II

106TH CONGRESS

1ST SESSION S. 1725

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

supplemental policies so that outpatient prescription drugs are affordable

and accessible for medicare beneficiaries.

IN THE SENATE OF THE UNITED STATES

OCTOBER 14, 1999

Mr. JEFFORDS 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 modernize

medicare supplemental policies so that outpatient prescription drugs are affordable and accessible for medicare

beneficiaries.

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 ‘‘DrugGap Insurance for Seniors Act of 1999’’.

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. Findings and purposes.

Sec. 3. Modernization of medicare supplemental benefit packages.
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Sec. 4. Assistance to qualified low-income medicare beneficiaries.

Sec. 5. Grandfathering of current Medigap enrollees.

Sec. 6. Health insurance information, counseling, and assistance grants.

Sec. 7. NAIC study and report.

1 SEC. 2. FINDINGS AND PURPOSES.

2 (a) FINDINGS.—Congress finds the following:

3 (1) Coverage of outpatient prescription drugs is

4 the most important aspect of medical care not cur5 rently provided under the medicare program under

6 title XVIII of the Social Security Act.

7 (2) The medicare program needs to be re8 formed, and should include provisions that provide

9 access to outpatient prescription drugs for all medi10 care beneficiaries.

11 (3) Comprehensive medicare reform will require

12 extensive time and effort, but Congress must act

13 now to provide outpatient prescription drug coverage

14 to the most vulnerable medicare beneficiaries until

15 such time as the medicare program is reformed.

16 (4) Low-income medicare beneficiaries are the

17 most vulnerable to the high cost of outpatient pre18 scription drugs, since they are often not eligible to

19 receive benefits under medicaid, yet have incomes

20 too low to afford medicare supplemental policies that

21 include coverage for outpatient prescription drugs.

22 (5) Medicare beneficiaries deserve meaningful

23 choices among medicare supplemental policies, in-
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1 cluding the option of purchasing affordable out2 patient prescription drug-only medicare supple3 mental policies.

4 (6) Premiums for medicare supplemental poli5 cies have risen dramatically in recent years, and

6 steps must be taken to keep premiums from rising

7 out of the reach of medicare beneficiaries.

8 (7) Increased use of medicare supplemental

9 policies does not represent sufficient structural medi10 care reform.

11 (b) PURPOSES.—The purposes of this Act are as fol12 lows:

13 (1) To provide medicare supplemental policies

14 covering outpatient prescription drugs to low-income

15 medicare beneficiaries at no cost.

16 (2) To provide expanded choice to all medicare

17 beneficiaries by creating affordable drug-only medi18 care supplemental policies.

19 (3) To ensure that medicare supplemental poli20 cies are modernized in a manner that promotes com21 petition and preserves affordability for all medicare

22 beneficiaries.
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1 SEC. 3. MODERNIZATION OF MEDICARE SUPPLEMENTAL

2 BENEFIT PACKAGES.

3 (a) ADDITION OF DRUGGAP POLICIES AND MODI4 FICATION OF EXISTING MEDIGAP POLICIES.—Section

5 1882 of the Social Security Act (42 U.S.C. 1395ss) is

6 amended by adding at the end the following:

7 ‘‘(v) MODERNIZED BENEFIT PACKAGES FOR MEDI8 CARE SUPPLEMENTAL POLICIES.—

9 ‘‘(1) PROMULGATION OF MODEL REGULA10 TION.—

11 ‘‘(A) NAIC MODEL REGULATION.—If,

12 within 9 months after the date of enactment of

13 the DrugGap Insurance for Seniors Act of

14 1999, the National Association of Insurance

15 Commissioners (in this subsection referred to as

16 the ‘‘NAIC’’) changes the 1991 NAIC Model

17 Regulation (described in subsection (p)) to

18 incorporate—

19 ‘‘(i) limitations on the benefit pack20 ages that may be offered under a medicare

21 supplemental policy consistent with para22 graphs (2) and (3) of this subsection;

23 ‘‘(ii) an appropriate range of coverage

24 options for outpatient prescription drugs,

25 including at least a minimal level of cov26 erage under each benefit package;
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1 ‘‘(iii) a deductible for outpatient pre2 scription drugs that is uniform across each

3 benefit package;

4 ‘‘(iv) uniform language and definitions

5 to be used with respect to such benefits;

6 ‘‘(v) uniform format to be used in the

7 policy with respect to such benefits; and

8 ‘‘(vi) other standards to meet the ad9 ditional requirements imposed by the

10 amendments made by the DrugGap Insur11 ance for Seniors Act of 1999;

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

13 State, effective for policies issued to policy hold14 ers on and after the date specified in subpara15 graph (C), as if the reference to the Model Reg16 ulation adopted on June 6, 1979, were a ref17 erence to the 1991 NAIC Model Regulation as

18 changed under this subparagraph (such

19 changed regulation referred to in this section as

20 the ‘2000 NAIC Model Regulation’).

