108TH CONGRESS 

1ST SESSION S. 1

AN ACT

To amend title XVIII of the Social Security Act to provide 

for a voluntary prescription drug benefit under the medicare program and to strengthen and improve the medicare program, 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; AMENDMENTS TO SOCIAL SECU4 RITY ACT; REFERENCES TO BIPA AND SEC5 RETARY; TABLE OF CONTENTS. 

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

7 ‘‘Prescription Drug and Medicare Improvement Act of 

8 2003’’. 
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1 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex2 cept as otherwise specifically provided, whenever in this 

3 Act an amendment is expressed in terms of an amendment 

4 to or repeal of a section or other provision, the reference 

5 shall be considered to be made to that section or other 

6 provision of the Social Security Act. 

7 (c) BIPA; SECRETARY.—In this Act: 

8 (1) BIPA.—The term ‘‘BIPA’’ means the 

9 Medicare, Medicaid, and SCHIP Benefits Improve10 ment and Protection Act of 2000, as enacted into 

11 law by section 1(a)(6) of Public Law 106–554. 

12 (2) SECRETARY.—The term ‘‘Secretary’’ means 

13 the Secretary of Health and Human Services. 

14 (d) TABLE OF CONTENTS.—The table of contents of 

15 this Act is as follows:

Sec. 1. Short title; amendments to Social Security Act; references to BIPA and 

Secretary; table of contents. 

TITLE I—MEDICARE PRESCRIPTION DRUG BENEFIT 

Subtitle A—Medicare Voluntary Prescription Drug Delivery Program 

Sec. 101. Medicare voluntary prescription drug delivery program. 

‘‘PART D—VOLUNTARY PRESCRIPTION DRUG DELIVERY PROGRAM

‘‘Sec. 1860D. Definitions; treatment of references to provisions in 

MedicareAdvantage program. 

‘‘Subpart 1—Establishment of Voluntary Prescription Drug Delivery Program 

‘‘Sec. 1860D–1. Establishment of voluntary prescription drug delivery program. 

‘‘Sec. 1860D–2. Enrollment under program. 

‘‘Sec. 1860D–3. Election of a Medicare Prescription Drug plan. 

‘‘Sec. 1860D–4. Providing information to beneficiaries. 

‘‘Sec. 1860D–5. Beneficiary protections. 

‘‘Sec. 1860D–6. Prescription drug benefits. 
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‘‘Sec. 1860D–7. Requirements for entities offering Medicare Prescription 

Drug plans; establishment of standards. 

‘‘Subpart 2—Prescription Drug Delivery System 

‘‘Sec. 1860D–10. Establishment of service areas. 

‘‘Sec. 1860D–11. Publication of risk adjusters. 

‘‘Sec. 1860D–12. Submission of bids for proposed Medicare Prescription 

Drug plans. 

‘‘Sec. 1860D–13. Approval of proposed Medicare Prescription Drug plans. 

‘‘Sec. 1860D–14. Computation of monthly standard prescription drug coverage premiums. 

‘‘Sec. 1860D–15. Computation of monthly national average premium. 

‘‘Sec. 1860D–16. Payments to eligible entities. 

‘‘Sec. 1860D–17. Computation of monthly beneficiary obligation. 

‘‘Sec. 1860D–18. Collection of monthly beneficiary obligation. 

‘‘Sec. 1860D–19. Premium and cost-sharing subsidies for low-income individuals. 

‘‘Sec. 1860D–20. Reinsurance payments for expenses incurred in providing 

prescription drug coverage above the annual out-of-pocket 

threshold. 

‘‘Sec. 1860D–21. Direct subsidy for sponsor of a qualified retiree prescription drug plan for plan enrollees eligible for, but not enrolled in, this part. 

‘‘Sec. 1860D–22. Direct subsidies for qualified State offering a State 

pharmaceutical assistance program for program enrollees 

eligible for, but not enrolled in, this part. 

‘‘Subpart 3—Miscellaneous Provisions 

‘‘Sec. 1860D–25. Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund. 

‘‘Sec. 1860D–26. Other related provisions.

Sec. 102. Study and report on permitting part B only individuals to enroll in 

medicare voluntary prescription drug delivery program. 

Sec. 103. Rules relating to medigap policies that provide prescription drug coverage. 

Sec. 104. Medicaid and other amendments related to low-income beneficiaries. 

Sec. 105. Expansion of membership and duties of Medicare Payment Advisory 

Commission (MedPAC). 

Sec. 106. Study regarding variations in spending and drug utilization. 

Sec. 107. Limitation on prescription drug benefits of Members of Congress. 

Sec. 108. Protecting seniors with cancer. 

Sec. 109. Protecting seniors with cardiovascular disease, cancer, or Alzheimer’s 

disease. 

Sec. 110. Review and report on current standards of practice for pharmacy 

services provided to patients in nursing facilities. 

Sec. 110A. Medication therapy management assessment program. 

Subtitle B—Medicare Prescription Drug Discount Card and Transitional 

Assistance for Low-Income Beneficiaries 

Sec. 111. Medicare prescription drug discount card and transitional assistance 

for low-income beneficiaries. 

Subtitle C—Standards for Electronic Prescribing 
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Sec. 121. Standards for electronic prescribing. 

Subtitle D—Other Provisions 

Sec. 131. Additional requirements for annual financial report and oversight on 

medicare program. 

Sec. 132. Trustees’ report on medicare’s unfunded obligations. 

Sec. 133. Pharmacy benefit managers transparency requirements. 

Sec. 134. Office of the Medicare Beneficiary Advocate. 

TITLE II—MEDICAREADVANTAGE 

Subtitle A—MedicareAdvantage Competition 

Sec. 201. Eligibility, election, and enrollment. 

Sec. 202. Benefits and beneficiary protections. 

Sec. 203. Payments to MedicareAdvantage organizations. 

Sec. 204. Submission of bids; premiums. 

Sec. 205. Special rules for prescription drug benefits. 

Sec. 206. Facilitating employer participation. 

Sec. 207. Administration by the Center for Medicare Choices. 

Sec. 208. Conforming amendments. 

Sec. 209. Effective date. 

Sec. 210. Improvements in MedicareAdvantage benchmark determinations. 

Subtitle B—Preferred Provider Organizations 

Sec. 211. Establishment of MedicareAdvantage preferred provider program option. 

Subtitle C—Other Managed Care Reforms 

Sec. 221. Extension of reasonable cost contracts. 

Sec. 222. Specialized Medicare+Choice plans for special needs beneficiaries. 

Sec. 223. Payment by PACE providers for medicare and medicaid services furnished by noncontract providers. 

Sec. 224. Institute of Medicine evaluation and report on health care performance measures. 

Sec. 225. Expanding the work of medicare quality improvement organizations 

to include parts C and D. 

Sec. 226. Extension of demonstration for ESRD managed care. 

SUBTITLE D—EVALUATION OF ALTERNATIVE PAYMENT AND DELIVERY

SYSTEMS

Sec. 231. Establishment of alternative payment system for preferred provider 

organizations in highly competitive regions. 

Sec. 232. Fee-for-service modernization projects. 

SUBTITLE E—NATIONAL BIPARTISAN COMMISSION ON MEDICARE REFORM

Sec. 241. MedicareAdvantage goal; establishment of Commission. 

Sec. 242. National bipartisan commission on medicare reform. 

Sec. 243. Congressional consideration of reform proposals. 

Sec. 244. Authorization of appropriations. 

TITLE III—CENTER FOR MEDICARE CHOICES 

Sec. 301. Establishment of the Center for Medicare Choices. 
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Sec. 302. Miscellaneous administrative provisions. 

TITLE IV—MEDICARE FEE-FOR-SERVICE IMPROVEMENTS 

Subtitle A—Provisions Relating to Part A 

Sec. 401. Equalizing urban and rural standardized payment amounts under the 

medicare inpatient hospital prospective payment system. 

Sec. 402. Adjustment to the medicare inpatient hospital PPS wage index to revise the labor-related share of such index. 

Sec. 403. Medicare inpatient hospital payment adjustment for low-volume hospitals. 

Sec. 404. Fairness in the medicare disproportionate share hospital (DSH) adjustment for rural hospitals. 

Sec. 404A. Medpac study and report regarding medicare Disproportionate 

Share Hospital (DSH) adjustment payments. 

Sec. 405. Critical access hospital (CAH) improvements. 

Sec. 406. Authorizing use of arrangements to provide core hospice services in 

certain circumstances. 

Sec. 407. Services provided to hospice patients by nurse practitioners, clinical 

nurse specialists, and physician assistants. 

Sec. 408. Authority to include costs of training of psychologists in payments to 

hospitals under medicare. 

Sec. 409. Revision of Federal rate for hospitals in Puerto Rico. 

Sec. 410. Exception to initial residency period for geriatric residency or fellowship programs. 

Sec. 411. Clarification of congressional intent regarding the counting of residents in a nonprovider setting and a technical amendment regarding the 3-year rolling average and the IME ratio. 

Sec. 412. Limitation on charges for inpatient hospital contract health services 

provided to Indians by medicare participating hospitals. 

Sec. 413. GAO study and report on appropriateness of payments under the prospective payment system for inpatient hospital services. 

Sec. 414. Rural community hospital demonstration program. 

Sec. 415. Critical access hospital improvement demonstration program. 

Sec. 416. Treatment of grandfathered long-term care hospitals. 

Sec. 417. Treatment of certain entities for purposes of payments under the 

medicare program. 

Sec. 418. Revision of the indirect medical education (IME) adjustment percentage. 

Sec. 419. Calculation of wage indices for hospitals. 

Sec. 420. Conforming changes regarding federally qualified health centers. 

Sec. 420A. Increase for hospitals with disproportionate indigent care revenues. 

Sec. 420B. Treatment of grandfathered long-term care hospitals. 

Subtitle B—Provisions Relating to Part B 

Sec. 421. Establishment of floor on geographic adjustments of payments for 

physicians’ services. 

Sec. 422. Medicare incentive payment program improvements. 

Sec. 423. Extension of hold harmless provisions for small rural hospitals and 

treatment of certain sole community hospitals to limit decline 

in payment under the OPD PPS. 

Sec. 424. Increase in payments for certain services furnished by small rural and 

sole community hospitals under medicare prospective payment 

system for hospital outpatient department services. 
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Sec. 425. Temporary increase for ground ambulance services. 

Sec. 426. Ensuring appropriate coverage of air ambulance services under ambulance fee schedule. 

Sec. 427. Treatment of certain clinical diagnostic laboratory tests furnished by 

a sole community hospital. 

Sec. 428. Improvement in rural health clinic reimbursement. 

Sec. 429. Elimination of consolidated billing for certain services under the 

medicare PPS for skilled nursing facility services. 

Sec. 430. Freeze in payments for certain items of durable medical equipment 

and certain orthotics; establishment of quality standards and 

accreditation requirements for DME providers. 

Sec. 431. Application of coinsurance and deductible for clinical diagnostic laboratory tests. 

Sec. 432. Basing medicare payments for covered outpatient drugs on market 

prices. 

Sec. 433. Indexing part B deductible to inflation. 

Sec. 434. Revisions to reassignment provisions. 

Sec. 435. Extension of treatment of certain physician pathology services under 

medicare. 

Sec. 436. Adequate reimbursement for outpatient pharmacy therapy under the 

hospital outpatient PPS. 

Sec. 437. Limitation of application of functional equivalence standard. 

Sec. 438. Medicare coverage of routine costs associated with certain clinical 

trials. 

Sec. 439. Waiver of part B late enrollment penalty for certain military retirees; 

special enrollment period. 

Sec. 440. Demonstration of coverage of chiropractic services under medicare. 

Sec. 441. Medicare health care quality demonstration programs. 

Sec. 442. Medicare complex clinical care management payment demonstration. 

Sec. 443. Medicare fee-for-service care coordination demonstration program. 

Sec. 444. GAO study of geographic differences in payments for physicians’ 

services. 

Sec. 445. Improved payment for certain mammography services. 

Sec. 446. Improvement of outpatient vision services under Part B. 

Sec. 447. GAO study and report on the propagation of concierge care. 

Sec. 448. Coverage of marriage and family therapist services and mental health 

counselor services under Part B of the medicare program. 

Sec. 449. Medicare demonstration project for direct access to physical therapy 

services. 

Sec. 450. Demonstration project to clarify the definition of homebound. 

Sec. 450A. Demonstration project for exclusion of brachytherapy devices from 

prospective payment system for outpatient hospital services. 

Sec. 450B. Reimbursement for total body orthotic management for certain 

nursing home patients. 

Sec. 450C. Authorization of reimbursement for all medicare part B services 

furnished by certain Indian hospitals and clinics. 

Sec. 450D. Coverage of cardiovascular screening tests. 

Sec. 450E. Medicare coverage of self-injected biologicals. 

Sec. 450F. Extension of medicare secondary payer rules for individuals with 

end-stage renal disease. 

Sec. 450G. Requiring the Internal Revenue Service to deposit installment 

agreement and other fees in the Treasury as miscellaneous receipts. 

Sec. 450H. Increasing types of originating telehealth sites and facilitating the 

provision of telehealth services across State lines. 
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Sec. 450I. Demonstration project for coverage of surgical first assisting services 

of certified registered nurse first assistants. 

Sec. 450J. Equitable treatment for children’s hospitals. 

Sec. 450K. Treatment of physicians’ services furnished in Alaska. 

Sec. 450L. Demonstration project to examine what weight loss weight management services can cost effectively reach the same result as the 

NIH Diabetes Primary Prevention Trial study: A 50 percent 

reduction in the risk for type 2 diabetes for individuals who 

have impaired glucose tolerance and are obese. 

Subtitle C—Provisions Relating to Parts A and B 

Sec. 451. Increase for home health services furnished in a rural area. 

Sec. 452. Limitation on reduction in area wage adjustment factors under the 

prospective payment system for home health services. 

Sec. 453. Clarifications to certain exceptions to medicare limits on physician referrals. 

Sec. 454. Demonstration program for substitute adult day services. 

Sec. 455. MEDPAC study on medicare payments and efficiencies in the health 

care system. 

Sec. 456. Medicare coverage of kidney disease education services. 

Sec. 457. Frontier extended stay clinic demonstration project. 

Sec. 458. Improvements in national coverage determination process to respond 

to changes in technology. 

Sec. 459. Increase in medicare payment for certain home health services. 

Sec. 460. Frontier extended stay clinic demonstration project. 

Sec. 461. Medicare secondary payor (MSP) provisions. 

Sec. 462. Medicare pancreatic islet cell transplant demonstration project. 

Sec. 463. Increase in medicare payment for certain home health services. 

Sec. 464. Sense of the Senate concerning medicare payment update for physicians and other health professionals. 

TITLE V—MEDICARE APPEALS, REGULATORY, AND CONTRACTING 

IMPROVEMENTS 

Subtitle A—Regulatory Reform 

Sec. 501. Rules for the publication of a final regulation based on the previous 

publication of an interim final regulation. 

Sec. 502. Compliance with changes in regulations and policies. 

Sec. 503. Report on legal and regulatory inconsistencies. 

Sec. 504. Streamlining and simplification of medicare regulations. 

Subtitle B—Appeals Process Reform 

Sec. 511. Submission of plan for transfer of responsibility for medicare appeals. 

Sec. 512. Expedited access to judicial review. 

Sec. 513. Expedited review of certain provider agreement determinations. 

Sec. 514. Revisions to medicare appeals process. 

Sec. 515. Hearing rights related to decisions by the Secretary to deny or not 

renew a medicare enrollment agreement; consultation before 

changing provider enrollment forms. 

Sec. 516. Appeals by providers when there is no other party available. 

Sec. 517. Provider access to review of local coverage determinations. 

Sec. 518. Revisions to appeals timeframes. 

Sec. 519. Elimination of requirement to use Social Security Administration Administrative Law Judges. 
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Sec. 520. Elimination of requirement for de novo review by the departmental 

appeals board. 

Subtitle C—Contracting Reform 

Sec. 521. Increased flexibility in medicare administration. 

Subtitle D—Education and Outreach Improvements 

Sec. 531. Provider education and technical assistance. 

Sec. 532. Access to and prompt responses from medicare contractors. 

Sec. 533. Reliance on guidance. 

Sec. 534. Medicare provider ombudsman. 

Sec. 535. Beneficiary outreach demonstration programs. 

Subtitle E—Review, Recovery, and Enforcement Reform 

Sec. 541. Prepayment review. 

Sec. 542. Recovery of overpayments. 

Sec. 543. Process for correction of minor errors and omissions on claims without pursuing appeals process. 

Sec. 544. Authority to waive a program exclusion. 

SUBTITLE F—OTHER IMPROVEMENTS

Sec. 551. Inclusion of additional information in notices to beneficiaries about 

skilled nursing facility and hospital benefits. 

Sec. 552. Information on medicare-certified skilled nursing facilities in hospital 

discharge plans. 

Sec. 553. Evaluation and management documentation guidelines consideration. 

Sec. 554. Council for Technology and Innovation. 

Sec. 555. Treatment of certain dental claims. 

TITLE VI—OTHER PROVISIONS 

Sec. 601. Increase in medicaid DSH allotments for fiscal years 2004 and 2005. 

Sec. 602. Increase in floor for treatment as an extremely low DSH State under 

the medicaid program for fiscal years 2004 and 2005. 

Sec. 603. Increased reporting requirements to ensure the appropriateness of 

payment adjustments to disproportionate share hospitals under 

the medicaid program. 

Sec. 604. Clarification of inclusion of inpatient drug prices charged to certain 

public hospitals in the best price exemptions for the medicaid 

drug rebate program. 

Sec. 605. Assistance with coverage of legal immigrants under the medicaid program and SCHIP. 

Sec. 606. Establishment of consumer ombudsman account. 

Sec. 607. GAO study regarding impact of assets test for low-income beneficiaries. 

Sec. 608. Health care infrastructure improvement. 

Sec. 609. Capital infrastructure revolving loan program. 

Sec. 610. Federal reimbursement of emergency health services furnished to undocumented aliens. 

Sec. 611. Increase in appropriation to the health care fraud and abuse control 

account. 

Sec. 612. Increase in civil penalties under the False Claims Act. 

Sec. 613. Increase in civil monetary penalties under the Social Security Act. 
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Sec. 614. Extension of customs user fees. 

Sec. 615. Reimbursement for federally qualified health centers participating in 

medicare managed care. 

Sec. 616. Provision of information on advance directives. 

Sec. 617. Sense of the Senate regarding implementation of the Prescription 

Drug and Medicare Improvement Act of 2003. 

Sec. 618. Extension of municipal health service demonstration projects. 

Sec. 619. Study on making prescription pharmaceutical information accessible 

for blind and visually-impaired individuals. 

Sec. 620. Health care that works for all americans-citizens health care working 

group. 

Sec. 621. GAO study of pharmaceutical price controls and patent protections 

in the G–7 countries. 

Sec. 622. Sense of the Senate concerning medicare payment update for physicians and other health professionals. 

Sec. 623. Restoration of Federal Hospital Insurance Trust Fund. 

Sec. 624. Safety net organizations and Patient Advisory Commission. 

Sec. 625. Urban health provider adjustment. 

Sec. 626. Committee on drug compounding. 

Sec. 627. Sense of the Senate concerning the structure of medicare reform and 

the prescription drug benefit. 

Sec. 628. Sense of the Senate regarding the establishment of a nationwide permanent lifestyle modification program for medicare beneficiaries. 

Sec. 629. Sense of the Senate on payment reductions under medicare physician 

fee schedule. 

Sec. 630. Temporary suspension of oasis requirement for collection of data on 

non-medicare and non-medicaid patients. 

Sec. 631. Employer flexibility. 

Sec. 632. One Hundred percent FMAP for medical assistance provided to a 

Native Hawaiian through a federally-qualified health center or 

a Native Hawaiian health care system under the medicaid program. 

Sec. 633. Extension of moratorium. 

Sec. 634. GAO study of pharmaceutical price controls and patent protections 

in the G–7 countries. 

Sec. 635. Safety Net Organizations and Patient Advisory Commission. 

Sec. 636. Establishment of program to prevent abuse of nursing facility residents. 

Sec. 637. Office of Rural Health Policy Improvements. 

TITLE VII—ACCESS TO AFFORDABLE PHARMACEUTICALS 

Sec. 701. Short title. 

Sec. 702. 30-month stay-of-effectiveness period. 

Sec. 703. Forfeiture of 180-day exclusivity period. 

Sec. 704. Bioavailability and bioequivalence. 

Sec. 705. Remedies for infringement. 

Sec. 706. Conforming amendments. 

TITLE VIII—IMPORTATION OF PRESCRIPTION DRUGS 

Sec. 801. Importation of prescription drugs. 

TITLE IX—DRUG COMPETITION ACT OF 2003
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Sec. 901. Short title. 

Sec. 902. Findings. 

Sec. 903. Purposes. 

Sec. 904. Definitions. 

Sec. 905. Notification of agreements. 

Sec. 906. Filing deadlines. 

Sec. 907. Disclosure exemption. 

Sec. 908. Enforcement. 

Sec. 909. Rulemaking. 

Sec. 910. Savings clause. 

Sec. 911. Effective date.

1 TITLE I—MEDICARE 

2 PRESCRIPTION DRUG BENEFIT 

3 Subtitle A—Medicare Voluntary 

4 Prescription Drug Delivery Pro5 gram 

6 SEC. 101. MEDICARE VOLUNTARY PRESCRIPTION DRUG DE7 LIVERY PROGRAM. 

8 (a) ESTABLISHMENT.—Title XVIII (42 U.S.C. 1395 

9 et seq.) is amended by redesignating part D as part E 

10 and by inserting after part C the following new part: 

11 ‘‘PART D—VOLUNTARY PRESCRIPTION DRUG DELIVERY

12 PROGRAM

13 ‘‘DEFINITIONS; TREATMENT OF REFERENCES TO

14 PROVISIONS IN MEDICAREADVANTAGE PROGRAM

15 ‘‘SEC. 1860D. (a) DEFINITIONS.—In this part: 

16 ‘‘(1) ADMINISTRATOR.—The term ‘Adminis17 trator’ means the Administrator of the Center for 

18 Medicare Choices as established under section 1808. 

19 ‘‘(2) COVERED DRUG.—
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1 ‘‘(A) IN GENERAL.—Except as provided in 

2 subparagraphs (B), (C), and (D), the term ‘cov3 ered drug’ means—

4 ‘‘(i) a drug that may be dispensed 

5 only upon a prescription and that is de6 scribed in clause (i) or (ii) of subparagraph 

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

8 ‘‘(ii) a biological product described in 

9 clauses (i) through (iii) of subparagraph 

10 (B) of such section; or 

11 ‘‘(iii) insulin described in subpara12 graph (C) of such section (including sy13 ringes, and necessary medical supplies as14 sociated with the administration of insulin, 

15 as defined by the Administrator); 

16 and such term includes a vaccine licensed under 

17 section 351 of the Public Health Service Act 

18 and any use of a covered drug for a medically 

19 accepted indication (as defined in section 

20 1927(k)(6)). 

21 ‘‘(B) EXCLUSIONS.—

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

23 drug’ does not include drugs or classes of 

24 drugs, or their medical uses, which may be 

25 excluded from coverage or otherwise re-
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1 stricted under section 1927(d)(2), other 

2 than subparagraph (E) thereof (relating to 

3 smoking cessation agents), or under sec4 tion 1927(d)(3). 

5 ‘‘(ii) AVOIDANCE OF DUPLICATE COV6 ERAGE.—A drug prescribed for an indi7 vidual that would otherwise be a covered 

8 drug under this part shall not be so con9 sidered if payment for such drug is avail10 able under part A or B, but shall be so 

11 considered if such payment is not available 

12 under part A or B or because benefits 

13 under such parts have been exhausted. 

14 ‘‘(C) APPLICATION OF FORMULARY RE15 STRICTIONS.—A drug prescribed for an indi16 vidual that would otherwise be a covered drug 

17 under this part shall not be so considered under 

18 a plan if the plan excludes the drug under a 

19 formulary and such exclusion is not successfully 

20 resolved under subsection (d) or (e)(2) of sec21 tion 1860D–5. 

22 ‘‘(D) APPLICATION OF GENERAL EXCLU23 SION PROVISIONS.—A Medicare Prescription 

24 Drug plan or a MedicareAdvantage plan may 
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1 exclude from qualified prescription drug cov2 erage any covered drug—

3 ‘‘(i) for which payment would not be 

4 made if section 1862(a) applied to part D; 

5 or 

6 ‘‘(ii) which are not prescribed in ac7 cordance with the plan or this part. 

8 Such exclusions are determinations subject to 

9 reconsideration and appeal pursuant to section 

10 1860D–5(e). 

11 ‘‘(3) ELIGIBLE BENEFICIARY.—The term ‘eligi12 ble beneficiary’ means an individual who is entitled 

13 to, or enrolled for, benefits under part A and en14 rolled under part B (other than a dual eligible indi15 vidual, as defined in section 1860D–19(a)(4)(E)). 

16 ‘‘(4) ELIGIBLE ENTITY.—The term ‘eligible en17 tity’ means any risk-bearing entity that the Adminis18 trator determines to be appropriate to provide eligi19 ble beneficiaries with the benefits under a Medicare 

20 Prescription Drug plan, including—

21 ‘‘(A) a pharmaceutical benefit management 

22 company; 

23 ‘‘(B) a wholesale or retail pharmacist deliv24 ery system; 
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1 ‘‘(C) an insurer (including an insurer that 

2 offers medicare supplemental policies under sec3 tion 1882); 

4 ‘‘(D) any other risk-bearing entity; or 

5 ‘‘(E) any combination of the entities de6 scribed in subparagraphs (A) through (D). 

7 ‘‘(5) INITIAL COVERAGE LIMIT.—The term ‘ini8 tial coverage limit’ means the limit as established 

9 under section 1860D–6(c)(3), or, in the case of cov10 erage that is not standard prescription drug cov11 erage, the comparable limit (if any) established 

12 under the coverage. 

13 ‘‘(6) MEDICAREADVANTAGE ORGANIZATION; 

14 MEDICAREADVANTAGE PLAN.—The terms 

15 ‘MedicareAdvantage organization’ and 

16 ‘MedicareAdvantage plan’ have the meanings given 

17 such terms in subsections (a)(1) and (b)(1), respec18 tively, of section 1859 (relating to definitions relat19 ing to MedicareAdvantage organizations). 

20 ‘‘(7) MEDICARE PRESCRIPTION DRUG PLAN.—

21 The term ‘Medicare Prescription Drug plan’ means 

22 prescription drug coverage that is offered under a 

23 policy, contract, or plan—

24 ‘‘(A) that has been approved under section 

25 1860D–13; and 
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1 ‘‘(B) by an eligible entity pursuant to, and 

2 in accordance with, a contract between the Ad3 ministrator and the entity under section 

4 1860D–7(b). 

5 ‘‘(8) PRESCRIPTION DRUG ACCOUNT.—The 

6 term ‘Prescription Drug Account’ means the Pre7 scription Drug Account (as established under section 

8 1860D–25) in the Federal Supplementary Medical 

9 Insurance Trust Fund under section 1841. 

10 ‘‘(9) QUALIFIED PRESCRIPTION DRUG COV11 ERAGE.—The term ‘qualified prescription drug cov12 erage’ means the coverage described in section 

13 1860D–6(a)(1). 

14 ‘‘(10) STANDARD PRESCRIPTION DRUG COV15 ERAGE.—The term ‘standard prescription drug cov16 erage’ means the coverage described in section 

17 1860D–6(c). 

18 ‘‘(b) APPLICATION OF MEDICAREADVANTAGE PROVI19 SIONS UNDER THIS PART.—For purposes of applying pro20 visions of part C under this part with respect to a Medi21 care Prescription Drug plan and an eligible entity, unless 

22 otherwise provided in this part such provisions shall be 

23 applied as if—
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1 ‘‘(1) any reference to a MedicareAdvantage 

2 plan included a reference to a Medicare Prescription 

3 Drug plan; 

4 ‘‘(2) any reference to a provider-sponsored or5 ganization included a reference to an eligible entity; 

6 ‘‘(3) any reference to a contract under section 

7 1857 included a reference to a contract under sec8 tion 1860D–7(b); and 

9 ‘‘(4) any reference to part C included a ref10 erence to this part. 

11 ‘‘Subpart 1—Establishment of Voluntary Prescription 

12 Drug Delivery Program 

13 ‘‘ESTABLISHMENT OF VOLUNTARY PRESCRIPTION DRUG

14 DELIVERY PROGRAM

15 ‘‘SEC. 1860D–1. (a) PROVISION OF BENEFIT.—

16 ‘‘(1) IN GENERAL.—The Administrator shall 

17 provide for and administer a voluntary prescription 

18 drug delivery program under which each eligible ben19 eficiary enrolled under this part shall be provided 

20 with access to qualified prescription drug coverage 

21 as follows: 

22 ‘‘(A) MEDICAREADVANTAGE ENROLLEES

23 RECEIVE COVERAGE THROUGH

24 MEDICAREADVANTAGE PLAN.—
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1 ‘‘(i) IN GENERAL.—Except as pro2 vided in clause (ii), an eligible beneficiary 

3 who is enrolled under this part and en4 rolled in a MedicareAdvantage plan offered 

5 by a MedicareAdvantage organization shall 

6 receive coverage of benefits under this part 

7 through such plan. 

8 ‘‘(ii) EXCEPTION FOR ENROLLEES IN

9 MEDICAREADVANTAGE MSA PLANS.—An el10 igible beneficiary who is enrolled under this 

11 part and enrolled in an MSA plan under 

12 part C shall receive coverage of benefits 

13 under this part through enrollment in a 

14 Medicare Prescription Drug plan that is 

15 offered in the geographic area in which the 

16 beneficiary resides. For purposes of this 

17 part, the term ‘MSA plan’ has the meaning 

18 given such term in section 1859(b)(3). 

19 ‘‘(iii) EXCEPTION FOR ENROLLEES IN

20 MEDICAREADVANTAGE PRIVATE FEE-FOR21 SERVICE PLANS.—An eligible beneficiary 

22 who is enrolled under this part and en23 rolled in a private fee-for-service plan 

24 under part C shall—
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1 ‘‘(i) receive benefits under this 

2 part through such plan if the plan 

3 provides qualified prescription drug 

4 coverage; and 

5 ‘‘(ii) if the plan does not provide 

6 qualified prescription drug coverage, 

7 receive coverage of benefits under this 

8 part through enrollment in a Medicare 

9 Prescription Drug plan that is offered 

10 in the geographic area in which the 

11 beneficiary resides. For purposes of 

12 this part, the term ‘private fee-for13 service plan’ has the meaning given 

14 such term in section 1859(b)(2). 

15 ‘‘(B) FEE-FOR-SERVICE ENROLLEES RE16 CEIVE COVERAGE THROUGH A MEDICARE PRE17 SCRIPTION DRUG PLAN.—An eligible beneficiary 

18 who is enrolled under this part but is not en19 rolled in a MedicareAdvantage plan (except for 

20 an MSA plan or a private fee-for-service plan 

21 that does not provide qualified prescription 

22 drug coverage) shall receive coverage of benefits 

23 under this part through enrollment in a Medi24 care Prescription Drug plan that is offered in 
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1 the geographic area in which the beneficiary re2 sides. 

3 ‘‘(2) VOLUNTARY NATURE OF PROGRAM.—

4 Nothing in this part shall be construed as requiring 

5 an eligible beneficiary to enroll in the program under 

6 this part. 

7 ‘‘(3) SCOPE OF BENEFITS.—Pursuant to sec8 tion 1860D–6(b)(3)(C), the program established 

9 under this part shall provide for coverage of all 

10 therapeutic categories and classes of covered drugs 

11 (although not necessarily for all drugs within such 

12 categories and classes). 

13 ‘‘(4) PROGRAM TO BEGIN IN 2006.—The Admin14 istrator shall establish the program under this part 

15 in a manner so that benefits are first provided be16 ginning on January 1, 2006. 

17 ‘‘(b) ACCESS TO ALTERNATIVE PRESCRIPTION DRUG

18 COVERAGE.—In the case of an eligible beneficiary who has 

19 creditable prescription drug coverage (as defined in section 

20 1860D–2(b)(1)(F)), such beneficiary—

21 ‘‘(1) may continue to receive such coverage and 

22 not enroll under this part; and 

23 ‘‘(2) pursuant to section 1860D–2(b)(1)(C), is 

24 permitted to subsequently enroll under this part 

25 without any penalty and obtain access to qualified 
20

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1 prescription drug coverage in the manner described 

2 in subsection (a) if the beneficiary involuntarily loses 

3 such coverage. 

4 ‘‘(c) FINANCING.—The costs of providing benefits 

5 under this part shall be payable from the Prescription 

6 Drug Account. 

7 ‘‘ENROLLMENT UNDER PROGRAM

8 ‘‘SEC. 1860D–2. (a) ESTABLISHMENT OF ENROLL9 MENT PROCESS.—

10 ‘‘(1) PROCESS SIMILAR TO PART B ENROLL11 MENT.—The Administrator shall establish a process 

12 through which an eligible beneficiary (including an 

13 eligible beneficiary enrolled in a MedicareAdvantage 

14 plan offered by a MedicareAdvantage organization) 

15 may make an election to enroll under this part. Such 

16 process shall be similar to the process for enrollment 

17 in part B under section 1837, including the deeming 

18 provisions of such section. 

19 ‘‘(2) CONDITION OF ENROLLMENT.—An eligible 

20 beneficiary must be enrolled under this part in order 

21 to be eligible to receive access to qualified prescrip22 tion drug coverage. 

23 ‘‘(b) SPECIAL ENROLLMENT PROCEDURES.—

24 ‘‘(1) LATE ENROLLMENT PENALTY.—

25 ‘‘(A) INCREASE IN MONTHLY BENEFICIARY

26 OBLIGATION.—Subject to the succeeding provi-
21

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1 sions of this paragraph, in the case of an eligi2 ble beneficiary whose coverage period under this 

3 part began pursuant to an enrollment after the 

4 beneficiary’s initial enrollment period under 

5 part B (determined pursuant to section 

6 1837(d)) and not pursuant to the open enroll7 ment period described in paragraph (2), the Ad8 ministrator shall establish procedures for in9 creasing the amount of the monthly beneficiary 

10 obligation under section 1860D–17 applicable 

11 to such beneficiary by an amount that the Ad12 ministrator determines is actuarially sound for 

13 each full 12-month period (in the same contin14 uous period of eligibility) in which the eligible 

15 beneficiary could have been enrolled under this 

16 part but was not so enrolled. 

17 ‘‘(B) PERIODS TAKEN INTO ACCOUNT.—

18 For purposes of calculating any 12-month pe19 riod under subparagraph (A), there shall be 

20 taken into account—

21 ‘‘(i) the months which elapsed be22 tween the close of the eligible beneficiary’s 

23 initial enrollment period and the close of 

24 the enrollment period in which the bene25 ficiary enrolled; and 
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1 ‘‘(ii) in the case of an eligible bene2 ficiary who reenrolls under this part, the 

3 months which elapsed between the date of 

4 termination of a previous coverage period 

5 and the close of the enrollment period in 

6 which the beneficiary reenrolled. 

7 ‘‘(C) PERIODS NOT TAKEN INTO AC8 COUNT.—

9 ‘‘(i) IN GENERAL.—For purposes of 

10 calculating any 12-month period under 

11 subparagraph (A), subject to clause (ii), 

12 there shall not be taken into account 

13 months for which the eligible beneficiary 

14 can demonstrate that the beneficiary had 

15 creditable prescription drug coverage (as 

16 defined in subparagraph (F)). 

17 ‘‘(ii) BENEFICIARY MUST INVOLUN18 TARILY LOSE COVERAGE.—Clause (i) shall 

19 only apply with respect to coverage—

20 ‘‘(I) in the case of coverage de21 scribed in clause (ii) of subparagraph 

22 (F), if the plan terminates, ceases to 

23 provide, or reduces the value of the 

24 prescription drug coverage under such 

25 plan to below the actuarial value of 
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1 standard prescription drug coverage 

2 (as determined under section 1860D–

3 6(f)); 

4 ‘‘(II) in the case of coverage de5 scribed in clause (i), (iii), or (iv) of 

6 subparagraph (F), if the beneficiary is 

7 involuntarily disenrolled or becomes 

8 ineligible for such coverage; or 

9 ‘‘(III) in the case of a beneficiary 

10 with coverage described in clause (v) 

11 of subparagraph (F), if the issuer of 

12 the policy terminates coverage under 

13 the policy. 

14 ‘‘(D) PERIODS TREATED SEPARATELY.—

15 Any increase in an eligible beneficiary’s monthly 

16 beneficiary obligation under subparagraph (A) 

17 with respect to a particular continuous period 

18 of eligibility shall not be applicable with respect 

19 to any other continuous period of eligibility 

20 which the beneficiary may have. 

21 ‘‘(E) CONTINUOUS PERIOD OF ELIGI22 BILITY.—

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

24 (ii), for purposes of this paragraph, an eli25 gible beneficiary’s ‘continuous period of eli-
24

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1 gibility’ is the period that begins with the 

2 first day on which the beneficiary is eligi3 ble to enroll under section 1836 and ends 

4 with the beneficiary’s death. 

5 ‘‘(ii) SEPARATE PERIOD.—Any period 

6 during all of which an eligible beneficiary 

7 satisfied paragraph (1) of section 1836 

8 and which terminated in or before the 

9 month preceding the month in which the 

10 beneficiary attained age 65 shall be a sepa11 rate ‘continuous period of eligibility’ with 

12 respect to the beneficiary (and each such 

13 period which terminates shall be deemed 

14 not to have existed for purposes of subse15 quently applying this paragraph). 

16 ‘‘(F) CREDITABLE PRESCRIPTION DRUG

17 COVERAGE DEFINED.—Subject to subparagraph 

18 (G), for purposes of this part, the term ‘cred19 itable prescription drug coverage’ means any of 

20 the following: 

21 ‘‘(i) DRUG-ONLY COVERAGE UNDER

22 MEDICAID.—Coverage of covered out23 patient drugs (as defined in section 1927) 

24 under title XIX or a waiver under 1115 

25 that is provided to an individual who is not 
25

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1 a dual eligible individual (as defined in sec2 tion 1860D–19(a)(4)(E)). 

3 ‘‘(ii) PRESCRIPTION DRUG COVERAGE

4 UNDER A GROUP HEALTH PLAN.—Any out5 patient prescription drug coverage under a 

6 group health plan, including a health bene7 fits plan under chapter 89 of title 5, 

8 United States Code (commonly known as 

9 the Federal employees health benefits pro10 gram), and a qualified retiree prescription 

11 drug plan (as defined in section 1860D–

12 20(e)(4)). 

13 ‘‘(iii) STATE PHARMACEUTICAL AS14 SISTANCE PROGRAM.—Coverage of pre15 scription drugs under a State pharma16 ceutical assistance program. 

17 ‘‘(iv) VETERANS’ COVERAGE OF PRE18 SCRIPTION DRUGS.—Coverage of prescrip19 tion drugs for veterans, and survivors and 

20 dependents of veterans, under chapter 17 

21 of title 38, United States Code. 

22 ‘‘(v) PRESCRIPTION DRUG COVERAGE

23 UNDER MEDIGAP POLICIES.—Coverage 

24 under a medicare supplemental policy 

25 under section 1882 that provides benefits 
26

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1 for prescription drugs (whether or not such 

2 coverage conforms to the standards for 

3 packages of benefits under section 

4 1882(p)(1)). 

5 ‘‘(G) REQUIREMENT FOR CREDITABLE

6 COVERAGE.—Coverage described in clauses (i) 

7 through (v) of subparagraph (F) shall not be 

8 considered to be creditable coverage under this 

9 part unless the coverage provides coverage of 

10 the cost of prescription drugs the actuarial 

11 value of which (as defined by the Adminis12 trator) to the beneficiary equals or exceeds the 

13 actuarial value of standard prescription drug 

14 coverage (as determined under section 1860D–

15 6(f)). 

16 ‘‘(H) DISCLOSURE.—

17 ‘‘(i) IN GENERAL.—Each entity that 

18 offers coverage of the type described in 

19 clause (ii) (iii), (iv), or (v) of subparagraph 

20 (F) shall provide for disclosure, consistent 

21 with standards established by the Adminis22 trator, of whether the coverage provides 

23 coverage of the cost of prescription drugs 

24 the actuarial value of which (as defined by 

25 the Administrator) to the beneficiary 
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1 equals or exceeds the actuarial value of 

2 standard prescription drug coverage (as 

3 determined under section 1860D–6(f)). 

4 ‘‘(ii) WAIVER OF LIMITATIONS.—An 

5 individual may apply to the Administrator 

6 to waive the application of subparagraph 

7 (G) if the individual establishes that the 

8 individual was not adequately informed 

9 that the coverage the beneficiary was en10 rolled in did not provide the level of bene11 fits required in order for the coverage to be 

12 considered creditable coverage under sub13 paragraph (F). 

14 ‘‘(2) INITIAL ELECTION PERIODS.—

15 ‘‘(A) OPEN ENROLLMENT PERIOD FOR

16 CURRENT BENEFICIARIES IN WHICH LATE EN17 ROLLMENT PROCEDURES DO NOT APPLY.—In 

18 the case of an individual who is an eligible ben19 eficiary as of November 1, 2005, there shall be 

20 an open enrollment period of 6 months begin21 ning on that date under which such beneficiary 

22 may enroll under this part without the applica23 tion of the late enrollment procedures estab24 lished under paragraph (1)(A). 
28

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1 ‘‘(B) INDIVIDUAL COVERED IN FUTURE.—

2 In the case of an individual who becomes an eli3 gible beneficiary after such date, there shall be 

4 an initial election period which is the same as 

5 the initial enrollment period under section 

6 1837(d). 

7 ‘‘(3) SPECIAL ENROLLMENT PERIOD FOR BENE8 FICIARIES WHO INVOLUNTARILY LOSE CREDITABLE

9 PRESCRIPTION DRUG COVERAGE.—

10 ‘‘(A) ESTABLISHMENT.—The Adminis11 trator shall establish a special open enrollment 

12 period (as described in subparagraph (B)) for 

13 an eligible beneficiary that loses creditable pre14 scription drug coverage. 

15 ‘‘(B) SPECIAL OPEN ENROLLMENT PE16 RIOD.—The special open enrollment period de17 scribed in this subparagraph is the 63-day pe18 riod that begins on—

19 ‘‘(i) in the case of a beneficiary with 

20 coverage described in clause (ii) of para21 graph (1)(F), the later of the date on 

22 which the plan terminates, ceases to pro23 vide, or substantially reduces (as defined 

24 by the Administrator) the value of the pre25 scription drug coverage under such plan or 
29

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1 the date the beneficiary is provided with 

2 notice of such termination or reduction; 

3 ‘‘(ii) in the case of a beneficiary with 

4 coverage described in clause (i), (iii), or 

5 (iv) of paragraph (1)(F), the later of the 

6 date on which the beneficiary is involun7 tarily disenrolled or becomes ineligible for 

8 such coverage or the date the beneficiary is 

9 provided with notice of such loss of eligi10 bility; or 

11 ‘‘(iii) in the case of a beneficiary with 

12 coverage described in clause (v) of para13 graph (1)(F), the latter of the date on 

14 which the issuer of the policy terminates 

15 coverage under the policy or the date the 

16 beneficiary is provided with notice of such 

17 termination. 

