II

106TH CONGRESS

2D SESSION S. 2836

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

beneficiaries with access to affordable outpatient prescription drugs.

IN THE SENATE OF THE UNITED STATES

JUNE 30, 2000

Mr. HAGEL (for himself, Mr. ABRAHAM, Mr. HUTCHINSON, Mr. BURNS, Mr.

COVERDELL, Mr. MCCAIN, Mr. ASHCROFT, and Mr. KYL) introduced the

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

A BILL

To amend title XVIII of the Social Security Act to provide

medicare beneficiaries with access to affordable outpatient prescription drugs.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medicare Rx Drug Discount and Security Act of 2000’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

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

DISCOUNT AND SECURITY PROGRAM

‘‘Sec. 1860. Definitions.

‘‘SUBPART 1—ESTABLISHMENT OF VOLUNTARY MEDICARE OUTPATIENT

PRESCRIPTION DRUG DISCOUNT AND SECURITY PROGRAM

‘‘Sec. 1860A. Establishment of program.

‘‘Sec. 1860B. Enrollment.

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

‘‘Sec. 1860D. Annual enrollment fee.

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

‘‘Sec. 1860F. Selection of entities to provide outpatient drug benefit.

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

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

‘‘Sec. 1860I. Appropriations.

‘‘SUBPART 2—ESTABLISHMENT OF THE MEDICARE PRESCRIPTION DRUG

AGENCY

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

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

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

‘‘Sec. 1860O. Duties and authority of the Secretary.’’.

Sec. 3. Exclusion of part D costs from determination of part B monthly premium.

Sec. 4. Medigap revisions.

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

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

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

7 after part C the following new part:

8 ‘‘PART D—VOLUNTARY MEDICARE OUTPATIENT PRE9 SCRIPTION DRUG DISCOUNT AND SECURITY PRO10 GRAM

11 ‘‘DEFINITIONS

12 ‘‘SEC. 1860. In this part:
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1 ‘‘(1) COMMISSIONER.—The term ‘Commis2 sioner’ means the Commissioner of Medicare Pre3 scription Drugs established under subpart 2.

4 ‘‘(2) COVERED OUTPATIENT DRUG.—

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

6 subparagraph (B), the term ‘covered outpatient

7 drug’ means—

8 ‘‘(i) a drug that may be dispensed

9 only upon a prescription and that is de10 scribed in clause (i) or (ii) of subparagraph

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

12 ‘‘(ii) a biological product or insulin de13 scribed in subparagraph (B) or (C) of such

14 section.

15 ‘‘(B) EXCLUSIONS.—

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

17 outpatient drug’ does not include drugs or

18 classes of drugs, or their medical uses,

19 which may be excluded from coverage or

20 otherwise restricted under section

21 1927(d)(2), other than subparagraph (E)

22 thereof (relating to smoking cessation

23 agents).

24 ‘‘(ii) AVOIDANCE OF DUPLICATE COV25 ERAGE.—A drug prescribed for an indi-
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1 vidual that would otherwise be a covered

2 outpatient drug under this part shall not

3 be so considered if payment for such drug

4 is available under part A or B (but shall

5 be so considered if such payment is not

6 available because benefits under part A or

7 B have been exhausted), without regard to

8 whether the individual is entitled to bene9 fits under part A or enrolled under part B.

10 ‘‘(3) ELIGIBLE BENEFICIARY.—In this section,

11 the term ‘eligible beneficiary’ means an individual

12 who is—

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

14 enrolled under part B; and

15 ‘‘(B) not eligible for medical assistance

16 consisting of prescribed drugs under title XIX.

17 ‘‘(4) ELIGIBLE ENTITY.—The term ‘eligible en18 tity’ means any entity that the Commissioner deter19 mines to be appropriate to provide the benefits

20 under this part, including—

21 ‘‘(A) pharmaceutical benefit management

22 companies;

23 ‘‘(B) wholesale and retail pharmacist deliv24 ery systems;

25 ‘‘(C) insurers;
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1 ‘‘(D) Medicare+Choice organizations;

2 ‘‘(E) other entities; or

3 ‘‘(F) any combination of the entities de4 scribed in subparagraphs (A) through (E).

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

6 means the income official poverty line (as defined by

7 the Office of Management and Budget, and revised

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

9 Omnibus Budget Reconciliation Act of 1981) appli10 cable to a family of the size involved.

11 ‘‘SUBPART 1—ESTABLISHMENT OF VOLUNTARY MEDI12 CARE OUTPATIENT PRESCRIPTION DRUG DISCOUNT

13 AND SECURITY PROGRAM

14 ‘‘ESTABLISHMENT OF PROGRAM

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

16 Commissioner shall establish a Medicare Outpatient Pre17 scription Drug Discount and Security Program under

18 which an eligible beneficiary may voluntarily enroll and re19 ceive benefits under this part through enrollment with a

20 private entity with a contract under this part.

