mma2 — Health Hippo

Health Hippo: Medicare Prescription Drug, Improvement, and Modernization Act of 2003

TITLE II–MEDICARE ADVANTAGE

Subtitle A–Implementation of Medicare Advantage Program

SEC. 201. IMPLEMENTATION OF MEDICARE ADVANTAGE PROGRAM.

(a) IN GENERAL- There is hereby established the Medicare Advantage program. The Medicare Advantage program shall consist of the program under part C of title XVIII of the Social Security Act (as amended by this Act).

(b) REFERENCES- Subject to subsection (c), any reference to the program under part C of title XVIII of the Social Security Act shall be deemed a reference to the Medicare Advantage program and, with respect to such part, any reference to Medicare+Choice is deemed a reference to Medicare Advantage and MA.

(c) TRANSITION- In order to provide for an orderly transition and avoid beneficiary and provider confusion, the Secretary shall provide for an appropriate transition in the use of the terms Medicare+Choice and Medicare Advantage (or MA) in reference to the program under part C of title XVIII of the Social Security Act. Such transition shall be fully completed for all materials for plan years beginning not later than January 1, 2006. Before the completion of such transition, any reference to Medicare Advantage or MA shall be deemed to include a reference to Medicare+Choice.

Subtitle B–Immediate Improvements

SEC. 211. IMMEDIATE IMPROVEMENTS.

(a) EQUALIZING PAYMENTS WITH FEE-FOR-SERVICE-

(1) IN GENERAL- Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1)) is amended by adding at the end the following:

(D) 100 PERCENT OF FEE-FOR-SERVICE COSTS-

(i) IN GENERAL- For each year specified in clause (ii), the adjusted average per capita cost for the year involved, determined under section 1876(a)(4) and adjusted as appropriate for the purpose of risk adjustment, for the MA payment area for individuals who are not enrolled in an MA plan under this part for the year, but adjusted to exclude costs attributable to payments under section 1886(h).

(ii) PERIODIC REBASING- The provisions of clause (i) shall apply for 2004 and for subsequent years as the Secretary shall specify (but not less than once every 3 years).

(iii) INCLUSION OF COSTS OF VA AND DOD MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES- In determining the adjusted average per capita cost under clause (i) for a year, such cost shall be adjusted to include the Secretarys estimate, on a per capita basis, of the amount of additional payments that would have been made in the area involved under this title if individuals entitled to benefits under this title had not received services from facilities of the Department of Defense or the Department of Veterans Affairs..

(2) CONFORMING AMENDMENT- Such section is further amended, in the matter before subparagraph (A), by striking or (C) and inserting (C), or (D).

(b) CHANGE IN BUDGET NEUTRALITY FOR BLEND- Section 1853(c) (42 U.S.C. 1395w-23(c)) is amended–

(1) in paragraph (1)(A), by inserting (for a year other than 2004) after multiplied; and

(2) in paragraph (5), by inserting (other than 2004) after for each year.

(1) IN GENERAL- Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1)) is amended–

(A) in subparagraph (A), by striking The sum and inserting For a year before 2005, the sum;

(B) in subparagraph (B)(iv), by striking and each succeeding year and inserting , 2003, and 2004;

(D) by adding at the end of subparagraph (C) the following new clause:

(v) For 2004 and each succeeding year, the greater of–

(I) 102 percent of the annual MA capitation rate under this paragraph for the area for the previous year; or

(II) the annual MA capitation rate under this paragraph for the area for the previous year increased by the national per capita MA growth percentage, described in paragraph (6) for that succeeding year, but not taking into account any adjustment under paragraph (6)(C) for a year before 2004..

(2) CONFORMING AMENDMENT- Section 1853(c)(6)(C) (42 U.S.C. 1395w-23(c)(6)(C)) is amended by inserting before the period at the end the following: , except that for purposes of paragraph (1)(C)(v)(II), no such adjustment shall be made for a year before 2004.

(d) INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES IN CALCULATION OF PAYMENT RATES- Section 1853(c)(3) (42 U.S.C. 1395w-23(c)(3)) is amended–

(1) in subparagraph (A), by striking subparagraph (B) and inserting subparagraphs (B) and (E); and

(2) by adding at the end the following new subparagraph:

(E) INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES- In determining the area-specific MA capitation rate under subparagraph (A) for a year (beginning with 2004), the annual per capita rate of payment for 1997 determined under section 1876(a)(1)(C) shall be adjusted to include in the rate the Secretarys estimate, on a per capita basis, of the amount of additional payments that would have been made in the area involved under this title if individuals entitled to benefits under this title had not received services from facilities of the Department of Defense or the Department of Veterans Affairs..

(e) EXTENDING SPECIAL RULE FOR CERTAIN INPATIENT HOSPITAL STAYS TO REHABILITATION HOSPITALS AND LONG-TERM CARE HOSPITALS-

(1) IN GENERAL- Section 1853(g) (42 U.S.C. 1395w-23(g)) is amended–

(A) in the matter preceding paragraph (1), by inserting , a rehabilitation hospital described in section 1886(d)(1)(B)(ii) or a distinct part rehabilitation unit described in the matter following clause (v) of section 1886(d)(1)(B), or a long-term care hospital (described in section 1886(d)(1)(B)(iv)) after 1886(d)(1)(B)); and

(B) in paragraph (2)(B), by inserting or other payment provision under this title for inpatient services for the type of facility, hospital, or unit involved, described in the matter preceding paragraph (1), as the case may be, after 1886(d).

(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall apply to contract years beginning on or after January 1, 2004.

(f) MEDPAC STUDY OF AAPCC-

(1) STUDY- The Medicare Payment Advisory Commission shall conduct a study that assesses the method used for determining the adjusted average per capita cost (AAPCC) under section 1876(a)(4) of the Social Security Act (42 U.S.C. 1395mm(a)(4)) as applied under section 1853(c)(1)(A) of such Act (as amended by subsection (a)). Such study shall include an examination of–

(A) the bases for variation in such costs between different areas, including differences in input prices, utilization, and practice patterns;

(B) the appropriate geographic area for payment of MA local plans under the Medicare Advantage program under part C of title XVIII of such Act; and

(C) the accuracy of risk adjustment methods in reflecting differences in costs of providing care to different groups of beneficiaries served under such program.

(2) REPORT- Not later than 18 months after the date of the enactment of this Act, the Commission shall submit to Congress a report on the study conducted under paragraph (1).

(g) REPORT ON IMPACT OF INCREASED FINANCIAL ASSISTANCE TO MEDICARE ADVANTAGE PLANS- Not later than July 1, 2006, the Secretary shall submit to Congress a report that describes the impact of additional financing provided under this Act and other Acts (including the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 and BIPA) on the availability of Medicare Advantage plans in different areas and its impact on lowering premiums and increasing benefits under such plans.

(h) MEDPAC STUDY AND REPORT ON CLARIFICATION OF AUTHORITY REGARDING DISAPPROVAL OF UNREASONABLE BENEFICIARY COST-SHARING-

(1) STUDY- The Medicare Payment Advisory Commission, in consultation with beneficiaries, consumer groups, employers, and organizations offering plans under part C of title XVIII of the Social Security Act, shall conduct a study to determine the extent to which the cost-sharing structures under such plans affect access to covered services or select enrollees based on the health status of eligible individuals described in section 1851(a)(3) of the Social Security Act (42 U.S.C. 1395w-21(a)(3)).

(2) REPORT- Not later than December 31, 2004, the Commission shall submit a report to Congress on the study conducted under paragraph (1) together with recommendations for such legislation and administrative actions as the Commission considers appropriate.

(i) IMPLEMENTATION OF PROVISIONS-

(1) ANNOUNCEMENT OF REVISED MEDICARE ADVANTAGE PAYMENT RATES- Within 6 weeks after the date of the enactment of this Act, the Secretary shall determine, and shall announce (in a manner intended to provide notice to interested parties) MA capitation rates under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for 2004, revised in accordance with the provisions of this section.

(2) TRANSITION TO REVISED PAYMENT RATES- The provisions of section 604 of BIPA (114 Stat. 2763A-555) (other than subsection (a)) shall apply to the provisions of subsections (a) through (d) of this section for 2004 in the same manner as the provisions of such section 604 applied to the provisions of BIPA for 2001.

(3) SPECIAL RULE FOR PAYMENT RATES IN 2004-

(A) JANUARY AND FEBRUARY- Notwithstanding the amendments made by subsections (a) through (d), for purposes of making payments under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for January and February 2004, the annual capitation rate for a payment area shall be calculated and the excess amount under section 1854(f)(1)(B) of such Act (42 U.S.C. 1395w-24(f)(1)(B)) shall be determined as if such amendments had not been enacted.

(B) MARCH THROUGH DECEMBER- Notwithstanding the amendments made by subsections (a) through (d), for purposes of making payments under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for March through December 2004, the annual capitation rate for a payment area shall be calculated and the excess amount under section 1854(f)(1)(B) of such Act (42 U.S.C. 1395w-24(f)(1)(B)) shall be determined, in such manner as the Secretary estimates will ensure that the total of such payments with respect to 2004 is the same as the amounts that would have been if subparagraph (A) had not been enacted.

(C) CONSTRUCTION- Subparagraphs (A) and (B) shall not be taken into account in computing such capitation rate for 2005 and subsequent years.

(4) PLANS REQUIRED TO PROVIDE NOTICE OF CHANGES IN PLAN BENEFITS- In the case of an organization offering a plan under part C of title XVIII of the Social Security Act that revises its submission of the information described in section 1854(a)(1) of such Act (42 U.S.C. 1395w-23(a)(1)) for a plan pursuant to the application of paragraph (2), if such revision results in changes in beneficiary premiums, beneficiary cost-sharing, or benefits under the plan, then by not later than 3 weeks after the date the Secretary approves such submission, the organization offering the plan shall provide each beneficiary enrolled in the plan with written notice of such changes.

(5) LIMITATION ON REVIEW- There shall be no administrative or judicial review under section 1869 or section 1878 of the Social Security Act (42 U.S.C. 1395ff and 1395oo), or otherwise of any determination made by the Secretary under this subsection or the application of the payment rates determined pursuant to this subsection.

(j) ADDITIONAL AMENDMENTS- Section 1852(d)(4) (42 U.S.C. 1395w-22(d)(4)) is amended–

(1) in subparagraph (B), by inserting (other than deemed contracts or agreements under subsection (j)(6)) after the plan has contracts or agreements; and

(2) in the last sentence, by inserting before the period at the end the following: , except that, if a plan entirely meets such requirement with respect to a category of health care professional or provider on the basis of subparagraph (B), it may provide for a higher beneficiary copayment in the case of health care professionals and providers of that category who do not have contracts or agreements (other than deemed contracts or agreements under subsection (j)(6)) to provide covered services under the terms of the plan.

Subtitle C–Offering of Medicare Advantage (MA) Regional Plans; Medicare Advantage Competition

SEC. 221. ESTABLISHMENT OF MA REGIONAL PLANS.

(a) OFFERING OF MA REGIONAL PLANS-

(1) IN GENERAL- Section 1851(a)(2)(A) is amended–

(A) by striking COORDINATED CARE PLANS- Coordinated and inserting the following: COORDINATED CARE PLANS (INCLUDING REGIONAL PLANS)-

(i) IN GENERAL- Coordinated;

(B) by inserting regional or local before preferred provider organization plans; and

(2) MORATORIUM ON NEW LOCAL PREFERRED PROVIDER ORGANIZATION PLANS- The Secretary shall not permit the offering of a local preferred provider organization plan under part C of title XVIII of the Social Security Act during 2006 or 2007 in a service area unless such plan was offered under such part (including under a demonstration project under such part) in such area as of December 31, 2005.

(b) DEFINITION OF MA REGIONAL PLAN; MA LOCAL PLAN-

(1) IN GENERAL- Section 1859(b) (42 U.S.C. 1395w-29(b)) is amended by adding at the end the following new paragraphs:

(4) MA REGIONAL PLAN- The term MA regional plan means an MA plan described in section 1851(a)(2)(A)(i)–

(A) that has a network of providers that have agreed to a contractually specified reimbursement for covered benefits with the organization offering the plan;

(B) that provides for reimbursement for all covered benefits regardless of whether such benefits are provided within such network of providers; and

(5) MA LOCAL PLAN- The term MA local plan means an MA plan that is not an MA regional plan..

(2) CONSTRUCTION- Nothing in part C of title XVIII of the Social Security Act shall be construed as preventing an MSA plan or MA private fee-for-service plan from having a service area that covers one or more MA regions or the entire nation.

(c) RULES FOR MA REGIONAL PLANS- Part C of title XVIII (42 U.S.C. 1395w-21 et seq.) is amended by inserting after section 1857 the following new section:

SPECIAL RULES FOR MA REGIONAL PLANS

SEC. 1858. (a) REGIONAL SERVICE AREA; ESTABLISHMENT OF MA REGIONS-

(1) COVERAGE OF ENTIRE MA REGION- The service area for an MA regional plan shall consist of an entire MA region established under paragraph (2) and the provisions of section 1854(h) shall not apply to such a plan.

(2) ESTABLISHMENT OF MA REGIONS-

(A) MA REGION- For purposes of this title, the term MA region means such a region within the 50 States and the District of Columbia as established by the Secretary under this paragraph.

(B) ESTABLISHMENT-

(i) INITIAL ESTABLISHMENT- Not later than January 1, 2005, the Secretary shall first establish and publish MA regions.

(ii) PERIODIC REVIEW AND REVISION OF SERVICE AREAS- The Secretary may periodically review MA regions under this paragraph and, based on such review, may revise such regions if the Secretary determines such revision to be appropriate.

