II

107TH CONGRESS

1ST SESSION S. 1239

To amend title XVIII of the Social Security Act to provide medicare beneficiaries with a drug discount card that ensures access to affordable

outpatient prescription drugs.

IN THE SENATE OF THE UNITED STATES

JULY 25, 2001

Mr. HAGEL (for himself, Mr. ENSIGN, and Mr. LUGAR) 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 provide

medicare beneficiaries with a drug discount card that

ensures access to affordable outpatient prescription

drugs.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medicare Rx Drug Discount and Security Act of 2001’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Voluntary Medicare Outpatient Prescription Drug Discount and Security Program.
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‘‘PART D—VOLUNTARY MEDICARE OUTPATIENT PRESCRIPTION DRUG

DISCOUNT AND SECURITY PROGRAM

‘‘Sec. 1860. Definitions.

‘‘SUBPART 1—ESTABLISHMENT OF VOLUNTARY MEDICARE OUTPATIENT

PRESCRIPTION DRUG DISCOUNT AND SECURITY PROGRAM

‘‘Sec. 1860A. Establishment of program.

‘‘Sec. 1860B. Enrollment.

‘‘Sec. 1860C. Providing enrollment and coverage information to beneficiaries.

‘‘Sec. 1860D. Enrollee protections.

‘‘Sec. 1860E. Annual enrollment fee.

‘‘Sec. 1860F. Benefits under the program.

‘‘Sec. 1860G. Selection of entities to provide prescription drug coverage.

‘‘Sec. 1860H. Payments to eligible entities for administering the catastrophic benefit.

‘‘Sec. 1860I. Determination of income levels.

‘‘Sec. 1860J. Appropriations.

‘‘SUBPART 2—ESTABLISHMENT OF THE MEDICARE PRESCRIPTION DRUG

AGENCY

‘‘Sec. 1860S. Medicare Prescription Drug Agency.

‘‘Sec. 1860T. Commissioner; Deputy Commissioner; other officers.

‘‘Sec. 1860U. Administrative duties of the Commissioner.

‘‘Sec. 1860V. Medicare Competition and Prescription Drug Advisory

Board.’’.

Sec. 3. Commissioner as member of the board of trustees of the medicare trust

funds.

Sec. 4. Exclusion of part D costs from determination of part B monthly premium.

Sec. 5. Medigap revisions.

1 SEC. 2. VOLUNTARY MEDICARE OUTPATIENT PRESCRIP2 TION DRUG DISCOUNT AND SECURITY PRO3 GRAM.

4 (a) ESTABLISHMENT OF PROGRAM.—Title XVIII of

5 the Social Security Act (42 U.S.C. 1395 et seq.) is amend6 ed by redesignating part D as part E and by inserting

7 after part C the following new part:
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1 ‘‘PART D—VOLUNTARY MEDICARE OUTPATIENT PRE2 SCRIPTION DRUG DISCOUNT AND SECURITY PRO3 GRAM

4 ‘‘DEFINITIONS

5 ‘‘SEC. 1860. In this part:

6 ‘‘(1) COMMISSIONER.—The term ‘Commis7 sioner’ means the Commissioner of Medicare Pre8 scription Drugs appointed under section 1860S(a).

9 ‘‘(2) COVERED OUTPATIENT DRUG.—

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

11 subparagraph (B), the term ‘covered outpatient

12 drug’ means—

13 ‘‘(i) a drug that may be dispensed

14 only upon a prescription and that is de15 scribed in clause (i) or (ii) of subparagraph

16 (A) of section 1927(k)(2); or

17 ‘‘(ii) a biological product or insulin de18 scribed in subparagraph (B) or (C) of such

19 section.

20 ‘‘(B) EXCLUSIONS.—

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

22 outpatient drug’ does not include drugs or

23 classes of drugs, or their medical uses,

24 which may be excluded from coverage or

25 otherwise restricted under section
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1 1927(d)(2), other than those restricted

2 under subparagraph (E) of such section

3 (relating to smoking cessation agents).

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

7 outpatient drug under this part shall not

8 be considered to be such a drug if payment

9 for the drug is available under part A or

10 B (but such drug shall be so considered if

11 such payment is not available because the

12 eligible beneficiary has exhausted benefits

13 under part A or B), without regard to

14 whether the individual is entitled to bene15 fits under part A or enrolled under part B.

16 ‘‘(3) ELIGIBLE BENEFICIARY.—The term ‘eligi17 ble beneficiary’ means an individual who is—

18 ‘‘(A) eligible for benefits under part A or

19 enrolled under part B; and

20 ‘‘(B) not eligible for prescription drug cov21 erage under a medicaid plan under title XIX.

22 ‘‘(4) ELIGIBLE ENTITY.—The term ‘eligible en23 tity’ means any entity that the Commissioner deter24 mines to be appropriate to provide the benefits

25 under this part, including—
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1 ‘‘(A) pharmaceutical benefit management

2 companies;

3 ‘‘(B) wholesale and retail pharmacy deliv4 ery systems;

5 ‘‘(C) insurers;

6 ‘‘(D) Medicare+Choice organizations;

7 ‘‘(E) other entities; or

8 ‘‘(F) any combination of the entities de9 scribed in subparagraphs (A) through (E).

10 ‘‘(5) POVERTY LINE.—The term ‘poverty line’

11 means the income official poverty line (as defined by

12 the Office of Management and Budget, and revised

13 annually in accordance with section 673(2) of the

14 Omnibus Budget Reconciliation Act of 1981) appli15 cable to a family of the size involved.

16 ‘‘SUBPART 1—ESTABLISHMENT OF VOLUNTARY MEDI17 CARE OUTPATIENT PRESCRIPTION DRUG DISCOUNT

18 AND SECURITY PROGRAM

19 ‘‘ESTABLISHMENT OF PROGRAM

20 ‘‘SEC. 1860A. (a) PROVISION OF BENEFIT.—The

21 Commissioner shall establish a Medicare Outpatient Pre22 scription Drug Discount and Security Program under

23 which an eligible beneficiary may voluntarily enroll and re24 ceive benefits under this part through enrollment with an

25 eligible entity with a contract under this part.
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1 ‘‘(b) PROGRAM TO BEGIN IN 2003.—The Commis2 sioner shall establish the program under this part in a

3 manner so that benefits are first provided for months be4 ginning with January 2003.

5 ‘‘(c) VOLUNTARY NATURE OF PROGRAM.—Nothing

6 in this part shall be construed as requiring an eligible ben7 eficiary to enroll in the program under this part.

8 ‘‘(d) FINANCING.—The costs of providing benefits

9 under this part shall be payable from the Federal Supple10 mentary Medical Insurance Trust Fund established under

11 section 1841.

12 ‘‘ENROLLMENT

13 ‘‘SEC. 1860B. (a) ENROLLMENT UNDER PART D.—

14 ‘‘(1) ESTABLISHMENT OF PROCESS.—

15 ‘‘(A) IN GENERAL.—The Commissioner

16 shall establish a process through which an eligi17 ble beneficiary (including an eligible beneficiary

18 enrolled in a Medicare+Choice plan offered by

19 a Medicare+Choice organization) may make an

20 election to enroll under this part. Except as

21 otherwise provided in this subsection, such

22 process shall be similar to the process for en23 rollment under part B under section 1837.

24 ‘‘(B) REQUIREMENT OF ENROLLMENT.—

25 An eligible beneficiary must enroll under this
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1 part in order to be eligible to receive the bene2 fits under this part.

3 ‘‘(2) ENROLLMENT PERIODS.—

4 ‘‘(A) IN GENERAL.—Except as provided

5 under subparagraph (B) or (C), an eligible ben6 eficiary may not enroll in the program under

7 this part during any period after the bene8 ficiary’s initial enrollment period under part B

9 (as determined under section 1837).

10 ‘‘(B) SPECIAL ENROLLMENT PERIOD.—In

11 the case of eligible beneficiaries that have re12 cently lost eligibility for prescription drug cov13 erage under a medicaid plan under title XIX,

14 the Commissioner shall establish a special en15 rollment period in which such beneficiaries may

16 enroll under this part.

