42 USC 1395w-23 - Payments to Medicare+Choice organizations

U.S Code last checked for updates: Aug 03, 2025

§ 1395w–23.

Payments to Medicare+Choice organizations

(a)

Payments to organizations

(1)

Monthly payments

(A)

In general

Under a contract under section 1395w–27 of this title and subject to subsections (e), (g), (i), and (l) and section 1395w–28(e)(4) of this title, the Secretary shall make monthly payments under this section in advance to each Medicare+Choice organization, with respect to coverage of an individual under this part in a Medicare+Choice payment area for a month, in an amount determined as follows:

(i)

Payment before 2006

(ii)

Payment for original fee-for-service benefits beginning with 2006

(B)

Payment amount for original fee-for-service benefits beginning with 2006

(i)

Payment of bid for plans with bids below benchmark

(ii)

Payment of benchmark for plans with bids at or above benchmark

(iii)

Payment of benchmark for MSA plans

(iv)

Authority to apply frailty adjustment under PACE payment rules for certain specialized MA plans for special needs individuals

(I)

In general

(II)

Plan described

(C)

Demographic adjustment, including adjustment for health status

(i)

In general

(ii)

Application of coding adjustment

For 2006 and each subsequent year:

(I)

In applying the adjustment under clause (i) for health status to payment amounts, the Secretary shall ensure that such adjustment reflects changes in treatment and coding practices in the fee-for-service sector and reflects differences in coding patterns between Medicare Advantage plans and providers under part 1

 So in original. Probably should be “parts”.

A and B to the extent that the Secretary has identified such differences.

(II)

In order to ensure payment accuracy, the Secretary shall annually conduct an analysis of the differences described in subclause (I). The Secretary shall complete such analysis by a date necessary to ensure that the results of such analysis are incorporated on a timely basis into the risk scores for 2008 and subsequent years. In conducting such analysis, the Secretary shall use data submitted with respect to 2004 and subsequent years, as available and updated as appropriate.

(III)

In calculating each year’s adjustment, the adjustment factor shall be for 2014, not less than the adjustment factor applied for 2010, plus 1.5 percentage points; for each of years 2015 through 2018, not less than the adjustment factor applied for the previous year, plus 0.25 percentage point; and for 2019 and each subsequent year, not less than 5.9 percent.

(IV)

Such adjustment shall be applied to risk scores until the Secretary implements risk adjustment using Medicare Advantage diagnostic, cost, and use data.

(iii)

Improvements to risk adjustment for special needs individuals with chronic health conditions

(I)

In general

(II)

Individuals described

(III)

Evaluation

(IV)

Publication of evaluation and revisions

(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 1395w–115 of this title (other than under subsection (g)); and

(ii)

reimbursement for premium and cost-sharing reductions for low-income individuals under section 1395w–114(c)(1)(C) of this title.

(E)

Payment of rebate for plans with bids below benchmark

(F)

Adjustment for intra-area variations

(i)

Intra-regional variations

(ii)

Intra-service area variations

(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 1395w–24(b)(2)(A) of this title; 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).

(H)

Special rule for end-stage renal disease

(I)

Improvements to risk adjustment for 2019 and subsequent years

(i)

In general

In order to determine the appropriate adjustment for health status under subparagraph (C)(i), the following shall apply:

(I)

Taking into account total number of diseases or conditions

(II)

Using at least 2 years of diagnostic data

(III)

Providing separate adjustments for dual eligible individuals

With respect to individuals who are dually eligible for benefits under this subchapter and subchapter XIX, the Secretary shall make separate adjustments for each of the following:

(aa)

Full-benefit dual eligible individuals (as defined in section 1396u–5(c)(6) of this title).

(bb)

Such individuals not described in item (aa).

(IV)

Evaluation of mental health and substance use disorders

(V)

Evaluation of chronic kidney disease

(VI)

Evaluation of payment rates for end-stage renal disease

(ii)

Phased-in implementation

(iii)

Opportunity for review and public comment

(2)

Adjustment to reflect number of enrollees

(A)

In general

(B)

Special rule for certain enrollees

(i)

In general

(ii)

Exception

(3)

Establishment of risk adjustment factors

(A)

Report

(B)

Data collection

(C)

Initial implementation

(i)

In general

(ii)

Phase-in

Except as provided in clause (iv), such risk adjustment methodology shall be implemented in a phased-in manner so that the methodology insofar as it makes adjustments to capitation rates for health status applies to—

(I)

10 percent of ¹⁄₁₂ of the annual Medicare+Choice capitation rate in 2000 and each succeeding year through 2003;

(II)

30 percent of such capitation rate in 2004;

(III)

50 percent of such capitation rate in 2005;

(IV)

75 percent of such capitation rate in 2006; and

(V)

100 percent of such capitation rate in 2007 and succeeding years.

(iii)

Data for risk adjustment methodology

(iv)

Full implementation of risk adjustment for congestive heart failure enrollees for 2001

(I)

Exemption from phase-in

(II)

Period of application

(D)

Uniform application to all types of plans

(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

(A)

the Secretary shall pay the amount determined under section 1395l(a)(3)(B) of this title 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).

(b)

Annual announcement of payment rates

(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

(ii)

Adjustment factors

(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

(II)

Adjustment factors

(ii)

Regional benchmark announcement

(iii)

Benchmark announcement for CCA local areas

(2)

Advance notice of methodological changes

(3)

Explanation of assumptions

(4)

Continued computation and publication of county-specific per capita fee-for-service expenditure information

The Secretary, through the Chief Actuary of the Centers for Medicare & Medicaid Services, shall provide for the computation and publication, on an annual basis beginning with 2001 at the time of publication of the annual Medicare+Choice capitation rates under paragraph (1), of the following information for the original medicare fee-for-service program under parts A and B (exclusive of individuals eligible for coverage under section 426–1 of this title) for each Medicare+Choice payment area for the second calendar year ending before the date of publication:

(A)

Total expenditures per capita per month, computed separately for part A and for part B.

