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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 3016 Introduced in Senate (IS)]

106th CONGRESS
  2d Session
                                S. 3016

      To amend the Social Security Act to establish an outpatient 
     prescription drug assistance program for low-income medicare 
     beneficiaries and medicare beneficiaries with high drug costs.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 7, 2000

  Mr. Roth (for himself, Mr. Jeffords, Mr. Gramm, Mr. Murkowski, Mr. 
Campbell, Mr. Nickles, Mr. Lott, Mr. Stevens, Mr. Frist, Mr. Domenici, 
Mr. Craig, and Mr. Grams) 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 an outpatient 
     prescription drug assistance program for low-income medicare 
     beneficiaries and medicare beneficiaries with high drug costs.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Temporary Drug Assistance 
Act''.

SEC. 2. OUTPATIENT PRESCRIPTION DRUG ASSISTANCE PROGRAM.

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

     ``TITLE XXII--OUTPATIENT PRESCRIPTION DRUG ASSISTANCE PROGRAM

``SEC. 2201. PURPOSE; OUTPATIENT PRESCRIPTION DRUG ASSISTANCE PLANS.

    ``(a) Purpose.--The purpose of this title is to provide funds to 
States to enable States, individually or in a group, to establish a 
program, separate from the medicaid program under title XIX, to provide 
assistance to low-income medicare beneficiaries (as defined in section 
2202(b)) and, at State option, medicare beneficiaries with high drug 
costs (as defined in section 2202(c)) to obtain coverage for outpatient 
prescription drugs.
    ``(b) Outpatient Prescription Drug Assistance Plan Required.--A 
State may not receive payments under section 2205 unless the State, 
individually or as part of a group of States, submits in writing to the 
Secretary an outpatient prescription drug assistance plan under section 
2206(a)(1) that--
            ``(1) describes how the State or group of States intends to 
        use the funds provided under this title to provide outpatient 
        prescription drug assistance to low-income medicare 
        beneficiaries and, if applicable, medicare beneficiaries with 
        high drug costs consistent with the provisions of this title;
            ``(2) includes a description of the budget for the plan 
        (updated periodically as necessary) and details on the planned 
        use of funds, the sources of the non-Federal share of plan 
        expenditures, and any requirements for cost-sharing by 
        beneficiaries;
            ``(3) describes the procedures to be used to ensure that 
        the outpatient prescription drug assistance provided to low-
        income medicare beneficiaries and, if applicable, medicare 
        beneficiaries with high drug costs under the plan does not 
        supplant coverage for outpatient prescription drugs available 
        to such beneficiaries under group health plans; and
            ``(4) has been approved by the Secretary under section 
        2206(a)(2).
    ``(c) Entitlement.--Subject to subsection (d)(2), this title 
constitutes budget authority in advance of appropriations Acts and 
represents the obligation of the Federal Government to provide for the 
payment to States, groups of States, and contractors described in 
section 2209(a)(2)(A), of amounts provided under section 2204.
    ``(d) Period of Applicability.--
            ``(1) In general.--No State, group of States, or contractor 
        described in section 2209(a)(2)(A), may receive payments under 
        section 2205 for outpatient prescription drug assistance 
        provided for periods beginning before October 1, 2000, or after 
        December 31, 2003.
            ``(2) Medicare reform.--If medicare reform legislation that 
        includes coverage for outpatient prescription drugs is enacted 
        during the period that begins on October 1, 2000, and ends on 
        December 31, 2003, this title shall be repealed upon the 
        effective date of such legislation, and no State, group of 
        States, or contractor described in section 2209(a)(2)(A) shall 
        be entitled to receive payments for any outpatient prescription 
        drug assistance provided on or after such date.

``SEC. 2202. BENEFICIARY ELIGIBILITY.