(C) REQUIREMENTS FOR MA REGIONS- The Secretary shall establish, and may revise, MA regions under this paragraph in a manner consistent with the following:

(i) NUMBER OF REGIONS- There shall be no fewer than 10 regions, and no more than 50 regions.

(ii) MAXIMIZING AVAILABILITY OF PLANS- The regions shall maximize the availability of MA regional plans to all MA eligible individuals without regard to health status, especially those residing in rural areas.

(D) MARKET SURVEY AND ANALYSIS- Before establishing MA regions, the Secretary shall conduct a market survey and analysis, including an examination of current insurance markets, to determine how the regions should be established.

(3) NATIONAL PLAN- Nothing in this subsection shall be construed as preventing an MA regional plan from being offered in more than one MA region (including all regions).

(b) APPLICATION OF SINGLE DEDUCTIBLE AND CATASTROPHIC LIMIT ON OUT-OF-POCKET EXPENSES- An MA regional plan shall include the following:

(1) SINGLE DEDUCTIBLE- Any deductible for benefits under the original medicare fee-for-service program option shall be a single deductible (instead of a separate inpatient hospital deductible and a part B deductible) and may be applied differentially for in-network services and may be waived for preventive or other items and services.

(2) CATASTROPHIC LIMIT-

(A) IN-NETWORK- A catastrophic limit on out-of-pocket expenditures for in-network benefits under the original medicare fee-for-service program option.

(B) TOTAL- A catastrophic limit on out-of-pocket expenditures for all benefits under the original medicare fee-for-service program option.

(1) APPLICATION OF RISK CORRIDORS-

(A) IN GENERAL- This subsection shall only apply to MA regional plans offered during 2006 or 2007.

(B) NOTIFICATION OF ALLOWABLE COSTS UNDER THE PLAN- In the case of an MA organization that offers an MA regional plan in an MA region in 2006 or 2007, the organization shall notify the Secretary, before such date in the succeeding year as the Secretary specifies, of–

(i) its total amount of costs that the organization incurred in providing benefits covered under the original medicare fee-for-service program option for all enrollees under the plan in the region in the year and the portion of such costs that is attributable to administrative expenses described in subparagraph (C); and

(ii) its total amount of costs that the organization incurred in providing rebatable integrated benefits (as defined in subparagraph (D)) and with respect to such benefits the portion of such costs that is attributable to administrative expenses described in subparagraph (C) and not described in clause (i) of this subparagraph.

(C) ALLOWABLE COSTS DEFINED- For purposes of this subsection, the term allowable costs means, with respect to an MA regional plan for a year, the total amount of costs described in subparagraph (B) for the plan and year, reduced by the portion of such costs attributable to administrative expenses incurred in providing the benefits described in such subparagraph.

(D) REBATABLE INTEGRATED BENEFITS- For purposes of this subsection, the term rebatable integrated benefits means such non-drug supplemental benefits under subclause (I) of section 1854(b)(1)(C)(ii) pursuant to a rebate under such section that the Secretary determines are integrated with the benefits described in subparagraph (B)(i).

(2) ADJUSTMENT OF PAYMENT-

(A) NO ADJUSTMENT IF ALLOWABLE COSTS WITHIN 3 PERCENT OF TARGET AMOUNT- If the allowable costs for the plan for the year are at least 97 percent, but do not exceed 103 percent, of the target amount for the plan and year, there shall be no payment adjustment under this subsection for the plan and year.

(B) INCREASE IN PAYMENT IF ALLOWABLE COSTS ABOVE 103 PERCENT OF TARGET AMOUNT-

(i) COSTS BETWEEN 103 AND 108 PERCENT OF TARGET AMOUNT- If the allowable costs for the plan for the year are greater than 103 percent, but not greater than 108 percent, of the target amount for the plan and year, the Secretary shall increase the total of the monthly payments made to the organization offering the plan for the year under section 1853(a) by an amount equal to 50 percent of the difference between such allowable costs and 103 percent of such target amount.

(ii) COSTS ABOVE 108 PERCENT OF TARGET AMOUNT- If the allowable costs for the plan for the year are greater than 108 percent of the target amount for the plan and year, the Secretary shall increase the total of the monthly payments made to the organization offering the plan for the year under section 1853(a) by an amount equal to the sum of–

(I) 2.5 percent of such target amount; and

(II) 80 percent of the difference between such allowable costs and 108 percent of such target amount.

(i) COSTS BETWEEN 92 AND 97 PERCENT OF TARGET AMOUNT- If the allowable costs for the plan for the year are less than 97 percent, but greater than or equal to 92 percent, of the target amount for the plan and year, the Secretary shall reduce the total of the monthly payments made to the organization offering the plan for the year under section 1853(a) by an amount (or otherwise recover from the plan an amount) equal to 50 percent of the difference between 97 percent of the target amount and such allowable costs.

(ii) COSTS BELOW 92 PERCENT OF TARGET AMOUNT- If the allowable costs for the plan for the year are less than 92 percent of the target amount for the plan and year, the Secretary shall reduce the total of the monthly payments made to the organization offering the plan for the year under section 1853(a) by an amount (or otherwise recover from the plan an amount) equal to the sum of–

(I) 2.5 percent of such target amount; and

(II) 80 percent of the difference between 92 percent of such target amount and such allowable costs.

(D) TARGET AMOUNT DESCRIBED- For purposes of this paragraph, the term target amount means, with respect to an MA regional plan offered by an organization in a year, an amount equal to–

(i) the sum of–

(I) the total monthly payments made to the organization for enrollees in the plan for the year that are attributable to benefits under the original medicare fee-for-service program option (as defined in section 1852(a)(1)(B));

(II) the total of the MA monthly basic beneficiary premium collectable for such enrollees for the year; and

(III) the total amount of the rebates under section 1854(b)(1)(C)(ii) that are attributable to rebatable integrated benefits; reduced by

(ii) the amount of administrative expenses assumed in the bid insofar as the bid is attributable to benefits described in clause (i)(I) or (i)(III).

(3) DISCLOSURE OF INFORMATION-

(A) IN GENERAL- Each contract under this part shall provide–

(i) that an MA organization offering an MA regional plan shall provide the Secretary with such information as the Secretary determines is necessary to carry out this subsection; and

(ii) that, pursuant to section 1857(d)(2)(B), the Secretary has the right to inspect and audit any books and records of the organization that pertain to the information regarding costs provided to the Secretary under paragraph (1)(B).

(B) RESTRICTION ON USE OF INFORMATION- Information disclosed or obtained pursuant to the provisions of this subsection may be used by officers, employees, and contractors of the Department of Health and Human Services only for the purposes of, and to the extent necessary in, carrying out this subsection.

(d) ORGANIZATIONAL AND FINANCIAL REQUIREMENTS-

(1) IN GENERAL- In the case of an MA organization that is offering an MA regional plan in an MA region and–

(A) meets the requirements of section 1855(a)(1) with respect to at least one such State in such region; and

(B) with respect to each other State in such region in which it does not meet requirements, it demonstrates to the satisfaction of the Secretary that it has filed the necessary application to meet such requirements,

the Secretary may waive such requirement with respect to each State described in subparagraph (B) for such period of time as the Secretary determines appropriate for the timely processing of such an application by the State (and, if such application is denied, through the end of such plan year as the Secretary determines appropriate to provide for a transition).

(2) SELECTION OF APPROPRIATE STATE- In applying paragraph (1) in the case of an MA organization that meets the requirements of section 1855(a)(1) with respect to more than one State in a region, the organization shall select, in a manner specified by the Secretary among such States, one State the rules of which shall apply in the case of the States described in paragraph (1)(B).

(e) STABILIZATION FUND-

(1) ESTABLISHMENT- The Secretary shall establish under this subsection an MA Regional Plan Stabilization Fund (in this subsection referred to as the Fund) which shall be available for two purposes:

(A) PLAN ENTRY- To provide incentives to have MA regional plans offered in each MA region under paragraph (3).

(B) PLAN RETENTION- To provide incentives to retain MA regional plans in certain MA regions with below-national-average MA market penetration under paragraph (4).

(2) FUNDING-

(A) INITIAL FUNDING-

(i) IN GENERAL- There shall be available to the Fund, for expenditures from the Fund during the period beginning on January 1, 2007, and ending on December 31, 2013, a total of $10,000,000,000.

(ii) PAYMENT FROM TRUST FUNDS- Such amount shall be available to the Fund, as expenditures are made from the Fund, from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund in the proportion specified in section 1853(f).

(B) ADDITIONAL FUNDING FROM SAVINGS-

(i) IN GENERAL- There shall also be made available to the Fund, 50 percent of savings described in clause (ii).

(ii) SAVINGS- The savings described in this clause are 25 percent of the average per capita savings described in section 1854(b)(4)(C) for which monthly rebates are provided under section 1854(b)(1)(C) in the fiscal year involved that are attributable to MA regional plans.

(iii) AVAILABILITY- Funds made available under this subparagraph shall be transferred into a special account in the Treasury from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund in the proportion specified in section 1853(f) on a monthly basis.

(C) OBLIGATIONS- Amounts in the Fund shall be available in advance of appropriations to MA regional plans in qualifying MA regions only in accordance with paragraph (5).

(D) ORDERING- Expenditures from the Fund shall first be made from amounts made available under subparagraph (A).

(3) PLAN ENTRY FUNDING-

(A) IN GENERAL- Funding is available under this paragraph for a year only as follows:

(i) NATIONAL PLAN- For a national bonus payment described in subparagraph (B) for the offering by a single MA organization of an MA regional plan in each MA region in the year, but only if there was not such a plan offered in each such region in the previous year. Funding under this clause is only available with respect to any individual MA organization for a single year, but may be made available to more than one such organization in the same year.

(ii) REGIONAL PLANS- Subject to clause (iii), for an increased amount under subparagraph (C) for an MA regional plan offered in an MA region which did not have any MA regional plan offered in the prior year.

(iii) LIMITATION ON REGIONAL PLAN FUNDING IN CASE OF NATIONAL PLAN- In no case shall there be any payment adjustment under subparagraph (C) for a year for which a national payment adjustment is made under subparagraph (B).

(B) NATIONAL BONUS PAYMENT- The national bonus payment under this subparagraph shall–

(i) be available to an MA organization only if the organization offers MA regional plans in every MA region;

(ii) be available with respect to all MA regional plans of the organization regardless of whether any other MA regional plan is offered in any region; and

(iii) subject to amounts available under paragraph (5) for a year, be equal to 3 percent of the benchmark amount otherwise applicable for each MA regional plan offered by the organization.

(i) IN GENERAL- The increased amount under this subparagraph for an MA regional plan in an MA region for a year shall be an amount, determined by the Secretary, based on the bid submitted for such plan (or plans) and shall be available to all MA regional plans offered in such region and year. Such amount may be based on the mean, mode, or median, or other measure of such bids and may vary from region to region. The Secretary may not limit the number of plans or bids in a region.

(ii) MULTI-YEAR FUNDING-

(I) IN GENERAL- Subject to amounts available under paragraph (5), funding under this subparagraph shall be available for a period determined by the Secretary.

(II) REPORT- If the Secretary determines that funding will be provided for a second consecutive year with respect to an MA region, the Secretary shall submit to the Congress a report that describes the underlying market dynamics in the region and that includes recommendations concerning changes in the payment methodology otherwise provided for MA regional plans under this part.

(iii) APPLICATION TO ALL PLANS IN A REGION- Funding under this subparagraph with respect to an MA region shall be made available with respect to all MA regional plans offered in the region.

(iv) LIMITATION ON AVAILABILITY OF PLAN RETENTION FUNDING IN NEXT YEAR- If an increased amount is made available under this subparagraph with respect to an MA region for a period determined by the Secretary under clause (ii)(I), in no case shall funding be available under paragraph (4) with respect to MA regional plans offered in the region in the year following such period.

(D) APPLICATION- Any additional payment under this paragraph provided for an MA regional plan for a year shall be treated as if it were an addition to the benchmark amount otherwise applicable to such plan and year, but shall not be taken into account in the computation of any benchmark amount for any subsequent year.

(4) PLAN RETENTION FUNDING-

(A) IN GENERAL- Funding is available under this paragraph for a year with respect to MA regional plans offered in an MA region for the increased amount specified in subparagraph (B) but only if the region meets the requirements of subparagraphs (C) and (E).

(B) PAYMENT INCREASE- The increased amount under this subparagraph for an MA regional plan in an MA region for a year shall be an amount, determined by the Secretary, that does not exceed the greater of–

(i) 3 percent of the benchmark amount applicable in the region; or

(ii) such amount as (when added to the benchmark amount applicable to the region) will result in the ratio of–

(I) such additional amount plus the benchmark amount computed under section 1854(b)(4)(B)(i) for the region and year, to the adjusted average per capita cost for the region and year, as estimated by the Secretary under section 1876(a)(4) and adjusted as appropriate for the purpose of risk adjustment; being equal to

(II) the weighted average of such benchmark amounts for all the regions and such year, to the average per capita cost for the United States and such year, as estimated by the Secretary under section 1876(a)(4) and adjusted as appropriate for the purpose of risk adjustment.

(i) NOTIFICATION OF PLAN EXIT- The Secretary has received notice (in such form and manner as the Secretary specifies) before a year that one or more MA regional plans that were offered in the region in the previous year will not be offered in the succeeding year.

