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[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 828 Introduced in House (IH)]

107th CONGRESS
  1st Session
                                H. R. 828

 To amend title XVIII of the Social Security Act to expand coverage of 
preventive services under the Medicare Program and to provide coverage 
          of outpatient prescription drugs under that program.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 1, 2001

  Mr. Grucci introduced the following bill; which was referred to the 
 Committee on Energy and Commerce, and in addition to the Committee on 
   Ways and Means, for a period to be subseqently 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 expand coverage of 
preventive services under the Medicare Program and to provide coverage 
          of outpatient prescription drugs under that program.

    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 ``Senior's Health 
Care Choice Act of 2001''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
           TITLE I--MEDICARE COVERAGE OF PREVENTIVE SERVICES

Sec. 101. Counseling for cessation of tobacco use.
Sec. 102. Screening for hypertension.
Sec. 103. Counseling for hormone replacement therapy.
Sec. 104. Screening for diminished visual acuity.
Sec. 105. Screening for hearing impairment.
Sec. 106. Screening and counseling for osteoporosis.
Sec. 107. Screening for cholesterol.
Sec. 108. Expansion of coverage of medical nutrition therapy services.
Sec. 109. Expansion of coverage of glaucoma screening.
Sec. 110. Routine annual physical checkups.
Sec. 111. Routine annual dental examinations and cleaning.
Sec. 112. Routine annual eye examinations.
 TITLE II--MEDICARE PRESCRIPTION DRUG AND SUPPLEMENTAL BENEFIT PROGRAM

Sec. 201. Establishment of program.
        ``TITLE XXII--MEDICARE PRESCRIPTION DRUG BENEFIT PROGRAM

        ``Sec. 2201. Establishment of prescription drug and 
                            supplemental benefit program.
        ``Sec. 2202. Enrollment under program.
        ``Sec. 2203. Election of a medicare prescription plus plan.
        ``Sec. 2204. Beneficiary information.
        ``Sec. 2205. Outpatient prescription drug and other 
                            supplemental benefits.
        ``Sec. 2206. Beneficiary protections.
        ``Sec. 2207. Requirements for entities offering medicare 
                            prescription plus plans.
        ``Sec. 2208. Submission of medicare prescription plus plans.
        ``Sec. 2209. Approval of medicare prescription plus plans.
        ``Sec. 2210. Payments to medicare prescription plus plans for 
                            benefits.
        ``Sec. 2211. Computation and collection of beneficiary share of 
                            premium.
        ``Sec. 2212. Additional prescription drug subsidies through 
                            reinsurance.
        ``Sec. 2213. Plan fees for administrative costs.
        ``Sec. 2214. Medicare prescription drug account.
        ``Sec. 2215. Secondary payer provisions.
        ``Sec. 2216. Definitions; treatment of references to provisions 
                            in medicare+choice program.
Sec. 202. Amendments to Federal Supplementary Medical Insurance Trust 
                            Fund.
Sec. 203. Prescription drug coverage under the Medicare+Choice program.
Sec. 205. Medigap provisions.

           TITLE I--MEDICARE COVERAGE OF PREVENTIVE SERVICES

SEC. 101. COUNSELING FOR CESSATION OF TOBACCO USE.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)), as amended by 102(a) and 105(a) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (as 
enacted into law by section 1(a)(6) of Public Law 106-554), is 
amended--
            (1) in subparagraph (U), by striking ``and'' at the end;
            (2) in subparagraph (V), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(W) counseling for cessation of tobacco use (as defined 
        in subsection (vv)) for individuals who have a history of 
        tobacco use;''.
    (b) Services Described.--Section 1861 of such Act (42 U.S.C. 
1395x), as amended by section 102(b) of the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act of 2000 (as enacted into 
law by section 1(a)(6) of Public Law 106-554), is amended by adding at 
the end the following new subsection:

               ``Counseling for Cessation of Tobacco Use

    ``(vv)(1) Except as provided in paragraph (2), the term `counseling 
for cessation of tobacco use' means diagnostic, therapy, and counseling 
services for cessation of tobacco use which are furnished--
            ``(A) by or under the supervision of a physician; or
            ``(B) by any other health care professional who is legally 
        authorized to furnish such services under State law (or the 
        State regulatory mechanism provided by State law) of the State 
        in which the services are furnished, as would otherwise be 
        covered if furnished by a physician or as an incident to a 
        physician's professional service.
    ``(2) The term `counseling for cessation of tobacco use' does not 
include coverage for drugs or biologicals that are not otherwise 
covered under this title.''.
    (c) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)), as amended by section 105(c) and 
        223(c) of the Medicare, Medicaid, and SCHIP Benefits 
        Improvement and Protection Act of 2000 (as enacted into law by 
        section 1(a)(6) of Public Law 106-554), is amended--
                    (A) by striking ``and'' before ``(U)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (V) with respect to counseling 
                for cessation of tobacco use (as defined in section 
                1861(vv)), the amount paid shall be 100 percent of the 
                lesser of the actual charge for the services or the 
                amount determined by a fee schedule established by the 
                Secretary for the purposes of this subparagraph''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) is amended--
                    (A) by striking ``and'' before ``(6)''; and
                    (B) by inserting before the period the following: 
                ``, and (7) such deductible shall not apply with 
                respect to counseling for cessation of tobacco use (as 
                defined in section 1861(vv))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2002.

SEC. 102. SCREENING FOR HYPERTENSION.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) (as amended by section 101(a)) is amended--
            (1) in subparagraph (V), by striking ``and'' at the end;
            (2) in subparagraph (W), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(X) screening for hypertension (as defined in subsection 
        (ww)) not more frequently than once every 2 years for 
        individuals with normotensive blood pressure measurements and 
        annually for individuals with blood pressure measurements that 
        are not normotensive;''.
    (b) Services Described.--Section 1861 of such Act (42 U.S.C. 1395x) 
(as amended by section 101(b)) is amended by adding at the end the 
following new subsection:

                      ``Screening for Hypertension

    ``(ww) The term `screening for hypertension' means diagnostic 
services for hypertension which are furnished--
            ``(1) by or under the supervision of a physician; or
            ``(2) by any other health care professional who is legally 
        authorized to furnish such services under State law (or the 
        State regulatory mechanism provided by State law) of the State 
        in which the services are furnished, as would otherwise be 
        covered if furnished by a physician or as an incident to a 
        physician's professional service.''.
    (c) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 101(c)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(V)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (W) with respect to screening 
                for hypertension (as defined in section 1861(ww)), the 
                amount paid shall be 100 percent of the lesser of the 
                actual charge for the services or the amount determined 
                by a fee schedule established by the Secretary for the 
                purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 101(c)(2)) is amended--
                    (A) by striking ``and'' before ``(7)''; and
                    (B) by inserting before the period the following: 
                ``, and (8) such deductible shall not apply with 
                respect to screening for hypertension (as defined in 
                section 1861(ww))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2002.

SEC. 103. COUNSELING FOR HORMONE REPLACEMENT THERAPY.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) (as amended by section 102(a)) is amended--
            (1) in subparagraph (W), by striking ``and'' at the end;
            (2) in subparagraph (X), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(Y) counseling for hormone replacement therapy (as 
        defined in subsection (xx));''.
    (b) Services Described.--Section 1861 of such Act (42 U.S.C. 1395x) 
(as amended by section 102(b)) is amended by adding at the end the 
following new subsection:

              ``Counseling for Hormone Replacement Therapy

    ``(xx)(1) Except as provided in paragraph (2), the term `counseling 
for hormone replacement therapy' means diagnostic, therapy, and 
counseling services for hormone replacement which are furnished--
            ``(A) by or under the supervision of a physician; or
            ``(B) by any other health care professional who is legally 
        authorized to furnish such services under State law (or the 
        State regulatory mechanism provided by State law) of the State 
        in which the services are furnished, as would otherwise be 
        covered if furnished by a physician or as an incident to a 
        physician's professional service.
    ``(2) The term `counseling for hormone replacement therapy' does 
not include coverage for drugs or biologicals that are not otherwise 
covered under this title.''.
    (c) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 102(c)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(W)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (X) with respect to counseling 
                for hormone replacement therapy (as defined in section 
                1861(xx)), the amount paid shall be 100 percent of the 
                lesser of the actual charge for the services or the 
                amount determined by a fee schedule established by the  
Secretary for the purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 102(c)(2)) is amended--
                    (A) by striking ``and'' before ``(8)''; and
                    (B) by inserting before the period the following: 
                ``, and (9) such deductible shall not apply with 
                respect to counseling for hormone replacement therapy 
                (as defined in section 1861(xx))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2002.

SEC. 104. SCREENING FOR DIMINISHED VISUAL ACUITY.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) (as amended by section 103(a)) is amended--
            (1) in subparagraph (X), by striking ``and'' at the end;
            (2) in subparagraph (Y), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(Z) screening for diminished visual acuity (as defined in 
        subsection (yy));''.
    (b) Services Described.--Section 1861 of such Act (42 U.S.C. 1395x) 
(as amended by section 103(b)) is amended by adding at the end the 
following new subsection:

                ``Screening for Diminished Visual Acuity

    ``(yy) The term `screening for diminished visual acuity' means 
diagnostic services for screening for diminished visual acuity which 
are furnished by or under the supervision of an optometrist or 
ophthalmologist who is legally authorized to furnish such services 
under State law (or the State regulatory mechanism provided by State 
law) of the State in which the services are furnished, as would 
otherwise be covered if furnished by a physician or as an incident to a 
physician's professional service.''.
    (c) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 103(c)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(X)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (Y) with respect to screening 
                for diminished visual acuity (as defined in section 
                1861(yy)), the amount paid shall be 100 percent of the 
                lesser of the actual charge for the services or the 
                amount determined by a fee schedule established by the 
                Secretary for the purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 103(c)(2)) is amended--
                    (A) by striking ``and'' before ``(9)''; and
                    (B) by inserting before the period the following: 
                ``, and (10) such deductible shall not apply with 
                respect to screening for diminished visual acuity (as 
                defined in section 1861(yy))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2002.

