II

106TH CONGRESS

1ST SESSION S. 1480

To amend title XVIII of the Social Security Act to assure access of medicare

beneficiaries to prescription drug coverage through the SPICE drug

benefit program.

IN THE SENATE OF THE UNITED STATES

AUGUST 4, 1999

Ms. SNOWE (for herself and Mr. WYDEN) 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 assure

access of medicare beneficiaries to prescription drug coverage through the SPICE drug benefit program.

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 ‘‘Seniors Prescription Insurance Coverage Equity

6 (SPICE) Act of 1999’’.

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

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. SPICE drug benefit program.
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‘‘PART D—SPICE DRUG BENEFIT PROGRAM

‘‘Sec. 1860A. Establishment of SPICE drug benefit program.

‘‘Sec. 1860B. Requirements for offering SPICE drug benefit coverage.

‘‘Sec. 1860C. Enrollment process for SPICE drug benefit coverage.

‘‘Sec. 1860D. Financial assistance to obtain SPICE prescription drug coverage

‘‘Sec. 1860E. SPICE Board.

‘‘Sec. 1860F. SPICE Trust Fund.

Sec. 3. Conforming changes to medigap.

Sec. 4. Provision of information on SPICE drug benefit program under health

insurance information, counseling, and assistance grants.

Sec. 5. Funding through taxes on tobacco products.

1 SEC. 2. SPICE DRUG BENEFIT PROGRAM.

2 Title XVIII of the Social Security Act (42 U.S.C.

3 1395 et seq.) is amended by redesignating part D as part

4 E and by inserting after part C the following new part:

5 ‘‘PART D—SPICE DRUG BENEFIT PROGRAM

6 ‘‘ESTABLISHMENT OF SPICE DRUG BENEFIT PROGRAM

7 ‘‘SEC. 1860A. (a) IN GENERAL.—Under this part,

8 the SPICE Board (established under section 1860E) shall

9 provide for a SPICE drug benefit program under which—

10 ‘‘(1) all eligible medicare beneficiaries shall be

11 provided access to SPICE prescription drug cov12 erage (meeting the conditions of section 1860B)

13 through either enrollment in a Medicare+Choice

14 plan, enrollment in a SPICE medicare supplemental

15 policy, or coverage under a group health plan; and

16 ‘‘(2) there is financial assistance provided under

17 section 1860D for beneficiaries who voluntarily ob18 tain such coverage, with such assistance varying de19 pending upon the income of such beneficiaries.
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1 ‘‘(b) VOLUNTARY NATURE OF PROGRAM FOR ENTI2 TIES AND BENEFICIARIES.—Nothing in this part shall be

3 construed as requiring—

4 ‘‘(1) an eligible medicare beneficiary to obtain

5 coverage under a plan or policy that provides SPICE

6 prescription drug coverage;

7 ‘‘(2) a Medicare+Choice organization to offer a

8 Medicare+Choice plan that provides SPICE pre9 scription drug coverage; or

10 ‘‘(3) an issuer of a medicare supplemental pol11 icy to issue a SPICE medicare supplemental policy.

12 ‘‘(c) PROVIDING INFORMATION TO BENE13 FICIARIES.—

14 ‘‘(1) IN GENERAL.—The SPICE Board shall

15 broadly disseminate information to eligible medicare

16 beneficiaries on the SPICE drug benefit program

17 under this part, including information on the sanc18 tions for delayed enrollment under section 1860D(e).

19 ‘‘(2) SIMILAR TO MEDICARE+CHOICE ACTIVI20 TIES.—Such activities shall be similar to the activi21 ties performed under section 1851(d) (including the

22 approval of policy marketing materials).

23 ‘‘(3) ARRANGEMENTS.—The SPICE Board

24 shall, in cooperation with the Secretary, enter into

25 such arrangements as may be appropriate to dis-
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1 seminate widely to eligible medicare beneficiaries in2 formation about the SPICE drug benefit program in

3 connection with materials distributed by the Sec4 retary to medicare beneficiaries, including in the

5 medicare handbook under section 1804 and in mate6 rials distributed under section 1851(d).

7 ‘‘(d) ELIGIBLE MEDICARE BENEFICIARY DE8 FINED.—For purposes of this part, the term ‘eligible

9 medicare beneficiary’ means an individual who is entitled

10 to benefits under part A and enrolled under part B.

11 ‘‘REQUIREMENTS FOR OFFERING SPICE DRUG BENEFIT

12 COVERAGE

13 ‘‘SEC. 1860B. (a) REQUIREMENT FOR APPROVAL OF

14 NAIC MODEL REVISIONS.—

15 ‘‘(1) IN GENERAL.—

16 ‘‘(A) CONDITION FOR OFFERING SPICE

17 MEDICARE SUPPLEMENTAL POLICY.—On or

18 after the effective date of this provision, it is

19 unlawful to issue or sell a medicare supple20 mental policy (as defined in section 1882(g))

21 that provides coverage of outpatient prescrip22 tion drugs in a State unless—

23 ‘‘(i) the State has adopted the Na24 tional Association of Insurance Commis25 sioners revisions under section
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1 1882(v)(1)(A) that have been approved by

2 the SPICE Board under this section; and

3 ‘‘(ii) the coverage is offered consistent

4 with section 1860C.

5 The penalties described in clause (ii) of section

6 1882(d)(3)(A) shall apply to whoever violates

7 this subparagraph in the same manner as they

8 apply to whoever violates such section.

9 ‘‘(B) CONDITION FOR RECEIPT OF SPICE

10 FINANCIAL ASSISTANCE.—No payment of finan11 cial assistance with respect to coverage of an el12 igible medicare beneficiary under SPICE pre13 scription drug coverage which is offered either

14 as a SPICE medicare supplemental policy, as

15 part of the benefits under a Medicare+Choice

16 plan, or as part of the benefits under a group

17 health plan, shall be made unless—

18 ‘‘(i) an application with respect to

19 such coverage has been approved by the

20 SPICE Board under this section; and

21 ‘‘(ii) in the case of a SPICE medicare

22 supplemental policy or a Medicare+Choice

23 plan, the coverage is offered consistent

24 with section 1860C.
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1 ‘‘(2) ESTABLISHMENT OF APPLICATION PROC2 ESS.—

3 ‘‘(A) IN GENERAL.—The SPICE Board

4 shall establish—

5 ‘‘(i) procedures regarding the informa6 tion to be included in applications under

7 this section and for the time and manner

8 in which such applications should be sub9 mitted;

10 ‘‘(ii) conditions (consistent with this

11 part) for the approval of such applications;

12 and

13 ‘‘(iii) the period (in no case less than

14 1 year) for which approval of such an ap15 plication is valid.

16 ‘‘(B) DISAPPROVAL.—The SPICE Board

17 may disapprove (or revoke the approval) of such

18 an application if the Board finds that, in the

19 case of a SPICE medicare supplemental policy

20 or Medicare+Choice plan, that the entity offer21 ing the SPICE prescription drug coverage is

22 purposefully engaged in activities intended to

23 result in favorable selection of those eligible

24 medicare beneficiaries obtaining coverage

25 through the policy or plan.
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1 ‘‘(b) SPICE PRESCRIPTION DRUG COVERAGE DE2 FINED.—For purposes of this title, the term ‘SPICE pre3 scription drug coverage’ means coverage of outpatient pre4 scription drugs that the SPICE Board determines meets

5 the following requirements:

6 ‘‘(1) BENEFIT LEVEL.—The benefits

7 provided—

8 ‘‘(A) are limited to outpatient prescription

9 drugs;

10 ‘‘(B) include at least the threshold benefits

11 specified under subsection (c); and

12 ‘‘(C) do not include benefits for prescrip13 tion drugs for which benefits are otherwise

14 available (directly or when furnished as part of,

15 or as an incident to, another item or service)

16 under part A or B.