(ii) REGIONAL PLANS AVAILABLE FROM FEWER THAN 2 MA ORGANIZATIONS IN THE REGION- The Secretary determines that if the plans referred to in clause (i) are not offered in the year, fewer than 2 MA organizations will be offering MA regional plans in the region in the year involved.

(iii) PERCENTAGE ENROLLMENT IN MA REGIONAL PLANS BELOW NATIONAL AVERAGE- For the previous year, the Secretary determines that the average percentage of MA eligible individuals residing in the region who are enrolled in MA regional plans is less than the average percentage of such individuals in the United States enrolled in such plans.

(E) 2-CONSECUTIVE-YEAR LIMITATION-

(i) IN GENERAL- In no case shall any funding be available under this paragraph in an MA region in a period of consecutive years that exceeds 2 years.

(ii) REPORT- If the Secretary determines that funding will be provided under this paragraph for a second consecutive year with respect to an MA region, the Secretary shall submit to the Congress a report that describes the underlying market dynamics in the region and that includes recommendations concerning changes in the payment methodology otherwise provided for MA regional plans under this part.

(5) FUNDING LIMITATION-

(A) IN GENERAL- The total amount expended from the Fund as a result of the application of this subsection through the end of a calendar year may not exceed the amount available to the Fund as of the first day of such year. For purposes of this subsection, amounts that are expended under this title insofar as such amounts would not have been expended but for the application of this subsection shall be counted as amounts expended as a result of such application.

(B) APPLICATION OF LIMITATION- The Secretary may obligate funds from the Fund for a year only if the Secretary determines (and the Chief Actuary of the Centers for Medicare & Medicaid Services and the appropriate budget officer certify) that there are available in the Fund at the beginning of the year sufficient amounts to cover all such obligations incurred during the year consistent with subparagraph (A). The Secretary shall take such steps, in connection with computing additional payment amounts under paragraphs (3) and (4) and including limitations on enrollment in MA regional plans receiving such payments, as will ensure that sufficient funds are available to make such payments for the entire year. Funds shall only be made available from the Fund pursuant to an apportionment made in accordance with applicable procedures.

(6) SECRETARY REPORTS- Not later than April 1 of each year (beginning in 2008), the Secretary shall submit a report to Congress and the Comptroller General of the United States that includes–

(A) a detailed description of–

(i) the total amount expended as a result of the application of this subsection in the previous year compared to the total amount that would have been expended under this title in the year if this subsection had not been enacted;

(ii) the projections of the total amount that will be expended as a result of the application of this subsection in the year in which the report is submitted compared to the total amount that would have been expended under this title in the year if this subsection had not been enacted;

(iii) amounts remaining within the funding limitation specified in paragraph (5); and

(iv) the steps that the Secretary will take under paragraph (5)(B) to ensure that the application of this subsection will not cause expenditures to exceed the amount available in the Fund; and

(B) a certification from the Chief Actuary of the Centers for Medicare & Medicaid Services that the description provided under subparagraph (A) is reasonable, accurate, and based on generally accepted actuarial principles and methodologies.

(7) BIENNIAL GAO REPORTS- Not later than January 1 of 2009, 2011, 2013, and 2015, the Comptroller General of the United States shall submit to the Secretary and Congress a report on the application of additional payments under this subsection. Each report shall include–

(A) an evaluation of–

(i) the quality of care provided to individuals enrolled in MA regional plans for which additional payments were made under this subsection;

(ii) the satisfaction of such individuals with benefits under such a plan;

(iii) the costs to the medicare program for payments made to such plans; and

(iv) any improvements in the delivery of health care services under such a plan;

(B) a comparative analysis of the performance of MA regional plans receiving payments under this subsection with MA regional plans not receiving such payments; and

(C) recommendations for such legislation or administrative action as the Comptroller General determines to be appropriate.

(f) COMPUTATION OF APPLICABLE MA REGION-SPECIFIC NON-DRUG MONTHLY BENCHMARK AMOUNTS-

(1) COMPUTATION FOR REGIONS- For purposes of section 1853(j)(2) and this section, subject to subsection (e), the term MA region-specific non-drug monthly benchmark amount means, with respect to an MA region for a month in a year, the sum of the 2 components described in paragraph (2) for the region and year. The Secretary shall compute such benchmark amount for each MA region before the beginning of each annual, coordinated election period under section 1851(e)(3)(B) for each year (beginning with 2006).

(2) 2 COMPONENTS- For purposes of paragraph (1), the 2 components described in this paragraph for an MA region and a year are the following:

(A) STATUTORY COMPONENT- The product of the following:

(i) STATUTORY REGION-SPECIFIC NON-DRUG AMOUNT- The statutory region-specific non-drug amount (as defined in paragraph (3)) for the region and year.

(ii) STATUTORY NATIONAL MARKET SHARE- The statutory national market share percentage, determined under paragraph (4) for the year.

(B) PLAN-BID COMPONENT- The product of the following:

(i) WEIGHTED AVERAGE OF MA PLAN BIDS IN REGION- The weighted average of the plan bids for the region and year (as determined under paragraph (5)(A)).

(ii) NON-STATUTORY MARKET SHARE- 1 minus the statutory national market share percentage, determined under paragraph (4) for the year.

(3) STATUTORY REGION-SPECIFIC NON-DRUG AMOUNT- For purposes of paragraph (2)(A)(i), the term statutory region-specific non-drug amount means, for an MA region and year, an amount equal the sum (for each MA local area within the region) of the product of–

(A) MA area-specific non-drug monthly benchmark amount under section 1853(j)(1)(A) for that area and year; and

(B) the number of MA eligible individuals residing in the local area, divided by the total number of MA eligible individuals residing in the region.

(4) COMPUTATION OF STATUTORY MARKET SHARE PERCENTAGE-

(A) IN GENERAL- The Secretary shall determine for each year a statutory national market share percentage that is equal to the proportion of MA eligible individuals nationally who were not enrolled in an MA plan during the reference month.

(B) REFERENCE MONTH DEFINED- For purposes of this part, the term reference month means, with respect to a year, the most recent month during the previous year for which the Secretary determines that data are available to compute the percentage specified in subparagraph (A) and other relevant percentages under this part.

(5) DETERMINATION OF WEIGHTED AVERAGE MA BIDS FOR A REGION-

(A) IN GENERAL- For purposes of paragraph (2)(B)(i), the weighted average of plan bids for an MA region and a year is the sum, for MA regional plans described in subparagraph (D) in the region and year, of the products (for each such plan) of the following:

(i) MONTHLY MA STATUTORY NON-DRUG BID AMOUNT- The unadjusted MA statutory non-drug monthly bid amount for the plan.

(ii) PLANS SHARE OF MA ENROLLMENT IN REGION- The factor described in subparagraph (B) for the plan.

(B) PLANS SHARE OF MA ENROLLMENT IN REGION-

(i) IN GENERAL- Subject to the succeeding provisions of this subparagraph, the factor described in this subparagraph for a plan is equal to the number of individuals described in subparagraph (C) for such plan, divided by the total number of such individuals for all MA regional plans described in subparagraph (D) for that region and year.

(ii) SINGLE PLAN RULE- In the case of an MA region in which only a single MA regional plan is being offered, the factor described in this subparagraph shall be equal to 1.

(iii) EQUAL DIVISION AMONG MULTIPLE PLANS IN YEAR IN WHICH PLANS ARE FIRST AVAILABLE- In the case of an MA region in the first year in which any MA regional plan is offered, if more than one MA regional plan is offered in such year, the factor described in this subparagraph for a plan shall (as specified by the Secretary) be equal to–

(I) 1 divided by the number of such plans offered in such year; or

(II) a factor for such plan that is based upon the organizations estimate of projected enrollment, as reviewed and adjusted by the Secretary to ensure reasonableness and as is certified by the Chief Actuary of the Centers for Medicare & Medicaid Services.

(C) COUNTING OF INDIVIDUALS- For purposes of subparagraph (B)(i), the Secretary shall count for each MA regional plan described in subparagraph (D) for an MA region and year, the number of individuals who reside in the region and who were enrolled under such plan under this part during the reference month.

(D) PLANS COVERED- For an MA region and year, an MA regional plan described in this subparagraph is an MA regional plan that is offered in the region and year and was offered in the region in the reference month.

(g) ELECTION OF UNIFORM COVERAGE DETERMINATION- Instead of applying section 1852(a)(2)(C) with respect to an MA regional plan, the organization offering the plan may elect to have a local coverage determination for the entire MA region be the local coverage determination applied for any part of such region (as selected by the organization).

(h) ASSURING NETWORK ADEQUACY-

(1) IN GENERAL- For purposes of enabling MA organizations that offer MA regional plans to meet applicable provider access requirements under section 1852 with respect to such plans, the Secretary may provide for payment under this section to an essential hospital that provides inpatient hospital services to enrollees in such a plan where the MA organization offering the plan certifies to the Secretary that the organization was unable to reach an agreement between the hospital and the organization regarding provision of such services under the plan. Such payment shall be available only if–

(A) the organization provides assurances satisfactory to the Secretary that the organization will make payment to the hospital for inpatient hospital services of an amount that is not less than the amount that would be payable to the hospital under section 1886 with respect to such services; and

(B) with respect to specific inpatient hospital services provided to an enrollee, the hospital demonstrates to the satisfaction of the Secretary that the hospitals costs of such services exceed the payment amount described in subparagraph (A).

(2) PAYMENT AMOUNTS- The payment amount under this subsection for inpatient hospital services provided by a subsection (d) hospital to an enrollee in an MA regional plan shall be, subject to the limitation of funds under paragraph (3), the amount (if any) by which–

(A) the amount of payment that would have been paid for such services under this title if the enrollees were covered under the original medicare fee-for-service program option and the hospital were a critical access hospital; exceeds

(B) the amount of payment made for such services under paragraph (1)(A).

(3) AVAILABLE AMOUNTS- There shall be available for payments under this subsection–

(A) in 2006, $25,000,000; and

(B) in each succeeding year the amount specified in this paragraph for the preceding year increased by the market basket percentage increase (as defined in section 1886(b)(3)(B)(iii)) for the fiscal year ending in such succeeding year.

Payments under this subsection shall be made from the Federal Hospital Insurance Trust Fund.

(4) ESSENTIAL HOSPITAL- In this subsection, the term essential hospital means, with respect to an MA regional plan offered by an MA organization, a subsection (d) hospital (as defined in section 1886(d)) that the Secretary determines, based upon an application filed by the organization with the Secretary, is necessary to meet the requirements referred to in paragraph (1) for such plan..

(d) CONFORMING AMENDMENTS-

(1) RELATING TO MA REGIONS- Section 1853(d) (42 U.S.C. 1395w-23(d)) is amended–

(A) by amending the heading to read as follows: MA PAYMENT AREA; MA LOCAL AREA; MA REGION DEFINED;

(B) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively;

(1) MA PAYMENT AREA- In this part, except as provided in this subsection, the term MA payment area means–

(A) with respect to an MA local plan, an MA local area (as defined in paragraph (2)); and

(B) with respect to an MA regional plan, an MA region (as established under section 1858(a)(2)).;

(D) by inserting after paragraph (1) the following new paragraph:

(2) MA LOCAL AREA- The term MA local area means a county or equivalent area specified by the Secretary.; and

(E) in paragraph (4), as so redesignated–

(i) in subparagraph (A), by inserting for MA local plans after paragraph (1);

(ii) in subparagraph (A)(iii), by striking paragraph (1) and inserting paragraph (1)(A); and

(iii) in subparagraph (B)–

(I) by inserting with respect to MA local plans after established under this section;

(II) by inserting for such plans after payments under this section; and

(III) by inserting for such plans after made under this section.

(2) MA LOCAL AREA DEFINED- Section 1859(c) (42 U.S.C. 1395w-29(c)) is amended by adding at the end the following:

(5) MA LOCAL AREA- The term MA local area is defined in section 1853(d)(2)..

(3) APPLICATION OF SPECIAL BENEFIT RULES TO PPOS AND REGIONAL PLANS- Section 1852(a) (42 U.S.C. 1395w-22(a)) is amended–

(A) in paragraph (1), by inserting and except as provided in paragraph (6) for MA regional plans after MSA plans; and

(B) by adding at the end the following new paragraph:

(6) SPECIAL BENEFIT RULES FOR REGIONAL PLANS- In the case of an MA plan that is an MA regional plan, benefits under the plan shall include the benefits described in paragraphs (1) and (2) of section 1858(b)..

(4) APPLICATION OF CAPITATION RATES TO LOCAL AREAS- Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1)) is amended by inserting that is an MA local area after for a Medicare+Choice payment area.

(5) NETWORK ADEQUACY HOSPITAL PAYMENTS- Section 1851(i)(2) (42 U.S.C. 1395w-21(i)(2)) is amended by inserting 1858(h), after 1857(f)(2),.

SEC. 222. COMPETITION PROGRAM BEGINNING IN 2006.

(a) SUBMISSION OF BIDDING AND REBATE INFORMATION BEGINNING IN 2006-

(1) IN GENERAL- Section 1854 (42 U.S.C. 1395w-24) is amended–

(A) by amending paragraph (1) of subsection (a) to read as follows:

(1) IN GENERAL-

(A) INITIAL SUBMISSION- Not later than the second Monday in September of 2002, 2003, and 2004 (or the first Monday in June of each subsequent year), each MA organization shall submit to the Secretary, in a form and manner specified by the Secretary and for each MA plan for the service area (or segment of such an area if permitted under subsection (h)) in which it intends to be offered in the following year the following:

(i) The information described in paragraph (2), (3), (4), or (6)(A) for the type of plan and year involved.

(ii) The plan type for each plan.

