioner shall notify each State in Y1 and for purposes of section 1902(gg)(1) of the Social Security Act (as added by section 1703(a)) whether the Health Insurance Exchange can support enrollment of children described in paragraph (2) in such State in such year.

(e)

Medicaid coverage for Medicaid eligible individuals

(1)

In general

(A)

Choice for limited Exchange-eligible individuals

As part of the enrollment process under subsection (b), the Commissioner shall provide the option, in the case of an Exchange-eligible individual described in section 202(d)(3), for the individual to elect to enroll under Medicaid instead of under an Exchange-participating health benefits plan. Such an individual may change such election during an enrollment period under subsection (b)(2).

(B)

Medicaid enrollment obligation

An Exchange eligible individual may apply, in the manner described in section 241(b)(1), for a determination of whether the individual is a Medicaid-eligible individual. If the individual is determined to be so eligible, the Commissioner, through the Medicaid memorandum of understanding, shall provide for the enrollment of the individual under the State Medicaid plan in accordance with the Medicaid memorandum of understanding under paragraph (4). In the case of such an enrollment, the State shall provide for the same periodic redetermination of eligibility under Medicaid as would otherwise apply if the individual had directly applied for medical assistance to the State Medicaid agency.

(2)

Non-traditional Medicaid eligible individuals

In the case of a non-traditional Medicaid eligible individual described in section 202(d)(3) who elects to enroll under Medicaid under paragraph (1)(A), the Commissioner shall provide for the enrollment of the individual under the State Medicaid plan in accordance with the Medicaid memorandum of understanding under paragraph (4).

(3)

Coordinated enrollment with State through memorandum of understanding

The Commissioner, in consultation with the Secretary of Health and Human Services, shall enter into a memorandum of understanding with each State (each in this subdivision referred to as a Medicaid memorandum of understanding) with respect to coordinating enrollment of individuals in Exchange-participating health benefits plans and under the State’s Medicaid program consistent with this section and to otherwise coordinate the implementation of the provisions of this subdivision with respect to the Medicaid program. Such memorandum shall permit the exchange of information consistent with the limitations described in section 1902(a)(7) of the Social Security Act. Nothing in this section shall be construed as permitting such memorandum to modify or vitiate any requirement of a State Medicaid plan.

(4)

Medicaid eligible individuals

For purposes of this subdivision:

(A)

Medicaid eligible individual

The term Medicaid eligible individual means an individual who is eligible for medical assistance under Medicaid.

(B)

Traditional Medicaid eligible individual

The term traditional Medicaid eligible individual means a Medicaid eligible individual other than an individual who is—

(i)

a Medicaid eligible individual by reason of the application of subclause (VIII) of section 1902(a)(10)(A)(i) of the Social Security Act; or

(ii)

a childless adult not described in section 1902(a)(10)(A) or (C) of such Act (as in effect as of the day before the date of the enactment of this Act).

(C)

Non-traditional Medicaid eligible individual

The term non-traditional Medicaid eligible individual means a Medicaid eligible individual who is not a traditional Medicaid eligible individual.

(f)

Effective culturally and linguistically appropriate communication

In carrying out this section, the Commissioner shall establish effective methods for communicating in plain language and a culturally and linguistically appropriate manner.

206.

Other functions

(a)

Coordination of affordability credits

The Commissioner shall coordinate the distribution of affordability premium and cost-sharing credits under subtitle C to QHBP offering entities offering Exchange-participating health benefits plans.

(b)

Coordination of risk pooling

The Commissioner shall establish a mechanism whereby there is an adjustment made of the premium amounts payable among QHBP offering entities offering Exchange-participating health benefits plans of premiums collected for such plans that takes into account (in a manner specified by the Commissioner) the differences in the risk characteristics of individuals and employers enrolled under the different Exchange-participating health benefits plans offered by such entities so as to minimize the impact of adverse selection of enrollees among the plans offered by such entities.

(c)

Special Inspector General for the Health Insurance Exchange

(1)

Establishment; appointment

There is hereby established the Office of the Special Inspector General for the Health Insurance Exchange, to be headed by a Special Inspector General for the Health Insurance Exchange (in this subsection referred to as the Special Inspector General) to be appointed by the President, by and with the advice and consent of the Senate. The nomination of an individual as Special Inspector General shall be made as soon as practicable after the establishment of the program under this subtitle.

(2)

Duties

The Special Inspector General shall—

(A)

conduct, supervise, and coordinate audits, evaluations and investigations of the Health Insurance Exchange to protect the integrity of the Health Insurance Exchange, as well as the health and welfare of participants in the Exchange;

(B)

report both to the Commissioner and to the Congress regarding program and management problems and recommendations to correct them;

(C)

have other duties (described in paragraphs (2) and (3) of section 121 of division A of Public Law 110–343) in relation to the duties described in the previous subparagraphs; and

(D)

have the authorities provided in section 6 of the Inspector General Act of 1978 in carrying out duties under this paragraph.

(3)

Application of other special inspector general provisions

The provisions of subsections (b) (other than paragraphs (1) and (3)), (d) (other than paragraph (1)), and (e) of section 121 of division A of the Emergency Economic Stabilization Act of 2009 (Public Law 110–343) shall apply to the Special Inspector General under this subsection in the same manner as such provisions apply to the Special Inspector General under such section.

(4)

Reports

Not later than one year after the confirmation of the Special Inspector General, and annually thereafter, the Special Inspector General shall submit to the appropriate committees of Congress a report summarizing the activities of the Special Inspector General during the one year period ending on the date such report is submitted.

(5)

Termination

The Office of the Special Inspector General shall terminate five years after the date of the enactment of this Act.

207.

Health Insurance Exchange Trust Fund

(a)

Establishment of Health Insurance Exchange Trust Fund

There is created within the Treasury of the United States a trust fund to be known as the Health Insurance Exchange Trust Fund (in this section referred to as the Trust Fund), consisting of such amounts as may be appropriated or credited to the Trust Fund under this section or any other provision of law.

(b)

Payments from Trust Fund

The Commissioner shall pay from time to time from the Trust Fund such amounts as the Commissioner determines are necessary to make payments to operate the Health Insurance Exchange, including payments under subtitle C (relating to affordability credits).

(c)

Transfers to Trust Fund

(1)

Dedicated payments

There is hereby appropriated to the Trust Fund amounts equivalent to the following:

(A)

Taxes on individuals not obtaining acceptable coverage

The amounts received in the Treasury under section 59B of the Internal Revenue Code of 1986 (relating to requirement of health insurance coverage for individuals).

(B)

Employment taxes on employers not providing acceptable coverage

The amounts received in the Treasury under section 3111(c) of the Internal Revenue Code of 1986 (relating to employers electing to not provide health benefits).

(C)

Excise tax on failures to meet certain health coverage requirements

The amounts received in the Treasury under section 4980H(b) (relating to excise tax with respect to failure to meet health coverage participation requirements).

(2)

Appropriations to cover government contributions

There are hereby appropriated, out of any moneys in the Treasury not otherwise appropriated, to the Trust Fund, an amount equivalent to the amount of payments made from the Trust Fund under subsection (b) plus such amounts as are necessary reduced by the amounts deposited under paragraph (1).

(d)

Application of certain rules

Rules similar to the rules of subchapter B of chapter 98 of the Internal Revenue Code of 1986 shall apply with respect to the Trust Fund.

208.

Optional operation of State-based health insurance exchanges

(a)

In general

If—

(1)

a State (or group of States, subject to the approval of the Commissioner) applies to the Commissioner for approval of a State-based Health Insurance Exchange to operate in the State (or group of States); and

(2)

the Commissioner approves such State-based Health Insurance Exchange,

then, subject to subsections (c) and (d), the State-based Health Insurance Exchange shall operate, instead of the Health Insurance Exchange, with respect to such State (or group of States). The Commissioner shall approve a State-based Health Insurance Exchange if it meets the requirements for approval under subsection (b).
(b)

Requirements for approval

The Commissioner may not approve a State-based Health Insurance Exchange under this section unless the following requirements are met:

(1)

The State-based Health Insurance Exchange must demonstrate the capacity to and provide assurances satisfactory to the Commissioner that the State-based Health Insurance Exchange will carry out the functions specified for the Health Insurance Exchange in the State (or States) involved, including—

(A)

negotiating and contracting with QHBP offering entities for the offering of Exchange-participating health benefits plan, which satisfy the standards and requirements of this title and title I;

(B)

enrolling Exchange-eligible individuals and employers in such State in such plans;

(C)

the establishment of sufficient local offices to meet the needs of Exchange-eligible individuals and employers;

(D)

administering affordability credits under subtitle B using the same methodologies (and at least the same income verification methods) as would otherwise apply under such subtitle and at a cost to the Federal Government which does exceed the cost to the Federal Government if this section did not apply; and

(E)

enforcement activities consistent with federal requirements.

(2)

There is no more than one Health Insurance Exchange operating with respect to any one State.

(3)

The State provides assurances satisfactory to the Commissioner that approval of such an Exchange will not result in any net increase in expenditures to the Federal Government.

(4)

The State provides for reporting of such information as the Commissioner determines and assurances satisfactory to the Commissioner that it will vigorously enforce violations of applicable requirements.

(5)

Such other requirements as the Commissioner may specify.

(c)

Ceasing operation

(1)

In general

A State-based Health Insurance Exchange may, at the option of each State involved, and only after providing timely and reasonable notice to the Commissioner, cease operation as such an Exchange, in which case the Health Insurance Exchange shall operate, instead of such State-based Health Insurance Exchange, with respect to such State (or States).

(2)

Termination; Health Insurance Exchange resumption of functions

The Commissioner may terminate the approval (for some or all functions) of a State-based Health Insurance Exchange under this section if the Commissioner determines that such Exchange no longer meets the requirements of subsection (b) or is no longer capable of carrying out such functions in accordance with the requirements of this subtitle. In lieu of terminating such approval, the Commissioner may temporarily assume some or all functions of the State-based Health Insurance Exchange until such time as the Commissioner determines the State-based Health Insurance Exchange meets such requirements of subsection (b) and is capable of carrying out such functions in accordance with the requirements of this subtitle.

(3)

Effectiveness

The ceasing or termination of a State-based Health Insurance Exchange under this subsection shall be effective in such time and manner as the Commissioner shall specify.

(d)

Retention of authority

(1)

Authority retained

Enforcement authorities of the Commissioner shall be retained by the Commissioner.

(2)

Discretion to retain additional authority

The Commissioner may specify functions of the Health Insurance Exchange that—

(A)

may not be performed by a State-based Health Insurance Exchange under this section; or

(B)

may be performed by the Commissioner and by such a State-based Health Insurance Exchange.

(e)

References

In the case of a State-based Health Insurance Exchange, except as the Commissioner may otherwise specify under subsection (d), any references in this subtitle to the Health Insurance Exchange or to the Commissioner in the area in which the State-based Health Insurance Exchange operates shall be deemed a reference to the State-based Health Insurance Exchange and the head of such Exchange, respectively.

(f)

Funding

In the case of a State-based Health Insurance Exchange, there shall be assistance provided for the operation of such Exchange in the form of a matching grant with a State share of expenditures required.

B

Public health insurance option

221.

Establishment and administration of a public health insurance option as an Exchange-qualified health benefits plan

(a)

Establishment

For years beginning with Y1, the Secretary of Health and Human Services (in this subtitle referred to as the Secretary) shall provide for the offering of an Exchange-participating health benefits plan (in this subdivision referred to as the public health insurance option) that ensures choice, competition, and stability of affordable, high quality coverage throughout the United States in accordance with this subtitle. In designing the option, the Secretary’s primary responsibility is to create a low-cost plan without compromising quality or access to care.

(b)

Offering as an Exchange-participating health benefits plan

(1)

Exclusive to the Exchange

The public health insurance option shall only be made available through the Health Insurance Exchange.

(2)

Ensuring a level playing field

Consistent with this subtitle, the public health insurance option shall comply with requirements that are applicable under this title to an Exchange-participating health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost sharing.

(3)

Provision of benefit levels

The public health insurance option—

(A)

shall offer basic, enhanced, and premium plans; and

(B)

may offer premium-plus plans.

(c)

Administrative contracting

The Secretary may enter into contracts for the purpose of performing administrative functions (including functions described in subsection (a)(4) of section 1874A of the Social Security Act) with respect to the public health insurance option in the same manner as the Secretary may enter into contracts under subsection (a)(1) of such section. The Secretary has the same authority with respect to the public health insurance option as the Secretary has under subsections (a)(1) and (b) of section 1874A of the Social Security Act with respect to title XVIII of such Act. Contracts under this subsection shall not involve the transfer of insurance risk to such entity.

(d)

Ombudsman

The Secretary shall establish an office of the ombudsman for the public health insurance option which shall have duties with respect to the public health insurance option similar to the duties of the Medicare Beneficiary Ombudsman under section 1808(c)(2) of the Social Security Act.

(e)

Data collection

The Secretary shall collect such data as may be required to establish premiums and payment rates for the public health insurance option and for other purposes under this subtitle, including to improve quality and to reduce racial, ethnic, and other disparities in health and health care.

(f)

Treatment of public health insurance option

With respect to the public health insurance option, the Secretary shall be treated as a QHBP offering entity offering an Exchange-participating health benefits plan.

(g)

Access to Federal courts

The provisions of Medicare (and related provisions of title II of the Social Security Act) relating to access of Medicare beneficiaries to Federal courts for the enforcement of rights under Medicare, including with respect to amounts in controversy, shall apply to the public health insurance option and individuals enrolled under such option under this title in the same manner as such provisions apply to Medicare and Medicare beneficiaries.

222.

Premiums and financing

(a)

Establishment of premiums

(1)

In general

The Secretary shall establish geographically-adjusted premium rates for the public health insurance option in a manner—

(A)

that complies with the premium rules established by the Commissioner under section 113 for Exchange-participating health benefit plans; and

(B)

at a level sufficient to fully finance the costs of—

(i)

health benefits provided by the public health insurance option; and

(ii)

administrative costs related to operating the public health insurance option.

(2)

Contingency margin

In establishing premium rates under paragraph (1), the Secretary shall include an appropriate amount for a contingency margin.

(b)

Account

(1)

Establishment

There is established in the Treasury of the United States an Account for the receipts and disbursements attributable to the operation of the public health insurance option, including the start-up funding under paragraph (2). Section 1854(g) of the Social Security Act shall apply to receipts described in the previous sentence in the same manner as such section applies to payments or premiums described in such section.

(2)

Start-up funding

(A)

In general

In order to provide for the establishment of the public health insurance option there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, $2,000,000,000. In order to provide for initial claims reserves before the collection of premiums, there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, such sums as necessary to cover 90 days worth of claims reserves based on projected enrollment.

(B)

Amortization of start-up funding

The Secretary shall provide for the repayment of the startup funding provided under subparagraph (A) to the Treasury in an amortized manner over the 10-year period beginning with Y1.

(C)

Limitation on funding

Nothing in this section shall be construed as authorizing any additional appropriations to the Account, other than such amounts as are otherwise provided with respect to other Exchange-participating health benefits plans.

223.

Payment rates for items and services

(a)

Rates established by Secretary

(1)

In general

The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224.

(2)

Initial payment rules

(A)

In general

Except as provided in subparagraph (B) and subsection (b)(1), during Y1, Y2, and Y3, the Secretary shall base the payment rates under this section for services and providers described in paragraph (1) on the payment rates for similar services and providers under parts A and B of Medicare.

(B)

Exceptions

(i)

Practitioners’ services

Payment rates for practitioners’ services otherwise established under the fee schedule under section 1848 of the Social Security Act shall be applied without regard to the provisions under subsection (f) of such section and the update under subsection (d)(4) under such section for a year as applied under this paragraph shall be not less than 1 percent.

(ii)

Adjustments

The Secretary may determine the extent to which Medicare adjustments applicable to base payment rates under parts A and B of Medicare shall apply under this subtitle.

(3)

For new services

The Secretary shall modify payment rates described in paragraph (2) in order to accommodate payments for services, such as well-child visits, that are not otherwise covered under Medicare.

(4)

Prescription drugs

Payment rates under this section for prescription drugs that are not paid for under part A or part B of Medicare shall be at rates negotiated by the Secretary.

(b)

Incentives for participating providers

(1)

Initial incentive period

(A)

In general

The Secretary shall provide, in the case of services described in subparagraph (B) furnished during Y1, Y2, and Y3, for payment rates that are 5 percent greater than the rates established under subsection (a).

(B)

Services described

The services described in this subparagraph are items and professional services, under the public health insurance option by a physician or other health care practitioner who participates in both Medicare and the public health insurance option.

(C)

Special rules

A pediatrician and any other health care practitioner who is a type of practitioner that does not typically participate in Medicare (as determined by the Secretary) shall also be eligible for the increased payment rates under subparagraph (A).

(2)

Subsequent periods

Beginning with Y4 and for subsequent years, the Secretary shall continue to use an administrative process to set such rates in order to promote payment accuracy, to ensure adequate beneficiary access to providers, and to promote affordability and the efficient delivery of medical care consistent with section 221(a). Such rates shall not be set at levels expected to increase overall medical costs under the option beyond what would be expected if the process under subsection (a)(2) and paragraph (1) of this subsection were continued.

(3)

Establishment of a provider network

Health care providers participating under Medicare are participating providers in the public health insurance option unless they opt out in a process established by the Secretary.

(c)

Administrative process for setting rates

Chapter 5 of title 5, United States Code shall apply to the process for the initial establishment of payment rates under this section but not to the specific methodology for establishing such rates or the calculation of such rates.

(d)

Construction

Nothing in this subtitle shall be construed as limiting the Secretary’s authority to correct for payments that are excessive or deficient, taking into account the provisions of section 221(a) and the amounts paid for similar health care providers and services under other Exchange-participating health benefits plans.

(e)

Construction

Nothing in this subtitle shall be construed as affecting the authority of the Secretary to establish payment rates, including payments to provide for the more efficient delivery of services, such as the initiatives provided for under section 224.

(f)

Limitations on review

There shall be no administrative or judicial review of a payment rate or methodology established under this section or under section 224.

224.

Modernized payment initiatives and delivery system reform

(a)

In general

For plan years beginning with Y1, the Secretary may utilize innovative payment mechanisms and policies to determine payments for items and services under the public health insurance option. The payment mechanisms and policies under this section may include patient-centered medical home and other care management payments, accountable care organizations, value-based purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers.

(b)

Requirements for innovative payments

The Secretary shall design and implement the payment mechanisms and policies under this section in a manner that—

(1)

seeks to—

(A)

improve health outcomes;

(B)

reduce health disparities (including racial, ethnic, and other disparities);

(C)

provide efficient and affordable care;

(D)

address geographic variation in the provision of health services; or

(E)

prevent or manage chronic illness; and

(2)

promotes care that is integrated, patient-centered, quality, and efficient.

(c)

Encouraging the use of high value services

To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option may modify cost sharing and payment rates to encourage the use of services that promote health and value.

(d)

Non-uniformity permitted

Nothing in this subtitle shall prevent the Secretary from varying payments based on different payment structure models (such as accountable care organizations and medical homes) under the public health insurance option for different geographic areas.

225.

Provider participation

(a)

In general

The Secretary shall establish conditions of participation for health care providers under the public health insurance option.

(b)

Licensure or certification

The Secretary shall not allow a health care provider to participate in the public health insurance option unless such provider is appropriately licensed or certified under State law.

(c)

Payment terms for providers

(1)

Physicians

The Secretary shall provide for the annual participation of physicians under the public health insurance option, for which payment may be made for services furnished during the year, in one of 2 classes:

(A)

Preferred physicians

Those physicians who agree to accept the payment rate established under section 223 (without regard to cost-sharing) as the payment in full.

(B)

Participating, non-preferred physicians

Those physicians who agree not to impose charges (in relation to the payment rate described in section 223 for such physicians) that exceed the ratio permitted under section 1848(g)(2)(C) of the Social Security Act.

(2)

Other providers

The Secretary shall provide for the participation (on an annual or other basis specified by the Secretary) of health care providers (other than physicians) under the public health insurance option under which payment shall only be available if the provider agrees to accept the payment rate established under section 223 (without regard to cost-sharing) as the payment in full.

(d)

Exclusion of certain providers

The Secretary shall exclude from participation under the public health insurance option a health care provider that is excluded from participation in a Federal health care program (as defined in section 1128B(f) of the Social Security Act).

226.

Application of fraud and abuse provisions

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

C

Individual Affordability Credits

241.

Availability through Health Insurance Exchange

(a)

In general

Subject to the succeeding provisions of this subtitle, in the case of an affordable credit eligible individual enrolled in an Exchange-participating health benefits plan—

(1)

the individual shall be eligible for, in accordance with this subtitle, affordability credits consisting of—

(A)

an affordability premium credit under section 243 to be applied against the premium for the Exchange-participating health benefits plan in which the individual is enrolled; and

(B)

an affordability cost-sharing credit under section 244 to be applied as a reduction of the cost-sharing otherwise applicable to such plan; and

(2)

the Commissioner shall pay the QHBP offering entity that offers such plan from the Health Insurance Exchange Trust Fund the aggregate amount of affordability credits for all affordable credit eligible individuals enrolled in such plan.

(b)

Application

(1)

In general

An Exchange eligible individual may apply to the Commissioner through the Health Insurance Exchange or through another entity under an arrangement made with the Commissioner, in a form and manner specified by the Commissioner. The Commissioner through the Health Insurance Exchange or through another public entity under an arrangement made with the Commissioner shall make a determination as to eligibility of an individual for affordability credits under this subtitle. The Commissioner shall establish a process whereby, on the basis of information otherwise available, individuals may be deemed to be affordable credit eligible individuals. In carrying this subtitle, the Commissioner shall establish effective methods that ensure that individuals with limited English proficiency are able to apply for affordability credits.

(2)

Use of State Medicaid agencies

If the Commissioner determines that a State Medicaid agency has the capacity to make a determination of eligibility for affordability credits under this subtitle and under the same standards as used by the Commissioner, under the Medicaid memorandum of understanding (as defined in section 205(c)(4))—

(A)

the State Medicaid agency is authorized to conduct such determinations for any Exchange-eligible individual who requests such a determination; and

(B)

the Commissioner shall reimburse the State Medicaid agency for the costs of conducting such determinations.

(3)

Medicaid screen and enroll obligation

In the case of an application made under paragraph (1), there shall be a determination of whether the individual is a Medicaid-eligible individual. If the individual is determined to be so eligible, the Commissioner, through the Medicaid memorandum of understanding, shall provide for the enrollment of the individual under the State Medicaid plan in accordance with the Medicaid memorandum of understanding. In the case of such an enrollment, the State shall provide for the same periodic redetermination of eligibility under Medicaid as would otherwise apply if the individual had directly applied for medical assistance to the State Medicaid agency.

(c)

Use of affordability credits

(1)

In general

In Y1 and Y2 an affordable credit eligible individual may use an affordability credit only with respect to a basic plan.

(2)

Flexibility in plan enrollment authorized

Beginning with Y3, the Commissioner shall establish a process to allow an affordability credit to be used for enrollees in enhanced or premium plans. In the case of an affordable credit eligible individual who enrolls in an enhanced or premium plan, the individual shall be responsible for any difference between the premium for such plan and the affordability credit amount otherwise applicable if the individual had enrolled in a basic plan.

(d)

Access to data

In carrying out this subtitle, the Commissioner shall request from the Secretary of the Treasury consistent with section 6103 of the Internal Revenue Code of 1986 such information as may be required to carry out this subtitle.

(e)

No cash rebates

In no case shall an affordable credit eligible individual receive any cash payment as a result of the application of this subtitle.

242.

Affordable credit eligible individual

(a)

Definition

(1)

In general

For purposes of this subdivision, the term affordable credit eligible individual means, subject to subsection (b), an individual who is lawfully present in a State in the United States (other than as a nonimmigrant described in a subparagraph (excluding subparagraphs (K), (T), (U), and (V)) of section 101(a)(15) of the Immigration and Nationality Act)—

(A)

who is enrolled under an Exchange-participating health benefits plan and is not enrolled under such plan as an employee (or dependent of an employee) through an employer qualified health benefits plan that meets the requirements of section 312;

(B)

with family income below 400 percent of the Federal poverty level for a family of the size involved; and

(C)

who is not a Medicaid eligible individual, other than an individual described in section 202(d)(3) or an individual during a transition period under section 202(d)(4)(B)(ii).

(2)

Treatment of family

Except as the Commissioner may otherwise provide, members of the same family who are affordable credit eligible individuals shall be treated as a single affordable credit individual eligible for the applicable credit for such a family under this subtitle.

(b)

Limitations on employee and dependent disqualification

(1)

In general

Subject to paragraph (2), the term affordable credit eligible individual does not include a full-time employee of an employer if the employer offers the employee coverage (for the employee and dependents) as a full-time employee under a group health plan if the coverage and employer contribution under the plan meet the requirements of section 312.

