II

107TH CONGRESS

1ST SESSION S. 1135

To amend title XVIII of the Social Security Act to provide comprehensive

reform of the medicare program, including the provision of coverage

of outpatient prescription drugs under such program.

IN THE SENATE OF THE UNITED STATES

JUNE 28, 2001

Mr. GRAHAM (for himself, Mr. CHAFEE, Mr. CONRAD, Mrs. LINCOLN, Mr.

MILLER, Mr. ROCKEFELLER, Mr. BINGAMAN, Mr. KERRY, and Mr. CARPER) 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

comprehensive reform of the medicare program, including

the provision of coverage of outpatient prescription drugs

under such program.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medicare Reform Act of 2001’’.

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

7 this Act is as follows:
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Sec. 1. Short title; table of contents.

TITLE I—MEDICARE MANAGEMENT AND ADMINISTRATION

Subtitle A—Transfer of Responsibility for National Coverage Determinations

and Establishment of the Medicare Coverage Commission

Sec. 101. Transfer of responsibility for national coverage determinations and

establishment of the Medicare Coverage Commission.

Subtitle B—Centers for Medicare & Medicaid Services Leadership

Sec. 111. Salary increase for the CMS Administrator.

Sec. 112. Addition of political appointee positions.

Sec. 113. Hiring flexibility for scientific and clinical experts.

Subtitle C—Increased Funding for Improved Customer Service

Sec. 121. Increased funding for improved customer service.

Subtitle D—Private Sector Purchasing and Quality Improvement Tools for

Original Medicare

Sec. 131. Care coordination services.

Sec. 132. Disease management services.

Sec. 133. Competitive acquisition of items and services.

Sec. 134. Provider and physician collaborations.

Sec. 135. Preferred participants.

Sec. 136. Simplified center payments.

Sec. 137. Conforming changes to physician group practice demonstration and

administrative provisions.

Sec. 138. Increased flexibility in contracting for medicare claims processing.

TITLE II—MEDICARE+CHOICE COMPETITION

Sec. 201. Revision of Medicare+Choice competitive bidding demonstration

project.

TITLE III—MEDICARE OUTPATIENT PRESCRIPTION DRUG

BENEFIT PROGRAM

Sec. 301. Medicare outpatient prescription drug benefit program.

‘‘PART D—OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM

‘‘Sec. 1860. Definitions.

‘‘Sec. 1860A. Establishment of outpatient prescription drug benefit program.

‘‘Sec. 1860B. Enrollment.

‘‘Sec. 1860C. Providing information to beneficiaries.

‘‘Sec. 1860D. Premiums.

‘‘Sec. 1860E. Outpatient prescription drug benefits.

‘‘Sec. 1860F. Entities eligible to provide outpatient drug benefit.

‘‘Sec. 1860G. Minimum standards for eligible entities.

‘‘Sec. 1860H. Payments.

‘‘Sec. 1860I. Employer incentive program for employment-based retiree drug

coverage.

‘‘Sec. 1860J. Prescription drug account in the Federal Supplementary Medical

Insurance Trust Fund.

‘‘Sec. 1860K. Medicare Prescription Drug Advisory Committee.’’.
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Sec. 302. Part D benefits under Medicare+Choice plans.

Sec. 303. Reporting requirements for Secretary of the Treasury regarding sliding scale part D premium.

Sec. 304. Additional assistance for low-income beneficiaries.

Sec. 305. Medigap revisions.

Sec. 306. Studies and report to Congress.

TITLE IV—MEDICARE WELLNESS

Sec. 400. Definitions.

Subtitle A—Healthy Seniors Promotion Program

Sec. 401. Definitions.

Sec. 402. Working Group on Disease Self-Management and Health Promotion.

Sec. 403. Healthy seniors promotion grants.

Sec. 404. Disease self-management demonstration projects.

Subtitle B—Medicare Coverage of Preventive Health Benefits

Sec. 411. Therapy and counseling for cessation of tobacco use.

Sec. 412. Counseling for post-menopausal women.

Sec. 413. Screening for diminished visual acuity.

Sec. 414. Screening for hearing impairment.

Sec. 415. Screening for cholesterol.

Sec. 416. Screening for hypertension.

Sec. 417. Expansion of eligibility for bone mass measurement.

Sec. 418. Coverage of medical nutrition therapy services for beneficiaries with

cardiovascular diseases.

Sec. 419. Elimination of deductibles and coinsurance for existing preventive

health benefits.

Sec. 420. Program integrity.

Sec. 421. Promotion of preventive health benefits.

Subtitle C—National Falls Prevention Education and Awareness Campaign

Sec. 431. National falls prevention education and awareness campaign.

Subtitle D—Clinical Depression Screening Demonstration Projects

Sec. 441. Clinical depression screening demonstration projects.

Subtitle E—Medicare Health Education and Risk Appraisal Program

Sec. 451. Medicare health education and risk appraisal program.

Subtitle F—Studies, Evaluations, and Reports in the Field of Disease

Prevention and the Elderly

Sec. 461. MedPAC evaluation and report on medicare benefit package in relation to private sector benefit packages.

Sec. 462. National Institute on Aging study and report on ways to improve the

quality of life of elderly.

Sec. 463. Institute of Medicine medicare prevention benefit study and report.

Sec. 464. Fast-track consideration of prevention benefit legislation.

Subtitle G—Informatics Systems Grant Program for Hospitals and Skilled

Nursing Facilities
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Sec. 471. Informatics systems grant program for hospitals and skilled nursing

facilities.

TITLE V—MEDICARE SUSTAINABILITY

Sec. 501. Indexing part B deductible to inflation.

Sec. 502. Income-related reduction in medicare subsidy for part B premium.

1 TITLE I—MEDICARE MANAGE2 MENT AND ADMINISTRATION

3 Subtitle A—Transfer of Responsi4 bility for National Coverage De5 terminations and Establishment

6 of the Medicare Coverage Com7 mission

8 SEC. 101. TRANSFER OF RESPONSIBILITY FOR NATIONAL

9 COVERAGE DETERMINATIONS AND ESTAB10 LISHMENT OF THE MEDICARE COVERAGE

11 COMMISSION.

12 (a) RESPONSIBILITY AND ESTABLISHMENT.—Title

13 XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)

14 is amended by inserting after section 1869 the following

15 new sections:

16 ‘‘NATIONAL COVERAGE DETERMINATIONS

17 ‘‘SEC. 1869A. (a) RESPONSIBILITY.—

18 ‘‘(1) IN GENERAL.—

19 ‘‘(A) SOLE RESPONSIBILITY.—Beginning

20 in 2003, the Medicare Coverage Commission es21 tablished under section 1869B (in this section

22 referred to as the ‘Commission’) shall have sole
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1 responsibility for making national coverage de2 terminations under this title.

3 ‘‘(B) LOCAL COVERAGE DETERMINA4 TIONS.—The Secretary shall continue to have

5 responsibility for local coverage determinations

6 in accordance with section 1869(f).

7 ‘‘(2) PROCEDURES.—

8 ‘‘(A) IN GENERAL.—The Commission shall

9 establish procedures for making national cov10 erage determinations under this title.

11 ‘‘(B) REQUIREMENTS.—The procedures es12 tablished under subparagraph (A) shall ensure

13 that, in making national coverage

14 determinations—

15 ‘‘(i) meetings of advisory committees

16 established under section 1869B(f) with

17 respect to the determination are made on

18 the record;

19 ‘‘(ii) the Commission considers appli20 cable information (including clinical experi21 ence and medical, technical, and scientific

22 evidence) with respect to the subject mat23 ter of the determination;

24 ‘‘(iii) the Commission provides a clear

25 statement of—
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1 ‘‘(I) the basis for the determina2 tion (including responses to comments

3 received from the public); and

4 ‘‘(II) the assumptions underlying

5 that basis; and

6 ‘‘(iv) the Commission makes available

7 to the public the data (other than propri8 etary data) considered in making the de9 termination.

10 ‘‘(3) DEFINITION OF NATIONAL COVERAGE DE11 TERMINATION.—For purposes of this section, the

12 term ‘national coverage determination’ means a de13 termination by the Commission with respect to

14 whether or not a particular item or service is covered

15 nationally under this title, but does not include a de16 termination of what code, if any, is assigned to a

17 particular item or service covered under this title or

18 a determination with respect to the amount of pay19 ment made for a particular item or service so cov20 ered.

21 ‘‘(b) REVIEW OF NATIONAL COVERAGE DETERMINA22 TIONS.—

23 ‘‘(1) IN GENERAL.—Review of any national cov24 erage determination shall be subject to the following

25 limitations:
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1 ‘‘(A) Such a determination shall not be re2 viewed by any administrative law judge.

3 ‘‘(B) Such a determination shall not be

4 held unlawful or set aside on the ground that

5 a requirement of section 553 of title 5, United

6 States Code, relating to publication in the Fed7 eral Register or opportunity for public com8 ment, was not satisfied.

9 ‘‘(C) Upon the filing of a complaint by an

10 aggrieved person (as described in paragraph

11 (4)), such a determination shall be reviewed by

12 the Appeals Board of the Commission. In con13 ducting such a review, the Appeals Board—

14 ‘‘(i) shall review the record and shall

15 permit discovery and the taking of evidence

16 to evaluate the reasonableness of the deter17 mination, if the Board determines that the

18 record is incomplete or lacks adequate in19 formation to support the validity of the de20 termination;

21 ‘‘(ii) may, as appropriate, consult with

22 appropriate scientific and clinical experts;

23 and

24 ‘‘(iii) shall defer only to the reason25 able findings of fact, reasonable interpreta-
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1 tions of law, and reasonable applications of

2 fact to law by the Commission.

3 ‘‘(D) A decision of the Appeals Board con4 stitutes a final agency action and is subject to

5 judicial review.

6 ‘‘(2) NO MATERIAL ISSUES OF FACT IN DIS7 PUTE.—In the case of a determination that may oth8 erwise be subject to review under paragraph (1)(C),

9 where the moving party alleges that—

10 ‘‘(A) there are no material issues of fact in

11 dispute; and

12 ‘‘(B) the only issue of law is the constitu13 tionality of a provision of this title, or that a

14 regulation, determination, or ruling by the

15 Commission is invalid,

16 the moving party may seek review by a court of com17 petent jurisdiction without filing a complaint under

18 such paragraph and without otherwise exhausting

19 other administrative remedies.

20 ‘‘(3) PENDING NATIONAL COVERAGE DETER21 MINATIONS.—

22 ‘‘(A) IN GENERAL.—In the event that the

23 Commission has not issued a national coverage

24 or noncoverage determination with respect to a

25 particular type or class of items or services, an
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1 aggrieved person (as described in paragraph

2 (4)) may submit to the Commission a request

3 to make such a determination with respect to

4 such items or services. By not later than the

5 end of the 90-day period that begins on the

6 date the Commission receives such a request

7 (notwithstanding the receipt by the Commission

8 of new evidence (if any) during such 90-day pe9 riod), the Commission shall take 1 of the fol10 lowing actions:

11 ‘‘(i) Issue a national coverage deter12 mination, with or without limitations.

13 ‘‘(ii) Issue a national noncoverage de14 termination.

15 ‘‘(iii) Issue a determination that no

16 national coverage or noncoverage deter17 mination is appropriate as of the end of

18 such 90-day period with respect to national

19 coverage of such items or services.

20 ‘‘(iv) Issue a notice that—

21 ‘‘(I) states that the Commission

22 has not completed a review of the re23 quest for a national coverage deter24 mination; and
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1 ‘‘(II) includes an identification of

2 the remaining steps in the Commis3 sion’s review process and a deadline

4 by which the Commission will com5 plete the review and take an action

6 described in clause (i), (ii), or (iii).

7 ‘‘(B) DEEMED ACTION BY THE COMMIS8 SION.—In the case of an action described in

9 subparagraph (A)(iv), if the Commission fails to

10 take an action referred to in such subparagraph

11 by the deadline specified by the Commission

12 under such subparagraph, then the Commission

13 is deemed to have taken an action described in

14 subparagraph (A)(iii) as of the deadline.

15 ‘‘(C) EXPLANATION OF DETERMINA16 TION.—When issuing a determination under

17 subparagraph (A), the Commission shall include

18 an explanation of the basis for the determina19 tion. An action taken under such subparagraph

20 (other than clause (iv) of such subparagraph) is

21 deemed to be a national coverage determination

22 for purposes of review under paragraph (1).

23 ‘‘(4) STANDING.—An action under this sub24 section seeking review of a national coverage deter25 mination may be initiated by—
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1 ‘‘(A) an individual who is entitled to bene2 fits under part A, or enrolled under part B, or

3 both, and who is in need of the items or serv4 ices that are the subject of the coverage deter5 mination; and

6 ‘‘(B) any other aggrieved party that has a

7 financial interest in the coverage determination.

8 ‘‘(5) PUBLICATION ON THE INTERNET OF DECI9 SIONS OF HEARINGS OF THE COMMISSION.—Each

10 decision of a hearing by the Commission with re11 spect to a national coverage determination shall be

12 made public, and the Commission shall coordinate

13 with the Secretary for the publication of each deci14 sion on the Medicare Internet site of the Depart15 ment of Health and Human Services. The Commis16 sion shall remove from such decision any informa17 tion that would identify any individual, provider of

18 services, or supplier.

19 ‘‘(6) ANNUAL REPORT TO CONGRESS ON NA20 TIONAL COVERAGE DETERMINATIONS.—

21 ‘‘(A) IN GENERAL.—Not later than De22 cember 1 of each year, beginning in 2003, the

23 Commission shall submit to Congress a report

24 that sets forth a detailed compilation of—
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1 ‘‘(i) the actual time periods that were

2 necessary to complete national coverage de3 terminations that were made in the pre4 vious fiscal year for items or services not

5 previously covered as a benefit under this

6 title; and

7 ‘‘(ii) the basis for each such deter8 mination.

9 ‘‘(B) PUBLICATION OF REPORTS ON THE

10 INTERNET.—The Commission shall coordinate

11 with the Secretary for the publication of each

12 report submitted under subparagraph (A) on

13 the Medicare Internet site of the Department of

14 Health and Human Services.

15 ‘‘(7) CONSTRUCTION.—Nothing in this sub16 section shall be construed as permitting administra17 tive or judicial review pursuant to this section inso18 far as such review is explicitly prohibited or re19 stricted under another provision of law.

20 ‘‘(c) COMMUNICATION BETWEEN COMMISSION AND

21 SECRETARY.—

22 ‘‘(1) NOTIFICATION.—If the Commission or the

23 Appeals Board of the Commission after a review of

24 a determination makes a determination that a par25 ticular item or service is covered nationally under
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1 this title, the Commission shall immediately notify

2 the Secretary of such determination.

3 ‘‘(2) IMPLEMENTATION BY SECRETARY.—Upon

4 being notified by the Commission that a determina5 tion has been made under this section that a par6 ticular item or service is covered nationally under

7 this title, the Secretary shall implement such cov8 erage in a timely manner.

9 ‘‘MEDICARE COVERAGE COMMISSION

10 ‘‘SEC. 1869B. (a) ESTABLISHMENT.—There is estab11 lished a Medicare Coverage Commission (in this section

12 referred to as the ‘Commission’). The Commission shall

13 be an independent establishment (as defined in section

14 104 of title 5, United States Code).

15 ‘‘(b) STRUCTURE AND MEMBERSHIP.—

16 ‘‘(1) STRUCTURE.—

17 ‘‘(A) IN GENERAL.—The Commission shall

18 be composed of 7 members appointed by the

19 President, by and with the advice and consent

20 of the Senate.

21 ‘‘(B) RESTRICTION.—No member of the

22 Commission may serve in any other office of the

23 Federal Government while a member of the

24 Commission.

25 ‘‘(2) MEMBERSHIP.—
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1 ‘‘(A) IN GENERAL.—The members of the

2 Commission shall be chosen on the basis of

3 their integrity, impartiality, and good judgment,

4 and shall be individuals who are, by reason of

5 their education, experience, and clinical, med6 ical, technical, and scientific expertise, excep7 tionally qualified to perform the duties of the

8 members of the Commission.

9 ‘‘(B) TERMS OF APPOINTMENT.—The

10 terms of members of the Commission shall be

11 for 3 years.

12 ‘‘(C) VACANCIES.—Any member appointed

13 to fill a vacancy occurring before the expiration

14 of the term for which the member’s predecessor

15 was appointed shall be appointed only for the

16 remainder of that term. A member may serve

17 after the expiration of that member’s term until

18 a successor has taken office.

19 ‘‘(D) LIMITATION ON NUMBER OF

20 TERMS.—Any person appointed as a member of

21 the Commission shall not be eligible for re22 appointment to the Commission after having

23 served 2 terms.

24 ‘‘(E) CHAIRPERSON.—The President shall

25 designate a member of the Commission, at the
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1 time of appointment of the member, as chair2 person for that term of appointment, except

3 that in the case of any vacancy of the chair4 person, the President may designate another

5 member for the remainder of that member’s

6 term.

7 ‘‘(c) DUTIES.—

8 ‘‘(1) IN GENERAL.—The Commission shall be

9 responsible for making national coverage determina10 tions (as defined in section 1869A(a)(3)) under this

11 title, including at the request of medicare bene12 ficiaries or their representatives, Federal Govern13 ment agencies, including the Centers for Medicare &

14 Medicaid Services, manufacturers and suppliers, and

15 providers for such a determination.

16 ‘‘(2) ESTABLISHMENT OF APPEALS BOARD.—

17 The Commission shall establish an Appeals Board

18 for purposes of providing review of national coverage

19 determinations under section 1869B(b).

20 ‘‘(3) OTHER SPECIFIC DUTIES.—In order to

21 carry out the duties described in paragraph (1), the

22 Commission may do the following if determined ap23 propriate:

24 ‘‘(A) Commission technology assessments

25 and studies.
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1 ‘‘(B) Request that technology assessments

2 and related studies be conducted by other Fed3 eral agencies pursuant to subsection (g).

4 ‘‘(C) Establish advisory committees pursu5 ant to subsection (f) as appropriate to evaluate

6 new procedures.

7 ‘‘(D) Review conflicting local coverage de8 terminations (as defined in section

9 1869(f)(1)(B)) and determine whether a na10 tional coverage determination is necessary or

11 desirable.

12 ‘‘(d) OPERATION OF THE COMMISSION.—

13 ‘‘(1) MEETINGS.—The Commission shall meet

14 at the call of its chairperson not less often than

15 quarterly.

16 ‘‘(2) QUORUM.—A quorum shall consist of 4

17 members of the Commission, except that the Com18 mission may establish a lesser quorum to conduct

19 hearings.

20 ‘‘(e) COMMISSION PERSONNEL MATTERS.—

21 ‘‘(1) MEMBERS.—

22 ‘‘(A) COMPENSATION.—Membership on the

23 Commission is not a full-time position. Each

24 member of the Commission shall be com25 pensated at a rate equal to the per diem equiva-
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1 lent of the rate provided for level IV of the Ex2 ecutive Schedule under section 5315 of title 5,

3 United States Code.

4 ‘‘(B) TRAVEL EXPENSES.—The members

5 of the Commission shall be allowed travel ex6 penses, including per diem in lieu of subsist7 ence, at rates authorized for employees of agen8 cies under subchapter I of chapter 57 of title 5,

9 United States Code, while away from their

10 homes or regular places of business in the per11 formance of service for the Commission.

12 ‘‘(2) STAFF AND SUPPORT SERVICES.—

13 ‘‘(A) EXECUTIVE DIRECTOR.—The Chair14 person shall appoint an executive director of the

15 Commission who shall be paid at a rate speci16 fied by the Commission.

17 ‘‘(B) STAFF.—With the approval of the

18 Commission, the executive director may appoint

19 such personnel as the executive director con20 siders appropriate.

21 ‘‘(C) INAPPLICABILITY OF CIVIL SERVICE

22 LAWS.—The staff of the Commission shall be

23 appointed without regard to the provisions of

24 title 5, United States Code, governing appoint25 ments in the competitive service, and shall be
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1 paid without regard to the provisions of chapter

2 51 and subchapter III of chapter 53 of such

3 title (relating to classification and General

4 Schedule pay rates).

5 ‘‘(D) EXPERTS AND CONSULTANTS.—With

6 the approval of the Commission, the executive

7 director may procure temporary and intermit8 tent services under section 3109(b) of title 5,

9 United States Code.

10 ‘‘(3) TRANSFER OF PERSONNEL, ASSETS,

11 ETC.—For purposes of the Commission carrying out

12 its duties, the Secretary and the Commission may

13 provide for the transfer to the Commission of such

14 civil service personnel employed by the Department

15 of Health and Human Services, and such resources

16 and assets of the Department used in carrying out

17 this title, as the Commission requires.

18 ‘‘(f) APPOINTMENT OF ADVISORY COMMITTEES.—

19 ‘‘(1) IN GENERAL.—The Commission may ap20 point such advisory committees as the Commission

21 determines appropriate to advise and consult the

22 Commission in carrying out the duties of the Com23 mission.

24 ‘‘(2) INAPPLICABILITY OF CIVIL SERVICE

25 LAWS.—The advisory committees shall be appointed
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1 without regard to the provisions of title 5, United

2 States Code, governing appointments in the competi3 tive service.

4 ‘‘(3) TRAVEL EXPENSES.—The members of the

5 committees shall serve without compensation, except

6 that such members shall be allowed travel expenses,

7 including per diem in lieu of subsistence, at rates

8 authorized for employees of agencies under sub9 chapter I of chapter 57 of title 5, United States

10 Code, while away from their homes or regular places

11 of business in the performance of services for the

12 committee.

13 ‘‘(4) REPORT ON ADVISORY COMMITTEES.—The

14 Commission shall include in the annual report to

15 Congress described in section 1869A(b)(6) the num16 ber of committees appointed under subsection (f)

17 during the preceding year and the membership and

18 activities of each such committee.

19 ‘‘(g) AUTHORITY TO REQUEST THAT FEDERAL

20 AGENCIES CONDUCT ASSESSMENTS AND STUDIES.—The

21 Commission may request any Federal department or agen22 cy to conduct a technology assessment or a related study

23 that the Commission determines is necessary in order to

24 carry out its duties under this section.
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1 ‘‘(h) FUNDING OF COMMISSION.—There are author2 ized to be appropriated such sums as may be necessary

3 to carry out the purposes of this section.’’.

4 (b) CONFORMING AMENDMENTS.—

5 (1) BIPA PROVISIONS.—

6 (A) Section 1869(c)(3)(B)(ii)(I) of the So7 cial Security Act, as added by section 521 of

8 the Medicare, Medicaid, and SCHIP Benefits

9 Improvement and Protection Act of 2000 (114

10 Stat. 2763A–534), as enacted into law by sec11 tion 1(a)(6) of Public Law 106–554, is amend12 ed by striking ‘‘If the Secretary has made a na13 tional coverage determination pursuant to the

14 requirements established under the third sen15 tence of section 1862(a)’’ and inserting ‘‘If the

16 Medicare Coverage Commission has made a na17 tional coverage determination pursuant to the

18 requirements established under section 1869A’’.

19 (B) Section 1869(f) of the Social Security

20 Act, as added by section 522(a) of the Medi21 care, Medicaid, and SCHIP Benefits Improve22 ment and Protection Act of 2000 (114 Stat.

23 2763A–543), as so enacted into law, is amend24 ed to read as follows:
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1 ‘‘(f) REVIEW OF LOCAL COVERAGE DETERMINA2 TIONS.—

3 ‘‘(1) REVIEW.—

4 ‘‘(A) IN GENERAL.—Review of any local

5 coverage determination shall be subject to the

6 following limitations:

7 ‘‘(i) Upon the filing of a complaint by

8 an aggrieved party, such a determination

9 shall be reviewed by an administrative law

10 judge of the Social Security Administra11 tion. The administrative law judge—

12 ‘‘(I) shall review the record and

13 shall permit discovery and the taking

14 of evidence to evaluate the reasonable15 ness of the determination, if the ad16 ministrative law judge determines that

17 the record is incomplete or lacks ade18 quate information to support the va19 lidity of the determination;

20 ‘‘(II) may, as appropriate, con21 sult with appropriate scientific and

22 clinical experts; and

23 ‘‘(III) shall defer only to the rea24 sonable findings of fact, reasonable in25 terpretations of law, and reasonable
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1 applications of fact to law by the Sec2 retary.

3 ‘‘(ii) Upon the filing of a complaint by

4 an aggrieved party, a decision of an admin5 istrative law judge under clause (i) shall be

6 reviewed by the Departmental Appeals

7 Board of the Department of Health and

8 Human Services.

9 ‘‘(iii) The Secretary shall implement a

10 decision of the administrative law judge or

11 the Departmental Appeals Board within 30

12 days of receipt of such decision.

13 ‘‘(iv) A decision of the Departmental

14 Appeals Board constitutes a final agency

15 action and is subject to judicial review.

16 ‘‘(B) DEFINITION OF LOCAL COVERAGE

17 DETERMINATION.—For purposes of this section,

18 the term ‘local coverage determination’ means a

19 determination by a fiscal intermediary or a car20 rier under part A or B, as applicable, respect21 ing whether or not a particular item or service

22 is covered on an intermediary- or carrier-wide

23 basis under such parts, in accordance with sec24 tion 1862(a)(1)(A).
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1 ‘‘(2) NO MATERIAL ISSUES OF FACT IN DIS2 PUTE.—In the case of a determination that may oth3 erwise be subject to review under paragraph

4 (1)(A)(i), where the moving party alleges that—

5 ‘‘(A) there are no material issues of fact in

6 dispute, and

7 ‘‘(B) the only issue of law is the constitu8 tionality of a provision of this title, or that a

9 regulation, determination, or ruling by the Sec10 retary is invalid,

11 the moving party may seek review by a court of com12 petent jurisdiction without filing a complaint under

13 such paragraph and without otherwise exhausting

14 other administrative remedies.

15 ‘‘(3) STANDING.—An action under this sub16 section seeking review of a local coverage determina17 tion may be initiated only by an individual who is

18 entitled to benefits under part A, or enrolled under

19 part B, or both, and who is in need of the items or

20 services that are the subject of the coverage deter21 mination.

22 ‘‘(4) CONSTRUCTION.—Nothing in this sub23 section shall be construed as permitting administra24 tive or judicial review pursuant to this section inso-
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1 far as such review is explicitly prohibited or re2 stricted under another provision of law.’’.

3 (C) Section 1862(a) of the Social Security

4 Act (42 U.S.C. 1395y(a)), as amended by sec5 tion 522(b) of the Medicare, Medicaid, and

6 SCHIP Benefits Improvement and Protection

7 Act of 2000 (114 Stat. 2763A–546), as so en8 acted into law, is amended by striking the third

9 sentence.

10 (D) Section 1114 of the Social Security

11 Act (42 U.S.C. 1314), as amended by section

12 522(c) of the Medicare, Medicaid, and SCHIP

13 Benefits Improvement and Protection Act of

14 2000 (114 Stat. 2763A–546), as so enacted

15 into law, is amended by striking subsection (i).

16 (2) MEDICARE+CHOICE.—Section 1853(c)(7)

17 of the Social Security Act (42 U.S.C. 1395w–

18 23(c)(7)) is amended by inserting ‘‘or the Medicare

19 Coverage Commission’’ after ‘‘If the Secretary’’.

20 (c) EFFECTIVE DATE.—The amendments made by

21 this section shall apply with respect to—

22 (1) the responsibility for making national cov23 erage determinations;

24 (2) a review of any national or local coverage

25 determination filed;
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1 (3) a request to make such a determination

2 made; and

3 (4) a national coverage determination made,

4 on or after January 1, 2003.

5 Subtitle B—Centers for Medicare &

6 Medicaid Services Leadership

7 SEC. 111. SALARY INCREASE FOR THE CMS ADMINIS8 TRATOR.

9 (a) IN GENERAL.—Section 5314 of title 5, United

10 States Code, is amended by adding at the end the fol11 lowing:

12 ‘‘Administrator of the Centers for Medicare &

13 Medicaid Services.’’.

14 (b) CONFORMING AMENDMENT.—Section 5315 of

15 title 5, United States Code, is amended by striking ‘‘Ad16 ministrator of the Health Care Financing Administra17 tion.’’.

18 (c) EFFECTIVE DATE.—The amendments made by

19 this subsection take effect on January 1, 2002.

20 SEC. 112. ADDITION OF POLITICAL APPOINTEE POSITIONS.

21 (a) ESTABLISHMENT OF POSITIONS.—Section 1117

22 of the Social Security Act (42 U.S.C. 1317) is amended

23 by adding at the end the following new subsection:

24 ‘‘(c) ADDITIONAL APPOINTEES.—
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1 ‘‘(1) APPOINTMENT.—In addition to the Ad2 ministrator of the Centers for Medicare & Medicaid

3 Services, there shall be in such Centers 9 individuals

4 who shall be appointed by the President.

5 ‘‘(2) DUTIES AND POWERS.—The individuals

6 appointed under paragraph (1) shall perform such

7 duties and exercise such powers as the Adminis8 trator of the Centers for Medicare & Medicaid Serv9 ices shall from time to time assign or delegate.’’.

10 (b) CONFORMING AMENDMENTS.—Section 1117 of

11 the Social Security Act (42 U.S.C. 1317) is amended—

12 (1) in subsection (a), by striking ‘‘The Adminis13 trator of the Health Care Financing Administra14 tion’’ and inserting ‘‘ADMINISTRATOR.—The Admin15 istrator of the Centers for Medicare & Medicaid

16 Services’’;

17 (2) in subsection (b)—

18 (A) by striking ‘‘(b)(1) There is established

19 in the Health Care Financing Administration’’

20 and inserting ‘‘(b) CHIEF ACTUARY.—

21 ‘‘(1) APPOINTMENT.—There is established in

22 the Centers for Medicare & Medicaid Services’’;

23 (B) in the second sentence of paragraph

24 (1), by striking ‘‘of such Administration’’ and

25 inserting ‘‘of such Centers’’; and
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•S 1135 IS

1 (C) in paragraph (2), by striking ‘‘The

2 Chief Actuary’’ and inserting ‘‘COMPENSA3 TION.—The Chief Actuary’’; and

4 (D) by realigning paragraph (2) so as to

5 align the left margin of such paragraph with

6 the left margin of paragraph (1); and

7 (3) by amending the heading to read as follows:

8 ‘‘ORGANIZATION OF THE CENTERS FOR MEDICARE &

9 MEDICAID SERVICES’’.

10 SEC. 113. HIRING FLEXIBILITY FOR SCIENTIFIC AND CLIN11 ICAL EXPERTS.

12 Section 1117 of the Social Security Act (42 U.S.C.

13 1317), as amended by section 112(a), is amended by add14 ing at the end the following new subsection:

15 ‘‘(d) HIRING FLEXIBILITY FOR SCIENTIFIC AND

16 CLINICAL EXPERTS.—

17 ‘‘(1) IN GENERAL.—The Administrator of the

18 Centers for Medicare & Medicaid Services may ap19 point such individuals with scientific or clinical ex20 pertise as the Administrator determines appropriate.

21 ‘‘(2) INAPPLICABILITY OF CIVIL SERVICE

22 LAWS.—The Administrator may appoint an indi23 vidual described in paragraph (1) without regard to

24 the provisions of title 5, United States Code, gov25 erning appointments in the competitive service, and

26 may provide that such an individual is paid without
28

•S 1135 IS

1 regard to the provisions of chapter 51 and sub2 chapter III of chapter 53 of such title (relating to

3 classification and General Schedule pay rates).’’.

4 Subtitle C—Increased Funding for

5 Improved Customer Service

6 SEC. 121. INCREASED FUNDING FOR IMPROVED CUSTOMER

7 SERVICE.

8 (a) PURPOSES.—The purposes of this section are—

9 (1) to provide for an annual authorization of

10 appropriation for the program management budget

11 of the Centers for Medicare & Medicaid Services

12 that is based on the growth in expenditures under

13 the medicare program under title XVIII of the So14 cial Security Act; and

15 (2) to provide sufficient funding to ensure that

16 the Centers for Medicare & Medicaid Services has

17 the resources to provide improved services to medi18 care beneficiaries and providers under the medicare

19 program and build the analytical and institutional

20 infrastructure necessary for a competitive health

21 care delivery system through such measures as—

22 (A) placing representatives of the medicare

23 program in social security field offices;

24 (B) establishing customer services posi25 tions at the regional offices of the Centers for
29

•S 1135 IS

1 Medicare & Medicaid Services for providers

2 under the medicare program;

3 (C) increasing the amount and availability

4 of grants for health insurance information,

5 counseling, and assistance under section 4360

6 of the Omnibus Budget Reconciliation Act of

7 1990 (42 U.S.C. 1395b–4);

8 (D) updating information technology sys9 tems;

10 (E) expanding the provider relations and

11 training functions of fiscal intermediaries and

12 carriers under the medicare program; and

13 (F) hiring staff to develop—

14 (i) improved mechanisms for risk ad15 justing payments under the medicare pro16 gram;

17 (ii) improved mechanisms to measure

18 the quality of entities with a contract

19 under part C or D (as added by section

20 301) of the medicare program and plans

21 offered by such entities;

22 (iii) improved systems for providing

23 information regarding the medicare pro24 gram to medicare beneficiaries and poten25 tial medicare beneficiaries; and
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•S 1135 IS

1 (iv) methods for determining which

2 geographic cost differences are related to

3 the quality of care provided and which are

4 related to other factors.

5 (b) AUTHORIZATION OF APPROPRIATIONS.—Title

6 XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)

7 is amended by adding at the end the following new section:

8 ‘‘AUTHORIZATION OF APPROPRIATIONS FOR CMS

9 PROGRAM MANAGEMENT

10 ‘‘SEC. 1897. There are authorized to be appropriated

11 for carrying out part A, B, and C the following amounts:

12 ‘‘(1) For fiscal year 2002, $2,408,934,900; and

13 ‘‘(2) For each subsequent fiscal year, the

14 amount appropriated under this section for the pre15 vious fiscal year increased by the percentage in16 crease in outlays under this title (determined with17 out regard to amounts appropriated under this sec18 tion) for such subsequent year.

19 Subtitle D—Private Sector Pur20 chasing and Quality Improve21 ment Tools for Original Medi22 care

23 SEC. 131. CARE COORDINATION SERVICES.

24 (a) PROGRAM AUTHORIZED.—Title XVIII of the So25 cial Security Act (42 U.S.C. 1395 et seq.) is amended—
31

•S 1135 IS

1 (1) by redesignating section 1866B, as added

2 by section 412 of the Medicare, Medicaid, and

3 SCHIP Benefits Improvement and Protection Act of

4 2000 (114 Stat. 2763A–509), as enacted into law by

5 section 1(a)(6) of Public Law 106–554), as section

6 1866M; and

7 (2) by inserting after section 1866A (as added

8 by such section 412) the following new section:

9 ‘‘CARE COORDINATION SERVICES

10 ‘‘SEC. 1866B. (a) IN GENERAL.—

11 ‘‘(1) PROGRAM AUTHORITY.—The Secretary,

12 beginning in 2003, shall implement a care coordina13 tion services program in accordance with the provi14 sions of this section under which, in appropriate cir15 cumstances, eligible individuals may elect to have

16 health care services covered under this title managed

17 and coordinated by a designated care coordinator.

18 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

19 as otherwise specifically provided, the Secretary may

20 administer the program under this section in accord21 ance with section 1866M, including subsection (b)(2)

22 of such section (relating to the discretion of the Sec23 retary as to the scope of the program).

24 ‘‘(b) ELIGIBILITY CRITERIA; IDENTIFICATION AND

25 NOTIFICATION OF ELIGIBLE INDIVIDUALS.—
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•S 1135 IS

1 ‘‘(1) INDIVIDUAL ELIGIBILITY CRITERIA.—The

2 Secretary shall specify criteria to be used in making

3 a determination as to whether an individual may ap4 propriately be enrolled in the care coordination serv5 ices program under this section, which shall include

6 at least a finding by the Secretary that for each co7 hort of individuals with characteristics identified by

8 the Secretary, professional management and coordi9 nation of care can reasonably be expected to improve

10 processes or outcomes of health care.

11 ‘‘(2) PROCEDURES TO FACILITATE ENROLL12 MENT.—The Secretary shall develop and implement

13 procedures designed to facilitate enrollment of eligi14 ble individuals in the program under this section.

15 ‘‘(c) ENROLLMENT OF INDIVIDUALS.—

16 ‘‘(1) SECRETARY’S DETERMINATION OF ELIGI17 BILITY.—The Secretary shall determine the eligi18 bility for services under this section of individuals

19 who are enrolled in the program under this section

20 and who make application for such services in such

21 form and manner as the Secretary may prescribe.

