II

107TH CONGRESS

1ST SESSION S. 1263

To amend title XVIII of the Social Security Act to establish a voluntary

Medicare Prescription Drug Plan under which eligible medicare beneficiaries may elect to receive coverage under the Rx Option for outpatient

prescription drugs and a combined deductible.

IN THE SENATE OF THE UNITED STATES

JULY 27, 2001

Mr. SMITH of New Hampshire (for himself and Mr. ALLARD) introduced the

following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend title XVIII of the Social Security Act to establish

a voluntary Medicare Prescription Drug Plan under

which eligible medicare beneficiaries may elect to receive

coverage under the Rx Option for outpatient prescription

drugs and a combined deductible.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Voluntary Medicare Prescription Drug Plan Act of

6 2001’’.
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1 (b) TABLE OF CONTENTS.—The table of contents of

2 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Medicare payment for outpatient prescription drugs.

‘‘PART D—VOLUNTARY MEDICARE PRESCRIPTION DRUG COVERAGE

‘‘Sec. 1860A. Medicare Prescription Drug Plan.

‘‘Sec. 1860B. Rx Option.

‘‘Sec. 1860C. Combined deductible.

‘‘Sec. 1860D. Partnerships with private entities to offer the Rx Option.’’.

Sec. 3. Conforming changes to Medigap.

3 SEC. 2. MEDICARE PAYMENT FOR OUTPATIENT PRESCRIP4 TION DRUGS.

5 (a) IN GENERAL.—Title XVIII of the Social Security

6 Act (42 U.S.C. 1395 et seq.) is amended by redesignating

7 part D as part E and by inserting after part C the fol8 lowing new part:

9 ‘‘PART D—VOLUNTARY MEDICARE PRESCRIPTION DRUG

10 COVERAGE

11 ‘‘MEDICARE PRESCRIPTION DRUG PLAN

12 ‘‘SEC. 1860A. (a) IN GENERAL.—Each Medicare

13 Prescription Drug Plan eligible individual may elect cov14 erage (beginning on January 1, 2002) under this part by

15 enrolling in the Rx Option in order to receive coverage

16 for outpatient prescription drugs as described in section

17 1860B and to pay a combined deductible under section

18 1860C.

19 ‘‘(b) MEDICARE PRESCRIPTION DRUG PLAN ELIGI20 BLE INDIVIDUAL DEFINED.—In this part, the term ‘Medi-
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1 care Prescription Drug Plan eligible individual’ means an

2 individual who is—

3 ‘‘(1) eligible for benefits under part A and en4 rolled under part B;

5 ‘‘(2) not enrolled in a Medicare+Choice plan

6 under part C; and

7 ‘‘(3) not eligible for medical assistance for out8 patient prescription drugs under title XIX.

9 ‘‘RX OPTION

10 ‘‘SEC. 1860B. (a) ENROLLMENT IN THE RX OP11 TION.—

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), the Secretary shall establish a process for

14 the enrollment of Medicare Prescription Drug Plan

15 eligible individuals under the Rx Option that is

16 based upon the process for enrollment in

17 Medicare+Choice plans under part C of this title.

18 ‘‘(2) EXCEPTIONS.—

19 ‘‘(A) 2-YEAR OBLIGATION.—Except as pro20 vided in subparagraph (B), a Medicare Pre21 scription Drug Plan eligible individual who

22 elects the Rx Option shall be subject to the pro23 visions of this part for a minimum period of 2

24 years, beginning with the first full month dur25 ing which the individual is eligible for benefits

26 under the Rx Option.
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1 ‘‘(B) FREE LOOK PERIOD.—An individual

2 who elects the Rx Option may disenroll from

3 such Option no later than the last day of the

4 first full month following the month in which

5 such election was made.

6 ‘‘(3) ENROLLMENT IN MEDICARE SUPPLE7 MENTAL POLICIES.—An individual enrolled in the

8 Rx Option may be enrolled only in a medicare sup9 plemental policy subject to the special rules de10 scribed in section 1882(v).

11 ‘‘(b) OUTPATIENT PRESCRIPTION DRUG BENE12 FITS.—

13 ‘‘(1) IN GENERAL.—Beginning in 2002, under

14 the Rx Option, after the enrollee has met the com15 bined deductible under section 1860C, the Secretary

16 shall provide a benefit for outpatient prescription

17 drugs through private entities under section 1860D

18 equal to 50 percent of the lesser of—

19 ‘‘(A) the cost of outpatient prescription

20 drugs for such year; or

21 ‘‘(B) $5000.

22 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—In the

23 case of any calendar year beginning after 2002, the

24 dollar amount in paragraph (1)(B) shall be in25 creased by an amount equal to—
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1 ‘‘(A) such dollar amount; multiplied by

2 ‘‘(B) the percentage (if any) by which—

3 ‘‘(i) the prescription drug component

4 of the Consumer Price Index for all urban

5 consumers (all items city average) for the

6 12-month period ending with August of the

7 preceding year; exceeds

8 ‘‘(ii) such prescription drug compo9 nent of the Consumer Price Index for the

10 12-month period ending with August 2001.

11 ‘‘(3) ROUNDING.—If any increase determined

12 under paragraph (2) is not a multiple of $1, such

13 increase shall be rounded to the nearest multiple of

14 $1.