    ``(a) Eligibility.--
            ``(1) In general.--In order for a State (individually or as 
        part of a group of States) to receive payments under section 
        2205 with respect to an outpatient prescription drug assistance 
        program, the program must provide, subject to the availability 
        of funds, outpatient prescription drug assistance to each 
        individual who--
                    ``(A) resides in the State;
                    ``(B) applies for such assistance; and
                    ``(C) establishes that the individual is--
                            ``(i) a low-income medicare beneficiary (as 
                        defined in subsection (b)); or
                            ``(ii) at the option of the State, a 
                        medicare beneficiary with high drug costs (as 
                        defined in subsection (c)).
            ``(2) Residency rules.--In applying paragraph (1), 
        residency rules similar to the residency rules applicable to 
        the State plan under title XIX shall apply.
    ``(b) Low-Income Medicare Beneficiary Defined.--
            ``(1) In general.--In this title, except as provided in 
        section 2209(a)(2)(B), the term `low-income medicare 
        beneficiary' means an individual who--
                    ``(A) is entitled to benefits under part A of title 
                XVIII or enrolled under part B of such title, including 
                an individual enrolled in a Medicare+Choice plan under 
                part C of such title;
                    ``(B) subject to subsection (d), is not entitled to 
                medical assistance with respect to prescribed drugs 
                under title XIX or under a waiver under section 1115 of 
the requirements of such title;
                    ``(C) is determined to have family income that does 
                not exceed a percentage of the poverty line for a 
                family of the size involved specified by the State 
                that, subject to paragraph (2), may not exceed 150 
                percent; and
                    ``(D) at the option of the State, is determined to 
                have resources that do not exceed a level specified by 
                the State.
            ``(2) State-only drug assistance programs.--In the case of 
        a State that has a State-based drug assistance program 
        described in section 2203(e) that provides outpatient 
        prescription drug coverage for individuals described in 
        paragraph (1)(A) who have family income up to or exceeding 150 
        percent of the poverty line, the State may specify a percentage 
        of the poverty line under paragraph (1)(C) that exceeds the 
        income eligibility level specified by the State for such 
        program but does not exceed 50 percentage points above such 
        income eligibility level.
    ``(c) Medicare Beneficiary With High Drug Costs Defined.--
            ``(1) In general.--In this title, except as provided in 
        section 2209(a)(2)(C), the term `medicare beneficiary with high 
        drug costs' means an individual--
                    ``(A) who satisfies the requirements of 
                subparagraphs (A) and (B) of subsection (b)(1);
                    ``(B) whose family income exceeds the percentage of 
                the poverty line specified by the State in accordance 
                with subsection (b)(1)(C);
                    ``(C) at the option of the State, whose resources 
                exceed a level (if any) specified by the State in 
                accordance with subsection (b)(1)(D); and
                    ``(D) who has out-of-pocket expenses for outpatient 
                prescription drugs and biologicals (including insulin 
                and insulin supplies) for which outpatient prescription 
                drug assistance is available under this title that 
                exceed such amount as the State specifies in accordance 
                with paragraph (2).
            ``(2) Determination of out-of-pocket expenses.--A State 
        that elects to provide outpatient prescription drug assistance 
        to an individual described in paragraph (1) shall provide the 
        Secretary with the methodology and standards used to determine 
        the individual's eligibility under subparagraph (D) of such 
        paragraph.
    ``(d) Access for Medicaid Expansion States.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, with respect to any State that, as of the date of 
        enactment of this title, has made outpatient prescription drug 
        coverage for individuals described in paragraph (2) available 
        through the State medicaid program under title XIX under a 
        section 1115 waiver, the Secretary, in consultation with such 
        State, shall establish procedures under which the State shall 
        be able to receive payments from the allotment made available 
        under section 2204 for such State for a fiscal year for 
        purposes of offsetting the costs of making such coverage 
        available to such individuals.
            ``(2) Individuals described.--Individuals described in this 
        paragraph are individuals who are--
                    ``(A) entitled to benefits under part A of title 
                XVIII or enrolled under part B of such title, including 
                an individual enrolled in a Medicare+Choice plan under 
                part C of such title; and
                    ``(B) eligible for outpatient prescription drug 
                coverage only, under a State medicaid program under 
                title XIX as a result of a section 1115 waiver.
    ``(e) Individual Nonentitlement.--Nothing in this title shall be 
construed as providing an individual with an entitlement to outpatient 
prescription drug assistance provided under this title.

``SEC. 2203. COVERAGE REQUIREMENTS.