22 ‘‘(2) ENROLLMENT PERIOD.—

23 ‘‘(A) EFFECTIVE DATE AND DURATION.—

24 Enrollment of an individual in the program

25 under this section shall be effective as of the
33

•S 1135 IS

1 first day of the month following the month in

2 which the Secretary approves the individual’s

3 application under paragraph (1), shall remain

4 in effect for 1 month (or such longer period as

5 the Secretary may specify), and shall be auto6 matically renewed for additional periods, unless

7 terminated in accordance with such procedures

8 as the Secretary shall establish by regulation.

9 ‘‘(B) LIMITATION ON REENROLLMENT.—

10 The Secretary may establish limits on an indi11 vidual’s eligibility to reenroll in the program

12 under this section if the individual has

13 disenrolled from the program more than once

14 during a specified time period.

15 ‘‘(d) PROGRAM.—The care coordination services pro16 gram under this section shall include the following ele17 ments:

18 ‘‘(1) BASIC CARE COORDINATION SERVICES.—

19 ‘‘(A) IN GENERAL.—Except as otherwise

20 provided in this section, each enrolled

21 individual—

22 ‘‘(i) shall receive the case manage23 ment-related services described in section

24 1905(t)(1), assessment services (as defined

25 by the Secretary), and such other care co-
34

•S 1135 IS

1 ordination services as the Secretary may

2 specify; and

3 ‘‘(ii) may receive any additional item

4 or service specified under subparagraph

5 (B).

6 ‘‘(B) ADDITIONAL BENEFITS.—The Sec7 retary may specify additional benefits for which

8 payment would not otherwise be made under

9 this title that may be available to individuals

10 enrolled in the program under this section (sub11 ject to an assessment by the care coordinator of

12 an individual’s circumstance and need for such

13 benefits) in order to encourage enrollment in, or

14 to improve the effectiveness of, such program.

15 ‘‘(2) AUTHORITY OF THE SECRETARY TO RE16 QUIRE CARE COORDINATION.—Notwithstanding any

17 other provision of this title, the Secretary may pro18 vide that an individual enrolled in the program

19 under this section is entitled to payment under this

20 title for any specified health care items or services

21 only if the items or services have been furnished by

22 the care coordinator, or coordinated through the

23 care coordination services program. Under such pro24 vision, the Secretary shall prescribe exceptions for

25 emergency medical services as described in section
35

•S 1135 IS

1 1852(d)(3), and other exceptions determined by the

2 Secretary for the delivery of timely and needed care.

3 ‘‘(3) REDUCTION OR ELIMINATION OF COST

4 SHARING.—Notwithstanding any other provision of

5 law, the Secretary may provide for the reduction or

6 elimination of beneficiary cost sharing (such as

7 deductibles, copayments, and coinsurance) with re8 spect to any of the items or services furnished under

9 this title (other than the care coordination services

10 and other benefits described in paragraph (1)) and

11 may limit such reduction or elimination to particular

12 service areas.

13 ‘‘(e) CARE COORDINATORS.—

14 ‘‘(1) CONDITIONS OF PARTICIPATION.—In order

15 to be qualified to furnish care coordination services

16 under this section, an individual or entity shall—

17 ‘‘(A) be—

18 ‘‘(i)(I) a physician; or

19 ‘‘(II) a health care professional (other

20 than a physician) who meets such condi21 tions as the Secretary may specify; or

22 ‘‘(ii) an entity (which may include

23 physicians, physician group practices, and

24 any other health care professional or entity

25 that the Secretary determines is appro-
36

•S 1135 IS

1 priate) that meets such conditions as the

2 Secretary may specify;

3 ‘‘(B) have entered into a care coordination

4 agreement; and

5 ‘‘(C) meet such criteria as the Secretary

6 may establish (which may include experience in

7 the provision of care coordination or primary

8 care physician’s services).

9 ‘‘(2) AGREEMENT TERM; PAYMENT.—

10 ‘‘(A) DURATION AND RENEWAL.—A care

11 coordination agreement under this subsection

12 shall be for 1 year and may be renewed if the

13 Secretary is satisfied that the care coordinator

14 continues to meet the conditions of participa15 tion specified in paragraph (1).

16 ‘‘(B) PAYMENT FOR SERVICES.—The Sec17 retary may negotiate or otherwise establish pay18 ment terms and rates for services described in

19 subsection (d)(1).

20 ‘‘(C) TERMS.—In addition to such other

21 terms as the Secretary may require, an agree22 ment under this section shall include the terms

23 specified in subparagraphs (A) through (C) of

24 section 1905(t)(3).’’.
37

•S 1135 IS

1 (b) COVERAGE OF CARE COORDINATION SERVICES

2 AS A PART B MEDICAL SERVICE.—

3 (1) IN GENERAL.—Section 1861(s) of the So4 cial Security Act (42 U.S.C. 1395x(s)) is amended—

5 (A) in the second sentence, by redesig6 nating paragraphs (16) and (17) as clauses (i)

7 and (ii), respectively; and

8 (B) in the first sentence—

9 (i) in paragraph (14), by striking

10 ‘‘and’’ at the end;

11 (ii) in paragraph (15), by striking the

12 period at the end and inserting ‘‘; and’’;

13 and

14 (iii) by inserting after paragraph (15)

15 the following new paragraph:

16 ‘‘(16) care coordination services furnished in

17 accordance with section 1866B.’’.

18 (2) PART B COINSURANCE AND DEDUCTIBLE

19 NOT APPLICABLE TO CARE COORDINATION SERV20 ICES.—

21 (A) COINSURANCE.—Section 1833(a)(1) of

22 the Social Security Act (42 U.S.C.

23 1395l(a)(1)), as amended by section 223(c) of

24 the Medicare, Medicaid, and SCHIP Benefits

25 Improvement and Protection Act of 2000 (114
38

•S 1135 IS

1 Stat. 2763A–489), as enacted into law by sec2 tion 1(a)(6) of Public Law 106–554, is

3 amended—

4 (i) by striking ‘‘and (U)’’ and insert5 ing ‘‘(U)’’; and

6 (ii) by inserting before the semicolon

7 at the end the following: ‘‘, and (V) with

8 respect to care coordination services de9 scribed in section 1861(s)(16), the

10 amounts paid shall be 100 percent of the

11 payment amount established under section

12 1866B’’.

13 (B) DEDUCTIBLE.—The first sentence of

14 section 1833(b) of the Social Security Act (42

15 U.S.C. 1395l(b)) is amended—

16 (i) by striking ‘‘and (6)’’ and inserting

17 ‘‘(6)’’; and

18 (ii) by inserting before the period at

19 the end the following: ‘‘, and (7) such de20 ductible shall not apply with respect to

21 care coordination services (as described in

22 section 1861(s)(16))’’.

23 SEC. 132. DISEASE MANAGEMENT SERVICES.

24 (a) PROGRAM AUTHORIZED.—Title XVIII of the So25 cial Security Act (42 U.S.C. 1395 et seq.), as amended
39

•S 1135 IS

1 by section 131(a), is amended by inserting after section

2 1866B the following new section:

3 ‘‘DISEASE MANAGEMENT SERVICES

4 ‘‘SEC. 1866C. (a) IN GENERAL.—

5 ‘‘(1) PROGRAM AUTHORITY.—The Secretary,

6 beginning in 2003, may implement a program in ac7 cordance with the provisions of this section under

8 which certain eligible individuals may, in appropriate

9 circumstances, receive disease management services

10 from entities designated by the Secretary with re11 spect to diagnoses that the Secretary determines are

12 amenable to such management.

13 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

14 as otherwise specifically provided, the Secretary may

15 administer the program under this section in accord16 ance with section 1866M, including subsection (b)(2)

17 of such section (relating to the discretion of the Sec18 retary as to the scope of the program).

19 ‘‘(b) INDIVIDUALS WHO MAY RECEIVE DISEASE

20 MANAGEMENT SERVICES.—No individual shall be eligible

21 for enrollment in a disease management program under

22 this section unless the Secretary finds the following with

23 respect to the individual:

24 ‘‘(1) DIAGNOSIS AND RELATED CHARACTERIS25 TICS.—
40

•S 1135 IS

1 ‘‘(A) IN GENERAL.—The individual has

2 been diagnosed with congestive heart failure,

3 chronic obstructive pulmonary disease, diabetes,

4 or any other diagnosis, if the Secretary has de5 termined with respect to such diagnoses that

6 there is evidence that the provision of disease

7 management services, over clinically relevant

8 time periods, to cohorts of individuals with such

9 diagnoses can reasonably be expected to im10 prove processes or outcomes of health care for

11 the medicare population and to reduce aggre12 gate costs to the programs under this title.

13 ‘‘(B) ADDITIONAL FACTORS.—Where re14 quired by the Secretary, the individual also has

15 certain clinical characteristics or conditions, ex16 hibits certain patterns of utilization, or mani17 fests other factors indicating the need for and

18 potential effectiveness of disease management.

19 ‘‘(2) REFERRAL BY QUALIFIED INDIVIDUAL OR

20 ENTITY.—The individual has been referred for con21 sideration for such services by an individual or entity

22 furnishing health care items or services, or by an en23 tity administering benefits under this title.

24 ‘‘(c) PROCEDURES TO FACILITATE ENROLLMENT.—

25 The Secretary shall develop and implement procedures de-
41

•S 1135 IS

1 signed to facilitate enrollment of eligible individuals in the

2 program under this section.

3 ‘‘(d) ENROLLMENT OF INDIVIDUALS WITH DISEASE

4 MANAGEMENT ORGANIZATIONS.—

5 ‘‘(1) EFFECTIVE DATE AND DURATION.—En6 rollment of an individual in the program under this

7 section shall remain in effect for 1 month (or such

8 longer period as the Secretary may specify), and

9 shall be automatically renewed for additional peri10 ods, unless terminated in accordance with such pro11 cedures as the Secretary shall establish by regula12 tion.

13 ‘‘(2) LIMITATION ON REENROLLMENT.—The

14 Secretary may establish limits on an individual’s eli15 gibility to reenroll in the program under this section

16 if the individual has disenrolled from the program

17 more than once during a specified time period.

18 ‘‘(e) DISEASE MANAGEMENT REQUIREMENT.—Not19 withstanding any other provision of this title, the Sec20 retary may provide that an individual enrolled in the pro21 gram under this section may be entitled to payment under

22 this title for any specified health care items or services

23 only if the items or services have been furnished by the

24 disease management organization, or coordinated through

25 the disease management services program. Under such
42

•S 1135 IS

1 provision, the Secretary shall prescribe exceptions for

2 emergency medical services as described in section

3 1852(d)(3), and other exceptions determined by the Sec4 retary for the delivery of timely and needed care.

5 ‘‘(f) DISEASE MANAGEMENT SERVICES.—

6 ‘‘(1) IN GENERAL.—Subject to the cost-effec7 tiveness criteria specified in subsection (b)(1), dis8 ease management services provided to an individual

9 under this section may include—

10 ‘‘(A) initial and periodic health screening

11 and assessment;

12 ‘‘(B) management (including coordination

13 with other providers) of, and referral for, med14 ical and other health services related to the

15 managed diagnosis (which may include referral

16 for provision of such services by the disease

17 management organization);

18 ‘‘(C) monitoring and control of medications

19 (including coordination with the entity man20 aging benefits for the individual under part D);

21 ‘‘(D) patient education and counseling;

22 ‘‘(E) nursing or other health professional

23 home visits, as appropriate;

24 ‘‘(F) providing access for consultations by

25 telephone with physicians or other appropriate
43

•S 1135 IS

1 medical professionals, including 24-hour avail2 ability for emergency consultations;

3 ‘‘(G) managing and facilitating the transi4 tion to other care arrangements in preparation

5 for termination of the disease management en6 rollment; and

7 ‘‘(H) such other services for which pay8 ment would not otherwise be made under this

9 title as the Secretary shall determine to be ap10 propriate.

11 ‘‘(2) VARIATIONS IN SERVICE PACKAGES.—The

12 types and combinations of disease management serv13 ices furnished under agreements under this section

14 may vary (as permitted or required by the Sec15 retary) according to the types of diagnoses, condi16 tions, patient profiles being managed, expertise of

17 the disease management organization, and other fac18 tors the Secretary finds appropriate.

19 ‘‘(3) REDUCTION OR ELIMINATION OF COST20 SHARING.—Notwithstanding any other provision of

21 law, subject to the cost-effectiveness criteria speci22 fied in subsection (b)(1), the Secretary may provide

23 for the reduction or elimination of beneficiary cost24 sharing (such as deductibles, copayments, and coin25 surance) with respect to any of the items or services
44

•S 1135 IS

1 furnished under this title (other than those fur2 nished under a service package developed under

3 paragraph (2)), and may limit such reduction or

4 elimination to particular service areas.

5 ‘‘(g) AGREEMENTS WITH DISEASE MANAGEMENT

6 ORGANIZATIONS.—

7 ‘‘(1) ENTITIES ELIGIBLE.—Entities qualified to

8 enter into agreements with the Secretary for the

9 provision of disease management services under this

10 section include entities that have demonstrated the

11 ability to meet the performance standards and other

12 criteria established by the Secretary with respect

13 to—

14 ‘‘(A) the management of each diagnosis

15 and condition with respect to which the entity,

16 if designated, would furnish disease manage17 ment services under this section; and

18 ‘‘(B) the implementation of each disease

19 management approach that the entity, if des20 ignated, would implement under this section.

21 ‘‘(2) CONDITIONS OF PARTICIPATION.—In order

22 to be eligible to provide disease management services

23 under this section, an entity shall—

24 ‘‘(A) have in effect an agreement with the

25 Secretary setting forth such obligations of the
45

•S 1135 IS

1 entity as a disease management organization

2 under this section as the Secretary shall pre3 scribe;

4 ‘‘(B) meet the standards established by the

5 Secretary under subsection (h); and

6 ‘‘(C) meet such other conditions as the

7 Secretary may establish.

8 ‘‘(3) SECRETARY’S OPTION FOR NONCOMPETI9 TIVE DESIGNATION.—The Secretary may designate

10 an entity to provide disease management services

11 under this section without regard to the require12 ments of section 5 of title 41, United States Code.

13 ‘‘(h) STANDARDS.—

14 ‘‘(1) QUALITY.—The Secretary shall establish

15 standards for, and procedures for assessing, the

16 quality of care provided by disease management or17 ganizations under this section, which shall include—

18 ‘‘(A) performance standards with respect

19 to the processes or outcomes of health care or

20 the health status of enrolled individuals, includ21 ing procedures for establishing a baseline and

22 measuring changes in health care processes or

23 health outcomes with respect to managed dis24 eases or health conditions;
46

•S 1135 IS

1 ‘‘(B) a requirement that the organization

2 meet such licensure and other accreditation

3 standards as the Secretary may find appro4 priate; and

5 ‘‘(C) such other quality standards, includ6 ing patient satisfaction, as the Secretary may

7 find appropriate.

8 ‘‘(2) COST MANAGEMENT.—The Secretary shall

9 establish a performance standard with respect to

10 management or reduction of the aggregate costs of

11 health care items and services related to managed

12 health conditions furnished to enrolled individuals,

13 including procedures for establishing a baseline and

14 measuring changes in costs for such items and serv15 ices.

16 ‘‘(i) PAYMENT.—

17 ‘‘(1) TERMS OF PAYMENT.—The Secretary may

18 negotiate or otherwise establish payment terms and

19 rates for service packages developed under sub20 section (f)(2).

21 ‘‘(2) WITHHOLDING OF PAYMENTS.—An agree22 ment under subsection (g) may provide that the Sec23 retary may withhold up to 10 percent of the amount

24 due a disease management organization under the

25 basis of payment established under paragraph (1)
47

•S 1135 IS

1 until such time as such organization meets a stand2 ard or standards specified in such agreement.’’.

3 (b) COVERAGE OF DISEASE MANAGEMENT SERVICES

4 AS A PART B MEDICAL SERVICE.—

5 (1) IN GENERAL.—Section 1861(s) of the So6 cial Security Act (42 U.S.C. 1395x(s)), as amended

7 by section 131(b)(1), is amended—

8 (A) by striking ‘‘and’’ at the end of para9 graph (15);

10 (B) by striking the period at the end of

11 paragraph (16) and inserting ‘‘; and’’; and

12 (C) by inserting after paragraph (16) the

13 following new paragraph:

14 ‘‘(17) disease management services furnished in

15 accordance with section 1866C.’’.

16 (2) PART B COINSURANCE AND DEDUCTIBLE

17 NOT APPLICABLE TO DISEASE MANAGEMENT SERV18 ICES.—

19 (A) COINSURANCE.—Section

20 1833(a)(1)(V) of the Social Security Act (42

21 U.S.C. 1395l(a)(1)(V)), as added by section

22 131(b)(2)(A), is amended to read as follows:

23 ‘‘(V) with respect to care coordination services

24 described in section 1861(s)(16) and disease

25 management services described in section
48

•S 1135 IS

1 1861(s)(17), the amounts paid shall be 100

2 percent of the payment amounts established

3 under sections 1866B and 1866C, respec4 tively;’’.

5 (B) DEDUCTIBLE.—The first sentence of

6 section 1833(b) of the Social Security Act (42

7 U.S.C. 1395l(b)), as amended by section

8 131(b)(2)(B), is amended by inserting before

9 the period at the end the following: ‘‘or to dis10 ease management services (as described in sec11 tion 1861(s)(17))’’.

12 SEC. 133. COMPETITIVE ACQUISITION OF ITEMS AND SERV13 ICES.

14 (a) PROGRAM AUTHORIZED.—Title XVIII of the So15 cial Security Act (42 U.S.C. 1395 et seq.), as amended

16 by section 132, is amended by inserting after section

17 1866C the following new section:

18 ‘‘COMPETITIVE ACQUISITION OF ITEMS AND SERVICES

19 ‘‘SEC. 1866D. (a) IN GENERAL.—

20 ‘‘(1) PROGRAM AUTHORITY.—The Secretary

21 shall implement a program to purchase, on behalf of

22 individuals enrolled under this part certain competi23 tively priced items and services for which payment

24 may be made under part B.

25 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

26 as otherwise specifically provided, the Secretary may
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•S 1135 IS

1 administer the program under this section in accord2 ance with section 1866M, including subsection (b)(2)

3 of such section (relating to the discretion of the Sec4 retary as to the scope of the program).

5 ‘‘(b) ESTABLISHMENT OF COMPETITIVE ACQUISI6 TION AREAS.—

7 ‘‘(1) IN GENERAL.—The Secretary shall estab8 lish competitive acquisition areas for agreement

9 award purposes for the furnishing under part B of

10 the items and services described in subsection (d)

11 after 2003. The Secretary may establish different

12 competitive acquisition areas under this subsection

13 for different classes of items and services.

14 ‘‘(2) CRITERIA FOR ESTABLISHMENT.—The

15 competitive acquisition areas established under para16 graph (1) shall be chosen based on the availability

17 and accessibility of individuals and entities able to

18 furnish items and services, and the estimated sav19 ings to be realized by the use of competitive acquisi20 tion in the furnishing of items and services in the

21 area.

22 ‘‘(c) AWARDING OF AGREEMENTS IN COMPETITIVE

23 ACQUISITION AREAS.—

24 ‘‘(1) IN GENERAL.—The Secretary shall con25 duct a competition among individuals and entities
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1 supplying items and services described in subsection

2 (d) for each competitive acquisition area established

3 under subsection (b) for each class of items and

4 services.

5 ‘‘(2) CONDITIONS FOR AWARDING AGREE6 MENT.—The Secretary may not enter an agreement

7 with any entity under the competition conducted

8 pursuant to paragraph (1) to furnish an item or

9 service unless the Secretary finds that the entity

10 meets quality standards specified by the Secretary,

11 and that the aggregate amounts to be paid under

12 the agreement are expected to be less than the ag13 gregate amounts that would otherwise be paid.

14 ‘‘(3) TERMS OF AGREEMENT.—An agreement

15 entered into with an entity under the competition

16 conducted pursuant to paragraph (1) is subject to

17 terms and conditions that the Secretary may specify.

18 ‘‘(d) SERVICES DESCRIBED.—The items and services

19 to which this section applies are all items and services de20 scribed in paragraphs (3) and (5) through (9) of section

21 1861(s) (other than custom fabricated prostheses, as de22 fined by the Secretary), and such other items or services

23 as the Secretary may specify.’’.

24 (b) ITEMS AND SERVICES TO BE FURNISHED ONLY

25 THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)
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1 of the Social Security Act (42 U.S.C. 1395y(a)) is

2 amended—

3 (1) by striking ‘‘or’’ at the end of paragraph

4 (20);

5 (2) by striking the period at the end of para6 graph (21) and inserting ‘‘; or’’; and

7 (3) by inserting after paragraph (21) the fol8 lowing new paragraph:

9 ‘‘(22) where the expenses are for an item or

10 service furnished in a competitive acquisition area

11 (as established by the Secretary under section

12 1866D(a)) by an entity other than an entity with

13 which the Secretary has entered into an agreement

14 under section 1866D(c) for the furnishing of such

15 an item or service in that area, except in such cases

16 of emergency or urgent need as the Secretary shall

17 prescribe.’’.

18 (c) EFFECTIVE DATE.—The amendments made by

19 this section apply to items and services furnished after

20 2003.

21 SEC. 134. PROVIDER AND PHYSICIAN COLLABORATIONS.

22 Title XVIII of the Social Security Act (42 U.S.C.

23 1395 et seq.), as amended by section 133, is amended by

24 inserting after section 1866D the following new section:

25 ‘‘PROVIDER AND PHYSICIAN COLLABORATIONS

26 ‘‘SEC. 1866E. (a) IN GENERAL.—
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1 ‘‘(1) PROGRAM AUTHORITY.—The Secretary

2 may enter into agreements with specific providers,

3 suppliers, or other individuals or entities for the fur4 nishing of bundled items and services in selected

5 sites of service or related to specific medical condi6 tions or needs for an episode of care. The services

7 may include any items or services covered under this

8 title that the Secretary determines to be appropriate,

9 including post-hospital services.

10 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

11 as otherwise specifically provided, the Secretary may

12 administer the program under this section in accord13 ance with section 1866M, including subsection (b)(2)

14 of such section (relating to the discretion of the Sec15 retary as to the scope of the program).

16 ‘‘(b) BASIS OF SELECTION.—The Secretary shall se17 lect entities for agreements under this section on the basis

18 of ability to provide services more efficiently, to provide

19 improved coordination of care, to offer additional benefits,

20 and to meet quality and other standards and beneficiary

21 protections and other requirements set by the Secretary.

22 ‘‘(c) PAYMENT.—Payment under this section shall be

23 made on the basis of all-inclusive rates. The all-inclusive

24 rate paid to an entity for bundled items and services fur25 nished during an episode of care under this section shall
53

•S 1135 IS

1 be less than the estimated amount of the payments that

2 the Secretary would have otherwise made for the items

3 and services.

4 ‘‘(d) TERM OF AGREEMENT.—Agreements under this

5 section shall be for periods that the Secretary may deter6 mine.

7 ‘‘(e) INCENTIVES TO BENEFICIARIES FOR USE OF

8 CONTRACTING ENTITIES.—Notwithstanding any other

9 provision of law, entities under a contract under this sec10 tion may furnish additional services or waive part or all

11 beneficiary cost-sharing (such as deductibles, copayments,

12 and coinsurance) with respect to any of the items or serv13 ices furnished under this section.

14 ‘‘(f) BENEFICIARY ELECTION.—An individual enti15 tled to benefits under this title who elects to obtain serv16 ices under an agreement under this section shall agree to

17 receive under such agreement all benefits related to the

18 episode of care covered by the agreement (subject to such

19 exceptions for emergency services and as the Secretary

20 otherwise may specify).’’.

21 SEC. 135. PREFERRED PARTICIPANTS.

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

23 Act (42 U.S.C. 1395 et seq.), as amended by section 134,

24 is amended by inserting after section 1866E the following

25 new section:
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1 ‘‘PREFERRED PARTICIPANTS

2 ‘‘SEC. 1866F. (a) PROGRAM AUTHORITY.—

3 ‘‘(1) IN GENERAL.—The Secretary shall imple4 ment beginning in 2003, a preferred participant pro5 gram, under which the Secretary enters into agree6 ments for the furnishing of health care items and

7 services by individuals and entities participating in

8 the program under part A or B of this title that pro9 vide high-quality, efficient health care.

10 ‘‘(2) LIMITATION.—The Secretary shall not im11 plement the program under this section with respect

12 to a service area, or with respect to a category of in13 dividuals and entities furnishing items and services

14 in such service area, unless the Secretary estimates

15 that to do so will reduce the cost and improve the

16 quality of the programs under this title.

17 ‘‘(3) ADMINISTRATION BY CONTRACT.—Except

18 as otherwise specifically provided, the Secretary shall

19 administer the program under this section in accord20 ance with section 1866M, including subsection (b)(2)

21 of such section (relating to the discretion of the Sec22 retary as to the scope of the program).

23 ‘‘(b) PREFERRED PARTICIPANT AGREEMENT.—

24 ‘‘(1) CRITERIA AND TERMS.—In order to be eli25 gible to participate in the program under part A or
55

•S 1135 IS

1 B as a preferred participant, an individual or entity

2 shall meet the following conditions:

3 ‘‘(A) PARTICIPATION CRITERIA.—The indi4 vidual or entity shall meet the criteria estab5 lished by the Secretary under section

6 1866M(b)(5) (relating to quality, cost-effective7 ness, categories of participants in each service

8 area, and such other standards or criteria as

9 the Secretary may establish).

10 ‘‘(B) PAYMENT RATE.—The individual or

11 entity shall agree to accept payment, for cov12 ered health care items and services furnished

13 during the term of the agreement, at the rates

14 established under this section (which may in15 clude rates in effect under part A or B, dis16 counted rates, or such other rates as the Sec17 retary may find appropriate).

18 ‘‘(2) DURATION.—A preferred participant

19 agreement under this section shall be for a calendar

20 year (or, in the case of an agreement commencing

21 after the first day of January (or such later date as

22 the Secretary may specify), for the remainder of

23 such calendar year), and shall be annually renew24 able, at the option of the participant, while the par-
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1 ticipant continues to meet all applicable conditions

2 of participation.

3 ‘‘(c) OPTION TO REDUCE COST-SHARING.—Notwith4 standing any other provision of law, subject to the cost5 effectiveness criteria specified in subsection (a)(2), the

6 Secretary may—

7 ‘‘(1) provide for the reduction or elimination of

8 beneficiary cost-sharing (such as deductibles, copay9 ments, and coinsurance) with respect to any of the

10 items or services furnished under this section, and

11 may limit such reduction or elimination to particular

12 service areas; and

13 ‘‘(2) permit individuals or entities under an

14 agreement under this section to waive part or all of

15 such beneficiary cost-sharing.’’.

16 (b) DEFINITIONS.—Section 1861 of the Social Secu17 rity Act (42 U.S.C. 1395x), as amended by section 105

18 of the Medicare, Medicaid, and SCHIP Benefits Improve19 ment and Protection Act of 2000 (114 Stat. 2763A–471),

20 as enacted into law by section 1(a)(6) of Public Law 106–

21 554, is amended by adding at the end the following new

22 subsection:

23 ‘‘(ww) PREFERRED PARTICIPANT.—The term ‘pre24 ferred participant’ means an individual or entity that fur25 nishes health care items or services under part A or B
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1 and that has in effect an agreement under section

2 1866F(b).’’.

3 SEC. 136. SIMPLIFIED CENTER PAYMENTS.

4 Title XVIII of the Social Security Act (42 U.S.C.

5 1395 et seq.), as amended by section 135, is amended by

6 inserting after section 1866F the following new section:

7 ‘SIMPLIFIED CENTER PAYMENTS

8 ‘‘SEC. 1866G. (a) IN GENERAL.—

9 ‘‘(1) COMPETITION TO FURNISH BUNDLED

10 ITEMS AND SERVICES.—The Secretary, beginning in

11 2003, shall use a competitive process to enter into

12 agreements with specific hospitals or other entities

13 for the furnishing of bundled groups of items and

14 services related to certain surgical procedures, and

15 of other bundled groups of items and services (unre16 lated to surgical procedures) specified by the Sec17 retary furnished during an episode of care (as de18 fined by the Secretary). Such items and services may

19 include any items or services covered under this title

20 that the Secretary determines to be appropriate.

21 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

22 as otherwise specifically provided, the Secretary may

23 administer the program under this section in accord24 ance with section 1866M, including subsection (b)(2)

25 of such section (relating to the discretion of the Sec26 retary as to the scope of the program).
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1 ‘‘(b) ELIGIBILITY CRITERIA.—In order to be eligible

2 for an agreement under this section, an entity shall—

3 ‘‘(1) meet quality standards established by the

4 Secretary;

5 ‘‘(2) implement an ongoing quality assurance

6 program approved by the Secretary; and

7 ‘‘(3) meet such other requirements as the Sec8 retary may establish.

9 ‘‘(c) PAYMENT.—

10 ‘‘(1) IN GENERAL.—The Secretary shall estab11 lish criteria for identifying the health care items and

12 services furnished by a center with an agreement

13 under this section during an episode of care that are

14 to be bundled together and for which payment shall

15 be made on the basis of an all-inclusive rate.

16 ‘‘(2) PAYMENT LIMITATION.—

17 ‘‘(A) LIMITATION ON AGGREGATE PAY18 MENTS TO ENTITIES.—The estimated amount

19 of aggregate payments to all entities under this

20 section for a year shall be less than the esti21 mated amount of aggregate payments that the

22 Secretary would otherwise have made for such

23 year, adjusted for changes in the number of in24 dividuals receiving services.
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1 ‘‘(B) LIMITATION ON PAYMENTS TO PAR2 TICULAR ENTITIES.—In no case shall the all-in3 clusive rate paid to an entity for items and

4 services furnished during an episode of care

5 under this section exceed the estimated amount

6 of the payments that the Secretary would other7 wise have made for such items and services.

8 ‘‘(d) AGREEMENT PERIOD.—An agreement period

9 shall be for up to 3 years (subject to renewal).

10 ‘‘(e) INCENTIVES FOR USE OF CENTERS.—Notwith11 standing any other provision of law, the Secretary may

12 permit entities under an agreement under this section to

13 furnish additional services or to waive part or all bene14 ficiary cost-sharing (such as deductibles, copayments, and

15 coinsurance) with respect to any of the items or services

16 furnished under this section.

17 ‘‘(f) BENEFICIARY ELECTION.—Notwithstanding any

18 other provision of this title, an individual who voluntarily

19 elects to receive items and services under an arrangement

20 described in subsection (a)(1) with respect to an episode

21 of care shall not be entitled to payment under this title

22 for any such item or service furnished with respect to such

23 episode of care other than through such arrangement, sub24 ject to such exceptions as the Secretary may prescribe for
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1 emergency medical services as described in section

2 1852(d)(3) and other cases of urgent need.’’.

3 SEC. 137. CONFORMING CHANGES TO PHYSICIAN GROUP

4 PRACTICE DEMONSTRATION AND ADMINIS5 TRATIVE PROVISIONS.

6 (a) CONFORMING CHANGE TO PHYSICIAN GROUP

7 PRACTICE DEMONSTRATION.—Section 1866A(a)(2), as

8 added by section 412 of the Medicare, Medicaid, and

9 SCHIP Benefits Improvement and Protection Act of 2000

10 (114 Stat. 2763A–509), as enacted into law by section

11 1(a)(6) of Public Law 106–554, is amended by striking

12 ‘‘1866B’’ and inserting ‘‘1866M, including subsection

13 (b)(2) of such section (relating to the discretion of the Sec14 retary as to the scope of the program)’’.

15 (b) CONFORMING CHANGES TO ADMINISTRATIVE

16 PROVISIONS.—Section 1866M (as redesignated by section

17 131(a)(1)) is amended to read as follows:

18 ‘‘GENERAL PROVISIONS FOR ADMINISTRATION OF CER19 TAIN PRIVATE SECTOR PURCHASING AND QUALITY

20 IMPROVEMENT PROGRAMS

21 ‘‘SEC. 1866M. (a) IN GENERAL.—Except as other22 wise specifically provided, the provisions of this section

23 apply to the programs under the following provisions of

24 this title:
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1 ‘‘(1) Section 1866A (demonstration of applica2 tion of physician volume increases to group prac3 tices).

4 ‘‘(2) Section 1866B (care coordination serv5 ices).

6 ‘‘(3) Section 1866C (disease management serv7 ices).

8 ‘‘(4) Section 1866D (competitive acquisition of

9 items and services).

10 ‘‘(5) Section 1866E (provider and physician col11 laborations).

12 ‘‘(6) Section 1866F (preferred participants).

13 ‘‘(7) Section 1866G (simplified center pay14 ments).

15 ‘‘(b) PROVISIONS GENERALLY APPLICABLE TO DES16 IGNATED PROGRAMS.—The following provisions apply to

17 programs specified in subsection (a), except as otherwise

18 specifically provided:

19 ‘‘(1) BENEFICIARY ELIGIBILITY.—Except as

20 otherwise provided by the Secretary, an individual

21 shall only be eligible to receive benefits under a pro22 gram specified in subsection (a) if such individual—

23 ‘‘(A) is enrolled in under the program

24 under part B;
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•S 1135 IS

1 ‘‘(B) is not enrolled in a Medicare+Choice

2 plan under part C, an eligible organization

3 under a contract under section 1876 (or a simi4 lar organization operating under a demonstra5 tion project authority), an organization with an

6 agreement under section 1833(a)(1)(A), or a

7 PACE program under section 1894; and

8 ‘‘(C) in the case of the programs specified

9 in paragraphs (1), (2), (3), (5), and (7) of sub10 section (a), is entitled to benefits under part A.

11 ‘‘(2) SECRETARY’S DISCRETION AS TO SCOPE

12 OF PROGRAM.—The Secretary may limit the imple13 mentation of a program specified in subsection (a)

14 to—

15 ‘‘(A) a geographic area (or areas) that the

16 Secretary designates for purposes of the pro17 gram, based upon such criteria as the Secretary

18 finds appropriate;

19 ‘‘(B) a subgroup (or subgroups) of bene20 ficiaries or individuals and entities furnishing

21 items or services (otherwise eligible to partici22 pate in the program), selected on the basis of

23 the number of such participants that the Sec24 retary finds consistent with the effective and ef25 ficient implementation of the program;
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1 ‘‘(C) an element (or elements) of the pro2 gram that the Secretary determines to be suit3 able for implementation; or

4 ‘‘(D) any combination of any of the limits

5 described in subparagraphs (A) through (C).

6 ‘‘(3) VOLUNTARY RECEIPT OF ITEMS AND

7 SERVICES.—Except as provided in the authority for

8 the program specified in subsection (a)(4), items and

9 services shall be furnished to an individual under the

10 programs specified in subsection (a) only at the indi11 vidual’s election.

12 ‘‘(4) AGREEMENTS.—The Secretary is author13 ized to enter into agreements with individuals and

14 entities to furnish health care items and services to

15 beneficiaries under the programs specified in sub16 section (a).

17 ‘‘(5) PROGRAM STANDARDS AND CRITERIA.—

18 The Secretary shall establish performance standards

19 for the programs specified in subsection (a) includ20 ing, as applicable, standards for quality of health

21 care items and services, cost-effectiveness, bene22 ficiary satisfaction, and such other factors as the

23 Secretary finds appropriate. The eligibility of indi24 viduals or entities for the initial award, continuation,

25 and renewal of agreements to provide health care
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1 items and services under the program shall be condi2 tioned, at a minimum, on performance that meets or

3 exceeds such standards.

4 ‘‘(6) ADMINISTRATIVE REVIEW OF ADVERSE

5 DECISION.—

6 ‘‘(A) DECISIONS AFFECTING INDIVIDUALS

7 AND ENTITIES FURNISHING SERVICES UNDER

8 PROGRAMS.—An individual or entity furnishing

9 services under a program specified in subsection

10 (a) shall be entitled to a review by the program

11 administrator (or, if the Secretary has not con12 tracted with a program administrator, by the

13 Secretary) of a decision not to enter into, or to

14 terminate, or not to renew, an agreement with

15 the individual or entity to provide health care

16 items or services under such program.

17 ‘‘(B) DECISIONS AFFECTING BENE18 FICIARIES UNDER CARE COORDINATION SERV19 ICES OR DISEASE MANAGEMENT SERVICES PRO20 GRAMS.—

21 ‘‘(i) DETERMINATION OF INELIGI22 BILITY.—An individual shall be entitled to

23 a review by the program administrator (or,

24 if the Secretary has not contracted with a

25 program administrator, by the Secretary)
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1 of a determination that the individual does

2 not meet the criteria for eligibility to par3 ticipate in a program specified in para4 graph (2) or (3) of subsection (a).

