II

106TH CONGRESS

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 Finance

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.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medicare Prescription Drug and Modernization Act of

6 2000’’.
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1 (b) TABLE OF CONTENTS.—The table of contents of

2 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. 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.
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‘‘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.’’.

1 SEC. 2. FINDINGS AND PURPOSES.

2 (a) FINDINGS.—

3 (1) Based on the deliberations of the National

4 Bipartisan Commission on the Future of Medicare,

5 the medicare program under title XVIII of the So6 cial Security Act in its current form is

7 unsustainable, with the part A trust fund scheduled

8 to become insolvent in 2025.

9 (2) The medicare program relies on general rev10 enues to pay for 36 percent of total program ex11 penditures and will continue to use an increasing

12 share of general revenues. Part B outlays under

such program, 3 13 ⁄4 of which are funded through gen-
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1 eral revenues, have increased 38 percent over the

2 past 5 years, or about 5 percent faster than the

3 economy as a whole.

4 (3) Medicare’s spending, left unchecked, will

5 continue to consume an increasing share of the Fed6 eral budget, leaving little room for other priorities,

7 such as defense, education, debt reduction, tax cuts,

8 and domestic spending.

9 (4) Medicare’s current benefit package is out10 dated in that it does not provide a prescription drug

11 benefit and limits beneficiary access to new tech12 nologies.

13 (5) Medicare only covers 53 percent of a bene14 ficiary’s average health care costs and exposes bene15 ficiaries to large out-of-pocket liabilities.

16 (6) The number of beneficiaries in the medicare

17 program is estimated to more than double by the

18 end of 2030, due to the influx of 77,000,000 baby

19 boomers beginning in 2010.

20 (7) Each year there are fewer workers paying

21 payroll taxes to fund current medicare obligations,

22 evidenced by a decrease in the number of workers

23 per retiree from 4.5 in 1960 to 3.9 in 2000. This

24 number is expected to decline further to 2.8 in 2020.
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1 (8) The Balanced Budget Act of 1997 and the

2 Medicare, Medicaid, and SCHIP Balanced Budget

3 Refinement Act of 1999 underscore the need to fun4 damentally restructure the medicare program and

5 reduce Government micromanagement of that pro6 gram.

7 (b) PURPOSES.—The purposes of this Act are—

8 (1) to improve the Medicare+Choice program

9 by adopting a stable, competitive system that pro10 vides medicare beneficiaries with better and broader

11 health coverage and a greater variety of affordable

12 options from which to choose.

13 (2) to assist all medicare beneficiaries, espe14 cially those with low incomes, in obtaining coverage

15 for outpatient prescription drugs;

16 (3) to establish an independent executive

17 branch Competitive Medicare Agency outside of the

18 Health Care Financing Administration and the De19 partment of Health and Human Services based on

20 the Social Security Administration to administer the

21 outpatient prescription drug benefit and the

22 Medicare+Choice program;

23 (4) to increase the flexibility of the medicare

24 program and provide medicare beneficiaries timely

25 access to the latest advances in the practice of medi-
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1 cine and delivery of care and to end the congres2 sional micromanagement over prices and delivery of

3 benefits currently administered through approxi4 mately 130,000 pages of rules and regulations estab5 lished under the medicare program; and

6 (5) to better determine the financial health of

7 the medicare program by establishing a mechanism

8 that monitors the total spending and revenues of the

9 medicare program and serves as an early warning

10 system that triggers congressional debate on policy

11 decisions and that takes into account recommenda12 tions of the Medicare Competition and Prescription

13 Drug Advisory Board.

14 TITLE I—MEDICARE MANAGE15 MENT AND ADMINISTRATION

16 Subtitle A—Establishment of the

17 Competitive Medicare Agency

18 SEC. 101. ESTABLISHMENT OF THE COMPETITIVE MEDI19 CARE AGENCY.

20 (a) IN GENERAL.—The Social Security Act (42

21 U.S.C. 301 et seq.) is amended by adding at the end the

22 following new title:
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1 ‘‘TITLE XXII—MEDICARE COMPETITION AND

2 PRESCRIPTION DRUGS

3 ‘‘PART A—ESTABLISHMENT OF THE COMPETITIVE

4 MEDICARE AGENCY

5 ‘‘COMPETITIVE MEDICARE AGENCY

6 ‘‘SEC. 2201. (a) ESTABLISHMENT.—There is estab7 lished, as an independent agency in the executive branch

8 of the Government, a Medicare Competition Agency (in

9 this part referred to as the ‘Agency’).

10 ‘‘(b) DUTY.—

11 ‘‘(1) IN GENERAL.—It shall be the duty of the

12 Agency to administer the Medicare Prescription

13 Drug and Supplemental Benefit Program under part

14 B of this title and the Medicare+Choice program

15 under part C of title XVIII.

16 ‘‘(2) TRANSITION.—The Secretary of Health

17 and Human Services (in this title referred to as the

18 ‘Secretary’), the Commissioner of the Competitive

19 Medicare Agency, and the Administrator of the

20 Health Care Financing Administration shall estab21 lish an appropriate transition of responsibility in

22 order to redelegate the administration of part C

23 from the Secretary and the Administrator of the

24 Health Care Financing Administration to the Com-
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1 missioner as is appropriate to carry out the purposes

2 of this section.

3 ‘‘(3) CONSTRUCTION.—Insofar as a responsi4 bility of the Secretary or the Administrator of the

5 Health Care Financing Administration is redele6 gated to the Commissioner of the Competitive Medi7 care Agency under this part, any reference to the

8 Secretary or the Administrator of the Health Care

9 Financing Administration in this title or title XI

10 with respect to such responsibility is deemed to be

11 a reference to such Commissioner.

12 ‘‘COMMISSIONER; DEPUTY COMMISSIONER; OTHER

13 OFFICERS

14 ‘‘SEC. 2202. (a) COMMISSIONER OF THE COMPETI15 TIVE MEDICARE AGENCY.—

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

17 Agency a Commissioner of the Competitive Medicare

18 Agency (in this part referred to as the ‘Commis19 sioner’) who shall be appointed by the President, by

20 and with the advice and consent of the Senate.

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

22 be compensated at the rate provided for level I of

23 the Executive Schedule.

24 ‘‘(3) TERM.—

25 ‘‘(A) IN GENERAL.—The Commissioner

26 shall be appointed for a term of 6 years.
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1 ‘‘(B) CONTINUANCE IN OFFICE.—In any

2 case in which a successor does not take office

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

4 such Commissioner may continue in office until

5 the appointment of a successor.

6 ‘‘(C) DELAYED APPOINTMENTS.—A Com7 missioner appointed to a term of office after the

8 commencement of such term may serve under

9 such appointment only for the remainder of

10 such term.

11 ‘‘(D) REMOVAL.—An individual serving in

12 the office of Commissioner may be removed

13 from office only pursuant to a finding by the

14 President of neglect of duty or malfeasance in

15 office.

16 ‘‘(4) RESPONSIBILITIES.—The Commissioner

17 shall be responsible for the exercise of all powers

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

19 shall have authority and control over all personnel

20 and activities thereof. Responsibilities of the Com21 missioner shall include the following:

22 ‘‘(A) GENERAL RESPONSIBILITIES.—

23 ‘‘(i) ELIGIBILITY AND ENROLL24 MENT.—Coordinating determinations of

25 beneficiary eligibility and enrollment under
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1 title XVIII and part B of this title with

2 the Commissioner of Social Security.

3 ‘‘(ii) CONTRACTING AUTHORITY.—En4 tering into, and enforcing, contracts with

5 entities for the offering of Medicare Pre6 scription Plus plans under part B of this

7 title.

8 ‘‘(iii) DISSEMINATION OF INFORMA9 TION.—Conducting information activities

10 under sections 1804 and 1851(d) of title

11 XVIII, and under part B of this title with

12 respect to benefits and limitations on pay13 ment under Medicare Prescription Plus

14 plans under part B of this title, including

15 a comparative analysis of such plans and

16 the quality of such plans in the area in

17 which the medicare beneficiary resides.

18 The information disseminated pursuant to

19 such activities shall be presented in a man20 ner so that medicare beneficiaries may

21 compare benefits under parts A and B of

22 title XVIII, part B of this title, and medi23 care supplemental policies under section

24 1882 with benefits under Medicare+Choice

25 plans under part C of title XVIII.
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1 ‘‘(iv) DISSEMINATION OF APPEALS

2 RIGHTS INFORMATION.—Disseminating to

3 medicare beneficiaries a description of pro4 cedural rights (including grievance and ap5 peals procedures) of beneficiaries under the

6 original medicare fee-for-service program

7 under parts A and B of title XVIII, the

8 Medicare+Choice program under part C of

9 such title, and the Outpatient Prescription

10 Drug and Supplemental Benefit Program

11 under part B of this title.

12 ‘‘(v) BENEFICIARY EDUCATION PRO13 GRAM.—Establishing a medicare bene14 ficiary education program to provide time15 ly, readable, accurate, and understandable

16 information to medicare beneficiaries re17 garding Medicare Prescription Plus plan

18 options.

19 ‘‘(B) OTHER RESPONSIBILITIES.—The

20 Commissioner shall carry out any responsibility

21 provided for under part C of title XVIII or part

22 B of this title, including demonstration projects

23 carried out in part or in whole under such

24 parts, the programs of all-inclusive care for the

25 elderly (PACE program) under section 1894,
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1 the social health maintenance organization

2 (SHMO) demonstration projects (referred to in

3 section 4104(c) of the Balanced Budget Act of

4 1997), and through a Medicare+Choice project

5 that demonstrates the application of capitation

6 payment rates for frail elderly medicare bene7 ficiaries through the use of an interdisciplinary

8 team and through the provision of primary care

9 services to such beneficiaries by means of such

10 a team at the nursing facility involved).

11 ‘‘(C) ANNUAL REPORTS.—Not later than

12 March 31 of each year, the Commissioner shall

13 submit to Congress and the President a report

14 on the administration of part C of title XVIII

15 and part B of this title during the previous fis16 cal year.

17 ‘‘(5) PROMULGATION OF RULES AND REGULA18 TIONS.—

19 ‘‘(A) IN GENERAL.—The Commissioner

20 may prescribe such rules and regulations as the

21 Commissioner determines necessary or appro22 priate to carry out the functions of the Agency.

23 ‘‘(B) RULEMAKING.—The regulations pre24 scribed by the Commissioner shall be subject to
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1 the rulemaking procedures established under

2 section 553 of title 5, United States Code.

3 ‘‘(6) DELEGATION OF AUTHORITY.—

4 ‘‘(A) IN GENERAL.—The Commissioner

5 may assign duties, and delegate, or authorize

6 successive redelegations of, authority to act and

7 to render decisions, to such officers and employ8 ees of the Agency as the Commissioner may

9 find necessary.

10 ‘‘(B) EFFECT OF DELEGATION.—Within

11 the limitations of such delegations, redelega12 tions, or assignments, all official acts and deci13 sions of such officers and employees shall have

14 the same force and effect as though performed

15 or rendered by the Commissioner.

16 ‘‘(7) CONSULTATION WITH SECRETARY OF

17 HEALTH AND HUMAN SERVICES.—The Commis18 sioner and the Secretary shall consult, on an ongo19 ing basis, to ensure—

20 ‘‘(A) the coordination of the programs ad21 ministered by the Commissioner under part C

22 of title XVIII and part B of this title with the

23 programs administered by the Secretary under

24 parts A and B of title XVIII and under title

25 XIX; and
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1 ‘‘(B) that adequate information concerning

2 benefits under parts A and B of title XVIII and

3 title XIX is available to the public.

4 ‘‘(b) DEPUTY COMMISSIONER OF THE COMPETITIVE

5 MEDICARE AGENCY.—

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

7 Agency a Deputy Commissioner of the Competitive

8 Medicare Agency (in this part referred to as the

9 ‘Deputy Commissioner’) who shall be appointed by

10 the President, by and with the advice and consent

11 of the Senate.

12 ‘‘(2) TERM.—

13 ‘‘(A) IN GENERAL.—The Deputy Commis14 sioner shall be appointed for a term of 6 years.

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

16 case in which a successor does not take office

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

18 office, such Deputy Commissioner may continue

19 in office until the entry upon office of such a

20 successor.

21 ‘‘(C) DELAYED APPOINTMENT.—A Deputy

22 Commissioner appointed to a term of office

23 after the commencement of such term may

24 serve under such appointment only for the re25 mainder of such term.
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1 ‘‘(3) COMPENSATION.—The Deputy Commis2 sioner shall be compensated at the rate provided for

3 level II of the Executive Schedule.

4 ‘‘(4) DUTIES.—

5 ‘‘(A) IN GENERAL.—The Deputy Commis6 sioner shall perform such duties and exercise

7 such powers as the Commissioner shall from

8 time to time assign or delegate.

9 ‘‘(B) ACTING COMMISSIONER.—The Dep10 uty Commissioner shall be Acting Commissioner

11 of the Agency during the absence or disability

12 of the Commissioner, unless the President des13 ignates another officer of the Government as

14 Acting Commissioner, in the event of a vacancy

15 in the office of the Commissioner.

16 ‘‘(c) CHIEF ACTUARY.—

17 ‘‘(1) APPOINTMENT.—

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

19 Agency a Chief Actuary, who shall be appointed

20 by, and in direct line of authority to, the Com21 missioner.

22 ‘‘(B) QUALIFICATIONS.—The Chief Actu23 ary shall be appointed from individuals who

24 have demonstrated, by their education and ex-
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1 perience, superior expertise in the actuarial

2 sciences.

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

4 serve as the chief actuarial officer of the Agen5 cy, and shall exercise such duties as are appro6 priate for the office of the Chief Actuary and

7 in accordance with professional standards of ac8 tuarial independence.

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

10 be compensated at the highest rate of basic pay for

11 the Senior Executive Service under section 5382(b)

12 of title 5, United States Code.

13 ‘‘ADMINISTRATIVE DUTIES OF THE COMMISSIONER

14 ‘‘SEC. 2203. (a) PERSONNEL.—

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

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

17 United States Code, such officers and employees as

18 are necessary to administer the activities to be car19 ried out through the Competitive Medicare Agency.

20 ‘‘(2) FLEXIBILITY WITH RESPECT TO CIVIL

21 SERVICE LAWS.—

22 ‘‘(A) IN GENERAL.—The staff of the Com23 petitive Medicare Agency shall be appointed

24 without regard to the provisions of title 5,

25 United States Code, governing appointments in

26 the competitive service, and, subject to subpara-
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1 graph (B), shall be paid without regard to the

2 provisions of chapters 51 and 53 of such title

3 (relating to classification and schedule pay

4 rates).

5 ‘‘(B) MAXIMUM RATE.—In no case may

6 the rate of compensation determined under sub7 paragraph (A) exceed the rate of basic pay pay8 able for level IV of the Executive Schedule

9 under section 5315 of title 5, United States

10 Code.

11 ‘‘(b) BUDGETARY MATTERS.—

12 ‘‘(1) SUBMISSION OF ANNUAL BUDGET.—The

13 Commissioner shall prepare an annual budget for

14 the Agency, which shall be submitted by the Presi15 dent to Congress without revision, together with the

16 President’s annual budget for the Agency.

17 ‘‘(2) APPROPRIATIONS REQUESTS.—

18 ‘‘(A) STAFFING AND PERSONNEL.—Appro19 priations requests for staffing and personnel of

20 the Agency shall be based upon a comprehen21 sive work force plan, which shall be established

22 and revised from time to time by the Commis23 sioner.

24 ‘‘(B) ADMINISTRATIVE EXPENSES.—Ap25 propriations for administrative expenses of the
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1 Agency are authorized to be provided on a bien2 nial basis.

3 ‘‘(c) SEAL OF OFFICE.—

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

5 cause a seal of office to be made for the Agency of

6 such design as the Commissioner shall approve.

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

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

9 ‘‘(d) DATA EXCHANGES.—

10 ‘‘(1) DISCLOSURE OF RECORDS AND OTHER IN11 FORMATION.—Notwithstanding any other provision

12 of law (including subsection (b), (o), (p), (q), (r),

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

14 Code)—

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

16 Commissioner any record or information re17 quested in writing by the Commissioner for the

18 purpose of administering any program adminis19 tered by the Commissioner, if records or infor20 mation of such type were disclosed to the Ad21 ministrator of the Health Care Financing Ad22 ministration in the Department of Health and

23 Human Services under applicable rules, regula24 tions, and procedures in effect before the date
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1 of enactment of the Medicare Prescription Drug

2 and Modernization Act of 2000; and

3 ‘‘(B) the Commissioner shall disclose to

4 the Secretary or to any State any record or in5 formation requested in writing by the Secretary

6 to be so disclosed for the purpose of admin7 istering any program administered by the Sec8 retary, if records or information of such type

9 were so disclosed under applicable rules, regula10 tions, and procedures in effect before the date

11 of enactment of the Medicare Prescription Drug

12 and Modernization Act of 2000.

13 ‘‘(2) EXCHANGE OF OTHER DATA.—The Com14 missioner and the Secretary shall periodically review

15 the need for exchanges of information not referred

16 to in paragraph (1) and shall enter into such agree17 ments as may be necessary and appropriate to pro18 vide information to each other or to States in order

19 to meet the programmatic needs of the requesting

20 agencies.

21 ‘‘(3) ROUTINE USE.—

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

23 system of records (as defined in section

24 552a(a)(5) of title 5, United States Code) pur25 suant to this subsection shall be made as a rou-
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1 tine use under subsection (b)(3) of section 552a

2 of such title (unless otherwise authorized under

3 such section 552a).

4 ‘‘(B) COMPUTERIZED COMPARISON.—Any

5 computerized comparison of records, including

6 matching programs, between the Commissioner

7 and the Secretary shall be conducted in accord8 ance with subsections (o), (p), (q), (r), and (u)

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

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

11 the Secretary shall each ensure that timely action is

12 taken to establish any necessary routine uses for dis13 closures required under paragraph (1) or agreed to

14 pursuant to paragraph (2).

15 ‘‘MEDICARE COMPETITION AND PRESCRIPTION DRUG

16 ADVISORY BOARD

17 ‘‘SEC. 2204. (a) ESTABLISHMENT OF BOARD.—

18 There is established a Medicare Competition and Prescrip19 tion Drug Advisory Board (in this section referred to as

20 the ‘Board’).

21 ‘‘(b) ADVICE ON POLICIES; REPORTS.—

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

23 date the Commissioner takes office, the Board shall

24 advise the Commissioner on policies relating to the

25 Medicare Competition and Prescription Drug Pro26 gram under part B of this title and the
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1 Medicare+Choice program under part C of title

2 XVIII.

3 ‘‘(2) REPORTS.—

4 ‘‘(A) IN GENERAL.—With respect to mat5 ters of the administration of part C of title

6 XVIII and part B of this title, the Board shall

7 submit to Congress and to the Commissioner of

8 the Competitive Medicare Agency such reports

9 as the Board determines appropriate. Each

10 such report may contain such recommendations

11 as the Board determines appropriate for legisla12 tive or administrative changes to improve the

13 administration of such parts. Each such report

14 shall be published in the Federal Register.