17 ‘‘(C) OPEN ENROLLMENT PERIOD IN 2003

18 FOR CURRENT BENEFICIARIES.—The Commis19 sioner shall establish a period, which shall begin

20 on the date on which the Commissioner first be21 gins to accept elections for enrollment under

22 this part and shall end on December 31, 2003,

23 during which any eligible beneficiary may—

24 ‘‘(i) enroll under this part; or
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1 ‘‘(ii) enroll or re-enroll under this part

2 after having previously declined or termi3 nated such enrollment.

4 ‘‘(3) PERIOD OF COVERAGE.—

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

6 subparagraph (B) and subject to subparagraph

7 (C), an eligible beneficiary’s coverage under the

8 program under this part shall be effective for

9 the period provided under section 1838, as if

10 that section applied to the program under this

11 part.

12 ‘‘(B) ENROLLMENT DURING OPEN AND

13 SPECIAL ENROLLMENT.—Subject to subpara14 graph (C), an eligible beneficiary who enrolls

15 under the program under this part under sub16 paragraph (B) or (C) of paragraph (2) shall be

17 entitled to the benefits under this part begin18 ning on the first day of the month following the

19 month in which such enrollment occurs.

20 ‘‘(C) LIMITATION.—Coverage under this

21 part shall not begin prior to January 1, 2003.

22 ‘‘(4) PART D COVERAGE TERMINATED BY TER23 MINATION OF COVERAGE UNDER PARTS A AND B OR

24 ELIGIBILITY FOR MEDICAL ASSISTANCE.—
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1 ‘‘(A) IN GENERAL.—In addition to the

2 causes of termination specified in section 1838,

3 the Commissioner shall terminate an individ4 ual’s coverage under this part if the individual

5 is—

6 ‘‘(i) no longer enrolled in part A or B;

7 or

8 ‘‘(ii) eligible for prescription drug cov9 erage under a medicaid plan under title

10 XIX.

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

12 described in subparagraph (A) shall be effective

13 on the effective date of—

14 ‘‘(i) the termination of coverage under

15 part A or (if later) under part B; or

16 ‘‘(ii) the coverage under title XIX.

17 ‘‘(b) ENROLLMENT WITH ELIGIBLE ENTITY.—

18 ‘‘(1) PROCESS.—

19 ‘‘(A) IN GENERAL.—The Commissioner

20 shall establish a process through which an eligi21 ble beneficiary who is enrolled under this part

22 shall make an annual election to enroll with any

23 eligible entity that has been awarded a contract

24 under this part and serves the geographic area

25 in which the beneficiary resides.
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1 ‘‘(B) RULES.—In establishing the process

2 under subparagraph (A), the Commissioner

3 shall use rules similar to the rules for enroll4 ment and disenrollment with a

5 Medicare+Choice plan under section 1851 (in6 cluding the special election periods under sub7 section (e)(4) of such section).

8 ‘‘(2) MEDICARE+CHOICE ENROLLEES.—An eli9 gible beneficiary who is enrolled under this part and

10 enrolled in a Medicare+Choice plan offered by a

11 Medicare+Choice organization must enroll with an

12 eligible entity in order to receive benefits under this

13 part. The beneficiary may elect to receive such bene14 fits from the Medicare+Choice organization in

15 which the beneficiary is enrolled if the organization

16 has been awarded a contract under this part.

17 ‘‘(3) COMPETITION.—Eligible entities with a

18 contract under this part shall compete for bene19 ficiaries on the basis of discounts, formularies, phar20 macy networks, and other services provided for

21 under the contract.

22 ‘‘(c) ENROLLMENT PERIOD FOR BENEFITS IN

23 2003.—The processes developed under subsections (a) and

24 (b) shall ensure that eligible beneficiaries are permitted

25 to enroll under this part and with an eligible entity prior
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1 to January 1, 2003, in order to ensure that coverage

2 under this part is effective as of such date.

3 ‘‘PROVIDING ENROLLMENT AND COVERAGE INFORMATION

4 TO BENEFICIARIES

5 ‘‘SEC. 1860C. (a) ACTIVITIES.—The Commissioner

6 shall provide for activities under this part to broadly dis7 seminate information to eligible beneficiaries (and pro8 spective eligible beneficiaries) regarding enrollment under

9 this part and the prescription drug coverage made avail10 able by eligible entities with a contract under this part.

11 ‘‘(b) SPECIAL RULE FOR FIRST ENROLLMENT

12 UNDER THE PROGRAM.—To the extent practicable, the

13 activities described in subsection (a) shall ensure that eli14 gible beneficiaries are provided with such information at

15 least 60 days prior to the first enrollment period described

16 in section 1860B(c).

17 ‘‘ENROLLEE PROTECTIONS

18 ‘‘SEC. 1860D. (a) GUARANTEED ISSUE AND NON19 DISCRIMINATION.—

20 ‘‘(1) GUARANTEED ISSUE.—

21 ‘‘(A) IN GENERAL.—An eligible beneficiary

22 who is eligible to enroll with an eligible entity

23 under section 1860B(b) for prescription drug

24 coverage under this part at a time during which

25 elections are accepted under this part with re26 spect to the coverage shall not be denied enroll-
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1 ment based on any health status-related factor

2 (described in section 2702(a)(1) of the Public

3 Health Service Act) or any other factor.

4 ‘‘(B) MEDICARE+CHOICE LIMITATIONS

5 PERMITTED.—The provisions of paragraphs (2)

6 and (3) (other than subparagraph (C)(i), relat7 ing to default enrollment) of section 1851(g)

8 (relating to priority and limitation on termi9 nation of election) shall apply to eligible entities

10 under this subsection.

11 ‘‘(2) NONDISCRIMINATION.—An eligible entity

12 offering prescription drug coverage under this part

13 shall not establish a service area in a manner that

14 would discriminate based on health or economic sta15 tus of potential enrollees.

16 ‘‘(b) DISSEMINATION OF INFORMATION.—

17 ‘‘(1) GENERAL INFORMATION.—An eligible enti18 ty with a contract under this part shall disclose, in

19 a clear, accurate, and standardized form to each eli20 gible beneficiary enrolled for prescription drug cov21 erage with such entity under this part at the time

22 of enrollment and at least annually thereafter, the

23 information described in section 1852(c)(1) relating

24 to such prescription drug coverage. Such information

25 includes the following:
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1 ‘‘(A) Access to covered outpatient drugs,

2 including access through pharmacy networks.

3 ‘‘(B) How any formulary used by the eligi4 ble entity functions.

5 ‘‘(C) Grievance and appeals procedures.

6 ‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL

7 COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA8 TION.—Upon request of an eligible beneficiary, the

9 eligible entity shall provide the information described

10 in section 1852(c)(2) (other than subparagraph (D))

11 to such beneficiary.

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

13 Each eligible entity offering prescription drug cov14 erage under this part shall have a mechanism for

15 providing specific information to enrollees upon re16 quest. The entity shall make available, through an

17 Internet website and in writing upon request, infor18 mation on specific changes in its formulary.

19 ‘‘(c) ACCESS TO COVERED BENEFITS.—

20 ‘‘(1) ENSURING PHARMACY ACCESS.—

21 ‘‘(A) IN GENERAL.—Each eligible entity

22 with a contract under this part shall permit any

23 pharmacy located in the area covered by such

24 contract to participate in the pharmacy network

25 of the eligible entity if the pharmacy agrees to
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1 accept such operating terms as the eligible enti2 ty may specify, including any fee schedule, re3 quirements relating to covered expenses, and

4 quality standards relating to the provision of

5 prescription drug coverage.

6 ‘‘(B) CONSTRUCTION.—Nothing in this

7 paragraph shall be construed as requiring a

8 pharmacy to participate in a pharmacy network

9 of an eligible entity with a contract under this

10 part to participate in any other coverage pro11 gram of the eligible entity.