17 ‘‘(2) ACCESSIBILITY.—The benefits are acces18 sible and convenient to all eligible medicare bene19 ficiaries who have such coverage and provide for ac20 cess on a timely basis to new outpatient prescription

21 drugs and they become available.

22 ‘‘(3) NO PRE-EXISTING CONDITION EXCLU23 SIONS.—There are no pre-existing condition exclu24 sions or similar exclusions applied with respect to

25 the coverage.
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1 ‘‘(4) LIMITS ON FORMULARIES.—If the cov2 erage uses a formulary, the formulary meets the re3 quirements of subsection (d).

4 ‘‘(c) THRESHOLD BENEFIT LEVEL.—

5 ‘‘(1) IN GENERAL.—The SPICE Board shall re6 quest the National Association of Insurance Com7 missioners to revise the model standards for medi8 care supplemental policies pursuant to section

9 1882(v) for the purpose of—

10 ‘‘(A) defining the term ‘outpatient pre11 scription drugs’; and

12 ‘‘(B) specifying a threshold level of benefits

13 for SPICE prescription drug coverage.

14 ‘‘(2) CONSIDERATIONS.—

15 ‘‘(A) DEFINITION.—In establishing a defi16 nition under paragraph (1)(A), the Board shall

17 request that the National Association of Insur18 ance Commissioners take into account the defi19 nition of covered outpatient drugs under section

20 1927(k)(2) (which includes biological products

21 and insulin).

22 ‘‘(B) THRESHOLD.—In specifying the

23 threshold level under paragraph (1)(B), the

24 Board shall request that the National Associa25 tion of Insurance Commissioners—
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1 ‘‘(i) take into account the level of such

2 coverage (including deductibles and other

3 cost-sharing) applied under health plans

4 offered under the Federal Employees

5 Health Benefits Program (under chapter

6 89 of title 5, United States Code) and

7 under other large group health plans; and

8 ‘‘(ii) permit (if determined appro9 priate) optional coverage of drugs (except

10 for agents used to promote smoking ces11 sation) for which coverage may be excluded

12 or restricted under section 1927(d)(2).

13 ‘‘(3) CONSTRUCTION.—Nothing in this part

14 shall be construed as preventing SPICE prescription

15 drug coverage from providing benefits for outpatient

16 prescription drugs in excess of the threshold speci17 fied under this subsection.

18 ‘‘(d) FORMULARY REQUIREMENTS.—

19 ‘‘(1) IN GENERAL.—A formulary meets the re20 quirements of this subsection only if—

21 ‘‘(A) such formulary is based on the med22 ical needs of eligible medicare beneficiaries;

23 ‘‘(B) the entity offering the coverage has

24 in place an appeals process for any eligible

25 medicare beneficiary to receive any medically
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1 necessary outpatient prescription drug that is

2 not on the formulary;

3 ‘‘(C) such procedures do not impose a sig4 nificant financial burden on an eligible medicare

5 beneficiary or delay the provision of medically

6 necessary outpatient prescription drugs to such

7 a beneficiary; and

8 ‘‘(D) the entity offering the coverage pro9 vides notification to enrollees of any change in

10 the formulary and such notification is provided

11 at least 60 days prior to such change.

12 ‘‘(2) APPEAL PROCESS.—The appeals process

13 established under paragraph (1)(B) shall provide for

14 at least a level of protection that is similar to or bet15 ter than the level of protection provided with respect

16 to benefits under Medicare+Choice plans under part

17 C.

18 ‘‘(e) USE OF COST CONTAINMENT MECHANISMS.—

19 Nothing in this part shall be construed as preventing an

20 entity offering SPICE prescription drug coverage from

21 using reasonable cost containment methods, such as

22 formularies, mail order services, and generic drug substi23 tution, consistent with the specific requirements of this

24 part and applicable law.
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1 ‘‘ENROLLMENT PROCESS FOR SPICE DRUG BENEFIT

2 COVERAGE

3 ‘‘SEC. 1860C. (a) ENROLLMENT PROCESS.—The

4 SPICE Board shall establish procedures, consistent with

5 this section, through which an eligible medicare bene6 ficiary may voluntarily elect whether or not to enroll,

7 disenroll, and change enrollment in a SPICE medicare

8 supplemental policy or in a Medicare+Choice plan that

9 includes SPICE prescription drug coverage.

10 ‘‘(b) CONSIDERATIONS.—In establishing such proce11 dures, the SPICE Board shall—

12 ‘‘(1) use rules similar to the rules for enroll13 ment, disenrollment, and changes in enrollment in a

14 Medicare+Choice plan under section 1851 (includ15 ing annual open enrollment periods and guaranteed

16 issue during any enrollment period);

17 ‘‘(2) permit special enrollment periods in cases

18 in which an eligible medicare beneficiary, who is en19 rolled under a Medicare+Choice plan or group

20 health plan that provides SPICE prescription drug

21 coverage—

22 ‘‘(A) loses such coverage under such a

23 plan; or

24 ‘‘(B) experiences a significant adverse in25 come level change (as defined by the SPICE
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1 Board) which changes the level of financial as2 sistance available under section 1860D; and

3 ‘‘(3) provide for coordination with the Secretary

4 with respect to such enrollment, disenrollment, and

5 changes in enrollment under par C.

6 ‘‘FINANCIAL ASSISTANCE TO OBTAIN SPICE

7 PRESCRIPTION DRUG COVERAGE

8 ‘‘SEC. 1860D. (a) IN GENERAL.—The SPICE Board

9 shall provide financial assistance, in accordance with this

10 section, with respect to eligible medicare beneficiaries who

11 have SPICE prescription drug coverage through enroll12 ment in a SPICE medicare supplemental policy, in a

13 Medicare+Choice plan that includes such coverage, or in

14 a group health plan that includes such coverage.

15 ‘‘(b) AMOUNT OF ASSISTANCE.—

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

17 and (f) and paragraph (2), the amount of financial

18 assistance with respect to an eligible medicare bene19 ficiary is equal to the following percentage of the ap20 plicable cost (as defined in subsection (g)(1)) of the

21 SPICE prescription drug coverage:

22 ‘‘(A) 100 PERCENT IF INCOME BELOW 150

23 PERCENT OF POVERTY.—In the case of an eligi24 ble medicare beneficiary who applies for en25 hanced financial assistance under subsection (c)

26 and whose income (as verified under such sub-
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1 section) does not exceed 150 percent of the pov2 erty line, the percentage is 100 percent.

3 ‘‘(B) OTHER PERCENT IF INCOME BE4 TWEEN 150 AND 175 PERCENT OF POVERTY.—

5 In the case of an eligible medicare beneficiary

6 who applies for enhanced financial assistance

7 under subsection (c) and whose income (as

8 verified under such subsection) is greater than

9 150 percent, but does not exceed 175 percent,

10 of the poverty line, the SPICE Board shall

11 specify the percentage consistent with the fol12 lowing rules:

13 ‘‘(i) RANGE.—The percentage may

14 not exceed 100 percent nor be less than

15 the percentage specified under subpara16 graph (C).

17 ‘‘(ii) SLIDING SCALE.—The percent18 age may not be higher for eligible medicare

19 beneficiaries whose income is higher.

20 ‘‘(iii) WITHIN AVAILABLE FUNDS.—

21 The percentage is established in a manner

22 that is consistent with the amount of funds

23 available for financial assistance under this

24 section.
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1 ‘‘(C) 25 PERCENT FOR OTHER BENE2 FICIARIES.—In the case of any other eligible

3 medicare beneficiary, the percentage is 25 per4 cent.