(2)

Exceptions

(A)

For certain family circumstances

The Commissioner shall establish such exceptions and special rules in the case described in paragraph (1) as may be appropriate in the case of a divorced or separated individual or such a dependent of an employee who would otherwise be an affordable credit eligible individual.

(B)

For unaffordable employer coverage

Beginning in Y2, in the case of full-time employees for which the cost of the employee premium for coverage under a group health plan would exceed 11 percent of current family income (determined by the Commissioner on the basis of verifiable documentation and without regard to section 245), paragraph (1) shall not apply.

(c)

Income defined

(1)

In general

In this title, the term income means modified adjusted gross income (as defined in section 59B of the Internal Revenue Code of 1986).

(2)

Study of income disregards

The Commissioner shall conduct a study that examines the application of income disregards for purposes of this subtitle. Not later than the first day of Y2, the Commissioner shall submit to Congress a report on such study and shall include such recommendations as the Commissioner determines appropriate.

(d)

Clarification of treatment of affordability credits

Affordability credits under this subtitle shall not be treated, for purposes of title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, to be a benefit provided under section 403 of such title.

243.

Affordability premium credit

(a)

In general

The affordability premium credit under this section for an affordable credit eligible individual enrolled in an Exchange-participating health benefits plan is in an amount equal to the amount (if any) by which the premium for the plan (or, if less, the reference premium amount specified in subsection (c)), exceeds the affordable premium amount specified in subsection (b) for the individual.

(b)

Affordable premium amount

(1)

In general

The affordable premium amount specified in this subsection for an individual for monthly premium in a plan year shall be equal to 1/12 of the product of—

(A)

the premium percentage limit specified in paragraph (2) for the individual based upon the individual’s family income for the plan year; and

(B)

the individual’s family income for such plan year.

(2)

Premium percentage limits based on table

The Commissioner shall establish premium percentage limits so that for individuals whose family income is within an income tier specified in the table in subsection (d) such percentage limits shall increase, on a sliding scale in a linear manner, from the initial premium percentage to the final premium percentage specified in such table for such income tier.

(c)

Reference premium amount

The reference premium amount specified in this subsection for a plan year for an individual in a premium rating area is equal to the average premium for the 3 basic plans in the area for the plan year with the lowest premium levels. In computing such amount the Commissioner may exclude plans with extremely limited enrollments.

(d)

Table of premium percentage limits and actuarial value percentages based on income tier

(1)

In general

For purposes of this subtitle, the table specified in this subsection is as follows:

In the case of family income (expressed as a percent of FPL) within the following income tier: The initial premium percentage is—The final premium percentage is—The actuarial value percentage is—
133% through 150%1.5%3%97%
150% through 200%3%5%93%
200% through 250%5%7%85%
250% through 300%7%9%78%
300% through 350%9%10%72%
350% through 400%10%11%70%
(2)

Special rules

For purposes of applying the table under paragraph (1)—

(A)

For lowest level of income

In the case of an individual with income that does not exceed 133 percent of FPL, the individual shall be considered to have income that is 133% of FPL.

(B)

Application of higher actuarial value percentage at tier transition points

If two actuarial value percentages may be determined with respect to an individual, the actuarial value percentage shall be the higher of such percentages.

244.

Affordability cost-sharing credit

(a)

In general

The affordability cost-sharing credit under this section for an affordable credit eligible individual enrolled in an Exchange-participating health benefits plan is in the form of the cost-sharing reduction described in subsection (b) provided under this section for the income tier in which the individual is classified based on the individual’s family income.

(b)

Cost-sharing reductions

The Commissioner shall specify a reduction in cost-sharing amounts and the annual limitation on cost-sharing specified in section 122(c)(2)(B) under a basic plan for each income tier specified in the table under section 243(d), with respect to a year, in a manner so that, as estimated by the Commissioner, the actuarial value of the coverage with such reduced cost-sharing amounts (and the reduced annual cost-sharing limit) is equal to the actuarial value percentage (specified in the table under section 243(d) for the income tier involved) of the full actuarial value if there were no cost-sharing imposed under the plan.

(c)

Determination and payment of cost-sharing affordability credit

In the case of an affordable credit eligible individual in a tier enrolled in an Exchange-participating health benefits plan offered by a QHBP offering entity, the Commissioner shall provide for payment to the offering entity of an amount equivalent to the increased actuarial value of the benefits under the plan provided under section 203(c)(2)(B) resulting from the reduction in cost-sharing described in subsection (b).

245.

Income determinations

(a)

In general

In applying this subtitle for an affordability credit for an individual for a plan year, the individual’s income shall be the income (as defined in section 242(c)) for the individual for the most recent taxable year (as determined in accordance with rules of the Commissioner). The Federal poverty level applied shall be such level in effect as of the date of the application.

(b)

Program integrity; Income verification procedures

(1)

Program integrity

The Commissioner shall take such steps as may be appropriate to ensure the accuracy of determinations and redeterminations under this subtitle.

(2)

Income verification

(A)

In general

Upon an initial application of an individual for an affordability credit under this subtitle (or in applying section 242(b)) or upon an application for a change in the affordability credit based upon a significant change in family income described in subparagraph (A)—

(i)

the Commissioner shall request from the Secretary of the Treasury the disclosure to the Commissioner of such information as may be permitted to verify the information contained in such application; and

(ii)

the Commissioner shall use the information so disclosed to verify such information.

(B)

Alternative procedures

The Commissioner shall establish procedures for the verification of income for purposes of this subtitle if no income tax return is available for the most recent completed tax year.

(c)

Special rules

(1)

Changes in income as a percent of FPL

In the case that an individual’s income (expressed as a percentage of the Federal poverty level for a family of the size involved) for a plan year is expected (in a manner specified by the Commissioner) to be significantly different from the income (as so expressed) used under subsection (a), the Commissioner shall establish rules requiring an individual to report, consistent with the mechanism established under paragraph (2), significant changes in such income (including a significant change in family composition) to the Commissioner and requiring the substitution of such income for the income otherwise applicable.

(2)

Reporting of significant changes in income

The Commissioner shall establish rules under which an individual determined to be an affordable credit eligible individual would be required to inform the Commissioner when there is a significant change in the family income of the individual (expressed as a percentage of the FPL for a family of the size involved) and of the information regarding such change. Such mechanism shall provide for guidelines that specify the circumstances that qualify as a significant change, the verifiable information required to document such a change, and the process for submission of such information. If the Commissioner receives new information from an individual regarding the family income of the individual, the Commissioner shall provide for a redetermination of the individual’s eligibility to be an affordable credit eligible individual.

(3)

Transition for CHIP

In the case of a child described in section 202(d)(2), the Commissioner shall establish rules under which the family income of the child is deemed to be no greater than the family income of the child as most recently determined before Y1 by the State under title XXI of the Social Security Act.

(4)

Study of geographic variation in application of FPL

The Commissioner shall examine the feasibility and implication of adjusting the application of the Federal poverty level under this subtitle for different geographic areas so as to reflect the variations in cost-of-living among different areas within the United States. If the Commissioner determines that an adjustment is feasible, the study should include a methodology to make such an adjustment. Not later than the first day of Y2, the Commissioner shall submit to Congress a report on such study and shall include such recommendations as the Commissioner determines appropriate.

(d)

Penalties for misrepresentation

In the case of an individual intentionally misrepresents family income or the individual fails (without regard to intent) to disclose to the Commissioner a significant change in family income under subsection (c) in a manner that results in the individual becoming an affordable credit eligible individual when the individual is not or in the amount of the affordability credit exceeding the correct amount—

(1)

the individual is liable for repayment of the amount of the improper affordability credit; ;and

(2)

in the case of such an intentional misrepresentation or other egregious circumstances specified by the Commissioner, the Commissioner may impose an additional penalty.

246.

No Federal payment for undocumented aliens

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

III

Shared responsibility

A

Individual responsibility

301.

Individual responsibility

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

B

Employer Responsibility

1

Health coverage participation requirements

311.

Health coverage participation requirements

An employer meets the requirements of this section if such employer does all of the following:

(1)

Offer of coverage

The employer offers each employee individual and family coverage under a qualified health benefits plan (or under a current employment-based health plan (within the meaning of section 102(b))) in accordance with section 312.

(2)

Contribution towards coverage

If an employee accepts such offer of coverage, the employer makes timely contributions towards such coverage in accordance with section 312.

(3)

Contribution in lieu of coverage

Beginning with Y2, if an employee declines such offer but otherwise obtains coverage in an Exchange-participating health benefits plan (other than by reason of being covered by family coverage as a spouse or dependent of the primary insured), the employer shall make a timely contribution to the Health Insurance Exchange with respect to each such employee in accordance with section 313.

312.

Employer responsibility to contribute towards employee and dependent coverage

(a)

In general

An employer meets the requirements of this section with respect to an employee if the following requirements are met:

(1)

Offering of coverage

The employer offers the coverage described in section 311(1) either through an Exchange-participating health benefits plan or other than through such a plan.

(2)

Employer required contribution

The employer timely pays to the issuer of such coverage an amount not less than the employer required contribution specified in subsection (b) for such coverage.

(3)

Provision of information

The employer provides the Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury, as applicable, with such information as the Commissioner may require to ascertain compliance with the requirements of this section.

(4)

Autoenrollment of employees

The employer provides for autoenrollment of the employee in accordance with subsection (c).

(b)

Reduction of employee premiums through minimum employer contribution

(1)

Full-time employees

The minimum employer contribution described in this subsection for coverage of a full-time employee (and, if any, the employee’s spouse and qualifying children (as defined in section 152(c) of the Internal Revenue Code of 1986) under a qualified health benefits plan (or current employment-based health plan) is equal to—

(A)

in case of individual coverage, not less than 72.5 percent of the applicable premium (as defined in section 4980B(f)(4) of such Code, subject to paragraph (2)) of the lowest cost plan offered by the employer that is a qualified health benefits plan (or is such current employment-based health plan); and

(B)

in the case of family coverage which includes coverage of such spouse and children, not less 65 percent of such applicable premium of such lowest cost plan.

(2)

Applicable premium for Exchange coverage

In this subtitle, the amount of the applicable premium of the lowest cost plan with respect to coverage of an employee under an Exchange-participating health benefits plan is the reference premium amount under section 243(c) for individual coverage (or, if elected, family coverage) for the premium rating area in which the individual or family resides.

(3)

Minimum employer contribution for employees other than full-time employees

In the case of coverage for an employee who is not a full-time employee, the amount of the minimum employer contribution under this subsection shall be a proportion (as determined in accordance with rules of the Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury, as applicable) of the minimum employer contribution under this subsection with respect to a full-time employee that reflects the proportion of—

(A)

the average weekly hours of employment of the employee by the employer, to

(B)

the minimum weekly hours specified by the Commissioner for an employee to be a full-time employee.

(4)

Salary reductions not treated as employer contributions

For purposes of this section, any contribution on behalf of an employee with respect to which there is a corresponding reduction in the compensation of the employee shall not be treated as an amount paid by the employer.

(c)

Automatic enrollment for employer sponsored health benefits

(1)

In general

The requirement of this subsection with respect to an employer and an employee is that the employer automatically enroll such employee into the employment-based health benefits plan for individual coverage under the plan option with the lowest applicable employee premium.

(2)

Opt-out

In no case may an employer automatically enroll an employee in a plan under paragraph (1) if such employee makes an affirmative election to opt out of such plan or to elect coverage under an employment-based health benefits plan offered by such employer. An employer shall provide an employee with a 30-day period to make such an affirmative election before the employer may automatically enroll the employee in such a plan.

(3)

Notice requirements

(A)

In general

Each employer described in paragraph (1) who automatically enrolls an employee into a plan as described in such paragraph shall provide the employees, within a reasonable period before the beginning of each plan year (or, in the case of new employees, within a reasonable period before the end of the enrollment period for such a new employee), written notice of the employees’ rights and obligations relating to the automatic enrollment requirement under such paragraph. Such notice must be comprehensive and understood by the average employee to whom the automatic enrollment requirement applies.

(B)

Inclusion of specific information

The written notice under subparagraph (A) must explain an employee’s right to opt out of being automatically enrolled in a plan and in the case that more than one level of benefits or employee premium level is offered by the employer involved, the notice must explain which level of benefits and employee premium level the employee will be automatically enrolled in the absence of an affirmative election by the employee.

313.

Employer contributions in lieu of coverage

(a)

In general

A contribution is made in accordance with this section with respect to an employee if such contribution is equal to an amount equal to 8 percent of the average wages paid by the employer during the period of enrollment (determined by taking into account all employees of the employer and in such manner as the Commissioner provides, including rules providing for the appropriate aggregation of related employers). Any such contribution—

(1)

shall be paid to the Health Choices Commissioner for deposit into the Health Insurance Exchange Trust Fund, and

(2)

shall not be applied against the premium of the employee under the Exchange-participating health benefits plan in which the employee is enrolled.

(b)

Special rules for small employers

(1)

In general

In the case of any employer who is a small employer for any calendar year, subsection (a) shall be applied by substituting the applicable percentage determined in accordance with the following table for 8 percent:

If the annual payroll of such employer for the preceding calendar year:The applicable percentage is:
Does not exceed $250,0000 percent
Exceeds $250,000, but does not exceed $300,0002 percent
Exceeds $300,000, but does not exceed $350,0004 percent
Exceeds $350,000, but does not exceed $400,0006 percent
(2)

Small employer

For purposes of this subsection, the term small employer means any employer for any calendar year if the annual payroll of such employer for the preceding calendar year does not exceed $400,000.

(3)

Annual payroll

For purposes of this paragraph, the term annual payroll means, with respect to any employer for any calendar year, the aggregate wages paid by the employer during such calendar year.

(4)

Aggregation rules

Related employers and predecessors shall be treated as a single employer for purposes of this subsection.

314.

Authority related to improper steering

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

2

Satisfaction of Health Coverage Participation Requirements

321.

Satisfaction of health coverage participation requirements under the Employee Retirement Income Security Act of 1974

(a)

In general

Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding at the end the following new part:

8

National Health Coverage Participation Requirements

801.

Election of employer to be subject to national health coverage participation requirements

(a)

In general

An employer may make an election with the Secretary to be subject to the health coverage participation requirements.

(b)

Time and manner

An election under subsection (a) may be made at such time and in such form and manner as the Secretary may prescribe.

802.

Treatment of coverage resulting from election

(a)

In general

If an employer makes an election to the Secretary under section 801—

(1)

such election shall be treated as the establishment and maintenance of a group health plan (as defined in section 733(a)) for purposes of this title, subject to section 151 of the America’s Affordable Health Choices Act of 2009, and

(2)

the health coverage participation requirements shall be deemed to be included as terms and conditions of such plan.

(b)

Periodic investigations to discover noncompliance

The Secretary shall regularly audit a representative sampling of employers and group health plans and conduct investigations and other activities under section 504 with respect to such sampling of plans so as to discover noncompliance with the health coverage participation requirements in connection with such plans. The Secretary shall communicate findings of noncompliance made by the Secretary under this subsection to the Secretary of the Treasury and the Health Choices Commissioner. The Secretary shall take such timely enforcement action as appropriate to achieve compliance.

803.

Health coverage participation requirements

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

804.

Rules for applying requirements

(a)

Affiliated groups

In the case of any employer which is part of a group of employers who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986, the election under section 801 shall be made by such employer as the Secretary may provide. Any such election, once made, shall apply to all members of such group.

(b)

Separate elections

Under regulations prescribed by the Secretary, separate elections may be made under section 801 with respect to—

(1)

separate lines of business, and

(2)

full-time employees and employees who are not full-time employees.

805.

Termination of election in cases of substantial noncompliance

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

806.

Regulations

The Secretary may promulgate such regulations as may be necessary or appropriate to carry out the provisions of this part, in accordance with section 324(a) of the America’s Affordable Health Choices Act of 2009. The Secretary may promulgate any interim final rules as the Secretary determines are appropriate to carry out this part.

.

(b)

Enforcement of health coverage participation requirements

Section 502 of such Act (29 U.S.C. 1132) is amended—

(1)

in subsection (a)(6), by striking paragraph and all that follows through subsection (c) and inserting paragraph (2), (4), (5), (6), (7), (8), (9), (10), or (11) of subsection (c); and

(2)

in subsection (c), by redesignating the second paragraph (10) as paragraph (12) and by inserting after the first paragraph (10) the following new paragraph:

(11)

Health coverage participation requirements

(A)

Civil penalties

In the case of any employer who fails (during any period with respect to which an election under section 801(a) is in effect) to satisfy the health coverage participation requirements with respect to any employee, the Secretary may assess a civil penalty against the employer of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.

(B)

Health coverage participation requirements

For purposes of this paragraph, the term health coverage participation requirements has the meaning provided in section 803.

(C)

Limitations on amount of penalty

(i)

Penalty not to apply where failure not discovered exercising reasonable diligence

No penalty shall be assessed under subparagraph (A) with respect to any failure during any period for which it is established to the satisfaction of the Secretary that the employer did not know, or exercising reasonable diligence would not have known, that such failure existed.

(ii)

Penalty not to apply to failures corrected within 30 days

No penalty shall be assessed under subparagraph (A) with respect to any failure if—

(I)

such failure was due to reasonable cause and not to willful neglect, and

(II)

such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

(iii)

Overall limitation for unintentional failures

In the case of failures which are due to reasonable cause and not to willful neglect, the penalty assessed under subparagraph (A) for failures during any 1-year period shall not exceed the amount equal to the lesser of—

(I)

10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding 1-year period for group health plans, or

(II)

$500,000.

(D)

Advance notification of failure prior to assessment

Before a reasonable time prior to the assessment of any penalty under this paragraph with respect to any failure by an employer, the Secretary shall inform the employer in writing of such failure and shall provide the employer information regarding efforts and procedures which may be undertaken by the employer to correct such failure.

(E)

Coordination with excise tax

Under regulations prescribed in accordance with section 324 of the America’s Affordable Health Choices Act of 2009, the Secretary and the Secretary of the Treasury shall coordinate the assessment of penalties under this section in connection with failures to satisfy health coverage participation requirements with the imposition of excise taxes on such failures under section 4980H(b) of the Internal Revenue Code of 1986 so as to avoid duplication of penalties with respect to such failures.

(F)

Deposit of penalty collected

Any amount of penalty collected under this paragraph shall be deposited as miscellaneous receipts in the Treasury of the United States.

.

(c)

Clerical amendments

The table of contents in section 1 of such Act is amended by inserting after the item relating to section 734 the following new items:

Part 8—National Health Coverage Participation Requirements

Sec. 801. Election of employer to be subject to national health coverage participation requirements.

Sec. 802. Treatment of coverage resulting from election.

Sec. 803. Health coverage participation requirements.

Sec. 804. Rules for applying requirements.

Sec. 805. Termination of election in cases of substantial noncompliance.

Sec. 806. Regulations.

.

(d)

Effective date

The amendments made by this section shall apply to periods beginning after December 31, 2012.

322.

Satisfaction of health coverage participation requirements under the Internal Revenue Code of 1986

(a)

Failure to elect, or substantially comply with, health coverage participation requirements

For employment tax on employers who fail to elect, or substantially comply with, the health coverage participation requirements described in part 1, see section 3111(c) of the Internal Revenue Code of 1986 (as added by section 412 of this division).

(b)

Other failures

For excise tax on other failures of electing employers to comply with such requirements, see section 4980H of the Internal Revenue Code of 1986 (as added by section 411 of this division).

323.

Satisfaction of health coverage participation requirements under the Public Health Service Act

(a)

In general

Part C of title XXVII of the Public Health Service Act is amended by adding at the end the following new section:

2793.

National health coverage participation requirements

(a)

Election of employer to be subject to national health coverage participation requirements

(1)

In general

An employer may make an election with the Secretary to be subject to the health coverage participation requirements.

(2)

Time and manner

An election under paragraph (1) may be made at such time and in such form and manner as the Secretary may prescribe.

(b)

Treatment of coverage resulting from election

(1)

In general

If an employer makes an election to the Secretary under subsection (a)—

(A)

such election shall be treated as the establishment and maintenance of a group health plan for purposes of this title, subject to section 151 of the America’s Affordable Health Choices Act of 2009, and

(B)

the health coverage participation requirements shall be deemed to be included as terms and conditions of such plan.

(2)

Periodic investigations to determine compliance with health coverage participation requirements

The Secretary shall regularly audit a representative sampling of employers and conduct investigations and other activities with respect to such sampling of employers so as to discover noncompliance with the health coverage participation requirements in connection with such employers (during any period with respect to which an election under subsection (a) is in effect). The Secretary shall communicate findings of noncompliance made by the Secretary under this subsection to the Secretary of the Treasury and the Health Choices Commissioner. The Secretary shall take such timely enforcement action as appropriate to achieve compliance.

(c)

Health coverage participation requirements

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

(d)

Separate elections

Under regulations prescribed by the Secretary, separate elections may be made under subsection (a) with respect to full-time employees and employees who are not full-time employees.

(e)

Termination of election in cases of substantial noncompliance

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

(f)

Enforcement of health coverage participation requirements

(1)

Civil penalties

In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee, the Secretary may assess a civil penalty against the employer of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.

(2)

Limitations on amount of penalty

(A)

Penalty not to apply where failure not discovered exercising reasonable diligence

No penalty shall be assessed under paragraph (1) with respect to any failure during any period for which it is established to the satisfaction of the Secretary that the employer did not know, or exercising reasonable diligence would not have known, that such failure existed.

(B)

Penalty not to apply to failures corrected within 30 days

No penalty shall be assessed under paragraph (1) with respect to any failure if—

(i)

such failure was due to reasonable cause and not to willful neglect, and

(ii)

such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

(C)

Overall limitation for unintentional failures

In the case of failures which are due to reasonable cause and not to willful neglect, the penalty assessed under paragraph (1) for failures during any 1-year period shall not exceed the amount equal to the lesser of—

(i)

10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for group health plans, or

(ii)

$500,000.

(3)

Advance notification of failure prior to assessment

Before a reasonable time prior to the assessment of any penalty under paragraph (1) with respect to any failure by an employer, the Secretary shall inform the employer in writing of such failure and shall provide the employer information regarding efforts and procedures which may be undertaken by the employer to correct such failure.

(4)

Actions to enforce assessments

The Secretary may bring a civil action in any District Court of the United States to collect any civil penalty under this subsection.

(5)

Coordination with excise tax

Under regulations prescribed in accordance with section 324 of the America’s Affordable Health Choices Act of 2009, the Secretary and the Secretary of the Treasury shall coordinate the assessment of penalties under paragraph (1) in connection with failures to satisfy health coverage participation requirements with the imposition of excise taxes on such failures under section 4980H(b) of the Internal Revenue Code of 1986 so as to avoid duplication of penalties with respect to such failures.

(6)

Deposit of penalty collected

Any amount of penalty collected under this subsection shall be deposited as miscellaneous receipts in the Treasury of the United States.

(g)

Regulations

The Secretary may promulgate such regulations as may be necessary or appropriate to carry out the provisions of this section, in accordance with section 324(a) of the America’s Affordable Health Choices Act of 2009. The Secretary may promulgate any interim final rules as the Secretary determines are appropriate to carry out this section.

.

(b)

Effective date

The amendments made by subsection (a) shall apply to periods beginning after December 31, 2012.

324.

Additional rules relating to health coverage participation requirements

(a)

Assuring coordination

The officers consisting of the Secretary of Labor, the Secretary of the Treasury, the Secretary of Health and Human Services, and the Health Choices Commissioner shall ensure, through the execution of an interagency memorandum of understanding among such officers, that—

(1)

regulations, rulings, and interpretations issued by such officers relating to the same matter over which two or more of such officers have responsibility under subpart B of part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, section 4980H of the Internal Revenue Code of 1986, and section 2793 of the Public Health Service Act are administered so as to have the same effect at all times; and

(2)

coordination of policies relating to enforcing the same requirements through such officers in order to have a coordinated enforcement strategy that avoids duplication of enforcement efforts and assigns priorities in enforcement.

(b)

Multiemployer plans

In the case of a group health plan that is a multiemployer plan (as defined in section 3(37) of the Employee Retirement Income Security Act of 1974), the regulations prescribed in accordance with subsection (a) by the officers referred to in subsection (a) shall provide for the application of the health coverage participation requirements to the plan sponsor and contributing sponsors of such plan.

IV

Amendments to Internal Revenue Code of 1986

A

Shared responsibility

1

Individual responsibility

401.

Tax on individuals without acceptable health care coverage

(a)

In general

Subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new part:

VIII

Health care related taxes

Subpart A. Tax on individuals without acceptable health care coverage.

A

Tax on individuals without acceptable health care coverage

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

59B.

Tax on individuals without acceptable health care coverage

(a)

Tax imposed

In the case of any individual who does not meet the requirements of subsection (d) at any time during the taxable year, there is hereby imposed a tax equal to 2.5 percent of the excess of—

(1)

the taxpayer’s modified adjusted gross income for the taxable year, over

(2)

the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.