    ``(a) Required Scope of Coverage.--
            ``(1) In general.--The outpatient prescription drug 
        assistance provided under the plan may consist of any of the 
        following:
                    ``(A) Benchmark coverage.--Outpatient prescription 
                drug coverage that is equivalent to the outpatient 
                prescription drug coverage in a benchmark benefit 
                package described in subsection (b).
                    ``(B) Aggregate actuarial value equivalent to 
                benchmark package.--Outpatient prescription drug 
                coverage that has an aggregate actuarial value that is 
                at least equivalent to one of the benchmark benefit 
                packages.
                    ``(C) Existing comprehensive state-based 
                coverage.--Outpatient prescription drug coverage under 
                an existing State-based program, described in 
                subsection (e).
                    ``(D) Secretary-approved coverage.--Any other 
                outpatient prescription drug coverage that the 
                Secretary determines, upon application by a State or 
                group of States, provides appropriate outpatient 
                prescription drug coverage for the population of 
                medicare beneficiaries proposed to be provided such 
                coverage.
            ``(2) Consistent design.--A State or group of States may 
        only select one of the options described in paragraph (1) (and, 
        if the State or group chooses to provide outpatient 
        prescription drug coverage that is equivalent to the outpatient 
        prescription drug coverage in a benchmark benefit package, only 
        one of the benchmark benefit package options described in 
        subsection (b)) in order to provide outpatient prescription 
        drug assistance in a uniform manner for the population of 
        medicare beneficiaries provided such coverage.
    ``(b) Benchmark Benefit Packages.--The benchmark benefit packages 
are as follows:
            ``(1) Medicaid outpatient prescription drug coverage.--In 
        the case of--
                    ``(A) a State, the outpatient prescription drug 
                coverage provided under the State medicaid plan under 
                title XIX; or
                    ``(B) a group of States, the outpatient 
                prescription drug coverage provided under the State 
                medicaid plan under such title of one of the States in 
                the group, as identified in the outpatient prescription 
                drug assistance plan.
            ``(2) FEHBP-equivalent outpatient prescription drug 
        coverage.--The outpatient prescription drug coverage provided 
        under the Standard Option Blue Cross and Blue Shield Service 
        Benefit Plan described in and offered under section 8903(1) of 
        title 5, United States Code.
            ``(3) State employee outpatient prescription drug 
        coverage.--In the case of--
                    ``(A) a State, the outpatient prescription drug 
                coverage provided under a health benefits coverage plan 
                that is offered and generally available to State 
                employees in the State involved; or
                    ``(B) a group of States, the outpatient 
                prescription drug coverage provided under a health 
                benefits coverage plan that is offered and generally 
                available to State employees in one of the States in 
                the group, as identified in the outpatient prescription 
                drug assistance plan.
            ``(4) Outpatient prescription drug coverage offered through 
        largest hmo.--In the case of--
                    ``(A) a State, the outpatient prescription drug 
                coverage provided under a health insurance coverage 
                plan that is offered by a health maintenance 
                organization (as defined in section 2791(b)(3) of the 
                Public Health Service Act) and has the largest insured 
                commercial, nonmedicaid enrollment of covered lives of 
                such coverage plans offered by such a health 
                maintenance organization in the State involved; or
                    ``(B) a group of States, the outpatient 
                prescription drug coverage provided under a health 
                insurance coverage plan that is offered by a health 
                maintenance organization (as defined in section 
                2791(b)(3) of the Public Health Service Act) and has 
                the largest insured commercial, nonmedicaid enrollment 
                of covered lives of such coverage plans offered by such 
                a health maintenance organization in one of the States 
                involved.
    ``(c) Determination of Actuarial Value of Coverage.--
            ``(1) In general.--The actuarial value of outpatient 
        prescription drug coverage offered under benchmark benefit 
        packages and the outpatient prescription drug assistance plan 
        shall be set forth in an opinion in a report that has been 
        prepared--
                    ``(A) by an individual who is a member of the 
                American Academy of Actuaries;
                    ``(B) using generally accepted actuarial principles 
                and methodologies;
                    ``(C) using a standardized set of utilization and 
                price factors;
                    ``(D) using a standardized population that is 
                representative of the population to be covered under 
                the outpatient prescription drug assistance plan;
                    ``(E) applying the same principles and factors in 
                comparing the value of different coverage;
                    ``(F) without taking into account any differences 
                in coverage based on the method of delivery or means of 
                cost control or utilization used; and
                    ``(G) taking into account the ability of a State or 
                group of States to reduce benefits by taking into 
                account the increase in actuarial value of benefits 
                coverage offered under the outpatient prescription drug 
                assistance plan that results from the limitations on 
                cost-sharing under such coverage.
            ``(2) Requirement.--The actuary preparing the opinion shall 
        select and specify in the report the standardized set and 
        population to be used under subparagraphs (C) and (D) of 
        paragraph (1).
    ``(d) Prohibited Coverage.--Nothing in this section shall be 
construed as requiring any outpatient prescription drug coverage 
offered under the plan to provide coverage for an outpatient 
prescription drug for which payment is prohibited under this title, 
notwithstanding that any benchmark benefit package includes coverage 
for such an outpatient prescription drug.
    ``(e) Description of Existing Comprehensive State-Based Coverage.--
            ``(1) In general.--A program described in this paragraph is 
        an outpatient prescription drug coverage program for 
        individuals who are entitled to benefits under part A of title 
        XVIII or enrolled under part B of such title, including an 
        individual enrolled in a Medicare+Choice plan under part C of 
        such title, that--
                    ``(A) is administered or overseen by the State and 
                receives funds from the State;
                    ``(B) was offered as of the date of the enactment 
                of this title;
                    ``(C) does not receive or use any Federal funds; 
                and
                    ``(D) is certified by the Secretary as providing 
                outpatient prescription drug coverage that satisfies 
                the scope of coverage required under subparagraph (A), 
                (B), or (D) of subsection (a)(1).
            ``(2) Modifications.--A State may modify a program 
        described in paragraph (1) from time to time so long as it does 
        not reduce the actuarial value (evaluated as of the time of the 
        modification) of the outpatient prescription drug coverage 
        under the program below the lower of--
                    ``(A) the actuarial value of the coverage under the 
                program as of the date of enactment of this title; or
                    ``(B) the actuarial value described in subsection 
                (a)(1)(B).
    ``(f) Beneficiary Premiums and Cost-Sharing.--
            ``(1) Description; general conditions.--
                    ``(A) Description.--
                            ``(i) In general.--An outpatient 
                        prescription drug assistance plan shall include 
                        a description, consistent with this subsection, 
                        of the amount of any premiums or cost-sharing 
                        imposed under the plan.
                            ``(ii) Public schedule of charges.--Any 
                        premium or cost-sharing described under clause 
                        (i) shall be imposed under the plan pursuant to 
                        a public schedule.
                    ``(B) Protection for beneficiaries.--The outpatient 
                prescription drug assistance plan may only vary 
                premiums and cost-sharing based on the family income of 
                low-income medicare beneficiaries and, if applicable, 
                medicare beneficiaries with high drug costs, in a 
                manner that does not favor such beneficiaries with 
                higher income over beneficiaries with low-income.
            ``(2) Limitations on premiums and cost-sharing.--
                    ``(A) No premiums or cost-sharing for beneficiaries 
                with income below 100 percent of poverty line.--In the 
                case of a low-income medicare beneficiary whose family 
                income does not exceed 100 percent of the poverty line, 
                the outpatient prescription drug assistance plan may 
                not impose any premium or cost-sharing.
                    ``(B) Other beneficiaries.--For low-income medicare 
                beneficiaries not described in subparagraph (A) and, if 
                applicable, medicare beneficiaries with high drug 
                costs, any premiums or cost-sharing imposed under the 
                outpatient prescription drug assistance plan may be 
                imposed, subject to paragraph (1)(B), on a sliding 
                scale related to income, except that the total annual 
                aggregate of such premiums and cost-sharing with 
                respect to all such beneficiaries in a family under 
                this title may not exceed 5 percent of such family's 
                income for the year involved.
    ``(g) Restriction on Application of Preexisting Condition 
Exclusions.--The outpatient prescription drug assistance plan shall not 
permit the imposition of any preexisting condition exclusion for 
covered benefits under the plan and may not discriminate in the pricing 
of premiums under such plan because of health status, claims 
experience, receipt of health care, or medical condition.