21 ‘‘(b) PROGRAM TO BEGIN IN 2002.—The Commis22 sioner shall establish the program under this part in a

23 manner so that benefits are first provided for months be24 ginning with January 2002.
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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 Federal Supple6 mentary Medical Insurance Trust Fund established under

7 section 1841.

8 ‘‘ENROLLMENT

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

10 ‘‘(1) ESTABLISHMENT OF PROCESS.—

11 ‘‘(A) IN GENERAL.—The Commissioner

12 shall establish a process through which an eligi13 ble beneficiary (including an eligible beneficiary

14 enrolled in a Medicare+Choice plan offered by

15 a Medicare+Choice organization) may make an

16 election to enroll under this part. Except as

17 otherwise provided in this subsection, such

18 process shall be similar to the process for en19 rollment in part B under section 1837.

20 ‘‘(B) REQUIREMENT OF ENROLLMENT.—

21 An eligible beneficiary must enroll under this

22 part in order to be eligible to receive the bene23 fits under this part.

24 ‘‘(2) ENROLLMENT PERIOD.—

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

26 subparagraph (B) or (C), an eligible beneficiary
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1 may not enroll in the program under this part

2 during any period after the beneficiary’s initial

3 enrollment period.

4 ‘‘(B) OPEN ENROLLMENT PERIOD IN 2002

5 FOR CURRENT BENEFICIARIES.—The Commis6 sioner shall establish a period, which shall begin

7 on the date on which the Commissioner first be8 gins to accept elections for enrollment under

9 this part and shall end on December 31, 2002,

10 during which any eligible beneficiary may—

11 ‘‘(i) enroll under this part; or

12 ‘‘(ii) enroll or re-enroll under this part

13 after having previously declined or termi14 nated such enrollment.

15 ‘‘(C) SPECIAL ENROLLMENT PERIOD.—In

16 the case of eligible beneficiaries that have re17 cently lost eligibility for medical assistance con18 sisting of prescribed drugs under title XIX, the

19 Commissioner shall establish a special enroll20 ment period in which such beneficiaries may en21 roll under this part.

22 ‘‘(3) PERIOD OF COVERAGE.—

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

24 subparagraph (B) and subject to subparagraph

25 (C), an eligible beneficiary’s coverage under the
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1 program under this part shall be effective for

2 the period provided in section 1838, as if that

3 section applied to the program under this part.

4 ‘‘(B) ENROLLMENT DURING OPEN AND

5 SPECIAL ENROLLMENT.—Subject to subpara6 graph (C), an eligible beneficiary who enrolls

7 under the program under this part pursuant to

8 subparagraph (B) or (C) of paragraph (2) shall

9 be entitled to the benefits under this part begin10 ning on the first day of the month following the

11 month in which such enrollment occurs.

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

13 part shall not begin prior to January 1, 2002.

14 ‘‘(4) PART D COVERAGE TERMINATED BY TER15 MINATION OF COVERAGE UNDER PARTS A AND B OR

16 ELIGIBILITY FOR MEDICAL ASSISTANCE.—

17 ‘‘(A) IN GENERAL.—In addition to the

18 causes of termination specified in section 1838,

19 the Commissioner shall terminate an individ20 ual’s coverage under this part if the

21 individual—

22 ‘‘(i) is no longer enrolled in either

23 part A or B; or
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1 ‘‘(ii) is eligible for medical assistance

2 consisting of prescribed drugs under title

3 XIX.

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

5 described in subparagraph (A) shall be effective

6 on the effective date of—

7 ‘‘(i) the termination of coverage under

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

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

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

11 ‘‘(1) PROCESS.—

12 ‘‘(A) IN GENERAL.—The Commissioner

13 shall establish a process through which an eligi14 ble beneficiary who is enrolled under this part

15 shall make an annual election to enroll with any

16 eligible entity that has been awarded a contract

17 under this part and serves the geographic area

18 in which the beneficiary resides.

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

20 under subparagraph (A), the Commissioner

21 shall use rules similar to the rules for enroll22 ment and disenrollment with a

23 Medicare+Choice plan under section 1851 (in24 cluding special election periods under subsection

25 (e)(4) of such section).
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1 ‘‘(2) MEDICARE+CHOICE ENROLLEES.—An eli2 gible beneficiary who is enrolled under this part and

3 enrolled in a Medicare+Choice plan offered by a

4 Medicare+Choice organization must enroll with an

5 eligible entity in order to receive benefits under this

6 part. The beneficiary may elect to receive such bene7 fits from the Medicare+Choice organization in

8 which the beneficiary is enrolled if the organization

9 has been awarded a contract under this part.

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

11 contract under this part shall compete for bene12 ficiaries on the basis of the discounts, formularies,

13 pharmacy networks, and other services under the

14 contract.

15 ‘‘(c) FIRST ENROLLMENT PERIOD.—The processes

16 developed under subsections (a) and (b) shall ensure that

17 eligible beneficiaries are permitted to enroll under this

18 part and with an eligible entity prior to January 1, 2002,

19 in order to ensure that coverage under this part is effective

20 as of such date.