(b)

Limitations

(1)

Tax limited to average premium

(A)

In general

The tax imposed under subsection (a) with respect to any taxpayer for any taxable year shall not exceed the applicable national average premium for such taxable year.

(B)

Applicable national average premium

(i)

In general

For purposes of subparagraph (A), the applicable national average premium means, with respect to any taxable year, the average premium (as determined by the Secretary, in coordination with the Health Choices Commissioner) for self-only coverage under a basic plan which is offered in a Health Insurance Exchange for the calendar year in which such taxable year begins.

(ii)

Failure to provide coverage for more than one individual

In the case of any taxpayer who fails to meet the requirements of subsection (e) with respect to more than one individual during the taxable year, clause (i) shall be applied by substituting family coverage for self-only coverage.

(2)

Proration for part year failures

The tax imposed under subsection (a) with respect to any taxpayer for any taxable year shall not exceed the amount which bears the same ratio to the amount of tax so imposed (determined without regard to this paragraph and after application of paragraph (1)) as—

(A)

the aggregate periods during such taxable year for which such individual failed to meet the requirements of subsection (d), bears to

(B)

the entire taxable year.

(c)

Exceptions

(1)

Dependents

Subsection (a) shall not apply to any individual for any taxable year if a deduction is allowable under section 151 with respect to such individual to another taxpayer for any taxable year beginning in the same calendar year as such taxable year.

(2)

Nonresident aliens

Subsection (a) shall not apply to any individual who is a nonresident alien.

(3)

Individuals residing outside United States

Any qualified individual (as defined in section 911(d)) (and any qualifying child residing with such individual) shall be treated for purposes of this section as covered by acceptable coverage during the period described in subparagraph (A) or (B) of section 911(d)(1), whichever is applicable.

(4)

Individuals residing in possessions of the United States

Any individual who is a bona fide resident of any possession of the United States (as determined under section 937(a)) for any taxable year (and any qualifying child residing with such individual) shall be treated for purposes of this section as covered by acceptable coverage during such taxable year.

(5)

Religious conscience exemption

(A)

In general

Subsection (a) shall not apply to any individual (and any qualifying child residing with such individual) for any period if such individual has in effect an exemption which certifies that such individual is a member of a recognized religious sect or division thereof described in section 1402(g)(1) and an adherent of established tenets or teachings of such sect or division as described in such section.

(B)

Exemption

An application for the exemption described in subparagraph (A) shall be filed with the Secretary at such time and in such form and manner as the Secretary may prescribe. Any such exemption granted by the Secretary shall be effective for such period as the Secretary determines appropriate.

(d)

Acceptable coverage requirement

(1)

In general

The requirements of this subsection are met with respect to any individual for any period if such individual (and each qualifying child of such individual) is covered by acceptable coverage at all times during such period.

(2)

Acceptable coverage

For purposes of this section, the term acceptable coverage means any of the following:

(A)

Qualified health benefits plan coverage

Coverage under a qualified health benefits plan (as defined in section 100(c) of the America’s Affordable Health Choices Act of 2009).

(B)

Grandfathered health insurance coverage; coverage under grandfathered employment-based health plan

Coverage under a grandfathered health insurance coverage (as defined in subsection (a) of section 102 of the America’s Affordable Health Choices Act of 2009) or under a current employment-based health plan (within the meaning of subsection (b) of such section).

(C)

Medicare

Coverage under part A of title XVIII of the Social Security Act.

(D)

Medicaid

Coverage for medical assistance under title XIX of the Social Security Act.

(E)

Members of the Armed Forces and dependents (including TRICARE)

Coverage under chapter 55 of title 10, United States Code, including similar coverage furnished under section 1781 of title 38 of such Code.

(F)

VA

Coverage under the veteran’s health care program under chapter 17 of title 38, United States Code, but only if the coverage for the individual involved is determined by the Secretary in coordination with the Health Choices Commissioner to be not less than the level specified by the Secretary of the Treasury, in coordination with the Secretary of Veteran’s Affairs and the Health Choices Commissioner, based on the individual’s priority for services as provided under section 1705(a) of such title.

(G)

Other coverage

Such other health benefits coverage as the Secretary, in coordination with the Health Choices Commissioner, recognizes for purposes of this subsection.

(e)

Other definitions and special rules

(1)

Qualifying child

For purposes of this section, the term qualifying child has the meaning given such term by section 152(c). With respect to any period during which health coverage for a child must be provided by an individual pursuant to a child support order, such child shall be treated as a qualifying child of such individual (and not as a qualifying child of any other individual).

(2)

Basic plan

For purposes of this section, the term basic plan has the meaning given such term under section 100(c) of the America’s Affordable Health Choices Act of 2009.

(3)

Health Insurance Exchange

For purposes of this section, the term Health Insurance Exchange has the meaning given such term under section 100(c) of the America’s Affordable Health Choices Act of 2009, including any State-based health insurance exchange approved for operation under section 208 of such Act.

(4)

Family coverage

For purposes of this section, the term family coverage means any coverage other than self-only coverage.

(5)

Modified adjusted gross income

For purposes of this section, the term modified adjusted gross income means adjusted gross income—

(A)

determined without regard to section 911, and

(B)

increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.

(6)

Not treated as tax imposed by this chapter for certain purposes

The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.

(f)

Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance (developed in coordination with the Health Choices Commissioner) which provide—

(1)

exemption from the tax imposed under subsection (a) in cases of de minimis lapses of acceptable coverage, and

(2)

a process for applying for a waiver of the application of subsection (a) in cases of hardship.

.

(b)

Information reporting

(1)

In general

Subpart B of part III of subchapter A of chapter 61 of such Code is amended by inserting after section 6050W the following new section:

6050X.

Returns relating to health insurance coverage

(a)

Requirement of reporting

Every person who provides acceptable coverage (as defined in section 59B(d)) to any individual during any calendar year shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to such individual.

(b)

Form and manner of returns

A return is described in this subsection if such return—

(1)

is in such form as the Secretary may prescribe, and

(2)

contains—

(A)

the name, address, and TIN of the primary insured and the name of each other individual obtaining coverage under the policy,

(B)

the period for which each such individual was provided with the coverage referred to in subsection (a), and

(C)

such other information as the Secretary may require.

(c)

Statements to be furnished to individuals with respect to whom information is required

Every person required to make a return under subsection (a) shall furnish to each primary insured whose name is required to be set forth in such return a written statement showing—

(1)

the name and address of the person required to make such return and the phone number of the information contact for such person, and

(2)

the information required to be shown on the return with respect to such individual.

The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.
(d)

Coverage provided by governmental units

In the case of coverage provided by any governmental unit or any agency or instrumentality thereof, the officer or employee who enters into the agreement to provide such coverage (or the person appropriately designated for purposes of this section) shall make the returns and statements required by this section.

.

(2)

Penalty for failure to file

(A)

Return

Subparagraph (B) of section 6724(d)(1) of such Code is amended by striking or at the end of clause (xxii), by striking and at the end of clause (xxiii) and inserting or, and by adding at the end the following new clause:

(xxiv)

section 6050X (relating to returns relating to health insurance coverage), and

.

(B)

Statement

Paragraph (2) of section 6724(d) of such Code is amended by striking or at the end of subparagraph (EE), by striking the period at the end of subparagraph (FF) and inserting , or, and by inserting after subparagraph (FF) the following new subparagraph:

(GG)

section 6050X (relating to returns relating to health insurance coverage).

.

(c)

Return requirement

Subsection (a) of section 6012 of such Code is amended by inserting after paragraph (9) the following new paragraph:

(10)

Every individual to whom section 59B(a) applies and who fails to meet the requirements of section 59B(d) with respect to such individual or any qualifying child (as defined in section 152(c)) of such individual.

.

(d)

Clerical amendments

(1)

The table of parts for subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Part VIII. Health care related taxes.

.

(2)

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

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

.

(e)

Section 15 not to apply

The amendment made by subsection (a) shall not be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

(f)

Effective date

(1)

In general

The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

(2)

Returns

The amendments made by subsection (b) shall apply to calendar years beginning after December 31, 2012.

2

Employer Responsibility

411.

Election to satisfy health coverage participation requirements

(a)

In general

Chapter 43 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

4980H.

Election with respect to health coverage participation requirements

(a)

Election of employer responsibility to provide health coverage

(1)

In general

Subsection (b) shall apply to any employer with respect to whom an election under paragraph (2) is in effect.

(2)

Time and manner

An employer may make an election under this paragraph at such time and in such form and manner as the Secretary may prescribe.

(3)

Affiliated groups

In the case of any employer which is part of a group of employers who are treated as a single employer under subsection (b), (c), (m), or (o) of section 414, the election under paragraph (2) shall be made by such person as the Secretary may provide. Any such election, once made, shall apply to all members of such group.

(4)

Separate elections

Under regulations prescribed by the Secretary, separate elections may be made under paragraph (2) with respect to—

(A)

separate lines of business, and

(B)

full-time employees and employees who are not full-time employees.

(5)

Termination of election in cases of substantial noncompliance

The Secretary may terminate the election of any employer under paragraph (2) if the Secretary (in coordination with the Health Choices Commissioner) determines that such employer is in substantial noncompliance with the health coverage participation requirements.

(b)

Excise tax with respect to failure to meet health coverage participation requirements

(1)

In general

In the case of any employer who fails (during any period with respect to which the election under subsection (a) is in effect) to satisfy the health coverage participation requirements with respect to any employee to whom such election applies, there is hereby imposed on each such failure with respect to each such employee a tax of $100 for each day in the period beginning on the date such failure first occurs and ending on the date such failure is corrected.

(2)

Limitations on amount of tax

(A)

Tax not to apply where failure not discovered exercising reasonable diligence

No tax shall be imposed by paragraph (1) on any failure during any period for which it is established to the satisfaction of the Secretary that the employer neither knew, nor exercising reasonable diligence would have known, that such failure existed.

(B)

Tax not to apply to failures corrected within 30 days

No tax shall be imposed by paragraph (1) on any failure if—

(i)

such failure was due to reasonable cause and not to willful neglect, and

(ii)

such failure is corrected during the 30-day period beginning on the 1st date that the employer knew, or exercising reasonable diligence would have known, that such failure existed.

(C)

Overall limitation for unintentional failures

In the case of failures which are due to reasonable cause and not to willful neglect, the tax imposed by subsection (a) for failures during the taxable year of the employer shall not exceed the amount equal to the lesser of—

(i)

10 percent of the aggregate amount paid or incurred by the employer (or predecessor employer) during the preceding taxable year for employment-based health plans, or

(ii)

$500,000.

(D)

Coordination with other enforcement provisions

The tax imposed under paragraph (1) with respect to any failure shall be reduced (but not below zero) by the amount of any civil penalty collected under section 502(c)(11) of the Employee Retirement Income Security Act of 1974 or section 2793(g) of the Public Health Service Act with respect to such failure.

(c)

Health coverage participation requirements

For purposes of this section, the term health coverage participation requirements means the requirements of part I of subtitle B of title III of the America’s Affordable Health Choices Act of 2009 (as in effect on the date of the enactment of this section).

.

(b)

Clerical amendment

The table of sections for chapter 43 of such Code is amended by adding at the end the following new item:

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

.

(c)

Effective date

The amendments made by this section shall apply to periods beginning after December 31, 2012.

412.

Responsibilities of nonelecting employers

(a)

In general

Section 3111 of the Internal Revenue Code of 1986 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

(c)

Employers electing to not provide health benefits

(1)

In general

In addition to other taxes, there is hereby imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of the wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121(b)).

(2)

Special rules for small employers

(A)

In general

In the case of any employer who is small employer for any calendar year, paragraph (1) shall be applied by substituting the applicable percentage determined in accordance with the following table for 8 percent:

If the annual payroll of such employer for the preceding calendar year:The applicable percentage is:
Does not exceed $250,0000 percent
Exceeds $250,000, but does not exceed $300,0002 percent
Exceeds $300,000, but does not exceed $350,0004 percent
Exceeds $350,000, but does not exceed $400,0006 percent
(B)

Small employer

For purposes of this paragraph, the term small employer means any employer for any calendar year if the annual payroll of such employer for the preceding calendar year does not exceed $400,000.

(C)

Annual payroll

For purposes of this paragraph, the term annual payroll means, with respect to any employer for any calendar year, the aggregate wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121(b)) during such calendar year.

(3)

Nonelecting employer

For purposes of paragraph (1), the term nonelecting employer means any employer for any period with respect to which such employer does not have an election under section 4980H(a) in effect.

(4)

Special rule for separate elections

In the case of an employer who makes a separate election described in section 4980H(a)(4) for any period, paragraph (1) shall be applied for such period by taking into account only the wages paid to employees who are not subject to such election.

(5)

Aggregation; predecessors

For purposes of this subsection—

(A)

all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer, and

(B)

any reference to any person shall be treated as including a reference to any predecessor of such person.

.

(b)

Definitions

Section 3121 of such Code is amended by adding at the end the following new subsection:

(aa)

Special rules for tax on employers electing not to provide health benefits

For purposes of section 3111(c)—

(1)

Paragraphs (1), (5), and (19) of subsection (b) shall not apply.

(2)

Paragraph (7) of subsection (b) shall apply by treating all services as not covered by the retirement systems referred to in subparagraphs (C) and (F) thereof.

(3)

Subsection (e) shall not apply and the term State shall include the District of Columbia.

.

(c)

Conforming amendment

Subsection (d) of section 3111 of such Code, as redesignated by this section, is amended by striking this section and inserting subsections (a) and (b).

(d)

Application to railroads

(1)

In general

Section 3221 of such Code is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

(c)

Employers electing to not provide health benefits

(1)

In general

In addition to other taxes, there is hereby imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of the compensation paid during any calendar year by such employer for services rendered to such employer.

(2)

Exception for small employers

Rules similar to the rules of section 3111(c)(2) shall apply for purposes of this subsection.

(3)

Nonelecting employer

For purposes of paragraph (1), the term nonelecting employer means any employer for any period with respect to which such employer does not have an election under section 4980H(a) in effect.

(4)

Special rule for separate elections

In the case of an employer who makes a separate election described in section 4980H(a)(4) for any period, subsection (a) shall be applied for such period by taking into account only the wages paid to employees who are not subject to such election.

.

(2)

Definitions

Subsection (e) of section 3231 of such Code is amended by adding at the end the following new paragraph:

(13)

Special rules for tax on employers electing not to provide health benefits

For purposes of section 3221(c)—

(A)

Paragraph (1) shall be applied without regard to the third sentence thereof.

(B)

Paragraph (2) shall not apply.

.

(3)

Conforming amendment

Subsection (d) of section 3221 of such Code, as redesignated by this section, is amended by striking subsections (a) and (b), see section 3231(e)(2) and inserting this section, see paragraphs (2) and (13)(B) of section 3231(e).

(e)

Effective date

The amendments made by this section shall apply to periods beginning after December 31, 2012.

B

Credit for small business employee health coverage expenses

421.

Credit for small business employee health coverage expenses

(a)

In general

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

45R.

Small business employee health coverage credit

(a)

In general

For purposes of section 38, in the case of a qualified small employer, the small business employee health coverage credit determined under this section for the taxable year is an amount equal to the applicable percentage of the qualified employee health coverage expenses of such employer for such taxable year.

(b)

Applicable percentage

(1)

In general

For purposes of this section, the applicable percentage is 50 percent.

(2)

Phaseout based on average compensation of employees

In the case of an employer whose average annual employee compensation for the taxable year exceeds $20,000, the percentage specified in paragraph (1) shall be reduced by a number of percentage points which bears the same ratio to 50 as such excess bears to $20,000.

(c)

Limitations

(1)

Phaseout based on employer size

In the case of an employer who employs more than 10 qualified employees during the taxable year, the credit determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this paragraph and after the application of the other provisions of this section) as—

(A)

the excess of—

(i)

the number of qualified employees employed by the employer during the taxable year, over

(ii)

10, bears to

(B)

15.

(2)

Credit not allowed with respect to certain highly compensated employees

No credit shall be allowed under subsection (a) with respect to qualified employee health coverage expenses paid or incurred with respect to any employee for any taxable year if the aggregate compensation paid by the employer to such employee during such taxable year exceeds $80,000.

(d)

Qualified employee health coverage expenses

For purposes of this section—

(1)

In general

The term qualified employee health coverage expenses means, with respect to any employer for any taxable year, the aggregate amount paid or incurred by such employer during such taxable year for coverage of any qualified employee of the employer (including any family coverage which covers such employee) under qualified health coverage.

(2)

Qualified health coverage

The term qualified health coverage means acceptable coverage (as defined in section 59B(d)) which—

(A)

is provided pursuant to an election under section 4980H(a), and

(B)

satisfies the requirements referred to in section 4980H(c).

(e)

Other definitions

For purposes of this section—

(1)

Qualified small employer

For purposes of this section, the term qualified small employer means any employer for any taxable year if—

(A)

the number of qualified employees employed by such employer during the taxable year does not exceed 25, and

(B)

the average annual employee compensation of such employer for such taxable year does not exceed the sum of the dollar amounts in effect under subsection (b)(2).

(2)

Qualified employee

The term qualified employee means any employee of an employer for any taxable year of the employer if such employee received at least $5,000 of compensation from such employer for services performed in the trade or business of such employer during such taxable year.

(3)

Average annual employee compensation

The term average annual employee compensation means, with respect to any employer for any taxable year, the average amount of compensation paid by such employer to qualified employees of such employer during such taxable year.

(4)

Compensation

The term compensation has the meaning given such term in section 408(p)(6)(A).

(5)

Family coverage

The term family coverage means any coverage other than self-only coverage.

(f)

Special rules

For purposes of this section—

(1)

Special rule for partnerships and self-employed

In the case of a partnership (or a trade or business carried on by an individual) which has one or more qualified employees (determined without regard to this paragraph) with respect to whom the election under 4980H(a) applies, each partner (or, in the case of a trade or business carried on by an individual, such individual) shall be treated as an employee.

(2)

Aggregation rule

All persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as 1 employer.

(3)

Denial of double benefit

Any deduction otherwise allowable with respect to amounts paid or incurred for health insurance coverage to which subsection (a) applies shall be reduced by the amount of the credit determined under this section.

(4)

Inflation adjustment

In the case of any taxable year beginning after 2013, each of the dollar amounts in subsections (b)(2), (c)(2), and (e)(2) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost of living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins determined by substituting calendar year 2012 for calendar year 1992 in subparagraph (B) thereof.

If any increase determined under this paragraph is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.

.

(b)

Credit to be part of general business credit

Subsection (b) of section 38 of such Code (relating to general business credit) is amended by striking plus at the end of paragraph (34), by striking the period at the end of paragraph (35) and inserting , plus , and by adding at the end the following new paragraph:

(36)

in the case of a qualified small employer (as defined in section 45R(e)), the small business employee health coverage credit determined under section 45R(a).

.

(c)

Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45Q the following new item:

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

.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

C

Disclosures to carry out health insurance exchange subsidies

431.

Disclosures to carry out health insurance exchange subsidies

(a)

In general

Subsection (l) of section 6103 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(21)

Disclosure of return information to carry out health insurance exchange subsidies

(A)

In general

The Secretary, upon written request from the Health Choices Commissioner or the head of a State-based health insurance exchange approved for operation under section 208 of the America’s Affordable Health Choices Act of 2009, shall disclose to officers and employees of the Health Choices Administration or such State-based health insurance exchange, as the case may be, return information of any taxpayer whose income is relevant in determining any affordability credit described in subtitle C of title II of the America’s Affordable Health Choices Act of 2009. Such return information shall be limited to—

(i)

taxpayer identity information with respect to such taxpayer,

(ii)

the filing status of such taxpayer,

(iii)

the modified adjusted gross income of such taxpayer (as defined in section 59B(e)(5)),

(iv)

the number of dependents of the taxpayer,

(v)

such other information as is prescribed by the Secretary by regulation as might indicate whether the taxpayer is eligible for such affordability credits (and the amount thereof), and

(vi)

the taxable year with respect to which the preceding information relates or, if applicable, the fact that such information is not available.

(B)

Restriction on use of disclosed information

Return information disclosed under subparagraph (A) may be used by officers and employees of the Health Choices Administration or such State-based health insurance exchange, as the case may be, only for the purposes of, and to the extent necessary in, establishing and verifying the appropriate amount of any affordability credit described in subtitle C of title II of the America’s Affordable Health Choices Act of 2009 and providing for the repayment of any such credit which was in excess of such appropriate amount.

.

(b)

Procedures and recordkeeping related to disclosures

Paragraph (4) of section 6103(p) of such Code is amended—

(1)

by inserting , or any entity described in subsection (l)(21), after or (20) in the matter preceding subparagraph (A),

(2)

by inserting or any entity described in subsection (l)(21), after or (o)(1)(A), in subparagraph (F)(ii), and

(3)

by inserting or any entity described in subsection (l)(21), after or (20), both places it appears in the matter after subparagraph (F).

(c)

Unauthorized disclosure or inspection

Paragraph (2) of section 7213(a) of such Code is amended by striking or (20) and inserting (20), or (21).

D

Other revenue provisions

1

General provisions

441.

Surcharge on high income individuals

(a)

In general

Part VIII of subchapter A of chapter 1 of the Internal Revenue Code of 1986, as added by this title, is amended by adding at the end the following new subpart:

B

Surcharge on high income individuals

Sec. 59C. Surcharge on high income individuals.

59C.

Surcharge on high income individuals

(a)

General rule

In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to—

(1)

1 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $350,000 but does not exceed $500,000,

(2)

1.5 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $500,000 but does not exceed $1,000,000, and

(3)

5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000.

(b)

Taxpayers not making a joint return

In the case of any taxpayer other than a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), subsection (a) shall be applied by substituting for each of the dollar amounts therein (after any increase determined under subsection (e)) a dollar amount equal to—

(1)

50 percent of the dollar amount so in effect in the case of a married individual filing a separate return, and

(2)

80 percent of the dollar amount so in effect in any other case.

(c)

Adjustments based on Federal health reform savings

(1)

In general

Except as provided in paragraph (2), in the case of any taxable year beginning after December 31, 2012, subsection (a) shall be applied—

(A)

by substituting 2 percent for 1 percent, and

(B)

by substituting 3 percent for 1.5 percent.

(2)

Adjustments based on excess Federal health reform savings

(A)

Exception if Federal health reform savings significantly exceeds base amount

If the excess Federal health reform savings is more than $150,000,000,000 but not more than $175,000,000,000, paragraph (1) shall not apply.

(B)

Further adjustment for additional Federal health reform savings

If the excess Federal health reform savings is more than $175,000,000,000, paragraphs (1) and (2) of subsection (a) (and paragraph (1) of this subsection) shall not apply to any taxable year beginning after December 31, 2012.

(C)

Excess Federal health reform savings

For purposes of this subsection, the term excess Federal health reform savings means the excess of—

(i)

the Federal health reform savings, over

(ii)

$525,000,000,000.

(D)

Federal health reform savings

The term Federal health reform savings means the sum of the amounts described in subparagraphs (A) and (B) of paragraph (3).

(3)

Determination of Federal health reform savings

Not later than December 1, 2012, the Director of the Office of Management and Budget shall—

(A)

determine, on the basis of the study conducted under paragraph (4), the aggregate reductions in Federal expenditures which have been achieved as a result of the provisions of, and amendments made by, subdivision B of the America’s Affordable Health Choices Act of 2009 during the period beginning on October 1, 2009, and ending with the latest date with respect to which the Director has sufficient data to make such determination, and

(B)

estimate, on the basis of such study and the determination under subparagraph (A), the aggregate reductions in Federal expenditures which will be achieved as a result of such provisions and amendments during so much of the period beginning with fiscal year 2010 and ending with fiscal year 2019 as is not taken into account under subparagraph (A).

(4)

Study of Federal health reform savings

The Director of the Office of Management and Budget shall conduct a study of the reductions in Federal expenditures during fiscal years 2010 through 2019 which are attributable to the provisions of, and amendments made by, subdivision B of the America’s Affordable Health Choices Act of 2009. The Director shall complete such study not later than December 1, 2012.

(5)

Reductions in Federal expenditures determined without regard to program investments

For purposes of paragraphs (3) and (4), reductions in Federal expenditures shall be determined without regard to section 1121 of the America’s Affordable Health Choices Act of 2009 and other program investments under subdivision B thereof.

(d)

Modified adjusted gross income

For purposes of this section, the term modified adjusted gross income means adjusted gross income reduced by any deduction (not taken into account in determining adjusted gross income) allowed for investment interest (as defined in section 163(d)). In the case of an estate or trust, adjusted gross income shall be determined as provided in section 67(e).

(e)

Inflation adjustments

(1)

In general

In the case of taxable years beginning after 2011, the dollar amounts in subsection (a) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2010 for calendar year 1992 in subparagraph (B) thereof.

(2)

Rounding

If any amount as adjusted under paragraph (1) is not a multiple of $5,000, such amount shall be rounded to the next lowest multiple of $5,000.

