I 

108TH CONGRESS 

1ST SESSION H. R. 2469

To amend the Social Security Act to modify the Medicare Program. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 12, 2003

Mr. TERRY (for himself, Mr. TANCREDO, Mrs. MUSGRAVE, Mr. SESSIONS, Mr. 

MANZULLO, and Mr. JENKINS) introduced the following bill; which was 

referred to the Committee on Ways and Means, and in addition to the 

Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions 

as fall within the jurisdiction of the committee concerned 

A BILL

To amend the Social Security Act to modify the Medicare 

Program.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Medicare Reform Act of 2003’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Establishment of Medicare premium support system. 
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‘‘TITLE XXII—ESTABLISHMENT OF MEDICARE PREMIUM 

SUPPORT SYSTEM 

‘‘Sec. 2200. Construction; references; general definitions. 

‘‘PART A—PREMIUM SUPPORT SYSTEM

‘‘Sec. 2201. Offering of benefits through Medicare plans. 

‘‘Sec. 2202. Standard and high option Medicare plans. 

‘‘Sec. 2203. Submission of benefit packages and premium rates for Medicare plans. 

‘‘Sec. 2204. Government contribution toward coverage and beneficiary premium. 

‘‘Sec. 2205. Subsidized premiums for low-income individuals to enroll in 

high option Medicare plans. 

‘‘Sec. 2206. Relation to certain laws; treatment of current plans. 

‘‘PART B—MEDICARE TRUST FUND

‘‘Sec. 2211. Medicare Trust Fund. 

‘‘Sec. 2212. Programmatic insolvency and limitation on general revenue financing. 

Sec. 3. Conforming amendments to the Internal Revenue Code of 1986.

1 SEC. 2. ESTABLISHMENT OF MEDICARE PREMIUM SUP2 PORT SYSTEM. 

3 The Social Security Act is amended by adding at the 

4 end the following: 

5 ‘‘TITLE XXII—ESTABLISHMENT OF MEDICARE 

6 PREMIUM SUPPORT SYSTEM 

7 ‘‘SEC. 2200. CONSTRUCTION; REFERENCES; GENERAL DEFI8 NITIONS. 

9 ‘‘(a) CONSTRUCTION OF TITLE.—The provisions of 

10 this title shall be construed to modify and supersede the 

11 provisions and operation of title XVIII to the extent such 

12 provisions are inconsistent with the provisions of this title. 

13 ‘‘(b) REFERENCES TO MEDICARE PROVISIONS.—Any 

14 reference in any law or regulation (other than in this title) 

15 to any provision of title XVIII is deemed a reference to 
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1 such provision as modified through the operation of this 

2 title. 

3 ‘‘(c) DEFINITIONS RELATING TO MEDICARE

4 PLANS.—

5 ‘‘(1) MEDICARE PLAN.—The term ‘Medicare 

6 plan’ means a health benefits plan which the Sec7 retary permits to be offered by an entity that is li8 censed under State law to provide health benefits 

9 plans in the State involved to Medicare beneficiaries 

10 under this title. 

11 ‘‘(2) HIGH OPTION MEDICARE PLAN.—The term 

12 ‘high option Medicare plan’ means a Medicare plan 

13 that includes stop loss coverage consistent with sec14 tion 2202(b). 

15 ‘‘(3) STANDARD MEDICARE PLAN.—The term 

16 ‘standard Medicare plan’ means a Medicare plan 

17 that is not a high option Medicare plan. 

18 ‘‘(4) FEHBP.—The term ‘FEHBP’ means the 

19 Federal Employees Health Benefits program under 

20 chapter 89 of title 5, United States Code. 

21 ‘‘(d) OTHER GENERAL DEFINITIONS.—For purposes 

22 of this title: 

23 ‘‘(1) MEDICARE BENEFICIARY.—The term 

24 ‘Medicare beneficiary’ means an individual entitled 
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1 to benefits under part A of title XVIII, enrolled for 

2 benefits under part B of such title, or both. 

3 ‘‘(2) MEDICARE TRUST FUND.—The term 

4 ‘Medicare Trust Fund’ means such trust fund as es5 tablished under section 2211.

6 ‘‘PART A—PREMIUM SUPPORT SYSTEM

7 ‘‘SEC. 2201. OFFERING OF BENEFITS THROUGH MEDICARE 

8 PLANS. 

9 ‘‘(a) ELECTION OF COVERAGE THROUGH A MEDI10 CARE PLAN.—

11 ‘‘(1) CONTINUED ENTITLEMENT TO MEDICARE

12 BENEFITS.—Effective January 1, 2008, in accord13 ance with this title, Medicare beneficiaries shall con14 tinue to be entitled to receive benefits under title 

15 XVIII (as modified by this title) and with respect to 

16 medicare beneficiaries first eligible for benefits on or 

17 after January 1, 2008, shall only receive such bene18 fits through enrollment in a Medicare plan. 

19 ‘‘(2) ELECTION FOR CERTAIN MEDICARE BENE20 FICIARIES TO RETAIN CURRENT MEDICARE BENE21 FITS PROGRAM.—In the case of a medicare bene22 ficiary who was first eligible for benefits under title 

23 XVIII before January 1, 2008, such beneficiaries 

24 may make a one-time, irrevocable election, in a form 

25 and manner determined by the Secretary to continue 
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1 to receive benefits for items and services for which 

2 payment may be made under title XVIII. 

