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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4770 Introduced in House (IH)]

106th CONGRESS
  2d Session
                                H. R. 4770

     To amend title XVIII of the Social Security Act to provide a 
 prescription medicine benefit under the Medicare Program, to enhance 
   the preventive benefits covered under such program, and for other 
                               purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             June 27, 2000

  Mr. Gephardt (for himself, Mr. Hoeffel, Mr. Bonior, Mr. Rangel, Mr. 
   Dingell, Mr. Stark, Mr. Brown of Ohio, Mr. Matsui, Mr. Coyne, Mr. 
 Levin, Mr. Cardin, Mr. McDermott, Mr. Kleczka, Mr. Lewis of Georgia, 
Mr. Neal of Massachusetts, Mr. McNulty, Mr. Jefferson, Mr. Tanner, Mr. 
    Becerra, Mrs. Thurman, Mr. Doggett, Mr. Waxman, Mr. Markey, Mr. 
 Boucher, Mr. Pallone, Mr. Stupak, Mr. Engel, Mr. Green of Texas, Mr. 
Allen, Mr. Baca, Mr. Bentsen, Ms. Berkley, Mr. Bishop, Mrs. Capps, Mr. 
 Blagojevich, Mr. Blumenauer, Mr. Brady of Pennsylvania, Ms. Brown of 
Florida, Mr. Capuano, Mr. Clay, Mrs. Clayton, Mr. Clement, Mr. Conyers, 
  Mr. Costello, Mr. Cummings, Ms. Danner, Mr. Davis of Illinois, Ms. 
DeGette, Mr. Delahunt, Ms. DeLauro, Mr. Dixon, Mr. Doyle, Mr. Edwards, 
      Mr. Evans, Mr. Farr of California, Mr. Forbes, Mr. Frank of 
 Massachusetts, Mr. Frost, Mr. Gonzalez, Mr. Gutierrez, Mr. Hilliard, 
    Ms. Norton, Mr. Hoyer, Mr. Inslee, Mr. Jackson of Illinois, Ms. 
 Jackson-Lee of Texas, Ms. Eddie Bernice Johnson of Texas, Mr. Kennedy 
of Rhode Island, Mr. Kildee, Ms. Kilpatrick, Mr. Kucinich, Mr. Lampson, 
  Mr. Lantos, Ms. Lee, Mrs. Lowey, Mr. McGovern, Mrs. Maloney of New 
 York, Mr. Meehan, Mr. Menendez, Ms. Millender-McDonald, Mr. Moakley, 
Mrs. Napolitano, Mr. Oberstar, Mr. Olver, Mr. Ortiz, Mr. Pascrell, Mr. 
Pastor, Ms. Pelosi, Mr. Phelps, Mr. Pomeroy, Mr. Reyes, Mr. Rodriguez, 
     Ms. Roybal-Allard, Ms. Sanchez, Mr. Sandlin, Mr. Skelton, Ms. 
 Slaughter, Mr. Snyder, Mr. Spratt, Ms. Stabenow, Mrs. Jones of Ohio, 
 Mr. Turner, Mr. Udall of New Mexico, Mr. Underwood, Mr. Weygand, Mr. 
   Wexler, and Ms. Woolsey) introduced the following bill; which was 
  referred to the Committee on Ways and Means, and in addition to the 
 Committee on 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 title XVIII of the Social Security Act to provide a 
 prescription medicine benefit under the Medicare Program, to enhance 
   the preventive benefits covered under such program, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Guaranteed and Defined Rx Benefit and Health Provider Relief Act of 
2000''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
        TITLE I--MEDICARE PRESCRIPTION MEDICINE BENEFIT PROGRAM

Sec. 101. Prescription medicine benefit program.
   ``Part D--Prescription Medicine Benefit for the Aged and Disabled

        ``Sec. 1860. Establishment of defined prescription medicine 
                            benefit program for the aged and disabled 
                            under the medicare program.
        ``Sec. 1860A. Scope of defined benefits; coverage of all 
                            medically necessary prescription medicines.
        ``Sec. 1860B. Payment of defined basic and catastrophic 
                            benefits.
        ``Sec. 1860C. Eligibility and enrollment.
        ``Sec. 1860D. Monthly premium; initial $25 premium.
        ``Sec. 1860F. Prescription medicine insurance account.
        ``Sec. 1860G. Administration of benefits .
        ``Sec. 1860H. Incentive program to encourage employers to 
                            continue coverage .
        ``Sec. 1860I. Appropriations to cover government contributions.
        ``Sec. 1860J. Definitions.''.
Sec. 102. Medicaid buy-in of medicare prescription drug coverage for 
                            certain low-income individuals.
        ``Sec. 1860E. Special eligibility, enrollment, and copayment 
                            rules for low-income individuals.''.
Sec. 103. Offset for catastrophic prescription medicine benefit.
Sec. 104. GAO ongoing studies and reports on program; miscellaneous 
                            studies and reports.
             TITLE II--IMPROVEMENT IN BENEFICIARY SERVICES

    Subtitle A--Improvement of Medicare Coverage and Appeals Process

Sec. 201. Revisions to medicare appeals process.
Sec. 202. Provisions with respect to limitations on liability of 
                            beneficiaries.
Sec. 203. Waivers of liability for cost sharing amounts.
            Subtitle B--Establishment of Medicare Ombudsman

Sec. 211. Establishment of Medicare Ombudsman for Beneficiary 
                            Assistance and Advocacy.
  TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B 
                              DRUG BENEFIT

                  Subtitle A--Medicare+Choice Reforms

Sec. 301. Increase in national per capita Medicare+Choice growth 
                            percentage in 2001 and 2002.
Sec. 302. Permanently removing application of budget neutrality 
                            beginning in 2002.
Sec. 303. Increasing minimum payment amount.
Sec. 304. Allowing movement to 50:50 percent blend in 2002.
Sec. 305. Increased update for payment areas with only one or no 
                            Medicare+Choice contracts.
Sec. 306. Permitting higher negotiated rates in certain Medicare+Choice 
                            payment areas below national average.
Sec. 307. 10-year phase in of risk adjustment based on data from all 
                            settings.
 Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals

Sec. 311. Preservation of coverage of drugs and biologicals under part 
                            B of the medicare program.
Sec. 312. Comprehensive immunosuppressive medicine coverage for 
                            transplant patients.
         Subtitle C--Improvement of Certain Preventive Benefits

Sec. 321. Coverage of annual screening pap smear and pelvic exams.
 TITLE IV--ADJUSTMENTS TO PAYMENT PROVISIONS OF THE BALANCED BUDGET ACT

          Subtitle A--Payments for Inpatient Hospital Services

Sec. 401. Eliminating reduction in hospital market basket update for 
                            fiscal year 2001.
Sec. 402. Eliminating further reductions in indirect medical education 
                            (IME) for fiscal year 2001.
Sec. 403. Eliminating further reductions in disproportionate share 
                            hospital (DSH) payments.
Sec. 404. Increase base payment to Puerto Rico hospitals.
           Subtitle B--Payments for Skilled Nursing Services

Sec. 411. Eliminating reduction in SNF market basket update for fiscal 
                            year 2001.
Sec. 412. Extension of moratorium on therapy caps.
             Subtitle C--Payments for Home Health Services

Sec. 421. 1-year additional delay in application of 15 percent 
                            reduction on payment limits for home health 
                            services.
Sec. 422. Provision of full market basket update for home health 
                            services for fiscal year 2001.
                 Subtitle D--Rural Provider Provisions

Sec. 431. Elimination of reduction in hospital outpatient market basket 
                            increase.
                      Subtitle E--Other Providers

Sec. 441. Update in renal dialysis composite rate.
            Subtitle F--Provision for Additional Adjustments

Sec. 451. Guarantee of additional adjustments to payments for providers 
                            from budget surplus.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Prescription medicine coverage was not a standard part 
        of health insurance when the medicare program under title XVIII 
        of the Social Security Act was enacted in 1965. Since 1965, 
        however, medicine coverage has become a key component of most 
        private and public health insurance coverage, except for the 
        medicare program.
            (2) At least \2/3\ of medicare beneficiaries have 
        unreliable, inadequate, or no medicine coverage at all.
            (3) Seniors who do not have medicine coverage typically 
        pay, at a minimum, 15 percent more than people with coverage.
            (4) Medicare beneficiaries at all income levels lack 
        prescription medicine coverage, with more than \1/2\ of such 
        beneficiaries having incomes greater than 150 percent of the 
        poverty line.
            (5) The number of private firms offering retiree health 
        coverage is declining.
            (6) Medigap premiums for medicines are too expensive for 
        most beneficiaries and are highest for older senior citizens, 
        who need prescription medicine coverage the most and typically 
        have the lowest incomes.
            (7) While the management of a medicare prescription 
        medicine benefit program should mirror the practices employed 
        by benefit administrators in delivering prescription medicines, 
        the Secretary of Health and Human Services should oversee that 
        program to assure that a guaranteed and defined prescription 
        drug benefit is provided to all medicare beneficiaries.
            (8) All medicare beneficiaries should have access to a 
        voluntary, reliable, affordable, dependable, and defined 
        outpatient medicine benefit as part of the medicare program 
        that assists with the high cost of prescription medicines and 
        protects them against excessive out-of-pocket costs.

        TITLE I--MEDICARE PRESCRIPTION MEDICINE BENEFIT PROGRAM

SEC. 101. ESTABLISHMENT OF THE MEDICARE PRESCRIPTION MEDICINE BENEFIT 
              PROGRAM.

    (a) In General.--Title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.) is amended--
            (1) by redesignating part D as part E; and
            (2) by inserting after part C the following new part:

   ``Part D--Prescription Medicine Benefit for the Aged and Disabled

 ``establishment of defined prescription medicine benefit program for 
            the aged and disabled under the medicare program

    ``Sec. 1860. (a) In General.--There is established as a part of the 
medicare program under this title a voluntary insurance program to 
provide defined prescription medicine benefits, including pharmacy 
services, in accordance with the provisions of this part for 
individuals who are aged or disabled or have end-stage renal disease 
and who voluntarily elect to enroll under such program, to be financed 
from premium payments by enrollees together with contributions from 
funds appropriated by the Federal Government.
    ``(b) Noninterference by the Secretary.--In administering the 
prescription medicine benefit program established under this part, the 
Secretary may not--
            ``(1) require a particular formulary, institute a price 
        structure for benefits, or in any way ration benefits;
            ``(2) interfere in any way with negotiations between 
        benefit administrators and medicine manufacturers, or 
        wholesalers; or
            ``(3) otherwise interfere with the competitive nature of 
        providing a prescription medicine benefit using private benefit 
        administrators, except as is required to guarantee coverage of 
        the defined benefit.

   ``scope of defined benefits; coverage of all medically necessary 
                         prescription medicines

    ``Sec. 1860A. (a) In General.--The benefits provided to an 
individual enrolled in the insurance program under this part shall 
consist of--
            ``(1) payments made, in accordance with the provisions of 
        this part, for covered prescription medicines (as specified in 
        subsection (b)) dispensed by any pharmacy participating in the 
        program under this part (and, in circumstances designated by 
        the benefit administrator, by a nonparticipating pharmacy), 
        including any specifically named medicine prescribed for the 
        individual by a qualified health care professional regardless 
        of whether the medicine is included in a formulary established 
        by the benefit administrator if such medicine is certified as 
        medically necessary by such health care professional (except 
        that to the maximum extent possible the substitution and use of 
        lower-cost generics shall be encouraged); and
            ``(2) charging by pharmacies of the negotiated discount 
        price--
                    ``(A) for all covered prescription medicines, 
                without regard to such basic benefit limitation; and
                    ``(B) established with respect to any drugs or 
                classes of drugs described in subparagraphs (A), (B), 
                (D), (E), or (F) of section 1927(d)(2) that are 
                available to individuals receiving benefits under this 
                title.
    ``(b) Covered Prescription Medicines.--
            ``(1) In general.--Covered prescription medicines, for 
        purposes of this part, include all prescription medicines (as 
        defined in section 1860J(1)), including smoking cessation 
        agents, except as otherwise provided in this subsection.
            ``(2) Exclusions from coverage.--Covered prescription 
        medicines shall not include drugs or classes of drugs described 
        in subparagraphs (A) through (D) and (F) through (H) of section 
        1927(d)(2) unless--
                    ``(A) specifically provided otherwise by the 
                Secretary with respect to a drug in any of such 
                classes; or
                    ``(B) a drug in any of such classes is certified to 
                be medically necessary by a health care professional.
            ``(3) Nonduplication of prescription medicines covered 
        under part a or b.--A medicine prescribed for an individual 
        that would otherwise be a covered prescription medicine under 
        this part shall not be so considered to the extent that payment 
        for such medicine is available under part A or B (including all 
        injectable drugs and biologicals for which payment was made or 
        should have been made by a carrier under section 1861(s)(2) (A) 
        or (B) as of the date of enactment of the Medicare Guaranteed 
        and Defined Rx Benefit and Health Provider Relief Act of 2000). 
        Medicines otherwise covered under part A or B shall be covered 
        under this part to the extent that benefits under part A or B 
        are exhausted.
            ``(4) Study on inclusion of home infusion therapy 
        services.--Not later than one year after the date of the 
        enactment of the Medicare Guaranteed and Defined Rx Benefit and 
        Health Provider Relief Act of 2000, the Secretary shall submit 
        to Congress a legislative proposal for the delivery of home 
        infusion therapy services under this title and for a system of 
        payment for such a benefit that coordinates items and services 
        furnished under part B and under this part.

          ``payment of defined basic and catastrophic benefits

    ``Sec. 1860B. (a) Payment of Benefits.--There shall be paid from 
the Prescription Medicine Insurance Account within the Supplementary 
Medical Insurance Trust Fund, in the case of each individual who is 
enrolled in the insurance program under this part and who purchases 
covered prescription medicines in a calendar year, the sum of the 
benefit amounts under subsections (b) and (c).
    ``(b) Basic Benefit.--
            ``(1) In general.--An amount (not exceeding 50 percent of 
        the annual limitation under paragraph (3)) equal to the 
        applicable government percentage (specified in paragraph (2)) 
        of the negotiated price for each such covered prescription 
        medicine or such higher percentage as is proposed under section 
        1860G(d)(9).
            ``(2) Applicable government percentage.--The applicable 
        government percentage specified in this paragraph is 50 percent 
        or such higher percentage as may be proposed under section 
        1860G(d)(9), if the Secretary finds that such higher percentage 
        will not increase aggregate costs to the Prescription Medicine 
        Insurance Account.
            ``(3) Annual limitation in basic benefit.--
                    ``(A) For 2003 through 2009.--For purposes of the 
                basic benefit described in paragraph (1), the annual 
                limitation under this paragraph is--
                            ``(i) $2,000 for each of 2003 and 2004;
                            ``(ii) $3,000 for each of 2005 and 2006;
                            ``(iii) $4,000 for each of 2007 and 2008; 
                        and
                            ``(iv) $5,000 for 2009.
                    ``(B) For 2010 and subsequent years.--For purposes 
                of paragraph (1), the annual limitation under this 
                paragraph for 2010 and each subsequent year is equal to 
                the limitation for the preceding year adjusted by the 
                annual percentage increase in average per capita 
                aggregate expenditures for covered outpatient medicines 
                in the United States for medicare beneficiaries, as 
                estimated by the Secretary. Any amount determined under 
                this subparagraph that is not a multiple of $10 shall 
                be rounded to the nearest multiple of $10.
    ``(c) Catastrophic Benefit.--
            ``(1) For 2003.--In the case of and with respect to out-of-
        pocket expenditures, the amount of such expenditures that 
        exceeds the catastrophic benefit level established by the 
        Secretary under paragraph (2) and increased in subsequent years 
        by the annual percentage increase under paragraph (3).
            ``(2) Establishment of catastrophic benefit level.--The 
        Chief Actuary shall estimate, over each five-year period, 
        beginning with 2003, the amount of savings to the program under 
        this title attributable to the operation of section 103 of the 
        Medicare Guaranteed and Defined Rx Benefit and Health Provider 
        Relief Act of 2000. Based on such estimates, the Secretary 
        shall establish the catastrophic benefit level in a manner so 
        that the aggregate amount of expenditures under this paragraph 
        does not exceed the aggregate amount of such savings, except 
        that in 2003 and each year thereafter, the catastrophic benefit 
        level may not be greater than $4,000, as adjusted under 
        paragraph (3).
            ``(3) Indexing for outyears.--For a year beginning after 
        2003, the catastrophic benefit level shall be increased by 
        annual percentage increase determined for the year involved 
        under subsection (b)(3)(B).