(f)

Special rules

(1)

Nonresident alien

In the case of a nonresident alien individual, only amounts taken into account in connection with the tax imposed under section 871(b) shall be taken into account under this section.

(2)

Citizens and residents living abroad

The dollar amounts in effect under subsection (a) (after the application of subsections (b) and (e)) shall be decreased by the excess of—

(A)

the amounts excluded from the taxpayer’s gross income under section 911, over

(B)

the amounts of any deductions or exclusions disallowed under section 911(d)(6) with respect to the amounts described in subparagraph (A).

(3)

Charitable trusts

Subsection (a) shall not apply to a trust all the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B).

(4)

Not treated as tax imposed by this chapter for certain purposes

The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.

.

(b)

Clerical amendment

The table of subparts for part VIII of subchapter A of chapter 1 of such Code, as added by this title, is amended by inserting after the item relating to subpart A the following new item:

Subpart B. Surcharge on high income individuals.

.

(c)

Section 15 not to apply

The amendment made by subsection (a) shall not be treated as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code of 1986.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

442.

Distributions for medicine qualified only if for prescribed drug or insulin

(a)

HSAs

Subparagraph (A) of section 223(d)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug or is insulin..

(b)

Archer MSAs

Subparagraph (A) of section 220(d)(2) of such Code is amended by adding at the end the following: Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug or is insulin..

(c)

Health flexible spending arrangements and health reimbursement arrangements

Section 106 of such Code is amended by adding at the end the following new subsection:

(f)

Reimbursements for medicine restricted to prescribed drugs and insulin

For purposes of this section and section 105, reimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug or is insulin.

.

(d)

Effective dates

The amendment made by this section shall apply to expenses incurred after December 31, 2009.

443.

Delay in application of worldwide allocation of interest

(a)

In general

Paragraphs (5)(D) and (6) of section 864(f) of the Internal Revenue Code of 1986 are each amended by striking December 31, 2010 and inserting December 31, 2019.

(b)

Transition

Subsection (f) of section 864 of such Code is amended by striking paragraph (7).

2

Prevention of tax avoidance

451.

Limitation on treaty benefits for certain deductible payments

(a)

In general

Section 894 of the Internal Revenue Code of 1986 (relating to income affected by treaty) is amended by adding at the end the following new subsection:

(d)

Limitation on treaty benefits for certain deductible payments

(1)

In general

In the case of any deductible related-party payment, any withholding tax imposed under chapter 3 (and any tax imposed under subpart A or B of this part) with respect to such payment may not be reduced under any treaty of the United States unless any such withholding tax would be reduced under a treaty of the United States if such payment were made directly to the foreign parent corporation.

(2)

Deductible related-party payment

For purposes of this subsection, the term deductible related-party payment means any payment made, directly or indirectly, by any person to any other person if the payment is allowable as a deduction under this chapter and both persons are members of the same foreign controlled group of entities.

(3)

Foreign controlled group of entities

For purposes of this subsection—

(A)

In general

The term foreign controlled group of entities means a controlled group of entities the common parent of which is a foreign corporation.

(B)

Controlled group of entities

The term controlled group of entities means a controlled group of corporations as defined in section 1563(a)(1), except that—

(i)

more than 50 percent shall be substituted for at least 80 percent each place it appears therein, and

(ii)

the determination shall be made without regard to subsections (a)(4) and (b)(2) of section 1563.

A partnership or any other entity (other than a corporation) shall be treated as a member of a controlled group of entities if such entity is controlled (within the meaning of section 954(d)(3)) by members of such group (including any entity treated as a member of such group by reason of this sentence).
(4)

Foreign parent corporation

For purposes of this subsection, the term foreign parent corporation means, with respect to any deductible related-party payment, the common parent of the foreign controlled group of entities referred to in paragraph (3)(A).

(5)

Regulations

The Secretary may prescribe such regulations or other guidance as are necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance which provide for—

(A)

the treatment of two or more persons as members of a foreign controlled group of entities if such persons would be the common parent of such group if treated as one corporation, and

(B)

the treatment of any member of a foreign controlled group of entities as the common parent of such group if such treatment is appropriate taking into account the economic relationships among such entities.

.

(b)

Effective date

The amendment made by this section shall apply to payments made after the date of the enactment of this Act.

452.

Codification of economic substance doctrine

(a)

In general

Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (o) as subsection (p) and by inserting after subsection (n) the following new subsection:

(o)

Clarification of economic substance doctrine

(1)

Application of doctrine

In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if—

(A)

the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and

(B)

the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.

(2)

Special rule where taxpayer relies on profit potential

(A)

In general

The potential for profit of a transaction shall be taken into account in determining whether the requirements of subparagraphs (A) and (B) of paragraph (1) are met with respect to the transaction only if the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected.

(B)

Treatment of fees and foreign taxes

Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (A).

(3)

State and local tax benefits

For purposes of paragraph (1), any State or local income tax effect which is related to a Federal income tax effect shall be treated in the same manner as a Federal income tax effect.

(4)

Financial accounting benefits

For purposes of paragraph (1)(B), achieving a financial accounting benefit shall not be taken into account as a purpose for entering into a transaction if the origin of such financial accounting benefit is a reduction of Federal income tax.

(5)

Definitions and special rules

For purposes of this subsection—

(A)

Economic substance doctrine

The term economic substance doctrine means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.

(B)

Exception for personal transactions of individuals

In the case of an individual, paragraph (1) shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.

(C)

Other common law doctrines not affected

Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.

(D)

Determination of application of doctrine not affected

The determination of whether the economic substance doctrine is relevant to a transaction (or series of transactions) shall be made in the same manner as if this subsection had never been enacted.

(6)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.

.

(b)

Effective Date

The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

453.

Penalties for underpayments

(a)

Penalty for underpayments attributable to transactions lacking economic substance

(1)

In general

Subsection (b) of section 6662 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (5) the following new paragraph:

(6)

Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.

.

(2)

Increased penalty for nondisclosed transactions

Section 6662 of such Code is amended by adding at the end the following new subsection:

(i)

Increase in penalty in case of nondisclosed noneconomic substance transactions

(1)

In general

In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting 40 percent for 20 percent.

(2)

Nondisclosed noneconomic substance transactions

For purposes of this subsection, the term nondisclosed noneconomic substance transaction means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.

(3)

Special rule for amended returns

Except as provided in regulations, in no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.

.

(3)

Conforming amendment

Subparagraph (B) of section 6662A(e)(2) of such Code is amended—

(A)

by striking section 6662(h) and inserting subsections (h) or (i) of section 6662, and

(B)

by striking gross valuation misstatement penalty in the heading and inserting certain increased underpayment penalties.

(b)

Reasonable cause exception not applicable to noneconomic substance transactions, tax shelters, and certain large or publicly traded persons

Subsection (c) of section 6664 of such Code is amended—

(1)

by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,

(2)

by striking paragraph (2) in paragraph (4)(A), as so redesignated, and inserting paragraph (3), and

(3)

by inserting after paragraph (1) the following new paragraph:

(2)

Exception

Paragraph (1) shall not apply to—

(A)

to any portion of an underpayment which is attributable to one or more tax shelters (as defined in section 6662(d)(2)(C)) or transactions described in section 6662(b)(6), and

(B)

to any taxpayer if such taxpayer is a specified person (as defined in section 6662(d)(2)(D)(ii)).

.

(c)

Application of penalty for erroneous claim for refund or credit to noneconomic substance transactions

Section 6676 of such Code is amended by redesignating subsection (c) as subsection (d) and inserting after subsection (b) the following new subsection:

(c)

Noneconomic substance transactions treated as lacking reasonable basis

For purposes of this section, any excessive amount which is attributable to any transaction described in section 6662(b)(6) shall not be treated as having a reasonable basis.

.

(d)

Special understatement reduction rule for certain large or publicly traded persons

(1)

In general

Paragraph (2) of section 6662(d) of such Code is amended by adding at the end the following new subparagraph:

(D)

Special reduction rule for certain large or publicly traded persons

(i)

In general

In the case of any specified person—

(I)

subparagraph (B) shall not apply, and

(II)

the amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to any item with respect to which the taxpayer has a reasonable belief that the tax treatment of such item by the taxpayer is more likely than not the proper tax treatment of such item.

(ii)

Specified person

For purposes of this subparagraph, the term specified person means—

(I)

any person required to file periodic or other reports under section 13 of the Securities Exchange Act of 1934, and

(II)

any corporation with gross receipts in excess of $100,000,000 for the taxable year involved.

All persons treated as a single employer under section 52(a) shall be treated as one person for purposes of subclause (II).

.

(2)

Conforming amendment

Subparagraph (C) of section 6662(d)(2) of such Code is amended by striking Subparagraph (B) and inserting Subparagraphs (B) and (D)(i)(II).

(e)

Effective Date

The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

3

Parity in health benefits

461.

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

(a)

Application of accident and health plans to eligible beneficiaries

(1)

Exclusion of contributions

Section 106 of the Internal Revenue Code of 1986, as amended by section 442, (relating to contributions by employer to accident and health plans) is amended by adding at the end the following new subsection:

(g)

Coverage provided for eligible beneficiaries of employees

(1)

In general

Subsection (a) shall apply with respect to any eligible beneficiary of the employee.

(2)

Eligible beneficiary

For purposes of this subsection, the term eligible beneficiary means any individual who is eligible to receive benefits or coverage under an accident or health plan.

.

(2)

Exclusion of amounts expended for medical care

The first sentence of section 105(b) of such Code (relating to amounts expended for medical care) is amended—

(A)

by striking “and his dependents” and inserting “his dependents”, and

(B)

by inserting before the period the following: and any eligible beneficiary (within the meaning of section 106(f)) with respect to the taxpayer.

(3)

Payroll taxes

(A)

Section 3121(a)(2) of such Code is amended—

(i)

by striking or any of his dependents in the matter preceding subparagraph (A) and inserting , any of his dependents, or any eligible beneficiary (within the meaning of section 106(g)) with respect to the employee,

(ii)

by striking or any of his dependents, in subparagraph (A) and inserting , any of his dependents, or any eligible beneficiary (within the meaning of section 106(g)) with respect to the employee,, and

(iii)

by striking and their dependents both places it appears and inserting and such employees’ dependents and eligible beneficiaries (within the meaning of section 106(g)).

(B)

Section 3231(e)(1) of such Code is amended—

(i)

by striking or any of his dependents and inserting , any of his dependents, or any eligible beneficiary (within the meaning of section 106(g)) with respect to the employee,, and

(ii)

by striking and their dependents both places it appears and inserting and such employees’ dependents and eligible beneficiaries (within the meaning of section 106(g)).

(C)

Section 3306(b)(2) of such Code is amended—

(i)

by striking or any of his dependents in the matter preceding subparagraph (A) and inserting , any of his dependents, or any eligible beneficiary (within the meaning of section 106(g)) with respect to the employee,,

(ii)

by striking or any of his dependents in subparagraph (A) and inserting , any of his dependents, or any eligible beneficiary (within the meaning of section 106(g)) with respect to the employee, and

(iii)

by striking “and their dependents” both places it appears and inserting and such employees’ dependents and eligible beneficiaries (within the meaning of section 106(g)).

(D)

Section 3401(a) of such Code is amended by striking or at the end of paragraph (22), by striking the period at the end of paragraph (23) and inserting ; or, and by inserting after paragraph (23) the following new paragraph:

(24)

for any payment made to or for the benefit of an employee or any eligible beneficiary (within the meaning of section 106(g)) if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 106 or under section 105 by reference in section 105(b) to section 106(g).

.

(b)

Expansion of dependency for purposes of deduction for health insurance costs of self-employed individuals

(1)

In general

Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 (relating to special rules for health insurance costs of self-employed individuals) is amended to read as follows:

(1)

Allowance of deduction

In the case of a taxpayer who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to the amount paid during the taxable year for insurance which constitutes medical care for—

(A)

the taxpayer,

(B)

the taxpayer’s spouse,

(C)

the taxpayer’s dependents, and

(D)

any individual who—

(i)

satisfies the age requirements of section 152(c)(3)(A),

(ii)

bears a relationship to the taxpayer described in section 152(d)(2)(H), and

(iii)

meets the requirements of section 152(d)(1)(C), and

(E)

one individual who—

(i)

does not satisfy the age requirements of section 152(c)(3)(A),

(ii)

bears a relationship to the taxpayer described in section 152(d)(2)(H),

(iii)

meets the requirements of section 152(d)(1)(D), and

(iv)

is not the spouse of the taxpayer and does not bear any relationship to the taxpayer described in subparagraphs (A) through (G) of section 152(d)(2).

.

(2)

Conforming amendment

Subparagraph (B) of section 162(l)(2) of such Code is amended by inserting , any dependent, or individual described in subparagraph (D) or (E) of paragraph (1) with respect to after spouse.

(c)

Extension to eligible beneficiaries of sick and accident benefits provided to members of a voluntary employees’ beneficiary association and their dependents

Section 501(c)(9) of the Internal Revenue Code of 1986 (relating to list of exempt organizations) is amended by adding at the end the following new sentence: For purposes of providing for the payment of sick and accident benefits to members of such an association and their dependents, the term dependents shall include any individual who is an eligible beneficiary (within the meaning of section 106(f)), as determined under the terms of a medical benefit, health insurance, or other program under which members and their dependents are entitled to sick and accident benefits..

(d)

Flexible spending arrangements and health reimbursement arrangements

The Secretary of Treasury shall issue guidance of general applicability providing that medical expenses that otherwise qualify—

(1)

for reimbursement from a flexible spending arrangement under regulations in effect on the date of the enactment of this Act may be reimbursed from an employee’s flexible spending arrangement, notwithstanding the fact that such expenses are attributable to any individual who is not the employee’s spouse or dependent (within the meaning of section 105(b) of the Internal Revenue Code of 1986) but is an eligible beneficiary (within the meaning of section 106(f) of such Code) under the flexible spending arrangement with respect to the employee, and

(2)

for reimbursement from a health reimbursement arrangement under regulations in effect on the date of the enactment of this Act may be reimbursed from an employee’s health reimbursement arrangement, notwithstanding the fact that such expenses are attributable to an individual who is not a spouse or dependent (within the meaning of section 105(b) of such Code) but is an eligible beneficiary (within the meaning of section 106(f) of such Code) under the health reimbursement arrangement with respect to the employee.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

B

Medicare and Medicaid Improvements

1001.

Table of contents of subdivision

The table of contents for this subdivision is as follows:

Sec. 1001. Table of contents of subdivision.

Title I—Improving Health Care Value

Subtitle A—Provisions related to Medicare part A

Part 1—Market basket updates

Sec. 1101. Skilled nursing facility payment update.

Sec. 1102. Inpatient rehabilitation facility payment update.

Sec. 1103. Incorporating productivity improvements into market basket updates that do not already incorporate such improvements.

Part 2—Other Medicare part A provisions

Sec. 1111. Payments to skilled nursing facilities.

Sec. 1112. Medicare DSH report and payment adjustments in response to coverage expansion.

Sec. 1113. Extension of hospice regulation moratorium.

Subtitle B—Provisions Related to Part B

Part 1—Physicians’ Services

Sec. 1121. Sustainable growth rate reform.

Sec. 1122. Misvalued codes under the physician fee schedule.

Sec. 1123. Payments for efficient areas.

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

Sec. 1125. Adjustment to Medicare payment localities.

Part 2—Market basket updates

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

Part 3—Other Provisions

Sec. 1141. Rental and purchase of power-driven wheelchairs.

Sec. 1142. Extension of payment rule for brachytherapy.

Sec. 1143. Home infusion therapy report to congress.

Sec. 1144. Require ambulatory surgical centers (ASCs) to submit cost data and other data.

Sec. 1145. Treatment of certain cancer hospitals.

Sec. 1146. Medicare Improvement Fund.

Sec. 1147. Payment for imaging services.

Sec. 1148. Durable medical equipment program improvements.

Sec. 1149. MedPAC study and report on bone mass measurement.

Subtitle C—Provisions Related to Medicare Parts A and B

Sec. 1151. Reducing potentially preventable hospital readmissions.

Sec. 1152. Post acute care services payment reform plan and bundling pilot program.

Sec. 1153. Home health payment update for 2010.

Sec. 1154. Payment adjustments for home health care.

Sec. 1155. Incorporating productivity improvements into market basket update for home health services.

Sec. 1156. Limitation on Medicare exceptions to the prohibition on certain physician referrals made to hospitals.

Sec. 1157. Institute of Medicine study of geographic adjustment factors under Medicare.

Sec. 1158. Revision of medicare payment systems to address geographic inequities.

Sec. 1159. Institute of Medicine study of geographic variation in health care spending and promoting high-value health care.

Subtitle D—Medicare Advantage Reforms

Part 1—Payment and Administration

Sec. 1161. Phase-in of payment based on fee-for-service costs.

Sec. 1162. Quality bonus payments.

Sec. 1163. Extension of Secretarial coding intensity adjustment authority.

Sec. 1164. Simplification of annual beneficiary election periods.

Sec. 1165. Extension of reasonable cost contracts.

Sec. 1166. Limitation of waiver authority for employer group plans.

Sec. 1167. Improving risk adjustment for payments.

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

Part 2—Beneficiary Protections and Anti-Fraud

Sec. 1171. Limitation on cost-sharing for individual health services.

Sec. 1172. Continuous open enrollment for enrollees in plans with enrollment suspension.

Sec. 1173. Information for beneficiaries on MA plan administrative costs.

Sec. 1174. Strengthening audit authority.

Sec. 1175. Authority to deny plan bids.

Part 3—Treatment of special needs plans

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

Sec. 1177. Extension of authority of special needs plans to restrict enrollment.

Subtitle E—Improvements to Medicare Part D

Sec. 1181. Elimination of coverage gap.

Sec. 1182. Discounts for certain part D drugs in original coverage gap.

Sec. 1183. Repeal of provision relating to submission of claims by pharmacies located in or contracting with long-term care facilities.

Sec. 1184. Including costs incurred by AIDS drug assistance programs and Indian Health Service in providing prescription drugs toward the annual out-of-pocket threshold under part D.

Sec. 1185. Permitting mid-year changes in enrollment for formulary changes that adversely impact an enrollee.

Subtitle F—Medicare Rural Access Protections

Sec. 1191. Telehealth expansion and enhancements.

Sec. 1192. Extension of outpatient hold harmless provision.

Sec. 1193. Extension of section 508 hospital reclassifications.

Sec. 1194. Extension of geographic floor for work.

Sec. 1195. Extension of payment for technical component of certain physician pathology services.

Sec. 1196. Extension of ambulance add-ons.

Title II—Medicare Beneficiary Improvements

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

Sec. 1201. Improving assets tests for Medicare Savings Program and low-income subsidy program.

Sec. 1202. Elimination of part D cost-sharing for certain non-institutionalized full-benefit dual eligible individuals.

Sec. 1203. Eliminating barriers to enrollment.

Sec. 1204. Enhanced oversight relating to reimbursements for retroactive low income subsidy enrollment.

Sec. 1205. Intelligent assignment in enrollment.

Sec. 1206. Special enrollment period and automatic enrollment process for certain subsidy eligible individuals.

Sec. 1207. Application of MA premiums prior to rebate in calculation of low income subsidy benchmark.

Subtitle B—Reducing Health Disparities

Sec. 1221. Ensuring effective communication in Medicare.

Sec. 1222. Demonstration to promote access for Medicare beneficiaries with limited English proficiency by providing reimbursement for culturally and linguistically appropriate services.

Sec. 1223. IOM report on impact of language access services.

Sec. 1224. Definitions.

Subtitle C—Miscellaneous Improvements

Sec. 1231. Extension of therapy caps exceptions process.

Sec. 1232. Extended months of coverage of immunosuppressive drugs for kidney transplant patients and other renal dialysis provisions.

Sec. 1233. Advance care planning consultation.

Sec. 1234. Part B special enrollment period and waiver of limited enrollment penalty for TRICARE beneficiaries.

Sec. 1235. Exception for use of more recent tax year in case of gains from sale of primary residence in computing part B income-related premium.

Sec. 1236. Demonstration program on use of patient decisions aids.

Title III—Promoting Primary Care, Mental Health Services, and Coordinated Care

Sec. 1301. Accountable Care Organization pilot program.

Sec. 1302. Medical home pilot program.

Sec. 1303. Payment incentive for selected primary care services.

Sec. 1304. Increased reimbursement rate for certified nurse-midwives.

Sec. 1305. Coverage and waiver of cost-sharing for preventive services.

Sec. 1306. Waiver of deductible for colorectal cancer screening tests regardless of coding, subsequent diagnosis, or ancillary tissue removal.

Sec. 1307. Excluding clinical social worker services from coverage under the medicare skilled nursing facility prospective payment system and consolidated payment.

Sec. 1308. Coverage of marriage and family therapist services and mental health counselor services.

Sec. 1309. Extension of physician fee schedule mental health add-on.

Sec. 1310. Expanding access to vaccines.

Sec. 1311. Expansion of Medicare-Covered Preventive Services at Federally Qualified Health Centers.

Title IV—Quality

Subtitle A—Comparative Effectiveness Research

Sec. 1401. Comparative effectiveness research.

Subtitle B—Nursing Home Transparency

Part 1—Improving transparency of information on skilled nursing facilities and nursing facilities

Sec. 1411. Required disclosure of ownership and additional disclosable parties information.

Sec. 1412. Accountability requirements.

Sec. 1413. Nursing home compare Medicare website.

Sec. 1414. Reporting of expenditures.

Sec. 1415. Standardized complaint form.

Sec. 1416. Ensuring staffing accountability.

Part 2—Targeting Enforcement

Sec. 1421. Civil money penalties.

Sec. 1422. National independent monitor pilot program.

Sec. 1423. Notification of facility closure.

Part 3—Improving staff training

Sec. 1431. Dementia and abuse prevention training.

Sec. 1432. Study and report on training required for certified nurse aides and supervisory staff.

Subtitle C—Quality Measurements

Sec. 1441. Establishment of national priorities for quality improvement.

Sec. 1442. Development of new quality measures; GAO evaluation of data collection process for quality measurement.

Sec. 1443. Multi-stakeholder pre-rulemaking input into selection of quality measures.

Sec. 1444. Application of quality measures.

Sec. 1445. Consensus-based entity funding.

Subtitle D—Physician Payments Sunshine Provision

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

Subtitle E—Public Reporting on Health Care-Associated Infections

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

Title V—Medicare Graduate Medical Education

Sec. 1501. Distribution of unused residency positions.

Sec. 1502. Increasing training in nonprovider settings.

Sec. 1503. Rules for counting resident time for didactic and scholarly activities and other activities.

Sec. 1504. Preservation of resident cap positions from closed hospitals.

Sec. 1505. Improving accountability for approved medical residency training.

Title VI—Program Integrity

Subtitle A—Increased funding to fight waste, fraud, and abuse

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

Subtitle B—Enhanced penalties for fraud and abuse

Sec. 1611. Enhanced penalties for false statements on provider or supplier enrollment applications.

Sec. 1612. Enhanced penalties for submission of false statements material to a false claim.

Sec. 1613. Enhanced penalties for delaying inspections.

Sec. 1614. Enhanced hospice program safeguards.

Sec. 1615. Enhanced penalties for individuals excluded from program participation.

Sec. 1616. Enhanced penalties for provision of false information by Medicare Advantage and part D plans.

Sec. 1617. Enhanced penalties for Medicare Advantage and part D marketing violations.

Sec. 1618. Enhanced penalties for obstruction of program audits.

Sec. 1619. Exclusion of certain individuals and entities from participation in Medicare and State health care programs.

Subtitle C—Enhanced Program and Provider Protections

Sec. 1631. Enhanced CMS program protection authority.

Sec. 1632. Enhanced Medicare, Medicaid, and CHIP program disclosure requirements relating to previous affiliations.

Sec. 1633. Required inclusion of payment modifier for certain evaluation and management services.

Sec. 1634. Evaluations and reports required under Medicare Integrity Program.

Sec. 1635. Require providers and suppliers to adopt programs to reduce waste, fraud, and abuse.

Sec. 1636. Maximum period for submission of Medicare claims reduced to not more than 12 months.

Sec. 1637. Physicians who order durable medical equipment or home health services required to be Medicare enrolled physicians or eligible professionals.

Sec. 1638. Requirement for physicians to provide documentation on referrals to programs at high risk of waste and abuse.

Sec. 1639. Face to face encounter with patient required before physicians may certify eligibility for home health services or durable medical equipment under Medicare.

Sec. 1640. Extension of testimonial subpoena authority to program exclusion investigations.

Sec. 1641. Required repayments of Medicare and Medicaid overpayments.

Sec. 1642. Expanded application of hardship waivers for OIG exclusions to beneficiaries of any Federal health care program.

Sec. 1643. Access to certain information on renal dialysis facilities.

Sec. 1644. Billing agents, clearinghouses, or other alternate payees required to register under Medicare.

Sec. 1645. Conforming civil monetary penalties to False Claims Act amendments.

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

Sec. 1651. Access to Information Necessary to Identify Fraud, Waste, and Abuse.