21 ‘‘PROVIDING INFORMATION TO BENEFICIARIES

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

23 shall provide for activities under this part to broadly dis24 seminate information to eligible beneficiaries (and pro25 spective eligible beneficiaries) regarding the coverage pro26 vided under this part.
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1 ‘‘(b) SPECIAL RULE FOR FIRST ENROLLMENT

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

3 activities described in subsection (a) shall ensure that eli4 gible beneficiaries are provided with such information at

5 least 60 days prior to the first enrollment period described

6 in section 1860B(c).

7 ‘‘ANNUAL ENROLLMENT FEE

8 ‘‘SEC. 1860D. (a) AMOUNT.—

9 ‘‘(1) IN GENERAL.—Except as provided in sub10 section (c), enrollment under the program under this

11 part is conditioned upon payment of a $35 annual

12 enrollment fee.

13 ‘‘(2) ADJUSTMENT.—The Commissioner may,

14 as determined appropriate, annually adjust the dol15 lar amount under paragraph (1) to reflect inflation

16 and changes in the costs and utilization under the

17 program over time.

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

19 The annual enrollment fee described in subsection (a)

20 shall be collected and credited to the Federal Supple21 mentary Medical Insurance Trust Fund in the same man22 ner as the monthly premium determined under section

23 1839 is collected and credited to such Trust Fund under

24 section 1840.

25 ‘‘(c) WAIVER.—The Commissioner shall waive the en26 rollment fee described in subsection (a) in the case of an
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1 eligible beneficiary whose income is below 200 percent of

2 the poverty line.

3 ‘‘BENEFITS UNDER THE PROGRAM

4 ‘‘SEC. 1860E. (a) ACCESS TO NEGOTIATED

5 PRICES.—

6 ‘‘(1) IN GENERAL.—An eligible entity with a

7 contract under this part shall provide eligible bene8 ficiaries enrolled with the entity with access to nego9 tiated prices (including applicable discounts) used

10 for payment for prescription drugs for which cov11 erage is not otherwise provided under this part.

12 ‘‘(2) DISCOUNT CARD.—An eligible entity shall

13 issue such a card that may be used by an enrolled

14 beneficiary to assure the access to negotiated prices

15 under paragraph (1).

16 ‘‘(b) CATASTROPHIC BENEFIT.—

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

18 (relating to eligibility for the catastrophic benefit)—

19 ‘‘(A) BENEFICIARIES WITH INCOME BELOW

20 200 PERCENT OF POVERTY LINE.—In the case

21 of an eligible beneficiary whose income is below

22 200 percent of the poverty line, the beneficiary

23 shall not be responsible for making a payment

24 for a covered outpatient drug provided to the

25 beneficiary in a year to the extent that the out26 of-pocket expenses of the beneficiary for such
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1 drug, when added to the out-of-pocket expenses

2 of the beneficiary for covered outpatient drugs

3 previously provided in the year, exceed $1,200.

4 ‘‘(B) BENEFICIARIES WITH INCOME BE5 TWEEN 200 AND 400 PERCENT OF POVERTY

6 LINE.—In the case of an eligible beneficiary

7 whose income exceeds 200 percent but does not

8 exceed 400 percent of the poverty line, the ben9 eficiary shall not be responsible for making a

10 payment for a covered outpatient drug provided

11 to the beneficiary in a year to the extent that

12 the out-of-pocket expenses of the beneficiary for

13 such drug, when added to the out-of-pocket ex14 penses of the beneficiary for covered outpatient

15 drugs previously provided in the year, exceed

16 $2,500.

17 ‘‘(C) BENEFICIARIES WITH INCOME ABOVE

18 400 PERCENT OF POVERTY LINE.—In the case

19 of an eligible beneficiary whose income exceeds

20 400 percent of the poverty line, the beneficiary

21 shall not be responsible for making a payment

22 for a covered outpatient drug provided to the

23 beneficiary in a year to the extent that the out24 of-pocket expenses of the beneficiary for such

25 drug, when added to the out-of-pocket expenses
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1 of the beneficiary for covered outpatient drugs

2 previously provided in the year, exceed $5,000.

3 ‘‘(2) ADJUSTMENT.—The Commissioner may,

4 as determined appropriate, annually adjust the dol5 lar amounts under subparagraph (A) to reflect infla6 tion and changes in the costs and utilization under

7 the program over time.

8 ‘‘(3) ELIGIBLE ENTITY NOT AT RISK FOR CATA9 STROPHIC BENEFIT.—

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

11 not the eligible entity, shall be at risk for the

12 provision of the catastrophic benefit under this

13 subsection.

14 ‘‘(B) PROVISIONS RELATING TO PAYMENTS

15 TO ELIGIBLE ENTITIES.—For provisions relat16 ing to payments to eligible entities for admin17 istering the catastrophic benefit under this sub18 section, see section 1860G.