18 ‘‘(c) PERIOD OF COVERAGE.—

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graph (2) and subject to paragraph (3), an eligible 

21 beneficiary’s coverage under the program under this 

22 part shall be effective for the period provided in sec23 tion 1838, as if that section applied to the program 

24 under this part. 

25 ‘‘(2) OPEN AND SPECIAL ENROLLMENT.—
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1 ‘‘(A) OPEN ENROLLMENT.—An eligible 

2 beneficiary who enrolls under the program 

3 under this part pursuant to subsection (b)(2) 

4 shall be entitled to the benefits under this part 

5 beginning on January 1, 2006. 

6 ‘‘(B) SPECIAL ENROLLMENT.—Subject to 

7 paragraph (3), an eligible beneficiary who en8 rolls under the program under this part pursu9 ant to subsection (b)(3) shall be entitled to the 

10 benefits under this part beginning on the first 

11 day of the month following the month in which 

12 such enrollment occurs. 

13 ‘‘(3) LIMITATION.—Coverage under this part 

14 shall not begin prior to January 1, 2006. 

15 ‘‘(d) TERMINATION.—

16 ‘‘(1) IN GENERAL.—The causes of termination 

17 specified in section 1838 shall apply to this part in 

18 the same manner as such causes apply to part B. 

19 ‘‘(2) COVERAGE TERMINATED BY TERMINATION

20 OF COVERAGE UNDER PART A OR B.—

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

22 causes of termination specified in paragraph 

23 (1), the Administrator shall terminate an indi24 vidual’s coverage under this part if the indi-
31

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1 vidual is no longer enrolled in both parts A and 

2 B. 

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

4 described in subparagraph (A) shall be effective 

5 on the effective date of termination of coverage 

6 under part A or (if earlier) under part B. 

7 ‘‘(3) PROCEDURES REGARDING TERMINATION

8 OF A BENEFICIARY UNDER A PLAN.—The Adminis9 trator shall establish procedures for determining the 

10 status of an eligible beneficiary’s enrollment under 

11 this part if the beneficiary’s enrollment in a Medi12 care Prescription Drug plan offered by an eligible 

13 entity under this part is terminated by the entity for 

14 cause (pursuant to procedures established by the 

15 Administrator under section 1860D–3(a)(1)). 

16 ‘‘ELECTION OF A MEDICARE PRESCRIPTION DRUG PLAN

17 ‘‘SEC. 1860D–3. (a) IN GENERAL.—

18 ‘‘(1) PROCESS.—

19 ‘‘(A) ELECTION.—

20 ‘‘(i) IN GENERAL.—The Administrator 

21 shall establish a process through which an 

22 eligible beneficiary who is enrolled under 

23 this part but not enrolled in a 

24 MedicareAdvantage plan (except for an 

25 MSA plan or a private fee-for-service plan 

26 that does not provide qualified prescription 
32

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1 drug coverage) offered by a 

2 MedicareAdvantage organization—

3 ‘‘(I) shall make an election to en4 roll in any Medicare Prescription 

5 Drug plan that is offered by an eligi6 ble entity and that serves the geo7 graphic area in which the beneficiary 

8 resides; and 

9 ‘‘(II) may make an annual elec10 tion to change the election under this 

11 clause. 

12 ‘‘(ii) CLARIFICATION REGARDING EN13 ROLLMENT.—The process established 

14 under clause (i) shall include, in the case 

15 of an eligible beneficiary who is enrolled 

16 under this part but who has failed to make 

17 an election of a Medicare Prescription 

18 Drug plan in an area, for the enrollment 

19 in any Medicare Prescription Drug plan 

20 that has been designated by the Adminis21 trator in the area. The Administrator shall 

22 establish a process for designating a plan 

23 or plans in order to carry out the pre24 ceding sentence. 
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1 ‘‘(B) REQUIREMENTS FOR PROCESS.—In 

2 establishing the process under subparagraph 

3 (A), the Administrator shall—

4 ‘‘(i) use rules similar to the rules for 

5 enrollment, disenrollment, and termination 

6 of enrollment with a MedicareAdvantage 

7 plan under section 1851, including—

8 ‘‘(I) the establishment of special 

9 election periods under subsection 

10 (e)(4) of such section; and 

11 ‘‘(II) the application of the guar12 anteed issue and renewal provisions of 

13 section 1851(g) (other than clause (i) 

14 and the second sentence of clause (ii) 

15 of paragraph (3)(C), relating to de16 fault enrollment); and 

17 ‘‘(ii) coordinate enrollments, 

18 disenrollments, and terminations of enroll19 ment under part C with enrollments, 

20 disenrollments, and terminations of enroll21 ment under this part. 

22 ‘‘(2) FIRST ENROLLMENT PERIOD FOR PLAN

23 ENROLLMENT.—The process developed under para24 graph (1) shall ensure that eligible beneficiaries who 

25 enroll under this part during the open enrollment 
34

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1 period under section 1860D–2(b)(2) are permitted 

2 to elect an eligible entity prior to January 1, 2006, 

3 in order to ensure that coverage under this part is 

4 effective as of such date. 

5 ‘‘(b) ENROLLMENT IN A MEDICAREADVANTAGE

6 PLAN.—

7 ‘‘(1) IN GENERAL.—An eligible beneficiary who 

8 is enrolled under this part and enrolled in a 

9 MedicareAdvantage plan (except for an MSA plan or 

10 a private fee-for-service plan that does not provide 

11 qualified prescription drug coverage) offered by a 

12 MedicareAdvantage organization shall receive access 

13 to such coverage under this part through such plan. 

14 ‘‘(2) RULES.—Enrollment in a 

15 MedicareAdvantage plan is subject to the rules for 

16 enrollment in such plan under section 1851. 

17 ‘‘(c) INFORMATION TO ENTITIES TO FACILITATE EN18 ROLLMENT.—Notwithstanding any other provision of law, 

19 the Administrator may provide to each eligible entity with 

20 a contract under this part such information about eligible 

21 beneficiaries as the Administrator determines to be nec22 essary to facilitate efficient enrollment by such bene23 ficiaries with such entities. The Administrator may pro24 vide such information only so long as and to the extent 

25 necessary to carry out such objective. 
35

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1 ‘‘PROVIDING INFORMATION TO BENEFICIARIES

2 ‘‘SEC. 1860D–4. (a) ACTIVITIES.—

3 ‘‘(1) IN GENERAL.—The Administrator shall 

4 conduct activities that are designed to broadly dis5 seminate information to eligible beneficiaries (and 

6 prospective eligible beneficiaries) regarding the cov7 erage provided under this part. 

8 ‘‘(2) SPECIAL RULE FOR FIRST ENROLLMENT

9 UNDER THE PROGRAM.—The activities described in 

10 paragraph (1) shall ensure that eligible beneficiaries 

11 are provided with such information at least 30 days 

12 prior to the first enrollment period described in sec13 tion 1860D–3(a)(2). 

14 ‘‘(b) REQUIREMENTS.—

15 ‘‘(1) IN GENERAL.—The activities described in 

16 subsection (a) shall—

17 ‘‘(A) be similar to the activities performed 

18 by the Administrator under section 1851(d); 

19 ‘‘(B) be coordinated with the activities per20 formed by—

21 ‘‘(i) the Administrator under such sec22 tion; and 

23 ‘‘(ii) the Secretary under section 

24 1804; and 
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1 ‘‘(C) provide for the dissemination of infor2 mation comparing the plans offered by eligible 

3 entities under this part that are available to eli4 gible beneficiaries residing in an area. 

5 ‘‘(2) COMPARATIVE INFORMATION.—The com6 parative information described in paragraph (1)(C) 

7 shall include a comparison of the following: 

8 ‘‘(A) BENEFITS.—The benefits provided 

9 under the plan and the formularies and griev10 ance and appeals processes under the plan. 

11 ‘‘(B) MONTHLY BENEFICIARY OBLIGA12 TION.—The monthly beneficiary obligation 

13 under the plan. 

14 ‘‘(C) QUALITY AND PERFORMANCE.—The 

15 quality and performance of the eligible entity 

16 offering the plan. 

17 ‘‘(D) BENEFICIARY COST-SHARING.—The 

18 cost-sharing required of eligible beneficiaries 

19 under the plan. 

20 ‘‘(E) CONSUMER SATISFACTION SUR21 VEYS.—The results of consumer satisfaction 

22 surveys regarding the plan and the eligible enti23 ty offering such plan (conducted pursuant to 

24 section 1860D–5(h). 
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1 ‘‘(F) ADDITIONAL INFORMATION.—Such 

2 additional information as the Administrator 

3 may prescribe. 

4 ‘‘BENEFICIARY PROTECTIONS

5 ‘‘SEC. 1860D–5. (a) DISSEMINATION OF INFORMA6 TION.—

7 ‘‘(1) GENERAL INFORMATION.—An eligible enti8 ty offering a Medicare Prescription Drug plan shall 

9 disclose, in a clear, accurate, and standardized form 

10 to each enrollee at the time of enrollment, and at 

11 least annually thereafter, the information described 

12 in section 1852(c)(1) relating to such plan. Such in13 formation includes the following: 

14 ‘‘(A) Access to covered drugs, including ac15 cess through pharmacy networks. 

16 ‘‘(B) How any formulary used by the enti17 ty functions. 

18 ‘‘(C) Copayments, coinsurance, and de19 ductible requirements. 

20 ‘‘(D) Grievance and appeals processes. 

21 The information described in the preceding sentence 

22 shall also be made available on request to prospec23 tive enrollees during open enrollment periods. 

24 ‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL

25 COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA26 TION.—Upon request of an individual eligible to en-
38

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1 roll in a Medicare Prescription Drug plan, the eligi2 ble entity offering such plan shall provide informa3 tion similar (as determined by the Administrator) to 

4 the information described in subparagraphs (A), 

5 (B), and (C) of section 1852(c)(2) to such indi6 vidual. 

7 ‘‘(3) RESPONSE TO BENEFICIARY QUESTIONS.—

8 An eligible entity offering a Medicare Prescription 

9 Drug plan shall have a mechanism for providing on 

10 a timely basis specific information to enrollees upon 

11 request, including information on the coverage of 

12 specific drugs and changes in its formulary. 

13 ‘‘(4) CLAIMS INFORMATION.—An eligible entity 

14 offering a Medicare Prescription Drug plan must 

15 furnish to enrolled individuals in a form easily un16 derstandable to such individuals—

17 ‘‘(A) an explanation of benefits (in accord18 ance with section 1806(a) or in a comparable 

19 manner); and 

20 ‘‘(B) when prescription drug benefits are 

21 provided under this part, a notice of the bene22 fits in relation to the initial coverage limit and 

23 annual out-of-pocket limit for the current year 

24 (except that such notice need not be provided 

25 more often than monthly). 
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1 ‘‘(5) APPROVAL OF MARKETING MATERIAL AND

2 APPLICATION FORMS.—The provisions of section 

3 1851(h) shall apply to marketing material and appli4 cation forms under this part in the same manner as 

5 such provisions apply to marketing material and ap6 plication forms under part C. 

7 ‘‘(b) ACCESS TO COVERED DRUGS.—

8 ‘‘(1) ACCESS TO NEGOTIATED PRICES FOR PRE9 SCRIPTION DRUGS.—An eligible entity offering a 

10 Medicare Prescription Drug plan shall have in place 

11 procedures to ensure that beneficiaries are not 

12 charged more than the negotiated price of a covered 

13 drug. Such procedures shall include the issuance of 

14 a card (or other technology) that may be used by an 

15 enrolled beneficiary for the purchase of prescription 

16 drugs for which coverage is not otherwise provided 

17 under the Medicare Prescription Drug plan. 

18 ‘‘(2) ASSURING PHARMACY ACCESS.—

19 ‘‘(A) IN GENERAL.—An eligible entity of20 fering a Medicare Prescription Drug plan shall 

21 secure the participation in its network of a suf22 ficient number of pharmacies that dispense 

23 (other than by mail order) drugs directly to pa24 tients to ensure convenient access (as deter25 mined by the Administrator and including ade-
40

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1 quate emergency access) for enrolled bene2 ficiaries, in accordance with standards estab3 lished by the Administrator under section 

4 1860D–7(g) that ensure such convenient ac5 cess. Such standards shall take into account 

6 reasonable distances to pharmacy services in 

7 urban and rural areas and access to pharmacy 

8 services of the Indian Health Service and In9 dian tribes and tribal organizations. 

10 ‘‘(B) USE OF POINT-OF-SERVICE SYS11 TEM.—An eligible entity offering a Medicare 

12 Prescription Drug plan shall establish an op13 tional point-of-service method of operation 

14 under which—

15 ‘‘(i) the plan provides access to any or 

16 all pharmacies that are not participating 

17 pharmacies in its network; and 

18 ‘‘(ii) the plan may charge beneficiaries 

19 through adjustments in copayments any 

20 additional costs associated with the point21 of-service option. 

22 The additional copayments so charged shall not 

23 count toward the application of section 1860D–

24 6(c). 
41

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1 ‘‘(C) LEVEL PLAYING FIELD.—An eligible 

2 entity offering a Medicare Prescription Drug 

3 plan shall permit enrollees to receive benefits 

4 (which may include a 90-day supply of drugs or 

5 biologicals) through a community pharmacy, 

6 rather than through mail order, and may per7 mit a differential amount to be paid by such en8 rollees. 

9 ‘‘(3) REQUIREMENTS ON DEVELOPMENT AND

10 APPLICATION OF FORMULARIES.—If an eligible enti11 ty offering a Medicare Prescription Drug plan uses 

12 a formulary, the following requirements must be 

13 met: 

14 ‘‘(A) PHARMACY AND THERAPEUTIC (P&T)

15 COMMITTEE.—

16 ‘‘(i) IN GENERAL.—The eligible entity 

17 must establish a pharmacy and therapeutic 

18 committee that develops and reviews the 

19 formulary. 

20 ‘‘(ii) COMPOSITION.—A pharmacy and 

21 therapeutic committee shall include at least 

22 1 academic expert, at least 1 practicing 

23 physician, and at least 1 practicing phar24 macist, all of whom have expertise in the 

25 care of elderly or disabled persons, and a 
42

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1 majority of the members of such committee 

2 shall consist of individuals who are a prac3 ticing physician or a practicing pharmacist 

4 (or both). 

5 ‘‘(B) FORMULARY DEVELOPMENT.—In de6 veloping and reviewing the formulary, the com7 mittee shall base clinical decisions on the 

8 strength of scientific evidence and standards of 

9 practice, including assessing peer-reviewed med10 ical literature, such as randomized clinical 

11 trials, pharmacoeconomic studies, outcomes re12 search data, and on such other information as 

13 the committee determines to be appropriate. 

14 ‘‘(C) INCLUSION OF DRUGS IN ALL THERA15 PEUTIC CATEGORIES AND CLASSES.—

16 ‘‘(i) IN GENERAL.—The formulary 

17 must include drugs within each therapeutic 

18 category and class of covered drugs (as de19 fined by the Administrator), although not 

20 necessarily for all drugs within such cat21 egories and classes. 

22 ‘‘(ii) REQUIREMENT.—In defining 

23 therapeutic categories and classes of cov24 ered drugs pursuant to clause (i), the Ad25 ministrator shall use—
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1 ‘‘(I) the compendia referred to 

2 section 1927(g)(1)(B)(i); and 

3 ‘‘(II) other recognized sources of 

4 drug classifications and categoriza5 tions determined appropriate by the 

6 Administrator. 

7 ‘‘(D) PROVIDER EDUCATION.—The com8 mittee shall establish policies and procedures to 

9 educate and inform health care providers con10 cerning the formulary. 

11 ‘‘(E) NOTICE BEFORE REMOVING DRUGS

12 FROM FORMULARY.—Any removal of a drug 

13 from a formulary shall take effect only after ap14 propriate notice is made available to bene15 ficiaries, physicians, and pharmacists. 

16 ‘‘(F) APPEALS AND EXCEPTIONS TO APPLI17 CATION.—The eligible entity must have, as part 

18 of the appeals process under subsection (e), a 

19 process for timely appeals for denials of cov20 erage based on such application of the for21 mulary. 

22 ‘‘(c) COST AND UTILIZATION MANAGEMENT; QUAL23 ITY ASSURANCE; MEDICATION THERAPY MANAGEMENT

24 PROGRAM.—
44

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1 ‘‘(1) IN GENERAL.—An eligible entity shall have 

2 in place the following with respect to covered drugs: 

3 ‘‘(A) A cost-effective drug utilization man4 agement program, including incentives to re5 duce costs when appropriate. 

6 ‘‘(B) Quality assurance measures to reduce 

7 medical errors and adverse drug interactions 

8 and to improve medication use, which—

9 ‘‘(i) shall include a medication therapy 

10 management program described in para11 graph (2); and 

12 ‘‘(ii) may include beneficiary edu13 cation programs, counseling, medication 

14 refill reminders, and special packaging. 

15 ‘‘(C) A program to control fraud, abuse, 

16 and waste. 

17 Nothing in this section shall be construed as impair18 ing an eligible entity from applying cost manage19 ment tools (including differential payments) under 

20 all methods of operation. 

21 ‘‘(2) MEDICATION THERAPY MANAGEMENT PRO22 GRAM.—

23 ‘‘(A) IN GENERAL.—A medication therapy 

24 management program described in this para25 graph is a program of drug therapy manage-
45

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1 ment and medication administration that is de2 signed to assure, with respect to beneficiaries 

3 with chronic diseases (such as diabetes, asthma, 

4 hypertension, hyperlipidemia, and congestive 

5 heart failure) or multiple prescriptions, that 

6 covered drugs under the Medicare Prescription 

7 Drug plan are appropriately used to optimize 

8 therapeutic outcomes through improved medica9 tion use and to achieve therapeutic goals and 

10 reduce the risk of adverse events, including ad11 verse drug interactions. 

12 ‘‘(B) ELEMENTS.—Such program may in13 clude—

14 ‘‘(i) enhanced beneficiary under15 standing of such appropriate use through 

16 beneficiary education, counseling, and 

17 other appropriate means; 

18 ‘‘(ii) increased beneficiary adherence 

19 with prescription medication regimens 

20 through medication refill reminders, special 

21 packaging, and other appropriate means; 

22 and 

23 ‘‘(iii) detection of patterns of overuse 

24 and underuse of prescription drugs. 
46

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1 ‘‘(C) DEVELOPMENT OF PROGRAM IN CO2 OPERATION WITH LICENSED PHARMACISTS.—

3 The program shall be developed in cooperation 

4 with licensed and practicing pharmacists and 

5 physicians. 

6 ‘‘(D) CONSIDERATIONS IN PHARMACY

7 FEES.—The eligible entity offering a Medicare 

8 Prescription Drug plan shall take into account, 

9 in establishing fees for pharmacists and others 

10 providing services under the medication therapy 

11 management program, the resources and time 

12 used in implementing the program. 

13 ‘‘(3) PUBLIC DISCLOSURE OF PHARMACEUTICAL

14 PRICES FOR EQUIVALENT DRUGS.—The eligible enti15 ty offering a Medicare Prescription Drug plan shall 

16 provide that each pharmacy or other dispenser that 

17 arranges for the dispensing of a covered drug shall 

18 inform the beneficiary at the time of purchase of the 

19 drug of any differential between the price of the pre20 scribed drug to the enrollee and the price of the low21 est cost generic drug covered under the plan that is 

22 therapeutically equivalent and bioequivalent. 

23 ‘‘(d) GRIEVANCE MECHANISM, COVERAGE DETER24 MINATIONS, AND RECONSIDERATIONS.—
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1 ‘‘(1) IN GENERAL.—An eligible entity shall pro2 vide meaningful procedures for hearing and resolving 

3 grievances between the eligible entity (including any 

4 entity or individual through which the eligible entity 

5 provides covered benefits) and enrollees with Medi6 care Prescription Drug plans of the eligible entity 

7 under this part in accordance with section 1852(f). 

8 ‘‘(2) APPLICATION OF COVERAGE DETERMINA9 TION AND RECONSIDERATION PROVISIONS.—The re10 quirements of paragraphs (1) through (3) of section 

11 1852(g) shall apply to an eligible entity with respect 

12 to covered benefits under the Medicare Prescription 

13 Drug plan it offers under this part in the same man14 ner as such requirements apply to a 

15 MedicareAdvantage organization with respect to ben16 efits it offers under a MedicareAdvantage plan 

17 under part C. 

18 ‘‘(3) REQUEST FOR REVIEW OF TIERED FOR19 MULARY DETERMINATIONS.—In the case of a Medi20 care Prescription Drug plan offered by an eligible 

21 entity that provides for tiered cost-sharing for drugs 

22 included within a formulary and provides lower cost23 sharing for preferred drugs included within the for24 mulary, an individual who is enrolled in the plan 

25 may request coverage of a nonpreferred drug under 
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1 the terms applicable for preferred drugs if the pre2 scribing physician determines that the preferred 

3 drug for treatment of the same condition is not as 

4 effective for the individual or has adverse effects for 

5 the individual. 

6 ‘‘(e) APPEALS.—

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

8 the requirements of paragraphs (4) and (5) of sec9 tion 1852(g) shall apply to an eligible entity with re10 spect to drugs not included on any formulary in a 

11 manner that is similar (as determined by the Admin12 istrator) to the manner that such requirements 

13 apply to a MedicareAdvantage organization with re14 spect to benefits it offers under a 

15 MedicareAdvantage plan under part C. 

16 ‘‘(2) FORMULARY DETERMINATIONS.—An indi17 vidual who is enrolled in a Medicare Prescription 

18 Drug plan offered by an eligible entity may appeal 

19 to obtain coverage for a covered drug that is not on 

20 a formulary of the entity under the terms applicable 

21 for a formulary drug if the prescribing physician de22 termines that the formulary drug for treatment of 

23 the same condition is not as effective for the indi24 vidual or has adverse effects for the individual. 
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1 ‘‘(f) PRIVACY, CONFIDENTIALITY, AND ACCURACY OF

2 ENROLLEE RECORDS.—Insofar as an eligible entity main3 tains individually identifiable medical records or other 

4 health information regarding eligible beneficiaries enrolled 

5 in the Medicare Prescription Drug plan offered by the en6 tity, the entity shall have in place procedures to—

7 ‘‘(1) safeguard the privacy of any individually 

8 identifiable beneficiary information in a manner con9 sistent with the Federal regulations (concerning the 

10 privacy of individually identifiable health informa11 tion) promulgated under section 264(c) of the 

12 Health Insurance Portability and Accountability Act 

13 of 1996; 

14 ‘‘(2) maintain such records and information in 

15 a manner that is accurate and timely; 

16 ‘‘(3) ensure timely access by such beneficiaries 

17 to such records and information; and 

18 ‘‘(4) otherwise comply with applicable laws re19 lating to patient privacy and confidentiality. 

20 ‘‘(g) UNIFORM MONTHLY PLAN PREMIUM.—An eligi21 ble entity shall ensure that the monthly plan premium for 

22 a Medicare Prescription Drug plan charged under this 

23 part is the same for all eligible beneficiaries enrolled in 

24 the plan. Such requirement shall not apply to enrollees 

25 of a Medicare Prescription Drug plan who are enrolled in 
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1 the plan pursuant to a contractual agreement between the 

2 plan and an employer or other group health plan that pro3 vides employment-based retiree health coverage (as de4 fined in section 1860D–20(d)(4)(B)) if the premium 

5 amount is the same for all such enrollees under such 

6 agreement. 

7 ‘‘(h) CONSUMER SATISFACTION SURVEYS.—An eligi8 ble entity shall conduct consumer satisfaction surveys with 

9 respect to the plan and the entity. The Administrator shall 

10 establish uniform requirements for such surveys. 

11 ‘‘PRESCRIPTION DRUG BENEFITS

12 ‘‘SEC. 1860D–6. (a) REQUIREMENTS.—

13 ‘‘(1) IN GENERAL.—For purposes of this part 

14 and part C, the term ‘qualified prescription drug 

15 coverage’ means either of the following: 

16 ‘‘(A) STANDARD PRESCRIPTION DRUG COV17 ERAGE WITH ACCESS TO NEGOTIATED

18 PRICES.—Standard prescription drug coverage 

19 (as defined in subsection (c)) and access to ne20 gotiated prices under subsection (e). 

21 ‘‘(B) ACTUARIALLY EQUIVALENT PRE22 SCRIPTION DRUG COVERAGE WITH ACCESS TO

23 NEGOTIATED PRICES.—Coverage of covered 

24 drugs which meets the alternative coverage re25 quirements of subsection (d) and access to ne26 gotiated prices under subsection (e), but only if 
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1 it is approved by the Administrator as provided 

2 under subsection (d). 

3 ‘‘(2) PERMITTING ADDITIONAL PRESCRIPTION

4 DRUG COVERAGE.—

5 ‘‘(A) IN GENERAL.—Subject to subpara6 graph (B) and section 1860D–13(c)(2), nothing 

7 in this part shall be construed as preventing 

8 qualified prescription drug coverage from in9 cluding coverage of covered drugs that exceeds 

10 the coverage required under paragraph (1). 

11 ‘‘(B) REQUIREMENT.—An eligible entity 

12 may not offer a Medicare Prescription Drug 

13 plan that provides additional benefits pursuant 

14 to subparagraph (A) in an area unless the eligi15 ble entity offering such plan also offers a Medi16 care Prescription Drug plan in the area that 

17 only provides the coverage of prescription drugs 

18 that is required under paragraph (1). 

19 ‘‘(3) COST CONTROL MECHANISMS.—In pro20 viding qualified prescription drug coverage, the enti21 ty offering the Medicare Prescription Drug plan or 

22 the MedicareAdvantage plan may use a variety of 

23 cost control mechanisms, including the use of 

24 formularies, tiered copayments, selective contracting 
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1 with providers of prescription drugs, and mail order 

2 pharmacies. 

3 ‘‘(b) APPLICATION OF SECONDARY PAYOR PROVI4 SIONS.—The provisions of section 1852(a)(4) shall apply 

5 under this part in the same manner as they apply under 

6 part C. 

7 ‘‘(c) STANDARD PRESCRIPTION DRUG COVERAGE.—

8 For purposes of this part and part C, the term ‘standard 

9 prescription drug coverage’ means coverage of covered 

10 drugs that meets the following requirements: 

11 ‘‘(1) DEDUCTIBLE.—

12 ‘‘(A) IN GENERAL.—The coverage has an 

13 annual deductible—

14 ‘‘(i) for 2006, that is equal to $275; 

15 or 

16 ‘‘(ii) for a subsequent year, that is 

17 equal to the amount specified under this 

18 paragraph for the previous year increased 

19 by the percentage specified in paragraph 

20 (5) for the year involved. 

21 ‘‘(B) ROUNDING.—Any amount determined 

22 under subparagraph (A)(ii) that is not a mul23 tiple of $1 shall be rounded to the nearest mul24 tiple of $1. 
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1 ‘‘(2) LIMITS ON COST-SHARING.—The coverage 

2 has cost-sharing (for costs above the annual deduct3 ible specified in paragraph (1) and up to the initial 

4 coverage limit under paragraph (3)) that is equal to 

5 50 percent or that is actuarially consistent (using 

6 processes established under subsection (f)) with an 

7 average expected payment of 50 percent of such 

8 costs. 

9 ‘‘(3) INITIAL COVERAGE LIMIT.—

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

11 (4), the coverage has an initial coverage limit 

12 on the maximum costs that may be recognized 

13 for payment purposes (including the annual de14 ductible)—

15 ‘‘(i) for 2006, that is equal to $4,500; 

16 or 

17 ‘‘(ii) for a subsequent year, that is 

18 equal to the amount specified in this para19 graph for the previous year, increased by 

20 the annual percentage increase described 

21 in paragraph (5) for the year involved. 

22 ‘‘(B) ROUNDING.—Any amount determined 

23 under subparagraph (A)(ii) that is not a mul24 tiple of $1 shall be rounded to the nearest mul25 tiple of $1. 
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1 ‘‘(4) LIMITATION ON OUT-OF-POCKET EXPENDI2 TURES BY BENEFICIARY.—

3 ‘‘(A) IN GENERAL.—The coverage provides 

4 benefits with cost-sharing that is equal to 10 

5 percent after the individual has incurred costs 

6 (as described in subparagraph (C)) for covered 

7 drugs in a year equal to the annual out-of-pock8 et limit specified in subparagraph (B). 

9 ‘‘(B) ANNUAL OUT-OF-POCKET LIMIT.—

10 ‘‘(i) IN GENERAL.—For purposes of 

11 this part, the ‘annual out-of-pocket limit’ 

12 specified in this subparagraph—

13 ‘‘(I) for 2006, is equal to $3,700; 

14 or 

15 ‘‘(II) for a subsequent year, is 

16 equal to the amount specified in this 

17 subparagraph for the previous year, 

18 increased by the annual percentage in19 crease described in paragraph (5) for 

20 the year involved. 

21 ‘‘(ii) ROUNDING.—Any amount deter22 mined under clause (i)(II) that is not a 

23 multiple of $1 shall be rounded to the 

24 nearest multiple of $1. 
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1 ‘‘(C) APPLICATION.—In applying subpara2 graph (A)—

3 ‘‘(i) incurred costs shall only include 

4 costs incurred, with respect to covered 

5 drugs, for the annual deductible (described 

6 in paragraph (1)), cost-sharing (described 

7 in paragraph (2)), and amounts for which 

8 benefits are not provided because of the 

9 application of the initial coverage limit de10 scribed in paragraph (3) (including costs 

11 incurred for covered drugs described in 

12 section 1860D(a)(2)(C)); and 

13 ‘‘(ii) such costs shall be treated as in14 curred only if they are paid by the indi15 vidual (or by another individual, such as a 

16 family member, on behalf of the indi17 vidual), under section 1860D–19 (but only 

18 with respect to the percentage of such 

19 costs that the individual is responsible for 

20 under that section), under title XIX, or 

21 under a State pharmaceutical assistance 

22 program and the individual (or other indi23 vidual) is not reimbursed through insur24 ance or otherwise, a group health plan, or 
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1 other third-party payment arrangement for 

2 such costs. 

3 ‘‘(D) INFORMATION REGARDING THIRD4 PARTY REIMBURSEMENT.—In order to ensure 

5 compliance with the requirements of subpara6 graph (C)(ii), the Administrator is authorized 

7 to establish procedures, in coordination with the 

8 Secretary of Treasury and the Secretary of 

9 Labor, for determining whether costs for indi10 viduals are being reimbursed through insurance 

11 or otherwise, a group health plan, or other 

12 third-party payment arrangement, and for 

13 alerting the entities in which such individuals 

14 are enrolled about such reimbursement arrange15 ments. An entity with a contract under this 

16 part may also periodically ask individuals en17 rolled in a plan offered by the entity whether 

18 the individuals have or expect to receive such 

19 third-party reimbursement. A material mis20 representation of the information described in 

21 the preceding sentence by an individual (as de22 fined in standards set by the Administrator and 

23 determined through a process established by the 

24 Administrator) shall constitute grounds for ter-
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1 mination of enrollment under section 1860D–

2 2(d). 

3 ‘‘(5) ANNUAL PERCENTAGE INCREASE.—For 

4 purposes of this part, the annual percentage increase 

5 specified in this paragraph for a year is equal to the 

6 annual percentage increase in average per capita ag7 gregate expenditures for covered drugs in the United 

8 States for beneficiaries under this title, as deter9 mined by the Administrator for the 12-month period 

10 ending in July of the previous year. 

11 ‘‘(d) ALTERNATIVE COVERAGE REQUIREMENTS.—A 

12 Medicare Prescription Drug plan or MedicareAdvantage 

13 plan may provide a different prescription drug benefit de14 sign from the standard prescription drug coverage de15 scribed in subsection (c) so long as the Administrator de16 termines (based on an actuarial analysis by the Adminis17 trator) that the following requirements are met and the 

18 plan applies for, and receives, the approval of the Adminis19 trator for such benefit design: 

20 ‘‘(1) ASSURING AT LEAST ACTUARIALLY EQUIV21 ALENT PRESCRIPTION DRUG COVERAGE.—

22 ‘‘(A) ASSURING EQUIVALENT VALUE OF

23 TOTAL COVERAGE.—The actuarial value of the 

24 total coverage (as determined under subsection 

25 (f)) is at least equal to the actuarial value (as 
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1 so determined) of standard prescription drug 

2 coverage. 

3 ‘‘(B) ASSURING EQUIVALENT UNSUB4 SIDIZED VALUE OF COVERAGE.—The unsub5 sidized value of the coverage is at least equal to 

6 the unsubsidized value of standard prescription 

7 drug coverage. For purposes of this subpara8 graph, the unsubsidized value of coverage is the 

9 amount by which the actuarial value of the cov10 erage (as determined under subsection (f)) ex11 ceeds the actuarial value of the amounts associ12 ated with the application of section 1860D–

13 17(c) and reinsurance payments under section 

14 1860D–20 with respect to such coverage. 

15 ‘‘(C) ASSURING STANDARD PAYMENT FOR

16 COSTS AT INITIAL COVERAGE LIMIT.—The cov17 erage is designed, based upon an actuarially 

18 representative pattern of utilization (as deter19 mined under subsection (f)), to provide for the 

20 payment, with respect to costs incurred that are 

21 equal to the initial coverage limit under sub22 section (c)(3), of an amount equal to at least 

23 the product of—

24 ‘‘(i) such initial coverage limit minus 

25 the deductible under subsection (c)(1); and 
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1 ‘‘(ii) the percentage specified in sub2 section (c)(2). 

3 Benefits other than qualified prescription drug cov4 erage shall not be taken into account for purposes 

5 of this paragraph. 

6 ‘‘(2) DEDUCTIBLE AND LIMITATION ON OUT7 OF-POCKET EXPENDITURES BY BENEFICIARIES MAY

8 NOT VARY.—The coverage may not vary the deduct9 ible under subsection (c)(1) for the year or the limi10 tation on out-of-pocket expenditures by beneficiaries 

11 described in subsection (c)(4) for the year. 

12 ‘‘(e) ACCESS TO NEGOTIATED PRICES.—

13 ‘‘(1) ACCESS.—

14 ‘‘(A) IN GENERAL.—Under qualified pre15 scription drug coverage offered by an eligible 

16 entity or a MedicareAdvantage organization, 

17 the entity or organization shall provide bene18 ficiaries with access to negotiated prices used 

19 for payment for covered drugs, regardless of the 

20 fact that no benefits may be payable under the 

21 coverage with respect to such drugs because of 

22 the application of the deductible, any cost-shar23 ing, or an initial coverage limit (described in 

24 subsection (c)(3)). For purposes of this part, 

25 the term ‘negotiated prices’ includes all dis-
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1 counts, direct or indirect subsidies, rebates, or 

2 other price concessions or direct or indirect re3 munerations. 

4 ‘‘(B) MEDICAID RELATED PROVISIONS.—

5 Insofar as a State elects to provide medical as6 sistance under title XIX for a drug based on 

7 the prices negotiated under a Medicare Pre8 scription Drug plan under this part—

9 ‘‘(i) the medical assistance for such a 

10 drug shall be disregarded for purposes of 

11 a rebate agreement entered into under sec12 tion 1927 which would otherwise apply to 

13 the provision of medical assistance for the 

14 drug under title XIX; and 

15 ‘‘(ii) the prices negotiated under a 

16 Medicare Prescription Drug plan with re17 spect to covered drugs, under a 

18 MedicareAdvantage plan with respect to 

19 such drugs, or under a qualified retiree 

20 prescription drug plan (as defined in sec21 tion 1860D–20(e)(4)) with respect to such 

22 drugs, on behalf of eligible beneficiaries, 

23 shall (notwithstanding any other provision 

24 of law) not be taken into account for the 
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1 purposes of establishing the best price 

2 under section 1927(c)(1)(C). 

3 ‘‘(2) CARDS OR OTHER TECHNOLOGY.—

4 ‘‘(A) IN GENERAL.—In providing the ac5 cess under paragraph (1), the eligible entity or 

6 MedicareAdvantage organization shall issue a 

7 card or use other technology pursuant to sec8 tion 1860D–5(b)(1). 

9 ‘‘(B) NATIONAL STANDARDS.—

10 ‘‘(i) DEVELOPMENT.—The Adminis11 trator shall provide for the development of 

12 national standards relating to a standard13 ized format for the card or other tech14 nology required under subparagraph (A). 

15 Such standards shall be compatible with 

16 parts C and D of title XI and may be 

17 based on standards developed by an appro18 priate standard setting organization. 

19 ‘‘(ii) CONSULTATION.—In developing 

20 the standards under clause (i), the Admin21 istrator shall consult with the National 

22 Council for Prescription Drug Programs 

23 and other standard-setting organizations 

24 determined appropriate by the Adminis25 trator. 
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1 ‘‘(iii) IMPLEMENTATION.—The Ad2 ministrator shall implement the standards 

3 developed under clause (i) by January 1, 

4 2008. 

5 ‘‘(3) DISCLOSURE.—The eligible entity offering 

6 a Medicare Prescription Drug plan and the 

7 MedicareAdvantage organization offering a 

8 MedicareAdvantage plan shall disclose to the Admin9 istrator (in a manner specified by the Administrator) 

10 the extent to which discounts, direct or indirect sub11 sidies, rebates, or other price concessions or direct or 

12 indirect remunerations made available to the entity 

13 or organization by a manufacturer are passed 

14 through to enrollees through pharmacies and other 

15 dispensers or otherwise. The provisions of section 

16 1927(b)(3)(D) shall apply to information disclosed 

17 to the Administrator under this paragraph in the 

18 same manner as such provisions apply to informa19 tion disclosed under such section. 

20 ‘‘(4) AUDITS AND REPORTS.—To protect 

21 against fraud and abuse and to ensure proper disclo22 sures and accounting under this part, in addition to 

23 any protections against fraud and abuse provided 

24 under section 1860D–7(f)(1), the Administrator may 

25 periodically audit the financial statements and 
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1 records of an eligible entity offering a Medicare Pre2 scription Drug plan and a MedicareAdvantage orga3 nization offering a MedicareAdvantage plan with the 

4 auditor of the Administrator’s choice. 

5 ‘‘(f) ACTUARIAL VALUATION; DETERMINATION OF

6 ANNUAL PERCENTAGE INCREASES.—

7 ‘‘(1) PROCESSES.—For purposes of this section, 

8 the Administrator shall establish processes and 

9 methods—

10 ‘‘(A) for determining the actuarial valu11 ation of prescription drug coverage, including—

12 ‘‘(i) an actuarial valuation of standard 

13 prescription drug coverage and of the rein14 surance payments under section 1860D–

15 20; 

16 ‘‘(ii) the use of generally accepted ac17 tuarial principles and methodologies; and 

18 ‘‘(iii) applying the same methodology 

19 for determinations of alternative coverage 

20 under subsection (d) as is used with re21 spect to determinations of standard pre22 scription drug coverage under subsection 

23 (c); and 

24 ‘‘(B) for determining annual percentage in25 creases described in subsection (c)(5). 
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1 Such processes shall take into account any effect 

2 that providing actuarially equivalent prescription 

3 drug coverage rather than standard prescription 

4 drug coverage has on drug utilization. 

5 ‘‘(2) USE OF OUTSIDE ACTUARIES.—Under the 

6 processes under paragraph (1)(A), eligible entities 

7 and MedicareAdvantage organizations may use actu8 arial opinions certified by independent, qualified ac9 tuaries to establish actuarial values, but the Admin10 istrator shall determine whether such actuarial val11 ues meet the requirements under subsection (c)(1). 

12 ‘‘REQUIREMENTS FOR ENTITIES OFFERING MEDICARE

13 PRESCRIPTION DRUG PLANS; ESTABLISHMENT OF

14 STANDARDS

15 ‘‘SEC. 1860D–7. (a) GENERAL REQUIREMENTS.—An 

16 eligible entity offering a Medicare Prescription Drug plan 

17 shall meet the following requirements: 

18 ‘‘(1) LICENSURE.—Subject to subsection (c), 

19 the entity is organized and licensed under State law 

20 as a risk-bearing entity eligible to offer health insur21 ance or health benefits coverage in each State in 

22 which it offers a Medicare Prescription Drug plan. 

23 ‘‘(2) ASSUMPTION OF FINANCIAL RISK.—

24 ‘‘(A) IN GENERAL.—Subject to subpara25 graph (B) and subsections (d)(2) and (e) of 

26 section 1860D–13, to the extent that the entity 
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1 is at risk pursuant to such section 1860D–16, 

2 the entity assumes financial risk on a prospec3 tive basis for the benefits that it offers under 

4 a Medicare Prescription Drug plan and that is 

5 not covered under section 1860D–20. 

6 ‘‘(B) REINSURANCE PERMITTED.—To the 

7 extent that the entity is at risk pursuant to sec8 tion 1860D–16, the entity may obtain insur9 ance or make other arrangements for the cost 

10 of coverage provided to any enrolled member 

11 under this part. 

12 ‘‘(3) SOLVENCY FOR UNLICENSED ENTITIES.—

13 In the case of an eligible entity that is not described 

14 in paragraph (1) and for which a waiver has been 

15 approved under subsection (c), such entity shall 

16 meet solvency standards established by the Adminis17 trator under subsection (d). 

18 ‘‘(b) CONTRACT REQUIREMENTS.—The Adminis19 trator shall not permit an eligible beneficiary to elect a 

20 Medicare Prescription Drug plan offered by an eligible en21 tity under this part, and the entity shall not be eligible 

22 for payments under section 1860D–16 or 1860D–20, un23 less the Administrator has entered into a contract under 

24 this subsection with the entity with respect to the offering 

25 of such plan. Such a contract with an entity may cover 
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1 more than 1 Medicare Prescription Drug plan. Such con2 tract shall provide that the entity agrees to comply with 

3 the applicable requirements and standards of this part and 

4 the terms and conditions of payment as provided for in 

5 this part. 

6 ‘‘(c) WAIVER OF CERTAIN REQUIREMENTS IN ORDER

7 TO ENSURE BENEFICIARY CHOICE.—

8 ‘‘(1) IN GENERAL.—In the case of an eligible 

9 entity that seeks to offer a Medicare Prescription 

10 Drug plan in a State, the Administrator shall waive 

11 the requirement of subsection (a)(1) that the entity 

12 be licensed in that State if the Administrator deter13 mines, based on the application and other evidence 

14 presented to the Administrator, that any of the 

15 grounds for approval of the application described in 

16 paragraph (2) have been met. 

17 ‘‘(2) GROUNDS FOR APPROVAL.—The grounds 

18 for approval under this paragraph are the grounds 

19 for approval described in subparagraphs (B), (C), 

20 and (D) of section 1855(a)(2), and also include the 

21 application by a State of any grounds other than 

22 those required under Federal law. 

23 ‘‘(3) APPLICATION OF WAIVER PROCEDURES.—

24 With respect to an application for a waiver (or a 

25 waiver granted) under this subsection, the provisions 
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1 of subparagraphs (E), (F), and (G) of section 

2 1855(a)(2) shall apply. 

3 ‘‘(4) REFERENCES TO CERTAIN PROVISIONS.—

4 For purposes of this subsection, in applying the pro5 visions of section 1855(a)(2) under this subsection 

6 to Medicare Prescription Drug plans and eligible en7 tities—

8 ‘‘(A) any reference to a waiver application 

9 under section 1855 shall be treated as a ref10 erence to a waiver application under paragraph 

11 (1); and 

12 ‘‘(B) any reference to solvency standards 

13 were treated as a reference to solvency stand14 ards established under subsection (d). 