15 ‘‘(B) MAINTAINING INDEPENDENCE OF

16 BOARD.—The Board shall directly submit to

17 Congress reports required under subparagraph

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

19 may require the Board to submit to any officer

20 or agency of the United States for approval,

21 comments, or review, prior to the submission to

22 Congress of such reports.

23 ‘‘(c) STRUCTURE AND MEMBERSHIP OF THE

24 BOARD.—
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1 ‘‘(1) MEMBERSHIP.—The Board shall be com2 posed of 7 members who shall be appointed as fol3 lows:

4 ‘‘(A) PRESIDENTIAL APPOINTMENTS.—

5 ‘‘(i) IN GENERAL.—3 members shall

6 be appointed by the President, by and with

7 the advice and consent of the Senate.

8 ‘‘(ii) LIMITATION.—Not more than 2

9 of such members shall be from the same

10 political party.

11 ‘‘(B) SENATORIAL APPOINTMENTS.—2

12 members (each member from a different polit13 ical party) shall be appointed by the President

14 pro tempore of the Senate with the advice of

15 the Chairman and the Ranking Minority Mem16 ber of the Committee on Finance of the Senate.

17 ‘‘(C) CONGRESSIONAL APPOINTMENTS.—2

18 members (each member from a different polit19 ical party) shall be appointed by the Speaker of

20 the House of Representatives, with the advice

21 of the Chairman and the Ranking Minority

22 Member of the Committee on Ways and Means

23 of the House of Representatives.

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

25 chosen on the basis of their integrity, impartiality,
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1 and good judgment, and shall be individuals who

2 are, by reason of their education, experience, and at3 tainments, exceptionally qualified to perform the du4 ties of members of the Board.

5 ‘‘(d) TERMS OF APPOINTMENT.—

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

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

8 6 years.

9 ‘‘(2) CONTINUANCE IN OFFICE AND STAGGERED

10 TERMS.—

11 ‘‘(A) CONTINUANCE IN OFFICE.—A mem12 ber appointed to a term of office after the com13 mencement of such term may serve under such

14 appointment only for the remainder of such

15 term.

16 ‘‘(B) STAGGERED TERMS.—The terms of

17 service of the members initially appointed under

18 this section shall begin on January 1, 2002,

19 and expire as follows:

20 ‘‘(i) PRESIDENTIAL APPOINTMENTS.—

21 The terms of service of the members ini22 tially appointed by the President shall ex23 pire as designated by the President at the

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

25 ‘‘(I) 2 years;
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1 ‘‘(II) 4 years; and

2 ‘‘(III) 6 years.

3 ‘‘(ii) SENATORIAL APPOINTMENTS.—

4 The terms of service of members initially

5 appointed by the President pro tempore of

6 the Senate shall expire as designated by

7 the President pro tempore of the Senate at

8 the time of nomination, 1 each at the end

9 of—

10 ‘‘(I) 3 years; and

11 ‘‘(II) 6 years.

12 ‘‘(iii) CONGRESSIONAL APPOINT13 MENTS.—The terms of service of members

14 initially appointed by the Speaker of the

15 House of Representatives shall expire as

16 designated by the Speaker of the House of

17 Representatives at the time of nomination,

18 1 each at the end of—

19 ‘‘(I) 4 years; and

20 ‘‘(II) 5 years.

21 ‘‘(C) REAPPOINTMENTS.—Any person ap22 pointed as a member of the Board may not

23 serve for more than 8 years.

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

25 to fill a vacancy occurring before the expiration
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1 of the term for which the member’s predecessor

2 was appointed shall be appointed only for the

3 remainder of that term. A member may serve

4 after the expiration of that member’s term until

5 a successor has taken office. A vacancy in the

6 Board shall be filled in the manner in which the

7 original appointment was made.

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

9 be designated by the President to serve as Chairperson

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

11 President, or until the designation of a successor.

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

13 Board shall serve without compensation, except that, while

14 serving on business of the Board away from their homes

15 or regular places of business, members may be allowed

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

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

18 Code, for persons in the Government employed intermit19 tently.

20 ‘‘(g) MEETING.—

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

22 the call of the Chairperson (in consultation with the

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

24 each year to consider a specific agenda of issues, as
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1 determined by the Chairperson in consultation with

2 the other members of the Board.

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

4 (not more than 3 of whom may be of the same polit5 ical party) shall constitute a quorum for purposes of

6 conducting business.

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

8 Board shall be exempt from the provisions of the Federal

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

10 ‘‘(i) PERSONNEL.—

11 ‘‘(1) STAFF DIRECTOR.—The Board shall, with12 out regard to the provisions of title 5, United States

13 Code, relating to the competitive service, appoint a

14 Staff Director who shall be paid at a rate equivalent

15 to a rate established for the Senior Executive Serv16 ice under section 5382 of title 5, United States

17 Code.

18 ‘‘(2) STAFF.—

19 ‘‘(A) IN GENERAL.—The Board may em20 ploy, without regard to chapter 31 of title 5,

21 United States Code, such officers and employ22 ees as are necessary to administer the activities

23 to be carried out by the Board.

24 ‘‘(B) FLEXIBILITY WITH RESPECT TO

25 CIVIL SERVICE LAWS.—
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•S 2807 IS

1 ‘‘(i) IN GENERAL.—The staff of the

2 Board shall be appointed without regard to

3 the provisions of title 5, United States

4 Code, governing appointments in the com5 petitive service, and, subject to clause (ii),

6 shall be paid without regard to the provi7 sions of chapters 51 and 53 of such title

8 (relating to classification and schedule pay

9 rates).

10 ‘‘(ii) MAXIMUM RATE.—In no case

11 may the rate of compensation determined

12 under clause (i) exceed the rate of basic

13 pay payable for level IV of the Executive

14 Schedule under section 5315 of title 5,

15 United States Code.

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

17 are authorized to be appropriated, out of the Federal Hos18 pital Insurance Trust Fund and the Federal Supplemental

19 Medical Insurance Trust Fund, and the general fund of

20 the Treasury, such sums as are necessary to carry out the

21 purposes of this section.’’.

22 (b) EFFECTIVE DATE.—

23 (1) IN GENERAL.—The amendment made by

24 subsection (a) shall take effect on the date of enact25 ment of this Act.
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•S 2807 IS

1 (2) TIMING OF INITIAL APPOINTMENTS.—The

2 Commissioner and Deputy Commissioner of the

3 Competitive Medicare Agency may not be appointed

4 before March 1, 2001.

5 (3) DUTIES WITH RESPECT TO ELIGIBILITY DE6 TERMINATIONS AND ENROLLMENT.—The Commis7 sioner of the Competitive Medicare Agency shall

8 carry out enrollment under title XVIII of the Social

9 Security Act, make eligibility determinations under

10 such title, and carry out part C of such title for

11 years beginning on or after January 1, 2003.

12 SEC. 102. COMMISSIONER AS MEMBER OF THE BOARD OF

13 TRUSTEES OF THE MEDICARE TRUST FUNDS.

14 (a) IN GENERAL.—Sections 1817(b) and 1841(b) of

15 the Social Security Act (42 U.S.C. 1395i(b); 1395t(b)) are

16 each amended by striking ‘‘and the Secretary of Health

17 and Human Services, all ex officio,’’ and inserting ‘‘, the

18 Secretary of Health and Human Services, and the Com19 missioner of the Competitive Medicare Agency, all ex offi20 cio,’’.

21 (b) EFFECTIVE DATE.—The amendments made by

22 this subsection shall take effect on March 1, 2001.
29

•S 2807 IS

1 SEC. 103. SALARY INCREASE FOR THE HCFA ADMINIS2 TRATOR.

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

4 States Code, is amended by adding at the end the fol5 lowing:

6 ‘‘Administrator of the Health Care Financing

7 Administration.’’.

8 (b) CONFORMING AMENDMENT.—Section 5315 of

9 such title is amended by striking ‘‘Administrator of the

10 Health Care Financing Administration.’’.

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

12 this subsection take effect on March 1, 2001.

13 Subtitle B—Redefined Medicare

14 Solvency Measures

15 SEC. 151. REQUIREMENTS FOR ANNUAL FINANCIAL RE16 PORTING AND OVERSIGHT OF MEDICARE

17 PROGRAM.

18 (a) IN GENERAL.—Section 1817 of the Social Secu19 rity Act (42 U.S.C. 1395i) is amended by adding at the

20 end the following new subsection:

21 ‘‘(l) COMBINED REPORT ON OPERATION AND STATUS

22 OF THE TRUST FUND AND THE FEDERAL SUPPLE23 MENTARY MEDICAL INSURANCE TRUST FUND.—

24 ‘‘(1) IN GENERAL.—In addition to the duty of

25 the Board of Trustees to report to Congress under

26 subsection (b), on the date the Board submits the
30

•S 2807 IS

1 report required under subsection (b)(2), the Board

2 shall submit to Congress a report on the operation

3 and status of the Trust Fund and the Federal Sup4 plementary Medical Insurance Trust Fund estab5 lished under section 1841, including the Medicare

6 Prescription Drug Account within such Trust Fund

7 (in this subsection referred to as the ‘Trust Funds’).

8 Such report shall include the following information:

9 ‘‘(A) OVERALL SPENDING FROM THE GEN10 ERAL FUND OF THE TREASURY.—A statement

11 of total amounts obligated during the preceding

12 fiscal year from the General Revenues of the

13 Treasury to the Trust Funds for payment for

14 benefits covered under this title and part B of

15 title XXII, stated in terms of the total amount

16 and in terms of the percentage such amount

17 bears to all other amounts obligated from such

18 General Revenues during such fiscal year.

19 ‘‘(B) HISTORICAL OVERVIEW OF SPEND20 ING.—From the date of the inception of the

21 program of insurance under this title through

22 the fiscal year involved, a statement of the total

23 amounts referred to in subparagraph (A).

24 ‘‘(C) 10-YEAR AND 50-YEAR PROJEC25 TIONS.—An estimate of total amounts referred
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•S 2807 IS

1 to in subparagraph (A) required to be obligated

2 for payment for benefits covered under this title

3 for each of the 10 fiscal years succeeding the

4 fiscal year involved and for the 50-year period

5 beginning with the succeeding fiscal year.

6 ‘‘(D) RELATION TO GDP GROWTH.—A

7 comparison of the rate of growth of the total

8 amounts referred to in subparagraph (A) to the

9 rate of growth in the gross domestic product for

10 the same period.

11 ‘‘(2) PUBLICATION.—Each report submitted

12 under paragraph (1) shall be published by the Com13 mittee on Ways and Means as a public document.’’.

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

15 subsection (a) shall apply with respect to fiscal years be16 ginning on or after the date of enactment of this Act.

17 (c) CONGRESSIONAL HEARINGS.—It is the sense of

18 Congress that the committees of jurisdiction shall hold

19 hearings on the reports submitted under section 1817(l)

20 (42 U.S.C. 1395i(l)) of the Social Security Act.
32

•S 2807 IS

1 TITLE II—MEDICARE PRESCRIP2 TION DRUG AND SUPPLE3 MENTAL BENEFIT PROGRAM

4 SEC. 201. ESTABLISHMENT OF PROGRAM.

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

6 Act, as added by section 101, is amended by adding at

7 the end the following new part:

8 ‘‘PART B—MEDICARE PRESCRIPTION DRUG AND

9 SUPPLEMENTAL BENEFIT PROGRAM

10 ‘‘ESTABLISHMENT OF PRESCRIPTION DRUG AND

11 SUPPLEMENTAL BENEFIT PROGRAM

12 ‘‘SEC. 2221. (a) PROVISION OF BENEFIT.—The

13 Commissioner shall establish a Prescription Drug and

14 Supplemental Benefit Program under which an eligible

15 beneficiary may voluntarily enroll and receive access to

16 covered outpatient prescription drugs and other benefits

17 through enrollment in a Medicare Prescription Plus plan

18 offered by a private entity or a Medicare+Choice plan of19 fered by a Medicare+Choice organization.

20 ‘‘(b) PROGRAM TO BEGIN IN 2003.—The Commis21 sioner shall establish the program under this part in a

22 manner so that benefits are first provided for months be23 ginning with January 2003.
33

•S 2807 IS

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

2 in this part shall be construed as requiring an eligible ben3 eficiary to enroll in the program under this part.

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

5 under this part shall be payable from the Medicare Pre6 scription Drug Account.

7 ‘‘(e) NO EFFECT ON TITLE XVIII BENEFITS.—The

8 program under this part shall have no effect on the entitle9 ment to benefits under title XVIII.

10 ‘‘ENROLLMENT UNDER PROGRAM

11 ‘‘SEC. 2222. (a) ESTABLISHMENT OF PROCESS.—

12 ‘‘(1) IN GENERAL.—The Commissioner shall es13 tablish a process through which an eligible bene14 ficiary (including an eligible beneficiary enrolled in a

15 Medicare+Choice plan offered by a

16 Medicare+Choice organization) may make an elec17 tion to enroll under the program under this part.

18 Except as otherwise provided in this section, such

19 process shall be similar to the process for enrollment

20 in part B under section 1837.

21 ‘‘(2) REQUIREMENT OF ENROLLMENT.—An eli22 gible beneficiary must enroll under this part in order

23 to be eligible to receive benefits under this part.

24 ‘‘(b) ENROLLMENT PERIOD.—

25 ‘‘(1) IN GENERAL.—Except as provided in para26 graph (2) or (3), an eligible beneficiary may not en-
34

•S 2807 IS

1 roll in the program under this part during any pe2 riod after the beneficiary’s initial enrollment period.

3 ‘‘(2) OPEN ENROLLMENT PERIOD FOR BENE4 FICIARIES CURRENTLY COVERED.—In the case of an

5 individual who is entitled to part A of title XVIII

6 and enrolled under part B of such title as of Novem7 ber 1, 2002, there shall be an open enrollment pe8 riod of 6 months beginning on that date.

9 ‘‘(3) SPECIAL ENROLLMENT PERIOD FOR BENE10 FICIARIES THAT LOSE OTHER DRUG COVERAGE.—

11 ‘‘(A) IN GENERAL.—Subject to subpara12 graph (D), in the case of an applicable eligible

13 beneficiary, the Commissioner shall establish

14 procedures for permitting such beneficiary to

15 enroll under the program under this part.

16 ‘‘(B) APPLICABLE ELIGIBLE BENE17 FICIARY.—For purposes of this paragraph, the

18 term ‘applicable eligible beneficiary’ means an

19 eligible beneficiary who—

20 ‘‘(i) had applicable drug coverage; and

21 ‘‘(ii) involuntarily lost such coverage.

22 ‘‘(C) APPLICABLE DRUG COVERAGE DE23 FINED.—For purposes of subparagraph (B),

24 the term ‘applicable drug coverage’ means any

25 of the following prescription drug coverage:
35

•S 2807 IS

1 ‘‘(i) MEDICAID PRESCRIPTION DRUG

2 COVERAGE.—Prescription drug coverage

3 under a medicaid plan under title XIX, in4 cluding through the Program of All-inclu5 sive Care for the Elderly (PACE) under

6 section 1934, through a social health main7 tenance organization (referred to in section

8 4104(c) of the Balanced Budget Act of

9 1997), or through a Medicare+Choice

10 project that demonstrates the application

11 of capitation payment rates for frail elderly

12 medicare beneficiaries through the use of a

13 interdisciplinary team and through the

14 provision of primary care services to such

15 beneficiaries by means of such a team at

16 the nursing facility involved.

17 ‘‘(ii) PRESCRIPTION DRUG COVERAGE

18 UNDER GROUP HEALTH PLAN.—Any out19 patient prescription drug coverage under a

20 group health plan, including a health bene21 fits plan under the Federal Employees

22 Health Benefit Plan under chapter 89 of

23 title 5, United States Code, and a qualified

24 retiree prescription drug plan (as defined

25 in section 2232(e)(1)).
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•S 2807 IS

1 ‘‘(iii) PRESCRIPTION DRUG COVERAGE

2 UNDER CERTAIN MEDIGAP POLICIES.—

3 Coverage under a medicare supplemental

4 policy under section 1882 that provides

5 benefits for prescription drugs (whether or

6 not such coverage conforms to the stand7 ards for packages of benefits under section

8 1882(p)(1)), but only if the policy was in

9 effect on January 1, 2003.

10 ‘‘(iv) STATE PHARMACEUTICAL AS11 SISTANCE PROGRAM.—Coverage of pre12 scription drugs under a State pharma13 ceutical assistance program.

14 ‘‘(v) VETERANS’ COVERAGE OF PRE15 SCRIPTION DRUGS.—Coverage of prescrip16 tion drugs for veterans under chapter 17

17 of title 38, United States Code.

18 ‘‘(D) REQUIREMENTS.—The procedures

19 established under subparagraph (A) shall re20 quire that an applicable eligible beneficiary—

21 ‘‘(i) seek to enroll under the program

22 not later than 63 days after the date that

23 the beneficiary lost applicable drug cov24 erage; and
37

•S 2807 IS

1 ‘‘(ii) submit evidence of the date that

2 the beneficiary lost such coverage along

3 with the application for enrollment in the

4 program under this part.

5 ‘‘(4) STUDY AND REPORT ON PERMITTING PART

6 B ONLY INDIVIDUALS TO ENROLL IN PROGRAM.—

7 ‘‘(A) STUDY.—The Commissioner shall

8 conduct a study on the need for rules relating

9 to permitting individuals who are enrolled under

10 part B of title XVIII but are not entitled to

11 benefits under part A to buy into the program

12 under this part.

13 ‘‘(B) REPORT.—Not later than January 1,

14 2002, the Commissioner shall submit a report

15 to Congress on the study conducted under sub16 paragraph (A), together with any recommenda17 tions for legislation that the Commissioner de18 termines to be appropriate as a result of such

19 study.

20 ‘‘(c) PERIOD OF COVERAGE.—

21 ‘‘(1) IN GENERAL.—Except as provided in para22 graph (2) and subject to paragraph (3), an eligible

23 beneficiary’s coverage under the program under this

24 part shall be effective for the period provided in sec-
38

•S 2807 IS

1 tion 1838, as if that section applied to the program

2 under this part.

3 ‘‘(2) ENROLLMENT DURING OPEN AND SPECIAL

4 ENROLLMENT.—Subject to paragraph (3), an eligi5 ble beneficiary who enrolls under the program under

6 this part pursuant to paragraph (2) or (3) of sub7 section (b) shall be entitled to the benefits under

8 this part beginning on the first day of the month fol9 lowing the month in which such enrollment occurs.

10 ‘‘(3) LIMITATION.—Coverage under this part

11 shall not begin prior to January 1, 2003.

12 ‘‘(d) PROGRAM COVERAGE TERMINATED BY TERMI13 NATION OF COVERAGE UNDER PARTS A AND B OF TITLE

14 XVIII.—

15 ‘‘(1) IN GENERAL.—In addition to the causes of

16 termination specified in section 1838, the Commis17 sioner shall terminate an individual’s coverage under

18 the program under this part if the individual is no

19 longer enrolled in both parts A and B of title XVIII.