5 ‘‘(2) LIMITATION IN CASE OF COVERAGE PRO6 VIDED THROUGH A MEDICARE+CHOICE PLAN.—In

7 the case of financial assistance provided under this

8 section with respect to SPICE prescription drug cov9 erage provided through a Medicare+Choice plan, the

10 amount of the financial assistance may not exceed

11 the amount of the portion of the premium charged

12 for enrollment in the plan that is related to out13 patient prescription drugs.

14 ‘‘(c) APPLICATION FOR ENHANCED FINANCIAL AS15 SISTANCE.—

16 ‘‘(1) IN GENERAL.—The SPICE Board shall es17 tablish procedures under which an individual who

18 desires enhanced financial assistance under this sec19 tion may voluntarily apply for an income determina20 tion.

21 ‘‘(2) INCOME VERIFICATION.—

22 ‘‘(A) IN GENERAL.—Under the procedures

23 established under paragraph (1), if an indi24 vidual voluntarily applies for an income deter25 mination under this subsection, the individual is
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1 deemed to have consented to the SPICE Board

2 seeking and using income-related information

3 from other Government agencies in order to

4 verify the individual’s income.

5 ‘‘(B) RESTRICTION ON USE OF INFORMA6 TION.—Information obtained under subpara7 graph (A) may be used by officers and employ8 ees of the SPICE Board only for the purposes

9 of, and to the extent necessary in, carrying out

10 their responsibilities under this part.

11 ‘‘(3) PERIODIC REDETERMINATIONS.—Such in12 come determinations shall be valid for a period (of

13 not less than 1 year) specified by the SPICE Board.

14 ‘‘(d) FORM OF ASSISTANCE.—

15 ‘‘(1) IN GENERAL.—Financial assistance under

16 this section shall be provided in the form of a pay17 ment to the issuer of the SPICE medicare supple18 mental policy involved, the Medicare+Choice organi19 zation offering the Medicare+Choice plan involved,

20 or the sponsor of the group health plan involved, of

21 the amount of the subsidy. Such payment shall be

22 in a manner and time provided for by the SPICE

23 Board.

24 ‘‘(2) ADDITIONAL REQUIREMENT.—No financial

25 assistance shall be made available with respect to
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1 SPICE prescription drug coverage provided by an

2 entity to an eligible medicare beneficiary unless the

3 entity provides assurances satisfactory to the SPICE

4 Board that the entity shall reduce the amount other5 wise charged the beneficiary for such coverage by an

6 amount equal to the amount of such assistance.

7 ‘‘(3) SPECIAL RULE WHERE NO OR LOW PRE8 MIUM CHARGED.—The SPICE Board shall establish

9 appropriate procedures to assure that eligible medi10 care beneficiaries who obtain SPICE prescription

11 drug coverage through enrollment in a group health

12 plan which does not impose a premium or imposes

13 a premium that is less than the amount of the finan14 cial assistance otherwise provided, are provided the

15 benefit of some of such financial assistance.

16 ‘‘(e) LATE ENROLLMENT PENALTY.—

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

18 the SPICE Board shall establish procedures for re19 ducing the amount of financial assistance provided

20 under this section on behalf of an eligible medicare

21 beneficiary if the beneficiary fails to obtain and

22 maintain SPICE prescription drug coverage during

23 periods in which the beneficiary is eligible to obtain

24 such coverage. Such procedures may be similar to

25 the part B late enrollment penalty provisions under
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1 section 1839(b) and shall not take into account peri2 ods before the first period in which financial assist3 ance is made available under this section.

4 ‘‘(2) EXCEPTION.—The late enrollment proce5 dures established pursuant to paragraph (1) shall

6 not apply to an eligible medicare beneficiary who is

7 enrolled under Medicare+Choice plan or a group

8 health plan that provides outpatient prescription

9 drug coverage and the plan terminates or ceases to

10 provide such coverage to the beneficiary, but only

11 if—

12 ‘‘(A) the beneficiary seeks to enroll under

13 a plan or policy that offers SPICE prescription

14 drug coverage at the next opportunity that is

15 available to the beneficiary after the effective

16 date of the termination of such coverage; and

17 ‘‘(B) submits evidence of the effective date

18 of the termination of such coverage.

19 ‘‘(f) ADJUSTMENT OF FINANCIAL ASSISTANCE IF IN20 SUFFICIENT FUNDING.—

21 ‘‘(1) LIMITATION OF ASSISTANCE TO FUNDS

22 AVAILABLE.—In no case shall the amount of finan23 cial assistance provided under this section exceed the

24 amount of funds available for such assistance under

25 the SPICE Trust Fund.
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1 ‘‘(2) REQUIRED ADJUSTMENT.—If the SPICE

2 Board determines under section 1860E(b)(3)(C)

3 that the amount in the SPICE Trust Fund in the

4 next year will be insufficient to cover the costs of

5 providing financial assistance under this section in

6 such year—

7 ‘‘(A) the SPICE Board shall first reduce

8 the percentage specified in subsection (b)(3) to

9 such lower percentage (but not below 10 per10 cent) as may be required, and to adjust the per11 centage specified under subsection (b)(2) to re12 flect such reduction;

13 ‘‘(B) if such percentage reductions are not

14 sufficient to reduce the costs to comply with

15 paragraph (1), the SPICE Board shall next re16 duce the income thresholds (as a percentage of

17 the poverty line) under subsection (b) as may

18 be further required; and

19 ‘‘(C) if such previous reductions are still

20 not sufficient to reduce the costs to comply with

21 paragraph (1), the SPICE Board shall imme22 diately report to Congress and suspend the pro23 vision of financial assistance under this section

24 during such year.

25 ‘‘(g) DEFINITIONS.—For purposes of this section:
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1 ‘‘(1) APPLICABLE COST.—The term ‘applicable

2 cost’ means, with respect to SPICE prescription

3 drug coverage provided under—

4 ‘‘(A) a SPICE medicare supplemental pol5 icy, is the premium charged for the policy;

6 ‘‘(B) a Medicare+Choice plan, is the actu7 arial value of the portion of the adjusted com8 munity rate for the plan that is related to pro9 viding such coverage, as determined by the

10 SPICE Board in consultation with the Sec11 retary; or

12 ‘‘(C) a group health plan, is the actuarial

13 value of the portion of the applicable premium

14 for the plan that is related to providing such

15 coverage, as determined by the SPICE Board

16 taking into account the applicable premium for

17 such plan (as defined in section 604(1) of the

18 Employee Retirement Income Security Act of

19 1974).

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

21 means the income official poverty line (as defined by

22 the Office of Management and Budget, and revised

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

24 Omnibus Budget Reconciliation Act of 1981) appli25 cable to a family of the size involved.
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1 ‘‘SPICE BOARD

2 ‘‘SEC. 1860E. (a) ESTABLISHMENT.—There is estab3 lished within the Department of Health and Human Serv4 ices a Seniors Prescription Insurance Coverage Equity Of5 fice, which shall be—

6 ‘‘(1) outside of the Health Care Financing Ad7 ministration; and

8 ‘‘(2) run by a board to be known as the SPICE

9 Board.

10 ‘‘(b) DUTIES.—

11 ‘‘(1) IN GENERAL.—The SPICE Board shall

12 administer the SPICE drug benefit program under

13 this part.

14 ‘‘(2) ONGOING STUDIES.—The SPICE Board

15 shall conduct ongoing studies of the following issues:

16 ‘‘(A) The administration of this part.