15 ‘‘(d) SOLVENCY STANDARDS FOR NON-LICENSED

16 ENTITIES.—

17 ‘‘(1) ESTABLISHMENT AND PUBLICATION.—The 

18 Administrator, in consultation with the National As19 sociation of Insurance Commissioners, shall establish 

20 and publish, by not later than January 1, 2005, fi21 nancial solvency and capital adequacy standards for 

22 entities described in paragraph (2). 

23 ‘‘(2) COMPLIANCE WITH STANDARDS.—An eligi24 ble entity that is not licensed by a State under sub25 section (a)(1) and for which a waiver application has 
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1 been approved under subsection (c) shall meet sol2 vency and capital adequacy standards established 

3 under paragraph (1). The Administrator shall estab4 lish certification procedures for such eligible entities 

5 with respect to such solvency standards in the man6 ner described in section 1855(c)(2). 

7 ‘‘(e) LICENSURE DOES NOT SUBSTITUTE FOR OR

8 CONSTITUTE CERTIFICATION.—The fact that an entity is 

9 licensed in accordance with subsection (a)(1) or has a 

10 waiver application approved under subsection (c) does not 

11 deem the eligible entity to meet other requirements im12 posed under this part for an eligible entity. 

13 ‘‘(f) INCORPORATION OF CERTAIN

14 MEDICAREADVANTAGE CONTRACT REQUIREMENTS.—The 

15 following provisions of section 1857 shall apply, subject 

16 to subsection (c)(4), to contracts under this section in the 

17 same manner as they apply to contracts under section 

18 1857(a): 

19 ‘‘(1) PROTECTIONS AGAINST FRAUD AND BENE20 FICIARY PROTECTIONS.—Section 1857(d). 

21 ‘‘(2) INTERMEDIATE SANCTIONS.—Section 

22 1857(g), except that in applying such section—

23 ‘‘(A) the reference in section 

24 1857(g)(1)(B) to section 1854 is deemed a ref25 erence to this part; and 
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1 ‘‘(B) the reference in section 

2 1857(g)(1)(F) to section 1852(k)(2)(A)(ii) shall 

3 not be applied. 

4 ‘‘(3) PROCEDURES FOR TERMINATION.—Section 

5 1857(h). 

6 ‘‘(g) OTHER STANDARDS.—The Administrator shall 

7 establish by regulation other standards (not described in 

8 subsection (d)) for eligible entities and Medicare Prescrip9 tion Drug plans consistent with, and to carry out, this 

10 part. The Administrator shall publish such regulations by 

11 January 1, 2005. 

12 ‘‘(h) PERIODIC REVIEW AND REVISION OF STAND13 ARDS.—

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

15 the Administrator shall periodically review the 

16 standards established under this section and, based 

17 on such review, may revise such standards if the Ad18 ministrator determines such revision to be appro19 priate. 

20 ‘‘(2) PROHIBITION OF MIDYEAR IMPLEMENTA21 TION OF SIGNIFICANT NEW REGULATORY REQUIRE22 MENTS.—The Administrator may not implement, 

23 other than at the beginning of a calendar year, regu24 lations under this section that impose new, signifi-
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1 cant regulatory requirements on an eligible entity or 

2 a Medicare Prescription Drug plan. 

3 ‘‘(h) RELATION TO STATE LAWS.—

4 ‘‘(1) IN GENERAL.—The standards established 

5 under this part shall supersede any State law or reg6 ulation (including standards described in paragraph 

7 (2)) with respect to Medicare Prescription Drug 

8 plans which are offered by eligible entities under this 

9 part—

10 ‘‘(A) to the extent such law or regulation 

11 is inconsistent with such standards; and 

12 ‘‘(B) in the same manner as such laws and 

13 regulations are superseded under section 

14 1856(b)(3). 

15 ‘‘(2) STANDARDS SPECIFICALLY SUPER16 SEDED.—State standards relating to the following 

17 are superseded under this section: 

18 ‘‘(A) Benefit requirements, including re19 quirements relating to cost-sharing and the 

20 structure of formularies. 

21 ‘‘(B) Premiums. 

22 ‘‘(C) Requirements relating to inclusion or 

23 treatment of providers. 

24 ‘‘(D) Coverage determinations (including 

25 related appeals and grievance processes). 
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1 ‘‘(E) Requirements relating to marketing 

2 materials and summaries and schedules of ben3 efits regarding a Medicare Prescription Drug 

4 plan. 

5 ‘‘(3) PROHIBITION OF STATE IMPOSITION OF

6 PREMIUM TAXES.—No State may impose a premium 

7 tax or similar tax with respect to—

8 ‘‘(A) monthly beneficiary obligations paid 

9 to the Administrator for Medicare Prescription 

10 Drug plans under this part; or 

11 ‘‘(B) any payments made by the Adminis12 trator under this part to an eligible entity offer13 ing such a plan. 

14 ‘‘Subpart 2—Prescription Drug Delivery System 

15 ‘‘ESTABLISHMENT OF SERVICE AREAS

16 ‘‘SEC. 1860D–10. (a) ESTABLISHMENT.—

17 ‘‘(1) INITIAL ESTABLISHMENT.—Not later than 

18 April 15, 2005, the Administrator shall establish 

19 and publish the service areas in which Medicare Pre20 scription Drug plans may offer benefits under this 

21 part. 

22 ‘‘(2) PERIODIC REVIEW AND REVISION OF

23 SERVICE AREAS.—The Administrator shall periodi24 cally review the service areas applicable under this 

25 section and, based on such review, may revise such 
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1 service areas if the Administrator determines such 

2 revision to be appropriate. 

3 ‘‘(b) REQUIREMENTS FOR ESTABLISHMENT OF

4 SERVICE AREAS.—

5 ‘‘(1) IN GENERAL.—The Administrator shall es6 tablish the service areas under subsection (a) in a 

7 manner that—

8 ‘‘(A) maximizes the availability of Medi9 care Prescription Drug plans to eligible bene10 ficiaries; and 

11 ‘‘(B) minimizes the ability of eligible enti12 ties offering such plans to favorably select eligi13 ble beneficiaries. 

14 ‘‘(2) ADDITIONAL REQUIREMENTS.—The Ad15 ministrator shall establish the service areas under 

16 subsection (a) consistent with the following require17 ments: 

18 ‘‘(A) There shall be at least 10 service 

19 areas. 

20 ‘‘(B) Each service area must include at 

21 least 1 State. 

22 ‘‘(C) The Administrator may not divide 

23 States so that portions of the State are in dif24 ferent service areas. 
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1 ‘‘(D) To the extent possible, the Adminis2 trator shall include multistate metropolitan sta3 tistical areas in a single service area. The Ad4 ministrator may divide metropolitan statistical 

5 areas where it is necessary to establish service 

6 areas of such size and geography as to maxi7 mize the participation of Medicare Prescription 

8 Drug plans. 

9 ‘‘(3) MAY CONFORM TO MEDICAREADVANTAGE

10 PREFERRED PROVIDER REGIONS.—The Adminis11 trator may conform the service areas established 

12 under this section to the preferred provider regions 

13 established under section 1858(a)(3). 

14 ‘‘PUBLICATION OF RISK ADJUSTERS

15 ‘‘SEC. 1860D–11. (a) PUBLICATION.—Not later than 

16 April 15 of each year (beginning in 2005), the Adminis17 trator shall publish the risk adjusters established under 

18 subsection (b) to be used in computing—

19 ‘‘(1) the amount of payment to Medicare Pre20 scription Drug plans in the subsequent year under 

21 section 1860D–16(a), insofar as it is attributable to 

22 standard prescription drug coverage (or actuarially 

23 equivalent prescription drug coverage); and 

24 ‘‘(2) the amount of payment to 

25 MedicareAdvantage plans in the subsequent year 

26 under section 1858A(c), insofar as it is attributable 
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1 to standard prescription drug coverage (or actuari2 ally equivalent prescription drug coverage). 

3 ‘‘(b) ESTABLISHMENT OF RISK ADJUSTERS.—

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

5 the Administrator shall establish an appropriate 

6 methodology for adjusting the amount of payment to 

7 plans referred to in subsection (a) to take into ac8 count variation in costs based on the differences in 

9 actuarial risk of different enrollees being served. Any 

10 such risk adjustment shall be designed in a manner 

11 as to not result in a change in the aggregate pay12 ments described in paragraphs (1) and (2) of sub13 section (a). 

14 ‘‘(2) CONSIDERATIONS.—In establishing the 

15 methodology under paragraph (1), the Administrator 

16 may take into account the similar methodologies 

17 used under section 1853(a)(3) to adjust payments to 

18 MedicareAdvantage organizations. 

19 ‘‘(3) DATA COLLECTION.—In order to carry out 

20 this subsection, the Administrator shall require—

21 ‘‘(A) eligible entities to submit data re22 garding drug claims that can be linked at the 

23 beneficiary level to part A and part B data and 

24 such other information as the Administrator de25 termines necessary; and 
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1 ‘‘(B) MedicareAdvantage organizations 

2 (except MSA plans or a private fee-for-service 

3 plan that does not provide qualified prescription 

4 drug coverage) to submit data regarding drug 

5 claims that can be linked to other data that 

6 such organizations are required to submit to 

7 the Administrator and such other information 

8 as the Administrator determines necessary. 

9 ‘‘SUBMISSION OF BIDS FOR PROPOSED MEDICARE

10 PRESCRIPTION DRUG PLANS

11 ‘‘SEC. 1860D–12. (a) SUBMISSION.—

12 ‘‘(1) IN GENERAL.—Each eligible entity that in13 tends to offer a Medicare Prescription Drug plan in 

14 an area in a year (beginning with 2006) shall submit 

15 to the Administrator, at such time in the previous 

16 year and in such manner as the Administrator may 

17 specify, such information as the Administrator may 

18 require, including the information described in sub19 section (b). 

20 ‘‘(2) ANNUAL SUBMISSION.—An eligible entity 

21 shall submit the information required under para22 graph (1) with respect to a Medicare Prescription 

23 Drug plan that the entity intends to offer on an an24 nual basis. 
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1 ‘‘(b) INFORMATION DESCRIBED.—The information 

2 described in this subsection includes information on each 

3 of the following: 

4 ‘‘(1) The benefits under the plan (as required 

5 under section 1860D–6). 

6 ‘‘(2) The actuarial value of the qualified pre7 scription drug coverage. 

8 ‘‘(3) The amount of the monthly plan premium 

9 under the plan, including an actuarial certification 

10 of—

11 ‘‘(A) the actuarial basis for such monthly 

12 plan premium; 

13 ‘‘(B) the portion of such monthly plan pre14 mium attributable to standard prescription 

15 drug coverage or actuarially equivalent prescrip16 tion drug coverage and, if applicable, to benefits 

17 that are in addition to such coverage; and 

18 ‘‘(C) the reduction in such monthly plan 

19 premium resulting from the payments provided 

20 under section 1860D–20. 

21 ‘‘(4) The service area for the plan. 

22 ‘‘(5) Whether the entity plans to use any funds 

23 in the plan stabilization reserve fund in the Prescrip24 tion Drug Account that are available to the entity to 

25 stabilize or reduce the monthly plan premium sub-
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1 mitted under paragraph (3), and if so, the amount 

2 in such reserve fund that is to be used. 

3 ‘‘(6) Such other information as the Adminis4 trator may require to carry out this part. 

5 ‘‘(c) OPTIONS REGARDING SERVICE AREAS.—

6 ‘‘(1) IN GENERAL.—The service area of a Medi7 care Prescription Drug plan shall be either—

8 ‘‘(A) the entire area of 1 of the service 

9 areas established by the Administrator under 

10 section 1860D–10; or 

11 ‘‘(B) the entire area covered by the medi12 care program. 

13 ‘‘(2) RULE OF CONSTRUCTION.—Nothing in 

14 this part shall be construed as prohibiting an eligible 

15 entity from submitting separate bids in multiple 

16 service areas as long as each bid is for a single serv17 ice area. 

18 ‘‘APPROVAL OF PROPOSED MEDICARE PRESCRIPTION

19 DRUG PLANS

20 ‘‘SEC. 1860D–13. (a) APPROVAL.—

21 ‘‘(1) IN GENERAL.—The Administrator shall re22 view the information filed under section 1860D–12 

23 and shall approve or disapprove the Medicare Pre24 scription Drug plan. 

25 ‘‘(2) REQUIREMENTS FOR APPROVAL.—The Ad26 ministrator may not approve a Medicare Prescrip-
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1 tion Drug plan unless the following requirements are 

2 met: 

3 ‘‘(A) COMPLIANCE WITH REQUIRE4 MENTS.—The plan and the entity offering the 

5 plan comply with the requirements under this 

6 part. 

7 ‘‘(B) APPLICATION OF FEHBP STAND8 ARD.—(i) The portion of the monthly plan pre9 mium submitted under section 1860D–12(b) 

10 that is attributable to standard prescription 

11 drug coverage reasonably and equitably reflects 

12 the actuarial value of the standard prescription 

13 drug coverage less the actuarial value of the re14 insurance payments under section 1860D–20 

15 and the amount of any funds in the plan sta16 bilization reserve fund in the Prescription Drug 

17 Account used to stabilize or reduce the monthly 

18 plan premium. 

19 ‘‘(ii) If the plan provides additional pre20 scription drug coverage pursuant to section 

21 1860D–6(a)(2), the monthly plan premium rea22 sonably and equitably reflects the actuarial 

23 value of the coverage provided less the actuarial 

24 value of the reinsurance payments under section 

25 1860D–20 and the amount of any funds in the 
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1 plan stabilization reserve fund in the Prescrip2 tion Drug Account used to stabilize or reduce 

3 the monthly plan premium. 

4 ‘‘(b) NEGOTIATION.—In exercising the authority 

5 under subsection (a), the Administrator shall have the au6 thority to—

7 ‘‘(1) negotiate the terms and conditions of the 

8 proposed monthly plan premiums submitted and 

9 other terms and conditions of a proposed plan; and 

10 ‘‘(2) disapprove, or limit enrollment in, a pro11 posed plan based on—

12 ‘‘(A) the costs to beneficiaries under the 

13 plan; 

14 ‘‘(B) the quality of the coverage and bene15 fits under the plan; 

16 ‘‘(C) the adequacy of the network under 

17 the plan; 

18 ‘‘(D) the average aggregate projected cost 

19 of covered drugs under the plan relative to 

20 other Medicare Prescription Drug plans and 

21 MedicareAdvantage plans; or 

22 ‘‘(E) other factors determined appropriate 

23 by the Administrator. 

24 ‘‘(c) SPECIAL RULES FOR APPROVAL.—The Adminis25 trator may approve a Medicare Prescription Drug plan 
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1 submitted under section 1860D–12 only if the benefits 

2 under such plan—

3 ‘‘(1) include the required benefits under section 

4 1860D–6(a)(1); and 

5 ‘‘(2) are not designed in such a manner that 

6 the Administrator finds is likely to result in favor7 able selection of eligible beneficiaries. 

8 ‘‘(d) ACCESS TO COMPETITIVE COVERAGE.—

9 ‘‘(1) NUMBER OF CONTRACTS.—The Adminis10 trator, consistent with the requirements of this part 

11 and the goal of containing costs under this title, 

12 shall, with respect to a year, approve at least 2 con13 tracts to offer a Medicare Prescription Drug plan in 

14 each service area (established under section 1860D–

15 10) for the year. 

16 ‘‘(2) AUTHORITY TO REDUCE RISK TO ENSURE

17 ACCESS.—

18 ‘‘(A) IN GENERAL.—Subject to subpara19 graph (B), if the Administrator determines, 

20 with respect to an area, that the access re21 quired under paragraph (1) is not going to be 

22 provided in the area during the subsequent 

23 year, the Administrator shall— 
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1 ‘‘(i) adjust the percents specified in 

2 paragraphs (2) and (4) of section 1860D–

3 16(b) in an area in a year; or 

4 ‘‘(ii) increase the percent specified in 

5 section 1860D–20(c)(1) in an area in a 

6 year. 

7 The administrator shall exercise the authority 

8 under the preceding sentence only so long as 

9 (and to the extent) necessary to assure the ac10 cess guaranteed under paragraph (1). 

11 ‘‘(B) REQUIREMENTS FOR USE OF AU12 THORITY.—In exercising authority under sub13 paragraph (A), the Administrator—

14 ‘‘(i) shall not provide for the full un15 derwriting of financial risk for any eligible 

16 entity; 

17 ‘‘(ii) shall not provide for any under18 writing of financial risk for a public eligi19 ble entity with respect to the offering of a 

20 nationwide Medicare Prescription Drug 

21 plan; and 

22 ‘‘(iii) shall seek to maximize the as23 sumption of financial risk by eligible enti24 ties to ensure fair competition among 

25 Medicare Prescription Drug plans. 
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1 ‘‘(C) REQUIREMENT TO ACCEPT 2 FULL2 RISK QUALIFIED BIDS BEFORE EXERCISING AU3 THORITY.—The Administrator may not exercise 

4 the authority under subparagraph (A) with re5 spect to an area and year if 2 or more qualified 

6 bids are submitted by eligible entities to offer a 

7 Medicare Prescription Drug plan in the area for 

8 the year under paragraph (1) before the appli9 cation of subparagraph (A). 

10 ‘‘(D) REPORTS.—The Administrator, in 

11 each annual report to Congress under section 

12 1808(c)(1)(D), shall include information on the 

13 exercise of authority under subparagraph (A). 

14 The Administrator also shall include such rec15 ommendations as may be appropriate to limit 

16 the exercise of such authority. 

17 ‘‘(e) GUARANTEED ACCESS.—

18 ‘‘(1) ACCESS.—In order to assure access to 

19 qualified prescription drug coverage in an area, the 

20 Administrator shall take the following steps: 

21 ‘‘(A) DETERMINATION.—Not later than 

22 September 1 of each year (beginning in 2005) 

23 and for each area (established under section 

24 1860D–10), the Administrator shall make a de25 termination as to whether the access required 
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1 under subsection (d)(1) is going to be provided 

2 in the area during the subsequent year. Such 

3 determination shall be made after the Adminis4 trator has exercised the authority under sub5 section (d)(2). 

6 ‘‘(B) CONTRACT WITH AN ENTITY TO PRO7 VIDE COVERAGE IN AN AREA.—Subject to para8 graph (3), if the Administrator makes a deter9 mination under subparagraph (A) that the ac10 cess required under subsection (d)(1) is not 

11 going to be provided in an area during the sub12 sequent year, the Administrator shall enter into 

13 a contract with an entity to provide eligible 

14 beneficiaries enrolled under this part (and not, 

15 except for an MSA plan or a private fee-for16 service plan that does not provide qualified pre17 scription drug coverage enrolled in a 

18 MedicareAdvantage plan) and residing in the 

19 area with standard prescription drug coverage 

20 (including access to negotiated prices for such 

21 beneficiaries pursuant to section 1860D–6(e)) 

22 during the subsequent year. An entity may be 

23 awarded a contract for more than 1 of the 

24 areas for which the Administrator is required to 

25 enter into a contract under this paragraph but 
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1 the Administrator may enter into only 1 such 

2 contract in each such area. 

3 ‘‘(C) REQUIREMENT TO ACCEPT 2 RE4 DUCED-RISK QUALIFIED BIDS BEFORE ENTER5 ING INTO CONTRACT.—The Administrator may 

6 not enter into a contract under subparagraph 

7 (B) with respect to an area and year if 2 or 

8 more qualified bids are submitted by eligible en9 tities to offer a Medicare Prescription Drug 

10 plan in the area for the year after the Adminis11 trator has exercised the authority under sub12 section (d)(2) in the area for the year. 

13 ‘‘(D) ENTITY REQUIRED TO MEET BENE14 FICIARY PROTECTION AND OTHER REQUIRE15 MENTS.—An entity with a contract under sub16 paragraph (B) shall meet the requirements de17 scribed in section 1860D–5 and such other re18 quirements determined appropriate by the Ad19 ministrator. 

20 ‘‘(E) COMPETITIVE PROCEDURES.—Com21 petitive procedures (as defined in section 4(5) 

22 of the Office of Federal Procurement Policy Act 

23 (41 U.S.C. 403(5))) shall be used to enter into 

24 a contract under subparagraph (B). 
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1 ‘‘(2) MONTHLY BENEFICIARY OBLIGATION FOR

2 ENROLLMENT.—

3 ‘‘(A) IN GENERAL.—In the case of an eligi4 ble beneficiary receiving access to qualified pre5 scription drug coverage through enrollment with 

6 an entity with a contract under paragraph 

7 (1)(B), the monthly beneficiary obligation of 

8 such beneficiary for such enrollment shall be an 

9 amount equal to the applicable percent (as de10 termined under section 1860D–17(c)) of the 

11 monthly national average premium (as com12 puted under section 1860D–15) for the area for 

13 the year, as adjusted using the geographic ad14 juster under subparagraph (B). 

15 ‘‘(B) ESTABLISHMENT OF GEOGRAPHIC

16 ADJUSTER.—The Administrator shall establish 

17 an appropriate methodology for adjusting the 

18 monthly beneficiary obligation (as computed 

19 under subparagraph (A)) for the year in an 

20 area to take into account differences in drug 

21 prices among areas. In establishing such meth22 odology, the Administrator may take into ac23 count differences in drug utilization between eli24 gible beneficiaries in an area and eligible bene25 ficiaries in other areas and the results of the 
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1 ongoing study required under section 106 of the 

2 Prescription Drug and Medicare Improvement 

3 Act of 2003. Any such adjustment shall be ap4 plied in a manner so as to not result in a 

5 change in the aggregate payments made under 

6 this part that would have been made if the Ad7 ministrator had not applied such adjustment. 

8 ‘‘(3) PAYMENTS UNDER THE CONTRACT.—

9 ‘‘(A) IN GENERAL.—A contract entered 

10 into under paragraph (1)(B) shall provide for—

11 ‘‘(i) payment for the negotiated costs 

12 of covered drugs provided to eligible bene13 ficiaries enrolled with the entity; and 

14 ‘‘(ii) payment of prescription manage15 ment fees that are tied to performance re16 quirements established by the Adminis17 trator for the management, administration, 

18 and delivery of the benefits under the con19 tract. 

20 ‘‘(B) PERFORMANCE REQUIREMENTS.—

21 The performance requirements established by 

22 the Administrator pursuant to subparagraph 

23 (A)(ii) shall include the following: 

24 ‘‘(i) The entity contains costs to the 

25 Prescription Drug Account and to eligible 
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1 beneficiaries enrolled under this part and 

2 with the entity. 

3 ‘‘(ii) The entity provides such bene4 ficiaries with quality clinical care. 

5 ‘‘(iii) The entity provides such bene6 ficiaries with quality services. 

7 ‘‘(C) ENTITY ONLY AT RISK TO THE EX8 TENT OF THE FEES TIED TO PERFORMANCE

9 REQUIREMENTS.—An entity with a contract 

10 under paragraph (1)(B) shall only be at risk for 

11 the provision of benefits under the contract to 

12 the extent that the management fees paid to 

13 the entity are tied to performance requirements 

14 under subparagraph (A)(ii). 

15 ‘‘(4) ELIGIBLE ENTITY THAT SUBMITTED A BID

16 FOR THE AREA NOT ELIGIBLE TO BE AWARDED THE

17 CONTRACT.—An eligible entity that submitted a bid 

18 to offer a Medicare Prescription Drug plan for an 

19 area for a year under section 1860D–12, including 

20 a bid submitted after the Administrator has exer21 cised the authority under subsection (d)(2), may not 

22 be awarded a contract under paragraph (1)(B) for 

23 that area and year. The previous sentence shall 

24 apply to an entity that was awarded a contract 

25 under paragraph (1)(B) for the area in the previous 
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1 year and submitted such a bid under section 

2 1860D–12 for the year. 

3 ‘‘(5) TERM OF CONTRACT.—A contract entered 

4 into under paragraph (1)(B) shall be for a 1-year 

5 period. Such contract may provide for renewal at the 

6 discretion of the Administrator if the Administrator 

7 is required to enter into a contract under such para8 graph with respect to the area covered by such con9 tract for the subsequent year. 

10 ‘‘(6) ENTITY NOT PERMITTED TO MARKET OR

11 BRAND THE CONTRACT.—An entity with a contract 

12 under paragraph (1)(B) may not engage in any mar13 keting or branding of such contract. 

14 ‘‘(7) RULES FOR AREAS WHERE ONLY 1 COM15 PETITIVELY BID PLAN WAS APPROVED.—In the case 

16 of an area where (before the application of this sub17 section) only 1 Medicare Prescription Drug plan was 

18 approved for a year—

19 ‘‘(A) the plan may (at the option of the 

20 plan) be offered in the area for the year (under 

21 rules applicable to such plans under this part 

22 and not under this subsection); 

23 ‘‘(B) eligible beneficiaries described in 

24 paragraph (1)(B) may receive access to quali25 fied prescription drug coverage through enroll-
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1 ment in the plan or with an entity with a con2 tract under paragraph (1)(B); and 

3 ‘‘(C) for purposes of applying section 

4 1860D–3(a)(1)(A)(ii), such plan shall be the 

5 plan designated in the area under such section. 

6 ‘‘(f) TWO-YEAR CONTRACTS.—Except for a contract 

7 entered into under subsection (e)(1)(B), a contract ap8 proved under this part shall be for a 2-year period. 

9 ‘‘COMPUTATION OF MONTHLY STANDARD PRESCRIPTION

10 DRUG COVERAGE PREMIUMS

11 ‘‘SEC. 1860D–14. (a) IN GENERAL.—For each year 

12 (beginning with 2006), the Administrator shall compute 

13 a monthly standard prescription drug coverage premium 

14 for each Medicare Prescription Drug plan approved under 

15 section 1860D–13 and for each MedicareAdvantage plan. 

16 ‘‘(b) REQUIREMENTS.—The monthly standard pre17 scription drug coverage premium for a plan for a year 

18 shall be equal to—

19 ‘‘(1) in the case of a plan offered by an eligible 

20 entity or MedicareAdvantage organization that pro21 vides standard prescription drug coverage or an ac22 tuarially equivalent prescription drug coverage and 

23 does not provide additional prescription drug cov24 erage pursuant to section 1860D–6(a)(2), the 

25 monthly plan premium approved for the plan under 

26 section 1860D–13 for the year; and 
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1 ‘‘(2) in the case of a plan offered by an eligible 

2 entity or MedicareAdvantage organization that pro3 vides additional prescription drug coverage pursuant 

4 to section 1860D–6(a)(2)—

5 ‘‘(A) an amount that reflects only the actu6 arial value of the standard prescription drug 

7 coverage offered under the plan; or 

8 ‘‘(B) if determined appropriate by the Ad9 ministrator, the monthly plan premium ap10 proved under section 1860D–13 for the year for 

11 the Medicare Prescription Drug plan (or, if ap12 plicable, the MedicareAdvantage plan) that, as 

13 required under section 1860D–6(a)(2)(B) for a 

14 Medicare Prescription Drug plans and a 

15 MedicareAdvantage plan—

16 ‘‘(i) is offered by such entity or orga17 nization in the same area as the plan; and 

18 ‘‘(ii) does not provide additional pre19 scription drug coverage pursuant to such 

20 section. 

21 ‘‘COMPUTATION OF MONTHLY NATIONAL AVERAGE

22 PREMIUM

23 ‘‘SEC. 1860D–15. (a) COMPUTATION.—

24 ‘‘(1) IN GENERAL.—For each year (beginning 

25 with 2006) the Administrator shall compute a 

26 monthly national average premium equal to the aver-
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1 age of the monthly standard prescription drug cov2 erage premium for each Medicare Prescription Drug 

3 plan and each MedicareAdvantage plan (as com4 puted under section 1860D–14). Such premium may 

5 be adjusted pursuant to any methodology deter6 mined under subsection (b), as determined appro7 priate by the Administrator. 

8 ‘‘(2) WEIGHTED AVERAGE.—The monthly na9 tional average premium computed under paragraph 

10 (1) shall be a weighted average, with the weight for 

11 each plan being equal to the average number of 

12 beneficiaries enrolled under such plan in the pre13 vious year. 

14 ‘‘(b) GEOGRAPHIC ADJUSTMENT.—The Adminis15 trator shall establish an appropriate methodology for ad16 justing the monthly national average premium (as com17 puted under subsection (a)) for the year in an area to take 

18 into account differences in prices for covered drugs among 

19 different areas. In establishing such methodology, the Ad20 ministrator may take into account differences in drug uti21 lization between eligible beneficiaries in that area and 

22 other eligible beneficiaries and the results of the ongoing 

23 study required under section 106 of the Prescription Drug 

24 and Medicare Improvement Act of 2003. Any such adjust25 ment shall be applied in a manner as to not result in a 
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1 change in aggregate payments made under this part than 

2 would have been made if the Administrator had not ap3 plied such adjustment. 

4 ‘‘(c) SPECIAL RULE FOR 2006.—For purposes of ap5 plying this section for 2006, the Administrator shall estab6 lish procedures for determining the weighted average 

7 under subsection (a)(2) for 2005. 

8 ‘‘PAYMENTS TO ELIGIBLE ENTITIES

9 ‘‘SEC. 1860D–16. (a) PAYMENT OF MONTHLY PLAN

10 PREMIUMS.—For each year (beginning with 2006), the 

11 Administrator shall pay to each entity offering a Medicare 

12 Prescription Drug plan in which an eligible beneficiary is 

13 enrolled an amount equal to the full amount of the month14 ly plan premium approved for the plan under section 

15 1860D–13 on behalf of each eligible beneficiary enrolled 

16 in such plan for the year, as adjusted using the risk ad17 justers that apply to the standard prescription drug cov18 erage published under section 1860D–11. 

19 ‘‘(b) PORTION OF TOTAL PAYMENTS OF MONTHLY

20 PLAN PREMIUMS SUBJECT TO RISK.—

21 ‘‘(1) NOTIFICATION OF SPENDING UNDER THE

22 PLAN.—

23 ‘‘(A) IN GENERAL.—For each year (begin24 ning in 2007), the eligible entity offering a 

25 Medicare Prescription Drug plan shall notify 

26 the Administrator of the following: 
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1 ‘‘(i) TOTAL ACTUAL COSTS.—The 

2 total amount of costs that the entity in3 curred in providing standard prescription 

4 drug coverage (or prescription drug cov5 erage that is actuarially equivalent pursu6 ant to section 1860D–6(a)(1)(B)) for all 

7 enrollees under the plan in the previous 

8 year. 

9 ‘‘(ii) AMOUNTS RESULTING IN ACTUAL

10 COSTS.—With respect to the total amount 

11 under clause (i) for the year—

12 ‘‘(I) the aggregate amount of 

13 payments made by the entity to phar14 macies and other entities with respect 

15 to such coverage for such enrollees; 

16 and 

17 ‘‘(II) the aggregate amount of 

18 discounts, direct or indirect subsidies, 

19 rebates, or other price concessions or 

20 direct or indirect remunerations made 

21 to the entity with respect to such cov22 erage for such enrollees. 

23 ‘‘(B) CERTAIN EXPENSES NOT IN24 CLUDED.—The amount under subparagraph 

25 (A)(i) may not include—
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1 ‘‘(i) administrative expenses incurred 

2 in providing the coverage described in sub3 paragraph (A)(i); 

4 ‘‘(ii) amounts expended on providing 

5 additional prescription drug coverage pur6 suant to section 1860D–6(a)(2); 

7 ‘‘(iii) amounts expended for which the 

8 entity is subsequently provided with rein9 surance payments under section 1860D–

10 20; or 

11 ‘‘(iv) discounts, direct or indirect sub12 sidies, rebates, or other price concessions 

13 or direct or indirect remunerations made 

14 to the entity with respect to coverage de15 scribed in subparagraph (A)(i). 

16 ‘‘(2) ADJUSTMENT OF PAYMENT.—

17 ‘‘(A) NO ADJUSTMENT IF ALLOWABLE

18 COSTS WITHIN RISK CORRIDOR.—If the allow19 able costs (specified in paragraph (3)) for the 

20 plan for the year are not more than the first 

21 threshold upper limit of the risk corridor (speci22 fied in paragraph (4)(A)(iii)) and are not less 

23 than the first threshold lower limit of the risk 

24 corridor (specified in paragraph (4)(A)(i)) for 

25 the plan for the year, then no additional pay-
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1 ments shall be made by the Administrator and 

2 no payments shall be made by (or collected 

3 from) the eligible entity offering the plan. 

4 ‘‘(B) INCREASE IN PAYMENT IF ALLOW5 ABLE COSTS ABOVE UPPER LIMIT OF RISK COR6 RIDOR.—

7 ‘‘(i) IN GENERAL.—If the allowable 

8 costs for the plan for the year are more 

9 than the first threshold upper limit of the 

10 risk corridor for the plan for the year, then 

11 the Administrator shall increase the total 

12 of the monthly payments made to the enti13 ty offering the plan for the year under sub14 section (a) by an amount equal to the sum 

15 of—

16 ‘‘(I) the applicable percent (as 

17 defined in subparagraph (D)) of such 

18 allowable costs which are more than 

19 such first threshold upper limit of the 

20 risk corridor and not more than the 

21 second threshold upper limit of the 

22 risk corridor for the plan for the year 

23 (as specified under paragraph 

24 (4)(A)(iv)); and 
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1 ‘‘(II) 90 percent of such allow2 able costs which are more than such 

3 second threshold upper limit of the 

4 risk corridor. 

5 ‘‘(ii) SPECIAL TRANSITIONAL COR6 RIDOR FOR 2006 AND 2007.—If the Admin7 istrator determines with respect to 2006 or 

8 2007 that at least 60 percent of Medicare 

9 Prescription Drug plans and 

10 MedicareAdvantage Plans (excluding MSA 

11 plans or private fee-for-service plans that 

12 do not provide qualified prescription drug 

13 coverage) have allowable costs for the plan 

14 for the year that are more than the first 

15 threshold upper limit of the risk corridor 

16 for the plan for the year and that such 

17 plans represent at least 60 percent of eligi18 ble beneficiaries enrolled under this part, 

19 clause (i)(I) shall be applied by sub20 stituting ‘90 percent’ for ‘applicable per21 cent’. 

22 ‘‘(C) PLAN PAYMENT IF ALLOWABLE

23 COSTS BELOW LOWER LIMIT OF RISK COR24 RIDOR.—If the allowable costs for the plan for 

25 the year are less than the first threshold lower 
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1 limit of the risk corridor for the plan for the 

2 year, then the entity offering the plan shall a 

3 make a payment to the Administrator of an 

4 amount (or the Administrator shall otherwise 

5 recover from the plan an amount) equal to—

6 ‘‘(i) the applicable percent (as so de7 fined) of such allowable costs which are 

8 less than such first threshold lower limit of 

9 the risk corridor and not less than the sec10 ond threshold lower limit of the risk cor11 ridor for the plan for the year (as specified 

12 under paragraph (4)(A)(ii)); and 

13 ‘‘(ii) 90 percent of such allowable 

14 costs which are less than such second 

15 threshold lower limit of the risk corridor. 

16 ‘‘(D) APPLICABLE PERCENT DEFINED.—

17 For purposes of this paragraph, the term ‘ap18 plicable percent’ means—

19 ‘‘(i) for 2006 and 2007, 75 percent; 

20 and 

21 ‘‘(ii) for 2008 and subsequent years, 

22 50 percent. 

23 ‘‘(3) ESTABLISHMENT OF ALLOWABLE

24 COSTS.—For each year, the Administrator shall es25 tablish the allowable costs for each Medicare Pre-
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1 scription Drug plan for the year. The allowable costs 

2 for a plan for a year shall be equal to the amount 

3 described in paragraph (1)(A)(i) for the plan for the 

4 year. 

5 ‘‘(4) ESTABLISHMENT OF RISK CORRIDORS.—

6 ‘‘(A) IN GENERAL.—For each year (begin7 ning with 2006), the Administrator shall estab8 lish a risk corridor for each Medicare Prescrip9 tion Drug plan. The risk corridor for a plan for 

10 a year shall be equal to a range as follows: 

11 ‘‘(i) FIRST THRESHOLD LOWER

12 LIMIT.—The first threshold lower limit of 

13 such corridor shall be equal to—

14 ‘‘(I) the target amount described 

15 in subparagraph (B) for the plan; 

16 minus 

17 ‘‘(II) an amount equal to the 

18 first threshold risk percentage for the 

19 plan (as determined under subpara20 graph (C)(i)) of such target amount. 

21 ‘‘(ii) SECOND THRESHOLD LOWER

22 LIMIT.—The second threshold lower limit 

23 of such corridor shall be equal to—
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1 ‘‘(I) the target amount described 

2 in subparagraph (B) for the plan; 

3 minus 

4 ‘‘(II) an amount equal to the sec5 ond threshold risk percentage for the 

6 plan (as determined under subpara7 graph (C)(ii)) of such target amount. 

8 ‘‘(iii) FIRST THRESHOLD UPPER

9 LIMIT.—The first threshold upper limit of 

10 such corridor shall be equal to the sum 

11 of—

12 ‘‘(I) such target amount; and 

13 ‘‘(II) the amount described in 

14 clause (i)(II). 

15 ‘‘(iv) SECOND THRESHOLD UPPER

16 LIMIT.—The second threshold upper limit 

17 of such corridor shall be equal to the sum 

18 of—

19 ‘‘(I) such target amount; and 

20 ‘‘(II) the amount described in 

21 clause (ii)(II). 

22 ‘‘(B) TARGET AMOUNT DESCRIBED.—The 

23 target amount described in this paragraph is, 

24 with respect to a Medicare Prescription Drug 

25 plan offered by an eligible entity in a year—
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1 ‘‘(i) in the case of a plan offered by 

2 an eligible entity that provides standard 

3 prescription drug coverage or actuarially 

4 equivalent prescription drug coverage and 

5 does not provide additional prescription 

6 drug coverage pursuant to section 1860D–

7 6(a)(2), an amount equal to the total of 

8 the monthly plan premiums paid to such 

9 entity for such plan for the year pursuant 

10 to subsection (a), reduced by the percent11 age specified in subparagraph (D); and 

12 ‘‘(ii) in the case of a plan offered by 

13 an eligible entity that provides additional 

14 prescription drug coverage pursuant to sec15 tion 1860D–6(a)(2), an amount equal to 

16 the total of the monthly plan premiums 

17 paid to such entity for such plan for the 

18 year pursuant to subsection (a) that are 

19 related to standard prescription drug cov20 erage (determined using the rules under 

21 section 1860D–14(b)), reduced by the per22 centage specified in subparagraph (D). 

23 ‘‘(C) FIRST AND SECOND THRESHOLD

24 RISK PERCENTAGE DEFINED.—
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1 ‘‘(i) FIRST THRESHOLD RISK PER2 CENTAGE.—Subject to clause (iii), for pur3 poses of this section, the first threshold 

4 risk percentage is—

5 ‘‘(I) for 2006 and 2007, and 2.5 

6 percent; 

7 ‘‘(II) for 2008 through 2011, 5 

8 percent; and 

9 ‘‘(III) for 2012 and subsequent 

10 years, a percentage established by the 

11 Administrator, but in no case less 

12 than 5 percent. 

13 ‘‘(ii) SECOND THRESHOLD RISK PER14 CENTAGE.—Subject to clause (iii), for pur15 poses of this section, the second threshold 

16 risk percentage is—

17 ‘‘(I) for 2006 and 2007, 5.0 per18 cent; 

19 ‘‘(II) for 2008 through 2011, 10 

20 percent 

21 ‘‘(III) for 2012 and subsequent 

22 years, a percentage established by the 

23 Administrator that is greater than the 

24 percent established for the year under 
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1 clause (i)(III), but in no case less 

2 than 10 percent. 

3 ‘‘(iii) REDUCTION OF RISK PERCENT4 AGE TO ENSURE 2 PLANS IN AN AREA.—

5 Pursuant to paragraph (2) of section 

6 1860D–13(d), the Administrator may re7 duce the applicable first or second thresh8 old risk percentage in an area in a year in 

9 order to ensure the access to plans re10 quired under paragraph (1) of such sec11 tion. 

12 ‘‘(D) TARGET AMOUNT NOT TO INCLUDE

13 ADMINISTRATIVE EXPENSES NEGOTIATED BE14 TWEEN THE ADMINISTRATOR AND THE ENTITY

15 OFFERING THE PLAN.—For each year (begin16 ning in 2006), the Administrator and the entity 

17 offering a Medicare Prescription Drug plan 

18 shall negotiate, as part of the negotiation proc19 ess described in section 1860D–13(b) during 

20 the previous year, the percentage of the pay21 ments to the entity under subsection (a) with 

22 respect to the plan that are attributable and 

23 reasonably incurred for administrative expenses 

24 for providing standard prescription drug cov-
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1 erage or actuarially equivalent prescription drug 

2 coverage in the year. 

3 ‘‘(5) PLANS AT RISK FOR ENTIRE AMOUNT OF

4 ADDITIONAL PRESCRIPTION DRUG COVERAGE.—An 

5 eligible entity that offers a Medicare Prescription 

6 Drug plan that provides additional prescription drug 

7 coverage pursuant to section 1860D–6(a)(2) shall be 

8 at full financial risk for the provision of such addi9 tional coverage. 

10 ‘‘(6) NO EFFECT ON ELIGIBLE BENE11 FICIARIES.—No change in payments made by reason 

12 of this subsection shall affect the beneficiary obliga13 tion under section 1860D–17 for the year in which 

14 such change in payments is made. 

15 ‘‘(7) DISCLOSURE OF INFORMATION.—

16 ‘‘(A) IN GENERAL.—Each contract under 

17 this part shall provide that—

18 ‘‘(i) the entity offering a Medicare 

19 Prescription Drug plan shall provide the 

20 Administrator with such information as the 

21 Administrator determines is necessary to 

22 carry out this section; and 

23 ‘‘(ii) the Administrator shall have the 

24 right to inspect and audit any books and 

25 records of the eligible entity that pertain to 
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1 the information regarding costs provided to 

2 the Administrator under paragraph (1). 

3 ‘‘(B) RESTRICTION ON USE OF INFORMA4 TION.—Information disclosed or obtained pur5 suant to the provisions of this section may be 

6 used by officers and employees of the Depart7 ment of Health and Human Services only for 

8 the purposes of, and to the extent necessary in, 

9 carrying out this section. 

10 ‘‘(c) STABILIZATION RESERVE FUND.—

11 ‘‘(1) ESTABLISHMENT.—

12 ‘‘(A) IN GENERAL.—There is established, 

13 within the Prescription Drug Account, a sta14 bilization reserve fund in which the Adminis15 trator shall deposit amounts on behalf of eligi16 ble entities in accordance with paragraph (2) 

17 and such amounts shall be made available by 

18 the Secretary for the use of eligible entities in 

19 contract year 2008 and subsequent contract 

20 years in accordance with paragraph (3). 

21 ‘‘(B) REVERSION OF UNUSED AMOUNTS.—

22 Any amount in the stabilization reserve fund es23 tablished under subparagraph (A) that is not 

24 expended by an eligible entity in accordance 

25 with paragraph (3) or that was deposited for 
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1 the use of an eligible entity that no longer has 

2 a contract under this part shall revert for the 

3 use of the Prescription Drug Account. 