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

22 If the NAIC does not make the changes in the

23 1991 NAIC Model Regulation within the 9-

24 month period specified in subparagraph (A), the

25 Secretary shall promulgate, not later than 9
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1 months after the end of such period, a regula2 tion and subsection (g)(2)(A) shall be applied in

3 each State, effective for policies issued to policy

4 holders on and after the date specified in sub5 paragraph (C), as if the reference to the Model

6 Regulation adopted on June 6, 1979, were a

7 reference to the 1991 NAIC Model Regulation

8 as changed by the Secretary under this sub9 paragraph (such changed regulation referred to

10 in this section as the ‘2000 Federal Regula11 tion’).

12 ‘‘(C) DATE SPECIFIED.—

13 ‘‘(i) IN GENERAL.—Subject to clause

14 (ii), the date specified in this subparagraph

15 for a State is the date the State adopts the

16 2000 NAIC Model Regulation or 2000

17 Federal Regulation or 1 year after the date

18 the NAIC or the Secretary first adopts

19 such standards, whichever is earlier.

20 ‘‘(ii) STATES REQUIRING REVISIONS

21 TO STATE LAW.—In the case of a State

22 which the Secretary identifies, in consulta23 tion with the NAIC, as—

24 ‘‘(I) requiring State legislation

25 (other than legislation appropriating
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1 funds) in order for medicare supple2 mental policies to meet the 2000

3 NAIC Model Regulation or 2000 Fed4 eral Regulation; but

5 ‘‘(II) having a legislature which

6 is not scheduled to meet in 2001 in a

7 legislative session in which such legis8 lation may be considered;

9 the date specified in this subparagraph is

10 the first day of the first calendar quarter

11 beginning after the close of the first legis12 lative session of the State legislature that

13 begins on or after January 1, 2000. For

14 purposes of the previous sentence, in the

15 case of a State that has a 2-year legislative

16 session, each year of such session shall be

17 deemed to be a separate regular session of

18 the State legislature.

19 ‘‘(D) CONSULTATION WITH WORKING

20 GROUP.—In promulgating standards under this

21 paragraph, the NAIC or Secretary shall consult

22 with a working group composed of representa23 tives of issuers of medicare supplemental poli24 cies, consumer groups, medicare beneficiaries,

25 and other qualified individuals. Such represent-
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1 atives shall be selected in a manner so as to as2 sure balanced representation among the inter3 ested groups.

4 ‘‘(E) MODIFICATION OF STANDARDS IF

5 MEDICARE BENEFITS CHANGE.—If benefits (in6 cluding deductibles and coinsurance) under this

7 title are changed and the Secretary determines,

8 in consultation with the NAIC, that changes in

9 the 2000 NAIC Model Regulation or 2000 Fed10 eral Regulation are needed to reflect such

11 changes, the preceding provisions of this para12 graph shall apply to the modification of stand13 ards previously established in the same manner

14 as they applied to the original establishment of

15 such standards.

16 ‘‘(2) CORE GROUP OF BENEFITS AND NUMBER

17 OF BENEFIT PACKAGES.—The benefits under the

18 2000 NAIC Model Regulation or 2000 Federal Reg19 ulation shall provide—

20 ‘‘(A) for such groups or packages of bene21 fits as may be appropriate taking into account

22 the considerations specified in paragraph (3)

23 and the requirements of the succeeding sub24 paragraphs;
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1 ‘‘(B) for identification of a core group of

2 basic benefits common to all policies other than

3 the medicare supplemental policies described in

4 paragraph (12)(B); and

5 ‘‘(C) that, subject to paragraph (4)(B), the

6 total number of different benefit packages

7 (counting the core group of basic benefits de8 scribed in subparagraph (B) and each other

9 combination of benefits that may be offered as

10 a separate benefit package) that may be estab11 lished in all the States and by all issuers shall

12 not exceed 10 plus the 2 benefit packages de13 scribed in paragraph (11) and the 3 policies de14 scribed in paragraph (12)(B).

