I 

108TH CONGRESS 

1ST SESSION H. R. 1568

To amend part B of title XVIII of the Social Security Act to provide 

for a prescription drug benefit with a high deductible at no additional 

premium and access to discount prices on drugs and to provide for 

the operation of such benefit without a deductible for certain low-income 

Medicare beneficiaries. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 2, 2003

Mr. DOOLEY of California (for himself, Mrs. TAUSCHER, Mr. KIND, Mr. 

DAVIS of Florida, Mr. SMITH of Washington, Mr. STENHOLM, Mr. EMANUEL, Mr. COOPER, Mr. HILL, Mr. FORD, Mr. PETERSON of Minnesota, 

Mr. CARDOZA, Mr. CASE, Mr. CRAMER, Mr. MOORE, Ms. HARMAN, Mr. 

MILLER of North Carolina, Mr. DAVIS of Alabama, Mrs. MCCARTHY of 

New York, Mr. ISRAEL, Mr. WU, Mr. MARSHALL, Mr. LUCAS of Kentucky, Mr. MATHESON, and Mr. LARSEN of Washington) introduced the 

following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL

To amend part B of title XVIII of the Social Security 

Act to provide for a prescription drug benefit with a 

high deductible at no additional premium and access 

to discount prices on drugs and to provide for the operation of such benefit without a deductible for certain 

low-income Medicare beneficiaries.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Medicare Rx Now Act of 2003’’. 

6 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex7 cept as otherwise specifically provided, whenever in this 

8 Act an amendment is expressed in terms of an amendment 

9 to or repeal of a section or other provision, the reference 

10 shall be considered to be made to that section or other 

11 provision of the Social Security Act. 

12 (c) TABLE OF CONTENTS.—The table of contents of 

13 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Purpose. 

TITLE I—PART B DRUG BENEFIT WITH HIGH DEDUCTIBLE AND 

NO PREMIUM 

Sec. 101. Inclusion of high-deductible outpatient prescription drug benefit under 

part B. 

Sec. 102. Provision of benefits through medicare approved prescription drug 

plans. 

TITLE II—BENEFITS FOR LOW-INCOME BENEFICIARIES 

Sec. 201. Benefits for low-income beneficiaries. 

Sec. 202. Improving enrollment process under medicaid.

14 SEC. 2. PURPOSE. 

15 The purpose of this Act is to provide for outpatient 

16 prescription drug benefits to medicare beneficiaries in the 

17 following manner: 

18 (1) Medicare beneficiaries enrolled under medi19 care part B qualify for outpatient prescription drug 
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1 benefits after an annual deductible (initially set at 

2 $4,000) has been met. This benefit is available with3 out any additional premium. 

4 (2) There are fixed dollar copayments for this 

5 coverage, with the average of such copayments equal 

6 to 20 percent of the benefits and the amount of the 

7 copayments varying depending upon whether the 

8 drugs are generic, preferred brand-name, or non-pre9 ferred brand-name drugs. 

10 (3) The benefits are provided through medicare11 approved prescription drug plans. These plans may 

12 be current plans, such as Medicare+Choice plans, 

13 employer-based retiree coverage, medigap plans, 

14 State assistance programs, medicaid, drug discount 

15 card plans, and other qualified plans (as determined 

16 by the Secretary). All of these plans must offer, in 

17 addition to the high-deductible coverage, discounts 

18 for prescription drugs both while the annual deduct19 ible is being satisfied and after it is satisfied. 

20 (4) To assure access to medicare-approved pre21 scription drug plans for all medicare beneficiaries, 

22 the Secretary will solicit bids for prescription drug 

23 discount plans that will be available in all geographic 

24 regions to all medicare beneficiaries. 
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1 (5) All pharmacies that comply with electronic 

2 claims processing standards may provide drugs 

3 under the program. 

4 (6) The Act also provides for the availability of 

5 additional benefits in the form of a waiver of the an6 nual deductible, thereby providing immediate entitle7 ment to prescription drug benefits, for medicare 

8 beneficiaries who have incomes under 200 percent of 

9 the poverty line and who are not eligible for med10 icaid prescription drug benefits. 

11 TITLE I—PART B DRUG BENEFIT 

12 WITH HIGH DEDUCTIBLE AND 

13 NO PREMIUM 

14 SEC. 101. INCLUSION OF HIGH-DEDUCTIBLE OUTPATIENT 

15 PRESCRIPTION DRUG BENEFIT UNDER PART 

16 B. 

17 (a) COVERAGE.—Section 1832(a) (42 U.S.C. 

18 1395k(a)) is amended—

19 (1) by striking ‘‘and’’ at the end of paragraph 

20 (1); 

21 (2) by striking the period at the end of para22 graph (2) and inserting ‘‘; and’’; and 

23 (3) by adding at the end the following new 

24 paragraph:
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1 ‘‘(3) entitlement to have payment made on his 

2 behalf (subject to the provisions of this part) for 

3 high-deductible outpatient prescription drug cov4 erage under section 1845.’’. 

5 (b) DESCRIPTION OF HIGH-DEDUCTIBLE PRESCRIP6 TION DRUG BENEFIT.—Title XVIII is amended by insert7 ing after section 1844 the following new section: 

8 ‘‘OUTPATIENT PRESCRIPTION DRUG COVERAGE

9 ‘‘SEC. 1845. (a) HIGH-DEDUCTIBLE OUTPATIENT

10 PRESCRIPTION DRUG COVERAGE DEFINED.—

11 ‘‘(1) IN GENERAL.—For purposes of this part, 

12 the term ‘high-deductible outpatient prescription 

13 drug coverage’ means payment of—

14 ‘‘(A) expenses for covered outpatient pre15 scription drugs incurred in a year after the in16 dividual has incurred expenses for such drugs 

17 in the year of an amount equal to the annual 

18 deductible specified in paragraph (2); reduced 

19 by 

20 ‘‘(B) cost-sharing described in paragraph 

21 (3). 

