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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1568 Introduced in House (IH)]

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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Rx Now 
Act of 2003''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) Table of Contents.--The table of contents of 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.

SEC. 2. PURPOSE.

    The purpose of this Act is to provide for outpatient prescription 
drug benefits to medicare beneficiaries in the following manner:
            (1) Medicare beneficiaries enrolled under medicare part B 
        qualify for outpatient prescription drug benefits after an 
        annual deductible (initially set at $4,000) has been met. This 
        benefit is available without any additional premium.
            (2) There are fixed dollar copayments for this coverage, 
        with the average of such copayments equal to 20 percent of the 
        benefits and the amount of the copayments varying depending 
        upon whether the drugs are generic, preferred brand-name, or 
        non-preferred brand-name drugs.
            (3) The benefits are provided through medicare-approved 
        prescription drug plans. These plans may be current plans, such 
        as Medicare+Choice plans, employer-based retiree coverage, 
        medigap plans, State assistance programs, medicaid, drug 
        discount card plans, and other qualified plans (as determined 
        by the Secretary). All of these plans must offer, in addition 
        to the high-deductible coverage, discounts for prescription 
        drugs both while the annual deductible is being satisfied and 
        after it is satisfied.
            (4) To assure access to medicare-approved prescription drug 
        plans for all medicare beneficiaries, the Secretary will 
        solicit bids for prescription drug discount plans that will be 
        available in all geographic regions to all medicare 
        beneficiaries.
            (5) All pharmacies that comply with electronic claims 
        processing standards may provide drugs under the program.
            (6) The Act also provides for the availability of 
        additional benefits in the form of a waiver of the annual 
        deductible, thereby providing immediate entitlement to 
        prescription drug benefits, for medicare beneficiaries who have 
        incomes under 200 percent of the poverty line and who are not 
        eligible for medicaid prescription drug benefits.

    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.

    (a) Coverage.--Section 1832(a) (42 U.S.C. 1395k(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (1);
            (2) by striking the period at the end of paragraph (2) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(3) entitlement to have payment made on his behalf 
        (subject to the provisions of this part) for high-deductible 
        outpatient prescription drug coverage under section 1845.''.
    (b) Description of High-Deductible Prescription Drug Benefit.--
Title XVIII is amended by inserting after section 1844 the following 
new section:

                ``outpatient prescription drug coverage

    ``Sec. 1845. (a) High-Deductible Outpatient Prescription Drug 
Coverage Defined.--
            ``(1) In general.--For purposes of this part, the term 
        `high-deductible outpatient prescription drug coverage' means 
        payment of--
                    ``(A) expenses for covered outpatient prescription 
                drugs incurred in a year after the individual has 
                incurred expenses for such drugs in the year of an 
                amount equal to the annual deductible specified in 
                paragraph (2); reduced by
                    ``(B) cost-sharing described in paragraph (3).
            ``(2) Annual deductible.--
                    ``(A) In general.--The annual deductible under this 
                paragraph--
                            ``(i) for 2005 is equal to $4,000; and
                            ``(ii) for a subsequent year is equal to 
                        the amount specified in subparagraph (B) for 
                        that year, except that, if the amount specified 
                        in such subparagraph is not a multiple of $10, 
                        it shall be rounded to the nearest multiple of 
                        $10.
                    ``(B) Inflationary adjustment.--The amount 
                specified in this subparagraph--
                            ``(i) for 2005, is $4,000; or
                            ``(ii) the amount specified in this 
                        subparagraph for a subsequent year is the 
                        amount specified in this subparagraph for the 
                        previous year increased by the annual 
                        percentage increase in average per capita 
                        aggregate expenditures for covered outpatient 
                        prescription drugs in the United States for 
                        medicare beneficiaries, as determined by the 
                        Secretary for the 12-month period ending in 
                        July of the previous year.
            ``(3) Cost-sharing.--
                    ``(A) Three-tiered copayment structure.--Subject to 
                the succeeding provisions of this paragraph, in the 
                case of a covered outpatient drug that is dispensed in 
                a year to an eligible individual, the individual shall 
                be responsible for a copayment for the drug in an 
                amount equal to the following (or, if less, the price 
                for the drug negotiated pursuant to subsection (c)(5)):
                            ``(i) Generic drugs.--In the case of a 
                        generic covered outpatient drug, the base 
                        copayment amount specified in accordance with 
                        subparagraph (B) for each prescription (as 
                        defined by the Secretary) of such drug.
                            ``(ii) Preferred brand name drugs.--In the 
                        case of a preferred brand name covered 
                        outpatient drug, 4 times the copayment amount 
                        applied under clause (i) for each prescription 
                        (as so defined) of such drug.
                            ``(iii) Nonpreferred brand name drug.--In 
                        the case of a nonpreferred brand name covered 
                        outpatient drug, 150 percent of the copayment 
                        amount applied under clause (ii) for each 
                        prescription (as so defined) of such drug.
                    ``(B) Establishment of base copayment amount 
                consistent with 80:20 benefit ratio.--For each year 
                beginning with 2005 the Secretary shall establish a 
                base copayment amount in a manner consistent with the 
                principle (subject to reasonable rounding rules) that 
                the ratio of the aggregate amount of benefits provided 
                under this section to the aggregate copayments under 
                this paragraph for each year should be approximately 
                equal to 80 to 20.
                    ``(C) Discounts allowed for network pharmacies.--A 
                medicare-approved prescription drug plan may reduce 
                copayments for its designees below the level otherwise 
                provided under this paragraph, but in no case shall 
                such a reduction result in an increase in payments made 
                by the Secretary under this section to a plan.
                    ``(D) Treatment of medically necessary nonpreferred 
                drugs.--A nonpreferred brand name drug shall be treated 
                as a preferred brand name drug under this paragraph if 
                such nonpreferred drug is determined (pursuant to 
                procedures established under subsection (c)(6)) to be 
                medically necessary.
                    ``(E) Requirement for designation of preferred 
                brand name drugs.--Within each category of therapeutic-
                equivalent covered outpatient prescription drugs (as 
defined by the Secretary), each medicare-approved prescription drug 
plan shall provide for the designation of at least one preferred brand 
name covered outpatient drug.
            ``(4) Payment of benefits beyond deductible.--
                    ``(A) In general.--There shall be paid from the 
                Federal Supplementary Medical Insurance Trust Fund, in 
                the case of each individual who is covered under the 
                insurance program established by this part and incurs 
                expenses for covered outpatient prescription drugs with 
                respect to which benefits are payable under this 
                section, amounts equal to the amounts provided under 
                paragraph (1).
                    ``(B) Counting of incurred expenses.--Expenses with 
                respect to covered outpatient prescription drugs under 
                this section shall--
                            ``(i) be treated as incurred regardless of 
                        whether they are reimbursed by a third-party 
                        payor;
                            ``(ii) not be treated as incurred unless 
                        the expenses were incurred during a period in 
                        which the individual was covered under this 
                        part; and
                            ``(iii) not be treated as incurred unless 
                        information concerning the transaction giving 
                        rise to such expenses has been electronically 
                        transmitted by the pharmacy or other entity 
                        dispensing the covered outpatient prescription 
                        drugs to the medicare-approved prescription 
                        drug plan consistent with electronic claims 
                        standards established under subsection 
                        (c)(3).''.

SEC. 102. PROVISION OF BENEFITS THROUGH MEDICARE APPROVED PRESCRIPTION 
              DRUG PLANS.

