In the Senate of the United States,

July 7, 2003.

Resolved, That the bill from the House of Representatives (H.R. 1) entitled ‘‘An Act to amend title XVIII of the

Social Security Act to provide for a voluntary program for

prescription drug coverage under the Medicare Program, to

modernize the Medicare Program, to amend the Internal Revenue Code of 1986 to allow a deduction to individuals for

amounts contributed to health savings security accounts and

health savings accounts, to provide for the disposition of unused health benefits in cafeteria plans and flexible spending

arrangements, and for other purposes.’’, do pass with the following

AMENDMENTS:

Strike out all after the enacting clause and insert:

1 SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU2 RITY ACT; REFERENCES TO BIPA AND SEC3 RETARY; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the ‘‘Pre5 scription Drug and Medicare Improvement Act of 2003’’.
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1 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except

2 as otherwise specifically provided, whenever in this Act an

3 amendment is expressed in terms of an amendment to or

4 repeal of a section or other provision, the reference shall

5 be considered to be made to that section or other provision

6 of the Social Security Act.

7 (c) BIPA; SECRETARY.—In this Act:

8 (1) BIPA.—The term ‘‘BIPA’’ means the Medi9 care, Medicaid, and SCHIP Benefits Improvement

10 and Protection Act of 2000, as enacted into law by

11 section 1(a)(6) of Public Law 106–554.

12 (2) SECRETARY.—The term ‘‘Secretary’’ means

13 the Secretary of Health and Human Services.

14 (d) TABLE OF CONTENTS.—The table of contents of

15 this Act is as follows:

Sec. 1. Short title; amendments to Social Security Act; references to BIPA and

Secretary; table of contents.

TITLE I—MEDICARE PRESCRIPTION DRUG BENEFIT

Subtitle A—Medicare Voluntary Prescription Drug Delivery Program

Sec. 101. Medicare voluntary prescription drug delivery program.

‘‘PART D—VOLUNTARY PRESCRIPTION DRUG DELIVERY PROGRAM

‘‘Sec. 1860D. Definitions; treatment of references to provisions in

MedicareAdvantage program.

‘‘Subpart 1—Establishment of Voluntary Prescription Drug Delivery Program

‘‘Sec. 1860D–1. Establishment of voluntary prescription drug delivery program.

‘‘Sec. 1860D–2. Enrollment under program.

‘‘Sec. 1860D–3. Election of a Medicare Prescription Drug plan.

‘‘Sec. 1860D–4. Providing information to beneficiaries.

‘‘Sec. 1860D–5. Beneficiary protections.

‘‘Sec. 1860D–6. Prescription drug benefits.
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‘‘Sec. 1860D–7. Requirements for entities offering Medicare Prescription

Drug plans; establishment of standards.

‘‘Subpart 2—Prescription Drug Delivery System

‘‘Sec. 1860D–10. Establishment of service areas.

‘‘Sec. 1860D–11. Publication of risk adjusters.

‘‘Sec. 1860D–12. Submission of bids for proposed Medicare Prescription

Drug plans.

‘‘Sec. 1860D–13. Approval of proposed Medicare Prescription Drug plans.

‘‘Sec. 1860D–14. Computation of monthly standard prescription drug coverage premiums.

‘‘Sec. 1860D–15. Computation of monthly national average premium.

‘‘Sec. 1860D–16. Payments to eligible entities.

‘‘Sec. 1860D–17. Computation of monthly beneficiary obligation.

‘‘Sec. 1860D–18. Collection of monthly beneficiary obligation.

‘‘Sec. 1860D–19. Premium and cost-sharing subsidies for low-income individuals.

‘‘Sec. 1860D–20. Reinsurance payments for expenses incurred in providing

prescription drug coverage above the annual out-of-pocket

threshold.

‘‘Sec. 1860D–21. Direct subsidy for sponsor of a qualified retiree prescription drug plan for plan enrollees eligible for, but not enrolled in, this part.

‘‘Sec. 1860D–22. Direct subsidies for qualified State offering a State pharmaceutical assistance program for program enrollees eligible for, but not enrolled in, this part.

‘‘Subpart 3—Miscellaneous Provisions

‘‘Sec. 1860D–25. Prescription Drug Account in the Federal Supplementary

Medical Insurance Trust Fund.

‘‘Sec. 1860D–26. Other related provisions.

Sec. 102. Study and report on permitting part B only individuals to enroll in

medicare voluntary prescription drug delivery program.

Sec. 103. Rules relating to medigap policies that provide prescription drug coverage.

Sec. 104. Medicaid and other amendments related to low-income beneficiaries.

Sec. 105. Expansion of membership and duties of Medicare Payment Advisory

Commission (MedPAC).

Sec. 106. Study regarding variations in spending and drug utilization.

Sec. 107. Limitation on prescription drug benefits of Members of Congress.

Sec. 108. Protecting seniors with cancer.

Sec. 109. Protecting seniors with cardiovascular disease, cancer, or Alzheimer’s

disease.

Sec. 110. Review and report on current standards of practice for pharmacy services provided to patients in nursing facilities.

Sec. 110A. Medication therapy management assessment program.

Subtitle B—Medicare Prescription Drug Discount Card and Transitional

Assistance for Low-Income Beneficiaries

Sec. 111. Medicare prescription drug discount card and transitional assistance

for low-income beneficiaries.
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Subtitle C—Standards for Electronic Prescribing

Sec. 121. Standards for electronic prescribing.

Subtitle D—Other Provisions

Sec. 131. Additional requirements for annual financial report and oversight on

medicare program.

Sec. 132. Trustees’ report on medicare’s unfunded obligations.

Sec. 133. Pharmacy benefit managers transparency requirements.

Sec. 134. Office of the Medicare Beneficiary Advocate.

TITLE II—MEDICAREADVANTAGE

Subtitle A—MedicareAdvantage Competition

Sec. 201. Eligibility, election, and enrollment.

Sec. 202. Benefits and beneficiary protections.

Sec. 203. Payments to MedicareAdvantage organizations.

Sec. 204. Submission of bids; premiums.

Sec. 205. Special rules for prescription drug benefits.

Sec. 206. Facilitating employer participation.

Sec. 207. Administration by the Center for Medicare Choices.

Sec. 208. Conforming amendments.

Sec. 209. Effective date.

Sec. 210. Improvements in MedicareAdvantage benchmark determinations.

Subtitle B—Preferred Provider Organizations

Sec. 211. Establishment of MedicareAdvantage preferred provider program option.

Subtitle C—Other Managed Care Reforms

Sec. 221. Extension of reasonable cost contracts.

Sec. 222. Specialized Medicare+Choice plans for special needs beneficiaries.

Sec. 223. Payment by PACE providers for medicare and medicaid services furnished by noncontract providers.

Sec. 224. Institute of Medicine evaluation and report on health care performance

measures.

Sec. 225. Expanding the work of medicare quality improvement organizations to

include parts C and D.

Sec. 226. Extension of demonstration for ESRD managed care.

SUBTITLE D—EVALUATION OF ALTERNATIVE PAYMENT AND DELIVERY

SYSTEMS

Sec. 231. Establishment of alternative payment system for preferred provider organizations in highly competitive regions.

Sec. 232. Fee-for-service modernization projects.

SUBTITLE E—NATIONAL BIPARTISAN COMMISSION ON MEDICARE REFORM

Sec. 241. MedicareAdvantage goal; establishment of Commission.

Sec. 242. National bipartisan commission on medicare reform.

Sec. 243. Congressional consideration of reform proposals.

Sec. 244. Authorization of appropriations.
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TITLE III—CENTER FOR MEDICARE CHOICES

Sec. 301. Establishment of the Center for Medicare Choices.

Sec. 302. Miscellaneous administrative provisions.

TITLE IV—MEDICARE FEE-FOR-SERVICE IMPROVEMENTS

Subtitle A—Provisions Relating to Part A

Sec. 401. Equalizing urban and rural standardized payment amounts under the

medicare inpatient hospital prospective payment system.

Sec. 402. Adjustment to the medicare inpatient hospital PPS wage index to revise

the labor-related share of such index.

Sec. 403. Medicare inpatient hospital payment adjustment for low-volume hospitals.

Sec. 404. Fairness in the medicare disproportionate share hospital (DSH) adjustment for rural hospitals.

Sec. 404A. Medpac study and report regarding medicare Disproportionate Share

Hospital (DSH) adjustment payments.

Sec. 405. Critical access hospital (CAH) improvements.

Sec. 406. Authorizing use of arrangements to provide core hospice services in certain circumstances.

Sec. 407. Services provided to hospice patients by nurse practitioners, clinical

nurse specialists, and physician assistants.

Sec. 408. Authority to include costs of training of psychologists in payments to

hospitals under medicare.

Sec. 409. Revision of Federal rate for hospitals in Puerto Rico.

Sec. 410. Exception to initial residency period for geriatric residency or fellowship programs.

Sec. 411. Clarification of congressional intent regarding the counting of residents

in a nonprovider setting and a technical amendment regarding

the 3-year rolling average and the IME ratio.

Sec. 412. Limitation on charges for inpatient hospital contract health services

provided to Indians by medicare participating hospitals.

Sec. 413. GAO study and report on appropriateness of payments under the prospective payment system for inpatient hospital services.

Sec. 414. Rural community hospital demonstration program.

Sec. 415. Critical access hospital improvement demonstration program.

Sec. 416. Treatment of grandfathered long-term care hospitals.

Sec. 417. Treatment of certain entities for purposes of payments under the medicare program.

Sec. 418. Revision of the indirect medical education (IME) adjustment percentage.

Sec. 419. Calculation of wage indices for hospitals.

Sec. 420. Conforming changes regarding federally qualified health centers.

Sec. 420A. Increase for hospitals with disproportionate indigent care revenues.

Sec. 420B. Treatment of grandfathered long-term care hospitals.

Subtitle B—Provisions Relating to Part B

Sec. 421. Establishment of floor on geographic adjustments of payments for physicians’ services.

Sec. 422. Medicare incentive payment program improvements.

Sec. 423. Extension of hold harmless provisions for small rural hospitals and

treatment of certain sole community hospitals to limit decline in

payment under the OPD PPS.
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Sec. 424. Increase in payments for certain services furnished by small rural and

sole community hospitals under medicare prospective payment

system for hospital outpatient department services.

Sec. 425. Temporary increase for ground ambulance services.

Sec. 426. Ensuring appropriate coverage of air ambulance services under ambulance fee schedule.

Sec. 427. Treatment of certain clinical diagnostic laboratory tests furnished by a

sole community hospital.

Sec. 428. Improvement in rural health clinic reimbursement.

Sec. 429. Elimination of consolidated billing for certain services under the medicare PPS for skilled nursing facility services.

Sec. 430. Freeze in payments for certain items of durable medical equipment and

certain orthotics; establishment of quality standards and accreditation requirements for DME providers.

Sec. 431. Application of coinsurance and deductible for clinical diagnostic laboratory tests.

Sec. 432. Basing medicare payments for covered outpatient drugs on market

prices.

Sec. 433. Indexing part B deductible to inflation.

Sec. 434. Revisions to reassignment provisions.

Sec. 435. Extension of treatment of certain physician pathology services under

medicare.

Sec. 436. Adequate reimbursement for outpatient pharmacy therapy under the

hospital outpatient PPS.

Sec. 437. Limitation of application of functional equivalence standard.

Sec. 438. Medicare coverage of routine costs associated with certain clinical trials.

Sec. 439. Waiver of part B late enrollment penalty for certain military retirees;

special enrollment period.

Sec. 440. Demonstration of coverage of chiropractic services under medicare.

Sec. 441. Medicare health care quality demonstration programs.

Sec. 442. Medicare complex clinical care management payment demonstration.

Sec. 443. Medicare fee-for-service care coordination demonstration program.

Sec. 444. GAO study of geographic differences in payments for physicians’ services.

Sec. 445. Improved payment for certain mammography services.

Sec. 446. Improvement of outpatient vision services under Part B.

Sec. 447. GAO study and report on the propagation of concierge care.

Sec. 448. Coverage of marriage and family therapist services and mental health

counselor services under Part B of the medicare program.

Sec. 449. Medicare demonstration project for direct access to physical therapy

services.

Sec. 450. Demonstration project to clarify the definition of homebound.

Sec. 450A. Demonstration project for exclusion of brachytherapy devices from

prospective payment system for outpatient hospital services.

Sec. 450B. Reimbursement for total body orthotic management for certain nursing home patients.

Sec. 450C. Authorization of reimbursement for all medicare part B services furnished by certain Indian hospitals and clinics.

Sec. 450D. Coverage of cardiovascular screening tests.

Sec. 450E. Medicare coverage of self-injected biologicals.

Sec. 450F. Extension of medicare secondary payer rules for individuals with endstage renal disease.

Sec. 450G. Requiring the Internal Revenue Service to deposit installment agreement and other fees in the Treasury as miscellaneous receipts.
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Sec. 450H. Increasing types of originating telehealth sites and facilitating the

provision of telehealth services across State lines.

Sec. 450I. Demonstration project for coverage of surgical first assisting services

of certified registered nurse first assistants.

Sec. 450J. Equitable treatment for children’s hospitals.

Sec. 450K. Treatment of physicians’ services furnished in Alaska.

Sec. 450L. Demonstration project to examine what weight loss weight management services can cost effectively reach the same result as the

NIH Diabetes Primary Prevention Trial study: A 50 percent reduction in the risk for type 2 diabetes for individuals who have

impaired glucose tolerance and are obese.

Subtitle C—Provisions Relating to Parts A and B

Sec. 451. Increase for home health services furnished in a rural area.

Sec. 452. Limitation on reduction in area wage adjustment factors under the prospective payment system for home health services.

Sec. 453. Clarifications to certain exceptions to medicare limits on physician referrals.

Sec. 454. Demonstration program for substitute adult day services.

Sec. 455. MEDPAC study on medicare payments and efficiencies in the health

care system.

Sec. 456. Medicare coverage of kidney disease education services.

Sec. 457. Frontier extended stay clinic demonstration project.

Sec. 458. Improvements in national coverage determination process to respond to

changes in technology.

Sec. 459. Increase in medicare payment for certain home health services.

Sec. 460. Frontier extended stay clinic demonstration project.

Sec. 461. Medicare secondary payor (MSP) provisions.

Sec. 462. Medicare pancreatic islet cell transplant demonstration project.

Sec. 463. Increase in medicare payment for certain home health services.

Sec. 464. Sense of the Senate concerning medicare payment update for physicians

and other health professionals.

TITLE V—MEDICARE APPEALS, REGULATORY, AND CONTRACTING

IMPROVEMENTS

Subtitle A—Regulatory Reform

Sec. 501. Rules for the publication of a final regulation based on the previous

publication of an interim final regulation.

Sec. 502. Compliance with changes in regulations and policies.

Sec. 503. Report on legal and regulatory inconsistencies.

Sec. 504. Streamlining and simplification of medicare regulations.

Subtitle B—Appeals Process Reform

Sec. 511. Submission of plan for transfer of responsibility for medicare appeals.

Sec. 512. Expedited access to judicial review.

Sec. 513. Expedited review of certain provider agreement determinations.

Sec. 514. Revisions to medicare appeals process.

Sec. 515. Hearing rights related to decisions by the Secretary to deny or not

renew a medicare enrollment agreement; consultation before

changing provider enrollment forms.

Sec. 516. Appeals by providers when there is no other party available.

Sec. 517. Provider access to review of local coverage determinations.

Sec. 518. Revisions to appeals timeframes.
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Sec. 519. Elimination of requirement to use Social Security Administration Administrative Law Judges.

Sec. 520. Elimination of requirement for de novo review by the departmental appeals board.

Subtitle C—Contracting Reform

Sec. 521. Increased flexibility in medicare administration.

Subtitle D—Education and Outreach Improvements

Sec. 531. Provider education and technical assistance.

Sec. 532. Access to and prompt responses from medicare contractors.

Sec. 533. Reliance on guidance.

Sec. 534. Medicare provider ombudsman.

Sec. 535. Beneficiary outreach demonstration programs.

Subtitle E—Review, Recovery, and Enforcement Reform

Sec. 541. Prepayment review.

Sec. 542. Recovery of overpayments.

Sec. 543. Process for correction of minor errors and omissions on claims without

pursuing appeals process.

Sec. 544. Authority to waive a program exclusion.

SUBTITLE F—OTHER IMPROVEMENTS

Sec. 551. Inclusion of additional information in notices to beneficiaries about

skilled nursing facility and hospital benefits.

Sec. 552. Information on medicare-certified skilled nursing facilities in hospital

discharge plans.

Sec. 553. Evaluation and management documentation guidelines consideration.

Sec. 554. Council for Technology and Innovation.

Sec. 555. Treatment of certain dental claims.

TITLE VI—OTHER PROVISIONS

Sec. 601. Increase in medicaid DSH allotments for fiscal years 2004 and 2005.

Sec. 602. Increase in floor for treatment as an extremely low DSH State under

the medicaid program for fiscal years 2004 and 2005.

Sec. 603. Increased reporting requirements to ensure the appropriateness of payment adjustments to disproportionate share hospitals under the

medicaid program.

Sec. 604. Clarification of inclusion of inpatient drug prices charged to certain

public hospitals in the best price exemptions for the medicaid

drug rebate program.

Sec. 605. Assistance with coverage of legal immigrants under the medicaid program and SCHIP.

Sec. 606. Establishment of consumer ombudsman account.

Sec. 607. GAO study regarding impact of assets test for low-income beneficiaries.

Sec. 608. Health care infrastructure improvement.

Sec. 609. Capital infrastructure revolving loan program.

Sec. 610. Federal reimbursement of emergency health services furnished to undocumented aliens.

Sec. 611. Increase in appropriation to the health care fraud and abuse control

account.

Sec. 612. Increase in civil penalties under the False Claims Act.
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Sec. 613. Increase in civil monetary penalties under the Social Security Act.

Sec. 614. Extension of customs user fees.

Sec. 615. Reimbursement for federally qualified health centers participating in

medicare managed care.

Sec. 616. Provision of information on advance directives.

Sec. 617. Sense of the Senate regarding implementation of the Prescription Drug

and Medicare Improvement Act of 2003.

Sec. 618. Extension of municipal health service demonstration projects.

Sec. 619. Study on making prescription pharmaceutical information accessible

for blind and visually-impaired individuals.

Sec. 620. Health care that works for all americans-citizens health care working

group.

Sec. 621. GAO study of pharmaceutical price controls and patent protections in

the G–7 countries.

Sec. 622. Sense of the Senate concerning medicare payment update for physicians

and other health professionals.

Sec. 623. Restoration of Federal Hospital Insurance Trust Fund.

Sec. 624. Safety net organizations and Patient Advisory Commission.

Sec. 625. Urban health provider adjustment.

Sec. 626. Committee on drug compounding.

Sec. 627. Sense of the Senate concerning the structure of medicare reform and the

prescription drug benefit.

Sec. 628. Sense of the Senate regarding the establishment of a nationwide permanent lifestyle modification program for medicare beneficiaries.

Sec. 629. Sense of the Senate on payment reductions under medicare physician

fee schedule.

Sec. 630. Temporary suspension of oasis requirement for collection of data on

non-medicare and non-medicaid patients.

Sec. 631. Employer flexibility.

Sec. 632. One Hundred percent FMAP for medical assistance provided to a Native Hawaiian through a federally-qualified health center or a

Native Hawaiian health care system under the medicaid program.

Sec. 633. Extension of moratorium.

Sec. 634. GAO study of pharmaceutical price controls and patent protections in

the G–7 countries.

Sec. 635. Safety Net Organizations and Patient Advisory Commission.

Sec. 636. Establishment of program to prevent abuse of nursing facility residents.

Sec. 637. Office of Rural Health Policy Improvements.

TITLE VII—ACCESS TO AFFORDABLE PHARMACEUTICALS

Sec. 701. Short title.

Sec. 702. 30-month stay-of-effectiveness period.

Sec. 703. Forfeiture of 180-day exclusivity period.

Sec. 704. Bioavailability and bioequivalence.

Sec. 705. Remedies for infringement.

Sec. 706. Conforming amendments.

TITLE VIII—IMPORTATION OF PRESCRIPTION DRUGS

Sec. 801. Importation of prescription drugs.

TITLE IX—DRUG COMPETITION ACT OF 2003

Sec. 901. Short title.
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Sec. 902. Findings.

Sec. 903. Purposes.

Sec. 904. Definitions.

Sec. 905. Notification of agreements.

Sec. 906. Filing deadlines.

Sec. 907. Disclosure exemption.

Sec. 908. Enforcement.

Sec. 909. Rulemaking.

Sec. 910. Savings clause.

Sec. 911. Effective date.

1 TITLE I—MEDICARE

2 PRESCRIPTION DRUG BENEFIT

3 Subtitle A—Medicare Voluntary

4 Prescription Drug Delivery Pro5 gram

6 SEC. 101. MEDICARE VOLUNTARY PRESCRIPTION DRUG DE7 LIVERY PROGRAM.

8 (a) ESTABLISHMENT.—Title XVIII (42 U.S.C. 1395 et

9 seq.) is amended by redesignating part D as part E and

10 by inserting after part C the following new part:

11 ‘‘PART D—VOLUNTARY PRESCRIPTION DRUG DELIVERY

12 PROGRAM

13 ‘‘DEFINITIONS; TREATMENT OF REFERENCES TO

14 PROVISIONS IN MEDICAREADVANTAGE PROGRAM

15 ‘‘SEC. 1860D. (a) DEFINITIONS.—In this part:

16 ‘‘(1) ADMINISTRATOR.—The term ‘Adminis17 trator’ means the Administrator of the Center for

18 Medicare Choices as established under section 1808.

19 ‘‘(2) COVERED DRUG.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraphs (B), (C), and (D), the term ‘cov3 ered drug’ means—

4 ‘‘(i) a drug that may be dispensed only

5 upon a prescription and that is described in

6 clause (i) or (ii) of subparagraph (A) of sec7 tion 1927(k)(2); or

8 ‘‘(ii) a biological product described in

9 clauses (i) through (iii) of subparagraph

10 (B) of such section; or

11 ‘‘(iii) insulin described in subpara12 graph (C) of such section (including sy13 ringes, and necessary medical supplies asso14 ciated with the administration of insulin,

15 as defined by the Administrator);

16 and such term includes a vaccine licensed under

17 section 351 of the Public Health Service Act and

18 any use of a covered drug for a medically accept19 ed indication (as defined in section 1927(k)(6)).

20 ‘‘(B) EXCLUSIONS.—

21 ‘‘(i) IN GENERAL.—The term ‘covered

22 drug’ does not include drugs or classes of

23 drugs, or their medical uses, which may be

24 excluded from coverage or otherwise re25 stricted under section 1927(d)(2), other than
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1 subparagraph (E) thereof (relating to smok2 ing cessation agents), or under section

3 1927(d)(3).

4 ‘‘(ii) AVOIDANCE OF DUPLICATE COV5 ERAGE.—A drug prescribed for an indi6 vidual that would otherwise be a covered

7 drug under this part shall not be so consid8 ered if payment for such drug is available

9 under part A or B, but shall be so consid10 ered if such payment is not available under

11 part A or B or because benefits under such

12 parts have been exhausted.

13 ‘‘(C) APPLICATION OF FORMULARY RESTRIC14 TIONS.—A drug prescribed for an individual

15 that would otherwise be a covered drug under

16 this part shall not be so considered under a plan

17 if the plan excludes the drug under a formulary

18 and such exclusion is not successfully resolved

19 under subsection (d) or (e)(2) of section 1860D–

20 5.

21 ‘‘(D) APPLICATION OF GENERAL EXCLUSION

22 PROVISIONS.—A Medicare Prescription Drug

23 plan or a MedicareAdvantage plan may exclude

24 from qualified prescription drug coverage any

25 covered drug—
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1 ‘‘(i) for which payment would not be

2 made if section 1862(a) applied to part D;

3 or

4 ‘‘(ii) which are not prescribed in ac5 cordance with the plan or this part.

6 Such exclusions are determinations subject to re7 consideration and appeal pursuant to section

8 1860D–5(e).

9 ‘‘(3) ELIGIBLE BENEFICIARY.—The term ‘eligible

10 beneficiary’ means an individual who is entitled to,

11 or enrolled for, benefits under part A and enrolled

12 under part B (other than a dual eligible individual,

13 as defined in section 1860D–19(a)(4)(E)).

14 ‘‘(4) ELIGIBLE ENTITY.—The term ‘eligible enti15 ty’ means any risk-bearing entity that the Adminis16 trator determines to be appropriate to provide eligible

17 beneficiaries with the benefits under a Medicare Pre18 scription Drug plan, including—

19 ‘‘(A) a pharmaceutical benefit management

20 company;

21 ‘‘(B) a wholesale or retail pharmacist deliv22 ery system;

23 ‘‘(C) an insurer (including an insurer that

24 offers medicare supplemental policies under sec25 tion 1882);
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1 ‘‘(D) any other risk-bearing entity; or

2 ‘‘(E) any combination of the entities de3 scribed in subparagraphs (A) through (D).

4 ‘‘(5) INITIAL COVERAGE LIMIT.—The term ‘ini5 tial coverage limit’ means the limit as established

6 under section 1860D–6(c)(3), or, in the case of cov7 erage that is not standard prescription drug coverage,

8 the comparable limit (if any) established under the

9 coverage.

10 ‘‘(6) MEDICAREADVANTAGE ORGANIZATION;

11 MEDICAREADVANTAGE PLAN.—The terms

12 ‘MedicareAdvantage organization’ and

13 ‘MedicareAdvantage plan’ have the meanings given

14 such terms in subsections (a)(1) and (b)(1), respec15 tively, of section 1859 (relating to definitions relating

16 to MedicareAdvantage organizations).

17 ‘‘(7) MEDICARE PRESCRIPTION DRUG PLAN.—

18 The term ‘Medicare Prescription Drug plan’ means

19 prescription drug coverage that is offered under a pol20 icy, contract, or plan—

21 ‘‘(A) that has been approved under section

22 1860D–13; and

23 ‘‘(B) by an eligible entity pursuant to, and

24 in accordance with, a contract between the Ad-
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1 ministrator and the entity under section 1860D–

2 7(b).

3 ‘‘(8) PRESCRIPTION DRUG ACCOUNT.—The term

4 ‘Prescription Drug Account’ means the Prescription

5 Drug Account (as established under section 1860D–

6 25) in the Federal Supplementary Medical Insurance

7 Trust Fund under section 1841.

8 ‘‘(9) QUALIFIED PRESCRIPTION DRUG COV9 ERAGE.—The term ‘qualified prescription drug cov10 erage’ means the coverage described in section 1860D–

11 6(a)(1).

12 ‘‘(10) STANDARD PRESCRIPTION DRUG COV13 ERAGE.—The term ‘standard prescription drug cov14 erage’ means the coverage described in section 1860D–

15 6(c).

16 ‘‘(b) APPLICATION OF MEDICAREADVANTAGE PROVI17 SIONS UNDER THIS PART.—For purposes of applying pro18 visions of part C under this part with respect to a Medicare

19 Prescription Drug plan and an eligible entity, unless other20 wise provided in this part such provisions shall be applied

21 as if—

22 ‘‘(1) any reference to a MedicareAdvantage plan

23 included a reference to a Medicare Prescription Drug

24 plan;
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1 ‘‘(2) any reference to a provider-sponsored orga2 nization included a reference to an eligible entity;

3 ‘‘(3) any reference to a contract under section

4 1857 included a reference to a contract under section

5 1860D–7(b); and

6 ‘‘(4) any reference to part C included a reference

7 to this part.

8 ‘‘Subpart 1—Establishment of Voluntary Prescription

9 Drug Delivery Program

10 ‘‘ESTABLISHMENT OF VOLUNTARY PRESCRIPTION DRUG

11 DELIVERY PROGRAM

12 ‘‘SEC. 1860D–1. (a) PROVISION OF BENEFIT.—

13 ‘‘(1) IN GENERAL.—The Administrator shall pro14 vide for and administer a voluntary prescription

15 drug delivery program under which each eligible bene16 ficiary enrolled under this part shall be provided with

17 access to qualified prescription drug coverage as fol18 lows:

19 ‘‘(A) MEDICAREADVANTAGE ENROLLEES RE20 CEIVE COVERAGE THROUGH

21 MEDICAREADVANTAGE PLAN.—

22 ‘‘(i) IN GENERAL.—Except as provided

23 in clause (ii), an eligible beneficiary who is

24 enrolled under this part and enrolled in a

25 MedicareAdvantage plan offered by a
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1 MedicareAdvantage organization shall re2 ceive coverage of benefits under this part

3 through such plan.

4 ‘‘(ii) EXCEPTION FOR ENROLLEES IN

5 MEDICAREADVANTAGE MSA PLANS.—An eli6 gible beneficiary who is enrolled under this

7 part and enrolled in an MSA plan under

8 part C shall receive coverage of benefits

9 under this part through enrollment in a

10 Medicare Prescription Drug plan that is of11 fered in the geographic area in which the

12 beneficiary resides. For purposes of this

13 part, the term ‘MSA plan’ has the meaning

14 given such term in section 1859(b)(3).

15 ‘‘(iii) EXCEPTION FOR ENROLLEES IN

16 MEDICAREADVANTAGE PRIVATE FEE-FOR17 SERVICE PLANS.—An eligible beneficiary

18 who is enrolled under this part and enrolled

19 in a private fee-for-service plan under part

20 C shall—

21 ‘‘(i) receive benefits under this

22 part through such plan if the plan pro23 vides qualified prescription drug cov24 erage; and
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1 ‘‘(ii) if the plan does not provide

2 qualified prescription drug coverage,

3 receive coverage of benefits under this

4 part through enrollment in a Medicare

5 Prescription Drug plan that is offered

6 in the geographic area in which the

7 beneficiary resides. For purposes of

8 this part, the term ‘private fee-for-serv9 ice plan’ has the meaning given such

10 term in section 1859(b)(2).

11 ‘‘(B) FEE-FOR-SERVICE ENROLLEES RE12 CEIVE COVERAGE THROUGH A MEDICARE PRE13 SCRIPTION DRUG PLAN.—An eligible beneficiary

14 who is enrolled under this part but is not en15 rolled in a MedicareAdvantage plan (except for

16 an MSA plan or a private fee-for-service plan

17 that does not provide qualified prescription drug

18 coverage) shall receive coverage of benefits under

19 this part through enrollment in a Medicare Pre20 scription Drug plan that is offered in the geo21 graphic area in which the beneficiary resides.

22 ‘‘(2) VOLUNTARY NATURE OF PROGRAM.—Noth23 ing in this part shall be construed as requiring an el24 igible beneficiary to enroll in the program under this

25 part.
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1 ‘‘(3) SCOPE OF BENEFITS.—Pursuant to section

2 1860D–6(b)(3)(C), the program established under this

3 part shall provide for coverage of all therapeutic cat4 egories and classes of covered drugs (although not nec5 essarily for all drugs within such categories and class6 es).

7 ‘‘(4) PROGRAM TO BEGIN IN 2006.—The Adminis8 trator shall establish the program under this part in

9 a manner so that benefits are first provided beginning

10 on January 1, 2006.

11 ‘‘(b) ACCESS TO ALTERNATIVE PRESCRIPTION DRUG

12 COVERAGE.—In the case of an eligible beneficiary who has

13 creditable prescription drug coverage (as defined in section

14 1860D–2(b)(1)(F)), such beneficiary—

15 ‘‘(1) may continue to receive such coverage and

16 not enroll under this part; and

17 ‘‘(2) pursuant to section 1860D–2(b)(1)(C), is

18 permitted to subsequently enroll under this part with19 out any penalty and obtain access to qualified pre20 scription drug coverage in the manner described in

21 subsection (a) if the beneficiary involuntarily loses

22 such coverage.

23 ‘‘(c) FINANCING.—The costs of providing benefits

24 under this part shall be payable from the Prescription Drug

25 Account.
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1 ‘‘ENROLLMENT UNDER PROGRAM

2 ‘‘SEC. 1860D–2. (a) ESTABLISHMENT OF ENROLL3 MENT PROCESS.—

4 ‘‘(1) PROCESS SIMILAR TO PART B ENROLL5 MENT.—The Administrator shall establish a process

6 through which an eligible beneficiary (including an

7 eligible beneficiary enrolled in a MedicareAdvantage

8 plan offered by a MedicareAdvantage organization)

9 may make an election to enroll under this part. Such

10 process shall be similar to the process for enrollment

11 in part B under section 1837, including the deeming

12 provisions of such section.

13 ‘‘(2) CONDITION OF ENROLLMENT.—An eligible

14 beneficiary must be enrolled under this part in order

15 to be eligible to receive access to qualified prescription

16 drug coverage.

17 ‘‘(b) SPECIAL ENROLLMENT PROCEDURES.—

18 ‘‘(1) LATE ENROLLMENT PENALTY.—

19 ‘‘(A) INCREASE IN MONTHLY BENEFICIARY

20 OBLIGATION.—Subject to the succeeding provi21 sions of this paragraph, in the case of an eligible

22 beneficiary whose coverage period under this

23 part began pursuant to an enrollment after the

24 beneficiary’s initial enrollment period under

25 part B (determined pursuant to section 1837(d))
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1 and not pursuant to the open enrollment period

2 described in paragraph (2), the Administrator

3 shall establish procedures for increasing the

4 amount of the monthly beneficiary obligation

5 under section 1860D–17 applicable to such bene6 ficiary by an amount that the Administrator de7 termines is actuarially sound for each full 12-

8 month period (in the same continuous period of

9 eligibility) in which the eligible beneficiary could

10 have been enrolled under this part but was not

11 so enrolled.

12 ‘‘(B) PERIODS TAKEN INTO ACCOUNT.—For

13 purposes of calculating any 12-month period

14 under subparagraph (A), there shall be taken

15 into account—

16 ‘‘(i) the months which elapsed between

17 the close of the eligible beneficiary’s initial

18 enrollment period and the close of the en19 rollment period in which the beneficiary en20 rolled; and

21 ‘‘(ii) in the case of an eligible bene22 ficiary who reenrolls under this part, the

23 months which elapsed between the date of

24 termination of a previous coverage period
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1 and the close of the enrollment period in

2 which the beneficiary reenrolled.

3 ‘‘(C) PERIODS NOT TAKEN INTO ACCOUNT.—

4 ‘‘(i) IN GENERAL.—For purposes of

5 calculating any 12-month period under sub6 paragraph (A), subject to clause (ii), there

7 shall not be taken into account months for

8 which the eligible beneficiary can dem9 onstrate that the beneficiary had creditable

10 prescription drug coverage (as defined in

11 subparagraph (F)).

12 ‘‘(ii) BENEFICIARY MUST INVOLUN13 TARILY LOSE COVERAGE.—Clause (i) shall

14 only apply with respect to coverage—

15 ‘‘(I) in the case of coverage de16 scribed in clause (ii) of subparagraph

17 (F), if the plan terminates, ceases to

18 provide, or reduces the value of the pre19 scription drug coverage under such

20 plan to below the actuarial value of

21 standard prescription drug coverage

22 (as determined under section 1860D–

23 6(f));

24 ‘‘(II) in the case of coverage de25 scribed in clause (i), (iii), or (iv) of
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1 subparagraph (F), if the beneficiary is

2 involuntarily disenrolled or becomes

3 ineligible for such coverage; or

4 ‘‘(III) in the case of a beneficiary

5 with coverage described in clause (v) of

6 subparagraph (F), if the issuer of the

7 policy terminates coverage under the

8 policy.

9 ‘‘(D) PERIODS TREATED SEPARATELY.—

10 Any increase in an eligible beneficiary’s monthly

11 beneficiary obligation under subparagraph (A)

12 with respect to a particular continuous period of

13 eligibility shall not be applicable with respect to

14 any other continuous period of eligibility which

15 the beneficiary may have.

16 ‘‘(E) CONTINUOUS PERIOD OF ELIGI17 BILITY.—

18 ‘‘(i) IN GENERAL.—Subject to clause

19 (ii), for purposes of this paragraph, an eli20 gible beneficiary’s ‘continuous period of eli21 gibility’ is the period that begins with the

22 first day on which the beneficiary is eligible

23 to enroll under section 1836 and ends with

24 the beneficiary’s death.
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1 ‘‘(ii) SEPARATE PERIOD.—Any period

2 during all of which an eligible beneficiary

3 satisfied paragraph (1) of section 1836 and

4 which terminated in or before the month

5 preceding the month in which the bene6 ficiary attained age 65 shall be a separate

7 ‘continuous period of eligibility’ with re8 spect to the beneficiary (and each such pe9 riod which terminates shall be deemed not

10 to have existed for purposes of subsequently

11 applying this paragraph).

12 ‘‘(F) CREDITABLE PRESCRIPTION DRUG

13 COVERAGE DEFINED.—Subject to subparagraph

14 (G), for purposes of this part, the term ‘cred15 itable prescription drug coverage’ means any of

16 the following:

17 ‘‘(i) DRUG-ONLY COVERAGE UNDER

18 MEDICAID.—Coverage of covered outpatient

19 drugs (as defined in section 1927) under

20 title XIX or a waiver under 1115 that is

21 provided to an individual who is not a dual

22 eligible individual (as defined in section

23 1860D–19(a)(4)(E)).

24 ‘‘(ii) PRESCRIPTION DRUG COVERAGE

25 UNDER A GROUP HEALTH PLAN.—Any out-
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1 patient prescription drug coverage under a

2 group health plan, including a health bene3 fits plan under chapter 89 of title 5, United

4 States Code (commonly known as the Fed5 eral employees health benefits program),

6 and a qualified retiree prescription drug

7 plan (as defined in section 1860D–

8 20(e)(4)).

9 ‘‘(iii) STATE PHARMACEUTICAL AS10 SISTANCE PROGRAM.—Coverage of prescrip11 tion drugs under a State pharmaceutical

12 assistance program.

13 ‘‘(iv) VETERANS’ COVERAGE OF PRE14 SCRIPTION DRUGS.—Coverage of prescrip15 tion drugs for veterans, and survivors and

16 dependents of veterans, under chapter 17 of

17 title 38, United States Code.

18 ‘‘(v) PRESCRIPTION DRUG COVERAGE

19 UNDER MEDIGAP POLICIES.—Coverage

20 under a medicare supplemental policy

21 under section 1882 that provides benefits for

22 prescription drugs (whether or not such cov23 erage conforms to the standards for pack24 ages of benefits under section 1882(p)(1)).
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1 ‘‘(G) REQUIREMENT FOR CREDITABLE COV2 ERAGE.—Coverage described in clauses (i)

3 through (v) of subparagraph (F) shall not be

4 considered to be creditable coverage under this

5 part unless the coverage provides coverage of the

6 cost of prescription drugs the actuarial value of

7 which (as defined by the Administrator) to the

8 beneficiary equals or exceeds the actuarial value

9 of standard prescription drug coverage (as deter10 mined under section 1860D–6(f)).

11 ‘‘(H) DISCLOSURE.—

12 ‘‘(i) IN GENERAL.—Each entity that

13 offers coverage of the type described in

14 clause (ii) (iii), (iv), or (v) of subparagraph

15 (F) shall provide for disclosure, consistent

16 with standards established by the Adminis17 trator, of whether the coverage provides cov18 erage of the cost of prescription drugs the

19 actuarial value of which (as defined by the

20 Administrator) to the beneficiary equals or

21 exceeds the actuarial value of standard pre22 scription drug coverage (as determined

23 under section 1860D–6(f)).

24 ‘‘(ii) WAIVER OF LIMITATIONS.—An

25 individual may apply to the Administrator
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1 to waive the application of subparagraph

2 (G) if the individual establishes that the in3 dividual was not adequately informed that

4 the coverage the beneficiary was enrolled in

5 did not provide the level of benefits required

6 in order for the coverage to be considered

7 creditable coverage under subparagraph (F).

8 ‘‘(2) INITIAL ELECTION PERIODS.—

9 ‘‘(A) OPEN ENROLLMENT PERIOD FOR CUR10 RENT BENEFICIARIES IN WHICH LATE ENROLL11 MENT PROCEDURES DO NOT APPLY.—In the case

12 of an individual who is an eligible beneficiary as

13 of November 1, 2005, there shall be an open en14 rollment period of 6 months beginning on that

15 date under which such beneficiary may enroll

16 under this part without the application of the

17 late enrollment procedures established under

18 paragraph (1)(A).

19 ‘‘(B) INDIVIDUAL COVERED IN FUTURE.—In

20 the case of an individual who becomes an eligible

21 beneficiary after such date, there shall be an ini22 tial election period which is the same as the ini23 tial enrollment period under section 1837(d).
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1 ‘‘(3) SPECIAL ENROLLMENT PERIOD FOR BENE2 FICIARIES WHO INVOLUNTARILY LOSE CREDITABLE

3 PRESCRIPTION DRUG COVERAGE.—

4 ‘‘(A) ESTABLISHMENT.—The Administrator

5 shall establish a special open enrollment period

6 (as described in subparagraph (B)) for an eligi7 ble beneficiary that loses creditable prescription

8 drug coverage.

9 ‘‘(B) SPECIAL OPEN ENROLLMENT PE10 RIOD.—The special open enrollment period de11 scribed in this subparagraph is the 63-day pe12 riod that begins on—

13 ‘‘(i) in the case of a beneficiary with

14 coverage described in clause (ii) of para15 graph (1)(F), the later of the date on which

16 the plan terminates, ceases to provide, or

17 substantially reduces (as defined by the Ad18 ministrator) the value of the prescription

19 drug coverage under such plan or the date

20 the beneficiary is provided with notice of

21 such termination or reduction;

22 ‘‘(ii) in the case of a beneficiary with

23 coverage described in clause (i), (iii), or (iv)

24 of paragraph (1)(F), the later of the date on

25 which the beneficiary is involuntarily
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1 disenrolled or becomes ineligible for such

2 coverage or the date the beneficiary is pro3 vided with notice of such loss of eligibility;

4 or

5 ‘‘(iii) in the case of a beneficiary with

6 coverage described in clause (v) of para7 graph (1)(F), the latter of the date on which

8 the issuer of the policy terminates coverage

9 under the policy or the date the beneficiary

10 is provided with notice of such termination.

11 ‘‘(c) PERIOD OF COVERAGE.—

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2) and subject to paragraph (3), an eligible

14 beneficiary’s coverage under the program under this

15 part shall be effective for the period provided in sec16 tion 1838, as if that section applied to the program

17 under this part.

18 ‘‘(2) OPEN AND SPECIAL ENROLLMENT.—

19 ‘‘(A) OPEN ENROLLMENT.—An eligible bene20 ficiary who enrolls under the program under this

21 part pursuant to subsection (b)(2) shall be enti22 tled to the benefits under this part beginning on

23 January 1, 2006.

24 ‘‘(B) SPECIAL ENROLLMENT.—Subject to

25 paragraph (3), an eligible beneficiary who en-
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1 rolls under the program under this part pursu2 ant to subsection (b)(3) shall be entitled to the

3 benefits under this part beginning on the first

4 day of the month following the month in which

5 such enrollment occurs.

6 ‘‘(3) LIMITATION.—Coverage under this part

7 shall not begin prior to January 1, 2006.

8 ‘‘(d) TERMINATION.—

9 ‘‘(1) IN GENERAL.—The causes of termination

10 specified in section 1838 shall apply to this part in

11 the same manner as such causes apply to part B.

12 ‘‘(2) COVERAGE TERMINATED BY TERMINATION

13 OF COVERAGE UNDER PART A OR B.—

14 ‘‘(A) IN GENERAL.—In addition to the

15 causes of termination specified in paragraph (1),

16 the Administrator shall terminate an individ17 ual’s coverage under this part if the individual

18 is no longer enrolled in both parts A and B.

19 ‘‘(B) EFFECTIVE DATE.—The termination

20 described in subparagraph (A) shall be effective

21 on the effective date of termination of coverage

22 under part A or (if earlier) under part B.

23 ‘‘(3) PROCEDURES REGARDING TERMINATION OF

24 A BENEFICIARY UNDER A PLAN.—The Administrator

25 shall establish procedures for determining the status of
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1 an eligible beneficiary’s enrollment under this part if

2 the beneficiary’s enrollment in a Medicare Prescrip3 tion Drug plan offered by an eligible entity under

4 this part is terminated by the entity for cause (pursu5 ant to procedures established by the Administrator

6 under section 1860D–3(a)(1)).

7 ‘‘ELECTION OF A MEDICARE PRESCRIPTION DRUG PLAN

8 ‘‘SEC. 1860D–3. (a) IN GENERAL.—

9 ‘‘(1) PROCESS.—

10 ‘‘(A) ELECTION.—

11 ‘‘(i) IN GENERAL.—The Administrator

12 shall establish a process through which an

13 eligible beneficiary who is enrolled under

14 this part but not enrolled in a

15 MedicareAdvantage plan (except for an

16 MSA plan or a private fee-for-service plan

17 that does not provide qualified prescription

18 drug coverage) offered by a

19 MedicareAdvantage organization—

20 ‘‘(I) shall make an election to en21 roll in any Medicare Prescription

22 Drug plan that is offered by an eligible

23 entity and that serves the geographic

24 area in which the beneficiary resides;

25 and
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1 ‘‘(II) may make an annual elec2 tion to change the election under this

3 clause.

4 ‘‘(ii) CLARIFICATION REGARDING EN5 ROLLMENT.—The process established under

6 clause (i) shall include, in the case of an el7 igible beneficiary who is enrolled under this

8 part but who has failed to make an election

9 of a Medicare Prescription Drug plan in an

10 area, for the enrollment in any Medicare

11 Prescription Drug plan that has been des12 ignated by the Administrator in the area.

13 The Administrator shall establish a process

14 for designating a plan or plans in order to

15 carry out the preceding sentence.

16 ‘‘(B) REQUIREMENTS FOR PROCESS.—In es17 tablishing the process under subparagraph (A),

18 the Administrator shall—

19 ‘‘(i) use rules similar to the rules for

20 enrollment, disenrollment, and termination

21 of enrollment with a MedicareAdvantage

22 plan under section 1851, including—

23 ‘‘(I) the establishment of special

24 election periods under subsection (e)(4)

25 of such section; and
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1 ‘‘(II) the application of the guar2 anteed issue and renewal provisions of

3 section 1851(g) (other than clause (i)

4 and the second sentence of clause (ii) of

5 paragraph (3)(C), relating to default

6 enrollment); and

7 ‘‘(ii) coordinate enrollments,

8 disenrollments, and terminations of enroll9 ment under part C with enrollments,

10 disenrollments, and terminations of enroll11 ment under this part.

12 ‘‘(2) FIRST ENROLLMENT PERIOD FOR PLAN EN13 ROLLMENT.—The process developed under paragraph

14 (1) shall ensure that eligible beneficiaries who enroll

15 under this part during the open enrollment period

16 under section 1860D–2(b)(2) are permitted to elect an

17 eligible entity prior to January 1, 2006, in order to

18 ensure that coverage under this part is effective as of

19 such date.

20 ‘‘(b) ENROLLMENT IN A MEDICAREADVANTAGE

21 PLAN.—

22 ‘‘(1) IN GENERAL.—An eligible beneficiary who

23 is enrolled under this part and enrolled in a

24 MedicareAdvantage plan (except for an MSA plan or

25 a private fee-for-service plan that does not provide
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1 qualified prescription drug coverage) offered by a

2 MedicareAdvantage organization shall receive access

3 to such coverage under this part through such plan.

4 ‘‘(2) RULES.—Enrollment in a

5 MedicareAdvantage plan is subject to the rules for en6 rollment in such plan under section 1851.

7 ‘‘(c) INFORMATION TO ENTITIES TO FACILITATE EN8 ROLLMENT.—Notwithstanding any other provision of law,

9 the Administrator may provide to each eligible entity with

10 a contract under this part such information about eligible

11 beneficiaries as the Administrator determines to be nec12 essary to facilitate efficient enrollment by such beneficiaries

13 with such entities. The Administrator may provide such in14 formation only so long as and to the extent necessary to

15 carry out such objective.

16 ‘‘PROVIDING INFORMATION TO BENEFICIARIES

17 ‘‘SEC. 1860D–4. (a) ACTIVITIES.—

18 ‘‘(1) IN GENERAL.—The Administrator shall con19 duct activities that are designed to broadly dissemi20 nate information to eligible beneficiaries (and pro21 spective eligible beneficiaries) regarding the coverage

22 provided under this part.

23 ‘‘(2) SPECIAL RULE FOR FIRST ENROLLMENT

24 UNDER THE PROGRAM.—The activities described in

25 paragraph (1) shall ensure that eligible beneficiaries

26 are provided with such information at least 30 days
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1 prior to the first enrollment period described in sec2 tion 1860D–3(a)(2).

3 ‘‘(b) REQUIREMENTS.—

4 ‘‘(1) IN GENERAL.—The activities described in

5 subsection (a) shall—

6 ‘‘(A) be similar to the activities performed

7 by the Administrator under section 1851(d);

8 ‘‘(B) be coordinated with the activities per9 formed by—

10 ‘‘(i) the Administrator under such sec11 tion; and

12 ‘‘(ii) the Secretary under section 1804;

13 and

14 ‘‘(C) provide for the dissemination of infor15 mation comparing the plans offered by eligible

16 entities under this part that are available to eli17 gible beneficiaries residing in an area.

18 ‘‘(2) COMPARATIVE INFORMATION.—The com19 parative information described in paragraph (1)(C)

20 shall include a comparison of the following:

21 ‘‘(A) BENEFITS.—The benefits provided

22 under the plan and the formularies and griev23 ance and appeals processes under the plan.
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1 ‘‘(B) MONTHLY BENEFICIARY OBLIGA2 TION.—The monthly beneficiary obligation under

3 the plan.

4 ‘‘(C) QUALITY AND PERFORMANCE.—The

5 quality and performance of the eligible entity of6 fering the plan.

7 ‘‘(D) BENEFICIARY COST-SHARING.—The

8 cost-sharing required of eligible beneficiaries

9 under the plan.

10 ‘‘(E) CONSUMER SATISFACTION SURVEYS.—

11 The results of consumer satisfaction surveys re12 garding the plan and the eligible entity offering

13 such plan (conducted pursuant to section

14 1860D–5(h).

15 ‘‘(F) ADDITIONAL INFORMATION.—Such ad16 ditional information as the Administrator may

17 prescribe.

18 ‘‘BENEFICIARY PROTECTIONS

19 ‘‘SEC. 1860D–5. (a) DISSEMINATION OF INFORMA20 TION.—

21 ‘‘(1) GENERAL INFORMATION.—An eligible entity

22 offering a Medicare Prescription Drug plan shall dis23 close, in a clear, accurate, and standardized form to

24 each enrollee at the time of enrollment, and at least

25 annually thereafter, the information described in sec-
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1 tion 1852(c)(1) relating to such plan. Such informa2 tion includes the following:

3 ‘‘(A) Access to covered drugs, including ac4 cess through pharmacy networks.

5 ‘‘(B) How any formulary used by the entity

6 functions.

7 ‘‘(C) Copayments, coinsurance, and deduct8 ible requirements.

9 ‘‘(D) Grievance and appeals processes.

10 The information described in the preceding sentence

11 shall also be made available on request to prospective

12 enrollees during open enrollment periods.

13 ‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL

14 COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA15 TION.—Upon request of an individual eligible to en16 roll in a Medicare Prescription Drug plan, the eligi17 ble entity offering such plan shall provide informa18 tion similar (as determined by the Administrator) to

19 the information described in subparagraphs (A), (B),

20 and (C) of section 1852(c)(2) to such individual.

21 ‘‘(3) RESPONSE TO BENEFICIARY QUESTIONS.—

22 An eligible entity offering a Medicare Prescription

23 Drug plan shall have a mechanism for providing on

24 a timely basis specific information to enrollees upon
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1 request, including information on the coverage of spe2 cific drugs and changes in its formulary.

3 ‘‘(4) CLAIMS INFORMATION.—An eligible entity

4 offering a Medicare Prescription Drug plan must fur5 nish to enrolled individuals in a form easily under6 standable to such individuals—

7 ‘‘(A) an explanation of benefits (in accord8 ance with section 1806(a) or in a comparable

9 manner); and

10 ‘‘(B) when prescription drug benefits are

11 provided under this part, a notice of the benefits

12 in relation to the initial coverage limit and an13 nual out-of-pocket limit for the current year (ex14 cept that such notice need not be provided more

15 often than monthly).

16 ‘‘(5) APPROVAL OF MARKETING MATERIAL AND

17 APPLICATION FORMS.—The provisions of section

18 1851(h) shall apply to marketing material and appli19 cation forms under this part in the same manner as

20 such provisions apply to marketing material and ap21 plication forms under part C.

22 ‘‘(b) ACCESS TO COVERED DRUGS.—

23 ‘‘(1) ACCESS TO NEGOTIATED PRICES FOR PRE24 SCRIPTION DRUGS.—An eligible entity offering a

25 Medicare Prescription Drug plan shall have in place
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1 procedures to ensure that beneficiaries are not charged

2 more than the negotiated price of a covered drug.

3 Such procedures shall include the issuance of a card

4 (or other technology) that may be used by an enrolled

5 beneficiary for the purchase of prescription drugs for

6 which coverage is not otherwise provided under the

7 Medicare Prescription Drug plan.

8 ‘‘(2) ASSURING PHARMACY ACCESS.—

9 ‘‘(A) IN GENERAL.—An eligible entity offer10 ing a Medicare Prescription Drug plan shall se11 cure the participation in its network of a suffi12 cient number of pharmacies that dispense (other

13 than by mail order) drugs directly to patients to

14 ensure convenient access (as determined by the

15 Administrator and including adequate emer16 gency access) for enrolled beneficiaries, in ac17 cordance with standards established by the Ad18 ministrator under section 1860D–7(g) that en19 sure such convenient access. Such standards shall

20 take into account reasonable distances to phar21 macy services in urban and rural areas and ac22 cess to pharmacy services of the Indian Health

23 Service and Indian tribes and tribal organiza24 tions.
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1 ‘‘(B) USE OF POINT-OF-SERVICE SYSTEM.—

2 An eligible entity offering a Medicare Prescrip3 tion Drug plan shall establish an optional point4 of-service method of operation under which—

5 ‘‘(i) the plan provides access to any or

6 all pharmacies that are not participating

7 pharmacies in its network; and

8 ‘‘(ii) the plan may charge beneficiaries

9 through adjustments in copayments any ad10 ditional costs associated with the point-of11 service option.

12 The additional copayments so charged shall not

13 count toward the application of section 1860D–

14 6(c).

15 ‘‘(C) LEVEL PLAYING FIELD.—An eligible

16 entity offering a Medicare Prescription Drug

17 plan shall permit enrollees to receive benefits

18 (which may include a 90-day supply of drugs or

19 biologicals) through a community pharmacy,

20 rather than through mail order, and may permit

21 a differential amount to be paid by such enroll22 ees.

23 ‘‘(3) REQUIREMENTS ON DEVELOPMENT AND AP24 PLICATION OF FORMULARIES.—If an eligible entity of-
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1 fering a Medicare Prescription Drug plan uses a for2 mulary, the following requirements must be met:

3 ‘‘(A) PHARMACY AND THERAPEUTIC (P&T)

4 COMMITTEE.—

5 ‘‘(i) IN GENERAL.—The eligible entity

6 must establish a pharmacy and therapeutic

7 committee that develops and reviews the for8 mulary.

9 ‘‘(ii) COMPOSITION.—A pharmacy and

10 therapeutic committee shall include at least

11 1 academic expert, at least 1 practicing

12 physician, and at least 1 practicing phar13 macist, all of whom have expertise in the

14 care of elderly or disabled persons, and a

15 majority of the members of such committee

16 shall consist of individuals who are a prac17 ticing physician or a practicing pharmacist

18 (or both).

19 ‘‘(B) FORMULARY DEVELOPMENT.—In de20 veloping and reviewing the formulary, the com21 mittee shall base clinical decisions on the

22 strength of scientific evidence and standards of

23 practice, including assessing peer-reviewed med24 ical literature, such as randomized clinical

25 trials, pharmacoeconomic studies, outcomes re-
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1 search data, and on such other information as

2 the committee determines to be appropriate.

3 ‘‘(C) INCLUSION OF DRUGS IN ALL THERA4 PEUTIC CATEGORIES AND CLASSES.—

5 ‘‘(i) IN GENERAL.—The formulary

6 must include drugs within each therapeutic

7 category and class of covered drugs (as de8 fined by the Administrator), although not

9 necessarily for all drugs within such cat10 egories and classes.

11 ‘‘(ii) REQUIREMENT.—In defining

12 therapeutic categories and classes of covered

13 drugs pursuant to clause (i), the Adminis14 trator shall use—

15 ‘‘(I) the compendia referred to sec16 tion 1927(g)(1)(B)(i); and

17 ‘‘(II) other recognized sources of

18 drug classifications and categorizations

19 determined appropriate by the Admin20 istrator.

21 ‘‘(D) PROVIDER EDUCATION.—The com22 mittee shall establish policies and procedures to

23 educate and inform health care providers con24 cerning the formulary.
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1 ‘‘(E) NOTICE BEFORE REMOVING DRUGS

2 FROM FORMULARY.—Any removal of a drug from

3 a formulary shall take effect only after appro4 priate notice is made available to beneficiaries,

5 physicians, and pharmacists.

6 ‘‘(F) APPEALS AND EXCEPTIONS TO APPLI7 CATION.—The eligible entity must have, as part

8 of the appeals process under subsection (e), a

9 process for timely appeals for denials of coverage

10 based on such application of the formulary.

11 ‘‘(c) COST AND UTILIZATION MANAGEMENT; QUALITY

12 ASSURANCE; MEDICATION THERAPY MANAGEMENT PRO13 GRAM.—

14 ‘‘(1) IN GENERAL.—An eligible entity shall have

15 in place the following with respect to covered drugs:

16 ‘‘(A) A cost-effective drug utilization man17 agement program, including incentives to reduce

18 costs when appropriate.

19 ‘‘(B) Quality assurance measures to reduce

20 medical errors and adverse drug interactions

21 and to improve medication use, which—

22 ‘‘(i) shall include a medication therapy

23 management program described in para24 graph (2); and
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1 ‘‘(ii) may include beneficiary edu2 cation programs, counseling, medication re3 fill reminders, and special packaging.

4 ‘‘(C) A program to control fraud, abuse,

5 and waste.

6 Nothing in this section shall be construed as impair7 ing an eligible entity from applying cost management

8 tools (including differential payments) under all

9 methods of operation.

10 ‘‘(2) MEDICATION THERAPY MANAGEMENT PRO11 GRAM.—

12 ‘‘(A) IN GENERAL.—A medication therapy

13 management program described in this para14 graph is a program of drug therapy management

15 and medication administration that is designed

16 to assure, with respect to beneficiaries with

17 chronic diseases (such as diabetes, asthma, hy18 pertension, hyperlipidemia, and congestive heart

19 failure) or multiple prescriptions, that covered

20 drugs under the Medicare Prescription Drug

21 plan are appropriately used to optimize thera22 peutic outcomes through improved medication

23 use and to achieve therapeutic goals and reduce

24 the risk of adverse events, including adverse drug

25 interactions.
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1 ‘‘(B) ELEMENTS.—Such program may

2 include—

3 ‘‘(i) enhanced beneficiary under4 standing of such appropriate use through

5 beneficiary education, counseling, and other

6 appropriate means;

7 ‘‘(ii) increased beneficiary adherence

8 with prescription medication regimens

9 through medication refill reminders, special

10 packaging, and other appropriate means;

11 and

12 ‘‘(iii) detection of patterns of overuse

13 and underuse of prescription drugs.

14 ‘‘(C) DEVELOPMENT OF PROGRAM IN CO15 OPERATION WITH LICENSED PHARMACISTS.—The

16 program shall be developed in cooperation with

17 licensed and practicing pharmacists and physi18 cians.

19 ‘‘(D) CONSIDERATIONS IN PHARMACY

20 FEES.—The eligible entity offering a Medicare

21 Prescription Drug plan shall take into account,

22 in establishing fees for pharmacists and others

23 providing services under the medication therapy

24 management program, the resources and time

25 used in implementing the program.
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1 ‘‘(3) PUBLIC DISCLOSURE OF PHARMACEUTICAL

2 PRICES FOR EQUIVALENT DRUGS.—The eligible entity

3 offering a Medicare Prescription Drug plan shall pro4 vide that each pharmacy or other dispenser that ar5 ranges for the dispensing of a covered drug shall in6 form the beneficiary at the time of purchase of the

7 drug of any differential between the price of the pre8 scribed drug to the enrollee and the price of the lowest

9 cost generic drug covered under the plan that is thera10 peutically equivalent and bioequivalent.

11 ‘‘(d) GRIEVANCE MECHANISM, COVERAGE DETERMINA12 TIONS, AND RECONSIDERATIONS.—

13 ‘‘(1) IN GENERAL.—An eligible entity shall pro14 vide meaningful procedures for hearing and resolving

15 grievances between the eligible entity (including any

16 entity or individual through which the eligible entity

17 provides covered benefits) and enrollees with Medicare

18 Prescription Drug plans of the eligible entity under

19 this part in accordance with section 1852(f).

20 ‘‘(2) APPLICATION OF COVERAGE DETERMINA21 TION AND RECONSIDERATION PROVISIONS.—The re22 quirements of paragraphs (1) through (3) of section

23 1852(g) shall apply to an eligible entity with respect

24 to covered benefits under the Medicare Prescription

25 Drug plan it offers under this part in the same man-
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1 ner as such requirements apply to a

2 MedicareAdvantage organization with respect to bene3 fits it offers under a MedicareAdvantage plan under

4 part C.

5 ‘‘(3) REQUEST FOR REVIEW OF TIERED FOR6 MULARY DETERMINATIONS.—In the case of a Medicare

7 Prescription Drug plan offered by an eligible entity

8 that provides for tiered cost-sharing for drugs in9 cluded within a formulary and provides lower cost10 sharing for preferred drugs included within the for11 mulary, an individual who is enrolled in the plan

12 may request coverage of a nonpreferred drug under

13 the terms applicable for preferred drugs if the pre14 scribing physician determines that the preferred drug

15 for treatment of the same condition is not as effective

16 for the individual or has adverse effects for the indi17 vidual.

18 ‘‘(e) APPEALS.—

19 ‘‘(1) IN GENERAL.—Subject to paragraph (2), the

20 requirements of paragraphs (4) and (5) of section

21 1852(g) shall apply to an eligible entity with respect

22 to drugs not included on any formulary in a manner

23 that is similar (as determined by the Administrator)

24 to the manner that such requirements apply to a

25 MedicareAdvantage organization with respect to bene-
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1 fits it offers under a MedicareAdvantage plan under

2 part C.

3 ‘‘(2) FORMULARY DETERMINATIONS.—An indi4 vidual who is enrolled in a Medicare Prescription

5 Drug plan offered by an eligible entity may appeal

6 to obtain coverage for a covered drug that is not on

7 a formulary of the entity under the terms applicable

8 for a formulary drug if the prescribing physician de9 termines that the formulary drug for treatment of the

10 same condition is not as effective for the individual

11 or has adverse effects for the individual.

12 ‘‘(f) PRIVACY, CONFIDENTIALITY, AND ACCURACY OF

13 ENROLLEE RECORDS.—Insofar as an eligible entity main14 tains individually identifiable medical records or other

15 health information regarding eligible beneficiaries enrolled

16 in the Medicare Prescription Drug plan offered by the enti17 ty, the entity shall have in place procedures to—

18 ‘‘(1) safeguard the privacy of any individually

19 identifiable beneficiary information in a manner con20 sistent with the Federal regulations (concerning the

21 privacy of individually identifiable health informa22 tion) promulgated under section 264(c) of the Health

23 Insurance Portability and Accountability Act of 1996;

24 ‘‘(2) maintain such records and information in

25 a manner that is accurate and timely;
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1 ‘‘(3) ensure timely access by such beneficiaries to

2 such records and information; and

3 ‘‘(4) otherwise comply with applicable laws re4 lating to patient privacy and confidentiality.

5 ‘‘(g) UNIFORM MONTHLY PLAN PREMIUM.—An eligible

6 entity shall ensure that the monthly plan premium for a

7 Medicare Prescription Drug plan charged under this part

8 is the same for all eligible beneficiaries enrolled in the plan.

9 Such requirement shall not apply to enrollees of a Medicare

10 Prescription Drug plan who are enrolled in the plan pursu11 ant to a contractual agreement between the plan and an

12 employer or other group health plan that provides employ13 ment-based retiree health coverage (as defined in section

14 1860D–20(d)(4)(B)) if the premium amount is the same for

15 all such enrollees under such agreement.

16 ‘‘(h) CONSUMER SATISFACTION SURVEYS.—An eligible

17 entity shall conduct consumer satisfaction surveys with re18 spect to the plan and the entity. The Administrator shall

19 establish uniform requirements for such surveys.

20 ‘‘PRESCRIPTION DRUG BENEFITS

21 ‘‘SEC. 1860D–6. (a) REQUIREMENTS.—

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

23 and part C, the term ‘qualified prescription drug cov24 erage’ means either of the following:

25 ‘‘(A) STANDARD PRESCRIPTION DRUG COV26 ERAGE WITH ACCESS TO NEGOTIATED PRICES.—
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1 Standard prescription drug coverage (as defined

2 in subsection (c)) and access to negotiated prices

3 under subsection (e).

4 ‘‘(B) ACTUARIALLY EQUIVALENT PRESCRIP5 TION DRUG COVERAGE WITH ACCESS TO NEGO6 TIATED PRICES.—Coverage of covered drugs

7 which meets the alternative coverage require8 ments of subsection (d) and access to negotiated

9 prices under subsection (e), but only if it is ap10 proved by the Administrator as provided under

11 subsection (d).

12 ‘‘(2) PERMITTING ADDITIONAL PRESCRIPTION

13 DRUG COVERAGE.—

14 ‘‘(A) IN GENERAL.—Subject to subpara15 graph (B) and section 1860D–13(c)(2), nothing

16 in this part shall be construed as preventing

17 qualified prescription drug coverage from includ18 ing coverage of covered drugs that exceeds the

19 coverage required under paragraph (1).

20 ‘‘(B) REQUIREMENT.—An eligible entity

21 may not offer a Medicare Prescription Drug

22 plan that provides additional benefits pursuant

23 to subparagraph (A) in an area unless the eligi24 ble entity offering such plan also offers a Medi25 care Prescription Drug plan in the area that
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1 only provides the coverage of prescription drugs

2 that is required under paragraph (1).

3 ‘‘(3) COST CONTROL MECHANISMS.—In pro4 viding qualified prescription drug coverage, the entity

5 offering the Medicare Prescription Drug plan or the

6 MedicareAdvantage plan may use a variety of cost

7 control mechanisms, including the use of formularies,

8 tiered copayments, selective contracting with pro9 viders of prescription drugs, and mail order phar10 macies.

11 ‘‘(b) APPLICATION OF SECONDARY PAYOR PROVI12 SIONS.—The provisions of section 1852(a)(4) shall apply

13 under this part in the same manner as they apply under

14 part C.

15 ‘‘(c) STANDARD PRESCRIPTION DRUG COVERAGE.—

16 For purposes of this part and part C, the term ‘standard

17 prescription drug coverage’ means coverage of covered drugs

18 that meets the following requirements:

19 ‘‘(1) DEDUCTIBLE.—

20 ‘‘(A) IN GENERAL.—The coverage has an

21 annual deductible—

22 ‘‘(i) for 2006, that is equal to $275; or

23 ‘‘(ii) for a subsequent year, that is

24 equal to the amount specified under this

25 paragraph for the previous year increased
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1 by the percentage specified in paragraph (5)

2 for the year involved.

3 ‘‘(B) ROUNDING.—Any amount determined

4 under subparagraph (A)(ii) that is not a mul5 tiple of $1 shall be rounded to the nearest mul6 tiple of $1.

7 ‘‘(2) LIMITS ON COST-SHARING.—The coverage

8 has cost-sharing (for costs above the annual deductible

9 specified in paragraph (1) and up to the initial cov10 erage limit under paragraph (3)) that is equal to 50

11 percent or that is actuarially consistent (using proc12 esses established under subsection (f)) with an average

13 expected payment of 50 percent of such costs.

14 ‘‘(3) INITIAL COVERAGE LIMIT.—

15 ‘‘(A) IN GENERAL.—Subject to paragraph

16 (4), the coverage has an initial coverage limit on

17 the maximum costs that may be recognized for

18 payment purposes (including the annual deduct19 ible)—

20 ‘‘(i) for 2006, that is equal to $4,500;

21 or

22 ‘‘(ii) for a subsequent year, that is

23 equal to the amount specified in this para24 graph for the previous year, increased by
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1 the annual percentage increase described in

2 paragraph (5) for the year involved.

3 ‘‘(B) ROUNDING.—Any amount determined

4 under subparagraph (A)(ii) that is not a mul5 tiple of $1 shall be rounded to the nearest mul6 tiple of $1.

7 ‘‘(4) LIMITATION ON OUT-OF-POCKET EXPENDI8 TURES BY BENEFICIARY.—

9 ‘‘(A) IN GENERAL.—The coverage provides

10 benefits with cost-sharing that is equal to 10 per11 cent after the individual has incurred costs (as

12 described in subparagraph (C)) for covered drugs

13 in a year equal to the annual out-of-pocket limit

14 specified in subparagraph (B).

15 ‘‘(B) ANNUAL OUT-OF-POCKET LIMIT.—

16 ‘‘(i) IN GENERAL.—For purposes of

17 this part, the ‘annual out-of-pocket limit’

18 specified in this subparagraph—

19 ‘‘(I) for 2006, is equal to $3,700;

20 or

21 ‘‘(II) for a subsequent year, is

22 equal to the amount specified in this

23 subparagraph for the previous year,

24 increased by the annual percentage in-
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1 crease described in paragraph (5) for

2 the year involved.

3 ‘‘(ii) ROUNDING.—Any amount deter4 mined under clause (i)(II) that is not a

5 multiple of $1 shall be rounded to the near6 est multiple of $1.

7 ‘‘(C) APPLICATION.—In applying subpara8 graph (A)—

9 ‘‘(i) incurred costs shall only include

10 costs incurred, with respect to covered

11 drugs, for the annual deductible (described

12 in paragraph (1)), cost-sharing (described

13 in paragraph (2)), and amounts for which

14 benefits are not provided because of the ap15 plication of the initial coverage limit de16 scribed in paragraph (3) (including costs

17 incurred for covered drugs described in sec18 tion 1860D(a)(2)(C)); and

19 ‘‘(ii) such costs shall be treated as in20 curred only if they are paid by the indi21 vidual (or by another individual, such as a

22 family member, on behalf of the individual),

23 under section 1860D–19 (but only with re24 spect to the percentage of such costs that the

25 individual is responsible for under that sec-
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1 tion), under title XIX, or under a State

2 pharmaceutical assistance program and the

3 individual (or other individual) is not re4 imbursed through insurance or otherwise, a

5 group health plan, or other third-party pay6 ment arrangement for such costs.

7 ‘‘(D) INFORMATION REGARDING THIRD8 PARTY REIMBURSEMENT.—In order to ensure

9 compliance with the requirements of subpara10 graph (C)(ii), the Administrator is authorized to

11 establish procedures, in coordination with the

12 Secretary of Treasury and the Secretary of

13 Labor, for determining whether costs for individ14 uals are being reimbursed through insurance or

15 otherwise, a group health plan, or other third16 party payment arrangement, and for alerting

17 the entities in which such individuals are en18 rolled about such reimbursement arrangements.

19 An entity with a contract under this part may

20 also periodically ask individuals enrolled in a

21 plan offered by the entity whether the individ22 uals have or expect to receive such third-party

23 reimbursement. A material misrepresentation of

24 the information described in the preceding sen25 tence by an individual (as defined in standards
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1 set by the Administrator and determined through

2 a process established by the Administrator) shall

3 constitute grounds for termination of enrollment

4 under section 1860D–2(d).

5 ‘‘(5) ANNUAL PERCENTAGE INCREASE.—For pur6 poses of this part, the annual percentage increase

7 specified in this paragraph for a year is equal to the

8 annual percentage increase in average per capita ag9 gregate expenditures for covered drugs in the United

10 States for beneficiaries under this title, as determined

11 by the Administrator for the 12-month period ending

12 in July of the previous year.

13 ‘‘(d) ALTERNATIVE COVERAGE REQUIREMENTS.—A

14 Medicare Prescription Drug plan or MedicareAdvantage

15 plan may provide a different prescription drug benefit de16 sign from the standard prescription drug coverage described

17 in subsection (c) so long as the Administrator determines

18 (based on an actuarial analysis by the Administrator) that

19 the following requirements are met and the plan applies

20 for, and receives, the approval of the Administrator for such

21 benefit design:

22 ‘‘(1) ASSURING AT LEAST ACTUARIALLY EQUIVA23 LENT PRESCRIPTION DRUG COVERAGE.—

24 ‘‘(A) ASSURING EQUIVALENT VALUE OF

25 TOTAL COVERAGE.—The actuarial value of the
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1 total coverage (as determined under subsection

2 (f)) is at least equal to the actuarial value (as

3 so determined) of standard prescription drug

4 coverage.

5 ‘‘(B) ASSURING EQUIVALENT UNSUBSIDIZED

6 VALUE OF COVERAGE.—The unsubsidized value

7 of the coverage is at least equal to the unsub8 sidized value of standard prescription drug cov9 erage. For purposes of this subparagraph, the

10 unsubsidized value of coverage is the amount by

11 which the actuarial value of the coverage (as de12 termined under subsection (f)) exceeds the actu13 arial value of the amounts associated with the

14 application of section 1860D–17(c) and reinsur15 ance payments under section 1860D–20 with re16 spect to such coverage.

17 ‘‘(C) ASSURING STANDARD PAYMENT FOR

18 COSTS AT INITIAL COVERAGE LIMIT.—The cov19 erage is designed, based upon an actuarially rep20 resentative pattern of utilization (as determined

21 under subsection (f)), to provide for the payment,

22 with respect to costs incurred that are equal to

23 the initial coverage limit under subsection (c)(3),

24 of an amount equal to at least the product of—
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1 ‘‘(i) such initial coverage limit minus

2 the deductible under subsection (c)(1); and

3 ‘‘(ii) the percentage specified in sub4 section (c)(2).

5 Benefits other than qualified prescription drug cov6 erage shall not be taken into account for purposes of

7 this paragraph.

8 ‘‘(2) DEDUCTIBLE AND LIMITATION ON OUT-OF9 POCKET EXPENDITURES BY BENEFICIARIES MAY NOT

10 VARY.—The coverage may not vary the deductible

11 under subsection (c)(1) for the year or the limitation

12 on out-of-pocket expenditures by beneficiaries de13 scribed in subsection (c)(4) for the year.

14 ‘‘(e) ACCESS TO NEGOTIATED PRICES.—

15 ‘‘(1) ACCESS.—

16 ‘‘(A) IN GENERAL.—Under qualified pre17 scription drug coverage offered by an eligible en18 tity or a MedicareAdvantage organization, the

19 entity or organization shall provide beneficiaries

20 with access to negotiated prices used for payment

21 for covered drugs, regardless of the fact that no

22 benefits may be payable under the coverage with

23 respect to such drugs because of the application

24 of the deductible, any cost-sharing, or an initial

25 coverage limit (described in subsection (c)(3)).
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1 For purposes of this part, the term ‘negotiated

2 prices’ includes all discounts, direct or indirect

3 subsidies, rebates, or other price concessions or

4 direct or indirect remunerations.

5 ‘‘(B) MEDICAID RELATED PROVISIONS.—In6 sofar as a State elects to provide medical assist7 ance under title XIX for a drug based on the

8 prices negotiated under a Medicare Prescription

9 Drug plan under this part—

10 ‘‘(i) the medical assistance for such a

11 drug shall be disregarded for purposes of a

12 rebate agreement entered into under section

13 1927 which would otherwise apply to the

14 provision of medical assistance for the drug

15 under title XIX; and

16 ‘‘(ii) the prices negotiated under a

17 Medicare Prescription Drug plan with re18 spect to covered drugs, under a

19 MedicareAdvantage plan with respect to

20 such drugs, or under a qualified retiree pre21 scription drug plan (as defined in section

22 1860D–20(e)(4)) with respect to such drugs,

23 on behalf of eligible beneficiaries, shall (not24 withstanding any other provision of law)

25 not be taken into account for the purposes
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1 of establishing the best price under section

2 1927(c)(1)(C).

3 ‘‘(2) CARDS OR OTHER TECHNOLOGY.—

4 ‘‘(A) IN GENERAL.—In providing the access

5 under paragraph (1), the eligible entity or

6 MedicareAdvantage organization shall issue a

7 card or use other technology pursuant to section

8 1860D–5(b)(1).

9 ‘‘(B) NATIONAL STANDARDS.—

10 ‘‘(i) DEVELOPMENT.—The Adminis11 trator shall provide for the development of

12 national standards relating to a standard13 ized format for the card or other technology

14 required under subparagraph (A). Such

15 standards shall be compatible with parts C

16 and D of title XI and may be based on

17 standards developed by an appropriate

18 standard setting organization.

19 ‘‘(ii) CONSULTATION.—In developing

20 the standards under clause (i), the Adminis21 trator shall consult with the National Coun22 cil for Prescription Drug Programs and

23 other standard-setting organizations deter24 mined appropriate by the Administrator.
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1 ‘‘(iii) IMPLEMENTATION.—The Admin2 istrator shall implement the standards de3 veloped under clause (i) by January 1,

4 2008.

5 ‘‘(3) DISCLOSURE.—The eligible entity offering a

6 Medicare Prescription Drug plan and the

7 MedicareAdvantage organization offering a

8 MedicareAdvantage plan shall disclose to the Admin9 istrator (in a manner specified by the Administrator)

10 the extent to which discounts, direct or indirect sub11 sidies, rebates, or other price concessions or direct or

12 indirect remunerations made available to the entity

13 or organization by a manufacturer are passed

14 through to enrollees through pharmacies and other

15 dispensers or otherwise. The provisions of section

16 1927(b)(3)(D) shall apply to information disclosed to

17 the Administrator under this paragraph in the same

18 manner as such provisions apply to information dis19 closed under such section.

20 ‘‘(4) AUDITS AND REPORTS.—To protect against

21 fraud and abuse and to ensure proper disclosures and

22 accounting under this part, in addition to any pro23 tections against fraud and abuse provided under sec24 tion 1860D–7(f)(1), the Administrator may periodi25 cally audit the financial statements and records of an
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1 eligible entity offering a Medicare Prescription Drug

2 plan and a MedicareAdvantage organization offering

3 a MedicareAdvantage plan with the auditor of the

4 Administrator’s choice.

5 ‘‘(f) ACTUARIAL VALUATION; DETERMINATION OF AN6 NUAL PERCENTAGE INCREASES.—

7 ‘‘(1) PROCESSES.—For purposes of this section,

8 the Administrator shall establish processes and

9 methods—

10 ‘‘(A) for determining the actuarial valu11 ation of prescription drug coverage, including—

12 ‘‘(i) an actuarial valuation of standard

13 prescription drug coverage and of the rein14 surance payments under section 1860D–20;

15 ‘‘(ii) the use of generally accepted actu16 arial principles and methodologies; and

17 ‘‘(iii) applying the same methodology

18 for determinations of alternative coverage

19 under subsection (d) as is used with respect

20 to determinations of standard prescription

21 drug coverage under subsection (c); and

22 ‘‘(B) for determining annual percentage in23 creases described in subsection (c)(5).

24 Such processes shall take into account any effect that

25 providing actuarially equivalent prescription drug
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1 coverage rather than standard prescription drug cov2 erage has on drug utilization.

3 ‘‘(2) USE OF OUTSIDE ACTUARIES.—Under the

4 processes under paragraph (1)(A), eligible entities

5 and MedicareAdvantage organizations may use actu6 arial opinions certified by independent, qualified ac7 tuaries to establish actuarial values, but the Adminis8 trator shall determine whether such actuarial values

9 meet the requirements under subsection (c)(1).

10 ‘‘REQUIREMENTS FOR ENTITIES OFFERING MEDICARE PRE11 SCRIPTION DRUG PLANS; ESTABLISHMENT OF STAND12 ARDS

13 ‘‘SEC. 1860D–7. (a) GENERAL REQUIREMENTS.—An

14 eligible entity offering a Medicare Prescription Drug plan

15 shall meet the following requirements:

16 ‘‘(1) LICENSURE.—Subject to subsection (c), the

17 entity is organized and licensed under State law as

18 a risk-bearing entity eligible to offer health insurance

19 or health benefits coverage in each State in which it

20 offers a Medicare Prescription Drug plan.

21 ‘‘(2) ASSUMPTION OF FINANCIAL RISK.—

22 ‘‘(A) IN GENERAL.—Subject to subpara23 graph (B) and subsections (d)(2) and (e) of sec24 tion 1860D–13, to the extent that the entity is at

25 risk pursuant to such section 1860D–16, the en26 tity assumes financial risk on a prospective basis
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1 for the benefits that it offers under a Medicare

2 Prescription Drug plan and that is not covered

3 under section 1860D–20.

4 ‘‘(B) REINSURANCE PERMITTED.—To the

5 extent that the entity is at risk pursuant to sec6 tion 1860D–16, the entity may obtain insurance

7 or make other arrangements for the cost of cov8 erage provided to any enrolled member under

9 this part.

10 ‘‘(3) SOLVENCY FOR UNLICENSED ENTITIES.—In

11 the case of an eligible entity that is not described in

12 paragraph (1) and for which a waiver has been ap13 proved under subsection (c), such entity shall meet

14 solvency standards established by the Administrator

15 under subsection (d).

16 ‘‘(b) CONTRACT REQUIREMENTS.—The Administrator

17 shall not permit an eligible beneficiary to elect a Medicare

18 Prescription Drug plan offered by an eligible entity under

19 this part, and the entity shall not be eligible for payments

20 under section 1860D–16 or 1860D–20, unless the Adminis21 trator has entered into a contract under this subsection with

22 the entity with respect to the offering of such plan. Such

23 a contract with an entity may cover more than 1 Medicare

24 Prescription Drug plan. Such contract shall provide that

25 the entity agrees to comply with the applicable requirements
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1 and standards of this part and the terms and conditions

2 of payment as provided for in this part.

3 ‘‘(c) WAIVER OF CERTAIN REQUIREMENTS IN ORDER

4 TO ENSURE BENEFICIARY CHOICE.—

5 ‘‘(1) IN GENERAL.—In the case of an eligible en6 tity that seeks to offer a Medicare Prescription Drug

7 plan in a State, the Administrator shall waive the re8 quirement of subsection (a)(1) that the entity be li9 censed in that State if the Administrator determines,

10 based on the application and other evidence presented

11 to the Administrator, that any of the grounds for ap12 proval of the application described in paragraph (2)

13 have been met.

14 ‘‘(2) GROUNDS FOR APPROVAL.—The grounds for

15 approval under this paragraph are the grounds for

16 approval described in subparagraphs (B), (C), and

17 (D) of section 1855(a)(2), and also include the appli18 cation by a State of any grounds other than those re19 quired under Federal law.

20 ‘‘(3) APPLICATION OF WAIVER PROCEDURES.—

21 With respect to an application for a waiver (or a

22 waiver granted) under this subsection, the provisions

23 of subparagraphs (E), (F), and (G) of section

24 1855(a)(2) shall apply.
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1 ‘‘(4) REFERENCES TO CERTAIN PROVISIONS.—

2 For purposes of this subsection, in applying the pro3 visions of section 1855(a)(2) under this subsection to

4 Medicare Prescription Drug plans and eligible

5 entities—

6 ‘‘(A) any reference to a waiver application

7 under section 1855 shall be treated as a reference

8 to a waiver application under paragraph (1);

9 and

10 ‘‘(B) any reference to solvency standards

11 were treated as a reference to solvency standards

12 established under subsection (d).

13 ‘‘(d) SOLVENCY STANDARDS FOR NON-LICENSED ENTI14 TIES.—

15 ‘‘(1) ESTABLISHMENT AND PUBLICATION.—The

16 Administrator, in consultation with the National As17 sociation of Insurance Commissioners, shall establish

18 and publish, by not later than January 1, 2005, fi19 nancial solvency and capital adequacy standards for

20 entities described in paragraph (2).

21 ‘‘(2) COMPLIANCE WITH STANDARDS.—An eligi22 ble entity that is not licensed by a State under sub23 section (a)(1) and for which a waiver application has

24 been approved under subsection (c) shall meet sol25 vency and capital adequacy standards established
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1 under paragraph (1). The Administrator shall estab2 lish certification procedures for such eligible entities

3 with respect to such solvency standards in the manner

4 described in section 1855(c)(2).

5 ‘‘(e) LICENSURE DOES NOT SUBSTITUTE FOR OR CON6 STITUTE CERTIFICATION.—The fact that an entity is li7 censed in accordance with subsection (a)(1) or has a waiver

8 application approved under subsection (c) does not deem

9 the eligible entity to meet other requirements imposed under

10 this part for an eligible entity.

11 ‘‘(f) INCORPORATION OF CERTAIN

12 MEDICAREADVANTAGE CONTRACT REQUIREMENTS.—The

13 following provisions of section 1857 shall apply, subject to

14 subsection (c)(4), to contracts under this section in the same

15 manner as they apply to contracts under section 1857(a):

16 ‘‘(1) PROTECTIONS AGAINST FRAUD AND BENE17 FICIARY PROTECTIONS.—Section 1857(d).

18 ‘‘(2) INTERMEDIATE SANCTIONS.—Section

19 1857(g), except that in applying such section—

20 ‘‘(A) the reference in section 1857(g)(1)(B)

21 to section 1854 is deemed a reference to this

22 part; and

23 ‘‘(B) the reference in section 1857(g)(1)(F)

24 to section 1852(k)(2)(A)(ii) shall not be applied.
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1 ‘‘(3) PROCEDURES FOR TERMINATION.—Section

2 1857(h).

3 ‘‘(g) OTHER STANDARDS.—The Administrator shall

4 establish by regulation other standards (not described in

5 subsection (d)) for eligible entities and Medicare Prescrip6 tion Drug plans consistent with, and to carry out, this part.

7 The Administrator shall publish such regulations by Janu8 ary 1, 2005.

9 ‘‘(h) PERIODIC REVIEW AND REVISION OF STAND10 ARDS.—

11 ‘‘(1) IN GENERAL.—Subject to paragraph (2), the

12 Administrator shall periodically review the standards

13 established under this section and, based on such re14 view, may revise such standards if the Administrator

15 determines such revision to be appropriate.

16 ‘‘(2) PROHIBITION OF MIDYEAR IMPLEMENTA17 TION OF SIGNIFICANT NEW REGULATORY REQUIRE18 MENTS.—The Administrator may not implement,

19 other than at the beginning of a calendar year, regu20 lations under this section that impose new, signifi21 cant regulatory requirements on an eligible entity or

22 a Medicare Prescription Drug plan.

23 ‘‘(h) RELATION TO STATE LAWS.—

24 ‘‘(1) IN GENERAL.—The standards established

25 under this part shall supersede any State law or reg-
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1 ulation (including standards described in paragraph

2 (2)) with respect to Medicare Prescription Drug plans

3 which are offered by eligible entities under this

4 part—

5 ‘‘(A) to the extent such law or regulation is

6 inconsistent with such standards; and

7 ‘‘(B) in the same manner as such laws and

8 regulations are superseded under section

9 1856(b)(3).

10 ‘‘(2) STANDARDS SPECIFICALLY SUPERSEDED.—

11 State standards relating to the following are super12 seded under this section:

13 ‘‘(A) Benefit requirements, including re14 quirements relating to cost-sharing and the

15 structure of formularies.

16 ‘‘(B) Premiums.

17 ‘‘(C) Requirements relating to inclusion or

18 treatment of providers.

19 ‘‘(D) Coverage determinations (including

20 related appeals and grievance processes).

21 ‘‘(E) Requirements relating to marketing

22 materials and summaries and schedules of bene23 fits regarding a Medicare Prescription Drug

24 plan.
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1 ‘‘(3) PROHIBITION OF STATE IMPOSITION OF

2 PREMIUM TAXES.—No State may impose a premium

3 tax or similar tax with respect to—

4 ‘‘(A) monthly beneficiary obligations paid

5 to the Administrator for Medicare Prescription

6 Drug plans under this part; or

7 ‘‘(B) any payments made by the Adminis8 trator under this part to an eligible entity offer9 ing such a plan.

10 ‘‘Subpart 2—Prescription Drug Delivery System

11 ‘‘ESTABLISHMENT OF SERVICE AREAS

12 ‘‘SEC. 1860D–10. (a) ESTABLISHMENT.—

13 ‘‘(1) INITIAL ESTABLISHMENT.—Not later than

14 April 15, 2005, the Administrator shall establish and

15 publish the service areas in which Medicare Prescrip16 tion Drug plans may offer benefits under this part.

17 ‘‘(2) PERIODIC REVIEW AND REVISION OF SERV18 ICE AREAS.—The Administrator shall periodically re19 view the service areas applicable under this section

20 and, based on such review, may revise such service

21 areas if the Administrator determines such revision to

22 be appropriate.

23 ‘‘(b) REQUIREMENTS FOR ESTABLISHMENT OF SERV24 ICE AREAS.—
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1 ‘‘(1) IN GENERAL.—The Administrator shall es2 tablish the service areas under subsection (a) in a

3 manner that—

4 ‘‘(A) maximizes the availability of Medicare

5 Prescription Drug plans to eligible beneficiaries;

6 and

7 ‘‘(B) minimizes the ability of eligible enti8 ties offering such plans to favorably select eligible

9 beneficiaries.

10 ‘‘(2) ADDITIONAL REQUIREMENTS.—The Admin11 istrator shall establish the service areas under sub12 section (a) consistent with the following requirements:

13 ‘‘(A) There shall be at least 10 service areas.

14 ‘‘(B) Each service area must include at

15 least 1 State.

16 ‘‘(C) The Administrator may not divide

17 States so that portions of the State are in dif18 ferent service areas.

19 ‘‘(D) To the extent possible, the Adminis20 trator shall include multistate metropolitan sta21 tistical areas in a single service area. The Ad22 ministrator may divide metropolitan statistical

23 areas where it is necessary to establish service

24 areas of such size and geography as to maximize
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1 the participation of Medicare Prescription Drug

2 plans.

3 ‘‘(3) MAY CONFORM TO MEDICAREADVANTAGE

4 PREFERRED PROVIDER REGIONS.—The Administrator

5 may conform the service areas established under this

6 section to the preferred provider regions established

7 under section 1858(a)(3).

8 ‘‘PUBLICATION OF RISK ADJUSTERS

9 ‘‘SEC. 1860D–11. (a) PUBLICATION.—Not later than

10 April 15 of each year (beginning in 2005), the Adminis11 trator shall publish the risk adjusters established under sub12 section (b) to be used in computing—

13 ‘‘(1) the amount of payment to Medicare Pre14 scription Drug plans in the subsequent year under

15 section 1860D–16(a), insofar as it is attributable to

16 standard prescription drug coverage (or actuarially

17 equivalent prescription drug coverage); and

18 ‘‘(2) the amount of payment to

19 MedicareAdvantage plans in the subsequent year

20 under section 1858A(c), insofar as it is attributable

21 to standard prescription drug coverage (or actuarially

22 equivalent prescription drug coverage).

23 ‘‘(b) ESTABLISHMENT OF RISK ADJUSTERS.—

24 ‘‘(1) IN GENERAL.—Subject to paragraph (2), the

25 Administrator shall establish an appropriate method26 ology for adjusting the amount of payment to plans
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1 referred to in subsection (a) to take into account vari2 ation in costs based on the differences in actuarial

3 risk of different enrollees being served. Any such risk

4 adjustment shall be designed in a manner as to not

5 result in a change in the aggregate payments de6 scribed in paragraphs (1) and (2) of subsection (a).

7 ‘‘(2) CONSIDERATIONS.—In establishing the

8 methodology under paragraph (1), the Administrator

9 may take into account the similar methodologies used

10 under section 1853(a)(3) to adjust payments to

11 MedicareAdvantage organizations.

12 ‘‘(3) DATA COLLECTION.—In order to carry out

13 this subsection, the Administrator shall require—

14 ‘‘(A) eligible entities to submit data regard15 ing drug claims that can be linked at the bene16 ficiary level to part A and part B data and such

17 other information as the Administrator deter18 mines necessary; and

19 ‘‘(B) MedicareAdvantage organizations (ex20 cept MSA plans or a private fee-for-service plan

21 that does not provide qualified prescription drug

22 coverage) to submit data regarding drug claims

23 that can be linked to other data that such orga24 nizations are required to submit to the Adminis-
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1 trator and such other information as the Admin2 istrator determines necessary.

3 ‘‘SUBMISSION OF BIDS FOR PROPOSED MEDICARE

4 PRESCRIPTION DRUG PLANS

5 ‘‘SEC. 1860D–12. (a) SUBMISSION.—

6 ‘‘(1) IN GENERAL.—Each eligible entity that in7 tends to offer a Medicare Prescription Drug plan in

8 an area in a year (beginning with 2006) shall submit

9 to the Administrator, at such time in the previous

10 year and in such manner as the Administrator may

11 specify, such information as the Administrator may

12 require, including the information described in sub13 section (b).

14 ‘‘(2) ANNUAL SUBMISSION.—An eligible entity

15 shall submit the information required under para16 graph (1) with respect to a Medicare Prescription

17 Drug plan that the entity intends to offer on an an18 nual basis.

19 ‘‘(b) INFORMATION DESCRIBED.—The information de20 scribed in this subsection includes information on each of

21 the following:

22 ‘‘(1) The benefits under the plan (as required

23 under section 1860D–6).

24 ‘‘(2) The actuarial value of the qualified pre25 scription drug coverage.
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1 ‘‘(3) The amount of the monthly plan premium

2 under the plan, including an actuarial certification

3 of—

4 ‘‘(A) the actuarial basis for such monthly

5 plan premium;

6 ‘‘(B) the portion of such monthly plan pre7 mium attributable to standard prescription drug

8 coverage or actuarially equivalent prescription

9 drug coverage and, if applicable, to benefits that

10 are in addition to such coverage; and

11 ‘‘(C) the reduction in such monthly plan

12 premium resulting from the payments provided

13 under section 1860D–20.

14 ‘‘(4) The service area for the plan.

15 ‘‘(5) Whether the entity plans to use any funds

16 in the plan stabilization reserve fund in the Prescrip17 tion Drug Account that are available to the entity to

18 stabilize or reduce the monthly plan premium sub19 mitted under paragraph (3), and if so, the amount in

20 such reserve fund that is to be used.

21 ‘‘(6) Such other information as the Adminis22 trator may require to carry out this part.

23 ‘‘(c) OPTIONS REGARDING SERVICE AREAS.—

24 ‘‘(1) IN GENERAL.—The service area of a Medi25 care Prescription Drug plan shall be either—
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1 ‘‘(A) the entire area of 1 of the service areas

2 established by the Administrator under section

3 1860D–10; or

4 ‘‘(B) the entire area covered by the medicare

5 program.

6 ‘‘(2) RULE OF CONSTRUCTION.—Nothing in this

7 part shall be construed as prohibiting an eligible enti8 ty from submitting separate bids in multiple service

9 areas as long as each bid is for a single service area.

10 ‘‘APPROVAL OF PROPOSED MEDICARE PRESCRIPTION DRUG

11 PLANS

12 ‘‘SEC. 1860D–13. (a) APPROVAL.—

13 ‘‘(1) IN GENERAL.—The Administrator shall re14 view the information filed under section 1860D–12

15 and shall approve or disapprove the Medicare Pre16 scription Drug plan.

17 ‘‘(2) REQUIREMENTS FOR APPROVAL.—The Ad18 ministrator may not approve a Medicare Prescription

19 Drug plan unless the following requirements are met:

20 ‘‘(A) COMPLIANCE WITH REQUIREMENTS.—

21 The plan and the entity offering the plan comply

22 with the requirements under this part.

23 ‘‘(B) APPLICATION OF FEHBP STANDARD.—

24 (i) The portion of the monthly plan premium

25 submitted under section 1860D–12(b) that is at26 tributable to standard prescription drug coverage
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1 reasonably and equitably reflects the actuarial

2 value of the standard prescription drug coverage

3 less the actuarial value of the reinsurance pay4 ments under section 1860D–20 and the amount

5 of any funds in the plan stabilization reserve

6 fund in the Prescription Drug Account used to

7 stabilize or reduce the monthly plan premium.

8 ‘‘(ii) If the plan provides additional pre9 scription drug coverage pursuant to section

10 1860D–6(a)(2), the monthly plan premium rea11 sonably and equitably reflects the actuarial value

12 of the coverage provided less the actuarial value

13 of the reinsurance payments under section

14 1860D–20 and the amount of any funds in the

15 plan stabilization reserve fund in the Prescrip16 tion Drug Account used to stabilize or reduce the

17 monthly plan premium.

18 ‘‘(b) NEGOTIATION.—In exercising the authority under

19 subsection (a), the Administrator shall have the authority

20 to—

21 ‘‘(1) negotiate the terms and conditions of the

22 proposed monthly plan premiums submitted and

23 other terms and conditions of a proposed plan; and

24 ‘‘(2) disapprove, or limit enrollment in, a pro25 posed plan based on—
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1 ‘‘(A) the costs to beneficiaries under the

2 plan;

3 ‘‘(B) the quality of the coverage and benefits

4 under the plan;

5 ‘‘(C) the adequacy of the network under the

6 plan;

7 ‘‘(D) the average aggregate projected cost of

8 covered drugs under the plan relative to other

9 Medicare Prescription Drug plans and

10 MedicareAdvantage plans; or

11 ‘‘(E) other factors determined appropriate

12 by the Administrator.

13 ‘‘(c) SPECIAL RULES FOR APPROVAL.—The Adminis14 trator may approve a Medicare Prescription Drug plan

15 submitted under section 1860D–12 only if the benefits

16 under such plan—

17 ‘‘(1) include the required benefits under section

18 1860D–6(a)(1); and

19 ‘‘(2) are not designed in such a manner that the

20 Administrator finds is likely to result in favorable se21 lection of eligible beneficiaries.

22 ‘‘(d) ACCESS TO COMPETITIVE COVERAGE.—

23 ‘‘(1) NUMBER OF CONTRACTS.—The Adminis24 trator, consistent with the requirements of this part

25 and the goal of containing costs under this title, shall,
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1 with respect to a year, approve at least 2 contracts

2 to offer a Medicare Prescription Drug plan in each

3 service area (established under section 1860D–10) for

4 the year.

5 ‘‘(2) AUTHORITY TO REDUCE RISK TO ENSURE

6 ACCESS.—

7 ‘‘(A) IN GENERAL.—Subject to subpara8 graph (B), if the Administrator determines, with

9 respect to an area, that the access required under

10 paragraph (1) is not going to be provided in the

11 area during the subsequent year, the Adminis12 trator shall—

13 ‘‘(i) adjust the percents specified in

14 paragraphs (2) and (4) of section 1860D–

15 16(b) in an area in a year; or

16 ‘‘(ii) increase the percent specified in

17 section 1860D–20(c)(1) in an area in a

18 year.

19 The administrator shall exercise the authority

20 under the preceding sentence only so long as

21 (and to the extent) necessary to assure the access

22 guaranteed under paragraph (1).

23 ‘‘(B) REQUIREMENTS FOR USE OF AUTHOR24 ITY.—In exercising authority under subpara25 graph (A), the Administrator—
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1 ‘‘(i) shall not provide for the full un2 derwriting of financial risk for any eligible

3 entity;

4 ‘‘(ii) shall not provide for any under5 writing of financial risk for a public eligi6 ble entity with respect to the offering of a

7 nationwide Medicare Prescription Drug

8 plan; and

9 ‘‘(iii) shall seek to maximize the as10 sumption of financial risk by eligible enti11 ties to ensure fair competition among Medi12 care Prescription Drug plans.

13 ‘‘(C) REQUIREMENT TO ACCEPT 2 FULL14 RISK QUALIFIED BIDS BEFORE EXERCISING AU15 THORITY.—The Administrator may not exercise

16 the authority under subparagraph (A) with re17 spect to an area and year if 2 or more qualified

18 bids are submitted by eligible entities to offer a

19 Medicare Prescription Drug plan in the area for

20 the year under paragraph (1) before the applica21 tion of subparagraph (A).

22 ‘‘(D) REPORTS.—The Administrator, in

23 each annual report to Congress under section

24 1808(c)(1)(D), shall include information on the

25 exercise of authority under subparagraph (A).
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1 The Administrator also shall include such rec2 ommendations as may be appropriate to limit

3 the exercise of such authority.

4 ‘‘(e) GUARANTEED ACCESS.—

5 ‘‘(1) ACCESS.—In order to assure access to quali6 fied prescription drug coverage in an area, the Ad7 ministrator shall take the following steps:

8 ‘‘(A) DETERMINATION.—Not later than Sep9 tember 1 of each year (beginning in 2005) and

10 for each area (established under section 1860D–

11 10), the Administrator shall make a determina12 tion as to whether the access required under sub13 section (d)(1) is going to be provided in the area

14 during the subsequent year. Such determination

15 shall be made after the Administrator has exer16 cised the authority under subsection (d)(2).

17 ‘‘(B) CONTRACT WITH AN ENTITY TO PRO18 VIDE COVERAGE IN AN AREA.—Subject to para19 graph (3), if the Administrator makes a deter20 mination under subparagraph (A) that the ac21 cess required under subsection (d)(1) is not going

22 to be provided in an area during the subsequent

23 year, the Administrator shall enter into a con24 tract with an entity to provide eligible bene25 ficiaries enrolled under this part (and not, ex-
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1 cept for an MSA plan or a private fee-for-service

2 plan that does not provide qualified prescription

3 drug coverage enrolled in a MedicareAdvantage

4 plan) and residing in the area with standard

5 prescription drug coverage (including access to

6 negotiated prices for such beneficiaries pursuant

7 to section 1860D–6(e)) during the subsequent

8 year. An entity may be awarded a contract for

9 more than 1 of the areas for which the Adminis10 trator is required to enter into a contract under

11 this paragraph but the Administrator may enter

12 into only 1 such contract in each such area.

13 ‘‘(C) REQUIREMENT TO ACCEPT 2 REDUCED14 RISK QUALIFIED BIDS BEFORE ENTERING INTO

15 CONTRACT.—The Administrator may not enter

16 into a contract under subparagraph (B) with re17 spect to an area and year if 2 or more qualified

18 bids are submitted by eligible entities to offer a

19 Medicare Prescription Drug plan in the area for

20 the year after the Administrator has exercised

21 the authority under subsection (d)(2) in the area

22 for the year.

23 ‘‘(D) ENTITY REQUIRED TO MEET BENE24 FICIARY PROTECTION AND OTHER REQUIRE25 MENTS.—An entity with a contract under sub-
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1 paragraph (B) shall meet the requirements de2 scribed in section 1860D–5 and such other re3 quirements determined appropriate by the Ad4 ministrator.

5 ‘‘(E) COMPETITIVE PROCEDURES.—Com6 petitive procedures (as defined in section 4(5) of

7 the Office of Federal Procurement Policy Act (41

8 U.S.C. 403(5))) shall be used to enter into a con9 tract under subparagraph (B).

10 ‘‘(2) MONTHLY BENEFICIARY OBLIGATION FOR

11 ENROLLMENT.—

12 ‘‘(A) IN GENERAL.—In the case of an eligi13 ble beneficiary receiving access to qualified pre14 scription drug coverage through enrollment with

15 an entity with a contract under paragraph

16 (1)(B), the monthly beneficiary obligation of

17 such beneficiary for such enrollment shall be an

18 amount equal to the applicable percent (as deter19 mined under section 1860D–17(c)) of the month20 ly national average premium (as computed

21 under section 1860D–15) for the area for the

22 year, as adjusted using the geographic adjuster

23 under subparagraph (B).

24 ‘‘(B) ESTABLISHMENT OF GEOGRAPHIC AD25 JUSTER.—The Administrator shall establish an
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1 appropriate methodology for adjusting the

2 monthly beneficiary obligation (as computed

3 under subparagraph (A)) for the year in an area

4 to take into account differences in drug prices

5 among areas. In establishing such methodology,

6 the Administrator may take into account dif7 ferences in drug utilization between eligible bene8 ficiaries in an area and eligible beneficiaries in

9 other areas and the results of the ongoing study

10 required under section 106 of the Prescription

11 Drug and Medicare Improvement Act of 2003.

12 Any such adjustment shall be applied in a man13 ner so as to not result in a change in the aggre14 gate payments made under this part that would

15 have been made if the Administrator had not ap16 plied such adjustment.

17 ‘‘(3) PAYMENTS UNDER THE CONTRACT.—

18 ‘‘(A) IN GENERAL.—A contract entered into

19 under paragraph (1)(B) shall provide for—

20 ‘‘(i) payment for the negotiated costs of

21 covered drugs provided to eligible bene22 ficiaries enrolled with the entity; and

23 ‘‘(ii) payment of prescription manage24 ment fees that are tied to performance re25 quirements established by the Administrator
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1 for the management, administration, and

2 delivery of the benefits under the contract.

3 ‘‘(B) PERFORMANCE REQUIREMENTS.—The

4 performance requirements established by the Ad5 ministrator pursuant to subparagraph (A)(ii)

6 shall include the following:

7 ‘‘(i) The entity contains costs to the

8 Prescription Drug Account and to eligible

9 beneficiaries enrolled under this part and

10 with the entity.

11 ‘‘(ii) The entity provides such bene12 ficiaries with quality clinical care.

13 ‘‘(iii) The entity provides such bene14 ficiaries with quality services.

15 ‘‘(C) ENTITY ONLY AT RISK TO THE EXTENT

16 OF THE FEES TIED TO PERFORMANCE REQUIRE17 MENTS.—An entity with a contract under para18 graph (1)(B) shall only be at risk for the provi19 sion of benefits under the contract to the extent

20 that the management fees paid to the entity are

21 tied to performance requirements under subpara22 graph (A)(ii).

23 ‘‘(4) ELIGIBLE ENTITY THAT SUBMITTED A BID

24 FOR THE AREA NOT ELIGIBLE TO BE AWARDED THE

25 CONTRACT.—An eligible entity that submitted a bid to
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1 offer a Medicare Prescription Drug plan for an area

2 for a year under section 1860D–12, including a bid

3 submitted after the Administrator has exercised the

4 authority under subsection (d)(2), may not be award5 ed a contract under paragraph (1)(B) for that area

6 and year. The previous sentence shall apply to an en7 tity that was awarded a contract under paragraph

8 (1)(B) for the area in the previous year and sub9 mitted such a bid under section 1860D–12 for the

10 year.

11 ‘‘(5) TERM OF CONTRACT.—A contract entered

12 into under paragraph (1)(B) shall be for a 1-year pe13 riod. Such contract may provide for renewal at the

14 discretion of the Administrator if the Administrator

15 is required to enter into a contract under such para16 graph with respect to the area covered by such con17 tract for the subsequent year.

18 ‘‘(6) ENTITY NOT PERMITTED TO MARKET OR

19 BRAND THE CONTRACT.—An entity with a contract

20 under paragraph (1)(B) may not engage in any mar21 keting or branding of such contract.

22 ‘‘(7) RULES FOR AREAS WHERE ONLY 1 COM23 PETITIVELY BID PLAN WAS APPROVED.—In the case of

24 an area where (before the application of this sub-
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1 section) only 1 Medicare Prescription Drug plan was

2 approved for a year—

3 ‘‘(A) the plan may (at the option of the

4 plan) be offered in the area for the year (under

5 rules applicable to such plans under this part

6 and not under this subsection);

7 ‘‘(B) eligible beneficiaries described in para8 graph (1)(B) may receive access to qualified pre9 scription drug coverage through enrollment in

10 the plan or with an entity with a contract under

11 paragraph (1)(B); and

12 ‘‘(C) for purposes of applying section

13 1860D–3(a)(1)(A)(ii), such plan shall be the

14 plan designated in the area under such section.

15 ‘‘(f) TWO-YEAR CONTRACTS.—Except for a contract

16 entered into under subsection (e)(1)(B), a contract approved

17 under this part shall be for a 2-year period.

18 ‘‘COMPUTATION OF MONTHLY STANDARD PRESCRIPTION

19 DRUG COVERAGE PREMIUMS

20 ‘‘SEC. 1860D–14. (a) IN GENERAL.—For each year

21 (beginning with 2006), the Administrator shall compute a

22 monthly standard prescription drug coverage premium for

23 each Medicare Prescription Drug plan approved under sec24 tion 1860D–13 and for each MedicareAdvantage plan.
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1 ‘‘(b) REQUIREMENTS.—The monthly standard pre2 scription drug coverage premium for a plan for a year shall

3 be equal to—

4 ‘‘(1) in the case of a plan offered by an eligible

5 entity or MedicareAdvantage organization that pro6 vides standard prescription drug coverage or an actu7 arially equivalent prescription drug coverage and

8 does not provide additional prescription drug cov9 erage pursuant to section 1860D–6(a)(2), the monthly

10 plan premium approved for the plan under section

11 1860D–13 for the year; and

12 ‘‘(2) in the case of a plan offered by an eligible

13 entity or MedicareAdvantage organization that pro14 vides additional prescription drug coverage pursuant

15 to section 1860D–6(a)(2)—

16 ‘‘(A) an amount that reflects only the actu17 arial value of the standard prescription drug

18 coverage offered under the plan; or

19 ‘‘(B) if determined appropriate by the Ad20 ministrator, the monthly plan premium ap21 proved under section 1860D–13 for the year for

22 the Medicare Prescription Drug plan (or, if ap23 plicable, the MedicareAdvantage plan) that, as

24 required under section 1860D–6(a)(2)(B) for a
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1 Medicare Prescription Drug plans and a

2 MedicareAdvantage plan—

3 ‘‘(i) is offered by such entity or organi4 zation in the same area as the plan; and

5 ‘‘(ii) does not provide additional pre6 scription drug coverage pursuant to such

7 section.

8 ‘‘COMPUTATION OF MONTHLY NATIONAL AVERAGE PREMIUM

9 ‘‘SEC. 1860D–15. (a) COMPUTATION.—

10 ‘‘(1) IN GENERAL.—For each year (beginning

11 with 2006) the Administrator shall compute a month12 ly national average premium equal to the average of

13 the monthly standard prescription drug coverage pre14 mium for each Medicare Prescription Drug plan and

15 each MedicareAdvantage plan (as computed under

16 section 1860D–14). Such premium may be adjusted

17 pursuant to any methodology determined under sub18 section (b), as determined appropriate by the Admin19 istrator.

20 ‘‘(2) WEIGHTED AVERAGE.—The monthly na21 tional average premium computed under paragraph

22 (1) shall be a weighted average, with the weight for

23 each plan being equal to the average number of bene24 ficiaries enrolled under such plan in the previous

25 year.
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1 ‘‘(b) GEOGRAPHIC ADJUSTMENT.—The Administrator

2 shall establish an appropriate methodology for adjusting the

3 monthly national average premium (as computed under

4 subsection (a)) for the year in an area to take into account

5 differences in prices for covered drugs among different

6 areas. In establishing such methodology, the Administrator

7 may take into account differences in drug utilization be8 tween eligible beneficiaries in that area and other eligible

9 beneficiaries and the results of the ongoing study required

10 under section 106 of the Prescription Drug and Medicare

11 Improvement Act of 2003. Any such adjustment shall be ap12 plied in a manner as to not result in a change in aggregate

13 payments made under this part than would have been made

14 if the Administrator had not applied such adjustment.

15 ‘‘(c) SPECIAL RULE FOR 2006.—For purposes of ap16 plying this section for 2006, the Administrator shall estab17 lish procedures for determining the weighted average under

18 subsection (a)(2) for 2005.

19 ‘‘PAYMENTS TO ELIGIBLE ENTITIES

20 ‘‘SEC. 1860D–16. (a) PAYMENT OF MONTHLY PLAN

21 PREMIUMS.—For each year (beginning with 2006), the Ad22 ministrator shall pay to each entity offering a Medicare

23 Prescription Drug plan in which an eligible beneficiary is

24 enrolled an amount equal to the full amount of the monthly

25 plan premium approved for the plan under section 1860D–

26 13 on behalf of each eligible beneficiary enrolled in such
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1 plan for the year, as adjusted using the risk adjusters that

2 apply to the standard prescription drug coverage published

3 under section 1860D–11.

4 ‘‘(b) PORTION OF TOTAL PAYMENTS OF MONTHLY

5 PLAN PREMIUMS SUBJECT TO RISK.—

6 ‘‘(1) NOTIFICATION OF SPENDING UNDER THE

7 PLAN.—

8 ‘‘(A) IN GENERAL.—For each year (begin9 ning in 2007), the eligible entity offering a

10 Medicare Prescription Drug plan shall notify the

11 Administrator of the following:

12 ‘‘(i) TOTAL ACTUAL COSTS.—The total

13 amount of costs that the entity incurred in

14 providing standard prescription drug cov15 erage (or prescription drug coverage that is

16 actuarially equivalent pursuant to section

17 1860D–6(a)(1)(B)) for all enrollees under

18 the plan in the previous year.

19 ‘‘(ii) AMOUNTS RESULTING IN ACTUAL

20 COSTS.—With respect to the total amount

21 under clause (i) for the year—

22 ‘‘(I) the aggregate amount of pay23 ments made by the entity to phar24 macies and other entities with respect

25 to such coverage for such enrollees; and
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1 ‘‘(II) the aggregate amount of dis2 counts, direct or indirect subsidies, re3 bates, or other price concessions or di4 rect or indirect remunerations made to

5 the entity with respect to such coverage

6 for such enrollees.

7 ‘‘(B) CERTAIN EXPENSES NOT INCLUDED.—

8 The amount under subparagraph (A)(i) may not

9 include—

10 ‘‘(i) administrative expenses incurred

11 in providing the coverage described in sub12 paragraph (A)(i);

13 ‘‘(ii) amounts expended on providing

14 additional prescription drug coverage pur15 suant to section 1860D–6(a)(2);

16 ‘‘(iii) amounts expended for which the

17 entity is subsequently provided with rein18 surance payments under section 1860D–20;

19 or

20 ‘‘(iv) discounts, direct or indirect sub21 sidies, rebates, or other price concessions or

22 direct or indirect remunerations made to

23 the entity with respect to coverage described

24 in subparagraph (A)(i).

25 ‘‘(2) ADJUSTMENT OF PAYMENT.—
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1 ‘‘(A) NO ADJUSTMENT IF ALLOWABLE COSTS

2 WITHIN RISK CORRIDOR.—If the allowable costs

3 (specified in paragraph (3)) for the plan for the

4 year are not more than the first threshold upper

5 limit of the risk corridor (specified in paragraph

6 (4)(A)(iii)) and are not less than the first thresh7 old lower limit of the risk corridor (specified in

8 paragraph (4)(A)(i)) for the plan for the year,

9 then no additional payments shall be made by

10 the Administrator and no payments shall be

11 made by (or collected from) the eligible entity of12 fering the plan.

13 ‘‘(B) INCREASE IN PAYMENT IF ALLOWABLE

14 COSTS ABOVE UPPER LIMIT OF RISK COR15 RIDOR.—

16 ‘‘(i) IN GENERAL.—If the allowable

17 costs for the plan for the year are more than

18 the first threshold upper limit of the risk

19 corridor for the plan for the year, then the

20 Administrator shall increase the total of the

21 monthly payments made to the entity offer22 ing the plan for the year under subsection

23 (a) by an amount equal to the sum of—

24 ‘‘(I) the applicable percent (as de25 fined in subparagraph (D)) of such al-
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1 lowable costs which are more than such

2 first threshold upper limit of the risk

3 corridor and not more than the second

4 threshold upper limit of the risk cor5 ridor for the plan for the year (as spec6 ified under paragraph (4)(A)(iv)); and

7 ‘‘(II) 90 percent of such allowable

8 costs which are more than such second

9 threshold upper limit of the risk cor10 ridor.

11 ‘‘(ii) SPECIAL TRANSITIONAL COR12 RIDOR FOR 2006 AND 2007.—If the Adminis13 trator determines with respect to 2006 or

14 2007 that at least 60 percent of Medicare

15 Prescription Drug plans and

16 MedicareAdvantage Plans (excluding MSA

17 plans or private fee-for-service plans that do

18 not provide qualified prescription drug cov19 erage) have allowable costs for the plan for

20 the year that are more than the first thresh21 old upper limit of the risk corridor for the

22 plan for the year and that such plans rep23 resent at least 60 percent of eligible bene24 ficiaries enrolled under this part, clause
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1 (i)(I) shall be applied by substituting ‘90

2 percent’ for ‘applicable percent’.

3 ‘‘(C) PLAN PAYMENT IF ALLOWABLE COSTS

4 BELOW LOWER LIMIT OF RISK CORRIDOR.—If the

5 allowable costs for the plan for the year are less

6 than the first threshold lower limit of the risk

7 corridor for the plan for the year, then the entity

8 offering the plan shall a make a payment to the

9 Administrator of an amount (or the Adminis10 trator shall otherwise recover from the plan an

11 amount) equal to—

12 ‘‘(i) the applicable percent (as so de13 fined) of such allowable costs which are less

14 than such first threshold lower limit of the

15 risk corridor and not less than the second

16 threshold lower limit of the risk corridor for

17 the plan for the year (as specified under

18 paragraph (4)(A)(ii)); and

19 ‘‘(ii) 90 percent of such allowable costs

20 which are less than such second threshold

21 lower limit of the risk corridor.

22 ‘‘(D) APPLICABLE PERCENT DEFINED.—For

23 purposes of this paragraph, the term ‘applicable

24 percent’ means—
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1 ‘‘(i) for 2006 and 2007, 75 percent;

2 and

3 ‘‘(ii) for 2008 and subsequent years, 50

4 percent.

5 ‘‘(3) ESTABLISHMENT OF ALLOWABLE COSTS.—

6 For each year, the Administrator shall establish the

7 allowable costs for each Medicare Prescription Drug

8 plan for the year. The allowable costs for a plan for

9 a year shall be equal to the amount described in

10 paragraph (1)(A)(i) for the plan for the year.

11 ‘‘(4) ESTABLISHMENT OF RISK CORRIDORS.—

12 ‘‘(A) IN GENERAL.—For each year (begin13 ning with 2006), the Administrator shall estab14 lish a risk corridor for each Medicare Prescrip15 tion Drug plan. The risk corridor for a plan for

16 a year shall be equal to a range as follows:

17 ‘‘(i) FIRST THRESHOLD LOWER

18 LIMIT.—The first threshold lower limit of

19 such corridor shall be equal to—

20 ‘‘(I) the target amount described

21 in subparagraph (B) for the plan;

22 minus

23 ‘‘(II) an amount equal to the first

24 threshold risk percentage for the plan
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1 (as determined under subparagraph

2 (C)(i)) of such target amount.

3 ‘‘(ii) SECOND THRESHOLD LOWER

4 LIMIT.—The second threshold lower limit of

5 such corridor shall be equal to—

6 ‘‘(I) the target amount described

7 in subparagraph (B) for the plan;

8 minus

9 ‘‘(II) an amount equal to the sec10 ond threshold risk percentage for the

11 plan (as determined under subpara12 graph (C)(ii)) of such target amount.

13 ‘‘(iii) FIRST THRESHOLD UPPER

14 LIMIT.—The first threshold upper limit of

15 such corridor shall be equal to the sum of—

16 ‘‘(I) such target amount; and

17 ‘‘(II) the amount described in

18 clause (i)(II).

19 ‘‘(iv) SECOND THRESHOLD UPPER

20 LIMIT.—The second threshold upper limit of

21 such corridor shall be equal to the sum of—

22 ‘‘(I) such target amount; and

23 ‘‘(II) the amount described in

24 clause (ii)(II).
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1 ‘‘(B) TARGET AMOUNT DESCRIBED.—The

2 target amount described in this paragraph is,

3 with respect to a Medicare Prescription Drug

4 plan offered by an eligible entity in a year—

5 ‘‘(i) in the case of a plan offered by an

6 eligible entity that provides standard pre7 scription drug coverage or actuarially

8 equivalent prescription drug coverage and

9 does not provide additional prescription

10 drug coverage pursuant to section 1860D–

11 6(a)(2), an amount equal to the total of the

12 monthly plan premiums paid to such entity

13 for such plan for the year pursuant to sub14 section (a), reduced by the percentage speci15 fied in subparagraph (D); and

16 ‘‘(ii) in the case of a plan offered by

17 an eligible entity that provides additional

18 prescription drug coverage pursuant to sec19 tion 1860D–6(a)(2), an amount equal to the

20 total of the monthly plan premiums paid to

21 such entity for such plan for the year pur22 suant to subsection (a) that are related to

23 standard prescription drug coverage (deter24 mined using the rules under section 1860D–
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1 14(b)), reduced by the percentage specified

2 in subparagraph (D).

3 ‘‘(C) FIRST AND SECOND THRESHOLD RISK

4 PERCENTAGE DEFINED.—

5 ‘‘(i) FIRST THRESHOLD RISK PER6 CENTAGE.—Subject to clause (iii), for pur7 poses of this section, the first threshold risk

8 percentage is—

9 ‘‘(I) for 2006 and 2007, and 2.5

10 percent;

11 ‘‘(II) for 2008 through 2011, 5

12 percent; and

13 ‘‘(III) for 2012 and subsequent

14 years, a percentage established by the

15 Administrator, but in no case less than

16 5 percent.

17 ‘‘(ii) SECOND THRESHOLD RISK PER18 CENTAGE.—Subject to clause (iii), for pur19 poses of this section, the second threshold

20 risk percentage is—

21 ‘‘(I) for 2006 and 2007, 5.0 per22 cent;

23 ‘‘(II) for 2008 through 2011, 10

24 percent
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1 ‘‘(III) for 2012 and subsequent

2 years, a percentage established by the

3 Administrator that is greater than the

4 percent established for the year under

5 clause (i)(III), but in no case less than

6 10 percent.

7 ‘‘(iii) REDUCTION OF RISK PERCENT8 AGE TO ENSURE 2 PLANS IN AN AREA.—

9 Pursuant to paragraph (2) of section

10 1860D–13(d), the Administrator may re11 duce the applicable first or second threshold

12 risk percentage in an area in a year in

13 order to ensure the access to plans required

14 under paragraph (1) of such section.

15 ‘‘(D) TARGET AMOUNT NOT TO INCLUDE AD16 MINISTRATIVE EXPENSES NEGOTIATED BETWEEN

17 THE ADMINISTRATOR AND THE ENTITY OFFERING

18 THE PLAN.—For each year (beginning in 2006),

19 the Administrator and the entity offering a

20 Medicare Prescription Drug plan shall negotiate,

21 as part of the negotiation process described in

22 section 1860D–13(b) during the previous year,

23 the percentage of the payments to the entity

24 under subsection (a) with respect to the plan

25 that are attributable and reasonably incurred for
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1 administrative expenses for providing standard

2 prescription drug coverage or actuarially equiva3 lent prescription drug coverage in the year.

4 ‘‘(5) PLANS AT RISK FOR ENTIRE AMOUNT OF

5 ADDITIONAL PRESCRIPTION DRUG COVERAGE.—An el6 igible entity that offers a Medicare Prescription Drug

7 plan that provides additional prescription drug cov8 erage pursuant to section 1860D–6(a)(2) shall be at

9 full financial risk for the provision of such additional

10 coverage.

11 ‘‘(6) NO EFFECT ON ELIGIBLE BENEFICIARIES.—

12 No change in payments made by reason of this sub13 section shall affect the beneficiary obligation under

14 section 1860D–17 for the year in which such change

15 in payments is made.

16 ‘‘(7) DISCLOSURE OF INFORMATION.—

17 ‘‘(A) IN GENERAL.—Each contract under

18 this part shall provide that—

19 ‘‘(i) the entity offering a Medicare Pre20 scription Drug plan shall provide the Ad21 ministrator with such information as the

22 Administrator determines is necessary to

23 carry out this section; and

24 ‘‘(ii) the Administrator shall have the

25 right to inspect and audit any books and
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1 records of the eligible entity that pertain to

2 the information regarding costs provided to

3 the Administrator under paragraph (1).

4 ‘‘(B) RESTRICTION ON USE OF INFORMA5 TION.—Information disclosed or obtained pursu6 ant to the provisions of this section may be used

7 by officers and employees of the Department of

8 Health and Human Services only for the pur9 poses of, and to the extent necessary in, carrying

10 out this section.

11 ‘‘(c) STABILIZATION RESERVE FUND.—

12 ‘‘(1) ESTABLISHMENT.—

13 ‘‘(A) IN GENERAL.—There is established,

14 within the Prescription Drug Account, a sta15 bilization reserve fund in which the Adminis16 trator shall deposit amounts on behalf of eligible

17 entities in accordance with paragraph (2) and

18 such amounts shall be made available by the Sec19 retary for the use of eligible entities in contract

20 year 2008 and subsequent contract years in ac21 cordance with paragraph (3).

22 ‘‘(B) REVERSION OF UNUSED AMOUNTS.—

23 Any amount in the stabilization reserve fund es24 tablished under subparagraph (A) that is not ex25 pended by an eligible entity in accordance with
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1 paragraph (3) or that was deposited for the use

2 of an eligible entity that no longer has a contract

3 under this part shall revert for the use of the

4 Prescription Drug Account.

5 ‘‘(2) DEPOSIT OF AMOUNTS FOR 5 YEARS.—

6 ‘‘(A) IN GENERAL.—If the target amount for

7 a Medicare Prescription Drug plan for 2006,

8 2007, 2008, 2009, or 2010 (as determined under

9 subsection (b)(4)(B)) exceeds the applicable costs

10 for the plan for the year by more than 3 percent,

11 then—

12 ‘‘(i) the entity offering the plan shall

13 make a payment to the Administrator of an

14 amount (or the Administrator shall other15 wise recover from the plan an amount)

16 equal to the portion of such excess that is in

17 excess of 3 percent of the target amount;

18 and

19 ‘‘(ii) the Administrator shall deposit

20 an amount equal to the amount collected or

21 otherwise recovered under clause (i) in the

22 stabilization reserve fund on behalf of the el23 igible entity offering such plan.

24 ‘‘(B) APPLICABLE COSTS.—For purposes of

25 subparagraph (A), the term ‘applicable costs’
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1 means, with respect to a Medicare Prescription

2 Drug plan and year, an amount equal the sum

3 of—

4 ‘‘(i) the allowable costs for the plan

5 and year (as determined under subsection

6 (b)(3)(A); and

7 ‘‘(ii) the total amount by which month8 ly payments to the plan were reduced (or

9 otherwise recovered from the plan) for the

10 year under subsection (b)(2)(C).

11 ‘‘(3) USE OF RESERVE FUND TO STABILIZE OR

12 REDUCE MONTHLY PLAN PREMIUMS.—

13 ‘‘(A) IN GENERAL.—For any contract year

14 beginning after 2007, an eligible entity offering

15 a Medicare Prescription Drug plan may use

16 funds in the stabilization reserve fund in the

17 Prescription Drug Account that were deposited

18 in such fund on behalf of the entity to stabilize

19 or reduce monthly plan premiums submitted

20 under section 1860D–12(b)(3).

21 ‘‘(B) PROCEDURES.—The Administrator

22 shall establish procedures for—

23 ‘‘(i) reducing monthly plan premiums

24 submitted under section 1860D–12(b)(3)

25 pursuant to subparagraph (A); and
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1 ‘‘(ii) making payments from the plan

2 stabilization reserve fund in the Prescrip3 tion Drug Account to eligible entities that

4 inform the Secretary under section 1860D–

5 12(b)(5) of the entity’s intent to use funds

6 in such reserve fund to reduce such pre7 miums.

8 ‘‘(d) PORTION OF PAYMENTS OF MONTHLY PLAN PRE9 MIUMS ATTRIBUTABLE TO ADMINISTRATIVE EXPENSES

10 TIED TO PERFORMANCE REQUIREMENTS.—

11 ‘‘(1) IN GENERAL.—The Administrator shall es12 tablish procedures to adjust the portion of the pay13 ments made to an entity under subsection (a) that are

14 attributable to administrative expenses (as deter15 mined pursuant to subsection (b)(4)(D)) to ensure

16 that the entity meets the performance requirements

17 described in clauses (ii) and (iii) of section 1860D–

18 13(e)(4)(B).

19 ‘‘(2) NO EFFECT ON ELIGIBLE BENEFICIARIES.—

20 No change in payments made by reason of this sub21 section shall affect the beneficiary obligation under

22 section 1860D–17 for the year in which such change

23 in payments is made.

24 ‘‘(e) PAYMENT TERMS.—
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1 ‘‘(1) ADMINISTRATOR PAYMENTS.—Payments to

2 an entity offering a Medicare Prescription Drug plan

3 under this section shall be made in a manner deter4 mined by the Administrator and based upon the man5 ner in which payments are made under section

6 1853(a) (relating to payments to MedicareAdvantage

7 organizations).

8 ‘‘(2) PLAN PAYMENTS.—The Administrator shall

9 establish a process for collecting (or other otherwise

10 recovering) amounts that an entity offering a Medi11 care Prescription Drug plan is required to make to

12 the Administrator under this section.

13 ‘‘(f) PAYMENTS TO MEDICAREADVANTAGE PLANS.—

14 For provisions related to payments to MedicareAdvantage

15 organizations offering MedicareAdvantage plans for quali16 fied prescription drug coverage made available under the

17 plan, see section 1858A(c).

18 ‘‘(g) SECONDARY PAYER PROVISIONS.—The provisions

19 of section 1862(b) shall apply to the benefits provided under

20 this part.

21 ‘‘COMPUTATION OF MONTHLY BENEFICIARY OBLIGATION

22 ‘‘SEC. 1860D–17. (a) BENEFICIARIES ENROLLED IN A

23 MEDICARE PRESCRIPTION DRUG PLAN.—In the case of an

24 eligible beneficiary enrolled under this part and in a Medi25 care Prescription Drug plan, the monthly beneficiary obli-
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1 gation for enrollment in such plan in a year shall be deter2 mined as follows:

3 ‘‘(1) MONTHLY PLAN PREMIUM EQUALS MONTHLY

4 NATIONAL AVERAGE PREMIUM.—If the amount of the

5 monthly plan premium approved by the Adminis6 trator under section 1860D–13 for a Medicare Pre7 scription Drug plan for the year is equal to the

8 monthly national average premium (as computed

9 under section 1860D–15) for the area for the year, the

10 monthly beneficiary obligation of the eligible bene11 ficiary in that year shall be an amount equal to the

12 applicable percent (as determined in subsection (c)) of

13 the amount of such monthly national average pre14 mium.

15 ‘‘(2) MONTHLY PLAN PREMIUM LESS THAN

16 MONTHLY NATIONAL AVERAGE PREMIUM.—If the

17 amount of the monthly plan premium approved by

18 the Administrator under section 1860D–13 for the

19 Medicare Prescription Drug plan for the year is less

20 than the monthly national average premium (as com21 puted under section 1860D–15) for the area for the

22 year, the monthly beneficiary obligation of the eligible

23 beneficiary in that year shall be an amount equal

24 to—
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1 ‘‘(A) the applicable percent of the amount of

2 such monthly national average premium; minus

3 ‘‘(B) the amount by which such monthly

4 national average premium exceeds the amount of

5 the monthly plan premium approved by the Ad6 ministrator for the plan.

7 ‘‘(3) MONTHLY PLAN PREMIUM EXCEEDS MONTH8 LY NATIONAL AVERAGE PREMIUM.—If the amount of

9 the monthly plan premium approved by the Adminis10 trator under section 1860D–13 for a Medicare Pre11 scription Drug plan for the year exceeds the monthly

12 national average premium (as computed under sec13 tion 1860D–15) for the area for the year, the monthly

14 beneficiary obligation of the eligible beneficiary in

15 that year shall be an amount equal to the sum of—

16 ‘‘(A) the applicable percent of the amount of

17 such monthly national average premium; plus

18 ‘‘(B) the amount by which the monthly plan

19 premium approved by the Administrator for the

20 plan exceeds the amount of such monthly na21 tional average premium.

22 ‘‘(b) BENEFICIARIES ENROLLED IN A

23 MEDICAREADVANTAGE PLAN.—In the case of an eligible

24 beneficiary that is enrolled in a MedicareAdvantage plan

25 (except for an MSA plan or a private fee-for-service plan
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1 that does not provide qualified prescription drug coverage),

2 the Medicare monthly beneficiary obligation for qualified

3 prescription drug coverage shall be determined pursuant to

4 section 1858A(d).

5 ‘‘(c) APPLICABLE PERCENT.—For purposes of this sec6 tion, except as provided in section 1860D–19 (relating to

7 premium subsidies for low-income individuals), the appli8 cable percent for any year is the percentage equal to a

9 fraction—

10 ‘‘(1) the numerator of which is 30 percent; and

11 ‘‘(2) the denominator of which is 100 percent

12 minus a percentage equal to—

13 ‘‘(A) the total reinsurance payments which

14 the Administrator estimates will be made under

15 section 1860D–20 to qualifying entities described

16 in subsection (e)(3) of such section during the

17 year; divided by

18 ‘‘(B) the sum of—

19 ‘‘(i) the amount estimated under sub20 paragraph (A) for the year; and

21 ‘‘(ii) the total payments which the Ad22 ministrator estimates will be made under

23 sections 1860D–16 and 1858A(c) during the

24 year that relate to standard prescription
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1 drug coverage (or actuarially equivalent

2 prescription drug coverage).

3 ‘‘COLLECTION OF MONTHLY BENEFICIARY OBLIGATION

4 ‘‘SEC. 1860D–18. (a) COLLECTION OF AMOUNT IN

5 SAME MANNER AS PART B PREMIUM.—

6 ‘‘(1) IN GENERAL.—Subject to paragraph (2), the

7 amount of the monthly beneficiary obligation (deter8 mined under section 1860D–17) applicable to an eli9 gible beneficiary under this part (after application of

10 any increase under section 1860D–2(b)(1)(A)) shall

11 be collected and credited to the Prescription Drug Ac12 count in the same manner as the monthly premium

13 determined under section 1839 is collected and cred14 ited to the Federal Supplementary Medical Insurance

15 Trust Fund under section 1840.

16 ‘‘(2) PROCEDURES FOR SPONSOR TO PAY OBLIGA17 TION ON BEHALF OF RETIREE.—The Administrator

18 shall establish procedures under which an eligible ben19 eficiary enrolled in a Medicare Prescription Drug

20 plan may elect to have the sponsor (as defined in

21 paragraph (5) of section 1860D–20(e)) of employ22 ment-based retiree health coverage (as defined in

23 paragraph (4)(B) of such section) in which the bene24 ficiary is enrolled pay the amount of the monthly

25 beneficiary obligation applicable to the beneficiary

26 under this part directly to the Administrator.
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1 ‘‘(b) INFORMATION NECESSARY FOR COLLECTION.—In

2 order to carry out subsection (a), the Administrator shall

3 transmit to the Commissioner of Social Security—

4 ‘‘(1) by the beginning of each year, the name, so5 cial security account number, monthly beneficiary ob6 ligation owed by each individual enrolled in a Medi7 care Prescription Drug plan for each month during

8 the year, and other information determined appro9 priate by the Administrator; and

10 ‘‘(2) periodically throughout the year, informa11 tion to update the information previously transmitted

12 under this paragraph for the year.

13 ‘‘(c) COLLECTION FOR BENEFICIARIES ENROLLED IN

14 A MEDICAREADVANTAGE PLAN.—For provisions related to

15 the collection of the monthly beneficiary obligation for

16 qualified prescription drug coverage under a

17 MedicareAdvantage plan, see section 1858A(e).

18 ‘‘PREMIUM AND COST-SHARING SUBSIDIES FOR LOW19 INCOME INDIVIDUALS

20 ‘‘SEC. 1860D–19. (a) AMOUNT OF SUBSIDIES.—

21 ‘‘(1) FULL PREMIUM SUBSIDY AND REDUCTION

22 OF COST-SHARING FOR QUALIFIED MEDICARE BENE23 FICIARIES.—In the case of a qualified medicare bene24 ficiary (as defined in paragraph (4)(A))—

25 ‘‘(A) section 1860D–17 shall be applied—
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1 ‘‘(i) in subsection (c), by substituting

2 ‘0 percent’ for the applicable percent that

3 would otherwise apply under such sub4 section; and

5 ‘‘(ii) in subsection (a)(3)(B), by sub6 stituting ‘the amount of the monthly plan

7 premium for the Medicare Prescription

8 Drug plan with the lowest monthly plan

9 premium in the area that the beneficiary

10 resides’ for ‘the amount of such monthly na11 tional average premium’, but only if there

12 is no Medicare Prescription Drug plan of13 fered in the area in which the individual re14 sides that has a monthly plan premium for

15 the year that is equal to or less than the

16 monthly national average premium (as

17 computed under section 1860D–15) for the

18 area for the year;

19 ‘‘(B) the annual deductible applicable under

20 section 1860D–6(c)(1) in a year shall be reduced

21 to $0;

22 ‘‘(C) section 1860D–6(c)(2) shall be applied

23 by substituting ‘2.5 percent’ for ‘50 percent’ each

24 place it appears;
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1 ‘‘(D) such individual shall be responsible for

2 cost-sharing for the cost of any covered drug pro3 vided in the year (after the individual has

4 reached the initial coverage limit described in

5 section 1860D–6(c)(3) and before the individual

6 has reached the annual out-of-pocket limit under

7 section 1860D–6(c)(4)(A)), that is equal to 5.0

8 percent; and

9 ‘‘(E) section 1860D–6(c)(4)(A) shall be ap10 plied by substituting ‘2.5 percent’ for ‘10 per11 cent’.

12 In no case may the application of subparagraph (A)

13 result in a monthly beneficiary obligation that is

14 below 0.

15 ‘‘(2) FULL PREMIUM SUBSIDY AND REDUCTION

16 OF COST-SHARING FOR SPECIFIED LOW INCOME MEDI17 CARE BENEFICIARIES AND QUALIFYING INDIVID18 UALS.—In the case of a specified low income medicare

19 beneficiary (as defined in paragraph (4)(B)) or a

20 qualifying individual (as defined in paragraph

21 (4)(C))—

22 ‘‘(A) section 1860D–17 shall be applied—

23 ‘‘(i) in subsection (c), by substituting

24 ‘0 percent’ for the applicable percent that
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1 would otherwise apply under such sub2 section; and

3 ‘‘(ii) in subsection (a)(3)(B), by sub4 stituting ‘the amount of the monthly plan

5 premium for the Medicare Prescription

6 Drug plan with the lowest monthly plan

7 premium in the area that the beneficiary

8 resides’ for ‘the amount of such monthly na9 tional average premium’, but only if there

10 is no Medicare Prescription Drug plan of11 fered in the area in which the individual re12 sides that has a monthly plan premium for

13 the year that is equal to or less than the

14 monthly national average premium (as

15 computed under section 1860D–15) for the

16 area for the year;

17 ‘‘(B) the annual deductible applicable under

18 section 1860D–6(c)(1) in a year shall be reduced

19 to $0;

20 ‘‘(C) section 1860D–6(c)(2) shall be applied

21 by substituting ‘5.0 percent’ for ‘50 percent’ each

22 place it appears;

23 ‘‘(D) such individual shall be responsible for

24 cost-sharing for the cost of any covered drug pro25 vided in the year (after the individual has
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1 reached the initial coverage limit described in

2 section 1860D–6(c)(3) and before the individual

3 has reached the annual out-of-pocket limit under

4 section 1860D–6(c)(4)(A)), that is equal to 10.0

5 percent; and

6 ‘‘(E) section 1860D–6(c)(4)(A) shall be ap7 plied by substituting ‘2.5 percent’ for ‘10 per8 cent’.

9 In no case may the application of subparagraph (A)

10 result in a monthly beneficiary obligation that is

11 below 0.

12 ‘‘(3) SLIDING SCALE PREMIUM SUBSIDY AND RE13 DUCTION OF COST-SHARING FOR SUBSIDY-ELIGIBLE

14 INDIVIDUALS.—

15 ‘‘(A) IN GENERAL.—In the case of a sub16 sidy-eligible individual (as defined in paragraph

17 (4)(D))—

18 ‘‘(i) section 1860D–17 shall be

19 applied—

20 ‘‘(I) in subsection (c), by sub21 stituting ‘subsidy percent’ for the ap22 plicable percentage that would other23 wise apply under such subsection; and

24 ‘‘(II) in subparagraphs (A) and

25 (B) of subsection (a)(3), by sub-
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1 stituting ‘the amount of the monthly

2 plan premium for the Medicare Pre3 scription Drug plan with the lowest

4 monthly plan premium in the area

5 that the beneficiary resides’ for ‘the

6 amount of such monthly national aver7 age premium’, but only if there is no

8 Medicare Prescription Drug plan of9 fered in the area in which the indi10 vidual resides that has a monthly plan

11 premium for the year that is equal to

12 or less than the monthly national aver13 age premium (as computed under sec14 tion 1860D–15) for the area for the

15 year; and

16 ‘‘(ii) the annual deductible applicable

17 under section 1860D–6(c)(1)—

18 ‘‘(I) for 2006, shall be reduced to

19 $50; and

20 ‘‘(II) for a subsequent year, shall

21 be reduced to the amount specified

22 under this clause for the previous year

23 increased by the percentage specified in

24 section 1860D–6(c)(5) for the year in25 volved;
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1 ‘‘(iii) section 1860D–6(c)(2) shall be

2 applied by substituting ‘10.0 percent’ for

3 ‘50 percent’ each place it appears;

4 ‘‘(iv) such individual shall be respon5 sible for cost-sharing for the cost of any cov6 ered drug provided in the year (after the in7 dividual has reached the initial coverage

8 limit described in section 1860D–6(c)(3)

9 and before the individual has reached the

10 annual out-of-pocket limit under section

11 1860D–6(c)(4)(A)), that is equal to 20.0

12 percent; and

13 ‘‘(v) such individual shall be respon14 sible for the cost-sharing described in section

15 1860D–6(c)(4)(A).

16 In no case may the application of clause (i) re17 sult in a monthly beneficiary obligation that is

18 below 0.

19 ‘‘(B) SUBSIDY PERCENT DEFINED.—For

20 purposes of subparagraph (A)(i), the term ‘sub21 sidy percent’ means, with respect to a State, a

22 percent determined on a linear sliding scale

23 ranging from—

24 ‘‘(i) 0 percent with respect to a sub25 sidy-eligible individual residing in the
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1 State whose income does not exceed 135 per2 cent of the poverty line; to

3 ‘‘(ii) the highest percentage that would

4 otherwise apply under section 1860D–17 in

5 the service area in which the subsidy-eligible

6 individual resides, in the case of a subsidy7 eligible individual residing in the State

8 whose income equals 160 percent of the pov9 erty line.