12 ‘‘(2) ACCESS TO NEGOTIATED PRICES FOR PRE13 SCRIPTION DRUGS.—For requirements relating to

14 the access of an eligible beneficiary to negotiated

15 prices (including applicable discounts), see section

16 1860F(a).

17 ‘‘(3) REQUIREMENTS ON DEVELOPMENT AND

18 APPLICATION OF FORMULARIES.—Insofar as an eli19 gible entity with a contract under this part uses a

20 formulary, the following requirements must be met:

21 ‘‘(A) FORMULARY COMMITTEE.—The eligi22 ble entity must establish a pharmaceutical and

23 therapeutic committee that develops the for24 mulary. Such committee shall include at least 1

25 physician and at least 1 pharmacist.
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1 ‘‘(B) INCLUSION OF DRUGS IN ALL THERA2 PEUTIC CATEGORIES.—The formulary must in3 clude drugs within all therapeutic categories

4 and classes of covered outpatient drugs (al5 though not necessarily for all drugs within such

6 categories and classes).

7 ‘‘(C) APPEALS AND EXCEPTIONS TO APPLI8 CATION.—The entity must have, as part of the

9 appeals process under subsection (f)(2), a proc10 ess for appeals for denials of coverage based on

11 such application of the formulary.

12 ‘‘(d) COST AND UTILIZATION MANAGEMENT; QUAL13 ITY ASSURANCE; MEDICATION THERAPY MANAGEMENT

14 PROGRAM.—

15 ‘‘(1) IN GENERAL.—For purposes of providing

16 access to negotiated benefits under section 1860F(a)

17 and the catastrophic benefit described in section

18 1860F(b), the eligible entity shall have in place—

19 ‘‘(A) an effective cost and drug utilization

20 management program, including appropriate in21 centives to use generic drugs, when appropriate;

22 ‘‘(B) quality assurance measures and sys23 tems to reduce medical errors and adverse drug

24 interactions, including a medication therapy
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1 management program described in paragraph

2 (2); and

3 ‘‘(C) a program to control fraud, abuse,

4 and waste.

5 ‘‘(2) MEDICATION THERAPY MANAGEMENT PRO6 GRAM.—

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

8 management program described in this para9 graph is a program of drug therapy manage10 ment and medication administration provided

11 by a community-based pharmacy that is de12 signed to ensure that prescription drugs made

13 available under this part are appropriately used

14 to achieve therapeutic goals and reduce the risk

15 of adverse events, including adverse drug inter16 actions.

17 ‘‘(B) ELEMENTS.—Such program shall

18 include—

19 ‘‘(i) enhanced beneficiary under20 standing of such appropriate use through

21 beneficiary education, counseling, and

22 other appropriate means; and

23 ‘‘(ii) increased beneficiary adherence

24 with prescription medication regimens
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1 through medication refill reminders, special

2 packaging, and other appropriate means.

3 ‘‘(C) DEVELOPMENT OF PROGRAM IN CO4 OPERATION WITH LICENSED PHARMACISTS.—

5 The program shall be developed in cooperation

6 with licensed pharmacists and physicians.

7 ‘‘(D) CONSIDERATIONS IN PHARMACY

8 FEES.—An eligible entity with a contract under

9 this part shall establish fees for pharmacists,

10 pharmacies, and others providing services under

11 the medication therapy management program

12 that take into account the resources and time

13 used in implementing the program.

14 ‘‘(3) TREATMENT OF ACCREDITATION.—Section

15 1852(e)(4) (relating to treatment of accreditation)

16 shall apply to prescription drug coverage provided

17 under this part with respect to the following require18 ments, in the same manner as they apply to

19 Medicare+Choice plans under part C with respect to

20 the requirements described in a clause of section

21 1852(e)(4)(B):

22 ‘‘(A) Subsection (c)(1) (relating to access

23 to covered benefits).

24 ‘‘(B) Subsection (g) (relating to confiden25 tiality and accuracy of enrollee records).
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1 ‘‘(e) GRIEVANCE MECHANISM.—Each eligible entity

2 shall provide meaningful procedures for hearing and re3 solving grievances between the organization (including any

4 entity or individual through which the eligible entity pro5 vides covered benefits) and eligible beneficiaries enrolled

6 with the entity under this part in accordance with section

7 1852(f).

8 ‘‘(f) COVERAGE DETERMINATIONS, RECONSIDER9 ATIONS, AND APPEALS.—

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

11 meet the requirements of section 1852(g) with re12 spect to covered benefits under the prescription drug

13 coverage it offers under this part in the same man14 ner as such requirements apply to a

15 Medicare+Choice organization with respect to bene16 fits it offers under a Medicare+Choice plan under

17 part C.

18 ‘‘(2) APPEALS OF FORMULARY DETERMINA19 TIONS.—Under the appeals process under paragraph

20 (1) an individual who is enrolled with an eligible en21 tity with a contract under this part for prescription

22 drug coverage may appeal any denial of coverage of

23 a prescription drug to obtain coverage for a medi24 cally necessary covered outpatient drug that is not

25 on the formulary of the eligible entity (established
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1 under subsection (c)) if the prescribing physician de2 termines that the therapeutically similar drug that is

3 on the formulary is not effective for the enrollee or

4 has significant adverse effects for the enrollee.

5 ‘‘(g) CONFIDENTIALITY AND ACCURACY OF EN6 ROLLEE RECORDS.—An eligible entity shall meet the re7 quirements of section 1852(h) with respect to enrollees

8 under this part in the same manner as such requirements

9 apply to a Medicare+Choice organization with respect to

10 enrollees under part C.

11 ‘‘ANNUAL ENROLLMENT FEE

12 ‘‘SEC. 1860E. (a) AMOUNT.—

13 ‘‘(1) IN GENERAL.—Except as provided in sub14 section (c), enrollment under the program under this

15 part is conditioned upon payment of an annual en16 rollment fee of $25.

17 ‘‘(2) ANNUAL PERCENTAGE INCREASE.—

18 ‘‘(A) IN GENERAL.—In the case of any cal19 endar year beginning after 2003, the dollar

20 amount in paragraph (1) shall be increased by

21 an amount equal to—

22 ‘‘(i) such dollar amount; multiplied by

23 ‘‘(ii) the inflation adjustment.

24 ‘‘(B) INFLATION ADJUSTMENT.—For pur25 poses of subparagraph (A)(ii), the inflation ad-
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1 justment for any calendar year is the percent2 age (if any) by which—

3 ‘‘(i) the average per capita aggregate

4 expenditures for covered outpatient drugs

5 in the United States for medicare bene6 ficiaries, as determined by the Commis7 sioner for the 12-month period ending in

8 July of the previous year; exceeds

9 ‘‘(ii) such aggregate expenditures for

10 the 12-month period ending with July

11 2003.

12 ‘‘(C) ROUNDING.—If any increase deter13 mined under clause (ii) is not a multiple of $1,

14 such increase shall be rounded to the nearest

15 multiple of $1.

16 ‘‘(b) COLLECTION OF ANNUAL ENROLLMENT FEE.—

17 ‘‘(1) IN GENERAL.—Unless the eligible bene18 ficiary makes an election under paragraph (2), the

19 annual enrollment fee described in subsection (a)

20 shall be collected and credited to the Federal Sup21 plementary Medical Insurance Trust Fund in the

22 same manner as the monthly premium determined

23 under section 1839 is collected and credited to such

24 Trust Fund under section 1840.
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1 ‘‘(2) DIRECT PAYMENT.—An eligible beneficiary

2 may elect to pay the annual enrollment fee directly

3 or in any other manner approved by the Commis4 sioner. The Commissioner shall establish procedures

5 for making such an election.

6 ‘‘(c) WAIVER.—The Commissioner shall waive the en7 rollment fee described in subsection (a) in the case of an

8 eligible beneficiary whose income is below 200 percent of

9 the poverty line.