3 ‘‘(3) ENROLLMENT PROCESS.—The Secretary 

4 shall establish a process for the enrollment of Medi5 care beneficiaries under Medicare plans that is 

6 based, except as the Secretary may provide, upon 

7 the process for enrollment for health plans under 

8 FEHBP, including provision of information and 

9 open enrollment and disenrollment opportunities. 

10 ‘‘(4) CONTRACT PERIOD.—Each contract under 

11 this part with an entity offering a Medicare plan 

12 shall be for a term of at least 2 years, as determined 

13 by the Secretary, and may be made automatically re14 newable from term to term in the absence of notice 

15 by either party of intention to terminate at the end 

16 of the current term. 

17 ‘‘(5) PLAN PERIOD.—The plan period for a 

18 Medicare plan offered by an entity with a contract 

19 under paragraph (4) shall be a term of 2 years. 

20 ‘‘(b) BENEFICIARY PROTECTIONS AND OTHER

21 QUALIFICATIONS FOR MEDICARE PLANS.—In order to be 

22 offered as a Medicare plan under this part, except as pro23 vided in this title, the plan and the entity offering the plan 

24 shall meet the requirements applicable to health benefits 

25 plans and qualified carriers under FEHBP, including—
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1 ‘‘(1) the offering and scope of benefits; 

2 ‘‘(2) protections for beneficiaries enrolled in the 

3 plans; and 

4 ‘‘(3) requirements for financial solvency. 

5 ‘‘(c) SELECTION OF PLANS.—

6 ‘‘(1) IN GENERAL.—With respect to each plan 

7 period under subsection (a)(5), a medicare bene8 ficiary shall be deemed to have elected to remain en9 rolled in the medicare plan in which the beneficiary 

10 was enrolled during the prior plan period. 

11 ‘‘(2) DEFAULT.—In the case of a medicare ben12 eficiary who fails to enroll in a medicare plan for a 

13 plan period, the Secretary shall provide for enroll14 ment of the beneficiary under a medicare plan of15 fered in the State in which the beneficiary resides 

16 that the Secretary determines to be appropriate. 

17 ‘‘(d) EXCLUSIVE PAYMENT METHODOLOGY.—Except 

18 as provided in subsection (a)(2) and other provisions of 

19 this title, for items and services furnished on or after Jan20 uary 1, 2008—

21 ‘‘(1) payment to an entity offering a Medicare 

22 plan in the amounts provided under this title shall 

23 be instead of any amounts that may be otherwise 

24 payable under title XVIII; and 
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1 ‘‘(2) only the entity offering the Medicare plan 

2 is eligible to receive payment for items and services 

3 under such title. 

4 ‘‘SEC. 2202. STANDARD AND HIGH OPTION MEDICARE 

5 PLANS. 

6 ‘‘(a) BENEFITS UNDER STANDARD PLANS.—Subject 

7 to section 2203(b)(2), the Secretary may approve benefits 

8 submitted under section 2203(a)(1) with respect to a 

9 standard plan only if the plan include benefits for the 

10 items and services described in subsection (d). 

11 ‘‘(b) BENEFITS UNDER HIGH OPTION PLANS.—The 

12 Secretary may approve the benefits submitted under sec13 tion 2203(a)(1) with respect to a high option Medicare 

14 plan only if the plan includes benefits required for a stand15 ard plan under subsection (a) and also includes—

16 ‘‘(1) rates of beneficiary deductible, cost-shar17 ing, and coinsurance requirements that are lower 

18 than such rates applicable under standard plans 

19 under subsection (a); and 

20 ‘‘(2) stop-loss coverage benefits that are de21 signed to limit the application of beneficiary cost22 sharing for covered benefits in a year after incurring 

23 out-of-pocket covered expenditures that exceed a 

24 limit applicable to health benefits plans under 

25 FEHBP. 
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1 ‘‘(c) REQUIREMENT TO OFFER HIGH OPTION MEDI2 CARE PLAN.—The Secretary may not approve the offering 

3 of a standard Medicare plan by an entity under this title 

4 in an area unless the entity also offers a high option Medi5 care plan in that area that the Secretary approves under 

6 this title. 

7 ‘‘(d) BENEFITS DESCRIBED.—For purposes of this 

8 part, a Medicare plan shall provide for coverage for the 

9 following items and services that are medically necessary 

10 and appropriate: 

11 ‘‘(1) Hospital services, including inpatient, out12 patient, and 24-hour a day emergency services. 

13 ‘‘(2) Services of health professionals, such as 

14 physicians services and services that would be physi15 cians services if furnished by a physician but are 

16 provided by any other licensed health care profes17 sional. 

18 ‘‘(3) Emergency and ambulatory medical and 

19 surgical services furnished by a facility that is not 

20 a hospital. 

21 ‘‘(4) Clinical preventive services. 

22 ‘‘(5) Services for pregnant women. 

23 ‘‘(6) Hospice care. 

24 ‘‘(7) Home health care and home infusion drug 

25 therapy services. 
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1 ‘‘(8) Extended care services, as defined in sec2 tion 1861(h). 

3 ‘‘(9) Ambulance services, including ground, air, 

4 and water transportation, as appropriate. 

5 ‘‘(10) Outpatient laboratory, radiology, and di6 agnostic services. 

7 ‘‘(11) Outpatient prescription drugs and 

8 biologicals. 

9 ‘‘(12) Outpatient rehabilitation services, includ10 ing outpatient occupational therapy, physical ther11 apy, and speech pathology services. 

12 ‘‘(13) Durable medical equipment and pros13 thetic and orthotic devices. 

14 ‘‘(14) Vision care, to the same extent such serv15 ices are a covered benefit under title XVIII as of the 

16 date of the enactment of this Act. 