SEC. 105. SCREENING FOR HEARING IMPAIRMENT.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) (as amended by section 104(a)) is amended--
            (1) in subparagraph (Y), by striking ``and'' at the end;
            (2) in subparagraph (Z), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(AA) screening for hearing impairment (as defined in 
        subsection (zz));''.
    (b) Services Described.--Section 1861 of such Act (42 U.S.C. 1395x) 
(as amended by section 104(b)) is amended by adding at the end the 
following new subsection:

                   ``Screening for Hearing Impairment

    ``(zz) The term `screening for hearing impairment' means diagnostic 
services for hearing impairment by use of periodic questions, otoscopic 
examination and audio metric testing if such questions indicate 
potential hearing impairment, and counseling about hearing aid devices 
which are furnished--
            ``(1) by or under the supervision of a physician; or
            ``(2) by any other health care professional who is legally 
        authorized to furnish such services under State law (or the 
        State regulatory mechanism provided by State law) of the State 
        in which the services are furnished, as would otherwise be 
        covered if furnished by a physician or as an incident to a 
        physician's professional service.''.
    (c) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 104(c)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(Y)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (Z) with respect to screening 
                for hearing impairment (as defined in section 
                1861(zz)), the amount paid shall be 100 percent of the 
                lesser of the actual charge for the services or the 
                amount determined by a fee schedule established by the 
                Secretary for the purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 104(c)(2)) is amended--
                    (A) by striking ``and'' before ``(10)''; and
                    (B) by inserting before the period the following: 
                ``, and (11) such deductible shall not apply with 
                respect to screening for hearing impairment (as defined 
                in section 1861(zz))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2002.

SEC. 106. SCREENING AND COUNSELING FOR OSTEOPOROSIS.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) (as amended by section 105(a)) is amended--
            (1) in subparagraph (Z), by striking ``and'' at the end;
            (2) in subparagraph (AA), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(BB) screening and counseling for osteoporosis (as 
        defined in subsection (aaa)) for--
                    ``(i) women; and
                    ``(ii) men with fractures;''.
    (b) Services Described.--Section 1861 of such Act (42 U.S.C. 1395x) 
(as amended by section 105(b)) is amended by adding at the end the 
following new subsection:

              ``Screening and Counseling for Osteoporosis

    ``(aaa) The term `screening and counseling for osteoporosis' means 
diagnostic and counseling services for osteoporosis in addition to a 
bone mass measurement (as defined in subsection (rr)) which are 
furnished in accordance with methods approved by the Food and Drug 
Administration--
            ``(1) by or under the supervision of a physician; or
            ``(2) by any other health care professional who is legally 
        authorized to furnish such services under State law (or the 
        State regulatory mechanism provided by State law) of the State 
        in which the services are furnished, as would otherwise be 
        covered if furnished by a physician or as an incident to a 
        physician's professional service.''.
    (c) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 105(c)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(Z)''; and
                    (B) by inserting before the semicolon at the end 
                and inserting the following: ``, and (AA) with respect 
                to screening and counseling for osteoporosis (as 
                defined in section 1861(aaa)), the amount paid shall be 
                100 percent of the lesser of the actual charge for the 
                services or the amount determined by a fee schedule 
                established by the Secretary for the purposes of this 
                subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 105(c)(2)) is amended--
                    (A) by striking ``and'' before ``(11)''; and
                    (B) by inserting before the period the following: 
                ``, and (12) such deductible shall not apply with 
                respect to screening and counseling for osteoporosis 
                (as defined in section 1861(aaa))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2002.

SEC. 107. SCREENING FOR CHOLESTEROL.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) (as amended by section 106(a)) is amended--
            (1) in subparagraph (AA), by striking ``and'' at the end;
            (2) in subparagraph (BB), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(CC) screening for cholesterol (as defined in subsection 
        (bbb)) for individuals between the ages of 65 and 75 that 
        exhibit major risk factors for coronary heart disease, 
        including smoking, hypertension, and diabetes;''.
    (b) Services Described.--Section 1861 of such Act (42 U.S.C. 1395x) 
(as amended by section 106(b)) is amended by adding at the end the 
following new subsection:

                      ``Screening for Cholesterol

    ``(bbb) The term `screening for cholesterol' means diagnostic 
services for cholesterol that are furnished--
            ``(1) by or under the supervision of a physician; or
            ``(2) by any other health care professional who is legally 
        authorized to furnish such services under State law (or the 
        State regulatory mechanism provided by State law) of the State 
        in which the services are furnished, as would otherwise be 
        covered if furnished by a physician or as an incident to a 
        physician's professional service.''.
    (c) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 106(c)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(AA)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (BB) with respect to screening 
                for cholesterol (as defined in section 1861(bbb)), the 
                amount paid shall be 100 percent of the lesser of the 
                actual charge for the services or the amount determined 
                by a fee schedule established by the Secretary for the 
                purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 106(c)(2)) is amended--
                    (A) by striking ``and'' before ``(12)''; and
                    (B) by inserting before the period the following: 
                ``, and (13) such deductible shall not apply with 
                respect to screening and counseling for osteoporosis 
                (as defined in section 1861(bbb))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2002.

SEC. 108. EXPANSION OF COVERAGE OF MEDICAL NUTRITION THERAPY SERVICES.

    (a) Expansion of Medical Nutrition Therapy Services to 
Beneficiaries with a Cardiovascular Disease.--Section 1861(s)(2)(V) of 
the Social Security Act, as added by section 105(a) of the Medicare, 
Medicaid,  and SCHIP Benefits Improvement and Protection Act of 2000 
(as enacted into law by section 1(a)(6) of Public Law 106-554), is 
amended by inserting ``, a cardiovascular disease (including congestive 
heart failure, arteriosclerosis, hyperlipidemia, hypertension, and 
hypercholesterolemia),'' after ``diabetes''.
    (b) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 107(c)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(BB)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (CC) with respect to medical 
                nutrition therapy services (as defined in section 
                1861(vv)(1)), the amount paid shall be 85 percent of 
                the lesser of the actual charge for the services or the 
                amount determined under the fee schedule established 
                under section 1848(b) for the same services if 
                furnished by a physician''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 107(c)(2)) is amended--
                    (A) by striking ``and'' before ``(13)''; and
                    (B) by inserting before the period the following: 
                ``, and (14) such deductible shall not apply with 
                respect to nutrition therapy services (as defined in 
                section 1861(vv)(1))''.
    (c) Effective Date.--The amendments made by this section apply to 
services furnished on or after January 1, 2002.

SEC. 109. EXPANSION OF COVERAGE OF GLAUCOMA SCREENING.

    (a) Expansion of Glaucoma Screening to Cover Individuals With 
Myopia.--Section 1861(s)(2)(U) of the Social Security Act, as added by 
section 101(a) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (as enacted into law by section 
1(a)(6) of Public Law 106-554), is amended by inserting ``or myopia'' 
after ``diabetes''.
    (b) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 108(b)(1) is 
        amended--
                    (A) by striking ``and'' before ``(BB)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (CC) with respect to screening 
                for glaucoma (as defined in section 1861(uu)), the 
                amount paid shall be 100 percent of the lesser of the 
                actual charge for the services or amount determined by 
                a fee schedule established by the Secretary for the 
                purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 108(b)(2)) is amended--
                    (A) by striking ``and'' before ``(14)''; and
                    (B) by inserting before the period the following: 
                ``, and (15) such deductible shall not apply with 
                respect to screening for glaucoma (as defined in 
                section 1861(uu))''.
    (c) Effective Date.--The amendments made by this section apply to 
services furnished on or after January 1, 2002.

SEC. 110. ROUTINE ANNUAL PHYSICAL CHECKUPS.

    (a) In General.--Section 1862 of the Social Security Act (42 U.S.C. 
1395y) is amended--
            (1) in subsection (a)(7), by inserting ``subject to 
        subsection (h),'' after ``(7)''; and
            (2) by inserting after subsection (g) the following new 
        subsection:
    ``(h)(1) The exclusion under subsection (a)(7) shall not include 
coverage of a routine annual physical checkup, including coverage of 
related laboratory tests.''.
    (b) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 109(b)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(CC)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (DD) with respect to routine 
                annual physical checkups described in section 
                1862(h)(1), the amount paid shall be 100 percent of the 
                lesser of the actual charge for the services or amount 
                determined by a fee schedule established by the 
                Secretary for the purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 109(b)(2)) is amended--
                    (A) by striking ``and'' before ``(15)''; and
                    (B) by inserting before the period the following: 
                ``, and (16) such deductible shall not apply with 
                respect to routine annual physical checkups described 
                in section 1862(h)(1)''.
    (c) Effective Date.--The amendments made by this section apply to 
services furnished on or after January 1, 2002.

SEC. 111. ROUTINE ANNUAL DENTAL EXAMINATIONS AND CLEANING.

    (a) In General.--Section 1862 of the Social Security Act (42 U.S.C. 
1395y), as amended by section 110(a), is amended--
            (1) in subsection (a)(2), by inserting ``subject to 
        subsection (h),'' after ``(7)''; and
            (2) by adding at the end of subsection (h) the following 
        new paragraph:
    ``(2) The exclusion subsection (a)(12) shall not include coverage 
of a routine annual dental examination and cleaning, including coverage 
of oral gum disease screening.''.
    (b) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 110(b)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(DD)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (EE) with respect to routine 
                annual dental examination and cleaning described in 
                section 1862(h)(2), the amount  paid shall be 100 
percent of the lesser of the actual charge for the services or amount 
determined by a fee schedule established by the Secretary for the 
purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 110(b)(2)) is amended--
                    (A) by striking ``and'' before ``(16)''; and
                    (B) by inserting before the period the following: 
                ``, and (17) such deductible shall not apply with 
                respect to routine annual dental examination and 
                cleaning described in section 1862(h)(2)''.
    (c) Effective Date.--The amendments made by this section apply to 
services furnished on or after January 1, 2002.

SEC. 112. ROUTINE ANNUAL EYE EXAMINATIONS.

    (a) In General.--Section 1862(h) of the Social Security Act (42 
U.S.C. 1395y(h)), as inserted by section 111(a), is amended by adding 
at the end the following new paragraph:
    ``(3) The exclusion under subsection (a)(7) shall not include 
coverage of a routine annual eye examination, including a refraction, 
and of coverage per year of 1 pair of glasses (or coverage of contract 
or other correctible lenses, up to the financial equivalence of a pair 
of glasses).''.
    (b) Elimination of Cost-Sharing.--
            (1) Elimination of coinsurance.--Section 1833(a)(1) of such 
        Act (42 U.S.C. 1395l(a)(1)) (as amended by section 111(b)(1)) 
        is amended--
                    (A) by striking ``and'' before ``(EE)''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``, and (FF) with respect to routine 
                annual eye examinations and coverage of eyeglasses (or 
                other lense equivalents) described in section 
                1862(h)(3), the amount paid shall be 100 percent of the 
                lesser of the actual charge for the services or amount 
                determined by a fee schedule established by the 
                Secretary for the purposes of this subparagraph;''.
            (2) Elimination of deductible.--The first sentence of 
        section 1833(b) of such Act (42 U.S.C. 1395l(b)) (as amended by 
        section 111(b)(2)) is amended--
                    (A) by striking ``and'' before ``(17)''; and
                    (B) by inserting before the period the following: 
                ``, and (18) such deductible shall not apply with 
                respect to routine annual eye examinations and coverage 
                of eyeglasses and other lenses described in section 
                1862(h)(3)''.
    (c) Effective Date.--The amendments made by this section apply to 
services furnished on or after January 1, 2002.