4 ‘‘(2) DEPOSIT OF AMOUNTS FOR 5 YEARS.—

5 ‘‘(A) IN GENERAL.—If the target amount 

6 for a Medicare Prescription Drug plan for 

7 2006, 2007, 2008, 2009, or 2010 (as deter8 mined under subsection (b)(4)(B)) exceeds the 

9 applicable costs for the plan for the year by 

10 more than 3 percent, then—

11 ‘‘(i) the entity offering the plan shall 

12 make a payment to the Administrator of 

13 an amount (or the Administrator shall oth14 erwise recover from the plan an amount) 

15 equal to the portion of such excess that is 

16 in excess of 3 percent of the target 

17 amount; and 

18 ‘‘(ii) the Administrator shall deposit 

19 an amount equal to the amount collected 

20 or otherwise recovered under clause (i) in 

21 the stabilization reserve fund on behalf of 

22 the eligible entity offering such plan. 

23 ‘‘(B) APPLICABLE COSTS.—For purposes 

24 of subparagraph (A), the term ‘applicable costs’ 

25 means, with respect to a Medicare Prescription 
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1 Drug plan and year, an amount equal the sum 

2 of—

3 ‘‘(i) the allowable costs for the plan 

4 and year (as determined under subsection 

5 (b)(3)(A); and 

6 ‘‘(ii) the total amount by which 

7 monthly payments to the plan were re8 duced (or otherwise recovered from the 

9 plan) for the year under subsection 

10 (b)(2)(C). 

11 ‘‘(3) USE OF RESERVE FUND TO STABILIZE OR

12 REDUCE MONTHLY PLAN PREMIUMS.—

13 ‘‘(A) IN GENERAL.—For any contract year 

14 beginning after 2007, an eligible entity offering 

15 a Medicare Prescription Drug plan may use 

16 funds in the stabilization reserve fund in the 

17 Prescription Drug Account that were deposited 

18 in such fund on behalf of the entity to stabilize 

19 or reduce monthly plan premiums submitted 

20 under section 1860D–12(b)(3). 

21 ‘‘(B) PROCEDURES.—The Administrator 

22 shall establish procedures for— 

23 ‘‘(i) reducing monthly plan premiums 

24 submitted under section 1860D–12(b)(3) 

25 pursuant to subparagraph (A); and 
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1 ‘‘(ii) making payments from the plan 

2 stabilization reserve fund in the Prescrip3 tion Drug Account to eligible entities that 

4 inform the Secretary under section 

5 1860D–12(b)(5) of the entity’s intent to 

6 use funds in such reserve fund to reduce 

7 such premiums. 

8 ‘‘(d) PORTION OF PAYMENTS OF MONTHLY PLAN

9 PREMIUMS ATTRIBUTABLE TO ADMINISTRATIVE EX10 PENSES TIED TO PERFORMANCE REQUIREMENTS.—

11 ‘‘(1) IN GENERAL.—The Administrator shall es12 tablish procedures to adjust the portion of the pay13 ments made to an entity under subsection (a) that 

14 are attributable to administrative expenses (as deter15 mined pursuant to subsection (b)(4)(D)) to ensure 

16 that the entity meets the performance requirements 

17 described in clauses (ii) and (iii) of section 1860D–

18 13(e)(4)(B). 

19 ‘‘(2) NO EFFECT ON ELIGIBLE BENE20 FICIARIES.—No change in payments made by reason 

21 of this subsection shall affect the beneficiary obliga22 tion under section 1860D–17 for the year in which 

23 such change in payments is made. 

24 ‘‘(e) PAYMENT TERMS.—
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1 ‘‘(1) ADMINISTRATOR PAYMENTS.—Payments 

2 to an entity offering a Medicare Prescription Drug 

3 plan under this section shall be made in a manner 

4 determined by the Administrator and based upon the 

5 manner in which payments are made under section 

6 1853(a) (relating to payments to MedicareAdvantage 

7 organizations). 

8 ‘‘(2) PLAN PAYMENTS.—The Administrator 

9 shall establish a process for collecting (or other oth10 erwise recovering) amounts that an entity offering a 

11 Medicare Prescription Drug plan is required to make 

12 to the Administrator under this section. 

13 ‘‘(f) PAYMENTS TO MEDICAREADVANTAGE PLANS.—

14 For provisions related to payments to MedicareAdvantage 

15 organizations offering MedicareAdvantage plans for quali16 fied prescription drug coverage made available under the 

17 plan, see section 1858A(c). 

18 ‘‘(g) SECONDARY PAYER PROVISIONS.—The provi19 sions of section 1862(b) shall apply to the benefits pro20 vided under this part. 

21 ‘‘COMPUTATION OF MONTHLY BENEFICIARY OBLIGATION

22 ‘‘SEC. 1860D–17. (a) BENEFICIARIES ENROLLED IN

23 A MEDICARE PRESCRIPTION DRUG PLAN.—In the case of 

24 an eligible beneficiary enrolled under this part and in a 

25 Medicare Prescription Drug plan, the monthly beneficiary 
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1 obligation for enrollment in such plan in a year shall be 

2 determined as follows: 

3 ‘‘(1) MONTHLY PLAN PREMIUM EQUALS

4 MONTHLY NATIONAL AVERAGE PREMIUM.—If the 

5 amount of the monthly plan premium approved by 

6 the Administrator under section 1860D–13 for a 

7 Medicare Prescription Drug plan for the year is 

8 equal to the monthly national average premium (as 

9 computed under section 1860D–15) for the area for 

10 the year, the monthly beneficiary obligation of the 

11 eligible beneficiary in that year shall be an amount 

12 equal to the applicable percent (as determined in 

13 subsection (c)) of the amount of such monthly na14 tional average premium. 

15 ‘‘(2) MONTHLY PLAN PREMIUM LESS THAN

16 MONTHLY NATIONAL AVERAGE PREMIUM.—If the 

17 amount of the monthly plan premium approved by 

18 the Administrator under section 1860D–13 for the 

19 Medicare Prescription Drug plan for the year is less 

20 than the monthly national average premium (as 

21 computed under section 1860D–15) for the area for 

22 the year, the monthly beneficiary obligation of the 

23 eligible beneficiary in that year shall be an amount 

24 equal to—
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1 ‘‘(A) the applicable percent of the amount 

2 of such monthly national average premium; 

3 minus 

4 ‘‘(B) the amount by which such monthly 

5 national average premium exceeds the amount 

6 of the monthly plan premium approved by the 

7 Administrator for the plan. 

8 ‘‘(3) MONTHLY PLAN PREMIUM EXCEEDS

9 MONTHLY NATIONAL AVERAGE PREMIUM.—If the 

10 amount of the monthly plan premium approved by 

11 the Administrator under section 1860D–13 for a 

12 Medicare Prescription Drug plan for the year ex13 ceeds the monthly national average premium (as 

14 computed under section 1860D–15) for the area for 

15 the year, the monthly beneficiary obligation of the 

16 eligible beneficiary in that year shall be an amount 

17 equal to the sum of—

18 ‘‘(A) the applicable percent of the amount 

19 of such monthly national average premium; plus 

20 ‘‘(B) the amount by which the monthly 

21 plan premium approved by the Administrator 

22 for the plan exceeds the amount of such month23 ly national average premium. 

24 ‘‘(b) BENEFICIARIES ENROLLED IN A

25 MEDICAREADVANTAGE PLAN.—In the case of an eligible 
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1 beneficiary that is enrolled in a MedicareAdvantage plan 

2 (except for an MSA plan or a private fee-for-service plan 

3 that does not provide qualified prescription drug cov4 erage), the Medicare monthly beneficiary obligation for 

5 qualified prescription drug coverage shall be determined 

6 pursuant to section 1858A(d). 

7 ‘‘(c) APPLICABLE PERCENT.—For purposes of this 

8 section, except as provided in section 1860D–19 (relating 

9 to premium subsidies for low-income individuals), the ap10 plicable percent for any year is the percentage equal to 

11 a fraction—

12 ‘‘(1) the numerator of which is 30 percent; and 

13 ‘‘(2) the denominator of which is 100 percent 

14 minus a percentage equal to—

15 ‘‘(A) the total reinsurance payments which 

16 the Administrator estimates will be made under 

17 section 1860D–20 to qualifying entities de18 scribed in subsection (e)(3) of such section dur19 ing the year; divided by 

20 ‘‘(B) the sum of—

21 ‘‘(i) the amount estimated under sub22 paragraph (A) for the year; and 

23 ‘‘(ii) the total payments which the Ad24 ministrator estimates will be made under 

25 sections 1860D–16 and 1858A(c) during 
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1 the year that relate to standard prescrip2 tion drug coverage (or actuarially equiva3 lent prescription drug coverage). 

4 ‘‘COLLECTION OF MONTHLY BENEFICIARY OBLIGATION

5 ‘‘SEC. 1860D–18. (a) COLLECTION OF AMOUNT IN

6 SAME MANNER AS PART B PREMIUM.—

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

8 the amount of the monthly beneficiary obligation 

9 (determined under section 1860D–17) applicable to 

10 an eligible beneficiary under this part (after applica11 tion of any increase under section 1860D–

12 2(b)(1)(A)) shall be collected and credited to the 

13 Prescription Drug Account in the same manner as 

14 the monthly premium determined under section 

15 1839 is collected and credited to the Federal Supple16 mentary Medical Insurance Trust Fund under sec17 tion 1840. 

18 ‘‘(2) PROCEDURES FOR SPONSOR TO PAY OBLI19 GATION ON BEHALF OF RETIREE.—The Adminis20 trator shall establish procedures under which an eli21 gible beneficiary enrolled in a Medicare Prescription 

22 Drug plan may elect to have the sponsor (as defined 

23 in paragraph (5) of section 1860D–20(e)) of employ24 ment-based retiree health coverage (as defined in 

25 paragraph (4)(B) of such section) in which the bene26 ficiary is enrolled pay the amount of the monthly 
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1 beneficiary obligation applicable to the beneficiary 

2 under this part directly to the Administrator. 

3 ‘‘(b) INFORMATION NECESSARY FOR COLLECTION.—

4 In order to carry out subsection (a), the Administrator 

5 shall transmit to the Commissioner of Social Security—

6 ‘‘(1) by the beginning of each year, the name, 

7 social security account number, monthly beneficiary 

8 obligation owed by each individual enrolled in a 

9 Medicare Prescription Drug plan for each month 

10 during the year, and other information determined 

11 appropriate by the Administrator; and 

12 ‘‘(2) periodically throughout the year, informa13 tion to update the information previously trans14 mitted under this paragraph for the year. 

15 ‘‘(c) COLLECTION FOR BENEFICIARIES ENROLLED IN

16 A MEDICAREADVANTAGE PLAN.—For provisions related 

17 to the collection of the monthly beneficiary obligation for 

18 qualified prescription drug coverage under a 

19 MedicareAdvantage plan, see section 1858A(e). 

20 ‘‘PREMIUM AND COST-SHARING SUBSIDIES FOR LOW21 INCOME INDIVIDUALS

22 ‘‘SEC. 1860D–19. (a) AMOUNT OF SUBSIDIES.—

23 ‘‘(1) FULL PREMIUM SUBSIDY AND REDUCTION

24 OF COST-SHARING FOR QUALIFIED MEDICARE BENE25 FICIARIES.—In the case of a qualified medicare ben26 eficiary (as defined in paragraph (4)(A))—
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1 ‘‘(A) section 1860D–17 shall be applied—

2 ‘‘(i) in subsection (c), by substituting 

3 ‘0 percent’ for the applicable percent that 

4 would otherwise apply under such sub5 section; and 

6 ‘‘(ii) in subsection (a)(3)(B), by sub7 stituting ‘the amount of the monthly plan 

8 premium for the Medicare Prescription 

9 Drug plan with the lowest monthly plan 

10 premium in the area that the beneficiary 

11 resides’ for ‘the amount of such monthly 

12 national average premium’, but only if 

13 there is no Medicare Prescription Drug 

14 plan offered in the area in which the indi15 vidual resides that has a monthly plan pre16 mium for the year that is equal to or less 

17 than the monthly national average pre18 mium (as computed under section 1860D–

19 15) for the area for the year; 

20 ‘‘(B) the annual deductible applicable 

21 under section 1860D–6(c)(1) in a year shall be 

22 reduced to $0; 

23 ‘‘(C) section 1860D–6(c)(2) shall be ap24 plied by substituting ‘2.5 percent’ for ‘50 per25 cent’ each place it appears; 
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1 ‘‘(D) such individual shall be responsible 

2 for cost-sharing for the cost of any covered 

3 drug provided in the year (after the individual 

4 has reached the initial coverage limit described 

5 in section 1860D–6(c)(3) and before the indi6 vidual has reached the annual out-of-pocket 

7 limit under section 1860D–6(c)(4)(A)), that is 

8 equal to 5.0 percent; and 

9 ‘‘(E) section 1860D–6(c)(4)(A) shall be 

10 applied by substituting ‘2.5 percent’ for ‘10 

11 percent’. 

12 In no case may the application of subparagraph (A) 

13 result in a monthly beneficiary obligation that is 

14 below 0. 

15 ‘‘(2) FULL PREMIUM SUBSIDY AND REDUCTION

16 OF COST-SHARING FOR SPECIFIED LOW INCOME

17 MEDICARE BENEFICIARIES AND QUALIFYING INDI18 VIDUALS.—In the case of a specified low income 

19 medicare beneficiary (as defined in paragraph 

20 (4)(B)) or a qualifying individual (as defined in 

21 paragraph (4)(C))—

22 ‘‘(A) section 1860D–17 shall be applied—

23 ‘‘(i) in subsection (c), by substituting 

24 ‘0 percent’ for the applicable percent that 
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1 would otherwise apply under such sub2 section; and 

3 ‘‘(ii) in subsection (a)(3)(B), by sub4 stituting ‘the amount of the monthly plan 

5 premium for the Medicare Prescription 

6 Drug plan with the lowest monthly plan 

7 premium in the area that the beneficiary 

8 resides’ for ‘the amount of such monthly 

9 national average premium’, but only if 

10 there is no Medicare Prescription Drug 

11 plan offered in the area in which the indi12 vidual resides that has a monthly plan pre13 mium for the year that is equal to or less 

14 than the monthly national average pre15 mium (as computed under section 1860D–

16 15) for the area for the year; 

17 ‘‘(B) the annual deductible applicable 

18 under section 1860D–6(c)(1) in a year shall be 

19 reduced to $0; 

20 ‘‘(C) section 1860D–6(c)(2) shall be ap21 plied by substituting ‘5.0 percent’ for ‘50 per22 cent’ each place it appears; 

23 ‘‘(D) such individual shall be responsible 

24 for cost-sharing for the cost of any covered 

25 drug provided in the year (after the individual 
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1 has reached the initial coverage limit described 

2 in section 1860D–6(c)(3) and before the indi3 vidual has reached the annual out-of-pocket 

4 limit under section 1860D–6(c)(4)(A)), that is 

5 equal to 10.0 percent; and 

6 ‘‘(E) section 1860D–6(c)(4)(A) shall be 

7 applied by substituting ‘2.5 percent’ for ‘10 

8 percent’. 

9 In no case may the application of subparagraph (A) 

10 result in a monthly beneficiary obligation that is 

11 below 0. 

12 ‘‘(3) SLIDING SCALE PREMIUM SUBSIDY AND

13 REDUCTION OF COST-SHARING FOR SUBSIDY-ELIGI14 BLE INDIVIDUALS.—

15 ‘‘(A) IN GENERAL.—In the case of a sub16 sidy-eligible individual (as defined in paragraph 

17 (4)(D))—

18 ‘‘(i) section 1860D–17 shall be ap19 plied—

20 ‘‘(I) in subsection (c), by sub21 stituting ‘subsidy percent’ for the ap22 plicable percentage that would other23 wise apply under such subsection; and 

24 ‘‘(II) in subparagraphs (A) and 

25 (B) of subsection (a)(3), by sub-
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1 stituting ‘the amount of the monthly 

2 plan premium for the Medicare Pre3 scription Drug plan with the lowest 

4 monthly plan premium in the area 

5 that the beneficiary resides’ for ‘the 

6 amount of such monthly national av7 erage premium’, but only if there is 

8 no Medicare Prescription Drug plan 

9 offered in the area in which the indi10 vidual resides that has a monthly plan 

11 premium for the year that is equal to 

12 or less than the monthly national av13 erage premium (as computed under 

14 section 1860D–15) for the area for 

15 the year; and 

16 ‘‘(ii) the annual deductible applicable 

17 under section 1860D–6(c)(1)—

18 ‘‘(I) for 2006, shall be reduced to 

19 $50; and 

20 ‘‘(II) for a subsequent year, shall 

21 be reduced to the amount specified 

22 under this clause for the previous year 

23 increased by the percentage specified 

24 in section 1860D–6(c)(5) for the year 

25 involved; 
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1 ‘‘(iii) section 1860D–6(c)(2) shall be 

2 applied by substituting ‘10.0 percent’ for 

3 ‘50 percent’ each place it appears; 

4 ‘‘(iv) such individual shall be respon5 sible for cost-sharing for the cost of any 

6 covered drug provided in the year (after 

7 the individual has reached the initial cov8 erage limit described in section 1860D–

9 6(c)(3) and before the individual has 

10 reached the annual out-of-pocket limit 

11 under section 1860D–6(c)(4)(A)), that is 

12 equal to 20.0 percent; and 

13 ‘‘(v) such individual shall be respon14 sible for the cost-sharing described in sec15 tion 1860D–6(c)(4)(A). 

16 In no case may the application of clause (i) re17 sult in a monthly beneficiary obligation that is 

18 below 0. 

19 ‘‘(B) SUBSIDY PERCENT DEFINED.—For 

20 purposes of subparagraph (A)(i), the term ‘sub21 sidy percent’ means, with respect to a State, a 

22 percent determined on a linear sliding scale 

23 ranging from—

24 ‘‘(i) 0 percent with respect to a sub25 sidy-eligible individual residing in the State 
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1 whose income does not exceed 135 percent 

2 of the poverty line; to 

3 ‘‘(ii) the highest percentage that 

4 would otherwise apply under section 

5 1860D–17 in the service area in which the 

6 subsidy-eligible individual resides, in the 

7 case of a subsidy-eligible individual resid8 ing in the State whose income equals 160 

9 percent of the poverty line. 

10 ‘‘(4) DEFINITIONS.—In this part: 

11 ‘‘(A) QUALIFIED MEDICARE BENE12 FICIARY.—Subject to subparagraph (H), the 

13 term ‘qualified medicare beneficiary’ means an 

14 individual who—

15 ‘‘(i) is enrolled under this part, in16 cluding an individual who is enrolled under 

17 a MedicareAdvantage plan; 

18 ‘‘(ii) is eligible for medicare cost-shar19 ing described in section 1905(p)(3) under 

20 the State plan under title XIX (or under 

21 a waiver of such plan), on the basis of 

22 being described in section 1905(p)(1), as 

23 determined under such plan (or under a 

24 waiver of plan); and 

25 ‘‘(iii) is not—
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1 ‘‘(I) a specified low-income medi2 care beneficiary; 

3 ‘‘(II) a qualifying individual; or 

4 ‘‘(III) a dual eligible individual. 

5 ‘‘(B) SPECIFIED LOW INCOME MEDICARE

6 BENEFICIARY.—Subject to subparagraph (H), 

7 the term ‘specified low income medicare bene8 ficiary’ means an individual who—

9 ‘‘(i) is enrolled under this part, in10 cluding an individual who is enrolled under 

11 a MedicareAdvantage plan; 

12 ‘‘(ii) is eligible for medicare cost-shar13 ing described in section 1905(p)(3)(A)(ii) 

14 under the State plan under title XIX (or 

15 under a waiver of such plan), on the basis 

16 of being described in section 

17 1902(a)(10)(E)(iii), as determined under 

18 such plan (or under a waiver of plan); and 

19 ‘‘(iii) is not—

20 ‘‘(I) a qualified medicare bene21 ficiary; 

22 ‘‘(II) a qualifying individual; or 

23 ‘‘(III) a dual eligible individual. 
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1 ‘‘(C) QUALIFYING INDIVIDUAL.—Subject 

2 to subparagraph (H), the term ‘qualifying indi3 vidual’ means an individual who—

4 ‘‘(i) is enrolled under this part, in5 cluding an individual who is enrolled under 

6 a MedicareAdvantage plan; 

7 ‘‘(ii) is eligible for medicare cost-shar8 ing described in section 1905(p)(3)(A)(ii) 

9 under the State plan under title XIX (or 

10 under a waiver of such plan), on the basis 

11 of being described in section 

12 1902(a)(10)(E)(iv) (without regard to any 

13 termination of the application of such sec14 tion under title XIX), as determined under 

15 such plan (or under a waiver of such plan); 

16 and 

17 ‘‘(iii) is not—

18 ‘‘(I) a qualified medicare bene19 ficiary; 

20 ‘‘(II) a specified low-income 

21 medicare beneficiary; or 

22 ‘‘(III) a dual eligible individual. 

23 ‘‘(D) SUBSIDY-ELIGIBLE INDIVIDUAL.—

24 Subject to subparagraph (H), the term ‘sub25 sidy-eligible individual’ means an individual—
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1 ‘‘(i) who is enrolled under this part, 

2 including an individual who is enrolled 

3 under a MedicareAdvantage plan; 

4 ‘‘(ii) whose income is less than 160 

5 percent of the poverty line; and 

6 ‘‘(iii) who is not—

7 ‘‘(I) a qualified medicare bene8 ficiary; 

9 ‘‘(II) a specified low-income 

10 medicare beneficiary; 

11 ‘‘(III) a qualifying individual; or 

12 ‘‘(IV) a dual eligible individual. 

13 ‘‘(E) DUAL ELIGIBLE INDIVIDUAL.—

14 ‘‘(i) IN GENERAL.—The term ‘dual el15 igible individual’ means an individual who 

16 is—

17 ‘‘(I) enrolled under title XIX or 

18 under a waiver under section 1115 of 

19 the requirements of such title for 

20 medical assistance that is not less 

21 than the medical assistance provided 

22 to an individual described in section 

23 1902(a)(10)(A)(i) and includes cov24 ered outpatient drugs (as such term is 
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1 defined for purposes of section 1927); 

2 and 

3 ‘‘(II) entitled to benefits under 

4 part A and enrolled under part B. 

5 ‘‘(ii) INCLUSION OF MEDICALLY

6 NEEDY.—Such term includes an individual 

7 described in section 1902(a)(10)(C). 

8 ‘‘(F) POVERTY LINE.—The term ‘poverty 

9 line’ has the meaning given such term in sec10 tion 673(2) of the Community Services Block 

11 Grant Act (42 U.S.C. 9902(2)), including any 

12 revision required by such section. 

13 ‘‘(G) ELIGIBILITY DETERMINATIONS.—Be14 ginning on November 1, 2005, the determina15 tion of whether an individual residing in a State 

16 is an individual described in subparagraph (A), 

17 (B), (C), (D), or (E) and, for purposes of para18 graph (3), the amount of an individual’s in19 come, shall be determined under the State med20 icaid plan for the State under section 1935(a). 

21 In the case of a State that does not operate 

22 such a medicaid plan (either under title XIX or 

23 under a statewide waiver granted under section 

24 1115), such determination shall be made under 

25 arrangements made by the Administrator. 
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1 ‘‘(H) NONAPPLICATION TO DUAL ELIGIBLE

2 INDIVIDUALS AND TERRITORIAL RESIDENTS.—

3 In the case of an individual who is a dual eligi4 ble individual or an individual who is not a resi5 dent of the 50 States or the District of Colum6 bia—

7 ‘‘(i) the subsidies provided under this 

8 section shall not apply; and 

9 ‘‘(ii) in the case of such an individual 

10 who is not a resident of the 50 States or 

11 the District of Columbia, such individual 

12 may be provided with medical assistance 

13 for covered outpatient drugs (as such term 

14 is defined for purposes of section 1927) in 

15 accordance with section 1935 under the 

16 State medicaid program under title XIX. 

17 ‘‘(I) UPDATE OF ASSET OR RESOURCE

18 TEST.—With respect to eligibility determina19 tions for premium and cost-sharing subsidies 

20 under this section that are made on or after 

21 January 1, 2009, such determinations shall be 

22 made (to the extent a State, as of such date, 

23 has not already eliminated the application of an 

24 asset or resource test under section 
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1 1905(p)(1)(C)) in accordance with the fol2 lowing: 

3 ‘‘(i) SELF-DECLARATION OF VALUE.—

4 ‘‘(I) IN GENERAL.—A State shall 

5 permit an individual applying for such 

6 subsidies to declare and certify by sig7 nature under penalty of perjury on 

8 the application form that the value of 

9 the individual’s assets or resources (or 

10 the combined value of the individual’s 

11 assets or resources and the assets or 

12 resources of the individual’s spouse), 

13 as determined under section 1613 for 

14 purposes of the supplemental security 

15 income program, does not exceed 

16 $10,000 ($20,000 in the case of the 

17 combined value of the individual’s as18 sets or resources and the assets or re19 sources of the individual’s spouse). 

20 ‘‘(II) ANNUAL ADJUSTMENT.—

21 Beginning on January 1, 2010, and 

22 for each subsequent year, the dollar 

23 amounts specified in subclause (I) for 

24 the preceding year shall be increased 

25 by the percentage increase in the Con-
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1 sumer Price Index for all urban con2 sumers (U.S. urban average) for the 

3 12-month period ending with June of 

4 the previous year. 

5 ‘‘(ii) METHODOLOGY FLEXIBILITY.—

6 Nothing in clause (i) shall be construed as 

7 prohibiting a State in making eligibility de8 terminations for premium and cost-sharing 

9 subsidies under this section from using 

10 asset or resource methodologies that are 

11 less restrictive than the methodologies used 

12 under 1613 for purposes of the supple13 mental security income program. 

14 ‘‘(J) DEVELOPMENT OF MODEL DECLARA15 TION FORM.—The Secretary shall—

16 ‘‘(i) develop a model, simplified appli17 cation form for individuals to use in mak18 ing a self-declaration of assets or resources 

19 in accordance with subparagraph (I)(i); 

20 and 

21 ‘‘(ii) provide such form to States and, 

22 for purposes of outreach under section 

23 1144, the Commissioner of Social Secu24 rity.’’. 
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1 ‘‘(b) RULES IN APPLYING COST-SHARING SUB2 SIDIES.—Nothing in this section shall be construed as pre3 venting an eligible entity offering a Medicare Prescription 

4 Drug plan or a MedicareAdvantage organization offering 

5 a MedicareAdvantage plan from waiving or reducing the 

6 amount of the deductible or other cost-sharing otherwise 

7 applicable pursuant to section 1860D–6(a)(2). 

8 ‘‘(c) ADMINISTRATION OF SUBSIDY PROGRAM.—The 

9 Administrator shall establish a process whereby, in the 

10 case of an individual eligible for a cost-sharing subsidy 

11 under subsection (a) who is enrolled in a Medicare Pre12 scription Drug plan or a MedicareAdvantage plan—

13 ‘‘(1) the Administrator provides for a notifica14 tion of the eligible entity or MedicareAdvantage or15 ganization involved that the individual is eligible for 

16 a cost-sharing subsidy and the amount of the sub17 sidy under such subsection; 

18 ‘‘(2) the entity or organization involved reduces 

19 the cost-sharing otherwise imposed by the amount of 

20 the applicable subsidy and submits to the Adminis21 trator information on the amount of such reduction; 

22 and 

23 ‘‘(3) the Administrator periodically and on a 

24 timely basis reimburses the entity or organization 

25 for the amount of such reductions. 
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1 The reimbursement under paragraph (3) may be com2 puted on a capitated basis, taking into account the actu3 arial value of the subsidies and with appropriate adjust4 ments to reflect differences in the risks actually involved. 

5 ‘‘(d) RELATION TO MEDICAID PROGRAM.—For provi6 sions providing for eligibility determinations and addi7 tional Federal payments for expenditures related to pro8 viding prescription drug coverage for dual eligible individ9 uals and territorial residents under the medicaid program, 

10 see section 1935. 

11 ‘‘REINSURANCE PAYMENTS FOR EXPENSES INCURRED IN

12 PROVIDING PRESCRIPTION DRUG COVERAGE ABOVE

13 THE ANNUAL OUT-OF-POCKET THRESHOLD

14 ‘‘SEC. 1860D–20. (a) REINSURANCE PAYMENTS.—

15 ‘‘(1) IN GENERAL.—Subject to section 1860D–

16 21(b), the Administrator shall provide in accordance 

17 with this section for payment to a qualifying entity 

18 of the reinsurance payment amount (as specified in 

19 subsection (c)(1)) for costs incurred by the entity in 

20 providing prescription drug coverage for a qualifying 

21 covered individual after the individual has reached 

22 the annual out-of-pocket threshold specified in sec23 tion 1860D–6(c)(4)(B) for the year. 

24 ‘‘(2) BUDGET AUTHORITY.—This section con25 stitutes budget authority in advance of appropria26 tions Acts and represents the obligation of the Ad-
130

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1 ministrator to provide for the payment of amounts 

2 provided under this section. 

3 ‘‘(b) NOTIFICATION OF SPENDING UNDER THE PLAN

4 FOR COSTS INCURRED IN PROVIDING PRESCRIPTION

5 DRUG COVERAGE ABOVE THE ANNUAL OUT-OF-POCKET

6 THRESHOLD.— 

7 ‘‘(1) IN GENERAL.—Each qualifying entity shall 

8 notify the Administrator of the following with re9 spect to a qualifying covered individual for a cov10 erage year: 

11 ‘‘(A) TOTAL ACTUAL COSTS.—The total 

12 amount (if any) of costs that the qualifying en13 tity incurred in providing prescription drug cov14 erage for the individual in the year after the in15 dividual had reached the annual out-of-pocket 

16 threshold specified in section 1860D–6(c)(4)(B) 

17 for the year. 

18 ‘‘(B) AMOUNTS RESULTING IN ACTUAL

19 COSTS.—With respect to the total amount 

20 under subparagraph (A) for the year—

21 ‘‘(i) the aggregate amount of pay22 ments made by the entity to pharmacies 

23 and other entities with respect to such cov24 erage for such enrollees; and 
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1 ‘‘(ii) the aggregate amount of dis2 counts, direct or indirect subsidies, rebates, 

3 or other price concessions or direct or indi4 rect remunerations made to the entity with 

5 respect to such coverage for such enrollees. 

6 ‘‘(2) CERTAIN EXPENSES NOT INCLUDED.—The 

7 amount under paragraph (1)(A) may not include—

8 ‘‘(A) administrative expenses incurred in 

9 providing the coverage described in paragraph 

10 (1)(A); 

11 ‘‘(B) amounts expended on providing addi12 tional prescription drug coverage pursuant to 

13 section 1860D–6(a)(2); or 

14 ‘‘(C) discounts, direct or indirect subsidies, 

15 rebates, or other price concessions or direct or 

16 indirect remunerations made to the entity with 

17 respect to coverage described in paragraph 

18 (1)(A). 

19 ‘‘(3) RESTRICTION ON USE OF INFORMATION.—

20 The restriction specified in section 1860D–

21 16(b)(7)(B) shall apply to information disclosed or 

22 obtained pursuant to the provisions of this section. 

23 ‘‘(c) REINSURANCE PAYMENT AMOUNT.—

24 ‘‘(1) IN GENERAL.—The reinsurance payment 

25 amount under this subsection for a qualifying cov-
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1 ered individual for a coverage year is an amount 

2 equal to 80 percent (or 65 percent with respect to 

3 a qualifying covered individual described in sub4 section (e)(2)(D)) of the allowable costs (as specified 

5 in paragraph (2)) incurred by the qualifying entity 

6 with respect to the individual and year. 

7 ‘‘(2) ESTABLISHMENT OF ALLOWABLE

8 COSTS.—In the case of a qualifying entity that has 

9 incurred costs described in subsection (b)(1)(A) with 

10 respect to a qualifying covered individual for a cov11 erage year, the Administrator shall establish the al12 lowable costs for the individual and year. Such al13 lowable costs shall be equal to the amount described 

14 in such subsection for the individual and year. 

15 ‘‘(d) PAYMENT METHODS.—

16 ‘‘(1) IN GENERAL.—Payments under this sec17 tion shall be based on such a method as the Admin18 istrator determines. The Administrator may estab19 lish a payment method by which interim payments 

20 of amounts under this section are made during a 

21 year based on the Administrator’s best estimate of 

22 amounts that will be payable after obtaining all of 

23 the information. 
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1 ‘‘(2) SOURCE OF PAYMENTS.—Payments under 

2 this section shall be made from the Prescription 

3 Drug Account. 

4 ‘‘(e) DEFINITIONS.—In this section: 

5 ‘‘(1) COVERAGE YEAR.—The term ‘coverage 

6 year’ means a calendar year in which covered drugs 

7 are dispensed if a claim for payment is made under 

8 the plan for such drugs, regardless of when the 

9 claim is paid. 

10 ‘‘(2) QUALIFYING COVERED INDIVIDUAL.—The 

11 term ‘qualifying covered individual’ means an indi12 vidual who—

13 ‘‘(A) is enrolled in this part and in a Medi14 care Prescription Drug plan; 

15 ‘‘(B) is enrolled in this part and in a 

16 MedicareAdvantage plan (except for an MSA 

17 plan or a private fee-for-service plan that does 

18 not provide qualified prescription drug cov19 erage); 

20 ‘‘(C) is eligible for, but not enrolled in, the 

21 program under this part, and is covered under 

22 a qualified retiree prescription drug plan; or 

23 ‘‘(D) is eligible for, but not enrolled in, the 

24 program under this part, and is covered under 
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1 a qualified State pharmaceutical assistance pro2 gram. 

3 ‘‘(3) QUALIFYING ENTITY.—The term ‘quali4 fying entity’ means any of the following that has en5 tered into an agreement with the Administrator to 

6 provide the Administrator with such information as 

7 may be required to carry out this section: 

8 ‘‘(A) An eligible entity offering a Medicare 

9 Prescription Drug plan under this part. 

10 ‘‘(B) A MedicareAdvantage organization 

11 offering a MedicareAdvantage plan under part 

12 C (except for an MSA plan or a private fee-for13 service plan that does not provide qualified pre14 scription drug coverage). 

15 ‘‘(C) The sponsor of a qualified retiree pre16 scription drug plan. 

17 ‘‘(D) A State offering a qualified State 

18 pharmaceutical assistance program. 

19 ‘‘(4) QUALIFIED RETIREE PRESCRIPTION DRUG

20 PLAN.—

21 ‘‘(A) IN GENERAL.—The term ‘qualified 

22 retiree prescription drug plan’ means employ23 ment-based retiree health coverage if, with re24 spect to a qualifying covered individual who is 
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1 covered under the plan, the following require2 ments are met: 

3 ‘‘(i) ATTESTATION OF ACTUARIAL

4 VALUE OF COVERAGE.—The sponsor of the 

5 plan shall, annually or at such other time 

6 as the Administrator may require, provide 

7 the Administrator an attestation, in ac8 cordance with the procedures established 

9 under section 1860D–6(f), that the actu10 arial value of prescription drug coverage 

11 under the plan is at least equal to the ac12 tuarial value of standard prescription drug 

13 coverage. 

14 ‘‘(ii) AUDITS.—The sponsor of the 

15 plan, or an administrator of the plan des16 ignated by the sponsor, shall maintain 

17 (and afford the Administrator access to) 

18 such records as the Administrator may re19 quire for purposes of audits and other 

20 oversight activities necessary to ensure the 

21 adequacy of prescription drug coverage and 

22 the accuracy of payments made under this 

23 part to and by the plan. 

24 ‘‘(B) EMPLOYMENT-BASED RETIREE

25 HEALTH COVERAGE.—The term ‘employment-
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1 based retiree health coverage’ means health in2 surance or other coverage, whether provided by 

3 voluntary insurance coverage or pursuant to 

4 statutory or contractual obligation, of health 

5 care costs for retired individuals (or for such in6 dividuals and their spouses and dependents) 

7 based on their status as former employees or 

8 labor union members. 

9 ‘‘(5) QUALIFIED STATE PHARMACEUTICAL AS10 SISTANCE PROGRAM.—

11 ‘‘(A) IN GENERAL.—The term ‘qualified 

12 State pharmaceutical assistance program’ 

13 means a State pharmaceutical assistance pro14 gram if, with respect to a qualifying covered in15 dividual who is covered under the program, the 

16 following requirements are met: 

17 ‘‘(i) ASSURANCE.—The State offering 

18 the program shall, annually or at such 

19 other times as the Administrator may re20 quire, provide the Administrator an attes21 tation that, in accordance with the proce22 dures established under section 1860D–

23 6(f), that—

24 ‘‘(I) the actuarial value of pre25 scription drug coverage under the pro-
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1 gram is at least equal to the actuarial 

2 value of standard prescription drug 

3 coverage; and 

4 ‘‘(II) the actuarial value of sub5 sidies to individuals provided under 

6 the program are at least equal to the 

7 actuarial value of the subsidies that 

8 would apply under section 1860D–19 

9 if the individual was enrolled under 

10 this part rather than under the pro11 gram. 

12 ‘‘(ii) DISCLOSURE OF INFORMA13 TION.—The State complies with the re14 quirements described in clauses (i) and (ii) 

15 of section 1860D–16(b)(7)(A). 

16 ‘‘(B) STATE PHARMACEUTICAL ASSIST17 ANCE PROGRAM.—For purposes of subpara18 graph (A), the term ‘State pharmaceutical as19 sistance program’ means a program—

20 ‘‘(i) that is in operation as of the date 

21 of enactment of the Prescription Drug and 

22 Medicare Improvement Act of 2003; 

23 ‘‘(ii) that is sponsored and financed 

24 by a State; and 
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1 ‘‘(iii) that provides coverage for out2 patient drugs for individuals in the State 

3 who meet income- and resource-related 

4 qualifications specified under such pro5 gram. 

6 ‘‘(6) SPONSOR.—The term ‘sponsor’ means a 

7 plan sponsor, as defined in section 3(16)(B) of the 

8 Employee Retirement Income Security Act of 1974. 

9 ‘‘(f) DISTRIBUTION OF REINSURANCE PAYMENT

10 AMOUNTS.—

11 ‘‘(1) IN GENERAL.—Any sponsor meeting the 

12 requirements of subsection (e)(3) with respect to a 

13 quarter in a calendar year, but which is not an em14 ployer, shall distribute the reinsurance payments re15 ceived for such quarter under subsection (c) to the 

16 employers contributing to the qualified retiree pre17 scription drug plan maintained by such sponsor dur18 ing that quarter, in the manner described in para19 graphs (2) and (3). 

20 ‘‘(2) ALLOCATION.—The reinsurance payments 

21 to be distributed pursuant to paragraph (1) shall be 

22 allocated proportionally among all employers who 

23 contribute to the plan during the quarter with re24 spect to which the payments are received. The share 

25 allocated to each employer contributing to the plan 
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1 during a quarter shall be determined by multiplying 

2 the total reinsurance payments received by the spon3 sor for the quarter by a fraction, the numerator of 

4 which is the total contributions made by an employer 

5 for that quarter, and the denominator of which is 

6 the total contributions required to be made to the 

7 plan by all employers for that quarter. Any share al8 located to an employer required to contribute for a 

9 quarter who does not make the contributions re10 quired for that quarter on or before the date due 

11 shall be retained by the sponsor for the benefit of 

12 the plan as a whole. 

13 ‘‘(3) TIMING.—Reinsurance payments required 

14 to be distributed to employers pursuant to this sub15 section shall be distributed as soon as practicable 

16 after received by the sponsor, but in no event later 

17 than the end of the quarter immediately following 

18 the quarter in which such reinsurance payments are 

19 received by the sponsor. 

20 ‘‘(4) REGULATIONS.—The Secretary shall pro21 mulgate regulations providing that any sponsor sub22 ject to the requirements of this subsection who fails 

23 to meet such requirements shall not be eligible for 

24 a payment under this section. 
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1 ‘‘DIRECT SUBSIDY FOR SPONSOR OF A QUALIFIED RE2 TIREE PRESCRIPTION DRUG PLAN FOR PLAN EN3 ROLLEES ELIGIBLE FOR, BUT NOT ENROLLED IN, 

4 THIS PART

5 ‘‘SEC. 1860D–21. (a) DIRECT SUBSIDY.—

6 ‘‘(1) IN GENERAL.—The Administrator shall 

7 provide for the payment to a sponsor of a qualified 

8 retiree prescription drug plan (as defined in section 

9 1860D–20(e)(4)) for each qualifying covered indi10 vidual (described in subparagraph (C) of section 

11 1860D–20(e)(2)) enrolled in the plan for each 

12 month for which such individual is so enrolled. 

13 ‘‘(2) AMOUNT OF PAYMENT.—

14 ‘‘(A) IN GENERAL.—The amount of the 

15 payment under paragraph (1) shall be an 

16 amount equal to the direct subsidy percent de17 termined for the year of the monthly national 

18 average premium for the area for the year (de19 termined under section 1860D–15), as adjusted 

20 using the risk adjusters that apply to the stand21 ard prescription drug coverage published under 

22 section 1860D–11. 

23 ‘‘(B) DIRECT SUBSIDY PERCENT.—For 

24 purposes of subparagraph (A), the term ‘direct 
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1 subsidy percent’ means the percentage equal 

2 to—

3 ‘‘(i) 100 percent; minus 

4 ‘‘(ii) the applicable percent for the 

5 year (as determined under section 1860D–

6 17(c). 

7 ‘‘(b) PAYMENT METHODS.—

8 ‘‘(1) IN GENERAL.—Payments under this sec9 tion shall be based on such a method as the Admin10 istrator determines. The Administrator may estab11 lish a payment method by which interim payments 

12 of amounts under this section are made during a 

13 year based on the Administrator’s best estimate of 

14 amounts that will be payable after obtaining all of 

15 the information. 

16 ‘‘(2) SOURCE OF PAYMENTS.—Payments under 

17 this section shall be made from the Prescription 

18 Drug Account. 

19 ‘‘DIRECT SUBSIDIES FOR QUALIFIED STATE OFFERING A

20 STATE PHARMACEUTICAL ASSISTANCE PROGRAM FOR

21 PROGRAM ENROLLEES ELIGIBLE FOR, BUT NOT EN22 ROLLED IN, THIS PART

23 ‘‘SEC. 1860D–22. (a) DIRECT SUBSIDY.—

24 ‘‘(1) IN GENERAL.—The Administrator shall 

25 provide for the payment to a State offering a quali26 fied State pharmaceutical assistance program (as de-
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1 fined in section 1860D–20(e)(6)) for each qualifying 

2 covered individual (described in subparagraph (D) of 

3 section 1860D–(e)(2)) enrolled in the program for 

4 each month for which such individual is so enrolled. 

5 ‘‘(2) AMOUNT OF PAYMENT.—

6 ‘‘(A) IN GENERAL.—The amount of the 

7 payment under paragraph (1) shall be an 

8 amount equal to the amount of payment for the 

9 area and year made under section 1860D–

10 21(a)(2). 

11 ‘‘(b) ADDITIONAL SUBSIDY.—

12 ‘‘(1) IN GENERAL.—The Administrator shall 

13 provide for the payment to a State offering a quali14 fied State pharmaceutical program (as defined in 

15 section 1860D–20(e)(6)) for each applicable low-in16 come individual enrolled in the program for each 

17 month for which such individual is so enrolled. 