(iii) The enrollment capacity (if any) in relation to the plan and area.

(B) BENEFICIARY REBATE INFORMATION- In the case of a plan required to provide a monthly rebate under subsection (b)(1)(C) for a year, the MA organization offering the plan shall submit to the Secretary, in such form and manner and at such time as the Secretary specifies, information on–

(i) the manner in which such rebate will be provided under clause (ii) of such subsection; and

(ii) the MA monthly prescription drug beneficiary premium (if any) and the MA monthly supplemental beneficiary premium (if any).

(C) PAPERWORK REDUCTION FOR OFFERING OF MA REGIONAL PLANS NATIONALLY OR IN MULTI-REGION AREAS- The Secretary shall establish requirements for information submission under this subsection in a manner that promotes the offering of MA regional plans in more than one region (including all regions) through the filing of consolidated information.; and

(B) by adding at the end of subsection (a) the following:

(6) SUBMISSION OF BID AMOUNTS BY MA ORGANIZATIONS BEGINNING IN 2006-

(A) INFORMATION TO BE SUBMITTED- For an MA plan (other than an MSA plan) for a plan year beginning on or after January 1, 2006, the information described in this subparagraph is as follows:

(i) The monthly aggregate bid amount for the provision of all items and services under the plan, which amount shall be based on average revenue requirements (as used for purposes of section 1302(8) of the Public Health Service Act) in the payment area for an enrollee with a national average risk profile for the factors described in section 1853(a)(1)(C) (as specified by the Secretary).

(ii) The proportions of such bid amount that are attributable to–

(I) the provision of benefits under the original medicare fee-for-service program option (as defined in section 1852(a)(1)(B));

(II) the provision of basic prescription drug coverage; and

(III) the provision of supplemental health care benefits.

(iii) The actuarial basis for determining the amount under clause (i) and the proportions described in clause (ii) and such additional information as the Secretary may require to verify such actuarial bases and the projected number of enrollees in each MA local area.

(iv) A description of deductibles, coinsurance, and copayments applicable under the plan and the actuarial value of such deductibles, coinsurance, and copayments, described in subsection (e)(4)(A).

(v) With respect to qualified prescription drug coverage, the information required under section 1860D-4, as incorporated under section 1860D-11(b)(2), with respect to such coverage.

In the case of a specialized MA plan for special needs individuals, the information described in this subparagraph is such information as the Secretary shall specify.

(B) ACCEPTANCE AND NEGOTIATION OF BID AMOUNTS-

(i) AUTHORITY- Subject to clauses (iii) and (iv), the Secretary has the authority to negotiate regarding monthly bid amounts submitted under subparagraph (A) (and the proportions described in subparagraph (A)(ii)), including supplemental benefits provided under subsection (b)(1)(C)(ii)(I) and in exercising such authority the Secretary shall have authority similar to the authority of the Director of the Office of Personnel Management with respect to health benefits plans under chapter 89 of title 5, United States Code.

(ii) APPLICATION OF FEHBP STANDARD- Subject to clause (iv), the Secretary may only accept such a bid amount or proportion if the Secretary determines that such amount and proportions are supported by the actuarial bases provided under subparagraph (A) and reasonably and equitably reflects the revenue requirements (as used for purposes of section 1302(8) of the Public Health Service Act) of benefits provided under that plan.

(iii) NONINTERFERENCE- In order to promote competition under this part and part D and in carrying out such parts, the Secretary may not require any MA organization to contract with a particular hospital, physician, or other entity or individual to furnish items and services under this title or require a particular price structure for payment under such a contract to the extent consistent with the Secretarys authority under this part.

(iv) EXCEPTION- In the case of a plan described in section 1851(a)(2)(C), the provisions of clauses (i) and (ii) shall not apply and the provisions of paragraph (5)(B), prohibiting the review, approval, or disapproval of amounts described in such paragraph, shall apply to the negotiation and rejection of the monthly bid amounts and the proportions referred to in subparagraph (A)..

(2) DEFINITION OF BENEFITS UNDER THE ORIGINAL MEDICARE FEE-FOR-SERVICE PROGRAM OPTION- Section 1852(a)(1) (42 U.S.C. 1395w-22(a)(1)) is amended–

(A) by striking IN GENERAL- Except and inserting REQUIREMENT-

(A) IN GENERAL- Except; and

(B) by striking title XI and all that follows and inserting the following: title XI, benefits under the original medicare fee-for-service program option (and, for plan years before 2006, additional benefits required under section 1854(f)(1)(A)).

(B) BENEFITS UNDER THE ORIGINAL MEDICARE FEE-FOR-SERVICE PROGRAM OPTION DEFINED-

(i) IN GENERAL- For purposes of this part, the term benefits under the original medicare fee-for-service program option means those items and services (other than hospice care) for which benefits are available under parts A and B to individuals entitled to benefits under part A and enrolled under part B, with cost-sharing for those services as required under parts A and B or an actuarially equivalent level of cost-sharing as determined in this part.

(ii) SPECIAL RULE FOR REGIONAL PLANS- In the case of an MA regional plan in determining an actuarially equivalent level of cost-sharing with respect to benefits under the original medicare fee-for-service program option, there shall only be taken into account, with respect to the application of section 1858(b)(2), such expenses only with respect to subparagraph (A) of such section..

(3) CONFORMING AMENDMENT RELATING TO SUPPLEMENTAL HEALTH BENEFITS- Section 1852(a)(3) (42 U.S.C. 1395w-22(a)(3)) is amended by adding at the end the following: Such benefits may include reductions in cost-sharing below the actuarial value specified in section 1854(e)(4)(B)..

(b) PROVIDING FOR BENEFICIARY SAVINGS FOR CERTAIN PLANS-

(1) BENEFICIARY REBATES- Section 1854(b)(1) (42 U.S.C. 1395w-24(b)(1)) is amended–

(A) in subparagraph (A), by striking The monthly amount and inserting Subject to the rebate under subparagraph (C), the monthly amount (if any); and

(B) by adding at the end the following new subparagraph:

(i) REQUIREMENT- The MA plan shall provide to the enrollee a monthly rebate equal to 75 percent of the average per capita savings (if any) described in paragraph (3)(C) or (4)(C), as applicable to the plan and year involved.

(ii) FORM OF REBATE- A rebate required under this subparagraph shall be provided through the application of the amount of the rebate toward one or more of the following:

(I) PROVISION OF SUPPLEMENTAL HEALTH CARE BENEFITS AND PAYMENT FOR PREMIUM FOR SUPPLEMENTAL BENEFITS- The provision of supplemental health care benefits described in section 1852(a)(3) in a manner specified under the plan, which may include the reduction of cost-sharing otherwise applicable as well as additional health care benefits which are not benefits under the original medicare fee-for-service program option, or crediting toward an MA monthly supplemental beneficiary premium (if any).

(II) PAYMENT FOR PREMIUM FOR PRESCRIPTION DRUG COVERAGE- Crediting toward the MA monthly prescription drug beneficiary premium.

(III) PAYMENT TOWARD PART B PREMIUM- Crediting toward the premium imposed under part B (determined without regard to the application of subsections (b), (h), and (i) of section 1839).

(iii) DISCLOSURE RELATING TO REBATES- The plan shall disclose to the Secretary information on the form and amount of the rebate provided under this subparagraph or the actuarial value in the case of supplemental health care benefits.

(iv) APPLICATION OF PART B PREMIUM REDUCTION- Insofar as an MA organization elects to provide a rebate under this subparagraph under a plan as a credit toward the part B premium under clause (ii)(III), the Secretary shall apply such credit to reduce the premium under section 1839 of each enrollee in such plan as provided in section 1840(i)..

(2) REVISION OF PREMIUM TERMINOLOGY- Section 1854(b)(2) (42 U.S.C. 1395w-24(b)(2)) is amended–

(A) in the heading, by inserting AND BID after PREMIUM;

(B) by redesignating subparagraph (C) as subparagraph (D);

(A) MA MONTHLY BASIC BENEFICIARY PREMIUM- The term MA monthly basic beneficiary premium means, with respect to an MA plan–

(i) described in section 1853(a)(1)(B)(i) (relating to plans providing rebates), zero; or

(ii) described in section 1853(a)(1)(B)(ii), the amount (if any) by which the unadjusted MA statutory non-drug monthly bid amount (as defined in subparagraph (E)) exceeds the applicable unadjusted MA area-specific non-drug monthly benchmark amount (as defined in section 1853(j)).

(B) MA MONTHLY PRESCRIPTION DRUG BENEFICIARY PREMIUM- The term MA monthly prescription drug beneficiary premium means, with respect to an MA plan, the base beneficiary premium (as determined under section 1860D-13(a)(2) and as adjusted under section 1860D-13(a)(1)(B)), less the amount of rebate credited toward such amount under section 1854(b)(1)(C)(ii)(II).

(C) MA MONTHLY SUPPLEMENTAL BENEFICIARY PREMIUM- The term MA monthly supplemental beneficiary premium means, with respect to an MA plan, the portion of the aggregate monthly bid amount submitted under clause (i) of subsection (a)(6)(A) for the year that is attributable under clause (ii)(III) of such subsection to the provision of supplemental health care benefits, less the amount of rebate credited toward such portion under section 1854(b)(1)(C)(ii)(I).; and

(D) by adding at the end the following:

(E) UNADJUSTED MA STATUTORY NON-DRUG MONTHLY BID AMOUNT- The term unadjusted MA statutory non-drug monthly bid amount means the portion of the bid amount submitted under clause (i) of subsection (a)(6)(A) for the year that is attributable under clause (ii)(I) of such subsection to the provision of benefits under the original medicare fee-for-service program option (as defined in section 1852(a)(1)(B))..

(3) COMPUTATION OF SAVINGS- Section 1854(b) (42 U.S.C. 1395w-24(b)) is further amended by adding at the end the following new paragraphs:

(3) COMPUTATION OF AVERAGE PER CAPITA MONTHLY SAVINGS FOR LOCAL PLANS- For purposes of paragraph (1)(C)(i), the average per capita monthly savings referred to in such paragraph for an MA local plan and year is computed as follows:

(A) DETERMINATION OF STATEWIDE AVERAGE RISK ADJUSTMENT FOR LOCAL PLANS-

(i) IN GENERAL- Subject to clause (iii), the Secretary shall determine, at the same time rates are promulgated under section 1853(b)(1) (beginning with 2006) for each State, the average of the risk adjustment factors to be applied under section 1853(a)(1)(C) to payment for enrollees in that State for MA local plans.

(ii) TREATMENT OF STATES FOR FIRST YEAR IN WHICH LOCAL PLAN OFFERED- In the case of a State in which no MA local plan was offered in the previous year, the Secretary shall estimate such average. In making such estimate, the Secretary may use average risk adjustment factors applied to comparable States or applied on a national basis.

(iii) AUTHORITY TO DETERMINE RISK ADJUSTMENT FOR AREAS OTHER THAN STATES- The Secretary may provide for the determination and application of risk adjustment factors under this subparagraph on the basis of areas other than States or on a plan-specific basis.

(B) DETERMINATION OF RISK ADJUSTED BENCHMARK AND RISK-ADJUSTED BID FOR LOCAL PLANS- For each MA plan offered in a local area in a State, the Secretary shall–

(i) adjust the applicable MA area-specific non-drug monthly benchmark amount (as defined in section 1853(j)(1)) for the area by the average risk adjustment factor computed under subparagraph (A); and

(ii) adjust the unadjusted MA statutory non-drug monthly bid amount by such applicable average risk adjustment factor.

(C) DETERMINATION OF AVERAGE PER CAPITA MONTHLY SAVINGS- The average per capita monthly savings described in this subparagraph for an MA local plan is equal to the amount (if any) by which–

(i) the risk-adjusted benchmark amount computed under subparagraph (B)(i); exceeds

(ii) the risk-adjusted bid computed under subparagraph (B)(ii).

(4) COMPUTATION OF AVERAGE PER CAPITA MONTHLY SAVINGS FOR REGIONAL PLANS- For purposes of paragraph (1)(C)(i), the average per capita monthly savings referred to in such paragraph for an MA regional plan and year is computed as follows:

(A) DETERMINATION OF REGIONWIDE AVERAGE RISK ADJUSTMENT FOR REGIONAL PLANS-

(i) IN GENERAL- The Secretary shall determine, at the same time rates are promulgated under section 1853(b)(1) (beginning with 2006) for each MA region the average of the risk adjustment factors to be applied under section 1853(a)(1)(C) to payment for enrollees in that region for MA regional plans.

(ii) TREATMENT OF REGIONS FOR FIRST YEAR IN WHICH REGIONAL PLAN OFFERED- In the case of an MA region in which no MA regional plan was offered in the previous year, the Secretary shall estimate such average. In making such estimate, the Secretary may use average risk adjustment factors applied to comparable regions or applied on a national basis.

(iii) AUTHORITY TO DETERMINE RISK ADJUSTMENT FOR AREAS OTHER THAN REGIONS- The Secretary may provide for the determination and application of risk adjustment factors under this subparagraph on the basis of areas other than MA regions or on a plan-specific basis.

(B) DETERMINATION OF RISK-ADJUSTED BENCHMARK AND RISK-ADJUSTED BID FOR REGIONAL PLANS- For each MA regional plan offered in a region, the Secretary shall–

(i) adjust the applicable MA area-specific non-drug monthly benchmark amount (as defined in section 1853(j)(2)) for the region by the average risk adjustment factor computed under subparagraph (A); and

(ii) adjust the unadjusted MA statutory non-drug monthly bid amount by such applicable average risk adjustment factor.