19 ‘‘(4) CATASTROPHIC BENEFIT NOT AVAILABLE

20 TO CERTAIN HIGH INCOME INDIVIDUALS.—

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

22 enrolled under this part whose modified ad23 justed gross income for a taxable year exceeds

24 the applicable amount shall not be eligible for

25 the catastrophic benefit under this subsection.
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1 ‘‘(B) BENEFICIARY STILL ELIGIBLE FOR

2 DISCOUNT BENEFIT.—Nothing in subparagraph

3 (A) shall be construed as effecting the eligibility

4 of a beneficiary described in such subparagraph

5 for the benefits under subsection (a).

6 ‘‘(C) PROCEDURES FOR DETERMINING

7 MODIFIED ADJUSTED GROSS INCOME.—

8 ‘‘(i) IN GENERAL.—The Commis9 sioner shall establish procedures for deter10 mining the modified adjusted gross income

11 of eligible beneficiaries enrolled under this

12 part.

13 ‘‘(ii) CONSULTATION.—The Commis14 sioner shall consult with the Secretary of

15 the Treasury in making the determinations

16 described in clause (i).

17 ‘‘(iii) DISCLOSURE OF INFORMA18 TION.—Notwithstanding section 6103(a) of

19 the Internal Revenue Code of 1986, the

20 Secretary of the Treasury may, upon writ21 ten request from the Commissioner, dis22 close to officers and employees of the

23 Medicare Prescription Drug Agency such

24 return information as is necessary to make

25 the determinations described in clause (i).
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1 Return information disclosed pursuant to

2 the preceding sentence may be used by of3 ficers and employees of the Medicare Pre4 scription Drug Agency only for the pur5 poses of, and to the extent necessary in,

6 making such determinations.

7 ‘‘(D) DEFINITION OF APPLICABLE

8 AMOUNT.—For purposes of this paragraph, the

9 term ‘applicable amount’ means—

10 ‘‘(i) except as otherwise provided in

11 this subparagraph, $100,000;

12 ‘‘(ii) $200,000 in the case of a tax13 payer who files a joint return; and

14 ‘‘(iii) zero in the case of a taxpayer

15 who—

16 ‘‘(I) is married at the close of the

17 taxable year but does not file a joint

18 return for such year; and

19 ‘‘(II) does not live apart from his

20 spouse at all times during the taxable

21 year.

22 ‘‘(E) DEFINITION OF MODIFIED ADJUSTED

23 GROSS INCOME.—For purposes of this para24 graph, the term ‘modified adjusted gross in25 come’ means adjusted gross income (as defined
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1 in section 62 of the Internal Revenue Code of

2 1986)—

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

5 Code; and

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

8 during the taxable year which is exempt

9 from tax under such Code.

10 ‘‘(F) DEFINITION OF JOINT RETURN.—For

11 purposes of this paragraph, the term ‘joint re12 turn’ has the meaning given the term in section

13 7701(a)(38) of the Internal Revenue Code of

14 1986.

15 ‘‘(5) ASSURING CATASTROPHIC BENEFIT IN ALL

16 AREAS.—The Commissioner shall develop procedures

17 for the provision of the catastrophic benefit under

18 this subsection to each eligible beneficiary that re19 sides in an area where there are no eligible entities

20 that have been awarded a contract under this part.

21 ‘‘SELECTION OF ENTITIES TO PROVIDE OUTPATIENT

22 DRUG BENEFIT

23 ‘‘SEC. 1860F. (a) ESTABLISHMENT OF BIDDING

24 PROCESS.—The Commissioner shall establish a process

25 under which the Commissioner accepts bids from eligible
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1 entities and awards contracts to the entities to provide the

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

3 ‘‘(b) SUBMISSION OF BIDS.—Each eligible entity de4 siring to enter into a contract under this part shall submit

5 a bid to the Commissioner at such time, in such manner,

6 and accompanied by such information as the Commis7 sioner may reasonably require.

8 ‘‘(c) AWARDING OF CONTRACTS.—

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

10 consistent with the requirements of this part and the

11 goal of containing medicare program costs, award at

12 least 2 contracts in an area, unless only 1 bidding

13 entity meets the terms and conditions specified by

14 the Commissioner pursuant to paragraph (2).

15 ‘‘(2) TERMS AND CONDITIONS.—

16 ‘‘(A) IN GENERAL.—The Commissioner

17 shall not award a contract to an eligible entity

18 under this section unless the Commissioner

19 finds that the eligible entity is in compliance

20 with such terms and conditions as the Commis21 sioner shall specify.

22 ‘‘(B) PROCEDURES TO ENSURE PROPER

23 UTILIZATION AND TO AVOID ADVERSE DRUG

24 REACTIONS.—The terms and conditions estab25 lished pursuant to subparagraph (A) shall in-
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1 clude a requirement that an eligible entity have

2 in place procedures to ensure—

3 ‘‘(i) the appropriate utilization of pre4 scription drugs by eligible beneficiaries en5 rolled with the entity; and

6 ‘‘(ii) the avoidance of adverse drug re7 actions among such beneficiaries.

8 ‘‘(C) CLINICAL GUIDELINE REQUIREMENTS

9 AND FORMULARY STANDARDS.—The terms and

10 conditions established pursuant to subpara11 graph (A) shall include clinical guideline re12 quirements and formulary standards.