18 ‘‘(2) AMOUNT OF PAYMENT.—

19 ‘‘(A) IN GENERAL.—The amount of the 

20 payment under paragraph (1) shall be the 

21 amount the Administrator estimates would have 

22 been made to an entity or organization under 

23 section 1860D–19 with respect to the applicable 

24 low-income individual if such individual was en25 rolled in this part and under a Medicare Pre-
143

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1 scription Drug plan or a MedicareAdvantage 

2 plan. 

3 ‘‘(B) MAXIMUM PAYMENTS.—In no case 

4 may the amount of the payment determined 

5 under subparagraph (A) with respect to an ap6 plicable low-income individual exceed, as esti7 mated by the Administrator, the average 

8 amounts made in a year under section 1860D–

9 19 on behalf of an eligible beneficiary enrolled 

10 under this part with income that is the same as 

11 the income of the applicable low-income indi12 vidual. 

13 ‘‘(3) APPLICABLE LOW-INCOME INDIVIDUAL.—

14 For purposes of this subsection, the term ‘applicable 

15 low-income individual’ means an individual who is 

16 both—

17 ‘‘(A) a qualifying covered individual (de18 scribed in subparagraph (D) of section 1860D–

19 (e)(2)); and 

20 ‘‘(B) a qualified medicare beneficiary, a 

21 specified low income medicare beneficiary, or a 

22 subsidy-eligible individual, as such terms are 

23 defined in section 1860D–19(a)(4). 

24 ‘‘(c) PAYMENT METHODS.—
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1 ‘‘(1) IN GENERAL.—Payments under this sec2 tion shall be based on such a method as the Admin3 istrator determines. The Administrator may estab4 lish a payment method by which interim payments 

5 of amounts under this section are made during a 

6 year based on the Administrator’s best estimate of 

7 amounts that will be payable after obtaining all of 

8 the information. 

9 ‘‘(2) SOURCE OF PAYMENTS.—Payments under 

10 this section shall be made from the Prescription 

11 Drug Account. 

12 ‘‘(d) CONSTRUCTION.—Nothing in this section or sec13 tion 1860D–20 shall effect the provisions of section 

14 1860D–26(b). 

15 ‘‘Subpart 3—Miscellaneous Provisions 

16 ‘‘PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL

17 SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND

18 ‘‘SEC. 1860D–25. (a) ESTABLISHMENT.—

19 ‘‘(1) IN GENERAL.—There is created within the 

20 Federal Supplementary Medical Insurance Trust 

21 Fund established by section 1841 an account to be 

22 known as the ‘Prescription Drug Account’ (in this 

23 section referred to as the ‘Account’). 

24 ‘‘(2) FUNDS.—The Account shall consist of 

25 such gifts and bequests as may be made as provided 
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1 in section 201(i)(1), and such amounts as may be 

2 deposited in, or appropriated to, the Account as pro3 vided in this part. 

4 ‘‘(3) SEPARATE FROM REST OF TRUST FUND.—

5 Funds provided under this part to the Account shall 

6 be kept separate from all other funds within the 

7 Federal Supplementary Medical Insurance Trust 

8 Fund. 

9 ‘‘(b) PAYMENTS FROM ACCOUNT.—

10 ‘‘(1) IN GENERAL.—The Managing Trustee 

11 shall pay from time to time from the Account such 

12 amounts as the Secretary certifies are necessary to 

13 make payments to operate the program under this 

14 part, including—

15 ‘‘(A) payments to eligible entities under 

16 section 1860D–16; 

17 ‘‘(B) payments under 1860D–19 for low18 income subsidy payments for cost-sharing; 

19 ‘‘(C) reinsurance payments under section 

20 1860D–20; 

21 ‘‘(D) payments to sponsors of qualified re22 tiree prescription drug plans under section 

23 1860D–21; 

24 ‘‘(E) payments to MedicareAdvantage or25 ganizations for the provision of qualified pre-
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1 scription drug coverage under section 1858A(c); 

2 and 

3 ‘‘(F) payments with respect to administra4 tive expenses under this part in accordance with 

5 section 201(g). 

6 ‘‘(2) TREATMENT IN RELATION TO PART B PRE7 MIUM.—Amounts payable from the Account shall not 

8 be taken into account in computing actuarial rates 

9 or premium amounts under section 1839. 

10 ‘‘(c) APPROPRIATIONS TO COVER BENEFITS AND

11 ADMINISTRATIVE COSTS.—There are appropriated to the 

12 Account in a fiscal year, out of any moneys in the Treas13 ury not otherwise appropriated, an amount equal to the 

14 payments and transfers made from the Account in the 

15 year. 

16 ‘‘OTHER RELATED PROVISIONS

17 ‘‘SEC. 1860D–26. (a) RESTRICTION ON ENROLL18 MENT IN A MEDICARE PRESCRIPTION DRUG PLAN OF19 FERED BY A SPONSOR OF EMPLOYMENT-BASED RETIREE

20 HEALTH COVERAGE.—

21 ‘‘(1) IN GENERAL.—In the case of a Medicare 

22 Prescription Drug plan offered by an eligible entity 

23 that is a sponsor (as defined in paragraph (5) of 

24 section 1860D–20(e)) of employment-based retiree 

25 health coverage (as defined in paragraph (4)(B) of 

26 such section), notwithstanding any other provision of 
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1 this part and in accordance with regulations of the 

2 Administrator, the entity offering the plan may re3 strict the enrollment of eligible beneficiaries enrolled 

4 under this part to eligible beneficiaries who are en5 rolled in such coverage. 

6 ‘‘(2) LIMITATION.—The sponsor of the employ7 ment-based retiree health coverage described in 

8 paragraph (1) may not offer enrollment in the Medi9 care Prescription Drug plan described in such para10 graph based on the health status of eligible bene11 ficiaries enrolled for such coverage. 

12 ‘‘(b) COORDINATION WITH STATE PHARMACEUTICAL

13 ASSISTANCE PROGRAMS.—

14 ‘‘(1) IN GENERAL.—An eligible entity offering a 

15 Medicare Prescription Drug plan, or a 

16 MedicareAdvantage organization offering a 

17 MedicareAdvantage plan (other than an MSA plan 

18 or a private fee-for-service plan that does not pro19 vide qualified prescription drug coverage), may enter 

20 into an agreement with a State pharmaceutical as21 sistance program described in paragraph (2) to co22 ordinate the coverage provided under the plan with 

23 the assistance provided under the State pharma24 ceutical assistance program. 
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1 ‘‘(2) STATE PHARMACEUTICAL ASSISTANCE

2 PROGRAM DESCRIBED.—For purposes of paragraph 

3 (1), a State pharmaceutical assistance program de4 scribed in this paragraph is a program that has been 

5 established pursuant to a waiver under section 1115 

6 or otherwise. 

7 ‘‘(c) REGULATIONS TO CARRY OUT THIS PART.—

8 ‘‘(1) AUTHORITY FOR INTERIM FINAL REGULA9 TIONS.—The Secretary may promulgate initial regu10 lations implementing this part in interim final form 

11 without prior opportunity for public comment. 

12 ‘‘(2) FINAL REGULATIONS.—A final regulation 

13 reflecting public comments must be published within 

14 1 year of the interim final regulation promulgated 

15 under paragraph (1).’’. 

16 ‘‘(d) WAIVER AUTHORITY.—The Secretary shall have 

17 authority similar to the waiver authority under section 

18 1857(i) to facilitate the offering of Medicare Prescription 

19 Drug plans by employer or other group health plans as 

20 part of employment-based retiree health coverage (as de21 fined in section 1860D–20(d)(4)(B)), including the au22 thority to establish separate premium amounts for enroll23 ees in a Medicare Prescription Drug plan by reason of 

24 such coverage.’’. 
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1 (b) CONFORMING AMENDMENTS TO FEDERAL SUP2 PLEMENTARY MEDICAL INSURANCE TRUST FUND.—Sec3 tion 1841 (42 U.S.C. 1395t) is amended—

4 (1) in the last sentence of subsection (a)—

5 (A) by striking ‘‘and’’ before ‘‘such 

6 amounts’’; and 

7 (B) by inserting before the period the fol8 lowing: ‘‘, and such amounts as may be depos9 ited in, or appropriated to, the Prescription 

10 Drug Account established by section 1860D–

11 25’’; 

12 (2) in subsection (g), by inserting after ‘‘by this 

13 part,’’ the following: ‘‘the payments provided for 

14 under part D (in which case the payments shall be 

15 made from the Prescription Drug Account in the 

16 Trust Fund),’’; 

17 (3) in subsection (h), by inserting after 

18 ‘‘1840(d)’’ the following: ‘‘and sections 1860D–18 

19 and 1858A(e) (in which case the payments shall be 

20 made from the Prescription Drug Account in the 

21 Trust Fund)’’; and 

22 (4) in subsection (i), by inserting after ‘‘section 

23 1840(b)(1)’’ the following: ‘‘, sections 1860D–18 

24 and 1858A(e) (in which case the payments shall be 
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1 made from the Prescription Drug Account in the 

2 Trust Fund),’’. 

3 (c) CONFORMING REFERENCES TO PREVIOUS PART

4 D.—Any reference in law (in effect before the date of en5 actment of this Act) to part D of title XVIII of the Social 

6 Security Act is deemed a reference to part F of such title 

7 (as in effect after such date). 

8 (d) SUBMISSION OF LEGISLATIVE PROPOSAL.—Not 

9 later than 6 months after the date of the enactment of 

10 this Act, the Secretary shall submit to the appropriate 

11 committees of Congress a legislative proposal providing for 

12 such technical and conforming amendments in the law as 

13 are required by the provisions of this Act. 

14 SEC. 102. STUDY AND REPORT ON PERMITTING PART B 

15 ONLY INDIVIDUALS TO ENROLL IN MEDICARE 

16 VOLUNTARY PRESCRIPTION DRUG DELIVERY 

17 PROGRAM. 

18 (a) STUDY.—The Administrator of the Center for 

19 Medicare Choices (as established under section 1808 of 

20 the Social Security Act, as added by section 301(a)) shall 

21 conduct a study on the need for rules relating to permit22 ting individuals who are enrolled under part B of title 

23 XVIII of the Social Security Act but are not entitled to 

24 benefits under part A of such title to buy into the medicare 
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1 voluntary prescription drug delivery program under part 

2 D of such title (as so added). 

3 (b) REPORT.—Not later than January 1, 2005, the 

4 Administrator of the Center for Medicare Choices shall 

5 submit a report to Congress on the study conducted under 

6 subsection (a), together with any recommendations for leg7 islation that the Administrator determines to be appro8 priate as a result of such study. 

9 SEC. 103. RULES RELATING TO MEDIGAP POLICIES THAT 

10 PROVIDE PRESCRIPTION DRUG COVERAGE. 

11 (a) RULES RELATING TO MEDIGAP POLICIES THAT

12 PROVIDE PRESCRIPTION DRUG COVERAGE.—Section 

13 1882 (42 U.S.C. 1395ss) is amended by adding at the end 

14 the following new subsection: 

15 ‘‘(v) RULES RELATING TO MEDIGAP POLICIES THAT

16 PROVIDE PRESCRIPTION DRUG COVERAGE.—

17 ‘‘(1) PROHIBITION ON SALE, ISSUANCE, AND

18 RENEWAL OF POLICIES THAT PROVIDE PRESCRIP19 TION DRUG COVERAGE TO PART D ENROLLEES.—

20 ‘‘(A) IN GENERAL.—Notwithstanding any 

21 other provision of law, on or after January 1, 

22 2006, no medicare supplemental policy that 

23 provides coverage of expenses for prescription 

24 drugs may be sold, issued, or renewed under 
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1 this section to an individual who is enrolled 

2 under part D. 

3 ‘‘(B) PENALTIES.—The penalties described 

4 in subsection (d)(3)(A)(ii) shall apply with re5 spect to a violation of subparagraph (A). 

6 ‘‘(2) ISSUANCE OF SUBSTITUTE POLICIES IF

7 THE POLICYHOLDER OBTAINS PRESCRIPTION DRUG

8 COVERAGE UNDER PART D.—

9 ‘‘(A) IN GENERAL.—The issuer of a medi10 care supplemental policy—

11 ‘‘(i) may not deny or condition the 

12 issuance or effectiveness of a medicare 

13 supplemental policy that has a benefit 

14 package classified as ‘A’, ‘B’, ‘C’, ‘D’, ‘E’, 

15 ‘F’ (including the benefit package classi16 fied as ‘F’ with a high deductible feature, 

17 as described in subsection (p)(11)), or ‘G’ 

18 (under the standards established under 

19 subsection (p)(2)) and that is offered and 

20 is available for issuance to new enrollees by 

21 such issuer; 

22 ‘‘(ii) may not discriminate in the pric23 ing of such policy, because of health sta24 tus, claims experience, receipt of health 

25 care, or medical condition; and 
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1 ‘‘(iii) may not impose an exclusion of 

2 benefits based on a pre-existing condition 

3 under such policy, 

4 in the case of an individual described in sub5 paragraph (B) who seeks to enroll under the 

6 policy during the open enrollment period estab7 lished under section 1860D–2(b)(2) and who 

8 submits evidence that they meet the require9 ments under subparagraph (B) along with the 

10 application for such medicare supplemental pol11 icy. 

12 ‘‘(B) INDIVIDUAL DESCRIBED.—An indi13 vidual described in this subparagraph is an in14 dividual who—

15 ‘‘(i) enrolls in the medicare prescrip16 tion drug delivery program under part D; 

17 and 

18 ‘‘(ii) at the time of such enrollment 

19 was enrolled and terminates enrollment in 

20 a medicare supplemental policy which has 

21 a benefit package classified as ‘H’, ‘I’, or 

22 ‘J’ (including the benefit package classified 

23 as ‘J’ with a high deductible feature, as 

24 described in section 1882(p)(11)) under 

25 the standards referred to in subparagraph 
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1 (A)(i) or terminates enrollment in a policy 

2 to which such standards do not apply but 

3 which provides benefits for prescription 

4 drugs. 

5 ‘‘(C) ENFORCEMENT.—The provisions of 

6 subparagraph (A) shall be enforced as though 

7 they were included in subsection (s). 

8 ‘‘(3) NOTICE REQUIRED TO BE PROVIDED TO

9 CURRENT POLICYHOLDERS WITH PRESCRIPTION

10 DRUG COVERAGE.—No medicare supplemental policy 

11 of an issuer shall be deemed to meet the standards 

12 in subsection (c) unless the issuer provides written 

13 notice during the 60-day period immediately pre14 ceding the period established for the open enrollment 

15 period established under section 1860D–2(b)(2), to 

16 each individual who is a policyholder or certificate 

17 holder of a medicare supplemental policy issued by 

18 that issuer that provides some coverage of expenses 

19 for prescription drugs (at the most recent available 

20 address of that individual) of—

21 ‘‘(A) the ability to enroll in a new medicare 

22 supplemental policy pursuant to paragraph (2); 

23 and 

24 ‘‘(B) the fact that, so long as such indi25 vidual retains coverage under such policy, the 
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1 individual shall be ineligible for coverage of pre2 scription drugs under part D.’’. 

3 (b) RULE OF CONSTRUCTION (1) IN GENERAL.—

4 Nothing in this Act shall be construed to require an issuer 

5 of a medicare supplemental policy under section 1882 of 

6 the Social Security Act (42 U.S.C. 1395rr) to participate 

7 as an eligible entity under part D of such Act, as added 

8 by section 101, as a condition for issuing such policy. 

9 (2) PROHIBITION ON STATE REQUIREMENT.—A 

10 State may not require an issuer of a medicare sup11 plemental policy under section 1882 of the Social 

12 Security Act (42 U.S.C. 1395rr) to participate as an 

13 eligible entity under part D of such Act, as added 

14 by section 101, as a condition for issuing such pol15 icy. 

16 SEC. 104. MEDICAID AND OTHER AMENDMENTS RELATED 

17 TO LOW-INCOME BENEFICIARIES. 

18 (a) DETERMINATIONS OF ELIGIBILITY FOR LOW-IN19 COME SUBSIDIES.—Section 1902(a) (42 U.S.C. 1396a(a)) 

20 is amended—

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

22 (64); 

23 (2) by striking the period at the end of para24 graph (65) and inserting ‘‘; and’’; and 
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1 (3) by inserting after paragraph (65) the fol2 lowing new paragraph: 

3 ‘‘(66) provide for making eligibility determina4 tions under section 1935(a).’’. 

5 (b) NEW SECTION.—

6 (1) IN GENERAL.—Title XIX (42 U.S.C. 1396 

7 et seq.) is amended—

8 (A) by redesignating section 1935 as sec9 tion 1936; and 

10 (B) by inserting after section 1934 the fol11 lowing new section: 

12 ‘‘SPECIAL PROVISIONS RELATING TO MEDICARE

13 PRESCRIPTION DRUG BENEFIT

14 ‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI15 BILITY DETERMINATIONS FOR LOW-INCOME SUB16 SIDIES.—As a condition of its State plan under this title 

17 under section 1902(a)(66) and receipt of any Federal fi18 nancial assistance under section 1903(a), a State shall 

19 satisfy the following: 

20 ‘‘(1) DETERMINATION OF ELIGIBILITY FOR

21 TRANSITIONAL PRESCRIPTION DRUG ASSISTANCE

22 CARD PROGRAM FOR ELIGIBLE LOW-INCOME BENE23 FICIARIES.—For purposes of section 1807A, submit 

24 to the Secretary an eligibility plan under which the 

25 State—
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1 ‘‘(A) establishes eligibility standards con2 sistent with the provisions of that section; 

3 ‘‘(B) establishes procedures for providing 

4 presumptive eligibility for eligible low-income 

5 beneficiaries (as defined in section 1807A(i)(2)) 

6 under that section; 

7 ‘‘(C) makes determinations of eligibility 

8 and income for purposes of identifying eligible 

9 low-income beneficiaries (as so defined) under 

10 that section; and 

11 ‘‘(D) communicates to the Secretary deter12 minations of eligibility or discontinuation of eli13 gibility under that section for purposes of noti14 fying prescription drug card sponsors under 

15 that section of the identity of eligible medicare 

16 low-income beneficiaries. 

17 ‘‘(2) DETERMINATION OF ELIGIBILITY FOR

18 PREMIUM AND COST-SHARING SUBSIDIES UNDER

19 PART D OF TITLE XVIII FOR LOW-INCOME INDIVID20 UALS.—Beginning November 1, 2005, for purposes 

21 of section 1860D–19—

22 ‘‘(A) make determinations of eligibility for 

23 premium and cost-sharing subsidies under and 

24 in accordance with such section; 
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1 ‘‘(B) establish procedures for providing 

2 presumptive eligibility for individuals eligible for 

3 subsidies under that section; 

4 ‘‘(C) inform the Administrator of the Cen5 ter for Medicare Choices of such determinations 

6 in cases in which such eligibility is established; 

7 and 

8 ‘‘(D) otherwise provide such Administrator 

9 with such information as may be required to 

10 carry out part D of title XVIII (including sec11 tion 1860D–19). 

12 ‘‘(3) AGREEMENT TO ESTABLISH INFORMATION

13 AND ENROLLMENT SITES AT SOCIAL SECURITY

14 FIELD OFFICES.—Enter into an agreement with the 

15 Commissioner of Social Security to use all Social Se16 curity field offices located in the State as informa17 tion and enrollment sites for making the eligibility 

18 determinations required under paragraphs (1) and 

19 (2). 

20 ‘‘(4) SCREEN AND ENROLL INDIVIDUALS ELIGI21 BLE FOR MEDICARE COST-SHARING.—As part of 

22 making an eligibility determination required under 

23 paragraph (1) or (2), screen an individual who ap24 plies for such a determination for eligibility for med25 ical assistance for any medicare cost-sharing de-
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1 scribed in section 1905(p)(3) and, if the individual 

2 is eligible for any such medicare cost-sharing, enroll 

3 the individual under the State plan (or under a 

4 waiver of such plan). 

5 ‘‘(b) FEDERAL SUBSIDY OF ADMINISTRATIVE

6 COSTS.—

7 ‘‘(1) ENHANCED MATCH FOR ELIGIBILITY DE8 TERMINATIONS.—Subject to paragraphs (2) and (4), 

9 with respect to calendar quarters beginning on or 

10 after January 1, 2004, the amounts expended by a 

11 State in carrying out subsection (a) are expenditures 

12 reimbursable under section 1903(a)(7) except that, 

13 in applying such section with respect to such ex14 penditures incurred for—

15 ‘‘(A) such calendar quarters occurring in 

16 fiscal year 2004 or 2005, ‘75 percent’ shall be 

17 substituted for ‘50 per centum’; 

18 ‘‘(B) calendar quarters occurring in fiscal 

19 year 2006, ‘70 percent’ shall be substituted for 

20 ‘50 per centum’; 

21 ‘‘(C) calendar quarters occurring in fiscal 

22 year 2007, ‘65 percent’ shall be substituted for 

23 ‘50 per centum’; and 
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1 ‘‘(D) calendar quarters occurring in fiscal 

2 year 2008 or any fiscal year thereafter, ‘60 per3 cent’ shall be substituted for ‘50 per centum’. 

4 ‘‘(2) 100 PERCENT MATCH FOR ELIGIBILITY

5 DETERMINATIONS FOR SUBSIDY-ELIGIBLE INDIVID6 UALS.—In the case of amounts expended by a State 

7 on or after November 1, 2005, to determine whether 

8 an individual is a subsidy-eligible individual for pur9 poses of section 1860D–19, such expenditures shall 

10 be reimbursed under section 1903(a)(7) by sub11 stituting ‘100 percent’ for ‘50 per centum’. 

12 ‘‘(3) ENHANCED MATCH FOR UPDATES OR IM13 PROVEMENTS TO ELIGIBILITY DETERMINATION SYS14 TEMS.—With respect to calendar quarters occurring 

15 in fiscal year 2004, 2005, or 2006, the Secretary, in 

16 addition to amounts otherwise paid under section 

17 1903(a), shall pay to each State which has a plan 

18 approved under this title, for each such quarter an 

19 amount equal to 90 percent of so much of the sums 

20 expended during such quarter as are attributable to 

21 the design, development, acquisition, or installation 

22 of improved eligibility determination systems (includ23 ing hardware and software for such systems) in 

24 order to carry out the requirements of subsection (a) 

25 and section 1807A(h)(1). No payment shall be made 
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1 to a State under the preceding sentence unless the 

2 State’s improved eligibility determination system—

3 ‘‘(A) satisfies such standards for improve4 ment as the Secretary may establish; and 

5 ‘‘(B) complies, and is compatible, with the 

6 standards established under part C of title XI 

7 and any regulations promulgated under section 

8 264(c) of the Health Insurance Portability and 

9 Accountability Act of 1996 (42 U.S.C. 1320d–

10 2 note). 

11 ‘‘(4) COORDINATION.—The State shall provide 

12 the Secretary with such information as may be nec13 essary to properly allocate expenditures described in 

14 paragraph (1), (2), or (3) that may otherwise be 

15 made for similar eligibility determinations or expend16 itures. 

17 ‘‘(c) FEDERAL PAYMENT OF MEDICARE PART B 

18 PREMIUM FOR STATES PROVIDING PRESCRIPTION DRUG

19 COVERAGE FOR DUAL ELIGIBLE INDIVIDUALS.—

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

21 and notwithstanding section 1905(b), in the case of 

22 a State that provides medical assistance for covered 

23 drugs (as such term is defined in section 

24 1860D(a)(2)) to dual eligible individuals under this 

25 title that satisfies the minimum standards described 
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1 in paragraph (2), the Federal medical assistance 

2 percentage shall be 100 percent for medicare cost3 sharing described in section 1905(p)(3)(A)(ii) (relat4 ing to premiums under section 1839) for individ5 uals—

6 ‘‘(A) who are dual eligible individuals or 

7 qualified medicare beneficiaries; and 

8 ‘‘(B) whose income is at least the income 

9 required for an individual to be an eligible indi10 vidual under section 1611 for purposes of the 

11 supplemental security income program (as de12 termined under section 1612), but does not ex13 ceed 100 percent of the poverty line (as defined 

14 in section 2110(c)(5)) applicable to a family of 

15 the size involved. 

16 ‘‘(2) MINIMUM STANDARDS DESCRIBED.—For 

17 purposes of paragraph (1), the minimum standards 

18 described in this paragraph are the following: 

19 ‘‘(A) In providing medical assistance for 

20 dual eligible individuals for such covered drugs, 

21 the State satisfies the requirements of this title 

22 (including limitations on cost-sharing imposed 

23 under section 1916) applicable to the provision 

24 of medical assistance for prescribed drugs to 

25 dual eligible individuals. 
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1 ‘‘(B) In providing medical assistance for 

2 dual eligible individuals for such covered drugs, 

3 the State provides such individuals with bene4 ficiary protections that the Secretary deter5 mines are equivalent to the beneficiary protec6 tions applicable under section 1860D–5 to eligi7 ble entities offering a Medicare Prescription 

8 Drug plan under part D of title XVIII. 

9 ‘‘(C) In providing medical assistance for 

10 dual eligible individuals for such covered drugs, 

11 the State does not impose a limitation on the 

12 number of prescriptions an individual may have 

13 filled. 

14 ‘‘(3) NONAPPLICATION.—Section 1927(d)(2)(E) 

15 shall not apply to a State for purposes of providing 

16 medical assistance for covered drugs (as such term 

17 is defined in section 1860D(a)(2)) to dual eligible in18 dividuals that satisfies the minimum standards de19 scribed in paragraph (2). 

20 ‘‘(4) LIMITATION.—Paragraph (1) shall not 

21 apply to any State before January 1, 2006. 

22 ‘‘(d) FEDERAL PAYMENT OF MEDICARE PART A 

23 COST-SHARING FOR CERTAIN STATES.—

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

25 and notwithstanding section 1905(b), in the case of 
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1 a State that, as of the date of enactment of the Pre2 scription Drug and Medicare Improvement Act of 

3 2003, provides medical assistance for individuals de4 scribed in section 1902(a)(10)(A)(ii))(X), the Fed5 eral medical assistance percentage shall be 100 per6 cent for medicare cost-sharing described in subpara7 graphs (B) and (C) of section 1905(p)(3) (relating 

8 to coinsurance and deductibles established under 

9 title XVIII) for the individuals provided medical as10 sistance under section 1902(a)(10)(A)(ii)(X), but 

11 only—

12 ‘‘(A) with respect to such medicare cost13 sharing that is incurred under part A of title 

14 XVIII; and 

15 ‘‘(B) for so long as the State elects to pro16 vide medical assistance under section 

17 1902(a)(10)(A)(ii)(X). 

18 ‘‘(2) LIMITATION.—Paragraph (1) shall not 

19 apply to any State before January 1, 2006. 

20 ‘‘(e) TREATMENT OF TERRITORIES.—

21 ‘‘(1) IN GENERAL.—In the case of a State, 

22 other than the 50 States and the District of Colum23 bia—

24 ‘‘(A) the previous provisions of this section 

25 shall not apply to residents of such State; and 
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1 ‘‘(B) if the State establishes a plan de2 scribed in paragraph (2), the amount otherwise 

3 determined under section 1108(f) (as increased 

4 under section 1108(g)) for the State shall be 

5 further increased by the amount specified in 

6 paragraph (3). 

7 ‘‘(2) PLAN.—The plan described in this para8 graph is a plan that—

9 ‘‘(A) provides medical assistance with re10 spect to the provision of covered drugs (as de11 fined in section 1860D(a)(2)) to individuals de12 scribed in subparagraph (A), (B), (C), or (D) 

13 of section 1860D–19(a)(3); and 

14 ‘‘(B) ensures that additional amounts re15 ceived by the State that are attributable to the 

16 operation of this subsection are used only for 

17 such assistance. 

18 ‘‘(3) INCREASED AMOUNT.—

19 ‘‘(A) IN GENERAL.—The amount specified 

20 in this paragraph for a State for a fiscal year 

21 is equal to the product of—

22 ‘‘(i) the aggregate amount specified in 

23 subparagraph (B); and 

24 ‘‘(ii) the amount specified in section 

25 1108(g)(1) for that State, divided by the 
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1 sum of the amounts specified in such sec2 tion for all such States. 

3 ‘‘(B) AGGREGATE AMOUNT.—The aggre4 gate amount specified in this subparagraph 

5 for—

6 ‘‘(i) the last 3 quarters of fiscal year 

7 2006, is equal to $37,500,000; 

8 ‘‘(ii) fiscal year 2007, is equal to 

9 $50,000,000; and 

10 ‘‘(iii) any subsequent fiscal year, is 

11 equal to the aggregate amount specified in 

12 this subparagraph for the previous fiscal 

13 year increased by the annual percentage 

14 increase specified in section 1860D–6(c)(5) 

15 for the calendar year beginning in such fis16 cal year. 

17 ‘‘(4) NONAPPLICATION.—Section 1927(d)(2)(E) 

18 shall not apply to a State described in paragraph (1) 

19 for purposes of providing medical assistance de20 scribed in paragraph (2)(A). 

21 ‘‘(5) REPORT.—The Secretary shall submit to 

22 Congress a report on the application of this sub23 section and may include in the report such rec24 ommendations as the Secretary deems appropriate. 
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1 ‘‘(f) DEFINITIONS.—For purposes of this section, the 

2 terms ‘qualified medicare beneficiary’, ‘subsidy-eligible in3 dividual’, and ‘dual eligible individual’ have the meanings 

4 given such terms in subparagraphs (A), (D), and (E), re5 spectively, of section 1860D–19(a)(4).’’. 

6 (2) CONFORMING AMENDMENTS.—

7 (A) Section 1905(b) (42 U.S.C. 1396d(b)) 

8 is amended by inserting ‘‘and subsections (c)(1) 

9 and (d)(1) of section 1935’’ after ‘‘1933(d)’’. 

10 (B) Section 1108(f) (42 U.S.C. 1308(f)) is 

11 amended by inserting ‘‘and section 

12 1935(e)(1)(B)’’ after ‘‘Subject to subsection 

13 (g)’’. 

14 (3) TRANSFER OF FEDERALLY ASSUMED POR15 TIONS OF MEDICARE COST-SHARING.—

16 (A) TRANSFER OF ASSUMPTION OF PART B

17 PREMIUM FOR STATES PROVIDING PRESCRIP18 TION DRUG COVERAGE FOR DUAL ELIGIBLE IN19 DIVIDUALS TO THE FEDERAL SUPPLEMENTARY

20 MEDICAL INSURANCE TRUST FUND.—Section 

21 1841(f) (42 U.S.C. 1395t(f)) is amended—

22 (i) by inserting ‘‘(1)’’ after ‘‘(f)’’; and 

23 (ii) by adding at the end the following 

24 new paragraph: 
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1 ‘‘(2) There shall be transferred periodically (but not 

2 less often than once each fiscal year) to the Trust Fund 

3 from the Treasury amounts which the Secretary of Health 

4 and Human Services shall have certified are equivalent to 

5 the amounts determined under section 1935(c)(1) with re6 spect to all States for a fiscal year.’’. 

7 (B) TRANSFER OF ASSUMPTION OF PART A

8 COST-SHARING FOR CERTAIN STATES.—Section 

9 1817(g) (42 U.S.C. 1395i(g)) is amended—

10 (i) by inserting ‘‘(1)’’ after ‘‘(g)’’; and 

11 (ii) by adding at the end the following 

12 new paragraph: 

13 ‘‘(2) There shall be transferred periodically (but not 

14 less often than once each fiscal year) to the Trust Fund 

15 from the Treasury amounts which the Secretary of Health 

16 and Human Services shall have certified are equivalent to 

17 the amounts determined under section 1935(d)(1) with re18 spect to certain States for a fiscal year.’’. 

19 (4) AMENDMENT TO BEST PRICE.—Section 

20 1927(c)(1)(C)(i) (42 U.S.C. 1396r–8(c)(1)(C)(i)), as 

21 amended by section 111(b), is amended—

22 (A) by striking ‘‘and’’ at the end of sub23 clause (IV); 

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

25 subclause (V) and inserting ‘‘; and’’; and 
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1 (C) by adding at the end the following new 

2 subclause: 

3 ‘‘(VI) any prices charged which 

4 are negotiated under a Medicare Pre5 scription Drug plan under part D of 

6 title XVIII with respect to covered 

7 drugs, under a MedicareAdvantage 

8 plan under part C of such title with 

9 respect to such drugs, or under a 

10 qualified retiree prescription drug 

11 plan (as defined in section 1860D–

12 20(f)(1)) with respect to such drugs, 

13 on behalf of eligible beneficiaries (as 

14 defined in section 1860D(a)(3).’’. 

15 (c) EXTENSION OF MEDICARE COST-SHARING FOR

16 PART B PREMIUM FOR QUALIFYING INDIVIDUALS

17 THROUGH 2008.—

18 (1) IN GENERAL.—Section 1902(a)(10)(E)(iv) 

19 (42 U.S.C. 1396a(a)(10)(E)(iv)) is amended to read 

20 as follows: 

21 ‘‘(iv) subject to sections 1933 and 

22 1905(p)(4), for making medical assistance 

23 available (but only for premiums payable with 

24 respect to months during the period beginning 

25 with January 1998, and ending with December 
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1 2008) for medicare cost-sharing described in 

2 section 1905(p)(3)(A)(ii) for individuals who 

3 would be qualified medicare beneficiaries de4 scribed in section 1905(p)(1) but for the fact 

5 that their income exceeds the income level es6 tablished by the State under section 1905(p)(2) 

7 and is at least 120 percent, but less than 135 

8 percent, of the official poverty line (referred to 

9 in such section) for a family of the size involved 

10 and who are not otherwise eligible for medical 

11 assistance under the State plan;’’. 

12 (2) TOTAL AMOUNT AVAILABLE FOR ALLOCA13 TION.—Section 1933(c) (42 U.S.C. 1396u–3(c)) is 

14 amended—

15 (A) in paragraph (1)—

16 (i) in subparagraph (D), by striking 

17 ‘‘and’’ at the end; 

18 (ii) in subparagraph (E)—

19 (I) by striking ‘‘fiscal year 2002’’ 

20 and inserting ‘‘each of fiscal years 

21 2002 through 2008’’; and 

22 (II) by striking the period and 

23 inserting ‘‘; and’’; and 

24 (iii) by adding at the end the fol25 lowing new subparagraph: 
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1 ‘‘(F) the first quarter of fiscal year 2009, 

2 $100,000,000.’’; and 

3 (B) in paragraph (2)(A), by striking ‘‘the 

4 sum of’’ and all that follows through 

5 ‘‘1902(a)(10)(E)(iv)(II) in the State; to’’ and 

6 inserting ‘‘twice the total number of individuals 

7 described in section 1902(a)(10)(E)(iv) in the 

8 State; to’’. 

9 (d) OUTREACH BY THE COMMISSIONER OF SOCIAL

10 SECURITY.—Section 1144 (42 U.S.C. 1320b–14) is 

11 amended—

12 (1) in the section heading, by inserting ‘‘AND

13 SUBSIDIES FOR LOW-INCOME INDIVIDUALS UNDER

14 TITLE XVIII’’ after ‘‘COST-SHARING’’; 

15 (2) in subsection (a)—

16 (A) in paragraph (1)—

17 (i) in subparagraph (A), by inserting 

18 ‘‘for the transitional prescription drug as19 sistance card program under section 

20 1807A, or for premium and cost-sharing 

21 subsidies under section 1860D–19’’ before 

22 the semicolon; and 

23 (ii) in subparagraph (B), by inserting 

24 ‘‘, program, and subsidies’’ after ‘‘medical 

25 assistance’’; and 
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1 (B) in paragraph (2)—

2 (i) in the matter preceding subpara3 graph (A), by inserting ‘‘, the transitional 

4 prescription drug assistance card program 

5 under section 1807A, or premium and 

6 cost-sharing subsidies under section 

7 1860D–19’’ after ‘‘assistance’’; and 

8 (ii) in subparagraph (A), by striking 

9 ‘‘such eligibility’’ and inserting ‘‘eligibility 

10 for medicare cost-sharing under the med11 icaid program’’; and 

12 (3) in subsection (b)—

13 (A) in paragraph (1)(A), by inserting ‘‘, 

14 for the transitional prescription drug assistance 

15 card program under section 1807A, or for pre16 mium and cost-sharing subsidies for low-income 

17 individuals under section 1860D–19’’ after 

18 ‘‘1933’’; 

19 (B) in paragraph (2), by inserting ‘‘, pro20 gram, and subsidies’’ after ‘‘medical assist21 ance’’; and 

22 (C) by adding at the end the following: 

23 ‘‘(3) AGREEMENTS TO ESTABLISH INFORMA24 TION AND ENROLLMENT SITES AT SOCIAL SECURITY

25 FIELD OFFICES.—
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1 ‘‘(A) IN GENERAL.—The Commissioner 

2 shall enter into an agreement with each State 

3 operating a State plan under title XIX (includ4 ing under a waiver of such plan) to establish in5 formation and enrollment sites within all the 

6 Social Security field offices located in the State 

7 for purposes of—

8 ‘‘(i) the State determining the eligi9 bility of individuals residing in the State 

10 for medical assistance for payment of the 

11 cost of medicare cost-sharing under the 

12 medicaid program pursuant to sections 

13 1902(a)(10)(E) and 1933, the transitional 

14 prescription drug assistance card program 

15 under section 1807A, or premium and 

16 cost-sharing subsidies under section 

17 1860D–19; and 

18 ‘‘(ii) enrolling individuals who are de19 termined eligible for such medical assist20 ance, program, or subsidies in the State 

21 plan (or waiver), the transitional prescrip22 tion drug assistance card program under 

23 section 1807A, or the appropriate category 

24 for premium and cost-sharing subsidies 

25 under section 1860D–19. 
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1 ‘‘(B) AGREEMENT TERMS.—The Secretary 

2 and the Commissioner jointly shall develop 

3 terms for the State agreements required under 

4 subparagraph (A) that shall specify the respon5 sibilities of the State and the Commissioner in 

6 the establishment and operation of such sites. 

7 ‘‘(C) AUTHORIZATION OF APPROPRIA8 TIONS.—There are authorized to be appro9 priated to the Commissioner, such sums as may 

10 be necessary to carry out this paragraph.’’. 

11 (e) REPORT REGARDING VOLUNTARY ENROLLMENT

12 OF DUAL ELIGIBLE INDIVIDUALS IN PART D.—Not later 

13 than January 1, 2005, the Secretary shall submit a report 

14 to Congress that contains such recommendations for legis15 lation as the Secretary determines are necessary in order 

16 to establish a voluntary option for dual eligible individuals 

17 (as defined in 1860D–19(a)(4)(E) of the Social Security 

18 Act (as added by section 101)) to enroll under part D of 

19 title XVIII of such Act for prescription drug coverage. 

20 SEC. 105. EXPANSION OF MEMBERSHIP AND DUTIES OF 

21 MEDICARE PAYMENT ADVISORY COMMISSION 

22 (MEDPAC). 

23 (a) EXPANSION OF MEMBERSHIP.—

24 (1) IN GENERAL.—Section 1805(c) (42 U.S.C. 

25 1395b–6(c)) is amended—
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1 (A) in paragraph (1), by striking ‘‘17’’ and 

2 inserting ‘‘19’’; and 

3 (B) in paragraph (2)(B), by inserting ‘‘ex4 perts in the area of pharmacology and prescrip5 tion drug benefit programs,’’ after ‘‘other 

6 health professionals,’’. 

7 (2) INITIAL TERMS OF ADDITIONAL MEM8 BERS.—

9 (A) IN GENERAL.—For purposes of stag10 gering the initial terms of members of the 

11 Medicare Payment Advisory Commission under 

12 section 1805(c)(3) of the Social Security Act 

13 (42 U.S.C. 1395b–6(c)(3)), the initial terms of 

14 the 2 additional members of the Commission 

15 provided for by the amendment under para16 graph (1)(A) are as follows: 

17 (i) One member shall be appointed for 

18 1 year. 

19 (ii) One member shall be appointed 

20 for 2 years. 

21 (B) COMMENCEMENT OF TERMS.—Such 

22 terms shall begin on January 1, 2005. 

23 (b) EXPANSION OF DUTIES.—Section 1805(b)(2) (42 

24 U.S.C. 1395b–6(b)(2)) is amended by adding at the end 

25 the following new subparagraph: 
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1 ‘‘(D) VOLUNTARY PRESCRIPTION DRUG

2 DELIVERY PROGRAM.—Specifically, the Com3 mission shall review, with respect to the vol4 untary prescription drug delivery program 

5 under part D, competition among eligible enti6 ties offering Medicare Prescription Drug plans 

7 and beneficiary access to such plans and cov8 ered drugs, particularly in rural areas. As part 

9 of such review, the Commission shall hold 3 

10 field hearings in 2007.’’. 

11 SEC. 106. STUDY REGARDING VARIATIONS IN SPENDING 

12 AND DRUG UTILIZATION. 

13 (a) STUDY.—The Secretary shall study on an ongo14 ing basis variations in spending and drug utilization under 

15 part D of title XVIII of the Social Security Act for covered 

16 drugs to determine the impact of such variations on pre17 miums imposed by eligible entities offering Medicare Pre18 scription Drug plans under that part. In conducting such 

19 study, the Secretary shall examine the impact of geo20 graphic adjustments of the monthly national average pre21 mium under section 1860D–15 of such Act on—

22 (1) maximization of competition under part D 

23 of title XVIII of such Act; and 
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1 (2) the ability of eligible entities offering Medi2 care Prescription Drug plans to contain costs for 

3 covered drugs. 

4 (b) REPORT.—Beginning with 2007, the Secretary 

5 shall submit annual reports to Congress on the study re6 quired under subsection (a). 

7 SEC. 107. LIMITATION ON PRESCRIPTION DRUG BENEFITS 

8 OF MEMBERS OF CONGRESS. 

9 (a) LIMITATION ON BENEFITS.—Notwithstanding 

10 any other provision of law, during calendar year 2004, the 

11 actuarial value of the prescription drug benefit of any 

12 Member of Congress enrolled in a health benefits plan 

13 under chapter 89 of title 5, United States Code, may not 

14 exceed the actuarial value of any prescription drug benefit 

15 under title XVIII of the Social Security Act passed by the 

16 1st session of the 108th Congress and enacted in law. 

17 (b) REGULATIONS.—The Office of Personnel Man18 agement shall promulgate regulations to carry out this 

19 section. 

20 SEC. 108. PROTECTING SENIORS WITH CANCER. 

21 Any eligible beneficiary (as defined in section 1860D(3) 

22 of the Social Security Act) who is diagnosed with cancer 

23 shall be protected from high prescription drug costs in the 

24 following manner: 
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1 (1) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN

2 INCOME BELOW 100 PERCENT OF THE FEDERAL

3 POVERTY LINE.—If the individual is a qualified 

4 medicare beneficiary (as defined in section 1860D–

5 19(a)(4) of such Act), such individual shall receive 

6 the full premium subsidy and reduction of cost-shar7 ing described in section 1860D–19(a)(1) of such 

8 Act, including the payment of—

9 (A) no deductible; 

10 (B) no monthly beneficiary premium for at 

11 least one Medicare Prescription Drug plan 

12 available in the area in which the individual re13 sides; and 

14 (C) reduced cost-sharing described in sub15 paragraphs (C), (D), and (E) of section 

16 1860D–19(a)(1) of such Act. 