17 ‘‘(B) The provision of information about

18 the program under the health insurance infor19 mation, counseling, and assistance grants under

20 section 4360 of the Omnibus Budget Reconcili21 ation Act of 1990.

22 ‘‘(C) Ways in which drug utilization can be

23 used to provide better overall care for eligible

24 medicare beneficiaries.
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1 ‘‘(D) Savings and potential savings in Fed2 eral health care programs which may occur, or

3 can be attributed to, eligible medicare bene4 ficiary access to, and utilization of, outpatient

5 prescription drugs.

6 ‘‘(E) Trends in premium increases and fac7 tors that contribute to changes in premiums.

8 ‘‘(F) Integration of the SPICE drug ben9 efit program into a reformed medicare program.

10 ‘‘(G) The ability of eligible medicare bene11 ficiaries to afford SPICE prescription drug cov12 erage.

13 ‘‘(H) The impact of the program on the

14 prescription drug benefits offered under

15 Medicare+Choice plans and group health plans.

16 ‘‘(I) The appropriateness of the levels of fi17 nancial assistance provided in the case of eligi18 ble medicare beneficiaries who obtain assistance

19 through SPICE prescription drug coverage pro20 vided under Medicare+Choice plans or group

21 health plans.

22 ‘‘(3) ANNUAL REPORT.—

23 ‘‘(A) IN GENERAL.—Not later than June 1

24 of each year (beginning with 2001), the SPICE
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1 Board shall submit an annual report to Con2 gress on the program under this part.

3 ‘‘(B) INFORMATION ON STUDIES.—Such

4 report shall include a detailed statement on the

5 issues studied under paragraph (2).

6 ‘‘(C) DETAILED FINANCIAL PROJECTIONS

7 AND REQUIRED ADJUSTMENTS IN FINANCIAL

8 ASSISTANCE.—Such report shall include—

9 ‘‘(i) the report on the financial status

10 of the SPICE Trust Fund under section

11 1860F; and

12 ‘‘(ii) a statement if, based on such

13 status, a reduction in financial assistance

14 for the subsequent year is required under

15 section 1860D(f) and, if so, the manner in

16 which such reductions will be made.

17 Such report may include recommendations re18 garding increases in financial assistance that

19 should be made in a subsequent year, to the ex20 tent they may be made consistent with section

21 1860D(f)(1).

22 ‘‘(D) RECOMMENDATIONS.—Such report

23 shall include such other recommendations for

24 legislation and administrative actions as the

25 SPICE Board considers appropriate.
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1 ‘‘(4) STUDY AND REPORT REGARDING EXPAN2 SION.—

3 ‘‘(A) STUDY.—The SPICE Board, in con4 sultation with the National Association of In5 surance Commissioners, shall conduct a study

6 on—

7 ‘‘(i) permitting a benefit package

8 under section 1882 of the Social Security

9 Act (other than the outpatient prescription

10 drug only package established under sub11 section (v)(1)(A) of such section) to offer

12 outpatient prescription drugs; and

13 ‘‘(ii) providing financial assistance

14 under this part on behalf of eligible medi15 care beneficiaries receiving coverage under

16 such a benefit package.

17 ‘‘(B) REPORT.—Not later than 1 year

18 after all of the members of the SPICE Board

19 are appointed under subsection (c), the SPICE

20 Board shall submit a detailed report to Con21 gress on the study conducted pursuant to sub22 paragraph (A), together with any recommenda23 tions as determined appropriate by the SPICE

24 Board.
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1 ‘‘(5) RECOMMENDATIONS REGARDING GRANT

2 PROGRAM.—The SPICE Board shall provide rec3 ommendations and necessary information regarding

4 the SPICE drug benefit program to the Secretary in

5 order for the Secretary to provide health insurance

6 information, counseling, and assistance grants under

7 section 4360 of the Omnibus Budget Reconciliation

8 Act of 1990.

9 ‘‘(c) MEMBERSHIP OF SPICE BOARD.—

10 ‘‘(1) NUMBER AND APPOINTMENT.—

11 ‘‘(A) IN GENERAL.—The SPICE Board

12 shall be composed of 7 members appointed by

13 the President, by and with the advice and con14 sent of the Senate.

15 ‘‘(B) SPECIFIC REPRESENTATIVES.—In

16 making appointments under subparagraph (A),

17 the President shall ensure that the following

18 groups are represented on the SPICE Board:

19 ‘‘(i) Consumers.

20 ‘‘(ii) Private health plan insurers (in21 cluding insurers that offer fee-for-service

22 and managed care plans) with expertise in

23 the quality, scope, and marketing of health

24 care services.
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1 ‘‘(iii) The Health Care Financing Ad2 ministration.

3 ‘‘(iv) State insurance commissioners.

4 ‘‘(C) SECRETARY OF HHS.—The Secretary

5 shall be a nonvoting, ex officio member of the

6 SPICE Board.

7 ‘‘(2) DEADLINE FOR INITIAL APPOINTMENT.—

8 The initial members of the SPICE Board shall be

9 appointed by not later than 6 months after the date

10 of enactment of this section.

11 ‘‘(3) TERMS.—

12 ‘‘(A) IN GENERAL.—The terms of the

13 members of the SPICE Board shall be for 6

14 years, except that of the members first

15 appointed—

16 ‘‘(i) three shall be appointed for terms

17 of 6 years;

18 ‘‘(ii) two shall be appointed for terms

19 of 4 years; and

20 ‘‘(iii) two shall be appointed for terms

21 of 2 years.

22 ‘‘(B) VACANCIES.—Any member appointed

23 to fill a vacancy occurring before the expiration

24 of the term for which the member’s predecessor

25 was appointed shall be appointed only for the
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1 remainder of that term. A member may serve

2 after the expiration of that member’s term until

3 a successor has taken office.

4 ‘‘(4) CHAIRPERSON.—The President shall des5 ignate the chairperson of the SPICE Board, except

6 that the representative from the Health Care Fi7 nancing Administration may not be designated as

8 chairperson.

9 ‘‘(d) OPERATION OF THE BOARD.—

10 ‘‘(1) MEETINGS.—The SPICE Board shall meet

11 at the call of the chairperson or upon written re12 quest of a majority of its members.

13 ‘‘(2) QUORUM.—A majority of the members of

14 the SPICE Board shall constitute a quorum, but a

15 lesser number of members may hold hearings.

16 ‘‘(e) POWERS OF THE SPICE BOARD.—

17 ‘‘(1) HEARINGS.—The SPICE Board may hold

18 such hearings, sit and act at such times and places,

19 take such testimony, and receive such evidence as

20 the SPICE Board considers advisable to carry out

21 the purposes of this part.

22 ‘‘(2) INFORMATION FROM FEDERAL AGEN23 CIES.—Upon request of the chairperson of the

24 SPICE Board, the head of any Federal department

25 or agency shall furnish such information to the
27

•S 1480 IS

1 SPICE Board as is necessary to carry out the func2 tions of the SPICE Board under this part.

3 ‘‘(3) POSTAL SERVICES.—The SPICE Board

4 may use the United States mails in the same man5 ner and under the same conditions as other depart6 ments and agencies of the Federal Government.

7 ‘‘(4) GIFTS.—The SPICE Board may accept,

8 use, and dispose of gifts or donations of services or

9 property.