20 ‘‘(2) EFFECTIVE DATE.—The termination de21 scribed in paragraph (1) shall be effective on the ef22 fective date of termination of coverage under part A

23 of title XVIII or (if earlier) under part B of such

24 title.
39

•S 2807 IS

1 ‘‘(e) FIRST ENROLLMENT PERIOD.—The Commis2 sioner shall ensure that eligible beneficiaries are permitted

3 to enroll under this part prior to January 1, 2003, in

4 order to ensure that coverage under this part is effective

5 as of such date.

6 ‘‘ELECTION OF A MEDICARE PRESCRIPTION PLUS PLAN

7 ‘‘SEC. 2223. (a) IN GENERAL.—

8 ‘‘(1) PROCESS.—

9 ‘‘(A) IN GENERAL.—Subject to paragraph

10 (2), the Commissioner shall establish a process

11 through which an eligible beneficiary who is en12 rolled under this part shall make an annual

13 election to enroll in a Medicare Prescription

14 Plus plan offered by an eligible entity that

15 serves the geographic area in which the bene16 ficiary resides.

17 ‘‘(B) RULES.—In establishing the process

18 under subparagraph (A), the Commissioner

19 shall use rules that are consistent with the rules

20 for enrollment and disenrollment with a

21 Medicare+Choice plan under section 1851,

22 including—

23 ‘‘(i) annual, coordinated election peri24 ods, which shall be coordinated with such

25 periods under part C of title XVIII;
40

•S 2807 IS

1 ‘‘(ii) special election periods under

2 subsection (e)(4) of section 1851; and

3 ‘‘(iii) the guaranteed issue require4 ments under subsection (g) of such section.

5 ‘‘(2) MEDICARE+CHOICE ENROLLEES.—An eli6 gible beneficiary who is enrolled under this part and

7 enrolled in a Medicare+Choice plan offered by a

8 Medicare+Choice organization shall receive coverage

9 of benefits under this part through such plan if such

10 plan provides qualified prescription drug coverage. If

11 the Medicare+Choice plan in which the beneficiary

12 is enrolled does not provide such coverage, the bene13 ficiary shall receive such coverage through the elec14 tion of a Medicare Prescription Plus plan offered by

15 an eligible entity under this part.

16 ‘‘(b) ASSURING ACCESS TO PRESCRIPTION DRUG

17 COVERAGE IN AREAS WITH NO MEDICARE PRESCRIPTION

18 PLUS PLAN OR MEDICARE+CHOICE PLAN PROVIDING

19 DRUG COVERAGE AVAILABLE.—The Commissioner shall

20 develop procedures for the provision of the benefits re21 quired under section 2225(a) to each eligible beneficiary

22 that resides in an area where there are no Medicare Pre23 scription Plus plans or Medicare+Choice plans available

24 that provide qualified prescription drug coverage.
41

•S 2807 IS

1 ‘‘BENEFICIARY INFORMATION

2 ‘‘SEC. 2224. (a) IN GENERAL.—The Commissioner

3 shall conduct activities that are designed to broadly dis4 seminate information to eligible beneficiaries (and pro5 spective eligible beneficiaries) regarding the coverage pro6 vided under this part.

7 ‘‘(b) REQUIREMENTS.—The activities conducted

8 under this subsection shall be—

9 ‘‘(1) similar to the activities performed by the

10 Commissioner under section 1851(d), including the

11 dissemination of comparative information; and

12 ‘‘(2) coordinated with the activities performed

13 by the Commissioner under such section and under

14 section 1804.

15 ‘‘OUTPATIENT PRESCRIPTION DRUG AND OTHER

16 SUPPLEMENTAL BENEFITS

17 ‘‘SEC. 2225. (a) REQUIREMENTS.—

18 ‘‘(1) IN GENERAL.—For purposes of this part

19 and part C of title XVIII, the term ‘qualified pre20 scription drug coverage’ means either of the fol21 lowing:

22 ‘‘(A) STANDARD COVERAGE WITH ACCESS

23 TO NEGOTIATED PRICES.—Standard coverage

24 (as defined in subsection (d)) and access to ne25 gotiated prices under subsection (f).
42

•S 2807 IS

1 ‘‘(B) ACTUARIALLY EQUIVALENT COV2 ERAGE WITH ACCESS TO NEGOTIATED

3 PRICES.—Coverage of covered outpatient drugs

4 which meets the alternative coverage require5 ments of subsection (e) and access to negotiated

6 prices under subsection (f).

7 ‘‘(2) PERMITTING ADDITIONAL OUTPATIENT

8 PRESCRIPTION DRUG COVERAGE.—

9 ‘‘(A) IN GENERAL.—Subject to subpara10 graph (B) and section 2229(c)(2), nothing in

11 this part shall be construed as preventing quali12 fied prescription drug coverage from including

13 coverage of covered outpatient drugs that ex14 ceeds the coverage required under paragraph

15 (1).

16 ‘‘(B) REQUIREMENT.—An eligible entity

17 may not offer a Medicare Prescription Plus

18 plan that provides additional benefits pursuant

19 to subparagraph (A) in an area unless the eligi20 ble entity offering such plan also offers a Medi21 care Prescription Plus plan in the area that

22 only provides the coverage of prescription drugs

23 that is required under subsection (a)(1).

24 ‘‘(3) COST CONTROL MECHANISMS.—In pro25 viding qualified prescription drug coverage, the enti-
43

•S 2807 IS

1 ty offering the Medicare Prescription Plus plan or

2 the Medicare+Choice plan may use cost control

3 mechanisms that are customarily used in employer4 sponsored health care plans that offer coverage for

5 outpatient prescription drugs, including the use of

6 formularies, tiered copayments, selective contracting

7 with providers of outpatient prescription drugs, and

8 mail order pharmacies.

9 ‘‘(b) PERMITTING BENEFITS IN ADDITION TO OUT10 PATIENT PRESCRIPTION DRUG COVERAGE.—

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

12 and section 2229(c)(2), nothing in this part shall be

13 construed as preventing a Medicare Prescription

14 Plus plan from including coverage of benefits that

15 are in addition to the benefits available under title

16 XVIII, including coverage of beneficiary cost-sharing

17 for benefits under such title.

18 ‘‘(2) REQUIREMENTS.—An eligible entity may

19 not offer a Medicare Prescription Plus plan that

20 provides additional benefits pursuant to paragraph

21 (1) in an area unless—

22 ‘‘(A) the eligible entity offering such plan

23 also offers a Medicare Prescription Plus plan in

24 the area that only provides the coverage of pre-
44

•S 2807 IS

1 scription drugs that is required under sub2 section (a)(1); and

3 ‘‘(B) if the additional benefits include any

4 of the core group of basic benefits described in

5 section 1882(p)(2)(B), the Medicare Prescrip6 tion Plus plan provides all of such core group

7 of basic benefits.

8 ‘‘(c) APPLICATION OF SECONDARY PAYOR PROVI9 SIONS.—The provisions of section 1852(a)(4) shall apply

10 under this part in the same manner as they apply under

11 part C of title XVIII.

12 ‘‘(d) STANDARD COVERAGE.—For purposes of this

13 part and part C of title XVIII, the ‘standard coverage’

14 is coverage of covered outpatient drugs that meets the fol15 lowing requirements:

16 ‘‘(1) DEDUCTIBLE.—The coverage has an an17 nual deductible—

18 ‘‘(A) for 2003, that is equal to $250; or

19 ‘‘(B) for a subsequent year, that is equal

20 to the amount specified under this paragraph

21 for the previous year increased by the percent22 age specified in paragraph (5) for the year in23 volved.
45

•S 2807 IS

1 Any amount determined under subparagraph (B)

2 that is not a multiple of $5 shall be rounded to the

3 nearest multiple of $5.

4 ‘‘(2) LIMITS ON COST-SHARING.—The coverage

5 has cost-sharing (for costs above the annual deduct6 ible specified in paragraph (1) and up to the initial

7 coverage limit under paragraph (3)) that is equal to

8 50 percent or that is actuarially consistent (using

9 processes established under subsection (g)) with an

10 average expected payment of 50 percent of such

11 costs.

12 ‘‘(3) INITIAL COVERAGE LIMIT.—Subject to

13 paragraph (4), the coverage has an initial coverage

14 limit on the maximum costs that may be recognized

15 for payment purposes (above the annual deduct16 ible)—

17 ‘‘(A) for 2003, that is equal to $2,100; or

18 ‘‘(B) for a subsequent year, that is equal

19 to the amount specified in this paragraph for

20 the previous year, increased by the annual per21 centage increase described in paragraph (5) for

22 the year involved.

23 Any amount determined under subparagraph (B)

24 that is not a multiple of $25 shall be rounded to the

25 nearest multiple of $25.
46

•S 2807 IS

1 ‘‘(4) LIMITATION ON OUT-OF-POCKET EXPENDI2 TURES BY BENEFICIARY.—

3 ‘‘(A) IN GENERAL.—Notwithstanding para4 graph (3), the coverage provides benefits with5 out any cost-sharing after the individual has in6 curred costs (as described in subparagraph (C))

7 for covered outpatient drugs in a year equal to

8 the annual out-of-pocket limit specified in sub9 paragraph (B).

10 ‘‘(B) ANNUAL OUT-OF-POCKET LIMIT.—

11 For purposes of this part, the ‘annual out-of12 pocket limit’ specified in this subparagraph—

13 ‘‘(i) for 2003, is equal to $6,000; or

14 ‘‘(ii) for a subsequent year, is equal to

15 the amount specified in the subparagraph

16 for the previous year, increased by the an17 nual percentage increase described in para18 graph (5) for the year involved.

19 Any amount determined under clause (ii) that

20 is not a multiple of $100 shall be rounded to

21 the nearest multiple of $100.

22 ‘‘(C) APPLICATION.—In applying subpara23 graph (A)—

24 ‘‘(i) incurred costs shall only include

25 costs incurred for the annual deductible
47

•S 2807 IS

1 (described in paragraph (1)), cost-sharing

2 (described in paragraph (2)), and amounts

3 for which benefits are not provided because

4 of the application of the initial coverage

5 limit described in paragraph (3); but

6 ‘‘(ii) costs shall be treated as incurred

7 without regard to whether the individual or

8 another person, including a State program,

9 has paid for such costs, but shall not be

10 counted insofar as such costs are covered

11 as benefits under a Medicare Prescription

12 Plus plan, a Medicare+Choice plan, or

13 other third-party coverage.

14 ‘‘(5) ANNUAL PERCENTAGE INCREASE.—For

15 purposes of this part, the annual percentage increase

16 specified in this paragraph for a year is equal to the

17 annual percentage increase in average per capita ag18 gregate expenditures for covered outpatient drugs in

19 the United States for medicare beneficiaries, as de20 termined by the Commissioner for the 12-month pe21 riod ending in July of the previous year.

22 ‘‘(e) ALTERNATIVE COVERAGE REQUIREMENTS.—A

23 Medicare Prescription Plus plan or Medicare+Choice plan

24 may provide a different prescription drug benefit design
48

•S 2807 IS

1 from the standard coverage described in subsection (d) so

2 long as the following requirements are met:

3 ‘‘(1) ASSURING AT LEAST ACTUARIALLY EQUIV4 ALENT COVERAGE.—

5 ‘‘(A) ASSURING EQUIVALENT VALUE OF

6 TOTAL COVERAGE.—The actuarial value of the

7 total coverage (as determined under subsection

8 (g)) is at least equal to the actuarial value (as

9 so determined) of standard coverage.

10 ‘‘(B) ASSURING EQUIVALENT UNSUB11 SIDIZED VALUE OF COVERAGE.—The unsub12 sidized value of the coverage is at least equal to

13 the unsubsidized value of standard coverage.

14 For purposes of this subparagraph, the unsub15 sidized value of coverage is the amount by

16 which the actuarial value of the coverage (as

17 determined under subsection (g)) exceeds the

18 actuarial value of the reinsurance subsidy pay19 ments under section 2232 with respect to such

20 coverage.

21 ‘‘(C) ASSURING STANDARD PAYMENT FOR

22 COSTS AT INITIAL COVERAGE LIMIT.—The cov23 erage is designed, based upon an actuarially

24 representative pattern of utilization (as deter25 mined under subsection (g)), to provide for the
49

•S 2807 IS

1 payment, with respect to costs incurred that are

2 equal to the sum of the deductible under sub3 section (d)(1) and the initial coverage limit

4 under subsection (d)(3), of an amount equal to

5 at least such initial coverage limit multiplied by

6 the percentage specified in subsection (d)(2).

7 Benefits other than qualified prescription drug cov8 erage shall not be taken into account for purposes

9 of this paragraph.

10 ‘‘(2) LIMITATION ON OUT-OF-POCKET EXPENDI11 TURES BY BENEFICIARIES.—The coverage provides

12 the limitation on out-of-pocket expenditures by bene13 ficiaries described in subsection (d)(4).

14 ‘‘(f) ACCESS TO NEGOTIATED PRICES.—Under quali15 fied prescription drug coverage offered by an eligible entity

16 or a Medicare+Choice organization, the entity or organi17 zation shall provide beneficiaries with access to negotiated

18 prices (including applicable discounts) used for payment

19 for covered outpatient drugs, regardless of the fact that

20 no benefits may be payable under the coverage with re21 spect to such drugs because of the application of cost-shar22 ing or an initial coverage limit (described in subsection

23 (d)(3)). In providing such access, the eligible entity or

24 Medicare+Choice organization shall issue a card pursuant

25 to section 2226(b)(1).
50

•S 2807 IS

1 ‘‘(g) ACTUARIAL VALUATION; DETERMINATION OF

2 ANNUAL PERCENTAGE INCREASES.—

3 ‘‘(1) PROCESSES.—For purposes of this section,

4 the Commissioner shall establish processes and

5 methods—

6 ‘‘(A) for determining the actuarial valu7 ation of prescription drug coverage, including—

8 ‘‘(i) an actuarial valuation of standard

9 coverage and of the reinsurance subsidy

10 payments under section 2232;

11 ‘‘(ii) the use of generally accepted ac12 tuarial principles and methodologies; and

13 ‘‘(iii) applying the same methodology

14 for determinations of alternative coverage

15 under subsection (e) as is used with re16 spect to determinations of standard cov17 erage under subsection (d); and

18 ‘‘(B) for determining annual percentage in19 creases described in subsection (d)(5).

20 ‘‘(2) USE OF OUTSIDE ACTUARIES.—Under the

21 processes under paragraph (1)(A), eligible entities

22 and Medicare+Choice organizations may use actu23 arial opinions certified by independent, qualified ac24 tuaries to establish actuarial values.
51

•S 2807 IS

1 ‘‘BENEFICIARY PROTECTIONS

2 ‘‘SEC. 2226. (a) DISSEMINATION OF INFORMA3 TION.—

4 ‘‘(1) GENERAL INFORMATION.—An eligible enti5 ty offering a Medicare Prescription Plus plan shall

6 disclose, in a clear, accurate, and standardized form

7 to each enrollee at the time of enrollment and at

8 least annually thereafter, the information described

9 in section 1852(c)(1) relating to such plan. Such in10 formation includes the following:

11 ‘‘(A) Access to covered outpatient drugs.

12 ‘‘(B) How any formulary used by the enti13 ty functions.

14 ‘‘(C) Co-payments, coinsurance, and de15 ductible requirements.

16 ‘‘(D) Grievance and appeals procedures.

17 ‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL

18 COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA19 TION.—Upon request of an individual eligible to en20 roll in a Medicare Prescription Plus plan, the eligible

21 entity offering such plan shall provide the informa22 tion described in section 1852(c)(2) to such indi23 vidual.

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

25 An eligible entity offering a Medicare Prescription
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1 Plus plan shall have a mechanism for providing spe2 cific information to enrollees upon request, including

3 information on specific changes in its formulary.

4 ‘‘(4) CLAIMS INFORMATION.—An eligible entity

5 offering a Medicare Prescription Plus plan must fur6 nish to enrolled individuals in a form easily under7 standable to such individuals an explanation of bene8 fits (in accordance with section 1806(a) or in a com9 parable manner) and a notice of the benefits in rela10 tion to initial coverage limit and annual out-of-pock11 et limit for the current year, whenever prescription

12 drug benefits are provided under this part (except

13 that such notice need not be provided more often

14 than monthly).

15 ‘‘(b) ACCESS TO COVERED OUTPATIENT DRUGS.—

16 ‘‘(1) ACCESS TO NEGOTIATED PRICES FOR PRE17 SCRIPTION DRUGS.—An eligible entity offering a

18 Medicare Prescription Plus plan shall issue such a

19 card that may be used by an enrolled beneficiary to

20 assure access to negotiated prices under section

21 2225(f) for the purchase of prescription drugs for

22 which coverage is not otherwise provided under the

23 Medicare Prescription Plus plan.

24 ‘‘(2) REQUIREMENTS ON DEVELOPMENT AND

25 APPLICATION OF FORMULARIES.—Insofar as an eli-
53

•S 2807 IS

1 gible entity offering a Medicare Prescription Plus

2 plan uses a formulary with respect to qualified pre3 scription drug coverage, the following requirements

4 must be met:

5 ‘‘(A) INCLUSION OF DRUGS IN ALL THERA6 PEUTIC CATEGORIES.—The formulary must in7 clude drugs within all therapeutic categories

8 and classes of covered outpatient drugs (al9 though not necessarily for all drugs within such

10 categories and classes).

11 ‘‘(B) APPEALS AND EXCEPTIONS TO AP12 PLICATION.—The eligible entity must have, as

13 part of the appeals process under subsection

14 (e)(2), a process for appeals for denials of cov15 erage based on such application of the for16 mulary.

17 ‘‘(c) COST AND UTILIZATION MANAGEMENT.—

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

19 in place—

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

21 management program, including appropriate in22 centives to use generic drugs, when appropriate;

23 ‘‘(B) quality assurance measures to reduce

24 medical errors and adverse drug interactions,
54

•S 2807 IS

1 which may include the measures described in

2 paragraph (2); and

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

4 and waste.

5 ‘‘(2) MEASURES.—The measures described in

6 this paragraph are beneficiary education programs,

7 counseling, medication refill reminders, and special

8 packaging.

9 ‘‘(d) GRIEVANCE MECHANISM.—An eligible entity

10 shall provide meaningful procedures for hearing and re11 solving grievances between the eligible entity (including

12 any entity or individual through which the eligible entity

13 provides covered benefits) and enrollees in a Medicare Pre14 scription Plus plan offered by the eligible entity in accord15 ance with section 1852(f).

16 ‘‘(e) COVERAGE DETERMINATIONS, RECONSIDER17 ATIONS, AND APPEALS.—

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

19 meet the requirements of section 1852(g) with re20 spect to covered benefits under the Medicare Pre21 scription Plus plan it offers under this part in the

22 same manner as such requirements apply to a

23 Medicare+Choice organization with respect to bene24 fits it offers under a Medicare+Choice plan under

25 part C of title XVIII.
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•S 2807 IS

1 ‘‘(2) APPEALS OF FORMULARY DETERMINA2 TIONS.—Consistent with the requirements of section

3 1852(g), an eligible entity shall establish a process

4 for appeals of formulary determinations.