17 (2) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN

18 INCOME BETWEEN 100 AND 135 PERCENT OF THE

19 FEDERAL POVERTY LINE.—If the individual is a 

20 specified low income medicare beneficiary (as defined 

21 in paragraph 1860D–19(4)(B) of such Act) or a 

22 qualifying individual (as defined in paragraph 

23 1860D–19(4)(C) of such Act) who is diagnosed with 

24 cancer, such individual shall receive the full premium 

25 subsidy and reduction of cost-sharing described in 
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1 section 1860D–19(a)(2) of such Act, including pay2 ment of—

3 (A) no deductible; 

4 (B) no monthly premium for any Medicare 

5 Prescription Drug plan described paragraph (1) 

6 or (2) of section 1860D–17(a) of such Act; and 

7 (C) reduced cost-sharing described in sub8 paragraphs (C), (D), and (E) of section 

9 1860D–19(a)(2) of such Act. 

10 (3) SUBSIDY-ELIGIBLE INDIVIDUALS WITH IN11 COME BETWEEN 135 PERCENT AND 160 PERCENT OF

12 THE FEDERAL POVERTY LEVEL.—If the individual is 

13 a subsidy-eligible individual (as defined in section 

14 1860D–19(a)(4)(D) of such Act) who is diagnosed 

15 with cancer, such individual shall receive sliding 

16 scale premium subsidy and reduction of cost-sharing 

17 for subsidy-eligible individuals, including payment 

18 of—

19 (A) for 2006, a deductible of only $50; 

20 (B) only a percentage of the monthly pre21 mium (as described in section 1860D–

22 19(a)(3)(A)(i)); and 

23 (C) reduced cost-sharing described in 

24 clauses (iii), (iv), and (v) of section 1860D–

25 19(a)(3)(A). 
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1 (4) ELIGIBLE BENEFICIARIES WITH INCOME

2 ABOVE 160 PERCENT OF THE FEDERAL POVERTY

3 LEVEL.—If an individual is an eligible beneficiary 

4 (as defined in section 1860D(3) of such Act), is not 

5 described in paragraphs (1) through (3), and is di6 agnosed with cancer, such individual shall have ac7 cess to qualified prescription drug coverage (as de8 scribed in section 1860D–6(a)(1) of such Act), in9 cluding payment of—

10 (A) for 2006, a deductible of $275; 

11 (B) the limits on cost-sharing described 

12 section 1860D–6(c)(2) of such Act up to, for 

13 2006, an initial coverage limit of $4,500; and 

14 (C) for 2006, an annual out-of-pocket limit 

15 of $3,700 with 10 percent cost-sharing after 

16 that limit is reached. 

17 SEC. 109. PROTECTING SENIORS WITH CARDIOVASCULAR 

18 DISEASE, CANCER, OR ALZHEIMER’S DISEASE. 

19 Any eligible beneficiary (as defined in section 1860D(3) 

20 of the Social Security Act) who is diagnosed with cardio21 vascular disease, cancer, diabetes or Alzheimer’s disease 

22 shall be protected from high prescription drug costs in the 

23 following manner: 

24 (1) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN

25 INCOME BELOW 100 PERCENT OF THE FEDERAL
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1 POVERTY LINE.—If the individual is a qualified 

2 medicare beneficiary (as defined in section 1860D–

3 19(a)(4) of such Act), such individual shall receive 

4 the full premium subsidy and reduction of cost-shar5 ing described in section 1860D–19(a)(1) of such 

6 Act, including the payment of—

7 (A) no deductible; 

8 (B) no monthly beneficiary premium for at 

9 least one Medicare Prescription Drug plan 

10 available in the area in which the individual re11 sides; and 

12 (C) reduced cost-sharing described in sub13 paragraphs (C), (D), and (E) of section 

14 1860D–19(a)(1) of such Act. 

15 (2) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN

16 INCOME BETWEEN 100 AND 135 PERCENT OF THE

17 FEDERAL POVERTY LINE.—If the individual is a 

18 specified low income medicare beneficiary (as defined 

19 in paragraph 1860D–19(4)(B) of such Act) or a 

20 qualifying individual (as defined in paragraph 

21 1860D–19(4)(C) of such Act) who is diagnosed with 

22 cardiovascular disease, cancer, or Alzheimer’s dis23 ease, such individual shall receive the full premium 

24 subsidy and reduction of cost-sharing described in 
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1 section 1860D–19(a)(2) of such Act, including pay2 ment of—

3 (A) no deductible; 

4 (B) no monthly premium for any Medicare 

5 Prescription Drug plan described paragraph (1) 

6 or (2) of section 1860D–17(a) of such Act; and 

7 (C) reduced cost-sharing described in sub8 paragraphs (C), (D), and (E) of section 

9 1860D–19(a)(2) of such Act. 

10 (3) SUBSIDY-ELIGIBLE INDIVIDUALS WITH IN11 COME BETWEEN 135 PERCENT AND 160 PERCENT OF

12 THE FEDERAL POVERTY LEVEL.—If the individual is 

13 a subsidy-eligible individual (as defined in section 

14 1860D–19(a)(4)(D) of such Act) who is diagnosed 

15 with cardiovascular disease, cancer, or Alzheimer’s 

16 disease, such individual shall receive sliding scale 

17 premium subsidy and reduction of cost-sharing for 

18 subsidy-eligible individuals, including payment of—

19 (A) for 2006, a deductible of only $50; 

20 (B) only a percentage of the monthly pre21 mium (as described in section 1860D–

22 19(a)(3)(A)(i)); and 

23 (C) reduced cost-sharing described in 

24 clauses (iii), (iv), and (v) of section 1860D–

25 19(a)(3)(A). 
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1 (4) ELIGIBLE BENEFICIARIES WITH INCOME

2 ABOVE 160 PERCENT OF THE FEDERAL POVERTY

3 LEVEL.—If an individual is an eligible beneficiary 

4 (as defined in section 1860D(3) of such Act), is not 

5 described in paragraphs (1) through (3), and is di6 agnosed with cardiovascular disease, cancer, or Alz7 heimer’s disease, such individual shall have access to 

8 qualified prescription drug coverage (as described in 

9 section 1860D–6(a)(1) of such Act), including pay10 ment of—

11 (A) for 2006, a deductible of $275; 

12 (B) the limits on cost-sharing described 

13 section 1860D–6(c)(2) of such Act up to, for 

14 2006, an initial coverage limit of $4,500; and 

15 (C) for 2006, an annual out-of-pocket limit 

16 of $3,700 with 10 percent cost-sharing after 

17 that limit is reached. 

18 SEC. 110. REVIEW AND REPORT ON CURRENT STANDARDS 

19 OF PRACTICE FOR PHARMACY SERVICES 

20 PROVIDED TO PATIENTS IN NURSING FACILI21 TIES. 

22 (a) REVIEW.—

23 (1) IN GENERAL.—The Secretary shall conduct 

24 a thorough review of the current standards of prac-
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1 tice for pharmacy services provided to patients in 

2 nursing facilities. 

3 (2) SPECIFIC MATTERS REVIEWED.—In con4 ducting the review under paragraph (1), the Sec5 retary shall—

6 (A) assess the current standards of prac7 tice, clinical services, and other service require8 ments generally used for pharmacy services in 

9 long-term care settings; and 

10 (B) evaluate the impact of those standards 

11 with respect to patient safety, reduction of 

12 medication errors and quality of care. 

13 (b) REPORT.—

14 (1) IN GENERAL.—Not later than the date that 

15 is 18 months after the date of enactment of this Act, 

16 the Secretary shall submit a report to Congress on 

17 the study conducted under subsection (a)(1), to18 gether with any recommendations for legislation that 

19 the Administrator determines to be appropriate as a 

20 result of such study. 

21 (2) CONTENTS.—The report submitted under 

22 paragraph (1) shall contain—

23 (A) a detailed description of the plans of 

24 the Secretary to implement the provisions of 

25 this Act in a manner consistent with applicable 
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1 State and Federal laws designed to protect the 

2 safety and quality of care of nursing facility pa3 tients; and 

4 (B) recommendations regarding necessary 

5 actions and appropriate reimbursement to en6 sure the provision of prescription drugs to 

7 medicare beneficiaries residing in nursing facili8 ties in a manner consistent with existing patient 

9 safety and quality of care standards under ap10 plicable State and Federal laws. 

11 SEC. 110A. MEDICATION THERAPY MANAGEMENT ASSESS12 MENT PROGRAM. 

13 (a) ESTABLISHMENT.—

14 (1) IN GENERAL.—The Secretary shall establish 

15 an assessment program to contract with qualified 

16 pharmacists to provide medication therapy manage17 ment services to eligible beneficiaries who receive 

18 care under the original medicare fee-for-service pro19 gram under parts A and B of title XVIII of the So20 cial Security Act to eligible beneficiaries. 

21 (2) SITES.—The Secretary shall designate 6 ge22 ographic areas, each containing not less than 3 sites, 

23 at which to conduct the assessment program under 

24 this section. At least 2 geographic areas designated 

25 under this paragraph shall be located in rural areas. 
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1 (3) DURATION.—The Secretary shall conduct 

2 the assessment program under this section for a 1-

3 year period. 

4 (4) IMPLEMENTATION.—The Secretary shall 

5 implement the program not later than January 1, 

6 2005, but may not implement the assessment pro7 gram before October 1, 2004. 

8 (b) PARTICIPANTS.—Any eligible beneficiary who re9 sides in an area designated by the Secretary as an assess10 ment site under subsection (a)(2) may participate in the 

11 assessment program under this section if such beneficiary 

12 identifies a qualified pharmacist who agrees to furnish 

13 medication therapy management services to the eligible 

14 beneficiary under the assessment program. 

15 (c) CONTRACTS WITH QUALIFIED PHARMACISTS.—

16 (1) IN GENERAL.—The Secretary shall enter 

17 into a contract with qualified pharmacists to provide 

18 medication therapy management services to eligible 

19 beneficiaries residing in the area served by the quali20 fied pharmacist. 

21 (2) NUMBER OF QUALIFIED PHARMACISTS.—

22 The Secretary may contract with more than 1 quali23 fied pharmacist at each site. 

24 (d) PAYMENT TO QUALIFIED PHARMACISTS.—
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1 (1) IN GENERAL.—Under an contract entered 

2 into under subsection (c), the Secretary shall pay 

3 qualified pharmacists a fee for providing medication 

4 therapy management services. 

5 (2) ASSESSMENT OF PAYMENT METHODOLO6 GIES.—The Secretary shall, in consultation with na7 tional pharmacist and pharmacy associations, design 

8 the fee paid under paragraph (1) to test various 

9 payment methodologies applicable with respect to 

10 medication therapy management services, including 

11 a payment methodology that applies a relative value 

12 scale and fee-schedule with respect to such services 

13 that take into account the differences in—

14 (A) the time required to perform the dif15 ferent types of medication therapy management 

16 services; 

17 (B) the level of risk associated with the use 

18 of particular outpatient prescription drugs or 

19 groups of drugs; and 

20 (C) the health status of individuals to 

21 whom such services are provided. 

22 (e) FUNDING.—

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

24 the Secretary shall provide for the transfer from the 

25 Federal Supplementary Insurance Trust Fund es-
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1 tablished under section 1841 of the Social Security 

2 Act (42 U.S.C. 1395t) of such funds as are nec3 essary for the costs of carrying out the assessment 

4 program under this section. 

5 (2) BUDGET NEUTRALITY.—In conducting the 

6 assessment program under this section, the Sec7 retary shall ensure that the aggregate payments 

8 made by the Secretary do not exceed the amount 

9 which the Secretary would have paid if the assess10 ment program under this section was not imple11 mented. 

12 (f) WAIVER AUTHORITY.—The Secretary may waive 

13 such requirements of titles XI and XVIII of the Social 

14 Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as 

15 may be necessary for the purpose of carrying out the as16 sessment program under this section. 

17 (g) AVAILABILITY OF DATA.—During the period in 

18 which the assessment program is conducted, the Secretary 

19 annually shall make available data regarding—

20 (1) the geographic areas and sites designated 

21 under subsection (a)(2); 

22 (2) the number of eligible beneficiaries partici23 pating in the program under subsection (b) and the 

24 level and types medication therapy management 

25 services used by such beneficiaries; 
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1 (3) the number of qualified pharmacists with 

2 contracts under subsection (c), the location of such 

3 pharmacists, and the number of eligible beneficiaries 

4 served by such pharmacists; and 

5 (4) the types of payment methodologies being 

6 tested under subsection (d)(2). 

7 (h) REPORT.—

8 (1) IN GENERAL.—Not later than 6 months 

9 after the completion of the assessment program 

10 under this section, the Secretary shall submit to 

11 Congress a final report summarizing the final out12 come of the program and evaluating the results of 

13 the program, together with recommendations for 

14 such legislation and administrative action as the 

15 Secretary determines to be appropriate. 

16 (2) ASSESSMENT OF PAYMENT METHODOLO17 GIES.—The final report submitted under paragraph 

18 (1) shall include an assessment of the feasibility and 

19 appropriateness of the various payment methodolo20 gies tested under subsection (d)(2). 

21 (i) DEFINITIONS.—In this section: 

22 (1) MEDICATION THERAPY MANAGEMENT SERV23 ICES.—The term ‘‘medication therapy management 

24 services’’ means services or programs furnished by a 

25 qualified pharmacist to an eligible beneficiary, indi-
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1 vidually or on behalf of a pharmacy provider, which 

2 are designed—

3 (A) to ensure that medications are used 

4 appropriately by such individual; 

5 (B) to enhance the individual’s under6 standing of the appropriate use of medications; 

7 (C) to increase the individual’s compliance 

8 with prescription medication regimens; 

9 (D) to reduce the risk of potential adverse 

10 events associated with medications; and 

11 (E) to reduce the need for other costly 

12 medical services through better management of 

13 medication therapy. 

14 (2) ELIGIBLE BENEFICIARY.—The term ‘‘eligi15 ble beneficiary’’ means an individual who is—

16 (A) entitled to (or enrolled for) benefits 

17 under part A and enrolled for benefits under 

18 part B of the Social Security Act (42 U.S.C. 

19 1395c et seq.; 1395j et seq.); 

20 (B) not enrolled with a Medicare+Choice 

21 plan or a MedicareAdvantage plan under part 

22 C; and 

23 (C) receiving, in accordance with State law 

24 or regulation, medication for—
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1 (i) the treatment of asthma, diabetes, 

2 or chronic cardiovascular disease, including 

3 an individual on anticoagulation or lipid 

4 reducing medications; or 

5 (ii) such other chronic diseases as the 

6 Secretary may specify. 

7 (3) QUALIFIED PHARMACIST.—The term 

8 ‘‘qualified pharmacist’’ means an individual who is a 

9 licensed pharmacist in good standing with the State 

10 Board of Pharmacy. 

11 Subtitle B—Medicare Prescription 

12 Drug Discount Card and Transi13 tional Assistance for Low-In14 come Beneficiaries 

15 SEC. 111. MEDICARE PRESCRIPTION DRUG DISCOUNT 

16 CARD AND TRANSITIONAL ASSISTANCE FOR 

17 LOW-INCOME BENEFICIARIES. 

18 (a) IN GENERAL.—Title XVIII is amended by insert19 ing after section 1806 the following new sections: 

20 ‘‘MEDICARE PRESCRIPTION DRUG DISCOUNT CARD

21 ENDORSEMENT PROGRAM

22 ‘‘SEC. 1807. (a) ESTABLISHMENT.—There is estab23 lished a medicare prescription drug discount card endorse24 ment program under which the Secretary shall—
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1 ‘‘(1) endorse prescription drug discount card 

2 programs offered by prescription drug card sponsors 

3 that meet the requirements of this section; and 

4 ‘‘(2) make available to eligible beneficiaries in5 formation regarding such endorsed programs. 

6 ‘‘(b) ELIGIBILITY, ELECTION OF PROGRAM, AND EN7 ROLLMENT FEES.—

8 ‘‘(1) ELIGIBILITY AND ELECTION OF PRO9 GRAM.—

10 ‘‘(A) IN GENERAL.—Subject to subpara11 graph (B), the Secretary shall establish proce12 dures—

13 ‘‘(i) for identifying eligible bene14 ficiaries; and 

15 ‘‘(ii) under which such beneficiaries 

16 may make an election to enroll in any pre17 scription drug discount card program en18 dorsed under this section and disenroll 

19 from such a program. 

20 ‘‘(B) LIMITATION.—An eligible beneficiary 

21 may not be enrolled in more than 1 prescription 

22 drug discount card program at any time. 

23 ‘‘(2) ENROLLMENT FEES.—

24 ‘‘(A) IN GENERAL.—A prescription drug 

25 card sponsor may charge an annual enrollment 
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1 fee to each eligible beneficiary enrolled in a pre2 scription drug discount card program offered by 

3 such sponsor. 

4 ‘‘(B) AMOUNT.—No enrollment fee 

5 charged under subparagraph (A) may exceed 

6 $25. 

7 ‘‘(C) UNIFORM ENROLLMENT FEE.—A 

8 prescription drug card sponsor shall ensure that 

9 the enrollment fee for a prescription drug dis10 count card program endorsed under this section 

11 is the same for all eligible medicare bene12 ficiaries enrolled in the program. 

13 ‘‘(D) COLLECTION.—Any enrollment fee 

14 shall be collected by the prescription drug card 

15 sponsor. 

16 ‘‘(c) PROVIDING INFORMATION TO ELIGIBLE BENE17 FICIARIES.—

18 ‘‘(1) PROMOTION OF INFORMED CHOICE.—

19 ‘‘(A) BY THE SECRETARY.—In order to 

20 promote informed choice among endorsed pre21 scription drug discount card programs, the Sec22 retary shall provide for the dissemination of in23 formation which compares the costs and bene24 fits of such programs. Such dissemination shall 
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1 be coordinated with the dissemination of edu2 cational information on other medicare options. 

3 ‘‘(B) BY PRESCRIPTION DRUG CARD SPON4 SORS.—Each prescription drug card sponsor 

5 shall make available to each eligible beneficiary 

6 (through the Internet and otherwise) informa7 tion—

8 ‘‘(i) that the Secretary identifies as 

9 being necessary to promote informed 

10 choice among endorsed prescription drug 

11 discount card programs by eligible bene12 ficiaries, including information on enroll13 ment fees, negotiated prices for prescrip14 tion drugs charged to beneficiaries, and 

15 services relating to prescription drugs of16 fered under the program; 

17 ‘‘(ii) on how any formulary used by 

18 such sponsor functions. 

19 ‘‘(2) USE OF MEDICARE TOLL-FREE NUMBER.—

20 The Secretary shall provide through the 1–800–

21 MEDICARE toll free telephone number for the re22 ceipt and response to inquiries and complaints con23 cerning the medicare prescription drug discount card 

24 endorsement program established under this section 
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1 and prescription drug discount card programs en2 dorsed under such program. 

3 ‘‘(d) BENEFICIARY PROTECTIONS.—

4 ‘‘(1) IN GENERAL.—Each prescription drug dis5 count card program endorsed under this section 

6 shall meet such requirements as the Secretary iden7 tifies to protect and promote the interest of eligible 

8 beneficiaries, including requirements that—

9 ‘‘(A) relate to appeals by eligible bene10 ficiaries and marketing practices; and 

11 ‘‘(B) ensure that beneficiaries are not 

12 charged more than the lower of the negotiated 

13 retail price or the usual and customary price. 

14 ‘‘(2) ENSURING PHARMACY ACCESS.—Each pre15 scription drug card sponsor offering a prescription 

16 drug discount card program endorsed under this sec17 tion shall secure the participation in its network of 

18 a sufficient number of pharmacies that dispense 

19 (other than by mail order) drugs directly to patients 

20 to ensure convenient access (as determined by the 

21 Secretary and including adequate emergency access) 

22 for enrolled beneficiaries. Such standards shall take 

23 into account reasonable distances to pharmacy serv24 ices in urban and rural areas and access to phar-
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1 macy services of the Indian Health Service and In2 dian tribes and tribal organizations. 

3 ‘‘(3) QUALITY ASSURANCE.—Each prescription 

4 drug card sponsor offering a prescription drug dis5 count card program endorsed under this section 

6 shall have in place adequate procedures for assuring 

7 that quality service is provided to eligible bene8 ficiaries enrolled in a prescription drug discount 

9 card program offered by such sponsor. 

10 ‘‘(4) CONFIDENTIALITY OF ENROLLEE

11 RECORDS.—Insofar as a prescription drug card 

12 sponsor maintains individually identifiable medical 

13 records or other health information regarding eligi14 ble beneficiaries enrolled in a prescription drug dis15 count card program endorsed under this section, the 

16 prescription drug card sponsor shall have in place 

17 procedures to safeguard the privacy of any individ18 ually identifiable beneficiary information in a man19 ner that the Secretary determines is consistent with 

20 the Federal regulations (concerning the privacy of 

21 individually identifiable health information) promul22 gated under section 264(c) of the Health Insurance 

23 Portability and Accountability Act of 1996. 

24 ‘‘(5) NO OTHER FEES.—A prescription drug 

25 card sponsor may not charge any fee to an eligible 
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1 beneficiary under a prescription drug discount card 

2 program endorsed under this section other than an 

3 enrollment fee charged under subsection (b)(2)(A). 

4 ‘‘(6) PRICES.—

5 ‘‘(A) AVOIDANCE OF HIGH PRICED

6 DRUGS.—A prescription drug card sponsor may 

7 not recommend switching an eligible beneficiary 

8 to a drug with a higher negotiated price absent 

9 a recommendation by a licensed health profes10 sional that there is a clinical indication with re11 spect to the patient for such a switch. 

12 ‘‘(B) PRICE STABILITY.—Negotiated prices 

13 charged for prescription drugs covered under a 

14 prescription drug discount card program en15 dorsed under this section may not change more 

16 frequently than once every 60 days. 

17 ‘‘(e) PRESCRIPTION DRUG BENEFITS.—

18 ‘‘(1) IN GENERAL.—Each prescription drug 

19 card sponsor may only provide benefits that relate to 

20 prescription drugs (as defined in subsection (i)(2)) 

21 under a prescription drug discount card program en22 dorsed under this section. 

23 ‘‘(2) SAVINGS TO ELIGIBLE BENEFICIARIES.—

24 ‘‘(A) IN GENERAL.—Subject to subpara25 graph (D), each prescription drug card sponsor 
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1 shall provide eligible beneficiaries who enroll in 

2 a prescription drug discount card program of3 fered by such sponsor that is endorsed under 

4 this section with access to negotiated prices 

5 used by the sponsor with respect to prescription 

6 drugs dispensed to eligible beneficiaries. 

7 ‘‘(B) INAPPLICABILITY OF MEDICAID BEST

8 PRICE RULES.—The requirements of section 

9 1927 relating to manufacturer best price shall 

10 not apply to the negotiated prices for prescrip11 tion drugs made available under a prescription 

12 drug discount card program endorsed under 

13 this section. 

14 ‘‘(C) GUARANTEED ACCESS TO NEGO15 TIATED PRICES.—The Secretary, in consulta16 tion with the Inspector General of the Depart17 ment of Health and Human Services, shall es18 tablish procedures to ensure that eligible bene19 ficiaries have access to the negotiated prices for 

20 prescription drugs provided under subparagraph 

21 (A). 

22 ‘‘(D) APPLICATION OF FORMULARY RE23 STRICTIONS.—A drug prescribed for an eligible 

24 beneficiary that would otherwise be a covered 

25 drug under this section shall not be so consid-
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1 ered under a prescription drug discount card 

2 program if the program excludes the drug 

3 under a formulary. 

4 ‘‘(3) BENEFICIARY SERVICES.—Each prescrip5 tion drug discount card program endorsed under 

6 this section shall provide pharmaceutical support 

7 services, such as education, counseling, and services 

8 to prevent adverse drug interactions. 

9 ‘‘(4) DISCOUNT CARDS.—Each prescription 

10 drug card sponsor shall issue a card to eligible bene11 ficiaries enrolled in a prescription drug discount 

12 card program offered by such sponsor that the bene13 ficiary may use to obtain benefits under the pro14 gram. 

15 ‘‘(f) SUBMISSION OF APPLICATIONS FOR ENDORSE16 MENT AND APPROVAL.—

17 ‘‘(1) SUBMISSION OF APPLICATIONS FOR EN18 DORSEMENT.—Each prescription drug card sponsor 

19 that seeks endorsement of a prescription drug dis20 count card program under this section shall submit 

21 to the Secretary, at such time and in such manner 

22 as the Secretary may specify, such information as 

23 the Secretary may require. 

24 ‘‘(2) APPROVAL.—The Secretary shall review 

25 the information submitted under paragraph (1) and 
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1 shall determine whether to endorse the prescription 

2 drug discount card program to which such informa3 tion relates. The Secretary may not approve a pro4 gram unless the program and prescription drug card 

5 sponsor offering the program comply with the re6 quirements under this section. 

7 ‘‘(g) REQUIREMENTS ON DEVELOPMENT AND APPLI8 CATION OF FORMULARIES.—If a prescription drug card 

9 sponsor offering a prescription drug discount card pro10 gram uses a formulary, the following requirements must 

11 be met: 

12 ‘‘(1) PHARMACY AND THERAPEUTIC (P&T) COM13 MITTEE.—

14 ‘‘(A) IN GENERAL.—The eligible entity 

15 must establish a pharmacy and therapeutic 

16 committee that develops and reviews the for17 mulary. 

18 ‘‘(B) COMPOSITION.—A pharmacy and 

19 therapeutic committee shall include at least 1 

20 academic expert, at least 1 practicing physician, 

21 and at least 1 practicing pharmacist, all of 

22 whom have expertise in the care of elderly or 

23 disabled persons, and a majority of the mem24 bers of such committee shall consist of individ-
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1 uals who are a practicing physician or a prac2 ticing pharmacist (or both). 

3 ‘‘(2) FORMULARY DEVELOPMENT.—In devel4 oping and reviewing the formulary, the committee 

5 shall base clinical decisions on the strength of sci6 entific evidence and standards of practice, including 

7 assessing peer-reviewed medical literature, such as 

8 randomized clinical trials, pharmacoeconomic stud9 ies, outcomes research data, and such other informa10 tion as the committee determines to be appropriate. 

11 ‘‘(3) INCLUSION OF DRUGS IN ALL THERA12 PEUTIC CATEGORIES AND CLASSES.—

13 ‘‘(A) IN GENERAL.—The formulary must 

14 include drugs within each therapeutic category 

15 and class of covered outpatient drugs (as de16 fined by the Secretary), although not nec17 essarily for all drugs within such categories and 

18 classes. 

19 ‘‘(B) REQUIREMENT.—In defining thera20 peutic categories and classes of covered out21 patient drugs pursuant to subparagraph (A), 

22 the Secretary shall use the compendia referred 

23 to section 1927(g)(1)(B)(i) or other recognized 

24 sources for categorizing drug therapeutic cat25 egories and classes. 
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1 ‘‘(4) PROVIDER EDUCATION.—The committee 

2 shall establish policies and procedures to educate 

3 and inform health care providers concerning the for4 mulary. 

5 ‘‘(5) NOTICE BEFORE REMOVING DRUGS FROM

6 FORMULARY.—Any removal of a drug from a for7 mulary shall take effect only after appropriate notice 

8 is made available to beneficiaries and pharmacies. 

9 ‘‘(h) FRAUD AND ABUSE PREVENTION.—

10 ‘‘(1) IN GENERAL.—The Secretary shall provide 

11 appropriate oversight to ensure compliance of en12 dorsed programs with the requirements of this sec13 tion, including verification of the negotiated prices 

14 and services provided. 

15 ‘‘(2) DISQUALIFICATION FOR ABUSIVE PRAC16 TICES.—The Secretary may implement intermediate 

17 sanctions and may revoke the endorsement of a pro18 gram that the Secretary determines no longer meets 

19 the requirements of this section or that has engaged 

20 in false or misleading marketing practices. 

21 ‘‘(3) AUTHORITY WITH RESPECT TO CIVIL

22 MONEY PENALTIES.—The Secretary may impose a 

23 civil money penalty in an amount not to exceed 

24 $10,000 for any violation of this section. The provi25 sions of section 1128A (other than subsections (a) 
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1 and (b)) shall apply to a civil money penalty under 

2 the previous sentence in the same manner as such 

3 provisions apply to a penalty or proceeding under 

4 section 1128A(a). 

5 ‘‘(4) REPORTING TO SECRETARY.—Each pre6 scription drug card sponsor offering a prescription 

7 drug discount card program endorsed under this sec8 tion shall report information relating to program 

9 performance, use of prescription drugs by eligible 

10 beneficiaries enrolled in the program, financial infor11 mation of the sponsor, and such other information 

12 as the Secretary may specify. The Secretary may not 

13 disclose any proprietary data reported under this 

14 paragraph. 

15 ‘‘(5) DRUG UTILIZATION REVIEW.—The Sec16 retary may use claims data from parts A and B for 

17 purposes of conducting a drug utilization review pro18 gram. 

19 ‘‘(i) DEFINITIONS.—In this section: 

20 ‘‘(1) ELIGIBLE BENEFICIARY.—

21 ‘‘(A) IN GENERAL.—The term ‘eligible 

22 beneficiary’ means an individual who—

23 ‘‘(i) is entitled to, or enrolled for, ben24 efits under part A and enrolled under part 

25 B; and 
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1 ‘‘(ii) is not a dual eligible individual 

2 (as defined in subparagraph (B)). 

3 ‘‘(B) DUAL ELIGIBLE INDIVIDUAL.—

4 ‘‘(i) IN GENERAL.—The term ‘dual el5 igible individual’ means an individual who 

6 is—

7 ‘‘(I) enrolled under title XIX or 

8 under a waiver under section 1115 of 

9 the requirements of such title for 

10 medical assistance that is not less 

11 than the medical assistance provided 

12 to an individual described in section 

13 1902(a)(10)(A)(i) and includes cov14 ered outpatient drugs (as such term is 

15 defined for purposes of section 1927); 

16 and 

17 ‘‘(II) entitled to benefits under 

18 part A and enrolled under part B. 

19 ‘‘(ii) INCLUSION OF MEDICALLY

20 NEEDY.—Such term includes an individual 

21 described in section 1902(a)(10)(C). 

22 ‘‘(2) PRESCRIPTION DRUG.—

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

24 subparagraph (B), the term ‘prescription drug’ 

25 means—
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1 ‘‘(i) a drug that may be dispensed 

2 only upon a prescription and that is de3 scribed in clause (i) or (ii) of subparagraph 

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

5 ‘‘(ii) a biological product or insulin de6 scribed in subparagraph (B) or (C) of such 

7 section (including syringes, and necessary 

8 medical supplies associated with the ad9 ministration of insulin, as defined by the 

10 Secretary), 

11 and such term includes a vaccine licensed under 

12 section 351 of the Public Health Service Act 

13 and any use of a covered outpatient drug for a 

14 medically accepted indication (as defined in sec15 tion 1927(k)(6)). 

16 ‘‘(B) EXCLUSIONS.—The term ‘prescrip17 tion drug’ does not include drugs or classes of 

18 drugs, or their medical uses, which may be ex19 cluded from coverage or otherwise restricted 

20 under section 1927(d)(2), other than subpara21 graph (E) thereof (relating to smoking ces22 sation agents), or under section 1927(d)(3). 

23 ‘‘(3) NEGOTIATED PRICE.—The term ‘nego24 tiated price’ includes all discounts, direct or indirect 
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1 subsidies, rebates, price concessions, and direct or 

2 indirect remunerations. 

3 ‘‘(4) PRESCRIPTION DRUG CARD SPONSOR.—

4 The term ‘prescription drug card sponsor’ means 

5 any entity with demonstrated experience and exper6 tise in operating a prescription drug discount card 

7 program, an insurance program that provides cov8 erage for prescription drugs, or a similar program 

9 that the Secretary determines to be appropriate to 

10 provide eligible beneficiaries with the benefits under 

11 a prescription drug discount card program endorsed 

12 by the Secretary under this section, including—

13 ‘‘(A) a pharmaceutical benefit management 

14 company; 

15 ‘‘(B) a wholesale or retail pharmacist deliv16 ery system; 

17 ‘‘(C) an insurer (including an insurer that 

18 offers medicare supplemental policies under sec19 tion 1882); 

20 ‘‘(D) any other entity; or 

21 ‘‘(E) any combination of the entities de22 scribed in subparagraphs (A) through (D). 

23 ‘‘TRANSITIONAL PRESCRIPTION DRUG ASSISTANCE CARD

24 PROGRAM FOR ELIGIBLE LOW-INCOME BENEFICIARIES

25 ‘‘SEC. 1807A. (a) ESTABLISHMENT.—
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1 ‘‘(1) IN GENERAL.—There is established a pro2 gram under which the Secretary shall award con3 tracts to prescription drug card sponsors offering a 

4 prescription drug discount card that has been en5 dorsed by the Secretary under section 1807 under 

6 which such sponsors shall offer a prescription drug 

7 assistance card program to eligible low-income bene8 ficiaries in accordance with the requirements of this 

9 section. 

10 ‘‘(2) APPLICATION OF DISCOUNT CARD PROVI11 SIONS.—Except as otherwise provided in this sec12 tion, the provisions of section 1807 shall apply to 

13 the program established under this section. 

14 ‘‘(b) ELIGIBILITY, ELECTION OF PROGRAM, AND EN15 ROLLMENT FEES.—

16 ‘‘(1) ELIGIBILITY AND ELECTION OF PRO17 GRAM.—

18 ‘‘(A) IN GENERAL.—Subject to the suc19 ceeding provisions of this paragraph, the enroll20 ment procedures established under section 

21 1807(b)(1)(A)(ii) shall apply for purposes of 

22 this section. 

23 ‘‘(B) ENROLLMENT OF ANY ELIGIBLE

24 LOW-INCOME BENEFICIARY.—Each prescription 

25 drug card sponsor offering a prescription drug 
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1 assistance card program under this section shall 

2 permit any eligible low-income beneficiary to en3 roll in such program if it serves the geographic 

4 area in which the beneficiary resides. 

5 ‘‘(C) SIMULTANEOUS ENROLLMENT IN

6 PRESCRIPTION DRUG DISCOUNT CARD PRO7 GRAM.—An eligible low-income beneficiary who 

8 enrolls in a prescription drug assistance card 

9 program offered by a prescription drug card 

10 sponsor under this section shall be simulta11 neously enrolled in a prescription drug discount 

12 card program offered by such sponsor. 

13 ‘‘(2) WAIVER OF ENROLLMENT FEES.—

14 ‘‘(A) IN GENERAL.—A prescription drug 

15 card sponsor may not charge an enrollment fee 

16 to any eligible low-income beneficiary enrolled 

17 in a prescription drug discount card program 

18 offered by such sponsor. 

19 ‘‘(B) PAYMENT BY SECRETARY.—Under a 

20 contract awarded under subsection (f)(2), the 

21 Secretary shall pay to each prescription drug 

22 card sponsor an amount equal to any enroll23 ment fee charged under section 1807(b)(2)(A) 

24 on behalf of each eligible low-income beneficiary 

25 enrolled in a prescription drug discount card 
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1 program under paragraph (1)(C) offered by 

2 such sponsor. 

3 ‘‘(c) ADDITIONAL BENEFICIARY PROTECTIONS.—

4 ‘‘(1) PROVIDING INFORMATION TO ELIGIBLE

5 LOW-INCOME BENEFICIARIES.—In addition to the in6 formation provided to eligible beneficiaries under 

7 section 1807(c), the prescription drug card sponsor 

8 shall—

9 ‘‘(A) periodically notify each eligible low-in10 come beneficiary enrolled in a prescription drug 

11 assistance card program offered by such spon12 sor of the amount of coverage for prescription 

13 drugs remaining under subsection (d)(2)(A); 

14 and 

15 ‘‘(B) notify each eligible low-income bene16 ficiary enrolled in a prescription drug assistance 

17 card program offered by such sponsor of the 

18 grievance and appeals processes under the pro19 gram. 

20 ‘‘(2) CONVENIENT ACCESS IN LONG-TERM CARE

21 FACILITIES.—For purposes of determining whether 

22 convenient access has been provided under section 

23 1807(d)(2) with respect to eligible low-income bene24 ficiaries enrolled in a prescription drug assistance 

25 card program, the Secretary may only make a deter-
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1 mination that such access has been provided if an 

2 appropriate arrangement is in place for eligible low3 income beneficiaries who are in a long-term care fa4 cility (as defined by the Secretary) to receive pre5 scription drug benefits under the program. 

6 ‘‘(3) COORDINATION OF BENEFITS.—

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

8 establish procedures under which eligible low-in9 come beneficiaries who are enrolled for coverage 

10 described in subparagraph (B) and enrolled in 

11 a prescription drug assistance card program 

12 have access to the prescription drug benefits 

13 available under such program. 

14 ‘‘(B) COVERAGE DESCRIBED.—Coverage 

15 described in this subparagraph is as follows: 

16 ‘‘(i) Coverage of prescription drugs 

17 under a State pharmaceutical assistance 

18 program. 

19 ‘‘(ii) Enrollment in a 

20 Medicare+Choice plan under part C. 

21 ‘‘(4) GRIEVANCE MECHANISM.—Each prescrip22 tion drug card sponsor with a contract under this 

23 section shall provide in accordance with section 

24 1852(f) meaningful procedures for hearing and re25 solving grievances between the prescription drug 
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1 card sponsor (including any entity or individual 

2 through which the prescription drug card sponsor 

3 provides covered benefits) and enrollees in a pre4 scription drug assistance card program offered by 

5 such sponsor. 

6 ‘‘(5) APPLICATION OF COVERAGE DETERMINA7 TION AND RECONSIDERATION PROVISIONS.—

8 ‘‘(A) IN GENERAL.—The requirements of 

9 paragraphs (1) through (3) of section 1852(g) 

10 shall apply with respect to covered benefits 

11 under a prescription drug assistance card pro12 gram under this section in the same manner as 

13 such requirements apply to a Medicare+Choice 

14 organization with respect to benefits it offers 

15 under a Medicare+Choice plan under part C. 

16 ‘‘(B) REQUEST FOR REVIEW OF TIERED

17 FORMULARY DETERMINATIONS.—In the case of 

18 a prescription drug assistance card program of19 fered by a prescription drug card sponsor that 

20 provides for tiered pricing for drugs included 

21 within a formulary and provides lower prices for 

22 preferred drugs included within the formulary, 

23 an eligible low-income beneficiary who is en24 rolled in the program may request coverage of 

25 a nonpreferred drug under the terms applicable 
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1 for preferred drugs if the prescribing physician 

2 determines that the preferred drug for treat3 ment of the same condition is not as effective 

4 for the eligible low-income beneficiary or has 

5 adverse effects for the eligible low-income bene6 ficiary. 

7 ‘‘(C) FORMULARY DETERMINATIONS.—An 

8 eligible low-income beneficiary who is enrolled 

9 in a prescription drug assistance card program 

10 offered by a prescription drug card sponsor may 

11 appeal to obtain coverage for a covered drug 

12 that is not on a formulary of the entity if the 

13 prescribing physician determines that the for14 mulary drug for treatment of the same condi15 tion is not as effective for the eligible low-in16 come beneficiary or has adverse effects for the 

17 eligible low-income beneficiary. 

18 ‘‘(6) APPEALS.—

19 ‘‘(A) IN GENERAL.—Subject to subpara20 graph (B), a prescription drug card sponsor 

21 shall meet the requirements of paragraphs (4) 

22 and (5) of section 1852(g) with respect to 

23 drugs not included on any formulary in a simi24 lar manner (as determined by the Secretary) as 

25 such requirements apply to a Medicare+Choice 
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1 organization with respect to benefits it offers 

2 under a Medicare+Choice plan under part C. 

3 ‘‘(B) FORMULARY DETERMINATIONS.—An 

4 eligible low-income beneficiary who is enrolled 

5 in a prescription drug assistance card program 

6 offered by a prescription drug card sponsor may 

7 appeal to obtain coverage for a covered drug 

8 that is not on a formulary of the entity if the 

9 prescribing physician determines that the for10 mulary drug for treatment of the same condi11 tion is not as effective for the eligible low-in12 come beneficiary or has adverse effects for the 

13 eligible low-income beneficiary. 

14 ‘‘(C) APPEALS AND EXCEPTIONS TO APPLI15 CATION.—The prescription drug card sponsor 

16 must have, as part of the appeals process under 

17 this paragraph, a process for timely appeals for 

18 denials of coverage based on the application of 

19 the formulary. 

20 ‘‘(d) PRESCRIPTION DRUG BENEFITS.—

21 ‘‘(1) IN GENERAL.—Subject to paragraph (5), 

22 all the benefits available under a prescription drug 

23 discount card program offered by a prescription 

24 drug card sponsor and endorsed under section 1807 

25 shall be available to eligible low-income beneficiaries 
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1 enrolled in a prescription drug assistance card pro2 gram offered by such sponsor. 

3 ‘‘(2) ASSISTANCE FOR ELIGIBLE LOW-INCOME

4 BENEFICIARIES.—

5 ‘‘(A) $600 ANNUAL ASSISTANCE.—Subject 

6 to subparagraphs (B) and (C) and paragraph 

7 (5), each prescription drug card sponsor with a 

8 contract under this section shall provide cov9 erage for the first $600 of expenses for pre10 scription drugs incurred during each calendar 

11 year by an eligible low-income beneficiary en12 rolled in a prescription drug assistance card 

13 program offered by such sponsor. 

14 ‘‘(B) COINSURANCE.—

15 ‘‘(i) IN GENERAL.—The prescription 

16 drug card sponsor shall determine an 

17 amount of coinsurance to collect from each 

18 eligible low-income beneficiary enrolled in a 

19 prescription drug assistance card program 

20 offered by such sponsor for which coverage 

21 is available under subparagraph (A). 

22 ‘‘(ii) AMOUNT.—The amount of coin23 surance collected under clause (i) shall be 

24 at least 10 percent of the negotiated price 
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1 of each prescription drug dispensed to an 

2 eligible low-income beneficiary. 

3 ‘‘(iii) CONSTRUCTION.—Amounts col4 lected under clause (i) shall not be counted 

5 against the total amount of coverage avail6 able under subparagraph (A). 

7 ‘‘(C) REDUCTION FOR LATE ENROLL8 MENT.—For each month during a calendar 

9 quarter in which an eligible low-income bene10 ficiary is not enrolled in a prescription drug as11 sistance card program offered by a prescription 

12 drug card sponsor with a contract under this 

13 section, the amount of assistance available 

14 under subparagraph (A) shall be reduced by 

15 $50. 

16 ‘‘(D) CREDITING OF UNUSED BENEFITS

17 TOWARD FUTURE YEARS.—The dollar amount 

18 of coverage described in subparagraph (A) shall 

19 be increased by any amount of coverage de20 scribed in such subparagraph that was not used 

21 during the previous calendar year. 

22 ‘‘(E) WAIVER TO ENSURE PROVISION OF

23 BENEFIT.—The Secretary may waive such re24 quirements of this section and section 1807 as 

25 may be necessary to ensure that each eligible 
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1 low-income beneficiaries has access to the as2 sistance described in subparagraph (A). 

3 ‘‘(3) ADDITIONAL DISCOUNTS.—A prescription 

4 drug card sponsor with a contract under this section 

5 shall provide each eligible low-income beneficiary en6 rolled in a prescription drug assistance program of7 fered by the sponsor with access to negotiated prices 

8 that reflect a minimum average discount of at least 

9 20 percent of the average wholesale price for pre10 scription drugs covered under that program. 

11 ‘‘(4) ASSISTANCE CARDS.—Each prescription 

12 drug card sponsor shall permit eligible low-income 

13 beneficiaries enrolled in a prescription drug assist14 ance card program offered by such sponsor to use 

15 the discount card issued under section 1807(e)(4) to 

16 obtain benefits under the program. 