5 ‘‘(ii) DENIAL OF PAYMENT FOR ITEMS

6 OR SERVICES.—A beneficiary shall be enti7 tled to a reconsideration or appeal of a de8 nial of payment under section 1866B(d)(2)

9 or 1866C(e)(2) in accordance with the pro10 visions of section 1852(g), as if such sec11 tion applied to this clause. In applying

12 such section 1852(g), any reference to a

13 Medicare+Choice organization is construed

14 to refer to the program administrator or, if

15 the Secretary has not contracted with a

16 program administrator, to the Secretary.

17 ‘‘(7) SECRETARY’S REVIEW OF MARKETING MA18 TERIALS.—An agreement with an individual or enti19 ty furnishing services under a program specified in

20 subsection (a) shall require the individual or entity

21 to guarantee that it will not distribute materials

22 marketing items or services under such program

23 without the Secretary’s prior review and approval;

24 ‘‘(8) PAYMENT IN FULL.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), an individual or entity re3 ceiving payment from the Secretary under a

4 contract or agreement under a program speci5 fied in subsection (a) shall agree to accept such

6 payment as payment in full, and such payment

7 shall be in lieu of any payments to which the

8 individual or entity would otherwise be entitled

9 under this title.

10 ‘‘(B) COLLECTION OF DEDUCTIBLES AND

11 COINSURANCE.—Such individual or entity may

12 collect any applicable deductible or coinsurance

13 amount from a beneficiary.

14 ‘‘(c) CONTRACTS FOR PROGRAM ADMINISTRATION.—

15 ‘‘(1) IN GENERAL.—The Secretary may admin16 ister a program specified in subsection (a) through

17 a contract with a program administrator in accord18 ance with the provisions of this subsection.

19 ‘‘(2) SCOPE OF PROGRAM ADMINISTRATOR CON20 TRACTS.—A contract under this subsection may, at

21 the Secretary’s discretion, relate to administration of

22 any or all of the programs specified in subsection

23 (a). The Secretary may enter into such contracts for

24 a limited geographic area, or on a regional or na25 tional basis.
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1 ‘‘(3) ELIGIBLE CONTRACTORS.—The Secretary

2 may contract for the administration of the program

3 with—

4 ‘‘(A) an entity that, under a contract

5 under section 1816 or 1842, determines the

6 amount of and makes payments for health care

7 items and services furnished under this title; or

8 ‘‘(B) any other entity with substantial ex9 perience in managing the type of program con10 cerned.

11 ‘‘(4) CONTRACT AWARD, DURATION, AND RE12 NEWAL.—

13 ‘‘(A) IN GENERAL.—A contract under this

14 subsection shall be for an initial term of up to

15 3 years, renewable for additional terms of up to

16 3 years.

17 ‘‘(B) NONCOMPETITIVE AWARD AND RE18 NEWAL FOR ENTITIES ADMINISTERING PART A

19 OR PART B PAYMENTS.—The Secretary may

20 enter or renew a contract under this subsection

21 with an entity described in paragraph (3)(A)

22 without regard to the requirements of section 5

23 of title 41, United States Code.

24 ‘‘(5) APPLICABILITY OF FEDERAL ACQUISITION

25 REGULATION.—The Federal Acquisition Regulation
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•S 1135 IS

1 shall apply to program administration contracts

2 under this subsection.

3 ‘‘(6) PERFORMANCE STANDARDS.—The Sec4 retary shall establish performance standards for the

5 program administrator including, as applicable,

6 standards for the quality and cost-effectiveness of

7 the program administered, and such other factors as

8 the Secretary finds appropriate. The eligibility of en9 tities for the initial award, continuation, and renewal

10 of program administration contracts shall be condi11 tioned, at a minimum, on performance that meets or

12 exceeds such standards.

13 ‘‘(7) FUNCTIONS OF PROGRAM ADMINIS14 TRATOR.—A program administrator shall perform

15 any or all of the following functions, as specified by

16 the Secretary:

17 ‘‘(A) AGREEMENTS WITH INDIVIDUALS OR

18 ENTITIES FURNISHING HEALTH CARE ITEMS

19 AND SERVICES.—Determine the qualifications

20 of individuals or entities seeking to enter or

21 renew agreements to provide services under a

22 program specified in subsection (a), and as ap23 propriate enter or renew (or refuse to enter or

24 renew) such agreements on behalf of the Sec25 retary.
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1 ‘‘(B) ESTABLISHMENT OF PAYMENT

2 RATES.—Negotiate or otherwise establish, sub3 ject to the Secretary’s approval, payment rates

4 for covered health care items and services.

5 ‘‘(C) PAYMENT OF CLAIMS OR FEES.—Ad6 minister payments for health care items or serv7 ices furnished under any such program.

8 ‘‘(D) PAYMENT OF BONUSES.—Using such

9 guidelines as the Secretary shall establish, and

10 subject to the approval of the Secretary, make

11 bonus payments as described in subsection

12 (d)(2)(A)(ii) to individuals and entities fur13 nishing items or services for which payment

14 may be made under any such program.

15 ‘‘(E) LIST OF PROGRAM PARTICIPANTS.—

16 Maintain and regularly update a list of individ17 uals or entities with agreements to provide

18 health care items and services under any such

19 program, and ensure that such list, in electronic

20 and hard copy formats, is readily available, as

21 applicable, to—

22 ‘‘(i) individuals residing in the service

23 area who are entitled to benefits under

24 part A or enrolled in the program under

25 part B;
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•S 1135 IS

1 ‘‘(ii) the entities responsible under

2 sections 1816 and 1842 for administering

3 payments for health care items and serv4 ices furnished; and

5 ‘‘(iii) individuals and entities pro6 viding health care items and services in the

7 service area.

8 ‘‘(F) BENEFICIARY ENROLLMENT.—Deter9 mine eligibility of individuals to enroll under a

10 program specified in subsection (a) and provide

11 enrollment-related services (but only if the Sec12 retary finds that the program administrator has

13 no conflict of interest caused by a financial re14 lationship with any individual or entity fur15 nishing items or services for which payment

16 may be made under any such program, or any

17 other conflict of interest with respect to such

18 function).

19 ‘‘(G) OVERSIGHT.—Monitor the compli20 ance of individuals and entities with agreements

21 under any such program with the conditions of

22 participation.

23 ‘‘(H) ADMINISTRATIVE REVIEW.—Conduct

24 reviews of adverse determinations specified in

25 subparagraph (A) and in subsection (b)(6).
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1 ‘‘(I) REVIEW OF MARKETING MATE2 RIALS.—Conduct a review of marketing mate3 rials proposed by an individual or entity fur4 nishing services under any such program.

5 ‘‘(J) ADDITIONAL FUNCTIONS.—Perform

6 such other functions as the Secretary may

7 specify.

8 ‘‘(8) LIMITATION OF LIABILITY.—The provi9 sions of section 1157(b) shall apply with respect to

10 activities of contractors and their officers, employ11 ees, and agents under a contract under this sub12 section.

13 ‘‘(9) INFORMATION SHARING.—Notwithstanding

14 section 1106 and section 552a of title 5, United

15 States Code, the Secretary is authorized to disclose

16 to an entity with a program administration contract

17 under this subsection such information (including

18 medical information) on individuals receiving health

19 care items and services under the program as the

20 entity may require to carry out its responsibilities

21 under the contract.

22 ‘‘(d) RULES APPLICABLE TO BOTH PROGRAM

23 AGREEMENTS AND PROGRAM ADMINISTRATION CON24 TRACTS.—
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1 ‘‘(1) RECORDS, REPORTS, AND AUDITS.—The

2 Secretary is authorized to require individuals and

3 entities with agreements to provide health care items

4 or services under programs specified under sub5 section (a), and entities with program administration

6 contracts under subsection (c), to maintain adequate

7 records, to afford the Secretary access to such

8 records (including for audit purposes), and to fur9 nish such reports and other materials (including au10 dited financial statements and performance data) as

11 the Secretary may require for purposes of implemen12 tation, oversight, and evaluation of such program

13 and of individuals’ and entities’ effectiveness in per14 formance of such agreements or contracts.

15 ‘‘(2) BONUSES.—Notwithstanding any other

16 provision of law, but subject to subparagraph

17 (B)(ii), the Secretary may make bonus payments

18 under a program specified in subsection (a) from the

19 Health Insurance and Supplementary Medical Insur20 ance Trust Funds in amounts that do not exceed 50

21 percent of the savings to such Trust Funds attrib22 utable to such programs (or in the case of the pro23 gram specified in subsection (a)(1), in amounts au24 thorized under such program), in accordance with

25 the following:
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•S 1135 IS

1 ‘‘(A) PAYMENTS TO PROGRAM ADMINIS2 TRATORS.—The Secretary may make bonus

3 payments under each program specified in sub4 section (a) to program administrators.

5 ‘‘(B) PAYMENTS TO INDIVIDUALS AND EN6 TITIES FURNISHING SERVICES.—

7 ‘‘(i) IN GENERAL.—Subject to clause

8 (ii), the Secretary may make bonus pay9 ments to individuals or entities furnishing

10 items or services for which payment may

11 be made under the programs specified in

12 paragraphs (1), (2), (3), and (6) of sub13 section (a), or may authorize a program

14 administrator to make such bonus pay15 ments in accordance with such guidelines

16 as the Secretary shall establish and subject

17 to the Secretary’s approval.

18 ‘‘(ii) LIMITATIONS.—The Secretary

19 may limit bonus payments under clause (i)

20 to particular service areas, types of individ21 uals or entities furnishing items or services

22 under a program, or kinds of items or

23 services, and may condition such payments

24 on the achievement of such standards re25 lated to efficiency, improvement in proc-
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•S 1135 IS

1 esses or outcomes of care, or such other

2 factors as the Secretary determines to be

3 appropriate.

4 ‘‘(3) ANTIDISCRIMINATION LIMITATION.—

5 ‘‘(A) IN GENERAL.—The Secretary shall

6 not enter into an agreement with an individual

7 or entity to provide health care items or serv8 ices under a program specified under subsection

9 (a), or with an entity to administer such a pro10 gram, unless such individual or entity guaran11 tees that it will not deny, limit, or condition the

12 coverage or provision of benefits under such

13 program, for individuals eligible to be enrolled

14 under such program, based on any health sta15 tus-related factor described in section

16 2702(a)(1) of the Public Health Service Act.

17 ‘‘(B) CONSTRUCTION.—Subparagraph (A)

18 shall not be construed to prohibit such indi19 vidual or entity from taking any action explic20 itly authorized by the provisions of section

21 1866B (care coordination services) or section

22 1866C (disease management services).

23 ‘‘(e) LIMITATIONS ON JUDICIAL REVIEW.—The fol24 lowing actions and determinations with respect to a pro-
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1 gram specified in subsection (a) shall not be subject to

2 review by a judicial or administrative tribunal:

3 ‘‘(1) Limiting the implementation of a program

4 under subsection (b)(2).

5 ‘‘(2) The establishment of program participa6 tion standards under subsection (b)(5); or the denial

7 or termination of, or refusal to renew, an agreement

8 with an individual or entity to provide health care

9 items and services under the program.

10 ‘‘(3) The determination of a beneficiary’s eligi11 bility under subsection (b)(6)(B).

12 ‘‘(4) The establishment of program administra13 tion contract performance standards under sub14 section (c)(6); or the refusal to renew a program ad15 ministration contract; or the noncompetitive award

16 or renewal of a program administration contract

17 under subsection (c)(4)(B).

18 ‘‘(5) The establishment of payment rates,

19 through negotiation or otherwise, under a program

20 agreement or a program administration contract.

21 ‘‘(6) A determination with respect to a program

22 (where specifically authorized by the program au23 thority or by subsection (d)(2))—

24 ‘‘(A) as to whether cost savings have been

25 achieved, and the amount of savings;
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1 ‘‘(B) as to whether, to whom, and in what

2 amounts bonuses will be paid; or

3 ‘‘(C) as to whether to reduce or eliminate

4 beneficiary cost-sharing.

5 ‘‘(f) APPLICATION LIMITED TO PARTS A AND B.—

6 None of the provisions of this section or of the programs

7 specified in subsection (a) shall apply to the programs

8 under parts C and D.

9 ‘‘(g) REPORTS TO CONGRESS.—Not later than 2

10 years after the date of enactment of this section, and bien11 nially thereafter for 6 years, the Secretary shall report to

12 Congress on the use of authorities under each of sections

13 1866A through 1866G. Each report shall address the im14 pact of the use of those authorities on expenditures, ac15 cess, and quality under the programs under this title.’’.

16 (b) EXCEPTION TO LIMITS ON PHYSICIAN REFER17 RALS.—Section 1877(b) of the Social Security Act (42

18 U.S.C. 1395nn(b)) is amended—

19 (1) by redesignating paragraph (4) as para20 graph (5); and

21 (2) by inserting after paragraph (3) the fol22 lowing new paragraph:

23 ‘‘(4) PRIVATE SECTOR PURCHASING AND QUAL24 ITY IMPROVEMENT TOOLS FOR ORIGINAL MEDI-
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•S 1135 IS

1 CARE.—In the case of a designated health service, if

2 the designated health service is—

3 ‘‘(A) included in the services under section

4 1866B, 1866C, 1866E, or 1866G; and

5 ‘‘(B) provided by an individual or entity

6 meeting such criteria related to quality assur7 ance, financial disclosure, and other factors as

8 the Secretary may find appropriate.’’.

9 SEC. 138. INCREASED FLEXIBILITY IN CONTRACTING FOR

10 MEDICARE CLAIMS PROCESSING.

11 (a) CARRIERS TO INCLUDE ENTITIES THAT ARE

12 NOT INSURANCE COMPANIES.—Section 1842 of the Social

13 Security Act (42 U.S.C. 1395u) is amended—

14 (1) in subsection (a), in the matter preceding

15 paragraph (1), by striking ‘‘with carriers’’ and in16 serting ‘‘with agencies and organizations (in this

17 section referred to as ‘carriers’)’’; and

18 (2) by repealing subsection (f).

19 (b) SECRETARIAL FLEXIBILITY IN CONTRACTING

20 FOR AND IN ASSIGNING FISCAL INTERMEDIARY AND CAR21 RIER FUNCTIONS.—

22 (1) AUTHORITY TO ENTER INTO CONTRACTS.—

23 (A) IN GENERAL.—Section 1816(a) of the

24 Social Security Act (42 U.S.C. 1395h(a)) is

25 amended to read as follows:
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•S 1135 IS

1 ‘‘(a)(1) The Secretary may enter into contracts with

2 agencies or organizations to perform any or all of the fol3 lowing functions, or parts of those functions (or, to the

4 extent provided in a contract, to secure performance there5 of by other organizations) to—

6 ‘‘(A) determine (subject to the provisions of sec7 tion 1878 and to such review by the Secretary as

8 may be provided for by the contracts) the amount of

9 the payments required pursuant to this part to be

10 made to providers of services;

11 ‘‘(B) make payments described in subparagraph

12 (A);

13 ‘‘(C) provide consultative services to institutions

14 or agencies to enable them to establish and maintain

15 fiscal records necessary for purposes of this part and

16 otherwise to qualify as providers of services;

17 ‘‘(D) serve as a center for, and communicate to

18 individuals entitled to benefits under this part and

19 to providers of services, any information or instruc20 tions furnished to the agency or organization by the

21 Secretary, and serve as a channel of communication

22 from individuals entitled to benefits under this part

23 and from providers of services to the Secretary;
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•S 1135 IS

1 ‘‘(E) make such audits of the records of pro2 viders of services as may be necessary to ensure that

3 proper payments are made under this part;

4 ‘‘(F) perform the functions described by sub5 section (d); and

6 ‘‘(G) perform such other functions as are nec7 essary to carry out the purposes of this part.

8 ‘‘(2) In this title and title XI, the term ‘fiscal inter9 mediary’ means an agency or organization with a contract

10 under this section.’’.

11 (B) PREREQUISITES FOR CONTRACTS.—

12 Section 1816(b)(1)(A) of the Social Security

13 Act (42 U.S.C. 1395h(b)(1)(A)) is amended by

14 striking ‘‘after applying the standards, criteria,

15 and procedures’’ and inserting ‘‘after evaluating

16 the ability of the agency or organization to ful17 fill the contract performance requirements’’.

18 (C) DUTIES OF FISCAL INTERMEDIARIES;

19 RIGHTS OF PROVIDERS.—Section 1816(d) of

20 the Social Security Act (42 U.S.C. 1395h(d)) is

21 amended to read as follows:

22 ‘‘(d) Each provider of services shall have a fiscal

23 intermediary that—

24 ‘‘(1) acts as a single point of contact for the

25 provider of services under this part;
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•S 1135 IS

1 ‘‘(2) makes its services sufficiently available to

2 meet the needs of the provider of services; and

3 ‘‘(3) is responsible and accountable for arrang4 ing the resolution of issues raised under this part by

5 the provider of services.’’.

6 (D) SOLICITATION OF COMMENTS FOR

7 PERFORMANCE EVALUATIONS.—Section 1816(e)

8 of the Social Security Act (42 U.S.C. 1395h(e))

9 is amended to read as follows:

10 ‘‘(e) The Secretary, in evaluating the performance of

11 a fiscal intermediary, may solicit comments from providers

12 of services.’’.

13 (E) CONSULTATION WITH RESPECT TO

14 PERFORMANCE REQUIREMENTS FOR FISCAL

15 INTERMEDIARIES.—Section 1816(f)(1) of the

16 Social Security Act (42 U.S.C. 1395h(f)) is

17 amended to read as follows:

18 ‘‘(f)(1) With respect to the establishment of contract

19 performance requirements, the Secretary may consult

20 with—

21 ‘‘(A) Medicare+Choice organizations under

22 part C of this title;

23 ‘‘(B) providers of services and other persons

24 who furnish items or services for which payment

25 may be made under this title; and
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•S 1135 IS

1 ‘‘(C) organizations and agencies performing

2 functions necessary to carry out the purposes of this

3 part.’’.

4 (F) CONSULTATION WITH RESPECT TO

5 PERFORMANCE REQUIREMENTS FOR CAR6 RIERS.—Section 1842(b)(2) of the Social Secu7 rity Act (42 U.S.C. 1395u(b)(2)) is amended—

8 (i) in subparagraph (A)—

9 (I) by inserting ‘‘(i)’’ before ‘‘No

10 such contract’’;

11 (II) by striking the second sen12 tence and inserting the following new

13 clause:

14 ‘‘(ii) With respect to the establishment of contract

15 performance requirements, the Secretary may consult

16 with—

17 ‘‘(I) Medicare+Choice organizations under part

18 C of this title;

19 ‘‘(II) providers of services and other persons

20 who furnish items or services for which payment

21 may be made under this title; and

22 ‘‘(III) organizations and agencies performing

23 functions necessary to carry out the purposes of this

24 part.’’;
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•S 1135 IS

1 (III) by striking the third sen2 tence; and

3 (IV) by striking the fourth sen4 tence and inserting the following new

5 clause:

6 ‘‘(iii) The Secretary may not require, as a condition

7 of entering into a contract under this section or under sec8 tion 1871, that a carrier match data obtained other than

9 in its activities under this part with data used in the ad10 ministration of this part for purposes of identifying situa11 tions in which section 1862(b) may apply.’’;

12 (ii) in subparagraph (B), in the mat13 ter preceding clause (i), by striking ‘‘estab14 lish standards’’ and inserting ‘‘develop con15 tract performance requirements’’; and

16 (iii) in subparagraph (D), by striking

17 ‘‘standards and criteria’’ each place it ap18 pears and inserting ‘‘contract performance

19 requirements’’.

20 (2) CONFORMING AMENDMENTS.—

21 (A) PREREQUISITES FOR CONTRACTS.—

22 Section 1816(b) of the Social Security Act (42

23 U.S.C. 1395h(b)) is amended—
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•S 1135 IS

1 (i) in the matter preceding paragraph

2 (1), by striking ‘‘an agreement’’ and in3 serting ‘‘a contract’’;

4 (ii) in paragraph (1)(B), by striking

5 ‘‘agreement’’ and inserting ‘‘contract’’; and

6 (iii) in paragraph (2)(A), by striking

7 ‘‘agreement’’ and inserting ‘‘contract’’.

8 (B) TERMS AND CONDITIONS OF CON9 TRACTS; PROMPT PAYMENT OF CLAIMS.—Sec10 tion 1816(c) of the Social Security Act (42

11 U.S.C. 1395h(c)) is amended—

12 (i) in paragraph (1)—

13 (I) in the first sentence, by strik14 ing ‘‘An agreement’’ and inserting ‘‘A

15 contract’’; and

16 (II) in the last sentence, by strik17 ing ‘‘an agreement’’ and inserting ‘‘a

18 contract’’;

19 (ii) in paragraph (2)—

20 (I) in subparagraph (A), in the

21 matter preceding clause (i), by strik22 ing ‘‘Each agreement under this sec23 tion’’ and inserting ‘‘Each contract

24 under this section that provides for
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•S 1135 IS

1 making payments under this part’’;

2 and

3 (II) in subparagraph (C), by

4 striking ‘‘hospital, rural primary care

5 hospital, skilled nursing facility, home

6 health agency, hospice program, com7 prehensive outpatient rehabilitation

8 facility, or rehabilitation agency’’ and

9 inserting ‘‘provider of services (as de10 fined in section 1861(u))’’; and

11 (iii) in paragraph (3)(A), by striking

12 ‘‘agreement under this section’’ and insert13 ing ‘‘contract under this section that pro14 vides for making payments under this

15 part’’.

16 (C) SURETY BONDS.—Section 1816(h) of

17 the Social Security Act (42 U.S.C. 1395h(h)) is

18 amended—

19 (i) by striking ‘‘An agreement’’ and

20 inserting ‘‘A contract’’; and

21 (ii) by striking ‘‘the agreement’’ each

22 place it appears and inserting ‘‘the con23 tract’’.

24 (D) LIMITATION ON LIABILITY FOR CERTI25 FYING AND DISBURSING OFFICERS.—Section
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•S 1135 IS

1 1816(i)(1) of the Social Security Act (42

2 U.S.C. 1395h(i)(1)) is amended by striking ‘‘an

3 agreement’’ and inserting ‘‘a contract’’.

4 (E) DENIAL OF CLAIM; NOTIFICATION AND

5 RECONSIDERATION.—Section 1816(j) of the So6 cial Security Act (42 U.S.C. 1395h(j)) is

7 amended in the matter preceding paragraph

8 (1)—

9 (i) by striking ‘‘An agreement’’ and

10 inserting ‘‘A contract’’; and

11 (ii) by striking ‘‘for home health serv12 ices, extended care services, or post-hos13 pital extended care services’’.

14 (F) ANNUAL REPORTING REQUIREMENT

15 ON ERRONEOUS PAYMENT RECOVERY.—Section

16 1816(k) of the Social Security Act (42 U.S.C.

17 1395h(k)) is amended—

18 (i) by striking ‘‘An agreement’’ and

19 inserting ‘‘A contract’’; and

20 (ii) by inserting ‘‘(as appropriate)’’

21 after ‘‘submit’’.

22 (G) COORDINATION WITH MEDICARE IN23 TEGRITY PROGRAM.—Section 1816(l) of the So24 cial Security Act (42 U.S.C. 1395h(l)) is
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•S 1135 IS

1 amended by striking ‘‘an agreement’’ and in2 serting ‘‘a contract’’.

3 (H) AUTHORITY TO ENTER INTO CON4 TRACTS WITH CARRIERS.—Section 1842(a) of

5 the Social Security Act (42 U.S.C. 1395u(a)) is

6 amended—

7 (i) in the matter preceding paragraph

8 (1)—

9 (I) by striking ‘‘carriers with

10 which agreements’’ and inserting ‘‘sin11 gle contracts under section 1816 and

12 this section together, or separate con13 tracts with eligible agencies and orga14 nizations with which contracts’’; and

15 (II) by striking ‘‘some or all of

16 the following functions’’ and inserting

17 ‘‘any or all of the following functions,

18 or parts of those functions’’; and

19 (ii) in paragraph (3), by inserting ‘‘(to

20 and from individuals enrolled under this

21 part and to and from physicians and other

22 entities that furnish items and services)’’

23 after ‘‘communication’’.

24 (I) APPLICABILITY OF COMPETITIVE BID25 DING PROVISIONS; FINDINGS AS TO FINANCIAL
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•S 1135 IS

1 RESPONSIBILITIES; CONTRACTUAL DUTIES.—

2 Section 1842(b) of the Social Security Act (42

3 U.S.C. 1395u(b)) is amended—

4 (i) in paragraph (2)(C), in the first

5 sentence, by inserting ‘‘(as appropriate)’’

6 after ‘‘carriers’’;

7 (ii) in paragraph (3), in the matter

8 preceding subparagraph (A), by inserting

9 ‘‘(as appropriate)’’ after ‘‘contract’’;

10 (iii) in paragraph (7)(A), in the mat11 ter preceding clause (i), by striking ‘‘the

12 carrier’’ and inserting ‘‘a carrier’’; and

13 (iv) in paragraph (11)(A), in the mat14 ter preceding clause (i), by inserting ‘‘(as

15 appropriate)’’ after ‘‘each carrier’’.

16 (J) PARTICIPATING PHYSICIAN OR SUP17 PLIER; CONTRACTS WITH THE SECRETARY; PAY18 MENT OF CLAIMS ON ASSIGNMENT.—Section

19 1842(h) of the Social Security Act (42 U.S.C.

20 1395u(h)) is amended—

21 (i) in paragraph (2), in the first

22 sentence—

23 (I) by striking ‘‘an agreement’’

24 and inserting ‘‘a contract’’; and
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•S 1135 IS

1 (II) by inserting ‘‘(as appro2 priate)’’ after ‘‘shall’’;

3 (ii) in paragraph (3)(A), by striking

4 ‘‘an agreement’’ and inserting ‘‘a con5 tract’’;

6 (iii) in paragraph (3)(B), in the third

7 sentence, by striking ‘‘agreements’’ and in8 serting ‘‘contracts’’;

9 (iv) in paragraph (5)(A), by inserting

10 ‘‘(as appropriate)’’ after ‘‘carriers’’; and

11 (v) in paragraph (8)—

12 (I) by striking ‘‘an agreement’’

13 and inserting ‘‘a contract’’; and

14 (II) by striking ‘‘such agree15 ment’’ and inserting ‘‘such contract’’.

16 (c) ELIMINATION OF SPECIAL PROVISIONS FOR TER17 MINATIONS OF CONTRACTS.—

18 (1) FISCAL INTERMEDIARIES.—Section 1816 of

19 the Social Security Act (42 U.S.C. 1395h) is

20 amended—

21 (A) in subsection (b), in the matter pre22 ceding paragraph (1), by striking ‘‘or renew’’;

23 (B) in subsection (c)(1), in the last sen24 tence, by striking ‘‘or renewing’’; and

25 (C) by repealing subsection (g).
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•S 1135 IS

1 (2) CARRIERS.—Section 1842(b) of the Social

2 Security Act (42 U.S.C. 1395u(b)) is amended by

3 repealing paragraph (5).

4 (d) REPEAL OF FISCAL INTERMEDIARY REQUIRE5 MENTS THAT ARE NOT COST-EFFECTIVE.—Section

6 1816(f)(2) of the Social Security Act (42 U.S.C.

7 1395h(f)(2)) is amended—

8 (1) in the matter preceding subparagraph (A),

9 by striking ‘‘standards and criteria established

10 under’’ and inserting ‘‘contract performance require11 ments described in’’; and

12 (2) by striking subparagraph (A) and inserting

13 the following new subparagraph:

14 ‘‘(A) with respect to claims for services fur15 nished under this part by any provider of services

16 (as defined in section 1861(u)) other than a hos17 pital, whether such agency or organization is able to

18 process 75 percent of reconsiderations within 60

19 days and 90 percent of reconsiderations within 90

20 days; and’’.

21 (e) REPEAL OF COST REIMBURSEMENT REQUIRE22 MENTS.—

23 (1) FISCAL INTERMEDIARIES.—Section

24 1816(c)(1) of the Social Security Act (42 U.S.C.

25 1395h(c)(1)) is amended—
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•S 1135 IS

1 (A) in the first sentence—

2 (i) by striking the comma after ‘‘ap3 propriate’’ and inserting ‘‘and’’; and

4 (ii) by striking ‘‘, and shall provide

5 for payment’’ and all that follows before

6 the period; and

7 (B) by striking the second and third sen8 tences.

9 (2) CARRIERS.—Section 1842(c)(1) of the So10 cial Security Act (42 U.S.C. 1395u(c)(1)) is

11 amended—

12 (A) in the first sentence—

13 (i) by striking ‘‘section shall provide’’

14 and inserting ‘‘section may provide’’; and

15 (ii) by striking ‘‘, and shall provide’’

16 and all that follows before the period; and

17 (B) by striking the second and third sen18 tences.

19 (3) CONFORMING AMENDMENT TO DEFICIT RE20 DUCTION ACT.—Subsection (a) of section 2326 of

21 the Deficit Reduction Act of 1984 (42 U.S.C. 1395h

22 note) is repealed.

23 (f) SECRETARIAL FLEXIBILITY WITH RESPECT TO

24 RENEWING CONTRACTS AND TRANSFER OF FUNC25 TIONS.—
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•S 1135 IS

1 (1) FISCAL INTERMEDIARIES.—Section 1816(c)

2 of the Social Security Act (42 U.S.C. 1395h(c)) is

3 amended by adding at the end the following:

4 ‘‘(4)(A) Except as provided in laws with general ap5 plicability to Federal acquisition and procurement or in

6 subparagraph (B), the Secretary shall use competitive pro7 cedures when entering into contracts under this section.

8 ‘‘(B)(i) The Secretary may renew a contract with a

9 fiscal intermediary under this section from term to term

10 without regard to section 5 of title 41, United States Code,

11 or any other provision of law requiring competition, if the

12 fiscal intermediary has met or exceeded the performance

13 requirements established in the current contract.

14 ‘‘(ii) Functions may be transferred among fiscal

15 intermediaries without regard to any provision of law re16 quiring competition. However, the Secretary shall ensure

17 that performance quality is considered in such transfers.’’.

18 (2) CARRIERS.—Section 1842(b)(1) of the So19 cial Security Act (42 U.S.C. 1395u(b)(1)) is amend20 ed to read as follows:

21 ‘‘(b)(1)(A) Except as provided in laws with general

22 applicability to Federal acquisition and procurement or in

23 subparagraph (B), the Secretary shall use competitive pro24 cedures when entering into contracts under this section.
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•S 1135 IS

1 ‘‘(B)(i) The Secretary may renew a contract with a

2 carrier under subsection (a) from term to term without

3 regard to section 5 of title 41, United States Code, or any

4 other provision of law requiring competition, if the carrier

5 has met or exceeded the performance requirements estab6 lished in the current contract.

7 ‘‘(ii) Functions may be transferred among carriers

8 without regard to any provision of law requiring competi9 tion. However, the Secretary shall ensure that perform10 ance quality is considered in such transfers.’’.

11 (g) WAIVER OF COMPETITIVE REQUIREMENTS FOR

12 INITIAL CONTRACTS.—Contracts that have periods that

13 begin before or during the 1-year period that begins on

14 the first day of the fourth calendar month that begins

15 after the date of enactment of this Act may be entered

16 into under section 1816(a) or 1842(a) of the Social Secu17 rity Act (42 U.S.C. 1395h(a) and 1395u(a)) without re18 gard to any provision of law requiring the use of competi19 tive procedures.

20 (h) EFFECTIVE DATES.—

21 (1) IN GENERAL.—Except as provided in para22 graphs (2) and (3), the amendments made by this

23 section apply to contracts that have periods begin24 ning after the third calendar month that begins

25 after the date of enactment of this Act.
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•S 1135 IS

1 (2) ELIMINATION OF SPECIAL PROVISIONS FOR

2 TERMINATIONS OF CONTRACTS.—The amendments

3 made by subsection (c) apply to contracts that have

4 periods ending on or after the end of the third cal5 endar month that begins after the date of enactment

6 of this Act.

7 (3) SECRETARIAL FLEXIBILITY WITH RESPECT

8 TO RENEWING CONTRACTS AND TRANSFER OF FUNC9 TIONS.—The amendments made by subsection (f)

10 apply to contracts that have periods that begin after

11 the end of the 1-year period specified in subsection

12 (g).

13 TITLE II—MEDICARE+CHOICE

14 COMPETITION

15 SEC. 201. REVISION OF MEDICARE+CHOICE COMPETITIVE

16 BIDDING DEMONSTRATION PROJECT.

17 (a) AREAS IN FLORIDA.—Section 4011 of the Bal18 anced Budget Act of 1997 (42 U.S.C. 1395w–23 note)

19 is amended—

20 (1) by striking subsection (b)(2)(B) and insert21 ing the following:

22 ‘‘(B) LOCATION OF DESIGNATION.—Of the

23 4 areas recommended under subparagraph

24 (A)—

25 ‘‘(i) 2 shall be in Florida; and
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•S 1135 IS

1 ‘‘(ii) 3 shall be in urban areas and 1

2 shall be in a rural area.’’; and

3 (2) in subsection (c), by adding at the end the

4 following new paragraph:

5 ‘‘(3) IMPLEMENTATION OF PROJECT IN AREAS

6 IN FLORIDA.—The Secretary shall ensure that the

7 areas in Florida designated pursuant to subsection

8 (b)(2)(B)(i) be the first 2 areas in which the project

9 is implemented.’’.

10 (b) BUDGET NEUTRALITY DURING 5-FISCAL-YEAR

11 PERIOD.—Section 4011(g) of the Balanced Budget Act of

12 1997 (42 U.S.C. 1395w–23 note) is amended—

13 (1) by striking ‘‘for a fiscal year’’ and inserting

14 ‘‘for any 5-fiscal-year period’’; and

15 (2) by inserting ‘‘for such period’’ after

16 ‘‘4001,’’.

17 (c) EFFECTIVE DATE.—The amendments made by

18 this section shall take effect as if included in the enact19 ment of section 533 of the Medicare, Medicaid, and

20 SCHIP Balanced Budget Refinement Act of 1999 (Appen21 dix F, 113 Stat. 1501A–389), as enacted into law by sec22 tion 1000(a)(6) of Public Law 106–113.
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1 TITLE III—MEDICARE OUT2 PATIENT PRESCRIPTION

3 DRUG BENEFIT PROGRAM

4 SEC. 301. MEDICARE OUTPATIENT PRESCRIPTION DRUG

5 BENEFIT PROGRAM.

6 (a) ESTABLISHMENT.—Title XVIII of the Social Se7 curity Act (42 U.S.C. 1395 et seq.) is amended by redesig8 nating part D as part E and by inserting after part C

9 the following new part:

10 ‘‘PART D—OUTPATIENT PRESCRIPTION DRUG BENEFIT

11 PROGRAM

12 ‘‘DEFINITIONS

13 ‘‘SEC. 1860. In this part:

14 ‘‘(1) COVERED OUTPATIENT DRUG.—

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

16 subparagraph (B), the term ‘covered outpatient

17 drug’ means any of the following products:

18 ‘‘(i) A drug which may be dispensed

19 only upon prescription, and—

20 ‘‘(I) which is approved for safety

21 and effectiveness as a prescription

22 drug under section 505 of the Federal

23 Food, Drug, and Cosmetic Act;

24 ‘‘(II)(aa) which was commercially

25 used or sold in the United States be-
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•S 1135 IS

1 fore the date of enactment of the

2 Drug Amendments of 1962 or which

3 is identical, similar, or related (within

4 the meaning of section 310.6(b)(1) of

5 title 21 of the Code of Federal Regu6 lations) to such a drug, and (bb)

7 which has not been the subject of a

8 final determination by the Secretary

9 that it is a ‘new drug’ (within the

10 meaning of section 201(p) of the Fed11 eral Food, Drug, and Cosmetic Act)

12 or an action brought by the Secretary

13 under section 301, 302(a), or 304(a)

14 of such Act to enforce section 502(f)

15 or 505(a) of such Act; or

16 ‘‘(III)(aa) which is described in

17 section 107(c)(3) of the Drug Amend18 ments of 1962 and for which the Sec19 retary has determined there is a com20 pelling justification for its medical

21 need, or is identical, similar, or re22 lated (within the meaning of section

23 310.6(b)(1) of title 21 of the Code of

24 Federal Regulations) to such a drug,

25 and (bb) for which the Secretary has
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•S 1135 IS

1 not issued a notice of an opportunity

2 for a hearing under section 505(e) of

3 the Federal Food, Drug, and Cos4 metic Act on a proposed order of the

5 Secretary to withdraw approval of an

6 application for such drug under such

7 section because the Secretary has de8 termined that the drug is less than ef9 fective for all conditions of use pre10 scribed, recommended, or suggested in

11 its labeling.