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

8 under this part in the same manner as such requirements

9 apply to a Medicare+Choice organization with respect to

10 enrollees under part C of title XVIII.

11 ‘‘(g) UNIFORM PREMIUM.—An eligible entity shall

12 ensure that the premium for a Medicare Prescription Plus

13 plan charged under this section is the same for all individ14 uals enrolled in the plan in the same service area.

15 ‘‘REQUIREMENTS FOR ENTITIES OFFERING MEDICARE

16 PRESCRIPTION PLUS PLANS

17 ‘‘SEC. 2227. (a) GENERAL REQUIREMENTS.—An eli18 gible entity offering a Medicare Prescription Plus plan

19 shall meet the following requirements:

20 ‘‘(1) LICENSURE.—Subject to subsection (c),

21 the entity is organized and licensed under State law

22 as a risk-bearing entity eligible to offer health insur23 ance or health benefits coverage in each State in

24 which it offers a Medicare Prescription Plus plan.

25 ‘‘(2) ASSUMPTION OF FULL FINANCIAL RISK.—
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•S 2807 IS

1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the entity assumes full financial risk

3 on a prospective basis for the benefits that it

4 offers under a Medicare Prescription Plus plan

5 and that is not covered under reinsurance

6 under section 2232.

7 ‘‘(B) REINSURANCE PERMITTED.—The en8 tity may obtain insurance or make other ar9 rangements for the cost of coverage provided to

10 any enrolled member under this part.

11 ‘‘(3) SOLVENCY FOR UNLICENSED ENTITIES.—

12 In the case of an eligible entity that is not described

13 in paragraph (1), the entity shall meet solvency

14 standards established by the Commissioner under

15 subsection (d).

16 ‘‘(b) CONTRACT REQUIREMENTS.—The Commis17 sioner shall not permit an eligible beneficiary to elect a

18 Medicare Prescription Plus plan offered by an eligible en19 tity under this part, and the entity shall not be eligible

20 for payments under section 2230, 2231(e), or 2232, unless

21 the Commissioner has entered into a contract under this

22 subsection with the entity with respect to the offering of

23 such plan. Such a contract with an entity may cover more

24 than 1 Medicare Prescription Plus plan. Such contract

25 shall provide that the entity agrees to comply with the ap-
57

•S 2807 IS

1 plicable requirements and standards of this part and the

2 terms and conditions of payment as provided for in this

3 part.

4 ‘‘(c) WAIVER OF CERTAIN REQUIREMENTS TO EX5 PAND CHOICE.—

6 ‘‘(1) IN GENERAL.—In the case of an eligible

7 entity that seeks to offer a Medicare Prescription

8 Plus plan in a State, the Commissioner shall waive

9 the requirement of subsection (a)(1) that the entity

10 be licensed in that State if the Commissioner deter11 mines, based on the application and other evidence

12 presented to the Commissioner, that any of the

13 grounds for approval of the application described in

14 paragraph (2) have been met.

15 ‘‘(2) GROUNDS FOR APPROVAL.—The grounds

16 for approval under this paragraph are the grounds

17 for approval described in subparagraphs (B), (C),

18 and (D) of section 1855(a)(2), and also include the

19 application by a State of any grounds other than

20 those required under Federal law.

21 ‘‘(3) APPLICATION OF MEDICARE+CHOICE PSO

22 WAIVER PROCEDURES.—With respect to an applica23 tion for a waiver (or a waiver granted) under this

24 subsection, the provisions of subparagraphs (E), (F),

25 and (G) of section 1855(a)(2) shall apply.
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1 ‘‘(4) LICENSURE DOES NOT SUBSTITUTE FOR

2 OR CONSTITUTE CERTIFICATION.—The fact that an

3 entity is licensed in accordance with subsection

4 (a)(1) does not deem the eligible entity to meet other

5 requirements imposed under this part for an eligible

6 entity.

7 ‘‘(5) REFERENCES TO CERTAIN PROVISIONS.—

8 For purposes of this subsection, in applying the pro9 visions of section 1855(a)(2) under this subsection

10 to Medicare Prescription Plus plans and eligible

11 entities—

12 ‘‘(A) any reference to a waiver application

13 under section 1855 shall be treated as a ref14 erence to a waiver application under paragraph

15 (1); and

16 ‘‘(B) any reference to solvency standards

17 were treated as a reference to solvency stand18 ards established under subsection (d).

19 ‘‘(d) SOLVENCY STANDARDS FOR NON-LICENSED

20 ENTITIES.—

21 ‘‘(1) ESTABLISHMENT.—The Commissioner

22 shall establish, by not later than October 1, 2001,

23 financial solvency and capital adequacy standards

24 that an entity that does not meet the requirements
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•S 2807 IS

1 of subsection (a)(1) must meet to qualify as an eligi2 ble entity under this part.

3 ‘‘(2) COMPLIANCE WITH STANDARDS.—An eligi4 ble entity that is not licensed by a State under sub5 section (a)(1) and for which a waiver application has

6 been approved under subsection (c) shall meet sol7 vency and capital adequacy standards established

8 under paragraph (1). The Commissioner shall estab9 lish certification procedures for such eligible entities

10 with respect to such solvency standards in the man11 ner described in section 1855(c)(2).

12 ‘‘(e) OTHER STANDARDS.—The Commissioner shall

13 establish by regulation other standards (not described in

14 subsection (d)) for eligible entities and Medicare Prescrip15 tion Plus plans consistent with, and to carry out, this part.

16 The Commissioner shall publish such regulations by Octo17 ber 1, 2001.

18 ‘‘(f) RELATION TO STATE LAWS.—

19 ‘‘(1) IN GENERAL.—The standards established

20 under this section shall supersede any State law or

21 regulation (including standards described in para22 graph (2)) with respect to Medicare Prescription

23 Plus plans which are offered by eligible entities

24 under this part to the extent such law or regulation

25 is inconsistent with such standards, in the same
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1 manner as such laws and regulations are superseded

2 under section 1856(b)(3).

3 ‘‘(2) STANDARDS SPECIFICALLY SUPER4 SEDED.—State standards relating to the following

5 are superseded under this section:

6 ‘‘(A) Benefit requirements.

7 ‘‘(B) Requirements relating to inclusion or

8 treatment of providers.

9 ‘‘(C) Coverage determinations (including

10 related appeals and grievance processes).

11 ‘‘(3) PROHIBITION OF STATE IMPOSITION OF

12 PREMIUM TAXES.—No State may impose a premium

13 tax or similar tax with respect to premiums paid to

14 eligible entities for Medicare Prescription Plus plans

15 under this part, or with respect to any payments

16 made to such an entity by the Commissioner under

17 this part.

18 ‘‘SUBMISSION OF MEDICARE PRESCRIPTION PLUS PLANS

19 ‘‘SEC. 2228. (a) IN GENERAL.—Each eligible entity

20 that intends to offer a Medicare Prescription Plus plan

21 in a year (beginning with 2003) shall submit to the Com22 missioner, at such time and in such manner as the Com23 missioner may specify, such information as the Commis24 sioner may require, including the information described in

25 subsection (b).
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1 ‘‘(b) INFORMATION DESCRIBED.—The information

2 described in this subsection includes information on each

3 of the following:

4 ‘‘(1) A description of the benefits under the

5 plan, including any supplemental benefits pursuant

6 to section 2225(b).

7 ‘‘(2) Information on the actuarial value of the

8 qualified prescription drug coverage.

9 ‘‘(3) Information on the monthly premium to be

10 charged for all benefits, including an actuarial cer11 tification of—

12 ‘‘(A) the actuarial basis for such premium;

13 ‘‘(B) the portion of such premium attrib14 utable to benefits in excess of standard cov15 erage; and

16 ‘‘(C) the reduction in such premium result17 ing from the reinsurance subsidy payments pro18 vided under section 2232.

19 ‘‘(4) The service area for the plan.

20 ‘‘(5) Such other information as the Commis21 sioner may require to carry out this part.

22 ‘‘APPROVAL OF MEDICARE PRESCRIPTION PLUS PLANS

23 ‘‘SEC. 2229. (a) IN GENERAL.—The Commissioner

24 shall review the information filed under section 2228 and

25 shall approve or disapprove the Medicare Prescription

26 Plus plan.
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1 ‘‘(b) NEGOTIATION.—In exercising such authority,

2 the Commissioner shall have the same authority to nego3 tiate the terms and conditions of the premiums submitted

4 and other terms and conditions of plans as the Director

5 of the Office of Personnel Management has with respect

6 to health benefits plans under chapter 89 of title 5, United

7 States Code.

8 ‘‘(c) SPECIAL RULES FOR APPROVAL.—

9 ‘‘(1) SERVICE AREA.—The Commissioner may

10 approve a service area submitted under section

11 2228(b)(4) only if the Commissioner finds that—

12 ‘‘(A) the use of such an area is consistent

13 with the purposes of this part; and

14 ‘‘(B) the service area for the plan is not

15 designed so as to discriminate based on the

16 health status, economic status, or prior receipt

17 of health care of eligible beneficiaries.

18 ‘‘(2) AVOIDANCE OF FAVORABLE SELECTION.—

19 The Commissioner may approve a Medicare Pre20 scription Plus plan submitted under section 2228

21 only if the benefits under such plan—

22 ‘‘(A) include the required benefits under

23 section 2225(a)(1); and
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•S 2807 IS

1 ‘‘(B) are not designed in such a manner

2 that the Commissioner finds is likely to result

3 in favorable selection of eligible beneficiaries.

4 ‘‘PAYMENTS TO MEDICARE PRESCRIPTION PLUS PLANS

5 FOR BENEFITS

6 ‘‘SEC. 2230. (a) IN GENERAL.—Subject to subsection

7 (b), for each year (beginning with 2003), the Commis8 sioner shall pay to each eligible entity offering a Medicare

9 Prescription Plus plan in which an eligible beneficiary is

10 enrolled an amount equal to—

11 ‘‘(1) the full amount of the premium approved

12 under section 2229 on behalf of each eligible bene13 ficiary enrolled in such plan for the year; minus

14 ‘‘(2) the amount of any fees imposed on the en15 tity pursuant to section 2233).

16 ‘‘(b) PAYMENT TERMS.—Payment under this section

17 to an eligible entity offering a Medicare Prescription Plus

18 plan shall be made in a manner determined by the Com19 missioner and based upon the manner in which payments

20 are made under section 1853(a) (relating to payments to

21 Medicare+Choice organizations).

22 ‘‘COMPUTATION AND COLLECTION OF BENEFICIARY

23 SHARE OF PREMIUM

24 ‘‘SEC. 2231. (a) COMPUTATION.—

25 ‘‘(1) AMOUNT.—The annual beneficiary pre26 mium for enrollment in a Medicare Prescription Plus
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•S 2807 IS

1 plan providing coverage under this part for a year

2 shall be an amount equal to—

3 ‘‘(A) an amount equal to the full amount

4 of the premium approved under section 2229

5 for the plan in which the beneficiary is enrolled;

6 minus

7 ‘‘(B) the amount of the discount deter8 mined under subsection (b).

9 ‘‘(2) COLLECTION OF PREMIUM AMOUNT IN

10 SAME MANNER AS PART B PREMIUM.—

11 ‘‘(A) IN GENERAL.—The amount of the

12 annual beneficiary premium determined under

13 paragraph (1) shall be collected and credited to

14 the Medicare Prescription Drug Account in the

15 same manner as the monthly premium deter16 mined under section 1839 is collected and cred17 ited to the Federal Supplementary Medical In18 surance Trust Fund under section 1840.

19 ‘‘(B) INFORMATION NECESSARY FOR COL20 LECTION.—In order to carry out subparagraph

21 (A), the Commissioner shall transmit to the

22 Commissioner of Social Security—

23 ‘‘(i) at the beginning of each year, the

24 name, social security account number, and

25 annual beneficiary premium owed by each
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•S 2807 IS

1 individual enrolled in a Medicare Prescrip2 tion Plus plan for each month during the

3 year; and

4 ‘‘(ii) periodically throughout the year,

5 information to update the information pre6 viously transmitted under this paragraph

7 for the year.

8 ‘‘(b) DISCOUNTS FOR REQUIRED DRUG PORTION OF

9 PREMIUM.—

10 ‘‘(1) FULL PREMIUM DISCOUNT AND REDUC11 TION OF COST-SHARING FOR INDIVIDUALS WITH IN12 COME BELOW 135 PERCENT OF FEDERAL POVERTY

13 LEVEL.—In the case of a low-income individual (as

14 defined in paragraph (5)(A)) who is determined to

15 have income that does not exceed 135 percent of the

16 Federal poverty level, the individual is entitled under

17 this section—

18 ‘‘(A) to a premium discount equal to 100

19 percent of the amount described in subsection

20 (c); and

21 ‘‘(B) subject to subsection (d), to the sub22 stitution for the beneficiary cost-sharing de23 scribed in paragraphs (1) and (2) of section

24 2225(d) (up to the initial coverage limit speci-
66

•S 2807 IS

1 fied in paragraph (3) of such section) of

2 amounts that are nominal.

3 ‘‘(2) SLIDING SCALE PREMIUM DISCOUNT FOR

4 INDIVIDUALS WITH INCOME ABOVE 135, BUT BELOW

5 150 PERCENT, OF FEDERAL POVERTY LEVEL.—In

6 the case of a low-income individual who is deter7 mined to have income that exceeds 135 percent, but

8 does not exceed 150 percent, of the Federal poverty

9 level, the individual is entitled under this section to

10 a premium discount determined on a linear sliding

11 scale ranging from 100 percent of the amount de12 scribed in subsection (c) for individuals with incomes

13 at 135 percent of such level to 25 percent of such

14 amount for individuals with incomes at 150 percent

15 of such level.

16 ‘‘(3) PARTIAL PREMIUM DISCOUNT FOR INDI17 VIDUALS WITH INCOME ABOVE 150 PERCENT OF

18 FEDERAL POVERTY LEVEL.—In the case of an eligi19 ble beneficiary who is not a low-income individual,

20 the beneficiary is entitled under this section to a

21 premium discount equal to 25 percent of the amount

22 described in subsection (c).

23 ‘‘(4) TAX TREATMENT OF PREMIUM DIS24 COUNT.—
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1 ‘‘(A) IN GENERAL.—For purposes of the

2 Internal Revenue Code of 1986, the premium

3 discount determined under this subsection for

4 an eligible beneficiary for a year shall be in5 cluded in the gross income of the beneficiary for

6 the year.

7 ‘‘(B) STATEMENT OF TAXABLE AMOUNT.—

8 Not later than January 31 of each year (begin9 ning with 2004), the Commissioner shall

10 provide—

11 ‘‘(i) each eligible beneficiary enrolled

12 under this part with a statement that de13 scribes the amount of the discount that is

14 required to be included in the gross income

15 of the beneficiary for the previous year

16 pursuant to subparagraph (A); and

17 ‘‘(ii) the Secretary of the Treasury

18 with the information described in clause

19 (i).

20 ‘‘(5) DETERMINATION OF ELIGIBILITY.—

21 ‘‘(A) LOW-INCOME INDIVIDUAL DE22 FINED.—For purposes of this section, subject

23 to subparagraph (D), the term ‘low-income indi24 vidual’ means an individual who—
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1 ‘‘(i) is eligible to enroll, and has en2 rolled, under this part;

3 ‘‘(ii) has income below 150 percent of

4 the Federal poverty line; and

5 ‘‘(iii) meets the resources requirement

6 described in section 1905(p)(1)(C).

7 ‘‘(B) DETERMINATIONS.—The determina8 tion of whether an individual residing in a State

9 is a low-income individual and the amount of

10 such individual’s income shall be determined

11 under the State medicaid plan for the State

12 under section 1935(a). In the case of a State

13 that does not operate such a medicaid plan (ei14 ther under title XIX or under a statewide waiv15 er granted under section 1115), such deter16 mination shall be made under arrangements

17 made by the Commissioner.

18 ‘‘(C) INCOME DETERMINATIONS.—For pur19 poses of applying this section—

20 ‘‘(i) income shall be determined in the

21 manner described in section

22 1905(p)(1)(B); and

23 ‘‘(ii) the term ‘Federal poverty line’

24 means the official poverty line (as defined

25 by the Office of Management and Budget,
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•S 2807 IS

1 and revised annually in accordance with

2 section 673(2) of the Omnibus Budget

3 Reconciliation Act of 1981) applicable to a

4 family of the size involved.

5 ‘‘(D) TREATMENT OF TERRITORIAL RESI6 DENTS.—In the case of an individual who is not

7 a resident of the 50 States or the District of

8 Columbia, the individual is not eligible to be a

9 low-income individual but may be eligible for fi10 nancial assistance with prescription drug ex11 penses under section 1935(e).

12 ‘‘(c) PREMIUM DISCOUNT AMOUNT.—The premium

13 discount amount described in this subsection for an eligi14 ble beneficiary residing in an area is an amount equal to—

15 ‘‘(1) in the case of an individual enrolled in a

16 Medicare Prescription Plus plan, the actuarial value

17 of the standard drug coverage provided under the

18 plan (determined without regard to any premium

19 discount under this section); and

20 ‘‘(2) in the case of an individual enrolled in a

21 Medicare+Choice plan that provides qualified pre22 scription drug coverage, the standard premium com23 puted under section 1851(j)(5)(A)(iii).

24 ‘‘(d) RULES IN APPLYING COST-SHARING SUB25 SIDIES.—
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•S 2807 IS

1 ‘‘(1) IN GENERAL.—In applying subsection

2 (b)(1)(B)—

3 ‘‘(A) the maximum amount of subsidy that

4 may be provided with respect to an enrollee for

5 a year may not exceed 95 percent of the max6 imum cost-sharing described in such subsection

7 that may be incurred for standard coverage;

8 ‘‘(B) the Commissioner shall determine

9 what is ‘nominal’ taking into account the rules

10 applied under section 1916(a)(3); and

11 ‘‘(C) nothing in this part shall be con12 strued as preventing a plan or provider from

13 waiving or reducing the amount of cost-sharing

14 otherwise applicable.

15 ‘‘(2) LIMITATION ON CHARGES.—In the case of

16 a low-income individual receiving cost-sharing sub17 sidies under subsection (b)(1)(B), the eligible entity

18 may not charge more than a nominal amount in

19 cases in which the cost-sharing subsidy is provided

20 under such subsection.

21 ‘‘(e) ADMINISTRATION OF COST-SHARING PRO22 GRAM.—The Commissioner shall provide a process where23 by, in the case of a low-income individual who is eligible

24 for reduced cost-sharing under subsection (b)(1)(B) and

25 is enrolled in a Medicare Prescription Plus plan or a
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•S 2807 IS

1 Medicare+Choice plan under which qualified prescription

2 drug coverage is provided—

3 ‘‘(1) the Commissioner provides for a notifica4 tion of the eligible entity or Medicare+Choice orga5 nization involved that the individual is eligible for

6 such reduced cost-sharing;

7 ‘‘(2) the entity or organization involved reduces

8 the cost-sharing pursuant to this section and sub9 mits to the Commissioner information on the

10 amount of such reduction; and

11 ‘‘(3) the Commissioner periodically and on a

12 timely basis reimburses the entity or organization

13 for the amount of such reductions.

