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1 Secretary to accept any or every bid by an MA
2 organization under this subsection.’’.
3 (b) APPLICATION UNDER PART D.—Section 1860D–
4 11(d) of such Act (42 U.S.C. 1395w–111(d)) is amended
5 by adding at the end the following new paragraph:
6 ‘‘(3) REJECTION OF BIDS.—Paragraph (5)(C)
7 of section 1854(a) shall apply with respect to bids
8 under this section in the same manner as it applies
9 to bids by an MA organization under such section.’’.
10 (c) EFFECTIVE DATE.—The amendments made by
11 this section shall apply to bids for contract years begin-
12 ning on or after January 1, 2011.
13 PART 3—TREATMENT OF SPECIAL NEEDS PLANS
14 SEC. 1176. LIMITATION ON ENROLLMENT OUTSIDE OPEN

15 ENROLLMENT PERIOD OF INDIVIDUALS INTO

16 CHRONIC CARE SPECIALIZED MA PLANS FOR

17 SPECIAL NEEDS INDIVIDUALS.

18 Section 1859(f)(4) of the Social Security Act (42

19 U.S.C. 1395w–28(f)(4)) is amended by adding at the end
20 the following new subparagraph:
21 ‘‘(C) The plan does not enroll an individual
22 on or after January 1, 2011, other than during
23 an annual, coordinated open enrollment period
24 or when at the time of the diagnosis of the dis-
25 ease or condition that qualifies the individual as

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1 an individual described in subsection
2 (b)(6)(B)(iii).’’.
3 SEC. 1177. EXTENSION OF AUTHORITY OF SPECIAL NEEDS

4 PLANS TO RESTRICT ENROLLMENT.

5 (a) IN GENERAL.—Section 1859(f)(1) of the Social

6 Security Act (42 U.S.C. 1395w–28(f)(1)) is amended by
7 striking ‘‘January 1, 2011’’ and inserting ‘‘January 1,
8 2013 (or January 1, 2016, in the case of a plan described
9 in section 1177(b)(1) of the America’s Affordable Health
10 Choices Act of 2009)’’.
11 (b) GRANDFATHERING OF CERTAIN PLANS.—
12 (1) PLANS DESCRIBED.—For purposes of sec-
13 tion 1859(f)(1) of the Social Security Act (42
14 U.S.C. 1395w–28(f)(1)), a plan described in this
15 paragraph is a plan that had a contract with a State
16 that had a State program to operate an integrated
17 Medicaid-Medicare program that had been approved
18 by the Centers for Medicare & Medicaid Services as
19 of January 1, 2004.
20 (2) ANALYSIS; REPORT.—The Secretary of
21 Health and Human Services shall provide, through
22 a contract with an independent health services eval-
23 uation organization, for an analysis of the plans de-
24 scribed in paragraph (1) with regard to the impact
25 of such plans on cost, quality of care, patient satis-

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1 faction, and other subjects as specified by the Sec-
2 retary. Not later than December 31, 2011, the Sec-
3 retary shall submit to Congress a report on such
4 analysis and shall include in such report such rec-
5 ommendations with regard to the treatment of such
6 plans as the Secretary deems appropriate.
7 Subtitle E—Improvements to
8 Medicare Part D
9 SEC. 1181. ELIMINATION OF COVERAGE GAP.

10 (a) IN GENERAL.—Section 1860D–2(b) of such Act

11 (42 U.S.C. 1395w–102(b)) is amended—
12 (1) in paragraph (3)(A), by striking ‘‘paragraph
13 (4)’’ and inserting ‘‘paragraphs (4) and (7)’’;
14 (2) in paragraph (4)(B)(i), by inserting ‘‘sub-
15 ject to paragraph (7)’’ after ‘‘purposes of this part’’;
16 and
17 (3) by adding at the end the following new
18 paragraph:
19 ‘‘(7) PHASED-IN ELIMINATION OF COVERAGE

20 GAP.—

21 ‘‘(A) IN GENERAL.—For each year begin-

22 ning with 2011, the Secretary shall consistent
23 with this paragraph progressively increase the
24 initial coverage limit (described in subsection
25 (b)(3)) and decrease the annual out-of-pocket

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1 threshold from the amounts otherwise computed
2 until there is a continuation of coverage from
3 the initial coverage limit for expenditures in-
4 curred through the total amount of expendi-
5 tures at which benefits are available under
6 paragraph (4).
7 ‘‘(B) INCREASE IN INITIAL COVERAGE

8 LIMIT.—For a year beginning with 2011, the

9 initial coverage limit otherwise computed with-
10 out regard to this paragraph shall be increased
11 by 1⁄2 of the cumulative phase-in percentage (as
12 defined in subparagraph (D)(ii) for the year)
13 times the out-of-pocket gap amount (as defined
14 in subparagraph (E)) for the year.
15 ‘‘(C) DECREASE IN ANNUAL OUT-OF-POCK-