15 ‘‘(3) BALANCE OF OBJECTIVES.—The benefits

16 under paragraph (2) shall, to the extent possible,

17 balance the objectives of—

18 ‘‘(A) ensuring that medicare supplemental

19 policies are affordable for beneficiaries under

20 this title, and that the policies modernized

21 under this subsection do not have premiums

22 higher than the medicare supplemental policies

23 available on the date of enactment of the

24 DrugGap Insurance for Seniors Act of 1999;
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1 ‘‘(B) facilitating comparisons among poli2 cies;

3 ‘‘(C) avoiding adverse selection;

4 ‘‘(D) providing consumer choice;

5 ‘‘(E) providing market stability;

6 ‘‘(F) promoting competition;

7 ‘‘(G) including some drug coverage, how8 ever limited, in each of the 10 benefit packages

9 described in paragraph (2)(C); and

10 ‘‘(H) ensuring that beneficiaries under this

11 title receive the benefit of prices for outpatient

12 prescription drugs negotiated by issuers of

13 medicare supplemental policies under this sec14 tion.

15 ‘‘(4) STATES MAY OFFER NEW OR INNOVATIVE

16 SUPPLEMENTAL BENEFITS.—

17 ‘‘(A) COMPLIANCE WITH APPLICABLE 2000

18 NAIC MODEL REGULATION OR 2000 FEDERAL

19 REGULATION REQUIRED.—

20 ‘‘(i) STATES.—Except as provided in

21 subparagraph (B) or paragraph (6), no

22 State with a regulatory program approved

23 under subsection (b)(1) may provide for or

24 permit the grouping of benefits (or lan25 guage or format with respect to such bene-
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1 fits) under a medicare supplemental policy

2 unless such grouping meets the applicable

3 2000 NAIC Model Regulation or 2000

4 Federal Regulation.

5 ‘‘(ii) FEDERAL GOVERNMENT.—Ex6 cept as provided in subparagraph (B), the

7 Secretary may not provide for or permit

8 the grouping of benefits (or language or

9 format with respect to such benefits) under

10 a medicare supplemental policy seeking ap11 proval by the Secretary unless such group12 ing meets the applicable 2000 NAIC Model

13 Regulation or 2000 Federal Regulation.

14 ‘‘(B) ADDITIONAL BENEFITS.—The issuer

15 of a medicare supplemental policy may offer the

16 benefits described in subsection (p)(3)(B) under

17 the circumstances described in such subsection

18 as if each reference to ‘1991’ were a reference

19 to ‘2000’.

20 ‘‘(5) STATES MAY NOT RESTRICT CORE BENE21 FITS.—

22 ‘‘(A) MEDICARE SUPPLEMENTAL POLICIES

23 SUBJECT TO STATE REGULATION.—Except as

24 provided in subparagraph (B), this subsection

25 shall not be construed as preventing a State
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1 from restricting the groups of benefits that may

2 be offered in medicare supplemental policies in

3 the State.

4 ‘‘(B) MUST MAKE CORE BENEFITS AVAIL5 ABLE.—A State with a regulatory program ap6 proved under subsection (b)(1) may not restrict

7 under subparagraph (A) the offering of a medi8 care supplemental policy consisting only of the

9 core group of benefits described in paragraph

10 (2)(B).

11 ‘‘(6) STATE ALTERNATIVE SIMPLIFICATION

12 PROGRAMS.—The Secretary may waive the applica13 tion of standards described in clauses (i) through

14 (vi) of paragraph (1)(A) in those States that on the

15 date of enactment of the DrugGap Insurance for

16 Seniors Act of 1999 had in place an alternative sim17 plification program.

18 ‘‘(7) DISCOUNTS FOR ITEMS AND SERVICES

19 NOT COVERED UNDER MEDICARE SUPPLEMENTAL

20 POLICIES.—This subsection shall not be construed

21 as preventing an issuer of a medicare supplemental

22 policy who otherwise meets the requirements of this

23 section from providing, through an arrangement

24 with a vendor, for discounts from that vendor to pol25 icy holders or certificate holders for the purchase of
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1 items or services not covered under its medicare sup2 plemental policies or under this title, including the

3 issuance of drug discount cards.

4 ‘‘(8) CIVIL PENALTY FOR VIOLATION OF THE

5 MODEL REGULATION.—Except as provided in para6 graph (10), any person who sells or issues a medi7 care supplemental policy, on and after the effective

8 date specified in paragraph (1)(C), in violation of

9 the applicable 2000 NAIC Model Regulation or 2000

10 Federal Regulation insofar as such regulation relates

11 to the requirements of subsection (o) or (q) or

12 clauses (i) through (vi) of paragraph (1)(A) is sub13 ject to a civil money penalty of not to exceed

14 $25,000 (or $15,000 in the case of a seller who is

15 not an issuer of a policy) for each such violation.

16 The provisions of section 1128A (other than the

17 first sentence of subsection (a) and other than sub18 section (b)) shall apply to a civil money penalty

19 under the previous sentence in the same manner as

20 such provisions apply to a penalty or proceeding

21 under section 1128A(a).