``SEC. 2204. ALLOTMENTS.

    ``(a) Appropriation.--
            ``(1) In general.--For the purpose of providing allotments 
        under this section to States, there is appropriated, out of any 
        money in the Treasury not otherwise appropriated--
                    ``(A) for fiscal year 2001, $1,200,000,000;
                    ``(B) for fiscal year 2002, $4,200,000,000;
                    ``(C) for fiscal year 2003, $9,000,000,000; and
                    ``(D) for fiscal year 2004, $3,000,000,000.
            ``(2) Availability.--Amounts appropriated under paragraph 
        (1) shall only be available for providing the allotments 
        described in such paragraph during the fiscal year for which 
        such amounts are appropriated. Any amounts that have not been 
        obligated by the Secretary for the purposes of making payments 
        from such allotments under section 2205, or under contracts 
        entered into under section 2209(b)(2)(B), on or before 
        September 30 of fiscal year 2001, 2002, or 2003 (as applicable) 
        or, with respect to fiscal year 2004, December 31, 2003, shall 
        be returned to the Treasury.
    ``(b) Allotments to 50 States and District of Columbia.--
            ``(1) In general.--Subject to paragraph (3), of the amount 
        available for allotment under subsection (a) for a fiscal year, 
        reduced by the amount of allotments made under subsection (c) 
        for the fiscal year, the Secretary shall allot to each State 
        (other than a State described in such subsection) with an 
        outpatient prescription drug assistance plan approved under 
        this title the same proportion as the ratio of--
                    ``(A) the number of medicare beneficiaries with 
                family income that does not exceed 150 percent of the 
                poverty line residing in the State for the fiscal year; 
                to
                    ``(B) the total number of such beneficiaries 
                residing in all such States.
            ``(2) Determination of number of medicare beneficiaries 
        with income that does not exceed 150 percent of poverty.--For 
        purposes of paragraph (1), a determination of the number of 
        medicare beneficiaries with family income that does not exceed 
        150 percent of the poverty line residing in a State for the 
        calendar year in which such fiscal year begins shall be made on 
        the basis of the arithmetic average of the number of such 
        medicare beneficiaries, as reported and defined in the 5 most 
        recent March supplements to the Current Population Survey of 
        the Bureau of the Census before the beginning of the fiscal 
        year.
            ``(3) Minimum allotment.--In no case shall the amount of 
        the allotment under this subsection for one of the 50 States or 
        the District of Columbia for a fiscal year be less than an 
        amount equal to 0.5 percent of the amount provided for 
        allotments under subsection (a) for that fiscal year (reduced 
        by the amount of allotments made under subsection (c) for the 
        fiscal year). To the extent that the application of the 
        previous sentence results in an increase in the allotment to a 
        State or the District of Columbia above the amount otherwise 
        provided, the allotments for the other States and the District 
        of Columbia under this subsection shall be reduced in a pro 
        rata manner (but not below the minimum allotment described in 
        such preceding sentence) so that the total of such allotments 
        in a fiscal year does not exceed the amount otherwise provided 
        for allotment under subsection (a) for that fiscal year (as so 
        reduced).
    ``(c) Allotments to Territories.--
            ``(1) In general.--Of the amount available for allotment 
        under subsection (a) for a fiscal year, the Secretary shall 
        allot 0.25 percent among each of the commonwealths and 
territories described in paragraph (3) in the same proportion as the 
percentage specified in paragraph (2) for such commonwealth or 
territory bears to the sum of such percentages for all such 
commonwealths or territories so described.
            ``(2) Percentage.--The percentage specified in this 
        paragraph for--
                    ``(A) Puerto Rico is 91.6 percent;
                    ``(B) Guam is 3.5 percent;
                    ``(C) the United States Virgin Islands is 2.6 
                percent;
                    ``(D) American Samoa is 1.2 percent; and
                    ``(E) the Northern Mariana Islands is 1.1 percent.
            ``(3) Commonwealths and territories.--A commonwealth or 
        territory described in this paragraph is any of the following 
        if it has an outpatient prescription drug assistance plan 
        approved under this title:
                    ``(A) Puerto Rico.
                    ``(B) Guam.
                    ``(C) The United States Virgin Islands.
                    ``(D) American Samoa.
                    ``(E) The Northern Mariana Islands.
    ``(d) Transfer of Certain Allotments and Portions of Allotments.--
            ``(1) Transfer and redistribution.--
                    ``(A) In general.--Subject to subparagraph (B), not 
                later than 30 days after the date described in 
                paragraph (2)--
                            ``(i) 90 percent of the allotment 
                        determined for a fiscal year under subsection 
                        (b) or (c) for a State shall be transferred and 
                        made available in such fiscal year to the 
                        Secretary, acting through the Administrator of 
                        the Health Care Financing Administration, for 
                        purposes of carrying out the default program 
                        established under section 2209; and
                            ``(ii) 10 percent of such allotment shall 
                        be redistributed in accordance with subsection 
                        (e).
                    ``(B) Applicability.--Subparagraph (A) shall not 
                apply if, not later than the date described in 
                paragraph (2) for such fiscal year, a State submits a 
                plan or is part of a group of States that submits a 
                plan to the Secretary that the Secretary finds meets 
                the requirements of section 2201(b).
            ``(2) Date described.--The date described in this paragraph 
        is--
                    ``(A) in the case of fiscal year 2001, December 31, 
                2000; and
                    ``(B) in the case of fiscal year 2002, 2003, or 
                2004, September 1 of the fiscal year preceding such 
                fiscal year.
    ``(e) Redistribution of Portion of Allotments.--With respect to a 
fiscal year, not later than 30 days after the date described in 
subsection (d)(2) for such fiscal year, the Secretary shall 
redistribute the total amount made available for redistribution for 
such fiscal year under subsection (d)(1)(A)(ii) to each State that 
submits a plan or is part of a group of States that submits a plan to 
the Secretary that the Secretary finds meets the requirements of this 
title. Such amount shall be redistributed in the same manner as 
allotments are determined under subsections (b) and (c) and shall be 
available only to the extent consistent with subsection (a)(2).

