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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2807 Introduced in Senate (IS)]

  2d Session
                                S. 2807

 To amend the Social Security Act to establish a Medicare Prescription 
Drug and Supplemental Benefit Program and to stabilize and improve the 
            Medicare+Choice program, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 28, 2000

 Mr. Breaux (for himself, Mr. Frist, Mr. Kerrey, Mr. Bond, Mr. 
        Santorum, Ms. Landrieu, Mr. Ashcroft, and Ms. Collins) 
        introduced the following bill; which was read twice and 
        referred to the Committee on FinanceYYYYYYYYYYYYYYYYYYYYYYYYYYY

_______________________________________________________________________

                                 A BILL

 
 To amend the Social Security Act to establish a Medicare Prescription 
Drug and Supplemental Benefit Program and to stabilize and improve the 
            Medicare+Choice program, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Prescription Drug and Modernization Act of 2000''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
            TITLE I--MEDICARE MANAGEMENT AND ADMINISTRATION

      Subtitle A--Establishment of the Competitive Medicare Agency

Sec. 101. Establishment of the Competitive Medicare Agency.
       ``TITLE XXII--MEDICARE COMPETITION AND PRESCRIPTION DRUGS

       ``Part A--Establishment of the Competitive Medicare Agency

        ``Sec. 2201. Competitive Medicare Agency.
        ``Sec. 2202. Commissioner; Deputy Commissioner; other officers.
        ``Sec. 2203. Administrative duties of the Commissioner.
        ``Sec. 2204. Medicare Competition and Prescription Drug 
                            Advisory Board.''.
Sec. 102. Commissioner as member of the board of trustees of the 
                            medicare trust funds.
Sec. 103. Salary increase for the HCFA Administrator.
            Subtitle B--Redefined Medicare Solvency Measures

Sec. 151. Requirements for annual financial reporting and oversight of 
                            medicare program.
 TITLE II--MEDICARE PRESCRIPTION DRUG AND SUPPLEMENTAL BENEFIT PROGRAM

Sec. 201. Establishment of program.
 ``Part B--Medicare Prescription Drug and Supplemental Benefit Program

        ``Sec. 2221. Establishment of Prescription Drug and 
                            Supplemental Benefit Program.
        ``Sec. 2222. Enrollment under program.
        ``Sec. 2223. Election of a Medicare Prescription Plus plan.
        ``Sec. 2224. Beneficiary information.
        ``Sec. 2225. Outpatient prescription drug and other 
                            supplemental benefits.
        ``Sec. 2226. Beneficiary protections.
        ``Sec. 2227. Requirements for entities offering Medicare 
                            Prescription Plus plans.
        ``Sec. 2228. Submission of Medicare Prescription Plus plans.
        ``Sec. 2229. Approval of Medicare Prescription Plus plans.
        ``Sec. 2230. Payments to Medicare Prescription Plus plans for 
                            benefits.
        ``Sec. 2231. Computation and collection of beneficiary share of 
                            premium.
        ``Sec. 2232. Additional prescription drug subsidies through 
                            reinsurance.
        ``Sec. 2233. Plan fees for administrative costs.
        ``Sec. 2234. Medicare prescription drug account.
        ``Sec. 2235. Secondary payer provisions.
        ``Sec. 2236. Definitions; treatment of references to provisions 
                            in Medicare+Choice program.''.
Sec. 202. Amendments to Federal Supplementary Medical Insurance Trust 
                            Fund.
Sec. 203. Prescription drug coverage under the Medicare+Choice program.
Sec. 204. Medicaid amendments.
        ``Sec. 1935. Special provisions relating to medicare 
                            prescription drug benefit.''.
Sec. 205. Medigap provisions.
Sec. 206. GAO report on part B payment for drugs and biologicals and 
                            related services.
                   TITLE III--MEDICARE+CHOICE REFORMS

Sec. 301. Increase in national per capita Medicare+Choice growth 
                            percentage in 2001 and 2002.
Sec. 302. Removing application of budget neutrality beginning in 2002.
Sec. 303. Medicare+Choice competition program.
Sec. 304. Freeze of health risk adjuster at 20 percent.
         TITLE IV--MEDICARE BENEFICIARY OUTREACH AND EDUCATION

Sec. 401. Medicare Consumer Coalitions.
                 ``Part C--Medicare Consumer Coalitions

        ``Sec. 2281. Establishment of medicare consumer coalitions.''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--
            (1) Based on the deliberations of the National Bipartisan 
        Commission on the Future of Medicare, the medicare program 
        under title XVIII of the Social Security Act in its current 
        form is unsustainable, with the part A trust fund scheduled to 
        become insolvent in 2025.
            (2) The medicare program relies on general revenues to pay 
        for 36 percent of total program expenditures and will continue 
        to use an increasing share of general revenues. Part B outlays 
        under such program, \3/4\ of which are funded through general 
        revenues, have increased 38 percent over the past 5 years, or 
        about 5 percent faster than the economy as a whole.
            (3) Medicare's spending, left unchecked, will continue to 
        consume an increasing share of the Federal budget, leaving 
        little room for other priorities, such as defense, education, 
        debt reduction, tax cuts, and domestic spending.
            (4) Medicare's current benefit package is outdated in that 
        it does not provide a prescription drug benefit and limits 
        beneficiary access to new technologies.
            (5) Medicare only covers 53 percent of a beneficiary's 
        average health care costs and exposes beneficiaries to large 
        out-of-pocket liabilities.
            (6) The number of beneficiaries in the medicare program is 
        estimated to more than double by the end of 2030, due to the 
        influx of 77,000,000 baby boomers beginning in 2010.
            (7) Each year there are fewer workers paying payroll taxes 
        to fund current medicare obligations, evidenced by a decrease 
        in the number of workers per retiree from 4.5 in 1960 to 3.9 in 
        2000. This number is expected to decline further to 2.8 in 
        2020.
            (8) The Balanced Budget Act of 1997 and the Medicare, 
        Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 
        underscore the need to fundamentally restructure the medicare 
        program and reduce Government micromanagement of that program.
    (b) Purposes.--The purposes of this Act are--
            (1) to improve the Medicare+Choice program by adopting a 
        stable, competitive system that provides medicare beneficiaries 
        with better and broader health coverage and a greater variety 
        of affordable options from which to choose.
            (2) to assist all medicare beneficiaries, especially those 
        with low incomes, in obtaining coverage for outpatient 
        prescription drugs;
            (3) to establish an independent executive branch 
        Competitive Medicare Agency outside of the Health Care 
        Financing Administration and the Department of Health and Human 
        Services based on the Social Security Administration to 
        administer the outpatient prescription drug benefit and the 
        Medicare+Choice program;
            (4) to increase the flexibility of the medicare program and 
        provide medicare beneficiaries timely access to the latest 
        advances in the practice of medicine and delivery of care and 
        to end the congressional micromanagement over prices and 
        delivery of benefits currently administered through 
        approximately 130,000 pages of rules and regulations 
        established under the medicare program; and
            (5) to better determine the financial health of the 
        medicare program by establishing a mechanism that monitors the 
        total spending and revenues of the medicare program and serves 
        as an early warning system that triggers congressional debate 
        on policy decisions and that takes into account recommendations 
        of the Medicare Competition and Prescription Drug Advisory 
        Board.

            TITLE I--MEDICARE MANAGEMENT AND ADMINISTRATION

      Subtitle A--Establishment of the Competitive Medicare Agency

SEC. 101. ESTABLISHMENT OF THE COMPETITIVE MEDICARE AGENCY.

    (a) In General.--The Social Security Act (42 U.S.C. 301 et seq.) is 
amended by adding at the end the following new title:

       ``TITLE XXII--MEDICARE COMPETITION AND PRESCRIPTION DRUGS

       ``Part A--Establishment of the Competitive Medicare Agency

                     ``competitive medicare agency

    ``Sec. 2201. (a) Establishment.--There is established, as an 
independent agency in the executive branch of the Government, a 
Medicare Competition Agency (in this part referred to as the `Agency').
    ``(b) Duty.--
            ``(1) In general.--It shall be the duty of the Agency to 
        administer the Medicare Prescription Drug and Supplemental 
        Benefit Program under part B of this title and the 
        Medicare+Choice program under part C of title XVIII.
            ``(2) Transition.--The Secretary of Health and Human 
        Services (in this title referred to as the `Secretary'), the 
        Commissioner of the Competitive Medicare Agency, and the 
        Administrator of the Health Care Financing Administration shall 
        establish an appropriate transition of responsibility in order 
        to redelegate the administration of part C from the Secretary 
        and the Administrator of the Health Care Financing 
        Administration to the Commissioner as is appropriate to carry 
        out the purposes of this section.
            ``(3) Construction.--Insofar as a responsibility of the 
        Secretary or the Administrator of the Health Care Financing 
        Administration is redelegated to the Commissioner of the 
        Competitive Medicare Agency under this part, any reference to 
        the Secretary or the Administrator of the Health Care Financing 
        Administration in this title or title XI with respect to such 
        responsibility is deemed to be a reference to such 
        Commissioner.

          ``commissioner; deputy commissioner; other officers

    ``Sec. 2202. (a) Commissioner of the Competitive Medicare Agency.--
            ``(1) Appointment.--There shall be in the Agency a 
        Commissioner of the Competitive Medicare Agency (in this part 
        referred to as the `Commissioner') who shall be appointed by 
        the President, by and with the advice and consent of the 
        Senate.
            ``(2) Compensation.--The Commissioner shall be compensated 
        at the rate provided for level I of the Executive Schedule.
            ``(3) Term.--
                    ``(A) In general.--The Commissioner shall be 
                appointed for a term of 6 years.
                    ``(B) Continuance in office.--In any case in which 
                a successor does not take office at the end of a 
                Commissioner's term of office, such Commissioner may 
                continue in office until the appointment of a 
                successor.
                    ``(C) Delayed appointments.--A Commissioner 
                appointed to a term of office after the commencement of 
                such term may serve under such appointment only for the 
                remainder of such term.
                    ``(D) Removal.--An individual serving in the office 
                of Commissioner may be removed from office only 
                pursuant to a finding by the President of neglect of 
                duty or malfeasance in office.
            ``(4) Responsibilities.--The Commissioner shall be 
        responsible for the exercise of all powers and the discharge of 
        all duties of the Agency, and shall have authority and control 
        over all personnel and activities thereof. Responsibilities of 
        the Commissioner shall include the following:
                    ``(A) General responsibilities.--
                            ``(i) Eligibility and enrollment.--
                        Coordinating determinations of beneficiary 
                        eligibility and enrollment under title XVIII 
and part B of this title with the Commissioner of Social Security.
                            ``(ii) Contracting authority.--Entering 
                        into, and enforcing, contracts with entities 
                        for the offering of Medicare Prescription Plus 
                        plans under part B of this title.
                            ``(iii) Dissemination of information.--
                        Conducting information activities under 
                        sections 1804 and 1851(d) of title XVIII, and 
                        under part B of this title with respect to 
                        benefits and limitations on payment under 
                        Medicare Prescription Plus plans under part B 
                        of this title, including a comparative analysis 
                        of such plans and the quality of such plans in 
                        the area in which the medicare beneficiary 
                        resides. The information disseminated pursuant 
                        to such activities shall be presented in a 
                        manner so that medicare beneficiaries may 
                        compare benefits under parts A and B of title 
                        XVIII, part B of this title, and medicare 
                        supplemental policies under section 1882 with 
                        benefits under Medicare+Choice plans under part 
                        C of title XVIII.
                          ``(iv) Dissemination of appeals rights 
                        information.--Disseminating to medicare 
                        beneficiaries a description of procedural 
                        rights (including grievance and appeals 
                        procedures) of beneficiaries under the original 
                        medicare fee-for-service program under parts A 
                        and B of title XVIII, the Medicare+Choice 
                        program under part C of such title, and the 
                        Outpatient Prescription Drug and Supplemental 
                        Benefit Program under part B of this title.
                            ``(v) Beneficiary education program.--
                        Establishing a medicare beneficiary education 
                        program to provide timely, readable, accurate, 
                        and understandable information to medicare 
                        beneficiaries regarding Medicare Prescription 
                        Plus plan options.
                    ``(B) Other responsibilities.--The Commissioner 
                shall carry out any responsibility provided for under 
                part C of title XVIII or part B of this title, 
                including demonstration projects carried out in part or 
                in whole under such parts, the programs of all-
                inclusive care for the elderly (PACE program) under 
                section 1894, the social health maintenance 
                organization (SHMO) demonstration projects (referred to 
                in section 4104(c) of the Balanced Budget Act of 1997), 
                and through a Medicare+Choice project that demonstrates 
                the application of capitation payment rates for frail 
                elderly medicare beneficiaries through the use of an 
                interdisciplinary team and through the provision of 
                primary care services to such beneficiaries by means of 
                such a team at the nursing facility involved).
                    ``(C) Annual reports.--Not later than March 31 of 
                each year, the Commissioner shall submit to Congress 
                and the President a report on the administration of 
                part C of title XVIII and part B of this title during 
                the previous fiscal year.
            ``(5) Promulgation of rules and regulations.--
                    ``(A) In general.--The Commissioner may prescribe 
                such rules and regulations as the Commissioner 
                determines necessary or appropriate to carry out the 
                functions of the Agency.
                    ``(B) Rulemaking.--The regulations prescribed by 
                the Commissioner shall be subject to the rulemaking 
                procedures established under section 553 of title 5, 
                United States Code.
            ``(6) Delegation of authority.--
                    ``(A) In general.--The Commissioner may assign 
                duties, and delegate, or authorize successive 
                redelegations of, authority to act and to render 
                decisions, to such officers and employees of the Agency 
                as the Commissioner may find necessary.
                    ``(B) Effect of delegation.--Within the limitations 
                of such delegations, redelegations, or assignments, all 
                official acts and decisions of such officers and 
                employees shall have the same force and effect as 
                though performed or rendered by the Commissioner.
            ``(7) Consultation with secretary of health and human 
        services.--The Commissioner and the Secretary shall consult, on 
        an ongoing basis, to ensure--
                    ``(A) the coordination of the programs administered 
                by the Commissioner under part C of title XVIII and 
                part B of this title with the programs administered by 
                the Secretary under parts A and B of title XVIII and 
                under title XIX; and
                    ``(B) that adequate information concerning benefits 
                under parts A and B of title XVIII and title XIX is 
                available to the public.
    ``(b) Deputy Commissioner of the Competitive Medicare Agency.--
            ``(1) Appointment.--There shall be in the Agency a Deputy 
        Commissioner of the Competitive Medicare Agency (in this part 
        referred to as the `Deputy Commissioner') who shall be 
        appointed by the President, by and with the advice and consent 
        of the Senate.
            ``(2) Term.--
                    ``(A) In general.--The Deputy Commissioner shall be 
                appointed for a term of 6 years.
                    ``(B) Continuance in office.--In any case in which 
                a successor does not take office at the end of a Deputy 
                Commissioner's term of office, such Deputy Commissioner 
                may continue in office until the entry upon office of 
                such a successor.
                    ``(C) Delayed appointment.--A Deputy Commissioner 
                appointed to a term of office after the commencement of 
                such term may serve under such appointment only for the 
                remainder of such term.
            ``(3) Compensation.--The Deputy Commissioner shall be 
        compensated at the rate provided for level II of the Executive 
        Schedule.
            ``(4) Duties.--
                    ``(A) In general.--The Deputy Commissioner shall 
                perform such duties and exercise such powers as the 
                Commissioner shall from time to time assign or 
                delegate.
                    ``(B) Acting commissioner.--The Deputy Commissioner 
                shall be Acting Commissioner of the Agency during the 
                absence or disability of the Commissioner, unless the 
                President designates another officer of the Government 
                as Acting Commissioner, in the event of a vacancy in 
                the office of the Commissioner.
    ``(c) Chief Actuary.--
            ``(1) Appointment.--
                    ``(A) In general.--There shall be in the Agency a 
                Chief Actuary, who shall be appointed by, and in direct 
                line of authority to, the Commissioner.
                    ``(B) Qualifications.--The Chief Actuary shall be 
                appointed from individuals who have demonstrated, by 
                their education and experience, superior expertise in 
                the actuarial sciences.
                    ``(C) Duties.--The Chief Actuary shall serve as the 
                chief actuarial officer of the Agency, and shall 
                exercise such duties as are appropriate for the office 
                of the Chief Actuary and in accordance with 
                professional standards of actuarial independence.
            ``(2) Compensation.--The Chief Actuary shall be compensated 
        at the highest rate of basic pay for the Senior Executive 
        Service under section 5382(b) of title 5, United States Code.