10 ‘‘(f) BOARD PERSONNEL MATTERS.—

11 ‘‘(1) MEMBERS.—

12 ‘‘(A) COMPENSATION.—Each member of

13 the SPICE Board who is not an officer or em14 ployee of the Federal Government shall be com15 pensated at a rate equal to the daily equivalent

16 of the annual rate of basic pay prescribed for

17 level IV of the Executive Schedule under section

18 5315 of title 5, United States Code, for each

19 day (including travel time) during which such

20 member is engaged in the performance of the

21 duties of the SPICE Board. All members of the

22 SPICE Board who are officers or employees of

23 the United States shall serve without compensa24 tion in addition to that received for their serv-
28

•S 1480 IS

1 ices as officers or employees of the United

2 States.

3 ‘‘(B) TRAVEL EXPENSES.—The members

4 of the SPICE Board shall be allowed travel ex5 penses, including per diem in lieu of subsist6 ence, at rates authorized for employees of agen7 cies under subchapter I of chapter 57 of title 5,

8 United States Code, while away from their

9 homes or regular places of business in the per10 formance of services for the SPICE Board.

11 ‘‘(C) REMOVAL.—The President may re12 move a member of the SPICE Board only for

13 neglect of duty or malfeasance in office.

14 ‘‘(2) STAFF.—

15 ‘‘(A) IN GENERAL.—The chairperson of

16 the SPICE Board may, without regard to the

17 civil service laws and regulations, appoint and

18 terminate an executive director and such other

19 additional personnel as may be necessary to en20 able the SPICE Board to perform its duties.

21 The employment of an executive director shall

22 be subject to confirmation by the SPICE

23 Board.

24 ‘‘(B) COMPENSATION.—The chairperson of

25 the SPICE Board may fix the compensation of
29

•S 1480 IS

1 the executive director and other personnel with2 out regard to the provisions of chapter 51 and

3 subchapter III of chapter 53 of title 5, United

4 States Code, relating to classification of posi5 tions and General Schedule pay rates, except

6 that the rate of pay for the executive director

7 and other personnel may not exceed the rate

8 payable for level V of the Executive Schedule

9 under section 5316 of such title.

10 ‘‘(C) DETAIL OF GOVERNMENT EMPLOY11 EES.—Any Federal Government employee may

12 be detailed to the SPICE Board without further

13 reimbursement, and such detail shall be without

14 interruption or loss of civil service status or

15 privilege.

16 ‘‘(D) PROCUREMENT OF TEMPORARY AND

17 INTERMITTENT SERVICES.—The chairperson of

18 the SPICE Board may procure temporary and

19 intermittent services under section 3109(b) of

20 title 5, United States Code, at rates for individ21 uals which do not exceed the daily equivalent of

22 the annual rate of basic pay prescribed for level

23 V of the Executive Schedule under section 5316

24 of such title.
30

•S 1480 IS

1 ‘‘SPICE TRUST FUND

2 ‘‘SEC. 1860F. (a) CREATION OF TRUST FUND.—

3 There is established in the Treasury of the United States

4 a trust fund to be known as the ‘SPICE Trust Fund’,

5 consisting of such amounts as may be appropriated or

6 credited to the SPICE Trust Fund as provided in this sec7 tion.

8 ‘‘(b) AMOUNTS IN SPICE TRUST FUND.—

9 ‘‘(1) IN GENERAL.—The SPICE Trust Fund

10 shall consist of the following amounts:

11 ‘‘(A) Amounts deposited in, or appro12 priated to, the SPICE Trust Fund as provided

13 in this section.

14 ‘‘(B) Any gifts and bequests made to such

15 Trust Fund.

16 ‘‘(2) APPROPRIATION.—

17 ‘‘(A) AMOUNTS FROM TOBACCO TAX.—

18 There are appropriated to the SPICE Trust

19 Fund amounts equivalent to the net revenues

20 received in the Treasury after December 31,

21 1999, from the taxes imposed by section 5701

22 of the Internal Revenue Code of 1986 to the ex23 tent attributable to increases in the rates of tax

24 imposed by such section over the rates which

25 would have been imposed if the Seniors Pre-
31

•S 1480 IS

1 scription Insurance Coverage Equity (SPICE)

2 Act of 1999 had not been enacted.

3 ‘‘(B) OTHER AMOUNTS.—There are hereby

4 authorized to be appropriated to the SPICE

5 Trust Fund amounts from the on-budget sur6 plus.

7 ‘‘(3) NET REVENUES.—For purposes of this

8 subsection, the term ‘net revenues’ means the

9 amount estimated by the Secretary of the Treasury

10 based on the excess of—

11 ‘‘(A) the taxes received in the Treasury as

12 described in paragraph (1), over

13 ‘‘(B) the sum of the decrease in the tax

14 imposed by chapter 1 of the Internal Revenue

15 Code of 1986 resulting from the imposition of

16 the taxes described in paragraph (2) and the

17 amount of refunds provided under subchapter A

18 of chapter 52 of such Code to the extent such

19 refunds are attributable to the revenues trans20 ferred to such Trust Fund under this section.

21 ‘‘(4) TRANSFER.—The amounts appropriated

22 pursuant to paragraph (2) shall be transferred by

23 the Secretary of the Treasury from time to time

24 from the general fund in the Treasury to the SPICE

25 Trust Fund. The amount to be transferred under
32

•S 1480 IS

1 this paragraph shall be determined on the basis of

2 estimates by the Secretary of the Treasury of the

3 taxes, described in such paragraph, paid to or depos4 ited into the Treasury. The Secretary of the Treas5 ury shall make adjustments in amounts subsequently

6 transferred to the extent that prior estimates were

7 in excess of, or were less than, such taxes.

8 ‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts

9 in the SPICE Trust Fund shall only be available for mak10 ing expenditures to carry out this part, including adminis11 trative expenses of the SPICE Board.

12 ‘‘(d) APPLICATION OF HI TRUST FUND PROVI13 SIONS.—The provisions of subsections (b) through (e) of

14 section 1817 shall apply to the SPICE Board, this part,

15 and the SPICE Trust Fund in the same manner as they

16 apply to the Board of Trustees (and the Secretary and

17 the Health Care Financing Administration), part A, and

18 the Federal Hospital Insurance Trust Fund, respectively,

19 except that—

20 ‘‘(1) the Board of Trustees shall be composed

21 of the SPICE Board and the Secretary of the Treas22 ury; and

23 ‘‘(2) the annual report shall be submitted as

24 part of the annual report provided under section

25 1860E(b)(3).’’.
33

•S 1480 IS

1 SEC. 3. CONFORMING CHANGES TO MEDIGAP.

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

3 1395ss) is amended by adding at the end the following:

4 ‘‘(v)(1) Notwithstanding subsection (p), the benefit

5 packages established under such subsection shall be re6 vised (in the manner described in subsection (p)(1)(E))

7 so that—

8 ‘‘(A) there is established a benefit package con9 sisting of only outpatient prescription drug benefits

10 that are consistent with SPICE prescription drug

11 coverage (as defined in section 1860B(b)) and that

12 are offered only through the SPICE Board and in

13 accordance with part D;

14 ‘‘(B) such package shall permit coverage of out15 patient prescription drugs that exceeds the thresh16 olds established under such section;

17 ‘‘(C) no package (except the package estab18 lished under subparagraph (A)) includes coverage of

19 outpatient prescription drugs provided under part D;

20 and

21 ‘‘(D) other benefit packages that do not include

22 prescription drug coverage may be substituted for

23 the packages eliminated under subparagraph (C).

24 In this title, a medicare supplemental policy which has the

25 benefit package described in subparagraph (A) is referred

26 to as a ‘SPICE medicare supplemental policy’. The revi-
34

•S 1480 IS

1 sions of benefit packages under this paragraph shall not

2 effect the renewal of medicare supplemental policies under

3 this section that are in existence on the effective date of

4 such revisions, and shall be designed to avoid adverse se5 lection and to be affordable.

