II

106TH CONGRESS

2D SESSION S. 2342

To amend the Medicare program under title XVIII of the Social Security

Act to make Medicare more competitive and efficient, to provide for

a prescription drug benefit, and for other purposes.

IN THE SENATE OF THE UNITED STATES

APRIL 4, 2000

Mr. MOYNIHAN (by request) introduced the following bill; which was read

twice and referred to the Committee on finance

A BILL

To amend the Medicare program under title XVIII of the

Social Security Act to make Medicare more competitive

and efficient, to provide for a prescription drug benefit,

and for other purposes.

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

3 SECTION 1. SHORT TITLE; REFERENCES IN ACT; TABLE OF

4 CONTENTS.

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

6 ‘‘Medicare Modernization Act of 2000’’.

7 (b) REFERENCES.—Except where otherwise specifi8 cally provided, references in this Act shall be considered
2

S 2342 IS

1 to be made to the Social Security Act, or to a section or

2 other provision thereof.

3 (c) TABLE OF CONTENTS.—The table of contents of

4 this Act is as follows:

TITLE I—MAKING MEDICARE MORE COMPETITIVE AND

EFFICIENT

PART A—COMPETITIVE DEFINED BENEFIT

Sec. 101. Competitive defined benefit.

PART B—PRIVATE SECTOR PURCHASING AND QUALITY IMPROVEMENT

TOOLS FOR TRADITIONAL MEDICARE

Sec. 111. Care coordination services.

Sec. 112. Disease management services.

Sec. 113. Competitive acquisition of items and services.

Sec. 114. Provider and physician collaborations.

Sec. 115. Preferred participants.

Sec. 116. Centers of excellence.

Sec. 117. Demonstration of bonus payments for health care groups.

Sec. 118. Administration of certain private sector purchasing and quality improvement programs.

Sec. 119. Reports to Congress on private sector purchasing and quality improvement programs.

Sec. 120. Increased flexibility in contracting for Medicare claims processing.

Sec. 121. Special provisions for funding of activities related to certain overpayment recoveries and provider enrollment and reverification of

eligibility.

TITLE II—MODERNIZING MEDICARE BENEFITS

PART A—PRESCRIPTION DRUG BENEFIT

Sec. 201. Prescription drug benefit.

Sec. 202. Medicaid buy-in of Medicare prescription drug coverage for certain

low-income individuals.

PART B—IMPROVING PREVENTIVE BENEFITS AND ELIMINATING COST

SHARING

Sec. 221. Elimination of cost sharing for preventive benefits.

Sec. 222. Information campaign on prevention.

Sec. 223. Smoking cessation demonstration.

PART C—RATIONALIZING COST SHARING AND MEDIGAP

Sec. 231. Deductibles and coinsurance for clinical laboratory services.

Sec. 232. Indexing deductible to inflation.

Sec. 233. Updating and expanding Medigap plan options.

Sec. 234. Report to Congress on options for improving Medicare supplemental

coverage.

Sec. 235. Increasing access to Medigap.
3

S 2342 IS

Sec. 236. Removal of sunset date for cost-sharing in Medicare part B premiums

for certain qualifying individuals.

TITLE III—PROTECTING AND EXTENDING MEDICARE SOLVENCY

Sec. 301. Transfers to extend solvency.

Sec. 302. Catastrophic prescription drug coverage reserve.

Sec. 303. Medicare solvency debt reduction reserve.

Sec. 304. Protection of Medicare solvency debt reduction reserve.

1 TITLE I—MAKING MEDICARE

2 MORE COMPETITIVE AND EF3 FICIENT

4 PART A—COMPETITIVE DEFINED BENEFIT

5 SEC. 101. COMPETITIVE DEFINED BENEFIT.

6 (a) PAYMENTS TO MEDICARE+CHOICE ORGANIZA7 TIONS BASED ON RISK-ADJUSTED BIDS.—

8 (1) IN GENERAL.—Section 1853(a)(1) (42

9 U.S.C. 1395w–23(a)(1)) is amended by striking ‘‘the

10 Secretary shall make’’ and all that follows and in11 serting ‘‘the Secretary shall make, to each

12 Medicare+Choice organization, with respect to cov13 erage of an individual for a month under this part

14 in a Medicare+Choice payment area, separate

15 monthly payments with respect to benefits under

16 parts A and B combined, and (as applicable) with

17 respect to benefits under part D, as determined in

18 accordance with this section.’’.

19 (2) ANNUAL DETERMINATION AND ANNOUNCE20 MENT OF PAYMENT FACTORS.—
4

S 2342 IS

1 (A) IN GENERAL.—Section 1853(b) (42

2 U.S.C. 1395w–23(b)) is amended—

3 (i) in paragraph (1), by striking ‘‘the

4 calendar year concerned’’ and all that fol5 lows and inserting ‘‘the calendar year con6 cerned, the following factors, as defined in

7 paragraph (4):

8 ‘‘(A) national monthly per capita costs,

9 ‘‘(B) the benchmark amount for each pay10 ment area, and

11 ‘‘(C) the health status and demographic

12 adjustment factors to be used in making pay13 ment for individual enrollees.’’;

14 (ii) in paragraph (3), by striking

15 ‘‘monthly adjusted’’ and all that follows

16 and inserting ‘‘such estimates, factors, and

17 amounts’’; and

18 (iii) by adding at the end the fol19 lowing new paragraphs:

20 ‘‘(4) FACTORS USED IN ADJUSTING BIDS FOR

21 MEDICARE+CHOICE ORGANIZATIONS AND IN DETER22 MINING ENROLLEE PREMIUMS.—

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

24 (5), the Secretary shall use, for purposes of ad25 justing plan bids and determining enrollee pre-
5

S 2342 IS

1 miums under this part, the factors specified in

2 this paragraph, which factors—

3 ‘‘(i) shall be calculated separately for

4 benefits under parts A and B combined,

5 and under part D; and

6 ‘‘(ii) shall be calculated separately

7 for—

8 ‘‘(I) beneficiaries who are aged or

9 disabled; and

10 ‘‘(II) beneficiaries who have end

11 stage renal disease until such time as

12 the Secretary establishes an inte13 grated risk adjustment system for the

14 groups specified in subclauses (I) and

15 (II).

16 ‘‘(B) NATIONAL MONTHLY PER CAPITA

17 COSTS.—

18 ‘‘(i) IN GENERAL.—The term ‘na19 tional monthly per capita costs’ means

20 (subject to clause (ii)) the projected na21 tional, monthly, per capita costs of benefits

22 under this title and associated claims proc23 essing costs for individuals entitled to ben24 efits under part A and individuals enrolled
6

S 2342 IS

1 in the program under part B who are not

2 enrolled in a plan under this part.

3 ‘‘(ii) EXCLUSION OF DSH AND GME

4 COSTS.—The calculation of costs under

5 clause (i) shall not take into account any

6 amounts attributable to—

7 ‘‘(I) payment adjustments under

8 section 1886(d)(5)(F) for hospitals

9 serving a significantly dispropor10 tionate number of low income pa11 tients;

12 ‘‘(II) payments for costs of grad13 uate medical education under section

14 1886(h); or

15 ‘‘(III) payments for indirect costs

16 of medical education under section

17 1886(d)(5)(B).

18 ‘‘(C) BENCHMARK AMOUNT.—

19 ‘‘(i) The term ‘benchmark amount’

20 means, for a payment area, an amount

21 equal to the greater of—

22 ‘‘(I) except as provided in clause

(ii), 1 23 ⁄12 of the annual

24 Medicare+Choice capitation rate that

25 would have applied in that payment
7

S 2342 IS

1 area under section 1853(c) (as in ef2 fect prior to the enactment of the

3 Medicare Modernization Act of 2000);

4 or

5 ‘‘(II) the product of 96 percent

6 of national monthly per capita costs

7 and the ratio, for a previous period,

8 of—

9 ‘‘(aa) monthly per capita

10 costs of Medicare benefits for in11 dividuals entitled to benefits

12 under part A and individuals en13 rolled in the program under part

14 B in that payment area (adjusted

15 for relative risk due to health

16 status and demographic adjust17 ment factors) to—

18 ‘‘(bb) the weighted average

19 for all payment areas of such

20 monthly per capita costs.

21 ‘‘(ii) If the amount calculated under

22 clause (i)(I) for a year for all payment

23 areas is equal to either the minimum

24 amount or the blended capitation rate, for

25 all subsequent years the Secretary shall
8

S 2342 IS

1 not calculate the rates described in that

2 clause and the amount under such clause

3 instead shall be equal to the product of 96

4 percent of national monthly per capita

5 costs and the ratio of—

6 ‘‘(I) the annual Medicare+Choice

7 capitation rate for the last year that

8 such rates were calculated under such

9 clause to—

10 ‘‘(II) the weighted average of the

11 area-specific Medicare+Choice capita12 tion rates for that same year.

13 ‘‘(iii) For years prior to 2005, with

14 regard to benefits under part D, the Sec15 retary may use 96 percent of national

16 monthly per capita costs as the benchmark

17 amount for all payment areas or provide

18 for regional rather than payment area-spe19 cific determinations of the benchmark

20 amounts.

21 ‘‘(D) HEALTH STATUS AND DEMOGRAPHIC

22 ADJUSTMENT FACTORS.—The term ‘health sta23 tus and demographic adjustment factors’ means

24 health status and such other risk factors as

25 age, disability status, gender, institutional sta-
9

S 2342 IS

1 tus, and such other factors as the Secretary de2 termines to be appropriate, so as to ensure ac3 tuarial equivalence. The Secretary may add to,

4 modify, or substitute for such factors, if such

5 changes will improve the determination of actu6 arial equivalence, and in that event will make

7 comparable adjustments to the benchmark

8 amounts. For years prior to 2005, with regard

9 to part D benefits, the Secretary shall not be

10 required to include health status in the factors

11 described in this subparagraph.’’.

12 (B) CONFORMING AMENDMENT.—Section

13 1853(c)(7) is relocated and redesignated as sec14 tion 1853(b)(5), indented accordingly, and

15 amended by striking all that follows ‘‘shall ad16 just appropriately’’ and inserting ‘‘national

17 monthly per capita costs for the following

18 year’’.

19 (3) SUBMISSION OF BIDS BY

20 MEDICARE+CHOICE ORGANIZATIONS.—

21 (A) IN GENERAL.—Section 1853 (42

22 U.S.C. 1395w–23) is amended by striking sub23 section (c) and inserting the following new sub24 section:
10

S 2342 IS

1 ‘‘(c) SUBMISSION OF BIDS BY MEDICARE+CHOICE

2 ORGANIZATIONS.—

3 ‘‘(1) IN GENERAL.—Each Medicare+Choice or4 ganization shall submit to the Secretary, in a form

5 and manner specified by the Secretary and for each

6 Medicare+Choice plan which it intends to offer in a

7 service area in the following year—

8 ‘‘(A) by April 1, notice of such intent and

9 information on the service area and plan type

10 for each plan; and

11 ‘‘(B) by July 1—

12 ‘‘(i) the information described in para13 graph (2) for the type of plan involved;

14 and

15 ‘‘(ii) the enrollment capacity (if any)

16 in relation to the plan and area.

17 ‘‘(2) INFORMATION REQUIRED FOR COMPETI18 TIVE PLANS.—The information described in this

19 paragraph, which shall be submitted separately for

20 combined part A and part B benefits, and for part

21 D benefits, is as follows:

22 ‘‘(A) The monthly plan bid for the provi23 sion of benefits.

24 ‘‘(B) The actuarial value of the reduction

25 in cost-sharing for Medicare benefits included
11

S 2342 IS

1 in each plan bid (which value shall not exceed

2 15 percent of the value of the balance of the

3 bid).

4 ‘‘(C) A description of the cost-sharing for

5 Medicare benefits that will apply and the actu6 arial value of such cost-sharing.

7 ‘‘(D) For each supplemental benefits pack8 age offered (if any), the adjusted community

9 rate of the package, the monthly supplemental

10 premium, a description of cost-sharing and such

11 other information as the Secretary considers

12 necessary.

13 ‘‘(E) The assumptions used with respect to

14 numbers, in each payment area, of—

15 ‘‘(i) enrolled individuals who are aged

16 or disabled; and

17 ‘‘(ii) enrolled individuals who have

18 end-stage renal disease.’’.

19 (B) CONFORMING AMENDMENTS.—

20 (i) Paragraphs (3) and (5) of section

21 1854(a) are relocated and redesignated as

22 paragraphs (3) and (4), respectively, of

23 section 1853(c), as amended.
12

S 2342 IS

1 (ii) Section 1853(c)(3)(B) (42 U.S.C.

2 1395w–23(c)(3)(B)), as redesignated, is

3 amended by striking ‘‘beneficiary’’.

4 (iii) Section 1853(c)(4)(B) (42 U.S.C.

5 1395w–23(c)(3)(B)), as redesignated, is

6 amended by striking ‘‘or subparagraphs

7 (A)(ii) and (B) of paragraph (4)’’.

8 (4) SECRETARY’S DETERMINATION OF PAY9 MENT AMOUNT.—Section 1853 is further

10 amended—

11 (A) by redesignating subsections (d)

12 through (h) as subsections (e) through (i), re13 spectively; and

14 (B) by adding after subsection (c) the fol15 lowing new subsection:

16 ‘‘(d) SECRETARY’S DETERMINATION OF PAYMENT

17 AMOUNT.—

18 ‘‘(1) CONVERSION TO NORMALIZED BIDS.—

19 ‘‘(A) NORMALIZED BIDS.—Subject to sub20 paragraph (B), the Secretary shall adjust each

21 monthly plan bid submitted under subsection

22 (c) for the relative risk of enrollees in such plan

23 based on health status and demographic adjust24 ment factors.
13

S 2342 IS

1 ‘‘(B) SPECIAL RULE FOR PLAN BIDS FOR

2 PART D BENEFITS BEFORE 2005.—The Sec3 retary is not required, for years before 2005, to

4 make the adjustments described in subpara5 graph (A) with respect to plans for part D ben6 efits.

7 ‘‘(2) COMPARISON TO PLAN BENCHMARK

8 AMOUNT.—

9 ‘‘(A) DETERMINATION OF PLAN BENCH10 MARK.—The Secretary shall determine, using

11 the plan enrollment assumptions included in the

12 organization’s bid, a plan benchmark amount

13 for each plan equal to—

14 ‘‘(i) (until such time as the Secretary

15 establishes an integrated risk adjustment

16 system for individuals who are aged or dis17 abled and for individuals who have end18 stage renal disease)—

19 ‘‘(I) the product of the weighted

20 average of the benchmark amounts for

21 the payment areas included in the

22 plan’s service area for individuals who

23 are aged or disabled and the number

24 of such individuals in the plan, plus
14

S 2342 IS

1 ‘‘(II) the product of the weighted

2 average of the benchmark amounts for

3 the payment areas included in the

4 plan’s service area for individuals who

5 have end-stage renal disease and the

6 number of such individuals in the

7 plan,divided by the total number of

8 individuals in subclauses (I) and (II);

9 and

10 ‘‘(ii) (after such time) the weighted

11 average of the benchmark amounts for the

12 payment areas included in the plan’s serv13 ice area.

14 ‘‘(B) COMPARISON TO BENCHMARK; DE15 TERMINATION OF PAYMENT AMOUNT.—The

16 monthly payment to a Medicare+Choice organi17 zation with respect to each individual enrolled

18 in a plan shall be set as follows:

19 ‘‘(i) IF BID DOES NOT EXCEED

20 BENCHMARK.—If the normalized bid deter21 mined under paragraph (1) does not ex22 ceed the plan benchmark amount deter23 mined under subparagraph (A), the month24 ly payment shall be the normalized bid, ad25 justed to account for the health status and
15

S 2342 IS

1 demographic adjustment factors of the in2 dividual enrollee.

3 ‘‘(ii) IF BID EXCEEDS BENCHMARK.—

4 If the normalized bid determined under

5 paragraph (1) exceeds the plan benchmark

6 amount determined under subparagraph

7 (B), the monthly payment shall be the nor8 malized bid, adjusted as described in

9 clause (i), minus the monthly excess pre10 mium determined under section 1854.’’.

11 (b) PREMIUMS.—

12 (1) DETERMINATION OF PREMIUM AMOUNT.—

13 Section 1854 (42 U.S.C. 1395–4) is amended—

14 (A) by striking subsection (a) and redesig15 nating subsections (b) and (c) as subsections

16 (a) and (b);

17 (B) by adding after subsection (b) the fol18 lowing new subsection:

19 ‘‘(c) DETERMINATION OF MEDICARE PREMIUM RE20 DUCTION AND EXCESS PREMIUM.—

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

22 the Secretary shall subtract the normalized bid (de23 termined under section 1853(d)(1)) from the plan’s

24 benchmark amount (determined under section

25 1853(d)(2)) to determine the Medicare premium re-
16

S 2342 IS

1 duction or monthly excess premium for plan enroll2 ees.

3 ‘‘(2) ADJUSTMENT.—If the difference between

4 the normalized bid and the plan’s benchmark

5 amount—

6 ‘‘(A) is a positive amount, 75 percent of

7 that amount shall be equal to—

8 ‘‘(i) the monthly Medicare premium

9 reduction for individuals enrolled in the

10 plan (up to the entire amount of the pre11 mium for part B or part D, as applicable);

12 and

13 ‘‘(ii) the remainder, if any, under

14 clause (i) shall be equal to the additional

15 reduction in the actuarial value of plan

16 cost-sharing for plan enrollees;

17 ‘‘(B) is a negative amount, the absolute

18 value of that amount shall equal the monthly

19 excess premium for individuals enrolled in the

20 plan.

21 (2) LIMITATION ON ENROLLEE LIABILITY.—

22 (A) FOR BASIC BENEFITS.—Section

23 1854(e)(1) (42 U.S.C. 1395w-4(e)(1)) is

24 amended to read as follows:

25 ‘‘(1) FOR BASIC BENEFITS.—The sum of—
17

S 2342 IS

1 ‘‘(A) the actuarial value of the deductibles,

2 coinsurance, and copayments applicable on av3 erage to individuals enrolled under this part

4 with a Medicare+Choice plan described in sec5 tion 1851(a)(2)(A) or (C) of an organization

6 with respect to benefits described in section

7 1852(a)(1);

8 ‘‘(B) the reduction in cost sharing included

9 in the plan bid;

10 ‘‘(C) the portion, if any, of the monthly

11 supplemental premium that is in lieu of plan

12 cost-sharing for Medicare benefits; and

13 ‘‘(D) any additional reduction in cost-shar14 ing under subsection (c)(2)(A) (determined sep15 arately with respect to benefits under parts A

16 and B, and benefits under part D) must equal

17 the actuarial value of the deductibles, coinsur18 ance, and copayments that would be applicable

19 on average to individuals entitled to such bene20 fits if they were not members of a

21 Medicare+Choice organization for the year (ad22 justed as determined appropriate by the Sec23 retary to account for geographic differences and

24 for plan cost and utilization differences).’’.
18

S 2342 IS

1 (B) FOR SUPPLEMENTAL BENEFITS.—

2 Section1854(e)(2) (42 U.S.C. 1395w–4(e)(2))

3 is amended—

4 (i) by striking ‘‘section

5 1851(a)(2)(A)’’ and inserting ‘‘subpara6 graph (A) or (C) of section 1851(a)(2)’’;

7 (ii) by striking ‘‘(multiplied by 12)’’;

8 and

9 (iii) by striking ‘‘may not exceed’’ and

10 inserting ‘‘must equal’’.

11 (c) OTHER CHANGES IN PLAN DESIGN.—

12 (1) ALLOWING PLANS TO INCLUDE COST SHAR13 ING REDUCTION IN THEIR BASIC BENEFITS.—Sec14 tion 1852(a)(1) (42 U.S.C. 1395w–22(a)(1)) is

15 amended by striking subparagraph (B) and inserting

16 the following—

17 ‘‘(B) at plan option, reduction in cost-shar18 ing for part A and part B benefits, or part D

19 benefits, that would otherwise be applicable (the

20 actuarial value of such reduction however shall

21 not exceed 15 percent of the value of the por22 tion of the bid related to combined part A and

23 part B benefits, or part D benefits, as applica24 ble).’’.
19

S 2342 IS

1 (2) ELIMINATION OF MANDATORY SUPPLE2 MENTAL BENEFITS.—Section 1852(a)(3) (42 U.S.C.

3 1395w–22(a)(3)) is amended by striking subpara4 graph (A) and redesignating subparagraphs (B) and

5 (C) and subparagraphs (A) and (B).

6 (d) CONFORMING AMENDMENTS.—

7 (1) PREMIUM REDUCTIONS.—

8 (A) UNDER PART B.—

9 (i) Section 1839(a)(2) (42 U.S.C.

10 1395r(a)(2)) is amended by striking

11 ‘‘shall’’ and all that follows and inserting

12 ‘‘shall be the amount determined under

13 paragraph (3), adjusted as required in ac14 cordance with subsections (b), (c), and (f),

15 and thereafter further modified as required

16 to comply with section 1854(c)(2)(A).’’.

17 (ii) Section 1840 (42 U.S.C. 1395s) is

18 amended by adding at the end the fol19 lowing:

20 ‘‘(i) The Secretary shall provide for

21 necessary adjustments of the Medicare pre22 mium for Medicare+Choice enrollees de23 termined under section 1854(c)(2)(A).

24 This premium adjustment may be provided

25 directly or as an adjustment to Social Se-
20

S 2342 IS

1 curity, Railroad Retirement and Civil Serv2 ice Retirement benefits, as appropriate, as

3 the Secretary determines feasible with the

4 concurrence of such agencies.’’.

5 (B) UNDER PART D.—

6 (i) Section 1859D(a)(2)(B) is amend7 ed by inserting ‘‘thereafter further modi8 fied as required to comply with section

9 1854(c)(2)(A),’’ before ‘‘and rounded’’.

10 (ii) Section 1859(b)(1) is amended by

11 adding at the end the following:

12 ‘‘(C) The Secretary shall provide for nec13 essary adjustments of the Medicare premium

14 for Medicare+Choice enrollees determined

15 under section 1854(c)(2)(A). This premium ad16 justment may be provided directly or as an ad17 justment to Social Security, Railroad Retire18 ment and Civil Service Retirement benefits, as

19 appropriate, as the Secretary determines fea20 sible with the concurrence of such agencies.’’.

21 (2) APPROPRIATIONS FOR GOVERNMENT CON22 TRIBUTION.—Section 1844(a)(1) (42 U.S.C.

23 1395w(a)(1)) is amended by adding after subpara24 graph (B) the following new subparagraph:
21

S 2342 IS

1 ‘‘(C) an adjustment for the Government

2 contribution to reflect the savings to the Trust

3 Fund from enrollment in Medicare+Choice

4 plans by beneficiaries who receive monthly

5 Medicare premium reductions in accordance

6 with section 1854(c)(2)(A).’’.

7 (3) Section 1851(b)(1)(B) (42 U.S.C. 1395w–

8 21(b)(1)(B)) is amended by striking ‘‘section

9 1852(a)(1)(A)’’ and inserting ‘‘section 1852(a)(1)’’.

10 (4) Section 1851(d)(2)(A) (42 U.S.C. 1395w–

11 21(d)(2)(A)) is amended by striking ‘‘At least 15

12 days before’’ and inserting ‘‘Before’’.

13 (5) Part C is amended by striking ‘‘BENE14 FICIARY’’ each time it appears immediately before

15 ‘‘PREMIUM’’ or ‘‘PREMIUMS’’, and by striking ‘‘bene16 ficiary’’ each time it appears immediately before

17 ‘‘premium’’ or ‘‘premiums’’.

18 (6) Section 1851(d)(4)(B) (42 U.S.C. 1395w–

19 21(d)(4)(B)) is amended—

20 (A) by inserting ‘‘(i)’’ after ‘‘PREMI21 UMS.—’’; and

22 (B) by adding before the period ‘‘; and (ii)

23 the reduction in the part B and part D pre24 miums, if any’’.
22

S 2342 IS

1 (7) Section 1851(d)(4)(E) (42 U.S.C. 1395w–

2 21(d)(4)(E)) is amended by striking ‘‘includes man3 datory supplemental benefits in its base benefit

4 package or’’.

5 (8) Section 1852(a)(5) (42 U.S.C. 1395w–

6 22(a)(5)) is amended by striking ‘‘the annual

7 Medicare+Choice capitation rate’’ and inserting

8 ‘‘the national monthly per capita costs’’.

9 (9) Section 1852(c)(1)(F) (42 U.S.C. 1395w–

10 22(c)(1)(F)) is amended by striking clause (i) and

11 redesignating clauses (ii) and (iii) as clauses (i) and

12 (ii).

13 (10) Section 1853(a)(1)(B) (42 U.S.C. 1395w–

14 23(a)(1)(B)) is amended by striking the first and

15 second sentences.