17 ‘‘(e) SCOPE OF BENEFITS.—Each Medicare plan 

18 shall establish the scope of benefits applicable under the 

19 plan, subject to approval by the Secretary, including the 

20 scope of outpatient prescription drugs under the plan, any 

21 formulary restrictions for such drugs, and any copayment 

22 structure under such formulary (if any). 

23 ‘‘(f) PAPERWORK REDUCTION.—Each Medicare plan 

24 shall comply with the provisions of part C of title XI, relat25 ing to administrative simplification and paperwork reduc-
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1 tion with respect to health care transactions for health 

2 care providers submitting claims to health plans. 

3 ‘‘(g) LICENSURE.—Each entity offering a Medicare 

4 plan shall be licensed under State law to provide health 

5 benefits plans in the State. 

6 ‘‘SEC. 2203. SUBMISSION OF BENEFIT PACKAGES AND PRE7 MIUM RATES FOR MEDICARE PLANS. 

8 ‘‘(a) IN GENERAL.—Each entity that intends to offer 

9 a Medicare plan in a year (beginning with 2008) in a State 

10 shall submit to the Secretary, at such time (before the be11 ginning of each open enrollment period for each year) and 

12 in such manner as the Secretary specifies, such informa13 tion as the Secretary may require to carry out title XVIII 

14 (as modified by this title). Such information shall include 

15 information on each of the following: 

16 ‘‘(1) BENEFITS.—A description of the benefits 

17 under the plan. 

18 ‘‘(2) PREMIUM BID.—The premium proposed to 

19 be charged for enrollment under the plan. 

20 ‘‘(b) REVIEW AND APPROVAL BY SECRETARY.—

21 ‘‘(1) IN GENERAL.—The Secretary shall review 

22 the benefits and premium bids submitted under sub23 section (a). 

24 ‘‘(2) AUTHORITY TO NEGOTIATE.—The Sec25 retary may negotiate with the entities offering such 
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1 plans regarding such terms and conditions but may 

2 approve such a submission only if the Secretary 

3 finds that it complies with the requirements of this 

4 section and section 2202. The terms and conditions 

5 with respect to which the Secretary may negotiate 

6 include—

7 ‘‘(A) the scope of benefits offered under 

8 the plan; 

9 ‘‘(B) the premium bid for the benefits so 

10 offered; and 

11 ‘‘(C) the assumptions of the entities offer12 ing the plan with respect to cost, risk, geo13 graphic variation, and projected number of en14 rollees. 

15 ‘‘(3) SPECIAL RULE FOR HIGH OPTION MEDI16 CARE PLANS.—If information is submitted to estab17 lish that a Medicare plan is a high option Medicare 

18 plan, the Secretary shall determine whether or not 

19 the plan meets the requirements to be a high option 

20 Medicare plan. 

21 ‘‘(4) BENEFIT APPROVAL.—Subject to section 

22 2202, the following applies to approval by the Sec23 retary of benefits submitted under subsection (a)(1): 

24 ‘‘(A) IN GENERAL.—The Secretary may 

25 approve benefits submitted under subsection 
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1 (a)(1) only if the benefits are not designed in 

2 such a manner that the Secretary finds that it 

3 is likely to result in favorable selection of bene4 ficiaries. 

5 ‘‘(B) VARIATION IN COST-SHARING.—For 

6 purposes of meeting the requirement of section 

7 2202, the Secretary shall permit reasonable 

8 variation in cost-sharing so long as actuarial 

9 equivalence of total cost-sharing for the benefits 

10 described in such section is maintained. Noth11 ing in this subparagraph shall be construed as 

12 preventing a Medicare plan from providing, as 

13 an additional benefit, a lower level of cost-shar14 ing from that otherwise described in title XVIII 

15 (as modified by this title). 

16 ‘‘(5) PREMIUM APPROVAL.—The Secretary may 

17 approve premiums submitted under subsection (a)(2) 

18 only if the Secretary finds that the premium rates 

19 are adequate in terms of actuarial soundness to as20 sure the financial solvency of the entity offering the 

21 plan. 

22 ‘‘(6) STATEWIDE SERVICE AREA.—

23 ‘‘(A) IN GENERAL.—Except as provided in 

24 subparagraph (B), for purposes of this title, a 
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1 State shall be the service area for a Medicare 

2 plan. 

3 ‘‘(B) DISCRETION TO ESTABLISH

4 MULTISTATE AREAS.—If the Secretary deter5 mines that medicare plans will not be offered in 

6 a State for a plan period, the Secretary may 

7 provide for a multistate service area to ensure 

8 the offering of such plans in such State during 

9 such plan period. 

10 ‘‘(c) PROVIDING INFORMATION TO PROMOTE IN11 FORMED CHOICE.—The Secretary shall provide for activi12 ties to broadly disseminate information to medicare bene13 ficiaries (and prospective medicare beneficiaries) on the 

14 coverage options under medicare plans provided under this 

15 title in order to promote an active, informed selection 

16 among such options. 

17 ‘‘SEC. 2204. GOVERNMENT CONTRIBUTION TOWARD COV18 ERAGE AND BENEFICIARY PREMIUM. 

19 ‘‘(a) PREMIUM SUPPORT PAYMENT BY GOVERN20 MENT.—Except as provided in subsection (d), the amount 

21 of payment to an entity offering a Medicare plan in a 

22 State for a Medicare beneficiary (other than a qualified 

23 low-income Medicare beneficiary, as defined in section 

24 2115(a)) residing in the State who is enrolled in the plan 

25 for a year is equal to the bid amount determined or nego-
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1 tiated, as the case may be, by the Secretary under section 

2 2203. 

