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1 (c) EVALUATION.—Such study shall, within the con-
2 text of the United States health care marketplace, evalu-
3 ate and consider the following:
4 (1) The effect of the adjustment factors on the
5 level and distribution of the health care workforce
6 and resources, including—
7 (A) recruitment and retention that takes
8 into account workforce mobility between urban
9 and rural areas;
10 (B) ability of hospitals and other facilities
11 to maintain an adequate and skilled workforce;
12 and
13 (C) patient access to providers and needed
14 medical technologies.
15 (2) The effect of the adjustment factors on pop-
16 ulation health and quality of care.
17 (3) The effect of the adjustment factors on the
18 ability of providers to furnish efficient, high value
19 care.
20 (d) REPORT.—The contract under subsection (a)
21 shall provide for the Institute of Medicine to submit, not
22 later than one year after the date of the enactment of this
23 Act, to the Secretary and the Congress a report containing
24 results and recommendations of the study conducted
25 under this section.

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1 (e) FUNDING.—There are authorized to be appro-
2 priated to carry out this section such sums as may be nec-
3 essary.
4 SEC. 1158. REVISION OF MEDICARE PAYMENT SYSTEMS TO

5 ADDRESS GEOGRAPHIC INEQUITIES.

6 (a) IN GENERAL.—The Secretary of Health and

7 Human Services, taking into account the recommenda-
8 tions made in the report under section 1157(d), shall in-
9 clude in the proposed rules published to implement
10 changes to payment systems for physicians and hospitals
11 under sections 1848(e) and 1886(d)(3)(E), respectively, of
12 the Social Security Act, proposals to revise geographic ad-
13 justment factors for such payment systems for services
14 furnished under the Medicare program. Such proposed
15 rules shall be published in the rulemaking period imme-
16 diately following submission of the report under section
17 1157(d).
18 (b) PAYMENT ADJUSTMENTS.—
19 (1) FUNDING FOR IMPROVEMENTS.—In making
20 any changes to the geographic adjustment factors in
21 accordance with subsection (a), the Secretary shall
22 use funds made available for such purposes under
23 subsection (c).
24 (2) ENSURING FAIRNESS.—In carrying out this
25 subsection, the Secretary shall not change payment

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1 rates to be less than they would have been had this
2 section not been enacted.
3 (c) FUNDING.—Amounts in the Medicare Improve-
4 ment Fund under section 1898 of the Social Security Act
5 (42 U.S.C. 1395iii), as amended by section 1146, shall
6 be available to the Secretary to make changes to the geo-
7 graphic adjustments factors established under sections
8 1848(e) and 1886(d)(3)(E) of the Social Security Act. For
9 such purpose, such funds shall be available for expenditure
10 for services furnished before January 1, 2014, and shall
11 not exceed the total amounts available under such Fund
12 for such period. No more than one-half of such amounts
13 shall be available for expenditure for services furnished in
14 any one payment year.
15 Subtitle D—Medicare Advantage
16 Reforms
17 PART 1—PAYMENT AND ADMINISTRATION

18 SEC. 1161. PHASE-IN OF PAYMENT BASED ON FEE-FOR-

19 SERVICE COSTS.

20 Section 1853 of the Social Security Act (42 U.S.C.

21 1395w–23) is amended—
22 (1) in subsection (j)(1)(A)—
23 (A) by striking ‘‘beginning with 2007’’ and
24 inserting ‘‘for 2007, 2008, 2009, and 2010’’;
25 and

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1 (B) by inserting after ‘‘(k)(1)’’ the fol-
2 lowing: ‘‘, or, beginning with 2011, 1⁄12 of the
3 blended benchmark amount determined under
4 subsection (n)(1)’’; and
5 (2) by adding at the end the following new sub-
6 section:
7 ‘‘(n) DETERMINATION OF BLENDED BENCHMARK
8 AMOUNT.—
9 ‘‘(1) IN GENERAL.—For purposes of subsection
10 (j), subject to paragraphs (3) and (4), the term
11 ‘blended benchmark amount’ means for an area—
12 ‘‘(A) for 2011 the sum of—
13 ‘‘(i) 2⁄3 of the applicable amount (as
14 defined in subsection (k)) for the area and
15 year; and
16 ‘‘(ii) 13 ⁄ of the amount specified in
17 paragraph (2) for the area and year;
18 ‘‘(B) for 2012 the sum of—
19 ‘‘(i) 1⁄3 of the applicable amount for
20 the area and year; and
21 ‘‘(ii) 23 ⁄ of the amount specified in
22 paragraph (2) for the area and year; and
23 ‘‘(C) for a subsequent year the amount
24 specified in paragraph (2) for the area and
25 year.