6 ‘‘(2) Notwithstanding subsection (d), nothing in this

7 section shall be construed as prohibiting or making

8 unlawful—

9 ‘‘(A) the sale or issuance of a SPICE medicare

10 supplemental policy to an individual who has a medi11 care supplemental policy that does not provide cov12 erage of outpatient prescription drugs;

13 ‘‘(B) the sale or issuance of a medicare supple14 mental policy that does not provide coverage of out15 patient prescription drugs to an individual who has

16 a SPICE medicare supplemental policy; or

17 ‘‘(C) the sale or issuance of such a SPICE

18 medicare supplemental policy to an individual who is

19 enrolled in a Medicare+Choice plan that does not

20 provide coverage of outpatient prescription drugs

21 (not including coverage required to be provided

22 under part A or B).

23 The sale or issuance of policies under the circumstances

24 described in this paragraph shall be treated as not ‘dupli25 cative’ under this section.
35

•S 1480 IS

1 ‘‘(3)(A) No medicare supplemental policy of the in2 surer that is in effect on the effective date of the revision

3 under paragraph (1) and that has a benefit package classi4 fied as ‘H’, ‘I’, or ‘J’ under the standards established by

5 subsection (p)(2) shall be deemed to meet the standards

6 in subsection (c) unless the insurer—

7 ‘‘(i) provides written notice, within a 60-day pe8 riod specified by the revisions, to the policyholder or

9 certificate holder (at the most recent available ad10 dress) of the offer described in clause (ii) and of the

11 fact that, so long as they retain coverage under such

12 policy, they are unable to purchase a SPICE medi13 care supplemental policy; and

14 ‘‘(ii) offers the individual under the terms de15 scribed in subparagraph (B), during a period of at

16 least 180 days beginning on the date specified in

17 subparagraph (C), institution of coverage effective

18 as of a date specified by the revisions, a non-SPICE

19 medicare supplemental policy that the Secretary de20 termines is most comparable to the policy in which

21 the individual is enrolled (but for coverage of pre22 scription drugs).

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

24 are terms which do not—
36

•S 1480 IS

1 ‘‘(i) deny or condition the issuance or effective2 ness of a medicare supplemental policy described in

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

4 for issuance to new enrollees by such issuer;

5 ‘‘(ii) discriminate in the pricing of such policy

6 because of health status, claims experience, receipt

7 of health care, or medical condition; or

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

9 a pre-existing condition under such policy.

10 ‘‘(C) The date specified in this subparagraph for a

11 policy issued in a State is such date as specified by the

12 revisions (taking into account the method used under sub13 section (n)(4) for establishing a date under that sub14 section).

15 ‘‘(4) In applying this section with respect to SPICE

16 medicare supplemental policies, any reference to the ‘Sec17 retary’ is deemed a reference to the SPICE Board.’’.

18 SEC. 4. PROVISION OF INFORMATION ON SPICE DRUG BEN19 EFIT PROGRAM UNDER HEALTH INSURANCE

20 INFORMATION, COUNSELING, AND ASSIST21 ANCE GRANTS.

22 Section 4360(b)(2)(A)(ii) of the Omnibus Budget

23 Reconciliation Act of 1990 (42 U.S.C. 1395b–

24 4(b)(2)(A)(ii)) is amended by striking ‘‘and information’’

25 and inserting ‘‘, information regarding the SPICE drug
37

•S 1480 IS

1 benefit program under part D of title XVIII of the Social

2 Security Act, and information’’.

3 SEC. 5. FUNDING THROUGH TAXES ON TOBACCO PROD4 UCTS.

5 (a) CIGARETTES.—Subsection (b) of section 5701 of

6 the Internal Revenue Code of 1986 is amended—

7 (1) by striking ‘‘$12 per thousand ($10 per

8 thousand on cigarettes removed during 1991 or

9 1992);’’ in paragraph (1) and inserting ‘‘the applica10 ble rate per thousand determined in accordance with

11 the following table:

‘‘In the case of cigarettes removed

during: The applicable rate is:

2000 and 2001 ......................................................................... $44.50

2002 and thereafter ................................................................. $47.00.’’;

12 and

13 (2) by striking paragraph (2) and inserting the

14 following:

15 ‘‘(2) LARGE CIGARETTES.—

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

17 subparagraph (B), on cigarettes, weighing more

18 than 3 pounds per thousand, the applicable rate

19 per thousand determined in accordance with the

20 following table:

‘‘In the case of cigarettes removed

during: The applicable rate is:

2000 and 2001 ......................................................................... $93.45

2002 and thereafter ................................................................. $98.70.
38

•S 1480 IS

1 ‘‘(B) EXCEPTION.—On cigarettes more

than 61 2 ⁄2 inches in length, at the rate pre3 scribed for cigarettes weighing not more than 3

pounds per thousand, counting each 23 4 ⁄4 inches,

5 or fraction thereof, of the length of each as one

6 cigarette.’’

7 (b) CIGARS.—Subsection (a) of section 5701 of such

8 Code is amended—

9 (1) by striking ‘‘$1.125 cents per thousand

10 (93.75 cents per thousand on cigars removed during

11 1991 or 1992),’’ in paragraph (1) and inserting ‘‘the

12 applicable rate per thousand determined in accord13 ance with the following table:

‘‘In the case of cigarettes removed

during: The applicable rate is:

2000 and 2001 .................................................................. $4.173 cents

2002 and thereafter .......................................................... $4.406 cents.’’;

14 and

15 (2) by striking paragraph (2) and inserting the

16 following:

17 ‘‘(2) LARGE CIGARS.—On cigars, weighing more

18 than 3 pounds per thousand, the applicable percent19 age of the price for which sold but not more that the

20 applicable rate per thousand determined in accord21 ance with the following table:
39

•S 1480 IS

‘‘In the case of

cigars removed during:

The applicable

percentage is:

The applicable rate is:

2000 and 2001 59.458% $139.90

2002 and

thereafter

68.201% $160.47.’’

1 (c) CIGARETTE PAPERS.—Subsection (c) of section

2 5701 of such Code is amended to read as follows:

3 ‘‘(c) CIGARETTE PAPERS.—

4 ‘‘(1) IN GENERAL.—Except as provided in para5 graph (2), on each book or set of cigarette papers

6 containing more than 25 papers, manufactured in or

7 imported into the United States, there shall be im8 posed a tax of the applicable rate for each 50 papers

9 or fractional part thereof as determined in accord10 ance with the following table:

‘‘In the case of cigarettes papers

removed during: The applicable rate is:

rate is:

2000 and 2001 ......................................................................... 2.80 cents

2002 and thereafter ................................................................. 2.90 cents.

11 ‘‘(2) EXCEPTION.—If cigarette papers measure

more than 61 12 ⁄2 inches in length, such cigarette pa13 pers shall be taxable at the rate prescribed, counting

each 23 14 ⁄4 inches, or fraction thereof, of the length of

15 each as one cigarette paper.’’

16 (d) CIGARETTE TUBES.—Subsection (d) of section

17 5701 of such Code is amended to read as follows:

18 ‘‘(d) CIGARETTE TUBES.—
40

•S 1480 IS

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), on cigarette tubes, manufactured in or

3 imported into the United States, there shall be im4 posed a tax of the applicable rate for each 50 tubes

5 or fractional part thereof as determined in accord6 ance with the following table:

‘‘In the case of cigarettes tubes

removed during: The applicable rate is:

rate is:

2000 and 2001 ......................................................................... 5.60 cents

2002 and thereafter ................................................................. 5.90 cents.

7 ‘‘(2) EXCEPTION.—If cigarette tubes measure

more than 61 8 ⁄2 inches in length, such cigarette tubes

9 shall be taxable at the rate prescribed, counting each

23 10 ⁄4 inches, or fraction thereof, of the length of each

11 as one cigarette tube.’’