3 ‘‘(b) COMPUTATION AND COLLECTION OF BENE4 FICIARY PREMIUM.—

5 ‘‘(1) COMPUTATION OF TOTAL BENEFICIARY

6 PREMIUM.—

7 ‘‘(A) IN GENERAL.—For purposes of this 

8 section, the amount of the total beneficiary pre9 mium for a Medicare beneficiary enrolled in a 

10 Medicare plan is equal 30 percent (or in the 

11 case of an individual to whom subsection (c) ap12 plies, the means-tested premium percentage de13 termined under such subsection) of the amount 

14 of payment to the entity offering the Medicare 

15 plan under subsection (a). 

16 ‘‘(B) NO APPLICATION TO QUALIFIED

17 LOW-INCOME MEDICARE BENEFICIARIES.—For 

18 provisions relating to computation of bene19 ficiary premiums for qualified low-income Medi20 care beneficiaries, see section 2205(b).

21 ‘‘(2) COLLECTION OF AMOUNT IN SAME MAN22 NER AS PART B PREMIUM.—

23 ‘‘(A) IN GENERAL.—The amount of the 

24 total beneficiary premium under paragraph (1) 

25 shall be paid to the Medicare Trust Fund in the 
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1 same manner as monthly premiums under part 

2 B of title XVIII were payable to the credit of 

3 the Federal Supplementary Medical Insurance 

4 Trust Fund under section 1840 (as in effect as 

5 of the date of the enactment of this title). 

6 ‘‘(B) COLLECTION.—In order to carry out 

7 subparagraph (A), the Secretary shall transmit 

8 to the Commissioner of Social Security—

9 ‘‘(i) at the beginning of each year, in10 formation on the name, social security ac11 count number, and the total beneficiary 

12 premium owed by each individual enrolled 

13 in a Medicare plan for months in the year; 

14 and 

15 ‘‘(ii) periodically throughout the year, 

16 information to update the information pre17 viously transmitted under this subpara18 graph during the year. 

19 ‘‘(c) MEANS-TESTED PREMIUM PERCENTAGE.—

20 ‘‘(1) INCREASE IN PREMIUM AMOUNT.—

21 ‘‘(A) IN GENERAL.—Subject to subpara22 graph (B), in the case of an Medicare bene23 ficiary whose modified adjusted gross income 

24 for a taxable year ending with or within a cal25 endar year (as initially determined by the Sec-
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1 retary in accordance with paragraph (2)) is 

2 equal to or greater than 300 percent of the offi3 cial poverty line (referred to in section 

4 1905(p)(2)(A)), the Secretary shall increase the 

5 amount of the total beneficiary premium under 

6 subsection (b) for months in the calendar year 

7 by 10 percent for each multiple of 100 percent 

8 by which such individual’s income exceeds 200 

9 percent of such poverty line. 

10 ‘‘(B) UPPER LIMIT ON PREMIUM

11 AMOUNT.—In no case may the application of 

12 subparagraph (A) result in a premium contribu13 tion amount under subsection (b) of greater 

14 than 70 percent of the amount of payment to 

15 the entity offering the Medicare plan under sub16 section (a). 

17 ‘‘(2) DETERMINATION OF INCOME.—The Sec18 retary shall make an initial determination of the 

19 amount of an individual’s modified adjusted gross 

20 income for a taxable year ending with or within a 

21 calendar year for purposes of this subsection as fol22 lows: 

23 ‘‘(A) SECRETARY’S ESTIMATE OF

24 AMOUNT.—Not later than September 1 of the 

25 year preceding the year, the Secretary shall 
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1 provide notice to each individual whom the Sec2 retary finds (on the basis of the individual’s ac3 tual modified adjusted gross income for the 

4 most recent taxable year for which such infor5 mation is available or other information pro6 vided to the Secretary by the Secretary of the 

7 Treasury) will be subject to an increase under 

8 this subsection that the individual will be sub9 ject to such an increase, and shall include in 

10 such notice the Secretary’s estimate of the indi11 vidual’s modified adjusted gross income for the 

12 year. 

13 ‘‘(B) MODIFICATION OF SECRETARY’S ES14 TIMATE.—If, during the 30-day period begin15 ning on the date notice is provided to an indi16 vidual under subparagraph (A), the individual 

17 provides the Secretary with information on the 

18 individual’s anticipated modified adjusted gross 

19 income for the year, the amount initially deter20 mined by the Secretary under this paragraph 

21 with respect to the individual shall be based on 

22 the information provided by the individual. 

23 ‘‘(C) DEFAULT INCOME AMOUNT.—If an 

24 individual does not provide the Secretary with 

25 information under subparagraph (B), the 
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1 amount initially determined by the Secretary 

2 under this paragraph with respect to the indi3 vidual shall be the amount included in the no4 tice provided to the individual under subpara5 graph (A). 

6 ‘‘(3) ADJUSTMENT OF PREMIUMS TO ACCOUNT

7 FOR MISESTIMATION.—

8 ‘‘(A) IN GENERAL.—If the Secretary deter9 mines (on the basis of final information pro10 vided by the Secretary of the Treasury) that 

11 the amount of an individual’s actual modified 

12 adjusted gross income for a taxable year ending 

13 with or within a calendar year is less than or 

14 greater than the amount initially determined by 

15 the Secretary under paragraph (3), the Sec16 retary shall increase or decrease the amount of 

17 the individual’s monthly premium under this 

18 section (as the case may be) for months during 

19 the following calendar year by an amount equal 

to 1 20 ⁄12 of the difference between—

21 ‘‘(i) the total amount of all monthly 

22 premiums paid by the individual under this 

23 section during the previous calendar year; 

24 and 
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1 ‘‘(ii) the total amount of all such pre2 miums which would have been paid by the 

3 individual during the previous calendar 

4 year if the amount of the individual’s 

5 modified adjusted gross income initially de6 termined under paragraph (3) were equal 

7 to the actual amount of the individual’s 

8 modified adjusted gross income determined 

9 under this paragraph. 