              ``administrative duties of the commissioner

    ``Sec. 2203. (a) Personnel.--
            ``(1) In general.--The Commissioner may employ, without 
        regard to chapter 31 of title 5, United States Code, such 
        officers and employees as are necessary to administer the 
        activities to be carried out through the Competitive Medicare 
        Agency.
            ``(2) Flexibility with respect to civil service laws.--
                    ``(A) In general.--The staff of the Competitive 
                Medicare Agency shall be appointed without regard to 
                the provisions of title 5, United States Code, 
                governing appointments in the competitive service, and, 
                subject to subparagraph (B), shall be paid without 
                regard to the provisions of chapters 51 and 53 of such 
                title (relating to classification and schedule pay 
                rates).
                    ``(B) Maximum rate.--In no case may the rate of 
                compensation determined under subparagraph (A) exceed 
                the rate of basic pay payable for level IV of the 
                Executive Schedule under section 5315 of title 5, 
                United States Code.
    ``(b) Budgetary Matters.--
            ``(1) Submission of annual budget.--The Commissioner shall 
        prepare an annual budget for the Agency, which shall be 
        submitted by the President to Congress without revision, 
        together with the President's annual budget for the Agency.
            ``(2) Appropriations requests.--
                    ``(A) Staffing and personnel.--Appropriations 
                requests for staffing and personnel of the Agency shall 
                be based upon a comprehensive work force plan, which 
                shall be established and revised from time to time by 
                the Commissioner.
                    ``(B) Administrative expenses.--Appropriations for 
                administrative expenses of the Agency are authorized to 
                be provided on a biennial basis.
    ``(c) Seal of Office.--
            ``(1) In general.--The Commissioner shall cause a seal of 
        office to be made for the Agency of such design as the 
        Commissioner shall approve.
            ``(2) Judicial notice.--Judicial notice shall be taken of 
        the seal made under paragraph (1).
    ``(d) Data Exchanges.--
            ``(1) Disclosure of records and other information.--
        Notwithstanding any other provision of law (including 
        subsection (b), (o), (p), (q), (r), and (u) of section 552a of 
        title 5, United States Code)--
                    ``(A) the Secretary shall disclose to the 
                Commissioner any record or information requested in 
                writing by the Commissioner for the purpose of 
                administering any program administered by the 
                Commissioner, if records or information of such type 
                were disclosed to the Administrator of the Health Care 
                Financing Administration in the Department of Health 
                and Human Services under applicable rules, regulations, 
                and procedures in effect before the date of enactment 
of the Medicare Prescription Drug and Modernization Act of 2000; and
                    ``(B) the Commissioner shall disclose to the 
                Secretary or to any State any record or information 
                requested in writing by the Secretary to be so 
                disclosed for the purpose of administering any program 
                administered by the Secretary, if records or 
                information of such type were so disclosed under 
                applicable rules, regulations, and procedures in effect 
                before the date of enactment of the Medicare 
                Prescription Drug and Modernization Act of 2000.
            ``(2) Exchange of other data.--The Commissioner and the 
        Secretary shall periodically review the need for exchanges of 
        information not referred to in paragraph (1) and shall enter 
        into such agreements as may be necessary and appropriate to 
        provide information to each other or to States in order to meet 
        the programmatic needs of the requesting agencies.
            ``(3) Routine use.--
                    ``(A) In general.--Any disclosure from a system of 
                records (as defined in section 552a(a)(5) of title 5, 
                United States Code) pursuant to this subsection shall 
                be made as a routine use under subsection (b)(3) of 
                section 552a of such title (unless otherwise authorized 
                under such section 552a).
                    ``(B) Computerized comparison.--Any computerized 
                comparison of records, including matching programs, 
                between the Commissioner and the Secretary shall be 
                conducted in accordance with subsections (o), (p), (q), 
                (r), and (u) of section 552a of title 5, United States 
                Code.
            ``(4) Timely action.--The Commissioner and the Secretary 
        shall each ensure that timely action is taken to establish any 
        necessary routine uses for disclosures required under paragraph 
        (1) or agreed to pursuant to paragraph (2).

      ``medicare competition and prescription drug advisory board

    ``Sec. 2204. (a) Establishment of Board.--There is established a 
Medicare Competition and Prescription Drug Advisory Board (in this 
section referred to as the `Board').
    ``(b) Advice on Policies; Reports.--
            ``(1) Advice on policies.--On and after the date the 
        Commissioner takes office, the Board shall advise the 
        Commissioner on policies relating to the Medicare Competition 
        and Prescription Drug Program under part B of this title and 
        the Medicare+Choice program under part C of title XVIII.
            ``(2) Reports.--
                    ``(A) In general.--With respect to matters of the 
                administration of part C of title XVIII and part B of 
                this title, the Board shall submit to Congress and to 
                the Commissioner of the Competitive Medicare Agency 
                such reports as the Board determines appropriate. Each 
                such report may contain such recommendations as the 
                Board determines appropriate for legislative or 
                administrative changes to improve the administration of 
                such parts. Each such report shall be published in the 
                Federal Register.
                    ``(B) Maintaining independence of board.--The Board 
                shall directly submit to Congress reports required 
                under subparagraph (A). No officer or agency of the 
                United States may require the Board to submit to any 
                officer or agency of the United States for approval, 
                comments, or review, prior to the submission to 
                Congress of such reports.
    ``(c) Structure and Membership of the Board.--
            ``(1) Membership.--The Board shall be composed of 7 members 
        who shall be appointed as follows:
                    ``(A) Presidential appointments.--
                            ``(i) In general.--3 members shall be 
                        appointed by the President, by and with the 
                        advice and consent of the Senate.
                            ``(ii) Limitation.--Not more than 2 of such 
                        members shall be from the same political party.
                    ``(B) Senatorial appointments.--2 members (each 
                member from a different political party) shall be 
                appointed by the President pro tempore of the Senate 
                with the advice of the Chairman and the Ranking 
                Minority Member of the Committee on Finance of the 
                Senate.
                    ``(C) Congressional appointments.--2 members (each 
                member from a different political party) shall be 
                appointed by the Speaker of the House of 
                Representatives, with the advice of the Chairman and 
                the Ranking Minority Member of the Committee on Ways 
                and Means of the House of Representatives.
            ``(2) Qualifications.--The members shall be chosen on the 
        basis of their integrity, impartiality, and good judgment, and 
        shall be individuals who are, by reason of their education, 
        experience, and attainments, exceptionally qualified to perform 
        the duties of members of the Board.
    ``(d) Terms of Appointment.--
            ``(1) In general.--Subject to paragraph (2) each member of 
        the Board shall serve for a term of 6 years.
            ``(2) Continuance in office and staggered terms.--
                    ``(A) Continuance in office.--A member appointed to 
                a term of office after the commencement of such term 
                may serve under such appointment only for the remainder 
                of such term.
                    ``(B) Staggered terms.--The terms of service of the 
                members initially appointed under this section shall 
                begin on January 1, 2002, and expire as follows:
                            ``(i) Presidential appointments.--The terms 
                        of service of the members initially appointed 
                        by the President shall expire as designated by 
                        the President at the time of nomination, 1 each 
                        at the end of--
                                    ``(I) 2 years;
                                    ``(II) 4 years; and
                                    ``(III) 6 years.
                            ``(ii) Senatorial appointments.--The terms 
                        of service of members initially appointed by 
                        the President pro tempore of the Senate shall 
                        expire as designated by the President pro 
                        tempore of the Senate at the time of 
                        nomination, 1 each at the end of--
                                    ``(I) 3 years; and
                                    ``(II) 6 years.
                            ``(iii) Congressional appointments.--The 
                        terms of service of members initially appointed 
                        by the Speaker of the House of Representatives 
                        shall expire as designated by the Speaker of 
                        the House of Representatives at the time of 
                        nomination, 1 each at the end of--
                                    ``(I) 4 years; and
                                    ``(II) 5 years.
                    ``(C) Reappointments.--Any person appointed as a 
                member of the Board may not serve for more than 8 
                years.
                    ``(D) Vacancies.--Any member appointed to fill a 
                vacancy occurring before the expiration of the term for 
                which the member's predecessor was appointed shall be 
                appointed only for the remainder of that term. A member 
                may serve after the expiration of that member's term 
                until a successor has taken office. A vacancy in the 
                Board shall be filled in the manner in which the 
                original appointment was made.
    ``(e) Chairperson.--A member of the Board shall be designated by 
the President to serve as Chairperson for a term of 4 years, coincident 
with the term of the President, or until the designation of a 
successor.
    ``(f) Expenses and Per Diem.--Members of the Board shall serve 
without compensation, except that, while serving on business of the 
Board away from their homes or regular places of business, members may 
be allowed travel expenses, including per diem in lieu of subsistence, 
as authorized by section 5703 of title 5, United States Code, for 
persons in the Government employed intermittently.
    ``(g) Meeting.--
            ``(1) In general.--The Board shall meet at the call of the 
        Chairperson (in consultation with the other members of the 
        Board) not less than 4 times each year to consider a specific 
        agenda of issues, as determined by the Chairperson in 
        consultation with the other members of the Board.
            ``(2) Quorum.--Four members of the Board (not more than 3 
        of whom may be of the same political party) shall constitute a 
        quorum for purposes of conducting business.
    ``(h) Federal Advisory Committee Act.--The Board shall be exempt 
from the provisions of the Federal Advisory Committee Act (5 U.S.C. 
App.).
    ``(i) Personnel.--
            ``(1) Staff director.--The Board shall, without regard to 
        the provisions of title 5, United States Code, relating to the 
        competitive service, appoint a Staff Director who shall be paid 
        at a rate equivalent to a rate established for the Senior 
        Executive Service under section 5382 of title 5, United States 
        Code.
            ``(2) Staff.--
                    ``(A) In general.--The Board may employ, without 
                regard to chapter 31 of title 5, United States Code, 
                such officers and employees as are necessary to 
                administer the activities to be carried out by the 
                Board.
                    ``(B) Flexibility with respect to civil service 
                laws.--
                            ``(i) In general.--The staff of the Board 
                        shall be appointed without regard to the 
                        provisions of title 5, United States Code, 
                        governing appointments in the competitive 
                        service, and, subject to clause (ii), shall be 
                        paid without regard to the provisions of 
                        chapters 51 and 53 of such title (relating to 
                        classification and schedule pay rates).
                            ``(ii) Maximum rate.--In no case may the 
                        rate of compensation determined under clause 
                        (i) exceed the rate of basic pay payable for 
                        level IV of the Executive Schedule under 
                        section 5315 of title 5, United States Code.
    ``(j) Authorization of Appropriations.--There are authorized to be 
appropriated, out of the Federal Hospital Insurance Trust Fund and the 
Federal Supplemental Medical Insurance Trust Fund, and the general fund 
of the Treasury, such sums as are necessary to carry out the purposes 
of this section.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by subsection (a) shall 
        take effect on the date of enactment of this Act.
            (2) Timing of initial appointments.--The Commissioner and 
        Deputy Commissioner of the Competitive Medicare Agency may not 
        be appointed before March 1, 2001.
            (3) Duties with respect to eligibility determinations and 
        enrollment.--The Commissioner of the Competitive Medicare 
        Agency shall carry out enrollment under title XVIII of the 
        Social Security Act, make eligibility determinations under such 
        title, and carry out part C of such title for years beginning 
        on or after January 1, 2003.

SEC. 102. COMMISSIONER AS MEMBER OF THE BOARD OF TRUSTEES OF THE 
              MEDICARE TRUST FUNDS.

    (a) In General.--Sections 1817(b) and 1841(b) of the Social 
Security Act (42 U.S.C. 1395i(b); 1395t(b)) are each amended by 
striking ``and the Secretary of Health and Human Services, all ex 
officio,'' and inserting ``, the Secretary of Health and Human 
Services, and the Commissioner of the Competitive Medicare Agency, all 
ex officio,''.
    (b) Effective Date.--The amendments made by this subsection shall 
take effect on March 1, 2001.

SEC. 103. SALARY INCREASE FOR THE HCFA ADMINISTRATOR.

    (a) In General.--Section 5314 of title 5, United States Code, is 
amended by adding at the end the following:
            ``Administrator of the Health Care Financing 
        Administration.''.
    (b) Conforming Amendment.--Section 5315 of such title is amended by 
striking ``Administrator of the Health Care Financing 
Administration.''.
    (c) Effective Date.--The amendments made by this subsection take 
effect on March 1, 2001.

            Subtitle B--Redefined Medicare Solvency Measures

SEC. 151. REQUIREMENTS FOR ANNUAL FINANCIAL REPORTING AND OVERSIGHT OF 
              MEDICARE PROGRAM.

    (a) In General.--Section 1817 of the Social Security Act (42 U.S.C. 
1395i) is amended by adding at the end the following new subsection:
    ``(l) Combined Report on Operation and Status of the Trust Fund and 
the Federal Supplementary Medical Insurance Trust Fund.--
            ``(1) In general.--In addition to the duty of the Board of 
        Trustees to report to Congress under subsection (b), on the 
        date the Board submits the report required under subsection 
        (b)(2), the Board shall submit to Congress a report on the 
        operation and status of the Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund established under 
        section 1841, including the Medicare Prescription Drug Account 
        within such Trust Fund (in this subsection referred to as the 
        `Trust Funds'). Such report shall include the following 
        information:
                    ``(A) Overall spending from the general fund of the 
                treasury.--A statement of total amounts obligated 
                during the preceding fiscal year from the General 
                Revenues of the Treasury to the Trust Funds for payment 
                for benefits covered under this title and part B of 
                title XXII, stated in terms of the total amount and in 
                terms of the percentage such amount bears to all other 
                amounts obligated from such General Revenues during 
                such fiscal year.
                    ``(B) Historical overview of spending.--From the 
                date of the inception of the program of insurance under 
                this title through the fiscal year involved, a 
                statement of the total amounts referred to in 
                subparagraph (A).
                    ``(C) 10-year and 50-year projections.--An estimate 
                of total amounts referred to in subparagraph (A) 
                required to be obligated for payment for benefits 
                covered under this title for each of the 10 fiscal 
                years succeeding the fiscal year involved and for the 
                50-year period beginning with the succeeding fiscal 
                year.
                    ``(D) Relation to gdp growth.--A comparison of the 
                rate of growth of the total amounts referred to in 
                subparagraph (A) to the rate of growth in the gross 
                domestic product for the same period.
            ``(2) Publication.--Each report submitted under paragraph 
        (1) shall be published by the Committee on Ways and Means as a 
        public document.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to fiscal years beginning on or after the date of 
enactment of this Act.
    (c) Congressional Hearings.--It is the sense of Congress that the 
committees of jurisdiction shall hold hearings on the reports submitted 
under section 1817(l) (42 U.S.C. 1395i(l)) of the Social Security Act.

 TITLE II--MEDICARE PRESCRIPTION DRUG AND SUPPLEMENTAL BENEFIT PROGRAM

SEC. 201. ESTABLISHMENT OF PROGRAM.

    (a) In General.--Title XXII of the Social Security Act, as added by 
section 101, is amended by adding at the end the following new part:

 ``Part B--Medicare Prescription Drug and Supplemental Benefit Program

 ``establishment of prescription drug and supplemental benefit program

    ``Sec. 2221. (a) Provision of Benefit.--The Commissioner shall 
establish a Prescription Drug and Supplemental Benefit Program under 
which an eligible beneficiary may voluntarily enroll and receive access 
to covered outpatient prescription drugs and other benefits through 
enrollment in a Medicare Prescription Plus plan offered by a private 
entity or a Medicare+Choice plan offered by a Medicare+Choice 
organization.
    ``(b) Program To Begin in 2003.--The Commissioner shall establish 
the program under this part in a manner so that benefits are first 
provided for months beginning with January 2003.
    ``(c) Voluntary Nature of Program.--Nothing in this part shall be 
construed as requiring an eligible beneficiary to enroll in the program 
under this part.
    ``(d) Financing.--The costs of providing benefits under this part 
shall be payable from the Medicare Prescription Drug Account.
    ``(e) No Effect on Title XVIII Benefits.--The program under this 
part shall have no effect on the entitlement to benefits under title 
XVIII.