    (a) In General.--Section 1845 of the Social Security Act, as 
inserted by section 101(a), is further amended by adding at the end the 
following:
    ``(b) Provision of Benefits Through a Medicare Approved 
Prescription Drug Plan.--
            ``(1) In general.--In the case of an individual entitled to 
        benefits for high-deductible outpatient prescription drug 
        coverage under this section, the individual shall obtain such 
        benefits through a medicare-approved prescription drug plan 
        that is designated under this subsection.
            ``(2) Designation process.--The Secretary shall provide for 
        a process for designation of medicare-approved prescription 
        drug plans consistent with the following:
                    ``(A) Frequency of designations.--The Secretary 
                shall permit individuals, on an annual basis and at 
                such other times during a year as the Secretary may 
                specify, to change the plan designated.
                    ``(B) Dissemination of information.--The Secretary 
                shall provide for the dissemination of information on 
                designation of plans under this subsection. Such 
                dissemination may be coordinated with the dissemination 
                of information on Medicare+Choice plan selection under 
                part C.
                    ``(C) Default assignment.--In the case of an 
                individual who is enrolled under this part who has not 
                otherwise designated a medicare-approved prescription 
                drug plan, the Secretary shall assign the individual to 
                an appropriate prescription drug discount card plan 
                serving the area in which the individual resides.
                    ``(D) Deemed designation.--The Secretary may deem 
                an individual who is enrolled in a medicare-approved 
                prescription drug plan described in subparagraph (A) 
                through (E) of subsection (c)(2) as having designated 
                such plan, but shall permit the individual to designate 
                a prescription drug discount card plan instead. The 
                Secretary shall establish rules in cases where an 
                individual is enrolled in more than one such plan.
            ``(3) Designee defined.--In this section, the term 
        `designee' means such an individual who makes such a 
        designation and, with respect to a plan, an individual who has 
        designated that plan under this subsection.
    ``(c) Medicare-Approved Prescription Drug Plans.--
            ``(1) In general.--For purposes of this part, the term 
        `medicare-approved prescription drug plan' means a health plan 
        or program described in paragraph (2) that--
                    ``(A) provides at least high-deductible outpatient 
                prescription drug coverage to designees of that plan or 
                program;
                    ``(B) meets the applicable requirements of 
                paragraph (3) and succeeding paragraphs of this 
                subsection with respect to such designees;
                    ``(C) has entered into an agreement with the 
                Secretary to provide and exchange electronically such 
                information as the Secretary may require for the 
                administration of the program of benefits under this 
                section; and
                    ``(D) meets such additional requirements as the 
                Secretary may specify, including requiring the 
                provision of appropriate periodic audits.
            ``(2) Types of plans and programs that may qualify.--The 
        types of plans and programs that may qualify as a medicare-
        approved prescription drug plan are the following:
                    ``(A) A Medicare+Choice plan.
                    ``(B) A group health plan, including a retirement 
                health benefits plan, that provides prescription drug 
                coverage.
                    ``(C) A State plan under title XIX.
                    ``(D) A health benefits plan under the Federal 
                employees' health benefits program under chapter 89 of 
                title 5, United States Code.
                    ``(E) A medicare supplemental policy.
                    ``(F) State pharmaceutical assistance program.
                    ``(G) A prescription drug discount card plan 
                (described in subsection (d)).
                    ``(H) Any other prescription drug plan that is 
                determined to meet such requirements as the Secretary 
                establishes.
            ``(3) Administration through card-based electronic 
        mechanism.--
                    ``(A) Use of medicare prescription drug card.--
                Claims for benefits under this section under a 
                medicare-approved prescription drug plan may only be 
                made electronically through the use of an electronic 
                prescription card system (in this paragraph referred to 
                as the `system').
                    ``(B) Standards for electronic prescription card 
                system.--The Secretary shall establish standards for 
                the system, including the following:
                            ``(i) Cards.--Standards for claims cards to 
                        be used by designees under the system.
                            ``(ii) Coordination of electronic 
                        information.--Standards for the real-time 
                        transmittal among pharmacies, medicare-approved 
                        prescription drug plans, and the Secretary 
                        (including an appropriate data clearinghouse 
                        operated by or under contract with the 