10 ‘‘(B) APPLICATION OF INTEREST

11 CHARGE.—

12 ‘‘(i) IN GENERAL.—In the case of an 

13 individual for whom the amount initially 

14 determined by the Secretary under para15 graph (3) is based on information provided 

16 by the individual under subparagraph (B) 

17 of such paragraph, if the Secretary deter18 mines under subparagraph (A) that the 

19 amount of the individual’s actual modified 

20 adjusted gross income for a taxable year is 

21 greater than the amount initially deter22 mined under paragraph (3), the Secretary 

23 shall increase the amount otherwise deter24 mined for the year under subparagraph 

25 (A) by interest in an amount equal to the 
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1 sum of the amounts determined under 

2 clause (ii) for each of the months described 

3 in clause (ii). 

4 ‘‘(ii) COMPUTATION OF INTEREST

5 CHARGE.—Interest shall be computed for 

6 any month in an amount determined by 

7 applying the underpayment rate estab8 lished under section 6621 of the Internal 

9 Revenue Code of 1986 (compounded daily) 

10 to any portion of the difference between 

11 the amount initially determined under 

12 paragraph (3) and the amount determined 

13 under subparagraph (A) for the period be14 ginning on the first day of the month be15 ginning after the individual provided infor16 mation to the Secretary under subpara17 graph (B) of paragraph (3) and ending 30 

18 days before the first month for which the 

19 individual’s monthly premium is increased 

20 under this paragraph. 

21 ‘‘(iii) WAIVER OF INTEREST

22 CHARGE.—Interest shall not be imposed 

23 under this subparagraph if the amount of 

24 the individual’s modified adjusted gross in25 come provided by the individual under sub-
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1 paragraph (B) of paragraph (3) was not 

2 less than the individual’s modified adjusted 

3 gross income determined on the basis of 

4 information shown on the return of tax im5 posed by chapter 1 of the Internal Revenue 

6 Code of 1986 for the taxable year involved. 

7 ‘‘(C) ENROLLMENT DURING A PORTION OF

8 THE YEAR.—In the case of an individual who is 

9 not enrolled under this part for any calendar 

10 year for which the individual’s monthly pre11 mium under this section for months during the 

12 year would be increased pursuant to subpara13 graph (A) if the individual were enrolled under 

14 this part for the year, the Secretary may take 

15 such steps as the Secretary considers appro16 priate to recover from the individual the total 

17 amount by which the individual’s monthly pre18 mium for months during the year would have 

19 been increased under subparagraph (A) if the 

20 individual were enrolled under this part for the 

21 year. 

22 ‘‘(D) PAYMENTS TO SURVIVING SPOUSE

23 FOR ENROLLEES WHO DIE DURING THE

24 YEAR.—In the case of a deceased individual for 

25 whom the amount of the monthly premium 
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1 under this section for months in a year would 

2 have been decreased pursuant to subparagraph 

3 (A) if the individual were not deceased, the Sec4 retary shall make a payment to the individual’s 

5 surviving spouse (or, in the case of an indi6 vidual who does not have a surviving spouse, to 

7 the individual’s estate) in an amount equal to 

8 the difference between—

9 ‘‘(i) the total amount by which the in10 dividual’s premium would have been de11 creased for all months during the year pur12 suant to subparagraph (A); and 

13 ‘‘(ii) the amount (if any) by which the 

14 individual’s premium was decreased for 

15 months during the year pursuant to sub16 paragraph (A). 

17 ‘‘(4) MODIFIED ADJUSTED GROSS INCOME DE18 FINED.—In this subsection, the term ‘modified ad19 justed gross income’ means adjusted gross income 

20 (as defined in section 62 of the Internal Revenue 

21 Code of 1986)—

22 ‘‘(A) determined without regard to sections 

23 135, 911, 931, and 933 of such Code, and 

24 ‘‘(B) increased by the amount of interest 

25 received or accrued by the taxpayer during the 
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1 taxable year which is exempt from tax under 

2 such Code. 

3 ‘‘(d) PAYMENT TERMS.—Payment under this section 

4 or section 2205(c) to an entity offering a Medicare plan 

5 shall be made in a manner determined by the Secretary 

6 and based upon the manner in which payments are made 

7 to qualified carriers under FEHBP for health benefits 

8 plans. 

9 ‘‘(e) SPECIAL ADJUSTMENT FOR MEDICARE BENE10 FICIARIES WITH END-STAGE RENAL DISEASE.—

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

12 the amount of payment to an entity offering a Medi13 care plan for a Medicare beneficiary under sub14 section (a) shall be increased by 20 percent for each 

15 Medicare beneficiary who is diagnosed with end16 stage renal disease. 

17 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

18 apply to a Medicare beneficiary who develops end19 stage renal disease while enrolled in a Medicare 

20 plan. 

21 ‘‘SEC. 2205. SUBSIDIZED PREMIUMS FOR LOW-INCOME INDI22 VIDUALS TO ENROLL IN HIGH OPTION MEDI23 CARE PLANS. 