                       ``enrollment under program

    ``Sec. 2222. (a) Establishment of Process.--
            ``(1) In general.--The Commissioner shall establish a 
        process through which an eligible beneficiary (including an 
        eligible beneficiary enrolled in a Medicare+Choice plan offered 
        by a Medicare+Choice organization) may make an election to 
        enroll under the program under this part. Except as otherwise 
        provided in this section, such process shall be similar to the 
        process for enrollment in part B under section 1837.
            ``(2) Requirement of enrollment.--An eligible beneficiary 
        must enroll under this part in order to be eligible to receive 
        benefits under this part.
    ``(b) Enrollment Period.--
            ``(1) In general.--Except as provided in paragraph (2) or 
        (3), an eligible beneficiary may not enroll in the program 
        under this part during any period after the beneficiary's 
        initial enrollment period.
            ``(2) Open enrollment period for beneficiaries currently 
        covered.--In the case of an individual who is entitled to part 
        A of title XVIII and enrolled under part B of such title as of 
        November 1, 2002, there shall be an open enrollment period of 6 
        months beginning on that date.
            ``(3) Special enrollment period for beneficiaries that lose 
        other drug coverage.--
                    ``(A) In general.--Subject to subparagraph (D), in 
                the case of an applicable eligible beneficiary, the 
                Commissioner shall establish procedures for permitting 
                such beneficiary to enroll under the program under this 
                part.
                    ``(B) Applicable eligible beneficiary.--For 
                purposes of this paragraph, the term `applicable 
                eligible beneficiary' means an eligible beneficiary 
                who--
                            ``(i) had applicable drug coverage; and
                            ``(ii) involuntarily lost such coverage.
                    ``(C) Applicable drug coverage defined.--For 
                purposes of subparagraph (B), the term `applicable drug 
                coverage' means any of the following prescription drug 
                coverage:
                            ``(i) Medicaid prescription drug 
                        coverage.--Prescription drug coverage under a 
                        medicaid plan under title XIX, including 
                        through the Program of All-inclusive Care for 
                        the Elderly (PACE) under section 1934, through 
                        a social health maintenance organization 
                        (referred to in section 4104(c) of the Balanced 
                        Budget Act of 1997), or through a 
                        Medicare+Choice project that demonstrates the 
                        application of capitation payment rates for 
                        frail elderly medicare beneficiaries through 
                        the use of a interdisciplinary team and through 
                        the provision of primary care services to such 
                        beneficiaries by means of such a team at the 
                        nursing facility involved.
                            ``(ii) Prescription drug coverage under 
                        group health plan.--Any outpatient prescription 
                        drug coverage under a group health plan, 
                        including a health benefits plan under the 
                        Federal Employees Health Benefit Plan under 
                        chapter 89 of title 5, United States Code, and 
                        a qualified retiree prescription drug plan (as 
                        defined in section 2232(e)(1)).
                            ``(iii) Prescription drug coverage under 
                        certain medigap policies.--Coverage under a 
                        medicare supplemental policy under section 1882 
                        that provides benefits for prescription drugs 
                        (whether or not such coverage conforms to the 
                        standards for packages of benefits under 
                        section 1882(p)(1)), but only if the policy was 
                        in effect on January 1, 2003.
                            ``(iv) State pharmaceutical assistance 
                        program.--Coverage of prescription drugs under 
                        a State pharmaceutical assistance program.
                            ``(v) Veterans' coverage of prescription 
                        drugs.--Coverage of prescription drugs for 
                        veterans under chapter 17 of title 38, United 
                        States Code.
                    ``(D) Requirements.--The procedures established 
                under subparagraph (A) shall require that an applicable 
                eligible beneficiary--
                            ``(i) seek to enroll under the program not 
                        later than 63 days after the date that the 
                        beneficiary lost applicable drug coverage; and
                            ``(ii) submit evidence of the date that the 
                        beneficiary lost such coverage along with the 
                        application for enrollment in the program under 
                        this part.
            ``(4) Study and report on permitting part b only 
        individuals to enroll in program.--
                    ``(A) Study.--The Commissioner shall conduct a 
                study on the need for rules relating to permitting 
                individuals who are enrolled under part B of title 
                XVIII but are not entitled to benefits under part A to 
                buy into the program under this part.
                    ``(B) Report.--Not later than January 1, 2002, the 
                Commissioner shall submit a report to Congress on the 
                study conducted under subparagraph (A), together with 
                any recommendations for legislation that the 
                Commissioner determines to be appropriate as a result 
                of such study.
    ``(c) Period of Coverage.--
            ``(1) In general.--Except as provided in paragraph (2) and 
        subject to paragraph (3), an eligible beneficiary's coverage 
        under the program under this part shall be effective for the 
        period provided in section 1838, as if that section applied to 
        the program under this part.
            ``(2) Enrollment during open and special enrollment.--
        Subject to paragraph (3), an eligible beneficiary who enrolls 
        under the program under this part pursuant to paragraph (2) or 
        (3) of subsection (b) shall be entitled to the benefits under 
        this part beginning on the first day of the month following the 
        month in which such enrollment occurs.
            ``(3) Limitation.--Coverage under this part shall not begin 
        prior to January 1, 2003.
    ``(d) Program Coverage Terminated by Termination of Coverage Under 
Parts A and B of Title XVIII.--
            ``(1) In general.--In addition to the causes of termination 
        specified in section 1838, the Commissioner shall terminate an 
        individual's coverage under the program under this part if the 
        individual is no longer enrolled in both parts A and B of title 
        XVIII.
            ``(2) Effective date.--The termination described in 
        paragraph (1) shall be effective on the effective date of 
        termination of coverage under part A of title XVIII or (if 
        earlier) under part B of such title.
    ``(e) First Enrollment Period.--The Commissioner shall ensure that 
eligible beneficiaries are permitted to enroll under this part prior to 
January 1, 2003, in order to ensure that coverage under this part is 
effective as of such date.

            ``election of a medicare prescription plus plan

    ``Sec. 2223. (a) In General.--
            ``(1) Process.--
                    ``(A) In general.--Subject to paragraph (2), the 
                Commissioner shall establish a process through which an 
                eligible beneficiary who is enrolled under this part 
                shall make an annual election to enroll in a Medicare 
                Prescription Plus plan offered by an eligible entity 
                that serves the geographic area in which the 
                beneficiary resides.
                    ``(B) Rules.--In establishing the process under 
                subparagraph (A), the Commissioner shall use rules that 
                are consistent with the rules for enrollment and 
                disenrollment with a Medicare+Choice plan under section 
                1851, including--
                            ``(i) annual, coordinated election periods, 
                        which shall be coordinated with such periods 
                        under part C of title XVIII;
                            ``(ii) special election periods under 
                        subsection (e)(4) of section 1851; and
                            ``(iii) the guaranteed issue requirements 
                        under subsection (g) of such section.
            ``(2) Medicare+choice enrollees.--An eligible beneficiary 
        who is enrolled under this part and enrolled in a 
        Medicare+Choice plan offered by a Medicare+Choice organization 
        shall receive coverage of benefits under this part through such 
        plan if such plan provides qualified prescription drug 
        coverage. If the Medicare+Choice plan in which the beneficiary 
        is enrolled does not provide such coverage, the beneficiary 
        shall receive such coverage through the election of a Medicare 
        Prescription Plus plan offered by an eligible entity under this 
        part.
    ``(b) Assuring Access to Prescription Drug Coverage in Areas With 
No Medicare Prescription Plus Plan or Medicare+Choice Plan Providing 
Drug Coverage Available.--The Commissioner shall develop procedures for 
the provision of the benefits required under section 2225(a) to each 
eligible beneficiary that resides in an area where there are no 
Medicare Prescription Plus plans or Medicare+Choice plans available 
that provide qualified prescription drug coverage.

                       ``beneficiary information

    ``Sec. 2224. (a) In General.--The Commissioner shall conduct 
activities that are designed to broadly disseminate information to 
eligible beneficiaries (and prospective eligible beneficiaries) 
regarding the coverage provided under this part.
    ``(b) Requirements.--The activities conducted under this subsection 
shall be--
            ``(1) similar to the activities performed by the 
        Commissioner under section 1851(d), including the dissemination 
        of comparative information; and
            ``(2) coordinated with the activities performed by the 
        Commissioner under such section and under section 1804.

     ``outpatient prescription drug and other supplemental benefits

    ``Sec. 2225. (a) Requirements.--
            ``(1) In general.--For purposes of this part and part C of 
        title XVIII, the term `qualified prescription drug coverage' 
        means either of the following:
                    ``(A) Standard coverage with access to negotiated 
                prices.--Standard coverage (as defined in subsection 
                (d)) and access to negotiated prices under subsection 
                (f).
                    ``(B) Actuarially equivalent coverage with access 
                to negotiated prices.--Coverage of covered outpatient 
                drugs which meets the alternative coverage requirements 
                of subsection (e) and access to negotiated prices under 
                subsection (f).
            ``(2) Permitting additional outpatient prescription drug 
        coverage.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                section 2229(c)(2), nothing in this part shall be 
                construed as preventing qualified prescription drug 
                coverage from including coverage of covered outpatient 
                drugs that exceeds the coverage required under 
                paragraph (1).
                    ``(B) Requirement.--An eligible entity may not 
                offer a Medicare Prescription Plus plan that provides 
                additional benefits pursuant to subparagraph (A) in an 
                area unless the eligible entity offering such plan also 
                offers a Medicare Prescription Plus plan in the area 
                that only provides the coverage of prescription drugs 
                that is required under subsection (a)(1).
            ``(3) Cost control mechanisms.--In providing qualified 
        prescription drug coverage, the entity offering the Medicare 
        Prescription Plus plan or the Medicare+Choice plan may use cost 
        control mechanisms that are customarily used in employer-
        sponsored health care plans that offer coverage for outpatient 
        prescription drugs, including the use of formularies, tiered 
        copayments, selective contracting with providers of outpatient 
        prescription drugs, and mail order pharmacies.
    ``(b) Permitting Benefits in Addition to Outpatient Prescription 
Drug Coverage.--
            ``(1) In general.--Subject to paragraph (2) and section 
        2229(c)(2), nothing in this part shall be construed as 
        preventing a Medicare Prescription Plus plan from including 
        coverage of benefits that are in addition to the benefits 
        available under title XVIII, including coverage of beneficiary 
        cost-sharing for benefits under such title.
            ``(2) Requirements.--An eligible entity may not offer a 
        Medicare Prescription Plus plan that provides additional 
        benefits pursuant to paragraph (1) in an area unless--
                    ``(A) the eligible entity offering such plan also 
                offers a Medicare Prescription Plus plan in the area 
                that only provides the coverage of prescription drugs 
                that is required under subsection (a)(1); and
                    ``(B) if the additional benefits include any of the 
                core group of basic benefits described in section 
                1882(p)(2)(B), the Medicare Prescription Plus plan 
                provides all of such core group of basic benefits.
    ``(c) Application of Secondary Payor Provisions.--The provisions of 
section 1852(a)(4) shall apply under this part in the same manner as 
they apply under part C of title XVIII.
    ``(d) Standard Coverage.--For purposes of this part and part C of 
title XVIII, the `standard coverage' is coverage of covered outpatient 
drugs that meets the following requirements:
            ``(1) Deductible.--The coverage has an annual deductible--
                    ``(A) for 2003, that is equal to $250; or
                    ``(B) for a subsequent year, that is equal to the 
                amount specified under this paragraph for the previous 
                year increased by the percentage specified in paragraph 
                (5) for the year involved.
        Any amount determined under subparagraph (B) that is not a 
        multiple of $5 shall be rounded to the nearest multiple of $5.
            ``(2) Limits on cost-sharing.--The coverage has cost-
        sharing (for costs above the annual deductible specified in 
        paragraph (1) and up to the initial coverage limit under 
        paragraph (3)) that is equal to 50 percent or that is 
        actuarially consistent (using processes established under 
        subsection (g)) with an average expected payment of 50 percent 
        of such costs.
            ``(3) Initial coverage limit.--Subject to paragraph (4), 
        the coverage has an initial coverage limit on the maximum costs 
        that may be recognized for payment purposes (above the annual 
        deductible)--
                    ``(A) for 2003, that is equal to $2,100; or
                    ``(B) for a subsequent year, that is equal to the 
                amount specified in this paragraph for the previous 
                year, increased by the annual percentage increase 
                described in paragraph (5) for the year involved.
        Any amount determined under subparagraph (B) that is not a 
        multiple of $25 shall be rounded to the nearest multiple of 
        $25.
            ``(4) Limitation on out-of-pocket expenditures by 
        beneficiary.--
                    ``(A) In general.--Notwithstanding paragraph (3), 
                the coverage provides benefits without any cost-sharing 
                after the individual has incurred costs (as described 
                in subparagraph (C)) for covered outpatient drugs in a 
                year equal to the annual out-of-pocket limit specified 
                in subparagraph (B).
                    ``(B) Annual out-of-pocket limit.--For purposes of 
                this part, the `annual out-of-pocket limit' specified 
                in this subparagraph--
                            ``(i) for 2003, is equal to $6,000; or
                            ``(ii) for a subsequent year, is equal to 
                        the amount specified in the subparagraph for 
                        the previous year, increased by the annual 
                        percentage increase described in paragraph (5) 
                        for the year involved.
                Any amount determined under clause (ii) that is not a 
                multiple of $100 shall be rounded to the nearest 
                multiple of $100.
                    ``(C) Application.--In applying subparagraph (A)--
                            ``(i) incurred costs shall only include 
                        costs incurred for the annual 
deductible (described in paragraph (1)), cost-sharing (described in 
paragraph (2)), and amounts for which benefits are not provided because 
of the application of the initial coverage limit described in paragraph 
(3); but
                            ``(ii) costs shall be treated as incurred 
                        without regard to whether the individual or 
                        another person, including a State program, has 
                        paid for such costs, but shall not be counted 
                        insofar as such costs are covered as benefits 
                        under a Medicare Prescription Plus plan, a 
                        Medicare+Choice plan, or other third-party 
                        coverage.
            ``(5) Annual percentage increase.--For purposes of this 
        part, the annual percentage increase specified in this 
        paragraph for a year is equal to the annual percentage increase 
        in average per capita aggregate expenditures for covered 
        outpatient drugs in the United States for medicare 
        beneficiaries, as determined by the Commissioner for the 12-
        month period ending in July of the previous year.
    ``(e) Alternative Coverage Requirements.--A Medicare Prescription 
Plus plan or Medicare+Choice plan may provide a different prescription 
drug benefit design from the standard coverage described in subsection 
(d) so long as the following requirements are met:
            ``(1) Assuring at least actuarially equivalent coverage.--
                    ``(A) Assuring equivalent value of total 
                coverage.--The actuarial value of the total coverage 
                (as determined under subsection (g)) is at least equal 
                to the actuarial value (as so determined) of standard 
                coverage.
                    ``(B) Assuring equivalent unsubsidized value of 
                coverage.--The unsubsidized value of the coverage is at 
                least equal to the unsubsidized value of standard 
                coverage. For purposes of this subparagraph, the 
                unsubsidized value of coverage is the amount by which 
                the actuarial value of the coverage (as determined 
                under subsection (g)) exceeds the actuarial value of 
                the reinsurance subsidy payments under section 2232 
                with respect to such coverage.
                    ``(C) Assuring standard payment for costs at 
                initial coverage limit.--The coverage is designed, 
                based upon an actuarially representative pattern of 
                utilization (as determined under subsection (g)), to 
                provide for the payment, with respect to costs incurred 
                that are equal to the sum of the deductible under 
                subsection (d)(1) and the initial coverage limit under 
                subsection (d)(3), of an amount equal to at least such 
                initial coverage limit multiplied by the percentage 
                specified in subsection (d)(2).
        Benefits other than qualified prescription drug coverage shall 
        not be taken into account for purposes of this paragraph.
            ``(2) Limitation on out-of-pocket expenditures by 
        beneficiaries.--The coverage provides the limitation on out-of-
        pocket expenditures by beneficiaries described in subsection 
        (d)(4).
    ``(f) Access to Negotiated Prices.--Under qualified prescription 
drug coverage offered by an eligible entity or a Medicare+Choice 
organization, the entity or organization shall provide beneficiaries 
with access to negotiated prices (including applicable discounts) used 
for payment for covered outpatient drugs, regardless of the fact that 
no benefits may be payable under the coverage with respect to such 
drugs because of the application of cost-sharing or an initial coverage 
limit (described in subsection (d)(3)). In providing such access, the 
eligible entity or Medicare+Choice organization shall issue a card 
pursuant to section 2226(b)(1).
    ``(g) Actuarial Valuation; Determination of Annual Percentage 
Increases.--
            ``(1) Processes.--For purposes of this section, the 
        Commissioner shall establish processes and methods--
                    ``(A) for determining the actuarial valuation of 
                prescription drug coverage, including--
                            ``(i) an actuarial valuation of standard 
                        coverage and of the reinsurance subsidy 
                        payments under section 2232;
                            ``(ii) the use of generally accepted 
                        actuarial principles and methodologies; and
                            ``(iii) applying the same methodology for 
                        determinations of alternative coverage under 
                        subsection (e) as is used with respect to 
                        determinations of standard coverage under 
                        subsection (d); and
                    ``(B) for determining annual percentage increases 
                described in subsection (d)(5).
            ``(2) Use of outside actuaries.--Under the processes under 
        paragraph (1)(A), eligible entities and Medicare+Choice 
        organizations may use actuarial opinions certified by 
        independent, qualified actuaries to establish actuarial values.