12 (e) SMOKELESS TOBACCO.—Paragraphs (1) and (2)

13 of subsection (e) of section 5701 are amended to read as

14 follows:

15 ‘‘(1) SNUFF.—On snuff, the applicable rate per

16 pound determined in accordance with the following

17 table (and a proportionate tax at the like rate on all

18 fractional parts of a pound):

‘‘In the case of snuff removed

during: The applicable rate is:

2000 and 2001 ......................................................................... $1.335 cents

2002 and thereafter ................................................................. $1.410 cents.

19 ‘‘(2) CHEWING TOBACCO.—On chewing tobacco,

20 the applicable rate per pound determined in accord21 ance with the following table (and a proportionate
41

•S 1480 IS

1 tax at the like rate on all fractional parts of a

2 pound):

‘‘In the case of chewing tobacco

removed during: The applicable rate is:

2000 and 2001 ......................................................................... 44.5 cents

2002 and thereafter ................................................................. 47.0 cents.’’

3 (f) PIPE TOBACCO.—Subsection (f) of section 5701

4 of such Code is amended to read as follows:

5 ‘‘(f) PIPE TOBACCO.—On pipe tobacco, manufac6 tured in or imported into the United States, there shall

7 be imposed a tax of the applicable rate per pound deter8 mined in accordance with the following table (and a pro9 portionate tax at the like rate on all fractional parts of

10 a pound):

‘‘In the case of pipe tobacco

removed during: The applicable rate is:

2000 and 2001 ......................................................................... $2.504 cents

2002 and thereafter ................................................................. $2.644

cents.’’

11 (g) IMPOSITION OF EXCISE TAX ON MANUFACTURE

12 OR IMPORTATION OF ROLL-YOUR-OWN TOBACCO.—

13 (1) IN GENERAL.—Section 5701 of such Code

14 (relating to rate of tax) is amended by redesignating

15 subsection (g) as subsection (h) and by inserting

16 after subsection (f) the following:

17 ‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own

18 tobacco, manufactured in or imported into the United

19 States, there shall be imposed a tax of the applicable rate

20 per pound determined in accordance with the following
42

•S 1480 IS

1 table (and a proportionate tax at the like rate on all frac2 tional parts of a pound):

‘‘In the case of roll-your-own

tobacco removed during: The applicable rate is:

2000 and 2001 ......................................................................... $2.504 cents

2002 and thereafter ................................................................. $2.644

cents.’’

3 (2) ROLL-YOUR-OWN TOBACCO.—Section 5702

4 of such Code (relating to definitions) is amended by

5 adding at the end the following:

6 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll7 your-own tobacco’ means any tobacco which, because of

8 its appearance, type, packaging, or labeling, is suitable for

9 use and likely to be offered to, or purchased by, consumers

10 as tobacco for making cigarettes.’’

11 (3) TECHNICAL AMENDMENTS.—

12 (A) Subsection (c) of section 5702 of such

13 Code is amended by striking ‘‘and pipe to14 bacco’’ and inserting ‘‘pipe tobacco, and roll15 your-own tobacco’’.

16 (B) Subsection (d) of section 5702 of such

17 Code is amended—

18 (i) in the material preceding para19 graph (1), by striking ‘‘or pipe tobacco’’

20 and inserting ‘‘pipe tobacco, or roll-your21 own tobacco’’, and
43

•S 1480 IS

1 (ii) by striking paragraph (1) and in2 serting the following:

3 ‘‘(1) a person who produces cigars, cigarettes,

4 smokeless tobacco, pipe tobacco, or roll-your-own to5 bacco solely for the person’s own personal consump6 tion or use, and’’.

7 (C) The chapter heading for chapter 52 of

8 such Code is amended to read as follows:

9 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND

10 CIGARETTE PAPERS AND TUBES’’.

11 (D) The table of chapters for subtitle E of

12 such Code is amended by striking the item re13 lating to chapter 52 and inserting the following:

‘‘CHAPTER 52. Tobacco products and cigarette papers and tubes.’’

14 (h) FLOOR STOCKS TAXES AND APPLICATION OF

15 TAXES TO POSSESSIONS.—Section 5701 of such Code, as

16 amended by subsection (g), is amended by redesignating

17 subsection (h) as subsection (j) and by inserting after sub18 section (g) the following:

19 ‘‘(h) FLOOR STOCKS TAXES.—

20 ‘‘(1) IMPOSITION OF TAX.—On tobacco prod21 ucts manufactured in or imported into the United

22 States or any possession of the United States which

23 are removed before any tax increase date, and held

24 on such date for sale by any person, there is hereby

25 imposed a tax in an amount equal to the excess of—
44

•S 1480 IS

1 ‘‘(A) the tax which would be imposed

2 under any preceding subsection of this section

3 on the article if the article had been removed on

4 such date, over

5 ‘‘(B) the prior tax (if any) imposed under

6 such subsection on such article.

7 ‘‘(2) CREDIT AGAINST TAX.—Each person shall

8 be allowed as a credit against the taxes imposed by

9 paragraph (1) an amount equal to $500. Such credit

10 shall not exceed the amount of taxes imposed by

11 paragraph (1) on any tax increase date, for which

12 such person is liable.

13 ‘‘(3) LIABILITY FOR TAX AND METHOD OF PAY14 MENT.—

15 ‘‘(A) LIABILITY FOR TAX.—A person hold16 ing cigarettes on any tax increase date, to

17 which any tax imposed by paragraph (1) applies

18 shall be liable for such tax.

19 ‘‘(B) METHOD OF PAYMENT.—The tax im20 posed by paragraph (1) shall be paid in such

21 manner as the Secretary shall prescribe by reg22 ulations.

23 ‘‘(C) TIME FOR PAYMENT.—The tax im24 posed by paragraph (1) shall be paid on or be-
45

•S 1480 IS

1 fore the date which is 180 days after any tax

2 increase date.

3 ‘‘(4) ARTICLES IN FOREIGN TRADE ZONES.—

4 Notwithstanding the Act of June 18, 1934 (48 Stat.

5 998, 19 U.S.C. 81a) and any other provision of law,

6 any article which is located in a foreign trade zone

7 on any tax increase date, shall be subject to the tax

8 imposed by paragraph (1) if—

9 ‘‘(A) internal revenue taxes have been de10 termined, or customs duties liquidated, with re11 spect to such article before such date pursuant

12 to a request made under the 1st proviso of sec13 tion 3(a) of such Act, or

14 ‘‘(B) such article is held on such date

15 under the supervision of a customs officer pur16 suant to the 2d proviso of such section 3(a).

17 ‘‘(5) TAX INCREASE DATE.—The term ‘tax in18 crease date’ means January 1, 2000, and January

19 1, 2002.

20 ‘‘(6) CONTROLLED GROUPS.—Rules similar to

21 the rules of section 5061(e)(3) shall apply for pur22 poses of this subsection.

23 ‘‘(7) OTHER LAWS APPLICABLE.—All provisions

24 of law, including penalties, applicable with respect to

25 the taxes imposed by the preceding subsections of
46

•S 1480 IS

1 this section shall, insofar as applicable and not in2 consistent with the provisions of this subsection,

3 apply to the floor stocks taxes imposed by paragraph

4 (1), to the same extent as if such taxes were im5 posed by such subsections. The Secretary may treat

6 any person who bore the ultimate burden of the tax

7 imposed by paragraph (1) as the person to whom a

8 credit or refund under such provisions may be al9 lowed or made.