16 (11) Section 1853(e)(3)(B) (42 U.S.C. 1395w–

17 23(e)(3)(B)), as redesignated, is amended—

18 (A) in the caption, by striking ‘‘BUDGET

19 NEUTRALITY’’;

20 (B) by striking ‘‘adjust the payment rates’’

21 and all that follows through ‘‘that would have

22 been made’’ and inserting ‘‘adjust the bench23 mark amounts otherwise established under this

24 section for Medicare+Choice payment areas in

25 the State in a manner so that the weighted av-
23

S 2342 IS

1 erage of the benchmark amounts under this

2 section in the State equals the weighted average

3 of benchmark amounts that would have been

4 applicable’’.

5 (12) Section 1853(i)(2) (42 U.S.C. 1395w–

6 23(i)(2)), as redesignated, is amended—

7 (A) by inserting ‘‘and’’ at the end of sub8 paragraph (A);

9 (B) by striking ‘‘; and’’ at the end of sub10 paragraph (B) and inserting a period; and

11 (C) by striking subparagraph (C).

12 (13)(A) Section 1854(a)(2)(A) (42 U.S.C.

13 1395w–4(a)(2)(A)), as redesignated, is amended by

14 striking ‘‘the amount authorized to be charged’’ and

15 all that follows and inserting ‘‘the amount required

16 to be charged under subsection (c)(2)(B) for the

17 plan.’’.

18 (B) Section 1854(a)(2)(B) (42 U.S.C. 1395w–

19 4(a)(2)(B)), as redesignated, is amended—

20 (i) by striking ‘‘or Medicare+Choice fee21 for-service plan’’, and

22 (ii) by striking ‘‘or (4)(B)’’.

23 (14) Section 1854(e) (42 U.S.C. 1395w–4(e)) is

24 amended by striking paragraph (4).
24

S 2342 IS

1 (15)(A) Paragraphs (3) and (4) of section

2 1854(f) (42 U.S.C. 1395w–4(f)) are relocated and

3 redesignated as paragraphs (4) and (5) of subsection

4 (e).

5 (B) Section 1854(e)(4) (42 U.S.C. 1395w–

6 4(e)(4)), as so redesignated, is amended by striking

7 ‘‘subject to paragraph (4)’’ and inserting ‘‘subject to

8 paragraph (5)’’.

9 (C) Section 1854(f) (42 U.S.C. 1395w–4(f)) is

10 stricken.

11 (16) Section 1858(c), as redesignated by section

12 201, is amended by striking paragraph (3) and re13 designating paragraph (4) as paragraph (3).

14 (e) EFFECTIVE DATE.—The amendments made by

15 this section shall be effective for 2003 and succeeding

16 years.

17 PART B—PRIVATE SECTOR PURCHASING AND

18 QUALITY IMPROVEMENT TOOLS FOR ORIGI19 NAL MEDICARE

20 SEC. 111. CARE COORDINATION SERVICES.

21 (a) PROGRAM AUTHORIZED.—Title XVIII (42 U.S.C.

22 1395 et seq.) is amended by adding after section 1866

23 the following new section:

24 ‘‘SEC. 1866A. CARE COORDINATION SERVICES.

25 ‘‘(a) IN GENERAL.—
25

S 2342 IS

1 ‘‘(1) PROGRAM AUTHORITY.—The Secretary,

2 beginning in 2002, may implement a care coordina3 tion services program in accordance with the provi4 sions of this section under which, in appropriate cir5 cumstances, eligible individuals may elect to have

6 health care services covered under this title managed

7 and coordinated by a designated care coordinator.

8 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

9 as otherwise specifically provided, the Secretary may

10 administer the program under this section in accord11 ance with section 1866M.

12 ‘‘(b) ELIGIBILITY CRITERIA; IDENTIFICATION AND

13 NOTIFICATION OF ELIGIBLE INDIVIDUALS.—

14 ‘‘(1) INDIVIDUAL ELIGIBILITY CRITERIA.—The

15 Secretary shall specify criteria to be used in making

16 a determination as to whether an individual may ap17 propriately be enrolled in the care coordination serv18 ices program under this section, which shall include

19 at least a finding by the Secretary that for cohorts

20 of individuals with characteristics identified by the

21 Secretary, professional management and coordina22 tion of care can reasonably be expected to improve

23 processes or outcomes of health care and to reduce

24 aggregate costs to the programs under this title.
26

S 2342 IS

1 ‘‘(2) PROCEDURES TO FACILITATE ENROLL2 MENT.—The Secretary shall develop and implement

3 procedures designed to facilitate enrollment of eligi4 ble individuals in the program under this section.

5 ‘‘(c) ENROLLMENT OF INDIVIDUALS.—

6 ‘‘(1) SECRETARY’S DETERMINATION OF ELIGI7 BILITY.—The Secretary shall determine the eligi8 bility for services under this section of individuals

9 who are enrolled in the program under this section

10 and who make application for such services in such

11 form and manner as the Secretary may prescribe.

12 ‘‘(2) ENROLLMENT PERIOD.—

13 ‘‘(A) EFFECTIVE DATE AND DURATION.—

14 Enrollment of an individual in the program

15 under this section shall be effective as of the

16 first day of the month following the month in

17 which the Secretary approves the individual’s

18 application under paragraph (1), shall remain

19 in effect for one month (or such longer period

20 as the Secretary may specify), and shall be

21 automatically renewed for additional periods,

22 unless terminated in accordance with such pro23 cedures as the Secretary shall establish by regu24 lation.
27

S 2342 IS

1 ‘‘(B) LIMITATION ON REENROLLMENT.—

2 The Secretary may establish limits on an indi3 vidual’s eligibility to reenroll in the program

4 under this section if the individual has

5 disenrolled from the program more than once

6 during a specified time period.

7 ‘‘(d) PROGRAM.—The care coordination services pro8 gram under this section shall include the following ele9 ments:

10 ‘‘(1) BASIC CARE COORDINATION SERVICES.—

11 ‘‘(A) IN GENERAL.—Subject to the cost-ef12 fectiveness criteria specified in subsection

13 (b)(1), except as otherwise provided in this sec14 tion, enrolled individuals shall receive services

15 described in section 1905(t)(1) and may receive

16 additional items and services as described in

17 subparagraph (B).

18 ‘‘(B) ADDITIONAL BENEFITS.—The Sec19 retary may specify additional benefits for which

20 payment would not otherwise be made under

21 this title that may be available to individuals

22 enrolled in the program under this section (sub23 ject to an assessment by the care coordinator of

24 an individual’s circumstance and need for such
28

S 2342 IS

1 benefits) in order to encourage enrollment in, or

2 to improve the effectiveness of, such program.

3 ‘‘(2) CARE COORDINATION REQUIREMENT.—

4 Notwithstanding any other provision of this title, the

5 Secretary may provide that an individual enrolled in

6 the program under this section may be entitled to

7 payment under this title for any specified health

8 care items or services only if the items or services

9 have been furnished by the care coordinator, or co10 ordinated through the care coordination services pro11 gram. Under such provision, the Secretary shall pre12 scribe exceptions for emergency medical services as

13 described in section 1852(d)(3), and other excep14 tions determined by the Secretary for the delivery of

15 timely and needed care.

16 ‘‘(3) REDUCTION OR ELIMINATION OF COST

17 SHARING.—Notwithstanding any other provision of

18 law, subject to the cost-effectiveness criteria speci19 fied in subsection (b)(1), the Secretary may provide

20 for the reduction or elimination of beneficiary cost

21 sharing (such as deductibles, copayments, and coin22 surance) with respect to any of the items or services

23 furnished under this title (other than the care co24 ordination services and other benefits described in
29

S 2342 IS

1 paragraph (1)) and may limit such reduction or

2 elimination to particular service areas.

3 ‘‘(e) CARE COORDINATORS.—

4 ‘‘(1) CONDITIONS OF PARTICIPATION.—In order

5 to be qualified to furnish care coordination services

6 under this section, an individual or entity shall—

7 ‘‘(A) be a health care professional or entity

8 (which may include physicians, physician group

9 practices, or other health care professionals or

10 entities the Secretary may find appropriate)

11 meeting such conditions as the Secretary may

12 specify;

13 ‘‘(B) have entered into a care coordination

14 agreement; and

15 ‘‘(C) meet such criteria as the Secretary

16 may establish (which may include experience in

17 the provision of care coordination or primary

18 care physician’s services).

19 ‘‘(2) AGREEMENT TERM; PAYMENT.—

20 ‘‘(A) DURATION AND RENEWAL.—A care

21 coordination agreement under this subsection

22 shall be for one year and may be renewed if the

23 Secretary is satisfied that the care coordinator

24 continues to meet the conditions of participa25 tion specified in paragraph (1).
30

S 2342 IS

1 ‘‘(B) PAYMENT FOR SERVICES.—The Sec2 retary may negotiate or otherwise establish pay3 ment terms and rates for services described in

4 subsection (d)(1).

5 ‘‘(C) TERMS.—In addition to such other

6 terms as the Secretary may require, an agree7 ment under this section shall include the terms

8 specified in subparagraphs (A) through (C) of

9 section 1905(t)(3).’’.

10 (b) COVERAGE OF CARE COORDINATION SERVICES

11 AS A PART B MEDICAL SERVICE.—

12 (1) IN GENERAL.—Section 1861(s) (42 U.S.C.

13 1395x(s)) is amended—

14 (A) in the second sentence, by redesig15 nating paragraphs (16) and (17) as clauses (i)

16 and (ii); and

17 (B) in the first sentence—

18 (i) by striking ‘‘and’’ at the end of

19 paragraph (14);

20 (ii) by striking the period at the end

21 of paragraph (15) and inserting ‘‘; and’’;

22 and

23 (iii) by adding after paragraph (15)

24 the following new paragraph:
31

S 2342 IS

1 ‘‘(16) care coordination services furnished in

2 accordance with section 1866A.’’.

3 (2) PART B COINSURANCE AND DEDUCTIBLE

4 NOT APPLICABLE TO CARE COORDINATION SERV5 ICES.—

6 (A) COINSURANCE.—Section 1833(a)(1) is

7 amended—

8 (i) by striking ‘‘and’’ at the end of

9 subparagraph (R); and

10 (ii) by inserting before the final semi11 colon ‘‘, and (T) with respect to care co12 ordination services described in section

13 1861(s)(16), the amounts paid shall be

14 100 percent of the payment amount estab15 lished under section 1866C’’.

16 (B) DEDUCTIBLE.—Section 1833(b) (42

17 U.S.C. 1395l(b)) is amended—

18 (i) by striking ‘‘and’’ at the end of

19 paragraph (5); and

20 (ii) by inserting before the final period

21 ‘‘, and (7) such deductible shall not apply

22 with respect to care coordination services

23 (as described in section 1861(s)(16))’’.
32

S 2342 IS

1 SEC. 112. DISEASE MANAGEMENT SERVICES.

2 (a) PROGRAM AUTHORIZED.—Title XVIII (42 U.S.C.

3 1395 et seq.), as previously amended by this part, is fur4 ther amended by adding after section 1866A the following

5 new section:

6 ‘‘SEC. 1866B. DISEASE MANAGEMENT SERVICES.

7 ‘‘(a) IN GENERAL.—

8 ‘‘(1) PROGRAM AUTHORITY.—The Secretary,

9 beginning in 2002, may implement a program in ac10 cordance with the provisions of this section under

11 which certain eligible individuals may, in appropriate

12 circumstances, receive disease management services

13 from entities designated by the Secretary with re14 spect to diagnoses that the Secretary determines are

15 amenable to such management.

16 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

17 as otherwise specifically provided, the Secretary may

18 administer the program under this section in accord19 ance with section 1866M.

20 ‘‘(b) INDIVIDUALS WHO MAY RECEIVE DISEASE

21 MANAGEMENT SERVICES.—No individual shall be eligible

22 for enrollment in a disease management program under

23 this section unless the Secretary finds the following with

24 respect to the individual:

25 ‘‘(1) DIAGNOSIS AND RELATED CHARACTERIS26 TICS.—
33

S 2342 IS

1 ‘‘(A) IN GENERAL.—The individual has

2 been diagnosed with congestive heart failure,

3 chronic obstructive pulmonary disease, diabetes,

4 or any other diagnosis, if the Secretary has de5 termined with respect to such diagnoses that

6 there is evidence that the provision of disease

7 management services, over clinically relevant

8 time-periods, to cohorts of individuals with such

9 diagnoses can reasonably be expected to im10 prove processes or outcomes of health care for

11 the Medicare population and to reduce aggre12 gate costs to the programs under this title.

13 ‘‘(B) ADDITIONAL FACTORS.—Where re14 quired by the Secretary, the individual also has

15 certain clinical characteristics or conditions, ex16 hibits certain patterns of utilization, or mani17 fests other factors indicating the need for and

18 potential effectiveness of disease management.

19 ‘‘(2) REFERRAL BY QUALIFIED INDIVIDUAL OR

20 ENTITY.—The individual has been referred for con21 sideration for such services by an individual or entity

22 furnishing health care items or services, or by an en23 tity administering benefits under this title.

24 ‘‘(c) PROCEDURES TO FACILITATE ENROLLMENT.—

25 The Secretary shall develop and implement procedures de-
34

S 2342 IS

1 signed to facilitate enrollment of eligible individuals in the

2 program under this section.

3 ‘‘(d) ENROLLMENT OF INDIVIDUALS WITH DISEASE

4 MANAGEMENT ORGANIZATIONS.—

5 ‘‘(1) EFFECTIVE DATE AND DURATION.—En6 rollment of an individual in the program under this

7 section shall remain in effect for one month (or such

8 longer period as the Secretary may specify), and

9 shall be automatically renewed for additional peri10 ods, unless terminated in accordance with such pro11 cedures as the Secretary shall establish by regula12 tion.

13 ‘‘(2) LIMITATION ON REENROLLMENT.—The

14 Secretary may establish limits on an individual’s eli15 gibility to reenroll in the program under this section

16 if the individual has disenrolled from the program

17 more than once during a specified time period.

18 ‘‘(e) DISEASE MANAGEMENT REQUIREMENT.—Not19 withstanding any other provision of this title, the Sec20 retary may provide that an individual enrolled in the pro21 gram under this section may be entitled to payment under

22 this title for any specified health care items or services

23 only if the items or services have been furnished by the

24 disease management organization, or coordinated through

25 the disease management services program. Under such
35

S 2342 IS

1 provision, the Secretary shall prescribe exceptions for

2 emergency medical services as described in section

3 1852(d)(3), and other exceptions determined by the Sec4 retary for the delivery of timely and needed care.

5 ‘‘(f) DISEASE MANAGEMENT SERVICES.—

6 ‘‘(1) IN GENERAL.—Subject to the cost-effec7 tiveness criteria specified in subsection (b)(1), dis8 ease management services provided to an individual

9 under this section may include—

10 ‘‘(A) initial and periodic health screening

11 and assessment;

12 ‘‘(B) management (including coordination

13 with other providers) of, and referral for, med14 ical and other health services related to the

15 managed diagnosis (which may include referral

16 for provision of such services by the disease

17 management organization);

18 ‘‘(C) monitoring and control of medications

19 (including coordination with the entity man20 aging benefits for the individual under part D);

21 ‘‘(D) patient education and counseling;

22 ‘‘(E) nursing or other health professional

23 home visits, as appropriate;

24 ‘‘(F) providing access for consultations by

25 telephone with physicians or other appropriate
36

S 2342 IS

1 medical professionals, including 24-hour avail2 ability for emergency consultations;

3 ‘‘(G) managing and facilitating the transi4 tion to other care arrangements in preparation

5 for termination of the disease management en6 rollment; and

7 ‘‘(H) such other services for which pay8 ment would not otherwise be made under this

9 title as the Secretary shall determine to be ap10 propriate.

11 ‘‘(2) VARIATIONS IN SERVICE PACKAGES.—The

12 types and combinations of disease management serv13 ices furnished under agreements under this section

14 may vary (as permitted or required by the Sec15 retary) according to the types of diagnoses, condi16 tions, patient profiles being managed, expertise of

17 the disease management organization, and other fac18 tors the Secretary finds appropriate.

19 ‘‘(3) REDUCTION OR ELIMINATION OF COST

20 SHARING.—Notwithstanding any other provision of

21 law, subject to the cost-effectiveness criteria speci22 fied in subsection (b)(1), the Secretary may provide

23 for the reduction or elimination of beneficiary cost

24 sharing (such as deductibles, copayments, and coin25 surance) with respect to any of the items or services
37

S 2342 IS

1 furnished under this title (other than those fur2 nished under a service package developed under

3 paragraph (2)), and may limit such reduction or

4 elimination to particular service areas.

5 ‘‘(g) AGREEMENTS WITH DISEASE MANAGEMENT

6 ORGANIZATIONS.—

7 ‘‘(1) ENTITIES ELIGIBLE.—Entities qualified to

8 enter into agreements with the Secretary for the

9 provision of disease management services under this

10 section include entities that have demonstrated the

11 ability to meet the performance standards and other

12 criteria established by the Secretary with respect

13 to—

14 ‘‘(A) the management of each diagnosis

15 and condition with respect to which the entity,

16 if designated, would furnish disease manage17 ment services under this section; and

18 ‘‘(B) the implementation of each disease

19 management approach that the entity, if des20 ignated, would implement under this section.

21 ‘‘(2) CONDITIONS OF PARTICIPATION.—In order

22 to be eligible to provide disease management services

23 under this section, an entity shall—

24 ‘‘(A) have in effect an agreement with the

25 Secretary setting forth such obligations of the
38

S 2342 IS

1 entity as a disease management organization

2 under this section as the Secretary shall pre3 scribe;

4 ‘‘(B) meet the standards established by the

5 Secretary under subsection (h); and

6 ‘‘(C) meet such other conditions as the

7 Secretary may establish.

8 ‘‘(3) SECRETARY’S OPTION FOR NONCOMPETI9 TIVE DESIGNATION.—The Secretary may designate

10 an entity to provide disease management services

11 under this section without regard to the require12 ments of section 5 of title 41, United States Code.

13 ‘‘(h) STANDARDS.—

14 ‘‘(1) QUALITY.—The Secretary shall establish

15 standards for, and procedures for assessing, the

16 quality of care provided by disease management or17 ganizations under this section, which shall include—

18 ‘‘(A) performance standards with respect

19 to the processes or outcomes of health care or

20 the health status of enrolled individuals, includ21 ing procedures for establishing a baseline and

22 measuring changes in health care processes or

23 health outcomes with respect to managed dis24 eases or health conditions;
39

S 2342 IS

1 ‘‘(B) a requirement that the organization

2 meet such licensure and other accreditation

3 standards as the Secretary may find appro4 priate; and

5 ‘‘(C) such other quality standards, includ6 ing patient satisfaction, as the Secretary may

7 find appropriate.

8 ‘‘(2) COST MANAGEMENT.—The Secretary shall

9 establish a performance standard with respect to

10 management or reduction of the aggregate costs of

11 health care items and services related to managed

12 health conditions furnished to enrolled individuals,

13 including procedures for establishing a baseline and

14 measuring changes in costs for such items and serv15 ices.

16 ‘‘(i) PAYMENT.—

17 ‘‘(1) TERMS OF PAYMENT.—The Secretary may

18 negotiate or otherwise establish payment terms and

19 rates for service packages developed under sub20 section (f)(2).

21 ‘‘(2) WITHHOLDING OF PAYMENTS.—An agree22 ment under subsection (g) may provide that the Sec23 retary may withhold up to ten percent of the amount

24 due a disease management organization under the

25 basis of payment established under paragraph (1)
40

S 2342 IS

1 until such time as such organization meets a stand2 ard or standards specified in such agreement.

3 (b) COVERAGE OF DISEASE MANAGEMENT SERVICES

4 AS A PART B MEDICAL SERVICE.—

5 (1) IN GENERAL.—Section 1861(s), as amended

6 by section 111, is further amended—

7 (A) by striking ‘‘and’’ at the end of para8 graph (15);

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

10 paragraph (16) and inserting ‘‘and’’; and

11 (C) by adding after paragraph (16) the fol12 lowing new paragraph:

13 ‘‘(17) disease management services furnished in

14 accordance with section 1866B.’’.

15 (2) PART B COINSURANCE AND DEDUCTIBLE

16 NOT APPLICABLE TO DISEASE MANAGEMENT SERV17 ICES.—

18 (A) COINSURANCE.—Section

19 1833(a)(1)(T) (42 U.S.C. 1395l(a)(1)(T)), as

20 added by section 111(b)(2)(A), is amended to

21 read as follows: ‘‘(T) with respect to care co22 ordination services described in section

23 1861(s)(16) and disease management services

24 described in section 1861(s)(17), the amounts

25 paid shall be 100 percent of the payment
41

S 2342 IS

1 amounts established under sections 1866A and

2 1866B, respectively;’’.

3 (B) DEDUCTIBLE.—Section 1833(b) (42

4 U.S.C. 1395l(b)), as amended by section

5 111(b)(2)(A), is further amended by inserting

6 before the final period ‘‘or to disease manage7 ment services (as described in section

8 1861(s)(17))’’.

9 SEC. 113. COMPETITIVE ACQUISITION OF ITEMS AND SERV10 ICES.

11 (a) PROGRAM AUTHORIZED.—Title XVIII (42 U.S.C.

12 1395 et seq.), as previously amended by this part, is fur13 ther amended by adding after section 1866B the following

14 new section:

15 ‘‘SEC. 1866C. COMPETITIVE ACQUISITION OF ITEMS AND

16 SERVICES.

17 ‘‘(a) IN GENERAL.—

18 ‘‘(1) PROGRAM AUTHORITY.—The Secretary

19 shall implement a program to purchase, on behalf of

20 individuals enrolled under this part certain competi21 tively priced items and services for which payment

22 may be made under part B.

23 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

24 as otherwise specifically provided, the Secretary may
42

S 2342 IS

1 administer the program under this section in accord2 ance with section 1866M.

3 ‘‘(b) ESTABLISHMENT OF COMPETITIVE ACQUISI4 TION AREAS.—

5 ‘‘(1) IN GENERAL.—The Secretary shall estab6 lish competitive acquisition areas for agreement

7 award purposes for the furnishing under part B of

8 the items and services described in subsection (d)

9 after 2002. The Secretary may establish different

10 competitive acquisition areas under this subsection

11 for different classes of items and services.

12 ‘‘(2) CRITERIA FOR ESTABLISHMENT.—The

13 competitive acquisition areas established under para14 graph (1) shall be chosen based on the availability

15 and accessibility of individuals and entities able to

16 furnish items and services, and the estimated sav17 ings to be realized by the use of competitive acquisi18 tion in the furnishing of items and services in the

19 area.

20 ‘‘(c) AWARDING OF AGREEMENTS IN COMPETITIVE

21 ACQUISITION AREAS.—

22 ‘‘(1) IN GENERAL.—The Secretary shall con23 duct a competition among individuals and entities

24 supplying items and services described in subsection

25 (d) for each competitive acquisition area established
43

S 2342 IS

1 under subsection (b) for each class of items and

2 services.

3 ‘‘(2) CONDITIONS FOR AWARDING AGREE4 MENT.—The Secretary may not enter an agreement

5 with any entity under the competition conducted

6 pursuant to paragraph (1) to furnish an item or

7 service unless the Secretary finds that the entity

8 meets quality standards specified by the Secretary,

9 and that the aggregate amounts to be paid under

10 the agreement are expected to be less than the ag11 gregate amounts that would otherwise be paid.

12 ‘‘(3) TERMS OF AGREEMENT.—An agree13 ment entered into with an entity under the

14 competition conducted pursuant to paragraph

15 (1) is subject to terms and conditions that the

16 Secretary may specify.

17 ‘‘(d) SERVICES DESCRIBED.—The items and services

18 to which this section applies are all items and services de19 scribed in paragraphs (3) and (5) through (9) of section

20 1861(s) (other than custom fabricated prostheses, as de21 fined by the Secretary), and such other items or services

22 as the Secretary may specify.’’.

23 (b) ITEMS AND SERVICES TO BE FURNISHED ONLY

24 THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)

25 (42 U.S.C. 1395y(a)) is amended—
44

S 2342 IS

1 (1) by striking ‘‘or’’ at the end of paragraph

2 (20),

3 (2) by striking the period at the end of para4 graph (21) and inserting ‘‘; or’’, and

5 (3) by adding after paragraph (21) the fol6 lowing:

7 ‘‘(22) where the expenses are for an item or

8 service furnished in a competitive acquisition area

9 (as established by the Secretary under section

10 1866C(a)) by an entity other than an entity with

11 which the Secretary has entered into an agreement

12 under section 1866C(c) for the furnishing of such an

13 item or service in that area, except in such cases of

14 emergency or urgent need as the Secretary shall pre15 scribe.