17 ‘‘(5) APPLICATION OF FORMULARY RESTRIC18 TIONS.—A drug prescribed for an eligible low-income 

19 beneficiary that would otherwise be a covered drug 

20 under this section shall not be so considered under 

21 a prescription drug assistance card program if the 

22 program excludes the drug under a formulary and 

23 such exclusion is not successfully resolved under 

24 paragraph (4), (5), or (6) of subsection (c). 
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1 ‘‘(e) REQUIREMENTS FOR PRESCRIPTION DRUG

2 CARD SPONSORS THAT OFFER PRESCRIPTION DRUG AS3 SISTANCE CARD PROGRAMS.—

4 ‘‘(1) IN GENERAL.—Each prescription drug 

5 card sponsor shall—

6 ‘‘(A) process claims made by eligible low7 income beneficiaries; 

8 ‘‘(B) negotiate with brand name and ge9 neric prescription drug manufacturers and oth10 ers for low prices on prescription drugs; 

11 ‘‘(C) track individual beneficiary expendi12 tures in a format and periodicity specified by 

13 the Secretary; and 

14 ‘‘(D) perform such other functions as the 

15 Secretary may assign. 

16 ‘‘(2) DATA EXCHANGES.—Each prescription 

17 drug card sponsor shall receive data exchanges in a 

18 format specified by the Secretary and shall maintain 

19 real-time beneficiary files. 

20 ‘‘(3) PUBLIC DISCLOSURE OF PHARMACEUTICAL

21 PRICES FOR EQUIVALENT DRUGS.—The prescription 

22 drug card sponsor offering the prescription drug as23 sistance card program shall provide that each phar24 macy or other dispenser that arranges for the dis25 pensing of a covered drug shall inform the eligible 
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1 low-income beneficiary at the time of purchase of the 

2 drug of any differential between the price of the pre3 scribed drug to the enrollee and the price of the low4 est priced generic drug covered under the plan that 

5 is therapeutically equivalent and bioequivalent and 

6 available at such pharmacy or other dispenser. 

7 ‘‘(f) SUBMISSION OF BIDS AND AWARDING OF CON8 TRACTS.—

9 ‘‘(1) SUBMISSION OF BIDS.—Each prescription 

10 drug card sponsor that seeks to offer a prescription 

11 drug assistance card program under this section 

12 shall submit to the Secretary, at such time and in 

13 such manner as the Secretary may specify, such in14 formation as the Secretary may require. 

15 ‘‘(2) AWARDING OF CONTRACTS.—The Sec16 retary shall review the information submitted under 

17 paragraph (1) and shall determine whether to award 

18 a contract to the prescription drug card sponsor of19 fering the program to which such information re20 lates. The Secretary may not approve a program un21 less the program and prescription drug card sponsor 

22 offering the program comply with the requirements 

23 under this section. 

24 ‘‘(3) NUMBER OF CONTRACTS.—There shall be 

25 no limit on the number of prescription drug card 
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1 sponsors that may be awarded contracts under para2 graph (2). 

3 ‘‘(4) CONTRACT PROVISIONS.—

4 ‘‘(A) DURATION.—A contract awarded 

5 under paragraph (2) shall be for the lifetime of 

6 the program under this section. 

7 ‘‘(B) WITHDRAWAL.—A prescription drug 

8 card sponsor that desires to terminate the con9 tract awarded under paragraph (2) may termi10 nate such contract without penalty if such spon11 sor gives notice—

12 ‘‘(i) to the Secretary 90 days prior to 

13 the termination of such contract; and 

14 ‘‘(ii) to each eligible low-income bene15 ficiary that is enrolled in a prescription 

16 drug assistance card program offered by 

17 such sponsor 60 days prior to such termi18 nation. 

19 ‘‘(C) SERVICE AREA.—The service area 

20 under the contract shall be the same as the 

21 area served by the prescription drug card spon22 sor under section 1807. 

23 ‘‘(5) SIMULTANEOUS APPROVAL OF DISCOUNT

24 CARD AND ASSISTANCE PROGRAMS.—A prescription 

25 drug card sponsor may submit an application for en-
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1 dorsement under section 1807 as part of the bid 

2 submitted under paragraph (1) and the Secretary 

3 may approve such application at the same time as 

4 the Secretary awards a contract under this section. 

5 ‘‘(g) PAYMENTS TO PRESCRIPTION DRUG CARD

6 SPONSORS.—

7 ‘‘(1) IN GENERAL.—The Secretary shall pay to 

8 each prescription drug card sponsor offering a pre9 scription drug assistance card program in which an 

10 eligible low-income beneficiary is enrolled an amount 

11 equal to the amount agreed to by the Secretary and 

12 the sponsor in the contract awarded under sub13 section (f)(2). 

14 ‘‘(2) PAYMENT FROM PART B TRUST FUND.—

15 The costs of providing benefits under this section 

16 shall be payable from the Federal Supplementary 

17 Medical Insurance Trust Fund established under 

18 section 1841. 

19 ‘‘(h) ELIGIBILITY DETERMINATIONS MADE BY

20 STATES; PRESUMPTIVE ELIGIBILITY.—States shall per21 form the functions described in section 1935(a)(1). 

22 ‘‘(i) APPROPRIATIONS.—There are appropriated from 

23 the Federal Supplementary Medical Insurance Trust 

24 Fund established under section 1841 such sums as may 

25 be necessary to carry out the program under this section. 
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1 ‘‘(j) DEFINITIONS.—In this section: 

2 ‘‘(1) ELIGIBLE BENEFICIARY; NEGOTIATED

3 PRICE; PRESCRIPTION DRUG.—The terms ‘eligible 

4 beneficiary’, ‘negotiated price’, and ‘prescription 

5 drug’ have the meanings given those terms in section 

6 1807(i). 

7 ‘‘(2) ELIGIBLE LOW-INCOME BENEFICIARY.—

8 The term ‘eligible low-income beneficiary’ means an 

9 individual who—

10 ‘‘(A) is an eligible beneficiary (as defined 

11 in section 1807(i)); and 

12 ‘‘(B) is described in clause (iii) or (iv) of 

13 section 1902(a)(10)(E) or in section 

14 1905(p)(1). 

15 ‘‘(3) PRESCRIPTION DRUG CARD SPONSOR.—

16 The term ‘prescription drug card sponsor’ has the 

17 meaning given that term in section 1807(i), except 

18 that such sponsor shall also be an entity that the 

19 Secretary determines is—

20 ‘‘(A) is appropriate to provide eligible low21 income beneficiaries with the benefits under a 

22 prescription drug assistance card program 

23 under this section; and 

24 ‘‘(B) is able to manage the monetary as25 sistance made available under subsection (d)(2); 
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1 ‘‘(C) agrees to submit to audits by the Sec2 retary; and 

3 ‘‘(D) provides such other assurances as the 

4 Secretary may require. 

5 ‘‘(4) STATE.—The term ‘State’ has the mean6 ing given such term for purposes of title XIX.’’. 

7 (b) EXCLUSION OF PRICES FROM DETERMINATION

8 OF BEST PRICE.—Section 1927(c)(1)(C)(i) (42 U.S.C. 

9 1396r–8(c)(1)(C)(i)) is amended—

10 (1) by striking ‘‘and’’ at the end of subclause 

11 (III); 

12 (2) by striking the period at the end of sub13 clause (IV) and inserting ‘‘; and’’; and 

14 (3) by adding at the end the following new sub15 clause: 

16 ‘‘(V) any negotiated prices 

17 charged under the medicare prescrip18 tion drug discount card endorsement 

19 program under section 1807 or under 

20 the transitional prescription drug as21 sistance card program for eligible low22 income beneficiaries under section 

23 1807A.’’. 

24 (c) EXCLUSION OF PRESCRIPTION DRUG ASSIST25 ANCE CARD COSTS FROM DETERMINATION OF PART B 
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1 MONTHLY PREMIUM.—Section 1839(g) of the Social Se2 curity Act (42 U.S.C. 1395r(g)) is amended—

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

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

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

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

7 and’’; and 

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

9 paragraph: 

10 ‘‘(2) the prescription drug assistance card pro11 gram under section 1807A.’’. 

12 (d) REGULATIONS.—

13 (1) AUTHORITY FOR INTERIM FINAL REGULA14 TIONS.—The Secretary may promulgate initial regu15 lations implementing sections 1807 and 1807A of 

16 the Social Security Act (as added by this section) in 

17 interim final form without prior opportunity for pub18 lic comment. 

19 (2) FINAL REGULATIONS.—A final regulation 

20 reflecting public comments must be published within 

21 1 year of the interim final regulation promulgated 

22 under paragraph (1). 

23 (3) EXEMPTION FROM THE PAPERWORK RE24 DUCTION ACT.—The promulgation of the regulations 

25 under this subsection and the administration the 
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1 programs established by sections 1807 and 1807A of 

2 the Social Security Act (as added by this section) 

3 shall be made without regard to chapter 35 of title 

4 44, United States Code (commonly known as the 

5 ‘‘Paperwork Reduction Act’’). 

6 (e) IMPLEMENTATION; TRANSITION.—

7 (1) IMPLEMENTATION.—The Secretary shall 

8 implement the amendments made by this section in 

9 a manner that discounts are available to eligible 

10 beneficiaries under section 1807 of the Social Secu11 rity Act and assistance is available to eligible low-in12 come beneficiaries under section 1807A of such Act 

13 not later than January 1, 2004. 

14 (2) TRANSITION.—The Secretary shall provide 

15 for an appropriate transition and discontinuation of 

16 the programs under section 1807 and 1807A of the 

17 Social Security Act. Such transition and discontinu18 ation shall ensure that such programs continue to 

19 operate until the date on which the first enrollment 

20 period under part D ends. 

21 Subtitle C—Standards for 

22 Electronic Prescribing 

23 SEC. 121. STANDARDS FOR ELECTRONIC PRESCRIBING. 

24 Title XI (42 U.S.C. 1301 et seq.) is amended by add25 ing at the end the following new part: 
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1 ‘‘PART D—ELECTRONIC PRESCRIBING

2 ‘‘STANDARDS FOR ELECTRONIC PRESCRIBING

3 ‘‘SEC. 1180. (a) STANDARDS.—

4 ‘‘(1) DEVELOPMENT AND ADOPTION.—

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

6 develop or adopt standards for transactions and 

7 data elements for such transactions (in this sec8 tion referred to as ‘standards’) to enable the 

9 electronic transmission of medication history, 

10 eligibility, benefit, and other prescription infor11 mation. 

12 ‘‘(B) CONSULTATION.—In developing and 

13 adopting the standards under subparagraph 

14 (A), the Secretary shall consult with representa15 tives of physicians, hospitals, pharmacists, 

16 standard setting organizations, pharmacy ben17 efit managers, beneficiary information exchange 

18 networks, technology experts, and representa19 tives of the Departments of Veterans Affairs 

20 and Defense and other interested parties. 

21 ‘‘(2) OBJECTIVE.—Any standards developed or 

22 adopted under this part shall be consistent with the 

23 objectives of improving—

24 ‘‘(A) patient safety; and 
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1 ‘‘(B) the quality of care provided to pa2 tients. 

3 ‘‘(3) REQUIREMENTS.—Any standards devel4 oped or adopted under this part shall comply with 

5 the following: 

6 ‘‘(A) PATIENT MAY REQUEST A WRITTEN

7 PRESCRIPTION.—The standards provide that—

8 ‘‘(i) a prescription shall be written 

9 and not transmitted electronically if the 

10 patient makes such a request; and 

11 ‘‘(ii) no additional charges may be im12 posed on the patient for making such a re13 quest. 

14 ‘‘(B) PATIENT-SPECIFIC MEDICATION HIS15 TORY, ELIGIBILITY, BENEFIT, AND OTHER PRE16 SCRIPTION INFORMATION.—

17 ‘‘(i) IN GENERAL.—The standards 

18 shall accommodate electronic transmittal of 

19 patient-specific medication history, eligi20 bility, benefit, and other prescription infor21 mation among prescribing and dispensing 

22 professionals at the point of care. 

23 ‘‘(ii) REQUIRED INFORMATION.—The 

24 information described in clause (i) shall in25 clude the following: 
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1 ‘‘(I) Information (to the extent 

2 available and feasible) on the drugs 

3 being prescribed for that patient and 

4 other information relating to the 

5 medication history of the patient that 

6 may be relevant to the appropriate 

7 prescription for that patient. 

8 ‘‘(II) Cost-effective alternatives 

9 (if any) to the drug prescribed. 

10 ‘‘(III) Information on eligibility 

11 and benefits, including the drugs in12 cluded in the applicable formulary and 

13 any requirements for prior authoriza14 tion. 

15 ‘‘(IV) Information on potential 

16 interactions with drugs listed on the 

17 medication history, graded by severity 

18 of the potential interaction. 

19 ‘‘(V) Other information to im20 prove the quality of patient care and 

21 to reduce medical errors. 

22 ‘‘(C) UNDUE BURDEN.—The standards 

23 shall be designed so that, to the extent prac24 ticable, the standards do not impose an undue 
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1 administrative burden on the practice of medi2 cine, pharmacy, or other health professions. 

3 ‘‘(D) COMPATIBILITY WITH ADMINISTRA4 TIVE SIMPLIFICATION AND PRIVACY LAWS.—

5 The standards shall be—

6 ‘‘(i) consistent with the Federal regu7 lations (concerning the privacy of individ8 ually identifiable health information) pro9 mulgated under section 264(c) of the 

10 Health Insurance Portability and Account11 ability Act of 1996; and 

12 ‘‘(ii) compatible with the standards 

13 adopted under part C. 

14 ‘‘(4) TRANSFER OF INFORMATION.—The Sec15 retary shall develop and adopt standards for trans16 ferring among prescribing and insurance entities and 

17 other necessary entities appropriate standard data 

18 elements needed for the electronic exchange of medi19 cation history, eligibility, benefit, and other prescrip20 tion drug information and other health information 

21 determined appropriate in compliance with the 

22 standards adopted or modified under this part. 

23 ‘‘(b) TIMETABLE FOR ADOPTION OF STANDARDS.—

24 ‘‘(1) IN GENERAL.—The Secretary shall adopt 

25 the standards under this part by January 1, 2006. 
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1 ‘‘(2) ADDITIONS AND MODIFICATIONS TO

2 STANDARDS.—The Secretary shall, in consultation 

3 with appropriate representatives of interested par4 ties, review the standards developed or adopted 

5 under this part and adopt modifications to the 

6 standards (including additions to the standards), as 

7 determined appropriate. Any addition or modifica8 tion to such standards shall be completed in a man9 ner which minimizes the disruption and cost of com10 pliance. 

11 ‘‘(c) COMPLIANCE WITH STANDARDS.—

12 ‘‘(1) REQUIREMENT FOR ALL INDIVIDUALS AND

13 ENTITIES THAT TRANSMIT OR RECEIVE PRESCRIP14 TIONS ELECTRONICALLY.—

15 ‘‘(A) IN GENERAL.—Individuals or entities 

16 that transmit or receive prescriptions electroni17 cally shall comply with the standards adopted 

18 or modified under this part. 

19 ‘‘(B) RELATION TO STATE LAWS.—The 

20 standards adopted or modified under this part 

21 shall supersede any State law or regulations 

22 pertaining to the electronic transmission of 

23 medication history, eligibility, benefit and pre24 scription information. 

25 ‘‘(2) TIMETABLE FOR COMPLIANCE.—
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1 ‘‘(A) INITIAL COMPLIANCE.—

2 ‘‘(i) IN GENERAL.—Not later than 24 

3 months after the date on which an initial 

4 standard is adopted under this part, each 

5 individual or entity to whom the standard 

6 applies shall comply with the standard. 

7 ‘‘(ii) SPECIAL RULE FOR SMALL

8 HEALTH PLANS.—In the case of a small 

9 health plan, as defined by the Secretary for 

10 purposes of section 1175(b)(1)(B), clause 

11 (i) shall be applied by substituting ‘36 

12 months’ for ‘24 months’. 

13 ‘‘(d) CONSULTATION WITH ATTORNEY GENERAL.—

14 The Secretary shall consult with the Attorney General be15 fore developing, adopting, or modifying a standard under 

16 this part to ensure that the standard accommodates secure 

17 electronic transmission of prescriptions for controlled sub18 stances in a manner that minimizes the possibility of viola19 tions under the Comprehensive Drug Abuse Prevention 

20 and Control Act of 1970 and related Federal laws. 

21 ‘‘(e) NO REQUIREMENT TO TRANSMIT OR RECEIVE

22 PRESCRIPTIONS ELECTRONICALLY.—Nothing in this part 

23 shall be construed to require an individual or entity to 

24 transmit or receive prescriptions electronically. 
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1 ‘‘GRANTS TO HEALTH CARE PROVIDERS TO IMPLEMENT

2 ELECTRONIC PRESCRIPTION PROGRAMS

3 ‘‘SEC. 1180A. (a) IN GENERAL.—The Secretary is 

4 authorized to make grants to health care providers for the 

5 purpose of assisting such entities to implement electronic 

6 prescription programs that comply with the standards 

7 adopted or modified under this part. 

8 ‘‘(b) APPLICATION.—No grant may be made under 

9 this section except pursuant to a grant application that 

10 is submitted in a time, manner, and form approved by the 

11 Secretary. 

12 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—There 

13 are authorized to be appropriated for each of fiscal years 

14 2006, 2007, and 2008, such sums as may be necessary 

15 to carry out this section.’’. 

16 Subtitle D—Other Provisions 

17 SEC. 131. ADDITIONAL REQUIREMENTS FOR ANNUAL FI18 NANCIAL REPORT AND OVERSIGHT ON MEDI19 CARE PROGRAM. 

20 (a) IN GENERAL.—Section 1817 (42 U.S.C. 1395i) 

21 is amended by adding at the end the following new sub22 section: 

23 ‘‘(l) COMBINED REPORT ON OPERATION AND STATUS

24 OF THE TRUST FUND AND THE FEDERAL SUPPLE25 MENTARY MEDICAL INSURANCE TRUST FUND (INCLUD-
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1 ING THE PRESCRIPTION DRUG ACCOUNT).—In addition 

2 to the duty of the Board of Trustees to report to Congress 

3 under subsection (b), on the date the Board submits the 

4 report required under subsection (b)(2), the Board shall 

5 submit to Congress a report on the operation and status 

6 of the Trust Fund and the Federal Supplementary Med7 ical Insurance Trust Fund established under section 1841 

8 (including the Prescription Drug Account within such 

9 Trust Fund), in this subsection referred to as the ‘Trust 

10 Funds’. Such report shall include the following informa11 tion: 

12 ‘‘(1) OVERALL SPENDING FROM THE GENERAL

13 FUND OF THE TREASURY.—A statement of total 

14 amounts obligated during the preceding fiscal year 

15 from the General Revenues of the Treasury to the 

16 Trust Funds, separately stated in terms of the total 

17 amount and in terms of the percentage such amount 

18 bears to all other amounts obligated from such Gen19 eral Revenues during such fiscal year, for each of 

20 the following amounts: 

21 ‘‘(A) MEDICARE BENEFITS.—The amount 

22 expended for payment of benefits covered under 

23 this title. 

24 ‘‘(B) ADMINISTRATIVE AND OTHER EX25 PENSES.—The amount expended for payments 
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1 not related to the benefits described in subpara2 graph (A). 

3 ‘‘(2) HISTORICAL OVERVIEW OF SPENDING.—

4 From the date of the inception of the program of in5 surance under this title through the fiscal year in6 volved, a statement of the total amounts referred to 

7 in paragraph (1), separately stated for the amounts 

8 described in subparagraphs (A) and (B) of such 

9 paragraph. 

10 ‘‘(3) 10-YEAR AND 50-YEAR PROJECTIONS.—An 

11 estimate of total amounts referred to in paragraph 

12 (1), separately stated for the amounts described in 

13 subparagraphs (A) and (B) of such paragraph, re14 quired to be obligated for payment for benefits cov15 ered under this title for each of the 10 fiscal years 

16 succeeding the fiscal year involved and for the 50-

17 year period beginning with the succeeding fiscal 

18 year. 

19 ‘‘(4) RELATION TO OTHER MEASURES OF

20 GROWTH.—A comparison of the rate of growth of 

21 the total amounts referred to in paragraph (1), sepa22 rately stated for the amounts described in subpara23 graphs (A) and (B) of such paragraph, to the rate 

24 of growth for the same period in—

25 ‘‘(A) the gross domestic product; 
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1 ‘‘(B) health insurance costs in the private 

2 sector; 

3 ‘‘(C) employment-based health insurance 

4 costs in the public and private sectors; and 

5 ‘‘(D) other areas as determined appro6 priate by the Board of Trustees.’’. 

7 (b) EFFECTIVE DATE.—The amendment made by 

8 subsection (a) shall apply with respect to fiscal years be9 ginning on or after the date of enactment of this Act. 

10 (c) CONGRESSIONAL HEARINGS.—It is the sense of 

11 Congress that the committees of jurisdiction of Congress 

12 shall hold hearings on the reports submitted under section 

13 1817(l) of the Social Security Act (as added by subsection 

14 (a)). 

15 SEC. 132. TRUSTEES’ REPORT ON MEDICARE’S UNFUNDED 

16 OBLIGATIONS. 

17 (a) REPORT.—The report submitted under sections 

18 1817(b)(2) and 1841(b)(2) of the Social Security Act (42 

19 U.S.C. 1395i(b)(2) and 1395t(b)(2)) during 2004 shall in20 clude an analysis of the total amount of the unfunded obli21 gations of the Medicare program under title XVIII of the 

22 Social Security Act. 

23 (b) MATTERS ANALYZED.—The analysis described in 

24 subsection (A) shall compare the long-term obligations of 

25 the Medicare program to the dedicated funding sources 
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1 for that program (other than general revenue transfers), 

2 including the combined obligations of the Federal Hospital 

3 Insurance Trust Fund established under section 1817 of 

4 such Act (42 U.S.C. 1395i) and the Federal Supple5 mentary Medical Insurance Trust Fund established under 

6 section 1841 of such Act (42 U.S.C. 1395t). 

7 SEC. 133. PHARMACY BENEFIT MANAGERS TRANSPARENCY 

8 REQUIREMENTS. 

9 Subpart 3 of part D of title XVIII of the Social Secu10 rity Act (as added by section 101) is amended by adding 

11 at the end the following new section: 

12 ‘‘PHARMACY BENEFIT MANAGERS TRANSPARENCY

13 REQUIREMENTS

14 ‘‘SEC. 1860D–27. (a) PROHIBITION.—

15 ‘‘(1) IN GENERAL.—Notwithstanding any other 

16 provision of law, an eligible entity offering a Medi17 care Prescription Drug plan under this part or a 

18 MedicareAdvantage organization offering a 

19 MedicareAdvantage plan under part C shall not 

20 enter into a contract with any pharmacy benefit 

21 manager (in this section referred to as a ‘PBM’) 

22 that is owned by a pharmaceutical manufacturing 

23 company. 

24 ‘‘(2) PROVISION OF INFORMATION.—A PBM 

25 that manages prescription drug coverage under this 

26 part or part C shall provide the following informa-
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1 tion, on an annual basis, to the Assistant Attorney 

2 General for Antitrust of the Department of Justice 

3 and the Inspector General of the Health and Human 

4 Services Department: 

5 ‘‘(A) The aggregate amount of any and all 

6 rebates, discounts, administrative fees, pro7 motional allowances, and other payments re8 ceived or recovered from each pharmaceutical 

9 manufacturer. 

10 ‘‘(B) The amount of payments received or 

11 recovered from each pharmaceutical manufac12 turer for each of the top 50 drugs as measured 

13 by volume (as determined by the Secretary). 

14 ‘‘(C) The percentage differential between 

15 the price the PBM pays pharmacies for a drug 

16 described in subparagraph (B) and the price 

17 the PBM charges a Medicare Prescription Drug 

18 Plan or a MedicareAdvantage organization for 

19 such drug. 

20 ‘‘(b) FAILURE TO DISCLOSE.—

21 ‘‘(1) CIVIL PENALTY.—Any PBM that fails to 

22 comply with subsection (a) shall be liable for a civil 

23 penalty as determined appropriate through regula24 tions promulgated by the Attorney General. Such 
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1 penalty may be recovered in a civil action brought by 

2 the United States. 

3 ‘‘(2) COMPLIANCE AND EQUITABLE RELIEF.—If 

4 any PBM fails to comply with subsection (a), the 

5 United States district court may order compliance, 

6 and may grant such other equitable relief as the 

7 court in its discretion determines necessary or ap8 propriate, upon application of the Assistant Attorney 

9 General. 

10 ‘‘(c) DISCLOSURE EXEMPTION.—Any information 

11 filed with the Assistant Attorney General under subsection 

12 (a)(2) shall be exempt from disclosure under section 552 

13 of title 5, and no such information may be made public, 

14 except as may be relevant to any administrative or judicial 

15 action or proceeding. Nothing in this section is intended 

16 to prevent disclosure to either body of Congress or to any 

17 duly authorized committee or subcommittee of the Con18 gress.’’. 

19 SEC. 134. OFFICE OF THE MEDICARE BENEFICIARY ADVO20 CATE. 

21 (a) ESTABLISHMENT.—Not later than 1 year after 

22 the date of enactment of this Act, the Secretary shall es23 tablish within the Department of Health and Human 

24 Services, an Office of the Medicare Beneficiary Advocate 

25 (in this section referred to as the ‘‘Office’’). 
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1 (b) DUTIES.—The Office shall carry out the following 

2 activities: 

3 (1) Establishing a toll-free telephone number 

4 for medicare beneficiaries to use to obtain informa5 tion on the medicare program, and particularly with 

6 respect to the benefits provided under part D of title 

7 XVIII of the Social Security Act and the Medicare 

8 Prescription Drug plans and MedicareAdvantage 

9 plans offering such benefits. The Office shall ensure 

10 that the toll-free telephone number accommodates 

11 beneficiaries with disabilities and limited-English 

12 proficiency. 

13 (2) Establishing an Internet website with easily 

14 accessible information regarding Medicare Prescrip15 tion Drug plans and MedicareAdvantage plans and 

16 the benefits offered under such plans. The website 

17 shall—

18 (A) be updated regularly to reflect changes 

19 in services and benefits, including with respect 

20 to the plans offered in a region and the associ21 ated monthly premiums, benefits offered, 

22 formularies, and contact information for such 

23 plans, and to ensure that there are no broken 

24 links or errors; 
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1 (B) have printer-friendly, downloadable 

2 fact sheets on the medicare coverage options 

3 and benefits; 

4 (C) be easy to navigate, with large print 

5 and easily recognizable links; and 

6 (D) provide links to the websites of the eli7 gible entities participating in part D of title 

8 XVIII. 

9 (3) Providing regional publications to medicare 

10 beneficiaries that include regional contacts for infor11 mation, and that inform the beneficiaries of the pre12 scription drug benefit options under title XVIII of 

13 the Social Security Act, including with respect to—

14 (A) monthly premiums; 

15 (B) formularies; and 

16 (C) the scope of the benefits offered. 

17 (4) Conducting outreach to medicare bene18 ficiaries to inform the beneficiaries of the medicare 

19 coverage options and benefits under parts A, B, C, 

20 and D of title XVIII of the Social Security Act. 

21 (5) Working with local benefits administrators, 

22 ombudsmen, local benefits specialists, and advocacy 

23 groups to ensure that medicare beneficiaries are 

24 aware of the medicare coverage options and benefits 
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1 under parts A, B, C, and D of title XVIII of the So2 cial Security Act. 

3 (c) FUNDING.—

4 (1) ESTABLISHMENT.—Of the amounts author5 ized to be appropriated under the Secretary’s discre6 tion for administrative expenditures, $2,000,000 

7 may be used to establish the Office in accordance 

8 with this section. 

9 (2) OPERATION.—With respect to each fiscal 

10 year occurring after the fiscal year in which the Of11 fice is established under this section, the Secretary 

12 may use, out of amounts authorized to be appro13 priated under the Secretary’s discretion for adminis14 trative expenditures for such fiscal year, such sums 

15 as may be necessary to operate the Office in that fis16 cal year. 

17 TITLE II—

18 MEDICAREADVANTAGE 

19 Subtitle A—MedicareAdvantage 

20 Competition 

21 SEC. 201. ELIGIBILITY, ELECTION, AND ENROLLMENT. 

22 Section 1851 (42 U.S.C. 1395w–21) is amended to 

23 read as follows: 

24 ‘‘ELIGIBILITY, ELECTION, AND ENROLLMENT

25 ‘‘SEC. 1851. (a) CHOICE OF MEDICARE BENEFITS

26 THROUGH MEDICAREADVANTAGE PLANS.—
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1 ‘‘(1) IN GENERAL.—Subject to the provisions of 

2 this section, each MedicareAdvantage eligible indi3 vidual (as defined in paragraph (3)) is entitled to 

4 elect to receive benefits under this title—

5 ‘‘(A) through—

6 ‘‘(i) the original Medicare fee-for-serv7 ice program under parts A and B; and 

8 ‘‘(ii) the voluntary prescription drug 

9 delivery program under part D; or 

10 ‘‘(B) through enrollment in a 

11 MedicareAdvantage plan under this part. 

12 ‘‘(2) TYPES OF MEDICAREADVANTAGE PLANS

13 THAT MAY BE AVAILABLE.—A MedicareAdvantage 

14 plan may be any of the following types of plans of 

15 health insurance: 

16 ‘‘(A) COORDINATED CARE PLANS.—Coordi17 nated care plans which provide health care serv18 ices, including health maintenance organization 

19 plans (with or without point of service options) 

20 and plans offered by provider-sponsored organi21 zations (as defined in section 1855(d)). 

22 ‘‘(B) COMBINATION OF MSA PLAN AND

23 CONTRIBUTIONS TO MEDICAREADVANTAGE

24 MSA.—An MSA plan, as defined in section 

25 1859(b)(3), and a contribution into a 
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1 MedicareAdvantage medical savings account 

2 (MSA). 

3 ‘‘(C) PRIVATE FEE-FOR-SERVICE PLANS.—

4 A MedicareAdvantage private fee-for-service 

5 plan, as defined in section 1859(b)(2). 

6 ‘‘(3) MEDICAREADVANTAGE ELIGIBLE INDI7 VIDUAL.—

8 ‘‘(A) IN GENERAL.—Subject to subpara9 graph (B), in this title, the term 

10 ‘MedicareAdvantage eligible individual’ means 

11 an individual who is entitled to (or enrolled for) 

12 benefits under part A, enrolled under part B, 

13 and enrolled under part D. 

14 ‘‘(B) SPECIAL RULE FOR END-STAGE

15 RENAL DISEASE.—Such term shall not include 

16 an individual medically determined to have end17 stage renal disease, except that—

18 ‘‘(i) an individual who develops end19 stage renal disease while enrolled in a 

20 Medicare+Choice or a MedicareAdvantage 

21 plan may continue to be enrolled in that 

22 plan; and 

23 ‘‘(ii) in the case of such an individual 

24 who is enrolled in a Medicare+Choice plan 

25 or a MedicareAdvantage plan under clause 
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1 (i) (or subsequently under this clause), if 

2 the enrollment is discontinued under cir3 cumstances described in section 

4 1851(e)(4)(A), then the individual will be 

5 treated as a ‘MedicareAdvantage eligible 

6 individual’ for purposes of electing to con7 tinue enrollment in another 

8 MedicareAdvantage plan. 

9 ‘‘(b) SPECIAL RULES.—

10 ‘‘(1) RESIDENCE REQUIREMENT.—

11 ‘‘(A) IN GENERAL.—Except as the Sec12 retary may otherwise provide and except as pro13 vided in subparagraph (C), an individual is eli14 gible to elect a MedicareAdvantage plan offered 

15 by a MedicareAdvantage organization only if 

16 the plan serves the geographic area in which 

17 the individual resides. 

18 ‘‘(B) CONTINUATION OF ENROLLMENT

19 PERMITTED.—Pursuant to rules specified by 

20 the Secretary, the Secretary shall provide that 

21 a plan may offer to all individuals residing in 

22 a geographic area the option to continue enroll23 ment in the plan, notwithstanding that the indi24 vidual no longer resides in the service area of 

25 the plan, so long as the plan provides that indi-
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1 viduals exercising this option have, as part of 

2 the basic benefits described in section 

3 1852(a)(1)(A), reasonable access within that 

4 geographic area to the full range of basic bene5 fits, subject to reasonable cost-sharing liability 

6 in obtaining such benefits. 

7 ‘‘(C) CONTINUATION OF ENROLLMENT

8 PERMITTED WHERE SERVICE CHANGED.—Not9 withstanding subparagraph (A) and in addition 

10 to subparagraph (B), if a MedicareAdvantage 

11 organization eliminates from its service area a 

12 MedicareAdvantage payment area that was pre13 viously within its service area, the organization 

14 may elect to offer individuals residing in all or 

15 portions of the affected area who would other16 wise be ineligible to continue enrollment the op17 tion to continue enrollment in a 

18 MedicareAdvantage plan it offers so long as—

19 ‘‘(i) the enrollee agrees to receive the 

20 full range of basic benefits (excluding 

21 emergency and urgently needed care) ex22 clusively at facilities designated by the or23 ganization within the plan service area; 

24 and 
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1 ‘‘(ii) there is no other 

2 MedicareAdvantage plan offered in the 

3 area in which the enrollee resides at the 

4 time of the organization’s election. 

5 ‘‘(2) SPECIAL RULE FOR CERTAIN INDIVIDUALS

6 COVERED UNDER FEHBP OR ELIGIBLE FOR VET7 ERANS OR MILITARY HEALTH BENEFITS.—

8 ‘‘(A) FEHBP.—An individual who is en9 rolled in a health benefit plan under chapter 89 

10 of title 5, United States Code, is not eligible to 

11 enroll in an MSA plan until such time as the 

12 Director of the Office of Management and 

13 Budget certifies to the Secretary that the Office 

14 of Personnel Management has adopted policies 

15 which will ensure that the enrollment of such 

16 individuals in such plans will not result in in17 creased expenditures for the Federal Govern18 ment for health benefit plans under such chap19 ter. 

20 ‘‘(B) VA AND DOD.—The Secretary may 

21 apply rules similar to the rules described in 

22 subparagraph (A) in the case of individuals who 

23 are eligible for health care benefits under chap24 ter 55 of title 10, United States Code, or under 

25 chapter 17 of title 38 of such Code. 
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1 ‘‘(3) LIMITATION ON ELIGIBILITY OF QUALI2 FIED MEDICARE BENEFICIARIES AND OTHER MED3 ICAID BENEFICIARIES TO ENROLL IN AN MSA

4 PLAN.—An individual who is a qualified medicare 

5 beneficiary (as defined in section 1905(p)(1)), a 

6 qualified disabled and working individual (described 

7 in section 1905(s)), an individual described in sec8 tion 1902(a)(10)(E)(iii), or otherwise entitled to 

9 medicare cost-sharing under a State plan under title 

10 XIX is not eligible to enroll in an MSA plan. 

11 ‘‘(4) COVERAGE UNDER MSA PLANS ON A DEM12 ONSTRATION BASIS.—

13 ‘‘(A) IN GENERAL.—An individual is not 

14 eligible to enroll in an MSA plan under this 

15 part—

16 ‘‘(i) on or after January 1, 2004, un17 less the enrollment is the continuation of 

18 such an enrollment in effect as of such 

19 date; or 

20 ‘‘(ii) as of any date if the number of 

21 such individuals so enrolled as of such date 

22 has reached 390,000. 

23 Under rules established by the Secretary, an in24 dividual is not eligible to enroll (or continue en25 rollment) in an MSA plan for a year unless the 
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1 individual provides assurances satisfactory to 

2 the Secretary that the individual will reside in 

3 the United States for at least 183 days during 

4 the year. 

5 ‘‘(B) EVALUATION.—The Secretary shall 

6 regularly evaluate the impact of permitting en7 rollment in MSA plans under this part on selec8 tion (including adverse selection), use of preven9 tive care, access to care, and the financial sta10 tus of the Trust Funds under this title. 

11 ‘‘(C) REPORTS.—The Secretary shall sub12 mit to Congress periodic reports on the num13 bers of individuals enrolled in such plans and 

14 on the evaluation being conducted under sub15 paragraph (B). 

16 ‘‘(c) PROCESS FOR EXERCISING CHOICE.—

17 ‘‘(1) IN GENERAL.—The Secretary shall estab18 lish a process through which elections described in 

19 subsection (a) are made and changed, including the 

20 form and manner in which such elections are made 

21 and changed. Such elections shall be made or 

22 changed only during coverage election periods speci23 fied under subsection (e) and shall become effective 

24 as provided in subsection (f). 
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1 ‘‘(2) COORDINATION THROUGH

2 MEDICAREADVANTAGE ORGANIZATIONS.—

3 ‘‘(A) ENROLLMENT.—Such process shall 

4 permit an individual who wishes to elect a 

5 MedicareAdvantage plan offered by a 

6 MedicareAdvantage organization to make such 

7 election through the filing of an appropriate 

8 election form with the organization. 

9 ‘‘(B) DISENROLLMENT.—Such process 

10 shall permit an individual, who has elected a 

11 MedicareAdvantage plan offered by a 

12 MedicareAdvantage organization and who wish13 es to terminate such election, to terminate such 

14 election through the filing of an appropriate 

15 election form with the organization. 

16 ‘‘(3) DEFAULT.—

17 ‘‘(A) INITIAL ELECTION.—

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

19 (ii), an individual who fails to make an 

20 election during an initial election period 

21 under subsection (e)(1) is deemed to have 

22 chosen the original medicare fee-for-service 

23 program option. 

24 ‘‘(ii) SEAMLESS CONTINUATION OF

25 COVERAGE.—The Secretary may establish 
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1 procedures under which an individual who 

2 is enrolled in a Medicare+Choice plan or 

3 another health plan (other than a 

4 MedicareAdvantage plan) offered by a 

5 MedicareAdvantage organization at the 

6 time of the initial election period and who 

7 fails to elect to receive coverage other than 

8 through the organization is deemed to have 

9 elected the MedicareAdvantage plan of10 fered by the organization (or, if the organi11 zation offers more than 1 such plan, such 

12 plan or plans as the Secretary identifies 

13 under such procedures). 

14 ‘‘(B) CONTINUING PERIODS.—An indi15 vidual who has made (or is deemed to have 

16 made) an election under this section is consid17 ered to have continued to make such election 

18 until such time as—

19 ‘‘(i) the individual changes the elec20 tion under this section; or 

21 ‘‘(ii) the MedicareAdvantage plan with 

22 respect to which such election is in effect 

23 is discontinued or, subject to subsection 

24 (b)(1)(B), no longer serves the area in 

25 which the individual resides. 
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1 ‘‘(d) PROVIDING INFORMATION TO PROMOTE IN2 FORMED CHOICE.—

3 ‘‘(1) IN GENERAL.—The Secretary shall provide 

4 for activities under this subsection to broadly dis5 seminate information to medicare beneficiaries (and 

6 prospective medicare beneficiaries) on the coverage 

7 options provided under this section in order to pro8 mote an active, informed selection among such op9 tions. 

10 ‘‘(2) PROVISION OF NOTICE.—

11 ‘‘(A) OPEN SEASON NOTIFICATION.—At 

12 least 15 days before the beginning of each an13 nual, coordinated election period (as defined in 

14 subsection (e)(3)(B)), the Secretary shall mail 

15 to each MedicareAdvantage eligible individual 

16 residing in an area the following: 

17 ‘‘(i) GENERAL INFORMATION.—The 

18 general information described in paragraph 

19 (3). 

20 ‘‘(ii) LIST OF PLANS AND COMPARI21 SON OF PLAN OPTIONS.—A list identifying 

22 the MedicareAdvantage plans that are (or 

23 will be) available to residents of the area 

24 and information described in paragraph 

25 (4) concerning such plans. Such informa-
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1 tion shall be presented in a comparative 

2 form. 

3 ‘‘(iii) ADDITIONAL INFORMATION.—

4 Any other information that the Secretary 

5 determines will assist the individual in 

6 making the election under this section. 

7 The mailing of such information shall be coordi8 nated, to the extent practicable, with the mail9 ing of any annual notice under section 1804. 

10 ‘‘(B) NOTIFICATION TO NEWLY ELIGIBLE

11 MEDICAREADVANTAGE ELIGIBLE INDIVID12 UALS.—To the extent practicable, the Secretary 

13 shall, not later than 30 days before the begin14 ning of the initial MedicareAdvantage enroll15 ment period for an individual described in sub16 section (e)(1), mail to the individual the infor17 mation described in subparagraph (A). 

18 ‘‘(C) FORM.—The information dissemi19 nated under this paragraph shall be written and 

20 formatted using language that is easily under21 standable by medicare beneficiaries. 

22 ‘‘(D) PERIODIC UPDATING.—The informa23 tion described in subparagraph (A) shall be up24 dated on at least an annual basis to reflect 

25 changes in the availability of 
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1 MedicareAdvantage plans, the benefits under 

2 such plans, and the MedicareAdvantage month3 ly basic beneficiary premium, 

4 MedicareAdvantage monthly beneficiary pre5 mium for enhanced medical benefits, and 

6 MedicareAdvantage monthly beneficiary obliga7 tion for qualified prescription drug coverage for 

8 such plans. 

9 ‘‘(3) GENERAL INFORMATION.—General infor10 mation under this paragraph, with respect to cov11 erage under this part during a year, shall include 

12 the following: 

13 ‘‘(A) BENEFITS UNDER THE ORIGINAL

14 MEDICARE FEE-FOR-SERVICE PROGRAM OP15 TION.—A general description of the benefits 

16 covered under parts A and B of the original 

17 medicare fee-for-service program, including—

18 ‘‘(i) covered items and services; 

19 ‘‘(ii) beneficiary cost-sharing, such as 

20 deductibles, coinsurance, and copayment 

21 amounts; and 

22 ‘‘(iii) any beneficiary liability for bal23 ance billing. 

24 ‘‘(B) CATASTROPHIC COVERAGE AND COM25 BINED DEDUCTIBLE.—A description of the cat-
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1 astrophic coverage and unified deductible appli2 cable under the plan. 

3 ‘‘(C) OUTPATIENT PRESCRIPTION DRUG

4 COVERAGE BENEFITS.—The information re5 quired under section 1860D–4 with respect to 

6 coverage for prescription drugs under the plan. 

7 ‘‘(D) ELECTION PROCEDURES.—Informa8 tion and instructions on how to exercise election 

9 options under this section. 

10 ‘‘(E) RIGHTS.—A general description of 

11 procedural rights (including grievance and ap12 peals procedures) of beneficiaries under the 

13 original medicare fee-for-service program (in14 cluding such rights under part D) and the 

15 MedicareAdvantage program and the right to 

16 be protected against discrimination based on 

17 health status-related factors under section 

18 1852(b). 

19 ‘‘(F) INFORMATION ON MEDIGAP AND

20 MEDICARE SELECT.—A general description of 

21 the benefits, enrollment rights, and other re22 quirements applicable to medicare supplemental 

23 policies under section 1882 and provisions relat24 ing to medicare select policies described in sec25 tion 1882(t). 
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1 ‘‘(G) POTENTIAL FOR CONTRACT TERMI2 NATION.—The fact that a MedicareAdvantage 

3 organization may terminate its contract, refuse 

4 to renew its contract, or reduce the service area 

5 included in its contract, under this part, and 

6 the effect of such a termination, nonrenewal, or 

7 service area reduction may have on individuals 

8 enrolled with the MedicareAdvantage plan 

9 under this part. 