24 ‘‘(a) QUALIFIED LOW-INCOME MEDICARE BENE25 FICIARY DEFINED.—
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1 ‘‘(1) IN GENERAL.—For purposes of this part, 

2 the term ‘qualified low-income Medicare beneficiary’ 

3 means a Medicare beneficiary whose income (as de4 termined for purposes of section 1905(p)) does not 

5 exceed 200 percent of the official poverty line (re6 ferred to in paragraph (2)(A) of such section) appli7 cable to a family of the size involved and who is en8 rolled in a high option Medicare plan. 

9 ‘‘(2) ANNUAL ELIGIBILITY DETERMINATION BY

10 STATES.—The Secretary shall establish an arrange11 ment with each State (as defined under section 

12 1861(x) for purposes of title XVIII) under which the 

13 State provides for the determination of whether a 

14 Medicare beneficiary in the State is a qualified low15 income Medicare beneficiary. A determination that a 

16 Medicare beneficiary is a qualified low-income Medi17 care beneficiary shall remain valid for a period of 12 

18 months but is conditioned upon continuing enroll19 ment in a high option Medicare plan. 

20 ‘‘(b) PAYMENT BY GOVERNMENT ON BEHALF OF

21 QUALIFIED LOW-INCOME MEDICARE BENEFICIARIES.—

22 ‘‘(1) AMOUNT.—The amount of payment to an 

23 entity offering a Medicare plan for a qualified low24 income Medicare beneficiary who is enrolled in the 

25 plan for a year is equal to—
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1 ‘‘(A) in the case of a plan that is the low2 est cost high option plan offered in the State, 

3 the full premium for the plan determined or ne4 gotiated, as the case may be, by the Secretary 

5 under section 2203; and

6 ‘‘(B) in the case of a plan that is not the 

7 lowest cost high option plan, the full premium 

8 for the plan described in subparagraph (A). 

9 If a qualified low-income Medicare beneficiary elects a 

10 plan referred to in subparagraph (B), the beneficiary is 

11 responsible for payment, in the manner prescribed in sub12 section (c), of any premium in excess of the amount pay13 able by the Secretary under such subparagraph. 

14 ‘‘(2) GEOGRAPHIC AND RISK ADJUSTMENT.—

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graph (B), the Secretary shall establish an ap17 propriate methodology for adjusting the amount 

18 paid under paragraph (1) to take into account, 

19 in a budget neutral manner, appropriate vari20 ations in costs—

21 ‘‘(i) based on provision of items and 

22 services in different geographic areas; and 

23 ‘‘(ii) based on differences in the actu24 arial risk of different enrollees being 

25 served. 
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1 ‘‘(B) CONSIDERATIONS.—The provisions of 

2 section 2204(b)(2)(B) shall apply to estab3 lishing adjustors under subparagraph (A) in the 

4 same manner as they apply to establishing ad5 justors under section 2204(b)(2)(A), except 

6 that the population for which such adjustors is 

7 computed and applicable shall be the population 

8 of qualified low-income Medicare beneficiaries. 

9 ‘‘(c) COLLECTION OF BENEFICIARY PREMIUM (IF

10 ANY).—The provisions of section 2204 apply to collection 

11 of premiums under subsection (b)(1)(B) in the same man12 ner as they apply to collection of premiums under section 

13 2204(b)(2). 

14 ‘‘(d) CONSTRUCTION RELATIVE TO OTHER BENE15 FITS.—

16 ‘‘(1) NO REQUIREMENT FOR STATE MEDICAID

17 PAYMENT.—Nothing in this section shall be con18 strued as requiring a State, under its plan under 

19 title XIX, to pay any part of the additional subsidy 

20 provided under this section to qualified low-income 

21 Medicare beneficiaries. 

22 ‘‘(2) NO MEDICAID MATCHING FOR PAYMENT.—

23 Insofar as this section applies to an individual, not24 withstanding any other provision of law, a State 

25 plan under title XIX is not required to provide med-
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1 ical assistance with respect to Medicare cost-sharing 

2 described in section 1905(p)(3)(A) and Federal fi3 nancial assistance shall not be available under sec4 tion 1903 with respect to such medical assistance. 

5 ‘‘(3) NONDUPLICATION OF PRESCRIPTION DRUG

6 BENEFITS.—In the case of prescription drugs pro7 vided to a qualified low-income Medicare beneficiary 

8 enrolled in a high option Medicare plan to the extent 

9 the beneficiary is covered under a State-funded pre10 scription drug program, the entity offering the plan 

11 may charge or authorize the provider of such serv12 ices to charge, in accordance with the charges al13 lowed under the program—

14 ‘‘(A) the State program for payment for 

15 the drugs; or 

16 ‘‘(B) such beneficiary to the extent that 

17 the beneficiary has been paid under such pro18 gram for such drugs. 

19 ‘‘SEC. 2206. RELATION TO CERTAIN LAWS; TREATMENT OF 

20 CURRENT PLANS. 

21 ‘‘(a) IN GENERAL.—Effective January 1, 2008, the 

22 following provisions of law are modified as follows, in 

23 order to reflect the policies specified in this part: 

24 ‘‘(1) CHANGE IN PAYMENT RULES.—Payment 

25 rates established under sections 2204 and 2205 shall 
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1 supersede the payment rates and amounts applicable 

2 under parts A, B, C, and D of title XVIII in the 

3 case of individuals enrolled in a medicare plan under 

4 this title. 