10 ‘‘BENEFITS UNDER THE PROGRAM

11 ‘‘SEC. 1860F. (a) ACCESS TO NEGOTIATED

12 PRICES.—

13 ‘‘(1) NEGOTIATED PRICES.—

14 ‘‘(A) IN GENERAL.—Subject to subpara15 graph (B), each eligible entity with a contract

16 under this part shall provide each eligible bene17 ficiary enrolled with the entity with access to

18 negotiated prices (including applicable dis19 counts) for such prescription drugs as the eligi20 ble entity determines appropriate. If such a

21 beneficiary becomes eligible for the catastrophic

22 benefit under subsection (b), the negotiated

23 prices (including applicable discounts) shall con24 tinue to be available to the beneficiary for those

25 prescription drugs for which payment may not

26 be made under section 1860H(b). For purposes
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1 of this subparagraph, the term ‘prescription

2 drugs’ is not limited to covered outpatient

3 drugs, but does not include any over-the4 counter drug that is not a covered outpatient

5 drug.

6 ‘‘(B) LIMITATIONS.—

7 ‘‘(i) FORMULARY RESTRICTIONS.—In8 sofar as an eligible entity with a contract

9 under this part uses a formulary, the nego10 tiated prices (including applicable dis11 counts) for prescription drugs shall only be

12 available for drugs included in such for13 mulary.

14 ‘‘(ii) AVOIDANCE OF DUPLICATE COV15 ERAGE.—The negotiated prices (including

16 applicable discounts) for prescription drugs

17 shall not be available for any drug pre18 scribed for an eligible beneficiary if pay19 ment for the drug is available under part

20 A or B (but such negotiated prices shall be

21 available if payment under part A or B is

22 not available because the beneficiary has

23 not met the deductible or has exhausted

24 benefits under part A or B).
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1 ‘‘(2) DISCOUNT CARD.—The Commissioner

2 shall develop a uniform standard card format to be

3 issued by each eligible entity that may be used by

4 an enrolled beneficiary to ensure the access of such

5 beneficiary to negotiated prices under paragraph (1).

6 ‘‘(3) ENSURING DISCOUNTS IN ALL AREAS.—

7 The Commissioner shall develop procedures that en8 sure that each eligible beneficiary that resides in an

9 area where no eligible entity has been awarded a

10 contract under this part is provided with access to

11 negotiated prices for prescription drugs (including

12 applicable discounts).

13 ‘‘(b) CATASTROPHIC BENEFIT.—

14 ‘‘(1) IN GENERAL.—Subject to paragraph (4)

15 (relating to eligibility for the catastrophic benefit)

16 and any formulary used by the eligible entity with

17 which the eligible beneficiary is enrolled, the cata18 strophic benefit shall be administered as follows:

19 ‘‘(A) BENEFICIARIES WITH ANNUAL IN20 COMES BELOW 200 PERCENT OF THE POVERTY

21 LINE.—In the case of an eligible beneficiary

22 whose modified adjusted gross income (as de23 fined in paragraph (4)(E)) is below 200 percent

24 of the poverty line, the beneficiary shall not be

25 responsible for making a payment for a covered
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1 outpatient drug provided to the beneficiary in a

2 year to the extent that the out-of-pocket ex3 penses of the beneficiary for such drug, when

4 added to the out-of-pocket expenses of the bene5 ficiary for covered outpatient drugs previously

6 provided in the year, exceed $1,200.

7 ‘‘(B) BENEFICIARIES WITH ANNUAL IN8 COMES BETWEEN 200 AND 400 PERCENT OF THE

9 POVERTY LINE.—In the case of an eligible ben10 eficiary whose modified adjusted gross income

11 (as so defined) exceeds 200 percent, but does

12 not exceed 400 percent, of the poverty line, the

13 beneficiary shall not be responsible for making

14 a payment for a covered outpatient drug pro15 vided to the beneficiary in a year to the extent

16 that the out-of-pocket expenses of the bene17 ficiary for such drug, when added to the out-of18 pocket expenses of the beneficiary for covered

19 outpatient drugs previously provided in the

20 year, exceed $2,500.

21 ‘‘(C) BENEFICIARIES WITH ANNUAL IN22 COMES ABOVE 400 PERCENT OF THE POVERTY

23 LINE.—In the case of an eligible beneficiary

24 whose modified adjusted gross income (as so

25 defined) exceeds 400 percent of the poverty
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1 line, the beneficiary shall not be responsible for

2 making a payment for a covered outpatient

3 drug provided to the beneficiary in a year to the

4 extent that the out-of-pocket expenses of the

5 beneficiary for such drug, when added to the

6 out-of-pocket expenses of the beneficiary for

7 covered outpatient drugs previously provided in

8 the year, exceed $5,000.

9 ‘‘(2) ANNUAL PERCENTAGE INCREASE.—

10 ‘‘(A) IN GENERAL.—In the case of any cal11 endar year after 2003, the dollar amounts in

12 paragraph (1) shall be increased by an amount

13 equal to—

14 ‘‘(i) such dollar amount; multiplied by

15 ‘‘(ii) the inflation adjustment deter16 mined under section 1860E(a)(2)(B) for

17 such calendar year.

18 ‘‘(B) ROUNDING.—If any increase deter19 mined under subparagraph (A) is not a multiple

20 of $1, such increase shall be rounded to the

21 nearest multiple of $1.

22 ‘‘(3) ELIGIBLE ENTITY NOT AT RISK FOR CATA23 STROPHIC BENEFIT.—

24 ‘‘(A) IN GENERAL.—The Commissioner,

25 and not the eligible entity, shall be at risk for
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1 the provision of the catastrophic benefit under

2 this subsection.

3 ‘‘(B) PROVISIONS RELATING TO PAYMENTS

4 TO ELIGIBLE ENTITIES.—For provisions relat5 ing to payments to eligible entities for admin6 istering the catastrophic benefit under this sub7 section, see section 1860H.

8 ‘‘(4) CATASTROPHIC BENEFIT NOT AVAILABLE

9 TO CERTAIN HIGH INCOME INDIVIDUALS.—

10 ‘‘(A) IN GENERAL.—An eligible beneficiary

11 enrolled under this part whose modified ad12 justed gross income for a taxable year exceeds

13 600 percent of the poverty line shall not be eli14 gible for the catastrophic benefit under this

15 subsection.

16 ‘‘(B) BENEFICIARY STILL ELIGIBLE FOR

17 DISCOUNT BENEFIT.—Nothing in subparagraph

18 (A) shall be construed as affecting the eligibility

19 of a beneficiary described in such subparagraph

20 for the benefits under subsection (a).

21 ‘‘(C) PROCEDURES FOR DETERMINING

22 MODIFIED ADJUSTED GROSS INCOME.—

23 ‘‘(i) IN GENERAL.—The Commissioner

24 shall establish procedures for determining
27

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1 the modified adjusted gross income of eligi2 ble beneficiaries enrolled under this part.

3 ‘‘(ii) CONSULTATION.—The Commis4 sioner shall consult with the Secretary of

5 the Treasury in making the determinations

6 described in clause (i).

7 ‘‘(iii) DISCLOSURE OF INFORMA8 TION.—Notwithstanding section 6103(a) of

9 the Internal Revenue Code of 1986, the

10 Secretary of the Treasury may, upon writ11 ten request from the Commissioner, dis12 close to officers and employees of the

13 Medicare Prescription Drug Agency such

14 return information as is necessary to make

15 the determinations described in clause (i).

16 Return information disclosed under the

17 preceding sentence may be used by officers

18 and employees of the Medicare Prescrip19 tion Drug Agency only for the purposes of,

20 and to the extent necessary in, making

21 such determinations.

22 ‘‘(D) DEFINITION OF MODIFIED ADJUSTED

23 GROSS INCOME.—In this paragraph, the term

24 ‘modified adjusted gross income’ means ad-
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1 justed gross income (as defined in section 62 of

2 the Internal Revenue Code of 1986)—

3 ‘‘(i) determined without regard to sec4 tions 135, 911, 931, and 933 of such

5 Code; and

6 ‘‘(ii) increased by the amount of inter7 est received or accrued by the taxpayer

8 during the taxable year which is exempt

9 from tax under such Code.

