---
kind: "section"
citation: "42 U.S.C. § 1395cc–2"
title: "42"
title_heading: "The Public Health and Welfare"
number: "1395cc–2"
heading: "Provisions for administration of demonstration program"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/1395cc-2"
units:
  - "Chapter 7 — Social Security"
  - "Subchapter XVIII — Health Insurance for Aged and Disabled"
  - "Part E — Miscellaneous Provisions"
---

# §1395cc–2. Provisions for administration of demonstration program

- (a) **General administrative authority—**
  - (1) **Beneficiary eligibility—** Except as otherwise provided by the [Secretary](/usc/42/1301.md?p=a-6), an individual shall only be eligible to receive benefits under the program under [section 1395cc–1 of this title](/usc/42/1395cc–1.md) (in this section referred to as the “demonstration program”) if such individual—
    - (A) is enrolled under the program under part B and entitled to benefits under part A; and
    - (B) is not enrolled in a [Medicare+Choice plan](/usc/42/1395w–28.md?p=b-1) under part C, an eligible organization under a contract under [section 1395mm of this title](/usc/42/1395mm.md) (or a similar organization operating under a demonstration [project](/usc/42/13641.md?p=2) authority), an organization with an agreement under [section 1395l(a)(1)(A)](/usc/42/1395l.md) of this title, or a PACE program under [section 1395eee of this title](/usc/42/1395eee.md).
  - (2) **Secretary’s discretion as to scope of program—** The [Secretary](/usc/42/1301.md?p=a-6) may limit the implementation of the demonstration program to—
    - (A) a geographic area (or areas) that the [Secretary](/usc/42/1301.md?p=a-6) designates for purposes of the program, based upon such criteria as the [Secretary](/usc/42/1301.md?p=a-6) finds appropriate;
    - (B) a subgroup (or subgroups) of beneficiaries or individuals and entities furnishing items or services (otherwise eligible to participate in the program), selected on the basis of the number of such participants that the [Secretary](/usc/42/1301.md?p=a-6) finds consistent with the effective and efficient implementation of the program;
    - (C) an element (or elements) of the program that the [Secretary](/usc/42/1301.md?p=a-6) determines to be suitable for implementation; or
    - (D) any combination of any of the limits described in subparagraphs [(A)](#a-2-A) through [(C)](#a-2-C).
  - (3) **Voluntary receipt of items and services—** Items and services shall be furnished to an individual under the demonstration program only at the individual’s election.
  - (4) **Agreements—** The [Secretary](/usc/42/1301.md?p=a-6) is authorized to enter into agreements with individuals and entities to furnish health care items and services to beneficiaries under the demonstration program.
  - (5) **Program standards and criteria—** The [Secretary](/usc/42/1301.md?p=a-6) shall establish performance [standards](/usc/42/1320d.md?p=7) for the demonstration program [including](/usc/42/1301.md?p=b), as applicable, [standards](/usc/42/1320d.md?p=7) for quality of health care items and services, cost-effectiveness, beneficiary satisfaction, and such other factors as the [Secretary](/usc/42/1301.md?p=a-6) finds appropriate. The eligibility of individuals or entities for the initial award, continuation, and renewal of agreements to provide health care items and services under the program shall be conditioned, at a minimum, on performance that meets or exceeds such [standards](/usc/42/1320d.md?p=7).
  - (6) **Administrative review of decisions affecting individuals and entities furnishing services—** An individual or entity furnishing services under the demonstration program shall be entitled to a review by the program [administrator](/usc/42/4005.md?p=1) (or, if the [Secretary](/usc/42/1301.md?p=a-6) has not contracted with a program [administrator](/usc/42/4005.md?p=1), by the [Secretary](/usc/42/1301.md?p=a-6)) of a decision not to enter into, or to terminate, or not to renew, an agreement with the entity to provide health care items or services under the program.
  - (7) **Secretary’s review of marketing materials—** An agreement with an individual or entity furnishing services under the demonstration program shall require the individual or entity to guarantee that it will not distribute materials that market items or services under the program without the [Secretary](/usc/42/1301.md?p=a-6)’s prior review and approval.
  - (8) **Payment in full—**
    - (A) **In general—** Except as provided in [subparagraph (B)](#a-8-B), an individual or entity receiving payment from the [Secretary](/usc/42/1301.md?p=a-6) under a contract or agreement under the demonstration program shall agree to accept such payment as payment in full, and such payment shall be in lieu of any payments to which the individual or entity would otherwise be entitled under this subchapter.
    - (B) **Collection of deductibles and coinsurance—** Such individual or entity may collect any applicable deductible or coinsurance amount from a beneficiary.
- (b) **Contracts for program administration—**
  - (1) **In general—** The [Secretary](/usc/42/1301.md?p=a-6) may administer the demonstration program through a contract with a program [administrator](/usc/42/4005.md?p=1) in accordance with the provisions of this subsection.
  - (2) **Scope of program administrator contracts—** The [Secretary](/usc/42/1301.md?p=a-6) may enter into such contracts for a limited geographic area, or on a regional or national basis.
  - (3) **Eligible contractors—** The [Secretary](/usc/42/1301.md?p=a-6) may contract for the [administration](/usc/42/1301.md?p=a-10) of the program with—
    - (A) an entity that, under a contract under section [1395h](/usc/42/1395h.md) or [1395u](/usc/42/1395u.md) of this title, determines the amount of and makes payments for health care items and services furnished under this subchapter; or
    - (B) any other entity with substantial experience in managing the type of program concerned.
  - (4) **Contract award, duration, and renewal—**
    - (A) **In general—** A contract under this subsection shall be for an initial term of up to three years, renewable for additional terms of up to three years.
    - (B) **Noncompetitive award and renewal for entities administering part A or part B payments—** The [Secretary](/usc/42/1301.md?p=a-6) may enter or renew a contract under this subsection with an entity described in [paragraph (3)(A)](#b-3-A) without regard to the requirements of [section 6101 of title 41](/usc/41/6101.md).
  - (5) **Applicability of Federal Acquisition Regulation—** The Federal Acquisition Regulation shall apply to program [administration](/usc/42/1301.md?p=a-10) contracts under this subsection.
  - (6) **Performance standards—** The [Secretary](/usc/42/1301.md?p=a-6) shall establish performance [standards](/usc/42/1320d.md?p=7) for the program [administrator](/usc/42/4005.md?p=1) [including](/usc/42/1301.md?p=b), as applicable, [standards](/usc/42/1320d.md?p=7) for the quality and cost-effectiveness of the program administered, and such other factors as the [Secretary](/usc/42/1301.md?p=a-6) finds appropriate. The eligibility of entities for the initial award, continuation, and renewal of program [administration](/usc/42/1301.md?p=a-10) contracts shall be conditioned, at a minimum, on performance that meets or exceeds such [standards](/usc/42/1320d.md?p=7).