``SEC. 2205. PAYMENTS TO STATES.

    ``(a) In General.--Subject to the succeeding provisions of this 
section, the Secretary shall pay to each State with a plan approved 
under section 2206(a)(2) (individually or as part of a group of States) 
from the State's allotment under section 2204, an amount for each 
quarter equal to the applicable percentage of expenditures in the 
quarter--
            ``(1) for outpatient prescription drug assistance under the 
        plan for low-income medicare beneficiaries and, if applicable, 
        medicare beneficiaries with high drug costs in the form of 
        providing coverage for outpatient prescription drugs that meets 
        the requirements of section 2203; and
            ``(2) only to the extent permitted consistent with 
        subsection (c), for reasonable costs incurred to administer the 
        plan.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is--
            ``(1) for low-income medicare beneficiaries with family 
        incomes that do not exceed 135 percent of the poverty line, 100 
        percent; and
            ``(2) for all other low-income medicare beneficiaries and 
        for medicare beneficiaries with high drug costs, the enhanced 
        FMAP (as defined in section 2105(b)).
    ``(c) Limitation on Payments for Certain Expenditures.--
            ``(1) General limitations.--Funds provided to a State or 
        group of States under this title shall only be used to carry 
        out the purposes of this title.
            ``(2) Administrative expenditures.--
                    ``(A) In general.--Subject to subparagraph (B), 
                payment shall not be made under subsection (a) for 
                expenditures described in subsection (a)(2) for a 
                fiscal year to the extent the total of such 
                expenditures (for which payment is made under such 
                subsection) exceeds 10 percent of the total 
                expenditures described in subsection (a)(1) made by--
                            ``(i) in the case of a State that is not 
                        part of a group of States, the State for such 
                        fiscal year; and
                            ``(ii) in the case of a group of States, 
                        the group for such fiscal year.
                    ``(B) Special rule.--With respect to the first 
                fiscal year that a State or group of States provides 
                outpatient prescription drug assistance under a plan 
                approved under this title, the 10 percent limitation 
                described in subparagraph (A) shall be applied--
                            ``(i) in the case of a State that is not 
                        part of a group of States, to the allotment 
                        available for such State for such fiscal year; 
                        and
                            ``(ii) in the case of a group of States, to 
                        the aggregate of the State allotments available 
                        for all the States in such group for such 
                        fiscal year.
            ``(3) Use of non-federal funds for state matching 
        requirement.--Amounts provided by the Federal Government, or 
        services assisted or subsidized to any significant extent by 
        the Federal Government, may not be included in determining the 
        amount of the non-Federal share of plan expenditures required 
        under the plan.
            ``(4) Offset of receipts attributable to premiums or cost-
        sharing.--For purposes of subsection (a), the amount of the 
        expenditures under the plan shall be reduced by the amount of 
        any premiums or cost-sharing received by a State.
            ``(5) Prevention of duplicative payments.--
                    ``(A) Other health plans.--No payment shall be made 
                under this section for expenditures for outpatient 
                prescription drug assistance provided under an 
                outpatient prescription drug assistance plan to the 
                extent that a private insurer (as defined by the 
                Secretary by regulation and including a group health 
                plan, a service benefit plan, and a health maintenance 
                organization) would have been obligated to provide such 
                assistance but for a provision of its insurance 
                contract which has the effect of limiting or excluding 
                such obligation because the beneficiary is eligible for 
                or is provided outpatient prescription drug assistance 
                under the plan.
                    ``(B) Other federal governmental programs.--Except 
                as otherwise provided by law, no payment shall be made 
                under this section for expenditures for outpatient 
                prescription drug assistance provided under an 
                outpatient prescription drug assistance plan to the 
                extent that payment has been made or can reasonably be 
                expected to be made promptly (as determined in 
                accordance with regulations) under any other federally 
                operated or financed health care insurance program 
                identified by the Secretary. For purposes of this 
                paragraph, rules similar to the rules for overpayments 
                under section 1903(d)(2) shall apply.
    ``(d) Advance Payment; Retrospective Adjustment.--The Secretary may 
make payments under this section for each quarter on the basis of 
advance estimates of expenditures submitted by a State or group of 
States and such other investigation as the Secretary may find 
necessary, and may reduce or increase the payments as necessary to 
adjust for any overpayment or underpayment for prior quarters.
    ``(e) Flexibility in Submittal of Claims.--Nothing in this section 
shall be construed as preventing a State or group of States from 
claiming as expenditures in any quarter of a fiscal year expenditures 
that were incurred in a previous quarter of such fiscal year.

``SEC. 2206. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT OF 
              OUTPATIENT PRESCRIPTION DRUG ASSISTANCE PLANS.