22 ‘‘(9) REQUIREMENTS OF SELLERS.—

23 ‘‘(A) CORE BENEFIT PACKAGE.—Anyone

24 who sells a medicare supplemental policy to an

25 individual shall make available for sale to the
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1 individual a medicare supplemental policy with

2 only the core group of basic benefits (described

3 in paragraph (2)(B)).

4 ‘‘(B) OUTLINE OF COVERAGE.—Anyone

5 who sells a medicare supplemental policy to an

6 individual shall provide the individual, before

7 the sale of the policy, an outline of coverage

8 which describes the benefits under the policy.

9 Such outline shall be on a standard form ap10 proved by the State regulatory program or the

11 Secretary (as the case may be) consistent with

12 the 2000 NAIC Model Regulation or 2000 Fed13 eral Regulation under this subsection.

14 ‘‘(C) PENALTIES.—Whoever sells a medi15 care supplemental policy in violation of this

16 paragraph is subject to a civil money penalty of

17 not to exceed $25,000 (or $15,000 in the case

18 of a seller who is not the issuer of the policy)

19 for each such violation. The provisions of sec20 tion 1128A (other than the first sentence of

21 subsection (a) and other than subsection (b))

22 shall apply to a civil money penalty under the

23 previous sentence in the same manner as such

24 provisions apply to a penalty or proceeding

25 under section 1128A(a).
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1 ‘‘(D) EFFECTIVE DATE.—Subject to para2 graph (10), this paragraph shall apply to sales

3 of policies occurring on or after the effective

4 date specified in paragraph (1)(C).

5 ‘‘(10) SAFE HARBOR FOR SELLERS.—No pen6 alty may be imposed under paragraph (8) or (9) in

7 the case of a seller who is not the issuer of a policy

8 until the Secretary has published a list of the groups

9 of benefit packages that may be sold or issued con10 sistent with paragraph (1)(A)(i).

11 ‘‘(11) ADDITION OF HIGH DEDUCTIBLE MEDI12 CARE SUPPLEMENTAL POLICIES.—For purposes of

13 paragraph (2), the benefit packages described in this

14 paragraph are the benefit packages modernized

15 under this subsection that the Secretary determines

16 are most comparable to the benefit packages de17 scribed in subsection (p)(11).

18 ‘‘(12) DRUGGAP MEDICARE SUPPLEMENTAL

19 POLICIES.—

20 ‘‘(A) ESTABLISHMENT OF DRUG-ONLY

21 MEDICARE SUPPLEMENTAL POLICIES.—

22 ‘‘(i) IN GENERAL.—There are estab23 lished 3 benefit packages, consistent with

24 the benefit packages described in subpara25 graph (B), that—
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1 ‘‘(I) consist of only outpatient

2 prescription drug benefits;

3 ‘‘(II) may be designed to incor4 porate the utilization management

5 techniques described in subparagraph

6 (C);

7 ‘‘(III) do not include benefits for

8 prescription drugs otherwise available

9 under part A or B; and

10 ‘‘(IV) do not include benefits for

11 any prescription drug excluded by the

12 State in which the medicare supple13 mental policy is issued or sold under

14 section 1927(d).

15 ‘‘(ii) DEFINITION.—In this section,

16 the term ‘DrugGap medicare supplemental

17 policy’ means a medicare supplemental pol18 icy (as defined in subsection (g)(1)) that

19 has 1 of the benefit packages described in

20 subparagraph (B).

21 ‘‘(B) BENEFIT PACKAGES DESCRIBED.—

22 The benefit packages for DrugGap medicare

23 supplemental policies described in this para24 graph are as follows:
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1 ‘‘(i) STANDARD DRUGGAP BENEFIT

2 PACKAGES.—

3 ‘‘(I) STANDARD DRUGGAP.—A

4 Standard DrugGap medicare supple5 mental policy that provides a deduct6 ible not to exceed $250, coinsurance

7 not to exceed 20 percent, and a

8 $5,000 maximum benefit.

9 ‘‘(II) LOW-COST STANDARD

10 DRUGGAP.—A Low-Cost Standard

11 DrugGap medicare supplemental pol12 icy that provides a deductible not to

13 exceed $750, coinsurance not to ex14 ceed 30 percent, and a $5,000 max15 imum benefit.

16 ‘‘(ii) STOP-LOSS DRUGGAP BENEFIT

17 PACKAGE.—A Stop-Loss DrugGap medi18 care supplemental policy that provides a

19 stop-loss coverage benefit that limits the

20 application of any beneficiary cost-sharing

21 during a year after the beneficiary incurs

22 out-of-pocket covered expenditures in ex23 cess of $5,000, or, in the case that the

24 beneficiary owns a DrugGap medicare sup25 plemental policy described in clause (i),
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1 such beneficiary reaches the maximum

2 benefit under such policy.