(B)

The expenditures described in subparagraph (A) reduced by the best estimate of the expenditures (such as graduate medical education and disproportionate share hospital payments) not related to the payment of claims.

(C)

The average risk factor for the covered population based on diagnoses reported for medicare inpatient services, using the same methodology as is expected to be applied in making payments under subsection (a).

(D)

Such average risk factor based on diagnoses for inpatient and other sites of service, using the same methodology as is expected to be applied in making payments under subsection (a).

(c)

Calculation of annual Medicare+Choice capitation rates

(1)

In general

For purposes of this part, subject to paragraphs (6)(C) and (7), each annual Medicare+Choice capitation rate, for a Medicare+Choice payment area that is an MA local area for a contract year consisting of a calendar year, is equal to the largest of the amounts specified in the following subparagraph (A), (B), (C), or (D):

(A)

Blended capitation rate

For a year before 2005, the sum of—

(i)

the area-specific percentage (as specified under paragraph (2) for the year) of the annual area-specific Medicare+Choice capitation rate for the Medicare+Choice payment area, as determined under paragraph (3) for the year, and

(ii)

the national percentage (as specified under paragraph (2) for the year) of the input-price-adjusted annual national Medicare+Choice capitation rate, as determined under paragraph (4) for the year,

multiplied (for a year other than 2004) by the budget neutrality adjustment factor determined under paragraph (5).

(B)

Minimum amount

12 multiplied by the following amount:

(i)

For 1998, $367 (but not to exceed, in the case of an area outside the 50 States and the District of Columbia, 150 percent of the annual per capita rate of payment for 1997 determined under section 1395mm(a)(1)(C) of this title for the area).

(ii)

For 1999 and 2000, the minimum amount determined under clause (i) or this clause, respectively, for the preceding year, increased by the national per capita Medicare+Choice growth percentage described in paragraph (6)(A) applicable to 1999 or 2000, respectively.

(iii)

(I)

Subject to subclause (II), for 2001, for any area in a Metropolitan Statistical Area with a population of more than 250,000, $525, and for any other area $475.

(II)

In the case of an area outside the 50 States and the District of Columbia, the amount specified in this clause shall not exceed 120 percent of the amount determined under clause (ii) for such area for 2000.

(iv)

For 2002, 2003, and 2004, the minimum amount specified in this clause (or clause (iii)) for the preceding year increased by the national per capita Medicare+Choice growth percentage, described in paragraph (6)(A) for that succeeding year.

(C)

Minimum percentage increase

(i)

For 1998, 102 percent of the annual per capita rate of payment for 1997 determined under section 1395mm(a)(1)(C) of this title for the Medicare+Choice payment area.

(ii)

For 1999 and 2000, 102 percent of the annual Medicare+Choice capitation rate under this paragraph for the area for the previous year.

(iii)

For 2001, 103 percent of the annual Medicare+Choice capitation rate under this paragraph for the area for 2000.

(iv)

For 2002 and 2003, 102 percent of the annual Medicare+Choice capitation rate under this paragraph for the area for the previous year.

(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.

(D)

100 percent of fee-for-service costs

(i)

In general

(ii)

Periodic rebasing

(iii)

Inclusion of costs of VA and DOD military facility services to medicare-eligible beneficiaries

(2)

Area-specific and national percentages

For purposes of paragraph (1)(A)—

(A)

for 1998, the “area-specific percentage” is 90 percent and the “national percentage” is 10 percent,

(B)

for 1999, the “area-specific percentage” is 82 percent and the “national percentage” is 18 percent,

(C)

for 2000, the “area-specific percentage” is 74 percent and the “national percentage” is 26 percent,

(D)

for 2001, the “area-specific percentage” is 66 percent and the “national percentage” is 34 percent,

(E)

for 2002, the “area-specific percentage” is 58 percent and the “national percentage” is 42 percent, and

(F)

for a year after 2002, the “area-specific percentage” is 50 percent and the “national percentage” is 50 percent.

(3)

Annual area-specific Medicare+Choice capitation rate

(A)

In general

For purposes of paragraph (1)(A), subject to subparagraphs (B) and (E), the annual area-specific Medicare+Choice capitation rate for a Medicare+Choice payment area—

(i)

for 1998 is, subject to subparagraph (D), the annual per capita rate of payment for 1997 determined under section 1395mm(a)(1)(C) of this title for the area, increased by the national per capita Medicare+Choice growth percentage for 1998 (described in paragraph (6)(A)); or

(ii)

for a subsequent year is the annual area-specific Medicare+Choice capitation rate for the previous year determined under this paragraph for the area, increased by the national per capita Medicare+Choice growth percentage for such subsequent year.

(B)

Removal of medical education from calculation of adjusted average per capita cost

(i)

In general

(ii)

Applicable percent

For purposes of clause (i), the applicable percent for—

(I)

1998 is 20 percent,

(II)

1999 is 40 percent,

(III)

2000 is 60 percent,

(IV)

2001 is 80 percent, and

(V)

a succeeding year is 100 percent.

(C)

Payment adjustment

(i)

In general

Subject to clause (ii), the payment adjustments described in this subparagraph are payment adjustments which the Secretary estimates were payable during 1997—

(I)

for the indirect costs of medical education under section 1395ww(d)(5)(B) of this title, and

(II)

for direct graduate medical education costs under section 1395ww(h) of this title.