Sec. 1652. Elimination of duplication between the Healthcare Integrity and Protection Data Bank and the National Practitioner Data Bank.

Sec. 1653. Compliance with HIPAA privacy and security standards.

Title VII—Medicaid and CHIP

Subtitle A—Medicaid and Health Reform

Sec. 1701. Eligibility for individuals with income below 1331/3 percent of the Federal poverty level.

Sec. 1702.  Requirements and special rules for certain Medicaid eligible individuals.

Sec. 1703. CHIP and Medicaid maintenance of effort.

Sec. 1704. Reduction in Medicaid DSH.

Sec. 1705. Expanded outstationing.

Subtitle B—Prevention

Sec. 1711. Required coverage of preventive services.

Sec. 1712. Tobacco cessation.

Sec. 1713. Optional coverage of nurse home visitation services.

Sec. 1714. State eligibility option for family planning services.

Subtitle C—Access

Sec. 1721. Payments to primary care practitioners.

Sec. 1722. Medical home pilot program.

Sec. 1723. Translation or interpretation services.

Sec. 1724. Optional coverage for freestanding birth center services.

Sec. 1725. Inclusion of public health clinics under the vaccines for children program.

Subtitle D—Coverage

Sec. 1731. Optional medicaid coverage of low-income HIV-infected individuals.

Sec. 1732. Extending transitional Medicaid Assistance (TMA).

Sec. 1733. Requirement of 12-month continuous coverage under certain CHIP programs.

Subtitle E—Financing

Sec. 1741. Payments to pharmacists.

Sec. 1742. Prescription drug rebates.

Sec. 1743. Extension of prescription drug discounts to enrollees of medicaid managed care organizations.

Sec. 1744. Payments for graduate medical education.

Subtitle F—Waste, Fraud, and Abuse

Sec. 1751. Health-care acquired conditions.

Sec. 1752. Evaluations and reports required under Medicaid Integrity Program.

Sec. 1753. Require providers and suppliers to adopt programs to reduce waste, fraud, and abuse.

Sec. 1754. Overpayments.

Sec. 1755. Managed Care Organizations.

Sec. 1756. Termination of provider participation under Medicaid and CHIP if terminated under Medicare or other State plan or child health plan.

Sec. 1757.  Medicaid and CHIP exclusion from participation relating to certain ownership, control, and management affiliations.

Sec. 1758.  Requirement to report expanded set of data elements under MMIS to detect fraud and abuse.

Sec. 1759. Billing agents, clearinghouses, or other alternate payees required to register under Medicaid.

Sec. 1760. Denial of payments for litigation-related misconduct.

Subtitle G—Puerto Rico and the Territories

Sec. 1771. Puerto Rico and territories.

Subtitle H—Miscellaneous

Sec. 1781. Technical corrections.

Sec. 1782. Extension of QI program.

Title VIII—Revenue-related provisions

Sec. 1801. Disclosures to facilitate identification of individuals likely to be ineligible for the low-income assistance under the Medicare prescription drug program to assist Social Security Administration’s outreach to eligible individuals.

Sec. 1802. Comparative Effectiveness Research Trust Fund; financing for Trust Fund.

Title IX—Miscellaneous Provisions

Sec. 1901. Repeal of trigger provision.

Sec. 1902. Repeal of comparative cost adjustment (CCA) program.

Sec. 1903. Extension of gainsharing demonstration.

Sec. 1904. Grants to States for quality home visitation programs for families with young children and families expecting children.

Sec. 1905. Improved coordination and protection for dual eligibles.

Sec. 1906. Assessment of Medicare cost-intensive diseases and conditions.

I

Improving Health Care Value

A

Provisions related to Medicare part A

1

Market basket updates

1101.

Skilled nursing facility payment update

(a)

In general

Section 1888(e)(4)(E)(ii) of the Social Security Act (42 U.S.C. 1395yy(e)(4)(E)(ii)) is amended—

(1)

in subclause (III), by striking and at the end;

(2)

by redesignating subclause (IV) as subclause (VI); and

(3)

by inserting after subclause (III) the following new subclauses:

(IV)

for each of fiscal years 2004 through 2009, the rate computed for the previous fiscal year increased by the skilled nursing facility market basket percentage change for the fiscal year involved;

(V)

for fiscal year 2010, the rate computed for the previous fiscal year; and

.

(b)

Delayed effective date

Section 1888(e)(4)(E)(ii)(V) of the Social Security Act, as inserted by subsection (a)(3), shall not apply to payment for days before January 1, 2010.

1102.

Inpatient rehabilitation facility payment update

(a)

In general

Section 1886(j)(3)(C) of the Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is amended by striking and 2009 and inserting through 2010.

(b)

Delayed effective date

The amendment made by subsection (a) shall not apply to payment units occurring before January 1, 2010.

1103.

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

(a)

Inpatient acute hospitals

Section 1886(b)(3)(B) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended—

(1)

in clause (iii)—

(A)

by striking (iii) For purposes of this subparagraph, and inserting (iii)(I) For purposes of this subparagraph, subject to the productivity adjustment described in subclause (II),; and

(B)

by adding at the end the following new subclause:

(II)

The productivity adjustment described in this subclause, with respect to an increase or change for a fiscal year or year or cost reporting period, or other annual period, is a productivity offset equal to the percentage change in the 10-year moving average of annual economy-wide private nonfarm business multi-factor productivity (as recently published before the promulgation of such increase for the year or period involved). Except as otherwise provided, any reference to the increase described in this clause shall be a reference to the percentage increase described in subclause (I) minus the percentage change under this subclause.

;

(2)

in the first sentence of clause (viii)(I), by inserting (but not below zero) after shall be reduced; and

(3)

in the first sentence of clause (ix)(I)—

(A)

by inserting (determined without regard to clause (iii)(II) after clause (i) the second time it appears; and

(B)

by inserting (but not below zero) after reduced.

(b)

Skilled nursing facilities

Section 1888(e)(5)(B) of such Act (42 U.S.C. 1395yy(e)(5))(B) is amended by inserting subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II) after as calculated by the Secretary.

(c)

Long term care hospitals

Section 1886(m) of the Social Security Act (42 U.S.C. 1395ww(m)) is amended by adding at the end the following new paragraph:

(3)

Productivity adjustment

In implementing the system described in paragraph (1) for discharges occurring during the rate year ending in 2010 or any subsequent rate year for a hospital, to the extent that an annual percentage increase factor applies to a base rate for such discharges for the hospital, such factor shall be subject to the productivity adjustment described in subsection (b)(3)(B)(iii)(II).

.

(d)

Inpatient rehabilitation facilities

The second sentence of section 1886(j)(3)(C) of the Social Security Act (42 U.S.C. 1395ww(j)(3)(C)) is amended by inserting (subject to the productivity adjustment described in subsection (b)(3)(B)(iii)(II)) after appropriate percentage increase.

(e)

Psychiatric hospitals

Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is amended by adding at the end the following new subsection:

(o)

Prospective payment for psychiatric hospitals

(1)

Reference to establishment and implementation of system

For provisions related to the establishment and implementation of a prospective payment system for payments under this title for inpatient hospital services furnished by psychiatric hospitals (as described in clause (i) of subsection (d)(1)(B) and psychiatric units (as described in the matter following clause (v) of such subsection), see section 124 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999.

(2)

Productivity adjustment

In implementing the system described in paragraph (1) for discharges occurring during the rate year ending in 2011 or any subsequent rate year for a psychiatric hospital or unit described in such paragraph, to the extent that an annual percentage increase factor applies to a base rate for such discharges for the hospital or unit, respectively, such factor shall be subject to the productivity adjustment described in subsection (b)(3)(B)(iii)(II).

.

(f)

Hospice care

Subclause (VII) of section 1814(i)(1)(C)(ii) of the Social Security Act (42 U.S.C. 1395f(i)(1)(C)(ii)) is amended by inserting after the market basket percentage increase the following: (which is subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)).

(g)

Effective date

The amendments made by subsections (a), (b), (d), and (f) shall apply to annual increases effected for fiscal years beginning with fiscal year 2010.

2

Other Medicare part A provisions

1111.

Payments to skilled nursing facilities

(a)

Change in recalibration factor

(1)

Analysis

The Secretary of Health and Human Services shall conduct, using calendar year 2006 claims data, an initial analysis comparing total payments under title XVIII of the Social Security Act for skilled nursing facility services under the RUG–53 and under the RUG–44 classification systems.

(2)

Adjustment in recalibration factor

Based on the initial analysis under paragraph (1), the Secretary shall adjust the case mix indexes under section 1888(e)(4)(G)(i) of the Social Security Act (42 U.S.C. 1395yy(e)(4)(G)(i)) for fiscal year 2010 by the appropriate recalibration factor as proposed in the proposed rule for Medicare skilled nursing facilities issued by such Secretary on May 12, 2009 (74 Federal Register 22214 et seq.).

(b)

Change in payment for nontherapy ancillary (NTA) services and therapy services

(1)

Changes under current SNF classification system

(A)

In general

Subject to subparagraph (B), the Secretary of Health and Human Services shall, under the system for payment of skilled nursing facility services under section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)), increase payment by 10 percent for non-therapy ancillary services (as specified by the Secretary in the notice issued on November 27, 1998 (63 Federal Register 65561 et seq.)) and shall decrease payment for the therapy case mix component of such rates by 5.5 percent.

(B)

Effective date

The changes in payment described in subparagraph (A) shall apply for days on or after January 1, 2010, and until the Secretary implements an alternative case mix classification system for payment of skilled nursing facility services under section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)).

(C)

Implementation

Notwithstanding any other provision of law, the Secretary may implement by program instruction or otherwise the provisions of this paragraph.

(2)

Changes under a future SNF case mix classification system

(A)

Analysis

(i)

In general

The Secretary of Health and Human Services shall analyze payments for non-therapy ancillary services under a future skilled nursing facility classification system to ensure the accuracy of payment for non-therapy ancillary services. Such analysis shall consider use of appropriate predictors which may include age, physical and mental status, ability to perform activities of daily living, prior nursing home stay, diagnoses, broad RUG category, and a proxy for length of stay.

(ii)

Application

Such analysis shall be conducted in a manner such that the future skilled nursing facility classification system is implemented to apply to services furnished during a fiscal year beginning with fiscal year 2011.

(B)

Consultation

In conducting the analysis under subparagraph (A), the Secretary shall consult with interested parties, including the Medicare Payment Advisory Commission and other interested stakeholders, to identify appropriate predictors of nontherapy ancillary costs.

(C)

Rulemaking

The Secretary shall include the result of the analysis under subparagraph (A) in the fiscal year 2011 rulemaking cycle for purposes of implementation beginning for such fiscal year.

(D)

Implementation

Subject to subparagraph (E) and consistent with subparagraph (A)(ii), the Secretary shall implement changes to payments for non-therapy ancillary services (which shall include a separate rate component for non-therapy ancillary services and may include use of a model that predicts payment amounts applicable for non-therapy ancillary services) under such future skilled nursing facility services classification system as the Secretary determines appropriate based on the analysis conducted pursuant to subparagraph (A).

(E)

Budget neutrality

The Secretary shall implement changes described in subparagraph (D) in a manner such that the estimated expenditures under such future skilled nursing facility services classification system for a fiscal year beginning with fiscal year 2011 with such changes would be equal to the estimated expenditures that would otherwise occur under title XVIII of the Social Security Act under such future skilled nursing facility services classification system for such year without such changes.

(c)

Outlier policy for NTA and therapy

Section 1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)) is amended by adding at the end the following new paragraph:

(13)

Outliers for NTA and therapy

(A)

In general

With respect to outliers because of unusual variations in the type or amount of medically necessary care, beginning with October 1, 2010, the Secretary—

(i)

shall provide for an addition or adjustment to the payment amount otherwise made under this section with respect to non-therapy ancillary services in the case of such outliers; and

(ii)

may provide for such an addition or adjustment to the payment amount otherwise made under this section with respect to therapy services in the case of such outliers.

(B)

Outliers based on aggregate costs

Outlier adjustments or additional payments described in subparagraph (A) shall be based on aggregate costs during a stay in a skilled nursing facility and not on the number of days in such stay.

(C)

Budget neutrality

The Secretary shall reduce estimated payments that would otherwise be made under the prospective payment system under this subsection with respect to a fiscal year by 2 percent. The total amount of the additional payments or payment adjustments for outliers made under this paragraph with respect to a fiscal year may not exceed 2 percent of the total payments projected or estimated to be made based on the prospective payment system under this subsection for the fiscal year.

.

(d)

Conforming amendments

Section 1888(e)(8) of such Act (42 U.S.C. 1395yy(e)(8)) is amended—

(1)

in subparagraph (A)—

(A)

by striking and before adjustments; and

(B)

by inserting , and adjustment under section 1111(b) of the America’s Affordable Health Choices Act of 2009 before the semicolon at the end;

(2)

in subparagraph (B), by striking “and”;

(3)

in subparagraph (C), by striking the period and inserting “; and”; and

(4)

by adding at the end the following new subparagraph:

(D)

the establishment of outliers under paragraph (13).

.

1112.

Medicare DSH report and payment adjustments in response to coverage expansion

(a)

DSH report

(1)

In general

Not later than January 1, 2016, the Secretary of Health and Human Services shall submit to Congress a report on Medicare DSH taking into account the impact of the health care reforms carried out under subdivision A in reducing the number of uninsured individuals. The report shall include recommendations relating to the following:

(A)

The appropriate amount, targeting, and distribution of Medicare DSH to compensate for higher Medicare costs associated with serving low-income beneficiaries (taking into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size), consistent with the original intent of Medicare DSH.

(B)

The appropriate amount, targeting, and distribution of Medicare DSH to hospitals given their continued uncompensated care costs, to the extent such costs remain.

(2)

Coordination with Medicaid DSH report

The Secretary shall coordinate the report under this subsection with the report on Medicaid DSH under section 1704(a).

(b)

Payment adjustments in response to coverage expansion

(1)

In general

If there is a significant decrease in the national rate of uninsurance as a result of this division (as determined under paragraph (2)(A)), then the Secretary of Health and Human Services shall, beginning in fiscal year 2017, implement the following adjustments to Medicare DSH:

(A)

In lieu of the amount of Medicare DSH payment that would otherwise be made under section 1886(d)(5)(F) of the Social Security Act, the amount of Medicare DSH payment shall be an amount based on the recommendations of the report under subsection (a)(1)(A) and shall take into account variations in the empirical justification for Medicare DSH attributable to hospital characteristics, including bed size.

(B)

Subject to paragraph (3), make an additional payment to a hospital by an amount that is estimated based on the amount of uncompensated care provided by the hospital based on criteria for uncompensated care as determined by the Secretary, which shall exclude bad debt.

(2)

Significant decrease in national rate of uninsurance as a result of this division

For purposes of this subsection—

(A)

In general

There is a significant decrease in the national rate of uninsurance as a result of this division if there is a decrease in the national rate of uninsurance (as defined in subparagraph (B)) from 2012 to 2014 that exceeds 8 percentage points.

(B)

National rate of uninsurance defined

The term national rate of uninsurance means, for a year, such rate for the under-65 population for the year as determined and published by the Bureau of the Census in its Current Population Survey in or about September of the succeeding year.

(3)

Uncompensated care increase

(A)

Computation of DSH savings

For each fiscal year (beginning with fiscal year 2017), the Secretary shall estimate the aggregate reduction in the amount of Medicare DSH payment that would be expected to result from the adjustment under paragraph (1)(A).

(B)

Structure of payment increase

The Secretary shall compute the additional payment to a hospital as described in paragraph (1)(B) for a fiscal year in accordance with a formula established by the Secretary that provides that—

(i)

the estimated aggregate amount of such increase for the fiscal year does not exceed 50 percent of the aggregate reduction in Medicare DSH estimated by the Secretary for such fiscal year; and

(ii)

hospitals with higher levels of uncompensated care receive a greater increase.

(c)

Medicare DSH

In this section, the term Medicare DSH means adjustments in payments under section 1886(d)(5)(F) of the Social Security Act (42 U.S.C. 1395ww(d)(5)(F)) for inpatient hospital services furnished by disproportionate share hospitals.

1113.

Extension of hospice regulation moratorium

Section 4301(a) of division B of the American Recovery and Reinvestment Act of 2009 (Public Law 111–5) is amended—

(1)

by striking October 1, 2009 and inserting October 1, 2010; and

(2)

by striking for fiscal year 2009 and inserting for fiscal years 2009 and 2010.

B

Provisions Related to Part B

1

Physicians’ Services

1121.

Sustainable growth rate reform

(a)

Transitional update for 2010

Section 1848(d) of the Social Security Act (42 U.S.C. 1395w–4(d)) is amended by adding at the end the following new paragraph:

(10)

Update for 2010

The update to the single conversion factor established in paragraph (1)(C) for 2010 shall be the percentage increase in the MEI (as defined in section 1842(i)(3)) for that year.

.

(b)

Rebasing SGR using 2009; limitation on cumulative adjustment period

Section 1848(d)(4) of such Act (42 U.S.C. 1395w–4(d)(4)) is amended—

(1)

in subparagraph (B), by striking subparagraph (D) and inserting subparagraphs (D) and (G); and

(2)

by adding at the end the following new subparagraph:

(G)

Rebasing using 2009 for future update adjustments

In determining the update adjustment factor under subparagraph (B) for 2011 and subsequent years—

(i)

the allowed expenditures for 2009 shall be equal to the amount of the actual expenditures for physicians’ services during 2009; and

(ii)

the reference in subparagraph (B)(ii)(I) to April 1, 1996 shall be treated as a reference to January 1, 2009 (or, if later, the first day of the fifth year before the year involved).

.

(c)

Limitation on physicians’ services included in target growth rate computation to services covered under physician fee schedule

Effective for services furnished on or after January 1, 2009, section 1848(f)(4)(A) of such Act is amended by striking (such as clinical and all that follows through in a physician’s office and inserting for which payment under this part is made under the fee schedule under this section, for services for practitioners described in section 1842(b)(18)(C) on a basis related to such fee schedule, or for services described in section 1861(p) (other than such services when furnished in the facility of a provider of services).

(d)

Establishment of separate target growth rates for categories of services

(1)

Establishment of service categories

Subsection (j) of section 1848 of the Social Security Act (42 U.S.C. 1395w–4) is amended by adding at the end the following new paragraph:

(5)

Service categories

For services furnished on or after January 1, 2009, each of the following categories of physicians’ services (as defined in paragraph (3)) shall be treated as a separate service category:

(A)

Evaluation and management services that are procedure codes (for services covered under this title) for—

(i)

services in the category designated Evaluation and Management in the Health Care Common Procedure Coding System (established by the Secretary under subsection (c)(5) as of December 31, 2009, and as subsequently modified by the Secretary); and

(ii)

preventive services (as defined in section 1861(iii)) for which payment is made under this section.

(B)

All other services not described in subparagraph (A).

Service categories established under this paragraph shall apply without regard to the specialty of the physician furnishing the service.

.

(2)

Establishment of separate conversion factors for each service category

Subsection (d)(1) of section 1848 of the Social Security Act (42 U.S.C. 1395w–4) is amended—

(A)

in subparagraph (A)—

(i)

by designating the sentence beginning The conversion factor as clause (i) with the heading Application of single conversion factor.— and with appropriate indentation;

(ii)

by striking The conversion factor and inserting Subject to clause (ii), the conversion factor; and

(iii)

by adding at the end the following new clause:

(ii)

Application of multiple conversion factors beginning with 2011

(I)

In general

In applying clause (i) for years beginning with 2011, separate conversion factors shall be established for each service category of physicians’ services (as defined in subsection (j)(5)) and any reference in this section to a conversion factor for such years shall be deemed to be a reference to the conversion factor for each of such categories.

(II)

Initial conversion factors

Such factors for 2011 shall be based upon the single conversion factor for the previous year multiplied by the update established under paragraph (11) for such category for 2011.

(III)

Updating of conversion factors

Such factor for a service category for a subsequent year shall be based upon the conversion factor for such category for the previous year and adjusted by the update established for such category under paragraph (11) for the year involved.

; and

(B)

in subparagraph (D), by striking other physicians’ services and inserting for physicians’ services described in the service category described in subsection (j)(5)(B).

(3)

Establishing updates for conversion factors for service categories

Section 1848(d) of the Social Security Act (42 U.S.C. 1395w–4(d)), as amended by subsection (a), is amended—

(A)

in paragraph (4)(C)(iii), by striking The allowed and inserting Subject to paragraph (11)(B), the allowed; and

(B)

by adding at the end the following new paragraph:

(11)

Updates for service categories beginning with 2011

(A)

In general

In applying paragraph (4) for a year beginning with 2011, the following rules apply:

(i)

Application of separate update adjustments for each service category

Pursuant to paragraph (1)(A)(ii)(I), the update shall be made to the conversion factor for each service category (as defined in subsection (j)(5)) based upon an update adjustment factor for the respective category and year and the update adjustment factor shall be computed, for a year, separately for each service category.

(ii)

Computation of allowed and actual expenditures based on service categories

In computing the prior year adjustment component and the cumulative adjustment component under clauses (i) and (ii) of paragraph (4)(B), the following rules apply:

(I)

Application based on service categories

The allowed expenditures and actual expenditures shall be the allowed and actual expenditures for the service category, as determined under subparagraph (B).

(II)

Application of category specific target growth rate

The growth rate applied under clause (ii)(II) of such paragraph shall be the target growth rate for the service category involved under subsection (f)(5).

(B)

Determination of allowed expenditures

In applying paragraph (4) for a year beginning with 2010, notwithstanding subparagraph (C)(iii) of such paragraph, the allowed expenditures for a service category for a year is an amount computed by the Secretary as follows:

(i)

For 2010

For 2010:

(I)

Total 2009 actual expenditures for all services included in SGR computation for each service category

Compute total actual expenditures for physicians’ services (as defined in subsection (f)(4)(A)) for 2009 for each service category.

(II)

Increase by growth rate to obtain 2010 allowed expenditures for service category

Compute allowed expenditures for the service category for 2010 by increasing the allowed expenditures for the service category for 2009 computed under subclause (I) by the target growth rate for such service category under subsection (f) for 2010.

(ii)

For subsequent years

For a subsequent year, take the amount of allowed expenditures for such category for the preceding year (under clause (i) or this clause) and increase it by the target growth rate determined under subsection (f) for such category and year.

.

(4)

Application of separate target growth rates for each category

(A)

In general

Section 1848(f) of the Social Security Act (42 U.S.C. 1395w–4(f)) is amended by adding at the end the following new paragraph:

(5)

Application of separate target growth rates for each service category beginning with 2010

The target growth rate for a year beginning with 2010 shall be computed and applied separately under this subsection for each service category (as defined in subsection (j)(5)) and shall be computed using the same method for computing the target growth rate except that the factor described in paragraph (2)(C) for—

(A)

the service category described in subsection (j)(5)(A) shall be increased by 0.02; and

(B)

the service category described in subsection (j)(5)(B) shall be increased by 0.01.

.

(B)

Use of target growth rates

Section 1848 of such Act is further amended—

(i)

in subsection (d)—

(I)

in paragraph (1)(E)(ii), by inserting or target after sustainable; and

(II)

in paragraph (4)(B)(ii)(II), by inserting or target after sustainable; and

(ii)

in the heading of subsection (f), by inserting and target growth rate after sustainable growth rate;

(iii)

in subsection (f)(1)—

(I)

by striking and at the end of subparagraph (A);

(II)

in subparagraph (B), by inserting before 2010 after each succeeding year and by striking the period at the end and inserting ; and; and

(III)

by adding at the end the following new subparagraph:

(C)

November 1 of each succeeding year the target growth rate for such succeeding year and each of the 2 preceding years.

; and

(iv)

in subsection (f)(2), in the matter before subparagraph (A), by inserting after beginning with 2000 the following: and ending with 2009.

(e)

Application to accountable care organization pilot program

In applying the target growth rate under subsections (d) and (f) of section 1848 of the Social Security Act to services furnished by a practitioner to beneficiaries who are attributable to an accountable care organization under the pilot program provided under section 1866D of such Act, the Secretary of Health and Human Services shall develop, not later than January 1, 2012, for application beginning with 2012, a method that—

(1)

allows each such organization to have its own expenditure targets and updates for such practitioners, with respect to beneficiaries who are attributable to that organization, that are consistent with the methodologies described in such subsection (f); and

(2)

provides that the target growth rate applicable to other physicians shall not apply to such physicians to the extent that the physicians’ services are furnished through the accountable care organization.

In applying paragraph (1), the Secretary of Health and Human Services may apply the difference in the update under such paragraph on a claim-by-claim or lump sum basis and such a payment shall be taken into account under the pilot program.
1122.

Misvalued codes under the physician fee schedule

(a)

In general

Section 1848(c)(2) of the Social Security Act (42 U.S.C. 1395w-4(c)(2)) is amended by adding at the end the following new subparagraphs:

(K)

Potentially misvalued codes

(i)

In general

The Secretary shall—

(I)

periodically identify services as being potentially misvalued using criteria specified in clause (ii); and

(II)

review and make appropriate adjustments to the relative values established under this paragraph for services identified as being potentially misvalued under subclause (I).