10 ‘‘(4) DEFINITIONS.—In this part:

11 ‘‘(A) QUALIFIED MEDICARE BENEFICIARY.—

12 Subject to subparagraph (H), the term ‘qualified

13 medicare beneficiary’ means an individual

14 who—

15 ‘‘(i) is enrolled under this part, includ16 ing an individual who is enrolled under a

17 MedicareAdvantage plan;

18 ‘‘(ii) is eligible for medicare cost-shar19 ing described in section 1905(p)(3) under

20 the State plan under title XIX (or under a

21 waiver of such plan), on the basis of being

22 described in section 1905(p)(1), as deter23 mined under such plan (or under a waiver

24 of plan); and

25 ‘‘(iii) is not—
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1 ‘‘(I) a specified low-income medi2 care beneficiary;

3 ‘‘(II) a qualifying individual; or

4 ‘‘(III) a dual eligible individual.

5 ‘‘(B) SPECIFIED LOW INCOME MEDICARE

6 BENEFICIARY.—Subject to subparagraph (H), the

7 term ‘specified low income medicare beneficiary’

8 means an individual who—

9 ‘‘(i) is enrolled under this part, includ10 ing an individual who is enrolled under a

11 MedicareAdvantage plan;

12 ‘‘(ii) is eligible for medicare cost-shar13 ing described in section 1905(p)(3)(A)(ii)

14 under the State plan under title XIX (or

15 under a waiver of such plan), on the basis

16 of being described in section

17 1902(a)(10)(E)(iii), as determined under

18 such plan (or under a waiver of plan); and

19 ‘‘(iii) is not—

20 ‘‘(I) a qualified medicare bene21 ficiary;

22 ‘‘(II) a qualifying individual; or

23 ‘‘(III) a dual eligible individual.
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1 ‘‘(C) QUALIFYING INDIVIDUAL.—Subject to

2 subparagraph (H), the term ‘qualifying indi3 vidual’ means an individual who—

4 ‘‘(i) is enrolled under this part, includ5 ing an individual who is enrolled under a

6 MedicareAdvantage plan;

7 ‘‘(ii) is eligible for medicare cost-shar8 ing described in section 1905(p)(3)(A)(ii)

9 under the State plan under title XIX (or

10 under a waiver of such plan), on the basis

11 of being described in section

12 1902(a)(10)(E)(iv) (without regard to any

13 termination of the application of such sec14 tion under title XIX), as determined under

15 such plan (or under a waiver of such plan);

16 and

17 ‘‘(iii) is not—

18 ‘‘(I) a qualified medicare bene19 ficiary;

20 ‘‘(II) a specified low-income medi21 care beneficiary; or

22 ‘‘(III) a dual eligible individual.

23 ‘‘(D) SUBSIDY-ELIGIBLE INDIVIDUAL.—Sub24 ject to subparagraph (H), the term ‘subsidy-eligi25 ble individual’ means an individual—
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1 ‘‘(i) who is enrolled under this part,

2 including an individual who is enrolled

3 under a MedicareAdvantage plan;

4 ‘‘(ii) whose income is less than 160

5 percent of the poverty line; and

6 ‘‘(iii) who is not—

7 ‘‘(I) a qualified medicare bene8 ficiary;

9 ‘‘(II) a specified low-income medi10 care beneficiary;

11 ‘‘(III) a qualifying individual; or

12 ‘‘(IV) a dual eligible individual.

13 ‘‘(E) DUAL ELIGIBLE INDIVIDUAL.—

14 ‘‘(i) IN GENERAL.—The term ‘dual eli15 gible individual’ means an individual who

16 is—

17 ‘‘(I) enrolled under title XIX or

18 under a waiver under section 1115 of

19 the requirements of such title for med20 ical assistance that is not less than the

21 medical assistance provided to an indi22 vidual described in section

23 1902(a)(10)(A)(i) and includes covered

24 outpatient drugs (as such term is de25 fined for purposes of section 1927); and
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1 ‘‘(II) entitled to benefits under

2 part A and enrolled under part B.

3 ‘‘(ii) INCLUSION OF MEDICALLY

4 NEEDY.—Such term includes an individual

5 described in section 1902(a)(10)(C).

6 ‘‘(F) POVERTY LINE.—The term ‘poverty

7 line’ has the meaning given such term in section

8 673(2) of the Community Services Block Grant

9 Act (42 U.S.C. 9902(2)), including any revision

10 required by such section.

11 ‘‘(G) ELIGIBILITY DETERMINATIONS.—Be12 ginning on November 1, 2005, the determination

13 of whether an individual residing in a State is

14 an individual described in subparagraph (A),

15 (B), (C), (D), or (E) and, for purposes of para16 graph (3), the amount of an individual’s income,

17 shall be determined under the State medicaid

18 plan for the State under section 1935(a). In the

19 case of a State that does not operate such a med20 icaid plan (either under title XIX or under a

21 statewide waiver granted under section 1115),

22 such determination shall be made under arrange23 ments made by the Administrator.

24 ‘‘(H) NONAPPLICATION TO DUAL ELIGIBLE

25 INDIVIDUALS AND TERRITORIAL RESIDENTS.—In
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1 the case of an individual who is a dual eligible

2 individual or an individual who is not a resi3 dent of the 50 States or the District of

4 Columbia—

5 ‘‘(i) the subsidies provided under this

6 section shall not apply; and

7 ‘‘(ii) in the case of such an individual

8 who is not a resident of the 50 States or the

9 District of Columbia, such individual may

10 be provided with medical assistance for cov11 ered outpatient drugs (as such term is de12 fined for purposes of section 1927) in ac13 cordance with section 1935 under the State

14 medicaid program under title XIX.

15 ‘‘(I) UPDATE OF ASSET OR RESOURCE

16 TEST.—With respect to eligibility determinations

17 for premium and cost-sharing subsidies under

18 this section that are made on or after January

19 1, 2009, such determinations shall be made (to

20 the extent a State, as of such date, has not al21 ready eliminated the application of an asset or

22 resource test under section 1905(p)(1)(C)) in ac23 cordance with the following:

24 ‘‘(i) SELF-DECLARATION OF VALUE.—
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1 ‘‘(I) IN GENERAL.—A State shall

2 permit an individual applying for

3 such subsidies to declare and certify by

4 signature under penalty of perjury on

5 the application form that the value of

6 the individual’s assets or resources (or

7 the combined value of the individual’s

8 assets or resources and the assets or re9 sources of the individual’s spouse), as

10 determined under section 1613 for pur11 poses of the supplemental security in12 come program, does not exceed $10,000

13 ($20,000 in the case of the combined

14 value of the individual’s assets or re15 sources and the assets or resources of

16 the individual’s spouse).

17 ‘‘(II) ANNUAL ADJUSTMENT.—Be18 ginning on January 1, 2010, and for

19 each subsequent year, the dollar

20 amounts specified in subclause (I) for

21 the preceding year shall be increased

22 by the percentage increase in the Con23 sumer Price Index for all urban con24 sumers (U.S. urban average) for the
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1 12-month period ending with June of

2 the previous year.

3 ‘‘(ii) METHODOLOGY FLEXIBILITY.—

4 Nothing in clause (i) shall be construed as

5 prohibiting a State in making eligibility

6 determinations for premium and cost-shar7 ing subsidies under this section from using

8 asset or resource methodologies that are less

9 restrictive than the methodologies used

10 under 1613 for purposes of the supplemental

11 security income program.

12 ‘‘(J) DEVELOPMENT OF MODEL DECLARA13 TION FORM.—The Secretary shall—

14 ‘‘(i) develop a model, simplified appli15 cation form for individuals to use in mak16 ing a self-declaration of assets or resources

17 in accordance with subparagraph (I)(i);

18 and

19 ‘‘(ii) provide such form to States and,

20 for purposes of outreach under section 1144,

21 the Commissioner of Social Security.’’.

22 ‘‘(b) RULES IN APPLYING COST-SHARING SUB23 SIDIES.—Nothing in this section shall be construed as pre24 venting an eligible entity offering a Medicare Prescription

25 Drug plan or a MedicareAdvantage organization offering
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1 a MedicareAdvantage plan from waiving or reducing the

2 amount of the deductible or other cost-sharing otherwise ap3 plicable pursuant to section 1860D–6(a)(2).

4 ‘‘(c) ADMINISTRATION OF SUBSIDY PROGRAM.—The

5 Administrator shall establish a process whereby, in the case

6 of an individual eligible for a cost-sharing subsidy under

7 subsection (a) who is enrolled in a Medicare Prescription

8 Drug plan or a MedicareAdvantage plan—

9 ‘‘(1) the Administrator provides for a notifica10 tion of the eligible entity or MedicareAdvantage orga11 nization involved that the individual is eligible for a

12 cost-sharing subsidy and the amount of the subsidy

13 under such subsection;

14 ‘‘(2) the entity or organization involved reduces

15 the cost-sharing otherwise imposed by the amount of

16 the applicable subsidy and submits to the Adminis17 trator information on the amount of such reduction;

18 and

19 ‘‘(3) the Administrator periodically and on a

20 timely basis reimburses the entity or organization for

21 the amount of such reductions.

22 The reimbursement under paragraph (3) may be computed

23 on a capitated basis, taking into account the actuarial

24 value of the subsidies and with appropriate adjustments to

25 reflect differences in the risks actually involved.
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1 ‘‘(d) RELATION TO MEDICAID PROGRAM.—For provi2 sions providing for eligibility determinations and addi3 tional Federal payments for expenditures related to pro4 viding prescription drug coverage for dual eligible individ5 uals and territorial residents under the medicaid program,

6 see section 1935.

7 ‘‘REINSURANCE PAYMENTS FOR EXPENSES INCURRED IN

8 PROVIDING PRESCRIPTION DRUG COVERAGE ABOVE

9 THE ANNUAL OUT-OF-POCKET THRESHOLD

10 ‘‘SEC. 1860D–20. (a) REINSURANCE PAYMENTS.—

11 ‘‘(1) IN GENERAL.—Subject to section 1860D–

12 21(b), the Administrator shall provide in accordance

13 with this section for payment to a qualifying entity

14 of the reinsurance payment amount (as specified in

15 subsection (c)(1)) for costs incurred by the entity in

16 providing prescription drug coverage for a qualifying

17 covered individual after the individual has reached

18 the annual out-of-pocket threshold specified in section

19 1860D–6(c)(4)(B) for the year.

20 ‘‘(2) BUDGET AUTHORITY.—This section con21 stitutes budget authority in advance of appropria22 tions Acts and represents the obligation of the Admin23 istrator to provide for the payment of amounts pro24 vided under this section.

25 ‘‘(b) NOTIFICATION OF SPENDING UNDER THE PLAN

26 FOR COSTS INCURRED IN PROVIDING PRESCRIPTION DRUG
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1 COVERAGE ABOVE THE ANNUAL OUT-OF-POCKET THRESH2 OLD.—

3 ‘‘(1) IN GENERAL.—Each qualifying entity shall

4 notify the Administrator of the following with respect

5 to a qualifying covered individual for a coverage

6 year:

7 ‘‘(A) TOTAL ACTUAL COSTS.—The total

8 amount (if any) of costs that the qualifying enti9 ty incurred in providing prescription drug cov10 erage for the individual in the year after the in11 dividual had reached the annual out-of-pocket

12 threshold specified in section 1860D–6(c)(4)(B)

13 for the year.

14 ‘‘(B) AMOUNTS RESULTING IN ACTUAL

15 COSTS.—With respect to the total amount under

16 subparagraph (A) for the year—

17 ‘‘(i) the aggregate amount of payments

18 made by the entity to pharmacies and other

19 entities with respect to such coverage for

20 such enrollees; and

21 ‘‘(ii) the aggregate amount of dis22 counts, direct or indirect subsidies, rebates,

23 or other price concessions or direct or indi24 rect remunerations made to the entity with

25 respect to such coverage for such enrollees.
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1 ‘‘(2) CERTAIN EXPENSES NOT INCLUDED.—The

2 amount under paragraph (1)(A) may not include—

3 ‘‘(A) administrative expenses incurred in

4 providing the coverage described in paragraph

5 (1)(A);

6 ‘‘(B) amounts expended on providing addi7 tional prescription drug coverage pursuant to

8 section 1860D–6(a)(2); or

9 ‘‘(C) discounts, direct or indirect subsidies,

10 rebates, or other price concessions or direct or in11 direct remunerations made to the entity with re12 spect to coverage described in paragraph (1)(A).

13 ‘‘(3) RESTRICTION ON USE OF INFORMATION.—

14 The restriction specified in section 1860D–16(b)(7)(B)

15 shall apply to information disclosed or obtained pur16 suant to the provisions of this section.

17 ‘‘(c) REINSURANCE PAYMENT AMOUNT.—

18 ‘‘(1) IN GENERAL.—The reinsurance payment

19 amount under this subsection for a qualifying covered

20 individual for a coverage year is an amount equal to

21 80 percent (or 65 percent with respect to a qualifying

22 covered individual described in subsection (e)(2)(D))

23 of the allowable costs (as specified in paragraph (2))

24 incurred by the qualifying entity with respect to the

25 individual and year.
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1 ‘‘(2) ESTABLISHMENT OF ALLOWABLE COSTS.—

2 In the case of a qualifying entity that has incurred

3 costs described in subsection (b)(1)(A) with respect to

4 a qualifying covered individual for a coverage year,

5 the Administrator shall establish the allowable costs

6 for the individual and year. Such allowable costs

7 shall be equal to the amount described in such sub8 section for the individual and year.

9 ‘‘(d) PAYMENT METHODS.—

10 ‘‘(1) IN GENERAL.—Payments under this section

11 shall be based on such a method as the Administrator

12 determines. The Administrator may establish a pay13 ment method by which interim payments of amounts

14 under this section are made during a year based on

15 the Administrator’s best estimate of amounts that will

16 be payable after obtaining all of the information.

17 ‘‘(2) SOURCE OF PAYMENTS.—Payments under

18 this section shall be made from the Prescription Drug

19 Account.

20 ‘‘(e) DEFINITIONS.—In this section:

21 ‘‘(1) COVERAGE YEAR.—The term ‘coverage year’

22 means a calendar year in which covered drugs are

23 dispensed if a claim for payment is made under the

24 plan for such drugs, regardless of when the claim is

25 paid.
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1 ‘‘(2) QUALIFYING COVERED INDIVIDUAL.—The

2 term ‘qualifying covered individual’ means an indi3 vidual who—

4 ‘‘(A) is enrolled in this part and in a Medi5 care Prescription Drug plan;

6 ‘‘(B) is enrolled in this part and in a

7 MedicareAdvantage plan (except for an MSA

8 plan or a private fee-for-service plan that does

9 not provide qualified prescription drug cov10 erage);

11 ‘‘(C) is eligible for, but not enrolled in, the

12 program under this part, and is covered under

13 a qualified retiree prescription drug plan; or

14 ‘‘(D) is eligible for, but not enrolled in, the

15 program under this part, and is covered under

16 a qualified State pharmaceutical assistance pro17 gram.

18 ‘‘(3) QUALIFYING ENTITY.—The term ‘qualifying

19 entity’ means any of the following that has entered

20 into an agreement with the Administrator to provide

21 the Administrator with such information as may be

22 required to carry out this section:

23 ‘‘(A) An eligible entity offering a Medicare

24 Prescription Drug plan under this part.
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1 ‘‘(B) A MedicareAdvantage organization of2 fering a MedicareAdvantage plan under part C

3 (except for an MSA plan or a private fee-for4 service plan that does not provide qualified pre5 scription drug coverage).

6 ‘‘(C) The sponsor of a qualified retiree pre7 scription drug plan.

8 ‘‘(D) A State offering a qualified State

9 pharmaceutical assistance program.

10 ‘‘(4) QUALIFIED RETIREE PRESCRIPTION DRUG

11 PLAN.—

12 ‘‘(A) IN GENERAL.—The term ‘qualified re13 tiree prescription drug plan’ means employment14 based retiree health coverage if, with respect to a

15 qualifying covered individual who is covered

16 under the plan, the following requirements are

17 met:

18 ‘‘(i) ATTESTATION OF ACTUARIAL

19 VALUE OF COVERAGE.—The sponsor of the

20 plan shall, annually or at such other time

21 as the Administrator may require, provide

22 the Administrator an attestation, in accord23 ance with the procedures established under

24 section 1860D–6(f), that the actuarial value

25 of prescription drug coverage under the
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1 plan is at least equal to the actuarial value

2 of standard prescription drug coverage.

3 ‘‘(ii) AUDITS.—The sponsor of the

4 plan, or an administrator of the plan des5 ignated by the sponsor, shall maintain (and

6 afford the Administrator access to) such

7 records as the Administrator may require

8 for purposes of audits and other oversight

9 activities necessary to ensure the adequacy

10 of prescription drug coverage and the accu11 racy of payments made under this part to

12 and by the plan.

13 ‘‘(B) EMPLOYMENT-BASED RETIREE

14 HEALTH COVERAGE.—The term ‘employment15 based retiree health coverage’ means health in16 surance or other coverage, whether provided by

17 voluntary insurance coverage or pursuant to

18 statutory or contractual obligation, of health care

19 costs for retired individuals (or for such individ20 uals and their spouses and dependents) based on

21 their status as former employees or labor union

22 members.

23 ‘‘(5) QUALIFIED STATE PHARMACEUTICAL AS24 SISTANCE PROGRAM.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 State pharmaceutical assistance program’ means

3 a State pharmaceutical assistance program if,

4 with respect to a qualifying covered individual

5 who is covered under the program, the following

6 requirements are met:

7 ‘‘(i) ASSURANCE.—The State offering

8 the program shall, annually or at such

9 other times as the Administrator may re10 quire, provide the Administrator an attesta11 tion that, in accordance with the procedures

12 established under section 1860D–6(f),

13 that—

14 ‘‘(I) the actuarial value of pre15 scription drug coverage under the pro16 gram is at least equal to the actuarial

17 value of standard prescription drug

18 coverage; and

19 ‘‘(II) the actuarial value of sub20 sidies to individuals provided under

21 the program are at least equal to the

22 actuarial value of the subsidies that

23 would apply under section 1860D–19

24 if the individual was enrolled under
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1 this part rather than under the pro2 gram.

3 ‘‘(ii) DISCLOSURE OF INFORMATION.—

4 The State complies with the requirements

5 described in clauses (i) and (ii) of section

6 1860D–16(b)(7)(A).

7 ‘‘(B) STATE PHARMACEUTICAL ASSISTANCE

8 PROGRAM.—For purposes of subparagraph (A),

9 the term ‘State pharmaceutical assistance pro10 gram’ means a program—

11 ‘‘(i) that is in operation as of the date

12 of enactment of the Prescription Drug and

13 Medicare Improvement Act of 2003;

14 ‘‘(ii) that is sponsored and financed by

15 a State; and

16 ‘‘(iii) that provides coverage for out17 patient drugs for individuals in the State

18 who meet income- and resource-related

19 qualifications specified under such program.

20 ‘‘(6) SPONSOR.—The term ‘sponsor’ means a

21 plan sponsor, as defined in section 3(16)(B) of the

22 Employee Retirement Income Security Act of 1974.

23 ‘‘(f) DISTRIBUTION OF REINSURANCE PAYMENT

24 AMOUNTS.—
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1 ‘‘(1) IN GENERAL.—Any sponsor meeting the re2 quirements of subsection (e)(3) with respect to a quar3 ter in a calendar year, but which is not an employer,

4 shall distribute the reinsurance payments received for

5 such quarter under subsection (c) to the employers

6 contributing to the qualified retiree prescription drug

7 plan maintained by such sponsor during that quar8 ter, in the manner described in paragraphs (2) and

9 (3).

10 ‘‘(2) ALLOCATION.—The reinsurance payments to

11 be distributed pursuant to paragraph (1) shall be al12 located proportionally among all employers who con13 tribute to the plan during the quarter with respect to

14 which the payments are received. The share allocated

15 to each employer contributing to the plan during a

16 quarter shall be determined by multiplying the total

17 reinsurance payments received by the sponsor for the

18 quarter by a fraction, the numerator of which is the

19 total contributions made by an employer for that

20 quarter, and the denominator of which is the total

21 contributions required to be made to the plan by all

22 employers for that quarter. Any share allocated to an

23 employer required to contribute for a quarter who

24 does not make the contributions required for that
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1 quarter on or before the date due shall be retained by

2 the sponsor for the benefit of the plan as a whole.

3 ‘‘(3) TIMING.—Reinsurance payments required

4 to be distributed to employers pursuant to this sub5 section shall be distributed as soon as practicable

6 after received by the sponsor, but in no event later

7 than the end of the quarter immediately following the

8 quarter in which such reinsurance payments are re9 ceived by the sponsor.

10 ‘‘(4) REGULATIONS.—The Secretary shall pro11 mulgate regulations providing that any sponsor sub12 ject to the requirements of this subsection who fails to

13 meet such requirements shall not be eligible for a pay14 ment under this section.

15 ‘‘DIRECT SUBSIDY FOR SPONSOR OF A QUALIFIED RETIREE

16 PRESCRIPTION DRUG PLAN FOR PLAN ENROLLEES EL17 IGIBLE FOR, BUT NOT ENROLLED IN, THIS PART

18 ‘‘SEC. 1860D–21. (a) DIRECT SUBSIDY.—

19 ‘‘(1) IN GENERAL.—The Administrator shall pro20 vide for the payment to a sponsor of a qualified re21 tiree prescription drug plan (as defined in section

22 1860D–20(e)(4)) for each qualifying covered indi23 vidual (described in subparagraph (C) of section

24 1860D–20(e)(2)) enrolled in the plan for each month

25 for which such individual is so enrolled.

26 ‘‘(2) AMOUNT OF PAYMENT.—
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1 ‘‘(A) IN GENERAL.—The amount of the pay2 ment under paragraph (1) shall be an amount

3 equal to the direct subsidy percent determined

4 for the year of the monthly national average pre5 mium for the area for the year (determined

6 under section 1860D–15), as adjusted using the

7 risk adjusters that apply to the standard pre8 scription drug coverage published under section

9 1860D–11.

10 ‘‘(B) DIRECT SUBSIDY PERCENT.—For pur11 poses of subparagraph (A), the term ‘direct sub12 sidy percent’ means the percentage equal to—

13 ‘‘(i) 100 percent; minus

14 ‘‘(ii) the applicable percent for the year

15 (as determined under section 1860D–17(c).

16 ‘‘(b) PAYMENT METHODS.—

17 ‘‘(1) IN GENERAL.—Payments under this section

18 shall be based on such a method as the Administrator

19 determines. The Administrator may establish a pay20 ment method by which interim payments of amounts

21 under this section are made during a year based on

22 the Administrator’s best estimate of amounts that will

23 be payable after obtaining all of the information.
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1 ‘‘(2) SOURCE OF PAYMENTS.—Payments under

2 this section shall be made from the Prescription Drug

3 Account.

4 ‘‘DIRECT SUBSIDIES FOR QUALIFIED STATE OFFERING A

5 STATE PHARMACEUTICAL ASSISTANCE PROGRAM FOR

6 PROGRAM ENROLLEES ELIGIBLE FOR, BUT NOT EN7 ROLLED IN, THIS PART

8 ‘‘SEC. 1860D–22. (a) DIRECT SUBSIDY.—

9 ‘‘(1) IN GENERAL.—The Administrator shall pro10 vide for the payment to a State offering a qualified

11 State pharmaceutical assistance program (as defined

12 in section 1860D–20(e)(6)) for each qualifying cov13 ered individual (described in subparagraph (D) of

14 section 1860D–(e)(2)) enrolled in the program for

15 each month for which such individual is so enrolled.

16 ‘‘(2) AMOUNT OF PAYMENT.—

17 ‘‘(A) IN GENERAL.—The amount of the pay18 ment under paragraph (1) shall be an amount

19 equal to the amount of payment for the area and

20 year made under section 1860D–21(a)(2).

21 ‘‘(b) ADDITIONAL SUBSIDY.—

22 ‘‘(1) IN GENERAL.—The Administrator shall pro23 vide for the payment to a State offering a qualified

24 State pharmaceutical program (as defined in section

25 1860D–20(e)(6)) for each applicable low-income indi-
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1 vidual enrolled in the program for each month for

2 which such individual is so enrolled.

3 ‘‘(2) AMOUNT OF PAYMENT.—

4 ‘‘(A) IN GENERAL.—The amount of the pay5 ment under paragraph (1) shall be the amount

6 the Administrator estimates would have been

7 made to an entity or organization under section

8 1860D–19 with respect to the applicable low-in9 come individual if such individual was enrolled

10 in this part and under a Medicare Prescription

11 Drug plan or a MedicareAdvantage plan.

12 ‘‘(B) MAXIMUM PAYMENTS.—In no case

13 may the amount of the payment determined

14 under subparagraph (A) with respect to an ap15 plicable low-income individual exceed, as esti16 mated by the Administrator, the average

17 amounts made in a year under section 1860D–

18 19 on behalf of an eligible beneficiary enrolled

19 under this part with income that is the same as

20 the income of the applicable low-income indi21 vidual.

22 ‘‘(3) APPLICABLE LOW-INCOME INDIVIDUAL.—

23 For purposes of this subsection, the term ‘applicable

24 low-income individual’ means an individual who is

25 both—
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1 ‘‘(A) a qualifying covered individual (de2 scribed in subparagraph (D) of section 1860D–

3 (e)(2)); and

4 ‘‘(B) a qualified medicare beneficiary, a

5 specified low income medicare beneficiary, or a

6 subsidy-eligible individual, as such terms are de7 fined in section 1860D–19(a)(4).

8 ‘‘(c) PAYMENT METHODS.—

9 ‘‘(1) IN GENERAL.—Payments under this section

10 shall be based on such a method as the Administrator

11 determines. The Administrator may establish a pay12 ment method by which interim payments of amounts

13 under this section are made during a year based on

14 the Administrator’s best estimate of amounts that will

15 be payable after obtaining all of the information.

16 ‘‘(2) SOURCE OF PAYMENTS.—Payments under

17 this section shall be made from the Prescription Drug

18 Account.

19 ‘‘(d) CONSTRUCTION.—Nothing in this section or sec20 tion 1860D–20 shall effect the provisions of section 1860D–

21 26(b).

22 ‘‘Subpart 3—Miscellaneous Provisions

23 ‘‘PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL

24 SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND

25 ‘‘SEC. 1860D–25. (a) ESTABLISHMENT.—
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1 ‘‘(1) IN GENERAL.—There is created within the

2 Federal Supplementary Medical Insurance Trust

3 Fund established by section 1841 an account to be

4 known as the ‘Prescription Drug Account’ (in this

5 section referred to as the ‘Account’).

6 ‘‘(2) FUNDS.—The Account shall consist of such

7 gifts and bequests as may be made as provided in sec8 tion 201(i)(1), and such amounts as may be deposited

9 in, or appropriated to, the Account as provided in

10 this part.

11 ‘‘(3) SEPARATE FROM REST OF TRUST FUND.—

12 Funds provided under this part to the Account shall

13 be kept separate from all other funds within the Fed14 eral Supplementary Medical Insurance Trust Fund.

15 ‘‘(b) PAYMENTS FROM ACCOUNT.—

16 ‘‘(1) IN GENERAL.—The Managing Trustee shall

17 pay from time to time from the Account such

18 amounts as the Secretary certifies are necessary to

19 make payments to operate the program under this

20 part, including—

21 ‘‘(A) payments to eligible entities under sec22 tion 1860D–16;

23 ‘‘(B) payments under 1860D–19 for low-in24 come subsidy payments for cost-sharing;
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1 ‘‘(C) reinsurance payments under section

2 1860D–20;

3 ‘‘(D) payments to sponsors of qualified re4 tiree prescription drug plans under section

5 1860D–21;

6 ‘‘(E) payments to MedicareAdvantage orga7 nizations for the provision of qualified prescrip8 tion drug coverage under section 1858A(c); and

9 ‘‘(F) payments with respect to administra10 tive expenses under this part in accordance with

11 section 201(g).

12 ‘‘(2) TREATMENT IN RELATION TO PART B PRE13 MIUM.—Amounts payable from the Account shall not

14 be taken into account in computing actuarial rates or

15 premium amounts under section 1839.

16 ‘‘(c) APPROPRIATIONS TO COVER BENEFITS AND AD17 MINISTRATIVE COSTS.—There are appropriated to the Ac18 count in a fiscal year, out of any moneys in the Treasury

19 not otherwise appropriated, an amount equal to the pay20 ments and transfers made from the Account in the year.

21 ‘‘OTHER RELATED PROVISIONS

22 ‘‘SEC. 1860D–26. (a) RESTRICTION ON ENROLLMENT

23 IN A MEDICARE PRESCRIPTION DRUG PLAN OFFERED BY

24 A SPONSOR OF EMPLOYMENT-BASED RETIREE HEALTH

25 COVERAGE.—
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1 ‘‘(1) IN GENERAL.—In the case of a Medicare

2 Prescription Drug plan offered by an eligible entity

3 that is a sponsor (as defined in paragraph (5) of sec4 tion 1860D–20(e)) of employment-based retiree health

5 coverage (as defined in paragraph (4)(B) of such sec6 tion), notwithstanding any other provision of this

7 part and in accordance with regulations of the Ad8 ministrator, the entity offering the plan may restrict

9 the enrollment of eligible beneficiaries enrolled under

10 this part to eligible beneficiaries who are enrolled in

11 such coverage.

12 ‘‘(2) LIMITATION.—The sponsor of the employ13 ment-based retiree health coverage described in para14 graph (1) may not offer enrollment in the Medicare

15 Prescription Drug plan described in such paragraph

16 based on the health status of eligible beneficiaries en17 rolled for such coverage.

18 ‘‘(b) COORDINATION WITH STATE PHARMACEUTICAL

19 ASSISTANCE PROGRAMS.—

20 ‘‘(1) IN GENERAL.—An eligible entity offering a

21 Medicare Prescription Drug plan, or a

22 MedicareAdvantage organization offering a

23 MedicareAdvantage plan (other than an MSA plan or

24 a private fee-for-service plan that does not provide

25 qualified prescription drug coverage), may enter into
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1 an agreement with a State pharmaceutical assistance

2 program described in paragraph (2) to coordinate the

3 coverage provided under the plan with the assistance

4 provided under the State pharmaceutical assistance

5 program.

6 ‘‘(2) STATE PHARMACEUTICAL ASSISTANCE PRO7 GRAM DESCRIBED.—For purposes of paragraph (1), a

8 State pharmaceutical assistance program described in

9 this paragraph is a program that has been established

10 pursuant to a waiver under section 1115 or otherwise.

11 ‘‘(c) REGULATIONS TO CARRY OUT THIS PART.—

12 ‘‘(1) AUTHORITY FOR INTERIM FINAL REGULA13 TIONS.—The Secretary may promulgate initial regu14 lations implementing this part in interim final form

15 without prior opportunity for public comment.

16 ‘‘(2) FINAL REGULATIONS.—A final regulation

17 reflecting public comments must be published within

18 1 year of the interim final regulation promulgated

19 under paragraph (1).’’.

20 ‘‘(d) WAIVER AUTHORITY.—The Secretary shall have

21 authority similar to the waiver authority under section

22 1857(i) to facilitate the offering of Medicare Prescription

23 Drug plans by employer or other group health plans as part

24 of employment-based retiree health coverage (as defined in

25 section 1860D–20(d)(4)(B)), including the authority to es-
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1 tablish separate premium amounts for enrollees in a Medi2 care Prescription Drug plan by reason of such coverage.’’.

3 (b) CONFORMING AMENDMENTS TO FEDERAL SUPPLE4 MENTARY MEDICAL INSURANCE TRUST FUND.—Section

5 1841 (42 U.S.C. 1395t) is amended—

6 (1) in the last sentence of subsection (a)—

7 (A) by striking ‘‘and’’ before ‘‘such

8 amounts’’; and

9 (B) by inserting before the period the fol10 lowing: ‘‘, and such amounts as may be depos11 ited in, or appropriated to, the Prescription

12 Drug Account established by section 1860D–25’’;

13 (2) in subsection (g), by inserting after ‘‘by this

14 part,’’ the following: ‘‘the payments provided for

15 under part D (in which case the payments shall be

16 made from the Prescription Drug Account in the

17 Trust Fund),’’;

18 (3) in subsection (h), by inserting after

19 ‘‘1840(d)’’ the following: ‘‘and sections 1860D–18 and

20 1858A(e) (in which case the payments shall be made

21 from the Prescription Drug Account in the Trust

22 Fund)’’; and

23 (4) in subsection (i), by inserting after ‘‘section

24 1840(b)(1)’’ the following: ‘‘, sections 1860D–18 and

25 1858A(e) (in which case the payments shall be made
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1 from the Prescription Drug Account in the Trust

2 Fund),’’.

3 (c) CONFORMING REFERENCES TO PREVIOUS PART

4 D.—Any reference in law (in effect before the date of enact5 ment of this Act) to part D of title XVIII of the Social

6 Security Act is deemed a reference to part F of such title

7 (as in effect after such date).

8 (d) SUBMISSION OF LEGISLATIVE PROPOSAL.—Not

9 later than 6 months after the date of the enactment of this

10 Act, the Secretary shall submit to the appropriate commit11 tees of Congress a legislative proposal providing for such

12 technical and conforming amendments in the law as are

13 required by the provisions of this Act.

14 SEC. 102. STUDY AND REPORT ON PERMITTING PART B

15 ONLY INDIVIDUALS TO ENROLL IN MEDICARE

16 VOLUNTARY PRESCRIPTION DRUG DELIVERY

17 PROGRAM.

18 (a) STUDY.—The Administrator of the Center for

19 Medicare Choices (as established under section 1808 of the

20 Social Security Act, as added by section 301(a)) shall con21 duct a study on the need for rules relating to permitting

22 individuals who are enrolled under part B of title XVIII

23 of the Social Security Act but are not entitled to benefits

24 under part A of such title to buy into the medicare vol-
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1 untary prescription drug delivery program under part D

2 of such title (as so added).

3 (b) REPORT.—Not later than January 1, 2005, the Ad4 ministrator of the Center for Medicare Choices shall submit

5 a report to Congress on the study conducted under sub6 section (a), together with any recommendations for legisla7 tion that the Administrator determines to be appropriate

8 as a result of such study.

9 SEC. 103. RULES RELATING TO MEDIGAP POLICIES THAT

10 PROVIDE PRESCRIPTION DRUG COVERAGE.

11 (a) RULES RELATING TO MEDIGAP POLICIES THAT

12 PROVIDE PRESCRIPTION DRUG COVERAGE.—Section 1882

13 (42 U.S.C. 1395ss) is amended by adding at the end the

14 following new subsection:

15 ‘‘(v) RULES RELATING TO MEDIGAP POLICIES THAT

16 PROVIDE PRESCRIPTION DRUG COVERAGE.—

17 ‘‘(1) PROHIBITION ON SALE, ISSUANCE, AND RE18 NEWAL OF POLICIES THAT PROVIDE PRESCRIPTION

19 DRUG COVERAGE TO PART D ENROLLEES.—

20 ‘‘(A) IN GENERAL.—Notwithstanding any

21 other provision of law, on or after January 1,

22 2006, no medicare supplemental policy that pro23 vides coverage of expenses for prescription drugs

24 may be sold, issued, or renewed under this sec-
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1 tion to an individual who is enrolled under part

2 D.

3 ‘‘(B) PENALTIES.—The penalties described

4 in subsection (d)(3)(A)(ii) shall apply with re5 spect to a violation of subparagraph (A).

6 ‘‘(2) ISSUANCE OF SUBSTITUTE POLICIES IF THE

7 POLICYHOLDER OBTAINS PRESCRIPTION DRUG COV8 ERAGE UNDER PART D.—

9 ‘‘(A) IN GENERAL.—The issuer of a medi10 care supplemental policy—

11 ‘‘(i) may not deny or condition the

12 issuance or effectiveness of a medicare sup13 plemental policy that has a benefit package

14 classified as ‘A’, ‘B’, ‘C’, ‘D’, ‘E’, ‘F’ (in15 cluding the benefit package classified as ‘F’

16 with a high deductible feature, as described

17 in subsection (p)(11)), or ‘G’ (under the

18 standards established under subsection

19 (p)(2)) and that is offered and is available

20 for issuance to new enrollees by such issuer;

21 ‘‘(ii) may not discriminate in the pric22 ing of such policy, because of health status,

23 claims experience, receipt of health care, or

24 medical condition; and
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1 ‘‘(iii) may not impose an exclusion of

2 benefits based on a pre-existing condition

3 under such policy,

4 in the case of an individual described in sub5 paragraph (B) who seeks to enroll under the pol6 icy during the open enrollment period established

7 under section 1860D–2(b)(2) and who submits

8 evidence that they meet the requirements under

9 subparagraph (B) along with the application for

10 such medicare supplemental policy.

11 ‘‘(B) INDIVIDUAL DESCRIBED.—An indi12 vidual described in this subparagraph is an in13 dividual who—

14 ‘‘(i) enrolls in the medicare prescrip15 tion drug delivery program under part D;

16 and

17 ‘‘(ii) at the time of such enrollment

18 was enrolled and terminates enrollment in

19 a medicare supplemental policy which has a

20 benefit package classified as ‘H’, ‘I’, or ‘J’

21 (including the benefit package classified as

22 ‘J’ with a high deductible feature, as de23 scribed in section 1882(p)(11)) under the

24 standards referred to in subparagraph

25 (A)(i) or terminates enrollment in a policy
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1 to which such standards do not apply but

2 which provides benefits for prescription

3 drugs.

4 ‘‘(C) ENFORCEMENT.—The provisions of

5 subparagraph (A) shall be enforced as though

6 they were included in subsection (s).

7 ‘‘(3) NOTICE REQUIRED TO BE PROVIDED TO

8 CURRENT POLICYHOLDERS WITH PRESCRIPTION DRUG

9 COVERAGE.—No medicare supplemental policy of an

10 issuer shall be deemed to meet the standards in sub11 section (c) unless the issuer provides written notice

12 during the 60-day period immediately preceding the

13 period established for the open enrollment period es14 tablished under section 1860D–2(b)(2), to each indi15 vidual who is a policyholder or certificate holder of

16 a medicare supplemental policy issued by that issuer

17 that provides some coverage of expenses for prescrip18 tion drugs (at the most recent available address of

19 that individual) of—

20 ‘‘(A) the ability to enroll in a new medicare

21 supplemental policy pursuant to paragraph (2);

22 and

23 ‘‘(B) the fact that, so long as such indi24 vidual retains coverage under such policy, the
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1 individual shall be ineligible for coverage of pre2 scription drugs under part D.’’.

3 (b) RULE OF CONSTRUCTION (1) IN GENERAL.—

4 Nothing in this Act shall be construed to require an issuer

5 of a medicare supplemental policy under section 1882 of

6 the Social Security Act (42 U.S.C. 1395rr) to participate

7 as an eligible entity under part D of such Act, as added

8 by section 101, as a condition for issuing such policy.

9 (2) PROHIBITION ON STATE REQUIREMENT.—A

10 State may not require an issuer of a medicare supple11 mental policy under section 1882 of the Social Secu12 rity Act (42 U.S.C. 1395rr) to participate as an eligi13 ble entity under part D of such Act, as added by sec14 tion 101, as a condition for issuing such policy.

15 SEC. 104. MEDICAID AND OTHER AMENDMENTS RELATED

16 TO LOW-INCOME BENEFICIARIES.

17 (a) DETERMINATIONS OF ELIGIBILITY FOR LOW-IN18 COME SUBSIDIES.—Section 1902(a) (42 U.S.C. 1396a(a))

19 is amended—

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

21 (64);

22 (2) by striking the period at the end of para23 graph (65) and inserting ‘‘; and’’; and

24 (3) by inserting after paragraph (65) the fol25 lowing new paragraph:
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1 ‘‘(66) provide for making eligibility determina2 tions under section 1935(a).’’.

3 (b) NEW SECTION.—

4 (1) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

5 seq.) is amended—

6 (A) by redesignating section 1935 as section

7 1936; and

8 (B) by inserting after section 1934 the fol9 lowing new section:

10 ‘‘SPECIAL PROVISIONS RELATING TO MEDICARE

11 PRESCRIPTION DRUG BENEFIT

12 ‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI13 BILITY DETERMINATIONS FOR LOW-INCOME SUBSIDIES.—

14 As a condition of its State plan under this title under sec15 tion 1902(a)(66) and receipt of any Federal financial as16 sistance under section 1903(a), a State shall satisfy the fol17 lowing:

18 ‘‘(1) DETERMINATION OF ELIGIBILITY FOR TRAN19 SITIONAL PRESCRIPTION DRUG ASSISTANCE CARD

20 PROGRAM FOR ELIGIBLE LOW-INCOME BENE21 FICIARIES.—For purposes of section 1807A, submit to

22 the Secretary an eligibility plan under which the

23 State—

24 ‘‘(A) establishes eligibility standards con25 sistent with the provisions of that section;
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1 ‘‘(B) establishes procedures for providing

2 presumptive eligibility for eligible low-income

3 beneficiaries (as defined in section 1807A(i)(2))

4 under that section;

5 ‘‘(C) makes determinations of eligibility

6 and income for purposes of identifying eligible

7 low-income beneficiaries (as so defined) under

8 that section; and

9 ‘‘(D) communicates to the Secretary deter10 minations of eligibility or discontinuation of eli11 gibility under that section for purposes of noti12 fying prescription drug card sponsors under that

13 section of the identity of eligible medicare low14 income beneficiaries.

15 ‘‘(2) DETERMINATION OF ELIGIBILITY FOR PRE16 MIUM AND COST-SHARING SUBSIDIES UNDER PART D

17 OF TITLE XVIII FOR LOW-INCOME INDIVIDUALS.—Be18 ginning November 1, 2005, for purposes of section

19 1860D–19—

20 ‘‘(A) make determinations of eligibility for

21 premium and cost-sharing subsidies under and

22 in accordance with such section;

23 ‘‘(B) establish procedures for providing pre24 sumptive eligibility for individuals eligible for

25 subsidies under that section;
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1 ‘‘(C) inform the Administrator of the Center

2 for Medicare Choices of such determinations in

3 cases in which such eligibility is established; and

4 ‘‘(D) otherwise provide such Administrator

5 with such information as may be required to

6 carry out part D of title XVIII (including sec7 tion 1860D–19).

8 ‘‘(3) AGREEMENT TO ESTABLISH INFORMATION

9 AND ENROLLMENT SITES AT SOCIAL SECURITY FIELD

10 OFFICES.—Enter into an agreement with the Com11 missioner of Social Security to use all Social Security

12 field offices located in the State as information and

13 enrollment sites for making the eligibility determina14 tions required under paragraphs (1) and (2).

15 ‘‘(4) SCREEN AND ENROLL INDIVIDUALS ELIGI16 BLE FOR MEDICARE COST-SHARING.—As part of mak17 ing an eligibility determination required under para18 graph (1) or (2), screen an individual who applies for

19 such a determination for eligibility for medical assist20 ance for any medicare cost-sharing described in sec21 tion 1905(p)(3) and, if the individual is eligible for

22 any such medicare cost-sharing, enroll the individual

23 under the State plan (or under a waiver of such

24 plan).
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1 ‘‘(b) FEDERAL SUBSIDY OF ADMINISTRATIVE

2 COSTS.—

3 ‘‘(1) ENHANCED MATCH FOR ELIGIBILITY DETER4 MINATIONS.—Subject to paragraphs (2) and (4), with

5 respect to calendar quarters beginning on or after

6 January 1, 2004, the amounts expended by a State

7 in carrying out subsection (a) are expenditures reim8 bursable under section 1903(a)(7) except that, in ap9 plying such section with respect to such expenditures

10 incurred for—

11 ‘‘(A) such calendar quarters occurring in

12 fiscal year 2004 or 2005, ‘75 percent’ shall be

13 substituted for ‘50 per centum’;

14 ‘‘(B) calendar quarters occurring in fiscal

15 year 2006, ‘70 percent’ shall be substituted for

16 ‘50 per centum’;

17 ‘‘(C) calendar quarters occurring in fiscal

18 year 2007, ‘65 percent’ shall be substituted for

19 ‘50 per centum’; and

20 ‘‘(D) calendar quarters occurring in fiscal

21 year 2008 or any fiscal year thereafter, ‘60 per22 cent’ shall be substituted for ‘50 per centum’.

23 ‘‘(2) 100 PERCENT MATCH FOR ELIGIBILITY DE24 TERMINATIONS FOR SUBSIDY-ELIGIBLE INDIVID25 UALS.—In the case of amounts expended by a State
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1 on or after November 1, 2005, to determine whether

2 an individual is a subsidy-eligible individual for pur3 poses of section 1860D–19, such expenditures shall be

4 reimbursed under section 1903(a)(7) by substituting

5 ‘100 percent’ for ‘50 per centum’.

6 ‘‘(3) ENHANCED MATCH FOR UPDATES OR IM7 PROVEMENTS TO ELIGIBILITY DETERMINATION SYS8 TEMS.—With respect to calendar quarters occurring

9 in fiscal year 2004, 2005, or 2006, the Secretary, in

10 addition to amounts otherwise paid under section

11 1903(a), shall pay to each State which has a plan ap12 proved under this title, for each such quarter an

13 amount equal to 90 percent of so much of the sums

14 expended during such quarter as are attributable to

15 the design, development, acquisition, or installation of

16 improved eligibility determination systems (including

17 hardware and software for such systems) in order to

18 carry out the requirements of subsection (a) and sec19 tion 1807A(h)(1). No payment shall be made to a

20 State under the preceding sentence unless the State’s

21 improved eligibility determination system—

22 ‘‘(A) satisfies such standards for improve23 ment as the Secretary may establish; and

24 ‘‘(B) complies, and is compatible, with the

25 standards established under part C of title XI
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1 and any regulations promulgated under section

2 264(c) of the Health Insurance Portability and

3 Accountability Act of 1996 (42 U.S.C. 1320d–2

4 note).

5 ‘‘(4) COORDINATION.—The State shall provide

6 the Secretary with such information as may be nec7 essary to properly allocate expenditures described in

8 paragraph (1), (2), or (3) that may otherwise be

9 made for similar eligibility determinations or expend10 itures.

11 ‘‘(c) FEDERAL PAYMENT OF MEDICARE PART B PRE12 MIUM FOR STATES PROVIDING PRESCRIPTION DRUG COV13 ERAGE FOR DUAL ELIGIBLE INDIVIDUALS.—

14 ‘‘(1) IN GENERAL.—Subject to paragraph (4)

15 and notwithstanding section 1905(b), in the case of a

16 State that provides medical assistance for covered

17 drugs (as such term is defined in section

18 1860D(a)(2)) to dual eligible individuals under this

19 title that satisfies the minimum standards described

20 in paragraph (2), the Federal medical assistance per21 centage shall be 100 percent for medicare cost-sharing

22 described in section 1905(p)(3)(A)(ii) (relating to pre23 miums under section 1839) for individuals—

24 ‘‘(A) who are dual eligible individuals or

25 qualified medicare beneficiaries; and
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1 ‘‘(B) whose income is at least the income re2 quired for an individual to be an eligible indi3 vidual under section 1611 for purposes of the

4 supplemental security income program (as deter5 mined under section 1612), but does not exceed

6 100 percent of the poverty line (as defined in sec7 tion 2110(c)(5)) applicable to a family of the

8 size involved.

9 ‘‘(2) MINIMUM STANDARDS DESCRIBED.—For

10 purposes of paragraph (1), the minimum standards

11 described in this paragraph are the following:

12 ‘‘(A) In providing medical assistance for

13 dual eligible individuals for such covered drugs,

14 the State satisfies the requirements of this title

15 (including limitations on cost-sharing imposed

16 under section 1916) applicable to the provision

17 of medical assistance for prescribed drugs to dual

18 eligible individuals.

19 ‘‘(B) In providing medical assistance for

20 dual eligible individuals for such covered drugs,

21 the State provides such individuals with bene22 ficiary protections that the Secretary determines

23 are equivalent to the beneficiary protections ap24 plicable under section 1860D–5 to eligible enti-
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1 ties offering a Medicare Prescription Drug plan

2 under part D of title XVIII.

3 ‘‘(C) In providing medical assistance for

4 dual eligible individuals for such covered drugs,

5 the State does not impose a limitation on the

6 number of prescriptions an individual may have

7 filled.

8 ‘‘(3) NONAPPLICATION.—Section 1927(d)(2)(E)

9 shall not apply to a State for purposes of providing

10 medical assistance for covered drugs (as such term is

11 defined in section 1860D(a)(2)) to dual eligible indi12 viduals that satisfies the minimum standards de13 scribed in paragraph (2).

14 ‘‘(4) LIMITATION.—Paragraph (1) shall not

15 apply to any State before January 1, 2006.

16 ‘‘(d) FEDERAL PAYMENT OF MEDICARE PART A COST17 SHARING FOR CERTAIN STATES.—

18 ‘‘(1) IN GENERAL.—Subject to paragraph (2)

19 and notwithstanding section 1905(b), in the case of a

20 State that, as of the date of enactment of the Prescrip21 tion Drug and Medicare Improvement Act of 2003,

22 provides medical assistance for individuals described

23 in section 1902(a)(10)(A)(ii))(X), the Federal medical

24 assistance percentage shall be 100 percent for medi25 care cost-sharing described in subparagraphs (B) and
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1 (C) of section 1905(p)(3) (relating to coinsurance and

2 deductibles established under title XVIII) for the indi3 viduals provided medical assistance under section

4 1902(a)(10)(A)(ii)(X), but only—

5 ‘‘(A) with respect to such medicare cost6 sharing that is incurred under part A of title

7 XVIII; and

8 ‘‘(B) for so long as the State elects to pro9 vide medical assistance under section

10 1902(a)(10)(A)(ii)(X).

11 ‘‘(2) LIMITATION.—Paragraph (1) shall not

12 apply to any State before January 1, 2006.

13 ‘‘(e) TREATMENT OF TERRITORIES.—

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

15 than the 50 States and the District of Columbia—

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

17 shall not apply to residents of such State; and

18 ‘‘(B) if the State establishes a plan de19 scribed in paragraph (2), the amount otherwise

20 determined under section 1108(f) (as increased

21 under section 1108(g)) for the State shall be fur22 ther increased by the amount specified in para23 graph (3).

24 ‘‘(2) PLAN.—The plan described in this para25 graph is a plan that—
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1 ‘‘(A) provides medical assistance with re2 spect to the provision of covered drugs (as de3 fined in section 1860D(a)(2)) to individuals de4 scribed in subparagraph (A), (B), (C), or (D) of

5 section 1860D–19(a)(3); and

6 ‘‘(B) ensures that additional amounts re7 ceived by the State that are attributable to the

8 operation of this subsection are used only for

9 such assistance.

10 ‘‘(3) INCREASED AMOUNT.—

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

12 in this paragraph for a State for a fiscal year

13 is equal to the product of—

14 ‘‘(i) the aggregate amount specified in

15 subparagraph (B); and

16 ‘‘(ii) the amount specified in section

17 1108(g)(1) for that State, divided by the

18 sum of the amounts specified in such section

19 for all such States.

20 ‘‘(B) AGGREGATE AMOUNT.—The aggregate

21 amount specified in this subparagraph for—

22 ‘‘(i) the last 3 quarters of fiscal year

23 2006, is equal to $37,500,000;

24 ‘‘(ii) fiscal year 2007, is equal to

25 $50,000,000; and
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1 ‘‘(iii) any subsequent fiscal year, is

2 equal to the aggregate amount specified in

3 this subparagraph for the previous fiscal

4 year increased by the annual percentage in5 crease specified in section 1860D–6(c)(5) for

6 the calendar year beginning in such fiscal

7 year.

8 ‘‘(4) NONAPPLICATION.—Section 1927(d)(2)(E)

9 shall not apply to a State described in paragraph (1)

10 for purposes of providing medical assistance described

11 in paragraph (2)(A).

12 ‘‘(5) REPORT.—The Secretary shall submit to

13 Congress a report on the application of this subsection

14 and may include in the report such recommendations

15 as the Secretary deems appropriate.

16 ‘‘(f) DEFINITIONS.—For purposes of this section, the

17 terms ‘qualified medicare beneficiary’, ‘subsidy-eligible in18 dividual’, and ‘dual eligible individual’ have the meanings

19 given such terms in subparagraphs (A), (D), and (E), re20 spectively, of section 1860D–19(a)(4).’’.

21 (2) CONFORMING AMENDMENTS.—

22 (A) Section 1905(b) (42 U.S.C. 1396d(b)) is

23 amended by inserting ‘‘and subsections (c)(1)

24 and (d)(1) of section 1935’’ after ‘‘1933(d)’’.
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1 (B) Section 1108(f) (42 U.S.C. 1308(f)) is

2 amended by inserting ‘‘and section

3 1935(e)(1)(B)’’ after ‘‘Subject to subsection (g)’’.

4 (3) TRANSFER OF FEDERALLY ASSUMED POR5 TIONS OF MEDICARE COST-SHARING.—

6 (A) TRANSFER OF ASSUMPTION OF PART B

7 PREMIUM FOR STATES PROVIDING PRESCRIPTION

8 DRUG COVERAGE FOR DUAL ELIGIBLE INDIVID9 UALS TO THE FEDERAL SUPPLEMENTARY MED10 ICAL INSURANCE TRUST FUND.—Section 1841(f)

11 (42 U.S.C. 1395t(f)) is amended—

12 (i) by inserting ‘‘(1)’’ after ‘‘(f)’’; and

13 (ii) by adding at the end the following

14 new paragraph:

15 ‘‘(2) There shall be transferred periodically (but not

16 less often than once each fiscal year) to the Trust Fund from

17 the Treasury amounts which the Secretary of Health and

18 Human Services shall have certified are equivalent to the

19 amounts determined under section 1935(c)(1) with respect

20 to all States for a fiscal year.’’.

21 (B) TRANSFER OF ASSUMPTION OF PART A

22 COST-SHARING FOR CERTAIN STATES.—Section

23 1817(g) (42 U.S.C. 1395i(g)) is amended—

24 (i) by inserting ‘‘(1)’’ after ‘‘(g)’’; and
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1 (ii) by adding at the end the following

2 new paragraph:

3 ‘‘(2) There shall be transferred periodically (but not

4 less often than once each fiscal year) to the Trust Fund from

5 the Treasury amounts which the Secretary of Health and

6 Human Services shall have certified are equivalent to the

7 amounts determined under section 1935(d)(1) with respect

8 to certain States for a fiscal year.’’.

9 (4) AMENDMENT TO BEST PRICE.—Section

10 1927(c)(1)(C)(i) (42 U.S.C. 1396r–8(c)(1)(C)(i)), as

11 amended by section 111(b), is amended—

12 (A) by striking ‘‘and’’ at the end of sub13 clause (IV);

14 (B) by striking the period at the end of sub15 clause (V) and inserting ‘‘; and’’; and

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

17 subclause:

18 ‘‘(VI) any prices charged which

19 are negotiated under a Medicare Pre20 scription Drug plan under part D of

21 title XVIII with respect to covered

22 drugs, under a MedicareAdvantage

23 plan under part C of such title with

24 respect to such drugs, or under a quali25 fied retiree prescription drug plan (as
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1 defined in section 1860D–20(f)(1))

2 with respect to such drugs, on behalf of

3 eligible beneficiaries (as defined in sec4 tion 1860D(a)(3).’’.

5 (c) EXTENSION OF MEDICARE COST-SHARING FOR

6 PART B PREMIUM FOR QUALIFYING INDIVIDUALS

7 THROUGH 2008.—

8 (1) IN GENERAL.—Section 1902(a)(10)(E)(iv)

9 (42 U.S.C. 1396a(a)(10)(E)(iv)) is amended to read

10 as follows:

11 ‘‘(iv) subject to sections 1933 and

12 1905(p)(4), for making medical assistance avail13 able (but only for premiums payable with respect

14 to months during the period beginning with Jan15 uary 1998, and ending with December 2008) for

16 medicare cost-sharing described in section

17 1905(p)(3)(A)(ii) for individuals who would be

18 qualified medicare beneficiaries described in sec19 tion 1905(p)(1) but for the fact that their income

20 exceeds the income level established by the State

21 under section 1905(p)(2) and is at least 120 per22 cent, but less than 135 percent, of the official

23 poverty line (referred to in such section) for a

24 family of the size involved and who are not oth-
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1 erwise eligible for medical assistance under the

2 State plan;’’.

3 (2) TOTAL AMOUNT AVAILABLE FOR ALLOCA4 TION.—Section 1933(c) (42 U.S.C. 1396u–3(c)) is

5 amended—

6 (A) in paragraph (1)—

7 (i) in subparagraph (D), by striking

8 ‘‘and’’ at the end;

9 (ii) in subparagraph (E)—

10 (I) by striking ‘‘fiscal year 2002’’

11 and inserting ‘‘each of fiscal years

12 2002 through 2008’’; and

13 (II) by striking the period and in14 serting ‘‘; and’’; and

15 (iii) by adding at the end the following

16 new subparagraph:

17 ‘‘(F) the first quarter of fiscal year 2009,

18 $100,000,000.’’; and

19 (B) in paragraph (2)(A), by striking ‘‘the

20 sum of’’ and all that follows through

21 ‘‘1902(a)(10)(E)(iv)(II) in the State; to’’ and in22 serting ‘‘twice the total number of individuals

23 described in section 1902(a)(10)(E)(iv) in the

24 State; to’’.
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1 (d) OUTREACH BY THE COMMISSIONER OF SOCIAL SE2 CURITY.—Section 1144 (42 U.S.C. 1320b–14) is amended—

3 (1) in the section heading, by inserting ‘‘AND

4 SUBSIDIES FOR LOW-INCOME INDIVIDUALS UNDER

5 TITLE XVIII’’ after ‘‘COST-SHARING’’;

6 (2) in subsection (a)—

7 (A) in paragraph (1)—

8 (i) in subparagraph (A), by inserting

9 ‘‘for the transitional prescription drug as10 sistance card program under section 1807A,

11 or for premium and cost-sharing subsidies

12 under section 1860D–19’’ before the semi13 colon; and

14 (ii) in subparagraph (B), by inserting

15 ‘‘, program, and subsidies’’ after ‘‘medical

16 assistance’’; and

17 (B) in paragraph (2)—

18 (i) in the matter preceding subpara19 graph (A), by inserting ‘‘, the transitional

20 prescription drug assistance card program

21 under section 1807A, or premium and cost22 sharing subsidies under section 1860D–19’’

23 after ‘‘assistance’’; and

24 (ii) in subparagraph (A), by striking

25 ‘‘such eligibility’’ and inserting ‘‘eligibility
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1 for medicare cost-sharing under the med2 icaid program’’; and

3 (3) in subsection (b)—

4 (A) in paragraph (1)(A), by inserting ‘‘, for

5 the transitional prescription drug assistance

6 card program under section 1807A, or for pre7 mium and cost-sharing subsidies for low-income

8 individuals under section 1860D–19’’ after

9 ‘‘1933’’;

10 (B) in paragraph (2), by inserting ‘‘, pro11 gram, and subsidies’’ after ‘‘medical assistance’’;

12 and

13 (C) by adding at the end the following:

14 ‘‘(3) AGREEMENTS TO ESTABLISH INFORMATION

15 AND ENROLLMENT SITES AT SOCIAL SECURITY FIELD

16 OFFICES.—

17 ‘‘(A) IN GENERAL.—The Commissioner shall

18 enter into an agreement with each State oper19 ating a State plan under title XIX (including

20 under a waiver of such plan) to establish infor21 mation and enrollment sites within all the So22 cial Security field offices located in the State for

23 purposes of—

24 ‘‘(i) the State determining the eligi25 bility of individuals residing in the State
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1 for medical assistance for payment of the

2 cost of medicare cost-sharing under the med3 icaid program pursuant to sections

4 1902(a)(10)(E) and 1933, the transitional

5 prescription drug assistance card program

6 under section 1807A, or premium and cost7 sharing subsidies under section 1860D–19;

8 and

9 ‘‘(ii) enrolling individuals who are de10 termined eligible for such medical assist11 ance, program, or subsidies in the State

12 plan (or waiver), the transitional prescrip13 tion drug assistance card program under

14 section 1807A, or the appropriate category

15 for premium and cost-sharing subsidies

16 under section 1860D–19.

17 ‘‘(B) AGREEMENT TERMS.—The Secretary

18 and the Commissioner jointly shall develop terms

19 for the State agreements required under subpara20 graph (A) that shall specify the responsibilities

21 of the State and the Commissioner in the estab22 lishment and operation of such sites.

23 ‘‘(C) AUTHORIZATION OF APPROPRIA24 TIONS.—There are authorized to be appropriated
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1 to the Commissioner, such sums as may be nec2 essary to carry out this paragraph.’’.

3 (e) REPORT REGARDING VOLUNTARY ENROLLMENT OF

4 DUAL ELIGIBLE INDIVIDUALS IN PART D.—Not later than

5 January 1, 2005, the Secretary shall submit a report to

6 Congress that contains such recommendations for legisla7 tion as the Secretary determines are necessary in order to

8 establish a voluntary option for dual eligible individuals

9 (as defined in 1860D–19(a)(4)(E) of the Social Security

10 Act (as added by section 101)) to enroll under part D of

11 title XVIII of such Act for prescription drug coverage.

12 SEC. 105. EXPANSION OF MEMBERSHIP AND DUTIES OF

13 MEDICARE PAYMENT ADVISORY COMMISSION

14 (MEDPAC).

15 (a) EXPANSION OF MEMBERSHIP.—

16 (1) IN GENERAL.—Section 1805(c) (42 U.S.C.

17 1395b–6(c)) is amended—

18 (A) in paragraph (1), by striking ‘‘17’’ and

19 inserting ‘‘19’’; and

20 (B) in paragraph (2)(B), by inserting ‘‘ex21 perts in the area of pharmacology and prescrip22 tion drug benefit programs,’’ after ‘‘other health

23 professionals,’’.

24 (2) INITIAL TERMS OF ADDITIONAL MEMBERS.—
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1 (A) IN GENERAL.—For purposes of stag2 gering the initial terms of members of the Medi3 care Payment Advisory Commission under sec4 tion 1805(c)(3) of the Social Security Act (42

5 U.S.C. 1395b–6(c)(3)), the initial terms of the 2

6 additional members of the Commission provided

7 for by the amendment under paragraph (1)(A)

8 are as follows:

9 (i) One member shall be appointed for

10 1 year.

11 (ii) One member shall be appointed for

12 2 years.

13 (B) COMMENCEMENT OF TERMS.—Such

14 terms shall begin on January 1, 2005.

15 (b) EXPANSION OF DUTIES.—Section 1805(b)(2) (42

16 U.S.C. 1395b–6(b)(2)) is amended by adding at the end the

17 following new subparagraph:

18 ‘‘(D) VOLUNTARY PRESCRIPTION DRUG DE19 LIVERY PROGRAM.—Specifically, the Commission

20 shall review, with respect to the voluntary pre21 scription drug delivery program under part D,

22 competition among eligible entities offering

23 Medicare Prescription Drug plans and bene24 ficiary access to such plans and covered drugs,

25 particularly in rural areas. As part of such re-
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1 view, the Commission shall hold 3 field hearings

2 in 2007.’’.

3 SEC. 106. STUDY REGARDING VARIATIONS IN SPENDING

4 AND DRUG UTILIZATION.

5 (a) STUDY.—The Secretary shall study on an ongoing

6 basis variations in spending and drug utilization under

7 part D of title XVIII of the Social Security Act for covered

8 drugs to determine the impact of such variations on pre9 miums imposed by eligible entities offering Medicare Pre10 scription Drug plans under that part. In conducting such

11 study, the Secretary shall examine the impact of geographic

12 adjustments of the monthly national average premium

13 under section 1860D–15 of such Act on—

14 (1) maximization of competition under part D of

15 title XVIII of such Act; and

16 (2) the ability of eligible entities offering Medi17 care Prescription Drug plans to contain costs for cov18 ered drugs.

19 (b) REPORT.—Beginning with 2007, the Secretary

20 shall submit annual reports to Congress on the study re21 quired under subsection (a).

22 SEC. 107. LIMITATION ON PRESCRIPTION DRUG BENEFITS

23 OF MEMBERS OF CONGRESS.

24 (a) LIMITATION ON BENEFITS.—Notwithstanding any

25 other provision of law, during calendar year 2004, the actu-
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1 arial value of the prescription drug benefit of any Member

2 of Congress enrolled in a health benefits plan under chapter

3 89 of title 5, United States Code, may not exceed the actu4 arial value of any prescription drug benefit under title

5 XVIII of the Social Security Act passed by the 1st session

6 of the 108th Congress and enacted in law.

7 (b) REGULATIONS.—The Office of Personnel Manage8 ment shall promulgate regulations to carry out this section.

9 SEC. 108. PROTECTING SENIORS WITH CANCER.

10 Any eligible beneficiary (as defined in section 1860D(3)

11 of the Social Security Act) who is diagnosed with cancer

12 shall be protected from high prescription drug costs in the

13 following manner:

14 (1) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN IN15 COME BELOW 100 PERCENT OF THE FEDERAL POV16 ERTY LINE.—If the individual is a qualified medicare

17 beneficiary (as defined in section 1860D–19(a)(4) of

18 such Act), such individual shall receive the full pre19 mium subsidy and reduction of cost-sharing described

20 in section 1860D–19(a)(1) of such Act, including the

21 payment of—

22 (A) no deductible;

23 (B) no monthly beneficiary premium for at

24 least one Medicare Prescription Drug plan avail-
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1 able in the area in which the individual resides;

2 and

3 (C) reduced cost-sharing described in sub4 paragraphs (C), (D), and (E) of section 1860D–

5 19(a)(1) of such Act.

6 (2) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN IN7 COME BETWEEN 100 AND 135 PERCENT OF THE FED8 ERAL POVERTY LINE.—If the individual is a specified

9 low income medicare beneficiary (as defined in para10 graph 1860D–19(4)(B) of such Act) or a qualifying

11 individual (as defined in paragraph 1860D–19(4)(C)

12 of such Act) who is diagnosed with cancer, such indi13 vidual shall receive the full premium subsidy and re14 duction of cost-sharing described in section 1860D–

15 19(a)(2) of such Act, including payment of—

16 (A) no deductible;

17 (B) no monthly premium for any Medicare

18 Prescription Drug plan described paragraph (1)

19 or (2) of section 1860D–17(a) of such Act; and

20 (C) reduced cost-sharing described in sub21 paragraphs (C), (D), and (E) of section 1860D–

22 19(a)(2) of such Act.

23 (3) SUBSIDY-ELIGIBLE INDIVIDUALS WITH IN24 COME BETWEEN 135 PERCENT AND 160 PERCENT OF

25 THE FEDERAL POVERTY LEVEL.—If the individual is
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1 a subsidy-eligible individual (as defined in section

2 1860D–19(a)(4)(D) of such Act) who is diagnosed

3 with cancer, such individual shall receive sliding scale

4 premium subsidy and reduction of cost-sharing for

5 subsidy-eligible individuals, including payment of—

6 (A) for 2006, a deductible of only $50;

7 (B) only a percentage of the monthly pre8 mium (as described in section 1860D–

9 19(a)(3)(A)(i)); and

10 (C) reduced cost-sharing described in

11 clauses (iii), (iv), and (v) of section 1860D–

12 19(a)(3)(A).

13 (4) ELIGIBLE BENEFICIARIES WITH INCOME

14 ABOVE 160 PERCENT OF THE FEDERAL POVERTY

15 LEVEL.—If an individual is an eligible beneficiary

16 (as defined in section 1860D(3) of such Act), is not

17 described in paragraphs (1) through (3), and is diag18 nosed with cancer, such individual shall have access

19 to qualified prescription drug coverage (as described

20 in section 1860D–6(a)(1) of such Act), including pay21 ment of—

22 (A) for 2006, a deductible of $275;

23 (B) the limits on cost-sharing described sec24 tion 1860D–6(c)(2) of such Act up to, for 2006,

25 an initial coverage limit of $4,500; and
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1 (C) for 2006, an annual out-of-pocket limit

2 of $3,700 with 10 percent cost-sharing after that

3 limit is reached.

4 SEC. 109. PROTECTING SENIORS WITH CARDIOVASCULAR

5 DISEASE, CANCER, OR ALZHEIMER’S DISEASE.

6 Any eligible beneficiary (as defined in section 1860D(3)

7 of the Social Security Act) who is diagnosed with cardio8 vascular disease, cancer, diabetes or Alzheimer’s disease

9 shall be protected from high prescription drug costs in the

10 following manner:

11 (1) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN IN12 COME BELOW 100 PERCENT OF THE FEDERAL POV13 ERTY LINE.—If the individual is a qualified medicare

14 beneficiary (as defined in section 1860D–19(a)(4) of

15 such Act), such individual shall receive the full pre16 mium subsidy and reduction of cost-sharing described

17 in section 1860D–19(a)(1) of such Act, including the

18 payment of—

19 (A) no deductible;

20 (B) no monthly beneficiary premium for at

21 least one Medicare Prescription Drug plan avail22 able in the area in which the individual resides;

23 and
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1 (C) reduced cost-sharing described in sub2 paragraphs (C), (D), and (E) of section 1860D–

3 19(a)(1) of such Act.

4 (2) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN IN5 COME BETWEEN 100 AND 135 PERCENT OF THE FED6 ERAL POVERTY LINE.—If the individual is a specified

7 low income medicare beneficiary (as defined in para8 graph 1860D–19(4)(B) of such Act) or a qualifying

9 individual (as defined in paragraph 1860D–19(4)(C)

10 of such Act) who is diagnosed with cardiovascular

11 disease, cancer, or Alzheimer’s disease, such indi12 vidual shall receive the full premium subsidy and re13 duction of cost-sharing described in section 1860D–

14 19(a)(2) of such Act, including payment of—

15 (A) no deductible;

16 (B) no monthly premium for any Medicare

17 Prescription Drug plan described paragraph (1)

18 or (2) of section 1860D–17(a) of such Act; and

19 (C) reduced cost-sharing described in sub20 paragraphs (C), (D), and (E) of section 1860D–

21 19(a)(2) of such Act.

22 (3) SUBSIDY-ELIGIBLE INDIVIDUALS WITH IN23 COME BETWEEN 135 PERCENT AND 160 PERCENT OF

24 THE FEDERAL POVERTY LEVEL.—If the individual is

25 a subsidy-eligible individual (as defined in section
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1 1860D–19(a)(4)(D) of such Act) who is diagnosed

2 with cardiovascular disease, cancer, or Alzheimer’s

3 disease, such individual shall receive sliding scale pre4 mium subsidy and reduction of cost-sharing for sub5 sidy-eligible individuals, including payment of—

6 (A) for 2006, a deductible of only $50;

7 (B) only a percentage of the monthly pre8 mium (as described in section 1860D–

9 19(a)(3)(A)(i)); and

10 (C) reduced cost-sharing described in

11 clauses (iii), (iv), and (v) of section 1860D–

12 19(a)(3)(A).

13 (4) ELIGIBLE BENEFICIARIES WITH INCOME

14 ABOVE 160 PERCENT OF THE FEDERAL POVERTY

15 LEVEL.—If an individual is an eligible beneficiary

16 (as defined in section 1860D(3) of such Act), is not

17 described in paragraphs (1) through (3), and is diag18 nosed with cardiovascular disease, cancer, or Alz19 heimer’s disease, such individual shall have access to

20 qualified prescription drug coverage (as described in

21 section 1860D–6(a)(1) of such Act), including pay22 ment of—

23 (A) for 2006, a deductible of $275;
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1 (B) the limits on cost-sharing described sec2 tion 1860D–6(c)(2) of such Act up to, for 2006,

3 an initial coverage limit of $4,500; and

4 (C) for 2006, an annual out-of-pocket limit

5 of $3,700 with 10 percent cost-sharing after that

6 limit is reached.

7 SEC. 110. REVIEW AND REPORT ON CURRENT STANDARDS

8 OF PRACTICE FOR PHARMACY SERVICES PRO9 VIDED TO PATIENTS IN NURSING FACILITIES.

10 (a) REVIEW.—

11 (1) IN GENERAL.—The Secretary shall conduct a

12 thorough review of the current standards of practice

13 for pharmacy services provided to patients in nursing

14 facilities.

15 (2) SPECIFIC MATTERS REVIEWED.—In con16 ducting the review under paragraph (1), the Sec17 retary shall—

18 (A) assess the current standards of practice,

19 clinical services, and other service requirements

20 generally used for pharmacy services in long21 term care settings; and

22 (B) evaluate the impact of those standards

23 with respect to patient safety, reduction of medi24 cation errors and quality of care.

25 (b) REPORT.—
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1 (1) IN GENERAL.—Not later than the date that

2 is 18 months after the date of enactment of this Act,

3 the Secretary shall submit a report to Congress on the

4 study conducted under subsection (a)(1), together with

5 any recommendations for legislation that the Admin6 istrator determines to be appropriate as a result of

7 such study.

8 (2) CONTENTS.—The report submitted under

9 paragraph (1) shall contain—

10 (A) a detailed description of the plans of the

11 Secretary to implement the provisions of this Act

12 in a manner consistent with applicable State

13 and Federal laws designed to protect the safety

14 and quality of care of nursing facility patients;

15 and

16 (B) recommendations regarding necessary

17 actions and appropriate reimbursement to en18 sure the provision of prescription drugs to medi19 care beneficiaries residing in nursing facilities

20 in a manner consistent with existing patient

21 safety and quality of care standards under ap22 plicable State and Federal laws.

23 SEC. 110A. MEDICATION THERAPY MANAGEMENT ASSESS24 MENT PROGRAM.

25 (a) ESTABLISHMENT.—
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1 (1) IN GENERAL.—The Secretary shall establish

2 an assessment program to contract with qualified

3 pharmacists to provide medication therapy manage4 ment services to eligible beneficiaries who receive care

5 under the original medicare fee-for-service program

6 under parts A and B of title XVIII of the Social Se7 curity Act to eligible beneficiaries.

8 (2) SITES.—The Secretary shall designate 6 geo9 graphic areas, each containing not less than 3 sites,

10 at which to conduct the assessment program under

11 this section. At least 2 geographic areas designated

12 under this paragraph shall be located in rural areas.

13 (3) DURATION.—The Secretary shall conduct the

14 assessment program under this section for a 1-year

15 period.

16 (4) IMPLEMENTATION.—The Secretary shall im17 plement the program not later than January 1, 2005,

18 but may not implement the assessment program be19 fore October 1, 2004.

20 (b) PARTICIPANTS.—Any eligible beneficiary who re21 sides in an area designated by the Secretary as an assess22 ment site under subsection (a)(2) may participate in the

23 assessment program under this section if such beneficiary

24 identifies a qualified pharmacist who agrees to furnish
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1 medication therapy management services to the eligible ben2 eficiary under the assessment program.

3 (c) CONTRACTS WITH QUALIFIED PHARMACISTS.—

4 (1) IN GENERAL.—The Secretary shall enter into

5 a contract with qualified pharmacists to provide

6 medication therapy management services to eligible

7 beneficiaries residing in the area served by the quali8 fied pharmacist.

9 (2) NUMBER OF QUALIFIED PHARMACISTS.—The

10 Secretary may contract with more than 1 qualified

11 pharmacist at each site.

12 (d) PAYMENT TO QUALIFIED PHARMACISTS.—

13 (1) IN GENERAL.—Under an contract entered

14 into under subsection (c), the Secretary shall pay

15 qualified pharmacists a fee for providing medication

16 therapy management services.

17 (2) ASSESSMENT OF PAYMENT METHODOLO18 GIES.—The Secretary shall, in consultation with na19 tional pharmacist and pharmacy associations, design

20 the fee paid under paragraph (1) to test various pay21 ment methodologies applicable with respect to medica22 tion therapy management services, including a pay23 ment methodology that applies a relative value scale

24 and fee-schedule with respect to such services that take

25 into account the differences in—
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1 (A) the time required to perform the dif2 ferent types of medication therapy management

3 services;

4 (B) the level of risk associated with the use

5 of particular outpatient prescription drugs or

6 groups of drugs; and

7 (C) the health status of individuals to whom

8 such services are provided.

9 (e) FUNDING.—

10 (1) IN GENERAL.—Subject to paragraph (2), the

11 Secretary shall provide for the transfer from the Fed12 eral Supplementary Insurance Trust Fund established

13 under section 1841 of the Social Security Act (42

14 U.S.C. 1395t) of such funds as are necessary for the

15 costs of carrying out the assessment program under

16 this section.

17 (2) BUDGET NEUTRALITY.—In conducting the

18 assessment program under this section, the Secretary

19 shall ensure that the aggregate payments made by the

20 Secretary do not exceed the amount which the Sec21 retary would have paid if the assessment program

22 under this section was not implemented.

23 (f) WAIVER AUTHORITY.—The Secretary may waive

24 such requirements of titles XI and XVIII of the Social Secu25 rity Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be
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1 necessary for the purpose of carrying out the assessment

2 program under this section.

3 (g) AVAILABILITY OF DATA.—During the period in

4 which the assessment program is conducted, the Secretary

5 annually shall make available data regarding—

6 (1) the geographic areas and sites designated

7 under subsection (a)(2);

8 (2) the number of eligible beneficiaries partici9 pating in the program under subsection (b) and the

10 level and types medication therapy management serv11 ices used by such beneficiaries;

12 (3) the number of qualified pharmacists with

13 contracts under subsection (c), the location of such

14 pharmacists, and the number of eligible beneficiaries

15 served by such pharmacists; and

16 (4) the types of payment methodologies being

17 tested under subsection (d)(2).

18 (h) REPORT.—

19 (1) IN GENERAL.—Not later than 6 months after

20 the completion of the assessment program under this

21 section, the Secretary shall submit to Congress a final

22 report summarizing the final outcome of the program

23 and evaluating the results of the program, together

24 with recommendations for such legislation and ad-
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1 ministrative action as the Secretary determines to be

2 appropriate.

3 (2) ASSESSMENT OF PAYMENT METHODOLO4 GIES.—The final report submitted under paragraph

5 (1) shall include an assessment of the feasibility and

6 appropriateness of the various payment methodologies

7 tested under subsection (d)(2).

8 (i) DEFINITIONS.—In this section:

9 (1) MEDICATION THERAPY MANAGEMENT SERV10 ICES.—The term ‘‘medication therapy management

11 services’’ means services or programs furnished by a

12 qualified pharmacist to an eligible beneficiary, indi13 vidually or on behalf of a pharmacy provider, which

14 are designed—

15 (A) to ensure that medications are used ap16 propriately by such individual;

17 (B) to enhance the individual’s under18 standing of the appropriate use of medications;

19 (C) to increase the individual’s compliance

20 with prescription medication regimens;

21 (D) to reduce the risk of potential adverse

22 events associated with medications; and

23 (E) to reduce the need for other costly med24 ical services through better management of medi25 cation therapy.
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1 (2) ELIGIBLE BENEFICIARY.—The term ‘‘eligible

2 beneficiary’’ means an individual who is—

3 (A) entitled to (or enrolled for) benefits

4 under part A and enrolled for benefits under

5 part B of the Social Security Act (42 U.S.C.

6 1395c et seq.; 1395j et seq.);

7 (B) not enrolled with a Medicare+Choice

8 plan or a MedicareAdvantage plan under part

9 C; and

10 (C) receiving, in accordance with State law

11 or regulation, medication for—

12 (i) the treatment of asthma, diabetes,

13 or chronic cardiovascular disease, including

14 an individual on anticoagulation or lipid

15 reducing medications; or

16 (ii) such other chronic diseases as the

17 Secretary may specify.

18 (3) QUALIFIED PHARMACIST.—The term ‘‘quali19 fied pharmacist’’ means an individual who is a li20 censed pharmacist in good standing with the State

21 Board of Pharmacy.
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1 Subtitle B—Medicare Prescription

2 Drug Discount Card and Transi3 tional Assistance for Low-In4 come Beneficiaries

5 SEC. 111. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD

6 AND TRANSITIONAL ASSISTANCE FOR LOW7 INCOME BENEFICIARIES.

8 (a) IN GENERAL.—Title XVIII is amended by insert9 ing after section 1806 the following new sections:

10 ‘‘MEDICARE PRESCRIPTION DRUG DISCOUNT CARD

11 ENDORSEMENT PROGRAM

12 ‘‘SEC. 1807. (a) ESTABLISHMENT.—There is estab13 lished a medicare prescription drug discount card endorse14 ment program under which the Secretary shall—

15 ‘‘(1) endorse prescription drug discount card

16 programs offered by prescription drug card sponsors

17 that meet the requirements of this section; and

18 ‘‘(2) make available to eligible beneficiaries in19 formation regarding such endorsed programs.

20 ‘‘(b) ELIGIBILITY, ELECTION OF PROGRAM, AND EN21 ROLLMENT FEES.—

22 ‘‘(1) ELIGIBILITY AND ELECTION OF PROGRAM.—

23 ‘‘(A) IN GENERAL.—Subject to subpara24 graph (B), the Secretary shall establish

25 procedures—
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1 ‘‘(i) for identifying eligible bene2 ficiaries; and

3 ‘‘(ii) under which such beneficiaries

4 may make an election to enroll in any pre5 scription drug discount card program en6 dorsed under this section and disenroll from

7 such a program.

8 ‘‘(B) LIMITATION.—An eligible beneficiary

9 may not be enrolled in more than 1 prescription

10 drug discount card program at any time.

11 ‘‘(2) ENROLLMENT FEES.—

12 ‘‘(A) IN GENERAL.—A prescription drug

13 card sponsor may charge an annual enrollment

14 fee to each eligible beneficiary enrolled in a pre15 scription drug discount card program offered by

16 such sponsor.

17 ‘‘(B) AMOUNT.—No enrollment fee charged

18 under subparagraph (A) may exceed $25.

19 ‘‘(C) UNIFORM ENROLLMENT FEE.—A pre20 scription drug card sponsor shall ensure that the

21 enrollment fee for a prescription drug discount

22 card program endorsed under this section is the

23 same for all eligible medicare beneficiaries en24 rolled in the program.
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1 ‘‘(D) COLLECTION.—Any enrollment fee

2 shall be collected by the prescription drug card

3 sponsor.

4 ‘‘(c) PROVIDING INFORMATION TO ELIGIBLE BENE5 FICIARIES.—

6 ‘‘(1) PROMOTION OF INFORMED CHOICE.—

7 ‘‘(A) BY THE SECRETARY.—In order to pro8 mote informed choice among endorsed prescrip9 tion drug discount card programs, the Secretary

10 shall provide for the dissemination of informa11 tion which compares the costs and benefits of

12 such programs. Such dissemination shall be co13 ordinated with the dissemination of educational

14 information on other medicare options.

15 ‘‘(B) BY PRESCRIPTION DRUG CARD SPON16 SORS.—Each prescription drug card sponsor

17 shall make available to each eligible beneficiary

18 (through the Internet and otherwise)

19 information—

20 ‘‘(i) that the Secretary identifies as

21 being necessary to promote informed choice

22 among endorsed prescription drug discount

23 card programs by eligible beneficiaries, in24 cluding information on enrollment fees, ne25 gotiated prices for prescription drugs
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1 charged to beneficiaries, and services relat2 ing to prescription drugs offered under the

3 program;

4 ‘‘(ii) on how any formulary used by

5 such sponsor functions.

6 ‘‘(2) USE OF MEDICARE TOLL-FREE NUMBER.—

7 The Secretary shall provide through the 1–800–

8 MEDICARE toll free telephone number for the receipt

9 and response to inquiries and complaints concerning

10 the medicare prescription drug discount card endorse11 ment program established under this section and pre12 scription drug discount card programs endorsed

13 under such program.

14 ‘‘(d) BENEFICIARY PROTECTIONS.—

15 ‘‘(1) IN GENERAL.—Each prescription drug dis16 count card program endorsed under this section shall

17 meet such requirements as the Secretary identifies to

18 protect and promote the interest of eligible bene19 ficiaries, including requirements that—

20 ‘‘(A) relate to appeals by eligible bene21 ficiaries and marketing practices; and

22 ‘‘(B) ensure that beneficiaries are not

23 charged more than the lower of the negotiated re24 tail price or the usual and customary price.
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1 ‘‘(2) ENSURING PHARMACY ACCESS.—Each pre2 scription drug card sponsor offering a prescription

3 drug discount card program endorsed under this sec4 tion shall secure the participation in its network of

5 a sufficient number of pharmacies that dispense

6 (other than by mail order) drugs directly to patients

7 to ensure convenient access (as determined by the Sec8 retary and including adequate emergency access) for

9 enrolled beneficiaries. Such standards shall take into

10 account reasonable distances to pharmacy services in

11 urban and rural areas and access to pharmacy serv12 ices of the Indian Health Service and Indian tribes

13 and tribal organizations.

14 ‘‘(3) QUALITY ASSURANCE.—Each prescription

15 drug card sponsor offering a prescription drug dis16 count card program endorsed under this section shall

17 have in place adequate procedures for assuring that

18 quality service is provided to eligible beneficiaries en19 rolled in a prescription drug discount card program

20 offered by such sponsor.

21 ‘‘(4) CONFIDENTIALITY OF ENROLLEE

22 RECORDS.—Insofar as a prescription drug card spon23 sor maintains individually identifiable medical

24 records or other health information regarding eligible

25 beneficiaries enrolled in a prescription drug discount
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1 card program endorsed under this section, the pre2 scription drug card sponsor shall have in place proce3 dures to safeguard the privacy of any individually

4 identifiable beneficiary information in a manner that

5 the Secretary determines is consistent with the Fed6 eral regulations (concerning the privacy of individ7 ually identifiable health information) promulgated

8 under section 264(c) of the Health Insurance Port9 ability and Accountability Act of 1996.

10 ‘‘(5) NO OTHER FEES.—A prescription drug

11 card sponsor may not charge any fee to an eligible

12 beneficiary under a prescription drug discount card

13 program endorsed under this section other than an

14 enrollment fee charged under subsection (b)(2)(A).

15 ‘‘(6) PRICES.—

16 ‘‘(A) AVOIDANCE OF HIGH PRICED

17 DRUGS.—A prescription drug card sponsor may

18 not recommend switching an eligible beneficiary

19 to a drug with a higher negotiated price absent

20 a recommendation by a licensed health profes21 sional that there is a clinical indication with re22 spect to the patient for such a switch.

23 ‘‘(B) PRICE STABILITY.—Negotiated prices

24 charged for prescription drugs covered under a

25 prescription drug discount card program en-
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1 dorsed under this section may not change more

2 frequently than once every 60 days.

3 ‘‘(e) PRESCRIPTION DRUG BENEFITS.—

4 ‘‘(1) IN GENERAL.—Each prescription drug card

5 sponsor may only provide benefits that relate to pre6 scription drugs (as defined in subsection (i)(2)) under

7 a prescription drug discount card program endorsed

8 under this section.

9 ‘‘(2) SAVINGS TO ELIGIBLE BENEFICIARIES.—

10 ‘‘(A) IN GENERAL.—Subject to subpara11 graph (D), each prescription drug card sponsor

12 shall provide eligible beneficiaries who enroll in

13 a prescription drug discount card program of14 fered by such sponsor that is endorsed under this

15 section with access to negotiated prices used by

16 the sponsor with respect to prescription drugs

17 dispensed to eligible beneficiaries.

18 ‘‘(B) INAPPLICABILITY OF MEDICAID BEST

19 PRICE RULES.—The requirements of section 1927

20 relating to manufacturer best price shall not

21 apply to the negotiated prices for prescription

22 drugs made available under a prescription drug

23 discount card program endorsed under this sec24 tion.
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1 ‘‘(C) GUARANTEED ACCESS TO NEGOTIATED

2 PRICES.—The Secretary, in consultation with the

3 Inspector General of the Department of Health

4 and Human Services, shall establish procedures

5 to ensure that eligible beneficiaries have access to

6 the negotiated prices for prescription drugs pro7 vided under subparagraph (A).

8 ‘‘(D) APPLICATION OF FORMULARY RE9 STRICTIONS.—A drug prescribed for an eligible

10 beneficiary that would otherwise be a covered

11 drug under this section shall not be so considered

12 under a prescription drug discount card pro13 gram if the program excludes the drug under a

14 formulary.

15 ‘‘(3) BENEFICIARY SERVICES.—Each prescrip16 tion drug discount card program endorsed under this

17 section shall provide pharmaceutical support services,

18 such as education, counseling, and services to prevent

19 adverse drug interactions.

20 ‘‘(4) DISCOUNT CARDS.—Each prescription drug

21 card sponsor shall issue a card to eligible beneficiaries

22 enrolled in a prescription drug discount card pro23 gram offered by such sponsor that the beneficiary may

24 use to obtain benefits under the program.
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1 ‘‘(f) SUBMISSION OF APPLICATIONS FOR ENDORSE2 MENT AND APPROVAL.—

3 ‘‘(1) SUBMISSION OF APPLICATIONS FOR EN4 DORSEMENT.—Each prescription drug card sponsor

5 that seeks endorsement of a prescription drug dis6 count card program under this section shall submit to

7 the Secretary, at such time and in such manner as

8 the Secretary may specify, such information as the

9 Secretary may require.

10 ‘‘(2) APPROVAL.—The Secretary shall review the

11 information submitted under paragraph (1) and shall

12 determine whether to endorse the prescription drug

13 discount card program to which such information re14 lates. The Secretary may not approve a program un15 less the program and prescription drug card sponsor

16 offering the program comply with the requirements

17 under this section.

18 ‘‘(g) REQUIREMENTS ON DEVELOPMENT AND APPLICA19 TION OF FORMULARIES.—If a prescription drug card spon20 sor offering a prescription drug discount card program uses

21 a formulary, the following requirements must be met:

22 ‘‘(1) PHARMACY AND THERAPEUTIC (P&T) COM23 MITTEE.—
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1 ‘‘(A) IN GENERAL.—The eligible entity must

2 establish a pharmacy and therapeutic committee

3 that develops and reviews the formulary.

4 ‘‘(B) COMPOSITION.—A pharmacy and

5 therapeutic committee shall include at least 1

6 academic expert, at least 1 practicing physician,

7 and at least 1 practicing pharmacist, all of

8 whom have expertise in the care of elderly or dis9 abled persons, and a majority of the members of

10 such committee shall consist of individuals who

11 are a practicing physician or a practicing phar12 macist (or both).

13 ‘‘(2) FORMULARY DEVELOPMENT.—In developing

14 and reviewing the formulary, the committee shall base

15 clinical decisions on the strength of scientific evidence

16 and standards of practice, including assessing peer17 reviewed medical literature, such as randomized clin18 ical trials, pharmacoeconomic studies, outcomes re19 search data, and such other information as the com20 mittee determines to be appropriate.

21 ‘‘(3) INCLUSION OF DRUGS IN ALL THERAPEUTIC

22 CATEGORIES AND CLASSES.—

23 ‘‘(A) IN GENERAL.—The formulary must in24 clude drugs within each therapeutic category and

25 class of covered outpatient drugs (as defined by
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1 the Secretary), although not necessarily for all

2 drugs within such categories and classes.

3 ‘‘(B) REQUIREMENT.—In defining thera4 peutic categories and classes of covered out5 patient drugs pursuant to subparagraph (A), the

6 Secretary shall use the compendia referred to sec7 tion 1927(g)(1)(B)(i) or other recognized sources

8 for categorizing drug therapeutic categories and

9 classes.

10 ‘‘(4) PROVIDER EDUCATION.—The committee

11 shall establish policies and procedures to educate and

12 inform health care providers concerning the for13 mulary.

14 ‘‘(5) NOTICE BEFORE REMOVING DRUGS FROM

15 FORMULARY.—Any removal of a drug from a for16 mulary shall take effect only after appropriate notice

17 is made available to beneficiaries and pharmacies.

18 ‘‘(h) FRAUD AND ABUSE PREVENTION.—

19 ‘‘(1) IN GENERAL.—The Secretary shall provide

20 appropriate oversight to ensure compliance of en21 dorsed programs with the requirements of this section,

22 including verification of the negotiated prices and

23 services provided.

24 ‘‘(2) DISQUALIFICATION FOR ABUSIVE PRAC25 TICES.—The Secretary may implement intermediate
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1 sanctions and may revoke the endorsement of a pro2 gram that the Secretary determines no longer meets

3 the requirements of this section or that has engaged

4 in false or misleading marketing practices.

5 ‘‘(3) AUTHORITY WITH RESPECT TO CIVIL MONEY

6 PENALTIES.—The Secretary may impose a civil

7 money penalty in an amount not to exceed $10,000

8 for any violation of this section. The provisions of sec9 tion 1128A (other than subsections (a) and (b)) shall

10 apply to a civil money penalty under the previous

11 sentence in the same manner as such provisions apply

12 to a penalty or proceeding under section 1128A(a).

13 ‘‘(4) REPORTING TO SECRETARY.—Each pre14 scription drug card sponsor offering a prescription

15 drug discount card program endorsed under this sec16 tion shall report information relating to program per17 formance, use of prescription drugs by eligible bene18 ficiaries enrolled in the program, financial informa19 tion of the sponsor, and such other information as the

20 Secretary may specify. The Secretary may not dis21 close any proprietary data reported under this para22 graph.

23 ‘‘(5) DRUG UTILIZATION REVIEW.—The Sec24 retary may use claims data from parts A and B for
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1 purposes of conducting a drug utilization review pro2 gram.

3 ‘‘(i) DEFINITIONS.—In this section:

4 ‘‘(1) ELIGIBLE BENEFICIARY.—

5 ‘‘(A) IN GENERAL.—The term ‘eligible bene6 ficiary’ means an individual who—

7 ‘‘(i) is entitled to, or enrolled for, bene8 fits under part A and enrolled under part

9 B; and

10 ‘‘(ii) is not a dual eligible individual

11 (as defined in subparagraph (B)).

12 ‘‘(B) DUAL ELIGIBLE INDIVIDUAL.—

13 ‘‘(i) IN GENERAL.—The term ‘dual eli14 gible individual’ means an individual who

15 is—

16 ‘‘(I) enrolled under title XIX or

17 under a waiver under section 1115 of

18 the requirements of such title for med19 ical assistance that is not less than the

20 medical assistance provided to an indi21 vidual described in section

22 1902(a)(10)(A)(i) and includes covered

23 outpatient drugs (as such term is de24 fined for purposes of section 1927); and
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1 ‘‘(II) entitled to benefits under

2 part A and enrolled under part B.

3 ‘‘(ii) INCLUSION OF MEDICALLY

4 NEEDY.—Such term includes an individual

5 described in section 1902(a)(10)(C).

6 ‘‘(2) PRESCRIPTION DRUG.—

7 ‘‘(A) IN GENERAL.—Except as provided in

8 subparagraph (B), the term ‘prescription drug’

9 means—

10 ‘‘(i) a drug that may be dispensed only

11 upon a prescription and that is described in

12 clause (i) or (ii) of subparagraph (A) of sec13 tion 1927(k)(2); or

14 ‘‘(ii) a biological product or insulin

15 described in subparagraph (B) or (C) of

16 such section (including syringes, and nec17 essary medical supplies associated with the

18 administration of insulin, as defined by the

19 Secretary),

20 and such term includes a vaccine licensed under

21 section 351 of the Public Health Service Act and

22 any use of a covered outpatient drug for a medi23 cally accepted indication (as defined in section

24 1927(k)(6)).
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1 ‘‘(B) EXCLUSIONS.—The term ‘prescription

2 drug’ does not include drugs or classes of drugs,

3 or their medical uses, which may be excluded

4 from coverage or otherwise restricted under sec5 tion 1927(d)(2), other than subparagraph (E)

6 thereof (relating to smoking cessation agents), or

7 under section 1927(d)(3).

8 ‘‘(3) NEGOTIATED PRICE.—The term ‘negotiated

9 price’ includes all discounts, direct or indirect sub10 sidies, rebates, price concessions, and direct or indi11 rect remunerations.

12 ‘‘(4) PRESCRIPTION DRUG CARD SPONSOR.—The

13 term ‘prescription drug card sponsor’ means any en14 tity with demonstrated experience and expertise in

15 operating a prescription drug discount card program,

16 an insurance program that provides coverage for pre17 scription drugs, or a similar program that the Sec18 retary determines to be appropriate to provide eligible

19 beneficiaries with the benefits under a prescription

20 drug discount card program endorsed by the Sec21 retary under this section, including—

22 ‘‘(A) a pharmaceutical benefit management

23 company;

24 ‘‘(B) a wholesale or retail pharmacist deliv25 ery system;
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1 ‘‘(C) an insurer (including an insurer that

2 offers medicare supplemental policies under sec3 tion 1882);

4 ‘‘(D) any other entity; or

5 ‘‘(E) any combination of the entities de6 scribed in subparagraphs (A) through (D).

7 ‘‘TRANSITIONAL PRESCRIPTION DRUG ASSISTANCE CARD

8 PROGRAM FOR ELIGIBLE LOW-INCOME BENEFICIARIES

9 ‘‘SEC. 1807A. (a) ESTABLISHMENT.—

10 ‘‘(1) IN GENERAL.—There is established a pro11 gram under which the Secretary shall award con12 tracts to prescription drug card sponsors offering a

13 prescription drug discount card that has been en14 dorsed by the Secretary under section 1807 under

15 which such sponsors shall offer a prescription drug

16 assistance card program to eligible low-income bene17 ficiaries in accordance with the requirements of this

18 section.

19 ‘‘(2) APPLICATION OF DISCOUNT CARD PROVI20 SIONS.—Except as otherwise provided in this section,

21 the provisions of section 1807 shall apply to the pro22 gram established under this section.

23 ‘‘(b) ELIGIBILITY, ELECTION OF PROGRAM, AND EN24 ROLLMENT FEES.—

25 ‘‘(1) ELIGIBILITY AND ELECTION OF PROGRAM.—
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1 ‘‘(A) IN GENERAL.—Subject to the suc2 ceeding provisions of this paragraph, the enroll3 ment procedures established under section

4 1807(b)(1)(A)(ii) shall apply for purposes of this

5 section.

6 ‘‘(B) ENROLLMENT OF ANY ELIGIBLE LOW7 INCOME BENEFICIARY.—Each prescription drug

8 card sponsor offering a prescription drug assist9 ance card program under this section shall per10 mit any eligible low-income beneficiary to enroll

11 in such program if it serves the geographic area

12 in which the beneficiary resides.

13 ‘‘(C) SIMULTANEOUS ENROLLMENT IN PRE14 SCRIPTION DRUG DISCOUNT CARD PROGRAM.—

15 An eligible low-income beneficiary who enrolls in

16 a prescription drug assistance card program of17 fered by a prescription drug card sponsor under

18 this section shall be simultaneously enrolled in a

19 prescription drug discount card program offered

20 by such sponsor.

21 ‘‘(2) WAIVER OF ENROLLMENT FEES.—

22 ‘‘(A) IN GENERAL.—A prescription drug

23 card sponsor may not charge an enrollment fee

24 to any eligible low-income beneficiary enrolled in
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1 a prescription drug discount card program of2 fered by such sponsor.

3 ‘‘(B) PAYMENT BY SECRETARY.—Under a

4 contract awarded under subsection (f)(2), the

5 Secretary shall pay to each prescription drug

6 card sponsor an amount equal to any enrollment

7 fee charged under section 1807(b)(2)(A) on behalf

8 of each eligible low-income beneficiary enrolled

9 in a prescription drug discount card program

10 under paragraph (1)(C) offered by such sponsor.

11 ‘‘(c) ADDITIONAL BENEFICIARY PROTECTIONS.—

12 ‘‘(1) PROVIDING INFORMATION TO ELIGIBLE

13 LOW-INCOME BENEFICIARIES.—In addition to the in14 formation provided to eligible beneficiaries under sec15 tion 1807(c), the prescription drug card sponsor

16 shall—

17 ‘‘(A) periodically notify each eligible low-in18 come beneficiary enrolled in a prescription drug

19 assistance card program offered by such sponsor

20 of the amount of coverage for prescription drugs

21 remaining under subsection (d)(2)(A); and

22 ‘‘(B) notify each eligible low-income bene23 ficiary enrolled in a prescription drug assistance

24 card program offered by such sponsor of the
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1 grievance and appeals processes under the pro2 gram.

3 ‘‘(2) CONVENIENT ACCESS IN LONG-TERM CARE

4 FACILITIES.—For purposes of determining whether

5 convenient access has been provided under section

6 1807(d)(2) with respect to eligible low-income bene7 ficiaries enrolled in a prescription drug assistance

8 card program, the Secretary may only make a deter9 mination that such access has been provided if an ap10 propriate arrangement is in place for eligible low-in11 come beneficiaries who are in a long-term care facil12 ity (as defined by the Secretary) to receive prescrip13 tion drug benefits under the program.

14 ‘‘(3) COORDINATION OF BENEFITS.—

15 ‘‘(A) IN GENERAL.—The Secretary shall es16 tablish procedures under which eligible low-in17 come beneficiaries who are enrolled for coverage

18 described in subparagraph (B) and enrolled in a

19 prescription drug assistance card program have

20 access to the prescription drug benefits available

21 under such program.

22 ‘‘(B) COVERAGE DESCRIBED.—Coverage de23 scribed in this subparagraph is as follows:
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1 ‘‘(i) Coverage of prescription drugs

2 under a State pharmaceutical assistance

3 program.

4 ‘‘(ii) Enrollment in a

5 Medicare+Choice plan under part C.

6 ‘‘(4) GRIEVANCE MECHANISM.—Each prescrip7 tion drug card sponsor with a contract under this sec8 tion shall provide in accordance with section 1852(f)

9 meaningful procedures for hearing and resolving

10 grievances between the prescription drug card sponsor

11 (including any entity or individual through which

12 the prescription drug card sponsor provides covered

13 benefits) and enrollees in a prescription drug assist14 ance card program offered by such sponsor.

15 ‘‘(5) APPLICATION OF COVERAGE DETERMINA16 TION AND RECONSIDERATION PROVISIONS.—

17 ‘‘(A) IN GENERAL.—The requirements of

18 paragraphs (1) through (3) of section 1852(g)

19 shall apply with respect to covered benefits under

20 a prescription drug assistance card program

21 under this section in the same manner as such

22 requirements apply to a Medicare+Choice orga23 nization with respect to benefits it offers under

24 a Medicare+Choice plan under part C.
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1 ‘‘(B) REQUEST FOR REVIEW OF TIERED

2 FORMULARY DETERMINATIONS.—In the case of a

3 prescription drug assistance card program of4 fered by a prescription drug card sponsor that

5 provides for tiered pricing for drugs included

6 within a formulary and provides lower prices for

7 preferred drugs included within the formulary,

8 an eligible low-income beneficiary who is en9 rolled in the program may request coverage of a

10 nonpreferred drug under the terms applicable for

11 preferred drugs if the prescribing physician de12 termines that the preferred drug for treatment of

13 the same condition is not as effective for the eli14 gible low-income beneficiary or has adverse ef15 fects for the eligible low-income beneficiary.

16 ‘‘(C) FORMULARY DETERMINATIONS.—An

17 eligible low-income beneficiary who is enrolled in

18 a prescription drug assistance card program of19 fered by a prescription drug card sponsor may

20 appeal to obtain coverage for a covered drug that

21 is not on a formulary of the entity if the pre22 scribing physician determines that the formulary

23 drug for treatment of the same condition is not

24 as effective for the eligible low-income beneficiary
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1 or has adverse effects for the eligible low-income

2 beneficiary.

3 ‘‘(6) APPEALS.—

4 ‘‘(A) IN GENERAL.—Subject to subpara5 graph (B), a prescription drug card sponsor

6 shall meet the requirements of paragraphs (4)

7 and (5) of section 1852(g) with respect to drugs

8 not included on any formulary in a similar

9 manner (as determined by the Secretary) as such

10 requirements apply to a Medicare+Choice orga11 nization with respect to benefits it offers under

12 a Medicare+Choice plan under part C.

13 ‘‘(B) FORMULARY DETERMINATIONS.—An

14 eligible low-income beneficiary who is enrolled in

15 a prescription drug assistance card program of16 fered by a prescription drug card sponsor may

17 appeal to obtain coverage for a covered drug that

18 is not on a formulary of the entity if the pre19 scribing physician determines that the formulary

20 drug for treatment of the same condition is not

21 as effective for the eligible low-income beneficiary

22 or has adverse effects for the eligible low-income

23 beneficiary.

24 ‘‘(C) APPEALS AND EXCEPTIONS TO APPLI25 CATION.—The prescription drug card sponsor
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1 must have, as part of the appeals process under

2 this paragraph, a process for timely appeals for

3 denials of coverage based on the application of

4 the formulary.

5 ‘‘(d) PRESCRIPTION DRUG BENEFITS.—

6 ‘‘(1) IN GENERAL.—Subject to paragraph (5), all

7 the benefits available under a prescription drug dis8 count card program offered by a prescription drug

9 card sponsor and endorsed under section 1807 shall

10 be available to eligible low-income beneficiaries en11 rolled in a prescription drug assistance card program

12 offered by such sponsor.

13 ‘‘(2) ASSISTANCE FOR ELIGIBLE LOW-INCOME

14 BENEFICIARIES.—

15 ‘‘(A) $600 ANNUAL ASSISTANCE.—Subject to

16 subparagraphs (B) and (C) and paragraph (5),

17 each prescription drug card sponsor with a con18 tract under this section shall provide coverage for

19 the first $600 of expenses for prescription drugs

20 incurred during each calendar year by an eligi21 ble low-income beneficiary enrolled in a pre22 scription drug assistance card program offered

23 by such sponsor.

24 ‘‘(B) COINSURANCE.—
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1 ‘‘(i) IN GENERAL.—The prescription

2 drug card sponsor shall determine an

3 amount of coinsurance to collect from each

4 eligible low-income beneficiary enrolled in a

5 prescription drug assistance card program

6 offered by such sponsor for which coverage

7 is available under subparagraph (A).

8 ‘‘(ii) AMOUNT.—The amount of coin9 surance collected under clause (i) shall be at

10 least 10 percent of the negotiated price of

11 each prescription drug dispensed to an eli12 gible low-income beneficiary.

13 ‘‘(iii) CONSTRUCTION.—Amounts col14 lected under clause (i) shall not be counted

15 against the total amount of coverage avail16 able under subparagraph (A).

17 ‘‘(C) REDUCTION FOR LATE ENROLL18 MENT.—For each month during a calendar quar19 ter in which an eligible low-income beneficiary is

20 not enrolled in a prescription drug assistance

21 card program offered by a prescription drug

22 card sponsor with a contract under this section,

23 the amount of assistance available under sub24 paragraph (A) shall be reduced by $50.
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1 ‘‘(D) CREDITING OF UNUSED BENEFITS TO2 WARD FUTURE YEARS.—The dollar amount of

3 coverage described in subparagraph (A) shall be

4 increased by any amount of coverage described

5 in such subparagraph that was not used during

6 the previous calendar year.

7 ‘‘(E) WAIVER TO ENSURE PROVISION OF

8 BENEFIT.—The Secretary may waive such re9 quirements of this section and section 1807 as

10 may be necessary to ensure that each eligible

11 low-income beneficiaries has access to the assist12 ance described in subparagraph (A).

13 ‘‘(3) ADDITIONAL DISCOUNTS.—A prescription

14 drug card sponsor with a contract under this section

15 shall provide each eligible low-income beneficiary en16 rolled in a prescription drug assistance program of17 fered by the sponsor with access to negotiated prices

18 that reflect a minimum average discount of at least

19 20 percent of the average wholesale price for prescrip20 tion drugs covered under that program.

21 ‘‘(4) ASSISTANCE CARDS.—Each prescription

22 drug card sponsor shall permit eligible low-income

23 beneficiaries enrolled in a prescription drug assist24 ance card program offered by such sponsor to use the
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1 discount card issued under section 1807(e)(4) to ob2 tain benefits under the program.

3 ‘‘(5) APPLICATION OF FORMULARY RESTRIC4 TIONS.—A drug prescribed for an eligible low-income

5 beneficiary that would otherwise be a covered drug

6 under this section shall not be so considered under a

7 prescription drug assistance card program if the pro8 gram excludes the drug under a formulary and such

9 exclusion is not successfully resolved under paragraph

10 (4), (5), or (6) of subsection (c).

11 ‘‘(e) REQUIREMENTS FOR PRESCRIPTION DRUG CARD

12 SPONSORS THAT OFFER PRESCRIPTION DRUG ASSISTANCE

13 CARD PROGRAMS.—

14 ‘‘(1) IN GENERAL.—Each prescription drug card

15 sponsor shall—

16 ‘‘(A) process claims made by eligible low-in17 come beneficiaries;

18 ‘‘(B) negotiate with brand name and ge19 neric prescription drug manufacturers and oth20 ers for low prices on prescription drugs;

21 ‘‘(C) track individual beneficiary expendi22 tures in a format and periodicity specified by

23 the Secretary; and

24 ‘‘(D) perform such other functions as the

25 Secretary may assign.
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1 ‘‘(2) DATA EXCHANGES.—Each prescription drug

2 card sponsor shall receive data exchanges in a format

3 specified by the Secretary and shall maintain real4 time beneficiary files.

5 ‘‘(3) PUBLIC DISCLOSURE OF PHARMACEUTICAL

6 PRICES FOR EQUIVALENT DRUGS.—The prescription

7 drug card sponsor offering the prescription drug as8 sistance card program shall provide that each phar9 macy or other dispenser that arranges for the dis10 pensing of a covered drug shall inform the eligible

11 low-income beneficiary at the time of purchase of the

12 drug of any differential between the price of the pre13 scribed drug to the enrollee and the price of the lowest

14 priced generic drug covered under the plan that is

15 therapeutically equivalent and bioequivalent and

16 available at such pharmacy or other dispenser.

17 ‘‘(f) SUBMISSION OF BIDS AND AWARDING OF CON18 TRACTS.—

19 ‘‘(1) SUBMISSION OF BIDS.—Each prescription

20 drug card sponsor that seeks to offer a prescription

21 drug assistance card program under this section shall

22 submit to the Secretary, at such time and in such

23 manner as the Secretary may specify, such informa24 tion as the Secretary may require.
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1 ‘‘(2) AWARDING OF CONTRACTS.—The Secretary

2 shall review the information submitted under para3 graph (1) and shall determine whether to award a

4 contract to the prescription drug card sponsor offer5 ing the program to which such information relates.

6 The Secretary may not approve a program unless the

7 program and prescription drug card sponsor offering

8 the program comply with the requirements under this

9 section.

10 ‘‘(3) NUMBER OF CONTRACTS.—There shall be no

11 limit on the number of prescription drug card spon12 sors that may be awarded contracts under paragraph

13 (2).

14 ‘‘(4) CONTRACT PROVISIONS.—

15 ‘‘(A) DURATION.—A contract awarded

16 under paragraph (2) shall be for the lifetime of

17 the program under this section.

18 ‘‘(B) WITHDRAWAL.—A prescription drug

19 card sponsor that desires to terminate the con20 tract awarded under paragraph (2) may termi21 nate such contract without penalty if such spon22 sor gives notice—

23 ‘‘(i) to the Secretary 90 days prior to

24 the termination of such contract; and
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1 ‘‘(ii) to each eligible low-income bene2 ficiary that is enrolled in a prescription

3 drug assistance card program offered by

4 such sponsor 60 days prior to such termi5 nation.

6 ‘‘(C) SERVICE AREA.—The service area

7 under the contract shall be the same as the area

8 served by the prescription drug card sponsor

9 under section 1807.

10 ‘‘(5) SIMULTANEOUS APPROVAL OF DISCOUNT

11 CARD AND ASSISTANCE PROGRAMS.—A prescription

12 drug card sponsor may submit an application for en13 dorsement under section 1807 as part of the bid sub14 mitted under paragraph (1) and the Secretary may

15 approve such application at the same time as the Sec16 retary awards a contract under this section.

17 ‘‘(g) PAYMENTS TO PRESCRIPTION DRUG CARD SPON18 SORS.—

19 ‘‘(1) IN GENERAL.—The Secretary shall pay to

20 each prescription drug card sponsor offering a pre21 scription drug assistance card program in which an

22 eligible low-income beneficiary is enrolled an amount

23 equal to the amount agreed to by the Secretary and

24 the sponsor in the contract awarded under subsection

25 (f)(2).
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1 ‘‘(2) PAYMENT FROM PART B TRUST FUND.—The

2 costs of providing benefits under this section shall be

3 payable from the Federal Supplementary Medical In4 surance Trust Fund established under section 1841.

5 ‘‘(h) ELIGIBILITY DETERMINATIONS MADE BY STATES;

6 PRESUMPTIVE ELIGIBILITY.—States shall perform the func7 tions described in section 1935(a)(1).

8 ‘‘(i) APPROPRIATIONS.—There are appropriated from

9 the Federal Supplementary Medical Insurance Trust Fund

10 established under section 1841 such sums as may be nec11 essary to carry out the program under this section.

12 ‘‘(j) DEFINITIONS.—In this section:

13 ‘‘(1) ELIGIBLE BENEFICIARY; NEGOTIATED

14 PRICE; PRESCRIPTION DRUG.—The terms ‘eligible ben15 eficiary’, ‘negotiated price’, and ‘prescription drug’

16 have the meanings given those terms in section

17 1807(i).

18 ‘‘(2) ELIGIBLE LOW-INCOME BENEFICIARY.—The

19 term ‘eligible low-income beneficiary’ means an indi20 vidual who—

21 ‘‘(A) is an eligible beneficiary (as defined in

22 section 1807(i)); and

23 ‘‘(B) is described in clause (iii) or (iv) of

24 section 1902(a)(10)(E) or in section 1905(p)(1).
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1 ‘‘(3) PRESCRIPTION DRUG CARD SPONSOR.—The

2 term ‘prescription drug card sponsor’ has the mean3 ing given that term in section 1807(i), except that

4 such sponsor shall also be an entity that the Secretary

5 determines is—

6 ‘‘(A) is appropriate to provide eligible low7 income beneficiaries with the benefits under a

8 prescription drug assistance card program under

9 this section; and

10 ‘‘(B) is able to manage the monetary assist11 ance made available under subsection (d)(2);

12 ‘‘(C) agrees to submit to audits by the Sec13 retary; and

14 ‘‘(D) provides such other assurances as the

15 Secretary may require.

16 ‘‘(4) STATE.—The term ‘State’ has the meaning

17 given such term for purposes of title XIX.’’.

18 (b) EXCLUSION OF PRICES FROM DETERMINATION OF

19 BEST PRICE.—Section 1927(c)(1)(C)(i) (42 U.S.C. 1396r–

20 8(c)(1)(C)(i)) is amended—

21 (1) by striking ‘‘and’’ at the end of subclause

22 (III);

23 (2) by striking the period at the end of subclause

24 (IV) and inserting ‘‘; and’’; and
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1 (3) by adding at the end the following new sub2 clause:

3 ‘‘(V) any negotiated prices

4 charged under the medicare prescrip5 tion drug discount card endorsement

6 program under section 1807 or under

7 the transitional prescription drug as8 sistance card program for eligible low9 income beneficiaries under section

10 1807A.’’.

11 (c) EXCLUSION OF PRESCRIPTION DRUG ASSISTANCE

12 CARD COSTS FROM DETERMINATION OF PART B MONTHLY

13 PREMIUM.—Section 1839(g) of the Social Security Act (42

14 U.S.C. 1395r(g)) is amended—

15 (1) by striking ‘‘attributable to the application of

16 section’’ and inserting ‘‘attributable to—

17 ‘‘(1) the application of section’’;

18 (2) by striking the period and inserting ‘‘; and’’;

19 and

20 (3) by adding at the end the following new para21 graph:

22 ‘‘(2) the prescription drug assistance card pro23 gram under section 1807A.’’.

24 (d) REGULATIONS.—
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1 (1) AUTHORITY FOR INTERIM FINAL REGULA2 TIONS.—The Secretary may promulgate initial regu3 lations implementing sections 1807 and 1807A of the

4 Social Security Act (as added by this section) in in5 terim final form without prior opportunity for public

6 comment.

7 (2) FINAL REGULATIONS.—A final regulation re8 flecting public comments must be published within 1

9 year of the interim final regulation promulgated

10 under paragraph (1).

11 (3) EXEMPTION FROM THE PAPERWORK REDUC12 TION ACT.—The promulgation of the regulations

13 under this subsection and the administration the pro14 grams established by sections 1807 and 1807A of the

15 Social Security Act (as added by this section) shall

16 be made without regard to chapter 35 of title 44,

17 United States Code (commonly known as the ‘‘Paper18 work Reduction Act’’).

19 (e) IMPLEMENTATION; TRANSITION.—

20 (1) IMPLEMENTATION.—The Secretary shall im21 plement the amendments made by this section in a

22 manner that discounts are available to eligible bene23 ficiaries under section 1807 of the Social Security Act

24 and assistance is available to eligible low-income
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1 beneficiaries under section 1807A of such Act not

2 later than January 1, 2004.

3 (2) TRANSITION.—The Secretary shall provide

4 for an appropriate transition and discontinuation of

5 the programs under section 1807 and 1807A of the

6 Social Security Act. Such transition and discontinu7 ation shall ensure that such programs continue to op8 erate until the date on which the first enrollment pe9 riod under part D ends.

10 Subtitle C—Standards for

11 Electronic Prescribing

12 SEC. 121. STANDARDS FOR ELECTRONIC PRESCRIBING.

13 Title XI (42 U.S.C. 1301 et seq.) is amended by adding

14 at the end the following new part:

15 ‘‘PART D—ELECTRONIC PRESCRIBING

16 ‘‘STANDARDS FOR ELECTRONIC PRESCRIBING

17 ‘‘SEC. 1180. (a) STANDARDS.—

18 ‘‘(1) DEVELOPMENT AND ADOPTION.—

19 ‘‘(A) IN GENERAL.—The Secretary shall de20 velop or adopt standards for transactions and

21 data elements for such transactions (in this sec22 tion referred to as ‘standards’) to enable the elec23 tronic transmission of medication history, eligi24 bility, benefit, and other prescription informa25 tion.
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1 ‘‘(B) CONSULTATION.—In developing and

2 adopting the standards under subparagraph (A),

3 the Secretary shall consult with representatives

4 of physicians, hospitals, pharmacists, standard

5 setting organizations, pharmacy benefit man6 agers, beneficiary information exchange net7 works, technology experts, and representatives of

8 the Departments of Veterans Affairs and Defense

9 and other interested parties.

10 ‘‘(2) OBJECTIVE.—Any standards developed or

11 adopted under this part shall be consistent with the

12 objectives of improving—

13 ‘‘(A) patient safety; and

14 ‘‘(B) the quality of care provided to pa15 tients.

16 ‘‘(3) REQUIREMENTS.—Any standards developed

17 or adopted under this part shall comply with the fol18 lowing:

19 ‘‘(A) PATIENT MAY REQUEST A WRITTEN

20 PRESCRIPTION.—The standards provide that—

21 ‘‘(i) a prescription shall be written and

22 not transmitted electronically if the patient

23 makes such a request; and
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1 ‘‘(ii) no additional charges may be im2 posed on the patient for making such a re3 quest.

4 ‘‘(B) PATIENT-SPECIFIC MEDICATION HIS5 TORY, ELIGIBILITY, BENEFIT, AND OTHER PRE6 SCRIPTION INFORMATION.—

7 ‘‘(i) IN GENERAL.—The standards shall

8 accommodate electronic transmittal of pa9 tient-specific medication history, eligibility,

10 benefit, and other prescription information

11 among prescribing and dispensing profes12 sionals at the point of care.

13 ‘‘(ii) REQUIRED INFORMATION.—The

14 information described in clause (i) shall in15 clude the following:

16 ‘‘(I) Information (to the extent

17 available and feasible) on the drugs

18 being prescribed for that patient and

19 other information relating to the medi20 cation history of the patient that may

21 be relevant to the appropriate prescrip22 tion for that patient.

23 ‘‘(II) Cost-effective alternatives (if

24 any) to the drug prescribed.
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1 ‘‘(III) Information on eligibility

2 and benefits, including the drugs in3 cluded in the applicable formulary and

4 any requirements for prior authoriza5 tion.

6 ‘‘(IV) Information on potential

7 interactions with drugs listed on the

8 medication history, graded by severity

9 of the potential interaction.

10 ‘‘(V) Other information to im11 prove the quality of patient care and

12 to reduce medical errors.

13 ‘‘(C) UNDUE BURDEN.—The standards shall

14 be designed so that, to the extent practicable, the

15 standards do not impose an undue administra16 tive burden on the practice of medicine, phar17 macy, or other health professions.

18 ‘‘(D) COMPATIBILITY WITH ADMINISTRATIVE

19 SIMPLIFICATION AND PRIVACY LAWS.—The stand20 ards shall be—

21 ‘‘(i) consistent with the Federal regula22 tions (concerning the privacy of individ23 ually identifiable health information) pro24 mulgated under section 264(c) of the Health
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1 Insurance Portability and Accountability

2 Act of 1996; and

3 ‘‘(ii) compatible with the standards

4 adopted under part C.

5 ‘‘(4) TRANSFER OF INFORMATION.—The Sec6 retary shall develop and adopt standards for transfer7 ring among prescribing and insurance entities and

8 other necessary entities appropriate standard data

9 elements needed for the electronic exchange of medica10 tion history, eligibility, benefit, and other prescrip11 tion drug information and other health information

12 determined appropriate in compliance with the

13 standards adopted or modified under this part.

14 ‘‘(b) TIMETABLE FOR ADOPTION OF STANDARDS.—

15 ‘‘(1) IN GENERAL.—The Secretary shall adopt

16 the standards under this part by January 1, 2006.

17 ‘‘(2) ADDITIONS AND MODIFICATIONS TO STAND18 ARDS.—The Secretary shall, in consultation with ap19 propriate representatives of interested parties, review

20 the standards developed or adopted under this part

21 and adopt modifications to the standards (including

22 additions to the standards), as determined appro23 priate. Any addition or modification to such stand24 ards shall be completed in a manner which minimizes

25 the disruption and cost of compliance.
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1 ‘‘(c) COMPLIANCE WITH STANDARDS.—

2 ‘‘(1) REQUIREMENT FOR ALL INDIVIDUALS AND

3 ENTITIES THAT TRANSMIT OR RECEIVE PRESCRIP4 TIONS ELECTRONICALLY.—

5 ‘‘(A) IN GENERAL.—Individuals or entities

6 that transmit or receive prescriptions electroni7 cally shall comply with the standards adopted or

8 modified under this part.

9 ‘‘(B) RELATION TO STATE LAWS.—The

10 standards adopted or modified under this part

11 shall supersede any State law or regulations per12 taining to the electronic transmission of medica13 tion history, eligibility, benefit and prescription

14 information.

15 ‘‘(2) TIMETABLE FOR COMPLIANCE.—

16 ‘‘(A) INITIAL COMPLIANCE.—

17 ‘‘(i) IN GENERAL.—Not later than 24

18 months after the date on which an initial

19 standard is adopted under this part, each

20 individual or entity to whom the standard

21 applies shall comply with the standard.

22 ‘‘(ii) SPECIAL RULE FOR SMALL

23 HEALTH PLANS.—In the case of a small

24 health plan, as defined by the Secretary for

25 purposes of section 1175(b)(1)(B), clause (i)
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1 shall be applied by substituting ‘36 months’

2 for ‘24 months’.

3 ‘‘(d) CONSULTATION WITH ATTORNEY GENERAL.—The

4 Secretary shall consult with the Attorney General before de5 veloping, adopting, or modifying a standard under this

6 part to ensure that the standard accommodates secure elec7 tronic transmission of prescriptions for controlled sub8 stances in a manner that minimizes the possibility of viola9 tions under the Comprehensive Drug Abuse Prevention and

10 Control Act of 1970 and related Federal laws.

11 ‘‘(e) NO REQUIREMENT TO TRANSMIT OR RECEIVE

12 PRESCRIPTIONS ELECTRONICALLY.—Nothing in this part

13 shall be construed to require an individual or entity to

14 transmit or receive prescriptions electronically.

15 ‘‘GRANTS TO HEALTH CARE PROVIDERS TO IMPLEMENT

16 ELECTRONIC PRESCRIPTION PROGRAMS

17 ‘‘SEC. 1180A. (a) IN GENERAL.—The Secretary is au18 thorized to make grants to health care providers for the pur19 pose of assisting such entities to implement electronic pre20 scription programs that comply with the standards adopted

21 or modified under this part.

22 ‘‘(b) APPLICATION.—No grant may be made under this

23 section except pursuant to a grant application that is sub24 mitted in a time, manner, and form approved by the Sec25 retary.
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1 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—There are

2 authorized to be appropriated for each of fiscal years 2006,

3 2007, and 2008, such sums as may be necessary to carry

4 out this section.’’.

5 Subtitle D—Other Provisions

6 SEC. 131. ADDITIONAL REQUIREMENTS FOR ANNUAL FI7 NANCIAL REPORT AND OVERSIGHT ON MEDI8 CARE PROGRAM.

9 (a) IN GENERAL.—Section 1817 (42 U.S.C. 1395i) is

10 amended by adding at the end the following new subsection:

11 ‘‘(l) COMBINED REPORT ON OPERATION AND STATUS

12 OF THE TRUST FUND AND THE FEDERAL SUPPLEMENTARY

13 MEDICAL INSURANCE TRUST FUND (INCLUDING THE PRE14 SCRIPTION DRUG ACCOUNT).—In addition to the duty of

15 the Board of Trustees to report to Congress under subsection

16 (b), on the date the Board submits the report required under

17 subsection (b)(2), the Board shall submit to Congress a re18 port on the operation and status of the Trust Fund and

19 the Federal Supplementary Medical Insurance Trust Fund

20 established under section 1841 (including the Prescription

21 Drug Account within such Trust Fund), in this subsection

22 referred to as the ‘Trust Funds’. Such report shall include

23 the following information:

24 ‘‘(1) OVERALL SPENDING FROM THE GENERAL

25 FUND OF THE TREASURY.—A statement of total
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1 amounts obligated during the preceding fiscal year

2 from the General Revenues of the Treasury to the

3 Trust Funds, separately stated in terms of the total

4 amount and in terms of the percentage such amount

5 bears to all other amounts obligated from such Gen6 eral Revenues during such fiscal year, for each of the

7 following amounts:

8 ‘‘(A) MEDICARE BENEFITS.—The amount

9 expended for payment of benefits covered under

10 this title.

11 ‘‘(B) ADMINISTRATIVE AND OTHER EX12 PENSES.—The amount expended for payments

13 not related to the benefits described in subpara14 graph (A).

15 ‘‘(2) HISTORICAL OVERVIEW OF SPENDING.—

16 From the date of the inception of the program of in17 surance under this title through the fiscal year in18 volved, a statement of the total amounts referred to in

19 paragraph (1), separately stated for the amounts de20 scribed in subparagraphs (A) and (B) of such para21 graph.

22 ‘‘(3) 10-YEAR AND 50-YEAR PROJECTIONS.—An

23 estimate of total amounts referred to in paragraph

24 (1), separately stated for the amounts described in

25 subparagraphs (A) and (B) of such paragraph, re-
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1 quired to be obligated for payment for benefits covered

2 under this title for each of the 10 fiscal years suc3 ceeding the fiscal year involved and for the 50-year

4 period beginning with the succeeding fiscal year.

5 ‘‘(4) RELATION TO OTHER MEASURES OF

6 GROWTH.—A comparison of the rate of growth of the

7 total amounts referred to in paragraph (1), separately

8 stated for the amounts described in subparagraphs

9 (A) and (B) of such paragraph, to the rate of growth

10 for the same period in—

11 ‘‘(A) the gross domestic product;

12 ‘‘(B) health insurance costs in the private

13 sector;

14 ‘‘(C) employment-based health insurance

15 costs in the public and private sectors; and

16 ‘‘(D) other areas as determined appropriate

17 by the Board of Trustees.’’.

18 (b) EFFECTIVE DATE.—The amendment made by sub19 section (a) shall apply with respect to fiscal years beginning

20 on or after the date of enactment of this Act.

21 (c) CONGRESSIONAL HEARINGS.—It is the sense of

22 Congress that the committees of jurisdiction of Congress

23 shall hold hearings on the reports submitted under section

24 1817(l) of the Social Security Act (as added by subsection

25 (a)).
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1 SEC. 132. TRUSTEES’ REPORT ON MEDICARE’S UNFUNDED

2 OBLIGATIONS.

3 (a) REPORT.—The report submitted under sections

4 1817(b)(2) and 1841(b)(2) of the Social Security Act (42

5 U.S.C. 1395i(b)(2) and 1395t(b)(2)) during 2004 shall in6 clude an analysis of the total amount of the unfunded obli7 gations of the Medicare program under title XVIII of the

8 Social Security Act.

9 (b) MATTERS ANALYZED.—The analysis described in

10 subsection (A) shall compare the long-term obligations of

11 the Medicare program to the dedicated funding sources for

12 that program (other than general revenue transfers), includ13 ing the combined obligations of the Federal Hospital Insur14 ance Trust Fund established under section 1817 of such Act

15 (42 U.S.C. 1395i) and the Federal Supplementary Medical

16 Insurance Trust Fund established under section 1841 of

17 such Act (42 U.S.C. 1395t).

18 SEC. 133. PHARMACY BENEFIT MANAGERS TRANSPARENCY

19 REQUIREMENTS.

20 Subpart 3 of part D of title XVIII of the Social Secu21 rity Act (as added by section 101) is amended by adding

22 at the end the following new section:

23 ‘‘PHARMACY BENEFIT MANAGERS TRANSPARENCY

24 REQUIREMENTS

25 ‘‘SEC. 1860D–27. (a) PROHIBITION.—
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1 ‘‘(1) IN GENERAL.—Notwithstanding any other

2 provision of law, an eligible entity offering a Medi3 care Prescription Drug plan under this part or a

4 MedicareAdvantage organization offering a

5 MedicareAdvantage plan under part C shall not enter

6 into a contract with any pharmacy benefit manager

7 (in this section referred to as a ‘PBM’) that is owned

8 by a pharmaceutical manufacturing company.

9 ‘‘(2) PROVISION OF INFORMATION.—A PBM that

10 manages prescription drug coverage under this part

11 or part C shall provide the following information, on

12 an annual basis, to the Assistant Attorney General

13 for Antitrust of the Department of Justice and the In14 spector General of the Health and Human Services

15 Department:

16 ‘‘(A) The aggregate amount of any and all

17 rebates, discounts, administrative fees, pro18 motional allowances, and other payments re19 ceived or recovered from each pharmaceutical

20 manufacturer.

21 ‘‘(B) The amount of payments received or

22 recovered from each pharmaceutical manufac23 turer for each of the top 50 drugs as measured

24 by volume (as determined by the Secretary).
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1 ‘‘(C) The percentage differential between the

2 price the PBM pays pharmacies for a drug de3 scribed in subparagraph (B) and the price the

4 PBM charges a Medicare Prescription Drug

5 Plan or a MedicareAdvantage organization for

6 such drug.

7 ‘‘(b) FAILURE TO DISCLOSE.—

8 ‘‘(1) CIVIL PENALTY.—Any PBM that fails to

9 comply with subsection (a) shall be liable for a civil

10 penalty as determined appropriate through regula11 tions promulgated by the Attorney General. Such pen12 alty may be recovered in a civil action brought by the

13 United States.

14 ‘‘(2) COMPLIANCE AND EQUITABLE RELIEF.—If

15 any PBM fails to comply with subsection (a), the

16 United States district court may order compliance,

17 and may grant such other equitable relief as the court

18 in its discretion determines necessary or appropriate,

19 upon application of the Assistant Attorney General.

20 ‘‘(c) DISCLOSURE EXEMPTION.—Any information

21 filed with the Assistant Attorney General under subsection

22 (a)(2) shall be exempt from disclosure under section 552

23 of title 5, and no such information may be made public,

24 except as may be relevant to any administrative or judicial

25 action or proceeding. Nothing in this section is intended
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1 to prevent disclosure to either body of Congress or to any

2 duly authorized committee or subcommittee of the Con3 gress.’’.

4 SEC. 134. OFFICE OF THE MEDICARE BENEFICIARY ADVO5 CATE.

6 (a) ESTABLISHMENT.—Not later than 1 year after the

7 date of enactment of this Act, the Secretary shall establish

8 within the Department of Health and Human Services, an

9 Office of the Medicare Beneficiary Advocate (in this section

10 referred to as the ‘‘Office’’).

11 (b) DUTIES.—The Office shall carry out the following

12 activities:

13 (1) Establishing a toll-free telephone number for

14 medicare beneficiaries to use to obtain information on

15 the medicare program, and particularly with respect

16 to the benefits provided under part D of title XVIII

17 of the Social Security Act and the Medicare Prescrip18 tion Drug plans and MedicareAdvantage plans offer19 ing such benefits. The Office shall ensure that the toll20 free telephone number accommodates beneficiaries

21 with disabilities and limited-English proficiency.

22 (2) Establishing an Internet website with easily

23 accessible information regarding Medicare Prescrip24 tion Drug plans and MedicareAdvantage plans and
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1 the benefits offered under such plans. The website

2 shall—

3 (A) be updated regularly to reflect changes

4 in services and benefits, including with respect to

5 the plans offered in a region and the associated

6 monthly premiums, benefits offered, formularies,

7 and contact information for such plans, and to

8 ensure that there are no broken links or errors;

9 (B) have printer-friendly, downloadable fact

10 sheets on the medicare coverage options and ben11 efits;

12 (C) be easy to navigate, with large print

13 and easily recognizable links; and

14 (D) provide links to the websites of the eligi15 ble entities participating in part D of title

16 XVIII.

17 (3) Providing regional publications to medicare

18 beneficiaries that include regional contacts for infor19 mation, and that inform the beneficiaries of the pre20 scription drug benefit options under title XVIII of the

21 Social Security Act, including with respect to—

22 (A) monthly premiums;

23 (B) formularies; and

24 (C) the scope of the benefits offered.
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1 (4) Conducting outreach to medicare bene2 ficiaries to inform the beneficiaries of the medicare

3 coverage options and benefits under parts A, B, C,

4 and D of title XVIII of the Social Security Act.

5 (5) Working with local benefits administrators,

6 ombudsmen, local benefits specialists, and advocacy

7 groups to ensure that medicare beneficiaries are

8 aware of the medicare coverage options and benefits

9 under parts A, B, C, and D of title XVIII of the So10 cial Security Act.

11 (c) FUNDING.—

12 (1) ESTABLISHMENT.—Of the amounts author13 ized to be appropriated under the Secretary’s discre14 tion for administrative expenditures, $2,000,000 may

15 be used to establish the Office in accordance with this

16 section.

17 (2) OPERATION.—With respect to each fiscal

18 year occurring after the fiscal year in which the Of19 fice is established under this section, the Secretary

20 may use, out of amounts authorized to be appro21 priated under the Secretary’s discretion for adminis22 trative expenditures for such fiscal year, such sums as

23 may be necessary to operate the Office in that fiscal

24 year.
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1 TITLE II—MEDICAREADVANTAGE

2 Subtitle A—MedicareAdvantage

3 Competition

4 SEC. 201. ELIGIBILITY, ELECTION, AND ENROLLMENT.

5 Section 1851 (42 U.S.C. 1395w–21) is amended to

6 read as follows:

7 ‘‘ELIGIBILITY, ELECTION, AND ENROLLMENT

8 ‘‘SEC. 1851. (a) CHOICE OF MEDICARE BENEFITS

9 THROUGH MEDICAREADVANTAGE PLANS.—

10 ‘‘(1) IN GENERAL.—Subject to the provisions of

11 this section, each MedicareAdvantage eligible indi12 vidual (as defined in paragraph (3)) is entitled to

13 elect to receive benefits under this title—

14 ‘‘(A) through—

15 ‘‘(i) the original Medicare fee-for-serv16 ice program under parts A and B; and

17 ‘‘(ii) the voluntary prescription drug

18 delivery program under part D; or

19 ‘‘(B) through enrollment in a

20 MedicareAdvantage plan under this part.

21 ‘‘(2) TYPES OF MEDICAREADVANTAGE PLANS

22 THAT MAY BE AVAILABLE.—A MedicareAdvantage

23 plan may be any of the following types of plans of

24 health insurance:
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1 ‘‘(A) COORDINATED CARE PLANS.—Coordi2 nated care plans which provide health care serv3 ices, including health maintenance organization

4 plans (with or without point of service options)

5 and plans offered by provider-sponsored organi6 zations (as defined in section 1855(d)).

7 ‘‘(B) COMBINATION OF MSA PLAN AND CON8 TRIBUTIONS TO MEDICAREADVANTAGE MSA.—An

9 MSA plan, as defined in section 1859(b)(3), and

10 a contribution into a MedicareAdvantage med11 ical savings account (MSA).

12 ‘‘(C) PRIVATE FEE-FOR-SERVICE PLANS.—A

13 MedicareAdvantage private fee-for-service plan,

14 as defined in section 1859(b)(2).

15 ‘‘(3) MEDICAREADVANTAGE ELIGIBLE INDI16 VIDUAL.—

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B), in this title, the term

19 ‘MedicareAdvantage eligible individual’ means

20 an individual who is entitled to (or enrolled for)

21 benefits under part A, enrolled under part B,

22 and enrolled under part D.

23 ‘‘(B) SPECIAL RULE FOR END-STAGE RENAL

24 DISEASE.—Such term shall not include an indi-
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1 vidual medically determined to have end-stage

2 renal disease, except that—

3 ‘‘(i) an individual who develops end4 stage renal disease while enrolled in a

5 Medicare+Choice or a MedicareAdvantage

6 plan may continue to be enrolled in that

7 plan; and

8 ‘‘(ii) in the case of such an individual

9 who is enrolled in a Medicare+Choice plan

10 or a MedicareAdvantage plan under clause

11 (i) (or subsequently under this clause), if

12 the enrollment is discontinued under cir13 cumstances described in section

14 1851(e)(4)(A), then the individual will be

15 treated as a ‘MedicareAdvantage eligible in16 dividual’ for purposes of electing to con17 tinue enrollment in another

18 MedicareAdvantage plan.

19 ‘‘(b) SPECIAL RULES.—

20 ‘‘(1) RESIDENCE REQUIREMENT.—

21 ‘‘(A) IN GENERAL.—Except as the Secretary

22 may otherwise provide and except as provided in

23 subparagraph (C), an individual is eligible to

24 elect a MedicareAdvantage plan offered by a

25 MedicareAdvantage organization only if the plan
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1 serves the geographic area in which the indi2 vidual resides.

3 ‘‘(B) CONTINUATION OF ENROLLMENT PER4 MITTED.—Pursuant to rules specified by the Sec5 retary, the Secretary shall provide that a plan

6 may offer to all individuals residing in a geo7 graphic area the option to continue enrollment

8 in the plan, notwithstanding that the individual

9 no longer resides in the service area of the plan,

10 so long as the plan provides that individuals ex11 ercising this option have, as part of the basic

12 benefits described in section 1852(a)(1)(A), rea13 sonable access within that geographic area to the

14 full range of basic benefits, subject to reasonable

15 cost-sharing liability in obtaining such benefits.

16 ‘‘(C) CONTINUATION OF ENROLLMENT PER17 MITTED WHERE SERVICE CHANGED.—Notwith18 standing subparagraph (A) and in addition to

19 subparagraph (B), if a MedicareAdvantage orga20 nization eliminates from its service area a

21 MedicareAdvantage payment area that was pre22 viously within its service area, the organization

23 may elect to offer individuals residing in all or

24 portions of the affected area who would otherwise

25 be ineligible to continue enrollment the option to
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1 continue enrollment in a MedicareAdvantage

2 plan it offers so long as—

3 ‘‘(i) the enrollee agrees to receive the

4 full range of basic benefits (excluding emer5 gency and urgently needed care) exclusively

6 at facilities designated by the organization

7 within the plan service area; and

8 ‘‘(ii) there is no other

9 MedicareAdvantage plan offered in the area

10 in which the enrollee resides at the time of

11 the organization’s election.

12 ‘‘(2) SPECIAL RULE FOR CERTAIN INDIVIDUALS

13 COVERED UNDER FEHBP OR ELIGIBLE FOR VETERANS

14 OR MILITARY HEALTH BENEFITS.—

15 ‘‘(A) FEHBP.—An individual who is en16 rolled in a health benefit plan under chapter 89

17 of title 5, United States Code, is not eligible to

18 enroll in an MSA plan until such time as the

19 Director of the Office of Management and Budget

20 certifies to the Secretary that the Office of Per21 sonnel Management has adopted policies which

22 will ensure that the enrollment of such individ23 uals in such plans will not result in increased

24 expenditures for the Federal Government for

25 health benefit plans under such chapter.
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1 ‘‘(B) VA AND DOD.—The Secretary may

2 apply rules similar to the rules described in sub3 paragraph (A) in the case of individuals who are

4 eligible for health care benefits under chapter 55

5 of title 10, United States Code, or under chapter

6 17 of title 38 of such Code.

7 ‘‘(3) LIMITATION ON ELIGIBILITY OF QUALIFIED

8 MEDICARE BENEFICIARIES AND OTHER MEDICAID

9 BENEFICIARIES TO ENROLL IN AN MSA PLAN.—An in10 dividual who is a qualified medicare beneficiary (as

11 defined in section 1905(p)(1)), a qualified disabled

12 and working individual (described in section

13 1905(s)), an individual described in section

14 1902(a)(10)(E)(iii), or otherwise entitled to medicare

15 cost-sharing under a State plan under title XIX is

16 not eligible to enroll in an MSA plan.

17 ‘‘(4) COVERAGE UNDER MSA PLANS ON A DEM18 ONSTRATION BASIS.—

19 ‘‘(A) IN GENERAL.—An individual is not el20 igible to enroll in an MSA plan under this

21 part—

22 ‘‘(i) on or after January 1, 2004, un23 less the enrollment is the continuation of

24 such an enrollment in effect as of such date;

25 or
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1 ‘‘(ii) as of any date if the number of

2 such individuals so enrolled as of such date

3 has reached 390,000.

4 Under rules established by the Secretary, an in5 dividual is not eligible to enroll (or continue en6 rollment) in an MSA plan for a year unless the

7 individual provides assurances satisfactory to the

8 Secretary that the individual will reside in the

9 United States for at least 183 days during the

10 year.

11 ‘‘(B) EVALUATION.—The Secretary shall

12 regularly evaluate the impact of permitting en13 rollment in MSA plans under this part on selec14 tion (including adverse selection), use of preven15 tive care, access to care, and the financial status

16 of the Trust Funds under this title.

17 ‘‘(C) REPORTS.—The Secretary shall submit

18 to Congress periodic reports on the numbers of

19 individuals enrolled in such plans and on the

20 evaluation being conducted under subparagraph

21 (B).