                      ``eligibility and enrollment

    ``Sec. 1860C. (a) Eligibility.--Every individual who, in or after 
2003, is entitled to hospital insurance benefits under part A or 
enrolled in the medical insurance program under part B is eligible to 
enroll in the insurance program under this part, during an enrollment 
period prescribed in or under this section, in such manner and form as 
may be prescribed by regulations.
    ``(b) Enrollment.--
            ``(1) In general.--Each individual who satisfies subsection 
        (a) shall be enrolled (or eligible to enroll) in the program 
        under this part in accordance with the provisions of section 
        1837, as if that section applied to this part, except as 
        otherwise explicitly provided in this part.
            ``(2) Single enrollment period.--Except as provided in 
        section 1837(i) (as such section applies to this part), 1860E 
        (relating to loss of coverage under the medicaid program), or 
        1860H(e) (relating to loss of employer or union coverage), or 
        as otherwise explicitly provided, no individual shall be 
        entitled to enroll in the program under this part at any time 
        after the initial enrollment period without penalty, and in the 
        case of all other late enrollments, the Secretary shall develop 
        a late enrollment penalty for the individual that fully 
        recovers the additional actuarial risk involved in providing 
        coverage for the individual.
            ``(3) Special enrollment period in 2003.--
                    ``(A) In general.--An individual who first 
                satisfies subsection (a) in 2003 may, at any time on or 
                before December 31, 2003--
                            ``(i) enroll in the program under this 
                        part; and
                            ``(ii) enroll or reenroll in such program 
                        after having previously declined or terminated 
                        enrollment in such program.
                    ``(B) Effective date of coverage.--An individual 
                who enrolls under the program under this part pursuant 
                to subparagraph (A) shall be entitled to benefits under 
                this part beginning on the first day of the month 
                following the month in which such enrollment occurs.
    ``(c) Period of Coverage.--
            ``(1) In general.--Except as otherwise provided in this 
        part, an individual's coverage under the program under this 
        part shall be effective for the period provided in section 
        1838, as if that section applied to the program under this 
        part.
            ``(2) Part d coverage terminated by termination of coverage 
        under parts a and b.--In addition to the causes of termination 
        specified in section 1838, an individual's coverage under this 
        part shall be terminated when the individual retains coverage 
        under neither the program under part A nor the program under 
        part B, effective on the effective date of termination of 
        coverage under part A or (if later) under part B.

                 ``monthly premium; initial $25 premium

    ``Sec. 1860D. (a) Annual Establishment of Guaranteed Single Rate 
for All Participating Beneficiaries.--
            ``(1) $25 monthly premium rate in 2003.--The monthly 
        premium rate in 2003 for prescription medicine benefits under 
        this part is $25.
            ``(2) Premium rates in subsequent years.--
                    ``(A) In general.--The Secretary shall, during 
                September of 2003 and of each succeeding year, 
                determine and promulgate a monthly premium rate for the 
                succeeding year in accordance with the provisions of 
                this paragraph.
                    ``(B) Determination of annual benefit costs.--The 
                Secretary shall estimate annually for the succeeding 
                year the amount equal to the total of the benefits (but 
                not including catastrophic benefits under section 
                1860B(c)) that will be payable from the Prescription 
                Medicine Insurance Account for prescription medicines 
                dispensed in such calendar year with respect to 
                enrollees in the program under this part. In 
                calculating such amount, the Secretary shall include an 
                appropriate amount for a contingency margin.
                    ``(C) Determination of monthly premium rates.--
                            ``(i) In general.--The Secretary shall 
                        determine the monthly premium rate with respect 
                        to such enrollees for such succeeding year, 
                        which shall be \1/12\ of the share specified in 
                        clause (ii) of the amount determined under 
                        subparagraph (B), divided by the total number 
                        of such enrollees, and rounded (if such rate is 
                        not a multiple of 10 cents) to the nearest 
                        multiple of 10 cents.
                            ``(ii) Enrollee and employer percentage 
                        shares.--The share specified in this clause, 
                        for purposes of clause (i), shall be--
                                    ``(I) one-half, in the case of 
                                premiums paid by an individual enrolled 
                                in the program under this part; and
                                    ``(II) two-thirds, in the case of 
                                premiums paid for such an individual by 
                                a former employer (as defined in 
                                section 1860H(f)(2)).
                    ``(D) Publication of assumptions.--The Secretary 
                shall publish, together with the promulgation of the 
                monthly premium rates for the succeeding year, a 
                statement setting forth the actuarial assumptions and 
                bases employed in arriving at the amounts and rates 
                determined under this paragraph.
    ``(b) Payment of Premiums.--
            ``(1) Generally through deduction from social security, 
        railroad retirement benefits, or benefits administered by 
        opm.--
                    ``(A) In general.--In the case of an individual who 
                is entitled to or receiving benefits as described 
in subsection (a), (b), or (d) of section 1840, premiums payable under 
this part shall be collected by deduction from such benefits at the 
same time and in the same manner as premiums payable under part B are 
collected pursuant to section 1840.
                    ``(B) Transfers of deduction to account.--The 
                Secretary of the Treasury shall, from time to time, but 
                not less often than quarterly, transfer premiums 
                collected pursuant to subparagraph (A) to the 
                Prescription Medicine Insurance Account from the 
                appropriate funds and accounts described in subsections 
                (a)(2), (b)(2), and (d)(2) of section 1840, on the 
                basis of the certifications described in such 
                subsections. The amounts of such transfers shall be 
                appropriately adjusted to the extent that prior 
                transfers were too great or too small.
            ``(2) Otherwise through direct payments by enrollee to 
        secretary.--
                    ``(A) In the case of inadequate deduction.--An 
                individual to whom paragraph (1) applies (other than an 
                individual receiving benefits as described in section 
                1840(d)) and who estimates that the amount that will be 
                available for deduction under such paragraph for any 
                premium payment period will be less than the amount of 
                the monthly premiums for such period may (under 
                regulations) pay to the Secretary the estimated 
                balance, or such greater portion of the monthly premium 
                as the individual chooses.
                    ``(B) Other cases.--An individual enrolled in the 
                insurance program under this part with respect to whom 
                none of the preceding provisions of this subsection 
                applies (or to whom section 1840(c) applies) shall pay 
                premiums to the Secretary at such times and in such 
                manner as the Secretary shall by regulations prescribe.
                    ``(C) Deposit of premiums in account.--Amounts paid 
                to the Secretary under this paragraph shall be 
                deposited in the Treasury to the credit of the 
                Prescription Medicine Insurance Account in the 
                Supplementary Medical Insurance Trust Fund.
    ``(c) Certain Low-Income Individuals.--For rules concerning 
premiums for certain low-income individuals, see section 1860E.

               ``prescription medicine insurance account

    ``Sec. 1860F. (a) Establishment.--There is created within the 
Federal Supplemental Medical Insurance Trust Fund established by 
section 1841 an account to be known as the `Prescription Medicine 
Insurance Account' (in this section referred to as the `Account').
    ``(b) Amounts in Account.--
            ``(1) In general.--The Account shall consist of--
                    ``(A) such amounts as may be deposited in, or 
                appropriated to, such fund as provided in this part; 
                and
                    ``(B) such gifts and bequests as may be made as 
                provided in section 201(i)(1).
            ``(2) Separation of funds.--Funds provided under this part 
        to the Account shall be kept separate from all other funds 
        within the Federal Supplemental Medical Insurance Trust Fund.
    ``(c) Payments From Account.--
            ``(1) In general.--The Managing Trustee shall pay from time 
        to time from the Account such amounts as the Secretary 
        certifies are necessary to make the payments provided for by 
        this part, and the payments with respect to administrative 
        expenses in accordance with section 201(g).
            ``(2) Treatment in relation to part b premium.--Amounts 
        payable from the Account shall not be taken into account in 
        computing actuarial rates or premium amounts under section 
        1839.