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

17 subsections (a) and (b) apply to items and services fur18 nished after 2002.

19 SEC. 114. PROVIDER AND PHYSICIAN COLLABORATIONS.

20 Title XVIII (42 U.S.C. 1395 et seq.), as previously

21 amended by this part, is further amended by adding after

22 section 1866C the following new section:

23 ‘‘SEC. 1866D. PROVIDER AND PHYSICIAN COLLABORATIONS.

24 ‘‘(a) IN GENERAL.—
45

S 2342 IS

1 ‘‘(1) PROGRAM AUTHORITY.—The Secretary

2 may enter into agreements with specific providers,

3 suppliers, or other individuals or entities for the fur4 nishing of bundled items and services in selected

5 sites of service or related to specific medical condi6 tions or needs for an episode of care. The services

7 may include any items or services covered under this

8 title that the Secretary determines to be appropriate,

9 including post-hospital services.

10 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

11 as otherwise specifically provided, the Secretary may

12 administer the program under this section in accord13 ance with section 1866M.

14 ‘‘(b) BASIS OF SELECTION.—The Secretary shall se15 lect entities for agreements under this section on the basis

16 of ability to provide services more efficiently, to provide

17 improved coordination of care, to offer additional benefits,

18 and to meet quality and other standards and beneficiary

19 protections and other requirements set by the Secretary.

20 ‘‘(c) PAYMENT.—Payment under this section shall be

21 made on the basis of all-inclusive rates. The all-inclusive

22 rate paid to an entity for bundled items and services fur23 nished during an episode of care under this section shall

24 be less than the estimated amount of the payments that
46

S 2342 IS

1 the Secretary would have otherwise made for the items

2 and services.

3 ‘‘(d) TERM OF AGREEMENT.—Agreements under this

4 section shall be for periods that the Secretary may deter5 mine.

6 ‘‘(e) INCENTIVES TO BENEFICIARIES FOR USE OF

7 CONTRACTING ENTITIES.—Notwithstanding any other

8 provision of law, entities under a contract under this sec9 tion may furnish additional services or waive part or all

10 beneficiary cost sharing (such as deductibles, copayments,

11 and coinsurance) with respect to any of the items or serv12 ices furnished under this section.

13 ‘‘(f) BENEFICIARY ELECTION.—An individual enti14 tled to benefits under this title who elects to obtain serv15 ices under an agreement under this section shall agree to

16 receive under such agreement all benefits related to the

17 episode of care covered by the agreement (subject to such

18 exceptions for emergency services and as the Secretary

19 otherwise may specify).’’.

20 SEC. 115. PREFERRED PARTICIPANTS.

21 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

22 seq.), as previously amended by this part, is further

23 amended by adding after section 1866D the following new

24 section:
47

S 2342 IS

1 ‘‘SEC. 1866E. PREFERRED PARTICIPANTS.

2 ‘‘(a) PROGRAM AUTHORITY.—

3 ‘‘(1) IN GENERAL.—The Secretary shall imple4 ment beginning in 2002, a preferred participant pro5 gram, under which the Secretary enters into agree6 ments for the furnishing of health care items and

7 services by individuals and entities participating in

8 the program under part A or B of this title that pro9 vide high-quality, efficient health care.

10 ‘‘(2) LIMITATION.—The Secretary shall not im11 plement the program under this section with respect

12 to a service area, or with respect to a category of in13 dividuals and entities furnishing items and services

14 in such service area, unless the Secretary estimates

15 that to do so will reduce the cost and improve the

16 quality of the programs under this title.

17 ‘‘(3) ADMINISTRATION BY CONTRACT.—Except

18 as otherwise specifically provided, the Secretary shall

19 administer the program under this section in accord20 ance with section 1866M.

21 ‘‘(b) PREFERRED PARTICIPANT AGREEMENT.—

22 ‘‘(1) CRITERIA AND TERMS.—In order to be eli23 gible to participate in the program under part A or

24 B as a preferred participant, an individual or entity

25 shall meet the following conditions:
48

S 2342 IS

1 ‘‘(A) PARTICIPATION CRITERIA.—The indi2 vidual or entity shall meet the criteria estab3 lished by the Secretary under section

4 1866M(b)(5) (relating to quality, cost-effective5 ness, categories of participants in service area,

6 and such other standards or criteria as the Sec7 retary may establish).

8 ‘‘(B) PAYMENT RATE.—The individual or

9 entity shall agree to accept payment, for cov10 ered health care items and services furnished

11 during the term of the agreement, at the rates

12 established under this section (which may in13 clude rates in effect under part A or B, dis14 counted rates, or such other rates as the Sec15 retary may find appropriate).

16 ‘‘(2) DURATION.—A preferred participant agreement

17 under this section shall be for a calendar year (or,

18 in the case of an agreement commencing after the

19 first day of January (or such later date as the Sec20 retary may specify), for the remainder of such cal21 endar year), and shall be annually renewable, at the

22 option of the participant, while the participant con23 tinues to meet all applicable conditions of participa24 tion.
49

S 2342 IS

1 ‘‘(c) OPTION TO REDUCE COST SHARING.—Notwith2 standing any other provision of law, subject to the cost3 effectiveness criteria specified in subsection (a)(2), the

4 Secretary may—

5 ‘‘(1) provide for the reduction or elimination of

6 beneficiary cost sharing (such as deductibles, copay7 ments, and coinsurance) with respect to any of the

8 items or services furnished under this section, and

9 may limit such reduction or elimination to particular

10 service areas; and

11 ‘‘(2) permit individuals or entities under an

12 agreement under this section to waive part or all of

13 such beneficiary cost sharing.’’.

14 (b) DEFINITIONS.—Section 1861 (42 U.S.C. 1395x)

15 is amended by adding at the end the following new sub16 section:

17 ‘‘(uu) PREFERRED PARTICIPANT.—The term ‘pre18 ferred participant’ means an individual or entity that fur19 nishes health care items or services under part A or B

20 and that has in effect an agreement under section

21 1866E(b).’’.

22 SEC. 116. CENTERS OF EXCELLENCE.

23 Title XVIII (42 U.S.C. 1395 et seq.), as previously

24 amended by this part, is further amended by adding after

25 section 1866E the following new section:
50

S 2342 IS

1 ‘‘SEC. 1866F. CENTERS OF EXCELLENCE.

2 ‘‘(a) IN GENERAL.—

3 ‘‘(1) COMPETITION TO FURNISH BUNDLED

4 ITEMS AND SERVICES.—The Secretary, beginning in

5 2002, shall use a competitive process to enter into

6 agreements with specific hospitals or other entities

7 for the furnishing of bundled groups of items and

8 services related to certain surgical procedures, and

9 of other bundled groups of items and services (unre10 lated to surgical procedures) specified by the Sec11 retary furnished during an episode of care (as de12 fined by the Secretary). Such items and services may

13 include any items or services covered under this title

14 that the Secretary determines to be appropriate.

15 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

16 as otherwise specifically provided, the Secretary may

17 administer the program under this section in accord18 ance with section 1866M.

19 ‘‘(b) ELIGIBILITY CRITERIA.—In order to be eligible

20 for an agreement under this section, an entity shall—

21 ‘‘(1) meet quality standards established by the

22 Secretary;

23 ‘‘(2) implement an ongoing quality assurance

24 program approved by the Secretary; and

25 ‘‘(3) meet such other requirements as the Sec26 retary may establish.
51

S 2342 IS

1 ‘‘(c) PAYMENT.—

2 ‘‘(1) IN GENERAL.—The Secretary shall estab3 lish criteria for identifying the health care items and

4 services furnished by a center with an agreement

5 under this section during an episode of care that are

6 to be bundled together and for which payment shall

7 be made on the basis of an all-inclusive rate.

8 ‘‘(2) PAYMENT LIMITATION.—

9 ‘‘(A) LIMITATION ON AGGREGATE PAY10 MENTS TO ENTITIES.—The estimated amount

11 of aggregate payments to all entities under this

12 section for a year shall be less than the esti13 mated amount of aggregate payments that the

14 Secretary would otherwise have made for such

15 year, adjusted for changes in the number of in16 dividuals receiving services.

17 ‘‘(B) LIMITATION ON PAYMENTS TO PAR18 TICULAR ENTITIES.—In no case shall the all-in19 clusive rate paid to an entity for items and

20 services furnished during an episode of care

21 under this section exceed the estimated amount

22 of the payments that the Secretary would other23 wise have made for such items and services.

24 ‘‘(d) AGREEMENT PERIOD.—An agreement period

25 shall be for up to three years (subject to renewal).
52

S 2342 IS

1 ‘‘(e) INCENTIVES FOR USE OF CENTERS.—Notwith2 standing any other provision of law, the Secretary may

3 permit entities under an agreement under this section to

4 furnish additional services or to waive part or all bene5 ficiary cost sharing (such as deductibles, copayments, and

6 coinsurance) with respect to any of the items or services

7 furnished under this section.

8 ‘‘(f) BENEFICIARY ELECTION.—Notwithstanding any

9 other provision of this title, an individual who voluntarily

10 elects to receive items and services under an arrangement

11 described in subsection (a)(1) with respect to an episode

12 of care shall not be entitled to payment under this title

13 for any such item or service furnished with respect to such

14 episode of care other than through such arrangement, sub15 ject to such exceptions as the Secretary may prescribe for

16 emergency medical services as described in section

17 1852(d)(3) and other cases of urgent need.’’.

18 SEC. 117. DEMONSTRATION OF BONUS PAYMENTS FOR

19 HEALTH CARE GROUPS.

20 Title XVIII (42 U.S.C. 1395 et seq.), as previously

21 amended by this part, is further amended by adding after

22 section 1866F the following new section:

23 ‘‘SEC. 1866G. DEMONSTRATION OF BONUS PAYMENTS FOR

24 HEALTH CARE GROUPS.

25 ‘‘(a) DEMONSTRATION PROGRAM AUTHORIZED.—
53

S 2342 IS

1 ‘‘(1) IN GENERAL.—The Secretary shall con2 duct demonstration projects to test and, if proven ef3 fective, expand the use of incentives to health care

4 groups participating in the program under this title

5 that—

6 ‘‘(A) encourage coordination of the care

7 furnished to individuals under the programs

8 under parts A and B by institutional and other

9 providers, practitioners, and suppliers of health

10 care items and services;

11 ‘‘(B) encourage investment in administra12 tive structures and processes to ensure efficient

13 service delivery; and

14 ‘‘(C) reward physicians for improving

15 health outcomes.

16 ‘‘(2) ADMINISTRATION BY CONTRACT.—Except

17 as otherwise specifically provided, the Secretary may

18 administer the program under this section in accord19 ance with section 1866M.

20 ‘‘(3) DEFINITIONS.—For purposes of this sec21 tion, terms have the following meanings:

22 ‘‘(A) PHYSICIAN.—Except as the Secretary

23 may otherwise provide, the term ‘physician’

24 means any individual who furnishes services
54

S 2342 IS

1 which may be paid for as physicians’ services

2 under this title .

3 ‘‘(B) HEALTH CARE GROUP.—The term

4 ‘health care group’ means a group of physicians

5 (as defined in subparagraph (A)) organized at

6 least in part for the purpose of providing physi7 cians’ services under this title. As the Secretary

8 finds appropriate, a health care group may in9 clude a hospital and any other individual or en10 tity furnishing items or services for which pay11 ment may be made under this title that is affili12 ated with the health care group under an ar13 rangement structured so that such individual or

14 entity participates in a demonstration under

15 this section and will share in any bonus earned

16 under subsection (d).

17 ‘‘(b) ELIGIBILITY CRITERIA.—

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

19 to establish criteria for health care groups eligible to

20 participate in a demonstration under this section, in21 cluding criteria relating to numbers of health care

22 professionals in, and of patients served by, the

23 group, scope of services provided, and quality of

24 care.
55

S 2342 IS

1 ‘‘(2) PAYMENT METHOD.—A health care group

2 participating in the demonstration under this section

3 shall agree with respect to services furnished to

4 beneficiaries within the scope of the demonstration

5 (as determined under subsection (c))—

6 ‘‘(A) to be paid on a fee-for-service basis;

7 and

8 ‘‘(B) that payment with respect to all such

9 services furnished by members of the health

10 care group to such beneficiaries shall (where de11 termined appropriate by the Secretary) be made

12 to a single entity.

13 ‘‘(3) DATA REPORTING.—A health care group

14 participating in a demonstration under this section

15 shall report to the Secretary such data, at such

16 times and in such format as the Secretary require,

17 for purposes of monitoring and evaluation of the

18 demonstration under this section.

19 ‘‘(c) PATIENTS WITHIN SCOPE OF DEMONSTRA20 TION.—

21 ‘‘(1) IN GENERAL.—The Secretary shall specify,

22 in accordance with this subsection, the criteria for

23 identifying those patients of a health care group who

24 shall be considered within the scope of the dem25 onstration under this section for purposes of applica-
56

S 2342 IS

1 tion of subsection (d) and for assessment of the ef2 fectiveness of the group in achieving the objectives

3 of this section.

4 ‘‘(2) OTHER CRITERIA.—The Secretary may es5 tablish additional criteria for inclusion of bene6 ficiaries within a demonstration under this section,

7 which may include frequency of contact with physi8 cians in the group or other factors or criteria that

9 the Secretary finds to be appropriate.

10 ‘‘(3) NOTICE REQUIREMENTS.—In the case of

11 each beneficiary determined to be within the scope

12 of a demonstration under this section with respect to

13 a specific health care group, the Secretary shall en14 sure that such beneficiary is notified of the incen15 tives, and of any waivers of coverage or payment

16 rules, applicable to such group under such dem17 onstration.

18 ‘‘(d) INCENTIVES.—

19 ‘‘(1) PERFORMANCE TARGET.—The Secretary

20 shall establish for each health care group partici21 pating in a demonstration under this section—

22 ‘‘(A) a base expenditure amount, equal to

23 the average total payments under parts A, B,

24 and D for patients served by the health care
57

S 2342 IS

1 group on a fee-for-service basis in a base period

2 determined by the Secretary; and

3 ‘‘(B) an annual per capita expenditure tar4 get for patients determined to be within the

5 scope of the demonstration, reflecting the base

6 expenditure amount adjusted for risk and ex7 pected growth rates.

8 ‘‘(2) INCENTIVE BONUS.—The Secretary shall

9 pay to each participating health care group (subject

10 to paragraph (4)) a bonus for each year under the

11 demonstration equal to a portion of the Medicare

12 savings realized for such year relative to the per13 formance target.

14 ‘‘(3) ADDITIONAL BONUS FOR PROCESS AND

15 OUTCOME IMPROVEMENTS.—At such time as the

16 Secretary has established appropriate criteria based

17 on evidence the Secretary determines to be suffi18 cient, the Secretary shall also pay to a participating

19 health care group (subject to paragraph (4)) an ad20 ditional bonus for a year, equal to such portion as

21 the Secretary may designate of the saving to the

22 Medicare program resulting from process improve23 ments made by and patient outcome improvements

24 attributable to activities of the group.
58

S 2342 IS

1 ‘‘(4) LIMITATION.—The Secretary shall limit

2 bonus payments under this section as necessary to

3 ensure that the aggregate expenditures under this

4 title (inclusive of bonus payments) with respect to

5 patients within the scope of the demonstration do

6 not exceed the amount which the Secretary esti7 mates would be expended if the demonstration

8 projects under this section were not implemented.

9 ‘‘(e) SELECTION OF DEMONSTRATION PROJECTS.—

10 The Secretary shall implement up to ten demonstrations

11 under this section, selected competitively on the basis of

12 criteria determined by the Secretary.’’.

13 SEC. 118. ADMINISTRATION OF CERTAIN PRIVATE SECTOR

14 PURCHASING AND QUALITY IMPROVEMENT

15 PROGRAMS.

16 Title XVIII (42 U.S.C. 1395 et seq.) is amended by

17 adding after section 1866F the following new section:

18 ‘‘SEC. 1866M. GENERAL PROVISIONS FOR ADMINISTRATION

19 OF CERTAIN PRIVATE SECTOR PURCHASING

20 AND QUALITY IMPROVEMENT PROGRAMS.

21 ‘‘(a) IN GENERAL.—Except as otherwise specifically

22 provided, the provisions of this section apply to the pro23 grams under the following provisions of this title:

24 ‘‘(1) section 1866A (care coordination services);
59

S 2342 IS

1 ‘‘(2) section 1866B (disease management serv2 ices);

3 ‘‘(3) section 1866C (competitive acquisition of

4 items and services);

5 ‘‘(4) section 1866D (provider and physician col6 laborations); and

7 ‘‘(5) section 1866E (preferred participants);

8 ‘‘(6) section 1866F (centers of excellence);

9 ‘‘(7) section 1866G (demonstration of bonus

10 payments for health care groups).

11 ‘‘(b) PROVISIONS GENERALLY APPLICABLE TO DES12 IGNATED PROGRAMS.—The following provisions apply to

13 programs specified in subsection (a), except as otherwise

14 specifically provided:

15 ‘‘(1) BENEFICIARY ELIGIBILITY.—Except as

16 otherwise provided by the Secretary, an individual

17 shall only be eligible to receive benefits under a pro18 gram specified in subsection (a) if such individual—

19 ‘‘(A) is enrolled in under the program

20 under part B;

21 ‘‘(B) is not enrolled in a Medicare+Choice

22 plan under part C, an eligible organization

23 under a contract under section 1876 (or a simi24 lar organization operating under a demonstra25 tion project authority), an organization with an
60

S 2342 IS

1 agreement under section 1833(a)(1)(A), or a

2 PACE program under section 1894; and

3 ‘‘(C) in the case of the programs specified

4 in paragraphs (1), (2), (4), (6), and (7) of sub5 section (a), is entitled to benefits under part A.

6 ‘‘(2) SECRETARY’S DISCRETION AS TO SCOPE

7 OF PROGRAM.—The Secretary may limit the imple8 mentation of a program specified in subsection (a)

9 to—

10 ‘‘(A) a geographic area (or areas) that the

11 Secretary designates for purposes of the pro12 gram, based upon such criteria as the Secretary

13 finds appropriate;

14 ‘‘(B) a subgroup (or subgroups) of bene15 ficiaries or individuals and entities furnishing

16 items or services (otherwise eligible to partici17 pate in the program), selected on the basis of

18 the number of such participants that the Sec19 retary finds consistent with the effective and ef20 ficient implementation of the program;

21 ‘‘(C) an element (or elements) of the pro22 gram that the Secretary determines to be suit23 able for implementation; or

24 ‘‘(D) any combination of any of the limits

25 described in subparagraphs (A) through (C).
61

S 2342 IS

1 ‘‘(3) VOLUNTARY RECEIPT OF ITEMS AND

2 SERVICES.—Except as provided in the authority for

3 the program specified in subsection (a)(3), items and

4 services shall be furnished to an individual under the

5 programs specified in subsection (a) only at the indi6 vidual’s election.

7 ‘‘(4) AGREEMENTS.—The Secretary is author8 ized to enter into agreements with individuals and

9 entities to furnish health care items and services to

10 beneficiaries under the programs specified in sub11 section (a).

12 ‘‘(5) PROGRAM STANDARDS AND CRITERIA.—

13 The Secretary shall establish performance standards

14 for the programs specified in subsection (a) includ15 ing, as applicable, standards for quality of health

16 care items and services, cost-effectiveness, bene17 ficiary satisfaction, and such other factors as the

18 Secretary finds appropriate. The eligibility of indi19 viduals or entities for the initial award, continuation,

20 and renewal of agreements to provide health care

21 items and services under the program shall be condi22 tioned, at a minimum, on performance that meets or

23 exceeds such standards.

24 ‘‘(6) ADMINISTRATIVE REVIEW OF ADVERSE

25 DECISION.—
62

S 2342 IS

1 ‘‘(A) DECISIONS AFFECTING INDIVIDUALS

2 AND ENTITIES FURNISHING SERVICES UNDER

3 PROGRAMS.—An individual or entity furnishing

4 services under a program specified in subsection

5 (a) shall be entitled to a review by the program

6 administrator (or, if the Secretary has not con7 tracted with a program administrator, by the

8 Secretary) of a decision not to enter into, or to

9 terminate, or not to renew, an agreement with

10 the individual or entity to provide health care

11 items or services under such program.

12 ‘‘(B) DECISIONS AFFECTING BENE13 FICIARIES UNDER CARE COORDINATION SERV14 ICES OR DISEASE MANAGEMENT SERVICES PRO15 GRAMS.—

16 ‘‘(i) DETERMINATION OF INELIGI17 BILITY.—An individual shall be entitled to

18 a review by the program administrator (or,

19 if the Secretary has not contracted with a

20 program administrator, by the Secretary)

21 of a determination that the individual does

22 not meet the criteria for eligibility to par23 ticipate in a program specified in para24 graph (1) or (2) of subsection (a).
63

S 2342 IS

1 ‘‘(ii) DENIAL OF PAYMENT FOR ITEMS

2 OR SERVICES.—A beneficiary shall be enti3 tled to a reconsideration or appeal of a de4 nial of payment under section 1866A(d)(2)

5 or 1866B(e)(2) in accordance with the pro6 visions of section 1852(g), as if such sec7 tion applied to this clause. In applying

8 such section 1852(g), any reference to a

9 Medicare+Choice organization is construed

10 to refer to the program administrator or, if

11 the Secretary has not contracted with a

12 program administrator, to the Secretary.

13 ‘‘(7) SECRETARY’S REVIEW OF MARKETING MA14 TERIALS.—An agreement with an individual or enti15 ty furnishing services under a program specified in

16 subsection (a) shall require the individual or entity

17 to guarantee that it will not distribute materials

18 marketing items or services under such program

19 without the Secretary’s prior review and approval;

20 ‘‘(8) PAYMENT IN FULL.—

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

22 subparagraph (B), an individual or entity re23 ceiving payment from the Secretary under a

24 contract or agreement under a program speci25 fied in subsection (a) shall agree to accept such
64

S 2342 IS

1 payment as payment in full, and such payment

2 shall be in lieu of any payments to which the

3 individual or entity would otherwise be entitled

4 under this title.

5 ‘‘(B) COLLECTION OF DEDUCTIBLES AND

6 COINSURANCE.—Such individual or entity may

7 collect any applicable deductible or coinsurance

8 amount from a beneficiary.

9 ‘‘(c) CONTRACTS FOR PROGRAM ADMINISTRATION.—

10 ‘‘(1) IN GENERAL.—The Secretary may admin11 ister a program specified in subsection (a) through

12 a contract with a program administrator in accord13 ance with the provisions of this subsection.

14 ‘‘(2) SCOPE OF PROGRAM ADMINISTRATOR CON15 TRACTS.—A contract under this subsection may, at

16 the Secretary’s discretion, relate to administration of

17 any or all of the programs specified in subsection

18 (a). The Secretary may enter into such contracts for

19 a limited geographic area, or on a regional or na20 tional basis.

21 ‘‘(3) ELIGIBLE CONTRACTORS.—The Secretary

22 may contract for the administration of the program

23 with—

24 ‘‘(A) an entity that, under a contract

25 under section 1816 or 1842, determines the
65

S 2342 IS

1 amount of and makes payments for health care

2 items and services furnished under this title; or

3 ‘‘(B) any other entity with substantial ex4 perience in managing the type of program con5 cerned.

6 ‘‘(4) CONTRACT AWARD, DURATION, AND RE7 NEWAL.—

8 ‘‘(A) IN GENERAL.—A contract under this

9 subsection shall be for an initial term of up to

10 three years, renewable for additional terms of

11 up to three years.

12 ‘‘(B) NONCOMPETITIVE AWARD AND RE13 NEWAL FOR ENTITIES ADMINISTERING PART A

14 OR PART B PAYMENTS.—The Secretary may

15 enter or renew a contract under this subsection

16 with an entity described in paragraph (3)(A)

17 without regard to the requirements of section 5

18 of title 41, United States Code.

19 ‘‘(5) APPLICABILITY OF FEDERAL ACQUISITION

20 REGULATION.—The Federal Acquisition Regulation

21 shall apply to program administration contracts

22 under this subsection.

23 ‘‘(6) PERFORMANCE STANDARDS.—The Sec24 retary shall establish performance standards for the

25 program administrator including, as applicable,
66

S 2342 IS

1 standards for the quality and cost-effectiveness of

2 the program administered, and such other factors as

3 the Secretary finds appropriate. The eligibility of en4 tities for the initial award, continuation, and renewal

5 of program administration contracts shall be condi6 tioned, at a minimum, on performance that meets or

7 exceeds such standards.