 TITLE II--MEDICARE PRESCRIPTION DRUG AND SUPPLEMENTAL BENEFIT PROGRAM

SEC. 201. ESTABLISHMENT OF PROGRAM.

    (a) In General.--The Social Security Act is amended by adding at 
the end the following new title:

        ``TITLE XXII--MEDICARE PRESCRIPTION DRUG BENEFIT PROGRAM

 ``establishment of prescription drug and supplemental benefit program

    ``Sec. 2201. (a) Provision of Benefit.--The Secretary shall 
establish a Prescription Drug and Supplemental Benefit Program under 
which an eligible beneficiary may voluntarily enroll and receive access 
to covered outpatient prescription drugs and other benefits through 
enrollment in a Medicare Prescription Plus plan offered by a private 
entity or a Medicare+Choice plan offered by a Medicare+Choice 
organization.
    ``(b) Program To Begin in 2003.--The Secretary shall establish the 
program under this part in a manner so that benefits are first provided 
for months beginning with January 2003.
    ``(c) Voluntary Nature of Program.--Nothing in this part shall be 
construed as requiring an eligible beneficiary to enroll in the program 
under this part.
    ``(d) Financing.--The costs of providing benefits under this part 
shall be payable from the Medicare Prescription Drug Account.
    ``(e) No Effect on Title XVIII Benefits.--The program under this 
part shall have no effect on the entitlement to benefits under title 
XVIII.

                       ``enrollment under program

    ``Sec. 2202. (a) Establishment of Process.--
            ``(1) In general.--The Secretary shall establish a process 
        through which an eligible beneficiary (including an eligible 
        beneficiary enrolled in a Medicare+Choice plan offered by a 
        Medicare+Choice organization) may make an election to enroll 
        under the program under this part. Except as otherwise provided 
        in this section, such process shall be similar to the process 
        for enrollment in part B under section 1837.
            ``(2) Requirement of enrollment.--An eligible beneficiary 
        must enroll under this part in order to be eligible to receive 
        benefits under this part.
    ``(b) Enrollment Period.--
            ``(1) In general.--Except as provided in paragraph (2) or 
        (3), an eligible beneficiary may not enroll in the program 
        under this part during any period after the beneficiary's 
        initial enrollment period.
            ``(2) Open enrollment period for beneficiaries currently 
        covered.--In the case of an individual who is entitled to part 
        A of title XVIII and enrolled under part B of such title as of 
        November 1, 2002, there shall be an open enrollment period of 6 
        months beginning on that date.
            ``(3) Special enrollment period for beneficiaries that lose 
        other drug coverage.--
                    ``(A) In general.--Subject to subparagraph (D), in 
                the case of an applicable eligible beneficiary, the 
                Secretary shall establish procedures for permitting 
                such beneficiary to enroll under the program under this 
                part.
                    ``(B) Applicable eligible beneficiary.--For 
                purposes of this paragraph, the term `applicable 
                eligible beneficiary' means an eligible beneficiary 
                who--
                            ``(i) had applicable drug coverage; and
                            ``(ii) involuntarily lost such coverage.
                    ``(C) Applicable drug coverage defined.--For 
                purposes of subparagraph (B), the term `applicable drug 
coverage' means any of the following prescription drug coverage:
                            ``(i) Medicaid prescription drug 
                        coverage.--Prescription drug coverage under a 
                        medicaid plan under title XIX, including 
                        through the Program of All-inclusive Care for 
                        the Elderly (PACE) under section 1934, through 
                        a social health maintenance organization 
                        (referred to in section 4104(c) of the Balanced 
                        Budget Act of 1997), or through a 
                        Medicare+Choice project that demonstrates the 
                        application of capitation payment rates for 
                        frail elderly medicare beneficiaries through 
                        the use of a interdisciplinary team and through 
                        the provision of primary care services to such 
                        beneficiaries by means of such a team at the 
                        nursing facility involved.
                            ``(ii) Prescription drug coverage under 
                        group health plan.--Any outpatient prescription 
                        drug coverage under a group health plan, 
                        including a health benefits plan under the 
                        Federal Employees Health Benefit Plan under 
                        chapter 89 of title 5, United States Code, and 
                        a qualified retiree prescription drug plan (as 
                        defined in section 2212(e)(1)).
                            ``(iii) Prescription drug coverage under 
                        certain medigap policies.--Coverage under a 
                        medicare supplemental policy under section 1882 
                        that provides benefits for prescription drugs 
                        (whether or not such coverage conforms to the 
                        standards for packages of benefits under 
                        section 1882(p)(1)), but only if the policy was 
                        in effect on January 1, 2003.
                            ``(iv) State pharmaceutical assistance 
                        program.--Coverage of prescription drugs under 
                        a State pharmaceutical assistance program.
                            ``(v) Veterans' coverage of prescription 
                        drugs.--Coverage of prescription drugs for 
                        veterans under chapter 17 of title 38, United 
                        States Code.
                    ``(D) Requirements.--The procedures established 
                under subparagraph (A) shall require that an applicable 
                eligible beneficiary--
                            ``(i) seek to enroll under the program not 
                        later than 63 days after the date that the 
                        beneficiary lost applicable drug coverage; and
                            ``(ii) submit evidence of the date that the 
                        beneficiary lost such coverage along with the 
                        application for enrollment in the program under 
                        this part.
            ``(4) Study and report on permitting part b only 
        individuals to enroll in program.--
                    ``(A) Study.--The Secretary shall conduct a study 
                on the need for rules relating to permitting 
                individuals who are enrolled under part B of title 
                XVIII but are not entitled to benefits under part A to 
                buy into the program under this part.
                    ``(B) Report.--Not later than January 1, 2002, the 
                Secretary shall submit a report to Congress on the 
                study conducted under subparagraph (A), together with 
                any recommendations for legislation that the Secretary 
                determines to be appropriate as a result of such study.
    ``(c) Period of Coverage.--
            ``(1) In general.--Except as provided in paragraph (2) and 
        subject to paragraph (3), an eligible beneficiary'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) Enrollment during open and special enrollment.--
        Subject to paragraph (3), an eligible beneficiary who enrolls 
        under the program under this part pursuant to paragraph (2) or 
        (3) of subsection (b) shall be entitled to the benefits under 
        this part beginning on the first day of the month following the 
        month in which such enrollment occurs.
            ``(3) Limitation.--Coverage under this part shall not begin 
        prior to January 1, 2003.
    ``(d) Program Coverage Terminated by Termination of Coverage Under 
Parts A and B of Title XVIII.--
            ``(1) In general.--In addition to the causes of termination 
        specified in section 1838, the Secretary shall terminate an 
        individual's coverage under the program under this part if the 
        individual is no longer enrolled in both parts A and B of title 
        XVIII.
            ``(2) Effective date.--The termination described in 
        paragraph (1) shall be effective on the effective date of 
        termination of coverage under part A of title XVIII or (if 
        earlier) under part B of such title.
    ``(e) First Enrollment Period.--The Secretary shall ensure that 
eligible beneficiaries are permitted to enroll under this part prior to 
January 1, 2003, in order to ensure that coverage under this part is 
effective as of such date.

            ``election of a medicare prescription plus plan

    ``Sec. 2203. (a) In General.--
            ``(1) Process.--
                    ``(A) In general.--Subject to paragraph (2), the 
                Secretary shall establish a process through which an 
                eligible beneficiary who is enrolled under this part 
                shall make an annual election to enroll in a Medicare 
                Prescription Plus plan offered by an eligible entity 
                that serves the geographic area in which the 
                beneficiary resides.
                    ``(B) Rules.--In establishing the process under 
                subparagraph (A), the Secretary shall use rules that 
                are consistent with the rules for enrollment and 
                disenrollment with a Medicare+Choice plan under section 
                1851, including--
                            ``(i) annual, coordinated election periods, 
                        which shall be coordinated with such periods 
                        under part C of title XVIII;
                            ``(ii) special election periods under 
                        subsection (e)(4) of section 1851; and
                            ``(iii) the guaranteed issue requirements 
                        under subsection (g) of such section.
            ``(2) Medicare+choice enrollees.--An eligible beneficiary 
        who is enrolled under this part and enrolled in a 
        Medicare+Choice plan offered by a Medicare+Choice organization 
        shall receive coverage of benefits under this part through such 
        plan if such plan provides qualified prescription drug 
        coverage. If the Medicare+Choice plan in which the beneficiary 
        is enrolled does not provide such coverage, the beneficiary 
        shall receive such coverage through the election of a Medicare 
        Prescription Plus plan offered by an eligible entity under this 
        part.
    ``(b) Assuring Access to Prescription Drug Coverage in Areas With 
No Medicare Prescription Plus Plan or Medicare+Choice Plan Providing 
Drug Coverage Available.--The Secretary shall develop procedures for 
the provision of the benefits required under section 2205(a) to each 
eligible beneficiary that resides in an area where there are no 
Medicare Prescription Plus plans or Medicare+Choice plans available 
that provide qualified prescription drug coverage.

                       ``beneficiary information

    ``Sec. 2204. (a) In General.--The Secretary shall conduct 
activities that are designed to broadly disseminate information to 
eligible beneficiaries (and prospective eligible beneficiaries) 
regarding the coverage provided under this part.
    ``(b) Requirements.--The activities conducted under this subsection 
shall be--
            ``(1) similar to the activities performed by the Secretary 
        under section 1851(d), including the dissemination of 
        comparative information; and
            ``(2) coordinated with the activities performed by the 
        Secretary under such section and under section 1804.