(C) DETERMINATION OF AVERAGE PER CAPITA MONTHLY SAVINGS- The average per capita monthly savings described in this subparagraph for an MA regional plan is equal to the amount (if any) by which–

(i) the risk-adjusted benchmark amount computed under subparagraph (B)(i); exceeds

(ii) the risk-adjusted bid computed under subparagraph (B)(ii)..

(1) by striking PREMIUMS- Each and inserting PREMIUMS-

(1) IN GENERAL- Each; and

(2) by adding at the end the following new paragraphs:

(2) BENEFICIARYS OPTION OF PAYMENT THROUGH WITHHOLDING FROM SOCIAL SECURITY PAYMENT OR USE OF ELECTRONIC FUNDS TRANSFER MECHANISM- In accordance with regulations, an MA organization shall permit each enrollee, at the enrollees option, to make payment of premiums (if any) under this part to the organization through–

(A) withholding from benefit payments in the manner provided under section 1840 with respect to monthly premiums under section 1839;

(B) an electronic funds transfer mechanism (such as automatic charges of an account at a financial institution or a credit or debit card account); or

(C) such other means as the Secretary may specify, including payment by an employer or under employment-based retiree health coverage (as defined in section 1860D-22(c)(1)) on behalf of an employee or former employee (or dependent).

All premium payments that are withheld under subparagraph (A) shall be credited to the appropriate Trust Fund (or Account thereof), as specified by the Secretary, under this title and shall be paid to the MA organization involved. No charge may be imposed under an MA plan with respect to the election of the payment option described in subparagraph (A). The Secretary shall consult with the Commissioner of Social Security and the Secretary of the Treasury regarding methods for allocating premiums withheld under subparagraph (A) among the appropriate Trust Funds and Account.

(3) INFORMATION NECESSARY FOR COLLECTION- In order to carry out paragraph (2)(A) with respect to an enrollee who has elected such paragraph to apply, the Secretary shall transmit to the Commissioner of Social Security–

(A) by the beginning of each year, the name, social security account number, consolidated monthly beneficiary premium described in paragraph (4) owed by such enrollee for each month during the year, and other information determined appropriate by the Secretary, in consultation with the Commissioner of Social Security; and

(B) periodically throughout the year, information to update the information previously transmitted under this paragraph for the year.

(4) CONSOLIDATED MONTHLY BENEFICIARY PREMIUM- In the case of an enrollee in an MA plan, the Secretary shall provide a mechanism for the consolidation of–

(A) the MA monthly basic beneficiary premium (if any);

(B) the MA monthly supplemental beneficiary premium (if any); and

(d) COMPUTATION OF MA AREA-SPECIFIC NON-DRUG BENCHMARK- Section 1853 (42 U.S.C. 1395w-23) is amended by adding at the end the following new subsection:

(j) COMPUTATION OF BENCHMARK AMOUNTS- For purposes of this part, the term MA area-specific non-drug monthly benchmark amount means for a month in a year–

(1) with respect to–

(A) a service area that is entirely within an MA local area, an amount equal to 1/12 of the annual MA capitation rate under section 1853(c)(1) for the area for the year, adjusted as appropriate for the purpose of risk adjustment; or

(B) a service area that includes more than one MA local area, an amount equal to the average of the amounts described in subparagraph (A) for each such local MA area, weighted by the projected number of enrollees in the plan residing in the respective local MA areas (as used by the plan for purposes of the bid and disclosed to the Secretary under section 1854(a)(6)(A)(iii)), adjusted as appropriate for the purpose of risk adjustment; or

(2) with respect to an MA region for a month in a year, the MA region-specific non-drug monthly benchmark amount, as defined in section 1858(f) for the region for the year..

(e) PAYMENT OF PLANS BASED ON BID AMOUNTS-

(1) IN GENERAL- Section 1853(a)(1) (42 U.S.C. 1395w-23(a)(1)) (42 U.S.C. 1395w-23) is amended–

(A) by redesignating subparagraph (B) as subparagraph (H); and

(B) in subparagraph (A), by striking in an amount and all that follows and inserting the following: in an amount determined as follows:

(i) PAYMENT BEFORE 2006- For years before 2006, the payment amount shall be equal to 1/12 of the annual MA capitation rate (as calculated under subsection (c)(1)) with respect to that individual for that area, adjusted under subparagraph (C) and reduced by the amount of any reduction elected under section 1854(f)(1)(E).

(ii) PAYMENT FOR ORIGINAL FEE-FOR-SERVICE BENEFITS BEGINNING WITH 2006- For years beginning with 2006, the amount specified in subparagraph (B).

(B) PAYMENT AMOUNT FOR ORIGINAL FEE-FOR-SERVICE BENEFITS BEGINNING WITH 2006-

(i) PAYMENT OF BID FOR PLANS WITH BIDS BELOW BENCHMARK- In the case of a plan for which there are average per capita monthly savings described in section 1854(b)(3)(C) or 1854(b)(4)(C), as the case may be, the amount specified in this subparagraph is equal to the unadjusted MA statutory non-drug monthly bid amount, adjusted under subparagraph (C) and (if applicable) under subparagraphs (F) and (G), plus the amount (if any) of any rebate under subparagraph (E).

(ii) PAYMENT OF BENCHMARK FOR PLANS WITH BIDS AT OR ABOVE BENCHMARK- In the case of a plan for which there are no average per capita monthly savings described in section 1854(b)(3)(C) or 1854(b)(4)(C), as the case may be, the amount specified in this subparagraph is equal to the MA area-specific non-drug monthly benchmark amount, adjusted under subparagraph (C) and (if applicable) under subparagraphs (F) and (G).

(iii) PAYMENT OF BENCHMARK FOR MSA PLANS- Notwithstanding clauses (i) and (ii), in the case of an MSA plan, the amount specified in this subparagraph is equal to the MA area-specific non-drug monthly benchmark amount, adjusted under subparagraph (C).

(C) DEMOGRAPHIC ADJUSTMENT, INCLUDING ADJUSTMENT FOR HEALTH STATUS- The Secretary shall adjust the payment amount under subparagraph (A)(i) and the amount specified under subparagraph (B)(i), (B)(ii), and (B)(iii) for such risk factors as age, disability status, gender, institutional status, and such other factors as the Secretary determines to be appropriate, including adjustment for health status under paragraph (3), so as to ensure actuarial equivalence. The Secretary may add to, modify, or substitute for such adjustment factors if such changes will improve the determination of actuarial equivalence.

(D) SEPARATE PAYMENT FOR FEDERAL DRUG SUBSIDIES- In the case of an enrollee in an MA-PD plan, the MA organization offering such plan also receives–

(i) subsidies under section 1860D-15 (other than under subsection (g)); and

(ii) reimbursement for premium and cost-sharing reductions for low-income individuals under section 1860D-14(c)(1)(C).

(E) PAYMENT OF REBATE FOR PLANS WITH BIDS BELOW BENCHMARK- In the case of a plan for which there are average per capita monthly savings described in section 1854(b)(3)(C) or 1854(b)(4)(C), as the case may be, the amount specified in this subparagraph is the amount of the monthly rebate computed under section 1854(b)(1)(C)(i) for that plan and year (as reduced by the amount of any credit provided under section 1854(b)(1)(C)(iv)).

(F) ADJUSTMENT FOR INTRA-AREA VARIATIONS-

(i) INTRA-REGIONAL VARIATIONS- In the case of payment with respect to an MA regional plan for an MA region, the Secretary shall also adjust the amounts specified under subparagraphs (B)(i) and (B)(ii) in a manner to take into account variations in MA local payment rates under this part among the different MA local areas included in such region.

(ii) INTRA-SERVICE AREA VARIATIONS- In the case of payment with respect to an MA local plan for a service area that covers more than one MA local area, the Secretary shall also adjust the amounts specified under subparagraphs (B)(i) and (B)(ii) in a manner to take into account variations in MA local payment rates under this part among the different MA local areas included in such service area.

(G) ADJUSTMENT RELATING TO RISK ADJUSTMENT- The Secretary shall adjust payments with respect to MA plans as necessary to ensure that–

(i) the sum of–

(I) the monthly payment made under subparagraph (A)(ii); and

(II) the MA monthly basic beneficiary premium under section 1854(b)(2)(A); equals

(ii) the unadjusted MA statutory non-drug monthly bid amount, adjusted in the manner described in subparagraph (C) and, for an MA regional plan, subparagraph (F)..

(f) CONFORMING CHANGES TO ANNUAL ANNOUNCEMENT PROCESS- Section 1853(b) (42 U.S.C. 1395w-23(b)(1)) is amended–

(1) by amending paragraph (1) to read as follows:

(1) ANNUAL ANNOUNCEMENTS-

(A) FOR 2005- The Secretary shall determine, and shall announce (in a manner intended to provide notice to interested parties), not later than the second Monday in May of 2004, with respect to each MA payment area, the following:

(i) MA CAPITATION RATES- The annual MA capitation rate for each MA payment area for 2005.

(ii) ADJUSTMENT FACTORS- The risk and other factors to be used in adjusting such rates under subsection (a)(1)(C) for payments for months in 2005.

(B) FOR 2006 AND SUBSEQUENT YEARS- For a year after 2005–

(i) INITIAL ANNOUNCEMENT- The Secretary shall determine, and shall announce (in a manner intended to provide notice to interested parties), not later than the first Monday in April before the calendar year concerned, with respect to each MA payment area, the following:

(I) MA CAPITATION RATES; MA LOCAL AREA BENCHMARK- The annual MA capitation rate for each MA payment area for the year.

(II) ADJUSTMENT FACTORS- The risk and other factors to be used in adjusting such rates under subsection (a)(1)(C) for payments for months in such year.

(ii) REGIONAL BENCHMARK ANNOUNCEMENT- The Secretary shall determine, and shall announce (in a manner intended to provide notice to interested parties), on a timely basis before the calendar year concerned, with respect to each MA region and each MA regional plan for which a bid was submitted under section 1854, the MA region-specific non-drug monthly benchmark amount for that region for the year involved.; and

(2) in paragraph (3), by striking in the announcement and all that follows and inserting in such announcement..

(g) OTHER AMENDMENTS RELATING TO PREMIUMS AND BID AMOUNTS-

(1) IN GENERAL- Section 1854 (42 U.S.C. 1395w-24) is amended–

(A) by amending the section heading to read as follows:

PREMIUMS AND BID AMOUNTS;

(B) in the heading of subsection (a), by inserting , BID AMOUNTS, after PREMIUMS;

(i) by inserting BEFORE 2006 after FOR COORDINATED CARE PLANS; and

(ii) by inserting for a year before 2006 after section 1851(a)(2)(A);

(D) in subsection (a)(3), by striking described and inserting for any year;

(E) in subsection (a)(4)–

(i) by inserting BEFORE 2006 after FOR PRIVATE FEE-FOR-SERVICE PLANS; and

(ii) by inserting for a year before 2006 after section 1852(a)(1)(A);

(F) in subsection (a)(5)(A), by inserting paragraphs (2) and (4) of after filed under;

(G) in subsection (a)(5)(B), by inserting after paragraph (3) or the following: , in the case of an MA private fee-for-service plan,; and

(H) in subsection (b)(1)(A) by striking and and inserting a comma and by inserting before the period at the end the following: , and, if the plan provides qualified prescription drug coverage, the MA monthly prescription drug beneficiary premium.

(2) UNIFORMITY- Section 1854(c) (42 U.S.C. 1395w-24(c)) is amended to read as follows:

(c) UNIFORM PREMIUM AND BID AMOUNTS- Except as permitted under section 1857(i), the MA monthly bid amount submitted under subsection (a)(6), the amounts of the MA monthly basic, prescription drug, and supplemental beneficiary premiums, and the MA monthly MSA premium charged under subsection (b) of an MA organization under this part may not vary among individuals enrolled in the plan..

(3) PREMIUMS- Section 1854(d)(1) (42 U.S.C. 1395w-24(d)(1)), as amended by subsection (c)(1), is amended by inserting , prescription drug, after basic.

(4) LIMITATION ON ENROLLEE LIABILITY- Section 1854(e) (42 U.S.C. 1395w-24(e)) is amended–

(A) in paragraph (1), by striking – In and inserting BEFORE 2006- For periods before 2006, in;

(B) in paragraph (2), by striking – If and insert BEFORE 2006- For periods before 2006, if;

(D) in paragraph (4)–

(i) by inserting AND FOR BASIC BENEFITS BEGINNING IN 2006 after PLANS;

(ii) in the matter before subparagraph (A), by inserting and for periods beginning with 2006, with respect to an MA plan described in section 1851(a)(2)(A) after MSA plan);

(iii) in subparagraph (A), by striking required benefits described in section 1852(a)(1) and inserting benefits under the original medicare fee-for-service program option; and

(iv) in subparagraph (B), by inserting with respect to such benefits after would be applicable.

(5) MODIFICATION OF ACR PROCESS- Section 1854(f) (42 U.S.C. 1395w-24(f)) is amended–

(A) in the heading, by inserting BEFORE 2006 after ADDITIONAL BENEFITS; and

(B) in paragraph (1)(A), by striking Each and inserting For years before 2006, each.

(h) PLAN INCENTIVES- Section 1852(j)(4) (42 U.S.C. 1395w-22(j)(4)) is amended–

(1) by inserting the organization provides assurances satisfactory to the Secretary that after unless;

(2) in clause (ii)–

(A) by striking the organization– and all that follows through (I) provides and inserting the organization provides;

(B) by striking , and and inserting a period; and

(3) by striking clause (iii).