22 ‘‘(2) ANNUAL DEDUCTIBLE.—

23 ‘‘(A) IN GENERAL.—The annual deductible 

24 under this paragraph—

25 ‘‘(i) for 2005 is equal to $4,000; and 
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1 ‘‘(ii) for a subsequent year is equal to 

2 the amount specified in subparagraph (B) 

3 for that year, except that, if the amount 

4 specified in such subparagraph is not a 

5 multiple of $10, it shall be rounded to the 

6 nearest multiple of $10. 

7 ‘‘(B) INFLATIONARY ADJUSTMENT.—The 

8 amount specified in this subparagraph—

9 ‘‘(i) for 2005, is $4,000; or 

10 ‘‘(ii) the amount specified in this sub11 paragraph for a subsequent year is the 

12 amount specified in this subparagraph for 

13 the previous year increased by the annual 

14 percentage increase in average per capita 

15 aggregate expenditures for covered out16 patient prescription drugs in the United 

17 States for medicare beneficiaries, as deter18 mined by the Secretary for the 12-month 

19 period ending in July of the previous year. 

20 ‘‘(3) COST-SHARING.—

21 ‘‘(A) THREE-TIERED COPAYMENT STRUC22 TURE.—Subject to the succeeding provisions of 

23 this paragraph, in the case of a covered out24 patient drug that is dispensed in a year to an 

25 eligible individual, the individual shall be re-
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1 sponsible for a copayment for the drug in an 

2 amount equal to the following (or, if less, the 

3 price for the drug negotiated pursuant to sub4 section (c)(5)): 

5 ‘‘(i) GENERIC DRUGS.—In the case of 

6 a generic covered outpatient drug, the base 

7 copayment amount specified in accordance 

8 with subparagraph (B) for each prescrip9 tion (as defined by the Secretary) of such 

10 drug. 

11 ‘‘(ii) PREFERRED BRAND NAME

12 DRUGS.—In the case of a preferred brand 

13 name covered outpatient drug, 4 times the 

14 copayment amount applied under clause (i) 

15 for each prescription (as so defined) of 

16 such drug. 

17 ‘‘(iii) NONPREFERRED BRAND NAME

18 DRUG.—In the case of a nonpreferred 

19 brand name covered outpatient drug, 150 

20 percent of the copayment amount applied 

21 under clause (ii) for each prescription (as 

22 so defined) of such drug. 

23 ‘‘(B) ESTABLISHMENT OF BASE COPAY24 MENT AMOUNT CONSISTENT WITH 80:20 BEN25 EFIT RATIO.—For each year beginning with 
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1 2005 the Secretary shall establish a base copay2 ment amount in a manner consistent with the 

3 principle (subject to reasonable rounding rules) 

4 that the ratio of the aggregate amount of bene5 fits provided under this section to the aggregate 

6 copayments under this paragraph for each year 

7 should be approximately equal to 80 to 20. 

8 ‘‘(C) DISCOUNTS ALLOWED FOR NETWORK

9 PHARMACIES.—A medicare-approved prescrip10 tion drug plan may reduce copayments for its 

11 designees below the level otherwise provided 

12 under this paragraph, but in no case shall such 

13 a reduction result in an increase in payments 

14 made by the Secretary under this section to a 

15 plan. 

16 ‘‘(D) TREATMENT OF MEDICALLY NEC17 ESSARY NONPREFERRED DRUGS.—A nonpre18 ferred brand name drug shall be treated as a 

19 preferred brand name drug under this para20 graph if such nonpreferred drug is determined 

21 (pursuant to procedures established under sub22 section (c)(6)) to be medically necessary. 

23 ‘‘(E) REQUIREMENT FOR DESIGNATION OF

24 PREFERRED BRAND NAME DRUGS.—Within 

25 each category of therapeutic-equivalent covered
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1 outpatient prescription drugs (as defined by the 

2 Secretary), each medicare-approved prescription 

3 drug plan shall provide for the designation of 

4 at least one preferred brand name covered out5 patient drug. 

6 ‘‘(4) PAYMENT OF BENEFITS BEYOND DEDUCT7 IBLE.—

8 ‘‘(A) IN GENERAL.—There shall be paid 

9 from the Federal Supplementary Medical Insur10 ance Trust Fund, in the case of each individual 

11 who is covered under the insurance program es12 tablished by this part and incurs expenses for 

13 covered outpatient prescription drugs with re14 spect to which benefits are payable under this 

15 section, amounts equal to the amounts provided 

16 under paragraph (1). 

17 ‘‘(B) COUNTING OF INCURRED EX18 PENSES.—Expenses with respect to covered 

19 outpatient prescription drugs under this section 

20 shall—

21 ‘‘(i) be treated as incurred regardless 

22 of whether they are reimbursed by a third23 party payor; 

24 ‘‘(ii) not be treated as incurred unless 

25 the expenses were incurred during a period 
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1 in which the individual was covered under 

2 this part; and 

3 ‘‘(iii) not be treated as incurred unless 

4 information concerning the transaction giv5 ing rise to such expenses has been elec6 tronically transmitted by the pharmacy or 

7 other entity dispensing the covered out8 patient prescription drugs to the medicare9 approved prescription drug plan consistent 

10 with electronic claims standards estab11 lished under subsection (c)(3).’’. 

12 SEC. 102. PROVISION OF BENEFITS THROUGH MEDICARE 

13 APPROVED PRESCRIPTION DRUG PLANS. 

14 (a) IN GENERAL.—Section 1845 of the Social Secu15 rity Act, as inserted by section 101(a), is further amended 

16 by adding at the end the following: 

17 ‘‘(b) PROVISION OF BENEFITS THROUGH A MEDI18 CARE APPROVED PRESCRIPTION DRUG PLAN.—

19 ‘‘(1) IN GENERAL.—In the case of an individual 

20 entitled to benefits for high-deductible outpatient 

21 prescription drug coverage under this section, the in22 dividual shall obtain such benefits through a medi23 care-approved prescription drug plan that is des24 ignated under this subsection. 
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1 ‘‘(2) DESIGNATION PROCESS.—The Secretary 

2 shall provide for a process for designation of medi3 care-approved prescription drug plans consistent 

4 with the following: 

5 ‘‘(A) FREQUENCY OF DESIGNATIONS.—

6 The Secretary shall permit individuals, on an 

7 annual basis and at such other times during a 

8 year as the Secretary may specify, to change 

9 the plan designated. 