                      ``administration of benefits

    ``Sec. 1860G. (a) Administration.--
            ``(1) Use of private benefit administrators as provided for 
        under parts a and b.--The Secretary shall provide for 
        administration of the benefits under this part through a 
        contract with a private benefit administrator designated in 
        accordance with subsection (c), for enrolled individuals 
        residing in each service area designated pursuant to subsection 
        (b) (other than such individuals enrolled in a Medicare+Choice 
        program under part C), in accordance with the provisions of 
        this section.
            ``(2) Guarantee of program administration.--In the case of 
        a service area in which no private benefit administrator has 
        entered into a contract with the Secretary under paragraph (1) 
        for the administration of this part, the Secretary shall seek 
        to enter into a contract with a fiscal intermediary under part 
        A (with a contract under section 1816) or a carrier under part 
        B (with a contract under section 1842) to administer this part 
        in that service area in accordance with the provisions of 
        subsection (d). If the Secretary is unable to enter into such a 
        contract for that service area, the Secretary shall provide for 
        the administration of this part in that service area in 
        accordance with the provisions of subsection (d) through 
        another benefit administrator.
    ``(b) Designation of Geographic Service Areas.--
            ``(1) In general.--The Secretary shall divide the total 
        geographic area served by the programs under this title into an 
        appropriate number of service areas for purposes of 
        administration of benefits under this part.
            ``(2) Considerations in determining service areas.--In 
        determining or adjusting the number and boundaries of service 
        areas under this subsection, the Secretary shall seek to ensure 
        that--
                    ``(A) there is a reasonable level of competition 
                among entities eligible to contract to administer the 
                benefit program under this section for each area; and
                    ``(B) the designation of areas is consistent with 
                the goal of securing contracts under this section that 
                use the volume purchasing power of enrollees to obtain 
                the same or similar type of prescription medicine 
                discounts as are afforded favored, large purchasers.
    ``(c) Designation of Benefit Administrator.--
            ``(1) Award and duration of contract.--
                    ``(A) Competitive award.--Each contract for a 
                service area shall be awarded competitively in 
                accordance with section 5 of title 41, United States 
                Code, for a period (subject to subparagraph (B)) of not 
                less than 2 nor more than 5 years.
                    ``(B) Review.--A contract for a service area shall 
                be subject to an evaluation after a year and 
                termination for cause.
            ``(2) Eligible benefit administrators.--An entity shall not 
        be eligible for consideration as a benefit administrator 
        responsible for administering the prescription medicine benefit 
        program under this part in a service area unless it meets at 
        least the following criteria:
                    ``(A) Type of entity.--The entity shall be capable 
                of administering a prescription medicine benefit 
                program, and may be a prescription medicine vendor, 
                wholesale and retail pharmacy delivery system, health 
                care provider or insurer, any other type of entity as 
                the Secretary may specify, or a consortium of such 
                entities.
                    ``(B) Performance capability.--The entity shall 
                have sufficient expertise, personnel, and resources to 
                perform effectively the benefit administration 
                functions for such area.
                    ``(C) Financial integrity.--The entity and its 
                officers, directors, agents, and managing employees 
                shall have a satisfactory record of professional 
                competence and professional and financial integrity, 
                and the entity shall have adequate financial resources 
                to perform services under the contract without risk of 
                insolvency.
            ``(3) Proposal requirements.--
                    ``(A) In general.--An entity's proposal for award 
                or renewal of a contract under this section shall 
                include such material and information as the Secretary 
                may require.
                    ``(B) Specific information.--A proposal described 
                in subparagraph (A) shall--
                            ``(i) include a detailed description of--
                                    ``(I) the schedule of negotiated 
                                prices that will be charged to 
                                enrollees;
                                    ``(II) how the entity will deter 
                                medical errors that are related to 
                                prescription medicines; and
                                    ``(III) proposed contracts with 
                                local pharmacy providers designed to 
                                ensure access, including compensation 
                                for local pharmacists' services;
                            ``(ii) be accompanied by such information 
                        as the Secretary may require on the entity's 
                        past performance; and
                            ``(iii) disclose ownership and shared 
                        financial interests with other entities 
                        involved in the delivery of the benefit as 
                        proposed.
            ``(4) Criteria for competitive selection.--In awarding a 
        contract competitively, the Secretary shall consider the 
        comparative merits of each of the applications by eligible 
        entities, as determined on the basis of the entities' past 
        performance and other relevant factors, with respect to the 
        following:
                    ``(A) the estimated total cost of the contract, 
                taking into consideration the entity's proposed fees 
                and price and cost estimates, as evaluated and adjusted 
                by the Secretary in accordance with the provisions of 
                the Federal Acquisition Regulation concerning 
                contracting by negotiation;
                    ``(B) prior experience in administering a type of 
                health insurance program;
                    ``(C) effectiveness in containing costs through 
                obtaining discounts from manufacturers, pricing 
                incentives, utilization management, and drug 
                utilization review;
                    ``(D) the quality and efficiency of benefit 
                management services with respect to such matters as 
                claims processing and benefits coordination; record-
                keeping and reporting; maintenance of medical records 
                confidentiality; and drug utilization review, patient 
                information, customer satisfaction, and other 
                activities supporting quality of care; and
                    ``(E) such other factors as the Secretary deems 
                necessary to evaluate the merits of each application.
            ``(5) Flexibility in securing best benefit administrator.--
        In awarding contracts under this subsection, the Secretary may 
        waive conflict of interest rules generally applicable to 
        Federal acquisitions (subject to such safeguards as the 
        Secretary may find necessary to impose) in circumstances where 
        the Secretary finds that such waiver--
                    ``(A) is not inconsistent with the purposes of the 
                programs under this title and the best interests of 
                enrolled individuals; and
                    ``(B) will permit a sufficient level of competition 
                for such contracts, promote efficiency of benefits 
                administration, or otherwise serve the objectives of 
                the program under this part.
        If the Secretary waives such rules, the Secretary shall 
        establish a special monitoring program to ensure that 
        beneficiaries served by the benefit administrator have access 
        to all necessary pharmaceuticals as prescribed.
            ``(6) Maximizing competition and savings.--In awarding 
        contracts under this section, the Secretary shall give 
        consideration to the need to maintain sufficient numbers of 
        entities eligible and willing to administer benefits under this 
        part to ensure vigorous competition for such contracts, while 
        also giving consideration to the need for a benefit 
        administrator to have sufficient purchasing power to obtain 
        appropriate cost savings.
    ``(d) Functions of Benefit Administrator.--A benefit administrator 
for a service area shall (or in the case of the function described in 
paragraph (9), may) perform the following functions:
            ``(1) Participation agreements, prices, and fees.--
                    ``(A) Privately negotiated prices.--Each benefit 
                administrator shall establish, through negotiations 
                with medicine manufacturers and wholesalers and 
                pharmacies, a schedule of prices for covered 
                prescription medicines.
                    ``(B) Agreements with any willing pharmacy.--Each 
                benefit administrator shall enter into participation 
                agreements under subsection (e) with any willing 
                pharmacy, that include terms that--
                            ``(i) secure the participation of 
                        sufficient numbers of pharmacies to ensure 
                        convenient access (including adequate emergency 
                        access);
                            ``(ii) permit the participation of any 
                        willing pharmacy in the service area that meets 
                        the participation requirements described in 
                        subsection (e); and
                            ``(iii) allow for reasonable dispensing and 
                        consultation fees for pharmacies.
                    ``(C) Lists of prices and participating 
                pharmacies.--Each benefit administrator shall ensure 
                that the negotiated prices established under 
                subparagraph (A) and the list of pharmacies with 
                agreements under subsection (e) are regularly updated 
                and readily available in the service area to health 
                care professionals authorized to prescribe medicines, 
                participating pharmacies, and enrolled individuals.
            ``(2) Tracking of covered enrolled individuals.--In 
        coordination with the Secretary, each benefit administrator 
        shall maintain accurate, updated records of all enrolled 
        individuals residing in the service area (other than 
        individuals enrolled in a plan under part C).
            ``(3) Payment and coordination of benefits.--
                    ``(A) Payment.--Each benefit administrator shall--
                            ``(i) administer claims for payment of 
                        benefits under this part and encourage, to the 
                        maximum extent possible, use of electronic 
                        means for the submissions of claims;
                            ``(ii) determine amounts of benefit 
                        payments to be made; and
                            ``(iii) receive, disburse, and account for 
                        funds used in making such payments, including 
                        through the activities specified in the 
                        provisions of this paragraph.
                    ``(B) Coordination.--Each benefit administrator 
                shall coordinate with the Secretary, other benefit 
                administrators, pharmacies, and other relevant entities 
                as necessary to ensure appropriate coordination of 
                benefits with respect to enrolled individuals, 
                including coordination of access to and payment for 
                covered prescription medicines according to an 
                individual's in-service area plan provisions, when such 
                individual is traveling outside the home service area, 
                and under such other circumstances as the Secretary may 
                specify.
                    ``(C) Explanation of benefits.--Each benefit 
                administrator shall furnish to enrolled individuals an 
                explanation of benefits in accordance with section 
                1806(a), and a notice of the balance of benefits 
                remaining for the current year, whenever prescription 
                medicine benefits are provided under this part (except 
                that such notice need not be provided more often than 
                monthly).
            ``(4) Requirements with respect to formularies.--If a 
        benefit administrator uses a formulary to contain costs under 
        this part, the benefit administrator shall--
                    ``(A) use a pharmacy and therapeutics committee 
                comprised of licensed practicing physicians, 
                pharmacists, and other health care practitioners to 
                develop and manage the formulary;
                    ``(B) include in the formulary at least 1 medicine 
                from each therapeutic class and, if available, a 
                generic equivalent thereof; and
                    ``(C) disclose to current and prospective enrollees 
                and to participating providers and pharmacies in the 
                service area, the nature of the formulary restrictions, 
                including information regarding the medicines included 
                in the formulary and any difference in cost-sharing 
                amounts.
            ``(5) Cost and utilization management; quality assurance.--
        Each benefit administrator shall have in place effective cost 
        and utilization management, drug utilization review, quality 
        assurance measures, and systems to reduce medical errors, 
        including at least the following, together with such additional 
        measures as the Secretary may specify:
                    ``(A) Drug utilization review.--A drug utilization 
                review program conforming to the standards provided in 
                section 1927(g)(2) (with such modifications as the 
                Secretary finds appropriate).
                    ``(B) Fraud and abuse control.--Activities to 
                control fraud, abuse, and waste, including prevention 
                of diversion of pharmaceuticals to the illegal market.
                    ``(C) Medication therapy management.--
                            ``(i) In general.--A program of medicine 
                        therapy management and medication 
                        administration that is designed to assure that 
                        covered outpatient medicines are appropriately 
                        used to achieve therapeutic goals and reduce 
                        the risk of adverse events, including adverse 
                        drug interactions.
                            ``(ii) Elements of medication therapy 
                        management.--Such program may include--
                                    ``(I) enhanced beneficiary 
                                understanding of such appropriate use 
                                through beneficiary education, 
                                counseling, and other appropriate 
                                means; and
                                    ``(II) increased beneficiary 
                                adherence with prescription medication 
                                regimens through medication refill 
                                reminders, special packaging, and other 
                                appropriate means.
                            ``(iii) Development of program in 
                        cooperation with licensed pharmacists.--The 
                        program shall be developed in cooperation with 
                        licensed pharmacists and physicians.
                            ``(iv) Considerations in pharmacy fees.--
                        The benefit administrators shall take into 
                        account, in establishing fees for pharmacists 
                        and others providing services under the 
                        medication therapy management program, the 
                        resources and time used in implementing the 
                        program.
            ``(6) Education and information activities.--Each benefit 
        administrator shall have in place mechanisms for disseminating 
        educational and informational materials to enrolled individuals 
        and health care providers designed to encourage effective and 
        cost-effective use of prescription medicine benefits and to 
        ensure that enrolled individuals understand their rights and 
        obligations under the program.
            ``(7) Beneficiary protections.--
                    ``(A) Confidentiality of health information.--Each 
                benefit administrator shall have in effect systems to 
                safeguard the confidentiality of health care 
                information on enrolled individuals, which comply with 
                section 1106 and with section 552a of title 5, United 
                States Code, and meet such additional standards as the 
                Secretary may prescribe.
                    ``(B) Grievance and appeal procedures.--Each 
                benefit administrator shall have in place such 
                procedures as the Secretary may specify for hearing and 
                resolving grievances and appeals, including expedited 
                appeals, brought by enrolled individuals against the 
                benefit administrator or a pharmacy concerning benefits 
                under this part, which shall include procedures 
                equivalent to those specified in subsections (f) and 
                (g) of section 1852.
            ``(8) Records, reports, and audits of benefit 
        administrators.--
                    ``(A) Records and audits.--Each benefit 
                administrator shall maintain adequate records, and 
                afford the Secretary access to such records (including 
                for audit purposes).
                    ``(B) Reports.--Each benefit administrator shall 
                make such reports and submissions of financial and 
                utilization data as the Secretary may require taking 
                into account standard commercial practices.
            ``(9) Proposal for alternative coinsurance amount.--
                    ``(A) Submission.--Each benefit administrator may 
                submit a proposal for decreased beneficiary cost-
                sharing for generic prescription medicines, 
                prescription medicines on the benefit administrator's 
                formulary, or prescription medicines obtained through 
                mail order pharmacies.
                    ``(B) Contents.--The proposal submitted under 
                subparagraph (A) shall contain evidence that such 
                decreased cost-sharing would not result in an increase 
                in aggregate costs to the Account, including an 
                analysis of differences in projected drug utilization 
                patterns by beneficiaries whose cost-sharing would be 
                reduced under the proposal and those making the cost-
                sharing payments that would otherwise apply.
            ``(10) Other requirements.--Each benefit administrator 
        shall meet such other requirements as the Secretary may 
        specify.
    ``(e) Pharmacy Participation Agreements.--
            ``(1) In general.--A pharmacy that meets the requirements 
        of this subsection shall be eligible to enter an agreement with 
        a benefit administrator to furnish covered prescription 
medicines and pharmacists' services to enrolled individuals residing in 
the service area.
            ``(2) Terms of agreement.--An agreement under this 
        subsection shall include the following terms and requirements:
                    ``(A) Licensing.--The pharmacy and pharmacists 
                shall meet (and throughout the contract period will 
                continue to meet) all applicable State and local 
                licensing requirements.
                    ``(B) Limitation on charges.--Pharmacies 
                participating under this part shall not charge an 
                enrolled individual more than the negotiated price for 
                an individual medicine as established under subsection 
                (d)(1), regardless of whether such individual has 
                attained the basic benefit limitation under section 
                1860B(b)(3), and shall not charge an enrolled 
                individual more than the individual's share of the 
                negotiated price as determined under the provisions of 
                this part.
                    ``(C) Performance standards.--The pharmacy and the 
                pharmacist shall comply with performance standards 
                relating to--
                            ``(i) measures for quality assurance, 
                        reduction of medical errors, and participation 
                        in the drug utilization review program 
                        described in subsection (d)(3)(A);
                            ``(ii) systems to ensure compliance with 
                        the confidentiality standards applicable under 
                        subsection (d)(5)(A); and
                            ``(iii) other requirements as the Secretary 
                        may impose to ensure integrity, efficiency, and 
                        the quality of the program.
                    ``(D) Disclosure of price of generic medicine.--A 
                pharmacy participating under this part that dispenses a 
                prescription medicine to a medicare beneficiary 
                enrolled under this part shall inform the beneficiary 
                at the time of purchase of the drug of any differential 
                between the price of the prescribed drug to the 
                enrollee and the price of the lowest cost generic drug 
                that is therapeutically and pharmaceutically equivalent 
                and bioequivalent.
    ``(f) Flexibility in Assigning Workload Among Benefit 
Administrators.--During the period after the Secretary has given notice 
of intent to terminate a contract with a benefit administrator, the 
Secretary may transfer responsibilities of the benefit administrator 
under such contract to another benefit administrator.
    ``(g) Guaranteed Access to Medicines in Rural and Hard-To-Serve 
Areas.--
            ``(1) In general.--The Secretary shall ensure that all 
        beneficiaries have guaranteed access to the full range of 
        pharmaceuticals under this part, and shall give special 
        attention to access, pharmacist counseling, and delivery in 
        rural and hard-to-serve areas, including through the use of 
        incentives such as bonus payments to retail pharmacists in 
        rural areas and extra payments to the benefit administrator for 
        the cost of rapid delivery of pharmaceuticals, and any other 
        actions necessary.
            ``(2) GAO report.--Not later than 2 years after the 
        implementation of this part the Comptroller General of the 
        United States shall submit to Congress a report on the access 
        of medicare beneficiaries to pharmaceuticals and pharmacists' 
        services in rural and hard-to-serve areas under this part 
        together with any recommendations of the Comptroller General 
        regarding any additional steps the Secretary may need to take 
        to ensure the access of medicare beneficiaries to 
        pharmaceuticals and pharmacists' services in such areas under 
        this part.
    ``(h) Incentives for Cost and Utilization Management and Quality 
Improvement.--The Secretary is authorized to include in a contract 
awarded under subsection (c) such incentives for cost and utilization 
management and quality improvement as the Secretary may deem 
appropriate, including--
            ``(1) bonus and penalty incentives to encourage 
        administrative efficiency;
            ``(2) incentives under which benefit administrators share 
        in any benefit savings achieved;
            ``(3) financial incentives under which savings derived from 
        the substitution of generic medicines in lieu of non-generic 
        medicines are made available to beneficiaries enrolled under 
        this part, benefit administrators, pharmacies, and the 
        Prescription Medicine Insurance Account; and
            ``(4) any other incentive that the Secretary deems 
        appropriate and likely to be effective in managing costs or 
        utilization.

    ``incentive program to encourage employers to continue coverage

    ``Sec. 1860H. (a) Program Authority.--The Secretary shall develop 
and implement a program under this section called the `Employer 
Incentive Program' that encourages employers and other sponsors of 
employment-based health care coverage to provide adequate prescription 
medicine benefits to retired individuals and to maintain such existing 
benefit programs, by subsidizing, in part, the cost of providing 
coverage under qualifying plans.
    ``(b) Sponsor Requirements.--In order to be eligible to receive an 
incentive payment under this section with respect to coverage of an 
individual under a qualified retiree prescription medicine plan (as 
defined in subsection (f)(3)), a sponsor shall meet the following 
requirements:
            ``(1) Assurances.--The sponsor shall--
                    ``(A) annually attest, and provide such assurances 
                as the Secretary may require, that the coverage offered 
                by the sponsor is a qualified retiree prescription 
                medicine plan, and will remain such a plan for the 
                duration of the sponsor's participation in the program 
                under this section; and
                    ``(B) guarantee that it will give notice to the 
                Secretary and covered retirees--
                            ``(i) at least 120 days before terminating 
                        its plan; and
                            ``(ii) immediately upon determining that 
                        the actuarial value of the prescription 
                        medicine benefit under the plan falls below the 
                        actuarial value of the insurance benefit under 
                        this part.
            ``(2) Other requirements.--The sponsor shall provide such 
        information, and comply with such requirements, including 
        information requirements to ensure the integrity of the 
        program, as the Secretary may find necessary to administer the 
        program under this section.
    ``(c) Incentive Payment.--
            ``(1) In general.--A sponsor that meets the requirements of 
        subsection (b) with respect to a quarter in a calendar year 
        shall have payment made by the Secretary on a quarterly basis 
        to the appropriate employment-based health plan of an incentive 
        payment, in the amount determined as described in paragraph 
        (2), for each retired individual (or spouse) who--
                    ``(A) was covered under the sponsor's qualified 
                retiree prescription medicine plan during such quarter; 
                and
                    ``(B) was eligible for but was not enrolled in the 
                insurance program under this part.
            ``(2) Amount of incentive.--The payment under this section 
        with respect to each individual described in paragraph (1) for 
        a month shall be equal to \2/3\ of the monthly premium amount 
        payable from the Prescription Medicine Insurance Account for an 
        enrolled individual, as set for the calendar year pursuant to 
        section 1860D(a)(2).
            ``(3) Payment date.--The incentive under this section with 
        respect to a calendar quarter shall be payable as of the end of 
        the next succeeding calendar quarter.
    ``(d) Civil Money Penalties.--A sponsor, health plan, or other 
entity that the Secretary determines has, directly or through its 
agent, provided information in connection with a request for an 
incentive payment under this section that the entity knew or should 
have known to be false shall be subject to a civil monetary penalty in 
an amount up to 3 times the total incentive amounts under subsection 
(c) that were paid (or would have been payable) on the basis of such 
information.
    ``(e) Part D Enrollment for Individuals Whose Employment-Based 
Retiree Health Coverage Ends.--
            ``(1) Eligible individuals.--An individual shall be given 
        the opportunity to enroll in the program under this part during 
        the period specified in paragraph (2) if--
                    ``(A) the individual declined enrollment in the 
                program under this part at the time the individual 
                first satisfied section 1860C(a);
                    ``(B) at that time, the individual was covered 
                under a qualified retiree prescription medicine plan 
                for which an incentive payment was paid under this 
                section; and
                    ``(C)(i) the sponsor subsequently ceased to offer 
                such plan; or
                    ``(ii) the value of prescription medicine coverage 
                under such plan became less than the value of the 
                coverage under the program under this part.
            ``(2) Special enrollment period.--An individual described 
        in paragraph (1) shall be eligible to enroll in the program 
        under this part during the 6-month period beginning on the 
        first day of the month in which--
                    ``(A) the individual receives a notice that 
                coverage under such plan has terminated (in the 
                circumstance described in paragraph (1)(C)(i)) or 
                notice that a claim has been denied because of such a 
                termination; or
                    ``(B) the individual received notice of the change 
                in benefits (in the circumstance described in paragraph 
                (1)(C)(ii)).
    ``(f) Definitions.--In this section:
            ``(1) Employment-based retiree health coverage.--The term 
        `employment-based retiree health coverage' means health 
        insurance or other coverage of health care costs for retired 
        individuals (or for such individuals and their spouses and 
        dependents) based on their status as former employees or labor 
        union members.
            ``(2) Employer.--The term `employer' has the meaning given 
        to such term by section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (except that such term shall include only 
        employers of 2 or more employees).
            ``(3) Qualified retiree prescription medicine plan.--The 
        term `qualified retiree prescription medicine plan' means 
        health insurance coverage included in employment-based retiree 
        health coverage that--
                    ``(A) provides coverage of the cost of prescription 
                medicines whose actuarial value to each retired 
                beneficiary equals or exceeds the actuarial value of 
                the benefits provided to an individual enrolled in the 
                program under this part; and
                    ``(B) does not deny, limit, or condition the 
                coverage or provision of prescription medicine benefits 
                for retired individuals based on age or any health 
                status-related factor described in section 2702(a)(1) 
                of the Public Health Service Act.
            ``(4) Sponsor.--The term `sponsor' has the meaning given 
        the term `plan sponsor' by section 3(16)(B) of the Employee 
        Retirement Income Security Act of 1974.

           ``appropriations to cover government contributions

    ``Sec. 1860I. (a) In General.--There are authorized to be 
appropriated from time to time, out of any moneys in the Treasury not 
otherwise appropriated, to the Prescription Medicine Insurance Account, 
a Government contribution equal to--
            ``(1) the aggregate premiums payable for a month pursuant 
        to section 1860D(a)(2) by individuals enrolled in the program 
        under this part; plus
            ``(2) one-half the aggregate premiums payable for a month 
        pursuant to such section for such individuals by former 
        employers; plus
            ``(3) the benefits payable by reason of the application of 
        section 1860B(c) (relating to catastrophic benefits).
    ``(b) Appropriations To Cover Incentives for Employment-Based 
Retiree Medicine Coverage.--There are authorized to be appropriated to 
the Prescription Medicine Insurance Account from time to time, out of 
any moneys in the Treasury not otherwise appropriated such sums as may 
be necessary for payment of incentive payments under section 1860H(c).