     ``outpatient prescription drug and other supplemental benefits

    ``Sec. 2205. (a) Requirements.--
            ``(1) In general.--For purposes of this part and part C of 
        title XVIII, the term `qualified prescription drug coverage' 
        means either of the following:
                    ``(A) Standard coverage with access to negotiated 
                prices.--Standard coverage (as defined in subsection 
                (d)) and access to negotiated prices under subsection 
                (f).
                    ``(B) Actuarially equivalent coverage with access 
                to negotiated prices.--Coverage of covered outpatient 
                drugs which meets the alternative coverage requirements 
                of subsection (e) and access to negotiated prices under 
                subsection (f).
            ``(2) Permitting additional outpatient prescription drug 
        coverage.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                section 2209(c)(2), nothing in this part shall be 
                construed as preventing qualified prescription drug 
                coverage from including coverage of covered outpatient 
                drugs that exceeds the coverage required under 
                paragraph (1).
                    ``(B) Requirement.--An eligible entity may not 
                offer a Medicare Prescription Plus plan that provides 
                additional benefits pursuant to subparagraph (A) in an 
                area unless the eligible entity offering such plan also 
                offers a Medicare Prescription Plus plan in the area 
                that only provides the coverage of prescription drugs 
                that is required under subsection (a)(1).
            ``(3) Cost control mechanisms.--In providing qualified 
        prescription drug coverage, the entity offering the Medicare 
        Prescription Plus plan or the Medicare+Choice plan may use cost 
        control mechanisms that are customarily used in employer-
        sponsored health care plans that offer coverage for outpatient 
        prescription drugs, including the use of formularies, tiered 
        copayments, selective contracting with providers of outpatient 
        prescription drugs, and mail order pharmacies.
    ``(b) Permitting Benefits in Addition to Outpatient Prescription 
Drug Coverage.--
            ``(1) In general.--Subject to paragraph (2) and section 
        2209(c)(2), nothing in this part shall be construed as 
        preventing a Medicare Prescription Plus plan from including 
        coverage of benefits that are in addition to the benefits 
        available under title XVIII, including coverage of beneficiary 
        cost-sharing for benefits under such title.
            ``(2) Requirements.--An eligible entity may not offer a 
        Medicare Prescription Plus plan that provides additional 
        benefits pursuant to paragraph (1) in an area unless--
                    ``(A) the eligible entity offering such plan also 
                offers a Medicare Prescription Plus plan in the area 
                that only provides the coverage of prescription drugs 
                that is required under subsection (a)(1); and
                    ``(B) if the additional benefits include any of the 
                core group of basic benefits described in section 
                1882(p)(2)(B), the Medicare Prescription Plus plan 
                provides all of such core group of basic benefits.
    ``(c) Application of Secondary Payor Provisions.--The provisions of 
section 1852(a)(4) shall apply under this part in the same manner as 
they apply under part C of title XVIII.
    ``(d) Standard Coverage.--For purposes of this part and part C of 
title XVIII, the `standard coverage' is coverage of covered outpatient 
drugs that meets the following requirements:
            ``(1) Deductible.--The coverage has an annual deductible--
                    ``(A) for 2003, that is equal to $250; or
                    ``(B) for a subsequent year, that is equal to the 
                amount specified under this paragraph for the previous 
                year increased by the percentage specified in paragraph 
                (5) for the year involved.
        Any amount determined under subparagraph (B) that is not a 
        multiple of $5 shall be rounded to the nearest multiple of $5.
            ``(2) Limits on cost-sharing.--The coverage has cost-
        sharing (for costs above the annual deductible specified in 
        paragraph (1) and up to the initial coverage limit under 
        paragraph (3)) that is equal to 50 percent or that is 
        actuarially consistent (using processes established under 
        subsection (g)) with an average expected payment of 50 percent 
        of such costs.
            ``(3) Initial coverage limit.--Subject to paragraph (4), 
        the coverage has an initial coverage limit on the maximum costs 
        that may be recognized for payment purposes (above the annual 
        deductible)--
                    ``(A) for 2003, that is equal to $2,100; or
                    ``(B) for a subsequent year, that is equal to the 
                amount specified in this paragraph for the previous 
                year, increased by the annual percentage increase 
                described in paragraph (5) for the year involved.
        Any amount determined under subparagraph (B) that is not a 
        multiple of $25 shall be rounded to the nearest multiple of 
        $25.
            ``(4) Limitation on out-of-pocket expenditures by 
        beneficiary.--
                    ``(A) In general.--Notwithstanding paragraph (3), 
                the coverage provides benefits without any cost-sharing 
                after the individual has incurred costs (as described 
                in subparagraph (C)) for covered outpatient drugs in a 
                year equal to the annual out-of-pocket limit specified 
                in subparagraph (B).
                    ``(B) Annual out-of-pocket limit.--For purposes of 
                this part, the `annual out-of-pocket limit' specified 
                in this subparagraph--
                            ``(i) for 2003, is equal to $6,000; or
                            ``(ii) for a subsequent year, is equal to 
                        the amount specified in the subparagraph for 
                        the previous year, increased by the annual 
                        percentage increase described in paragraph (5) 
                        for the year involved.
                Any amount determined under clause (ii) that is not a 
                multiple of $100 shall be rounded to the nearest 
                multiple of $100.
                    ``(C) Application.--In applying subparagraph (A)--
                            ``(i) incurred costs shall only include 
                        costs incurred for the annual 
deductible (described in paragraph (1)), cost-sharing (described in 
paragraph (2)), and amounts for which benefits are not provided because 
of the application of the initial coverage limit described in paragraph 
(3); but
                            ``(ii) costs shall be treated as incurred 
                        without regard to whether the individual or 
                        another person, including a State program, has 
                        paid for such costs, but shall not be counted 
                        insofar as such costs are covered as benefits 
                        under a Medicare Prescription Plus plan, a 
                        Medicare+Choice plan, or other third-party 
                        coverage.
            ``(5) Annual percentage increase.--For purposes of this 
        part, the annual percentage increase specified in this 
        paragraph for a year is equal to the annual percentage increase 
        in average per capita aggregate expenditures for covered 
        outpatient drugs in the United States for medicare 
        beneficiaries, as determined by the Secretary for the 12-month 
        period ending in July of the previous year.
    ``(e) Alternative Coverage Requirements.--A Medicare Prescription 
Plus plan or Medicare+Choice plan may provide a different prescription 
drug benefit design from the standard coverage described in subsection 
(d) so long as the following requirements are met:
            ``(1) Assuring at least actuarially equivalent coverage.--
                    ``(A) Assuring equivalent value of total 
                coverage.--The actuarial value of the total coverage 
                (as determined under subsection (g)) is at least equal 
                to the actuarial value (as so determined) of standard 
                coverage.
                    ``(B) Assuring equivalent unsubsidized value of 
                coverage.--The unsubsidized value of the coverage is at 
                least equal to the unsubsidized value of standard 
                coverage. For purposes of this subparagraph, the 
                unsubsidized value of coverage is the amount by which 
                the actuarial value of the coverage (as determined 
                under subsection (g)) exceeds the actuarial value of 
                the reinsurance subsidy payments under section 2212 
                with respect to such coverage.
                    ``(C) Assuring standard payment for costs at 
                initial coverage limit.--The coverage is designed, 
                based upon an actuarially representative pattern of 
                utilization (as determined under subsection (g)), to 
                provide for the payment, with respect to costs incurred 
                that are equal to the sum of the deductible under 
                subsection (d)(1) and the initial coverage limit under 
                subsection (d)(3), of an amount equal to at least such 
                initial coverage limit multiplied by the percentage 
                specified in subsection (d)(2).
        Benefits other than qualified prescription drug coverage shall 
        not be taken into account for purposes of this paragraph.
            ``(2) Limitation on out-of-pocket expenditures by 
        beneficiaries.--The coverage provides the limitation on out-of-
        pocket expenditures by beneficiaries described in subsection 
        (d)(4).
    ``(f) Access to Negotiated Prices.--Under qualified prescription 
drug coverage offered by an eligible entity or a Medicare+Choice 
organization, the entity or organization shall provide beneficiaries 
with access to negotiated prices (including applicable discounts) used 
for payment for covered outpatient drugs, regardless of the fact that 
no benefits may be payable under the coverage with respect to such 
drugs because of the application of cost-sharing or an initial coverage 
limit (described in subsection (d)(3)). In providing such access, the 
eligible entity or Medicare+Choice organization shall issue a card 
pursuant to section 2206(b)(1).
    ``(g) Actuarial Valuation; Determination of Annual Percentage 
Increases.--
            ``(1) Processes.--For purposes of this section, the 
        Secretary shall establish processes and methods--
                    ``(A) for determining the actuarial valuation of 
                prescription drug coverage, including--
                            ``(i) an actuarial valuation of standard 
                        coverage and of the reinsurance subsidy 
                        payments under section 2212;
                            ``(ii) the use of generally accepted 
                        actuarial principles and methodologies; and
                            ``(iii) applying the same methodology for 
                        determinations of alternative coverage under 
                        subsection (e) as is used with respect to 
                        determinations of standard coverage under 
                        subsection (d); and
                    ``(B) for determining annual percentage increases 
                described in subsection (d)(5).
            ``(2) Use of outside actuaries.--Under the processes under 
        paragraph (1)(A), eligible entities and Medicare+Choice 
        organizations may use actuarial opinions certified by 
        independent, qualified actuaries to establish actuarial values.