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

14 which of the eligible entities that submitted bids that

15 meet the terms and conditions specified by the Com16 missioner pursuant to paragraph (2) to award a con17 tract, the Commissioner shall consider the compara18 tive merits of each of the bids.

19 ‘‘PAYMENTS TO ELIGIBLE ENTITIES FOR ADMINISTERING

20 THE CATASTROPHIC BENEFIT

21 ‘‘SEC. 1860G. (a) PROCEDURES.—The Commissioner

22 shall establish procedures for making payments to an eligi23 ble entity under a contract entered into under this part

24 for administering the catastrophic benefit under section

25 1860E(b).

26 ‘‘(b) ADMINISTRATIVE FEE.—
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1 ‘‘(1) PROCEDURES.—The procedures estab2 lished pursuant to subsection (a) shall provide for

3 payment to the eligible entity of an administrative

4 fee for each prescription filled by the entity for an

5 eligible beneficiary—

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

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

8 (C) of section 1860E(b)(1) applies with respect

9 to a covered outpatient drug.

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

11 (1) shall be—

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

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

14 private sector pharmaceutical benefit contracts.

15 ‘‘(c) SECONDARY PAYER PROVISIONS.—The provi16 sions of section 1862(b) shall apply to the benefits pro17 vided under this part.

18 ‘‘DETERMINATION OF INCOME LEVELS

19 ‘‘SEC. 1860H. (a) PROCEDURES.—The Commis20 sioner shall establish procedures for determining the in21 come levels of eligible beneficiaries for purposes of sections

22 1860D(c) and 1860E(b).

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

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

25 1 year) specified by the Commissioner.
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1 ‘‘APPROPRIATIONS

2 ‘‘SEC. 1860I. There are authorized to be appro3 priated from time to time, out of any moneys in the Treas4 ury not otherwise appropriated, to the Federal Supple5 mentary Medical Insurance Trust Fund established under

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

7 the benefits and administrative costs of providing the ben8 efits under this part exceed the enrollment fees collected

9 under section 1860D.

10 ‘‘SUBPART 2—ESTABLISHMENT OF THE MEDICARE

11 PRESCRIPTION DRUG AGENCY

12 ‘‘MEDICARE PRESCRIPTION DRUG AGENCY

13 ‘‘SEC. 1860L. (a) ESTABLISHMENT.—There is estab14 lished, as an independent agency in the executive branch

15 of the Government, a Medicare Prescription Drug Agency

16 (in this subpart referred to as the ‘Agency’).

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

18 administer the Voluntary Medicare Outpatient Prescrip19 tion Drug Discount and Security Program under subpart

20 1.

21 ‘‘COMMISSIONER; DEPUTY COMMISSIONER; OTHER

22 OFFICERS

23 ‘‘SEC. 1860M. (a) COMMISSIONER OF MEDICARE

24 PRESCRIPTION DRUGS.—

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

26 Agency a Commissioner of Medicare Prescription
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1 Drugs who shall be appointed by the President, by

2 and with the advice and consent of the Senate.

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

4 be compensated at the rate provided for level I of

5 the Executive Schedule.

6 ‘‘(3) TERM.—

7 ‘‘(A) IN GENERAL.—The Commissioner

8 shall be appointed for a term of 6 years.

9 ‘‘(B) CONTINUANCE IN OFFICE.—In any

10 case in which a successor does not take office

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

12 such Commissioner may continue in office until

13 the appointment of a successor.

14 ‘‘(C) DELAYED APPOINTMENTS.—A Com15 missioner appointed to a term of office after the

16 commencement of such term may serve under

17 such appointment only for the remainder of

18 such term.

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

20 the office of Commissioner may be removed

21 from office only pursuant to a finding by the

22 President of neglect of duty or malfeasance in

23 office.

24 ‘‘(4) RESPONSIBILITIES.—The Commissioner

25 shall be responsible for the exercise of all powers
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1 and the discharge of all duties of the Agency, and

2 shall have authority and control over all personnel

3 and activities thereof.

4 ‘‘(5) PROMULGATION OF RULES AND REGULA5 TIONS.—

6 ‘‘(A) IN GENERAL.—The Commissioner

7 may prescribe such rules and regulations as the

8 Commissioner determines necessary or appro9 priate to carry out the functions of the Agency.

10 ‘‘(B) RULEMAKING.—The regulations pre11 scribed by the Commissioner shall be subject to

12 the rulemaking procedures established under

13 section 553 of title 5, United States Code.

14 ‘‘(6) DETERMINATION OF ADMINISTRATIVE OR15 GANIZATION.—The Commissioner may establish,

16 alter, consolidate, or discontinue such organizational

17 units or components within the Agency as the Com18 missioner considers necessary or appropriate, except

19 that this paragraph shall not apply with respect to

20 any unit, component, or provision provided for by

21 this Act.