22 ‘‘(c) PROCESS FOR EXERCISING CHOICE.—

23 ‘‘(1) IN GENERAL.—The Secretary shall establish

24 a process through which elections described in sub25 section (a) are made and changed, including the form
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1 and manner in which such elections are made and

2 changed. Such elections shall be made or changed only

3 during coverage election periods specified under sub4 section (e) and shall become effective as provided in

5 subsection (f).

6 ‘‘(2) COORDINATION THROUGH

7 MEDICAREADVANTAGE ORGANIZATIONS.—

8 ‘‘(A) ENROLLMENT.—Such process shall

9 permit an individual who wishes to elect a

10 MedicareAdvantage plan offered by a

11 MedicareAdvantage organization to make such

12 election through the filing of an appropriate elec13 tion form with the organization.

14 ‘‘(B) DISENROLLMENT.—Such process shall

15 permit an individual, who has elected a

16 MedicareAdvantage plan offered by a

17 MedicareAdvantage organization and who wishes

18 to terminate such election, to terminate such elec19 tion through the filing of an appropriate election

20 form with the organization.

21 ‘‘(3) DEFAULT.—

22 ‘‘(A) INITIAL ELECTION.—

23 ‘‘(i) IN GENERAL.—Subject to clause

24 (ii), an individual who fails to make an

25 election during an initial election period
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1 under subsection (e)(1) is deemed to have

2 chosen the original medicare fee-for-service

3 program option.

4 ‘‘(ii) SEAMLESS CONTINUATION OF

5 COVERAGE.—The Secretary may establish

6 procedures under which an individual who

7 is enrolled in a Medicare+Choice plan or

8 another health plan (other than a

9 MedicareAdvantage plan) offered by a

10 MedicareAdvantage organization at the

11 time of the initial election period and who

12 fails to elect to receive coverage other than

13 through the organization is deemed to have

14 elected the MedicareAdvantage plan offered

15 by the organization (or, if the organization

16 offers more than 1 such plan, such plan or

17 plans as the Secretary identifies under such

18 procedures).

19 ‘‘(B) CONTINUING PERIODS.—An individual

20 who has made (or is deemed to have made) an

21 election under this section is considered to have

22 continued to make such election until such time

23 as—

24 ‘‘(i) the individual changes the election

25 under this section; or
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1 ‘‘(ii) the MedicareAdvantage plan with

2 respect to which such election is in effect is

3 discontinued or, subject to subsection

4 (b)(1)(B), no longer serves the area in

5 which the individual resides.

6 ‘‘(d) PROVIDING INFORMATION TO PROMOTE IN7 FORMED CHOICE.—

8 ‘‘(1) IN GENERAL.—The Secretary shall provide

9 for activities under this subsection to broadly dissemi10 nate information to medicare beneficiaries (and pro11 spective medicare beneficiaries) on the coverage op12 tions provided under this section in order to promote

13 an active, informed selection among such options.

14 ‘‘(2) PROVISION OF NOTICE.—

15 ‘‘(A) OPEN SEASON NOTIFICATION.—At least

16 15 days before the beginning of each annual, co17 ordinated election period (as defined in sub18 section (e)(3)(B)), the Secretary shall mail to

19 each MedicareAdvantage eligible individual re20 siding in an area the following:

21 ‘‘(i) GENERAL INFORMATION.—The

22 general information described in paragraph

23 (3).

24 ‘‘(ii) LIST OF PLANS AND COMPARISON

25 OF PLAN OPTIONS.—A list identifying the
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1 MedicareAdvantage plans that are (or will

2 be) available to residents of the area and in3 formation described in paragraph (4) con4 cerning such plans. Such information shall

5 be presented in a comparative form.

6 ‘‘(iii) ADDITIONAL INFORMATION.—

7 Any other information that the Secretary

8 determines will assist the individual in

9 making the election under this section.

10 The mailing of such information shall be coordi11 nated, to the extent practicable, with the mailing

12 of any annual notice under section 1804.

13 ‘‘(B) NOTIFICATION TO NEWLY ELIGIBLE

14 MEDICAREADVANTAGE ELIGIBLE INDIVIDUALS.—

15 To the extent practicable, the Secretary shall, not

16 later than 30 days before the beginning of the

17 initial MedicareAdvantage enrollment period for

18 an individual described in subsection (e)(1),

19 mail to the individual the information described

20 in subparagraph (A).

21 ‘‘(C) FORM.—The information disseminated

22 under this paragraph shall be written and for23 matted using language that is easily understand24 able by medicare beneficiaries.
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1 ‘‘(D) PERIODIC UPDATING.—The informa2 tion described in subparagraph (A) shall be up3 dated on at least an annual basis to reflect

4 changes in the availability of MedicareAdvantage

5 plans, the benefits under such plans, and the

6 MedicareAdvantage monthly basic beneficiary

7 premium, MedicareAdvantage monthly bene8 ficiary premium for enhanced medical benefits,

9 and MedicareAdvantage monthly beneficiary ob10 ligation for qualified prescription drug coverage

11 for such plans.

12 ‘‘(3) GENERAL INFORMATION.—General informa13 tion under this paragraph, with respect to coverage

14 under this part during a year, shall include the fol15 lowing:

16 ‘‘(A) BENEFITS UNDER THE ORIGINAL

17 MEDICARE FEE-FOR-SERVICE PROGRAM OP18 TION.—A general description of the benefits cov19 ered under parts A and B of the original medi20 care fee-for-service program, including—

21 ‘‘(i) covered items and services;

22 ‘‘(ii) beneficiary cost-sharing, such as

23 deductibles, coinsurance, and copayment

24 amounts; and
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1 ‘‘(iii) any beneficiary liability for bal2 ance billing.

3 ‘‘(B) CATASTROPHIC COVERAGE AND COM4 BINED DEDUCTIBLE.—A description of the cata5 strophic coverage and unified deductible applica6 ble under the plan.

7 ‘‘(C) OUTPATIENT PRESCRIPTION DRUG

8 COVERAGE BENEFITS.—The information required

9 under section 1860D–4 with respect to coverage

10 for prescription drugs under the plan.

11 ‘‘(D) ELECTION PROCEDURES.—Informa12 tion and instructions on how to exercise election

13 options under this section.

14 ‘‘(E) RIGHTS.—A general description of

15 procedural rights (including grievance and ap16 peals procedures) of beneficiaries under the origi17 nal medicare fee-for-service program (including

18 such rights under part D) and the

19 MedicareAdvantage program and the right to be

20 protected against discrimination based on health

21 status-related factors under section 1852(b).

22 ‘‘(F) INFORMATION ON MEDIGAP AND MEDI23 CARE SELECT.—A general description of the ben24 efits, enrollment rights, and other requirements

25 applicable to medicare supplemental policies
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1 under section 1882 and provisions relating to

2 medicare select policies described in section

3 1882(t).

4 ‘‘(G) POTENTIAL FOR CONTRACT TERMI5 NATION.—The fact that a MedicareAdvantage or6 ganization may terminate its contract, refuse to

7 renew its contract, or reduce the service area in8 cluded in its contract, under this part, and the

9 effect of such a termination, nonrenewal, or serv10 ice area reduction may have on individuals en11 rolled with the MedicareAdvantage plan under

12 this part.

13 ‘‘(4) INFORMATION COMPARING PLAN OPTIONS.—

14 Information under this paragraph, with respect to a

15 MedicareAdvantage plan for a year, shall include the

16 following:

17 ‘‘(A) BENEFITS.—The benefits covered

18 under the plan, including the following:

19 ‘‘(i) Covered items and services beyond

20 those provided under the original medicare

21 fee-for-service program option.

22 ‘‘(ii) Beneficiary cost-sharing for any

23 items and services described in clause (i)

24 and paragraph (3)(A)(i), including infor-
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1 mation on the unified deductible under sec2 tion 1852(a)(1)(C).

3 ‘‘(iii) The maximum limitations on

4 out-of-pocket expenses under section

5 1852(a)(1)(C).

6 ‘‘(iv) In the case of an MSA plan, dif7 ferences in cost-sharing, premiums, and bal8 ance billing under such a plan compared to

9 under other MedicareAdvantage plans.

10 ‘‘(v) In the case of a

11 MedicareAdvantage private fee-for-service

12 plan, differences in cost-sharing, premiums,

13 and balance billing under such a plan com14 pared to under other MedicareAdvantage

15 plans.

16 ‘‘(vi) The extent to which an enrollee

17 may obtain benefits through out-of-network

18 health care providers.

19 ‘‘(vii) The extent to which an enrollee

20 may select among in-network providers and

21 the types of providers participating in the

22 plan’s network.

23 ‘‘(viii) The organization’s coverage of

24 emergency and urgently needed care.
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1 ‘‘(ix) The comparative information de2 scribed in section 1860D–4(b)(2) relating to

3 prescription drug coverage under the plan.

4 ‘‘(B) PREMIUMS.—

5 ‘‘(i) IN GENERAL.—The

6 MedicareAdvantage monthly basic bene7 ficiary premium and MedicareAdvantage

8 monthly beneficiary premium for enhanced

9 medical benefits, if any, for the plan or, in

10 the case of an MSA plan, the

11 MedicareAdvantage monthly MSA pre12 mium.

13 ‘‘(ii) REDUCTIONS.—The reduction in

14 part B premiums, if any.

15 ‘‘(iii) NATURE OF THE PREMIUM FOR

16 ENHANCED MEDICAL BENEFITS.—Whether

17 the MedicareAdvantage monthly premium

18 for enhanced benefits is optional or manda19 tory.

20 ‘‘(C) SERVICE AREA.—The service area of

21 the plan.

22 ‘‘(D) QUALITY AND PERFORMANCE.—Plan

23 quality and performance indicators for the bene24 fits under the plan (and how such indicators

25 compare to quality and performance indicators
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1 under the original medicare fee-for-service pro2 gram under parts A and B and under the vol3 untary prescription drug delivery program

4 under part D in the area involved), including—

5 ‘‘(i) disenrollment rates for medicare

6 enrollees electing to receive benefits through

7 the plan for the previous 2 years (excluding

8 disenrollment due to death or moving out9 side the plan’s service area);

10 ‘‘(ii) information on medicare enrollee

11 satisfaction;

12 ‘‘(iii) information on health outcomes;

13 and

14 ‘‘(iv) the recent record regarding com15 pliance of the plan with requirements of

16 this part (as determined by the Secretary).

17 ‘‘(5) MAINTAINING A TOLL-FREE NUMBER AND

18 INTERNET SITE.—The Secretary shall maintain a

19 toll-free number for inquiries regarding

20 MedicareAdvantage options and the operation of this

21 part in all areas in which MedicareAdvantage plans

22 are offered and an Internet site through which indi23 viduals may electronically obtain information on

24 such options and MedicareAdvantage plans.
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1 ‘‘(6) USE OF NON-FEDERAL ENTITIES.—The Sec2 retary may enter into contracts with non-Federal en3 tities to carry out activities under this subsection.

4 ‘‘(7) PROVISION OF INFORMATION.—A

5 MedicareAdvantage organization shall provide the

6 Secretary with such information on the organization

7 and each MedicareAdvantage plan it offers as may be

8 required for the preparation of the information re9 ferred to in paragraph (2)(A).

10 ‘‘(e) COVERAGE ELECTION PERIODS.—

11 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO MAKE

12 ELECTION IF MEDICAREADVANTAGE PLANS AVAILABLE

13 TO INDIVIDUAL.—If, at the time an individual first

14 becomes eligible to elect to receive benefits under part

15 B or D (whichever is later), there is 1 or more

16 MedicareAdvantage plans offered in the area in which

17 the individual resides, the individual shall make the

18 election under this section during a period specified

19 by the Secretary such that if the individual elects a

20 MedicareAdvantage plan during the period, coverage

21 under the plan becomes effective as of the first date

22 on which the individual may receive such coverage.

23 ‘‘(2) OPEN ENROLLMENT AND DISENROLLMENT

24 OPPORTUNITIES.—Subject to paragraph (5), the fol25 lowing rules shall apply:
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1 ‘‘(A) CONTINUOUS OPEN ENROLLMENT AND

2 DISENROLLMENT THROUGH 2005.—At any time

3 during the period beginning January 1, 1998,

4 and ending on December 31, 2005, a

5 Medicare+Choice eligible individual may change

6 the election under subsection (a)(1).

7 ‘‘(B) CONTINUOUS OPEN ENROLLMENT AND

8 DISENROLLMENT FOR FIRST 6 MONTHS DURING

9 2006.—

10 ‘‘(i) IN GENERAL.—Subject to clause

11 (ii) and subparagraph (D), at any time

12 during the first 6 months of 2006, or, if the

13 individual first becomes a

14 MedicareAdvantage eligible individual dur15 ing 2006, during the first 6 months during

16 2006 in which the individual is a

17 MedicareAdvantage eligible individual, a

18 MedicareAdvantage eligible individual may

19 change the election under subsection (a)(1).

20 ‘‘(ii) LIMITATION OF 1 CHANGE.—An

21 individual may exercise the right under

22 clause (i) only once. The limitation under

23 this clause shall not apply to changes in

24 elections effected during an annual, coordi25 nated election period under paragraph (3)
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1 or during a special enrollment period under

2 the first sentence of paragraph (4).

3 ‘‘(C) CONTINUOUS OPEN ENROLLMENT AND

4 DISENROLLMENT FOR FIRST 3 MONTHS IN SUB5 SEQUENT YEARS.—

6 ‘‘(i) IN GENERAL.—Subject to clause

7 (ii) and subparagraph (D), at any time

8 during the first 3 months of 2007 and each

9 subsequent year, or, if the individual first

10 becomes a MedicareAdvantage eligible indi11 vidual during 2007 or any subsequent year,

12 during the first 3 months of such year in

13 which the individual is a

14 MedicareAdvantage eligible individual, a

15 MedicareAdvantage eligible individual may

16 change the election under subsection (a)(1).

17 ‘‘(ii) LIMITATION OF 1 CHANGE DURING

18 OPEN ENROLLMENT PERIOD EACH YEAR.—

19 An individual may exercise the right under

20 clause (i) only once during the applicable 3-

21 month period described in such clause in

22 each year. The limitation under this clause

23 shall not apply to changes in elections ef24 fected during an annual, coordinated elec25 tion period under paragraph (3) or during
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1 a special enrollment period under para2 graph (4).

3 ‘‘(D) CONTINUOUS OPEN ENROLLMENT FOR

4 INSTITUTIONALIZED INDIVIDUALS.—At any time

5 during 2006 or any subsequent year, in the case

6 of a MedicareAdvantage eligible individual who

7 is institutionalized (as defined by the Secretary),

8 the individual may elect under subsection

9 (a)(1)—

10 ‘‘(i) to enroll in a MedicareAdvantage

11 plan; or

12 ‘‘(ii) to change the MedicareAdvantage

13 plan in which the individual is enrolled.

14 ‘‘(3) ANNUAL, COORDINATED ELECTION PE15 RIOD.—

16 ‘‘(A) IN GENERAL.—Subject to paragraph

17 (5), each individual who is eligible to make an

18 election under this section may change such elec19 tion during an annual, coordinated election pe20 riod.

21 ‘‘(B) ANNUAL, COORDINATED ELECTION PE22 RIOD.—For purposes of this section, the term

23 ‘annual, coordinated election period’ means, with

24 respect to a year before 2003 and after 2006, the

25 month of November before such year and with re-
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1 spect to 2003, 2004, 2005, and 2006, the period

2 beginning on November 15 and ending on De3 cember 31 of the year before such year.

4 ‘‘(C) MEDICAREADVANTAGE HEALTH INFOR5 MATION FAIRS.—During the fall season of each

6 year (beginning with 2006), in conjunction with

7 the annual coordinated election period defined in

8 subparagraph (B), the Secretary shall provide

9 for a nationally coordinated educational and

10 publicity campaign to inform

11 MedicareAdvantage eligible individuals about

12 MedicareAdvantage plans and the election proc13 ess provided under this section.

14 ‘‘(D) SPECIAL INFORMATION CAMPAIGN IN

15 2005.—During the period beginning on November

16 15, 2005, and ending on December 31, 2005, the

17 Secretary shall provide for an educational and

18 publicity campaign to inform

19 MedicareAdvantage eligible individuals about the

20 availability of MedicareAdvantage plans, and el21 igible organizations with risk-sharing contracts

22 under section 1876, offered in different areas and

23 the election process provided under this section.

24 ‘‘(4) SPECIAL ELECTION PERIODS.—Effective on

25 and after January 1, 2006, an individual may dis-
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1 continue an election of a MedicareAdvantage plan of2 fered by a MedicareAdvantage organization other

3 than during an annual, coordinated election period

4 and make a new election under this section if—

5 ‘‘(A)(i) the certification of the organization

6 or plan under this part has been terminated, or

7 the organization or plan has notified the indi8 vidual of an impending termination of such cer9 tification; or

10 ‘‘(ii) the organization has terminated or

11 otherwise discontinued providing the plan in the

12 area in which the individual resides, or has noti13 fied the individual of an impending termination

14 or discontinuation of such plan;

15 ‘‘(B) the individual is no longer eligible to

16 elect the plan because of a change in the individ17 ual’s place of residence or other change in cir18 cumstances (specified by the Secretary, but not

19 including termination of the individual’s enroll20 ment on the basis described in clause (i) or (ii)

21 of subsection (g)(3)(B));

22 ‘‘(C) the individual demonstrates (in ac23 cordance with guidelines established by the Sec24 retary) that—
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1 ‘‘(i) the organization offering the plan

2 substantially violated a material provision

3 of the organization’s contract under this

4 part in relation to the individual (includ5 ing the failure to provide an enrollee on a

6 timely basis medically necessary care for

7 which benefits are available under the plan

8 or the failure to provide such covered care

9 in accordance with applicable quality

10 standards); or

11 ‘‘(ii) the organization (or an agent or

12 other entity acting on the organization’s be13 half) materially misrepresented the plan’s

14 provisions in marketing the plan to the in15 dividual; or

16 ‘‘(D) the individual meets such other excep17 tional conditions as the Secretary may provide.

18 Effective on and after January 1, 2006, an indi19 vidual who, upon first becoming eligible for benefits

20 under part A at age 65, enrolls in a

21 MedicareAdvantage plan under this part, the indi22 vidual may discontinue the election of such plan, and

23 elect coverage under the original fee-for-service plan,

24 at any time during the 12-month period beginning on

25 the effective date of such enrollment.
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1 ‘‘(5) SPECIAL RULES FOR MSA PLANS.—Notwith2 standing the preceding provisions of this subsection,

3 an individual—

4 ‘‘(A) may elect an MSA plan only during—

5 ‘‘(i) an initial open enrollment period

6 described in paragraph (1);

7 ‘‘(ii) an annual, coordinated election

8 period described in paragraph (3)(B); or

9 ‘‘(iii) the month of November 1998;

10 ‘‘(B) subject to subparagraph (C), may not

11 discontinue an election of an MSA plan except

12 during the periods described in clause (ii) or

13 (iii) of subparagraph (A) and under the first

14 sentence of paragraph (4); and

15 ‘‘(C) who elects an MSA plan during an

16 annual, coordinated election period, and who

17 never previously had elected such a plan, may

18 revoke such election, in a manner determined by

19 the Secretary, by not later than December 15 fol20 lowing the date of the election.

21 ‘‘(6) OPEN ENROLLMENT PERIODS.—Subject to

22 paragraph (5), a MedicareAdvantage organization—

23 ‘‘(A) shall accept elections or changes to

24 elections during the initial enrollment periods

25 described in paragraph (1), during the period be-
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1 ginning on November 15, 2005, and ending on

2 December 31, 2005, and during the annual, co3 ordinated election period under paragraph (3)

4 for each subsequent year, and during special

5 election periods described in the first sentence of

6 paragraph (4); and

7 ‘‘(B) may accept other changes to elections

8 at such other times as the organization provides.

9 ‘‘(f) EFFECTIVENESS OF ELECTIONS AND CHANGES OF

10 ELECTIONS.—

11 ‘‘(1) DURING INITIAL COVERAGE ELECTION PE12 RIOD.—An election of coverage made during the ini13 tial coverage election period under subsection

14 (e)(1)(A) shall take effect upon the date the individual

15 becomes entitled to (or enrolled for) benefits under

16 part A, enrolled under part B, and enrolled under

17 part D, except as the Secretary may provide (con18 sistent with sections 1838 and 1860D–2)) in order to

19 prevent retroactive coverage.

20 ‘‘(2) DURING CONTINUOUS OPEN ENROLLMENT

21 PERIODS.—An election or change of coverage made

22 under subsection (e)(2) shall take effect with the first

23 day of the first calendar month following the date on

24 which the election or change is made.
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1 ‘‘(3) ANNUAL, COORDINATED ELECTION PE2 RIOD.—An election or change of coverage made dur3 ing an annual, coordinated election period (as defined

4 in subsection (e)(3)(B)) in a year shall take effect as

5 of the first day of the following year.

6 ‘‘(4) OTHER PERIODS.—An election or change of

7 coverage made during any other period under sub8 section (e)(4) shall take effect in such manner as the

9 Secretary provides in a manner consistent (to the ex10 tent practicable) with protecting continuity of health

11 benefit coverage.

12 ‘‘(g) GUARANTEED ISSUE AND RENEWAL.—

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

14 subsection, a MedicareAdvantage organization shall

15 provide that at any time during which elections are

16 accepted under this section with respect to a

17 MedicareAdvantage plan offered by the organization,

18 the organization will accept without restrictions indi19 viduals who are eligible to make such election.

20 ‘‘(2) PRIORITY.—If the Secretary determines that

21 a MedicareAdvantage organization, in relation to a

22 MedicareAdvantage plan it offers, has a capacity

23 limit and the number of MedicareAdvantage eligible

24 individuals who elect the plan under this section ex25 ceeds the capacity limit, the organization may limit
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1 the election of individuals of the plan under this sec2 tion but only if priority in election is provided—

3 ‘‘(A) first to such individuals as have elect4 ed the plan at the time of the determination; and

5 ‘‘(B) then to other such individuals in such

6 a manner that does not discriminate, on a basis

7 described in section 1852(b), among the individ8 uals (who seek to elect the plan).

9 The preceding sentence shall not apply if it would re10 sult in the enrollment of enrollees substantially non11 representative, as determined in accordance with reg12 ulations of the Secretary, of the medicare population

13 in the service area of the plan.

14 ‘‘(3) LIMITATION ON TERMINATION OF ELEC15 TION.—

16 ‘‘(A) IN GENERAL.—Subject to subpara17 graph (B), a MedicareAdvantage organization

18 may not for any reason terminate the election of

19 any individual under this section for a

20 MedicareAdvantage plan it offers.

21 ‘‘(B) BASIS FOR TERMINATION OF ELEC22 TION.—A MedicareAdvantage organization may

23 terminate an individual’s election under this sec24 tion with respect to a MedicareAdvantage plan it

25 offers if—
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1 ‘‘(i) any MedicareAdvantage monthly

2 basic beneficiary premium,

3 MedicareAdvantage monthly beneficiary ob4 ligation for qualified prescription drug cov5 erage, or MedicareAdvantage monthly bene6 ficiary premium for required or optional

7 enhanced medical benefits required with re8 spect to such plan are not paid on a timely

9 basis (consistent with standards under sec10 tion 1856 that provide for a grace period

11 for late payment of such premiums);

12 ‘‘(ii) the individual has engaged in

13 disruptive behavior (as specified in such

14 standards); or

15 ‘‘(iii) the plan is terminated with re16 spect to all individuals under this part in

17 the area in which the individual resides.

18 ‘‘(C) CONSEQUENCE OF TERMINATION.—

19 ‘‘(i) TERMINATIONS FOR CAUSE.—Any

20 individual whose election is terminated

21 under clause (i) or (ii) of subparagraph (B)

22 is deemed to have elected to receive benefits

23 under the original medicare fee-for-service

24 program option.
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1 ‘‘(ii) TERMINATION BASED ON PLAN

2 TERMINATION OR SERVICE AREA REDUC3 TION.—Any individual whose election is

4 terminated under subparagraph (B)(iii)

5 shall have a special election period under

6 subsection (e)(4)(A) in which to change cov7 erage to coverage under another

8 MedicareAdvantage plan. Such an indi9 vidual who fails to make an election during

10 such period is deemed to have chosen to

11 change coverage to the original medicare

12 fee-for-service program option.

13 ‘‘(D) ORGANIZATION OBLIGATION WITH RE14 SPECT TO ELECTION FORMS.—Pursuant to a

15 contract under section 1857858., each

16 MedicareAdvantage organization receiving an

17 election form under subsection (c)(2) shall trans18 mit to the Secretary (at such time and in such

19 manner as the Secretary may specify) a copy of

20 such form or such other information respecting

21 the election as the Secretary may specify.

22 ‘‘(h) APPROVAL OF MARKETING MATERIAL AND APPLI23 CATION FORMS.—

24 ‘‘(1) SUBMISSION.—No marketing material or

25 application form may be distributed by a
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1 MedicareAdvantage organization to (or for the use of)

2 MedicareAdvantage eligible individuals unless—

3 ‘‘(A) at least 45 days (or 10 days in the

4 case described in paragraph (5)) before the date

5 of distribution the organization has submitted

6 the material or form to the Secretary for review;

7 and

8 ‘‘(B) the Secretary has not disapproved the

9 distribution of such material or form.

10 ‘‘(2) REVIEW.—The standards established under

11 section 1856 shall include guidelines for the review of

12 any material or form submitted and under such

13 guidelines the Secretary shall disapprove (or later re14 quire the correction of) such material or form if the

15 material or form is materially inaccurate or mis16 leading or otherwise makes a material misrepresenta17 tion.

18 ‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—

19 In the case of material or form that is submitted

20 under paragraph (1)(A) to the Secretary or a re21 gional office of the Department of Health and Human

22 Services and the Secretary or the office has not dis23 approved the distribution of marketing material or

24 form under paragraph (1)(B) with respect to a

25 MedicareAdvantage plan in an area, the Secretary is
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1 deemed not to have disapproved such distribution in

2 all other areas covered by the plan and organization

3 except with regard to that portion of such material or

4 form that is specific only to an area involved.

5 ‘‘(4) PROHIBITION OF CERTAIN MARKETING

6 PRACTICES.—Each MedicareAdvantage organization

7 shall conform to fair marketing standards, in relation

8 to MedicareAdvantage plans offered under this part,

9 included in the standards established under section

10 1856. Such standards—

11 ‘‘(A) shall not permit a MedicareAdvantage

12 organization to provide for cash or other mone13 tary rebates as an inducement for enrollment or

14 otherwise (other than as an additional benefit

15 described in section 1854(g)(1)(C)(i)); and

16 ‘‘(B) may include a prohibition against a

17 MedicareAdvantage organization (or agent of

18 such an organization) completing any portion of

19 any election form used to carry out elections

20 under this section on behalf of any individual.

21 ‘‘(5) SPECIAL TREATMENT OF MARKETING MATE22 RIAL FOLLOWING MODEL MARKETING LANGUAGE.—In

23 the case of marketing material of an organization

24 that uses, without modification, proposed model lan25 guage specified by the Secretary, the period specified
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1 in paragraph (1)(A) shall be reduced from 45 days to

2 10 days.

3 ‘‘(i) EFFECT OF ELECTION OF MEDICAREADVANTAGE

4 PLAN OPTION.—

5 ‘‘(1) PAYMENTS TO ORGANIZATIONS.—Subject to

6 sections 1852(a)(5), 1853(h), 1853(i), 1886(d)(11),

7 and 1886(h)(3)(D), payments under a contract with

8 a MedicareAdvantage organization under section

9 1853(a) with respect to an individual electing a

10 MedicareAdvantage plan offered by the organization

11 shall be instead of the amounts which (in the absence

12 of the contract) would otherwise be payable under

13 parts A, B, and D for items and services furnished

14 to the individual.

15 ‘‘(2) ONLY ORGANIZATION ENTITLED TO PAY16 MENT.—Subject to sections 1853(f), 1853(h), 1853(i),

17 1857(f)(2), 1886(d)(11), and 1886(h)(3)(D), only the

18 MedicareAdvantage organization shall be entitled to

19 receive payments from the Secretary under this title

20 for services furnished to the individual.’’.

21 SEC. 202. BENEFITS AND BENEFICIARY PROTECTIONS.

22 Section 1852 (42 U.S.C. 1395w–22) is amended to

23 read as follows:

24 ‘‘BENEFITS AND BENEFICIARY PROTECTIONS

25 ‘‘SEC. 1852. (a) BASIC BENEFITS.—
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1 ‘‘(1) IN GENERAL.—Except as provided in sec2 tion 1859(b)(3) for MSA plans, each

3 MedicareAdvantage plan shall provide to members en4 rolled under this part, through providers and other

5 persons that meet the applicable requirements of this

6 title and part A of title XI—

7 ‘‘(A) those items and services (other than

8 hospice care) for which benefits are available

9 under parts A and B to individuals residing in

10 the area served by the plan;

11 ‘‘(B) except as provided in paragraph

12 (2)(D), qualified prescription drug coverage

13 under part D to individuals residing in the area

14 served by the plan;

15 ‘‘(C) a maximum limitation on out-of-pock16 et expenses and a unified deductible; and

17 ‘‘(D) additional benefits required under sec18 tion 1854(d)(1).

19 ‘‘(2) SATISFACTION OF REQUIREMENT.—

20 ‘‘(A) IN GENERAL.—A MedicareAdvantage

21 plan (other than an MSA plan) offered by a

22 MedicareAdvantage organization satisfies para23 graph (1)(A), with respect to benefits for items

24 and services furnished other than through a pro25 vider or other person that has a contract with
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1 the organization offering the plan, if the plan

2 provides payment in an amount so that—

3 ‘‘(i) the sum of such payment amount

4 and any cost-sharing provided for under the

5 plan; is equal to at least

6 ‘‘(ii) the total dollar amount of pay7 ment for such items and services as would

8 otherwise be authorized under parts A and

9 B (including any balance billing permitted

10 under such parts).

11 ‘‘(B) REFERENCE TO RELATED PROVI12 SIONS.—For provisions relating to—

13 ‘‘(i) limitations on balance billing

14 against MedicareAdvantage organizations

15 for noncontract providers, see sections

16 1852(k) and 1866(a)(1)(O); and

17 ‘‘(ii) limiting actuarial value of en18 rollee liability for covered benefits, see sec19 tion 1854(f).

20 ‘‘(C) ELECTION OF UNIFORM COVERAGE

21 POLICY.—In the case of a MedicareAdvantage or22 ganization that offers a MedicareAdvantage plan

23 in an area in which more than 1 local coverage

24 policy is applied with respect to different parts

25 of the area, the organization may elect to have
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1 the local coverage policy for the part of the area

2 that is most beneficial to MedicareAdvantage en3 rollees (as identified by the Secretary) apply

4 with respect to all MedicareAdvantage enrollees

5 enrolled in the plan.

6 ‘‘(D) SPECIAL RULE FOR PRIVATE FEE-FOR7 SERVICE PLANS.—

8 ‘‘(i) IN GENERAL.—A private fee-for9 service plan may elect not to provide quali10 fied prescription drug coverage under part

11 D to individuals residing in the area served

12 by the plan.

13 ‘‘(ii) AVAILABILITY OF DRUG COV14 ERAGE FOR ENROLLEES.—If a beneficiary

15 enrolls in a plan making the election de16 scribed in clause (i), the beneficiary may

17 enroll for drug coverage under part D with

18 an eligible entity under such part.

19 ‘‘(3) ENHANCED MEDICAL BENEFITS.—

20 ‘‘(A) BENEFITS INCLUDED SUBJECT TO SEC21 RETARY’S APPROVAL.—Each MedicareAdvantage

22 organization may provide to individuals enrolled

23 under this part, other than under an MSA plan

24 (without affording those individuals an option to

25 decline the coverage), enhanced medical benefits
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1 that the Secretary may approve. The Secretary

2 shall approve any such enhanced medical bene3 fits unless the Secretary determines that includ4 ing such enhanced medical benefits would sub5 stantially discourage enrollment by

6 MedicareAdvantage eligible individuals with the

7 organization.

8 ‘‘(B) AT ENROLLEES’ OPTION.—A

9 MedicareAdvantage organization may not pro10 vide, under an MSA plan, enhanced medical

11 benefits that cover the deductible described in sec12 tion 1859(b)(2)(B). In applying the previous

13 sentence, health benefits described in section

14 1882(u)(2)(B) shall not be treated as covering

15 such deductible.

16 ‘‘(C) APPLICATION TO MEDICAREADVANTAGE

17 PRIVATE FEE-FOR-SERVICE PLANS.—Nothing in

18 this paragraph shall be construed as preventing

19 a MedicareAdvantage private fee-for-service plan

20 from offering enhanced medical benefits that in21 clude payment for some or all of the balance bill22 ing amounts permitted consistent with section

23 1852(k) and coverage of additional services that

24 the plan finds to be medically necessary.
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1 ‘‘(D) RULE FOR APPROVAL OF MEDICAL AND

2 PRESCRIPTION DRUG BENEFITS.—Notwith3 standing the preceding provisions of this para4 graph, the Secretary may not approve any en5 hanced medical benefit that provides for the cov6 erage of any prescription drug (other than that

7 relating to prescription drugs covered under the

8 original medicare fee-for-service program op9 tion).

10 ‘‘(4) ORGANIZATION AS SECONDARY PAYER.—

11 Notwithstanding any other provision of law, a

12 MedicareAdvantage organization may (in the case of

13 the provision of items and services to an individual

14 under a MedicareAdvantage plan under cir15 cumstances in which payment under this title is

16 made secondary pursuant to section 1862(b)(2))

17 charge or authorize the provider of such services to

18 charge, in accordance with the charges allowed under

19 a law, plan, or policy described in such section—

20 ‘‘(A) the insurance carrier, employer, or

21 other entity which under such law, plan, or pol22 icy is to pay for the provision of such services;

23 or
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1 ‘‘(B) such individual to the extent that the

2 individual has been paid under such law, plan,

3 or policy for such services.

4 ‘‘(5) NATIONAL COVERAGE DETERMINATIONS AND

5 LEGISLATIVE CHANGES IN BENEFITS.—If there is a

6 national coverage determination or legislative change

7 in benefits required to be provided under this part

8 made in the period beginning on the date of an an9 nouncement under section 1853(b) and ending on the

10 date of the next announcement under such section and

11 the Secretary projects that the determination will re12 sult in a significant change in the costs to a

13 MedicareAdvantage organization of providing the

14 benefits that are the subject of such national coverage

15 determination and that such change in costs was not

16 incorporated in the determination of the benchmark

17 amount announced under section 1853(b)(1)(A) at the

18 beginning of such period, then, unless otherwise re19 quired by law—

20 ‘‘(A) such determination or legislative

21 change in benefits shall not apply to contracts

22 under this part until the first contract year that

23 begins after the end of such period; and

24 ‘‘(B) if such coverage determination or leg25 islative change provides for coverage of addi-
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1 tional benefits or coverage under additional cir2 cumstances, section 1851(i)(1) shall not apply to

3 payment for such additional benefits or benefits

4 provided under such additional circumstances

5 until the first contract year that begins after the

6 end of such period.

7 The projection under the previous sentence shall be

8 based on an analysis by the Secretary of the actuarial

9 costs associated with the coverage determination or

10 legislative change in benefits.

11 ‘‘(6) AUTHORITY TO PROHIBIT RISK SELEC12 TION.—The Secretary shall have the authority to dis13 approve any MedicareAdvantage plan that the Sec14 retary determines is designed to attract a population

15 that is healthier than the average population residing

16 in the service area of the plan.

17 ‘‘(7) UNIFIED DEDUCTIBLE DEFINED.—In this

18 part, the term ‘unified deductible’ means an annual

19 deductible amount that is applied in lieu of the inpa20 tient hospital deductible under section 1813(b)(1) and

21 the deductible under section 1833(b). Nothing in this

22 part shall be construed as preventing a

23 MedicareAdvantage organization from requiring coin24 surance or a copayment for inpatient hospital serv25 ices after the unified deductible is satisfied, subject to
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1 the limitation on enrollee liability under section

2 1854(f).

3 ‘‘(b) ANTIDISCRIMINATION.—

4 ‘‘(1) BENEFICIARIES.—

5 ‘‘(A) IN GENERAL.—A MedicareAdvantage

6 organization may not deny, limit, or condition

7 the coverage or provision of benefits under this

8 part, for individuals permitted to be enrolled

9 with the organization under this part, based on

10 any health status-related factor described in sec11 tion 2702(a)(1) of the Public Health Service Act.

12 ‘‘(B) CONSTRUCTION.—Except as provided

13 under section 1851(a)(3)(B), subparagraph (A)

14 shall not be construed as requiring a

15 MedicareAdvantage organization to enroll indi16 viduals who are determined to have end-stage

17 renal disease.

18 ‘‘(2) PROVIDERS.—A MedicareAdvantage organi19 zation shall not discriminate with respect to partici20 pation, reimbursement, or indemnification as to any

21 provider who is acting within the scope of the pro22 vider’s license or certification under applicable State

23 law, solely on the basis of such license or certification.

24 This paragraph shall not be construed to prohibit a

25 plan from including providers only to the extent nec-
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1 essary to meet the needs of the plan’s enrollees or from

2 establishing any measure designed to maintain qual3 ity and control costs consistent with the responsibil4 ities of the plan.

5 ‘‘(c) DISCLOSURE REQUIREMENTS.—

6 ‘‘(1) DETAILED DESCRIPTION OF PLAN PROVI7 SIONS.—A MedicareAdvantage organization shall dis8 close, in clear, accurate, and standardized form to

9 each enrollee with a MedicareAdvantage plan offered

10 by the organization under this part at the time of en11 rollment and at least annually thereafter, the fol12 lowing information regarding such plan:

13 ‘‘(A) SERVICE AREA.—The plan’s service

14 area.

15 ‘‘(B) BENEFITS.—Benefits offered under the

16 plan, including information described section

17 1852(a)(1) (relating to benefits under the origi18 nal medicare fee-for-service program option, the

19 maximum limitation in out-of-pocket expenses

20 and the unified deductible, and qualified pre21 scription drug coverage under part D, respec22 tively) and exclusions from coverage and, if it is

23 an MSA plan, a comparison of benefits under

24 such a plan with benefits under other

25 MedicareAdvantage plans.
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1 ‘‘(C) ACCESS.—The number, mix, and dis2 tribution of plan providers, out-of-network cov3 erage (if any) provided by the plan, and any

4 point-of-service option (including the

5 MedicareAdvantage monthly beneficiary pre6 mium for enhanced medical benefits for such op7 tion).

8 ‘‘(D) OUT-OF-AREA COVERAGE.—Out-of9 area coverage provided by the plan.

10 ‘‘(E) EMERGENCY COVERAGE.—Coverage of

11 emergency services, including—

12 ‘‘(i) the appropriate use of emergency

13 services, including use of the 911 telephone

14 system or its local equivalent in emergency

15 situations and an explanation of what con16 stitutes an emergency situation;

17 ‘‘(ii) the process and procedures of the

18 plan for obtaining emergency services; and

19 ‘‘(iii) the locations of—

20 ‘‘(I) emergency departments; and

21 ‘‘(II) other settings, in which plan

22 physicians and hospitals provide emer23 gency services and post-stabilization

24 care.
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1 ‘‘(F) ENHANCED MEDICAL BENEFITS.—En2 hanced medical benefits available from the orga3 nization offering the plan, including—

4 ‘‘(i) whether the enhanced medical ben5 efits are optional;

6 ‘‘(ii) the enhanced medical benefits cov7 ered; and

8 ‘‘(iii) the MedicareAdvantage monthly

9 beneficiary premium for enhanced medical

10 benefits.

11 ‘‘(G) PRIOR AUTHORIZATION RULES.—

12 Rules regarding prior authorization or other re13 view requirements that could result in non14 payment.

15 ‘‘(H) PLAN GRIEVANCE AND APPEALS PRO16 CEDURES.—All plan appeal or grievance rights

17 and procedures.

18 ‘‘(I) QUALITY ASSURANCE PROGRAM.—A de19 scription of the organization’s quality assurance

20 program under subsection (e).

21 ‘‘(2) DISCLOSURE UPON REQUEST.—Upon re22 quest of a MedicareAdvantage eligible individual, a

23 MedicareAdvantage organization must provide the fol24 lowing information to such individual:
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1 ‘‘(A) The general coverage information and

2 general comparative plan information made

3 available under clauses (i) and (ii) of section

4 1851(d)(2)(A).

5 ‘‘(B) Information on procedures used by the

6 organization to control utilization of services

7 and expenditures.

8 ‘‘(C) Information on the number of griev9 ances, reconsiderations, and appeals and on the

10 disposition in the aggregate of such matters.

11 ‘‘(D) An overall summary description as to

12 the method of compensation of participating

13 physicians.

14 ‘‘(E) The information described in subpara15 graphs (A) through (C) in relation to the quali16 fied prescription drug coverage provided by the

17 organization.

18 ‘‘(d) ACCESS TO SERVICES.—

19 ‘‘(1) IN GENERAL.—A MedicareAdvantage orga20 nization offering a MedicareAdvantage plan may se21 lect the providers from whom the benefits under the

22 plan are provided so long as—

23 ‘‘(A) the organization makes such benefits

24 available and accessible to each individual elect25 ing the plan within the plan service area with
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1 reasonable promptness and in a manner which

2 assures continuity in the provision of benefits;

3 ‘‘(B) when medically necessary the organi4 zation makes such benefits available and acces5 sible 24 hours a day and 7 days a week;

6 ‘‘(C) the plan provides for reimbursement

7 with respect to services which are covered under

8 subparagraphs (A) and (B) and which are pro9 vided to such an individual other than through

10 the organization, if—

11 ‘‘(i) the services were not emergency

12 services (as defined in paragraph (3)),

13 but—

14 ‘‘(I) the services were medically

15 necessary and immediately required

16 because of an unforeseen illness, injury,

17 or condition; and

18 ‘‘(II) it was not reasonable given

19 the circumstances to obtain the services

20 through the organization;

21 ‘‘(ii) the services were renal dialysis

22 services and were provided other than

23 through the organization because the indi24 vidual was temporarily out of the plan’s

25 service area; or
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1 ‘‘(iii) the services are maintenance care

2 or post-stabilization care covered under the

3 guidelines established under paragraph (2);

4 ‘‘(D) the organization provides access to ap5 propriate providers, including credentialed spe6 cialists, for medically necessary treatment and

7 services; and

8 ‘‘(E) coverage is provided for emergency

9 services (as defined in paragraph (3)) without

10 regard to prior authorization or the emergency

11 care provider’s contractual relationship with the

12 organization.

13 ‘‘(2) GUIDELINES RESPECTING COORDINATION OF

14 POST-STABILIZATION CARE.—A MedicareAdvantage

15 plan shall comply with such guidelines as the Sec16 retary may prescribe relating to promoting efficient

17 and timely coordination of appropriate maintenance

18 and post-stabilization care of an enrollee after the en19 rollee has been determined to be stable under section

20 1867.

21 ‘‘(3) DEFINITION OF EMERGENCY SERVICES.—In

22 this subsection—

23 ‘‘(A) IN GENERAL.—The term ‘emergency

24 services’ means, with respect to an individual
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1 enrolled with an organization, covered inpatient

2 and outpatient services that—

3 ‘‘(i) are furnished by a provider that is

4 qualified to furnish such services under this

5 title; and

6 ‘‘(ii) are needed to evaluate or stabilize

7 an emergency medical condition (as defined

8 in subparagraph (B)).

9 ‘‘(B) EMERGENCY MEDICAL CONDITION

10 BASED ON PRUDENT LAYPERSON.—The term

11 ‘emergency medical condition’ means a medical

12 condition manifesting itself by acute symptoms

13 of sufficient severity (including severe pain) such

14 that a prudent layperson, who possesses an aver15 age knowledge of health and medicine, could rea16 sonably expect the absence of immediate medical

17 attention to result in—

18 ‘‘(i) placing the health of the indi19 vidual (or, with respect to a pregnant

20 woman, the health of the woman or her un21 born child) in serious jeopardy;

22 ‘‘(ii) serious impairment to bodily

23 functions; or

24 ‘‘(iii) serious dysfunction of any bodily

25 organ or part.
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1 ‘‘(4) ASSURING ACCESS TO SERVICES IN

2 MEDICAREADVANTAGE PRIVATE FEE-FOR-SERVICE

3 PLANS.—In addition to any other requirements

4 under this part, in the case of a

5 MedicareAdvantage private fee-for-service plan,

6 the organization offering the plan must dem7 onstrate to the Secretary that the organization

8 has sufficient number and range of health care

9 professionals and providers willing to provide

10 services under the terms of the plan. The Sec11 retary shall find that an organization has met

12 such requirement with respect to any category of

13 health care professional or provider if, with re14 spect to that category of provider—

15 ‘‘(A) the plan has established payment

16 rates for covered services furnished by that

17 category of provider that are not less than

18 the payment rates provided for under part

19 A, B, or D for such services; or

20 ‘‘(B) the plan has contracts or agree21 ments (other than deemed contracts or

22 agreements under subsection (j)(6), with a

23 sufficient number and range of providers

24 within such category to provide covered

25 services under the terms of the plan,
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1 or a combination of both. The previous sentence

2 shall not be construed as restricting the persons

3 from whom enrollees under such a plan may ob4 tain covered benefits, except that, if a plan en5 tirely meets such requirement with respect to a

6 category of health care professional or provider

7 on the basis of subparagraph (B), it may provide

8 for a higher beneficiary copayment in the case of

9 health care professionals and providers of that

10 category who do not have contracts or agree11 ments (other than deemed contracts or agree12 ments under subsection (j)(6)) to provide covered

13 services under the terms of the plan.

14 ‘‘(e) QUALITY ASSURANCE PROGRAM.—

15 ‘‘(1) IN GENERAL.—Each MedicareAdvantage or16 ganization must have arrangements, consistent with

17 any regulation, for an ongoing quality assurance pro18 gram for health care services it provides to individ19 uals enrolled with MedicareAdvantage plans of the or20 ganization.

21 ‘‘(2) ELEMENTS OF PROGRAM.—

22 ‘‘(A) IN GENERAL.—The quality assurance

23 program of an organization with respect to a

24 MedicareAdvantage plan (other than a
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1 MedicareAdvantage private fee-for-service plan

2 or a nonnetwork MSA plan) it offers shall—

3 ‘‘(i) stress health outcomes and provide

4 for the collection, analysis, and reporting of

5 data (in accordance with a quality meas6 urement system that the Secretary recog7 nizes) that will permit measurement of out8 comes and other indices of the quality of

9 MedicareAdvantage plans and organiza10 tions;

11 ‘‘(ii) monitor and evaluate high vol12 ume and high risk services and the care of

13 acute and chronic conditions;

14 ‘‘(iii) provide access to disease man15 agement and chronic care services;

16 ‘‘(iv) provide access to preventive bene17 fits and information for enrollees on such

18 benefits;

19 ‘‘(v) evaluate the continuity and co20 ordination of care that enrollees receive;

21 ‘‘(vi) be evaluated on an ongoing basis

22 as to its effectiveness;

23 ‘‘(vii) include measures of consumer

24 satisfaction;
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1 ‘‘(viii) provide the Secretary with such

2 access to information collected as may be

3 appropriate to monitor and ensure the qual4 ity of care provided under this part;

5 ‘‘(ix) provide review by physicians and

6 other health care professionals of the process

7 followed in the provision of such health care

8 services;

9 ‘‘(x) provide for the establishment of

10 written protocols for utilization review,

11 based on current standards of medical prac12 tice;

13 ‘‘(xi) have mechanisms to detect both

14 underutilization and overutilization of serv15 ices;

16 ‘‘(xii) after identifying areas for im17 provement, establish or alter practice pa18 rameters;

19 ‘‘(xiii) take action to improve quality

20 and assesses the effectiveness of such action

21 through systematic followup; and

22 ‘‘(xiv) make available information on

23 quality and outcomes measures to facilitate

24 beneficiary comparison and choice of health

25 coverage options (in such form and on such
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1 quality and outcomes measures as the Sec2 retary determines to be appropriate).

3 Such program shall include a separate focus

4 (with respect to all the elements described in this

5 subparagraph) on racial and ethnic minorities.

6 ‘‘(B) ELEMENTS OF PROGRAM FOR ORGANI7 ZATIONS OFFERING MEDICAREADVANTAGE PRI8 VATE FEE-FOR-SERVICE PLANS, AND NONNET9 WORK MSA PLANS.—The quality assurance pro10 gram of an organization with respect to a

11 MedicareAdvantage private fee-for-service plan

12 or a nonnetwork MSA plan it offers shall—

13 ‘‘(i) meet the requirements of clauses

14 (i) through (viii) of subparagraph (A);

15 ‘‘(ii) insofar as it provides for the es16 tablishment of written protocols for utiliza17 tion review, base such protocols on current

18 standards of medical practice; and

19 ‘‘(iii) have mechanisms to evaluate uti20 lization of services and inform providers

21 and enrollees of the results of such evalua22 tion.

23 Such program shall include a separate focus

24 (with respect to all the elements described in this

25 subparagraph) on racial and ethnic minorities.
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1 ‘‘(C) DEFINITION OF NONNETWORK MSA

2 PLAN.—In this subsection, the term ‘nonnetwork

3 MSA plan’ means an MSA plan offered by a

4 MedicareAdvantage organization that does not

5 provide benefits required to be provided by this

6 part, in whole or in part, through a defined set

7 of providers under contract, or under another ar8 rangement, with the organization.

9 ‘‘(3) EXTERNAL REVIEW.—

10 ‘‘(A) IN GENERAL.—Each

11 MedicareAdvantage organization shall, for each

12 MedicareAdvantage plan it operates, have an

13 agreement with an independent quality review

14 and improvement organization approved by the

15 Secretary to perform functions of the type de16 scribed in paragraphs (4)(B) and (14) of section

17 1154(a) with respect to services furnished by

18 MedicareAdvantage plans for which payment is

19 made under this title. The previous sentence shall

20 not apply to a MedicareAdvantage private fee21 for-service plan or a nonnetwork MSA plan that

22 does not employ utilization review.

23 ‘‘(B) NONDUPLICATION OF ACCREDITA24 TION.—Except in the case of the review of qual25 ity complaints, and consistent with subpara-
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1 graph (C), the Secretary shall ensure that the ex2 ternal review activities conducted under sub3 paragraph (A) are not duplicative of review ac4 tivities conducted as part of the accreditation

5 process.

6 ‘‘(C) WAIVER AUTHORITY.—The Secretary

7 may waive the requirement described in sub8 paragraph (A) in the case of an organization if

9 the Secretary determines that the organization

10 has consistently maintained an excellent record

11 of quality assurance and compliance with other

12 requirements under this part.

13 ‘‘(4) TREATMENT OF ACCREDITATION.—

14 ‘‘(A) IN GENERAL.—The Secretary shall

15 provide that a MedicareAdvantage organization

16 is deemed to meet all the requirements described

17 in any specific clause of subparagraph (B) if the

18 organization is accredited (and periodically re19 accredited) by a private accrediting organization

20 under a process that the Secretary has deter21 mined assures that the accrediting organization

22 applies and enforces standards that meet or ex23 ceed the standards established under section 1856

24 to carry out the requirements in such clause.
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1 ‘‘(B) REQUIREMENTS DESCRIBED.—The

2 provisions described in this subparagraph are

3 the following:

4 ‘‘(i) Paragraphs (1) and (2) of this

5 subsection (relating to quality assurance

6 programs).

7 ‘‘(ii) Subsection (b) (relating to anti8 discrimination).

9 ‘‘(iii) Subsection (d) (relating to access

10 to services).

11 ‘‘(iv) Subsection (h) (relating to con12 fidentiality and accuracy of enrollee

13 records).

14 ‘‘(v) Subsection (i) (relating to infor15 mation on advance directives).

16 ‘‘(vi) Subsection (j) (relating to pro17 vider participation rules).

18 ‘‘(C) TIMELY ACTION ON APPLICATIONS.—

19 The Secretary shall determine, within 210 days

20 after the date the Secretary receives an applica21 tion by a private accrediting organization and

22 using the criteria specified in section 1865(b)(2),

23 whether the process of the private accrediting or24 ganization meets the requirements with respect

25 to any specific clause in subparagraph (B) with
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1 respect to which the application is made. The

2 Secretary may not deny such an application on

3 the basis that it seeks to meet the requirements

4 with respect to only one, or more than one, such

5 specific clause.

6 ‘‘(D) CONSTRUCTION.—Nothing in this

7 paragraph shall be construed as limiting the au8 thority of the Secretary under section 1857, in9 cluding the authority to terminate contracts with

10 MedicareAdvantage organizations under sub11 section (c)(2) of such section.

12 ‘‘(5) REPORT TO CONGRESS.—

13 ‘‘(A) IN GENERAL.—The Secretary shall

14 submit to Congress a biennial report regarding

15 how quality assurance programs conducted

16 under this subsection focus on racial and ethnic

17 minorities.

18 ‘‘(B) CONTENTS OF REPORT.—Each such re19 port shall include the following:

20 ‘‘(i) A description of the means by

21 which such programs focus on such racial

22 and ethnic minorities.

23 ‘‘(ii) An evaluation of the impact of

24 such programs on eliminating health dis25 parities and on improving health outcomes,
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1 continuity and coordination of care, man2 agement of chronic conditions, and con3 sumer satisfaction.

4 ‘‘(iii) Recommendations on ways to re5 duce clinical outcome disparities among ra6 cial and ethnic minorities.

7 ‘‘(f) GRIEVANCE MECHANISM.—Each

8 MedicareAdvantage organization must provide meaningful

9 procedures for hearing and resolving grievances between the

10 organization (including any entity or individual through

11 which the organization provides health care services) and

12 enrollees with MedicareAdvantage plans of the organization

13 under this part.

14 ‘‘(g) COVERAGE DETERMINATIONS, RECONSIDER15 ATIONS, AND APPEALS.—

16 ‘‘(1) DETERMINATIONS BY ORGANIZATION.—

17 ‘‘(A) IN GENERAL.—A MedicareAdvantage

18 organization shall have a procedure for making

19 determinations regarding whether an individual

20 enrolled with the plan of the organization under

21 this part is entitled to receive a health service

22 under this section and the amount (if any) that

23 the individual is required to pay with respect to

24 such service. Subject to paragraph (3), such pro-
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1 cedures shall provide for such determination to

2 be made on a timely basis.

3 ‘‘(B) EXPLANATION OF DETERMINATION.—

4 Such a determination that denies coverage, in

5 whole or in part, shall be in writing and shall

6 include a statement in understandable language

7 of the reasons for the denial and a description of

8 the reconsideration and appeals processes.

9 ‘‘(2) RECONSIDERATIONS.—

10 ‘‘(A) IN GENERAL.—The organization shall

11 provide for reconsideration of a determination

12 described in paragraph (1)(B) upon request by

13 the enrollee involved. The reconsideration shall be

14 within a time period specified by the Secretary,

15 but shall be made, subject to paragraph (3), not

16 later than 60 days after the date of the receipt

17 of the request for reconsideration.

18 ‘‘(B) PHYSICIAN DECISION ON CERTAIN RE19 CONSIDERATIONS.—A reconsideration relating to

20 a determination to deny coverage based on a lack

21 of medical necessity shall be made only by a

22 physician with appropriate expertise in the field

23 of medicine which necessitates treatment who is

24 other than a physician involved in the initial de25 termination.
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1 ‘‘(3) EXPEDITED DETERMINATIONS AND RECON2 SIDERATIONS.—

3 ‘‘(A) RECEIPT OF REQUESTS.—

4 ‘‘(i) ENROLLEE REQUESTS.—An en5 rollee in a MedicareAdvantage plan may re6 quest, either in writing or orally, an expe7 dited determination under paragraph (1) or

8 an expedited reconsideration under para9 graph (2) by the MedicareAdvantage orga10 nization.

11 ‘‘(ii) PHYSICIAN REQUESTS.—A physi12 cian, regardless whether the physician is af13 filiated with the organization or not, may

14 request, either in writing or orally, such an

15 expedited determination or reconsideration.

16 ‘‘(B) ORGANIZATION PROCEDURES.—

17 ‘‘(i) IN GENERAL.—The

18 MedicareAdvantage organization shall

19 maintain procedures for expediting organi20 zation determinations and reconsiderations

21 when, upon request of an enrollee, the orga22 nization determines that the application of

23 the normal timeframe for making a deter24 mination (or a reconsideration involving a

25 determination) could seriously jeopardize
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1 the life or health of the enrollee or the en2 rollee’s ability to regain maximum function.

3 ‘‘(ii) EXPEDITION REQUIRED FOR PHY4 SICIAN REQUESTS.—In the case of a request

5 for an expedited determination or reconsid6 eration made under subparagraph (A)(ii),

7 the organization shall expedite the deter8 mination or reconsideration if the request

9 indicates that the application of the normal

10 timeframe for making a determination (or a

11 reconsideration involving a determination)

12 could seriously jeopardize the life or health

13 of the enrollee or the enrollee’s ability to re14 gain maximum function.

15 ‘‘(iii) TIMELY RESPONSE.—In cases de16 scribed in clauses (i) and (ii), the organiza17 tion shall notify the enrollee (and the physi18 cian involved, as appropriate) of the deter19 mination or reconsideration under time

20 limitations established by the Secretary, but

21 not later than 72 hours of the time of re22 ceipt of the request for the determination or

23 reconsideration (or receipt of the informa24 tion necessary to make the determination or
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1 reconsideration), or such longer period as

2 the Secretary may permit in specified cases.

3 ‘‘(4) INDEPENDENT REVIEW OF CERTAIN COV4 ERAGE DENIALS.—The Secretary shall contract with

5 an independent, outside entity to review and resolve

6 in a timely manner reconsiderations that affirm de7 nial of coverage, in whole or in part. The provisions

8 of section 1869(c)(5) shall apply to independent out9 side entities under contract with the Secretary under

10 this paragraph.

11 ‘‘(5) APPEALS.—An enrollee with a

12 MedicareAdvantage plan of a MedicareAdvantage or13 ganization under this part who is dissatisfied by rea14 son of the enrollee’s failure to receive any health serv15 ice to which the enrollee believes the enrollee is enti16 tled and at no greater charge than the enrollee believes

17 the enrollee is required to pay is entitled, if the

18 amount in controversy is $100 or more, to a hearing

19 before the Secretary to the same extent as is provided

20 in section 205(b), and in any such hearing the Sec21 retary shall make the organization a party. If the

22 amount in controversy is $1,000 or more, the indi23 vidual or organization shall, upon notifying the other

24 party, be entitled to judicial review of the Secretary’s

25 final decision as provided in section 205(g), and both
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1 the individual and the organization shall be entitled

2 to be parties to that judicial review. In applying sub3 sections (b) and (g) of section 205 as provided in this

4 paragraph, and in applying section 205(l) thereto,

5 any reference therein to the Commissioner of Social

6 Security or the Social Security Administration shall

7 be considered a reference to the Secretary or the De8 partment of Health and Human Services, respec9 tively.

10 ‘‘(h) CONFIDENTIALITY AND ACCURACY OF ENROLLEE

11 RECORDS.—Insofar as a MedicareAdvantage organization

12 maintains medical records or other health information re13 garding enrollees under this part, the MedicareAdvantage

14 organization shall establish procedures—

15 ‘‘(1) to safeguard the privacy of any individ16 ually identifiable enrollee information;

17 ‘‘(2) to maintain such records and information

18 in a manner that is accurate and timely; and

19 ‘‘(3) to assure timely access of enrollees to such

20 records and information.

21 ‘‘(i) INFORMATION ON ADVANCE DIRECTIVES.—Each

22 MedicareAdvantage organization shall meet the requirement

23 of section 1866(f) (relating to maintaining written policies

24 and procedures respecting advance directives).

25 ‘‘(j) RULES REGARDING PROVIDER PARTICIPATION.—
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1 ‘‘(1) PROCEDURES.—Insofar as a

2 MedicareAdvantage organization offers benefits under

3 a MedicareAdvantage plan through agreements with

4 physicians, the organization shall establish reasonable

5 procedures relating to the participation (under an

6 agreement between a physician and the organization)

7 of physicians under such a plan. Such procedures

8 shall include—

9 ‘‘(A) providing notice of the rules regarding

10 participation;

11 ‘‘(B) providing written notice of participa12 tion decisions that are adverse to physicians;

13 and

14 ‘‘(C) providing a process within the organi15 zation for appealing such adverse decisions, in16 cluding the presentation of information and

17 views of the physician regarding such decision.

18 ‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A

19 MedicareAdvantage organization shall consult with

20 physicians who have entered into participation agree21 ments with the organization regarding the organiza22 tion’s medical policy, quality, and medical manage23 ment procedures.

24 ‘‘(3) PROHIBITING INTERFERENCE WITH PRO25 VIDER ADVICE TO ENROLLEES.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graphs (B) and (C), a MedicareAdvantage orga3 nization (in relation to an individual enrolled

4 under a MedicareAdvantage plan offered by the

5 organization under this part) shall not prohibit

6 or otherwise restrict a covered health care profes7 sional (as defined in subparagraph (D)) from

8 advising such an individual who is a patient of

9 the professional about the health status of the in10 dividual or medical care or treatment for the in11 dividual’s condition or disease, regardless of

12 whether benefits for such care or treatment are

13 provided under the plan, if the professional is

14 acting within the lawful scope of practice.

15 ‘‘(B) CONSCIENCE PROTECTION.—Subpara16 graph (A) shall not be construed as requiring a

17 MedicareAdvantage plan to provide, reimburse

18 for, or provide coverage of a counseling or refer19 ral service if the MedicareAdvantage organiza20 tion offering the plan—

21 ‘‘(i) objects to the provision of such

22 service on moral or religious grounds; and

23 ‘‘(ii) in the manner and through the

24 written instrumentalities such

25 MedicareAdvantage organization deems ap-
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1 propriate, makes available information on

2 its policies regarding such service to pro3 spective enrollees before or during enroll4 ment and to enrollees within 90 days after

5 the date that the organization or plan

6 adopts a change in policy regarding such a

7 counseling or referral service.

8 ‘‘(C) CONSTRUCTION.—Nothing in subpara9 graph (B) shall be construed to affect disclosure

10 requirements under State law or under the Em11 ployee Retirement Income Security Act of 1974.

12 ‘‘(D) HEALTH CARE PROFESSIONAL DE13 FINED.—For purposes of this paragraph, the

14 term ‘health care professional’ means a physi15 cian (as defined in section 1861(r)) or other

16 health care professional if coverage for the profes17 sional’s services is provided under the

18 MedicareAdvantage plan for the services of the

19 professional. Such term includes a podiatrist,

20 optometrist, chiropractor, psychologist, dentist,

21 licensed pharmacist, physician assistant, phys22 ical or occupational therapist and therapy as23 sistant, speech-language pathologist, audiologist,

24 registered or licensed practical nurse (including

25 nurse practitioner, clinical nurse specialist, cer-
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1 tified registered nurse anesthetist, and certified

2 nurse-midwife), licensed certified social worker,

3 registered respiratory therapist, and certified res4 piratory therapy technician.

5 ‘‘(4) LIMITATIONS ON PHYSICIAN INCENTIVE

6 PLANS.—

7 ‘‘(A) IN GENERAL.—No MedicareAdvantage

8 organization may operate any physician incen9 tive plan (as defined in subparagraph (B)) un10 less the following requirements are met:

11 ‘‘(i) No specific payment is made di12 rectly or indirectly under the plan to a phy13 sician or physician group as an inducement

14 to reduce or limit medically necessary serv15 ices provided with respect to a specific indi16 vidual enrolled with the organization.

17 ‘‘(ii) If the plan places a physician or

18 physician group at substantial financial

19 risk (as determined by the Secretary) for

20 services not provided by the physician or

21 physician group, the organization—

22 ‘‘(I) provides stop-loss protection

23 for the physician or group that is ade24 quate and appropriate, based on stand25 ards developed by the Secretary that
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1 take into account the number of physi2 cians placed at such substantial finan3 cial risk in the group or under the

4 plan and the number of individuals

5 enrolled with the organization who re6 ceive services from the physician or

7 group; and

8 ‘‘(II) conducts periodic surveys of

9 both individuals enrolled and individ10 uals previously enrolled with the orga11 nization to determine the degree of ac12 cess of such individuals to services pro13 vided by the organization and satisfac14 tion with the quality of such services.

15 ‘‘(iii) The organization provides the

16 Secretary with descriptive information re17 garding the plan, sufficient to permit the

18 Secretary to determine whether the plan is

19 in compliance with the requirements of this

20 subparagraph.

21 ‘‘(B) PHYSICIAN INCENTIVE PLAN DE22 FINED.—In this paragraph, the term ‘physician

23 incentive plan’ means any compensation ar24 rangement between a MedicareAdvantage organi25 zation and a physician or physician group that
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1 may directly or indirectly have the effect of re2 ducing or limiting services provided with respect

3 to individuals enrolled with the organization

4 under this part.

5 ‘‘(5) LIMITATION ON PROVIDER INDEMNIFICA6 TION.—A MedicareAdvantage organization may not

7 provide (directly or indirectly) for a health care pro8 fessional, provider of services, or other entity pro9 viding health care services (or group of such profes10 sionals, providers, or entities) to indemnify the orga11 nization against any liability resulting from a civil

12 action brought for any damage caused to an enrollee

13 with a MedicareAdvantage plan of the organization

14 under this part by the organization’s denial of medi15 cally necessary care.

16 ‘‘(6) SPECIAL RULES FOR MEDICAREADVANTAGE

17 PRIVATE FEE-FOR-SERVICE PLANS.—For purposes of

18 applying this part (including subsection (k)(1)) and

19 section 1866(a)(1)(O), a hospital (or other provider of

20 services), a physician or other health care profes21 sional, or other entity furnishing health care services

22 is treated as having an agreement or contract in effect

23 with a MedicareAdvantage organization (with respect

24 to an individual enrolled in a MedicareAdvantage

25 private fee-for-service plan it offers), if—
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1 ‘‘(A) the provider, professional, or other en2 tity furnishes services that are covered under the

3 plan to such an enrollee; and

4 ‘‘(B) before providing such services, the pro5 vider, professional, or other entity —

6 ‘‘(i) has been informed of the individ7 ual’s enrollment under the plan; and

8 ‘‘(ii) either—

9 ‘‘(I) has been informed of the

10 terms and conditions of payment for

11 such services under the plan; or

12 ‘‘(II) is given a reasonable oppor13 tunity to obtain information con14 cerning such terms and conditions,

15 in a manner reasonably designed to effect

16 informed agreement by a provider.

17 The previous sentence shall only apply in the absence

18 of an explicit agreement between such a provider, pro19 fessional, or other entity and the MedicareAdvantage

20 organization.

21 ‘‘(k) TREATMENT OF SERVICES FURNISHED BY CER22 TAIN PROVIDERS.—

23 ‘‘(1) IN GENERAL.—Except as provided in para24 graph (2), a physician or other entity (other than a

25 provider of services) that does not have a contract es-
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1 tablishing payment amounts for services furnished to

2 an individual enrolled under this part with a

3 MedicareAdvantage organization described in section

4 1851(a)(2)(A) shall accept as payment in full for cov5 ered services under this title that are furnished to

6 such an individual the amounts that the physician or

7 other entity could collect if the individual were not so

8 enrolled. Any penalty or other provision of law that

9 applies to such a payment with respect to an indi10 vidual entitled to benefits under this title (but not en11 rolled with a MedicareAdvantage organization under

12 this part) also applies with respect to an individual

13 so enrolled.

14 ‘‘(2) APPLICATION TO MEDICAREADVANTAGE PRI15 VATE FEE-FOR-SERVICE PLANS.—

16 ‘‘(A) BALANCE BILLING LIMITS UNDER

17 MEDICAREADVANTAGE PRIVATE FEE-FOR-SERVICE

18 PLANS IN CASE OF CONTRACT PROVIDERS.—

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

20 individual enrolled in a MedicareAdvantage

21 private fee-for-service plan under this part,

22 a physician, provider of services, or other

23 entity that has a contract (including

24 through the operation of subsection (j)(6))

25 establishing a payment rate for services fur-
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1 nished to the enrollee shall accept as pay2 ment in full for covered services under this

3 title that are furnished to such an indi4 vidual an amount not to exceed (including

5 any deductibles, coinsurance, copayments,

6 or balance billing otherwise permitted under

7 the plan) an amount equal to 115 percent

8 of such payment rate.

9 ‘‘(ii) PROCEDURES TO ENFORCE LIM10 ITS.—The MedicareAdvantage organization

11 that offers such a plan shall establish proce12 dures, similar to the procedures described in

13 section 1848(g)(1)(A), in order to carry out

14 clause (i).

15 ‘‘(iii) ASSURING ENFORCEMENT.—If

16 the MedicareAdvantage organization fails to

17 establish and enforce procedures required

18 under clause (ii), the organization is subject

19 to intermediate sanctions under section

20 1857(g).

21 ‘‘(B) ENROLLEE LIABILITY FOR NONCON22 TRACT PROVIDERS.—For provisions—

23 ‘‘(i) establishing a minimum payment

24 rate in the case of noncontract providers
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1 under a MedicareAdvantage private fee-for2 service plan, see section 1852(a)(2); or

3 ‘‘(ii) limiting enrollee liability in the

4 case of covered services furnished by such

5 providers, see paragraph (1) and section

6 1866(a)(1)(O).

7 ‘‘(C) INFORMATION ON BENEFICIARY LIABIL8 ITY.—

9 ‘‘(i) IN GENERAL.—Each

10 MedicareAdvantage organization that offers

11 a MedicareAdvantage private fee-for-service

12 plan shall provide that enrollees under the

13 plan who are furnished services for which

14 payment is sought under the plan are pro15 vided an appropriate explanation of bene16 fits (consistent with that provided under

17 parts A, B, and D, and, if applicable,

18 under medicare supplemental policies) that

19 includes a clear statement of the amount of

20 the enrollee’s liability (including any liabil21 ity for balance billing consistent with this

22 subsection) with respect to payments for

23 such services.

24 ‘‘(ii) ADVANCE NOTICE BEFORE RE25 CEIPT OF INPATIENT HOSPITAL SERVICES
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1 AND CERTAIN OTHER SERVICES.—In addi2 tion, such organization shall, in its terms

3 and conditions of payments to hospitals for

4 inpatient hospital services and for other

5 services identified by the Secretary for

6 which the amount of the balance billing

7 under subparagraph (A) could be substan8 tial, require the hospital to provide to the

9 enrollee, before furnishing such services and

10 if the hospital imposes balance billing under

11 subparagraph (A)—

12 ‘‘(I) notice of the fact that balance

13 billing is permitted under such sub14 paragraph for such services; and

15 ‘‘(II) a good faith estimate of the

16 likely amount of such balance billing

17 (if any), with respect to such services,

18 based upon the presenting condition of

19 the enrollee.

20 ‘‘(l) RETURN TO HOME SKILLED NURSING FACILITIES

21 FOR COVERED POST-HOSPITAL EXTENDED CARE SERV22 ICES.—

23 ‘‘(1) ENSURING RETURN TO HOME SNF.—

24 ‘‘(A) IN GENERAL.—In providing coverage

25 of post-hospital extended care services, a
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1 MedicareAdvantage plan shall provide for such

2 coverage through a home skilled nursing facility

3 if the following conditions are met:

4 ‘‘(i) ENROLLEE ELECTION.—The en5 rollee elects to receive such coverage through

6 such facility.

7 ‘‘(ii) SNF AGREEMENT.—The facility

8 has a contract with the MedicareAdvantage

9 organization for the provision of such serv10 ices, or the facility agrees to accept substan11 tially similar payment under the same

12 terms and conditions that apply to simi13 larly situated skilled nursing facilities that

14 are under contract with the

15 MedicareAdvantage organization for the

16 provision of such services and through

17 which the enrollee would otherwise receive

18 such services.

19 ‘‘(B) MANNER OF PAYMENT TO HOME

20 SNF.—The organization shall provide payment

21 to the home skilled nursing facility consistent

22 with the contract or the agreement described in

23 subparagraph (A)(ii), as the case may be.

24 ‘‘(2) NO LESS FAVORABLE COVERAGE.—The cov25 erage provided under paragraph (1) (including scope
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1 of services, cost-sharing, and other criteria of cov2 erage) shall be no less favorable to the enrollee than

3 the coverage that would be provided to the enrollee

4 with respect to a skilled nursing facility the post-hos5 pital extended care services of which are otherwise

6 covered under the MedicareAdvantage plan.

7 ‘‘(3) RULE OF CONSTRUCTION.—Nothing in this

8 subsection shall be construed to do the following:

9 ‘‘(A) To require coverage through a skilled

10 nursing facility that is not otherwise qualified to

11 provide benefits under part A for medicare bene12 ficiaries not enrolled in a MedicareAdvantage

13 plan.

14 ‘‘(B) To prevent a skilled nursing facility

15 from refusing to accept, or imposing conditions

16 upon the acceptance of, an enrollee for the receipt

17 of post-hospital extended care services.

18 ‘‘(4) DEFINITIONS.—In this subsection:

19 ‘‘(A) HOME SKILLED NURSING FACILITY.—

20 The term ‘home skilled nursing facility’ means,

21 with respect to an enrollee who is entitled to re22 ceive post-hospital extended care services under a

23 MedicareAdvantage plan, any of the following

24 skilled nursing facilities:
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1 ‘‘(i) SNF RESIDENCE AT TIME OF AD2 MISSION.—The skilled nursing facility in

3 which the enrollee resided at the time of ad4 mission to the hospital preceding the receipt

5 of such post-hospital extended care services.

6 ‘‘(ii) SNF IN CONTINUING CARE RE7 TIREMENT COMMUNITY.—A skilled nursing

8 facility that is providing such services

9 through a continuing care retirement com10 munity (as defined in subparagraph (B))

11 which provided residence to the enrollee at

12 the time of such admission.

13 ‘‘(iii) SNF RESIDENCE OF SPOUSE AT

14 TIME OF DISCHARGE.—The skilled nursing

15 facility in which the spouse of the enrollee

16 is residing at the time of discharge from

17 such hospital.

18 ‘‘(B) CONTINUING CARE RETIREMENT COM19 MUNITY.—The term ‘continuing care retirement

20 community’ means, with respect to an enrollee in

21 a MedicareAdvantage plan, an arrangement

22 under which housing and health-related services

23 are provided (or arranged) through an organiza24 tion for the enrollee under an agreement that is
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1 effective for the life of the enrollee or for a speci2 fied period.’’.

3 SEC. 203. PAYMENTS TO MEDICAREADVANTAGE ORGANIZA4 TIONS.

5 Section 1853 (42 U.S.C. 1395w–23) is amended to

6 read as follows:

7 ‘‘PAYMENTS TO MEDICAREADVANTAGE ORGANIZATIONS

8 ‘‘SEC. 1853. (a) PAYMENTS TO ORGANIZATIONS.—

9 ‘‘(1) MONTHLY PAYMENTS.—

10 ‘‘(A) IN GENERAL.—Under a contract under

11 section 1857 and subject to subsections (f), (h),

12 and (j) and section 1859(e)(4), the Secretary

13 shall make, to each MedicareAdvantage organiza14 tion, with respect to coverage of an individual

15 for a month under this part in a

16 MedicareAdvantage payment area, separate

17 monthly payments with respect to—

18 ‘‘(i) benefits under the original medi19 care fee-for-service program under parts A

20 and B in accordance with subsection (d);

21 and

22 ‘‘(ii) benefits under the voluntary pre23 scription drug program under part D in

24 accordance with section 1858A and the

25 other provisions of this part.
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1 ‘‘(B) SPECIAL RULE FOR END-STAGE RENAL

2 DISEASE.—The Secretary shall establish separate

3 rates of payment to a MedicareAdvantage orga4 nization with respect to classes of individuals de5 termined to have end-stage renal disease and en6 rolled in a MedicareAdvantage plan of the orga7 nization. Such rates of payment shall be actuari8 ally equivalent to rates paid to other enrollees in

9 the MedicareAdvantage payment area (or such

10 other area as specified by the Secretary). In ac11 cordance with regulations, the Secretary shall

12 provide for the application of the seventh sen13 tence of section 1881(b)(7) to payments under

14 this section covering the provision of renal dialy15 sis treatment in the same manner as such sen16 tence applies to composite rate payments de17 scribed in such sentence. In establishing such

18 rates, the Secretary shall provide for appropriate

19 adjustments to increase each rate to reflect the

20 demonstration rate (including the risk adjust21 ment methodology associated with such rate) of

22 the social health maintenance organization end23 stage renal disease capitation demonstrations

24 (established by section 2355 of the Deficit Reduc25 tion Act of 1984, as amended by section 13567(b)
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1 of the Omnibus Budget Reconciliation Act of

2 1993), and shall compute such rates by taking

3 into account such factors as renal treatment mo4 dality, age, and the underlying cause of the end5 stage renal disease.

6 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF EN7 ROLLEES.—

8 ‘‘(A) IN GENERAL.—The amount of pay9 ment under this subsection may be retroactively

10 adjusted to take into account any difference be11 tween the actual number of individuals enrolled

12 with an organization under this part and the

13 number of such individuals estimated to be so

14 enrolled in determining the amount of the ad15 vance payment.

16 ‘‘(B) SPECIAL RULE FOR CERTAIN ENROLL17 EES.—

18 ‘‘(i) IN GENERAL.—Subject to clause

19 (ii), the Secretary may make retroactive ad20 justments under subparagraph (A) to take

21 into account individuals enrolled during the

22 period beginning on the date on which the

23 individual enrolls with a

24 MedicareAdvantage organization under a

25 plan operated, sponsored, or contributed to
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1 by the individual’s employer or former em2 ployer (or the employer or former employer

3 of the individual’s spouse) and ending on

4 the date on which the individual is enrolled

5 in the organization under this part, except

6 that for purposes of making such retroactive

7 adjustments under this subparagraph, such

8 period may not exceed 90 days.

9 ‘‘(ii) EXCEPTION.—No adjustment may

10 be made under clause (i) with respect to

11 any individual who does not certify that the

12 organization provided the individual with

13 the disclosure statement described in section

14 1852(c) at the time the individual enrolled

15 with the organization.

16 ‘‘(C) EQUALIZATION OF FEDERAL CON17 TRIBUTION.—In applying subparagraph (A), the

18 Secretary shall ensure that the payment to the

19 MedicareAdvantage organization for each indi20 vidual enrolled with the organization shall equal

21 the MedicareAdvantage benchmark amount for

22 the payment area in which that individual re23 sides (as determined under paragraph (4)), as

24 adjusted—
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1 ‘‘(i) by multiplying the benchmark

2 amount for that payment area by the ratio

3 of—

4 ‘‘(I) the payment amount deter5 mined under subsection (d)(4); to

6 ‘‘(II) the weighted service area

7 benchmark amount determined under

8 subsection (d)(2); and

9 ‘‘(ii) using such risk adjustment factor

10 as specified by the Secretary under sub11 section (b)(1)(B).

12 ‘‘(3) COMPREHENSIVE RISK ADJUSTMENT METH13 ODOLOGY.—

14 ‘‘(A) APPLICATION OF METHODOLOGY.—The

15 Secretary shall apply the comprehensive risk ad16 justment methodology described in subparagraph

17 (B) to 100 percent of the amount of payments to

18 plans under subsection (d)(4)(B).

19 ‘‘(B) COMPREHENSIVE RISK ADJUSTMENT

20 METHODOLOGY DESCRIBED.—The comprehensive

21 risk adjustment methodology described in this

22 subparagraph is the risk adjustment methodology

23 that would apply with respect to

24 MedicareAdvantage plans offered by

25 MedicareAdvantage organizations in 2005, ex-
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1 cept that if such methodology does not apply to

2 groups of beneficiaries who are aged or disabled

3 and groups of beneficiaries who have end-stage

4 renal disease, the Secretary shall revise such

5 methodology to apply to such groups.

6 ‘‘(C) UNIFORM APPLICATION TO ALL TYPES

7 OF PLANS.—Subject to section 1859(e)(4), the

8 comprehensive risk adjustment methodology es9 tablished under this paragraph shall be applied

10 uniformly without regard to the type of plan.

11 ‘‘(D) DATA COLLECTION.—In order to carry

12 out this paragraph, the Secretary shall require

13 MedicareAdvantage organizations to submit such

14 data and other information as the Secretary

15 deems necessary.

16 ‘‘(E) IMPROVEMENT OF PAYMENT ACCU17 RACY.—Notwithstanding any other provision of

18 this paragraph, the Secretary may revise the

19 comprehensive risk adjustment methodology de20 scribed in subparagraph (B) from time to time

21 to improve payment accuracy.

22 ‘‘(4) ANNUAL CALCULATION OF BENCHMARK

23 AMOUNTS.—For each year, the Secretary shall cal24 culate a benchmark amount for each

25 MedicareAdvantage payment area for each month for
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1 such year with respect to coverage of the benefits

2 available under the original medicare fee-for-service

3 program option equal to the greater of the following

4 amounts (adjusted as appropriate for the application

5 of the risk adjustment methodology under paragraph

6 (3)):

‘‘(A) MINIMUM AMOUNT.—1 7 ⁄12 of the annual

8 Medicare+Choice capitation rate determined

9 under subsection (c)(1)(B) for the payment area

10 for the year.

11 ‘‘(B) LOCAL FEE-FOR-SERVICE RATE.—The

12 local fee-for-service rate for such area for the

13 year (as calculated under paragraph (5)).

14 ‘‘(5) ANNUAL CALCULATION OF LOCAL FEE-FOR15 SERVICE RATES.—

16 ‘‘(A) IN GENERAL.—Subject to subpara17 graph (B), the term ‘local fee-for-service rate’

18 means the amount of payment for a month in a

19 MedicareAdvantage payment area for benefits

20 under this title and associated claims processing

21 costs for an individual who has elected to receive

22 benefits under the original medicare fee-for-serv23 ice program option and not enrolled in a

24 MedicareAdvantage plan under this part. The

25 Secretary shall annually calculate such amount
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1 in a manner similar to the manner in which the

2 Secretary calculated the adjusted average per

3 capita cost under section 1876.

4 ‘‘(B) REMOVAL OF MEDICAL EDUCATION

5 COSTS FROM CALCULATION OF LOCAL FEE-FOR6 SERVICE RATE.—

7 ‘‘(i) IN GENERAL.—In calculating the

8 local fee-for-service rate under subparagraph

9 (A) for a year, the amount of payment de10 scribed in such subparagraph shall be ad11 justed to exclude from such payment the

12 payment adjustments described in clause

13 (ii).

14 ‘‘(ii) PAYMENT ADJUSTMENTS DE15 SCRIBED.—

16 ‘‘(I) IN GENERAL.—Subject to

17 subclause (II), the payment adjust18 ments described in this subparagraph

19 are payment adjustments which the

20 Secretary estimates are payable during

21 the year—

22 ‘‘(aa) for the indirect costs of

23 medical education under section

24 1886(d)(5)(B); and
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1 ‘‘(bb) for direct graduate

2 medical education costs under sec3 tion 1886(h).

4 ‘‘(II) TREATMENT OF PAYMENTS

5 COVERED UNDER STATE HOSPITAL RE6 IMBURSEMENT SYSTEM.—To the extent

7 that the Secretary estimates that the

8 amount of the local fee-for-service rates

9 reflects payments to hospitals reim10 bursed under section 1814(b)(3), the

11 Secretary shall estimate a payment ad12 justment that is comparable to the

13 payment adjustment that would have

14 been made under clause (i) if the hos15 pitals had not been reimbursed under

16 such section.

17 ‘‘(b) ANNUAL ANNOUNCEMENT OF PAYMENT FAC18 TORS.—

19 ‘‘(1) ANNUAL ANNOUNCEMENT.—Beginning in

20 2005, at the same time as the Secretary publishes the

21 risk adjusters under section 1860D–11, the Secretary

22 shall annually announce (in a manner intended to

23 provide notice to interested parties) the following pay24 ment factors:
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1 ‘‘(A) The benchmark amount for each

2 MedicareAdvantage payment area (as calculated

3 under subsection (a)(4)) for the year.

4 ‘‘(B) The factors to be used for adjusting

5 payments under the comprehensive risk adjust6 ment methodology described in subsection

7 (a)(3)(B) with respect to each

8 MedicareAdvantage payment area for the year.

9 ‘‘(2) ADVANCE NOTICE OF METHODOLOGICAL

10 CHANGES.—At least 45 days before making the an11 nouncement under paragraph (1) for a year, the Sec12 retary shall—

13 ‘‘(A) provide for notice to

14 MedicareAdvantage organizations of proposed

15 changes to be made in the methodology from the

16 methodology and assumptions used in the pre17 vious announcement; and

18 ‘‘(B) provide such organizations with an

19 opportunity to comment on such proposed

20 changes.

21 ‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each

22 announcement made under paragraph (1), the Sec23 retary shall include an explanation of the assump24 tions and changes in methodology used in the an25 nouncement in sufficient detail so that
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1 MedicareAdvantage organizations can compute each

2 payment factor described in paragraph (1).

3 ‘‘(c) CALCULATION OF ANNUAL MEDICARE+CHOICE

4 CAPITATION RATES.—

5 ‘‘(1) IN GENERAL.—For purposes of making pay6 ments under this part for years before 2006 and for

7 purposes of calculating the annual Medicare+Choice

8 capitation rates under paragraph (7) beginning with

9 such year, subject to paragraph (6)(C), each annual

10 Medicare+Choice capitation rate, for a

11 Medicare+Choice payment area before 2006 or a

12 MedicareAdvantage payment area beginning with

13 such year for a contract year consisting of a calendar

14 year, is equal to the largest of the amounts specified

15 in the following subparagraph (A), (B), or (C):

16 ‘‘(A) BLENDED CAPITATION RATE.—The

17 sum of—

18 ‘‘(i) the area-specific percentage (as

19 specified under paragraph (2) for the year)

20 of the annual area-specific

21 Medicare+Choice capitation rate for the

22 MedicareAdvantage payment area, as deter23 mined under paragraph (3) for the year;

24 and
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1 ‘‘(ii) the national percentage (as speci2 fied under paragraph (2) for the year) of

3 the input-price-adjusted annual national

4 Medicare+Choice capitation rate, as deter5 mined under paragraph (4) for the year,

6 multiplied by the budget neutrality adjustment

7 factor determined under paragraph (5).

8 ‘‘(B) MINIMUM AMOUNT.—12 multiplied by

9 the following amount:

10 ‘‘(i) For 1998, $367 (but not to exceed,

11 in the case of an area outside the 50 States

12 and the District of Columbia, 150 percent of

13 the annual per capita rate of payment for

14 1997 determined under section

15 1876(a)(1)(C) for the area).

16 ‘‘(ii) For 1999 and 2000, the min17 imum amount determined under clause (i)

18 or this clause, respectively, for the preceding

19 year, increased by the national per capita

20 Medicare+Choice growth percentage de21 scribed in paragraph (6)(A) applicable to

22 1999 or 2000, respectively.

23 ‘‘(iii)(I) Subject to subclause (II), for

24 2001, for any area in a Metropolitan Sta25 tistical Area with a population of more
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1 than 250,000, $525, and for any other area

2 $475.

3 ‘‘(II) In the case of an area outside the

4 50 States and the District of Columbia, the

5 amount specified in this clause shall not ex6 ceed 120 percent of the amount determined

7 under clause (ii) for such area for 2000.

8 ‘‘(iv) For 2002 through 2013, the min9 imum amount specified in this clause (or

10 clause (iii)) for the preceding year increased

11 by the national per capita

12 Medicare+Choice growth percentage, de13 scribed in paragraph (6)(A) for that suc14 ceeding year.

15 ‘‘(v) For 2014 and each succeeding

16 year, the minimum amount specified in this

17 clause (or clause (iv)) for the preceding year

18 increased by the percentage increase in the

19 Consumer Price Index for all urban con20 sumers (U.S. urban average) for the 12-

21 month period ending with June of the pre22 vious year.

23 ‘‘(C) MINIMUM PERCENTAGE INCREASE.—

24 ‘‘(i) For 1998, 102 percent of the an25 nual per capita rate of payment for 1997
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1 determined under section 1876(a)(1)(C) for

2 the Medicare+Choice payment area.

3 ‘‘(ii) For 1999 and 2000, 102 percent

4 of the annual Medicare+Choice capitation

5 rate under this paragraph for the area for

6 the previous year.

7 ‘‘(iii) For 2001, 103 percent of the an8 nual Medicare+Choice capitation rate

9 under this paragraph for the area for 2000.

10 ‘‘(iv) For 2002, 2003, and 2004, 102

11 percent of the annual Medicare+Choice

12 capitation rate under this paragraph for

13 the area for the previous year.

14 ‘‘(v) For 2005, 103 percent of the an15 nual Medicare+Choice capitation rate

16 under this paragraph for the area for 2003.

17 ‘‘(vi) For 2006 and each succeeding

18 year, 102 percent of the annual

19 Medicare+Choice capitation rate under this

20 paragraph for the area for the previous

21 year, except that such rate shall be deter22 mined by substituting ‘102’ for ‘103’ in

23 clause (v).

24 ‘‘(2) AREA-SPECIFIC AND NATIONAL PERCENT25 AGES.—For purposes of paragraph (1)(A)—
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1 ‘‘(A) for 1998, the ‘area-specific percentage’

2 is 90 percent and the ‘national percentage’ is 10

3 percent;

4 ‘‘(B) for 1999, the ‘area-specific percentage’

5 is 82 percent and the ‘national percentage’ is 18

6 percent;

7 ‘‘(C) for 2000, the ‘area-specific percentage’

8 is 74 percent and the ‘national percentage’ is 26

9 percent;

10 ‘‘(D) for 2001, the ‘area-specific percentage’

11 is 66 percent and the ‘national percentage’ is 34

12 percent;

13 ‘‘(E) for 2002, the ‘area-specific percentage’

14 is 58 percent and the ‘national percentage’ is 42

15 percent; and

16 ‘‘(F) for a year after 2002, the ‘area-specific

17 percentage’ is 50 percent and the ‘national per18 centage’ is 50 percent.

19 ‘‘(3) ANNUAL AREA-SPECIFIC MEDICARE+CHOICE

20 CAPITATION RATE.—

21 ‘‘(A) IN GENERAL.—For purposes of para22 graph (1)(A), subject to subparagraph (B), the

23 annual area-specific Medicare+Choice capita24 tion rate for a Medicare+Choice payment

25 area—
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1 ‘‘(i) for 1998 is, subject to subpara2 graph (D), the annual per capita rate of

3 payment for 1997 determined under section

4 1876(a)(1)(C) for the area, increased by the

5 national per capita Medicare+Choice

6 growth percentage for 1998 (described in

7 paragraph (6)(A)); or

8 ‘‘(ii) for a subsequent year is the an9 nual area-specific Medicare+Choice capita10 tion rate for the previous year determined

11 under this paragraph for the area, increased

12 by the national per capita

13 Medicare+Choice growth percentage for

14 such subsequent year.

15 ‘‘(B) REMOVAL OF MEDICAL EDUCATION

16 FROM CALCULATION OF ADJUSTED AVERAGE PER

17 CAPITA COST.—

18 ‘‘(i) IN GENERAL.—In determining the

19 area-specific Medicare+Choice capitation

20 rate under subparagraph (A) for a year (be21 ginning with 1998), the annual per capita

22 rate of payment for 1997 determined under

23 section 1876(a)(1)(C) shall be adjusted to

24 exclude from the rate the applicable percent
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1 (specified in clause (ii)) of the payment ad2 justments described in subparagraph (C).

3 ‘‘(ii) APPLICABLE PERCENT.—For pur4 poses of clause (i), the applicable percent

5 for—

6 ‘‘(I) 1998 is 20 percent;

7 ‘‘(II) 1999 is 40 percent;

8 ‘‘(III) 2000 is 60 percent;

9 ‘‘(IV) 2001 is 80 percent; and

10 ‘‘(V) a succeeding year is 100 per11 cent.

12 ‘‘(C) PAYMENT ADJUSTMENT.—

13 ‘‘(i) IN GENERAL.—Subject to clause

14 (ii), the payment adjustments described in

15 this subparagraph are payment adjustments

16 which the Secretary estimates were payable

17 during 1997—

18 ‘‘(I) for the indirect costs of med19 ical education under section

20 1886(d)(5)(B); and

21 ‘‘(II) for direct graduate medical

22 education costs under section 1886(h).

23 ‘‘(ii) TREATMENT OF PAYMENTS COV24 ERED UNDER STATE HOSPITAL REIMBURSE25 MENT SYSTEM.—To the extent that the Sec-
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1 retary estimates that an annual per capita

2 rate of payment for 1997 described in clause

3 (i) reflects payments to hospitals reimbursed

4 under section 1814(b)(3), the Secretary shall

5 estimate a payment adjustment that is com6 parable to the payment adjustment that

7 would have been made under clause (i) if

8 the hospitals had not been reimbursed under

9 such section.

10 ‘‘(D) TREATMENT OF AREAS WITH HIGHLY

11 VARIABLE PAYMENT RATES.—In the case of a

12 Medicare+Choice payment area for which the

13 annual per capita rate of payment determined

14 under section 1876(a)(1)(C) for 1997 varies by

15 more than 20 percent from such rate for 1996,

16 for purposes of this subsection the Secretary may

17 substitute for such rate for 1997 a rate that is

18 more representative of the costs of the enrollees in

19 the area.

20 ‘‘(4) INPUT-PRICE-ADJUSTED ANNUAL NATIONAL

21 MEDICARE+CHOICE CAPITATION RATE.—

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (1)(A), the input-price-adjusted annual

24 national Medicare+Choice capitation rate for a

25 Medicare+Choice payment area for a year is
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1 equal to the sum, for all the types of medicare

2 services (as classified by the Secretary), of the

3 product (for each such type of service) of—

4 ‘‘(i) the national standardized annual

5 Medicare+Choice capitation rate (deter6 mined under subparagraph (B)) for the

7 year;

8 ‘‘(ii) the proportion of such rate for the

9 year which is attributable to such type of

10 services; and

11 ‘‘(iii) an index that reflects (for that

12 year and that type of services) the relative

13 input price of such services in the area com14 pared to the national average input price of

15 such services.

16 In applying clause (iii), the Secretary may, sub17 ject to subparagraph (C), apply those indices

18 under this title that are used in applying (or up19 dating) national payment rates for specific areas

20 and localities.

21 ‘‘(B) NATIONAL STANDARDIZED ANNUAL

22 MEDICARE+CHOICE CAPITATION RATE.—In sub23 paragraph (A)(i), the ‘national standardized an24 nual Medicare+Choice capitation rate’ for a

25 year is equal to—
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1 ‘‘(i) the sum (for all Medicare+Choice

2 payment areas) of the product of—

3 ‘‘(I) the annual area-specific

4 Medicare+Choice capitation rate for

5 that year for the area under paragraph

6 (3); and

7 ‘‘(II) the average number of medi8 care beneficiaries residing in that area

9 in the year, multiplied by the average

10 of the risk factor weights used to adjust

11 payments under subsection (a)(1)(A)

12 for such beneficiaries in such area; di13 vided by

14 ‘‘(ii) the sum of the products described

15 in clause (i)(II) for all areas for that year.

16 ‘‘(5) PAYMENT ADJUSTMENT BUDGET NEU17 TRALITY FACTOR.—For purposes of paragraph (1)(A),

18 for each year, the Secretary shall determine a budget

19 neutrality adjustment factor so that the aggregate of

20 the payments under this part (other than those attrib21 utable to subsections (a)(3)(C)(iii) and (i)) shall

22 equal the aggregate payments that would have been

23 made under this part if payment were based entirely

24 on area-specific capitation rates.
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1 ‘‘(6) NATIONAL PER CAPITA MEDICARE+CHOICE

2 GROWTH PERCENTAGE DEFINED.—

3 ‘‘(A) IN GENERAL.—In this part, the ‘na4 tional per capita Medicare+Choice growth per5 centage’ for a year is the percentage determined

6 by the Secretary, by March 1st before the begin7 ning of the year involved, to reflect the Sec8 retary’s estimate of the projected per capita rate

9 of growth in expenditures under this title for an

10 individual entitled to (or enrolled for) benefits

11 under part A and enrolled under part B, reduced

12 by the number of percentage points specified in

13 subparagraph (B) for the year. Separate deter14 minations may be made for aged enrollees, dis15 abled enrollees, and enrollees with end-stage

16 renal disease.

17 ‘‘(B) ADJUSTMENT.—The number of per18 centage points specified in this subparagraph

19 is—

20 ‘‘(i) for 1998, 0.8 percentage points;

21 ‘‘(ii) for 1999, 0.5 percentage points;

22 ‘‘(iii) for 2000, 0.5 percentage points;

23 ‘‘(iv) for 2001, 0.5 percentage points;

24 ‘‘(v) for 2002, 0.3 percentage points;

25 and
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1 ‘‘(vi) for a year after 2002, 0 percent2 age points.

3 ‘‘(C) ADJUSTMENT FOR OVER OR UNDER

4 PROJECTION OF NATIONAL PER CAPITA

5 MEDICARE+CHOICE GROWTH PERCENTAGE.—Be6 ginning with rates calculated for 1999, before

7 computing rates for a year as described in para8 graph (1), the Secretary shall adjust all area9 specific and national Medicare+Choice capita10 tion rates (and beginning in 2000, the minimum

11 amount) for the previous year for the differences

12 between the projections of the national per capita

13 Medicare+Choice growth percentage for that

14 year and previous years and the current estimate

15 of such percentage for such years.

16 ‘‘(7) TRANSITION TO MEDICAREADVANTAGE COM17 PETITION.—

18 ‘‘(A) IN GENERAL.—For each year (begin19 ning with 2006) payments to MedicareAdvantage

20 plans shall not be computed under this sub21 section, but instead shall be based on the pay22 ment amount determined under subsection (d).

23 ‘‘(B) CONTINUED CALCULATION OF CAPITA24 TION RATES.—For each year (beginning with

25 2006) the Secretary shall calculate and publish
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1 the annual Medicare+Choice capitation rates

2 under this subsection and shall use the annual

3 Medicare+Choice capitation rate determined

4 under subsection (c)(1) for purposes of deter5 mining the benchmark amount under subsection

6 (a)(4).

7 ‘‘(d) SECRETARY’S DETERMINATION OF PAYMENT

8 AMOUNT.—

9 ‘‘(1) REVIEW OF PLAN BIDS.—The Secretary

10 shall review each plan bid submitted under section

11 1854(a) for the coverage of benefits under the original

12 medicare fee-for-service program option to ensure that

13 such bids are consistent with the requirements under

14 this part an are based on the assumptions described

15 in section 1854(a)(2)(A)(iii).

16 ‘‘(2) DETERMINATION OF WEIGHTED SERVICE

17 AREA BENCHMARK AMOUNTS.—The Secretary shall

18 calculate a weighted service area benchmark amount

19 for the benefits under the original medicare fee-for20 service program option for each plan equal to the

21 weighted average of the benchmark amounts for bene22 fits under such original medicare fee-for-service pro23 gram option for the payment areas included in the

24 service area of the plan using the assumptions de25 scribed in section 1854(a)(2)(A)(iii).
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1 ‘‘(3) COMPARISON TO BENCHMARK.—The Sec2 retary shall determine the difference between each

3 plan bid (as adjusted under paragraph (1)) and the

4 weighted service area benchmark amount (as deter5 mined under paragraph (2)) for purposes of

6 determining—

7 ‘‘(A) the payment amount under paragraph

8 (4); and

9 ‘‘(B) the additional benefits required and

10 MedicareAdvantage monthly basic beneficiary

11 premiums.

12 ‘‘(4) DETERMINATION OF PAYMENT AMOUNT FOR

13 ORIGINAL MEDICARE FEE-FOR-SERVICE BENEFITS.—

14 ‘‘(A) IN GENERAL.—Subject to subpara15 graph (B), the Secretary shall determine the

16 payment amount for MedicareAdvantage plans

17 for the benefits under the original medicare fee18 for-service program option as follows:

19 ‘‘(i) BIDS THAT EQUAL OR EXCEED

20 THE BENCHMARK.—In the case of a plan

21 bid that equals or exceeds the weighted serv22 ice area benchmark amount, the amount of

23 each monthly payment to a

24 MedicareAdvantage organization with re25 spect to each individual enrolled in a plan
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1 shall be the weighted service area benchmark

2 amount.

3 ‘‘(ii) BIDS BELOW THE BENCHMARK.—

4 In the case of a plan bid that is less than

5 the weighted service area benchmark

6 amount, the amount of each monthly pay7 ment to a MedicareAdvantage organization

8 with respect to each individual enrolled in

9 a plan shall be the weighted service area

10 benchmark amount reduced by the amount

11 of any premium reduction elected by the

12 plan under section 1854(d)(1)(A)(i).

13 ‘‘(B) APPLICATION OF COMPREHENSIVE

14 RISK ADJUSTMENT METHODOLOGY.—The Sec15 retary shall adjust the amounts determined

16 under subparagraph (A) using the comprehensive

17 risk adjustment methodology applicable under

18 subsection (a)(3).

19 ‘‘(6) ADJUSTMENT FOR NATIONAL COVERAGE DE20 TERMINATIONS AND LEGISLATIVE CHANGES IN BENE21 FITS.—If the Secretary makes a determination with

22 respect to coverage under this title or there is a

23 change in benefits required to be provided under this

24 part that the Secretary projects will result in a sig25 nificant increase in the costs to MedicareAdvantage
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1 organizations of providing benefits under contracts

2 under this part (for periods after any period de3 scribed in section 1852(a)(5)), the Secretary shall ap4 propriately adjust the benchmark amounts or pay5 ment amounts (as determined by the Secretary). Such

6 projection and adjustment shall be based on an anal7 ysis by the Secretary of the actuarial costs associated

8 with the new benefits.

9 ‘‘(7) BENEFITS UNDER THE ORIGINAL MEDICARE

10 FEE-FOR-SERVICE PROGRAM OPTION DEFINED.—For

11 purposes of this part, the term ‘benefits under the

12 original medicare fee-for-service program option’

13 means those items and services (other than hospice

14 care) for which benefits are available under parts A

15 and B to individuals entitled to, or enrolled for, bene16 fits under part A and enrolled under part B, with

17 cost-sharing for those services as required under parts

18 A and B or an actuarially equivalent level of cost19 sharing as determined in this part.

20 ‘‘(e) MEDICAREADVANTAGE PAYMENT AREA DE21 FINED.—

22 ‘‘(1) IN GENERAL.—In this part, except as pro23 vided in paragraph (3), the term ‘MedicareAdvantage

24 payment area’ means a county, or equivalent area

25 specified by the Secretary.
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1 ‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the

2 case of individuals who are determined to have end

3 stage renal disease, the MedicareAdvantage payment

4 area shall be a State or such other payment area as

5 the Secretary specifies.

6 ‘‘(3) GEOGRAPHIC ADJUSTMENT.—

7 ‘‘(A) IN GENERAL.—Upon written request of

8 the chief executive officer of a State for a con9 tract year (beginning after 2005) made by not

10 later than February 1 of the previous year, the

11 Secretary shall make a geographic adjustment to

12 a MedicareAdvantage payment area in the State

13 otherwise determined under paragraph (1)—

14 ‘‘(i) to a single statewide

15 MedicareAdvantage payment area;

16 ‘‘(ii) to the metropolitan based system

17 described in subparagraph (C); or

18 ‘‘(iii) to consolidating into a single

19 MedicareAdvantage payment area non20 contiguous counties (or equivalent areas de21 scribed in paragraph (1)) within a State.

22 Such adjustment shall be effective for payments

23 for months beginning with January of the year

24 following the year in which the request is re25 ceived.
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1 ‘‘(B) BUDGET NEUTRALITY ADJUSTMENT.—

2 In the case of a State requesting an adjustment

3 under this paragraph, the Secretary shall ini4 tially (and annually thereafter) adjust the pay5 ment rates otherwise established under this sec6 tion for MedicareAdvantage payment areas in

7 the State in a manner so that the aggregate of

8 the payments under this section in the State

9 shall not exceed the aggregate payments that

10 would have been made under this section for

11 MedicareAdvantage payment areas in the State

12 in the absence of the adjustment under this para13 graph.

14 ‘‘(C) METROPOLITAN BASED SYSTEM.—The

15 metropolitan based system described in this sub16 paragraph is one in which—

17 ‘‘(i) all the portions of each metropoli18 tan statistical area in the State or in the

19 case of a consolidated metropolitan statis20 tical area, all of the portions of each pri21 mary metropolitan statistical area within

22 the consolidated area within the State, are

23 treated as a single MedicareAdvantage pay24 ment area; and
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1 ‘‘(ii) all areas in the State that do not

2 fall within a metropolitan statistical area

3 are treated as a single MedicareAdvantage

4 payment area.

5 ‘‘(D) AREAS.—In subparagraph (C), the

6 terms ‘metropolitan statistical area’, ‘consoli7 dated metropolitan statistical area’, and ‘pri8 mary metropolitan statistical area’ mean any

9 area designated as such by the Secretary of Com10 merce.

11 ‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING

12 MSA PLANS.—

13 ‘‘(1) IN GENERAL.—If the amount of the

14 MedicareAdvantage monthly MSA premium (as de15 fined in section 1854(b)(2)(D)) for an MSA plan for

a year is less than 1 16 ⁄12 of the annual

17 Medicare+Choice capitation rate applied under this

18 section for the area and year involved, the Secretary

19 shall deposit an amount equal to 100 percent of such

20 difference in a MedicareAdvantage MSA established

21 (and, if applicable, designated) by the individual

22 under paragraph (2).

23 ‘‘(2) ESTABLISHMENT AND DESIGNATION OF

24 MEDICAREADVANTAGE MEDICAL SAVINGS ACCOUNT AS

25 REQUIREMENT FOR PAYMENT OF CONTRIBUTION.—In
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1 the case of an individual who has elected coverage

2 under an MSA plan, no payment shall be made under

3 paragraph (1) on behalf of an individual for a month

4 unless the individual—

5 ‘‘(A) has established before the beginning of

6 the month (or by such other deadline as the Sec7 retary may specify) a MedicareAdvantage MSA

8 (as defined in section 138(b)(2) of the Internal

9 Revenue Code of 1986); and

10 ‘‘(B) if the individual has established more

11 than 1 such MedicareAdvantage MSA, has des12 ignated 1 of such accounts as the individual’s

13 MedicareAdvantage MSA for purposes of this

14 part.

15 Under rules under this section, such an individual

16 may change the designation of such account under

17 subparagraph (B) for purposes of this part.

18 ‘‘(3) LUMP-SUM DEPOSIT OF MEDICAL SAVINGS

19 ACCOUNT CONTRIBUTION.—In the case of an indi20 vidual electing an MSA plan effective beginning with

21 a month in a year, the amount of the contribution to

22 the MedicareAdvantage MSA on behalf of the indi23 vidual for that month and all successive months in

24 the year shall be deposited during that first month. In

25 the case of a termination of such an election as of a
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1 month before the end of a year, the Secretary shall

2 provide for a procedure for the recovery of deposits at3 tributable to the remaining months in the year.

4 ‘‘(g) PAYMENTS FROM TRUST FUNDS.—Except as pro5 vided in section 1858A(c) (relating to payments for quali6 fied prescription drug coverage), the payment to a

7 MedicareAdvantage organization under this section for in8 dividuals enrolled under this part with the organization

9 and payments to a MedicareAdvantage MSA under sub10 section (e)(1) shall be made from the Federal Hospital In11 surance Trust Fund and the Federal Supplementary Med12 ical Insurance Trust Fund in such proportion as the Sec13 retary determines reflects the relative weight that benefits

14 under part A and under part B represents of the actuarial

15 value of the total benefits under this title. Monthly pay16 ments otherwise payable under this section for October 2000

17 shall be paid on the first business day of such month.

18 Monthly payments otherwise payable under this section for

19 October 2001 shall be paid on the last business day of Sep20 tember 2001. Monthly payments otherwise payable under

21 this section for October 2006 shall be paid on the first busi22 ness day of October 2006.

23 ‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS24 PITAL STAYS.—In the case of an individual who is receiv25 ing inpatient hospital services from a subsection (d) hos-
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1 pital (as defined in section 1886(d)(1)(B)) as of the effective

2 date of the individual’s—

3 ‘‘(1) election under this part of a

4 MedicareAdvantage plan offered by a

5 MedicareAdvantage organization—

6 ‘‘(A) payment for such services until the

7 date of the individual’s discharge shall be made

8 under this title through the MedicareAdvantage

9 plan or the original medicare fee-for-service pro10 gram option (as the case may be) elected before

11 the election with such organization,

12 ‘‘(B) the elected organization shall not be fi13 nancially responsible for payment for such serv14 ices until the date after the date of the individ15 ual’s discharge; and

16 ‘‘(C) the organization shall nonetheless be

17 paid the full amount otherwise payable to the or18 ganization under this part; or

19 ‘‘(2) termination of election with respect to a

20 MedicareAdvantage organization under this part—

21 ‘‘(A) the organization shall be financially

22 responsible for payment for such services after

23 such date and until the date of the individual’s

24 discharge;
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1 ‘‘(B) payment for such services during the

2 stay shall not be made under section 1886(d) or

3 by any succeeding MedicareAdvantage organiza4 tion; and

5 ‘‘(C) the terminated organization shall not

6 receive any payment with respect to the indi7 vidual under this part during the period the in8 dividual is not enrolled.

9 ‘‘(i) SPECIAL RULE FOR HOSPICE CARE.—

10 ‘‘(1) INFORMATION.—A contract under this part

11 shall require the MedicareAdvantage organization to

12 inform each individual enrolled under this part with

13 a MedicareAdvantage plan offered by the organization

14 about the availability of hospice care if—

15 ‘‘(A) a hospice program participating under

16 this title is located within the organization’s

17 service area; or

18 ‘‘(B) it is common practice to refer patients

19 to hospice programs outside such service area.

20 ‘‘(2) PAYMENT.—If an individual who is enrolled

21 with a MedicareAdvantage organization under this

22 part makes an election under section 1812(d)(1) to re23 ceive hospice care from a particular hospice

24 program—
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1 ‘‘(A) payment for the hospice care furnished

2 to the individual shall be made to the hospice

3 program elected by the individual by the Sec4 retary;

5 ‘‘(B) payment for other services for which

6 the individual is eligible notwithstanding the in7 dividual’s election of hospice care under section

8 1812(d)(1), including services not related to the

9 individual’s terminal illness, shall be made by

10 the Secretary to the MedicareAdvantage organi11 zation or the provider or supplier of the service

12 instead of payments calculated under subsection

13 (a); and

14 ‘‘(C) the Secretary shall continue to make

15 monthly payments to the MedicareAdvantage or16 ganization in an amount equal to the value of

17 the additional benefits required under section

18 1854(f)(1)(A).’’.

19 SEC. 204. SUBMISSION OF BIDS; PREMIUMS.

20 Section 1854 (42 U.S.C. 1395w–24) is amended to

21 read as follows:

22 ‘‘SUBMISSION OF BIDS; PREMIUMS

23 ‘‘SEC. 1854. (a) SUBMISSION OF BIDS BY

24 MEDICAREADVANTAGE ORGANIZATIONS.—

25 ‘‘(1) IN GENERAL.—Not later than the second

26 Monday in September and except as provided in
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1 paragraph (3), each MedicareAdvantage organization

2 shall submit to the Secretary, in such form and man3 ner as the Secretary may specify, for each

4 MedicareAdvantage plan that the organization in5 tends to offer in a service area in the following

6 year—

7 ‘‘(A) notice of such intent and information

8 on the service area of the plan;

9 ‘‘(B) the plan type for each plan;

10 ‘‘(C) if the MedicareAdvantage plan is a co11 ordinated care plan (as described in section

12 1851(a)(2)(A)) or a private fee-for-service plan

13 (as described in section 1851(a)(2)(C)), the infor14 mation described in paragraph (2) with respect

15 to each payment area;

16 ‘‘(D) the enrollment capacity (if any) in re17 lation to the plan and each payment area;

18 ‘‘(E) the expected mix, by health status, of

19 enrolled individuals; and

20 ‘‘(F) such other information as the Sec21 retary may specify.

22 ‘‘(2) INFORMATION REQUIRED FOR COORDINATED

23 CARE PLANS AND PRIVATE FEE-FOR-SERVICE

24 PLANS.—For a MedicareAdvantage plan that is a co25 ordinated care plan (as described in section
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1 1851(a)(2)(A)) or a private fee-for-service plan (as

2 described in section 1851(a)(2)(C)), the information

3 described in this paragraph is as follows:

4 ‘‘(A) INFORMATION REQUIRED WITH RE5 SPECT TO BENEFITS UNDER THE ORIGINAL

6 MEDICARE FEE-FOR-SERVICE PROGRAM OP7 TION.—Information relating to the coverage of

8 benefits under the original medicare fee-for-serv9 ice program option as follows:

10 ‘‘(i) The plan bid, which shall consist

11 of a dollar amount that represents the total

12 amount that the plan is willing to accept

13 (not taking into account the application of

14 the comprehensive risk adjustment method15 ology under section 1853(a)(3)) for pro16 viding coverage of the benefits under the

17 original medicare fee-for-service program

18 option to an individual enrolled in the plan

19 that resides in the service area of the plan

20 for a month.

21 ‘‘(ii) For the enhanced medical benefits

22 package offered—

23 ‘‘(I) the adjusted community rate

24 (as defined in subsection (g)(3)) of the

25 package;
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1 ‘‘(II) the portion of the actuarial

2 value of such benefits package (if any)

3 that will be applied toward satisfying

4 the requirement for additional benefits

5 under subsection (g);

6 ‘‘(III) the MedicareAdvantage

7 monthly beneficiary premium for en8 hanced medical benefits (as defined in

9 subsection (b)(2)(C));

10 ‘‘(IV) a description of any cost11 sharing;

12 ‘‘(V) a description of whether the

13 amount of the unified deductible has

14 been lowered or the maximum limita15 tions on out-of-pocket expenses have

16 been decreased (relative to the levels

17 used in calculating the plan bid);

18 ‘‘(VI) such other information as

19 the Secretary considers necessary.

20 ‘‘(iii) The assumptions that the

21 MedicareAdvantage organization used in

22 preparing the plan bid with respect to num23 bers, in each payment area, of enrolled in24 dividuals and the mix, by health status, of

25 such individuals.
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1 ‘‘(B) INFORMATION REQUIRED WITH RE2 SPECT TO PART D.—The information required to

3 be submitted by an eligible entity under section

4 1860D–12, including the monthly premiums for

5 standard coverage and any other qualified pre6 scription drug coverage available to individuals

7 enrolled under part D.

8 ‘‘(C) DETERMINING PLAN COSTS INCLUDED

9 IN PLAN BID.—For purposes of submitting its

10 plan bid under subparagraph (A)(i) a

11 MedicareAdvantage plan offered by a

12 MedicareAdvantage organization satisfies sub13 paragraphs (A) and (C) of section 1852(a)(1) if

14 the actuarial value of the deductibles, coinsur15 ance, and copayments applicable on average to

16 individuals enrolled in such plan under this part

17 with respect to benefits under the original medi18 care fee-for-service program option on which that

19 bid is based (ignoring any reduction in cost20 sharing offered by such plan as enhanced med21 ical benefits under paragraph (2)(A)(ii) or re22 quired under clause (ii) or (iii) of subsection

23 (g)(1)(C)) equals the amount specified in sub24 section (f)(1)(B).
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1 ‘‘(3) REQUIREMENTS FOR MSA PLANS.—For an

2 MSA plan described in section 1851(a)(2)(B), the in3 formation described in this paragraph is the informa4 tion that such a plan would have been required to

5 submit under this part if the Prescription Drug and

6 Medicare Improvements Act of 2003 had not been en7 acted.

8 ‘‘(4) REVIEW.—

9 ‘‘(A) IN GENERAL.—Subject to subpara10 graph (B), the Secretary shall review the ad11 justed community rates (as defined in section

12 1854(g)(3)), the amounts of the

13 MedicareAdvantage monthly basic premium and

14 the MedicareAdvantage monthly beneficiary pre15 mium for enhanced medical benefits filed under

16 this subsection and shall approve or disapprove

17 such rates and amounts so submitted. The Sec18 retary shall review the actuarial assumptions

19 and data used by the MedicareAdvantage organi20 zation with respect to such rates and amounts so

21 submitted to determine the appropriateness of

22 such assumptions and data.

23 ‘‘(B) EXCEPTION.—The Secretary shall not

24 review, approve, or disapprove the amounts sub25 mitted under paragraph (3), or, with respect to
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1 a private fee-for-service plan (as described in sec2 tion 1851(a)(2)(C)) under subparagraph (A)(i),

3 (A)(ii)(III), or (B) of paragraph (2).

4 ‘‘(C) CLARIFICATION OF AUTHORITY RE5 GARDING DISAPPROVAL OF UNREASONABLE BEN6 EFICIARY COST-SHARING.—Under the authority

7 under subparagraph (A), the Secretary may dis8 approve the bid if the Secretary determines that

9 the deductibles, coinsurance, or copayments ap10 plicable under the plan discourage access to cov11 ered services or are likely to result in favorable

12 selection of MedicareAdvantage eligible individ13 uals.

14 ‘‘(5) APPLICATION OF FEHBP STANDARD; PROHI15 BITION ON PRICE GOUGING.—Each bid amount sub16 mitted under paragraph (1) for a MedicareAdvantage

17 plan must reasonably and equitably reflect the cost of

18 benefits provided under that plan.

19 ‘‘(b) MONTHLY PREMIUMS CHARGED.—

20 ‘‘(1) IN GENERAL.—

21 ‘‘(A) COORDINATED CARE AND PRIVATE

22 FEE-FOR-SERVICE PLANS.—The monthly amount

23 of the premium charged to an individual en24 rolled in a MedicareAdvantage plan (other than

25 an MSA plan) offered by a MedicareAdvantage
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1 organization shall be equal to the sum of the fol2 lowing:

3 ‘‘(i) The MedicareAdvantage monthly

4 basic beneficiary premium (if any).

5 ‘‘(ii) The MedicareAdvantage monthly

6 beneficiary premium for enhanced medical

7 benefits (if any).

8 ‘‘(iii) The MedicareAdvantage monthly

9 obligation for qualified prescription drug

10 coverage (if any).

11 ‘‘(B) MSA PLANS.—The rules under this

12 section that would have applied with respect to

13 an MSA plan if the Prescription Drug and

14 Medicare Improvements Act of 2003 had not

15 been enacted shall continue to apply to MSA

16 plans after the date of enactment of such Act.

17 ‘‘(2) PREMIUM TERMINOLOGY.—For purposes of

18 this part:

19 ‘‘(A) MEDICAREADVANTAGE MONTHLY BASIC

20 BENEFICIARY PREMIUM.—The term

21 ‘MedicareAdvantage monthly basic beneficiary

22 premium’ means, with respect to a

23 MedicareAdvantage plan, the amount required to

24 be charged under subsection (d)(2) for the plan.
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1 ‘‘(B) MEDICAREADVANTAGE MONTHLY BEN2 EFICIARY OBLIGATION FOR QUALIFIED PRESCRIP3 TION DRUG COVERAGE.—The term

4 ‘MedicareAdvantage monthly beneficiary obliga5 tion for qualified prescription drug coverage’

6 means, with respect to a MedicareAdvantage

7 plan, the amount determined under section

8 1858A(d).

9 ‘‘(C) MEDICAREADVANTAGE MONTHLY BEN10 EFICIARY PREMIUM FOR ENHANCED MEDICAL

11 BENEFITS.—The term ‘MedicareAdvantage

12 monthly beneficiary premium for enhanced med13 ical benefits’ means, with respect to a

14 MedicareAdvantage plan, the amount required to

15 be charged under subsection (f)(2) for the plan,

16 or, in the case of an MSA plan, the amount filed

17 under subsection (a)(3).

18 ‘‘(D) MEDICAREADVANTAGE MONTHLY MSA

19 PREMIUM.—The term ‘MedicareAdvantage

20 monthly MSA premium’ means, with respect to

21 a MedicareAdvantage plan, the amount of such

22 premium filed under subsection (a)(3) for the

23 plan.

24 ‘‘(c) UNIFORM PREMIUM.—The MedicareAdvantage

25 monthly basic beneficiary premium, the MedicareAdvantage
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1 monthly beneficiary obligation for qualified prescription

2 drug coverage, the MedicareAdvantage monthly beneficiary

3 premium for enhanced medical benefits, and the

4 MedicareAdvantage monthly MSA premium charged under

5 subsection (b) of a MedicareAdvantage organization under

6 this part may not vary among individuals enrolled in the

7 plan. Subject to the provisions of section 1858(h), such re8 quirement shall not apply to enrollees of a

9 MedicareAdvantage plan who are enrolled in the plan pur10 suant to a contractual agreement between the plan and an

11 employer or other group health plan that provides employ12 ment-based retiree health coverage (as defined in section

13 1860D–20(d)(4)(B)) if the premium amount is the same for

14 all such enrollees under such agreement.

15 ‘‘(d) DETERMINATION OF PREMIUM REDUCTIONS, RE16 DUCED COST-SHARING, ADDITIONAL BENEFITS, AND BENE17 FICIARY PREMIUMS.—

18 ‘‘(1) BIDS BELOW THE BENCHMARK.—If the Sec19 retary determines under section 1853(d)(3) that the

20 weighted service area benchmark amount exceeds the

21 plan bid, the Secretary shall require the plan to pro22 vide additional benefits in accordance with subsection

23 (g).

24 ‘‘(2) BIDS ABOVE THE BENCHMARK.—If the Sec25 retary determines under section 1853(d)(3) that the
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1 plan bid exceeds the weighted service area benchmark

2 amount (determined under section 1853(d)(2)), the

3 amount of such excess shall be the MedicareAdvantage

4 monthly basic beneficiary premium (as defined in

5 section 1854(b)(2)(A)).

6 ‘‘(e) TERMS AND CONDITIONS OF IMPOSING PRE7 MIUMS.—Each MedicareAdvantage organization shall per8 mit the payment of any MedicareAdvantage monthly basic

9 premium, the MedicareAdvantage monthly beneficiary obli10 gation for qualified prescription drug coverage, and the

11 MedicareAdvantage monthly beneficiary premium for en12 hanced medical benefits on a monthly basis, may terminate

13 election of individuals for a MedicareAdvantage plan for

14 failure to make premium payments only in accordance with

15 section 1851(g)(3)(B)(i), and may not provide for cash or

16 other monetary rebates as an inducement for enrollment or

17 otherwise (other than as an additional benefit described in

18 subsection (g)(1)(C)(i)).

19 ‘‘(f) LIMITATION ON ENROLLEE LIABILITY.—

20 ‘‘(1) FOR BENEFITS UNDER THE ORIGINAL MEDI21 CARE FEE-FOR-SERVICE PROGRAM OPTION.—The sum

22 of—

23 ‘‘(A) the MedicareAdvantage monthly basic

24 beneficiary premium (multiplied by 12) and the

25 actuarial value of the deductibles, coinsurance,
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1 and copayments (determined on the same basis

2 as used in determining the plan’s bid under

3 paragraph (2)(C)) applicable on average to indi4 viduals enrolled under this part with a

5 MedicareAdvantage plan described in subpara6 graph (A) of section 1851(a)(2) of an organiza7 tion with respect to required benefits described in

8 section 1852(a)(1)(A); must equal

9 ‘‘(B) the actuarial value of the deductibles,

10 coinsurance, and copayments that would be ap11 plicable on average to individuals who have

12 elected to receive benefits under the original

13 medicare fee-for-service program option if such

14 individuals were not members of a

15 MedicareAdvantage organization for the year

16 (adjusted as determined appropriate by the Sec17 retary to account for geographic differences and

18 for plan cost and utilization differences).

19 ‘‘(2) FOR ENHANCED MEDICAL BENEFITS.—If the

20 MedicareAdvantage organization provides to its mem21 bers enrolled under this part in a MedicareAdvantage

22 plan described in subparagraph (A) of section

23 1851(a)(2) with respect to enhanced medical benefits

24 relating to benefits under the original medicare fee25 for-service program option, the sum of the
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1 MedicareAdvantage monthly beneficiary premium for

2 enhanced medical benefits (multiplied by 12) charged

3 and the actuarial value of its deductibles, coinsur4 ance, and copayments charged with respect to such

5 benefits for a year must equal the adjusted commu6 nity rate (as defined in subsection (g)(3)) for such

7 benefits for the year minus the actuarial value of any

8 additional benefits pursuant to clause (ii), (iii), or

9 (iv) of subsection (g)(2)(C) that the plan specified

10 under subsection (a)(2)(i)(II).

11 ‘‘(3) DETERMINATION ON OTHER BASIS.—If the

12 Secretary determines that adequate data are not

13 available to determine the actuarial value under

14 paragraph (1)(A) or (2), the Secretary may determine

15 such amount with respect to all individuals in the

16 same geographic area, the State, or in the United

17 States, eligible to enroll in the MedicareAdvantage

18 plan involved under this part or on the basis of other

19 appropriate data.

20 ‘‘(4) SPECIAL RULE FOR PRIVATE FEE-FOR-SERV21 ICE PLANS.—With respect to a MedicareAdvantage

22 private fee-for-service plan (other than a plan that is

23 an MSA plan), in no event may—

24 ‘‘(A) the actuarial value of the deductibles,

25 coinsurance, and copayments applicable on aver-
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1 age to individuals enrolled under this part with

2 such a plan of an organization with respect to

3 required benefits described in subparagraphs (A),

4 (C), and (D) of section 1852(a)(1); exceed

5 ‘‘(B) the actuarial value of the deductibles,

6 coinsurance, and copayments that would be ap7 plicable on average to individuals entitled to (or

8 enrolled for) benefits under part A and enrolled

9 under part B if they were not members of a

10 MedicareAdvantage organization for the year.

11 ‘‘(g) REQUIREMENT FOR ADDITIONAL BENEFITS.—

12 ‘‘(1) REQUIREMENT.—

13 ‘‘(A) IN GENERAL.—Each

14 MedicareAdvantage organization (in relation to

15 a MedicareAdvantage plan, other than an MSA

16 plan, it offers) shall provide that if there is an

17 excess amount (as defined in subparagraph (B))

18 for the plan for a contract year, subject to the

19 succeeding provisions of this subsection, the orga20 nization shall provide to individuals such addi21 tional benefits described in subparagraph (C) as

22 the organization may specify in a value which

23 the Secretary determines is at least equal to the

24 adjusted excess amount (as defined in subpara25 graph (D)).
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1 ‘‘(B) EXCESS AMOUNT.—For purposes of

2 this paragraph, the term ‘excess amount’ means,

3 for an organization for a plan, is 100 percent of

4 the amount (if any) by which the weighted serv5 ice area benchmark amount (determined under

6 section 1853(d)(2)) exceeds the plan bid (as ad7 justed under section 1853(d)(1)).

8 ‘‘(C) ADDITIONAL BENEFITS DESCRIBED.—

9 The additional benefits described in this sub10 paragraph are as follows:

11 ‘‘(i) Subject to subparagraph (F), a

12 monthly part B premium reduction for in13 dividuals enrolled in the plan.

14 ‘‘(ii) Lowering the amount of the uni15 fied deductible and decreasing the max16 imum limitations on out-of-pocket expenses

17 for individuals enrolled in the plan.

18 ‘‘(iii) A reduction in the actuarial

19 value of plan cost-sharing for plan enrollees.

20 ‘‘(iv) Subject to subparagraph (E),

21 such additional benefits as the organization

22 may specify.

23 ‘‘(v) Contributing to the stabilization

24 fund under paragraph (2).
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1 ‘‘(vi) Any combination of the reduc2 tions and benefits described in clauses (i)

3 through (v).

4 ‘‘(D) ADJUSTED EXCESS AMOUNT.—For

5 purposes of this paragraph, the term ‘adjusted

6 excess amount’ means, for an organization for a

7 plan, is the excess amount reduced to reflect any

8 amount withheld and reserved for the organiza9 tion for the year under paragraph (2).

10 ‘‘(E) RULE FOR APPROVAL OF MEDICAL AND

11 PRESCRIPTION DRUG BENEFITS.—An organiza12 tion may not specify any additional benefit that

13 provides for the coverage of any prescription

14 drug (other than that relating to prescription

15 drugs covered under the original medicare fee16 for-service program option).

17 ‘‘(F) PREMIUM REDUCTIONS.—

18 ‘‘(i) IN GENERAL.—Subject to clause

19 (ii), as part of providing any additional

20 benefits required under subparagraph (A), a

21 MedicareAdvantage organization may elect

22 a reduction in its payments under section

23 1853(a)(1)(A)(i) with respect to a

24 MedicareAdvantage plan and the Secretary

25 shall apply such reduction to reduce the
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1 premium under section 1839 of each en2 rollee in such plan as provided in section

3 1840(i).

4 ‘‘(ii) AMOUNT OF REDUCTION.—The

5 amount of the reduction under clause (i)

6 with respect to any enrollee in a

7 MedicareAdvantage plan—

8 ‘‘(I) may not exceed 125 percent

9 of the premium described under section

10 1839(a)(3); and

11 ‘‘(II) shall apply uniformly to

12 each enrollee of the MedicareAdvantage

13 plan to which such reduction applies.

14 ‘‘(G) UNIFORM APPLICATION.—This para15 graph shall be applied uniformly for all enrollees

16 for a plan.

17 ‘‘(H) CONSTRUCTION.—Nothing in this sub18 section shall be construed as preventing a

19 MedicareAdvantage organization from providing

20 enhanced medical benefits (described in section

21 1852(a)(3)) that are in addition to the health

22 care benefits otherwise required to be provided

23 under this paragraph and from imposing a pre24 mium for such enhanced medical benefits.
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1 ‘‘(2) STABILIZATION FUND.—A

2 MedicareAdvantage organization may provide that a

3 part of the value of an excess amount described in

4 paragraph (1) be withheld and reserved in the Fed5 eral Hospital Insurance Trust Fund and in the Fed6 eral Supplementary Medical Insurance Trust Fund

7 (in such proportions as the Secretary determines to be

8 appropriate) by the Secretary for subsequent annual

9 contract periods, to the extent required to prevent

10 undue fluctuations in the additional benefits offered

11 in those subsequent periods by the organization in ac12 cordance with such paragraph. Any of such value of

13 the amount reserved which is not provided as addi14 tional benefits described in paragraph (1)(A) to indi15 viduals electing the MedicareAdvantage plan of the

16 organization in accordance with such paragraph

17 prior to the end of such periods, shall revert for the

18 use of such Trust Funds.

19 ‘‘(3) ADJUSTED COMMUNITY RATE.—For pur20 poses of this subsection, subject to paragraph (4), the

21 term ‘adjusted community rate’ for a service or serv22 ices means, at the election of a MedicareAdvantage or23 ganization, either—

24 ‘‘(A) the rate of payment for that service or

25 services which the Secretary annually determines
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1 would apply to an individual electing a

2 MedicareAdvantage plan under this part if the

3 rate of payment were determined under a ‘com4 munity rating system’ (as defined in section

5 1302(8) of the Public Health Service Act, other

6 than subparagraph (C)); or

7 ‘‘(B) such portion of the weighted aggregate

8 premium, which the Secretary annually esti9 mates would apply to such an individual, as the

10 Secretary annually estimates is attributable to

11 that service or services,

12 but adjusted for differences between the utilization

13 characteristics of the individuals electing coverage

14 under this part and the utilization characteristics of

15 the other enrollees with the plan (or, if the Secretary

16 finds that adequate data are not available to adjust

17 for those differences, the differences between the utili18 zation characteristics of individuals selecting other

19 MedicareAdvantage coverage, or MedicareAdvantage

20 eligible individuals in the area, in the State, or in the

21 United States, eligible to elect MedicareAdvantage

22 coverage under this part and the utilization charac23 teristics of the rest of the population in the area, in

24 the State, or in the United States, respectively).
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1 ‘‘(4) DETERMINATION BASED ON INSUFFICIENT

2 DATA.—For purposes of this subsection, if the Sec3 retary finds that there is insufficient enrollment expe4 rience to determine the average amount of payments

5 to be made under this part at the beginning of a con6 tract period or to determine (in the case of a newly

7 operated provider-sponsored organization or other

8 new organization) the adjusted community rate for

9 the organization, the Secretary may determine such

10 an average based on the enrollment experience of other

11 contracts entered into under this part and may deter12 mine such a rate using data in the general commer13 cial marketplace.

14 ‘‘(h) PROHIBITION OF STATE IMPOSITION OF PREMIUM

15 TAXES.—No State may impose a premium tax or similar

16 tax with respect to payments to MedicareAdvantage organi17 zations under section 1853.

18 ‘‘(i) PERMITTING USE OF SEGMENTS OF SERVICE

19 AREAS.—The Secretary shall permit a MedicareAdvantage

20 organization to elect to apply the provisions of this section

21 uniformly to separate segments of a service area (rather

22 than uniformly to an entire service area) as long as such

23 segments are composed of 1 or more MedicareAdvantage

24 payment areas.’’.
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1 (b) STUDY AND REPORT ON CLARIFICATION OF AU2 THORITY REGARDING DISAPPROVAL OF UNREASONABLE

3 BENEFICIARY COST-SHARING.—

4 (1) STUDY.—The Secretary, in consultation with

5 beneficiaries, consumer groups, employers, and

6 Medicare+Choice organizations, shall conduct a study

7 to determine the extent to which the cost-sharing

8 structures under Medicare+Choice plans under part

9 C of title XVIII of the Social Security Act discourage

10 access to covered services or discriminate based on the

11 health status of Medicare+Choice eligible individuals

12 (as defined in section 1851(a)(3) of the Social Secu13 rity Act (42 U.S.C. 1395w–21(a)(3))).

14 (2) REPORT.—Not later than December 31, 2004,

15 the Secretary shall submit a report to Congress on the

16 study conducted under paragraph (1) together with

17 recommendations for such legislation and administra18 tive actions as the Secretary considers appropriate.

19 SEC. 205. SPECIAL RULES FOR PRESCRIPTION DRUG BENE20 FITS.

21 Part C of title XVIII (42 U.S.C. 1395w–21 et seq.)

22 is amended by inserting after section 1857 the following

23 new section:

24 ‘‘SPECIAL RULES FOR PRESCRIPTION DRUG BENEFITS

25 ‘‘SEC. 1858A. (a) AVAILABILITY.—
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1 ‘‘(1) PLANS REQUIRED TO PROVIDE QUALIFIED

2 PRESCRIPTION DRUG COVERAGE TO ENROLLEES.—

3 ‘‘(A) IN GENERAL.—Except as provided in

4 subparagraph (B), on and after January 1,

5 2006, a MedicareAdvantage organization offering

6 a MedicareAdvantage plan (except for an MSA

7 plan) shall make available qualified prescription

8 drug coverage that meets the requirements for

9 such coverage under this part and part D to each

10 enrollee of the plan.

11 ‘‘(B) PRIVATE FEE-FOR-SERVICE PLANS

12 MAY, BUT ARE NOT REQUIRED TO, PROVIDE

13 QUALIFIED PRESCRIPTION DRUG COVERAGE.—

14 Pursuant to section 1852(a)(2)(D), a private fee15 for-service plan may elect not to provide quali16 fied prescription drug coverage under part D to

17 individuals residing in the area served by the

18 plan.

19 ‘‘(2) REFERENCE TO PROVISION PERMITTING AD20 DITIONAL PRESCRIPTION DRUG COVERAGE.—For the

21 provisions of part D, made applicable to this part

22 pursuant to paragraph (1), that permit a plan to

23 make available qualified prescription drug coverage

24 that includes coverage of covered drugs that exceeds

25 the coverage required under paragraph (1) of section
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1 1860D–6 in an area, but only if the

2 MedicareAdvantage organization offering the plan

3 also offers a MedicareAdvantage plan in the area that

4 only provides the coverage that is required under such

5 paragraph (1), see paragraph (2) of such section.

6 ‘‘(3) RULE FOR APPROVAL OF MEDICAL AND PRE7 SCRIPTION DRUG BENEFITS.—Pursuant to sections

8 1854(g)(1)(F) and 1852(a)(3)(D), a

9 MedicareAdvantage organization offering a

10 MedicareAdvantage plan that provides qualified pre11 scription drug coverage may not make available cov12 erage of any prescription drugs (other than that relat13 ing to prescription drugs covered under the original

14 medicare fee-for-service program option) to an en15 rollee as an additional benefit or as an enhanced

16 medical benefit.

17 ‘‘(b) COMPLIANCE WITH ADDITIONAL BENEFICIARY

18 PROTECTIONS.—With respect to the offering of qualified

19 prescription drug coverage by a MedicareAdvantage organi20 zation under a MedicareAdvantage plan, the organization

21 and plan shall meet the requirements of section 1860D–5,

22 including requirements relating to information dissemina23 tion and grievance and appeals, and such other require24 ments under part D that the Secretary determines appro25 priate in the same manner as such requirements apply to
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1 an eligible entity and a Medicare Prescription Drug plan

2 under part D. The Secretary shall waive such requirements

3 to the extent the Secretary determines that such require4 ments duplicate requirements otherwise applicable to the or5 ganization or the plan under this part.

6 ‘‘(c) PAYMENTS FOR PRESCRIPTION DRUGS.—

7 ‘‘(1) PAYMENT OF FULL AMOUNT OF PREMIUM TO

8 ORGANIZATIONS FOR QUALIFIED PRESCRIPTION DRUG

9 COVERAGE.—

10 ‘‘(A) IN GENERAL.—For each year (begin11 ning with 2006), the Secretary shall pay to each

12 MedicareAdvantage organization offering a

13 MedicareAdvantage plan that provides qualified

14 prescription drug coverage, an amount equal to

15 the full amount of the monthly premium sub16 mitted under section 1854(a)(2)(B) for the year,

17 as adjusted using the risk adjusters that apply to

18 the standard prescription drug coverage pub19 lished under section 1860D–11.

20 ‘‘(B) APPLICATION OF PART D RISK COR21 RIDOR, STABILIZATION RESERVE FUND, AND AD22 MINISTRATIVE EXPENSES PROVISIONS.—The pro23 visions of subsections (b), (c), and (d) of section

24 1860D–16 shall apply to a MedicareAdvantage

25 organization offering a MedicareAdvantage plan
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1 that provides qualified prescription drug cov2 erage and payments made to such organization

3 under subparagraph (A) in the same manner as

4 such provisions apply to an eligible entity offer5 ing a Medicare Prescription Drug plan and pay6 ments made to such entity under subsection (a)

7 of section 1860D–16.

8 ‘‘(2) PAYMENT FROM PRESCRIPTION DRUG AC9 COUNT.—Payment made to MedicareAdvantage orga10 nizations under this subsection shall be made from the

11 Prescription Drug Account in the Federal Supple12 mentary Medical Insurance Trust Fund under section

13 1841.

14 ‘‘(d) COMPUTATION OF MEDICAREADVANTAGE MONTH15 LY BENEFICIARY OBLIGATION FOR QUALIFIED PRESCRIP16 TION DRUG COVERAGE.—In the case of a

17 MedicareAdvantage eligible individual receiving qualified

18 prescription drug coverage under a MedicareAdvantage

19 plan during a year after 2005, the MedicareAdvantage

20 monthly beneficiary obligation for qualified prescription

21 drug coverage of such individual in the year shall be deter22 mined in the same manner as the monthly beneficiary obli23 gation is determined under section 1860D–17 for eligible

24 beneficiaries enrolled in a Medicare Prescription Drug

25 plan, except that, for purposes of this subparagraph, any
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1 reference to the monthly plan premium approved by the

2 Secretary under section 1860D–13 shall be treated as a ref3 erence to the monthly premium for qualified prescription

4 drug coverage submitted by the MedicareAdvantage organi5 zation offering the plan under section 1854(a)(2)(A) and

6 approved by the Secretary.

7 ‘‘(e) COLLECTION OF MEDICAREADVANTAGE MONTHLY

8 BENEFICIARY OBLIGATION FOR QUALIFIED PRESCRIPTION

9 DRUG COVERAGE.—The provisions of section 1860D–18,

10 including subsection (b) of such section, shall apply to the

11 amount of the MedicareAdvantage monthly beneficiary obli12 gation for qualified prescription drug coverage (as deter13 mined under subsection (d)) required to be paid by a

14 MedicareAdvantage eligible individual enrolled in a

15 MedicareAdvantage plan in the same manner as such provi16 sions apply to the amount of the monthly beneficiary obli17 gation required to be paid by an eligible beneficiary en18 rolled in a Medicare Prescription Drug plan under part

19 D.

20 ‘‘(f) AVAILABILITY OF PREMIUM SUBSIDY AND COST21 SHARING REDUCTIONS FOR LOW-INCOME ENROLLEES AND

22 REINSURANCE PAYMENTS.—For provisions—

23 ‘‘(1) providing premium subsidies and cost-shar24 ing reductions for low-income individuals receiving
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1 qualified prescription drug coverage through a

2 MedicareAdvantage plan, see section 1860D–19; and

3 ‘‘(2) providing a MedicareAdvantage organiza4 tion with reinsurance payments for certain expenses

5 incurred in providing qualified prescription drug cov6 erage through a MedicareAdvantage plan, see section

7 1860D–20.’’.

8 (b) TREATMENT OF REDUCTION FOR PURPOSES OF

9 DETERMINING GOVERNMENT CONTRIBUTION UNDER PART

10 B.—Section 1844(c) (42 U.S.C. 1395w) is amended by

11 striking ‘‘section 1854(f)(1)(E)’’ and inserting ‘‘section

12 1854(d)(1)(A)(i)’’.

13 SEC. 206. FACILITATING EMPLOYER PARTICIPATION.

14 Section 1858(h) (as added by section 211) is

15 amended—

16 (1) by inserting ‘‘(including subsection (i) of

17 such section)’’ after ‘‘section 1857’’; and

18 (2) by adding at the end the following new sen19 tence: ‘‘In applying the authority under section

20 1857(i) pursuant to this subsection, the Adminis21 trator may permit MedicareAdvantage plans to estab22 lish separate premium amounts for enrollees in an

23 employer or other group health plan that provides

24 employment-based retiree health coverage (as defined

25 in section 1860D–20(d)(4)(B)).’’
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1 SEC. 207. ADMINISTRATION BY THE CENTER FOR MEDICARE

2 CHOICES.

3 On and after January 1, 2006, the MedicareAdvantage

4 program under part C of title XVIII of the Social Security

5 Act shall be administered by the Center for Medicare

6 Choices established under section 1808 such title (as added

7 by section 301), and each reference to the Secretary made

8 in such part shall be deemed to be a reference to the Admin9 istrator of the Center for Medicare Choices.

