SEC. 221. ESTABLISHMENT OF MA REGIONAL PLANS.

TITLE II--MEDICARE ADVANTAGE

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

SEC. 221. ESTABLISHMENT OF MA REGIONAL PLANS.

`(i) IN GENERAL- Coordinated';

`(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

`(C) the service area of which is one or more entire MA regions.

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

`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.

`(c) PORTION OF TOTAL PAYMENTS TO AN ORGANIZATION SUBJECT TO RISK FOR 2006 AND 2007-

`(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.

`(C) REDUCTION IN PAYMENT IF ALLOWABLE COSTS BELOW 97 PERCENT OF 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.

`(C) REGIONAL PAYMENT ADJUSTMENT-

`(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.

`(C) REGIONAL REQUIREMENTS- The requirements of this subparagraph for an MA region for a year are as follows:

`(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) PLAN'S SHARE OF MA ENROLLMENT IN REGION- The factor described in subparagraph (B) for the plan.

`(B) PLAN'S 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 organization's 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 hospital's 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.'.

`(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)).';

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

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

`(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).'.

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