10 ‘‘(5) ENSURING CATASTROPHIC BENEFIT IN

11 ALL AREAS.—The Commissioner shall develop proce12 dures for the provision of the catastrophic benefit

13 under this subsection to each eligible beneficiary

14 that resides in an area where there are no eligible

15 entities that have been awarded a contract under

16 this part.

17 ‘‘SELECTION OF ENTITIES TO PROVIDE PRESCRIPTION

18 DRUG COVERAGE

19 ‘‘SEC. 1860G. (a) ESTABLISHMENT OF BIDDING

20 PROCESS.—The Commissioner shall establish a process

21 under which the Commissioner accepts bids from eligible

22 entities and awards contracts to the entities to provide the

23 benefits under this part to eligible beneficiaries in an area.

24 ‘‘(b) SUBMISSION OF BIDS.—Each eligible entity de25 siring to enter into a contract under this part shall submit

26 a bid to the Commissioner at such time, in such manner,
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1 and accompanied by such information as the Commis2 sioner may reasonably require.

3 ‘‘(c) AWARDING OF CONTRACTS.—

4 ‘‘(1) IN GENERAL.—The Commissioner shall,

5 consistent with the requirements of this part and the

6 goal of containing medicare program costs, award at

7 least 2 contracts in each area, unless only 1 bidding

8 entity meets the terms and conditions specified by

9 the Commissioner under paragraph (2).

10 ‘‘(2) TERMS AND CONDITIONS.—The Commis11 sioner shall not award a contract to an eligible entity

12 under this section unless the Commissioner finds

13 that the eligible entity is in compliance with such

14 terms and conditions as the Commissioner shall

15 specify.

16 ‘‘(3) COMPARATIVE MERITS.—In determining

17 which of the eligible entities that submitted bids that

18 meet the terms and conditions specified by the Com19 missioner under paragraph (2) to award a contract,

20 the Commissioner shall consider the comparative

21 merits of each of the bids.

22 ‘‘PAYMENTS TO ELIGIBLE ENTITIES FOR ADMINISTERING

23 THE CATASTROPHIC BENEFIT

24 ‘‘SEC. 1860H. (a) IN GENERAL.—The Commissioner

25 shall establish procedures for making payments to an eligi-
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1 ble entity under a contract entered into under this part

2 for—

3 ‘‘(1) providing covered outpatient prescription

4 drugs to beneficiaries eligible for the catastrophic

5 benefit in accordance with subsection (b); and

6 ‘‘(2) costs incurred by the entity in admin7 istering the catastrophic benefit in accordance with

8 subsection (c).

9 ‘‘(b) PAYMENT FOR COVERED OUTPATIENT PRE10 SCRIPTION DRUGS.—

11 ‘‘(1) IN GENERAL.—Except as provided in sub12 section (c) and subject to paragraph (2), the Com13 missioner may only pay an eligible entity for covered

14 outpatient drugs furnished by the eligible entity to

15 an eligible beneficiary enrolled with such entity

16 under this part that is eligible for the catastrophic

17 benefit under section 1860F(b).

18 ‘‘(2) LIMITATIONS.—

19 ‘‘(A) FORMULARY RESTRICTIONS.—Insofar

20 as an eligible entity with a contract under this

21 part uses a formulary, the Commissioner may

22 not make any payment for a covered outpatient

23 drug that is not included in such formulary.

24 ‘‘(B) NEGOTIATED PRICES.—The Commis25 sioner may not pay an amount for a covered
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1 outpatient drug furnished to an eligible bene2 ficiary that exceeds the negotiated price (includ3 ing applicable discounts) that the beneficiary

4 would have been responsible for under section

5 1860F(a).

6 ‘‘(c) PAYMENT FOR ADMINISTRATIVE COSTS.—

7 ‘‘(1) PROCEDURES.—The procedures estab8 lished under subsection (a)(1) shall provide for pay9 ment to the eligible entity of an administrative fee

10 for each prescription filled by the entity for an eligi11 ble beneficiary—

12 ‘‘(A) who is enrolled with the entity; and

13 ‘‘(B) to whom subparagraph (A), (B), or

14 (C) of section 1860F(b)(1) applies with respect

15 to a covered outpatient drug.

16 ‘‘(2) AMOUNT.—The fee described in paragraph

17 (1) shall be—

18 ‘‘(A) negotiated by the Commissioner; and

19 ‘‘(B) consistent with such fees paid under

20 private sector pharmaceutical benefit contracts.

21 ‘‘(d) SECONDARY PAYER PROVISIONS.—The provi22 sions of section 1862(b) shall apply to the benefits pro23 vided under this part.

24 ‘‘DETERMINATION OF INCOME LEVELS

25 ‘‘SEC. 1860I. (a) PROCEDURES.—The Commissioner

26 shall establish procedures for determining the income lev-
32

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1 els of eligible beneficiaries for purposes of sections

2 1860E(c) and 1860F(b).

3 ‘‘(b) PERIODIC REDETERMINATIONS.—Such income

4 determinations shall be valid for a period (of not less than

5 1 year) specified by the Commissioner.

6 ‘‘APPROPRIATIONS

7 ‘‘SEC. 1860J. There are authorized to be appro8 priated from time to time, out of any moneys in the Treas9 ury not otherwise appropriated, to the Federal Supple10 mentary Medical Insurance Trust Fund established under

11 section 1841, an amount equal to the amount by which

12 the benefits and administrative costs of providing the ben13 efits under this part exceed the enrollment fees collected

14 under section 1860E.

15 ‘‘SUBPART 2—ESTABLISHMENT OF THE MEDICARE

16 PRESCRIPTION DRUG AGENCY

17 ‘‘MEDICARE PRESCRIPTION DRUG AGENCY

18 ‘‘SEC. 1860S. (a) ESTABLISHMENT.—There is estab19 lished, as an independent agency in the executive branch

20 of the Government, a Medicare Prescription Drug Agency

21 (in this part referred to as the ‘Agency’).

22 ‘‘(b) DUTY.—It shall be the duty of the Agency to

23 administer the Medicare Outpatient Prescription Drug

24 Discount and Security Program under subpart 1.
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1 ‘‘COMMISSIONER; DEPUTY COMMISSIONER; OTHER

2 OFFICERS

3 ‘‘SEC. 1860T. (a) COMMISSIONER OF MEDICARE

4 PRESCRIPTION DRUGS.—

5 ‘‘(1) APPOINTMENT.—There shall be in the

6 Agency a Commissioner of Medicare Prescription

7 Drugs (in this subpart referred to as the ‘Commis8 sioner’) who shall be appointed by the President, by

9 and with the advice and consent of the Senate.

10 ‘‘(2) COMPENSATION.—The Commissioner shall

11 be compensated at the rate provided for level I of

12 the Executive Schedule.

13 ‘‘(3) TERM.—

14 ‘‘(A) IN GENERAL.—The Commissioner

15 shall be appointed for a term of 6 years.

16 ‘‘(B) CONTINUANCE IN OFFICE.—In any

17 case in which a successor does not take office

18 at the end of a Commissioner’s term of office,

19 such Commissioner may continue in office until

20 the appointment of a successor.

21 ‘‘(C) DELAYED APPOINTMENTS.—A Com22 missioner appointed to a term of office after the

23 commencement of such term may serve under

24 such appointment only for the remainder of

25 such term.
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1 ‘‘(D) REMOVAL.—An individual serving in

2 the office of Commissioner may be removed

3 from office only under a finding by the Presi4 dent of neglect of duty or malfeasance in office.

5 ‘‘(4) RESPONSIBILITIES.—The Commissioner

6 shall be responsible for the exercise of all powers

7 and the discharge of all duties of the Agency, and

8 shall have authority and control over all personnel

9 and activities thereof.