                             ``definitions

    ``Sec. 1860J. As used in this part--
            ``(1) the term `prescription medicine' means--
                    ``(A) a drug that may be dispensed only upon a 
                prescription, and that is described in subparagraph 
                (A)(i), (A)(ii), or (B) of section 1927(k)(2); and
                    ``(B) insulin certified under section 506 of the 
                Federal Food, Drug, and Cosmetic Act, and needles, 
                syringes, and disposable pumps for the administration 
                of such insulin; and
            ``(2) the term `benefit administrator' means an entity 
        which is providing for the administration of benefits under 
        this part pursuant to 1860G.''.
    (b) Conforming Amendments.--
            (1) Amendments to federal supplementary health insurance 
        trust fund.--Section 1841 of the Social Security Act (42 U.S.C. 
        1395t) is amended--
                    (A) in the last sentence of subsection (a)--
                            (i) by striking ``and'' after ``section 
                        201(i)(1)''; and
                            (ii) by inserting before the period the 
                        following: ``, and such amounts as may be 
                        deposited in, or appropriated to, the 
                        Prescription Medicine Insurance Account 
                        established by section 1860F'';
                    (B) in subsection (g), by inserting after ``by this 
                part,'' the following: ``the payments provided for 
                under part D (in which case the payments shall come 
                from the Prescription Medicine Insurance Account in the 
                Supplementary Medical Insurance Trust Fund),'';
                    (C) in the first sentence of subsection (h), by 
                inserting before the period the following: ``and 
                section 1860D(b)(4) (in which case the payments shall 
                come from the Prescription Medicine Insurance Account 
                in the Supplementary Medical Insurance Trust Fund)''; 
                and
                    (D) in the first sentence of subsection (i)--
                            (i) by striking ``and'' after ``section 
                        1840(b)(1)''; and
                            (ii) by inserting before the period the 
                        following: ``, section 1860D(b)(2) (in which 
                        case the payments shall come from the 
                        Prescription Medicine Insurance Account in the 
                        Supplementary Medical Insurance Trust Fund)''.
            (2) Prescription medicine option under medicare+choice 
        plans.--
                    (A) Eligibility, election, and enrollment.--Section 
                1851 of the Social Security Act (42 U.S.C. 1395w-21) is 
                amended--
                            (i) in subsection (a)(1)(A), by striking 
                        ``parts A and B'' inserting ``parts A, B, and 
                        D''; and
                            (ii) in subsection (i)(1), by striking 
                        ``parts A and B'' and inserting ``parts A, B, 
                        and D''.
                    (B) Voluntary beneficiary enrollment for medicine 
                coverage.--Section 1852(a)(1)(A) of such Act (42 U.S.C. 
                1395w-22(a)(1)(A)) is amended by inserting ``(and under 
                part D to individuals also enrolled under that part)'' 
                after ``parts A and B''.
                    (C) Access to services.--Section 1852(d)(1) of such 
                Act (42 U.S.C. 1395w-22(d)(1)) is amended--
                            (i) in subparagraph (D), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (E), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(F) the plan for prescription medicine benefits 
                under part D guarantees coverage of any specifically 
                named covered prescription medicine for an enrollee, 
                when prescribed by a physician in accordance with the 
                provisions of such part, regardless of whether such 
                medicine would otherwise be covered under an applicable 
                formulary or discount arrangement.''.
                    (D) Payments to organizations.--Section 
                1853(a)(1)(A) of such Act (42 U.S.C. 1395w-23(a)(1)(A)) 
                is amended--
                            (i) by inserting ``determined separately 
                        for benefits under parts A and B and under part 
                        D (for individuals enrolled under that part)'' 
                        after ``as calculated under subsection (c)'';
                            (ii) by striking ``that area, adjusted for 
                        such risk factors'' and inserting ``that area. 
                        In the case of payment for benefits under parts 
                        A and B, such payment shall be adjusted for 
                        such risk factors as''; and
                            (iii) by inserting before the last sentence 
                        the following: ``In the case of the payments 
                        for benefits under part D, such payment shall 
                        initially be adjusted for the risk factors of 
                        each enrollee as the Secretary determines to be 
                        feasible and appropriate. By 2006, the 
                        adjustments would be for the same risk factors 
                        applicable for benefits under parts A and B.''.
                    (E) Calculation of annual medicare +choice 
                capitation rates.--Section 1853(c) of such Act (42 
                U.S.C. 1395w-23(c)) is amended--
                            (i) in paragraph (1), in the matter 
                        preceding subparagraph (A), by inserting ``for 
                        benefits under parts A and B'' after 
                        ``capitation rate'';
                            (ii) in paragraph (6)(A), by striking 
                        ``rate of growth in expenditures under this 
                        title'' and inserting ``rate of growth in 
                        expenditures for benefits available under parts 
                        A and B''; and
                            (iii) by adding at the end the following 
                        new paragraph:
            ``(8) Payment for prescription medicines.--The Secretary 
        shall determine a capitation rate for prescription medicines--
                    ``(A) dispensed in 2003, which is based on the 
                projected national per capita costs for prescription 
                medicine benefits under part D and associated claims 
                processing costs for beneficiaries under the original 
                medicare fee-for-service program; and
                    ``(B) dispensed in each subsequent year, which 
                shall be equal to the rate for the previous year 
                updated by the Secretary's estimate of the projected 
                per capita rate of growth in expenditures under this 
                title for prescription medicines for an individual 
                enrolled under part D.''.
                    (F) Limitation on enrollee liability.--Section 
                1854(e) of such Act (42 U.S.C. 1395w-24(e)) is amended 
                by adding at the end the following new paragraph:
            ``(5) Special rule for provision of part d benefits.--In no 
        event may a Medicare+Choice organization include as part of a 
        plan for prescription medicine benefits under part D the 
        following requirements:
                    ``(A) No deductible; no coinsurance greater than 50 
                percent.--A requirement that an enrollee pay a 
                deductible, or a coinsurance percentage that exceeds 50 
                percent.
                    ``(B) Mandatory inclusion of catastrophic 
                benefit.--A requirement that the catastrophic benefit 
                level under the plan be greater than such level 
                established under section 1860B(c).''.
                    (G) Requirement for additional benefits.--Section 
                1854(f)(1) of such Act (42 U.S.C. 1395w-24(f)(1)) is 
                amended by adding at the end the following new 
                sentence: ``Such determination shall be made separately 
                for benefits under parts A and B and for prescription 
                medicine benefits under part D.''.
                    (H) Protections against fraud and beneficiary 
                protections.--Section 1857(d) of such Act (42 U.S.C. 
                1395w-27(d)) is amended by adding at the end the 
                following new paragraph:
            ``(6) Availability of negotiated prices.--Each contract 
        under this section shall provide that enrollees who exhaust 
        prescription medicine benefits under the plan will continue to 
        have access to prescription medicines at negotiated prices 
        equivalent to the total combined cost of such medicines to the 
        plan and the enrollee prior to such exhaustion of benefits.''.
            (3) Exclusions from coverage.--
                    (A) Application to part d.--Section 1862(a) of the 
                Social Security Act (42 U.S.C. 1395y(a)) is amended in 
                the matter preceding paragraph (1) by striking ``part A 
                or part B'' and inserting ``part A, B, or D''.
                    (B) Prescription medicines not excluded from 
                coverage if appropriately prescribed.--Section 
                1862(a)(1) of such Act (42 U.S.C. 1395y(a)(1)) is 
                amended--
                            (i) in subparagraph (H), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (I), by striking the 
                        semicolon at the end and inserting ``, and''; 
                        and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(J) in the case of prescription medicines covered 
                under part D, which are not prescribed in accordance 
                with such part;''.

SEC. 102. MEDICAID BUY-IN OF MEDICARE PRESCRIPTION MEDICINE COVERAGE 
              FOR CERTAIN LOW-INCOME INDIVIDUALS.

    (a) State Option To Buy-In Dually Eligible Individuals.--
            (1) Coverage of premiums as medical assistance.--Section 
        1905(a) of the Social Security Act (42 U.S.C. 1396d) is amended 
        in the second sentence of the flush matter at the end by 
        striking ``premiums under part B'' the first place it appears 
        and inserting ``premiums under parts B and D''.
            (2) State commitment to continue participation in part d 
        after benefit limit exceeded.--Section 1902(a) of such Act (42 
        U.S.C. 1396a) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (64);
                    (B) by striking the period at the end of paragraph 
                (65)(B) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(66) provide that in the case of any individual whose 
        eligibility for medical assistance is not limited to medicare 
        or medicare medicine cost-sharing and for whom the State elects 
        to pay premiums under part D of title XVIII pursuant to section 
        1860E, the State will purchase all prescription medicines for 
        such individual in accordance with the provisions of such part 
        D, without regard to whether the basic benefit limitation for 
        such individual under section 1860B(b)(3) has been reached.''.
    (b) Government Payment of Medicare Medicine Cost-Sharing Required 
for Qualified Medicare Beneficiaries.--Section 1905(p)(3) of the Social 
Security Act (42 U.S.C. 1396d(p)(3)) is amended--
            (1) in subparagraph (A)--
                    (A) in clause (i), by striking ``and'' at the end;
                    (B) in clause (ii), by inserting ``and'' at the 
                end; and
                    (C) by adding at the end the following new clause:
                            ``(iii) premiums under section 1860D.''; 
                        and
            (2) in subparagraph (D)--
                    (A) by inserting ``(i)'' after ``(D)''; and
                    (B) by adding at the end the following:
                    ``(ii) Part d cost-sharing.--The difference between 
                the amount that is paid under section 1860B and the 
                amount that would be paid under such section if any 
                reference to `50 percent' therein were deemed a 
                reference to `100 percent' (or, if the Secretary 
                approves a higher percentage under such section, if 
                such percentage were deemed to be 100 percent).''.
    (c) Government Payment of Medicare Medicine Cost-Sharing Required 
for Medicare Beneficiaries With Incomes Between 100 and 150 Percent of 
Poverty Line.--
            (1) State plan requirement.--Section 1902(a)(10)(E) of the 
        Social Security Act (42 U.S.C. 1396a(a)(10)(E)) is amended--
                    (A) in clause (iii), by striking ``and'' at the 
                end; and
                    (B) by adding at the end the following new clause:
                    ``(v) for making medical assistance available for 
                medicare medicine cost-sharing (as defined in section 
                1905(x)(2)) for qualified medicare medicine 
                beneficiaries described in section 1905(x)(1); and''.
            (2) 100 percent federal matching of state medical 
        assistance costs for medicare medicine cost-sharing.--Section 
        1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) is 
        amended--
                    (A) by redesignating paragraph (7) as paragraph 
                (8); and
                    (B) by inserting after paragraph (6) the following 
                new paragraph:
            ``(7) except in the case of amounts expended for an 
        individual whose eligibility for medical assistance is not 
        limited to medicare or medicare medicine cost-sharing, an 
        amount equal to 100 percent of amounts as expended as medicare 
        medicine cost-sharing for qualified medicare medicine 
        beneficiaries (as defined in section 1905(x)); plus''.
            (3) Additional funds for medicare medicine cost-sharing in 
        territories.--Section 1108 of the Social Security Act (42 
        U.S.C. 1308) is amended--
                    (A) in subsection (f), by striking ``subsection 
                (g),'' and inserting ``subsections (g) and (h)''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(h) Additional Medicaid Payments to Territories for Medicare 
Medicine Cost-Sharing.--
            ``(1) In general.--In the case of a territory that develops 
        and implements a plan described in paragraph (2) (for providing 
        medical assistance with respect to the provision of 
        prescription drugs to medicare beneficiaries), the amount 
        otherwise determined under subsection (f) (as increased under 
        subsection (g)) for the State shall be increased by the amount 
        specified in paragraph (3).
            ``(2) Plan.--The plan described in this paragraph is a plan 
        that--
                    ``(A) provides medical assistance with respect to 
                the provision of some or all medicare medicine cost 
                sharing (as defined in section 1905(x)(2)) to low-
                income medicare beneficiaries; and
                    ``(B) assures that additional amounts received by 
                the State that are attributable to the operation of 
                this subsection are used only for such assistance.
            ``(3) Increased amount.--
                    ``(A) In general.--The amount specified in this 
                paragraph for a State for a year is equal to the 
                product of--
                            ``(i) the aggregate amount specified in 
                        subparagraph (B); and
                            ``(ii) the amount specified in subsection 
                        (g)(1) for that State, divided by the sum of 
                        the amounts specified in such section for all 
                        such States.
                    ``(B) Aggregate amount.--The aggregate amount 
                specified in this subparagraph for--
                            ``(i) 2003, is equal to $25,000,000; or
                            ``(ii) a subsequent year, is equal to the 
                        aggregate amount specified in this subparagraph 
                        for the previous year increased by annual 
                        percentage increase specified in section 
                        1860B(b)(3)(B) for the year involved.''.
            (4) Definitions of eligible beneficiaries and coverage.--
        Section 1905 of the Social Security Act (42 U.S.C. 1396d) is 
amended by adding at the end the following new subsection:
    ``(x)(1) The term `qualified medicare medicine beneficiary' means 
an individual--
            ``(A) who is enrolled or enrolling under part D of title 
        XVIII;
            ``(B) whose income (as determined under section 1612 for 
        purposes of the supplemental security income program, except as 
        provided in subsection (p)(2)(D)) is above 100 percent but 
        below 150 percent of the official poverty line (as referred to 
        in subsection (p)(2)) applicable to a family of the size 
        involved; and
            ``(C) whose resources (as determined under section 1613 for 
        purposes of the supplemental security income program) do not 
        exceed twice the maximum amount of resources that an individual 
        may have and obtain benefits under that program.
    ``(2) The term `medicare medicine cost-sharing' means the following 
costs incurred with respect to a qualified medicare medicine 
beneficiary, without regard to whether the costs incurred were for 
items and services for which medical assistance is otherwise available 
under the plan:
            ``(A) In the case of a qualified medicare medicine 
        beneficiary whose income (as determined under paragraph (1)) is 
        less than 135 percent of the official poverty line--
                    ``(i) premiums under section 1860D; and
                    ``(ii) the difference between the amount that is 
                paid under section 1860B and the amount that would be 
                paid under such section if any reference to `50 
                percent' therein were deemed a reference to `100 
                percent' (or, if the Secretary approves a higher 
                percentage under such section, if such percentage were 
                deemed to be 100 percent).
            ``(B) In the case of a qualified medicare medicine 
        beneficiary whose income (as determined under paragraph (1)) is 
        at least 135 percent but less than 150 percent of the official 
        poverty line, a percentage of premiums under section 1860D, 
        determined on a linear sliding scale ranging from 100 percent 
        for individuals with incomes at 135 percent of such line to 0 
        percent for individuals with incomes at 150 percent of such 
        line.
    ``(3) In the case of any State which is providing medical 
assistance to its residents under a waiver granted under section 1115, 
the Secretary shall require the State to meet the requirement of 
section 1902(a)(10)(E) in the same manner as the State would be 
required to meet such requirement if the State had in effect a plan 
approved under this title.''.
    (d) Medicaid Medicine Price Rebates Unavailable With Respect to 
Medicines Purchased Through Medicare Buy-In.--Section 1927 of the 
Social Security Act (42 U.S.C. 1396r-8) is amended by adding at the end 
the following new subsection:
    ``(l) Medicines Purchased Through Medicare Buy-In.--The provisions 
of this section shall not apply to prescription medicines purchased 
under part D of title XVIII pursuant to an agreement with the Secretary 
under section 1860E (including any medicines so purchased after the 
limit under section 1860B(b)(3) has been exceeded).''.
    (e) Amendments to Medicare Part D.--Part D of title XVIII of the 
Social Security Act (as added by section 2) is amended by inserting 
after section 1860D the following new section:

 ``special eligibility, enrollment, and copayment rules for low-income 
                              individuals