                       ``beneficiary protections

    ``Sec. 2206. (a) Dissemination of Information.--
            ``(1) General information.--An eligible entity offering a 
        Medicare Prescription Plus plan shall disclose, in a clear, 
        accurate, and standardized form to each enrollee at the time of 
        enrollment and at least annually thereafter, the information 
        described in section 1852(c)(1) relating to such plan. Such 
        information includes the following:
                    ``(A) Access to covered outpatient drugs.
                    ``(B) How any formulary used by the entity 
                functions.
                    ``(C) Co-payments, coinsurance, and deductible 
                requirements.
                    ``(D) Grievance and appeals procedures.
            ``(2) Disclosure upon request of general coverage, 
        utilization, and grievance information.--Upon request of an 
        individual eligible to enroll in a Medicare Prescription Plus 
        plan, the eligible entity offering such plan shall provide the 
        information described in section 1852(c)(2) to such individual.
            ``(3) Response to beneficiary questions.--An eligible 
        entity offering a Medicare Prescription Plus plan shall have a 
mechanism for providing specific information to enrollees upon request, 
including information on specific changes in its formulary.
            ``(4) Claims information.--An eligible entity offering a 
        Medicare Prescription Plus plan must furnish to enrolled 
        individuals in a form easily understandable to such individuals 
        an explanation of benefits (in accordance with section 1806(a) 
        or in a comparable manner) and a notice of the benefits in 
        relation to initial coverage limit and annual out-of-pocket 
        limit for the current year, whenever prescription drug benefits 
        are provided under this part (except that such notice need not 
        be provided more often than monthly).
    ``(b) Access to Covered Outpatient Drugs.--
            ``(1) Access to negotiated prices for prescription drugs.--
        An eligible entity offering a Medicare Prescription Plus plan 
        shall issue such a card that may be used by an enrolled 
        beneficiary to assure access to negotiated prices under section 
        2205(f) for the purchase of prescription drugs for which 
        coverage is not otherwise provided under the Medicare 
        Prescription Plus plan.
            ``(2) Requirements on development and application of 
        formularies.--Insofar as an eligible entity offering a Medicare 
        Prescription Plus plan uses a formulary with respect to 
        qualified prescription drug coverage, the following 
        requirements must be met:
                    ``(A) Inclusion of drugs in all therapeutic 
                categories.--The formulary must include drugs within 
                all therapeutic categories and classes of covered 
                outpatient drugs (although not necessarily for all 
                drugs within such categories and classes).
                    ``(B) Appeals and exceptions to application.--The 
                eligible entity must have, as part of the appeals 
                process under subsection (e)(2), a process for appeals 
                for denials of coverage based on such application of 
                the formulary.
    ``(c) Cost and Utilization Management.--
            ``(1) In general.--An eligible entity shall have in place--
                    ``(A) an effective cost and drug utilization 
                management program, including appropriate incentives to 
                use generic drugs, when appropriate;
                    ``(B) quality assurance measures to reduce medical 
                errors and adverse drug interactions, which may include 
                the measures described in paragraph (2); and
                    ``(C) a program to control fraud, abuse, and waste.
            ``(2) Measures.--The measures described in this paragraph 
        are beneficiary education programs, counseling, medication 
        refill reminders, and special packaging.
    ``(d) Grievance Mechanism.--An eligible entity shall provide 
meaningful procedures for hearing and resolving grievances between the 
eligible entity (including any entity or individual through which the 
eligible entity provides covered benefits) and enrollees in a Medicare 
Prescription Plus plan offered by the eligible entity in accordance 
with section 1852(f).
    ``(e) Coverage Determinations, Reconsiderations, and Appeals.--
            ``(1) In general.--An eligible entity shall meet the 
        requirements of section 1852(g) with respect to covered 
        benefits under the Medicare Prescription Plus plan it offers 
        under this part in the same manner as such requirements apply 
        to a Medicare+Choice organization with respect to benefits it 
        offers under a Medicare+Choice plan under part C of title 
        XVIII.
            ``(2) Appeals of formulary determinations.--Consistent with 
        the requirements of section 1852(g), an eligible entity shall 
        establish a process for appeals of formulary determinations.
    ``(f) Confidentiality and Accuracy of Enrollee Records.--An 
eligible entity shall meet the requirements of section 1852(h) with 
respect to enrollees under this part in the same manner as such 
requirements apply to a Medicare+Choice organization with respect to 
enrollees under part C of title XVIII.
    ``(g) Uniform Premium.--An eligible entity shall ensure that the 
premium for a Medicare Prescription Plus plan charged under this 
section is the same for all individuals enrolled in the plan in the 
same service area.

 ``requirements for entities offering medicare prescription plus plans

    ``Sec. 2207. (a) General Requirements.--An eligible entity offering 
a Medicare Prescription Plus plan shall meet the following 
requirements:
            ``(1) Licensure.--Subject to subsection (c), the entity is 
        organized and licensed under State law as a risk-bearing entity 
        eligible to offer health insurance or health benefits coverage 
        in each State in which it offers a Medicare Prescription Plus 
        plan.
            ``(2) Assumption of full financial risk.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                entity assumes full financial risk on a prospective 
                basis for the benefits that it offers under a Medicare 
                Prescription Plus plan and that is not covered under 
                reinsurance under section 2212.
                    ``(B) Reinsurance permitted.--The entity may obtain 
                insurance or make other arrangements for the cost of 
                coverage provided to any enrolled member under this 
                part.
            ``(3) Solvency for unlicensed entities.--In the case of an 
        eligible entity that is not described in paragraph (1), the 
        entity shall meet solvency standards established by the 
        Secretary under subsection (d).
    ``(b) Contract Requirements.--The Secretary shall not permit an 
eligible beneficiary to elect a Medicare Prescription Plus plan offered 
by an eligible entity under this part, and the entity shall not be 
eligible for payments under section 2210, 2211(e), or 2212, unless the 
Secretary has entered into a contract under this subsection with the 
entity with respect to the offering of such plan. Such a contract with 
an entity may cover more than 1 Medicare Prescription Plus plan. Such 
contract shall provide that the entity agrees to comply with the 
applicable requirements and standards of this part and the terms and 
conditions of payment as provided for in this part.
    ``(c) Waiver of Certain Requirements To Expand Choice.--
            ``(1) In general.--In the case of an eligible entity that 
        seeks to offer a Medicare Prescription Plus plan in a State, 
        the Secretary shall waive the requirement of subsection (a)(1) 
        that the entity be licensed in that State if the Secretary 
        determines, based on the application and other evidence 
        presented to the Secretary, that any of the grounds for 
        approval of the application described in paragraph (2) have 
        been met.
            ``(2) Grounds for approval.--The grounds for approval under 
        this paragraph are the grounds for approval described in 
        subparagraphs (B), (C), and (D) of section 1855(a)(2), and also 
        include the application by a State of any grounds other than 
        those required under Federal law.
            ``(3) Application of medicare+choice pso waiver 
        procedures.--With respect to an application for a waiver (or a 
        waiver granted) under this subsection, the provisions of 
        subparagraphs (E), (F), and (G) of section 1855(a)(2) shall 
        apply.
            ``(4) Licensure does not substitute for or constitute 
        certification.--The fact that an entity is licensed in 
        accordance with subsection (a)(1) does not deem the eligible 
        entity to meet other requirements imposed under this part for 
        an eligible entity.
            ``(5) References to certain provisions.--For purposes of 
        this subsection, in applying the provisions of section 
        1855(a)(2) under this subsection to Medicare Prescription Plus 
        plans and eligible entities--
                    ``(A) any reference to a waiver application under 
                section 1855 shall be treated as a reference to a 
                waiver application under paragraph (1); and
                    ``(B) any reference to solvency standards were 
                treated as a reference to solvency standards 
                established under subsection (d).
    ``(d) Solvency Standards for Non-Licensed Entities.--
            ``(1) Establishment.--The Secretary shall establish, by not 
        later than October 1, 2001, financial solvency and capital 
        adequacy standards that an entity that does not meet the 
        requirements of subsection (a)(1) must meet to qualify as an 
        eligible entity under this part.
            ``(2) Compliance with standards.--An eligible entity that 
        is not licensed by a State under subsection (a)(1) and for 
        which a waiver application has been approved under subsection 
        (c) shall meet solvency and capital adequacy standards 
        established under paragraph (1). The Secretary shall establish 
        certification procedures for such eligible entities with 
        respect to such solvency standards in the manner described in 
        section 1855(c)(2).
    ``(e) Other Standards.--The Secretary shall establish by regulation 
other standards (not described in subsection (d)) for eligible entities 
and Medicare Prescription Plus plans consistent with, and to carry out, 
this part. The Secretary shall publish such regulations by October 1, 
2001.
    ``(f) Relation to State Laws.--
            ``(1) In general.--The standards established under this 
        section shall supersede any State law or regulation (including 
        standards described in paragraph (2)) with respect to Medicare 
        Prescription Plus plans which are offered by eligible entities 
        under this part to the extent such law or regulation is 
        inconsistent with such standards, in the same  manner as such 
laws and regulations are superseded under section 1856(b)(3).
            ``(2) Standards specifically superseded.--State standards 
        relating to the following are superseded under this section:
                    ``(A) Benefit requirements.
                    ``(B) Requirements relating to inclusion or 
                treatment of providers.
                    ``(C) Coverage determinations (including related 
                appeals and grievance processes).
            ``(3) Prohibition of state imposition of premium taxes.--No 
        State may impose a premium tax or similar tax with respect to 
        premiums paid to eligible entities for Medicare Prescription 
        Plus plans under this part, or with respect to any payments 
        made to such an entity by the Secretary under this part.

            ``submission of medicare prescription plus plans

    ``Sec. 2208. (a) In General.--Each eligible entity that intends to 
offer a Medicare Prescription Plus plan in a year (beginning with 2003) 
shall submit to the Secretary, at such time and in such manner as the 
Secretary may specify, such information as the Secretary may require, 
including the information described in subsection (b).
    ``(b) Information Described.--The information described in this 
subsection includes information on each of the following:
            ``(1) A description of the benefits under the plan, 
        including any supplemental benefits pursuant to section 
        2205(b).
            ``(2) Information on the actuarial value of the qualified 
        prescription drug coverage.
            ``(3) Information on the monthly premium to be charged for 
        all benefits, including an actuarial certification of--
                    ``(A) the actuarial basis for such premium;
                    ``(B) the portion of such premium attributable to 
                benefits in excess of standard coverage; and
                    ``(C) the reduction in such premium resulting from 
                the reinsurance subsidy payments provided under section 
                2212.
            ``(4) The service area for the plan.
            ``(5) Such other information as the Secretary may require 
        to carry out this part.

             ``approval of medicare prescription plus plans

    ``Sec. 2209. (a) In General.--The Secretary shall review the 
information filed under section 2208 and shall approve or disapprove 
the Medicare Prescription Plus plan.
    ``(b) Negotiation.--In exercising such authority, the Secretary 
shall have the same authority to negotiate the terms and conditions of 
the premiums submitted and other terms and conditions of plans as the 
Director of the Office of Personnel Management has with respect to 
health benefits plans under chapter 89 of title 5, United States Code.
    ``(c) Special Rules for Approval.--
            ``(1) Service area.--The Secretary may approve a service 
        area submitted under section 2208(b)(4) only if the Secretary 
        finds that--
                    ``(A) the use of such an area is consistent with 
                the purposes of this part; and
                    ``(B) the service area for the plan is not designed 
                so as to discriminate based on the health status, 
                economic status, or prior receipt of health care of 
                eligible beneficiaries.
            ``(2) Avoidance of favorable selection.--The Secretary may 
        approve a Medicare Prescription Plus plan submitted under 
        section 2208 only if the benefits under such plan--
                    ``(A) include the required benefits under section 
                2205(a)(1); and
                    ``(B) are not designed in such a manner that the 
                Secretary finds is likely to result in favorable 
                selection of eligible beneficiaries.

      ``payments to medicare prescription plus plans for benefits

    ``Sec. 2210. (a) In General.--Subject to subsection (b), for each 
year (beginning with 2003), the Secretary shall pay to each eligible 
entity offering a Medicare Prescription Plus plan in which an eligible 
beneficiary is enrolled an amount equal to--
            ``(1) the full amount of the premium approved under section 
        2209 on behalf of each eligible beneficiary enrolled in such 
        plan for the year; minus
            ``(2) the amount of any fees imposed on the entity pursuant 
        to section 2213).
    ``(b) Payment Terms.--Payment under this section to an eligible 
entity offering a Medicare Prescription Plus plan shall be made in a 
manner determined by the Secretary and based upon the manner in which 
payments are made under section 1853(a) (relating to payments to 
Medicare+Choice organizations).