(i) CONTINUATION OF TREATMENT OF ENROLLEES WITH END-STAGE RENAL DISEASE- Section 1853(a)(1)(H), as redesignated under subsection (d)(1)(A), is amended–

(1) by amending the second sentence to read as follows: Such rates of payment shall be actuarially equivalent to rates that would have been paid with respect to other enrollees in the MA payment area (or such other area as specified by the Secretary) under the provisions of this section as in effect before the date of the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.; and

(2) by adding at the end the following new sentence: The Secretary may apply the competitive bidding methodology provided for in this section, with appropriate adjustments to account for the risk adjustment methodology applied to end stage renal disease payments..

(j) FACILITATION OF EMPLOYER SPONSORSHIP OF MA PLANS- Section 1857(i) (42 U.S.C. 1395w-27(i)) is amended–

(1) by designating the matter following the heading as a paragraph (1) with the heading CONTRACTS WITH MA ORGANIZATIONS- and appropriate indentation; and

(2) by adding at the end the following new paragraph:

(2) EMPLOYER SPONSORED MA PLANS- To facilitate the offering of MA plans by employers, labor organizations, or the trustees of a fund established by one or more employers or labor organizations (or combination thereof) to furnish benefits to the entitys employees, former employees (or combination thereof) or members or former members (or combination thereof) of the labor organizations, the Secretary may waive or modify requirements that hinder the design of, the offering of, or the enrollment in such MA plans. Notwithstanding section 1851(g), an MA plan described in the previous sentence may restrict the enrollment of individuals under this part to individuals who are beneficiaries and participants in such plan..

(k) EXPANSION OF MEDICARE BENEFICIARY EDUCATION AND INFORMATION CAMPAIGN- Section 1857(e)(2) (42 U.S.C. 1395w-27(e)(2)) is amended–

(1) in subparagraph (A) by inserting and a PDP sponsor under part D after organization;

(2) in subparagraph (B)–

(A) by inserting and each PDP sponsor with a contract under part D after contract under this part;

(B) by inserting or sponsors after organizations; and

(3) in subparagraph (C)–

(A) by inserting and ending with fiscal year 2005 after beginning with fiscal year 2001;

(B) by inserting and for each fiscal year beginning with fiscal year 2006 an amount equal to $200,000,000, after $100,000,000,; and

(4) in subparagraph (D)–

(A) in clause (i) by inserting and section 1860D-1(c) after section 1851;

(B) in clause (ii)(III), by striking and at the end of subclause (III);

(C) in clause (ii)(IV), by striking each succeeding fiscal year. and inserting each succeeding fiscal year before fiscal year 2006; and; and

(D) in clause (ii), by adding at the end the following new subclause:

(V) the applicable portion (as defined in subparagraph (F)) of $200,000,000 in fiscal year 2006 and each succeeding fiscal year.; and

(5) by adding at the end the following new subparagraph:

(F) APPLICABLE PORTION DEFINED- In this paragraph, the term applicable portion means, for a fiscal year–

(i) with respect to MA organizations, the Secretarys estimate of the total proportion of expenditures under this title that are attributable to expenditures made under this part (including payments under part D that are made to such organizations); or

(ii) with respect to PDP sponsors, the Secretarys estimate of the total proportion of expenditures under this title that are attributable to expenditures made to such sponsors under part D..

(l) CONFORMING AMENDMENTS-

(1) PROTECTION AGAINST BENEFICIARY SELECTION- Section 1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by adding at the end the following: The Secretary shall not approve a plan of an organization if the Secretary determines that the design of the plan and its benefits are likely to substantially discourage enrollment by certain MA eligible individuals with the organization..

(2) RELATING TO REBATES-

(A) Section 1839(a)(2) (42 U.S.C. 1395r(a)(2)) is amended by striking 80 percent of any reduction elected under section 1854(f)(1)(E) and inserting any credit provided under section 1854(b)(1)(C)(ii)(III).

(B) The first sentence of section 1840(i) (42 U.S.C. 1395s(i)) is amended by inserting and to reflect any credit provided under section 1854(b)(1)(C)(iv) after section 1854(f)(1)(E).

(C) Section 1844(c) (42 U.S.C. 1395w(c)) is amended by inserting or any credits provided under section 1854(b)(1)(C)(iv) after section 1854(f)(1)(E).

(3) OTHER CONFORMING AND TECHNICAL AMENDMENTS-

(A) Section 1851(b)(1) (42 U.S.C. 1395w-21(b)(1)) is amended–

(i) in subparagraph (B), by striking a plan and inserting an MA local plan;

(ii) in subparagraph (B), by striking basic benefits described in section 1852(a)(1)(A) and inserting benefits under the original medicare fee-for-service program option; and

(iii) in subparagraph (C), by striking in a Medicare+Choice plan and inserting in an MA local plan.

(B) Section 1851(d) (42 U.S.C. 1395w-21(d)) is amended–

(i) in paragraph (3), by adding at the end the following new subparagraph:

(F) CATASTROPHIC COVERAGE AND SINGLE DEDUCTIBLE- In the case of an MA regional plan, a description of the catastrophic coverage and single deductible applicable under the plan.;

(ii) in paragraph (4)(A)(ii), by inserting , including information on the single deductible (if applicable) under section 1858(b)(1) after cost sharing;

(iii) in paragraph (4)(B)(i), by striking Medicare+Choice monthly basic and all that follows and inserting monthly amount of the premium charged to an individual.; and

(iv) by amending subparagraph (E) of subsection (d)(4) to read as follows:

(E) SUPPLEMENTAL BENEFITS- Supplemental health care benefits, including any reductions in cost-sharing under section 1852(a)(3) and the terms and conditions (including premiums) for such benefits..

(C) Section 1857(d)(1) (42 U.S.C. 1395w-27(d)(1)) is amended by striking , costs, and computation of the adjusted community rate and inserting and costs, including allowable costs under section 1858(c).

(D) Section 1851(a)(3)(B)(ii) (42 U.S.C. 1395w-21(a)(3)(B)(ii)) is amended by striking section 1851(e)(4)(A) and inserting subsection (e)(4)(A).

(E) Section 1851(f)(1) (42 U.S.C. 1395w-21(f)(1)) is amended by striking subsection (e)(1)(A) and inserting subsection (e)(1).

SEC. 223. EFFECTIVE DATE.

(a) EFFECTIVE DATE- The amendments made by this subtitle shall apply with respect to plan years beginning on or after January 1, 2006.

(b) ISSUANCE OF REGULATIONS- The Secretary shall revise the regulations previously promulgated to carry out part C of title XVIII of the Social Security Act to carry out the provisions of this Act.

Subtitle D–Additional Reforms

SEC. 231. SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS.

(a) TREATMENT AS COORDINATED CARE PLAN- Section 1851(a)(2)(A) (42 U.S.C. 1395w-21(a)(2)(A)), as amended by section 221(a), is amended by adding at the end the following new clause:

(ii) SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS- Specialized MA plans for special needs individuals (as defined in section 1859(b)(6)) may be any type of coordinated care plan..

(b) SPECIALIZED MA PLAN FOR SPECIAL NEEDS INDIVIDUALS DEFINED- Section 1859(b) (42 U.S.C. 1395w-29(b)), as amended by section 221(b), is amended by adding at the end the following new paragraph:

(6) SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS-

(A) IN GENERAL- The term specialized MA plan for special needs individuals means an MA plan that exclusively serves special needs individuals (as defined in subparagraph (B)).

(B) SPECIAL NEEDS INDIVIDUAL- The term special needs individual means an MA eligible individual who–

(i) is institutionalized (as defined by the Secretary);

(ii) is entitled to medical assistance under a State plan under title XIX; or

(iii) meets such requirements as the Secretary may determine would benefit from enrollment in such a specialized MA plan described in subparagraph (A) for individuals with severe or disabling chronic conditions.

The Secretary may waive application of section 1851(a)(3)(B) in the case of an individual described in clause (i), (ii), or (iii) of this subparagraph and may apply rules similar to the rules of section 1894(c)(4) for continued eligibility of special needs individuals..

(c) RESTRICTION ON ENROLLMENT PERMITTED- Section 1859 (42 U.S.C. 1395w-29) is amended by adding at the end the following new subsection:

(f) RESTRICTION ON ENROLLMENT FOR SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS- In the case of a specialized MA plan for special needs individuals (as defined in subsection (b)(6)), notwithstanding any other provision of this part and in accordance with regulations of the Secretary and for periods before January 1, 2009, the plan may restrict the enrollment of individuals under the plan to individuals who are within one or more classes of special needs individuals..

(d) AUTHORITY TO DESIGNATE OTHER PLANS AS SPECIALIZED MA PLANS- In promulgating regulations to carry out section 1851(a)(2)(A)(ii) of the Social Security Act (as added by subsection (a)) and section 1859(b)(6) of such Act (as added by subsection (b)), the Secretary may provide (notwithstanding section 1859(b)(6)(A) of such Act) for the offering of specialized MA plans for special needs individuals by MA plans that disproportionately serve special needs individuals.

(e) REPORT TO CONGRESS- Not later than December 31, 2007, the Secretary shall submit to Congress a report that assesses the impact of specialized MA plans for special needs individuals on the cost and quality of services provided to enrollees. Such report shall include an assessment of the costs and savings to the medicare program as a result of amendments made by subsections (a), (b), and (c).

(f) EFFECTIVE DATES-

(1) IN GENERAL- The amendments made by subsections (a), (b), and (c) shall take effect upon the date of the enactment of this Act.

(2) DEADLINE FOR ISSUANCE OF REQUIREMENTS FOR SPECIAL NEEDS INDIVIDUALS; TRANSITION- No later than 1 year after the date of the enactment of this Act, the Secretary shall issue final regulations to establish requirements for special needs individuals under section 1859(b)(6)(B)(iii) of the Social Security Act, as added by subsection (b).

SEC. 232. AVOIDING DUPLICATIVE STATE REGULATION.

(a) IN GENERAL- Section 1856(b)(3) (42 U.S.C. 1395w-26(b)(3)) is amended to read as follows:

(3) RELATION TO STATE LAWS- The standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations under this part..

(b) CONFORMING AMENDMENT- Section 1854(g) (42 U.S.C. 1395w-24(g)) is amended by inserting or premiums paid to such organizations under this part after section 1853.

SEC. 233. MEDICARE MSAS.

(a) EXEMPTION FROM REPORTING REQUIREMENT-

(1) IN GENERAL- Section 1852(e)(1) (42 U.S.C. 1395w-22(e)(1)) is amended by inserting (other than MSA plans) after plans.

(2) CONFORMING AMENDMENTS- Section 1852 (42 U.S.C. 1395w-22) is amended–

(A) in subsection (c)(1)(I), by inserting before the period at the end the following: , if required under such section;

(B) in subsection (e)(2)(A), by striking , a non-network MSA plan,; and

(3) EFFECTIVE DATE- The amendments made by this subsection shall apply on and after the date of the enactment of this Act but shall not apply to contract years beginning on or after January 1, 2006.

(b) MAKING PROGRAM PERMANENT AND ELIMINATING CAP- Section 1851(b)(4) (42 U.S.C. 1395w-21(b)(4)) is amended–

(1) in the heading, by striking ON A DEMONSTRATION BASIS;

(2) by striking the first sentence of subparagraph (A); and

(3) by striking the second sentence of subparagraph (C).

(c) APPLYING LIMITATIONS ON BALANCE BILLING- Section 1852(k)(1) (42 U.S.C. 1395w-22(k)(1)) is amended by inserting or with an organization offering an MSA plan after section 1851(a)(2)(A).

(d) ADDITIONAL AMENDMENT- Section 1851(e)(5)(A) (42 U.S.C. 1395w-21(e)(5)(A)) is amended–

(1) by adding or at the end of clause (i);

(2) by striking , or at the end of clause (ii) and inserting a semicolon; and

(3) by striking clause (iii).

SEC. 234. EXTENSION OF REASONABLE COST CONTRACTS.

Subparagraph (C) of section 1876(h)(5) (42 U.S.C. 1395mm(h)(5)) is amended to read as follows:

(C)(i) Subject to clause (ii), a reasonable cost reimbursement contract under this subsection may be extended or renewed indefinitely.

(ii) For any period beginning on or after January 1, 2008, a reasonable cost reimbursement contract under this subsection may not be extended or renewed for a service area insofar as such area during the entire previous year was within the service area of–

(I) 2 or more MA regional plans described in clause (iii); or

(II) 2 or more MA local plans described in clause (iii).

(iii) A plan described in this clause for a year for a service area is a plan described in section 1851(a)(2)(A)(i) if the service area for the year meets the following minimum enrollment requirements:

(I) With respect to any portion of the area involved that is within a Metropolitan Statistical Area with a population of more than 250,000 and counties contiguous to such Metropolitan Statistical Area, 5,000 individuals.

(II) With respect to any other portion of such area, 1,500 individuals..

SEC. 235. TWO-YEAR EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION PROJECTS.

The last sentence of section 9215(a) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (42 U.S.C. 1395b-1 note), as amended by section 6135 of the Omnibus Budget Reconciliation Act of 1989, section 13557 of the Omnibus Budget Reconciliation Act of 1993, section 4017 of BBA, section 534 of BBRA (113 Stat. 1501A-390), and section 633 of BIPA, is amended by striking December 31, 2004 and inserting December 31, 2006.

SEC. 236. PAYMENT BY PACE PROVIDERS FOR MEDICARE AND MEDICAID SERVICES FURNISHED BY NONCONTRACT PROVIDERS.