8 ‘‘(7) FUNCTIONS OF PROGRAM ADMINIS9 TRATOR.—A program administrator shall perform

10 any or all of the following functions, as specified by

11 the Secretary:

12 ‘‘(A) AGREEMENTS WITH INDIVIDUALS OR

13 ENTITIES FURNISHING HEALTH CARE ITEMS

14 AND SERVICES.—Determine the qualifications

15 of individuals or entities seeking to enter or

16 renew agreements to provide services under a

17 program specified in subsection (a), and as ap18 propriate enter or renew (or refuse to enter or

19 renew) such agreements on behalf of the Sec20 retary.

21 ‘‘(B) ESTABLISHMENT OF PAYMENT

22 RATES.—Negotiate or otherwise establish, sub23 ject to the Secretary’s approval, payment rates

24 for covered health care items and services.
67

S 2342 IS

1 ‘‘(C) PAYMENT OF CLAIMS OR FEES.—Ad2 minister payments for health care items or serv3 ices furnished under any such program.

4 ‘‘(D) PAYMENT OF BONUSES.—Using such

5 guidelines as the Secretary shall establish, and

6 subject to the approval of the Secretary, make

7 bonus payments as described in subsection

8 (d)(2)(A)(ii) to individuals and entities fur9 nishing items or services for which payment

10 may be made under any such program.

11 ‘‘(E) LIST OF PROGRAM PARTICIPANTS.—

12 Maintain and regularly update a list of individ13 uals or entities with agreements to provide

14 health care items and services under any such

15 program, and ensure that such list, in electronic

16 and hard copy formats, is readily available, as

17 applicable, to—

18 ‘‘(i) individuals residing in the service

19 area who are entitled to benefits under

20 part A or enrolled in the program under

21 part B;

22 ‘‘(ii) the entities responsible under

23 sections 1816 and 1842 for administering

24 payments for health care items and serv25 ices furnished; and
68

S 2342 IS

1 ‘‘(iii) individuals and entities pro2 viding health care items and services in the

3 service area.

4 ‘‘(F) BENEFICIARY ENROLLMENT.—Deter5 mine eligibility of individuals to enroll under a

6 program specified in subsection (a) and provide

7 enrollment-related services (but only if the Sec8 retary finds that the program administrator has

9 no conflict of interest caused by a financial re10 lationship with any individual or entity fur11 nishing items or services for which payment

12 may be made under any such program, or any

13 other conflict of interest with respect to such

14 function).

15 ‘‘(G) OVERSIGHT.—Monitor the compli16 ance of individuals and entities with agreements

17 under any such program with the conditions of

18 participation.

19 ‘‘(H) ADMINISTRATIVE REVIEW.—Conduct

20 reviews of adverse determinations specified in

21 subparagraph (A) and in subsection (b)(6).

22 ‘‘(I) REVIEW OF MARKETING MATE23 RIALS.—Conduct a review of marketing mate24 rials proposed by an individual or entity fur25 nishing services under any such program.
69

S 2342 IS

1 ‘‘(J) ADDITIONAL FUNCTIONS.—Perform

2 such other functions as the Secretary may

3 specify.

4 ‘‘(8) LIMITATION OF LIABILITY.—The provi5 sions of section 1157(b) shall apply with respect to

6 activities of contractors and their officers, employ7 ees, and agents under a contract under this sub8 section.

9 ‘‘(9) INFORMATION SHARING.—Notwithstanding

10 section 1106 and section 552a of title 5, United

11 States Code, the Secretary is authorized to disclose

12 to an entity with a program administration contract

13 under this subsection such information (including

14 medical information) on individuals receiving health

15 care items and services under the program as the

16 entity may require to carry out its responsibilities

17 under the contract.

18 ‘‘(d) RULES APPLICABLE TO BOTH PROGRAM

19 AGREEMENTS AND PROGRAM ADMINISTRATION CON20 TRACTS.—

21 ‘‘(1) RECORDS, REPORTS, AND AUDITS.—The

22 Secretary is authorized to require individuals and

23 entities with agreements to provide health care items

24 or services under programs specified under sub25 section (a), and entities with program administration
70

S 2342 IS

1 contracts under subsection (c), to maintain adequate

2 records, to afford the Secretary access to such

3 records (including for audit purposes), and to fur4 nish such reports and other materials (including au5 dited financial statements and performance data) as

6 the Secretary may require for purposes of implemen7 tation, oversight, and evaluation of such program

8 and of individuals’ and entities’ effectiveness in per9 formance of such agreements or contracts.

10 ‘‘(2) BONUSES.—Notwithstanding any other

11 provision of law, but subject to subparagraph

12 (B)(ii), the Secretary may make bonus payments

13 under a program specified in subsection (a) from the

14 Health Insurance and Supplementary Medical Insur15 ance Trust Funds in amounts that do not exceed

16 50 percent of the savings to such Trust Funds at17 tributable to such programs (or in the case of the

18 program specified in subsection (a)(7), in amounts

19 authorized under such program), in accordance with

20 the following:

21 ‘‘(A) PAYMENTS TO PROGRAM ADMINIS22 TRATORS.—The Secretary may make bonus

23 payments under each program specified in sub24 section (a) to program administrators.
71

S 2342 IS

1 ‘‘(B) PAYMENTS TO INDIVIDUALS AND EN2 TITIES FURNISHING SERVICES.—

3 ‘‘(i) IN GENERAL.—Subject to clause

4 (ii), the Secretary may make bonus pay5 ments to individuals or entities furnishing

6 items or services for which payment may

7 be made under the programs specified in

8 paragraphs (1), (2), (5), and (7) of sub9 section (a), or may authorize a program

10 administrator to make such bonus pay11 ments in accordance with such guidelines

12 as the Secretary shall establish and subject

13 to the Secretary’s approval.

14 ‘‘(ii) LIMITATIONS.—The Secretary

15 may limit bonus payments under clause (i)

16 to particular service areas, types of individ17 uals or entities furnishing items or services

18 under a program, or kinds of items or

19 services, and may condition such payments

20 on the achievement of such standards re21 lated to efficiency, improvement in proc22 esses or outcomes of care, or such other

23 factors as the Secretary determines to be

24 appropriate.

25 ‘‘(3) ANTIDISCRIMINATION LIMITATION.—
72

S 2342 IS

1 ‘‘(A) IN GENERAL.—The Secretary shall

2 not enter into an agreement with an individual

3 or entity to provide health care items or serv4 ices under a program specified under subsection

5 (a), or with an entity to administer such a pro6 gram, unless such individual or entity guaran7 tees that it will not deny, limit, or condition the

8 coverage or provision of benefits under such

9 program, for individuals eligible to be enrolled

10 under such program, based on any health sta11 tus-related factor described in section

12 2702(a)(1) of the Public Health Service Act.

13 ‘‘(B) CONSTRUCTION.—Subparagraph (A)

14 shall not be construed to prohibit such indi15 vidual or entity from taking any action explic16 itly authorized by the provisions of section

17 1866A (care coordination services) or section

18 1866B (disease management services).

19 ‘‘(e) LIMITATIONS ON JUDICIAL REVIEW.—The fol20 lowing actions and determinations with respect to a pro21 gram specified in subsection (a) shall not be subject to

22 review by a judicial or administrative tribunal:

23 ‘‘(1) limiting the implementation of a program

24 under subsection (b)(2);
73

S 2342 IS

1 ‘‘(2) establishment of program participation

2 standards under subsection (b)(5); or the denial or

3 termination of, or refusal to renew, an agreement

4 with an individual or entity to provide health care

5 items and services under the program;

6 ‘‘(3) determination of a beneficiary’s eligibility

7 under subsection (b)(6)(B);

8 ‘‘(4) establishment of program administration

9 contract performance standards under subsection

10 (c)(6); or the refusal to renew a program adminis11 tration contract; or the noncompetitive award or re12 newal of a program administration contract under

13 subsection (c)(4)(B);

14 ‘‘(5) the establishment of payment rates,

15 through negotiation or otherwise, under a program

16 agreement or a program administration contract;

17 ‘‘(6) a determination with respect to a program

18 (where specifically authorized by the program au19 thority or by subsection (d)(2))—

20 ‘‘(A) as to whether cost savings have been

21 achieved, and the amount of savings;

22 ‘‘(B) as to whether, to whom, and in what

23 amounts bonuses will be paid; or

24 ‘‘(C) as to whether to reduce or eliminate

25 beneficiary cost-sharing.
74

S 2342 IS

1 ‘‘(f) APPLICATION LIMITED TO PARTS A AND B.—

2 None of the provisions of this section or of the programs

3 specified in subsection (a) shall apply to the programs

4 under parts C and D.’’.

5 (b) EXCEPTION TO LIMITS ON PHYSICIAN REFER6 RALS.—Section 1877(b) (42 U.S.C. 1395nn(b)) is

7 amended—

8 (1) by redesignating paragraph (4) as para9 graph (5); and

10 (2) by adding after paragraph (3) the following

11 new paragraph:

12 ‘‘(4) PRIVATE SECTOR PURCHASING AND QUAL13 ITY IMPROVEMENT TOOLS FOR ORIGINAL MEDI14 CARE.—In the case of a designated health service, if

15 the designated health service is—

16 ‘‘(A) included in the services under section

17 1866A, 1866B, 1866D, or 1866F; and

18 ‘‘(B) is provided by an individual or entity

19 meeting such criteria related to quality assur20 ance, financial disclosure, and other factors as

21 the Secretary may find appropriate.’’.
75

S 2342 IS

1 SEC. 119. REPORTS TO CONGRESS ON PRIVATE SECTOR

2 PURCHASING AND QUALITY IMPROVEMENT

3 PROGRAMS.

4 Not later than two years after the date of enactment

5 of the Medicare Modernization Act of 2000, and biennially

6 thereafter for six years, the Secretary shall report to the

7 Congress on the use of authorities enacted by sections 111

8 through 117 of this Act. Each report shall address the

9 impact of the use of those authorities on expenditures, ac10 cess, and quality under the programs under title XVIII

11 of the Social Security Act.

12 SEC. 120. INCREASED FLEXIBILITY IN CONTRACTING FOR

13 MEDICARE CLAIMS PROCESSING.

14 (a) CARRIERS TO INCLUDE ENTITIES THAT ARE

15 NOT INSURANCE COMPANIES.—

16 (1) The matter in section 1842(a) (42 U.S.C.

17 1395u(a)) preceding paragraph (1) is amended by

18 striking ‘‘with carriers’’ and inserting ‘‘with agencies

19 and organizations (referred to as carriers)’’.

20 (2) Section 1842(f) (42 U.S.C. 1395u(f)) is re21 pealed.

22 (b) SECRETARIAL FLEXIBILITY IN CONTRACTING

23 FOR AND IN ASSIGNING FISCAL INTERMEDIARY AND CAR24 RIER FUNCTIONS.—
76

S 2342 IS

1 (1) Section 1816 (42 U.S.C. 1395h) is amended

2 by striking everything after the heading but before

3 subsection (b) and inserting the following:

4 ‘‘SEC. 1816. (a)(1) The Secretary may enter into con5 tracts with agencies or organizations to perform any or

6 all of the following functions, or parts of those functions

7 (or, to the extent provided in a contract, to secure per8 formance thereof by other organizations):

9 ‘‘(A) determine (subject to the provisions of sec10 tion 1878 and to such review by the Secretary as

11 may be provided for by the contracts) the amount of

12 the payments required pursuant to this part to be

13 made to providers of services,

14 ‘‘(B) make payments described in subparagraph

15 (A),

16 ‘‘(C) provide consultative services to institutions

17 or agencies to enable them to establish and maintain

18 fiscal records necessary for purposes of this part and

19 otherwise to qualify as providers of services,

20 ‘‘(D) serve as a center for, and communicate to

21 individuals entitled to benefits under this part and

22 to providers of services, any information or instruc23 tions furnished to the agency or organization by the

24 Secretary, and serve as a channel of communication
77

S 2342 IS

1 from individuals entitled to benefits under this part

2 and from providers of services to the Secretary,

3 ‘‘(E) make such audits of the records of pro4 viders of services as may be necessary to insure that

5 proper payments are made under this part,

6 ‘‘(F) perform the functions described by sub7 section (d), and

8 ‘‘(G) perform such other functions as are nec9 essary to carry out the purposes of this part.

10 ‘‘(2) As used in this title and title XI, the term ‘fiscal

11 intermediary’ means an agency or organization with a con12 tract under this section.’’.

13 (2) Subsections (d) and (e) of section 1816 (42

14 U.S.C. 1395h) are amended to read as follows:

15 ‘‘(d) Each provider of services shall have a fiscal

16 intermediary that—

17 ‘‘(1) acts as a single point of contact for the

18 provider of services under this part,

19 ‘‘(2) makes its services sufficiently available to

20 meet the needs of the provider of services, and

21 ‘‘(3) is responsible and accountable for arrang22 ing the resolution of issues raised under this part by

23 the provider of services.
78

S 2342 IS

1 ‘‘(e) The Secretary, in evaluating the performance of

2 a fiscal intermediary, may solicit comments from providers

3 of services.’’.

4 (3)(A) Section 1816(b)(1)(A) (42 U.S.C.

5 1395h(b)(1)(A)) is amended by striking ‘‘after ap6 plying the standards, criteria, and procedures’’ and

7 inserting ‘‘after evaluating the ability of the agency

8 or organization to fulfill the contract performance

9 requirements’’.

10 (B) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1))

11 is amended to read as follows:

12 ‘‘(f)(1) The Secretary may consult with

13 Medicare+Choice organizations under part C of this title,

14 providers of services and other persons who furnish items

15 or services for which payment may be made under this

16 title, and organizations and agencies performing functions

17 necessary to carry out the purposes of this part with re18 spect to performance requirements for contracts under

19 subsection (a).’’.

20 (C) The second sentence of section

21 1842(b)(2)(A) (42 U.S.C. 1395u(b)(2)(A)) is

22 amended to read as follows: ‘‘The Secretary may

23 consult with Medicare+Choice organizations under

24 part C of this title, providers of services and other

25 persons who furnish items or services for which pay-
79

S 2342 IS

1 ment may be made under this title, and organiza2 tions and agencies performing functions necessary to

3 carry out the purposes of this part with respect to

4 performance requirements for contracts under sub5 section (a).’’.

6 (D) Section 1842(b)(2)(A) (42 U.S.C.

7 1395u(b)(2)(A)) is amended by striking the third

8 sentence.

9 (E) The matter in section 1842(b)(2)(B) (42

10 U.S.C. 1395u(b)(2)(B)) preceding clause (i) is

11 amended by striking ‘‘establish standards’’ and in12 serting ‘‘develop contract performance require13 ments’’.

14 (F) Section 1842(b)(2)(D) (42 U.S.C.

15 1395u(b)(2)(D)) is amended by striking ‘‘standards

16 and criteria’’ each place it occurs and inserting

17 ‘‘contract performance requirements’’.

18 (4)(A) The matter in section 1816(b) (42

19 U.S.C. 1395h(b)) preceding paragraph (1) is amend20 ed by striking ‘‘an agreement’’ and inserting ‘‘a con21 tract’’.

22 (B) Paragraphs (1)(B) and (2)(A) of section

23 1816(b) (42 U.S.C. 1395h(b)) are each amended by

24 striking ‘‘agreement’’ and inserting ‘‘contract’’.
80

S 2342 IS

1 (C) The first sentence of section 1816(c)(1) (42

2 U.S.C. 1395h(c)(1)) is amended by striking ‘‘An

3 agreement’’ and inserting ‘‘A contract’’.

4 (D) The last sentence of section 1816(c)(1) (42

5 U.S.C. 1395h(c)(1)) is amended by striking ‘‘an

6 agreement’’ and inserting ‘‘a contract’’.

7 (E) The matter in section 1816(c)(2)(A) (42

8 U.S.C. 1395h(c)(2)(A)) preceding clause (i) is

9 amended by striking ‘‘agreement’’ and inserting

10 ‘‘contract’’.

11 (F) Section 1816(c)(3)(A) (42 U.S.C.

12 1395h(c)(3)(A)) is amended by striking ‘‘agree13 ment’’ and inserting ‘‘contract’’.

14 (G) Section 1816(h) (42 U.S.C. 1395h(h)) is

15 amended—

16 (i) by striking ‘‘An agreement’’ and insert17 ing ‘‘A contract’’, and

18 (ii) by striking ‘‘the agreement’’ each place

19 it occurs and inserting ‘‘the contract’’.

20 (H) Section 1816(i)(1) (42 U.S.C. 1395h(i)(1))

21 is amended by striking ‘‘an agreement’’ and insert22 ing ‘‘a contract’’.

23 (I) Section 1816(j) (42 U.S.C. 1395h(j)) is

24 amended by striking ‘‘An agreement’’ and inserting

25 ‘‘A contract’’.
81

S 2342 IS

1 (J) Section 1816(k) (42 U.S.C. 1395h(k)) is

2 amended by striking ‘‘An agreement’’ and inserting

3 ‘‘A contract’’.

4 (K) Section 1816(l) (42 U.S.C. 1395h(l)) is

5 amended by striking ‘‘an agreement’’ and inserting

6 ‘‘a contract’’.

7 (L) The matter in section 1842(a) (42 U.S.C.

8 1395u(a)) preceding paragraph (1) is amended by

9 striking ‘‘agreements’’ and inserting ‘‘contracts’’.

10 (M) Section 1842(h)(3)(A) (42 U.S.C.

11 1395u(h)(3)(A)) is amended by striking ‘‘an agree12 ment’’ and inserting ‘‘a contract’’.

13 (5)(A) The matter in section 1816(c)(2)(A) (42

14 U.S.C. 1395h(c)(2)(A)) preceding clause (i) is

15 amended by inserting ‘‘that provides for making

16 payments under this part’’ after ‘‘this section’’.

17 (B) Section 1816(c)(3)(A) (42 U.S.C.

18 1395h(c)(3)(A)) is amended by inserting ‘‘that pro19 vides for making payments under this part’’ after

20 ‘‘this section’’.

21 (C) Section 1816(k) (42 U.S.C. 1395h(k)) is

22 amended by inserting ‘‘(as appropriate)’’ after ‘‘sub23 mit’’.

24 (D) The matter in section 1842(a) (42 U.S.C.

25 1395u(a)) preceding paragraph (1) is amended by
82

S 2342 IS

1 striking ‘‘some or all of the following functions’’ and

2 inserting ‘‘any or all of the following functions, or

3 parts of those functions’’.

4 (E) The first sentence of section 1842(b)(2)(C)

5 (42 U.S.C. 1395u(b)(2)(C)) is amended by inserting

6 ‘‘(as appropriate)’’ after ‘‘carriers’’.

7 (F) The matter preceding subparagraph (A) in

8 the first sentence of section 1842(b)(3) (42 U.S.C.

9 1395u(b)(3)) is amended by inserting ‘‘(as appro10 priate)’’ after ‘‘contract’’.

11 (G) The matter in section 1842(b)(7)(A) (42

12 U.S.C. 1395u(b)(7)(A)) preceding clause (i) is

13 amended by striking ‘‘the carrier’’ and inserting ‘‘a

14 carrier’’.

15 (H) The matter in section 1842(b)(11)(A) (42

16 U.S.C. 1395u(b)(11)(A)) preceding clause (i) is

17 amended by inserting ‘‘(as appropriate)’’ after ‘‘each

18 carrier’’.

19 (I) The first sentence of section 1842(h)(2) (42

20 U.S.C. 1395u(h)(2)) is amended by inserting ‘‘(as

21 appropriate)’’ after ‘‘shall’’.

22 (J) Section 1842(h)(5)(A) (42 U.S.C.

23 1395u(h)(5)(A)) is amended by inserting ‘‘(as ap24 propriate)’’ after ‘‘carriers’’.
83

S 2342 IS

1 (6)(A) Section 1816(c)(2)(C) (42 U.S.C.

2 1395h(c)(2)(C)) is amended by striking ‘‘hospital,

3 rural primary care hospital, skilled nursing facility,

4 home health agency, hospice program, comprehen5 sive outpatient rehabilitation facility, or rehabilita6 tion agency’’ and inserting ‘‘provider of services’’.

7 (B) The matter in section 1816(j) (42 U.S.C.

8 1395h(j)) preceding paragraph (1) is amended by

9 striking ‘‘for home health services, extended care

10 services, or post-hospital extended care services’’.

11 (7) Section 1842(a)(3) (42 U.S.C. 1395u(a)(3))

12 is amended by inserting ‘‘(to and from individuals

13 enrolled under this part and to and from physicians

14 and other entities that furnish items and services)’’

15 after ‘‘communication’’.

16 (8) The matter in section 1842(a) (42 U.S.C.

17 1395u(a)) preceding paragraph (1), as amended by

18 subsection (b)(4)(L), is amended by striking ‘‘car19 riers with which contracts’’ and inserting ‘‘single

20 contracts under section 1816 and this section to21 gether, or separate contracts with eligible agencies

22 and organizations with which contracts’’.

23 (c) ELIMINATION OF SPECIAL PROVISIONS FOR TER24 MINATIONS OF CONTRACTS.—
84

S 2342 IS

1 (1) The matter in section 1816(b) (42 U.S.C.

2 1395h(b)) preceding paragraph (1) is amended by

3 striking ‘‘or renew’’.

4 (2) The last sentence of section 1816(c)(1) (42

5 U.S.C. 1395h(c)(1)) is amended by striking ‘‘or re6 newing’’.

7 (3) Section 1816(g) (42 U.S.C. 1395h(g)) is re8 pealed.

9 (4) The last sentence of section 1842(b)(2)(A)

10 (42 U.S.C. 1395u(b)(2)(A)) is amended by striking

11 ‘‘or renewing’’.

12 (5) Section 1842(b) (42 U.S.C. 1395u(b)) is

13 amended by striking paragraph (5).

14 (d) REPEAL OF FISCAL INTERMEDIARY REQUIRE15 MENTS THAT ARE NOT COST-EFFECTIVE.—Section

16 1816(f)(2) (42 U.S.C. 1395h(f)(2)) is amended to read

17 as follows:

18 ‘‘(2) The contract performance requirements de19 scribed in paragraph (1) shall include, with respect to

20 claims for services furnished under this part by any pro21 vider of services other than a hospital, whether such agen22 cy or organization is able to process 75 percent of recon23 siderations within 60 days and 90 percent of reconsider24 ations within 90 days.’’.
85

S 2342 IS

1 (e) REPEAL OF COST REIMBURSEMENT REQUIRE2 MENTS.—

3 (1) The first sentence of section 1816(c)(1) (42

4 U.S.C. 1395h(c)(1)) is amended—

5 (A) by striking the comma after ‘‘appro6 priate’’ and inserting ‘‘and’’, and

7 (B) by striking everything after ‘‘sub8 section (a)’’ up to the period.

9 (2) Section 1816(c)(1) (42 U.S.C. 1395h(c)(1))

10 is further amended by striking the second and third

11 sentences.

12 (3) The first sentence of section 1842(c)(1) (42

13 U.S.C. 1395h(c)(1)) is amended—

14 (A) by striking ‘‘shall provide’’ the first

15 place it occurs and inserting ‘‘may provide’’,

16 and

17 (B) by striking everything after ‘‘this

18 part’’ up to the period.

19 (4) Section 1842(c)(1) (42 U.S.C. 1395h(c)(1))

20 is further amended by striking the remaining sen21 tences.

22 (5) Section 2326(a) of the Deficit Reduction

23 Act of 1984 (42 U.S.C. 1395h nt) is repealed.
86

S 2342 IS

1 (f) SECRETARIAL FLEXIBILITY WITH RESPECT TO

2 RENEWING CONTRACTS AND TRANSFER OF FUNC3 TIONS.—

4 (1) Section 1816(c) (42 U.S.C. 1395h(c)) is

5 amended by adding at the end the following:

6 ‘‘(4)(A) Except as provided in laws with general

7 applicability to Federal acquisition and procurement

8 or in subparagraph (B), the Secretary shall use com9 petitive procedures when entering into contracts

10 under this section.

11 ‘‘(B)(i) The Secretary may renew a contract

12 with a fiscal intermediary under this section from

13 term to term without regard to section 5 of title 41,

14 United States Code, or any other provision of law

15 requiring competition, if the fiscal intermediary has

16 met or exceeded the performance requirements es17 tablished in the current contract.

18 ‘‘(ii) Functions may be transferred among fiscal

19 intermediaries without regard to any provision of

20 law requiring competition. However, the Secretary

21 shall ensure that performance quality is considered

22 in such transfers.’’.

23 (2) Section 1842(b) (42 U.S.C. 1395u(b)) is

24 amended by striking everything before paragraph (2)

25 and inserting the following:
87

S 2342 IS

1 ‘‘(b)(1)(A) Except as provided in laws with general

2 applicability to Federal acquisition and procurement or in

3 subparagraph (B), the Secretary shall use competitive pro4 cedures when entering into contracts under this section.

5 ‘‘(B)(i) The Secretary may renew a contract with a

6 carrier under subsection (a) from term to term without

7 regard to section 5 of title 41, United States Code, or any

8 other provision of law requiring competition, if the carrier

9 has met or exceeded the performance requirements estab10 lished in the current contract.