10 ‘‘(B) DISSEMINATION OF INFORMATION.—

11 The Secretary shall provide for the dissemina12 tion of information on designation of plans 

13 under this subsection. Such dissemination may 

14 be coordinated with the dissemination of infor15 mation on Medicare+Choice plan selection 

16 under part C. 

17 ‘‘(C) DEFAULT ASSIGNMENT.—In the case 

18 of an individual who is enrolled under this part 

19 who has not otherwise designated a medicare20 approved prescription drug plan, the Secretary 

21 shall assign the individual to an appropriate 

22 prescription drug discount card plan serving the 

23 area in which the individual resides. 

24 ‘‘(D) DEEMED DESIGNATION.—The Sec25 retary may deem an individual who is enrolled 
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1 in a medicare-approved prescription drug plan 

2 described in subparagraph (A) through (E) of 

3 subsection (c)(2) as having designated such 

4 plan, but shall permit the individual to des5 ignate a prescription drug discount card plan 

6 instead. The Secretary shall establish rules in 

7 cases where an individual is enrolled in more 

8 than one such plan. 

9 ‘‘(3) DESIGNEE DEFINED.—In this section, the 

10 term ‘designee’ means such an individual who makes 

11 such a designation and, with respect to a plan, an 

12 individual who has designated that plan under this 

13 subsection. 

14 ‘‘(c) MEDICARE-APPROVED PRESCRIPTION DRUG

15 PLANS.—

16 ‘‘(1) IN GENERAL.—For purposes of this part, 

17 the term ‘medicare-approved prescription drug plan’ 

18 means a health plan or program described in para19 graph (2) that—

20 ‘‘(A) provides at least high-deductible out21 patient prescription drug coverage to designees 

22 of that plan or program; 

23 ‘‘(B) meets the applicable requirements of 

24 paragraph (3) and succeeding paragraphs of 

25 this subsection with respect to such designees; 
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1 ‘‘(C) has entered into an agreement with 

2 the Secretary to provide and exchange electroni3 cally such information as the Secretary may re4 quire for the administration of the program of 

5 benefits under this section; and 

6 ‘‘(D) meets such additional requirements 

7 as the Secretary may specify, including requir8 ing the provision of appropriate periodic audits. 

9 ‘‘(2) TYPES OF PLANS AND PROGRAMS THAT

10 MAY QUALIFY.—The types of plans and programs 

11 that may qualify as a medicare-approved prescrip12 tion drug plan are the following: 

13 ‘‘(A) A Medicare+Choice plan. 

14 ‘‘(B) A group health plan, including a re15 tirement health benefits plan, that provides pre16 scription drug coverage. 

17 ‘‘(C) A State plan under title XIX. 

18 ‘‘(D) A health benefits plan under the Fed19 eral employees’ health benefits program under 

20 chapter 89 of title 5, United States Code. 

21 ‘‘(E) A medicare supplemental policy. 

22 ‘‘(F) State pharmaceutical assistance pro23 gram. 

24 ‘‘(G) A prescription drug discount card 

25 plan (described in subsection (d)).
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1 ‘‘(H) Any other prescription drug plan 

2 that is determined to meet such requirements 

3 as the Secretary establishes. 

4 ‘‘(3) ADMINISTRATION THROUGH CARD-BASED

5 ELECTRONIC MECHANISM.—

6 ‘‘(A) USE OF MEDICARE PRESCRIPTION

7 DRUG CARD.—Claims for benefits under this 

8 section under a medicare-approved prescription 

9 drug plan may only be made electronically 

10 through the use of an electronic prescription 

11 card system (in this paragraph referred to as 

12 the ‘system’). 

13 ‘‘(B) STANDARDS FOR ELECTRONIC PRE14 SCRIPTION CARD SYSTEM.—The Secretary shall 

15 establish standards for the system, including 

16 the following: 

17 ‘‘(i) CARDS.—Standards for claims 

18 cards to be used by designees under the 

19 system. 

20 ‘‘(ii) COORDINATION OF ELECTRONIC

21 INFORMATION.—Standards for the real22 time transmittal among pharmacies, medi23 care-approved prescription drug plans, and 

24 the Secretary (including an appropriate 

25 data clearinghouse operated by or under 
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1 contract with the Secretary) of information 

2 on expenses incurred for covered out3 patient prescription drugs by designees. 

4 ‘‘(iii) CONFIDENTIALITY.—Standards 

5 that assure the confidentiality of individ6 ually identifiable information of designees 

7 and that are consistent with the regula8 tions promulgated under section 264(c) of 

9 the Health Insurance Portability and Ac10 countability Act of 1996. 

11 ‘‘(4) ACCEPTANCE OF CLAIMS THROUGH ALL

12 QUALIFYING PHARMACIES.—A medicare-approved 

13 prescription drug plan shall provide for acceptance 

14 and process of claims for designees from any phar15 macy that meets standards the Secretary has estab16 lished under paragraph (3) to carry out real-time 

17 transmittal of claims to such plans and that provides 

18 for disclosure, in the case of dispensing of a brand 

19 name drug to a designee, of information on the 

20 availability of generic equivalents at reduced cost to 

21 the designee. 

22 ‘‘(5) REQUIREMENT TO NEGOTIATE DISCOUNTS

23 AND GENERIC EQUIVALENTS.—A medicare-approved 

24 prescription drug plan shall provide designees of the 

25 plan with the following: 
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1 ‘‘(A) NEGOTIATED PRICES.—Access to ne2 gotiated prices (including applicable discounts) 

3 used for payment for covered outpatient drugs, 

4 regardless of the fact that no benefits or only 

5 partial benefits may be payable with respect to 

6 such drugs because of the application of the de7 ductible under subsection (a)(2) or copayment 

8 under subsection (a)(3). 

9 ‘‘(B) GENERIC EQUIVALENTS.—Informa10 tion on the availability of generic equivalents at 

11 reduced cost to such designees. 