15 ‘‘COMBINED DEDUCTIBLE

16 ‘‘SEC. 1860C. (a) IN GENERAL.—Notwithstanding

17 any provision of this title and beginning in 2002, a bene18 ficiary electing the Rx Option shall be subject to a com19 bined deductible that shall apply in lieu of the deductibles

20 applied under sections 1813(a)(1) and 1833(b).

21 ‘‘(b) AMOUNT.—

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

23 (a), the combined deductible is equal to $675.

24 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—In the

25 case of any calendar year after 2002, the dollar
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1 amount in paragraph (1) shall be increased by an

2 amount equal to—

3 ‘‘(A) such dollar amount; multiplied by

4 ‘‘(B) the percentage (if any) by which—

5 ‘‘(i) the medical component of the

6 Consumer Price Index for all urban con7 sumers (all items city average) for the 12-

8 month period ending with August of the

9 preceding year; exceeds

10 ‘‘(ii) such medical component of the

11 Consumer Price Index for the 12-month

12 period ending with August 2001.

13 ‘‘(3) ROUNDING.—If any increase determined

14 under paragraph (2) is not a multiple of $1, such

15 increase shall be rounded to the nearest multiple of

16 $1.

17 ‘‘(c) APPLICATION.—In applying the combined de18 ductible described in subsection (a) such deductible shall

19 apply to each expense incurred on a calendar year basis

20 for each item or service covered under this title, and each

21 expense paid on a calendar year basis for such an item

22 or service shall be credited against such deductible.

23 ‘‘PARTNERSHIPS WITH PRIVATE ENTITIES TO OFFER THE

24 RX OPTION

25 ‘‘SEC. 1860D. (a) PARTNERSHIPS.—
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1 ‘‘(1) IN GENERAL.—The Secretary shall con2 tract with private entities for the provision of out3 patient prescription drug benefits under the Rx Op4 tion.

5 ‘‘(2) PRIVATE ENTITIES.—The private entities

6 described in paragraph (1) shall include insurers (in7 cluding issuers of medicare supplemental policies

8 under section 1882), pharmaceutical benefit man9 agers, chain pharmacies, groups of independent

10 pharmacies, and other private entities that the Sec11 retary determines are appropriate.

12 ‘‘(3) AREAS.—The Secretary may award a con13 tract to a private entity under this section on a

14 local, regional, or national basis.

15 ‘‘(4) DRUG BENEFITS ONLY THROUGH PRIVATE

16 ENTITIES.—Outpatient prescription drug benefits

17 under the Rx Option shall be offered only through

18 a contract with a private entity under this section.

19 ‘‘(b) SECRETARY REQUIRED TO CONTRACT WITH

20 ANY WILLING QUALIFIED PRIVATE ENTITY.—The Sec21 retary may not exclude a private entity from receiving a

22 contract to provide outpatient prescription drug benefits

23 under the Rx Option if the private entity meets all of the

24 requirements established by the Secretary for providing

25 such benefits.’’.
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1 SEC. 3. CONFORMING CHANGES TO MEDIGAP.

2 Section 1882 of the Social Security Act (42 U.S.C.

3 1395ss) is amended by adding at the end the following

4 new subsection:

5 ‘‘(v) SPECIAL RULES FOR MEDICARE PRESCRIPTION

6 DRUG PLAN ENROLLEES.—

7 ‘‘(1) REVISION OF BENEFIT PACKAGES.—

8 ‘‘(A) IN GENERAL.—Notwithstanding sub9 section (p), the benefit packages established

10 under such subsection (including the 2 plans

11 described in paragraph (11)(A) of such sub12 section) shall be revised (in the manner de13 scribed in subsection (p)(1)(E)) so that each of

14 the benefit packages classified as ‘A’ through

15 ‘J’ remain exactly the same, except that each

16 benefit package shall include special rules that

17 apply only to individuals enrolled in the Rx Op18 tion under section 1860B as follows:

19 ‘‘(i) COMBINED DEDUCTIBLE.—Each

20 benefit package shall require the bene21 ficiary of the policy to pay annual out-of22 pocket expenses (other than premiums) in

23 an amount equal to the amount of the

24 combined deductible under section

25 1860C(b) before the policy begins payment

26 of any benefits.
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1 ‘‘(ii) PRESCRIPTION DRUG COV2 ERAGE.—In the case of a benefit package

3 classified as ‘H’, ‘I’, and ‘J’, such policy

4 may not provide coverage for outpatient

5 prescription drugs that duplicates the cov6 erage for outpatient prescription drugs

7 provided under the Rx Option under sec8 tion 1860B(b).

9 ‘‘(B) ADJUSTED PREMIUM.—In the case of

10 an individual enrolled in the Rx Option, the

11 premium for the policy in which the individual

12 is enrolled may be appropriately adjusted to re13 flect the special rules applicable to such indi14 vidual under subparagraph (A).

15 ‘‘(2) RENEWABILITY AND CONTINUITY OF COV16 ERAGE.—The revisions of benefit packages under

17 paragraph (1) shall not affect—

18 ‘‘(A) the renewal of medicare supplemental

19 policies under this section that are in existence

20 on the effective date of such revisions; or

21 ‘‘(B) the continuity of coverage under such

22 policies.’’.

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