10 SEC. 208. CONFORMING AMENDMENTS.

11 (a) ORGANIZATIONAL AND FINANCIAL REQUIREMENTS

12 FOR MEDICAREADVANTAGE ORGANIZATIONS; PROVIDER13 SPONSORED ORGANIZATIONS.—Section 1855 (42 U.S.C.

14 1395w–25) is amended—

15 (1) in subsection (b), in the matter preceding

16 paragraph (1), by inserting ‘‘subparagraphs (A), (B),

17 and (D) of’’ before ‘‘section 1852(A)(1)’’; and

18 (2) by striking ‘‘Medicare+Choice’’ and insert19 ing ‘‘MedicareAdvantage’’ each place it appears.

20 (b) ESTABLISHMENT OF PSO STANDARDS.—Section

21 1856 (42 U.S.C. 1395w–26) is amended by striking

22 ‘‘Medicare+Choice’’ and inserting ‘‘MedicareAdvantage’’

23 each place it appears.

24 (c) CONTRACTS WITH MEDICAREADVANTAGE ORGANI25 ZATIONS.—Section 1857 (42 U.S.C. 1395w–27) is

26 amended—
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1 (1) in subsection (g)(1)—

2 (A) in subparagraph (B), by striking

3 ‘‘amount of the Medicare+Choice monthly basic

4 and supplemental beneficiary premiums’’ and

5 inserting ‘‘amounts of the MedicareAdvantage

6 monthly basic premium and MedicareAdvantage

7 monthly beneficiary premium for enhanced med8 ical benefits’’;

9 (B) in subparagraph (F), by striking ‘‘or’’

10 after the semicolon at the end;

11 (C) in subparagraph (G), by adding ‘‘or’’

12 after the semicolon at the end; and

13 (D) by inserting after subparagraph (G) the

14 following new subparagraph:

15 ‘‘(H)(i) charges any individual an amount

16 in excess of the MedicareAdvantage monthly ben17 eficiary obligation for qualified prescription

18 drug coverage under section 1858A(d);

19 ‘‘(ii) provides coverage for prescription

20 drugs that is not qualified prescription drug cov21 erage;

22 ‘‘(iii) offers prescription drug coverage, but

23 does not make standard prescription drug cov24 erage available; or
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1 ‘‘(iv) provides coverage for prescription

2 drugs (other than that relating to prescription

3 drugs covered under the original medicare fee4 for-service program option described in section

5 1851(a)(1)(A)(i)) as an enhanced medical benefit

6 under section 1852(a)(3)(D) or as an additional

7 benefit under section 1854(g)(1)(F),’’; and

8 (2) by striking ‘‘Medicare+Choice’’ and insert9 ing ‘‘MedicareAdvantage’’ each place it appears.

10 (d) DEFINITIONS; MISCELLANEOUS PROVISIONS.—Sec11 tion 1859 (42 U.S.C. 1395w–28) is amended—

12 (1) by striking subsection (c) and inserting the

13 following new subsection:

14 ‘‘(c) OTHER REFERENCES TO OTHER TERMS.—

15 ‘‘(1) ENHANCED MEDICAL BENEFITS.—The term

16 ‘enhanced medical benefits’ is defined in section

17 1852(a)(3)(E).

18 ‘‘(2) MEDICAREADVANTAGE ELIGIBLE INDI19 VIDUAL.—The term ‘MedicareAdvantage eligible indi20 vidual’ is defined in section 1851(a)(3).

21 ‘‘(3) MEDICAREADVANTAGE PAYMENT AREA.—

22 The term ‘MedicareAdvantage payment area’ is de23 fined in section 1853(d).

24 ‘‘(4) NATIONAL PER CAPITA MEDICARE+CHOICE

25 GROWTH PERCENTAGE.—The ‘national per capita
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1 Medicare+Choice growth percentage’ is defined in sec2 tion 1853(c)(6).

3 ‘‘(5) MEDICAREADVANTAGE MONTHLY BASIC BEN4 EFICIARY PREMIUM; MEDICAREADVANTAGE MONTHLY

5 BENEFICIARY OBLIGATION FOR QUALIFIED PRESCRIP6 TION DRUG COVERAGE; MEDICAREADVANTAGE MONTH7 LY BENEFICIARY PREMIUM FOR ENHANCED MEDICAL

8 BENEFITS.—The terms ‘MedicareAdvantage monthly

9 basic beneficiary premium’, ‘MedicareAdvantage

10 monthly beneficiary obligation for qualified prescrip11 tion drug coverage’, and ‘MedicareAdvantage monthly

12 beneficiary premium for enhanced medical benefits’

13 are defined in section 1854(b)(2).

14 ‘‘(6) QUALIFIED PRESCRIPTION DRUG COV15 ERAGE.—The term ‘qualified prescription drug cov16 erage’ has the meaning given such term in section

17 1860D(9).

18 ‘‘(7) STANDARD PRESCRIPTION DRUG COV19 ERAGE.—The term ‘standard prescription drug cov20 erage’ has the meaning given such term in section

21 1860D(10).’’; and

22 (2) by striking ‘‘Medicare+Choice’’ and insert23 ing ‘‘MedicareAdvantage’’ each place it appears.

24 (e) CONFORMING AMENDMENTS EFFECTIVE BEFORE

25 2006.—
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1 (1) EXTENSION OF MSAS.—Section 1851(b)(4)

2 (42 U.S.C. 1395w–21(b)(4)) is amended by striking

3 ‘‘January 1, 2003’’ and inserting ‘‘January 1, 2004’’.

4 (2) CONTINUOUS OPEN ENROLLMENT AND

5 DISENROLLMENT THROUGH 2005.—Section 1851(e) of

6 the Social Security Act (42 U.S.C. 1395w–21(e)) is

7 amended—

8 (A) in paragraph (2)(A), by striking

9 ‘‘THROUGH 2004’’ and ‘‘December 31,2004’’ and

10 inserting ‘‘THROUGH 2005’’ and ‘‘December 31,

11 2005’’, respectively;

12 (B) in the heading of paragraph (2)(B), by

13 striking ‘‘DURING 2005’’ and inserting ‘‘DURING

14 2006’’;

15 (C) in paragraphs (2)(B)(i) and (2)(C)(i),

16 by striking ‘‘2005’’ and inserting ‘‘2006’’ each

17 place it appears;

18 (D) in paragraph (2)(D), by striking

19 ‘‘2004’’ and inserting ‘‘2005’’; and

20 (E) in paragraph (4), by striking ‘‘2005’’

21 and inserting ‘‘2006’’ each place it appears.

22 (3) UPDATE IN MINIMUM PERCENTAGE IN23 CREASE.—Section 1853(c)(1)(C) (42 U.S.C. 1395w–

24 23(c)(1)(C)) is amended by striking clause (iv) and

25 inserting the following new clauses:
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1 ‘‘(iv) For 2002, 2003, and 2004, 102

2 percent of the annual Medicare+Choice

3 capitation rate under this paragraph for

4 the area for the previous year.

5 ‘‘(v) For 2005, 103 percent of the an6 nual Medicare+Choice capitation rate

7 under this paragraph for the area for 2003.

8 ‘‘(vi) For 2006 and each succeeding

9 year, 102 percent of the annual

10 Medicare+Choice capitation rate under this

11 paragraph for the area for the previous

12 year, except that such rate shall be deter13 mined by substituting ‘102’ for ‘103’ in

14 clause (v).’’.

15 (4) EFFECTIVE DATE.—The amendments made

16 by this subsection shall take effect on the date of en17 actment of this Act.

18 (e) OTHER CONFORMING AMENDMENTS.—

19 (1) CONFORMING MEDICARE CROSS-REF20 ERENCES.—

21 (A) Section 1839(a)(2) (42 U.S.C.

22 1395r(a)(2)) is amended by striking ‘‘section

23 1854(f)(1)(E)’’ and inserting ‘‘section

24 1854(g)(1)(C)(i)’’.
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1 (B) Section 1840(i) (42 U.S.C. 1395s(i)) is

2 amended by striking ‘‘section 1854(f)(1)(E)’’ and

3 inserting ‘‘section 1854(g)(1)(C)(i)’’.

4 (C) Section 1844(c) (42 U.S.C. 1395w(c)) is

5 amended by striking ‘‘section 1854(f)(1)(E)’’ and

6 inserting ‘‘section 1854(g)(1)(C)(i)’’.

7 (D) Section 1876(k)(3)(A) (42 U.S.C.

8 1395mm(k)(3)(A)) is amended by inserting ‘‘(as

9 in effect immediately before the enactment of the

10 Prescription Drug and Medicare Improvements

11 Act of 2003)’’ after section 1853(a).

12 (F) Section 1876(k)(4) (42 U.S.C.

13 1395mm(k)(4)(A)) is amended—

14 (i) in subparagraph (A), by striking

15 ‘‘section 1853(a)(3)(B)’’ and inserting ‘‘sec16 tion 1853(a)(3)(D)’’; and

17 (ii) in subparagraph (B), by striking

18 ‘‘section 1854(g)’’ and inserting ‘‘section

19 1854(h)’’.

20 (G) Section 1876(k)(4)(C) (42 U.S.C.

21 1395mm(k)(4)(C)) in amended by inserting ‘‘(as

22 in effect immediately before the enactment of the

23 Prescription Drug and Medicare Improvements

24 Act of 2003)’’ after ‘‘section 1851(e)(6)’’.
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1 (H) Section 1894(d) (42 U.S.C. 1395eee(d))

2 is amended by adding at the end the following

3 new paragraph:

4 ‘‘(3) APPLICATION OF PROVISIONS.—For pur5 poses of paragraphs (1) and (2), the references to sec6 tion 1853 and subsection (a)(2) of such section in

7 such paragraphs shall be deemed to be references to

8 those provisions as in effect immediately before the

9 enactment of the Prescription Drug and Medicare Im10 provements Act of 2003.’’.

11 (2) CONFORMING MEDICARE TERMINOLOGY.—

12 Title XVIII (42 U.S.C. 1395 et seq.), except for part

13 C of such title (42 U.S.C. 1395w–21 et seq.), and title

14 XIX (42 U.S.C. 1396 et seq.) are each amended by

15 striking ‘‘Medicare+Choice’’ and inserting

16 ‘‘MedicareAdvantage’’ each place it appears.

17 SEC. 209. EFFECTIVE DATE.

18 (a) IN GENERAL.—Except as provided in section

19 208(d)(3) and subsection (b), the amendments made by this

20 title shall apply with respect to plan years beginning on

21 and after January 1, 2006.

22 (b) MEDICAREADVANTAGE MSA PLANS.—Notwith23 standing any provision of this title, the Secretary shall

24 apply the payment and other rules that apply with respect

25 to an MSA plan described in section 1851(a)(2)(B) of the
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1 Social Security Act (42 U.S.C. 1395w–21(a)(2)(B)) as if

2 this title had not been enacted.

3 SEC. 210. IMPROVEMENTS IN MEDICAREADVANTAGE

4 BENCHMARK DETERMINATIONS.

5 (a) INCLUSION OF COSTS OF DOD AND VA MILITARY

6 FACILITY SERVICES TO MEDICARE-ELIGIBLE BENE7 FICIARIES IN CALCULATION OF MEDICAREADVANTAGE PAY8 MENT RATES.—

9 (1) FOR PURPOSES OF CALCULATING

10 MEDICARE+CHOICE PAYMENT RATES.—Section

11 1853(c)(3) (42 U.S.C. 1395w–23(c)(3)), as amended

12 by section 203, is amended—

13 (A) in subparagraph (A), by striking ‘‘sub14 paragraph (B)’’ and inserting ‘‘subparagraphs

15 (B) and (E)’’; and

16 (B) by adding at the end the following new

17 subparagraph:

18 ‘‘(E) INCLUSION OF COSTS OF DOD AND VA

19 MILITARY FACILITY SERVICES TO MEDICARE-ELI20 GIBLE BENEFICIARIES.—In determining the

21 area-specific Medicare+Choice capitation rate

22 under subparagraph (A) for a year (beginning

23 with 2006), the annual per capita rate of pay24 ment for 1997 determined under section

25 1876(a)(1)(C) shall be adjusted to include in the
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1 rate the Secretary’s estimate, on a per capita

2 basis, of the amount of additional payments that

3 would have been made in the area involved

4 under this title if individuals entitled to benefits

5 under this title had not received services from fa6 cilities of the Department of Defense or the De7 partment of Veterans Affairs.’’.

8 (2) FOR PURPOSES OF CALCULATING LOCAL FEE9 FOR-SERVICE RATES.—Section 1853(d)(5) (42 U.S.C.

10 1395w–23(d)(5)), as amended by section 203, is

11 amended—

12 (A) in subparagraph (A), by striking ‘‘sub13 paragraph (B)’’ and inserting ‘‘subparagraphs

14 (B) and (C)’’; and

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

16 subparagraph:

17 ‘‘(C) INCLUSION OF COSTS OF DOD AND VA

18 MILITARY FACILITY SERVICES TO MEDICARE-ELI19 GIBLE BENEFICIARIES.—In determining the local

20 fee-for-service rate under subparagraph (A) for a

21 year (beginning with 2006), the annual per cap22 ita rate of payment for 1997 determined under

23 section 1876(a)(1)(C) shall be adjusted to include

24 in the rate the Secretary’s estimate, on a per

25 capita basis, of the amount of additional pay-
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1 ments that would have been made in the area in2 volved under this title if individuals entitled to

3 benefits under this title had not received services

4 from facilities of the Department of Defense or

5 the Department of Veterans Affairs.’’.

6 (b) EFFECTIVE DATE.—The amendments made by this

7 section shall apply with respect to plan years beginning on

8 and after January 1, 2006.

9 Subtitle B—Preferred Provider

10 Organizations

11 SEC. 211. ESTABLISHMENT OF MEDICAREADVANTAGE PRE12 FERRED PROVIDER PROGRAM OPTION.

13 (a) ESTABLISHMENT OF PREFERRED PROVIDER PRO14 GRAM OPTION.—Section 1851(a)(2) is amended by adding

15 at the end the following new subparagraph:

16 ‘‘(D) PREFERRED PROVIDER ORGANIZATION

17 PLANS.—A MedicareAdvantage preferred pro18 vider organization plan under the program es19 tablished under section 1858.’’.

20 (b) PROGRAM SPECIFICATIONS.—Part C of title XVIII

21 (42 U.S.C. 1395w–21 et seq.) is amended by inserting after

22 section 1857 the following new section:

23 ‘‘PREFERRED PROVIDER ORGANIZATIONS

24 ‘‘SEC. 1858. (a) ESTABLISHMENT OF PROGRAM.—

25 ‘‘(1) IN GENERAL.—Beginning on January 1,

26 2006, there is established a preferred provider pro-
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1 gram under which preferred provider organization

2 plans offered by preferred provider organizations are

3 offered to MedicareAdvantage eligible individuals in

4 preferred provider regions.

5 ‘‘(2) DEFINITIONS.—

6 ‘‘(A) PREFERRED PROVIDER ORGANIZA7 TION.—The term ‘preferred provider organiza8 tion’ means an entity with a contract under sec9 tion 1857 that meets the requirements of this sec10 tion applicable with respect to preferred provider

11 organizations.

12 ‘‘(B) PREFERRED PROVIDER ORGANIZATION

13 PLAN.—The term ‘preferred provider organiza14 tion plan’ means a MedicareAdvantage plan

15 that—

16 ‘‘(i) has a network of providers that

17 have agreed to a contractually specified re18 imbursement for covered benefits with the

19 organization offering the plan;

20 ‘‘(ii) provides for reimbursement for all

21 covered benefits regardless of whether such

22 benefits are provided within such network of

23 providers; and

24 ‘‘(iii) is offered by a preferred provider

25 organization.
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1 ‘‘(C) PREFERRED PROVIDER REGION.—The

2 term ‘preferred provider region’ means—

3 ‘‘(i) a region established under para4 graph (3); and

5 ‘‘(ii) a region that consists of the entire

6 United States.

7 ‘‘(3) PREFERRED PROVIDER REGIONS.—For pur8 poses of this part the Secretary shall establish pre9 ferred provider regions as follows:

10 ‘‘(A) There shall be at least 10 regions.

11 ‘‘(B) Each region must include at least 1

12 State.

13 ‘‘(C) The Secretary may not divide States

14 so that portions of the State are in different re15 gions.

16 ‘‘(D) To the extent possible, the Secretary

17 shall include multistate metropolitan statistical

18 areas in a single region. The Secretary may di19 vide metropolitan statistical areas where it is

20 necessary to establish regions of such size and ge21 ography as to maximize the participation of pre22 ferred provider organization plans.

23 ‘‘(E) The Secretary may conform the pre24 ferred provider regions to the service areas estab25 lished under section 1860D–10.
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1 ‘‘(b) ELIGIBILITY, ELECTION, AND ENROLLMENT; BEN2 EFITS AND BENEFICIARY PROTECTIONS.—

3 ‘‘(1) IN GENERAL.—Except as provided in the

4 succeeding provisions of this subsection, the provisions

5 of sections 1851 and 1852 that apply with respect to

6 coordinated care plans shall apply to preferred pro7 vider organization plans offered by a preferred pro8 vider organization.

9 ‘‘(2) SERVICE AREA.—The service area of a pre10 ferred provider organization plan shall be a preferred

11 provider region.

12 ‘‘(3) AVAILABILITY.—Each preferred provider or13 ganization plan must be offered to each

14 MedicareAdvantage eligible individual who resides in

15 the service area of the plan.

16 ‘‘(4) AUTHORITY TO PROHIBIT RISK SELEC17 TION.—The provisions of section 1852(a)(6) shall

18 apply to preferred provider organization plans.

19 ‘‘(5) ASSURING ACCESS TO SERVICES IN PRE20 FERRED PROVIDER ORGANIZATION PLANS.—

21 ‘‘(A) IN GENERAL.—In addition to any

22 other requirements under this section, in the case

23 of a preferred provider organization plan, the or24 ganization offering the plan must demonstrate to

25 the Secretary that the organization has sufficient
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1 number and range of health care professionals

2 and providers willing to provide services under

3 the terms of the plan.

4 ‘‘(B) DETERMINATION OF SUFFICIENT AC5 CESS.—The Secretary shall find that an organi6 zation has met the requirement under subpara7 graph (A) with respect to any category of health

8 care professional or provider if, with respect to

9 that category of provider the plan has contracts

10 or agreements with a sufficient number and

11 range of providers within such category to pro12 vide covered services under the terms of the plan.

13 ‘‘(C) CONSTRUCTION.—Subparagraph (B)

14 shall not be construed as restricting—

15 ‘‘(i) the persons from whom enrollees

16 under such plan may obtain covered bene17 fits; or

18 ‘‘(ii) the categories of licensed health

19 professionals or providers from whom en20 rollees under such a plan may obtain cov21 ered benefits if the covered services are pro22 vided to enrollees in a State where 25 per23 cent or more of the population resides in

24 health professional shortage areas des-
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1 ignated pursuant to section 332 of the Pub2 lic Health Service Act.

3 ‘‘(c) PAYMENTS TO PREFERRED PROVIDER ORGANIZA4 TIONS.—

5 ‘‘(1) PAYMENTS TO ORGANIZATIONS.—

6 ‘‘(A) MONTHLY PAYMENTS.—

7 ‘‘(i) IN GENERAL.—Under a contract

8 under section 1857 and subject to para9 graph (5), subsection (e), and section

10 1859(e)(4), the Secretary shall make, to

11 each preferred provider organization, with

12 respect to coverage of an individual for a

13 month under this part in a preferred pro14 vider region, separate monthly payments

15 with respect to—

16 ‘‘(I) benefits under the original

17 medicare fee-for-service program under

18 parts A and B in accordance with

19 paragraph (4); and

20 ‘‘(II) benefits under the voluntary

21 prescription drug program under part

22 D in accordance with section 1858A

23 and the other provisions of this part.

24 ‘‘(ii) SPECIAL RULE FOR END-STAGE

25 RENAL DISEASE.—The Secretary shall es-
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1 tablish separate rates of payment applicable

2 with respect to classes of individuals deter3 mined to have end-stage renal disease and

4 enrolled in a preferred provider organiza5 tion plan under this clause that are similar

6 to the separate rates of payment described

7 in section 1853(a)(1)(B).

8 ‘‘(B) ADJUSTMENT TO REFLECT NUMBER OF

9 ENROLLEES.—The Secretary may retroactively

10 adjust the amount of payment under this para11 graph in a manner that is similar to the manner

12 in which payment amounts may be retroactively

13 adjusted under section 1853(a)(2).

14 ‘‘(C) COMPREHENSIVE RISK ADJUSTMENT

15 METHODOLOGY.—The Secretary shall apply the

16 comprehensive risk adjustment methodology de17 scribed in section 1853(a)(3)(B) to 100 percent

18 of the amount of payments to plans under para19 graph (4)(D)(ii).

20 ‘‘(D) ADJUSTMENT FOR SPENDING VARI21 ATIONS WITHIN A REGION.—The Secretary shall

22 establish a methodology for adjusting the amount

23 of payments to plans under paragraph (4)(D)(ii)

24 that achieves the same objective as the adjust25 ment described in paragraph 1853(a)(2)(C).
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1 ‘‘(2) ANNUAL CALCULATION OF BENCHMARK

2 AMOUNTS FOR PREFERRED PROVIDER REGIONS.—For

3 each year (beginning in 2006), the Secretary shall

4 calculate a benchmark amount for each preferred pro5 vider region for each month for such year with respect

6 to coverage of the benefits available under the original

7 medicare fee-for-service program option equal to the

8 average of each benchmark amount calculated under

9 section 1853(a)(4) for each MedicareAdvantage pay10 ment area for the year within such region, weighted

11 by the number of MedicareAdvantage eligible individ12 uals residing in each such payment area for the year.

13 ‘‘(3) ANNUAL ANNOUNCEMENT OF PAYMENT FAC14 TORS.—

15 ‘‘(A) ANNUAL ANNOUNCEMENT.—Beginning

16 in 2005, at the same time as the Secretary pub17 lishes the risk adjusters under section 1860D–11,

18 the Secretary shall annually announce (in a

19 manner intended to provide notice to interested

20 parties) the following payment factors:

21 ‘‘(i) The benchmark amount for each

22 preferred provider region (as calculated

23 under paragraph (2)(A)) for the year.

24 ‘‘(ii) The factors to be used for adjust25 ing payments described under—
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1 ‘‘(I) the comprehensive risk ad2 justment methodology described in

3 paragraph (1)(C) with respect to each

4 preferred provider region for the year;

5 and

6 ‘‘(II) the methodology used for ad7 justment for geographic variations

8 within such region established under

9 paragraph (1)(D).

10 ‘‘(B) ADVANCE NOTICE OF METHODO11 LOGICAL CHANGES.—At least 45 days before

12 making the announcement under subparagraph

13 (A) for a year, the Secretary shall—

14 ‘‘(i) provide for notice to preferred pro15 vider organizations of proposed changes to

16 be made in the methodology from the meth17 odology and assumptions used in the pre18 vious announcement; and

19 ‘‘(ii) provide such organizations with

20 an opportunity to comment on such pro21 posed changes.

22 ‘‘(C) EXPLANATION OF ASSUMPTIONS.—In

23 each announcement made under subparagraph

24 (A), the Secretary shall include an explanation

25 of the assumptions and changes in methodology
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1 used in the announcement in sufficient detail so

2 that preferred provider organizations can com3 pute each payment factor described in such sub4 paragraph.

5 ‘‘(4) SECRETARY’S DETERMINATION OF PAYMENT

6 AMOUNT FOR BENEFITS UNDER THE ORIGINAL MEDI7 CARE FEE-FOR-SERVICE PROGRAM.—The Secretary

8 shall determine the payment amount for plans as fol9 lows:

10 ‘‘(A) REVIEW OF PLAN BIDS.—The Sec11 retary shall review each plan bid submitted

12 under subsection (d)(1) for the coverage of bene13 fits under the original medicare fee-for-service

14 program option to ensure that such bids are con15 sistent with the requirements under this part

16 and are based on the assumptions described in

17 section 1854(a)(2)(A)(iii) that the plan used

18 with respect to numbers of enrolled individuals.

19 ‘‘(B) DETERMINATION OF PREFERRED PRO20 VIDER REGIONAL BENCHMARK AMOUNTS.—The

21 Secretary shall calculate a preferred provider re22 gional benchmark amount for that plan for the

23 benefits under the original medicare fee-for-serv24 ice program option for each plan equal to the re25 gional benchmark adjusted by using the assump-
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1 tions described in section 1854(a)(2)(A)(iii) that

2 the plan used with respect to numbers of enrolled

3 individuals.

4 ‘‘(C) COMPARISON TO BENCHMARK.—The

5 Secretary shall determine the difference between

6 each plan bid (as adjusted under subparagraph

7 (A)) and the preferred provider regional bench8 mark amount (as determined under subpara9 graph (B)) for purposes of determining—

10 ‘‘(i) the payment amount under sub11 paragraph (D); and

12 ‘‘(ii) the additional benefits required

13 and MedicareAdvantage monthly basic ben14 eficiary premiums.

15 ‘‘(D) DETERMINATION OF PAYMENT

16 AMOUNT.—

17 ‘‘(i) IN GENERAL.—Subject to clause

18 (ii), the Secretary shall determine the pay19 ment amount to a preferred provider orga20 nization for a preferred provider organiza21 tion plan as follows:

22 ‘‘(I) BIDS THAT EQUAL OR EX23 CEED THE BENCHMARK.—In the case

24 of a plan bid that equals or exceeds the

25 preferred provider regional benchmark
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1 amount, the amount of each monthly

2 payment to the organization with re3 spect to each individual enrolled in a

4 plan shall be the preferred provider re5 gional benchmark amount.

6 ‘‘(II) BIDS BELOW THE BENCH7 MARK.—In the case of a plan bid that

8 is less than the preferred provider re9 gional benchmark amount, the amount

10 of each monthly payment to the orga11 nization with respect to each indi12 vidual enrolled in a plan shall be the

13 preferred provider regional benchmark

14 amount reduced by the amount of any

15 premium reduction elected by the plan

16 under section 1854(d)(1)(A)(i).

17 ‘‘(ii) APPLICATION OF ADJUSTMENT

18 METHODOLOGIES.—The Secretary shall ad19 just the amounts determined under subpara20 graph (A) using the factors described in

21 paragraph (3)(A)(ii).

22 ‘‘(E) FACTORS USED IN ADJUSTING BIDS

23 AND BENCHMARKS FOR PREFERRED PROVIDER

24 ORGANIZATIONS AND IN DETERMINING ENROLLEE

25 PREMIUMS.—Subject to subparagraph (F), in
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1 addition to the factors used to adjust payments

2 to plans described in section 1853(d)(6), the Sec3 retary shall use the adjustment for geographic

4 variation within the region established under

5 paragraph (1)(D).

6 ‘‘(F) ADJUSTMENT FOR NATIONAL COV7 ERAGE DETERMINATIONS AND LEGISLATIVE

8 CHANGES IN BENEFITS.—The Secretary shall

9 provide for adjustments for national coverage de10 terminations and legislative changes in benefits

11 applicable with respect to preferred provider or12 ganizations in the same manner as the Secretary

13 provides for adjustments under section

14 1853(d)(7).

15 ‘‘(5) PAYMENTS FROM TRUST FUND.—The pay16 ment to a preferred provider organization under this

17 section shall be made from the Federal Hospital In18 surance Trust Fund and the Federal Supplementary

19 Medical Insurance Trust Fund in a manner similar

20 to the manner described in section 1853(g).

21 ‘‘(6) SPECIAL RULE FOR CERTAIN INPATIENT

22 HOSPITAL STAYS.—Rules similar to the rules applica23 ble under section 1853(h) shall apply with respect

24 preferred provider organizations.
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1 ‘‘(7) SPECIAL RULE FOR HOSPICE CARE.—Rules

2 similar to the rules applicable under section 1853(i)

3 shall apply with respect to preferred provider organi4 zations.

5 ‘‘(d) SUBMISSION OF BIDS BY PPOS; PREMIUMS.—

6 ‘‘(1) SUBMISSION OF BIDS BY PREFERRED PRO7 VIDER ORGANIZATIONS.—

8 ‘‘(A) IN GENERAL.—For the requirements

9 on submissions by MedicareAdvantage preferred

10 provider organization plans, see section

11 1854(a)(1).

12 ‘‘(B) UNIFORM PREMIUMS.—Each bid

13 amount submitted under subparagraph (A) for a

14 preferred provider organization plan in a pre15 ferred provider region may not vary among

16 MedicareAdvantage eligible individuals residing

17 in such preferred provider region.

18 ‘‘(C) APPLICATION OF FEHBP STANDARD;

19 PROHIBITION ON PRICE GOUGING.—Each bid

20 amount submitted under subparagraph (A) for a

21 preferred provider organization plan must rea22 sonably and equitably reflect the cost of benefits

23 provided under that plan.

24 ‘‘(D) REVIEW.—The Secretary shall review

25 the adjusted community rates (as defined in sec-
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1 tion 1854(g)(3)), the amounts of the

2 MedicareAdvantage monthly basic premium and

3 the MedicareAdvantage monthly beneficiary pre4 mium for enhanced medical benefits filed under

5 this paragraph and shall approve or disapprove

6 such rates and amounts so submitted. The Sec7 retary shall review the actuarial assumptions

8 and data used by the preferred provider organi9 zation with respect to such rates and amounts so

10 submitted to determine the appropriateness of

11 such assumptions and data.

12 ‘‘(E) AUTHORITY TO LIMIT NUMBER OF

13 PLANS IN A REGION.—If there are bids for more

14 than 3 preferred provider organization plans in

15 a preferred provider region, the Secretary shall

16 accept only the 3 lowest-cost credible bids for

17 that region that meet or exceed the quality and

18 minimum standards applicable under this sec19 tion.

20 ‘‘(2) MONTHLY PREMIUMS CHARGED.—The

21 amount of the monthly premium charged to an indi22 vidual enrolled in a preferred provider organization

23 plan offered by a preferred provider organization

24 shall be equal to the sum of the following:
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1 ‘‘(A) The MedicareAdvantage monthly basic

2 beneficiary premium, as defined in section

3 1854(b)(2)(A) (if any).

4 ‘‘(B) The MedicareAdvantage monthly bene5 ficiary premium for enhanced medical benefits,

6 as defined in section 1854(b)(2)(C) (if any).

7 ‘‘(C) The MedicareAdvantage monthly obli8 gation for qualified prescription drug coverage,

9 as defined in section 1854(b)(2)(B) (if any).

10 ‘‘(3) DETERMINATION OF PREMIUM REDUCTIONS,

11 REDUCED COST-SHARING, ADDITIONAL BENEFITS, AND

12 BENEFICIARY PREMIUMS.—The rules for determining

13 premium reductions, reduced cost-sharing, additional

14 benefits, and beneficiary premiums under section

15 1854(d) shall apply with respect to preferred provider

16 organizations.

17 ‘‘(4) PROHIBITION OF SEGMENTING PREFERRED

18 PROVIDER REGIONS.—The Secretary may not permit

19 a preferred provider organization to elect to apply the

20 provisions of this section uniformly to separate seg21 ments of a preferred provider region (rather than uni22 formly to an entire preferred provider region).

23 ‘‘(e) PORTION OF TOTAL PAYMENTS TO AN ORGANIZA24 TION SUBJECT TO RISK FOR 2 YEARS.—
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1 ‘‘(1) NOTIFICATION OF SPENDING UNDER THE

2 PLAN.—

3 ‘‘(A) IN GENERAL.—For 2007 and 2008, the

4 preferred provider organization offering a pre5 ferred provider organization plan shall notify the

6 Secretary of the total amount of costs that the or7 ganization incurred in providing benefits covered

8 under parts A and B of the original medicare

9 fee-for-service program for all enrollees under the

10 plan in the previous year.

11 ‘‘(B) CERTAIN EXPENSES NOT INCLUDED.—

12 The total amount of costs specified in subpara13 graph (A) may not include—

14 ‘‘(i) subject to subparagraph (C), ad15 ministrative expenses incurred in providing

16 the benefits described in such subparagraph;

17 or

18 ‘‘(ii) amounts expended on providing

19 enhanced medical benefits under section

20 1852(a)(3)(D).

21 ‘‘(C) ESTABLISHMENT OF ALLOWABLE AD22 MINISTRATIVE EXPENSES.—For purposes of ap23 plying subparagraph (B)(i), the administrative

24 expenses incurred in providing benefits described

25 in subparagraph (A) under a preferred provider
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1 organization plan may not exceed an amount de2 termined appropriate by the Administrator.

3 ‘‘(2) ADJUSTMENT OF PAYMENT.—

4 ‘‘(A) NO ADJUSTMENT IF COSTS WITHIN

5 RISK CORRIDOR.—If the total amount of costs

6 specified in paragraph (1)(A) for the plan for

7 the year are not more than the first threshold

8 upper limit of the risk corridor (specified in

9 paragraph (3)(A)(iii)) and are not less than the

10 first threshold lower limit of the risk corridor

11 (specified in paragraph (3)(A)(i)) for the plan

12 for the year, then no additional payments shall

13 be made by the Secretary and no reduced pay14 ments shall be made to the preferred provider or15 ganization offering the plan.

16 ‘‘(B) INCREASE IN PAYMENT IF COSTS

17 ABOVE UPPER LIMIT OF RISK CORRIDOR.—

18 ‘‘(i) IN GENERAL.—If the total amount

19 of costs specified in paragraph (1)(A) for

20 the plan for the year are more than the first

21 threshold upper limit of the risk corridor for

22 the plan for the year, then the Secretary

23 shall increase the total of the monthly pay24 ments made to the preferred provider orga25 nization offering the plan for the year
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1 under subsection (c)(1)(A) by an amount

2 equal to the sum of—

3 ‘‘(I) 50 percent of the amount of

4 such total costs which are more than

5 such first threshold upper limit of the

6 risk corridor and not more than the

7 second threshold upper limit of the risk

8 corridor for the plan for the year (as

9 specified under paragraph (3)(A)(iv));

10 and

11 ‘‘(II) 90 percent of the amount of

12 such total costs which are more than

13 such second threshold upper limit of

14 the risk corridor.

15 ‘‘(C) REDUCTION IN PAYMENT IF COSTS

16 BELOW LOWER LIMIT OF RISK CORRIDOR.—If the

17 total amount of costs specified in paragraph

18 (1)(A) for the plan for the year are less than the

19 first threshold lower limit of the risk corridor for

20 the plan for the year, then the Secretary shall re21 duce the total of the monthly payments made to

22 the preferred provider organization offering the

23 plan for the year under subsection (c)(1)(A) by

24 an amount (or otherwise recover from the plan

25 an amount) equal to—
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1 ‘‘(i) 50 percent of the amount of such

2 total costs which are less than such first

3 threshold lower limit of the risk corridor

4 and not less than the second threshold lower

5 limit of the risk corridor for the plan for the

6 year (as specified under paragraph

7 (3)(A)(ii)); and

8 ‘‘(ii) 90 percent of the amount of such

9 total costs which are less than such second

10 threshold lower limit of the risk corridor.

11 ‘‘(3) ESTABLISHMENT OF RISK CORRIDORS.—

12 ‘‘(A) IN GENERAL.—For 2006 and 2007, the

13 Secretary shall establish a risk corridor for each

14 preferred provider organization plan. The risk

15 corridor for a plan for a year shall be equal to

16 a range as follows:

17 ‘‘(i) FIRST THRESHOLD LOWER

18 LIMIT.—The first threshold lower limit of

19 such corridor shall be equal to—

20 ‘‘(I) the target amount described

21 in subparagraph (B) for the plan;

22 minus

23 ‘‘(II) an amount equal to 5 per24 cent of such target amount.
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1 ‘‘(ii) SECOND THRESHOLD LOWER

2 LIMIT.—The second threshold lower limit of

3 such corridor shall be equal to—

4 ‘‘(I) the target amount described

5 in subparagraph (B) for the plan;

6 minus

7 ‘‘(II) an amount equal to 10 per8 cent of such target amount.

9 ‘‘(iii) FIRST THRESHOLD UPPER

10 LIMIT.—The first threshold upper limit of

11 such corridor shall be equal to the sum of—

12 ‘‘(I) such target amount; and

13 ‘‘(II) the amount described in

14 clause (i)(II).

15 ‘‘(iv) SECOND THRESHOLD UPPER

16 LIMIT.—The second threshold upper limit of

17 such corridor shall be equal to the sum of—

18 ‘‘(I) such target amount; and

19 ‘‘(II) the amount described in

20 clause (ii)(II).

21 ‘‘(B) TARGET AMOUNT DESCRIBED.—The

22 target amount described in this paragraph is,

23 with respect to a preferred provider organization

24 plan offered by a preferred provider organization

25 in a year, an amount equal to the sum of—
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1 ‘‘(i) the total monthly payments made

2 to the organization for enrollees in the plan

3 for the year under subsection (c)(1)(A); and

4 ‘‘(ii) the total MedicareAdvantage basic

5 beneficiary premiums collected for such en6 rollees for the year under subsection

7 (d)(2)(A).

8 ‘‘(4) PLANS AT RISK FOR ENTIRE AMOUNT OF

9 ENHANCED MEDICAL BENEFITS.—A preferred provider

10 organization that offers a preferred provider organi11 zation plan that provides enhanced medial benefits

12 under section 1852(a)(3)(D) shall be at full financial

13 risk for the provision of such benefits.

14 ‘‘(5) NO EFFECT ON ELIGIBLE BENEFICIARIES.—

15 No change in payments made by reason of this sub16 section shall affect the amount of the

17 MedicareAdvantage basic beneficiary premium that a

18 beneficiary is otherwise required to pay under the

19 plan for the year under subsection (d)(2)(A).

20 ‘‘(6) DISCLOSURE OF INFORMATION.—The provi21 sions of section 1860D–16(b)(7), including subpara22 graph (B) of such section, shall apply to a preferred

23 provider organization and a preferred provider orga24 nization plan in the same manner as such provisions
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1 apply to an eligible entity and a Medicare Prescrip2 tion Drug plan under part D.

3 ‘‘(f) ORGANIZATIONAL AND FINANCIAL REQUIREMENTS

4 FOR PREFERRED PROVIDER ORGANIZATIONS.—A preferred

5 provider organization shall be organized and licensed under

6 State law as a risk-bearing entity eligible to offer health

7 insurance or health benefits coverage in each State within

8 the preferred provider region in which it offers a preferred

9 provider organization plan.

10 ‘‘(g) INAPPLICABILITY OF PROVIDER-SPONSORED OR11 GANIZATION SOLVENCY STANDARDS.—The requirements of

12 section 1856 shall not apply with respect to preferred pro13 vider organizations.

14 ‘‘(h) CONTRACTS WITH PREFERRED PROVIDER ORGA15 NIZATIONS.—The provisions of section 1857 shall apply to

16 a preferred provider organization plan offered by a pre17 ferred provider organization under this section.’’.

18 (c) PREFERRED PROVIDER TERMINOLOGY DE19 FINED.—Section 1859(a) is amended by adding at the end

20 the following new paragraph:

21 ‘‘(3) PREFERRED PROVIDER ORGANIZATION; PRE22 FERRED PROVIDER ORGANIZATION PLAN; PREFERRED

23 PROVIDER REGION.—The terms ‘preferred provider or24 ganization’, ‘preferred provider organization plan’,
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1 and ‘preferred provider region’ have the meaning

2 given such terms in section 1858(a)(2).’’.

3 Subtitle C—Other Managed Care

4 Reforms

5 SEC. 221. EXTENSION OF REASONABLE COST CONTRACTS.

6 (a) FIVE-YEAR EXTENSION.—Section 1876(h)(5)(C)

7 (42 U.S.C. 1395mm(h)(5)(C)) is amended by striking

8 ‘‘2004’’ and inserting ‘‘2009’’.

9 (b) APPLICATION OF CERTAIN MEDICARE+CHOICE

10 REQUIREMENTS TO COST CONTRACTS EXTENDED OR RE11 NEWED AFTER 2003.—Section 1876(h) (42 U.S.C.

12 1395mm(h)(5)), as amended by subsection (a), is

13 amended—

14 (1) by redesignating paragraph (5) as para15 graph (6); and

16 (2) by inserting after paragraph (4) the fol17 lowing new paragraph:

18 ‘‘(5) Any reasonable cost reimbursement contract with

19 an eligible organization under this subsection that is ex20 tended or renewed on or after the date of enactment of the

21 Prescription Drug and Medicare Improvements Act of 2003

22 for plan years beginning on or after January 1, 2004, shall

23 provide that the following provisions of the

24 Medicare+Choice program under part C (and, on and after

25 January 1, 2006, the provisions of the MedicareAdvantage
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1 program under such part) shall apply to such organization

2 and such contract in a substantially similar manner as

3 such provisions apply to Medicare+Choice organizations

4 and Medicare+Choice plans (or, on and after January 1,

5 2006, MedicareAdvantage organizations and

6 MedicareAdvantage plans, respectively) under such part:

7 ‘‘(A) Paragraph (1) of section 1852(e) (relating

8 to the requirement of having an ongoing quality as9 surance program) and paragraph (2)(B) of such sec10 tion (relating to the required elements for such a pro11 gram).

12 ‘‘(B) Section 1852(j)(4) (relating to limitations

13 on physician incentive plans).

14 ‘‘(C) Section 1854(c) (relating to the requirement

15 of uniform premiums among individuals enrolled in

16 the plan).

17 ‘‘(D) Section 1854(g), or, on and after January

18 1, 2006, section 1854(h) (relating to restrictions on

19 imposition of premium taxes with respect to pay20 ments to organizations).

21 ‘‘(E) Section 1856(b) (regarding compliance

22 with the standards established by regulation pursuant

23 to such section, including the provisions of paragraph

24 (3) of such section relating to relation to State laws).
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1 ‘‘(F) Section 1852(a)(3)(A) (regarding the au2 thority of organizations to include supplemental

3 health care benefits and, on and after January 1,

4 2006, enhanced medical benefits under the plan sub5 ject to the approval of the Secretary).

6 ‘‘(G) The provisions of part C relating to

7 timelines for benefit filings, contract renewal, and

8 beneficiary notification.

9 ‘‘(H) Section 1854(e), or, on and after January

10 1, 2006, section 1854(f) (relating to proposed cost11 sharing under the contract being subject to review by

12 the Secretary).’’.

13 (c) PERMITTING DEDICATED GROUP PRACTICE

14 HEALTH MAINTENANCE ORGANIZATIONS TO PARTICIPATE

15 IN THE MEDICARE COST CONTRACT PROGRAM.—Section

16 1876(h)(6) of the Social Security Act (42 U.S.C.

17 1395mm(h)(6)), as redesignated and amended by sub18 sections (a) and (b), is amended—

19 (1) in subparagraph (A), by striking ‘‘After the

20 date of the enactment’’ and inserting ‘‘Except as pro21 vided in subparagraph (C), after the date of the en22 actment’’;

23 (2) in subparagraph (B), by striking ‘‘subpara24 graph (C)’’ and inserting ‘‘subparagraph (D)’’;
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1 (3) by redesignating subparagraph (C) as sub2 paragraph (D); and

3 (4) by inserting after subparagraph (B), the fol4 lowing new subparagraph:

5 ‘‘(C) Subject to paragraph (5) and subparagraph (D),

6 the Secretary shall approve an application to enter into a

7 reasonable cost contract under this section if—

8 ‘‘(i) the application is submitted to the Secretary

9 by a health maintenance organization (as defined in

10 section 1301(a) of the Public Health Service Act)

11 that, as of January 1, 2004, and except as provided

12 in section 1301(b)(3)(B) of such Act, provides at least

13 85 percent of the services of a physician which are

14 provided as basic health services through a medical

15 group (or groups), as defined in section 1302(4) of

16 such Act; and

17 ‘‘(ii) the Secretary determines that the organiza18 tion meets the requirements applicable to such organi19 zations and contracts under this section.’’.

20 SEC. 222. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPE21 CIAL NEEDS BENEFICIARIES.

22 (a) TREATMENT AS COORDINATED CARE PLAN.—Sec23 tion 1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)) is

24 amended by adding at the end the following new sentence:

25 ‘‘Specialized Medicare+Choice plans for special needs bene-
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1 ficiaries (as defined in section 1859(b)(4)) may be any type

2 of coordinated care plan.’’.

3 (b) SPECIALIZED MEDICARE+CHOICE PLAN FOR SPE4 CIAL NEEDS BENEFICIARIES DEFINED.—Section 1859(b)

5 (42 U.S.C. 1395w–28(b)) is amended by adding at the end

6 the following new paragraph:

7 ‘‘(4) SPECIALIZED MEDICARE+CHOICE PLANS

8 FOR SPECIAL NEEDS BENEFICIARIES.—

9 ‘‘(A) IN GENERAL.—The term ‘specialized

10 Medicare+Choice plans for special needs bene11 ficiaries’ means a Medicare+Choice plan that—

12 ‘‘(i) exclusively serves special needs

13 beneficiaries (as defined in subparagraph

14 (B)), or

15 ‘‘(ii) to the extent provided in regula16 tions prescribed by the Secretary, dispropor17 tionately serves such special needs bene18 ficiaries, frail elderly medicare bene19 ficiaries, or both.

20 ‘‘(B) SPECIAL NEEDS BENEFICIARY.—The

21 term ‘special needs beneficiary’ means a

22 Medicare+Choice eligible individual who—

23 ‘‘(i) is institutionalized (as defined by

24 the Secretary);
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1 ‘‘(ii) is entitled to medical assistance

2 under a State plan under title XIX; or

3 ‘‘(iii) meets such requirements as the

4 Secretary may determine would benefit

5 from enrollment in such a specialized

6 Medicare+Choice plan described in sub7 paragraph (A) for individuals with severe

8 or disabling chronic conditions.’’.

9 (c) RESTRICTION ON ENROLLMENT PERMITTED.—Sec10 tion 1859 (42 U.S.C. 1395w–28) is amended by adding at

11 the end the following new subsection:

12 ‘‘(f) RESTRICTION ON ENROLLMENT FOR SPECIALIZED

13 MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS BENE14 FICIARIES.—In the case of a specialized Medicare+Choice

15 plan (as defined in subsection (b)(4)), notwithstanding any

16 other provision of this part and in accordance with regula17 tions of the Secretary and for periods before January 1,

18 2008, the plan may restrict the enrollment of individuals

19 under the plan to individuals who are within 1 or more

20 classes of special needs beneficiaries.’’.

21 (d) REPORT TO CONGRESS.—Not later than December

22 31, 2006, the Secretary shall submit to Congress a report

23 that assesses the impact of specialized Medicare+Choice

24 plans for special needs beneficiaries on the cost and quality

25 of services provided to enrollees. Such report shall include
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1 an assessment of the costs and savings to the medicare pro2 gram as a result of amendments made by subsections (a),

3 (b), and (c).

4 (e) EFFECTIVE DATES.—

5 (1) IN GENERAL.—The amendments made by

6 subsections (a), (b), and (c) shall take effect on the

7 date of enactment of this Act.

8 (2) DEADLINE FOR ISSUANCE OF REQUIREMENTS

9 FOR SPECIAL NEEDS BENEFICIARIES; TRANSITION.—

10 No later than 1 year after the date of enactment of

11 this Act, the Secretary shall issue final regulations to

12 establish requirements for special needs beneficiaries

13 under section 1859(b)(4)(B)(iii) of the Social Secu14 rity Act, as added by subsection (b).

15 SEC. 223. PAYMENT BY PACE PROVIDERS FOR MEDICARE

16 AND MEDICAID SERVICES FURNISHED BY

17 NONCONTRACT PROVIDERS.

18 (a) MEDICARE SERVICES.—

19 (1) MEDICARE SERVICES FURNISHED BY PRO20 VIDERS OF SERVICES.—Section 1866(a)(1)(O) (42

21 U.S.C. 1395cc(a)(1)(O)) is amended—

22 (A) by striking ‘‘part C or’’ and inserting

23 ‘‘part C, with a PACE provider under section

24 1894 or 1934, or’’;

25 (B) by striking ‘‘(i)’’;
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1 (C) by striking ‘‘and (ii)’’; and

2 (D) by striking ‘‘members of the organiza3 tion’’ and inserting ‘‘members of the organiza4 tion or PACE program eligible individuals en5 rolled with the PACE provider,’’.

6 (2) MEDICARE SERVICES FURNISHED BY PHYSI7 CIANS AND OTHER ENTITIES.—Section 1894(b) (42

8 U.S.C. 1395eee(b)) is amended by adding at the end

9 the following new paragraphs:

10 ‘‘(3) TREATMENT OF MEDICARE SERVICES FUR11 NISHED BY NONCONTRACT PHYSICIANS AND OTHER

12 ENTITIES.—

13 ‘‘(A) APPLICATION OF MEDICARE+CHOICE

14 REQUIREMENT WITH RESPECT TO MEDICARE

15 SERVICES FURNISHED BY NONCONTRACT PHYSI16 CIANS AND OTHER ENTITIES.—Section

17 1852(k)(1) (relating to limitations on balance

18 billing against Medicare+Choice organizations

19 for noncontract physicians and other entities

20 with respect to services covered under this title)

21 shall apply to PACE providers, PACE program

22 eligible individuals enrolled with such PACE

23 providers, and physicians and other entities that

24 do not have a contract establishing payment

25 amounts for services furnished to such an indi-
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1 vidual in the same manner as such section ap2 plies to Medicare+Choice organizations, individ3 uals enrolled with such organizations, and physi4 cians and other entities referred to in such sec5 tion.

6 ‘‘(B) REFERENCE TO RELATED PROVISION

7 FOR NONCONTRACT PROVIDERS OF SERVICES.—

8 For the provision relating to limitations on bal9 ance billing against PACE providers for services

10 covered under this title furnished by noncontract

11 providers of services, see section 1866(a)(1)(O).

12 ‘‘(4) REFERENCE TO RELATED PROVISION

13 FOR SERVICES COVERED UNDER TITLE XIX BUT

14 NOT UNDER THIS TITLE.—For provisions relat15 ing to limitations on payments to providers par16 ticipating under the State plan under title XIX

17 that do not have a contract with a PACE pro18 vider establishing payment amounts for services

19 covered under such plan (but not under this

20 title) when such services are furnished to enroll21 ees of that PACE provider, see section

22 1902(a)(66).’’.

23 (b) MEDICAID SERVICES.—

24 (1) REQUIREMENT UNDER STATE PLAN.—Section

25 1902(a) (42 U.S.C. 1396a(a)) is amended—
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1 (A) in paragraph (64), by striking ‘‘and’’

2 at the end;

3 (B) in paragraph (65), by striking the pe4 riod at the end and inserting ‘‘; and’’; and

5 (C) by inserting after paragraph (65) the

6 following new paragraph:

7 ‘‘(66) provide, with respect to services cov8 ered under the State plan (but not under title

9 XVIII) that are furnished to a PACE program

10 eligible individual enrolled with a PACE pro11 vider by a provider participating under the

12 State plan that does not have a contract with the

13 PACE provider that establishes payment

14 amounts for such services, that such partici15 pating provider may not require the PACE pro16 vider to pay the participating provider an

17 amount greater than the amount that would oth18 erwise be payable for the service to the partici19 pating provider under the State plan for the

20 State where the PACE provider is located (in ac21 cordance with regulations issued by the Sec22 retary).’’.

23 (2) REFERENCE IN MEDICAID STATUTE.—Section

24 1934(b) (42 U.S.C. 1396u–4(b)) is amended by add25 ing at the end the following new paragraphs:
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1 ‘‘(3) TREATMENT OF MEDICARE SERVICES FUR2 NISHED BY NONCONTRACT PHYSICIANS AND OTHER

3 ENTITIES.—

4 ‘‘(A) APPLICATION OF MEDICARE+CHOICE

5 REQUIREMENT WITH RESPECT TO MEDICARE

6 SERVICES FURNISHED BY NONCONTRACT PHYSI7 CIANS AND OTHER ENTITIES.—Section

8 1852(k)(1) (relating to limitations on balance

9 billing against Medicare+Choice organizations

10 for noncontract physicians and other entities

11 with respect to services covered under title

12 XVIII) shall apply to PACE providers, PACE

13 program eligible individuals enrolled with such

14 PACE providers, and physicians and other enti15 ties that do not have a contract establishing pay16 ment amounts for services furnished to such an

17 individual in the same manner as such section

18 applies to Medicare+Choice organizations, indi19 viduals enrolled with such organizations, and

20 physicians and other entities referred to in such

21 section.

22 ‘‘(B) REFERENCE TO RELATED PROVISION

23 FOR NONCONTRACT PROVIDERS OF SERVICES.—

24 For the provision relating to limitations on bal25 ance billing against PACE providers for services
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1 covered under title XVIII furnished by noncon2 tract providers of services, see section

3 1866(a)(1)(O).

4 ‘‘(4) REFERENCE TO RELATED PROVISION

5 FOR SERVICES COVERED UNDER THIS TITLE BUT

6 NOT UNDER TITLE XVIII.—For provisions relat7 ing to limitations on payments to providers par8 ticipating under the State plan under this title

9 that do not have a contract with a PACE pro10 vider establishing payment amounts for services

11 covered under such plan (but not under title

12 XVIII) when such services are furnished to en13 rollees of that PACE provider, see section

14 1902(a)(66).’’.

15 (c) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to services furnished on or after January

17 1, 2004.

18 SEC. 224. INSTITUTE OF MEDICINE EVALUATION AND RE19 PORT ON HEALTH CARE PERFORMANCE

20 MEASURES.

21 (a) EVALUATION.—

22 (1) IN GENERAL.—Not later than the date that

23 is 2 months after the date of enactment of this Act,

24 the Secretary of Health and Human Services shall

25 enter into an arrangement under which the Institute
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1 of Medicine of the National Academy of Sciences (in

2 this section referred to as the ‘‘Institute’’) shall con3 duct an evaluation of leading health care performance

4 measures and options to implement policies that align

5 performance with payment under the medicare pro6 gram under title XVIII of the Social Security Act (42

7 U.S.C. 1395 et seq.).

8 (2) SPECIFIC MATTERS EVALUATED.—In con9 ducting the evaluation under paragraph (1), the In10 stitute shall—

11 (A) catalogue, review, and evaluate the va12 lidity of leading health care performance meas13 ures;

14 (B) catalogue and evaluate the success and

15 utility of alternative performance incentive pro16 grams in public or private sector settings; and

17 (C) identify and prioritize options to imple18 ment policies that align performance with pay19 ment under the medicare program that

20 indicate—

21 (i) the performance measurement set to

22 be used and how that measurement set will

23 be updated;

24 (ii) the payment policy that will re25 ward performance; and
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1 (iii) the key implementation issues

2 (such as data and information technology

3 requirements) that must be addressed.

4 (3) SCOPE OF HEALTH CARE PERFORMANCE

5 MEASURES.—The health care performance measures

6 described in paragraph (2)(A) shall encompass a va7 riety of perspectives, including physicians, hospitals,

8 health plans, purchasers, and consumers.

9 (4) CONSULTATION WITH MEDPAC.—In evalu10 ating the matters described in paragraph (2)(C), the

11 Institute shall consult with the Medicare Payment

12 Advisory Commission established under section 1805

13 of the Social Security Act (42 U.S.C. 1395b–6).

14 (b) REPORT.—Not later than the date that is 18

15 months after the date of enactment of this Act, the Institute

16 shall submit to the Secretary of Health and Human Serv17 ices, the Committees on Ways and Means and Energy and

18 Commerce of the House of Representatives, and the Com19 mittee on Finance of the Senate a report on the evaluation

20 conducted under subsection (a)(1) describing the findings

21 of such evaluation and recommendations for an overall

22 strategy and approach for aligning payment with perform23 ance in the original medicare fee-for-service program under

24 parts A and B of title XVIII of the Social Security Act,
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1 the Medicare+Choice program under part C of such title,

2 and any other programs under such title XVIII.

3 (c) AUTHORIZATION OF APPROPRIATIONS.—There are

4 authorized to be appropriated $1,000,000 for purposes of

5 conducting the evaluation and preparing the report re6 quired by this section.

7 SEC. 225. EXPANDING THE WORK OF MEDICARE QUALITY

8 IMPROVEMENT ORGANIZATIONS TO INCLUDE

9 PARTS C AND D.

10 (a) APPLICATION TO MEDICARE MANAGED CARE AND

11 PRESCRIPTION DRUG COVERAGE.—Section 1154(a)(1) (42

12 U.S.C. 1320c–3(a)(1)) is amended by inserting ‘‘,

13 Medicare+Choice organizations and MedicareAdvantage

14 organizations under part C, and prescription drug card

15 sponsors and eligible entities under part D’’ after ‘‘under

16 section 1876’’.

17 (b) PRESCRIPTION DRUG THERAPY QUALITY IM18 PROVEMENT.—Section 1154(a) (42 U.S.C. 1320c–3(a)) is

19 amended by adding at the end the following new paragraph:

20 ‘‘(17) The organization shall execute its respon21 sibilities under subparagraphs (A) and (B) of para22 graph (1) by offering to providers, practitioners, pre23 scription drug card sponsors and eligible entities

24 under part D, and Medicare+Choice and

25 MedicareAdvantage plans under part C quality im-
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1 provement assistance pertaining to prescription drug

2 therapy. For purposes of this part and title XVIII,

3 the functions described in this paragraph shall be

4 treated as a review function.’’.

5 (c) EFFECTIVE DATE.—The amendments made by this

6 section shall apply on and after January 1, 2004.

7 SEC. 226. EXTENSION OF DEMONSTRATION FOR ESRD MAN8 AGED CARE.

9 The Secretary shall extend without interruption,

10 through December 31, 2007, the approval of the demonstra11 tion project, Contract No. H1021, under the authority of

12 section 2355(b)(1)(B)(iv) of the Deficit Reduction Act of

13 1984, as amended by section 13567 of the Omnibus Rec14 onciliation Act of 1993. Such approval shall be subject to

15 the terms and conditions in effect for the 2002 project year

16 with respect to eligible participants and covered benefits.

17 The Secretary shall set the monthly capitation rate for en18 rollees on the basis of the reasonable medical and direct ad19 ministrative costs of providing those benefits to such par20 ticipants.
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1 Subtitle D—Evaluation of Alter2 native Payment and Delivery

3 Systems

4 SEC. 231. ESTABLISHMENT OF ALTERNATIVE PAYMENT SYS5 TEM FOR PREFERRED PROVIDER ORGANIZA6 TIONS IN HIGHLY COMPETITIVE REGIONS.

7 (a) ESTABLISHMENT OF ALTERNATIVE PAYMENT SYS8 TEM FOR PREFERRED PROVIDER ORGANIZATIONS IN HIGH9 LY COMPETITIVE REGIONS.—Section 1858 (as added by sec10 tion 211(b)) is amended by adding at the end the following

11 new subsection:

12 ‘‘(i) ALTERNATIVE PAYMENT METHODOLOGY FOR

13 HIGHLY COMPETITIVE REGIONS.—

14 ‘‘(1) ANNUAL DETERMINATION AND DESIGNA15 TION.—

16 ‘‘(A) IN 2008.—In 2008, prior to the date on

17 which the Secretary expects to publish the risk

18 adjusters under section 1860D–11, the Secretary

19 shall designate a limited number (but in no case

20 fewer than 1) of preferred provider regions (other

21 than the region described in subsection

22 (a)(2)(C)(ii)) as highly competitive regions.

23 ‘‘(B) SUBSEQUENT YEARS.—For each year

24 (beginning with 2009) the Secretary may des25 ignate a limited number of preferred provider re-
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1 gions (other than the region described in sub2 section (a)(2)(C)(ii)) as highly competitive re3 gions in addition to any region designated as a

4 highly competitive region under subparagraph

5 (A).

6 ‘‘(C) CONSIDERATIONS.—In determining

7 which preferred provider regions to designate as

8 highly competitive regions under subparagraph

9 (A) or (B), the Secretary shall consider the fol10 lowing:

11 ‘‘(i) Whether the application of this

12 subsection to the preferred provider region

13 would enhance the participation of pre14 ferred provider organization plans in that

15 region.

16 ‘‘(ii) Whether the Secretary anticipates

17 that there is likely to be at least 3 bids sub18 mitted under subsection (d)(1) with respect

19 to the preferred provider region if the Sec20 retary designates such region as a highly

21 competitive region under subparagraph (A)

22 or (B).

23 ‘‘(iii) Whether the Secretary expects

24 that MedicareAdvantage eligible individuals

25 will elect preferred provider organization
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1 plans in the preferred provider region if the

2 region is designated as a highly competitive

3 region under subparagraph (A) or (B).

4 ‘‘(iv) Whether the designation of the

5 preferred provider region as a highly com6 petitive region will permit compliance with

7 the limitation described in paragraph (5).

8 In considering the matters described in clauses

9 (i) through (iv), the Secretary shall give special

10 consideration to preferred provider regions where

11 no bids were submitted under subsection (d)(1)

12 for the previous year.

13 ‘‘(2) EFFECT OF DESIGNATION.—If a preferred

14 provider region is designated as a highly competitive

15 region under subparagraph (A) or (B) of paragraph

16 (1)—

17 ‘‘(A) the provisions of this subsection shall

18 apply to such region and shall supersede the pro19 visions of this part relating to benchmarks for

20 preferred provider regions; and

21 ‘‘(B) such region shall continue to be a

22 highly competitive region until such designation

23 is rescinded pursuant to paragraph (5)(B)(ii).

24 ‘‘(3) SUBMISSION OF BIDS.—
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1 ‘‘(A) IN GENERAL.—Notwithstanding sub2 section (d)(1), for purposes of applying section

3 1854(a)(2)(A)(i), the plan bid for a highly com4 petitive region shall consist of a dollar amount

5 that represents the total amount that the plan is

6 willing to accept (not taking into account the

7 application of the comprehensive risk adjustment

8 methodology under section 1853(a)(3)) for pro9 viding coverage of only the benefits described in

10 section 1852(a)(1)(A) to an individual enrolled

11 in the plan that resides in the service area of the

12 plan for a month.

13 ‘‘(B) CONSTRUCTION.—Nothing in subpara14 graph (A) shall be construed as permitting a

15 preferred provider organization plan not to pro16 vide coverage for the benefits described in section

17 1852(a)(1)(C).

18 ‘‘(4) PAYMENTS TO PREFERRED PROVIDER ORGA19 NIZATIONS IN HIGHLY COMPETITIVE AREAS.—With re20 spect to highly competitive regions, the following rules

21 shall apply:

22 ‘‘(A) IN GENERAL.—Notwithstanding sub23 section (c), of the plans described in subsection

24 (d)(1)(E), the Secretary shall substitute the sec-
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1 ond lowest bid for the benchmark applicable

2 under subsection (c)(4).

3 ‘‘(B) IF THERE ARE FEWER THAN THREE

4 BIDS.—Notwithstanding subsection (c), if there

5 are fewer than 3 bids in a highly competitive re6 gion for a year, the Secretary shall substitute the

7 lowest bid for the benchmark applicable under

8 subsection (c)(4).

9 ‘‘(5) FUNDING LIMITATION.—

10 ‘‘(A) IN GENERAL.—

11 ‘‘(i) IN GENERAL.—The total amount

12 expended as a result of the application of

13 this subsection during the period or year, as

14 applicable, may not exceed the applicable

15 amount (as defined in clause (ii)).

16 ‘‘(ii) APPLICABLE AMOUNT DEFINED.—

17 In this paragraph, the term ‘applicable

18 amount’ means—

19 ‘‘(I) for the period beginning on

20 January 1, 2009, and ending on Sep21 tember 30, 2013, the total amount that

22 would have been expended under this

23 title during the period if this sub24 section had not been enacted plus

25 $6,000,000,000; and
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1 ‘‘(II) for fiscal year 2014 and any

2 subsequent fiscal year, the total

3 amount that would have been expended

4 under this title during the year if this

5 subsection had not been enacted.

6 ‘‘(B) APPLICATION OF LIMITATION.—If the

7 Secretary determines that the application of this

8 subsection will cause expenditures to exceed the

9 applicable amount, the Secretary shall—

10 ‘‘(i) take appropriate steps to stay

11 within the applicable amount, including

12 through providing limitations on enroll13 ment; or

14 ‘‘(ii) rescind the designation under

15 subparagraph (A) or (B) of paragraph (1)

16 of 1 or more preferred provider regions as

17 highly competitive regions.

18 ‘‘(C) TRANSITION.—If the Secretary re19 scinds a designation under subparagraph (A) or

20 (B) of paragraph (1) pursuant to subparagraph

21 (B)(ii) with respect to a preferred provider re22 gion, the Secretary shall provide for an appro23 priate transition from the payment system ap24 plicable under this subsection to the payment

25 system described in the other provisions of this
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1 section in that region. Any amount expended by

2 reason of the preceding sentence shall be consid3 ered to be part of the total amount expended as

4 a result of the application of this subsection for

5 purposes of applying the limitation under sub6 paragraph (A).

7 ‘‘(D) APPLICATION.—Notwithstanding

8 paragraph (1)(B), on or after January 1 of the

9 year in which the fiscal year described in sub10 paragraph (A)(ii)(II) begins, the Secretary may

11 designate appropriate regions under such para12 graph.

13 ‘‘(6) LIMITATION OF JUDICIAL REVIEW.—There

14 shall be no administrative or judicial review under

15 section 1869, section 1878, or otherwise, of designa16 tions made under subparagraph (A) or (B) of para17 graph (1).

18 ‘‘(7) SECRETARY REPORTS.—Not later than

19 April 1 of each year (beginning in 2010), the Sec20 retary shall submit a report to Congress and the

21 Comptroller General of the United States that

22 includes—

23 ‘‘(A) a detailed description of—

24 ‘‘(i) the total amount expended as a re25 sult of the application of this subsection in
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1 the previous year compared to the total

2 amount that would have been expended

3 under this title in the year if this subsection

4 had not been enacted;

5 ‘‘(ii) the projections of the total

6 amount that will be expended as a result of

7 the application of this subsection in the

8 year in which the report is submitted com9 pared to the total amount that would have

10 been expended under this title in the year if

11 this subsection had not been enacted;

12 ‘‘(iii) amounts remaining within the

13 funding limitation specified in paragraph

14 (5); and

15 ‘‘(iv) the steps that the Secretary will

16 take under clauses (i) and (ii) of paragraph

17 (5)(B) to ensure that the application of this

18 subsection will not cause expenditures to ex19 ceed the applicable amount described in

20 paragraph (5)(A); and

21 ‘‘(B) a certification from the Chief Actuary

22 of the Centers for Medicare & Medicaid Services

23 that the descriptions under clauses (i), (ii), (iii),

24 and (iv) of subparagraph (A) are reasonable, ac-
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1 curate, and based on generally accepted actu2 arial principles and methodologies.

3 ‘‘(8) BIENNIAL GAO REPORTS.—Not later than

4 January 1, 2011, and biennially thereafter, the

5 Comptroller General of the United States shall submit

6 to the Secretary and Congress a report on the des7 ignation of highly competitive regions under this sub8 section and the application of the payment system

9 under this subsection within such regions. Each re10 port shall include—

11 ‘‘(A) an evaluation of—

12 ‘‘(i) the quality of care provided to

13 beneficiaries enrolled in a

14 MedicareAdvantage preferred provider plan

15 in a highly competitive region;

16 ‘‘(ii) the satisfaction of beneficiaries

17 with benefits under such a plan;

18 ‘‘(iii) the costs to the medicare pro19 gram for payments made to such plans; and

20 ‘‘(iv) any improvements in the delivery

21 of health care services under such a plan;

22 ‘‘(B) a comparative analysis of the bench23 mark system applicable under the other provi24 sions of this section and the payment system ap-
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1 plicable in highly competitive regions under this

2 subsection; and

3 ‘‘(C) recommendations for such legislation

4 or administrative action as the Comptroller Gen5 eral determines to be appropriate.

6 ‘‘(9) REPORT ON BUDGET NEUTRALITY FOR FIS7 CAL YEARS AFTER 2013.—

8 ‘‘(A) IN GENERAL.—If the Secretary intends

9 to designate 1 or more regions as highly competi10 tive regions with respect to calendar 2014 or any

11 subsequent calendar year, the Secretary shall

12 submit a report to Congress indicating such in13 tent no later than April 1 of the calendar year

14 prior to the calendar year in which the applica15 ble designation year begins.

16 ‘‘(B) REQUIREMENTS.—A report submitted

17 under subparagraph (A) shall—

18 ‘‘(i) specify the steps (if any) that the

19 Secretary will take pursuant to paragraph

20 (5)(B) to ensure that the total amount ex21 pended as a result of the application of this

22 subsection during the year will not exceed

23 the applicable amount for the year (as de24 fined in paragraph (5)(A)(ii)(II)); and
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1 ‘‘(ii) contain a certification from the

2 Chief Actuary of the Centers for Medicare

3 and Medicaid Services that such steps will

4 meet the requirements of paragraph (5)(A)

5 based on an analysis using generally ac6 cepted actuarial principles and methodolo7 gies.’’.

8 (b) CONFORMING AMENDMENT.—Section

9 1858(c)(3)(A)(i) (as added by section 211(b)) is amended

10 to read as follows:

11 ‘‘(i) Whether each preferred provider

12 region has been designated as a highly com13 petitive region under subparagraph (A) or

14 (B) of subsection (i)(1) and the benchmark

15 amount for any preferred provider region

16 (as calculated under paragraph (2)(A)) for

17 the year that has not been designated as a

18 highly competitive region.’’.

19 SEC. 232. FEE-FOR-SERVICE MODERNIZATION PROJECTS.

20 (a) ESTABLISHMENT.—

21 (1) REVIEW AND REPORT ON RESULTS OF EXIST22 ING DEMONSTRATIONS.—

23 (A) REVIEW.—The Secretary shall conduct

24 an empirical review of the results of the dem25 onstrations under sections 442, 443, and 444.
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1 (B) REPORT.—Not later than January 1,

2 2008, the Secretary shall submit a report to Con3 gress on the empirical review conducted under

4 subparagraph (A) which shall include estimates

5 of the total costs of the demonstrations, including

6 expenditures as a result of the provision of serv7 ices provided to beneficiaries under the dem8 onstrations that are incidental to the services

9 provided under the demonstrations, and all other

10 expenditures under title XVIII of the Social Se11 curity Act. The report shall also include a cer12 tification from the Chief Actuary of the Centers

13 for Medicare & Medicaid Services that such esti14 mates are reasonable, accurate, and based on

15 generally accepted actuarial principles and

16 methodologies.

17 (2) PROJECTS.—Beginning in 2009, the Sec18 retary, based on the empirical review conducted under

19 paragraph (1), shall establish projects under which

20 medicare beneficiaries receiving benefits under the

21 medicare fee-for-service program under parts A and B

22 of title XVIII of the Social Security Act are provided

23 with coverage of enhanced benefits or services under

24 such program. The purpose of such projects is to
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1 evaluate whether the provision of such enhanced bene2 fits or services to such beneficiaries—

3 (A) improves the quality of care provided to

4 such beneficiaries under the medicare program;

5 (B) improves the health care delivery system

6 under the medicare program; and

7 (C) results in reduced expenditures under

8 the medicare program.

9 (2) ENHANCED BENEFITS OR SERVICES.—For

10 purposes of this section, enhanced benefits or services

11 shall include—

12 (A) preventive services not otherwise covered

13 under title XVIII of the Social Security Act;

14 (B) chronic care coordination services;

15 (C) disease management services; or

16 (D) other benefits or services that the Sec17 retary determines will improve preventive health

18 care for medicare beneficiaries, result in im19 proved chronic disease management, and man20 agement of complex, life-threatening, or high-cost

21 conditions and are consistent with the goals de22 scribed in subparagraphs (A), (B), and (C) of

23 paragraph (1).

24 (b) PROJECT SITES AND DURATION.—
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1 (1) IN GENERAL.—Subject to subsection (e)(2),

2 the projects under this section shall be conducted—

3 (A) in a region or regions that are com4 parable (as determined by the Secretary) to the

5 region or regions that are designated as a highly

6 competitive region under subparagraph (A) or

7 (B) of section 1858(i)(1) of the Social Security

8 Act, as added by section 231 of this Act; and

9 (B) during the years that a region or re10 gions are designated as such a highly competitive

11 region.

12 (2) RULE OF CONSTRUCTION.—For purposes of

13 paragraph (1), a comparable region does not nec14 essarily mean the identical region.

15 (c) WAIVER AUTHORITY.—The Secretary shall waive

16 compliance with the requirements of title XVIII of the So17 cial Security Act (42 U.S.C. 1395 et seq.) only to the extent

18 and for such period as the Secretary determines is necessary

19 to provide for enhanced benefits or services consistent with

20 the projects under this section.

21 (d) BIENNIAL GAO REPORTS.—Not later than Janu22 ary 1, 2011, and biennially thereafter for as long as the

23 projects under this section are being conducted, the Comp24 troller General of the United States shall submit to the Sec-
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1 retary and Congress a report that evaluates the projects.

2 Each report shall include—

3 (1) an evaluation of—

4 (A) the quality of care provided to bene5 ficiaries receiving benefits or services under the

6 projects;

7 (B) the satisfaction of beneficiaries receiv8 ing benefits or services under the projects;

9 (C) the costs to the medicare program under

10 the projects; and

11 (D) any improvements in the delivery of

12 health care services under the projects; and

13 (2) recommendations for such legislation or ad14 ministrative action as the Comptroller General deter15 mines to be appropriate.

16 (e) FUNDING.—

17 (1) IN GENERAL.—Payments for the costs of car18 rying out the projects under this section shall be made

19 from the Federal Hospital Insurance Trust Fund

20 under section 1817 of the Social Security Act (42

21 U.S.C. 1395i) and the Federal Supplementary Insur22 ance Trust Fund under section 1841 of such Act (42

23 U.S.C. 1395t), as determined appropriate by the Sec24 retary.
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1 (2) LIMITATION.—The total amount expended

2 under the medicare fee-for-service program under

3 parts A and B of title XVIII of the Social Security

4 Act (including all amounts expended as a result of the

5 projects under this section) during the period or year,

6 as applicable, may not exceed—

7 (A) for the period beginning on January 1,

8 2009, and ending on September 30, 2013, an

9 amount equal to the total amount that would

10 have been expended under the medicare fee-for11 service program under parts A and B of title

12 XVIII of the Social Security Act during the pe13 riod if the projects had not been conducted plus

14 $6,000,000,000; and

15 (B) for fiscal year 2014 and any subsequent

16 fiscal year, an amount equal to the total amount

17 that would have been expended under the medi18 care fee-for-service program under parts A and B

19 of such title during the year if the projects had

20 not been conducted.

21 (3) MONITORING AND REPORTS.—

22 (A) ONGOING MONITORING BY THE SEC23 RETARY TO ENSURE FUNDING LIMITATION IS NOT

24 VIOLATED.—The Secretary shall continually

25 monitor expenditures made under title XVIII of
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1 the Social Security Act by reason of the projects

2 under this section to ensure that the limitations

3 described in subparagraphs (A) and (B) of para4 graph (2) are not violated.

5 (B) REPORTS.—Not later than April 1 of

6 each year (beginning in 2010), the Secretary

7 shall submit a report to Congress and the Comp8 troller General of the United States that

9 includes—

10 (i) a detailed description of—

11 (I) the total amount expended

12 under the medicare fee-for-service pro13 gram under parts A and B of title

14 XVIII of the Social Security Act (in15 cluding all amounts expended as a re16 sult of the projects under this section)

17 during the previous year compared to

18 the total amount that would have been

19 expended under the original medicare

20 fee-for-service program in the year if

21 the projects had not been conducted;

22 (II) the projections of the total

23 amount expended under the medicare

24 fee-for-service program under parts A

25 and B of title XVIII of the Social Se-
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1 curity Act (including all amounts ex2 pended as a result of the projects under

3 this section) during the year in which

4 the report is submitted compared to the

5 total amount that would have been ex6 pended under the original medicare

7 fee-for-service program in the year if

8 the projects had not been conducted;

9 (III) amounts remaining within

10 the funding limitation specified in

11 paragraph (2); and

12 (IV) how the Secretary will

13 change the scope, site, and duration of

14 the projects in subsequent years in

15 order to ensure that the limitations de16 scribed in subparagraphs (A) and (B)

17 of paragraph (2) are not violated; and

18 (ii) a certification from the Chief Actu19 ary of the Centers for Medicare & Medicaid

20 Services that the descriptions under sub21 clauses (I), (II), (III), and (IV) of clause (i)

22 are reasonable, accurate, and based on gen23 erally accepted actuarial principles and

24 methodologies.
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1 (C) REPORT ON BUDGET NEUTRALITY FOR

2 FISCAL YEARS AFTER 2013.—

3 (i) IN GENERAL.—If the Secretary in4 tends to continue the projects under this sec5 tion for fiscal year 2014 or any subsequent

6 fiscal year, the Secretary shall submit a re7 port to Congress indicating such intent no

8 later than April 1 of the year prior to the

9 year in which the fiscal year begins.

10 (ii) REQUIREMENTS.—A report sub11 mitted under clause (i) shall—

12 (I) specify the steps (if any) that

13 the Secretary will take pursuant to

14 paragraph (4) to ensure that the limi15 tations described in paragraph (2)(B)

16 will not be violated for the year; and

17 (II) contain a certification from

18 the Chief Actuary of the Centers for

19 Medicare and Medicaid Services that

20 such steps will meet the requirements

21 of paragraph (2) based on an analysis

22 using generally accepted actuarial

23 principles and methodologies.

24 (4) APPLICATION OF LIMITATION.—If the Sec25 retary determines that the projects under this section
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1 will cause the limitations described in subparagraphs

2 (A) and (B) of paragraph (2) to be violated, the Sec3 retary shall take appropriate steps to reduce spending

4 under the projects, including through reducing the

5 scope, site, and duration of the projects.

6 (5) AUTHORITY.—Beginning in 2014, the Sec7 retary shall make necessary spending adjustments

8 (including pro rata reductions in payments to health

9 care providers under the medicare program) to recoup

10 amounts so that the limitations described in subpara11 graphs (A) and (B) of paragraph (2) are not violated.

12 Subtitle E—National Bipartisan

13 Commission on Medicare Reform

14 SEC. 241. MEDICAREADVANTAGE GOAL; ESTABLISHMENT OF

15 COMMISSION.

16 (a) ENROLLMENT GOAL.—It is the goal of this title

17 that, not later than January 1, 2010, at least 15 percent

18 of individuals entitled to, or enrolled for, benefits under

19 part A of title XVIII of the Social Security Act and enrolled

20 under part B of such title should be enrolled in a

21 MedicareAdvantage plan, as determined by the Center for

22 Medicare Choices.

23 (b) FAILURE TO ACHIEVE GOAL.—If the goal described

24 in subsection (a) is not met by January 1, 2012, as deter-
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1 mined by the Center for Medicare Choices, there shall be

2 established a commission as described in section 2.

3 SEC. 242. NATIONAL BIPARTISAN COMMISSION ON MEDI4 CARE REFORM.

5 (a) ESTABLISHMENT.—Upon a determination under

6 section 241(b) that the enrollment goal has not been met,

7 there shall be established a commission to be known as the

8 National Bipartisan Commission on Medicare Reform (in

9 this section referred to as the ‘‘Commission’’).

10 (b) DUTIES OF THE COMMISSION.—The Commission

11 shall—

12 (1) review and analyze the long-term financial

13 condition of the medicare program under title XVIII

14 of the Social Security Act (42 U.S.C. 1395 et seq.);

15 (2) identify problems that threaten the financial

16 integrity of the Federal Hospital Insurance Trust

17 Fund and the Federal Supplementary Medical Insur18 ance Trust Fund established under sections 1817 and

19 1841 of such Act (42 U.S.C. 1395i and 1395t),

20 including—

21 (A) the financial impact on the medicare

22 program of the significant increase in the num23 ber of medicare eligible individuals; and

24 (B) the ability of the Federal Government to

25 sustain the program into the future;
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1 (3) analyze potential solutions to the problems

2 identified under paragraph (2) that will ensure both

3 the financial integrity of the medicare program and

4 the provision of appropriate benefits under such pro5 gram, including methods used by other nations to re6 spond to comparable demographic patterns in eligi7 bility for health care benefits for elderly and disabled

8 individuals and trends in employment-related health

9 care for retirees;

10 (4) make recommendations to restore the solvency

11 of the Federal Hospital Insurance Trust Fund and

12 the financial integrity of the Federal Supplementary

13 Medical Insurance Trust Fund;

14 (5) make recommendations for establishing the

15 appropriate financial structure of the medicare pro16 gram as a whole;

17 (6) make recommendations for establishing the

18 appropriate balance of benefits covered under, and

19 beneficiary contributions to, the medicare program;

20 (7) make recommendations for the time periods

21 during which the recommendations described in para22 graphs (4), (5) and (6) should be implemented;

23 (8) make recommendations on the impact of

24 chronic disease and disability trends on future costs

25 and quality of services under the current benefit, fi-
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1 nancing, and delivery system structure of the medi2 care program;

3 (9) make recommendations regarding a com4 prehensive approach to preserve the medicare pro5 gram, including ways to increase the effectiveness of

6 the MedicareAdvantage program and to increase

7 MedicareAdvantage enrollment rates; and

8 (10) review and analyze such other matters as

9 the Commission determines appropriate.

10 (c) MEMBERSHIP.—

11 (1) NUMBER AND APPOINTMENT.—The Commis12 sion shall be composed of 17 members, of whom—

13 (A) four shall be appointed by the Presi14 dent;

15 (B) six shall be appointed by the Majority

16 Leader of the Senate, in consultation with the

17 Minority Leader of the Senate, of whom not

18 more than 4 shall be of the same political party;

19 (C) six shall be appointed by the Speaker of

20 the House of Representatives, in consultation

21 with the Minority Leader of the House of Rep22 resentatives, of whom not more than 4 shall be

23 of the same political party; and

24 (D) one, who shall serve as Chairperson of

25 the Commission, shall be appointed jointly by
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1 the President, Majority Leader of the Senate,

2 and the Speaker of the House of Representatives.

3 (2) DEADLINE FOR APPOINTMENT.—Members of

4 the Commission shall be appointed by not later than

5 October 1, 2012.

6 (3) TERMS OF APPOINTMENT.—The term of any

7 member appointed under paragraph (1) shall be for

8 the life of the Commission.

9 (4) MEETINGS.—The Commission shall meet at

10 the call of the Chairperson or a majority of its mem11 bers.

12 (5) QUORUM.—A quorum for purposes of con13 ducting the business of the Commission shall consist

14 of 8 members of the Commission, except that 4 mem15 bers may conduct a hearing under subsection (e).

16 (6) VACANCIES.—A vacancy in the membership

17 of the Commission shall be filled, not later than 30

18 days after the Commission is given notice of the va19 cancy, in the same manner in which the original ap20 pointment was made. Such a vacancy shall not affect

21 the power of the remaining members to carry out the

22 duties of the Commission.

23 (7) COMPENSATION.—Members of the Commis24 sion shall receive no additional pay, allowances, or

25 benefits by reason of their service on the Commission.
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1 (8) EXPENSES.—Each member of the Commis2 sion shall receive travel expenses and per diem in lieu

3 of subsistence in accordance with sections 5702 and

4 5703 of title 5, United States Code.

5 (d) STAFF AND SUPPORT SERVICES.—

6 (1) EXECUTIVE DIRECTOR.—

7 (A) APPOINTMENT.—The Chairperson shall

8 appoint an executive director of the Commission.

9 (B) COMPENSATION.—The executive director

10 shall be paid the rate of basic pay for level V of

11 the Executive Schedule under title 5, United

12 States Code.

13 (2) STAFF.—With the approval of the Commis14 sion, the executive director may appoint such per15 sonnel as the executive director considers appropriate.

16 (3) APPLICABILITY OF CIVIL SERVICE LAWS.—

17 The staff of the Commission shall be appointed with18 out regard to the provisions of title 5, United States

19 Code, governing appointments in the competitive serv20 ice, and shall be paid without regard to the provisions

21 of chapter 51 and subchapter III of chapter 53 of such

22 title (relating to classification and General Schedule

23 pay rates).

24 (4) EXPERTS AND CONSULTANTS.—With the ap25 proval of the Commission, the executive director may
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1 procure temporary and intermittent services under

2 section 3109(b) of title 5, United States Code.

3 (5) PHYSICAL FACILITIES.—The Administrator

4 of the General Services Administration shall locate

5 suitable office space for the operation of the Commis6 sion. The facilities shall serve as the headquarters of

7 the Commission and shall include all necessary equip8 ment and incidentals required for the proper func9 tioning of the Commission.

10 (e) POWERS OF COMMISSION.—

11 (1) HEARINGS AND OTHER ACTIVITIES.—The

12 Commission may hold such hearings and undertake

13 such other activities as the Commission determines to

14 be necessary to carry out its duties under this section.

15 (2) STUDIES BY GAO.—Upon the request of the

16 Commission, the Comptroller General shall conduct

17 such studies or investigations as the Commission de18 termines to be necessary to carry out its duties under

19 this section.

20 (3) COST ESTIMATES BY CONGRESSIONAL BUDG21 ET OFFICE AND OFFICE OF THE CHIEF ACTUARY OF

22 THE CENTERS FOR MEDICARE & MEDICAID.—

23 (A) IN GENERAL.—The Director of the Con24 gressional Budget Office or the Chief Actuary of

25 the Center for Medicare & Medicaid Services, or
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1 both, shall provide to the Commission, upon the

2 request of the Commission, such cost estimates as

3 the Commission determines to be necessary to

4 carry out its duties under this section.

5 (B) REIMBURSEMENTS.—The Commission

6 shall reimburse the Director of the Congressional

7 Budget Office for expenses relating to the em8 ployment in the office of the Director of such ad9 ditional staff as may be necessary for the Direc10 tor to comply with requests by the Commission

11 under subparagraph (A).

12 (4) DETAIL OF FEDERAL EMPLOYEES.—Upon the

13 request of the Commission, the head of any Federal

14 agency is authorized to detail, without reimburse15 ment, any of the personnel of such agency to the Com16 mission to assist the Commission in carrying out its

17 duties under this section. Any such detail shall not

18 interrupt or otherwise affect the civil service status or

19 privileges of the Federal employee.

20 (5) TECHNICAL ASSISTANCE.—Upon the request

21 of the Commission, the head of a Federal agency shall

22 provide such technical assistance to the Commission

23 as the Commission determines to be necessary to

24 carry out its duties under this section.
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1 (6) USE OF MAILS.—The Commission may use

2 the United States mails in the same manner and

3 under the same conditions as Federal agencies and

4 shall, for purposes of the frank, be considered a com5 mission of Congress as described in section 3215 of

6 title 39, United States Code.

7 (7) OBTAINING INFORMATION.—The Commission

8 may secure directly from any Federal agency infor9 mation necessary to enable it to carry out its duties

10 under this section, if the information may be disclosed

11 under section 552 of title 5, United States Code.

12 Upon request of the Chairperson of the Commission,

13 the head of each such agency shall furnish such infor14 mation to the Commission.

15 (8) ADMINISTRATIVE SUPPORT SERVICES.—Upon

16 the request of the Commission, the Administrator of

17 General Services shall provide to the Commission on

18 a reimbursable basis such administrative support

19 services as the Commission may request.

20 (9) PRINTING.—For purposes of costs relating to

21 printing and binding, including the cost of personnel

22 detailed from the Government Printing Office, the

23 Commission shall be deemed to be a committee of

24 Congress.
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1 (f) REPORT.—Not later than April 1, 2014, the Com2 mission shall submit to the President and Congress a report

3 and an implementation bill that shall contain a detailed

4 statement of only those recommendations, findings, and

5 conclusions of the Commission that receive the approval of

6 at least 11 members of the Commission.

7 (g) TERMINATION.—The Commission shall terminate

8 on the date that is 30 days after the date on which the re9 port and implementation bill is submitted under subsection

10 (f).

11 SEC. 243. CONGRESSIONAL CONSIDERATION OF REFORM

12 PROPOSALS.

13 (a) DEFINITIONS.—In this section:

14 (1) IMPLEMENTATION BILL.—The term ‘‘imple15 mentation bill’’ means only a bill that is introduced

16 as provided under subsection (b), and contains the

17 proposed legislation included in the report submitted

18 to Congress under section 242(f), without modifica19 tion.

20 (2) CALENDAR DAY.—The term ‘‘calendar day’’

21 means a calendar day other than 1 on which either

22 House is not in session because of an adjournment of

23 more than 3 days to a date certain.

24 (b) INTRODUCTION; REFERRAL; AND REPORT OR DIS25 CHARGE.—
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1 (1) INTRODUCTION.—On the first calendar day

2 on which both Houses are in session immediately fol3 lowing the date on which the report is submitted to

4 Congress under section 242(f), a single implementa5 tion bill shall be introduced (by request)—

6 (A) in the Senate by the Majority Leader of

7 the Senate, for himself and the Minority Leader

8 of the Senate, or by Members of the Senate des9 ignated by the Majority Leader and Minority

10 Leader of the Senate; and

11 (B) in the House of Representatives by the

12 Speaker of the House of Representatives, for him13 self and the Minority Leader of the House of

14 Representatives, or by Members of the House of

15 Representatives designated by the Speaker and

16 Minority Leader of the House of Representatives.

17 (2) REFERRAL.—The implementation bills intro18 duced under paragraph (1) shall be referred to any

19 appropriate committee of jurisdiction in the Senate

20 and any appropriate committee of jurisdiction in the

21 House of Representatives. A committee to which an

22 implementation bill is referred under this paragraph

23 may report such bill to the respective House without

24 amendment.
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1 (3) REPORT OR DISCHARGE.—If a committee to

2 which an implementation bill is referred has not re3 ported such bill by the end of the 15th calendar day

4 after the date of the introduction of such bill, such

5 committee shall be immediately discharged from fur6 ther consideration of such bill, and upon being re7 ported or discharged from the committee, such bill

8 shall be placed on the appropriate calendar.

9 (c) FLOOR CONSIDERATION.—

10 (1) IN GENERAL.—When the committee to which

11 an implementation bill is referred has reported, or

12 has been discharged under subsection (b)(3), it is at

13 any time thereafter in order (even though a previous

14 motion to the same effect has been disagreed to) for

15 any Member of the respective House to move to pro16 ceed to the consideration of the implementation bill,

17 and all points of order against the implementation

18 bill (and against consideration of the implementation

19 bill) are waived. The motion is highly privileged in

20 the House of Representatives and is privileged in the

21 Senate. The motion is not subject to amendment, or

22 to a motion to postpone, or to a motion to proceed to

23 the consideration of other business. A motion to recon24 sider the vote by which the motion is agreed to or dis25 agreed to shall not be in order. If a motion to proceed
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1 to the consideration of the implementation bill is

2 agreed to, the implementation bill shall remain the

3 unfinished business of the respective House until dis4 posed of.

5 (2) AMENDMENTS.—An implementation bill may

6 not be amended in the Senate or the House of Rep7 resentatives.

8 (3) DEBATE.—Debate on the implementation

9 bill, and on all debatable motions and appeals in con10 nection therewith, shall be limited to not more than

11 20 hours, which shall be divided equally between those

12 favoring and those opposing the resolution. A motion

13 further to limit debate is in order and not debatable.

14 An amendment to, or a motion to postpone, or a mo15 tion to proceed to the consideration of other business,

16 or a motion to recommit the implementation bill is

17 not in order. A motion to reconsider the vote by which

18 the implementation bill is agreed to or disagreed to

19 is not in order.

20 (4) VOTE ON FINAL PASSAGE.—Immediately fol21 lowing the conclusion of the debate on an implemen22 tation bill, and a single quorum call at the conclusion

23 of the debate if requested in accordance with the rules

24 of the appropriate House, the vote on final passage of

25 the implementation bill shall occur.
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1 (5) RULINGS OF THE CHAIR ON PROCEDURE.—

2 Appeals from the decisions of the Chair relating to the

3 application of the rules of the Senate or the House of

4 Representatives, as the case may be, to the procedure

5 relating to an implementation bill shall be decided

6 without debate.

7 (d) COORDINATION WITH ACTION BY OTHER

8 HOUSE.—If, before the passage by 1 House of an implemen9 tation bill of that House, that House receives from the other

10 House an implementation bill, then the following proce11 dures shall apply:

12 (1) NONREFERRAL.—The implementation bill of

13 the other House shall not be referred to a committee.

14 (2) VOTE ON BILL OF OTHER HOUSE.—With re15 spect to an implementation bill of the House receiving

16 the implementation bill—

17 (A) the procedure in that House shall be the

18 same as if no implementation bill had been re19 ceived from the other House; but

20 (B) the vote on final passage shall be on the

21 implementation bill of the other House.

22 (e) RULES OF SENATE AND HOUSE OF REPRESENTA23 TIVES.—This section is enacted by Congress—

24 (1) as an exercise of the rulemaking power of the

25 Senate and House of Representatives, respectively,
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1 and as such it is deemed a part of the rules of each

2 House, respectively, but applicable only with respect

3 to the procedure to be followed in that House in the

4 case of an implementation bill described in subsection

5 (a), and it supersedes other rules only to the extent

6 that it is inconsistent with such rules; and

7 (2) with full recognition of the constitutional

8 right of either House to change the rules (so far as re9 lating to the procedure of that House) at any time,

10 in the same manner, and to the same extent as in the

11 case of any other rule of that House.

12 SEC. 244. AUTHORIZATION OF APPROPRIATIONS.

13 There are authorized to be appropriated such sums as

14 may be necessary to carry out this subtitle for each of fiscal

15 years 2012 through 2013.

16 TITLE III—CENTER FOR

17 MEDICARE CHOICES

18 SEC. 301. ESTABLISHMENT OF THE CENTER FOR MEDICARE

19 CHOICES.

20 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

21 seq.), as amended by section 111, is amended by inserting

22 after 1806 the following new section:

23 ‘‘ESTABLISHMENT OF THE CENTER FOR MEDICARE

24 CHOICES

25 ‘‘SEC. 1808. (a) ESTABLISHMENT.—By not later than

26 March 1, 2004, the Secretary shall establish within the De-
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1 partment of Health and Human Services the Center for

2 Medicare Choices, which shall be separate from the Centers

3 for Medicare & Medicaid Services.

4 ‘‘(b) ADMINISTRATOR AND DEPUTY ADMINIS5 TRATOR.—

6 ‘‘(1) ADMINISTRATOR.—

7 ‘‘(A) IN GENERAL.—The Center for Medi8 care Choices shall be headed by an Adminis9 trator (in this section referred to as the ‘Admin10 istrator’) who shall be appointed by the Presi11 dent, by and with the advice and consent of the

12 Senate. The Administrator shall report directly

13 to the Secretary.

14 ‘‘(B) COMPENSATION.—The Administrator

15 shall be paid at the rate of basic pay payable for

16 level III of the Executive Schedule under section

17 5314 of title 5, United States Code.

18 ‘‘(C) TERM OF OFFICE.—The Administrator

19 shall be appointed for a term of 5 years. In any

20 case in which a successor does not take office at

21 the end of an Administrator’s term of office, that

22 Administrator may continue in office until the

23 entry upon office of such a successor. An Admin24 istrator appointed to a term of office after the

25 commencement of such term may serve under
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1 such appointment only for the remainder of such

2 term.

3 ‘‘(D) GENERAL AUTHORITY.—The Adminis4 trator shall be responsible for the exercise of all

5 powers and the discharge of all duties of the Cen6 ter for Medicare Choices, and shall have author7 ity and control over all personnel and activities

8 thereof.

9 ‘‘(E) RULEMAKING AUTHORITY.—The Ad10 ministrator may prescribe such rules and regula11 tions as the Administrator determines necessary

12 or appropriate to carry out the functions of the

13 Center for Medicare Choices. The regulations pre14 scribed by the Administrator shall be subject to

15 the rulemaking procedures established under sec16 tion 553 of title 5, United States Code.

17 ‘‘(F) AUTHORITY TO ESTABLISH ORGANIZA18 TIONAL UNITS.—The Administrator may estab19 lish, alter, consolidate, or discontinue such orga20 nizational units or components within the Cen21 ter for Medicare Choices as the Administrator

22 considers necessary or appropriate, except that

23 this subparagraph shall not apply with respect

24 to any unit, component, or provision provided

25 for by this section.
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1 ‘‘(G) AUTHORITY TO DELEGATE.—The Ad2 ministrator may assign duties, and delegate, or

3 authorize successive redelegations of, authority to

4 act and to render decisions, to such officers and

5 employees of the Center for Medicare Choices as

6 the Administrator may find necessary. Within

7 the limitations of such delegations, redelegations,

8 or assignments, all official acts and decisions of

9 such officers and employees shall have the same

10 force and effect as though performed or rendered

11 by the Administrator.

12 ‘‘(2) DEPUTY ADMINISTRATOR.—

13 ‘‘(A) IN GENERAL.—There shall be a Dep14 uty Administrator of the Center for Medicare

15 Choices who shall be appointed by the Adminis16 trator.

17 ‘‘(B) COMPENSATION.—The Deputy Admin18 istrator shall be paid at the rate of basic pay

19 payable for level IV of the Executive Schedule

20 under section 5315 of title 5, United States Code.

21 ‘‘(C) TERM OF OFFICE.—The Deputy Ad22 ministrator shall be appointed for a term of 5

23 years. In any case in which a successor does not

24 take office at the end of a Deputy Administra25 tor’s term of office, such Deputy Administrator
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1 may continue in office until the entry upon of2 fice of such a successor. A Deputy Administrator

3 appointed to a term of office after the commence4 ment of such term may serve under such ap5 pointment only for the remainder of such term.

6 ‘‘(D) DUTIES.—The Deputy Administrator

7 shall perform such duties and exercise such pow8 ers as the Administrator shall from time to time

9 assign or delegate. The Deputy Administrator

10 shall be the Acting Administrator of the Center

11 for Medicare Choices during the absence or dis12 ability of the Administrator and, unless the

13 President designates another officer of the Gov14 ernment as Acting Administrator, in the event of

15 a vacancy in the office of the Administrator.

16 ‘‘(3) SECRETARIAL COORDINATION OF PROGRAM

17 ADMINISTRATION.—The Secretary shall ensure appro18 priate coordination between the Administrator and

19 the Administrator of the Centers for Medicare & Med20 icaid Services in carrying out the programs under

21 this title.

22 ‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—

23 ‘‘(1) DUTIES.—
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1 ‘‘(A) GENERAL DUTIES.—The Adminis2 trator shall carry out parts C and D,

3 including—

4 ‘‘(i) negotiating, entering into, and en5 forcing, contracts with plans for the offering

6 of MedicareAdvantage plans under part C,

7 including the offering of qualified prescrip8 tion drug coverage under such plans; and

9 ‘‘(ii) negotiating, entering into, and

10 enforcing, contracts with eligible entities for

11 the offering of Medicare Prescription Drug

12 plans under part D.

13 ‘‘(B) OTHER DUTIES.—The Administrator

14 shall carry out any duty provided for under part

15 C or D, including duties relating to—

16 ‘‘(i) reasonable cost contracts with eli17 gible organizations under section 1876(h);

18 and

19 ‘‘(ii) demonstration projects carried

20 out in part or in whole under such parts,

21 including the demonstration project carried

22 out through a MedicareAdvantage (formerly

23 Medicare+Choice) project that demonstrates

24 the application of capitation payment rates

25 for frail elderly medicare beneficiaries
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1 through the use of an interdisciplinary

2 team and through the provision of primary

3 care services to such beneficiaries by means

4 of such a team at the nursing facility in5 volved.

6 ‘‘(C) NONINTERFERENCE.—In order to pro7 mote competition under parts C and D, the Ad8 ministrator, in carrying out the duties required

9 under this section, may not, to the extent pos10 sible, interfere in any way with negotiations be11 tween eligible entities, MedicareAdvantage orga12 nizations, hospitals, physicians, other entities or

13 individuals furnishing items and services under

14 this title (including contractors for such items

15 and services), and drug manufacturers, whole16 salers, or other suppliers of covered drugs

17 ‘‘(D) ANNUAL REPORTS.—Not later than

18 March 31 of each year, the Administrator shall

19 submit to Congress and the President a report on

20 the administration of the voluntary prescription

21 drug delivery program under this part during

22 the previous fiscal year.

23 ‘‘(2) MANAGEMENT STAFF.—

24 ‘‘(A) IN GENERAL.—The Administrator,

25 with the approval of the Secretary, may employ,
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1 such management staff as determined appro2 priate. Any such manager shall be required to

3 have demonstrated, by their education and expe4 rience (either in the public or private sector), su5 perior expertise in the following areas:

6 ‘‘(i) The review, negotiation, and ad7 ministration of health care contracts.

8 ‘‘(ii) The design of health care benefit

9 plans.

10 ‘‘(iii) Actuarial sciences.

11 ‘‘(iv) Compliance with health plan con12 tracts.

13 ‘‘(v) Consumer education and decision

14 making.

15 ‘‘(B) COMPENSATION.—

16 ‘‘(i) IN GENERAL.—Subject to clause

17 (ii), the Administrator shall establish the

18 rate of pay for an individual employed

19 under subparagraph (A).

20 ‘‘(ii) MAXIMUM RATE.—In no case

21 may the rate of compensation determined

22 under clause (i) exceed the highest rate of

23 basic pay for the Senior Executive Service

24 under section 5382(b) of title 5, United

25 States Code.
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1 ‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS OF

2 THE CENTERS FOR MEDICARE & MEDICAID SERV3 ICES.—

4 ‘‘(A) IN GENERAL.—The Secretary, the Ad5 ministrator of the Center for Medicare Choices,

6 and the Administrator of the Centers for Medi7 care & Medicaid Services shall establish an ap8 propriate transition of responsibility in order to

9 redelegate the administration of part C from the

10 Secretary and the Administrator of the Centers

11 for Medicare & Medicaid Services to the Admin12 istrator of the Center for Medicare Choices as is

13 appropriate to carry out the purposes of this sec14 tion.

15 ‘‘(B) TRANSFER OF DATA AND INFORMA16 TION.—The Secretary shall ensure that the Ad17 ministrator of the Centers for Medicare & Med18 icaid Services transfers to the Administrator

19 such information and data in the possession of

20 the Administrator of the Centers for Medicare &

21 Medicaid Services as the Administrator requires

22 to carry out the duties described in paragraph

23 (1).

24 ‘‘(C) CONSTRUCTION.—Insofar as a respon25 sibility of the Secretary or the Administrator of
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1 the Centers for Medicare & Medicaid Services is

2 redelegated to the Administrator under this sec3 tion, any reference to the Secretary or the Ad4 ministrator of the Centers for Medicare & Med5 icaid Services in this title or title XI with re6 spect to such responsibility is deemed to be a ref7 erence to the Administrator.

8 ‘‘(d) OFFICE OF BENEFICIARY ASSISTANCE.—

9 ‘‘(1) ESTABLISHMENT.—The Secretary shall es10 tablish within the Center for Medicare Choices an Of11 fice of Beneficiary Assistance to carry out functions

12 relating to medicare beneficiaries under this title, in13 cluding making determinations of eligibility of indi14 viduals for benefits under this title, providing for en15 rollment of medicare beneficiaries under this title,

16 and the functions described in paragraph (2). The Of17 fice shall be a separate operating division within the

18 Center for Medicare Choices.

19 ‘‘(2) DISSEMINATION OF INFORMATION ON BENE20 FITS AND APPEALS RIGHTS.—

21 ‘‘(A) DISSEMINATION OF BENEFITS INFOR22 MATION.—The Office of Beneficiary Assistance

23 shall disseminate to medicare beneficiaries, by

24 mail, by posting on the Internet site of the Cen25 ter for Medicare Choices, and through the toll-
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1 free telephone number provided for under section

2 1804(b), information with respect to the fol3 lowing:

4 ‘‘(i) Benefits, and limitations on pay5 ment (including cost-sharing, stop-loss pro6 visions, and formulary restrictions) under

7 parts C and D.

8 ‘‘(ii) Benefits, and limitations on pay9 ment under parts A, and B, including in10 formation on medicare supplemental poli11 cies under section 1882.

12 ‘‘(iii) Other areas determined to be ap13 propriate by the Administrator.

14 Such information shall be presented in a manner

15 so that medicare beneficiaries may compare ben16 efits under parts A, B, and D, and medicare

17 supplemental policies with benefits under

18 MedicareAdvantage plans under part C.

19 ‘‘(B) DISSEMINATION OF APPEALS RIGHTS

20 INFORMATION.—The Office of Beneficiary Assist21 ance shall disseminate to medicare beneficiaries

22 in the manner provided under subparagraph (A)

23 a description of procedural rights (including

24 grievance and appeals procedures) of bene25 ficiaries under the original medicare fee-for-serv-
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1 ice program under parts A and B, the

2 MedicareAdvantage program under part C, and

3 the voluntary prescription drug delivery pro4 gram under part D.

5 ‘‘(3) MEDICARE OMBUDSMAN.—

6 ‘‘(A) IN GENERAL.—Within the Office of

7 Beneficiary Assistance, there shall be a Medicare

8 Ombudsman, appointed by the Secretary from

9 among individuals with expertise and experience

10 in the fields of health care and advocacy, to

11 carry out the duties described in subparagraph

12 (B).

13 ‘‘(B) DUTIES.—The Medicare Ombudsman

14 shall—

15 ‘‘(i) receive complaints, grievances, and

16 requests for information submitted by a

17 medicare beneficiary, with respect to any

18 aspect of the medicare program;

19 ‘‘(ii) provide assistance with respect to

20 complaints, grievances, and requests re21 ferred to in clause (i), including—

22 ‘‘(I) assistance in collecting rel23 evant information for such bene24 ficiaries, to seek an appeal of a deci25 sion or determination made by a fiscal
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1 intermediary, carrier,

2 MedicareAdvantage organization, an

3 eligible entity under part D, or the

4 Secretary; and

5 ‘‘(II) assistance to such bene6 ficiaries with any problems arising

7 from disenrollment from a

8 MedicareAdvantage plan under part C

9 or a prescription drug plan under part

10 D; and

11 ‘‘(iii) submit annual reports to Con12 gress, the Secretary, and the Medicare Com13 petitive Policy Advisory Board describing

14 the activities of the Office, and including

15 such recommendations for improvement in

16 the administration of this title as the Om17 budsman determines appropriate.

18 ‘‘(C) COORDINATION WITH STATE OMBUDS19 MAN PROGRAMS AND CONSUMER ORGANIZA20 TIONS.—The Medicare Ombudsman shall, to the

21 extent appropriate, coordinate with State med22 ical Ombudsman programs, and with State- and

23 community-based consumer organizations, to—

24 ‘‘(i) provide information about the

25 medicare program; and
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1 ‘‘(ii) conduct outreach to educate medi2 care beneficiaries with respect to manners

3 in which problems under the medicare pro4 gram may be resolved or avoided.

5 ‘‘(e) MEDICARE COMPETITIVE POLICY ADVISORY

6 BOARD.—

7 ‘‘(1) ESTABLISHMENT.—There is established

8 within the Center for Medicare Choices the Medicare

9 Competitive Policy Advisory Board (in this section

10 referred to as the ‘Board’). The Board shall advise,

11 consult with, and make recommendations to the Ad12 ministrator with respect to the administration of

13 parts C and D, including the review of payment poli14 cies under such parts.

15 ‘‘(2) REPORTS.—

16 ‘‘(A) IN GENERAL.—With respect to matters

17 of the administration of parts C and D, the

18 Board shall submit to Congress and to the Ad19 ministrator such reports as the Board determines

20 appropriate. Each such report may contain such

21 recommendations as the Board determines ap22 propriate for legislative or administrative

23 changes to improve the administration of such

24 parts, including the stability and solvency of the

25 programs under such parts and the topics de-
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1 scribed in subparagraph (B). Each such report

2 shall be published in the Federal Register.

3 ‘‘(B) TOPICS DESCRIBED.—Reports required

4 under subparagraph (A) may include the fol5 lowing topics:

6 ‘‘(i) FOSTERING COMPETITION.—Rec7 ommendations or proposals to increase com8 petition under parts C and D for services

9 furnished to medicare beneficiaries.

10 ‘‘(ii) EDUCATION AND ENROLLMENT.—

11 Recommendations for the improvement of

12 efforts to provide medicare beneficiaries in13 formation and education on the program

14 under this title, and specifically parts C

15 and D, and the program for enrollment

16 under the title.

17 ‘‘(iii) QUALITY.—Recommendations on

18 ways to improve the quality of benefits pro19 vided under plans under parts C and D.

20 ‘‘(iv) DISEASE MANAGEMENT PRO21 GRAMS.—Recommendations on the incorpo22 ration of disease management programs

23 under parts C and D.
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1 ‘‘(v) RURAL ACCESS.—Recommenda2 tions to improve competition and access to

3 plans under parts C and D in rural areas.

4 ‘‘(C) MAINTAINING INDEPENDENCE OF

5 BOARD.—The Board shall directly submit to

6 Congress reports required under subparagraph

7 (A). No officer or agency of the United States

8 may require the Board to submit to any officer

9 or agency of the United States for approval,

10 comments, or review, prior to the submission to

11 Congress of such reports.

12 ‘‘(3) DUTY OF ADMINISTRATOR.—With respect to

13 any report submitted by the Board under paragraph

14 (2)(A), not later than 90 days after the report is sub15 mitted, the Administrator shall submit to Congress

16 and the President an analysis of recommendations

17 made by the Board in such report. Each such anal18 ysis shall be published in the Federal Register.

19 ‘‘(4) MEMBERSHIP.—

20 ‘‘(A) APPOINTMENT.—Subject to the suc21 ceeding provisions of this paragraph, the Board

22 shall consist of 7 members to be appointed as fol23 lows:

24 ‘‘(i) Three members shall be appointed

25 by the President.
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1 ‘‘(ii) Two members shall be appointed

2 by the Speaker of the House of Representa3 tives, with the advice of the chairman and

4 the ranking minority member of the Com5 mittees on Ways and Means and on Energy

6 and Commerce of the House of Representa7 tives.

8 ‘‘(iii) Two members shall be appointed

9 by the President pro tempore of the Senate

10 with the advice of the chairman and the

11 ranking minority member of the Committee

12 on Finance of the Senate.

13 ‘‘(B) QUALIFICATIONS.—The members shall

14 be chosen on the basis of their integrity, impar15 tiality, and good judgment, and shall be individ16 uals who are, by reason of their education and

17 experience in health care benefits management,

18 exceptionally qualified to perform the duties of

19 members of the Board.

20 ‘‘(C) PROHIBITION ON INCLUSION OF FED21 ERAL EMPLOYEES.—No officer or employee of the

22 United States may serve as a member of the

23 Board.

24 ‘‘(5) COMPENSATION.—Members of the Board

25 shall receive, for each day (including travel time) they
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1 are engaged in the performance of the functions of the

2 Board, compensation at rates not to exceed the daily

3 equivalent to the annual rate in effect for level IV of

4 the Executive Schedule under section 5315 of title 5,

5 United States Code.

6 ‘‘(6) TERMS OF OFFICE.—

7 ‘‘(A) IN GENERAL.—The term of office of

8 members of the Board shall be 3 years.

9 ‘‘(B) TERMS OF INITIAL APPOINTEES.—As

10 designated by the President at the time of ap11 pointment, of the members first appointed—

12 ‘‘(i) one shall be appointed for a term

13 of 1 year;

14 ‘‘(ii) three shall be appointed for terms

15 of 2 years; and

16 ‘‘(iii) three shall be appointed for

17 terms of 3 years.

18 ‘‘(C) REAPPOINTMENTS.—Any person ap19 pointed as a member of the Board may not serve

20 for more than 8 years.

21 ‘‘(D) VACANCY.—Any member appointed to

22 fill a vacancy occurring before the expiration of

23 the term for which the member’s predecessor was

24 appointed shall be appointed only for the re25 mainder of that term. A member may serve after
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1 the expiration of that member’s term until a suc2 cessor has taken office. A vacancy in the Board

3 shall be filled in the manner in which the origi4 nal appointment was made.

5 ‘‘(7) CHAIR.—The Chair of the Board shall be

6 elected by the members. The term of office of the Chair

7 shall be 3 years.

8 ‘‘(8) MEETINGS.—The Board shall meet at the

9 call of the Chair, but in no event less than 3 times

10 during each fiscal year.

11 ‘‘(9) DIRECTOR AND STAFF.—

12 ‘‘(A) APPOINTMENT OF DIRECTOR.—The

13 Board shall have a Director who shall be ap14 pointed by the Chair.

15 ‘‘(B) IN GENERAL.—With the approval of

16 the Board, the Director may appoint such addi17 tional personnel as the Director considers appro18 priate.

19 ‘‘(C) ASSISTANCE FROM THE ADMINIS20 TRATOR.—The Administrator shall make avail21 able to the Board such information and other as22 sistance as it may require to carry out its func23 tions.

24 ‘‘(10) CONTRACT AUTHORITY.—The Board may

25 contract with and compensate government and pri-
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1 vate agencies or persons to carry out its duties under

2 this subsection, without regard to section 3709 of the

3 Revised Statutes (41 U.S.C. 5).

4 ‘‘(f) FUNDING.—There is authorized to be appro5 priated, in appropriate part from the Federal Hospital In6 surance Trust Fund and from the Federal Supplementary

7 Medical Insurance Trust Fund (including the Prescription

8 Drug Account), such sums as are necessary to carry out

9 this section.’’.

10 (b) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–

11 MEDICARE).—Section 1804(b) (42 U.S.C. 1395b–2(b)) is

12 amended by adding at the end the following: ‘‘By not later

13 than 1 year after the date of the enactment of the Prescrip14 tion Drug and Medicare Improvement Act of 2003, the Sec15 retary shall provide, through the toll-free number 1–800–

16 MEDICARE, for a means by which individuals seeking in17 formation about, or assistance with, such programs who

18 phone such toll-free number are transferred (without

19 charge) to appropriate entities for the provision of such in20 formation or assistance. Such toll-free number shall be the

21 toll-free number listed for general information and assist22 ance in the annual notice under subsection (a) instead of

23 the listing of numbers of individual contractors.’’.
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1 SEC. 302. MISCELLANEOUS ADMINISTRATIVE PROVISIONS.

2 (a) ADMINISTRATOR AS MEMBER AND CO-SECRETARY

3 OF THE BOARD OF TRUSTEES OF THE MEDICARE TRUST

4 FUNDS.—The fifth sentence of sections 1817(b) and 1841(b)

5 (42 U.S.C. 1395i(b), 1395t(b)) are each amended by strik6 ing ‘‘shall serve as the Secretary’’ and inserting ‘‘and the

7 Administrator of the Center for Medicare Choices shall serve

8 as the Co-Secretaries’’.

9 (b) INCREASE IN GRADE TO EXECUTIVE LEVEL III

10 FOR THE ADMINISTRATOR OF THE CENTERS FOR MEDI11 CARE & MEDICAID SERVICES.—

12 (1) IN GENERAL.—Section 5314 of title 5,

13 United States Code, is amended by adding at the end

14 the following:

15 ‘‘Administrator of the Centers for Medicare &

16 Medicaid Services.’’.

17 (2) CONFORMING AMENDMENT.—Section 5315 of

18 such title is amended by striking ‘‘Administrator of

19 the Health Care Financing Administration.’’.

20 (3) EFFECTIVE DATE.—The amendments made

21 by this subsection take effect on March 1, 2004.
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1 TITLE IV—MEDICARE FEE-FOR2 SERVICE IMPROVEMENTS

3 Subtitle A—Provisions Relating to

4 Part A

5 SEC. 401. EQUALIZING URBAN AND RURAL STANDARDIZED

6 PAYMENT AMOUNTS UNDER THE MEDICARE

7 INPATIENT HOSPITAL PROSPECTIVE PAY8 MENT SYSTEM.

9 (a) IN GENERAL.—Section 1886(d)(3)(A)(iv) (42

10 U.S.C. 1395ww(d)(3)(A)(iv)) is amended—

11 (1) by striking ‘‘(iv) For discharges’’ and insert12 ing ‘‘(iv)(I) Subject to subclause (II), for discharges’’;

13 and

14 (2) by adding at the end the following new sub15 clause:

16 ‘‘(II) For discharges occurring in a fiscal year

17 (beginning with fiscal year 2004), the Secretary shall

18 compute a standardized amount for hospitals located

19 in any area within the United States and within

20 each region equal to the standardized amount com21 puted for the previous fiscal year under this subpara22 graph for hospitals located in a large urban area (or,

23 beginning with fiscal year 2005, for applicable for all

24 hospitals in the previous fiscal year) increased by the
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1 applicable percentage increase under subsection

2 (b)(3)(B)(i) for the fiscal year involved.’’.

3 (b) APPLICATION TO SUBSECTION (D) PUERTO RICO

4 HOSPITALS.—Section 1886(d)(9) (42 U.S.C.

5 1395ww(d)(9)) is amended—

6 (1) in subparagraph (A)—

7 (A) in clause (i), by striking ‘‘and’’ after

8 the comma at the end;

9 (B) in clause (ii)—

10 (i) in the matter preceding subclause

11 (I), by inserting ‘‘and before October 1,

12 2003’’ after ‘‘October 1, 1997’’; and

13 (ii) in the matter following clause

14 (III), by striking the period at the end and

15 inserting ‘‘, and’’; and

16 (iii) by adding at the end the following

17 new clause:

18 ‘‘(iii) for discharges in a fiscal year beginning

19 on or after October 1, 2003, 50 percent of the national

20 standardized rate (determined under paragraph

21 (3)(D)(iii)) for hospitals located in any area.’’;

22 (2) in subparagraph (C)—

23 (A) in clause (i)—

24 (i) by striking ‘‘(i) The Secretary’’ and

25 inserting ‘‘(i)(I) For discharges in a fiscal
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1 year after fiscal year 1988 and before fiscal

2 year 2004, the Secretary; and

3 (ii) by adding at the end the following:

4 ‘‘(II) For discharges in fiscal year 2004, the Sec5 retary shall compute an average standardized amount

6 for hospitals located in any area of Puerto Rico that

7 is equal to the average standardized amount com8 puted under subclause (I) for fiscal year 2003 for hos9 pitals in an urban area, increased by the applicable

10 percentage increase under subsection (b)(3)(B) for fis11 cal year 2004.

12 ‘‘(III) For discharges in a fiscal year after fiscal

13 year 2004, the Secretary shall compute an average

14 standardized amount for hospitals located in any are

15 of Puerto Rico that is equal to the average standard16 ized amount computed under subclause (II) or this

17 subclause for the previous fiscal year, increased by the

18 applicable percentage increase under subsection

19 (b)(3)(B), adjusted to reflect the most recent case mix

20 data.’’;

21 (B) in clause (ii), by inserting ‘‘(or for fis22 cal year 2004 and thereafter, the standardized

23 amount)’’ after ‘‘each of the average standardized

24 amounts’’; and
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1 (C) in clause (iii)(I), by striking ‘‘for hos2 pitals located in an urban or rural area, respec3 tively’’.

4 (c) CONFORMING AMENDMENTS.—

5 (1) COMPUTING DRG-SPECIFIC RATES.—Section

6 1886(d)(3)(D) (42 U.S.C. 1395ww(d)(3)(D)) is

7 amended—

8 (A) in the heading, by striking ‘‘IN DIF9 FERENT AREAS’’;

10 (B) in the matter preceding clause (i), by

11 striking ‘‘, each of’’;

12 (C) in clause (i)—

13 (i) in the matter preceding subclause

14 (I), by inserting ‘‘for fiscal years before fis15 cal year 2004,’’ before ‘‘for hospitals’’; and

16 (ii) in subclause (II), by striking

17 ‘‘and’’ after the semicolon at the end;

18 (D) in clause (ii)—

19 (i) in the matter preceding subclause

20 (I), by inserting ‘‘for fiscal years before fis21 cal year 2004,’’ before ‘‘for hospitals’’; and

22 (ii) in subclause (II), by striking the

23 period at the end and inserting ‘‘; and’’;

24 and
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1 (E) by adding at the end the following new

2 clause:

3 ‘‘(iii) for a fiscal year beginning after fiscal

4 year 2003, for hospitals located in all areas, to

5 the product of—

6 ‘‘(I) the applicable standardized

7 amount (computed under subparagraph

8 (A)), reduced under subparagraph (B), and

9 adjusted or reduced under subparagraph (C)

10 for the fiscal year; and

11 ‘‘(II) the weighting factor (determined

12 under paragraph (4)(B)) for that diagnosis13 related group.’’.

14 (2) TECHNICAL CONFORMING SUNSET.—Section

15 1886(d)(3) (42 U.S.C. 1395ww(d)(3)) is amended—

16 (A) in the matter preceding subparagraph

17 (A), by inserting ‘‘, for fiscal years before fiscal

18 year 1997,’’ before ‘‘a regional adjusted DRG

19 prospective payment rate’’; and

20 (B) in subparagraph (D), in the matter

21 preceding clause (i), by inserting ‘‘, for fiscal

22 years before fiscal year 1997,’’ before ‘‘a regional

23 DRG prospective payment rate for each region,’’.
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1 SEC. 402. ADJUSTMENT TO THE MEDICARE INPATIENT HOS2 PITAL PPS WAGE INDEX TO REVISE THE

3 LABOR-RELATED SHARE OF SUCH INDEX.

4 (a) IN GENERAL.—Section 1886(d)(3)(E) (42 U.S.C.

5 1395ww(d)(3)(E)) is amended—

6 (1) by striking ‘‘WAGE LEVELS.—The Secretary’’

7 and inserting ‘‘WAGE LEVELS.—

8 ‘‘(i) IN GENERAL.—Except as provided in

9 clause (ii), the Secretary’’; and

10 (2) by adding at the end the following new

11 clause:

12 ‘‘(ii) ALTERNATIVE PROPORTION TO BE AD13 JUSTED BEGINNING IN FISCAL YEAR 2005.—

14 ‘‘(I) IN GENERAL.—Except as provided

15 in subclause (II), for discharges occurring

16 on or after October 1, 2004, the Secretary

17 shall substitute ‘62 percent’ for the propor18 tion described in the first sentence of clause

19 (i).

20 ‘‘(II) HOLD HARMLESS FOR CERTAIN

21 HOSPITALS.—If the application of subclause

22 (I) would result in lower payments to a hos23 pital than would otherwise be made, then

24 this subparagraph shall be applied as if this

25 clause had not been enacted.’’.
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1 (b) WAIVING BUDGET NEUTRALITY.—Section

2 1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E)), as amended

3 by subsection (a), is amended by adding at the end of clause

4 (i) the following new sentence: ‘‘The Secretary shall apply

5 the previous sentence for any period as if the amendments

6 made by section 402(a) of the Prescription Drug and Medi7 care Improvement Act of 2003 had not been enacted.’’.

8 SEC. 403. MEDICARE INPATIENT HOSPITAL PAYMENT AD9 JUSTMENT FOR LOW-VOLUME HOSPITALS.

10 Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by

11 adding at the end the following new paragraph:

12 ‘‘(12) PAYMENT ADJUSTMENT FOR LOW-VOLUME

13 HOSPITALS.—

14 ‘‘(A) PAYMENT ADJUSTMENT.—

15 ‘‘(i) IN GENERAL.—Notwithstanding

16 any other provision of this section, for each

17 cost reporting period (beginning with the

18 cost reporting period that begins in fiscal

19 year 2005), the Secretary shall provide for

20 an additional payment amount to each low21 volume hospital (as defined in clause (iii))

22 for discharges occurring during that cost re23 porting period which is equal to the appli24 cable percentage increase (determined under
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1 clause (ii)) in the amount paid to such hos2 pital under this section for such discharges.

3 ‘‘(ii) APPLICABLE PERCENTAGE IN4 CREASE.—The Secretary shall determine a

5 percentage increase applicable under this

6 paragraph that ensures that—

7 ‘‘(I) no percentage increase in

8 payments under this paragraph ex9 ceeds 25 percent of the amount of pay10 ment that would (but for this para11 graph) otherwise be made to a low-vol12 ume hospital under this section for

13 each discharge;

14 ‘‘(II) low-volume hospitals that

15 have the lowest number of discharges

16 during a cost reporting period receive

17 the highest percentage increases in

18 payments due to the application of this

19 paragraph; and

20 ‘‘(III) the percentage increase in

21 payments to any low-volume hospital

22 due to the application of this para23 graph is reduced as the number of dis24 charges per cost reporting period in25 creases.
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1 ‘‘(iii) LOW-VOLUME HOSPITAL DE2 FINED.—For purposes of this paragraph,

3 the term ‘low-volume hospital’ means, for a

4 cost reporting period, a subsection (d) hos5 pital (as defined in paragraph (1)(B)) other

6 than a critical access hospital (as defined in

7 section 1861(mm)(1)) that—

8 ‘‘(I) the Secretary determines had

9 an average of less than 2,000 dis10 charges (determined with respect to all

11 patients and not just individuals re12 ceiving benefits under this title) during

13 the 3 most recent cost reporting periods

14 for which data are available that pre15 cede the cost reporting period to which

16 this paragraph applies; and

17 ‘‘(II) is located at least 15 miles

18 from a like hospital (or is deemed by

19 the Secretary to be so located by reason

20 of such factors as the Secretary deter21 mines appropriate, including the time

22 required for an individual to travel to

23 the nearest alternative source of appro24 priate inpatient care (after taking into

25 account the location of such alternative
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1 source of inpatient care and any

2 weather or travel conditions that may

3 affect such travel time).

4 ‘‘(B) PROHIBITING CERTAIN REDUCTIONS.—

5 Notwithstanding subsection (e), the Secretary

6 shall not reduce the payment amounts under this

7 section to offset the increase in payments result8 ing from the application of subparagraph (A).’’.

9 SEC. 404. FAIRNESS IN THE MEDICARE DISPROPORTIONATE

10 SHARE HOSPITAL (DSH) ADJUSTMENT FOR

11 RURAL HOSPITALS.

12 (a) EQUALIZING DSH PAYMENT AMOUNTS.—

13 (1) IN GENERAL.—Section 1886(d)(5)(F)(vii)

14 (42 U.S.C. 1395ww(d)(5)(F)(vii)) is amended by in15 serting ‘‘, and, after October 1, 2004, for any other

16 hospital described in clause (iv),’’ after ‘‘clause

17 (iv)(I)’’ in the matter preceding subclause (I).

18 (2) CONFORMING AMENDMENTS.—Section

19 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is

20 amended—

21 (A) in clause (iv)—

22 (i) in subclause (II)—

23 (I) by inserting ‘‘and before Octo24 ber 1, 2004,’’ after ‘‘April 1, 2001,’’;

25 and
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1 (II) by inserting ‘‘or, for dis2 charges occurring on or after October

3 1, 2004, is equal to the percent deter4 mined in accordance with the applica5 ble formula described in clause (vii)’’

6 after ‘‘clause (xiii)’’;

7 (ii) in subclause (III)—

8 (I) by inserting ‘‘and before Octo9 ber 1, 2004,’’ after ‘‘April 1, 2001,’’;

10 and

11 (II) by inserting ‘‘or, for dis12 charges occurring on or after October

13 1, 2004, is equal to the percent deter14 mined in accordance with the applica15 ble formula described in clause (vii)’’

16 after ‘‘clause (xii)’’;

17 (iii) in subclause (IV)—

18 (I) by inserting ‘‘and before Octo19 ber 1, 2004,’’ after ‘‘April 1, 2001,’’;

20 and

21 (II) by inserting ‘‘or, for dis22 charges occurring on or after October

23 1, 2004, is equal to the percent deter24 mined in accordance with the applica-
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1 ble formula described in clause (vii)’’

2 after ‘‘clause (x) or (xi)’’;

3 (iv) in subclause (V)—

4 (I) by inserting ‘‘and before Octo5 ber 1, 2004,’’ after ‘‘April 1, 2001,’’;

6 and

7 (II) by inserting ‘‘or, for dis8 charges occurring on or after October

9 1, 2004, is equal to the percent deter10 mined in accordance with the applica11 ble formula described in clause (vii)’’

12 after ‘‘clause (xi)’’; and

13 (v) in subclause (VI)—

14 (I) by inserting ‘‘and before Octo15 ber 1, 2004,’’ after ‘‘April 1, 2001,’’;

16 and

17 (II) by inserting ‘‘or, for dis18 charges occurring on or after October

19 1, 2004, is equal to the percent deter20 mined in accordance with the applica21 ble formula described in clause (vii)’’

22 after ‘‘clause (x)’’;

23 (B) in clause (viii), by striking ‘‘The for24 mula’’ and inserting ‘‘For discharges occurring

25 before October 1, 2004, the formula’’; and
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1 (C) in each of clauses (x), (xi), (xii), and

2 (xiii), by striking ‘‘For purposes’’ and inserting

3 ‘‘With respect to discharges occurring before Oc4 tober 1, 2004, for purposes’’.

5 (b) EFFECTIVE DATE.—The amendments made by this

6 section shall apply to discharges occurring on or after Octo7 ber 1, 2004.

8 SEC. 404A. MEDPAC STUDY AND REPORT REGARDING MEDI9 CARE DISPROPORTIONATE SHARE HOSPITAL

10 (DSH) ADJUSTMENT PAYMENTS.

11 (a) STUDY.—The Medicare Payment Advisory Com12 mission established under section 1805 of the Social Secu13 rity Act (42 U.S.C. 1395b–6) (in this section referred to

14 as ‘‘MedPAC’’) shall conduct a study to determine, with re15 spect to additional payment amounts paid to subsection (d)

16 hospitals under section 1886(d)(5)(F) of the Social Security

17 Act (42 U.S.C. 1395ww(d)(5)(F))—

18 (1) whether such payments should be made in the

19 same manner as payments are made with respect to

20 graduate medical education under title XVIII and

21 with respect to hospitals that serve a disproportionate

22 share of low-income patients under the medicaid pro23 gram; and
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1 (2) whether to add costs attributable to uncom2 pensated care to the formula for determining such

3 payment amounts.

4 (b) REPORT.—Not later than 1 year after the date of

5 enactment of this Act, MedPAC shall submit a report to

6 Congress on the study conducted under subsection (a), to7 gether with such recommendations for legislation as

8 MedPAC determines are appropriate.

9 SEC. 405. CRITICAL ACCESS HOSPITAL (CAH) IMPROVE10 MENTS.

11 (a) PERMITTING CAHS TO ALLOCATE SWING BEDS

12 AND ACUTE CARE INPATIENT BEDS SUBJECT TO A TOTAL

13 LIMIT OF 25 BEDS.—

14 (1) IN GENERAL.—Section 1820(c)(2)(B)(iii) (42

15 U.S.C. 1395i–4(c)(2)(B)(iii)) is amended to read as

16 follows:

17 ‘‘(iii) provides not more than a total of

18 25 extended care service beds (pursuant to

19 an agreement under subsection (f)) and

20 acute care inpatient beds (meeting such

21 standards as the Secretary may establish)

22 for providing inpatient care for a period

23 that does not exceed, as determined on an

24 annual, average basis, 96 hours per pa25 tient;’’.
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1 (2) CONFORMING AMENDMENT.—Section 1820(f)

2 (42 U.S.C. 1395i–4(f)) is amended by striking ‘‘and

3 the number of beds used at any time for acute care

4 inpatient services does not exceed 15 beds’’.

5 (3) EFFECTIVE DATE.—The amendments made

6 by this subsection shall with respect to designations

7 made on or after October 1, 2004.

8 (b) ELIMINATION OF THE ISOLATION TEST FOR COST9 BASED CAH AMBULANCE SERVICES.—

10 (1) ELIMINATION.—

11 (A) IN GENERAL.—Section 1834(l)(8) (42

12 U.S.C. 1395m(l)(8)), as added by section 205(a)

13 of BIPA (114 Stat. 2763A–482), is amended by

14 striking the comma at the end of subparagraph

15 (B) and all that follows and inserting a period.

16 (B) EFFECTIVE DATE.—The amendment

17 made by subparagraph (A) shall apply to serv18 ices furnished on or after January 1, 2005.

19 (2) TECHNICAL CORRECTION.—Section 1834(l)

20 (42 U.S.C. 1395m(l)) is amended by redesignating

21 paragraph (8), as added by section 221(a) of BIPA

22 (114 Stat. 2763A–486), as paragraph (9).

23 (c) COVERAGE OF COSTS FOR CERTAIN EMERGENCY

24 ROOM ON-CALL PROVIDERS.—
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1 (1) IN GENERAL.—Section 1834(g)(5) (42 U.S.C.

2 1395m(g)(5)) is amended—

3 (A) in the heading—

4 (i) by inserting ‘‘CERTAIN’’ before

5 ‘‘EMERGENCY’’; and

6 (ii) by striking ‘‘PHYSICIANS’’ and in7 serting ‘‘PROVIDERS’’;

8 (B) by striking ‘‘emergency room physicians

9 who are on-call (as defined by the Secretary)’’

10 and inserting ‘‘physicians, physician assistants,

11 nurse practitioners, and clinical nurse specialists

12 who are on-call (as defined by the Secretary) to

13 provide emergency services’’; and

14 (C) by striking ‘‘physicians’ services’’ and

15 inserting ‘‘services covered under this title’’.

16 (2) EFFECTIVE DATE.—The amendments made

17 by paragraph (1) shall apply to costs incurred for

18 services provided on or after January 1, 2005.

19 (d) AUTHORIZATION OF PERIODIC INTERIM PAYMENT

20 (PIP).—

21 (1) IN GENERAL.—Section 1815(e)(2) (42 U.S.C.

22 1395g(e)(2)) is amended—

23 (A) in subparagraph (C), by striking ‘‘and’’

24 after the semicolon at the end;
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1 (B) in subparagraph (D), by adding ‘‘and’’

2 after the semicolon at the end; and

3 (C) by inserting after subparagraph (D) the

4 following new subparagraph:

5 ‘‘(E) inpatient critical access hospital services;’’.

6 (2) EFFECTIVE DATE.—The amendments made

7 by paragraph (1) shall apply to payments for inpa8 tient critical access facility services furnished on or

9 after January 1, 2005.

10 (e) EXCLUSION OF NEW CAHS FROM PPS HOSPITAL

11 WAGE INDEX CALCULATION.—Section 1886(d)(3)(E)(i) (42

12 U.S.C. 1395ww(d)(3)(E)(i)), as amended by section 402, is

13 amended by inserting after the first sentence the following

14 new sentence: ‘‘In calculating the hospital wage levels under

15 the preceding sentence applicable with respect to cost report16 ing periods beginning on or after January 1, 2004, the Sec17 retary shall exclude the wage levels of any facility that be18 came a critical access hospital prior to the cost reporting

19 period for which such hospital wage levels are calculated.’’.

20 (f) PROVISIONS RELATED TO CERTAIN RURAL

21 GRANTS.—

22 (1) SMALL RURAL HOSPITAL IMPROVEMENT PRO23 GRAM.—Section 1820(g) (42 U.S.C. 1395i–4(g)) is

24 amended—
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1 (A) by redesignating paragraph (3)(F) as

2 paragraph (5) and redesignating and indenting

3 appropriately; and

4 (B) by inserting after paragraph (3) the fol5 lowing new paragraph:

6 ‘‘(4) SMALL RURAL HOSPITAL IMPROVEMENT

7 PROGRAM.—

8 ‘‘(A) GRANTS TO HOSPITALS.—The Sec9 retary may award grants to hospitals that have

10 submitted applications in accordance with sub11 paragraph (B) to assist eligible small rural hos12 pitals (as defined in paragraph (3)(B)) in meet13 ing the costs of reducing medical errors, increas14 ing patient safety, protecting patient privacy,

15 and improving hospital quality and perform16 ance.

17 ‘‘(B) APPLICATION.—A hospital seeking a

18 grant under this paragraph shall submit an ap19 plication to the Secretary on or before such date

20 and in such form and manner as the Secretary

21 specifies.

22 ‘‘(C) AMOUNT OF GRANT.—A grant to a

23 hospital under this paragraph may not exceed

24 $50,000.
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1 ‘‘(D) USE OF FUNDS.—A hospital receiving

2 a grant under this paragraph may use the funds

3 for the purchase of computer software and hard4 ware, the education and training of hospital

5 staff, and obtaining technical assistance.’’.

6 (2) AUTHORIZATION FOR APPROPRIATIONS.—

7 Section 1820(j) (42 U.S.C. 1395i–4(j)) is amended to

8 read as follows:

9 ‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—

10 ‘‘(1) HI TRUST FUND.—There are authorized to

11 be appropriated from the Federal Hospital Insurance

12 Trust Fund for making grants to all States under—

13 ‘‘(A) subsection (g), $25,000,000 in each of

14 the fiscal years 1998 through 2002; and

15 ‘‘(B) paragraphs (1) and (2) of subsection

16 (g), $40,000,000 in each of the fiscal years 2004

17 through 2008.

18 ‘‘(2) GENERAL REVENUES.—There are authorized

19 to be appropriated from amounts in the Treasury not

20 otherwise appropriated for making grants to all

21 States under subsection (g)(4), $25,000,000 in each of

22 the fiscal years 2004 through 2008.’’.

23 (3) REQUIREMENT THAT STATES AWARDED

24 GRANTS CONSULT WITH THE STATE HOSPITAL ASSO-
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1 CIATION AND RURAL HOSPITALS ON THE MOST APPRO2 PRIATE WAYS TO USE SUCH GRANTS.—

3 (A) IN GENERAL.—Section 1820(g) (42

4 U.S.C. 1395i–4(g)), as amended by paragraph

5 (1), is amended by adding at the end the fol6 lowing new paragraph:

7 ‘‘(6) REQUIRED CONSULTATION FOR STATES

8 AWARDED GRANTS.—A State awarded a grant under

9 paragraph (1) or (2) shall consult with the hospital

10 association of such State and rural hospitals located

11 in such State on the most appropriate ways to use the

12 funds under such grant.’’.

13 (B) EFFECTIVE DATE AND APPLICATION.—

14 The amendment made by subparagraph (A) shall

15 take effect on the date of enactment of this Act

16 and shall apply to grants awarded on or after

17 such date and to grants awarded prior to such

18 date to the extent that funds under such grants

19 have not been obligated as of such date.

20 (g) EXCLUSION OF CERTAIN BEDS FROM BED COUNT

21 AND REMOVAL OF BARRIERS TO ESTABLISHMENT OF DIS22 TINCT PART UNITS.—

23 (1) EXCLUSION OF CERTAIN BEDS FROM BED

24 COUNT.—Section 1820(c)(2) (42 U.S.C. 1395i–
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1 4(c)(2)) is amended by adding at the end the fol2 lowing:

3 ‘‘(E) EXCLUSION OF CERTAIN BEDS FROM

4 BED COUNT.—In determining the number of beds

5 of a facility for purposes of applying the bed

6 limitations referred to in subparagraph (B)(iii)

7 and subsection (f), the Secretary shall not take

8 into account any bed of a distinct part psy9 chiatric or rehabilitation unit (described in the

10 matter following clause (v) of section

11 1886(d)(1)(B)) of the facility, except that the

12 total number of beds that are not taken into ac13 count pursuant to this subparagraph with re14 spect to a facility shall not exceed 25.’’.

15 (2) REMOVING BARRIERS TO ESTABLISHMENT OF

16 DISTINCT PART UNITS BY CRITICAL ACCESS HOS17 PITALS.—Section 1886(d)(1)(B) (42 U.S.C.

18 195ww(d)(1)(B)) is amended by striking ‘‘a distinct

19 part of the hospital (as defined by the Secretary)’’ in

20 the matter following cause (v) and inserting ‘‘a dis21 tinct part (as defined by the Secretary) of the hospital

22 or of a critical access hospital’’.

23 (3) EFFECTIVE DATE.—The amendments made

24 by this subsection shall apply to determinations with

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1 to designations, that are made on or after October 1,

2 2003.

3 SEC. 406. AUTHORIZING USE OF ARRANGEMENTS TO PRO4 VIDE CORE HOSPICE SERVICES IN CERTAIN

5 CIRCUMSTANCES.

6 (a) IN GENERAL.—Section 1861(dd)(5) (42 U.S.C.

7 1395x(dd)(5)) is amended by adding at the end the fol8 lowing:

9 ‘‘(D) In extraordinary, exigent, or other non-routine

10 circumstances, such as unanticipated periods of high pa11 tient loads, staffing shortages due to illness or other events,

12 or temporary travel of a patient outside a hospice pro13 gram’s service area, a hospice program may enter into ar14 rangements with another hospice program for the provision

15 by that other program of services described in paragraph

16 (2)(A)(ii)(I). The provisions of paragraph (2)(A)(ii)(II)

17 shall apply with respect to the services provided under such

18 arrangements.

19 ‘‘(E) A hospice program may provide services de20 scribed in paragraph (1)(A) other than directly by the pro21 gram if the services are highly specialized services of a reg22 istered professional nurse and are provided non-routinely

23 and so infrequently so that the provision of such services

24 directly would be impracticable and prohibitively expen25 sive.’’.
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1 (b) CONFORMING PAYMENT PROVISION.—Section

2 1814(i) (42 U.S.C. 1395f(i)) is amended by adding at the

3 end the following new paragraph:

4 ‘‘(4) In the case of hospice care provided by a hospice

5 program under arrangements under section 1861(dd)(5)(D)

6 made by another hospice program, the hospice program that

7 made the arrangements shall bill and be paid for the hospice

8 care.’’.

9 (c) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to hospice care provided on or after Oc11 tober 1, 2004.

12 SEC. 407. SERVICES PROVIDED TO HOSPICE PATIENTS BY

13 NURSE PRACTITIONERS, CLINICAL NURSE

14 SPECIALISTS, AND PHYSICIAN ASSISTANTS.

15 (a) IN GENERAL.—Section 1812(d)(2)(A) (42 U.S.C.

16 1395d(d)(2)(A) in the matter following clause (i)(II), is

17 amended—

18 (1) by inserting ‘‘or services described in section

19 1861(s)(2)(K)’’ after ‘‘except that clause (i) shall not

20 apply to physicians’ services’’; and

21 (2) by inserting ‘‘, or by a physician assistant,

22 nurse practitioner, or clinical nurse specialist whom

23 is not an employee of the hospice program, and who

24 the individual identifies as the health care provider

25 having the most significant role in the determination
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1 and delivery of medical care to the individual at the

2 time the individual makes an election to receive hos3 pice care,’’ after the ‘‘(if not an employee of the hos4 pice program)’’.

5 (b) PERMITTING NURSE PRACTITIONERS, PHYSICIAN

6 ASSISTANTS, AND CLINICAL NURSE SPECIALIST TO REVIEW

7 HOSPICE PLANS OF CARE.—Section 1814(a)(7)(B) is

8 amended by inserting ‘‘(or by a physician assistant, nurse

9 practitioner or clinical nurse specialist who is not an em10 ployee of the hospice program, and whom the individual

11 identifies as the health care provider having the most sig12 nificant role in the determination and delivery of medical

13 care to the individual at the time the individual makes an

14 election to receive hospice care)’’ after ‘‘and is periodically

15 reviewed by the individual’s attending physician’’.