12 ‘‘(6) TREATMENT OF NONPREFERRED BRAND

13 NAME DRUGS.—

14 ‘‘(A) PROCEDURES REGARDING THE DE15 TERMINATION OF DRUGS THAT ARE MEDICALLY

16 NECESSARY.—

17 ‘‘(i) IN GENERAL.—A medicare-ap18 proved prescription drug plan shall have in 

19 place procedures on a case-by-case basis to 

20 treat a nonpreferred brand name drug as 

21 a preferred brand name drug for purposes 

22 of subsection (a) if the nonpreferred brand 

23 name drug is determined—

24 ‘‘(I) to be not as effective for the 

25 designee in preventing or slowing the
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1 deterioration of, or improving or 

2 maintaining, the health of the indi3 vidual; or 

4 ‘‘(II) to have a significant ad5 verse effect on the individual. 

6 ‘‘(ii) REQUIREMENT.—The procedures 

7 under clause (i) shall require that deter8 minations under such clause are based on 

9 professional medical judgment, the medical 

10 condition of the enrollee, and other medical 

11 evidence. 

12 ‘‘(B) PROCEDURES REGARDING APPEAL

13 RIGHTS WITH RESPECT TO DENIALS OF

14 CARE.—Such a plan shall have in place proce15 dures to ensure a timely internal review (and 

16 timely independent external review) for resolu17 tion of denials of coverage in accordance with 

18 the medical exigencies of the case in accordance 

19 with requirements established by the Secretary 

20 that are comparable to such requirements for 

21 Medicare+Choice organizations under part C 

22 and to ensure notice to designees regarding 

23 such procedures. A designee shall have the fur24 ther right to an appeal of such a denial of cov25 erage in the same manner as is provided under 
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1 section 1852(g)(5) in the case of a failure to re2 ceive health services under a Medicare+Choice 

3 plan. 

4 ‘‘(7) PROMPT PAYMENT OF PHARMACIES FOR

5 COVERED BENEFITS.—Medicare-approved prescrip6 tion drug plans shall provide for payment to quali7 fying pharmacies of benefits under subsection (a)(4) 

8 promptly in accordance with rules no less generous 

9 than the rules applicable under section 

10 1842(c)(2)(B). 

11 ‘‘(8) EDUCATION.—Medicare-approved prescrip12 tion drug plans shall apply methods to identify and 

13 educate providers, pharmacists, and designees re14 garding—

15 ‘‘(A) instances or patterns concerning the 

16 unnecessary or inappropriate prescribing or dis17 pensing of covered outpatient prescription 

18 drugs; 

19 ‘‘(B) instances or patterns of substandard 

20 care; 

21 ‘‘(C) potential adverse reactions to covered 

22 outpatient prescription drugs; 

23 ‘‘(D) inappropriate use of antibiotics; 

24 ‘‘(E) appropriate use of generic products; 

25 and 
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1 ‘‘(F) the importance of using covered out2 patient prescription drugs in accordance with 

3 the instruction of prescribing providers. 

4 ‘‘(9) NOT AT FINANCIAL RISK.—The entity of5 fering a medicare-approved prescription drug plan 

6 shall not be at financial risk for the provision of 

7 high-deductible prescription drug coverage under the 

8 plan to designees, but there shall be performance in9 centives (based on risk corridors negotiated between 

10 the entity and the Secretary and subject to audit) in 

11 relation to the administration of the contract and 

12 the entity’s ability to reduce costs through appro13 priate incentive mechanisms. 

14 ‘‘(10) PROVISION OF DATA.—The entity offer15 ing such a plan shall provide the Secretary with such 

16 information as is required to make payments to the 

17 entity under this section. 

18 ‘‘(d) PRESCRIPTION DRUG DISCOUNT CARD

19 PLANS.—

20 ‘‘(1) SOLICITATION OF BIDS.—The Secretary 

21 shall solicit bids from entities to offer prescription 

22 drug discount card plans to individuals enrolled 

23 under this part either nationwide or in large geo24 graphic areas. The Secretary shall award bids in a 

25 manner so that such plans are offered in all areas 
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1 of the United States. The Secretary may not award 

2 a contract based on such a bid to an entity with re3 spect to a plan unless the entity and plan meet the 

4 applicable requirements to be a medicare-approved 

5 prescription drug plan under this section. 

6 ‘‘(2) LIMITATION ON BENEFITS.—The entity of7 fering a prescription drug discount card plan shall 

8 not offer (or charge for) benefits to designees of the 

9 plan in addition to high-deductible prescription drug 

10 coverage, access to negotiated prices, and other ben11 efits required under this section and, in the case of 

12 subsidy eligible individuals, benefits under subsection 

13 (h). 

14 ‘‘(e) PAYMENT OF PLANS.—

15 ‘‘(1) IN GENERAL.—The Secretary shall pro16 vide, in the contract entered into between the Sec17 retary and entities that offer medicare-approved pre18 scription drug plans, for payment to the plans for 

19 high-deductible prescription drug coverage offered 

20 through the plan, including expanded coverage for 

21 low-income individuals under subsection (g) and tak22 ing into account performance incentives described in 

23 paragraph (2). In addition, in the case of prescrip24 tion drug discount card plans, the Secretary shall 

25 provide for payment of administrative costs in car-
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1 rying out the contract (taking into account the per2 formance incentives described in paragraph (2)), 

3 based on rates negotiated between the Secretary and 

4 the entity in the solicitation process under sub5 section (d). 