22 ‘‘(7) DELEGATION OF AUTHORITY.—

23 ‘‘(A) IN GENERAL.—The Commissioner

24 may assign duties, and delegate, or authorize

25 successive redelegations of, authority to act and
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1 to render decisions, to such officers and employ2 ees of the Agency as the Commissioner may

3 find necessary.

4 ‘‘(B) EFFECT OF DELEGATION.—Within

5 the limitations of such delegations, redelega6 tions, or assignments, all official acts and deci7 sions of such officers and employees shall have

8 the same force and effect as though performed

9 or rendered by the Commissioner.

10 ‘‘(8) CONSULTATION WITH SECRETARY OF

11 HEALTH AND HUMAN SERVICES.—The Commis12 sioner and the Secretary shall consult, on an ongo13 ing basis, to ensure—

14 ‘‘(A) the coordination of the Voluntary

15 Medicare Outpatient Prescription Drug and

16 Benefit Program under subpart 1 with the pro17 grams administered by the Secretary under

18 parts A, B, and C and under title XIX; and

19 ‘‘(B) that adequate information concerning

20 benefits under parts A, B, and C and title XIX

21 is available to the public.

22 ‘‘(b) DEPUTY COMMISSIONER OF MEDICARE PRE23 SCRIPTION DRUGS.—

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

25 Agency a Deputy Commissioner of Medicare Pre-
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1 scription Drugs (in this subpart referred to as the

2 ‘Deputy Commissioner’) who shall be appointed by

3 the President, by and with the advice and consent

4 of the Senate.

5 ‘‘(2) COMPENSATION.—The Deputy Commis6 sioner shall be compensated at the rate provided for

7 level II of the Executive Schedule.

8 ‘‘(3) TERM.—

9 ‘‘(A) IN GENERAL.—The Deputy Commis10 sioner shall be appointed for a term of 6 years.

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

12 case in which a successor does not take office

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

14 office, such Deputy Commissioner may continue

15 in office until the entry upon office of such a

16 successor.

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

18 Commissioner appointed to a term of office

19 after the commencement of such term may

20 serve under such appointment only for the re21 mainder of such term.

22 ‘‘(4) DUTIES.—

23 ‘‘(A) IN GENERAL.—The Deputy Commis24 sioner shall perform such duties and exercise
26

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1 such powers as the Commissioner shall from

2 time to time assign or delegate.

3 ‘‘(B) ACTING COMMISSIONER.—The Dep4 uty Commissioner shall be Acting Commissioner

5 of the Agency during the absence or disability

6 of the Commissioner and, unless the President

7 designates another officer of the Government as

8 Acting Commissioner, in the event of a vacancy

9 in the office of the Commissioner.

10 ‘‘(c) CHIEF ACTUARY.—

11 ‘‘(1) APPOINTMENT.—

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

13 Agency a Chief Actuary, who shall be appointed

14 by, and in direct line of authority to, the Com15 missioner.

16 ‘‘(B) QUALIFICATIONS.—The Chief Actu17 ary shall be appointed from individuals who

18 have demonstrated, by their education and ex19 perience, superior expertise in the actuarial

20 sciences.

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

22 serve as the chief actuarial officer of the Agen23 cy, and shall exercise such duties as are appro24 priate for the office of the Chief Actuary and
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1 in accordance with professional standards of ac2 tuarial independence.

3 ‘‘(D) REMOVAL.—The Chief Actuary may

4 be removed only for cause.

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

6 be compensated at the highest rate of basic pay for

7 the Senior Executive Service under section 5382(b)

8 of title 5, United States Code.

9 ‘‘(d) CHIEF FINANCIAL OFFICER.—There shall be in

10 the Agency a Chief Financial Officer appointed by the

11 Commissioner in accordance with section 901(a)(2) of title

12 31, United States Code.

13 ‘‘(e) INSPECTOR GENERAL.—There shall be in the

14 Agency an Inspector General appointed by the President,

15 by and with the advice and consent of the Senate, in ac16 cordance with section 3(a) of the Inspector General Act

17 of 1978.

18 ‘‘ADMINISTRATIVE DUTIES OF THE COMMISSIONER

19 ‘‘SEC. 1860N. (a) PERSONNEL.—

20 ‘‘(1) APPOINTMENT OF ADDITIONAL OFFI21 CERS.—

22 ‘‘(A) IN GENERAL.—The Commissioner

23 shall appoint such additional officers and em24 ployees as the Commissioner considers nec25 essary to carry out the functions of the Agency

26 under this Act, and attorneys and experts may
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1 be appointed without regard to the civil service

2 laws.

3 ‘‘(B) COMPENSATION.—Except as other4 wise provided in subparagraph (A) or in any

5 other provision of law, such officers and em6 ployees shall be appointed, and their compensa7 tion shall be fixed, in accordance with title 5,

8 United States Code.

9 ‘‘(2) EXPERTS AND CONSULTANTS.—The Com10 missioner may procure the services of experts and

11 consultants in accordance with the provisions of sec12 tion 3109 of title 5, United States Code.