(a) MEDICARE SERVICES-

(1) MEDICARE SERVICES FURNISHED BY PROVIDERS OF SERVICES- Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended–

(A) by striking part C or and inserting part C, with a PACE provider under section 1894 or 1934, or;

(B) by striking (i);

(D) by inserting (or, in the case of a PACE provider, contract or other agreement) after have a contract; and

(E) by striking members of the organization and inserting members of the organization or PACE program eligible individuals enrolled with the PACE provider,.

(2) MEDICARE SERVICES FURNISHED BY PHYSICIANS AND OTHER ENTITIES- Section 1894(b) (42 U.S.C. 1395eee(b)) is amended by adding at the end the following new paragraphs:

(3) TREATMENT OF MEDICARE SERVICES FURNISHED BY NONCONTRACT PHYSICIANS AND OTHER ENTITIES-

(A) APPLICATION OF MEDICARE ADVANTAGE REQUIREMENT WITH RESPECT TO MEDICARE SERVICES FURNISHED BY NONCONTRACT PHYSICIANS AND OTHER ENTITIES- Section 1852(k)(1) (relating to limitations on balance billing against MA organizations for noncontract physicians and other entities with respect to services covered under this title) shall apply to PACE providers, PACE program eligible individuals enrolled with such PACE providers, and physicians and other entities that do not have a contract or other agreement establishing payment amounts for services furnished to such an individual in the same manner as such section applies to MA organizations, individuals enrolled with such organizations, and physicians and other entities referred to in such section.

(B) REFERENCE TO RELATED PROVISION FOR NONCONTRACT PROVIDERS OF SERVICES- For the provision relating to limitations on balance billing against PACE providers for services covered under this title furnished by noncontract providers of services, see section 1866(a)(1)(O).

(4) REFERENCE TO RELATED PROVISION FOR SERVICES COVERED UNDER TITLE XIX BUT NOT UNDER THIS TITLE- For provisions relating to limitations on payments to providers participating under the State plan under title XIX that do not have a contract or other agreement with a PACE provider establishing payment amounts for services covered under such plan (but not under this title) when such services are furnished to enrollees of that PACE provider, see section 1902(a)(66)..

(b) MEDICAID SERVICES-

(1) REQUIREMENT UNDER STATE PLAN- Section 1902(a) (42 U.S.C. 1396a(a)), as amended by section 103(a), is amended–

(A) in paragraph (65), by striking and at the end;

(B) in paragraph (66), by striking the period at the end and inserting ; and; and

(67) provide, with respect to services covered under the State plan (but not under title XVIII) that are furnished to a PACE program eligible individual enrolled with a PACE provider by a provider participating under the State plan that does not have a contract or other agreement with the PACE provider that establishes payment amounts for such services, that such participating provider may not require the PACE provider to pay the participating provider an amount greater than the amount that would otherwise be payable for the service to the participating provider under the State plan for the State where the PACE provider is located (in accordance with regulations issued by the Secretary)..

(2) APPLICATION UNDER MEDICAID- Section 1934(b) (42 U.S.C. 1396u-4(b)) is amended by adding at the end the following new paragraphs:

(3) TREATMENT OF MEDICARE SERVICES FURNISHED BY NONCONTRACT PHYSICIANS AND OTHER ENTITIES-

(A) APPLICATION OF MEDICARE ADVANTAGE REQUIREMENT WITH RESPECT TO MEDICARE SERVICES FURNISHED BY NONCONTRACT PHYSICIANS AND OTHER ENTITIES- Section 1852(k)(1) (relating to limitations on balance billing against MA organizations for noncontract physicians and other entities with respect to services covered under title XVIII) shall apply to PACE providers, PACE program eligible individuals enrolled with such PACE providers, and physicians and other entities that do not have a contract or other agreement establishing payment amounts for services furnished to such an individual in the same manner as such section applies to MA organizations, individuals enrolled with such organizations, and physicians and other entities referred to in such section.

(B) REFERENCE TO RELATED PROVISION FOR NONCONTRACT PROVIDERS OF SERVICES- For the provision relating to limitations on balance billing against PACE providers for services covered under title XVIII furnished by noncontract providers of services, see section 1866(a)(1)(O).

(4) REFERENCE TO RELATED PROVISION FOR SERVICES COVERED UNDER THIS TITLE BUT NOT UNDER TITLE XVIII- For provisions relating to limitations on payments to providers participating under the State plan under this title that do not have a contract or other agreement with a PACE provider establishing payment amounts for services covered under such plan (but not under title XVIII) when such services are furnished to enrollees of that PACE provider, see section 1902(a)(67)..

SEC. 237. REIMBURSEMENT FOR FEDERALLY QUALIFIED HEALTH CENTERS PROVIDING SERVICES UNDER MA PLANS.

(a) REIMBURSEMENT- Section 1833(a)(3) (42 U.S.C. 1395l(a)(3)) is amended to read as follows:

(3) in the case of services described in section 1832(a)(2)(D)–

(A) except as provided in subparagraph (B), the costs which are reasonable and related to the cost of furnishing such services or which are based on such other tests of reasonableness as the Secretary may prescribe in regulations, including those authorized under section 1861(v)(1)(A), less the amount a provider may charge as described in clause (ii) of section 1866(a)(2)(A), but in no case may the payment for such services (other than for items and services described in section 1861(s)(10)(A)) exceed 80 percent of such costs; or

(B) with respect to the services described in clause (ii) of section 1832(a)(2)(D) that are furnished to an individual enrolled with a MA plan under part C pursuant to a written agreement described in section 1853(a)(4), the amount (if any) by which–

(i) the amount of payment that would have otherwise been provided under subparagraph (A) (calculated as if 100 percent were substituted for 80 percent in such subparagraph) for such services if the individual had not been so enrolled; exceeds

(ii) the amount of the payments received under such written agreement for such services (not including any financial incentives provided for in such agreement such as risk pool payments, bonuses, or withholds),

less the amount the federally qualified health center may charge as described in section 1857(e)(3)(B);.

(b) CONTINUATION OF MONTHLY PAYMENTS-

(1) IN GENERAL- Section 1853(a) (42 U.S.C. 1395w-23(a)) is amended by adding at the end the following new paragraph:

(4) PAYMENT RULE FOR FEDERALLY QUALIFIED HEALTH CENTER SERVICES- If an individual who is enrolled with an MA plan under this part receives a service from a federally qualified health center that has a written agreement with the MA organization that offers such plan for providing such a service (including any agreement required under section 1857(e)(3))–

(A) the Secretary shall pay the amount determined under section 1833(a)(3)(B) directly to the federally qualified health center not less frequently than quarterly; and

(B) the Secretary shall not reduce the amount of the monthly payments under this subsection as a result of the application of subparagraph (A)..

(2) CONFORMING AMENDMENTS-

(A) Section 1851(i) (42 U.S.C. 1395w-21(i)) is amended–

(i) in paragraph (1), by inserting 1853(a)(4), after Subject to sections 1852(a)(5),; and

(ii) in paragraph (2), by inserting 1853(a)(4), after Subject to sections.

(B) Section 1853(c)(5) is amended by striking subsections (a)(3)(C)(iii) and (i) and inserting subsections (a)(3)(C)(iii), (a)(4), and (i).

(c) ADDITIONAL CONTRACT REQUIREMENTS- Section 1857(e) (42 U.S.C. 1395w-27(e)) is amended by adding at the end the following new paragraph:

(3) AGREEMENTS WITH FEDERALLY QUALIFIED HEALTH CENTERS-

(A) PAYMENT LEVELS AND AMOUNTS- A contract under this section with an MA organization shall require the organization to provide, in any written agreement described in section 1853(a)(4) between the organization and a federally qualified health center, for a level and amount of payment to the federally qualified health center for services provided by such health center that is not less than the level and amount of payment that the plan would make for such services if the services had been furnished by a entity providing similar services that was not a federally qualified health center.

(B) COST-SHARING- Under the written agreement referred to in subparagraph (A), a federally qualified health center must accept the payment amount referred to in such subparagraph plus the Federal payment provided for in section 1833(a)(3)(B) as payment in full for services covered by the agreement, except that such a health center may collect any amount of cost-sharing permitted under the contract under this section, so long as the amounts of any deductible, coinsurance, or copayment comply with the requirements under section 1854(e)..

(d) SAFE HARBOR- Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)), as amended by section 101(f)(2), is amended–

(1) in subparagraph (F), by striking and after the semicolon at the end;

(2) in subparagraph (G), by striking the period at the end and inserting ; and; and

(3) by adding at the end the following new subparagraph:

(H) any remuneration between a federally qualified health center (or an entity controlled by such a health center) and an MA organization pursuant to a written agreement described in section 1853(a)(4)..

(e) EFFECTIVE DATE- The amendments made by this section shall apply to services provided on or after January 1, 2006, and contract years beginning on or after such date.

SEC. 238. INSTITUTE OF MEDICINE EVALUATION AND REPORT ON HEALTH CARE PERFORMANCE MEASURES.

(a) EVALUATION-

(1) IN GENERAL- Not later than the date that is 2 months after the date of the enactment of this Act, the Secretary shall enter into an arrangement under which the Institute of Medicine of the National Academy of Sciences (in this section referred to as the Institute) shall conduct an evaluation of leading health care performance measures in the public and private sectors and options to implement policies that align performance with payment under the medicare program under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.).

(2) SPECIFIC MATTERS EVALUATED- In conducting the evaluation under paragraph (1), the Institute shall–

(A) catalogue, review, and evaluate the validity of leading health care performance measures;

(B) catalogue and evaluate the success and utility of alternative performance incentive programs in public or private sector settings; and

(C) identify and prioritize options to implement policies that align performance with payment under the medicare program that indicate–

(i) the performance measurement set to be used and how that measurement set will be updated;

(ii) the payment policy that will reward performance; and

(iii) the key implementation issues (such as data and information technology requirements) that must be addressed.

(3) SCOPE OF HEALTH CARE PERFORMANCE MEASURES- The health care performance measures described in paragraph (2)(A) shall encompass a variety of perspectives, including physicians, hospitals, other health care providers, health plans, purchasers, and patients.

(4) CONSULTATION WITH MEDPAC- In evaluating the matters described in paragraph (2)(C), the Institute shall consult with the Medicare Payment Advisory Commission established under section 1805 of the Social Security Act (42 U.S.C. 1395b-6).

(b) REPORT- Not later than the date that is 18 months after the date of enactment of this Act, the Institute shall submit to the Secretary and appropriate committees of jurisdiction of the Senate and House of Representatives a report on the evaluation conducted under subsection (a)(1) describing the findings of such evaluation and recommendations for an overall strategy and approach for aligning payment with performance, including options for updating performance measures, in the original medicare fee-for-service program under parts A and B of title XVIII of the Social Security Act, the Medicare Advantage program under part C of such title, and any other programs under such title XVIII.

(c) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated such sums as may be necessary for purposes of conducting the evaluation and preparing the report required by this section.

Subtitle E–Comparative Cost Adjustment (CCA) Program

SEC. 241. COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM.

(a) IN GENERAL- Part C of title XVIII is amended by adding at the end the following new section:

COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM

SEC. 1860C-1. (a) ESTABLISHMENT OF PROGRAM-

(1) IN GENERAL- The Secretary shall establish a program under this section (in this section referred to as the CCA program) for the application of comparative cost adjustment in CCA areas selected under this section.

(2) DURATION- The CCA program shall begin January 1, 2010, and shall extend over a period of 6 years, and end on December 31, 2015.

(3) REPORT- Upon the completion of the CCA program, the Secretary shall submit a report to Congress. Such report shall include the following, with respect to both this part and the original medicare fee-for-service program:

(A) An evaluation of the financial impact of the CCA program.

(B) An evaluation of changes in access to physicians and other health care providers.

(D) Recommendations regarding any extension or expansion of the CCA program.

(b) REQUIREMENTS FOR SELECTION OF CCA AREAS-

(1) CCA AREA DEFINED-

(A) IN GENERAL- For purposes of this section, the term CCA area means an MSA that meets the requirements of paragraph (2) and is selected by the Secretary under subsection (c).

(B) MSA DEFINED- For purposes of this section, the term MSA means a Metropolitan Statistical Area (or such similar area as the Secretary recognizes).

(2) REQUIREMENTS FOR CCA AREAS- The requirements of this paragraph for an MSA to be a CCA area are as follows:

(A) MA ENROLLMENT REQUIREMENT- For the reference month (as defined under section 1858(f)(4)(B)) with respect to 2010, at least 25 percent of the total number of MA eligible individuals who reside in the MSA were enrolled in an MA local plan described in section 1851(a)(2)(A)(i).

(B) 2 PLAN REQUIREMENT- There will be offered in the MSA during the annual, coordinated election period under section 1851(e)(3)(B) before the beginning of 2010 at least 2 MA local plans described in section 1851(a)(2)(A)(i) (in addition to the fee-for-service program under parts A and B), each offered by a different MA organization and each of which met the minimum enrollment requirements of paragraph (1) of section 1857(b) (as applied without regard to paragraph (3) thereof) as of the reference month.

(1) GENERAL SELECTION CRITERIA- The Secretary shall select CCA areas from among those MSAs qualifying under subsection (b) in a manner that–

(A) seeks to maximize the opportunity to test the application of comparative cost adjustment under this title;

(B) does not seek to maximize the number of MA eligible individuals who reside in such areas; and

(2) SELECTION CRITERIA- With respect to the selection of MSAs that qualify to be CCA areas under subsection (b), the following rules apply, to the maximum extent feasible:

(A) MAXIMUM NUMBER- The number of such MSAs selected may not exceed the lesser of (i) 6, or (ii) 25 percent of the number of MSAs that meet the requirement of subsection (b)(2)(A).