      ``computation and collection of beneficiary share of premium

    ``Sec. 2211. (a) Computation.--
            ``(1) Amount.--The annual beneficiary premium for 
        enrollment in a Medicare Prescription Plus plan providing 
        coverage under this part for a year shall be an amount equal 
        to--
                    ``(A) an amount equal to the full amount of the 
                premium approved under section 2209 for the plan in 
                which the beneficiary is enrolled; minus
                    ``(B) the amount of the discount determined under 
                subsection (b).
            ``(2) Collection of premium amount in same manner as part b 
        premium.--
                    ``(A) In general.--The amount of the annual 
                beneficiary premium determined under paragraph (1) 
                shall be collected and credited to the Medicare 
                Prescription Drug Account in the same manner as the 
                monthly premium determined under section 1839 is 
                collected and credited to the Federal Supplementary 
                Medical Insurance Trust Fund under section 1840.
                    ``(B) Information necessary for collection.--In 
                order to carry out subparagraph (A), the Secretary 
                shall transmit to the Secretary of Social Security--
                            ``(i) at the beginning of each year, the 
                        name, social security account number, and 
                        annual beneficiary premium owed by 
each individual enrolled in a Medicare Prescription Plus plan for each 
month during the year; and
                            ``(ii) periodically throughout the year, 
                        information to update the information 
                        previously transmitted under this paragraph for 
                        the year.
    ``(b) Discounts for Required Drug Portion of Premium.--
            ``(1) Full premium discount and reduction of cost-sharing 
        for individuals with income below 135 percent of federal 
        poverty level.--In the case of a low-income individual (as 
        defined in paragraph (5)(A)) who is determined to have income 
        that does not exceed 135 percent of the Federal poverty level, 
        the individual is entitled under this section--
                    ``(A) to a premium discount equal to 100 percent of 
                the amount described in subsection (c); and
                    ``(B) subject to subsection (d), to the 
                substitution for the beneficiary cost-sharing described 
                in paragraphs (1) and (2) of section 2205(d) (up to the 
                initial coverage limit specified in paragraph (3) of 
                such section) of amounts that are nominal.
            ``(2) Sliding scale premium discount for individuals with 
        income above 135, but below 150 percent, of federal poverty 
        level.--In the case of a low-income individual who is 
        determined to have income that exceeds 135 percent, but does 
        not exceed 150 percent, of the Federal poverty level, the 
        individual is entitled under this section to a premium discount 
        determined on a linear sliding scale ranging from 100 percent 
        of the amount described in subsection (c) for individuals with 
        incomes at 135 percent of such level to 25 percent of such 
        amount for individuals with incomes at 150 percent of such 
        level.
            ``(3) Partial premium discount for individuals with income 
        above 150 percent of federal poverty level.--In the case of an 
        eligible beneficiary who is not a low-income individual, the 
        beneficiary is entitled under this section to a premium 
        discount equal to 25 percent of the amount described in 
        subsection (c).
            ``(4) Tax treatment of premium discount.--
                    ``(A) In general.--For purposes of the Internal 
                Revenue Code of 1986, the premium discount determined 
                under this subsection for an eligible beneficiary for a 
                year shall be included in the gross income of the 
                beneficiary for the year.
                    ``(B) Statement of taxable amount.--Not later than 
                January 31 of each year (beginning with 2004), the 
                Secretary shall provide--
                            ``(i) each eligible beneficiary enrolled 
                        under this part with a statement that describes 
                        the amount of the discount that is required to 
                        be included in the gross income of the 
                        beneficiary for the previous year pursuant to 
                        subparagraph (A); and
                            ``(ii) the Secretary of the Treasury with 
                        the information described in clause (i).
            ``(5) Determination of eligibility.--
                    ``(A) Low-income individual defined.--For purposes 
                of this section, subject to subparagraph (D), the term 
                `low-income individual' means an individual who--
                            ``(i) is eligible to enroll, and has 
                        enrolled, under this part;
                            ``(ii) has income below 150 percent of the 
                        Federal poverty line; and
                            ``(iii) meets the resources requirement 
                        described in section 1905(p)(1)(C).
                    ``(B) Determinations.--The determination of whether 
                an individual residing in a State is a low-income 
                individual and the amount of such individual's income 
                shall be determined under the State medicaid plan for 
                the State under section 1935(a). In the case of a State 
                that does not operate such a medicaid plan (either 
                under title XIX or under a statewide waiver granted 
                under section 1115), such determination shall be made 
                under arrangements made by the Secretary.
                    ``(C) Income determinations.--For purposes of 
                applying this section--
                            ``(i) income shall be determined in the 
                        manner described in section 1905(p)(1)(B); and
                            ``(ii) the term `Federal poverty line' 
                        means the official poverty line (as defined by 
                        the Office of Management and Budget, and 
                        revised annually in accordance with section 
                        673(2) of the Omnibus Budget Reconciliation Act 
                        of 1981) applicable to a family of the size 
                        involved.
                    ``(D) Treatment of territorial residents.--In the 
                case of an individual who is not a resident of the 50 
                States or the District of Columbia, the individual is 
                not eligible to be a low-income individual but may be 
                eligible for financial assistance with prescription 
                drug expenses under section 1935(e).
    ``(c) Premium Discount Amount.--The premium discount amount 
described in this subsection for an eligible beneficiary residing in an 
area is an amount equal to--
            ``(1) in the case of an individual enrolled in a Medicare 
        Prescription Plus plan, the actuarial value of the standard 
        drug coverage provided under the plan (determined without 
        regard to any premium discount under this section); and
            ``(2) in the case of an individual enrolled in a 
        Medicare+Choice plan that provides qualified prescription drug 
        coverage, the standard premium computed under section 
        1851(j)(5)(A)(iii).
    ``(d) Rules in Applying Cost-Sharing Subsidies.--
            ``(1) In general.--In applying subsection (b)(1)(B)--
                    ``(A) the maximum amount of subsidy that may be 
                provided with respect to an enrollee for a year may not 
                exceed 95 percent of the maximum cost-sharing described 
                in such subsection that may be incurred for standard 
                coverage;
                    ``(B) the Secretary shall determine what is 
                `nominal' taking into account the rules applied under 
                section 1916(a)(3); and
                    ``(C) nothing in this part shall be construed as 
                preventing a plan or provider from waiving or reducing 
                the amount of cost-sharing otherwise applicable.
            ``(2) Limitation on charges.--In the case of a low-income 
        individual receiving cost-sharing subsidies under subsection 
        (b)(1)(B), the eligible entity may not charge more than a 
        nominal amount in cases in which the cost-sharing subsidy is 
        provided under such subsection.
    ``(e) Administration of Cost-Sharing Program.--The Secretary shall 
provide a process whereby, in the case of a low-income individual who 
is eligible for reduced cost-sharing under subsection (b)(1)(B) and is 
enrolled in a Medicare Prescription Plus plan or a Medicare+Choice plan 
under which qualified prescription drug coverage is provided--
            ``(1) the Secretary provides for a notification of the 
        eligible entity or Medicare+Choice organization involved that 
        the individual is eligible for such reduced cost-sharing;
            ``(2) the entity or organization involved reduces the cost-
        sharing pursuant to this section and submits to the Secretary 
        information on the amount of such reduction; and
            ``(3) the Secretary periodically and on a timely basis 
        reimburses the entity or organization for the amount of such 
        reductions.
The reimbursement under paragraph (3) may be computed on a capitated 
basis, taking into account the actuarial value of the reductions and 
with appropriate adjustments to reflect differences in the risks 
actually involved.
    ``(f) Relation to Medicaid Program.--
            ``(1) In general.--For provisions providing for eligibility 
        determinations, and additional financing, under the medicaid 
        program, see section 1935.
            ``(2) Medicaid providing wrap around benefits.--The 
        coverage provided under this part is primary payor to benefits 
        for prescribed drugs provided under the medicaid program under 
        title XIX.