    ``Sec. 1860E. (a) State Options for Coverage: Continuation of 
Medicaid Coverage or Enrollment Under This Part.--
            ``(1) In general.--The Secretary shall, at the request of a 
        State, enter into an agreement with the State under which all 
        individuals described in paragraph (2) are enrolled in the 
        program under this part, without regard to whether any such 
        individual has previously declined the opportunity to enroll in 
        such program.
            ``(2) Eligibility groups.--The individuals described in 
        this paragraph, for purposes of paragraph (1), are individuals 
        who satisfy section 1860C(a) and who are--
                    ``(A) in a coverage group or groups permitted under 
                section 1843 (as selected by the State and specified in 
                the agreement); or
                    ``(B) qualified medicare medicine beneficiaries (as 
                defined in section 1905(x)(1)).
            ``(3) Coverage period.--The period of coverage under this 
        part of an individual enrolled under an agreement under this 
        subsection shall be as follows:
                    ``(A) Individuals eligible (at state option) for 
                part b buy-in.--In the case of an individual described 
                in subsection (a)(2)(A), the coverage period shall be 
                the same period that applies (or would apply) pursuant 
                to section 1843(d).
                    ``(B) Qualified medicare medicine beneficiaries.--
                In the case of an individual described in subsection 
                (a)(2)(B)--
                            ``(i) the coverage period shall begin on 
                        the latest of--
                                    ``(I) January 1, 2003;
                                    ``(II) the first day of the third 
                                month following the month in which the 
                                State agreement is entered into; or
                                    ``(III) the first day of the first 
                                month following the month in which the 
                                individual satisfies section 1860C(a); 
                                and
                            ``(ii) the coverage period shall end on the 
                        last day of the month in which the individual 
                        is determined by the State to have become 
                        ineligible for medicare medicine cost-sharing.
            ``(4) Enrollment for low-income subsidy through other 
        means.--
                    ``(A) Flexibility in enrollment process.--With 
                respect to low-income individuals residing in a State 
                enrolling under this part on or after January 1, 2003, 
the Secretary shall provide for determinations of whether the 
individual is eligible for a subsidy and the amount of such 
individual's income to be made under arrangements with appropriate 
entities other than State medicaid agencies.
                    ``(B) Use of certain information.--Arrangements 
                with entities under subparagraph (A) shall provide for 
                --
                            ``(i) the use of existing Federal 
                        government databases to identify eligibility; 
                        and
                            ``(ii) the use of information obtained 
                        under section 154 of the Social Security Act 
                        Amendments of 1994 for newly eligible medicare 
                        beneficiaries, and the application of such 
                        information with respect to other medicare 
                        beneficiaries.
    ``(b) Special Part D Enrollment Opportunity for Individuals Losing 
Medicaid Eligibility.--In the case of an individual who--
            ``(1) satisfies section 1860C(a); and
            ``(2) loses eligibility for benefits under the State plan 
        under title XIX after having been enrolled under such plan or 
        having been determined eligible for such benefits;
the Secretary shall provide an opportunity for enrollment under the 
program under this part during the period that begins on the date that 
such individual loses such eligibility and ends on the date specified 
by the Secretary.
    ``(c) Definition.--For purposes of this section, the term `State' 
has the meaning given such term under section 1101(a) for purposes of 
title XIX.''.
    (f) Removal of Sunset Date for Cost-Sharing in Medicare Part B 
Premiums for Certain Qualifying Individuals.--
            (1) In general.--Section 1902(a)(10)(E)(iv) of the Social 
        Security Act (42 U.S.C. 1396a(a)(10)(E)(iv)) is amended to read 
        as follows--
                            ``(iv) subject to section 1905(p)(4), for 
                        making medical assistance available for 
                        medicare cost-sharing described in section 
                        1905(p)(3)(A)(ii) for individuals who would be 
                        qualified medicare beneficiaries described in 
                        section 1905(p)(1) but for the fact that their 
                        income exceeds the income level established by 
                        the State under section 1905(p)(2) and is at 
                        least 120 percent, but less than 135 percent, 
                        of the official poverty line (referred to in 
                        such section) for a family of the size involved 
                        and who are not otherwise eligible for medical 
                        assistance under the State plan;''.
            (2) Relocation of provision requiring 100 percent federal 
        matching of state medical assistance costs for certain 
        qualifying individuals.--Section 1903(a) of the Social Security 
        Act (42 U.S.C. 1396b(a)), as amended by subsection (c)(3), is 
        amended--
                    (A) by redesignating paragraph (8) as paragraph 
                (9); and
                    (B) by inserting after paragraph (7) the following 
                new paragraph:
            ``(8) an amount equal to 100 percent of amounts expended as 
        medicare cost-sharing described in section 1903(a)(10)(E)(iv) 
        for individuals described in such section; plus''.
            (3) Repeal of section 1933.--Section 1933 is repealed.
            (4) Effective date.--The amendments made by this subsection 
        shall take effect on January 1, 2003.

SEC. 103. OFFSET FOR CATASTROPHIC PRESCRIPTION MEDICINE BENEFIT.

    If the mid-summer 2000 budget estimate prepared by the Director of 
the Congressional Budget Office results in a higher level of projected 
on-budget surplus over the ten fiscal year period beginning with fiscal 
year 2001 than the projected on-budget surplus in the estimate prepared 
by the Director in March, 2000, there shall be transferred out of any 
moneys in the Treasury not otherwise appropriated in a fiscal year 
(beginning with fiscal year 2003) to the Prescription Medicine 
Insurance Account (created in the Federal Supplemental Medical 
Insurance Trust Fund established by section 1841 of the Social Security 
Act (42 U.S.C. 1395t)) such sums as are necessary to offset the costs 
attributable to the operation of section 1860B(a)(2) of the Social 
Security Act (as added by section 3) (relating to catastrophic benefit 
payment amounts) in that fiscal year.

SEC. 104. GAO ONGOING STUDIES AND REPORTS ON PROGRAM; MISCELLANEOUS 
              REPORTS.

    (a) Ongoing Study.--The Comptroller General of the United States 
shall conduct an ongoing study and analysis of the prescription 
medicine benefit program under part D of the Medicare program under 
title XVIII of the Social Security Act (as added by section 3 of this 
Act), including an analysis of each of the following:
            (1) The extent to which the administering entities have -
        achieved volume-based discounts similar to the favored -price 
        paid by other large purchasers.
            (2) Whether access to the benefits under such program are 
        in fact available to all beneficiaries, with special attention 
        given to access for beneficiaries living in rural and hard-to-
        serve areas.
            (3) The success of such program in reducing medication 
        error and adverse medicine reactions and improving quality of 
        care, and whether it is probable that the program has resulted 
        in savings through reduced hospitalizations and morbidity due 
        to medication errors and adverse medicine reactions.
            (4) Whether patient medical record confidentiality is being 
        maintained and safe-guarded.
            (5) Such other issues as the Comptroller General may 
        consider.
    (b) Reports.--The Comptroller General shall issue such reports on 
the results of the ongoing study described in (a) as the Comptroller 
General shall deem appropriate and shall notify Congress on a timely 
basis of significant problems in the operation of the part D 
prescription medicine program and the need for legislative adjustments 
and improvements.
    (c) Miscellaneous Studies and Reports.--
            (1) Study on methods to encourage additional research on 
        breakthrough pharmaceuticals.--
                    (A) In general.--The Secretary of Health and Human 
                Services shall seek the advice of the Secretary of the 
                Treasury on possible tax and trade law changes to 
                encourage increased original research on new 
                pharmaceutical breakthrough products designed to 
                address disease and illness.
                    (B) Report.--Not later than January 1, 2003, the 
                Secretary shall submit to Congress a report on such 
                study. The report shall include recommended methods to 
                encourage the pharmaceutical industry to devote more 
                resources to research and development of new covered 
                products than it devotes to overhead expenses.
            (2) Study on pharmaceutical sales practices and impact on 
        costs and quality of care.--
                    (A) In general.--The Secretary of Health and Human 
                Services shall conduct a study on the methods used by 
                the pharmaceutical industry to advertise and sell to 
                consumers and educate and sell to providers.
                    (B) Report.--Not later than January 1, 2003, the 
                Secretary shall submit to Congress a report on such 
                study. The report shall include the estimated direct 
                and indirect costs of the sales methods used, the 
                quality of the information conveyed, and whether such 
                sales efforts leads (or could lead) to inappropriate 
                prescribing. Such report may include legislative and 
                regulatory recommendations to encourage more 
                appropriate education and prescribing practices.
            (3) Study on cost of pharmaceutical research.--
                    (A) In general.--The Secretary of Health and Human 
                Services shall conduct a study on the costs of, and 
                needs for, the pharmaceutical research and the 
role that the taxpayer provides in encouraging such research.
                    (B) Report.--Not later than January 1, 2003, the 
                Secretary shall submit to Congress a report on such 
                study. The report shall include a description of the 
                full-range of taxpayer-assisted programs impacting 
                pharmaceutical research, including tax, trade, 
                government research, and regulatory assistance. The 
                report may also include legislative and regulatory 
                recommendations that are designed to ensure that the 
                taxpayer's investment in pharmaceutical research 
                results in the availability of pharmaceuticals at 
                reasonable prices.
            (4) Report on pharmaceutical prices in major foreign 
        nations.--Not later than January 1, 2003, the Secretary of 
        Health and Human Services shall submit to Congress a report on 
        the retail price of major pharmaceutical products in various 
        developed nations, compared to prices for the same or similar 
        products in the United States. The report shall include a 
        description of the principal reasons for any price differences 
        that may exist.

             TITLE II--IMPROVEMENT IN BENEFICIARY SERVICES

    Subtitle A--Improvement of Medicare Coverage and Appeals Process

SEC. 201. REVISIONS TO MEDICARE APPEALS PROCESS.

    (a) Conduct of Reconsiderations of Determinations by Independent 
Contractors.--Section 1869 of the Social Security Act (42 U.S.C. 
1395ff) is amended to read as follows:

                       ``determinations; appeals

    ``Sec. 1869. (a) Initial Determinations.--The Secretary shall 
promulgate regulations and make initial determinations with respect to 
benefits under part A or part B in accordance with those regulations 
for the following:
            ``(1) The initial determination of whether an individual is 
        entitled to benefits under such parts.
            ``(2) The initial determination of the amount of benefits 
        available to the individual under such parts.
            ``(3) Any other initial determination with respect to a 
        claim for benefits under such parts, including an initial 
        determination by the Secretary that payment may not be made, or 
        may no longer be made, for an item or service under such parts, 
        an initial determination made by a utilization and quality 
        control peer review organization under section 1154(a)(2), and 
        an initial determination made by an entity pursuant to a 
        contract with the Secretary to administer provisions of this 
        title or title XI.
    ``(b) Appeal Rights.--
            ``(1) In general.--
                    ``(A) Reconsideration of initial determination.--
                Subject to subparagraph (D), any individual 
                dissatisfied with any initial determination under 
                subsection (a) shall be entitled to reconsideration of 
                the determination, and, subject to subparagraphs (D) 
                and (E), a hearing thereon by the Secretary to the same 
                extent as is provided in section 205(b) and to judicial 
                review of the Secretary's final decision after such 
                hearing as is provided in section 205(g).
                    ``(B) Representation by provider or supplier.--
                            ``(i) In general.--Sections 206(a), 1102, 
                        and 1871 shall not be construed as authorizing 
                        the Secretary to prohibit an individual from 
                        being represented under this section by a 
                        person that furnishes or supplies the 
                        individual, directly or indirectly, with 
                        services or items, solely on the basis that the 
                        person furnishes or supplies the individual 
                        with such a service or item.
                            ``(ii) Mandatory waiver of right to payment 
                        from beneficiary.--Any person that furnishes 
                        services or items to an individual may not 
                        represent an individual under this section with 
                        respect to the issue described in section 
                        1879(a)(2) unless the person has waived any 
                        rights for payment from the beneficiary with 
                        respect to the services or items involved in 
                        the appeal.
                            ``(iii) Prohibition on payment for 
                        representation.--If a person furnishes services 
                        or items to an individual and represents the 
                        individual under this section, the person may 
                        not impose any financial liability on such 
                        individual in connection with such 
                        representation.
                            ``(iv) Requirements for representatives of 
                        a beneficiary.--The provisions of section 
                        205(j) and section 206 (regarding 
                        representation of claimants) shall apply to 
                        representation of an individual with respect to 
                        appeals under this section in the same manner 
                        as they apply to representation of an 
                        individual under those sections.
                    ``(C) Succession of rights in cases of 
                assignment.--The right of an individual to an appeal 
                under this section with respect to an item or service 
                may be assigned to the provider of services or supplier 
                of the item or service upon the written consent of such 
                individual using a standard form established by the 
                Secretary for such an assignment.
                    ``(D) Time limits for appeals.--
                            ``(i) Reconsiderations.--Reconsideration 
                        under subparagraph (A) shall be available only 
                        if the individual described in subparagraph (A) 
                        files notice with the Secretary to request 
                        reconsideration by not later than 180 days 
                        after the individual receives notice of the 
                        initial determination under subsection (a) or 
                        within such additional time as the Secretary 
                        may allow.
                            ``(ii) Hearings conducted by the 
                        secretary.--The Secretary shall establish in 
                        regulations time limits for the filing of a 
                        request for a hearing by the Secretary in 
                        accordance with provisions in sections 205 and 
                        206.
                    ``(E) Amounts in controversy.--
                            ``(i) In general.--A hearing (by the 
                        Secretary) shall not be available to an 
                        individual under this section if the amount in 
                        controversy is less than $100, and judicial 
                        review shall not be available to the individual 
                        if the amount in controversy is less than 
                        $1,000.
                            ``(ii) Aggregation of claims.--In 
                        determining the amount in controversy, the 
                        Secretary, under regulations, shall allow 2 or 
                        more appeals to be aggregated if the appeals 
                        involve--
                                    ``(I) the delivery of similar or 
                                related services to the same individual 
                                by one or more providers of services or 
                                suppliers, or
                                    ``(II) common issues of law and 
                                fact arising from services furnished to 
                                2 or more individuals by one or more 
                                providers of services or suppliers.
                    ``(F) Expedited proceedings.--
                            ``(i) Expedited determination.--In the case 
                        of an individual who--
                                    ``(I) has received notice by a 
                                provider of services that the provider 
                                of services plans to terminate services 
                                provided to an individual and a 
                                physician certifies that failure to 
                                continue the provision of such services 
                                is likely to place the individual's 
                                health at significant risk, or
                                    ``(II) has received notice by a 
                                provider of services that the provider 
                                of services plans to discharge the 
                                individual from the provider of 
                                services,
                        the individual may request, in writing or 
                        orally, an expedited determination or an 
                        expedited reconsideration of an initial 
                        determination made under subsection (a), as the 
                        case may be, and the Secretary shall provide 
such expedited determination or expedited reconsideration.
                            ``(ii) Expedited hearing.--In a hearing by 
                        the Secretary under this section, in which the 
                        moving party alleges that no material issues of 
                        fact are in dispute, the Secretary shall make 
                        an expedited determination as to whether any 
                        such facts are in dispute and, if not, shall 
                        render a decision expeditiously.
                    ``(G) Reopening and revision of determinations.--
                The Secretary may reopen or revise any initial 
                determination or reconsidered determination described 
                in this subsection under guidelines established by the 
                Secretary in regulations.
            ``(2) Review of coverage determinations.--
                    ``(A) National coverage determinations.--
                            ``(i) In general.--Review of any national 
                        coverage determination shall be subject to the 
                        following limitations:
                                    ``(I) Such a determination shall 
                                not be reviewed by any administrative 
                                law judge.
                                    ``(II) Such a determination shall 
                                not be held unlawful or set aside on 
                                the ground that a requirement of 
                                section 553 of title 5, United States 
                                Code, or section 1871(b) of this title, 
                                relating to publication in the Federal 
                                Register or opportunity for public 
                                comment, was not satisfied.
                                    ``(III) Upon the filing of a 
                                complaint by an aggrieved party, such a 
                                determination shall be reviewed by the 
                                Departmental Appeals Board of the 
                                Department of Health and Human 
                                Services. In conducting such a review, 
                                the Departmental Appeals Board shall 
                                review the record and shall permit 
                                discovery and the taking of evidence to 
                                evaluate the reasonableness of the 
                                determination. In reviewing such a 
                                determination, the Departmental Appeals 
                                Board shall defer only to the 
                                reasonable findings of fact, reasonable 
                                interpretations of law, and reasonable 
                                applications of fact to law by the 
                                Secretary.
                                    ``(IV) A decision of the 
                                Departmental Appeals Board constitutes 
                                a final agency action and is subject to 
                                judicial review.
                            ``(ii) Definition of national coverage 
                        determination.--For purposes of this section, 
                        the term `national coverage determination' 
                        means a determination by the Secretary 
                        respecting whether or not a particular item or 
                        service is covered nationally under this title, 
                        including such a determination under 
                        1862(a)(1).
            ``(B) Local coverage determination.--In the case of a local 
        coverage determination made by a fiscal intermediary or a 
        carrier under part A or part B respecting whether a particular 
        type or class of items or services is covered under such parts, 
        the following limitations apply:
                    ``(i) Upon the filing of a complaint by an 
                aggrieved party, such a determination shall be reviewed 
                by an administrative law judge of the Social Security 
                Administration. The administrative law judge shall 
                review the record and shall permit discovery and the 
                taking of evidence to evaluate the reasonableness of 
                the determination. In reviewing such a determination, 
                the administrative law judge shall defer only to the 
                reasonable findings of fact, reasonable interpretations 
                of law, and reasonable applications of fact to law by 
                the Secretary.
                    ``(ii) Such a determination may be reviewed by the 
                Departmental Appeals Board of the Department of Health 
                and Human Services.
                    ``(iii) A decision of the Departmental Appeals 
                Board constitutes a final agency action and is subject 
                to judicial review.
            ``(C) No material issues of fact in dispute.--In the case 
        of review of a determination under subparagraph (A)(i)(III) or 
        (B)(i) where the moving party alleges that there are no 
        material issues of fact in dispute, and alleges that the only 
        issue is the constitutionality of a provision of this title, or 
        that a regulation, determination, or ruling by the Secretary is 
        invalid, the moving party may seek review by a court of 
        competent jurisdiction.
            ``(D) Pending national coverage determinations.--
                    ``(i) In general.--In the event the Secretary has 
                not issued a national coverage or noncoverage 
                determination with respect to a particular type or 
                class of items or services, an affected party may 
                submit to the Secretary a request to make such a 
                determination with respect to such items or services. 
                By not later than the end of the 90-day period 
                beginning on the date the Secretary receives such a 
                request, the Secretary shall take one of the following 
                actions:
                            ``(I) Issue a national coverage 
                        determination, with or without limitations.
                            ``(II) Issue a national noncoverage 
                        determination.
                            ``(III) Issue a determination that no 
                        national coverage or noncoverage determination 
                        is appropriate as of the end of such 90-day 
                        period with respect to national coverage of 
                        such items or services.
                            ``(IV) Issue a notice that states that the 
                        Secretary has not completed a review of the 
                        request for a national coverage determination 
                        and that includes an identification of the 
                        remaining steps in the Secretary's review 
                        process and a deadline by which the Secretary 
                        will complete the review and take an action 
                        described in subclause (I), (II), or (III).
                    ``(ii) In the case of an action described in clause 
                (i)(IV), if the Secretary fails to take an action 
                referred to in such clause by the deadline specified by 
                the Secretary under such clause, then the Secretary is 
                deemed to have taken an action described in clause 
                (i)(III) as of the deadline.
                    ``(iii) When issuing a determination under clause 
                (i), the Secretary shall include an explanation of the 
                basis for the determination. An action taken under 
                clause (i) (other than subclause (IV)) is deemed to be 
                a national coverage determination for purposes of 
                review under subparagraph (A).
            ``(E) Annual report on national coverage determinations.--
                    ``(i) In general.--Not later than December 1 of 
                each year, beginning in 2001, the Secretary shall 
                submit to Congress a report that sets forth a detailed 
                compilation of the actual time periods that were 
                necessary to complete and fully implement national 
                coverage determinations that were made in the previous 
                fiscal year for items, services, or medical devices not 
                previously covered as a benefit under this title, 
                including, with respect to each new item, service, or 
                medical device, a statement of the time taken by the 
                Secretary to make the necessary coverage, coding, and 
                payment determinations, including the time taken to 
                complete each significant step in the process of making 
                such determinations.
                    ``(ii) Publication of reports on the internet.--The 
                Secretary shall publish each report submitted under 
                clause (i) on the medicare Internet site of the 
                Department of Health and Human Services.
            ``(3) Publication on the internet of decisions of hearings 
        of the secretary.--Each decision of a hearing by the Secretary 
        shall be made public, and the Secretary shall publish each 
        decision on the Medicare Internet site of the Department of 
        Health and Human Services. The Secretary shall remove from such 
        decision any information that would identify any individual, 
provider of services, or supplier.
            ``(4) Limitation on review of certain regulations.--A 
        regulation or instruction which relates to a method for 
        determining the amount of payment under part B and which was 
        initially issued before January 1, 1981, shall not be subject 
        to judicial review.
            ``(5) Standing.--An action under this section seeking 
        review of a coverage determination (with respect to items and 
        services under this title) may be initiated only by one (or 
        more) of the following aggrieved persons, or classes of 
        persons:
                    ``(A) Individuals entitled to benefits under part 
                A, or enrolled under part B, or both, who are in need 
                of the items or services that are the subject of the 
                coverage determination.
                    ``(B) Persons, or classes of persons, who make, 
                manufacture, offer, supply, make available, or provide 
                such items and services.
    ``(c) Conduct of Reconsiderations by Independent Contractors.--
            ``(1) In general.--The Secretary shall enter into contracts 
        with qualified independent contractors to conduct 
        reconsiderations of initial determinations made under 
        paragraphs (2) and (3) of subsection (a). Contracts shall be 
        for an initial term of three years and shall be renewable on a 
        triennial basis thereafter.
            ``(2) Qualified independent contractor.--For purposes of 
        this subsection, the term `qualified independent contractor' 
        means an entity or organization that is independent of any 
        organization under contract with the Secretary that makes 
        initial determinations under subsection (a), and that meets the 
        requirements established by the Secretary consistent with 
        paragraph (3).
            ``(3) Requirements.--Any qualified independent contractor 
        entering into a contract with the Secretary under this 
        subsection shall meet the following requirements:
                    ``(A) In general.--The qualified independent 
                contractor shall perform such duties and functions and 
                assume such responsibilities as may be required under 
                regulations of the Secretary promulgated to carry out 
                the provisions of this subsection, and such additional 
                duties, functions, and responsibilities as provided 
                under the contract.
                    ``(B) Determinations.--The qualified independent 
                contractor shall determine, on the basis of such 
                criteria, guidelines, and policies established by the 
                Secretary and published under subsection (d)(2)(D), 
                whether payment shall be made for items or services 
                under part A or part B and the amount of such payment. 
                Such determination shall constitute the conclusive 
                determination on those issues for purposes of payment 
                under such parts for fiscal intermediaries, carriers, 
                and other entities whose determinations are subject to 
                review by the contractor; except that payment may be 
                made if--
                            ``(i) such payment is allowed by reason of 
                        section 1879;
                            ``(ii) in the case of inpatient hospital 
                        services or extended care services, the 
                        qualified independent contractor determines 
                        that additional time is required in order to 
                        arrange for postdischarge care, but payment may 
                        be continued under this clause for not more 
                        than 2 days, and only in the case in which the 
                        provider of such services did not know and 
                        could not reasonably have been expected to know 
                        (as determined under section 1879) that payment 
                        would not otherwise be made for such services 
                        under part A or part B prior to notification by 
                        the qualified independent contractor under this 
                        subsection;
                            ``(iii) such determination is changed as 
                        the result of any hearing by the Secretary or 
                        judicial review of the decision under this 
                        section; or
                            ``(iv) such payment is authorized under 
                        section 1861(v)(1)(G).
                    ``(C) Deadlines for decisions.--
                            ``(i) Determinations.--The qualified 
                        independent contractor shall conduct and 
                        conclude a determination under subparagraph (B) 
                        or an appeal of an initial determination, and 
                        mail the notice of the decision by not later 
                        than the end of the 45-day period beginning on 
                        the date a request for reconsideration has been 
                        timely filed.
                            ``(ii) Consequences of failure to meet 
                        deadline.--In the case of a failure by the 
                        qualified independent contractor to mail the 
                        notice of the decision by the end of the period 
                        described in clause (i), the party requesting 
                        the reconsideration or appeal may request a 
                        hearing before an administrative law judge, 
                        notwithstanding any requirements for a 
                        reconsidered determination for purposes of the 
                        party's right to such hearing.
                            ``(iii) Expedited reconsiderations.--The 
                        qualified independent contractor shall perform 
                        an expedited reconsideration under subsection 
                        (b)(1)(F) of a notice from a provider of 
                        services or supplier that payment may not be 
                        made for an item or service furnished by the 
                        provider of services or supplier, of a decision 
                        by a provider of services to terminate services 
                        furnished to an individual, or in accordance 
                        with the following:
                                    ``(I) Deadline for decision.--
                                Notwithstanding section 216(j), not 
                                later than 1 day after the date the 
                                qualified independent contractor has 
                                received a request for such 
                                reconsideration and has received such 
                                medical or other records needed for 
                                such reconsideration, the qualified 
                                independent contractor shall provide 
                                notice (by telephone and in writing) to 
                                the individual and the provider of 
                                services and attending physician of the 
                                individual of the results of the 
                                reconsideration. Such reconsideration 
                                shall be conducted regardless of 
                                whether the provider of services or 
                                supplier will charge the individual for 
                                continued services or whether the 
                                individual will be liable for payment 
                                for such continued services.
                                    ``(II) Consultation with 
                                beneficiary.--In such reconsideration, 
                                the qualified independent contractor 
                                shall solicit the views of the 
                                individual involved.
                    ``(D) Limitation on individual reviewing 
                determinations.--
                            ``(i) Physicians.--No physician under the 
                        employ of a qualified independent contractor 
                        may review--
                                    ``(I) determinations regarding 
                                health care services furnished to a 
                                patient if the physician was directly 
                                responsible for furnishing such 
                                services; or
                                    ``(II) determinations regarding 
                                health care services provided in or by 
                                an institution, organization, or 
                                agency, if the physician or any member 
                                of the physician's family has, directly 
                                or indirectly, a significant financial 
                                interest in such institution, 
                                organization, or agency.
                            ``(ii) Physician's family described.--For 
                        purposes of this paragraph, a physician's 
                        family includes the physician's spouse (other 
                        than a spouse who is legally separated from the 
                        physician under a decree of divorce or separate 
                        maintenance), children (including stepchildren 
                        and legally adopted children), grandchildren, 
                        parents, and grandparents.
                    ``(E) Explanation of determinations.--Any 
                determination of a qualified independent contractor 
                shall be in writing, and shall include a detailed 
                explanation of the determination as well as a 
                discussion of the pertinent facts and applicable 
                regulations applied in making such determination.
                    ``(F) Notice requirements.--Whenever a qualified 
                independent contractor makes a determination under this 
                subsection, the qualified independent contractor shall 
                promptly notify such individual and the entity 
                responsible for the payment of claims under part A or 
                part B of such determination.
                    ``(G) Dissemination of information.--Each qualified 
                independent contractor shall, using the methodology 
                established by the Secretary under subsection (d)(4), 
                make available all determinations of such qualified 
                independent contractors to fiscal intermediaries (under 
                section 1816), carriers (under section 1842), peer 
                review organizations (under part B of title XI), 
                Medicare+Choice organizations offering Medicare+Choice 
                plans under part C, and other entities under contract 
                with the Secretary to make initial determinations under 
                part A or part B or title XI.
                    ``(H) Ensuring consistency in determinations.--Each 
                qualified independent contractor shall monitor its 
                determinations to ensure the consistency of its 
                determinations with respect to requests for 
                reconsideration of similar or related matters.
                    ``(I) Data collection.--
                            ``(i) In general.--Consistent with the 
                        requirements of clause (ii), a qualified 
                        independent contractor shall collect such 
                        information relevant to its functions, and keep 
                        and maintain such records in such form and 
                        manner as the Secretary may require to carry 
                        out the purposes of this section and shall 
                        permit access to and use of any such 
                        information and records as the Secretary may 
                        require for such purposes.
                            ``(ii) Type of data collected.--Each 
                        qualified independent contractor shall keep 
                        accurate records of each decision made, 
consistent with standards established by the Secretary for such 
purpose. Such records shall be maintained in an electronic database in 
a manner that provides for identification of the following:
                                    ``(I) Specific claims that give 
                                rise to appeals.
                                    ``(II) Situations suggesting the 
                                need for increased education for 
                                providers of services, physicians, or 
                                suppliers.
                                    ``(III) Situations suggesting the 
                                need for changes in national or local 
                                coverage policy.
                                    ``(IV) Situations suggesting the 
                                need for changes in local medical 
                                review policies.
                            ``(iii) Annual reporting.--Each qualified 
                        independent contractor shall submit annually to 
                        the Secretary (or otherwise as the Secretary 
                        may request) records maintained under this 
                        paragraph for the previous year.
                    ``(J) Hearings by the secretary.--The qualified 
                independent contractor shall (i) prepare such 
                information as is required for an appeal of its 
                reconsidered determination to the Secretary for a 
                hearing, including as necessary, explanations of issues 
                involved in the determination and relevant policies, 
                and (ii) participate in such hearings as required by 
                the Secretary.
            ``(4) Number of qualified independent contractors.--The 
        Secretary shall enter into contracts with not fewer than 12 
        qualified independent contractors under this subsection.
            ``(5) Limitation on qualified independent contractor 
        liability.--No qualified independent contractor having a 
        contract with the Secretary under this subsection and no person 
        who is employed by, or who has a fiduciary relationship with, 
        any such qualified independent contractor or who furnishes 
        professional services to such qualified independent contractor, 
        shall be held by reason of the performance of any duty, 
        function, or activity required or authorized pursuant to this 
        subsection or to a valid contract entered into under this 
        subsection, to have violated any criminal law, or to be civilly 
        liable under any law of the United States or of any State (or 
        political subdivision thereof) provided due care was exercised 
        in the performance of such duty, function, or activity.
    ``(d) Administrative Provisions.--
            ``(1) Outreach.--The Secretary shall perform such outreach 
        activities as are necessary to inform individuals entitled to 
        benefits under this title and providers of services and 
        suppliers with respect to their rights of, and the process for, 
        appeals made under this section. The Secretary shall use the 
        toll-free telephone number maintained by the Secretary (1-800-
        MEDICAR(E)) (1-800-633-4227) to provide information regarding 
        appeal rights and respond to inquiries regarding the status of 
        appeals.
            ``(2) Guidance for reconsiderations and hearings.--
                    ``(A) Regulations.--Not later than 1 year after the 
                date of the enactment of this section, the Secretary 
                shall promulgate regulations governing the processes of 
                reconsiderations of determinations by the Secretary and 
                qualified independent contractors and of hearings by 
                the Secretary. Such regulations shall include such 
                specific criteria and provide such guidance as required 
                to ensure the adequate functioning of the 
                reconsiderations and hearings processes and to ensure 
                consistency in such processes.
                    ``(B) Deadlines for administrative action.--
                            ``(i) Hearing by administrative law 
                        judge.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), an 
                                administrative law judge shall conduct 
                                and conclude a hearing on a decision of 
                                a qualified independent contractor 
                                under subsection (c) and render a 
                                decision on such hearing by not later 
                                than the end of the 90-day period 
                                beginning on the date a request for 
                                hearing has been timely filed.
                                    ``(II) Waiver of deadline by party 
                                seeking hearing.--The 90-day period 
                                under subclause (i) shall not apply in 
                                the case of a motion or stipulation by 
                                the party requesting the hearing to 
                                waive such period.
                            ``(ii) Departmental appeals board review.--
                        The Departmental Appeals Board of the 
                        Department of Health and Human Services shall 
                        conduct and conclude a review of the decision 
                        on a hearing described in subparagraph (B) and 
                        make a decision or remand the case to the 
                        administrative law judge for reconsideration by 
                        not later than the end of the 90-day period 
                        beginning on the date a request for review has 
                        been timely filed.
                            ``(iii) Consequences of failure to meet 
                        deadlines.--In the case of a failure by an 
                        administrative law judge to render a decision 
                        by the end of the period described in clause 
                        (ii), the party requesting the hearing may 
                        request a review by the Departmental Appeals 
                        Board of the Department of Health and Human 
                        Services, notwithstanding any requirements for 
                        a hearing for purposes of the party's right to 
                        such a review.
                            ``(iv) DAB hearing procedure.--In the case 
                        of a request described in clause (iii), the 
                        Departmental Appeals Board shall review the 
                        case de novo.
                    ``(C) Policies.--The Secretary shall provide such 
                specific criteria and guidance, including all 
                applicable national and local coverage policies and 
                rationale for such policies, as is necessary to assist 
                the qualified independent contractors to make informed 
                decisions in considering appeals under this section. 
                The Secretary shall furnish to the qualified 
                independent contractors the criteria and guidance 
                described in this paragraph in a published format, 
                which may be an electronic format.
                    ``(D) Publication of medicare coverage policies on 
                the internet.--The Secretary shall publish national and 
                local coverage policies under this title on an Internet 
                site maintained by the Secretary.
                    ``(E) Effect of failure to publish policies.--
                            ``(i) National and local coverage 
                        policies.--Qualified independent contractors 
                        shall not be bound by any national or local 
                        medicare coverage policy established by the 
                        Secretary that is not published on the Internet 
                        site under subparagraph (D).
                            ``(ii) Other policies.--With respect to 
                        policies established by the Secretary other 
                        than the policies described in clause (i), 
                        qualified independent contractors shall not be 
                        bound by such policies if the Secretary does 
                        not furnish to the qualified independent 
                        contractor the policies in a published format 
                        consistent with subparagraph (C).
            ``(3) Continuing education requirement for qualified 
        independent contractors and administrative law judges.--
                    ``(A) In general.--The Secretary shall provide to 
                each qualified independent contractor, and, in 
                consultation with the Commissioner of Social Security, 
                to administrative law judges that decide appeals of 
                reconsiderations of initial determinations or other 
                decisions or determinations under this section, such 
                continuing education with respect to policies of the 
                Secretary under this title or part B of title XI as is 
                necessary for such qualified independent contractors 
                and administrative law judges to make informed 
                decisions with respect to appeals.
                    ``(B) Monitoring of decisions by qualified 
                independent contractors and administrative law 
                judges.--The Secretary shall monitor determinations 
                made by all qualified independent contractors and 
                administrative law judges under this section and shall 
                provide continuing education and training to such 
                qualified independent contractors and administrative 
                law judges to ensure consistency of determinations with 
                respect to appeals on similar or related matters. To 
                ensure such consistency, the Secretary shall provide 
                for administration and oversight of qualified 
                independent contractors and, in consultation with the 
                Commissioner of Social Security, administrative law 
                judges through a central office of the Department of 
                Health and Human Services. Such administration and 
                oversight may not be delegated to regional offices of 
                the Department.
            ``(4) Dissemination of determinations.--The Secretary shall 
        establish a methodology under which qualified independent 
        contractors shall carry out subsection (c)(3)(G).
            ``(5) Survey.--Not less frequently than every 5 years, the 
        Secretary shall conduct a survey of a valid sample of 
        individuals entitled to benefits under this title, providers of 
        services, and suppliers to determine the satisfaction of such 
        individuals or entities with the process for appeals of 
        determinations provided for under this section and education 
        and training provided by the Secretary with respect to that 
        process. The Secretary shall submit to Congress a report 
        describing the results of the survey, and shall include any 
        recommendations for administrative or legislative actions that 
        the Secretary determines appropriate.
            ``(6) Report to congress.--The Secretary shall submit to 
        Congress an annual report describing the number of appeals for 
        the previous year, identifying issues that require 
        administrative or legislative actions, and including any 
        recommendations of the Secretary with respect to such actions. 
        The Secretary shall include in such report an analysis of 
        determinations by qualified independent contractors with 
        respect to inconsistent decisions and an analysis of the causes 
        of any such inconsistencies.''.
    (b) Applicability of Requirements and Limitations on Liability of 
Qualified Independent Contractors to Medicare+Choice Independent 
Appeals Contractors.--Section 1852(g)(4) of the Social Security Act (42 
U.S.C. 1395w-22(e)(3)) is amended by adding at the end the following: 
``The provisions of section 1869(c)(5) shall apply to independent 
outside entities under contract with the Secretary under this 
paragraph.''.
    (c) Conforming Amendment to Review by the Provider Reimbursement 
Review Board.--Section 1878(g) of the Social Security Act (42 U.S.C. 
1395oo(g)) is amended by adding at the end the following new paragraph:
    ``(3) Findings described in paragraph (1) and determinations and 
other decisions described in paragraph (2) may be reviewed or appealed 
under section 1869.''.