12 ‘‘(ii) A biological product which—

13 ‘‘(I) may only be dispensed upon

14 prescription;

15 ‘‘(II) is licensed under section

16 351 of the Public Health Service Act;

17 and

18 ‘‘(III) is produced at an estab19 lishment licensed under such section

20 to produce such product.

21 ‘‘(iii) Insulin approved under appro22 priate Federal law, including needles, sy23 ringes, and disposable pumps for the ad24 ministration of such insulin.
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•S 1135 IS

1 ‘‘(iv) A prescribed drug or biological

2 product that would meet the requirements

3 of clause (i) or (ii) except that it is avail4 able over-the-counter in addition to being

5 available upon prescription.

6 ‘‘(B) EXCLUSION.—The term ‘covered out7 patient drug’ does not include any product—

8 ‘‘(i) except as provided in subpara9 graph (A)(iv), which may be distributed to

10 individuals without a prescription;

11 ‘‘(ii) for which payment is available

12 under part A or B or would be available

13 under part B but for the application of a

14 deductible under such part (unless pay15 ment for such product is not available be16 cause benefits under part A or B have

17 been exhausted), determined without re18 gard to whether the beneficiary involved is

19 entitled to benefits under part A or en20 rolled under part B; or

21 ‘‘(iii) except for agents used to pro22 mote smoking cessation, for which cov23 erage may be excluded or restricted under

24 section 1927(d)(2).
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1 ‘‘(2) ELIGIBLE BENEFICIARY.—The term ‘eligi2 ble beneficiary’ means an individual that is entitled

3 to benefits under part A or enrolled under part B.

4 ‘‘(3) ELIGIBLE ENTITY.—The term ‘eligible en5 tity’ means any entity that the Secretary determines

6 to be appropriate to provide eligible beneficiaries

7 with covered outpatient drugs under a plan under

8 this part, including—

9 ‘‘(A) a pharmacy benefit management com10 pany;

11 ‘‘(B) a retail pharmacy delivery system;

12 ‘‘(C) a health plan or insurer;

13 ‘‘(D) a State (through mechanisms estab14 lished under a State plan under title XIX);

15 ‘‘(E) any other entity approved by the Sec16 retary; or

17 ‘‘(F) any combination of the entities de18 scribed in subparagraphs (A) through (E) if the

19 Secretary determines that such combination—

20 ‘‘(i) increases the scope or efficiency

21 of the provision of benefits under this part;

22 and

23 ‘‘(ii) is not anticompetitive.

24 ‘‘(4) MEDICARE+CHOICE ORGANIZATION;

25 MEDICARE+CHOICE PLAN.—The terms
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1 ‘Medicare+Choice organization’ and

2 ‘Medicare+Choice plan’ have the meanings given

3 such terms in subsections (a)(1) and (b)(1), respec4 tively, of section 1859 (relating to definitions relat5 ing to Medicare+Choice organizations).

6 ‘‘(5) PRESCRIPTION DRUG ACCOUNT.—The

7 term ‘Prescription Drug Account’ means the Pre8 scription Drug Account (as established under section

9 1860J) in the Federal Supplementary Medical In10 surance Trust Fund under section 1841.

11 ‘‘ESTABLISHMENT OF OUTPATIENT PRESCRIPTION DRUG

12 BENEFIT PROGRAM

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

14 ‘‘(1) IN GENERAL.—Beginning in 2004, the

15 Secretary shall provide for and administer an out16 patient prescription drug benefit program under

17 which each eligible beneficiary enrolled under this

18 part shall be provided with coverage of covered out19 patient drugs as follows:

20 ‘‘(A) MEDICARE+CHOICE PLAN.—If the el21 igible beneficiary is eligible to enroll in a

22 Medicare+Choice plan, the beneficiary may en23 roll in such a plan and obtain coverage of cov24 ered outpatient drugs through such plan.

25 ‘‘(B) MEDICARE PRESCRIPTION DRUG

26 PLAN.—If the eligible beneficiary is not enrolled
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1 in a Medicare+Choice plan, the beneficiary

2 shall obtain coverage of covered outpatient

3 drugs through enrollment in a plan offered by

4 an eligible entity with a contract under this

5 part.

6 ‘‘(2) VOLUNTARY NATURE OF PROGRAM.—

7 Nothing in this part shall be construed as requiring

8 an eligible beneficiary to enroll in the program es9 tablished under this part.

10 ‘‘(3) SCOPE OF BENEFITS.—The program es11 tablished under this part shall provide for coverage

12 of all therapeutic classes of covered outpatient

13 drugs.

14 ‘‘(b) ACCESS TO ALTERNATIVE PRESCRIPTION DRUG

15 COVERAGE.—In the case of an eligible beneficiary who has

16 creditable prescription drug coverage (as defined in section

17 1860B(a)(2)(A)(vi)), such beneficiary—

18 ‘‘(1) may continue to receive such coverage and

19 not enroll under this part; and

20 ‘‘(2) pursuant to section 1860B(a)(2)(A)(iii), is

21 permitted to subsequently enroll under this part

22 without any penalty and obtain coverage of covered

23 outpatient drugs in the manner described in sub24 section (a) if the beneficiary involuntarily loses such

25 coverage.
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1 ‘‘(c) FINANCING.—The costs of providing benefits

2 under this part shall be payable from the Prescription

3 Drug Account.

4 ‘‘ENROLLMENT

5 ‘‘SEC. 1860B. (a) ENROLLMENT UNDER THIS

6 PART.—

7 ‘‘(1) ESTABLISHMENT OF PROCESS.—

8 ‘‘(A) IN GENERAL.—The Secretary shall

9 establish a process through which an eligible

10 beneficiary (including an eligible beneficiary en11 rolled in a Medicare+Choice plan offered by a

12 Medicare+Choice organization) may make an

13 election to enroll under this part. Such process

14 shall be similar to the process for enrollment in

15 part B under section 1837, including the deem16 ing provisions of such section.

17 ‘‘(B) REQUIREMENT OF ENROLLMENT.—

18 An eligible beneficiary must enroll under this

19 part in order to be eligible to receive covered

20 outpatient drugs under this title.

21 ‘‘(2) ENROLLMENT PROCEDURES.—

22 ‘‘(A) LATE ENROLLMENT PENALTY.—

23 ‘‘(i) IN GENERAL.—Subject to the

24 succeeding provisions of this subparagraph,

25 in the case of an eligible beneficiary whose

26 coverage period under this part began pur-
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•S 1135 IS

1 suant to an enrollment after the bene2 ficiary’s initial enrollment period under

3 part B (determined pursuant to section

4 1837(d)) and not pursuant to the open en5 rollment period described in subparagraph

6 (B), the Secretary shall establish proce7 dures for increasing the amount of the

8 monthly part D premium under section

9 1860D applicable to such beneficiary—

10 ‘‘(I) by an amount that is equal

11 to 10 percent of such premium for

12 each full 12-month period (in the

13 same continuous period of eligibility)

14 in which the eligible beneficiary could

15 have been enrolled under this part but

16 was not so enrolled; or

17 ‘‘(II) if determined appropriate

18 by the Secretary, by an amount that

19 the Secretary determines is actuarily

20 sound for each such period.

21 ‘‘(ii) PERIODS TAKEN INTO AC22 COUNT.—For purposes of calculating any

23 12-month period under clause (i), there

24 shall be taken into account—
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•S 1135 IS

1 ‘‘(I) the months which elapsed

2 between the close of the eligible bene3 ficiary’s initial enrollment period and

4 the close of the enrollment period in

5 which the beneficiary enrolled; and

6 ‘‘(II) in the case of an eligible

7 beneficiary who reenrolls under this

8 part, the months which elapsed be9 tween the date of termination of a

10 previous coverage period and the close

11 of the enrollment period in which the

12 beneficiary reenrolled.

13 ‘‘(iii) PERIODS NOT TAKEN INTO AC14 COUNT.—

15 ‘‘(I) IN GENERAL.—For purposes

16 of calculating any 12-month period

17 under clause (i), subject to subclause

18 (II), there shall not be taken into ac19 count months for which the eligible

20 beneficiary can demonstrate that the

21 beneficiary had creditable prescription

22 drug coverage (as defined in subpara23 graph (vi)).

24 ‘‘(II) APPLICATION.—This clause

25 shall only apply with respect to a cov-
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•S 1135 IS

1 erage period the enrollment for which

2 occurs before the end of the 60-day

3 period that begins on the first day of

4 the month which includes—

5 ‘‘(aa) in the case of a bene6 ficiary with coverage described in

7 subclause (II) of clause (vi), the

8 date on which the plan termi9 nates, ceases to provide, or re10 duces the value of the prescrip11 tion drug coverage under such

12 plan to below the actuarial value

13 of the coverage provided under

14 the program under this part; or

15 ‘‘(bb) in the case of a bene16 ficiary with coverage described in

17 subclause (I), (III), or (IV) of

18 clause (vi), the date on which the

19 beneficiary loses eligibility for

20 such coverage.

21 ‘‘(iv) PERIODS TREATED SEPA22 RATELY.—Any increase in an eligible bene23 ficiary’s monthly part D premium under

24 clause (i) with respect to a particular con25 tinuous period of eligibility shall not be ap-
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•S 1135 IS

1 plicable with respect to any other contin2 uous period of eligibility which the bene3 ficiary may have.

4 ‘‘(v) CONTINUOUS PERIOD OF ELIGI5 BILITY.—

6 ‘‘(I) IN GENERAL.—Subject to

7 subclause (II), for purposes of this

8 subparagraph, an eligible beneficiary’s

9 ‘continuous period of eligibility’ is the

10 period that begins with the first day

11 on which the beneficiary is eligible to

12 enroll under section 1836 and ends

13 with the beneficiary’s death.

14 ‘‘(II) SEPARATE PERIOD.—Any

15 period during all of which an eligible

16 beneficiary satisfied paragraph (1) of

17 section 1836 and which terminated in

18 or before the month preceding the

19 month in which the beneficiary at20 tained age 65 shall be a separate ‘con21 tinuous period of eligibility’ with re22 spect to the beneficiary (and each

23 such period which terminates shall be

24 deemed not to have existed for pur-
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•S 1135 IS

1 poses of subsequently applying this

2 subparagraph).

3 ‘‘(vi) CREDITABLE PRESCRIPTION

4 DRUG COVERAGE DEFINED.—For purposes

5 of this part, the term ‘creditable prescrip6 tion drug coverage’ means any of the fol7 lowing:

8 ‘‘(I) MEDICAID PRESCRIPTION

9 DRUG COVERAGE.—Prescription drug

10 coverage under a medicaid plan under

11 title XIX, including through the Pro12 gram of All-inclusive Care for the El13 derly (PACE) under section 1934 and

14 through a social health maintenance

15 organization (referred to in section

16 4104(c) of the Balanced Budget Act

17 of 1997).

18 ‘‘(II) PRESCRIPTION DRUG COV19 ERAGE UNDER A GROUP HEALTH

20 PLAN.—Prescription drug coverage

21 under a group health plan, including a

22 health benefits plan under the Federal

23 Employees Health Benefit Program

24 under chapter 89 of title 5, United

25 States Code, and a qualified retiree
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•S 1135 IS

1 prescription drug plan as defined in

2 section 1860I(e)(3), that provides cov3 erage of the cost of prescription drugs

4 the actuarial value of which (as de5 fined by the Secretary) to the bene6 ficiary equals or exceeds the actuarial

7 value of the benefits provided to an

8 individual enrolled in the outpatient

9 prescription drug benefit program

10 under this part.

11 ‘‘(III) STATE PHARMACEUTICAL

12 ASSISTANCE PROGRAM.—Coverage of

13 prescription drugs under a State

14 pharmaceutical assistance program.

15 ‘‘(IV) VETERANS’ COVERAGE OF

16 PRESCRIPTION DRUGS.—Coverage of

17 prescription drugs for veterans, and

18 survivors and dependents of veterans,

19 under chapter 17 of title 38, United

20 States Code.

21 ‘‘(B) OPEN ENROLLMENT PERIOD FOR

22 CURRENT BENEFICIARIES IN WHICH LATE EN23 ROLLMENT PROCEDURES DO NOT APPLY.—The

24 Secretary shall establish an applicable period,

25 which shall begin on the date on which the Sec-
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•S 1135 IS

1 retary first begins to accept elections for enroll2 ment under this part, during which any eligible

3 beneficiary may enroll under this part without

4 the application of the late enrollment proce5 dures established under subparagraph (A)(i).

6 ‘‘(3) PERIOD OF COVERAGE.—

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

8 subparagraph (B) and subject to subparagraph

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

10 program under this part shall be effective for

11 the period provided in section 1838, as if that

12 section applied to the program under this part.

13 ‘‘(B) OPEN ENROLLMENT.—Subject to

14 subparagraph (C), an eligible beneficiary who

15 enrolls under the program under this part pur16 suant to paragraph (2)(B) shall be entitled to

17 the benefits under this part beginning on the

18 first day of the month following the month in

19 which such enrollment occurs.

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

21 part shall not begin prior to January 1, 2004.

22 ‘‘(4) TERMINATION.—

23 ‘‘(A) IN GENERAL.—The causes of termi24 nation specified in section 1838 shall apply to
110

•S 1135 IS

1 this part in the same manner as such causes

2 apply to part B.

3 ‘‘(B) COVERAGE TERMINATED BY TERMI4 NATION OF COVERAGE UNDER PARTS A AND

5 B.—

6 ‘‘(i) IN GENERAL.—In addition to the

7 causes of termination specified in subpara8 graph (A), the Secretary shall terminate

9 an individual’s coverage under this part if

10 the individual is no longer enrolled in ei11 ther part A or B.

12 ‘‘(ii) EFFECTIVE DATE.—The termi13 nation described in clause (i) shall be effec14 tive on the effective date of termination of

15 coverage under part A or (if later) under

16 part B.

17 ‘‘(C) PROCEDURES REGARDING TERMI18 NATION OF A BENEFICIARY UNDER A PLAN.—

19 The Secretary shall establish procedures for de20 termining the status of an eligible beneficiary’s

21 enrollment under this part if the beneficiary’s

22 enrollment in a plan offered by an eligible enti23 ty under this part is terminated by the entity

24 for cause (pursuant to procedures established

25 by the Secretary under subsection (b)(1)).
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•S 1135 IS

1 ‘‘(b) ENROLLMENT IN A PLAN.—

2 ‘‘(1) PROCESS.—

3 ‘‘(A) IN GENERAL.—The Secretary shall

4 establish a process through which an eligible

5 beneficiary who is enrolled under this part but

6 not enrolled in a Medicare+Choice plan offered

7 by a Medicare+Choice organization shall make

8 an annual election to enroll in any plan offered

9 by an eligible entity that has been awarded a

10 contract under this part and serves the geo11 graphic area in which the beneficiary resides.

12 ‘‘(B) RULES.—In establishing the process

13 under subparagraph (A), the Secretary shall—

14 ‘‘(i) use rules similar to the rules for

15 enrollment, disenrollment, and termination

16 of enrollment with a Medicare+Choice

17 plan under section 1851, including—

18 ‘‘(I) the establishment of special

19 election periods under subsection

20 (e)(4) of such section; and

21 ‘‘(II) the application of the guar22 anteed issue and renewal provisions of

23 section 1851(g) (other than para24 graph (3)(C)(i), relating to default en25 rollment); and
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•S 1135 IS

1 ‘‘(ii) coordinate enrollments,

2 disenrollments, and terminations of enroll3 ment under part C with enrollments,

4 disenrollments, and terminations of enroll5 ment under this part.

6 ‘‘(2) MEDICARE+CHOICE ENROLLEES.—An eli7 gible beneficiary who is enrolled under this part and

8 enrolled in a Medicare+Choice plan offered by a

9 Medicare+Choice organization shall receive coverage

10 of covered outpatient drugs under this part through

11 such plan.

12 ‘‘(c) FIRST ENROLLMENT PERIOD.—The processes

13 developed under subsections (a) and (b) shall ensure that

14 eligible beneficiaries are permitted to enroll under this

15 part and with an eligible entity prior to January 1, 2004,

16 in order to ensure that coverage under this part is effective

17 as of such date.

18 ‘‘(d) ENROLLMENT IN A MEDICARE+CHOICE

19 PLAN.—Enrollment in a Medicare+Choice plan is subject

20 to the rules for enrollment in such plan under section

21 1851.

22 ‘‘PROVIDING INFORMATION TO BENEFICIARIES

23 ‘‘SEC. 1860C. (a) ACTIVITIES.—

24 ‘‘(1) IN GENERAL.—The Secretary shall con25 duct activities that are designed to broadly dissemi26 nate information to eligible beneficiaries (and pro-
113

•S 1135 IS

1 spective eligible beneficiaries) regarding the coverage

2 provided under this part.

3 ‘‘(2) SPECIAL RULE FOR FIRST ENROLLMENT

4 UNDER THE PROGRAM.—To the extent practicable,

5 the activities described in paragraph (1) shall ensure

6 that eligible beneficiaries are provided with such in7 formation at least 30 days prior to the first enroll8 ment period described in section 1860B(c).

9 ‘‘(b) REQUIREMENTS.—

10 ‘‘(1) IN GENERAL.—The activities described in

11 subsection (a) shall—

12 ‘‘(A) be similar to the activities performed

13 by the Secretary under section 1851(d);

14 ‘‘(B) be coordinated with the activities per15 formed by the Secretary under such section and

16 under section 1804; and

17 ‘‘(C) provide for the dissemination of infor18 mation comparing the plans offered by eligible

19 entities under this part that are available to eli20 gible beneficiaries residing in an area.

21 ‘‘(2) COMPARATIVE INFORMATION.—The com22 parative information described in paragraph (1)(C)

23 shall include a comparison of the following:

24 ‘‘(A) BENEFITS.—The benefits provided

25 under the plan, including the prices bene-
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•S 1135 IS

1 ficiaries will be charged for covered outpatient

2 drugs, any preferred pharmacy networks used

3 by the eligible entity under the plan, and the

4 formularies and appeals processes under the

5 plan.

6 ‘‘(B) QUALITY AND PERFORMANCE.—To

7 the extent available, the quality and perform8 ance of the eligible entity offering the plan.

9 ‘‘(C) BENEFICIARY COST-SHARING.—The

10 cost-sharing required of eligible beneficiaries

11 under the plan.

12 ‘‘(D) CONSUMER SATISFACTION SUR13 VEYS.—To the extent available, the results of

14 consumer satisfaction surveys regarding the

15 plan and the eligible entity offering such plan.

16 ‘‘(E) ADDITIONAL INFORMATION.—Such

17 additional information as the Secretary may

18 prescribe.

19 ‘‘(3) INFORMATION STANDARDS.—The Sec20 retary shall develop standards to ensure that the in21 formation provided to eligible beneficiaries under

22 this part is complete, accurate, and uniform.

23 ‘‘(c) USE OF MEDICARE CONSUMER COALITIONS TO

24 PROVIDE INFORMATION.—
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•S 1135 IS

1 ‘‘(1) IN GENERAL.—The Secretary may con2 tract with Medicare Consumer Coalitions to conduct

3 the informational activities—

4 ‘‘(A) under this section;

5 ‘‘(B) under section 1851(d); and

6 ‘‘(C) under section 1804.

7 ‘‘(2) SELECTION OF COALITIONS.—If the Sec8 retary determines the use of Medicare Consumer

9 Coalitions to be appropriate, the Secretary shall—

10 ‘‘(A) develop and disseminate, in such

11 areas as the Secretary determines appropriate,

12 a request for proposals for Medicare Consumer

13 Coalitions to contract with the Secretary in

14 order to conduct any of the informational ac15 tivities described in paragraph (1); and

16 ‘‘(B) select a proposal of a Medicare Con17 sumer Coalition to conduct the informational

18 activities in each such area, with a preference

19 for broad participation by organizations with

20 experience in providing information to bene21 ficiaries under this title.

22 ‘‘(3) PAYMENT TO MEDICARE CONSUMER COA23 LITIONS.—The Secretary shall make payments to

24 Medicare Consumer Coalitions contracting under
116

•S 1135 IS

1 this subsection in such amounts and in such manner

2 as the Secretary determines appropriate.

3 ‘‘(4) AUTHORIZATION OF APPROPRIATIONS.—

4 There are authorized to be appropriated to the Sec5 retary such sums as may be necessary to contract

6 with Medicare Consumer Coalitions under this sec7 tion.

8 ‘‘(5) MEDICARE CONSUMER COALITION DE9 FINED.—In this subsection, the term ‘Medicare Con10 sumer Coalition’ means an entity that is a nonprofit

11 organization operated under the direction of a board

12 of directors that is primarily composed of bene13 ficiaries under this title.

14 ‘‘PREMIUMS

15 ‘‘SEC. 1860D. (a) ANNUAL ESTABLISHMENT OF

16 MONTHLY PART D PREMIUM RATES.—

17 ‘‘(1) IN GENERAL.—The Secretary shall, during

18 September of each year (beginning in 2003), deter19 mine and promulgate a monthly part D premium

20 rate for the succeeding year in accordance with the

21 provisions of this subsection.

22 ‘‘(2) ACTUARIAL DETERMINATIONS.—

23 ‘‘(A) DETERMINATION OF ANNUAL BEN24 EFIT AND ADMINISTRATIVE COSTS.—The Sec25 retary shall estimate annually for the suc26 ceeding year the amount equal to the total of
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•S 1135 IS

1 the benefits and administrative costs that will

2 be payable from the Prescription Drug Account

3 for providing covered outpatient drugs in such

4 calendar year with respect to enrollees in the

5 program under this part.

6 ‘‘(B) DETERMINATION OF MONTHLY PART

7 D PREMIUM RATES.—

8 ‘‘(i) IN GENERAL.—The Secretary

9 shall determine the monthly part D pre10 mium rate for such succeeding year, which

shall be 1 11 ⁄12 of the applicable share of—

12 ‘‘(I) the amount determined

13 under subparagraph (A); divided by

14 ‘‘(II) the total number of enroll15 ees under this part,

16 rounded (if such rate is not a multiple of

17 10 cents) to the nearest multiple of 10

18 cents.

19 ‘‘(ii) DEFINITION OF APPLICABLE

20 SHARE.—For purposes of clause (i), the

21 term ‘applicable share’ means—

22 ‘‘(I) one-half, in the case of pre23 miums paid by an eligible beneficiary

24 enrolled in the program under this

25 part; and
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•S 1135 IS

1 ‘‘(II) two-thirds, in the case of

2 premiums paid for such a beneficiary

3 by an employer (as defined in section

4 1860I(e)(2)) with which the bene5 ficiary was formerly employed.

6 ‘‘(3) PUBLICATION OF ASSUMPTIONS.—The

7 Secretary shall publish, together with the promulga8 tion of the monthly part D premium rates for the

9 succeeding year, a statement setting forth the actu10 arial assumptions and bases employed in arriving at

11 the amounts and rates determined under paragraphs

12 (1) and (2).

13 ‘‘(4) COLLECTION OF PART D PREMIUM.—The

14 monthly part D premium applicable to an eligible

15 beneficiary under this part (after application of any

16 increase under subsection (b) or under section

17 1860B(a)(2)(A)) shall be collected and credited to

18 the Prescription Drug Account in the same manner

19 as the monthly premium determined under section

20 1839 is collected and credited to the Federal Supple21 mentary Medical Insurance Trust Fund under sec22 tion 1840.

23 ‘‘(b) SLIDING SCALE PREMIUM.—

24 ‘‘(1) INCREASE.—

25 ‘‘(A) AMOUNT.—
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•S 1135 IS

1 ‘‘(i) IN GENERAL.—Except as pro2 vided in paragraph (4), in the case of an

3 eligible beneficiary whose modified ad4 justed gross income for a taxable year end5 ing with or within a calendar year (as ini6 tially determined by the Secretary in ac7 cordance with paragraph (2)) exceeds the

8 threshold amount, the Secretary shall in9 crease the amount of the monthly part D

10 premium for such individual established

11 under subsection (a) by an amount which

12 bears the same ratio to such premium as

13 such excess bears to an amount equal to

1 14 ⁄3 of the applicable threshold amount

15 under subparagraph (B).

16 ‘‘(ii) LIMITATION.—In no event shall

17 the increase described in clause (i) exceed

18 an amount equal to 50 percent of the

19 monthly part D premium established under

20 subsection (a).

21 ‘‘(B) DEFINITION OF THRESHOLD

22 AMOUNT.—For purposes of this subsection, the

23 term ‘threshold amount’ means—

24 ‘‘(i) except as otherwise provided in

25 this subparagraph, $75,000;
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•S 1135 IS

1 ‘‘(ii) $150,000 in the case of a joint

2 return; and

3 ‘‘(iii) zero in the case of a taxpayer

4 who—

5 ‘‘(I) is married at the close of the

6 taxable year but does not file a joint

7 return for such year; and

8 ‘‘(II) does not live apart from his

9 spouse at all times during the taxable

10 year.

11 ‘‘(C) INFLATION ADJUSTMENT FOR

12 THRESHOLD AMOUNT.—

13 ‘‘(i) IN GENERAL.—In the case of any

14 calendar year beginning after 2004, each

15 of the dollar amounts in clauses (i) and (ii)

16 of subparagraph (B) shall be increased by

17 an amount equal to—

18 ‘‘(I) such dollar amount, multi19 plied by

20 ‘‘(II) the percentage (if any) by

21 which the average of the Consumer

22 Price Index for all urban consumers

23 (United States city average) for the

24 12-month period ending with June of

25 the preceding calendar year, exceeds
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•S 1135 IS

1 such average for the 12-month period

2 ending with June 2003.

3 ‘‘(ii) ROUNDING.—If any dollar

4 amount after being increased under clause

5 (i) is not a multiple of $5, such dollar

6 amount shall be rounded to the nearest

7 multiple of $5.

8 ‘‘(D) DEFINITION OF MODIFIED ADJUSTED

9 GROSS INCOME.—For purposes of this sub10 section, the term ‘modified adjusted gross in11 come’ means adjusted gross income (as defined

12 in section 62 of the Internal Revenue Code of

13 1986)—

14 ‘‘(i) determined without regard to sec15 tions 135, 911, 931, and 933 of such

16 Code; and

17 ‘‘(ii) increased by the amount of inter18 est received or accrued by the taxpayer

19 during the taxable year which is exempt

20 from tax under such Code.

21 ‘‘(E) DEFINITION OF JOINT RETURN.—

22 For purposes of this subsection, the term ‘joint

23 return’ has the meaning given the term in sec24 tion 7701(a)(38) of the Internal Revenue Code

25 of 1986.
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•S 1135 IS

1 ‘‘(2) DETERMINATION OF MODIFIED ADJUSTED

2 GROSS INCOME.—The Secretary shall make an initial

3 determination of the amount of an eligible bene4 ficiary’s modified adjusted gross income for a tax5 able year ending with or within a calendar year for

6 purposes of this subsection as follows:

7 ‘‘(A) NOTICE.—Not later than September

8 1 of the year preceding the year, the Secretary

9 shall provide notice to each eligible beneficiary

10 whom the Secretary finds (on the basis of the

11 beneficiary’s actual modified adjusted gross in12 come for the most recent taxable year for which

13 such information is available or other informa14 tion provided to the Secretary by the Secretary

15 of the Treasury) will be subject to an increase

16 under this subsection that the beneficiary will

17 be subject to such an increase, and shall include

18 in such notice the Secretary’s estimate of the

19 beneficiary’s modified adjusted gross income for

20 the year.

21 ‘‘(B) CALCULATION BASED ON INFORMA22 TION PROVIDED BY BENEFICIARY.—If, during

23 the 60-day period beginning on the date notice

24 is provided to an eligible beneficiary under sub25 paragraph (A), the beneficiary provides the Sec-
123

•S 1135 IS

1 retary with appropriate information (as deter2 mined by the Secretary) on the beneficiary’s an3 ticipated modified adjusted gross income for the

4 year, the amount initially determined by the

5 Secretary under this paragraph with respect to

6 the beneficiary shall be based on the informa7 tion provided by the beneficiary.

8 ‘‘(C) CALCULATION BASED ON NOTICE

9 AMOUNT IF NO INFORMATION IS PROVIDED BY

10 THE BENEFICIARY OR IF THE SECRETARY DE11 TERMINES THAT THE PROVIDED INFORMATION

12 IS NOT APPROPRIATE.—The amount initially

13 determined by the Secretary under this para14 graph with respect to an eligible beneficiary

15 shall be the amount included in the notice pro16 vided to the beneficiary under subparagraph

17 (A) if—

18 ‘‘(i) the beneficiary does not provide

19 the Secretary with information under sub20 paragraph (B); or

21 ‘‘(ii) the Secretary determines that

22 the information provided by the beneficiary

23 to the Secretary under such subparagraph

24 is not appropriate.

25 ‘‘(3) ADJUSTMENTS.—
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•S 1135 IS

1 ‘‘(A) IN GENERAL.—If the Secretary deter2 mines (on the basis of final information pro3 vided by the Secretary of the Treasury) that

4 the amount of an eligible beneficiary’s actual

5 modified adjusted gross income for a taxable

6 year ending with or within a calendar year is

7 less than or greater than the amount initially

8 determined by the Secretary under paragraph

9 (2), the Secretary shall increase or decrease the

10 amount of the beneficiary’s monthly part D pre11 mium under this part (as the case may be) for

12 months during the following calendar year by

an amount equal to 1 13 ⁄12 of the difference

14 between—

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

16 part D premiums paid by the beneficiary

17 under this part during the previous cal18 endar year; and

19 ‘‘(ii) the total amount of all such pre20 miums which would have been paid by the

21 beneficiary during the previous calendar

22 year if the amount of the beneficiary’s

23 modified adjusted gross income initially de24 termined under paragraph (2) were equal

25 to the actual amount of the beneficiary’s
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•S 1135 IS

1 modified adjusted gross income determined

2 under this paragraph.

3 ‘‘(B) INTEREST.—

4 ‘‘(i) INCREASE.—In the case of an eli5 gible beneficiary for whom the amount ini6 tially determined by the Secretary under

7 paragraph (2) is based on information pro8 vided by the beneficiary under subpara9 graph (B) of such paragraph, if the Sec10 retary determines under subparagraph (A)

11 that the amount of the beneficiary’s actual

12 modified adjusted gross income for a tax13 able year is greater than the amount ini14 tially determined under paragraph (2), the

15 Secretary shall increase the amount other16 wise determined for the year under sub17 paragraph (A) by an amount of interest

18 equal to the sum of the amounts deter19 mined under clause (ii) for each of the

20 months described in such clause.

21 ‘‘(ii) COMPUTATION.—Interest shall

22 be computed for any month in an amount

23 determined by applying the underpayment

24 rate established under section 6621 of the

25 Internal Revenue Code of 1986 (com-
126

•S 1135 IS

1 pounded daily) to any portion of the dif2 ference between the amount initially deter3 mined under paragraph (2) and the

4 amount determined under subparagraph

5 (A) for the period beginning on the first

6 day of the month beginning after the eligi7 ble beneficiary provided information to the

8 Secretary under subparagraph (B) of para9 graph (2) and ending 30 days before the

10 first month for which the beneficiary’s

11 monthly part D premium is increased

12 under this paragraph.

13 ‘‘(iii) EXCEPTION.—Interest shall not

14 be imposed under this subparagraph if the

15 amount of the eligible beneficiary’s modi16 fied adjusted gross income provided by the

17 beneficiary under subparagraph (B) of

18 paragraph (2) was not less than the bene19 ficiary’s modified adjusted gross income

20 determined on the basis of information

21 shown on the return of tax imposed by

22 chapter 1 of the Internal Revenue Code of

23 1986 for the taxable year involved.

24 ‘‘(C) STEPS TO RECOVER AMOUNTS DUE

25 FROM PREVIOUSLY ENROLLED BENE-
127

•S 1135 IS

1 FICIARIES.—In the case of an eligible bene2 ficiary who is not enrolled under this part for

3 any calendar year for which the beneficiary’s

4 monthly part D premium under this part for

5 months during the year would be increased pur6 suant to subparagraph (A) if the beneficiary

7 were enrolled under this part for the year, the

8 Secretary may take such steps as the Secretary

9 considers appropriate to recover from the bene10 ficiary the total amount by which the bene11 ficiary’s monthly part D premium under this

12 part for months during the year would have

13 been increased under subparagraph (A) if the

14 beneficiary were enrolled under this part for the

15 year.

16 ‘‘(D) DECEASED BENEFICIARY.—In the

17 case of a deceased eligible beneficiary for whom

18 the amount of the monthly part D premium

19 under this part for months in a year would have

20 been decreased pursuant to subparagraph (A) if

21 the beneficiary were not deceased, the Secretary

22 shall make a payment to the beneficiary’s sur23 viving spouse (or, in the case of an eligible ben24 eficiary who does not have a surviving spouse,
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•S 1135 IS

1 to the beneficiary’s estate) in an amount equal

2 to the difference between—

3 ‘‘(i) the total amount by which the

4 beneficiary’s premium would have been de5 creased for all months during the year pur6 suant to subparagraph (A); and

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

8 beneficiary’s premium was decreased for

9 months during the year pursuant to sub10 paragraph (A).

11 ‘‘(4) WAIVER BY SECRETARY.—The Secretary

12 may waive the imposition of all or part of the in13 crease of the premium or all or part of any interest

14 due under this subsection for any period if the Sec15 retary determines that a gross injustice would other16 wise result without such waiver.

17 ‘‘(5) TRANSFER TO PRESCRIPTION DRUG AC18 COUNT.—The Secretary shall transfer amounts re19 ceived pursuant to this subsection to the Prescrip20 tion Drug Account.

21 ‘‘OUTPATIENT PRESCRIPTION DRUG BENEFITS

22 ‘‘SEC. 1860E. (a) REQUIREMENT.—A plan offered by

23 an eligible entity under this part shall provide eligible

24 beneficiaries enrolled in such plan with—
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1 ‘‘(1) coverage of covered outpatient prescription

2 drugs with the cost-sharing described in subsection

3 (b); and

4 ‘‘(2) access to negotiated prices for such drugs

5 under subsection (c).

6 ‘‘(b) COST-SHARING.—

7 ‘‘(1) DEDUCTIBLE.—

8 ‘‘(A) IN GENERAL.—Subject to subpara9 graph (B), there is an annual deductible that is

10 equal to $250.

11 ‘‘(B) WAIVER OF DEDUCTIBLE FOR GE12 NERIC DRUGS.—

13 ‘‘(i) IN GENERAL.—An eligible entity

14 offering a plan under this part may pro15 vide, with respect to such plan, that ge16 neric drugs are not subject to the deduct17 ible described in subparagraph (A) if the

18 Secretary determines that the waiver of the

19 deductible—

20 ‘‘(I) is tied to the performance

21 goals described in section

22 1860H(b)(1)(C); and

23 ‘‘(II) will not result in an in24 crease in the expenditures made from

25 the Prescription Drug Account.
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•S 1135 IS

1 ‘‘(ii) CREDIT FOR AMOUNTS PAID.—If

2 the deductible is waived pursuant to clause

3 (i), any coinsurance paid by an eligible

4 beneficiary for the generic drug shall be

5 credited toward the annual deductible.

6 ‘‘(2) COINSURANCE.—

7 ‘‘(A) ESTABLISHMENT.—

8 ‘‘(i) IN GENERAL.—Subject to sub9 paragraph (B) and subparagraphs (A)(i)

10 and (B) of section 1860G(b)(4), if any cov11 ered outpatient drug is provided to an eli12 gible beneficiary in a year after the bene13 ficiary has met any deductible requirement

14 under paragraph (1) for the year, the ben15 eficiary shall be responsible for making

16 payments for the drug in an amount equal

17 to the applicable percentage of the cost of

18 the drug.

19 ‘‘(ii) APPLICABLE PERCENTAGE DE20 FINED.—For purposes of clause (i), the

21 ‘applicable percentage’ means, with respect

22 to any covered outpatient drug provided to

23 an eligible beneficiary in a year—

24 ‘‘(I) 50 percent to the extent the

25 out-of-pocket expenses of the bene-
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•S 1135 IS

1 ficiary for such drug, when added to

2 the out-of-pocket expenses of the ben3 eficiary for covered outpatient drugs

4 previously provided in the year, do not

5 exceed $3,500;

6 ‘‘(II) 25 percent to the extent

7 such expenses, when so added, exceed

8 $3,500 but do not exceed $4,000; and

9 ‘‘(III) 0 percent to the extent

10 such expenses, when so added, would

11 exceed $4,000.

12 ‘‘(iii) OUT-OF-POCKET EXPENSES DE13 FINED.—For purposes of clause (ii), the

14 term ‘out-of-pocket expenses’ means ex15 penses incurred as a result of the applica16 tion of the deductible under paragraph (1)

17 and the coinsurance required under this

18 subsection.