(ii)

Treatment of payments covered under State hospital reimbursement system

(D)

Treatment of areas with highly variable payment rates

(E)

Inclusion of costs of DOD and VA military facility services to Medicare-eligible beneficiaries

(4)

Input-price-adjusted annual national Medicare+Choice capitation rate

(A)

In general

For purposes of paragraph (1)(A), the input-price-adjusted annual national Medicare+Choice capitation rate for a Medicare+Choice payment area for a year is equal to the sum, for all the types of medicare services (as classified by the Secretary), of the product (for each such type of service) of—

(i)

the national standardized annual Medicare+Choice capitation rate (determined under subparagraph (B)) for the year,

(ii)

the proportion of such rate for the year which is attributable to such type of services, and

(iii)

an index that reflects (for that year and that type of services) the relative input price of such services in the area compared to the national average input price of such services.

In applying clause (iii), the Secretary may, subject to subparagraph (C), apply those indices under this subchapter that are used in applying (or updating) national payment rates for specific areas and localities.

(B)

National standardized annual Medicare+ÐChoice capitation rate

(i)

the sum (for all Medicare+Choice payment areas) of the product of—

(I)

the annual area-specific Medicare+ÐChoice capitation rate for that year for the area under paragraph (3), and

(II)

the average number of medicare beneficiaries residing in that area in the year, multiplied by the average of the risk factor weights used to adjust payments under subsection (a)(1)(A) for such beneficiaries in such area; divided by

(ii)

the sum of the products described in clause (i)(II) for all areas for that year.

(C)

Special rules for 1998

In applying this paragraph for 1998—

(i)

medicare services shall be divided into 2 types of services: part A services and part B services;

(ii)

the proportions described in subparagraph (A)(ii)—

(I)

for part A services shall be the ratio (expressed as a percentage) of the national average annual per capita rate of payment for part A for 1997 to the total national average annual per capita rate of payment for parts A and B for 1997, and

(II)

for part B services shall be 100 percent minus the ratio described in subclause (I);

(iii)

for part A services, 70 percent of payments attributable to such services shall be adjusted by the index used under section 1395ww(d)(3)(E) of this title to adjust payment rates for relative hospital wage levels for hospitals located in the payment area involved;

(iv)

for part B services—

(I)

66 percent of payments attributable to such services shall be adjusted by the index of the geographic area factors under section 1395w–4(e) of this title used to adjust payment rates for physicians’ services furnished in the payment area, and

(II)

of the remaining 34 percent of the amount of such payments, 40 percent shall be adjusted by the index described in clause (iii); and

(v)

the index values shall be computed based only on the beneficiary population who are 65 years of age or older and who are not determined to have end stage renal disease.

The Secretary may continue to apply the rules described in this subparagraph (or similar rules) for 1999.

(5)

Payment adjustment budget neutrality factor

(6)

“National per capita Medicare+Choice growth percentage” defined

(A)

In general

(B)

Adjustment

The number of percentage points specified in this subparagraph is—

(i)

for 1998, 0.8 percentage points,

(ii)

for 1999, 0.5 percentage points,

(iii)

for 2000, 0.5 percentage points,

(iv)

for 2001, 0.5 percentage points,

(v)

for 2002, 0.3 percentage points, and

(vi)

for a year after 2002, 0 percentage points.

(C)

Adjustment for over or under projection of national per capita Medicare+Choice growth percentage

(7)

Adjustment for national coverage determinations and legislative changes in benefits

(d)

MA payment area; MA local area; MA region defined

(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 1395w–27a(a)(2) of this title).

(2)

MA local area

(3)

Rule for ESRD beneficiaries

(4)

Geographic adjustment

(A)

In general

Upon written request of the chief executive officer of a State for a contract year (beginning after 1998) made by not later than February 1 of the previous year, the Secretary shall make a geographic adjustment to a Medicare+Choice payment area in the State otherwise determined under paragraph (1) for MA local plans—

(i)

to a single statewide Medicare+Choice payment area,

(ii)

to the metropolitan based system described in subparagraph (C), or

(iii)

to consolidating into a single Medicare+Choice payment area noncontiguous counties (or equivalent areas described in paragraph (1)(A)) within a State.

Such adjustment shall be effective for payments for months beginning with January of the year following the year in which the request is received.

(B)

Budget neutrality adjustment

(C)

Metropolitan based system

The metropolitan based system described in this subparagraph is one in which—

(i)

all the portions of each metropolitan statistical area in the State or in the case of a consolidated metropolitan statistical area, all of the portions of each primary metropolitan statistical area within the consolidated area within the State, are treated as a single Medicare+Choice payment area, and

(ii)

all areas in the State that do not fall within a metropolitan statistical area are treated as a single Medicare+Choice payment area.

(D)

Areas

(e)

Special rules for individuals electing MSA plans

(1)

In general

(2)

Establishment and designation of Medicare+Choice medical savings account as requirement for payment of contribution

In the case of an individual who has elected coverage under an MSA plan, no payment shall be made under paragraph (1) on behalf of an individual for a month unless the individual—

(A)

has established before the beginning of the month (or by such other deadline as the Secretary may specify) a Medicare+Choice MSA (as defined in section 138(b)(2) of the Internal Revenue Code of 1986), and

(B)

if the individual has established more than one such Medicare+Choice MSA, has designated one of such accounts as the individual’s Medicare+Choice MSA for purposes of this part.

Under rules under this section, such an individual may change the designation of such account under subparagraph (B) for purposes of this part.