      ``additional prescription drug subsidies through reinsurance

    ``Sec. 2212. (a) Reinsurance Subsidy Payment.--In order to reduce 
premium levels applicable to qualified prescription drug coverage for 
all medicare beneficiaries, to reduce adverse selection among Medicare 
Prescription Plus plans and Medicare+Choice plans that provide 
qualified prescription drug coverage, and to promote the participation 
of eligible entities under this part, the Secretary shall provide in 
accordance with this section for payment to a qualifying entity (as 
defined in subsection (b)) of the reinsurance payment amount (as 
defined in subsection (c)) for excess costs incurred in providing 
qualified prescription drug coverage--
            ``(1) for individuals enrolled with a Medicare Prescription 
        Plus plan under this part;
            ``(2) for individuals enrolled with a Medicare+Choice plan 
        that provides qualified prescription drug coverage under part C 
        of title XVIII; and
            ``(3) for medicare secondary payer eligible individuals 
        (described in subsection (e)(3)(D)) who are enrolled in a 
        qualified retiree prescription drug plan.
This section constitutes budget authority in advance of appropriations 
Acts and represents the obligation of the Secretary to provide for the 
payment of amounts provided under this section.
    ``(b) Qualifying Entity Defined.--For purposes of this section, the 
term `qualifying entity' means any of the following that has entered 
into an agreement with the Secretary to provide the Secretary with such 
information as may be required to carry out this section:
            ``(1) An eligible entity offering a Medicare Prescription 
        Plus plan under this part.
            ``(2) A Medicare+Choice organization that provides 
        qualified prescription drug coverage under a Medicare+Choice 
        plan under part C of title XVIII.
            ``(3) The sponsor of a qualified retiree prescription drug 
        plan (as defined in subsection (e)).
    ``(c) Reinsurance Payment Amount.--
            ``(1) In general.--Subject to subsection (e)(2) and 
        paragraph (4), the reinsurance payment amount under this 
        subsection for a qualified beneficiary (as defined in 
        subsection (f)(1)) for a coverage year (as defined in 
        subsection (f)(2)) is an amount equal to 80 percent of the 
        allowable costs attributable to the portion of the individual's 
        gross covered prescription drug costs for the year that exceeds 
        $7,050.
            ``(2) Allowable costs.--For purposes of this section, the 
        term `allowable costs' means, with respect to gross covered 
        prescription drug costs under a plan described in subsection 
        (b) offered by a qualifying entity, the part of such costs that 
        are actually paid under the plan, but in no case more than the 
        part of such costs that would have been paid under the plan if 
        the prescription drug coverage under the plan were standard 
        coverage.
            ``(3) Gross covered prescription drug costs.--For purposes 
        of this section, the term `gross covered prescription drug 
        costs' means, with respect to an enrollee with a qualifying 
        entity under a plan described in subsection (b) during a 
        coverage year, the costs incurred under the plan for covered 
        prescription drugs dispensed during the year, including costs 
        relating to the deductible, whether paid by the enrollee or 
        under the plan, regardless of whether the coverage under the 
        plan exceeds standard coverage and regardless of when the 
        payment for such drugs is made.
            ``(4) Indexing dollar amount.--
                    ``(A) Amount for 2003.--The dollar amount applied 
                under paragraph (1) for 2003 shall be the dollar amount 
                specified in such paragraph.
                    ``(B) For 2004.--The dollar amount applied under 
                paragraph (1) for 2004 shall be the dollar amount 
                specified in such paragraph increased by the annual 
                percentage increase described in section 2205(d)(5) for 
                2004.
                    ``(C) For subsequent years.--The dollar amount 
                applied under paragraph (1) for a year after 2004 shall 
                be the dollar amount (under this paragraph) applied 
                under paragraph (1) for the preceding year increased by 
                the annual percentage increase described in section 
                2205(d)(5) for the year involved.
                    ``(D) Rounding.--Any amount, determined under the 
                preceding provisions of this paragraph for a year, 
                which is not a multiple of $5 shall be rounded to the 
                nearest multiple of $5.
    ``(d) Payment Methods.--
            ``(1) In general.--Payments under this section shall be 
        based on such a method as the Secretary determines. The 
        Secretary may establish a payment method by which interim 
        payments of amounts under this section are made during a year 
        based on the Secretary's best estimate of amounts that will be 
        payable after obtaining all of the information.
            ``(2) Source of payments.--Payments under this section 
        shall be made from the Medicare Prescription Drug Account.
    ``(e) Qualified Retiree Prescription Drug Plan Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified retiree prescription drug plan' means employment-
        based retiree health coverage (as defined in paragraph (3)(A)) 
        if, with respect to an individual enrolled (or eligible to be 
        enrolled) under this part who is covered under the plan, the 
        following requirements are met:
                    ``(A) Assurance.--The sponsor of the plan shall 
                annually attest, and provide such assurances as the 
                Secretary may require, that the coverage meets the 
                requirements for qualified prescription drug coverage.
                    ``(B) Audits.--The sponsor (and the plan) shall 
                maintain, and afford the Secretary access to, such 
                records as the Secretary may require for purposes of 
                audits and other oversight activities necessary to 
                ensure the adequacy of prescription drug coverage, the 
                accuracy of payments made, and such other matters as 
                may be appropriate.
                    ``(C) Other requirements.--The sponsor of the plan 
                shall comply with such other requirements as the 
                Secretary finds necessary to administer the program 
                under this section.
            ``(2) Limitation on benefit eligibility.--No payment shall 
        be provided under this section with respect to an individual 
        who is enrolled under a qualified retiree prescription drug 
        plan unless the individual is a medicare secondary payer 
        eligible individual who--
                    ``(A) is covered under the plan; and
                    ``(B) is eligible to obtain qualified prescription 
                drug coverage under this part but did not elect such 
                coverage (either through a Medicare Prescription Plus 
                plan or through a Medicare+Choice plan).
            ``(3) Definitions.--As used in this section:
                    ``(A) Employment-based retiree health coverage.--
                The term `employment-based retiree health coverage' 
                means health insurance or other coverage of health care 
                costs for medicare secondary payer eligible individuals 
                (or for such individuals and their spouses and 
                dependents) based on their status as former employees 
                or labor union members.
                    ``(B) Employer.--The term `employer' has the 
                meaning given 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).
                    ``(C) Sponsor.--The term `sponsor' means a plan 
                sponsor, as defined in section 3(16)(B) of the Employee 
                Retirement Income Security Act of 1974.
                    ``(D) Medicare secondary payer individual.--The 
                term `medicare secondary payer eligible individual' 
                means, with respect to a plan, an individual who is 
                covered under the plan and with respect to whom the 
                plan is not a primary plan (as defined in section 
                1862(b)(2)(A)).
    ``(f) General Definitions.--For purposes of this section:
            ``(1) Qualified beneficiary.--The term `qualified 
        beneficiary' means an individual who--
                    ``(A) is enrolled with a Medicare Prescription Plus 
                plan under this part;
                    ``(B) is enrolled with a Medicare+Choice plan that 
                provides qualified prescription drug coverage under 
                part C of title XVIII; or
                    ``(C) is covered as a medicare secondary payer 
                eligible individual under a qualified retiree 
                prescription drug plan.
            ``(2) Coverage year.--The term `coverage year' means a 
        calendar year in which covered outpatient drugs are dispensed 
        if a claim for payment is made under the plan for such drugs, 
        regardless of when the claim is paid.

                  ``plan fees for administrative costs

    ``Sec. 2213. (a) In General.--The Secretary may levy on Medicare 
Prescription Plus plans and Medicare+Choice plans that provide drug 
coverage pursuant to this part an assessment sufficient to pay the 
estimated expenses of the Secretary for administering the program under 
this part.
    ``(b) Deposits and Use.--The assessments described in subsection 
(a) shall be--
            ``(1) deposited into the Medicare Prescription Drug 
        Account; and
            ``(2) available for administering the program under this 
        part without regard to amounts provided for in advance by 
        appropriations Acts.

                  ``medicare prescription drug account

    ``Sec. 2214. (a) Establishment.--There is created within the 
Federal Supplementary Medical Insurance Trust Fund established under 
section 1841 an account to be known as the `Medicare Prescription Drug 
Account'.
    ``(b) Amounts in Account.--
            ``(1) In general.--The Medicare Prescription Drug Account 
        shall consist of--
                    ``(A) such amounts as may be deposited in, or 
                appropriated to, such account 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 Medicare Prescription Drug 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 Medicare Prescription Drug 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) Transfers to medicaid account for increased 
        administrative costs.--The Managing Trustee shall transfer from 
        time to time from the Account to the Grants to States for 
        Medicaid account amounts the Secretary certifies are 
        attributable to increases in payment resulting from the 
        application of a higher Federal matching percentage under 
        section 1935(b).
    ``(d) Deposits Into Account.--
            ``(1) Medicaid transfer.--There is hereby transferred to 
        the Account, from amounts appropriated for Grants to States for 
        Medicaid, amounts equivalent to the aggregate amount of the 
        reductions in payments under section 1903(a)(1) attributable to 
        the application of section 1935(c).
            ``(2) Appropriations to cover government contributions.--
        There are authorized to be appropriated from time to time, out 
        of any moneys in the Treasury not otherwise appropriated, to 
        the Account, an amount equivalent to the amount of payments 
        made from the Account, reduced by--
                    ``(1) the amount transferred to the Account under 
                paragraph (1);
                    ``(2) the beneficiary premiums collected and 
                credited to the account under section 2211(b)(2); and
                    ``(3) fees collected and credited to the account 
                under section 2213.

                      ``secondary payer provisions

    ``Sec. 2215. The provisions of section 1862(b) shall apply to the 
benefits provided under this part.

``definitions; treatment of references to provisions in medicare+choice 
                                program

    ``Sec. 2216. (a) Definitions.--In this part:
            ``(1) Covered outpatient drug.--
                    ``(A) In general.--Except as provided in this 
                subparagraph (B), the term `covered outpatient drug' 
                means--
                            ``(i) a drug that may be dispensed only 
                        upon a prescription and that is described in 
                        clause (i) or (ii) of section 1927(k)(2)(A); or
                            ``(ii) a biological product or insulin 
                        described in subparagraph (B) or (C) of such 
                        section.
                    ``(B) Exclusions.--
                            ``(i) In general.--The term `covered 
                        outpatient drug' does not include drugs or 
                        classes of drugs, or their medical uses, which 
                        may be excluded from coverage or otherwise 
                        restricted under section 1927(d)(2), other than 
                        subparagraph (E) thereof (relating to smoking 
                        cessation agents).
                            ``(ii) Avoidance of duplicate coverage.--A 
                        drug prescribed for an individual that would 
                        otherwise be a covered outpatient drug under 
                        this part shall not be so considered if payment 
                        for such drug is available under part A or B of 
                        title XVIII (but shall be so considered if such 
                        payment is not available because benefits under 
                        part A or B of title XVIII have been 
                        exhausted), without regard to whether the 
                        individual is entitled to benefits under such 
                        part A or enrolled under such part B.
            ``(3) Eligible beneficiary.--The term `eligible 
        beneficiary' means an individual that is entitled to benefits 
        under part A of title XVIII and enrolled under part B of such 
        title.
            ``(4) Eligible entity.--The term `eligible entity' means 
        any risk-bearing entity that the Secretary determines to be 
        appropriate to provide eligible beneficiaries with the benefits 
        under a Medicare Prescription Plus plan, including--
                    ``(A) a pharmaceutical benefit management company;
                    ``(B) a wholesale or retail pharmacist delivery 
                system;
                    ``(C) an insurer (including an insurer that offers 
                medicare supplemental policies under section 1882);
                    ``(D) another entity; or
                    ``(E) any combination of the entities described in 
                subparagraphs (A) through (D).
            ``(5) Initial coverage limit.--The term `initial coverage 
        limit' means the limit as established under section 2205(d)(3), 
        or, in the case of coverage that is not standard coverage, the 
        comparable limit (if any) established under the coverage.
            ``(6) Medicare+choice organization; medicare+choice plan.--
        The terms `Medicare+Choice organization' and `Medicare+Choice 
        plan' have the meanings given such terms in subsections (a)(1) 
        and (b)(1), respectively, of section 1859 (relating to 
        definitions relating to Medicare+Choice organizations and 
        plans).
            ``(7) Medicare prescription drug account.--The term 
        `Medicare Prescription Drug Account' means the Medicare 
        Prescription Drug Account established under section 2214 and 
        located within the Federal Supplementary Medical Insurance 
        Trust Fund established under section 1841.
            ``(8) Medicare prescription plus plan.--The term `Medicare 
        Prescription Plus plan' means a health benefits plan that the 
        Secretary has approved under section 2209.
            ``(9) Standard coverage.--The term `standard coverage' 
        means the coverage described in section 2205(d).
    ``(b) Application of Medicare+Choice Provisions Under This Part.--
For purposes of applying provisions of part C of title XVIII under this 
part with respect to a Medicare Prescription Plus plan and an eligible 
entity, unless otherwise provided in this part such provisions shall be 
applied as if--
            ``(1) any reference to a Medicare+Choice plan included a 
        reference to a Medicare Prescription Plus plan;
            ``(2) any reference to a provider-sponsored organization 
        included a reference to an eligible entity;
            ``(3) any reference to a contract under section 1857 
        included a reference to a contract under section 2207(b); and
            ``(4) any reference to part C of title XVIII included a 
        reference to this part.''.
    (b) Submission of Legislative Proposal.--Not later than 6 months 
after the date of enactment of this Act, the Secretary of Health and 
Human Services shall submit to the appropriate committees of Congress a 
legislative proposal providing for such technical and conforming 
amendments in the law as are required by the provisions of this Act.