                       ``beneficiary protections

    ``Sec. 2226. (a) Dissemination of Information.--
            ``(1) General information.--An eligible entity offering a 
        Medicare Prescription Plus plan shall disclose, in a clear, 
        accurate, and standardized form to each enrollee at the time of 
        enrollment and at least annually thereafter, the information 
        described in section 1852(c)(1) relating to such plan. Such 
        information includes the following:
                    ``(A) Access to covered outpatient drugs.
                    ``(B) How any formulary used by the entity 
                functions.
                    ``(C) Co-payments, coinsurance, and deductible 
                requirements.
                    ``(D) Grievance and appeals procedures.
            ``(2) Disclosure upon request of general coverage, 
        utilization, and grievance information.--Upon request of an 
        individual eligible to enroll in a Medicare Prescription Plus 
        plan, the eligible entity offering such plan shall provide the 
        information described in section 1852(c)(2) to such individual.
            ``(3) Response to beneficiary questions.--An eligible 
        entity offering a Medicare Prescription Plus plan shall have a 
mechanism for providing specific information to enrollees upon request, 
including information on specific changes in its formulary.
            ``(4) Claims information.--An eligible entity offering a 
        Medicare Prescription Plus plan must furnish to enrolled 
        individuals in a form easily understandable to such individuals 
        an explanation of benefits (in accordance with section 1806(a) 
        or in a comparable manner) and a notice of the benefits in 
        relation to initial coverage limit and annual out-of-pocket 
        limit for the current year, whenever prescription drug benefits 
        are provided under this part (except that such notice need not 
        be provided more often than monthly).
    ``(b) Access to Covered Outpatient Drugs.--
            ``(1) Access to negotiated prices for prescription drugs.--
        An eligible entity offering a Medicare Prescription Plus plan 
        shall issue such a card that may be used by an enrolled 
        beneficiary to assure access to negotiated prices under section 
        2225(f) for the purchase of prescription drugs for which 
        coverage is not otherwise provided under the Medicare 
        Prescription Plus plan.
            ``(2) Requirements on development and application of 
        formularies.--Insofar as an eligible entity offering a Medicare 
        Prescription Plus plan uses a formulary with respect to 
        qualified prescription drug coverage, the following 
        requirements must be met:
                    ``(A) Inclusion of drugs in all therapeutic 
                categories.--The formulary must include drugs within 
                all therapeutic categories and classes of covered 
                outpatient drugs (although not necessarily for all 
                drugs within such categories and classes).
                    ``(B) Appeals and exceptions to application.--The 
                eligible entity must have, as part of the appeals 
                process under subsection (e)(2), a process for appeals 
                for denials of coverage based on such application of 
                the formulary.
    ``(c) Cost and Utilization Management.--
            ``(1) In general.--An eligible entity shall have in place--
                    ``(A) an effective cost and drug utilization 
                management program, including appropriate incentives to 
                use generic drugs, when appropriate;
                    ``(B) quality assurance measures to reduce medical 
                errors and adverse drug interactions, which may include 
                the measures described in paragraph (2); and
                    ``(C) a program to control fraud, abuse, and waste.
            ``(2) Measures.--The measures described in this paragraph 
        are beneficiary education programs, counseling, medication 
        refill reminders, and special packaging.
    ``(d) Grievance Mechanism.--An eligible entity shall provide 
meaningful procedures for hearing and resolving grievances between the 
eligible entity (including any entity or individual through which the 
eligible entity provides covered benefits) and enrollees in a Medicare 
Prescription Plus plan offered by the eligible entity in accordance 
with section 1852(f).
    ``(e) Coverage Determinations, Reconsiderations, and Appeals.--
            ``(1) In general.--An eligible entity shall meet the 
        requirements of section 1852(g) with respect to covered 
        benefits under the Medicare Prescription Plus plan it offers 
        under this part in the same manner as such requirements apply 
        to a Medicare+Choice organization with respect to benefits it 
        offers under a Medicare+Choice plan under part C of title 
        XVIII.
            ``(2) Appeals of formulary determinations.--Consistent with 
        the requirements of section 1852(g), an eligible entity shall 
        establish a process for appeals of formulary determinations.
    ``(f) Confidentiality and Accuracy of Enrollee Records.--An 
eligible entity shall meet the requirements of section 1852(h) with 
respect to enrollees under this part in the same manner as such 
requirements apply to a Medicare+Choice organization with respect to 
enrollees under part C of title XVIII.
    ``(g) Uniform Premium.--An eligible entity shall ensure that the 
premium for a Medicare Prescription Plus plan charged under this 
section is the same for all individuals enrolled in the plan in the 
same service area.

 ``requirements for entities offering medicare prescription plus plans

    ``Sec. 2227. (a) General Requirements.--An eligible entity offering 
a Medicare Prescription Plus plan shall meet the following 
requirements:
            ``(1) Licensure.--Subject to subsection (c), the entity is 
        organized and licensed under State law as a risk-bearing entity 
        eligible to offer health insurance or health benefits coverage 
        in each State in which it offers a Medicare Prescription Plus 
        plan.
            ``(2) Assumption of full financial risk.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                entity assumes full financial risk on a prospective 
                basis for the benefits that it offers under a Medicare 
                Prescription Plus plan and that is not covered under 
                reinsurance under section 2232.
                    ``(B) Reinsurance permitted.--The entity may obtain 
                insurance or make other arrangements for the cost of 
                coverage provided to any enrolled member under this 
                part.
            ``(3) Solvency for unlicensed entities.--In the case of an 
        eligible entity that is not described in paragraph (1), the 
        entity shall meet solvency standards established by the 
        Commissioner under subsection (d).
    ``(b) Contract Requirements.--The Commissioner shall not permit an 
eligible beneficiary to elect a Medicare Prescription Plus plan offered 
by an eligible entity under this part, and the entity shall not be 
eligible for payments under section 2230, 2231(e), or 2232, unless the 
Commissioner has entered into a contract under this subsection with the 
entity with respect to the offering of such plan. Such a contract with 
an entity may cover more than 1 Medicare Prescription Plus plan. Such 
contract shall provide that the entity agrees to comply with the 
applicable requirements and standards of this part and the terms and 
conditions of payment as provided for in this part.
    ``(c) Waiver of Certain Requirements To Expand Choice.--
            ``(1) In general.--In the case of an eligible entity that 
        seeks to offer a Medicare Prescription Plus plan in a State, 
        the Commissioner shall waive the requirement of subsection 
        (a)(1) that the entity be licensed in that State if the 
        Commissioner determines, based on the application and other 
        evidence presented to the Commissioner, that any of the grounds 
        for approval of the application described in paragraph (2) have 
        been met.
            ``(2) Grounds for approval.--The grounds for approval under 
        this paragraph are the grounds for approval described in 
        subparagraphs (B), (C), and (D) of section 1855(a)(2), and also 
        include the application by a State of any grounds other than 
        those required under Federal law.
            ``(3) Application of medicare+choice pso waiver 
        procedures.--With respect to an application for a waiver (or a 
        waiver granted) under this subsection, the provisions of 
        subparagraphs (E), (F), and (G) of section 1855(a)(2) shall 
        apply.
            ``(4) Licensure does not substitute for or constitute 
        certification.--The fact that an entity is licensed in 
        accordance with subsection (a)(1) does not deem the eligible 
        entity to meet other requirements imposed under this part for 
        an eligible entity.
            ``(5) References to certain provisions.--For purposes of 
        this subsection, in applying the provisions of section 
        1855(a)(2) under this subsection to Medicare Prescription Plus 
        plans and eligible entities--
                    ``(A) any reference to a waiver application under 
                section 1855 shall be treated as a reference to a 
                waiver application under paragraph (1); and
                    ``(B) any reference to solvency standards were 
                treated as a reference to solvency standards 
                established under subsection (d).
    ``(d) Solvency Standards for Non-Licensed Entities.--
            ``(1) Establishment.--The Commissioner shall establish, by 
        not later than October 1, 2001, financial solvency and capital 
        adequacy standards that an entity that does not meet the 
        requirements of subsection (a)(1) must meet to qualify as an 
        eligible entity under this part.
            ``(2) Compliance with standards.--An eligible entity that 
        is not licensed by a State under subsection (a)(1) and for 
        which a waiver application has been approved under subsection 
        (c) shall meet solvency and capital adequacy standards 
        established under paragraph (1). The Commissioner shall 
        establish certification procedures for such eligible entities 
        with respect to such solvency standards in the manner described 
        in section 1855(c)(2).
    ``(e) Other Standards.--The Commissioner shall establish by 
regulation other standards (not described in subsection (d)) for 
eligible entities and Medicare Prescription Plus plans consistent with, 
and to carry out, this part. The Commissioner shall publish such 
regulations by October 1, 2001.
    ``(f) Relation to State Laws.--
            ``(1) In general.--The standards established under this 
        section shall supersede any State law or regulation (including 
        standards described in paragraph (2)) with respect to Medicare 
        Prescription Plus plans which are offered by eligible entities 
        under this part to the extent such law or regulation is 
        inconsistent with such standards, in the same manner as such 
        laws and regulations are superseded under section 1856(b)(3).
            ``(2) Standards specifically superseded.--State standards 
        relating to the following are superseded under this section:
                    ``(A) Benefit requirements.
                    ``(B) Requirements relating to inclusion or 
                treatment of providers.
                    ``(C) Coverage determinations (including related 
                appeals and grievance processes).
            ``(3) Prohibition of state imposition of premium taxes.--No 
        State may impose a premium tax or similar tax with respect to 
        premiums paid to eligible entities for Medicare Prescription 
        Plus plans under this part, or with respect to any payments 
        made to such an entity by the Commissioner under this part.

            ``submission of medicare prescription plus plans

    ``Sec. 2228. (a) In General.--Each eligible entity that intends to 
offer a Medicare Prescription Plus plan in a year (beginning with 2003) 
shall submit to the Commissioner, at such time and in such manner as 
the Commissioner may specify, such information as the Commissioner may 
require, including the information described in subsection (b).
    ``(b) Information Described.--The information described in this 
subsection includes information on each of the following:
            ``(1) A description of the benefits under the plan, 
        including any supplemental benefits pursuant to section 
        2225(b).
            ``(2) Information on the actuarial value of the qualified 
        prescription drug coverage.
            ``(3) Information on the monthly premium to be charged for 
        all benefits, including an actuarial certification of--
                    ``(A) the actuarial basis for such premium;
                    ``(B) the portion of such premium attributable to 
                benefits in excess of standard coverage; and
                    ``(C) the reduction in such premium resulting from 
                the reinsurance subsidy payments provided under section 
                2232.
            ``(4) The service area for the plan.
            ``(5) Such other information as the Commissioner may 
        require to carry out this part.

             ``approval of medicare prescription plus plans

    ``Sec. 2229. (a) In General.--The Commissioner shall review the 
information filed under section 2228 and shall approve or disapprove 
the Medicare Prescription Plus plan.
    ``(b) Negotiation.--In exercising such authority, the Commissioner 
shall have the same authority to negotiate the terms and conditions of 
the premiums submitted and other terms and conditions of plans as the 
Director of the Office of Personnel Management has with respect to 
health benefits plans under chapter 89 of title 5, United States Code.
    ``(c) Special Rules for Approval.--
            ``(1) Service area.--The Commissioner may approve a service 
        area submitted under section 2228(b)(4) only if the 
        Commissioner finds that--
                    ``(A) the use of such an area is consistent with 
                the purposes of this part; and
                    ``(B) the service area for the plan is not designed 
                so as to discriminate based on the health status, 
                economic status, or prior receipt of health care of 
                eligible beneficiaries.
            ``(2) Avoidance of favorable selection.--The Commissioner 
        may approve a Medicare Prescription Plus plan submitted under 
        section 2228 only if the benefits under such plan--
                    ``(A) include the required benefits under section 
                2225(a)(1); and
                    ``(B) are not designed in such a manner that the 
                Commissioner finds is likely to result in favorable 
                selection of eligible beneficiaries.

      ``payments to medicare prescription plus plans for benefits

    ``Sec. 2230. (a) In General.--Subject to subsection (b), for each 
year (beginning with 2003), the Commissioner shall pay to each eligible 
entity offering a Medicare Prescription Plus plan in which an eligible 
beneficiary is enrolled an amount equal to--
            ``(1) the full amount of the premium approved under section 
        2229 on behalf of each eligible beneficiary enrolled in such 
        plan for the year; minus
            ``(2) the amount of any fees imposed on the entity pursuant 
        to section 2233).
    ``(b) Payment Terms.--Payment under this section to an eligible 
entity offering a Medicare Prescription Plus plan shall be made in a 
manner determined by the Commissioner and based upon the manner in 
which payments are made under section 1853(a) (relating to payments to 
Medicare+Choice organizations).