(3)

Lump-sum deposit of medical savings account contribution

(f)

Payments from Trust Funds

(g)

Special rule for certain inpatient hospital stays

In the case of an individual who is receiving inpatient hospital services from a subsection (d) hospital (as defined in section 1395ww(d)(1)(B) of this title), a rehabilitation hospital described in section 1395ww(d)(1)(B)(ii) of this title or a distinct part rehabilitation unit described in the matter following clause (v) ² of section 1395ww(d)(1)(B) of this title, or a long-term care hospital (described in section 1395ww(d)(1)(B)(iv) of this title) as of the effective date of the individual’s—

(1)

election under this part of a Medicare+ÐChoice plan offered by a Medicare+Choice organization—

(A)

payment for such services until the date of the individual’s discharge shall be made under this subchapter through the Medicare+Choice plan or the original medicare fee-for-service program option described in section 1395w–21(a)(1)(A) of this title (as the case may be) elected before the election with such organization,

(B)

the elected organization shall not be financially responsible for payment for such services until the date after the date of the individual’s discharge, and

(C)

the organization shall nonetheless be paid the full amount otherwise payable to the organization under this part; or

(2)

termination of election with respect to a Medicare+Choice organization under this part—

(A)

the organization shall be financially responsible for payment for such services after such date and until the date of the individual’s discharge,

(B)

payment for such services during the stay shall not be made under section 1395ww(d) of this title or other payment provision under this subchapter for inpatient services for the type of facility, hospital, or unit involved, described in the matter preceding paragraph (1), as the case may be, or by any succeeding Medicare+Choice organization, and

(C)

the terminated organization shall not receive any payment with respect to the individual under this part during the period the individual is not enrolled.

(h)

Special rule for hospice care

(1)

Information

A contract under this part shall require the Medicare+Choice organization to inform each individual enrolled under this part with a Medicare+Choice plan offered by the organization about the availability of hospice care if—

(A)

a hospice program participating under this subchapter is located within the organization’s service area; or

(B)

it is common practice to refer patients to hospice programs outside such service area.

(2)

Payment

If an individual who is enrolled with a Medicare+Choice organization under this part makes an election under section 1395d(d)(1) of this title to receive hospice care from a particular hospice program—

(A)

payment for the hospice care furnished to the individual shall be made to the hospice program elected by the individual by the Secretary;

(B)

payment for other services for which the individual is eligible notwithstanding the individual’s election of hospice care under section 1395d(d)(1) of this title, including services not related to the individual’s terminal illness, shall be made by the Secretary to the Medicare+Choice organization or the provider or supplier of the service instead of payments calculated under subsection (a); and

(C)

the Secretary shall continue to make monthly payments to the Medicare+Choice organization in an amount equal to the value of the additional benefits required under section 1395w–24(f)(1)(A) of this title.

(i)

New entry bonus

(1)

In general

Subject to paragraphs (2) and (3), in the case of Medicare+Choice payment area in which a Medicare+Choice plan has not been offered since 1997 (or in which all organizations that offered a plan since such date have filed notice with the Secretary, as of October 13, 1999, that they will not be offering such a plan as of January 1, 2000, or filed notice with the Secretary as of October 3, 2000, that they will not be offering such a plan as of January 1, 2001), the amount of the monthly payment otherwise made under this section shall be increased—

(A)

only for the first 12 months in which any Medicare+Choice plan is offered in the area, by 5 percent of the total monthly payment otherwise computed for such payment area; and

(B)

only for the subsequent 12 months, by 3 percent of the total monthly payment otherwise computed for such payment area.

(2)

Period of application

(3)

Limitation to organization offering first plan in an area

(4)

Construction

(5)

Offered defined

(j)

Computation of benchmark amounts

For purposes of this part, subject to subsection (o), 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, subject to section 1395w–29(d)(2)(A) ² of this title, an amount equal to ¹⁄₁₂ of the annual MA capitation rate under subsection (c)(1) for the area for the year (or, for 2007, 2008, 2009, and 2010, ¹⁄₁₂ of the applicable amount determined under subsection (k)(1) for the area for the year; for 2011, ¹⁄₁₂ of the applicable amount determined under subsection (k)(1) for the area for 2010; and, beginning with 2012, ¹⁄₁₂ of the blended benchmark amount determined under subsection (n)(1) for the area for the year), adjusted as appropriate (for years before 2007) 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 1395w–24(a)(6)(A)(iii) of this title), adjusted as appropriate (for years before 2007) 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 1395w–27a(f) of this title for the region for the year.

(k)

Determination of applicable amount for purposes of calculating the benchmark amounts

(1)

Applicable amount defined

For purposes of subsection (j), subject to paragraphs (2), (4), and (5), the term “applicable amount” means for an area—

(A)

for 2007—

(i)

if such year is not specified under subsection (c)(1)(D)(ii), an amount equal to the amount specified in subsection (c)(1)(C) for the area for 2006—

(I)

first adjusted by the rescaling factor for 2006 for the area (as made available by the Secretary in the announcement of the rates on April 4, 2005, under subsection (b)(1), but excluding any national adjustment factors for coding intensity and risk adjustment budget neutrality that were included in such factor); and

(II)

then increased by the national per capita MA growth percentage, described in subsection (c)(6) for 2007, but not taking into account any adjustment under subparagraph (C) of such subsection for a year before 2004;

(ii)

if such year is specified under subsection (c)(1)(D)(ii), an amount equal to the greater of—

(I)

the amount determined under clause (i) for the area for the year; or

(II)

the amount specified in subsection (c)(1)(D) for the area for the year; and

(B)

for a subsequent year—

(i)

if such year is not specified under subsection (c)(1)(D)(ii), an amount equal to the amount determined under this paragraph for the area for the previous year (determined without regard to paragraphs (2), (4), and (5)), increased by the national per capita MA growth percentage, described in subsection (c)(6) for that succeeding year, but not taking into account any adjustment under subparagraph (C) of such subsection for a year before 2004; and

(ii)

if such year is specified under subsection (c)(1)(D)(ii), an amount equal to the greater of—

(I)

the amount determined under clause (i) for the area for the year; or

(II)

the amount specified in subsection (c)(1)(D) for the area for the year.