16 (c) EFFECTIVE DATE.—The amendments made by this

17 section shall apply to hospice care furnished on or after Oc18 tober 1, 2004.

19 SEC. 408. AUTHORITY TO INCLUDE COSTS OF TRAINING OF

20 PSYCHOLOGISTS IN PAYMENTS TO HOS21 PITALS UNDER MEDICARE.

22 Effective for cost reporting periods beginning on or

23 after October 1, 2004, for purposes of payments to hospitals

24 under the medicare program under title XVIII of the Social

25 Security Act for costs of approved educational activities (as
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1 defined in section 413.85 of title 42 of the Code of Federal

2 Regulations), such approved educational activities shall in3 clude professional educational training programs, recog4 nized by the Secretary, for psychologists.

5 SEC. 409. REVISION OF FEDERAL RATE FOR HOSPITALS IN

6 PUERTO RICO.

7 Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is

8 amended—

9 (1) in subparagraph (A)—

10 (A) in clause (i), by striking ‘‘for discharges

11 beginning on or after October 1, 1997, 50 percent

12 (and for discharges between October 1, 1987, and

13 September 30, 1997, 75 percent)’’ and inserting

14 ‘‘the applicable Puerto Rico percentage (specified

15 in subparagraph (E))’’; and

16 (B) in clause (ii), by striking ‘‘for dis17 charges beginning in a fiscal year beginning on

18 or after October 1, 1997, 50 percent (and for dis19 charges between October 1, 1987, and September

20 30, 1997, 25 percent)’’ and inserting ‘‘the appli21 cable Federal percentage (specified in subpara22 graph (E))’’; and

23 (2) by adding at the end the following new sub24 paragraph:
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1 ‘‘(E) For purposes of subparagraph (A), for discharges

2 occurring—

3 ‘‘(i) between October 1, 1987, and September 30,

4 1997, the applicable Puerto Rico percentage is 75 per5 cent and the applicable Federal percentage is 25 per6 cent;

7 ‘‘(ii) on or after October 1, 1997, and before Oc8 tober 1, 2004, the applicable Puerto Rico percentage

9 is 50 percent and the applicable Federal percentage is

10 50 percent;

11 ‘‘(iii) on or after October 1, 2004, and before Oc12 tober 1, 2009, the applicable Puerto Rico percentage

13 is 0 percent and the applicable Federal percentage is

14 100 percent; and

15 ‘‘(iv) on or after October 1, 2009, the applicable

16 Puerto Rico percentage is 50 percent and the applica17 ble Federal percentage is 50 percent.’’.

18 SEC. 410. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR

19 GERIATRIC RESIDENCY OR FELLOWSHIP PRO20 GRAMS.

21 (a) CLARIFICATION OF CONGRESSIONAL INTENT.—

22 Congress intended section 1886(h)(5)(F)(ii) of the Social

23 Security Act (42 U.S.C. 1395ww(h)(5)(F)(ii)), as added by

24 section 9202 of the Consolidated Omnibus Budget Reconcili25 ation Act of 1985 (Public Law 99–272), to provide an ex-
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1 ception to the initial residency period for geriatric resi2 dency or fellowship programs such that, where a particular

3 approved geriatric training program requires a resident to

4 complete 2 years of training to initially become board eligi5 ble in the geriatric specialty, the 2 years spent in the geri6 atric training program are treated as part of the resident’s

7 initial residency period, but are not counted against any

8 limitation on the initial residency period.

9 (b) INTERIM FINAL REGULATORY AUTHORITY AND EF10 FECTIVE DATE.—The Secretary shall promulgate interim

11 final regulations consistent with the congressional intent ex12 pressed in this section after notice and pending opportunity

13 for public comment to be effective for cost reporting periods

14 beginning on or after October 1, 2003.

15 SEC. 411. CLARIFICATION OF CONGRESSIONAL INTENT RE16 GARDING THE COUNTING OF RESIDENTS IN A

17 NONPROVIDER SETTING AND A TECHNICAL

18 AMENDMENT REGARDING THE 3-YEAR ROLL19 ING AVERAGE AND THE IME RATIO.

20 (a) CLARIFICATION OF REQUIREMENTS FOR COUNTING

21 RESIDENTS TRAINING IN NONPROVIDER SETTING.—

22 (1) D–GME.—Section 1886(h)(4)(E) (42 U.S.C.

23 1395ww(h)(4)(E)) is amended by adding at the end

24 the following new sentence: For purposes of the pre25 ceding sentence time shall only be counted from the ef-
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1 fective date of a written agreement between the hos2 pital and the entity owning or operating a nonpro3 vider setting. The effective date of such written agree4 ment shall be determined in accordance with gen5 erally accepted accounting principles. All, or substan6 tially all, of the costs for the training program in

7 that setting shall be defined as the residents’ stipends

8 and benefits and other costs, if any, as determined by

9 the parties.’’.

10 (2) IME.—Section 1886(d)(5)(B)(iv) (42 U.S.C.

11 1395ww(d)(5)(B)(iv)) is amended by adding at the

12 end the following new sentence: For purposes of the

13 preceding sentence time shall only be counted from the

14 effective date of a written agreement between the hos15 pital and the entity owning or operating a nonpro16 vider setting. The effective date of such written agree17 ment shall be determined in accordance with gen18 erally accepted accounting principles. All, or substan19 tially all, of the costs for the training program in

20 that setting shall be defined as the residents’ stipends

21 and benefits and other costs, if any, as determined by

22 the parties.’’.

23 (b) LIMITING ONE-YEAR LAG IN THE INDIRECT MED24 ICAL EDUCATION (IME) RATIO AND THREE-YEAR ROLLING

25 AVERAGE IN RESIDENT COUNT FOR IME AND FOR DIRECT
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1 GRADUATE MEDICAL EDUCATION (D–GME) TO MEDICAL

2 RESIDENCY PROGRAMS.—

3 (1) IME RATIO AND IME ROLLING AVERAGE.—

4 Section 1886(d)(5)(B)(vi) of the Social Security Act

5 (42 U.S.C. 1395ww(d)(5)(B)(vi)) is amended by add6 ing at the end the following new sentence: ‘‘For cost

7 reporting periods beginning during fiscal years begin8 ning on or after October 1, 2004, subclauses (I) and

9 (II) shall be applied only with respect to a hospital’s

10 approved medical residency training programs in the

11 fields of allopathic and osteopathic medicine.’’.

12 (2) D–GME ROLLING AVERAGE.—Section

13 1886(h)(4)(G) of the Social Security Act (42 U.S.C.

14 1395ww(h)(4)(G)) is amended by adding at the end

15 the following new clause:

16 ‘‘(iv) APPLICATION FOR FISCAL YEAR

17 2004 AND SUBSEQUENT YEARS.—For cost re18 porting periods beginning during fiscal

19 years beginning on or after October 1, 2004,

20 clauses (i) through (iii) shall be applied

21 only with respect to a hospital’s approved

22 medical residency training program in the

23 fields of allopathic and osteopathic medi24 cine.’’.
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1 SEC. 412. LIMITATION ON CHARGES FOR INPATIENT HOS2 PITAL CONTRACT HEALTH SERVICES PRO3 VIDED TO INDIANS BY MEDICARE PARTICI4 PATING HOSPITALS.

5 (a) IN GENERAL.—Section 1866(a)(1) (42 U.S.C.

6 1395cc(a)(1)) is amended—

7 (1) in subparagraph (R), by striking ‘‘and’’ at

8 the end;

9 (2) in subparagraph (S), by striking the period

10 and inserting ‘‘, and’’; and

11 (3) by adding at the end the following new sub12 paragraph:

13 ‘‘(T) in the case of hospitals which furnish

14 inpatient hospital services for which payment

15 may be made under this title, to be a partici16 pating provider of medical care—

17 ‘‘(i) under the contract health services

18 program funded by the Indian Health Serv19 ice and operated by the Indian Health

20 Service, an Indian tribe, or tribal organiza21 tion (as those terms are defined in section

22 4 of the Indian Health Care Improvement

23 Act), with respect to items and services that

24 are covered under such program and fur25 nished to an individual eligible for such

26 items and services under such program; and
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1 ‘‘(ii) under a program funded by the

2 Indian Health Service and operated by an

3 urban Indian organization with respect to

4 the purchase of items and services for an el5 igible urban Indian (as those terms are de6 fined in such section 4),

7 in accordance with regulations promulgated by

8 the Secretary regarding admission practices,

9 payment methodology, and rates of payment (in10 cluding the acceptance of no more than such

11 payment rate as payment in full for such items

12 and services).’’.

13 (b) EFFECTIVE DATE.—The amendments made by this

14 section shall apply as of a date specified by the Secretary

15 of Health and Human Services (but in no case later than

16 6 months after the date of enactment of this Act) to medi17 care participation agreements in effect (or entered into) on

18 or after such date.

19 SEC. 413. GAO STUDY AND REPORT ON APPROPRIATENESS

20 OF PAYMENTS UNDER THE PROSPECTIVE

21 PAYMENT SYSTEM FOR INPATIENT HOSPITAL

22 SERVICES.

23 (a) STUDY.—The Comptroller General of the United

24 States, using the most current data available, shall conduct

25 a study to determine—
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1 (1) the appropriate level and distribution of pay2 ments in relation to costs under the prospective pay3 ment system under section 1886 of the Social Security

4 Act (42 U.S.C. 1395ww) for inpatient hospital serv5 ices furnished by subsection (d) hospitals (as defined

6 in subsection (d)(1)(B) of such section); and

7 (2) whether there is a need to adjust such pay8 ments under such system to reflect legitimate dif9 ferences in costs across different geographic areas,

10 kinds of hospitals, and types of cases.

11 (b) REPORT.—Not later than 24 months after the date

12 of enactment of this Act, the Comptroller General of the

13 United States shall submit to Congress a report on the study

14 conducted under subsection (a) together with such rec15 ommendations for legislative and administrative action as

16 the Comptroller General determines appropriate.

17 SEC. 414. RURAL COMMUNITY HOSPITAL DEMONSTRATION

18 PROGRAM.

19 (a) ESTABLISHMENT OF RURAL COMMUNITY HOS20 PITAL (RCH) DEMONSTRATION PROGRAM.—

21 (1) IN GENERAL.—The Secretary shall establish

22 a demonstration program to test the feasibility and

23 advisability of the establishment of rural community

24 hospitals that furnish rural community hospital serv25 ices to medicare beneficiaries.
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1 (2) DESIGNATION OF RCHS.—

2 (A) APPLICATION.—Each hospital that is

3 located in a demonstration area described in

4 subparagraph (C) that desires to participate in

5 the demonstration program under this section

6 shall submit an application to the Secretary at

7 such time, in such manner, and containing such

8 information as the Secretary may require.

9 (B) DESIGNATION.—The Secretary shall

10 designate any hospital that is located in a dem11 onstration area described in subparagraph (C),

12 submits an application in accordance with sub13 paragraph (A), and meets the other requirements

14 of this section as a rural community hospital for

15 purposes of the demonstration program.

16 (C) DEMONSTRATION AREAS.—There shall

17 be four demonstration areas within this pro18 gram. Two of these demonstration areas de19 scribed in this subparagraph shall include Kan20 sas and Nebraska.

21 (3) DURATION.—The Secretary shall conduct the

22 demonstration program under this section for a 5-

23 year period.

24 (4) IMPLEMENTATION.—The Secretary shall im25 plement the demonstration program not later than
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1 January 1, 2005, but may not implement the pro2 gram before October 1, 2004.

3 (b) PAYMENT.—

4 (1) INPATIENT HOSPITAL SERVICES.—The

5 amount of payment under the demonstration program

6 for inpatient hospital services furnished in a rural

7 community hospital, other than such services fur8 nished in a psychiatric or rehabilitation unit of the

9 hospital which is a distinct part, is, at the election

10 of the hospital in the application referred to in sub11 section (a)(2)(A)—

12 (A) the reasonable costs of providing such

13 services, without regard to the amount of the cus14 tomary or other charge; or

15 (B) the amount of payment provided for

16 under the prospective payment system for inpa17 tient hospital services under section 1886(d) of

18 the Social Security Act (42 U.S.C. 1395ww(d)).

19 (2) OUTPATIENT SERVICES.—The amount of

20 payment under the demonstration program for out21 patient services furnished in a rural community hos22 pital is, at the election of the hospital in the applica23 tion referred to in subsection (a)(2)(A)—

24 (A) the reasonable costs of providing such

25 services, without regard to the amount of the cus-
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1 tomary or other charge and any limitation

2 under section 1861(v)(1)(U) of the Social Secu3 rity Act (42 U.S.C. 1395x(v)(1)(U)); or

4 (B) the amount of payment provided for

5 under the prospective payment system for cov6 ered OPD services under section 1833(t) of the

7 Social Security Act (42 U.S.C. 1395l(t)).

8 (3) HOME HEALTH SERVICES.—In determining

9 payments under the demonstration program for home

10 health services furnished by a qualified RCH-based

11 home health agency (as defined in paragraph (2))—

12 (A) the agency may make a one-time elec13 tion to waive application of the prospective pay14 ment system established under section 1895 of

15 the Social Security Act (42 U.S.C. 1395fff) to

16 such services furnished by the agency; and

17 (B) in the case of such an election, payment

18 shall be made on the basis of the reasonable costs

19 incurred in furnishing such services as deter20 mined under section 1861(v) of the Social Secu21 rity Act (42 U.S.C. 1395x(v)), but without re22 gard to the amount of the customary or other

23 charges with respect to such services or the limi24 tations established under paragraph (1)(L) of

25 such section.
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1 (4) CONSOLIDATED BILLING.—The Secretary

2 shall permit consolidated billing under section

3 1842(b)(6)(E) of the Social Security Act (42 U.S.C.

4 1395u(b)(6)(E)).

5 (5) EXEMPTION FROM 30 PERCENT REDUCTION IN

6 REIMBURSEMENT FOR BAD DEBT.—In determining

7 the reasonable costs for rural community hospitals,

8 section 1861(v)(1)(T) of the Social Security Act (42

9 U.S.C. 1395x(v)(1)(T)) shall not apply.

10 (6) BENEFICIARY COST-SHARING FOR OUT11 PATIENT SERVICES.—The amounts of beneficiary cost12 sharing for outpatient services furnished in a rural

13 community hospital under the demonstration pro14 gram shall be as follows:

15 (A) For items and services that would have

16 been paid under section 1833(t) of the Social Se17 curity Act (42 U.S.C. 1395l(t)) if provided by a

18 hospital, the amount of cost-sharing determined

19 under paragraph (8) of such section.

20 (B) For items and services that would have

21 been paid under section 1833(h) of such Act (42

22 U.S.C. 1395l(h)) if furnished by a provider or

23 supplier, no cost-sharing shall apply.

24 (C) For all other items and services, the

25 amount of cost-sharing that would apply to the
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1 item or service under the methodology that would

2 be used to determine payment for such item or

3 service if provided by a physician, provider, or

4 supplier, as the case may be.

5 (7) RETURN ON EQUITY.—

6 (A) IN GENERAL.—Notwithstanding sub7 paragraph (P)(i) and (S)(i) of section

8 1861(v)(1) of the Social Security Act (42 U.S.C.

9 1395x(v)(1)) and section 1886(g)(2) of such Act

10 (42 U.S.C. 1395ww(g)(2)), in determining the

11 reasonable costs of the services described in sub12 clause (II) furnished by a rural community hos13 pital for payment of a return on equity capital

14 at a rate of return equal to 150 percent of the

15 average specified in section 1861(v)(1)(P)(i) of

16 such Act (42 U.S.C. 1395x(v)(1)(P)(i)).

17 (B) SERVICES DESCRIBED.—The services re18 ferred to in subclause (I) are rural community

19 hospital services.

20 (C) DISREGARD OF PROPRIETARY PROVIDER

21 STATUS.—Payment under the demonstration

22 program shall be made without regard to wheth23 er a provider is a proprietary provider.

24 (8) REMOVING BARRIERS TO ESTABLISHMENT OF

25 DISTINCT PART UNITS BY RCH FACILITIES.—Notwith-
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1 standing section 1886(d)(1)(B) of the Social Security

2 Act (42 U.S.C. 1395ww(d)(1)(B)), the Secretary shall

3 permit rural community hospitals to establish dis4 tinct part units for purposes of applying such section.

5 (c) FUNDING.—

6 (1) IN GENERAL.—The Secretary shall provide

7 for the transfer from the Federal Hospital Insurance

8 Trust Fund under section 1817 of the Social Security

9 Act (42 U.S.C. 1395i) and the Federal Supple10 mentary Insurance Trust Fund established under sec11 tion 1841 of such Act (42 U.S.C. 1395t), in such pro12 portion as the Secretary determines to be appropriate,

13 of such funds as are necessary for the costs of car14 rying out the demonstration program under this sec15 tion.

16 (2) BUDGET NEUTRALITY.—In conducting the

17 demonstration program under this section, the Sec18 retary shall ensure that the aggregate payments made

19 by the Secretary do not exceed the amount which the

20 Secretary would have paid if the demonstration pro21 gram under this section was not implemented.

22 (d) WAIVER AUTHORITY.—The Secretary may waive

23 such requirements of titles XI and XVIII of the Social Secu24 rity Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be
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1 necessary for the purpose of carrying out the demonstration

2 program under this section.

3 (e) REPORT.—Not later than 6 months after the com4 pletion of the demonstration program under this section,

5 the Secretary shall submit to Congress a report on such pro6 gram, together with recommendations for such legislation

7 and administrative action as the Secretary determines to

8 be appropriate.

9 (f) DEFINITIONS.—In this section:

10 (1) RURAL COMMUNITY HOSPITAL.—

11 (A) IN GENERAL.—The term ‘‘rural commu12 nity hospital’’ means a hospital (as defined in

13 section 1861(e) of the Social Security Act (42

14 U.S.C. 1395x(e))) that—

15 (i) is located in a rural area (as de16 fined in section 1886(d)(2)(D) of such Act

17 (42 U.S.C. 1395ww(d)(2)(D))) or treated as

18 being so located pursuant to section

19 1886(d)(8)(E) of such Act (42 U.S.C.

20 1395ww(d)(8)(E));

21 (ii) subject to subparagraph (B), has

22 less than 51 acute care inpatient beds, as

23 reported in its most recent cost report;

24 (iii) makes available 24-hour emer25 gency care services;
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1 (iv) subject to subparagraph (C), has a

2 provider agreement in effect with the Sec3 retary and is open to the public as of Janu4 ary 1, 2003; and

5 (v) applies to the Secretary for such

6 designation.

7 (B) TREATMENT OF PSYCHIATRIC AND RE8 HABILITATION UNITS.—For purposes of para9 graph (1)(B), beds in a psychiatric or rehabilita10 tion unit of the hospital which is a distinct part

11 of the hospital shall not be counted.

12 (C) TYPES OF HOSPITALS THAT MAY PAR13 TICIPATE.—Subparagraph (1)(D) shall not be

14 construed to prohibit any of the following from

15 qualifying as a rural community hospital:

16 (i) A replacement facility (as defined

17 by the Secretary in regulations in effect on

18 January 1, 2003) with the same service

19 area (as defined by the Secretary in regula20 tions in effect on such date).

21 (ii) A facility obtaining a new pro22 vider number pursuant to a change of own23 ership.

24 (iii) A facility which has a binding

25 written agreement with an outside, unre-
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1 lated party for the construction, reconstruc2 tion, lease, rental, or financing of a build3 ing as of January 1, 2003.

4 (D) INCLUSION OF CAHS.—Nothing in this

5 subsection shall be construed as prohibiting a

6 critical access hospital from qualifying as a

7 rural community hospital if the critical access

8 hospital meets the conditions otherwise applica9 ble to hospitals under section 1861(e) of the So10 cial Security Act (42 U.S.C. 1395x(e)) and sec11 tion 1866 of such Act (42 U.S.C. 1395cc).

12 (2) QUALIFIED RCH-BASED HOME HEALTH

13 AGENCY DEFINED.—The term ‘‘qualified RCH-based

14 home health agency’’ is a home health agency that is

15 a provider-based entity (as defined in section 404 of

16 the Medicare, Medicaid, and SCHIP Benefits Im17 provement and Protection Act of 2000 (Public Law

18 106–554; Appendix F, 114 Stat. 2763A–506)) of a

19 rural community hospital that is located—

20 (A) in a county in which no main or

21 branch office of another home health agency is lo22 cated; or

23 (B) at least 35 miles from any main or

24 branch office of another home health agency.
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1 SEC. 415. CRITICAL ACCESS HOSPITAL IMPROVEMENT DEM2 ONSTRATION PROGRAM.

3 (a) ESTABLISHMENT OF CRITICAL ACCESS HOSPITAL

4 DEMONSTRATION PROGRAM.—

5 (1) IN GENERAL.—The Secretary shall establish

6 a demonstration program to test various methods to

7 improve the critical access hospital program under

8 section 1820 of the Social Security Act (42 U.S.C.

9 1395i–4).

10 (2) CRITICAL ACCESS HOSPITAL IMPROVE11 MENT.—In conducting the demonstration program

12 under this section, the Secretary shall apply rules

13 with respect to critical access hospitals participating

14 in the program as follows:

15 (A) EXCLUSION OF CERTAIN BEDS FROM

16 BED COUNT.—In determining the number of beds

17 of a facility for purposes of applying the bed

18 limitations referred to in subsections

19 (c)(2)(B)(iii) and (f) of section 1820 of the So20 cial Security Act (42 U.S.C. 1395i–4), the Sec21 retary shall not take into account any bed of a

22 distinct part psychiatric or rehabilitation unit

23 (described in the matter following clause (v) of

24 section 1886(d)(1)(B) of such Act (42 U.S.C.

25 1395ww(d)(1)(B))) of the facility, except that the

26 total number of beds that are not taken into ac-
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1 count pursuant to this subparagraph with re2 spect to a facility shall not exceed 10.

3 (B) EXCLUSION FROM HOME HEALTH

4 PPS.—Notwithstanding section 1895 of the So5 cial Security Act (42 U.S.C. 1395fff), in deter6 mining payments under the demonstration pro7 gram for home health services furnished by a

8 home health agency that is owned and operated

9 by a critical access hospital participating in the

10 demonstration program—

11 (i) the agency may make an election to

12 waive application of the prospective pay13 ment system established under such section

14 to such services furnished by the agency;

15 and

16 (ii) in the case of such an election,

17 payment shall be made on the basis of the

18 reasonable costs incurred in furnishing such

19 services as determined under section

20 1861(v), but without regard to the amount

21 of the customary or other charges with re22 spect to such services or the limitations es23 tablished under paragraph (1)(L) of such

24 section.
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1 (C) EXEMPTION OF CAH FACILITIES FROM

2 PPS.—Notwithstanding section 1888(e) of the So3 cial Security Act (42 U.S.C. 1395yy(e)), in de4 termining payments under this part for covered

5 skilled nursing facility services furnished by a

6 skilled nursing facility that is a distinct part

7 unit of a critical access hospital participating in

8 the demonstration program or is owned and op9 erated by a critical access hospital participating

10 in the demonstration program—

11 (i) the prospective payment system es12 tablished under such section shall not apply;

13 and

14 (ii) payment shall be made on the

15 basis of the reasonable costs incurred in fur16 nishing such services as determined under

17 section 1861(v) of such Act (42 U.S.C.

18 1395x(v)), but without regard to the amount

19 of the customary or other charges with re20 spect to such services.

21 (D) CONSOLIDATED BILLING.—The Sec22 retary shall permit consolidated billing under

23 section 1842(b)(6)(E) of the Social Security Act

24 (42 U.S.C. 1395u(b)(6)(E)).
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1 (E) EXEMPTION OF CERTAIN DISTINCT PART

2 PSYCHIATRIC OR REHABILITATION UNITS FROM

3 COST LIMITS.—Notwithstanding section 1886(b)

4 of the Social Security Act (42 U.S.C.

5 1395ww(b)), in determining payments under the

6 demonstration program for inpatient hospital

7 services furnished by a distinct part psychiatric

8 or rehabilitation unit (described in the matter

9 following section 1886(d)(1)(B)(v) of such Act

10 (42 U.S.C. 1395ww(d)(1)(B)(v))) of a critical

11 access hospital participating in the demonstra12 tion program—

13 (i) the limits imposed under the pre14 ceding paragraphs of this subsection shall

15 not apply; and

16 (ii) payment shall be made on the

17 basis of the reasonable costs incurred in fur18 nishing such services as determined under

19 section 1861(v) of such Act (42 U.S.C.

20 1395x(v)), but without regard to the amount

21 of the customary or other charges with re22 spect to such services.

23 (F) RETURN ON EQUITY.—

24 (i) IN GENERAL.—Notwithstanding

25 subparagraph (P)(i) and (S)(i) of section
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1 1861(v)(1) of the Social Security Act (42

2 U.S.C. 1395x(v)(1)) and section 1886(g)(2)

3 of such Act (42 U.S.C. 1395ww(g)(2)), in

4 determining the reasonable costs of the serv5 ices described in subclause (II) furnished by

6 a critical access hospital participating in

7 the demonstration program for payment of

8 a return on equity capital at a rate of re9 turn equal to 150 percent of the average

10 specified in section 1861(v)(1)(P)(i) of such

11 Act (42 U.S.C. 1395x(v)(1)(P)(i)).

12 (ii) SERVICES DESCRIBED.—The serv13 ices referred to in subclause (I) are inpa14 tient critical access hospital services, out15 patient critical access hospital services, ex16 tended care services, posthospital extended

17 care services, home health services, ambu18 lance services, and inpatient hospital serv19 ices.

20 (iii) DISREGARD OF PROPRIETARY

21 PROVIDER STATUS.—Payment under the

22 demonstration program shall be made with23 out regard to whether a provider is a pro24 prietary provider.
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1 (G) REMOVING BARRIERS TO ESTABLISH2 MENT OF DISTINCT PART UNITS BY CAH FACILI3 TIES.—Notwithstanding section 1886(d)(1)(B) of

4 the Social Security Act (42 U.S.C.

5 1395ww(d)(1)(B)), the Secretary shall permit

6 critical access hospitals participating in the

7 demonstration program to establish distinct part

8 units for purposes of applying such section.

9 (3) PARTICIPATION OF CAHS.—

10 (A) APPLICATION.—Each critical access

11 hospital that is located in a demonstration area

12 described in subparagraph (C) that desires to

13 participate in the demonstration program under

14 this section shall submit an application to the

15 Secretary at such time, in such manner, and

16 containing such information as the Secretary

17 may require.

18 (B) PARTICIPATION.—The Secretary shall

19 permit any critical access hospital that is located

20 in a demonstration area described in subpara21 graph (C), submits an application in accordance

22 with subparagraph (A), and meets the other re23 quirements of this section to participate in the

24 demonstration program.
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1 (C) DEMONSTRATION AREAS.—There shall

2 be four demonstration areas within this pro3 gram. Two of these demonstration areas de4 scribed in this subparagraph shall include Kan5 sas and Nebraska.

6 (4) DURATION.—The Secretary shall conduct the

7 demonstration program under this section for a 5-

8 year period.

9 (5) IMPLEMENTATION.—The Secretary shall im10 plement the demonstration program not later than

11 January 1, 2005, but may not implement the pro12 gram before October 1, 2004.

13 (b) FUNDING.—

14 (1) IN GENERAL.—The Secretary shall provide

15 for the transfer from the Federal Hospital Insurance

16 Trust Fund under section 1817 of the Social Security

17 Act (42 U.S.C. 1395i) and the Federal Supple18 mentary Insurance Trust Fund established under sec19 tion 1841 of such Act (42 U.S.C. 1395t), in such pro20 portion as the Secretary determines to be appropriate,

21 of such funds as are necessary for the costs of car22 rying out the demonstration program under this sec23 tion.

24 (2) BUDGET NEUTRALITY.—In conducting the

25 demonstration program under this section, the Sec-
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1 retary shall ensure that the aggregate payments made

2 by the Secretary do not exceed the amount which the

3 Secretary would have paid if the demonstration pro4 gram under this section was not implemented.

5 (c) WAIVER AUTHORITY.—The Secretary may waive

6 such requirements of titles XI and XVIII of the Social Secu7 rity Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be

8 necessary for the purpose of carrying out the demonstration

9 program under this section.

10 (d) REPORT.—Not later than 6 months after the com11 pletion of the demonstration program under this section,

12 the Secretary shall submit to Congress a report on such pro13 gram, together with recommendations for such legislation

14 and administrative action as the Secretary determines to

15 be appropriate.

16 SEC. 416. TREATMENT OF GRANDFATHERED LONG-TERM

17 CARE HOSPITALS.

18 (a) IN GENERAL.—The last sentence of section

19 1886(d)(1)(B) is amended by inserting ‘‘, and the Secretary

20 may not impose any special conditions on the operation,

21 size, number of beds, or location of any hospital so classified

22 for continued participation under this title or title XIX or

23 for continued classification as a hospital described in clause

24 (iv)’’ before the period at the end.
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1 (b) TREATMENT OF PROPOSED REVISION.—The Sec2 retary shall not adopt the proposed revision to section

3 412.22(f) of title 42, Code of Federal Regulations contained

4 in 68 Federal Register 27154 (May 19, 2003) or any revi5 sion reaching the same or substantially the same result as

6 such revision.

7 (c) EFFECTIVE DATE.—The amendment made by, and

8 provisions of, this section shall apply to cost reporting peri9 ods ending on or after December 31, 2002.

10 SEC. 417. TREATMENT OF CERTAIN ENTITIES FOR PUR11 POSES OF PAYMENTS UNDER THE MEDICARE

12 PROGRAM.

13 (a) PAYMENTS TO HOSPITALS.—

14 (1) IN GENERAL.—Notwithstanding any other

15 provision of law, effective for discharges occurring on

16 or after October 1, 2003, for purposes of making pay17 ments to hospitals (as defined in section 1886(d) and

18 1833(t) of the Social Security Act (42 U.S.C.

19 1395(d)) under the medicare program under title

20 XVIII of such Act (42 U.S.C. 1395 et seq.), Iredell

21 County, North Carolina, and Rowan County, North

22 Carolina, are deemed to be located in the Charlotte23 Gastonia-Rock Hill, North Carolina, South Carolina

24 Metropolitan Statistical Area.
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1 (2) BUDGET NEUTRAL WITHIN NORTH CARO2 LINA.—The Secretary shall adjust the area wage

3 index referred to in paragraph (1) with respect to

4 payments to hospitals located in North Carolina in a

5 manner which assures that the total payments made

6 under section 1886(d) of the Social Security Act (42

7 U.S.C., 1395(ww)(d)) in a fiscal year for the oper8 ating cost of inpatient hospital services are not great9 er or less than the total of such payments that would

10 have been made in the year if this subsection had not

11 been enacted.

12 (b) PAYMENTS TO SKILLED NURSING FACILITIES AND

13 HOME HEALTH AGENCIES.—

14 (1) IN GENERAL.—Notwithstanding any other

15 provision of law, effective beginning October 1, 2003,

16 for purposes of making payments to skilled nursing

17 facilities (SNFs) and home health agencies (as defined

18 in sections 1861(j) and 1861(o) of the Social Security

19 Act (42 U.S.C. 1395x(j); 1395x(o)) under the medi20 care program under title XVIII of such Act, Iredell

21 County, North Carolina, and Rowan County, North

22 Carolina, are deemed to be located in the Charlotte23 Gastonia-Rock Hill, North Carolina, South Carolina

24 Metropolitan Statistical Area.
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1 (2) APPLICATION AND BUDGET NEUTRAL WITHIN

2 NORTH CAROLINA.—Effective for fiscal year 2004, the

3 skilled nursing facility PPS and home health PPS

4 rates for Iredell County, North Carolina, and Rowan

5 County, North Carolina, will be updated by the

6 prefloor, prereclassified hospital wage index available

7 for the Charlotte-Gastonia-Rock Hill, North Carolina,

8 South Carolina Metropolitan Statistical Area. This

9 subsection shall be implemented in a budget neutral

10 manner, using a methodology that ensures that the

11 total amount of expenditures for skilled nursing facil12 ity services and home health services in a year does

13 not exceed the total amount of expenditures that

14 would have been made in the year if this subsection

15 had not been enacted. Required adjustments by reason

16 of the preceding sentence shall be done with respect to

17 skilled nursing facilities and home health agencies lo18 cated in North Carolina.

19 (c) CONSTRUCTION.—The provisions of this section

20 shall have no effect on the amount of payments made under

21 title XVIII of the Social Security Act to entities located in

22 States other than North Carolina.
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1 SEC. 418. REVISION OF THE INDIRECT MEDICAL EDU2 CATION (IME) ADJUSTMENT PERCENTAGE.

3 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42

4 U.S.C. 1395ww(d)(5)(B)(ii)) is amended—

5 (1) in subclause (VI), by striking ‘‘and’’ after the

6 semicolon at the end;

7 (2) in subclause (VII)—

8 (A) by striking ‘‘on or after October 1,

9 2002’’ and inserting ‘‘during fiscal year 2003’’;

10 and

11 (B) by striking the period at the end and

12 inserting a semicolon; and

13 (3) by adding at the end the following new sub14 clauses:

15 ‘‘(VIII) during each of fiscal years 2004

16 and 2005, ‘c’ is equal to 1.36; and

17 ‘‘(IX) on or after October 1, 2005, ‘c’ is

18 equal to 1.355.’’.

19 (b) CONFORMING AMENDMENT RELATING TO DETER20 MINATION OF STANDARDIZED AMOUNT.—Section

21 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is

22 amended—

23 (1) by striking ‘‘1999 or’’ and inserting ‘‘1999,’’;

24 and

25 (2) by inserting ‘‘, or the Prescription Drug and

26 Medicare Improvement Act of 2003’’ after ‘‘2000’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to discharges occurring on or after Octo3 ber 1, 2003.

4 SEC. 419. CALCULATION OF WAGE INDICES FOR HOSPITALS.

5 Notwithstanding any other provision of law, in the

6 calculation of a wage index in a State for purposes of mak7 ing payments for discharges occurring during fiscal year

8 2004, the Secretary may waive such other criteria for re9 classification, as deemed appropriate by the Secretary.

10 SEC. 420. CONFORMING CHANGES REGARDING FEDERALLY

11 QUALIFIED HEALTH CENTERS.

12 Section 1833(a)(3) (42 U.S.C. 1395l(a)(3)) is amended

13 by inserting ‘‘(which regulations shall exclude any cost in14 curred for the provision of services pursuant to a contract

15 with an eligible entity (as defined in section 1860D(4)) op16 erating a Medicare Prescription Drug plan or with an enti17 ty with a contract under section 1860D–13(e), for which

18 payment is made by the entity)’’ after ‘‘the Secretary may

19 prescribe in regulations’’.

20 SEC. 420A. INCREASE FOR HOSPITALS WITH DISPROPOR21 TIONATE INDIGENT CARE REVENUES.

22 (a) DISPROPORTIONATE SHARE ADJUSTMENT PER23 CENTAGE.—Section 1886(d)(5)(F)(iii) (42 U.S.C.

24 1395ww(d)(5)(F)(iii)) is amended by striking ‘‘35 percent’’
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1 and inserting ‘‘35 percent (or, for discharges occurring on

2 or after October 1, 2003, 40 percent)’’.

3 (b) CAPITAL COSTS.—Section 1886(g)(1)(B) (42

4 U.S.C. 1395ww(g)(1)(B)) is amended—

5 (1) in clause (iii), by striking ‘‘and’’ at the end;

6 (2) in clause (iv), by striking the period at the

7 end and inserting ‘‘, and’’; and

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

9 clause:

10 ‘‘(v) in the case of cost reporting periods begin11 ning on or after October 1, 2003, shall provide for a

12 disproportionate share adjustment in the same man13 ner as section 1886(d)(5)(F)(iii).’’.

14 SEC. 420B. TREATMENT OF GRANDFATHERED LONG-TERM

15 CARE HOSPITALS.

16 (a) IN GENERAL.—The last sentence of section

17 1886(d)(1)(B) is amended by inserting ‘‘, and the Secretary

18 may not impose any special conditions on the operation,

19 size, number of beds, or location of any hospital so classified

20 for continued participation under this title or title XIX or

21 for continued classification as a hospital described in clause

22 (iv)’’ before the period at the end.

23 (b) TREATMENT OF PROPOSED REVISION.—The Sec24 retary shall not adopt the proposed revision to section

25 412.22(f) of title 42, Code of Federal Regulations contained
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1 in 68 Federal Register 27154 (May 19, 2003) or any revi2 sion reaching the same or substantially the same result as

3 such revision.

4 (c) EFFECTIVE DATE.—The amendment made by, and

5 provisions of, this section shall apply to cost reporting peri6 ods ending on or after December 31, 2002.

7 Subtitle B—Provisions Relating to

8 Part B

9 SEC. 421. ESTABLISHMENT OF FLOOR ON GEOGRAPHIC AD10 JUSTMENTS OF PAYMENTS FOR PHYSICIANS’

11 SERVICES.

12 Section 1848(e)(1) (42 U.S.C. 1395w–4(e)(1)) is

13 amended—

14 (1) in subparagraph (A), by striking ‘‘subpara15 graphs (B) and (C)’’ and inserting ‘‘subparagraphs

16 (B), (C), (E), and (F)’’; and

17 (2) by adding at the end the following new sub18 paragraphs:

19 ‘‘(E) FLOOR FOR WORK GEOGRAPHIC INDI20 CES.—

21 ‘‘(i) IN GENERAL.—For purposes of

22 payment for services furnished on or after

23 January 1, 2004, and before January 1,

24 2008, after calculating the work geographic

25 indices in subparagraph (A)(iii), the Sec-
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1 retary shall increase the work geographic

2 index to the work floor index for any local3 ity for which such geographic index is less

4 than the work floor index.

5 ‘‘(ii) WORK FLOOR INDEX.—For pur6 poses of clause (i), the term ‘applicable floor

7 index’ means—

8 ‘‘(I) 0.980 with respect to services

9 furnished during 2004; and

10 ‘‘(II) 1.000 for services furnished

11 during 2005, 2006, and 2007.

12 ‘‘(F) FLOOR FOR PRACTICE EXPENSE AND

13 MALPRACTICE GEOGRAPHIC INDICES.—For pur14 poses of payment for services furnished on or

15 after January 1, 2005, and before January 1,

16 2008, after calculating the practice expense and

17 malpractice indices in clauses (i) and (ii) of sub18 paragraph (A) and in subparagraph (B), the

19 Secretary shall increase any such index to 1.00

20 for any locality for which such index is less than

21 1.00.’’.

22 SEC. 422. MEDICARE INCENTIVE PAYMENT PROGRAM IM23 PROVEMENTS.

24 (a) PROCEDURES FOR SECRETARY, AND NOT PHYSI25 CIANS, TO DETERMINE WHEN BONUS PAYMENTS UNDER
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1 MEDICARE INCENTIVE PAYMENT PROGRAM SHOULD BE

2 MADE.—Section 1833(m) (42 U.S.C. 1395l(m)) is

3 amended—

4 (1) by inserting ‘‘(1)’’ after ‘‘(m)’’; and

5 (2) by adding at the end the following new para6 graph:

7 ‘‘(2) The Secretary shall establish procedures under

8 which the Secretary, and not the physician furnishing the

9 service, is responsible for determining when a payment is

10 required to be made under paragraph (1).’’.

11 (b) EDUCATIONAL PROGRAM REGARDING THE MEDI12 CARE INCENTIVE PAYMENT PROGRAM.—The Secretary shall

13 establish and implement an ongoing educational program

14 to provide education to physicians under the medicare pro15 gram on the medicare incentive payment program under

16 section 1833(m) of the Social Security Act (42 U.S.C.

17 1395l(m)).

18 (c) ONGOING GAO STUDY AND ANNUAL REPORT ON

19 THE MEDICARE INCENTIVE PAYMENT PROGRAM.—

20 (1) ONGOING STUDY.—The Comptroller General

21 of the United States shall conduct an ongoing study

22 on the medicare incentive payment program under

23 section 1833(m) of the Social Security Act (42 U.S.C.

24 1395l(m)). Such study shall focus on whether such

25 program increases the access of medicare beneficiaries
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1 who reside in an area that is designated (under sec2 tion 332(a)(1)(A) of the Public Health Service Act

3 (42 U.S.C. 254e(a)(1)(A))) as a health professional

4 shortage area to physicians’ services under the medi5 care program.

6 (2) ANNUAL REPORTS.—Not later than 1 year

7 after the date of enactment of this Act, and annually

8 thereafter, the Comptroller General of the United

9 States shall submit to Congress a report on the study

10 conducted under paragraph (1), together with rec11 ommendations as the Comptroller General considers

12 appropriate.

13 SEC. 423. EXTENSION OF HOLD HARMLESS PROVISIONS

14 FOR SMALL RURAL HOSPITALS AND TREAT15 MENT OF CERTAIN SOLE COMMUNITY HOS16 PITALS TO LIMIT DECLINE IN PAYMENT

17 UNDER THE OPD PPS.

18 (a) SMALL RURAL HOSPITALS.—Section

19 1833(t)(7)(D)(i) (42 U.S.C. 1395l(t)(7)(D)(i)) is amended

20 by inserting ‘‘and during 2006’’ after ‘‘2004,’’.

21 (b) SOLE COMMUNITY HOSPITALS.—Section

22 1833(t)(7)(D) (42 U.S.C. 1395l(t)(7)(D)) is amended by

23 adding at the end the following:

24 ‘‘(iii) TEMPORARY TREATMENT FOR

25 SOLE COMMUNITY HOSPITALS.—In the case
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1 of a sole community hospital (as defined in

2 section 1886(d)(5)(D)(iii)) located in a

3 rural area, for covered OPD services fur4 nished in 2006, for which the PPS amount

5 is less than the pre-BBA amount, the

6 amount of payment under this subsection

7 shall be increased by the amount of such

8 difference.’’.

9 SEC. 424. INCREASE IN PAYMENTS FOR CERTAIN SERVICES

10 FURNISHED BY SMALL RURAL AND SOLE

11 COMMUNITY HOSPITALS UNDER MEDICARE

12 PROSPECTIVE PAYMENT SYSTEM FOR HOS13 PITAL OUTPATIENT DEPARTMENT SERVICES.

14 (a) INCREASE.—

15 (1) IN GENERAL.—In the case of an applicable

16 covered OPD service (as defined in paragraph (2))

17 that is furnished by a hospital described in clause (i)

18 or (iii) of paragraph (7)(D) of section 1833(t) of the

19 Social Security Act (42 U.S.C. 1395l(t)), as amended

20 by section 424, on or after January 1, 2005, and be21 fore January 1, 2008, the Secretary shall increase the

22 medicare OPD fee schedule amount (as determined

23 under paragraph (4)(A) of such section) that is appli24 cable for such service in that year (determined with-
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1 out regard to any increase under this section in a

2 previous year) by 5 percent.

3 (2) APPLICABLE COVERED OPD SERVICES DE4 FINED.—For purposes of this section, the term ‘‘appli5 cable covered OPD service’’ means a covered clinic or

6 emergency room visit that is classified within the

7 groups of covered OPD services (as defined in para8 graph (1)(B) of section 1833(t) of the Social Security

9 Act (42 U.S.C. 1395l(t))) established under paragraph

10 (2)(B) of such section.

11 (b) NO EFFECT ON COPAYMENT AMOUNT.—The Sec12 retary shall compute the copayment amount for applicable

13 covered OPD services under section 1833(t)(8)(A) of the So14 cial Security Act (42 U.S.C. 1395l(t)(8)(A)) as if this sec15 tion had not been enacted.

16 (c) NO EFFECT ON INCREASE UNDER HOLD HARM17 LESS OR OUTLIER PROVISIONS.—The Secretary shall apply

18 the temporary hold harmless provision under clause (i) and

19 (iii) of paragraph (7)(D) of section 1833(t) of the Social

20 Security Act (42 U.S.C. 1395l(t)) and the outlier provision

21 under paragraph (5) of such section as if this section had

22 not been enacted.

23 (d) WAIVING BUDGET NEUTRALITY AND NO REVISION

24 OR ADJUSTMENTS.—The Secretary shall not make any revi25 sion or adjustment under subparagraph (A), (B), or (C)
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1 of section 1833(t)(9) of the Social Security Act (42 U.S.C.

2 1395l(t)(9)) because of the application of subsection (a)(1).

3 (e) NO EFFECT ON PAYMENTS AFTER INCREASE PE4 RIOD ENDS.—The Secretary shall not take into account any

5 payment increase provided under subsection (a)(1) in deter6 mining payments for covered OPD services (as defined in

7 paragraph (1)(B) of section 1833(t) of the Social Security

8 Act (42 U.S.C. 1395l(t))) under such section that are fur9 nished after January 1, 2008.

10 (f) TECHNICAL AMENDMENT.—Section 1833(t)(2)(B)

11 (42 U.S.C. 1395l(t)(2)(B)) is amended by inserting ‘‘(and

12 periodically revise such groups pursuant to paragraph

13 (9)(A))’’ after ‘‘establish groups’’.

14 SEC. 425. TEMPORARY INCREASE FOR GROUND AMBU15 LANCE SERVICES.

16 Section 1834(l) (42 U.S.C. 1395m(l)), as amended by

17 section 405(b)(2), is amended by adding at the end the fol18 lowing new paragraphs:

19 ‘‘(10) TEMPORARY INCREASE FOR GROUND AM20 BULANCE SERVICES.—

21 ‘‘(A) IN GENERAL.—Notwithstanding any

22 other provision of this subsection, in the case of

23 ground ambulance services furnished on or after

24 January 1, 2005, and before January 1, 2008,

25 for which the transportation originates in—
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1 ‘‘(i) a rural area described in para2 graph (9) or in a rural census tract de3 scribed in such paragraph, the fee schedule

4 established under this section shall provide

5 that the rate for the service otherwise estab6 lished, after application of any increase

7 under such paragraph, shall be increased by

8 5 percent; and

9 ‘‘(ii) an area not described in clause

10 (i), the fee schedule established under this

11 section shall provide that the rate for the

12 service otherwise established shall be in13 creased by 2 percent.

14 ‘‘(B) APPLICATION OF INCREASED PAY15 MENTS AFTER 2007.—The increased payments

16 under subparagraph (A) shall not be taken into

17 account in calculating payments for services fur18 nished on or after the period specified in such

19 subparagraph.

20 ‘‘(11) CONVERSION FACTOR ADJUSTMENTS.—The

21 Secretary shall not adjust downward the conversion

22 factor in any year because of an evaluation of the

23 prior year conversion factor.’’.
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1 SEC. 426. ENSURING APPROPRIATE COVERAGE OF AIR AM2 BULANCE SERVICES UNDER AMBULANCE FEE

3 SCHEDULE.

4 (a) COVERAGE.—Section 1834(l) (42 U.S.C.

5 1395m(l)), as amended by section 426, is amended by add6 ing at the end the following new paragraph:

7 ‘‘(11) ENSURING APPROPRIATE COVERAGE OF

8 AIR AMBULANCE SERVICES.—

9 ‘‘(A) IN GENERAL.—The regulations de10 scribed in section 1861(s)(7) shall ensure that

11 air ambulance services (as defined in subpara12 graph (C)) are reimbursed under this subsection

13 at the air ambulance rate if the air ambulance

14 service—

15 ‘‘(i) is medically necessary based on

16 the health condition of the individual being

17 transported at or immediately prior to the

18 time of the transport; and

19 ‘‘(ii) complies with equipment and

20 crew requirements established by the Sec21 retary.

22 ‘‘(B) MEDICALLY NECESSARY.—An air am23 bulance service shall be considered to be medi24 cally necessary for purposes of subparagraph

25 (A)(i) if such service is requested—
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1 ‘‘(i) by a physician or a hospital in

2 accordance with the physician’s or hos3 pital’s responsibilities under section 1867

4 (commonly known as the Emergency Med5 ical Treatment and Active Labor Act);

6 ‘‘(ii) as a result of a protocol estab7 lished by a State or regional emergency

8 medical service (EMS) agency;

9 ‘‘(iii) by a physician, nurse practi10 tioner, physician assistant, registered nurse,

11 or emergency medical responder who rea12 sonably determines or certifies that the pa13 tient’s condition is such that the time need14 ed to transport the individual by land or

15 the lack of an appropriate ground ambu16 lance, significantly increases the medical

17 risks for the individual; or

18 ‘‘(iv) by a Federal or State agency to

19 relocate patients following a natural dis20 aster, an act of war, or a terrorist attack.

21 ‘‘(C) AIR AMBULANCE SERVICES DE22 FINED.—For purposes of this paragraph, the

23 term ‘air ambulance service’ means fixed wing

24 and rotary wing air ambulance services.’’.
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1 (b) CONFORMING AMENDMENT.—Section 1861(s)(7)

2 (42 U.S.C. 1395x(s)(7)) is amended by inserting ‘‘, subject

3 to section 1834(l)(11),’’ after ‘‘but’’.

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to services furnished on or after January

6 1, 2005.

7 SEC. 427. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC

8 LABORATORY TESTS FURNISHED BY A SOLE

9 COMMUNITY HOSPITAL.

10 Notwithstanding subsections (a), (b), and (h) of section

11 1833 of the Social Security Act (42 U.S.C. 1395l) and sec12 tion 1834(d)(1) of such Act (42 U.S.C. 1395m(d)(1)), in

13 the case of a clinical diagnostic laboratory test covered

14 under part B of title XVIII of such Act that is furnished

15 in 2005 or 2006 by a sole community hospital (as defined

16 in section 1886(d)(5)(D)(iii) of such Act (42 U.S.C.

17 1395ww(d)(5)(D)(iii))) as part of services furnished to pa18 tients of the hospital, the following rules shall apply:

19 (1) PAYMENT BASED ON REASONABLE COSTS.—

20 The amount of payment for such test shall be 100 per21 cent of the reasonable costs of the hospital in fur22 nishing such test.

23 (2) NO BENEFICIARY COST-SHARING.—Notwith24 standing section 432, no coinsurance, deductible, co25 payment, or other cost-sharing otherwise applicable
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1 under such part B shall apply with respect to such

2 test.

3 SEC. 428. IMPROVEMENT IN RURAL HEALTH CLINIC REIM4 BURSEMENT.

5 Section 1833(f) (42 U.S.C. 1395l(f)) is amended—

6 (1) in paragraph (1), by striking ‘‘, and’’ at the

7 end and inserting a semicolon;

8 (2) in paragraph (2)—

9 (A) by striking ‘‘in a subsequent year’’ and

10 inserting ‘‘in 1989 through 2004’’; and

11 (B) by striking the period at the end and

12 inserting a semicolon; and

13 (3) by adding at the end the following new para14 graphs:

15 ‘‘(3) in 2005, at $80 per visit; and

16 ‘‘(4) in a subsequent year, at the limit estab17 lished under this subsection for the previous year in18 creased by the percentage increase in the MEI (as so

19 defined) applicable to primary care services (as so de20 fined) furnished as of the first day of that year.’’.
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1 SEC. 429. ELIMINATION OF CONSOLIDATED BILLING FOR

2 CERTAIN SERVICES UNDER THE MEDICARE

3 PPS FOR SKILLED NURSING FACILITY SERV4 ICES.

5 (a) CERTAIN RURAL HEALTH CLINIC AND FEDERALLY

6 QUALIFIED HEALTH CENTER SERVICES.—Section 1888(e)

7 (42 U.S.C. 1395yy(e)) is amended—

8 (1) in paragraph (2)(A)(i)(II), by striking

9 ‘‘clauses (ii) and (iii)’’ and inserting ‘‘clauses (ii),

10 (iii), and (iv)’’; and

11 (2) by adding at the end of paragraph (2)(A) the

12 following new clause:

13 ‘‘(iv) EXCLUSION OF CERTAIN RURAL

14 HEALTH CLINIC AND FEDERALLY QUALIFIED

15 HEALTH CENTER SERVICES.—Services de16 scribed in this clause are—

17 ‘‘(I) rural health clinic services

18 (as defined in paragraph (1) of section

19 1861(aa)); and

20 ‘‘(II) Federally qualified health

21 center services (as defined in para22 graph (3) of such section);

23 that would be described in clause (ii) if such

24 services were furnished by a physician or

25 practitioner not affiliated with a rural
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1 health clinic or a Federally qualified health

2 center.’’.

3 (b) CERTAIN SERVICES FURNISHED BY AN ENTITY

4 JOINTLY OWNED BY HOSPITALS AND CRITICAL ACCESS

5 HOSPITALS.—For purposes of applying section 411.15(p)–

6 (3)(iii) of title 42 of the Code of Federal Regulations, the

7 Secretary shall treat an entity that is 100 percent owned

8 as a joint venture by 2 Medicare-participating hospitals or

9 critical access hospitals as a Medicare-participating hos10 pital or a critical access hospital.

11 (c) TECHNICAL AMENDMENTS.—Sections

12 1842(b)(6)(E) and 1866(a)(1)(H)(ii) (42 U.S.C.

13 1395u(b)(6)(E); 1395cc(a)(1)(H)(ii)) are each amended by

14 striking ‘‘section 1888(e)(2)(A)(ii)’’ and inserting ‘‘clauses

15 (ii), (iii), and (iv) of section 1888(e)(2)(A)’’.

16 (d) EFFECTIVE DATE.—The amendments made by this

17 section and the provision of subsection (b) shall apply to

18 services furnished on or after January 1, 2005.

19 SEC. 430. FREEZE IN PAYMENTS FOR CERTAIN ITEMS OF

20 DURABLE MEDICAL EQUIPMENT AND CER21 TAIN ORTHOTICS; ESTABLISHMENT OF QUAL22 ITY STANDARDS AND ACCREDITATION RE23 QUIREMENTS FOR DME PROVIDERS.

24 (a) FREEZE FOR DME.—Section 1834(a)(14) (42

25 U.S.C. 1395m(a)(14)) is amended—
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1 (1) in subparagraph (E), by striking ‘‘and’’ at

2 the end;

3 (2) in subparagraph (F)—

4 (A) by striking ‘‘a subsequent year’’ and in5 serting ‘‘2003’’; and

6 (B) by striking ‘‘the previous year.’’ and in7 serting ‘‘2002;’’; and

8 (3) by adding at the end the following new sub9 paragraphs:

10 ‘‘(G) for each of the years 2004 through

11 2010—

12 ‘‘(i) in the case of class III medical de13 vices described in section 513(a)(1)(C) of

14 the Federal Food, Drug, and Cosmetic Act

15 (21 U.S.C. 360(c)(1)(C)), the percentage in16 crease described in subparagraph (B) for

17 the year involved; and

18 ‘‘(ii) in the case of covered items not

19 described in clause (i), 0 percentage points;

20 and

21 ‘‘(H) for a subsequent year, the percentage

22 increase described in subparagraph (B) for the

23 year involved.’’.
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1 (b) FREEZE FOR OFF-THE-SHELF ORTHOTICS.—Sec2 tion 1834(h)(4)(A) of the Social Security Act (42 U.S.C.

3 1395m(h)(4)(A)) is amended—

4 (1) in clause (vii), by striking ‘‘and’’ at the end;

5 (2) in clause (viii), by striking ‘‘a subsequent

6 year’’ and inserting ‘‘2003’’; and

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

8 clauses:

9 ‘‘(ix) for each of the years 2004

10 through 2010—

11 ‘‘(I) in the case of orthotics that

12 have not been custom-fabricated, 0 per13 cent; and

14 ‘‘(II) in the case of prosthetics,

15 prosthetic devices, and custom-fab16 ricated orthotics, the percentage in17 crease described in clause (viii) for the

18 year involved; and

19 ‘‘(x) for 2011 and each subsequent

20 year, the percentage increase described in

21 clause (viii) for the year involved;’’.

22 (c) ESTABLISHMENT OF QUALITY STANDARDS AND AC23 CREDITATION REQUIREMENTS FOR DURABLE MEDICAL

24 EQUIPMENT PROVIDERS.—Section 1834(a) (42 U.S.C.

25 1395m(a)) is amended—
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1 (1) by redesignating paragraph (17), as added

2 by section 4551(c)(1) of the Balanced Budget Act of

3 1997 (111 Stat. 458), as paragraph (19); and

4 (2) by adding at the end the following new para5 graph:

6 ‘‘(20) IDENTIFICATION OF QUALITY STAND7 ARDS.—

8 ‘‘(A) IN GENERAL.—Subject to subpara9 graph (C), the Secretary shall establish and im10 plement quality standards for providers of dura11 ble medical equipment throughout the United

12 States that are developed by recognized inde13 pendent accreditation organizations (as des14 ignated under subparagraph (B)(i)) and with

15 which such providers shall be required to comply

16 in order to—

17 ‘‘(i) participate in the program under

18 this title;

19 ‘‘(ii) furnish any item or service de20 scribed in subparagraph (D) for which pay21 ment is made under this part; and

22 ‘‘(iii) receive or retain a provider or

23 supplier number used to submit claims for

24 reimbursement for any item or service de-
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1 scribed in subparagraph (D) for which pay2 ment may be made under this title.

3 ‘‘(B) DESIGNATION OF INDEPENDENT AC4 CREDITATION ORGANIZATIONS.—

5 ‘‘(i) IN GENERAL.—Not later that the

6 date that is 6 months after the date of en7 actment of the Prescription Drug and Medi8 care Improvement Act of 2003, the Sec9 retary shall designate independent accredi10 tation organizations for purposes of sub11 paragraph (A).

12 ‘‘(ii) CONSULTATION.—In determining

13 which independent accreditation organiza14 tions to designate under clause (i), the Sec15 retary shall consult with an expert outside

16 advisory panel composed of an appropriate

17 selection of representatives of physicians,

18 practitioners, suppliers, and manufacturers

19 to review (and advise the Secretary con20 cerning) selection of accrediting organiza21 tions and the quality standards of such or22 ganizations.

23 ‘‘(C) QUALITY STANDARDS.—The quality

24 standards described in subparagraph (A) may

25 not be less stringent than the quality standards
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1 that would otherwise apply if this paragraph did

2 not apply and shall include consumer services

3 standards.

4 ‘‘(D) ITEMS AND SERVICES DESCRIBED.—

5 The items and services described in this subpara6 graph are covered items (as defined in para7 graph (13)) for which payment may otherwise be

8 made under this subsection, other than items

9 used in infusion, and inhalation drugs used in

10 conjunction with durable medical equipment.

11 ‘‘(E) PHASED-IN IMPLEMENTATION.—The

12 application of the quality standards described in

13 subparagraph (A) shall be phased-in over a pe14 riod that does not exceed 3 years.’’.

15 SEC. 431. APPLICATION OF COINSURANCE AND DEDUCT16 IBLE FOR CLINICAL DIAGNOSTIC LABORA17 TORY TESTS.

18 (a) COINSURANCE.—

19 (1) IN GENERAL.—Section 1833(a) (42 U.S.C.

20 1395l(a)) is amended—

21 (A) in paragraph (1)(D)(i), by striking ‘‘(or

22 100 percent, in the case of such tests for which

23 payment is made on an assignment-related

24 basis)’’; and
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1 (B) in paragraph (2)(D)(i), by striking

2 ‘‘(or 100 percent, in the case of such tests for

3 which payment is made on an assignment-re4 lated basis or to a provider having an agreement

5 under section 1866)’’.

6 (2) CONFORMING AMENDMENT.—The third sen7 tence of section 1866(a)(2)(A) of the Social Security

8 Act (42 U.S.C. 1395cc(a)(2)(A) is amended by strik9 ing ‘‘and with respect to clinical diagnostic labora10 tory tests for which payment is made under part B’’.

11 (b) DEDUCTIBLE.—Section 1833(b) of the Social Secu12 rity Act (42 U.S.C. 1395l(b)) is amended—

13 (1) by striking paragraph (3); and

14 (2) by redesignating paragraphs (4), (5), and (6)

15 as paragraphs (3), (4), and (5), respectively.

16 (c) EFFECTIVE DATE.—The amendments made by this

17 section shall apply to tests furnished on or after January

18 1, 2004.

19 SEC. 432. BASING MEDICARE PAYMENTS FOR COVERED

20 OUTPATIENT DRUGS ON MARKET PRICES.

21 (a) MEDICARE MARKET BASED PAYMENT AMOUNT.—

22 Section 1842(o) (42 U.S.C. 1395u(o)) is amended—

23 (1) in paragraph (1), by striking ‘‘equal to 95

24 percent of the average wholesale price.’’ and inserting

25 ‘‘equal to—
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1 ‘‘(A) in the case of a drug or biological furnished

2 prior to January 1, 2004, 95 percent of the average

3 wholesale price; and

4 ‘‘(B) in the case of a drug or biological furnished

5 on or after January 1, 2004, the payment amount

6 specified in—

7 ‘‘(i) in the case of such a drug or biological

8 that is first available for payment under this

9 part on or before April 1, 2003, paragraph (4);

10 and

11 ‘‘(ii) in the case of such a drug or biological

12 that is first available for payment under this

13 part after such date, paragraph (5).’’; and

14 (2) by adding at the end the following new para15 graphs:

16 ‘‘(4)(A) Subject to subparagraph (C), the payment

17 amount specified in this paragraph for a year for a drug

18 or biological is an amount equal to the lesser of—

19 ‘‘(i) the average wholesale price for the drug or

20 biological; or

21 ‘‘(ii) the amount determined under subpara22 graph (B)

23 ‘‘(B)(i) Subject to clause (ii), the amount determined

24 under this subparagraph is an amount equal to—
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1 ‘‘(I) in the case of a drug or biological furnished

2 in 2004, 85 percent of the average wholesale price for

3 the drug or biological (determined as of April 1,

4 2003); and

5 ‘‘(II) in the case of a drug or biological furnished

6 in 2005 or a subsequent year, the amount determined

7 under this subparagraph for the previous year in8 creased by the percentage increase in the consumer

9 price index for medical care for the 12-month period

10 ending with June of the previous year.

11 ‘‘(ii) In the case of a vaccine described in subpara12 graph (A) or (B) of section 1861(s)(10), the amount deter13 mined under this subparagraph is an amount equal to the

14 average wholesale price for the drug or biological.

15 ‘‘(C)(i) The Secretary shall establish a process under

16 which the Secretary determines, for such drugs or

17 biologicals as the Secretary determines appropriate, wheth18 er the widely available market price to physicians or sup19 pliers for the drug or biological furnished in a year is dif20 ferent from the payment amount established under subpara21 graph (B) for the year. Such determination shall be based

22 on the information described in clause (ii) as the Secretary

23 determines appropriate.

24 ‘‘(ii) The information described in this clause is the

25 following information:
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1 ‘‘(I) Any report on drug or biological market

2 prices by the Inspector General of the Department of

3 Health and Human Services or the Comptroller Gen4 eral of the United States that is made available after

5 December 31, 1999.

6 ‘‘(II) A review of drug or biological market

7 prices by the Secretary, which may include informa8 tion on such market prices from insurers, private

9 health plans, manufacturers, wholesalers, distributors,

10 physician supply houses, specialty pharmacies, group

11 purchasing arrangements, physicians, suppliers, or

12 any other source the Secretary determines appro13 priate.

14 ‘‘(III) Data and information submitted by the

15 manufacturer of the drug or biological or by another

16 entity.

17 ‘‘(IV) Other data and information as determined

18 appropriate by the Secretary.

19 ‘‘(iii) If the Secretary makes a determination under

20 clause (i) with respect to the widely available market price

21 for a drug or biological for a year, the following provisions

22 shall apply:

23 ‘‘(I) Subject to clause (iv), the amount deter24 mined under this subparagraph shall be substituted

25 for the amount determined under subparagraph (B)
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1 for purposes of applying subparagraph (A)(ii)(I) for

2 the year and all subsequent years.

3 ‘‘(II) The Secretary may make subsequent deter4 minations under clause (i) with respect to the widely

5 available market price for the drug or biological.

6 ‘‘(III) If the Secretary does not make a subse7 quent determination under clause (i) with respect to

8 the widely available market price for the drug or bio9 logical for a year, the amount determined under this

10 subparagraph shall be an amount equal to the

11 amount determined under this subparagraph for the

12 previous year increased by the percentage increase de13 scribed in subparagraph (B)(i)(II) for the year in14 volved.

15 ‘‘(iv) If the first determination made under clause (i)

16 with respect to the widely available market price for a drug

17 or biological would result in a payment amount in a year

18 that is more than 15 percent less than the amount deter19 mined under subparagraph (B) for the drug or biological

20 for the previous year (or, for 2004, the payment amount

21 determined under paragraph (1)(A), determined as of April

22 1, 2003), the Secretary shall provide for a transition to the

23 amount determined under clause (i) so that the payment

24 amount is reduced in annual increments equal to 15 per25 cent of the payment amount in such previous year until
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1 the payment amount is equal to the amount determined

2 under clause (i), as increased each year by the percentage

3 increase described in subparagraph (B)(i)(II) for the year.

4 The preceding sentence shall not apply to a drug or biologi5 cal where a generic version of the drug or biological first

6 enters the market on or after January 1, 2004 (even if the

7 generic version of the drug or biological is not marketed

8 under the chemical name of such drug or biological).

9 ‘‘(5) In the case of a drug or biological that is first

10 available for payment under this part after April 1, 2003,

11 the following rules shall apply:

12 ‘‘(A) As a condition of obtaining a code to report

13 such new drug or biological and to receive payment

14 under this part, a manufacturer shall provide the

15 Secretary (in a time, manner, and form approved by

16 the Secretary) with data and information on prices

17 at which the manufacturer estimates physicians and

18 suppliers will be able to routinely obtain the drug or

19 biological in the market during the first year that the

20 drug or biological is available for payment under this

21 part and such additional information that the manu22 facturer determines appropriate.

23 ‘‘(B) During the year that the drug or biological

24 is first available for payment under this part, the

25 manufacturer of the drug or biological shall provide
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1 the Secretary (in a time, manner, and form approved

2 by the Secretary) with updated information on the

3 actual market prices paid by such physicians or sup4 pliers for the drug or biological in the year.

5 ‘‘(C) The amount specified in this paragraph for

6 a drug or biological for the year described in subpara7 graph (B) is equal to an amount determined by the

8 Secretary based on the information provided under

9 subparagraph (A) and other information that the Sec10 retary determines appropriate.

11 ‘‘(D) The amount specified in this paragraph for

12 a drug or biological for the year after the year de13 scribed in subparagraph (B) is equal to an amount

14 determined by the Secretary based on the information

15 provided under subparagraph (B) and other informa16 tion that the Secretary determines appropriate.

17 ‘‘(E) The amount specified in this paragraph for

18 a drug or biological for the year beginning after the

19 year described in subparagraph (D) and each subse20 quent year is equal to the lesser of—

21 ‘‘(i) the average wholesale price for the drug

22 or biological; or

23 ‘‘(ii) the amount determined—

24 ‘‘(I) by the Secretary under paragraph

25 (4)(C)(i) with respect to the widely avail-
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1 able market price for the drug or biological

2 for the year, if such paragraph was applied

3 by substituting ‘the payment determined

4 under paragraph (5)(E)(ii)(II) for the year’

5 for ‘established under subparagraph (B) for

6 the year’; and

7 ‘‘(II) if no determination described in

8 subclause (I) is made for the drug or bio9 logical for the year, under this subpara10 graph with respect to the drug or biological

11 for the previous year increased by the per12 centage increase described in paragraph

13 (4)(B)(i)(II) for the year involved.’’.

14 (b) ADJUSTMENTS TO PAYMENT AMOUNTS FOR ADMIN15 ISTRATION OF DRUGS AND BIOLOGICALS.—

16 (1) ADJUSTMENT IN PHYSICIAN PRACTICE EX17 PENSE RELATIVE VALUE UNITS.—Section 1848(c)(2)

18 (42 U.S.C. 1395w–4(c)(2)) is amended—

19 (A) in subparagraph (B)—

20 (i) in clause (ii)(II), by striking ‘‘The

21 adjustments’’ and inserting ‘‘Subject to

22 clause (iv), the adjustments’’; and

23 (ii) by adding at the end the following

24 new clause:
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1 ‘‘(iv) EXEMPTION FROM BUDGET NEU2 TRALITY IN 2004.—Any additional expendi3 tures under this part that are attributable

4 to subparagraph (H) shall not be taken into

5 account in applying clause (ii)(II) for

6 2004.’’; and

7 (B) by adding at the end the following new

8 subparagraph:

9 ‘‘(H) ADJUSTMENTS IN PRACTICE EXPENSE

10 RELATIVE VALUE UNITS FOR DRUG ADMINISTRA11 TION SERVICES FOR 2004.—In establishing the

12 physician fee schedule under subsection (b) with

13 respect to payments for services furnished in

14 2004, the Secretary shall, in determining prac15 tice expense relative value units under this sub16 section, utilize a survey submitted to the Sec17 retary as of January 1, 2003, by a physician

18 specialty organization pursuant to section 212 of

19 the Medicare, Medicaid, and SCHIP Balanced

20 Budget Refinement Act of 1999 if the survey—

21 ‘‘(i) covers practice expenses for oncol22 ogy administration services; and

23 ‘‘(ii) meets criteria established by the

24 Secretary for acceptance of such surveys.’’.
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1 (2) PAYMENT FOR MULTIPLE CHEMOTHERAPY

2 AGENTS FURNISHED ON A SINGLE DAY THROUGH THE

3 PUSH TECHNIQUE.—

4 (A) REVIEW OF POLICY.—The Secretary

5 shall review the policy, as in effect on the date

6 of enactment of this Act, with respect to payment

7 under section 1848 of the Social Security Act (42

8 U.S.C. 1395w–4) for the administration of more

9 than 1 anticancer chemotherapeutic agent to an

10 individual on a single day through the push

11 technique.

12 (B) MODIFICATION OF POLICY.—After con13 ducting the review under subparagraph (A), the

14 Secretary shall modify such payment policy if

15 the Secretary determines such modification to be

16 appropriate.

17 (C) EXEMPTION FROM BUDGET NEUTRALITY

18 UNDER PHYSICIAN FEE SCHEDULE.—If the Sec19 retary modifies such payment policy pursuant to

20 subparagraph (B), any increased expenditures

21 under title XVIII of the Social Security Act re22 sulting from such modification shall be treated

23 as additional expenditures attributable to sub24 paragraph (H) of section 1848(c)(2) of the Social

25 Security Act (42 U.S.C. 1395w–4(c)(2)), as
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1 added by paragraph (1)(B), for purposes of ap2 plying the exemption to budget neutrality under

3 subparagraph (B)(iv) of such section, as added

4 by paragraph (1)(A).

5 (3) TREATMENT OF OTHER SERVICES CUR6 RENTLY IN THE NONPHYSICIAN WORK POOL.—The

7 Secretary shall make adjustments to the nonphysician

8 work pool methodology (as such term is used in the

9 final rule promulgated by the Secretary in the Fed10 eral Register on December 31, 2002 (67 Fed. Reg.

11 251)), for the determination of practice expense rel12 ative value units under the physician fee schedule

13 under section 1848(c)(2)(C)(ii) of the Social Security

14 Act (42 U.S.C. 1395w–4(c)(2)(C)(ii)), so that the

15 practice expense relative value units for services deter16 mined under such methodology are not disproportion17 ately reduced relative to the practice expense relative

18 value units of services not determined under such

19 methodology, as a result of the amendments to such

20 Act made by paragraph (1).

21 (4) ADMINISTRATION OF BLOOD CLOTTING FAC22 TORS.—Section 1842(o) (42 U.S.C. 1395u(o)), as

23 amended by subsection (a)(2), is amended by adding

24 at the end the following new paragraph:
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1 ‘‘(6)(A) Subject to subparagraph (B), in the case of

2 clotting factors furnished on or after January 1, 2004, the

3 Secretary shall, after reviewing the January 2003 report

4 to Congress by the Comptroller General of the United States

5 entitled ‘Payment for Blood Clotting Factor Exceeds Pro6 viders Acquisition Cost’ (GAO–03–184), provide for a sepa7 rate payment for the administration of such blood clotting

8 factors in an amount that the Secretary determines to be

9 appropriate.

10 ‘‘(B) In determining the separate payment amount

11 under subparagraph (A) for blood clotting factors furnished

12 in 2004, the Secretary shall ensure that the total amount

13 of payments under this part (as estimated by the Secretary)

14 for such factors under paragraphs (4) and (5) and such sep15 arate payments for such factors does not exceed the total

16 amount of payments that would have been made for such

17 factors under this part (as estimated by the Secretary) if

18 the amendments made by section 433 of the Prescription

19 Drug and Medicare Improvement Act of 2003 had not been

20 enacted.

21 ‘‘(C) The separate payment amount under this sub22 paragraph for blood clotting factors furnished in 2005 or

23 a subsequent year shall be equal to the separate payment

24 amount determined under this paragraph for the previous
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1 year increased by the percentage increase described in para2 graph (4)(B)(i)(II) for the year involved.’’.

3 (5) INCREASE IN COMPOSITE RATE FOR END

4 STAGE RENAL DISEASE FACILITIES.—Section 1881(b)

5 (42 U.S.C. 1395rr(b) is amended—

6 (A) in paragraph (7), by adding at the end

7 the following new sentence: ‘‘In the case of dialy8 sis services furnished in 2004 or a subsequent

9 year, the composite rate for such services shall be

10 determined under paragraph (12).’’; and

11 (B) by adding at the end the following new

12 paragraph:

13 ‘‘(12)(A) In the case of dialysis services furnished dur14 ing 2004, the composite rate for such services shall be the

15 composite rate that would otherwise apply under paragraph

16 (7) for the year increased by an amount to ensure (as esti17 mated by the Secretary) that—

18 ‘‘(i) the sum of the total amount of—

19 ‘‘(I) the composite rate payments for such

20 services for the year, as increased under this

21 paragraph; and

22 ‘‘(II) the payments for drugs and biologicals

23 (other than erythropoetin) furnished in connec24 tion with the furnishing of renal dialysis services

25 and separately billed by renal dialysis facilities
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1 under paragraphs (4) and (5) of section 1842(o)

2 for the year; is equal to

3 ‘‘(ii) the sum of the total amount of the com4 posite rate payments under paragraph (7) for the

5 year and the payments for the separately billed drugs

6 and biologicals described in clause (i)(II) that would

7 have been made if the amendments made by section

8 433 of the Prescription Drug and Medicare Improve9 ment Act of 2003 had not been enacted.

10 ‘‘(B) Subject to subparagraph (E), in the case of dialy11 sis services furnished in 2005, the composite rate for such

12 services shall be an amount equal to the composite rate es13 tablished under subparagraph (A), increased by 0.05 per14 cent and further increased by 1.6 percent.

15 ‘‘(C) Subject to subparagraph (E), in the case of dialy16 sis services furnished in 2006, the composite rate for such

17 services shall be an amount equal to the composite rate es18 tablished under subparagraph (B), increased by 0.05 per19 cent and further increased by 1.6 percent.

20 ‘‘(D) Subject to subparagraph (E), in the case of dialy21 sis services furnished in 2007 and all subsequent years, the

22 composite rate for such services shall be an amount equal

23 to the composite rate established under this paragraph for

24 the previous year, increased by 0.05 percent.
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1 ‘‘(E) If the Secretary implements a reduction in the

2 payment amount under paragraph (4)(C) or (5) for a drug

3 or biological described in subparagraph (A)(i)(II) for a

4 year after 2004, the Secretary shall, as estimated by the

5 Secretary—

6 ‘‘(i) increase the composite rate for dialysis serv7 ices furnished in such year in the same manner that

8 the composite rate for such services for 2004 was in9 creased under subparagraph (A); and

10 ‘‘(ii) increase the percentage increase under sub11 paragraph (C) or (D) (as applicable) for years after

12 the year described in clause (i) to ensure that such in13 creased percentage would result in expenditures equal

14 to the sum of the total composite rate payments for

15 such services for such years and the total payments

16 for drugs and biologicals described in subparagraph

17 (A)(i)(II) is equal to the sum of the total amount of

18 the composite rate payments under this paragraph for

19 such years and the payments for the drugs and

20 biologicals described in subparagraph (A)(i)(II) that

21 would have been made if the reduction in payment

22 amount described in subparagraph had not been

23 made.

24 ‘‘(F) There shall be no administrative or judicial re25 view under section 1869, section 1878, or otherwise, of de-
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1 terminations of payment amounts, methods, or adjustments

2 under this paragraph.’’.

3 (6) HOME INFUSION DRUGS.—Section 1842(o)

4 (42 U.S.C. 1395u(o)), as amended by subsection

5 (a)(2) and paragraph (4), is amended by adding at

6 the end the following new paragraph:

7 ‘‘(7)(A) Subject to subparagraph (B), in the case of

8 infusion drugs and biologicals furnished through an item

9 of durable medical equipment covered under section 1861(n)

10 on or after January 1, 2004, the Secretary may make sepa11 rate payments for furnishing such drugs and biologicals in

12 an amount determined by the Secretary if the Secretary de13 termines such separate payment to be appropriate.

14 ‘‘(B) In determining the amount of any separate pay15 ment under subparagraph (A) for a year, the Secretary

16 shall ensure that the total amount of payments under this

17 part for such infusion drugs and biologicals for the year

18 and such separate payments for the year does not exceed

19 the total amount of payments that would have been made

20 under this part for the year for such infusion drugs and

21 biologicals if section 433 of the Prescription Drug and

22 Medicare Improvement Act of 2003 had not been enacted.’’.

23 (7) INHALATION DRUGS.—Section 1842(o) (42

24 U.S.C. 1395u(o)), as amended by subsection (a)(2)
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1 and paragraphs (4) and (6), is amended by adding

2 at the end the following new paragraph:

3 ‘‘(8)(A) Subject to subparagraph (B), in the case of

4 inhalation drugs and biologicals furnished through durable

5 medical equipment covered under section 1861(n) on or

6 after January 1, 2004, the Secretary may increase pay7 ments for such equipment under section 1834(a) and may

8 make separate payments for furnishing such drugs and

9 biologicals if the Secretary determines such increased or

10 separate payments are necessary to appropriately furnish

11 such equipment and drugs and biologicals to beneficiaries.

12 ‘‘(B) The total amount of any increased payments and

13 separate payments under subparagraph (A) for a year may

14 not exceed an amount equal to 10 percent of the amount

15 (as estimated by the Secretary) by which—

16 ‘‘(i) the total amount of payments that would

17 have been made for such drugs and biologicals for the

18 year if section 433 of the Prescription Drug and

19 Medicare Improvement Act of 2003 had not been en20 acted; exceeds

21 ‘‘(ii) the total amount of payments for such

22 drugs and biologicals under paragraphs (4) and (5).’’.

23 (8) PHARMACY DISPENSING FEE FOR CERTAIN

24 DRUGS AND BIOLOGICALS.—Section 1842(o)(2) (42

25 U.S.C. 1395u(o)(2)) is amended to read as follows:
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1 ‘‘(2) If payment for a drug or biological is made to

2 a licensed pharmacy approved to dispense drugs or

3 biologicals under this part, the Secretary—

4 ‘‘(A) in the case of an immunosuppressive drug

5 described in subparagraph (J) of section 1861(s)(2)

6 and an oral drug described in subparagraph (Q) or

7 (T) of such section, shall pay a dispensing fee deter8 mined appropriate by the Secretary (less the applica9 ble deductible and coinsurance amounts) to the phar10 macy; and

11 ‘‘(B) in the case of a drug or biological not de12 scribed in subparagraph (A), may pay a dispensing

13 fee determined appropriate by the Secretary (less the

14 applicable deductible and coinsurance amounts) to the

15 pharmacy.’’.

16 (9) PAYMENT FOR CHEMOTHERAPY DRUGS PUR17 CHASED BUT NOT ADMINISTERED BY PHYSICIANS.—

18 Section 1842(o) (42 U.S.C. 1395u(o)), as amended by

19 subsection (a)(2) and paragraphs (4), (6) and (7), is

20 amended by adding at the end the following new

21 paragraph:

22 ‘‘(9)(A) Subject to subparagraph (B), the Sec23 retary may increase (in an amount determined ap24 propriate) the amount of payments to physicians for

25 anticancer chemotherapeutic drugs or biologicals that
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1 would otherwise be made under this part in order to

2 compensate such physicians for anticancer

3 chemotherapeutic drugs or biologicals that are pur4 chased by physicians with a reasonable intent to ad5 minister to an individual enrolled under this part but

6 which cannot be administered to such individual de7 spite the reasonable efforts of the physician.

8 ‘‘(B) The total amount of increased payments

9 made under subparagraph (A) in a year (as esti10 mated by the Secretary) may not exceed an amount

11 equal to 1 percent of the total amount of payments

12 made under paragraphs (4) and (5) for such

13 anticancer chemotherapeutic drugs or biologicals fur14 nished by physicians in such year (as estimated by

15 the Secretary).’’.

16 (c) LINKAGE OF REVISED DRUG PAYMENTS AND IN17 CREASES FOR DRUG ADMINISTRATION.—The Secretary

18 shall not implement the revisions in payment amounts for

19 a category of drug or biological as a result of the amend20 ments made by subsection (a) unless the Secretary concur21 rently implements the adjustments to payment amounts for

22 administration of such category of drug or biological for

23 which the Secretary is required to make an adjustment, as

24 specified in the amendments made by, and provisions of,

25 subsection (b).
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1 (d) PROHIBITION OF ADMINISTRATIVE AND JUDICIAL

2 REVIEW.—

3 (1) DRUGS.—Section 1842(o) (42 U.S.C.

4 1395u(o)), as amended by subsection (a)(2) and para5 graphs (4), (6), (7), and (9) of subsection (b), is

6 amended by adding at the end the following new

7 paragraph:

8 ‘‘(10) There shall be no administrative or judicial re9 view under section 1869, section 1878, or otherwise, of de10 terminations of payment amounts, methods, or adjustments

11 under paragraph (2) or paragraphs (4) through (9).’’.

12 (2) PHYSICIAN FEE SCHEDULE.—Section

13 1848(i)(1) (42 U.S.C. 1395w–4(i)(1)) is amended—

14 (A) in subparagraph (D), by striking ‘‘and’’

15 at the end;

16 (B) in subparagraph (E), by striking the

17 period at the end and inserting ‘‘, and’’; and

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

19 subparagraph:

20 ‘‘(F) adjustments in practice expense rel21 ative value units under subsection (c)(2)(H).’’.

22 (3) MULTIPLE CHEMOTHERAPY AGENTS AND

23 OTHER SERVICES CURRENTLY ON THE NON-PHYSICIAN

24 WORK POOL.—There shall be no administrative or ju25 dicial review under section 1869, section 1878, or oth-
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1 erwise, of determinations of payment amounts, meth2 ods, or adjustments under paragraphs (2) and (3) of

3 subsection (b).

4 (e) STUDIES AND REPORTS.—

5 (1) GAO STUDY AND REPORT ON BENEFICIARY

6 ACCESS TO DRUGS AND BIOLOGICALS.—

7 (A) STUDY.—The Comptroller General of

8 the United States shall conduct a study that ex9 amines the impact the provisions of, and the

10 amendments made by, this section have on access

11 by medicare beneficiaries to drugs and

12 biologicals covered under the medicare program.

13 (B) REPORT.—Not later than January 1,

14 2006, the Comptroller General shall submit a re15 port to Congress on the study conducted under

16 subparagraph (A) together with such rec17 ommendations as the Comptroller General deter18 mines to be appropriate.

19 (2) STUDY AND REPORT BY THE HHS INSPECTOR

20 GENERAL ON MARKET PRICES OF DRUGS AND

21 BIOLOGICALS.—

22 (A) STUDY.—The Inspector General of the

23 Department of Health and Human Services shall

24 conduct 1 or more studies that—
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1 (i) examine the market prices that

2 drugs and biologicals covered under the

3 medicare program are widely available to

4 physicians and suppliers; and

5 (ii) compare such widely available

6 market prices to the payment amount for

7 such drugs and biologicals under section

8 1842(o) of the Social Security Act (42

9 U.S.C. 1395u(o).

10 (B) REQUIREMENT.—In conducting the

11 study under subparagraph (A), the Inspector

12 General shall focus on those drugs and

13 biologicals that represent the largest portions of

14 expenditures under the medicare program for

15 drugs and biologicals.

16 (C) REPORT.—The Inspector General shall

17 prepare a report on any study conducted under

18 subparagraph (A).

19 SEC. 433. INDEXING PART B DEDUCTIBLE TO INFLATION.

20 The first sentence of section 1833(b) (42 U.S.C.

21 1395l(b)) is amended by striking ‘‘and $100 for 1991 and

22 subsequent years’’ and inserting the following: ‘‘, $100 for

23 1991 through 2005, $125 for 2006, and for 2007 and there24 after, the amount in effect for the previous year, increase

25 by the percentage increase in the consumer price index for
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1 all urban consumers (U.S. city average) for the 12-month

2 period ending with June of the previous year, rounded to

3 the nearest dollar’’.

4 SEC. 434. REVISIONS TO REASSIGNMENT PROVISIONS.

5 (a) IN GENERAL.—Section 1842(b)(6)(A)(ii) (42

6 U.S.C. 1395u(b)(6)(A)(ii)) is amended to read as follows:

7 ‘‘(ii) where the service was provided under a contractual

8 arrangement between such physician or other person and

9 an entity (as defined by the Secretary), to the entity if

10 under such arrangement such entity submits the bill for

11 such service and such arrangement meets such program in12 tegrity and other safeguards as the Secretary may deter13 mine to be appropriate,’’.

14 (b) CONFORMING AMENDMENT.—The second sentence

15 of section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended

16 by striking ‘‘except to an employer or facility as described

17 in clause (A)’’ and inserting ‘‘except to an employer or enti18 ty as described in subparagraph (A)’’.

19 (c) EFFECTIVE DATE.—The amendments made by this

20 section shall apply to payments made on or after the date

21 of enactment of this Act.
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1 SEC. 435. EXTENSION OF TREATMENT OF CERTAIN PHYSI2 CIAN PATHOLOGY SERVICES UNDER MEDI3 CARE.

4 Section 542(c) of BIPA (114 Stat. 2763A–551) is

5 amended by inserting ‘‘, and for services furnished during

6 2005’’ before the period at the end.

7 SEC. 436. ADEQUATE REIMBURSEMENT FOR OUTPATIENT

8 PHARMACY THERAPY UNDER THE HOSPITAL

9 OUTPATIENT PPS.

10 (a) SPECIAL RULES FOR DRUGS AND BIOLOGICALS.—

11 Section 1833(t) (42 U.S.C. 1395(t)) is amended—

12 (1) by redesignating paragraph (13) as para13 graph (14); and

14 (2) by inserting after paragraph (12) the fol15 lowing new paragraph:

16 ‘‘(13) SPECIAL RULES FOR CERTAIN DRUGS AND

17 BIOLOGICALS.—

18 ‘‘(A) BEFORE 2007.—

19 ‘‘(i) IN GENERAL.—Notwithstanding

20 paragraph (6), but subject to clause (ii),

21 with respect to a separately payable drug or

22 biological described in subparagraph (D)

23 furnished on or after January 1, 2005, and

24 before January 1, 2007, hospitals shall be

25 reimbursed as follows:
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1 ‘‘(I) DRUGS AND BIOLOGICALS

2 FURNISHED AS PART OF A CURRENT

3 OPD SERVICE.—The amount of pay4 ment for a drug or biological described

5 in subparagraph (D) provided as a

6 part of a service that was a covered

7 OPD service on May 1, 2003, shall be

8 the applicable percentage (as defined

9 in subparagraph (C)) of the average

10 wholesale price for the drug or biologi11 cal that would have been determined

12 under section 1842(o) on such date.

13 ‘‘(II) DRUGS AND BIOLOGICALS

14 FURNISHED AS PART OF OTHER OPD

15 SERVICES.—The amount of payment

16 for a drug or biological described in

17 subparagraph (D) provided as part of

18 any other covered OPD service shall be

19 the applicable percentage (as defined

20 in subparagraph (C)) of the average

21 wholesale price that would have been

22 determined under section 1842(o) on

23 May 1, 2003, if payment for such a

24 drug or biological could have been

25 made under this part on that date.
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1 ‘‘(ii) UPDATE FOR 2006.—For 2006, the

2 amounts determined under clauses (i) and

3 (ii) shall be the amount established for 2005

4 increased by the percentage increase in the

5 Consumer Price Index for all urban con6 sumers (U.S. urban average) for the 12-

7 month period ending with June of the pre8 vious year.

9 ‘‘(B) AFTER 2007.—

10 ‘‘(i) ONGOING STUDY AND REPORTS ON

11 ADEQUATE REIMBURSEMENTS.—

12 ‘‘(I) STUDY.—The Secretary shall

13 contract with an eligible organization

14 (as defined in subclause (IV)) to con15 duct a study to determine the hospital

16 acquisition, pharmacy services, and

17 handling costs for each individual drug

18 or biological described in subparagraph

19 (D).

20 ‘‘(II) STUDY REQUIREMENTS.—

21 The study conducted under subclause

22 (I) shall—

23 ‘‘(aa) be accurate to within 3

24 percent of true mean hospital ac25 quisition and handling costs for
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1 each drug and biological at the 95

2 percent confidence level;

3 ‘‘(bb) begin not later than

4 January 1, 2005; and

5 ‘‘(cc) be updated annually

6 for changes in hospital costs and

7 the addition of newly marketed

8 products.

9 ‘‘(III) REPORTS.—Not later than

10 January 1 of each year (beginning

11 with 2006), the Secretary shall submit

12 to Congress a report on the study con13 ducted under clause (i) together with

14 recommendations for such legislative or

15 administrative action as the Secretary

16 determines to be appropriate.

17 ‘‘(IV) ELIGIBLE ORGANIZATION

18 DEFINED.—In this clause, the term ‘el19 igible organization’ means a private,

20 nonprofit organization within the

21 meaning of section 501(c) of the Inter22 nal Revenue Code.

23 ‘‘(ii) ESTABLISHMENT OF PAYMENT

24 METHODOLOGY.—Notwithstanding para25 graph (6), the Secretary, in establishing a
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1 payment methodology on or after the date of

2 enactment of the Prescription Drug and

3 Medicare Improvement Act of 2003, shall

4 take into consideration the findings of the

5 study conducted under clause (i)(I) in de6 termining payment amounts for each drug

7 and biological provided as part of a covered

8 OPD service furnished on or after January

9 1, 2007.

10 ‘‘(C) APPLICABLE PERCENTAGE DEFINED.—

11 In this paragraph, the term ‘applicable percent12 age’ means—

13 ‘‘(i) with respect to a biological prod14 uct (approved under a biologics license ap15 plication under section 351 of the Public

16 Health Service Act), a single source drug

17 (as defined in section 1927(k)(7)(A)(iv)), or

18 an orphan product designated under section

19 526 of the Food, Drug, and Cosmetic Act to

20 which the prospective payment system es21 tablished under this subsection did not

22 apply under the final rule for 2003 pay23 ments under such system, 94 percent;
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1 ‘‘(ii) with respect to an innovator mul2 tiple source drug (as defined in section

3 1927(k)(7)(A)(ii)), 91 percent; and

4 ‘‘(iii) with respect to a noninnovator

5 multiple source drug (as defined in as de6 fined in section 1927(k)(7)(A)(iii)), 71 per7 cent.

8 ‘‘(D) DRUGS AND BIOLOGICALS DE9 SCRIBED.—A drug or biological described in this

10 paragraph is any drug or biological—

11 ‘‘(i) for which the amount of payment

12 was determined under paragraph (6) prior

13 to January 1, 2005; and

14 ‘‘(ii)(I) which is assigned to a drug

15 specific ambulatory payment classification

16 on or after the date of enactment of the Pre17 scription Drug and Medicare Improvement

18 Act of 2003; or

19 ‘‘(II) that would have been reimbursed

20 under paragraph (6) but for the application

21 of this paragraph.’’.

22 (b) EXCEPTIONS TO BUDGET NEUTRALITY REQUIRE23 MENT.—Section 1833(t)(9)(B) (42 U.S.C. 1395l(t)(9)(B)) is

24 amended by adding at the end the following: ‘‘In deter25 mining the budget neutrality adjustment required by the
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1 preceding sentence for fiscal years 2005 and 2006, the Sec2 retary shall not take into account any expenditures that

3 would not have been made but for the application of para4 graph (13).’’.

5 SEC. 437. LIMITATION OF APPLICATION OF FUNCTIONAL

6 EQUIVALENCE STANDARD.

7 Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amended

8 by adding at the end the following new subparagraph:

9 ‘‘(F) LIMITATION OF APPLICATION OF FUNC10 TIONAL EQUIVALENCE STANDARD.—

11 ‘‘(i) IN GENERAL.—The Secretary may

12 not publish regulations that apply a func13 tional equivalence standard to a drug or bi14 ological under this paragraph.

15 ‘‘(ii) APPLICATION.—Paragraph (1)

16 shall apply to the application of a func17 tional equivalence standard to a drug or bi18 ological on or after the date of enactment of

19 the Prescription Drug and Medicare Im20 provement Act of 2003 unless—

21 ‘‘(I) such application was being

22 made to such drug or biological prior

23 to such date of enactment; and

24 ‘‘(II) the Secretary applies such

25 standard to such drug or biological
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1 only for the purpose of determining eli2 gibility of such drug or biological for

3 additional payments under this para4 graph and not for the purpose of any

5 other payments under this title.

6 ‘‘(iii) RULE OF CONSTRUCTION.—Noth7 ing in this subparagraph shall be construed

8 to effect the Secretary’s authority to deem a

9 particular drug to be identical to another

10 drug if the 2 products are pharmaceutically

11 equivalent and bioequvalent, as determined

12 by the Commissioner of Food and Drugs.

13 SEC. 438. MEDICARE COVERAGE OF ROUTINE COSTS ASSO14 CIATED WITH CERTAIN CLINICAL TRIALS.

15 (a) IN GENERAL.—With respect to the coverage of rou16 tine costs of care for beneficiaries participating in a quali17 fying clinical trial, as set forth on the date of the enactment

18 of this Act in National Coverage Determination 30–1 of the

19 Medicare Coverage Issues Manual, the Secretary shall deem

20 clinical trials conducted in accordance with an investiga21 tional device exemption approved under section 520(g) of

22 the Federal Food, Drug, and Cosmetic Act (42 U.S.C.

23 360j(g)) to be automatically qualified for such coverage.

24 (b) RULE OF CONSTRUCTION.—Nothing in this section

25 shall be construed as authorizing or requiring the Secretary
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1 to modify the regulations set forth on the date of the enact2 ment of this Act at subpart B of part 405 of title 42, Code

3 of Federal Regulations, or subpart A of part 411 of such

4 title, relating to coverage of, and payment for, a medical

5 device that is the subject of an investigational device exemp6 tion by the Food and Drug Administration (except as may

7 be necessary to implement subsection (a)).

8 (c) LIMITATION OF EXPENDITURES IN YEARS PRIOR

9 TO 2014.—

10 (1) IN GENERAL.—The Secretary shall ensure

11 that the total amount of expenditures under title

12 XVIII of the Social Security Act (including amounts

13 expended by reason of this section) in a year prior to

14 2014 does not exceed the sum of—

15 (A) the total amount of expenditures under

16 such title XVIII that would have made if this

17 section had not been enacted; and

18 (B) the applicable amount.

19 (2) APPLICABLE AMOUNT.—For purposes of

20 paragraph (1), the term ‘‘applicable amount’’

21 means—

22 (A) for 2005, $32,000,000;

23 (B) for 2006, $34,000,000;

24 (C) for 2007, $36,000,000;

25 (D) for 2008, $38,000,000;
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1 (E) for 2009, $40,000,000;

2 (F) for 2010, $42,000,000;

3 (G) for 2011, $44,000,000;

4 (H) for 2012, $48,000,000; and

5 (I) for 2013, $50,000,000.

6 (3) STEPS TO ENSURE FUNDING LIMITATION NOT

7 VIOLATED.—If the Secretary determines that the ap8 plication of this section will result in the funding

9 limitation described in paragraph (1) being violated

10 for any year, the Secretary shall take appropriate

11 steps to stay within such funding limitation, includ12 ing through limiting the number of clinical trials

13 deemed under subsection (a) and only covering a por14 tion of the routine costs described in such subsection.

15 (d) EFFECTIVE DATE.—This section shall apply to

16 clinical trials begun on or after January 1, 2005.

17 SEC. 439. WAIVER OF PART B LATE ENROLLMENT PENALTY

18 FOR CERTAIN MILITARY RETIREES; SPECIAL

19 ENROLLMENT PERIOD.

20 (a) WAIVER OF PENALTY.—

21 (1) IN GENERAL.—Section 1839(b) (42 U.S.C.

22 1395r(b)) is amended by adding at the end the fol23 lowing new sentence: ‘‘No increase in the premium

24 shall be effected for a month in the case of an indi25 vidual who is 65 years of age or older, who enrolls
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1 under this part during 2002, 2003, 2004, or 2005 and

2 who demonstrates to the Secretary before December

3 31, 2005, that the individual is a covered beneficiary

4 (as defined in section 1072(5) of title 10, United

5 States Code). The Secretary shall consult with the

6 Secretary of Defense in identifying individuals de7 scribed in the previous sentence.’’.

8 (2) EFFECTIVE DATE.—The amendment made by

9 paragraph (1) shall apply to premiums for months

10 beginning with January 2005. The Secretary shall es11 tablish a method for providing rebates of premium

12 penalties paid for months on or after January 2005

13 for which a penalty does not apply under such

14 amendment but for which a penalty was previously

15 collected.

16 (b) MEDICARE PART B SPECIAL ENROLLMENT PE17 RIOD.—

18 (1) IN GENERAL.—In the case of any individual

19 who, as of the date of enactment of this Act, is 65

20 years of age or older, is eligible to enroll but is not

21 enrolled under part B of title XVIII of the Social Se22 curity Act, and is a covered beneficiary (as defined

23 in section 1072(5) of title 10, United States Code), the

24 Secretary shall provide for a special enrollment pe25 riod during which the individual may enroll under
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1 such part. Such period shall begin 1 year after the

2 date of the enactment of this Act and shall end on De3 cember 31, 2005.

4 (2) COVERAGE PERIOD.—In the case of an indi5 vidual who enrolls during the special enrollment pe6 riod provided under paragraph (1), the coverage pe7 riod under part B of title XVIII of the Social Secu8 rity Act shall begin on the first day of the month fol9 lowing the month in which the individual enrolls.

10 SEC. 440. DEMONSTRATION OF COVERAGE OF CHIRO11 PRACTIC SERVICES UNDER MEDICARE.

12 (a) DEFINITIONS.—In this section:

13 (1) CHIROPRACTIC SERVICES.—The term ‘‘chiro14 practic services’’ has the meaning given that term by

15 the Secretary for purposes of the demonstration

16 projects, but shall include, at a minimum—

17 (A) care for neuromusculoskeletal conditions

18 typical among eligible beneficiaries; and

19 (B) diagnostic and other services that a chi20 ropractor is legally authorized to perform by the

21 State or jurisdiction in which such treatment is

22 provided.

23 (2) DEMONSTRATION PROJECT.—The term ‘‘dem24 onstration project’’ means a demonstration project es25 tablished by the Secretary under subsection (b)(1).
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1 (3) ELIGIBLE BENEFICIARY.—The term ‘‘eligible

2 beneficiary’’ means an individual who is enrolled

3 under part B of the medicare program.

4 (4) MEDICARE PROGRAM.—The term ‘‘medicare

5 program’’ means the health benefits program under

6 title XVIII of the Social Security Act (42 U.S.C. 1395

7 et seq.).

8 (b) DEMONSTRATION OF COVERAGE OF CHIROPRACTIC

9 SERVICES UNDER MEDICARE.—

10 (1) ESTABLISHMENT.—The Secretary shall estab11 lish demonstration projects in accordance with the

12 provisions of this section for the purpose of evaluating

13 the feasibility and advisability of covering chiro14 practic services under the medicare program (in addi15 tion to the coverage provided for services consisting of

16 treatment by means of manual manipulation of the

17 spine to correct a subluxation described in section

18 1861(r)(5) of the Social Security Act (42 U.S.C.

19 1395x(r)(5))).

20 (2) NO PHYSICIAN APPROVAL REQUIRED.—In es21 tablishing the demonstration projects, the Secretary

22 shall ensure that an eligible beneficiary who partici23 pates in a demonstration project, including an eligi24 ble beneficiary who is enrolled for coverage under a

25 Medicare+Choice plan (or, on and after January 1,
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1 2006, under a MedicareAdvantage plan), is not re2 quired to receive approval from a physician or other

3 health care provider in order to receive a chiropractic

4 service under a demonstration project.

5 (3) CONSULTATION.—In establishing the dem6 onstration projects, the Secretary shall consult with

7 chiropractors, organizations representing chiroprac8 tors, eligible beneficiaries, and organizations rep9 resenting eligible beneficiaries.

10 (4) PARTICIPATION.—Any eligible beneficiary

11 may participate in the demonstration projects on a

12 voluntary basis.

13 (c) CONDUCT OF DEMONSTRATION PROJECTS.—

14 (1) DEMONSTRATION SITES.—

15 (A) SELECTION OF DEMONSTRATION

16 SITES.—The Secretary shall conduct demonstra17 tion projects at 6 demonstration sites.

18 (B) GEOGRAPHIC DIVERSITY.—Of the sites

19 described in subparagraph (A)—

20 (i) 3 shall be in rural areas; and

21 (ii) 3 shall be in urban areas.

22 (C) SITES LOCATED IN HPSAS.—At least 1

23 site described in clause (i) of subparagraph (B)

24 and at least 1 site described in clause (ii) of such

25 subparagraph shall be located in an area that is
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1 designated under section 332(a)(1)(A) of the

2 Public Health Service Act (42 U.S.C.

3 254e(a)(1)(A)) as a health professional shortage

4 area.

5 (2) IMPLEMENTATION; DURATION.—

6 (A) IMPLEMENTATION.—The Secretary shall

7 not implement the demonstration projects before

8 October 1, 2004.

9 (B) DURATION.—The Secretary shall com10 plete the demonstration projects by the date that

11 is 3 years after the date on which the first dem12 onstration project is implemented.

13 (d) EVALUATION AND REPORT.—

14 (1) EVALUATION.—The Secretary shall conduct

15 an evaluation of the demonstration projects—

16 (A) to determine whether eligible bene17 ficiaries who use chiropractic services use a less18 er overall amount of items and services for which

19 payment is made under the medicare program

20 than eligible beneficiaries who do not use such

21 services;

22 (B) to determine the cost of providing pay23 ment for chiropractic services under the medicare

24 program;
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1 (C) to determine the satisfaction of eligible

2 beneficiaries participating in the demonstration

3 projects and the quality of care received by such

4 beneficiaries; and

5 (D) to evaluate such other matters as the

6 Secretary determines is appropriate.

7 (2) REPORT.—Not later than the date that is 1

8 year after the date on which the demonstration

9 projects conclude, the Secretary shall submit to Con10 gress a report on the evaluation conducted under

11 paragraph (1) together with such recommendations

12 for legislation or administrative action as the Sec13 retary determines is appropriate.

14 (e) WAIVER OF MEDICARE REQUIREMENTS.—The Sec15 retary shall waive compliance with such requirements of the

16 medicare program to the extent and for the period the Sec17 retary finds necessary to conduct the demonstration

18 projects.

19 (f) FUNDING.—

20 (1) DEMONSTRATION PROJECTS.—

21 (A) IN GENERAL.—Subject to subparagraph

22 (B) and paragraph (2), the Secretary shall pro23 vide for the transfer from the Federal Supple24 mentary Insurance Trust Fund under section

25 1841 of the Social Security Act (42 U.S.C.
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1 1395t) of such funds as are necessary for the

2 costs of carrying out the demonstration projects

3 under this section.

4 (B) LIMITATION.—In conducting the dem5 onstration projects under this section, the Sec6 retary shall ensure that the aggregate payments

7 made by the Secretary under the medicare pro8 gram do not exceed the amount which the Sec9 retary would have paid under the medicare pro10 gram if the demonstration projects under this

11 section were not implemented.

12 (2) EVALUATION AND REPORT.—There are au13 thorized to be appropriated such sums as are nec14 essary for the purpose of developing and submitting

15 the report to Congress under subsection (d).

16 SEC. 441. MEDICARE HEALTH CARE QUALITY DEMONSTRA17 TION PROGRAMS.

18 Title XVIII (42 U.S.C. 1395 et seq.) is amended by

19 inserting after section 1866B the following new section:

20 ‘‘HEALTH CARE QUALITY DEMONSTRATION PROGRAM

21 ‘‘SEC. 1866C. (a) DEFINITIONS.—In this section:

22 ‘‘(1) BENEFICIARY.—The term ‘beneficiary’

23 means a beneficiary who is enrolled in the original

24 medicare fee-for-service program under parts A and B

25 or a beneficiary in a staff model or dedicated group

26 model health maintenance organization under the
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1 Medicare+Choice program (or, on and after January

2 1, 2006, under the MedicareAdvantage program)

3 under part C.

4 ‘‘(2) HEALTH CARE GROUP.—

5 ‘‘(A) IN GENERAL.—The term ‘health care

6 group’ means—

7 ‘‘(i) a group of physicians that is orga8 nized at least in part for the purpose of

9 providing physician’s services under this

10 title;

11 ‘‘(ii) an integrated health care delivery

12 system that delivers care through coordi13 nated hospitals, clinics, home health agen14 cies, ambulatory surgery centers, skilled

15 nursing facilities, rehabilitation facilities

16 and clinics, and employed, independent, or

17 contracted physicians; or

18 ‘‘(iii) an organization representing re19 gional coalitions of groups or systems de20 scribed in clause (i) or (ii).

21 ‘‘(B) INCLUSION.—As the Secretary deter22 mines appropriate, a health care group may in23 clude a hospital or any other individual or enti24 ty furnishing items or services for which pay25 ment may be made under this title that is affili-
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1 ated with the health care group under an ar2 rangement structured so that such hospital, indi3 vidual, or entity participates in a demonstration

4 project under this section.

5 ‘‘(3) PHYSICIAN.—Except as otherwise provided

6 for by the Secretary, the term ‘physician’ means any

7 individual who furnishes services that may be paid

8 for as physicians’ services under this title.

9 ‘‘(b) DEMONSTRATION PROJECTS.—The Secretary

10 shall establish a 5-year demonstration program under

11 which the Secretary shall approve demonstration projects

12 that examine health delivery factors that encourage the de13 livery of improved quality in patient care, including—

14 ‘‘(1) the provision of incentives to improve the

15 safety of care provided to beneficiaries;

16 ‘‘(2) the appropriate use of best practice guide17 lines by providers and services by beneficiaries;

18 ‘‘(3) reduced scientific uncertainty in the deliv19 ery of care through the examination of variations in

20 the utilization and allocation of services, and out21 comes measurement and research;

22 ‘‘(4) encourage shared decision making between

23 providers and patients;
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1 ‘‘(5) the provision of incentives for improving the

2 quality and safety of care and achieving the efficient

3 allocation of resources;

4 ‘‘(6) the appropriate use of culturally and eth5 nically sensitive health care delivery; and

6 ‘‘(7) the financial effects on the health care mar7 ketplace of altering the incentives for care delivery

8 and changing the allocation of resources.

9 ‘‘(c) ADMINISTRATION BY CONTRACT.—

10 ‘‘(1) IN GENERAL.—Except as otherwise provided

11 in this section, the Secretary may administer the

12 demonstration program established under this section

13 in a manner that is similar to the manner in which

14 the demonstration program established under section

15 1866A is administered in accordance with section

16 1866B.

17 ‘‘(2) ALTERNATIVE PAYMENT SYSTEMS.—A

18 health care group that receives assistance under this

19 section may, with respect to the demonstration project

20 to be carried out with such assistance, include pro21 posals for the use of alternative payment systems for

22 items and services provided to beneficiaries by the

23 group that are designed to—
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1 ‘‘(A) encourage the delivery of high quality

2 care while accomplishing the objectives described

3 in subsection (b); and

4 ‘‘(B) streamline documentation and report5 ing requirements otherwise required under this

6 title.

7 ‘‘(3) BENEFITS.—A health care group that re8 ceives assistance under this section may, with respect

9 to the demonstration project to be carried out with

10 such assistance, include modifications to the package

11 of benefits available under the traditional fee-for-serv12 ice program under parts A and B or the package of

13 benefits available through a staff model or a dedicated

14 group model health maintenance organization under

15 part C. The criteria employed under the demonstra16 tion program under this section to evaluate outcomes

17 and determine best practice guidelines and incentives

18 shall not be used as a basis for the denial of medicare

19 benefits under the demonstration program to patients

20 against their wishes (or if the patient is incompetent,

21 against the wishes of the patient’s surrogate) on the

22 basis of the patient’s age or expected length of life or

23 of the patient’s present or predicted disability, degree

24 of medical dependency, or quality of life.
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1 ‘‘(d) ELIGIBILITY CRITERIA.—To be eligible to receive

2 assistance under this section, an entity shall—

3 ‘‘(1) be a health care group;

4 ‘‘(2) meet quality standards established by the

5 Secretary, including—

6 ‘‘(A) the implementation of continuous

7 quality improvement mechanisms that are aimed

8 at integrating community-based support services,

9 primary care, and referral care;

10 ‘‘(B) the implementation of activities to in11 crease the delivery of effective care to bene12 ficiaries;

13 ‘‘(C) encouraging patient participation in

14 preference-based decisions;

15 ‘‘(D) the implementation of activities to en16 courage the coordination and integration of med17 ical service delivery; and

18 ‘‘(E) the implementation of activities to

19 measure and document the financial impact on

20 the health care marketplace of altering the incen21 tives of health care delivery and changing the al22 location of resources; and

23 ‘‘(3) meet such other requirements as the Sec24 retary may establish.
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1 ‘‘(e) WAIVER AUTHORITY.—The Secretary may waive

2 such requirements of titles XI and XVIII as may be nec3 essary to carry out the purposes of the demonstration pro4 gram established under this section.

5 ‘‘(f) BUDGET NEUTRALITY.—With respect to the 5-year

6 period of the demonstration program under subsection (b),

7 the aggregate expenditures under this title for such period

8 shall not exceed the aggregate expenditures that would have

9 been expended under this title if the program established

10 under this section had not been implemented.

11 ‘‘(g) NOTICE REQUIREMENTS.—In the case of an indi12 vidual that receives health care items or services under a

13 demonstration program carried out under this section, the

14 Secretary shall ensure that such individual is notified of

15 any waivers of coverage or payment rules that are applica16 ble to such individual under this title as a result of the

17 participation of the individual in such program.

18 ‘‘(h) PARTICIPATION AND SUPPORT BY FEDERAL

19 AGENCIES.—In carrying out the demonstration program

20 under this section, the Secretary may direct—

21 ‘‘(1) the Director of the National Institutes of

22 Health to expand the efforts of the Institutes to evalu23 ate current medical technologies and improve the

24 foundation for evidence-based practice;
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1 ‘‘(2) the Administrator of the Agency for

2 Healthcare Research and Quality to, where possible

3 and appropriate, use the program under this section

4 as a laboratory for the study of quality improvement

5 strategies and to evaluate, monitor, and disseminate

6 information relevant to such program; and

7 ‘‘(3) the Administrator of the Centers for Medi8 care & Medicaid Services and the Administrator of

9 the Center for Medicare Choices to support linkages of

10 relevant medicare data to registry information from

11 participating health care groups for the beneficiary

12 populations served by the participating groups, for

13 analysis supporting the purposes of the demonstration

14 program, consistent with the applicable provisions of

15 the Health Insurance Portability and Accountability

16 Act of 1996.

17 ‘‘(i) IMPLEMENTATION.—The Secretary shall not im18 plement the demonstration program before October 1,

19 2004.’’.

20 SEC. 442. MEDICARE COMPLEX CLINICAL CARE MANAGE21 MENT PAYMENT DEMONSTRATION.

22 (a) ESTABLISHMENT.—

23 (1) IN GENERAL.—The Secretary shall establish

24 a demonstration program to make the medicare pro25 gram more responsive to needs of eligible beneficiaries
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1 by promoting continuity of care, helping stabilize

2 medical conditions, preventing or minimizing acute

3 exacerbations of chronic conditions, and reducing ad4 verse health outcomes, such as adverse drug inter5 actions related to polypharmacy.

6 (2) SITES.—The Secretary shall designate 6 sites

7 at which to conduct the demonstration program under

8 this section, of which at least 3 shall be in an urban

9 area and at least 1 shall be in a rural area. One of

10 the sites shall be located in the State of Arkansas.

11 (3) DURATION.—The Secretary shall conduct the

12 demonstration program under this section for a 3-

13 year period.

14 (4) IMPLEMENTATION.—The Secretary shall not

15 implement the demonstration program before October

16 1, 2004.

17 (b) PARTICIPANTS.—Any eligible beneficiary who re18 sides in an area designated by the Secretary as a dem19 onstration site under subsection (a)(2) may participate in

20 the demonstration program under this section if such bene21 ficiary identifies a principal care physician who agrees to

22 manage the complex clinical care of the eligible beneficiary

23 under the demonstration program.

24 (c) PRINCIPAL CARE PHYSICIAN RESPONSIBILITIES.—

25 The Secretary shall enter into an agreement with each prin-
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1 cipal care physician who agrees to manage the complex

2 clinical care of an eligible beneficiary under subsection (b)

3 under which the principal care physician shall—

4 (1) serve as the primary contact of the eligible

5 beneficiary in accessing items and services for which

6 payment may be made under the medicare program;

7 (2) maintain medical information related to care

8 provided by other health care providers who provide

9 health care items and services to the eligible bene10 ficiary, including clinical reports, medication and

11 treatments prescribed by other physicians, hospital

12 and hospital outpatient services, skilled nursing home

13 care, home health care, and medical equipment serv14 ices;

15 (3) monitor and advocate for the continuity of

16 care of the eligible beneficiary and the use of evidence17 based guidelines;

18 (4) promote self-care and family caregiver in19 volvement where appropriate;

20 (5) have appropriate staffing arrangements to

21 conduct patient self-management and other care co22 ordination activities as specified by the Secretary;

23 (6) refer the eligible beneficiary to community

24 services organizations and coordinate the services of
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1 such organizations with the care provided by health

2 care providers; and

3 (7) meet such other complex care management

4 requirements as the Secretary may specify.

5 (d) COMPLEX CLINICAL CARE MANAGEMENT FEE.—

6 (1) PAYMENT.—Under an agreement entered into

7 under subsection (c), the Secretary shall pay to each

8 principal care physician, on behalf of each eligible

9 beneficiary under the care of that physician, the com10 plex clinical care management fee developed by the

11 Secretary under paragraph (2).

12 (2) DEVELOPMENT OF FEE.—The Secretary shall

13 develop a complex care management fee under this

14 paragraph that is paid on a monthly basis and which

15 shall be payment in full for all the functions per16 formed by the principal care physician under the

17 demonstration program, including any functions per18 formed by other qualified practitioners acting on be19 half of the physician, appropriate staff under the su20 pervision of the physician, and any other person

21 under a contract with the physician, including any

22 person who conducts patient self-management and

23 caregiver education under subsection (c)(4).

24 (e) FUNDING.—
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1 (1) IN GENERAL.—The Secretary shall provide

2 for the transfer from the Federal Supplementary In3 surance Trust Fund established under section 1841 of

4 the Social Security Act (42 U.S.C. 1395t) of such

5 funds as are necessary for the costs of carrying out

6 the demonstration program under this section.

7 (2) BUDGET NEUTRALITY.—In conducting the

8 demonstration program under this section, the Sec9 retary shall ensure that the aggregate payments made

10 by the Secretary do not exceed the amount which the

11 Secretary would have paid if the demonstration pro12 gram under this section was not implemented.

13 (f) WAIVER AUTHORITY.—The Secretary may waive

14 such requirements of titles XI and XVIII of the Social Secu15 rity Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be

16 necessary for the purpose of carrying out the demonstration

17 program under this section.

18 (g) REPORT.—Not later than 6 months after the com19 pletion of the demonstration program under this section,

20 the Secretary shall submit to Congress a report on such pro21 gram, together with recommendations for such legislation

22 and administrative action as the Secretary determines to

23 be appropriate.

24 (h) DEFINITIONS.—In this section:
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1 (1) ACTIVITY OF DAILY LIVING.—The term ‘‘ac2 tivity of daily living’’ means eating, toiling, transfer3 ring, bathing, dressing, and continence.

4 (2) CHRONIC CONDITION.—The term ‘‘chronic

5 condition’’ means a biological, physical, or mental

6 condition that is likely to last a year or more, for

7 which there is no known cure, for which there is a

8 need for ongoing medical care, and which may affect

9 an individual’s ability to carry out activities of daily

10 living or instrumental activities of daily living, or

11 both.

12 (3) ELIGIBLE BENEFICIARY.—The term ‘‘eligible

13 beneficiary’’ means any individual who—

14 (A) is enrolled for benefits under part B of

15 the medicare program;

16 (B) has at least 4 complex medical condi17 tions (one of which may be cognitive impair18 ment); and

19 (C) has—

20 (i) an inability to self-manage their

21 care; or

22 (ii) a functional limitation defined as

23 an impairment in 1 or more activity of

24 daily living or instrumental activity of

25 daily living.
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1 (4) INSTRUMENTAL ACTIVITY OF DAILY LIVING.—

2 The term ‘‘instrumental activity of daily living’’

3 means meal preparation, shopping, housekeeping,

4 laundry, money management, telephone use, and

5 transportation use.

6 (5) MEDICARE PROGRAM.—The term ‘‘medicare

7 program’’ means the health care program under title

8 XVIII of the Social Security Act (42 U.S.C. 1395 et

9 seq.).

10 (6) PRINCIPAL CARE PHYSICIAN.—The term

11 ‘‘principal care physician’’ means the physician with

12 primary responsibility for overall coordination of the

13 care of an eligible beneficiary (as specified in a writ14 ten plan of care) who may be a primary care physi15 cian or a specialist.

16 SEC. 443. MEDICARE FEE-FOR-SERVICE CARE COORDINA17 TION DEMONSTRATION PROGRAM.

18 (a) ESTABLISHMENT.—

19 (1) IN GENERAL.—The Secretary shall establish

20 a demonstration program to contract with qualified

21 care management organizations to provide health risk

22 assessment and care management services to eligible

23 beneficiaries who receive care under the original

24 medicare fee-for-service program under parts A and B
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1 of title XVIII of the Social Security Act to eligible

2 beneficiaries.

3 (2) SITES.—The Secretary shall designate 6 sites

4 at which to conduct the demonstration program under

5 this section. In selecting sites under this paragraph,

6 the Secretary shall give preference to sites located in

7 rural areas.

8 (3) DURATION.—The Secretary shall conduct the

9 demonstration program under this section for a 5-

10 year period.

11 (4) IMPLEMENTATION.—The Secretary shall not

12 implement the demonstration program before October

13 1, 2004.

14 (b) PARTICIPANTS.—Any eligible beneficiary who re15 sides in an area designated by the Secretary as a dem16 onstration site under subsection (a)(2) may participate in

17 the demonstration program under this section if such bene18 ficiary identifies a care management organization who

19 agrees to furnish care management services to the eligible

20 beneficiary under the demonstration program.

21 (c) CONTRACTS WITH CMOS.—

22 (1) IN GENERAL.—The Secretary shall enter into

23 a contract with care management organizations to

24 provide care management services to eligible bene-
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1 ficiaries residing in the area served by the care man2 agement organization.

3 (2) CANCELLATION.—The Secretary may cancel

4 a contract entered into under paragraph (1) if the

5 care management organization does not meet nego6 tiated savings or quality outcomes targets for the

7 year.

8 (3) NUMBER OF CMOS.—The Secretary may con9 tract with more than 1 care management organiza10 tion in a geographic area.

11 (d) PAYMENT TO CMOS.—

12 (1) PAYMENT.—Under an contract entered into

13 under subsection (c), the Secretary shall pay care

14 management organizations a fee for which the care

15 management organization is partially at risk based

16 on bids submitted by care management organizations.

17 (2) PORTION OF PAYMENT AT RISK.—The Sec18 retary shall establish a benchmark for quality and

19 cost against which the results of the care management

20 organization are to be measured. The Secretary may

21 not pay a care management organization the portion

22 of the fee described in paragraph (1) that is at risk

23 unless the Secretary determines that the care manage24 ment organization has met the agreed upon savings

25 and outcomes targets for the year.
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1 (e) FUNDING.—

2 (1) IN GENERAL.—The Secretary shall provide

3 for the transfer from the Federal Hospital Insurance

4 Trust Fund under section 1817 of the Social Security

5 Act (42 U.S.C. 1395i) and the Federal Supple6 mentary Insurance Trust Fund established under sec7 tion 1841 of such Act (42 U.S.C. 1395t), in such pro8 portion as the Secretary determines to be appropriate,

9 of such funds as are necessary for the costs of car10 rying out the demonstration program under this sec11 tion.

12 (2) BUDGET NEUTRALITY.—In conducting the

13 demonstration program under this section, the Sec14 retary shall ensure that the aggregate payments made

15 by the Secretary do not exceed the amount which the

16 Secretary would have paid if the demonstration pro17 gram under this section was not implemented.

18 (f) WAIVER AUTHORITY.—

19 (1) IN GENERAL.—The Secretary may waive

20 such requirements of titles XI and XVIII of the Social

21 Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as

22 may be necessary for the purpose of carrying out the

23 demonstration program under this section.

24 (2) WAIVER OF MEDIGAP PREEMPTIONS.—The

25 Secretary shall waive any provision of section 1882
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1 of the Social Security Act that would prevent an in2 surance carrier described in subsection (h)(3)(D) from

3 participating in the demonstration program under

4 this section.

5 (g) REPORT.—Not later than 6 months after the com6 pletion of the demonstration program under this section,

7 the Secretary shall submit to Congress a report on such pro8 gram, together with recommendations for such legislation

9 and administrative action as the Secretary determines to

10 be appropriate.

11 (h) DEFINITIONS.—In this section:

12 (1) CARE MANAGEMENT SERVICES.—The term

13 ‘‘care management services’’ means services that are

14 furnished to an eligible beneficiary (as defined in

15 paragraph (2)) by a care management organization

16 (as defined in paragraph (3)) in accordance with

17 guidelines established by the Secretary that are con18 sistent with guidelines established by the American

19 Geriatrics Society.

20 (2) ELIGIBLE BENEFICIARY.—The term ‘‘eligible

21 beneficiary’’ means an individual who is—

22 (A) entitled to (or enrolled for) benefits

23 under part A and enrolled for benefits under

24 part B of the Social Security Act (42 U.S.C.

25 1395c et seq.; 1395j et seq.);
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1 (B) not enrolled with a Medicare+Choice

2 plan or a MedicareAdvantage plan under part

3 C; and

4 (C) at high-risk (as defined by the Sec5 retary, but including eligible beneficiaries with

6 multiple sclerosis or another disabling chronic

7 condition, eligible beneficiaries residing in a

8 nursing home or at risk for nursing home place9 ment, or eligible beneficiaries eligible for assist10 ance under a State plan under title XIX).

11 (3) CARE MANAGEMENT ORGANIZATION.—The

12 term ‘‘care management organization’’ means an or13 ganization that meets such qualifications as the Sec14 retary may specify and includes any of the following:

15 (A) A physician group practice, hospital,

16 home health agency, or hospice program.

17 (B) A disease management organization.

18 (C) A Medicare+Choice or

19 MedicareAdvantage organization.

20 (D) Insurance carriers offering medicare

21 supplemental policies under section 1882 of the

22 Social Security Act (42 U.S.C. 1395ss).

23 (E) Such other entity as the Secretary de24 termines to be appropriate.
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1 SEC. 444. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN

2 PAYMENTS FOR PHYSICIANS’ SERVICES.

3 (a) STUDY.—The Comptroller General of the United

4 States shall conduct a study of differences in payment

5 amounts under the physician fee schedule under section

6 1848 of the Social Security Act (42 U.S.C. 1395w–4) for

7 physicians’ services in different geographic areas. Such

8 study shall include—

9 (1) an assessment of the validity of the geo10 graphic adjustment factors used for each component of

11 the fee schedule;

12 (2) an evaluation of the measures used for such

13 adjustment, including the frequency of revisions;

14 (3) an evaluation of the methods used to deter15 mine professional liability insurance costs used in

16 computing the malpractice component, including a

17 review of increases in professional liability insurance

18 premiums and variation in such increases by State

19 and physician specialty and methods used to update

20 the geographic cost of practice index and relative

21 weights for the malpractice component;

22 (4) an evaluation of whether there is a sound

23 economic basis for the implementation of the adjust24 ment under subparagraphs (E) and (F) of section

25 1848(e)(1) of the Social Security Act (42 U.S.C.
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1 1395w–4(e)(1)), as added by section 421, in those

2 areas in which the adjustment applies;

3 (5) an evaluation of the effect of such adjustment

4 on physician location and retention in areas affected

5 by such adjustment, taking into account—

6 (A) differences in recruitment costs and re7 tention rates for physicians, including special8 ists, between large urban areas and other areas;

9 and

10 (B) the mobility of physicians, including

11 specialists, over the last decade;

12 (6) an evaluation of the appropriateness of ex13 tending such adjustment or making such adjustment

14 permanent;

15 (7) an evaluation of the adjustment of the work

16 geographic practice cost index required under section

17 1848(e)(1)(A)(iii) of the Social Security Act (42

U.S.C. 1395w–4(e)(1)(A)(iii)) to reflect 1 18 ⁄4 of the area

19 cost difference in physician work;

20 (8) an evaluation of the effect of the adjustment

21 described in paragraph (7) on physician location and

22 retention in higher than average cost-of-living areas,

23 taking into account difference in recruitment costs

24 and retention rates for physicians, including special25 ists; and
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1 (9) an evaluation of the appropriateness of the

1 2 ⁄4 adjustment for the work geographic practice cost

3 index.’’.

4 (b) REPORT.—Not later than 1 year after the date of

5 enactment of this Act, the Comptroller General of the United

6 States shall submit to Congress a report on the study con7 ducted under subsection (a). The report shall include rec8 ommendations regarding the use of more current data in

9 computing geographic cost of practice indices as well as the

10 use of data directly representative of physicians’ costs (rath11 er than proxy measures of such costs).

12 SEC. 445. IMPROVED PAYMENT FOR CERTAIN MAMMOG13 RAPHY SERVICES.

14 (a) EXCLUSION FROM OPD FEE SCHEDULE.—Section

15 1833(t)(1)(B)(iv) (42 U.S.C. 13951(t)(1)(B)(iv)) is amend16 ed by inserting before the period at the end the following:

17 ‘‘and does not include screening mammography (as defined

18 in section 1861(jj)) and unilateral and bilateral diagnostic

19 mammography’’.

20 (b) EFFECTIVE DATE.—The amendment made by sub21 section (a) shall apply to mammography performed on or

22 after January 1, 2005.
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1 SEC. 446. IMPROVEMENT OF OUTPATIENT VISION SERVICES

2 UNDER PART B.

3 (a) COVERAGE UNDER PART B.—Section 1861(s)(2)

4 (42 U.S.C. 1395x(s)(2)) is amended—

5 (1) in subparagraph (U), by striking ‘‘and’’ after

6 the semicolon at the end;

7 (2) in subparagraph (V)(iii), by adding ‘‘and’’

8 after the semicolon at the end; and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(W) vision rehabilitation services (as defined in

12 subsection (ww)(1));’’.

13 (b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C.

14 1395x) is amended by adding at the end the following new

15 subsection:

16 ‘‘Vision Rehabilitation Services; Vision Rehabilitation

17 Professional

18 ‘‘(ww)(1)(A) The term ‘vision rehabilitation services’

19 means rehabilitative services (as determined by the Sec20 retary in regulations) furnished—

21 ‘‘(i) to an individual diagnosed with a vision

22 impairment (as defined in paragraph (6));

23 ‘‘(ii) pursuant to a plan of care established by

24 a qualified physician (as defined in subparagraph

25 (C)) or by a qualified occupational therapist that is

26 periodically reviewed by a qualified physician;
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1 ‘‘(iii) in an appropriate setting (including the

2 home of the individual receiving such services if speci3 fied in the plan of care); and

4 ‘‘(iv) by any of the following individuals:

5 ‘‘(I) A qualified physician.

6 ‘‘(II) A qualified occupational therapist.

7 ‘‘(III) A vision rehabilitation professional

8 (as defined in paragraph (2)) while under the

9 general supervision (as defined in subparagraph

10 (D)) of a qualified physician.

11 ‘‘(B) In the case of vision rehabilitation services fur12 nished by a vision rehabilitation professional, the plan of

13 care may only be established and reviewed by a qualified

14 physician.

15 ‘‘(C) The term ‘qualified physician’ means—

16 ‘‘(i) a physician (as defined in subsection (r)(1))

17 who is an ophthalmologist; or

18 ‘‘(ii) a physician (as defined in subsection (r)(4)

19 (relating to a doctor of optometry)).

20 ‘‘(D) The term ‘general supervision’ means, with re21 spect to a vision rehabilitation professional, overall direc22 tion and control of that professional by the qualified physi23 cian who established the plan of care for the individual,

24 but the presence of the qualified physician is not required
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1 during the furnishing of vision rehabilitation services by

2 that professional to the individual.

3 ‘‘(2) The term ‘vision rehabilitation professional’

4 means any of the following individuals:

5 ‘‘(A) An orientation and mobility specialist (as

6 defined in paragraph (3)).

7 ‘‘(B) A rehabilitation teacher (as defined in

8 paragraph (4)).

9 ‘‘(C) A low vision therapist (as defined in para10 graph (5)).

11 ‘‘(3) The term ‘orientation and mobility specialist’

12 means an individual who—

13 ‘‘(A) if a State requires licensure or certification

14 of orientation and mobility specialists, is licensed or

15 certified by that State as an orientation and mobility

16 specialist;

17 ‘‘(B)(i) holds a baccalaureate or higher degree

18 from an accredited college or university in the United

19 States (or an equivalent foreign degree) with a con20 centration in orientation and mobility; and

21 ‘‘(ii) has successfully completed 350 hours of

22 clinical practicum under the supervision of an ori23 entation and mobility specialist and has furnished

24 not less than 9 months of supervised full-time orienta25 tion and mobility services;
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1 ‘‘(C) has successfully completed the national ex2 amination in orientation and mobility administered

3 by the Academy for Certification of Vision Rehabilita4 tion and Education Professionals; and

5 ‘‘(D) meets such other criteria as the Secretary

6 establishes.

7 ‘‘(4) The term ‘rehabilitation teacher’ means an indi8 vidual who—

9 ‘‘(A) if a State requires licensure or certification

10 of rehabilitation teachers, is licensed or certified by

11 the State as a rehabilitation teacher;

12 ‘‘(B)(i) holds a baccalaureate or higher degree

13 from an accredited college or university in the United

14 States (or an equivalent foreign degree) with a con15 centration in rehabilitation teaching, or holds such a

16 degree in a health field; and

17 ‘‘(ii) has successfully completed 350 hours of

18 clinical practicum under the supervision of a reha19 bilitation teacher and has furnished not less than 9

20 months of supervised full-time rehabilitation teaching

21 services;

22 ‘‘(C) has successfully completed the national ex23 amination in rehabilitation teaching administered by

24 the Academy for Certification of Vision Rehabilita25 tion and Education Professionals; and
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1 ‘‘(D) meets such other criteria as the Secretary

2 establishes.

3 ‘‘(5) The term ‘low vision therapist’ means an indi4 vidual who—

5 ‘‘(A) if a State requires licensure or certification

6 of low vision therapists, is licensed or certified by the

7 State as a low vision therapist;

8 ‘‘(B)(i) holds a baccalaureate or higher degree

9 from an accredited college or university in the United

10 States (or an equivalent foreign degree) with a con11 centration in low vision therapy, or holds such a de12 gree in a health field; and

13 ‘‘(ii) has successfully completed 350 hours of

14 clinical practicum under the supervision of a physi15 cian, and has furnished not less than 9 months of su16 pervised full-time low vision therapy services;

17 ‘‘(C) has successfully completed the national ex18 amination in low vision therapy administered by the

19 Academy for Certification of Vision Rehabilitation

20 and Education Professionals; and

21 ‘‘(D) meets such other criteria as the Secretary

22 establishes.

23 ‘‘(6) The term ‘vision impairment’ means vision loss

24 that constitutes a significant limitation of visual capability

25 resulting from disease, trauma, or a congenital or degenera-
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1 tive condition that cannot be corrected by conventional

2 means, including refractive correction, medication, or sur3 gery, and that is manifested by 1 or more of the following:

4 ‘‘(A) Best corrected visual acuity of less than 20/

5 60, or significant central field defect.

6 ‘‘(B) Significant peripheral field defect including

7 homonymous or heteronymous bilateral visual field

8 defect or generalized contraction or constriction of

9 field.

10 ‘‘(C) Reduced peak contrast sensitivity in con11 junction with a condition described in subparagraph

12 (A) or (B).

13 ‘‘(D) Such other diagnoses, indications, or other

14 manifestations as the Secretary may determine to be

15 appropriate.’’.

16 (c) PAYMENT UNDER PART B.—

17 (1) PHYSICIAN FEE SCHEDULE.—Section

18 1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended by

19 inserting ‘‘(2)(W),’’ after ‘‘(2)(S),’’.

20 (2) CARVE OUT FROM HOSPITAL OUTPATIENT

21 DEPARTMENT PROSPECTIVE PAYMENT SYSTEM.—Sec22 tion 1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv))

23 is amended by inserting ‘‘vision rehabilitation serv24 ices (as defined in section 1861(ww)(1)) or’’ after

25 ‘‘does not include’’.
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1 (3) CLARIFICATION OF BILLING REQUIRE2 MENTS.—The first sentence of section 1842(b)(6) of

3 such Act (42 U.S.C. 1395u(b)(6)) is amended—

4 (A) by striking ‘‘and’’ before ‘‘(G)’’; and

5 (B) by inserting before the period the fol6 lowing: ‘‘, and (H) in the case of vision rehabili7 tation services (as defined in section

8 1861(ww)(1)) furnished by a vision rehabilita9 tion professional (as defined in section

10 1861(ww)(2)) while under the general super11 vision (as defined in section 1861(ww)(1)(D)) of

12 a qualified physician (as defined in section

13 1861(ww)(1)(C)), payment shall be made to (i)

14 the qualified physician or (ii) the facility (such

15 as a rehabilitation agency, a clinic, or other fa16 cility) through which such services are furnished

17 under the plan of care if there is a contractual

18 arrangement between the vision rehabilitation

19 professional and the facility under which the fa20 cility submits the bill for such services’’.

21 (d) PLAN OF CARE.—Section 1835(a)(2) (42 U.S.C.

22 1395n(a)(2)) is amended—

23 (1) in subparagraph (E), by striking ‘‘and’’ after

24 the semicolon at the end;
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1 (2) in subparagraph (F), by striking the period

2 at the end and inserting ‘‘; and’’; and

3 (3) by inserting after subparagraph (F) the fol4 lowing new subparagraph:

5 ‘‘(G) in the case of vision rehabilitation

6 services, (i) such services are or were required be7 cause the individual needed vision rehabilitation

8 services, (ii) an individualized, written plan for

9 furnishing such services has been established (I)

10 by a qualified physician (as defined in section

11 1861(ww)(1)(C)), (II) by a qualified occupa12 tional therapist, or (III) in the case of such serv13 ices furnished by a vision rehabilitation profes14 sional, by a qualified physician, (iii) the plan is

15 periodically reviewed by the qualified physician,

16 and (iv) such services are or were furnished

17 while the individual is or was under the care of

18 the qualified physician.’’.

19 (e) RELATIONSHIP TO REHABILITATION ACT OF

20 1973.—The provision of vision rehabilitation services under

21 the medicare program under title XVIII (42 U.S.C. 1395

22 et seq.) shall not be taken into account for any purpose

23 under the Rehabilitation Act of 1973 (29 U.S.C. 701 et

24 seq.).

25 (f) EFFECTIVE DATE.—
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1 (1) INTERIM, FINAL REGULATIONS.—The Sec2 retary shall publish a rule under this section in the

3 Federal Register by not later than 180 days after the

4 date of enactment of this Act to carry out the provi5 sions of this section. Such rule shall be effective and

6 final immediately on an interim basis, but is subject

7 to change and revision after public notice and oppor8 tunity for a period for public comment of not less

9 than 60 days.

10 (2) CONSULTATION.—The Secretary shall consult

11 with the National Vision Rehabilitation Cooperative,

12 the Association for Education and Rehabilitation of

13 the Blind and Visually Impaired, the Academy for

14 Certification of Vision Rehabilitation and Education

15 Professionals, the American Academy of Ophthal16 mology, the American Occupational Therapy Associa17 tion, the American Optometric Association, and such

18 other qualified professional and consumer organiza19 tions as the Secretary determines appropriate in pro20 mulgating regulations to carry out this section.

21 SEC. 447. GAO STUDY AND REPORT ON THE PROPAGATION

22 OF CONCIERGE CARE.

23 (a) STUDY.—

24 (1) IN GENERAL.—The Comptroller General of

25 the United States shall conduct a study on concierge
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1 care (as defined in paragraph (2)) to determine the

2 extent to which such care—

3 (A) is used by medicare beneficiaries (as de4 fined in section 1802(b)(5)(A) of the Social Secu5 rity Act (42 U.S.C. 1395a(b)(5)(A))); and

6 (B) has impacted upon the access of medi7 care beneficiaries (as so defined) to items and

8 services for which reimbursement is provided

9 under the medicare program under title XVIII of

10 the Social Security Act (42 U.S.C. 1395 et seq.).

11 (2) CONCIERGE CARE.—In this section, the term

12 ‘‘concierge care’’ means an arrangement under which,

13 as a prerequisite for the provision of a health care

14 item or service to an individual, a physician, practi15 tioner (as described in section 1842(b)(18)(C) of the

16 Social Security Act (42 U.S.C. 1395u(b)(18)(C))), or

17 other individual—

18 (A) charges a membership fee or another in19 cidental fee to an individual desiring to receive

20 the health care item or service from such physi21 cian, practitioner, or other individual; or

22 (B) requires the individual desiring to re23 ceive the health care item or service from such

24 physician, practitioner, or other individual to

25 purchase an item or service.
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1 (b) REPORT.—Not later than the date that is 12

2 months after the date of enactment of this Act, the Comp3 troller General of the United States shall submit to Congress

4 a report on the study conducted under subsection (a)(1) to5 gether with such recommendations for legislative or admin6 istrative action as the Comptroller General determines to

7 be appropriate.

8 SEC. 448. COVERAGE OF MARRIAGE AND FAMILY THERA9 PIST SERVICES AND MENTAL HEALTH COUN10 SELOR SERVICES UNDER PART B OF THE

11 MEDICARE PROGRAM.

12 (a) COVERAGE OF SERVICES.—

13 (1) IN GENERAL.—Section 1861(s)(2) (42 U.S.C.

14 1395x(s)(2)) is amended—

15 (A) in subparagraph (U), by striking ‘‘and’’

16 after the semicolon at the end;

17 (B) in subparagraph (V)(iii), by inserting

18 ‘‘and’’ after the semicolon at the end; and

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

20 subparagraph:

21 ‘‘(W) marriage and family therapist services (as

22 defined in subsection (ww)(1)) and mental health

23 counselor services (as defined in subsection

24 (ww)(3));’’.
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1 (2) DEFINITIONS.—Section 1861 (42 U.S.C.

2 1395x) is amended by adding at the end the following

3 new subsection:

4 ‘‘Marriage and Family Therapist Services; Marriage and

5 Family Therapist; Mental Health Counselor Services;

6 Mental Health Counselor

7 ‘‘(ww)(1) The term ‘marriage and family therapist

8 services’ means services performed by a marriage and fam9 ily therapist (as defined in paragraph (2)) for the diagnosis

10 and treatment of mental illnesses, which the marriage and

11 family therapist is legally authorized to perform under

12 State law (or the State regulatory mechanism provided by

13 State law) of the State in which such services are performed,

14 as would otherwise be covered if furnished by a physician

15 or as an incident to a physician’s professional service, but

16 only if no facility or other provider charges or is paid any

17 amounts with respect to the furnishing of such services.

18 ‘‘(2) The term ‘marriage and family therapist’ means

19 an individual who—

20 ‘‘(A) possesses a master’s or doctoral degree

21 which qualifies for licensure or certification as a mar22 riage and family therapist pursuant to State law;

23 ‘‘(B) after obtaining such degree has performed

24 at least 2 years of clinical supervised experience in

25 marriage and family therapy; and
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1 ‘‘(C) in the case of an individual performing

2 services in a State that provides for licensure or cer3 tification of marriage and family therapists, is li4 censed or certified as a marriage and family therapist

5 in such State.

6 ‘‘(3) The term ‘mental health counselor services’ means

7 services performed by a mental health counselor (as defined

8 in paragraph (4)) for the diagnosis and treatment of mental

9 illnesses which the mental health counselor is legally author10 ized to perform under State law (or the State regulatory

11 mechanism provided by the State law) of the State in which

12 such services are performed, as would otherwise be covered

13 if furnished by a physician or as incident to a physician’s

14 professional service, but only if no facility or other provider

15 charges or is paid any amounts with respect to the fur16 nishing of such services.

17 ‘‘(4) The term ‘mental health counselor’ means an in18 dividual who—

19 ‘‘(A) possesses a master’s or doctor’s degree in

20 mental health counseling or a related field;

21 ‘‘(B) after obtaining such a degree has performed

22 at least 2 years of supervised mental health counselor

23 practice; and

24 ‘‘(C) in the case of an individual performing

25 services in a State that provides for licensure or cer-
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1 tification of mental health counselors or professional

2 counselors, is licensed or certified as a mental health

3 counselor or professional counselor in such State.’’.

4 (3) PROVISION FOR PAYMENT UNDER PART B.—

5 Section 1832(a)(2)(B) (42 U.S.C. 1395k(a)(2)(B)) is

6 amended by adding at the end the following new

7 clause:

8 ‘‘(v) marriage and family therapist

9 services and mental health counselor serv10 ices;’’.

11 (4) AMOUNT OF PAYMENT.—Section 1833(a)(1)

12 (42 U.S.C. 1395l(a)(1)) is amended—

13 (A) by striking ‘‘and (U)’’ and inserting

14 ‘‘(U)’’; and

15 (B) by inserting before the semicolon at the

16 end the following: ‘‘, and (V) with respect to

17 marriage and family therapist services and men18 tal health counselor services under section

19 1861(s)(2)(W), the amounts paid shall be 80 per20 cent of the lesser of the actual charge for the serv21 ices or 75 percent of the amount determined for

22 payment of a psychologist under subparagraph

23 (L)’’.