19 ‘‘(B) REDUCTION BY ELIGIBLE ENTITY.—

20 An eligible entity offering a plan under this

21 part may reduce the applicable percentage that

22 an eligible beneficiary enrolled in the plan is

23 subject to under subparagraph (A) if the Sec24 retary determines that such reduction—
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•S 1135 IS

1 ‘‘(i) is tied to the performance goals

2 described in section 1860H(b)(1)(C); and

3 ‘‘(ii) will not result in an increase in

4 the expenditures made from the Prescrip5 tion Drug Account.

6 ‘‘(3) INFLATION ADJUSTMENT.—

7 ‘‘(A) IN GENERAL.—In the case of any cal8 endar year beginning after 2004, each of the

9 dollar amounts in paragraphs (1)(A) and

10 (2)(A)(ii) shall be increased by an amount equal

11 to—

12 ‘‘(i) such dollar amount, multiplied by

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

14 the amount of average per capita expendi15 tures under this part in the preceding cal16 endar year exceeds the amount of such ex17 penditures in 2004.

18 ‘‘(B) ROUNDING.—If any dollar amount

19 after being increased under subparagraph (A) is

20 not a multiple of $5, such dollar amount shall

21 be rounded to the nearest multiple of $5.

22 ‘‘(c) ACCESS TO NEGOTIATED PRICES.—Under a

23 plan offered by an eligible entity with a contract under

24 this part, the eligible entity offering such plan shall pro25 vide eligible beneficiaries enrolled in such plan with access
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•S 1135 IS

1 to negotiated prices (including applicable discounts) used

2 for payment for covered outpatient drugs, regardless of

3 the fact that no benefits or only partial benefits may be

4 payable under the coverage with respect to such drugs be5 cause of the application of the deductible under subsection

6 (b)(1) or the coinsurance under subsection (b)(2).

7 ‘‘ENTITIES ELIGIBLE TO PROVIDE OUTPATIENT DRUG

8 BENEFIT

9 ‘‘SEC. 1860F. (a) ESTABLISHMENT OF PANELS OF

10 PLANS AVAILABLE IN AN AREA.—

11 ‘‘(1) IN GENERAL.—The Secretary shall estab12 lish procedures under which the Secretary—

13 ‘‘(A) accepts bids submitted by eligible en14 tities for the plans which such entities intend to

15 offer in an area established under subsection

16 (b); and

17 ‘‘(B) awards contracts to such entities to

18 provide such plans to eligible beneficiaries in

19 the area.

20 ‘‘(2) COMPETITIVE PROCEDURES.—Competitive

21 procedures (as defined in section 4(5) of the Office

22 of Federal Procurement Policy Act (41 U.S.C.

23 403(5))) shall be used to enter into contracts under

24 this part.

25 ‘‘(b) AREA FOR CONTRACTS.—

26 ‘‘(1) REGIONAL BASIS.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B) and subject to paragraph (2),

3 the contract entered into between the Secretary

4 and an eligible entity with respect to a plan

5 shall require the eligible entity to provide cov6 erage of covered outpatient drugs under the

7 plan in a region determined by the Secretary

8 under paragraph (2).

9 ‘‘(B) PARTIAL REGIONAL BASIS.—

10 ‘‘(i) IN GENERAL.—If determined ap11 propriate by the Secretary, the Secretary

12 may permit the coverage described in sub13 paragraph (A) to be provided in a partial

14 region determined appropriate by the Sec15 retary.

16 ‘‘(ii) REQUIREMENTS.—If the Sec17 retary permits coverage pursuant to clause

18 (i), the Secretary shall ensure that the par19 tial region in which coverage is provided

20 is—

21 ‘‘(I) at least the size of the com22 mercial service area of the eligible en23 tity for that area; and

24 ‘‘(II) not smaller than a State.

25 ‘‘(2) DETERMINATION.—
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•S 1135 IS

1 ‘‘(A) IN GENERAL.—In determining re2 gions for contracts under this part, the Sec3 retary shall—

4 ‘‘(i) take into account the number of

5 eligible beneficiaries in an area in order to

6 encourage participation by eligible entities;

7 and

8 ‘‘(ii) ensure that there are at least 10

9 different regions in the United States.

10 ‘‘(B) NO ADMINISTRATIVE OR JUDICIAL

11 REVIEW.—The determination of coverage areas

12 under this part shall not be subject to adminis13 trative or judicial review.

14 ‘‘(c) SUBMISSION OF BIDS.—

15 ‘‘(1) SUBMISSION.—

16 ‘‘(A) IN GENERAL.—Subject to subpara17 graph (B), each eligible entity desiring to offer

18 a plan under this part in an area shall submit

19 a bid with respect to such plan to the Secretary

20 at such time, in such manner, and accompanied

21 by such information as the Secretary may rea22 sonably require.

23 ‘‘(B) BID THAT COVERS MULTIPLE

24 AREAS.—The Secretary shall permit an eligible
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•S 1135 IS

1 entity to submit a single bid for multiple areas

2 if the bid is applicable to all such areas.

3 ‘‘(2) REQUIRED INFORMATION.—The bids de4 scribed in paragraph (1) shall include—

5 ‘‘(A) a proposal for the estimated prices of

6 covered outpatient drugs and the projected an7 nual increases in such prices, including differen8 tials between formulary and nonformulary

9 prices, if applicable;

10 ‘‘(B) a statement regarding the amount

11 that the entity will charge the Secretary for ad12 ministering and delivering the benefits under

13 the contract;

14 ‘‘(C) a statement regarding whether the

15 entity will waive the deductible for generic

16 drugs pursuant to section 1860E(b)(1)(B), and

17 if so, how such waiver is tied to the perform18 ance goals described in section 1860H(b)(1)(C);

19 ‘‘(D) a statement regarding whether the

20 entity will reduce the applicable coinsurance

21 percentage pursuant to section 1860E(b)(2)(B)

22 and if so, the amount of such reduction and

23 how such reduction is tied to the performance

24 goals described in section 1860H(b)(1)(C);
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•S 1135 IS

1 ‘‘(E) a detailed description of the perform2 ance goals for which the administrative fee of

3 the entity will be subject to risk pursuant to

4 section 1860H(b)(1)(C);

5 ‘‘(F) a detailed description of access to

6 pharmacy services provided under the plan, in7 cluding information regarding—

8 ‘‘(i) whether the entity will use a pre9 ferred pharmacy network under the plan;

10 ‘‘(ii) if a preferred pharmacy network

11 is used, whether the entity will offer access

12 to pharmacies that are outside such net13 work, and if such access is provided, the

14 increased coinsurance that beneficiaries

15 will be subject to if they obtain drugs at

16 such pharmacies;

17 ‘‘(G) if the entity utilizes a formulary, a

18 detailed description of the procedures and

19 standards the entity will use for—

20 ‘‘(i) adding new drugs to a thera21 peutic class within the formulary; and

22 ‘‘(ii) determining when and how often

23 the formulary should be modified;

24 ‘‘(H) a detailed description of any owner25 ship or shared financial interests with other en-
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•S 1135 IS

1 tities involved in the delivery of the benefit as

2 proposed under the plan;

3 ‘‘(I) a detailed description of the entity’s

4 estimated marketing and advertising expendi5 tures related to enrolling and retaining eligible

6 beneficiaries; and

7 ‘‘(J) such other information that the Sec8 retary determines is necessary in order to carry

9 out this part, including information relating to

10 the bidding process under this part.

11 ‘‘(d) ACCESS TO BENEFITS IN CERTAIN AREAS.—

12 ‘‘(1) AREAS NOT COVERED BY CONTRACTS.—

13 The Secretary shall develop procedures for the provi14 sion of covered outpatient drugs under this part to

15 each eligible beneficiary enrolled under this part that

16 resides in an area that is not covered by any con17 tract under this part.

18 ‘‘(2) BENEFICIARIES RESIDING IN DIFFERENT

19 LOCATIONS.—The Secretary shall develop procedures

20 to ensure that each eligible beneficiary enrolled

21 under this part that resides in different areas in a

22 year is provided the benefits under this part

23 throughout the entire year.

24 ‘‘(e) AWARDING OF CONTRACTS.—
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•S 1135 IS

1 ‘‘(1) NUMBER OF CONTRACTS.—The Secretary

2 shall, consistent with the requirements of this part

3 and the goal of containing costs under this title,

4 award in a competitive manner at least 2 contracts

5 to offer a plan in an area, unless only 1 bidding en6 tity (and the plan offered by the entity) meet the

7 minimum standards specified under this part and by

8 the Secretary.

9 ‘‘(2) DETERMINATION.—In determining which

10 of the eligible entities that submitted bids that meet

11 the minimum standards specified under this part

12 and by the Secretary to award a contract, the Sec13 retary shall consider the comparative merits of each

14 bid, as determined on the basis of the past perform15 ance of the entity and other relevant factors, with

16 respect to—

17 ‘‘(A) how well the entity (and the plan of18 fered by the entity) meet such minimum stand19 ards;

20 ‘‘(B) the amount that the entity will

21 charge the Secretary for administering and de22 livering the benefits under the contract;

23 ‘‘(C) the performance goals for which the

24 administrative fee of the entity will be subject

25 to risk pursuant to section 1860H(b)(1)(C);
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•S 1135 IS

1 ‘‘(D) the proposed negotiated prices of cov2 ered outpatient drugs and annual increases in

3 such prices;

4 ‘‘(E) the factors described in section

5 1860C(b)(2);

6 ‘‘(F) prior experience of the entity in ad7 ministering a prescription drug benefit pro8 gram;

9 ‘‘(G) effectiveness of the entity and plan in

10 containing costs through pricing incentives and

11 utilization management; and

12 ‘‘(H) such other factors as the Secretary

13 deems necessary to evaluate the merits of each

14 bid.

15 ‘‘(3) EXCEPTION TO CONFLICT OF INTEREST

16 RULES.—In awarding contracts under this part, the

17 Secretary may waive conflict of interest laws gen18 erally applicable to Federal acquisitions (subject to

19 such safeguards as the Secretary may find necessary

20 to impose) in circumstances where the Secretary

21 finds that such waiver—

22 ‘‘(A) is not inconsistent with the—

23 ‘‘(i) purposes of the programs under

24 this title; or
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•S 1135 IS

1 ‘‘(ii) best interests of beneficiaries en2 rolled under this part; and

3 ‘‘(B) permits a sufficient level of competi4 tion for such contracts, promotes efficiency of

5 benefits administration, or otherwise serves the

6 objectives of the program under this part.

7 ‘‘(4) NO ADMINISTRATIVE OR JUDICIAL RE8 VIEW.—The determination of the Secretary to award

9 or not award a contract to an eligible entity with re10 spect to a plan under this part shall not be subject

11 to administrative or judicial review.

12 ‘‘(f) APPROVAL OF MARKETING MATERIAL AND AP13 PLICATION FORMS.—The provisions of section 1851(h)

14 shall apply to marketing material and application forms

15 under this part in the same manner as such provisions

16 apply to marketing material and application forms under

17 part C.

18 ‘‘(g) DURATION OF CONTRACTS.—Each contract

19 awarded under this part shall be for a term of at least

20 2 years but not more than 5 years, as determined by the

21 Secretary.

22 ‘‘MINIMUM STANDARDS FOR ELIGIBLE ENTITIES

23 ‘‘SEC. 1860G. (a) IN GENERAL.—The Secretary shall

24 not award a contract to an eligible entity under this part

25 unless the Secretary finds that the eligible entity agrees
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•S 1135 IS

1 to comply with such terms and conditions as the Secretary

2 shall specify, including the following:

3 ‘‘(1) QUALITY AND FINANCIAL STANDARDS.—

4 The eligible entity meets the quality and financial

5 standards specified by the Secretary.

6 ‘‘(2) PROCEDURES TO ENSURE PROPER UTILI7 ZATION, COMPLIANCE, AND AVOIDANCE OF ADVERSE

8 DRUG REACTIONS.—The eligible entity has in place

9 drug utilization review procedures to ensure—

10 ‘‘(A) the appropriate utilization by eligible

11 beneficiaries enrolled in the plan covered by the

12 contract of the benefits to be provided under

13 the plan; and

14 ‘‘(B) the avoidance of adverse drug reac15 tions among such beneficiaries, including prob16 lems due to therapeutic duplication, drug-dis17 ease contraindications, drug-drug interactions

18 (including serious interactions with nonprescrip19 tion or over-the-counter drugs), incorrect drug

20 dosage or duration of drug treatment, drug-al21 lergy interactions, and clinical abuse and mis22 use.

23 ‘‘(3) PATIENT PROTECTIONS.—

24 ‘‘(A) ACCESS.—
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•S 1135 IS

1 ‘‘(i) IN GENERAL.—The eligible entity

2 ensures that the covered outpatient drugs

3 are accessible and convenient to eligible

4 beneficiaries enrolled in the plan covered

5 by the contract, including by offering the

6 services 24 hours a day and 7 days a week

7 for emergencies.

8 ‘‘(ii) PREFERRED PHARMACY NET9 WORKS.—If the eligible entity utilizes a

10 preferred pharmacy network, the network

11 complies with the standards under sub12 section (b)(3).

13 ‘‘(B) ENSURING THAT BENEFICIARIES ARE

14 NOT OVERCHARGED.—The eligible entity has

15 procedures in place to ensure that—

16 ‘‘(i) the total charge for each covered

17 outpatient drug dispensed to an eligible

18 beneficiary enrolled in the plan covered by

19 the contract does not exceed the negotiated

20 price for the drug (as reported to the Sec21 retary pursuant to paragraph (5)(A)); and

22 ‘‘(ii) the retail pharmacy dispensing

23 the drug does not charge (or collect from)

24 such beneficiary an amount that exceeds

25 the beneficiary’s obligation (as determined
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•S 1135 IS

1 in accordance with the provisions of this

2 part) of the negotiated price.

3 ‘‘(C) RETAIL PHARMACY MEETS MINIMUM

4 QUALITY AND TECHNOLOGY STANDARDS.—The

5 eligible entity ensures that any retail pharmacy

6 that it contracts with to deliver benefits under

7 this part meets minimum quality and tech8 nology standards (as established by the Sec9 retary).

10 ‘‘(D) CONTINUITY OF CARE.—

11 ‘‘(i) IN GENERAL.—The eligible entity

12 ensures that, in the case of an eligible ben13 eficiary who loses coverage under this part

14 with such entity under circumstances that

15 would permit a special election period (as

16 established by the Secretary under section

17 1860B(b)(1)), the entity will continue to

18 provide coverage under this part to such

19 beneficiary until the beneficiary enrolls and

20 receives such coverage with another eligible

21 entity under this part or, if eligible, with a

22 Medicare+Choice organization.

23 ‘‘(ii) LIMITED PERIOD.—In no event

24 shall an eligible entity be required to pro25 vide the extended coverage required under
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•S 1135 IS

1 clause (i) beyond the date which is 30 days

2 after the coverage with such entity would

3 have terminated but for this subparagraph.

4 ‘‘(E) PROCEDURES REGARDING THE DE5 TERMINATION OF DRUGS THAT ARE MEDICALLY

6 NECESSARY.—The eligible entity has in place

7 procedures to determine if a drug is medically

8 necessary to prevent or slow the deterioration

9 of, or improve or maintain, the health of an eli10 gible beneficiary enrolled in the plan that is

11 covered by the contract. Such procedures shall

12 require that such determinations are based on

13 professional medical judgment, the medical con14 dition of the beneficiary, and other medical evi15 dence.

16 ‘‘(F) PROCEDURES REGARDING DENIALS

17 OF CARE.—The eligible entity has in place pro18 cedures to ensure—

19 ‘‘(i) a timely internal and external re20 view and resolution of denials of coverage

21 (in whole or in part) and complaints (in22 cluding those regarding the use of

23 formularies under subsection (b)) by eligi24 ble beneficiaries enrolled in the plan that is

25 covered by the contract, or by providers,
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•S 1135 IS

1 pharmacists, and other individuals acting

2 on behalf of each such beneficiary (with

3 the beneficiary’s consent) in accordance

4 with requirements (as established by the

5 Secretary) that are comparable to such re6 quirements for Medicare+Choice organiza7 tions under part C; and

8 ‘‘(ii) that eligible beneficiaries are pro9 vided with information regarding the ap10 peals procedures under this part at the

11 time of enrollment with the entity.

12 ‘‘(G) PROCEDURES REGARDING PATIENT

13 CONFIDENTIALITY.—Insofar as an eligible enti14 ty maintains individually identifiable medical

15 records or other health information regarding

16 eligible beneficiaries enrolled in the plan that is

17 covered by the contract, the entity has in place

18 procedures to—

19 ‘‘(i) safeguard the privacy of any indi20 vidually identifiable beneficiary informa21 tion;

22 ‘‘(ii) maintain such records and infor23 mation in a manner that is accurate and

24 timely;
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•S 1135 IS

1 ‘‘(iii) ensure timely access by such

2 beneficiaries to such records and informa3 tion; and

4 ‘‘(iv) otherwise comply with applicable

5 laws relating to patient confidentiality.

6 ‘‘(H) PROCEDURES REGARDING TRANSFER

7 OF MEDICAL RECORDS.—

8 ‘‘(i) IN GENERAL.—The eligible entity

9 has in place procedures for the timely

10 transfer of records and information de11 scribed in subparagraph (G) (with respect

12 to a beneficiary who loses coverage under

13 this part with the entity and enrolls with

14 another entity (including a

15 Medicare+Choice organization) under this

16 part) to such other entity.

17 ‘‘(ii) PATIENT CONFIDENTIALITY.—

18 The procedures described in clause (i) shall

19 comply with the patient confidentiality pro20 cedures described in subparagraph (G).

21 ‘‘(I) PROCEDURES REGARDING MEDICAL

22 ERRORS.—The eligible entity has in place pro23 cedures for working with the Secretary to deter

24 medical errors related to the provision of cov25 ered outpatient drugs.
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•S 1135 IS

1 ‘‘(4) PROCEDURES TO CONTROL FRAUD, ABUSE,

2 AND WASTE.—The eligible entity has in place proce3 dures to control fraud, abuse, and waste.

4 ‘‘(5) REPORTING REQUIREMENTS.—

5 ‘‘(A) IN GENERAL.—The eligible entity

6 provides the Secretary with reports containing

7 information regarding the following:

8 ‘‘(i) The prices that the eligible entity

9 is paying for covered outpatient drugs.

10 ‘‘(ii) The prices that eligible bene11 ficiaries enrolled in the plan that is covered

12 by the contract will be charged for covered

13 outpatient drugs.

14 ‘‘(iii) The administrative costs of pro15 viding such benefits.

16 ‘‘(iv) Utilization of such benefits.

17 ‘‘(v) Marketing and advertising ex18 penditures related to enrolling and retain19 ing eligible beneficiaries.

20 ‘‘(B) TIMEFRAME FOR SUBMITTING RE21 PORTS.—

22 ‘‘(i) IN GENERAL.—The eligible entity

23 shall submit a report described in subpara24 graph (A) to the Secretary within 3

25 months after the end of each 12-month pe-
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•S 1135 IS

1 riod in which the eligible entity has a con2 tract under this part. Such report shall

3 contain information concerning the benefits

4 provided during such 12-month period.

5 ‘‘(ii) LAST YEAR OF CONTRACT.—In

6 the case of the last year of a contract

7 under this part, the Secretary may require

8 that a report described in subparagraph

9 (A) be submitted 3 months prior to the

10 end of the contract. Such report shall con11 tain information concerning the benefits

12 provided between the period covered by the

13 most recent report under this subpara14 graph and the date that a report is sub15 mitted under this clause.

16 ‘‘(C) CONFIDENTIALITY OF INFORMA17 TION.—

18 ‘‘(i) IN GENERAL.—Notwithstanding

19 any other provision of law and subject to

20 clause (ii), information disclosed by an eli21 gible entity pursuant to subparagraph (A)

22 (except for information described in clause

23 (ii) of such subparagraph) is confidential

24 and shall only be used by the Secretary for
150

•S 1135 IS

1 the purposes of, and to the extent nec2 essary, to carry out this part.

3 ‘‘(ii) UTILIZATION DATA.—Subject to

4 patient confidentiality laws, the Secretary

5 shall make information disclosed by an eli6 gible entity pursuant to subparagraph

7 (A)(iv) (regarding utilization data) avail8 able for research purposes. The Secretary

9 may charge a reasonable fee for making

10 such information available.

11 ‘‘(6) APPROVAL OF MARKETING MATERIAL AND

12 APPLICATION FORMS.—The eligible entity complies

13 with the requirements described in section 1860F(f).

14 ‘‘(7) RECORDS AND AUDITS.—The eligible enti15 ty maintains adequate records related to the admin16 istration of the benefit under this part and affords

17 the Secretary access to such records for auditing

18 purposes.

19 ‘‘(b) SPECIAL RULES REGARDING COST-EFFECTIVE

20 PROVISION OF BENEFITS.—

21 ‘‘(1) IN GENERAL.—In providing the benefits

22 under a contract under this part, an eligible entity

23 may—

24 ‘‘(A) employ mechanisms to provide the

25 benefits economically, including the use of—
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•S 1135 IS

1 ‘‘(i) formularies (pursuant to para2 graph (2));

3 ‘‘(ii) alternative methods of distribu4 tion;

5 ‘‘(iii) preferred pharmacy networks

6 (pursuant to paragraph (3)); and

7 ‘‘(iv) generic drug substitution;

8 ‘‘(B) use mechanisms to encourage eligible

9 beneficiaries to select cost-effective drugs or less

10 costly means of receiving drugs, including the

11 use of pharmacy incentive programs, thera12 peutic interchange programs, and disease man13 agement programs; and

14 ‘‘(C) encourage pharmacy providers to—

15 ‘‘(i) inform beneficiaries of the dif16 ferentials in price between generic and

17 nongeneric drug equivalents; and

18 ‘‘(ii) provide medication therapy man19 agement programs in order to enhance

20 beneficiaries’ understanding of the appro21 priate use of medications and to reduce the

22 risk of potential adverse events associated

23 with medications.

24 ‘‘(2) FORMULARIES.—If an eligible entity uses

25 a formulary under this part, such formulary shall
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•S 1135 IS

1 comply with standards established by the Secretary

2 in consultation with the Medicare Prescription Drug

3 Advisory Committee established under section

4 1860K. Such standards shall require that the eligi5 ble entity—

6 ‘‘(A) use a pharmacy and therapeutic com7 mittee (that meets the standards for a phar8 macy and therapeutic committee established by

9 the Secretary in consultation with such Medi10 care Prescription Drug Advisory Committee) to

11 develop and implement the formulary;

12 ‘‘(B) include in the formulary—

13 ‘‘(i) at least 1 drug from each thera14 peutic class (as defined by the Secretary in

15 consultation with such Medicare Prescrip16 tion Drug Advisory Committee);

17 ‘‘(ii) if there is more than 1 drug

18 available in a therapeutic class, at least 2

19 drugs from such class unless determined

20 clinically inappropriate in accordance with

21 standards established by the Secretary;

22 and

23 ‘‘(iii) if there are more than 2 drugs

24 available in a therapeutic class, at least 2

25 drugs from such class and a generic drug
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•S 1135 IS

1 substitute if available unless determined

2 clinically inappropriate in accordance with

3 standards established by the Secretary;

4 ‘‘(C) develop procedures for the modifica5 tion of the formulary, including for the addition

6 of new drugs to an existing therapeutic class;

7 ‘‘(D) provide for coverage of nonformulary

8 drugs when determined (pursuant to subpara9 graph (E) or (F)(i) of subsection (a)(3)) to be

10 medically necessary to prevent or slow the dete11 rioration of, or improve or maintain, the health

12 of an eligible beneficiary;

13 ‘‘(E) disclose to current and prospective

14 beneficiaries and to providers in the service

15 area the nature of the formulary restrictions,

16 including information regarding the drugs in17 cluded in the formulary, coinsurance, and any

18 difference in the cost-sharing for different types

19 of drugs; and

20 ‘‘(F) provide a reasonable amount of notice

21 to beneficiaries enrolled in the plan that is cov22 ered by the contract under this part of any

23 change in the formulary.

24 ‘‘(3) PREFERRED PHARMACY NETWORKS.—
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•S 1135 IS

1 ‘‘(A) IN GENERAL.—If an eligible entity

2 uses a preferred pharmacy network to deliver

3 benefits under this part, such network shall

4 meet minimum access standards established by

5 the Secretary.

6 ‘‘(B) STANDARDS.—In establishing stand7 ards under subparagraph (A), the Secretary

8 shall take into account reasonable distances to

9 pharmacy services in both urban and rural

10 areas.

11 ‘‘(4) CONSTRUCTION.—

12 ‘‘(A) FORMULARIES.—Nothing in this part

13 shall be construed as precluding an eligible enti14 ty from—

15 ‘‘(i) requiring cost-sharing for nonfor16 mulary drugs that is higher than the cost17 sharing established in section 1860E(b)(2),

18 except that such entity shall provide for

19 coverage of a nonformulary drug at the

20 same cost-sharing level as a drug within

21 the formulary if such nonformulary drug is

22 determined (pursuant to subparagraph (E)

23 or (F)(i) of subsection (a)(3)) to be medi24 cally necessary to prevent or slow the dete-
155

•S 1135 IS

1 rioration of, or improve or maintain, the

2 health of an eligible beneficiary;

3 ‘‘(ii) educating prescribing providers,

4 pharmacists, and beneficiaries about the

5 medical and cost benefits of formulary

6 drugs (including generic drugs); or

7 ‘‘(iii) requesting prescribing providers

8 to consider a formulary drug prior to dis9 pensing of a nonformulary drug, as long as

10 such request does not unduly delay the

11 provision of the drug.

12 ‘‘(B) PREFERRED PHARMACY NET13 WORKS.—Nothing in this part shall be con14 strued as precluding the entity from requiring

15 cost-sharing for a covered outpatient drug that

16 is higher than the cost-sharing established in

17 section 1860E(b)(2) if the drug was obtained at

18 a pharmacy that is not in such network.

19 ‘‘PAYMENTS

20 ‘‘SEC. 1860H. (a) PROCEDURES FOR PAYMENTS TO

21 ELIGIBLE ENTITIES.—The Secretary shall establish pro22 cedures for making payments to each eligible entity with

23 a contract under this part for the administration and de24 livery of the benefits under this part.

25 ‘‘(b) REQUIREMENTS FOR PROCEDURES.—
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•S 1135 IS

1 ‘‘(1) IN GENERAL.—The procedures established

2 under subsection (a) shall provide for the following:

3 ‘‘(A) ADMINISTRATIVE PAYMENT.—Pay4 ment of administrative fees for such adminis5 tration and delivery.

6 ‘‘(B) REIMBURSEMENT FOR COSTS OF

7 DRUGS PROVIDED.—Payments for the costs of

8 covered outpatient drugs provided to eligible

9 beneficiaries enrolled under this part and in a

10 plan offered by the eligible entity.

11 ‘‘(C) RISK REQUIREMENT.—An adjustment

12 of a percentage (determined under paragraph

13 (2)) of the administrative fee payments made to

14 an eligible entity to ensure that the entity, in

15 administering and delivering the benefits under

16 this part, pursues performance goals established

17 by the Secretary, including the following:

18 ‘‘(i) QUALITY SERVICE.—The entity

19 provides eligible beneficiaries enrolled in

20 the plan that is covered by the contract

21 under this part with quality services, as

22 measured by such factors as sustained

23 pharmacy network access, timeliness and

24 accuracy of service delivery in claims proc25 essing and card production, pharmacy and
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1 member service support access, response

2 time in mail delivery service, and timely

3 action with regard to appeals and current

4 beneficiary service surveys.

5 ‘‘(ii) QUALITY CLINICAL CARE.—The

6 entity provides such beneficiaries with

7 quality clinical care, as measured by such

8 factors as providing—

9 ‘‘(I) notification to such bene10 ficiaries and to providers in order to

11 prevent adverse drug reactions; and

12 ‘‘(II) specific clinical suggestions

13 to improve health and patient and

14 prescriber education as appropriate.

15 ‘‘(iii) CONTROL OF MEDICARE

16 COSTS.—The entity contains costs to the

17 Prescription Drug Account, as measured

18 by generic substitution rates, price dis19 counts, and other factors determined ap20 propriate by the Secretary that do not re21 duce the access of beneficiaries to medi22 cally necessary covered outpatient drugs.

23 ‘‘(2) PERCENTAGE OF PAYMENT TIED TO

24 RISK.—
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•S 1135 IS

1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the Secretary shall determine the

3 percentage of the administrative payments to

4 an eligible entity that will be tied to the per5 formance goals described in paragraph (1)(C).

6 ‘‘(B) LIMITATION ON RISK TO ENSURE

7 PROGRAM STABILITY.—In order to provide for

8 program stability, the Secretary may not estab9 lish a percentage to be adjusted under this sub10 section at a level that jeopardizes the ability of

11 an eligible entity to administer and deliver the

12 benefits under this part or administer and de13 liver such benefits in a quality manner.

14 ‘‘(3) RISK ADJUSTMENT OF PAYMENTS BASED

15 ON ENROLLEES IN PLAN.—To the extent that an eli16 gible entity is at risk under this subsection, the pro17 cedures established under subsection (a) may include

18 a methodology for risk adjusting the payments made

19 to such entity based on the differences in actuarial

20 risk of different enrollees being served if the Sec21 retary determines such adjustments to be necessary

22 and appropriate.

23 ‘‘(c) PAYMENTS TO MEDICARE+CHOICE ORGANIZA24 TIONS.—For provisions related to payments to

25 Medicare+Choice organizations for the administration
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•S 1135 IS

1 and delivery of benefits under this part to eligible bene2 ficiaries enrolled in a Medicare+Choice plan offered by the

3 organization, see section 1853(c)(8).

4 ‘‘(d) SECONDARY PAYER PROVISIONS.—The provi5 sions of section 1862(b) shall apply to the benefits pro6 vided under this part.

7 ‘‘EMPLOYER INCENTIVE PROGRAM FOR EMPLOYMENT8 BASED RETIREE DRUG COVERAGE

9 ‘‘SEC. 1860I. (a) PROGRAM AUTHORITY.—The Sec10 retary is authorized to develop and implement a program

11 under this section to be known as the ‘Employer Incentive

12 Program’ that encourages employers and other sponsors

13 of employment-based health care coverage to provide ade14 quate prescription drug benefits to retired individuals by

15 subsidizing, in part, the sponsor’s cost of providing cov16 erage under qualifying plans.

17 ‘‘(b) SPONSOR REQUIREMENTS.—In order to be eligi18 ble to receive an incentive payment under this section with

19 respect to coverage of an individual under a qualified re20 tiree prescription drug plan (as defined in subsection

21 (e)(3)), a sponsor shall meet the following requirements:

22 ‘‘(1) ASSURANCES.—The sponsor shall—

23 ‘‘(A) annually attest, and provide such as24 surances as the Secretary may require, that the

25 coverage offered by the sponsor is a qualified

26 retiree prescription drug plan, and will remain
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•S 1135 IS

1 such a plan for the duration of the sponsor’s

2 participation in the program under this section;

3 and

4 ‘‘(B) guarantee that it will give notice to

5 the Secretary and covered retirees—

6 ‘‘(i) at least 120 days before termi7 nating its plan; and

8 ‘‘(ii) immediately upon determining

9 that the actuarial value of the prescription

10 drug benefit under the plan falls below the

11 actuarial value of the outpatient prescrip12 tion drug benefit under this part.

13 ‘‘(2) BENEFICIARY INFORMATION.—The spon14 sor shall report to the Secretary, for each calendar

15 quarter for which it seeks an incentive payment

16 under this section, the names and social security

17 numbers of all retirees (and their spouses and de18 pendents) covered under such plan during such

19 quarter and the dates (if less than the full quarter)

20 during which each such individual was covered.

21 ‘‘(3) AUDITS.—The sponsor and the employ22 ment-based retiree health coverage plan seeking in23 centive payments under this section shall agree to

24 maintain, and to afford the Secretary access to, such

25 records as the Secretary may require for purposes of
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•S 1135 IS

1 audits and other oversight activities necessary to en2 sure the adequacy of prescription drug coverage, the

3 accuracy of incentive payments made, and such

4 other matters as may be appropriate.

5 ‘‘(4) OTHER REQUIREMENTS.—The sponsor

6 shall provide such other information, and comply

7 with such other requirements, as the Secretary may

8 find necessary to administer the program under this

9 section.

10 ‘‘(c) INCENTIVE PAYMENTS.—

11 ‘‘(1) IN GENERAL.—A sponsor that meets the

12 requirements of subsection (b) with respect to a

13 quarter in a calendar year shall be entitled to have

14 payment made by the Secretary on a quarterly basis

15 (to the sponsor or, at the sponsor’s direction, to the

16 appropriate employment-based health plan) of an in17 centive payment, in the amount determined in para18 graph (2), for each retired individual (or spouse)

19 who—

20 ‘‘(A) was covered under the sponsor’s

21 qualified retiree prescription drug plan during

22 such quarter; and

23 ‘‘(B) was eligible for but was not enrolled

24 in the outpatient prescription drug benefit pro25 gram under this part.
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•S 1135 IS

1 ‘‘(2) AMOUNT OF INCENTIVE.—The payment

2 under this section with respect to each individual de3 scribed in paragraph (1) for a month shall be equal

to 2 4 ⁄3 of the monthly part D premium amount pay5 able by an eligible beneficiary enrolled under this

6 part, as set for the calendar year pursuant to section

7 1860D(a)(2).

8 ‘‘(3) PAYMENT DATE.—The incentive under

9 this section with respect to a calendar quarter shall

10 be payable as of the end of the next succeeding cal11 endar quarter.

12 ‘‘(d) CIVIL MONEY PENALTIES.—A sponsor, health

13 plan, or other entity that the Secretary determines has,

14 directly or through its agent, provided information in con15 nection with a request for an incentive payment under this

16 section that the entity knew or should have known to be

17 false shall be subject to a civil monetary penalty in an

18 amount up to 3 times the total incentive amounts under

19 subsection (c) that were paid (or would have been payable)

20 on the basis of such information.

21 ‘‘(e) DEFINITIONS.—In this section:

22 ‘‘(1) EMPLOYMENT-BASED RETIREE HEALTH

23 COVERAGE.—The term ‘employment-based retiree

24 health coverage’ means health insurance or other

25 coverage of health care costs for retired individuals
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•S 1135 IS

1 (or for such individuals and their spouses and de2 pendents) based on their status as former employees

3 or labor union members.

4 ‘‘(2) EMPLOYER.—The term ‘employer’ has the

5 meaning given the term in section 3(5) of the Em6 ployee Retirement Income Security Act of 1974 (ex7 cept that such term shall include only employers of

8 2 or more employees).

9 ‘‘(3) QUALIFIED RETIREE PRESCRIPTION DRUG

10 PLAN.—The term ‘qualified retiree prescription drug

11 plan’ means health insurance coverage included in

12 employment-based retiree health coverage that—

13 ‘‘(A) provides coverage of the cost of pre14 scription drugs whose actuarial value (as de15 fined by the Secretary) to each retired bene16 ficiary equals or exceeds the actuarial value of

17 the benefits provided to an individual enrolled

18 in the outpatient prescription drug benefit pro19 gram under this part; and

20 ‘‘(B) does not deny, limit, or condition the

21 coverage or provision of prescription drug bene22 fits for retired individuals based on age or any

23 health status-related factor described in section

24 2702(a)(1) of the Public Health Service Act.
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•S 1135 IS

1 ‘‘(4) SPONSOR.—The term ‘sponsor’ has the

2 meaning given the term ‘plan sponsor’ in section

3 3(16)(B) of the Employer Retirement Income Secu4 rity Act of 1974.

5 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There

6 are authorized to be appropriated from time to time, out

7 of any moneys in the Treasury not otherwise appropriated,

8 such sums as may be necessary to carry out the program

9 under this section.

10 ‘‘PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL

11 SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND

12 ‘‘SEC. 1860J. (a) ESTABLISHMENT.—

13 ‘‘(1) IN GENERAL.—There is created within the

14 Federal Supplementary Medical Insurance Trust

15 Fund established by section 1841 an account to be

16 known as the ‘Prescription Drug Account’ (in this

17 section referred to as the ‘Account’).

18 ‘‘(2) FUNDS.—The Account shall consist of

19 such gifts and bequests as may be made as provided

20 in section 201(i)(1), and such amounts as may be

21 deposited in, or appropriated to, the account as pro22 vided in this part.