(2)

Phase-out of budget neutrality factor

(A)

In general

Except as provided in subparagraph (D), in the case of 2007 through 2010, the applicable amount determined under paragraph (1) shall be multiplied by a factor equal to 1 plus the product of—

(i)

the percent determined under subparagraph (B) for the year; and

(ii)

the applicable phase-out factor for the year under subparagraph (C).

(B)

Percent determined

(i)

In general

(ii)

Numerator based on difference between demographic rate and risk rate

(I)

In general

(II)

Demographic rate

(III)

Risk rate

(iii)

Denominator based on risk rate

(iv)

Requirements

In estimating the amounts under the previous clauses, the Secretary shall—

(I)

use a complete set of the most recent and representative Medicare Advantage risk scores under subsection (a)(3) that are available from the risk adjustment model announced for the year;

(II)

adjust the risk scores to reflect changes in treatment and coding practices in the fee-for-service sector;

(III)

adjust the risk scores for differences in coding patterns between Medicare Advantage plans and providers under the original Medicare fee-for-service program under parts A and B to the extent that the Secretary has identified such differences, as required in subsection (a)(1)(C);

(IV)

as necessary, adjust the risk scores for late data submitted by Medicare Advantage organizations;

(V)

as necessary, adjust the risk scores for lagged cohorts; and

(VI)

as necessary, adjust the risk scores for changes in enrollment in Medicare Advantage plans during the year.

(v)

Authority

(C)

Applicable phase-out factor

For purposes of subparagraph (A)(ii), the term “applicable phase-out factor” means—

(i)

for 2007, 0.55;

(ii)

for 2008, 0.40;

(iii)

for 2009, 0.25; and

(iv)

for 2010, 0.05.

(D)

Termination of application

(3)

No revision in percent

(A)

In general

(B)

Rule of construction

(4)

Phase-out of the indirect costs of medical education from capitation rates

(A)

In general

(B)

Percentages defined

For purposes of this paragraph:

(i)

Phase-in percentage

The term “phase-in percentage” means, for an area for a year, the ratio (expressed as a percentage, but in no case greater than 100 percent) of—

(I)

the maximum cumulative adjustment percentage for the year (as defined in clause (ii)); to

(II)

the standardized IME cost percentage (as defined in clause (iii)) for the area and year.

(ii)

Maximum cumulative adjustment percentage

The term “maximum cumulative adjustment percentage” means, for—

(I)

2010, 0.60 percent; and

(II)

a subsequent year, the maximum cumulative adjustment percentage for the previous year increased by 0.60 percentage points.

(iii)

Standardized IME cost percentage

(C)

Fee-for-service amount

(5)

Exclusion of costs for kidney acquisitions from capitation rates

(l)

Application of eligible professional incentives for certain MA organizations for adoption and meaningful use of certified EHR technology

(1)

In general

(2)

Eligible professional described

With respect to a qualifying MA organization, an eligible professional described in this paragraph is an eligible professional (as defined for purposes of section 1395w–4(o) of this title) who—

(A)

(i)

is employed by the organization; or

(ii)

(I)

is employed by, or is a partner of, an entity that through contract with the organization furnishes at least 80 percent of the entity’s Medicare patient care services to enrollees of such organization; and

(II)

furnishes at least 80 percent of the professional services of the eligible professional covered under this subchapter to enrollees of the organization; and

(B)

furnishes, on average, at least 20 hours per week of patient care services.

(3)

Eligible professional incentive payments

(A)

In general

(B)

Avoiding duplication of payments

(i)

In general

In the case of an eligible professional described in paragraph (2)—

(I)

that is eligible for the maximum incentive payment under section 1395w–4(o)(1)(A) of this title for the same payment period, the payment incentive shall be made only under such section and not under this subsection; and

(II)

that is eligible for less than such maximum incentive payment for the same payment period, the payment incentive shall be made only under this subsection and not under section 1395w–4(o)(1)(A) of this title.

(ii)

Methods

In the case of an eligible professional described in paragraph (2) who is eligible for an incentive payment under section 1395w–4(o)(1)(A) of this title but is not described in clause (i) for the same payment period, the Secretary shall develop a process—

(I)

to ensure that duplicate payments are not made with respect to an eligible professional both under this subsection and under section 1395w–4(o)(1)(A) of this title; and

(II)

to collect data from Medicare Advantage organizations to ensure against such duplicate payments.

(C)

Fixed schedule for application of limitation on incentive payments for all eligible professionals

(4)

Payment adjustment

(A)

In general

(B)

Specified percent

The percent specified under this subparagraph for a year is 100 percent minus a number of percentage points equal to the product of—

(i)

the number of percentage points by which the applicable percent (under section 1395w–4(a)(7)(A)(ii) of this title) for the year is less than 100 percent; and

(ii)

the Medicare physician expenditure proportion specified in subparagraph (C) for the year.

(C)

Medicare physician expenditure proportion

(D)

Application of payment adjustment

(5)

Qualifying MA organization defined

(6)

Meaningful EHR user attestation

For purposes of this subsection and subsection (m), a qualifying MA organization shall submit an attestation, in a form and manner specified by the Secretary which may include the submission of such attestation as part of submission of the initial bid under section 1395w–24(a)(1)(A)(iv) 4

 So in original. Section 1395w–24(a)(1)(A) of this title does not contain a cl. (iv).

of this title, identifying—

(A)

whether each eligible professional described in paragraph (2), with respect to such organization is a meaningful EHR user (as defined in section 1395w–4(o)(2) of this title) for a year specified by the Secretary; and

(B)

whether each eligible hospital described in subsection (m)(1),5

 So in original. Probably should be “(m)(2),”.

with respect to such organization, is a meaningful EHR user (as defined in section 1395ww(n)(3) of this title) for an applicable period specified by the Secretary.