24 (5) EXCLUSION OF MARRIAGE AND FAMILY THER25 APIST SERVICES AND MENTAL HEALTH COUNSELOR
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1 SERVICES FROM SKILLED NURSING FACILITY PRO2 SPECTIVE PAYMENT SYSTEM.—Section

3 1888(e)(2)(A)(ii) (42 U.S.C. 1395yy(e)(2)(A)(ii)), as

4 amended in section 301(a), is amended by inserting

5 ‘‘marriage and family therapist services (as defined

6 in subsection (ww)(1)), mental health counselor serv7 ices (as defined in section 1861(ww)(3)),’’ after

8 ‘‘qualified psychologist services,’’.

9 (6) INCLUSION OF MARRIAGE AND FAMILY

10 THERAPISTS AND MENTAL HEALTH COUNSELORS AS

11 PRACTITIONERS FOR ASSIGNMENT OF CLAIMS.—Sec12 tion 1842(b)(18)(C) (42 U.S.C. 1395u(b)(18)(C)) is

13 amended by adding at the end the following new

14 clauses:

15 ‘‘(vii) A marriage and family therapist (as de16 fined in section 1861(ww)(2)).

17 ‘‘(viii) A mental health counselor (as defined in

18 section 1861(ww)(4)).’’.

19 (b) COVERAGE OF CERTAIN MENTAL HEALTH SERV20 ICES PROVIDED IN CERTAIN SETTINGS.—

21 (1) RURAL HEALTH CLINICS AND FEDERALLY

22 QUALIFIED HEALTH CENTERS.—Section

23 1861(aa)(1)(B) (42 U.S.C. 1395x(aa)(1)(B)) is

24 amended by striking ‘‘or by a clinical social worker

25 (as defined in subsection (hh)(1)),’’ and inserting ‘‘,
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1 by a clinical social worker (as defined in subsection

2 (hh)(1)), by a marriage and family therapist (as de3 fined in subsection (ww)(2)), or by a mental health

4 counselor (as defined in subsection (ww)(4)),’’.

5 (2) HOSPICE PROGRAMS.—Section

6 1861(dd)(2)(B)(i)(III) (42 U.S.C.

7 1395x(dd)(2)(B)(i)(III)) is amended by inserting ‘‘or

8 a marriage and family therapist (as defined in sub9 section (ww)(2))’’ after ‘‘social worker’’.

10 (c) AUTHORIZATION OF MARRIAGE AND FAMILY

11 THERAPISTS TO DEVELOP DISCHARGE PLANS FOR POST12 HOSPITAL SERVICES.—Section 1861(ee)(2)(G) (42 U.S.C.

13 1395x(ee)(2)(G)) is amended by inserting ‘‘marriage and

14 family therapist (as defined in subsection (ww)(2)),’’ after

15 ‘‘social worker,’’.

16 (d) EFFECTIVE DATE.—The amendments made by this

17 section shall apply with respect to services furnished on or

18 after January 1, 2004.

19 SEC. 449. MEDICARE DEMONSTRATION PROJECT FOR DI20 RECT ACCESS TO PHYSICAL THERAPY SERV21 ICES.

22 (a) IN GENERAL.—The Secretary shall conduct a dem23 onstration project under this section (in this section referred

24 to as the ‘‘project’’) to demonstrate the impact of allowing

25 medicare fee-for-service beneficiaries direct access to out-
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1 patient physical therapy services and physical therapy

2 services furnished as comprehensive rehabilitation facility

3 services on—

4 (1) costs under the medicare program under title

5 XVIII of the Social Security Act; and

6 (2) the satisfaction of beneficiaries receiving such

7 services.

8 (b) DEADLINE FOR ESTABLISHMENT; DURATION;

9 SITES.—

10 (1) DEADLINE.—The Secretary shall establish the

11 project not later than 1 year after the date of enact12 ment of this Act.

13 (2) DURATION; SITES.—The project shall—

14 (A) be conducted for a period of 3 years;

15 (B) include sites in at least 5 States; and

16 (C) to the extent feasible, be conducted on a

17 statewide basis in each State included under sub18 paragraph (B).

19 (3) EARLY TERMINATION.—Notwithstanding

20 paragraph (2)(A), the Secretary may terminate the

21 operation of the project at a site before the end of the

22 3-year period specified in such paragraph if the Sec23 retary determines, based on actual data, that the total

24 amount expended for all services under this title for

25 individuals at such site for a 12-month period are
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1 greater than the total amount that would have been

2 expended for such services for such individuals for

3 such period but for the operation of the project at

4 such site.

5 (c) WAIVER OF MEDICARE REQUIREMENTS.—The Sec6 retary shall waive compliance with such requirements of the

7 medicare program under title XVIII of the Social Security

8 Act to the extent and for the period the Secretary finds nec9 essary to conduct the demonstration project.

10 (d) EVALUATIONS AND REPORTS.—

11 (1) EVALUATIONS.—

12 (A) IN GENERAL.—The Secretary shall con13 duct interim and final evaluations of the project.

14 (B) FOCUS.—The evaluations conducted

15 under paragraph (1) shall—

16 (i) focus on the impact of the project

17 on program costs under title XVIII of the

18 Social Security Act and patient satisfaction

19 with health care items and services for

20 which payment is made under such title;

21 and

22 (ii) include comparisons, with respect

23 to episodes of care involving direct access to

24 physical therapy services and episodes of
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1 care involving a physician referral for such

2 services, of—

3 (I) the average number of claims

4 paid per episode for outpatient phys5 ical therapy services and physical ther6 apy services furnished as comprehen7 sive outpatient rehabilitation facility

8 services;

9 (II) the average number of physi10 cian office visits per episode; and

11 (III) the average expenditures

12 under such title per episode.

13 (2) INTERIM AND FINAL REPORTS.—The Sec14 retary shall submit to the Committee on Finance of

15 the Senate and the Committees on Ways and Means

16 and Energy and Commerce of the House of Represent17 atives reports on the evaluations conducted under

18 paragraph (1) by—

19 (A) in the case of the report on the interim

20 evaluation, not later than the end of the second

21 year the project has been in operation; and

22 (B) in the case of the report on the final

23 evaluation, not later than 180 days after the

24 closing date of the project.
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1 (3) FUNDING FOR EVALUATION.—There are au2 thorized to be appropriated such sums as may be nec3 essary to provide for the evaluations and reports re4 quired by this subsection.

5 (e) DEFINITIONS.—In this section:

6 (1) COMPREHENSIVE OUTPATIENT REHABILITA7 TION SERVICES.—Subject to paragraph (2), the term

8 ‘‘comprehensive outpatient rehabilitation services’’ has

9 the meaning given to such term in section 1861(cc) of

10 the Social Security Act (42 U.S.C. 1395x(cc)).

11 (2) DIRECT ACCESS.—The term ‘‘direct access’’

12 means, with respect to outpatient physical therapy

13 services and physical therapy services furnished as

14 comprehensive outpatient rehabilitation facility serv15 ices, coverage of and payment for such services in ac16 cordance with the provisions of title XVIII of the So17 cial Security Act, except that sections 1835(a)(2),

18 1861(p), and 1861(cc) of such Act (42 U.S.C.

19 1395n(a)(2), 1395x(p), and 1395x(cc), respectively)

20 shall be applied—

21 (A) without regard to any requirement

22 that—

23 (i) an individual be under the care of

24 (or referred by) a physician; or
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1 (ii) services be provided under the su2 pervision of a physician; and

3 (B) by allowing a physician or a qualified

4 physical therapist to satisfy any requirement

5 for—

6 (i) certification and recertification;

7 and

8 (ii) establishment and periodic review

9 of a plan of care.

10 (3) FEE-FOR-SERVICE MEDICARE BENE11 FICIARY.—The term ‘‘fee-for-service medicare bene12 ficiary’’ means an individual who—

13 (A) is enrolled under part B of title XVIII

14 of the Social Security Act (42 U.S.C. 1395j et

15 seq.); and

16 (B) is not enrolled in—

17 (i) a Medicare+Choice plan under

18 part C of such title (42 U.S.C. 1395w–21 et

19 seq.);

20 (ii) a plan offered by an eligible orga21 nization under section 1876 of such Act (42

22 U.S.C. 1395mm);

23 (iii) a program of all-inclusive care for

24 the elderly (PACE) under section 1894 of

25 such Act (42 U.S.C. 1395eee); or
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1 (iv) a social health maintenance orga2 nization (SHMO) demonstration project es3 tablished under section 4018(b) of the Om4 nibus Budget Reconciliation Act of 1987

5 (Public Law 100–203).

6 (4) OUTPATIENT PHYSICAL THERAPY SERV7 ICES.—Subject to paragraph (2), the term ‘‘outpatient

8 physical therapy services’’ has the meaning given to

9 such term in section 1861(p) of the Social Security

10 Act (42 U.S.C. 1395x(p)), except that such term shall

11 not include the speech-language pathology services de12 scribed in the fourth sentence of such section.

13 (5) PHYSICIAN.—The term ‘‘physician’’ has the

14 meaning given to such term in section 1861(r)(1) of

15 such Act (42 U.S.C. 1395x(r)(1)).

16 (6) QUALIFIED PHYSICAL THERAPIST.—The term

17 ‘‘qualified physical therapist’’ has the meaning given

18 to such term for purposes of section 1861(p) of such

19 Act (42 U.S.C. 1395x(p)), as in effect on the date of

20 enactment of this Act.

21 SEC. 450. DEMONSTRATION PROJECT TO CLARIFY THE DEF22 INITION OF HOMEBOUND.

23 (a) DEMONSTRATION PROJECT.—Not later than 180

24 days after the date of enactment of this Act, the Secretary

25 shall conduct a two-year demonstration project under part
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1 B of title XVIII of the Social Security Act under which

2 medicare beneficiaries with chronic conditions described in

3 subsection (b) are deemed to be homebound for purposes of

4 receiving home health services under the medicare program.

5 (b) MEDICARE BENEFICIARY DESCRIBED.—For pur6 poses of subsection (a), a medicare beneficiary is eligible

7 to be deemed to be homebound, without regard to the pur8 pose, frequency, or duration of absences from the home, if

9 the beneficiary—

10 (1) has been certified by one physician as an in11 dividual who has a permanent and severe condition

12 that will not improve;

13 (2) requires the individual to receive assistance

14 from another individual with at least 3 out of the 5

15 activities of daily living for the rest of the individ16 ual’s life;

17 (3) requires 1 or more home health services to

18 achieve a functional condition that gives the indi19 vidual the ability to leave home; and

20 (4) requires technological assistance or the assist21 ance of another person to leave the home.

22 (c) DEMONSTRATION PROJECT SITES.—The dem23 onstration project established under this section shall be

24 conducted in 3 States selected by the Secretary to represent
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1 the Northeast, Midwest, and Western regions of the United

2 States.

3 (d) LIMITATION ON NUMBER OF PARTICIPANTS.—The

4 aggregate number of such beneficiaries that may participate

5 in the project may not exceed 15,000.

6 (e) DATA.—The Secretary shall collect such data on

7 the demonstration project with respect to the provision of

8 home health services to medicare beneficiaries that relates

9 to quality of care, patient outcomes, and additional costs,

10 if any, to the medicare program.

11 (f) REPORT TO CONGRESS.—Not later than 1 year

12 after the date of the completion of the demonstration project

13 under this section, the Secretary shall submit to Congress

14 a report on the project using the data collected under sub15 section (e) and shall include—

16 (1) an examination of whether the provision of

17 home health services to medicare beneficiaries under

18 the project—

19 (A) adversely effects the provision of home

20 health services under the medicare program; or

21 (B) directly causes an unreasonable increase

22 of expenditures under the medicare program for

23 the provision of such services that is directly at24 tributable to such clarification;
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1 (2) the specific data evidencing the amount of

2 any increase in expenditures that is a directly attrib3 utable to the demonstration project (expressed both in

4 absolute dollar terms and as a percentage) above ex5 penditures that would otherwise have been incurred

6 for home health services under the medicare program;

7 and

8 (3) specific recommendations to exempt perma9 nently and severely disabled homebound beneficiaries

10 from restrictions on the length, frequency and purpose

11 of their absences from the home to qualify for home

12 health services without incurring additional unrea13 sonable costs to the medicare program.

14 (g) WAIVER AUTHORITY.—The Secretary shall waive

15 compliance with the requirements of title XVIII of the So16 cial Security Act (42 U.S.C. 1395 et seq.) to such extent

17 and for such period as the Secretary determines is necessary

18 to conduct demonstration projects.

19 (h) CONSTRUCTION.—Nothing in this section shall be

20 construed as waiving any applicable civil monetary pen21 alty, criminal penalty, or other remedy available to the Sec22 retary under title XI or title XVIII of the Social Security

23 Act for acts prohibited under such titles, including penalties

24 for false certifications for purposes of receipt of items or

25 services under the medicare program.
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1 (i) AUTHORIZATION OF APPROPRIATIONS.—Payments

2 for the costs of carrying out the demonstration project under

3 this section shall be made from the Federal Supplementary

4 Insurance Trust Fund under section 1841 of such Act (42

5 U.S.C. 1395t).

6 (j) DEFINITIONS.—In this section:

7 (1) MEDICARE BENEFICIARY.—The term ‘‘medi8 care beneficiary’’ means an individual who is enrolled

9 under part B of title XVIII of the Social Security

10 Act.

11 (2) HOME HEALTH SERVICES.—The term ‘‘home

12 health services’’ has the meaning given such term in

13 section 1861(m) of the Social Security Act (42 U.S.C.

14 1395x(m)).

15 (3) ACTIVITIES OF DAILY LIVING DEFINED.—The

16 term ‘‘activities of daily living’’ means eating,

17 toileting, transferring, bathing, and dressing.

18 (4) SECRETARY.—The term ‘‘Secretary’’ means

19 the Secretary of Health and Human Services.

20 SEC. 450A. DEMONSTRATION PROJECT FOR EXCLUSION OF

21 BRACHYTHERAPY DEVICES FROM PROSPEC22 TIVE PAYMENT SYSTEM FOR OUTPATIENT

23 HOSPITAL SERVICES.

24 (a) DEMONSTRATION PROJECT.—The Secretary shall

25 conduct a demonstration project under part B of title XVIII
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1 of the Social Security Act under which brachytherapy de2 vices shall be excluded from the prospective payment system

3 for outpatient hospital services under the medicare program

4 and, notwithstanding section 1833(t) of the Social Security

5 Act (42 U.S.C. 1395l(t)), the amount of payment for a de6 vice of brachytherapy furnished under the demonstration

7 project shall be equal to the hospital’s charges for each de8 vice furnished, adjusted to cost.

9 (b) SPECIFICATION OF GROUPS FOR BRACHYTHERAPY

10 DEVICES.—The Secretary shall create additional groups of

11 covered OPD services that classify devices of brachytherapy

12 furnished under the demonstration project separately from

13 the other services (or group of services) paid for under sec14 tion 1833(t) of the Social Security Act (42 U.S.C. 1395l(t))

15 in a manner reflecting the number, isotope, and radioactive

16 intensity of such devices furnished, including separate

17 groups for palladium–103 and iodine–125 devices.

18 (c) DURATION.—The Secretary shall conduct the dem19 onstration project under this section for the 3-year period

20 beginning on the date that is 90 days after the date of enact21 ment of this Act.

22 (d) REPORT.—Not later than January 1, 2007, the

23 Secretary shall submit to Congress a report on the dem24 onstration project conducted under this section. The report

25 shall include an evaluation of patient outcomes under the
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1 demonstration project, as well as an analysis of the cost

2 effectiveness of the demonstration project.

3 (e) WAIVER AUTHORITY.—The Secretary shall waive

4 compliance with the requirements of title XVIII of the So5 cial Security Act to such extent and for such period as the

6 Secretary determines is necessary to conduct the demonstra7 tion project under this section.

8 (f) FUNDING.—

9 (1) IN GENERAL.—The Secretary shall provide

10 for the transfer from the Federal Supplementary In11 surance Trust Fund established under section 1841 of

12 the Social Security Act (42 U.S.C. 1395t) of such

13 funds as are necessary for the costs of carrying out

14 the demonstration project under this section.

15 (2) BUDGET NEUTRALITY.—In conducting the

16 demonstration project under this section, the Sec17 retary shall ensure that the aggregate payments made

18 by the Secretary do not exceed the amount which the

19 Secretary would have paid if the demonstration

20 project under this section was not implemented.

21 SEC. 450B. REIMBURSEMENT FOR TOTAL BODY ORTHOTIC

22 MANAGEMENT FOR CERTAIN NURSING HOME

23 PATIENTS.

24 (a) IN GENERAL.—Not later than 60 days after the

25 date of the enactment of this Act, the Secretary shall issue
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1 product codes that qualified practioners and suppliers may

2 use to receive reimbursement under section 1834(h) of the

3 Social Security Act (42 U.S.C. 1395m(h)) for qualified

4 total body orthotic management devices used for the treat5 ment of nonambulatory individuals with severe musculo6 skeletal conditions who are in the full-time care of skilled

7 nursing facilities (as defined in section 1861(j) of such Act

8 (42 U.S.C. 1395x(j))). In issuing such codes, the Secretary

9 shall take all steps necessary to prevent fraud and abuse.

10 (b) QUALIFIED TOTAL BODY ORTHOTIC MANAGEMENT

11 DEVICE.—For purposes of this section, the term ‘‘qualified

12 total body orthotic management device’’ means a medically13 prescribed device which—

14 (1) consists of custom fitted individual braces

15 with adjustable points at the hips, knee, ankle, elbow,

16 and wrist, but only if—

17 (A) the individually adjustable braces are

18 attached to a frame which is an integral compo19 nent of the device and cannot function or be used

20 apart from the frame; and

21 (B) the frame is designed such that it serves

22 no purpose without the braces; and

23 (2) is designed to—

24 (A) improve function;
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1 (B) retard progression of musculoskeletal

2 deformity; or

3 (C) restrict, eliminate, or assist in the func4 tioning of lower and upper extremities and pel5 vic, spinal, and cervical regions of the body af6 fected by injury, weakness, or deformity,

7 of an individual for whom stabilization of affected

8 areas of the body, or relief of pressure points, is re9 quired for medical reasons.

10 SEC. 450C. AUTHORIZATION OF REIMBURSEMENT FOR ALL

11 MEDICARE PART B SERVICES FURNISHED BY

12 CERTAIN INDIAN HOSPITALS AND CLINICS.

13 (a) IN GENERAL.—Section 1880(e) (42 U.S.C.

14 1395qq(e)) is amended—

15 (1) in paragraph (1)(A), by striking ‘‘for services

16 described in paragraph (2)’’ and inserting ‘‘for all

17 items and services for which payment may be made

18 under such part’’;

19 (2) by striking paragraph (2); and

20 (3) by redesignating paragraph (3) as para21 graph (2).

22 (b) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to items and services furnished on or

24 after October 1, 2004.
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1 SEC. 450D. COVERAGE OF CARDIOVASCULAR SCREENING

2 TESTS.

3 (a) COVERAGE.—Section 1861(s)(2) of the Social Secu4 rity Act (42 U.S.C. 1395x(s)(2)) is amended—

5 (1) in subparagraph (U), by striking ‘‘and’’ at

6 the end;

7 (2) in subparagraph (V)(iii), by inserting ‘‘and’’

8 at the end; and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(W) cardiovascular screening tests (as de12 fined in subsection (ww)(1));’’.

13 (b) SERVICES DESCRIBED.—Section 1861 of the Social

14 Security Act (42 U.S.C. 1395x) is amended by adding at

15 the end the following new subsection:

16 ‘‘Cardiovascular Screening Tests

17 ‘‘(ww)(1) The term ‘cardiovascular screening tests’

18 means the following diagnostic tests for the early detection

19 of cardiovascular disease:

20 ‘‘(A) Tests for the determination of cholesterol

21 levels.

22 ‘‘(B) Tests for the determination of lipid levels of

23 the blood.

24 ‘‘(C) Such other tests for cardiovascular disease

25 as the Secretary may approve.
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1 ‘‘(2)(A) Subject to subparagraph (B), the Secretary

2 shall establish standards, in consultation with appropriate

3 organizations, regarding the frequency and type of cardio4 vascular screening tests.

5 ‘‘(B) With respect to the frequency of cardiovascular

6 screening tests approved by the Secretary under subpara7 graph (A), in no case may the frequency of such tests be

8 more often than once every 2 years.’’.

9 (c) FREQUENCY.—Section 1862(a)(1) of the Social Se10 curity Act (42 U.S.C. 1395y(a)(1)) is amended—

11 (1) by striking ‘‘and’’ at the end of subpara12 graph (H);

13 (2) by striking the semicolon at the end of sub14 paragraph (I) and inserting ‘‘, and’’; and

15 (3) by adding at the end the following new sub16 paragraph:

17 ‘‘(J) in the case of a cardiovascular screening

18 test (as defined in section 1861(ww)(1)), which is per19 formed more frequently than is covered under section

20 1861(ww)(2).’’.

21 (d) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to tests furnished on or after January

23 1, 2005.
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1 SEC. 450E. MEDICARE COVERAGE OF SELF-INJECTED

2 BIOLOGICALS.

3 (a) COVERAGE.—

4 (1) IN GENERAL.—Section 1861(s)(2) (42 U.S.C.

5 1395x(s)(2)) is amended—

6 (A) in subparagraph (U), by striking ‘‘and’’

7 at the end;

8 (B) in subparagraph (V), by inserting

9 ‘‘and’’ at the end; and

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

11 subparagraph:

12 ‘‘(W)(i) a self-injected biological (which is ap13 proved by the Food and Drug Administration) that is

14 prescribed as a complete replacement for a drug or bi15 ological (including the same biological for which pay16 ment is made under this title when it is furnished in17 cident to a physicians’ service) that would otherwise

18 be described in subparagraph (A) or (B) and that is

19 furnished during 2004 or 2005; and

20 ‘‘(ii) a self-injected drug that is used to treat

21 multiple sclerosis;’’.

22 (2) CONFORMING AMENDMENT.—Subparagraphs

23 (A) and (B) of section 1861(s)(2) of the Social Secu24 rity Act (42 U.S.C. 1395x(s)(2)) are each amended by

25 inserting ‘‘, except for any drug or biological de26 scribed in subparagraph (W),’’ after ‘‘which’’.
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 section (a) shall apply to drugs and biologicals furnished

3 on or after January 1, 2004 and before January 1, 2006.

4 SEC. 450F. EXTENSION OF MEDICARE SECONDARY PAYER

5 RULES FOR INDIVIDUALS WITH END-STAGE

6 RENAL DISEASE.

7 Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is

8 amended—

9 (1) in the last sentence, by inserting ‘‘, and be10 fore January 1, 2004’’ after ‘‘prior to such date)’’;

11 and

12 (2) by adding at the end the following new sen13 tence: ‘‘Effective for items and services furnished on

14 or after January 1, 2004 (with respect to periods be15 ginning on or after June 1, 2002), clauses (i) and (ii)

16 shall be applied by substituting ‘36-month’ for ‘12-

17 month’ each place it appears in the first sentence.

18 SEC. 450G. REQUIRING THE INTERNAL REVENUE SERVICE

19 TO DEPOSIT INSTALLMENT AGREEMENT AND

20 OTHER FEES IN THE TREASURY AS MISCELLA21 NEOUS RECEIPTS.

22 Notwithstanding any other provision of law, the Sec23 retary of the Treasury is required to deposit in the Treasury

24 as miscellaneous receipts any fee receipts, including fees

25 from installment agreements and restructured installment
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1 agreements, collected under the authority provided by Sec2 tion 3 of the Administrative Provisions of the Internal Rev3 enue Service of Public Law 103–329, the Treasury, Postal

4 Service and General Government Appropriations Act, 1995.

5 Fees collected under this section shall be available for use

6 by the Internal Revenue Service only to the extent that such

7 authority is provided in advance in an appropriations Act.

8 SEC. 450H INCREASING TYPES OF ORIGINATING TELE9 HEALTH SITES AND FACILITATING THE PRO10 VISION OF TELEHEALTH SERVICES ACROSS

11 STATE LINES.

12 (a) INCREASING TYPES OF ORIGINATING SITES.—Sec13 tion 1834(m)(4)(C)(ii) (42 U.S.C. 1395m(m)(4)(C)(ii)) is

14 amended by adding at the end the following new subclauses:

15 ‘‘(VI) A skilled nursing facility

16 (as defined in section 1819(a)).

17 ‘‘(VII) An assisted-living facility

18 (as defined by the Secretary).

19 ‘‘(VIII) A board-and-care home

20 (as defined by the Secretary).

21 ‘‘(IX) A county of community

22 health clinic (as defined by the Sec23 retary).
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1 ‘‘(X) A community mental health

2 center (as described in section

3 1861(ff)(2)(B)).

4 ‘‘(XI) A long-term care facility

5 (as defined by the Secretary).

6 ‘‘(XII) A facility operated by the

7 Indian Health Service or by an Indian

8 tribe, tribal organization, or an urban

9 Indian organization (as such terms are

10 defined in section 4 of the Indian

11 Health Care Improvement Act (25

12 U.S.C. 1603)) directly, or under con13 tract or other arrangement.’’.

14 (b) FACILITATING THE PROVISION OF TELEHEALTH

15 SERVICES ACROSS STATE LINES.—

16 (1) IN GENERAL.—For purposes of expediting the

17 provision of telehealth services for which payment is

18 made under the medicare program under section

19 1834(m) of the Social Security Act (42 U.S.C.

20 1395m(m)), across State lines, the Secretary shall, in

21 consultation with representatives of States, physi22 cians, health care practitioners, and patient advo23 cates, encourage and facilitate the adoption of State

24 provisions allowing for multistate practitioner licen25 sure across State lines.
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1 (2) DEFINITIONS.—In this subsection:

2 (A) TELEHEALTH SERVICE.—The term

3 ‘‘telehealth service’’ has the meaning given that

4 term in subparagraph (F)(i) of section

5 1834(m)(4) of the Social Security Act (42 U.S.C.

6 1395m(m)(4)).

7 (B) PHYSICIAN, PRACTITIONER.—The terms

8 ‘‘physician’’ and ‘‘practitioner’’ have the mean9 ing given those terms in subparagraphs (D) and

10 (E), respectively, of such section.

11 (C) MEDICARE PROGRAM.—The term

12 ‘‘medicare program’’ means the program of

13 health insurance administered by the Secretary

14 under title XVIII of the Social Security Act (42

15 U.S.C. 1395 et seq.).

16 SEC. 450I. DEMONSTRATION PROJECT FOR COVERAGE OF

17 SURGICAL FIRST ASSISTING SERVICES OF

18 CERTIFIED REGISTERED NURSE FIRST AS19 SISTANTS.

20 (a) DEMONSTRATION PROJECT.—The Secretary shall

21 conduct a demonstration project under part B of title XVIII

22 of the Social Security Act under which payment is made

23 for surgical first assisting services furnished by a certified

24 registered nurse first assistant to medicare beneficiaries.

25 (b) DEFINITIONS.—In this section:
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1 (1) SURGICAL FIRST ASSISTING SERVICES.—The

2 term ‘‘surgical first assisting services’’ means services

3 consisting of first assisting a physician with surgery

4 and related preoperative, intraoperative, and post5 operative care (as determined by the Secretary) fur6 nished by a certified registered nurse first assistant

7 (as defined in paragraph (2)) which the certified reg8 istered nurse first assistant is legally authorized to

9 perform by the State in which the services are per10 formed.

11 (2) CERTIFIED REGISTERED NURSE FIRST AS12 SISTANT.—The term ‘‘certified registered nurse first

13 assistant’’ means an individual who—

14 (A) is a registered nurse and is licensed to prac15 tice nursing in the State in which the surgical first

16 assisting services are performed;

17 (B) has completed a minimum of 2,000 hours of

18 first assisting a physician with surgery and related

19 preoperative, intraoperative, and postoperative care;

20 and

21 (C) is certified as a registered nurse first assist22 ant by an organization recognized by the Secretary.

23 (c) PAYMENT RATES.—Payment under the demonstra24 tion project for surgical first assisting services furnished by

25 a certified registered nurse first assistant shall be made at
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1 the rate of 80 percent of the lesser of the actual charge for

2 the services or 85 percent of the amount determined under

3 the fee schedule established under section 1848(b) of the So4 cial Security Act (42 U.S.C. 1395w–4(b)) for the same serv5 ices if furnished by a physician.

6 (d) DEMONSTRATION PROJECT SITES.—The project es7 tablished under this section shall be conducted in 5 States

8 selected by the Secretary.

9 (e) DURATION.—The Secretary shall conduct the dem10 onstration project for the 3-year period beginning on the

11 date that is 90 days after the date of the enactment of this

12 Act.

13 (f) REPORT.—Not later than January 1, 2007, the Sec14 retary shall submit to Congress a report on the project. The

15 report shall include an evaluation of patient outcomes

16 under the project, as well as an analysis of the cost effective17 ness of the project.

18 (g) FUNDING.—

19 (1) IN GENERAL.—The Secretary shall provide

20 for the transfer from the Federal Supplementary In21 surance Trust Fund established under section 1841 of

22 the Social Security Act (42 U.S.C. 1395t) of such

23 funds as are necessary for the costs of carrying out

24 the project under this section.
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1 (2) BUDGET NEUTRALITY.—In conducting the

2 project under this section, the Secretary shall ensure

3 that the aggregate payments made by the Secretary

4 do not exceed the amount which the Secretary would

5 have paid if the project under this section was not

6 implemented.

7 (i) WAIVER AUTHORITY.—The Secretary shall waive

8 compliance with the requirements of title XVIII of the So9 cial Security Act to such extent and for such period as the

10 Secretary determines is necessary to conduct demonstration

11 projects.

12 SEC. 450J. EQUITABLE TREATMENT FOR CHILDREN’S HOS13 PITALS.

14 (a) IN GENERAL.—Section 1833(t)(7)(D)(ii) (42

15 U.S.C. 1395l(t)(7)(D)(ii)) is amended to read as follows:

16 ‘‘(ii) PERMANENT TREATMENT FOR

17 CANCER HOSPITALS AND CHILDREN’S HOS18 PITALS.—

19 ‘‘(I) IN GENERAL.—Subject to

20 subclause (II), in the case of a hospital

21 described in clause (iii) or (v) of sec22 tion 1886(d)(1)(B), for covered OPD

23 services for which the PPS amount is

24 less than the pre-BBA amount, the

25 amount of payment under this sub-
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1 section shall be increased by the

2 amount of such difference.

3 ‘‘(II) SPECIAL RULE FOR CERTAIN

4 CHILDREN’S HOSPITALS.—In the case

5 of a hospital described in section

6 1886(d)(1)(B)(iii) that is located in a

7 State with a reimbursement system

8 under section 1814(b)(3), but that is

9 not reimbursed under such system, for

10 covered OPD services furnished on or

11 after October 1, 2003, and for which

12 the PPS amount is less than the great13 er of the pre-BBA amount or the rea14 sonable operating and capital costs

15 without reductions of the hospital in

16 providing such services, the amount of

17 payment under this subsection shall be

18 increased by the amount of such dif19 ference.’’.

20 SEC. 450K. TREATMENT OF PHYSICIANS’ SERVICES FUR21 NISHED IN ALASKA.

22 Section 1848(b) (42 U.S.C. 1395w–4(b)) is amended—

23 (1) in paragraph (1), in the matter preceding

24 subparagraph (A), by striking ‘‘paragraph (2)’’ and

25 inserting ‘‘paragraphs (2) and (4)’’; and
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1 (2) by adding at the end the following new para2 graph:

3 ‘‘(4) TREATMENT OF PHYSICIANS’ SERVICES FUR4 NISHED IN ALASKA.—

5 ‘‘(A) IN GENERAL.—With respect to physi6 cians’ services furnished in Alaska on or after

7 January 1, 2004, and before January 1, 2006,

8 the fee schedule for such services shall be deter9 mined as follows:

10 ‘‘(i) Subject to clause (ii), the payment

11 amount for a service furnished in a year

12 shall be an amount equal to—

13 ‘‘(I) in the case of services fur14 nished in calendar year 2004, 90 per15 cent of the VA Alaska fee schedule

16 amount for the service for fiscal year

17 2001; and

18 ‘‘(II) in the case of services fur19 nished in calendar year 2005, the

20 amount determined under subclause (I)

21 for 2004, increased by the annual up22 date determined under subsection (d)

23 for the year involved.

24 ‘‘(ii) In the case of a service for which

25 there was no VA Alaska fee schedule amount
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1 for fiscal year 2001, the payment amount

2 shall be an amount equal to the sum of—

3 ‘‘(I) the amount of payment for

4 the service that would otherwise apply

5 under this section; plus

6 ‘‘(II) an amount equal to the ap7 plicable percent (as described in sub8 paragraph (C)) of the amount de9 scribed in subclause (I).

10 ‘‘(B) VA ALASKA FEE SCHEDULE

11 AMOUNT.—For purposes of this paragraph, the

12 term ‘VA Alaska fee schedule amount’ means the

13 amount that was paid by the Department of Vet14 erans Affairs in Alaska in fiscal year 2001 for

15 non-Department of Veterans Affairs physicians’

16 services associated with either outpatient or in17 patient care provided to individuals eligible for

18 hospital care or medical services under chapter

19 17 of title 38, United States Code, at a non-De20 partment facility (as that term is defined in sec21 tion 1701(4) of such title 38.

22 ‘‘(C) APPLICABLE PERCENT.—For purposes

23 of this paragraph, the term ‘applicable percent’

24 means the weighted average percentage (based on

25 claims under this section) by which the fiscal
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1 year 2001 VA Alaska fee schedule amount for

2 physicians’ services exceeded the amount of pay3 ment for such services under this section that ap4 plied in Alaska in 2001.’’.

5 SEC. 450L. DEMONSTRATION PROJECT TO EXAMINE WHAT

6 WEIGHT LOSS WEIGHT MANAGEMENT SERV7 ICES CAN COST EFFECTIVELY REACH THE

8 SAME RESULT AS THE NIH DIABETES PRI9 MARY PREVENTION TRIAL STUDY: A 50 PER10 CENT REDUCTION IN THE RISK FOR TYPE 2

11 DIABETES FOR INDIVIDUALS WHO HAVE IM12 PAIRED GLUCOSE TOLERANCE AND ARE

13 OBESE.

14 (a) IN GENERAL.—Inasmuch as the NIH Diabetes Pri15 mary Prevention Trial study proved that the risk of type

16 2 diabetes could be cut in half when the Institute of Medi17 cine definition of successful weight loss (5 percent weight

18 loss maintained for a year) is achieved by individuals at

19 risk for type 2 diabetes due to obesity and impaired glucose

20 tolerance, the Secretary shall conduct a demonstration

21 project to examine the cost effectiveness and health benefits

22 of providing group weight loss management services to

23 achieve the same result for beneficiaries under the medicare

24 program under title XVIII of the Social Security Act who

25 are obese and have impaired glucose tolerance.
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1 (b) LIMITATION.—The cost of the group weight loss

2 management services provided under subsection (a) shall

3 not exceed the cost per recipient per year of the medical

4 nutritional therapy benefit currently available to medicare

5 beneficiaries.

6 (c) SCOPE OF SERVICES.—

7 (1) DURATION.—The project shall be conducted

8 for a period of 2 fiscal years.

9 (2) SITES.—The Secretary shall designate the

10 sites at which to conduct the demonstration program

11 under this section. In selecting sites under this para12 graph, the Secretary shall give preference to sites lo13 cated in—

14 (A) rural areas; or

15 (B) areas that have a high concentration of

16 Native Americans with type 2 diabetes.

17 (3) FUNDING.—

18 (A) IN GENERAL.—Subject to subparagraph

19 (B), the Secretary shall provide for the transfer

20 from the Federal Supplementary Insurance

21 Trust Fund established under section 1841 of

22 such Act (42 U.S.C. 1395t) of such funds as are

23 necessary for the costs of carrying out the dem24 onstration program under this section.
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1 (B) LIMITATION.—The total amount of the

2 payments that may be made under this section

3 shall not exceed $2,500,000 for each fiscal year

4 in which the project is conducted under para5 graph (1).

6 (d) COVERAGE AS MEDICARE PART B SERVICES.—

7 (1) IN GENERAL.—Subject to the succeeding pro8 visions of this subsection, medical nutrition therapy

9 services furnished under the project shall be consid10 ered to be services covered under part B of title XVIII

11 of the Social Security Act (42 U.S.C. 1395j et seq.).

12 (2) PAYMENT.—Payment for such services shall

13 be made at a rate of 80 percent of the lesser of the

14 actual charge for the services or 85 percent of the fee

15 schedule amount provided under section 1848 of the

16 Social Security Act (42 U.S.C. 139w–4) for the same

17 services if such services were furnished by a physi18 cian.

19 (3) APPLICATION OF LIMITS OF BILLING.—The

20 provisions of section 1842(b)(18) of the Social Secu21 rity Act (42 U.S.C. 1395u(b)(18)) shall apply to a

22 group weight loss management professional furnishing

23 services under the project in the same manner as they

24 to a practitioner described in subparagraph (C) of
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1 such section furnishing services under title XVIII of

2 such Act.

3 (e) REPORTS.—The Secretary shall submit to the Com4 mittee on Ways and Means and the Committee on Com5 merce of the House of Representatives and the Committee

6 on Finance of the Senate interim reports on the project and

7 a final report on the project not later than the date that

8 is 6 months after the date on which the project concludes.

9 The final report shall include an evaluation of the impact

10 of the use of group weight loss management services as part

11 of medical nutrition therapy on medicare beneficiaries and

12 on the medicare program, including any impact on reduc13 ing costs under the program and improving the health of

14 beneficiaries.

15 (f) DEFINITIONS.—For purposes of this section:

16 (1) The term ‘‘obesity’’ means that an individual

17 has a Body Mass Index (BMI) of 30 and above.

18 (2) GROUP WEIGHT LOSS MANAGEMENT SERV19 ICES.—The term ‘‘group weight loss management

20 services’’ means comprehensive services furnished to

21 individuals who have been diagnosed and referred by

22 a physician as having impaired glucose tolerance and

23 who are obese that consist of—
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1 (A) assessment and treatment based on the

2 needs of individuals as determined by a group

3 weight loss management professional; or

4 (B) a specific program or method that has

5 demonstrated its efficacy to produce and main6 tain weight loss through results published in

7 peer-reviewed scientific journals using recognized

8 research methods and statistical analysis that

9 provides—

10 (i) assessment of current body weight

11 and recording of weight status at each meet12 ing session;

13 (ii) provision of a healthy eating plan;

14 (iii) provision of an activity plan;

15 (iv) provision of a behavior modifica16 tion plan; and

17 (v) a weekly group support meeting.

18 (3) GROUP WEIGHT LOSS MANAGEMENT PROFES19 SIONAL.—The term ‘‘group weight loss management

20 professional’’ means an individual who has completed

21 training to provide a program or method that has

22 completed clinical trials and has demonstrated its ef23 ficacy through publications in peer-reviewed scientific

24 journals who—
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1 (A)(i) holds a baccalaureate or higher de2 gree granted by a regionally accredited college or

3 university in the United States (or an equivalent

4 foreign degree) in nutrition social work, psy5 chology with experience in behavioral modifica6 tion methods to reduce obesity; or

7 (ii) has completed a curriculum of training

8 for a specific behavioral based weight manage9 ment program as described in section (4)(A)(2)

10 and recommended in the NIH Clinical Guide11 lines on Identification, Evaluation, and Treat12 ment of Overweight and Obesity in Adults, chap13 ter 4, section H, parts 1, 2, 3, 4, and pursuant

14 to guidelines by the Secretary; and

15 (B)(i) is licensed or certified as a group

16 weight loss management professional by the

17 State in which the services are performed; or

18 (ii) is certified by an organization that

19 meets such criteria as the Secretary establishes

20 with—

21 (I) national organizations representing

22 consumers such as the American Obesity As23 sociation and the elderly; and

24 (II) such other organizations as the

25 Secretary determines appropriate.
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1 Subtitle C—Provisions Relating to

2 Parts A and B

3 SEC. 451. INCREASE FOR HOME HEALTH SERVICES FUR4 NISHED IN A RURAL AREA.

5 (a) IN GENERAL.—In the case of home health services

6 furnished in a rural area (as defined in section

7 1886(d)(2)(D) of the Social Security Act (42 U.S.C.

8 1395ww(d)(2)(D))) on or after October 1, 2004, and before

9 October 1, 2006, the Secretary shall increase the payment

10 amount otherwise made under section 1895 of such Act (42

11 U.S.C. 1395fff ) for such services by 5 percent.

12 (b) WAIVING BUDGET NEUTRALITY.—The Secretary

13 shall not reduce the standard prospective payment amount

14 (or amounts) under section 1895 of the Social Security Act

15 (42 U.S.C. 1395fff ) applicable to home health services fur16 nished during a period to offset the increase in payments

17 resulting from the application of subsection (a).

18 (c) NO EFFECT ON SUBSEQUENT PERIODS.—The pay19 ment increase provided under subsection (a) for a period

20 under such subsection—

21 (1) shall not apply to episodes and visits ending

22 after such period; and

23 (2) shall not be taken into account in calculating

24 the payment amounts applicable for episodes and vis25 its occurring after such period.
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1 SEC. 452. LIMITATION ON REDUCTION IN AREA WAGE AD2 JUSTMENT FACTORS UNDER THE PROSPEC3 TIVE PAYMENT SYSTEM FOR HOME HEALTH

4 SERVICES.

5 Section 1895(b)(4)(C) (42 U.S.C. 1395fff(b)(4)(C)) is

6 amended—

7 (1) by striking ‘‘FACTORS.—The Secretary’’ and

8 inserting ‘‘FACTORS.—

9 ‘‘(i) IN GENERAL.—Subject to clause

10 (ii), the Secretary’’; and

11 (2) by adding at the end the following new

12 clause:

13 ‘‘(ii) LIMITATION ON REDUCTION IN

14 FISCAL YEAR 2005 AND 2006.—For fiscal

15 years 2005 and 2006, the area wage adjust16 ment factor applicable to home health serv17 ices furnished in an area in the fiscal year

18 may not be more that 3 percent less than

19 the area wage adjustment factor applicable

20 to home health services for the area for the

21 previous year.’’.

22 SEC. 453. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO

23 MEDICARE LIMITS ON PHYSICIAN REFER24 RALS.

25 (a) LIMITS ON PHYSICIAN REFERRALS.—
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1 (1) OWNERSHIP AND INVESTMENT INTERESTS IN

2 WHOLE HOSPITALS.—

3 (A) IN GENERAL.—Section 1877(d)(3) (42

4 U.S.C. 1395nn(d)(3)) is amended—

5 (i) by striking ‘‘and’’ at the end of sub6 paragraph (A); and

7 (ii) by redesignating subparagraph (B)

8 as subparagraph (C) and inserting after

9 subparagraph (A) the following:

10 ‘‘(B) the hospital is not a specialty hospital

11 (as defined in subsection (h)(7)); and’’.

12 (B) DEFINITION.—Section 1877(h) (42

13 U.S.C. 1395nn(h)) is amended by adding at the

14 end the following:

15 ‘‘(7) SPECIALTY HOSPITAL.—

16 ‘‘(A) IN GENERAL.—For purposes of this

17 section, except as provided in subparagraph (B),

18 the term ‘specialty hospital’ means a hospital

19 that is primarily or exclusively engaged in the

20 care and treatment of one of the following:

21 ‘‘(i) patients with a cardiac condition;

22 ‘‘(ii) patients with an orthopedic con23 dition;

24 ‘‘(iii) patients receiving a surgical pro25 cedure; or
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1 ‘‘(iv) any other specialized category of

2 patients or cases that the Secretary des3 ignates as inconsistent with the purpose of

4 permitting physician ownership and invest5 ment interests in a hospital under this sec6 tion.

7 ‘‘(B) EXCEPTION.—For purposes of this sec8 tion, the term ‘specialty hospital’ does not in9 clude any hospital—

10 ‘‘(i) determined by the Secretary—

11 ‘‘(I) to be in operation before

12 June 12, 2003; or

13 ‘‘(II) under development as of

14 such date;

15 ‘‘(ii) for which the number of beds and

16 the number of physician investors at any

17 time on or after such date is no greater

18 than the number of such beds or investors as

19 of such date; and

20 ‘‘(iii) that meets such other require21 ments as the Secretary may specify.’’.

22 (2) OWNERSHIP AND INVESTMENT INTERESTS IN

23 A RURAL PROVIDER.—Section 1877(d)(2) (42 U.S.C.

24 1395nn(d)(2)) is amended to read as follows:
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1 ‘‘(2) RURAL PROVIDERS.—In the case of des2 ignated health services furnished in a rural area (as

3 defined in section 1886(d)(2)(D)) by an entity, if—

4 ‘‘(A) substantially all of the designated

5 health services furnished by the entity are fur6 nished to individuals residing in such a rural

7 area;

8 ‘‘(B) the entity is not a specialty hospital

9 (as defined in subsection (h)(7)); and

10 ‘‘(C) the Secretary determines, with respect

11 to such entity, that such services would not be

12 available in such area but for the ownership or

13 investment interest.’’.

14 (b) EFFECTIVE DATE.—Subject to paragraph (2), the

15 amendments made by this section shall apply to referrals

16 made for designated health services on or after January 1,

17 2004.

18 (c) APPLICATION OF EXCEPTION FOR HOSPITALS

19 UNDER DEVELOPMENT.—For purposes of section

20 1877(h)(7)(B)(i)(II) of the Social Security Act, as added

21 by subsection (a)(1)(B), in determining whether a hospital

22 is under development as of June 12, 2003, the Secretary

23 shall consider—

24 (1) whether architectural plans have been com25 pleted, funding has been received, zoning requirements
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1 have been met, and necessary approvals from appro2 priate State agencies have been received; and

3 (2) any other evidence the Secretary determines

4 would indicate whether a hospital is under develop5 ment as of such date.

6 SEC. 454. DEMONSTRATION PROGRAM FOR SUBSTITUTE

7 ADULT DAY SERVICES.

8 (a) ESTABLISHMENT.—The Secretary shall establish a

9 demonstration program (in this section referred to as the

10 ‘‘demonstration program’’) under which the Secretary pro11 vides eligible medicare beneficiaries with coverage under the

12 medicare program of substitute adult day services furnished

13 by an adult day services facility.

14 (b) PAYMENT RATE FOR SUBSTITUTE ADULT DAY

15 SERVICES.—

16 (1) PAYMENT RATE.—For purposes of making

17 payments to an adult day services facility for sub18 stitute adult day services under the demonstration

19 program, the following rules shall apply:

20 (A) ESTIMATION OF PAYMENT AMOUNT.—

21 The Secretary shall estimate the amount that

22 would otherwise be payable to a home health

23 agency under section 1895 of the Social Security

24 Act (42 U.S.C. 1395fff) for all home health serv-
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1 ices described in subsection (i)(4)(B)(i) under the

2 plan of care.

3 (B) AMOUNT OF PAYMENT.—Subject to

4 paragraph (3)(B), the total amount payable for

5 substitute adult day services under the plan of

6 care is equal to 95 percent of the amount esti7 mated to be payable under subparagraph (A).

8 (2) LIMITATION ON BALANCE BILLING.—Under

9 the demonstration program, an adult day services fa10 cility shall accept as payment in full for substitute

11 adult day services (including those services described

12 in clauses (ii) through (iv) of subsection (i)(4)(B))

13 furnished by the facility to an eligible medicare bene14 ficiary the amount of payment provided under the

15 demonstration program for home health services con16 sisting of substitute adult services.

17 (3) ADJUSTMENT IN CASE OF OVERUTILIZATION

18 OF SUBSTITUTE ADULT DAY SERVICES TO ENSURE

19 BUDGET NEUTRALITY.—The Secretary shall monitor

20 the expenditures under the demonstration program

21 and under title XVIII of the Social Security Act for

22 home health services. If the Secretary estimates that

23 the total expenditures under the demonstration pro24 gram and under such title XVIII for home health

25 services for a period determined by the Secretary ex-
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1 ceed expenditures that would have been made under

2 such title XVIII for home health services for such pe3 riod if the demonstration program had not been con4 ducted, the Secretary shall adjust the rate of payment

5 to adult day services facilities under paragraph

6 (1)(B) in order to eliminate such excess.

7 (c) DEMONSTRATION PROGRAM SITES.—The dem8 onstration program shall be conducted in not more than

9 3 sites selected by the Secretary.

10 (d) DURATION; IMPLEMENTATION.—

11 (1) DURATION.—The Secretary shall conduct the

12 demonstration program for a period of 3 years.

13 (2) IMPLEMENTATION.—The Secretary may not

14 implement the demonstration program before October

15 1, 2004.

16 (e) VOLUNTARY PARTICIPATION.—Participation of eli17 gible medicare beneficiaries in the demonstration program

18 shall be voluntary.

19 (f) WAIVER AUTHORITY.—

20 (1) IN GENERAL.—Except as provided in para21 graph (2), the Secretary may waive such require22 ments of titles XI and XVIII of the Social Security

23 Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be

24 necessary for the purposes of carrying out the dem25 onstration program.
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1 (2) MAY NOT WAIVE ELIGIBILITY REQUIREMENTS

2 FOR HOME HEALTH SERVICES.—The Secretary may

3 not waive the beneficiary eligibility requirements for

4 home health services under title XVIII of the Social

5 Security Act.

6 (g) EVALUATION AND REPORT.—

7 (1) EVALUATION.—The Secretary shall conduct

8 an evaluation of the clinical and cost effectiveness of

9 the demonstration program.

10 (2) REPORT.—Not later than 30 months after the

11 commencement of the demonstration program, the

12 Secretary shall submit to Congress a report on the

13 evaluation conducted under paragraph (1) and shall

14 include in the report the following:

15 (A) An analysis of the patient outcomes and

16 costs of furnishing care to the eligible medicare

17 beneficiaries participating in the demonstration

18 program as compared to such outcomes and costs

19 to such beneficiaries receiving only home health

20 services under title XVIII of the Social Security

21 Act for the same health conditions.

22 (B) Such recommendations regarding the

23 extension, expansion, or termination of the pro24 gram as the Secretary determines appropriate.

25 (i) DEFINITIONS.—In this section:
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1 (1) ADULT DAY SERVICES FACILITY.—

2 (A) IN GENERAL.—Except as provided in

3 subparagraphs (B) and (C), the term ‘‘adult day

4 services facility’’ means a public agency or pri5 vate organization, or a subdivision of such an

6 agency or organization, that—

7 (i) is engaged in providing skilled

8 nursing services and other therapeutic serv9 ices directly or under arrangement with a

10 home health agency;

11 (ii) provides the items and services de12 scribed in paragraph (4)(B); and

13 (iii) meets the requirements of para14 graphs (2) through (8) of subsection (o).

15 (B) INCLUSION.—Notwithstanding subpara16 graph (A), the term ‘‘adult day services facility’’

17 shall include a home health agency in which the

18 items and services described in clauses (ii)

19 through (iv) of paragraph (4)(B) are provided—

20 (i) by an adult day services program

21 that is licensed or certified by a State, or

22 accredited, to furnish such items and serv23 ices in the State; and

24 (ii) under arrangements with that pro25 gram made by such agency.
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1 (C) WAIVER OF SURETY BOND.—The Sec2 retary may waive the requirement of a surety

3 bond under section 1861(o)(7) of the Social Secu4 rity Act (42 U.S.C. 1395x(o)(7)) in the case of

5 an agency or organization that provides a com6 parable surety bond under State law.

7 (2) ELIGIBLE MEDICARE BENEFICIARY.—The

8 term ‘‘eligible medicare beneficiary’’ means an indi9 vidual eligible for home health services under title

10 XVIII of the Social Security Act.

11 (3) HOME HEALTH AGENCY.—The term ‘‘home

12 health agency’’ has the meaning given such term in

13 section 1861(o) of the Social Security Act (42 U.S.C.

14 1395x(o)).

15 (4) SUBSTITUTE ADULT DAY SERVICES.—

16 (A) IN GENERAL.—The term ‘‘substitute

17 adult day services’’ means the items and services

18 described in subparagraph (B) that are fur19 nished to an individual by an adult day services

20 facility as a part of a plan under section

21 1861(m) of the Social Security Act (42 U.S.C.

22 1395x(m)) that substitutes such services for some

23 or all of the items and services described in sub24 paragraph (B)(i) furnished by a home health
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1 agency under the plan, as determined by the

2 physician establishing the plan.

3 (B) ITEMS AND SERVICES DESCRIBED.—The

4 items and services described in this subpara5 graph are the following items and services:

6 (i) Items and services described in

7 paragraphs (1) through (7) of such section

8 1861(m).

9 (ii) Meals.

10 (iii) A program of supervised activities

11 designed to promote physical and mental

12 health and furnished to the individual by

13 the adult day services facility in a group

14 setting for a period of not fewer than 4 and

15 not greater than 12 hours per day.

16 (iv) A medication management pro17 gram (as defined in subparagraph (C)).

18 (C) MEDICATION MANAGEMENT PROGRAM.—

19 For purposes of subparagraph (B)(iv), the term

20 ‘‘medication management program’’ means a

21 program of services, including medicine screen22 ing and patient and health care provider edu23 cation programs, that provides services to

24 minimize—
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1 (i) unnecessary or inappropriate use of

2 prescription drugs; and

3 (ii) adverse events due to unintended

4 prescription drug-to-drug interactions.

5 SEC. 455. MEDPAC STUDY ON MEDICARE PAYMENTS AND

6 EFFICIENCIES IN THE HEALTH CARE SYSTEM.

7 Not later than 18 months after the date of enactment

8 of this Act, the Medicare Payment Advisory Commission

9 established under section 1805 of the Social Security Act

10 (42 U.S.C. 1395b–6) shall provide Congress with rec11 ommendations to recognize and reward, within payment

12 methodologies for physicians and hospitals established

13 under the medicare program under title XVIII of the Social

14 Security Act, efficiencies, and the lower utilization of serv15 ices created by the practice of medicine in historically effi16 cient and low-cost areas. Measures of efficiency recognized

17 in accordance with the preceding sentence shall include—

18 (1) shorter hospital stays than the national aver19 age;

20 (2) fewer physician visits than the national av21 erage;

22 (3) fewer laboratory tests than the national aver23 age;

24 (4) a greater utilization of hospice services than

25 the national average; and
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1 (5) the efficacy of disease management and pre2 ventive health services.

3 SEC. 456. MEDICARE COVERAGE OF KIDNEY DISEASE EDU4 CATION SERVICES.

5 (a) COVERAGE OF KIDNEY DISEASE EDUCATION

6 SERVICES.—

7 (1) IN GENERAL.—Section 1861 of the Social Se8 curity Act (42 U.S.C.1395x) is amended—

9 (A) in subsection (s)(2)—

10 (i) in subparagraph (U), by striking

11 ‘‘and’’ at the end;

12 (ii) in subparagraph (V)(iii), by add13 ing ‘‘and’’ at the end; and

14 (iii) by adding at the end the following

15 new subparagraph:

16 ‘‘(W) kidney disease education services (as de17 fined in subsection (ww));’’; and

18 (B) by adding at the end the following new

19 subsection:

20 ‘‘Kidney Disease Education Services

21 ‘‘(ww)(1) The term ‘kidney disease education services’

22 means educational services that are—

23 ‘‘(A) furnished to an individual with kidney dis24 ease who, according to accepted clinical guidelines
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1 identified by the Secretary, will require dialysis or a

2 kidney transplant;

3 ‘‘(B) furnished, upon the referral of the physi4 cian managing the individual’s kidney condition, by

5 a qualified person (as defined in paragraph (2)); and

6 ‘‘(C) designed—

7 ‘‘(i) to provide comprehensive information

8 regarding—

9 ‘‘(I) the management of comorbidities;

10 ‘‘(II) the prevention of uremic com11 plications; and

12 ‘‘(III) each option for renal replace13 ment therapy (including peritoneal dialysis,

14 hemodialysis (including vascular access op15 tions), and transplantation); and

16 ‘‘(ii) to ensure that the individual has the

17 opportunity to actively participate in the choice

18 of therapy.

19 ‘‘(2) The term ‘qualified person’ means—

20 ‘‘(A) a physician (as described in subsection

21 (r)(1));

22 ‘‘(B) an individual who—

23 ‘‘(i) is—

24 ‘‘(I) a registered nurse;
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1 ‘‘(II) a registered dietitian or nutrition

2 professional (as defined in subsection

3 (vv)(2));

4 ‘‘(III) a clinical social worker (as de5 fined in subsection (hh)(1));

6 ‘‘(IV) a physician assistant, nurse

7 practitioner, or clinical nurse specialist (as

8 those terms are defined in subsection

9 (aa)(5)); or

10 ‘‘(V) a transplant coordinator; and

11 ‘‘(ii) meets such requirements related to ex12 perience and other qualifications that the Sec13 retary finds necessary and appropriate for fur14 nishing the services described in paragraph (1);

15 or

16 ‘‘(C) a renal dialysis facility subject to the re17 quirements of section 1881(b)(1) with personnel

18 who—

19 ‘‘(i) provide the services described in para20 graph (1); and

21 ‘‘(ii) meet the requirements of subparagraph

22 (A) or (B).

23 ‘‘(3) The Secretary shall develop the requirements

24 under paragraph (2)(B)(ii) after consulting with physi25 cians, health educators, professional organizations, accred-
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1 iting organizations, kidney patient organizations, dialysis

2 facilities, transplant centers, network organizations de3 scribed in section 1881(c)(2), and other knowledgeable per4 sons.

5 ‘‘(4) In promulgating regulations to carry out this sub6 section, the Secretary shall ensure that such regulations en7 sure that each beneficiary who is entitled to kidney disease

8 education services under this title receives such services in

9 a timely manner that ensures that the beneficiary receives

10 the maximum benefit of those services.

11 ‘‘(5) The Secretary shall monitor the implementation

12 of this subsection to ensure that beneficiaries who are eligi13 ble for kidney disease education services receive such serv14 ices in the manner described in paragraph (4).’’.

15 (2) PAYMENT UNDER PHYSICIAN FEE SCHED16 ULE.—Section 1848(j)(3) of such Act (42 U.S.C.

17 1395w–4(j)(3)) is amended by inserting ‘‘, (2)(W)’’,

18 after ‘‘(2)(S)’’.

19 (3) PAYMENT TO RENAL DIALYSIS FACILITIES.—

20 Section 1881(b) of such Act (42 U.S.C. 1395rr(b)), as

21 amended by section 433(b)(5), is further amended by

22 adding at the end the following new paragraph:

23 ‘‘(13) For purposes of paragraph (7), the single

24 composite weighted formulas determined under such

25 paragraph shall not take into account the amount of
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1 payment for kidney disease education services (as de2 fined in section 1861(ww)). Instead, payment for such

3 services shall be made to the renal dialysis facility on

4 an assignment-related basis under section 1848.’’.

5 (4) ANNUAL REPORT TO CONGRESS.—Not later

6 than April 1, 2004, and annually thereafter, the Sec7 retary of Health and Human Services shall submit to

8 Congress a report on the number of medicare bene9 ficiaries who are entitled to kidney disease education

10 services (as defined in section 1861(ww) of the Social

11 Security Act, as added by paragraph (1)) under title

12 XVIII of such Act and who receive such services, to13 gether with such recommendations for legislative and

14 administrative action as the Secretary determines to

15 be appropriate to fulfill the legislative intent that re16 sulted in the enactment of that subsection.

17 (b) EFFECTIVE DATE.—The amendments made by this

18 section shall apply to services furnished on or after January

19 1, 2004.

20 SEC. 457. FRONTIER EXTENDED STAY CLINIC DEMONSTRA21 TION PROJECT.

22 (a) AUTHORITY TO CONDUCT DEMONSTRATION

23 PROJECT.—The Secretary shall waive such provisions of the

24 medicare program established under title XVIII of the So25 cial Security Act (42 U.S.C. 1395 et seq.) as are necessary
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1 to conduct a demonstration project under which frontier ex2 tended stay clinics described in subsection (b) in isolated

3 rural areas are treated as providers of items and services

4 under the medicare program.

5 (b) CLINICS DESCRIBED.—A frontier extended stay

6 clinic is described in this subsection if the clinic—

7 (1) is located in a community where the closest

8 short-term acute care hospital or critical access hos9 pital is at least 75 miles away from the community

10 or is inaccessible by public road; and

11 (2) is designed to address the needs of—

12 (A) seriously or critically ill or injured pa13 tients who, due to adverse weather conditions or

14 other reasons, cannot be transferred quickly to

15 acute care referral centers; or

16 (B) patients who need monitoring and ob17 servation for a limited period of time.

18 (c) DEFINITIONS.—In this section, the terms ‘‘hos19 pital’’ and ‘‘critical access hospital’’ have the meanings

20 given such terms in subsections (e) and (mm), respectively,

21 of section 1861 of the Social Security Act (42 U.S.C.

22 1395x).
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1 SEC. 458. IMPROVEMENTS IN NATIONAL COVERAGE DETER2 MINATION PROCESS TO RESPOND TO

3 CHANGES IN TECHNOLOGY.

4 (a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) is

5 amended—

6 (A) in the third sentence of subsection (a)

7 by inserting ‘‘consistent with subsection (j)’’

8 after ‘‘the Secretary shall ensure’’; and

9 (B) by adding at the end the following new

10 subsection:

11 ‘‘(j) NATIONAL COVERAGE DETERMINATION PROC12 ESS.—

13 ‘‘(1) TIMEFRAME FOR DECISIONS ON REQUESTS

14 FOR NATIONAL COVERAGE DETERMINATIONS.—In the

15 case of a request for a national coverage determina16 tion that—

17 ‘‘(A) does not require a technology assess18 ment from an outside entity or deliberation from

19 the Medicare Coverage Advisory Committee, the

20 decision on the request shall be made not later

21 than 6 months after the date of the request; or

22 ‘‘(B) requires such an assessment or delib23 eration and in which a clinical trial is not re24 quested, the decision on the request shall be made

25 not later than 9 months after the date of the re26 quest.
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1 ‘‘(2) PROCESS FOR PUBLIC COMMENT IN NA2 TIONAL COVERAGE DETERMINATIONS.—At the end of

3 the 6-month period (with respect to a request under

4 paragraph (1)(A)) or 9-month period (with respect to

5 a request under paragraph (1)(B)) that begins on the

6 date a request for a national coverage determination

7 is made, the Secretary shall—

8 ‘‘(A) make a draft of proposed decision on

9 the request available to the public through the

10 Medicare Internet site of the Department of

11 Health and Human Services or other appro12 priate means;

13 ‘‘(B) provide a 30-day period for public

14 comment on such draft;

15 ‘‘(C) make a final decision on the request

16 within 60 days of the conclusion of the 30-day

17 period referred to under subparagraph (B);

18 ‘‘(D) include in such final decision sum19 maries of the public comments received and re20 sponses thereto;

21 ‘‘(E) make available to the public the clin22 ical evidence and other data used in making

23 such a decision when the decision differs from

24 the recommendations of the Medicare Coverage

25 Advisory Committee; and
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1 ‘‘(F) in the case of a decision to grant the

2 coverage determination, assign a temporary or

3 permanent code and implement the coverage de4 cision at the end of the 60-day period referred to

5 in subparagraph (C).

6 ‘‘(3) NATIONAL COVERAGE DETERMINATION DE7 FINED.—For purposes of this subsection, the term ‘na8 tional coverage determination’ has the meaning given

9 such term in section 1869(f)(1)(B).’’.

10 (b) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to national coverage determinations as

12 of January 1, 2004.

13 SEC. 459. INCREASE IN MEDICARE PAYMENT FOR CERTAIN

14 HOME HEALTH SERVICES.

15 (a) IN GENERAL.—Section 1895 of the Social Security

16 Act (42 U.S.C. 1395fff) is amended by adding at the end

17 the following:

18 ‘‘(f) INCREASE IN PAYMENT FOR SERVICES FUR19 NISHED IN A RURAL AREA.—

20 ‘‘(1) IN GENERAL.—In the case of home health

21 services furnished in a rural area (as defined in sec22 tion 1886(d)(2)(D)) on or after October 1, 2004 and

23 before October 1, 2006, the Secretary shall increase

24 the payment amount otherwise made under this sec25 tion for such services by 10 percent.
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1 ‘‘(2) WAIVER OF BUDGET NEUTRALITY.—The

2 Secretary shall not reduce the standard prospective

3 payment amount (or amounts) under this section ap4 plicable to home health services furnished during any

5 period to offset the increase in payments resulting

6 from the application of paragraph (1).’’.

7 (b) PAYMENT ADJUSTMENT.—Section 1895(b)(5) of the

8 Social Security Act (42 U.S.C. 1395fff(b)(5)) is amended

9 by adding at the end the following: ‘‘Notwithstanding this

10 paragraph, the total amount of the additional payments or

11 payment adjustments made under this paragraph may not

12 exceed, with respect to fiscal year 2004, 3 percent, and, with

13 respect to fiscal years 2005 and 2006, 4 percent, of the total

14 payments projected or estimated to be made based on the

15 prospective payment system under this subsection in the

16 year involved.’’.

17 (c) EFFECTIVE DATE.—The amendments made by this

18 section shall apply to services furnished on or after October

19 1, 2003.

20 SEC. 460. FRONTIER EXTENDED STAY CLINIC DEMONSTRA21 TION PROJECT.

22 (a) AUTHORITY TO CONDUCT DEMONSTRATION

23 PROJECT.—The Secretary shall waive such provisions of the

24 medicare program established under title XVIII of the So25 cial Security Act (42 U.S.C. 1395 et seq.) as are necessary
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1 to conduct a demonstration project under which frontier ex2 tended stay clinics described in subsection (b) in isolated

3 rural areas are treated as providers of items and services

4 under the medicare program.

5 (b) CLINICS DESCRIBED.—A frontier extended stay

6 clinic is described in this subsection if the clinic—

7 (1) is located in a community where the closest

8 short-term acute care hospital or critical access hos9 pital is at least 75 miles away from the community

10 or is inaccessible by public road; and

11 (2) is designed to address the needs of—

12 (A) seriously or critically ill or injured pa13 tients who, due to adverse weather conditions or

14 other reasons, cannot be transferred quickly to

15 acute care referral centers; or

16 (B) patients who need monitoring and ob17 servation for a limited period of time.

18 (c) DEFINITIONS.—In this section, the terms ‘‘hos19 pital’’ and ‘‘critical access hospital’’ have the meanings

20 given such terms in subsections (e) and (mm), respectively,

21 of section 1861 of the Social Security Act (42 U.S.C.

22 1395x).
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1 SEC. 461. MEDICARE SECONDARY PAYOR (MSP) PROVI2 SIONS.

3 (a) TECHNICAL AMENDMENT CONCERNING SEC4 RETARY’S AUTHORITY TO MAKE CONDITIONAL PAYMENT

5 WHEN CERTAIN PRIMARY PLANS DO NOT PAY PROMPT6 LY.—

7 (1) IN GENERAL.—Section 1862(b)(2) (42 U.S.C.

8 1395y(b)(2)) is amended—

9 (A) in subparagraph (A)(ii), by striking

10 ‘‘promptly (as determined in accordance with

11 regulations)’’;

12 (B) in subparagraph (B)—

13 (i) by redesignating clauses (i) through

14 (iii) as clauses (ii) through (iv), respec15 tively; and

16 (ii) by inserting before clause (ii), as

17 so redesignated, the following new clause:

18 ‘‘(i) AUTHORITY TO MAKE CONDI19 TIONAL PAYMENT.—The Secretary may

20 make payment under this title with respect

21 to an item or service if a primary plan de22 scribed in subparagraph (A)(ii) has not

23 made or cannot reasonably be expected to

24 make payment with respect to such item or

25 service promptly (as determined in accord26 ance with regulations). Any such payment
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1 by the Secretary shall be conditioned on re2 imbursement to the appropriate Trust Fund

3 in accordance with the succeeding provi4 sions of this subsection.’’.

5 (2) EFFECTIVE DATE.—The amendments made

6 by paragraph (1) shall be effective as if included in

7 the enactment of title III of the Medicare and Med8 icaid Budget Reconciliation Amendments of 1984

9 (Public Law 98-369).

10 (b) CLARIFYING AMENDMENTS TO CONDITIONAL PAY11 MENT PROVISIONS.—Section 1862(b)(2) (42 U.S.C.

12 1395y(b)(2)) is further amended—

13 (1) in subparagraph (A), in the matter following

14 clause (ii), by inserting the following sentence at the

15 end: ‘‘An entity that engages in a business, trade, or

16 profession shall be deemed to have a self-insured plan

17 if it carries its own risk (whether by a failure to ob18 tain insurance, or otherwise) in whole or in part.’’;

19 (2) in subparagraph (B)(ii), as redesignated by

20 subsection (a)(2)(B)—

21 (A) by striking the first sentence and insert22 ing the following: ‘‘A primary plan, and an enti23 ty that receives payment from a primary plan,

24 shall reimburse the appropriate Trust Fund for

25 any payment made by the Secretary under this
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1 title with respect to an item or service if it is

2 demonstrated that such primary plan has or had

3 a responsibility to make payment with respect to

4 such item or service. A primary plan’s responsi5 bility for such payment may be demonstrated by

6 a judgment, a payment conditioned upon the re7 cipient’s compromise, waiver, or release (whether

8 or not there is a determination or admission of

9 liability) of payment for items or services in10 cluded in a claim against the primary plan or

11 the primary plan’s insured, or by other means.’’;

12 and

13 (B) in the final sentence, by striking ‘‘on

14 the date such notice or other information is re15 ceived’’ and inserting ‘‘on the date notice of, or

16 information related to, a primary plan’s respon17 sibility for such payment or other information is

18 received’’; and

19 (3) in subparagraph (B)(iii), , as redesignated

20 by subsection (a)(2)(B), by striking the first sentence

21 and inserting the following: ‘‘In order to recover pay22 ment made under this title for an item or service, the

23 United States may bring an action against any or all

24 entities that are or were required or responsible (di25 rectly, as an insurer or self-insurer, as a third-party
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1 administrator, as an employer that sponsors or con2 tributes to a group health plan, or large group health

3 plan, or otherwise) to make payment with respect to

4 the same item or service (or any portion thereof)

5 under a primary plan. The United States may, in ac6 cordance with paragraph (3)(A) collect double dam7 ages against any such entity. In addition, the United

8 States may recover under this clause from any entity

9 that has received payment from a primary plan or

10 from the proceeds of a primary plan’s payment to

11 any entity.’’.

12 (c) CLERICAL AMENDMENTS.—Section 1862(b) (42

13 U.S.C. 1395y(b)) is amended—

14 (1) in paragraph (1)(A), by moving the indenta15 tion of clauses (ii) through (v) 2 ems to the left; and

16 (2) in paragraph (3)(A), by striking ‘‘such’’ be17 fore ‘‘paragraphs’’.

18 SEC. 462. MEDICARE PANCREATIC ISLET CELL TRANSPLANT

19 DEMONSTRATION PROJECT.

20 (a) ESTABLISHMENT.—In order to test the appro21 priateness of pancreatic islet cell transplantation, not later

22 than 120 days after the date of the enactment of this Act,

23 the Secretary shall establish a demonstration project which

24 the Secretary, provides for payment under the medicare

25 program under title XVIII of the Social Security Act for
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1 pancreatic islet cell transplantation and related items and

2 services in the case of medicare beneficiaries who have type

3 I (juvenile) diabetes and have end stage renal disease.

4 (b) DURATION OF PROJECT.—The authority of the Sec5 retary to conduct the demonstration project under this sec6 tion shall terminate on the date that is 5 years after the

7 date of the establishment of the project.

8 (c) EVALUATION AND REPORT.—The Secretary shall

9 conduct an evaluation of the outcomes of the demonstration

10 project. Not later than 120 days after the date of the termi11 nation of the demonstration project under subsection (b),

12 the Secretary shall submit to Congress a report on the

13 project, including recommendations for such legislative and

14 administrative action as the Secretary deems appropriate.

15 (d) PAYMENT METHODOLOGY.—The Secretary shall es16 tablish an appropriate payment methodology for the provi17 sion of items and services under the demonstration project,

18 which may include a payment methodology that bundles,

19 to the maximum extent feasible, payment for all such items

20 and services.

21 SEC. 463. INCREASE IN MEDICARE PAYMENT FOR CERTAIN

22 HOME HEALTH SERVICES.

23 (a) IN GENERAL.—Section 1895 of the Social Security

24 Act (42 U.S.C. 1395fff) is amended by adding at the end

25 the following:
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1 ‘‘(f) INCREASE IN PAYMENT FOR SERVICES FUR2 NISHED IN A RURAL AREA.—

3 ‘‘(1) IN GENERAL.—In the case of home health

4 services furnished in a rural area (as defined in sec5 tion 1886(d)(2)(D)) on or after October 1, 2004, and

6 before October 1, 2006, the Secretary shall increase

7 the payment amount otherwise made under this sec8 tion for such services by 10 percent.

9 ‘‘(2) WAIVER OF BUDGET NEUTRALITY.—The

10 Secretary shall not reduce the standard prospective

11 payment amount (or amounts) under this section ap12 plicable to home health services furnished during any

13 period to offset the increase in payments resulting

14 from the application of paragraph (1).’’.

15 (b) PAYMENT ADJUSTMENT.—Section 1895(b)(5) of the

16 Social Security Act (42 U.S. C. 1395fff(b)(5)) is amended

17 by adding at the end the following: ‘‘Notwithstanding this

18 paragraph, the total amount of the additional payments or

19 payment adjustments made under this paragraph may not

20 exceed, with respect to fiscal year 2004, 3 percent, and, with

21 respect to fiscal years 2005 and 2006, 4 percent, of the total

22 payments projected or estimated to be made based on the

23 prospective payment system under this subsection in the

24 year involved.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to services furnished on or after October

3 1, 2003.

4 SEC. 464. SENSE OF THE SENATE CONCERNING MEDICARE

5 PAYMENT UPDATE FOR PHYSICIANS AND

6 OTHER HEALTH PROFESSIONALS.

7 (a) FINDINGS.—The Senate makes the following find8 ings:

9 (1) The formula by which medicare payments

10 are updated each year for services furnished by physi11 cians and other health professionals is fundamentally

12 flawed.

13 (2) The flawed physician payment update for14 mula is causing a continuing physician payment cri15 sis, and, without congressional action, medicare pay16 ment rates for physicians and other practitioners are

17 predicted to fall by 4.2 percent in 2004.

18 (3) A physician payment cut in 2004 would the

19 fifth cut since 1991, and would be on top of a 5.4 per20 cent cut in 2002, with additional cuts estimated for

21 2005, 2006, and 2007. From 1991 through 2003, pay22 ment rates for physicians and health professionals fell

23 14 percent behind practice cost inflation as measured

24 by medicare’s own conservative estimates.
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1 (4) The sustainable growth rate (SGR) expendi2 ture target, which is the basis for the physician pay3 ment update, is linked to the gross domestic product

4 and penalizes physicians and other practitioners for

5 volume increases that they cannot control and that

6 the government actively promotes through new cov7 erage decisions, quality improvement activities, and

8 other initiatives that, while beneficial to patients, are

9 not reflected in the SGR.

10 (b) SENSE OF THE SENATE.—It is the sense of the Sen11 ate that medicare beneficiary access to quality care may

12 be compromised if Congress does not take action to prevent

13 cuts in 2004 and the following years that result from the

14 SGR formula.

15 TITLE V—MEDICARE APPEALS,

16 REGULATORY, AND CON17 TRACTING IMPROVEMENTS

18 Subtitle A—Regulatory Reform

19 SEC. 501. RULES FOR THE PUBLICATION OF A FINAL REGU20 LATION BASED ON THE PREVIOUS PUBLICA21 TION OF AN INTERIM FINAL REGULATION.

22 (a) IN GENERAL.—Section 1871(a) (42 U.S.C.

23 1395hh(a)) is amended by adding at the end the following

24 new paragraph:
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1 ‘‘(3)(A) With respect to the publication of a final regu2 lation based on the previous publication of an interim final

3 regulation—

4 ‘‘(i) subject to subparagraph (B), the Secretary

5 shall publish the final regulation within the 12-month

6 period that begins on the date of publication of the

7 interim final regulation;

8 ‘‘(ii) if a final regulation is not published by the

9 deadline established under this paragraph, the in10 terim final regulation shall not continue in effect un11 less the Secretary publishes a notice described in sub12 paragraph (B) by such deadline; and

13 ‘‘(iii) the final regulation shall include responses

14 to comments submitted in response to the interim

15 final regulation.

16 ‘‘(B) If the Secretary determines before the deadline

17 otherwise established in this paragraph that there is good

18 cause, specified in a notice published before such deadline,

19 for delaying the deadline otherwise applicable under this

20 paragraph, the deadline otherwise established under this

21 paragraph shall be extended for such period (not to exceed

22 12 months) as the Secretary specifies in such notice.’’.

23 (b) EFFECTIVE DATE.—The amendment made by sub24 section (a) shall take effect on the date of enactment of this
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1 Act and shall apply to interim final regulations published

2 on or after such date.

3 (c) STATUS OF PENDING INTERIM FINAL REGULA4 TIONS.—Not later than 6 months after the date of enactment

5 of this Act, the Secretary shall publish a notice in the Fed6 eral Register that provides the status of each interim final

7 regulation that was published on or before the date of enact8 ment of this Act and for which no final regulation has been

9 published. Such notice shall include the date by which the

10 Secretary plans to publish the final regulation that is based

11 on the interim final regulation.

12 SEC. 502. COMPLIANCE WITH CHANGES IN REGULATIONS

13 AND POLICIES.

14 (a) NO RETROACTIVE APPLICATION OF SUBSTANTIVE

15 CHANGES.—

16 (1) IN GENERAL.—Section 1871 (42 U.S.C.

17 1395hh) is amended by adding at the end the fol18 lowing new subsection:

19 ‘‘(d)(1)(A) A substantive change in regulations, man20 ual instructions, interpretative rules, statements of policy,

21 or guidelines of general applicability under this title shall

22 not be applied (by extrapolation or otherwise) retroactively

23 to items and services furnished before the effective date of

24 the change, unless the Secretary determines that—
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1 ‘‘(i) such retroactive application is necessary to

2 comply with statutory requirements; or

3 ‘‘(ii) failure to apply the change retroactively

4 would be contrary to the public interest.’’.

5 (2) EFFECTIVE DATE.—The amendment made by

6 paragraph (1) shall apply to substantive changes

7 issued on or after the date of enactment of this Act.

8 (b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE

9 CHANGES AFTER NOTICE.—

10 (1) IN GENERAL.—Section 1871(d)(1), as added

11 by subsection (a), is amended by adding at the end

12 the following:

13 ‘‘(B) A compliance action may be made against a pro14 vider of services, physician, practitioner, or other supplier

15 with respect to noncompliance with such a substantive

16 change only for items and services furnished on or after

17 the effective date of the change.

18 ‘‘(C)(i) Except as provided in clause (ii), a substantive

19 change may not take effect before the date that is the end

20 of the 30-day period that begins on the date that the Sec21 retary has issued or published, as the case may be, the sub22 stantive change.

23 ‘‘(ii) The Secretary may provide for a substantive

24 change to take effect on a date that precedes the end of the

25 30-day period under clause (i) if the Secretary finds that
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1 waiver of such 30-day period is necessary to comply with

2 statutory requirements or that the application of such 30-

3 day period is contrary to the public interest. If the Sec4 retary provides for an earlier effective date pursuant to this

5 clause, the Secretary shall include in the issuance or publi6 cation of the substantive change a finding described in the

7 first sentence, and a brief statement of the reasons for such

8 finding.’’.

9 (2) EFFECTIVE DATE.—The amendment made by

10 paragraph (1) shall apply to compliance actions un11 dertaken on or after the date of enactment of this Act.

12 SEC. 503. REPORT ON LEGAL AND REGULATORY INCONSIST13 ENCIES.

14 Section 1871 (42 U.S.C. 1395hh), as amended by sec15 tion 502(a)(1), is amended by adding at the end the fol16 lowing new subsection:

17 ‘‘(e)(1) Not later than 2 years after the date of enact18 ment of this subsection, and every 3 years thereafter, the

19 Secretary shall submit to Congress a report with respect

20 to the administration of this title and areas of inconsistency

21 or conflict among the various provisions under law and reg22 ulation.

23 ‘‘(2) In preparing a report under paragraph (1), the

24 Secretary shall collect—
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1 ‘‘(A) information from beneficiaries, providers of

2 services, physicians, practitioners, and other suppliers

3 with respect to such areas of inconsistency and con4 flict; and

5 ‘‘(B) information from medicare contractors that

6 tracks the nature of all communications and cor7 respondence.

8 ‘‘(3) A report under paragraph (1) shall include a de9 scription of efforts by the Secretary to reduce such inconsist10 ency or conflicts, and recommendations for legislation or

11 administrative action that the Secretary determines appro12 priate to further reduce such inconsistency or conflicts.’’.

13 SEC. 504. STREAMLINING AND SIMPLIFICATION OF MEDI14 CARE REGULATIONS.

15 (a) IN GENERAL.—The Secretary of Health and

16 Human Services shall conduct an analysis of the regula17 tions issued under title XVIII of the Social Security Act

18 and related laws in order to determine how such regulations

19 may be streamlined and simplified to increase the efficiency

20 and effectiveness of the medicare program without harming

21 beneficiaries or providers and to decrease the burdens the

22 medicare payment systems impose on both beneficiaries and

23 providers.

24 (b) REDUCTION IN REGULATIONS.—The Secretary,

25 after completion of the analysis under subsection (a), shall
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1 direct the rewriting of the regulations described in sub2 section (a) in such a manner as to—

3 (1) reduce the number of words comprising all

4 regulations by at least two-thirds by October 1, 2004,

5 and

6 (2) ensure the simple, effective, and efficient op7 eration of the medicare program.

8 (c) APPLICATION OF THE PAPERWORK REDUCTION

9 ACT.—The Secretary shall apply the provisions of chapter

10 35 of title 44, United States Code (commonly known as the

11 ‘‘Paperwork Reduction Act’’) to the provisions of this Act

12 to ensure that any regulations issued to implement this Act

13 are written in plain language, are streamlined, promote the

14 maximum efficiency and effectiveness of the medicare and

15 medicaid programs without harming beneficiaries or pro16 viders, and minimize the burdens the payment systems af17 fected by this Act impose on both beneficiaries and pro18 viders.

19 (d) FEASIBILITY.—If the Secretary determines that the

20 two-thirds reduction in words by October 1, 2004 required

21 in subsection (b)(1) is not feasible, he shall inform Congress

22 in writing by July 1, 2004 of the reasons for its

23 unfeasibility. He shall then establish a feasible reduction

24 to be achieved by January 1, 2005.
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1 Subtitle B—Appeals Process Reform

2 SEC. 511. SUBMISSION OF PLAN FOR TRANSFER OF RE3 SPONSIBILITY FOR MEDICARE APPEALS.

4 (a) SUBMISSION OF TRANSITION PLAN.—

5 (1) IN GENERAL.—Not later than April 1, 2004,

6 the Commissioner of Social Security and the Sec7 retary shall develop and transmit to Congress and the

8 Comptroller General of the United States a plan

9 under which the functions of administrative law

10 judges responsible for hearing cases under title XVIII

11 of the Social Security Act (and related provisions in

12 title XI of such Act) are transferred from the responsi13 bility of the Commissioner and the Social Security

14 Administration to the Secretary and the Department

15 of Health and Human Services.

16 (2) CONTENTS.—The plan shall include informa17 tion on the following:

18 (A) WORKLOAD.—The number of such ad19 ministrative law judges and support staff re20 quired now and in the future to hear and decide

21 such cases in a timely manner, taking into ac22 count the current and anticipated claims volume,

23 appeals, number of beneficiaries, and statutory

24 changes.
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1 (B) COST PROJECTIONS AND FINANCING.—

2 Funding levels required for fiscal year 2005 and

3 subsequent fiscal years to carry out the functions

4 transferred under the plan and how such transfer

5 should be financed.

6 (C) TRANSITION TIMETABLE.—A timetable

7 for the transition.

8 (D) REGULATIONS.—The establishment of

9 specific regulations to govern the appeals process.

10 (E) CASE TRACKING.—The development of a

11 unified case tracking system that will facilitate

12 the maintenance and transfer of case specific

13 data across both the fee-for-service and managed

14 care components of the medicare program.

15 (F) FEASIBILITY OF PRECEDENTIAL AU16 THORITY.—The feasibility of developing a proc17 ess to give decisions of the Departmental Appeals

18 Board in the Department of Health and Human

19 Services addressing broad legal issues binding,

20 precedential authority.

21 (G) ACCESS TO ADMINISTRATIVE LAW

22 JUDGES.—The feasibility of—

23 (i) filing appeals with administrative

24 law judges electronically; and
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1 (ii) conducting hearings using tele- or

2 video-conference technologies.

3 (H) INDEPENDENCE OF ADMINISTRATIVE

4 LAW JUDGES.—The steps that should be taken to

5 ensure the independence of administrative law

6 judges, including ensuring that such judges are

7 in an office that is functionally and operation8 ally separate from the Centers for Medicare &

9 Medicaid Services and the Center for Medicare

10 Choices.

11 (I) GEOGRAPHIC DISTRIBUTION.—The steps

12 that should be taken to provide for an appro13 priate geographic distribution of administrative

14 law judges throughout the United States to en15 sure timely access to such judges.

16 (J) HIRING.—The steps that should be taken

17 to hire administrative law judges (and support

18 staff).

19 (K) PERFORMANCE STANDARDS.—The es20 tablishment of performance standards for admin21 istrative law judges with respect to timelines for

22 decisions in cases under title XVIII of the Social

23 Security Act.

24 (L) SHARED RESOURCES.—The feasibility

25 of the Secretary entering into such arrangements
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1 with the Commissioner of Social Security as

2 may be appropriate with respect to transferred

3 functions under the plan to share office space,

4 support staff, and other resources, with appro5 priate reimbursement.

6 (M) TRAINING.—The training that should

7 be provided to administrative law judges with

8 respect to laws and regulations under title XVIII

9 of the Social Security Act.

10 (3) ADDITIONAL INFORMATION.—The plan may

11 also include recommendations for further congres12 sional action, including modifications to the require13 ments and deadlines established under section 1869 of

14 the Social Security Act (as amended by sections 521

15 and 522 of BIPA (114 Stat. 2763A–534) and this

16 Act).

17 (b) GAO EVALUATION.—The Comptroller General of

18 the United States shall—

19 (1) evaluate the plan submitted under subsection

20 (a); and

21 (2) not later than 6 months after such submis22 sion, submit to Congress, the Commissioner of Social

23 Security, and the Secretary a report on such evalua24 tion.
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1 (c) SUBMISSION OF GAO REPORT REQUIRED BEFORE

2 PLAN IMPLEMENTATION.—The Commissioner of Social Se3 curity and the Secretary may not implement the plan devel4 oped under subsection (a) before the date that is 6 months

5 after the date the report required under subsection (b)(2)

6 is submitted to the Commissioner and the Secretary.

7 SEC. 512. EXPEDITED ACCESS TO JUDICIAL REVIEW.

8 (a) IN GENERAL.—Section 1869(b) (42 U.S.C.

9 1395ff(b)) is amended—

10 (1) in paragraph (1)(A), by inserting ‘‘, subject

11 to paragraph (2),’’ before ‘‘to judicial review of the

12 Secretary’s final decision’’; and

13 (2) by adding at the end the following new para14 graph:

15 ‘‘(2) EXPEDITED ACCESS TO JUDICIAL RE16 VIEW.—

17 ‘‘(A) IN GENERAL.—The Secretary shall es18 tablish a process under which a provider of serv19 ices or supplier that furnishes an item or service

20 or a beneficiary who has filed an appeal under

21 paragraph (1) (other than an appeal filed under

22 paragraph (1)(F)(i)) may obtain access to judi23 cial review when a review entity (described in

24 subparagraph (D)), on its own motion or at the

25 request of the appellant, determines that the De-
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1 partmental Appeals Board does not have the au2 thority to decide the question of law or regula3 tion relevant to the matters in controversy and

4 that there is no material issue of fact in dispute.

5 The appellant may make such request only once

6 with respect to a question of law or regulation

7 for a specific matter in dispute in a case of an

8 appeal.

9 ‘‘(B) PROMPT DETERMINATIONS.—If, after

10 or coincident with appropriately filing a request

11 for an administrative hearing, the appellant re12 quests a determination by the appropriate review

13 entity that the Departmental Appeals Board does

14 not have the authority to decide the question of

15 law or regulations relevant to the matters in con16 troversy and that there is no material issue of

17 fact in dispute, and if such request is accom18 panied by the documents and materials as the

19 appropriate review entity shall require for pur20 poses of making such determination, such review

21 entity shall make a determination on the request

22 in writing within 60 days after the date such re23 view entity receives the request and such accom24 panying documents and materials. Such a deter25 mination by such review entity shall be consid-
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1 ered a final decision and not subject to review by

2 the Secretary.

3 ‘‘(C) ACCESS TO JUDICIAL REVIEW.—

4 ‘‘(i) IN GENERAL.—If the appropriate

5 review entity—

6 ‘‘(I) determines that there are no

7 material issues of fact in dispute and

8 that the only issues to be adjudicated

9 are ones of law or regulation that the

10 Departmental Appeals Board does not

11 have authority to decide; or

12 ‘‘(II) fails to make such deter13 mination within the period provided

14 under subparagraph (B);

15 then the appellant may bring a civil action

16 as described in this subparagraph.

17 ‘‘(ii) DEADLINE FOR FILING.—Such

18 action shall be filed, in the case described

19 in—

20 ‘‘(I) clause (i)(I), within 60 days

21 of the date of the determination de22 scribed in such clause; or

23 ‘‘(II) clause (i)(II), within 60

24 days of the end of the period provided
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1 under subparagraph (B) for the deter2 mination.

3 ‘‘(iii) VENUE.—Such action shall be

4 brought in the district court of the United

5 States for the judicial district in which the

6 appellant is located (or, in the case of an

7 action brought jointly by more than 1 ap8 plicant, the judicial district in which the

9 greatest number of applicants are located)

10 or in the District Court for the District of

11 Columbia.

12 ‘‘(iv) INTEREST ON ANY AMOUNTS IN

13 CONTROVERSY.—Where a provider of serv14 ices or supplier is granted judicial review

15 pursuant to this paragraph, the amount in

16 controversy (if any) shall be subject to an17 nual interest beginning on the first day of

18 the first month beginning after the 60-day

19 period as determined pursuant to clause (ii)

20 and equal to the rate of interest on obliga21 tions issued for purchase by the Federal

22 Supplementary Medical Insurance Trust

23 Fund for the month in which the civil ac24 tion authorized under this paragraph is

25 commenced, to be awarded by the reviewing
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1 court in favor of the prevailing party. No

2 interest awarded pursuant to the preceding

3 sentence shall be deemed income or cost for

4 the purposes of determining reimbursement

5 due providers of services, physicians, practi6 tioners, and other suppliers under this Act.

7 (D) REVIEW ENTITY DEFINED.—For pur8 poses of this subsection, the term ‘review entity’

9 means an entity of up to 3 qualified reviewers

10 drawn from existing appeals levels other than the

11 redetermination level.

12 (b) APPLICATION TO PROVIDER AGREEMENT DETER13 MINATIONS.—Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1))

14 is amended—

15 (1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and

16 (2) by adding at the end the following new sub17 paragraph:

18 ‘‘(B) An institution or agency described in subpara19 graph (A) that has filed for a hearing under subparagraph

20 (A) shall have expedited access to judicial review under this

21 subparagraph in the same manner as providers of services,

22 suppliers, and beneficiaries may obtain expedited access to

23 judicial review under the process established under section

24 1869(b)(2). Nothing in this subparagraph shall be construed

25 to affect the application of any remedy imposed under sec-
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1 tion 1819 during the pendency of an appeal under this sub2 paragraph.’’.

3 (c) GAO STUDY AND REPORT ON ACCESS TO JUDICIAL

4 REVIEW.—

5 (1) STUDY.—The Comptroller General of the

6 United States shall conduct a study on the access of

7 medicare beneficiaries and health care providers to

8 judicial review of actions of the Secretary and the De9 partment of Health and Human Services with respect

10 to items and services under title XVIII of the Social

11 Security Act subsequent to February 29, 2000, the

12 date of the decision of Shalala, Secretary of Health

13 and Human Services, et al. v. Illinois Council on

14 Long Term Care, Inc. (529 U.S. 1 (2000)).

15 (2) REPORT.—Not later than 1 year after the

16 date of enactment of this Act, the Comptroller General

17 shall submit to Congress a report on the study con18 ducted under paragraph (1) together with such rec19 ommendations as the Comptroller General determines

20 to be appropriate.

21 (d) CONFORMING AMENDMENT.—Section

22 1869(b)(1)(F)(ii) (42 U.S.C. 1395ff(b)(1)(F)(ii)) is amend23 ed to read as follows:

24 ‘‘(ii) REFERENCE TO EXPEDITED AC25 CESS TO JUDICIAL REVIEW.—For the provi-
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1 sion relating to expedited access to judicial

2 review, see paragraph (2).’’.

3 (e) EFFECTIVE DATE.—The amendments made by this

4 section shall apply to appeals filed on or after October 1,

5 2004.

6 SEC. 513. EXPEDITED REVIEW OF CERTAIN PROVIDER

7 AGREEMENT DETERMINATIONS.

8 (a) TERMINATION AND CERTAIN OTHER IMMEDIATE

9 REMEDIES.—

10 (1) IN GENERAL.—The Secretary shall develop

11 and implement a process to expedite proceedings

12 under sections 1866(h) of the Social Security Act (42

13 U.S.C. 1395cc(h)) in which—

14 (A) the remedy of termination of participa15 tion has been imposed;

16 (B) a sanction described in clause (i) or

17 (iii) of section 1819(h)(2)(B) of such Act (42

18 U.S.C. 1395i–3(h)(2)(B)) has been imposed, but

19 only if such sanction has been imposed on an

20 immediate basis; or

21 (C) the Secretary has required a skilled

22 nursing facility to suspend operations of a nurse

23 aide training program.

24 (2) PRIORITY FOR CASES OF TERMINATION.—

25 Under the process described in paragraph (1), pri-
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1 ority shall be provided in cases of termination de2 scribed in subparagraph (A) of such paragraph.

3 (b) INCREASED FINANCIAL SUPPORT.—In addition to

4 any amounts otherwise appropriated, to reduce by 50 per5 cent the average time for administrative determinations on

6 appeals under section 1866(h) of the Social Security Act

7 (42 U.S.C. 1395cc(h)), there are authorized to be appro8 priated (in appropriate part from the Federal Hospital In9 surance Trust Fund and the Federal Supplementary Med10 ical Insurance Trust Fund) to the Secretary such sums for

11 fiscal year 2004 and each subsequent fiscal year as may

12 be necessary to increase the number of administrative law

13 judges (and their staffs) at the Departmental Appeals Board

14 of the Department of Health and Human Services and to

15 educate such judges and staff on long-term care issues.

16 SEC. 514. REVISIONS TO MEDICARE APPEALS PROCESS.

17 (a) TIMEFRAMES FOR THE COMPLETION OF THE

18 RECORD.—Section 1869(b) (42 U.S.C. 1395ff(b)), as

19 amended by section 512(a)(2), is amended by adding at the

20 end the following new paragraph:

21 ‘‘(3) TIMELY COMPLETION OF THE RECORD.—

22 ‘‘(A) DEADLINE.—Subject to subparagraph

23 (B), the deadline to complete the record in a

24 hearing before an administrative law judge or a

25 review by the Departmental Appeals Board is 90
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1 days after the date the request for the review or

2 hearing is filed.

3 ‘‘(B) EXTENSIONS FOR GOOD CAUSE.—The

4 person filing a request under subparagraph (A)

5 may request an extension of such deadline for

6 good cause. The administrative law judge, in the

7 case of a hearing, and the Departmental Appeals

8 Board, in the case of a review, may extend such

9 deadline based upon a finding of good cause to

10 a date specified by the judge or Board, as the

11 case may be.

12 ‘‘(C) DELAY IN DECISION DEADLINES UNTIL

13 COMPLETION OF RECORD.—Notwithstanding any

14 other provision of this section, the deadlines oth15 erwise established under subsection (d) for the

16 making of determinations in hearings or review

17 under this section are 90 days after the date on

18 which the record is complete.

19 ‘‘(D) COMPLETE RECORD DESCRIBED.—For

20 purposes of this paragraph, a record is complete

21 when the administrative law judge, in the case

22 of a hearing, or the Departmental Appeals

23 Board, in the case of a review, has received—
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1 ‘‘(i) written or testimonial evidence, or

2 both, submitted by the person filing the re3 quest,

4 ‘‘(ii) written or oral argument, or both,

5 ‘‘(iii) the decision of, and the record

6 for, the prior level of appeal, and

7 ‘‘(iv) such other evidence as such judge

8 or Board, as the case may be, determines is

9 required to make a determination on the re10 quest.’’.

11 (b) USE OF PATIENTS’ MEDICAL RECORDS.—Section

12 1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)) is amended

13 by inserting ‘‘(including the medical records of the indi14 vidual involved)’’ after ‘‘clinical experience’’.

15 (c) NOTICE REQUIREMENTS FOR MEDICARE AP16 PEALS.—

17 (1) INITIAL DETERMINATIONS AND REDETER18 MINATIONS.—Section 1869(a) (42 U.S.C. 1395ff(a)) is

19 amended by adding at the end the following new

20 paragraph:

21 ‘‘(4) REQUIREMENTS OF NOTICE OF DETERMINA22 TIONS AND REDETERMINATIONS.—A written notice of

23 a determination on an initial determination or on a

24 redetermination, insofar as such determination or re25 determination results in a denial of a claim for bene-
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1 fits, shall be provided in printed form and written in

2 a manner to be understood by the beneficiary and

3 shall include—

4 ‘‘(A) the reasons for the determination, in5 cluding, as appropriate—

6 ‘‘(i) upon request in the case of an ini7 tial determination, the provision of the pol8 icy, manual, or regulation that resulted in

9 the denial; and

10 ‘‘(ii) in the case of a redetermination,

11 a summary of the clinical or scientific evi12 dence used in making the determination (as

13 appropriate);

14 ‘‘(B) the procedures for obtaining addi15 tional information concerning the determination

16 or redetermination; and

17 ‘‘(C) notification of the right to seek a rede18 termination or otherwise appeal the determina19 tion and instructions on how to initiate such a

20 redetermination or appeal under this section.’’.

21 (2) RECONSIDERATIONS.—Section 1869(c)(3)(E)

22 (42 U.S.C. 1395ff(c)(3)(E)) is amended to read as fol23 lows:

24 ‘‘(E) EXPLANATION OF DECISION.—Any de25 cision with respect to a reconsideration of a
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1 qualified independent contractor shall be in

2 writing in a manner to be understood by the

3 beneficiary and shall include—

4 ‘‘(i) to the extent appropriate, a de5 tailed explanation of the decision as well as

6 a discussion of the pertinent facts and ap7 plicable regulations applied in making such

8 decision;

9 ‘‘(ii) a notification of the right to ap10 peal such determination and instructions on

11 how to initiate such appeal under this sec12 tion; and

13 ‘‘(iii) in the case of a determination of

14 whether an item or service is reasonable and

15 necessary for the diagnosis or treatment of

16 illness or injury (under section

17 1862(a)(1)(A)) an explanation of the med18 ical or scientific rationale for the decision.’’.

19 (3) APPEALS.—Section 1869(d) (42 U.S.C.

20 1395ff(d)) is amended—

21 (A) in the heading, by inserting ‘‘; NOTICE’’

22 after ‘‘SECRETARY’’; and

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

24 paragraph:
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1 ‘‘(4) NOTICE.—Notice of the decision of an ad2 ministrative law judge shall be in writing in a man3 ner to be understood by the beneficiary and shall

4 include—

5 ‘‘(A) the specific reasons for the determina6 tion (including, to the extent appropriate, a

7 summary of the clinical or scientific evidence

8 used in making the determination);

9 ‘‘(B) the procedures for obtaining addi10 tional information concerning the decision; and

11 ‘‘(C) notification of the right to appeal the

12 decision and instructions on how to initiate such

13 an appeal under this section.’’.

14 (4) PREPARATION OF RECORD FOR APPEAL.—

15 Section 1869(c)(3)(J) (42 U.S.C. 1395ff(c)(3)(J)) is

16 amended by striking ‘‘such information as is required

17 for an appeal’’ and inserting ‘‘the record for the ap18 peal’’.

19 (d) QUALIFIED INDEPENDENT CONTRACTORS.—

20 (1) ELIGIBILITY REQUIREMENTS OF QUALIFIED

21 INDEPENDENT CONTRACTORS.—Section 1869(c) (42

22 U.S.C. 1395ff(c)) is amended—

23 (A) in paragraph (2)—

24 (i) by inserting ‘‘(except in the case of

25 a utilization and quality control peer re-
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1 view organization, as defined in section

2 1152)’’ after ‘‘means an entity or organiza3 tion that’’; and

4 (ii) by striking the period at the end

5 and inserting the following: ‘‘and meets the

6 following requirements:

7 ‘‘(A) GENERAL REQUIREMENTS.—

8 ‘‘(i) The entity or organization has

9 (directly or through contracts or other ar10 rangements) sufficient medical, legal, and

11 other expertise (including knowledge of the

12 program under this title) and sufficient

13 staffing to carry out duties of a qualified

14 independent contractor under this section

15 on a timely basis.

16 ‘‘(ii) The entity or organization has

17 provided assurances that it will conduct ac18 tivities consistent with the applicable re19 quirements of this section, including that it

20 will not conduct any activities in a case

21 unless the independence requirements of

22 subparagraph (B) are met with respect to

23 the case.
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1 ‘‘(iii) The entity or organization meets

2 such other requirements as the Secretary

3 provides by regulation.

4 ‘‘(B) INDEPENDENCE REQUIREMENTS.—

5 ‘‘(i) IN GENERAL.—Subject to clause

6 (ii), an entity or organization meets the

7 independence requirements of this subpara8 graph with respect to any case if the

9 entity—

10 ‘‘(I) is not a related party (as de11 fined in subsection (g)(5));

12 ‘‘(II) does not have a material fa13 milial, financial, or professional rela14 tionship with such a party in relation

15 to such case; and

16 ‘‘(III) does not otherwise have a

17 conflict of interest with such a party

18 (as determined under regulations).

19 ‘‘(ii) EXCEPTION FOR COMPENSA20 TION.—Nothing in clause (i) shall be con21 strued to prohibit receipt by a qualified

22 independent contractor of compensation

23 from the Secretary for the conduct of activi24 ties under this section if the compensation

25 is provided consistent with clause (iii).
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1 ‘‘(iii) LIMITATIONS ON ENTITY COM2 PENSATION.—Compensation provided by the

3 Secretary to a qualified independent con4 tractor in connection with reviews under

5 this section shall not be contingent on any

6 decision rendered by the contractor or by

7 any reviewing professional.’’; and

8 (B) in paragraph (3)(A), by striking ‘‘, and

9 shall have sufficient training and expertise in

10 medical science and legal matters to make recon11 siderations under this subsection’’.

12 (2) ELIGIBILITY REQUIREMENTS FOR REVIEW13 ERS.—Section 1869 (42 U.S.C. 1395ff) is amended—

14 (A) by amending subsection (c)(3)(D) to

15 read as follows:

16 ‘‘(D) QUALIFICATIONS OF REVIEWERS.—The

17 requirements of subsection (g) shall be met (relat18 ing to qualifications of reviewing profes19 sionals).’’; and

20 (B) by adding at the end the following new

21 subsection:

22 ‘‘(g) QUALIFICATIONS OF REVIEWERS.—

23 ‘‘(1) IN GENERAL.—In reviewing determinations

24 under this section, a qualified independent contractor

25 shall assure that—
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1 ‘‘(A) each individual conducting a review

2 shall meet the qualifications of paragraph (2);

3 ‘‘(B) compensation provided by the con4 tractor to each such reviewer is consistent with

5 paragraph (3); and

6 ‘‘(C) in the case of a review by a panel de7 scribed in subsection (c)(3)(B) composed of phy8 sicians or other health care professionals (each in

9 this subsection referred to as a ‘reviewing profes10 sional’), each reviewing professional meets the

11 qualifications described in paragraph (4).

12 ‘‘(2) INDEPENDENCE.—

13 ‘‘(A) IN GENERAL.—Subject to subpara14 graph (B), each individual conducting a review

15 in a case shall—

16 ‘‘(i) not be a related party (as defined

17 in paragraph (5));

18 ‘‘(ii) not have a material familial, fi19 nancial, or professional relationship with

20 such a party in the case under review; and

21 ‘‘(iii) not otherwise have a conflict of

22 interest with such a party (as determined

23 under regulations).

24 ‘‘(B) EXCEPTION.—Nothing in subpara25 graph (A) shall be construed to—
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1 ‘‘(i) prohibit an individual, solely on

2 the basis of affiliation with a fiscal inter3 mediary, carrier, or other contractor, from

4 serving as a reviewing professional if—

5 ‘‘(I) a nonaffiliated individual is

6 not reasonably available;

7 ‘‘(II) the affiliated individual is

8 not involved in the provision of items

9 or services in the case under review;

10 ‘‘(III) the fact of such an affili11 ation is disclosed to the Secretary and

12 the beneficiary (or authorized rep13 resentative) and neither party objects;

14 and

15 ‘‘(IV) the affiliated individual is

16 not an employee of the intermediary,

17 carrier, or contractor and does not pro18 vide services exclusively or primarily

19 to or on behalf of such intermediary,

20 carrier, or contractor;

21 ‘‘(ii) prohibit an individual who has

22 staff privileges at the institution where the

23 treatment involved takes place from serving

24 as a reviewer merely on the basis of such af25 filiation if the affiliation is disclosed to the
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1 Secretary and the beneficiary (or authorized

2 representative), and neither party objects; or

3 ‘‘(iii) prohibit receipt of compensation

4 by a reviewing professional from a con5 tractor if the compensation is provided con6 sistent with paragraph (3).

7 ‘‘(3) LIMITATIONS ON REVIEWER COMPENSA8 TION.—Compensation provided by a qualified inde9 pendent contractor to a reviewer in connection with

10 a review under this section shall not be contingent on

11 the decision rendered by the reviewer.

12 ‘‘(4) LICENSURE AND EXPERTISE.—Each review13 ing professional shall be a physician (allopathic or

14 osteopathic) or health care professional who—

15 ‘‘(A) is appropriately credentialed or li16 censed in 1 or more States to deliver health care

17 services; and

18 ‘‘(B) has medical expertise in the field of

19 practice that is appropriate for the items or serv20 ices at issue.

21 ‘‘(5) RELATED PARTY DEFINED.—For purposes

22 of this section, the term ‘related party’ means, with

23 respect to a case under this title involving an indi24 vidual beneficiary, any of the following:
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1 ‘‘(A) The Secretary, the medicare adminis2 trative contractor involved, or any fiduciary, of3 ficer, director, or employee of the Department of

4 Health and Human Services, or of such con5 tractor.

6 ‘‘(B) The individual (or authorized rep7 resentative).

8 ‘‘(C) The health care professional that pro9 vides the items or services involved in the case.

10 ‘‘(D) The institution at which the items or

11 services (or treatment) involved in the case are

12 provided.

13 ‘‘(E) The manufacturer of any drug or

14 other item that is included in the items or serv15 ices involved in the case.

16 ‘‘(F) Any other party determined under any

17 regulations to have a substantial interest in the

18 case involved.’’.

19 (3) NUMBER OF QUALIFIED INDEPENDENT CON20 TRACTORS.—Section 1869(c)(4) (42 U.S.C.

21 1395ff(c)(4)) is amended by striking ‘‘12’’ and insert22 ing ‘‘4’’.

23 (e) IMPLEMENTATION OF CERTAIN BIPA REFORMS.—
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1 (1) DELAY IN CERTAIN BIPA REFORMS.—Section

2 521(d) of BIPA (114 Stat. 2763A–543) is amended to

3 read as follows:

4 ‘‘(d) EFFECTIVE DATE.—

5 ‘‘(1) IN GENERAL.—Except as specified in para6 graph (2), the amendments made by this section shall

7 apply with respect to initial determinations made on

8 or after December 1, 2004.

9 ‘‘(2) EXPEDITED PROCEEDINGS AND RECONSID10 ERATION REQUIREMENTS.—For the following provi11 sions, the amendments made by subsection (a) shall

12 apply with respect to initial determinations made on

13 or after October 1, 2003:

14 ‘‘(A) Subsection (b)(1)(F)(i) of section 1869

15 of the Social Security Act.

16 ‘‘(B) Subsection (c)(3)(C)(iii) of such sec17 tion.

18 ‘‘(C) Subsection (c)(3)(C)(iv) of such section

19 to the extent that it applies to expedited recon20 siderations under subsection (c)(3)(C)(iii) of

21 such section.

22 ‘‘(3) TRANSITIONAL USE OF PEER REVIEW ORGA23 NIZATIONS TO CONDUCT EXPEDITED RECONSIDER24 ATIONS UNTIL QICS ARE OPERATIONAL.—Expedited

25 reconsiderations of initial determinations under sec-
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1 tion 1869(c)(3)(C)(iii) of the Social Security Act

2 shall be made by peer review organizations until

3 qualified independent contractors are available for

4 such expedited reconsiderations.’’.

5 (2) CONFORMING AMENDMENTS.—Section 521(c)

6 of BIPA (114 Stat. 2763A–543) and section

7 1869(c)(3)(C)(iii)(III) of the Social Security Act (42

8 U.S.C. 1395ff(c)(3)(C)(iii)(III)), as added by section

9 521 of BIPA, are repealed.

10 (f) EFFECTIVE DATE.—The amendments made by this

11 section shall be effective as if included in the enactment of

12 the respective provisions of subtitle C of title V of BIPA,

13 114 Stat. 2763A–534.

14 (g) TRANSITION.—In applying section 1869(g) of the

15 Social Security Act (as added by subsection (d)(2)), any

16 reference to a medicare administrative contractor shall be

17 deemed to include a reference to a fiscal intermediary under

18 section 1816 of the Social Security Act (42 U.S.C. 1395h)

19 and a carrier under section 1842 of such Act (42 U.S.C.

20 1395u).
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1 SEC. 515. HEARING RIGHTS RELATED TO DECISIONS BY

2 THE SECRETARY TO DENY OR NOT RENEW A

3 MEDICARE ENROLLMENT AGREEMENT; CON4 SULTATION BEFORE CHANGING PROVIDER

5 ENROLLMENT FORMS.

6 (a) HEARING RIGHTS.—

7 (1) IN GENERAL.—Section 1866 (42 U.S.C.

8 1395cc) is amended by adding at the end the fol9 lowing new subsection:

10 ‘‘(j) HEARING RIGHTS IN CASES OF DENIAL OR NON11 RENEWAL.—The Secretary shall establish by regulation pro12 cedures under which—

13 ‘‘(1) there are deadlines for actions on applica14 tions for enrollment (and, if applicable, renewal of

15 enrollment); and

16 ‘‘(2) providers of services, physicians, practi17 tioners, and suppliers whose application to enroll (or,

18 if applicable, to renew enrollment) are denied are

19 provided a mechanism to appeal such denial and a

20 deadline for consideration of such appeals.’’.

21 (2) EFFECTIVE DATE.—The Secretary shall pro22 vide for the establishment of the procedures under the

23 amendment made by paragraph (1) within 18 months

24 after the date of enactment of this Act.

25 (b) CONSULTATION BEFORE CHANGING PROVIDER EN26 ROLLMENT FORMS.—Section 1871 (42 U.S.C. 1395hh), as
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1 amended by sections 502 and 503, is amended by adding

2 at the end the following new subsection:

3 ‘‘(f) The Secretary shall consult with providers of serv4 ices, physicians, practitioners, and suppliers before making

5 changes in the provider enrollment forms required of such

6 providers, physicians, practitioners, and suppliers to be eli7 gible to submit claims for which payment may be made

8 under this title.’’.

9 SEC. 516. APPEALS BY PROVIDERS WHEN THERE IS NO

10 OTHER PARTY AVAILABLE.

11 (a) IN GENERAL.—Section 1870 (42 U.S.C. 1395gg)

12 is amended by adding at the end the following new sub13 section:

14 ‘‘(h) Notwithstanding subsection (f) or any other pro15 vision of law, the Secretary shall permit a provider of serv16 ices, physician, practitioner, or other supplier to appeal

17 any determination of the Secretary under this title relating

18 to services rendered under this title to an individual who

19 subsequently dies if there is no other party available to ap20 peal such determination.’’.

21 (b) EFFECTIVE DATE.—The amendment made by sub22 section (a) shall take effect on the date of enactment of this

23 Act and shall apply to items and services furnished on or

24 after such date.
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1 SEC. 517. PROVIDER ACCESS TO REVIEW OF LOCAL COV2 ERAGE DETERMINATIONS.

3 (a) PROVIDER ACCESS TO REVIEW OF LOCAL COV4 ERAGE DETERMINATIONS.—Section 1869(f)(5) (42 U.S.C.

5 1395ff(f)(5)) is amended to read as follows:

6 ‘‘(5) AGGRIEVED PARTY DEFINED.—In this sec7 tion, the term ‘aggrieved party’ means—

8 ‘‘(A) with respect to a national coverage de9 termination, an individual entitled to benefits

10 under part A, or enrolled under part B, or both,

11 who is in need of the items or services that are

12 the subject of the coverage determination; and

13 ‘‘(B) with respect to a local coverage

14 determination—

15 ‘‘(i) an individual who is entitled to

16 benefits under part A, or enrolled under

17 part B, or both, who is adversely affected by

18 such a determination; or

19 ‘‘(ii) a provider of services, physician,

20 practitioner, or supplier that is adversely

21 affected by such a determination.’’.

22 (b) CLARIFICATION OF LOCAL COVERAGE DETERMINA23 TION DEFINITION.—Section 1869(f)(2)(B) (42 U.S.C.

24 1395ff(f)(2)(B)) is amended by inserting ‘‘, including,

25 where appropriate, the specific requirements and clinical
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1 indications relating to the medical necessity of an item or

2 service’’ before the period at the end.

3 (c) REQUEST FOR LOCAL COVERAGE DETERMINATIONS

4 BY PROVIDERS.—Section 1869 (42 U.S.C. 1395ff), as

5 amended by section 514(d)(2)(B), is amended by adding at

6 the end the following new subsection:

7 ‘‘(h) REQUEST FOR LOCAL COVERAGE DETERMINA8 TIONS BY PROVIDERS.—

9 ‘‘(1) ESTABLISHMENT OF PROCESS.—The Sec10 retary shall establish a process under which a pro11 vider of services, physician, practitioner, or supplier

12 who certifies that they meet the requirements estab13 lished in paragraph (3) may request a local coverage

14 determination in accordance with the succeeding pro15 visions of this subsection.

16 ‘‘(2) PROVIDER LOCAL COVERAGE DETERMINA17 TION REQUEST DEFINED.—In this subsection, the

18 term ‘provider local coverage determination request’

19 means a request, filed with the Secretary, at such

20 time and in such form and manner as the Secretary

21 may specify, that the Secretary, pursuant to para22 graph (4)(A), require a fiscal intermediary, carrier,

23 or program safeguard contractor to make or revise a

24 local coverage determination under this section with

25 respect to an item or service.
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1 ‘‘(3) REQUEST REQUIREMENTS.—Under the

2 process established under paragraph (1), by not later

3 than 30 days after the date on which a provider local

4 coverage determination request is filed under para5 graph (1), the Secretary shall determine whether such

6 request establishes that—

7 ‘‘(A) there have been at least 5 reversals of

8 redeterminations made by a fiscal intermediary

9 or carrier after a hearing before an administra10 tive law judge on claims submitted by the pro11 vider in at least 2 different cases before an ad12 ministrative law judge;

13 ‘‘(B) each reversal described in subpara14 graph (A) involves substantially similar mate15 rial facts;

16 ‘‘(C) each reversal described in subpara17 graph (A) involves the same medical necessity

18 issue; and

19 ‘‘(D) at least 50 percent of the total number

20 of claims submitted by such provider within the

21 past year involving the substantially similar

22 material facts described in subparagraph (B)

23 and the same medical necessity issue described in

24 subparagraph (C) have been denied and have

25 been reversed by an administrative law judge.
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1 ‘‘(4) APPROVAL OR REJECTION OF REQUEST.—

2 ‘‘(A) APPROVAL OF REQUEST.—If the Sec3 retary determines that subparagraphs (A)

4 through (D) of paragraph (3) have been satisfied,

5 the Secretary shall require the fiscal inter6 mediary, carrier, or program safeguard con7 tractor identified in the provider local coverage

8 determination request, to make or revise a local

9 coverage determination with respect to the item

10 or service that is the subject of the request not

11 later than the date that is 210 days after the

12 date on which the Secretary makes the deter13 mination. Such fiscal intermediary, carrier, or

14 program safeguard contractor shall retain the

15 discretion to determine whether or not, and/or

16 the circumstances under which, to cover the item

17 or service for which a local coverage determina18 tion is requested. Nothing in this subsection shall

19 be construed to require a fiscal intermediary,

20 carrier or program safeguard contractor to de21 velop a local coverage determination that is in22 consistent with any national coverage determina23 tion, or any coverage provision in this title or in

24 regulation, manual, or interpretive guidance of

25 the Secretary.
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1 ‘‘(B) REJECTION OF REQUEST.—If the Sec2 retary determines that subparagraphs (A)

3 through (D) of paragraph (3) have not been sat4 isfied, the Secretary shall reject the provider

5 local coverage determination request and shall

6 notify the provider of services, physician, practi7 tioner, or supplier that filed the request of the

8 reason for such rejection and no further pro9 ceedings in relation to such request shall be con10 ducted.’’.

11 (d) STUDY AND REPORT ON THE USE OF CONTRAC12 TORS TO MONITOR MEDICARE APPEALS.—

13 (1) STUDY.—The Secretary shall conduct a study

14 on the feasibility and advisability of requiring fiscal

15 intermediaries and carriers to monitor and track—

16 (A) the subject matter and status of claims

17 denied by the fiscal intermediary or carrier (as

18 applicable) that are appealed under section 1869

19 of the Social Security Act (42 U.S.C. 1395ff), as

20 added by section 522 of BIPA (114 Stat. 2763A–

21 543) and amended by this Act; and

22 (B) any final determination made with re23 spect to such claims.

24 (2) REPORT.—Not later than the date that is 1

25 year after the date of enactment of this Act, the Sec-
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1 retary shall submit to Congress a report on the study

2 conducted under paragraph (1) together with such

3 recommendations for legislation and administrative

4 action as the Commission determines appropriate.

5 (e) AUTHORIZATION OF APPROPRIATIONS.—There are

6 authorized to be appropriated such sums as are necessary

7 to carry out the amendments made by subsections (a), (b),

8 and (c).

9 (f) EFFECTIVE DATES.—

10 (1) PROVIDER ACCESS TO REVIEW OF LOCAL

11 COVERAGE DETERMINATIONS.—The amendments

12 made by subsections (a) and (b) shall apply to—

13 (A) any review of any local coverage deter14 mination filed on or after October 1, 2003;

15 (B) any request to make such a determina16 tion made on or after such date; or

17 (C) any local coverage determination made

18 on or after such date.

19 (2) PROVIDER LOCAL COVERAGE DETERMINATION

20 REQUESTS.—The amendment made by subsection (c)

21 shall apply with respect to provider local coverage de22 termination requests (as defined in section 1869(h)(2)

23 of the Social Security Act, as added by subsection (c))

24 filed on or after the date of enactment of this Act.
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1 SEC. 518. REVISIONS TO APPEALS TIMEFRAMES.

2 Section 1869 (42 U.S.C. 1395ff) is amended—

3 (1) in subsection (a)(3)(C)(ii), by striking ‘‘30-

4 day period’’ each place it appears and inserting ‘‘60-

5 day period’’;

6 (2) in subsection (c)(3)(C)(i), by striking ‘‘30-

7 day period’’ and inserting ‘‘60-day period’’;

8 (3) in subsection (d)(1)(A), by striking ‘‘90-day

9 period’’ and inserting ‘‘120-day period’’; and

10 (4) in subsection (d)(2)(A), by striking ‘‘90-day

11 period’’ and inserting ‘‘120-day period’’.

12 SEC. 519. ELIMINATION OF REQUIREMENT TO USE SOCIAL

13 SECURITY ADMINISTRATION ADMINISTRA14 TIVE LAW JUDGES.

15 The first sentence of section 1869(f)(2)(A)(i) (42

16 U.S.C. 1395ff(f)(2)(A)(i)) is amended by striking ‘‘of the

17 Social Security Administration’’.

18 SEC. 520. ELIMINATION OF REQUIREMENT FOR DE NOVO

19 REVIEW BY THE DEPARTMENTAL APPEALS

20 BOARD.

21 Section 1869(d)(2) (42 U.S.C. 1395ff(d)(2)) is amend22 ed to read as follows:

23 ‘‘(2) DEPARTMENTAL APPEALS BOARD RE24 VIEW.—The Departmental Appeals Board of the De25 partment of Health and Human Services shall con26 duct and conclude a review of the decision on a hear-
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1 ing described in paragraph (1) and make a decision

2 or remand the case to the administrative law judge

3 for reconsideration by not later than the end of the

4 90-day period beginning on the date a request for re5 view has been timely filed.’’.

6 Subtitle C—Contracting Reform

7 SEC. 521. INCREASED FLEXIBILITY IN MEDICARE ADMINIS8 TRATION.

9 (a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE

10 ADMINISTRATION.—

11 (1) IN GENERAL.—Title XVIII is amended by in12 serting after section 1874 the following new section:

13 ‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE

14 CONTRACTORS

15 ‘‘SEC. 1874A. (a) AUTHORITY.—

16 ‘‘(1) AUTHORITY TO ENTER INTO CONTRACTS.—

17 The Secretary may enter into contracts with any eli18 gible entity to serve as a medicare administrative

19 contractor with respect to the performance of any or

20 all of the functions described in paragraph (4) or

21 parts of those functions (or, to the extent provided in

22 a contract, to secure performance thereof by other en23 tities).

24 ‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is el25 igible to enter into a contract with respect to the per-
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1 formance of a particular function described in para2 graph (4) only if—

3 ‘‘(A) the entity has demonstrated capability

4 to carry out such function;

5 ‘‘(B) the entity complies with such conflict

6 of interest standards as are generally applicable

7 to Federal acquisition and procurement;

8 ‘‘(C) the entity has sufficient assets to fi9 nancially support the performance of such func10 tion; and

11 ‘‘(D) the entity meets such other require12 ments as the Secretary may impose.

13 ‘‘(3) MEDICARE ADMINISTRATIVE CONTRACTOR

14 DEFINED.—For purposes of this title and title XI—

15 ‘‘(A) IN GENERAL.—The term ‘medicare ad16 ministrative contractor’ means an agency, orga17 nization, or other person with a contract under

18 this section.

19 ‘‘(B) APPROPRIATE MEDICARE ADMINISTRA20 TIVE CONTRACTOR.—With respect to the perform21 ance of a particular function in relation to an

22 individual entitled to benefits under part A or

23 enrolled under part B, or both, a specific pro24 vider of services, physician, practitioner, facility,

25 or supplier (or class of such providers of services,
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1 physicians, practitioners, facilities, or suppliers),

2 the ‘appropriate’ medicare administrative con3 tractor is the medicare administrative contractor

4 that has a contract under this section with re5 spect to the performance of that function in rela6 tion to that individual, provider of services, phy7 sician, practitioner, facility, or supplier or class

8 of provider of services, physician, practitioner,

9 facility, or supplier.

10 ‘‘(4) FUNCTIONS DESCRIBED.—The functions re11 ferred to in paragraphs (1) and (2) are payment

12 functions (including the function of developing local

13 coverage determinations, as defined in section

14 1869(f)(2)(B)), provider services functions, and bene15 ficiary services functions as follows:

16 ‘‘(A) DETERMINATION OF PAYMENT

17 AMOUNTS.—Determining (subject to the provi18 sions of section 1878 and to such review by the

19 Secretary as may be provided for by the con20 tracts) the amount of the payments required pur21 suant to this title to be made to providers of

22 services, physicians, practitioners, facilities, sup23 pliers, and individuals.

24 ‘‘(B) MAKING PAYMENTS.—Making pay25 ments described in subparagraph (A) (including
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1 receipt, disbursement, and accounting for funds

2 in making such payments).

3 ‘‘(C) BENEFICIARY EDUCATION AND ASSIST4 ANCE.—Serving as a center for, and commu5 nicating to individuals entitled to benefits under

6 part A or enrolled under part B, or both, with

7 respect to education and outreach for those indi8 viduals, and assistance with specific issues, con9 cerns, or problems of those individuals.

10 ‘‘(D) PROVIDER CONSULTATIVE SERV11 ICES.—Providing consultative services to institu12 tions, agencies, and other persons to enable them

13 to establish and maintain fiscal records nec14 essary for purposes of this title and otherwise to

15 qualify as providers of services, physicians, prac16 titioners, facilities, or suppliers.

17 ‘‘(E) COMMUNICATION WITH PROVIDERS.—

18 Serving as a center for, and communicating to

19 providers of services, physicians, practitioners,

20 facilities, and suppliers, any information or in21 structions furnished to the medicare administra22 tive contractor by the Secretary, and serving as

23 a channel of communication from such pro24 viders, physicians, practitioners, facilities, and

25 suppliers to the Secretary.
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1 ‘‘(F) PROVIDER EDUCATION AND TECHNICAL

2 ASSISTANCE.—Performing the functions de3 scribed in subsections (e) and (f), relating to

4 education, training, and technical assistance to

5 providers of services, physicians, practitioners,

6 facilities, and suppliers.

7 ‘‘(G) ADDITIONAL FUNCTIONS.—Performing

8 such other functions, including (subject to para9 graph (5)) functions under the Medicare Integ10 rity Program under section 1893, as are nec11 essary to carry out the purposes of this title.

12 ‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—

13 ‘‘(A) NONDUPLICATION OF ACTIVITIES.—In

14 entering into contracts under this section, the

15 Secretary shall assure that activities of medicare

16 administrative contractors do not duplicate ac17 tivities carried out under contracts entered into

18 under the Medicare Integrity Program under sec19 tion 1893. The previous sentence shall not apply

20 with respect to the activity described in section

21 1893(b)(5) (relating to prior authorization of

22 certain items of durable medical equipment

23 under section 1834(a)(15)).

24 ‘‘(B) CONSTRUCTION.—An entity shall not

25 be treated as a medicare administrative con-
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1 tractor merely by reason of having entered into

2 a contract with the Secretary under section

3 1893.

4 ‘‘(6) APPLICATION OF FEDERAL ACQUISITION

5 REGULATION.—Except to the extent inconsistent with

6 a specific requirement of this title, the Federal Acqui7 sition Regulation applies to contracts under this title.

8 ‘‘(b) CONTRACTING REQUIREMENTS.—

9 ‘‘(1) USE OF COMPETITIVE PROCEDURES.—

10 ‘‘(A) IN GENERAL.—Except as provided in

11 laws with general applicability to Federal acqui12 sition and procurement, the Federal Acquisition

13 Regulation, or in subparagraph (B), the Sec14 retary shall use competitive procedures when en15 tering into contracts with medicare administra16 tive contractors under this section.

17 ‘‘(B) RENEWAL OF CONTRACTS.—The Sec18 retary may renew a contract with a medicare

19 administrative contractor under this section

20 from term to term without regard to section 5 of

21 title 41, United States Code, or any other provi22 sion of law requiring competition, if the medi23 care administrative contractor has met or ex24 ceeded the performance requirements applicable

25 with respect to the contract and contractor, ex-
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1 cept that the Secretary shall provide for the ap2 plication of competitive procedures under such a

3 contract not less frequently than once every 6

4 years.

5 ‘‘(C) TRANSFER OF FUNCTIONS.—The Sec6 retary may transfer functions among medicare

7 administrative contractors without regard to any

8 provision of law requiring competition. The Sec9 retary shall ensure that performance quality is

10 considered in such transfers. The Secretary shall

11 provide notice (whether in the Federal Register

12 or otherwise) of any such transfer (including a

13 description of the functions so transferred and

14 contact information for the contractors involved)

15 to providers of services, physicians, practitioners,

16 facilities, and suppliers affected by the transfer.

17 ‘‘(D) INCENTIVES FOR QUALITY.—The Sec18 retary may provide incentives for medicare ad19 ministrative contractors to provide quality serv20 ice and to promote efficiency.

21 ‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No

22 contract under this section shall be entered into with

23 any medicare administrative contractor unless the

24 Secretary finds that such medicare administrative

25 contractor will perform its obligations under the con-
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1 tract efficiently and effectively and will meet such re2 quirements as to financial responsibility, legal au3 thority, and other matters as the Secretary finds per4 tinent.

5 ‘‘(3) PERFORMANCE REQUIREMENTS.—

6 ‘‘(A) DEVELOPMENT OF SPECIFIC PERFORM7 ANCE REQUIREMENTS.—The Secretary shall de8 velop contract performance requirements to carry

9 out the specific requirements applicable under

10 this title to a function described in subsection

11 (a)(4) and shall develop standards for measuring

12 the extent to which a contractor has met such re13 quirements. In developing such performance re14 quirements and standards for measurement, the

15 Secretary shall consult with providers of services,

16 organizations representative of beneficiaries

17 under this title, and organizations and agencies

18 performing functions necessary to carry out the

19 purposes of this section with respect to such per20 formance requirements. The Secretary shall make

21 such performance requirements and measurement

22 standards available to the public.

23 ‘‘(B) CONSIDERATIONS.—The Secretary

24 shall include, as 1 of the standards, provider and

25 beneficiary satisfaction levels.
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1 ‘‘(C) INCLUSION IN CONTRACTS.—All con2 tractor performance requirements shall be set

3 forth in the contract between the Secretary and

4 the appropriate medicare administrative con5 tractor. Such performance requirements—

6 ‘‘(i) shall reflect the performance re7 quirements published under subparagraph

8 (A), but may include additional perform9 ance requirements;

10 ‘‘(ii) shall be used for evaluating con11 tractor performance under the contract; and

12 ‘‘(iii) shall be consistent with the writ13 ten statement of work provided under the

14 contract.

15 ‘‘(4) INFORMATION REQUIREMENTS.—The Sec16 retary shall not enter into a contract with a medicare

17 administrative contractor under this section unless

18 the contractor agrees—

19 ‘‘(A) to furnish to the Secretary such timely

20 information and reports as the Secretary may

21 find necessary in performing his functions under

22 this title; and

23 ‘‘(B) to maintain such records and afford

24 such access thereto as the Secretary finds nec25 essary to assure the correctness and verification
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1 of the information and reports under subpara2 graph (A) and otherwise to carry out the pur3 poses of this title.

4 ‘‘(5) SURETY BOND.—A contract with a medi5 care administrative contractor under this section may

6 require the medicare administrative contractor, and

7 any of its officers or employees certifying payments or

8 disbursing funds pursuant to the contract, or other9 wise participating in carrying out the contract, to

10 give surety bond to the United States in such amount

11 as the Secretary may deem appropriate.

12 ‘‘(6) RETAINING DIVERSITY OF LOCAL COVERAGE

13 DETERMINATIONS.—A contract with a medicare ad14 ministrative contractor under this section to perform

15 the function of developing local coverage determina16 tions (as defined in section 1869(f)(2)(B)) shall pro17 vide that the contractor shall—

18 ‘‘(A) designate at least 1 different indi19 vidual to serve as medical director for each State

20 for which such contract performs such function;

21 ‘‘(B) utilize such medical director in the

22 performance of such function; and

23 ‘‘(C) appoint a contractor advisory com24 mittee with respect to each such State to provide

25 a formal mechanism for physicians in the State
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1 to be informed of, and participate in, the devel2 opment of a local coverage determination in an

3 advisory capacity.

4 ‘‘(c) TERMS AND CONDITIONS.—

5 ‘‘(1) IN GENERAL.—Subject to subsection (a)(6),

6 a contract with any medicare administrative con7 tractor under this section may contain such terms

8 and conditions as the Secretary finds necessary or ap9 propriate and may provide for advances of funds to

10 the medicare administrative contractor for the mak11 ing of payments by it under subsection (a)(4)(B).

12 ‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN

13 DATA COLLECTION.—The Secretary may not require,

14 as a condition of entering into, or renewing, a con15 tract under this section, that the medicare adminis16 trative contractor match data obtained other than in

17 its activities under this title with data used in the ad18 ministration of this title for purposes of identifying

19 situations in which the provisions of section 1862(b)

20 may apply.

21 ‘‘(d) LIMITATION ON LIABILITY OF MEDICARE ADMIN22 ISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—

23 ‘‘(1) CERTIFYING OFFICER.—No individual des24 ignated pursuant to a contract under this section as

25 a certifying officer shall, in the absence of the reckless
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1 disregard of the individual’s obligations or the intent

2 by that individual to defraud the United States, be

3 liable with respect to any payments certified by the

4 individual under this section.

5 ‘‘(2) DISBURSING OFFICER.—No disbursing offi6 cer shall, in the absence of the reckless disregard of the

7 officer’s obligations or the intent by that officer to de8 fraud the United States, be liable with respect to any

9 payment by such officer under this section if it was

10 based upon an authorization (which meets the appli11 cable requirements for such internal controls estab12 lished by the Comptroller General) of a certifying offi13 cer designated as provided in paragraph (1) of this

14 subsection.

15 ‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE

16 CONTRACTOR.—No medicare administrative con17 tractor shall be liable to the United States for a pay18 ment by a certifying or disbursing officer unless, in

19 connection with such a payment, the medicare ad20 ministrative contractor acted with reckless disregard

21 of its obligations under its medicare administrative

22 contract or with intent to defraud the United States.

23 ‘‘(4) RELATIONSHIP TO FALSE CLAIMS ACT.—

24 Nothing in this subsection shall be construed to limit

25 liability for conduct that would constitute a violation
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1 of sections 3729 through 3731 of title 31, United

2 States Code (commonly known as the ‘‘False Claims

3 Act’’).

4 ‘‘(5) INDEMNIFICATION BY SECRETARY.—

5 ‘‘(A) IN GENERAL.—Notwithstanding any

6 other provision of law and subject to the suc7 ceeding provisions of this paragraph, in the case

8 of a medicare administrative contractor (or a

9 person who is a director, officer, or employee of

10 such a contractor or who is engaged by the con11 tractor to participate directly in the claims ad12 ministration process) who is made a party to

13 any judicial or administrative proceeding aris14 ing from, or relating directly to, the claims ad15 ministration process under this title, the Sec16 retary may, to the extent specified in the con17 tract with the contractor, indemnify the con18 tractor (and such persons).

19 ‘‘(B) CONDITIONS.—The Secretary may not

20 provide indemnification under subparagraph (A)

21 insofar as the liability for such costs arises di22 rectly from conduct that is determined by the

23 Secretary to be criminal in nature, fraudulent,

24 or grossly negligent.
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1 ‘‘(C) SCOPE OF INDEMNIFICATION.—Indem2 nification by the Secretary under subparagraph

3 (A) may include payment of judgments, settle4 ments (subject to subparagraph (D)), awards,

5 and costs (including reasonable legal expenses).

6 ‘‘(D) WRITTEN APPROVAL FOR SETTLE7 MENTS.—A contractor or other person described

8 in subparagraph (A) may not propose to nego9 tiate a settlement or compromise of a proceeding

10 described in such subparagraph without the

11 prior written approval of the Secretary to nego12 tiate a settlement. Any indemnification under

13 subparagraph (A) with respect to amounts paid

14 under a settlement are conditioned upon the Sec15 retary’s prior written approval of the final set16 tlement.

17 ‘‘(E) CONSTRUCTION.—Nothing in this

18 paragraph shall be construed—

19 ‘‘(i) to change any common law immu20 nity that may be available to a medicare

21 administrative contractor or person de22 scribed in subparagraph (A); or

23 ‘‘(ii) to permit the payment of costs

24 not otherwise allowable, reasonable, or allo-
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1 cable under the Federal Acquisition Regula2 tions.’’.

3 (2) CONSIDERATION OF INCORPORATION OF CUR4 RENT LAW STANDARDS.—In developing contract per5 formance requirements under section 1874A(b) of the

6 Social Security Act (as added by paragraph (1)) the

7 Secretary shall consider inclusion of the performance

8 standards described in sections 1816(f)(2) of such Act

9 (relating to timely processing of reconsiderations and

10 applications for exemptions) and section

11 1842(b)(2)(B) of such Act (relating to timely review

12 of determinations and fair hearing requests), as such

13 sections were in effect before the date of enactment of

14 this Act.

15 (b) CONFORMING AMENDMENTS TO SECTION 1816 (RE16 LATING TO FISCAL INTERMEDIARIES).—Section 1816 (42

17 U.S.C. 1395h) is amended as follows:

18 (1) The heading is amended to read as follows:

19 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART

20 A’’.

21 (2) Subsection (a) is amended to read as follows:

22 ‘‘(a) The administration of this part shall be conducted

23 through contracts with medicare administrative contractors

24 under section 1874A.’’.

25 (3) Subsection (b) is repealed.

26 (4) Subsection (c) is amended—
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1 (A) by striking paragraph (1); and

2 (B) in each of paragraphs (2)(A) and

3 (3)(A), by striking ‘‘agreement under this sec4 tion’’ and inserting ‘‘contract under section

5 1874A that provides for making payments under

6 this part’’.

7 (5) Subsections (d) through (i) are repealed.

8 (6) Subsections (j) and (k) are each amended—

9 (A) by striking ‘‘An agreement with an

10 agency or organization under this section’’ and

11 inserting ‘‘A contract with a medicare adminis12 trative contractor under section 1874A with re13 spect to the administration of this part’’; and

14 (B) by striking ‘‘such agency or organiza15 tion’’ and inserting ‘‘such medicare administra16 tive contractor’’ each place it appears.

17 (7) Subsection (l) is repealed.

18 (c) CONFORMING AMENDMENTS TO SECTION 1842 (RE19 LATING TO CARRIERS).—Section 1842 (42 U.S.C. 1395u)

20 is amended as follows:

21 (1) The heading is amended to read as follows:

22 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART

23 B’’.

24 (2) Subsection (a) is amended to read as follows:
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1 ‘‘(a) The administration of this part shall be conducted

2 through contracts with medicare administrative contractors

3 under section 1874A.’’.

4 (3) Subsection (b) is amended—

5 (A) by striking paragraph (1);

6 (B) in paragraph (2)—

7 (i) by striking subparagraphs (A) and

8 (B);

9 (ii) in subparagraph (C), by striking

10 ‘‘carriers’’ and inserting ‘‘medicare admin11 istrative contractors’’; and

12 (iii) by striking subparagraphs (D)

13 and (E);

14 (C) in paragraph (3)—

15 (i) in the matter before subparagraph

16 (A), by striking ‘‘Each such contract shall

17 provide that the carrier’’ and inserting

18 ‘‘The Secretary’’;

19 (ii) by striking ‘‘will’’ the first place it

20 appears in each of subparagraphs (A), (B),

21 (F), (G), (H), and (L) and inserting

22 ‘‘shall’’;

23 (iii) in subparagraph (B), in the mat24 ter before clause (i), by striking ‘‘to the pol25 icyholders and subscribers of the carrier’’
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1 and inserting ‘‘to the policyholders and sub2 scribers of the medicare administrative con3 tractor’’;

4 (iv) by striking subparagraphs (C),

5 (D), and (E);

6 (v) in subparagraph (H)—

7 (I) by striking ‘‘if it makes deter8 minations or payments with respect to

9 physicians’ services,’’; and

10 (II) by striking ‘‘carrier’’ and in11 serting ‘‘medicare administrative con12 tractor’’;

13 (vi) by striking subparagraph (I);

14 (vii) in subparagraph (L), by striking

15 the semicolon and inserting a period;

16 (viii) in the first sentence, after sub17 paragraph (L), by striking ‘‘and shall con18 tain’’ and all that follows through the pe19 riod; and

20 (ix) in the seventh sentence, by insert21 ing ‘‘medicare administrative contractor,’’

22 after ‘‘carrier,’’;

23 (D) by striking paragraph (5);
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1 (E) in paragraph (6)(D)(iv), by striking

2 ‘‘carrier’’ and inserting ‘‘medicare administra3 tive contractor’’; and

4 (F) in paragraph (7), by striking ‘‘the car5 rier’’ and inserting ‘‘the Secretary’’ each place it

6 appears.

7 (4) Subsection (c) is amended—

8 (A) by striking paragraph (1);

9 (B) in paragraph (2), by striking ‘‘contract

10 under this section which provides for the dis11 bursement of funds, as described in subsection

12 (a)(1)(B),’’ and inserting ‘‘contract under section

13 1874A that provides for making payments under

14 this part’’;

15 (C) in paragraph (3)(A), by striking ‘‘sub16 section (a)(1)(B)’’ and inserting ‘‘section

17 1874A(a)(3)(B)’’;

18 (D) in paragraph (4), by striking ‘‘carrier’’

19 and inserting ‘‘medicare administrative con20 tractor’’;

21 (E) in paragraph (5), by striking ‘‘contract

22 under this section which provides for the dis23 bursement of funds, as described in subsection

24 (a)(1)(B), shall require the carrier’’ and ‘‘carrier

25 responses’’ and inserting ‘‘contract under section
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1 1874A that provides for making payments under

2 this part shall require the medicare administra3 tive contractor’’ and ‘‘contractor responses’’, re4 spectively; and

5 (F) by striking paragraph (6).

6 (5) Subsections (d), (e), and (f) are repealed.

7 (6) Subsection (g) is amended by striking ‘‘car8 rier or carriers’’ and inserting ‘‘medicare administra9 tive contractor or contractors’’.

10 (7) Subsection (h) is amended—

11 (A) in paragraph (2)—

12 (i) by striking ‘‘Each carrier having

13 an agreement with the Secretary under sub14 section (a)’’ and inserting ‘‘The Secretary’’;

15 and

16 (ii) by striking ‘‘Each such carrier’’

17 and inserting ‘‘The Secretary’’;

18 (B) in paragraph (3)(A)—

19 (i) by striking ‘‘a carrier having an

20 agreement with the Secretary under sub21 section (a)’’ and inserting ‘‘medicare ad22 ministrative contractor having a contract

23 under section 1874A that provides for mak24 ing payments under this part’’; and
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1 (ii) by striking ‘‘such carrier’’ and in2 serting ‘‘such contractor’’;

3 (C) in paragraph (3)(B)—

4 (i) by striking ‘‘a carrier’’ and insert5 ing ‘‘a medicare administrative contractor’’

6 each place it appears; and

7 (ii) by striking ‘‘the carrier’’ and in8 serting ‘‘the contractor’’ each place it ap9 pears; and

10 (D) in paragraphs (5)(A) and (5)(B)(iii),

11 by striking ‘‘carriers’’ and inserting ‘‘medicare

12 administrative contractors’’ each place it ap13 pears.