                        Secretary) of information on expenses incurred 
                        for covered outpatient prescription drugs by 
                        designees.
                            ``(iii) Confidentiality.--Standards that 
                        assure the confidentiality of individually 
                        identifiable information of designees and that 
                        are consistent with the regulations promulgated 
                        under section 264(c) of the Health Insurance 
                        Portability and Accountability Act of 1996.
            ``(4) Acceptance of claims through all qualifying 
        pharmacies.--A medicare-approved prescription drug plan shall 
        provide for acceptance and process of claims for designees from 
        any pharmacy that meets standards the Secretary has established 
        under paragraph (3) to carry out real-time transmittal of 
        claims to such plans and that provides for disclosure, in the 
        case of dispensing of a brand name drug to a designee, of 
        information on the availability of generic equivalents at 
        reduced cost to the designee.
            ``(5) Requirement to negotiate discounts and generic 
        equivalents.--A medicare-approved prescription drug plan shall 
        provide designees of the plan with the following:
                    ``(A) Negotiated prices.--Access to negotiated 
                prices (including applicable discounts) used for 
                payment for covered outpatient drugs, regardless of the 
                fact that no benefits or only partial benefits may be 
                payable with respect to such drugs because of the 
                application of the deductible under subsection (a)(2) 
                or copayment under subsection (a)(3).
                    ``(B) Generic equivalents.--Information on the 
                availability of generic equivalents at reduced cost to 
                such designees.
            ``(6) Treatment of nonpreferred brand name drugs.--
                    ``(A) Procedures regarding the determination of 
                drugs that are medically necessary.--
                            ``(i) In general.--A medicare-approved 
                        prescription drug plan shall have in place 
                        procedures on a case-by-case basis to treat a 
                        nonpreferred brand name drug as a preferred 
                        brand name drug for purposes of subsection (a) 
                        if the nonpreferred brand name drug is 
                        determined--
                                    ``(I) to be not as effective for 
                                the designee in preventing or slowing 
                                the deterioration of, or improving or 
maintaining, the health of the individual; or
                                    ``(II) to have a significant 
                                adverse effect on the individual.
                            ``(ii) Requirement.--The procedures under 
                        clause (i) shall require that determinations 
                        under such clause are based on professional 
                        medical judgment, the medical condition of the 
                        enrollee, and other medical evidence.
                    ``(B) Procedures regarding appeal rights with 
                respect to denials of care.--Such a plan shall have in 
                place procedures to ensure a timely internal review 
                (and timely independent external review) for resolution 
                of denials of coverage in accordance with the medical 
                exigencies of the case in accordance with requirements 
                established by the Secretary that are comparable to 
                such requirements for Medicare+Choice organizations 
                under part C and to ensure notice to designees 
                regarding such procedures. A designee shall have the 
                further right to an appeal of such a denial of coverage 
                in the same manner as is provided under section 
                1852(g)(5) in the case of a failure to receive health 
                services under a Medicare+Choice plan.
            ``(7) Prompt payment of pharmacies for covered benefits.--
        Medicare-approved prescription drug plans shall provide for 
        payment to qualifying pharmacies of benefits under subsection 
        (a)(4) promptly in accordance with rules no less generous than 
        the rules applicable under section 1842(c)(2)(B).
            ``(8) Education.--Medicare-approved prescription drug plans 
        shall apply methods to identify and educate providers, 
        pharmacists, and designees regarding--
                    ``(A) instances or patterns concerning the 
                unnecessary or inappropriate prescribing or dispensing 
                of covered outpatient prescription drugs;
                    ``(B) instances or patterns of substandard care;
                    ``(C) potential adverse reactions to covered 
                outpatient prescription drugs;
                    ``(D) inappropriate use of antibiotics;
                    ``(E) appropriate use of generic products; and
                    ``(F) the importance of using covered outpatient 
                prescription drugs in accordance with the instruction 
                of prescribing providers.
            ``(9) Not at financial risk.--The entity offering a 
        medicare-approved prescription drug plan shall not be at 
        financial risk for the provision of high-deductible 
        prescription drug coverage under the plan to designees, but 
        there shall be performance incentives (based on risk corridors 
        negotiated between the entity and the Secretary and subject to 
        audit) in relation to the administration of the contract and 