      ``computation and collection of beneficiary share of premium

    ``Sec. 2231. (a) Computation.--
            ``(1) Amount.--The annual beneficiary premium for 
        enrollment in a Medicare Prescription Plus plan providing 
        coverage under this part for a year shall be an amount equal 
        to--
                    ``(A) an amount equal to the full amount of the 
                premium approved under section 2229 for the plan in 
                which the beneficiary is enrolled; minus
                    ``(B) the amount of the discount determined under 
                subsection (b).
            ``(2) Collection of premium amount in same manner as part b 
        premium.--
                    ``(A) In general.--The amount of the annual 
                beneficiary premium determined under paragraph (1) 
                shall be collected and credited to the Medicare 
                Prescription Drug Account in the same manner as the 
                monthly premium determined under section 1839 is 
                collected and credited to the Federal Supplementary 
                Medical Insurance Trust Fund under section 1840.
                    ``(B) Information necessary for collection.--In 
                order to carry out subparagraph (A), the Commissioner 
                shall transmit to the Commissioner of Social Security--
                            ``(i) at the beginning of each year, the 
                        name, social security account number, and 
                        annual beneficiary premium owed by 
each individual enrolled in a Medicare Prescription Plus plan for each 
month during the year; and
                            ``(ii) periodically throughout the year, 
                        information to update the information 
                        previously transmitted under this paragraph for 
                        the year.
    ``(b) Discounts for Required Drug Portion of Premium.--
            ``(1) Full premium discount and reduction of cost-sharing 
        for individuals with income below 135 percent of federal 
        poverty level.--In the case of a low-income individual (as 
        defined in paragraph (5)(A)) who is determined to have income 
        that does not exceed 135 percent of the Federal poverty level, 
        the individual is entitled under this section--
                    ``(A) to a premium discount equal to 100 percent of 
                the amount described in subsection (c); and
                    ``(B) subject to subsection (d), to the 
                substitution for the beneficiary cost-sharing described 
                in paragraphs (1) and (2) of section 2225(d) (up to the 
                initial coverage limit specified in paragraph (3) of 
                such section) of amounts that are nominal.
            ``(2) Sliding scale premium discount for individuals with 
        income above 135, but below 150 percent, of federal poverty 
        level.--In the case of a low-income individual who is 
        determined to have income that exceeds 135 percent, but does 
        not exceed 150 percent, of the Federal poverty level, the 
        individual is entitled under this section to a premium discount 
        determined on a linear sliding scale ranging from 100 percent 
        of the amount described in subsection (c) for individuals with 
        incomes at 135 percent of such level to 25 percent of such 
        amount for individuals with incomes at 150 percent of such 
        level.
            ``(3) Partial premium discount for individuals with income 
        above 150 percent of federal poverty level.--In the case of an 
        eligible beneficiary who is not a low-income individual, the 
        beneficiary is entitled under this section to a premium 
        discount equal to 25 percent of the amount described in 
        subsection (c).
            ``(4) Tax treatment of premium discount.--
                    ``(A) In general.--For purposes of the Internal 
                Revenue Code of 1986, the premium discount determined 
                under this subsection for an eligible beneficiary for a 
                year shall be included in the gross income of the 
                beneficiary for the year.
                    ``(B) Statement of taxable amount.--Not later than 
                January 31 of each year (beginning with 2004), the 
                Commissioner shall provide--
                            ``(i) each eligible beneficiary enrolled 
                        under this part with a statement that describes 
                        the amount of the discount that is required to 
                        be included in the gross income of the 
                        beneficiary for the previous year pursuant to 
                        subparagraph (A); and
                            ``(ii) the Secretary of the Treasury with 
                        the information described in clause (i).
            ``(5) Determination of eligibility.--
                    ``(A) Low-income individual defined.--For purposes 
                of this section, subject to subparagraph (D), the term 
                `low-income individual' means an individual who--
                            ``(i) is eligible to enroll, and has 
                        enrolled, under this part;
                            ``(ii) has income below 150 percent of the 
                        Federal poverty line; and
                            ``(iii) meets the resources requirement 
                        described in section 1905(p)(1)(C).
                    ``(B) Determinations.--The determination of whether 
                an individual residing in a State is a low-income 
                individual and the amount of such individual's income 
                shall be determined under the State medicaid plan for 
                the State under section 1935(a). In the case of a State 
                that does not operate such a medicaid plan (either 
                under title XIX or under a statewide waiver granted 
                under section 1115), such determination shall be made 
                under arrangements made by the Commissioner.
                    ``(C) Income determinations.--For purposes of 
                applying this section--
                            ``(i) income shall be determined in the 
                        manner described in section 1905(p)(1)(B); and
                            ``(ii) the term `Federal poverty line' 
                        means the official poverty line (as defined by 
                        the Office of Management and Budget, and 
                        revised annually in accordance with section 
                        673(2) of the Omnibus Budget Reconciliation Act 
                        of 1981) applicable to a family of the size 
                        involved.
                    ``(D) Treatment of territorial residents.--In the 
                case of an individual who is not a resident of the 50 
                States or the District of Columbia, the individual is 
                not eligible to be a low-income individual but may be 
                eligible for financial assistance with prescription 
                drug expenses under section 1935(e).
    ``(c) Premium Discount Amount.--The premium discount amount 
described in this subsection for an eligible beneficiary residing in an 
area is an amount equal to--
            ``(1) in the case of an individual enrolled in a Medicare 
        Prescription Plus plan, the actuarial value of the standard 
        drug coverage provided under the plan (determined without 
        regard to any premium discount under this section); and
            ``(2) in the case of an individual enrolled in a 
        Medicare+Choice plan that provides qualified prescription drug 
        coverage, the standard premium computed under section 
        1851(j)(5)(A)(iii).
    ``(d) Rules in Applying Cost-Sharing Subsidies.--
            ``(1) In general.--In applying subsection (b)(1)(B)--
                    ``(A) the maximum amount of subsidy that may be 
                provided with respect to an enrollee for a year may not 
                exceed 95 percent of the maximum cost-sharing described 
                in such subsection that may be incurred for standard 
                coverage;
                    ``(B) the Commissioner shall determine what is 
                `nominal' taking into account the rules applied under 
                section 1916(a)(3); and
                    ``(C) nothing in this part shall be construed as 
                preventing a plan or provider from waiving or reducing 
                the amount of cost-sharing otherwise applicable.
            ``(2) Limitation on charges.--In the case of a low-income 
        individual receiving cost-sharing subsidies under subsection 
        (b)(1)(B), the eligible entity may not charge more than a 
        nominal amount in cases in which the cost-sharing subsidy is 
        provided under such subsection.
    ``(e) Administration of Cost-Sharing Program.--The Commissioner 
shall provide a process whereby, in the case of a low-income individual 
who is eligible for reduced cost-sharing under subsection (b)(1)(B) and 
is enrolled in a Medicare Prescription Plus plan or a Medicare+Choice 
plan under which qualified prescription drug coverage is provided--
            ``(1) the Commissioner provides for a notification of the 
        eligible entity or Medicare+Choice organization involved that 
        the individual is eligible for such reduced cost-sharing;
            ``(2) the entity or organization involved reduces the cost-
        sharing pursuant to this section and submits to the 
        Commissioner information on the amount of such reduction; and
            ``(3) the Commissioner periodically and on a timely basis 
        reimburses the entity or organization for the amount of such 
        reductions.
The reimbursement under paragraph (3) may be computed on a capitated 
basis, taking into account the actuarial value of the reductions and 
with appropriate adjustments to reflect differences in the risks 
actually involved.
    ``(f) Relation to Medicaid Program.--
            ``(1) In general.--For provisions providing for eligibility 
        determinations, and additional financing, under the medicaid 
        program, see section 1935.
            ``(2) Medicaid providing wrap around benefits.--The 
        coverage provided under this part is primary payor to benefits 
        for prescribed drugs provided under the medicaid program under 
        title XIX.

      ``additional prescription drug subsidies through reinsurance

    ``Sec. 2232. (a) Reinsurance Subsidy Payment.--In order to reduce 
premium levels applicable to qualified prescription drug coverage for 
all medicare beneficiaries, to reduce adverse selection among Medicare 
Prescription Plus plans and Medicare+Choice plans that provide 
qualified prescription drug coverage, and to promote the participation 
of eligible entities under this part, the Commissioner shall provide in 
accordance with this section for payment to a qualifying entity (as 
defined in subsection (b)) of the reinsurance payment amount (as 
defined in subsection (c)) for excess costs incurred in providing 
qualified prescription drug coverage--
            ``(1) for individuals enrolled with a Medicare Prescription 
        Plus plan under this part;
            ``(2) for individuals enrolled with a Medicare+Choice plan 
        that provides qualified prescription drug coverage under part C 
        of title XVIII; and
            ``(3) for medicare secondary payer eligible individuals 
        (described in subsection (e)(3)(D)) who are enrolled in a 
        qualified retiree prescription drug plan.
This section constitutes budget authority in advance of appropriations 
Acts and represents the obligation of the Commissioner to provide for 
the payment of amounts provided under this section.
    ``(b) Qualifying Entity Defined.--For purposes of this section, the 
term `qualifying entity' means any of the following that has entered 
into an agreement with the Commissioner to provide the Commissioner 
with such information as may be required to carry out this section:
            ``(1) An eligible entity offering a Medicare Prescription 
        Plus plan under this part.
            ``(2) A Medicare+Choice organization that provides 
        qualified prescription drug coverage under a Medicare+Choice 
        plan under part C of title XVIII.
            ``(3) The sponsor of a qualified retiree prescription drug 
        plan (as defined in subsection (e)).
    ``(c) Reinsurance Payment Amount.--
            ``(1) In general.--Subject to subsection (e)(2) and 
        paragraph (4), the reinsurance payment amount under this 
        subsection for a qualified beneficiary (as defined in 
        subsection (f)(1)) for a coverage year (as defined in 
        subsection (f)(2)) is an amount equal to 80 percent of the 
        allowable costs attributable to the portion of the individual's 
        gross covered prescription drug costs for the year that exceeds 
        $7,050.
            ``(2) Allowable costs.--For purposes of this section, the 
        term `allowable costs' means, with respect to gross covered 
        prescription drug costs under a plan described in subsection 
        (b) offered by a qualifying entity, the part of such costs that 
        are actually paid under the plan, but in no case more than the 
        part of such costs that would have been paid under the plan if 
        the prescription drug coverage under the plan were standard 
        coverage.
            ``(3) Gross covered prescription drug costs.--For purposes 
        of this section, the term `gross covered prescription drug 
        costs' means, with respect to an enrollee with a qualifying 
        entity under a plan described in subsection (b) during a 
        coverage year, the costs incurred under the plan for covered 
        prescription drugs dispensed during the year, including costs 
        relating to the deductible, whether paid by the enrollee or 
        under the plan, regardless of whether the coverage under the 
        plan exceeds standard coverage and regardless of when the 
        payment for such drugs is made.
            ``(4) Indexing dollar amount.--
                    ``(A) Amount for 2003.--The dollar amount applied 
                under paragraph (1) for 2003 shall be the dollar amount 
                specified in such paragraph.
                    ``(B) For 2004.--The dollar amount applied under 
                paragraph (1) for 2004 shall be the dollar amount 
                specified in such paragraph increased by the annual 
                percentage increase described in section 2225(d)(5) for 
                2004.
                    ``(C) For subsequent years.--The dollar amount 
                applied under paragraph (1) for a year after 2004 shall 
                be the dollar amount (under this paragraph) applied 
                under paragraph (1) for the preceding year increased by 
                the annual percentage increase described in section 
                2225(d)(5) for the year involved.
                    ``(D) Rounding.--Any amount, determined under the 
                preceding provisions of this paragraph for a year, 
                which is not a multiple of $5 shall be rounded to the 
                nearest multiple of $5.
    ``(d) Payment Methods.--
            ``(1) In general.--Payments under this section shall be 
        based on such a method as the Commissioner determines. The 
        Commissioner may establish a payment method by which interim 
        payments of amounts under this section are made during a year 
        based on the Commissioner's best estimate of amounts that will 
        be payable after obtaining all of the information.
            ``(2) Source of payments.--Payments under this section 
        shall be made from the Medicare Prescription Drug Account.
    ``(e) Qualified Retiree Prescription Drug Plan Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified retiree prescription drug plan' means employment-
        based retiree health coverage (as defined in paragraph (3)(A)) 
        if, with respect to an individual enrolled (or eligible to be 
        enrolled) under this part who is covered under the plan, the 
        following requirements are met:
                    ``(A) Assurance.--The sponsor of the plan shall 
                annually attest, and provide such assurances as the 
                Commissioner may require, that the coverage meets the 
                requirements for qualified prescription drug coverage.
                    ``(B) Audits.--The sponsor (and the plan) shall 
                maintain, and afford the Commissioner access to, such 
                records as the Commissioner may require for purposes of 
                audits and other oversight activities necessary to 
                ensure the adequacy of prescription drug coverage, the 
                accuracy of payments made, and such other matters as 
                may be appropriate.
                    ``(C) Other requirements.--The sponsor of the plan 
                shall comply with such other requirements as the 
                Commissioner finds necessary to administer the program 
                under this section.
            ``(2) Limitation on benefit eligibility.--No payment shall 
        be provided under this section with respect to an individual 
        who is enrolled under a qualified retiree prescription drug 
        plan unless the individual is a medicare secondary payer 
        eligible individual who--
                    ``(A) is covered under the plan; and
                    ``(B) is eligible to obtain qualified prescription 
                drug coverage under this part but did not elect such 
                coverage (either through a Medicare Prescription Plus 
                plan or through a Medicare+Choice plan).
            ``(3) Definitions.--As used in this section:
                    ``(A) Employment-based retiree health coverage.--
                The term `employment-based retiree health coverage' 
                means health insurance or other coverage of health care 
                costs for medicare secondary payer eligible individuals 
                (or for such individuals and their spouses and 
                dependents) based on their status as former employees 
                or labor union members.
                    ``(B) Employer.--The term `employer' has the 
                meaning given such term by section 3(5) of the Employee 
                Retirement Income Security Act of 1974 (except that 
                such term shall include only employers of 2 or more 
                employees).
                    ``(C) Sponsor.--The term `sponsor' means a plan 
                sponsor, as defined in section 3(16)(B) of the Employee 
                Retirement Income Security Act of 1974.
                    ``(D) Medicare secondary payer individual.--The 
                term `medicare secondary payer eligible individual' 
                means, with respect to a plan, an individual who is 
                covered under the plan and with respect to whom the 
                plan is not a primary plan (as defined in section 
                1862(b)(2)(A)).
    ``(f) General Definitions.--For purposes of this section:
            ``(1) Qualified beneficiary.--The term `qualified 
        beneficiary' means an individual who--
                    ``(A) is enrolled with a Medicare Prescription Plus 
                plan under this part;
                    ``(B) is enrolled with a Medicare+Choice plan that 
                provides qualified prescription drug coverage under 
                part C of title XVIII; or
                    ``(C) is covered as a medicare secondary payer 
                eligible individual under a qualified retiree 
                prescription drug plan.
            ``(2) Coverage year.--The term `coverage year' means a 
        calendar year in which covered outpatient drugs are dispensed 
        if a claim for payment is made under the plan for such drugs, 
        regardless of when the claim is paid.

                  ``plan fees for administrative costs

    ``Sec. 2233. (a) In General.--The Commissioner may levy on Medicare 
Prescription Plus plans and Medicare+Choice plans that provide drug 
coverage pursuant to this part an assessment sufficient to pay the 
estimated expenses of the Commissioner for administering the program 
under this part.
    ``(b) Deposits and Use.--The assessments described in subsection 
(a) shall be--
            ``(1) deposited into the Medicare Prescription Drug 
        Account; and
            ``(2) available for administering the program under this 
        part without regard to amounts provided for in advance by 
        appropriations Acts.

                  ``medicare prescription drug account

    ``Sec. 2234. (a) Establishment.--There is created within the 
Federal Supplementary Medical Insurance Trust Fund established under 
section 1841 an account to be known as the `Medicare Prescription Drug 
Account'.
    ``(b) Amounts in Account.--
            ``(1) In general.--The Medicare Prescription Drug Account 
        shall consist of--
                    ``(A) such amounts as may be deposited in, or 
                appropriated to, such account as provided in this part; 
                and
                    ``(B) such gifts and bequests as may be made as 
                provided in section 201(i)(1).
            ``(2) Separation of funds.--Funds provided under this part 
        to the Medicare Prescription Drug Account shall be kept 
        separate from all other funds within the Federal Supplemental 
        Medical Insurance Trust Fund.
    ``(c) Payments From Account.--
            ``(1) In general.--The Managing Trustee shall pay from time 
        to time from the Medicare Prescription Drug Account such 
        amounts as the Commissioner certifies are necessary to make the 
        payments provided for by this part, and the payments with 
        respect to administrative expenses in accordance with section 
        201(g).
            ``(2) Transfers to medicaid account for increased 
        administrative costs.--The Managing Trustee shall transfer from 
        time to time from the Account to the Grants to States for 
        Medicaid account amounts the Secretary certifies are 
        attributable to increases in payment resulting from the 
        application of a higher Federal matching percentage under 
        section 1935(b).
    ``(d) Deposits Into Account.--
            ``(1) Medicaid transfer.--There is hereby transferred to 
        the Account, from amounts appropriated for Grants to States for 
        Medicaid, amounts equivalent to the aggregate amount of the 
        reductions in payments under section 1903(a)(1) attributable to 
        the application of section 1935(c).
            ``(2) Appropriations to cover government contributions.--
        There are authorized to be appropriated from time to time, out 
        of any moneys in the Treasury not otherwise appropriated, to 
        the Account, an amount equivalent to the amount of payments 
        made from the Account, reduced by--
                    ``(1) the amount transferred to the Account under 
                paragraph (1);
                    ``(2) the beneficiary premiums collected and 
                credited to the account under section 2231(b)(2); and
                    ``(3) fees collected and credited to the account 
                under section 2233.