14 (8) Subsection (l) is amended—

15 (A) in paragraph (1)(A)(iii), by striking

16 ‘‘carrier’’ and inserting ‘‘medicare administra17 tive contractor’’; and

18 (B) in paragraph (2), by striking ‘‘carrier’’

19 and inserting ‘‘medicare administrative con20 tractor’’.

21 (9) Subsection (p)(3)(A) is amended by striking

22 ‘‘carrier’’ and inserting ‘‘medicare administrative

23 contractor’’.

24 (10) Subsection (q)(1)(A) is amended by striking

25 ‘‘carrier’’.
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1 (d) EFFECTIVE DATE; TRANSITION RULE.—

2 (1) EFFECTIVE DATE.—

3 (A) IN GENERAL.—Except as otherwise pro4 vided in this subsection, the amendments made

5 by this section shall take effect on October 1,

6 2005, and the Secretary is authorized to take

7 such steps before such date as may be necessary

8 to implement such amendments on a timely

9 basis.

10 (B) CONSTRUCTION FOR CURRENT CON11 TRACTS.—Such amendments shall not apply to

12 contracts in effect before the date specified under

13 subparagraph (A) that continue to retain the

14 terms and conditions in effect on such date (ex15 cept as otherwise provided under this title, other

16 than under this section) until such date as the

17 contract is let out for competitive bidding under

18 such amendments.

19 (C) DEADLINE FOR COMPETITIVE BID20 DING.—The Secretary shall provide for the let21 ting by competitive bidding of all contracts for

22 functions of medicare administrative contractors

23 for annual contract periods that begin on or

24 after October 1, 2011.

25 (2) GENERAL TRANSITION RULES.—
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1 (A) AUTHORITY TO CONTINUE TO ENTER

2 INTO NEW AGREEMENTS AND CONTRACTS AND

3 WAIVER OF PROVIDER NOMINATION PROVISIONS

4 DURING TRANSITION.—Prior to the date specified

5 in paragraph (1)(A), the Secretary may, con6 sistent with subparagraph (B), continue to enter

7 into agreements under section 1816 and con8 tracts under section 1842 of the Social Security

9 Act (42 U.S.C. 1395h, 1395u). The Secretary

10 may enter into new agreements under section

11 1816 during the time period without regard to

12 any of the provider nomination provisions of

13 such section.

14 (B) APPROPRIATE TRANSITION.—The Sec15 retary shall take such steps as are necessary to

16 provide for an appropriate transition from

17 agreements under section 1816 and contracts

18 under section 1842 of the Social Security Act (42

19 U.S.C. 1395h, 1395u) to contracts under section

20 1874A, as added by subsection (a)(1).

21 (3) AUTHORIZING CONTINUATION OF MIP ACTIVI22 TIES UNDER CURRENT CONTRACTS AND AGREEMENTS

23 AND UNDER TRANSITION CONTRACTS.—The provisions

24 contained in the exception in section 1893(d)(2) of the

25 Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall
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1 continue to apply notwithstanding the amendments

2 made by this section, and any reference in such provi3 sions to an agreement or contract shall be deemed to

4 include agreements and contracts entered into pursu5 ant to paragraph (2)(A).

6 (e) REFERENCES.—On and after the effective date pro7 vided under subsection (d)(1), any reference to a fiscal

8 intermediary or carrier under title XI or XVIII of the So9 cial Security Act (or any regulation, manual instruction,

10 interpretative rule, statement of policy, or guideline issued

11 to carry out such titles) shall be deemed a reference to an

12 appropriate medicare administrative contractor (as pro13 vided under section 1874A of the Social Security Act).

14 (f) SECRETARIAL SUBMISSION OF LEGISLATIVE PRO15 POSAL.—Not later than 6 months after the date of enact16 ment of this Act, the Secretary shall submit to the appro17 priate committees of Congress a legislative proposal pro18 viding for such technical and conforming amendments in

19 the law as are required by the provisions of this section.

20 (g) REPORTS ON IMPLEMENTATION.—

21 (1) PROPOSAL FOR IMPLEMENTATION.—At least

22 1 year before the date specified in subsection

23 (d)(1)(A), the Secretary shall submit a report to Con24 gress and the Comptroller General of the United

25 States that describes a plan for an appropriate tran-
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1 sition. The Comptroller General shall conduct an

2 evaluation of such plan and shall submit to Congress,

3 not later than 6 months after the date the report is

4 received, a report on such evaluation and shall in5 clude in such report such recommendations as the

6 Comptroller General deems appropriate.

7 (2) STATUS OF IMPLEMENTATION.—The Sec8 retary shall submit a report to Congress not later

9 than October 1, 2008, that describes the status of im10 plementation of such amendments and that includes

11 a description of the following:

12 (A) The number of contracts that have been

13 competitively bid as of such date.

14 (B) The distribution of functions among

15 contracts and contractors.

16 (C) A timeline for complete transition to

17 full competition.

18 (D) A detailed description of how the Sec19 retary has modified oversight and management

20 of medicare contractors to adapt to full competi21 tion.
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1 Subtitle D—Education and

2 Outreach Improvements

3 SEC. 531. PROVIDER EDUCATION AND TECHNICAL ASSIST4 ANCE.

5 (a) COORDINATION OF EDUCATION FUNDING.—

6 (1) IN GENERAL.—The Social Security Act is

7 amended by inserting after section 1888 the following

8 new section:

9 ‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE

10 ‘‘SEC. 1889. (a) COORDINATION OF EDUCATION FUND11 ING.—The Secretary shall coordinate the educational activi12 ties provided through medicare contractors (as defined in

13 subsection (e), including under section 1893) in order to

14 maximize the effectiveness of Federal education efforts for

15 providers of services, physicians, practitioners, and sup16 pliers.’’.

17 (2) EFFECTIVE DATE.—The amendment made by

18 paragraph (1) shall take effect on the date of enact19 ment of this Act.

20 (b) INCENTIVES TO IMPROVE CONTRACTOR PERFORM21 ANCE.—

22 (1) IN GENERAL.—Section 1874A, as added by

23 section 521(a)(1), is amended by adding at the end

24 the following new subsection:
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1 ‘‘(e) INCENTIVES TO IMPROVE CONTRACTOR PERFORM2 ANCE IN PROVIDER EDUCATION AND OUTREACH.—

3 ‘‘(1) METHODOLOGY TO MEASURE CONTRACTOR

4 ERROR RATES.—In order to give medicare contractors

5 (as defined in paragraph (3)) an incentive to imple6 ment effective education and outreach programs for

7 providers of services, physicians, practitioners, and

8 suppliers, the Secretary shall develop and implement

9 by October 1, 2004, a methodology to measure the spe10 cific claims payment error rates of such contractors

11 in the processing or reviewing of medicare claims.

12 ‘‘(2) GAO REVIEW OF METHODOLOGY.—The

13 Comptroller General of the United States shall review,

14 and make recommendations to the Secretary, regard15 ing the adequacy of such methodology.

16 ‘‘(3) MEDICARE CONTRACTOR DEFINED.—For

17 purposes of this subsection, the term ‘medicare con18 tractor’ includes a medicare administrative con19 tractor, a fiscal intermediary with a contract under

20 section 1816, and a carrier with a contract under sec21 tion 1842.’’.

22 (2) REPORT.—The Secretary shall submit to

23 Congress a report that describes how the Secretary in24 tends to use the methodology developed under section

25 1874A(e)(1) of the Social Security Act, as added by
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1 paragraph (1), in assessing medicare contractor per2 formance in implementing effective education and

3 outreach programs, including whether to use such

4 methodology as a basis for performance bonuses.

5 (c) IMPROVED PROVIDER EDUCATION AND TRAIN6 ING.—

7 (1) INCREASED FUNDING FOR ENHANCED EDU8 CATION AND TRAINING THROUGH MEDICARE INTEG9 RITY PROGRAM.—Section 1817(k)(4) (42 U.S.C.

10 1395i(k)(4)) is amended—

11 (A) in subparagraph (A), by striking ‘‘sub12 paragraph (B)’’ and inserting ‘‘subparagraphs

13 (B) and (C)’’;

14 (B) in subparagraph (B), by striking ‘‘The

15 amount appropriated’’ and inserting ‘‘Subject to

16 subparagraph (C), the amount appropriated’’;

17 and

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

19 subparagraph:

20 ‘‘(C) ENHANCED PROVIDER EDUCATION AND

21 TRAINING.—

22 ‘‘(i) IN GENERAL.—In addition to the

23 amount appropriated under subparagraph

24 (B), the amount appropriated under sub25 paragraph (A) for a fiscal year (beginning
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1 with fiscal year 2004) is increased by

2 $35,000,000.

3 ‘‘(ii) USE.—The funds made available

4 under this subparagraph shall be used only

5 to increase the conduct by medicare contrac6 tors of education and training of providers

7 of services, physicians, practitioners, and

8 suppliers regarding billing, coding, and

9 other appropriate items and may also be

10 used to improve the accuracy, consistency,

11 and timeliness of contractor responses to

12 written and phone inquiries from providers

13 of services, physicians, practitioners, and

14 suppliers.’’.

15 (2) TAILORING EDUCATION AND TRAINING FOR

16 SMALL PROVIDERS OR SUPPLIERS.—

17 (A) IN GENERAL.—Section 1889, as added

18 by subsection (a), is amended by adding at the

19 end the following new subsection:

20 ‘‘(b) TAILORING EDUCATION AND TRAINING ACTIVI21 TIES FOR SMALL PROVIDERS OR SUPPLIERS.—

22 ‘‘(1) IN GENERAL.—Insofar as a medicare con23 tractor conducts education and training activities, it

24 shall take into consideration the special needs of small

25 providers of services or suppliers (as defined in para-
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1 graph (2)). Such education and training activities for

2 small providers of services and suppliers may include

3 the provision of technical assistance (such as review

4 of billing systems and internal controls to determine

5 program compliance and to suggest more efficient and

6 effective means of achieving such compliance).

7 ‘‘(2) SMALL PROVIDER OF SERVICES OR SUP8 PLIER.—In this subsection, the term ‘small provider

9 of services or supplier’ means—

10 ‘‘(A) an institutional provider of services

11 with fewer than 25 full-time-equivalent employ12 ees; or

13 ‘‘(B) a physician, practitioner, or supplier

14 with fewer than 10 full-time-equivalent employ15 ees.’’.

16 (B) EFFECTIVE DATE.—The amendment

17 made by subparagraph (A) shall take effect on

18 January 1, 2004.

19 (d) ADDITIONAL PROVIDER EDUCATION PROVI20 SIONS.—

21 (1) IN GENERAL.—Section 1889, as added by

22 subsection (a) and as amended by subsection (c)(2),

23 is amended by adding at the end the following new

24 subsections:
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1 ‘‘(c) ENCOURAGEMENT OF PARTICIPATION IN EDU2 CATION PROGRAM ACTIVITIES.—A medicare contractor

3 may not use a record of attendance at (or failure to attend)

4 educational activities or other information gathered during

5 an educational program conducted under this section or

6 otherwise by the Secretary to select or track providers of

7 services, physicians, practitioners, or suppliers for the pur8 pose of conducting any type of audit or prepayment review.

9 ‘‘(d) CONSTRUCTION.—Nothing in this section or sec10 tion 1893(g) shall be construed as providing for disclosure

11 by a medicare contractor—

12 ‘‘(1) of the screens used for identifying claims

13 that will be subject to medical review; or

14 ‘‘(2) of information that would compromise

15 pending law enforcement activities or reveal findings

16 of law enforcement-related audits.

17 ‘‘(e) DEFINITIONS.—For purposes of this section and

18 section 1817(k)(4)(C), the term ‘medicare contractor’ in19 cludes the following:

20 ‘‘(1) A medicare administrative contractor with

21 a contract under section 1874A, a fiscal intermediary

22 with a contract under section 1816, and a carrier

23 with a contract under section 1842.

24 ‘‘(2) An eligible entity with a contract under sec25 tion 1893.
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1 Such term does not include, with respect to activities of a

2 specific provider of services, physician, practitioner, or sup3 plier an entity that has no authority under this title or

4 title XI with respect to such activities and such provider

5 of services, physician, practitioner, or supplier.’’.

6 (2) EFFECTIVE DATE.—The amendment made by

7 paragraph (1) shall take effect on the date of enact8 ment of this Act.

9 SEC. 532. ACCESS TO AND PROMPT RESPONSES FROM MEDI10 CARE CONTRACTORS.

11 (a) IN GENERAL.—Section 1874A, as added by section

12 521(a)(1) and as amended by section 531(b)(1), is amended

13 by adding at the end the following new subsection:

14 ‘‘(f) COMMUNICATING WITH BENEFICIARIES AND PRO15 VIDERS.—

16 ‘‘(1) COMMUNICATION PROCESS.—The Secretary

17 shall develop a process for medicare contractors to

18 communicate with beneficiaries and with providers of

19 services, physicians, practitioners, and suppliers

20 under this title.

21 ‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each

22 medicare contractor (as defined in paragraph (5))

23 shall provide general written responses (which may be

24 through electronic transmission) in a clear, concise,

25 and accurate manner to inquiries by beneficiaries,
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1 providers of services, physicians, practitioners, and

2 suppliers concerning the programs under this title

3 within 45 business days of the date of receipt of such

4 inquiries.

5 ‘‘(3) RESPONSE TO TOLL-FREE LINES.—The Sec6 retary shall ensure that medicare contractors provide

7 a toll-free telephone number at which beneficiaries,

8 providers, physicians, practitioners, and suppliers

9 may obtain information regarding billing, coding,

10 claims, coverage, and other appropriate information

11 under this title.

12 ‘‘(4) MONITORING OF CONTRACTOR RE13 SPONSES.—

14 ‘‘(A) IN GENERAL.—Each medicare con15 tractor shall, consistent with standards developed

16 by the Secretary under subparagraph (B)—

17 ‘‘(i) maintain a system for identifying

18 who provides the information referred to in

19 paragraphs (2) and (3); and

20 ‘‘(ii) monitor the accuracy, consist21 ency, and timeliness of the information so

22 provided.

23 ‘‘(B) DEVELOPMENT OF STANDARDS.—

24 ‘‘(i) IN GENERAL.—The Secretary shall

25 establish (and publish in the Federal Reg-
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1 ister) standards regarding the accuracy,

2 consistency, and timeliness of the informa3 tion provided in response to inquiries under

4 this subsection. Such standards shall be con5 sistent with the performance requirements

6 established under subsection (b)(3).

7 ‘‘(ii) EVALUATION.—In conducting

8 evaluations of individual medicare contrac9 tors, the Secretary shall consider the results

10 of the monitoring conducted under subpara11 graph (A) taking into account as perform12 ance requirements the standards established

13 under clause (i). The Secretary shall, in

14 consultation with organizations rep15 resenting providers of services, suppliers,

16 and individuals entitled to benefits under

17 part A or enrolled under part B, or both, es18 tablish standards relating to the accuracy,

19 consistency, and timeliness of the informa20 tion so provided.

21 ‘‘(C) DIRECT MONITORING.—Nothing in this

22 paragraph shall be construed as preventing the

23 Secretary from directly monitoring the accuracy,

24 consistency, and timeliness of the information so

25 provided.
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1 ‘‘(5) MEDICARE CONTRACTOR DEFINED.—For

2 purposes of this subsection, the term ‘medicare con3 tractor’ has the meaning given such term in sub4 section (e)(3).’’.

5 (b) EFFECTIVE DATE.—The amendment made by sub6 section (a) shall take effect October 1, 2004.

7 (c) AUTHORIZATION OF APPROPRIATIONS.—There are

8 authorized to be appropriated such sums as are necessary

9 to carry out section 1874A(f) of the Social Security Act,

10 as added by subsection (a).

11 SEC. 533. RELIANCE ON GUIDANCE.

12 (a) IN GENERAL.—Section 1871(d), as added by sec13 tion 502(a), is amended by adding at the end the following

14 new paragraph:

15 ‘‘(2) If—

16 ‘‘(A) a provider of services, physician, practi17 tioner, or other supplier follows written guidance

18 provided—

19 ‘‘(i) by the Secretary; or

20 ‘‘(ii) by a medicare contractor (as defined

21 in section 1889(e) and whether in the form of a

22 written response to a written inquiry under sec23 tion 1874A(f)(1) or otherwise) acting within the

24 scope of the contractor’s contract authority,
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1 in response to a written inquiry with respect to the

2 furnishing of items or services or the submission of a

3 claim for benefits for such items or services;

4 ‘‘(B) the Secretary determines that—

5 ‘‘(i) the provider of services, physician,

6 practitioner, or supplier has accurately presented

7 the circumstances relating to such items, services,

8 and claim to the Secretary or the contractor in

9 the written guidance; and

10 ‘‘(ii) there is no indication of fraud or

11 abuse committed by the provider of services, phy12 sician, practitioner, or supplier against the pro13 gram under this title; and

14 ‘‘(C) the guidance was in error;

15 the provider of services, physician, practitioner, or supplier

16 shall not be subject to any penalty or interest under this

17 title (or the provisions of title XI insofar as they relate to

18 this title) relating to the provision of such items or service

19 or such claim if the provider of services, physician, practi20 tioner, or supplier reasonably relied on such guidance. In

21 applying this paragraph with respect to guidance in the

22 form of general responses to frequently asked questions, the

23 Secretary retains authority to determine the extent to which

24 such general responses apply to the particular cir25 cumstances of individual claims.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by sub2 section (a) shall apply to penalties imposed on or after the

3 date of enactment of this Act.

4 SEC. 534. MEDICARE PROVIDER OMBUDSMAN.

5 (a) MEDICARE PROVIDER OMBUDSMAN.—Section 1868

6 (42 U.S.C. 1395ee) is amended—

7 (1) by adding at the end of the heading the fol8 lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’;

9 (2) by inserting ‘‘PRACTICING PHYSICIANS ADVI10 SORY COUNCIL.—(1)’’ after ‘‘(a)’’;

11 (3) in paragraph (1), as so redesignated under

12 paragraph (2), by striking ‘‘in this section’’ and in13 serting ‘‘in this subsection’’;

14 (4) by redesignating subsections (b) and (c) as

15 paragraphs (2) and (3), respectively; and

16 (5) by adding at the end the following new sub17 section:

18 ‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—

19 ‘‘(1) IN GENERAL.—By not later than 1 year

20 after the date of enactment of the Prescription Drug

21 and Medicare Improvement Act of 2003, the Secretary

22 shall appoint a Medicare Provider Ombudsman.

23 ‘‘(2) DUTIES.—The Medicare Provider Ombuds24 man shall—
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1 ‘‘(A) provide assistance, on a confidential

2 basis, to entities and individuals providing items

3 and services, including covered drugs under part

4 D, under this title with respect to complaints,

5 grievances, and requests for information con6 cerning the programs under this title (including

7 provisions of title XI insofar as they relate to

8 this title and are not administered by the Office

9 of the Inspector General of the Department of

10 Health and Human Services) and in the resolu11 tion of unclear or conflicting guidance given by

12 the Secretary and medicare contractors to such

13 providers of services and suppliers regarding

14 such programs and provisions and requirements

15 under this title and such provisions; and

16 ‘‘(B) submit recommendations to the Sec17 retary for improvement in the administration of

18 this title and such provisions, including—

19 ‘‘(i) recommendations to respond to re20 curring patterns of confusion in this title

21 and such provisions (including rec22 ommendations regarding suspending impo23 sition of sanctions where there is wide24 spread confusion in program administra25 tion), and
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1 ‘‘(ii) recommendations to provide for

2 an appropriate and consistent response (in3 cluding not providing for audits) in cases of

4 self-identified overpayments by providers of

5 services and suppliers.

6 ‘‘(3) STAFF.—The Secretary shall provide the

7 Medicare Provider Ombudsman with appropriate

8 staff.’’.

9 (b) FUNDING.—There are authorized to be appro10 priated to the Secretary (in appropriate part from the Fed11 eral Hospital Insurance Trust Fund and the Federal Sup12 plementary Medical Insurance Trust Fund (including the

13 Prescription Drug Account)) to carry out the provisions of

14 subsection (b) of section 1868 of the Social Security Act

15 (42 U.S.C. 1395ee) (relating to the Medicare Provider Om16 budsman), as added by subsection (a)(5), such sums as are

17 necessary for fiscal year 2004 and each succeeding fiscal

18 year.

19 SEC. 535. BENEFICIARY OUTREACH DEMONSTRATION PRO20 GRAMS.

21 (a) DEMONSTRATION ON THE PROVISION OF ADVICE

22 AND ASSISTANCE TO MEDICARE BENEFICIARIES AT LOCAL

23 OFFICES OF THE SOCIAL SECURITY ADMINISTRATION.—

24 (1) ESTABLISHMENT.—The Secretary shall estab25 lish a demonstration program (in this subsection re-
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1 ferred to as the ‘‘demonstration program’’) under

2 which medicare specialists employed by the Depart3 ment of Health and Human Services provide advice

4 and assistance to medicare beneficiaries at the loca5 tion of existing local offices of the Social Security Ad6 ministration.

7 (2) LOCATIONS.—

8 (A) IN GENERAL.—The demonstration pro9 gram shall be conducted in at least 6 offices or

10 areas. Subject to subparagraph (B), in selecting

11 such offices and areas, the Secretary shall pro12 vide preference for offices with a high volume of

13 visits by medicare beneficiaries.

14 (B) ASSISTANCE FOR RURAL BENE15 FICIARIES.—The Secretary shall provide for the

16 selection of at least 2 rural areas to participate

17 in the demonstration program. In conducting the

18 demonstration program in such rural areas, the

19 Secretary shall provide for medicare specialists

20 to travel among local offices in a rural area on

21 a scheduled basis.

22 (3) DURATION.—The demonstration program

23 shall be conducted over a 3-year period.

24 (4) EVALUATION AND REPORT.—
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1 (A) EVALUATION.—The Secretary shall pro2 vide for an evaluation of the demonstration pro3 gram. Such evaluation shall include an analysis

4 of—

5 (i) utilization of, and beneficiary satis6 faction with, the assistance provided under

7 the program; and

8 (ii) the cost-effectiveness of providing

9 beneficiary assistance through out-sta10 tioning medicare specialists at local social

11 security offices.

12 (B) REPORT.—The Secretary shall submit

13 to Congress a report on such evaluation and

14 shall include in such report recommendations re15 garding the feasibility of permanently out-sta16 tioning Medicare specialists at local social secu17 rity offices.

18 (b) DEMONSTRATION ON PROVIDING PRIOR DETER19 MINATIONS.—

20 (1) ESTABLISHMENT.—By not later than 1 year

21 after the date of enactment of this Act, the Secretary

22 shall establish a demonstration project to test the ad23 ministrative feasibility of providing a process for

24 medicare beneficiaries and entities and individuals

25 furnishing such beneficiaries with items and services
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1 under title XVIII of the Social Security Act program

2 to make a request for, and receive, a determination

3 (after an advance beneficiary notice is issued with re4 spect to the item or service involved but before such

5 item or service is furnished to the beneficiary) as to

6 whether the item or service is covered under such title

7 consistent with the applicable requirements of section

8 1862(a)(1)(A) of such Act (42 U.S.C. 1395y(a)(1)(A))

9 (relating to medical necessity).

10 (2) EVALUATION AND REPORT.—

11 (A) EVALUATION.—The Secretary shall pro12 vide for an evaluation of the demonstration pro13 gram conducted under paragraph (1).

14 (B) REPORT.—By not later than January

15 1, 2006, the Secretary shall submit to Congress

16 a report on such evaluation together with rec17 ommendations for such legislation and adminis18 trative actions as the Secretary considers appro19 priate.

20 Subtitle E—Review, Recovery, and

21 Enforcement Reform

22 SEC. 541. PREPAYMENT REVIEW.

23 (a) IN GENERAL.—Section 1874A, as added by section

24 521(a)(1) and as amended by sections 531(b)(1) and
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1 532(a), is amended by adding at the end the following new

2 subsection:

3 ‘‘(g) CONDUCT OF PREPAYMENT REVIEW.—

4 ‘‘(1) STANDARDIZATION OF RANDOM PREPAY5 MENT REVIEW.—A medicare administrative con6 tractor shall conduct random prepayment review only

7 in accordance with a standard protocol for random

8 prepayment audits developed by the Secretary.

9 ‘‘(2) LIMITATIONS ON INITIATION OF NONRANDOM

10 PREPAYMENT REVIEW.—A medicare administrative

11 contractor may not initiate nonrandom prepayment

12 review of a provider of services, physician, practi13 tioner, or supplier based on the initial identification

14 by that provider of services, physician, practitioner,

15 or supplier of an improper billing practice unless

16 there is a likelihood of sustained or high level of pay17 ment error (as defined by the Secretary).

18 ‘‘(3) TERMINATION OF NONRANDOM PREPAYMENT

19 REVIEW.—The Secretary shall establish protocols or

20 standards relating to the termination, including ter21 mination dates, of nonrandom prepayment review.

22 Such regulations may vary such a termination date

23 based upon the differences in the circumstances trig24 gering prepayment review.
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1 ‘‘(4) CONSTRUCTION.—Nothing in this subsection

2 shall be construed as preventing the denial of pay3 ments for claims actually reviewed under a random

4 prepayment review. In the case of a provider of serv5 ices, physician, practitioner, or supplier with respect

6 to which amounts were previously overpaid, nothing

7 in this subsection shall be construed as limiting the

8 ability of a medicare administrative contractor to re9 quest the periodic production of records or supporting

10 documentation for a limited sample of submitted

11 claims to ensure that the previous practice is not con12 tinuing.

13 ‘‘(5) RANDOM PREPAYMENT REVIEW DEFINED.—

14 For purposes of this subsection, the term ‘random pre15 payment review’ means a demand for the production

16 of records or documentation absent cause with respect

17 to a claim.’’.

18 (b) EFFECTIVE DATE.—

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

20 subsection, the amendment made by subsection (a)

21 shall take effect on the date of enactment of this Act.

22 (2) DEADLINE FOR PROMULGATION OF CERTAIN

23 REGULATIONS.—The Secretary shall first issue regula24 tions under section 1874A(g) of the Social Security
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1 Act, as added by subsection (a), by not later than 1

2 year after the date of enactment of this Act.

3 (3) APPLICATION OF STANDARD PROTOCOLS FOR

4 RANDOM PREPAYMENT REVIEW.—Section 1874A(g)(1)

5 of the Social Security Act, as added by subsection (a),

6 shall apply to random prepayment reviews conducted

7 on or after such date (not later than 1 year after the

8 date of enactment of this Act) as the Secretary shall

9 specify. The Secretary shall develop and publish the

10 standard protocol under such section by not later

11 than 1 year after the date of enactment of this Act.

12 SEC. 542. RECOVERY OF OVERPAYMENTS.

13 (a) IN GENERAL.—Section 1874A, as added by section

14 521(a)(1) and as amended by sections 531(b)(1), 532(a),

15 and 541(a), is amended by adding at the end the following

16 new subsection:

17 ‘‘(h) RECOVERY OF OVERPAYMENTS.—

18 ‘‘(1) USE OF REPAYMENT PLANS.—

19 ‘‘(A) IN GENERAL.—If the repayment, with20 in the period otherwise permitted by a provider

21 of services, physician, practitioner, or other sup22 plier, of an overpayment under this title meets

23 the standards developed under subparagraph (B),

24 subject to subparagraph (C), and the provider,

25 physician, practitioner, or supplier requests the
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1 Secretary to enter into a repayment plan with

2 respect to such overpayment, the Secretary shall

3 enter into a plan with the provider, physician,

4 practitioner, or supplier for the offset or repay5 ment (at the election of the provider, physician,

6 practitioner, or supplier) of such overpayment

7 over a period of at least 1 year, but not longer

8 than 3 years. Interest shall accrue on the balance

9 through the period of repayment. The repayment

10 plan shall meet terms and conditions determined

11 to be appropriate by the Secretary.

12 ‘‘(B) DEVELOPMENT OF STANDARDS.—The

13 Secretary shall develop standards for the recov14 ery of overpayments. Such standards shall—

15 ‘‘(i) include a requirement that the

16 Secretary take into account (and weigh in

17 favor of the use of a repayment plan) the

18 reliance (as described in section 1871(d)(2))

19 by a provider of services, physician, practi20 tioner, and supplier on guidance when de21 termining whether a repayment plan should

22 be offered; and

23 ‘‘(ii) provide for consideration of the

24 financial hardship imposed on a provider of
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1 services, physician, practitioner, or supplier

2 in considering such a repayment plan.

3 In developing standards with regard to financial

4 hardship with respect to a provider of services,

5 physician, practitioner, or supplier, the Sec6 retary shall take into account the amount of the

7 proposed recovery as a proportion of payments

8 made to that provider, physician, practitioner,

9 or supplier.

10 ‘‘(C) EXCEPTIONS.—Subparagraph (A)

11 shall not apply if—

12 ‘‘(i) the Secretary has reason to suspect

13 that the provider of services, physician,

14 practitioner, or supplier may file for bank15 ruptcy or otherwise cease to do business or

16 discontinue participation in the program

17 under this title; or

18 ‘‘(ii) there is an indication of fraud or

19 abuse committed against the program.

20 ‘‘(D) IMMEDIATE COLLECTION IF VIOLATION

21 OF REPAYMENT PLAN.—If a provider of services,

22 physician, practitioner, or supplier fails to make

23 a payment in accordance with a repayment plan

24 under this paragraph, the Secretary may imme25 diately seek to offset or otherwise recover the total
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1 balance outstanding (including applicable inter2 est) under the repayment plan.

3 ‘‘(E) RELATION TO NO FAULT PROVISION.—

4 Nothing in this paragraph shall be construed as

5 affecting the application of section 1870(c) (re6 lating to no adjustment in the cases of certain

7 overpayments).

8 ‘‘(2) LIMITATION ON RECOUPMENT.—

9 ‘‘(A) NO RECOUPMENT UNTIL RECONSIDER10 ATION EXERCISED.—In the case of a provider of

11 services, physician, practitioner, or supplier that

12 is determined to have received an overpayment

13 under this title and that seeks a reconsideration

14 of such determination by a qualified independent

15 contractor under section 1869(c), the Secretary

16 may not take any action (or authorize any other

17 person, including any Medicare contractor, as

18 defined in subparagraph (C)) to recoup the over19 payment until the date the decision on the recon20 sideration has been rendered.

21 ‘‘(B) PAYMENT OF INTEREST.—

22 ‘‘(i) RETURN OF RECOUPED AMOUNT

23 WITH INTEREST IN CASE OF REVERSAL.—

24 Insofar as such determination on appeal

25 against the provider of services, physician,
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1 practitioner, or supplier is later reversed,

2 the Secretary shall provide for repayment of

3 the amount recouped plus interest for the

4 period in which the amount was recouped.

5 ‘‘(ii) INTEREST IN CASE OF AFFIRMA6 TION.—Insofar as the determination on

7 such appeal is against the provider of serv8 ices, physician, practitioner, or supplier,

9 interest on the overpayment shall accrue on

10 and after the date of the original notice of

11 overpayment.

12 ‘‘(iii) RATE OF INTEREST.—The rate of

13 interest under this subparagraph shall be

14 the rate otherwise applicable under this title

15 in the case of overpayments.

16 ‘‘(C) MEDICARE CONTRACTOR DEFINED.—

17 For purposes of this subsection, the term ‘medi18 care contractor’ has the meaning given such term

19 in section 1889(e).

20 ‘‘(3) PAYMENT AUDITS.—

21 ‘‘(A) WRITTEN NOTICE FOR POST-PAYMENT

22 AUDITS.—Subject to subparagraph (C), if a

23 medicare contractor decides to conduct a post24 payment audit of a provider of services, physi25 cian, practitioner, or supplier under this title,
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1 the contractor shall provide the provider of serv2 ices, physician, practitioner, or supplier with

3 written notice (which may be in electronic form)

4 of the intent to conduct such an audit.

5 ‘‘(B) EXPLANATION OF FINDINGS FOR ALL

6 AUDITS.—Subject to subparagraph (C), if a

7 medicare contractor audits a provider of services,

8 physician, practitioner, or supplier under this

9 title, the contractor shall—

10 ‘‘(i) give the provider of services, phy11 sician, practitioner, or supplier a full re12 view and explanation of the findings of the

13 audit in a manner that is understandable

14 to the provider of services, physician, prac15 titioner, or supplier and permits the devel16 opment of an appropriate corrective action

17 plan;

18 ‘‘(ii) inform the provider of services,

19 physician, practitioner, or supplier of the

20 appeal rights under this title as well as con21 sent settlement options (which are at the

22 discretion of the Secretary); and

23 ‘‘(iii) give the provider of services, phy24 sician, practitioner, or supplier an oppor-
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1 tunity to provide additional information to

2 the contractor.

3 ‘‘(C) EXCEPTION.—Subparagraphs (A) and

4 (B) shall not apply if the provision of notice or

5 findings would compromise pending law enforce6 ment activities, whether civil or criminal, or re7 veal findings of law enforcement-related audits.

8 ‘‘(4) NOTICE OF OVER-UTILIZATION OF CODES.—

9 The Secretary shall establish, in consultation with or10 ganizations representing the classes of providers of

11 services, physicians, practitioners, and suppliers, a

12 process under which the Secretary provides for notice

13 to classes of providers of services, physicians, practi14 tioners, and suppliers served by a medicare contractor

15 in cases in which the contractor has identified that

16 particular billing codes may be overutilized by that

17 class of providers of services, physicians, practi18 tioners, or suppliers under the programs under this

19 title (or provisions of title XI insofar as they relate

20 to such programs).

21 ‘‘(5) STANDARD METHODOLOGY FOR PROBE SAM22 PLING.—The Secretary shall establish a standard

23 methodology for medicare administrative contractors

24 to use in selecting a sample of claims for review in

25 the case of an abnormal billing pattern.
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1 ‘‘(6) CONSENT SETTLEMENT REFORMS.—

2 ‘‘(A) IN GENERAL.—The Secretary may use

3 a consent settlement (as defined in subparagraph

4 (D)) to settle a projected overpayment.

5 ‘‘(B) OPPORTUNITY TO SUBMIT ADDITIONAL

6 INFORMATION BEFORE CONSENT SETTLEMENT

7 OFFER.—Before offering a provider of services,

8 physician, practitioner, or supplier a consent

9 settlement, the Secretary shall—

10 ‘‘(i) communicate to the provider of

11 services, physician, practitioner, or supplier

12 in a nonthreatening manner that, based on

13 a review of the medical records requested by

14 the Secretary, a preliminary evaluation of

15 those records indicates that there would be

16 an overpayment; and

17 ‘‘(ii) provide for a 45-day period dur18 ing which the provider of services, physi19 cian, practitioner, or supplier may furnish

20 additional information concerning the med21 ical records for the claims that had been re22 viewed.

23 ‘‘(C) CONSENT SETTLEMENT OFFER.—The

24 Secretary shall review any additional informa25 tion furnished by the provider of services, physi-
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1 cian, practitioner, or supplier under subpara2 graph (B)(ii). Taking into consideration such

3 information, the Secretary shall determine if

4 there still appears to be an overpayment. If so,

5 the Secretary—

6 ‘‘(i) shall provide notice of such deter7 mination to the provider of services, physi8 cian, practitioner, or supplier, including an

9 explanation of the reason for such deter10 mination; and

11 ‘‘(ii) in order to resolve the overpay12 ment, may offer the provider of services,

13 physician, practitioner, or supplier—

14 ‘‘(I) the opportunity for a statis15 tically valid random sample; or

16 ‘‘(II) a consent settlement.

17 The opportunity provided under clause (ii)(I)

18 does not waive any appeal rights with respect to

19 the alleged overpayment involved.

20 ‘‘(D) CONSENT SETTLEMENT DEFINED.—

21 For purposes of this paragraph, the term ‘con22 sent settlement’ means an agreement between the

23 Secretary and a provider of services, physician,

24 practitioner, or supplier whereby both parties

25 agree to settle a projected overpayment based on
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1 less than a statistically valid sample of claims

2 and the provider of services, physician, practi3 tioner, or supplier agrees not to appeal the

4 claims involved.’’.

5 (b) EFFECTIVE DATES AND DEADLINES.—

6 (1) Not later than 1 year after the date of enact7 ment of this Act, the Secretary shall first—

8 (A) develop standards for the recovery of

9 overpayments under section 1874A(h)(1)(B) of

10 the Social Security Act, as added by subsection

11 (a);

12 (B) establish the process for notice of over13 utilization of billing codes under section

14 1874A(h)(4) of the Social Security Act, as added

15 by subsection (a); and

16 (C) establish a standard methodology for se17 lection of sample claims for abnormal billing

18 patterns under section 1874A(h)(5) of the Social

19 Security Act, as added by subsection (a).

20 (2) Section 1874A(h)(2) of the Social Security

21 Act, as added by subsection (a), shall apply to actions

22 taken after the date that is 1 year after the date of

23 enactment of this Act.
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1 (3) Section 1874A(h)(3) of the Social Security

2 Act, as added by subsection (a), shall apply to audits

3 initiated after the date of enactment of this Act.

4 (4) Section 1874A(h)(6) of the Social Security

5 Act, as added by subsection (a), shall apply to consent

6 settlements entered into after the date of enactment of

7 this Act.

8 SEC. 543. PROCESS FOR CORRECTION OF MINOR ERRORS

9 AND OMISSIONS ON CLAIMS WITHOUT PUR10 SUING APPEALS PROCESS.

11 (a) IN GENERAL.—The Secretary shall develop, in con12 sultation with appropriate medicare contractors (as defined

13 in section 1889(e) of the Social Security Act, as added by

14 section 531(d)(1)) and representatives of providers of serv15 ices, physicians, practitioners, facilities, and suppliers, a

16 process whereby, in the case of minor errors or omissions

17 (as defined by the Secretary) that are detected in the sub18 mission of claims under the programs under title XVIII of

19 such Act, a provider of services, physician, practitioner, fa20 cility, or supplier is given an opportunity to correct such

21 an error or omission without the need to initiate an appeal.

22 Such process shall include the ability to resubmit corrected

23 claims.
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1 (b) DEADLINE.—Not later than 1 year after the date

2 of enactment of this Act, the Secretary shall first develop

3 the process under subsection (a).

4 SEC. 544. AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

5 The first sentence of section 1128(c)(3)(B) (42 U.S.C.

6 1320a–7(c)(3)(B)) is amended to read as follows: ‘‘Subject

7 to subparagraph (G), in the case of an exclusion under sub8 section (a), the minimum period of exclusion shall be not

9 less than 5 years, except that, upon the request of an admin10 istrator of a Federal health care program (as defined in

11 section 1128B(f)) who determines that the exclusion would

12 impose a hardship on beneficiaries of that program, the Sec13 retary may, after consulting with the Inspector General of

14 the Department of Health and Human Services, waive the

15 exclusion under subsection (a)(1), (a)(3), or (a)(4) with re16 spect to that program in the case of an individual or entity

17 that is the sole community physician or sole source of essen18 tial specialized services in a community.’’.

19 Subtitle F—Other Improvements

20 SEC. 551. INCLUSION OF ADDITIONAL INFORMATION IN NO21 TICES TO BENEFICIARIES ABOUT SKILLED

22 NURSING FACILITY AND HOSPITAL BENEFITS.

23 (a) IN GENERAL.—The Secretary shall provide that in

24 medicare beneficiary notices provided (under section

25 1806(a) of the Social Security Act, 42 U.S.C. 1395b–7(a))
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1 with respect to the provision of post-hospital extended care

2 services and inpatient hospital services under part A of title

3 XVIII of the Social Security Act, there shall be included

4 information on the number of days of coverage of such serv5 ices remaining under such part for the medicare beneficiary

6 and spell of illness involved.

7 (b) EFFECTIVE DATE.—Subsection (a) shall apply to

8 notices provided during calendar quarters beginning more

9 than 6 months after the date of enactment of this Act.

10 SEC. 552. INFORMATION ON MEDICARE-CERTIFIED SKILLED

11 NURSING FACILITIES IN HOSPITAL DIS12 CHARGE PLANS.

13 (a) AVAILABILITY OF DATA.—The Secretary shall pub14 licly provide information that enables hospital discharge

15 planners, medicare beneficiaries, and the public to identify

16 skilled nursing facilities that are participating in the medi17 care program.

18 (b) INCLUSION OF INFORMATION IN CERTAIN HOS19 PITAL DISCHARGE PLANS.—

20 (1) IN GENERAL.—Section 1861(ee)(2)(D) (42

21 U.S.C. 1395x(ee)(2)(D)) is amended—

22 (A) by striking ‘‘hospice services’’ and in23 serting ‘‘hospice care and post-hospital extended

24 care services’’; and
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1 (B) by inserting before the period at the end

2 the following: ‘‘and, in the case of individuals

3 who are likely to need post-hospital extended care

4 services, the availability of such services through

5 facilities that participate in the program under

6 this title and that serve the area in which the

7 patient resides’’.

8 (2) EFFECTIVE DATE.—The amendments made

9 by paragraph (1) shall apply to discharge plans made

10 on or after such date as the Secretary shall specify,

11 but not later than 6 months after the date the Sec12 retary provides for availability of information under

13 subsection (a).

14 SEC. 553. EVALUATION AND MANAGEMENT DOCUMENTA15 TION GUIDELINES CONSIDERATION.

16 The Secretary shall ensure, before making changes in

17 documentation guidelines for, or clinical examples of, or

18 codes to report evaluation and management physician serv19 ices under title XVIII of Social Security Act, that the proc20 ess used in developing such guidelines, examples, or codes

21 was widely consultative among physicians, reflects a broad

22 consensus among specialties, and would allow verification

23 of reported and furnished services.
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1 SEC. 554. COUNCIL FOR TECHNOLOGY AND INNOVATION.

2 Section 1868 (42 U.S.C. 1395ee), as amended by sec3 tion 534(a), is amended by adding at the end the following

4 new subsection:

5 ‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVATION.—

6 ‘‘(1) ESTABLISHMENT.—The Secretary shall es7 tablish a Council for Technology and Innovation

8 within the Centers for Medicare & Medicaid Services

9 (in this section referred to as ‘CMS’).

10 ‘‘(2) COMPOSITION.—The Council shall be com11 posed of senior CMS staff and clinicians and shall be

12 chaired by the Executive Coordinator for Technology

13 and Innovation (appointed or designated under para14 graph (4)).

15 ‘‘(3) DUTIES.—The Council shall coordinate the

16 activities of coverage, coding, and payment processes

17 under this title with respect to new technologies and

18 procedures, including new drug therapies, and shall

19 coordinate the exchange of information on new tech20 nologies between CMS and other entities that make

21 similar decisions.

22 ‘‘(4) EXECUTIVE COORDINATOR FOR TECH23 NOLOGY AND INNOVATION.—The Secretary shall ap24 point (or designate) a noncareer appointee (as defined

25 in section 3132(a)(7) of title 5, United States Code)

26 who shall serve as the Executive Coordinator for Tech-
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1 nology and Innovation. Such executive coordinator

2 shall report to the Administrator of CMS, shall chair

3 the Council, shall oversee the execution of its duties,

4 and shall serve as a single point of contact for outside

5 groups and entities regarding the coverage, coding,

6 and payment processes under this title.’’.

7 SEC. 555. TREATMENT OF CERTAIN DENTAL CLAIMS.

8 (a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) is

9 amended by adding after subsection (g) the following new

10 subsection:

11 ‘‘(h)(1) Subject to paragraph (2), a group health plan

12 (as defined in subsection (a)(1)(A)(v)) providing supple13 mental or secondary coverage to individuals also entitled

14 to services under this title shall not require a medicare

15 claims determination under this title for dental benefits spe16 cifically excluded under subsection (a)(12) as a condition

17 of making a claims determination for such benefits under

18 the group health plan.

19 ‘‘(2) A group health plan may require a claims deter20 mination under this title in cases involving or appearing

21 to involve inpatient dental hospital services or dental serv22 ices expressly covered under this title pursuant to actions

23 taken by the Secretary.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by sub2 section (a) shall take effect on the date that is 60 days after

3 the date of enactment of this Act.

4 TITLE VI—OTHER PROVISIONS

5 SEC. 601. INCREASE IN MEDICAID DSH ALLOTMENTS FOR

6 FISCAL YEARS 2004 AND 2005.

7 (a) IN GENERAL.—Section 1923(f)(4) (42 U.S.C.

8 1396r–4(f)(4)) is amended—

9 (1) in the paragraph heading, by striking ‘‘FIS10 CAL YEARS 2001 AND 2002’’ and inserting ‘‘CERTAIN

11 FISCAL YEARS’’;

12 (2) in subparagraph (A)—

13 (A) in clause (i)—

14 (i) by striking ‘‘paragraph (2)’’ and

15 inserting ‘‘paragraphs (2) and (3)’’; and

16 (ii) by striking ‘‘and’’ at the end;

17 (B) in clause (ii), by striking the period

18 and inserting a semicolon; and

19 (C) by adding at the end the following:

20 ‘‘(iii) for fiscal year 2004, shall be the

21 DSH allotment determined under para22 graph (3) for that fiscal year increased by

23 the amount equal to the product of 0.50 and

24 the difference between—
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1 ‘‘(I) the amount that the DSH al2 lotment would be if the DSH allotment

3 for the State determined under clause

4 (ii) were increased, subject to subpara5 graph (B) and paragraph (5), by the

6 percentage change in the Consumer

7 Price Index for all urban consumers

8 (all items; U.S. city average) for each

9 of fiscal years 2002 and 2003; and

10 ‘‘(II) the DSH allotment deter11 mined under paragraph (3) for the

12 State for fiscal year 2004; and

13 ‘‘(iv) for fiscal year 2005, shall be the

14 DSH allotment determined under para15 graph (3) for that fiscal year increased by

16 the amount equal to the product of 0.50 and

17 the difference between—

18 ‘‘(I) the amount that the DSH al19 lotment would be if the DSH allotment

20 for the State determined under clause

21 (ii) were increased, subject to subpara22 graph (B) and paragraph (5), by the

23 percentage change in the Consumer

24 Price Index for all urban consumers

25 (all items; U.S. city average) for each
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1 of fiscal years 2002, 2003, and 2004;

2 and

3 ‘‘(II) the DSH allotment deter4 mined under paragraph (3) for the

5 State for fiscal year 2005.’’; and

6 (3) in subparagraph (C)—

7 (A) in the subparagraph heading, by strik8 ing ‘‘AFTER FISCAL YEAR 2002’’ and inserting

9 ‘‘FOR OTHER FISCAL YEARS’’; and

10 (B) by striking ‘‘2003 or’’ and inserting

11 ‘‘2003, fiscal year 2006, or’’.

12 (b) DSH ALLOTMENT FOR THE DISTRICT OF COLUM13 BIA.—Section 1923(f)(4) (42 U.S.C. 1396r–4(f)(4)), as

14 amended by paragraph (1), is amended—

15 (1) in subparagraph (A), by inserting ‘‘and ex16 cept as provided in subparagraph (C)’’ after ‘‘para17 graph (2)’’;

18 (2) by redesignating subparagraph (C) as sub19 paragraph (D); and

20 (3) by inserting after subparagraph (B) the fol21 lowing:

22 ‘‘(C) DSH ALLOTMENT FOR THE DISTRICT

23 OF COLUMBIA.—

24 ‘‘(i) IN GENERAL.—Notwithstanding

25 subparagraph (A), the DSH allotment for
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1 the District of Columbia for fiscal year

2 2004, shall be determined by substituting

3 ‘‘49’’ for ‘‘32’’ in the item in the table con4 tained in paragraph (2) with respect to the

5 DSH allotment for FY 00 (fiscal year 2000)

6 for the District of Columbia, and then in7 creasing such allotment, subject to subpara8 graph (B) and paragraph (5), by the per9 centage change in the Consumer Price Index

10 for all urban consumers (all items; U.S.

11 city average) for each of fiscal years 2000,

12 2001, 2002, and 2003.

13 ‘‘(ii) NO APPLICATION TO ALLOTMENTS

14 AFTER FISCAL YEAR 2004.—The DSH allot15 ment for the District of Columbia for fiscal

16 year 2003, fiscal year 2005, or any suc17 ceeding fiscal year shall be determined

18 under paragraph (3) without regard to the

19 DSH allotment determined under clause

20 (i).’’.

21 (c) CONFORMING AMENDMENT.—Section 1923(f)(3) of

22 such Act (42 U.S.C. 1396r–4(f)(3)) is amended by inserting

23 ‘‘, paragraph (4),’’ after ‘‘subparagraph (B)’’.

24 (d) URBAN HEALTH PROVIDER ADJUSTMENT.—
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1 (1) IN GENERAL.—Beginning with fiscal year

2 2004, notwithstanding section 1923(f) of the Social

3 Security Act (42 U.S.C. 1396r–4(f)) and subject to

4 paragraph (3), with respect to a State, payment ad5 justments made under title XIX of the Social Security

6 Act (42 U.S.C. 1396 et seq.) to a hospital described

7 in paragraph (2) shall be made without regard to the

8 DSH allotment limitation for the State determined

9 under section 1923(f) of that Act (42 U.S.C. 1396r–

10 4(f)).

11 (2) HOSPITAL DESCRIBED.—A hospital is de12 scribed in this paragraph if the hospital—

13 (A) is owned or operated by a State (as de14 fined for purposes of title XIX of the Social Se15 curity Act), or by an instrumentality or a mu16 nicipal governmental unit within a State (as so

17 defined) as of January 1, 2003; and

18 (B) is located in Marion County, Indiana.

19 (3) LIMITATION.—The payment adjustment de20 scribed in paragraph (1) for fiscal year 2004 and

21 each fiscal year thereafter shall not exceed 175 percent

22 of the costs of furnishing hospital services described in

23 section 1923(g)(1)(A) of the Social Security Act (42

24 U.S.C. 1396r–4(g)(1)(A)).
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1 SEC. 602. INCREASE IN FLOOR FOR TREATMENT AS AN EX2 TREMELY LOW DSH STATE UNDER THE MED3 ICAID PROGRAM FOR FISCAL YEARS 2004 AND

4 2005.

5 (a) IN GENERAL.—Section 1923(f)(5) (42 U.S.C.

6 1396r–4(f)(5)) is amended—

7 (1) by striking ‘‘In the case of’’ and inserting the

8 following:

9 ‘‘(A) IN GENERAL.—In the case of’’; and

10 (2) by adding at the end the following:

11 ‘‘(B) INCREASE IN FLOOR FOR FISCAL

12 YEARS 2004 AND 2005.—

13 ‘‘(i) FISCAL YEAR 2004.—In the case of

14 a State in which the total expenditures

15 under the State plan (including Federal

16 and State shares) for disproportionate share

17 hospital adjustments under this section for

18 fiscal year 2000, as reported to the Admin19 istrator of the Centers for Medicare & Med20 icaid Services as of August 31, 2003, is

21 greater than 0 but less than 3 percent of the

22 State’s total amount of expenditures under

23 the State plan for medical assistance during

24 the fiscal year, the DSH allotment for fiscal

25 year 2004 shall be increased to 3 percent of

26 the State’s total amount of expenditures
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1 under such plan for such assistance during

2 such fiscal year.

3 ‘‘(ii) FISCAL YEAR 2005.—In the case of

4 a State in which the total expenditures

5 under the State plan (including Federal

6 and State shares) for disproportionate share

7 hospital adjustments under this section for

8 fiscal year 2001, as reported to the Admin9 istrator of the Centers for Medicare & Med10 icaid Services as of August 31, 2004, is

11 greater than 0 but less than 3 percent of the

12 State’s total amount of expenditures under

13 the State plan for medical assistance during

14 the fiscal year, the DSH allotment for fiscal

15 year 2005 shall be the DSH allotment deter16 mined for the State for fiscal year 2004

17 (under clause (i) or paragraph (4) (as ap18 plicable)), increased by the percentage

19 change in the consumer price index for all

20 urban consumers (all items; U.S. city aver21 age) for fiscal year 2004.

22 ‘‘(iii) NO APPLICATION TO ALLOT23 MENTS AFTER FISCAL YEAR 2005.—The

24 DSH allotment for any State for fiscal year

25 2006 or any succeeding fiscal year shall be
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1 determined under this subsection without

2 regard to the DSH allotments determined

3 under this subparagraph.’’.

4 (b) ALLOTMENT ADJUSTMENT.—

5 (1) IN GENERAL.—Section 1923(f) of the Social

6 Security Act (42 U.S.C. 1396r–4(f)) is amended—

7 (A) by redesignating paragraph (6) as

8 paragraph (7); and

9 (B) by inserting after paragraph (5) the fol10 lowing:

11 ‘‘(6) ALLOTMENT ADJUSTMENT.—Only with re12 spect to fiscal year 2004 or 2005, if a statewide waiv13 er under section 1115 that was implemented on Janu14 ary 1, 1994, is revoked or terminated before the end

15 of either such fiscal year, the Secretary shall—

16 ‘‘(A) permit the State whose waiver was re17 voked or terminated to submit an amendment to

18 its State plan that would describe the method19 ology to be used by the State (after the effective

20 date of such revocation or termination) to iden21 tify and make payments to disproportionate

22 share hospitals, including children’s hospitals

23 and institutions for mental diseases or other

24 mental health facilities (other than State-owned

25 institutions or facilities), on the basis of the pro-
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1 portion of patients served by such hospitals that

2 are low-income patients with special needs; and

3 ‘‘(B) provide for purposes of this subsection

4 for computation of an appropriate DSH allot5 ment for the State for fiscal year 2004 or 2005

6 (or both) that provides for the maximum amount

7 (permitted consistent with paragraph (3)(B)(ii))

8 that does not result in greater expenditures

9 under this title than would have been made if

10 such waiver had not been revoked or termi11 nated.’’.

12 (2) TREATMENT OF INSTITUTIONS FOR MENTAL

13 DISEASES.—Section 1923(h)(1) of the Social Security

14 Act (42 U.S.C. 1396r–4(h)(1)) is amended—

15 (A) in paragraph (1), in the matter pre16 ceding subparagraph (A), by inserting ‘‘(subject

17 to paragraph (3))’’ after ‘‘the lesser of the fol18 lowing’’; and

19 (B) by adding at the end the following new

20 paragraph:

21 ‘‘(3) SPECIAL RULE.—The limitation of para22 graph (1) shall not apply in the case of a State to

23 which subsection (f)(6) applies.’’.
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1 (3) APPLICATION TO HAWAII.—Section 1923(f)

2 (42 U.S.C. 1396r–4(f)), as amended by paragraph

3 (1), is amended—

4 (A) by redesignating paragraph (7) as

5 paragraph (8); and

6 (B) by inserting after paragraph (6), the

7 following:

8 ‘‘(7) TREATMENT OF HAWAII AS A LOW-DSH

9 STATE.—The Secretary shall compute a DSH allot10 ment for the State of Hawaii for each of fiscal years

11 2004 and 2005 in the same manner as DSH allot12 ments are determined with respect to those States to

13 which paragraph (5) applies (but without regard to

14 the requirement under such paragraph that total ex15 penditures under the State plan for disproportionate

16 share hospital adjustments for any fiscal year exceeds

17 0).’’.

18 SEC. 603. INCREASED REPORTING REQUIREMENTS TO EN19 SURE THE APPROPRIATENESS OF PAYMENT

20 ADJUSTMENTS TO DISPROPORTIONATE

21 SHARE HOSPITALS UNDER THE MEDICAID

22 PROGRAM.

23 Section 1923 (42 U.S.C. 1396r–4) is amended by add24 ing at the end the following new subsection:
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1 ‘‘(j) ANNUAL REPORTS REGARDING PAYMENT ADJUST2 MENTS.—With respect to fiscal year 2004 and each fiscal

3 year thereafter, the Secretary shall require a State, as a

4 condition of receiving a payment under section 1903(a)(1)

5 with respect to a payment adjustment made under this sec6 tion, to submit an annual report that—

7 ‘‘(1) identifies each disproportionate share hos8 pital that received a payment adjustment under this

9 section for the preceding fiscal year and the amount

10 of the payment adjustment made to such hospital for

11 the preceding fiscal year; and

12 ‘‘(2) includes such other information as the Sec13 retary determines necessary to ensure the appro14 priateness of the payment adjustments made under

15 this section for the preceding fiscal year.’’.

16 SEC. 604. CLARIFICATION OF INCLUSION OF INPATIENT

17 DRUG PRICES CHARGED TO CERTAIN PUBLIC

18 HOSPITALS IN THE BEST PRICE EXEMPTIONS

19 FOR THE MEDICAID DRUG REBATE PROGRAM.

20 (a) IN GENERAL.—Section 1927(c)(1)(C)(i)(I) of the

21 Social Security Act (42 U.S.C. 1396r–8(c)(1)(C)(i)(I)) is

22 amended by inserting before the semicolon the following:

23 ‘‘(including inpatient prices charged to hospitals described

24 in section 340B(a)(4)(L) of the Public Health Service Act)’’.
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1 (b) ANTI-DIVERSION PROTECTION.—Section

2 1927(c)(1)(C) of the Social Security Act (42 U.S.C. 1396r–

3 8(c)(1)(C)) is amended by adding at the end the following:

4 ‘‘(iii) APPLICATION OF AUDITING AND

5 RECORDKEEPING REQUIREMENTS.—With re6 spect to a covered entity described in section

7 340B(a)(4)(L) of the Public Health Service

8 Act, any drug purchased for inpatient use

9 shall be subject to the auditing and record10 keeping requirements described in section

11 340B(a)(5)(C) of the Public Health Service

12 Act.’’.

13 (c) EFFECTIVE DATE.—The amendments made by this

14 section take effect on October 1, 2003.

15 SEC. 605. ASSISTANCE WITH COVERAGE OF LEGAL IMMI16 GRANTS UNDER THE MEDICAID PROGRAM

17 AND SCHIP.

18 (a) MEDICAID PROGRAM.—Section 1903(v) (42 U.S.C.

19 1396b(v)) is amended—

20 (1) in paragraph (1), by striking ‘‘paragraph

21 (2)’’ and inserting ‘‘paragraphs (2) and (4)’’; and

22 (2) by adding at the end the following new para23 graph:

24 ‘‘(4)(A) With respect to any or all of fiscal years 2005

25 through 2007, a State may elect (in a plan amendment
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1 under this title) to provide medical assistance under this

2 title (including under a waiver authorized by the Secretary)

3 for aliens who are lawfully residing in the United States

4 (including battered aliens described in section 431(c) of

5 such Act) and who are otherwise eligible for such assistance,

6 within either or both of the following eligibility categories:

7 ‘‘(i) PREGNANT WOMEN.—Women during preg8 nancy (and during the 60-day period beginning on

9 the last day of the pregnancy).

10 ‘‘(ii) CHILDREN.—Children (as defined under

11 such plan), including optional targeted low-income

12 children described in section 1905(u)(2)(B).

13 ‘‘(B)(i) In the case of a State that has elected to pro14 vide medical assistance to a category of aliens under sub15 paragraph (A), no debt shall accrue under an affidavit of

16 support against any sponsor of such an alien on the basis

17 of provision of assistance to such category and the cost of

18 such assistance shall not be considered as an unreimbursed

19 cost.

20 ‘‘(ii) The provisions of sections 401(a), 402(b), 403,

21 and 421 of the Personal Responsibility and Work Oppor22 tunity Reconciliation Act of 1996 shall not apply to a State

23 that makes an election under subparagraph (A).’’.

24 (b) SCHIP.—Section 2107(e)(1) (42 U.S.C.

25 1397gg(e)(1)) is amended by redesignating subparagraphs
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1 (C) and (D) as subparagraph (D) and (E), respectively,

2 and by inserting after subparagraph (B) the following new

3 subparagraph:

4 ‘‘(C) Section 1903(v)(4) (relating to op5 tional coverage of categories of permanent resi6 dent alien children), but only if the State has

7 elected to apply such section to the category of

8 children under title XIX and only with respect

9 to any or all of fiscal years 2005 through 2007.’’.

10 SEC. 606. ESTABLISHMENT OF CONSUMER OMBUDSMAN AC11 COUNT.

12 (a) IN GENERAL.—Section 1817 (42 U.S.C. 1395i) is

13 amended by adding at the end the following new subsection:

14 ‘‘(i) CONSUMER OMBUDSMAN ACCOUNT.—

15 ‘‘(1) ESTABLISHMENT.—There is hereby estab16 lished in the Trust Fund an expenditure account to

17 be known as the ‘Consumer Ombudsman Account’ (in

18 this subsection referred to as the ‘Account’).

19 ‘‘(2) APPROPRIATED AMOUNTS TO ACCOUNT FOR

20 HEALTH INSURANCE INFORMATION, COUNSELING, AND

21 ASSISTANCE GRANTS.—

22 ‘‘(A) IN GENERAL.—There are hereby ap23 propriated to the Account from the Trust Fund

24 for each fiscal year beginning with fiscal year

25 2005, the amount described in subparagraph (B)
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1 for such fiscal year for the purpose of making

2 grants under section 4360 of the Omnibus Budg3 et Reconciliation Act of 1990.

4 ‘‘(B) AMOUNT DESCRIBED.—For purposes of

5 subparagraph (A), the amount described in this

6 subparagraph for a fiscal year is the amount

7 equal to the product of—

8 ‘‘(i) $1; and

9 ‘‘(ii) the total number of individuals

10 receiving benefits under this title for the cal11 endar year ending on December 31 of the

12 preceding fiscal year.’’.

13 (b) CONFORMING AMENDMENT.—Section 4360(g) of

14 the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C.

15 1395b–4(g)) is amended to read as follows:

16 ‘‘(g) FUNDING.—The Secretary shall use amounts ap17 propriated to the Consumer Ombudsman Account in ac18 cordance with section 1817(i) of the Social Security Act for

19 a fiscal year for making grants under this section for that

20 fiscal year.’’.

21 SEC. 607. GAO STUDY REGARDING IMPACT OF ASSETS TEST

22 FOR LOW-INCOME BENEFICIARIES.

23 (a) STUDY.—The Comptroller General of the United

24 States shall conduct a study to determine the extent to

25 which drug utilization and access to covered drugs for an
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1 individual described in subsection (b) differs from the drug

2 utilization and access to covered drugs of an individual who

3 qualifies for the transitional assistance prescription drug

4 card program under section 1807A of the Social Security

5 Act (as added by section 111) or for the premiums and cost6 sharing subsidies applicable to a qualified medicare bene7 ficiary, a specified low-income medicare beneficiary, or a

8 qualifying individual under section 1860D–19 of the Social

9 Security Act (as added by section 101).

10 (b) INDIVIDUAL DESCRIBED.—An individual is de11 scribed in this subsection if the individual does not qualify

12 for the transitional assistance prescription drug card pro13 gram under section 1807A of the Social Security Act or

14 for the premiums and cost-sharing subsidies applicable to

15 a qualified medicare beneficiary, a specified low-income

16 medicare beneficiary, or a qualifying individual under sec17 tion 1860D–19 of the Social Security Act solely as a result

18 of the application of an assets test to the individual.

19 (c) REPORT.—Not later than September 30, 2007, the

20 Comptroller General shall submit a report to Congress on

21 the study conducted under subsection (a) that includes such

22 recommendations for legislation as the Comptroller General

23 determines are appropriate.

24 (d) DEFINITIONS.—In this section:
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1 (1) COVERED DRUGS.—The term ‘‘covered drugs’’

2 has the meaning given that term in section

3 1860D(a)(D) of the Social Security Act.

4 (2) QUALIFIED MEDICARE BENEFICIARY; SPECI5 FIED LOW-INCOME MEDICARE BENEFICIARY; QUALI6 FYING INDIVIDUAL.—The terms ‘‘qualified medicare

7 beneficiary’’, ‘‘specified low-income medicare bene8 ficiary’’ and ‘‘qualifying individual’’ have the mean9 ing given those terms under section 1860D–19 of the

10 Social Security Act.

11 SEC. 608. HEALTH CARE INFRASTRUCTURE IMPROVEMENT.

12 At the end of the Social Security Act, add the following

13 new title:

14 ‘‘TITLE XXII—HEALTH CARE IN15 FRASTRUCTURE IMPROVE16 MENT

17 ‘‘SEC. 2201. DEFINITIONS.

18 ‘‘In this title, the following definitions apply:

19 ‘‘(1) ELIGIBLE PROJECT COSTS.—The term ‘eli20 gible project costs’ means amounts substantially all of

21 which are paid by, or for the account of, an obligor

22 in connection with a project, including the cost of—

23 ‘‘(A) development phase activities, including

24 planning, feasibility analysis, revenue fore25 casting, environmental study and review, per-
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1 mitting, architectural engineering and design

2 work, and other preconstruction activities;

3 ‘‘(B) construction, reconstruction, rehabili4 tation, replacement, and acquisition of facilities

5 and real property (including land related to the

6 project and improvements to land), environ7 mental mitigation, construction contingencies,

8 and acquisition of equipment;

9 ‘‘(C) capitalized interest necessary to meet

10 market requirements, reasonably required reserve

11 funds, capital issuance expenses, and other car12 rying costs during construction;

13 ‘‘(D) major medical equipment determined

14 to be appropriate by the Secretary; and

15 ‘‘(E) refinancing projects or activities that

16 are otherwise eligible for financial assistance

17 under subparagraphs (A) through (D).

18 ‘‘(2) FEDERAL CREDIT INSTRUMENT.—The term

19 ‘Federal credit instrument’ means a secured loan,

20 loan guarantee, or line of credit authorized to be

21 made available under this title with respect to a

22 project.

23 ‘‘(3) INVESTMENT-GRADE RATING.—The term

24 ‘investment-grade rating’ means a rating category of

25 BBB minus, Baa3, or higher assigned by a rating
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1 agency to project obligations offered into the capital

2 markets.

3 ‘‘(4) LENDER.—The term ‘lender’ means any

4 non-Federal qualified institutional buyer (as defined

5 in section 230.144A(a) of title 17, Code of Federal

6 Regulations (or any successor regulation), known as

7 Rule 144A(a) of the Securities and Exchange Com8 mission and issued under the Securities Act of 1933

9 (15 U.S.C. 77a et seq.)), including—

10 ‘‘(A) a qualified retirement plan (as defined

11 in section 4974(c) of the Internal Revenue Code

12 of 1986) that is a qualified institutional buyer;

13 and

14 ‘‘(B) a governmental plan (as defined in

15 section 414(d) of the Internal Revenue Code of

16 1986) that is a qualified institutional buyer.

17 ‘‘(5) LINE OF CREDIT.—The term ‘line of credit’

18 means an agreement entered into by the Secretary

19 with an obligor under section 2204 to provide a direct

20 loan at a future date upon the occurrence of certain

21 events.

22 ‘‘(6) LOAN GUARANTEE.—The term ‘loan guar23 antee’ means any guarantee or other pledge by the

24 Secretary to pay all or part of the principal of and
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1 interest on a loan or other debt obligation issued by

2 an obligor and funded by a lender.

3 ‘‘(7) LOCAL SERVICER.—The term ‘local servicer’

4 means a State or local government or any agency of

5 a State or local government that is responsible for

6 servicing a Federal credit instrument on behalf of the

7 Secretary.

8 ‘‘(8) OBLIGOR.—The term ‘obligor’ means a

9 party primarily liable for payment of the principal

10 of or interest on a Federal credit instrument, which

11 party may be a corporation, partnership, joint ven12 ture, trust, or governmental entity, agency, or instru13 mentality.

14 ‘‘(9) PROJECT.—The term ‘project’ means any

15 project that is designed to improve the health care in16 frastructure, including the construction, renovation,

17 or other capital improvement of any hospital, medical

18 research facility, or other medical facility or the pur19 chase of any equipment to be used in a hospital, re20 search facility, or other medical research facility.

21 ‘‘(10) PROJECT OBLIGATION.—The term ‘project

22 obligation’ means any note, bond, debenture, lease, in23 stallment sale agreement, or other debt obligation

24 issued or entered into by an obligor in connection
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1 with the financing of a project, other than a Federal

2 credit instrument.

3 ‘‘(11) RATING AGENCY.—The term ‘rating agen4 cy’ means a bond rating agency identified by the Se5 curities and Exchange Commission as a Nationally

6 Recognized Statistical Rating Organization.

7 ‘‘(12) SECURED LOAN.—The term ‘secured loan’

8 means a direct loan or other debt obligation issued by

9 an obligor and funded by the Secretary in connection

10 with the financing of a project under section 2203.

11 ‘‘(13) STATE.—The term ‘State’ has the meaning

12 given the term in section 101 of title 23, United

13 States Code.

14 ‘‘(14) SUBSIDY AMOUNT.—The term ‘subsidy

15 amount’ means the amount of budget authority suffi16 cient to cover the estimated long-term cost to the Fed17 eral Government of a Federal credit instrument, cal18 culated on a net present value basis, excluding ad19 ministrative costs and any incidental effects on gov20 ernmental receipts or outlays in accordance with the

21 provisions of the Federal Credit Reform Act of 1990

22 (2 U.S.C. 661 et seq.).

23 ‘‘(15) SUBSTANTIAL COMPLETION.—The term

24 ‘substantial completion’ means the opening of a

25 project to patients or for research purposes.
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1 ‘‘SEC. 2202. DETERMINATION OF ELIGIBILITY AND PROJECT

2 SELECTION.

3 ‘‘(a) ELIGIBILITY.—To be eligible to receive financial

4 assistance under this title, a project shall meet the following

5 criteria:

6 ‘‘(1) APPLICATION.—A State, a local servicer

7 identified under section 2205(a), or the entity under8 taking a project shall submit a project application to

9 the Secretary.

10 ‘‘(2) ELIGIBLE PROJECT COSTS.—To be eligible

11 for assistance under this title, a project shall have

12 total eligible project costs that are reasonably antici13 pated to equal or exceed $40,000,000.

14 ‘‘(3) SOURCES OF REPAYMENTS.—Project financ15 ing shall be repayable, in whole or in part, from reli16 able revenue sources as described in the application

17 submitted under paragraph (1).

18 ‘‘(4) PUBLIC SPONSORSHIP OF PRIVATE ENTI19 TIES.—In the case of a project that is undertaken by

20 an entity that is not a State or local government or

21 an agency or instrumentality of a State or local gov22 ernment, the project that the entity is undertaking

23 shall be publicly sponsored or sponsored by an entity

24 that is described in section 501(c)(3) of the Internal

25 Revenue Code of 1986 and exempt from tax under sec26 tion 501(a) of such Code.
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1 ‘‘(b) SELECTION AMONG ELIGIBLE PROJECTS.—

2 ‘‘(1) ESTABLISHMENT.—The Secretary shall es3 tablish criteria for selecting among projects that meet

4 the eligibility criteria specified in subsection (a).

5 ‘‘(2) SELECTION CRITERIA.—

6 ‘‘(A) IN GENERAL.—The selection criteria

7 shall include the following:

8 ‘‘(i) The extent to which the project is

9 nationally or regionally significant, in

10 terms of expanding or improving the health

11 care infrastructure of the United States or

12 the region or in terms of the medical benefit

13 that the project will have.

14 ‘‘(ii) The creditworthiness of the

15 project, including a determination by the

16 Secretary that any financing for the project

17 has appropriate security features, such as a

18 rate covenant, credit enhancement require19 ments, or debt services coverages, to ensure

20 repayment.

21 ‘‘(iii) The extent to which assistance

22 under this title would foster innovative pub23 lic-private partnerships and attract private

24 debt or equity investment.
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1 ‘‘(iv) The likelihood that assistance

2 under this title would enable the project to

3 proceed at an earlier date than the project

4 would otherwise be able to proceed.

5 ‘‘(v) The extent to which the project

6 uses or results in new technologies.

7 ‘‘(vi) The amount of budget authority

8 required to fund the Federal credit instru9 ment made available under this title.

10 ‘‘(vii) The extent to which the project

11 helps maintain or protect the environment.

12 ‘‘(B) SPECIFIC REQUIREMENTS.—The selec13 tion criteria shall require that a project

14 applicant—

15 ‘‘(i) be engaged in research in the

16 causes, prevention, and treatment of cancer;

17 ‘‘(ii) be designated as a cancer center

18 for the National Cancer Institute or be des19 ignated by the State as the official cancer

20 institute of the State; and

21 ‘‘(iii) be located in a State that, on the

22 date of enactment of this title, has a popu23 lation of less than 3,000,000 individuals.

24 ‘‘(C) RATING LETTER.—For purposes of

25 subparagraph (A)(ii), the Secretary shall require
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1 each project applicant to provide a rating letter

2 from at least 1 rating agency indicating that the

3 project’s senior obligations have the potential to

4 achieve an investment-grade rating with or with5 out credit enhancement.

6 ‘‘SEC. 2203. SECURED LOANS.

7 ‘‘(a) IN GENERAL.—

8 ‘‘(1) AGREEMENTS.—Subject to paragraphs (2)

9 through (4), the Secretary may enter into agreements

10 with 1 or more obligors to make secured loans, the

11 proceeds of which shall be used—

12 ‘‘(A) to finance eligible project costs;

13 ‘‘(B) to refinance interim construction fi14 nancing of eligible project costs; or

15 ‘‘(C) to refinance existing debt or prior

16 project obligations;

17 of any project selected under section 2202.

18 ‘‘(2) LIMITATION ON REFINANCING OF INTERIM

19 CONSTRUCTION FINANCING.—A loan under paragraph

20 (1) shall not refinance interim construction financing

21 under paragraph (1)(B) later than 1 year after the

22 date of substantial completion of the project.

23 ‘‘(3) RISK ASSESSMENT.—Before entering into

24 an agreement for a secured loan under this subsection,

25 the Secretary, in consultation with each rating agen-
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1 cy providing a rating letter under section

2 2202(b)(2)(B), shall determine an appropriate capital

3 reserve subsidy amount for each secured loan, taking

4 into account such letter.

5 ‘‘(4) INVESTMENT-GRADE RATING REQUIRE6 MENT.—The funding of a secured loan under this sec7 tion shall be contingent on the project’s senior obliga8 tions receiving an investment-grade rating, except

9 that—

10 ‘‘(A) the Secretary may fund an amount of

11 the secured loan not to exceed the capital reserve

12 subsidy amount determined under paragraph (3)

13 prior to the obligations receiving an investment14 grade rating; and

15 ‘‘(B) the Secretary may fund the remaining

16 portion of the secured loan only after the obliga17 tions have received an investment-grade rating

18 by at least 1 rating agency.

19 ‘‘(b) TERMS AND LIMITATIONS.—

20 ‘‘(1) IN GENERAL.—A secured loan under this

21 section with respect to a project shall be on such terms

22 and conditions and contain such covenants, represen23 tations, warranties, and requirements (including re24 quirements for audits) as the Secretary determines

25 appropriate.
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1 ‘‘(2) MAXIMUM AMOUNT.—The amount of the se2 cured loan shall not exceed 100 percent of the reason3 ably anticipated eligible project costs.

4 ‘‘(3) PAYMENT.—The secured loan—

5 ‘‘(A) shall—

6 ‘‘(i) be payable, in whole or in part,

7 from reliable revenue sources; and

8 ‘‘(ii) include a rate covenant, coverage

9 requirement, or similar security feature

10 supporting the project obligations; and

11 ‘‘(B) may have a lien on revenues described

12 in subparagraph (A) subject to any lien securing

13 project obligations.

14 ‘‘(4) INTEREST RATE.—The interest rate on the

15 secured loan shall be not less than the yield on mar16 ketable United States Treasury securities of a similar

17 maturity to the maturity of the secured loan on the

18 date of execution of the loan agreement.

19 ‘‘(5) MATURITY DATE.—The final maturity date

20 of the secured loan shall be not later than 30 years

21 after the date of substantial completion of the project.

22 ‘‘(6) NONSUBORDINATION.—The secured loan

23 shall not be subordinated to the claims of any holder

24 of project obligations in the event of bankruptcy, in25 solvency, or liquidation of the obligor.
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1 ‘‘(7) FEES.—The Secretary may establish fees at

2 a level sufficient to cover all or a portion of the costs

3 to the Federal Government of making a secured loan

4 under this section.

5 ‘‘(c) REPAYMENT.—

6 ‘‘(1) SCHEDULE.—The Secretary shall establish

7 a repayment schedule for each secured loan under this

8 section based on the projected cash flow from project

9 revenues and other repayment sources.

10 ‘‘(2) COMMENCEMENT.—Scheduled loan repay11 ments of principal or interest on a secured loan under

12 this section shall commence not later than 5 years

13 after the date of substantial completion of the project.

14 ‘‘(3) SOURCES OF REPAYMENT FUNDS.—The

15 sources of funds for scheduled loan repayments under

16 this section shall include any revenue generated by

17 the project.

18 ‘‘(4) DEFERRED PAYMENTS.—

19 ‘‘(A) AUTHORIZATION.—If, at any time

20 during the 10 years after the date of substantial

21 completion of the project, the project is unable to

22 generate sufficient revenues to pay the scheduled

23 loan repayments of principal and interest on the

24 secured loan, the Secretary may, subject to sub25 paragraph (C), allow the obligor to add unpaid
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1 principal and interest to the outstanding balance

2 of the secured loan.

3 ‘‘(B) INTEREST.—Any payment deferred

4 under subparagraph (A) shall—

5 ‘‘(i) continue to accrue interest in ac6 cordance with subsection (b)(4) until fully

7 repaid; and

8 ‘‘(ii) be scheduled to be amortized over

9 the remaining term of the loan beginning

10 not later than 10 years after the date of

11 substantial completion of the project in ac12 cordance with paragraph (1).

13 ‘‘(C) CRITERIA.—

14 ‘‘(i) IN GENERAL.—Any payment de15 ferral under subparagraph (A) shall be con16 tingent on the project meeting criteria es17 tablished by the Secretary.

18 ‘‘(ii) REPAYMENT STANDARDS.—The

19 criteria established under clause (i) shall

20 include standards for reasonable assurance

21 of repayment.

22 ‘‘(5) PREPAYMENT.—

23 ‘‘(A) USE OF EXCESS REVENUES.—Any ex24 cess revenues that remain after satisfying sched25 uled debt service requirements on the project obli-
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1 gations and secured loan and all deposit require2 ments under the terms of any trust agreement,

3 bond resolution, reimbursement agreement, credit

4 agreement, loan agreement, or similar agreement

5 securing project obligations may be applied an6 nually to prepay the secured loan without pen7 alty.

8 ‘‘(B) USE OF PROCEEDS OF REFI9 NANCING.—The secured loan may be prepaid at

10 any time without penalty, regardless of whether

11 such repayment is from the proceeds of refi12 nancing from non-Federal funding sources.

13 ‘‘(6) FORGIVENESS OF INDEBTEDNESS.—The

14 Secretary may forgive a loan secured under this title

15 under terms and conditions that are analogous to the

16 loan forgiveness provision for student loans under

17 part D of title IV of the Higher Education Act of

18 1965 (20 U.S.C. 1087a et seq.), except that the Sec19 retary shall condition such forgiveness on the estab20 lishment by the project of—

21 ‘‘(A) an outreach program for cancer pre22 vention, early diagnosis, and treatment that pro23 vides services to a substantial majority of the

24 residents of a State or region, including residents

25 of rural areas;
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1 ‘‘(B) an outreach program for cancer pre2 vention, early diagnosis, and treatment that pro3 vides services to multiple Indian tribes; and

4 ‘‘(C)(i) unique research resources (such as

5 population databases); or

6 ‘‘(ii) an affiliation with an entity that has

7 unique research resources.

8 ‘‘(d) SALE OF SECURED LOANS.—

9 ‘‘(1) IN GENERAL.—Subject to paragraph (2), as

10 soon as practicable after substantial completion of a

11 project and after notifying the obligor, the Secretary

12 may sell to another entity or reoffer into the capital

13 markets a secured loan for the project if the Secretary

14 determines that the sale or reoffering can be made on

15 favorable terms.

16 ‘‘(2) CONSENT OF OBLIGOR.—In making a sale

17 or reoffering under paragraph (1), the Secretary may

18 not change the original terms and conditions of the

19 secured loan without the written consent of the obli20 gor.

21 ‘‘(e) LOAN GUARANTEES.—

22 ‘‘(1) IN GENERAL.—The Secretary may provide

23 a loan guarantee to a lender in lieu of making a se24 cured loan if the Secretary determines that the budg-
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1 etary cost of the loan guarantee is substantially the

2 same as that of a secured loan.

3 ‘‘(2) TERMS.—The terms of a guaranteed loan

4 shall be consistent with the terms set forth in this sec5 tion for a secured loan, except that the rate on the

6 guaranteed loan and any prepayment features shall

7 be negotiated between the obligor and the lender, with

8 the consent of the Secretary.

9 ‘‘SEC. 2204. LINES OF CREDIT.

10 ‘‘(a) IN GENERAL.—

11 ‘‘(1) AGREEMENTS.—Subject to paragraphs (2)

12 through (4), the Secretary may enter into agreements

13 to make available lines of credit to 1 or more obligors

14 in the form of direct loans to be made by the Sec15 retary at future dates on the occurrence of certain

16 events for any project selected under section 2202.

17 ‘‘(2) USE OF PROCEEDS.—The proceeds of a line

18 of credit made available under this section shall be

19 available to pay debt service on project obligations

20 issued to finance eligible project costs, extraordinary

21 repair and replacement costs, operation and mainte22 nance expenses, and costs associated with unexpected

23 Federal or State environmental restrictions.

24 ‘‘(3) RISK ASSESSMENT.—Before entering into

25 an agreement for a secured loan under this subsection,
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1 the Secretary, in consultation with each rating agen2 cy providing a rating letter under section

3 2202(b)(2)(B), shall determine an appropriate sub4 sidy amount for each secured loan, taking into ac5 count such letter.

6 ‘‘(4) INVESTMENT-GRADE RATING REQUIRE7 MENT.—The funding of a line of credit under this sec8 tion shall be contingent on the project’s senior obliga9 tions receiving an investment-grade rating from at

10 least 1 rating agency.

11 ‘‘(b) TERMS AND LIMITATIONS.—

12 ‘‘(1) IN GENERAL.—A line of credit under this

13 section with respect to a project shall be on such terms

14 and conditions and contain such covenants, represen15 tations, warranties, and requirements (including re16 quirements for audits) as the Secretary determines

17 appropriate.

18 ‘‘(2) MAXIMUM AMOUNTS.—

19 ‘‘(A) TOTAL AMOUNT.—The total amount of

20 the line of credit shall not exceed 33 percent of

21 the reasonably anticipated eligible project costs.

22 ‘‘(B) 1-YEAR DRAWS.—The amount drawn

23 in any 1 year shall not exceed 20 percent of the

24 total amount of the line of credit.
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1 ‘‘(3) DRAWS.—Any draw on the line of credit

2 shall represent a direct loan and shall be made only

3 if net revenues from the project (including capitalized

4 interest, any debt service reserve fund, and any other

5 available reserve) are insufficient to pay the costs

6 specified in subsection (a)(2).

7 ‘‘(4) INTEREST RATE.—The interest rate on a di8 rect loan resulting from a draw on the line of credit

9 shall be not less than the yield on 30-year marketable

10 United States Treasury securities as of the date on

11 which the line of credit is obligated.

12 ‘‘(5) SECURITY.—The line of credit—

13 ‘‘(A) shall—

14 ‘‘(i) be payable, in whole or in part,

15 from reliable revenue sources; and

16 ‘‘(ii) include a rate covenant, coverage

17 requirement, or similar security feature

18 supporting the project obligations; and

19 ‘‘(B) may have a lien on revenues described

20 in subparagraph (A) subject to any lien securing

21 project obligations.

22 ‘‘(6) PERIOD OF AVAILABILITY.—The line of

23 credit shall be available during the period beginning

24 on the date of substantial completion of the project

25 and ending not later than 10 years after that date.
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1 ‘‘(7) RIGHTS OF THIRD-PARTY CREDITORS.—

2 ‘‘(A) AGAINST FEDERAL GOVERNMENT.—A

3 third-party creditor of the obligor shall not have

4 any right against the Federal Government with

5 respect to any draw on the line of credit.

6 ‘‘(B) ASSIGNMENT.—An obligor may assign

7 the line of credit to 1 or more lenders or to a

8 trustee on the lenders’ behalf.

9 ‘‘(8) NONSUBORDINATION.—A direct loan under

10 this section shall not be subordinated to the claims of

11 any holder of project obligations in the event of bank12 ruptcy, insolvency, or liquidation of the obligor.

13 ‘‘(9) FEES.—The Secretary may establish fees at

14 a level sufficient to cover all or a portion of the costs

15 to the Federal Government of providing a line of cred16 it under this section.

17 ‘‘(10) RELATIONSHIP TO OTHER CREDIT INSTRU18 MENTS.—A project that receives a line of credit under

19 this section also shall not receive a secured loan or

20 loan guarantee under section 2203 of an amount that,

21 combined with the amount of the line of credit, ex22 ceeds 100 percent of eligible project costs.

23 ‘‘(c) REPAYMENT.—

24 ‘‘(1) TERMS AND CONDITIONS.—The Secretary

25 shall establish repayment terms and conditions for
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1 each direct loan under this section based on the pro2 jected cash flow from project revenues and other re3 payment sources.

4 ‘‘(2) TIMING.—All scheduled repayments of prin5 cipal or interest on a direct loan under this section

6 shall commence not later than 5 years after the end

7 of the period of availability specified in subsection

8 (b)(6) and be fully repaid, with interest, by the date

9 that is 25 years after the end of the period of avail10 ability specified in subsection (b)(6).

11 ‘‘(3) SOURCES OF REPAYMENT FUNDS.—The

12 sources of funds for scheduled loan repayments under

13 this section shall include reliable revenue sources.

14 ‘‘SEC. 2205. PROJECT SERVICING.

15 ‘‘(a) REQUIREMENT.—The State in which a project

16 that receives financial assistance under this title is located

17 may identify a local servicer to assist the Secretary in serv18 icing the Federal credit instrument made available under

19 this title.

20 ‘‘(b) AGENCY; FEES.—If a State identifies a local

21 servicer under subsection (a), the local servicer—

22 ‘‘(1) shall act as the agent for the Secretary; and

23 ‘‘(2) may receive a servicing fee, subject to ap24 proval by the Secretary.
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1 ‘‘(c) LIABILITY.—A local servicer identified under sub2 section (a) shall not be liable for the obligations of the obli3 gor to the Secretary or any lender.

4 ‘‘(d) ASSISTANCE FROM EXPERT FIRMS.—The Sec5 retary may retain the services of expert firms in the field

6 of project finance to assist in the underwriting and serv7 icing of Federal credit instruments.

8 ‘‘SEC. 2206. STATE AND LOCAL PERMITS.

9 ‘‘The provision of financial assistance under this title

10 with respect to a project shall not—

11 ‘‘(1) relieve any recipient of the assistance of any

12 obligation to obtain any required State or local per13 mit or approval with respect to the project;

14 ‘‘(2) limit the right of any unit of State or local

15 government to approve or regulate any rate of return

16 on private equity invested in the project; or

17 ‘‘(3) otherwise supersede any State or local law

18 (including any regulation) applicable to the construc19 tion or operation of the project.

20 ‘‘SEC. 2207. REGULATIONS.

21 ‘‘The Secretary may issue such regulations as the Sec22 retary determines appropriate to carry out this title.

23 ‘‘SEC. 2208. FUNDING.

24 ‘‘(a) FUNDING.—
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1 ‘‘(1) IN GENERAL.—There are authorized to be

2 appropriated to carry out this title, $49,000,000 to

3 remain available during the period beginning on July

4 1, 2004 and ending on September 30, 2008.

5 ‘‘(2) ADMINISTRATIVE COSTS.—From funds

6 made available under paragraph (1), the Secretary

7 may use, for the administration of this title, not more

8 than $2,000,000 for each of fiscal years 2004 through

9 2008.

10 ‘‘(b) CONTRACT AUTHORITY.—Notwithstanding any

11 other provision of law, approval by the Secretary of a Fed12 eral credit instrument that uses funds made available under

13 this title shall be deemed to be acceptance by the United

14 States of a contractual obligation to fund the Federal credit

15 instrument.

16 ‘‘(c) AVAILABILITY.—Amounts appropriated under

17 this section shall be available for obligation on July 1, 2004.

18 ‘‘SEC. 2209. REPORT TO CONGRESS.

19 ‘‘Not later than 4 years after the date of enactment

20 of this title, the Secretary shall submit to Congress a report

21 summarizing the financial performance of the projects that

22 are receiving, or have received, assistance under this title,

23 including a recommendation as to whether the objectives of

24 this title are best served—
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1 ‘‘(1) by continuing the program under the au2 thority of the Secretary;

3 ‘‘(2) by establishing a Government corporation

4 or Government-sponsored enterprise to administer the

5 program; or

6 ‘‘(3) by phasing out the program and relying on

7 the capital markets to fund the types of infrastructure

8 investments assisted by this title without Federal par9 ticipation.’’.

10 SEC. 609. CAPITAL INFRASTRUCTURE REVOLVING LOAN

11 PROGRAM.

12 (a) IN GENERAL.—Part A of title XVI of the Public

13 Health Service Act (42 U.S.C. 300q et seq.) is amended by

14 adding at the end the following new section:

15 ‘‘CAPITAL INFRASTRUCTURE REVOLVING LOAN PROGRAM

16 ‘‘SEC. 1603. (a) AUTHORITY TO MAKE AND GUAR17 ANTEE LOANS.—

18 ‘‘(1) AUTHORITY TO MAKE LOANS.—The Sec19 retary may make loans from the fund established

20 under section 1602(d) to any rural entity for projects

21 for capital improvements, including—

22 ‘‘(A) the acquisition of land necessary for

23 the capital improvements;

24 ‘‘(B) the renovation or modernization of

25 any building;
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1 ‘‘(C) the acquisition or repair of fixed or

2 major movable equipment; and

3 ‘‘(D) such other project expenses as the Sec4 retary determines appropriate.

5 ‘‘(2) AUTHORITY TO GUARANTEE LOANS.—

6 ‘‘(A) IN GENERAL.—The Secretary may

7 guarantee the payment of principal and interest

8 for loans made to rural entities for projects for

9 any capital improvement described in paragraph

10 (1) to any non-Federal lender.

11 ‘‘(B) INTEREST SUBSIDIES.—In the case of

12 a guarantee of any loan made to a rural entity

13 under subparagraph (A), the Secretary may pay

14 to the holder of such loan, for and on behalf of

15 the project for which the loan was made,

16 amounts sufficient to reduce (by not more than

17 3 percent) the net effective interest rate otherwise

18 payable on such loan.

19 ‘‘(b) AMOUNT OF LOAN.—The principal amount of a

20 loan directly made or guaranteed under subsection (a) for

21 a project for capital improvement may not exceed

22 $5,000,000.

23 ‘‘(c) FUNDING LIMITATIONS.—

24 ‘‘(1) GOVERNMENT CREDIT SUBSIDY EXPO25 SURE.—The total of the Government credit subsidy
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1 exposure under the Credit Reform Act of 1990 scoring

2 protocol with respect to the loans outstanding at any

3 time with respect to which guarantees have been

4 issued, or which have been directly made, under sub5 section (a) may not exceed $50,000,000 per year.

6 ‘‘(2) TOTAL AMOUNTS.—Subject to paragraph

7 (1), the total of the principal amount of all loans di8 rectly made or guaranteed under subsection (a) may

9 not exceed $250,000,000 per year.

10 ‘‘(d) CAPITAL ASSESSMENT AND PLANNING GRANTS.—

11 ‘‘(1) NONREPAYABLE GRANTS.—Subject to para12 graph (2), the Secretary may make a grant to a rural

13 entity, in an amount not to exceed $50,000, for pur14 poses of capital assessment and business planning.

15 ‘‘(2) LIMITATION.—The cumulative total of

16 grants awarded under this subsection may not exceed

17 $2,500,000 per year.

18 ‘‘(e) TERMINATION OF AUTHORITY.—The Secretary

19 may not directly make or guarantee any loan under sub20 section (a) or make a grant under subsection (d) after Sep21 tember 30, 2008.’’.

22 (b) RURAL ENTITY DEFINED.—Section 1624 of the

23 Public Health Service Act (42 U.S.C. 300s–3) is amended

24 by adding at the end the following new paragraph:

25 ‘‘(14)(A) The term ‘rural entity’ includes—
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1 ‘‘(i) a rural health clinic, as defined in sec2 tion 1861(aa)(2) of the Social Security Act;

3 ‘‘(ii) any medical facility with at least 1

4 bed, but with less than 50 beds, that is located

5 in—

6 ‘‘(I) a county that is not part of a met7 ropolitan statistical area; or

8 ‘‘(II) a rural census tract of a metro9 politan statistical area (as determined

10 under the most recent modification of the

11 Goldsmith Modification, originally pub12 lished in the Federal Register on February

13 27, 1992 (57 Fed. Reg. 6725));

14 ‘‘(iii) a hospital that is classified as a

15 rural, regional, or national referral center under

16 section 1886(d)(5)(C) of the Social Security Act;

17 and

18 ‘‘(iv) a hospital that is a sole community

19 hospital (as defined in section 1886(d)(5)(D)(iii)

20 of the Social Security Act).

21 ‘‘(B) For purposes of subparagraph (A), the fact

22 that a clinic, facility, or hospital has been geographi23 cally reclassified under the medicare program under

24 title XVIII of the Social Security Act shall not pre-
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1 clude a hospital from being considered a rural entity

2 under clause (i) or (ii) of subparagraph (A).’’.

3 (c) CONFORMING AMENDMENTS.—Section 1602 of the

4 Public Health Service Act (42 U.S.C. 300q–2) is

5 amended—

6 (1) in subsection (b)(2)(D), by inserting ‘‘or

7 1603(a)(2)(B)’’ after ‘‘1601(a)(2)(B)’’; and

8 (2) in subsection (d)—

9 (A) in paragraph (1)(C), by striking ‘‘sec10 tion 1601(a)(2)(B)’’ and inserting ‘‘sections

11 1601(a)(2)(B) and 1603(a)(2)(B)’’; and

12 (B) in paragraph (2)(A), by inserting ‘‘or

13 1603(a)(2)(B)’’ after ‘‘1601(a)(2)(B)’’.

14 SEC. 610. FEDERAL REIMBURSEMENT OF EMERGENCY

15 HEALTH SERVICES FURNISHED TO UNDOCU16 MENTED ALIENS.

17 (a) TOTAL AMOUNT AVAILABLE FOR ALLOTMENT.—

18 There is appropriated, out of any funds in the Treasury

19 not otherwise appropriated, $250,000,000 for each of fiscal

20 years 2005 through 2008, for the purpose of making allot21 ments under this section to States described in paragraph

22 (1) or (2) of subsection (b). Funds appropriated under the

23 preceding sentence shall remain available until expended.

24 (b) STATE ALLOTMENTS.—
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1 (1) BASED ON PERCENTAGE OF UNDOCUMENTED

2 ALIENS.—

3 (A) IN GENERAL.—Out of the amount ap4 propriated under subsection (a) for a fiscal year,

5 the Secretary shall use $167,000,000 of such

6 amount to make allotments for such fiscal year

7 in accordance with subparagraph (B).

8 (B) FORMULA.—The amount of the allot9 ment for each State for a fiscal year shall be

10 equal to the product of—

11 (i) the total amount available for allot12 ments under this paragraph for the fiscal

13 year; and

14 (ii) the percentage of undocumented

15 aliens residing in the State with respect to

16 the total number of such aliens residing in

17 all States, as determined by the Statistics

18 Division of the Immigration and Natu19 ralization Service, as of January 2003,

20 based on the 2000 decennial census.

21 (2) BASED ON NUMBER OF UNDOCUMENTED

22 ALIEN APPREHENSION STATES.—

23 (A) IN GENERAL.—Out of the amount ap24 propriated under subsection (a) for a fiscal year,

25 the Secretary shall use $83,000,000 of such
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1 amount to make allotments for such fiscal year

2 for each of the 6 States with the highest number

3 of undocumented alien apprehensions for such

4 fiscal year.

5 (B) DETERMINATION OF ALLOTMENTS.—The

6 amount of the allotment for each State described

7 in subparagraph (A) for a fiscal year shall bear

8 the same ratio to the total amount available for

9 allotments under this paragraph for the fiscal

10 year as the ratio of the number of undocumented

11 alien apprehensions in the State in that fiscal

12 year bears to the total of such numbers for all

13 such States for such fiscal year.

14 (C) DATA.—For purposes of this paragraph,

15 the highest number of undocumented alien ap16 prehensions for a fiscal year shall be based on

17 the 4 most recent quarterly apprehension rates

18 for undocumented aliens in such States, as re19 ported by the Immigration and Naturalization

20 Service.

21 (3) RULE OF CONSTRUCTION.—Nothing in this

22 section shall be construed as prohibiting a State that

23 is described in both of paragraphs (1) and (2) from

24 receiving an allotment under both paragraphs for a

25 fiscal year.
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1 (c) USE OF FUNDS.—

2 (1) AUTHORITY TO MAKE PAYMENTS.—From the

3 allotments made for a State under subsection (b) for

4 a fiscal year, the Secretary shall pay directly to local

5 governments, hospitals, or other providers located in

6 the State (including providers of services received

7 through an Indian Health Service facility whether

8 operated by the Indian Health Service or by an In9 dian tribe or tribal organization) that provide un10 compensated emergency health services furnished to

11 undocumented aliens during that fiscal year, and to

12 the State, such amounts (subject to the total amount

13 available from such allotments) as the local govern14 ments, hospitals, providers, or State demonstrate were

15 incurred for the provision of such services during that

16 fiscal year.

17 (2) LIMITATION ON STATE USE OF FUNDS.—

18 Funds paid to a State from allotments made under

19 subsection (b) for a fiscal year may only be used for

20 making payments to local governments, hospitals, or

21 other providers for costs incurred in providing emer22 gency health services to undocumented aliens or for

23 State costs incurred with respect to the provision of

24 emergency health services to such aliens.
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1 (3) INCLUSION OF COSTS INCURRED WITH RE2 SPECT TO CERTAIN ALIENS.—Uncompensated emer3 gency health services furnished to aliens who have

4 been allowed to enter the United States for the sole

5 purpose of receiving emergency health services may be

6 included in the determination of costs incurred by a

7 State, local government, hospital, or other provider

8 with respect to the provision of such services.

9 (d) APPLICATIONS; ADVANCE PAYMENTS.—

10 (1) DEADLINE FOR ESTABLISHMENT OF APPLICA11 TION PROCESS.—24 (A) IN GENERAL.—Not later

12 than September 1, 2004, the Secretary shall establish

13 a process under which States, local governments, hos14 pitals, or other providers located in the State may

15 apply for payments from allotments made under sub16 section (b) for a fiscal year for uncompensated emer17 gency health services furnished to undocumented

18 aliens during that fiscal year.

19 (B) INCLUSION OF MEASURES TO COMBAT

20 FRAUD.—The Secretary shall include in the

21 process established under subparagraph (A)

22 measures to ensure that fraudulent payments are

23 not made from the allotments determined under

24 subsection (b).
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1 (2) ADVANCE PAYMENT; RETROSPECTIVE ADJUST2 MENT.—The process established under paragraph (1)

3 shall allow for making payments under this section

4 for each quarter of a fiscal year on the basis of ad5 vance estimates of expenditures submitted by appli6 cants for such payments and such other investigation

7 as the Secretary may find necessary, and for making

8 reductions or increases in the payments as necessary

9 to adjust for any overpayment or underpayment for

10 prior quarters of such fiscal year.

11 (e) DEFINITIONS.—In this section:

12 (1) HOSPITAL.—The term ‘‘hospital’’ has the

13 meaning given such term in section 1861(e) of the So14 cial Security Act (42 U.S.C. 1395x(e)).

15 (2) INDIAN TRIBE; TRIBAL ORGANIZATION.—The

16 terms ‘‘Indian tribe’’ and ‘‘tribal organization’’ have

17 the meanings given such terms in section 4 of the In18 dian Health Care Improvement Act (25 U.S.C. 1603).

19 (3) PROVIDER.—The term ‘‘provider’’ includes a

20 physician, any other health care professional licensed

21 under State law, and any other entity that furnishes

22 emergency health services, including ambulance serv23 ices.

24 (4) SECRETARY.—The term ‘‘Secretary’’ means

25 the Secretary of Health and Human Services.
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1 (5) STATE.—The term ‘‘State’’ means the 50

2 States and the District of Columbia.

3 SEC. 611. INCREASE IN APPROPRIATION TO THE HEALTH

4 CARE FRAUD AND ABUSE CONTROL AC5 COUNT.

6 Section 1817(k)(3)(A) (42 U.S.C. 1395i(k)(3)(A)) is

7 amended—

8 (1) in clause (i)—

9 (A) in subclause (II), by striking ‘‘and’’ at

10 the end; and

11 (B) by striking subclause (III), and insert12 ing the following new subclauses:

13 ‘‘(III) for fiscal year 2004, the

14 limit for fiscal year 2003 increased by

15 $10,000,000;

16 ‘‘(IV) for fiscal year 2005, the

17 limit for fiscal year 2003 increased by

18 $15,000,000;

19 ‘‘(V) for fiscal year 2006, the

20 limit for fiscal year 2003 increased by

21 $25,000,000; and

22 ‘‘(VI) for each fiscal year after fis23 cal year 2006, the limit for fiscal year

24 2003.’’; and

25 (2) in clause (ii)—
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1 (A) in subclause (VI), by striking ‘‘and’’ at

2 the end;

3 (B) in subclause (VII)—

4 (i) by striking ‘‘each fiscal year after

5 fiscal year 2002’’ and inserting ‘‘fiscal year

6 2003’’; and

7 (ii) by striking the period and insert8 ing a semicolon; and

9 (3) by adding at the end the following:

10 ‘‘(VIII) for fiscal year 2004,

11 $170,000,000;

12 ‘‘(IX) for fiscal year 2005,

13 $175,000,000;

14 ‘‘(X) for fiscal year 2006,

15 $185,000,000; and

16 ‘‘(XI) for each fiscal year after fis17 cal year 2006, not less than

18 $150,000,000 and not more than

19 $160,000,000.’’.

20 SEC. 612. INCREASE IN CIVIL PENALTIES UNDER THE FALSE

21 CLAIMS ACT.

22 (a) IN GENERAL.—Section 3729(a) of title 31, United

23 States Code, is amended—

24 (1) by striking ‘‘$5,000’’ and inserting ‘‘$7,500’’;

25 and
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1 (2) by striking ‘‘$10,000’’ and inserting

2 ‘‘$15,000’’.

3 (b) EFFECTIVE DATE.—The amendments made by sub4 section (a) shall apply to violations occurring on or after

5 January 1, 2004.

6 SEC. 613. INCREASE IN CIVIL MONETARY PENALTIES

7 UNDER THE SOCIAL SECURITY ACT.

8 (a) IN GENERAL.—Section 1128A(a) (42 U.S.C.

9 1320a–7a(a)), in the matter following paragraph (7), is

10 amended—

11 (1) by striking ‘‘$10,000’’ each place it appears

12 and inserting ‘‘$12,500’’;

13 (2) by striking ‘‘$15,000’’ and inserting

14 ‘‘$18,750’’; and

15 (3) striking ‘‘$50,000’’ and inserting ‘‘$62,500’’.

16 (b) EFFECTIVE DATE.—The amendments made by sub17 section (a) shall apply to violations occurring on or after

18 January 1, 2004.

19 SEC. 614. EXTENSION OF CUSTOMS USER FEES.

20 Section 13031(j)(3) of the Consolidated Omnibus

21 Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is

22 amended by striking ‘‘September 30, 2003’’ and inserting

23 ‘‘September 30, 2013’’.
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1 SEC. 615. REIMBURSEMENT FOR FEDERALLY QUALIFIED

2 HEALTH CENTERS PARTICIPATING IN MEDI3 CARE MANAGED CARE.

4 (a) REIMBURSEMENT.—

5 (1) IN GENERAL.—Section 1833(a)(3) (42 U.S.C.

6 1395l(a)(3)) is amended to read as follows:

7 ‘‘(3) in the case of services described in section

8 1832(a)(2)(D)—

9 ‘‘(A) except as provided in subparagraph

10 (B), the costs which are reasonable and related

11 to the cost of furnishing such services or which

12 are based on such other tests of reasonableness as

13 the Secretary may prescribe in regulations, in14 cluding those authorized under section

15 1861(v)(1)(A), less the amount a provider may

16 charge as described in clause (ii) of section

17 1866(a)(2)(A), but in no case may the payment

18 for such services (other than for items and serv19 ices described in section 1861(s)(10)(A)) exceed

20 80 percent of such costs; or

21 ‘‘(B) with respect to the services described

22 in clause (ii) of section 1832(a)(2)(D) that are

23 furnished to an individual enrolled with a

24 MedicareAdvantage plan under part C pursuant

25 to a written agreement described in section

26 1853(j), the amount by which—
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1 ‘‘(i) the amount of payment that would

2 have otherwise been provided under sub3 paragraph (A) (calculated as if ‘100 per4 cent’ were substituted for ‘80 percent’ in

5 such subparagraph) for such services if the

6 individual had not been so enrolled; exceeds

7 ‘‘(ii) the amount of the payments re8 ceived under such written agreement for

9 such services (not including any financial

10 incentives provided for in such agreement

11 such as risk pool payments, bonuses, or

12 withholds),

13 less the amount the Federally qualified health

14 center may charge as described in section

15 1857(e)(3)(C);’’.

16 (b) CONTINUATION OF MEDICAREADVANTAGE MONTH17 LY PAYMENTS.—

18 (1) IN GENERAL.—Section 1853 (42 U.S.C.

19 1395w–23), as amended by this Act, is amended by

20 adding at the end the following new subsection:

21 ‘‘(j) PAYMENT RULE FOR FEDERALLY QUALIFIED

22 HEALTH CENTER SERVICES.—If an individual who is en23 rolled with a MedicareAdvantage plan under this part re24 ceives a service from a Federally qualified health center that

25 has a written agreement with such plan for providing such
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1 a service (including any agreement required under section

2 1857(e)(3))—

3 ‘‘(1) the Secretary shall pay the amount deter4 mined under section 1833(a)(3)(B) directly to the

5 Federally qualified health center not less frequently

6 than quarterly; and

7 ‘‘(2) the Secretary shall not reduce the amount

8 of the monthly payments to the MedicareAdvantage

9 plan made under section 1853(a) as a result of the

10 application of paragraph (1).’’.

11 (2) CONFORMING AMENDMENTS.—

12 (A) Paragraphs (1) and (2) of section

13 1851(i) (42 U.S.C. 1395w–21(i)(1)), as amended

14 by this Act, are each amended by inserting

15 ‘‘1853(j),’’ after ‘‘1853(i),’’.

16 (B) Section 1853(c)(5) is amended by strik17 ing ‘‘subsections (a)(3)(C)(iii) and (i)’’ and in18 serting ‘‘subsections (a)(3)(C)(iii), (i), and

19 (j)(1)’’.

20 (c) ADDITIONAL MEDICAREADVANTAGE CONTRACT RE21 QUIREMENTS.—Section 1857(e) (42 U.S.C. 1395w–27(e)) is

22 amended by adding at the end the following new paragraph:

23 ‘‘(3) AGREEMENTS WITH FEDERALLY QUALIFIED

24 HEALTH CENTERS.—
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1 ‘‘(A) PAYMENT LEVELS AND AMOUNTS.—A

2 contract under this part shall require the

3 MedicareAdvantage plan to provide, in any con4 tract between the plan and a Federally qualified

5 health center, for a level and amount of payment

6 to the Federally qualified health center for serv7 ices provided by such health center that is not

8 less than the level and amount of payment that

9 the plan would make for such services if the serv10 ices had been furnished by a provider of services

11 that was not a Federally qualified health center.

12 ‘‘(B) COST-SHARING.—Under the written

13 agreement described in subparagraph (A), a Fed14 erally qualified health center must accept the

15 MedicareAdvantage contract price plus the Fed16 eral payment provided for in section

17 1833(a)(3)(B) as payment in full for services

18 covered by the contract, except that such a health

19 center may collect any amount of cost-sharing

20 permitted under the contract under this part, so

21 long as the amounts of any deductible, coinsur22 ance, or copayment comply with the require23 ments under section 1854(e).’’.
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1 (d) SAFE HARBOR FROM ANTIKICKBACK PROHIBI2 TION.—Section 1128B(b)(3) (42 U.S.C. 1320a–7b(b)(3)) is

3 amended—

4 (1) in subparagraph (E), by striking ‘‘and’’ after

5 the semicolon at the end;

6 (2) in subparagraph (F), by striking the period

7 at the end and inserting ‘‘; and’’; and

8 (3) by adding at the end the following new sub9 paragraph:

10 ‘‘(G) any remuneration between a Federally

11 qualified health center (or an entity controlled

12 by such a health center) and a

13 MedicareAdvantage plan pursuant to the written

14 agreement described in section 1853(j).’’.

15 (e) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to services provided on or after January

17 1, 2006, and contract years beginning on or after such date.

18 SEC. 616. PROVISION OF INFORMATION ON ADVANCE DI19 RECTIVES.

20 Section 1804(c) of the Social Security Act (42 U.S.C.

21 1395b-2(c)) is amended—

22 (1) by redesignating paragraphs (1) through (4)

23 as subparagraphs (A) through (D), respectively;
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1 (2) in the matter preceding subparagraph (A), as

2 so redesignated, by striking ‘‘The notice’’ and insert3 ing ‘‘(1) The notice’’; and

4 (3) by adding at the end the following:

5 ‘‘(2)(A) The Secretary shall annually provide each

6 medicare beneficiary with information concerning advance

7 directives. Such information shall be provided by the Sec8 retary as part of the Medicare and You handbook that is

9 provided to each such beneficiary. Such handbook shall in10 clude a separate section on advanced directives and specific

11 details on living wills and the durable power of attorney

12 for health care. The Secretary shall ensure that the intro13 ductory letter that accompanies such handbook contain a

14 statement concerning the inclusion of such information.

15 ‘‘(B) In this section:

16 ‘‘(i) The term ‘advance directive’ has the mean17 ing given such term in section 1866(f)(3).

18 ‘‘(ii) The term ‘medicare beneficiary’ means an

19 individual who is entitled to, or enrolled for, benefits

20 under part A or enrolled under part B, of this title.’’.

21 SEC. 617. SENSE OF THE SENATE REGARDING IMPLEMENTA22 TION OF THE PRESCRIPTION DRUG AND

23 MEDICARE IMPROVEMENT ACT OF 2003.

24 (a) IN GENERAL.—It is the sense of the Senate that

25 the Committee on Finance of the Senate should hold not
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1 less than 4 hearings to monitor implementation of the Pre2 scription Drug and Medicare Improvement Act of 2003

3 (hereinafter in this section referred to as the ‘‘Act’’) during

4 which the Secretary or his designee should testify before the

5 Committee.

6 (b) INITIAL HEARING.—It is the sense of the Senate

7 that the first hearing described in subsection (a) should be

8 held not later than 60 days after the date of the enactment

9 the Act. At the hearing, the Secretary or his designee should

10 submit written testimony and testify before the Committee

11 on Finance of the Senate on the following issues:

12 (1) The progress toward implementation of the

13 prescription drug discount card under section 111 of

14 the Act.

15 (2) Development of the blueprint that will direct

16 the implementation of the provisions of the Act, in17 cluding the implementation of title I (Medicare Pre18 scription Drug Benefit), title II (MedicareAdvantage),

19 and title III (Center for Medicare Choices) of the Act.

20 (3) Any problems that will impede the timely

21 implementation of the Act.

22 (4) The overall progress toward implementation

23 of the Act.

24 (c) SUBSEQUENT HEARINGS.—It is the sense of the

25 Senate that the additional hearings described in subsection
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1 (a) should be held in each of May 2004, October 2004, and

2 May 2005. At each hearing, the Secretary or his designee

3 should submit written testimony and testify before the Com4 mittee on Finance of the Senate on the following issues:

5 (1) Progress on implementation of title I (Medi6 care Prescription Drug Benefit), title II

7 (MedicareAdvantage), and title III (Center for Medi8 care Choices) of the Act.

9 (2) Any problems that will impede timely imple10 mentation of the Act.

11 SEC. 618. EXTENSION OF MUNICIPAL HEALTH SERVICE

12 DEMONSTRATION PROJECTS.

13 The last sentence of section 9215(a) of the Consolidated

14 Omnibus Budget Reconciliation Act of 1985 (42 U.S.C.

15 1395b–1 note), as previously amended, is amended by strik16 ing ‘‘December 31, 2004, and inserting ‘‘December 31, 2006.

17 SEC. 619. STUDY ON MAKING PRESCRIPTION PHARMA18 CEUTICAL INFORMATION ACCESSIBLE FOR

19 BLIND AND VISUALLY-IMPAIRED INDIVID20 UALS.

21 (a) STUDY.—

22 (1) IN GENERAL.—The Secretary of Health and

23 Human Services shall undertake a study of how to

24 make prescription pharmaceutical information, in-
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1 cluding drug labels and usage instructions, accessible

2 to blind and visually-impaired individuals.

3 (2) STUDY TO INCLUDE EXISTING AND EMERGING

4 TECHNOLOGIES.—The study under paragraph (1)

5 shall include a review of existing and emerging tech6 nologies, including assistive technology, that makes es7 sential information on the content and prescribed use

8 of pharmaceutical medicines available in a usable for9 mat for blind and visually-impaired individuals.

10 (b) REPORT.—

11 (1) IN GENERAL.—Not later than 18 months

12 after the date of the enactment of this Act, the Sec13 retary of Health and Human Services shall submit a

14 report to Congress on the study required under sub15 section (a).

16 (2) CONTENTS OF REPORT.—The report required

17 under subsection (a) shall include recommendations

18 for the implementation of usable formats for making

19 prescription pharmaceutical information available to

20 blind and visually-impaired individuals and an esti21 mate of the costs associated with the implementation

22 of each format.

23 SEC. 620. HEALTH CARE THAT WORKS FOR ALL AMERICANS24 CITIZENS HEALTH CARE WORKING GROUP.

25 (a) FINDINGS.—Congress finds the following:
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1 (1) In order to improve the health care system,

2 the American public must engage in an informed na3 tional public debate to make choices about the services

4 they want covered, what health care coverage they

5 want, and how they are willing to pay for coverage.

6 (2) More than a trillion dollars annually is

7 spent on the health care system, yet—

8 (A) 41,000,000 Americans are uninsured;

9 (B) insured individuals do not always have

10 access to essential, effective services to improve

11 and maintain their health; and

12 (C) employers, who cover over 170,000,000

13 Americans, find providing coverage increasingly

14 difficult because of rising costs and double digit

15 premium increases.

16 (3) Despite increases in medical care spending

17 that are greater than the rate of inflation, population

18 growth, and Gross Domestic Product growth, there

19 has not been a commensurate improvement in our

20 health status as a nation.

21 (4) Health care costs for even just 1 member of

22 a family can be catastrophic, resulting in medical

23 bills potentially harming the economic stability of the

24 entire family.
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1 (5) Common life occurrences can jeopardize the

2 ability of a family to retain private coverage or jeop3 ardize access to public coverage.

4 (6) Innovations in health care access, coverage,

5 and quality of care, including the use of technology,

6 have often come from States, local communities, and

7 private sector organizations, but more creative poli8 cies could tap this potential.

9 (7) Despite our Nation’s wealth, the health care

10 system does not provide coverage to all Americans

11 who want it.

12 (b) PURPOSES.—The purposes of this Act are—

13 (1) to provide for a nationwide public debate

14 about improving the health care system to provide

15 every American with the ability to obtain quality, af16 fordable health care coverage; and

17 (2) to provide for a vote by Congress on the rec18 ommendations that result from the debate.

19 (c) ESTABLISHMENT.—The Secretary, acting through

20 the Agency for Healthcare Research and Quality, shall es21 tablish an entity to be known as the Citizens’ Health Care

22 Working Group (referred to in this Act as the ‘‘Working

23 Group’’).

24 (d) APPOINTMENT.—Not later than 45 days after the

25 date of enactment of this Act, the Speaker and Minority
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1 Leader of the House of Representatives and the Majority

2 Leader and Minority Leader of the Senate (in this section

3 referred to as the ‘‘leadership’’) shall each appoint individ4 uals to serve as members of the Working Group in accord5 ance with subsections (e), (f), and (g).

6 (e) MEMBERSHIP CRITERIA.—

7 (1) APPOINTED MEMBERS.—

8 (A) SEPARATE APPOINTMENTS.—The

9 Speaker of the House of Representatives jointly

10 with the Minority Leader of the House of Rep11 resentatives, and the Majority Leader of the Sen12 ate jointly with the Minority Leader of the Sen13 ate, shall each appoint 1 member of the Working

14 Group described in subparagraphs (A), (G), (J),

15 (K), and (M) of paragraph (2).

16 (B) JOINT APPOINTMENTS.—Members of the

17 Working Group described in subparagraphs (B),

18 (C), (D), (E), (F), (I), and (N) of paragraph (2)

19 shall be appointed jointly by the leadership.

20 (C) COMBINED APPOINTMENTS.—Members

21 of the Working Group described in subpara22 graphs (H) and (L) shall be appointed in the fol23 lowing manner:
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1 (i) One member of the Working Group

2 in each of such subparagraphs shall be ap3 pointed jointly by the leadership.

4 (ii) The remaining appointments of

5 the members in each of such subparagraphs

6 shall be divided equally such that the

7 Speaker of the House of Representatives

8 jointly with the Minority Leader of the

9 House of Representatives, and the Majority

10 Leader of the Senate jointly with the Minor11 ity Leader of the Senate each appoint an

12 equal number of members.

13 (2) CATEGORIES OF APPOINTED MEMBERS.—

14 Members of the Working Group shall be appointed as

15 follows:

16 (A) 2 members shall be patients or family

17 members of patients who, at least 1 year prior

18 to the date of enactment of this Act, have had no

19 health insurance.

20 (B) 1 member shall be a representative of

21 children.

22 (C) 1 member shall be a representative of

23 the mentally ill.

24 (D) 1 member shall be a representative of

25 the disabled.
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1 (E) 1 member shall be over the age of 65

2 and a beneficiary under the medicare program

3 established under title XVIII of the Social Secu4 rity Act (42 U.S.C. 1395 et seq.).

5 (F) 1 member shall be a recipient of benefits

6 under the medicaid program under title XIX of

7 the Social Security Act (42 U.S.C. 1396 et seq.).

8 (G) 2 members shall be State health offi9 cials.

10 (H) 3 members shall be employers,

11 including—

12 (i) 1 large employer (an employer who

13 employed 50 or more employees on business

14 days during the preceding calendar year

15 and who employed at least 50 employees on

16 the first of the year);

17 (ii) 1 small employer (an employer

18 who employed an average of at least 2 em19 ployees but less than 50 employees on busi20 ness days in the preceding calendar year

21 and who employs at least 2 employees on

22 the first of the year); and

23 (iii) 1 multi-state employer.

24 (I) 1 member shall be a representative of

25 labor.
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1 (J) 2 members shall be health insurance

2 issuers.

3 (K) 2 members shall be health care pro4 viders.

5 (L) 5 members shall be appointed as fol6 lows:

7 (i) 1 economist.

8 (ii) 1 academician.

9 (iii) 1 health policy researcher.

10 (iv) 1 individual with expertise in

11 pharmacoeconomics.

12 (v) 1 health technology expert.

13 (M) 2 members shall be representatives of

14 community leaders who have developed State or

15 local community solutions to the problems ad16 dressed by the Working Group.

17 (N) 1 member shall be a representative of a

18 medical school.

19 (3) SECRETARY.—The Secretary, or the designee

20 of the Secretary, shall be a member of the Working

21 Group.

22 (f) PROHIBITED APPOINTMENTS.—Members of the

23 Working Group shall not include members of Congress or

24 other elected government officials (Federal, State, or local)

25 other than those individuals specified in subsection (e). To
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1 the extent possible, individuals appointed to the Working

2 Group shall have used the health care system within the

3 previous 2 years and shall not be paid employees or rep4 resentatives of associations or advocacy organizations in5 volved in the health care system.

6 (g) APPOINTMENT CRITERIA.—

7 (1) HOUSE OF REPRESENTATIVES.—The Speaker

8 and Minority Leader of the House of Representatives

9 shall make the appointments described in subsection

10 (d) in consultation with the chairperson and ranking

11 member of the following committees of the House of

12 Representatives:

13 (A) The Committee on Ways and Means.

14 (B) The Committee on Energy and Com15 merce.

16 (C) The Committee on Education and the

17 Workforce.

18 (2) SENATE.—The Majority Leader and Minor19 ity Leader of the Senate shall make the appointments

20 described in subsection (d) in consultation with the

21 chairperson and ranking member of the following

22 committees of the Senate:

23 (A) The Committee on Finance.

24 (B) The Committee on Health, Education,

25 Labor, and Pensions.
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1 (h) PERIOD OF APPOINTMENT.—Members of the Work2 ing Group shall be appointed for a term of 2 years. Such

3 term is renewable and any vacancies shall not affect the

4 power and duties of the Working Group but shall be filled

5 in the same manner as the original appointment.

6 (i) APPOINTMENT OF THE CHAIRPERSON.—Not later

7 than 15 days after the date on which all members of the

8 Working Group have been appointed under subsection (d),

9 the leadership shall make a joint designation of the chair10 person of the Working Group. If the leadership fails to make

11 such designation within such time period, the Working

12 Group Members shall, not later than 10 days after the end

13 of such time period, designate a chairperson by majority

14 vote.

15 (j) SUBCOMMITTEES.—The Working Group may estab16 lish subcommittees if doing so increases the efficiency of the

17 Working Group in completing its tasks.

18 (k) DUTIES.—

19 (1) HEARINGS.—Not later than 90 days after the

20 date of appointment of the chairperson under sub21 section (i), the Working Group shall hold hearings to

22 examine—

23 (A) the capacity of the public and private

24 health care systems to expand coverage options;
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1 (B) the cost of health care and the effective2 ness of care provided at all stages of disease;

3 (C) innovative State strategies used to ex4 pand health care coverage and lower health care

5 costs;

6 (D) local community solutions to accessing

7 health care coverage;

8 (E) efforts to enroll individuals currently el9 igible for public or private health care coverage;

10 (F) the role of evidence-based medical prac11 tices that can be documented as restoring, main12 taining, or improving a patient’s health, and the

13 use of technology in supporting providers in im14 proving quality of care and lowering costs; and

15 (G) strategies to assist purchasers of health

16 care, including consumers, to become more aware

17 of the impact of costs, and to lower the costs of

18 health care.

19 (2) ADDITIONAL HEARINGS.—The Working

20 Group may hold additional hearings on subjects other

21 than those listed in paragraph (1) so long as such

22 hearings are determined to be necessary by the Work23 ing Group in carrying out the purposes of this Act.

24 Such additional hearings do not have to be completed

25 within the time period specified in paragraph (1) but
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1 shall not delay the other activities of the Working

2 Group under this section.

3 (3) THE HEALTH REPORT TO THE AMERICAN

4 PEOPLE.—Not later than 90 days after the hearings

5 described in paragraphs (1) and (2) are completed,

6 the Working Group shall prepare and make available

7 to health care consumers through the Internet and

8 other appropriate public channels, a report to be enti9 tled, ‘‘The Health Report to the American People’’.

10 Such report shall be understandable to the general

11 public and include—

12 (A) a summary of—

13 (i) health care and related services that

14 may be used by individuals throughout

15 their life span;

16 (ii) the cost of health care services and

17 their medical effectiveness in providing bet18 ter quality of care for different age groups;

19 (iii) the source of coverage and pay20 ment, including reimbursement, for health

21 care services;

22 (iv) the reasons people are uninsured

23 or underinsured and the cost to taxpayers,

24 purchasers of health services, and commu-
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1 nities when Americans are uninsured or

2 underinsured;

3 (v) the impact on health care outcomes

4 and costs when individuals are treated in

5 all stages of disease;

6 (vi) health care cost containment strat7 egies; and

8 (vii) information on health care needs

9 that need to be addressed;

10 (B) examples of community strategies to

11 provide health care coverage or access;

12 (C) information on geographic-specific

13 issues relating to health care;

14 (D) information concerning the cost of care

15 in different settings, including institutional16 based care and home and community-based care;

17 (E) a summary of ways to finance health

18 care coverage; and

19 (F) the role of technology in providing fu20 ture health care including ways to support the

21 information needs of patients and providers.

22 (4) COMMUNITY MEETINGS.—

23 (A) IN GENERAL.—Not later than 1 year

24 after the date of enactment of this Act, the Work25 ing Group shall initiate health care community
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1 meetings throughout the United States (in this

2 section referred to as ‘‘community meetings’’).

3 Such community meetings may be geographi4 cally or regionally based and shall be completed

5 within 180 days after the initiation of the first

6 meeting.

7 (B) NUMBER OF MEETINGS.—The Working

8 Group shall hold a sufficient number of commu9 nity meetings in order to receive information

10 that reflects—

11 (i) the geographic differences through12 out the United States;

13 (ii) diverse populations; and

14 (iii) a balance among urban and rural

15 populations.

16 (C) MEETING REQUIREMENTS.—

17 (i) FACILITATOR.—A State health offi18 cer may be the facilitator at the community

19 meetings.

20 (ii) ATTENDANCE.—At least 1 member

21 of the Working Group shall attend and serve

22 as chair of each community meeting. Other

23 members may participate through inter24 active technology.
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1 (iii) TOPICS.—The community meet2 ings shall, at a minimum, address the fol3 lowing issues:

4 (I) The optimum way to balance

5 costs and benefits so that affordable

6 health coverage is available to as many

7 people as possible.

8 (II) The identification of services

9 that provide cost-effective, essential

10 health care services to maintain and

11 improve health and which should be

12 included in health care coverage.

13 (III) The cost of providing in14 creased benefits.

15 (IV) The mechanisms to finance

16 health care coverage, including defin17 ing the appropriate financial role for

18 individuals, businesses, and govern19 ment.

20 (iv) INTERACTIVE TECHNOLOGY.—The

21 Working Group may encourage public par22 ticipation in community meetings through

23 interactive technology and other means as

24 determined appropriate by the Working

25 Group.
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1 (D) INTERIM REQUIREMENTS.—Not later

2 than 180 days after the date of completion of the

3 community meetings, the Working Group shall

4 prepare and make available to the public

5 through the Internet and other appropriate pub6 lic channels, an interim set of recommendations

7 on health care coverage and ways to improve

8 and strengthen the health care system based on

9 the information and preferences expressed at the

10 community meetings. There shall be a 90-day

11 public comment period on such recommenda12 tions.

13 (l) RECOMMENDATIONS.—Not later than 120 days

14 after the expiration of the public comment period described

15 in subsection (k)(4)(D), the Working Group shall submit to

16 Congress and the President a final set of recommendations.

17 (m) ADMINISTRATION.—

18 (1) EXECUTIVE DIRECTOR.—There shall be an

19 Executive Director of the Working Group who shall be

20 appointed by the chairperson of the Working Group

21 in consultation with the members of the Working

22 Group.

23 (2) COMPENSATION.—While serving on the busi24 ness of the Working Group (including travel time), a

25 member of the Working Group shall be entitled to
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1 compensation at the per diem equivalent of the rate

2 provided for level IV of the Executive Schedule under

3 section 5315 of title 5, United States Code, and while

4 so serving away from home and the member’s regular

5 place of business, a member may be allowed travel ex6 penses, as authorized by the chairperson of the Work7 ing Group. For purposes of pay and employment ben8 efits, rights, and privileges, all personnel of the Work9 ing Group shall be treated as if they were employees

10 of the Senate.

11 (3) INFORMATION FROM FEDERAL AGENCIES.—

12 The Working Group may secure directly from any

13 Federal department or agency such information as

14 the Working Group considers necessary to carry out

15 this Act. Upon request of the Working Group, the

16 head of such department or agency shall furnish such

17 information.

18 (4) POSTAL SERVICES.—The Working Group

19 may use the United States mails in the same manner

20 and under the same conditions as other departments

21 and agencies of the Federal Government.

22 (n) DETAIL.—Not more than 10 Federal Government

23 employees employed by the Department of Labor and 10

24 Federal Government employees employed by the Depart25 ment of Health and Human Services may be detailed to
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1 the Working Group under this section without further reim2 bursement. Any detail of an employee shall be without

3 interruption or loss of civil service status or privilege.

4 (o) TEMPORARY AND INTERMITTENT SERVICES.—The

5 chairperson of the Working Group may procure temporary

6 and intermittent services under section 3109(b) of title 5,

7 United States Code, at rates for individuals which do not

8 exceed the daily equivalent of the annual rate of basic pay

9 prescribed for level V of the Executive Schedule under sec10 tion 5316 of such title.

11 (p) ANNUAL REPORT.—Not later than 1 year after the

12 date of enactment of this Act, and annually thereafter dur13 ing the existence of the Working Group, the Working Group

14 shall report to Congress and make public a detailed descrip15 tion of the expenditures of the Working Group used to carry

16 out its duties under this section.

17 (q) SUNSET OF WORKING GROUP.—The Working

18 Group shall terminate when the report described in sub19 section (l) is submitted to Congress.

20 (r) ADMINISTRATION REVIEW AND COMMENTS.—Not

21 later than 45 days after receiving the final recommenda22 tions of the Working Group under subsection (l), the Presi23 dent shall submit a report to Congress which shall

24 contain—
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1 (1) additional views and comments on such rec2 ommendations; and

3 (2) recommendations for such legislation and ad4 ministrative actions as the President considers appro5 priate.

6 (s) REQUIRED CONGRESSIONAL ACTION.—Not later

7 than 45 days after receiving the report submitted by the

8 President under subsection (r), each committee of jurisdic9 tion of Congress shall hold at least 1 hearing on such report

10 and on the final recommendations of the Working Group

11 submitted under subsection (l).

12 (t) AUTHORIZATION OF APPROPRIATIONS.—

13 (1) IN GENERAL.—There are authorized to be

14 appropriated to carry out this Act, other than sub15 section (k)(3), $3,000,000 for each of fiscal years

16 2004, 2005, and 2006.

17 (2) HEALTH REPORT TO THE AMERICAN PEO18 PLE.—There are authorized to be appropriated for the

19 preparation and dissemination of the Health Report

20 to the American People described in subsection (k)(3),

21 such sums as may be necessary for the fiscal year in

22 which the report is required to be submitted.
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1 SEC. 621. GAO STUDY OF PHARMACEUTICAL PRICE CON2 TROLS AND PATENT PROTECTIONS IN THE G–

3 7 COUNTRIES.

4 (a) STUDY.—The Comptroller General of the United

5 States shall conduct a study of price controls imposed on

6 pharmaceuticals in France, Germany, Italy, Japan, the

7 United Kingdom and Canada to review the impact such

8 regulations have on consumers, including American con9 sumers, and on innovation in medicine. Such study shall

10 include—

11 (1) the pharmaceutical price control structure in

12 each country for a wide range of pharmaceuticals,

13 compared with average pharmaceutical prices paid by

14 Americans covered by private sector health insurance;

15 (2) the proportion of the cost for innovation

16 borne by American consumers, compared with con17 sumers in the other six countries;

18 (3) a review of how closely the observed prices in

19 regulated markets correspond to the prices that effi20 ciently distribute common costs of production

21 (‘‘Ramsey prices’’);

22 (4) a review of any peer-reviewed literature that

23 might show the health consequences to patients in the

24 listed countries that result from the absence or de25 layed introduction of medicines, including the cost of
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1 not having access to medicines, in terms of lower life

2 expectancy and lower quality of health;

3 (5) the impact on American consumers, in terms

4 of reduced research into new or improved pharma5 ceuticals (including the cost of delaying the introduc6 tion of a significant advance in certain major dis7 eases), if similar price controls were adopted in the

8 United States;

9 (6) the existing standards under international

10 conventions, including the World Trade Organization

11 and the North American Free Trade Agreement, re12 garding regulated pharmaceutical prices, including

13 any restrictions on anti-competitive laws that might

14 apply to price regulations and how economic harm

15 caused to consumers in markets without price regula16 tions may be remedied;

17 (7) in parallel trade regimes, how much of the

18 price difference between countries in the European

19 Union is captured by middlemen and how much goes

20 to benefit patients and health systems where parallel

21 importing is significant; and

22 (8) how much cost is imposed on the owner of a

23 property right from counterfeiting and from inter24 national violation of intellectual property rights for

25 prescription medicines.
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1 (b) REPORT.—Not later than 1 year after the date of

2 enactment of this Act, the Comptroller General of the United

3 States shall submit to Congress a report on the study con4 ducted under subsection (a).

5 SEC. 622. SENSE OF THE SENATE CONCERNING MEDICARE

6 PAYMENT UPDATE FOR PHYSICIANS AND

7 OTHER HEALTH PROFESSIONALS.

8 (a) FINDINGS.—The Senate makes the following find9 ings:

10 (1) The formula by which medicare payments

11 are updated each year for services furnished by physi12 cians and other health professionals is fundamentally

13 flawed.

14 (2) The flawed physician payment update for15 mula is causing a continuing physician payment cri16 sis, and, without congressional action, medicare pay17 ment rates for physicians and other practitioners are

18 predicted to fall by 4.2 percent in 2004.

19 (3) A physician payment cut in 2004 would be

20 the fifth cut since 1991, and would be on top of a 5.4

21 percent cut in 2002, with additional cuts estimated

22 for 2005, 2006, and 2007; from 1991–2003, payment

23 rates for physicians and health professionals fell 14

24 percent behind practice cost inflation as measured by

25 medicare’s own conservative estimates.
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1 (4) The sustainable growth rate (SGR) expendi2 ture target, which is the basis for the physician pay3 ment update, is linked to the gross domestic product

4 and penalizes physicians and other practitioners for

5 volume increases that they cannot control and that

6 the Government actively promotes through new cov7 erage decisions, quality improvement activities and

8 other initiatives that, while beneficial to patients, are

9 not reflected in the SGR.

10 (b) SENSE OF THE SENATE.—It is the sense of the Sen11 ate that medicare beneficiary access to quality care may

12 be compromised if Congress does not take action to prevent

13 cuts next year and the following that result from the SGR

14 formula.

15 SEC. 623. RESTORATION OF FEDERAL HOSPITAL INSUR16 ANCE TRUST FUND.

17 (a) DEFINITIONS.—In this section:

18 (1) CLERICAL ERROR.—The term ‘‘clerical error’’

19 means the failure that occurred on April 15, 2001, to

20 have transferred the correct amount from the general

21 fund of the Treasury to the Trust Fund.

22 (2) TRUST FUND.—The term ‘‘Trust Fund’’

23 means the Federal Hospital Insurance Trust Fund es24 tablished under section 1817 of the Social Security

25 Act (42 U.S.C. 1395i).
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1 (b) CORRECTION OF TRUST FUND HOLDINGS.—

2 (1) IN GENERAL.—Not later than 120 days after

3 the date of enactment of this Act, the Secretary of the

4 Treasury shall take the actions described in para5 graph (2) with respect to the Trust Fund with the

6 goal being that, after such actions are taken, the hold7 ings of the Trust Fund will replicate, to the extent

8 practicable in the judgment of the Secretary of the

9 Treasury, in consultation with the Secretary of

10 Health and Human Services, the holdings that would

11 have been held by the Trust Fund if the clerical error

12 had not occurred.

13 (2) OBLIGATIONS ISSUED AND REDEEMED.—The

14 Secretary of the Treasury shall—

15 (A) issue to the Trust Fund obligations

16 under chapter 31 of title 31, United States Code,

17 that bear issue dates, interest rates, and matu18 rity dates that are the same as those for the obli19 gations that—

20 (i) would have been issued to the Trust

21 Fund if the clerical error had not occurred;

22 or

23 (ii) were issued to the Trust Fund and

24 were redeemed by reason of the clerical

25 error; and
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1 (B) redeem from the Trust Fund obligations

2 that would have been redeemed from the Trust

3 Fund if the clerical error had not occurred.

4 (c) APPROPRIATION.—Not later than 120 days after

5 the date of enactment of this Act, there is appropriated to

6 the Trust Fund, out of any money in the Treasury not oth7 erwise appropriated, an amount determined by the Sec8 retary of the Treasury, in consultation with the Secretary

9 of Health and Human Services, to be equal to the interest

10 income lost by the Trust Fund through the date on which

11 the appropriation is being made as a result of the clerical

12 error.

13 SEC. 624. SAFETY NET ORGANIZATIONS AND PATIENT ADVI14 SORY COMMISSION.

15 (a) IN GENERAL.—Title XI (42 U.S.C. 1320 et seq.)

16 is amended by adding at the end the following new part:

17 ‘‘PART D—SAFETY NET ORGANIZATIONS AND PATIENT

18 ADVISORY COMMISSION

19 ‘‘SAFETY NET ORGANIZATIONS AND PATIENT ADVISORY

20 COMMISSION

21 ‘‘SEC. 1181. (a) ESTABLISHMENT.—There is hereby es22 tablished the Safety Net Organizations and Patient Advi23 sory Commission (in this section referred to as the ‘Com24 mission’).
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1 ‘‘(b) REVIEW OF HEALTH CARE SAFETY NET PRO2 GRAMS AND REPORTING REQUIREMENTS.—

3 ‘‘(1) REVIEW.—The Commission shall conduct

4 an ongoing review of the health care safety net pro5 grams (as described in paragraph (3)(C)) by—

6 ‘‘(A) monitoring each health care safety net

7 program to document and analyze the effects of

8 changes in these programs on the core health care

9 safety net;

10 ‘‘(B) evaluating the impact of the Emer11 gency Medical Treatment and Labor Act, the

12 Health Insurance Portability and Accountability

13 Act of 1996, the Balanced Budget Act of 1997,

14 the Medicare, Medicaid, and SCHIP Balanced

15 Budget Refinement Act of 1999, the Medicare,

16 Medicaid, and SCHIP Benefits Protection and

17 Improvement Act of 2000, Prescription Drug

18 and Medicare Improvement Act of 2003, and

19 other forces on the capacity of the core health

20 care safety net to continue their roles in the core

21 health care safety net system to care for unin22 sured individuals, medicaid beneficiaries, and

23 other vulnerable populations;
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1 ‘‘(C) monitoring existing data sets to assess

2 the status of the core health care safety net and

3 health outcomes for vulnerable populations;

4 ‘‘(D) wherever possible, linking and inte5 grating existing data systems to enhance the

6 ability of the core health care safety net to track

7 changes in the status of the core health care safe8 ty net and health outcomes for vulnerable popu9 lations;

10 ‘‘(E) supporting the development of new

11 data systems where existing data are insufficient

12 or inadequate;

13 ‘‘(F) developing criteria and indicators of

14 impending core health care safety net failure;

15 ‘‘(G) establishing an early-warning system

16 to identify impending failures of core health care

17 safety net systems and providers;

18 ‘‘(H) providing accurate and timely infor19 mation to Federal, State, and local policymakers

20 on the indicators that may lead to the failure of

21 the core health care safety net and an estimate

22 of the projected consequences of such failures and

23 the impact of such a failure on the community;

24 ‘‘(I) monitoring and providing oversight for

25 the transition of individuals receiving supple-
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1 mental security income benefits, medical assist2 ance under title XIX, or child health assistance

3 under title XXI who enroll with a managed care

4 entity (as defined in section 1932(a)(1)(B)), in5 cluding the review of—

6 ‘‘(i) the degree to which health plans

7 have the capacity (including case manage8 ment and management information system

9 infrastructure) to provide quality managed

10 care services to such an individual;

11 ‘‘(ii) the degree to which these plans

12 may be overburdened by adverse selection;

13 and

14 ‘‘(iii) the degree to which emergency

15 departments are used by enrollees of these

16 plans; and

17 ‘‘(J) identifying and disseminating the best

18 practices for more effective application of the les19 sons that have been learned.

20 ‘‘(2) REPORTS.—

21 ‘‘(A) ANNUAL REPORTS.—Not later than

22 June 1 of each year (beginning with 2005), the

23 Commission shall, based on the review conducted

24 under paragraph (1), submit to the appropriate

25 committees of Congress a report on—
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1 ‘‘(i) the health care needs of the unin2 sured; and

3 ‘‘(ii) the financial and infrastructure

4 stability of the Nation’s core health care

5 safety net.

6 ‘‘(B) AGENDA AND ADDITIONAL REVIEWS.—

7 ‘‘(i) AGENDA.—The Chair of the Com8 mission shall consult periodically with the

9 Chairpersons and Ranking Minority Mem10 bers of the appropriate committees of Con11 gress regarding the Commission’s agenda

12 and progress toward achieving the agenda.

13 ‘‘(ii) ADDITIONAL REVIEWS.—The

14 Commission shall conduct additional re15 views and submit additional reports to the

16 appropriate committees of Congress on top17 ics relating to the health care safety net pro18 grams under the following circumstances:

19 ‘‘(I) If requested by the Chair20 persons or Ranking Minority Members

21 of such committees.

22 ‘‘(II) If the Commission deems

23 such additional reviews and reports

24 appropriate.
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1 ‘‘(C) AVAILABILITY OF REPORTS.—The

2 Commission shall transmit to the Comptroller

3 General and the Secretary a copy of each report

4 submitted under this subsection and shall make

5 such reports available to the public.

6 ‘‘(3) DEFINITIONS.—In this section:

7 ‘‘(A) APPROPRIATE COMMITTEES OF CON8 GRESS.—The term ‘appropriate committees of

9 Congress’ means the Committees on Ways and

10 Means and Energy and Commerce of the House

11 of Representatives and the Committees on Fi12 nance and Health, Education, Labor, and Pen13 sions of the Senate.

14 ‘‘(B) CORE HEALTH CARE SAFETY NET.—

15 The term ‘core health care safety net’ means any

16 health care provider that—

17 ‘‘(i) by legal mandate or explicitly

18 adopted mission, offers access to health care

19 services to patients, regardless of the ability

20 of the patient to pay for such services; and

21 ‘‘(ii) has a case mix that is substan22 tially comprised of patients who are unin23 sured, covered under the medicaid program,

24 covered under any other public health care
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1 program, or are otherwise vulnerable popu2 lations.

3 Such term includes disproportionate share hos4 pitals, Federally qualified health centers, other

5 Federal, State, and locally supported clinics,

6 rural health clinics, local health departments,

7 and providers covered under the Emergency

8 Medical Treatment and Labor Act.

9 ‘‘(C) HEALTH CARE SAFETY NET PRO10 GRAMS.—The term ‘health care safety net pro11 grams’ includes the following:

12 ‘‘(i) MEDICAID.—The medicaid pro13 gram under title XIX.

14 ‘‘(ii) SCHIP.—The State children’s

15 health insurance program under title XXI.

16 ‘‘(iii) MATERNAL AND CHILD HEALTH

17 SERVICES BLOCK GRANT PROGRAM.—The

18 maternal and child health services block

19 grant program under title V.