14 The reimbursement under paragraph (3) may be com15 puted on a capitated basis, taking into account the actu16 arial value of the reductions and with appropriate adjust17 ments to reflect differences in the risks actually involved.

18 ‘‘(f) RELATION TO MEDICAID PROGRAM.—

19 ‘‘(1) IN GENERAL.—For provisions providing

20 for eligibility determinations, and additional financ21 ing, under the medicaid program, see section 1935.

22 ‘‘(2) MEDICAID PROVIDING WRAP AROUND BEN23 EFITS.—The coverage provided under this part is

24 primary payor to benefits for prescribed drugs pro25 vided under the medicaid program under title XIX.
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1 ‘‘ADDITIONAL PRESCRIPTION DRUG SUBSIDIES THROUGH

2 REINSURANCE

3 ‘‘SEC. 2232. (a) REINSURANCE SUBSIDY PAY4 MENT.—In order to reduce premium levels applicable to

5 qualified prescription drug coverage for all medicare bene6 ficiaries, to reduce adverse selection among Medicare Pre7 scription Plus plans and Medicare+Choice plans that pro8 vide qualified prescription drug coverage, and to promote

9 the participation of eligible entities under this part, the

10 Commissioner shall provide in accordance with this section

11 for payment to a qualifying entity (as defined in sub12 section (b)) of the reinsurance payment amount (as de13 fined in subsection (c)) for excess costs incurred in pro14 viding qualified prescription drug coverage—

15 ‘‘(1) for individuals enrolled with a Medicare

16 Prescription Plus plan under this part;

17 ‘‘(2) for individuals enrolled with a

18 Medicare+Choice plan that provides qualified pre19 scription drug coverage under part C of title XVIII;

20 and

21 ‘‘(3) for medicare secondary payer eligible indi22 viduals (described in subsection (e)(3)(D)) who are

23 enrolled in a qualified retiree prescription drug plan.

24 This section constitutes budget authority in advance of ap25 propriations Acts and represents the obligation of the
73

•S 2807 IS

1 Commissioner to provide for the payment of amounts pro2 vided under this section.

3 ‘‘(b) QUALIFYING ENTITY DEFINED.—For purposes

4 of this section, the term ‘qualifying entity’ means any of

5 the following that has entered into an agreement with the

6 Commissioner to provide the Commissioner with such in7 formation as may be required to carry out this section:

8 ‘‘(1) An eligible entity offering a Medicare Pre9 scription Plus plan under this part.

10 ‘‘(2) A Medicare+Choice organization that pro11 vides qualified prescription drug coverage under a

12 Medicare+Choice plan under part C of title XVIII.

13 ‘‘(3) The sponsor of a qualified retiree prescrip14 tion drug plan (as defined in subsection (e)).

15 ‘‘(c) REINSURANCE PAYMENT AMOUNT.—

16 ‘‘(1) IN GENERAL.—Subject to subsection (e)(2)

17 and paragraph (4), the reinsurance payment amount

18 under this subsection for a qualified beneficiary (as

19 defined in subsection (f)(1)) for a coverage year (as

20 defined in subsection (f)(2)) is an amount equal to

21 80 percent of the allowable costs attributable to the

22 portion of the individual’s gross covered prescription

23 drug costs for the year that exceeds $7,050.

24 ‘‘(2) ALLOWABLE COSTS.—For purposes of this

25 section, the term ‘allowable costs’ means, with re-
74

•S 2807 IS

1 spect to gross covered prescription drug costs under

2 a plan described in subsection (b) offered by a quali3 fying entity, the part of such costs that are actually

4 paid under the plan, but in no case more than the

5 part of such costs that would have been paid under

6 the plan if the prescription drug coverage under the

7 plan were standard coverage.

8 ‘‘(3) GROSS COVERED PRESCRIPTION DRUG

9 COSTS.—For purposes of this section, the term

10 ‘gross covered prescription drug costs’ means, with

11 respect to an enrollee with a qualifying entity under

12 a plan described in subsection (b) during a coverage

13 year, the costs incurred under the plan for covered

14 prescription drugs dispensed during the year, includ15 ing costs relating to the deductible, whether paid by

16 the enrollee or under the plan, regardless of whether

17 the coverage under the plan exceeds standard cov18 erage and regardless of when the payment for such

19 drugs is made.

20 ‘‘(4) INDEXING DOLLAR AMOUNT.—

21 ‘‘(A) AMOUNT FOR 2003.—The dollar

22 amount applied under paragraph (1) for 2003

23 shall be the dollar amount specified in such

24 paragraph.
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•S 2807 IS

1 ‘‘(B) FOR 2004.—The dollar amount ap2 plied under paragraph (1) for 2004 shall be the

3 dollar amount specified in such paragraph in4 creased by the annual percentage increase de5 scribed in section 2225(d)(5) for 2004.

6 ‘‘(C) FOR SUBSEQUENT YEARS.—The dol7 lar amount applied under paragraph (1) for a

8 year after 2004 shall be the dollar amount

9 (under this paragraph) applied under para10 graph (1) for the preceding year increased by

11 the annual percentage increase described in sec12 tion 2225(d)(5) for the year involved.

13 ‘‘(D) ROUNDING.—Any amount, deter14 mined under the preceding provisions of this

15 paragraph for a year, which is not a multiple of

16 $5 shall be rounded to the nearest multiple of

17 $5.

18 ‘‘(d) PAYMENT METHODS.—

19 ‘‘(1) IN GENERAL.—Payments under this sec20 tion shall be based on such a method as the Com21 missioner determines. The Commissioner may estab22 lish a payment method by which interim payments

23 of amounts under this section are made during a

24 year based on the Commissioner’s best estimate of
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•S 2807 IS

1 amounts that will be payable after obtaining all of

2 the information.

3 ‘‘(2) SOURCE OF PAYMENTS.—Payments under

4 this section shall be made from the Medicare Pre5 scription Drug Account.

6 ‘‘(e) QUALIFIED RETIREE PRESCRIPTION DRUG

7 PLAN DEFINED.—

8 ‘‘(1) IN GENERAL.—For purposes of this sec9 tion, the term ‘qualified retiree prescription drug

10 plan’ means employment-based retiree health cov11 erage (as defined in paragraph (3)(A)) if, with re12 spect to an individual enrolled (or eligible to be en13 rolled) under this part who is covered under the

14 plan, the following requirements are met:

15 ‘‘(A) ASSURANCE.—The sponsor of the

16 plan shall annually attest, and provide such as17 surances as the Commissioner may require, that

18 the coverage meets the requirements for quali19 fied prescription drug coverage.

20 ‘‘(B) AUDITS.—The sponsor (and the plan)

21 shall maintain, and afford the Commissioner

22 access to, such records as the Commissioner

23 may require for purposes of audits and other

24 oversight activities necessary to ensure the ade25 quacy of prescription drug coverage, the accu-
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•S 2807 IS

1 racy of payments made, and such other matters

2 as may be appropriate.

3 ‘‘(C) OTHER REQUIREMENTS.—The spon4 sor of the plan shall comply with such other re5 quirements as the Commissioner finds nec6 essary to administer the program under this

7 section.

8 ‘‘(2) LIMITATION ON BENEFIT ELIGIBILITY.—

9 No payment shall be provided under this section

10 with respect to an individual who is enrolled under

11 a qualified retiree prescription drug plan unless the

12 individual is a medicare secondary payer eligible in13 dividual who—

14 ‘‘(A) is covered under the plan; and

15 ‘‘(B) is eligible to obtain qualified prescrip16 tion drug coverage under this part but did not

17 elect such coverage (either through a Medicare

18 Prescription Plus plan or through a

19 Medicare+Choice plan).

20 ‘‘(3) DEFINITIONS.—As used in this section:

21 ‘‘(A) EMPLOYMENT-BASED RETIREE

22 HEALTH COVERAGE.—The term ‘employment23 based retiree health coverage’ means health in24 surance or other coverage of health care costs

25 for medicare secondary payer eligible individ-
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1 uals (or for such individuals and their spouses

2 and dependents) based on their status as

3 former employees or labor union members.

4 ‘‘(B) EMPLOYER.—The term ‘employer’

5 has the meaning given such term by section

6 3(5) of the Employee Retirement Income Secu7 rity Act of 1974 (except that such term shall

8 include only employers of 2 or more employees).

9 ‘‘(C) SPONSOR.—The term ‘sponsor’

10 means a plan sponsor, as defined in section

11 3(16)(B) of the Employee Retirement Income

12 Security Act of 1974.

13 ‘‘(D) MEDICARE SECONDARY PAYER INDI14 VIDUAL.—The term ‘medicare secondary payer

15 eligible individual’ means, with respect to a

16 plan, an individual who is covered under the

17 plan and with respect to whom the plan is not

18 a primary plan (as defined in section

19 1862(b)(2)(A)).

20 ‘‘(f) GENERAL DEFINITIONS.—For purposes of this

21 section:

22 ‘‘(1) QUALIFIED BENEFICIARY.—The term

23 ‘qualified beneficiary’ means an individual who—

24 ‘‘(A) is enrolled with a Medicare Prescrip25 tion Plus plan under this part;
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1 ‘‘(B) is enrolled with a Medicare+Choice

2 plan that provides qualified prescription drug

3 coverage under part C of title XVIII; or

4 ‘‘(C) is covered as a medicare secondary

5 payer eligible individual under a qualified re6 tiree prescription drug plan.

7 ‘‘(2) COVERAGE YEAR.—The term ‘coverage

8 year’ means a calendar year in which covered out9 patient drugs are dispensed if a claim for payment

10 is made under the plan for such drugs, regardless of

11 when the claim is paid.

12 ‘‘PLAN FEES FOR ADMINISTRATIVE COSTS

13 ‘‘SEC. 2233. (a) IN GENERAL.—The Commissioner

14 may levy on Medicare Prescription Plus plans and

15 Medicare+Choice plans that provide drug coverage pursu16 ant to this part an assessment sufficient to pay the esti17 mated expenses of the Commissioner for administering the

18 program under this part.

19 ‘‘(b) DEPOSITS AND USE.—The assessments de20 scribed in subsection (a) shall be—

21 ‘‘(1) deposited into the Medicare Prescription

22 Drug Account; and

23 ‘‘(2) available for administering the program

24 under this part without regard to amounts provided

25 for in advance by appropriations Acts.
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1 ‘‘MEDICARE PRESCRIPTION DRUG ACCOUNT

2 ‘‘SEC. 2234. (a) ESTABLISHMENT.—There is created

3 within the Federal Supplementary Medical Insurance

4 Trust Fund established under section 1841 an account to

5 be known as the ‘Medicare Prescription Drug Account’.

6 ‘‘(b) AMOUNTS IN ACCOUNT.—

7 ‘‘(1) IN GENERAL.—The Medicare Prescription

8 Drug Account shall consist of—

9 ‘‘(A) such amounts as may be deposited in,

10 or appropriated to, such account as provided in

11 this part; and

12 ‘‘(B) such gifts and bequests as may be

13 made as provided in section 201(i)(1).

14 ‘‘(2) SEPARATION OF FUNDS.—Funds provided

15 under this part to the Medicare Prescription Drug

16 Account shall be kept separate from all other funds

17 within the Federal Supplemental Medical Insurance

18 Trust Fund.

19 ‘‘(c) PAYMENTS FROM ACCOUNT.—

20 ‘‘(1) IN GENERAL.—The Managing Trustee

21 shall pay from time to time from the Medicare Pre22 scription Drug Account such amounts as the Com23 missioner certifies are necessary to make the pay24 ments provided for by this part, and the payments
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•S 2807 IS

1 with respect to administrative expenses in accord2 ance with section 201(g).

3 ‘‘(2) TRANSFERS TO MEDICAID ACCOUNT FOR

4 INCREASED ADMINISTRATIVE COSTS.—The Man5 aging Trustee shall transfer from time to time from

6 the Account to the Grants to States for Medicaid ac7 count amounts the Secretary certifies are attrib8 utable to increases in payment resulting from the

9 application of a higher Federal matching percentage

10 under section 1935(b).

11 ‘‘(d) DEPOSITS INTO ACCOUNT.—

12 ‘‘(1) MEDICAID TRANSFER.—There is hereby

13 transferred to the Account, from amounts appro14 priated for Grants to States for Medicaid, amounts

15 equivalent to the aggregate amount of the reductions

16 in payments under section 1903(a)(1) attributable to

17 the application of section 1935(c).

18 ‘‘(2) APPROPRIATIONS TO COVER GOVERNMENT

19 CONTRIBUTIONS.—There are authorized to be appro20 priated from time to time, out of any moneys in the

21 Treasury not otherwise appropriated, to the Ac22 count, an amount equivalent to the amount of pay23 ments made from the Account, reduced by—

24 ‘‘(1) the amount transferred to the Ac25 count under paragraph (1);
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•S 2807 IS

1 ‘‘(2) the beneficiary premiums collected

2 and credited to the account under section

3 2231(b)(2); and

4 ‘‘(3) fees collected and credited to the ac5 count under section 2233.

6 ‘‘SECONDARY PAYER PROVISIONS

7 ‘‘SEC. 2235. The provisions of section 1862(b) shall

8 apply to the benefits provided under this part.

9 ‘‘DEFINITIONS; TREATMENT OF REFERENCES TO

10 PROVISIONS IN MEDICARE+CHOICE PROGRAM

11 ‘‘SEC. 2236. (a) DEFINITIONS.—In this part:

12 ‘‘(1) COMMISSIONER.—The term ‘Commis13 sioner’ means the Commissioner of the Competitive

14 Medicare Agency.

15 ‘‘(2) COVERED OUTPATIENT DRUG.—

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

17 this subparagraph (B), the term ‘covered out18 patient drug’ means—

19 ‘‘(i) a drug that may be dispensed

20 only upon a prescription and that is de21 scribed in clause (i) or (ii) of section

22 1927(k)(2)(A); or

23 ‘‘(ii) a biological product or insulin de24 scribed in subparagraph (B) or (C) of such

25 section.

26 ‘‘(B) EXCLUSIONS.—
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1 ‘‘(i) IN GENERAL.—The term ‘covered

2 outpatient drug’ does not include drugs or

3 classes of drugs, or their medical uses,

4 which may be excluded from coverage or

5 otherwise restricted under section

6 1927(d)(2), other than subparagraph (E)

7 thereof (relating to smoking cessation

8 agents).

9 ‘‘(ii) AVOIDANCE OF DUPLICATE COV10 ERAGE.—A drug prescribed for an indi11 vidual that would otherwise be a covered

12 outpatient drug under this part shall not

13 be so considered if payment for such drug

14 is available under part A or B of title

15 XVIII (but shall be so considered if such

16 payment is not available because benefits

17 under part A or B of title XVIII have been

18 exhausted), without regard to whether the

19 individual is entitled to benefits under such

20 part A or enrolled under such part B.

21 ‘‘(3) ELIGIBLE BENEFICIARY.—The term ‘eligi22 ble beneficiary’ means an individual that is entitled

23 to benefits under part A of title XVIII and enrolled

24 under part B of such title.
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1 ‘‘(4) ELIGIBLE ENTITY.—The term ‘eligible en2 tity’ means any risk-bearing entity that the Commis3 sioner determines to be appropriate to provide eligi4 ble beneficiaries with the benefits under a Medicare

5 Prescription Plus plan, including—

6 ‘‘(A) a pharmaceutical benefit management

7 company;

8 ‘‘(B) a wholesale or retail pharmacist deliv9 ery system;

10 ‘‘(C) an insurer (including an insurer that

11 offers medicare supplemental policies under sec12 tion 1882);

13 ‘‘(D) another entity; or

14 ‘‘(E) any combination of the entities de15 scribed in subparagraphs (A) through (D).

16 ‘‘(5) INITIAL COVERAGE LIMIT.—The term ‘ini17 tial coverage limit’ means the limit as established

18 under section 2225(d)(3), or, in the case of coverage

19 that is not standard coverage, the comparable limit

20 (if any) established under the coverage.

21 ‘‘(6) MEDICARE+CHOICE ORGANIZATION;

22 MEDICARE+CHOICE PLAN.—The terms

23 ‘Medicare+Choice organization’ and

24 ‘Medicare+Choice plan’ have the meanings given

25 such terms in subsections (a)(1) and (b)(1), respec-
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•S 2807 IS

1 tively, of section 1859 (relating to definitions relat2 ing to Medicare+Choice organizations and plans).

3 ‘‘(7) MEDICARE PRESCRIPTION DRUG AC4 COUNT.—The term ‘Medicare Prescription Drug Ac5 count’ means the Medicare Prescription Drug Ac6 count established under section 2234 and located

7 within the Federal Supplementary Medical Insur8 ance Trust Fund established under section 1841.

9 ‘‘(8) MEDICARE PRESCRIPTION PLUS PLAN.—

10 The term ‘Medicare Prescription Plus plan’ means a

11 health benefits plan that the Commissioner has ap12 proved under section 2229.

13 ‘‘(9) STANDARD COVERAGE.—The term ‘stand14 ard coverage’ means the coverage described in sec15 tion 2225(d).

16 ‘‘(b) APPLICATION OF MEDICARE+CHOICE PROVI17 SIONS UNDER THIS PART.—For purposes of applying pro18 visions of part C of title XVIII under this part with re19 spect to a Medicare Prescription Plus plan and an eligible

20 entity, unless otherwise provided in this part such provi21 sions shall be applied as if—

22 ‘‘(1) any reference to a Medicare+Choice plan

23 included a reference to a Medicare Prescription Plus

24 plan;
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1 ‘‘(2) any reference to a provider-sponsored or2 ganization included a reference to an eligible entity;

3 ‘‘(3) any reference to a contract under section

4 1857 included a reference to a contract under sec5 tion 2227(b); and

6 ‘‘(4) any reference to part C of title XVIII in7 cluded a reference to this part.’’.

8 (b) SUBMISSION OF LEGISLATIVE PROPOSAL.—Not

9 later than 6 months after the date of enactment of this

10 Act, the Secretary of Health and Human Services and the

11 Commissioner of the Competitive Medicare Agency shall

12 submit to the appropriate committees of Congress a legis13 lative proposal providing for such technical and con14 forming amendments in the law as are required by the

15 provisions of this Act.