                      ``secondary payer provisions

    ``Sec. 2235. The provisions of section 1862(b) shall apply to the 
benefits provided under this part.

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

    ``Sec. 2236. (a) Definitions.--In this part:
            ``(1) Commissioner.--The term `Commissioner' means the 
        Commissioner of the Competitive Medicare Agency.
            ``(2) Covered outpatient drug.--
                    ``(A) In general.--Except as provided in this 
                subparagraph (B), the term `covered outpatient drug' 
                means--
                            ``(i) a drug that may be dispensed only 
                        upon a prescription and that is described in 
                        clause (i) or (ii) of section 1927(k)(2)(A); or
                            ``(ii) a biological product or insulin 
                        described in subparagraph (B) or (C) of such 
                        section.
                    ``(B) Exclusions.--
                            ``(i) In general.--The term `covered 
                        outpatient drug' does not include drugs or 
                        classes of drugs, or their medical uses, which 
                        may be excluded from coverage or otherwise 
                        restricted under section 1927(d)(2), other than 
                        subparagraph (E) thereof (relating to smoking 
                        cessation agents).
                            ``(ii) Avoidance of duplicate coverage.--A 
                        drug prescribed for an individual that would 
                        otherwise be a covered outpatient drug under 
                        this part shall not be so considered if payment 
                        for such drug is available under part A or B of 
                        title XVIII (but shall be so considered if such 
                        payment is not available because benefits under 
                        part A or B of title XVIII have been 
                        exhausted), without regard to whether the 
                        individual is entitled to benefits under such 
                        part A or enrolled under such part B.
            ``(3) Eligible beneficiary.--The term `eligible 
        beneficiary' means an individual that is entitled to benefits 
        under part A of title XVIII and enrolled under part B of such 
        title.
            ``(4) Eligible entity.--The term `eligible entity' means 
        any risk-bearing entity that the Commissioner determines to be 
        appropriate to provide eligible beneficiaries with the benefits 
        under a Medicare Prescription Plus plan, including--
                    ``(A) a pharmaceutical benefit management company;
                    ``(B) a wholesale or retail pharmacist delivery 
                system;
                    ``(C) an insurer (including an insurer that offers 
                medicare supplemental policies under section 1882);
                    ``(D) another entity; or
                    ``(E) any combination of the entities described in 
                subparagraphs (A) through (D).
            ``(5) Initial coverage limit.--The term `initial coverage 
        limit' means the limit as established under section 2225(d)(3), 
        or, in the case of coverage that is not standard coverage, the 
        comparable limit (if any) established under the coverage.
            ``(6) Medicare+choice organization; medicare+choice plan.--
        The terms `Medicare+Choice organization' and `Medicare+Choice 
        plan' have the meanings given such terms in subsections (a)(1) 
        and (b)(1), respectively, of section 1859 (relating to 
        definitions relating to Medicare+Choice organizations and 
        plans).
            ``(7) Medicare prescription drug account.--The term 
        `Medicare Prescription Drug Account' means the Medicare 
        Prescription Drug Account established under section 2234 and 
        located within the Federal Supplementary Medical Insurance 
        Trust Fund established under section 1841.
            ``(8) Medicare prescription plus plan.--The term `Medicare 
        Prescription Plus plan' means a health benefits plan that the 
        Commissioner has approved under section 2229.
            ``(9) Standard coverage.--The term `standard coverage' 
        means the coverage described in section 2225(d).
    ``(b) Application of Medicare+Choice Provisions Under This Part.--
For purposes of applying provisions of part C of title XVIII under this 
part with respect to a Medicare Prescription Plus plan and an eligible 
entity, unless otherwise provided in this part such provisions shall be 
applied as if--
            ``(1) any reference to a Medicare+Choice plan included a 
        reference to a Medicare Prescription Plus plan;
            ``(2) any reference to a provider-sponsored organization 
        included a reference to an eligible entity;
            ``(3) any reference to a contract under section 1857 
        included a reference to a contract under section 2227(b); and
            ``(4) any reference to part C of title XVIII included a 
        reference to this part.''.
    (b) Submission of Legislative Proposal.--Not later than 6 months 
after the date of enactment of this Act, the Secretary of Health and 
Human Services and the Commissioner of the Competitive Medicare Agency 
shall submit to the appropriate committees of Congress a legislative 
proposal providing for such technical and conforming amendments in the 
law as are required by the provisions of this Act.

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

    Section 1841 of the Social Security Act (42 U.S.C. 1395t) is 
amended--
            (1) in the last sentence of subsection (a)--
                    (A) by striking ``and'' after ``section 
                201(i)(1)''; and
                    (B) by inserting before the period the following: 
                ``, and such amounts as may be deposited in, or 
                appropriated to, the Medicare Prescription Drug Account 
                established by section 2234'';
            (2) in subsection (g), by inserting after ``by this part,'' 
        the following: ``the payments provided for under the 
        Prescription Drug and Supplemental Benefit Program under part B 
        of title XVIII (in which case the payments shall come from the 
        Medicare Prescription Drug Account in the Supplementary Medical 
        Insurance Trust Fund),'';
            (3) in the first sentence of subsection (h), by inserting 
        ``(or the Commissioner of the Competitive Medicare Agency by 
        reason of section 2235 (in which case the payments shall come 
        from the Medicare Prescription Drug Account within such Trust 
        Fund))'' after ``Human Services''; and
            (4) in the first sentence of subsection (i), by inserting 
        ``(or the Commissioner of the Competitive Medicare Agency by 
        reason of section 2235 (in which case the payments shall come 
        from the Medicare Prescription Drug Account within such Trust 
        Fund))'' after ``Human Services''.

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

    (a) In General.--Section 1851 of the Social Security Act (42 U.S.C. 
1395w-21) is amended by adding at the end the following new subsection:
    ``(j) Availability of Prescription Drug Benefits.--
            ``(1) In general.--A Medicare+Choice organization may not 
        offer prescription drug coverage (other than that required 
        under parts A and B) to an enrollee under a Medicare+Choice 
        plan unless such drug coverage is at least qualified 
        prescription drug coverage and unless the requirements of this 
        subsection with respect to such coverage are met.
            ``(2) Compliance with additional beneficiary protections.--
        With respect to the offering of qualified prescription drug 
        coverage by a Medicare+Choice organization under a 
        Medicare+Choice plan, the organization and plan shall meet the 
        requirements of section 2226, including requirements relating 
        to information dissemination and grievance and appeals, in the 
        same manner as they apply to an eligible entity and a Medicare 
        Prescription Plus plan under part B of title XXII. The 
        Commissioner of the Competitive Medicare Agency shall waive 
        such requirements to the extent the Administrator determines 
that such requirements duplicate requirements otherwise applicable to 
the organization or plan under this part.
            ``(3) Treatment of coverage.--Except as provided in this 
        subsection, qualified prescription drug coverage offered under 
        this subsection shall be treated under this part in the same 
        manner as supplemental health care benefits described in 
        section 1852(a)(3)(A).
            ``(4) Availability of cost-sharing subsidies for low-income 
        enrollees and reinsurance subsidy payments for organizations.--
        For provisions--
                    ``(A) providing cost-sharing subsidies to low-
                income individuals receiving qualified prescription 
                drug coverage through a Medicare+Choice plan, see 
                section 2231; and
                    ``(B) providing a Medicare+Choice organization with 
                reinsurance subsidy payments for providing qualified 
                prescription drug coverage under this part, see section 
                2232.
            ``(5) Specification of separate and standard premium.--
                    ``(A) In general.--For purposes of applying section 
                1854 and determining the premium discount under section 
                2231(c) with respect to qualified prescription drug 
                coverage offered under this subsection under a plan, 
                the Medicare+Choice organization shall compute and 
                publish the following:
                            ``(i) Separate prescription drug premium.--
                        A premium for prescription drug benefits that 
                        constitutes qualified prescription drug 
                        coverage that is separate from other coverage 
                        under the plan.
                            ``(ii) Portion of coverage attributable to 
                        standard benefits.--The ratio of the actuarial 
                        value of standard coverage to the actuarial 
                        value of the qualified prescription drug 
                        coverage offered under the plan.
                            ``(iii) Portion of premium attributable to 
                        standard benefits.--A standard premium equal to 
                        the product of the premium described in clause 
                        (i) and the ratio under clause (ii).
                The premium under clause (i) shall be computed without 
                regard to any reduction in the premium permitted under 
                subparagraph (B).
                    ``(B) Reduction of premiums allowed.--Nothing in 
                this subsection shall be construed as preventing a 
                Medicare+Choice organization from reducing the amount 
                of a premium charged for prescription drug coverage 
                because of the application of subsections (f)(1)(A) and 
                (i)(2)(A) of section 1854 to other coverage.
            ``(6) Transition in initial enrollment period.--
        Notwithstanding any other provision of this part, the annual, 
        coordinated election period under subsection (e)(3)(B) for 2003 
        shall be the 6-month period beginning with November 2002.
            ``(7) Qualified prescription drug coverage; standard 
        coverage.--For purposes of this part, the terms `qualified 
        prescription drug coverage' and `standard coverage' have the 
        meanings given such terms in section 2225.''.
    (b) Conforming Amendments.--Section 1851(a)(1) of the Social 
Security Act (42 U.S.C. 1395w-21(a)(1)) is amended--
            (1) by inserting ``(other than qualified prescription drug 
        benefits)'' after ``benefits'';
            (2) by striking the period at the end of subparagraph (B) 
        and inserting a comma; and
            (3) by adding at the end the following flush language:
        ``and may elect qualified prescription drug coverage in 
        accordance with part B of title XXII.''.
    (c) Effective Date.--The amendments made by this section apply to 
coverage provided on or after January 1, 2003.

SEC. 204. MEDICAID AMENDMENTS.

    (a) Determinations of Eligibility for Low-Income Subsidies.--
            (1) Requirement.--Section 1902 of the Social Security Act 
        (42 U.S.C. 1396a) is amended in subsection (a)--
                    (A) by striking ``and'' at the end of paragraph 
                (64);
                    (B) by striking the period at the end of paragraph 
                (65) and inserting ``; and''; and
                    (C) by inserting after paragraph (65) the following 
                new paragraph:
            ``(66) provide for making eligibility determinations under 
        section 1935(a).''.
            (2) New section.--Title XIX of the Social Security Act (42 
        U.S.C. 1396 et seq.) is amended--
                    (A) by redesignating section 1935 as section 1936; 
                and
                    (B) by inserting after section 1934 the following 
                new section:

  ``special provisions relating to medicare prescription drug benefit

    ``Sec. 1935. (a) Requirement for Making Eligibility Determinations 
for Low-Income Subsidies.--As a condition of its State plan under this 
title under section 1902(a)(66) and receipt of any Federal financial 
assistance under section 1903(a), a State shall--
            ``(1) make determinations of eligibility for premium and 
        cost-sharing subsidies under (and in accordance with) section 
        2231;
            ``(2) inform the Commissioner of the Competitive Medicare 
        Agency of such determinations in cases in which such 
        eligibility is established; and
            ``(3) otherwise provide such Commissioner with such 
        information as may be required to carry out part B of title 
        XXII (including section 2231).
    ``(b) Payments for Additional Administrative Costs.--
            ``(1) In general.--The amounts expended by a State in 
        carrying out subsection (a) are, subject to paragraph (2), 
        expenditures reimbursable under the appropriate paragraph of 
        section 1903(a); except that, notwithstanding any other 
        provision of such section, the applicable Federal matching 
        rates with respect to such expenditures under such section 
shall be increased as follows:
                    ``(A) For expenditures attributable to costs 
                incurred during 2003, the otherwise applicable Federal 
                matching rate shall be increased by 20 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(B) For expenditures attributable to costs 
                incurred during 2004, the otherwise applicable Federal 
                matching rate shall be increased by 40 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(C) For expenditures attributable to costs 
                incurred during 2005, the otherwise applicable Federal 
                matching rate shall be increased by 60 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(D) For expenditures attributable to costs 
                incurred during 2006, the otherwise applicable Federal 
                matching rate shall be increased by 80 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(E) For expenditures attributable to costs 
                incurred after 2006, the otherwise applicable Federal 
                matching rate shall be increased to 100 percent.
            ``(2) Coordination.--The State shall provide the Secretary 
        with such information as may be necessary to properly allocate 
        administrative expenditures described in paragraph (1) that may 
        otherwise be made for similar eligibility determinations.''.
    (b) Phased-In Federal Assumption of Medicaid Responsibility for 
Premium and Cost-Sharing Subsidies for Dually Eligible Individuals.--
            (1) In general.--Section 1903(a)(1) of the Social Security 
        Act (42 U.S.C. 1396b(a)(1)) is amended by inserting before the 
        semicolon the following: ``, reduced by the amount computed 
        under section 1935(c)(1) for the State and the quarter''.
            (2) Amount described.--Section 1935 of the Social Security 
        Act, as inserted by subsection (a)(2), is amended by adding at 
        the end the following new subsection:
    ``(c) Federal Assumption of Medicaid Prescription Drug Costs for 
Dually Eligible Beneficiaries.--
            ``(1) In general.--For purposes of section 1903(a)(1), for 
        a State that is 1 of the 50 States or the District of Columbia 
        for a calendar quarter in a year (beginning with 2003) the 
        amount computed under this subsection is equal to the product 
        of the following:
                    ``(A) Medicare subsidies.--The total amount of 
                payments made in the quarter under section 2231 
                (relating to premium and cost-sharing prescription drug 
                subsidies for low-income medicare beneficiaries) that 
                are attributable to individuals who are residents of 
                the State and are entitled to benefits with respect to 
                prescribed drugs under the State plan under this title 
                (including such a plan operating under a waiver under 
                section 1115).
                    ``(B) State matching rate.--A proportion computed 
                by subtracting from 100 percent the Federal medical 
                assistance percentage (as defined in section 1905(b)) 
                applicable to the State and the quarter.
                    ``(C) Phase-out proportion.--The phase-out 
                proportion (as defined in paragraph (2)) for the 
                quarter.
            ``(2) Phase-out proportion.--For purposes of paragraph 
        (1)(C), the `phase-out proportion' for a calendar quarter in--
                    ``(A) 2003 is 90 percent;
                    ``(B) 2004 is 80 percent;
                    ``(C) 2005 is 70 percent;
                    ``(D) 2006 is 60 percent; or
                    ``(E) a year after 2006 is 50 percent.''.
    (c) Medicaid Providing Wrap-Around Benefits.--Section 1935 of the 
Social Security Act, as so inserted and amended, is further amended by 
adding at the end the following new subsection:
    ``(d) Additional Provisions.--
            ``(1) Medicaid as secondary payor.--In the case of an 
        individual dually entitled to qualified prescription drug 
        coverage under a Prescription Plus Plan under part B of title 
        XXII (or under a Medicare+Choice plan under part C of such 
        title) and medical assistance for prescribed drugs under this 
        title, medical assistance shall continue to be provided under 
        this title for prescribed drugs to the extent payment is not 
        made under the Medicare Prescription Plus plan or the 
        Medicare+Choice plan selected by the individual.
            ``(2) Condition.--A State may require, as a condition for 
        the receipt of medical assistance under this title with respect 
        to prescription drug benefits for an individual eligible to 
        obtain qualified prescription drug coverage described in 
        paragraph (1), that the individual elect qualified prescription 
        drug coverage under the program under part B of title XXII.''.
    (d) Treatment of Territories.--
            (1) In general.--Section 1935 of the Social Security Act, 
        as so inserted and amended, is further amended--
                    (A) in subsection (a)(1), by inserting ``subject to 
                subsection (e),'' after ``section 1903'';
                    (B) in subsection (c)(1), by inserting ``subject to 
                subsection (e),'' after ``1903(a)''; and
                    (C) by adding at the end the following new 
                subsection:
    ``(e) Treatment of Territories.--
            ``(1) In general.--In the case of a State, other than the 
        50 States and the District of Columbia--
                    ``(A) the previous provisions of this section shall 
                not apply to residents of such State; and
                    ``(B) if the State establishes a plan described in 
                paragraph (2) (for providing medical assistance with 
                respect to the provision of prescription drugs to 
                medicare beneficiaries), the amount otherwise 
                determined under section 1108(f) (as increased under 
                section 1108(g)) for the State shall be increased by 
the amount specified in paragraph (3).
            ``(2) Plan.--The plan described in this paragraph is a plan 
        that--
                    ``(A) provides medical assistance with respect to 
                the provision of covered outpatient drugs (as defined 
                in section 2236(2)) to low-income medicare 
                beneficiaries; and
                    ``(B) assures that additional amounts received by 
                the State that are attributable to the operation of 
                this subsection are used only for such assistance.
            ``(3) Increased amount.--
                    ``(A) In general.--The amount specified in this 
                paragraph for a State for a year is equal to the 
                product of--
                            ``(i) the aggregate amount specified in 
                        subparagraph (B); and
                            ``(ii) the amount specified in section 
                        1108(g)(1) for that State, divided by the sum 
                        of the amounts specified in such section for 
                        all such States.
                    ``(B) Aggregate amount.--The aggregate amount 
                specified in this subparagraph for--
                            ``(i) 2003, is equal to $20,000,000; or
                            ``(ii) a subsequent year, is equal to the 
                        aggregate amount specified in this subparagraph 
                        for the previous year increased by the annual 
                        percentage increase specified in section 
                        2225(d)(5) for the year involved.
            ``(4) Report.--The Secretary shall submit to Congress a 
        report on the application of this subsection and may include in 
        the report such recommendations as the Secretary deems 
        appropriate.''.
            (2) Conforming amendment.--Section 1108(f) of the Social 
        Security Act (42 U.S.C. 1308(f)) is amended by inserting ``and 
        section 1935(e)(1)(B)'' after ``Subject to subsection (g)''.