20 ‘‘(iv) FQHC PROGRAMS.—Each feder21 ally funded program under which a health

22 center (as defined in section 330(1) of the

23 Public Health Service Act), a Federally

24 qualified health center (as defined in section

25 1861(aa)(4)), or a Federally-qualified
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1 health center (as defined in section

2 1905(l)(2)(B)) receives funds.

3 ‘‘(v) RHC PROGRAMS.—Each federally

4 funded program under which a rural health

5 clinic (as defined in section 1861(aa)(4) or

6 1905(l)(1)) receives funds.

7 ‘‘(vi) DSH PAYMENT PROGRAMS.—

8 Each federally funded program under which

9 a disproportionate share hospital receives

10 funds.

11 ‘‘(vii) EMERGENCY MEDICAL TREAT12 MENT AND ACTIVE LABOR ACT.—All care

13 provided under section 1867 for the unin14 sured, underinsured, beneficiaries under

15 title XIX, and other vulnerable individuals.

16 ‘‘(viii) OTHER HEALTH CARE SAFETY

17 NET PROGRAMS.—Such term also includes

18 any other health care program that the

19 Commission determines to be appropriate.

20 ‘‘(D) VULNERABLE POPULATIONS.—The

21 term ‘vulnerable populations’ includes uninsured

22 and underinsured individuals, low-income indi23 viduals, farm workers, homeless individuals, in24 dividuals with disabilities, individuals with HIV
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1 or AIDS, and such other individuals as the Com2 mission may designate.

3 ‘‘(c) MEMBERSHIP.—

4 ‘‘(1) NUMBER AND APPOINTMENT.—The Commis5 sion shall be composed of 13 members appointed by

6 the Comptroller General of the United States (in this

7 section referred to as the ‘Comptroller General’), in

8 consultation with the appropriate committees of Con9 gress.

10 ‘‘(2) QUALIFICATIONS.—

11 ‘‘(A) IN GENERAL.—The membership of the

12 Commission shall include individuals with na13 tional recognition for their expertise in health fi14 nance and economics, health care safety net re15 search and program management, actuarial

16 science, health facility management, health plans

17 and integrated delivery systems, reimbursement

18 of health facilities, allopathic and osteopathic

19 medicine (including emergency medicine), and

20 other providers of health services, and other re21 lated fields, who provide a mix of different pro22 fessionals, broad geographic representation, and

23 a balance between urban and rural representa24 tives.
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1 ‘‘(B) INCLUSION.—The membership of the

2 Commission shall include health professionals,

3 employers, third-party payers, individuals

4 skilled in the conduct and interpretation of bio5 medical, health services, and health economics re6 search and expertise in outcomes and effective7 ness research and technology assessment. Such

8 membership shall also include recipients of care

9 from core health care safety net and individuals

10 who provide and manage the delivery of care by

11 the core health care safety net.

12 ‘‘(C) MAJORITY NONPROVIDERS.—Individ13 uals who are directly involved in the provision,

14 or management of the delivery, of items and

15 services covered under the health care safety net

16 programs shall not constitute a majority of the

17 membership of the Commission.

18 ‘‘(D) ETHICAL DISCLOSURE.—The Comp19 troller General shall establish a system for public

20 disclosure by members of the Commission of fi21 nancial and other potential conflicts of interest

22 relating to such members.

23 ‘‘(3) TERMS.—

24 ‘‘(A) IN GENERAL.—The terms of members

25 of the Commission shall be for 3 years except
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1 that of the members first appointed, the Comp2 troller General shall designate—

3 ‘‘(i) four to serve a term of 1 year;

4 ‘‘(ii) four to serve a term of 2 years;

5 and

6 ‘‘(iii) five to serve a term of 3 years.

7 ‘‘(B) VACANCIES.—

8 ‘‘(i) IN GENERAL.—A vacancy in the

9 Commission shall be filled in the same man10 ner in which the original appointment was

11 made.

12 ‘‘(ii) APPOINTMENT.—Any member ap13 pointed to fill a vacancy occurring before

14 the expiration of the term for which the

15 member’s predecessor was appointed shall be

16 appointed only for the remainder of that

17 term.

18 ‘‘(iii) TERMS.—A member may serve

19 after the expiration of that member’s term

20 until a successor has taken office.

21 ‘‘(4) COMPENSATION.—

22 ‘‘(A) MEMBERS.—While serving on the busi23 ness of the Commission (including travel time),

24 a member of the Commission—
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1 ‘‘(i) shall be entitled to compensation

2 at the per diem equivalent of the rate pro3 vided for level IV of the Executive Schedule

4 under section 5315 of title 5, United States

5 Code; and

6 ‘‘(ii) while so serving away from home

7 and the member’s regular place of business,

8 may be allowed travel expenses, as author9 ized by the Commission.

10 ‘‘(B) TREATMENT.—For purposes of pay

11 (other than pay of members of the Commission)

12 and employment benefits, rights, and privileges,

13 all personnel of the Commission shall be treated

14 as if they were employees of the United States

15 Senate.

16 ‘‘(5) CHAIR; VICE CHAIR.—The Comptroller Gen17 eral shall designate a member of the Commission, at

18 the time of appointment of the member as Chair and

19 a member as Vice Chair for that term of appoint20 ment, except that in the case of vacancy of the Chair

21 or Vice Chair, the Comptroller General may designate

22 another member for the remainder of that member’s

23 term.
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1 ‘‘(6) MEETINGS.—The Commission shall meet at

2 the call of the Chair or upon the written request of

3 a majority of its members.

4 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CONSULT5 ANTS.—Subject to such review as the Comptroller General

6 determines necessary to ensure the efficient administration

7 of the Commission, the Commission may—

8 ‘‘(1) employ and fix the compensation of an Ex9 ecutive Director (subject to the approval of the Comp10 troller General) and such other personnel as may be

11 necessary to carry out the duties of the Commission

12 under this section (without regard to the provisions of

13 title 5, United States Code, governing appointments

14 in the competitive service);

15 ‘‘(2) seek such assistance and support as may be

16 required in the performance of the duties of the Com17 mission under this section from appropriate Federal

18 departments and agencies;

19 ‘‘(3) enter into contracts or make other arrange20 ments, as may be necessary for the conduct of the

21 work of the Commission (without regard to section

22 3709 of the Revised Statutes (41 U.S.C. 5));

23 ‘‘(4) make advance, progress, and other pay24 ments which relate to the work of the Commission;
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1 ‘‘(5) provide transportation and subsistence for

2 persons serving without compensation; and

3 ‘‘(6) prescribe such rules and regulations as it

4 deems necessary with respect to the internal organiza5 tion and operation of the Commission.

6 ‘‘(e) POWERS.—

7 ‘‘(1) OBTAINING OFFICIAL DATA.—

8 ‘‘(A) IN GENERAL.—The Commission may

9 secure directly from any department or agency of

10 the United States information necessary for the

11 Commission to carry the duties under this sec12 tion.

13 ‘‘(B) REQUEST OF CHAIR.—Upon request of

14 the Chair, the head of that department or agency

15 shall furnish that information to the Commission

16 on an agreed upon schedule.

17 ‘‘(2) DATA COLLECTION.—In order to carry out

18 the duties of the Commission under this section, the

19 Commission shall—

20 ‘‘(A) use existing information, both pub21 lished and unpublished, where possible, collected

22 and assessed either by the staff of the Commis23 sion or under other arrangements made in ac24 cordance with this section;
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1 ‘‘(B) carry out, or award grants or con2 tracts for, original research and experimentation,

3 where existing information is inadequate; and

4 ‘‘(C) adopt procedures allowing any inter5 ested party to submit information for the Com6 mission’s use in making reports and rec7 ommendations.

8 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The

9 Comptroller General shall have unrestricted access to

10 all deliberations, records, and nonproprietary data

11 that pertains to the work of the Commission, imme12 diately upon request. The expense of providing such

13 information shall be borne by the General Accounting

14 Office.

15 ‘‘(4) PERIODIC AUDIT.—The Commission shall be

16 subject to periodic audit by the Comptroller General.

17 ‘‘(f) APPLICATION OF FACA.—Section 14 of the Fed18 eral Advisory Committee Act (5 U.S.C. App.) does not

19 apply to the Commission.

20 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—

21 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The

22 Commission shall submit requests for appropriations

23 in the same manner as the Comptroller General sub24 mits requests for appropriations, but amounts appro-
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1 priated for the Commission shall be separate from

2 amounts appropriated for the Comptroller General.

3 ‘‘(2) AUTHORIZATION.—There are authorized to

4 be appropriated such sums as may be necessary to

5 carry out the provisions of this section.’’.

6 (b) EFFECTIVE DATE.—The Comptroller General of

7 the United States shall appoint the initial members of the

8 Safety Net Organizations and Patient Advisory Commis9 sion established under subsection (a) not later than June

10 1, 2004.

11 SEC. 625. URBAN HEALTH PROVIDER ADJUSTMENT.

12 (a) IN GENERAL.—Beginning with fiscal year 2004,

13 notwithstanding section 1923(f) of the Social Security Act

14 (42 U.S.C. 1396r–4(f)) and subject to subsection (c), with

15 respect to a State, payment adjustments made under title

16 XIX of the Social Security Act (42 U.S.C. 1396 et seq.)

17 to a hospital described in subsection (b) shall be made with18 out regard to the DSH allotment limitation for the State

19 determined under section 1923(f) of that Act (42 U.S.C.

20 1396r–4(f)).

21 (b) HOSPITAL DESCRIBED.—A hospital is described in

22 this subsection if the hospital—

23 (1) is owned or operated by a State (as defined

24 for purposes of title XIX of the Social Security Act),

25 or by an instrumentality or a municipal govern-
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1 mental unit within a State (as so defined) as of Jan2 uary 1, 2003; and

3 (2) is located in Marion County, Indiana.

4 (c) LIMITATION.—The payment adjustment described

5 in subsection (a) for fiscal year 2004 and each fiscal year

6 thereafter shall not exceed 175 percent of the costs of fur7 nishing hospital services described in section 1923(g)(1)(A)

8 of the Social Security Act (42 U.S.C. 1396r–4(g)(1)(A)).

9 SEC. 626. COMMITTEE ON DRUG COMPOUNDING.

10 (a) ESTABLISHMENT.—The Secretary of Health and

11 Human Services shall establish an Committee on Drug

12 Compounding (referred to in this section as the ‘‘Com13 mittee’’) within the Food and Drug Administration on drug

14 compounding to ensure that patients are receiving nec15 essary, safe and accurate dosages of compounded drugs.

16 (b) MEMBERSHIP.—The membership of the Advisory

17 Committee shall be appointed by the Secretary of Health

18 and Human Services and shall include representatives of—

19 (1) the National Association of Boards of Phar20 macy;

21 (2) pharmacy groups;

22 (3) physician groups;

23 (4) consumer and patient advocate groups;

24 (5) the United States Pharmacopoeia; and
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1 (6) other individuals determined appropriate by

2 the Secretary.

3 (c) REPORT AND RECOMMENDATIONS.—Not later than

4 1 year after the date of enactment of this Act, the Committee

5 shall submit to the Secretary a report concerning the rec6 ommendations of the Committee to improve and protect pa7 tient safety.

8 (d) TERMINATION.—The Committee shall terminate on

9 the date that is 1 year after the date of enactment of this

10 Act.

11 SEC. 627. SENSE OF THE SENATE CONCERNING THE STRUC12 TURE OF MEDICARE REFORM AND THE PRE13 SCRIPTION DRUG BENEFIT.

14 (a) FINDINGS.—The Senate makes the following find15 ings:

16 (1) America’s seniors deserve a fiscally-strong

17 medicare system that fulfills its promise to them and

18 future retirees.

19 (2) The impending retirement of the ‘‘baby

20 boom’’ generation will dramatically increase the costs

21 of providing medicare benefits. Medicare costs will

22 double relative to the size of the economy from 2 per23 cent of GDP today to 4 percent in 2025 and double

24 again to 8 percent of GDP in 2075. This growth will
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1 accelerate substantially when Congress adds a nec2 essary prescription drug benefit.

3 (3) Medicare’s current structure does not have

4 the flexibility to quickly adapt to rapid advances in

5 modern health care. Medicare lags far behind other

6 insurers in providing prescription drug coverage, dis7 ease management programs, and host of other ad8 vances. Reforming medicare to create a more self-ad9 justing, innovative structure is essential to improve

10 medicare’s efficiency and the quality of the medical

11 care it provides.

12 (4) Private-sector choice for medicare bene13 ficiaries would provide two key benefits: It would be

14 tailored to the needs of America’s seniors, not the

15 Government, and would create a powerful incentive

16 for private-sector medicare plans to provide the best

17 quality health care to seniors at the most affordable

18 price.

19 (5) The method by which the national preferred

20 provider organizations in the Federal Employees

21 Health Benefits Program have been reimbursed has

22 proven to be a reliable and successful mechanism for

23 providing Members of Congress and Federal employ24 ees with excellent health care choices.
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1 (6) Unlike the medicare payment system, which

2 has had to be changed by Congress every few years,

3 the Federal Employees Health Benefits Program has

4 existed for 43 years with minimal changes from Con5 gress.

6 (b) SENSE OF THE SENATE.—It is the sense of the Sen7 ate that medicare reform legislation should:

8 (1) Ensure that prescription drug coverage is di9 rected to those who need it most.

10 (2) Provide that Government contributions used

11 to support MedicareAdvantage plans are based on

12 market principles beginning in 2006 to ensure the

13 long- and short-term viability of such options for

14 America’s seniors.

15 (3) Develop a payment system for the

16 MedicareAdvantage preferred provider organizations

17 similar to the payment system used for the national

18 preferred provider organizations in the Federal Em19 ployees Health Benefits Program.

20 (4) Limit the addition of new unfunded obliga21 tions in the medicare program so that the long-term

22 solvency of this important program is not further

23 jeopardized.
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1 (5) Incorporate private sector, market-based ele2 ments, that do not rely on the inefficient medicare

3 price control structure.

4 (6) Keep the cost of structural changes and new

5 benefits within the $400,000,000,000 provided for

6 under the current Congressional Budget Resolution

7 for implementing medicare reform and providing a

8 prescription drug benefit.

9 (7) Preserve the current employer-sponsored re10 tiree health plans and not design a benefit which has

11 the unintended consequences of supplanting private

12 coverage.

13 (8) Incorporate regulatory reform proposals to

14 eliminate red tape and reduce costs.

15 (9) Restore the right of medicare beneficiaries

16 and their doctors to work together to provide services,

17 allow private fee for service plans to set their own

18 premiums, and permit seniors to add their own dol19 lars beyond the Government contribution.

20 SEC. 628. SENSE OF THE SENATE REGARDING THE ESTAB21 LISHMENT OF A NATIONWIDE PERMANENT

22 LIFESTYLE MODIFICATION PROGRAM FOR

23 MEDICARE BENEFICIARIES.

24 (a) FINDINGS.—Congress finds that:
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1 (1) Heart disease kills more than 500,000 Ameri2 cans per year.

3 (2) The number and costs of interventions for the

4 treatment of coronary disease are rising and cur5 rently cost the health care system $58,000,000,000 an6 nually.

7 (3) The Medicare Lifestyle Modification Program

8 has been operating throughout 12 States and has been

9 demonstrated to reduce the need for coronary proce10 dures by 88 percent per year.

11 (4) The Medicare Lifestyle Modification Program

12 is less expensive to deliver than interventional cardiac

13 procedures and could reduce cardiovascular expendi14 tures by $36,000,000,000 annually.

15 (5) Lifestyle choices such as diet and exercise af16 fect heart disease and heart disease outcomes by 50

17 percent or greater.

18 (6) Intensive lifestyle interventions which include

19 teams of nurses, doctors, exercise physiologists, reg20 istered dietitians, and behavioral health clinicians

21 have been demonstrated to reduce heart disease risk

22 factors and enhance heart disease outcomes dramati23 cally.

24 (7) The National Institutes of Health estimates

25 that 17,000,000 Americans have diabetes and the Cen-
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1 ters for Disease Control and Prevention estimates that

2 the number of Americans who have a diagnosis of di3 abetes increased 61 percent in the last decade and is

4 expected to more than double by 2050.

5 (8) Lifestyle modification programs are superior

6 to medication therapy for treating diabetes.

7 (9) Individuals with diabetes are now considered

8 to have coronary disease at the date of diagnosis of

9 their diabetic state.

10 (10) The Medicare Lifestyle Modification Pro11 gram has been an effective lifestyle program for the

12 reversal and treatment of heart disease.

13 (11) Men with prostate cancer have shown sig14 nificant improvement in prostate cancer markers

15 using a similar approach in lifestyle modification.

16 (12) These lifestyle changes are therefore likely to

17 affect other chronic disease states, in addition to heart

18 disease.

19 (b) SENSE OF THE SENATE.—It is the sense of the Sen20 ate that—

21 (1) the Secretary of Health and Human Services

22 should carry out the demonstration project known as

23 the Lifestyle Modification Program Demonstration, as

24 described in the Health Care Financing Administra-
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1 tion Memorandum of Understanding entered into on

2 November 13, 2000, on a permanent basis;

3 (2) the project should include as many Medicare

4 beneficiaries as would like to participate in the

5 project on a voluntary basis; and

6 (3) the project should be conducted on a national

7 basis.

8 SEC. 629. SENSE OF THE SENATE ON PAYMENT REDUC9 TIONS UNDER MEDICARE PHYSICIAN FEE

10 SCHEDULE.

11 (a) FINDINGS.—Congress finds that—

12 (1) the fees medicare pays physicians were re13 duced by 5.4 percent across-the-board in 2002;

14 (2) recent action by Congress narrowly averted

15 another across-the-board reduction of 4.4 percent for

16 2003;

17 (3) based on current projections, the Centers for

18 Medicare & Medicaid Services (CMS) estimates that,

19 absent legislative or administrative action, fees will be

20 reduced across-the-board once again in 2004 by 4.2

21 percent;

22 (4) the prospect of continued payment reductions

23 under the medicare physician fee schedule for the fore24 seeable future threatens to destabilize an important
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1 element of the program, namely physician participa2 tion and willingness to accept medicare patients;

3 (5) the primary source of this instability is the

4 sustainable growth rate (SGR), a system of annual

5 spending targets for physicians’ services under medi6 care;

7 (6) the SGR system has a number of defects that

8 result in unrealistically low spending targets, such as

9 the use of the increase in the gross domestic product

10 (GDP) as a proxy for increases in the volume and in11 tensity of services provided by physicians, no toler12 ance for variance between growth in medicare bene13 ficiary health care costs and our Nation’s GDP, and

14 a requirement for immediate recoupment of the dif15 ference;

16 (7) both administrative and legislative action

17 are needed to return stability to the physician pay18 ment system;

19 (8) using the discretion given to it by medicare

20 law, CMS has included expenditures for prescription

21 drugs and biologicals administered incident to physi22 cians’ services under the annual spending targets

23 without making appropriate adjustments to the tar24 gets to reflect price increases in these drugs and
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1 biologicals or the growing reliance on such therapies

2 in the treatment of medicare patients;

3 (9) between 1996 and 2002, annual medicare

4 spending on these drugs grew from $1,800,000,000 to

5 $6,200,000,000, or from $55 per beneficiary to an es6 timated $187 per beneficiary;

7 (10) although physicians are responsible for pre8 scribing these drugs and biologicals, neither the price

9 of the drugs and biologicals, nor the standards of care

10 that encourage their use, are within the control of

11 physicians; and

12 (11) SGR target adjustments have not been made

13 for cost increases due to new coverage decisions and

14 new rules and regulations.

15 (b) SENSE OF THE SENATE.—It is the sense of the Sen16 ate that—

17 (1) the Center for Medicare & Medicaid Services

18 (CMS) should use its discretion to exclude drugs and

19 biologicals administered incident to physician services

20 from the sustainable growth rate (SGR) system;

21 (2) CMS should use its discretion to make SGR

22 target adjustments for new coverage decisions and

23 new rules and regulations; and

24 (3) in order to provide ample time for Congress

25 to consider more fundamental changes to the SGR
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1 system, the conferees on the Prescription Drug and

2 Medicare Improvement Act of 2003 should include in

3 the conference agreement a provision to establish a

4 minimum percentage update in physician fees for the

5 next 2 years and should consider adding provisions

6 that would mitigate the swings in payment, such as

7 establishing multi-year adjustments to recoup the

8 variance and creating ‘‘tolerance’’ corridors for vari9 ations around the update target trend.

10 SEC. 630. TEMPORARY SUSPENSION OF OASIS REQUIRE11 MENT FOR COLLECTION OF DATA ON NON12 MEDICARE AND NON-MEDICAID PATIENTS.

13 (a) IN GENERAL.—During the period described in sub14 section (b), the Secretary may not require, under section

15 4602(e) of the Balanced Budget Act of 1997 or otherwise

16 under OASIS, a home health agency to gather or submit

17 information that relates to an individual who is not eligible

18 for benefits under either title XVIII or title XIX of the So19 cial Security Act (such information in this section referred

20 to as ‘‘non-medicare/medicaid OASIS information’’).

21 (b) PERIOD OF SUSPENSION.—The period described in

22 this subsection—

23 (1) begins on the date of the enactment of this

24 Act; and
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1 (2) ends on the last day of the 2nd month begin2 ning after the date as of which the Secretary has pub3 lished final regulations regarding the collection and

4 use by the Centers for Medicare & Medicaid Services

5 of non-medicare/medicaid OASIS information fol6 lowing the submission of the report required under

7 subsection (c).

8 (c) REPORT.—

9 (1) STUDY.—The Secretary shall conduct a study

10 on how non-medicare/medicaid OASIS information is

11 and can be used by large home health agencies. Such

12 study shall examine—

13 (A) whether there are unique benefits from

14 the analysis of such information that cannot be

15 derived from other information available to, or

16 collected by, such agencies; and

17 (B) the value of collecting such information

18 by small home health agencies compared to the

19 administrative burden related to such collection.

20 In conducting the study the Secretary shall obtain

21 recommendations from quality assessment experts in

22 the use of such information and the necessity of small,

23 as well as large, home health agencies collecting such

24 information.
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1 (2) REPORT.—The Secretary shall submit to

2 Congress a report on the study conducted under para3 graph (1) by not later than 18 months after the date

4 of the enactment of this Act.

5 (d) CONSTRUCTION.—Nothing in this section shall be

6 construed as preventing home health agencies from col7 lecting non-medicare/medicaid OASIS information for

8 their own use.

9 SEC. 631. EMPLOYER FLEXIBILITY.

10 (a) MEDICARE.—Nothing in part D of title XVIII of

11 the Social Security Act, as added by section 101, shall be

12 construed as—

13 (1) preventing employment-based retiree health

14 coverage (as defined in section 1860D–20(e)(4)(B) of

15 such Act, as so added) from providing coverage that

16 is supplemental to the benefits provided under a

17 Medicare Prescription Drug plan under such part or

18 a MedicareAdvantage plan under part C of such title,

19 as amended by this Act; or

20 (2) requiring employment-based retiree health

21 coverage (as so defined) that provides medical benefits

22 to retired participants who are not eligible for med23 ical benefits under title XVIII of the Social Security

24 Act or under a plan maintained by a State or an

25 agency thereof to provide medical benefits, or the
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1 same medical benefits, to retired participants who are

2 so eligible.

3 (b) ADEA.—

4 (1) IN GENERAL.—Section 4(l) of the Age Dis5 crimination in Employment Act of 1967 (29 U.S.C.

6 623(l)) is amended by adding at the end the fol7 lowing:

8 ‘‘(4) An employee benefit plan (as defined in sec9 tion 3(3) of the Employee Retirement Income Secu10 rity Act of 1974 (29 U.S.C. 1002(3))) shall not be

11 treated as violating subsection (a), (b), (c), or (e) sole12 ly because the plan provides medical benefits to re13 tired participants who are not eligible for medical

14 benefits under title XVIII of the Social Security Act

15 (42 U.S.C. 1395 et seq.) or under a plan maintained

16 by a State or an agency thereof, but does not provide

17 medical benefits, or the same medical benefits, to re18 tired participants who are so eligible.’’

19 (2) EFFECTIVE DATE.—The amendment made by

20 this subsection shall apply as of the date of the enact21 ment of this Act.
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1 SEC. 632. ONE HUNDRED PERCENT FMAP FOR MEDICAL AS2 SISTANCE PROVIDED TO A NATIVE HAWAIIAN

3 THROUGH A FEDERALLY-QUALIFIED HEALTH

4 CENTER OR A NATIVE HAWAIIAN HEALTH

5 CARE SYSTEM UNDER THE MEDICAID PRO6 GRAM.

7 (a) MEDICAID.—Section 1905(b) of the Social Security

8 Act (42 U.S.C. 1396d(b)) is amended, in the third sentence,

9 by inserting ‘‘, and with respect to medical assistance pro10 vided to a Native Hawaiian (as defined in section 12 of

11 the Native Hawaiian Health Care Improvement Act)

12 through a federally-qualified health center or a Native Ha13 waiian health care system (as so defined) whether directly,

14 by referral, or under contract or other arrangement between

15 a federally-qualified health center or a Native Hawaiian

16 health care system and another health care provider’’ before

17 the period.

18 (b) EFFECTIVE DATE.—The amendment made by this

19 section applies to medical assistance provided on or after

20 the date of enactment of this Act.

21 SEC. 633. EXTENSION OF MORATORIUM.

22 (a) IN GENERAL.—Section 6408(a)(3) of the Omnibus

23 Budget Reconciliation Act of 1989, as amended by section

24 13642 of the Omnibus Budget Reconciliation Act of 1993

25 and section 4758 of the Balanced Budget Act of 1997, is

26 amended—
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1 (1) by striking ‘‘until December 31, 2002’’, and

2 (2) by striking ‘‘Kent Community Hospital

3 Complex in Michigan or.’’

4 (b) EFFECTIVE DATES.—

5 (1) PERMANENT EXTENSION.—The amendment

6 made by subsection (a)(1) shall take effect as if in7 cluded in the amendment made by section 4758 of the

8 Balanced Budget Act of 1997.

9 (2) MODIFICATION.—The amendment made by

10 subsection (a)(2) shall take effect on the date of enact11 ment of this Act.

12 SEC. 634. GAO STUDY OF PHARMACEUTICAL PRICE CON13 TROLS AND PATENT PROTECTIONS IN THE G–

14 7 COUNTRIES.

15 (a) STUDY.—The Comptroller General of the United

16 States shall conduct a study of price controls imposed on

17 pharmaceuticals in France, Germany, Italy, Japan, the

18 United Kingdom and Canada to review the impact such

19 regulations have on consumers, including American con20 sumers, and on innovation in medicine. The study shall in21 clude the following:

22 (1) The pharmaceutical price control structure

23 in each country for a wide range of pharmaceuticals,

24 compared with average pharmaceutical prices paid by

25 Americans covered by private sector health insurance.
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1 (2) The proportion of the cost for innovation

2 borne by American consumers, compared with con3 sumers in the other 6 countries.

4 (3) A review of how closely the observed prices in

5 regulated markets correspond to the prices that effi6 ciently distribute common costs of production

7 (‘‘Ramsey prices’’).

8 (4) A review of any peer-reviewed literature that

9 might show the health consequences to patients in the

10 listed countries that result from the absence or de11 layed introduction of medicines, including the cost of

12 not having access to medicines, in terms of lower life

13 expectancy and lower quality of health.

14 (5) The impact on American consumers, in

15 terms of reduced research into new or improved phar16 maceuticals (including the cost of delaying the intro17 duction of a significant advance in certain major dis18 eases), if similar price controls were adopted in the

19 United States.

20 (6) The existing standards under international

21 conventions, including the World Trade Organization

22 and the North American Free Trade Agreement, re23 garding regulated pharmaceutical prices, including

24 any restrictions on anti-competitive laws that might

25 apply to price regulations and how economic harm
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1 caused to consumers in markets without price regula2 tions may be remedied.

3 (7) In parallel trade regimes, how much of the

4 price difference between countries in the European

5 Union is captured by middlemen and how much goes

6 to benefit patients and health systems where parallel

7 importing is significant.

8 (8) How much cost is imposed on the owner of

9 a property right from counterfeiting and from inter10 national violations of intellectual property rights for

11 prescription medicines.

12 (b) REPORT.—Not later than 1 year after the date of

13 enactment of this Act, the Comptroller General of the United

14 States shall submit to Congress a report on the study con15 ducted under subsection (a).

16 SEC. 635. SAFETY NET ORGANIZATIONS AND PATIENT ADVI17 SORY COMMISSION.

18 (a) IN GENERAL.—Title XI (42 U.S.C. 1320 et seq.)

19 is amended by adding at the end the following new part:

20 ‘‘PART D—SAFETY NET ORGANIZATIONS AND PATIENT

21 ADVISORY COMMISSION

22 ‘‘SAFETY NET ORGANIZATIONS AND PATIENT ADVISORY

23 COMMISSION

24 ‘‘SEC. 1181. (a) ESTABLISHMENT.—There is hereby es25 tablished the Safety Net Organizations and Patient Advi-
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1 sory Commission (in this section referred to as the ‘Com2 mission’).

3 ‘‘(b) REVIEW OF HEALTH CARE SAFETY NET PRO4 GRAMS AND REPORTING REQUIREMENTS.—

5 ‘‘(1) REVIEW.—The Commission shall conduct

6 an ongoing review of the health care safety net pro7 grams (as described in paragraph (3)(C)) by—

8 ‘‘(A) monitoring each health care safety net

9 program to document and analyze the effects of

10 changes in these programs on the core health care

11 safety net;

12 ‘‘(B) evaluating the impact of the Emer13 gency Medical Treatment and Labor Act, the

14 Health Insurance Portability and Accountability

15 Act of 1996, the Balanced Budget Act of 1997,

16 the Medicare, Medicaid, and SCHIP Balanced

17 Budget Refinement Act of 1999, the Medicare,

18 Medicaid, and SCHIP Benefits Protection and

19 Improvement Act of 2000, Prescription Drug

20 and Medicare Improvement Act of 2003, and

21 other forces on the capacity of the core health

22 care safety net to continue their roles in the core

23 health care safety net system to care for unin24 sured individuals, medicaid beneficiaries, and

25 other vulnerable populations;
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1 ‘‘(C) monitoring existing data sets to assess

2 the status of the core health care safety net and

3 health outcomes for vulnerable populations;

4 ‘‘(D) wherever possible, linking and inte5 grating existing data systems to enhance the

6 ability of the core health care safety net to track

7 changes in the status of the core health care safe8 ty net and health outcomes for vulnerable popu9 lations;

10 ‘‘(E) supporting the development of new

11 data systems where existing data are insufficient

12 or inadequate;

13 ‘‘(F) developing criteria and indicators of

14 impending core health care safety net failure;

15 ‘‘(G) establishing an early-warning system

16 to identify impending failures of core health care

17 safety net systems and providers;

18 ‘‘(H) providing accurate and timely infor19 mation to Federal, State, and local policymakers

20 on the indicators that may lead to the failure of

21 the core health care safety net and an estimate

22 of the projected consequences of such failures and

23 the impact of such a failure on the community;

24 ‘‘(I) monitoring and providing oversight for

25 the transition of individuals receiving supple-
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1 mental security income benefits, medical assist2 ance under title XIX, or child health assistance

3 under title XXI who enroll with a managed care

4 entity (as defined in section 1932(a)(1)(B)), in5 cluding the review of—

6 ‘‘(i) the degree to which health plans

7 have the capacity (including case manage8 ment and management information system

9 infrastructure) to provide quality managed

10 care services to such an individual;

11 ‘‘(ii) the degree to which these plans

12 may be overburdened by adverse selection;

13 and

14 ‘‘(iii) the degree to which emergency

15 departments are used by enrollees of these

16 plans; and

17 ‘‘(J) identifying and disseminating the best

18 practices for more effective application of the les19 sons that have been learned.

20 ‘‘(2) REPORTS.—

21 ‘‘(A) ANNUAL REPORTS.—Not later than

22 June 1 of each year (beginning with 2005), the

23 Commission shall, based on the review conducted

24 under paragraph (1), submit to the appropriate

25 committees of Congress a report on—
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1 ‘‘(i) the health care needs of the unin2 sured; and

3 ‘‘(ii) the financial and infrastructure

4 stability of the Nation’s core health care

5 safety net.

6 ‘‘(B) AGENDA AND ADDITIONAL REVIEWS.—

7 ‘‘(i) AGENDA.—The Chair of the Com8 mission shall consult periodically with the

9 Chairpersons and Ranking Minority Mem10 bers of the appropriate committees of Con11 gress regarding the Commission’s agenda

12 and progress toward achieving the agenda.

13 ‘‘(ii) ADDITIONAL REVIEWS.—The

14 Commission shall conduct additional re15 views and submit additional reports to the

16 appropriate committees of Congress on top17 ics relating to the health care safety net pro18 grams under the following circumstances:

19 ‘‘(I) If requested by the Chair20 persons or Ranking Minority Members

21 of such committees.

22 ‘‘(II) If the Commission deems

23 such additional reviews and reports

24 appropriate.
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1 ‘‘(C) AVAILABILITY OF REPORTS.—The

2 Commission shall transmit to the Comptroller

3 General and the Secretary a copy of each report

4 submitted under this subsection and shall make

5 such reports available to the public.

6 ‘‘(3) DEFINITIONS.—In this section:

7 ‘‘(A) APPROPRIATE COMMITTEES OF CON8 GRESS.—The term ‘appropriate committees of

9 Congress’ means the Committees on Ways and

10 Means and Energy and Commerce of the House

11 of Representatives and the Committees on Fi12 nance and Health, Education, Labor, and Pen13 sions of the Senate.

14 ‘‘(B) CORE HEALTH CARE SAFETY NET.—

15 The term ‘core health care safety net’ means any

16 health care provider that—

17 ‘‘(i) by legal mandate or explicitly

18 adopted mission, offers access to health care

19 services to patients, regardless of the ability

20 of the patient to pay for such services; and

21 ‘‘(ii) has a case mix that is substan22 tially comprised of patients who are unin23 sured, covered under the medicaid program,

24 covered under any other public health care
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1 program, or are otherwise vulnerable popu2 lations.

3 Such term includes disproportionate share hos4 pitals, Federally qualified health centers, other

5 Federal, State, and locally supported clinics,

6 rural health clinics, local health departments,

7 and providers covered under the Emergency

8 Medical Treatment and Labor Act.

9 ‘‘(C) HEALTH CARE SAFETY NET PRO10 GRAMS.—The term ‘health care safety net pro11 grams’ includes the following:

12 ‘‘(i) MEDICAID.—The medicaid pro13 gram under title XIX.

14 ‘‘(ii) SCHIP.—The State children’s

15 health insurance program under title XXI.

16 ‘‘(iii) MATERNAL AND CHILD HEALTH

17 SERVICES BLOCK GRANT PROGRAM.—The

18 maternal and child health services block

19 grant program under title V.

20 ‘‘(iv) FQHC PROGRAMS.—Each feder21 ally funded program under which a health

22 center (as defined in section 330(1) of the

23 Public Health Service Act), a Federally

24 qualified health center (as defined in section

25 1861(aa)(4)), or a Federally-qualified
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1 health center (as defined in section

2 1905(l)(2)(B)) receives funds.

3 ‘‘(v) RHC PROGRAMS.—Each federally

4 funded program under which a rural health

5 clinic (as defined in section 1861(aa)(4) or

6 1905(l)(1)) receives funds.

7 ‘‘(vi) DSH PAYMENT PROGRAMS.—

8 Each federally funded program under which

9 a disproportionate share hospital receives

10 funds.

11 ‘‘(vii) EMERGENCY MEDICAL TREAT12 MENT AND ACTIVE LABOR ACT.—All care

13 provided under section 1867 for the unin14 sured, underinsured, beneficiaries under

15 title XIX, and other vulnerable individuals.

16 ‘‘(viii) OTHER HEALTH CARE SAFETY

17 NET PROGRAMS.—Such term also includes

18 any other health care program that the

19 Commission determines to be appropriate.

20 ‘‘(D) VULNERABLE POPULATIONS.—The

21 term ‘vulnerable populations’ includes uninsured

22 and underinsured individuals, low-income indi23 viduals, farm workers, homeless individuals, in24 dividuals with disabilities, individuals with HIV
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1 or AIDS, and such other individuals as the Com2 mission may designate.

3 ‘‘(c) MEMBERSHIP.—

4 ‘‘(1) NUMBER AND APPOINTMENT.—The Commis5 sion shall be composed of 13 members appointed by

6 the Comptroller General of the United States (in this

7 section referred to as the ‘Comptroller General’), in

8 consultation with the appropriate committees of Con9 gress.

10 ‘‘(2) QUALIFICATIONS.—

11 ‘‘(A) IN GENERAL.—The membership of the

12 Commission shall include individuals with na13 tional recognition for their expertise in health fi14 nance and economics, health care safety net re15 search and program management, actuarial

16 science, health facility management, health plans

17 and integrated delivery systems, reimbursement

18 of health facilities, allopathic and osteopathic

19 medicine (including emergency medicine), and

20 other providers of health services, and other re21 lated fields, who provide a mix of different pro22 fessionals, broad geographic representation, and

23 a balance between urban and rural representa24 tives.
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1 ‘‘(B) INCLUSION.—The membership of the

2 Commission shall include health professionals,

3 employers, third-party payers, individuals

4 skilled in the conduct and interpretation of bio5 medical, health services, and health economics re6 search and expertise in outcomes and effective7 ness research and technology assessment. Such

8 membership shall also include recipients of care

9 from core health care safety net and individuals

10 who provide and manage the delivery of care by

11 the core health care safety net.

12 ‘‘(C) MAJORITY NONPROVIDERS.—Individ13 uals who are directly involved in the provision,

14 or management of the delivery, of items and

15 services covered under the health care safety net

16 programs shall not constitute a majority of the

17 membership of the Commission.

18 ‘‘(D) ETHICAL DISCLOSURE.—The Comp19 troller General shall establish a system for public

20 disclosure by members of the Commission of fi21 nancial and other potential conflicts of interest

22 relating to such members.

23 ‘‘(3) TERMS.—

24 ‘‘(A) IN GENERAL.—The terms of members

25 of the Commission shall be for 3 years except
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1 that of the members first appointed, the Comp2 troller General shall designate—

3 ‘‘(i) four to serve a term of 1 year;

4 ‘‘(ii) four to serve a term of 2 years;

5 and

6 ‘‘(iii) five to serve a term of 3 years.

7 ‘‘(B) VACANCIES.—

8 ‘‘(i) IN GENERAL.—A vacancy in the

9 Commission shall be filled in the same man10 ner in which the original appointment was

11 made.

12 ‘‘(ii) APPOINTMENT.—Any member ap13 pointed to fill a vacancy occurring before

14 the expiration of the term for which the

15 member’s predecessor was appointed shall be

16 appointed only for the remainder of that

17 term.

18 ‘‘(iii) TERMS.—A member may serve

19 after the expiration of that member’s term

20 until a successor has taken office.

21 ‘‘(4) COMPENSATION.—

22 ‘‘(A) MEMBERS.—While serving on the busi23 ness of the Commission (including travel time),

24 a member of the Commission—
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1 ‘‘(i) shall be entitled to compensation

2 at the per diem equivalent of the rate pro3 vided for level IV of the Executive Schedule

4 under section 5315 of title 5, United States

5 Code; and

6 ‘‘(ii) while so serving away from home

7 and the member’s regular place of business,

8 may be allowed travel expenses, as author9 ized by the Commission.

10 ‘‘(B) TREATMENT.—For purposes of pay

11 (other than pay of members of the Commission)

12 and employment benefits, rights, and privileges,

13 all personnel of the Commission shall be treated

14 as if they were employees of the United States

15 Senate.

16 ‘‘(5) CHAIR; VICE CHAIR.—The Comptroller Gen17 eral shall designate a member of the Commission, at

18 the time of appointment of the member as Chair and

19 a member as Vice Chair for that term of appoint20 ment, except that in the case of vacancy of the Chair

21 or Vice Chair, the Comptroller General may designate

22 another member for the remainder of that member’s

23 term.
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1 ‘‘(6) MEETINGS.—The Commission shall meet at

2 the call of the Chair or upon the written request of

3 a majority of its members.

4 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CONSULT5 ANTS.—Subject to such review as the Comptroller General

6 determines necessary to ensure the efficient administration

7 of the Commission, the Commission may—

8 ‘‘(1) employ and fix the compensation of an Ex9 ecutive Director (subject to the approval of the Comp10 troller General) and such other personnel as may be

11 necessary to carry out the duties of the Commission

12 under this section (without regard to the provisions of

13 title 5, United States Code, governing appointments

14 in the competitive service);

15 ‘‘(2) seek such assistance and support as may be

16 required in the performance of the duties of the Com17 mission under this section from appropriate Federal

18 departments and agencies;

19 ‘‘(3) enter into contracts or make other arrange20 ments, as may be necessary for the conduct of the

21 work of the Commission (without regard to section

22 3709 of the Revised Statutes (41 U.S.C. 5));

23 ‘‘(4) make advance, progress, and other pay24 ments which relate to the work of the Commission;
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1 ‘‘(5) provide transportation and subsistence for

2 persons serving without compensation; and

3 ‘‘(6) prescribe such rules and regulations as it

4 deems necessary with respect to the internal organiza5 tion and operation of the Commission.

6 ‘‘(e) POWERS.—

7 ‘‘(1) OBTAINING OFFICIAL DATA.—

8 ‘‘(A) IN GENERAL.—The Commission may

9 secure directly from any department or agency of

10 the United States information necessary for the

11 Commission to carry the duties under this sec12 tion.

13 ‘‘(B) REQUEST OF CHAIR.—Upon request of

14 the Chair, the head of that department or agency

15 shall furnish that information to the Commission

16 on an agreed upon schedule.

17 ‘‘(2) DATA COLLECTION.—In order to carry out

18 the duties of the Commission under this section, the

19 Commission shall—

20 ‘‘(A) use existing information, both pub21 lished and unpublished, where possible, collected

22 and assessed either by the staff of the Commis23 sion or under other arrangements made in ac24 cordance with this section;
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1 ‘‘(B) carry out, or award grants or con2 tracts for, original research and experimentation,

3 where existing information is inadequate; and

4 ‘‘(C) adopt procedures allowing any inter5 ested party to submit information for the Com6 mission’s use in making reports and rec7 ommendations.

8 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The

9 Comptroller General shall have unrestricted access to

10 all deliberations, records, and nonproprietary data

11 that pertains to the work of the Commission, imme12 diately upon request. The expense of providing such

13 information shall be borne by the General Accounting

14 Office.

15 ‘‘(4) PERIODIC AUDIT.—The Commission shall be

16 subject to periodic audit by the Comptroller General.

17 ‘‘(f) APPLICATION OF FACA.—Section 14 of the Fed18 eral Advisory Committee Act (5 U.S.C. App.) does not

19 apply to the Commission.

20 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—

21 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The

22 Commission shall submit requests for appropriations

23 in the same manner as the Comptroller General sub24 mits requests for appropriations, but amounts appro-
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1 priated for the Commission shall be separate from

2 amounts appropriated for the Comptroller General.

3 ‘‘(2) AUTHORIZATION.—There are authorized to

4 be appropriated such sums as may be necessary to

5 carry out the provisions of this section.’’.

6 (b) EFFECTIVE DATE.—The Comptroller General of

7 the United States shall appoint the initial members of the

8 Safety Net Organizations and Patient Advisory Commis9 sion established under subsection (a) not later than June

10 1, 2004.

11 SEC. 636. ESTABLISHMENT OF PROGRAM TO PREVENT

12 ABUSE OF NURSING FACILITY RESIDENTS.

13 (a) IN GENERAL.—

14 (1) SCREENING OF SKILLED NURSING FACILITY

15 AND NURSING FACILITY PROVISIONAL EMPLOYEES.—

16 (A) MEDICARE PROGRAM.—Section 1819(b)

17 (42 U.S.C. 1395i–3(b)) is amended by adding at

18 the end the following:

19 ‘‘(8) SCREENING OF SKILLED NURSING FACILITY

20 WORKERS.—

21 ‘‘(A) BACKGROUND CHECKS OF PROVI22 SIONAL EMPLOYEES.—Subject to subparagraph

23 (B)(ii), after a skilled nursing facility selects an

24 individual for a position as a skilled nursing fa25 cility worker, the facility, prior to employing
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1 such worker in a status other than a provisional

2 status to the extent permitted under subpara3 graph (B)(ii), shall—

4 ‘‘(i) give such worker written notice

5 that the facility is required to perform back6 ground checks with respect to provisional

7 employees;

8 ‘‘(ii) require, as a condition of employ9 ment, that such worker—

10 ‘‘(I) provide a written statement

11 disclosing any conviction for a relevant

12 crime or finding of patient or resident

13 abuse;

14 ‘‘(II) provide a statement signed

15 by the worker authorizing the facility

16 to request the search and exchange of

17 criminal records;

18 ‘‘(III) provide in person to the fa19 cility a copy of the worker’s finger20 prints or thumb print, depending upon

21 available technology; and

22 ‘‘(IV) provide any other identi23 fication information the Secretary may

24 specify in regulation;
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1 ‘‘(iii) initiate a check of the data col2 lection system established under section

3 1128E in accordance with regulations pro4 mulgated by the Secretary to determine

5 whether such system contains any disquali6 fying information with respect to such

7 worker; and

8 ‘‘(iv) if that system does not contain

9 any such disqualifying information—

10 ‘‘(I) request through the appro11 priate State agency that the State ini12 tiate a State and national criminal

13 background check on such worker in

14 accordance with the provisions of sub15 section (e)(6); and

16 ‘‘(II) submit to such State agency

17 the information described in subclauses

18 (II) through (IV) of clause (ii) not

19 more than 7 days (excluding Satur20 days, Sundays, and legal public holi21 days under section 6103(a) of title 5,

22 United States Code) after completion of

23 the check against the system initiated

24 under clause (iii).
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1 ‘‘(B) PROHIBITION ON HIRING OF ABUSIVE

2 WORKERS.—

3 ‘‘(i) IN GENERAL.—A skilled nursing

4 facility may not knowingly employ any

5 skilled nursing facility worker who has any

6 conviction for a relevant crime or with re7 spect to whom a finding of patient or resi8 dent abuse has been made.

9 ‘‘(ii) PROVISIONAL EMPLOYMENT.—

10 After complying with the requirements of

11 clauses (i), (ii), and (iii) of subparagraph

12 (A), a skilled nursing facility may provide

13 for a provisional period of employment for

14 a skilled nursing facility worker pending

15 completion of the check against the data col16 lection system described under subpara17 graph (A)(iii) and the background check de18 scribed under subparagraph (A)(iv). Subject

19 to clause (iii), such facility shall maintain

20 direct supervision of the covered individual

21 during the worker’s provisional period of

22 employment.

23 ‘‘(iii) EXCEPTION FOR SMALL RURAL

24 SKILLED NURSING FACILITIES.—In the case

25 of a small rural skilled nursing facility (as
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1 defined by the Secretary), the Secretary

2 shall provide, by regulation after consulta3 tion with providers of skilled nursing facil4 ity services and entities representing bene5 ficiaries of such services, for an appropriate

6 level of supervision with respect to any pro7 visional employees employed by the facility

8 in accordance with clause (ii). Such regula9 tion should encourage the provision of direct

10 supervision of such employees whenever

11 practicable with respect to such a facility

12 and if such supervision would not impose

13 an unreasonable cost or other burden on the

14 facility.

15 ‘‘(C) REPORTING REQUIREMENTS.—A

16 skilled nursing facility shall report to the State

17 any instance in which the facility determines

18 that a skilled nursing facility worker has com19 mitted an act of resident neglect or abuse or mis20 appropriation of resident property in the course

21 of employment by the facility.

22 ‘‘(D) USE OF INFORMATION.—

23 ‘‘(i) IN GENERAL.—A skilled nursing

24 facility that obtains information about a

25 skilled nursing facility worker pursuant to
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1 clauses (iii) and (iv) of subparagraph (A)

2 may use such information only for the pur3 pose of determining the suitability of the

4 worker for employment.

5 ‘‘(ii) IMMUNITY FROM LIABILITY.—A

6 skilled nursing facility that, in denying em7 ployment for an individual selected for hir8 ing as a skilled nursing facility worker (in9 cluding during the period described in sub10 paragraph (B)(ii)), reasonably relies upon

11 information about such individual provided

12 by the State pursuant to subsection (e)(6) or

13 section 1128E shall not be liable in any ac14 tion brought by such individual based on

15 the employment determination resulting

16 from the information.

17 ‘‘(iii) CRIMINAL PENALTY.—Whoever

18 knowingly violates the provisions of clause

19 (i) shall be fined in accordance with title

20 18, United States Code, imprisoned for not

21 more than 2 years, or both.

22 ‘‘(E) CIVIL PENALTY.—

23 ‘‘(i) IN GENERAL.—A skilled nursing

24 facility that violates the provisions of this
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1 paragraph shall be subject to a civil penalty

2 in an amount not to exceed—

3 ‘‘(I) for the first such violation,

4 $2,000; and

5 ‘‘(II) for the second and each sub6 sequent violation within any 5-year

7 period, $5,000.

8 ‘‘(ii) KNOWING RETENTION OF WORK9 ER.—In addition to any civil penalty

10 under clause (i), a skilled nursing facility

11 that—

12 ‘‘(I) knowingly continues to em13 ploy a skilled nursing facility worker

14 in violation of subparagraph (A) or

15 (B); or

16 ‘‘(II) knowingly fails to report a

17 skilled nursing facility worker under

18 subparagraph (C),

19 shall be subject to a civil penalty in an

20 amount not to exceed $5,000 for the first

21 such violation, and $10,000 for the second

22 and each subsequent violation within any 5-

23 year period.

24 ‘‘(F) DEFINITIONS.—In this paragraph:
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1 ‘‘(i) CONVICTION FOR A RELEVANT

2 CRIME.—The term ‘conviction for a relevant

3 crime’ means any Federal or State criminal

4 conviction for—

5 ‘‘(I) any offense described in

6 paragraphs (1) through (4) of section

7 1128(a); and

8 ‘‘(II) such other types of offenses

9 as the Secretary may specify in regula10 tions, taking into account the severity

11 and relevance of such offenses, and

12 after consultation with representatives

13 of long-term care providers, representa14 tives of long-term care employees, con15 sumer advocates, and appropriate Fed16 eral and State officials.

17 ‘‘(ii) DISQUALIFYING INFORMATION.—

18 The term ‘disqualifying information’ means

19 information about a conviction for a rel20 evant crime or a finding of patient or resi21 dent abuse.

22 ‘‘(iii) FINDING OF PATIENT OR RESI23 DENT ABUSE.—The term ‘finding of patient

24 or resident abuse’ means any substantiated

25 finding by a State agency under subsection
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1 (g)(1)(C) or a Federal agency that a skilled

2 nursing facility worker has committed—

3 ‘‘(I) an act of patient or resident

4 abuse or neglect or a misappropriation

5 of patient or resident property; or

6 ‘‘(II) such other types of acts as

7 the Secretary may specify in regula8 tions.

9 ‘‘(iv) SKILLED NURSING FACILITY

10 WORKER.—The term ‘skilled nursing facil11 ity worker’ means any individual (other

12 than a volunteer) that has access to a pa13 tient of a skilled nursing facility under an

14 employment or other contract, or both, with

15 such facility. Such term includes individ16 uals who are licensed or certified by the

17 State to provide such services, and non18 licensed individuals providing such services,

19 as defined by the Secretary, including nurse

20 assistants, nurse aides, home health aides,

21 and personal care workers and attendants.’’.

22 (B) MEDICAID PROGRAM.—Section 1919(b)

23 (42 U.S.C. 1396r(b)) is amended by adding at

24 the end the following new paragraph:
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1 ‘‘(8) SCREENING OF NURSING FACILITY WORK2 ERS.—

3 ‘‘(A) BACKGROUND CHECKS ON PROVI4 SIONAL EMPLOYEES.—Subject to subparagraph

5 (B)(ii), after a nursing facility selects an indi6 vidual for a position as a nursing facility work7 er, the facility, prior to employing such worker

8 in a status other than a provisional status to the

9 extent permitted under subparagraph (B)(ii),

10 shall—

11 ‘‘(i) give the worker written notice that

12 the facility is required to perform back13 ground checks with respect to provisional

14 employees;

15 ‘‘(ii) require, as a condition of employ16 ment, that such worker—

17 ‘‘(I) provide a written statement

18 disclosing any conviction for a relevant

19 crime or finding of patient or resident

20 abuse;

21 ‘‘(II) provide a statement signed

22 by the worker authorizing the facility

23 to request the search and exchange of

24 criminal records;
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1 ‘‘(III) provide in person to the fa2 cility a copy of the worker’s finger3 prints or thumb print, depending upon

4 available technology; and

5 ‘‘(IV) provide any other identi6 fication information the Secretary may

7 specify in regulation;

8 ‘‘(iii) initiate a check of the data col9 lection system established under section

10 1128E in accordance with regulations pro11 mulgated by the Secretary to determine

12 whether such system contains any disquali13 fying information with respect to such

14 worker; and

15 ‘‘(iv) if that system does not contain

16 any such disqualifying information—

17 ‘‘(I) request through the appro18 priate State agency that the State ini19 tiate a State and national criminal

20 background check on such worker in

21 accordance with the provisions of sub22 section (e)(8); and

23 ‘‘(II) submit to such State agency

24 the information described in subclauses

25 (II) through (IV) of clause (ii) not
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1 more than 7 days (excluding Satur2 days, Sundays, and legal public holi3 days under section 6103(a) of title 5,

4 United States Code) after completion of

5 the check against the system initiated

6 under clause (iii).

7 ‘‘(B) PROHIBITION ON HIRING OF ABUSIVE

8 WORKERS.—

9 ‘‘(i) IN GENERAL.—A nursing facility

10 may not knowingly employ any nursing fa11 cility worker who has any conviction for a

12 relevant crime or with respect to whom a

13 finding of patient or resident abuse has

14 been made.

15 ‘‘(ii) PROVISIONAL EMPLOYMENT.—

16 After complying with the requirements of

17 clauses (i), (ii), and (iii) of subparagraph

18 (A), a nursing facility may provide for a

19 provisional period of employment for a

20 nursing facility worker pending completion

21 of the check against the data collection sys22 tem described under subparagraph (A)(iii)

23 and the background check described under

24 subparagraph (A)(iv). Subject to clause

25 (iii), such facility shall maintain direct su-
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1 pervision of the worker during the worker’s

2 provisional period of employment.

3 ‘‘(iii) EXCEPTION FOR SMALL RURAL

4 NURSING FACILITIES.—

5 ‘‘(I) IN GENERAL.—In the case of

6 a small rural nursing facility (as de7 fined by the Secretary), the Secretary

8 shall provide, by regulation after con9 sultation with providers of nursing fa10 cility services and entities representing

11 beneficiaries of such services, for an

12 appropriate level of supervision with

13 respect to any provisional employees

14 employed by the facility in accordance

15 with clause (ii). Such regulation

16 should encourage the provision of di17 rect supervision of such employees

18 whenever practicable with respect to

19 such a facility and if such supervision

20 would not impose an unreasonable cost

21 or other burden on the facility.

22 ‘‘(C) REPORTING REQUIREMENTS.—A nurs23 ing facility shall report to the State any instance

24 in which the facility determines that a nursing

25 facility worker has committed an act of resident
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1 neglect or abuse or misappropriation of resident

2 property in the course of employment by the fa3 cility.

4 ‘‘(D) USE OF INFORMATION.—

5 ‘‘(i) IN GENERAL.—A nursing facility

6 that obtains information about a nursing

7 facility worker pursuant to clauses (iii) and

8 (iv) of subparagraph (A) may use such in9 formation only for the purpose of deter10 mining the suitability of the worker for em11 ployment.

12 ‘‘(ii) IMMUNITY FROM LIABILITY.—A

13 nursing facility that, in denying employ14 ment for an individual selected for hiring

15 as a nursing facility worker (including dur16 ing the period described in subparagraph

17 (B)(ii)), reasonably relies upon information

18 about such individual provided by the State

19 pursuant to subsection (e)(6) or section

20 1128E shall not be liable in any action

21 brought by such individual based on the em22 ployment determination resulting from the

23 information.

24 ‘‘(iii) CRIMINAL PENALTY.—Whoever

25 knowingly violates the provisions of clause
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1 (i) shall be fined in accordance with title

2 18, United States Code, imprisoned for not

3 more than 2 years, or both.

4 ‘‘(E) CIVIL PENALTY.—

5 ‘‘(i) IN GENERAL.—A nursing facility

6 that violates the provisions of this para7 graph shall be subject to a civil penalty in

8 an amount not to exceed—

9 ‘‘(I) for the first such violation,

10 $2,000; and

11 ‘‘(II) for the second and each sub12 sequent violation within any 5-year

13 period, $5,000.

14 ‘‘(ii) KNOWING RETENTION OF WORK15 ER.—In addition to any civil penalty

16 under clause (i), a nursing facility that—

17 ‘‘(I) knowingly continues to em18 ploy a nursing facility worker in vio19 lation of subparagraph (A) or (B); or

20 ‘‘(II) knowingly fails to report a

21 nursing facility worker under subpara22 graph (C),

23 shall be subject to a civil penalty in an

24 amount not to exceed $5,000 for the first

25 such violation, and $10,000 for the second
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1 and each subsequent violation within any 5-

2 year period.

3 ‘‘(F) DEFINITIONS.—In this paragraph:

4 ‘‘(i) CONVICTION FOR A RELEVANT

5 CRIME.—The term ‘conviction for a relevant

6 crime’ means any Federal or State criminal

7 conviction for—

8 ‘‘(I) any offense described in

9 paragraphs (1) through (4) of section

10 1128(a); and

11 ‘‘(II) such other types of offenses

12 as the Secretary may specify in regula13 tions, taking into account the severity

14 and relevance of such offenses, and

15 after consultation with representatives

16 of long-term care providers, representa17 tives of long-term care employees, con18 sumer advocates, and appropriate Fed19 eral and State officials.

20 ‘‘(ii) DISQUALIFYING INFORMATION.—

21 The term ‘disqualifying information’ means

22 information about a conviction for a rel23 evant crime or a finding of patient or resi24 dent abuse.
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1 ‘‘(iii) FINDING OF PATIENT OR RESI2 DENT ABUSE.—The term ‘finding of patient

3 or resident abuse’ means any substantiated

4 finding by a State agency under subsection

5 (g)(1)(C) or a Federal agency that a nurs6 ing facility worker has committed—

7 ‘‘(I) an act of patient or resident

8 abuse or neglect or a misappropriation

9 of patient or resident property; or

10 ‘‘(II) such other types of acts as

11 the Secretary may specify in regula12 tions.

13 ‘‘(iv) NURSING FACILITY WORKER.—

14 The term ‘nursing facility worker’ means

15 any individual (other than a volunteer)

16 that has access to a patient of a nursing fa17 cility under an employment or other con18 tract, or both, with such facility. Such term

19 includes individuals who are licensed or

20 certified by the State to provide such serv21 ices, and nonlicensed individuals providing

22 such services, as defined by the Secretary,

23 including nurse assistants, nurse aides,

24 home health aides, and personal care work25 ers and attendants.’’.
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1 (2) FEDERAL RESPONSIBILITIES.—

2 (A) DEVELOPMENT OF STANDARD FEDERAL

3 AND STATE BACKGROUND CHECK FORM.—The

4 Secretary of Health and Human Services, in

5 consultation with the Attorney General and rep6 resentatives of appropriate State agencies, shall

7 develop a model form that a provisional em8 ployee at a nursing facility may complete and

9 Federal and State agencies may use to conduct

10 the criminal background checks required under

11 sections 1819(b)(8) and 1919(b)(8) of the Social

12 Security Act (42 U.S.C. 1395i–3(b), 1396r(b))

13 (as added by this section).

14 (B) PERIODIC EVALUATION.—The Secretary

15 of Health and Human Services, in consultation

16 with the Attorney General, periodically shall

17 evaluate the background check system imposed

18 under sections 1819(b)(8) and 1919(b)(8) of the

19 Social Security Act (42 U.S.C. 1395i–3(b),

20 1396r(b)) (as added by this section) and shall

21 implement changes, as necessary, based on avail22 able technology, to make the background check

23 system more efficient and able to provide a more

24 immediate response to long-term care providers

25 using the system.
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1 (3) NO PREEMPTION OF STRICTER STATE

2 LAWS.—Nothing in section 1819(b)(8) or 1919(b)(8)

3 of the Social Security Act (42 U.S.C. 1395i–3(b)(8),

4 1396r(b)(8)) (as so added) shall be construed to super5 sede any provision of State law that—

6 (A) specifies a relevant crime for purposes

7 of prohibiting the employment of an individual

8 at a long-term care facility (as defined in section

9 1128E(g)(6) of the Social Security Act (as added

10 by subsection (e)) that is not included in the list

11 of such crimes specified in such sections or in

12 regulations promulgated by the Secretary of

13 Health and Human Services to carry out such

14 sections; or

15 (B) requires a long-term care facility (as so

16 defined) to conduct a background check prior to

17 employing an individual in an employment po18 sition that is not included in the positions for

19 which a background check is required under such

20 sections.

21 (4) TECHNICAL AMENDMENTS.—Effective as if

22 included in the enactment of section 941 of BIPA

23 (114 Stat. 2763A–585), sections 1819(b) and 1919(b)

24 (42 U.S.C. 1395i–3(b), 1396r(b)), as amended by such

25 section 941 are each amended by redesignating the
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1 paragraph (8) added by such section as paragraph

2 (9).

3 (b) FEDERAL AND STATE REQUIREMENTS CON4 CERNING BACKGROUND CHECKS.—

5 (1) MEDICARE.—Section 1819(e) (42 U.S.C.

6 1395i–3(e)) is amended by adding at the end the fol7 lowing:

8 ‘‘(6) FEDERAL AND STATE REQUIREMENTS CON9 CERNING CRIMINAL BACKGROUND CHECKS ON

10 SKILLED NURSING FACILITY EMPLOYEES.—

11 ‘‘(A) IN GENERAL.—Upon receipt of a re12 quest by a skilled nursing facility pursuant to

13 subsection (b)(8) that is accompanied by the in14 formation described in subclauses (II) through

15 (IV) of subsection (b)(8)(A)(ii), a State, after

16 checking appropriate State records and finding

17 no disqualifying information (as defined in sub18 section (b)(8)(F)(ii)), shall immediately submit

19 such request and information to the Attorney

20 General and shall request the Attorney General

21 to conduct a search and exchange of records with

22 respect to the individual as described in sub23 paragraph (B).

24 ‘‘(B) SEARCH AND EXCHANGE OF RECORDS

25 BY ATTORNEY GENERAL.—Upon receipt of a sub-
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1 mission pursuant to subparagraph (A), the At2 torney General shall direct a search of the

3 records of the Federal Bureau of Investigation

4 for any criminal history records corresponding

5 to the fingerprints and other positive identifica6 tion information submitted. The Attorney Gen7 eral shall provide any corresponding information

8 resulting from the search to the State.

9 ‘‘(C) STATE REPORTING OF INFORMATION

10 TO SKILLED NURSING FACILITY.—Upon receipt

11 of the information provided by the Attorney Gen12 eral pursuant to subparagraph (B), the State

13 shall—

14 ‘‘(i) review the information to deter15 mine whether the individual has any con16 viction for a relevant crime (as defined in

17 subsection (b)(8)(F)(i));

18 ‘‘(ii) immediately report to the skilled

19 nursing facility in writing the results of

20 such review; and

21 ‘‘(iii) in the case of an individual with

22 a conviction for a relevant crime, report the

23 existence of such conviction of such indi24 vidual to the database established under sec25 tion 1128E.
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1 ‘‘(D) FEES FOR PERFORMANCE OF CRIMI2 NAL BACKGROUND CHECKS.—

3 ‘‘(i) AUTHORITY TO CHARGE FEES.—

4 ‘‘(I) ATTORNEY GENERAL.—The

5 Attorney General may charge a fee to

6 any State requesting a search and ex7 change of records pursuant to this

8 paragraph and subsection (b)(8) for

9 conducting the search and providing

10 the records. The amount of such fee

11 shall not exceed the lesser of the actual

12 cost of such activities or $50. Such fees

13 shall be available to the Attorney Gen14 eral, or, in the Attorney General’s dis15 cretion, to the Federal Bureau of Inves16 tigation until expended.

17 ‘‘(II) STATE.—A State may

18 charge a skilled nursing facility a fee

19 for initiating the criminal background

20 check under this paragraph and sub21 section (b)(8), including fees charged

22 by the Attorney General, and for per23 forming the review and report required

24 by subparagraph (C). The amount of
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1 such fee shall not exceed the actual cost

2 of such activities.

3 ‘‘(ii) PROHIBITION ON CHARGING.—An

4 entity may not impose on a provisional em5 ployee or an employee any charges relating

6 to the performance of a background check

7 under this paragraph.

8 ‘‘(E) REGULATIONS.—

9 ‘‘(i) IN GENERAL.—In addition to the

10 Secretary’s authority to promulgate regula11 tions under this title, the Attorney General,

12 in consultation with the Secretary, may

13 promulgate such regulations as are nec14 essary to carry out the Attorney General’s

15 responsibilities under this paragraph and

16 subsection (b)(9), including regulations re17 garding the security confidentiality, accu18 racy, use, destruction, and dissemination of

19 information, audits and recordkeeping, and

20 the imposition of fees.

21 ‘‘(ii) APPEAL PROCEDURES.—The At22 torney General, in consultation with the

23 Secretary, shall promulgate such regulations

24 as are necessary to establish procedures by

25 which a provisional employee or an em-
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1 ployee may appeal or dispute the accuracy

2 of the information obtained in a back3 ground check conducted under this para4 graph. Appeals shall be limited to instances

5 in which a provisional employee or an em6 ployee is incorrectly identified as the subject

7 of the background check, or when informa8 tion about the provisional employee or em9 ployee has not been updated to reflect

10 changes in the provisional employee’s or

11 employee’s criminal record.

12 ‘‘(F) REPORT.—Not later than 2 years after

13 the date of enactment of this paragraph, the At14 torney General shall submit a report to Congress

15 on—

16 ‘‘(i) the number of requests for searches

17 and exchanges of records made under this

18 section;

19 ‘‘(ii) the disposition of such requests;

20 and

21 ‘‘(iii) the cost of responding to such re22 quests.’’.

23 (2) MEDICAID.—Section 1919(e) (42 U.S.C.

24 1396r(e)) is amended by adding at the end the fol25 lowing:
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1 ‘‘(8) FEDERAL AND STATE REQUIREMENTS CON2 CERNING CRIMINAL BACKGROUND CHECKS ON NURS3 ING FACILITY EMPLOYEES.—

4 ‘‘(A) IN GENERAL.—Upon receipt of a re5 quest by a nursing facility pursuant to sub6 section (b)(8) that is accompanied by the infor7 mation described in subclauses (II) through (IV)

8 of subsection (b)(8)(A)(ii), a State, after checking

9 appropriate State records and finding no dis10 qualifying information (as defined in subsection

11 (b)(8)(F)(ii)), shall immediately submit such re12 quest and information to the Attorney General

13 and shall request the Attorney General to con14 duct a search and exchange of records with re15 spect to the individual as described in subpara16 graph (B).

17 ‘‘(B) SEARCH AND EXCHANGE OF RECORDS

18 BY ATTORNEY GENERAL.—Upon receipt of a sub19 mission pursuant to subparagraph (A), the At20 torney General shall direct a search of the

21 records of the Federal Bureau of Investigation

22 for any criminal history records corresponding

23 to the fingerprints and other positive identifica24 tion information submitted. The Attorney Gen-
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1 eral shall provide any corresponding information

2 resulting from the search to the State.

3 ‘‘(C) STATE REPORTING OF INFORMATION

4 TO NURSING FACILITY.—Upon receipt of the in5 formation provided by the Attorney General pur6 suant to subparagraph (B), the State shall—

7 ‘‘(i) review the information to deter8 mine whether the individual has any con9 viction for a relevant crime (as defined in

10 subsection (b)(8)(F)(i));

11 ‘‘(ii) immediately report to the nursing

12 facility in writing the results of such re13 view; and

14 ‘‘(iii) in the case of an individual with

15 a conviction for a relevant crime, report the

16 existence of such conviction of such indi17 vidual to the database established under sec18 tion 1128E.

19 ‘‘(D) FEES FOR PERFORMANCE OF CRIMI20 NAL BACKGROUND CHECKS.—

21 ‘‘(i) AUTHORITY TO CHARGE FEES.—

22 ‘‘(I) ATTORNEY GENERAL.—The

23 Attorney General may charge a fee to

24 any State requesting a search and ex25 change of records pursuant to this
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1 paragraph and subsection (b)(8) for

2 conducting the search and providing

3 the records. The amount of such fee

4 shall not exceed the lesser of the actual

5 cost of such activities or $50. Such fees

6 shall be available to the Attorney Gen7 eral, or, in the Attorney General’s dis8 cretion, to the Federal Bureau of Inves9 tigation, until expended.

10 ‘‘(II) STATE.—A State may

11 charge a nursing facility a fee for ini12 tiating the criminal background check

13 under this paragraph and subsection

14 (b)(8), including fees charged by the

15 Attorney General, and for performing

16 the review and report required by sub17 paragraph (C). The amount of such fee

18 shall not exceed the actual cost of such

19 activities.

20 ‘‘(ii) PROHIBITION ON CHARGING.—An

21 entity may not impose on a provisional em22 ployee or an employee any charges relating

23 to the performance of a background check

24 under this paragraph.

25 ‘‘(E) REGULATIONS.—
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1 ‘‘(i) IN GENERAL.—In addition to the

2 Secretary’s authority to promulgate regula3 tions under this title, the Attorney General,

4 in consultation with the Secretary, may

5 promulgate such regulations as are nec6 essary to carry out the Attorney General’s

7 responsibilities under this paragraph and

8 subsection (b)(8), including regulations re9 garding the security, confidentiality, accu10 racy, use, destruction, and dissemination of

11 information, audits and recordkeeping, and

12 the imposition of fees.

13 ‘‘(ii) APPEAL PROCEDURES.—The At14 torney General, in consultation with the

15 Secretary, shall promulgate such regulations

16 as are necessary to establish procedures by

17 which a provisional employee or an em18 ployee may appeal or dispute the accuracy

19 of the information obtained in a back20 ground check conducted under this para21 graph. Appeals shall be limited to instances

22 in which a provisional employee or an em23 ployee is incorrectly identified as the subject

24 of the background check, or when informa25 tion about the provisional employee or em-
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1 ployee has not been updated to reflect

2 changes in the provisional employee’s or

3 employee’s criminal record.

4 ‘‘(F) REPORT.—Not later than 2 years after

5 the date of enactment of this paragraph, the At6 torney General shall submit a report to Congress

7 on—

8 ‘‘(i) the number of requests for searches

9 and exchanges of records made under this

10 section;

11 ‘‘(ii) the disposition of such requests;

12 and

13 ‘‘(iii) the cost of responding to such re14 quests.’’.

15 (c) APPLICATION TO OTHER ENTITIES PROVIDING

16 HOME HEALTH OR LONG-TERM CARE SERVICES.—

17 (1) MEDICARE.—Part D of title XVIII (42

18 U.S.C. 1395x et seq.) is amended by adding at the

19 end the following:

20 ‘‘APPLICATION OF SKILLED NURSING FACILITY PREVENTIVE

21 ABUSE PROVISIONS TO ANY PROVIDER OF SERVICES

22 OR OTHER ENTITY PROVIDING HOME HEALTH OR

23 LONG-TERM CARE SERVICES

24 ‘‘SEC. 1897. (a) IN GENERAL.—The requirements of

25 subsections (b)(8) and (e)(6) of section 1819 shall apply to

26 any provider of services or any other entity that is eligible
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1 to be paid under this title for providing home health serv2 ices, hospice care (including routine home care and other

3 services included in hospice care under this title), or long4 term care services to an individual entitled to benefits under

5 part A or enrolled under part B, including an individual

6 provided with a Medicare+Choice plan offered by a

7 Medicare+Choice organization under part C (in this sec8 tion referred to as a ‘medicare beneficiary’).

9 ‘‘(b) SUPERVISION OF PROVISIONAL EMPLOYEES.—

10 ‘‘(1) IN GENERAL.—With respect to an entity

11 that provides home health services, such entity shall

12 be considered to have satisfied the requirements of sec13 tion 1819(b)(8)(B)(ii) or 1919(b)(8)(B)(ii) if the enti14 ty meets such requirements for supervision of provi15 sional employees of the entity as the Secretary shall,

16 by regulation, specify in accordance with paragraph

17 (2).

18 ‘‘(2) REQUIREMENTS.—The regulations required

19 under paragraph (1) shall provide the following:

20 ‘‘(A) Supervision of a provisional employee

21 shall consist of ongoing, good faith, verifiable ef22 forts by the supervisor of the provisional em23 ployee to conduct monitoring and oversight ac24 tivities to ensure the safety of a medicare bene25 ficiary.
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1 ‘‘(B) For purposes of subparagraph (A),

2 monitoring and oversight activities may include

3 (but are not limited to) the following:

4 ‘‘(i) Follow-up telephone calls to the

5 medicare beneficiary.

6 ‘‘(ii) Unannounced visits to the medi7 care beneficiary’s home while the provi8 sional employee is serving the medicare ben9 eficiary.

10 ‘‘(iii) To the extent practicable, lim11 iting the provisional employee’s duties to

12 serving only those medicare beneficiaries in

13 a home or setting where another family

14 member or resident of the home or setting of

15 the medicare beneficiary is present.

16 ‘‘(C) In promulgating such regulations, the

17 Secretary shall take into account the staffing and

18 geographic issues faced by small rural entities

19 (as defined by the Secretary) that provide home

20 health services, hospice care (including routine

21 home care and other services included in hospice

22 care under this title), or other long-term care

23 services. Such regulations should encourage the

24 provision of monitoring and oversight activities

25 whenever practicable with respect to such an en-
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1 tity, and if such activities would not impose an

2 unreasonable cost or other burden on the enti3 ty.’’.

4 (2) MEDICAID.—Section 1902(a) (42 U.S.C.

5 1396a), as amended by section 104(a), is amended—

6 (A) in paragraph (65), by striking ‘‘and’’

7 at the end;

8 (B) in paragraph (66), by striking the pe9 riod and inserting ‘‘; and’’; and

10 (C) by inserting after paragraph (66) the

11 following:

12 ‘‘(67) provide that any entity that is eligible to

13 be paid under the State plan for providing home

14 health services, hospice care (including routine home

15 care and other services included in hospice care under

16 title XVIII), or long-term care services for which med17 ical assistance is available under the State plan to

18 individuals requiring long-term care complies with

19 the requirements of subsections (b)(8) and (e)(8) of

20 section 1919 and section 1897(b) (in the same man21 ner as such section applies to a medicare bene22 ficiary).’’.

23 (3) EXPANSION OF STATE NURSE AIDE REG24 ISTRY.—
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1 (A) MEDICARE.—Section 1819 (42 U.S.C.

2 1395i–3) is amended—

3 (i) in subsection (e)(2)—

4 (I) in the paragraph heading, by

5 striking ‘‘NURSE AIDE REGISTRY’’ and

6 inserting ‘‘EMPLOYEE REGISTRY’’;

7 (II) in subparagraph (A)—

8 (aa) by striking ‘‘By not

9 later than January 1, 1989, the’’

10 and inserting ‘‘The’’;

11 (bb) by striking ‘‘a registry

12 of all individuals’’ and inserting

13 ‘‘a registry of (i) all individuals’’;

14 and

15 (cc) by inserting before the

16 period the following: ‘‘, (ii) all

17 other skilled nursing facility em18 ployees with respect to whom the

19 State has made a finding de20 scribed in subparagraph (B), and

21 (iii) any employee of any pro22 vider of services or any other enti23 ty that is eligible to be paid under

24 this title for providing home

25 health services, hospice care (in-
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1 cluding routine home care and

2 other services included in hospice

3 care under this title), or long-term

4 care services and with respect to

5 whom the entity has reported to

6 the State a finding of patient ne7 glect or abuse or a misappropria8 tion of patient property’’; and

9 (III) in subparagraph (C), by

10 striking ‘‘a nurse aide’’ and inserting

11 ‘‘an individual’’; and

12 (ii) in subsection (g)(1)—

13 (I) by striking the first sentence of

14 subparagraph (C) and inserting the

15 following: ‘‘The State shall provide,

16 through the agency responsible for sur17 veys and certification of skilled nurs18 ing facilities under this subsection, for

19 a process for the receipt and timely re20 view and investigation of allegations of

21 neglect and abuse and misappropria22 tion of resident property by a nurse

23 aide or a skilled nursing facility em24 ployee of a resident in a skilled nurs25 ing facility, by another individual
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1 used by the facility in providing serv2 ices to such a resident, or by an indi3 vidual described in subsection

4 (e)(2)(A)(iii).’’; and

5 (II) in the fourth sentence of sub6 paragraph (C), by inserting ‘‘or de7 scribed in subsection (e)(2)(A)(iii)’’

8 after ‘‘used by the facility’’; and

9 (III) in subparagraph (D)—

10 (aa) in the subparagraph

11 heading, by striking ‘‘NURSE

12 AIDE’’; and

13 (bb) in clause (i), in the mat14 ter preceding subclause (I), by

15 striking ‘‘a nurse aide’’ and in16 serting ‘‘an individual’’; and

17 (cc) in clause (i)(I), by strik18 ing ‘‘nurse aide’’ and inserting

19 ‘‘individual’’.

20 (B) MEDICAID.—Section 1919 (42 U.S.C.

21 1396r) is amended—

22 (i) in subsection (e)(2)—

23 (I) in the paragraph heading, by

24 striking ‘‘NURSE AIDE REGISTRY’’ and

25 inserting ‘‘EMPLOYEE REGISTRY’’;
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1 (II) in subparagraph (A)—

2 (aa) by striking ‘‘By not

3 later than January 1, 1989, the’’

4 and inserting ‘‘The’’;

5 (bb) by striking ‘‘a registry

6 of all individuals’’ and inserting

7 ‘‘a registry of (i) all individuals’’;

8 and

9 (cc) by inserting before the

10 period the following: ‘‘, (ii) all

11 other nursing facility employees

12 with respect to whom the State

13 has made a finding described in

14 subparagraph (B), and (iii) any

15 employee of an entity that is eligi16 ble to be paid under the State

17 plan for providing home health

18 services, hospice care (including

19 routine home care and other serv20 ices included in hospice care

21 under title XVIII), or long-term

22 care services and with respect to

23 whom the entity has reported to

24 the State a finding of patient ne-
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1 glect or abuse or a misappropria2 tion of patient property’’; and

3 (III) in subparagraph (C), by

4 striking ‘‘a nurse aide’’ and inserting

5 ‘‘an individual’’; and

6 (ii) in subsection (g)(1)—

7 (I) by striking the first sentence of

8 subparagraph (C) and inserting the

9 following: ‘‘The State shall provide,

10 through the agency responsible for sur11 veys and certification of nursing facili12 ties under this subsection, for a process

13 for the receipt and timely review and

14 investigation of allegations of neglect

15 and abuse and misappropriation of

16 resident property by a nurse aide or a

17 nursing facility employee of a resident

18 in a nursing facility, by another indi19 vidual used by the facility in pro20 viding services to such a resident, or by

21 an individual described in subsection

22 (e)(2)(A)(iii).’’; and

23 (II) in the fourth sentence of sub24 paragraph (C), by inserting ‘‘or de-
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1 scribed in subsection (e)(2)(A)(iii)’’

2 after ‘‘used by the facility’’; and

3 (III) in subparagraph (D)—

4 (aa) in the subparagraph

5 heading, by striking ‘‘NURSE

6 AIDE’’; and

7 (bb) in clause (i), in the mat8 ter preceding subclause (I), by

9 striking ‘‘a nurse aide’’ and in10 serting ‘‘an individual’’; and

11 (cc) in clause (i)(I), by strik12 ing ‘‘nurse aide’’ and inserting

13 ‘‘individual’’.

14 (d) REIMBURSEMENT OF COSTS FOR BACKGROUND

15 CHECKS.—The Secretary of Health and Human Services

16 shall reimburse nursing facilities, skilled nursing facilities,

17 and other entities for costs incurred by the facilities and

18 entities in order to comply with the requirements imposed

19 under sections 1819(b)(8) and 1919(b)(8) of such Act (42

20 U.S.C. 1395i–3(b)(8), 1396r(b)(8)), as added by this sec21 tion.

22 (e) INCLUSION OF ABUSIVE ACTS WITHIN A LONG23 TERM CARE FACILITY OR PROVIDER IN THE NATIONAL

24 HEALTH CARE FRAUD AND ABUSE DATA COLLECTION

25 PROGRAM.—
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1 (1) IN GENERAL.—Section 1128E(g)(1)(A) (42

2 U.S.C. 1320a–7e(g)(1)(A)) is amended—

3 (A) by redesignating clause (v) as clause

4 (vi); and

5 (B) by inserting after clause (iv), the fol6 lowing:

7 ‘‘(v) A finding of abuse or neglect of a

8 patient or a resident of a long-term care fa9 cility, or misappropriation of such a pa10 tient’s or resident’s property.’’.

11 (2) COVERAGE OF LONG-TERM CARE FACILITY OR

12 PROVIDER EMPLOYEES.—Section 1128E(g)(2) (42

13 U.S.C. 1320a–7e(g)(2)) is amended by inserting ‘‘,

14 and includes any individual of a long-term care facil15 ity or provider (other than any volunteer) that has

16 access to a patient or resident of such a facility under

17 an employment or other contract, or both, with the fa18 cility or provider (including individuals who are li19 censed or certified by the State to provide services at

20 the facility or through the provider, and nonlicensed

21 individuals, as defined by the Secretary, providing

22 services at the facility or through the provider, in23 cluding nurse assistants, nurse aides, home health

24 aides, individuals who provide home care, and per25 sonal care workers and attendants)’’ before the period.
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1 (3) REPORTING BY LONG-TERM CARE FACILITIES

2 OR PROVIDERS.—

3 (A) IN GENERAL.—Section 1128E(b)(1) (42

4 U.S.C. 1320a–7e(b)(1)) is amended by striking

5 ‘‘and health plan’’ and inserting ‘‘, health plan,

6 and long-term care facility or provider’’.

7 (B) CORRECTION OF INFORMATION.—Sec8 tion 1128E(c)(2) (42 U.S.C. 1320a–7e(c)(2)) is

9 amended by striking ‘‘and health plan’’ and in10 serting ‘‘, health plan, and long-term care facil11 ity or provider’’.

12 (4) ACCESS TO REPORTED INFORMATION.—Sec13 tion 1128E(d)(1) (42 U.S.C. 1320a–7e(d)(1)) is

14 amended by striking ‘‘and health plans’’ and insert15 ing ‘‘, health plans, and long-term care facilities or

16 providers’’.

17 (5) MANDATORY CHECK OF DATABASE BY LONG18 TERM CARE FACILITIES OR PROVIDERS.—Section

19 1128E(d) (42 U.S.C. 1320a–7e(d)) is amended by

20 adding at the end the following:

21 ‘‘(3) MANDATORY CHECK OF DATABASE BY LONG22 TERM CARE FACILITIES OR PROVIDERS.—A long-term

23 care facility or provider shall check the database

24 maintained under this section prior to hiring under

25 an employment or other contract, or both, (other than
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1 in a provisional status) any individual as an em2 ployee of such a facility or provider who will have ac3 cess to a patient or resident of the facility or provider

4 (including individuals who are licensed or certified

5 by the State to provide services at the facility or

6 through the provider, and nonlicensed individuals, as

7 defined by the Secretary, that will provide services at

8 the facility or through the provider, including nurse

9 assistants, nurse aides, home health aides, individuals

10 who provide home care, and personal care workers

11 and attendants).’’.

12 (6) DEFINITION OF LONG-TERM CARE FACILITY

13 OR PROVIDER.—Section 1128E(g) (42 U.S.C. 1320a–

14 7e(g)) is amended by adding at the end the following:

15 ‘‘(6) LONG-TERM CARE FACILITY OR PRO16 VIDER.—The term ‘long-term care facility or pro17 vider’ means a skilled nursing facility (as defined in

18 section 1819(a)), a nursing facility (as defined in sec19 tion 1919(a)), a home health agency, a provider of

20 hospice care (as defined in section 1861(dd)(1)), a

21 long-term care hospital (as described in section

22 1886(d)(1)(B)(iv)), an intermediate care facility for

23 the mentally retarded (as defined in section 1905(d)),

24 or any other facility or entity that provides, or is a

25 provider of, long-term care services, home health serv-
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1 ices, or hospice care (including routine home care and

2 other services included in hospice care under title

3 XVIII), and receives payment for such services under

4 the medicare program under title XVIII or the med5 icaid program under title XIX.’’.

6 (7) AUTHORIZATION OF APPROPRIATIONS.—

7 There is authorized to be appropriated to carry out

8 the amendments made by this subsection, $10,200,000

9 for fiscal year 2004.

10 (f) PREVENTION AND TRAINING DEMONSTRATION

11 PROJECT.—

12 (1) ESTABLISHMENT.—The Secretary of Health

13 and Human Services shall establish a demonstration

14 program to provide grants to develop information on

15 best practices in patient abuse prevention training

16 (including behavior training and interventions) for

17 managers and staff of hospital and health care facili18 ties.

19 (2) ELIGIBILITY.—To be eligible to receive a

20 grant under paragraph (1), an entity shall be a pub21 lic or private nonprofit entity and prepare and sub22 mit to the Secretary of Health and Human Services

23 an application at such time, in such manner, and

24 containing such information as the Secretary may re25 quire.
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1 (3) USE OF FUNDS.—Amounts received under a

2 grant under this subsection shall be used to—

3 (A) examine ways to improve collaboration

4 between State health care survey and provider

5 certification agencies, long-term care ombudsman

6 programs, the long-term care industry, and local

7 community members;

8 (B) examine patient care issues relating to

9 regulatory oversight, community involvement,

10 and facility staffing and management with a

11 focus on staff training, staff stress management,

12 and staff supervision;

13 (C) examine the use of patient abuse pre14 vention training programs by long-term care en15 tities, including the training program developed

16 by the National Association of Attorneys Gen17 eral, and the extent to which such programs are

18 used; and

19 (D) identify and disseminate best practices

20 for preventing and reducing patient abuse.

21 (4) AUTHORIZATION OF APPROPRIATIONS.—

22 There is authorized to be appropriated such sums as

23 may be necessary to carry out this subsection.

24 (g) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—With respect to a skilled nurs2 ing facility (as defined in section 1819(a) of the So3 cial Security Act (42 U.S.C. 1395i–3(a)) or a nursing

4 facility (as defined in section 1919(a) of the Social

5 Security Act (42 U.S.C. 1396r(a)), this section and

6 the amendments made by this section shall take effect

7 on the date that is the earlier of—

8 (A) 6 months after the effective date of final

9 regulations promulgated to carry out this section

10 and such amendments; or

11 (B) January 1, 2006.

12 (2) LONG-TERM CARE FACILITIES AND PRO13 VIDERS.—With respect to a long-term care facility or

14 provider (as defined in section 1128E(g)(6) of the So15 cial Security Act (42 U.S.C. 1320a–7e(g)(6)) (as

16 added by subsection (e)), this section and the amend17 ments made by this section shall take effect on the

18 date that is the earlier of—

19 (A) 18 months after the effective date of

20 final regulations promulgated to carry out this

21 section and such amendments; or

22 (B) January 1, 2007.

23 SEC. 637. OFFICE OF RURAL HEALTH POLICY IMPROVE24 MENTS.

25 Section 711(b) (42 U.S.C. 912(b)) is amended—
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1 (1) in paragraph (3), by striking ‘‘and’’ after the

2 comma at the end;

3 (2) in paragraph (4), by inserting ‘‘and’’ after

4 the comma at the end; and

5 (3) by inserting after paragraph (4) the fol6 lowing new paragraph:

7 ‘‘(5) administer grants, cooperative agreements,

8 and contracts to provide technical assistance and

9 other activities as necessary to support activities re10 lated to improving health care in rural areas.’’.

11 TITLE VII—ACCESS TO AFFORD12 ABLE PHARMACEUTICALS

13 SEC. 701. SHORT TITLE.

14 This title may be cited as the ‘‘Greater Access to Af15 fordable Pharmaceuticals Act’’.

16 SEC. 702. 30-MONTH STAY-OF-EFFECTIVENESS PERIOD.

17 (a) ABBREVIATED NEW DRUG APPLICATIONS.—Sec18 tion 505(j) of the Federal Food, Drug, and Cosmetic Act

19 (21 U.S.C. 355(j)) is amended—

20 (1) in paragraph (2), by striking subparagraph

21 (B) and inserting the following:

22 ‘‘(B) NOTICE OF OPINION THAT PATENT IS INVALID OR

23 WILL NOT BE INFRINGED.—

24 ‘‘(i) AGREEMENT TO GIVE NOTICE.—An appli25 cant that makes a certification described in subpara-
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1 graph (A)(vii)(IV) shall include in the application a

2 statement that the applicant will give notice as re3 quired by this subparagraph.

4 ‘‘(ii) TIMING OF NOTICE.—An applicant that

5 makes a certification described in subparagraph

6 (A)(vii)(IV) shall give notice as required under this

7 subparagraph—

8 ‘‘(I) if the certification is in the applica9 tion, not later than 20 days after the date of the

10 postmark on the notice with which the Secretary

11 informs the applicant that the application has

12 been filed; or

13 ‘‘(II) if the certification is in an amend14 ment or supplement to the application, at the

15 time at which the applicant submits the amend16 ment or supplement, regardless of whether the

17 applicant has already given notice with respect

18 to another such certification contained in the ap19 plication or in an amendment or supplement to

20 the application.

21 ‘‘(iii) RECIPIENTS OF NOTICE.—An applicant re22 quired under this subparagraph to give notice shall

23 give notice to—

24 ‘‘(I) each owner of the patent that is the

25 subject of the certification (or a representative of
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1 the owner designated to receive such a notice);

2 and

3 ‘‘(II) the holder of the approved application

4 under subsection (b) for the drug that is claimed

5 by the patent or a use of which is claimed by the

6 patent (or a representative of the holder des7 ignated to receive such a notice).

8 ‘‘(iv) CONTENTS OF NOTICE.—A notice required

9 under this subparagraph shall—

10 ‘‘(I) state that an application that contains

11 data from bioavailability or bioequivalence stud12 ies has been submitted under this subsection for

13 the drug with respect to which the certification

14 is made to obtain approval to engage in the com15 mercial manufacture, use, or sale of the drug be16 fore the expiration of the patent referred to in

17 the certification; and

18 ‘‘(II) include a detailed statement of the fac19 tual and legal basis of the opinion of the appli20 cant that the patent is invalid or will not be in21 fringed.’’; and

22 (2) in paragraph (5)—

23 (A) in subparagraph (B)—

24 (i) by striking ‘‘under the following’’

25 and inserting ‘‘by applying the following to
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1 each certification made under paragraph

2 (2)(A)(vii)’’; and

3 (ii) in clause (iii)—

4 (I) in the first sentence, by strik5 ing ‘‘unless’’ and all that follows and

6 inserting ‘‘unless, before the expiration

7 of 45 days after the date on which the

8 notice described in paragraph (2)(B) is

9 received, an action is brought for in10 fringement of the patent that is the

11 subject of the certification and for

12 which information was submitted to

13 the Secretary under subsection (b)(1)

14 or (c)(2) before the date on which the

15 application (excluding an amendment

16 or supplement to the application),

17 which the Secretary later determines to

18 be substantially complete, was sub19 mitted.’’; and

20 (II) in the second sentence—

21 (aa) by striking subclause (I)

22 and inserting the following:

23 ‘‘(I) if before the expiration of such period

24 the district court decides that the patent is in25 valid or not infringed (including any substantive
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1 determination that there is no cause of action for

2 patent infringement or invalidity), the approval

3 shall be made effective on—

4 ‘‘(aa) the date on which the court en5 ters judgment reflecting the decision; or

6 ‘‘(bb) the date of a settlement order or

7 consent decree signed and entered by the

8 court stating that the patent that is the sub9 ject of the certification is invalid or not in10 fringed;’’;

11 (bb) by striking subclause

12 (II) and inserting the following:

13 ‘‘(II) if before the expiration of such period

14 the district court decides that the patent has been

15 infringed—

16 ‘‘(aa) if the judgment of the district

17 court is appealed, the approval shall be

18 made effective on—

19 ‘‘(AA) the date on which the court

20 of appeals decides that the patent is

21 invalid or not infringed (including

22 any substantive determination that

23 there is no cause of action for patent

24 infringement or invalidity); or
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1 ‘‘(BB) the date of a settlement

2 order or consent decree signed and en3 tered by the court of appeals stating

4 that the patent that is the subject of the

5 certification is invalid or not in6 fringed; or

7 ‘‘(bb) if the judgment of the district

8 court is not appealed or is affirmed, the ap9 proval shall be made effective on the date

10 specified by the district court in a court

11 order under section 271(e)(4)(A) of title 35,

12 United States Code;’’;

13 (cc) in subclause (III), by

14 striking ‘‘on the date of such court

15 decision.’’ and inserting ‘‘as pro16 vided in subclause (I); or’’; and

17 (dd) by inserting after sub18 clause (III) the following:

19 ‘‘(IV) if before the expiration of such period

20 the court grants a preliminary injunction pro21 hibiting the applicant from engaging in the com22 mercial manufacture or sale of the drug until the

23 court decides the issues of patent validity and

24 infringement and if the court decides that such
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1 patent has been infringed, the approval shall be

2 made effective as provided in subclause (II).’’;

3 (B) by redesignating subparagraphs (C)

4 and (D) as subparagraphs (E) and (F), respec5 tively; and

6 (C) by inserting after subparagraph (B) the

7 following:

8 ‘‘(C) CIVIL ACTION TO OBTAIN PATENT CER9 TAINTY.—

10 ‘‘(i) DECLARATORY JUDGMENT ABSENT

11 INFRINGEMENT ACTION.—If an owner of the

12 patent or the holder of the approved appli13 cation under subsection (b) for the drug that

14 is claimed by the patent or a use of which

15 is claimed by the patent does not bring a

16 civil action against the applicant for in17 fringement of the patent on or before the

18 date that is 45 days after the date on which

19 the notice given under paragraph (2)(B)

20 was received, the applicant may bring a

21 civil action against the owner or holder (but

22 not against any owner or holder that has

23 brought such a civil action against that ap24 plicant, unless that civil action was dis25 missed without prejudice) for a declaratory
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1 judgment under section 2201 of title 28,

2 United States Code, that the patent is in3 valid or will not be infringed by the drug

4 for which the applicant seeks approval.

5 ‘‘(ii) COUNTERCLAIM TO INFRINGE6 MENT ACTION.—

7 ‘‘(I) IN GENERAL.—If an owner of

8 the patent or the holder of the ap9 proved application under subsection

10 (b) for the drug that is claimed by the

11 patent or a use of which is claimed by

12 the patent brings a patent infringe13 ment action against the applicant, the

14 applicant may assert a counterclaim

15 seeking an order requiring the holder

16 to correct or delete the patent informa17 tion submitted by the holder under sub18 section (b) or (c) on the ground that

19 the patent does not claim either—

20 ‘‘(aa) the drug for which the

21 application was approved; or

22 ‘‘(bb) an approved method of

23 using the drug.

24 ‘‘(II) NO INDEPENDENT CAUSE OF

25 ACTION.—Subclause (I) does not au-
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1 thorize the assertion of a claim de2 scribed in subclause (I) in any civil

3 action or proceeding other than a

4 counterclaim described in subclause

5 (I).

6 ‘‘(iii) NO DAMAGES.—An applicant

7 shall not be entitled to damages in a civil

8 action under subparagraph (i) or a counter9 claim under subparagraph (ii).’’.

10 (b) APPLICATIONS GENERALLY.—Section 505 of the

11 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) is

12 amended—

13 (1) in subsection (b), by striking paragraph (3)

14 and inserting the following:

15 ‘‘(3) NOTICE OF OPINION THAT PATENT IS INVALID OR

16 WILL NOT BE INFRINGED.—

17 ‘‘(A) AGREEMENT TO GIVE NOTICE.—An appli18 cant that makes a certification described in para19 graph (2)(A)(iv) shall include in the application a

20 statement that the applicant will give notice as re21 quired by this paragraph.

22 ‘‘(B) TIMING OF NOTICE.—An applicant that

23 makes a certification described in paragraph

24 (2)(A)(iv) shall give notice as required under this

25 paragraph—
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1 ‘‘(i) if the certification is in the applica2 tion, not later than 20 days after the date of the

3 postmark on the notice with which the Secretary

4 informs the applicant that the application has

5 been filed; or

6 ‘‘(ii) if the certification is in an amendment

7 or supplement to the application, at the time at

8 which the applicant submits the amendment or

9 supplement, regardless of whether the applicant

10 has already given notice with respect to another

11 such certification contained in the application or

12 in an amendment or supplement to the applica13 tion.

14 ‘‘(C) RECIPIENTS OF NOTICE.—An applicant re15 quired under this paragraph to give notice shall give

16 notice to—

17 ‘‘(i) each owner of the patent that is the

18 subject of the certification (or a representative of

19 the owner designated to receive such a notice);

20 and

21 ‘‘(ii) the holder of the approved application

22 under this subsection for the drug that is claimed

23 by the patent or a use of which is claimed by the

24 patent (or a representative of the holder des25 ignated to receive such a notice).
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1 ‘‘(D) CONTENTS OF NOTICE.—A notice required

2 under this paragraph shall—

3 ‘‘(i) state that an application that contains

4 data from bioavailability or bioequivalence stud5 ies has been submitted under this subsection for

6 the drug with respect to which the certification

7 is made to obtain approval to engage in the com8 mercial manufacture, use, or sale of the drug be9 fore the expiration of the patent referred to in

10 the certification; and

11 ‘‘(ii) include a detailed statement of the fac12 tual and legal basis of the opinion of the appli13 cant that the patent is invalid or will not be in14 fringed.’’; and

15 (2) in subsection (c)(3)—

16 (A) in the first sentence, by striking ‘‘under

17 the following’’ and inserting ‘‘by applying the

18 following to each certification made under sub19 section (b)(2)(A)(iv)’’;

20 (B) in subparagraph (C)—

21 (i) in the first sentence, by striking

22 ‘‘unless’’ and all that follows and inserting

23 ‘‘unless, before the expiration of 45 days

24 after the date on which the notice described

25 in subsection (b)(3) is received, an action is
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1 brought for infringement of the patent that

2 is the subject of the certification and for

3 which information was submitted to the

4 Secretary under paragraph (2) or sub5 section (b)(1) before the date on which the

6 application (excluding an amendment or

7 supplement to the application) was sub8 mitted.’’;

9 (ii) in the second sentence—

10 (I) by striking ‘‘paragraph

11 (3)(B)’’ and inserting ‘‘subsection

12 (b)(3)’’;

13 (II) by striking clause (i) and in14 serting the following:

15 ‘‘(i) if before the expiration of such period

16 the district court decides that the patent is in17 valid or not infringed (including any substantive

18 determination that there is no cause of action for

19 patent infringement or invalidity), the approval

20 shall be made effective on—

21 ‘‘(I) the date on which the court enters

22 judgment reflecting the decision; or

23 ‘‘(II) the date of a settlement order or

24 consent decree signed and entered by the

25 court stating that the patent that is the sub-
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1 ject of the certification is invalid or not in2 fringed;’’;

3 (III) by striking clause (ii) and

4 inserting the following:

5 ‘‘(ii) if before the expiration of such period

6 the district court decides that the patent has been

7 infringed—

8 ‘‘(I) if the judgment of the district

9 court is appealed, the approval shall be

10 made effective on—

11 ‘‘(aa) the date on which the court

12 of appeals decides that the patent is

13 invalid or not infringed (including

14 any substantive determination that

15 there is no cause of action for patent

16 infringement or invalidity); or

17 ‘‘(bb) the date of a settlement

18 order or consent decree signed and en19 tered by the court of appeals stating

20 that the patent that is the subject of the

21 certification is invalid or not in22 fringed; or

23 ‘‘(II) if the judgment of the district

24 court is not appealed or is affirmed, the ap25 proval shall be made effective on the date
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1 specified by the district court in a court

2 order under section 271(e)(4)(A) of title 35,

3 United States Code;’’;

4 (IV) in clause (iii), by striking

5 ‘‘on the date of such court decision.’’

6 and inserting ‘‘as provided in clause

7 (i); or’’; and

8 (V) by inserting after clause (iii),

9 the following:

10 ‘‘(iv) if before the expiration of such period

11 the court grants a preliminary injunction pro12 hibiting the applicant from engaging in the com13 mercial manufacture or sale of the drug until the

14 court decides the issues of patent validity and

15 infringement and if the court decides that such

16 patent has been infringed, the approval shall be

17 made effective as provided in clause (ii).’’; and

18 (iii) in the third sentence, by striking

19 ‘‘paragraph (3)(B)’’ and inserting ‘‘sub20 section (b)(3)’’;

21 (C) by redesignating subparagraph (D) as

22 subparagraph (E); and

23 (D) by inserting after subparagraph (C) the

24 following:
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1 ‘‘(D) CIVIL ACTION TO OBTAIN PATENT CER2 TAINTY.—

3 ‘‘(i) DECLARATORY JUDGMENT ABSENT

4 INFRINGEMENT ACTION.—If an owner of the

5 patent or the holder of the approved appli6 cation under subsection (b) for the drug that

7 is claimed by the patent or a use of which

8 is claimed by the patent does not bring a

9 civil action against the applicant for in10 fringement of the patent on or before the

11 date that is 45 days after the date on which

12 the notice given under subsection (b)(3) was

13 received, the applicant may bring a civil

14 action against the owner or holder (but not

15 against any owner or holder that has

16 brought such a civil action against that ap17 plicant, unless that civil action was dis18 missed without prejudice) for a declaratory

19 judgment under section 2201 of title 28,

20 United States Code, that the patent is in21 valid or will not be infringed by the drug

22 for which the applicant seeks approval.

23 ‘‘(ii) COUNTERCLAIM TO INFRINGE24 MENT ACTION.—
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1 ‘‘(I) IN GENERAL.—If an owner of

2 the patent or the holder of the ap3 proved application under subsection

4 (b) for the drug that is claimed by the

5 patent or a use of which is claimed by

6 the patent brings a patent infringe7 ment action against the applicant, the

8 applicant may assert a counterclaim

9 seeking an order requiring the holder

10 to correct or delete the patent informa11 tion submitted by the holder under sub12 section (b) or this subsection on the

13 ground that the patent does not claim

14 either—

15 ‘‘(aa) the drug for which the

16 application was approved; or

17 ‘‘(bb) an approved method of

18 using the drug.

19 ‘‘(II) NO INDEPENDENT CAUSE OF

20 ACTION.—Subclause (I) does not au21 thorize the assertion of a claim de22 scribed in subclause (I) in any civil

23 action or proceeding other than a

24 counterclaim described in subclause

25 (I).
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1 ‘‘(iii) NO DAMAGES.—An applicant

2 shall not be entitled to damages in a civil

3 action under clause (i) or a counterclaim

4 under clause (ii).’’.

5 (c) INFRINGEMENT ACTIONS.—Section 271(e) of title

6 35, United States Code, is amended by adding at the end

7 the following:

8 ‘‘(5) The filing of an application described in

9 paragraph (2) that includes a certification under sub10 section (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section

11 505 of the Federal Food, Drug, and Cosmetic Act (21

12 U.S.C. 355), and the failure of the owner of the pat13 ent to bring an action for infringement of a patent

14 that is the subject of the certification before the expi15 ration of 45 days after the date on which the notice

16 given under subsection (b)(3) or (j)(2)(B) of that sec17 tion is received, shall establish an actual controversy

18 between the applicant and the patent owner sufficient

19 to confer subject matter jurisdiction in the courts of

20 the United States in any action brought by the appli21 cant under section 2201 of title 28 for a declaratory

22 judgment that any patent that is the subject of the

23 certification is invalid or not infringed.’’.

24 (d) APPLICABILITY.—
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1 (1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), the amendments made by sub3 sections (a), (b), and (c) apply to any proceeding

4 under section 505 of the Federal Food, Drug, and

5 Cosmetic Act (21 U.S.C. 355) that is pending on or

6 after the date of enactment of this Act regardless of

7 the date on which the proceeding was commenced or

8 is commenced.

9 (2) NOTICE OF OPINION THAT PATENT IS IN10 VALID OR WILL NOT BE INFRINGED.—The amend11 ments made by subsections (a)(1) and (b)(1) apply

12 with respect to any certification under subsection

13 (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the

14 Federal Food, Drug, and Cosmetic Act (21 U.S.C.

15 355) after the date of enactment of this Act in an ap16 plication filed under subsection (b)(2) or (j) of that

17 section or in an amendment or supplement to an ap18 plication filed under subsection (b)(2) or (j) of that

19 section.

20 (3) EFFECTIVE DATE OF APPROVAL.—The

21 amendments made by subsections (a)(2)(A)(ii)(I) and

22 (b)(2)(B)(i) apply with respect to any patent infor23 mation submitted under subsection (b)(1) or (c)(2) of

24 section 505 of the Federal Food, Drug, and Cosmetic
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1 Act (21 U.S.C. 355) made after the date of enactment

2 of this Act.

3 SEC. 703. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.

4 (a) IN GENERAL.—Section 505(j)(5) of the Federal

5 Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)) (as

6 amended by section 702) is amended—

7 (1) in subparagraph (B), by striking clause (iv)

8 and inserting the following:

9 ‘‘(iv) 180-DAY EXCLUSIVITY PERIOD.—

10 ‘‘(I) DEFINITIONS.—In this paragraph:

11 ‘‘(aa) 180-DAY EXCLUSIVITY PERIOD.—

12 The term ‘180-day exclusivity period’

13 means the 180-day period ending on the

14 day before the date on which an application

15 submitted by an applicant other than a

16 first applicant could become effective under

17 this clause.

18 ‘‘(bb) FIRST APPLICANT.—The term

19 ‘first applicant’ means an applicant that,

20 on the first day on which a substantially

21 complete application containing a certifi22 cation described in paragraph

23 (2)(A)(vii)(IV) is submitted for approval of

24 a drug, submits a substantially complete

25 application containing a certification de-
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1 scribed in paragraph (2)(A)(vii)(IV) for the

2 drug.

3 ‘‘(cc) SUBSTANTIALLY COMPLETE AP4 PLICATION.—As used in this subsection, the

5 term ‘substantially complete application’

6 means an application under this subsection

7 that on its face is sufficiently complete to

8 permit a substantive review and contains

9 all the information required by paragraph

10 (2)(A).

11 ‘‘(dd) TENTATIVE APPROVAL.—

12 ‘‘(AA) IN GENERAL.—The term

13 ‘tentative approval’ means notification

14 to an applicant by the Secretary that

15 an application under this subsection

16 meets the requirements of paragraph

17 (2)(A), but cannot receive effective ap18 proval because the application does not

19 meet the requirements of this subpara20 graph, there is a period of exclusivity

21 for the listed drug under subparagraph

22 (E) or section 505A, or there is a 7-

23 year period of exclusivity for the listed

24 drug under section 527.
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1 ‘‘(BB) LIMITATION.—A drug that

2 is granted tentative approval by the

3 Secretary is not an approved drug and

4 shall not have an effective approval

5 until the Secretary issues an approval

6 after any necessary additional review

7 of the application.

8 ‘‘(II) EFFECTIVENESS OF APPLICATION.—

9 Subject to subparagraph (D), if the application

10 contains a certification described in paragraph

11 (2)(A)(vii)(IV) and is for a drug for which a

12 first applicant has submitted an application

13 containing such a certification, the application

14 shall be made effective on the date that is 180

15 days after the date of the first commercial mar16 keting of the drug (including the commercial

17 marketing of the listed drug) by any first appli18 cant.’’; and

19 (2) by inserting after subparagraph (C) the fol20 lowing:

21 ‘‘(D) FORFEITURE OF 180-DAY EXCLUSIVITY

22 PERIOD.—

23 ‘‘(i) DEFINITION OF FORFEITURE

24 EVENT.—In this subparagraph, the term

25 ‘forfeiture event’, with respect to an appli-
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1 cation under this subsection, means the oc2 currence of any of the following:

3 ‘‘(I) FAILURE TO MARKET.—The

4 first applicant fails to market the drug

5 by the later of—

6 ‘‘(aa) the earlier of the date

7 that is—

8 ‘‘(AA) 75 days after the

9 date on which the approval

10 of the application of the first

11 applicant is made effective

12 under subparagraph (B)(iii);

13 or

14 ‘‘(BB) 30 months after

15 the date of submission of the

16 application of the first appli17 cant; or

18 ‘‘(bb) with respect to the first

19 applicant or any other applicant

20 (which other applicant has re21 ceived tentative approval), the

22 date that is 75 days after the date

23 as of which, as to each of the pat24 ents with respect to which the first

25 applicant submitted a certifi-
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1 cation qualifying the first appli2 cant for the 180-day exclusivity

3 period under subparagraph

4 (B)(iv), at least 1 of the following

5 has occurred:

6 ‘‘(AA) In an infringe7 ment action brought against

8 that applicant with respect

9 to the patent or in a declara10 tory judgment action brought

11 by that applicant with re12 spect to the patent, a court

13 enters a final decision from

14 which no appeal (other than

15 a petition to the Supreme

16 Court for a writ of certio17 rari) has been or can be

18 taken that the patent is in19 valid or not infringed.

20 ‘‘(BB) In an infringe21 ment action or a declaratory

22 judgment action described in

23 subitem (AA), a court signs a

24 settlement order or consent

25 decree that enters a final
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1 judgment that includes a

2 finding that the patent is in3 valid or not infringed.

4 ‘‘(CC) The patent ex5 pires.

6 ‘‘(DD) The patent is

7 withdrawn by the holder of

8 the application approved

9 under subsection (b).

10 ‘‘(II) WITHDRAWAL OF APPLICA11 TION.—The first applicant withdraws

12 the application or the Secretary con13 siders the application to have been

14 withdrawn as a result of a determina15 tion by the Secretary that the applica16 tion does not meet the requirements for

17 approval under paragraph (4).

18 ‘‘(III) AMENDMENT OF CERTIFI19 CATION.—The first applicant amends

20 or withdraws the certification for all of

21 the patents with respect to which that

22 applicant submitted a certification

23 qualifying the applicant for the 180-

24 day exclusivity period.
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1 ‘‘(IV) FAILURE TO OBTAIN TEN2 TATIVE APPROVAL.—The first appli3 cant fails to obtain tentative approval

4 of the application within 30 months

5 after the date on which the application

6 is filed, unless the failure is caused by

7 a change in or a review of the require8 ments for approval of the application

9 imposed after the date on which the

10 application is filed.

11 ‘‘(V) AGREEMENT WITH ANOTHER

12 APPLICANT, THE LISTED DRUG APPLI13 CATION HOLDER, OR A PATENT

14 OWNER.—The first applicant enters

15 into an agreement with another appli16 cant under this subsection for the drug,

17 the holder of the application for the

18 listed drug, or an owner of the patent

19 that is the subject of the certification

20 under paragraph (2)(A)(vii)(IV), the

21 Federal Trade Commission or the At22 torney General files a complaint, and

23 there is a final decision of the Federal

24 Trade Commission or the court with

25 regard to the complaint from which no
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1 appeal (other than a petition to the

2 Supreme Court for a writ of certiorari)

3 has been or can be taken that the

4 agreement has violated the antitrust

5 laws (as defined in section 1 of the

6 Clayton Act (15 U.S.C. 12), except that

7 the term includes section 5 of the Fed8 eral Trade Commission Act (15 U.S.C.

9 45) to the extent that that section ap10 plies to unfair methods of competition).

11 ‘‘(VI) EXPIRATION OF ALL PAT12 ENTS.—All of the patents as to which

13 the applicant submitted a certification

14 qualifying it for the 180-day exclu15 sivity period have expired.

16 ‘‘(ii) FORFEITURE.—The 180-day ex17 clusivity period described in subparagraph

18 (B)(iv) shall be forfeited by a first appli19 cant if a forfeiture event occurs with respect

20 to that first applicant.

21 ‘‘(iii) SUBSEQUENT APPLICANT.—If all

22 first applicants forfeit the 180-day exclu23 sivity period under clause (ii)—

24 ‘‘(I) approval of any application

25 containing a certification described in
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1 paragraph (2)(A)(vii)(IV) shall be

2 made effective in accordance with sub3 paragraph (B)(iii); and

4 ‘‘(II) no applicant shall be eligible

5 for a 180-day exclusivity period.’’.

6 (b) EFFECTIVE DATE.—

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the amendment made by subsection (a)

9 shall be effective only with respect to an application

10 filed under section 505(j) of the Federal Food, Drug,

11 and Cosmetic Act (21 U.S.C. 355(j)) after the date of

12 enactment of this Act for a listed drug for which no

13 certification under section 505(j)(2)(A)(vii)(IV) of

14 that Act was made before the date of enactment of this

15 Act.

16 (2) COLLUSIVE AGREEMENTS.—If a forfeiture

17 event described in section 505(j)(5)(D)(i)(V) of that

18 Act occurs in the case of an applicant, the applicant

19 shall forfeit the 180-day period under section

20 505(j)(5)(B)(iv) of that Act without regard to when

21 the first certification under section

22 505(j)(2)(A)(vii)(IV) of that Act for the listed drug

23 was made.

24 (3) DECISION OF A COURT WHEN THE 180-DAY

25 EXCLUSIVITY PERIOD HAS NOT BEEN TRIGGERED.—
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1 With respect to an application filed before, on, or

2 after the date of enactment of this Act for a listed

3 drug for which a certification under section

4 505(j)(2)(A)(vii)(IV) of that Act was made before the

5 date of enactment of this Act and for which neither

6 of the events described in subclause (I) or (II) of sec7 tion 505(j)(5)(B)(iv) of that Act (as in effect on the

8 day before the date of enactment of this Act) has oc9 curred on or before the date of enactment of this Act,

10 the term ‘‘decision of a court’’ as used in clause (iv)

11 of section 505(j)(5)(B) of that Act means a final deci12 sion of a court from which no appeal (other than a

13 petition to the Supreme Court for a writ of certio14 rari) has been or can be taken.

15 SEC. 704. BIOAVAILABILITY AND BIOEQUIVALENCE.

16 (a) IN GENERAL.—Section 505(j)(8) of the Federal

17 Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(8)) is

18 amended—

19 (1) by striking subparagraph (A) and inserting

20 the following:

21 ‘‘(A)(i) The term ‘bioavailability’ means the rate

22 and extent to which the active ingredient or thera23 peutic ingredient is absorbed from a drug and be24 comes available at the site of drug action.
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1 ‘‘(ii) For a drug that is not intended to be ab2 sorbed into the bloodstream, the Secretary may assess

3 bioavailability by scientifically valid measurements

4 intended to reflect the rate and extent to which the ac5 tive ingredient or therapeutic ingredient becomes

6 available at the site of drug action.’’; and

7 (2) by adding at the end the following:

8 ‘‘(C) For a drug that is not intended to be ab9 sorbed into the bloodstream, the Secretary may estab10 lish alternative, scientifically valid methods to show

11 bioequivalence if the alternative methods are expected

12 to detect a significant difference between the drug and

13 the listed drug in safety and therapeutic effect.’’.

14 (b) EFFECT OF AMENDMENT.—The amendment made

15 by subsection (a) does not alter the standards for approval

16 of drugs under section 505(j) of the Federal Food, Drug,

17 and Cosmetic Act (21 U.S.C. 355(j)).

18 SEC. 705. REMEDIES FOR INFRINGEMENT.

19 Section 287 of title 35, United States Code, is amended

20 by adding at the end the following:

21 ‘‘(d) CONSIDERATION.—In making a determination

22 with respect to remedy brought for infringement of a patent

23 that claims a drug or a method or using a drug, the court

24 shall consider whether information on the patent was filed

25 as required under 21 U.S.C. 355 (b) or (c), and, if such
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1 information was required to be filed but was not, the court

2 may refuse to award treble damages under section 284.’’.

3 SEC. 706. CONFORMING AMENDMENTS.

4 Section 505A of the Federal Food, Drug, and Cosmetic

5 Act (21 U.S.C. 355a) is amended—

6 (1) in subsections (b)(1)(A)(i) and (c)(1)(A)(i),

7 by striking ‘‘(j)(5)(D)(ii)’’ each place it appears and

8 inserting ‘‘(j)(5)(F)(ii)’’;

9 (2) in subsections (b)(1)(A)(ii) and (c)(1)(A)(ii),

10 by striking ‘‘(j)(5)(D)’’ each place it appears and in11 serting ‘‘(j)(5)(F)’’; and

12 (3) in subsections (e) and (l), by striking

13 ‘‘505(j)(5)(D)’’ each place it appears and inserting

14 ‘‘505(j)(5)(F)’’.

15 TITLE VIII—IMPORTATION OF

16 PRESCRIPTION DRUGS

17 SEC. 801. IMPORTATION OF PRESCRIPTION DRUGS.

18 (a) IN GENERAL.—Chapter VIII of the Federal Food,

19 Drug, and Cosmetic Act (21 U.S.C. 381 et seq.) is amended

20 by striking section 804 and inserting the following:

21 ‘‘SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.

22 ‘‘(a) DEFINITIONS.—In this section:

23 ‘‘(1) IMPORTER.—The term ‘importer’ means a

24 pharmacist or wholesaler.
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1 ‘‘(2) PHARMACIST.—The term ‘pharmacist’

2 means a person licensed by a State to practice phar3 macy, including the dispensing and selling of pre4 scription drugs.

5 ‘‘(3) PRESCRIPTION DRUG.—The term ‘prescrip6 tion drug’ means a drug subject to section 503(b),

7 other than—

8 ‘‘(A) a controlled substance (as defined in

9 section 102 of the Controlled Substances Act (21

10 U.S.C. 802));

11 ‘‘(B) a biological product (as defined in sec12 tion 351 of the Public Health Service Act (42

13 U.S.C. 262));

14 ‘‘(C) an infused drug (including a peri15 toneal dialysis solution);

16 ‘‘(D) an intravenously injected drug; or

17 ‘‘(E) a drug that is inhaled during surgery.

18 ‘‘(4) QUALIFYING LABORATORY.—The term

19 ‘qualifying laboratory’ means a laboratory in the

20 United States that has been approved by the Sec21 retary for the purposes of this section.

22 ‘‘(5) WHOLESALER.—

23 ‘‘(A) IN GENERAL.—The term ‘wholesaler’

24 means a person licensed as a wholesaler or dis-
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1 tributor of prescription drugs in the United

2 States under section 503(e)(2)(A).

3 ‘‘(B) EXCLUSION.—The term ‘wholesaler’

4 does not include a person authorized to import

5 drugs under section 801(d)(1).

6 ‘‘(b) REGULATIONS.—The Secretary, after consultation

7 with the United States Trade Representative and the Com8 missioner of Customs, shall promulgate regulations permit9 ting pharmacists and wholesalers to import prescription

10 drugs from Canada into the United States.

11 ‘‘(c) LIMITATION.—The regulations under subsection

12 (b) shall—

13 ‘‘(1) require that safeguards be in place to ensure

14 that each prescription drug imported under the regu15 lations complies with section 505 (including with re16 spect to being safe and effective for the intended use

17 of the prescription drug), with sections 501 and 502,

18 and with other applicable requirements of this Act;

19 ‘‘(2) require that an importer of a prescription

20 drug under the regulations comply with subsections

21 (d)(1) and (e); and

22 ‘‘(3) contain any additional provisions deter23 mined by the Secretary to be appropriate as a safe24 guard to protect the public health or as a means to

25 facilitate the importation of prescription drugs.
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1 ‘‘(d) INFORMATION AND RECORDS.—

2 ‘‘(1) IN GENERAL.—The regulations under sub3 section (b) shall require an importer of a prescription

4 drug under subsection (b) to submit to the Secretary

5 the following information and documentation:

6 ‘‘(A) The name and quantity of the active

7 ingredient of the prescription drug.

8 ‘‘(B) A description of the dosage form of the

9 prescription drug.

10 ‘‘(C) The date on which the prescription

11 drug is shipped.

12 ‘‘(D) The quantity of the prescription drug

13 that is shipped.

14 ‘‘(E) The point of origin and destination of

15 the prescription drug.

16 ‘‘(F) The price paid by the importer for the

17 prescription drug.

18 ‘‘(G) Documentation from the foreign seller

19 specifying—

20 ‘‘(i) the original source of the prescrip21 tion drug; and

22 ‘‘(ii) the quantity of each lot of the

23 prescription drug originally received by the

24 seller from that source.
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1 ‘‘(H) The lot or control number assigned to

2 the prescription drug by the manufacturer of the

3 prescription drug.

4 ‘‘(I) The name, address, telephone number,

5 and professional license number (if any) of the

6 importer.

7 ‘‘(J)(i) In the case of a prescription drug

8 that is shipped directly from the first foreign re9 cipient of the prescription drug from the manu10 facturer:

11 ‘‘(I) Documentation demonstrating

12 that the prescription drug was received by

13 the recipient from the manufacturer and

14 subsequently shipped by the first foreign re15 cipient to the importer.

16 ‘‘(II) Documentation of the quantity of

17 each lot of the prescription drug received by

18 the first foreign recipient demonstrating

19 that the quantity being imported into the

20 United States is not more than the quantity

21 that was received by the first foreign recipi22 ent.

23 ‘‘(III)(aa) In the case of an initial im24 ported shipment, documentation dem25 onstrating that each batch of the prescrip-
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1 tion drug in the shipment was statistically

2 sampled and tested for authenticity and

3 degradation.

4 ‘‘(bb) In the case of any subsequent

5 shipment, documentation demonstrating

6 that a statistically valid sample of the ship7 ment was tested for authenticity and deg8 radation.

9 ‘‘(ii) In the case of a prescription drug that

10 is not shipped directly from the first foreign re11 cipient of the prescription drug from the manu12 facturer, documentation demonstrating that each

13 batch in each shipment offered for importation

14 into the United States was statistically sampled

15 and tested for authenticity and degradation.

16 ‘‘(K) Certification from the importer or

17 manufacturer of the prescription drug that the

18 prescription drug—

19 ‘‘(i) is approved for marketing in the

20 United States; and

21 ‘‘(ii) meets all labeling requirements

22 under this Act.

23 ‘‘(L) Laboratory records, including complete

24 data derived from all tests necessary to ensure
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1 that the prescription drug is in compliance with

2 established specifications and standards.

3 ‘‘(M) Documentation demonstrating that the

4 testing required by subparagraphs (J) and (L)

5 was conducted at a qualifying laboratory.

6 ‘‘(N) Any other information that the Sec7 retary determines is necessary to ensure the pro8 tection of the public health.

9 ‘‘(2) MAINTENANCE BY THE SECRETARY.—The

10 Secretary shall maintain information and docu11 mentation submitted under paragraph (1) for such

12 period of time as the Secretary determines to be nec13 essary.

14 ‘‘(e) TESTING.—The regulations under subsection (b)

15 shall require—

16 ‘‘(1) that testing described in subparagraphs (J)

17 and (L) of subsection (d)(1) be conducted by the im18 porter or by the manufacturer of the prescription

19 drug at a qualified laboratory;

20 ‘‘(2) if the tests are conducted by the importer—

21 ‘‘(A) that information needed to—

22 ‘‘(i) authenticate the prescription drug

23 being tested; and
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1 ‘‘(ii) confirm that the labeling of the

2 prescription drug complies with labeling re3 quirements under this Act;

4 be supplied by the manufacturer of the prescrip5 tion drug to the pharmacist or wholesaler; and

6 ‘‘(B) that the information supplied under

7 subparagraph (A) be kept in strict confidence

8 and used only for purposes of testing or other9 wise complying with this Act; and

10 ‘‘(3) may include such additional provisions as

11 the Secretary determines to be appropriate to provide

12 for the protection of trade secrets and commercial or

13 financial information that is privileged or confiden14 tial.

15 ‘‘(f) REGISTRATION OF FOREIGN SELLERS.—Any es16 tablishment within Canada engaged in the distribution of

17 a prescription drug that is imported or offered for importa18 tion into the United States shall register with the Secretary

19 the name and place of business of the establishment.

20 ‘‘(g) SUSPENSION OF IMPORTATION.—The Secretary

21 shall require that importations of a specific prescription

22 drug or importations by a specific importer under sub23 section (b) be immediately suspended on discovery of a pat24 tern of importation of that specific prescription drug or by

25 that specific importer of drugs that are counterfeit or in
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1 violation of any requirement under this section, until an

2 investigation is completed and the Secretary determines

3 that the public is adequately protected from counterfeit and

4 violative prescription drugs being imported under sub5 section (b).

6 ‘‘(h) APPROVED LABELING.—The manufacturer of a

7 prescription drug shall provide an importer written author8 ization for the importer to use, at no cost, the approved

9 labeling for the prescription drug.

10 ‘‘(i) PROHIBITION OF DISCRIMINATION.—

11 ‘‘(1) IN GENERAL.—It shall be unlawful for a

12 manufacturer of a prescription drug to discriminate

13 against, or cause any other person to discriminate

14 against, a pharmacist or wholesaler that purchases or

15 offers to purchase a prescription drug from the manu16 facturer or from any person that distributes a pre17 scription drug manufactured by the drug manufac18 turer.

19 ‘‘(2) DISCRIMINATION.—For the purposes of

20 paragraph (1), a manufacturer of a prescription drug

21 shall be considered to discriminate against a phar22 macist or wholesaler if the manufacturer enters into

23 a contract for sale of a prescription drug, places a

24 limit on supply, or employs any other measure, that

25 has the effect of—
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1 ‘‘(A) providing pharmacists or wholesalers

2 access to prescription drugs on terms or condi3 tions that are less favorable than the terms or

4 conditions provided to a foreign purchaser (other

5 than a charitable or humanitarian organization)

6 of the prescription drug; or

7 ‘‘(B) restricting the access of pharmacists or

8 wholesalers to a prescription drug that is per9 mitted to be imported into the United States

10 under this section.

11 ‘‘(j) CHARITABLE CONTRIBUTIONS.—Notwithstanding

12 any other provision of this section, section 801(d)(1) con13 tinues to apply to a prescription drug that is donated or

14 otherwise supplied at no charge by the manufacturer of the

15 drug to a charitable or humanitarian organization (includ16 ing the United Nations and affiliates) or to a government

17 of a foreign country.

18 ‘‘(k) WAIVER AUTHORITY FOR IMPORTATION BY INDI19 VIDUALS.—

20 ‘‘(1) DECLARATIONS.—Congress declares that in

21 the enforcement against individuals of the prohibition

22 of importation of prescription drugs and devices, the

23 Secretary should—
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1 ‘‘(A) focus enforcement on cases in which

2 the importation by an individual poses a signifi3 cant threat to public health; and

4 ‘‘(B) exercise discretion to permit individ5 uals to make such importations in circumstances

6 in which—

7 ‘‘(i) the importation is clearly for per8 sonal use; and

9 ‘‘(ii) the prescription drug or device

10 imported does not appear to present an un11 reasonable risk to the individual.

12 ‘‘(2) WAIVER AUTHORITY.—

13 ‘‘(A) IN GENERAL.—The Secretary may

14 grant to individuals, by regulation or on a case15 by-case basis, a waiver of the prohibition of im16 portation of a prescription drug or device or

17 class of prescription drugs or devices, under such

18 conditions as the Secretary determines to be ap19 propriate.

20 ‘‘(B) GUIDANCE ON CASE-BY-CASE WAIV21 ERS.—The Secretary shall publish, and update

22 as necessary, guidance that accurately describes

23 circumstances in which the Secretary will con24 sistently grant waivers on a case-by-case basis

25 under subparagraph (A), so that individuals
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1 may know with the greatest practicable degree of

2 certainty whether a particular importation for

3 personal use will be permitted.

4 ‘‘(3) DRUGS IMPORTED FROM CANADA.—In par5 ticular, the Secretary shall by regulation grant indi6 viduals a waiver to permit individuals to import into

7 the United States a prescription drug that—

8 ‘‘(A) is imported from a licensed pharmacy

9 for personal use by an individual, not for resale,

10 in quantities that do not exceed a 90-day supply;

11 ‘‘(B) is accompanied by a copy of a valid

12 prescription;

13 ‘‘(C) is imported from Canada, from a sell14 er registered with the Secretary;

15 ‘‘(D) is a prescription drug approved by the

16 Secretary under chapter V;

17 ‘‘(E) is in the form of a final finished dos18 age that was manufactured in an establishment

19 registered under section 510; and

20 ‘‘(F) is imported under such other condi21 tions as the Secretary determines to be necessary

22 to ensure public safety.

23 ‘‘(l) STUDIES; REPORTS.—

24 ‘‘(1) BY THE INSTITUTE OF MEDICINE OF THE

25 NATIONAL ACADEMY OF SCIENCES.—
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1 ‘‘(A) STUDY.—

2 ‘‘(i) IN GENERAL.—The Secretary shall

3 request that the Institute of Medicine of the

4 National Academy of Sciences conduct a

5 study of—

6 ‘‘(I) importations of prescription

7 drugs made under the regulations

8 under subsection (b); and

9 ‘‘(II) information and documenta10 tion submitted under subsection (d).

11 ‘‘(ii) REQUIREMENTS.—In conducting

12 the study, the Institute of Medicine shall—

13 ‘‘(I) evaluate the compliance of

14 importers with the regulations under

15 subsection (b);

16 ‘‘(II) compare the number of ship17 ments under the regulations under sub18 section (b) during the study period

19 that are determined to be counterfeit,

20 misbranded, or adulterated, and com21 pare that number with the number of

22 shipments made during the study pe23 riod within the United States that are

24 determined to be counterfeit, mis25 branded, or adulterated; and
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1 ‘‘(III) consult with the Secretary,

2 the United States Trade Representa3 tive, and the Commissioner of Patents

4 and Trademarks to evaluate the effect

5 of importations under the regulations

6 under subsection (b) on trade and pat7 ent rights under Federal law.

8 ‘‘(B) REPORT.—Not later than 2 years after

9 the effective date of the regulations under sub10 section (b), the Institute of Medicine shall submit

11 to Congress a report describing the findings of

12 the study under subparagraph (A).

13 ‘‘(2) BY THE COMPTROLLER GENERAL.—

14 ‘‘(A) STUDY.—The Comptroller General of

15 the United States shall conduct a study to deter16 mine the effect of this section on the price of pre17 scription drugs sold to consumers at retail.

18 ‘‘(B) REPORT.—Not later than 18 months

19 after the effective date of the regulations under

20 subsection (b), the Comptroller General of the

21 United States shall submit to Congress a report

22 describing the findings of the study under sub23 paragraph (A).

24 ‘‘(m) CONSTRUCTION.—Nothing in this section limits

25 the authority of the Secretary relating to the importation
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1 of prescription drugs, other than with respect to section

2 801(d)(1) as provided in this section.

3 ‘‘(n) EFFECTIVENESS OF SECTION.—

4 ‘‘(1) IN GENERAL.—If, after the date that is 1

5 year after the effective date of the regulations under

6 subsection (b) and before the date that is 18 months

7 after the effective date, the Secretary submits to Con8 gress a certification that, in the opinion of the Sec9 retary, based on substantial evidence obtained after

10 the effective date, the benefits of implementation of

11 this section do not outweigh any detriment of imple12 mentation of this section, this section shall cease to be

13 effective as of the date that is 30 days after the date

14 on which the Secretary submits the certification.

15 ‘‘(2) PROCEDURE.—The Secretary shall not sub16 mit a certification under paragraph (1) unless, after

17 a hearing on the record under sections 556 and 557

18 of title 5, United States Code, the Secretary—

19 ‘‘(A)(i) determines that it is more likely

20 than not that implementation of this section

21 would result in an increase in the risk to the

22 public health and safety;

23 ‘‘(ii) identifies specifically, in qualitative

24 and quantitative terms, the nature of the in25 creased risk;
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1 ‘‘(iii) identifies specifically the causes of the

2 increased risk; and

3 ‘‘(iv)(I) considers whether any measures can

4 be taken to avoid, reduce, or mitigate the in5 creased risk; and

6 ‘‘(II) if the Secretary determines that any

7 measures described in subclause (I) would re8 quire additional statutory authority, submits to

9 Congress a report describing the legislation that

10 would be required;

11 ‘‘(B) identifies specifically, in qualitative

12 and quantitative terms, the benefits that would

13 result from implementation of this section (in14 cluding the benefit of reductions in the cost of

15 covered products to consumers in the United

16 States, allowing consumers to procure needed

17 medication that consumers might not otherwise

18 be able to procure without foregoing other neces19 sities of life); and

20 ‘‘(C)(i) compares in specific terms the det21 riment identified under subparagraph (A) with

22 the benefits identified under subparagraph (B);

23 and

24 ‘‘(ii) determines that the benefits do not out25 weigh the detriment.
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1 ‘‘(o) AUTHORIZATION OF APPROPRIATIONS.—There

2 are authorized to be appropriated such sums as are nec3 essary to carry out this section.’’.

4 (b) CONFORMING AMENDMENTS.—The Federal Food,

5 Drug, and Cosmetic Act is amended—

6 (1) in section 301(aa) (21 U.S.C. 331(aa)), by

7 striking ‘‘covered product in violation of section 804’’

8 and inserting ‘‘prescription drug in violation of sec9 tion 804’’; and

10 (2) in section 303(a)(6) (21 U.S.C. 333(a)(6), by

11 striking ‘‘covered product pursuant to section 804(a)’’

12 and inserting ‘‘prescription drug under section

13 804(b)’’.

14 (c) CONDITIONS.—This section shall become effective

15 only if the Secretary of Health and Human Services cer16 tifies to the Congress that the implementation of this section

17 will—

18 (1) pose no additional risk to the public’s health

19 and safety; and

20 (2) result in a significant reduction in the cost

21 of covered products to the American consumer.
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1 TITLE IX—DRUG COMPETITION

2 ACT OF 2003

3 SEC. 901. SHORT TITLE.

4 This title may be cited as the ‘‘Drug Competition Act

5 of 2003’’.

6 SEC. 902. FINDINGS.

7 Congress finds that—

8 (1) prescription drug prices are increasing at an

9 alarming rate and are a major worry of many senior

10 citizens and American families;

11 (2) there is a potential for companies with pat12 ent rights regarding brand name drugs and compa13 nies which could manufacture generic versions of such

14 drugs to enter into financial deals that could tend to

15 restrain trade and greatly reduce competition and in16 crease prescription drug expenditures for American

17 citizens; and

18 (3) enhancing competition among these compa19 nies can significantly reduce prescription drug ex20 penditures for Americans.

21 SEC. 903. PURPOSES.

22 The purposes of this title are—

23 (1) to provide timely notice to the Department of

24 Justice and the Federal Trade Commission regarding

25 agreements between companies with patent rights re-
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1 garding brand name drugs and companies which

2 could manufacture generic versions of such drugs; and

3 (2) by providing timely notice, to enhance the ef4 fectiveness and efficiency of the enforcement of the

5 antitrust and competition laws of the United States.

6 SEC. 904. DEFINITIONS.

7 In this title:

8 (1) ANDA.—The term ‘‘ANDA’’ means an Ab9 breviated New Drug Application, as defined under

10 section 201(aa) of the Federal Food, Drug, and Cos11 metic Act (21 U.S.C. 321(aa)).

12 (2) ASSISTANT ATTORNEY GENERAL.—The term

13 ‘‘Assistant Attorney General’’ means the Assistant At14 torney General in charge of the Antitrust Division of

15 the Department of Justice.

16 (3) BRAND NAME DRUG.—The term ‘‘brand name

17 drug’’ means a drug approved under section 505(c) of

18 the Federal Food, Drug, and Cosmetic Act (21 U.S.C.

19 355(c)).

20 (4) BRAND NAME DRUG COMPANY.—The term

21 ‘‘brand name drug company’’ means the party that

22 received Food and Drug Administration approval to

23 market a brand name drug pursuant to an NDA,

24 where that drug is the subject of an ANDA, or a

25 party owning or controlling enforcement of any pat-
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1 ent listed in the Approved Drug Products With

2 Therapeutic Equivalence Evaluations of the Food and

3 Drug Administration for that drug, under section

4 505(b) of the Federal Food, Drug, and Cosmetic Act

5 (21 U.S.C. 355(b)).

6 (5) COMMISSION.—The term ‘‘Commission’’

7 means the Federal Trade Commission.

8 (6) GENERIC DRUG.—The term ‘‘generic drug’’

9 means a product that the Food and Drug Adminis10 tration has approved under section 505(j) of the Fed11 eral Food, Drug, and Cosmetic Act (21 U.S.C.

12 355(j)).

13 (7) GENERIC DRUG APPLICANT.—The term ‘‘ge14 neric drug applicant’’ means a person who has filed

15 or received approval for an ANDA under section

16 505(j) of the Federal Food, Drug, and Cosmetic Act

17 (21 U.S.C. 355(j)).

18 (8) NDA.—The term ‘‘NDA’’ means a New Drug

19 Application, as defined under section 505(b) et seq. of

20 the Federal Food, Drug, and Cosmetic Act (21 U.S.C.

21 355(b) et seq.)

22 SEC. 905. NOTIFICATION OF AGREEMENTS.

23 (a) IN GENERAL.—

24 (1) REQUIREMENT.—A generic drug applicant

25 that has submitted an ANDA containing a certifi-
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1 cation under section 505(j)(2)(vii)(IV) of the Federal

2 Food, Drug, and Cosmetic Act (21 U.S.C.

3 355(j)(2)(vii)(IV)) and a brand name drug company

4 that enter into an agreement described in paragraph

5 (2), prior to the generic drug that is the subject of the

6 application entering the market, shall each file the

7 agreement as required by subsection (b).

8 (2) DEFINITION.—An agreement described in

9 this paragraph is an agreement regarding—

10 (A) the manufacture, marketing or sale of

11 the brand name drug that is the subject of the ge12 neric drug applicant’s ANDA;

13 (B) the manufacture, marketing or sale of

14 the generic drug that is the subject of the generic

15 drug applicant’s ANDA; or

16 (C) the 180-day period referred to in section

17 505(j)(5)(B)(iv) of the Federal Food, Drug, and

18 Cosmetic Act (21 U.S.C. 355(j)(5)(B)(iv)) as it

19 applies to such ANDA or to any other ANDA

20 based on the same brand name drug.

21 (b) FILING.—

22 (1) AGREEMENT.—The generic drug applicant

23 and the brand name drug company entering into an

24 agreement described in subsection (a)(2) shall file

25 with the Assistant Attorney General and the Commis-
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1 sion the text of any such agreement, except that the

2 generic drug applicant and the brand-name drug

3 company shall not be required to file an agreement

4 that solely concerns—

5 (A) purchase orders for raw material sup6 plies;

7 (B) equipment and facility contracts;

8 (C) employment or consulting contracts; or

9 (D) packaging and labeling contracts.

10 (2) OTHER AGREEMENTS.—The generic drug ap11 plicant and the brand name drug company entering

12 into an agreement described in subsection (a)(2) shall

13 file with the Assistant Attorney General and the Com14 mission the text of any other agreements not described

15 in subsection (a)(2) between the generic drug appli16 cant and the brand name drug company which are

17 contingent upon, provide a contingent condition for,

18 or are otherwise related to an agreement which must

19 be filed under this title.

20 (3) DESCRIPTION.—In the event that any agree21 ment required to be filed by paragraph (1) or (2) has

22 not been reduced to text, both the generic drug appli23 cant and the brand name drug company shall file

24 written descriptions of the non-textual agreement or
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1 agreements that must be filed sufficient to reveal all

2 of the terms of the agreement or agreements.

3 SEC. 906. FILING DEADLINES.

4 Any filing required under section 5 shall be filed with

5 the Assistant Attorney General and the Commission not

6 later than 10 business days after the date the agreements

7 are executed.

8 SEC. 907. DISCLOSURE EXEMPTION.

9 Any information or documentary material filed with

10 the Assistant Attorney General or the Commission pursuant

11 to this title shall be exempt from disclosure under section

12 552 of title 5, and no such information or documentary ma13 terial may be made public, except as may be relevant to

14 any administrative or judicial action or proceeding. Noth15 ing in this section is intended to prevent disclosure to either

16 body of Congress or to any duly authorized committee or

17 subcommittee of the Congress.

18 SEC. 908. ENFORCEMENT.

19 (a) CIVIL PENALTY.—Any brand name drug company

20 or generic drug applicant which fails to comply with any

21 provision of this title shall be liable for a civil penalty of

22 not more than $11,000, for each day during which such en23 tity is in violation of this title. Such penalty may be recov24 ered in a civil action brought by the United States, or

25 brought by the Commission in accordance with the proce-
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1 dures established in section 16(a)(1) of the Federal Trade

2 Commission Act (15 U.S.C. 56(a)).

3 (b) COMPLIANCE AND EQUITABLE RELIEF.—If any

4 brand name drug company or generic drug applicant fails

5 to comply with any provision of this title, the United States

6 district court may order compliance, and may grant such

7 other equitable relief as the court in its discretion deter8 mines necessary or appropriate, upon application of the As9 sistant Attorney General or the Commission.

10 SEC. 909. RULEMAKING.

11 The Commission, with the concurrence of the Assistant

12 Attorney General and by rule in accordance with section

13 553 of title 5 United States Code, consistent with the pur14 poses of this title—

15 (1) may define the terms used in this title;

16 (2) may exempt classes of persons or agreements

17 from the requirements of this title; and

18 (3) may prescribe such other rules as may be

19 necessary and appropriate to carry out the purposes

20 of this title.

21 SEC. 910. SAVINGS CLAUSE.

22 Any action taken by the Assistant Attorney General

23 or the Commission, or any failure of the Assistant Attorney

24 General or the Commission to take action, under this title

25 shall not bar any proceeding or any action with respect
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1 to any agreement between a brand name drug company and

2 a generic drug applicant at any time under any other pro3 vision of law, nor shall any filing under this title constitute

4 or create a presumption of any violation of any antitrust

5 or competition laws.

6 SEC. 911. EFFECTIVE DATE.

7 This title shall—

8 (1) take effect 30 days after the date of enact9 ment of this title; and

10 (2) shall apply to agreements described in section

11 905 that are entered into 30 days after the date of en12 actment of this title.

Amend the title so as to read: ‘‘An Act to amend

title XVIII of the Social Security Act to provide for a voluntary prescription drug benefit under the medicare program and to strengthen and improve the medicare program, and for other purposes.’’.

Attest:

Secretary.
108TH CONGRESS

1ST SESSION H. R. 1

AMENDMENTS