  - (7) **Functions of program administrator—** A program [administrator](/usc/42/4005.md?p=1) shall perform any or all of the following functions, as specified by the [Secretary](/usc/42/1301.md?p=a-6):
    - (A) **Agreements with entities furnishing health care items and services—** Determine the qualifications of entities seeking to enter or renew agreements to provide services under the demonstration program, and as appropriate enter or renew (or refuse to enter or renew) such agreements on behalf of the [Secretary](/usc/42/1301.md?p=a-6).
    - (B) **Establishment of payment rates—** Negotiate or otherwise establish, subject to the [Secretary](/usc/42/1301.md?p=a-6)’s approval, payment rates for covered health care items and services.
    - (C) **Payment of claims or fees—** Administer payments for health care items or services furnished under the program.
    - (D) **Payment of bonuses—** Using such guidelines as the [Secretary](/usc/42/1301.md?p=a-6) shall establish, and subject to the approval of the [Secretary](/usc/42/1301.md?p=a-6), make bonus payments as described in [subsection (c)(2)(B)](#c-2-B) to entities furnishing items or services for which payment may be made under the program.
    - (E) **Oversight—** Monitor the compliance of individuals and entities with agreements under the program with the conditions of participation.
    - (F) **Administrative review—** Conduct reviews of adverse determinations specified in [subsection (a)(6)](#a-6).
    - (G) **Review of marketing materials—** Conduct a review of marketing materials proposed by an entity furnishing services under the program.
    - (H) **Additional functions—** Perform such other functions as the [Secretary](/usc/42/1301.md?p=a-6) may specify.
  - (8) **Limitation of liability—** The provisions of [section 1320c–6(b) of this title](/usc/42/1320c–6.md?p=b) shall apply with respect to activities of contractors and their officers, employees, and agents under a contract under this subsection.
  - (9) **Information sharing—** Notwithstanding [section 1306 of this title](/usc/42/1306.md) and [section 552a of title 5](/usc/5/552a.md), the [Secretary](/usc/42/1301.md?p=a-6) is authorized to disclose to an entity with a program [administration](/usc/42/1301.md?p=a-10) contract under this subsection such information ([including](/usc/42/1301.md?p=b) medical information) on individuals receiving health care items and services under the program as the entity may require to carry out its responsibilities under the contract.
- (c) **Rules applicable to both program agreements and program administration contracts—**
  - (1) **Records, reports, and audits—** The [Secretary](/usc/42/1301.md?p=a-6) is authorized to require entities with agreements to provide health care items or services under the demonstration program, and entities with program [administration](/usc/42/1301.md?p=a-10) contracts under [subsection (b)](#b), to maintain adequate records, to afford the [Secretary](/usc/42/1301.md?p=a-6) access to such records ([including](/usc/42/1301.md?p=b) for audit purposes), and to furnish such reports and other materials ([including](/usc/42/1301.md?p=b) audited financial statements and performance data) as the [Secretary](/usc/42/1301.md?p=a-6) may require for purposes of implementation, oversight, and evaluation of the program and of individuals’ and entities’ effectiveness in performance of such agreements or contracts.
  - (2) **Bonuses—** Notwithstanding any other provision of law, but subject to [subparagraph (B)(ii)](#c-2-B-ii), the [Secretary](/usc/42/1301.md?p=a-6) may make bonus payments under the demonstration program from the Federal Health Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund in amounts that do not exceed the amounts authorized under the program in accordance with the following:
    - (A) **Payments to program administrators—** The [Secretary](/usc/42/1301.md?p=a-6) may make bonus payments under the program to program [administrators](/usc/42/4005.md?p=1).
    - (B) **Payments to entities furnishing services—**
      - (i) **In general—** Subject to [clause (ii)](#c-2-B-ii), the [Secretary](/usc/42/1301.md?p=a-6) may make bonus payments to individuals or entities furnishing items or services for which payment may be made under the demonstration program, or may authorize the program [administrator](/usc/42/4005.md?p=1) to make such bonus payments in accordance with such guidelines as the [Secretary](/usc/42/1301.md?p=a-6) shall establish and subject to the [Secretary](/usc/42/1301.md?p=a-6)’s approval.
      - (ii) **Limitations—** The [Secretary](/usc/42/1301.md?p=a-6) may condition such payments on the achievement of such [standards](/usc/42/1320d.md?p=7) related to efficiency, improvement in processes or outcomes of care, or such other factors as the [Secretary](/usc/42/1301.md?p=a-6) determines to be appropriate.
  - (3) **Antidiscrimination limitation—** The [Secretary](/usc/42/1301.md?p=a-6) shall not enter into an agreement with an entity to provide health care items or services under the demonstration program, or with an entity to administer the program, unless such entity guarantees that it will not deny, limit, or condition the coverage or provision of benefits under the program, for individuals eligible to be enrolled under such program, based on any health status-related factor described in [section 2702(a)(1)](/usc/42/2702.md)[^1] of the Public Health Service Act.
- (d) **Limitations on judicial review—** The following actions and determinations with respect to the demonstration program shall not be subject to review by a judicial or administrative tribunal:
  - (1) Limiting the implementation of the program under [subsection (a)(2)](#a-2).
  - (2) Establishment of program participation [standards](/usc/42/1320d.md?p=7) under [subsection (a)(5)](#a-5) or the denial or termination of, or refusal to renew, an agreement with an entity to provide health care items and services under the program.
  - (3) Establishment of program [administration](/usc/42/1301.md?p=a-10) contract performance [standards](/usc/42/1320d.md?p=7) under [subsection (b)(6)](#b-6), the refusal to renew a program [administration](/usc/42/1301.md?p=a-10) contract, or the noncompetitive award or renewal of a program [administration](/usc/42/1301.md?p=a-10) contract under [subsection (b)(4)(B)](#b-4-B).
  - (4) Establishment of payment rates, through negotiation or otherwise, under a program agreement or a program [administration](/usc/42/1301.md?p=a-10) contract.
  - (5) A determination with respect to the program (where specifically authorized by the program authority or by [subsection (c)(2)](#c-2))—
    - (A) as to whether cost savings have been achieved, and the amount of savings; or
    - (B) as to whether, to whom, and in what amounts bonuses will be paid.
- (e) **Application limited to parts A and B—** None of the provisions of this section or of the demonstration program shall apply to the programs under part C.
- (f) **Reports to Congress—** Not later than two years after December 21, 2000, and biennially thereafter for six years, the [Secretary](/usc/42/1301.md?p=a-6) shall report to Congress on the use of authorities under the demonstration program. Each report shall address the impact of the use of those authorities on expenditures, access, and quality under the programs under this subchapter.