SEC. 205. MEDIGAP PROVISIONS.

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

SEC. 206. GAO REPORT ON PART B PAYMENT FOR DRUGS AND BIOLOGICALS AND 
              RELATED SERVICES.

    (a) In General.--The Comptroller General of the United States shall 
conduct a study to quantify the extent to which reimbursement for drugs 
and biologicals under the current medicare payment methodology 
(provided under section 1842(o) of the Social Security Act (42 U.S.C. 
1395u(o)) overpays for the cost of such drugs and biologicals compared 
to the average acquisition cost paid by physicians or other suppliers 
of such drugs.
    (b) Elements.--The study shall also assess the consequences of 
changing the current medicare payment methodology to a payment 
methodology that is based on the average acquisition cost of the drugs. 
The study shall, at a minimum, assess the effects of such a reduction 
on--
            (1) the delivery of health care services to medicare 
        beneficiaries with cancer;
            (2) total medicare expenditures, including an estimate of 
        the number of patients who would, as a result of the payment 
        reduction, receive chemotherapy in a hospital rather than in a 
        physician's office;
            (3) the delivery of dialysis services;
            (4) the delivery of vaccines;
            (5) the administration in physician offices of drugs other 
        than cancer therapy drugs; and
            (6) the effect on the delivery of drug therapies by 
        hospital outpatient departments of changing the average 
        wholesale price as the basis for medicare pass-through payments 
        to such departments, as included in the Medicare, Medicaid, and 
        SCHIP Balanced Budget Refinement Act of 1999.
    (c) Payment for Related Professional Services.--The study shall 
also include a review of the extent to which other payment 
methodologies under part B of the medicare program, if any, intended to 
reimburse physician and other suppliers of drugs and biologicals 
described in subsection (a) for costs incurred in handling, storing, 
and administering such drugs and biologicals are inadequate to cover 
such costs and whether an additional payment would be required to cover 
these costs under the average acquisition cost methodology.
    (d) Consideration of Issues in Implementing an Average Acquisition 
Cost Methodology.--The study shall assess possible means by which a 
payment method based on average acquisition cost could be implemented, 
including at least the following:
            (1) Identification of possible bases for determining the 
        average acquisition cost of drugs, such as surveys of 
        wholesaler catalog prices, and determination of the advantages, 
        disadvantages, and costs (to the government and the public) of 
        each possible approach.
            (2) The impact on individual providers and practitioners if 
        average or median prices are used as the payment basis.
            (3) Methods for updating and keeping current the prices 
        used as the payment basis.
    (e) Coordination With BBRA Study.--The Comptroller General of the 
United States shall conduct the study under this section in 
coordination with the study provided for under section 213(a) of the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 
(113 Stat. 1501A-350), as enacted into law by section 1000(a)(6) of 
Public Law 106-113.
    (f) Report.--Not later than 6 months after the date of enactment of 
this Act, the Comptroller General of the United States shall submit to 
Congress a report on the study conducted under this section, as well as 
the study referred to in subsection (e). Such report shall include 
recommendations regarding such changes in the medicare reimbursement 
policies described in subsections (a) and (c) as the Comptroller 
General deems appropriate, as well as the recommendations described in 
section 213(b) of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act of 1999.

                   TITLE III--MEDICARE+CHOICE REFORMS

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

    Section 1853(c)(6)(B) of the Social Security Act (42 U.S.C. 1395w-
23(c)(6)(B)) is amended--
            (1) by striking clauses (iv) and (v);
            (2) by redesignating clause (vi) as clause (iv); and
            (3) in clause (iv) (as so redesignated), by striking 
        ``2002'' and inserting ``2000''.

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

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

SEC. 303. MEDICARE+CHOICE COMPETITION PROGRAM.