23 ‘‘(3) SEPARATE FROM REST OF TRUST FUND.—

24 Funds provided under this part to the Account shall

25 be kept separate from all other funds within the
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•S 1135 IS

1 Federal Supplementary Medical Insurance Trust

2 Fund.

3 ‘‘(b) PAYMENTS FROM ACCOUNT.—

4 ‘‘(1) IN GENERAL.—The Managing Trustee

5 shall pay from time to time from the Account such

6 amounts as the Secretary certifies are necessary to

7 make payments to operate the program under this

8 part, including payments to eligible entities under

9 section 1860H and payments with respect to admin10 istrative expenses under this part in accordance with

11 section 201(g).

12 ‘‘(2) TRANSFER TO PART A AND B TRUST

13 FUNDS FOR MEDICARE+CHOICE PAYMENTS.—The

14 Managing Trustee shall establish procedures for the

15 transfer of funds from the Account, in an amount

16 determined appropriate by the Secretary, to the Fed17 eral Hospital Insurance Trust Fund and the Federal

18 Supplementary Medical Insurance Trust Fund in

19 order to reimburse such trust funds for payments to

20 Medicare+Choice organizations for the provision of

21 covered outpatient drugs pursuant to section

22 1853(c)(8).

23 ‘‘(3) TREATMENT IN RELATION TO PART B PRE24 MIUM.—Amounts payable from the Account shall not
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•S 1135 IS

1 be taken into account in computing actuarial rates

2 or premium amounts under section 1839.

3 ‘‘(c) APPROPRIATIONS TO COVER BENEFITS AND

4 ADMINISTRATIVE COSTS.—There are appropriated to the

5 Account in a fiscal year, out of any moneys in the Treas6 ury not otherwise appropriated, an amount equal to the

7 amount by which the benefits and administrative costs of

8 providing the benefits under this part in the year exceed

9 the premiums collected under section 1860D(a)(4) for the

10 year.

11 ‘‘MEDICARE PRESCRIPTION DRUG ADVISORY COMMITTEE

12 ‘‘SEC. 1860K. (a) ESTABLISHMENT OF COM13 MITTEE.—There is established a Medicare Prescription

14 Drug Advisory Committee (in this section referred to as

15 the ‘Committee’).

16 ‘‘(b) FUNCTIONS OF COMMITTEE.—On and after

17 March 1, 2002, the Committee shall advise the Secretary

18 on policies related to—

19 ‘‘(1) the development of guidelines for the im20 plementation and administration of the outpatient

21 prescription drug benefit program under this part;

22 and

23 ‘‘(2) the development of—

24 ‘‘(A) standards for a pharmacy and thera25 peutics committee required of eligible entities

26 under section 1860G(b)(2)(A);
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1 ‘‘(B) standards required of eligible entities

2 under subparagraphs (E) and (F) of section

3 1860G(a)(3) for determining if a drug is medi4 cally necessary to prevent or slow the deteriora5 tion of, or improve or maintain, the health of

6 an eligible beneficiary;

7 ‘‘(C) standards for—

8 ‘‘(i) defining therapeutic classes; and

9 ‘‘(ii) adding new therapeutic classes to

10 a formulary;

11 ‘‘(D) procedures to evaluate the bids sub12 mitted by eligible entities under this part; and

13 ‘‘(E) procedures to ensure that eligible en14 tities with a contract under this part are in

15 compliance with the requirements under this

16 part.

17 ‘‘(c) STRUCTURE AND MEMBERSHIP OF THE COM18 MITTEE.—

19 ‘‘(1) STRUCTURE.—The Committee shall be

20 composed of 19 members who shall be appointed by

21 the Secretary.

22 ‘‘(2) MEMBERSHIP.—

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

24 Committee shall be chosen on the basis of their

25 integrity, impartiality, and good judgment, and
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•S 1135 IS

1 shall be individuals who are, by reason of their

2 education, experience, and attainments, excep3 tionally qualified to perform the duties of mem4 bers of the Committee.

5 ‘‘(B) SPECIFIC MEMBERS.—Of the mem6 bers appointed under paragraph (1)—

7 ‘‘(i) nine shall be chosen to represent

8 physicians;

9 ‘‘(ii) four shall be chosen to represent

10 pharmacists;

11 ‘‘(iii) one shall be chosen to represent

12 the Centers for Medicare & Medicaid Serv13 ices;

14 ‘‘(iv) four shall be chosen to represent

15 actuaries, pharmacoeconomists, research16 ers, and other appropriate experts; and

17 ‘‘(v) one shall be chosen to represent

18 emerging drug technologies.

19 ‘‘(d) TERMS OF APPOINTMENT.—Each member of

20 the Committee shall serve for a term determined appro21 priate by the Secretary. The terms of service of the mem22 bers initially appointed shall begin on January 1, 2002.

23 ‘‘(e) CHAIRPERSON.—The Secretary shall designate

24 a member of the Committee as Chairperson. The term as

25 Chairperson shall be for a 1-year period.
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•S 1135 IS

1 ‘‘(f) COMMITTEE PERSONNEL MATTERS.—

2 ‘‘(1) MEMBERS.—

3 ‘‘(A) COMPENSATION.—Each member of

4 the Committee who is not an officer or em5 ployee of the Federal Government shall be com6 pensated at a rate equal to the daily equivalent

7 of the annual rate of basic pay prescribed for

8 level IV of the Executive Schedule under section

9 5315 of title 5, United States Code, for each

10 day (including travel time) during which such

11 member is engaged in the performance of the

12 duties of the Committee. All members of the

13 Committee who are officers or employees of the

14 United States shall serve without compensation

15 in addition to that received for their services as

16 officers or employees of the United States.

17 ‘‘(B) TRAVEL EXPENSES.—The members

18 of the Committee shall be allowed travel ex19 penses, including per diem in lieu of subsist20 ence, at rates authorized for employees of agen21 cies under subchapter I of chapter 57 of title 5,

22 United States Code, while away from their

23 homes or regular places of business in the per24 formance of services for the Committee.
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•S 1135 IS

1 ‘‘(2) STAFF.—The Committee may appoint

2 such personnel as the Committee considers appro3 priate.

4 ‘‘(g) OPERATION OF THE COMMITTEE.—

5 ‘‘(1) MEETINGS.—The Committee shall meet at

6 the call of the Chairperson (after consultation with

7 the other members of the Committee) not less often

8 than quarterly to consider a specific agenda of

9 issues, as determined by the Chairperson after such

10 consultation.

11 ‘‘(2) QUORUM.—Ten members of the Com12 mittee shall constitute a quorum for purposes of

13 conducting business.

14 ‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—Section

15 14 of the Federal Advisory Committee Act (5 U.S.C.

16 App.) shall not apply to the Committee.

17 ‘‘(i) TRANSFER OF PERSONNEL, RESOURCES, AND

18 ASSETS.—For purposes of carrying out its duties, the Sec19 retary and the Committee may provide for the transfer

20 to the Committee of such civil service personnel in the em21 ploy of the Department of Health and Human Services

22 (including the Centers for Medicare & Medicaid Services),

23 and such resources and assets of the Department used in

24 carrying out this title, as the Committee requires.
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•S 1135 IS

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

2 are authorized to be appropriated such sums as may be

3 necessary to carry out the purposes of this section.’’.

4 (b) EXCLUSIONS FROM COVERAGE.—

5 (1) APPLICATION TO PART D.—Section 1862(a)

6 of the Social Security Act (42 U.S.C. 1395y(a)) is

7 amended in the matter preceding paragraph (1) by

8 striking ‘‘part A or part B’’ and inserting ‘‘part A,

9 B, or D’’.

10 (2) PRESCRIPTION DRUGS NOT EXCLUDED

11 FROM COVERAGE IF REASONABLE AND NEC12 ESSARY.—Section 1862(a)(1) of the Social Security

13 Act (42 U.S.C. 1395y(a)(1)) is amended—

14 (A) in subparagraph (H), by striking

15 ‘‘and’’ at the end;

16 (B) in subparagraph (I), by striking the

17 semicolon at the end and inserting ‘‘, and’’; and

18 (C) by adding at the end the following new

19 subparagraph:

20 ‘‘(J) in the case of prescription drugs cov21 ered under part D, which are not reasonable

22 and necessary to prevent or slow the deteriora23 tion of, or improve or maintain, the health of

24 eligible beneficiaries;’’.
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•S 1135 IS

1 (c) CONFORMING AMENDMENTS TO FEDERAL SUP2 PLEMENTARY MEDICAL INSURANCE TRUST FUND.—Sec3 tion 1841 of the Social Security Act (42 U.S.C. 1395t)

4 is amended—

5 (1) in the last sentence of subsection (a)—

6 (A) by striking ‘‘and’’ before ‘‘such

7 amounts’’; and

8 (B) by inserting before the period the fol9 lowing: ‘‘, and such amounts as may be depos10 ited in, or appropriated to, the Prescription

11 Drug Account established by section 1860J’’;

12 (2) in subsection (g), by inserting after ‘‘by this

13 part,’’ the following: ‘‘the payments provided for

14 under part D (in which case the payments shall be

15 made from the Prescription Drug Account in the

16 Trust Fund),’’;

17 (3) in subsection (h), by inserting after

18 ‘‘1840(d)’’ the following: ‘‘and section 1860D(a)(4)

19 (in which case the payments shall be made from the

20 Prescription Drug Account in the Trust Fund)’’;

21 and

22 (4) in subsection (i), by inserting after ‘‘section

23 1840(b)(1)’’ the following: ‘‘, section 1860D(a)(4)

24 (in which case the payments shall be made from the

25 Prescription Drug Account in the Trust Fund),’’.
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1 (d) CONFORMING REFERENCES TO PREVIOUS PART

2 D.—

3 (1) IN GENERAL.—Any reference in law (in ef4 fect before the date of enactment of this Act) to part

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

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

7 such date).

8 (2) SECRETARIAL SUBMISSION OF LEGISLATIVE

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

10 of enactment of this Act, the Secretary of Health

11 and Human Services shall submit to the appropriate

12 committees of Congress a legislative proposal pro13 viding for such technical and conforming amend14 ments in the law as are required by the provisions

15 of this title.

16 SEC. 302. PART D BENEFITS UNDER MEDICARE+CHOICE

17 PLANS.

18 (a) ELIGIBILITY, ELECTION, AND ENROLLMENT.—

19 Section 1851 of the Social Security Act (42 U.S.C.

20 1395w–21) is amended—

21 (1) in subsection (a)(1)(A), by striking ‘‘parts

22 A and B’’ and inserting ‘‘parts A, B, and D’’; and

23 (2) in subsection (i)(1), by striking ‘‘parts A

24 and B’’ and inserting ‘‘parts A, B, and D’’.
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1 (b) VOLUNTARY BENEFICIARY ENROLLMENT FOR

2 DRUG COVERAGE.—Section 1852(a)(1)(A) of the Social

3 Security Act (42 U.S.C. 1395w–22(a)(1)(A)) is amended

4 by inserting ‘‘(and under part D to individuals also en5 rolled under that part)’’ after ‘‘parts A and B’’.

6 (c) ACCESS TO SERVICES.—Section 1852(d)(1) of the

7 Social Security Act (42 U.S.C. 1395w–22(d)(1)) is

8 amended—

9 (1) in subparagraph (D), by striking ‘‘and’’ at

10 the end;

11 (2) in subparagraph (E), by striking the period

12 at the end and inserting ‘‘; and’’; and

13 (3) by adding at the end the following new sub14 paragraph:

15 ‘‘(F) in the case of covered outpatient

16 drugs (as defined in section 1860(1)) provided

17 to individuals enrolled under part D, the orga18 nization complies with the access requirements

19 applicable under part D.’’.

20 (d) PAYMENTS TO ORGANIZATIONS.—Section

21 1853(a)(1)(A) of the Social Security Act (42 U.S.C.

22 1395w–23(a)(1)(A)) is amended—

23 (1) by inserting ‘‘determined separately for the

24 benefits under parts A and B and under part D (for
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•S 1135 IS

1 individuals enrolled under that part)’’ after ‘‘as cal2 culated under subsection (c)’’;

3 (2) by striking ‘‘that area, adjusted for such

4 risk factors’’ and inserting ‘‘that area. In the case

5 of payment for the benefits under parts A and B,

6 such payment shall be adjusted for such risk factors

7 as’’; and

8 (3) by inserting before the last sentence the fol9 lowing: ‘‘In the case of the payments for the benefits

10 under part D, such payment shall be adjusted for

11 the risk factors of each enrollee as the Secretary de12 termines to be feasible and appropriate to ensure ac13 tuarial equivalence.’’.

14 (e) CALCULATION OF ANNUAL MEDICARE+CHOICE

15 CAPITATION RATES.—Section 1853(c) of the Social Secu16 rity Act (42 U.S.C. 1395w–23(c)) is amended—

17 (1) in paragraph (1), in the matter preceding

18 subparagraph (A), by inserting ‘‘for benefits under

19 parts A and B’’ after ‘‘capitation rate’’; and

20 (2) by adding at the end the following new

21 paragraph:

22 ‘‘(8) PAYMENT FOR PART D BENEFITS.—The

23 Secretary shall determine a capitation rate for part

24 D benefits (for individuals enrolled under such part)

25 as follows:
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•S 1135 IS

1 ‘‘(A) DRUGS DISPENSED IN 2004.—In the

2 case of prescription drugs dispensed in 2004,

3 the capitation rate shall be based on the pro4 jected national per capita costs for prescription

5 drug benefits under part D and associated

6 claims processing costs for beneficiaries enrolled

7 under part D and not enrolled with a

8 Medicare+Choice organization under this part.

9 ‘‘(B) DRUGS DISPENSED IN SUBSEQUENT

10 YEARS.—In the case of prescription drugs dis11 pensed in a subsequent year, the capitation rate

12 shall be equal to the capitation rate for the pre13 ceding year increased by the Secretary’s esti14 mate of the projected per capita rate of annual

15 growth in expenditures under this title for an

16 individual enrolled under part D for such subse17 quent year.’’.

18 (f) LIMITATION ON ENROLLEE LIABILITY.—Section

19 1854(e) of the Social Security Act (42 U.S.C. 1395w–

20 24(e)) is amended by adding at the end the following new

21 paragraph:

22 ‘‘(5) SPECIAL RULE FOR PART D BENEFITS.—

23 With respect to outpatient prescription drug benefits

24 under part D, a Medicare+Choice organization may

25 not require that an enrollee pay a deductible or a co-
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•S 1135 IS

1 insurance percentage that exceeds the deductible or

2 coinsurance percentage applicable for such benefits

3 for an eligible beneficiary under part D.’’.

4 (g) REQUIREMENT FOR ADDITIONAL BENEFITS.—

5 Section 1854(f)(1) of the Social Security Act (42 U.S.C.

6 1395w–24(f)(1)) is amended by adding at the end the fol7 lowing new sentence: ‘‘Such determination shall be made

8 separately for the benefits under parts A and B and for

9 prescription drug benefits under part D.’’.

10 (h) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to items and services provided

12 under a Medicare+Choice plan on or after January 1,

13 2004.

14 SEC. 303. REPORTING REQUIREMENTS FOR SECRETARY OF

15 THE TREASURY REGARDING SLIDING SCALE

16 PART D PREMIUM.

17 (a) IN GENERAL.—Subsection (l) of section 6103 of

18 the Internal Revenue Code of 1986 (relating to disclosure

19 of returns and return information for purposes other than

20 tax administration) is amended by adding at the end the

21 following new paragraph:

22 ‘‘(18) DISCLOSURE OF RETURN INFORMATION

23 TO CARRY OUT SLIDING SCALE MEDICARE PART D

24 PREMIUM.—
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•S 1135 IS

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

2 upon written request from the Secretary of

3 Health and Human Services, disclose to officers

4 and employees of the Department of Health

5 and Human Services return information with

6 respect to a taxpayer who is required to pay a

7 monthly part D premium under part D of the

8 medicare program. Such return information

9 shall be limited to—

10 ‘‘(i) taxpayer identity information

11 with respect to such taxpayer,

12 ‘‘(ii) the filing status of such tax13 payer,

14 ‘‘(iii) the adjusted gross income of

15 such taxpayer,

16 ‘‘(iv) the amounts excluded from such

17 taxpayer’s gross income under sections 135

18 and 911,

19 ‘‘(v) the interest received or accrued

20 during the taxable year which is exempt

21 from the tax imposed by chapter 1 to the

22 extent such information is available, and

23 ‘‘(vi) the amounts excluded from such

24 taxpayer’s gross income under sections 931
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•S 1135 IS

1 and 933 to the extent such information is

2 available.

3 ‘‘(B) RESTRICTION ON USE OF DISCLOSED

4 INFORMATION.—Return information disclosed

5 under subparagraph (A) may be used by offi6 cers and employees of the Department of

7 Health and Human Services only for the pur8 poses of, and to the extent necessary in, estab9 lishing the appropriate monthly part D pre10 mium under part D of the medicare program.’’.

11 (b) CONFORMING AMENDMENT.—Paragraphs (3)(A)

12 and (4) of section 6103(p) of such Code are each amended

13 by striking ‘‘or (17)’’ each place it appears and inserting

14 ‘‘(17), or (18)’’.

15 SEC. 304. ADDITIONAL ASSISTANCE FOR LOW-INCOME

16 BENEFICIARIES.

17 (a) INCLUSION IN MEDICARE COST-SHARING.—Sec18 tion 1905(p)(3) of the Social Security Act (42 U.S.C.

19 1396d(p)(3)) is amended—

20 (1) in subparagraph (A)—

21 (A) in clause (i), by striking ‘‘and’’ at the

22 end;

23 (B) in clause (ii), by inserting ‘‘and’’ at

24 the end; and
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1 (C) by adding at the end the following new

2 clause:

3 ‘‘(iii) premiums under section 1860D(a).’’;

4 (2) in subparagraph (B), by striking ‘‘section

5 1813’’ and inserting ‘‘sections 1813 and

6 1860E(b)(2)’’; and

7 (3) in subparagraph (C), by striking ‘‘section

8 1813 and section 1833(b)’’ and inserting ‘‘sections

9 1813, 1833(b), and 1860E(b)(1)’’.

10 (b) EXPANSION OF MEDICAL ASSISTANCE.—Section

11 1902(a)(10)(E) of the Social Security Act (42 U.S.C.

12 1396a(a)(10)(E)) is amended—

13 (1) in clause (iii)—

14 (A) by striking ‘‘section 1905(p)(3)(A)(ii)’’

15 and inserting ‘‘clauses (ii) and (iii) of section

16 1905(p)(3)(A), for the coinsurance described in

17 section 1860E(b)(2), and for the deductible de18 scribed in section 1860E(b)(1)’’; and

19 (B) by striking ‘‘and’’ at the end;

20 (2) by redesignating clause (iv) as clause (vi);

21 and

22 (3) by inserting after clause (iii) the following

23 new clauses:

24 ‘‘(iv) for making medical assistance avail25 able for medicare cost-sharing described in sec-
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•S 1135 IS

1 tion 1905(p)(3)(A)(iii), for the coinsurance de2 scribed in section 1860E(b)(2), and for the de3 ductible described in section 1860E(b)(1) for

4 individuals who would be qualified medicare

5 beneficiaries described in section 1905(p)(1)

6 but for the fact that their income exceeds 120

7 percent but does not exceed 135 percent of such

8 official poverty line for a family of the size in9 volved;

10 ‘‘(v) for making medical assistance avail11 able for medicare cost-sharing described in sec12 tion 1905(p)(3)(A)(iii) on a linear sliding scale

13 based on the income of such individuals for in14 dividuals who would be qualified medicare bene15 ficiaries described in section 1905(p)(1) but for

16 the fact that their income exceeds 135 percent

17 but does not exceed 150 percent of such official

18 poverty line for a family of the size involved;

19 and’’.

20 (c) NONAPPLICABILITY OF PAYMENT DIFFERENTIAL

21 REQUIREMENTS TO MEDICARE PART D COST-SHAR22 ING.—Section 1902(n)(2) of the Social Security Act (42

23 U.S.C. 1396a(n)(2)) is amended by adding at the end the

24 following new sentence: ‘‘The preceding sentence shall not
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•S 1135 IS

1 apply to coinsurance described in section 1860E(b)(2) or

2 deductibles described in section 1860E(b)(1).’’.

3 (d) 100 PERCENT FEDERAL MEDICAL ASSISTANCE

4 PERCENTAGE.—The first sentence of section 1905(b) of

5 the Social Security Act (42 U.S.C. 1396d(b)) is

6 amended—

7 (1) by striking ‘‘and’’ before ‘‘(4)’’; and

8 (2) by inserting before the period at the end the

9 following: ‘‘, and (5) the Federal medical assistance

10 percentage shall be 100 percent with respect to med11 ical assistance provided under clauses (iv) and (v) of

12 section 1902(a)(10)(E)’’.

13 (e) TREATMENT OF TERRITORIES.—Section 1108(g)

14 of such Act (42 U.S.C. 1308(g)) is amended by adding

15 at the end the following new paragraph:

16 ‘‘(3) Notwithstanding the preceding provisions of this

17 subsection, with respect to fiscal year 2004 and any fiscal

18 year thereafter, the amount otherwise determined under

19 this subsection (and subsection (f)) for the fiscal year for

20 a Commonwealth or territory shall be increased by the

21 ratio (as estimated by the Secretary) of—

22 ‘‘(A) the aggregate amount of payments made

23 to the 50 States and the District of Columbia for

24 the fiscal year under title XIX that are attributable

25 to making medical assistance available for individ-
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•S 1135 IS

1 uals described in clauses (i), (iii), (iv), and (v) of

2 section 1902(a)(10)(E) for payment of medicare

3 cost-sharing that consists of premiums under section

4 1860D(a), coinsurance described in section

5 1860E(b)(2), or deductibles described in section

6 1860E(b)(1); to

7 ‘‘(B) the aggregate amount of total payments

8 made to such States and District for the fiscal year

9 under such title.’’.

10 (f) CONFORMING AMENDMENTS.—Section 1933 of

11 the Social Security Act (42 U.S.C. 1396u–3) is

12 amended—

13 (1) in subsection (a), by striking ‘‘section

14 1902(a)(10)(E)(iv)’’ and inserting ‘‘section

15 1902(a)(10)(E)(vi)’’;

16 (2) in subsection (c)(2)(A)—

17 (A) in clause (i), by striking ‘‘section

18 1902(a)(10)(E)(iv)(I)’’ and inserting ‘‘section

19 1902(a)(10)(E)(vi)(I)’’; and

20 (B) in clause (ii), by striking ‘‘section

21 1902(a)(10)(E)(iv)(II)’’ and inserting ‘‘section

22 1902(a)(10)(E)(vi)(II)’’;

23 (3) in subsection (d), by striking ‘‘section

24 1902(a)(10)(E)(iv)’’ and inserting ‘‘section

25 1902(a)(10)(E)(vi)’’; and
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•S 1135 IS

1 (4) in subsection (e), by striking ‘‘section

2 1902(a)(10)(E)(iv)’’ and inserting ‘‘section

3 1902(a)(10)(E)(vi)’’.

4 (g) EFFECTIVE DATE.—The amendments made by

5 this section shall apply for medical assistance provided

6 under section 1902(a)(10)(E) of the Social Security Act

7 (42 U.S.C. 1396a(a)(10)(E)) on and after January 1,

8 2004.

9 SEC. 305. MEDIGAP REVISIONS.

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

11 1395ss) is amended by adding at the end the following

12 new subsection:

13 ‘‘(v) MODERNIZED BENEFIT PACKAGES FOR MEDI14 CARE SUPPLEMENTAL POLICIES.—

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

16 ‘‘(A) IN GENERAL.—Notwithstanding sub17 section (p), the benefit packages classified as

18 ‘H’, ‘I’, and ‘J’ under the standards established

19 by subsection (p)(2) (including the benefit

20 package classified as ‘J’ with a high deductible

21 feature, as described in subsection (p)(11))

22 shall be revised so that—

23 ‘‘(i) the coverage of outpatient pre24 scription drugs available under such ben25 efit packages is replaced with coverage of
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•S 1135 IS

1 outpatient prescription drugs that com2 plements but does not duplicate the cov3 erage of outpatient prescription drugs that

4 is otherwise available under this title;

5 ‘‘(ii) the revised benefit packages pro6 vide a range of coverage options for out7 patient prescription drugs for beneficiaries,

8 but do not provide coverage for—

9 ‘‘(I) the deductible under section

10 1860E(b)(1); or

11 ‘‘(II) more than 90 percent of

12 the coinsurance applicable to an indi13 vidual under section 1860E(b)(2);

14 ‘‘(iii) uniform language and defini15 tions are used with respect to such revised

16 benefits;

17 ‘‘(iv) uniform format is used in the

18 policy with respect to such revised benefits;

19 ‘‘(v) such revised standards meet any

20 additional requirements imposed by the

21 Medicare Reform Act of 2001; and

22 ‘‘(vi) except as revised under the pre23 ceding clauses or as provided under sub24 section (p)(1)(E), the benefit packages are

25 identical to the benefit packages that were
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•S 1135 IS

1 available on the date of enactment of the

2 Medicare Reform Act of 2001.

3 ‘‘(B) MANNER OF REVISION.—The benefit

4 packages revised under this section shall be re5 vised in the manner described in subparagraph

6 (E) of subsection (p)(1), except that for pur7 poses of subparagraph (C) of such subsection,

8 the standards established under this subsection

9 shall take effect not later than January 1,

10 2004.

11 ‘‘(2) CONSTRUCTION OF BENEFITS IN OTHER

12 MEDICARE SUPPLEMENTAL POLICIES.—Nothing in

13 the benefit packages classified as ‘A’ through ‘G’

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

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

16 a high deductible feature, as described in subsection

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

18 benefits for which payment may be made under part

19 D.

20 ‘‘(3) GUARANTEED ISSUANCE AND RENEWAL

21 OF REVISED POLICIES.—The provisions of sub22 sections (q) and (s), including provisions of sub23 section (s)(3) (relating to special enrollment periods

24 in cases of termination or disenrollment), shall apply

25 to medicare supplemental policies revised under this
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•S 1135 IS

1 subsection in the same manner as such provisions

2 apply to medicare supplemental policies issued under

3 the standards established under subsection (p).

4 ‘‘(4) OPPORTUNITY OF CURRENT POLICY5 HOLDERS TO PURCHASE REVISED POLICIES.—

6 ‘‘(A) IN GENERAL.—No medicare supple7 mental policy of an issuer with a benefit pack8 age that is revised under paragraph (1) shall be

9 deemed to meet the standards in subsection (c)

10 unless the issuer—

11 ‘‘(i) provides written notice during the

12 60-day period immediately preceding the

13 period established for the open enrollment

14 period established under section

15 1860B(b)(2)(B), to each individual who is

16 a policyholder or certificate holder of a

17 medicare supplemental policy issued by

18 that issuer (at the most recent available

19 address of that individual) of the offer de20 scribed in clause (ii) and of the fact that,

21 so long as such individual retains coverage

22 under such policy, the individual shall be

23 ineligible for coverage of outpatient pre24 scription drugs under part D; and
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•S 1135 IS

1 ‘‘(ii) offers the policyholder or certifi2 cate holder under the terms described in

3 subparagraph (B), during at least the pe4 riod established under section

5 1860B(b)(2)(B), a medicare supplemental

6 policy with the benefit package that the

7 Secretary determines is most comparable

8 to the policy in which the individual is en9 rolled with coverage effective as of the date

10 on which the individual is first entitled to

11 benefits under part D.

12 ‘‘(B) TERMS OF OFFER DESCRIBED.—The

13 terms described in this subparagraph are terms

14 which do not—

15 ‘‘(i) deny or condition the issuance or

16 effectiveness of a medicare supplemental

17 policy described in subparagraph (A)(ii)

18 that is offered and is available for issuance

19 to new enrollees by such issuer;

20 ‘‘(ii) discriminate in the pricing of

21 such policy because of health status, claims

22 experience, receipt of health care, or med23 ical condition; or
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•S 1135 IS

1 ‘‘(iii) impose an exclusion of benefits

2 based on a preexisting condition under

3 such policy.

4 ‘‘(5) ELIMINATION OF OBSOLETE POLICIES

5 WITH NO GRANDFATHERING.—Except as provided in

6 subparagraph (B), no person may sell, issue, or

7 renew a medicare supplemental policy with a benefit

8 package that is classified as ‘H’, ‘I’, or ‘J’ (or with

9 a benefit package classified as ‘J’ with a high de10 ductible feature) that has not been revised under

11 this subsection on or after January 1, 2004.

12 ‘‘(6) PENALTIES.—Each penalty under this sec13 tion shall apply with respect to policies revised under

14 this subsection as if such policies were issued under

15 the standards established under subsection (p), in16 cluding the penalties under subsections (a), (d),

17 (p)(8), (p)(9), (q)(5), (r)(6)(A), (s)(4), and

18 (t)(2)(D).’’.

19 SEC. 306. STUDIES AND REPORT TO CONGRESS.

20 (a) STUDIES.—The Secretary of Health and Human

21 Services shall conduct a study to determine the feasibility

22 and advisability of—

23 (1) establishing a uniform format for pharmacy

24 benefit cards provided to beneficiaries by eligible en25 tities under the outpatient prescription drug benefit
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•S 1135 IS

1 program under part D of title XVIII of the Social

2 Security Act (as added by section 301); and

3 (2) developing systems to electronically transfer

4 prescriptions under such program from the pre5 scriber to the pharmacist.

6 (b) REPORT.—Not later than 2 years after the date

7 of enactment of this Act, the Secretary of Health and

8 Human Services shall submit to Congress a report on the

9 results of the studies conducted under subsection (a), to10 gether with any recommendations for legislation that the

11 Secretary determines to be appropriate as a result of such

12 studies.

13 TITLE IV—MEDICARE WELLNESS

14 SEC. 400. DEFINITIONS.

15 In this title:

16 (1) MEDICARE BENEFICIARY.—The term

17 ‘‘medicare beneficiary’’ means any individual who is

18 entitled to benefits under part A or enrolled under

19 part B of the medicare program, including any indi20 vidual enrolled in a Medicare+Choice plan offered

21 by a Medicare+Choice organization under part C of

22 such program.

23 (2) MEDICARE PROGRAM.—The term ‘‘medicare

24 program’’ means the health benefits program under
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•S 1135 IS

1 title XVIII of the Social Security Act (42 U.S.C.

2 1395 et seq.).

3 (3) SECRETARY.—The term ‘‘Secretary’’ means

4 the Secretary of Health and Human Services.

5 Subtitle A—Healthy Seniors

6 Promotion Program

7 SEC. 401. DEFINITIONS.

8 In this subtitle:

9 (1) COST-EFFECTIVE BENEFIT.—The term

10 ‘‘cost-effective benefit’’ means a benefit or technique

11 that has—

12 (A) been subject to peer review;

13 (B) been described in scientific journals;

14 and

15 (C) demonstrated value as measured by

16 unit costs relative to health outcomes achieved.

17 (2) COST-SAVING BENEFIT.—The term ‘‘cost18 saving benefit’’ means a benefit or technique that

19 has—

20 (A) been subject to peer review;

21 (B) been described in scientific journals;

22 and

23 (C) caused a net reduction in health care

24 costs for medicare beneficiaries.
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•S 1135 IS

1 (3) ELIGIBLE ENTITY.—The term ‘‘eligible enti2 ty’’ means an entity that the Working Group (as de3 fined in paragraph (6)) determines has dem4 onstrated expertise regarding health promotion and

5 disease prevention among medicare beneficiaries.

6 (4) MEDICALLY EFFECTIVE.—The term ‘‘medi7 cally effective’’ means, with respect to a benefit or

8 technique, that the benefit or technique has been—

9 (A) subject to peer review;

10 (B) described in scientific journals; and

11 (C) determined to achieve an intended goal

12 under normal programmatic conditions.

13 (5) MEDICALLY EFFICACIOUS.—The term

14 ‘‘medically efficacious’’ means, with respect to a ben15 efit or technique, that the benefit or technique has

16 been—

17 (A) subject to peer review;

18 (B) described in scientific journals; and

19 (C) determined to achieve an intended goal

20 under controlled conditions.

21 (6) WORKING GROUP.—The term ‘‘Working

22 Group’’ means the Working Group on Disease Self23 Management and Health Promotion established

24 under section 402.
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•S 1135 IS

1 SEC. 402. WORKING GROUP ON DISEASE SELF-MANAGE2 MENT AND HEALTH PROMOTION.

3 (a) ESTABLISHMENT.—There is established within

4 the Department of Health and Human Services a Working

5 Group on Disease Self-Management and Health Pro6 motion.

7 (b) COMPOSITION.—

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

9 the Working Group shall be composed of 5 members

10 as follows:

11 (A) The Administrator of the Centers for

12 Medicare & Medicaid Services.

13 (B) The Director of the Centers for Dis14 ease Control and Prevention.

15 (C) The Director of the Agency for

16 Healthcare Research and Quality.

17 (D) The Assistant Secretary for Aging.

18 (E) The Director of the National Institutes

19 of Health.

20 (2) ALTERNATIVE MEMBERSHIP.—Any member

21 of the Working Group described in a subparagraph

22 of paragraph (1) may appoint an individual who is

23 an officer or employee of the Federal Government to

24 serve as a member of the Working Group instead of

25 the member described in such subparagraph.
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•S 1135 IS

1 (c) DUTIES.—The duties of the Working Group are

2 as follows:

3 (1) HEALTHY SENIORS PROMOTION GRANTS.—

4 The Working Group shall establish general policies

5 and criteria with respect to the functions of the Sec6 retary under section 403, including—

7 (A) priorities for the approval of applica8 tions submitted under subsection (c) of such

9 section;

10 (B) procedures for monitoring and evalu11 ating research efforts conducted under such

12 section; and

13 (C) such other matters relating to the

14 grant program established under such section

15 as are recommended by the Working Group and

16 approved by the Secretary.

17 (2) DISEASE SELF-MANAGEMENT DEMONSTRA18 TION PROJECTS.—The Working Group shall estab19 lish general policies and criteria with respect to the

20 functions of the Secretary under section 404,

21 including—

22 (A) the identification of medical conditions

23 for which a demonstration project under such

24 section may be implemented;
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•S 1135 IS

1 (B) the prioritization of the conditions

2 identified under subparagraph (A) based on the

3 potential for the self-management of such con4 dition to be medically effective and for such

5 self-management to be a cost-effective benefit

6 or cost-saving benefit;

7 (C) the identification of target individuals

8 (as defined in section 404(a)(2));

9 (D) the development of procedures for se10 lecting areas in which such a demonstration

11 project may be implemented; and

12 (E) such other matters relating to such

13 demonstration projects as are recommended by

14 the Working Group and approved by the Sec15 retary.

16 (d) CHAIRPERSON.—The Secretary shall designate 1

17 of the members of the Working Group to be the chair18 person of the Group.

19 (e) QUORUM.—A majority of the members of the

20 Working Group shall constitute a quorum, but, subject to

21 subsection (f), a lesser number of members may hold

22 meetings.

23 (f) MEETINGS.—The Working Group shall meet at

24 the call of the chairperson, except that—
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•S 1135 IS

1 (1) it shall meet not less than 4 times each

2 year; and

3 (2) it shall meet upon the written request of a

4 majority of the members.

5 (g) COMPENSATION OF MEMBERS.—Each member of

6 the Working Group shall serve without compensation in

7 addition to that received for their service as an officer or

8 employee of the Federal Government.

9 (h) AUTHORIZATION OF APPROPRIATIONS.—There

10 are authorized to be appropriated such sums as may be

11 necessary for the purpose of carrying out this section.

12 SEC. 403. HEALTHY SENIORS PROMOTION GRANTS.

13 (a) PROGRAM AUTHORIZED.—The Secretary, using

14 the general policies and criteria established by the Work15 ing Group under section 402(c)(1) and in accordance with

16 the provisions of this section, is authorized to make grants

17 to eligible entities (as defined in section 401(3)) to pay

18 for the costs of the activities described in subsection (b).

19 (b) USE OF FUNDS.—An eligible entity may use pay20 ments received under this section in any fiscal year to con21 duct a program to—

22 (1) study whether using different types of pro23 viders of care and alternative settings (including

24 community-based senior centers) for the implemen25 tation of a successful health promotion and disease
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•S 1135 IS

1 prevention strategy, including the implications re2 garding the payment of such providers, is medically

3 efficacious or medically effective;

4 (2) determine the most effective means of edu5 cating medicare beneficiaries, either directly or

6 through providers of care, regarding the importance

7 of health promotion and disease prevention among

8 such beneficiaries;

9 (3) identify incentives that would increase the

10 use of new and existing preventive health benefits

11 and healthy behaviors by medicare beneficiaries;

12 (4) promote—

13 (A) the use of preventive health benefits by

14 medicare beneficiaries, including such services

15 that are covered under the medicare program;

16 (B) the proper use by medicare bene17 ficiaries of prescription and over-the-counter

18 drugs in order to reduce the number of hospital

19 stays and physician visits that are a result of

20 improper use of such drugs; and

21 (C) the utilization by medicare bene22 ficiaries of the steps (including exercise, mainte23 nance of a proper diet, and the utilization of ac24 cident prevention techniques) that research has
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•S 1135 IS

1 shown to promote and safeguard individual

2 health; and

3 (5) address other topics designated by the Sec4 retary.