6 ‘‘(2) INCENTIVES FOR COST AND UTILIZATION

7 MANAGEMENT AND QUALITY IMPROVEMENT.—The 

8 Secretary shall include in the contract such financial 

9 or other performance incentives for cost and utiliza10 tion management and quality improvement as the 

11 Secretary may deem appropriate. 

12 ‘‘(f) COVERED OUTPATIENT PRESCRIPTION DRUGS

13 DEFINED.—

14 ‘‘(1) IN GENERAL.—Except as provided in this 

15 subsection, for purposes of this section, the term 

16 ‘covered outpatient prescription drug’ means—

17 ‘‘(A) a drug that may be dispensed only 

18 upon a prescription and that is described in 

19 subparagraph (A)(i) or (A)(ii) of section 

20 1927(k)(2); or 

21 ‘‘(B) a biological product described in 

22 clauses (i) through (iii) of subparagraph (B) of 

23 such section or insulin described in subpara24 graph (C) of such section, 
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1 and such term includes a vaccine licensed under sec2 tion 351 of the Public Health Service Act and any 

3 use of a covered outpatient drug for a medically ac4 cepted indication (as defined in section 1927(k)(6)). 

5 ‘‘(2) EXCLUSIONS.—

6 ‘‘(A) IN GENERAL.—Such term does not 

7 include drugs or classes of drugs, or their med8 ical uses, which may be excluded from coverage 

9 or otherwise restricted under section 

10 1927(d)(2), other than subparagraph (E) there11 of (relating to smoking cessation agents), or 

12 under section 1927(d)(3), as the Secretary may 

13 specify and does not include such other medi14 cines, classes, and uses as the Secretary may 

15 specify consistent with the goals of providing 

16 quality care and containing costs under this 

17 section. 

18 ‘‘(B) AVOIDANCE OF DUPLICATE COV19 ERAGE.—A drug prescribed for an individual 

20 that would otherwise be a covered outpatient 

21 prescription drug under this section shall not be 

22 so considered if payment for such drug is avail23 able under part A or under this part (other 

24 than under this section).’’. 

25 (b) NO EFFECT ON PART B PREMIUM.—
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1 (1) IN GENERAL.—Section 1839(a) (42 U.S.C. 

2 1395r(a)) is amended by adding at the end the fol3 lowing new paragraph: 

4 ‘‘(5) Notwithstanding the previous provisions of this 

5 subsection, in computing actuarial rates there shall not be 

6 taken into account benefits and administrative costs that 

7 are attributable to the prescription drug coverage provided 

8 under section 1845.’’. 

9 (2) GOVERNMENT CONTRIBUTION.—Section 

10 1844(a)(1) (42 U.S.C. 1395w(a)(1)) is amended—

11 (A) by striking ‘‘plus’’ at the end of sub12 paragraph (A); 

13 (B) by striking ‘‘; plus’’ at the end of sub14 paragraph (B) and inserting ‘‘, plus’’; and 

15 (C) by adding at the end the following new 

16 subparagraph: 

17 ‘‘(C) a Government contribution equal to the 

18 aggregate amounts expended from the Trust Fund 

19 for benefits and administrative expenses attributable 

20 to the prescription drug coverage provided under 

21 section 1845; plus’’. 

22 (c) MEDICARE AS PRIMARY PAYOR.—Section 

23 1862(b) (42 U.S.C. 1395y(b)) is amended by adding at 

24 the end the following new paragraph: 
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1 ‘‘(7) EXCEPTION FOR OUTPATIENT PRESCRIP2 TION DRUG BENEFIT.—The previous provisions of 

3 this subsection shall not apply to benefits provided 

4 under section 1845.’’. 

5 TITLE II—BENEFITS FOR LOW6 INCOME BENEFICIARIES 

7 SEC. 201. BENEFITS FOR LOW-INCOME BENEFICIARIES. 

8 (a) IN GENERAL.—Section 1845, as inserted by sec9 tion 101(b), is amended by adding at the end the following 

10 new subsection: 

11 ‘‘(g) FIRST DOLLAR COVERAGE FOR CERTAIN LOW12 INCOME INDIVIDUALS.—

13 ‘‘(1) IN GENERAL.—In the case of a subsidy eli14 gible individual (as defined in paragraph (2)), this 

15 section shall be applied as if the annual deductible 

16 were equal to zero but, with respect to costs incurred 

17 before the amount of the annual deductible other18 wise applicable, the following copayment amounts 

19 shall apply: 

20 ‘‘(A) 20 PERCENT COPAYMENT FOR INDI21 VIDUALS WITH INCOMES UP TO 135 PERCENT

22 OF POVERTY.—For subsidy eligible individuals 

23 with income that does not exceed 135 percent 

24 of the poverty line, the copayment amounts 

25 shall be the copayments amounts specified in 
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1 subsection (a)(3), which reflects an average 

2 benefit percentage of 80 percent. 

3 ‘‘(B) 30 PERCENT COPAYMENT FOR INDI4 VIDUALS WITH INCOMES BETWEEN 135 AND 150

5 PERCENT OF POVERTY.—For subsidy eligible 

6 individuals with income that exceeds 135 per7 cent (but does not exceed 150 percent) of the 

8 poverty line, the copayment amounts shall be 

9 the copayments amounts specified in subsection 

10 (a)(3) increased by 50 percent, which reflects 

11 an average benefit percentage of 70 percent. 

12 ‘‘(C) 50 PERCENT COPAYMENT FOR INDI13 VIDUALS WITH INCOMES ABOVE 150 PERCENT

14 OF POVERTY.—For subsidy eligible individuals 

15 with income that exceeds 150 percent of the 

16 poverty line, the copayment amounts shall be 

17 the copayments amounts specified in subsection 

18 (a)(3) increased by 150 percent, which reflects 

19 an average benefit percentage of 50 percent. 

20 ‘‘(2) DETERMINATION OF ELIGIBILITY.—

21 ‘‘(A) SUBSIDY ELIGIBLE INDIVIDUAL DE22 FINED.—For purposes of this subsection, sub23 ject to subparagraph (D), the term ‘subsidy eli24 gible individual’ means an individual who—

25 ‘‘(i) is enrolled under this part; 
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1 ‘‘(ii) has income below 150 percent 

2 (or such higher percent, not to exceed 200 

3 percent, as a State may specify under sub4 paragraph (B)) of the Federal poverty line; 

5 and 

6 ‘‘(iii) is not eligible for medical assist7 ance with respect to prescription drugs 

8 under title XIX. 