10 ‘‘(i) APPLICATION OF TAXES TO U.S. POSSES11 SIONS.—Notwithstanding subsections (b) and (c) of sec12 tion 7653 and any other provision of law—

13 ‘‘(1) IN GENERAL.—On tobacco products manu14 factured in or imported into any possession of the

15 United States, there is hereby imposed a tax at the

16 rate equal to the excess of—

17 ‘‘(A) the rate of tax applicable under this

18 section to like articles manufactured in the

19 United States, over

20 ‘‘(B) the rate referred to in subparagraph

21 (A) which would have been in effect if the

22 amendments made by the Seniors Prescription

23 Insurance Coverage Equity (SPICE) Act of

24 1999 had not been enacted.
47

•S 1480 IS

1 ‘‘(2) SHIPMENTS TO U.S. POSSESSIONS FROM

2 THE UNITED STATES.—Only the rates of tax which

3 would have been in effect if the amendments made

4 by the Seniors Prescription Insurance Coverage Eq5 uity (SPICE) Act of 1999 had not been enacted

6 shall be taken into account in determining the

7 amount of any exemption from, or credit or draw8 back of, any tax imposed by this section on any arti9 cle shipped to any possession of the United States

10 from the United States.

11 ‘‘(3) SHIPMENTS FROM U.S. POSSESSIONS TO

12 THE UNITED STATES.—The rates of tax taken into

13 account under section 7652(a) with respect to to14 bacco products coming into the United States from

15 any possession of the United States shall be the

16 rates of tax which would have been in effect if the

17 amendments made by the Seniors Prescription In18 surance Coverage Equity (SPICE) Act of 1999 had

19 not been enacted.

20 ‘‘(4) DISPOSITION OF REVENUES.—The provi21 sions of section 7652(a)(3) shall not apply to any

22 tax imposed by reason of this subsection.’’

23 (i) MODIFICATIONS OF CERTAIN TOBACCO TAX PRO24 VISIONS.—
48

•S 1480 IS

1 (1) EXEMPTION FOR EXPORTED TOBACCO

2 PRODUCTS AND CIGARETTE PAPERS AND TUBES TO

3 APPLY ONLY TO ARTICLES MARKED FOR EXPORT.—

4 (A) Subsection (b) of section 5704 of such

5 Code is amended by adding at the end the fol6 lowing: ‘‘Tobacco products and cigarette papers

7 and tubes may not be transferred or removed

8 under this subsection unless such products or

9 papers and tubes bear such marks, labels, or

10 notices as the Secretary shall by regulations

11 prescribe.’’

12 (B) Section 5761 of such Code is amended

13 by redesignating subsections (c) and (d) as sub14 sections (d) and (e), respectively, and by insert15 ing after subsection (b) the following:

16 ‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE

17 PAPERS AND TUBES FOR EXPORT.—Except as provided

18 in subsections (b) and (d) of section 5704—

19 ‘‘(1) every person who sells, relands, or receives

20 within the jurisdiction of the United States any to21 bacco products or cigarette papers or tubes which

22 have been labeled or shipped for exportation under

23 this chapter,
49

•S 1480 IS

1 ‘‘(2) every person who sells or receives such re2 landed tobacco products or cigarette papers or tubes,

3 and

4 ‘‘(3) every person who aids or abets in such

5 selling, relanding, or receiving,

6 shall, in addition to the tax and any other penalty provided

7 in this title, be liable for a penalty equal to the greater

8 of $1,000 or 5 times the amount of the tax imposed by

9 this chapter. All tobacco products and cigarette papers

10 and tubes relanded within the jurisdiction of the United

11 States, and all vessels, vehicles, and aircraft used in such

12 relanding or in removing such products, papers, and tubes

13 from the place where relanded, shall be forfeited to the

14 United States.’’

15 (C) Subsection (a) of section 5761 of such

16 Code is amended by striking ‘‘subsection (b)’’

17 and inserting ‘‘subsection (b) or (c)’’.

18 (D) Subsection (d) of section 5761 of such

19 Code, as redesignated by subparagraph (B), is

20 amended by striking ‘‘The penalty imposed by

21 subsection (b)’’ and inserting ‘‘The penalties

22 imposed by subsections (b) and (c)’’.

23 (E)(i) Subpart F of chapter 52 of such

24 Code is amended by adding at the end the fol25 lowing:
50

•S 1480 IS

1 ‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE2 VIOUSLY EXPORTED TOBACCO PRODUCTS.

3 ‘‘(a) IN GENERAL.—Tobacco products and cigarette

4 papers and tubes previously exported from the United

5 States may be imported or brought into the United States

6 only as provided in section 5704(d). For purposes of this

7 section, section 5704(d), section 5761, and such other pro8 visions as the Secretary may specify by regulations, ref9 erences to exportation shall be treated as including a ref10 erence to shipment to the Commonwealth of Puerto Rico.

11 ‘‘(b) CROSS REFERENCE.—

‘‘For penalty for the sale of tobacco products and

cigarette papers and tubes in the United States

which are labeled for export, see section 5761(c).’’

12 (ii) The table of sections for subpart F of

13 chapter 52 of such Code is amended by adding

14 at the end the following:

‘‘Sec. 5754. Restriction on importation of previously exported tobacco products.’’

15 (2) IMPORTERS REQUIRED TO BE QUALIFIED.—

16 (A) Sections 5712, 5713(a), 5721, 5722,

17 5762(a)(1), and 5763 (b) and (c) of such Code

18 are each amended by inserting ‘‘or importer’’

19 after ‘‘manufacturer’’.

20 (B) The heading of subsection (b) of sec21 tion 5763 of such Code is amended by inserting

22 ‘‘QUALIFIED IMPORTERS,’’ after ‘‘MANUFAC23 TURERS,’’.
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1 (C) The heading for subchapter B of chap2 ter 52 of such Code is amended by inserting

3 ‘‘and Importers’’ after ‘‘Manufactur4 ers’’.

5 (D) The item relating to subchapter B in

6 the table of subchapters for chapter 52 of such

7 Code is amended by inserting ‘‘and importers’’

8 after ‘‘manufacturers’’.

9 (3) BOOKS OF 25 OR FEWER CIGARETTE PA10 PERS SUBJECT TO TAX.—Subsection (c) of section

11 5701 of such Code is amended by striking ‘‘On each

12 book or set of cigarette papers containing more than

13 25 papers,’’ and inserting ‘‘On cigarette papers,’’.

14 (4) STORAGE OF TOBACCO PRODUCTS.—Sub15 section (k) of section 5702 of such Code is amended

16 by inserting ‘‘under section 5704’’ after ‘‘internal

17 revenue bond’’.

18 (5) AUTHORITY TO PRESCRIBE MINIMUM MANU19 FACTURING ACTIVITY REQUIREMENTS.—Section

20 5712 of such Code is amended by striking ‘‘or’’ at

21 the end of paragraph (1), by redesignating para22 graph (2) as paragraph (3), and by inserting after

23 paragraph (1) the following:

24 ‘‘(2) the activity proposed to be carried out at

25 such premises does not meet such minimum capacity
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1 or activity requirements as the Secretary may pre2 scribe, or’’.

3 (j) REPEAL OF DUPLICATIVE PROVISIONS.—Section

4 9302 of the Balanced Budget Act of 1997 (other than sub5 section (i)(2)) and the amendments made by such section

6 are repealed, and the Internal Revenue Code of 1986 shall

7 be administered as if such section and such amendments

8 had not been enacted.

9 (k) EFFECTIVE DATE.—The amendments and repeal

10 made by this section shall apply to articles removed (as

11 defined in section 5702(k) of the Internal Revenue Code

12 of 1986, as amended by this section) after December 31,

13 1999.

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