    ``(a) Initial Plan.--
            ``(1) Submission.--A State may receive payments under 
        section 2205 with respect to a fiscal year if the State, 
        individually or as part of a group of States, has submitted to 
        the Secretary, not later than the date described in section 
        2204(d)(2), an outpatient prescription drug assistance plan 
        that the Secretary has found meets the applicable requirements 
        of this title.
            ``(2) Approval.--Except as the Secretary may provide under 
        subsection (e), a plan submitted under paragraph (1)--
                    ``(A) shall be approved for purposes of this title; 
                and
                    ``(B) shall be effective beginning with a calendar 
                quarter that is specified in the plan, but in no case 
                earlier than October 1, 2000.
    ``(b) Plan Amendments.--Within 30 days after a State or group of 
States amends an outpatient prescription drug assistance plan submitted 
pursuant to subsection (a), the State or group shall notify the 
Secretary of the amendment.
    ``(c) Disapproval of Plans and Plan Amendments.--
            ``(1) Prompt review of plan submittals.--The Secretary 
        shall promptly review plans and plan amendments submitted under 
        this section to determine if they substantially comply with the 
        requirements of this title.
            ``(2) 45-day approval deadlines.--A plan or plan amendment 
        is considered approved unless the Secretary notifies the State 
        or group of States in writing, within 45 days after receipt of 
        the plan or amendment, that the plan or amendment is 
        disapproved (and the reasons for the disapproval) or that 
        specified additional information is needed.
            ``(3) Correction.--In the case of a disapproval of a plan 
        or plan amendment, the Secretary shall provide a State or group 
        of States with a reasonable opportunity for correction before 
        taking financial sanctions against the State or group on the 
        basis of such disapproval.
    ``(d) Program Operation.--
            ``(1) In general.--A State or group of States shall conduct 
        the program in accordance with the plan (and any amendments) 
        approved under this section and with the requirements of this 
        title.
            ``(2) Violations.--The Secretary shall establish a process 
        for enforcing requirements under this title. Such process shall 
        provide for the withholding of funds in the case of substantial 
        noncompliance with such requirements. In the case of an 
        enforcement action against a State or group of States under 
        this paragraph, the Secretary shall provide a State or group of 
        States with a reasonable opportunity for correction and for 
        administrative and judicial appeal of the Secretary's action 
        before taking financial sanctions against the State or group of 
        States on the basis of such an action.
    ``(e) Continued Approval.--Subject to section 2201(d), an approved 
outpatient prescription drug assistance plan shall continue in effect 
unless and until the State or group of States amends the plan under 
subsection (b) or the Secretary finds, under subsection (d), 
substantial noncompliance of the plan with the requirements of this 
title.

``SEC. 2207. PLAN ADMINISTRATION; APPLICATION OF CERTAIN GENERAL 
              PROVISIONS.

    ``(a) Plan Administration.--An outpatient prescription drug 
assistance plan shall include an assurance that the State or group of 
States administering the plan will collect the data, maintain the 
records, afford the Secretary access to any records or information 
relating to the plan for the purposes of review or audit, and furnish 
reports to the Secretary, at the times and in the standardized format 
the Secretary may require in order to enable the Secretary to monitor 
program administration and compliance and to evaluate and compare the 
effectiveness of plans under this title.
    ``(b) Application of Certain General Provisions.--The following 
sections of this Act shall apply to the program established under this 
title in the same manner as they apply to a State under title XIX:
            ``(1) Title xix provisions.--
                    ``(A) Section 1902(a)(4)(C) (relating to conflict 
                of interest standards).
                    ``(B) Paragraphs (2), (16), and (17) of section 
                1903(i) (relating to limitations on payment).
                    ``(C) Section 1903(w) (relating to limitations on 
                provider taxes and donations).
            ``(2) Title xi provisions.--
                    ``(A) Section 1115 (relating to waiver authority).
                    ``(B) Section 1116 (relating to administrative and 
                judicial review), but only insofar as consistent with 
                this title.
                    ``(C) Section 1124 (relating to disclosure of 
                ownership and related information).
                    ``(D) Section 1126 (relating to disclosure of 
                information about certain convicted individuals).
                    ``(E) Section 1128A (relating to civil monetary 
                penalties).
                    ``(F) Section 1128B(d) (relating to criminal 
                penalties for certain additional charges).

``SEC. 2208. REPORTS.

    ``(a) In General.--Each State or group of States administering a 
plan under this title shall annually--
            ``(1) assess the operation of the outpatient prescription 
        drug assistance plan under this title in each fiscal year; and
            ``(2) report to the Secretary on the result of the 
        assessment.
    ``(b) Required Information.--The annual report required under 
subsection (a) shall include the following:
            ``(1) An assessment of the effectiveness of the plan in 
        providing outpatient prescription drug assistance to low-income 
        medicare beneficiaries and, if applicable, medicare 
        beneficiaries with high drug costs.
            ``(2) A description and analysis of the effectiveness of 
        elements of the plan, including--
                    ``(A) the characteristics of the low-income 
                medicare beneficiaries and, if applicable, medicare 
                beneficiaries with high drug costs assisted under the 
                plan, including family income and access to, or 
                coverage by, other health insurance prior to the plan 
                and after eligibility for the plan ends;
                    ``(B) the amount and level of assistance provided 
                under the plan; and
                    ``(C) the sources of the non-Federal share of plan 
                expenditures.
    ``(c) Annual Report of the Secretary.--The Secretary shall submit 
to Congress and make available to the public an annual report based on 
the reports required under subsection (a) and section 2209(b)(5), 
containing any conclusions and recommendations the Secretary considers 
appropriate.