9 For purposes of this section, an individual shall not 

10 be treated as eligible for medical assistance with re11 spect to prescription drugs under title XIX (includ12 ing under a waiver under section 1115) only if, with 

13 respect to such assistance, the individual is charged 

14 a copayment greater than a nominal amount (as de15 scribed in section 1916(a)(3)) and there is no 

16 monthly or similar dollar limit established for the 

17 amount of such assistance over any period of time. 

18 ‘‘(B) COVERAGE OF INDIVIDUALS WITH IN19 COME UP TO 200 PERCENT OF POVERTY AT

20 STATE OPTION.—One of the 50 States or the 

21 District of Columbia may, at its option and 

22 subject to section 1935(c), specify a percent of 

23 income, that exceeds 150 percent but does not 

24 exceed 200 percent, that will apply for purposes
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1 of this subsection to individuals residing in the 

2 State. 

3 ‘‘(C) DETERMINATIONS.—The determina4 tion of whether an individual residing in a State 

5 is a subsidy eligible individual shall be deter6 mined under the State medicaid plan for the 

7 State under section 1935(a) or by the Social 

8 Security Administration. There are authorized 

9 to be appropriated to the Social Security Ad10 ministration such sums as may be necessary for 

11 the determination of eligibility under this sub12 paragraph. 

13 ‘‘(D) INCOME DETERMINATIONS.—For 

14 purposes of applying this subsection—

15 ‘‘(i) income shall be determined in the 

16 manner no less restrictive than the manner 

17 described in section 1905(p)(1)(B); and 

18 ‘‘(ii) the term ‘Federal poverty line’ 

19 means the official poverty line (as defined 

20 by the Office of Management and Budget, 

21 and revised annually in accordance with 

22 section 673(2) of the Omnibus Budget 

23 Reconciliation Act of 1981) applicable to a 

24 family of the size involved. 
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1 ‘‘(E) TREATMENT OF TERRITORIAL RESI2 DENTS.—In the case of an individual who is not 

3 a resident of the 50 States or the District of 

4 Columbia, the individual is not eligible to be a 

5 subsidy eligible individual but may be eligible 

6 for financial assistance with prescription drug 

7 expenses under section 1935(f). 

8 ‘‘(3) ADMINISTRATION OF SUBSIDY PRO9 GRAM.—The Secretary shall provide a process 

10 whereby, in the case of an individual who is deter11 mined to be a subsidy eligible individual and who is 

12 enrolled in a medicare-approved prescription drug 

13 plan—

14 ‘‘(A) the Secretary provides for a notifica15 tion of the entity offering the plan that the in16 dividual is eligible for a subsidy under para17 graph (1); 

18 ‘‘(B) such entity adjusts the benefits for 

19 prescription drug coverage accordingly and sub20 mits to the Secretary information on the 

21 amount of such benefits provided; and 

22 ‘‘(C) the Secretary periodically and on a 

23 timely basis reimburses the entity for the 

24 amount of such benefits (including reasonable 

25 related administrative costs) that are provided 
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1 only because of the application of this sub2 section. 

3 ‘‘(4) RELATION TO MEDICAID PROGRAM.—

4 ‘‘(A) IN GENERAL.—For provisions pro5 viding for eligibility determinations, and addi6 tional financing, under the medicaid program, 

7 see section 1935. 

8 ‘‘(B) COORDINATION.—The Secretary shall 

9 develop and implement a plan for the coordina10 tion of prescription drug benefits under this 

11 part with the benefits provided under the med12 icaid program under title XIX, with particular 

13 attention to insuring coordination of payments 

14 and prevention of fraud and abuse. In devel15 oping and implementing such plan, the Sec16 retary shall involve the States, the data proc17 essing industry, pharmacists, and pharma18 ceutical manufacturers, and other experts and 

19 representatives of low-income medicare bene20 ficiaries. 

21 ‘‘(C) EXEMPTION.—Section 1902(n) shall 

22 not apply with respect to coverage of cost-shar23 ing imposed under paragraph (1) or under sub24 section (a)(3).’’. 

25 (b) MEDICAID AMENDMENTS.—
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1 (1) DETERMINATIONS OF ELIGIBILITY FOR

2 LOW-INCOME SUBSIDIES.—

3 (A) REQUIREMENT.—Section 1902(a) (42 

4 U.S.C. 1396a(a)) is amended—

5 (i) by striking ‘‘and’’ at the end of 

6 paragraph (64); 

7 (ii) by striking the period at the end 

8 of paragraph (65) and inserting ‘‘; and’’; 

9 and 

10 (iii) by inserting after paragraph (65) 

11 the following new paragraph: 

12 ‘‘(66) provide for making eligibility determina13 tions under sections 1845(g) and 1935(a).’’. 

14 (2) NEW SECTION.—Title XIX of such Act is 

15 further amended—

16 (A) by redesignating section 1935 as sec17 tion 1936; and 

18 (B) by inserting after section 1934 the fol19 lowing new section: 

20 ‘‘SPECIAL PROVISIONS RELATING TO MEDICARE

21 PRESCRIPTION DRUG BENEFIT

22 ‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI23 BILITY DETERMINATIONS FOR LOW-INCOME SUBSIDY.—

24 ‘‘(1) IN GENERAL.—As a condition of its State 

25 plan under this title under section 1902(a)(66) and
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1 receipt of any Federal financial assistance under sec2 tion 1903(a), a State shall—

3 ‘‘(A) make determinations of eligibility for 

4 subsidies under (and in accordance with) sec5 tion 1845(g); 

6 ‘‘(B) inform the Secretary of such deter7 minations in cases in which such eligibility is 

8 established; and 

9 ‘‘(C) otherwise provide the Secretary with 

10 such information as may be required to carry 

11 out section 1845. 

12 ‘‘(2) STATE OPTION FOR COVERAGE OF ADDI13 TIONAL LOW-INCOME INDIVIDUALS.—A State may 

14 elect under paragraph (2)(B) of section 1845(g) to 

15 cover additional low-income medicare beneficiaries 

16 under the prescription drug subsidy program pro17 vided under such subsection, subject to contribution 

18 under subsection (c). 