11 ‘‘(ii) Functions may be transferred among carriers

12 without regard to any provision of law requiring competi13 tion. However, the Secretary shall ensure that perform14 ance quality is considered in such transfers.’’.

15 (g) WAIVER OF COMPETITIVE REQUIREMENTS FOR

16 INITIAL CONTRACTS.—

17 (1) Contracts under section 1816(a) (42 U.S.C.

18 1395h(a)) or 1842(a) (42 U.S.C. 1395u(a)) whose

19 periods begin before or during the one year period

20 that begins on the first day of the fourth calendar

21 month that begins after the date of enactment of

22 this section may be entered into without regard to

23 any provision of law requiring competition.

24 (2) The amendments made by subsection (f)

25 apply to contracts whose periods begin after the end
88

S 2342 IS

1 of the one year period specified in paragraph (1) of

2 this subsection.

3 (h) EFFECTIVE DATES.—

4 (1) The amendments made by subsection (c)

5 apply to contracts whose periods end at, or after, the

6 end of the third calendar month that begins after

7 the date of enactment of this section.

8 (2) The amendments made by subsections (a),

9 (b), (d), and (e) apply to contracts whose periods

10 begin after the third calendar month that begins

11 after the date of enactment of this section.

12 SEC. 121. SPECIAL PROVISIONS FOR FUNDING OF ACTIVI13 TIES RELATED TO CERTAIN OVERPAYMENT

14 RECOVERIES AND PROVIDER ENROLLMENT

15 AND REVERIFICATION OF ELIGIBILITY.

16 (a) FUNDING AVAILABLE UNDER THE MEDICARE IN17 TEGRITY PROGRAM (MIP) APPROPRIATION FOR PRO18 VIDER ENROLLMENT ACTIVITIES PERFORMED BY FISCAL

19 INTERMEDIARIES AND CARRIERS.—Section 1817(k)(4)

20 (42 U.S.C. 1395i(k)(4)) is amended—

21 (1) in subparagraph (A), by inserting ‘‘and the

22 activities specified in subparagraph (C)’’ after ‘‘the

23 Medicare Integrity Program under section 1893’’;

24 and
89

S 2342 IS

1 (2) by adding at the end the following new sub2 paragraph:

3 ‘‘(C)(i) Of the amounts appropriated under

4 subparagraph (A), the amounts specified in

5 clause (iii) shall be available to the Secretary

6 for payment of the costs of the activities de7 scribed in clause (ii) which are performed by

8 entities with contracts under section 1816 or

9 1842.

10 ‘‘(ii) For purposes of clause (i), the activi11 ties specified in this paragraph are—

12 ‘‘(I) determinations as to whether

13 overpayments were made to an individual

14 or entity furnishing items or services for

15 which payment may be made under this

16 title and recovery of any such overpay17 ments; and

18 ‘‘(II) activities related to enrolling

19 such individuals and entities under the

20 program under this title, including estab21 lishing billing privileges and records sys22 tems, processing applications, background

23 investigations, and related activities.

24 ‘‘(iii) For purposes of clause (i), the

25 amount specified under this clause is the lesser
90

S 2342 IS

1 of the amounts necessary to perform the activi2 ties described in clause (ii) or—

3 ‘‘(I) for fiscal year 2001,

4 $14,000,000; and

5 ‘‘(II) for fiscal years 2002 and 2003,

6 the amount for the preceding year, in7 creased by 30 percent of the difference be8 tween the maximum amount specified in

9 subparagraph (B) for such year and the

10 maximum amount so specified for the pre11 ceding year.

12 ‘‘(iv) Amounts available under this sub13 paragraph for the activities described in clause

14 (ii) shall be in addition to any amounts that

15 may otherwise be available to carry out such ac16 tivities.’’.

17 (b) ADDITIONAL FUNCTIONS TO BE PERFORMED BY

18 MIP CONTRACTORS.—

19 (1) REVERIFICATION OF ELIGIBILITY FUNC20 TION.—Section 1893(b) (42 U.S.C. 1395ddd(b)) is

21 amended by adding at the end the following new

22 paragraph:

23 ‘‘(6) activities related to reverifying the eligi24 bility of individuals and entities described in para-
91

S 2342 IS

1 graph (1) to participate under the program under

2 this title, and related activities.

3 (2) PROVIDER ENROLLMENT AND OVERPAY4 MENT RECOVERY FUNCTIONS ADDED AS MIP CON5 TRACTOR FUNCTIONS AFTER PHASE-IN PERIOD.—

6 Section 1893(b) (42 U.S.C. 1395ddd(b)) is amended

7 by adding at the end the following new paragraphs:

8 ‘‘(7) Activities related to enrolling individuals

9 and entities described in paragraph (1) under the

10 program under this title, including establishing bill11 ing privileges and records systems, processing appli12 cations, background investigations, and related ac13 tivities.

14 ‘‘(8) Determinations with respect to overpay15 ments made under this title that are discovered pur16 suant to the performance of an activity described in

17 paragraph (1) or (2), and recovery of any such over18 payments.’’.

19 (3) EFFECTIVE DATES.—The amendment made

20 by paragraph (1) shall be effective on and after Oc21 tober 1, 2000. The amendment made by paragraph

22 (2) shall be effective on and after October 1, 2003.
92

S 2342 IS

1 TITLE II—MODERNIZING

2 MEDICARE BENEFITS

3 PART A—PRESCRIPTION DRUG BENEFIT

4 SEC. 201. PRESCRIPTION DRUG BENEFIT.

5 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

6 seq.) is amended—

7 (1) by redesignating section 1859 and part D

8 as section 1858 and part F, respectively; and

9 (2) by adding after section 1858, as so redesig10 nated, the following new part:

11 ‘‘PART D—PRESCRIPTION DRUG BENEFIT FOR

12 THE AGED AND DISABLED

13 ‘‘SEC. 1859. ESTABLISHMENT OF PRESCRIPTION DRUG BEN14 EFIT PROGRAM FOR THE AGED AND DIS15 ABLED.

16 ‘‘There is hereby established a voluntary insurance

17 program to provide prescription drug benefits in accord18 ance with the provisions of this part for individuals who

19 are aged or disabled or have end stage renal disease and

20 who elect to enroll under such program, to be financed

21 from premium payments by enrollees together with con22 tributions from funds appropriated by the Federal Govern23 ment.
93

S 2342 IS

1 ‘‘SEC. 1859A. SCOPE OF BENEFITS.

2 ‘‘(a) IN GENERAL.—The benefits provided to an indi3 vidual enrolled in the insurance program under this part

4 shall consist of—

5 ‘‘(1) payments made, in accordance with the

6 provisions of this part, for covered prescription

7 drugs (as specified in subsection (b)) dispensed by

8 any pharmacy participating in the program under

9 this part (and, in circumstances designated by the

10 benefit manager, by a non-participating pharmacy),

11 including any specifically named drug prescribed for

12 the individual by a qualified health care professional

13 regardless of whether the drug is included in a for14 mulary established by the benefit manager if such

15 drug is certified as medically necessary by such

16 health care professional, up to the benefit limits

17 specified in section 1859B; and

18 ‘‘(2) charging by participating pharmacies of—

19 ‘‘(A) the negotiated price for all covered

20 prescription drugs, without regard to such ben21 efit limit; and

22 ‘‘(B) the negotiated price (if any) estab23 lished with respect to any drugs or classes of

24 drugs described in subparagraphs (A) through

25 (D) or (F) of section 1927(d)(2) that are avail-
94

S 2342 IS

1 able to individuals receiving benefits under this

2 title.

3 ‘‘(b) COVERED PRESCRIPTION DRUGS.—

4 ‘‘(1) IN GENERAL.—Covered prescription drugs,

5 for purposes of this part, include all prescription

6 drugs (as defined in section 1859J(1)), including

7 smoking cessation agents, except as otherwise pro8 vided in this subsection.

9 ‘‘(2) EXCLUSIONS FROM COVERAGE.—Covered

10 prescription drugs shall not include drugs or classes

11 of drugs described in subparagraphs (A) through

12 (D) and (F) through (H) of section 1927(d)(2) (ex13 cept to the extent otherwise specifically provided by

14 the Secretary with respect to a drug in any of such

15 classes).

16 ‘‘(3) EXCLUSION OF PRESCRIPTION DRUGS TO

17 THE EXTENT COVERED UNDER PART A OR B.—A

18 drug prescribed for an individual that would other19 wise be a covered prescription drug under this part

20 shall not be so considered to the extent that pay21 ment for such drug is available under part A or B

22 (but shall be so considered to the extent that such

23 payment is not available because benefits under part

24 A or B have been exhausted).
95

S 2342 IS

1 ‘‘SEC. 1859B. PAYMENT OF BENEFITS; BENEFIT LIMITS.

2 ‘‘(a) PAYMENTS.—There shall be paid from the Pre3 scription Drug Insurance Account within the Supple4 mentary Medical Insurance Trust Fund (hereafter in this

5 part referred to as the ‘Prescription Drug Insurance Ac6 count’ or ‘the Insurance Account’), in the case of each in7 dividual who is enrolled in the insurance program under

8 this part and who purchases covered prescription drugs

9 in a calendar year, an amount (not exceeding 50 percent

10 of the applicable limit under subsection (b)) equal to 50

11 percent of the negotiated price for each such covered pre12 scription drug or such higher percentage as is proposed

13 by a benefit manager pursuant to section 1859G(d)(8),

14 if the Secretary finds that such percentage will not in15 crease aggregate costs to the Insurance Account.

16 ‘‘(b) LIMIT.—

17 ‘‘(1) FOR 2003 THROUGH 2009.—For purposes

18 of subsection (a), the limit under this subsection for

19 2003 through 2009 is—

20 ‘‘(A) $2,000 for each of calendar years

21 2003 and 2004;

22 ‘‘(B) $3,000 for each of calendar years

23 2005 and 2006;

24 ‘‘(C) $4,000 for each of calendar years

25 2007 and 2008; and

26 ‘‘(D) $5,000 for calendar year 2009.
96

S 2342 IS

1 ‘‘(2) FOR 2010 AND SUBSEQUENT YEARS.—For

2 purposes of subsection (a), the limit under this sub3 section for 2010 and each subsequent year is equal

4 to the greater of the limit for the preceding year ad5 justed by the percentage change in the consumer

6 price index for all urban consumers (U.S. urban av7 erage) for the 12-month period ending with June of

8 the preceding year; or the limit for the preceding

9 year.

10 ‘‘SEC. 1859C. ELIGIBILITY AND ENROLLMENT.

11 ‘‘(a) ELIGIBILITY.—Every individual who, in or after

12 2003, is entitled to hospital insurance benefits under part

13 A or enrolled in the medical insurance program under part

14 B is eligible to enroll, in accordance with the provisions

15 of this section, in the insurance program under this part,

16 during an enrollment period prescribed in or under this

17 section, in such manner and form as may be prescribed

18 by regulations.

19 ‘‘(b) ENROLLMENT.—

20 ‘‘(1) IN GENERAL.—Each individual who satis21 fies subsection (a) shall be enrolled (or eligible to en22 roll) in the program under this part in accordance

23 with the provisions of section 1837, as if that section

24 applied to this part, except as otherwise explicitly

25 provided in this part.
97

S 2342 IS

1 ‘‘(2) ENROLLMENT PERIOD.—Except as pro2 vided in section 1859E or 1859H, or as otherwise

3 explicitly provided, no individual shall be entitled to

4 enroll in the program under this part at any time

5 after the initial enrollment period.

6 ‘‘(3) SPECIAL ENROLLMENT PERIOD FOR

7 2003.—

8 ‘‘(A) IN GENERAL.—An individual who

9 first satisfies subsection (a) in 2003 may, at

10 any time on or before December 31, 2003—

11 ‘‘(i) enroll in the program under this

12 part; and

13 ‘‘(ii) enroll or re-enroll in such pro14 gram after having previously declined or

15 terminated enrollment in such program.

16 ‘‘(B) EFFECTIVE DATE OF COVERAGE.—

17 An individual who enrolls under the program

18 under this part pursuant to subparagraph (A)

19 shall be entitled to benefits under this part be20 ginning on the first day of the month following

21 the month in which such enrollment occurs.

22 ‘‘(e) PERIOD OF COVERAGE.—

23 ‘‘(1) IN GENERAL.—Except as otherwise pro24 vided in this part, an individual’s coverage under the

25 program under this part shall be effective for the pe-
98

S 2342 IS

1 riod provided in section 1838, as if that section ap2 plied to the program under this part.

3 ‘‘(2) PART D COVERAGE TERMINATED BY TER4 MINATION OF COVERAGE UNDER PARTS A AND B.—

5 In addition to the causes of termination specified in

6 section 1838, an individual’s coverage under this

7 part shall be terminated when the individual retains

8 coverage under neither the program under part A

9 nor the program under part B, effective on the effec10 tive date of termination of coverage under part A or

11 (if later) under part B.

12 ‘‘SEC. 1859D. PREMIUMS.

13 ‘‘(a) ANNUAL ESTABLISHMENT OF MONTHLY PRE14 MIUM RATES.—

15 ‘‘(1) IN GENERAL.—The Secretary shall, during

16 September of 2002 and of each succeeding year, de17 termine and promulgate a monthly premium rate for

18 the succeeding year in accordance with the provi19 sions of this subsection.

20 ‘‘(2) ACTUARIAL DETERMINATIONS.—

21 ‘‘(A) DETERMINATION OF ANNUAL BEN22 EFIT COSTS.—The Secretary shall estimate an23 nually for the succeeding year the amount equal

24 to the total of the benefits that will be payable

25 from the Insurance Account for prescription
99

S 2342 IS

1 drugs dispensed in such calendar year with re2 spect to enrollees in the program under this

3 part. In calculating such amount, the Secretary

4 shall include an appropriate amount for a con5 tingency margin.

6 ‘‘(B) DETERMINATION OF MONTHLY PRE7 MIUM RATES.—

8 ‘‘(i) IN GENERAL.—The Secretary

9 shall determine the monthly premium rate

10 with respect to such enrollees for such suc11 ceeding year, which shall be one-twelfth of

12 the share specified in clause (ii) of the

13 amount determined under subparagraph

14 (A), divided by the total number of such

15 enrollees, and rounded (if such rate is not

16 a multiple of 10 cents) to the nearest mul17 tiple of 10 cents.

18 ‘‘(ii) ENROLLEE AND EMPLOYER PER19 CENTAGE SHARES.—The share specified in

20 this clause, for purposes of clause (i), shall

21 be—

22 ‘‘(I) one-half, in the case of pre23 miums paid by an individual enrolled

24 in the program under this part; and
100

S 2342 IS

1 ‘‘(II) two-thirds, in the case of

2 premiums paid for such an individual

3 by a former employer (as defined in

4 section 1859H(f)(2)).

5 ‘‘(3) PUBLICATION OF ASSUMPTIONS.—The

6 Secretary shall publish, together with the promulga7 tion of the monthly premium rates for the suc8 ceeding year, a statement setting forth the actuarial

9 assumptions and bases employed in arriving at the

10 amounts and rates determined under paragraphs (1)

11 and (2).

12 ‘‘(b) PAYMENT OF PREMIUMS.—

13 ‘‘(1) PAYMENTS BY DEDUCTION FROM SOCIAL

14 SECURITY, RAILROAD RETIREMENT BENEFITS, OR

15 BENEFITS ADMINISTERED BY OPM.—

16 ‘‘(A) DEDUCTION FROM BENEFITS.—In

17 the case of an individual who is entitled to or

18 receiving benefits as described in subsection (a),

19 (b), or (d) of section 1840, premiums payable

20 under this part shall be collected by deduction

21 from such benefits at the same time and in the

22 same manner as premiums payable under part

23 B are collected pursuant to section 1840.

24 ‘‘(B) TRANSFERS TO INSURANCE AC25 COUNT.—The Secretary of the Treasury shall,
101

S 2342 IS

1 from time to time, but not less often than quar2 terly, transfer premiums collected pursuant to

3 subparagraph (A) to the Insurance Account

4 from the appropriate funds and accounts de5 scribed in subsections (a)(2), (b)(2), and (d)(2)

6 of section 1840, on the basis of the certifi7 cations described in such subsections. The

8 amounts of such transfers shall be appro9 priately adjusted to the extent that prior trans10 fers were too great or too small.

11 ‘‘(2) DIRECT PAYMENTS TO SECRETARY.—

12 ‘‘(A) ADDITIONAL PAYMENT BY EN13 ROLLEE.—An individual to whom paragraph

14 (1) applies (other than an individual receiving

15 benefits as described in section 1840(d)) and

16 who estimates that the amount that will be

17 available for deduction under such paragraph

18 for any premium payment period will be less

19 than the amount of the monthly premiums for

20 such period may (under regulations) pay to the

21 Secretary the estimated balance, or such great22 er portion of the monthly premium as the indi23 vidual chooses.

24 ‘‘(B) PAYMENTS BY OTHER ENROLLEES.—

25 An individual enrolled in the insurance program
102

S 2342 IS

1 under this part with respect to whom none of

2 the preceding provisions of this subsection ap3 plies (or to whom section 1840(c) applies) shall

4 pay premiums to the Secretary at such times

5 and in such manner as the Secretary shall by

6 regulations prescribe.

7 ‘‘(C) DEPOSIT OF PREMIUMS.—Amounts

8 paid to the Secretary under this paragraph

9 shall be deposited in the Treasury to the credit

10 of the Prescription Drug Insurance Account in

11 the Supplementary Medical Insurance Trust

12 Fund.

13 ‘‘(d) CERTAIN LOW-INCOME INDIVIDUALS.—For

14 rules concerning premiums for certain low-income individ15 uals, see section 1859E.

16 ‘‘SEC. 1859F. PRESCRIPTION DRUG INSURANCE ACCOUNT.

17 ‘‘(a) IN GENERAL.—There is created within the Fed18 eral Supplemental Medical Insurance Trust Fund estab19 lished by section 1841 an account to be known as the ‘Pre20 scription Drug Insurance Account’ (hereafter in this sec21 tion referred to as the ‘Account’). The Account shall con22 sist of such gifts and bequests as may be made as provided

23 in section 201(i)(1), and such amounts as may be depos24 ited in, or appropriated to, such fund as provided in this

25 part. Funds provided under this part to the Account shall
103

S 2342 IS

1 be kept separate from all other funds within the Federal

2 Supplemental Medical Insurance Trust Fund.

3 ‘‘(b) PAYMENTS FROM ACCOUNT.—The Managing

4 Trustee shall pay from time to time from the Account such

5 amounts as the Secretary of Health and Human Services

6 certifies are necessary to make the payments provided for

7 by this part, and the payments with respect to administra8 tive expenses in accordance with section 201(g).

9 ‘‘SEC. 1859G. ADMINISTRATION OF BENEFITS.

10 ‘‘(a) IN GENERAL.—The Secretary shall provide for

11 administration of the benefits under this part through a

12 contract with a benefit manager designated in accordance

13 with subsection (c), for enrolled individuals residing in

14 each service area designated pursuant to subsection (b)

15 (other than such individuals enrolled in a

16 Medicare+Choice program under part C), in accordance

17 with the provisions of this section.

18 ‘‘(b) DESIGNATION OF SERVICE AREAS.—

19 ‘‘(1) IN GENERAL.—The Secretary shall divide

20 the total geographic area served by the programs

21 under this title into at least fifteen service areas for

22 purposes of administration of benefits under this

23 part. Such division shall not be subject to adminis24 trative or judicial review.
104

S 2342 IS

1 ‘‘(2) CONSIDERATIONS.—In determining or ad2 justing the number and boundaries of service areas

3 under this subsection, the Secretary shall seek to en4 sure that—

5 ‘‘(A) there is a reasonable expectation of a

6 meaningful level of competition among entities

7 eligible to contract to provide the benefit man8 agement services under this section for each

9 area; and

10 ‘‘(B) the designation of areas is consistent

11 with the goal of securing contracts under this

12 section with respect to the maximum feasible

13 number of areas so designated.

14 ‘‘(c) DESIGNATION OF BENEFIT MANAGER.—

15 ‘‘(1) AWARD AND DURATION OF CONTRACT.—

16 The following shall apply to the award of a contract

17 under this subsection with respect to a service area:

18 ‘‘(A) COMPETITIVE AWARD.—Each con19 tract shall be awarded competitively in accord20 ance with section 5 of title 41, United States

21 Code, for a period (subject to subparagraph

22 (B)) of not less than three nor more than five

23 years.

24 ‘‘(B) NONCOMPETITIVE EXTENSION.—The

25 second and each succeeding contract for a serv-
105

S 2342 IS

1 ice area may be extended noncompetitively, at

2 the discretion of the Secretary, for a total con3 tract period not to exceed five years.

4 ‘‘(2) ELIGIBLE ENTITIES.—An entity eligi5 ble for consideration as a benefit manager for

6 a service area shall meet at least the following

7 criteria:

8 ‘‘(A) TYPE.—The entity shall be any entity

9 that the Secretary determines is capable of ad10 ministering a prescription drug benefit pro11 gram.

12 ‘‘(B) PERFORMANCE CAPABILITY.—The

13 entity shall have sufficient expertise, personnel,

14 and resources to perform effectively the benefit

15 administration functions for such area.

16 ‘‘(C) INTEGRITY; FISCAL SOUNDNESS.—

17 The entity and its officers, directors, agents,

18 and managing employees shall have a satisfac19 tory record of professional competence and pro20 fessional and financial integrity, and the entity

21 shall have financial resources the Secretary de22 termines to be adequate to perform services

23 under the contract without risk of insolvency.
106

S 2342 IS

1 ‘‘(3) PROPOSAL REQUIREMENTS.—An entity’s

2 proposal for award or renewal of a contract under

3 this section shall—

4 ‘‘(A) include a cost proposal setting forth

5 the entity’s proposed charges for administration

6 of the prescription drug benefit;

7 ‘‘(B) include a proposal for the prices of

8 drugs and annual increases in such prices, in9 cluding differentials between formulary and

10 non-formulary prices, if applicable (and at the

11 entity’s election, include a proposal described in

12 subsection (d)(8));

13 ‘‘(C) specify details of proposed cost and

14 utilization management, error reduction, and

15 quality assurance measures;

16 ‘‘(D) be accompanied by such information

17 as the Secretary may require on the entity’s

18 past performance;

19 ‘‘(E) disclose ownership and shared finan20 cial interests with other entities involved in the

21 delivery of the benefit as proposed;

22 ‘‘(F) include a proposal for working with

23 the Secretary to deter medical errors related to

24 prescription drugs; and
107

S 2342 IS

1 ‘‘(G) include such other material and infor2 mation as the Secretary may require.

3 ‘‘(4) CRITERIA FOR COMPETITIVE SELEC4 TION.—In awarding a contract competitively, the

5 Secretary shall consider the comparative merits of

6 each of the applications by eligible entities, as deter7 mined on the basis of the entities’ past performance

8 and other relevant factors, with respect to the fol9 lowing:

10 ‘‘(A) the estimated total cost of the con11 tract, taking into consideration the entity’s pro12 posed fees and price and cost estimates, as eval13 uated and adjusted by the Secretary in accord14 ance with the provisions of the Federal Acquisi15 tion Regulation concerning contracting by nego16 tiation;

17 ‘‘(B) prior experience in administering a

18 prescription drug benefit program;

19 ‘‘(C) effectiveness in containing costs

20 through pricing incentives and utilization man21 agement;

22 ‘‘(D) the quality and efficiency of benefit

23 management services with respect to such mat24 ters as claims processing and benefits coordina25 tion; record-keeping and reporting; and drug
108

S 2342 IS

1 utilization review, patient information, and

2 other activities supporting quality of care; and

3 ‘‘(E) such other factors as the Secretary

4 deems necessary to evaluate the merits of each

5 application.

6 ‘‘(5) EXCEPTIONS TO CONFLICT OF INTEREST

7 RULES.—In awarding contracts under this sub8 section, the Secretary may waive conflict of interest

9 rules generally applicable to Federal acquisitions

10 (subject to such safeguards as the Secretary may

11 find necessary to impose) in circumstances where the

12 Secretary finds that such waiver—

13 ‘‘(A) is not inconsistent with the purposes

14 of the programs under this title and the best in15 terests of enrolled individuals; and

16 ‘‘(B) will permit a sufficient level of com17 petition for such contracts, promote efficiency

18 of benefits administration, or otherwise serve

19 the objectives of the program under this part.

