To amend part D of title XVIII of the Social Security Act to improve the coordination of prescription drug coverage provided under retiree plans and State pharmaceutical assistance programs with the prescription drug benefit provided under the Medicare Program, and for other purposes.

Summary: Preserving Access to Affordable Drugs Act of 2004 - Amends part D (Voluntary Prescription Drug Benefit Program) of title XVIII (Medicare) of the Social Security Act, as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, to: (1) allow employer contributions on drug costs to count towards the catastrophic limit; and (2) provide for direct subsidies for certain State pharmaceutical assistance programs.

Directs the Secretary of Health and Human Services to ensure that employer-based plans receive the same subsidization as the Medicare prescription drug plans.

Amends SSA title XIX (Medicaid), as amended by the Medicare Prescription Drug Improvement, and Modernization Act of 2003, to ensure that States can provide supplemental Medicaid prescription drug coverage to complement the Medicare drug benefit for seniors who are dually eligible for Medicare and Medicaid.

Repeals the comparative cost adjustment program under Medicare.

Amends SSA title XVIII part D, as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, to allow the provision of wrap-around prescription drug coverage through Medigap.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Preserving Access to Affordable 
Drugs Act of 2004''.

SEC. 2. ELIMINATION OF DISCRIMINATORY TREATMENT OF EMPLOYER PLANS.

    (a) Elimination of True Out-of-Pocket Limitation.--Section 1860D-
2(b)(4)(C) of the Social Security Act, as added by section 101(a) of 
the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (Public Law 108-173), is amended to read as follows:
                    ``(C) Application.--In applying subparagraph (A), 
                incurred costs shall only include costs incurred with 
                respect to covered part D drugs for the annual 
                deductible described in paragraph (1), for cost-sharing 
                described in paragraph (2), and for amounts for which 
                benefits are not provided because of the application of 
                the initial coverage limit described in paragraph 
                (3).''.
    (b) Equalization of Subsidies.--Notwithstanding any other provision 
of law, the Secretary of Health and Human Services shall provide for 
such increase in the special subsidy payment amounts under section 
1860D-22(a)(3) of the Social Security Act, as added by section 101(a) 
of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Public Law 108-173), as may be appropriate to provide for 
payments in the aggregate equivalent to the payments that would have 
been made under section 1860D-15 of such Act if the individuals were 
not enrolled in a qualified retiree prescription drug plan. In making 
such computation, the Secretary shall not take into account the 
application of the amendments made by section 1202 of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003.

SEC. 3. DIRECT SUBSIDY FOR CERTAIN STATE PHARMACEUTICAL ASSISTANCE 
              PROGRAMS

    Part D of title XVIII of the Social Security Act (as so added) is 
amended by inserting after section 1860D-23 the following:

``direct subsidies for certain state pharmaceutical assistance programs

    ``Sec. 1860D-23A. (a) Direct Subsidy.--
            ``(1) In general.--The Secretary shall provide for the 
        payment to a State offering a State pharmaceutical assistance 
        program described in section 1860D-23(b)(1) for each individual 
        who is eligible for, but not enrolled in, a prescription drug 
        plan or MA-PD plan under this part, and who is enrolled in such 
        program for each month for which such individual is so 
        enrolled.
            ``(2) Amount of payment.--
                    ``(A) In general.--The amount of the payment under 
                paragraph (1) shall be an amount equal to the special 
                subsidy payment amount determined under section 1860D-
                22(a)(3) for a qualifying covered retiree for a 
                coverage year enrolled with the sponsor of a qualified 
                retiree prescription drug plan.
    ``(b) Additional Subsidy.--
            ``(1) In general.--The Secretary shall provide for the 
        payment to a State offering a State pharmaceutical assistance 
        program described in section 1860D-23(b)(1) for each applicable 
        low-income individual enrolled in the program for each month 
        for which such individual is so enrolled.
            ``(2) Amount of payment.--
                    ``(A) In general.--The amount of the payment under 
                paragraph (1) shall be the amount the Secretary 
                estimates would have been made to a prescription drug 
                plan or MA-PD plan under section 1860D-14 with respect 
                to the applicable low-income individual if such 
                individual was enrolled in such a plan.
                    ``(B) Maximum payments.--In no case may the amount 
                of the payment determined under subparagraph (A) with 
                respect to an applicable low-income individual exceed, 
                as estimated by the Secretary, the average amount paid 
                in a year under section 1860D-14 on behalf of a subsidy 
                eligible individual (as defined in section 1860D-
                14(a)(3)(A)) with income that is the same as the income 
                of the applicable low-income individual.
            ``(3) Applicable low-income individual.--For purposes of 
        this subsection, the term `applicable low-income individual' 
        means an individual who--
                    ``(A) is eligible for, but not enrolled in, a 
                prescription drug plan or MA-PD plan under this part, 
                and who is enrolled in a State pharmaceutical 
                assistance program described in section 1860D-23(b)(1); 
                and
                    ``(B) would be a subsidy eligible individual (as 
                defined in section 1860D-14(a)(3)(A)) if the individual 
                were enrolled in such a plan.
    ``(c) Payment Methods.--
            ``(1) In general.--Payments under this section shall be 
        based on such a method as the Secretary determines. The 
        Secretary may establish a payment method by which interim 
        payments of amounts under this section are made during a year 
        based on the Secretary's best estimate of amounts that will be 
        payable after obtaining all of the information.
            ``(2) Source of payments.--Payments under this section 
        shall be made from the Medicare Prescription Drug Account.
    ``(d) Construction.--Nothing in this section, section 1860D-23, or 
section 1860D-24 shall be construed as requiring a prescription drug 
plan or MA-PD plan to coordinate coverage provided under such plan with 
coverage provided under a State pharmaceutical assistance program 
described in section 1860D-23(b)(1) that is operated by a State which 
receives a payment under this section.''.

SEC. 4. FACILITATION OF COORDINATION.

    Section 1860D-24(c)(1) of the Social Security Act (as so added) is 
amended by striking ``all methods of operation'' and inserting ``its 
own methods of operation, except that a PDP sponsor or MA organization 
may not require a State Pharmaceutical Assistance Program or an RX plan 
described in subsection (b) to apply such tools when coordinating 
benefits''.

SEC. 5. ALLOWING MEDICAID WRAP.

    Section 1935(d) of the Social Security Act, as added by section 
103(c) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173), is repealed.

SEC. 6. REPEAL OF COMPARATIVE COST ADJUSTMENT PROGRAM.

    Effective as if included in the enactment of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108-173), subtitle E of title II of such Act is repealed and any 
provisions of law amended by such subtitle are restored as if such 
subtitle had not been enacted.

SEC. 7. PROVISION OF WRAP-AROUND PRESCRIPTION DRUG COVERAGE THROUGH 
              MEDIGAP.

    Section 1882(v) of the Social Security Act (42 U.S.C. 1395ss(v)), 
as added by section 104(a) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (Public Law 108-173), is 
amended as follows:
            (1) In paragraph (1)(A), by inserting ``, other than such a 
        policy that provides wrap-around prescription drug coverage 
        included within a range of such coverage approved under 
        subparagraph (D)(ii),'' after ``paragraph (6)(A))''.
            (2) Add at the end of paragraph (1) the following new 
        subparagraph:
                    ``(D) Wrap-around prescription drug coverage.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of this subsection, a medigap 
                        Rx policy that provides wrap-around 
                        prescription drug coverage included within a 
                        range of such coverage approved by the 
                        Secretary under clause (ii) may be offered to 
                        part D enrollees.
                            ``(ii) Development of standards.--The 
                        Secretary shall approve a range of wrap-around 
                        prescription drug coverage that may be offered 
                        under this subparagraph to part D enrollees.''.

SEC. 8. EFFECTIVE DATE.

    The amendments made by this Act shall take effect as if included in 
the enactment of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173).