3 ‘‘(iii) MAXIMUM BENEFIT DEFINED.—

4 In this paragraph, the term ‘maximum

5 benefit’ means the total amount paid for

6 covered outpatient prescription drugs, in7 cluding any amounts paid by the issuer of

8 the DrugGap medicare supplemental policy

9 and any cost-sharing paid by the policy10 holder.

11 ‘‘(C) USE OF UTILIZATION MANAGEMENT

12 TECHNIQUES.—

13 ‘‘(i) FORMULARIES.—An issuer may

14 use a formulary to contain costs under any

15 benefit package established under subpara16 graph (A)(i) only if the issuer—

17 ‘‘(I) includes in the formulary at

18 least 1 drug from each therapeutic

19 class and provides at least 1 generic

20 equivalent, if available; and

21 ‘‘(II) provides for coverage of

22 otherwise covered nonformulary drugs

23 when a nonformulary alternative is

24 medically necessary and appropriate.
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1 ‘‘(ii) OTHER UTILIZATION MANAGE2 MENT TECHNIQUES.—Nothing in this part

3 shall be construed as preventing an issuer

4 offering DrugGap medicare supplemental

5 policies from using reasonable utilization

6 management techniques, including generic

7 drug substitution, consistent with applica8 ble law.’’.

9 (b) DRUGGAP MEDIGAP POLICIES DO NOT DUPLI10 CATE OTHER MEDIGAP POLICIES.—Section 1882(d)(3) of

11 the Social Security Act (42 U.S.C. 1395ss(d)(3)) is

12 amended—

13 (1) in subparagraph (A), by adding at the end

14 the following:

15 ‘‘(ix) Nothing in this subparagraph shall be construed

16 as preventing the sale of a DrugGap policy to an indi17 vidual, provided that the sale is of a DrugGap policy that

18 does not duplicate any health benefits under a medicare

19 supplemental policy owned by the individual.’’;

20 (2) in subparagraph (B)(ii)(I), by inserting

21 ‘‘and one DrugGap medicare supplemental policy’’

22 before the comma; and

23 (3) in subparagraph (B)(iii)—

24 (A) in subclause (I), by striking ‘‘(II) and

25 (III)’’ and inserting ‘‘(II), (III), and (IV)’’;
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1 (B) by redesignating subclause (III) as

2 subclause (IV); and

3 (C) by inserting after subclause (II) the

4 following:

5 ‘‘(III) If the statement required by clause (i) is ob6 tained and indicates that the individual is enrolled in 1

7 or more medicare supplemental policies, the sale of a

8 DrugGap policy is not in violation of clause (i) if such

9 DrugGap policy does not duplicate health benefits under

10 any policy in which the individual is enrolled.’’.

11 (c) ENROLLMENT IN CASE OF INVOLUNTARY TERMI12 NATIONS OF COVERAGE.—Section 1882(s)(3)(C)(i) of the

13 Social Security Act (42 U.S.C. 1395ss(s)(3)(C)(i)) is

14 amended by striking ‘‘under subsection (p)(2)’’ and insert15 ing ‘‘under subsection (v)(2), a Standard DrugGap medi16 care supplemental policy under the standards established

17 under subsection (v)(12)(B)(i), and a Stop-Loss DrugGap

18 medicare supplemental policy under the standards estab19 lished under subsection (v)(12)(B)(ii)’’.

20 (d) SPECIAL ENROLLMENT PERIOD.—Section

21 1882(n) of the Social Security Act (42 U.S.C. 1395ss(n))

22 is amended by adding at the end the following:

23 ‘‘(7)(A) No medicare supplemental policy of the

24 issuer shall be deemed to meet the standards in subsection

25 (c) unless the issuer—
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1 ‘‘(i) provides written notice, within a 60-day pe2 riod specified in the modernization of the medicare

3 supplemental policies under subsection (v), to the

4 policyholder or certificate holder (at the most recent

5 available address) of the offer described in clause

6 (ii); and

7 ‘‘(ii) offers the individual under the terms de8 scribed in subparagraph (B), during a period of 180

9 days beginning on the date specified in subpara10 graph (C), institution of coverage effective as of the

11 date specified in the modernization described in

12 clause (i) for such purpose, for any policy described

13 under subsection (v).