``SEC. 2209. ESTABLISHMENT OF DEFAULT PROGRAM.

    ``(a) Program Authority.--
            ``(1) In general.--With respect to a fiscal year, in the 
        case of a State that fails to submit (individually or as part 
        of a group of States) an approved outpatient prescription drug 
        assistance plan to the Secretary by the date described in 
        section 2204(d)(2) for such fiscal year, outpatient 
        prescription drug assistance to low-income medicare 
        beneficiaries and, subject to the availability of funds, 
        medicare beneficiaries with high drug costs, who reside in such 
        State shall be provided during such fiscal year by the 
        Secretary, through the Administrator of the Health Care 
        Financing Administration, in accordance with this section.
            ``(2) Definitions.--In this section:
                    ``(A) Contractor.--The term `contractor' means a 
                pharmaceutical benefit manager or other entity that 
                meets standards established by the Administrator of the 
Health Care Financing Administration for the provision of outpatient 
prescription drug assistance under a contract entered into under this 
section.
                    ``(B) Low-income medicare beneficiary.--The term 
                `low-income medicare beneficiary' means an individual 
                who--
                            ``(i) satisfies the requirements of 
                        subparagraphs (A) and (B) of section 
                        2202(b)(1);
                            ``(ii) is determined to have family income 
                        that does not exceed a percentage of the 
                        poverty line for a family of the size involved 
                        specified by the Administrator of the Health 
                        Care Financing Administration that may not 
                        exceed 135 percent; and
                            ``(iii) at the option of the Administrator 
                        of the Health Care Financing Administration, is 
                        determined to have resources that do not exceed 
                        a level specified by such Administrator.
                    ``(C) Medicare beneficiary with high drug costs.--
                The term `medicare beneficiary with high drug costs' 
                means an individual--
                            ``(i) who satisfies the requirements of 
                        subparagraphs (A) and (B) of section 
                        2202(b)(1);
                            ``(ii) whose family income exceeds the 
                        percentage of the poverty line specified by the 
                        Administrator of the Health Care Financing 
                        Administration under subparagraph (B)(ii) for a 
                        low-income medicare beneficiary residing in the 
                        same State;
                            ``(iii) whose resources exceed a level (if 
                        any) specified by the Administrator of the 
                        Health Care Financing Administration under 
                        subparagraph (B)(iii) for a low-income medicare 
                        beneficiary residing in the same State; and
                            ``(iv) with respect to any 3-month period, 
                        who has out-of-pocket expenses for outpatient 
                        prescription drugs and biologicals (including 
                        insulin and insulin supplies) for which 
                        outpatient prescription drug assistance is 
                        available under this title that exceed a level 
                        specified by such Administrator (consistent 
                        with the availability of funds for the 
                        operation of the program established under this 
                        section in the State where the beneficiary 
                        resides).
    ``(b) Administration.--In administering the default program 
established under this section, the Administrator of the Health Care 
Financing Administration shall--
            ``(1) establish procedures to determine the eligibility of 
        the low-income medicare beneficiaries and medicare 
        beneficiaries with high drug costs described in subsection (a) 
        for outpatient prescription drug assistance;
            ``(2) establish a process for accepting bids to provide 
        outpatient prescription drug assistance to such beneficiaries, 
        awarding contracts under such bids, and making payments under 
        such contracts;
            ``(3) establish policies and procedures for overseeing the 
        provision of outpatient prescription drug assistance under such 
        contracts;
            ``(4) develop and implement quality and service assessment 
        measures that include beneficiary quality surveys and annual 
        quality and service rankings for contractors awarded a contract 
        under this section;
            ``(5) annually assess the program established under this 
        section and submit a report to the Secretary containing the 
        information required under section 2208(b); and
            ``(6) carry out such other responsibilities as are 
        necessary for the administration of the provision of outpatient 
        prescription drug assistance under this section.
    ``(c) Contract Requirements.--
            ``(1) Authority; term.--
                    ``(A) Use of competitive procedures.--
                            ``(i) Fiscal year 2001.--With respect to 
                        fiscal year 2001, the Administrator of the 
                        Health Care Financing Administration may enter 
                        into contracts under this section without using 
                        competitive procedures, as defined in section 
                        4(5) of the Office of Federal Procurement 
                        Policy Act (41 U.S.C. 403(5)), or any other 
                        provision of law requiring competitive bidding.
                            ``(ii) Fiscal years 2002, 2003, and 2004.--
                        With respect to fiscal years 2002, 2003, and 
                        2004, the Administrator of the Health Care 
                        Financing Administration shall award contracts 
                        under this section using competitive procedures 
                        (as so defined).
                    ``(B) Term.--Each contract shall be for a uniform 
                term of at least 1 year, but may be made automatically 
                renewable from term to term in the absence of notice of 
                termination by either party.
            ``(2) Benefit.--The contract shall require the contractor 
        to provide a low-income medicare beneficiary and, if 
        applicable, a medicare beneficiary with high drug costs, 
        outpatient prescription drug assistance that is equivalent to 
        the FEHBP-equivalent benchmark benefit package described in 
        section 2203(b)(2) in a manner that is consistent with the 
        provisions of this title as such provisions apply to a State 
        that provides such assistance.
            ``(3) Quality and service assessment.--The contract shall 
        require the contractor to cooperate with the quality and 
        service assessment measures implemented in accordance with 
        subsection (b)(4).
            ``(4) Payments.--The contract shall specify the amount and 
        manner by which payments (including any administrative fees) 
        shall be made to the contractor for the provision of outpatient 
        prescription drug assistance to low-income medicare 
        beneficiaries and, if applicable, medicare beneficiaries with 
        high drug costs.
    ``(d) Funding.--
            ``(1) Aggregate of transferred amounts.--The Secretary, 
        through the Administrator of the Health Care Financing 
        Administration, shall use the aggregate of the amounts 
        transferred and made available under section 2204(d)(1)(A)(i) 
        for purposes of carrying out the default program established 
        under this section. Such aggregate may be used to provide 
        outpatient prescription drug assistance to any low-income 
        medicare beneficiary, and, subject to the availability of 
        funds, medicare beneficiary with high drug costs, who resides 
        in a State described in subsection (a)(1).
            ``(2) Limitation on administrative costs.--Administrative 
        expenditures incurred by the Secretary or the Administrator of 
        the Health Care Financing Administration for a fiscal year to 
        carry out this section (other than administrative fees paid to 
        a contractor under a contract meeting the requirements of 
        subsection (c))--
                    ``(A) shall be paid out of the aggregate amounts 
                described in paragraph (1); and
                    ``(B) may not exceed an amount equal to 1 percent 
                of all premiums imposed for such fiscal year to provide 
                outpatient prescription drug assistance to low-income 
                medicare beneficiaries and medicare beneficiaries with 
                high drug costs under this section.
    ``(e) Termination.--Except as provided in section 2201(d)(2), the 
program established under this section shall terminate on December 31, 
2003.