20 ‘‘(6) MAXIMIZING COMPETITION.—In awarding

21 contracts under this section, the Secretary shall give

22 consideration to the need to maintain sufficient

23 numbers of entities eligible and willing to administer

24 benefits under this part to ensure vigorous competi25 tion for such contracts.
109

S 2342 IS

1 ‘‘(d) FUNCTIONS OF BENEFIT MANAGER.—The ben2 efit manager for a service area shall (or in the case of

3 the function described in paragraph (8), may) perform

4 some or all of the following functions, as specified by the

5 Secretary:

6 ‘‘(1) PARTICIPATION AGREEMENTS, PRICES,

7 AND FEES.—

8 ‘‘(A) SCHEDULE OF COVERED DRUG

9 PRICES.—Establish, through negotiations with

10 drug manufacturers and wholesalers and phar11 macies, a schedule of prices for covered pre12 scription drugs. Such negotiated prices shall not

13 be subject to administrative or judicial review.

14 ‘‘(B) AGREEMENTS WITH PHARMACIES.—

15 Enter into participation agreements under sub16 section (e) with qualifying pharmacies, on terms

17 that—

18 ‘‘(i) secure the participation of suffi19 cient numbers of pharmacies to ensure

20 convenient access (including adequate

21 emergency access); and

22 ‘‘(ii) permit the participation of any

23 pharmacy in the service area that meets

24 the participation requirements described in

25 subsection (e).
110

S 2342 IS

1 ‘‘(C) LISTS OF PRICES AND PARTICIPATING

2 PHARMACIES.—Ensure that the negotiated

3 prices established under subparagraph (A) and

4 the list of pharmacies with agreements under

5 subsection (e) are regularly updated and readily

6 available in the service area to health care pro7 fessionals authorized to prescribe drugs, partici8 pating pharmacies, and enrolled individuals.

9 ‘‘(2) TRACKING OF COVERED ENROLLED INDI10 VIDUALS.—Maintain accurate, updated records of all

11 enrolled individuals residing in the service area

12 (other than individuals enrolled in a plan under part

13 C).

14 ‘‘(3) PAYMENT AND COORDINATION OF BENE15 FITS.—

16 ‘‘(A) IN GENERAL.—Administer claims for

17 payment of benefits under this part; determine

18 amounts of benefit payments to be made; and

19 receive, disburse, and account for funds used in

20 making such payments, including through the

21 activities specified in the provisions of this

22 paragraph.

23 ‘‘(B) COORDINATION AND PAYMENT OF

24 BENEFITS.—Coordinate with the Secretary,

25 other benefit managers, pharmacies and other
111

S 2342 IS

1 relevant entities as necessary to ensure appro2 priate coordination of benefits with respect to

3 enrolled individuals, including coordination of

4 access to and payment for covered prescription

5 drugs according to an individual’s in-service

6 area plan provisions, when such individual is

7 traveling outside the home service area, and

8 under such other circumstances as the Sec9 retary may specify.

10 ‘‘(C) EXPLANATION OF BENEFITS.—Fur11 nish to enrolled individuals an explanation of

12 benefits in accordance with section 1806(a),

13 and a notice of the balance of benefits remain14 ing for the current year, whenever prescription

15 drug benefits are provided under this part (ex16 cept that such notice need not be provided more

17 often than monthly).

18 ‘‘(4) COST AND UTILIZATION MANAGEMENT;

19 QUALITY ASSURANCE.—Have in place effective cost

20 and utilization management, quality assurance meas21 ures, and systems to reduce medical errors, includ22 ing at least the following, together with such addi23 tional measures as the Secretary may specify:

24 ‘‘(A) DRUG UTILIZATION REVIEW.—A drug

25 utilization review program conforming to the
112

S 2342 IS

1 standards provided in section 1927(g)(2) (with

2 such modifications as the Secretary finds ap3 propriate for operation of such program by an

4 entity other than a State).

5 ‘‘(B) FRAUD AND ABUSE CONTROL.—Ac6 tivities to control fraud, abuse, and waste.

7 ‘‘(5) EDUCATION AND INFORMATION ACTIVI8 TIES.—Have in place mechanisms for disseminating

9 educational and informational materials to enrolled

10 individuals and health care providers designed to en11 courage effective and cost-effective use of prescrip12 tion drug benefits and to ensure that enrolled indi13 viduals understand their rights and obligations

14 under the program.

15 ‘‘(6) BENEFICIARY PROTECTIONS.—

16 ‘‘(A) CONFIDENTIALITY OF HEALTH IN17 FORMATION.—Have in effect systems to safe18 guard the confidentiality of health care infor19 mation on enrolled individuals, which comply

20 with section 1106 and with section 552a of title

21 5, United States Code, and meet such addi22 tional standards as the Secretary may pre23 scribe.

24 ‘‘(B) GRIEVANCE AND APPEAL PROCE25 DURES.—Have in place such procedures as the
113

S 2342 IS

1 Secretary may specify for hearing and resolving

2 grievances and appeals brought by enrolled in3 dividuals against the benefit manager or a

4 pharmacy concerning benefits under this part,

5 which shall, to the extent the Secretary finds

6 necessary and appropriate, include procedures

7 equivalent to those specified in subsections (f)

8 and (g) of section 1852.

9 ‘‘(7) RECORDS, REPORTS, AND AUDITS OF BEN10 EFIT MANAGERS.—

11 ‘‘(A) RECORDS AND AUDITS.—Maintain

12 adequate records, and afford the Secretary ac13 cess to such records (including for audit pur14 poses).

15 ‘‘(B) REPORTS.—Make such reports and

16 submissions of financial and utilization data as

17 the Secretary may require taking into account

18 standard commercial practices.

19 ‘‘(8) PROPOSAL FOR ALTERNATIVE COINSUR20 ANCE AMOUNT.—At the benefit manager’s election,

21 provide a proposal for increased Government cost

22 sharing for generic prescription drugs, prescription

23 drugs on the benefit manager’s formulary, or pre24 scription drugs obtained through mail order phar25 macies, which includes evidence that such increased
114

S 2342 IS

1 cost sharing would not result in an increase in ag2 gregate costs to the Account including an analysis of

3 differences in projected drug utilization patterns by

4 beneficiaries whose cost sharing would be reduced

5 under the proposal and those making the cost-shar6 ing payments that would otherwise apply.

7 ‘‘(9) OTHER REQUIREMENTS.—Meet such other

8 requirements as the Secretary may specify.

9 ‘‘(e) PHARMACY PARTICIPATION AGREEMENTS.—

10 ‘‘(1) IN GENERAL.—A pharmacy that meets the

11 requirements of this subsection shall be eligible to

12 enter an agreement with a benefit manager to fur13 nish covered prescription drugs to enrolled individ14 uals residing in the service area.

15 ‘‘(2) TERMS OF AGREEMENT.—An agreement

16 under this subsection shall include the following

17 terms and requirements:

18 ‘‘(A) LICENSING.—The pharmacy shall

19 meet (and throughout the contract period will

20 continue to meet) all applicable State and local

21 licensing requirements.

22 ‘‘(B) ACCESS AND QUALITY STANDARDS.—

23 The pharmacy shall comply with such standards

24 as the Secretary and the benefit manager shall

25 establish concerning the quality of, and enrolled
115

S 2342 IS

1 individuals’ access to, pharmacy services under

2 this part.

3 ‘‘(C) ADHERENCE TO ESTABLISHED

4 PRICES.—The total charge for each drug dis5 pensed to an enrolled individual, without regard

6 to whether such individual is financially respon7 sible for any or all of such charge, shall not ex8 ceed the negotiated price for the drug, as estab9 lished under subsection (d)(1)(A) with respect

10 to the service area in which the enrolled indi11 vidual resides.

12 ‘‘(D) MANAGEMENT SYSTEMS AND PROCE13 DURES.—The pharmacy shall—

14 ‘‘(i) have in effect management sys15 tems (including electronic systems) and

16 procedures for carrying out functions

17 under the agreement; and

18 ‘‘(ii) maintain adequate records, af19 ford the benefit manager access to such

20 records for audit purposes, and make such

21 reports as the benefit manager may require

22 to meet its responsibilities under this sec23 tion.

24 ‘‘(E) COST AND UTILIZATION MANAGE25 MENT; QUALITY ASSURANCE.—The pharmacy
116

S 2342 IS

1 shall implement effective measures for quality

2 assurance, cost management, and reduction of

3 medical errors with respect to drugs dispensed

4 under the agreement, including maintenance of

5 utilization records and participation in the drug

6 utilization review program described in sub7 section (d)(4)(A).

8 ‘‘(F) CONFIDENTIALITY PROTECTIONS.—

9 The pharmacy shall have in effect systems to

10 ensure compliance with the confidentiality

11 standards applicable under subsection

12 (d)(6)(A).

13 ‘‘(G) OTHER REQUIREMENTS.—The phar14 macy shall meet such other requirements as the

15 Secretary may impose.

16 (f) LIMITATION OF LIABILITY.—The provisions of

17 section 1157(b) shall apply with respect to activities of

18 benefit managers and their officers, employees, and agents

19 under a contract under this section.

20 (g) INCENTIVES FOR COST AND UTILIZATION MAN21 AGEMENT AND QUALITY IMPROVEMENT.—The Secretary

22 is authorized to include in a contract awarded under sub23 section (c)(4) such incentives for cost and utilization man24 agement and quality improvement as the Secretary may

25 deem appropriate, including—
117

S 2342 IS

1 ‘‘(1) bonus and penalty incentives to encourage

2 administrative efficiency;

3 ‘‘(2) incentives under which benefit managers

4 share in any benefit savings achieved;

5 ‘‘(3) risk sharing arrangements related to ben6 efit payments; and

7 ‘‘(4) any other incentive that the Secretary

8 deems appropriate and likely to be effective in man9 aging costs or utilization.

10 ‘‘(h) FLEXIBILITY IN ASSIGNING WORKLOAD AMONG

11 BENEFIT MANAGERS.—During the period after the Sec12 retary has given notice of intent to terminate a contract

13 under subsection (c)(4), the Secretary may transfer re14 sponsibilities of the benefit manager under such contract

15 to another benefit manager.

16 ‘‘(i) NONINTERFERENCE.—Nothing in this section or

17 in this part shall be construed as authorizing the Secretary

18 to authorize a particular formulary or to institute a price

19 structure for benefits, or to otherwise interfere with the

20 competitive nature of providing a prescription drug benefit

21 through benefit managers.
118

S 2342 IS

1 ‘‘SEC. 1859H. EMPLOYER INCENTIVE PROGRAM FOR EM2 PLOYMENT–BASED RETIREE DRUG COV3 ERAGE.

4 ‘‘(a) PROGRAM AUTHORITY.—The Secretary is au5 thorized to develop and implement a program under this

6 section called the Employer Incentive Program that en7 courages employers and other sponsors of employment8 based health care coverage to provide adequate prescrip9 tion drug benefits to retired individuals by subsidizing, in

10 part, the sponsor’s cost of providing coverage under quali11 fying plans.

12 ‘‘(b) SPONSOR REQUIREMENTS.—In order to be eligi13 ble to receive an incentive payment under this section with

14 respect to coverage of an individual under a qualified re15 tiree prescription drug plan (as defined in subsection

16 (f)(3)), a sponsor shall meet the following requirements:

17 ‘‘(1) ASSURANCES.—The sponsor shall—

18 ‘‘(A) annually attest, and provide such as19 surances as the Secretary may require, that the

20 coverage offered by the sponsor is a qualified

21 retiree prescription drug plan, and will remain

22 such a plan for the duration of the sponsor’s

23 participation in the program under this section;

24 and

25 ‘‘(B) guarantee that it will give notice to

26 the Secretary and covered retirees—
119

S 2342 IS

1 ‘‘(i) at least 120 days before termi2 nating its plan, and

3 ‘‘(ii) immediately upon determining

4 that the actuarial value of the prescription

5 drug benefit under the plan falls below the

6 actuarial value of the insurance benefit

7 under this part.

8 ‘‘(2) BENEFICIARY INFORMATION.—The spon9 sor shall report to the Secretary, for each calendar

10 quarter for which it seeks an incentive payment

11 under this section the names and social security

12 numbers of all retirees (and their spouses and de13 pendents) covered under such plan during such

14 quarter and the dates (if less than the full quarter)

15 during which each such individual was covered.

16 ‘‘(3) AUDITS.—The sponsor and the employ17 ment-based retiree health coverage plan seeking in18 centive payments under this section shall agree to

19 maintain, and to afford the Secretary access to, such

20 records as the Secretary may require for purposes of

21 audits and other oversight activities necessary to en22 sure the adequacy of prescription drug coverage, the

23 accuracy of incentive payments made, and such

24 other matters as may be appropriate.
120

S 2342 IS

1 ‘‘(4) OTHER REQUIREMENTS.—The sponsor

2 shall provide such other information, and comply

3 with such other requirements, as the Secretary may

4 find necessary to administer the program under this

5 section.

6 ‘‘(c) INCENTIVE PAYMENT.—

7 ‘‘(1) IN GENERAL.—A sponsor that meets the

8 requirements of subsection (b) with respect to a

9 quarter in a calendar year shall be entitled to have

10 payment made on a quarterly basis (to the sponsor

11 or, at the sponsor’s direction, to the appropriate em12 ployment-based health plan) of an incentive pay13 ment, in the amount determined as described in

14 paragraph (2), for each retired individual (or

15 spouse) who—

16 ‘‘(A) was covered under the sponsor’s

17 qualified retiree prescription drug plan during

18 such quarter; and

19 ‘‘(B) was eligible for but was not enrolled

20 in the insurance program under this part.

21 ‘‘(2) AMOUNT OF INCENTIVE.—The payment

22 under this section with respect to each individual de23 scribed in paragraph (1) for a month shall be equal

24 to two-thirds of the monthly premium amount pay-
121

S 2342 IS

1 able by an enrolled individual, as set for the cal2 endar year pursuant to section 1859D(a)(2).

3 ‘‘(3) PAYMENT DATE.—The incentive under

4 this section with respect to a calendar quarter shall

5 be payable as of the end of the next succeeding cal6 endar quarter.

7 ‘‘(d) CIVIL MONEY PENALTIES.—A sponsor, health

8 plan, or other entity that the Secretary determines has,

9 directly or through its agent, provided information in con10 nection with a request for an incentive payment under this

11 section that the entity knew or should have known to be

12 false shall be subject to a civil monetary penalty in an

13 amount up to three times the total incentive amounts

14 under subsection (c) that were paid (or would have been

15 payable) on the basis of such information.

16 ‘‘(e) PART D ENROLLMENT FOR CERTAIN INDIVID17 UALS COVERED BY EMPLOYMENT-BASED RETIREE

18 HEALTH COVERAGE PLANS.—

19 ‘‘(1) ELIGIBLE INDIVIDUALS.—An individual

20 shall be given the opportunity to enroll in the pro21 gram under this part during the period specified in

22 paragraph (2) if—

23 ‘‘(A) the individual declined enrollment in

24 the program under this part at the time the in25 dividual first satisfied section 1859C(a);
122

S 2342 IS

1 ‘‘(B) at that time, the individual was cov2 ered under a qualified retiree prescription drug

3 plan for which an incentive payment was paid

4 under this section; and

5 ‘‘(C)(i) the sponsor subsequently ceased to

6 offer such plan; or

7 ‘‘(ii) the value of prescription drug cov8 erage under such plan became less than the

9 value of the coverage under the program under

10 this part.

11 ‘‘(2) SPECIAL ENROLLMENT PERIOD.—An indi12 vidual described in paragraph (1) shall be eligible to

13 enroll in the program under this part during the six14 month period beginning on the first day of the

15 month in which—

16 ‘‘(A) the individual receives a notice that

17 coverage under such plan has terminated (in

18 the circumstance described in paragraph

19 (1)(C)(i)) or notice that a claim has been de20 nied because of such a termination; or

21 ‘‘(B) the individual received notice of the

22 change in benefits (in the circumstance de23 scribed in subparagraph (1)(C)(ii)).

24 ‘‘(f) DEFINITIONS.—As used in this section, terms

25 have the following meanings:
123

S 2342 IS

1 ‘‘(1) EMPLOYMENT-BASED RETIREE HEALTH

2 COVERAGE.—The term ‘employment-based retiree

3 health coverage’ means health insurance or other

4 coverage of health care costs for retired individuals

5 (or for such individuals and their spouses and de6 pendents) based on their status as former employees

7 or labor union members.

8 ‘‘(2) EMPLOYER.—The term ‘employer’ has the

9 meaning given such term by section 3(5) of the Em10 ployee Retirement Income Security Act of 1974 (ex11 cept that such term shall include only employers of

12 two or more employees).

13 ‘‘(3) QUALIFIED RETIREE PRESCRIPTION DRUG

14 PLAN.—The term ‘qualified retiree prescription drug

15 plan’ means health insurance coverage included in

16 employment-based retiree health coverage that—

17 ‘‘(A) provides coverage of the cost of pre18 scription drugs whose actuarial value (as de19 fined by the Secretary) to each retired bene20 ficiary equals or exceeds the actuarial value of

21 the benefits provided to an individual enrolled

22 in the program under this part; and

23 ‘‘(B) does not deny, limit, or condition the

24 coverage or provision of prescription drug bene25 fits for retired individuals based on age or any
124

S 2342 IS

1 health status-related factor described in section

2 2702(a)(1) of the Public Health Service Act.

3 ‘‘(4) SPONSOR.—The term ‘sponsor’ means

4 plan sponsor as defined in section 3(16) of the Em5 ployer Retirement Income Security Act of 1974.

6 (g) APPROPRIATIONS TO COVER INCENTIVES FOR

7 EMPLOYMENT-BASED RETIREE DRUG COVERAGE.—

8 There are authorized to be appropriated from time to

9 time, out of any moneys in the Treasury not otherwise

10 appropriated such sums as may be necessary for payment

11 of incentive payments under subsection (c).

12 ‘‘SEC. 1859I. APPROPRIATIONS TO COVER GOVERNMENT

13 CONTRIBUTIONS.

14 ‘‘There are authorized to be appropriated from time

15 to time, out of any moneys in the Treasury not otherwise

16 appropriated, to the Prescription Drug Insurance Ac17 count, a Government contribution equal to—

18 ‘‘(1) the aggregate premiums payable for a

19 month pursuant to section 1859D(a)(2) by individ20 uals enrolled in the program under this part, plus

21 ‘‘(2) one-half the aggregate premiums payable

22 for a month pursuant to such section for such indi23 viduals by former employers.
125

S 2342 IS

1 ‘‘SEC. 1859J. DEFINITION.

2 ‘‘As used in this part, the term ‘prescription drug’

3 means—

4 ‘‘(1) a drug that may be dispensed only upon

5 a prescription, and that is described in subpara6 graph (A)(i), (A)(ii), or (B) of section 1927(k)(2);

7 and

8 ‘‘(2) insulin certified under section 506 of the

9 Federal Food, Drug, and Cosmetic Act, and needles,

10 syringes, and disposable pumps for the administra11 tion of such insulin.’’.

12 (b) STUDY OF ANNUAL OPEN ENROLLMENT.—Dur13 ing 2003 and 2004, the Secretary shall study the feasi14 bility and advisability of establishing an annual open en15 rollment period for the program under part D (as added

16 by subsection (a)). Such study shall reflect data reported

17 by benefit managers administering benefits under such

18 part and shall include:

19 (1) a review of the costs, effectiveness, and ad20 ministrative feasibility of an annual open enrollment

21 period for beneficiaries who previously declined en22 rollment or who previously disenrolled and desire to

23 re-enroll;

24 (2) an evaluation of a premium penalty for late

25 enrollment based on actuarially determined costs to

26 the program of late enrollment; and
126

S 2342 IS

1 (3) a projection of the costs to the program

2 under such part through 2010 of an annual open en3 rollment period.

4 The Secretary shall prepare a report setting forth the out5 come of the study, and may include in the report a rec6 ommendation as to whether an annual open enrollment pe7 riod should be implemented under such part.

8 (c) CONFORMING AMENDMENTS.—

9 (1) AMENDMENTS TO FEDERAL SUPPLE10 MENTARY HEALTH INSURANCE TRUST FUND.—Sec11 tion 1841 (42 U.S.C. 1395t) is amended—

12 (A) in the last sentence of subsection (a)—

13 (i) by striking ‘‘and such amounts’’

14 and replacing it with ‘‘such amounts’’; and

15 (ii) by adding the following before the

16 period: ‘‘and such amounts as may be de17 posited in, or appropriated to, the Pre18 scription Drug Insurance Account estab19 lished by section 1859F’’;

20 (B) in subsection (g), by inserting after

21 ‘‘by this part,’’ the following: ‘‘the payments

22 provided for under part D (in which case the

23 payments shall come from the Prescription

24 Drug Insurance Account in the Supplementary

25 Medical Insurance Trust Fund),’’;
127

S 2342 IS

1 (C) in subsection (h), by adding at the end

2 of the first sentence: ‘‘and section 1859D(b)(4)

3 (in which case the payments shall come from

4 the Prescription Drug Insurance Account in the

5 Supplementary Medical Insurance Trust

6 Fund)’’; and

7 (D) in subsection (i), by inserting after

8 ‘‘section 1840(b)(1)’’ the following: ‘‘, section

9 1859D(b)(2) (in which case the payments shall

10 come from the Prescription Drug Insurance Ac11 count in the Supplementary Medical Insurance

12 Trust Fund),’’.

13 (2) PRESCRIPTION DRUG OPTION UNDER

14 MEDICARE+CHOICE PLANS.—

15 (A) Section 1851 (42 U.S.C. 1395w–21) is

16 amended—

17 (i) in subsection (a)(1)(A), by striking

18 ‘‘parts A and B’’ and inserting ‘‘parts A,

19 B, and D’’; and

20 (ii) in subsection (i), by striking

21 ‘‘parts A and B’’ and inserting ‘‘parts A,

22 B, and D’’.

23 (B) Section 1852(a)(1)(A) (42 U.S.C.

24 1395w–22(a)(1)(A)) is amended by inserting
128

S 2342 IS

1 ‘‘(and under part D to individuals also enrolled

2 under that part)’’ after ‘‘parts A and B’’.

3 (C) Section 1852(d)(1) (42 U.S.C.

4 1395(d)(1)) is amended—

5 (i) by striking ‘‘and’’ at the end of

6 subparagraph (D);

7 (ii) by striking the period at the end

8 of subparagraph (E) and inserting ‘‘; and’’

9 and

10 (iii) by adding at the end the fol11 lowing new subparagraph:

12 ‘‘(F) the plan for part D benefits guaran13 tees coverage of any specifically named covered

14 prescription drug for an enrollee, when pre15 scribed by a physician in accordance with the

16 provisions of such part, regardless of whether

17 such drug would otherwise be covered under an

18 applicable formulary or discount arrangement.’’.

19 (D) Section 1854(e) (42 U.S.C. 1395w–

20 4(e)) is amended by adding at the end the fol21 lowing new paragraph:

22 ‘‘(5) SPECIAL RULE FOR PROVISION OF PART D

23 BENEFITS.—In no event may a Medicare+Choice or24 ganization include as part of a plan for part D bene-
129

S 2342 IS

1 fits a requirement that an enrollee pay a deductible,

2 or a coinsurance percentage that exceeds 50 percent.

3 (E) Section 1857(d) (42 U.S.C. 1395w–

4 27(d)) is amended by adding at the end the fol5 lowing new paragraph:

6 ‘‘(6) AVAILABILITY OF NEGOTIATED PRICES.—

7 Each contract under this section shall provide that

8 enrollees who exhaust the plan’s prescription drug

9 benefits will continue to have access to prescription

10 drugs at negotiated prices equivalent to the total

11 combined cost of such drugs to the plan and the en12 rollee prior to such exhaustion of benefits.’’.

13 (3) EXCLUSIONS FROM COVERAGE.—

14 (A) APPLICATION TO PART D.—Section

15 1862(a) (42 U.S.C. 1395y(a)) is amended in

16 the matter preceding paragraph (1) by striking

17 ‘‘part A or part B’’ and inserting ‘‘part A, B,

18 or D’’.

19 (B) PRESCRIPTION DRUGS NOT EXCLUDED

20 FROM COVERAGE IF APPROPRIATELY PRE21 SCRIBED.—Section 1862(a)(1) (42 U.S.C.

22 1395y(a)(1)) is amended—

23 (i) by striking ‘‘and’’ at the end of

24 subparagraph (H);
130

S 2342 IS

1 (ii) by striking the semicolon at the

2 end of subparagraph (I) and inserting ‘‘,

3 and’’; and

4 (iii) by adding after subparagraph (I)

5 the following new subparagraph:

6 ‘‘(J) in the case of prescription drugs cov7 ered under part D, which are not prescribed in

8 accordance with such part;

9 SEC. 202. MEDICAID BUY-IN OF MEDICARE PRESCRIPTION

10 DRUG COVERAGE FOR CERTAIN LOW-INCOME

11 INDIVIDUALS.

12 (a) STATE OPTION TO BUY-IN DUALLY ELIGIBLE

13 INDIVIDUALS.—

14 (1) COVERAGE OF PREMIUMS AS MEDICAL AS15 SISTANCE.—Section 1905(a) (42 U.S.C. 1396d(a))

16 is amended in the fourth sentence by striking

17 ‘‘under part B’’ the first place it appears and insert18 ing ‘‘under parts B and D’’.