        the entity's ability to reduce costs through appropriate 
        incentive mechanisms.
            ``(10) Provision of data.--The entity offering such a plan 
        shall provide the Secretary with such information as is 
        required to make payments to the entity under this section.
    ``(d) Prescription Drug Discount Card Plans.--
            ``(1) Solicitation of bids.--The Secretary shall solicit 
        bids from entities to offer prescription drug discount card 
        plans to individuals enrolled under this part either nationwide 
        or in large geographic areas. The Secretary shall award bids in 
        a manner so that such plans are offered in all areas of the 
        United States. The Secretary may not award a contract based on 
        such a bid to an entity with respect to a plan unless the 
        entity and plan meet the applicable requirements to be a 
        medicare-approved prescription drug plan under this section.
            ``(2) Limitation on benefits.--The entity offering a 
        prescription drug discount card plan shall not offer (or charge 
        for) benefits to designees of the plan in addition to high-
        deductible prescription drug coverage, access to negotiated 
        prices, and other benefits required under this section and, in 
        the case of subsidy eligible individuals, benefits under 
        subsection (h).
    ``(e) Payment of Plans.--
            ``(1) In general.--The Secretary shall provide, in the 
        contract entered into between the Secretary and entities that 
        offer medicare-approved prescription drug plans, for payment to 
        the plans for high-deductible prescription drug coverage 
        offered through the plan, including expanded coverage for low-
        income individuals under subsection (g) and taking into account 
        performance incentives described in paragraph (2). In addition, 
        in the case of prescription drug discount card plans, the 
        Secretary shall provide for payment of administrative costs in 
        carrying out the contract (taking into account the performance 
        incentives described in paragraph (2)), based on rates 
        negotiated between the Secretary and the entity in the 
        solicitation process under subsection (d).
            ``(2) Incentives for cost and utilization management and 
        quality improvement.--The Secretary shall include in the 
        contract such financial or other performance incentives for 
        cost and utilization management and quality improvement as the 
        Secretary may deem appropriate.
    ``(f) Covered Outpatient Prescription Drugs Defined.--
            ``(1) In general.--Except as provided in this subsection, 
        for purposes of this section, the term `covered outpatient 
        prescription drug' means--
                    ``(A) a drug that may be dispensed only upon a 
                prescription and that is described in subparagraph 
                (A)(i) or (A)(ii) of section 1927(k)(2); or
                    ``(B) a biological product described in clauses (i) 
                through (iii) of subparagraph (B) of such section or 
                insulin described in subparagraph (C) of such section,
        and such term includes a vaccine licensed under section 351 of 
        the Public Health Service Act and any use of a covered 
        outpatient drug for a medically accepted indication (as defined 
        in section 1927(k)(6)).
            ``(2) Exclusions.--
                    ``(A) In general.--Such term does not include drugs 
                or classes of drugs, or their medical uses, which may 
                be excluded from coverage or otherwise restricted under 
                section 1927(d)(2), other than subparagraph (E) thereof 
                (relating to smoking cessation agents), or under 
                section 1927(d)(3), as the Secretary may specify and 
                does not include such other medicines, classes, and 
                uses as the Secretary may specify consistent with the 
                goals of providing quality care and containing costs 
                under this section.
                    ``(B) Avoidance of duplicate coverage.--A drug 
                prescribed for an individual that would otherwise be a 
                covered outpatient prescription drug under this section 
                shall not be so considered if payment for such drug is 
                available under part A or under this part (other than 
                under this section).''.
    (b) No Effect on Part B Premium.--
            (1) In general.--Section 1839(a) (42 U.S.C. 1395r(a)) is 
        amended by adding at the end the following new paragraph:
    ``(5) Notwithstanding the previous provisions of this subsection, 
in computing actuarial rates there shall not be taken into account 
benefits and administrative costs that are attributable to the 
prescription drug coverage provided under section 1845.''.
            (2) Government contribution.--Section 1844(a)(1) (42 U.S.C. 
        1395w(a)(1)) is amended--
                    (A) by striking ``plus'' at the end of subparagraph 
                (A);
                    (B) by striking ``; plus'' at the end of 
                subparagraph (B) and inserting ``, plus''; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(C) a Government contribution equal to the aggregate 
        amounts expended from the Trust Fund for benefits and 
        administrative expenses attributable to the prescription drug 
        coverage provided under section 1845; plus''.
    (c) Medicare as Primary Payor.--Section 1862(b) (42 U.S.C. 
1395y(b)) is amended by adding at the end the following new paragraph:
            ``(7) Exception for outpatient prescription drug benefit.--
        The previous provisions of this subsection shall not apply to 
        benefits provided under section 1845.''.