5 (c) APPLICATION.—

6 (1) IN GENERAL.—Each eligible entity that de7 sires to receive a grant under this section shall sub8 mit an application to the Secretary, at such time, in

9 such manner, and accompanied by such additional

10 information as the Secretary may reasonably re11 quire.

12 (2) CONTENTS.—Each application submitted

13 under paragraph (1) shall—

14 (A) describe the activities for which assist15 ance under this section is sought;

16 (B) describe how such activities will—

17 (i) reflect the medical, behavioral, and

18 social aspects of care for medicare bene19 ficiaries;

20 (ii) lead to the development of cost-ef21 fective benefits and cost-saving benefits;

22 and

23 (iii) impact the quality of life of medi24 care beneficiaries;
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1 (C) provide assurances that such activities

2 will focus on broad medicare populations rather

3 than unique local medicare populations;

4 (D) provide evidence that the eligible entity

5 meets the general policies and criteria estab6 lished by the Working Group under section

7 402(c)(1);

8 (E) provide assurances that the eligible en9 tity will take such steps as may be available to

10 the entity in order to continue the activities for

11 which the entity is making application after the

12 period for which assistance is sought; and

13 (F) provide such additional assurances as

14 the Secretary determines to be essential to en15 sure compliance with the requirements of this

16 subtitle.

17 (3) JOINT APPLICATION.—A consortium of eli18 gible entities may file a joint application under the

19 provisions of paragraph (1).

20 (d) APPROVAL OF APPLICATION.—The Secretary

21 shall approve applications in accordance with the general

22 policies and criteria established by the Working Group

23 under section 402(c)(1).

24 (e) PAYMENTS.—Subject to amounts appropriated

25 under subsection (g), the Secretary shall pay to each eligi-
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•S 1135 IS

1 ble entity having an application approved under subsection

2 (d) the cost of the activities described in the application.

3 (f) EVALUATION AND REPORT.—

4 (1) EVALUATION.—The Secretary shall conduct

5 an annual evaluation of grants made under this sec6 tion to determine—

7 (A) the results of the activities conducted

8 under the programs for which grants were

9 made under this section;

10 (B) the extent to which research assisted

11 under this section has improved or expanded

12 the general research for health promotion and

13 disease prevention among medicare beneficiaries

14 and identified practical interventions based

15 upon such research;

16 (C) a list of specific recommendations

17 based upon the activities conducted under the

18 programs for which grants were made under

19 this section which show promise as practical

20 interventions for health promotion and disease

21 prevention among medicare beneficiaries;

22 (D) whether or not, as a result of the ac23 tivities conducted under the programs for which

24 grants were made under this section, certain

25 health promotion and disease prevention bene-
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•S 1135 IS

1 fits or education efforts should be added to the

2 medicare program, including discussions of

3 quality of life, translating the applied research

4 results into a benefit under the medicare pro5 gram, and whether each additional benefit

6 would be a cost-effective benefit or a cost-saving

7 benefit for each proposed addition; and

8 (E) how best to increase utilization of ex9 isting and recommended health promotion and

10 disease prevention services, such as an edu11 cation and public awareness campaign, pro12 viding financial incentives for providers of care

13 and medicare beneficiaries, or utilizing other

14 administrative means.

15 (2) ANNUAL REPORT.—Not later than Decem16 ber 31, 2003, and annually thereafter through 2005,

17 the Secretary, in consultation with the Working

18 Group, shall submit a report to Congress on the

19 evaluation conducted under paragraph (1), together

20 with such recommendations for such legislation and

21 administrative actions as the Secretary considers ap22 propriate.

23 (g) AUTHORIZATION OF APPROPRIATIONS.—There

24 are authorized to be appropriated for the purpose of car-
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•S 1135 IS

1 rying out this section $50,000,000 for each of fiscal years

2 2002, 2003, 2004, and 2005.

3 SEC. 404. DISEASE SELF-MANAGEMENT DEMONSTRATION

4 PROJECTS.

5 (a) DEMONSTRATION PROJECTS.—

6 (1) IN GENERAL.—The Secretary shall conduct

7 demonstration projects for the purpose of promoting

8 disease self-management for conditions identified by

9 the Working Group under section 402(c)(2) for tar10 get individuals (as defined in paragraph (2)).

11 (2) TARGET INDIVIDUAL DEFINED.—In this

12 section, the term ‘‘target individual’’ means an indi13 vidual who—

14 (A) is at risk for, or has, 1 or more of the

15 conditions identified by the Working Group

16 under section 402(c)(2); and

17 (B) is enrolled under the original medicare

18 fee-for-service program under parts A and B of

19 title XVIII of the Social Security Act (42

20 U.S.C. 1395c et seq.; 1395j et seq.) or is en21 rolled under the Medicare+Choice program

22 under part C of title XVIII of such Act (42

23 U.S.C. 1395w–21 et seq.).

24 (b) NUMBER; PROJECT AREAS; DURATION.—
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1 (1) NUMBER.—Not later than 2 years after the

2 date of enactment of this Act, the Secretary shall

3 implement a series of demonstration projects to

4 carry out the purpose described in subsection (a)(1).

5 (2) PROJECT AREAS.—The Secretary shall im6 plement the demonstration projects described in

7 paragraph (1) in urban, suburban, and rural areas.

8 (3) DURATION.—The demonstration projects

9 under this section shall be conducted during the 3-

10 year period beginning on the date on which the ini11 tial demonstration project is implemented.

12 (c) REPORT TO CONGRESS.—

13 (1) IN GENERAL.—Not later than 18 months

14 after the conclusion of the demonstration projects

15 under this section, the Secretary shall submit a re16 port to Congress on such projects.

17 (2) CONTENTS OF REPORT.—The report re18 quired under paragraph (1) shall include the fol19 lowing:

20 (A) A description of the demonstration

21 projects.

22 (B) An evaluation of—

23 (i) whether each benefit provided

24 under the demonstration projects is a cost25 effective benefit or a cost-saving benefit;
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•S 1135 IS

1 (ii) the level of the disease self-man2 agement attained by target individuals

3 under the demonstration projects; and

4 (iii) the satisfaction of target individ5 uals under the demonstration projects.

6 (C) Recommendations of the Secretary re7 garding whether to conduct the demonstration

8 projects on a permanent basis.

9 (D) Such recommendations for legislation

10 and administrative action as the Secretary de11 termines to be appropriate.

12 (E) Any other information regarding the

13 demonstration projects that the Secretary de14 termines to be appropriate.

15 (d) FUNDING.—The Secretary shall provide for the

16 transfer from the Federal Hospital Insurance Trust Fund

17 under section 1817 of the Social Security Act (42 U.S.C.

18 1395i) an amount not to exceed $30,000,000 for the costs

19 of carrying out this section.

20 Subtitle B—Medicare Coverage of

21 Preventive Health Benefits

22 SEC. 411. THERAPY AND COUNSELING FOR CESSATION OF

23 TOBACCO USE.

24 (a) COVERAGE.—Section 1861(s)(2) of the Social Se25 curity Act (42 U.S.C. 1395x(s)(2)), as amended by section
205

•S 1135 IS

1 105(a) of the Medicare, Medicaid, and SCHIP Benefits

2 Improvement and Protection Act of 2000 (114 Stat.

3 2763A–471), as enacted into law by section 1(a)(6) of

4 Public Law 106–554, is amended—

5 (1) in subparagraph (U), by striking ‘‘and’’ at

6 the end;

7 (2) in subparagraph (V), by inserting ‘‘and’’ at

8 the end; and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(W) supplemental preventive health services

12 (as defined in subsection (ww));’’.

13 (b) SERVICES DESCRIBED.—Section 1861 of the So14 cial Security Act (42 U.S.C. 1395x), as amended by sec15 tion 115(b), is amended by adding at the end the following

16 new subsection:

17 ‘‘Supplemental Preventive Health Services

18 ‘‘(xx) The term ‘supplemental preventive health serv19 ices’ means the following:

20 ‘‘(1)(A) Therapy and counseling for cessation of

21 tobacco use for individuals who use tobacco products

22 or who are being treated for tobacco use that is

23 furnished—

24 ‘‘(i) by or under the supervision of a physi25 cian; or
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•S 1135 IS

1 ‘‘(ii) by any other health care professional

2 who—

3 ‘‘(I) is legally authorized to furnish

4 such services under State law (or the State

5 regulatory mechanism provided by State

6 law) of the State in which the services are

7 furnished; and

8 ‘‘(II) is authorized to receive payment

9 for other services under this title or is des10 ignated by the Secretary for this purpose.

11 ‘‘(B) Subject to subparagraph (C), such term is

12 limited to—

13 ‘‘(i) therapy and counseling services rec14 ommended in ‘Treating Tobacco Use and De15 pendence: A Clinical Practice Guideline’, pub16 lished by the Public Health Service in June

17 2000, or any subsequent modification of such

18 Guideline; and

19 ‘‘(ii) such other therapy and counseling

20 services that the Secretary recognizes to be ef21 fective.

22 ‘‘(C) Such term shall not include coverage for

23 drugs or biologicals that are not otherwise covered

24 under this title.’’.
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1 (c) PAYMENT AND ELIMINATION OF COST-SHARING

2 FOR ALL SUPPLEMENTAL PREVENTIVE HEALTH SERV3 ICES.—

4 (1) PAYMENT AND ELIMINATION OF COINSUR5 ANCE.—Section 1833(a)(1) of the Social Security

6 Act (42 U.S.C. 1395l(a)(1)), as amended by sections

7 111(b)(2)(A) and 112(b)(2)(A), is amended—

8 (A) in subparagraph (N), by inserting

9 ‘‘other than supplemental preventive health

10 services (as defined in section 1861(xx))’’ after

11 ‘‘(as defined in section 1848(j)(3))’’;

12 (B) by striking ‘‘and’’ before ‘‘(V)’’; and

13 (C) by inserting before the semicolon at

14 the end the following: ‘‘, and (W) with respect

15 to supplemental preventive health services (as

16 defined in section 1861(xx)), the amount paid

17 shall be 100 percent of the lesser of the actual

18 charge for the services or the amount deter19 mined under the payment basis determined

20 under section 1848 by the Secretary for the

21 particular supplemental preventive health serv22 ice involved’’.

23 (2) PAYMENT UNDER PHYSICIAN FEE SCHED24 ULE.—Section 1848(j)(3) (42 U.S.C. 1395w–
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•S 1135 IS

1 4(j)(3)) is amended by inserting ‘‘(2)(W),’’ after

2 ‘‘(2)(S),’’.

3 (3) ELIMINATION OF COINSURANCE IN OUT4 PATIENT HOSPITAL SETTINGS.—The third sentence

5 of section 1866(a)(2)(A) of the Social Security Act

6 (42 U.S.C. 1395cc(a)(2)(A)) is amended by insert7 ing after ‘‘1861(s)(10)(A)’’ the following: ‘‘, with re8 spect to supplemental preventive health services (as

9 defined in section 1861(xx)),’’.

10 (4) ELIMINATION OF DEDUCTIBLE.—The first

11 sentence of section 1833(b) of the Social Security

12 Act (42 U.S.C. 1395l(b)), as amended by section

13 111(b)(2)(B), is amended—

14 (A) by striking ‘‘and’’ before ‘‘(7)’’; and

15 (B) by inserting before the period the fol16 lowing: ‘‘, and (8) such deductible shall not

17 apply with respect to supplemental preventive

18 health services (as defined in section

19 1861(xx))’’.

20 (d) APPLICATION OF LIMITS ON BILLING.—Section

21 1842(b)(18)(C) of the Social Security Act (42 U.S.C.

22 1395u(b)(18)(C)), as amended by section 105(d) of the

23 Medicare, Medicaid, and SCHIP Benefits Improvement

24 and Protection Act of 2000 (114 Stat. 2763A–472), as

25 enacted into law by section 1(a)(6) of Public Law 106–
209

•S 1135 IS

1 554, is amended by adding at the end the following new

2 clause:

3 ‘‘(vii) Any health care professional designated

4 under section 1861(xx)(1)(A)(ii)(II) to perform ther5 apy and counseling for cessation of tobacco use.’’.

6 (e) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to services furnished on or after

8 the day that is 1 year after the date of enactment of this

9 Act.

10 SEC. 412. COUNSELING FOR POST-MENOPAUSAL WOMEN.

11 (a) COVERAGE.—Section 1861(xx) of the Social Se12 curity Act (42 U.S.C. 1395x(s)(2)), as added by section

13 411(b), is amended by adding at the end the following new

14 paragraph:

15 ‘‘(2)(A) Counseling for post-menopausal

16 women.

17 ‘‘(B) For purposes of subparagraph (A), the

18 term ‘counseling for post-menopausal women’ means

19 counseling provided to a post-menopausal woman

20 regarding—

21 ‘‘(i) the symptoms, risk factors, and condi22 tions associated with menopause;

23 ‘‘(ii) appropriate treatment options for

24 post-menopausal women, including hormone re25 placement therapy; and
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•S 1135 IS

1 ‘‘(iii) other interventions that can be imple2 mented to prevent or delay the onset of health

3 risks associated with menopause.

4 ‘‘(C) Such term does not include coverage for

5 drugs or biologicals that are not otherwise covered

6 under this title.’’.

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

8 this section shall apply to services furnished on or after

9 the day that is 1 year after the date of enactment of this

10 Act.

11 SEC. 413. SCREENING FOR DIMINISHED VISUAL ACUITY.

12 (a) COVERAGE.—Section 1861(xx) of the Social Se13 curity Act (42 U.S.C. 1395x(s)(2)), as amended by section

14 412(a), is amended by adding at the end the following new

15 paragraph:

16 ‘‘(3)(A) Screening for diminished visual acuity.

17 ‘‘(B) For purposes of subparagraph (A), the

18 term ‘screening for diminished visual acuity’ means

19 a screening for diminished visual acuity that is fur20 nished by or under the supervision of an optometrist

21 or ophthalmologist who is legally authorized to fur22 nish such services under State law (or the State reg23 ulatory mechanism provided by State law) of the

24 State in which the services are furnished.’’.
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•S 1135 IS

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

2 this section shall apply to services furnished on or after

3 the day that is 1 year after the date of enactment of this

4 Act.

5 SEC. 414. SCREENING FOR HEARING IMPAIRMENT.

6 (a) COVERAGE.—Section 1861(xx) of the Social Se7 curity Act (42 U.S.C. 1395x(s)(2)), as amended by section

8 413(a), is amended by adding at the end the following new

9 paragraph:

10 ‘‘(4)(A) Screening for hearing impairment.

11 ‘‘(B) For purposes of subparagraph (A), the

12 term ‘screening for hearing impairment’ means the

13 following services:

14 ‘‘(i) A screening for hearing impairment

15 using periodic questions that is furnished by—

16 ‘‘(I) a physician, including an

17 otolaryngologist;

18 ‘‘(II) a qualified audiologist (as de19 fined in subsection (ll)(3)(B)); or

20 ‘‘(III) any other health care profes21 sional who is legally authorized to furnish

22 such screening under State law (or the

23 State regulatory mechanism provided by

24 State law) of the State in which the

25 screening is furnished.
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•S 1135 IS

1 ‘‘(ii) If the answers to such questions indi2 cate potential hearing impairment, an otoscopic

3 examination and an audiometric screening test

4 that are furnished by an otolaryngologist or a

5 qualified audiologist (as so defined).

6 ‘‘(iii) If the results of such examination or

7 test indicate a need for assistive listening de8 vices (whether or not such examination or test

9 was based on a screening or was diagnostic),

10 counseling about such devices that is furnished

11 by an otolaryngologist or a qualified audiologist

12 (as so defined).’’.

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

14 this section shall apply to services furnished on or after

15 the day that is 1 year after the date of enactment of this

16 Act.

17 SEC. 415. SCREENING FOR CHOLESTEROL.

18 (a) COVERAGE.—Section 1861(xx) of the Social Se19 curity Act (42 U.S.C. 1395x(s)(2)), as amended by section

20 414(a), is amended by adding at the end the following new

21 paragraph:

22 ‘‘(5)(A) Screening for cholesterol if the indi23 vidual involved has not had such a screening during

24 the preceding 5 years.
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•S 1135 IS

1 ‘‘(B) Notwithstanding subparagraph (A), pay2 ment may be made under this part for a screening

3 for cholesterol with respect to an individual even if

4 the individual has had such a screening during the

5 preceding 5 years if the individual exhibits major

6 risk factors for coronary heart disease or a stroke,

7 including, but not limited to, smoking, hypertension,

8 and diabetes.’’.

9 (b) CONFORMING AMENDMENT.—Section 1862(a)(1)

10 of the Social Security Act (42 U.S.C. 1395y(a)(1)), as

11 amended by section 301(b)(2), is amended—

12 (1) in subparagraph (I), by striking ‘‘and’’ at

13 the end;

14 (2) in subparagraph (J), by striking the semi15 colon at the end and inserting ‘‘, and’’; and

16 (3) by adding at the end the following new sub17 paragraph:

18 ‘‘(K) in the case of a screening for choles19 terol, which is performed more frequently than

20 is covered under section 1861(xx)(5);’’.

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to services furnished on or after

23 the day that is 1 year after the date of enactment of this

24 Act.
214

•S 1135 IS

1 SEC. 416. SCREENING FOR HYPERTENSION.

2 (a) COVERAGE.—Section 1861(xx) of the Social Se3 curity Act (42 U.S.C. 1395x(s)(2)), as amended by section

4 415(a), is amended by adding at the end the following new

5 paragraph:

6 ‘‘(6)(A) Screening for hypertension if the indi7 vidual involved has not had such a screening during

8 the preceding 2 years.

9 ‘‘(B) Notwithstanding subparagraph (A), pay10 ment may be made under this part for a screening

11 for hypertension with respect to an individual even

12 if the individual has had such a screening during the

13 preceding 2 years if the individual has a history of,

14 or is at risk for, hypertension.’’.

15 (b) CONFORMING AMENDMENT.—Section 1862(a)(1)

16 of the Social Security Act (42 U.S.C. 1395y(a)(1)), as

17 amended by section 415(b), is amended—

18 (1) in subparagraph (J), by striking ‘‘and’’ at

19 the end;

20 (2) in subparagraph (K), by striking the semi21 colon at the end and inserting ‘‘, and’’; and

22 (3) by adding at the end the following new sub23 paragraph:

24 ‘‘(L) in the case of a screening for hyper25 tension, which is performed more frequently

26 than is covered under section 1861(xx)(6);’’.
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•S 1135 IS

1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to services furnished on or after

3 the day that is 1 year after the date of enactment of this

4 Act.

5 SEC. 417. EXPANSION OF ELIGIBILITY FOR BONE MASS

6 MEASUREMENT.

7 (a) EXPANSION.—Section 1861(rr)(2) of the Social

8 Security Act (42 U.S.C. 1395x(rr)(2)) is amended to read

9 as follows:

10 ‘‘(2) For purposes of this subsection, the term ‘quali11 fied individual’ means an individual who is (in accordance

12 with regulations prescribed by the Secretary)—

13 ‘‘(A) an estrogen-deficient woman (including

14 those receiving hormone replacement therapy);

15 ‘‘(B) an individual with low trauma or fragility

16 fractures (including vertebral abnormalities and hip,

17 rib, wrist, pelvic, or proximal humeral fractures);

18 ‘‘(C) an individual receiving long-term medica19 tions that have associations to bone loss or

20 osteoporosis (including glucocorticoid therapy and

21 androgen deprivation therapy);

22 ‘‘(D) an individual with a long-term medical

23 condition that has association to osteoporosis (in24 cluding primary hyperparathyroidism);
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•S 1135 IS

1 ‘‘(E) a man with risk factors for osteoporosis

2 such as hypogonadism; and

3 ‘‘(F) an individual being monitored to assess

4 the response to, or efficacy of, an approved

5 osteoporosis therapy.’’.

6 (b) REFERENCE TO ELIMINATION OF COINSURANCE

7 AND WAIVER OF APPLICATION OF DEDUCTIBLE.—For

8 the elimination of the coinsurance for bone mass measure9 ment and for the waiver of the application of the part B

10 deductible for such measurement, see section 419.

11 (c) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall apply to services furnished on or after

13 the day that is 1 year after the date of enactment of this

14 Act.

15 SEC. 418. COVERAGE OF MEDICAL NUTRITION THERAPY

16 SERVICES FOR BENEFICIARIES WITH CAR17 DIOVASCULAR DISEASES.

18 (a) IN GENERAL.—Section 1861(s)(2)(V) of the So19 cial Security Act (42 U.S.C. 1395x(s)(2)(V)), as added by

20 section 105(a) of the Medicare, Medicaid, and SCHIP

21 Benefits Improvement and Protection Act of 2000 (114

22 Stat. 2763A–471), as enacted into law by section 1(a)(6)

23 of Public Law 106–554, is amended to read as follows:
217

•S 1135 IS

1 ‘‘(V) medical nutrition therapy services (as de2 fined in subsection (vv)(1)) in the case of a

3 beneficiary—

4 ‘‘(i) with a cardiovascular disease (includ5 ing congestive heart failure, arteriosclerosis,

6 hyperlipidemia, hypertension, and

7 hypercholesterolemia), diabetes, or a renal dis8 ease (or a combination of such conditions)

9 who—

10 ‘‘(I) has not received diabetes out11 patient self-management training services

12 within a time period determined by the

13 Secretary;

14 ‘‘(II) is not receiving maintenance di15 alysis for which payment is made under

16 section 1881; and

17 ‘‘(III) meets such other criteria deter18 mined by the Secretary after consideration

19 of protocols established by dietitian or nu20 trition professional organizations; or

21 ‘‘(ii) with a combination of such conditions

22 who—

23 ‘‘(I) is not described in clause (i) be24 cause of the application of subclause (I) or

25 (II) of such clause;
218

•S 1135 IS

1 ‘‘(II) receives such medical nutrition

2 therapy services in a coordinated manner

3 (as determined appropriate by the Sec4 retary) with any services described in such

5 subclauses that the beneficiary is receiving;

6 and

7 ‘‘(III) meets such other criteria deter8 mined by the Secretary after consideration

9 of protocols established by dietitian or nu10 trition professional organizations;’’.

11 (b) ELIMINATION OF COINSURANCE.—Section

12 1833(a)(1)(T) of the Social Security Act (42 U.S.C.

13 1395l(a)(1)(T)), as added by section 105(c)(2) of the

14 Medicare, Medicaid, and SCHIP Benefits Improvement

15 and Protection Act of 2000 (114 Stat. 2763A–472), as

16 enacted into law by section 1(a)(6) of Public Law 106–

17 554, is amended by striking ‘‘80 percent’’ and inserting

18 ‘‘100 percent’’.

19 (c) REFERENCE TO WAIVER OF APPLICATION OF

20 DEDUCTIBLE.—For the waiver of the application of the

21 part B deductible for medical nutrition therapy services,

22 see section 419.

23 (d) EFFECTIVE DATE.—The amendments made by

24 this section shall take effect as if included in the enact25 ment of section 105 of the Medicare, Medicaid, and
219

•S 1135 IS

1 SCHIP Benefits Improvement and Protection Act of 2000

2 (114 Stat. 2763A–471), as enacted into law by section

3 1(a)(6) of Public Law 106–554.

4 SEC. 419. ELIMINATION OF DEDUCTIBLES AND COINSUR5 ANCE FOR EXISTING PREVENTIVE HEALTH

6 BENEFITS.

7 (a) IN GENERAL.—Section 1833 of the Social Secu8 rity Act (42 U.S.C. 1395l) is amended by inserting after

9 subsection (o) the following new subsection:

10 ‘‘(p) DEDUCTIBLES AND COINSURANCE WAIVED FOR

11 PREVENTIVE HEALTH ITEMS AND SERVICES.—The Sec12 retary may not require the payment of any deductible or

13 coinsurance under subsection (a) or (b), respectively, of

14 any individual enrolled for coverage under this part for

15 any of the following preventive health items and services:

16 ‘‘(1) Blood-testing strips, lancets, and blood

17 glucose monitors for individuals with diabetes de18 scribed in section 1861(n).

19 ‘‘(2) Diabetes outpatient self-management

20 training services (as defined in section 1861(qq)(1)).

21 ‘‘(3) Pneumococcal, influenza, and hepatitis B

22 vaccines and administration described in section

23 1861(s)(10).

24 ‘‘(4) Screening mammography (as defined in

25 section 1861(jj)).
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•S 1135 IS

1 ‘‘(5) Screening pap smear and screening pelvic

2 exam (as defined in paragraphs (1) and (2) of sec3 tion 1861(nn), respectively).

4 ‘‘(6) Bone mass measurement (as defined in

5 section 1861(rr)(1)).

6 ‘‘(7) Prostate cancer screening test (as defined

7 in section 1861(oo)(1)).

8 ‘‘(8) Colorectal cancer screening test (as de9 fined in section 1861(pp)(1)).

10 ‘‘(9) Screening for glaucoma (as defined in sec11 tion 1861(uu)).

12 ‘‘(10) Medical nutrition therapy services (as de13 fined in section 1861(vv)(1)).’’.

14 (b) WAIVER OF COINSURANCE.—

15 (1) IN GENERAL.—Section 1833(a)(1)(B) of the

16 Social Security Act (42 U.S.C. 1395l(a)(1)(B)) is

17 amended to read as follows: ‘‘(B) with respect to

18 preventive health items and services described in

19 subsection (p), the amounts paid shall be 100 per20 cent of the fee schedule or other basis of payment

21 under this title for the particular item or service,’’.

22 (2) ELIMINATION OF COINSURANCE IN OUT23 PATIENT HOSPITAL SETTINGS.—The third sentence

24 of section 1866(a)(2)(A) of the Social Security Act

25 (42 U.S.C. 1395cc(a)(2)(A)), as amended by section
221

•S 1135 IS

1 411(c)(3), is amended by inserting after ‘‘section

2 1861(xx)’’ the following: ‘‘and preventive health

3 items and services described in section 1833(p)’’.

4 (c) WAIVER OF APPLICATION OF DEDUCTIBLE.—

5 Section 1833(b)(1) of the Social Security Act (42 U.S.C.

6 1395l(b)(1)) is amended to read as follows: ‘‘(1) such de7 ductible shall not apply with respect to preventive health

8 items and services described in subsection (p),’’.

9 (d) ADDING ‘‘LANCET’’ TO DEFINITION OF DME.—

10 Section 1861(n) of the Social Security Act (42 U.S.C.

11 1395x(n)) is amended by striking ‘‘blood-testing strips

12 and blood glucose monitors’’ and inserting ‘‘blood-testing

13 strips, lancets, and blood glucose monitors’’.

14 (e) CONFORMING AMENDMENTS.—

15 (1) ELIMINATION OF COINSURANCE FOR CLIN16 ICAL DIAGNOSTIC LABORATORY TESTS.—Paragraphs

17 (1)(D)(i) and (2)(D)(i) of section 1833(a) of the So18 cial Security Act (42 U.S.C. 1395l(a)), as amended

19 by section 201(b)(1) of the Medicare, Medicaid, and

20 SCHIP Benefits Improvement and Protection Act of

21 2000 (114 Stat. 2763A–481), as enacted into law by

22 section 1(a)(6) of Public Law 106–554, are each

23 amended by inserting ‘‘or which are described in

24 subsection (p)’’ after ‘‘assignment-related basis’’.
222

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1 (2) ELIMINATION OF COINSURANCE FOR CER2 TAIN DME.—Section 1834(a)(1)(A) of the Social Se3 curity Act (42 U.S.C. 1395m(a)(1)(A)) is amended

4 by inserting ‘‘(or 100 percent, in the case of such an

5 item described in section 1833(p))’’ after ‘‘80 per6 cent’’.

7 (3) ELIMINATION OF DEDUCTIBLES AND COIN8 SURANCE FOR COLORECTAL CANCER SCREENING

9 TESTS.—Section 1834(d) of the Social Security Act

10 (42 U.S.C. 1395m(d)) is amended—

11 (A) in paragraph (2)(C)—

12 (i) by striking ‘‘(C) FACILITY PAY13 MENT LIMIT.—’’ and all that follows

14 through ‘‘Notwithstanding subsections’’

15 and inserting the following:

16 ‘‘(C) FACILITY PAYMENT LIMIT.—Notwith17 standing subsections’’;

18 (ii) by striking ‘‘(I) in accordance’’

19 and inserting the following:

20 ‘‘(i) in accordance’’;

21 (iii) by striking ‘‘(II) are performed’’

22 and all that follows through ‘‘payment

23 under’’ and inserting the following:
223

•S 1135 IS

1 ‘‘(ii) are performed in an ambulatory

2 surgical center or hospital outpatient de3 partment,

4 payment under’’; and

5 (iv) by striking clause (ii); and

6 (B) in paragraph (3)(C)—

7 (i) by striking ‘‘(C) FACILITY PAY8 MENT LIMIT.—’’ and all that follows

9 through ‘‘Notwithstanding subsections’’

10 and inserting the following:

11 ‘‘(C) FACILITY PAYMENT LIMIT.—Notwith12 standing subsections’’; and

13 (ii) by striking clause (ii).

14 (f) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to services furnished on or after

16 the day that is 1 year after the date of enactment of this

17 Act.

18 SEC. 420. PROGRAM INTEGRITY.

19 The Secretary, in consultation with the Inspector

20 General of the Department of Health and Human Serv21 ices, shall integrate supplemental preventive health serv22 ices (as defined in section 1861(xx) of the Social Security

23 Act (as added by the preceding provisions of this subtitle))

24 with existing program integrity measures.
224

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1 SEC. 421. PROMOTION OF PREVENTIVE HEALTH BENEFITS.

2 In order to promote the use by medicare beneficiaries

3 of preventive health benefits, including preventive health

4 services (as defined in section 1861(xx) of the Social Secu5 rity Act (as added by the preceding provisions of this sub6 title)) and preventive health items and services described

7 in section 1833(p) of such Act (as added by section 419),

8 the Secretary shall do the following:

9 (1) MEDICARE HANDBOOK AND OTHER ANNUAL

10 NOTICES.—Include in any medicare handbook and

11 any other annual notice provided to medicare bene12 ficiaries a detailed description of—

13 (A) the preventive health benefits that are

14 covered under the medicare program; and

15 (B) the importance of using such benefits.

16 (2) FISCAL INTERMEDIARIES AND CARRIERS.—

17 Require that fiscal intermediaries with a contract

18 under section 1816 of the Social Security Act (42

19 U.S.C. 1395h) and carriers with a contract under

20 section 1842 of such Act (42 U.S.C. 1395u) include

21 preventive health benefits messages on Medicare

22 Summary Notice Statements and Explanations of

23 Medicare Benefits distributed by such entities.

24 (3) MEDICARE PART B STATEMENT.—Regularly

25 include preventive health benefits messages on the

26 medicare part B statement.
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•S 1135 IS

1 (4) MEDICARE+CHOICE PLANS.—Require that

2 Medicare+Choice organizations offering a

3 Medicare+Choice plan disclose under section

4 1852(c)(1)(B) of the Social Security Act (42 U.S.C.

5 1395w–22(c)(1)(B)) information regarding the pre6 ventive health benefits that are covered under the

7 plan.

8 (5) OTHER ACTIVITIES.—Conduct activities in

9 addition to those described in paragraphs (1)

10 through (4) that the Secretary determines to be use11 ful in disseminating information to medicare bene12 ficiaries regarding—

13 (A) the preventive health benefits that are

14 covered under the medicare program;

15 (B) the importance of using such benefits;

16 and

17 (C) general health promotion.

18 Subtitle C—National Falls Preven19 tion Education and Awareness

20 Campaign

21 SEC. 431. NATIONAL FALLS PREVENTION EDUCATION AND

22 AWARENESS CAMPAIGN.

23 (a) IN GENERAL.—The Director of the Centers for

24 Disease Control and Prevention, in consultation with the

25 Administrator of the Centers for Medicare & Medicaid
226

•S 1135 IS

1 Services, shall conduct a national falls prevention and

2 awareness campaign to reduce fall-related injuries among

3 medicare beneficiaries.

4 (b) REPORT TO CONGRESS.—

5 (1) IN GENERAL.—The Director of the Centers

6 for Disease Control and Prevention, in consultation

7 with the Administrator of the Centers for Medicare

8 & Medicaid Services, shall submit to Congress a re9 port on the campaign conducted under this section.

10 (2) DEADLINE FOR REPORT.—The report re11 quired under paragraph (1) shall be submitted not

12 later than the earlier of—

13 (A) 6 months after the campaign is com14 pleted; or

15 (B) 3 years after the campaign is imple16 mented.

17 (3) CONTENTS OF REPORT.—The report re18 quired under paragraph (1) shall include the fol19 lowing:

20 (A) A description of the campaign.

21 (B) An evaluation of—

22 (i) whether the campaign has effec23 tively reached its target population; and

24 (ii) the cost-effectiveness of the cam25 paign.
227

•S 1135 IS

1 (C) An assessment of whether the cam2 paign has been effective, as measured by

3 whether—

4 (i) the target population has adopted

5 the interventions suggested in the cam6 paign, and if not, the reasons why such

7 interventions have not been adopted; and

8 (ii) the fall rates among the target

9 population have decreased since the cam10 paign was implemented, and if not, the

11 reasons why such fall rates have not de12 creased.

13 (D) Any other information regarding the

14 campaign that the Director of the Centers for

15 Disease Control and Prevention determines to

16 be appropriate.

17 (c) AUTHORIZATION OF APPROPRIATIONS.—There

18 are authorized to be appropriated such sums as may be

19 necessary for the purpose of carrying out this section.

20 Subtitle D—Clinical Depression

21 Screening Demonstration Projects

22 SEC. 441. CLINICAL DEPRESSION SCREENING DEMONSTRA23 TION PROJECTS.

24 (a) DEFINITIONS.—In this section:
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1 (1) DEMONSTRATION PROJECT.—The term

2 ‘‘demonstration project’’ means a demonstration

3 project established under subsection (b)(1).

4 (2) ELIGIBLE BENEFICIARY.—The term ‘‘eligi5 ble beneficiary’’ means an individual enrolled for

6 benefits under part B who is not enrolled in any of

7 the following:

8 (A) A Medicare+Choice plan under part C

9 of title XVIII of the Social Security Act (42

10 U.S.C. 1395w–21 et seq.).

11 (B) A plan offered by an eligible organiza12 tion under section 1876 of such Act (42 U.S.C.

13 1395mm).

14 (C) A program of all-inclusive care for the

15 elderly (PACE) under section 1894 of such Act

16 (42 U.S.C. 1395eee).

17 (D) A social health maintenance organiza18 tion (SHMO) demonstration project established

19 under section 4018(b) of the Omnibus Budget

20 Reconciliation Act of 1987 (Public Law 100–

21 203).

22 (E) A health care prepayment plan under

23 section 1833(a)(1)(A) of the Social Security Act

24 (42 U.S.C. 1395l(a)(1)(A)).
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•S 1135 IS

1 (3) PART B.—The term ‘‘part B’’ means part

2 B of the original medicare fee-for-service program

3 under title XVIII of the Social Security Act (42

4 U.S.C. 1395j et seq.).

5 (4) QUALIFIED HEALTH PROFESSIONAL.—The

6 term ‘‘qualified health professional’’ means an indi7 vidual that—

8 (A) is—

9 (i) a physician (as defined in section

10 1861(r)(1) of the Social Security Act (42

11 U.S.C. 1395x(r)(1)));

12 (ii) a nurse practitioner (as defined in

13 section 1861(aa)(5) of such Act (42 U.S.C.

14 1395x(aa)(5))); or

15 (iii) a mental health care professional

16 (including a clinical social worker, as de17 fined in section 1861(hh) of such Act (42

18 U.S.C. 1395x(hh))) that is licensed to per19 form mental health services by the State in

20 which a screening for clinical depression is

21 furnished under a demonstration project;

22 and

23 (B) has an agreement in effect with the

24 Secretary under which the professional agrees

25 to accept the amount determined by the Sec-
230

•S 1135 IS

1 retary under subsection (b)(4) as full payment

2 for such screening and to accept an assignment

3 described in section 1842(b)(3)(B)(ii) of the So4 cial Security Act (42 U.S.C.

5 1395u(b)(3)(B)(ii)) with respect to payment for

6 each screening furnished by the professional to

7 an eligible beneficiary participating in a dem8 onstration project.