16 SEC. 202. AMENDMENTS TO FEDERAL SUPPLEMENTARY

17 MEDICAL INSURANCE TRUST FUND.

18 Section 1841 of the Social Security Act (42 U.S.C.

19 1395t) is amended—

20 (1) in the last sentence of subsection (a)—

21 (A) by striking ‘‘and’’ after ‘‘section

22 201(i)(1)’’; and

23 (B) by inserting before the period the fol24 lowing: ‘‘, and such amounts as may be depos25 ited in, or appropriated to, the Medicare Pre-
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•S 2807 IS

1 scription Drug Account established by section

2 2234’’;

3 (2) in subsection (g), by inserting after ‘‘by this

4 part,’’ the following: ‘‘the payments provided for

5 under the Prescription Drug and Supplemental Ben6 efit Program under part B of title XVIII (in which

7 case the payments shall come from the Medicare

8 Prescription Drug Account in the Supplementary

9 Medical Insurance Trust Fund),’’;

10 (3) in the first sentence of subsection (h), by

11 inserting ‘‘(or the Commissioner of the Competitive

12 Medicare Agency by reason of section 2235 (in

13 which case the payments shall come from the Medi14 care Prescription Drug Account within such Trust

15 Fund))’’ after ‘‘Human Services’’; and

16 (4) in the first sentence of subsection (i), by in17 serting ‘‘(or the Commissioner of the Competitive

18 Medicare Agency by reason of section 2235 (in

19 which case the payments shall come from the Medi20 care Prescription Drug Account within such Trust

21 Fund))’’ after ‘‘Human Services’’.
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1 SEC. 203. PRESCRIPTION DRUG COVERAGE UNDER THE

2 MEDICARE+CHOICE PROGRAM.

3 (a) IN GENERAL.—Section 1851 of the Social Secu4 rity Act (42 U.S.C. 1395w–21) is amended by adding at

5 the end the following new subsection:

6 ‘‘(j) AVAILABILITY OF PRESCRIPTION DRUG BENE7 FITS.—

8 ‘‘(1) IN GENERAL.—A Medicare+Choice orga9 nization may not offer prescription drug coverage

10 (other than that required under parts A and B) to

11 an enrollee under a Medicare+Choice plan unless

12 such drug coverage is at least qualified prescription

13 drug coverage and unless the requirements of this

14 subsection with respect to such coverage are met.

15 ‘‘(2) COMPLIANCE WITH ADDITIONAL BENE16 FICIARY PROTECTIONS.—With respect to the offer17 ing of qualified prescription drug coverage by a

18 Medicare+Choice organization under a

19 Medicare+Choice plan, the organization and plan

20 shall meet the requirements of section 2226, includ21 ing requirements relating to information dissemina22 tion and grievance and appeals, in the same manner

23 as they apply to an eligible entity and a Medicare

24 Prescription Plus plan under part B of title XXII.

25 The Commissioner of the Competitive Medicare

26 Agency shall waive such requirements to the extent
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•S 2807 IS

1 the Administrator determines that such require2 ments duplicate requirements otherwise applicable to

3 the organization or plan under this part.

4 ‘‘(3) TREATMENT OF COVERAGE.—Except as

5 provided in this subsection, qualified prescription

6 drug coverage offered under this subsection shall be

7 treated under this part in the same manner as sup8 plemental health care benefits described in section

9 1852(a)(3)(A).

10 ‘‘(4) AVAILABILITY OF COST-SHARING SUB11 SIDIES FOR LOW-INCOME ENROLLEES AND REINSUR12 ANCE SUBSIDY PAYMENTS FOR ORGANIZATIONS.—

13 For provisions—

14 ‘‘(A) providing cost-sharing subsidies to

15 low-income individuals receiving qualified pre16 scription drug coverage through a

17 Medicare+Choice plan, see section 2231; and

18 ‘‘(B) providing a Medicare+Choice organi19 zation with reinsurance subsidy payments for

20 providing qualified prescription drug coverage

21 under this part, see section 2232.

22 ‘‘(5) SPECIFICATION OF SEPARATE AND STAND23 ARD PREMIUM.—

24 ‘‘(A) IN GENERAL.—For purposes of ap25 plying section 1854 and determining the pre-
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•S 2807 IS

1 mium discount under section 2231(c) with re2 spect to qualified prescription drug coverage of3 fered under this subsection under a plan, the

4 Medicare+Choice organization shall compute

5 and publish the following:

6 ‘‘(i) SEPARATE PRESCRIPTION DRUG

7 PREMIUM.—A premium for prescription

8 drug benefits that constitutes qualified

9 prescription drug coverage that is separate

10 from other coverage under the plan.

11 ‘‘(ii) PORTION OF COVERAGE ATTRIB12 UTABLE TO STANDARD BENEFITS.—The

13 ratio of the actuarial value of standard

14 coverage to the actuarial value of the

15 qualified prescription drug coverage offered

16 under the plan.

17 ‘‘(iii) PORTION OF PREMIUM ATTRIB18 UTABLE TO STANDARD BENEFITS.—A

19 standard premium equal to the product of

20 the premium described in clause (i) and

21 the ratio under clause (ii).

22 The premium under clause (i) shall be com23 puted without regard to any reduction in the

24 premium permitted under subparagraph (B).
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1 ‘‘(B) REDUCTION OF PREMIUMS AL2 LOWED.—Nothing in this subsection shall be

3 construed as preventing a Medicare+Choice or4 ganization from reducing the amount of a pre5 mium charged for prescription drug coverage

6 because of the application of subsections

7 (f)(1)(A) and (i)(2)(A) of section 1854 to other

8 coverage.

9 ‘‘(6) TRANSITION IN INITIAL ENROLLMENT PE10 RIOD.—Notwithstanding any other provision of this

11 part, the annual, coordinated election period under

12 subsection (e)(3)(B) for 2003 shall be the 6-month

13 period beginning with November 2002.

14 ‘‘(7) QUALIFIED PRESCRIPTION DRUG COV15 ERAGE; STANDARD COVERAGE.—For purposes of

16 this part, the terms ‘qualified prescription drug cov17 erage’ and ‘standard coverage’ have the meanings

18 given such terms in section 2225.’’.

19 (b) CONFORMING AMENDMENTS.—Section

20 1851(a)(1) of the Social Security Act (42 U.S.C. 1395w–

21 21(a)(1)) is amended—

22 (1) by inserting ‘‘(other than qualified prescrip23 tion drug benefits)’’ after ‘‘benefits’’;

24 (2) by striking the period at the end of sub25 paragraph (B) and inserting a comma; and
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1 (3) by adding at the end the following flush lan2 guage:

3 ‘‘and may elect qualified prescription drug coverage

4 in accordance with part B of title XXII.’’.

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

6 this section apply to coverage provided on or after January

7 1, 2003.

8 SEC. 204. MEDICAID AMENDMENTS.

9 (a) DETERMINATIONS OF ELIGIBILITY FOR LOW-IN10 COME SUBSIDIES.—

11 (1) REQUIREMENT.—Section 1902 of the Social

12 Security Act (42 U.S.C. 1396a) is amended in sub13 section (a)—

14 (A) by striking ‘‘and’’ at the end of para15 graph (64);

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

17 paragraph (65) and inserting ‘‘; and’’; and

18 (C) by inserting after paragraph (65) the

19 following new paragraph:

20 ‘‘(66) provide for making eligibility determina21 tions under section 1935(a).’’.

22 (2) NEW SECTION.—Title XIX of the Social Se23 curity Act (42 U.S.C. 1396 et seq.) is amended—

24 (A) by redesignating section 1935 as sec25 tion 1936; and
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1 (B) by inserting after section 1934 the fol2 lowing new section:

3 ‘‘SPECIAL PROVISIONS RELATING TO MEDICARE

4 PRESCRIPTION DRUG BENEFIT

5 ‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI6 BILITY DETERMINATIONS FOR LOW-INCOME SUB7 SIDIES.—As a condition of its State plan under this title

8 under section 1902(a)(66) and receipt of any Federal fi9 nancial assistance under section 1903(a), a State shall—

10 ‘‘(1) make determinations of eligibility for pre11 mium and cost-sharing subsidies under (and in ac12 cordance with) section 2231;

13 ‘‘(2) inform the Commissioner of the Competi14 tive Medicare Agency of such determinations in

15 cases in which such eligibility is established; and

16 ‘‘(3) otherwise provide such Commissioner with

17 such information as may be required to carry out

18 part B of title XXII (including section 2231).

19 ‘‘(b) PAYMENTS FOR ADDITIONAL ADMINISTRATIVE

20 COSTS.—

21 ‘‘(1) IN GENERAL.—The amounts expended by

22 a State in carrying out subsection (a) are, subject to

23 paragraph (2), expenditures reimbursable under the

24 appropriate paragraph of section 1903(a); except

25 that, notwithstanding any other provision of such

26 section, the applicable Federal matching rates with
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1 respect to such expenditures under such section shall

2 be increased as follows:

3 ‘‘(A) For expenditures attributable to costs

4 incurred during 2003, the otherwise applicable

5 Federal matching rate shall be increased by 20

6 percent of the percentage otherwise payable

7 (but for this subsection) by the State.

8 ‘‘(B) For expenditures attributable to costs

9 incurred during 2004, the otherwise applicable

10 Federal matching rate shall be increased by 40

11 percent of the percentage otherwise payable

12 (but for this subsection) by the State.

13 ‘‘(C) For expenditures attributable to costs

14 incurred during 2005, the otherwise applicable

15 Federal matching rate shall be increased by 60

16 percent of the percentage otherwise payable

17 (but for this subsection) by the State.

18 ‘‘(D) For expenditures attributable to costs

19 incurred during 2006, the otherwise applicable

20 Federal matching rate shall be increased by 80

21 percent of the percentage otherwise payable

22 (but for this subsection) by the State.

23 ‘‘(E) For expenditures attributable to costs

24 incurred after 2006, the otherwise applicable
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•S 2807 IS

1 Federal matching rate shall be increased to 100

2 percent.

3 ‘‘(2) COORDINATION.—The State shall provide

4 the Secretary with such information as may be nec5 essary to properly allocate administrative expendi6 tures described in paragraph (1) that may otherwise

7 be made for similar eligibility determinations.’’.

8 (b) PHASED-IN FEDERAL ASSUMPTION OF MEDICAID

9 RESPONSIBILITY FOR PREMIUM AND COST-SHARING SUB10 SIDIES FOR DUALLY ELIGIBLE INDIVIDUALS.—

11 (1) IN GENERAL.—Section 1903(a)(1) of the

12 Social Security Act (42 U.S.C. 1396b(a)(1)) is

13 amended by inserting before the semicolon the fol14 lowing: ‘‘, reduced by the amount computed under

15 section 1935(c)(1) for the State and the quarter’’.

16 (2) AMOUNT DESCRIBED.—Section 1935 of the

17 Social Security Act, as inserted by subsection (a)(2),

18 is amended by adding at the end the following new

19 subsection:

20 ‘‘(c) FEDERAL ASSUMPTION OF MEDICAID PRE21 SCRIPTION DRUG COSTS FOR DUALLY ELIGIBLE BENE22 FICIARIES.—

23 ‘‘(1) IN GENERAL.—For purposes of section

24 1903(a)(1), for a State that is 1 of the 50 States

25 or the District of Columbia for a calendar quarter
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1 in a year (beginning with 2003) the amount com2 puted under this subsection is equal to the product

3 of the following:

4 ‘‘(A) MEDICARE SUBSIDIES.—The total

5 amount of payments made in the quarter under

6 section 2231 (relating to premium and cost7 sharing prescription drug subsidies for low-in8 come medicare beneficiaries) that are attrib9 utable to individuals who are residents of the

10 State and are entitled to benefits with respect

11 to prescribed drugs under the State plan under

12 this title (including such a plan operating under

13 a waiver under section 1115).

14 ‘‘(B) STATE MATCHING RATE.—A propor15 tion computed by subtracting from 100 percent

16 the Federal medical assistance percentage (as

17 defined in section 1905(b)) applicable to the

18 State and the quarter.

19 ‘‘(C) PHASE-OUT PROPORTION.—The

20 phase-out proportion (as defined in paragraph

21 (2)) for the quarter.

22 ‘‘(2) PHASE-OUT PROPORTION.—For purposes

23 of paragraph (1)(C), the ‘phase-out proportion’ for

24 a calendar quarter in—

25 ‘‘(A) 2003 is 90 percent;
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1 ‘‘(B) 2004 is 80 percent;

2 ‘‘(C) 2005 is 70 percent;

3 ‘‘(D) 2006 is 60 percent; or

4 ‘‘(E) a year after 2006 is 50 percent.’’.

5 (c) MEDICAID PROVIDING WRAP-AROUND BENE6 FITS.—Section 1935 of the Social Security Act, as so in7 serted and amended, is further amended by adding at the

8 end the following new subsection:

9 ‘‘(d) ADDITIONAL PROVISIONS.—

10 ‘‘(1) MEDICAID AS SECONDARY PAYOR.—In the

11 case of an individual dually entitled to qualified pre12 scription drug coverage under a Prescription Plus

13 Plan under part B of title XXII (or under a

14 Medicare+Choice plan under part C of such title)

15 and medical assistance for prescribed drugs under

16 this title, medical assistance shall continue to be pro17 vided under this title for prescribed drugs to the ex18 tent payment is not made under the Medicare Pre19 scription Plus plan or the Medicare+Choice plan se20 lected by the individual.

21 ‘‘(2) CONDITION.—A State may require, as a

22 condition for the receipt of medical assistance under

23 this title with respect to prescription drug benefits

24 for an individual eligible to obtain qualified prescrip25 tion drug coverage described in paragraph (1), that
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1 the individual elect qualified prescription drug cov2 erage under the program under part B of title

3 XXII.’’.

4 (d) TREATMENT OF TERRITORIES.—

5 (1) IN GENERAL.—Section 1935 of the Social

6 Security Act, as so inserted and amended, is further

7 amended—

8 (A) in subsection (a)(1), by inserting ‘‘sub9 ject to subsection (e),’’ after ‘‘section 1903’’;

10 (B) in subsection (c)(1), by inserting ‘‘sub11 ject to subsection (e),’’ after ‘‘1903(a)’’; and

12 (C) by adding at the end the following new

13 subsection:

14 ‘‘(e) TREATMENT OF TERRITORIES.—

15 ‘‘(1) IN GENERAL.—In the case of a State,

16 other than the 50 States and the District of

17 Columbia—

18 ‘‘(A) the previous provisions of this section

19 shall not apply to residents of such State; and

20 ‘‘(B) if the State establishes a plan de21 scribed in paragraph (2) (for providing medical

22 assistance with respect to the provision of pre23 scription drugs to medicare beneficiaries), the

24 amount otherwise determined under section

25 1108(f) (as increased under section 1108(g))
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1 for the State shall be increased by the amount

2 specified in paragraph (3).

3 ‘‘(2) PLAN.—The plan described in this para4 graph is a plan that—

5 ‘‘(A) provides medical assistance with re6 spect to the provision of covered outpatient

7 drugs (as defined in section 2236(2)) to low-in8 come medicare beneficiaries; and

9 ‘‘(B) assures that additional amounts re10 ceived by the State that are attributable to the

11 operation of this subsection are used only for

12 such assistance.

13 ‘‘(3) INCREASED AMOUNT.—

14 ‘‘(A) IN GENERAL.—The amount specified

15 in this paragraph for a State for a year is equal

16 to the product of—

17 ‘‘(i) the aggregate amount specified in

18 subparagraph (B); and

19 ‘‘(ii) the amount specified in section

20 1108(g)(1) for that State, divided by the

21 sum of the amounts specified in such sec22 tion for all such States.

23 ‘‘(B) AGGREGATE AMOUNT.—The aggre24 gate amount specified in this subparagraph

25 for—
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1 ‘‘(i) 2003, is equal to $20,000,000; or

2 ‘‘(ii) a subsequent year, is equal to the

3 aggregate amount specified in this sub4 paragraph for the previous year increased

5 by the annual percentage increase specified

6 in section 2225(d)(5) for the year involved.

7 ‘‘(4) REPORT.—The Secretary shall submit to

8 Congress a report on the application of this sub9 section and may include in the report such rec10 ommendations as the Secretary deems appropriate.’’.

11 (2) CONFORMING AMENDMENT.—Section

12 1108(f) of the Social Security Act (42 U.S.C.

13 1308(f)) is amended by inserting ‘‘and section

14 1935(e)(1)(B)’’ after ‘‘Subject to subsection (g)’’.

15 SEC. 205. MEDIGAP PROVISIONS.

16 (a) IN GENERAL.—Notwithstanding any other provi17 sion of law, no new medicare supplemental policy that pro18 vides coverage of expenses for prescription drugs may be

19 issued under section 1882 of the Social Security Act on

20 or after January 1, 2003, to an individual unless it re21 places a medicare supplemental policy that was issued to

22 that individual and that provided some coverage of ex23 penses for prescription drugs.
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1 (b) ISSUANCE OF SUBSTITUTE POLICIES IF OBTAIN2 ING PRESCRIPTION DRUG COVERAGE THROUGH MEDI3 CARE.—

4 (1) IN GENERAL.—The issuer of a medicare

5 supplemental policy—

6 (A) may not deny or condition the issuance

7 or effectiveness of a medicare supplemental pol8 icy that has a benefit package classified as ‘‘A’’,

9 ‘‘B’’, ‘‘C’’, ‘‘D’’, ‘‘E’’, ‘‘F’’, or ‘‘G’’ (under the

10 standards established under subsection (p)(2) of

11 section 1882 of the Social Security Act (42

12 U.S.C. 1395ss)) and that is offered and is

13 available for issuance to new enrollees by such

14 issuer;

15 (B) may not discriminate in the pricing of

16 such policy, because of health status, claims ex17 perience, receipt of health care, or medical con18 dition; and

19 (C) may not impose an exclusion of bene20 fits based on a preexisting condition under such

21 policy,

22 in the case of an individual described in paragraph

23 (2) who seeks to enroll under the policy not later

24 than 63 days after the date of the termination of en25 rollment described in such paragraph and who sub-
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1 mits evidence of the date of termination or

2 disenrollment along with the application for such

3 medicare supplemental policy.

4 (2) INDIVIDUAL COVERED.—An individual de5 scribed in this paragraph is an individual who—

6 (A) enrolls in a Medicare Prescription Plus

7 plan under part B of title XXII of the Social

8 Security Act (as added by section 201); and

9 (B) at the time of such enrollment was en10 rolled and terminates enrollment in a medicare

11 supplemental policy which has a benefit pack12 age classified as ‘‘H’’, ‘‘I’’, or ‘‘J’’ under the

13 standards referred to in paragraph (1)(A) or

14 terminates enrollment in a policy to which such

15 standards do not apply but which provides ben16 efits for prescription drugs.