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1 ‘‘(2) SPECIFIED AMOUNT.—The amount speci-
2 fied in this paragraph for an area and year is the
3 amount specified in subsection (c)(1)(D)(i) for the
4 area and year adjusted (in a manner specified by the
5 Secretary) to take into account the phase-out in the
6 indirect costs of medical education from capitation
7 rates described in subsection (k)(4).
8 ‘‘(3) FEE-FOR-SERVICE PAYMENT FLOOR.—In

9 no case shall the blended benchmark amount for an

10 area and year be less than the amount specified in
11 paragraph (2).
12 ‘‘(4) EXCEPTION FOR PACE PLANS.—This sub-
13 section shall not apply to payments to a PACE pro-
14 gram under section 1894.’’.
15 SEC. 1162. QUALITY BONUS PAYMENTS.

16 (a) IN GENERAL.—Section 1853 of the Social Secu-

17 rity Act (42 U.S.C. 1395w-23), as amended by section
18 1161, is amended—
19 (1) in subsection (j), by inserting ‘‘subject to
20 subsection (o),’’ after ‘‘For purposes of this part’’;
21 and
22 (2) by adding at the end the following new sub-
23 section:
24 ‘‘(o) QUALITY BASED PAYMENT ADJUSTMENT.—

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1 ‘‘(1) HIGH QUALITY PLAN ADJUSTMENT.—For

2 years beginning with 2011, in the case of a Medicare

3 Advantage plan that is identified (under paragraph
4 (3)(E)(ii)) as a high quality MA plan with respect
5 to the year, the blended benchmark amount under
6 subsection (n)(1) shall be increased—
7 ‘‘(A) for 2011, by 1.0 percent;
8 ‘‘(B) for 2012, by 2.0 percent; and
9 ‘‘(C) for a subsequent year, by 3.0 percent.
10 ‘‘(2) IMPROVED QUALITY PLAN ADJUSTMENT.—

11 For years beginning with 2011, in the case of a

12 Medicare Advantage plan that is identified (under
13 paragraph (3)(E)(iii)) as an improved quality MA
14 plan with respect to the year, blended benchmark
15 amount under subsection (n)(1) shall be increased—
16 ‘‘(A) for 2011, by 0.33 percent;
17 ‘‘(B) for 2012, by 0.66 percent; and
18 ‘‘(C) for a subsequent year, by 1.0 percent.
19 ‘‘(3) DETERMINATIONS OF QUALITY.—

20 ‘‘(A) QUALITY PERFORMANCE.—The Sec-

21 retary shall provide for the computation of a
22 quality performance score for each Medicare
23 Advantage plan to be applied for each year be-
24 ginning with 2010.
25 ‘‘(B) COMPUTATION OF SCORE.—

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1 ‘‘(i) FOR YEARS BEFORE 2014.—For

2 years before 2014, the quality performance

3 score for a Medicare Advantage plan shall
4 be computed based on a blend (as des-
5 ignated by the Secretary) of the plan’s per-
6 formance on—
7 ‘‘(I) HEDIS effectiveness of care
8 quality measures;
9 ‘‘(II) CAHPS quality measures;
10 and
11 ‘‘(III) such other measures of
12 clinical quality as the Secretary may
13 specify.
14 Such measures shall be risk-adjusted as
15 the Secretary deems appropriate.
16 ‘‘(ii) ESTABLISHMENT OF OUTCOME-

17 BASED MEASURES.—By not later than for

18 2013 the Secretary shall implement report-
19 ing requirements for quality under this
20 section on measures selected under clause
21 (iii) that reflect the outcomes of care expe-
22 rienced by individuals enrolled in Medicare
23 Advantage plans (in addition to measures
24 described in clause (i)). Such measures
25 may include—

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1 ‘‘(I) measures of rates of admis-
2 sion and readmission to a hospital;
3 ‘‘(II) measures of prevention
4 quality, such as those established by
5 the Agency for Healthcare Research
6 and Quality (that include hospital ad-
7 mission rates for specified conditions);
8 ‘‘(III) measures of patient mor-
9 tality and morbidity following surgery;
10 ‘‘(IV) measures of health func-
11 tioning (such as limitations on activi-
12 ties of daily living) and survival for
13 patients with chronic diseases;
14 ‘‘(V) measures of patient safety;
15 and
16 ‘‘(VI) other measure of outcomes
17 and patient quality of life as deter-
18 mined by the Secretary.
19 Such measures shall be risk-adjusted as
20 the Secretary deems appropriate. In deter-
21 mining the quality measures to be used
22 under this clause, the Secretary shall take
23 into consideration the recommendations of
24 the Medicare Payment Advisory Commis-
25 sion in its report to Congress under section

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