9 (5) SCREENING FOR CLINICAL DEPRESSION.—

10 (A) IN GENERAL.—The term ‘‘screening

11 for clinical depression’’ means a consultation

12 during which—

13 (i) a self-administered written screen14 ing test (or an alternative format for such

15 test pursuant to subsection (b)(3)(B)) is

16 made available to an eligible beneficiary;

17 and

18 (ii) a qualified health professional—

19 (I) interprets the results of such

20 test;

21 (II) discusses the beneficiary’s

22 responses to the questions on the test

23 with the beneficiary;

24 (III) assesses the beneficiary’s

25 risk of clinical depression; and
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•S 1135 IS

1 (IV) if the qualified health pro2 fessional determines that the bene3 ficiary is at high risk for clinical de4 pression, refers the eligible beneficiary

5 for a full diagnostic evaluation and

6 such additional treatment as may be

7 required.

8 (B) CONSTRUCTION.—Nothing in subpara9 graph (A)(ii)(IV) shall be construed as prohib10 iting a qualified health professional performing

11 the screening for clinical depression with re12 spect to an individual from directly providing

13 the diagnostic evaluation and additional treat14 ment described in such subparagraph to such

15 individual if legally authorized under State law

16 to do so.

17 (6) SELF-ADMINISTERED WRITTEN SCREENING

18 TEST.—The term ‘‘self-administered written screen19 ing test’’ means an instrument on which an eligible

20 beneficiary writes answers to questions designed to

21 enable a qualified health professional to establish the

22 level of risk of such eligible beneficiary for clinical

23 depression.

24 (b) DEMONSTRATION PROJECTS.—
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•S 1135 IS

1 (1) IN GENERAL.—The Secretary shall establish

2 and conduct demonstration projects for the purpose

3 of evaluating the efficacy of providing screenings for

4 clinical depression as a benefit under part B to eligi5 ble beneficiaries through qualified health profes6 sionals in accordance with the requirements of this

7 section.

8 (2) NUMBER, PROJECT AREAS, DURATION.—

9 (A) NUMBER.—The Secretary shall estab10 lish no fewer than 6 and no more than 10 dem11 onstration projects.

12 (B) PROJECT AREAS.—

13 (i) IN GENERAL.—The Secretary shall

14 conduct demonstration projects in geo15 graphic areas that include urban, subur16 ban, and rural areas.

17 (ii) SELECTION.—The Secretary shall

18 select the geographic areas described in

19 clause (i) in a manner that—

20 (I) ensures geographic diversity

21 and a mix of screening sites (includ22 ing physicians’ offices, hospital out23 patient departments, community men24 tal health centers, and skilled nursing

25 facilities); and
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•S 1135 IS

1 (II) gives preference to areas

2 with a high concentration of eligible

3 beneficiaries.

4 (C) DURATION.—The demonstration

5 projects under this section shall be conducted

6 during the 3-year period beginning on the date

7 on which the initial demonstration project is

8 implemented.

9 (3) IDENTIFICATION AND DISTRIBUTION OF

10 SELF-ADMINISTERED TESTS.—

11 (A) IN GENERAL.—The Secretary, in con12 sultation with professionals experienced in con13 ducting large-scale depression screening

14 projects, shall—

15 (i) establish or identify a self-adminis16 tered written screening test to be used in

17 conducting the demonstration projects; and

18 (ii) not later than the date that is 3

19 months before the date on which a dem20 onstration project is implemented in a geo21 graphic area, distribute such test to each

22 qualified health professional that provides

23 services in such area in which the Sec24 retary conducts a demonstration project,
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•S 1135 IS

1 together with guidelines for making the

2 test available to eligible beneficiaries.

3 (B) ALTERNATIVE FORMATS FOR TEST.—

4 The Secretary shall also establish and distribute

5 alternative formats for the self-administered

6 written screening test under subparagraph (A)

7 which shall be available for use when cir8 cumstances do not permit an individual to com9 plete the self-administered written screening

10 test.

11 (4) PAYMENT FOR SCREENINGS FOR CLINICAL

12 DEPRESSION.—

13 (A) IN GENERAL.—Subject to subpara14 graph (C), the Secretary shall provide for pay15 ment of the reasonable charges for each screen16 ing for clinical depression furnished to an eligi17 ble beneficiary by a qualified health professional

18 from the amounts transferred under subsection

19 (d).

20 (B) WAIVER OF COINSURANCE AND

21 DEDUCTIBLES.—The Secretary may not require

22 the payment of any deductible or coinsurance

23 by any eligible beneficiary for a screening for

24 clinical depression furnished under a dem25 onstration project.
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•S 1135 IS

1 (C) FREQUENCY LIMITATION.—No pay2 ment may be made under this section for a

3 screening for clinical depression if such a

4 screening is performed with respect to an eligi5 ble beneficiary within the year after a previous

6 screening of such beneficiary.

7 (5) WAIVER AUTHORITY.—The Secretary may

8 waive such requirements under title XVIII of the So9 cial Security Act (42 U.S.C. 1395 et seq.) as the

10 Secretary determines necessary to carry out the

11 demonstration projects under this section.

12 (c) REPORTS TO CONGRESS.—

13 (1) INTERIM REPORT.—

14 (A) IN GENERAL.—Not later than 2 years

15 after the Secretary implements the initial dem16 onstration project, the Secretary shall submit to

17 Congress a report regarding the demonstration

18 projects conducted under this section.

19 (B) CONTENTS OF REPORT.—The report

20 submitted under subparagraph (A) shall

21 contain—

22 (i) a description of the demonstration

23 projects conducted under this section;

24 (ii) an evaluation of—
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•S 1135 IS

1 (I) whether screening for clinical

2 depression is a cost-effective benefit or

3 a cost-saving benefit; and

4 (II) the level of satisfaction of el5 igible beneficiaries to whom such a

6 screening is furnished under the dem7 onstration project; and

8 (iii) any other information regarding

9 the demonstration projects that the Sec10 retary determines to be appropriate.

11 (2) FINAL REPORT.—Not later than 1 year

12 after the conclusion of the demonstration projects,

13 the Secretary shall submit a final report to Congress

14 on the demonstration projects containing the rec15 ommendations of the Secretary regarding whether to

16 conduct the demonstration projects on a permanent

17 basis, together with such recommendations for legis18 lation and administrative action as the Secretary

19 considers appropriate.

20 (d) FUNDING.—The Secretary shall provide for the

21 transfer from the Federal Hospital Insurance Trust Fund

22 under section 1817 of the Social Security Act (42 U.S.C.

23 1395i) an amount not to exceed $30,000,000 for the costs

24 of carrying out the demonstration projects under this sec25 tion.
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•S 1135 IS

1 Subtitle E—Medicare Health Edu2 cation and Risk Appraisal Pro3 gram

4 SEC. 451. MEDICARE HEALTH EDUCATION AND RISK AP5 PRAISAL PROGRAM.

6 Title XVIII of the Social Security Act (42 U.S.C.

7 1395 et seq.) is amended by adding at the end the fol8 lowing new section:

9 ‘‘MEDICARE HEALTH EDUCATION AND RISK APPRAISAL

10 PROGRAM

11 ‘‘SEC. 1897. (a) ESTABLISHMENT.—Not later than

12 18 months after the date of the conclusion of the dem13 onstration projects conducted under subsection (b)(1), the

14 Secretary shall implement the demonstration project that

15 the Secretary identifies as being the most effective project

16 under subsection (c)(2)(C) on a nationwide and perma17 nent basis.

18 ‘‘(b) DEMONSTRATION PROJECTS.—

19 ‘‘(1) ESTABLISHMENT.—Not later than 1 year

20 after the date of enactment of this Act, the Sec21 retary, in consultation with the Centers for Medicare

22 & Medicaid Services, the Centers for Disease Control

23 and Prevention, and the Agency for Healthcare Re24 search and Quality, shall conduct a demonstration

25 project for the purpose of developing a comprehen-
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•S 1135 IS

1 sive and systematic model for delivering health pro2 motion and disease prevention services that—

3 ‘‘(A) through self-assessment identifies—

4 ‘‘(i) behavioral risk factors, such as

5 tobacco use, physical inactivity, alcohol

6 use, and depression, among target individ7 uals;

8 ‘‘(ii) needed medicare clinical preven9 tive and screening health benefits among

10 target individuals; and

11 ‘‘(iii) functional and self-management

12 information the Secretary determines to be

13 appropriate;

14 ‘‘(B) provides ongoing followup to reduce

15 risk factors and promote the appropriate use of

16 preventive and screening health benefits;

17 ‘‘(C) improves clinical outcomes, satisfac18 tion, quality of life, and appropriate use by tar19 get individuals of items and services covered

20 under the medicare program; and

21 ‘‘(D) provides target individuals with infor22 mation regarding the adoption of healthy behav23 iors.

24 ‘‘(2) SELF-ASSESSMENT AND PROVISION OF IN25 FORMATION.—The Secretary shall conduct the dem-
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•S 1135 IS

1 onstration projects established under paragraph (1)

2 in the following manner:

3 ‘‘(A) SELF-ASSESSMENT.—

4 ‘‘(i) IN GENERAL.—The Secretary

5 shall test different—

6 ‘‘(I) methods of making self-as7 sessments available to each target in8 dividual;

9 ‘‘(II) methods of encouraging

10 each target individual to participate in

11 the self-assessment; and

12 ‘‘(III) methods for processing re13 sponses to the self-assessment.

14 ‘‘(ii) CONTENTS.—A self-assessment

15 made available under clause (i) shall

16 include—

17 ‘‘(I) questions regarding behav18 ioral risk factors;

19 ‘‘(II) questions regarding needed

20 preventive screening health services;

21 ‘‘(III) questions regarding the

22 target individual’s preferences for re23 ceiving follow-up information; and

24 ‘‘(IV) other information that the

25 Secretary determines appropriate.
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•S 1135 IS

1 ‘‘(B) PROVISION OF INFORMATION.—After

2 each target individual completes the self-assess3 ment, the Secretary shall ensure that the target

4 individual is provided with such information as

5 the Secretary determines appropriate, which

6 may include—

7 ‘‘(i) information regarding the results

8 of the self-assessment;

9 ‘‘(ii) recommendations regarding any

10 appropriate behavior modification based on

11 the self-assessment;

12 ‘‘(iii) information regarding how to

13 access behavior modification assistance

14 that promotes healthy behavior, including

15 information on nurse hotlines, counseling

16 services, provider services, and case-man17 agement services;

18 ‘‘(iv) information, feedback, support,

19 and recommendations regarding any need

20 for clinical preventive and screening health

21 services or treatment; and

22 ‘‘(v) referrals to available community

23 resources in order to assist the target indi24 vidual in reducing health risks.

25 ‘‘(3) PROJECT AREAS AND DURATION.—
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•S 1135 IS

1 ‘‘(A) PROJECT AREAS.—The Secretary

2 shall implement the demonstration projects in

3 geographic areas that include urban, suburban,

4 and rural areas.

5 ‘‘(B) DURATION.—The Secretary shall

6 conduct the demonstration projects during the

7 3-year period beginning on the date on which

8 the first demonstration project is implemented.

9 ‘‘(c) REPORT TO CONGRESS.—

10 ‘‘(1) IN GENERAL.—Not later than 1 year after

11 the date on which the demonstration projects con12 clude, the Secretary shall submit to Congress a re13 port on such projects.

14 ‘‘(2) CONTENTS OF REPORT.—The report sub15 mitted under paragraph (1) shall—

16 ‘‘(A) describe the demonstration projects

17 conducted under this section;

18 ‘‘(B) identify the demonstration project

19 that is the most effective; and

20 ‘‘(C) contain such other information re21 garding the demonstration projects as the Sec22 retary determines appropriate.

23 ‘‘(3) MEASUREMENT OF EFFECTIVENESS.—For

24 purposes of paragraph (2)(B), in identifying the
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•S 1135 IS

1 demonstration project that is the most effective, the

2 Secretary shall consider—

3 ‘‘(A) how successful the project was at—

4 ‘‘(i) reaching target individuals and

5 engaging them in an assessment of the risk

6 factors of such individuals;

7 ‘‘(ii) educating target individuals on

8 healthy behaviors and getting such individ9 uals to modify their behaviors in order to

10 diminish the risk of chronic disease; and

11 ‘‘(iii) ensuring that target individuals

12 were provided with necessary information;

13 ‘‘(B) the cost-effectiveness of the dem14 onstration project; and

15 ‘‘(C) the degree of beneficiary satisfaction

16 under the demonstration projects.

17 ‘‘(d) WAIVER AUTHORITY.—The Secretary may

18 waive such requirements under this title as the Secretary

19 determines necessary to carry out the demonstration

20 projects under this section.

21 ‘‘(e) FUNDING.—There are authorized to be appro22 priated $25,000,000 for carrying out the demonstration

23 project under this section.

24 ‘‘(f) DEFINITIONS.—In this section:
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•S 1135 IS

1 ‘‘(1) TARGET INDIVIDUAL.—The term ‘target

2 individual’ means each individual that is—

3 ‘‘(A) entitled to benefits under part A or

4 enrolled under part B, including an individual

5 enrolled under the Medicare+Choice program

6 under part C; or

7 ‘‘(B) between the ages of 50 and 64 who

8 is not a beneficiary under this title.

9 ‘‘(2) MAJOR BEHAVIORAL RISK FACTOR.—The

10 term ‘major behavioral risk factor’ includes—

11 ‘‘(A) the lack of proper nutrition;

12 ‘‘(B) the use of alcohol;

13 ‘‘(C) the lack of regular exercise;

14 ‘‘(D) the use of tobacco;

15 ‘‘(E) depression; and

16 ‘‘(F) any other risk factor identified by the

17 Secretary.’’.

18 Subtitle F—Studies, Evaluations,

19 and Reports In the Field of Dis20 ease Prevention and the Elderly

21 SEC. 461. MEDPAC EVALUATION AND REPORT ON MEDI22 CARE BENEFIT PACKAGE IN RELATION TO

23 PRIVATE SECTOR BENEFIT PACKAGES.

24 (a) IN GENERAL.—Section 1805(b) of the Social Se25 curity Act (42 U.S.C. 1395b–6(b)), as amended by section
244

•S 1135 IS

1 544(b) of the Medicare, Medicaid, and SCHIP Benefits

2 Improvement and Protection Act of 2000 (114 Stat.

3 2763A–551), as enacted into law by section 1(a)(6) of

4 Public Law 106–554, is amended—

5 (1) in paragraph (1)—

6 (A) in subparagraph (C), by striking

7 ‘‘and’’ at the end;

8 (B) in subparagraph (D), by striking the

9 period and inserting ‘‘; and’’; and

10 (C) by adding at the end the following new

11 subparagraph:

12 ‘‘(E) on the date that is 3 years after the

13 date of enactment of the Medicare Reform Act

14 of 2001, and each successive 3-year anniversary

15 thereafter, submit the report described in para16 graph (8)(C) to Congress.’’; and

17 (2) by adding at the end the following new

18 paragraph:

19 ‘‘(8) EVALUATION OF MEDICARE BENEFIT

20 PACKAGE IN RELATION TO PRIVATE SECTOR BEN21 EFIT PACKAGES.—

22 ‘‘(A) EVALUATION.—The Commission shall

23 evaluate—

24 ‘‘(i) the benefit package offered under

25 the medicare program under this title; and
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•S 1135 IS

1 ‘‘(ii) the degree to which such benefit

2 package compares to the benefit packages

3 offered by health benefit programs avail4 able in the private sector to individuals

5 over age 55.

6 ‘‘(B) ISSUES.—In conducting the evalua7 tion under subparagraph (A)(ii), the Commis8 sion shall address the following issues:

9 ‘‘(i) Whether the benefit packages

10 available under the programs are—

11 ‘‘(I) similar;

12 ‘‘(II) appropriate for the enroll13 ees of the programs (based on what

14 experts recommend for such enroll15 ees);

16 ‘‘(III) actuarially equivalent; and

17 ‘‘(IV) comprehensive.

18 ‘‘(ii) The financial liabilities of enroll19 ees of the programs and whether such li20 abilities are appropriate.

21 ‘‘(iii) The ability of enrollees of the

22 programs to take advantage of benefits

23 under the programs.
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•S 1135 IS

1 ‘‘(C) REPORT.—The Commission shall

2 submit a report to Congress that shall

3 contain—

4 ‘‘(i) a detailed statement of the find5 ings and conclusions of the Commission re6 garding the evaluation conducted under

7 subparagraph (A);

8 ‘‘(ii) the recommendations of the

9 Commission regarding changes in the ben10 efit package offered under the medicare

11 program under this title that would keep

12 the program modern and competitive in re13 lation to health benefit packages offered by

14 health benefit programs available in the

15 private sector to individuals over age 55;

16 and

17 ‘‘(iii) the recommendations of the

18 Commission for such legislation and ad19 ministrative actions as it considers appro20 priate.’’.

21 (b) EFFECTIVE DATE.—The amendments made by

22 this section shall take effect on the date of enactment of

23 this Act.
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•S 1135 IS

1 SEC. 462. NATIONAL INSTITUTE ON AGING STUDY AND RE2 PORT ON WAYS TO IMPROVE THE QUALITY

3 OF LIFE OF ELDERLY.

4 (a) STUDIES.—The Director of the National Institute

5 on Aging, in consultation with the Working Group on Dis6 ease Self-Management and Health Promotion (established

7 in section 402) and the United States Preventive Services

8 Task Force, shall conduct 1 or more studies focusing on

9 ways to—

10 (1) improve quality of life for the elderly; and

11 (2) develop better ways to prevent or delay the

12 onset of age-related functional decline and disease

13 and disability among the elderly.

14 (b) REPORTS.—

15 (1) REPORT FOR EACH STUDY.—The Director

16 of the National Institute on Aging, in consultation

17 with the Working Group on Disease Self-Manage18 ment and Health Promotion and the United States

19 Preventive Services Task Force, shall submit a re20 port to the Secretary regarding each study con21 ducted under subsection (a), together with a detailed

22 statement of research findings and conclusions that

23 are scientifically valid and are demonstrated to pre24 vent or delay the onset of chronic illness or disability

25 among the elderly.
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•S 1135 IS

1 (2) TIMING FOR SUBMITTING REPORTS.—Each

2 report regarding a study that is required to be sub3 mitted pursuant to paragraph (1) shall be submitted

4 by not later than the earlier of—

5 (A) the date that is 18 months after the

6 completion of the study involved; or

7 (B) January 1, 2008.

8 (c) TRANSMISSION TO INSTITUTE OF MEDICINE.—

9 Upon receipt of each report described in subsection (b),

10 the Secretary shall transmit such report to the Institute

11 of Medicine of the National Academy of Sciences for con12 sideration in its effort to conduct the comprehensive study

13 of current literature and best practices in the field of

14 health promotion and disease prevention among the medi15 care beneficiaries described in section 463.

16 (d) AUTHORIZATION OF APPROPRIATIONS.—

17 (1) IN GENERAL.—There are authorized to be

18 appropriated for the purpose of carrying out this

19 section such sums as may be necessary for the pe20 riod of fiscal years 2002 through 2008.

21 (2) AVAILABILITY.—Any sums appropriated

22 under the authorization contained in this subsection

23 shall remain available, without fiscal year limitation,

24 until September 30, 2008.
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•S 1135 IS

1 SEC. 463. INSTITUTE OF MEDICINE MEDICARE PREVEN2 TION BENEFIT STUDY AND REPORT.

3 (a) STUDY.—

4 (1) IN GENERAL.—The Secretary shall contract

5 with the Institute of Medicine of the National Acad6 emy of Sciences to—

7 (A) conduct a comprehensive study of cur8 rent literature and best practices in the field of

9 health promotion and disease prevention among

10 medicare beneficiaries, including the issues de11 scribed in paragraph (2); and

12 (B) submit the report described in sub13 section (b).

14 (2) ISSUES STUDIED.—The study required

15 under paragraph (1) shall include an assessment

16 of—

17 (A) whether each health promotion and

18 disease prevention benefit covered under the

19 medicare program is—

20 (i) medically effective (as defined in

21 section 401(4)); and

22 (ii) a cost-effective benefit (as defined

23 in section 401(2)) or a cost-saving benefit

24 (as defined in section 401(3));
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•S 1135 IS

1 (B) utilization by medicare beneficiaries of

2 such benefits (including any barriers to or in3 centives to increase utilization);

4 (C) quality of life issues associated with

5 such benefits; and

6 (D) health promotion and disease preven7 tion benefits that are not covered under the

8 medicare program that would affect all medi9 care beneficiaries.

10 (b) REPORTS.—

11 (1) THREE-YEAR REPORT.—On the date that is

12 3 years after the date of enactment of this Act, and

13 each successive 3-year anniversary thereafter, the

14 Institute of Medicine of the National Academy of

15 Sciences shall submit to the President a report that

16 contains—

17 (A) a detailed statement of the findings

18 and conclusions of the study conducted under

19 subsection (a); and

20 (B) the recommendations for legislation

21 described in paragraph (3).

22 (2) INTERIM REPORT BASED ON NEW GUIDE23 LINES.—If the United States Preventive Services

24 Task Force or the Task Force on Community Pre25 ventive Services establishes new guidelines regarding
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•S 1135 IS

1 preventive health benefits for medicare beneficiaries

2 more than 1 year prior to the date that a report

3 described in paragraph (1) is due to be submitted

4 to the President, then not later than 6 months after

5 the date such new guidelines are established, the In6 stitute of Medicine of the National Academy of

7 Sciences shall submit to the President a report that

8 contains a detailed description of such new guide9 lines. Such report may also contain recommenda10 tions for legislation described in paragraph (3).

11 (3) RECOMMENDATIONS FOR LEGISLATION.—

12 The Institute of Medicine of the National Academy

13 of Sciences, in consultation with the United States

14 Preventive Services Task Force and the Task Force

15 on Community Preventive Services, shall develop

16 recommendations in legislative form that—

17 (A) prioritize the preventive health benefits

18 under the medicare program; and

19 (B) modify such benefits, including adding

20 new benefits under such program, based on the

21 study conducted under subsection (a).

22 (c) TRANSMISSION TO CONGRESS.—

23 (1) IN GENERAL.—On the day on which the re24 port described in paragraph (1) of subsection (b) (or

25 paragraph (2) of such subsection if the report con-
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•S 1135 IS

1 tains recommendations in legislative form described

2 in subsection (b)(3)) is submitted to the President,

3 the President shall transmit the report and rec4 ommendations to Congress.

5 (2) DELIVERY.—Copies of the report and rec6 ommendations in legislative form required to be

7 transmitted to Congress under paragraph (1) shall

8 be delivered—

9 (A) to both Houses of Congress on the

10 same day;

11 (B) to the Clerk of the House of Rep12 resentatives if the House is not in session; and

13 (C) to the Secretary of the Senate if the

14 Senate is not in session.

15 SEC. 464. FAST-TRACK CONSIDERATION OF PREVENTION

16 BENEFIT LEGISLATION.

17 (a) RULES OF HOUSE OF REPRESENTATIVES AND

18 SENATE.—This section is enacted by Congress—

19 (1) as an exercise of the rulemaking power of

20 the House of Representatives and the Senate, re21 spectively, and is deemed a part of the rules of each

22 House of Congress, but—

23 (A) is applicable only with respect to the

24 procedure to be followed in that House of Con-
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•S 1135 IS

1 gress in the case of an implementing bill (as de2 fined in subsection (d)); and

3 (B) supersedes other rules only to the ex4 tent that such rules are inconsistent with this

5 section; and

6 (2) with full recognition of the constitutional

7 right of either House of Congress to change the

8 rules (so far as relating to the procedure of that

9 House of Congress) at any time, in the same man10 ner and to the same extent as in the case of any

11 other rule of that House of Congress.

12 (b) INTRODUCTION AND REFERRAL.—

13 (1) INTRODUCTION.—

14 (A) IN GENERAL.—Subject to paragraph

15 (2), on the day on which the President trans16 mits the report pursuant to section 463(c) to

17 the House of Representatives and the Senate,

18 the recommendations in legislative form trans19 mitted by the President with respect to such re20 port shall be introduced as a bill (by request)

21 in the following manner:

22 (i) HOUSE OF REPRESENTATIVES.—In

23 the House of Representatives, by the Ma24 jority Leader, for himself and the Minority

25 Leader, or by Members of the House of
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•S 1135 IS

1 Representatives designated by the Majority

2 Leader and Minority Leader.

3 (ii) SENATE.—In the Senate, by the

4 Majority Leader, for himself and the Mi5 nority Leader, or by Members of the Sen6 ate designated by the Majority Leader and

7 Minority Leader.

8 (B) SPECIAL RULE.—If either House of

9 Congress is not in session on the day on which

10 such recommendations in legislative form are

11 transmitted, the recommendations in legislative

12 form shall be introduced as a bill in that House

13 of Congress, as provided in subparagraph (A),

14 on the first day thereafter on which that House

15 of Congress is in session.

16 (2) REFERRAL.—Such bills shall be referred by

17 the presiding officers of the respective Houses to the

18 appropriate committee, or, in the case of a bill con19 taining provisions within the jurisdiction of 2 or

20 more committees, jointly to such committees for con21 sideration of those provisions within their respective

22 jurisdictions.

23 (c) CONSIDERATION.—After the recommendations in

24 legislative form have been introduced as a bill and referred

25 under subsection (b), such implementing bill shall be con-
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•S 1135 IS

1 sidered in the same manner as an implementing bill is con2 sidered under subsections (d), (e), (f), and (g) of section

3 151 of the Trade Act of 1974 (19 U.S.C. 2191). The im4 plementing bill shall be subject to all congressional budget

5 points of order, including points of order under the Con6 gressional Budget Act of 1974.

7 (d) IMPLEMENTING BILL DEFINED.—In this section,

8 the term ‘‘implementing bill’’ means only the recommenda9 tions in legislative form of the Institute of Medicine of the

10 National Academy of Sciences described in section

11 463(b)(3), transmitted by the President to the House of

12 Representatives and the Senate under section 463(c), and

13 introduced and referred as provided in subsection (b) as

14 a bill of either House of Congress.

15 (e) COUNTING OF DAYS.—For purposes of this sec16 tion, any period of days referred to in section 151 of the

17 Trade Act of 1974 shall be computed by excluding—

18 (1) the days on which either House of Congress

19 is not in session because of an adjournment of more

20 than 3 days to a day certain or an adjournment of

21 Congress sine die; and

22 (2) any Saturday and Sunday, not excluded

23 under paragraph (1), when either House is not in

24 session.
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•S 1135 IS

1 Subtitle G—Informatics Systems

2 Grant Program for Hospitals

3 and Skilled Nursing Facilities

4 SEC. 471. INFORMATICS SYSTEMS GRANT PROGRAM FOR

5 HOSPITALS AND SKILLED NURSING FACILI6 TIES.

7 (a) GRANTS.—

8 (1) IN GENERAL.—The Secretary of Health and

9 Human Services (in this section referred to as the

10 ‘‘Secretary’’) shall establish a program to make

11 grants to eligible entities that have submitted appli12 cations in accordance with subsection (b) for the

13 purpose of assisting such entities in offsetting the

14 costs related to purchasing, leasing, developing, and

15 implementing standardized clinical health care

16 informatics systems designed to improve patient

17 safety and reduce adverse events and health care

18 complications resulting from medication errors.

19 (2) DURATION.—The authority of the Secretary

20 to make grants under this section shall terminate on

21 September 30, 2011.

22 (3) COSTS DEFINED.—For purposes of this sec23 tion, the term ‘‘costs’’ shall include total expendi24 tures incurred for—
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•S 1135 IS

1 (A) purchasing, leasing, and installing

2 computer software and hardware, including

3 handheld computer technologies;

4 (B) making improvements to existing com5 puter software and hardware;

6 (C) purchasing or leasing communications

7 capabilities necessary for clinical data access,

8 storage, and exchange; and

9 (D) providing education and training to el10 igible entity staff on computer patient safety in11 formation systems.

12 (4) ELIGIBLE ENTITY DEFINED.—For purposes

13 of this section, the term ‘‘eligible entity’’ means the

14 following entities:

15 (A) HOSPITAL.—A hospital (as defined in

16 section 1861(e) of the Social Security Act (42

17 U.S.C. 1395x(e))).

18 (B) SKILLED NURSING FACILITY.—A

19 skilled nursing facility (as defined in section

20 1819(a) of such Act (42 U.S.C. 1395i–3(e))).

21 (b) APPLICATION.—An eligible entity seeking a grant

22 under this section shall submit an application to the Sec23 retary at such time, in such form and manner, and con24 taining such information as the Secretary specifies.
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•S 1135 IS

1 (c) SPECIAL CONSIDERATION FOR ELIGIBLE ENTI2 TIES THAT SERVE A LARGE NUMBER OF MEDICARE AND

3 MEDICAID ELIGIBLE INDIVIDUALS.—In awarding grants

4 under this section, the Secretary shall give special consid5 eration to eligible entities in which individuals that are eli6 gible for benefits under the medicare program under title

7 XVIII of the Social Security Act or the medicaid program

8 under title XIX of such Act make up a high percentage

9 of the total patient population of the entity.

10 (d) LIMITATION ON AMOUNT OF GRANT.—

11 (1) IN GENERAL.—A grant awarded under this

12 section may not exceed the lesser of—

13 (A) an amount equal to the applicable per14 centage of the costs incurred by the eligible en15 tity for the project for which the entity is seek16 ing funding under this section; or

17 (B) in the case of a grant made to—

18 (i) a hospital, $750,000; or

19 (ii) a skilled nursing facility,

20 $200,000.

21 (2) APPLICABLE PERCENTAGE.—For purposes

22 of paragraph (1)(A), the term ‘‘applicable percent23 age’’ means, with respect to an eligible entity, the

24 percentage of total net revenues for such period as

25 determined appropriate by the Secretary for the en-
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1 tity that consists of net revenues from the medicare

2 program under title XVIII of the Social Security

3 Act.

4 (e) ELIGIBLE ENTITY REQUIRED TO FURNISH SEC5 RETARY WITH INFORMATION.—An eligible entity receiv6 ing a grant under this section shall furnish the Secretary

7 with such information as the Secretary may require to—

8 (1) evaluate the project for which the grant is

9 made; and

10 (2) ensure that funding provided under the

11 grant is expended for the purposes for which it is

12 made.

13 (f) REPORTS.—

14 (1) INTERIM REPORTS.—

15 (A) IN GENERAL.—The Secretary shall

16 submit, at least annually, a report to the Com17 mittee on Ways and Means of the House of

18 Representatives and the Committee on Finance

19 of the Senate on the grant program established

20 under this section.

21 (B) CONTENTS.—A report submitted pur22 suant to subparagraph (A) shall include infor23 mation on—

24 (i) the number of grants made;
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1 (ii) the nature of the projects for

2 which funding is provided under the grant

3 program;

4 (iii) the geographic distribution of

5 grant recipients; and

6 (iv) such other matters as the Sec7 retary determines appropriate.

8 (2) FINAL REPORT.—Not later than 180 days

9 after the completion of all of the projects for which

10 a grant is made under this section, the Secretary

11 shall submit a final report to the committees re12 ferred to in paragraph (1)(A) on the grant program

13 established under this section, together with such

14 recommendations for legislation and administrative

15 action as the Secretary determines appropriate.

16 (g) AUTHORIZATION OF APPROPRIATIONS.—

17 (1) AUTHORIZATION.—

18 (A) HOSPITALS.—There are authorized to

19 be appropriated from the Federal Hospital In20 surance Trust Fund under section 1817 of the

21 Social Security Act (42 U.S.C. 1395i)

22 $93,000,000, for each of the fiscal years 2002

23 through 2011, for the purpose of making grants

24 under this section to eligible entities that are

25 hospitals.
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1 (B) SKILLED NURSING FACILITIES.—

2 There are authorized to be appropriated from

3 the Federal Hospital Insurance Trust Fund

4 under section 1817 of the Social Security Act

5 (42 U.S.C. 1395i) $4,500,000, for each of the

6 fiscal years 2002 through 2011, for the purpose

7 of making grants under this section to eligible

8 entities that are skilled nursing facilities.

9 (2) AVAILABILITY.—Any amounts appropriated

10 pursuant to the authority contained in subparagraph

11 (A) or (B) of paragraph (1) shall remain available,

12 without fiscal year limitation, through September

13 30, 2011.

14 TITLE V—MEDICARE

15 SUSTAINABILITY

16 SEC. 501. INDEXING PART B DEDUCTIBLE TO INFLATION.

17 The first sentence of section 1833(b) of the Social

18 Security Act (42 U.S.C. 1395l(b)) is amended by inserting

19 after ‘‘1991 and subsequent years’’ the following: ‘‘, ad20 justed annually, effective January 1 of each year (begin21 ning in 2004), by a percentage increase or decrease equal

22 to the percentage increase or decrease in the consumer

23 price index for all urban consumers (U.S. city average)

24 for the 12-month period ending with June of the previous

25 year, rounded to the nearest dollar’’.
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1 SEC. 502. INCOME-RELATED REDUCTION IN MEDICARE

2 SUBSIDY FOR PART B PREMIUM.

3 (a) IN GENERAL.—Section 1839 of the Social Secu4 rity Act (42 U.S.C. 1395r) is amended by adding at the

5 end the following new subsection:

6 ‘‘(h)(1)(A) Notwithstanding the previous subsections

7 of this section, and subject to paragraph (2), in the case

8 of an individual whose modified adjusted gross income for

9 a taxable year ending with or within a calendar year ex10 ceeds the threshold amount, the Secretary shall increase

11 the amount of the monthly premium for such individual

12 for months in the calendar year by the amount which

13 bears the same ratio to the monthly actuarial rate for en14 rollees age 65 and over (as determined under subsection

15 (a)(1)) for that year as such excess bears to an amount

equal to 1 16 ⁄3 of the applicable threshold amount).

17 ‘‘(B) In no event shall the increase described in sub18 paragraph (A) exceed an amount equal to the monthly ac19 tuarial rate for enrollees age 65 and over (as determined

20 under subsection (a)(1)) for the year.

21 ‘‘(2) For purposes of this subsection—

22 ‘‘(A) the threshold amount, the modified ad23 justed gross income, and joint return shall be deter24 mined under section 1860D(b)(1); and
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1 ‘‘(B) rules similar to the rules of paragraphs

2 (2) through (5) of section 1860D(b) shall apply to

3 this subsection.’’.

4 (b) CONFORMING AMENDMENTS.—

5 (1) IN GENERAL.—Section 1839 of the Social

6 Security Act (42 U.S.C. 1395r) is amended—

7 (A) in subsection (a)(2), as amended by

8 section 606(a)(2)(B)(i) of the Medicare, Med9 icaid, and SCHIP Benefits Improvement and

10 Protection Act of 2000 (114 Stat. 2763A–557),

11 as enacted into law by section 1(a)(6) of Public

12 Law 106–554), by striking ‘‘and (f)’’ and in13 serting ‘‘(f), and (h)’’;

14 (B) in subsection (b), by inserting ‘‘(and

15 as increased under subsection (h))’’ after ‘‘sub16 section (a)’’; and

17 (C) in subsection (f), by striking ‘‘if an in18 dividual’’ and inserting the following: ‘‘if an in19 dividual (other than an individual subject to an

20 increase in the monthly premium under this

21 section pursuant to subsection (h))’’.

22 (2) PAYMENT TO SECRETARY.—Section 1840(c)

23 of the Social Security Act (42 U.S.C. 1395s(c)) is

24 amended by inserting ‘‘or an individual determines

25 that the estimate of modified adjusted gross income
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1 used in determining whether the individual is subject

2 to an increase in the monthly premium under section

3 1839 pursuant to subsection (h) of such section (or

4 in determining the amount of such increase) is too

5 low and results in a portion of the premium not

6 being deducted,’’ before ‘‘he may’’.

7 (c) REPORTING REQUIREMENTS FOR SECRETARY OF

8 THE TREASURY.—Paragraph (18) of section 6103(l) of

9 the Internal Revenue Code of 1986, as added by section

10 304(a), is amended—

11 (1) in the heading, by inserting ‘‘AND INCOME12 RELATED REDUCTION IN SUBSIDY FOR MEDICARE

13 PART B PREMIUM after ‘‘PART D PREMIUM’’;

14 (2) in subparagraph (A), in the matter pre15 ceding clause (i), by striking ‘‘part D’’ and inserting

16 ‘‘part B or D’’; and

17 (3) in subparagraph (B), by striking ‘‘part D’’

18 and inserting ‘‘part B or D’’.

19 (d) EFFECTIVE DATE.—The amendments made by

20 subsections (a) and (b) shall apply to the monthly pre21 mium under section 1839 of the Social Security Act (42

22 U.S.C. 1395r) for months beginning with January 2004.

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