10 ‘‘(5) PROMULGATION OF RULES AND REGULA11 TIONS.—

12 ‘‘(A) IN GENERAL.—The Commissioner

13 may prescribe such rules and regulations as the

14 Commissioner determines necessary or appro15 priate to carry out the functions of the Agency.

16 ‘‘(B) RULEMAKING.—The regulations pre17 scribed by the Commissioner shall be subject to

18 the rulemaking procedures established under

19 section 553 of title 5, United States Code.

20 ‘‘(6) DELEGATION OF AUTHORITY.—

21 ‘‘(A) IN GENERAL.—The Commissioner

22 may assign duties, and delegate, or authorize

23 successive redelegations of, authority to act and

24 to render decisions, to such officers and employ-
35

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1 ees of the Agency as the Commissioner may

2 find necessary.

3 ‘‘(B) EFFECT OF DELEGATION.—Within

4 the limitations of such delegations, redelega5 tions, or assignments, all official acts and deci6 sions of such officers and employees shall have

7 the same force and effect as though performed

8 or rendered by the Commissioner.

9 ‘‘(7) CONSULTATION WITH SECRETARY OF

10 HEALTH AND HUMAN SERVICES.—The Commis11 sioner and the Secretary shall consult, on an ongo12 ing basis, to ensure the coordination of the programs

13 administered by the Commissioner with the pro14 grams administered by the Secretary under this title

15 and under title XIX.

16 ‘‘(b) DEPUTY COMMISSIONER OF MEDICARE PRE17 SCRIPTION DRUGS.—

18 ‘‘(1) APPOINTMENT.—There shall be in the

19 Agency a Deputy Commissioner of Medicare Pre20 scription Drugs (in this subpart referred to as the

21 ‘Deputy Commissioner’) who shall be appointed by

22 the President, by and with the advice and consent

23 of the Senate.

24 ‘‘(2) TERM.—
36

•S 1239 IS

1 ‘‘(A) IN GENERAL.—The Deputy Commis2 sioner shall be appointed for a term of 6 years.

3 ‘‘(B) CONTINUANCE IN OFFICE.—In any

4 case in which a successor does not take office

5 at the end of a Deputy Commissioner’s term of

6 office, such Deputy Commissioner may continue

7 in office until the entry upon office of such a

8 successor.

9 ‘‘(C) DELAYED APPOINTMENT.—A Deputy

10 Commissioner appointed to a term of office

11 after the commencement of such term may

12 serve under such appointment only for the re13 mainder of such term.

14 ‘‘(3) COMPENSATION.—The Deputy Commis15 sioner shall be compensated at the rate provided for

16 level II of the Executive Schedule.

17 ‘‘(4) DUTIES.—

18 ‘‘(A) IN GENERAL.—The Deputy Commis19 sioner shall perform such duties and exercise

20 such powers as the Commissioner shall from

21 time to time assign or delegate.

22 ‘‘(B) ACTING COMMISSIONER.—The Dep23 uty Commissioner shall be Acting Commissioner

24 of the Agency during the absence or disability

25 of the Commissioner, unless the President des-
37

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1 ignates another officer of the Government as

2 Acting Commissioner, in the event of a vacancy

3 in the office of the Commissioner.

4 ‘‘(c) CHIEF ACTUARY.—

5 ‘‘(1) APPOINTMENT.—

6 ‘‘(A) IN GENERAL.—There shall be in the

7 Agency a Chief Actuary, who shall be appointed

8 by, and in direct line of authority to, the Com9 missioner.

10 ‘‘(B) QUALIFICATIONS.—The Chief Actu11 ary shall be appointed from individuals who

12 have demonstrated, by their education and ex13 perience, superior expertise in the actuarial

14 sciences.

15 ‘‘(C) DUTIES.—The Chief Actuary shall

16 serve as the chief actuarial officer of the Agen17 cy, and shall exercise such duties as are appro18 priate for the office of the Chief Actuary and

19 in accordance with professional standards of ac20 tuarial independence.

21 ‘‘(2) COMPENSATION.—The Chief Actuary shall

22 be compensated at the highest rate of basic pay for

23 the Senior Executive Service under section 5382(b)

24 of title 5, United States Code.

25 ‘‘ADMINISTRATIVE DUTIES OF THE COMMISSIONER

26 ‘‘SEC. 1860U. (a) PERSONNEL.—
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•S 1239 IS

1 ‘‘(1) IN GENERAL.—The Commissioner may

2 employ, without regard to chapter 31 of title 5,

3 United States Code, such officers and employees as

4 are necessary to administer the activities to be car5 ried out through the Medicare Prescription Drug

6 Agency.

7 ‘‘(2) FLEXIBILITY WITH RESPECT TO CIVIL

8 SERVICE LAWS.—

9 ‘‘(A) IN GENERAL.—The staff of the Medi10 care Prescription Drug Agency shall be ap11 pointed without regard to the provisions of title

12 5, United States Code, governing appointments

13 in the competitive service, and, subject to sub14 paragraph (B), shall be paid without regard to

15 the provisions of chapters 51 and 53 of such

16 title (relating to classification and schedule pay

17 rates).

18 ‘‘(B) MAXIMUM RATE.—In no case may

19 the rate of compensation determined under sub20 paragraph (A) exceed the rate of basic pay pay21 able for level IV of the Executive Schedule

22 under section 5315 of title 5, United States

23 Code.

24 ‘‘(b) BUDGETARY MATTERS.—
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1 ‘‘(1) SUBMISSION OF ANNUAL BUDGET.—The

2 Commissioner shall prepare an annual budget for

3 the Agency, which shall be submitted by the Presi4 dent to Congress without revision, together with the

5 President’s annual budget for the Agency.

6 ‘‘(2) APPROPRIATIONS REQUESTS.—

7 ‘‘(A) STAFFING AND PERSONNEL.—Appro8 priations requests for staffing and personnel of

9 the Agency shall be based upon a comprehen10 sive workforce plan, which shall be established

11 and revised from time to time by the Commis12 sioner.

13 ‘‘(B) ADMINISTRATIVE EXPENSES.—Ap14 propriations for administrative expenses of the

15 Agency are authorized to be provided on a bien16 nial basis.

17 ‘‘(c) SEAL OF OFFICE.—

18 ‘‘(1) IN GENERAL.—The Commissioner shall

19 cause a Seal of Office to be made for the Agency of

20 such design as the Commissioner shall approve.

21 ‘‘(2) JUDICIAL NOTICE.—Judicial notice shall

22 be taken of the seal made under paragraph (1).

23 ‘‘(d) DATA EXCHANGES.—

24 ‘‘(1) DISCLOSURE OF RECORDS AND OTHER IN25 FORMATION.—Notwithstanding any other provision
40

•S 1239 IS

1 of law (including subsections (b), (o), (p), (q), (r),

2 and (u) of section 552a of title 5, United States

3 Code)—

4 ‘‘(A) the Secretary shall disclose to the

5 Commissioner any record or information re6 quested in writing by the Commissioner for the

7 purpose of administering any program adminis8 tered by the Commissioner, if records or infor9 mation of such type were disclosed to the Ad10 ministrator of the Health Care Financing Ad11 ministration in the Department of Health and

12 Human Services under applicable rules, regula13 tions, and procedures in effect before the date

14 of enactment of the Medicare Rx Drug Dis15 count and Security Act of 2001; and

16 ‘‘(B) the Commissioner shall disclose to

17 the Secretary or to any State any record or in18 formation requested in writing by the Secretary

19 to be so disclosed for the purpose of admin20 istering any program administered by the Sec21 retary, if records or information of such type

22 were so disclosed under applicable rules, regula23 tions, and procedures in effect before the date

24 of enactment of the Medicare Rx Drug Dis25 count and Security Act of 2001.
41

•S 1239 IS

1 ‘‘(2) EXCHANGE OF OTHER DATA.—The Com2 missioner and the Secretary shall periodically review

3 the need for exchanges of information not referred

4 to in paragraph (1) and shall enter into such agree5 ments as may be necessary and appropriate to pro6 vide information to each other or to States in order

7 to meet the programmatic needs of the requesting

8 agencies.