14 ‘‘(B) The terms described under this subparagraph

15 are terms which do not—

16 ‘‘(i) deny or condition the issuance or effective17 ness of a medicare supplemental policy described in

18 subparagraph (A)(ii) that is offered and is available

19 for issuance to new enrollees by such issuer;

20 ‘‘(ii) discriminate in the pricing of such policy,

21 because of health status, claims experience, receipt

22 of health care, or medical condition; or

23 ‘‘(iii) impose an exclusion of benefits based on

24 a preexisting condition under such policy.
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1 ‘‘(C) The date specified in this subparagraph for a

2 policy issued in a State is such date as the Secretary, in

3 consultation with the NAIC, specifies (taking into account

4 the method used under paragraph (4) for establishing a

5 date under this subsection).’’.

6 (e) CONFORMING AMENDMENTS.—Section 1882 of

7 the Social Security Act (42 U.S.C. 1395ss) is amended—

8 (1) in subsection (a)(2)—

9 (A) in the matter preceding subparagraph

10 (A), by striking ‘‘(p)’’ and inserting ‘‘(v)’’;

11 (B) in subparagraph (A)—

12 (i) by striking ‘‘1991’’ each place it

13 appears and inserting ‘‘2000’’; and

14 (ii) by striking ‘‘(p)’’ and inserting

15 ‘‘(v)’’; and

16 (C) in the matter following subparagraph

17 (B), by striking ‘‘(p)’’ and inserting ‘‘(v)’’;

18 (2) in subsection (o)—

19 (A) in paragraph (1), by striking ‘‘(p)’’

20 and inserting ‘‘(v)’’; and

21 (B) in paragraph (2), by striking ‘‘(p)’’

22 and inserting ‘‘(v)’’; and

23 (3) in subsection (r)—

24 (A) in paragraph (1)—
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1 (i) in the matter preceding subpara2 graph (A), by striking ‘‘(p)’’ and inserting

3 ‘‘(v)’’; and

4 (ii) in the matter following subpara5 graph (B), by striking ‘‘(p)’’ and inserting

6 ‘‘(v)’’; and

7 (B) in paragraph (2)(A)—

8 (i) by striking ‘‘(p)’’ and inserting

9 ‘‘(v)’’; and

10 (ii) by striking ‘‘the date specified in

11 section 171(m)(4) of the Social Security

12 Act Amendments of 1994’’ and inserting

13 ‘‘the date of enactment of the DrugGap In14 surance for Seniors Act of 1999’’.

15 SEC. 4. ASSISTANCE TO QUALIFIED LOW-INCOME MEDI16 CARE BENEFICIARIES.

17 (a) IN GENERAL.—Part B of title XVIII of the Social

18 Security Act (42 U.S.C. 1395j et seq.) is amended by add19 ing at the end the following:

20 ‘‘SEC. 1849. ASSISTANCE TO QUALIFIED LOW-INCOME MEDI21 CARE BENEFICIARIES.

22 ‘‘(a) QUALIFIED LOW-INCOME MEDICARE BENE23 FICIARY DEFINED.—For purposes of this part, the term

24 ‘qualified low-income medicare beneficiary’ means an

25 individual—
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1 ‘‘(1) who is—

2 ‘‘(A) entitled to benefits under part A;

3 ‘‘(B) enrolled under this part; and

4 ‘‘(C) who does not have coverage for out5 patient prescription drugs through enrollment

6 in a Medicare+Choice plan offered by a

7 Medicare+Choice organization under part C or

8 in a group health plan;

9 ‘‘(2) who would be eligible for medical assist10 ance under title XIX but for the fact that the indi11 vidual’s income exceeds the income level (expressed

12 as a percentage of the poverty line) established by

13 the State for eligibility for medical assistance under

14 such title, including at least the care and services

15 listed in paragraphs (1) through (5), (17), and (21)

16 of section 1905(a), but does not exceed the lesser

17 of—

18 ‘‘(A) 50 percentage points above such in19 come level; or

20 ‘‘(B) 200 percent of the poverty line; and

21 ‘‘(3) who is enrolled in—

22 ‘‘(A) a Standard DrugGap medicare sup23 plemental policy and a Stop-Loss DrugGap

24 medicare supplemental policy as such policies
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1 are described in clauses (i)(I) and (ii) of section

2 1882(v)(12)(B), respectively; or

3 ‘‘(B) a Low-Cost Standard DrugGap medi4 care supplemental policy and a Stop-Loss

5 DrugGap medicare supplemental policy as such

6 policies are described in clauses (i)(II) and (ii)

7 of section 1882(v)(12)(B), respectively.

8 ‘‘(b) PROGRAM ADMINISTERED BY THE STATES.—

9 ‘‘(1) IN GENERAL.—The Secretary shall estab10 lish an arrangement with each State (as defined

11 under section 1861(x)) under which the State per12 forms the functions described in paragraphs (2)

13 through (4).