            TITLE II--BENEFITS FOR LOW-INCOME BENEFICIARIES

SEC. 201. BENEFITS FOR LOW-INCOME BENEFICIARIES.

    (a) In General.--Section 1845, as inserted by section 101(b), is 
amended by adding at the end the following new subsection:
    ``(g) First Dollar Coverage for Certain Low-income Individuals.--
            ``(1) In general.--In the case of a subsidy eligible 
        individual (as defined in paragraph (2)), this section shall be 
        applied as if the annual deductible were equal to zero but, 
        with respect to costs incurred before the amount of the annual 
        deductible otherwise applicable, the following copayment 
        amounts shall apply:
                    ``(A) 20 percent copayment for individuals with 
                incomes up to 135 percent of poverty.--For subsidy 
                eligible individuals with income that does not exceed 
                135 percent of the poverty line, the copayment amounts 
                shall be the copayments amounts specified in subsection 
                (a)(3), which reflects an average benefit percentage of 
                80 percent.
                    ``(B) 30 percent copayment for individuals with 
                incomes between 135 and 150 percent of poverty.--For 
                subsidy eligible individuals with income that exceeds 
                135 percent (but does not exceed 150 percent) of the 
                poverty line, the copayment amounts shall be the 
                copayments amounts specified in subsection (a)(3) 
                increased by 50 percent, which reflects an average 
                benefit percentage of 70 percent.
                    ``(C) 50 percent copayment for individuals with 
                incomes above 150 percent of poverty.--For subsidy 
                eligible individuals with income that exceeds 150 
                percent of the poverty line, the copayment amounts 
                shall be the copayments amounts specified in subsection 
                (a)(3) increased by 150 percent, which reflects an 
                average benefit percentage of 50 percent.
            ``(2) Determination of eligibility.--
                    ``(A) Subsidy eligible individual defined.--For 
                purposes of this subsection, subject to subparagraph 
                (D), the term `subsidy eligible individual' means an 
                individual who--
                            ``(i) is enrolled under this part;
                            ``(ii) has income below 150 percent (or 
                        such higher percent, not to exceed 200 percent, 
                        as a State may specify under subparagraph (B)) 
                        of the Federal poverty line; and
                            ``(iii) is not eligible for medical 
                        assistance with respect to prescription drugs 
                        under title XIX.
        For purposes of this section, an individual shall not be 
        treated as eligible for medical assistance with respect to 
        prescription drugs under title XIX (including under a waiver 
        under section 1115) only if, with respect to such assistance, 
        the individual is charged a copayment greater than a nominal 
        amount (as described in section 1916(a)(3)) and there is no 
        monthly or similar dollar limit established for the amount of 
        such assistance over any period of time.
                    ``(B) Coverage of individuals with income up to 200 
                percent of poverty at state option.--One of the 50 
                States or the District of Columbia may, at its option 
                and subject to section 1935(c), specify a percent of 
                income, that exceeds 150 percent but does not exceed 
                200 percent, that will apply for purposes of this 
subsection to individuals residing in the State.
                    ``(C) Determinations.--The determination of whether 
                an individual residing in a State is a subsidy eligible 
                individual shall be determined under the State medicaid 
                plan for the State under section 1935(a) or by the 
                Social Security Administration. There are authorized to 
                be appropriated to the Social Security Administration 
                such sums as may be necessary for the determination of 
                eligibility under this subparagraph.
                    ``(D) Income determinations.--For purposes of 
                applying this subsection--
                            ``(i) income shall be determined in the 
                        manner no less restrictive than the manner 
                        described in section 1905(p)(1)(B); and
                            ``(ii) the term `Federal poverty line' 
                        means the official poverty line (as defined by 
                        the Office of Management and Budget, and 
                        revised annually in accordance with section 
                        673(2) of the Omnibus Budget Reconciliation Act 
                        of 1981) applicable to a family of the size 
                        involved.
                    ``(E) Treatment of territorial residents.--In the 
                case of an individual who is not a resident of the 50 
                States or the District of Columbia, the individual is 
                not eligible to be a subsidy eligible individual but 
                may be eligible for financial assistance with 
                prescription drug expenses under section 1935(f).
            ``(3) Administration of subsidy program.--The Secretary 
        shall provide a process whereby, in the case of an individual 
        who is determined to be a subsidy eligible individual and who 
        is enrolled in a medicare-approved prescription drug plan--
                    ``(A) the Secretary provides for a notification of 
                the entity offering the plan that the individual is 
                eligible for a subsidy under paragraph (1);
                    ``(B) such entity adjusts the benefits for 
                prescription drug coverage accordingly and submits to 
                the Secretary information on the amount of such 
                benefits provided; and
                    ``(C) the Secretary periodically and on a timely 
                basis reimburses the entity for the amount of such 
                benefits (including reasonable related administrative 
                costs) that are provided only because of the 
                application of this subsection.
            ``(4) Relation to medicaid program.--
                    ``(A) In general.--For provisions providing for 
                eligibility determinations, and additional financing, 
                under the medicaid program, see section 1935.
                    ``(B) Coordination.--The Secretary shall develop 
                and implement a plan for the coordination of 
                prescription drug benefits under this part with the 
                benefits provided under the medicaid program under 
                title XIX, with particular attention to insuring 
                coordination of payments and prevention of fraud and 
                abuse. In developing and implementing such plan, the 
                Secretary shall involve the States, the data processing 
                industry, pharmacists, and pharmaceutical 
                manufacturers, and other experts and representatives of 
                low-income medicare beneficiaries.
                    ``(C) Exemption.--Section 1902(n) shall not apply 
                with respect to coverage of cost-sharing imposed under 
                paragraph (1) or under subsection (a)(3).''.
    (b) Medicaid Amendments.--
            (1) Determinations of eligibility for low-income 
        subsidies.--
                    (A) Requirement.--Section 1902(a) (42 U.S.C. 
                1396a(a)) is amended--
                            (i) by striking ``and'' at the end of 
                        paragraph (64);
                            (ii) by striking the period at the end of 
                        paragraph (65) and inserting ``; and''; and
                            (iii) by inserting after paragraph (65) the 
                        following new paragraph:
            ``(66) provide for making eligibility determinations under 
        sections 1845(g) and 1935(a).''.
            (2) New section.--Title XIX of such Act is further 
        amended--
                    (A) by redesignating section 1935 as section 1936; 
                and
                    (B) by inserting after section 1934 the following 
                new section:

  ``special provisions relating to medicare prescription drug benefit

    ``Sec. 1935. (a) Requirement for Making Eligibility Determinations 
for Low-Income Subsidy.--
            ``(1) In general.--As a condition of its State plan under 
        this title under section 1902(a)(66) and receipt of any Federal 
financial assistance under section 1903(a), a State shall--
                    ``(A) make determinations of eligibility for 
                subsidies under (and in accordance with) section 
                1845(g);
                    ``(B) inform the Secretary of such determinations 
                in cases in which such eligibility is established; and
                    ``(C) otherwise provide the Secretary with such 
                information as may be required to carry out section 
                1845.
            ``(2) State option for coverage of additional low-income 
        individuals.--A State may elect under paragraph (2)(B) of 
        section 1845(g) to cover additional low-income medicare 
        beneficiaries under the prescription drug subsidy program 
        provided under such subsection, subject to contribution under 
        subsection (c).
    ``(b) Payments for Additional Administrative Costs.--
            ``(1) In general.--The amounts expended by a State in 
        carrying out subsection (a) are, subject to paragraph (2), 
        expenditures reimbursable under the appropriate paragraph of 
        section 1903(a); except that, notwithstanding any other 
        provision of such section, the applicable Federal matching 
        rates with respect to such expenditures under such section 
        shall be increased as follows (but in no case shall the rate as 
        so increased exceed 100 percent):
                    ``(A) For expenditures attributable to costs 
                incurred during 2005, the otherwise applicable Federal 
                matching rate shall be increased by 10 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(B)(i) For expenditures attributable to costs 
                incurred during 2006 and each subsequent year through 
                2013, the otherwise applicable Federal matching rate 
                shall be increased by the applicable percent (as 
                defined in clause (ii)) of the percentage otherwise 
                payable (but for this subsection) by the State.
                    ``(ii) For purposes of clause (i), the `applicable 
                percent' for--
                            ``(I) 2006 is 20 percent; or
                            ``(II) a subsequent year is the applicable 
                        percent under this clause for the previous year 
                        increased by 10 percentage points.
                    ``(C) For expenditures attributable to costs 
                incurred after 2013, the otherwise applicable Federal 
                matching rate shall be increased to 100 percent.
            ``(2) Coordination.--The State shall provide the Secretary 
        with such information as may be necessary to properly allocate 
        administrative expenditures described in paragraph (1) that may 
        otherwise be made for similar eligibility determinations.
    ``(c) State Contribution at SCHIP Matching Rate Towards Additional 
Low-Income Subsidies for Optional Subsidy Eligible Individuals Covered 
Under State Option.--In the case of a State that specifies a percent of 
income under section 1845(g)(2)(B) for a quarter, the amount of payment 
made to the State under section 1903(a)(1) for the quarter shall be 
reduced by the product of--
            ``(1) 100 percent less the enhanced FMAP described in 
        section 2105(b) for that State and quarter; and
            ``(2) the additional amount of payment made under section 
        1845 because of the application of such specification.''.
    (b) Phased-In Federal Assumption of Medicaid Responsibility for 
Cost-Sharing Subsidies for Dually Eligible Individuals.--
            (1) In general.--Section 1903(a)(1) (42 U.S.C. 1396b(a)(1)) 
        is amended by inserting before the semicolon the following: ``, 
        reduced by the amount computed under section 1935(d)(1) for the 
        State and the quarter''.
            (2) Amount described.--Section 1935, as inserted by 
        subsection (a)(2), is amended by adding at the end the 
        following new subsection:
    ``(d) Federal Assumption of Medicaid Prescription Drug Costs for 
Dually-Eligible Beneficiaries.--
            ``(1) In general.--For purposes of section 1903(a)(1), for 
        a State that is one of the 50 States or the District of 
        Columbia for a calendar quarter in a year (beginning with 2005) 
        the amount computed under this subsection is equal to the 
        product of the following:
                    ``(A) Medicare benefits for medicaid eligibles.--
                The total amount of payments made in the quarter 
                because of the operation of section 1845 that are 
                attributable to individuals who are residents of the 
                State and are eligible for medical assistance with 
                respect to prescription drugs under this title.
                    ``(B) State matching rate.--A proportion computed 
                by subtracting from 100 percent the Federal medical 
                assistance percentage (as defined in section 1905(b)) 
                applicable to the State and the quarter.
                    ``(C) Phase-out proportion.--The phase-out 
                proportion (as defined in paragraph (2)) for the 
                quarter.
            ``(2) Phase-out proportion.--For purposes of paragraph 
        (1)(C), the `phase-out proportion' for a calendar quarter in--
                    ``(A) 2005 is 90 percent;
                    ``(B) a subsequent year before 2014, is the phase-
                out proportion for calendar quarters in the previous 
                year decreased by 10 percentage points; or
                    ``(C) a year after 2013 is 0 percent.''.
            (3) Medicaid providing wrap-around benefits.--Section 1935, 
        as so inserted and amended, is further amended by adding at the 
        end the following new subsection:
    ``(e) Medicaid as Secondary Payor.--In the case of an individual 
who is entitled to benefits under part B of title XVIII and is eligible 
for medical assistance with respect to prescribed drugs under this 
title, medical assistance shall continue to be provided under this 
title for prescribed drugs to the extent payment is not made under such 
part B, without regard to section 1902(n)(2).''.
    (d) Treatment of Territories.--
            (1) In general.--Section 1935 of such Act, as so inserted 
        and amended, is further amended--
                    (A) in subsection (a) in the matter preceding 
                paragraph (1), by inserting ``subject to subsection 
                (f)'' after ``section 1903(a)'';
                    (B) in subsection (c)(1), by inserting ``subject to 
                subsection (f)'' after ``1903(a)(1)''; and
                    (C) by adding at the end the following new 
                subsection:
    ``(f) Treatment of Territories.--
            ``(1) In general.--In the case of a State, other than the 
        50 States and the District of Columbia--
                    ``(A) the previous provisions of this section shall 
                not apply to residents of such State; and
                    ``(B) if the State establishes a plan described in 
                paragraph (2) (for providing medical assistance with 
                respect to the provision of prescription drugs to 
                medicare beneficiaries under section 1845(g)), the 
                amount otherwise determined under section 1108(f) (as 
                increased under section 1108(g)) for the State shall be 
                increased by the amount specified in paragraph (3).
            ``(2) Plan.--The plan described in this paragraph is a plan 
        that--
                    ``(A) provides medical assistance under section 
                1845(g) with respect to the provision of covered 
                outpatient drugs to low-income medicare beneficiaries 
                whose income does not exceed an income level specified 
                under the plan; and
                    ``(B) assures that additional amounts received by 
                the State that are attributable to the operation of 
                this subsection are used only for such assistance.
            ``(3) Increased amount.--
                    ``(A) In general.--The amount specified in this 
                paragraph for a State for a year is equal to the 
                product of--
                            ``(i) the aggregate amount specified in 
                        subparagraph (B); and
                            ``(ii) the amount specified in section 
                        1108(g)(1) for that State, divided by the sum 
                        of the amounts specified in such section for 
                        all such States.
                    ``(B) Aggregate amount.--The aggregate amount 
                specified in this subparagraph for--
                            ``(i) 2005, is equal to $25,000,000; or
                            ``(ii) a subsequent year, is equal to the 
                        aggregate amount specified in this subparagraph 
                        for the previous year increased by annual 
                        percentage increase specified in section 
                        1845(a)(2)(B) for the year involved.
            ``(4) Report.--The Secretary shall submit to Congress a 
        report on the application of this subsection and may include in 
        the report such recommendations as the Secretary deems 
        appropriate.''.
            (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
        1308(f)) is amended by inserting ``and section 1935(f)(1)(B)'' 
        after ``Subject to subsection (g)''.