9 ‘‘(3) ROUTINE USE.—

10 ‘‘(A) IN GENERAL.—Any disclosure from a

11 system of records (as defined in section

12 552a(a)(5) of title 5, United States Code) pur13 suant to this subsection shall be made as a rou14 tine use under subsection (b)(3) of section 552a

15 of such title (unless otherwise authorized under

16 such section 552a).

17 ‘‘(B) COMPUTERIZED COMPARISON.—Any

18 computerized comparison of records, including

19 matching programs, between the Commissioner

20 and the Secretary shall be conducted in accord21 ance with subsections (o), (p), (q), (r), and (u)

22 of section 552a of title 5, United States Code.

23 ‘‘(4) TIMELY ACTION.—The Commissioner and

24 the Secretary shall each ensure that timely action is

25 taken to establish any necessary routine uses for dis-
42

•S 1239 IS

1 closures required under paragraph (1) or agreed to

2 under paragraph (2).

3 ‘‘MEDICARE COMPETITION AND PRESCRIPTION DRUG

4 ADVISORY BOARD

5 ‘‘SEC. 1860V. (a) ESTABLISHMENT OF BOARD.—

6 There is established a Medicare Prescription Drug Advi7 sory Board (in this section referred to as the ‘Board’).

8 ‘‘(b) ADVICE ON POLICIES; REPORTS.—

9 ‘‘(1) ADVICE ON POLICIES.—On and after the

10 date the Commissioner takes office, the Board shall

11 advise the Commissioner on policies relating to the

12 Medicare Outpatient Prescription Drug Discount

13 and Security Program under subpart 1.

14 ‘‘(2) REPORTS.—

15 ‘‘(A) IN GENERAL.—With respect to mat16 ters of the administration of subpart 1, the

17 Board shall submit to Congress and to the

18 Commissioner of Medicare Prescription Drugs

19 such reports as the Board determines appro20 priate. Each such report may contain such rec21 ommendations as the Board determines appro22 priate for legislative or administrative changes

23 to improve the administration of such subpart.

24 Each such report shall be published in the Fed25 eral Register.
43

•S 1239 IS

1 ‘‘(B) MAINTAINING INDEPENDENCE OF

2 BOARD.—The Board shall directly submit to

3 Congress reports required under subparagraph

4 (A). No officer or agency of the United States

5 may require the Board to submit to any officer

6 or agency of the United States for approval,

7 comments, or review, prior to the submission to

8 Congress of such reports.

9 ‘‘(c) STRUCTURE AND MEMBERSHIP OF THE

10 BOARD.—

11 ‘‘(1) MEMBERSHIP.—The Board shall be com12 posed of 7 members who shall be appointed as fol13 lows:

14 ‘‘(A) PRESIDENTIAL APPOINTMENTS.—

15 ‘‘(i) IN GENERAL.—Three members

16 shall be appointed by the President, by and

17 with the advice and consent of the Senate.

18 ‘‘(ii) LIMITATION.—Not more than 2

19 such members may be from the same polit20 ical party.

21 ‘‘(B) SENATORIAL APPOINTMENTS.—Two

22 members (each member from a different polit23 ical party) shall be appointed by the President

24 pro tempore of the Senate with the advice of
44

•S 1239 IS

1 the Chairman and the Ranking Minority Mem2 ber of the Committee on Finance of the Senate.

3 ‘‘(C) CONGRESSIONAL APPOINTMENTS.—

4 Two members (each member from a different

5 political party) shall be appointed by the Speak6 er of the House of Representatives, with the ad7 vice of the Chairman and the Ranking Minority

8 Member of the Committee on Ways and Means

9 of the House of Representatives.

10 ‘‘(2) QUALIFICATIONS.—The members shall be

11 chosen on the basis of their integrity, impartiality,

12 and good judgment, and shall be individuals who

13 are, by reason of their education, experience, and at14 tainments, exceptionally qualified to perform the du15 ties of members of the Board.

16 ‘‘(d) TERMS OF APPOINTMENT.—

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

18 each member of the Board shall serve for a term of

19 6 years.

20 ‘‘(2) CONTINUANCE IN OFFICE AND STAGGERED

21 TERMS.—

22 ‘‘(A) CONTINUANCE IN OFFICE.—A mem23 ber appointed to a term of office after the com24 mencement of such term may serve under such
45

•S 1239 IS

1 appointment only for the remainder of such

2 term.

3 ‘‘(B) STAGGERED TERMS.—The terms of

4 service of the members initially appointed under

5 this section shall begin on January 1, 2002,

6 and expire as follows:

7 ‘‘(i) PRESIDENTIAL APPOINTMENTS.—

8 The terms of service of the members ini9 tially appointed by the President shall ex10 pire as designated by the President at the

11 time of nomination, 1 each at the end of—

12 ‘‘(I) 2 years;

13 ‘‘(II) 4 years; and

14 ‘‘(III) 6 years.

15 ‘‘(ii) SENATORIAL APPOINTMENTS.—

16 The terms of service of members initially

17 appointed by the President pro tempore of

18 the Senate shall expire as designated by

19 the President pro tempore of the Senate at

20 the time of nomination, 1 each at the end

21 of—

22 ‘‘(I) 3 years; and

23 ‘‘(II) 6 years.

24 ‘‘(iii) CONGRESSIONAL APPOINT25 MENTS.—The terms of service of members
46

•S 1239 IS

1 initially appointed by the Speaker of the

2 House of Representatives shall expire as

3 designated by the Speaker of the House of

4 Representatives at the time of nomination,

5 1 each at the end of—

6 ‘‘(I) 4 years; and

7 ‘‘(II) 5 years.

8 ‘‘(C) REAPPOINTMENTS.—Any person ap9 pointed as a member of the Board may not

10 serve for more than 8 years.

11 ‘‘(D) VACANCIES.—Any member appointed

12 to fill a vacancy occurring before the expiration

13 of the term for which the member’s predecessor

14 was appointed shall be appointed only for the

15 remainder of that term. A member may serve

16 after the expiration of that member’s term until

17 a successor has taken office. A vacancy in the

18 Board shall be filled in the manner in which the

19 original appointment was made.

20 ‘‘(e) CHAIRPERSON.—A member of the Board shall

21 be designated by the President to serve as Chairperson

22 for a term of 4 years, coincident with the term of the

23 President, or until the designation of a successor.

24 ‘‘(f) EXPENSES AND PER DIEM.—Members of the

25 Board shall serve without compensation, except that, while
47

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1 serving on business of the Board away from their homes

2 or regular places of business, members may be allowed

3 travel expenses, including per diem in lieu of subsistence,

4 as authorized by section 5703 of title 5, United States

5 Code, for persons in the Government employed intermit6 tently.

7 ‘‘(g) MEETING.—

8 ‘‘(1) IN GENERAL.—The Board shall meet at

9 the call of the Chairperson (in consultation with the

10 other members of the Board) not less than 4 times

11 each year to consider a specific agenda of issues, as

12 determined by the Chairperson in consultation with

13 the other members of the Board.

14 ‘‘(2) QUORUM.—Four members of the Board

15 (not more than 3 of whom may be of the same polit16 ical party) shall constitute a quorum for purposes of

17 conducting business.

18 ‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—The

19 Board shall be exempt from the provisions of the Federal

20 Advisory Committee Act (5 U.S.C. App.).

21 ‘‘(i) PERSONNEL.—

22 ‘‘(1) STAFF DIRECTOR.—The Board shall, with23 out regard to the provisions of title 5, United States

24 Code, relating to the competitive service, appoint a

25 Staff Director who shall be paid at a rate equivalent
48

•S 1239 IS

1 to a rate established for the Senior Executive Serv2 ice under section 5382 of title 5, United States

3 Code.

4 ‘‘(2) STAFF.—

5 ‘‘(A) IN GENERAL.—The Board may em6 ploy, without regard to chapter 31 of title 5,

7 United States Code, such officers and employ8 ees as are necessary to administer the activities

9 to be carried out by the Board.