(7)

Posting on website

The Secretary shall post on the Internet website of the Centers for Medicare & Medicaid Services, in an easily understandable format, a list of the names, business addresses, and business phone numbers of—

(A)

each qualifying MA organization receiving an incentive payment under this subsection for eligible professionals of the organization; and

(B)

the eligible professionals of such organization for which such incentive payment is based.

(8)

Limitation on review

There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of—

(A)

the methodology and standards for determining payment amounts and payment adjustments under this subsection, including avoiding duplication of payments under paragraph (3)(B) and the specification of rules for the fixed schedule for application of limitation on incentive payments for all eligible professionals under paragraph (3)(C);

(B)

the methodology and standards for determining eligible professionals under paragraph (2); and

(C)

the methodology and standards for determining a meaningful EHR user under section 1395w–4(o)(2) of this title, including specification of the means of demonstrating meaningful EHR use under section 1395w–4(o)(3)(C) 6

 So in original. Probably should be “1395w–4(o)(2)(C)”.

of this title and selection of measures under section 1395w–4(o)(3)(B) 7

 So in original. Probably should be “1395w–4(o)(2)(B)”.

of this title.

(m)

Application of eligible hospital incentives for certain MA organizations for adoption and meaningful use of certified EHR technology

(1)

Application

(2)

Eligible hospital described

(3)

Eligible hospital incentive payments

(A)

In general

In applying section 1395ww(n)(2) of this title under paragraph (1), instead of the additional payment amount under section 1395ww(n)(2) of this title, there shall be substituted an amount determined by the Secretary to be similar to the estimated amount in the aggregate that would be payable if payment for services furnished by such hospitals was payable under part A instead of this part. In implementing the previous sentence, the Secretary—

(i)

shall, insofar as data to determine the discharge related amount under section 1395ww(n)(2)(C) of this title for an eligible hospital are not available to the Secretary, use such alternative data and methodology to estimate such discharge related amount as the Secretary determines appropriate; and

(ii)

shall, insofar as data to determine the medicare share described in section 1395ww(n)(2)(D) of this title for an eligible hospital are not available to the Secretary, use such alternative data and methodology to estimate such share, which data and methodology may include use of the inpatient-bed-days (or discharges) with respect to an eligible hospital during the appropriate period which are attributable to both individuals for whom payment may be made under part A or individuals enrolled in an MA plan under a Medicare Advantage organization under this part as a proportion of the estimated total number of patient-bed-days (or discharges) with respect to such hospital during such period.

(B)

Avoiding duplication of payments

(i)

In general

(ii)

Methods

In the case of a hospital that is an eligible hospital described in paragraph (2) and also is eligible for an incentive payment under section 1395ww(n) of this title but is not described in clause (i) for the same payment period, the Secretary shall develop a process—

(I)

to ensure that duplicate payments are not made with respect to an eligible hospital both under this subsection and under section 1395ww(n) of this title; and

(II)

to collect data from Medicare Advantage organizations to ensure against such duplicate payments.

(4)

Payment adjustment

(A)

Subject to paragraph (3), in the case of a qualifying MA organization (as defined in subsection (l)(5)), if, according to the attestation of the organization submitted under subsection (l)(6) for an applicable period, one or more eligible hospitals (as defined in section 1395ww(n)(6)(B) of this title) that are under common corporate governance with such organization and that serve individuals enrolled under a plan offered by such organization are not meaningful EHR users (as defined in section 1395ww(n)(3) of this title) with respect to a period, the payment amount payable under this section for such organization for such period shall be the percent specified in subparagraph (B) for such period of the payment amount otherwise provided under this section for such period.

(B)

Specified percent.—

The percent specified under this subparagraph for a year is 100 percent minus a number of percentage points equal to the product of—

(i)

the number of the percentage point reduction effected under section 1395ww(b)(3)(B)(ix)(I) of this title for the period; and

(ii)

the Medicare hospital expenditure proportion specified in subparagraph (C) for the year.

(C)

Medicare hospital expenditure proportion.—

The Medicare hospital expenditure proportion under this subparagraph for a year is the Secretary’s estimate of the proportion, of the expenditures under parts A and B that are not attributable to this part, that are attributable to expenditures for inpatient hospital services.

(D)

Application of payment adjustment.—

In the case that a qualifying MA organization attests that not all eligible hospitals are meaningful EHR users with respect to an applicable period, the Secretary shall apply the payment adjustment under this paragraph based on a methodology specified by the Secretary, taking into account the proportion of such eligible hospitals, or discharges from such hospitals, that are not meaningful EHR users for such period.

(5)

Posting on website

The Secretary shall post on the Internet website of the Centers for Medicare & Medicaid Services, in an easily understandable format—

(A)

a list of the names, business addresses, and business phone numbers of each qualifying MA organization receiving an incentive payment under this subsection for eligible hospitals described in paragraph (2); and

(B)

a list of the names of the eligible hospitals for which such incentive payment is based.

(6)

Limitations on review

There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of—

(A)

the methodology and standards for determining payment amounts and payment adjustments under this subsection, including avoiding duplication of payments under paragraph (3)(B);

(B)

the methodology and standards for determining eligible hospitals under paragraph (2); and

(C)

the methodology and standards for determining a meaningful EHR user under section 1395ww(n)(3) of this title, including specification of the means of demonstrating meaningful EHR use under subparagraph (C) of such section and selection of measures under subparagraph (B) of such section.

(n)

Determination of blended benchmark amount

(1)

In general

For purposes of subsection (j), subject to paragraphs (3), (4), and (5), the term “blended benchmark amount” means for an area—

(A)

for 2012 the sum of—

(i)

½ of the applicable amount for the area and year; and

(ii)

½ of the amount specified in paragraph (2)(A) for the area and year; and

(B)

for a subsequent year the amount specified in paragraph (2)(A) for the area and year.