SEC. 202. IMPROVING ENROLLMENT PROCESS UNDER MEDICAID.

    (a) Automatic Reenrollment Without Need To Reapply.--
            (1) In general.--Section 1905(p) (42 U.S.C. 1396d(p)) is 
        amended--
                    (A) by redesignating paragraph (6) as paragraph 
                (9); and
                    (B) by inserting after paragraph (5), the following 
                new paragraph:
    ``(6) In the case of an individual who has been determined to 
qualify as a qualified medicare beneficiary or to be eligible for 
benefits under section 1902(a)(10)(E)(iii), the individual shall be 
deemed to continue to be so qualified or eligible without the need for 
any annual or periodic application unless and until the individual 
notifies the State that the individual's eligibility conditions have 
changed so that the individual is no longer so qualified or 
eligible.''.
            (2) Conforming amendment.--Section 1902(e)(8) (42 U.S.C. 
        1396a(e)(8)) is amended by striking the second sentence.
    (b) Use of Simplified Application Process.--Such section 1905(p) is 
further amended by adding at the end the following new paragraph:
    ``(7) A State shall permit individuals to apply to qualify as a 
qualified medicare beneficiary or for benefits under section 
1902(a)(10)(E)(iii) through the use of the simplified application form 
developed under section 1905(p)(5)(A) and shall permit such an 
application to be made over the telephone, the Internet, or by mail, 
without the need for an interview in person by the applicant or a 
representative of the applicant.''.
    (c) Role of Social Security Offices.--
            (1) Enrollment and provision of information at social 
        security offices.--Such section is further amended by adding at 
        the end the following new paragraph:
    ``(8) The Commissioner of Social Security shall provide, through 
local offices of the Social Security Administration--
            ``(A) for the enrollment under State plans under this title 
        for appropriate medicare cost-sharing benefits for individuals 
        who qualify as a qualified medicare beneficiary or for benefits 
        under section 1902(a)(10)(E)(iii); and
            ``(B) for providing oral and written notice of the 
        availability of such benefits.''.
            (2) Clarifying amendment.--Section 1902(a)(5) (42 U.S.C. 
        1396a(a)(5)) is amended by inserting ``as provided in section 
        1905(p)(10)'' before ``except''.
    (d) Outstationing of State Eligibility Workers at SSA Field 
Offices.--Section 1902(a)(55) (42 U.S.C. 1396a(a)(55)) is amended--
            (1) by striking ``subsection (a)(10)(A)(i)(IV), 
        (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or (a)(10)(A)(ii)(IX)'' 
        and inserting ``paragraph (10)(A)(i)(IV), (10)(A)(i)(VI), 
        (10)(A)(i)(VII), (10)(A)(ii)(IX), or (10)(E)''; and
            (2) in subparagraph (A), by inserting ``and in the case of 
        applications of individuals for medical assistance under 
        paragraph (10)(E), at locations that include field offices of 
        the Social Security Administration''.
                                 <all>
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