10 ‘‘(B) FLEXIBILITY WITH RESPECT TO

11 CIVIL SERVICE LAWS.—

12 ‘‘(i) IN GENERAL.—The staff of the

13 Board shall be appointed without regard to

14 the provisions of title 5, United States

15 Code, governing appointments in the com16 petitive service, and, subject to clause (ii),

17 shall be paid without regard to the provi18 sions of chapters 51 and 53 of such title

19 (relating to classification and schedule pay

20 rates).

21 ‘‘(ii) MAXIMUM RATE.—In no case

22 may the rate of compensation determined

23 under clause (i) exceed the rate of basic

24 pay payable for level IV of the Executive
49

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1 Schedule under section 5315 of title 5,

2 United States Code.

3 ‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There

4 are authorized to be appropriated, out of the Federal Sup5 plemental Medical Insurance Trust Fund established

6 under section 1841, and the general fund of the Treasury,

7 such sums as are necessary to carry out the purposes of

8 this section.’’.

9 (b) CONFORMING REFERENCES TO PREVIOUS PART

10 D.—

11 (1) IN GENERAL.—Any reference in law (in ef12 fect before the date of enactment of this Act) to part

13 D of title XVIII of the Social Security Act is deemed

14 a reference to part E of such title (as in effect after

15 such date).

16 (2) SECRETARIAL SUBMISSION OF LEGISLATIVE

17 PROPOSAL.—Not later than 6 months after the date

18 of enactment of this section, the Secretary of Health

19 and Human Services shall submit to the appropriate

20 committees of Congress a legislative proposal pro21 viding for such technical and conforming amend22 ments in the law as are required by the provisions

23 of this section.

24 (c) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendment made by

2 subsection (a) shall take effect on the date of enact3 ment of this Act.

4 (2) TIMING OF INITIAL APPOINTMENTS.—The

5 Commissioner and Deputy Commissioner of Medi6 care Prescription Drugs may not be appointed be7 fore March 1, 2002.

8 SEC. 3. COMMISSIONER AS MEMBER OF THE BOARD OF

9 TRUSTEES OF THE MEDICARE TRUST FUNDS.

10 (a) IN GENERAL.—Section 1841(b) of the Social Se11 curity Act (42 U.S.C. 1395t(b)) is amended by striking

12 ‘‘and the Secretary of Health and Human Services, all ex

13 officio,’’ and inserting ‘‘, the Secretary of Health and

14 Human Services, and the Commissioner of Medicare Pre15 scription Drugs, all ex officio,’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 this subsection shall take effect on March 1, 2002.

18 SEC. 4. EXCLUSION OF PART D COSTS FROM DETERMINA19 TION OF PART B MONTHLY PREMIUM.

20 Section 1839(g) of the Social Security Act (42 U.S.C.

21 1395r(g)) is amended—

22 (1) by striking ‘‘attributable to the application

23 of section’’ and inserting ‘‘attributable to—

24 ‘‘(1) the application of section’’;
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1 (2) by striking the period and inserting ‘‘;

2 and’’; and

3 (3) by adding at the end the following new

4 paragraph:

5 ‘‘(2) the Voluntary Medicare Outpatient Pre6 scription Drug Discount and Security Program

7 under part D.’’.

8 SEC. 5. MEDIGAP REVISIONS.

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

10 1395ss) is amended by adding at the end the following

11 new subsection:

12 ‘‘(v) MODERNIZATION OF MEDICARE SUPPLEMENTAL

13 POLICIES.—

14 ‘‘(1) PROMULGATION OF MODEL REGULA15 TION.—

16 ‘‘(A) NAIC MODEL REGULATION.—If,

17 within 9 months after the date of enactment of

18 the Medicare Rx Drug Discount and Security

19 Act of 2001, the National Association of Insur20 ance Commissioners (in this subsection referred

21 to as the ‘NAIC’) changes the 1991 NAIC

22 Model Regulation (described in subsection (p))

23 to revise the benefit package classified as ‘J’

24 under the standards established by subsection

25 (p)(2) (including the benefit package classified
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1 as ‘J’ with a high deductible feature, as de2 scribed in subsection (p)(11)) so that—

3 ‘‘(i) the coverage for outpatient pre4 scription drugs available under such ben5 efit package is replaced with coverage for

6 outpatient prescription drugs that com7 plements but does not duplicate the bene8 fits for outpatient prescription drugs that

9 beneficiaries are otherwise entitled to

10 under this title;

11 ‘‘(ii) a uniform format is used in the

12 policy with respect to such revised benefits;

13 and

14 ‘‘(iii) such revised standards meet any

15 additional requirements imposed by the

16 Medicare Rx Drug Discount and Security

17 Act of 2001;

18 subsection (g)(2)(A) shall be applied in each

19 State, effective for policies issued to policy hold20 ers on and after January 1, 2003, as if the ref21 erence to the Model Regulation adopted on

22 June 6, 1979, were a reference to the 1991

23 NAIC Model Regulation as changed under this

24 subparagraph (such changed regulation referred
53

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1 to in this section as the ‘2003 NAIC Model

2 Regulation’).

3 ‘‘(B) REGULATION BY THE SECRETARY.—

4 If the NAIC does not make the changes in the

5 1991 NAIC Model Regulation within the 9-

6 month period specified in subparagraph (A), the

7 Secretary shall promulgate, not later than 9

8 months after the end of such period, a regula9 tion and subsection (g)(2)(A) shall be applied in

10 each State, effective for policies issued to policy

11 holders on and after January 1, 2003, as if the

12 reference to the Model Regulation adopted on

13 June 6, 1979, were a reference to the 1991

14 NAIC Model Regulation as changed by the Sec15 retary under this subparagraph (such changed

16 regulation referred to in this section as the

17 ‘2003 Federal Regulation’).

18 ‘‘(C) CONSULTATION WITH WORKING

19 GROUP.—In promulgating standards under this

20 paragraph, the NAIC or Secretary shall consult

21 with a working group similar to the working

22 group described in subsection (p)(1)(D).

23 ‘‘(D) MODIFICATION OF STANDARDS IF

24 MEDICARE BENEFITS CHANGE.—If benefits

25 under part D of this title are changed and the
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1 Secretary determines, in consultation with the

2 NAIC, that changes in the 2003 NAIC Model

3 Regulation or 2003 Federal Regulation are

4 needed to reflect such changes, the preceding

5 provisions of this paragraph shall apply to the

6 modification of standards previously established

7 in the same manner as they applied to the

8 original establishment of such standards.

9 ‘‘(2) CONSTRUCTION OF BENEFITS IN OTHER

10 MEDICARE SUPPLEMENTAL POLICIES.—Nothing in

11 the benefit packages classified as ‘A’ through ‘I’

12 under the standards established by subsection (p)(2)

13 (including the benefit package classified as ‘F’ with

14 a high deductible feature, as described in subsection

15 (p)(11)) shall be construed as providing coverage for

16 benefits for which payment may be made under part

17 D.

18 ‘‘(3) APPLICATION OF PROVISIONS AND CON19 FORMING REFERENCES.—

20 ‘‘(A) APPLICATION OF PROVISIONS.—The

21 provisions of paragraphs (4) through (10) of

22 subsection (p) shall apply under this section,

23 except that—

24 ‘‘(i) any reference to the model regu25 lation applicable under that subsection
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1 shall be deemed to be a reference to the

2 applicable 2003 NAIC Model Regulation or

3 2003 Federal Regulation; and

4 ‘‘(ii) any reference to a date under

5 such paragraphs of subsection (p) shall be

6 deemed to be a reference to the appro7 priate date under this subsection.

8 ‘‘(B) OTHER REFERENCES.—Any reference

9 to a provision of subsection (p) or a date appli10 cable under such subsection shall also be con11 sidered to be a reference to the appropriate pro12 vision or date under this subsection.’’.

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