19 (2) STATE COMMITMENT TO CONTINUE PAR20 TICIPATION IN PART D AFTER BENEFIT LIMIT

21 REACHED.—Section 1902(a) (42 U.S.C. 1396a(a))

22 is amended—

23 (A) by striking ‘‘and’’ at the end of para24 graph (64);
131

S 2342 IS

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

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

3 (C) by adding after paragraph (65) the fol4 lowing new paragraph:

5 ‘‘(66) that, in the case of any individual

6 whose eligibility for medical assistance is not

7 limited to Medicare or Medicare drug cost shar8 ing and for whom the State elects to pay pre9 miums under part D of title XVIII pursuant to

10 section 1859E, the State will purchase all pre11 scription drugs for such individual in accord12 ance with the provisions of such part D, with13 out regard to whether the benefit limit for such

14 individual under section 1859B(b) has been

15 reached.’’.

16 (b) MEDICARE COST SHARING REQUIRED FOR

17 QUALIFIED MEDICARE BENEFICIARIES.—Section

18 1905(p)(3) (42 U.S.C. 1396d(p)(3)) is amended—

19 (1) in subparagraph (A)—

20 (A) by striking ‘‘and’’ at the end of clause

21 (i);

22 (B) by inserting ‘‘and’’ at the end of clause

23 (ii); and

24 (C) by adding after clause (ii) the fol25 lowing:
132

S 2342 IS

1 ‘‘(iii) premiums under section

2 1859D,’’;

3 (2) in subparagraph (D)—

4 (A) by inserting ‘‘(i)’’ after ‘‘(D)’’; and

5 (B) by adding at the end the following:

6 ‘‘(ii) The difference between the

7 amount that is paid under section 1859B

8 and the amount that would be paid under

9 such section if any reference to ‘50 per10 cent’ therein were deemed a reference to

11 ‘100 percent’ (or, if the Secretary approves

12 a higher percentage under such section, if

13 any reference to such percentage were

14 deemed to be multiplied by two).

15 (c) MEDICARE DRUG COST SHARING REQUIRED FOR

16 MEDICARE-ELIGIBLE INDIVIDUALS WITH INCOMES BE17 TWEEN 100 AND 150 PERCENT OF POVERTY LINE.—

18 (1) DEFINITIONS OF ELIGIBLE BENEFICIARIES

19 AND COVERAGE.—Section 1905 (42 U.S.C. 1396d)

20 is amended by adding at the end the following new

21 subsection:

22 ‘‘(v)(1) The term ‘qualified medicare drug bene23 ficiary’ means an individual—

24 ‘‘(A) who is entitled to hospital insurance bene25 fits under part A of title XVIII (including an indi-
133

S 2342 IS

1 vidual entitled to such benefits pursuant to an en2 rollment under section 1818, but not including an

3 individual entitled to such benefits only pursuant to

4 an enrollment under section 1818A),

5 ‘‘(B) whose income (as determined under sec6 tion 1612 for purposes of the supplemental security

7 income program, except as provided in subsection

8 (p)(2)(D)) is above 100 percent but below 150 per9 cent of the official poverty line (as defined by the

10 Office of Management and Budget, and revised an11 nually in accordance with section 673(2) of the Om12 nibus Budget Reconciliation Act of 1981) applicable

13 to a family of the size involved; and

14 ‘‘(C) whose resources (as determined under sec15 tion 1613 for purposes of the supplemental security

16 income program) do not exceed twice the maximum

17 amount of resources that an individual may have

18 and obtain benefits under that program.

19 ‘‘(2) The term ‘medicare drug cost-sharing’ means

20 the following costs incurred with respect to a qualified

21 medicare drug beneficiary, without regard to whether the

22 costs incurred were for items and services for which med23 ical assistance is otherwise available under the plan:

24 ‘‘(A) In the case of a qualified medicare drug

25 beneficiary whose income (as determined under
134

S 2342 IS

1 paragraph (1)) is less than 135 percent of the offi2 cial poverty line—

3 ‘‘(i) premiums under section 1859D; and

4 ‘‘(ii) the difference between the amount

5 that is paid under section 1859B and the

6 amount that would be paid under such section

7 if any reference to ‘50 percent’ therein were

8 deemed a reference to ‘100 percent’ (or, if the

9 Secretary approves a higher percentage under

10 such section, if any reference to such percent11 age were deemed to be multiplied by two).

12 ‘‘(B) In the case of a qualified medicare drug

13 beneficiary whose income (as determined under

14 paragraph (1)) is at least 135 percent but less than

15 150 percent of the official poverty line, a percentage

16 of premiums under section 1859D, determined on a

17 linear sliding scale ranging from 100 percent for in18 dividuals with incomes at 135 percent of such line

19 to 0 percent for individuals with incomes at 150 per20 cent of such line.

21 ‘‘(3) In the case of any State which is providing med22 ical assistance to its residents under a waiver granted

23 under section 1115, the Secretary shall require the State

24 to meet the requirement of section 1902(a)(10)(E) in the

25 same manner as the State would be required to meet such
135

S 2342 IS

1 requirement if the State had in effect a plan approved

2 under this title.’’.

3 (2) STATE PLAN REQUIREMENT.—Section

4 1902(a)(10)(E) (42 U.S.C. 1396(a)(10)(E)) is

5 amended—

6 (A) by striking ‘‘and’’ at the end of clause

7 (iii);

8 (B) by adding at the end the following new

9 clause:

10 ‘‘(v) for making medical assistance

11 available for medicare drug cost sharing

12 (as defined in section 1905(v)(2)) for

13 qualified medicare drug beneficiaries de14 scribed in section 1905(v)(1); and’’.

15 (3) 100 PERCENT FEDERAL MATCHING OF

16 STATE MEDICAL ASSISTANCE COSTS FOR MEDICARE

17 DRUG COST SHARING.—Section 1903(a) (42 U.S.C.

18 1396b(a)) is amended—

19 (A) by redesignating paragraph (7) as

20 paragraph (8); and

21 (B) by adding after paragraph (6) the fol22 lowing new paragraph:

23 ‘‘(7) an amount equal to 100 percent of

24 amounts as expended as medicare drug cost sharing

25 for qualified medicare drug beneficiaries (as defined
136

S 2342 IS

1 in section 1905(v)) (except that this paragraph shall

2 not apply to amounts expended with respect to any

3 individual whose eligibility for medical assistance is

4 not limited to medicare or medicare drug cost shar5 ing); and’’.

6 (d) MEDICAID DRUG PRICE REBATES UNAVAILABLE

7 WITH RESPECT TO DRUGS PURCHASED THROUGH MEDI8 CARE BUY-IN.—Section 1927 (42 U.S.C. 1396r–8) is

9 amended by adding at the end the following new sub10 section:

11 ‘‘(l) DRUGS PURCHASED THROUGH MEDICARE

12 BUY-IN.—The provisions of this section shall not

13 apply to prescription drugs purchased under part D

14 of title XVIII pursuant to an agreement with the

15 Secretary under section 1859E (including any drugs

16 so purchased after the limit under section 1859B(b)

17 has been exceeded).’’.

18 (e) AMENDMENTS TO MEDICARE PART D.—Part D

19 of title XVIII, as added by section 201, is amended by

20 adding after section 1859D the following new section:

21 ‘‘SEC. 1859E. SPECIAL ELIGIBILITY, ENROLLMENT, AND CO22 PAYMENT RULES FOR LOW-INCOME INDIVID23 UALS.

24 ‘‘(a) STATE AGREEMENTS FOR COVERAGE.—
137

S 2342 IS

1 ‘‘(1) IN GENERAL.—The Secretary shall, at the

2 request of a State, enter into an agreement with the

3 State under which all individuals described in para4 graph (2) are enrolled in the program under this

5 part, without regard to whether any such individual

6 has previously declined the opportunity to enroll in

7 such program.

8 ‘‘(2) ELIGIBILITY GROUPS.—The individuals

9 described in this paragraph, for purposes of para10 graph (1), are individuals who satisfy section

11 1859C(a) and who are—

12 ‘‘(A)(i) eligible individuals within the

13 meaning of section 1843, and

14 ‘‘(ii) in a coverage group or groups per15 mitted under section 1843 (as selected by the

16 State and specified in the agreement); or

17 ‘‘(B) qualified medicare drug beneficiaries

18 (as defined in section 1905(v)(1)).

19 ‘‘(3) COVERAGE PERIOD.—The period of cov20 erage under this part of an individual enrolled under

21 an agreement under this subsection shall be as fol22 lows:

23 ‘‘(A) INDIVIDUALS ELIGIBLE (AT STATE

24 OPTION) FOR PART B BUY-IN.—In the case of

25 an individual described in subsection (a)(2)(A),
138

S 2342 IS

1 the coverage period shall be the same period

2 that applies (or would apply) pursuant to sec3 tion 1843(d).

4 ‘‘(B) QUALIFIED MEDICARE DRUG BENE5 FICIARIES.—In the case of an individual de6 scribed in subsection (a)(2)(B)—

7 ‘‘(i) the coverage period shall begin on

8 the latest of—

9 ‘‘(I) January 1, 2003,

10 ‘‘(II) the first day of the third

11 month following the month in which

12 the State agreement is entered into;

13 or

14 ‘‘(III) the first day of the first

15 month following the month in which

16 the individual satisfies section

17 1859C(a); and

18 ‘‘(ii) the coverage period shall end on

19 the last day of the month in which the in20 dividual is determined by the State to have

21 become ineligible for medicare drug cost22 sharing.

23 ‘‘(b) SPECIAL PART D ENROLLMENT OPPORTUNITY

24 FOR INDIVIDUALS LOSING MEDICAID ELIGIBILITY.—In

25 the case of an individual who—
139

S 2342 IS

1 ‘‘(1) satisfies section 1859C(a), and

2 ‘‘(2) loses eligibility for benefits under the State

3 plan under title XIX after having been enrolled

4 under such plan or having been determined eligible

5 for such benefits,

6 the Secretary shall provide an opportunity for enrollment

7 under the program under this part during the period that

8 begins on the date that such individual loses such eligi9 bility and ends on the date specified by the Secretary.

10 ‘‘(c) DEFINITION.—For purposes of this section, the

11 term ‘State’ has the meaning given such term under sec12 tion 1101(a) for purposes of title XIX.’’.

13 PART B—IMPROVING PREVENTIVE BENEFITS AND

14 ELIMINATING COST SHARING

15 SEC. 221. ELIMINATION OF DEDUCTIBLES AND COINSUR16 ANCE FOR PREVENTIVE BENEFITS.

17 (a) IN GENERAL.—Section 1833 (42 U.S.C. 1395l)

18 is amended by adding after subsection (o) the following

19 new subsection:

20 ‘‘(p) DEDUCTIBLES AND COINSURANCE WAIVED FOR

21 PREVENTIVE BENEFITS.—Deductibles and coinsurance

22 under subsections (a) and (b) shall not be required of indi23 viduals covered under the insurance program under this

24 part for any of the following preventive health care items

25 and services:
140

S 2342 IS

1 ‘‘(1) blood-testing strips, lancets, and blood glu2 cose monitors for individuals with diabetes described

3 in section 1861(n);

4 ‘‘(2) diabetes outpatient self-management train5 ing services described in section 1861(s)(2)(S);

6 ‘‘(3) pneumococcal, influenza, and hepatitis B

7 vaccines and administration described in section

8 1861(s)(10) ;

9 ‘‘(4) screening mammography as described in

10 section 1861(s)(13);

11 ‘‘(5) screening pap smear and screening pelvic

12 examinations as described in section 1861(s)(14);

13 ‘‘(6) bone mass measurement as described in

14 section 1861(s)(15);

15 ‘‘(7) prostate cancer screening tests as defined

16 in section 1861(oo); and

17 ‘‘(8) colorectal cancer screening as defined in

18 section 1861(pp)(1).’’.

19 (b) WAIVER OF COINSURANCE.—Section

20 1833(a)(1)(B) (42 U.S.C. 1395l(a)(1)(B)) is amended by

21 striking ‘‘items and services described in section

22 1861(s)(10)(A)’’ and inserting ‘‘preventive care items and

23 services described in subsection (p)’’.

24 (c) WAIVER OF DEDUCTIBLE.—Section 1833(b) (42

25 U.S.C. 1395l(b)) is amended in clause (1) to read as fol-
141

S 2342 IS

1 lows: ‘‘(1) such deductible shall not apply with respect to

2 preventive health care items and services specified in sub3 section (p)’’.

4 (d) ADDING ‘‘LANCET’’ TO DEFINITION OF DME.—

5 Section 1861(n) (42 U.S.C. 1395x(n)) is amended by

6 striking ‘‘blood-testing strips and blood glucose monitors’’

7 and inserting ‘‘blood-testing strips, lancets, and blood glu8 cose monitors ’’.

9 (e) CONFORMING AMENDMENTS.—

10 (1) Section 1833(a)(1) (42 U.S.C. 1395l(a)(1))

11 is amended—

12 (A) in subparagraph (B)—

13 (i) by striking ‘‘section

14 1861(s)(10)(A)’’ and inserting ‘‘section

15 1833(p)’’; and

16 (ii) by striking ‘‘reasonable charges’’

17 and inserting ‘‘of the fee schedule or other

18 basis of payment under this title’’; and

19 (B) in subparagraphs (1)(D)(i) and

20 (2)(D)(i), by inserting ‘‘described in subsection

21 (p) or’’ after ‘‘in the case of such tests’’.

22 (2) Section 1834(a)(1)(A) (42 U.S.C.

23 1395m(a)(1)(A)) is amended by inserting ‘‘(or 100

24 percent, in the case of such an item described in sec25 tion 1833(p))’’ after ‘‘80 percent’’.
142

S 2342 IS

1 (3) Section 1834(c)(1)(C) (42 U.S.C.

2 1395m(c)(1)(C)) is amended by striking ‘‘80 per3 cent’’ and inserting ‘‘100 percent’’.

4 (4) Section 1834(d) (42 U.S.C. 1395m(d)) is

5 amended—

6 (A) in each of paragraphs (2)(C) and

7 (3)(C)—

8 (i) by striking clause (ii); and

9 (ii) by striking all that precedes ‘‘sub10 sections (i)(2)(A) and (t)’’ and inserting

11 the following:

12 ‘‘(C) FACILITY PAYMENT LIMIT.—Notwith13 standing’’, and adjusting margins accordingly;

14 and

15 (B) in paragraph (2)(C), by redesignating

16 subclauses (I) and (II) as clauses (i) and (ii).

17 (f) EFFECTIVE DATE.—The amendments made by

18 this section shall be effective on and after January 1,

19 2003.

20 SEC. 222. INFORMATION CAMPAIGN ON PREVENTION.

21 (a) REQUIRED ACTIVITIES.—The Secretary of

22 Health and Human Services shall carry out, during 2002

23 and 2003, a nationwide education campaign to promote

24 preventive health awareness among older Americans and
143

S 2342 IS

1 people with disabilities, which shall include the following

2 activities:

3 (1) An information campaign, in collaboration

4 with the Social Security Administration, State health

5 insurance assistance programs, area agencies on

6 aging, and the private sector, designed to educate all

7 Americans over age 50 and individuals with disabil8 ities about the importance of preventive health care.

9 (2) Activities designed to encourage Medicare

10 beneficiaries to use Medicare preventive benefits, in11 cluding distribution of comprehensive information on

12 Medicare preventive benefits to all Medicare bene13 ficiaries.

14 (3) Development and testing of a health status

15 assessment tool with follow-up interventions, to as16 sist Medicare beneficiaries and their providers in

17 identifying and mitigating health risks.

18 (4) A nationwide education and awareness cam19 paign designed to educate older Americans on ad20 justments to behavior and the home environment

21 that can prevent falls.

22 (b) AUTHORIZATION OF APPROPRIATIONS.—Such

23 sums as may be necessary to carry out this section are

24 authorized to be appropriated for fiscal years 2002 and

25 2003.
144

S 2342 IS

1 SEC. 223. SMOKING CESSATION DEMONSTRATION.

2 (a) IN GENERAL.—The Secretary shall, either di3 rectly or through grants, contracts, or cooperative agree4 ments, carry out a demonstration project testing a variety

5 of smoking cessation services for Medicare beneficiaries,

6 for the purpose of identifying the most successful and

7 cost-effective approaches.

8 (b) DESIGN OF DEMONSTRATION.—

9 (1) IN GENERAL.—The Secretary shall deter10 mine the design, implementation, and evaluation of

11 the demonstration under this section, subject to the

12 provisions of this section.

13 (2) SERVICES INCLUDED.—Services under the

14 demonstration may include an initial patient assess15 ment, counseling services, and any pharmacotherapy

16 for smoking cessation approved by the Food and

17 Drug Administration, and such other services as the

18 Secretary may authorize. Services may be furnished

19 by a person or entity that provides other services

20 for which payment may be made under title XVIII

21 of the Social Security Act, as well as by health edu22 cators and other professionals in categories des23 ignated by the Secretary who meet applicable certifi24 cation and licensing requirements of State and local

25 law.
145

S 2342 IS

1 (3) SCOPE AND DURATION.—Demonstration

2 projects under this section shall be conducted at a

3 minimum of four sites and shall not exceed five

4 years in duration.

5 (c) Notwithstanding any provision of title XVIII of

6 the Social Security Act (42 U.S.C. 1395 et seq.) or any

7 other provision of law, in the case of smoking cessation

8 items and services furnished to a Medicare beneficiary

9 under a demonstration conducted by the Secretary under

10 this section by an individual or entity authorized by the

11 Secretary to participate in such demonstration—

12 (1) Such items and services shall be deemed to

13 be health care items and services covered under the

14 insurance programs under such title XVIII for pur15 poses of payment from the Federal Health Insur16 ance and Federal Supplementary Medical Insurance

17 Trust Funds;

18 (2) Persons and entities furnishing smoking

19 cessation items and services under a demonstration

20 under this section shall be entitled to be paid from

21 such Trust Funds an amount equal to the lesser of

22 the actual cost of such items and services or the

23 payment amount prescribed for such items or serv24 ices under a fee schedule established by the Sec25 retary; and
146

S 2342 IS

1 (3) The Secretary shall waive all coinsurance

2 and deductibles under such title XVIII for smoking

3 cessation items and services furnished under such

4 demonstration.

5 (d) WAIVER AUTHORITY.—The Secretary is author6 ized to waive the requirements of title XVIII of the Social

7 Security Act (42 U.S.C. 1395 et seq.) to the extent and

8 for the period the Secretary finds necessary to conduct

9 the demonstration under this section.

10 (e) FUNDING.—The Secretary shall provide for the

11 transfer from the Federal Health Insurance and Federal

12 Supplementary Insurance Trust Fund of such funds as

13 are necessary for the costs of carrying out and evaluating

14 the demonstration projects under this section.

15 (f) EVALUATION; REPORT TO CONGRESS.—Upon

16 conclusion of the demonstration, the Secretary shall cause

17 the demonstration to be evaluated and shall submit to

18 Congress a report including the following:

19 (1) A description of the demonstration.

20 (2) An assessment of—

21 (A) patient outcomes, including smoking

22 ‘‘quit’’ rates;

23 (B) the cost-effectiveness of the dem24 onstration; and
147

S 2342 IS

1 (C) the quality of the services furnished

2 through the demonstration, including measures

3 of beneficiary and provider satisfaction.

4 (3) A recommendation as to whether the dem5 onstration should be continued or expanded under

6 part B of such title XVIII, including, if the evalua7 tion has found the demonstration successful, rec8 ommendations as to the individuals who should be

9 eligible to receive smoking cessation benefits, the

10 persons and entities that should be authorized to

11 provide the benefits, the type and scope of benefits,

12 and appropriate payment methodologies.

13 (4) Any other information that the Secretary

14 determines to be appropriate.

15 PART C—RATIONALIZING COST SHARING AND MEDIGAP

16 SEC. 231. DEDUCTIBLES AND COINSURANCE FOR CLINICAL

17 LABORATORY SERVICES.

18 (a) IN GENERAL.—Section 1833, as amended by sec19 tion 221, is further amended—

20 (1) in subsection (a)—

21 (A) in paragraph (1)(D)—

22 (i) in clause (i), by striking the open

23 parenthesis an all that follows through ‘‘on

24 an assignment-related basis)’’; and
148

S 2342 IS

1 (ii) in clause (ii), by striking ‘‘100

2 percent’’ and inserting ‘‘80 percent (or 100

3 percent, in the case of such tests described

4 in subsection (p))’’; and

5 (B) in paragraph (2)(D)—

6 (i) in clause (i), by striking the open

7 parenthesis and all that follows through

8 ‘‘section 1866’’ and inserting ‘‘such tests

9 described in subsection (p)’’; and

10 (ii) in clause (ii), by striking ‘‘100

11 percent’’ and inserting ‘‘80 percent (or 100

12 percent, in the case of such tests described

13 in subsection (p))’’; and

14 (2) in subsection (b)—

15 (A) by striking subparagraph (3); and

16 (B) by redesignating paragraphs (4)

17 through (6) as paragraphs (3) through (5) re18 spectively.

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

20 subsection (a) shall apply to tests furnished on or after

21 January 1, 2003.

22 SEC. 232. INDEXING DEDUCTIBLE TO INFLATION.

23 Section 1833(b) (42 U.S.C. 1395l(b)) is amended by

24 inserting after ‘‘1991 and subsequent years’’ the following:

25 ‘‘, adjusted annually, effective January 1 of each year be-
149

S 2342 IS

1 ginning in 2003, by a percentage increase or decrease

2 equal to the percentage increase or decrease in the con3 sumer price index for all urban consumers (U.S. city aver4 age) for the 12-month period ending with June of the pre5 vious year, rounded to the nearest dollar’’.

6 SEC. 233. UPDATING AND EXPANDING MEDIGAP PLAN OP7 TIONS.

8 (a) REVIEW AND UPDATE OF BENEFIT PACKAGES

9 FOR MEDIGAP POLICIES.—

10 (1) ESTABLISHMENT OF NEW MEDIGAP

11 PLAN.—

12 (A) IN GENERAL.—Section 1882(p)(1) (42

13 U.S.C. 1395ss(p)(1)) is amended by redesig14 nating subparagraph (E) as subparagraph (F)

15 and inserting after subparagraph (D) the fol16 lowing new subparagraph:

17 ‘‘(E) (i) Within 9 months after enactment

18 of this subparagraph, the Association may re19 vise the 1991 NAIC Model Regulation to in20 clude a new plan ‘K’ that—

21 ‘‘(I) complies with paragraphs (2) and

22 (3);

23 ‘‘(II) except as provided in subclause

24 (III), requires the beneficiary of the policy

25 to pay—
150

S 2342 IS

1 ‘‘(aa) nominal copayments; and

2 ‘‘(bb) all or a portion (not to be

3 less than 50 percent) of the part B

4 deductible under section 1833; and

5 ‘‘(III) in the case of beneficiaries

6 under the policy who are receiving services

7 under any of the programs specified in

8 paragraphs (1) through (4) of section

9 1866M(a), covers 100 percent of any cost10 sharing charges imposed on beneficiaries

11 under such program.

12 If the Association so revises the 1991

13 NAIC Model Regulation, references to the

14 1991 NAIC Model Regulation in this sec15 tion shall be interpreted to refer to the

16 1991 NAIC Model Regulation as so re17 vised.

18 ‘‘(ii) If the Association does not make the

19 changes in the revised NAIC Model Regulation

20 within the 9-month period specified in clause (i)

21 the Secretary shall provide for the establish22 ment of a new plan ‘K’ in accordance with the

23 provisions of subparagraph (B), and any re24 quirements applicable to a State under subpara25 graph (B) shall apply with respect to the estab-
151

S 2342 IS

1 lishment of the new plan under this subpara2 graph.’’.

3 (B) REQUIREMENT THAT ALL ISSUERS

4 OFFER PLAN ‘‘K’’.—

5 (i) IN GENERAL.—Section

6 1882(p)(9)(A) (42 U.S.C.

7 1395ss(p)(9)(A)) is amended by inserting

8 before the period ‘‘and a medicare supple9 mental policy described in paragraph

10 (1)(E)’’.

11 (ii) PROHIBITION ON STATE RESTRIC12 TION.—Section 1882(p)(5)(B) (42 U.S.C.

13 1395ss(p)(5)(B)) is amended by inserting

14 before the period ‘‘or a medicare supple15 mental policy described in paragraph

16 (1)(E)’’.