16 ET THRESHOLD.—For a year beginning with

17 2011, the annual out-of-pocket threshold other-
18 wise computed without regard to this paragraph
19 shall be decreased by 12 ⁄ of the cumulative
20 phase-in percentage of the out-of-pocket gap
21 amount for the year multiplied by 1.75.
22 ‘‘(D) PHASE–IN.—For purposes of this
23 paragraph:

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1 ‘‘(i) ANNUAL PHASE-IN PERCENT-

2 AGE.—The term ‘annual phase-in percent-

3 age’ means—
4 ‘‘(I) for 2011, 13 percent;
5 ‘‘(II) for 2012, 2013, 2014, and
6 2015, 5 percent;
7 ‘‘(III) for 2016 through 2018,
8 7.5 percent; and
9 ‘‘(IV) for 2019 and each subse-
10 quent year, 10 percent.
11 ‘‘(ii) CUMULATIVE PHASE-IN PER-

12 CENTAGE.—The term ‘cumulative phase-in

13 percentage’ means for a year the sum of
14 the annual phase-in percentage for the
15 year and the annual phase-in percentages
16 for each previous year beginning with
17 2011, but in no case more than 100 per-
18 cent.
19 ‘‘(E) OUT-OF-POCKET GAP AMOUNT.—For

20 purposes of this paragraph, the term ‘out-of-

21 pocket gap amount’ means for a year the
22 amount by which—
23 ‘‘(i) the annual out-of-pocket thresh-
24 old specified in paragraph (4)(B) for the

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1 year (as determined as if this paragraph
2 did not apply), exceeds
3 ‘‘(ii) the sum of—
4 ‘‘(I) the annual deductible under
5 paragraph (1) for the year; and
6 ‘‘(II) 1⁄4 of the amount by which
7 the initial coverage limit under para-
8 graph (3) for the year (as determined
9 as if this paragraph did not apply) ex-
10 ceeds such annual deductible.’’.
11 (b) REQUIRING DRUG MANUFACTURERS TO PROVIDE
12 DRUG REBATES FOR FULL-BENEFIT DUAL ELIGIBLES.—
13 (1) IN GENERAL.—Section 1860D–2 of the So-
14 cial Security Act (42 U.S.C. 1396r–8) is amended—
15 (A) in subsection (e)(1), in the matter be-
16 fore subparagraph (A), by inserting ‘‘and sub-
17 section (f)’’ after ‘‘this subsection’’; and
18 (B) by adding at the end the following new
19 subsection:
20 ‘‘(f) PRESCRIPTION DRUG REBATE AGREEMENT FOR

21 FULL-BENEFIT DUAL ELIGIBLE INDIVIDUALS.—

22 ‘‘(1) IN GENERAL.—In this part, the term ‘cov-
23 ered part D drug’ does not include any drug or bio-
24 logic that is manufactured by a manufacturer that

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1 has not entered into and have in effect a rebate
2 agreement described in paragraph (2).
3 ‘‘(2) REBATE AGREEMENT.—A rebate agree-
4 ment under this subsection shall require the manu-
5 facturer to provide to the Secretary a rebate for
6 each rebate period (as defined in paragraph (6)(B))
7 ending after December 31, 2010, in the amount
8 specified in paragraph (3) for any covered part D
9 drug of the manufacturer dispensed after December
10 31, 2010, to any full-benefit dual eligible individual
11 (as defined in paragraph (6)(A)) for which payment
12 was made by a PDP sponsor under part D or a MA
13 organization under part C for such period. Such re-
14 bate shall be paid by the manufacturer to the Sec-
15 retary not later than 30 days after the date of re-
16 ceipt of the information described in section 1860D–
17 12(b)(7), including as such section is applied under
18 section 1857(f)(3).
19 ‘‘(3) REBATE FOR FULL-BENEFIT DUAL ELIGI-

20 BLE MEDICARE DRUG PLAN ENROLLEES.—

21 ‘‘(A) IN GENERAL.—The amount of the re-

22 bate specified under this paragraph for a manu-
23 facturer for a rebate period, with respect to
24 each dosage form and strength of any covered
25 part D drug provided by such manufacturer

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1 and dispensed to a full-benefit dual eligible indi-
2 vidual, shall be equal to the product of—
3 ‘‘(i) the total number of units of such
4 dosage form and strength of the drug so
5 provided and dispensed for which payment
6 was made by a PDP sponsor under part D
7 or a MA organization under part C for the
8 rebate period (as reported under section
9 1860D–12(b)(7), including as such section
10 is applied under section 1857(f)(3)); and
11 ‘‘(ii) the amount (if any) by which—
12 ‘‘(I) the Medicaid rebate amount
13 (as defined in subparagraph (B)) for
14 such form, strength, and period, ex-
15 ceeds
16 ‘‘(II) the average Medicare drug
17 program full-benefit dual eligible re-
18 bate amount (as defined in subpara-
19 graph (C)) for such form, strength,
20 and period.
21 ‘‘(B) MEDICAID REBATE AMOUNT.—For

22 purposes of this paragraph, the term ‘Medicaid

23 rebate amount’ means, with respect to each
24 dosage form and strength of a covered part D

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