(B) ONE OF 4 LARGEST AREAS BY POPULATION- At least one such qualifying MSA shall be selected from among the 4 such qualifying MSAs with the largest total population of MA eligible individuals.

(C) ONE OF 4 AREAS WITH LOWEST POPULATION DENSITY- At least one such qualifying MSA shall be selected from among the 4 such qualifying MSAs with the lowest population density (as measured by residents per square mile or similar measure of density).

(D) MULTISTATE AREA- At least one such qualifying MSA shall be selected that includes a multi-State area. Such an MSA may be an MSA described in subparagraph (B) or (C).

(E) LIMITATION WITHIN SAME GEOGRAPHIC REGION- No more than 2 such MSAs shall be selected that are, in whole or in part, within the same geographic region (as specified by the Secretary) of the United States.

(F) PRIORITY TO AREAS NOT WITHIN CERTAIN DEMONSTRATION PROJECTS- Priority shall be provided for those qualifying MSAs that do not have a demonstration project in effect as of the date of the enactment of this section for medicare preferred provider organization plans under this part.

(d) APPLICATION OF COMPARATIVE COST ADJUSTMENT-

(1) IN GENERAL- In the case of a CCA area for a year–

(A) for purposes of applying this part with respect to payment for MA local plans, any reference to an MA area-specific non-drug monthly benchmark amount shall be treated as a reference to such benchmark computed as if the CCA area-specific non-drug monthly benchmark amount (as defined in subsection (e)(1)) were substituted for the amount described in section 1853(j)(1)(A) for the CCA area and year involved, as phased in under paragraph (3); and

(B) with respect to months in the year for individuals residing in the CCA area who are not enrolled in an MA plan, the amount of the monthly premium under section 1839 is subject to adjustment under subsection (f).

(2) EXCLUSION OF MA LOCAL AREAS WITH FEWER THAN 2 ORGANIZATIONS OFFERING MA PLANS-

(A) IN GENERAL- In no case shall an MA local area that is within an MSA be included as part of a CCA area unless for 2010 (and, except as provided in subparagraph (B), for a subsequent year) there is offered in each part of such MA local area at least 2 MA local plans described in section 1851(a)(2)(A)(i) each of which is offered by a different MA organization.

(B) CONTINUATION- If an MA local area meets the requirement of subparagraph (A) and is included in a CCA area for 2010, such local area shall continue to be included in such CCA area for a subsequent year notwithstanding that it no longer meets such requirement so long as there is at least one MA local plan described in section 1851(a)(2)(A)(i) that is offered in such local area.

(3) PHASE-IN OF CCA BENCHMARK-

(A) IN GENERAL- In applying this section for a year before 2013, paragraph (1)(A) shall be applied as if the phase-in fraction under subparagraph (B) of the CCA non-drug monthly benchmark amount for the year were substituted for such fraction of the MA area-specific non-drug monthly benchmark amount.

(B) PHASE-IN FRACTION- The phase-in fraction under this subparagraph is–

(i) for 2010 1/4 ; and

(ii) for a subsequent year is the phase-in fraction under this subparagraph for the previous year increased by 1/4 , but in no case more than 1.

(e) COMPUTATION OF CCA BENCHMARK AMOUNT-

(1) CCA NON-DRUG MONTHLY BENCHMARK AMOUNT- For purposes of this section, the term CCA non-drug monthly benchmark amount means, with respect to a CCA area for a month in a year, the sum of the 2 components described in paragraph (2) for the area and year. The Secretary shall compute such benchmark amount for each such CCA area before the beginning of each annual, coordinated election period under section 1851(e)(3)(B) for each year (beginning with 2010) in which the CCA area is so selected.

(2) 2 COMPONENTS- For purposes of paragraph (1), the 2 components described in this paragraph for a CCA area and a year are the following:

(A) MA LOCAL COMPONENT- The product of the following:

(i) WEIGHTED AVERAGE OF MEDICARE ADVANTAGE PLAN BIDS IN AREA- The weighted average of the plan bids for the area and year (as determined under paragraph (3)(A)).

(ii) NON-FFS MARKET SHARE- One minus the fee-for-service market share percentage, determined under paragraph (4) for the area and year.

(B) FEE-FOR-SERVICE COMPONENT- The product of the following:

(i) FEE-FOR-SERVICE AREA-SPECIFIC NON-DRUG AMOUNT- The fee-for-service area-specific non-drug amount (as defined in paragraph (5)) for the area and year.

(ii) FEE-FOR-SERVICE MARKET SHARE- The fee-for-service market share percentage, determined under paragraph (4) for the area and year.

(3) DETERMINATION OF WEIGHTED AVERAGE MA BIDS FOR A CCA AREA-

(A) IN GENERAL- For purposes of paragraph (2)(A)(i), the weighted average of plan bids for a CCA area and a year is, subject to subparagraph (D), the sum of the following products for MA local plans described in subparagraph (C) in the area and year:

(i) MONTHLY MEDICARE ADVANTAGE STATUTORY NON-DRUG BID AMOUNT- The accepted unadjusted MA statutory non-drug monthly bid amount.

(ii) PLANS SHARE OF MEDICARE ADVANTAGE ENROLLMENT IN AREA- The number of individuals described in subparagraph (B), divided by the total number of such individuals for all MA plans described in subparagraph (C) for that area and year.

(B) COUNTING OF INDIVIDUALS- The Secretary shall count, for each MA local plan described in subparagraph (C) for an area and year, the number of individuals who reside in the area and who were enrolled under such plan under this part during the reference month for that year.

(C) EXCLUSION OF PLANS NOT OFFERED IN PREVIOUS YEAR- For an area and year, the MA local plans described in this subparagraph are MA local plans described in section 1851(a)(2)(A)(i) that are offered in the area and year and were offered in the CCA area in the reference month.

(D) COMPUTATION OF WEIGHTED AVERAGE OF PLAN BIDS- In calculating the weighted average of plan bids for a CCA area under subparagraph (A)–

(i) in the case of an MA local plan that has a service area only part of which is within such CCA area, the MA organization offering such plan shall submit a separate bid for such plan for the portion within such CCA area; and

(ii) the Secretary shall adjust such separate bid (or, in the case of an MA local plan that has a service area entirely within such CCA area, the plan bid) as may be necessary to take into account differences between the service area of such plan within the CCA area and the entire CCA area and the distribution of plan enrollees of all MA local plans offered within the CCA area.

(4) COMPUTATION OF FEE-FOR-SERVICE MARKET SHARE PERCENTAGE- The Secretary shall determine, for a year and a CCA area, the proportion (in this subsection referred to as the fee-for-service market share percentage) equal to–

(A) the total number of MA eligible individuals residing in such area who during the reference month for the year were not enrolled in any MA plan; divided by

(B) the sum of such number and the total number of MA eligible individuals residing in such area who during such reference month were enrolled in an MA local plan described in section 1851(a)(2)(A)(i),

or, if greater, such proportion determined for individuals nationally.

(5) FEE-FOR-SERVICE AREA-SPECIFIC NON-DRUG AMOUNT-

(A) IN GENERAL- For purposes of paragraph (2)(B)(i) and subsection (f)(2)(A), subject to subparagraph (C), the term fee-for-service area-specific non-drug amount means, for a CCA area and a year, the adjusted average per capita cost for such area and year involved, determined under section 1876(a)(4) and adjusted as appropriate for the purpose of risk adjustment for benefits under the original medicare fee-for-service program option for individuals entitled to benefits under part A and enrolled under part B who are not enrolled in an MA plan for the year, but adjusted to exclude costs attributable to payments under section 1886(h).

(B) USE OF FULL RISK ADJUSTMENT TO STANDARDIZE FEE-FOR-SERVICE COSTS TO TYPICAL BENEFICIARY- In determining the adjusted average per capita cost for an area and year under subparagraph (A), such costs shall be adjusted to fully take into account the demographic and health status risk factors established under section 1853(a)(1)(A)(iv) so that such per capita costs reflect the average costs for a typical beneficiary residing in the CCA area.

(C) INCLUSION OF COSTS OF VA AND DOD MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES- In determining the adjusted average per capita cost under subparagraph (A) for a year, such cost shall be adjusted to include the Secretarys estimate, on a per capita basis, of the amount of additional payments that would have been made in the area involved under this title if individuals entitled to benefits under this title had not received services from facilities of the Department of Veterans Affairs or the Department of Defense.

(f) PREMIUM ADJUSTMENT-

(1) APPLICATION-

(A) IN GENERAL- Except as provided in subparagraph (B), in the case of an individual who is enrolled under part B, who resides in a CCA area, and who is not enrolled in an MA plan under this part, the monthly premium otherwise applied under part B (determined without regard to subsections (b), (f), and (i) of section 1839 or any adjustment under this subsection) shall be adjusted in accordance with paragraph (2), but only in the case of premiums for months during the period in which the CCA program under this section for such area is in effect.

(B) NO PREMIUM ADJUSTMENT FOR SUBSIDY ELIGIBLE BENEFICIARIES- No premium adjustment shall be made under this subsection for a premium for a month if the individual is determined to be a subsidy eligible individual (as defined in section 1860D-14(a)(3)(A)) for the month.

(2) AMOUNT OF ADJUSTMENT-

(A) IN GENERAL- Under this paragraph, subject to the exemption under paragraph (1)(B) and the limitation under subparagraph (B), if the fee-for-service area-specific non-drug amount (as defined in section (e)(5)) for a CCA area in which an individual resides for a month–

(i) does not exceed the CCA non-drug monthly benchmark amount (as determined under subsection (e)(1)) for such area and month, the amount of the premium for the individual for the month shall be reduced, by an amount equal to 75 percent of the amount by which such CCA benchmark exceeds such fee-for-service area-specific non-drug amount; or

(ii) exceeds such CCA non-drug benchmark, the amount of the premium for the individual for the month shall be adjusted to ensure, that–

(I) the sum of the amount of the adjusted premium and the CCA non-drug benchmark for the area; is equal to

(II) the sum of the unadjusted premium plus the amount of such fee-for-service area-specific non-drug amount for the area.

(B) LIMITATION- In no case shall the actual amount of an adjustment under subparagraph (A) for an area and month in a year result in an adjustment that exceeds the maximum adjustment permitted under subparagraph (C) for the area and year, or, if less, the maximum annual adjustment permitted under subparagraph (D) for the area and year.

(C) PHASE-IN OF ADJUSTMENT- The amount of an adjustment under subparagraph (A) for a CCA area and year may not exceed the product of the phase-in fraction for the year under subsection (d)(3)(B) multiplied by the amount of the adjustment otherwise computed under subparagraph (A) for the area and year, determined without regard to this subparagraph and subparagraph (D).

(D) 5-PERCENT LIMITATION ON ADJUSTMENT- The amount of the adjustment under this subsection for months in a year shall not exceed 5 percent of the amount of the monthly premium amount determined for months in the year under section 1839 without regard to subsections (b), (f), and (i) of such section and this subsection..

(b) CONFORMING AMENDMENTS-

(1) MA LOCAL PLANS-

(A) Section 1853(j)(1)(A) (42 U.S.C. 1395w-23(j)(1)(A)), as added by section 222(d), is amended by inserting subject to section 1860C-1(d)(2)(A), after within an MA local area,.

(B) Section 1853(b)(1)(B), as amended by section 222(f)(1), is amended by adding at the end the following new clause:

(iii) BENCHMARK ANNOUNCEMENT FOR CCA LOCAL AREAS- The Secretary shall determine, and shall announce (in a manner intended to provide notice to interested parties), on a timely basis before the calendar year concerned, with respect to each CCA area (as defined in section 1860C-1(b)(1)(A)), the CCA non-drug monthly benchmark amount under section 1860C-1(e)(1) for that area for the year involved..

(2) PREMIUM ADJUSTMENT-

(A) Section 1839 (42 U.S.C. 1395r) is amended by adding at the end the following new subsection:

(h) POTENTIAL APPLICATION OF COMPARATIVE COST ADJUSTMENT IN CCA AREAS-

(1) IN GENERAL- Certain individuals who are residing in a CCA area under section 1860C-1 who are not enrolled in an MA plan under part C may be subject to a premium adjustment under subsection (f) of such section for months in which the CCA program under such section is in effect in such area.

(2) NO EFFECT ON LATE ENROLLMENT PENALTY OR INCOME-RELATED ADJUSTMENT IN SUBSIDIES- Nothing in this subsection or section 1860C-1(f) shall be construed as affecting the amount of any premium adjustment under subsection (b) or (i). Subsection (f) shall be applied without regard to any premium adjustment referred to in paragraph (1).

(3) IMPLEMENTATION- In order to carry out a premium adjustment under this subsection and section 1860C-1(f) (insofar as it is effected through the manner of collection of premiums under section 1840(a)), the Secretary shall transmit to the Commissioner of Social Security–

(A) at the beginning of each year, the name, social security account number, and the amount of the premium adjustment (if any) for each individual enrolled under this part for each month during the year; and

(B) periodically throughout the year, information to update the information previously transmitted under this paragraph for the year..

(B) Section 1844(c) (42 U.S.C. 1395w(c)) is amended by inserting and without regard to any premium adjustment effected under sections 1839(h) and 1860C-1(f) before the period at the end.

(c) NO CHANGE IN MEDICARES DEFINED BENEFIT PACKAGE- Nothing in this part (or the amendments made by this part) shall be construed as changing the entitlement to defined benefits under parts A and B of title XVIII of the Social Security Act.