13 ‘‘(b) BUDGETARY MATTERS.—

14 ‘‘(1) ANNUAL BUDGET.—

15 ‘‘(A) SUBMISSION.—The Commissioner

16 shall prepare an annual budget for the Agency,

17 which shall be submitted by the President to

18 Congress without revision, together with the

19 President’s annual budget for the Agency.

20 ‘‘(B) COMBATTING FRAUD.—The Commis21 sioner shall include in the annual budget pre22 pared pursuant to subparagraph (A) an

23 itemization of the amount of funds required by

24 the Medicare Prescription Drug Agency for the

25 fiscal year covered by the budget to support ef-
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1 forts to combat fraud committed by applicants

2 and beneficiaries.

3 ‘‘(2) APPROPRIATIONS REQUESTS.—

4 ‘‘(A) STAFFING AND PERSONNEL.—Appro5 priations requests for staffing and personnel of

6 the Agency shall be based upon a comprehen7 sive work force plan, which shall be established

8 and revised from time to time by the Commis9 sioner.

10 ‘‘(B) ADMINISTRATIVE EXPENSES.—Ap11 propriations for administrative expenses of the

12 Agency are authorized to be provided on a bien13 nial basis.

14 ‘‘(c) EMPLOYMENT RESTRICTION.—

15 ‘‘(1) IN GENERAL.—The total number of posi16 tions described in paragraph (2) in the Agency

17 (other than positions established under section

18 1860M) may not exceed at any time the equivalent

19 of 20 full-time positions.

20 ‘‘(2) POSITIONS DESCRIBED.—The positions de21 scribed in this paragraph are as follows:

22 ‘‘(A) NONCAREER APPOINTEES.—Positions

23 that are held by noncareer appointees (within

24 the meaning of section 3132(a)(7) of title 5,
30

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1 United States Code) in the Senior Executive

2 Service.

3 ‘‘(B) EXCEPTED POSITIONS.—Positions

4 that have been determined by the President or

5 the Office of Personnel Management to be of a

6 confidential, policy-determining, policy-making,

7 or policy-advocating character and that have

8 been excepted from the competitive service.

9 ‘‘(d) SEAL OF OFFICE.—

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

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

12 such design as the Commissioner shall approve.

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

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

15 ‘‘(e) DATA EXCHANGES.—

16 ‘‘(1) DISCLOSURE OF RECORDS AND OTHER IN17 FORMATION.—Notwithstanding any other provision

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

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

20 Code)—

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

22 Commissioner any record or information re23 quested in writing by the Commissioner for the

24 purpose of administering the Voluntary Medi-
31

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1 care Outpatient Prescription Drug Discount

2 and Security Program under subpart 1; 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.

9 ‘‘(2) QUALITY DATA.—

10 ‘‘(A) AGREEMENT.—The Commissioner

11 and the Secretary shall enter into an agreement

12 under which the Commissioner provides the

13 Secretary data concerning the quality of the

14 services and information provided to bene15 ficiaries of the Voluntary Medicare Outpatient

16 Prescription Drug Discount and Security Pro17 gram under subpart 1 and the administrative

18 services provided by the Agency in support of

19 such program.

20 ‘‘(B) TERMS AND CONDITIONS.—The

21 agreement entered into under subparagraph (A)

22 shall stipulate the type of data to be provided

23 and the terms and conditions under which the

24 data are to be provided.
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1 ‘‘(3) EXCHANGE OF OTHER DATA.—The Com2 missioner and the Secretary shall periodically review

3 the need for exchanges of information not referred

4 to in paragraph (1) or (2) and shall enter into such

5 agreements as may be necessary and appropriate to

6 provide information to each other or to States in

7 order to meet the programmatic needs of the re8 questing agencies.

9 ‘‘(4) ROUTINE USE.—

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

11 system of records (as defined in section

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

15 of such title (unless otherwise authorized under

16 such section 552a).

17 ‘‘(B) COMPUTERIZED COMPARISON.—Any

18 computerized comparison of records, including

19 matching programs, between the Commissioner

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

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

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

24 the Secretary shall each ensure that timely action is

25 taken to establish any necessary routine uses for dis-
33

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1 closures required under paragraph (1) or agreed to

2 pursuant to paragraph (3).

3 ‘‘DUTIES AND AUTHORITY OF THE SECRETARY

4 ‘‘SEC. 1860O. (a) DUTIES.—The Secretary shall per5 form the duties imposed upon the Secretary by this Act.

6 ‘‘(b) AUTHORITY.—

7 ‘‘(1) IN GENERAL.—The Secretary is authorized

8 to appoint and fix the compensation of such officers

9 and employees, and to make such expenditures as

10 may be necessary for carrying out the functions of

11 the Secretary under this Act.

12 ‘‘(2) APPOINTMENT OF ATTORNEYS AND EX13 PERTS.—The Secretary may appoint attorneys and

14 experts without regard to the civil service laws.’’.

15 (b) CONFORMING REFERENCES TO PREVIOUS PART

16 D.—

17 (1) IN GENERAL.—Any reference in law (in ef18 fect before the date of enactment of this Act) to part

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

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

21 such date).