17 (3) ENFORCEMENT.—The provisions of para18 graph (1) shall be enforced as though such provi19 sions were included in section 1882(s) of the Social

20 Security Act (42 U.S.C. 1395ss(s)).

21 (4) DEFINITIONS.—For purposes of this sub22 section, the term ‘‘medicare supplemental policy’’

23 has the meaning given such term in section 1882(g)

24 of the Social Security Act (42 U.S.C. 1395ss(g)).
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1 (c) MEDIGAP PROTECTIONS FOR INDIVIDUALS WHO

2 LOSE MEDICARE PRESCRIPTION PLUS PLAN COV3 ERAGE.—Section 1882 of the Social Security Act (42

4 U.S.C. 1395ss) is amended—

5 (1) in subsection (d)(3)—

6 (A) in subparagraph (A), by adding at the

7 end the following:

8 ‘‘(ix) Nothing in this subparagraph shall be construed

9 as preventing the sale of 1 medicare supplemental policy

10 and 1 Medicare Prescription Plus plan to an individual,

11 except that the sale of such a policy or plan may not dupli12 cate any health benefits under any policy or plan owned

13 by the individual.’’; and

14 (B) in subparagraph (B)(iii)—

15 (i) in subclause (I), by striking ‘‘(II)

16 and (III)’’ and inserting ‘‘(II), (III), and

17 (IV)’’;

18 (ii) by redesignating subclause (III) as

19 subclause (IV); and

20 (iii) by inserting after subclause (II)

21 the following:

22 ‘‘(III) If the statement required by clause (i) is ob23 tained and indicates that the individual is enrolled in 1

24 medicare supplemental policy or 1 Medicare Prescription

25 Plus plan, the sale of another policy or plan is not in viola-
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1 tion of clause (i) if such other policy or plan does not du2 plicate health benefits under the policy or plan in which

3 the individual is enrolled.’’;

4 (2) in subsection (g)(1), by inserting ‘‘, Medi5 care Prescription Plus plan,’’ after

6 ‘‘Medicare+Choice plan’’; and

7 (3) in subsection (s)(3)—

8 (A) in subparagraph (B)—

9 (i) in clause (ii), by inserting ‘‘is en10 rolled with an eligible entity under a Medi11 care Prescription Plus plan under part B

12 of title XXII or’’ after ‘‘section 1851(e)(4)

13 or the individual’’;

14 (ii) in clause (v)(II), by inserting

15 ‘‘with any eligible entity under a Medicare

16 Prescription Plus plan under part B of

17 title XXII,’’ after ‘‘under part C,’’; and

18 (iii) in clause (vi), by inserting ‘‘, in

19 a Medicare Prescription Plus plan under

20 part B of title XXII,’’ after ‘‘under part

21 C’’; and

22 (B) in subparagraph (E)—

23 (i) in clause (i), by inserting ‘‘(or, in

24 the case of an individual enrolled under a

25 Medicare Prescription Plus plan, the date
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1 on which the individual was notified by the

2 eligible entity of the impending termination

3 or discontinuance of the Medicare Pre4 scription Plus plan) after ‘‘it offers in the

5 area’’; and

6 (ii) in clause (ii), by inserting ‘‘or

7 Medicare Prescription Plus plan’’ after

8 ‘‘Medicare+Choice plan’’.

9 SEC. 206. GAO REPORT ON PART B PAYMENT FOR DRUGS

10 AND BIOLOGICALS AND RELATED SERVICES.

11 (a) IN GENERAL.—The Comptroller General of the

12 United States shall conduct a study to quantify the extent

13 to which reimbursement for drugs and biologicals under

14 the current medicare payment methodology (provided

15 under section 1842(o) of the Social Security Act (42

16 U.S.C. 1395u(o)) overpays for the cost of such drugs and

17 biologicals compared to the average acquisition cost paid

18 by physicians or other suppliers of such drugs.

19 (b) ELEMENTS.—The study shall also assess the con20 sequences of changing the current medicare payment

21 methodology to a payment methodology that is based on

22 the average acquisition cost of the drugs. The study shall,

23 at a minimum, assess the effects of such a reduction on—

24 (1) the delivery of health care services to medi25 care beneficiaries with cancer;
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1 (2) total medicare expenditures, including an

2 estimate of the number of patients who would, as a

3 result of the payment reduction, receive chemo4 therapy in a hospital rather than in a physician’s of5 fice;

6 (3) the delivery of dialysis services;

7 (4) the delivery of vaccines;

8 (5) the administration in physician offices of

9 drugs other than cancer therapy drugs; and

10 (6) the effect on the delivery of drug therapies

11 by hospital outpatient departments of changing the

12 average wholesale price as the basis for medicare

13 pass-through payments to such departments, as in14 cluded in the Medicare, Medicaid, and SCHIP Bal15 anced Budget Refinement Act of 1999.

16 (c) PAYMENT FOR RELATED PROFESSIONAL SERV17 ICES.—The study shall also include a review of the extent

18 to which other payment methodologies under part B of

19 the medicare program, if any, intended to reimburse phy20 sician and other suppliers of drugs and biologicals de21 scribed in subsection (a) for costs incurred in handling,

22 storing, and administering such drugs and biologicals are

23 inadequate to cover such costs and whether an additional

24 payment would be required to cover these costs under the

25 average acquisition cost methodology.
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1 (d) CONSIDERATION OF ISSUES IN IMPLEMENTING

2 AN AVERAGE ACQUISITION COST METHODOLOGY.—The

3 study shall assess possible means by which a payment

4 method based on average acquisition cost could be imple5 mented, including at least the following:

6 (1) Identification of possible bases for deter7 mining the average acquisition cost of drugs, such as

8 surveys of wholesaler catalog prices, and determina9 tion of the advantages, disadvantages, and costs (to

10 the government and the public) of each possible ap11 proach.

12 (2) The impact on individual providers and

13 practitioners if average or median prices are used as

14 the payment basis.

15 (3) Methods for updating and keeping current

16 the prices used as the payment basis.

17 (e) COORDINATION WITH BBRA STUDY.—The

18 Comptroller General of the United States shall conduct

19 the study under this section in coordination with the study

20 provided for under section 213(a) of the Medicare, Med21 icaid, and SCHIP Balanced Budget Refinement Act of

22 1999 (113 Stat. 1501A–350), as enacted into law by sec23 tion 1000(a)(6) of Public Law 106–113.

24 (f) REPORT.—Not later than 6 months after the date

25 of enactment of this Act, the Comptroller General of the
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1 United States shall submit to Congress a report on the

2 study conducted under this section, as well as the study

3 referred to in subsection (e). Such report shall include rec4 ommendations regarding such changes in the medicare re5 imbursement policies described in subsections (a) and (c)

6 as the Comptroller General deems appropriate, as well as

7 the recommendations described in section 213(b) of the

8 Medicare, Medicaid, and SCHIP Balanced Budget Refine9 ment Act of 1999.

10 TITLE III—MEDICARE+CHOICE

11 REFORMS

12 SEC. 301. INCREASE IN NATIONAL PER CAPITA

13 MEDICARE+CHOICE GROWTH PERCENTAGE

14 IN 2001 AND 2002.

15 Section 1853(c)(6)(B) of the Social Security Act (42

16 U.S.C. 1395w–23(c)(6)(B)) is amended—

17 (1) by striking clauses (iv) and (v);

18 (2) by redesignating clause (vi) as clause (iv);

19 and

20 (3) in clause (iv) (as so redesignated), by strik21 ing ‘‘2002’’ and inserting ‘‘2000’’.

22 SEC. 302. REMOVING APPLICATION OF BUDGET NEU23 TRALITY BEGINNING IN 2002.

24 Section 1853(c) of the Social Security Act (42 U.S.C.

25 1395w–23(c)) is amended—
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1 (1) in paragraph (1)(A), in the matter following

2 clause (ii), by inserting ‘‘(for years other than

3 2002)’’ after ‘‘multiplied’’; and

4 (2) in paragraph (5), by inserting ‘‘(other than

5 2002)’’ after ‘‘for each year’’.

6 SEC. 303. MEDICARE+CHOICE COMPETITION PROGRAM.

7 (a) PAYMENTS TO MEDICARE+CHOICE ORGANIZA8 TIONS BASED ON RISK-ADJUSTED BIDS.—

9 (1) MONTHLY PAYMENTS.—Section

10 1853(a)(1)(A) of the Social Security Act (42 U.S.C.

11 1395w–23(a)(1)(A)) is amended by adding at the

12 end the following new sentences: ‘‘For each year (be13 ginning with 2003), under a contract under section

14 1857, the Commissioner shall make to each

15 Medicare+Choice organization, with respect to cov16 erage of an individual for a month under this part

17 in a Medicare+Choice payment area, monthly pay18 ments with respect to benefits under parts A and B

19 combined in accordance with subsection (c)(8). For

20 rules relating to payment of the Medicare+Choice

21 monthly supplemental beneficiary premium or any

22 prescription drug premium, see section 1854(j).’’.

23 (2) ANNUAL DETERMINATION AND ANNOUNCE24 MENT OF PAYMENT FACTORS.—
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1 (A) IN GENERAL.—Section 1853(b) (42

2 U.S.C. 1395w–23(b)) is amended—

3 (i) in paragraph (1), by striking ‘‘the

4 calendar year concerned’’ and all that fol5 lows and inserting ‘‘the calendar year con6 cerned with respect to each

7 Medicare+Choice payment area, the fol8 lowing:

9 ‘‘(A) The benchmark amount (as defined

10 in paragraph (5)(A)).

11 ‘‘(B) The county-specific monthly per cap12 ita costs (as defined in paragraph (5)(B)).

13 ‘‘(C) The demographic adjustment factors

14 to be used in making payment for individual en15 rollees (as defined in paragraph (5)(C)).

16 ‘‘(D) The ESRD adjustment (as defined in

17 paragraph (5)(D)).

18 ‘‘(E) The health status adjustment (as de19 fined in paragraph (5)(E)).’’.

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

21 ‘‘monthly adjusted’’ and all that follows be22 fore the period at the end and inserting

23 ‘‘the payment rates under this part for

24 each individual enrolled in the

25 Medicare+Choice plan offered by the
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1 Medicare+Choice organization for the

2 year’’; and

3 (iii) by adding at the end the fol4 lowing new paragraph:

5 ‘‘(5) DEFINITIONS RELATING TO FACTORS

6 USED IN ADJUSTING BIDS FOR MEDICARE+CHOICE

7 ORGANIZATIONS AND IN DETERMINING ENROLLEE

8 PREMIUMS.—In this part:

9 ‘‘(A) BENCHMARK AMOUNT.—

10 ‘‘(i) IN GENERAL.—The term ‘bench11 mark amount’ means, for a payment area,

12 an amount equal to the greater of—

13 ‘‘(I) except as provided in clause

(ii), 1 14 ⁄12 of the annual

15 Medicare+Choice capitation rate that

16 would have applied in that payment

17 area under paragraphs (1) through

18 (7) of subsection (c); or

19 ‘‘(II) the county-specific monthly

20 per capita costs for such area.

21 ‘‘(ii) PHASE-OUT OF MINIMUM

22 AMOUNT AND BLENDED CAPITATION

23 RATE.—If the amount calculated under

24 clause (i)(I) for a year for all payment

25 areas is equal to either the minimum
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1 amount or the blended capitation rate, for

2 all subsequent years the Commissioner

3 shall not calculate the rates described in

4 that clause and the amount under such

5 clause instead shall be equal to the county6 specific monthly per capita costs.

7 ‘‘(B) COUNTY-SPECIFIC MONTHLY PER

8 CAPITA COSTS.—

9 ‘‘(i) IN GENERAL.—Subject to clause

10 (ii), the term ‘county-specific monthly per

11 capita costs’ means the amount of payment

12 in a Medicare+Choice payment area for

13 benefits under this title and associated

14 claims processing costs for individuals enti15 tled to benefits under part A and individ16 uals enrolled in the program under part B

17 who are not enrolled in a Medicare+Choice

18 plan under this part. The Commissioner

19 shall determine such amount in a manner

20 similar to the manner in which the Sec21 retary determined the adjusted average per

22 capita cost under section 1876, except that

23 such determination shall include in such

24 amount any amounts that would have been

25 paid under this title if individuals entitled
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1 to benefits under this title had not received

2 services from facilities of the Department

3 of Veterans Affairs or the Department of

4 Defense.

5 ‘‘(ii) EXCLUSION OF GME COSTS.—

6 The calculation of costs under clause (i)

7 shall not take into account any amounts

8 attributable to—

9 ‘‘(I) payments for costs of grad10 uate medical education under section

11 1886(h); or

12 ‘‘(II) payments for indirect costs

13 of medical education under section

14 1886(d)(5)(B).

15 ‘‘(C) DEMOGRAPHIC ADJUSTMENT FAC16 TORS.—The term ‘demographic adjustment fac17 tors’ means such factors as age, disability sta18 tus, gender, and institutional status, so as to

19 ensure actuarial equivalence. The Commissioner

20 may add to, modify, or substitute for such fac21 tors, if such changes will improve the deter22 mination of actuarial equivalence, and in that

23 event the Commissioner will make comparable

24 adjustments to the benchmark amounts.
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1 ‘‘(D) ESRD ADJUSTMENT FACTOR.—The

2 term ‘ESRD adjustment factor’ means the ad3 justment established by the Commissioner

4 under section 1851(a)(3)(B) that applies with

5 respect to enrolled individuals who have end6 stage renal disease.

7 ‘‘(E) HEALTH STATUS ADJUSTMENT FAC8 TOR.—The term ‘health status adjustment fac9 tor’ means the health status adjustment imple10 mented under subsection (a)(3)(C) until such

11 time as the Commissioner develops a health sta12 tus adjustment factor that takes into account

13 the specific health care needs of

14 Medicare+Choice eligible individuals who do

15 not have end-stage renal disease based on the

16 delivery of care in all settings, which method17 ology shall be phased in equally over a 10-year

18 period, beginning with 2004, or (if later) the

19 date on which such factor is developed.

20 (3) SUBMISSION OF BIDS BY

21 MEDICARE+CHOICE ORGANIZATIONS.—Section

22 1854(a) of the Social Security Act (42 U.S.C.

23 1395w–24(a)) is amended—
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1 (A) in paragraph (1), by striking ‘‘Not

2 later than July 1’’ and inserting ‘‘Subject to

3 paragraph (6), not later than July 1’’; and

4 (B) by adding at the end the following:

5 ‘‘(6) SUBMISSION OF BIDS BY

6 MEDICARE+CHOICE ORGANIZATIONS.—

7 ‘‘(A) IN GENERAL.—For each year (begin8 ning with 2003), each Medicare+Choice organi9 zation shall submit to the Commissioner, in a

10 form and manner specified by the Commis11 sioner and for each Medicare+Choice plan

12 which it intends to offer in a service area in the

13 following year—

14 ‘‘(i) notice of such intent and informa15 tion on the service area and plan type for

16 each plan;

17 ‘‘(ii) the information described in

18 paragraph (2) for the type of plan in19 volved; and

20 ‘‘(iii) the enrollment capacity (if any)

21 in relation to the plan and area.

22 ‘‘(B) INFORMATION REQUIRED FOR COM23 PETITIVE PLANS.—The information described

24 in this paragraph is as follows:
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1 ‘‘(i) The monthly plan bid for the pro2 vision of benefits.

3 ‘‘(ii) The actuarial value of the reduc4 tion in cost-sharing for benefits under

5 parts A and B included in each plan bid

6 and a description of the cost-sharing for

7 such benefits.

8 ‘‘(iii) The actuarial value of any addi9 tional benefits required under subsection

10 (i), a description of cost-sharing for such

11 benefits, and such other information as the

12 Commissioner considers necessary.

13 ‘‘(iv) The actuarial value of any sup14 plemental benefits, the monthly supple15 mental premium (if any) for such benefits,

16 a description of any cost-sharing for such

17 benefits, and such other information as the

18 Commissioner considers necessary.

19 ‘‘(v) For each Medicare+Choice pay20 ment area, the assumptions used with re21 spect to the number of—

22 ‘‘(I) enrolled individuals who are

23 entitled to benefits under parts A and

24 enrolled under part B who do not

25 have end-stage renal disease; and
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1 ‘‘(II) such enrolled individuals

2 who have end-stage renal disease.’’.

3 (4) COMMISSIONER’S DETERMINATION OF PAY4 MENT AMOUNT.—Section 1853(c) of the Social Se5 curity Act (42 U.S.C. 1395w–23(c)) is amended—

6 (A) in paragraph (1), by striking ‘‘subject

7 to paragraphs (6)(C) and (7)’’ and inserting

8 ‘‘subject to paragraphs (6)(C), (7), and (8)’’;

9 (B) by adding at the end the following new

10 paragraph:

11 ‘‘(8) COMMISSIONER’S DETERMINATION OF PAY12 MENT AMOUNT.—

13 ‘‘(A) ADJUSTMENT OF BIDS.—The Com14 missioner shall adjust plan bids submitted

15 under section 1854(a)(6) based on the demo16 graphic adjustment factors, the ESRD adjust17 ment factor, and the health status adjustment

18 factor (as defined in subparagraphs (C), (D),

19 and (E), respectively, of subsection (b)(5)).

20 ‘‘(B) DETERMINATION OF BENCHMARK

21 PER COUNTY.—For each year (beginning with

22 2003), the Commissioner shall determine the

23 benchmark amount (as defined in subparagraph

24 (A) of subsection (b)(5)) for each

25 Medicare+Choice payment area and shall ad-
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1 just such amount based on the demographic ad2 justment factors, the ESRD adjustment factor,

3 and the health status adjustment factor (as de4 fined in subparagraphs (C), (D), and (E), re5 spectively, of such section).

6 ‘‘(C) COMPARISON TO PLAN BENCHMARK

7 AMOUNT.—

8 ‘‘(i) IN GENERAL.—The Commissioner

9 shall compare the organization’s bid (as

10 adjusted under subparagraph (A)) to the

11 benchmark amount (as adjusted under

12 subparagraph (B)) to determine the pay13 ment amount under clause (ii).

14 ‘‘(ii) DETERMINATION OF PAYMENT

15 AMOUNT.—The Commissioner shall deter16 mine the monthly payment to a

17 Medicare+Choice organization with respect

18 to each individual enrolled in a

19 Medicare+Choice plan as follows:

20 ‘‘(I) IF BID DOES NOT EXCEED

21 BENCHMARK.—If the

22 Medicare+Choice organization’s bid

23 (as adjusted under subparagraph (A))

24 does not exceed the benchmark

25 amount (as adjusted under subpara-
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1 graph (B)), the monthly payment

2 shall be the benchmark amount, ad3 justed to account for the demographic

4 adjustment factors, health status ad5 justment factor, and (if applicable)

6 the ESRD adjustment factor of the

7 individual enrollee, minus 25 percent

8 of the difference between the bid and

9 the benchmark amount determined

10 under section 1854(i)(2)(A).

11 ‘‘(II) IF BID EXCEEDS BENCH12 MARK.—If the organization’s bid (as

13 adjusted under subparagraph (A)) ex14 ceeds the benchmark amount (as ad15 justed under subparagraph (B)), the

16 monthly payment shall be the bid, ad17 justed to account for the demographic

18 adjustment factors, health status ad19 justment factor, and (if applicable)

20 the ESRD adjustment factor of the

21 individual enrollee.’’.