SEC. 202. PROVISIONS WITH RESPECT TO LIMITATIONS ON LIABILITY OF 
              BENEFICIARIES.

    (a) Expansion of Limitation of Liability Protection for 
Beneficiaries With Respect to Medicare Claims Not Paid or Paid 
Incorrectly.--
            (1) In general.--Section 1879 of the Social Security Act 
        (42 U.S.C. 1395pp) is amended by adding at the end the 
        following new subsections:
    ``(i) Notwithstanding any other provision of this Act, an 
individual who is entitled to benefits under this title and is 
furnished a service or item is not liable for repayment to the 
Secretary of amounts with respect to such benefits--
            ``(1) subject to paragraph (2), in the case of a claim for 
        such item or service that is incorrectly paid by the Secretary; 
        and
            ``(2) in the case of payments made to the individual by the 
        Secretary with respect to any claim under paragraph (1), the 
        individual shall be liable for repayment of such amount only up 
        to the amount of payment received by the individual from the 
        Secretary.
    ``(j)(1) An individual who is entitled to benefits under this title 
and is furnished a service or item is not liable for payment of amounts 
with respect to such benefits in the following cases:
            ``(A) In the case of a benefit for which an initial 
        determination has not been made by the Secretary under 
        subsection (a) whether payment may be made under this title for 
        such benefit.
            ``(B) In the case of a claim for such item or service that 
        is--
                    ``(i) improperly submitted by the provider of 
                services or supplier; or
                    ``(ii) rejected by an entity under contract with 
                the Secretary to review or pay claims for services and 
                items furnished under this title, including an entity 
                under contract with the Secretary under section 1857.
    ``(2) The limitation on liability under paragraph (1) shall not 
apply if the individual signs a waiver provided by the Secretary under 
subsection (l) of protections under this paragraph, except that any 
such waiver shall not apply in the case of a denial of a claim for 
noncompliance with applicable regulations or procedures under this 
title or title XI.
    ``(k) An individual who is entitled to benefits under this title 
and is furnished services by a provider of services is not liable for 
payment of amounts with respect to such services prior to noon of the 
first working day after the date the individual receives the notice of 
determination to discharge and notice of appeal rights under paragraph 
(1), unless the following conditions are met:
            ``(1) The provider of services shall furnish a notice of 
        discharge and appeal rights established by the Secretary under 
        subsection (l) to each individual entitled to benefits under 
        this title to whom such provider of services furnishes 
        services, upon admission of the individual to the provider of 
        services and upon notice of determination to discharge the 
        individual from the provider of services, of the individual's 
        limitations of liability under this section and rights of 
        appeal under section 1869.
            ``(2) If the individual, prior to discharge from the 
        provider of services, appeals the determination to discharge 
        under section 1869 not later than noon of the first working day 
        after the date the individual receives the notice of 
        determination to discharge and notice of appeal rights under 
        paragraph (1), the provider of services shall, by the close of 
        business of such first working day, provide to the Secretary 
        (or qualified independent contractor under section 1869, as 
        determined by the Secretary) the records required to review the 
        determination.
    ``(l) The Secretary shall develop appropriate standard forms for 
individuals entitled to benefits under this title to waive limitation 
of liability protections under subsection (j) and to receive notice of 
discharge and appeal rights under subsection (k). The forms developed 
by the Secretary under this subsection shall clearly and in plain 
language inform such individuals of their limitations on liability, 
their rights under section 1869(a) to obtain an initial determination 
by the Secretary of whether payment may be made under part A or part B 
for such benefit, and their rights of appeal under section 1869(b), and 
shall inform such individuals that they may obtain further information 
or file an appeal of the determination by use of the toll-free 
telephone number (1-800-MEDICAR(E)) (1-800-633-4227) maintained by the 
Secretary. The forms developed by the Secretary under this subsection 
shall be the only manner in which such individuals may waive such 
protections under this title or title XI.
    ``(m) An individual who is entitled to benefits under this title 
and is furnished an item or service is not liable for payment of cost 
sharing amounts of more than $50 with respect to such benefits unless 
the individual has been informed in advance of being furnished the item 
or service of the estimated amount of the cost sharing for the item or 
service using a standard form established by the Secretary.''.
            (2) Conforming amendment.--Section 1870(a) of the Social 
        Security Act (42 U.S.C. 1395gg(a)) is amended by striking ``Any 
        payment under this title'' and inserting ``Except as provided 
        in section 1879(i), any payment under this title''.
    (b) Inclusion of Beneficiary Liability Information in Explanation 
of Medicare Benefits.--Section 1806(a) of the Social Security Act (42 
U.S.C. 1395b-7(a)) is amended--
            (1) in paragraph (1), by striking ``and'' at the end;
            (2) by redesignating paragraph (2) as paragraph (3); and
            (3) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) lists with respect to each item or service furnished 
        the amount of the individual's liability for payment;'';
            (4) in paragraph (3), as so redesignated, by striking the 
        period at the end and inserting ``; and''; and
            (5) by adding at the end the following new paragraph:
            ``(4) includes the toll-free telephone number (1-800-
        MEDICAR(E)) (1-800-633-4227) for information and questions 
        concerning the statement, liability of the individual for 
        payment, and appeal rights.''.

SEC. 203. WAIVERS OF LIABILITY FOR COST SHARING AMOUNTS.

    (a) In General.--Section 1128A(i)(6)(A) of the Social Security Act 
(42 U.S.C. 1320a-7a(i)(6)(A)) is amended by striking clauses (i) 
through (iii) and inserting the following:
                            ``(i) the waiver is offered as a part of a 
                        supplemental insurance policy or retiree health 
                        plan;
                            ``(ii) the waiver is not offered as part of 
                        any advertisement or solicitation, other than 
                        in conjunction with a policy or plan described 
                        in clause (i);
                            ``(iii) the person waives the coinsurance 
                        and deductible amount after the beneficiary 
                        informs the person that payment of the 
                        coinsurance or deductible amount would pose a 
                        financial hardship for the individual; or
                            ``(iv) the person determines that the 
                        coinsurance and deductible amount would not 
                        justify the costs of collection.''.
    (b) Conforming Amendment.--Section 1128B(b) of the Social Security 
Act (42 U.S.C. 1320a-7b(b)) is amended by adding at the end the 
following new paragraph:
            ``(4) In this section, the term `remuneration' includes the 
        meaning given such term in section 1128A(i)(6).''.

            Subtitle B--Establishment of Medicare Ombudsman

SEC. 211. ESTABLISHMENT OF MEDICARE OMBUDSMAN FOR BENEFICIARY 
              ASSISTANCE AND ADVOCACY.

    (a) In General.--Within the Health Care Financing Administration of 
the Department of Health and Human Services, there shall be a Medicare 
Ombudsman, appointed by the Secretary of Health and Human Services from 
among individuals with expertise and experience in the fields of health 
care and advocacy, to carry out the duties described in subsection (b).
    (b) Duties.--The Medicare Ombudsman shall--
            (1) receive complaints, grievances, and requests for 
        information submitted by a medicare beneficiary, with respect 
        to any aspect of the medicare program;
            (2) provide assistance with respect to complaints, 
        grievances, and requests referred to in clause (i), including--
                    (A) assistance in collecting relevant information 
                for such beneficiaries, to seek an appeal of a decision 
                or determination made by a fiscal intermediary, 
                carrier, Medicare+Choice organization, a benefit 
                administrator responsible for administering the 
                prescription medicine benefit program under part D of 
                title XVIII of the Social Security Act, or the 
                Secretary;
                    (B) assistance to such beneficiaries with any 
                problems arising from disenrollment from a 
                Medicare+Choice plan under part C of title XVIII of 
                such Act or a benefit administrator responsible for 
                administering such prescription medicine benefit 
                program; and
                    (C) submit annual reports to Congress and the 
                Secretary, and include in such reports recommendations 
                for improvement in the administration of this title as 
                the Medicare Ombudsman determines appropriate.
    (c) Coordination With State Ombudsman Programs and Consumer 
Organizations.--The Medicare Ombudsman shall, to the extent 
appropriate, coordinate with State medical Ombudsman programs, and with 
State- and community-based consumer organizations, to--
            (1) provide information about the medicare program; and
            (2) conduct outreach to educate medicare beneficiaries with 
        respect to manners in which problems under the medicare program 
        may be resolved or avoided.
    (d) Definitions.--In this section:
            (1) The term ``medicare beneficiary'' means an individual 
        entitled to benefits under part A of title XVIII of the Social 
        Security Act, or enrolled under part B of such title, or both.
            (2) The term ``medicare program'' means the insurance 
        program established under title XVIII of the Social Security 
        Act.
            (3) The term ``fiscal intermediary'' has the meaning given 
        such term under section 1816(a) of the Social Security Act (42 
        U.S.C. 1395h(a)).
            (4) The term ``carrier'' has the meaning given such term 
        under section 1842(f) of the Social Security Act (42 U.S.C. 
        1395u(f)).
            (5) The term ``Medicare+Choice organization'' has the 
        meaning given such term under section 1859(a)(1) of the Social 
        Security Act (42 U.S.C. 1395w-29(a)(1)).
            (6) The term ``Secretary'' means the Secretary of Health 
        and Human Services.

  TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B 
                              DRUG BENEFIT

                  Subtitle A--Medicare+Choice Reforms

SEC. 301. INCREASE IN NATIONAL PER CAPITA MEDICARE+CHOICE GROWTH 
              PERCENTAGE IN 2001 AND 2002.

    Section 1853(c)(6)(B) of the Social Security Act (42 U.S.C. 1395w-
23(c)(6)(B)) is amended--
            (1) in clause (iv), by striking ``for 2001, 0.5 percentage 
        points'' and inserting ``for 2001, 0 percentage points''; and
            (2) in clause (v), by striking ``for 2002, 0.3 percentage 
        points'' and inserting ``for 2002, 0 percentage points''.

SEC. 302. PERMANENTLY REMOVING APPLICATION OF BUDGET NEUTRALITY 
              BEGINNING IN 2002.

    Section 1853(c) of the Social Security Act (42 U.S.C. 1395w-23(c)) 
is amended--
            (1) in paragraph (1)(A), in the matter following clause 
        (ii), by inserting ``(for years before 2002)'' after 
        ``multiplied''; and
            (2) in paragraph (5), by inserting ``(before 2002)'' after 
        ``for each year''.

SEC. 303. INCREASING MINIMUM PAYMENT AMOUNT.

    (a) In General.--Section 1853(c)(1)(B)(ii) of the Social Security 
Act (42 U.S.C. 1395w-23(c)(1)(B)(ii)) is amended--
            (1) by striking ``(ii) For a succeeding year'' and 
        inserting ``(ii)(I) Subject to subclause (II), for a succeeding 
        year''; and
            (2) by adding at the end the following new subclause:
                            ``(II) For 2002 for any of the 50 States 
                        and the District of Columbia, $450.''.
    (b) Effective Date.--The amendments made by subsection (a) apply to 
years beginning with 2002.

SEC. 304. ALLOWING MOVEMENT TO 50:50 PERCENT BLEND IN 2002.