(2)

Specified amount

(A)

In general

The amount specified in this subparagraph for an area and year is the product of—

(i)

the base payment amount specified in subparagraph (E) for the area and year adjusted to take into account the phase-out in the indirect costs of medical education from capitation rates described in subsection (k)(4) and, for 2021 and subsequent years, the exclusion of payments for organ acquisitions for kidney transplants from the capitation rate as described in subsection (k)(5); and

(ii)

the applicable percentage for the area for the year specified under subparagraph (B).

(B)

Applicable percentage

Subject to subparagraph (D), the applicable percentage specified in this subparagraph for an area for a year in the case of an area that is ranked—

(i)

in the highest quartile under subparagraph (C) for the previous year is 95 percent;

(ii)

in the second highest quartile under such subparagraph for the previous year is 100 percent;

(iii)

in the third highest quartile under such subparagraph for the previous year is 107.5 percent; or

(iv)

in the lowest quartile under such subparagraph for the previous year is 115 percent.

(C)

Periodic ranking

For purposes of this paragraph in the case of an area located—

(i)

in 1 of the 50 States or the District of Columbia, the Secretary shall rank such area in each year specified under subsection (c)(1)(D)(ii) based upon the level of the amount specified in subparagraph (A)(i) for such areas; or

(ii)

in a territory, the Secretary shall rank such areas in each such year based upon the level of the amount specified in subparagraph (A)(i) for such area relative to quartile rankings computed under clause (i).

(D)

1-year transition for changes in applicable percentage

If, for a year after 2012, there is a change in the quartile in which an area is ranked compared to the previous year, the applicable percentage for the area in the year shall be the average of—

(i)

the applicable percentage for the area for the previous year; and

(ii)

the applicable percentage that would otherwise apply for the area for the year.

(E)

Base payment amount

Subject to subparagraphs (F) and (G), the base payment amount specified in this subparagraph—

(i)

for 2012 is the amount specified in subsection (c)(1)(D) for the area for the year; or

(ii)

for a subsequent year that—

(I)

is not specified under subsection (c)(1)(D)(ii), is the base amount specified in this subparagraph for the area for the previous year, increased by the national per capita MA growth percentage, described in subsection (c)(6) for that succeeding year, but not taking into account any adjustment under subparagraph (C) of such subsection for a year before 2004; and

(II)

is specified under subsection (c)(1)(D)(ii), is the amount specified in subsection (c)(1)(D) for the area for the year.

(F)

Application of indirect medical education phase-out

(G)

Application of kidney acquisitions adjustment

(3)

Alternative phase-ins

(A)

4-year phase-in for certain areas

If the difference between the applicable amount (as defined in subsection (k)) for an area for 2010 and the projected 2010 benchmark amount (as defined in subparagraph (C)) for the area is at least $30 but less than $50, the blended benchmark amount for the area is—

(i)

for 2012 the sum of—

(I)

¾ of the applicable amount for the area and year; and

(II)

¼ of the amount specified in paragraph (2)(A) for the area and year;

(ii)

for 2013 the sum of—

(I)

½ of the applicable amount for the area and year; and

(II)

½ of the amount specified in paragraph (2)(A) for the area and year;

(iii)

for 2014 the sum of—

(I)

¼ of the applicable amount for the area and year; and

(II)

¾ of the amount specified in paragraph (2)(A) for the area and year; and

(iv)

for a subsequent year the amount specified in paragraph (2)(A) for the area and year.

(B)

6-year phase-in for certain areas

If the difference between the applicable amount (as defined in subsection (k)) for an area for 2010 and the projected 2010 benchmark amount (as defined in subparagraph (C)) for the area is at least $50, the blended benchmark amount for the area is—

(i)

for 2012 the sum of—

(I)

⅚ of the applicable amount for the area and year; and

(II)

⅙ of the amount specified in paragraph (2)(A) for the area and year;

(ii)

for 2013 the sum of—

(I)

⅔ of the applicable amount for the area and year; and

(II)

⅓ of the amount specified in paragraph (2)(A) for the area and year;

(iii)

for 2014 the sum of—

(I)

½ of the applicable amount for the area and year; and

(II)

½ of the amount specified in paragraph (2)(A) for the area and year;

(iv)

for 2015 the sum of—

(I)

⅓ of the applicable amount for the area and year; and

(II)

⅔ of the amount specified in paragraph (2)(A) for the area and year; and

(v)

for 2016 the sum of—

(I)

⅙ of the applicable amount for the area and year; and

(II)

⅚ of the amount specified in paragraph (2)(A) for the area and year; and

(vi)

for a subsequent year the amount specified in paragraph (2)(A) for the area and year.

(C)

Projected 2010 benchmark amount

The projected 2010 benchmark amount described in this subparagraph for an area is equal to the sum of—

(i)

½ of the applicable amount (as defined in subsection (k)) for the area for 2010; and

(ii)

½ of the amount specified in paragraph (2)(A) for the area for 2010 but determined as if there were substituted for the applicable percentage specified in clause (ii) of such paragraph the sum of—

(I)

the applicable percent that would be specified under subparagraph (B) of paragraph (2) (determined without regard to subparagraph (D) of such paragraph) for the area for 2010 if any reference in such paragraph to “the previous year” were deemed a reference to 2010; and

(II)

the applicable percentage increase that would apply to a qualifying plan in the area under subsection (o) as if any reference in such subsection to 2012 were deemed a reference to 2010 and as if the determination of a qualifying county under paragraph (3)(B) of such subsection were made for 2010.

(4)

Cap on benchmark amount

(5)

Non-application to PACE plans

(o)

Applicable percentage quality increases

(1)

In general

Subject to the succeeding paragraphs, in the case of a qualifying plan with respect to a year beginning with 2012, the applicable percentage under subsection (n)(2)(B) shall be increased on a plan or contract level, as determined by the Secretary—

(A)

for 2012, by 1.5 percentage points;

(B)

for 2013, by 3.0 percentage points; and

(C)

for 2014 or a subsequent year, by 5.0 percentage points.