5 ‘‘(2) ELIMINATION OF ADJUSTED COMMUNITY

6 RATE RULES.—Section 1854(f)(1)(A) (relating to re7 quiring additional benefits) no longer applies in the 

8 case of individuals enrolled in a medicare plan under 

9 this title. 

10 ‘‘(3) ELIMINATION OF PREMIUM REGULA11 TIONS.—Section 1854(e) (relating to regulations of 

12 Medicare+Choice premiums) no longer applies in 

13 the case of individuals enrolled in a medicare plan 

14 under this title. 

15 ‘‘(4) PART B PREMIUM.—No separate premium 

16 is payable under section 1839 in the case of individ17 uals enrolled in a medicare plan under this title. 

18 ‘‘(5) MEDICAID PREMIUM ASSISTANCE.—Sec19 tions 1902(a)(10)(E) and 1905(p)(3)(A), insofar as 

20 they require the provision of medical assistance for 

21 Medicare cost-sharing described in section 

22 1905(p)(3)(A) for qualified low-income Medicare 

23 beneficiaries, no longer apply in the case of individ24 uals enrolled in a medicare plan under this title. 
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1 ‘‘(6) ELIMINATION OF RESTRICTION ON EN2 ROLLMENT UNDER CERTAIN PLANS.—Subparagraph 

3 (B) of section 1851(a)(3) no longer applies in the 

4 case of individuals enrolled in a medicare plan under 

5 this title. 

6 The fact that a provision is not cited in this subsection 

7 does not indicate that the provision is not modified under 

8 this title in some manner consistent with section 2200(a). 

9 ‘‘(b) RELATION TO STATE LAWS.—Any standard es10 tablished under this title or by the Secretary pursuant to 

11 this title shall supersede any State law or regulation with 

12 respect to Medicare plans which are offered by entities 

13 under this title to the extent such law or regulation is in14 consistent with such standards. 

15 ‘‘PART B—MEDICARE TRUST FUND

16 ‘‘SEC. 2211. MEDICARE TRUST FUND. 

17 ‘‘(a) ESTABLISHMENT.—Effective January 1, 2008, 

18 there is created on the books of the Treasury of the United 

19 States a trust fund to be known as the Medicare Trust 

20 Fund. 

21 ‘‘(b) AMOUNTS IN MEDICARE TRUST FUND.—

22 ‘‘(1) IN GENERAL.—The Medicare Trust Fund 

23 shall consist of the following amounts: 
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1 ‘‘(A) Amounts deposited in, or appro2 priated to, the Medicare Trust Fund as pro3 vided in this title. 

4 ‘‘(B) Any gifts and bequests made to the 

5 Medicare Trust Fund as provided in section 

6 201(i)(1).

7 ‘‘(2) APPROPRIATION OF HOSPITAL INSURANCE

8 TAXES.—

9 ‘‘(A) IN GENERAL.—Beginning January 1, 

10 2008, and for each subsequent year, there is 

11 appropriated to the Medicare Trust Fund, out 

12 of moneys in the Treasury not otherwise appro13 priated, an amount equal to such percent of the 

14 taxes described in paragraphs (1) and (2) of 

15 section 1817(a) that the Secretary estimates re16 flects the relative weight that benefits under 

17 part A represents of the actuarial value of the 

18 total benefits under this title. 

19 ‘‘(B) TRANSFER.—The amounts appro20 priated pursuant to subparagraph (A) shall be 

21 transferred from time to time from the general 

22 fund in the Treasury to the Medicare Trust 

23 Fund. The amount to be transferred under this 

24 paragraph shall be determined on the basis of 

25 estimates by the Secretary of the Treasury of 
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1 the taxes, described in such paragraph, paid to 

2 or deposited into the Treasury. The Secretary 

3 of the Treasury shall make adjustments in 

4 amounts subsequently transferred to the extent 

5 that prior estimates were in excess of, or were 

6 less than, such taxes. 

7 ‘‘(3) GENERAL REVENUE CONTRIBUTION.—Be8 ginning January 1, 2008, and for each subsequent 

9 year, there is appropriated to the Medicare Trust 

10 Fund, out of moneys in the Treasury not otherwise 

11 appropriated, from time to time, an amount equal to 

12 the amount by which the aggregate expenditures 

13 under this title (including payments made to Medi14 care plans under section 2204) exceed the sum of—

15 ‘‘(A) the amount appropriated under para16 graph (2) for the period involved; 

17 ‘‘(B) the premiums collected under sections 

18 2204(b)(2) and 2205(c) for such period; and 

19 ‘‘(C) the fees collected under section 2206 

20 for such period. 

21 ‘‘(4) APPLICATION TO OBLIGATIONS OF, AND

22 AMOUNTS OWED TO, THE PART A AND B TRUST

23 FUNDS.—

24 ‘‘(A) CERTIFICATION.—Beginning January 

25 1, 2008, the Secretary shall periodically certify 
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1 to the Board of Trustees of the Medicare Trust 

2 Fund any amounts that would otherwise be—

3 ‘‘(i) payable from the Federal Hos4 pital Insurance Trust Fund or the Federal 

5 Supplementary Medical Insurance Trust 

6 Fund for items and services provided prior 

7 to such date; or 

8 ‘‘(ii) due to such trust funds for items 

9 and services provided prior to such date. 

10 ‘‘(B) TRANSFERS AND DEPOSITS.—

11 ‘‘(i) TRANSFERS.—If Secretary cer12 tifies an amount pursuant to subparagraph 

13 (A)(i), the Board of Trustees of the Medi14 care Trust Fund shall transfer to the Sec15 retary from such trust fund an amount 

16 equal to the amount certified. 