``SEC. 2210. DEFINITIONS.

    ``In this title:
            ``(1) Cost-sharing.--The term `cost-sharing' means a 
        deductible, coinsurance, copayment, or similar charge, and 
        includes an enrollment fee.
            ``(2) Outpatient prescription drug assistance.--
                    ``(A) In general.--The term `outpatient 
                prescription drug assistance' means, subject to 
                subparagraph (B), payment for part or all of the cost 
                of coverage of self-administered outpatient 
                prescription drugs and biologicals (including insulin 
                and insulin supplies) for low-income medicare 
                beneficiaries and, if applicable, medicare 
                beneficiaries with high drug costs.
                    ``(B) Exclusions.--Such term does not include 
                payment or coverage with respect to--
                            ``(i) items covered under title XVIII; or
                            ``(ii) items for which coverage is not 
                        available under a State plan under title XIX.
            ``(3) Outpatient prescription drug assistance plan; plan.--
        Unless the context otherwise requires, the terms `outpatient 
        prescription drug assistance plan' and `plan' mean an 
        outpatient prescription drug assistance plan approved under 
        section 2206.
            ``(4) Group health plan; group health insurance coverage; 
        etc.--The terms `group health plan', `group health insurance 
        coverage', and `health insurance coverage' have the meanings 
        given such terms in section 2791 of the Public Health Service 
        Act (42 U.S.C. 300gg-91).
            ``(5) Poverty line.--The term `poverty line' has the 
        meaning given such term in section 673(2) of the Community 
        Services Block Grant Act (42 U.S.C. 9902(2)), including any 
        revision required by such section.
            ``(6) Preexisting condition exclusion.--The term 
        `preexisting condition exclusion' has the meaning given such 
        term in section 2701(b)(1)(A) of the Public Health Service Act 
        (42 U.S.C. 300gg(b)(1)(A)).
            ``(7) State.--The term `State' has the meaning given such 
        term for purposes of title XIX.''.
    (b) Conforming Amendments.--
            (1) Definition of state.--Section 1101(a)(1) of the Social 
        Security Act (42 U.S.C. 1301(a)(1)) is amended in the first and 
        fourth sentences, by striking ``and XXI'' each place it appears 
        and inserting ``XXI, and XXII''.
            (2) Treatment as state health care program.--Section 
        1128(h) of such Act (42 U.S.C. 1320a-7(h)) is amended--
                    (A) in paragraph (3), by striking ``or'' at the 
                end;
                    (B) in paragraph (4), by striking the period at the 
                end and inserting ``, or''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(5) an outpatient prescription drug assistance plan 
        approved under title XXII.''.

SEC. 3. ELECTION BY LOW-INCOME MEDICARE BENEFICIARIES AND MEDICARE 
              BENEFICIARIES WITH HIGH DRUG COSTS TO SUSPEND MEDIGAP 
              INSURANCE.

    Section 1882(q) of the Social Security Act (42 U.S.C. 1395ss(q)) is 
amended--
            (1) in paragraph (5)(C), by striking ``this paragraph or 
        paragraph (6)'' and inserting ``this paragraph, or paragraph 
        (6) or (7)''; and
            (2) by adding at the end the following new paragraph:
            ``(7) Each medicare supplemental policy shall provide that 
        benefits and premiums under the policy shall be suspended at 
        the request of the policyholder if the policyholder is entitled 
        to benefits under section 226 and is covered under an 
        outpatient prescription drug assistance plan (as defined in 
        section 2210(3)) or provided outpatient prescription drug 
        assistance under the program established under section 2209. If 
        such suspension occurs and if the policyholder or certificate 
        holder loses coverage under such plan or program, such policy 
        shall be automatically reinstituted (effective as of the date 
        of such loss of coverage) under terms described in subsection 
        (n)(6)(A)(ii) as of the loss of such coverage if the 
        policyholder provides notice of loss of such coverage within 90 
        days after the date of such loss.''.
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