(2)

Increase for qualifying plans in qualifying counties

(3)

Qualifying plans and qualifying county defined; application of increases to low enrollment and new plans

For purposes of this subsection:

(A)

Qualifying plan

(i)

In general

(ii)

Application of increases to low enrollment plans

(I)

2012

(II)

2013 and subsequent years

(iii)

Application of increases to new plans

(I)

In general

A new MA plan that meets criteria specified by the Secretary shall be treated as a qualifying plan, except that in applying paragraph (1), the applicable percentage under subsection (n)(2)(B) shall be increased—

(aa)

for 2012, by 1.5 percentage points;

(bb)

for 2013, by 2.5 percentage points; and

(cc)

for 2014 or a subsequent year, by 3.5 percentage points.

(II)

New MA plan defined

(B)

Qualifying county

The term “qualifying county” means, for a year, a county—

(i)

that has an MA capitation rate that, in 2004, was based on the amount specified in subsection (c)(1)(B) for a Metropolitan Statistical Area with a population of more than 250,000;

(ii)

for which, as of December 2009, of the Medicare Advantage eligible individuals residing in the county at least 25 percent of such individuals were enrolled in Medicare Advantage plans; and

(iii)

that has per capita fee-for-service spending that is lower than the national monthly per capita cost for expenditures for individuals enrolled under the original medicare fee-for-service program for the year.

(4)

Quality determinations for application of increase

(A)

Quality determination

(B)

Plans that failed to report

(C)

Special rule for first 3 plan years for plans that were converted from a reasonable cost reimbursement contract

For purposes of applying paragraph (1) and section 1395w–24(b)(1)(C) of this title for the first 3 plan years under this part in the case of an MA plan to which deemed enrollment applies under section 1395w–21(c)(4) of this title—

(i)

such plan shall not be treated as a new MA plan (as defined in paragraph (3)(A)(iii)(II)); and

(ii)

in determining the star rating of the plan under subparagraph (A), to the extent that Medicare Advantage data for such plan is not available for a measure used to determine such star rating, the Secretary shall use data from the period in which such plan was a reasonable cost reimbursement contract.

(D)

Special rule to prevent the artificial inflation of star ratings after the consolidation of Medicare Advantage plans offered by a single organization

(i)

In general

If—

(I)

a Medicare Advantage organization has entered into more than one contract with the Secretary with respect to the offering of Medicare Advantage plans; and

(II)

on or after January 1, 2019, the Secretary approves a request from the organization to consolidate the plans under one or more contract 8

 So in original. Probably should be “contracts”.

(in this subparagraph referred to as a “closed contract”) with the plans offered under a separate contract (in this subparagraph referred to as the “continuing contract”);

with respect to the continuing contract, the Secretary shall adjust the quality rating under the 5-star rating system and any quality increase under this subsection and rebate amounts under section 1395w–24 of this title to reflect an enrollment-weighted average of scores or ratings for the continuing and closed contracts, as determined appropriate by the Secretary.

(ii)

Application

(5)

Exception for PACE plans

(6)

Quality measurement at the plan level for SNPs

(A)

In general

(B)

Considerations

Prior to applying quality measurement at the plan level under this paragraph, the Secretary shall—

(i)

take into consideration the minimum number of enrollees in a specialized MA plan for special needs individuals in order to determine if a statistically significant or valid measurement of quality at the plan level is possible under this paragraph;

(ii)

take into consideration the impact of such application on plans that serve a disproportionate number of individuals dually eligible for benefits under this subchapter and under subchapter XIX;

(iii)

if quality measures are reported at the plan level, ensure that MA plans are not required to provide duplicative information; and

(iv)

ensure that such reporting does not interfere with the collection of encounter data submitted by MA organizations or the administration of any changes to the program under this part as a result of the collection of such data.

(C)

Application

If the Secretary applies quality measurement at the plan level under this paragraph—

(i)

such quality measurement may include Medicare Health Outcomes Survey (HOS), Healthcare Effectiveness Data and Information Set (HEDIS), Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures and quality measures under part D; and

(ii)

the Secretary shall consider applying administrative actions, such as remedies described in section 1395w–27(g)(2) of this title, at the plan level.

(7)

Determination of feasibility of quality measurement at the plan level for all MA plans

(A)

Determination of feasibility

(B)

Consideration of change

(Aug. 14, 1935, ch. 531, title XVIII, § 1853, as added Pub. L. 105–33, title IV, § 4001, Aug. 5, 1997, 111 Stat. 299; amended Pub. L. 106–113, div. B, § 1000(a)(6) [title V, §§ 511(a), 512, 514(a), 517], Nov. 29, 1999, 113 Stat. 1536, 1501A–380, 1501A–382 to 1501A–384; Pub. L. 106–554, § 1(a)(6) [title VI, §§ 601(a), 602(a), 603, 605(a), 606(a)(2)(A), 607, 608(a), 611(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–554 to 2763A–559; Pub. L. 107–188, title V, § 532(d)(1), June 12, 2002, 116 Stat. 696; Pub. L. 108–173, title I, § 101(e)(3)(D), title II, §§ 211(a)–(e)(1), 221(d)(1), (4), 222(d)–(f), (i), 237(b)(1), (2)(B), 241(b)(1), title VII, § 736(d)(1), title IX, § 900(e)(1)(G), Dec. 8, 2003, 117 Stat. 2151, 2176–2178, 2192, 2193, 2200–2202, 2204, 2212, 2213, 2220, 2357, 2371; Pub. L. 109–171, title V, § 5301, Feb. 8, 2006,

cite as: 42 USC 1395w-23