22 (b) PREMIUMS.—

23 (1) DETERMINATION OF PREMIUM AMOUNT.—

24 Section 1854 of the Social Security Act (42 U.S.C.
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1 1395w–24) is amended by adding at the end the fol2 lowing new subsections:

3 ‘‘(i) DETERMINATION OF MEDICARE PREMIUM RE4 DUCTION AND MEDICARE+CHOICE MONTHLY SUPPLE5 MENTAL BENEFICIARY PREMIUM.—

6 ‘‘(1) IN GENERAL.—Notwithstanding subsection

7 (b) and subject to paragraph (2), for each year (be8 ginning with 2003), the Commissioner shall deter9 mine the difference between the organization’s bid

10 (submitted under subsection (a)(6) and adjusted

11 under section 1853(c)(8)(A)) and the plan’s bench12 mark amount (as adjusted under 1853(c)(8)(B)) to

13 determine the amount of any medicare premium re14 duction, prescription drug premium reduction, re15 duction in plan cost-sharing, or additional benefits

16 required under paragraph (2)(A), or the

17 Medicare+Choice monthly supplemental beneficiary

18 premium for plan enrollees.

19 ‘‘(2) ADJUSTMENT.—

20 ‘‘(A) BIDS BELOW THE BENCHMARK.—

21 Notwithstanding subsection (f), if the organiza22 tion’s bid is lower than the plan’s benchmark

23 amount, 75 percent of the difference deter24 mined under paragraph (1) shall be returned to
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1 the enrollee in the form of, at the option of the

2 organization offering the plan—

3 ‘‘(i) a monthly medicare premium re4 duction for individuals enrolled in the plan

5 (up to the entire amount of the premium

6 for part B);

7 ‘‘(ii) a prescription drug premium re8 duction pursuant to subsection (j)(5)(B);

9 ‘‘(iii) a reduction in the actuarial

10 value of plan cost-sharing for plan enroll11 ees;

12 ‘‘(iv) such additional benefits as the

13 organization may specify; or

14 ‘‘(v) any combination of the reduc15 tions and benefits described in clauses (i)

16 through (iv).

17 ‘‘(B) BIDS ABOVE THE BENCHMARK.—If

18 the organization’s bid is higher than the bench19 mark amount, the difference determined under

20 paragraph (1) shall be the Medicare+Choice

21 monthly supplemental beneficiary premium for

22 individuals enrolled in the plan.

23 ‘‘(j) RULES RELATING TO PREMIUMS OWED BY

24 MEDICARE+CHOICE ENROLLEES.—In the case of any

25 Medicare+Choice monthly supplemental beneficiary pre-
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1 mium under subsection (i)(2)(B) or any prescription drug

2 premium under section 1851(j) that an individual is re3 sponsible for under a Medicare+Choice plan in which the

4 individual is enrolled, the following rules shall apply:

5 ‘‘(1) COMMISSIONER SHALL PAY THE DRUG

6 PREMIUM TO THE ENTITY.—

7 ‘‘(A) IN GENERAL.—The Commissioner

8 shall pay to the Medicare+Choice organization

9 offering the Medicare+Choice plan the full

10 amount of the prescription drug premium under

11 section 1851(j) that the individual is respon12 sible for under the plan.

13 ‘‘(B) PAYMENTS FROM MEDICARE PRE14 SCRIPTION DRUG ACCOUNT.—Payments under

15 subparagraph (A) shall be made from the Medi16 care Prescription Drug Account within the Fed17 eral Supplementary Medical Insurance Trust

18 Fund under section 1841.

19 ‘‘(2) PREMIUM DISCOUNT FOR DRUG BENE20 FITS.—Subject to paragraph (4), the individual shall

21 be entitled to the premium discount for prescription

22 drugs determined under section 2231.

23 ‘‘(3) COLLECTION OF SUPPLEMENTAL AND

24 DRUG PREMIUMS IN SAME MANNER AS PART B PRE25 MIUM.—
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1 ‘‘(A) SUPPLEMENTAL PREMIUM.—The

2 amount of any Medicare+Choice monthly sup3 plemental beneficiary premium that an indi4 vidual is responsible for under the plan shall be

5 collected and credited to the Federal Hospital

6 Insurance Trust Fund and the Federal Supple7 mentary Medical Insurance Trust Fund—

8 ‘‘(i) in such proportion as the Com9 missioner determines appropriate; and

10 ‘‘(ii) in the same manner as the

11 monthly premium determined under sec12 tion 1839 is collected and credited to the

13 Federal Supplementary Medical Insurance

14 Trust Fund under section 1840.

15 ‘‘(B) DRUG PREMIUM.—Subject to the ap16 plication of the premium discounts available

17 under section 2231, the amount of any pre18 mium drug premium that an individual is re19 sponsible for under the plan shall be collected

20 and credited to the Medicare Prescription Drug

21 Account within the Federal Supplementary

22 Medical Insurance Trust Fund under section

23 1841 in the same manner as the monthly pre24 mium determined under section 1839 is col25 lected and credited to the Federal Supple-
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1 mentary Medical Insurance Trust Fund under

2 section 1840.

3 ‘‘(C) INFORMATION NECESSARY FOR COL4 LECTION.—In order to carry out subparagraph

5 (A), the Commissioner shall transmit to the

6 Commissioner of Social Security—

7 ‘‘(i) at the beginning of each year, the

8 name, social security account number, and

9 the Medicare+Choice monthly supple10 mental beneficiary premium and prescrip11 tion drug premium owed by the individual

12 for each month during the year; and

13 ‘‘(ii) periodically throughout the year,

14 information to update the information pre15 viously transmitted under this paragraph

16 for the year.

17 ‘‘(4) DISCOUNT REDUCED IF GREATER THAN

18 COMBINED PREMIUMS.—In the case of an individual

19 whose premium discount determined under section

20 2231(b) is equal to or less than the sum of any the

21 Medicare+Choice monthly supplemental beneficiary

22 premium and any prescription drug premium (after

23 any reduction described in section 1851(j)(5)(B)) for

24 the Medicare+Choice plan in which the individual is
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1 enrolled, the premium subsidy shall be deemed to be

2 an amount equal to such sum.’’.

3 (2) LIMITATION ON ENROLLEE LIABILITY FOR

4 SUPPLEMENTAL BENEFITS.—Section 1854(e)(2) of

5 the Social Security Act (42 U.S.C. 1395w–24(e)(2))

6 is amended by striking ‘‘If the Medicare+Choice or7 ganization’’ and inserting ‘‘Except as provided in

8 subsection (i)(2)(B), if the Medicare+Choice organi9 zation’’.

10 (c) ALLOWING PLANS TO INCLUDE REDUCTIONS

11 AND OTHER BENEFITS IN THEIR BASIC BENEFITS.—Sec12 tion 1852(a)(1)(B) of the Social Security Act (42 U.S.C.

13 1395w–22(a)(1)) is amended—

14 (1) by inserting ‘‘(i)’’ after ‘‘(B)’’; and

15 (2) by adding at the end the following new

16 clause:

17 ‘‘(ii) for 2003 and each subsequent year,

18 at plan option, the reductions and benefits de19 scribed in section 1854(i)(2)(A).’’.

20 (d) TRANSITION TO ESRD ELIGIBILITY.—Section

21 1851(a)(3)(B) of the Social Security Act (42 U.S.C.

22 1395w–21(a)(3)(B)) is amended by inserting ‘‘until such

23 time as the Commissioner establishes an ESRD adjust24 ment factor that takes into account the specific health

25 care needs of such individuals based on a delivery of care
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1 in all settings (to be phased-in in such manner as the

2 Commissioner deems appropriate)’’ after ‘‘determined to

3 have end-stage renal disease’’.

4 (e) CONFORMING AMENDMENTS.—

5 (1) PREMIUM REDUCTIONS UNDER PART B.—

6 (A) AMOUNT OF PREMIUMS.—Section

7 1839(a)(2) of the Social Security Act (42

8 U.S.C. 1395r(a)(2)) is amended by striking

9 ‘‘shall’’ and all that follows and inserting the

10 following: ‘‘shall be the amount determined

11 under paragraph (3), adjusted as required in

12 accordance with subsections (b), (c), and (f),

13 and thereafter further modified as required to

14 comply with section 1854(i)(2)(A).’’.

15 (B) PAYMENT OF PREMIUMS.—Section

16 1840 of the Social Security Act (42 U.S.C.

17 1395s) is amended by adding at the end the fol18 lowing new clause:

19 ‘‘(i) The Commissioner shall provide for necessary

20 adjustments of the medicare premium for

21 Medicare+Choice enrollees determined under section

22 1854(i)(2)(A)(i). This premium adjustment may be pro23 vided directly or as an adjustment to Social Security, Rail24 road Retirement and Civil Service Retirement benefits, as

25 appropriate, as the Commissioner of the Competitive
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1 Medicare Agency determines feasible with the concurrence

2 of such agencies.’’.

3 (2) APPROPRIATIONS FOR GOVERNMENT CON4 TRIBUTION.—Section 1844(a)(1) of the Social Secu5 rity Act (42 U.S.C. 1395w(a)(1)) is amended by

6 adding at the end the following new subparagraph:

7 ‘‘(C) an adjustment for the Government con8 tribution to reflect the savings to the Trust Fund

9 from enrollment in Medicare+Choice plans by bene10 ficiaries who receive monthly medicare premium re11 ductions in accordance with section 1854(i)(2)(A)(i);

12 plus’’.

13 (3) CONTINUATION OF ENROLLMENT PER14 MITTED.—Section 1851(b)(1)(B) of the Social Secu15 rity Act (42 U.S.C. 1395w–21(b)(1)(B)) is amended

16 by striking ‘‘section 1852(a)(1)(A)’’ and inserting

17 ‘‘section 1852(a)(1)’’.

18 (4) INFORMATION COMPARING PLAN PRE19 MIUMS.—Section 1851(d)(4)(B) of the Social Secu20 rity Act (42 U.S.C. 1395w–21(d)(4)(B)) is

21 amended—

22 (A) by striking ‘‘PREMIUMS.—The’’ and in23 serting ‘‘PREMIUMS.—

24 ‘‘(i) IN GENERAL.—The’’;
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1 (B) by adding at the end the following new

2 clause:

3 ‘‘(ii) REDUCTIONS.—The reduction in

4 the part B premiums, if any.’’.

5 (5) NATIONAL COVERAGE DETERMINATIONS.—

6 Section 1852(a)(5) of the Social Security Act (42

7 U.S.C. 1395w–22(a)(5)) is amended by inserting

8 ‘‘(or, for 2003 and each subsequent fiscal year, the

9 county-specific monthly per capita costs)’’ after ‘‘the

10 annual Medicare+Choice capitation rate’’.

11 (6) DISCLOSURE REQUIREMENTS.—Section

12 1852(c)(1)(F) of the Social Security Act (42 U.S.C.

13 1395w–22(c)(1)(F)) is amended by striking clause

14 (i) and redesignating clauses (ii) and (iii) as clauses

15 (i) and (ii), respectively.

16 (7) GEOGRAPHIC ADJUSTMENT.—Section

17 1853(d)(3)(B) of the Social Security Act (42 U.S.C.

18 1395w–23(e)(3)(B)) is amended—

19 (A) in the heading, by striking ‘‘BUDGET

20 NEUTRALITY’’;

21 (B) by striking ‘‘adjust the payment rates’’

22 and all that follows through ‘‘that would have

23 been made’’ and inserting ‘‘adjust the bench24 mark amounts otherwise established under this

25 section for Medicare+Choice payment areas in
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1 the State in a manner so that the weighted av2 erage of the benchmark amounts under this

3 section in the State equals the weighted average

4 of benchmark amounts that would have been

5 applicable’’.

6 (8) MEDICARE+CHOICE MONTHLY BASIC BENE7 FICIARY PREMIUM.—Section 1854(b)(2)(A) of the

8 Social Security Act (42 U.S.C. 1395w–24(b)(2)(A))

9 is amended by striking ‘‘the amount authorized to be

10 charged’’ and all that follows and inserting ‘‘the

11 amount required to be charged for the plan.’’.

12 (9) COMMISSIONER DEFINED.—Section 1859(a)

13 of the Social Security Act (42 U.S.C. 1395w–28(a))

14 is amended by adding at the end the following new

15 paragraph:

16 ‘‘(3) COMMISSIONER.—The term ‘Commis17 sioner’ means the Commissioner of the Competitive

18 Medicare Agency appointed under section

19 2202(a)(1).’’.

20 (f) INCLUSION OF COSTS OF VA AND DOD MILITARY

21 FACILITY SERVICES TO MEDICARE-ELIGIBLE BENE22 FICIARIES.—Section 1853(c) of the Social Security Act

23 (42 U.S.C. 1395w–23(c)) (as amended by subsection

24 (a)(4)) is amended by adding at the end the following new

25 paragraph:
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1 ‘‘(9) INCLUSION OF COSTS OF VA AND DOD

2 MILITARY FACILITY SERVICES TO MEDICARE-ELIGI3 BLE BENEFICIARIES.—For purposes of determining

4 the blended capitation rate under subparagraph (A)

5 of paragraph (1) and the minimum percentage in6 crease under subparagraph (C) of such paragraph

7 for a year, the annual per capita rate of payment for

8 1997 determined under section 1876(a)(1)(C) shall

9 be adjusted to include in such rate the Commis10 sioner’s estimate, on a per capita basis, of the

11 amount of additional payments that would have been

12 made in the area involved under this title if individ13 uals entitled to benefits under this title had not re14 ceived services from facilities of the Department of

15 Veterans Affairs or the Department of Defense.’’.

16 (g) EFFECTIVE DATE.—The amendments made by

17 this section shall take effect on January 1, 2003.

18 SEC. 304. FREEZE OF HEALTH RISK ADJUSTER AT 20 PER19 CENT.

20 (a) IN GENERAL.—Section 1853(a)(3)(C)(ii) of the

21 Social Security Act (42 U.S.C. 1395w–23(c)(1)(C)(ii)) is

22 amended by inserting ‘‘and each subsequent year’’ after

23 ‘‘not more than 20 percent of such capitation rate in

24 2002’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall take effect on the date of enactment of

3 this Act.

4 TITLE IV—MEDICARE BENE5 FICIARY OUTREACH AND

6 EDUCATION

7 SEC. 401. MEDICARE CONSUMER COALITIONS.

8 Title XXII of the Social Security Act (as added by

9 section 101) is amended by adding at the end the following

10 new part:

11 ‘‘PART C—MEDICARE CONSUMER COALITIONS

12 ‘‘ESTABLISHMENT OF MEDICARE CONSUMER COALITIONS

13 ‘‘SEC. 2281. (a) ESTABLISHMENT OF MEDICARE

14 CONSUMER COALITIONS.—The Commissioner of the Com15 petitive Medicare Agency (in this part referred to as the

16 ‘Commissioner’) may establish Medicare Consumer Coali17 tions (as defined in subsection (b)) to conduct information

18 programs described in subsection (e).

19 ‘‘(b) MEDICARE CONSUMER COALITION DEFINED.—

20 In this section, the term ‘Medicare Consumer Coalition’

21 means an entity that is a nonprofit organization operated

22 under the direction of a board of directors that is pri23 marily composed of eligible beneficiaries.

24 ‘‘(c) REQUEST FOR PROPOSALS; SELECTION OF

25 MEDICARE CONSUMER COALITIONS.—If the Commis-
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1 sioner elects to establish Medicare Consumer Coalitions

2 under subsection (a), the Commissioner shall—

3 ‘‘(1) develop and disseminate a request for pro4 posals to establish Medicare Consumer Coalitions in

5 such areas as the Commissioner determines appro6 priate to assist in conducting the information pro7 grams described in subsection (a); and

8 ‘‘(2) select a proposal to establish a Medicare

9 Consumer Coalition to conduct the information pro10 grams in each such area.

11 ‘‘(d) PAYMENT TO MEDICARE CONSUMER COALI12 TIONS.—The Commissioner shall pay to each Medicare

13 Consumer Coalition for which a proposal has been selected

14 under subsection (c)(2) an amount equal to the sum of

15 any costs incurred—

16 ‘‘(1) in conducting the information programs

17 under subsection (e); and

18 ‘‘(2) in the hiring of staff to conduct the infor19 mation programs under such subsection.

20 ‘‘(e) INFORMATION PROGRAMS.—The information

21 programs described in this subsection are those activities

22 that are the responsibilities of the Commissioner under

23 clause (iii) of section 2202(a)(4) (relating to dissemination

24 of information), clause (iv) of such section (relating to dis25 semination of appeals rights information), and clause (v)
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1 of such section (relating to beneficiary education pro2 grams). If the Commissioner selects a Medicare Consumer

3 Coalition to conduct such programs, the programs shall

4 include the following:

5 ‘‘(1) CONTENTS.—A comparison among the

6 original fee-for-service program under parts A and B

7 of title XVIII, available Medicare+Choice plans

8 under part C of such title, and available Medicare

9 Prescription Plus plans under part B as follows:

10 ‘‘(A) BENEFITS.—A comparison of the

11 benefits provided under each plan and program.

12 ‘‘(B) QUALITY AND PERFORMANCE.—The

13 quality and performance of each plan and pro14 gram.

15 ‘‘(C) BENEFICIARY COSTS.—The costs to

16 eligible beneficiaries enrolled under each plan

17 and program.

18 ‘‘(D) CONSUMER SATISFACTION SUR19 VEYS.—The results of consumer satisfaction

20 surveys regarding each plan and program.

21 ‘‘(E) ADDITIONAL INFORMATION.—Such

22 additional information as the Commissioner

23 may prescribe.

24 ‘‘(2) INFORMATION STANDARDS.—If the Com25 missioner establishes Medicare Consumer Coalitions,
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1 the Commissioner shall develop standards to ensure

2 that the information provided to eligible beneficiaries

3 under the information programs is complete, accu4 rate, and uniform.

5 ‘‘(3) REVIEW OF INFORMATION.—

6 ‘‘(A) IN GENERAL.—Subject to subpara7 graph (B), the Commissioner may prescribe the

8 procedures and conditions under which a Medi9 care Consumer Coalition may disseminate infor10 mation to eligible beneficiaries to ensure the co11 ordination of Federal, State, and local outreach

12 efforts to eligible beneficiaries.

13 ‘‘(B) DEADLINE.—Any information pro14 posed to be furnished to eligible beneficiaries

15 under this section shall be submitted to the

16 Commissioner not later than 45 days before the

17 date on which the information is to be dissemi18 nated to such beneficiaries.

19 ‘‘(4) CONSULTATION.—In order to conduct the

20 information programs under subsection (a), Medi21 care Consumer Coalitions may consult with the Ad22 ministrator of the Health Care Financing Adminis23 tration, entities that offer Medicare+Choice plans,

24 Medicare Prescription Plus plans, and public and

25 private purchasers of health care benefits.
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1 ‘‘(f) REPORT.—If the Commissioner establishes

2 Medicare Consumer Coalitions under this section, not

3 later than December 31, 2003, the Commissioner shall

4 submit to the appropriate committees of Congress a report

5 on the performance of any Medicare Consumer Coalitions,

6 including an assessment of the effectiveness of the out7 reach efforts conducted under this section.

8 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There

9 are authorized to be appropriated to carry out this section

10 such sums as may be necessary.

11 ‘‘(h) EFFECTIVE DATE.—If the Commissioner estab12 lishes Medicare Consumer Coalitions, the Commissioner

13 should establish the such Coalitions under this section in

14 a manner that ensures that the information programs con15 ducted by Medicare Consumer Coalitions begin not later

16 than January 1, 2003.’’.

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