19 ‘‘(b) PAYMENTS FOR ADDITIONAL ADMINISTRATIVE

20 COSTS.—

21 ‘‘(1) IN GENERAL.—The amounts expended by 

22 a State in carrying out subsection (a) are, subject to 

23 paragraph (2), expenditures reimbursable under the 

24 appropriate paragraph of section 1903(a); except 

25 that, notwithstanding any other provision of such 
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1 section, the applicable Federal matching rates with 

2 respect to such expenditures under such section shall 

3 be increased as follows (but in no case shall the rate 

4 as so increased exceed 100 percent): 

5 ‘‘(A) For expenditures attributable to costs 

6 incurred during 2005, the otherwise applicable 

7 Federal matching rate shall be increased by 10 

8 percent of the percentage otherwise payable 

9 (but for this subsection) by the State. 

10 ‘‘(B)(i) For expenditures attributable to 

11 costs incurred during 2006 and each subse12 quent year through 2013, the otherwise applica13 ble Federal matching rate shall be increased by 

14 the applicable percent (as defined in clause (ii)) 

15 of the percentage otherwise payable (but for 

16 this subsection) by the State. 

17 ‘‘(ii) For purposes of clause (i), the ‘appli18 cable percent’ for—

19 ‘‘(I) 2006 is 20 percent; or 

20 ‘‘(II) a subsequent year is the applica21 ble percent under this clause for the pre22 vious year increased by 10 percentage 

23 points. 

24 ‘‘(C) For expenditures attributable to costs 

25 incurred after 2013, the otherwise applicable 
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1 Federal matching rate shall be increased to 100 

2 percent. 

3 ‘‘(2) COORDINATION.—The State shall provide 

4 the Secretary with such information as may be nec5 essary to properly allocate administrative expendi6 tures described in paragraph (1) that may otherwise 

7 be made for similar eligibility determinations. 

8 ‘‘(c) STATE CONTRIBUTION AT SCHIP MATCHING

9 RATE TOWARDS ADDITIONAL LOW-INCOME SUBSIDIES

10 FOR OPTIONAL SUBSIDY ELIGIBLE INDIVIDUALS COV11 ERED UNDER STATE OPTION.—In the case of a State that 

12 specifies a percent of income under section 1845(g)(2)(B) 

13 for a quarter, the amount of payment made to the State 

14 under section 1903(a)(1) for the quarter shall be reduced 

15 by the product of—

16 ‘‘(1) 100 percent less the enhanced FMAP de17 scribed in section 2105(b) for that State and quar18 ter; and 

19 ‘‘(2) the additional amount of payment made 

20 under section 1845 because of the application of 

21 such specification.’’. 

22 (b) PHASED-IN FEDERAL ASSUMPTION OF MEDICAID

23 RESPONSIBILITY FOR COST-SHARING SUBSIDIES FOR DU24 ALLY ELIGIBLE INDIVIDUALS.—
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1 (1) IN GENERAL.—Section 1903(a)(1) (42 

2 U.S.C. 1396b(a)(1)) is amended by inserting before 

3 the semicolon the following: ‘‘, reduced by the 

4 amount computed under section 1935(d)(1) for the 

5 State and the quarter’’. 

6 (2) AMOUNT DESCRIBED.—Section 1935, as in7 serted by subsection (a)(2), is amended by adding at 

8 the end the following new subsection: 

9 ‘‘(d) FEDERAL ASSUMPTION OF MEDICAID PRE10 SCRIPTION DRUG COSTS FOR DUALLY-ELIGIBLE BENE11 FICIARIES.—

12 ‘‘(1) IN GENERAL.—For purposes of section 

13 1903(a)(1), for a State that is one of the 50 States 

14 or the District of Columbia for a calendar quarter 

15 in a year (beginning with 2005) the amount com16 puted under this subsection is equal to the product 

17 of the following: 

18 ‘‘(A) MEDICARE BENEFITS FOR MEDICAID

19 ELIGIBLES.—The total amount of payments 

20 made in the quarter because of the operation of 

21 section 1845 that are attributable to individuals 

22 who are residents of the State and are eligible 

23 for medical assistance with respect to prescrip24 tion drugs under this title.
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1 ‘‘(B) STATE MATCHING RATE.—A propor2 tion computed by subtracting from 100 percent 

3 the Federal medical assistance percentage (as 

4 defined in section 1905(b)) applicable to the 

5 State and the quarter. 

6 ‘‘(C) PHASE-OUT PROPORTION.—The 

7 phase-out proportion (as defined in paragraph 

8 (2)) for the quarter. 

9 ‘‘(2) PHASE-OUT PROPORTION.—For purposes 

10 of paragraph (1)(C), the ‘phase-out proportion’ for 

11 a calendar quarter in—

12 ‘‘(A) 2005 is 90 percent; 

13 ‘‘(B) a subsequent year before 2014, is the 

14 phase-out proportion for calendar quarters in 

15 the previous year decreased by 10 percentage 

16 points; or 

17 ‘‘(C) a year after 2013 is 0 percent.’’. 

18 (3) MEDICAID PROVIDING WRAP-AROUND BENE19 FITS.—Section 1935, as so inserted and amended, is 

20 further amended by adding at the end the following 

21 new subsection: 

22 ‘‘(e) MEDICAID AS SECONDARY PAYOR.—In the case 

23 of an individual who is entitled to benefits under part B 

24 of title XVIII and is eligible for medical assistance with 

25 respect to prescribed drugs under this title, medical assist-
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1 ance shall continue to be provided under this title for pre2 scribed drugs to the extent payment is not made under 

3 such part B, without regard to section 1902(n)(2).’’. 