(ii)

Identification of potentially misvalued codes

For purposes of identifying potentially misvalued services pursuant to clause (i)(I), the Secretary shall examine (as the Secretary determines to be appropriate) codes (and families of codes as appropriate) for which there has been the fastest growth; codes (and families of codes as appropriate) that have experienced substantial changes in practice expenses; codes for new technologies or services within an appropriate period (such as three years) after the relative values are initially established for such codes; multiple codes that are frequently billed in conjunction with furnishing a single service; codes with low relative values, particularly those that are often billed multiple times for a single treatment; codes which have not been subject to review since the implementation of the RBRVS (the so-called Harvard-valued codes); and such other codes determined to be appropriate by the Secretary.

(iii)

Review and adjustments

(I)

The Secretary may use existing processes to receive recommendations on the review and appropriate adjustment of potentially misvalued services described clause (i)(II).

(II)

The Secretary may conduct surveys, other data collection activities, studies, or other analyses as the Secretary determines to be appropriate to facilitate the review and appropriate adjustment described in clause (i)(II).

(III)

The Secretary may use analytic contractors to identify and analyze services identified under clause (i)(I), conduct surveys or collect data, and make recommendations on the review and appropriate adjustment of services described in clause (i)(II).

(IV)

The Secretary may coordinate the review and appropriate adjustment described in clause (i)(II) with the periodic review described in subparagraph (B).

(V)

As part of the review and adjustment described in clause (i)(II), including with respect to codes with low relative values described in clause (ii), the Secretary may make appropriate coding revisions (including using existing processes for consideration of coding changes) which may include consolidation of individual services into bundled codes for payment under the fee schedule under subsection (b).

(VI)

The provisions of subparagraph (B)(ii)(II) shall apply to adjustments to relative value units made pursuant to this subparagraph in the same manner as such provisions apply to adjustments under subparagraph (B)(ii)(II).

(L)

Validating relative value units

(i)

In general

The Secretary shall establish a process to validate relative value units under the fee schedule under subsection (b).

(ii)

Components and elements of work

The process described in clause (i) may include validation of work elements (such as time, mental effort and professional judgment, technical skill and physical effort, and stress due to risk) involved with furnishing a service and may include validation of the pre, post, and intra-service components of work.

(iii)

Scope of codes

The validation of work relative value units shall include a sampling of codes for services that is the same as the codes listed under subparagraph (K)(ii)

(iv)

Methods

The Secretary may conduct the validation under this subparagraph using methods described in subclauses (I) through (V) of subparagraph (K)(iii) as the Secretary determines to be appropriate.

(v)

Adjustments

The Secretary shall make appropriate adjustments to the work relative value units under the fee schedule under subsection (b). The provisions of subparagraph (B)(ii)(II) shall apply to adjustments to relative value units made pursuant to this subparagraph in the same manner as such provisions apply to adjustments under subparagraph (B)(ii)(II).

.

(b)

Implementation

(1)

Funding

For purposes of carrying out the provisions of subparagraphs (K) and (L) of 1848(c)(2) of the Social Security Act, as added by subsection (a), in addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary of Health and Human Services for the Center for Medicare & Medicaid Services Program Management Account $20,000,000 for fiscal year 2010 and each subsequent fiscal year. Amounts appropriated under this paragraph for a fiscal year shall be available until expended.

(2)

Administration

(A)

Chapter 35 of title 44, United States Code and the provisions of the Federal Advisory Committee Act (5 U.S.C. App.) shall not apply to this section or the amendment made by this section.

(B)

Notwithstanding any other provision of law, the Secretary may implement subparagraphs (K) and (L) of 1848(c)(2) of the Social Security Act, as added by subsection (a), by program instruction or otherwise.

(C)

Section 4505(d) of the Balanced Budget Act of 1997 is repealed.

(D)

Except for provisions related to confidentiality of information, the provisions of the Federal Acquisition Regulation shall not apply to this section or the amendment made by this section.

(3)

Focusing CMS resources on potentially overvalued codes

Section 1868(a) of the Social Security Act (42 1395ee(a)) is repealed.

1123.

Payments for efficient areas

Section 1833 of the Social Security Act (42 U.S.C. 1395l) is amended by adding at the end the following new subsection:

(x)

Incentive Payments for Efficient areas

(1)

In general

In the case of services furnished under the physician fee schedule under section 1848 on or after January 1, 2011, and before January 1, 2013, by a supplier that is paid under such fee schedule in an efficient area (as identified under paragraph (2)), in addition to the amount of payment that would otherwise be made for such services under this part, there also shall be paid (on a monthly or quarterly basis) an amount equal to 5 percent of the payment amount for the services under this part.

(2)

Identification of efficient areas

(A)

In general

Based upon available data, the Secretary shall identify those counties or equivalent areas in the United States in the lowest fifth percentile of utilization based on per capita spending under this part and part A for services provided in the most recent year for which data are available as of the date of the enactment of this subsection, as standardized to eliminate the effect of geographic adjustments in payment rates.

(B)

Identification of counties where service is furnished.

For purposes of paying the additional amount specified in paragraph (1), if the Secretary uses the 5-digit postal ZIP Code where the service is furnished, the dominant county of the postal ZIP Code (as determined by the United States Postal Service, or otherwise) shall be used to determine whether the postal ZIP Code is in a county described in subparagraph (A).

(C)

Limitation on review

There shall be no administrative or judicial review under section 1869, 1878, or otherwise, respecting—

(i)

the identification of a county or other area under subparagraph (A); or

(ii)

the assignment of a postal ZIP Code to a county or other area under subparagraph (B).

(D)

Publication of list of counties; posting on website

With respect to a year for which a county or area is identified under this paragraph, the Secretary shall identify such counties or areas as part of the proposed and final rule to implement the physician fee schedule under section 1848 for the applicable year. The Secretary shall post the list of counties identified under this paragraph on the Internet website of the Centers for Medicare & Medicaid Services.

.

1124.

Modifications to the Physician Quality Reporting Initiative (PQRI)

(a)

Feedback

Section 1848(m)(5) of the Social Security Act (42 U.S.C. 1395w–4(m)(5)) is amended by adding at the end the following new subparagraph:

(H)

Feedback

The Secretary shall provide timely feedback to eligible professionals on the performance of the eligible professional with respect to satisfactorily submitting data on quality measures under this subsection.

.

(b)

Appeals

Such section is further amended—

(1)

in subparagraph (E), by striking There shall be and inserting Subject to subparagraph (I), there shall be; and

(2)

by adding at the end the following new subparagraph:

(I)

Informal appeals process

Notwithstanding subparagraph (E), by not later than January 1, 2011, the Secretary shall establish and have in place an informal process for eligible professionals to appeal the determination that an eligible professional did not satisfactorily submit data on quality measures under this subsection.

.

(c)

Integration of physician quality reporting and EHR reporting

Section 1848(m) of such Act is amended by adding at the end the following new paragraph:

(7)

Integration of physician quality reporting and EHR reporting

Not later than January 1, 2012, the Secretary shall develop a plan to integrate clinical reporting on quality measures under this subsection with reporting requirements under subsection (o) relating to the meaningful use of electronic health records. Such integration shall consist of the following:

(A)

The development of measures, the reporting of which would both demonstrate—

(i)

meaningful use of an electronic health record for purposes of subsection (o); and

(ii)

clinical quality of care furnished to an individual.

(B)

The collection of health data to identify deficiencies in the quality and coordination of care for individuals eligible for benefits under this part.

(C)

Such other activities as specified by the Secretary.

.

(d)

Extension of incentive payments

Section 1848(m)(1) of such Act (42 U.S.C. 1395w–4(m)(1)) is amended—

(1)

in subparagraph (A), by striking 2010 and inserting 2012; and

(2)

in subparagraph (B)(ii), by striking 2009 and 2010 and inserting for each of the years 2009 through 2012.

1125.

Adjustment to Medicare payment localities

(a)

In general

Section 1848(e) of the Social Security Act (42 U.S.C.1395w–4(e)) is amended by adding at the end the following new paragraph:

(6)

Transition to use of MSAs as fee schedule areas in California

(A)

In general

(i)

Revision

Subject to clause (ii) and notwithstanding the previous provisions of this subsection, for services furnished on or after January 1, 2011, the Secretary shall revise the fee schedule areas used for payment under this section applicable to the State of California using the Metropolitan Statistical Area (MSA) iterative Geographic Adjustment Factor methodology as follows:

(I)

The Secretary shall configure the physician fee schedule areas using the Core-Based Statistical Areas-Metropolitan Statistical Areas (each in this paragraph referred to as an MSA), as defined by the Director of the Office of Management and Budget, as the basis for the fee schedule areas. The Secretary shall employ an iterative process to transition fee schedule areas. First, the Secretary shall list all MSAs within the State by Geographic Adjustment Factor described in paragraph (2) (in this paragraph referred to as a GAF) in descending order. In the first iteration, the Secretary shall compare the GAF of the highest cost MSA in the State to the weighted-average GAF of the group of remaining MSAs in the State. If the ratio of the GAF of the highest cost MSA to the weighted-average GAF of the rest of State is 1.05 or greater then the highest cost MSA becomes a separate fee schedule area.

(II)

In the next iteration, the Secretary shall compare the MSA of the second-highest GAF to the weighted-average GAF of the group of remaining MSAs. If the ratio of the second-highest MSA’s GAF to the weighted-average of the remaining lower cost MSAs is 1.05 or greater, the second-highest MSA becomes a separate fee schedule area. The iterative process continues until the ratio of the GAF of the highest-cost remaining MSA to the weighted-average of the remaining lower-cost MSAs is less than 1.05, and the remaining group of lower cost MSAs form a single fee schedule area, If two MSAs have identical GAFs, they shall be combined in the iterative comparison.

(ii)

Transition

For services furnished on or after January 1, 2011, and before January 1, 2016, in the State of California, after calculating the work, practice expense, and malpractice geographic indices described in clauses (i), (ii), and (iii) of paragraph (1)(A) that would otherwise apply through application of this paragraph, the Secretary shall increase any such index to the county-based fee schedule area value on December 31, 2009, if such index would otherwise be less than the value on January 1, 2010.

(B)

Subsequent revisions

(i)

Periodic review and adjustments in fee schedule areas

Subsequent to the process outlined in paragraph (1)(C), not less often than every three years, the Secretary shall review and update the California Rest-of-State fee schedule area using MSAs as defined by the Director of the Office of Management and Budget and the iterative methodology described in subparagraph (A)(i).

(ii)

Link with geographic index data revision

The revision described in clause (i) shall be made effective concurrently with the application of the periodic review of the adjustment factors required under paragraph (1)(C) for California for 2012 and subsequent periods. Upon request, the Secretary shall make available to the public any county-level or MSA derived data used to calculate the geographic practice cost index.

(C)

References to fee schedule areas

Effective for services furnished on or after January 1, 2010, for the State of California, any reference in this section to a fee schedule area shall be deemed a reference to an MSA in the State.

.

(b)

Conforming amendment to definition of fee schedule area

Section 1848(j)(2) of the Social Security Act (42 U.S.C. 1395w(j)(2)) is amended by striking The term and inserting Except as provided in subsection (e)(6)(C), the term.

2

Market basket updates

1131.

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

(a)

Outpatient hospitals

(1)

In general

The first sentence of section 1833(t)(3)(C)(iv) of the Social Security Act (42 U.S.C. 1395l(t)(3)(C)(iv)) is amended—

(A)

by inserting (which is subject to the productivity adjustment described in subclause (II) of such section) after 1886(b)(3)(B)(iii); and

(B)

by inserting (but not below 0) after reduced.

(2)

Effective date

The amendments made by paragraph (1) shall apply to increase factors for services furnished in years beginning with 2010.

(b)

Ambulance services

Section 1834(l)(3)(B) of such Act (42 U.S.C. 1395m(l)(3)(B))) is amended by inserting before the period at the end the following: and, in the case of years beginning with 2010, subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II).

(c)

Ambulatory surgical center services

Section 1833(i)(2)(D) of such Act (42 U.S.C. 1395l(i)(2)(D)) is amended—

(1)

by redesignating clause (v) as clause (vi); and

(2)

by inserting after clause (iv) the following new clause:

(v)

In implementing the system described in clause (i), for services furnished during 2010 or any subsequent year, to the extent that an annual percentage change factor applies, such factor shall be subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II).

.

(d)

Laboratory services

Section 1833(h)(2)(A) of such Act (42 U.S.C. 1395l(h)(2)(A)) is amended—

(1)

in clause (i), by striking for each of the years 2009 through 2013 and inserting for 2009; and

(2)

clause (ii)—

(A)

by striking and at the end of subclause (III);

(B)

by striking the period at the end of subclause (IV) and inserting ; and; and

(C)

by adding at the end the following new subclause:

(V)

the annual adjustment in the fee schedules determined under clause (i) for years beginning with 2010 shall be subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II).

.

(e)

Certain durable medical equipment

Section 1834(a)(14) of such Act (42 U.S.C. 1395m(a)(14)) is amended—

(1)

in subparagraph (K), by inserting before the semicolon at the end the following: , subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II);

(2)

in subparagraph (L)(i), by inserting after June 2013, the following: subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II),;

(3)

in subparagraph (L)(ii), by inserting after June 2013 the following: , subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II); and

(4)

in subparagraph (M), by inserting before the period at the end the following: , subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II).

3

Other Provisions

1141.

Rental and purchase of power-driven wheelchairs

(a)

In general

Section 1834(a)(7)(A)(iii) of the Social Security Act (42 U.S.C. 1395m(a)(7)(A)(iii)) is amended—

(1)

in the heading, by inserting certain complex rehabilitative after option for; and

(2)

by striking power-driven wheelchair and inserting complex rehabilitative power-driven wheelchair recognized by the Secretary as classified within group 3 or higher.

(b)

Effective date

The amendments made by subsection (a) shall take effect on January 1, 2011, and shall apply to power-driven wheelchairs furnished on or after such date. Such amendments shall not apply to contracts entered into under section 1847 of the Social Security Act (42 U.S.C. 1395w–3) pursuant to a bid submitted under such section before October 1, 2010, under subsection (a)(1)(B)(i)(I) of such section.

1142.

Extension of payment rule for brachytherapy

Section 1833(t)(16)(C) of the Social Security Act (42 U.S.C. 1395l(t)(16)(C)), as amended by section 142 of the Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110–275), is amended by striking, the first place it appears, January 1, 2010 and inserting January 1, 2012.

1143.

Home infusion therapy report to congress

Not later than 12 months after the date of enactment of this Act, the Medicare Payment Advisory Commission shall submit to Congress a report on the following:

(1)

The scope of coverage for home infusion therapy in the fee-for-service Medicare program under title XVIII of the Social Security Act, Medicare Advantage under part C of such title, the veteran’s health care program under chapter 17 of title 38, United States Code, and among private payers, including an analysis of the scope of services provided by home infusion therapy providers to their patients in such programs.

(2)

The benefits and costs of providing such coverage under the Medicare program, including a calculation of the potential savings achieved through avoided or shortened hospital and nursing home stays as a result of Medicare coverage of home infusion therapy.

(3)

An assessment of sources of data on the costs of home infusion therapy that might be used to construct payment mechanisms in the Medicare program.

(4)

Recommendations, if any, on the structure of a payment system under the Medicare program for home infusion therapy, including an analysis of the payment methodologies used under Medicare Advantage plans and private health plans for the provision of home infusion therapy and their applicability to the Medicare program.

1144.

Require ambulatory surgical centers (ASCs) to submit cost data and other data

(a)

Cost reporting

(1)

In general

Section 1833(i) of the Social Security Act (42 U.S.C. 1395l(i)) is amended by adding at the end the following new paragraph:

(8)

The Secretary shall require, as a condition of the agreement described in section 1832(a)(2)(F)(i), the submission of such cost report as the Secretary may specify, taking into account the requirements for such reports under section 1815 in the case of a hospital.

.

(2)

Development of cost report

Not later than 3 years after the date of the enactment of this Act, the Secretary of Health and Human Services shall develop a cost report form for use under section 1833(i)(8) of the Social Security Act, as added by paragraph (1).

(3)

Audit requirement

The Secretary shall provide for periodic auditing of cost reports submitted under section 1833(i)(8) of the Social Security Act, as added by paragraph (1).

(4)

Effective date

The amendment made by paragraph (1) shall apply to agreements applicable to cost reporting periods beginning 18 months after the date the Secretary develops the cost report form under paragraph (2).

(b)

Additional data on quality

(1)

In general

Section 1833(i)(7) of such Act (42 U.S.C. 1395l(i)(7)) is amended—

(A)

in subparagraph (B), by inserting subject to subparagraph (C), after may otherwise provide,; and

(B)

by adding at the end the following new subparagraph:

(C)

Under subparagraph (B) the Secretary shall require the reporting of such additional data relating to quality of services furnished in an ambulatory surgical facility, including data on health care associated infections, as the Secretary may specify.

.

(2)

Effective date

The amendment made by paragraph (1) shall to reporting for years beginning with 2012.

1145.

Treatment of certain cancer hospitals

Section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)) is amended by adding at the end the following new paragraph:

(18)

Authorization of adjustment for cancer hospitals

(A)

Study

The Secretary shall conduct a study to determine if, under the system under this subsection, costs incurred by hospitals described in section 1886(d)(1)(B)(v) with respect to ambulatory payment classification groups exceed those costs incurred by other hospitals furnishing services under this subsection (as determined appropriate by the Secretary).

(B)

Authorization of adjustment

Insofar as the Secretary determines under subparagraph (A) that costs incurred by hospitals described in section 1886(d)(1)(B)(v) exceed those costs incurred by other hospitals furnishing services under this subsection, the Secretary shall provide for an appropriate adjustment under paragraph (2)(E) to reflect those higher costs effective for services furnished on or after January 1, 2011.

.

1146.

Medicare Improvement Fund

Section 1898(b)(1)(A) of the Social Security Act (42 U.S.C. 1395iii(b)(1)(A)) is amended to read as follows:

(A)

the period beginning with fiscal year 2011 and ending with fiscal year 2019, $8,000,000,000; and

.

1147.

Payment for imaging services

(a)

Adjustment in practice expense to reflect higher presumed utilization

Section 1848 of the Social Security Act (42 U.S.C. 1395w) is amended—

(1)

in subsection (b)(4)—

(A)

in subparagraph (B), by striking subparagraph (A) and inserting this paragraph; and

(B)

by adding at the end the following new subparagraph:

(C)

Adjustment in practice expense to reflect higher presumed utilization

In computing the number of practice expense relative value units under subsection (c)(2)(C)(ii) with respect to advanced diagnostic imaging services (as defined in section 1834(e)(1)(B)) , the Secretary shall adjust such number of units so it reflects a 75 percent (rather than 50 percent) presumed rate of utilization of imaging equipment.

; and

(2)

in subsection (c)(2)(B)(v)(II), by inserting and other provisions after OPD payment cap.

(b)

Adjustment in technical component “discount” on single-session imaging to consecutive body parts

Section 1848(b)(4) of such Act is further amended by adding at the end the following new subparagraph:

(D)

Adjustment in technical component discount on single-session imaging involving consecutive body parts

The Secretary shall increase the reduction in expenditures attributable to the multiple procedure payment reduction applicable to the technical component for imaging under the final rule published by the Secretary in the Federal Register on November 21, 2005 (part 405 of title 42, Code of Federal Regulations) from 25 percent to 50 percent.

.

(c)

Effective date

Except as otherwise provided, this section, and the amendments made by this section, shall apply to services furnished on or after January 1, 2011.

1148.

Durable medical equipment program improvements

(a)

Waiver of surety bond requirement

Section 1834(a)(16) of the Social Security Act (42 U.S.C. 1395m(a)(16)) is amended by adding at the end the following: The requirement for a surety bond described in subparagraph (B) shall not apply in the case of a pharmacy (i) that has been enrolled under section 1866(j) as a supplier of durable medical equipment, prosthetics, orthotics, and supplies and has been issued (which may include renewal of) a provider number (as described in the first sentence of this paragraph) for at least 5 years, and (ii) for which a final adverse action (as defined in section 424.57(a) of title 42, Code of Federal Regulations) has never been imposed..

(b)

Ensuring supply of oxygen equipment

(1)

In general

Section 1834(a)(5)(F) of the Social Security Act (42 U.S.C. 1395m(a)(5)(F)) is amended—

(A)

in clause (ii), by striking After the and inserting Except as provided in clause (iii), after the; and

(B)

by adding at the end the following new clause:

(iii)

Continuation of supply

In the case of a supplier furnishing such equipment to an individual under this subsection as of the 27th month of the 36 months described in clause (i), the supplier furnishing such equipment as of such month shall continue to furnish such equipment to such individual (either directly or though arrangements with other suppliers of such equipment) during any subsequent period of medical need for the remainder of the reasonable useful lifetime of the equipment, as determined by the Secretary, regardless of the location of the individual, unless another supplier has accepted responsibility for continuing to furnish such equipment during the remainder of such period.

.

(2)

Effective date

The amendments made by paragraph (1) shall take effect as of the date of the enactment of this Act and shall apply to the furnishing of equipment to individuals for whom the 27th month of a continuous period of use of oxygen equipment described in section 1834(a)(5)(F) of the Social Security Act occurs on or after July 1, 2010.

(c)

Treatment of current accreditation applications

Section 1834(a)(20)(F) of such Act (42 U.S.C. 1395m(a)(20)(F)) is amended—

(1)

in clause (i)—

(A)

by striking clause (ii) and inserting clauses (ii) and (iii); and

(B)

by striking and at the end;

(2)

by striking the period at the end of clause (ii)(II) and by inserting ; and;

(3)

by inserting after clause (ii) the following new clause:

(iii)

the requirement for accreditation described in clause (i) shall not apply for purposes of supplying diabetic testing supplies, canes, and crutches in the case of a pharmacy that is enrolled under section 1866(j) as a supplier of durable medical equipment, prosthetics, orthotics, and supplies.

; and

(4)

by adding after and below clause (iii) the following:

Any supplier that has submitted an application for accreditation before August 1, 2009, shall be deemed as meeting applicable standards and accreditation requirement under this subparagraph until such time as the independent accreditation organization takes action on the supplier’s application.

.

(d)

Restoring 36-month oxygen rental period in case of supplier bankruptcy for certain individuals

Section 1834(a)(5)(F) of such Act (42 U.S.C. 1395m(a)(5)(F)), as amended by subsection (b), is further amended by adding at the end the following new clause:

(iv)

Exception for bankruptcy

If a supplier who furnishes oxygen and oxygen equipment to an individual is declared bankrupt and its assets are liquidated and at the time of such declaration and liquidation more than 24 months of rental payments have been made, such individual may begin a new 36-month rental period under this subparagraph with another supplier of oxygen.

.

1149.

MedPAC study and report on bone mass measurement

(a)

In general

The Medicare Payment Advisory Commission shall conduct a study regarding bone mass measurement, including computed tomography, duel-energy x-ray absorptriometry, and vertebral fracture assessment. The study shall focus on the following:

(1)

An assessment of the adequacy of Medicare payment rates for such services, taking into account costs of acquiring the necessary equipment, professional work time, and practice expense costs.

(2)

The impact of Medicare payment changes since 2006 on beneficiary access to bone mass measurement benefits in general and in rural and minority communities specifically.

(3)

A review of the clinically appropriate and recommended use among Medicare beneficiaries and how usage rates among such beneficiaries compares to such recommendations.

(4)

In conjunction with the findings under (3), recommendations, if necessary, regarding methods for reaching appropriate use of bone mass measurement studies among Medicare beneficiaries.

(b)

Report

The Commission shall submit a report to the Congress, not later than 9 months after the date of the enactment of this Act, containing a description of the results of the study conducted under subsection (a) and the conclusions and recommendations, if any, regarding each of the issues described in paragraphs (1), (2) (3) and (4) of such subsection.

C

Provisions Related to Medicare Parts A and B

1151.

Reducing potentially preventable hospital readmissions

(a)

Hospitals

(1)

In general

Section 1886 of the Social Security Act (42 U.S.C. 1395ww), as amended by section 1103(a), is amended by adding at the end the following new subsection:

(p)

Adjustment to hospital payments for excess readmissions

(1)

In general

With respect to payment for discharges from an applicable hospital (as defined in paragraph (5)(C)) occurring during a fiscal year beginning on or after October 1, 2011, in order to account for excess readmissions in the hospital, the Secretary shall reduce the payments that would otherwise be made to such hospital under subsection (d) (or section 1814(b)(3), as the case may be) for such a discharge by an amount equal to the product of—

(A)

the base operating DRG payment amount (as defined in paragraph (2)) for the discharge; and

(B)

the adjustment factor (described in paragraph (3)(A)) for the hospital for the fiscal year.