17 (C) CONFORMING AMENDMENTS.—Section

18 1882(p) (42 U.S.C. 1395ss(p)) is amended in

19 paragraph (2)(C) by striking ‘‘shall not exceed

20 10’’ and inserting ‘‘shall not exceed 11’’.

21 (2) PERIODIC REVIEW.—Section 1882(p)(1)(F)

22 (42 U.S.C. 1395ss(p)(1)(F)) as redesignated, is

23 amended—
152

S 2342 IS

1 (A) by striking all that precedes ‘‘the pre2 ceding provisions of this paragraph’’ and insert3 ing the following:

4 ‘‘(F) The Secretary, in consultation with

5 the Association, shall periodically review stand6 ard supplemental packages established pursuant

7 to paragraph (2). If, on the basis of such con8 sultation and review, the Secretary determines

9 that changes in the 1991 NAIC Model Regula10 tion or 1991 Federal Regulation (including

11 changes in the content or number of packages

12 established pursuant to paragraph (2), and in

13 the provision or scope of drug benefits available

14 under those packages), are needed to better re15 flect the needs of beneficiaries under this title

16 (including the need for affordable supplemental

17 insurance options),’’; and

18 (B) by adding at the end the following new

19 sentence: ‘‘If the Secretary determines that it is

20 necessary to change the benefit packages estab21 lished under paragraph (2) to better reflect the

22 needs of beneficiaries as described in this sub23 paragraph, the Secretary shall, through a notice

24 in the Federal Register, request the Association
153

S 2342 IS

1 to recommend such changes to the benefit pack2 age as it considers appropriate.’’.

3 (b) IMPROVED INFORMATION ON MEDIGAP.—Section

4 1882(e) (42 U.S.C. 1395ss(e)) is amended by adding at

5 the end the following new paragraph:

6 ‘‘(4) The Secretary shall provide to individuals

7 entitled to benefits under this title (and, to the ex8 tent feasible, individuals about to become so enti9 tled) information allowing easy comparison of the

10 supplemental insurance policies authorized under

11 subsection (p)(2), including the benefits, premiums,

12 and cost-sharing provisions of such policies.’’.

13 SEC. 234. REPORT TO CONGRESS ON OPTIONS FOR IM14 PROVING MEDICARE SUPPLEMENTAL COV15 ERAGE.

16 (a) IN GENERAL.—The Secretary shall prepare and

17 transmit to the Congress, not later than January 1, 2002,

18 a detailed report that may include specific recommenda19 tions on policy options for improving Medicare supple20 mental coverage, with particular attention to means of

21 limiting out-of-pocket costs for health care items and serv22 ices covered under title XVIII of the Social Security Act

23 (42 U.S.C. 1395 et seq.) .

24 (b) CONTENTS OF REPORT.—The report required

25 under this section may—
154

S 2342 IS

1 (1) consider effects of beneficiaries’ having mul2 tiple sources of health care coverage (including du3 plication of coverage and incentives for overutiliza4 tion of services);

5 (2) compare total cost sharing by Medicare

6 beneficiaries (under Medicare and Medicare supple7 mental policies) with cost sharing by beneficiaries of

8 private-sector health insurance;

9 (3) consider means of improving beneficiary in10 formation on the comparative cost and quality of

11 Medicare supplemental policies;

12 (4) consider options for structuring, and the

13 feasibility and advisability (including the potential

14 for reducing beneficiaries’ out-of-pocket costs and

15 unnecessary utilization) of alternatives including—

16 (A) optional unsubsidized supplemental

17 coverage under Medicare requiring beneficiary

18 cost-sharing; and

19 (B) a Medicare supplemental benefit, re20 quiring beneficiary copayments, to be offered by

21 private entities as a supplement to coverage

22 under original Medicare as part of the competi23 tive defined benefit program.
155

S 2342 IS

1 SEC. 235. INCREASING ACCESS TO MEDIGAP.

2 (a) APPLYING MEDIGAP PROTECTIONS TO DISABLED

3 AND ESRD MEDICARE BENEFICIARIES.—

4 (1) OPEN ENROLLMENT PERIOD FOR DISABLED

5 AND ESRD BENEFICIARIES.—

6 (A) IN GENERAL.—Section 1882(s) (42

7 U.S.C. 1395ss(s)) is amended—

8 (i) in paragraph (2)(A), by striking

9 ‘‘the 6 month period’’ and all that follows

10 through the period and inserting ‘‘(i) the 6

11 month period beginning with the first

12 month as of the first day on which the in13 dividual is first enrolled for benefits under

14 part B of this subchapter; and (ii) if dif15 ferent from the period specified in clause

16 (i), the 6 month period beginning with the

17 first month as of the first day on which

18 the individual is 65 years of age or older

19 and is enrolled for benefits under such part

20 B.’’;

21 (ii) in paragraph (2)(D), in the mat22 ter preceding clause (i)—

23 (I) by striking ‘‘the 6-month pe24 riod’’ and inserting ‘‘a 6-month pe25 riod’’; and
156

S 2342 IS

1 (II) by striking ‘‘who is 65 years

2 of age or older as of the date of

3 issuance and’’; and

4 (iii) in paragraph (3)(B)(vi), by strik5 ing ‘‘at age 65’’.

6 (B) INITIAL OPEN ENROLLMENT PE7 RIOD.—Section 1882(s)(2) (42 U.S.C.

8 1395ss(s)), as amended by subparagraph (A), is

9 amended by adding at the end the following

10 new subparagraph:

11 ‘‘(E) In the case of an individual who, as

12 of the effective date of enactment of this sub13 paragraph, is enrolled for benefits under part B

14 on the basis of disability or end-stage renal dis15 ease and has not attained age 65, the 6 month

16 period specified in subparagraph (A)(i) shall be

17 deemed to be the 6 month period beginning on

18 such date.’’.

19 (2) REQUIREMENT THAT MEDIGAP ISSUERS

20 OFFER POLICIES TO DISABLED AND ESRD BENE21 FICIARIES.—Section 1882(s) (42 U.S.C. 1395ss(s))

22 is amended—

23 (A) by redesignating paragraph (4) as

24 paragraph (5); and
157

S 2342 IS

1 (B) by adding after paragraph (3) the fol2 lowing new paragraph:

3 ‘‘(4) The issuer of a Medicare supplemental pol4 icy that offers such policy to individuals who are 65

5 years of age or older may not decline to offer such

6 policy to individuals entitled to benefits under this

7 title pursuant to section 226(b) or 226A.’’.

8 (3) RATING STANDARDS FOR POLICIES ISSUED

9 TO DISABLED AND ESRD BENEFICIARIES.—Section

10 1882(s) (42 U.S.C. 1395ss(s)), as amended by para11 graph (2), is amended—

12 (A) by redesignating paragraph (5) as

13 paragraph (6); and

14 (B) by adding after paragraph (4) the fol15 lowing new paragraph:

16 ‘‘(5)(A) The Secretary shall request the Na17 tional Association of Insurance Commissioners (in

18 this paragraph referred to as the ‘Association’) to

19 develop and publish model standards for rating

20 Medicare supplemental policies for individuals who

21 are under age 65. Such standards shall be designed

22 to ensure affordable access to such policies for such

23 individuals while avoiding, to the greatest extent

24 possible, disruptions in the market for Medicare sup25 plemental policies.’’.
158

S 2342 IS

1 (4) EFFECTIVE DATE.—The amendments made

2 by paragraphs (1), (2), and (3) are effective 30 days

3 after enactment of this Act.

4 (b) SPECIAL MEDIGAP ENROLLMENT ANTIDISCRIMI5 NATION PROVISION FOR CERTAIN BENEFICIARIES.—

6 (1) DISENROLLMENT WINDOW IN ACCORDANCE

7 WITH BENEFICIARY’S CIRCUMSTANCE.—Section

8 1882(s)(3) is amended—

9 (A) in subparagraph (A), by striking ‘‘not

10 later than 63 days after the date of termination

11 of enrollment described in such subparagraph’’

12 and inserting ‘‘during the period specified in

13 subparagraph (E)’’; and

14 (B) by adding at the end the following new

15 subparagraph:

16 ‘‘(E) For purposes of subparagraph (A),

17 the time period specified in this subsection in

18 the case of an individual—

19 ‘‘(i) described in clause (i) of subpara20 graph (B), is the period beginning on the

21 date the individual receives a notice of ter22 mination or cessation of all supplemental

23 health benefits or, if no such notice is re24 ceived, notice that a claim has been denied
159

S 2342 IS

1 because of such a termination or cessation

2 and ending 63 days thereafter;

3 ‘‘(ii) described in clause (ii), (iii), (v),

4 or (vi) of subparagraph (B) whose enroll5 ment is terminated involuntarily, is the pe6 riod beginning on the date that the indi7 vidual receives a notice of termination and

8 ending on the date 63 days after the date

9 coverage ends;

10 ‘‘(iii) described in clause (iv)(I), is the

11 period beginning on the earlier of (I) the

12 date that the individual receives a notice of

13 termination, a notice of the issuer’s bank14 ruptcy or insolvency, or other such similar

15 notice, if any, and (II) the date that cov16 erage ends, and ending on the date 63

17 days after the date coverage ends;

18 ‘‘(iv) described in clause (ii), (iii),

19 (iv)(II), (iv)(III), (v), or (vi) of subpara20 graph (B) who disenrolls voluntarily, is the

21 period beginning on the date 60 days be22 fore and ending on the date 63 days after,

23 the effective date of disenrollment; and

24 ‘‘(v) described in subparagraph (B),

25 but not described in the preceding provi-
160

S 2342 IS

1 sions of this subparagraph, is the period

2 beginning on the effective date of

3 disenrollment and ending on the date 63

4 days thereafter.’’.

5 (2) EXTENDED MEDIGAP ACCESS FOR INTER6 RUPTED TRIAL PERIODS.—Section 1882(s)(3), as

7 amended by paragraph (1), is further amended by

8 adding at the end the following new subparagraph:

9 ‘‘(F) For purposes of this paragraph—

10 ‘‘(i) in the case of an individual de11 scribed in subparagraph (B)(v) (or deemed

12 to be so described, pursuant to this sub13 paragraph) whose enrollment with an orga14 nization described in subparagraph

15 (B)(v)(II) is involuntarily terminated with16 in the first 12 months of such enrollment,

17 and who, without an intervening enroll18 ment, enrolls with another such organiza19 tion, such subsequent enrollment shall be

20 deemed to be an initial enrollment de21 scribed in such clause (v); and

22 ‘‘(ii) in the case of an individual de23 scribed in subparagraph (B)(vi) (or

24 deemed to be so described, pursuant to this

25 subparagraph) whose enrollment with a
161

S 2342 IS

1 plan described in subparagraph (B)(v)(II)

2 is involuntarily terminated within the first

3 12 months of such enrollment, and who,

4 without an intervening enrollment, enrolls

5 in another such plan, such subsequent en6 rollment shall be deemed to be an initial

7 enrollment described in such clause (vi).’’.

8 (c) ONE-TIME ADDITIONAL SPECIAL OPEN ENROLL9 MENT FOR BENEFICIARIES LOSING ACCESS TO

10 MEDICARE+CHOICE PLANS.—

11 (1) IN GENERAL.—An issuer of a medicare sup12 plemental policy must comply with the conditions of

13 clauses (i) through (iii) of section 1882(s)(3)(A) in

14 the case of an individual described in paragraph (2)

15 who seeks to enroll under the policy not later than

16 92 days after the date of enactment of this section.

17 (2) CONDITIONS OF ELIGIBILITY.—

18 (A) IN GENERAL.—For purposes of para19 graph (1), an individual is described in this

20 paragraph if—

21 (i) the individual’s enrollment with an

22 organization—

23 (I) described in clause (i) or (ii)

24 of subparagraph (B) is terminated be-
162

S 2342 IS

1 cause of a circumstance described in

2 section 1851(e)(4)(A); or

3 (II) described in clause (iii) of

4 subparagraph (B) is terminated on or

5 before December 31, 1998 because of

6 such a circumstance;

7 (ii) the individual is not enrolled—

8 (I) with another organization de9 scribed in subparagraph (B); or

10 (II) under a medicare supple11 mental policy; and

12 (iii) the individual submits evidence of

13 the date of termination or disenrollment

14 along with the application for such medi15 care supplemental policy.

16 (B) APPLICABLE ORGANIZATIONS.—For pur17 poses of subparagraph (A), an organization de18 scribed in this subparagraph is—

19 (i) an eligible organization under a

20 contract under section 1876 or a similar

21 organization operating under a demonstra22 tion project authority;

23 (ii) an organization under an agree24 ment under section 1833(a)(1)(A); or
163

S 2342 IS

1 (iii) a Medicare+Choice organization

2 under a Medicare+Choice plan under part

3 C.

4 (d) GUARANTEED ACCESS FOR CERTAIN MEDICARE

5 BENEFICIARIES TO ALL SUPPLEMENTAL POLICIES.—Sec6 tion 1882(s)(3)(C)(iii) (42 U.S.C. 1395ss(s)(3)(C)(iii)) is

7 amended by inserting ‘‘or an individual described in sub8 paragraph (B)(ii) or (B)(iii) in the case of circumstances

9 permitting discontinuance of the individual’s election

10 under section 1851(e)(4)(A)’’ after ‘‘subpara11 graph(B)(vi)’’.

12 (e) INCREASED CIVIL MONEY PENALTIES FOR VIO13 LATION OF OPEN ENROLLMENT REQUIREMENT.—Section

14 1882(s)(4) (42 U.S.C. 1395ss(s)(4)) is amended by strik15 ing ‘‘the requirements of this subsection is subject to a

16 civil money penalty of not to exceed $5,000 for each such

17 failure’’ and inserting ‘‘any requirement of this subsection

18 with respect to any individual is subject to a civil money

19 penalty of not to exceed $50,000 for each such failure with

20 respect to such individual, plus an additional civil money

21 penalty of not to exceed $5,000 for each day such failure

22 continues with respect to such individual’’.

23 (f) TRANSITION PROVISIONS.—The provisions of sec24 tion 4031(e) of the Balanced Budget Act of 1997 shall
164

S 2342 IS

1 apply to the amendments made by this section in the same

2 manner as they apply to such section 4031, except that—

3 (1) the reference in such section 4031(e) to ‘‘9

4 months after the date of the enactment of this Act’’

5 shall be considered to be a reference to 9 months

6 after the effective date of this section;

7 (2) the reference in such section 4031(e) to the

8 ‘‘1991 NAIC Model Regulation, as modified pursu9 ant to section 171(m)(2) of the Social Security Act

10 Amendments of 1994 (Public Law 103–432) and as

11 modified pursuant to section 1882(d)(3)(A)(vi)(IV)

12 of the Social Security Act, as added by section

13 271(a) of the Health Insurance Portability and Ac14 countability Act of 1996 (Public Law 104–191)’’

15 shall be considered to be a reference to the 1991

16 NAIC Model Regulation, as modified pursuant to all

17 statutes enacted prior to the enactment of this sec18 tion; and

19 (3) any reference to ‘‘1999’’ in such section

20 4031(e) shall be considered to be a reference to

21 2002 for purposes of the amendments made by this

22 section.
165

S 2342 IS

1 SEC. 236. REMOVAL OF SUNSET DATE FOR COST-SHARING

2 IN MEDICARE PART B PREMIUMS FOR CER3 TAIN QUALIFYING INDIVIDUALS.

4 (a) IN GENERAL.—Section 1902(a)(10)(E)(iv) (42

5 U.S.C. 1396a(a)(10)(E)(iv)) is amended—

6 (1) by striking subclause (II);

7 (2) by amending the text preceding subclause

8 (I) to read as follows:

9 ‘‘(iv) subject to section 1905(p)(4),

10 for making medical assistance available’’;

11 (3) by striking subclause designation ‘‘(I)’’, re12 locating the remaining text at the end of clause (iv),

13 and indenting appropriately; and

14 (4) by striking ‘‘, and’’ at the end of clause (iv),

15 as so amended, and inserting ‘‘; and’’.

16 (b) RELOCATION OF PROVISION REQUIRING 100

17 PERCENT FEDERAL MATCHING OF STATE MEDICAL AS18 SISTANCE COSTS FOR CERTAIN QUALIFYING INDIVID19 UALS.—Section 1903(a) (42 U.S.C. 1395b(a)), as amend20 ed by section 202(c)(3), is amended—

21 (1) by redesignating paragraph (8) as para22 graph (9); and

23 (2) by adding after paragraph (7) the following

24 new paragraph:

25 ‘‘(8) an amount equal to 100 percent of

26 amounts as expended as medicare drug cost sharing
166

S 2342 IS

1 for individuals described in section

2 1903(a)(10)(E)(iv);’’.

3 (c) REPEAL OF SECTION 1933.—Section 1933 (42

4 U.S.C. 1396u–3) is repealed.

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

6 this section shall be effective on and after January 1,

7 2003.

8 TITLE III—PROTECTING AND EX9 TENDING MEDICARE SOL10 VENCY

11 SEC. 301. TRANSFERS TO EXTEND MEDICARE SOLVENCY.

12 Section 1817 (42 U.S.C. 1395i) is amended by add13 ing at the end the following new subsection:

14 ‘‘(l) Additional Appropriation to Federal Hospital In15 surance Trust Fund.—

16 ‘‘(1) In addition to any other amounts appro17 priated to the Trust Fund, there is hereby appro18 priated to the Trust Fund, out of any moneys in the

19 Treasury not otherwise appropriated—

20 ‘‘(A) for the fiscal year ending September

21 30, 2001, $15,400,000,000;

22 ‘‘(B) for the fiscal year ending September

23 30, 2002, $12,600,000,000;

24 ‘‘(C) for the fiscal year ending September

25 30, 2006, $26,000,000,000;
167

S 2342 IS

1 ‘‘(D) for the fiscal year ending September

2 30, 2007, $47,000,000,000;

3 ‘‘(E) for the fiscal year ending September

4 30, 2008, $57,000,000,000;

5 ‘‘(F) for the fiscal year ending September

6 30, 2009, $61,000,000,000;

7 ‘‘(G) for the fiscal year ending September

8 30, 2010, $80,000,000,000;

9 ‘‘(H) for the fiscal year ending September

10 30, 2011, $22,400,000,000;

11 ‘‘(I) for the fiscal year ending September

12 30, 2012, $29,500,000,000;

13 ‘‘(J) for the fiscal year ending September

14 30, 2013, $32,000,000,000;

15 ‘‘(K) for the fiscal year ending September

16 30, 2014, $26,200,000,000;

17 ‘‘(L) for the fiscal year ending September

18 30, 2015, $13,800,000,000.

19 ‘‘(2) The amounts appropriated for each fiscal

20 year by paragraph (1) shall be transferred from the

21 general fund in the Treasury to the Trust Fund in

22 equal monthly installments on the first business day

23 of each month.’’.
168

S 2342 IS

1 SEC. 302. CATASTROPHIC PRESCRIPTION DRUG COVERAGE

2 RESERVE.

3 (a) ESTABLISHMENT OF RESERVE.—There is estab4 lished a reserve fund which shall be known as the ‘‘Cata5 strophic Prescription Drug Coverage Reserve,’’ as defined

6 in section 3(11) of the Congressional Budget Act of 1974,

7 as amended by this Act.

8 (b) DEFINITION.—Section 3 of the Congressional

9 Budget Act of 1974 is amended by adding at the end the

10 following:

11 ‘‘(11) The term ‘Catastrophic Prescription

12 Drug Coverage Reserve’ means—

13 ‘‘(A) for fiscal year 2006, $4,000,000,000;

14 ‘‘(B) for fiscal year 2007, $5,000,000,000;

15 ‘‘(C) for fiscal year 2008, $6,800,000,000;

16 ‘‘(D) for fiscal year 2009, $8,400,000,000;

17 and

18 ‘‘(E) for fiscal year 2010,

19 $10,800,000,000.’’.

20 (c) DISPOSITION OF RESERVE FUND.—Beginning

21 with September 30, 2006, any balance remaining in the

22 Catastrophic Prescription Drug Coverage Reserve on the

23 last day of a fiscal year is appropriated to the Federal

24 Hospital Insurance Trust Fund.
169

S 2342 IS

1 SEC. 303. MEDICARE SOLVENCY DEBT REDUCTION RE2 SERVE.

3 (a) IN GENERAL.—Both the transfers under section

4 1817(1) of the Social Security Act as well as amounts

5 placed in reserve for catastrophic prescription drug cov6 erage under section 3(11) of the Congressional Budget

7 Act shall be known as the Medicare Solvency Debt Reduc8 tion Reserve.

9 (b) POINTS OF ORDER TO PROTECT RESERVE.—

10 (1) Section 301 of the Congressional Budget

11 Act of 1974 is amended by adding at the end the

12 following:

13 ‘‘(j) POINT OF ORDER TO PROTECT MEDICARE SOL14 VENCY DEBT REDUCTION RESERVE.—

15 ‘‘(1) IN GENERAL.—It shall not be in order in

16 the House of Representatives or the Senate to con17 sider any concurrent resolution on the budget (or

18 amendment, motion, or conference report on the res19 olution) that would allocate any amount of, or as20 sume a reduction in the Medicare Solvency Debt Re21 duction Reserve.

22 ‘‘(2) INAPPLICABILITY.—This subsection shall

23 not apply to legislation that appropriates funds from

24 the Catastrophic Prescription Drug Coverage Re25 serve for catastrophic prescription drug benefits

26 under the Medicare program.’’
170

S 2342 IS

1 (2) Section 311(a) of the Congressional Budget

2 Act of 1974 is amended by adding at the end the

3 following:

4 ‘‘(4) ENFORCEMENT OF MEDICARE SOLVENCY

5 RESERVE.—

6 ‘‘(A) IN GENERAL.—It shall not be in

7 order in the House of Representatives or the

8 Senate to consider any bill, joint resolution,

9 amendment, motion, or conference report that

10 would cause a decrease in the level of the Medi11 care Solvency Debt Reduction Reserve.

12 ‘‘(B) INAPPLICABILITY.—This paragraph

13 shall not apply to legislation that appropriates

14 a portion of the Medicare Solvency Debt Reduc15 tion Reserve for new amounts for Medicare or

16 catastrophic prescription drug benefits under

17 the Medicare program.’’.

18 (c) SUPER MAJORITY REQUIREMENT.—

19 (1) Section 904(c)(2) of the Congressional

20 Budget Act of 1974 is amended by inserting

21 ‘‘301(j),’’ after ‘‘301(i),’’.

22 (2) Section 904(d)(3) of the Congressional

23 Budget Act of 1974 is amended by inserting

24 ‘‘301(j),’’ after ‘‘301(i),’’.
171

S 2342 IS

1 SEC. 304. PROTECTION OF MEDICARE SOLVENCY DEBT RE2 DUCTION RESERVE.

3 (a) REDUCTION OF MEDICARE SOLVENCY TRANS4 FERS, OR CATASTROPHIC PRESCRIPTION DRUG RESERVE

5 NOT TO BE COUNTED AS PAY-AS-YOU-GO OFFSET.—

6 Any provision of legislation that would reduce, repeal, or

7 reverse the transfers to the Hospital Insurance Trust

8 Fund under section 1817(1) of the Social Security Act or

9 the amount of the Catastrophic Prescription Drug Cov10 erage Reserve under section 3(11) of the Congressional

11 Budget Act, shall not be counted on the pay-as-you-go

12 scorecard and shall not be included in any pay-as-you-go

13 estimates made by the Congressional Budget Office or the

14 Office of Management and Budget under section 252 of

15 the Balanced Budget and Emergency Deficit Control Act

16 of 1985.

17 (b) CONFORMING CHANGE.—Section 252 of the Bal18 anced Budget and Emergency Deficit Control Act of 1985

19 is amended, in paragraph (4) of subsection (d), by—

20 (1) striking ‘‘and’’ after subparagraph (A),

21 (2) striking the period after the subparagraph

22 (B) and inserting ‘‘; and’’, and

23 (3) adding the following:

24 ‘‘(C) provisions that reduce, repeal, or re25 verse transfers under section 1817(1) of the So26 cial Security Act or the amount of the reserve
172

S 2342 IS

1 under section 3(11) of the Congressional Budg2 et Act.’’.

3 (c) MEDICARE SOLVENCY TRANSFERS AND CATA4 STROPHIC PRESCRIPTION DRUG RESERVE REDUCE ON5 BUDGET SURPLUS.—The transfers under section 1817(1)

6 of the Social Security Act and amounts placed in the re7 serve under section 3(11) of the Congressional Budget

8 Act, together known as the ‘‘Medicare Solvency Debt Re9 duction Reserve’’, shall be treated for purposes of the

10 President’s budget under title 31, United States Code, the

11 Balanced Budget and Emergency Deficit Control Act of

12 1985, and the Congressional Budget Act of 1974 as reduc13 tions to the on-budget surplus (or increases in the on14 budget deficit).

Æ