4 (d) TREATMENT OF TERRITORIES.—

5 (1) IN GENERAL.—Section 1935 of such Act, as 

6 so inserted and amended, is further amended—

7 (A) in subsection (a) in the matter pre8 ceding paragraph (1), by inserting ‘‘subject to 

9 subsection (f)’’ after ‘‘section 1903(a)’’; 

10 (B) in subsection (c)(1), by inserting ‘‘sub11 ject to subsection (f)’’ after ‘‘1903(a)(1)’’; and 

12 (C) by adding at the end the following new 

13 subsection: 

14 ‘‘(f) TREATMENT OF TERRITORIES.—

15 ‘‘(1) IN GENERAL.—In the case of a State, 

16 other than the 50 States and the District of Colum17 bia—

18 ‘‘(A) the previous provisions of this section 

19 shall not apply to residents of such State; and 

20 ‘‘(B) if the State establishes a plan de21 scribed in paragraph (2) (for providing medical 

22 assistance with respect to the provision of pre23 scription drugs to medicare beneficiaries under 

24 section 1845(g)), the amount otherwise deter25 mined under section 1108(f) (as increased 
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1 under section 1108(g)) for the State shall be in2 creased by the amount specified in paragraph 

3 (3). 

4 ‘‘(2) PLAN.—The plan described in this para5 graph is a plan that—

6 ‘‘(A) provides medical assistance under 

7 section 1845(g) with respect to the provision of 

8 covered outpatient drugs to low-income medi9 care beneficiaries whose income does not exceed 

10 an income level specified under the plan; and 

11 ‘‘(B) assures that additional amounts re12 ceived by the State that are attributable to the 

13 operation of this subsection are used only for 

14 such assistance. 

15 ‘‘(3) INCREASED AMOUNT.—

16 ‘‘(A) IN GENERAL.—The amount specified 

17 in this paragraph for a State for a year is equal 

18 to the product of—

19 ‘‘(i) the aggregate amount specified in 

20 subparagraph (B); and 

21 ‘‘(ii) the amount specified in section 

22 1108(g)(1) for that State, divided by the 

23 sum of the amounts specified in such sec24 tion for all such States. 
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1 ‘‘(B) AGGREGATE AMOUNT.—The aggre2 gate amount specified in this subparagraph 

3 for—

4 ‘‘(i) 2005, is equal to $25,000,000; or 

5 ‘‘(ii) a subsequent year, is equal to the 

6 aggregate amount specified in this sub7 paragraph for the previous year increased 

8 by annual percentage increase specified in 

9 section 1845(a)(2)(B) for the year in10 volved. 

11 ‘‘(4) REPORT.—The Secretary shall submit to 

12 Congress a report on the application of this sub13 section and may include in the report such rec14 ommendations as the Secretary deems appropriate.’’. 

15 (2) CONFORMING AMENDMENT.—Section 

16 1108(f) (42 U.S.C. 1308(f)) is amended by inserting 

17 ‘‘and section 1935(f)(1)(B)’’ after ‘‘Subject to sub18 section (g)’’. 

19 SEC. 202. IMPROVING ENROLLMENT PROCESS UNDER MED20 ICAID. 

21 (a) AUTOMATIC REENROLLMENT WITHOUT NEED

22 TO REAPPLY.—

23 (1) IN GENERAL.—Section 1905(p) (42 U.S.C. 

24 1396d(p)) is amended—
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1 (A) by redesignating paragraph (6) as 

2 paragraph (9); and 

3 (B) by inserting after paragraph (5), the 

4 following new paragraph: 

5 ‘‘(6) In the case of an individual who has been deter6 mined to qualify as a qualified medicare beneficiary or to 

7 be eligible for benefits under section 1902(a)(10)(E)(iii), 

8 the individual shall be deemed to continue to be so quali9 fied or eligible without the need for any annual or periodic 

10 application unless and until the individual notifies the 

11 State that the individual’s eligibility conditions have 

12 changed so that the individual is no longer so qualified 

13 or eligible.’’. 

14 (2) CONFORMING AMENDMENT.—Section 

15 1902(e)(8) (42 U.S.C. 1396a(e)(8)) is amended by 

16 striking the second sentence. 

17 (b) USE OF SIMPLIFIED APPLICATION PROCESS.—

18 Such section 1905(p) is further amended by adding at the 

19 end the following new paragraph: 

20 ‘‘(7) A State shall permit individuals to apply to qual21 ify as a qualified medicare beneficiary or for benefits 

22 under section 1902(a)(10)(E)(iii) through the use of the 

23 simplified application form developed under section 

24 1905(p)(5)(A) and shall permit such an application to be 

25 made over the telephone, the Internet, or by mail, without 
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1 the need for an interview in person by the applicant or 

2 a representative of the applicant.’’. 

3 (c) ROLE OF SOCIAL SECURITY OFFICES.—

4 (1) ENROLLMENT AND PROVISION OF INFORMA5 TION AT SOCIAL SECURITY OFFICES.—Such section 

6 is further amended by adding at the end the fol7 lowing new paragraph: 

8 ‘‘(8) The Commissioner of Social Security shall pro9 vide, through local offices of the Social Security Adminis10 tration—

11 ‘‘(A) for the enrollment under State plans 

12 under this title for appropriate medicare cost-shar13 ing benefits for individuals who qualify as a qualified 

14 medicare beneficiary or for benefits under section 

15 1902(a)(10)(E)(iii); and 

16 ‘‘(B) for providing oral and written notice of 

17 the availability of such benefits.’’. 

18 (2) CLARIFYING AMENDMENT.—Section 

19 1902(a)(5) (42 U.S.C. 1396a(a)(5)) is amended by 

20 inserting ‘‘as provided in section 1905(p)(10)’’ be21 fore ‘‘except’’. 

22 (d) OUTSTATIONING OF STATE ELIGIBILITY WORK23 ERS AT SSA FIELD OFFICES.—Section 1902(a)(55) (42 

24 U.S.C. 1396a(a)(55)) is amended—
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1 (1) by striking ‘‘subsection (a)(10)(A)(i)(IV), 

2 (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 

3 (a)(10)(A)(ii)(IX)’’ and inserting ‘‘paragraph 

4 (10)(A)(i)(IV), (10)(A)(i)(VI), (10)(A)(i)(VII), 

5 (10)(A)(ii)(IX), or (10)(E)’’; and 

6 (2) in subparagraph (A), by inserting ‘‘and in 

7 the case of applications of individuals for medical as8 sistance under paragraph (10)(E), at locations that 

9 include field offices of the Social Security Adminis10 tration’’.

Æ