14 ‘‘(2) ANNUAL ELIGIBILITY.—The State shall

15 determine whether a beneficiary under this title in

16 the State is a qualified low-income medicare bene17 ficiary. A determination that such an individual is a

18 qualified low-income medicare beneficiary shall re19 main valid for a period of 12 months but is condi20 tioned upon continuing enrollment in medicare sup21 plemental policies described in subsection (a)(4).

22 ‘‘(3) COMPUTATION OF STATE WEIGHTED AV23 ERAGE PREMIUM FOR STANDARD DRUGGAP AND

24 STOP-LOSS DRUGGAP MEDICARE SUPPLEMENTAL

25 POLICIES.—For each year, the State shall compute
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1 a State weighted average premium equal to the

2 weighted average of the premiums for medicare sup3 plemental policies described in clause (i)(I) of section

4 1882(v)(12)(B) and the medicare supplemental poli5 cies described in clause (ii) of such section for the

6 State, with the weight for each medicare supple7 mental policy being equal to the average number of

8 beneficiaries under this title enrolled under such pol9 icy in the previous year. In the initial year that such

10 medicare supplemental policies are available, the

11 State shall estimate the State weighted average pre12 mium for each type of policy.

13 ‘‘(4) PAYMENT BY STATES ON BEHALF OF

14 QUALIFIED LOW-INCOME MEDICARE BENE15 FICIARIES.—The State shall provide for payment to

16 the appropriate entity on behalf of a qualified low17 income medicare beneficiary for a year in an amount

18 equal to—

19 ‘‘(A) for the medicare supplemental policy

20 described under clause (i) of section

21 1882(v)(12)(B) in which such beneficiary is en22 rolled, the lesser of—

23 ‘‘(i) the amount of the State weighted

24 average premium (as computed under
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1 paragraph (3)) for the policies described

2 under subclause (I) of such clause; or

3 ‘‘(ii) the full quoted premium for the

4 policy;

5 ‘‘(B) for the medicare supplemental policy

6 described under clause (ii) of section

7 1882(v)(12)(B) in which such beneficiary is en8 rolled, the lesser of—

9 ‘‘(i) the amount of the State weighted

10 average premium (as computed under

11 paragraph (3)) for the policies described

12 under such clause; or

13 ‘‘(ii) the full quoted premium for the

14 policy; and

15 ‘‘(C) such beneficiary out-of-pocket ex16 penses related to the supplemental benefits pro17 vided under the policies described in subpara18 graphs (A) and (B) as the State determines is

19 appropriate.

20 ‘‘(c) PAYMENTS TO STATES.—

21 ‘‘(1) REIMBURSEMENT FROM FEDERAL SUP22 PLEMENTARY MEDICAL INSURANCE TRUST FUND.—

23 Each calendar quarter in a fiscal year, the Secretary

24 shall pay to each State from the Federal Supple25 mentary Medical Insurance Trust Fund under sec-
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1 tion 1841 an amount equal to the amount paid by

2 the State under subsection (b)(4).

3 ‘‘(2) EXCLUSION OF ADDITIONAL PART B COSTS

4 FROM DETERMINATION OF PART B PREMIUM.—In

5 estimating the benefits and administrative costs that

6 will be payable from the Federal Supplementary

7 Medical Insurance Trust Fund for a year for pur8 poses of determining the monthly premium rate

9 under section 1839(a)(3), the Secretary shall exclude

10 an estimate of any benefits and administrative costs

11 attributable to the application of this section.

12 ‘‘(3) CONSTRUCTION RELATIVE TO OTHER BEN13 EFITS.—Nothing in this section shall be construed

14 as requiring a State, under its plan under title XIX,

15 to be responsible for any portion of the subsidy or

16 beneficiary cost-sharing provided under this section

17 to qualified low-income medicare beneficiaries.

18 ‘‘(d) MAINTENANCE OF STATE EFFORT REQUIRE19 MENT.—In the case of any State in which the income level

20 (expressed as a percentage of the poverty line) established

21 by the State for eligibility for medical assistance under

22 title XIX (that includes at least the care and services list23 ed in paragraphs (1) through (5), (17), and (21) of section

24 1905(a)) is less than 150 percent of the poverty line appli-
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1 cable to a family of the size involved in a calendar quarter

2 in a fiscal year—

3 ‘‘(1) no payment may be made to such State

4 under section 1849(c) for a calendar quarter in a

5 fiscal year unless the State demonstrates to the sat6 isfaction of the Secretary that the expenditures of