22 (2) SUBMISSION OF LEGISLATIVE PROPOSAL.—

23 Not later than 6 months after the date of enactment

24 of this Act, the Commissioner of Medicare Prescrip25 tion Drugs and the Secretary of Health and Human

26 Services shall submit to the appropriate committees
34

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1 of Congress a legislative proposal providing for such

2 technical and conforming amendments in the law as

3 are required by the provisions of this title.

4 SEC. 3. EXCLUSION OF PART D COSTS FROM DETERMINA5 TION OF PART B MONTHLY PREMIUM.

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

7 1395r(g)) is amended—

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

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

10 ‘‘(1) the application of section’’;

11 (2) by striking the period and inserting ‘‘;

12 and’’; and

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

14 paragraph:

15 ‘‘(2) the Voluntary Medicare Outpatient Pre16 scription Drug Discount and Security Program

17 under part D.’’.

18 SEC. 4. MEDIGAP REVISIONS.

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

20 1395ss) is amended by adding at the end the following

21 new subsection:

22 ‘‘(v) MODERNIZATION OF MEDICARE SUPPLEMENTAL

23 POLICIES.—

24 ‘‘(1) PROMULGATION OF MODEL REGULA25 TION.—
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•S 2836 IS

1 ‘‘(A) NAIC MODEL REGULATION.—If,

2 within 9 months after the date of enactment of

3 the Medicare Rx Drug Discount and Security

4 Act of 2000, the National Association of Insur5 ance Commissioners (in this subsection referred

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

7 Model Regulation (described in subsection (p))

8 to revise the benefit package classified as ‘J’

9 under the standards established by subsection

10 (p)(2) (including the benefit package classified

11 as ‘J’ with a high deductible feature, as de12 scribed in subsection (p)(11)) so that—

13 ‘‘(i) the coverage for outpatient pre14 scription drugs available under such ben15 efit package is replaced with coverage for

16 outpatient prescription drugs that com17 pliments but does not duplicate the bene18 fits for outpatient prescription drugs that

19 beneficiaries are otherwise entitled to

20 under this title;

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

22 policy with respect to such revised benefits;

23 and

24 ‘‘(iii) such revised standards meet any

25 additional requirements imposed by the
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•S 2836 IS

1 Medicare Rx Drug Discount and Security

2 Act of 2000;

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

4 State, effective for policies issued to policy hold5 ers on and after January 1, 2002, as if the ref6 erence to the Model Regulation adopted on

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

8 NAIC Model Regulation as changed under this

9 subparagraph (such changed regulation referred

10 to in this section as the ‘2002 NAIC Model

11 Regulation’).

12 ‘‘(B) REGULATION BY THE SECRETARY.—

13 If the NAIC does not make the changes in the

14 1991 NAIC Model Regulation within the 9-

15 month period specified in subparagraph (A), the

16 Secretary shall promulgate, not later than 9

17 months after the end of such period, a regula18 tion and subsection (g)(2)(A) shall be applied in

19 each State, effective for policies issued to policy

20 holders on and after January 1, 2002, as if the

21 reference to the Model Regulation adopted on

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

23 NAIC Model Regulation as changed by the Sec24 retary under this subparagraph (such changed
37

•S 2836 IS

1 regulation referred to in this section as the

2 ‘2002 Federal Regulation’).

3 ‘‘(C) CONSULTATION WITH WORKING

4 GROUP.—In promulgating standards under this

5 paragraph, the NAIC or Secretary shall consult

6 with a working group similar to the working

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

8 ‘‘(D) MODIFICATION OF STANDARDS IF

9 MEDICARE BENEFITS CHANGE.—If benefits (in10 cluding deductibles and coinsurance) under part

11 D of this title are changed and the Secretary

12 determines, in consultation with the NAIC, that

13 changes in the 2002 NAIC Model Regulation or

14 2002 Federal Regulation are needed to reflect

15 such changes, the preceding provisions of this

16 paragraph shall apply to the modification of

17 standards previously established in the same

18 manner as they applied to the original estab19 lishment of such standards.

20 ‘‘(2) CONSTRUCTION OF BENEFITS IN OTHER

21 MEDICARE SUPPLEMENTAL POLICIES.—Nothing in

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

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

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

25 a high deductible feature, as described in subsection
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1 (p)(11)) shall be construed as providing coverage for

2 benefits for which payment may be made under part

3 D.

4 ‘‘(3) APPLICATION OF PROVISIONS AND CON5 FORMING REFERENCES.—

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

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

8 subsection (p) shall apply under this section,

9 except that—

10 ‘‘(i) any reference to the model regu11 lation applicable under that subsection

12 shall be deemed to be a reference to the

13 applicable 2002 NAIC Model Regulation or

14 2002 Federal Regulation; and

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

16 such paragraphs of subsection (p) shall be

17 deemed to be a reference to the appro18 priate date under this subsection.

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

20 to a provision of subsection (p) or a date appli21 cable under such subsection shall also be con22 sidered to be a reference to the appropriate pro23 vision or date under this subsection.’’.

Æ