    Section 1853(c)(2) of the Social Security Act (42 U.S.C. 1395w-
23(c)(2)) is amended--
            (1) by striking the period at the end of subparagraph (F) 
        and inserting a semicolon; and
            (2) by adding after and below subparagraph (F) the 
        following:
        ``except that a Medicare+Choice organization may elect to apply 
        subparagraph (F) (rather than subparagraph (E)) for 2002.''.

SEC. 305. INCREASED UPDATE FOR PAYMENT AREAS WITH ONLY ONE OR NO 
              MEDICARE+CHOICE CONTRACTS.

    (a) In General.--Section 1853(c)(1)(C)(ii) of the Social Security 
Act (42 U.S.C. 1395w-23(c)(1)(C)(ii)) is amended--
            (1) by striking ``(ii) For a subsequent year'' and 
        inserting ``(ii)(I) Subject to subclause (II), for a subsequent 
        year''; and
            (2) by adding at the end the following new subclause:
                            ``(II) During 2002, 2003, 2004, and 2005, 
                        in the case of a Medicare+Choice payment area 
                        in which there is no more than 1 contract 
                        entered into under this part as of July 1 
                        before the beginning of the year, 102.5 percent 
                        of the annual Medicare+Choice capitation rate 
                        under this paragraph for the area for the 
                        previous year.''.
    (b) Construction.--The amendments made by subsection (a) do not 
affect the payment of a first time bonus under section 1853(i) of the 
Social Security Act (42 U.S.C. 1395w-23(i)).

SEC. 306. PERMITTING HIGHER NEGOTIATED RATES IN CERTAIN MEDICARE+CHOICE 
              PAYMENT AREAS BELOW NATIONAL AVERAGE.

    Section 1853(c)(1) of the Social Security Act (42 U.S.C. 1395w-
23(c)(1)) is amended--
            (1) in the matter before subparagraph (A), by striking ``or 
        (C)'' and inserting ``(C), or (D)''; and
            (2) by adding at the end the following new subparagraph:
                    ``(D) Permitting higher rates through 
                negotiation.--
                            ``(i) In general.--For each year beginning 
                        with 2004, in the case of a Medicare+Choice 
                        payment area for which the Medicare+Choice 
                        capitation rate under this paragraph would 
                        otherwise be less than the United States per 
                        capita cost (USPCC), as calculated by the 
                        Secretary, a Medicare+Choice organization may 
                        negotiate with the Medicare Benefits 
                        Administrator an annual per capita rate that--
                                    ``(I) reflects an annual rate of 
                                increase up to the rate of increase 
                                specified in clause (ii);
                                    ``(II) takes into account audited 
                                current data supplied by the 
                                organization on its adjusted community 
                                rate (as defined in section 
                                1854(f)(3)); and
                                    ``(III) does not exceed the United 
                                States per capita cost, as projected by 
                                the Secretary for the year involved.
                            ``(ii) Maximum rate described.--The rate of 
                        increase specified in this clause for a year is 
                        the rate of inflation in private health 
                        insurance for the year involved, as projected 
                        by the Medicare Benefits Administrator, and 
                        includes such adjustments as may be necessary--
                                    ``(I) to reflect the demographic 
                                characteristics in the population under 
                                this title; and
                                    ``(II) to eliminate the costs of 
                                prescription drugs.
                            ``(iii) Adjustments for over or under 
                        projections.--If subparagraph is applied to an 
                        organization and payment area for a year, in 
                        applying this subparagraph for a subsequent 
                        year the provisions of paragraph (6)(C) shall 
                        apply in the same manner as such provisions 
                        apply under this paragraph.''.

SEC. 307. 10-YEAR PHASE IN OF RISK ADJUSTMENT BASED ON DATA FROM ALL 
              SETTINGS.

    Section 1853(a)(3)(C)(ii) of the Social Security Act (42 U.S.C. 
1395w-23(c)(1)(C)(ii)) is amended--
            (1) by striking the period at the end of subclause (II) and 
        inserting a semicolon; and
            (2) by adding after and below subclause (II) the following:
                        ``and, beginning in 2004, insofar as such risk 
                        adjustment is based on data from all settings, 
                        the methodology shall be phased in equal 
                        increments over a 10 year period, beginning 
                        with 2004 or (if later) the first year in which 
                        such data is used.''.

 Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals

SEC. 311. PRESERVATION OF COVERAGE OF DRUGS AND BIOLOGICALS UNDER PART 
              B OF THE MEDICARE PROGRAM.

    (a) In General.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) is amended, in each of subparagraphs (A) and (B), 
by striking ``(including drugs and biologicals which cannot, as 
determined in accordance with regulations, be self-administered)'' and 
inserting ``(including injectable and infusable drugs and biologicals 
which are not usually self-administered by the patient)''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
to drugs and biologicals administered on or after October 1, 2000.

SEC. 312. COMPREHENSIVE IMMUNOSUPPRESSIVE DRUG COVERAGE FOR TRANSPLANT 
              PATIENTS.

    (a) Revision of Medicare Coverage for Immunosuppressive Drugs.--
            (1) In general.--Section 1861(s)(2)(J) of the Social 
        Security Act (42 U.S.C. 1395x(s)(2)(J)) (as amended by section 
        227(a) of the Medicare, Medicaid, and SCHIP Balanced Budget 
        Refinement Act of 1999 (113 Stat. 1501A-354), as enacted into 
        law by section 1000(a)(6) of Public Law 106-113) is amended by 
        striking ``, to an individual who receives'' and all that 
        follows before the semicolon at the end and inserting ``to an 
        individual who has received an organ transplant''.
            (2) Conforming amendments.--
                    (A) Section 1832 of the Social Security Act (42 
                U.S.C. 1395k) (as amended by section 227(b) of the 
                Medicare, Medicaid, and SCHIP Balanced Budget 
                Refinement Act of 1999 (113 Stat. 1501A-354), as 
                enacted into law by section 1000(a)(6) of Public Law 
                106-113) is amended--
                            (i) by striking subsection (b); and
                            (ii) by redesignating subsection (c) as 
                        subsection (b).
                    (B) Subsections (c) and (d) of section 227 of the 
                Medicare, Medicaid, and SCHIP Balanced Budget 
                Refinement Act of 1999 (113 Stat. 1501A-355), as 
                enacted into law by section 1000(a)(6) of Public Law 
                106-113, are repealed.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to drugs furnished on or after the date of 
        enactment of this Act.
    (b) Extension of Certain Secondary Payer Requirements.--Section 
1862(b)(1)(C) of the Social Security Act (42 U.S.C. 1395y(b)(1)(C)) is 
amended by adding at the end the following: ``With regard to 
immunosuppressive drugs furnished on or after the date of enactment of 
the Medicare Guaranteed and Defined Rx Benefit and Health Provider 
Relief Act of 2000, this subparagraph shall be applied without regard 
to any time limitation.''.
    (c) Establishment of Part D Catastrophic Limit on Part B Copayments 
for Immunosuppressive Drugs.--Section 1833 of the Social Security Act 
(42 U.S.C. 1395l) is amended by inserting after subsection (o) the 
following new subsection:
    ``(p) Limitation on Amount of Deductibles and Coinsurance for 
Immunosuppressive Drugs for Certain Beneficiaries.--With respect to 
2003 and each subsequent year, no deductibles and coinsurance 
applicable to immunosuppresive drugs (as described in section 
1861(s)(2)(J)) in a year under this part shall be imposed to the extent 
that the individual has incurred expenditures in that year for out-of-
pocket expenditures for immunosuppressive drugs in excess of the 
catastrophic benefit level provided for under section 1860B(c).''.

         Subtitle C--Improvement of Certain Preventive Benefits

SEC. 321. COVERAGE OF ANNUAL SCREENING PAP SMEAR AND PELVIC EXAMS.

    (a) In General.--
            (1) Annual screening pap smear.--Section 1861(nn)(1) of the 
        Social Security Act (42 U.S.C. 1395x(nn)(1)) is amended by 
        striking ``if the individual involved has not had such a test 
        during the preceding 3 years, or during the preceding year in 
        the case of a woman described in paragraph (3).'' and inserting 
        ``if the woman involved has not had such a test during the 
        preceding year.''.
            (2) Annual screening pelvic exam.--Section 1861(nn)(2) of 
        such Act (42 U.S.C. 1395x(nn)(2)) is amended by striking 
        ``during the preceding 3 years, or during the preceding year in 
        the case of a woman described in paragraph (3),'' and inserting 
        ``during the preceding year,''.
            (3) Conforming amendment.--Section 1861(nn) of such Act (42 
        U.S.C. 1395x(nn)) is amended by striking paragraph (3).
    (b) Effective Date.--The amendments made by subsection (a) apply to 
items and services furnished on or after January 1, 2001.

 TITLE IV--ADJUSTMENTS TO PAYMENT PROVISIONS OF THE BALANCED BUDGET ACT

          Subtitle A--Payments for Inpatient Hospital Services

SEC. 401. ELIMINATING REDUCTION IN HOSPITAL MARKET BASKET UPDATE FOR 
              FISCAL YEAR 2001.

    Section 1886(b)(3)(B)(i)(XVI) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)(i)(XVI)) is amended by striking ``minus 1.1 percentage 
points for hospitals (other than sole community hospitals) in all 
areas, and the market basket percentage increase for sole community 
hospitals,'' and inserting ``for hospitals in all areas,''.

SEC. 402. ELIMINATING FURTHER REDUCTIONS IN INDIRECT MEDICAL EDUCATION 
              (IME) FOR FISCAL YEAR 2001.

    Section 1886(d)(5)(B)(ii) of the Social Security Act (42 U.S.C. 
1395ww(d)(5)(B)(ii)(V)) is amended--
            (1) in subclause (IV)--
                    (A) by striking ``fiscal year 2000'' and inserting 
                ``each of fiscal years 2000 and 2001''; and
                    (B) by adding ``and'' at the end;
            (2) by striking subclause (V); and
            (3) by redesignating subclause (VI) as subclause (V).

SEC. 403. ELIMINATING FURTHER REDUCTIONS IN DISPROPORTIONATE SHARE 
              HOSPITAL (DSH) PAYMENTS.

    (a) Medicare Payments.--Section 1886(d)(5)(F)(ix) of the Social 
Security Act (42 U.S.C. 1395ww(d)(5)(F)(ix)) is amended--
            (1) in subclause (III), by striking ``and 2001'';
            (2) by redesignating subclauses (IV) and (V) as subclauses 
        (V) and (VI), respectively; and
            (3) by inserting after subclause (III) the following new 
        subclause:
            ``(IV) during fiscal year 2001, such additional payment 
        amount shall be reduced by 0 percent;''.
    (b) Freeze in Medicaid DSH Allotments for Fiscal Year 2001.--
Notwithstanding section 1923(f)(2) of the Social Security Act (42 
U.S.C. 1396r-4(f)(2)), the DSH allotment under such section for a State 
for fiscal year 2001 shall be the same as the DSH allotment under such 
section for fiscal year 2000.

SEC. 404. INCREASE BASE PAYMENT TO PUERTO RICO HOSPITALS.

    Section 1886(d)(9)(A) of the Social Security Act (42 U.S.C. 
1395ww(d)(9)(A)) is amended--
            (1) in clause (i), by striking ``October 1, 1997, 50 
        percent ('' and inserting ``October 1, 2000, 25 percent (for 
        discharges between October 1, 1997 and September 30, 2000, 50 
        percent,''; and
            (2) in clause (ii), in the matter preceding subclause (I), 
        by striking ``after October 1, 1997, 50 percent ('' and 
        inserting ``after October 1, 2000, 75 percent (for discharges 
        between October 1, 1997, and September 30, 2000, 50 percent,''.

           Subtitle B--Payments for Skilled Nursing Services

SEC. 411. ELIMINATING REDUCTION IN SNF MARKET BASKET UPDATE FOR FISCAL 
              YEAR 2001.

    Section 1888(e)(4)(E) of the Social Security Act (42 U.S.C. 
1395yy(e)(4)(E)) is amended--
            (1) by redesignating subclauses (II) and (III) as 
        subclauses (III) and (IV) respectively;
            (2) in subclause (III) as redesignated, by striking ``for 
        each of fiscal years 2001 and 2002,'' and inserting ``for 
        fiscal year 2002,''; and
            (3) by inserting after subclause (I) the following new 
        subclause:
                                    ``(II) for fiscal year 2001, the 
                                rate computed for fiscal year 2000 
                                increased by the skilled nursing 
                                facility market basket percentage 
                                increase for fiscal year 2000.''.

SEC. 412. EXTENSION OF MORATORIUM ON THERAPY CAPS.

    Section 1833(g) of the Social Security Act (42 U.S.C. 1395l(g)) is 
amended in paragraph (4) by striking ``2000 and 2001.'' and inserting 
``2000 through 2002.''.

             Subtitle C--Payments for Home Health Services

SEC. 421. 1-YEAR ADDITIONAL DELAY IN APPLICATION OF 15 PERCENT 
              REDUCTION ON PAYMENT LIMITS FOR HOME HEALTH SERVICES.

    Section 1895(b)(3)(A)(i) of the Social Security Act (42 U.S.C. 
1395fff(b)(3)(A)(i)) is amended--
            (1) by redesignating subparagraph (II) as subparagraph 
        (III);
            (2) by inserting in subparagraph (III), as redesignated, 
        ``24 months'' following ``periods beginning''; and
            (3) by inserting after subclause (I) the following new 
        subclause:
                                    ``(II) For the 12-month period 
                                beginning after the period described in 
                                subclause (I), such amount (or amounts) 
                                shall be equal to the amount (or 
                                amounts) determined under subclause 
                                (I), updated under subparagraph (B).''.

SEC. 422. PROVISION OF FULL MARKET BASKET UPDATE FOR HOME HEALTH 
              SERVICES FOR FISCAL YEAR 2001.

    Section 1861(v)(1)(L)(x) of the Social Security Act (42 U.S.C. 
1395x(v)(1)(L)(x)) is amended--
            (1) by striking ``2001,''; and
            (2) by adding at the end the following: ``With respect to 
        cost reporting periods beginning during fiscal year 2001, the 
        update to any limit under this subparagraph shall be the home 
        health market basket.''.

                 Subtitle D--Rural Provider Provisions

SEC. 431. ELIMINATION OF REDUCTION IN HOSPITAL OUTPATIENT MARKET BASKET 
              INCREASE.

    Section 1833(t)(3)(C)(iii) of the Social Security Act (42 U.S.C. 
1395l(t)(3)(C)(iii)) is amended by striking ``reduced by 1 percentage 
point for such factor for services furnished in each of 2000, 2001, and 
2002'' and inserting ``reduced by 1 percentage point for such factor 
for services furnished in 2000 and reduced (except in the case of 
hospitals located in a rural area, as defined for purposes of section 
1886(d)) by 1 percentage point for such factor for services furnished 
in each of 2001 and 2002.''

                      Subtitle E--Other Providers

SEC. 441. UPDATE IN RENAL DIALYSIS COMPOSITE RATE.

    The last sentence of section 1881(b)(7) of the Social Security Act 
(42 U.S.C. 1395rr(b)(7)) is amended by striking ``for such services 
furnished on or after January 1, 2001, by 1.2 percent'' and inserting 
``for such services furnished on or after January 1, 2001, by 2.4 
percent''.

            Subtitle F--Provision for Additional Adjustments

SEC. 451. GUARANTEE OF ADDITIONAL ADJUSTMENTS TO PAYMENTS FOR PROVIDERS 
              FROM BUDGET SURPLUS.

    Notwithstanding any other provision of law, from amounts estimated 
to be in excess social security surpluses estimated under the Balanced 
Budget and Emergency Deficit Control Act of 1985 for the 5 fiscal year 
and 10 fiscal year periods beginning in fiscal year 2001, there shall 
be made available for further adjustments to payment policies 
established by the Balanced Budget Act of 1997, amounts that would 
provide for additional improvements to the medicare and medicaid 
programs carried out under titles XVIII and XIX of the Social Security 
Act and payments to providers of services and suppliers furnishing 
items and services for which payments is made under those programs in 
the aggregate amounts over such 5 fiscal year and 10 fiscal year 
periods of $11,000,000, and $21,000,000, respectively.
                                 <all>
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