SEC. 202. AMENDMENTS TO FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST 
              FUND.

    Section 1841 of the Social Security Act (42 U.S.C. 1395t) is 
amended--
            (1) in the last sentence of subsection (a)--
                    (A) by striking ``and'' after ``section 
                201(i)(1)''; and
                    (B) by inserting before the period the following: 
                ``, and such amounts as may be deposited in, or 
                appropriated to, the Medicare Prescription Drug Account 
                established by section 2214'';
            (2) in subsection (g), by inserting after ``by this part,'' 
        the following: ``the payments provided for under the 
        Prescription Drug and Supplemental Benefit Program under title 
        XXII (in which case the payments shall come from the Medicare 
        Prescription Drug Account in the Supplementary Medical 
        Insurance Trust Fund),'';
            (3) in the first sentence of subsection (h), by inserting 
        ``(or the Secretary by reason of section 2215 (in which case 
        the payments shall come from the Medicare Prescription Drug 
        Account within such Trust Fund))'' after ``Human Services''; 
        and
            (4) in the first sentence of subsection (i), by inserting 
        ``(or the Secretary by reason of section 2215 (in which case 
        the payments shall come from the Medicare Prescription Drug 
        Account within such Trust Fund))'' after ``Human Services''.

SEC. 203. PRESCRIPTION DRUG COVERAGE UNDER THE MEDICARE+CHOICE PROGRAM.

    (a) In General.--Section 1851 of the Social Security Act (42 U.S.C. 
1395w-21) is amended by adding at the end the following new subsection:
    ``(j) Availability of Prescription Drug Benefits.--
            ``(1) In general.--A Medicare+Choice organization may not 
        offer prescription drug coverage (other than that required 
        under parts A and B) to an enrollee under a Medicare+Choice 
        plan unless such drug coverage is at least qualified 
        prescription drug coverage and unless the requirements of this 
        subsection with respect to such coverage are met.
            ``(2) Compliance with additional beneficiary protections.--
        With respect to the offering of qualified prescription drug 
        coverage by a Medicare+Choice organization under a 
        Medicare+Choice plan, the organization and plan shall meet the 
        requirements of section 2206, including requirements relating 
        to information dissemination and grievance and appeals, in the 
        same manner as they apply to an eligible entity and a Medicare 
        Prescription Plus plan under title XXII. The Secretary shall 
        waive such requirements to the extent the Administrator 
determines that such requirements duplicate requirements otherwise 
applicable to the organization or plan under this part.
            ``(3) Treatment of coverage.--Except as provided in this 
        subsection, qualified prescription drug coverage offered under 
        this subsection shall be treated under this part in the same 
        manner as supplemental health care benefits described in 
        section 1852(a)(3)(A).
            ``(4) Availability of cost-sharing subsidies for low-income 
        enrollees and reinsurance subsidy payments for organizations.--
        For provisions--
                    ``(A) providing cost-sharing subsidies to low-
                income individuals receiving qualified prescription 
                drug coverage through a Medicare+Choice plan, see 
                section 2211; and
                    ``(B) providing a Medicare+Choice organization with 
                reinsurance subsidy payments for providing qualified 
                prescription drug coverage under this part, see section 
                2212.
            ``(5) Specification of separate and standard premium.--
                    ``(A) In general.--For purposes of applying section 
                1854 and determining the premium discount under section 
                2211(c) with respect to qualified prescription drug 
                coverage offered under this subsection under a plan, 
                the Medicare+Choice organization shall compute and 
                publish the following:
                            ``(i) Separate prescription drug premium.--
                        A premium for prescription  drug benefits that 
constitutes qualified prescription drug coverage that is separate from 
other coverage under the plan.
                            ``(ii) Portion of coverage attributable to 
                        standard benefits.--The ratio of the actuarial 
                        value of standard coverage to the actuarial 
                        value of the qualified prescription drug 
                        coverage offered under the plan.
                            ``(iii) Portion of premium attributable to 
                        standard benefits.--A standard premium equal to 
                        the product of the premium described in clause 
                        (i) and the ratio under clause (ii).
                The premium under clause (i) shall be computed without 
                regard to any reduction in the premium permitted under 
                subparagraph (B).
                    ``(B) Reduction of premiums allowed.--Nothing in 
                this subsection shall be construed as preventing a 
                Medicare+Choice organization from reducing the amount 
                of a premium charged for prescription drug coverage 
                because of the application of subsections (f)(1)(A) and 
                (i)(2)(A) of section 1854 to other coverage.
            ``(6) Transition in initial enrollment period.--
        Notwithstanding any other provision of this part, the annual, 
        coordinated election period under subsection (e)(3)(B) for 2003 
        shall be the 6-month period beginning with November 2002.
            ``(7) Qualified prescription drug coverage; standard 
        coverage.--For purposes of this part, the terms `qualified 
        prescription drug coverage' and `standard coverage' have the 
        meanings given such terms in section 2205.''.
    (b) Conforming Amendments.--Section 1851(a)(1) of such Act (42 
U.S.C. 1395w-21(a)(1)) is amended--
            (1) by inserting ``(other than qualified prescription drug 
        benefits)'' after ``benefits'';
            (2) by striking the period at the end of subparagraph (B) 
        and inserting a comma; and
            (3) by adding at the end the following flush language:
        ``and may elect qualified prescription drug coverage in 
        accordance with title XXII.''.
    (c) Effective Date.--The amendments made by this section apply to 
coverage provided on or after January 1, 2003.

SEC. 205. MEDIGAP PROVISIONS.

    (a) In General.--Notwithstanding any other provision of law, no new 
medicare supplemental policy that provides coverage of expenses for 
prescription drugs may be issued under section 1882 of the Social 
Security Act on or after January 1, 2003, to an individual unless it 
replaces a medicare supplemental policy that was issued to that 
individual and that provided some coverage of expenses for prescription 
drugs.
    (b) Issuance of Substitute Policies if Obtaining Prescription Drug 
Coverage Through Medicare.--
            (1) In general.--The issuer of a medicare supplemental 
        policy--
                    (A) may not deny or condition the issuance or 
                effectiveness of a medicare supplemental policy that 
                has a benefit package classified as ``A'', ``B'', 
                ``C'', ``D'', ``E'', ``F'', or ``G'' (under the 
                standards established under subsection (p)(2) of 
                section 1882 of the Social Security Act (42 U.S.C. 
                1395ss)) and that is offered and is available for 
                issuance to new enrollees by such issuer;
                    (B) may not discriminate in the pricing of such 
                policy, because of health status, claims experience, 
                receipt of health care, or medical condition; and
                    (C) may not impose an exclusion of benefits based 
                on a preexisting condition under such policy,
        in the case of an individual described in paragraph (2) who 
        seeks to enroll under the policy not later than 63 days after 
        the date of the termination of enrollment described in such 
        paragraph and who submits evidence of the date of termination 
        or disenrollment along with the application for such medicare 
        supplemental policy.
            (2) Individual covered.--An individual described in this 
        paragraph is an individual who--
                    (A) enrolls in a Medicare Prescription Plus plan 
                under title XXII of the Social Security Act (as added 
                by section 201); and
                    (B) at the time of such enrollment was enrolled and 
                terminates enrollment in a medicare supplemental policy 
                which has a benefit package classified as ``H'', ``I'', 
                or ``J'' under the standards referred to in paragraph 
                (1)(A) or terminates enrollment in a policy to which 
                such standards do not apply but which provides benefits 
                for prescription drugs.
            (3) Enforcement.--The provisions of paragraph (1) shall be 
        enforced as though such provisions were included in section 
        1882(s) of the Social Security Act (42 U.S.C. 1395ss(s)).
            (4) Definitions.--For purposes of this subsection, the term 
        ``medicare supplemental policy'' has the meaning given such 
        term in section 1882(g) of the Social Security Act (42 U.S.C. 
        1395ss(g)).
    (c) Medigap Protections for Individuals Who Lose Medicare 
Prescription Plus Plan Coverage.--Section 1882 of the Social Security 
Act (42 U.S.C. 1395ss) is amended--
            (1) in subsection (d)(3)--
                    (A) in subparagraph (A), by adding at the end the 
                following:
    ``(ix) Nothing in this subparagraph shall be construed as 
preventing the sale of 1 medicare supplemental policy and 1 Medicare 
Prescription Plus plan to an individual, except that the sale of such a 
policy or plan may not duplicate any health benefits under any policy 
or plan owned by the individual.''; and
                    (B) in subparagraph (B)(iii)--
                            (i) in subclause (I), by striking ``(II) 
                        and (III)'' and inserting ``(II), (III), and 
                        (IV)'';
                            (ii) by redesignating subclause (III) as 
                        subclause (IV); and
                            (iii) by inserting after subclause (II) the 
                        following:
    ``(III) If the statement required by clause (i) is obtained and 
indicates that the individual is enrolled in 1 medicare supplemental 
policy or 1 Medicare Prescription Plus plan, the sale of another policy 
or plan is not in violation of clause (i) if such other policy or plan 
does not duplicate health benefits under the policy or plan in which 
the individual is enrolled.'';
            (2) in subsection (g)(1), by inserting ``, Medicare 
        Prescription Plus plan,'' after ``Medicare+Choice plan''; and
            (3) in subsection (s)(3)--
                    (A) in subparagraph (B)--
                            (i) in clause (ii), by inserting ``is 
                        enrolled with an eligible entity under a 
                        Medicare Prescription Plus plan under title 
                        XXII or'' after ``section 1851(e)(4) or the 
                        individual'';
                            (ii) in clause (v)(II), by inserting ``with 
                        any eligible entity under a Medicare 
                        Prescription Plus plan under title XXII,'' 
                        after ``under part C,''; and
                            (iii) in clause (vi), by inserting ``, in a 
                        Medicare Prescription Plus plan under title 
                        XXII,'' after ``under part C''; and
                    (B) in subparagraph (E)--
                            (i) in clause (i), by inserting ``(or, in 
                        the case of an individual enrolled under a 
                        Medicare Prescription Plus plan, the date on 
                        which the individual was notified by the 
                        eligible entity of the impending termination or 
                        discontinuance of the Medicare Prescription 
                        Plus plan) after ``it offers in the area''; and
                            (ii) in clause (ii), by inserting ``or 
                        Medicare Prescription Plus plan'' after 
                        ``Medicare+Choice plan''.
                                 <all>
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