## Footnotes

[^1]: See References in Text note below.

## Source credit

(Aug. 14, 1935, ch. 531, title XVIII, § 1866B, as added Pub. L. 106–554, § 1(a)(6) [title IV, § 412(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–511; amended Pub. L. 108–173, title VII, § 736(c)(5), Dec. 8, 2003, 117 Stat. 2356.)

## Notes

### Editorial Notes

### References in Text

Section 2702 of the Public Health Service Act, referred to in subsec. (c)(3), is section 2702 of act July 1, 1944, which was classified to section 300gg–1 of this title, was amended by Pub. L. 111–148, title I, § 1201(3), Mar. 23, 2010, 124 Stat. 154, and was transferred to subsecs. (d) to (f) of section 300gg–4 of this title, effective for plan years beginning on or after Jan. 1, 2014. A new section 2702 of act July 1, 1944, related to guaranteed availability of coverage, was added by Pub. L. 111–148, title I, § 1201(4), Mar. 23, 2010, 124 Stat. 156, effective for plan years beginning on or after Jan. 1, 2014, and is classified to section 300gg–1 of this title.

### Codification

In subsec. (b)(4)(B), “section 6101 of title 41” substituted for “section 5 of title 41, United States Code” on authority of Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts.

### Amendments

2003—Subsec. (b)(7)(D). Pub. L. 108–173 substituted “(c)(2)(B)” for “(c)(2)(A)(ii)”.

### Statutory Notes and Related Subsidiaries

### Change of Name

References to Medicare+Choice deemed to refer to Medicare Advantage or MA, subject to an appropriate transition provided by the Secretary of Health and Human Services in the use of those terms, see section 201 of Pub. L. 108–173, set out as a note under section 1395w–21 of this title.