(2)

Base operating drg payment amount

(A)

In general

Except as provided in subparagraph (B), for purposes of this subsection, the term base operating DRG payment amount means, with respect to a hospital for a fiscal year, the payment amount that would otherwise be made under subsection (d) for a discharge if this subsection did not apply, reduced by any portion of such amount that is attributable to payments under subparagraphs (B) and (F) of paragraph (5).

(B)

Adjustments

For purposes of subparagraph (A), in the case of a hospital that is paid under section 1814(b)(3), the term base operating DRG payment amount means the payment amount under such section.

(3)

Adjustment factor

(A)

In general

For purposes of paragraph (1), the adjustment factor under this paragraph for an applicable hospital for a fiscal year is equal to the greater of—

(i)

the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or

(ii)

the floor adjustment factor specified in subparagraph (C).

(B)

Ratio

The ratio described in this subparagraph for a hospital for an applicable period is equal to 1 minus the ratio of—

(i)

the aggregate payments for excess readmissions (as defined in paragraph (4)(A)) with respect to an applicable hospital for the applicable period; and

(ii)

the aggregate payments for all discharges (as defined in paragraph (4)(B)) with respect to such applicable hospital for such applicable period.

(C)

Floor adjustment factor

For purposes of subparagraph (A), the floor adjustment factor specified in this subparagraph for—

(i)

fiscal year 2012 is 0.99;

(ii)

fiscal year 2013 is 0.98;

(iii)

fiscal year 2014 is 0.97; or

(iv)

a subsequent fiscal year is 0.95.

(4)

Aggregate payments, excess readmission ratio defined

For purposes of this subsection:

(A)

Aggregate payments for excess readmissions

The term aggregate payments for excess readmissions means, for a hospital for a fiscal year, the sum, for applicable conditions (as defined in paragraph (5)(A)), of the product, for each applicable condition, of—

(i)

the base operating DRG payment amount for such hospital for such fiscal year for such condition;

(ii)

the number of admissions for such condition for such hospital for such fiscal year; and

(iii)

the excess readmissions ratio (as defined in subparagraph (C)) for such hospital for the applicable period for such fiscal year minus 1.

(B)

Aggregate payments for all discharges

The term aggregate payments for all discharges means, for a hospital for a fiscal year, the sum of the base operating DRG payment amounts for all discharges for all conditions from such hospital for such fiscal year.

(C)

Excess readmission ratio

(i)

In general

Subject to clauses (ii) and (iii), the term excess readmissions ratio means, with respect to an applicable condition for a hospital for an applicable period, the ratio (but not less than 1.0) of—

(I)

the risk adjusted readmissions based on actual readmissions, as determined consistent with a readmission measure methodology that has been endorsed under paragraph (5)(A)(ii)(I), for an applicable hospital for such condition with respect to the applicable period; to

(II)

the risk adjusted expected readmissions (as determined consistent with such a methodology) for such hospital for such condition with respect to such applicable period.

(ii)

Exclusion of certain readmissions

For purposes of clause (i), with respect to a hospital, excess readmissions shall not include readmissions for an applicable condition for which there are fewer than a minimum number (as determined by the Secretary) of discharges for such applicable condition for the applicable period and such hospital.

(iii)

Adjustment

In order to promote a reduction over time in the overall rate of readmissions for applicable conditions, the Secretary may provide, beginning with discharges for fiscal year 2014, for the determination of the excess readmissions ratio under subparagraph (C) to be based on a ranking of hospitals by readmission ratios (from lower to higher readmission ratios) normalized to a benchmark that is lower than the 50th percentile.

(5)

Definitions

For purposes of this subsection:

(A)

Applicable condition

The term applicable condition means, subject to subparagraph (B), a condition or procedure selected by the Secretary among conditions and procedures for which—

(i)

readmissions (as defined in subparagraph (E)) that represent conditions or procedures that are high volume or high expenditures under this title (or other criteria specified by the Secretary); and

(ii)

measures of such readmissions—

(I)

have been endorsed by the entity with a contract under section 1890(a); and

(II)

such endorsed measures have appropriate exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital).

(B)

Expansion of applicable conditions

Beginning with fiscal year 2013, the Secretary shall expand the applicable conditions beyond the 3 conditions for which measures have been endorsed as described in subparagraph (A)(ii)(I) as of the date of the enactment of this subsection to the additional 4 conditions that have been so identified by the Medicare Payment Advisory Commission in its report to Congress in June 2007 and to other conditions and procedures which may include an all-condition measure of readmissions, as determined appropriate by the Secretary. In expanding such applicable conditions, the Secretary shall seek the endorsement described in subparagraph (A)(ii)(I) but may apply such measures without such an endorsement.

(C)

Applicable hospital

The term applicable hospital means a subsection (d) hospital or a hospital that is paid under section 1814(b)(3).

(D)

Applicable period

The term applicable period means, with respect to a fiscal year, such period as the Secretary shall specify for purposes of determining excess readmissions.

(E)

Readmission

The term readmission means, in the case of an individual who is discharged from an applicable hospital, the admission of the individual to the same or another applicable hospital within a time period specified by the Secretary from the date of such discharge. Insofar as the discharge relates to an applicable condition for which there is an endorsed measure described in subparagraph (A)(ii)(I), such time period (such as 30 days) shall be consistent with the time period specified for such measure.

(6)

Limitations on review

There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of—

(A)

the determination of base operating DRG payment amounts;

(B)

the methodology for determining the adjustment factor under paragraph (3), including excess readmissions ratio under paragraph (4)(C), aggregate payments for excess readmissions under paragraph (4)(A), and aggregate payments for all discharges under paragraph (4)(B), and applicable periods and applicable conditions under paragraph (5);

(C)

the measures of readmissions as described in paragraph (5)(A)(ii); and

(D)

the determination of a targeted hospital under paragraph (8)(B)(i), the increase in payment under paragraph (8)(B)(ii), the aggregate cap under paragraph (8)(C)(i), the hospital-specific limit under paragraph (8)(C)(ii), and the form of payment made by the Secretary under paragraph (8)(D).

(7)

Monitoring inappropriate changes in admissions practices

The Secretary shall monitor the activities of applicable hospitals to determine if such hospitals have taken steps to avoid patients at risk in order to reduce the likelihood of increasing readmissions for applicable conditions. If the Secretary determines that such a hospital has taken such a step, after notice to the hospital and opportunity for the hospital to undertake action to alleviate such steps, the Secretary may impose an appropriate sanction.

(8)

Assistance to certain hospitals

(A)

In general

For purposes of providing funds to applicable hospitals to take steps described in subparagraph (E) to address factors that may impact readmissions of individuals who are discharged from such a hospital, for fiscal years beginning on or after October 1, 2011, the Secretary shall make a payment adjustment for a hospital described in subparagraph (B), with respect to each such fiscal year, by a percent estimated by the Secretary to be consistent with subparagraph (C).

(B)

Targeted hospitals

Subparagraph (A) shall apply to an applicable hospital that—

(i)

received (or, in the case of an 1814(b)(3) hospital, otherwise would have been eligible to receive) $10,000,000 or more in disproportionate share payments using the latest available data as estimated by the Secretary; and

(ii)

provides assurances satisfactory to the Secretary that the increase in payment under this paragraph shall be used for purposes described in subparagraph (E).

(C)

Caps

(i)

Aggregate cap

The aggregate amount of the payment adjustment under this paragraph for a fiscal year shall not exceed 5 percent of the estimated difference in the spending that would occur for such fiscal year with and without application of the adjustment factor described in paragraph (3) and applied pursuant to paragraph (1).

(ii)

Hospital-specific limit

The aggregate amount of the payment adjustment for a hospital under this paragraph shall not exceed the estimated difference in spending that would occur for such fiscal year for such hospital with and without application of the adjustment factor described in paragraph (3) and applied pursuant to paragraph (1).

(D)

Form of payment

The Secretary may make the additional payments under this paragraph on a lump sum basis, a periodic basis, a claim by claim basis, or otherwise.

(E)

Use of additional payment

Funding under this paragraph shall be used by targeted hospitals for transitional care activities designed to address the patient noncompliance issues that result in higher than normal readmission rates, such as one or more of the following:

(i)

Providing care coordination services to assist in transitions from the targeted hospital to other settings.

(ii)

Hiring translators and interpreters.

(iii)

Increasing services offered by discharge planners.

(iv)

Ensuring that individuals receive a summary of care and medication orders upon discharge.

(v)

Developing a quality improvement plan to assess and remedy preventable readmission rates.

(vi)

Assigning discharged individuals to a medical home.

(vii)

Doing other activities as determined appropriate by the Secretary.

(F)

GAO report on use of funds

Not later than 3 years after the date on which funds are first made available under this paragraph, the Comptroller General of the United States shall submit to Congress a report on the use of such funds.

(G)

Disproportionate share hospital payment

In this paragraph, the term disproportionate share hospital payment means an additional payment amount under subsection (d)(5)(F).

.

(b)

Application to critical access hospitals

Section 1814(l) of the Social Security Act (42 U.S.C. 1395f(l)) is amended—

(1)

in paragraph (5)—

(A)

by striking and at the end of subparagraph (C);

(B)

by striking the period at the end of subparagraph (D) and inserting ; and;

(C)

by inserting at the end the following new subparagraph:

(E)

the methodology for determining the adjustment factor under paragraph (5), including the determination of aggregate payments for actual and expected readmissions, applicable periods, applicable conditions and measures of readmissions.

; and

(D)

by redesignating such paragraph as paragraph (6); and

(2)

by inserting after paragraph (4) the following new paragraph:

(5)

The adjustment factor described in section 1886(p)(3) shall apply to payments with respect to a critical access hospital with respect to a cost reporting period beginning in fiscal year 2012 and each subsequent fiscal year (after application of paragraph (4) of this subsection) in a manner similar to the manner in which such section applies with respect to a fiscal year to an applicable hospital as described in section 1886(p)(2).

.

(c)

Post acute care providers

(1)

Interim policy

(A)

In general

With respect to a readmission to an applicable hospital or a critical access hospital (as described in section 1814(l) of the Social Security Act) from a post acute care provider (as defined in paragraph (3)) and such a readmission is not governed by section 412.531 of title 42, Code of Federal Regulations, if the claim submitted by such a post-acute care provider under title XVIII of the Social Security Act indicates that the individual was readmitted to a hospital from such a post-acute care provider or admitted from home and under the care of a home health agency within 30 days of an initial discharge from an applicable hospital or critical access hospital, the payment under such title on such claim shall be the applicable percent specified in subparagraph (B) of the payment that would otherwise be made under the respective payment system under such title for such post-acute care provider if this subsection did not apply.

(B)

Applicable percent defined

For purposes of subparagraph (A), the applicable percent is—

(i)

for fiscal or rate year 2012 is 0.996;

(ii)

for fiscal or rate year 2013 is 0.993; and

(iii)

for fiscal or rate year 2014 is 0.99.

(C)

Effective date

Subparagraph (1) shall apply to discharges or services furnished (as the case may be with respect to the applicable post acute care provider) on or after the first day of the fiscal year or rate year, beginning on or after October 1, 2011, with respect to the applicable post acute care provider.

(2)

Development and application of performance measures

(A)

In general

The Secretary of Health and Human Services shall develop appropriate measures of readmission rates for post acute care providers. The Secretary shall seek endorsement of such measures by the entity with a contract under section 1890(a) of the Social Security Act but may adopt and apply such measures under this paragraph without such an endorsement. The Secretary shall expand such measures in a manner similar to the manner in which applicable conditions are expanded under paragraph (5)(B) of section 1886(p) of the Social Security Act, as added by subsection (a).

(B)

Implementation

The Secretary shall apply, on or after October 1, 2014, with respect to post acute care providers, policies similar to the policies applied with respect to applicable hospitals and critical access hospitals under the amendments made by subsection (a). The provisions of paragraph (1) shall apply with respect to any period on or after October 1, 2014, and before such application date described in the previous sentence in the same manner as such provisions apply with respect to fiscal or rate year 2014.

(C)

Monitoring and penalties

The provisions of paragraph (7) of such section 1886(p) shall apply to providers under this paragraph in the same manner as they apply to hospitals under such section.

(3)

Definitions

For purposes of this subsection:

(A)

Post acute care provider

The term post acute care provider means—

(i)

a skilled nursing facility (as defined in section 1819(a) of the Social Security Act);

(ii)

an inpatient rehabilitation facility (described in section 1886(h)(1)(A) of such Act);

(iii)

a home health agency (as defined in section 1861(o) of such Act); and

(iv)

a long term care hospital (as defined in section 1861(ccc) of such Act).

(B)

Other terms

The terms applicable condition, applicable hospital, and readmission have the meanings given such terms in section 1886(p)(5) of the Social Security Act, as added by subsection (a)(1).

(d)

Physicians

(1)

Study

The Secretary of Health and Human Services shall conduct a study to determine how the readmissions policy described in the previous subsections could be applied to physicians.

(2)

Considerations

In conducting the study, the Secretary shall consider approaches such as—

(A)

creating a new code (or codes) and payment amount (or amounts) under the fee schedule in section 1848 of the Social Security Act (in a budget neutral manner) for services furnished by an appropriate physician who sees an individual within the first week after discharge from a hospital or critical access hospital;

(B)

developing measures of rates of readmission for individuals treated by physicians;

(C)

applying a payment reduction for physicians who treat the patient during the initial admission that results in a readmission; and

(D)

methods for attributing payments or payment reductions to the appropriate physician or physicians.

(3)

Report

The Secretary shall issue a public report on such study not later than the date that is one year after the date of the enactment of this Act.

(e)

Funding

For purposes of carrying out the provisions of this section, in addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary of Health and Human Services for the Center for Medicare & Medicaid Services Program Management Account $25,000,000 for each fiscal year beginning with 2010. Amounts appropriated under this subsection for a fiscal year shall be available until expended.

1152.

Post acute care services payment reform plan and bundling pilot program

(a)

Plan

(1)

In general

The Secretary of Health and Human Services (in this section referred to as the Secretary) shall develop a detailed plan to reform payment for post acute care (PAC) services under the Medicare program under title XVIII of the Social Security Act (in this section referred to as the Medicare program). The goals of such payment reform are to—

(A)

improve the coordination, quality, and efficiency of such services; and

(B)

improve outcomes for individuals such as reducing the need for readmission to hospitals from providers of such services.

(2)

Bundling post acute services

The plan described in paragraph (1) shall include detailed specifications for a bundled payment for post acute services (in this section referred to as the post acute care bundle), and may include other approaches determined appropriate by the Secretary.

(3)

Post acute services

For purposes of this section, the term post acute services means services for which payment may be made under the Medicare program that are furnished by skilled nursing facilities, inpatient rehabilitation facilities, long term care hospitals, hospital based outpatient rehabilitation facilities and home health agencies to an individual after discharge of such individual from a hospital, and such other services determined appropriate by the Secretary.

(b)

Details

The plan described in subsection (a)(1) shall include consideration of the following issues:

(1)

The nature of payments under a post acute care bundle, including the type of provider or entity to whom payment should be made, the scope of activities and services included in the bundle, whether payment for physicians’ services should be included in the bundle, and the period covered by the bundle.

(2)

Whether the payment should be consolidated with the payment under the inpatient prospective system under section 1886 of the Social Security Act (in this section referred to as MS–DRGs) or a separate payment should be established for such bundle, and if a separate payment is established, whether it should be made only upon use of post acute care services or for every discharge.

(3)

Whether the bundle should be applied across all categories of providers of inpatient services (including critical access hospitals) and post acute care services or whether it should be limited to certain categories of providers, services, or discharges, such as high volume or high cost MS–DRGs.

(4)

The extent to which payment rates could be established to achieve offsets for efficiencies that could be expected to be achieved with a bundle payment, whether such rates should be established on a national basis or for different geographic areas, should vary according to discharge, case mix, outliers, and geographic differences in wages or other appropriate adjustments, and how to update such rates.

(5)

The nature of protections needed for individuals under a system of bundled payments to ensure that individuals receive quality care, are furnished the level and amount of services needed as determined by an appropriate assessment instrument, are offered choice of provider, and the extent to which transitional care services would improve quality of care for individuals and the functioning of a bundled post-acute system.

(6)

The nature of relationships that may be required between hospitals and providers of post acute care services to facilitate bundled payments, including the application of gainsharing, anti-referral, anti-kickback, and anti-trust laws.

(7)

Quality measures that would be appropriate for reporting by hospitals and post acute providers (such as measures that assess changes in functional status and quality measures appropriate for each type of post acute services provider including how the reporting of such quality measures could be coordinated with other reporting of such quality measures by such providers otherwise required).

(8)

How cost-sharing for a post acute care bundle should be treated relative to current rules for cost-sharing for inpatient hospital, home health, skilled nursing facility, and other services.

(9)

How other programmatic issues should be treated in a post acute care bundle, including rules specific to various types of post-acute providers such as the post-acute transfer policy, three-day hospital stay to qualify for services furnished by skilled nursing facilities, and the coordination of payments and care under the Medicare program and the Medicaid program.

(10)

Such other issues as the Secretary deems appropriate.

(c)

Consultations and analysis

(1)

Consultation with stakeholders

In developing the plan under subsection (a)(1), the Secretary shall consult with relevant stakeholders and shall consider experience with such research studies and demonstrations that the Secretary determines appropriate.

(2)

Analysis and data collection

In developing such plan, the Secretary shall—

(A)

analyze the issues described in subsection (b) and other issues that the Secretary determines appropriate;

(B)

analyze the impacts (including geographic impacts) of post acute service reform approaches, including bundling of such services on individuals, hospitals, post acute care providers, and physicians;

(C)

use existing data (such as data submitted on claims) and collect such data as the Secretary determines are appropriate to develop such plan required in this section; and

(D)

if patient functional status measures are appropriate for the analysis, to the extent practical, build upon the CARE tool being developed pursuant to section 5008 of the Deficit Reduction Act of 2005.

(d)

Administration

(1)

Funding

For purposes of carrying out the provisions of this section, in addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there are appropriated to the Secretary for the Center for Medicare & Medicaid Services Program Management Account $15,000,000 for each of the fiscal years 2010 through 2012. Amounts appropriated under this paragraph for a fiscal year shall be available until expended.

(2)

Expedited data collection

Chapter 35 of title 44, United States Code shall not apply to this section.

(e)

Public reports

(1)

Interim reports

The Secretary shall issue interim public reports on a periodic basis on the plan described in subsection (a)(1), the issues described in subsection (b), and impact analyses as the Secretary determines appropriate.

(2)

Final report

Not later than the date that is 3 years after the date of the enactment of this Act, the Secretary shall issue a final public report on such plan, including analysis of issues described in subsection (b) and impact analyses.

(f)

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

(1)

In general

Part E of title XVIII of the Social Security Act is amended by inserting after section 1866C the following new section:

1866D.

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

(a)

Conversion and expansion

(1)

In general

By not later than January 1, 2011, the Secretary shall, for the purpose of promoting the use of bundled payments to promote efficient and high quality delivery of care—

(A)

convert the acute care episode demonstration program conducted under section 1866C to a pilot program; and

(B)

subject to subsection (c), expand such program as so converted to include post acute services and such other services the Secretary determines to be appropriate, which may include transitional services.

(2)

Bundled payment structures

(A)

In general

In carrying out paragraph (1), the Secretary may apply bundled payments with respect to—

(i)

hospitals and physicians;

(ii)

hospitals and post-acute care providers;

(iii)

hospitals, physicians, and post-acute care providers; or

(iv)

combinations of post-acute providers.

(B)

Further application

(i)

In general

In carrying out paragraph (1), the Secretary shall apply bundled payments in a manner so as to include collaborative care networks and continuing care hospitals.

(ii)

Collaborative care network defined

For purposes of this subparagraph, the term collaborative care network means a consortium of health care providers that provides a comprehensive range of coordinated and integrated health care services to low-income patient populations (including the uninsured) which may include coordinated and comprehensive care by safety net providers to reduce any unnecessary use of items and services furnished in emergency departments, manage chronic conditions, improve quality and efficiency of care, increase preventive services, and promote adherence to post-acute and follow-up care plans.

(iii)

Continuing care hospital defined

For purposes of this subparagraph, the term continuing care hospital means an entity that has demonstrated the ability to meet patient care and patient safety standards and that provides under common management the medical and rehabilitation services provided in inpatient rehabilitation hospitals and units (as defined in section 1886(d)(1)(B)(ii)), long-term care hospitals (as defined in section 1886(d)(1)(B)(iv)(I)), and skilled nursing facilities (as defined in section 1819(a)) that are located in a hospital described in section 1886(d).

(b)

Scope

The pilot program under subsection (a) may include additional geographic areas and additional conditions which account for significant program spending, as defined by the Secretary. Nothing in this subsection shall be construed as limiting the number of hospital and physician groups or the number of hospital and post-acute provider groups that may participate in the pilot program.

(c)

Limitation

The Secretary shall only expand the pilot program under subsection (a) if the Secretary finds that—

(1)

the demonstration program under section 1866C and pilot program under this section maintain or increase the quality of care received by individuals enrolled under this title; and

(2)

such demonstration program and pilot program reduce program expenditures and, based on the certification under subsection (d), that the expansion of such pilot program would result in estimated spending that would be less than what spending would otherwise be in the absence of this section.

(d)

Certification

For purposes of subsection (c), the Chief Actuary of the Centers for Medicare & Medicaid Services shall certify whether expansion of the pilot program under this section would result in estimated spending that would be less than what spending would otherwise be in the absence of this section.

(e)

Voluntary participation

Nothing in this paragraph shall be construed as requiring the participation of an entity in the pilot program under this section.

(f)

Evaluation on cost and quality of care

The Secretary shall conduct an evaluation of the pilot program under subsection (a) to study the effect of such program on costs and quality of care. The findings of such evaluation shall be included in the final report required under section 1152(e)(2) of America’s Affordable Health Choices Act of 2009.

(g)

Study of additional bundling and episode-based payment for physicians’ services

(1)

In general

The Secretary shall provide for a study of and development of a plan for testing additional ways to increase bundling of payments for physicians in connection with an episode of care, such as in connection with outpatient hospital services or services rendered in physicians’ offices, other than those provided under the pilot program.

(2)

Application

The Secretary may implement such a plan through a demonstration program.

.

(2)

Conforming amendment

Section 1866C(b) of the Social Security Act (42 U.S.C. 1395cc–3(b)) is amended by striking The Secretary and inserting Subject to section 1866D, the Secretary.

1153.

Home health payment update for 2010

Section 1895(b)(3)(B)(ii) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended—

(1)

in subclause (IV), by striking and;

(2)

by redesignating subclause (V) as subclause (VII); and

(3)

by inserting after subclause (IV) the following new subclauses:

(V)

2007, 2008, and 2009, subject to clause (v), the home health market basket percentage increase;

(VI)

2010, subject to clause (v), 0 percent; and

.

1154.

Payment adjustments for home health care

(a)

Acceleration of adjustment for case mix changes

Section 1895(b)(3)(B) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended—

(1)

in clause (iv), by striking “Insofar as” and inserting “Subject to clause (vi), insofar as”; and

(2)

by adding at the end the following new clause:

(vi)

Special rule for case mix changes for 2011

(I)

In general

With respect to the case mix adjustments established in section 484.220(a) of title 42, Code of Federal Regulations, the Secretary shall apply, in 2010, the adjustment established in paragraph (3) of such section for 2011, in addition to applying the adjustment established in paragraph (2) for 2010.

(II)

Construction

Nothing in this clause shall be construed as limiting the amount of adjustment for case mix for 2010 or 2011 if more recent data indicate an appropriate adjustment that is greater than the amount established in the section described in subclause (I).

.

(b)

Rebasing home health prospective payment amount

Section 1895(b)(3)(A) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(A)) is amended—

(1)

in clause (i)—

(A)

in subclause (III), by inserting and before 2011 after after the period described in subclause (II); and

(B)

by inserting after subclause (III) the following new subclauses:

(IV)

Subject to clause (iii)(I), for 2011, such amount (or amounts) shall be adjusted by a uniform percentage determined to be appropriate by the Secretary based on analysis of factors such as changes in the average number and types of visits in an episode, the change in intensity of visits in an episode, growth in cost per episode, and other factors that the Secretary considers to be relevant.

(V)

Subject to clause (iii)(II), for a year after 2011, such a amount (or amounts) shall be equal to the amount (or amounts) determined under this clause for the previous year, updated under subparagraph (B).

; and

(2)

by adding at the end the following new clause:

(iii)

Special rule in case of inability to effect timely rebasing

(I)

Application of proxy amount for 2011

If the Secretary is not able to compute the amount (or amounts) under clause (i)(IV) so as to permit, on a timely basis, the application of such clause for 2011, the Secretary shall substitute for such amount (or amounts) 95 percent of the amount (or amounts) that would otherwise be specified under clause (i)(III) if it applied for 2011.