17 ‘‘(ii) DEPOSITS.—If Secretary certifies 

18 an amount pursuant to subparagraph 

19 (A)(ii), the Secretary shall deposit in the 

20 Medicare Trust Fund an amount equal to 

21 the amount certified. 

22 ‘‘(c) APPLICATION OF HI TRUST FUND PROVI23 SIONS.—Subject to other provisions of this title, the provi24 sions of subsections (b) through (i) of section 1817 shall 

25 apply to title XVIII (as modified by this title) and the 
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1 Medicare Trust Fund in the same manner as they apply 

2 to part A of title XVIII and the Federal Hospital Insur3 ance Trust Fund, respectively. 

4 ‘‘SEC. 2212. PROGRAMMATIC INSOLVENCY AND LIMITATION 

5 ON GENERAL REVENUE FINANCING. 

6 ‘‘(a) ANNUAL DETERMINATIONS.—In addition to any 

7 other duties, the Board of Trustees of the Medicare Trust 

8 Fund (in this section referred to as the ‘Board of Trust9 ees’) shall determine and report to Congress as part of 

10 its annual report each year the following: 

11 ‘‘(1) The percentage of total expenditures from 

12 the Medicare Trust Fund that is financed by the 

13 general revenue contributions described in section 

14 2211(b)(3). 

15 ‘‘(2) The first fiscal year (if any) that the Medi16 care Trust Fund is projected to become program17 matically insolvent (as defined in subsection (b)). 

18 ‘‘(3) The first fiscal year (if any) in which the 

19 amounts in the Medicare Trust Fund will be insuffi20 cient to pay for the total expenses incurred under 

21 title XVIII (as revised by this title). 

22 ‘‘(4) Recommendations to preclude the program 

23 from becoming programmatically insolvent. 

24 ‘‘(b) PROGRAMMATIC INSOLVENCY DEFINED.—
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1 ‘‘(1) IN GENERAL.—For purposes of this part, 

2 the Medicare Trust Fund shall be deemed to be 

3 ‘programmatically insolvent’ for a fiscal year if the 

4 amount appropriated to the Medicare Trust Fund 

5 under section 2211(b)(3) would exceed 40 percent of 

6 the amount described in paragraph (2). 

7 ‘‘(2) NET EXPENDITURES ON BASIC BENE8 FITS.—The amount described in this paragraph is, 

9 as estimated by the Board of Trustees in consulta10 tion with the Secretary and the Secretary of the 

11 Treasury, the total expenditures from the Medicare 

12 Trust Fund in the fiscal year involved, reduced by 

13 an amount equal to the administrative expenses of 

14 the Secretary for that fiscal year.’’. 

15 SEC. 3. CONFORMING AMENDMENTS TO THE INTERNAL 

16 REVENUE CODE OF 1986. 

17 (a) REPORTING REQUIREMENTS FOR SECRETARY OF

18 THE TREASURY.—

19 (1) IN GENERAL.—Subsection (l) of section 

20 6103 of the Internal Revenue Code of 1986 (relating 

21 to confidentiality and disclosure of returns and re22 turn information) is amended by adding at the end 

23 the following new paragraph:
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1 ‘‘(19) DISCLOSURE OF RETURN INFORMATION

2 TO CARRY OUT INCOME-RELATED REDUCTION IN

3 MEDICARE PART B PREMIUM.—

4 ‘‘(A) IN GENERAL.—The Secretary may, 

5 upon written request from the Secretary of 

6 Health and Human Services, disclose to officers 

7 and employees of the Centers for Medicare & 

8 Medicaid Services return information with re9 spect to a taxpayer who is required to pay a 

10 monthly premium under section 1839 of the So11 cial Security Act. Such return information shall 

12 be limited to—

13 ‘‘(i) taxpayer identity information 

14 with respect to such taxpayer, 

15 ‘‘(ii) the filing status of such tax16 payer, 

17 ‘‘(iii) the adjusted gross income of 

18 such taxpayer, 

19 ‘‘(iv) the amounts excluded from such 

20 taxpayer’s gross income under sections 135 

21 and 911, 

22 ‘‘(v) the interest received or accrued 

23 during the taxable year which is exempt 

24 from the tax imposed by chapter 1 to the 

25 extent such information is available, and 
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1 ‘‘(vi) the amounts excluded from such 

2 taxpayer’s gross income by sections 931 

3 and 933 to the extent such information is 

4 available. 

5 ‘‘(B) RESTRICTION ON USE OF DISCLOSED

6 INFORMATION.—Return information disclosed 

7 under subparagraph (A) may be used by offi8 cers and employees of the Centers for Medicare 

9 & Medicaid Services only for the purposes of, 

10 and to the extent necessary in, establishing the 

11 appropriate monthly premium under section 

12 1839 of the Social Security Act.’’

13 (2) CONFORMING AMENDMENT.—Paragraphs 

14 (3)(A) and (4) of section 6103(p) of such Code are 

15 each amended by striking ‘‘or (14)’’ each place it ap16 pears and inserting ‘‘(14), or (19)’’. 

17 (b) EFFECTIVE DATE.—

18 (1) IN GENERAL.—The amendments made by 

19 subsection (a) shall apply to the monthly premium 

20 under section 2204 of the Social Security Act for 

21 months beginning with January 2008. 

22 (2) INFORMATION FOR PRIOR YEARS.—The 

23 Secretary of Health and Human Services may re24 quest information under section 6013(l)(15) of the 
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1 Social Security Act (as added by subsection (c)) for 

2 taxable years beginning after December 31, 2007.

Æ