7 the State for any State-funded prescription drug

8 program for which individuals entitled to benefits

9 under this section are eligible during the fiscal year

10 is not less than the level of such expenditures for

11 fiscal year 1999; and

12 ‘‘(2) payments shall not be made under this

13 section for coverage of prescription drugs to the ex14 tent that—

15 ‘‘(A) payment is made under such a pro16 gram; or

17 ‘‘(B) the Secretary determines payment

18 would be made under such a program as in ef19 fect on the date of enactment of the DrugGap

20 Insurance for Seniors Act of 1999.

21 ‘‘(e) POVERTY LINE DEFINED.—The term ‘poverty

22 line’ has the meaning given such term in section 673(2)

23 of the Community Services Block Grant Act (42 U.S.C.

24 9902(2)), including any revision required by such sec25 tion.’’.
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1 (b) CONFORMING AMENDMENT.—Section 1839(a)(3)

2 of the Social Security Act (42 U.S.C. 1395r(a)(3)), as

3 amended by section 5101(e) of the Tax and Trade Relief

4 Extension Act of 1998 (contained in division J of Public

5 Law 105–277), is amended by striking ‘‘except as pro6 vided in subsection (g)’’ and inserting ‘‘except as provided

7 in subsection (g) or section 1849(d)’’.

8 SEC. 5. GRANDFATHERING OF CURRENT MEDIGAP EN9 ROLLEES.

10 (a) IN GENERAL.—The amendments made by this

11 Act shall take effect on the date of enactment of this Act,

12 and shall apply to medicare supplemental policies issued

13 or sold after the date specified in subsection (b), but shall

14 not apply to the renewal of medicare supplemental policies

15 that are in existence on such date.

16 (b) DATE SPECIFIED.—The date specified in this

17 subsection for each State is the date specified under sec18 tion 1882(n)(7)(C) of the Social Security Act (42 U.S.C.

19 1395ss(n)(7)(C)) (as added by section 3(d) of this Act).

20 SEC. 6. HEALTH INSURANCE INFORMATION, COUNSELING,

21 AND ASSISTANCE GRANTS.

22 (a) IN GENERAL.—Section 4360(b)(2)(A)(ii) of the

23 Omnibus Budget Reconciliation Act of 1990 (42 U.S.C.

24 1395b–4(b)(2)(A)(ii)) is amended by striking ‘‘and infor25 mation’’ and inserting ‘‘, providing specific information re-
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1 garding any DrugGap benefit medicare supplemental pol2 icy described under section 1882(v) of the Social Security

3 Act (42 U.S.C. 1395ss(v)), and information’’.

4 (b) AUTHORIZATION OF APPROPRIATIONS.—In addi5 tion to any amounts otherwise appropriated, there are au6 thorized to be appropriated $50,000,000 for each fiscal

7 year, beginning with the first year in which a DrugGap

8 medicare supplemental policy described in section

9 1882(v)(12) is available, for the purpose of carrying out

10 the provisions of section 4360 of the Omnibus Budget

11 Reconciliation Act of 1990 (as amended by subsection

12 (a)).

13 SEC. 7. NAIC STUDY AND REPORT.

14 (a) STUDY.—The Secretary of Health and Human

15 Services shall contract with the National Association of

16 Insurance Commissioners (referred to in this section as

17 the ‘‘NAIC’’) to conduct a study of medicare supplemental

18 policies offered under section 1882 of the Social Security

19 Act (42 U.S.C. 1395ss) in order to identify—

20 (1) areas that are the cause of increasing medi21 care supplemental insurance claims costs (such as

22 outpatient expenses) that affect the affordability of

23 medicare supplemental policies;

24 (2) changes to Federal law (if any) required to

25 address the issues identified under paragraph (1) to
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1 make medicare supplemental policies more afford2 able for beneficiaries under the medicare program

3 under title XVIII of the Social Security Act (42

4 U.S.C. 1395 et seq.); and

5 (3) methods of encouraging additional issuers

6 to offer such policies and to reduce the cost of pre7 miums for such policies.

8 (b) REPORT.—Not later than November 1, 2001, the

9 NAIC shall submit a report to the Secretary of Health

10 and Human Services on the study conducted under sub11 section (a) that contains a detailed statement of the find12 ings and conclusions of the NAIC together with rec13 ommendations for such legislation and administrative ac14 tions as the NAIC considers appropriate.

15 (c) TRANSMISSION TO CONGRESS.—Not later than

16 January 1, 2002, the Secretary of Health and Human

17 Services shall transmit the report submitted under sub18 section (b) to Congress together with recommendations for

19 such legislation and administrative actions as the Sec20 retary considers appropriate.

Æ