(II)

Adjustment for subsequent years based on data

If the Secretary applies subclause (I), the Secretary before July 1, 2011, shall compare the amount (or amounts) applied under such subclause with the amount (or amounts) that should have been applied under clause (i)(IV). The Secretary shall decrease or increase the prospective payment amount (or amounts) under clause (i)(V) for 2012 (or, at the Secretary’s discretion, over a period of several years beginning with 2012) by the amount (if any) by which the amount (or amounts) applied under subclause (I) is greater or less, respectively, than the amount (or amounts) that should have been applied under clause (i)(IV).

.

1155.

Incorporating productivity improvements into market basket update for home health services

(a)

In general

Section 1895(b)(3)(B) of the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended—

(1)

in clause (iii), by inserting (including being subject to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)) after in the same manner; and

(2)

in clause (v)(I), by inserting (but not below 0) after reduced.

(b)

Effective date

The amendment made by subsection (a) shall apply to home health market basket percentage increases for years beginning with 2010.

1156.

Limitation on Medicare exceptions to the prohibition on certain physician referrals made to hospitals

(a)

In general

Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is amended—

(1)

in subsection (d)(2)—

(A)

in subparagraph (A), by striking and at the end;

(B)

in subparagraph (B), by striking the period at the end and inserting ; and; and

(C)

by adding at the end the following new subparagraph:

(C)

in the case where the entity is a hospital, the hospital meets the requirements of paragraph (3)(D).

;

(2)

in subsection (d)(3)—

(A)

in subparagraph (B), by striking and at the end;

(B)

in subparagraph (C), by striking the period at the end and inserting ; and; and

(C)

by adding at the end the following new subparagraph:

(D)

the hospital meets the requirements described in subsection (i)(1).

;

(3)

by amending subsection (f) to read as follows:

(f)

Reporting and disclosure requirements

(1)

In general

Each entity providing covered items or services for which payment may be made under this title shall provide the Secretary with the information concerning the entity's ownership, investment, and compensation arrangements, including—

(A)

the covered items and services provided by the entity, and

(B)

the names and unique physician identification numbers of all physicians with an ownership or investment interest (as described in subsection (a)(2)(A)), or with a compensation arrangement (as described in subsection (a)(2)(B)), in the entity, or whose immediate relatives have such an ownership or investment interest or who have such a compensation relationship with the entity.

Such information shall be provided in such form, manner, and at such times as the Secretary shall specify. The requirement of this subsection shall not apply to designated health services provided outside the United States or to entities which the Secretary determines provide services for which payment may be made under this title very infrequently.
(2)

Requirements for hospitals with physician ownership or investment

In the case of a hospital that meets the requirements described in subsection (i)(1), the hospital shall—

(A)

submit to the Secretary an initial report, and periodic updates at a frequency determined by the Secretary, containing a detailed description of the identity of each physician owner and physician investor and any other owners or investors of the hospital;

(B)

require that any referring physician owner or investor discloses to the individual being referred, by a time that permits the individual to make a meaningful decision regarding the receipt of services, as determined by the Secretary, the ownership or investment interest, as applicable, of such referring physician in the hospital; and

(C)

disclose the fact that the hospital is partially or wholly owned by one or more physicians or has one or more physician investors—

(i)

on any public website for the hospital; and

(ii)

in any public advertising for the hospital.

The information to be reported or disclosed under this paragraph shall be provided in such form, manner, and at such times as the Secretary shall specify. The requirements of this paragraph shall not apply to designated health services furnished outside the United States or to entities which the Secretary determines provide services for which payment may be made under this title very infrequently.
(3)

Publication of information

The Secretary shall publish, and periodically update, the information submitted by hospitals under paragraph (2)(A) on the public Internet website of the Centers for Medicare & Medicaid Services.

;

(4)

by amending subsection (g)(5) to read as follows:

(5)

Failure to report or disclose information

(A)

Reporting

Any person who is required, but fails, to meet a reporting requirement of paragraphs (1) and (2)(A) of subsection (f) is subject to a civil money penalty of not more than $10,000 for each day for which reporting is required to have been made.

(B)

Disclosure

Any physician who is required, but fails, to meet a disclosure requirement of subsection (f)(2)(B) or a hospital that is required, but fails, to meet a disclosure requirement of subsection (f)(2)(C) is subject to a civil money penalty of not more than $10,000 for each case in which disclosure is required to have been made.

(C)

Application

The provisions of section 1128A (other than the first sentence of subsection (a) and other than subsection (b)) shall apply to a civil money penalty under subparagraphs (A) and (B) in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).

; and

(5)

by adding at the end the following new subsection:

(i)

Requirements to qualify for rural provider and hospital ownership exceptions to self-referral prohibition

(1)

Requirements described

For purposes of subsection (d)(3)(D), the requirements described in this paragraph are as follows:

(A)

Provider agreement

The hospital had—

(i)

physician ownership or investment on January 1, 2009; and

(ii)

a provider agreement under section 1866 in effect on such date.

(B)

Prohibition on physician ownership or investment

The percentage of the total value of the ownership or investment interests held in the hospital, or in an entity whose assets include the hospital, by physician owners or investors in the aggregate does not exceed such percentage as of the date of enactment of this subsection.

(C)

Prohibition on expansion of facility capacity

Except as provided in paragraph (2), the number of operating rooms, procedure rooms, or beds of the hospital at any time on or after the date of the enactment of this subsection are no greater than the number of operating rooms, procedure rooms, or beds, respectively, as of such date.

(D)

Ensuring bona fide ownership and investment

(i)

Any ownership or investment interests that the hospital offers to a physician are not offered on more favorable terms than the terms offered to a person who is not in a position to refer patients or otherwise generate business for the hospital.

(ii)

The hospital (or any investors in the hospital) does not directly or indirectly provide loans or financing for any physician owner or investor in the hospital.

(iii)

The hospital (or any investors in the hospital) does not directly or indirectly guarantee a loan, make a payment toward a loan, or otherwise subsidize a loan, for any physician owner or investor or group of physician owners or investors that is related to acquiring any ownership or investment interest in the hospital.

(iv)

Ownership or investment returns are distributed to each owner or investor in the hospital in an amount that is directly proportional to the ownership or investment interest of such owner or investor in the hospital.

(v)

The investment interest of the owner or investor is directly proportional to the owner’s or investor’s capital contributions made at the time the ownership or investment interest is obtained.

(vi)

Physician owners and investors do not receive, directly or indirectly, any guaranteed receipt of or right to purchase other business interests related to the hospital, including the purchase or lease of any property under the control of other owners or investors in the hospital or located near the premises of the hospital.

(vii)

The hospital does not offer a physician owner or investor the opportunity to purchase or lease any property under the control of the hospital or any other owner or investor in the hospital on more favorable terms than the terms offered to a person that is not a physician owner or investor.

(viii)

The hospital does not condition any physician ownership or investment interests either directly or indirectly on the physician owner or investor making or influencing referrals to the hospital or otherwise generating business for the hospital.

(E)

Patient safety

In the case of a hospital that does not offer emergency services, the hospital has the capacity to—

(i)

provide assessment and initial treatment for medical emergencies; and

(ii)

if the hospital lacks additional capabilities required to treat the emergency involved, refer and transfer the patient with the medical emergency to a hospital with the required capability.

(F)

Limitation on application to certain converted facilities

The hospital was not converted from an ambulatory surgical center to a hospital on or after the date of enactment of this subsection.

(2)

Exception to prohibition on expansion of facility capacity

(A)

Process

(i)

Establishment

The Secretary shall establish and implement a process under which a hospital may apply for an exception from the requirement under paragraph (1)(C).

(ii)

Opportunity for community input

The process under clause (i) shall provide persons and entities in the community in which the hospital applying for an exception is located with the opportunity to provide input with respect to the application.

(iii)

Timing for implementation

The Secretary shall implement the process under clause (i) on the date that is one month after the promulgation of regulations described in clause (iv).

(iv)

Regulations

Not later than the first day of the month beginning 18 months after the date of the enactment of this subsection, the Secretary shall promulgate regulations to carry out the process under clause (i). The Secretary may issue such regulations as interim final regulations.

(B)

Frequency

The process described in subparagraph (A) shall permit a hospital to apply for an exception up to once every 2 years.

(C)

Permitted increase

(i)

In general

Subject to clause (ii) and subparagraph (D), a hospital granted an exception under the process described in subparagraph (A) may increase the number of operating rooms, procedure rooms, or beds of the hospital above the baseline number of operating rooms, procedure rooms, or beds, respectively, of the hospital (or, if the hospital has been granted a previous exception under this paragraph, above the number of operating rooms, procedure rooms, or beds, respectively, of the hospital after the application of the most recent increase under such an exception).

(ii)

100 percent increase limitation

The Secretary shall not permit an increase in the number of operating rooms, procedure rooms, or beds of a hospital under clause (i) to the extent such increase would result in the number of operating rooms, procedure rooms, or beds of the hospital exceeding 200 percent of the baseline number of operating rooms, procedure rooms, or beds of the hospital.

(iii)

Baseline number of operating rooms, procedure rooms, or beds

In this paragraph, the term baseline number of operating rooms, procedure rooms, or beds means the number of operating rooms, procedure rooms, or beds of a hospital as of the date of enactment of this subsection.

(D)

Increase limited to facilities on the main campus of the hospital

Any increase in the number of operating rooms, procedure rooms, or beds of a hospital pursuant to this paragraph may only occur in facilities on the main campus of the hospital.

(E)

Conditions for approval of an increase in facility capacity

The Secretary may grant an exception under the process described in subparagraph (A) only to a hospital—

(i)

that is located in a county in which the percentage increase in the population during the most recent 5-year period for which data are available is estimated to be at least 150 percent of the percentage increase in the population growth of the State in which the hospital is located during that period, as estimated by Bureau of the Census and available to the Secretary;

(ii)

whose annual percent of total inpatient admissions that represent inpatient admissions under the program under title XIX is estimated to be equal to or greater than the average percent with respect to such admissions for all hospitals located in the county in which the hospital is located;

(iii)

that does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries;

(iv)

that is located in a State in which the average bed capacity in the State is estimated to be less than the national average bed capacity;

(v)

that has an average bed occupancy rate that is estimated to be greater than the average bed occupancy rate in the State in which the hospital is located; and

(vi)

that meets other conditions as determined by the Secretary.

(F)

Procedure rooms

In this subsection, the term procedure rooms includes rooms in which catheterizations, angiographies, angiograms, and endoscopies are furnished, but such term shall not include emergency rooms or departments (except for rooms in which catheterizations, angiographies, angiograms, and endoscopies are furnished).

(G)

Publication of final decisions

Not later than 120 days after receiving a complete application under this paragraph, the Secretary shall publish on the public Internet website of the Centers for Medicare & Medicaid Services the final decision with respect to such application.

(H)

Limitation on review

There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the exception process under this paragraph, including the establishment of such process, and any determination made under such process.

(3)

Physician owner or investor defined

For purposes of this subsection and subsection (f)(2), the term physician owner or investor means a physician (or an immediate family member of such physician) with a direct or an indirect ownership or investment interest in the hospital.

(4)

Patient safety requirement

In the case of a hospital to which the requirements of paragraph (1) apply, insofar as the hospital admits a patient and does not have any physician available on the premises 24 hours per day, 7 days per week, before admitting the patient—

(A)

the hospital shall disclose such fact to the patient; and

(B)

following such disclosure, the hospital shall receive from the patient a signed acknowledgment that the patient understands such fact.

(5)

Clarification

Nothing in this subsection shall be construed as preventing the Secretary from terminating a hospital’s provider agreement if the hospital is not in compliance with regulations pursuant to section 1866.

.

(b)

Verifying compliance

The Secretary of Health and Human Services shall establish policies and procedures to verify compliance with the requirements described in subsections (i)(1) and (i)(4) of section 1877 of the Social Security Act, as added by subsection (a)(5). The Secretary may use unannounced site reviews of hospitals and audits to verify compliance with such requirements.

(c)

Implementation

(1)

Funding

For purposes of carrying out the amendments made by subsection (a) and the provisions of subsection (b), in addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated there are appropriated to the Secretary of Health and Human Services for the Centers for Medicare & Medicaid Services Program Management Account $5,000,000 for each fiscal year beginning with fiscal year 2010. Amounts appropriated under this paragraph for a fiscal year shall be available until expended.

(2)

Administration

Chapter 35 of title 44, United States Code, shall not apply to the amendments made by subsection (a) and the provisions of subsection (b).

1157.

Institute of Medicine study of geographic adjustment factors under Medicare

(a)

In general

The Secretary of Health and Human Services shall enter into a contract with the Institute of Medicine of the National Academy of Science to conduct a comprehensive empirical study, and provide recommendations as appropriate, on the accuracy of the geographic adjustment factors established under sections 1848(e) and 1886(d)(3)(E) of the Social Security Act (42 U.S.C. 1395w–4(e), 11395ww(d)(3)).

(b)

Matters included

Such study shall include an evaluation and assessment of the following with respect to such adjustment factors:

(1)

Empirical validity of the adjustment factors.

(2)

Methodology used to determine the adjustment factors.

(3)

Measures used for the adjustment factors, taking into account—

(A)

timeliness of data and frequency of revisions to such data;

(B)

sources of data and the degree to which such data are representative of costs; and

(C)

operational costs of providers who participate in Medicare.

(c)

Evaluation

Such study shall, within the context of the United States health care marketplace, evaluate and consider the following:

(1)

The effect of the adjustment factors on the level and distribution of the health care workforce and resources, including—

(A)

recruitment and retention that takes into account workforce mobility between urban and rural areas;

(B)

ability of hospitals and other facilities to maintain an adequate and skilled workforce; and

(C)

patient access to providers and needed medical technologies.

(2)

The effect of the adjustment factors on population health and quality of care.

(3)

The effect of the adjustment factors on the ability of providers to furnish efficient, high value care.

(d)

Report

The contract under subsection (a) shall provide for the Institute of Medicine to submit, not later than one year after the date of the enactment of this Act, to the Secretary and the Congress a report containing results and recommendations of the study conducted under this section.

(e)

Funding

There are authorized to be appropriated to carry out this section such sums as may be necessary.

1158.

Revision of medicare payment systems to address geographic inequities

(a)

Revision of Medicare Payment Systems

Taking into account the recommendations described in the report under section 1157, and notwithstanding the geographic adjustments that would otherwise apply under section 1848(e) and section 1886(d)(3)(E) of the Social Security Act ((42 U.S.C. 1395w-4, 1395ww(d)), the Secretary of Health and Human Services shall include in proposed rules applicable to the rulemaking cycle for payment systems for physicians’ services and inpatient hospital services under sections 1848 and section 1886(d) of such Act, respectively, proposals (as the Secretary determines to be appropriate) to revise the geographic adjustment factors used in such systems. Such proposals’ rules shall be contained in the next rulemaking cycle following the submission to the Secretary of the report described in section 1157.

(b)

Payment Adjustments

(1)

Funding for Improvements

The Secretary shall use funds as provided under subsection (c) in making changes to the geographic adjustment factors pursuant to subsection (a). In making such changes to such geographic adjustment factors, the Secretary shall ensure that the estimated increased expenditures resulting from such changes does not exceed the amounts provided under subsection (c).

(2)

Ensuring Fairness

In carrying out this subsection, the Secretary shall not reduce the geographic adjustment below the factor that applied for such payment system in the payment year before such changes.

(c)

Funding

Amounts in the Medicare Improvement Fund under section 1898, as amended by section 1146, shall be available to the Secretary to make changes to the geographic adjustments factors as described in subsections (a) and (b) with respect to services furnished before January 1, 2014.  No more than one-half of such amounts shall be available with respect to services furnished in any one payment year.

1159.

Institute of Medicine study of geographic variation in health care spending and promoting high-value health care

(a)

In general

The Secretary of Health and Human Services shall enter into an agreement with the Institutes of Medicine of the National Academies (referred to in this section as the Institute) to conduct a study on geographic variation in per capita health care spending among both the Medicare and privately insured populations. Such study shall include each of the following:

(1)

An evaluation of the extent and range of such variation using various units of geographic measurement.

(2)

The extent to which geographic variation can be attributed to differences in input prices, practice patterns, access to medical services, supply of medical services, socio-economic factors, and provider organizational models.

(3)

The extent to which variations in spending are correlated with patient access to care, distribution of health care resources, and consensus-based measures of health care quality.

(4)

The extent to which variation can be attributed to physician and practitioner discretion in making treatment decisions, and the degree to which discretionary treatment decisions are made that could be characterized as different from the best available medical evidence.

(5)

An assessment of the degree to which variation cannot be explained by empirical evidence.

(6)

Other factors the Institute deems appropriate.

(b)

Recommendations

Taking into account the findings under subsection (a), the Institute shall recommend strategies for addressing variation in per capita spending by promoting high-value care (as defined in subsection (e)). In making such recommendations, the Institute shall consider each of the following:

(1)

Measurement and reporting on quality and population health.

(2)

Reducing fragmented and duplicative care.

(3)

Promoting the practice of evidence-based medicine.

(4)

Empowering patients to make value-based care decisions.

(5)

Leveraging the use of health information technology.

(6)

The role of financial and other incentives.

(7)

Other topics the Institute deems appropriate.

(c)

Specific considerations

In making the recommendations under subsection (b), the Institute shall specifically address whether payment systems under title XVIII of the Social Security Act for physicians and hospitals should be further modified to incentivize high-value care. In so doing, the Institute shall consider the adoption of a value index based on a composite of appropriate measures of quality and cost that would adjust provider payments on a regional or provider-level basis. If the Institute finds that application of such a value index would significantly incentivize providers to furnish high-value care, it shall make specific recommendations on how such an index would be designed and implemented. In so doing, it should identify specific measures of quality and cost appropriate for use in such an index, and include a thorough analysis (including on a geographic basis) of how payments and spending under such title would be affected by such an index.

(d)

Report

Not later than three years after the date of the enactment of this Act, the Institute shall submit to Congress a report containing findings and recommendations of the study conducted under this section.

(e)

High-value care defined

For purposes of this section, the term high-value care means the efficient delivery of high quality, evidence-based, patient-centered care.

(f)

Authorization of appropriations

There is authorized to be appropriated such sums as are necessary to carry out this section. Such sums are authorized to remain available until expended.

D

Medicare Advantage Reforms

1

Payment and Administration

1161.

Phase-in of payment based on fee-for-service costs

Section 1853 of the Social Security Act (42 U.S.C. 1395w–23) is amended—

(1)

in subsection (j)(1)(A)—

(A)

by striking beginning with 2007 and inserting for 2007, 2008, 2009, and 2010; and

(B)

by inserting after (k)(1) the following: , or, beginning with 2011, 1/12 of the blended benchmark amount determined under subsection (n)(1); and

(2)

by adding at the end the following new subsection:

(n)

Determination of blended benchmark amount

(1)

In general

For purposes of subsection (j), subject to paragraphs (3) and (4), the term blended benchmark amount means for an area—

(A)

for 2011 the sum of—

(i)

2/3 of the applicable amount (as defined in subsection (k)) for the area and year; and

(ii)

1/3 of the amount specified in paragraph (2) for the area and year;

(B)

for 2012 the sum of—

(i)

1/3 of the applicable amount for the area and year; and

(ii)

2/3 of the amount specified in paragraph (2) for the area and year; and

(C)

for a subsequent year the amount specified in paragraph (2) for the area and year.

(2)

Specified amount

The amount specified in this paragraph for an area and year is the amount specified in subsection (c)(1)(D)(i) for the area and year adjusted (in a manner specified by the Secretary) to take into account the phase-out in the indirect costs of medical education from capitation rates described in subsection (k)(4).

(3)

Fee-for-service payment floor

In no case shall the blended benchmark amount for an area and year be less than the amount specified in paragraph (2).

(4)

Exception for PACE plans

This subsection shall not apply to payments to a PACE program under section 1894.

.

1162.

Quality bonus payments

(a)

In general

Section 1853 of the Social Security Act (42 U.S.C. 1395w-23), as amended by section 1161, is amended—

(1)

in subsection (j), by inserting subject to subsection (o), after For purposes of this part,; and

(2)

by adding at the end the following new subsection:

(o)

Quality based payment adjustment

(1)

In general

In the case of a qualifying plan in a qualifying county with respect to a year beginning with 2011, the blended benchmark amount under subsection (n)(1) shall be increased—

(A)

for 2011, by 2.6 percent;

(B)

for 2012, by 5.3 percent; and

(C)

for a subsequent year, by 8.0 percent.

(2)

Qualifying plan and qualifying county defined

For purposes of this subsection:

(A)

Qualifying plan

The term qualifying plan means, for a year and subject to paragraph (4), a plan that, in a preceding year specified by the Secretary, had a quality ranking (based on the quality ranking system established by the Centers for Medicare & Medicaid Services for Medicare Advantage plans) of 4 stars or higher.

(B)

Qualifying county

The term qualifying county means, for a year, a county—

(i)

that ranked within the lowest quartile of counties in the amount specified in subsection (n)(2) for the year specified by the Secretary under subparagraph (A); and

(ii)

for which, as of June of such specified year, of the Medicare Advantage eligible individuals residing in the county—

(I)

at least 50 percent of such individuals were enrolled in Medicare Advantage plans; and

(II)

of the residents so enrolled at least 50 percent of such individuals were enrolled in such plans with a quality ranking (based on the quality ranking system established by the Centers for Medicare & Medicaid Services for Medicare Advantage plans) of 4 stars or higher.

(3)

Notification

The Secretary, in the annual announcement required under subsection (b)(1)(B) in 2010 and each succeeding year, shall notify the Medicare Advantage organization that is offering a qualifying plan in a qualifying county of such identification for the year. The Secretary shall provide for publication on the website for the Medicare program of the information described in the previous sentence.

(4)

Authority to disqualify deficient plans

The Secretary may determine that a Medicare Advantage plan is not a qualifying plan if the Secretary has identified deficiencies in the plan’s compliance with rules for Medicare Advantage plans under this part.

.

1163.

Extension of Secretarial coding intensity adjustment authority

Section 1853(a)(1)(C)(ii) of the Social Security Act (42 U.S.C. 1395w–23(a)(1)(C)(ii) is amended—

(1)

in the matter before subclause (I), by striking through 2010 and inserting and each subsequent year; and

(2)

in subclause (II)—

(A)

by inserting periodically before conduct an analysis;

(B)

by inserting on a timely basis after are incorporated; and

(C)

by striking only for 2008, 2009, and 2010 and inserting for 2008 and subsequent years.

1164.

Simplification of annual beneficiary election periods

(a)

2 week processing period for annual enrollment period (AEP)

Paragraph (3)(B) of section 1851(e) of the Social Security Act (42 U.S.C. 1395w–21(e)) is amended—

(1)

by striking and at the end of clause (iii);

(2)

in clause (iv)—

(A)

by striking and succeeding years and inserting , 2008, 2009, and 2010; and

(B)

by striking the period at the end and inserting ; and; and

(3)

by adding at the end the following new clause:

(v)

with respect to 2011 and succeeding years, the period beginning on November 1 and ending on December 15 of the year before such year.

.

(b)

Elimination of 3-month additional open enrollment period (OEP)

Effective for plan years beginning with 2011, paragraph (2) of such section is amended by striking subparagraph (C).

1165.

Extension of reasonable cost contracts

Section 1876(h)(5)(C) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)) is amended—

(1)

in clause (ii), by striking January 1, 2010 and inserting January 1, 2012; and

(2)

in clause (iii), by striking the service area for the year and inserting the portion of the plan’s service area for the year that is within the service area of a reasonable cost reimbursement contract.

1166.

Limitation of waiver authority for employer group plans

(a)

In general

The first sentence of paragraph (2) of section 1857(i) of the Social Security Act (42 U.S.C. 1395w–27(i)) is amended by inserting before the period at the end the following: , but only if 90 percent of the Medicare Advantage eligible individuals enrolled under such plan reside in a county in which the MA organization offers an MA local plan.

(b)

Effective date

The amendment made by subsection (a) shall apply for plan years beginning on or after January 1, 2011, and shall not apply to plans which were in effect as of December 31, 2010.

1167.

Improving risk adjustment for payments

(a)

Report to Congress

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

(b)

Improvements to Risk Adjustment

Not later than January 1, 2012, the Secretary shall implement necessary improvements to the risk adjustment system under section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395–23(a)(1)(C)), taking into account the evaluation under subsection (a).

1168.

Elimination of MA Regional Plan Stabilization Fund

(a)

In general

Section 1858 of the Social Security Act (42 U.S.C. 1395w–27a) is amended by striking subsection (e).

(b)

Transition

Any amount contained in the MA Regional Plan Stabilization Fund as of the date of the enactment of this Act shall be transferred to the Federal Supplementary Medical Insurance Trust Fund.

2

Beneficiary Protections and Anti-Fraud

1171.

Limitation on cost-sharing for individual health services

(a)

In general

Section 1852(a)(1) of the Social Security Act (42 U.S.C. 1395w–22(a)(1)) is amended—

(1)

in subparagraph (A), by inserting before the period at the end the following: with cost-sharing that is no greater (and may be less) than the cost-sharin