    (a) Payments to Medicare+Choice Organizations Based on Risk-
Adjusted Bids.--
            (1) Monthly payments.--Section 1853(a)(1)(A) of the Social 
        Security Act (42 U.S.C. 1395w-23(a)(1)(A)) is amended by adding 
        at the end the following new sentences: ``For each year 
        (beginning with 2003), under a contract under section 1857, the 
        Commissioner shall make to each Medicare+Choice organization, 
        with respect to coverage of an individual for a month under 
        this part in a Medicare+Choice payment area, monthly payments 
        with respect to benefits under parts A and B combined in 
        accordance with subsection (c)(8). For rules relating to 
        payment of the Medicare+Choice monthly supplemental beneficiary 
        premium or any prescription drug premium, see section 
        1854(j).''.
            (2) Annual determination and announcement of payment 
        factors.--
                    (A) In general.--Section 1853(b) (42 U.S.C. 1395w-
                23(b)) is amended--
                            (i) in paragraph (1), by striking ``the 
                        calendar year concerned'' and all that follows 
                        and inserting ``the calendar year concerned 
                        with respect to each Medicare+Choice payment 
                        area, the following:
                    ``(A) The benchmark amount (as defined in paragraph 
                (5)(A)).
                    ``(B) The county-specific monthly per capita costs 
                (as defined in paragraph (5)(B)).
                    ``(C) The demographic adjustment factors to be used 
                in making payment for individual enrollees (as defined 
                in paragraph (5)(C)).
                    ``(D) The ESRD adjustment (as defined in paragraph 
                (5)(D)).
                    ``(E) The health status adjustment (as defined in 
                paragraph (5)(E)).''.
                            (ii) in paragraph (3), by striking 
                        ``monthly adjusted'' and all that follows 
                        before the period at the end and inserting 
                        ``the payment rates under this part for each 
                        individual enrolled in the Medicare+Choice plan 
                        offered by the Medicare+Choice organization for 
                        the year''; and
                            (iii) by adding at the end the following 
                        new paragraph:
            ``(5) Definitions relating to factors used in adjusting 
        bids for medicare+choice organizations and in determining 
        enrollee premiums.--In this part:
                    ``(A) Benchmark amount.--
                            ``(i) In general.--The term `benchmark 
                        amount' means, for a payment area, an amount 
                        equal to the greater of--
                                    ``(I) except as provided in clause 
                                (ii), \1/12\ of the annual 
                                Medicare+Choice capitation rate that 
                                would have applied in that payment area 
                                under paragraphs (1) through (7) of 
                                subsection (c); or
                                    ``(II) the county-specific monthly 
                                per capita costs for such area.
                            ``(ii) Phase-out of minimum amount and 
                        blended capitation rate.--If the amount 
                        calculated under clause (i)(I) for a year for 
                        all payment areas is equal to either the 
                        minimum amount or the blended capitation rate, 
                        for all subsequent years the Commissioner shall 
                        not calculate the rates described in that 
                        clause and the amount under such clause instead 
                        shall be equal to the county-specific monthly 
                        per capita costs.
                    ``(B) County-specific monthly per capita costs.--
                            ``(i) In general.--Subject to clause (ii), 
                        the term `county-specific monthly per capita 
                        costs' means the amount of payment in a 
                        Medicare+Choice payment area for benefits under 
                        this title and associated claims processing 
                        costs for individuals entitled to benefits 
                        under part A and individuals enrolled in the 
                        program under part B who are not enrolled in a 
                        Medicare+Choice plan under this part. The 
                        Commissioner shall determine such amount in a 
                        manner similar to the manner in which the 
                        Secretary determined the adjusted average per 
                        capita cost under section 1876, except that 
                        such determination shall include in such amount 
                        any amounts that would have been paid under 
                        this title if individuals entitled to benefits 
under this title had not received services from facilities of the 
Department of Veterans Affairs or the Department of Defense.
                            ``(ii) Exclusion of gme costs.--The 
                        calculation of costs under clause (i) shall not 
                        take into account any amounts attributable to--
                                    ``(I) payments for costs of 
                                graduate medical education under 
                                section 1886(h); or
                                    ``(II) payments for indirect costs 
                                of medical education under section 
                                1886(d)(5)(B).
                    ``(C) Demographic adjustment factors.--The term 
                `demographic adjustment factors' means such factors as 
                age, disability status, gender, and institutional 
                status, so as to ensure actuarial equivalence. The 
                Commissioner may add to, modify, or substitute for such 
                factors, if such changes will improve the determination 
                of actuarial equivalence, and in that event the 
                Commissioner will make comparable adjustments to the 
                benchmark amounts.
                    ``(D) ESRD adjustment factor.--The term `ESRD 
                adjustment factor' means the adjustment established by 
                the Commissioner under section 1851(a)(3)(B) that 
                applies with respect to enrolled individuals who have 
                end-stage renal disease.
                    ``(E) Health status adjustment factor.--The term 
                `health status adjustment factor' means the health 
                status adjustment implemented under subsection 
                (a)(3)(C) until such time as the Commissioner develops 
                a health status adjustment factor that takes into 
                account the specific health care needs of 
                Medicare+Choice eligible individuals who do not have 
                end-stage renal disease based on the delivery of care 
                in all settings, which methodology shall be phased in 
                equally over a 10-year period, beginning with 2004, or 
                (if later) the date on which such factor is developed.
            (3) Submission of bids by medicare+choice organizations.--
        Section 1854(a) of the Social Security Act (42 U.S.C. 1395w-
        24(a)) is amended--
                    (A) in paragraph (1), by striking ``Not later than 
                July 1'' and inserting ``Subject to paragraph (6), not 
                later than July 1''; and
                    (B) by adding at the end the following:
            ``(6) Submission of bids by medicare+choice 
        organizations.--
                    ``(A) In general.--For each year (beginning with 
                2003), each Medicare+Choice organization shall submit 
                to the Commissioner, in a form and manner specified by 
                the Commissioner and for each Medicare+Choice plan 
                which it intends to offer in a service area in the 
                following year--
                            ``(i) notice of such intent and information 
                        on the service area and plan type for each 
                        plan;
                            ``(ii) the information described in 
                        paragraph (2) for the type of plan involved; 
                        and
                            ``(iii) the enrollment capacity (if any) in 
                        relation to the plan and area.
                    ``(B) Information required for competitive plans.--
                The information described in this paragraph is as 
                follows:
                            ``(i) The monthly plan bid for the 
                        provision of benefits.
                            ``(ii) The actuarial value of the reduction 
                        in cost-sharing for benefits under parts A and 
                        B included in each plan bid and a description 
                        of the cost-sharing for such benefits.
                            ``(iii) The actuarial value of any 
                        additional benefits required under subsection 
                        (i), a description of cost-sharing for such 
                        benefits, and such other information as the 
                        Commissioner considers necessary.
                            ``(iv) The actuarial value of any 
                        supplemental benefits, the monthly supplemental 
                        premium (if any) for such benefits, a 
                        description of any cost-sharing for such 
                        benefits, and such other information as the 
                        Commissioner considers necessary.
                            ``(v) For each Medicare+Choice payment 
                        area, the assumptions used with respect to the 
                        number of--
                                    ``(I) enrolled individuals who are 
                                entitled to benefits under parts A and 
                                enrolled under part B who do not have 
                                end-stage renal disease; and
                                    ``(II) such enrolled individuals 
                                who have end-stage renal disease.''.
            (4) Commissioner's determination of payment amount.--
        Section 1853(c) of the Social Security Act (42 U.S.C. 1395w-
        23(c)) is amended--
                    (A) in paragraph (1), by striking ``subject to 
                paragraphs (6)(C) and (7)'' and inserting ``subject to 
                paragraphs (6)(C), (7), and (8)'';
                    (B) by adding at the end the following new 
                paragraph:
            ``(8) Commissioner's determination of payment amount.--
                    ``(A) Adjustment of bids.--The Commissioner shall 
                adjust plan bids submitted under section 1854(a)(6) 
                based on the demographic adjustment factors, the ESRD 
                adjustment factor, and the health status adjustment 
                factor (as defined in subparagraphs (C), (D), and (E), 
                respectively, of subsection (b)(5)).
                    ``(B) Determination of benchmark per county.--For 
                each year (beginning with 2003), the Commissioner shall 
                determine the benchmark amount (as defined in 
                subparagraph (A) of subsection (b)(5)) for each 
                Medicare+Choice payment area and shall adjust such 
                amount based on the demographic adjustment factors, the 
                ESRD adjustment factor, and the health status 
                adjustment factor (as defined in subparagraphs (C), 
                (D), and (E), respectively, of such section).
                    ``(C) Comparison to plan benchmark amount.--
                            ``(i) In general.--The Commissioner shall 
                        compare the organization's bid (as adjusted 
                        under subparagraph (A)) to the benchmark amount 
                        (as adjusted under subparagraph (B)) to 
                        determine the payment amount under clause (ii).
                            ``(ii) Determination of payment amount.--
                        The Commissioner shall determine the monthly 
                        payment to a Medicare+Choice organization with 
                        respect to each individual enrolled in a 
                        Medicare+Choice plan as follows:
                                    ``(I)If bid does not exceed 
                                benchmark.--If the Medicare+Choice 
                                organization's bid (as adjusted under 
                                subparagraph (A)) does not exceed the 
                                benchmark amount (as adjusted under 
                                subparagraph (B)), the monthly payment 
                                shall be the benchmark amount, adjusted 
                                to account for the demographic 
                                adjustment factors, health status 
                                adjustment factor, and (if applicable) 
                                the ESRD adjustment factor of the 
                                individual enrollee, minus 25 percent 
                                of the difference between the bid and 
                                the benchmark amount determined under 
                                section 1854(i)(2)(A).
                                    ``(II) If bid exceeds benchmark.--
                                If the organization's bid (as adjusted 
                                under subparagraph (A)) exceeds the 
                                benchmark amount (as adjusted under 
                                subparagraph (B)), the monthly payment 
                                shall be the bid, adjusted to account 
                                for the demographic adjustment factors, 
                                health status adjustment factor, and 
                                (if applicable) the ESRD adjustment 
                                factor of the individual enrollee.''.
    (b) Premiums.--
            (1) Determination of premium amount.--Section 1854 of the 
        Social Security Act (42 U.S.C. 1395w-24) is amended by adding 
        at the end the following new subsections:
    ``(i) Determination of Medicare Premium Reduction and 
Medicare+Choice Monthly Supplemental Beneficiary Premium.--
            ``(1) In general.--Notwithstanding subsection (b) and 
        subject to paragraph (2), for each year (beginning with 2003), 
        the Commissioner shall determine the difference between the 
        organization's bid (submitted under subsection (a)(6) and 
        adjusted under section 1853(c)(8)(A)) and the plan's benchmark 
        amount (as adjusted under 1853(c)(8)(B)) to determine the 
        amount of any medicare premium reduction, prescription drug 
        premium reduction, reduction in plan cost-sharing, or 
        additional benefits required under paragraph (2)(A), or the 
        Medicare+Choice monthly supplemental beneficiary premium for 
        plan enrollees.
            ``(2) Adjustment.--
                    ``(A) Bids below the benchmark.--Notwithstanding 
                subsection (f), if the organization's bid is lower than 
                the plan's benchmark amount, 75 percent of the 
                difference determined under paragraph (1) shall be 
                returned to the enrollee in the form of, at the option 
of the organization offering the plan--
                            ``(i) a monthly medicare premium reduction 
                        for individuals enrolled in the plan (up to the 
                        entire amount of the premium for part B);
                            ``(ii) a prescription drug premium 
                        reduction pursuant to subsection (j)(5)(B);
                            ``(iii) a reduction in the actuarial value 
                        of plan cost-sharing for plan enrollees;
                            ``(iv) such additional benefits as the 
                        organization may specify; or
                            ``(v) any combination of the reductions and 
                        benefits described in clauses (i) through (iv).
                    ``(B) Bids above the benchmark.--If the 
                organization's bid is higher than the benchmark amount, 
                the difference determined under paragraph (1) shall be 
                the Medicare+Choice monthly supplemental beneficiary 
                premium for individuals enrolled in the plan.
    ``(j) Rules Relating to Premiums Owed by Medicare+Choice 
Enrollees.--In the case of any Medicare+Choice monthly supplemental 
beneficiary premium under subsection (i)(2)(B) or any prescription drug 
premium under section 1851(j) that an individual is responsible for 
under a Medicare+Choice plan in which the individual is enrolled, the 
following rules shall apply:
            ``(1) Commissioner shall pay the drug premium to the 
        entity.--
                    ``(A) In general.--The Commissioner shall pay to 
                the Medicare+Choice organization offering the 
                Medicare+Choice plan the full amount of the 
                prescription drug premium under section 1851(j) that 
                the individual is responsible for under the plan.
                    ``(B) Payments from medicare prescription drug 
                account.--Payments under subparagraph (A) shall be made 
                from the Medicare Prescription Drug Account within the 
                Federal Supplementary Medical Insurance Trust Fund 
                under section 1841.
            ``(2) Premium discount for drug benefits.--Subject to 
        paragraph (4), the individual shall be entitled to the premium 
        discount for prescription drugs determined under section 2231.
            ``(3) Collection of supplemental and drug premiums in same 
        manner as part b premium.--
                    ``(A) Supplemental premium.--The amount of any 
                Medicare+Choice monthly supplemental beneficiary 
                premium that an individual is responsible for under the 
                plan shall be collected and credited to the Federal 
                Hospital Insurance Trust Fund and the Federal 
                Supplementary Medical Insurance Trust Fund--
                            ``(i) in such proportion as the 
                        Commissioner determines appropriate; and
                            ``(ii) in the same manner as the monthly 
                        premium determined under section 1839 is 
                        collected and credited to the Federal 
                        Supplementary Medical Insurance Trust Fund 
                        under section 1840.
                    ``(B) Drug premium.--Subject to the application of 
                the premium discounts available under section 2231, the 
                amount of any premium drug premium that an individual 
                is responsible for under the plan shall be collected 
                and credited to the Medicare Prescription Drug Account 
                within the Federal Supplementary Medical Insurance 
                Trust Fund under section 1841 in the same manner as the 
                monthly premium determined under section 1839 is 
                collected and credited to the Federal Supplementary 
                Medical Insurance Trust Fund under section 1840.
                    ``(C) Information necessary for collection.--In 
                order to carry out subparagraph (A), the Commissioner 
                shall transmit to the Commissioner of Social Security--
                            ``(i) at the beginning of each year, the 
                        name, social security account number, and the 
                        Medicare+Choice monthly supplemental 
                        beneficiary premium and prescription drug 
                        premium owed by the individual for each month 
                        during the year; and
                            ``(ii) periodically throughout the year, 
                        information to update the information 
                        previously transmitted under this paragraph for 
                        the year.
            ``(4) Discount reduced if greater than combined premiums.--
        In the case of an individual whose premium discount determined 
        under section 2231(b) is equal to or less than the sum of any 
        the Medicare+Choice monthly supplemental beneficiary premium 
        and any prescription drug premium (after any reduction 
        described in section 1851(j)(5)(B)) for the Medicare+Choice 
        plan in which the individual is enrolled, the premium subsidy 
        shall be deemed to be an amount equal to such sum.''.
            (2) Limitation on enrollee liability for supplemental 
        benefits.--Section 1854(e)(2) of the Social Security Act (42 
        U.S.C. 1395w-24(e)(2)) is amended by striking ``If the 
        Medicare+Choice organization'' and inserting ``Except as 
        provided in subsection (i)(2)(B), if the Medicare+Choice 
        organization''.
    (c) Allowing Plans To Include Reductions and Other Benefits in 
Their Basic Benefits.--Section 1852(a)(1)(B) of the Social Security Act 
(42 U.S.C. 1395w-22(a)(1)) is amended--
            (1) by inserting ``(i)'' after ``(B)''; and
            (2) by adding at the end the following new clause:
                    ``(ii) for 2003 and each subsequent year, at plan 
                option, the reductions and benefits described in 
                section 1854(i)(2)(A).''.
    (d) Transition to ESRD Eligibility.--Section 1851(a)(3)(B) of the 
Social Security Act (42 U.S.C. 1395w-21(a)(3)(B)) is amended by 
inserting ``until such time as the Commissioner establishes an ESRD 
adjustment factor that takes into account the specific health care 
needs of such individuals based on a delivery of care in all settings 
(to be phased-in in such manner as the Commissioner deems 
appropriate)'' after ``determined to have end-stage renal disease''.
    (e) Conforming Amendments.--
            (1) Premium reductions under part b.--
                    (A) Amount of premiums.--Section 1839(a)(2) of the 
                Social Security Act (42 U.S.C. 1395r(a)(2)) is amended 
                by striking ``shall'' and all that follows and 
                inserting the following: ``shall be the amount 
                determined under paragraph (3), adjusted as required in 
                accordance with subsections (b), (c), and (f), and 
                thereafter further modified as required to comply with 
                section 1854(i)(2)(A).''.
                    (B) Payment of premiums.--Section 1840 of the 
                Social Security Act (42 U.S.C. 1395s) is amended by 
                adding at the end the following new clause:
    ``(i) The Commissioner shall provide for necessary adjustments of 
the medicare premium for Medicare+Choice enrollees determined under 
section 1854(i)(2)(A)(i). This premium adjustment may be provided 
directly or as an adjustment to Social Security, Railroad Retirement 
and Civil Service Retirement benefits, as appropriate, as the 
Commissioner of the Competitive Medicare Agency determines feasible 
with the concurrence of such agencies.''.
            (2) Appropriations for government contribution.--Section 
        1844(a)(1) of the Social Security Act (42 U.S.C. 1395w(a)(1)) 
        is amended by adding at the end the following new subparagraph:
            ``(C) an adjustment for the Government contribution to 
        reflect the savings to the Trust Fund from enrollment in 
        Medicare+Choice plans by beneficiaries who receive monthly 
        medicare premium reductions in accordance with section 
        1854(i)(2)(A)(i); plus''.
            (3) Continuation of enrollment permitted.--Section 
        1851(b)(1)(B) of the Social Security Act (42 U.S.C. 1395w-
        21(b)(1)(B)) is amended by striking ``section 1852(a)(1)(A)'' 
        and inserting ``section 1852(a)(1)''.
            (4) Information comparing plan premiums.--Section 
        1851(d)(4)(B) of the Social Security Act (42 U.S.C. 1395w-
        21(d)(4)(B)) is amended--
                    (A) by striking ``premiums.--The'' and inserting 
                ``premiums.--
                            ``(i) In general.--The'';
                    (B) by adding at the end the following new clause:
                            ``(ii) Reductions.--The reduction in the 
                        part B premiums, if any.''.
            (5) National coverage determinations.--Section 1852(a)(5) 
        of the Social Security Act (42 U.S.C. 1395w-22(a)(5)) is 
        amended by inserting ``(or, for 2003 and each subsequent fiscal 
        year, the county-specific monthly per capita costs)'' after 
        ``the annual Medicare+Choice capitation rate''.
            (6) Disclosure requirements.--Section 1852(c)(1)(F) of the 
        Social Security Act (42 U.S.C. 1395w-22(c)(1)(F)) is amended by 
        striking clause (i) and redesignating clauses (ii) and (iii) as 
        clauses (i) and (ii), respectively.
            (7) Geographic adjustment.--Section 1853(d)(3)(B) of the 
        Social Security Act (42 U.S.C. 1395w-23(e)(3)(B)) is amended--
                    (A) in the heading, by striking ``Budget 
                Neutrality'';
                    (B) by striking ``adjust the payment rates'' and 
                all that follows through ``that would have been made'' 
                and inserting ``adjust the benchmark amounts otherwise 
                established under this section for Medicare+Choice 
                payment areas in the State in a manner so that the 
                weighted average of the benchmark amounts under this 
                section in the State equals the weighted average of 
                benchmark amounts that would have been applicable''.
            (8) Medicare+choice monthly basic beneficiary premium.--
        Section 1854(b)(2)(A) of the Social Security Act (42 U.S.C. 
        1395w-24(b)(2)(A)) is amended by striking ``the amount 
        authorized to be charged'' and all that follows and inserting 
        ``the amount required to be charged for the plan.''.
            (9) Commissioner defined.--Section 1859(a) of the Social 
        Security Act (42 U.S.C. 1395w-28(a)) is amended by adding at 
        the end the following new paragraph:
            ``(3) Commissioner.--The term `Commissioner' means the 
        Commissioner of the Competitive Medicare Agency appointed under 
        section 2202(a)(1).''.
    (f) Inclusion of Costs of VA and DOD Military Facility Services to 
Medicare-Eligible Beneficiaries.--Section 1853(c) of the Social 
Security Act (42 U.S.C. 1395w-23(c)) (as amended by subsection (a)(4)) 
is amended by adding at the end the following new paragraph:
            ``(9) Inclusion of costs of va and dod military facility 
        services to medicare-eligible beneficiaries.--For purposes of 
        determining the blended capitation rate under subparagraph (A) 
        of paragraph (1) and the minimum percentage increase under 
        subparagraph (C) of such paragraph for a year, the annual per 
        capita rate of payment for 1997 determined under section 
        1876(a)(1)(C) shall be adjusted to include in such rate the 
        Commissioner's estimate, on a per capita basis, of the amount 
        of additional payments that would have been made in the area 
        involved under this title if individuals entitled to benefits 
        under this title had not received services from facilities of 
        the Department of Veterans Affairs or the Department of 
        Defense.''.
    (g) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2003.

SEC. 304. FREEZE OF HEALTH RISK ADJUSTER AT 20 PERCENT.

    (a) In General.--Section 1853(a)(3)(C)(ii) of the Social Security 
Act (42 U.S.C. 1395w-23(c)(1)(C)(ii)) is amended by inserting ``and 
each subsequent year'' after ``not more than 20 percent of such 
capitation rate in 2002''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of enactment of this Act.

         TITLE IV--MEDICARE BENEFICIARY OUTREACH AND EDUCATION

SEC. 401. MEDICARE CONSUMER COALITIONS.

    Title XXII of the Social Security Act (as added by section 101) is 
amended by adding at the end the following new part:

                 ``Part C--Medicare Consumer Coalitions

            ``establishment of medicare consumer coalitions

    ``Sec. 2281. (a) Establishment of Medicare Consumer Coalitions.--
The Commissioner of the Competitive Medicare Agency (in this part 
referred to as the `Commissioner') may establish Medicare Consumer 
Coalitions (as defined in subsection (b)) to conduct information 
programs described in subsection (e).
    ``(b) Medicare Consumer Coalition Defined.--In this section, the 
term `Medicare Consumer Coalition' means an entity that is a nonprofit 
organization operated under the direction of a board of directors that 
is primarily composed of eligible beneficiaries.
    ``(c) Request for Proposals; Selection of Medicare Consumer 
Coalitions.--If the Commissioner elects to establish Medicare Consumer 
Coalitions under subsection (a), the Commissioner shall--
            ``(1) develop and disseminate a request for proposals to 
        establish Medicare Consumer Coalitions in such areas as the 
        Commissioner determines appropriate to assist in conducting the 
        information programs described in subsection (a); and
            ``(2) select a proposal to establish a Medicare Consumer 
        Coalition to conduct the information programs in each such 
        area.
    ``(d) Payment to Medicare Consumer Coalitions.--The Commissioner 
shall pay to each Medicare Consumer Coalition for which a proposal has 
been selected under subsection (c)(2) an amount equal to the sum of any 
costs incurred--
            ``(1) in conducting the information programs under 
        subsection (e); and
            ``(2) in the hiring of staff to conduct the information 
        programs under such subsection.
    ``(e) Information Programs.--The information programs described in 
this subsection are those activities that are the responsibilities of 
the Commissioner under clause (iii) of section 2202(a)(4) (relating to 
dissemination of information), clause (iv) of such section (relating to 
dissemination of appeals rights information), and clause (v) of such 
section (relating to beneficiary education programs). If the 
Commissioner selects a Medicare Consumer Coalition to conduct such 
programs, the programs shall include the following:
            ``(1) Contents.--A comparison among the original fee-for-
        service program under parts A and B of title XVIII, available 
        Medicare+Choice plans under part C of such title, and available 
        Medicare Prescription Plus plans under part B as follows:
                    ``(A) Benefits.--A comparison of the benefits 
                provided under each plan and program.
                    ``(B) Quality and performance.--The quality and 
                performance of each plan and program.
                    ``(C) Beneficiary costs.--The costs to eligible 
                beneficiaries enrolled under each plan and program.
                    ``(D) Consumer satisfaction surveys.--The results 
                of consumer satisfaction surveys regarding each plan 
                and program.
                    ``(E) Additional information.--Such additional 
                information as the Commissioner may prescribe.
            ``(2) Information standards.--If the Commissioner 
        establishes Medicare Consumer Coalitions, the Commissioner 
        shall develop standards to ensure that the information provided 
        to eligible beneficiaries under the information programs is 
        complete, accurate, and uniform.
            ``(3) Review of information.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Commissioner may prescribe the procedures and 
                conditions under which a Medicare Consumer Coalition 
                may disseminate information to eligible beneficiaries 
                to ensure the coordination of Federal, State, and local 
                outreach efforts to eligible beneficiaries.
                    ``(B) Deadline.--Any information proposed to be 
                furnished to eligible beneficiaries under this section 
                shall be submitted to the Commissioner not later than 
                45 days before the date on which the information is to 
                be disseminated to such beneficiaries.
            ``(4) Consultation.--In order to conduct the information 
        programs under subsection (a), Medicare Consumer Coalitions may 
        consult with the Administrator of the Health Care Financing 
        Administration, entities that offer Medicare+Choice plans, 
        Medicare Prescription Plus plans, and public and private 
        purchasers of health care benefits.
    ``(f) Report.--If the Commissioner establishes Medicare Consumer 
Coalitions under this section, not later than December 31, 2003, the 
Commissioner shall submit to the appropriate committees of Congress a 
report on the performance of any Medicare Consumer Coalitions, 
including an assessment of the effectiveness of the outreach efforts 
conducted under this section.
    ``(g) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section such sums as may be necessary.
    ``(h) Effective Date.--If the Commissioner establishes Medicare 
Consumer Coalitions, the Commissioner should establish the such 
Coalitions under this section in a manner that ensures that the 
information programs conducted by Medicare Consumer Coalitions begin 
not later than January 1, 2003.''.
                                 <all>
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