10 ‘‘(4) INFORMATION COMPARING PLAN OP11 TIONS.—Information under this paragraph, with re12 spect to a MedicareAdvantage plan for a year, shall 

13 include the following: 

14 ‘‘(A) BENEFITS.—The benefits covered 

15 under the plan, including the following: 

16 ‘‘(i) Covered items and services be17 yond those provided under the original 

18 medicare fee-for-service program option. 

19 ‘‘(ii) Beneficiary cost-sharing for any 

20 items and services described in clause (i) 

21 and paragraph (3)(A)(i), including infor22 mation on the unified deductible under sec23 tion 1852(a)(1)(C). 
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1 ‘‘(iii) The maximum limitations on 

2 out-of-pocket expenses under section 

3 1852(a)(1)(C). 

4 ‘‘(iv) In the case of an MSA plan, dif5 ferences in cost-sharing, premiums, and 

6 balance billing under such a plan compared 

7 to under other MedicareAdvantage plans. 

8 ‘‘(v) In the case of a 

9 MedicareAdvantage private fee-for-service 

10 plan, differences in cost-sharing, pre11 miums, and balance billing under such a 

12 plan compared to under other 

13 MedicareAdvantage plans. 

14 ‘‘(vi) The extent to which an enrollee 

15 may obtain benefits through out-of-net16 work health care providers. 

17 ‘‘(vii) The extent to which an enrollee 

18 may select among in-network providers and 

19 the types of providers participating in the 

20 plan’s network. 

21 ‘‘(viii) The organization’s coverage of 

22 emergency and urgently needed care. 

23 ‘‘(ix) The comparative information de24 scribed in section 1860D–4(b)(2) relating 
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1 to prescription drug coverage under the 

2 plan. 

3 ‘‘(B) PREMIUMS.—

4 ‘‘(i) IN GENERAL.—The 

5 MedicareAdvantage monthly basic bene6 ficiary premium and MedicareAdvantage 

7 monthly beneficiary premium for enhanced 

8 medical benefits, if any, for the plan or, in 

9 the case of an MSA plan, the 

10 MedicareAdvantage monthly MSA pre11 mium. 

12 ‘‘(ii) REDUCTIONS.—The reduction in 

13 part B premiums, if any. 

14 ‘‘(iii) NATURE OF THE PREMIUM FOR

15 ENHANCED MEDICAL BENEFITS.—Whether 

16 the MedicareAdvantage monthly premium 

17 for enhanced benefits is optional or manda18 tory. 

19 ‘‘(C) SERVICE AREA.—The service area of 

20 the plan. 

21 ‘‘(D) QUALITY AND PERFORMANCE.—Plan 

22 quality and performance indicators for the ben23 efits under the plan (and how such indicators 

24 compare to quality and performance indicators 

25 under the original medicare fee-for-service pro-
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1 gram under parts A and B and under the vol2 untary prescription drug delivery program 

3 under part D in the area involved), including—

4 ‘‘(i) disenrollment rates for medicare 

5 enrollees electing to receive benefits 

6 through the plan for the previous 2 years 

7 (excluding disenrollment due to death or 

8 moving outside the plan’s service area); 

9 ‘‘(ii) information on medicare enrollee 

10 satisfaction; 

11 ‘‘(iii) information on health outcomes; 

12 and 

13 ‘‘(iv) the recent record regarding com14 pliance of the plan with requirements of 

15 this part (as determined by the Secretary). 

16 ‘‘(5) MAINTAINING A TOLL-FREE NUMBER AND

17 INTERNET SITE.—The Secretary shall maintain a 

18 toll-free number for inquiries regarding 

19 MedicareAdvantage options and the operation of this 

20 part in all areas in which MedicareAdvantage plans 

21 are offered and an Internet site through which indi22 viduals may electronically obtain information on 

23 such options and MedicareAdvantage plans. 
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1 ‘‘(6) USE OF NON-FEDERAL ENTITIES.—The 

2 Secretary may enter into contracts with non-Federal 

3 entities to carry out activities under this subsection. 

4 ‘‘(7) PROVISION OF INFORMATION.—A 

5 MedicareAdvantage organization shall provide the 

6 Secretary with such information on the organization 

7 and each MedicareAdvantage plan it offers as may 

8 be required for the preparation of the information 

9 referred to in paragraph (2)(A). 

10 ‘‘(e) COVERAGE ELECTION PERIODS.—

11 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO

12 MAKE ELECTION IF MEDICAREADVANTAGE PLANS

13 AVAILABLE TO INDIVIDUAL.—If, at the time an indi14 vidual first becomes eligible to elect to receive bene15 fits under part B or D (whichever is later), there is 

16 1 or more MedicareAdvantage plans offered in the 

17 area in which the individual resides, the individual 

18 shall make the election under this section during a 

19 period specified by the Secretary such that if the in20 dividual elects a MedicareAdvantage plan during the 

21 period, coverage under the plan becomes effective as 

22 of the first date on which the individual may receive 

23 such coverage. 
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1 ‘‘(2) OPEN ENROLLMENT AND DISENROLLMENT

2 OPPORTUNITIES.—Subject to paragraph (5), the fol3 lowing rules shall apply: 

4 ‘‘(A) CONTINUOUS OPEN ENROLLMENT

5 AND DISENROLLMENT THROUGH 2005.—At any 

6 time during the period beginning January 1, 

7 1998, and ending on December 31, 2005, a 

8 Medicare+Choice eligible individual may change 

9 the election under subsection (a)(1). 

10 ‘‘(B) CONTINUOUS OPEN ENROLLMENT

11 AND DISENROLLMENT FOR FIRST 6 MONTHS

12 DURING 2006.—

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

14 (ii) and subparagraph (D), at any time 

15 during the first 6 months of 2006, or, if 

16 the individual first becomes a 

17 MedicareAdvantage eligible individual dur18 ing 2006, during the first 6 months during 

19 2006 in which the individual is a 

20 MedicareAdvantage eligible individual, a 

21 MedicareAdvantage eligible individual may 

22 change the election under subsection 

23 (a)(1). 

24 ‘‘(ii) LIMITATION OF 1 CHANGE.—An 

25 individual may exercise the right under 
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1 clause (i) only once. The limitation under 

2 this clause shall not apply to changes in 

3 elections effected during an annual, coordi4 nated election period under paragraph (3) 

5 or during a special enrollment period under 

6 the first sentence of paragraph (4). 

7 ‘‘(C) CONTINUOUS OPEN ENROLLMENT

8 AND DISENROLLMENT FOR FIRST 3 MONTHS IN

9 SUBSEQUENT YEARS.—

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

11 (ii) and subparagraph (D), at any time 

12 during the first 3 months of 2007 and 

13 each subsequent year, or, if the individual 

14 first becomes a MedicareAdvantage eligible 

15 individual during 2007 or any subsequent 

16 year, during the first 3 months of such 

17 year in which the individual is a 

18 MedicareAdvantage eligible individual, a 

19 MedicareAdvantage eligible individual may 

20 change the election under subsection 

21 (a)(1). 

22 ‘‘(ii) LIMITATION OF 1 CHANGE DUR23 ING OPEN ENROLLMENT PERIOD EACH

24 YEAR.—An individual may exercise the 

25 right under clause (i) only once during the 
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1 applicable 3-month period described in 

2 such clause in each year. The limitation 

3 under this clause shall not apply to 

4 changes in elections effected during an an5 nual, coordinated election period under 

6 paragraph (3) or during a special enroll7 ment period under paragraph (4). 

8 ‘‘(D) CONTINUOUS OPEN ENROLLMENT

9 FOR INSTITUTIONALIZED INDIVIDUALS.—At 

10 any time during 2006 or any subsequent year, 

11 in the case of a MedicareAdvantage eligible in12 dividual who is institutionalized (as defined by 

13 the Secretary), the individual may elect under 

14 subsection (a)(1)—

15 ‘‘(i) to enroll in a MedicareAdvantage 

16 plan; or 

17 ‘‘(ii) to change the 

18 MedicareAdvantage plan in which the indi19 vidual is enrolled. 

20 ‘‘(3) ANNUAL, COORDINATED ELECTION PE21 RIOD.—

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

23 (5), each individual who is eligible to make an 

24 election under this section may change such 
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1 election during an annual, coordinated election 

2 period. 

3 ‘‘(B) ANNUAL, COORDINATED ELECTION

4 PERIOD.—For purposes of this section, the 

5 term ‘annual, coordinated election period’ 

6 means, with respect to a year before 2003 and 

7 after 2006, the month of November before such 

8 year and with respect to 2003, 2004, 2005, and 

9 2006, the period beginning on November 15 

10 and ending on December 31 of the year before 

11 such year. 

12 ‘‘(C) MEDICAREADVANTAGE HEALTH IN13 FORMATION FAIRS.—During the fall season of 

14 each year (beginning with 2006), in conjunction 

15 with the annual coordinated election period de16 fined in subparagraph (B), the Secretary shall 

17 provide for a nationally coordinated educational 

18 and publicity campaign to inform 

19 MedicareAdvantage eligible individuals about 

20 MedicareAdvantage plans and the election proc21 ess provided under this section. 

22 ‘‘(D) SPECIAL INFORMATION CAMPAIGN IN

23 2005.—During the period beginning on Novem24 ber 15, 2005, and ending on December 31, 

25 2005, the Secretary shall provide for an edu-
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1 cational and publicity campaign to inform 

2 MedicareAdvantage eligible individuals about 

3 the availability of MedicareAdvantage plans, 

4 and eligible organizations with risk-sharing con5 tracts under section 1876, offered in different 

6 areas and the election process provided under 

7 this section. 

8 ‘‘(4) SPECIAL ELECTION PERIODS.—Effective 

9 on and after January 1, 2006, an individual may 

10 discontinue an election of a MedicareAdvantage plan 

11 offered by a MedicareAdvantage organization other 

12 than during an annual, coordinated election period 

13 and make a new election under this section if—

14 ‘‘(A)(i) the certification of the organization 

15 or plan under this part has been terminated, or 

16 the organization or plan has notified the indi17 vidual of an impending termination of such cer18 tification; or 

19 ‘‘(ii) the organization has terminated or 

20 otherwise discontinued providing the plan in the 

21 area in which the individual resides, or has no22 tified the individual of an impending termi23 nation or discontinuation of such plan; 

24 ‘‘(B) the individual is no longer eligible to 

25 elect the plan because of a change in the indi-
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1 vidual’s place of residence or other change in 

2 circumstances (specified by the Secretary, but 

3 not including termination of the individual’s en4 rollment on the basis described in clause (i) or 

5 (ii) of subsection (g)(3)(B)); 

6 ‘‘(C) the individual demonstrates (in ac7 cordance with guidelines established by the Sec8 retary) that—

9 ‘‘(i) the organization offering the plan 

10 substantially violated a material provision 

11 of the organization’s contract under this 

12 part in relation to the individual (including 

13 the failure to provide an enrollee on a 

14 timely basis medically necessary care for 

15 which benefits are available under the plan 

16 or the failure to provide such covered care 

17 in accordance with applicable quality 

18 standards); or 

19 ‘‘(ii) the organization (or an agent or 

20 other entity acting on the organization’s 

21 behalf) materially misrepresented the 

22 plan’s provisions in marketing the plan to 

23 the individual; or 
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1 ‘‘(D) the individual meets such other ex2 ceptional conditions as the Secretary may pro3 vide. 

4 Effective on and after January 1, 2006, an indi5 vidual who, upon first becoming eligible for benefits 

6 under part A at age 65, enrolls in a 

7 MedicareAdvantage plan under this part, the indi8 vidual may discontinue the election of such plan, and 

9 elect coverage under the original fee-for-service plan, 

10 at any time during the 12-month period beginning 

11 on the effective date of such enrollment. 

12 ‘‘(5) SPECIAL RULES FOR MSA PLANS.—Not13 withstanding the preceding provisions of this sub14 section, an individual—

15 ‘‘(A) may elect an MSA plan only during—

16 ‘‘(i) an initial open enrollment period 

17 described in paragraph (1); 

18 ‘‘(ii) an annual, coordinated election 

19 period described in paragraph (3)(B); or 

20 ‘‘(iii) the month of November 1998; 

21 ‘‘(B) subject to subparagraph (C), may not 

22 discontinue an election of an MSA plan except 

23 during the periods described in clause (ii) or 

24 (iii) of subparagraph (A) and under the first 

25 sentence of paragraph (4); and 
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1 ‘‘(C) who elects an MSA plan during an 

2 annual, coordinated election period, and who 

3 never previously had elected such a plan, may 

4 revoke such election, in a manner determined 

5 by the Secretary, by not later than December 

6 15 following the date of the election. 

7 ‘‘(6) OPEN ENROLLMENT PERIODS.—Subject to 

8 paragraph (5), a MedicareAdvantage organization—

9 ‘‘(A) shall accept elections or changes to 

10 elections during the initial enrollment periods 

11 described in paragraph (1), during the period 

12 beginning on November 15, 2005, and ending 

13 on December 31, 2005, and during the annual, 

14 coordinated election period under paragraph (3) 

15 for each subsequent year, and during special 

16 election periods described in the first sentence 

17 of paragraph (4); and 

18 ‘‘(B) may accept other changes to elections 

19 at such other times as the organization pro20 vides. 

21 ‘‘(f) EFFECTIVENESS OF ELECTIONS AND CHANGES

22 OF ELECTIONS.—

23 ‘‘(1) DURING INITIAL COVERAGE ELECTION PE24 RIOD.—An election of coverage made during the ini25 tial coverage election period under subsection 
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1 (e)(1)(A) shall take effect upon the date the indi2 vidual becomes entitled to (or enrolled for) benefits 

3 under part A, enrolled under part B, and enrolled 

4 under part D, except as the Secretary may provide 

5 (consistent with sections 1838 and 1860D–2)) in 

6 order to prevent retroactive coverage. 

7 ‘‘(2) DURING CONTINUOUS OPEN ENROLLMENT

8 PERIODS.—An election or change of coverage made 

9 under subsection (e)(2) shall take effect with the 

10 first day of the first calendar month following the 

11 date on which the election or change is made. 

12 ‘‘(3) ANNUAL, COORDINATED ELECTION PE13 RIOD.—An election or change of coverage made dur14 ing an annual, coordinated election period (as de15 fined in subsection (e)(3)(B)) in a year shall take ef16 fect as of the first day of the following year. 

17 ‘‘(4) OTHER PERIODS.—An election or change 

18 of coverage made during any other period under 

19 subsection (e)(4) shall take effect in such manner as 

20 the Secretary provides in a manner consistent (to 

21 the extent practicable) with protecting continuity of 

22 health benefit coverage. 

23 ‘‘(g) GUARANTEED ISSUE AND RENEWAL.—

24 ‘‘(1) IN GENERAL.—Except as provided in this 

25 subsection, a MedicareAdvantage organization shall 
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1 provide that at any time during which elections are 

2 accepted under this section with respect to a 

3 MedicareAdvantage plan offered by the organization, 

4 the organization will accept without restrictions indi5 viduals who are eligible to make such election. 

6 ‘‘(2) PRIORITY.—If the Secretary determines 

7 that a MedicareAdvantage organization, in relation 

8 to a MedicareAdvantage plan it offers, has a capac9 ity limit and the number of MedicareAdvantage eli10 gible individuals who elect the plan under this sec11 tion exceeds the capacity limit, the organization may 

12 limit the election of individuals of the plan under 

13 this section but only if priority in election is pro14 vided—

15 ‘‘(A) first to such individuals as have elect16 ed the plan at the time of the determination; 

17 and 

18 ‘‘(B) then to other such individuals in such 

19 a manner that does not discriminate, on a basis 

20 described in section 1852(b), among the individ21 uals (who seek to elect the plan). 

22 The preceding sentence shall not apply if it would 

23 result in the enrollment of enrollees substantially 

24 nonrepresentative, as determined in accordance with 
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1 regulations of the Secretary, of the medicare popu2 lation in the service area of the plan. 

3 ‘‘(3) LIMITATION ON TERMINATION OF ELEC4 TION.—

5 ‘‘(A) IN GENERAL.—Subject to subpara6 graph (B), a MedicareAdvantage organization 

7 may not for any reason terminate the election 

8 of any individual under this section for a 

9 MedicareAdvantage plan it offers. 

10 ‘‘(B) BASIS FOR TERMINATION OF ELEC11 TION.—A MedicareAdvantage organization may 

12 terminate an individual’s election under this 

13 section with respect to a MedicareAdvantage 

14 plan it offers if—

15 ‘‘(i) any MedicareAdvantage monthly 

16 basic beneficiary premium, 

17 MedicareAdvantage monthly beneficiary 

18 obligation for qualified prescription drug 

19 coverage, or MedicareAdvantage monthly 

20 beneficiary premium for required or op21 tional enhanced medical benefits required 

22 with respect to such plan are not paid on 

23 a timely basis (consistent with standards 

24 under section 1856 that provide for a 
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1 grace period for late payment of such pre2 miums); 

3 ‘‘(ii) the individual has engaged in 

4 disruptive behavior (as specified in such 

5 standards); or 

6 ‘‘(iii) the plan is terminated with re7 spect to all individuals under this part in 

8 the area in which the individual resides. 

9 ‘‘(C) CONSEQUENCE OF TERMINATION.—

10 ‘‘(i) TERMINATIONS FOR CAUSE.—

11 Any individual whose election is terminated 

12 under clause (i) or (ii) of subparagraph 

13 (B) is deemed to have elected to receive 

14 benefits under the original medicare fee15 for-service program option. 

16 ‘‘(ii) TERMINATION BASED ON PLAN

17 TERMINATION OR SERVICE AREA REDUC18 TION.—Any individual whose election is 

19 terminated under subparagraph (B)(iii) 

20 shall have a special election period under 

21 subsection (e)(4)(A) in which to change 

22 coverage to coverage under another 

23 MedicareAdvantage plan. Such an indi24 vidual who fails to make an election during 

25 such period is deemed to have chosen to 
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1 change coverage to the original medicare 

2 fee-for-service program option. 

3 ‘‘(D) ORGANIZATION OBLIGATION WITH

4 RESPECT TO ELECTION FORMS.—Pursuant to a 

5 contract under section 1857858., each 

6 MedicareAdvantage organization receiving an 

7 election form under subsection (c)(2) shall 

8 transmit to the Secretary (at such time and in 

9 such manner as the Secretary may specify) a 

10 copy of such form or such other information re11 specting the election as the Secretary may 

12 specify. 

13 ‘‘(h) APPROVAL OF MARKETING MATERIAL AND AP14 PLICATION FORMS.—

15 ‘‘(1) SUBMISSION.—No marketing material or 

16 application form may be distributed by a 

17 MedicareAdvantage organization to (or for the use 

18 of) MedicareAdvantage eligible individuals unless—

19 ‘‘(A) at least 45 days (or 10 days in the 

20 case described in paragraph (5)) before the date 

21 of distribution the organization has submitted 

22 the material or form to the Secretary for re23 view; and 

24 ‘‘(B) the Secretary has not disapproved the 

25 distribution of such material or form. 
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1 ‘‘(2) REVIEW.—The standards established 

2 under section 1856 shall include guidelines for the 

3 review of any material or form submitted and under 

4 such guidelines the Secretary shall disapprove (or 

5 later require the correction of) such material or form 

6 if the material or form is materially inaccurate or 

7 misleading or otherwise makes a material misrepre8 sentation. 

9 ‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—

10 In the case of material or form that is submitted 

11 under paragraph (1)(A) to the Secretary or a re12 gional office of the Department of Health and 

13 Human Services and the Secretary or the office has 

14 not disapproved the distribution of marketing mate15 rial or form under paragraph (1)(B) with respect to 

16 a MedicareAdvantage plan in an area, the Secretary 

17 is deemed not to have disapproved such distribution 

18 in all other areas covered by the plan and organiza19 tion except with regard to that portion of such mate20 rial or form that is specific only to an area involved. 

21 ‘‘(4) PROHIBITION OF CERTAIN MARKETING

22 PRACTICES.—Each MedicareAdvantage organization 

23 shall conform to fair marketing standards, in rela24 tion to MedicareAdvantage plans offered under this 
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1 part, included in the standards established under 

2 section 1856. Such standards—

3 ‘‘(A) shall not permit a MedicareAdvantage 

4 organization to provide for cash or other mone5 tary rebates as an inducement for enrollment or 

6 otherwise (other than as an additional benefit 

7 described in section 1854(g)(1)(C)(i)); and 

8 ‘‘(B) may include a prohibition against a 

9 MedicareAdvantage organization (or agent of 

10 such an organization) completing any portion of 

11 any election form used to carry out elections 

12 under this section on behalf of any individual. 

13 ‘‘(5) SPECIAL TREATMENT OF MARKETING MA14 TERIAL FOLLOWING MODEL MARKETING LAN15 GUAGE.—In the case of marketing material of an or16 ganization that uses, without modification, proposed 

17 model language specified by the Secretary, the pe18 riod specified in paragraph (1)(A) shall be reduced 

19 from 45 days to 10 days. 

20 ‘‘(i) EFFECT OF ELECTION OF

21 MEDICAREADVANTAGE PLAN OPTION.—

22 ‘‘(1) PAYMENTS TO ORGANIZATIONS.—Subject 

23 to sections 1852(a)(5), 1853(h), 1853(i), 

24 1886(d)(11), and 1886(h)(3)(D), payments under a 

25 contract with a MedicareAdvantage organization 
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1 under section 1853(a) with respect to an individual 

2 electing a MedicareAdvantage plan offered by the or3 ganization shall be instead of the amounts which (in 

4 the absence of the contract) would otherwise be pay5 able under parts A, B, and D for items and services 

6 furnished to the individual. 

7 ‘‘(2) ONLY ORGANIZATION ENTITLED TO PAY8 MENT.—Subject to sections 1853(f), 1853(h), 

9 1853(i), 1857(f)(2), 1886(d)(11), and 

10 1886(h)(3)(D), only the MedicareAdvantage organi11 zation shall be entitled to receive payments from the 

12 Secretary under this title for services furnished to 

13 the individual.’’. 

14 SEC. 202. BENEFITS AND BENEFICIARY PROTECTIONS. 

15 Section 1852 (42 U.S.C. 1395w–22) is amended to 

16 read as follows: 

17 ‘‘BENEFITS AND BENEFICIARY PROTECTIONS

18 ‘‘SEC. 1852. (a) BASIC BENEFITS.—

19 ‘‘(1) IN GENERAL.—Except as provided in sec20 tion 1859(b)(3) for MSA plans, each 

21 MedicareAdvantage plan shall provide to members 

22 enrolled under this part, through providers and 

23 other persons that meet the applicable requirements 

24 of this title and part A of title XI—

25 ‘‘(A) those items and services (other than 

26 hospice care) for which benefits are available 
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1 under parts A and B to individuals residing in 

2 the area served by the plan; 

3 ‘‘(B) except as provided in paragraph 

4 (2)(D), qualified prescription drug coverage 

5 under part D to individuals residing in the area 

6 served by the plan; 

7 ‘‘(C) a maximum limitation on out-of-pock8 et expenses and a unified deductible; and 

9 ‘‘(D) additional benefits required under 

10 section 1854(d)(1). 

11 ‘‘(2) SATISFACTION OF REQUIREMENT.—

12 ‘‘(A) IN GENERAL.—A MedicareAdvantage 

13 plan (other than an MSA plan) offered by a 

14 MedicareAdvantage organization satisfies para15 graph (1)(A), with respect to benefits for items 

16 and services furnished other than through a 

17 provider or other person that has a contract 

18 with the organization offering the plan, if the 

19 plan provides payment in an amount so that—

20 ‘‘(i) the sum of such payment amount 

21 and any cost-sharing provided for under 

22 the plan; is equal to at least 

23 ‘‘(ii) the total dollar amount of pay24 ment for such items and services as would 

25 otherwise be authorized under parts A and 
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1 B (including any balance billing permitted 

2 under such parts). 

3 ‘‘(B) REFERENCE TO RELATED PROVI4 SIONS.—For provisions relating to—

5 ‘‘(i) limitations on balance billing 

6 against MedicareAdvantage organizations 

7 for noncontract providers, see sections 

8 1852(k) and 1866(a)(1)(O); and 

9 ‘‘(ii) limiting actuarial value of en10 rollee liability for covered benefits, see sec11 tion 1854(f). 

12 ‘‘(C) ELECTION OF UNIFORM COVERAGE

13 POLICY.—In the case of a MedicareAdvantage 

14 organization that offers a MedicareAdvantage 

15 plan in an area in which more than 1 local cov16 erage policy is applied with respect to different 

17 parts of the area, the organization may elect to 

18 have the local coverage policy for the part of 

19 the area that is most beneficial to 

20 MedicareAdvantage enrollees (as identified by 

21 the Secretary) apply with respect to all 

22 MedicareAdvantage enrollees enrolled in the 

23 plan. 

24 ‘‘(D) SPECIAL RULE FOR PRIVATE FEE25 FOR-SERVICE PLANS.—
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1 ‘‘(i) IN GENERAL.—A private fee-for2 service plan may elect not to provide quali3 fied prescription drug coverage under part 

4 D to individuals residing in the area served 

5 by the plan. 

6 ‘‘(ii) AVAILABILITY OF DRUG COV7 ERAGE FOR ENROLLEES.—If a beneficiary 

8 enrolls in a plan making the election de9 scribed in clause (i), the beneficiary may 

10 enroll for drug coverage under part D with 

11 an eligible entity under such part. 

12 ‘‘(3) ENHANCED MEDICAL BENEFITS.—

13 ‘‘(A) BENEFITS INCLUDED SUBJECT TO

14 SECRETARY’S APPROVAL.—Each 

15 MedicareAdvantage organization may provide to 

16 individuals enrolled under this part, other than 

17 under an MSA plan (without affording those in18 dividuals an option to decline the coverage), en19 hanced medical benefits that the Secretary may 

20 approve. The Secretary shall approve any such 

21 enhanced medical benefits unless the Secretary 

22 determines that including such enhanced med23 ical benefits would substantially discourage en24 rollment by MedicareAdvantage eligible individ25 uals with the organization. 
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1 ‘‘(B) AT ENROLLEES’ OPTION.—A 

2 MedicareAdvantage organization may not pro3 vide, under an MSA plan, enhanced medical 

4 benefits that cover the deductible described in 

5 section 1859(b)(2)(B). In applying the previous 

6 sentence, health benefits described in section 

7 1882(u)(2)(B) shall not be treated as covering 

8 such deductible. 

9 ‘‘(C) APPLICATION TO

10 MEDICAREADVANTAGE PRIVATE FEE-FOR-SERV11 ICE PLANS.—Nothing in this paragraph shall be 

12 construed as preventing a MedicareAdvantage 

13 private fee-for-service plan from offering en14 hanced medical benefits that include payment 

15 for some or all of the balance billing amounts 

16 permitted consistent with section 1852(k) and 

17 coverage of additional services that the plan 

18 finds to be medically necessary. 

19 ‘‘(D) RULE FOR APPROVAL OF MEDICAL

20 AND PRESCRIPTION DRUG BENEFITS.—Notwith21 standing the preceding provisions of this para22 graph, the Secretary may not approve any en23 hanced medical benefit that provides for the 

24 coverage of any prescription drug (other than 

25 that relating to prescription drugs covered 
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1 under the original medicare fee-for-service pro2 gram option). 

3 ‘‘(4) ORGANIZATION AS SECONDARY PAYER.—

4 Notwithstanding any other provision of law, a 

5 MedicareAdvantage organization may (in the case of 

6 the provision of items and services to an individual 

7 under a MedicareAdvantage plan under cir8 cumstances in which payment under this title is 

9 made secondary pursuant to section 1862(b)(2)) 

10 charge or authorize the provider of such services to 

11 charge, in accordance with the charges allowed 

12 under a law, plan, or policy described in such sec13 tion—

14 ‘‘(A) the insurance carrier, employer, or 

15 other entity which under such law, plan, or pol16 icy is to pay for the provision of such services; 

17 or 

18 ‘‘(B) such individual to the extent that the 

19 individual has been paid under such law, plan, 

20 or policy for such services. 

21 ‘‘(5) NATIONAL COVERAGE DETERMINATIONS

22 AND LEGISLATIVE CHANGES IN BENEFITS.—If there 

23 is a national coverage determination or legislative 

24 change in benefits required to be provided under this 

25 part made in the period beginning on the date of an 
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1 announcement under section 1853(b) and ending on 

2 the date of the next announcement under such sec3 tion and the Secretary projects that the determina4 tion will result in a significant change in the costs 

5 to a MedicareAdvantage organization of providing 

6 the benefits that are the subject of such national 

7 coverage determination and that such change in 

8 costs was not incorporated in the determination of 

9 the benchmark amount announced under section 

10 1853(b)(1)(A) at the beginning of such period, then, 

11 unless otherwise required by law—

12 ‘‘(A) such determination or legislative 

13 change in benefits shall not apply to contracts 

14 under this part until the first contract year that 

15 begins after the end of such period; and 

16 ‘‘(B) if such coverage determination or leg17 islative change provides for coverage of addi18 tional benefits or coverage under additional cir19 cumstances, section 1851(i)(1) shall not apply 

20 to payment for such additional benefits or bene21 fits provided under such additional cir22 cumstances until the first contract year that be23 gins after the end of such period. 

24 The projection under the previous sentence shall be 

25 based on an analysis by the Secretary of the actu-
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1 arial costs associated with the coverage determina2 tion or legislative change in benefits. 

3 ‘‘(6) AUTHORITY TO PROHIBIT RISK SELEC4 TION.—The Secretary shall have the authority to 

5 disapprove any MedicareAdvantage plan that the 

6 Secretary determines is designed to attract a popu7 lation that is healthier than the average population 

8 residing in the service area of the plan. 

9 ‘‘(7) UNIFIED DEDUCTIBLE DEFINED.—In this 

10 part, the term ‘unified deductible’ means an annual 

11 deductible amount that is applied in lieu of the inpa12 tient hospital deductible under section 1813(b)(1) 

13 and the deductible under section 1833(b). Nothing 

14 in this part shall be construed as preventing a 

15 MedicareAdvantage organization from requiring co16 insurance or a copayment for inpatient hospital serv17 ices after the unified deductible is satisfied, subject 

18 to the limitation on enrollee liability under section 

19 1854(f). 

20 ‘‘(b) ANTIDISCRIMINATION.—

21 ‘‘(1) BENEFICIARIES.—

22 ‘‘(A) IN GENERAL.—A MedicareAdvantage 

23 organization may not deny, limit, or condition 

24 the coverage or provision of benefits under this 

25 part, for individuals permitted to be enrolled 
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1 with the organization under this part, based on 

2 any health status-related factor described in 

3 section 2702(a)(1) of the Public Health Service 

4 Act. 

5 ‘‘(B) CONSTRUCTION.—Except as provided 

6 under section 1851(a)(3)(B), subparagraph (A) 

7 shall not be construed as requiring a 

8 MedicareAdvantage organization to enroll indi9 viduals who are determined to have end-stage 

10 renal disease. 

11 ‘‘(2) PROVIDERS.—A MedicareAdvantage orga12 nization shall not discriminate with respect to par13 ticipation, reimbursement, or indemnification as to 

14 any provider who is acting within the scope of the 

15 provider’s license or certification under applicable 

16 State law, solely on the basis of such license or cer17 tification. This paragraph shall not be construed to 

18 prohibit a plan from including providers only to the 

19 extent necessary to meet the needs of the plan’s en20 rollees or from establishing any measure designed to 

21 maintain quality and control costs consistent with 

22 the responsibilities of the plan. 

23 ‘‘(c) DISCLOSURE REQUIREMENTS.—

24 ‘‘(1) DETAILED DESCRIPTION OF PLAN PROVI25 SIONS.—A MedicareAdvantage organization shall 
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1 disclose, in clear, accurate, and standardized form to 

2 each enrollee with a MedicareAdvantage plan offered 

3 by the organization under this part at the time of 

4 enrollment and at least annually thereafter, the fol5 lowing information regarding such plan: 

6 ‘‘(A) SERVICE AREA.—The plan’s service 

7 area. 

8 ‘‘(B) BENEFITS.—Benefits offered under 

9 the plan, including information described sec10 tion 1852(a)(1) (relating to benefits under the 

11 original medicare fee-for-service program op12 tion, the maximum limitation in out-of-pocket 

13 expenses and the unified deductible, and quali14 fied prescription drug coverage under part D, 

15 respectively) and exclusions from coverage and, 

16 if it is an MSA plan, a comparison of benefits 

17 under such a plan with benefits under other 

18 MedicareAdvantage plans. 

19 ‘‘(C) ACCESS.—The number, mix, and dis20 tribution of plan providers, out-of-network cov21 erage (if any) provided by the plan, and any 

22 point-of-service option (including the 

23 MedicareAdvantage monthly beneficiary pre24 mium for enhanced medical benefits for such 

25 option). 
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1 ‘‘(D) OUT-OF-AREA COVERAGE.—Out-of2 area coverage provided by the plan. 

3 ‘‘(E) EMERGENCY COVERAGE.—Coverage 

4 of emergency services, including—

5 ‘‘(i) the appropriate use of emergency 

6 services, including use of the 911 telephone 

7 system or its local equivalent in emergency 

8 situations and an explanation of what con9 stitutes an emergency situation; 

10 ‘‘(ii) the process and procedures of the 

11 plan for obtaining emergency services; and 

12 ‘‘(iii) the locations of—

13 ‘‘(I) emergency departments; and 

14 ‘‘(II) other settings, in which 

15 plan physicians and hospitals provide 

16 emergency services and post-stabiliza17 tion care. 

18 ‘‘(F) ENHANCED MEDICAL BENEFITS.—

19 Enhanced medical benefits available from the 

20 organization offering the plan, including—

21 ‘‘(i) whether the enhanced medical 

22 benefits are optional; 

23 ‘‘(ii) the enhanced medical benefits 

24 covered; and 
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1 ‘‘(iii) the MedicareAdvantage monthly 

2 beneficiary premium for enhanced medical 

3 benefits. 

4 ‘‘(G) PRIOR AUTHORIZATION RULES.—

5 Rules regarding prior authorization or other re6 view requirements that could result in non7 payment. 

8 ‘‘(H) PLAN GRIEVANCE AND APPEALS PRO9 CEDURES.—All plan appeal or grievance rights 

10 and procedures. 

11 ‘‘(I) QUALITY ASSURANCE PROGRAM.—A 

12 description of the organization’s quality assur13 ance program under subsection (e). 

14 ‘‘(2) DISCLOSURE UPON REQUEST.—Upon re15 quest of a MedicareAdvantage eligible individual, a 

16 MedicareAdvantage organization must provide the 

17 following information to such individual: 

18 ‘‘(A) The general coverage information and 

19 general comparative plan information made 

20 available under clauses (i) and (ii) of section 

21 1851(d)(2)(A). 

22 ‘‘(B) Information on procedures used by 

23 the organization to control utilization of serv24 ices and expenditures. 
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1 ‘‘(C) Information on the number of griev2 ances, reconsiderations, and appeals and on the 

3 disposition in the aggregate of such matters. 

4 ‘‘(D) An overall summary description as to 

5 the method of compensation of participating 

6 physicians. 

7 ‘‘(E) The information described in sub8 paragraphs (A) through (C) in relation to the 

9 qualified prescription drug coverage provided by 

10 the organization. 

11 ‘‘(d) ACCESS TO SERVICES.—

12 ‘‘(1) IN GENERAL.—A MedicareAdvantage or13 ganization offering a MedicareAdvantage plan may 

14 select the providers from whom the benefits under 

15 the plan are provided so long as—

16 ‘‘(A) the organization makes such benefits 

17 available and accessible to each individual elect18 ing the plan within the plan service area with 

19 reasonable promptness and in a manner which 

20 assures continuity in the provision of benefits; 

21 ‘‘(B) when medically necessary the organi22 zation makes such benefits available and acces23 sible 24 hours a day and 7 days a week; 

24 ‘‘(C) the plan provides for reimbursement 

25 with respect to services which are covered under 
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1 subparagraphs (A) and (B) and which are pro2 vided to such an individual other than through 

3 the organization, if—

4 ‘‘(i) the services were not emergency 

5 services (as defined in paragraph (3)), 

6 but—

7 ‘‘(I) the services were medically 

8 necessary and immediately required 

9 because of an unforeseen illness, in10 jury, or condition; and 

11 ‘‘(II) it was not reasonable given 

12 the circumstances to obtain the serv13 ices through the organization; 

14 ‘‘(ii) the services were renal dialysis 

15 services and were provided other than 

16 through the organization because the indi17 vidual was temporarily out of the plan’s 

18 service area; or 

19 ‘‘(iii) the services are maintenance 

20 care or post-stabilization care covered 

21 under the guidelines established under 

22 paragraph (2); 

23 ‘‘(D) the organization provides access to 

24 appropriate providers, including credentialed 
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1 specialists, for medically necessary treatment 

2 and services; and 

3 ‘‘(E) coverage is provided for emergency 

4 services (as defined in paragraph (3)) without 

5 regard to prior authorization or the emergency 

6 care provider’s contractual relationship with the 

7 organization. 

8 ‘‘(2) GUIDELINES RESPECTING COORDINATION

9 OF POST-STABILIZATION CARE.—A 

10 MedicareAdvantage plan shall comply with such 

11 guidelines as the Secretary may prescribe relating to 

12 promoting efficient and timely coordination of appro13 priate maintenance and post-stabilization care of an 

14 enrollee after the enrollee has been determined to be 

15 stable under section 1867. 

16 ‘‘(3) DEFINITION OF EMERGENCY SERVICES.—

17 In this subsection—

18 ‘‘(A) IN GENERAL.—The term ‘emergency 

19 services’ means, with respect to an individual 

20 enrolled with an organization, covered inpatient 

21 and outpatient services that—

22 ‘‘(i) are furnished by a provider that 

23 is qualified to furnish such services under 

24 this title; and 
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1 ‘‘(ii) are needed to evaluate or sta2 bilize an emergency medical condition (as 

3 defined in subparagraph (B)). 

4 ‘‘(B) EMERGENCY MEDICAL CONDITION

5 BASED ON PRUDENT LAYPERSON.—The term 

6 ‘emergency medical condition’ means a medical 

7 condition manifesting itself by acute symptoms 

8 of sufficient severity (including severe pain) 

9 such that a prudent layperson, who possesses 

10 an average knowledge of health and medicine, 

11 could reasonably expect the absence of imme12 diate medical attention to result in—

13 ‘‘(i) placing the health of the indi14 vidual (or, with respect to a pregnant 

15 woman, the health of the woman or her 

16 unborn child) in serious jeopardy; 

17 ‘‘(ii) serious impairment to bodily 

18 functions; or 

19 ‘‘(iii) serious dysfunction of any bodily 

20 organ or part. 

21 ‘‘(4) ASSURING ACCESS TO SERVICES IN

22 MEDICAREADVANTAGE PRIVATE FEE-FOR-SERV23 ICE PLANS.—In addition to any other require24 ments under this part, in the case of a 

25 MedicareAdvantage private fee-for-service plan, 
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1 the organization offering the plan must dem2 onstrate to the Secretary that the organization 

3 has sufficient number and range of health care 

4 professionals and providers willing to provide 

5 services under the terms of the plan. The Sec6 retary shall find that an organization has met 

7 such requirement with respect to any category 

8 of health care professional or provider if, with 

9 respect to that category of provider—

10 ‘‘(A) the plan has established payment 

11 rates for covered services furnished by that 

12 category of provider that are not less than 

13 the payment rates provided for under part 

14 A, B, or D for such services; or 

15 ‘‘(B) the plan has contracts or agree16 ments (other than deemed contracts or 

17 agreements under subsection (j)(6), with a 

18 sufficient number and range of providers 

19 within such category to provide covered 

20 services under the terms of the plan, 

21 or a combination of both. The previous sentence 

22 shall not be construed as restricting the persons 

23 from whom enrollees under such a plan may ob24 tain covered benefits, except that, if a plan en25 tirely meets such requirement with respect to a 
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1 category of health care professional or provider 

2 on the basis of subparagraph (B), it may pro3 vide for a higher beneficiary copayment in the 

4 case of health care professionals and providers 

5 of that category who do not have contracts or 

6 agreements (other than deemed contracts or 

7 agreements under subsection (j)(6)) to provide 

8 covered services under the terms of the plan. 

9 ‘‘(e) QUALITY ASSURANCE PROGRAM.—

10 ‘‘(1) IN GENERAL.—Each MedicareAdvantage 

11 organization must have arrangements, consistent 

12 with any regulation, for an ongoing quality assur13 ance program for health care services it provides to 

14 individuals enrolled with MedicareAdvantage plans 

15 of the organization. 

16 ‘‘(2) ELEMENTS OF PROGRAM.—

17 ‘‘(A) IN GENERAL.—The quality assurance 

18 program of an organization with respect to a 

19 MedicareAdvantage plan (other than a 

20 MedicareAdvantage private fee-for-service plan 

21 or a nonnetwork MSA plan) it offers shall—

22 ‘‘(i) stress health outcomes and pro23 vide for the collection, analysis, and report24 ing of data (in accordance with a quality 

25 measurement system that the Secretary 
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1 recognizes) that will permit measurement 

2 of outcomes and other indices of the qual3 ity of MedicareAdvantage plans and orga4 nizations; 

5 ‘‘(ii) monitor and evaluate high vol6 ume and high risk services and the care of 

7 acute and chronic conditions; 

8 ‘‘(iii) provide access to disease man9 agement and chronic care services; 

10 ‘‘(iv) provide access to preventive ben11 efits and information for enrollees on such 

12 benefits; 

13 ‘‘(v) evaluate the continuity and co14 ordination of care that enrollees receive; 

15 ‘‘(vi) be evaluated on an ongoing basis 

16 as to its effectiveness; 

17 ‘‘(vii) include measures of consumer 

18 satisfaction; 

19 ‘‘(viii) provide the Secretary with such 

20 access to information collected as may be 

21 appropriate to monitor and ensure the 

22 quality of care provided under this part; 

23 ‘‘(ix) provide review by physicians and 

24 other health care professionals of the proc-
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1 ess followed in the provision of such health 

2 care services; 

3 ‘‘(x) provide for the establishment of 

4 written protocols for utilization review, 

5 based on current standards of medical 

6 practice; 

7 ‘‘(xi) have mechanisms to detect both 

8 underutilization and overutilization of serv9 ices; 

10 ‘‘(xii) after identifying areas for im11 provement, establish or alter practice pa12 rameters; 

13 ‘‘(xiii) take action to improve quality 

14 and assesses the effectiveness of such ac15 tion through systematic followup; and 

16 ‘‘(xiv) make available information on 

17 quality and outcomes measures to facilitate 

18 beneficiary comparison and choice of 

19 health coverage options (in such form and 

20 on such quality and outcomes measures as 

21 the Secretary determines to be appro22 priate). 

23 Such program shall include a separate focus 

24 (with respect to all the elements described in 
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1 this subparagraph) on racial and ethnic minori2 ties. 

3 ‘‘(B) ELEMENTS OF PROGRAM FOR ORGA4 NIZATIONS OFFERING MEDICAREADVANTAGE

5 PRIVATE FEE-FOR-SERVICE PLANS, AND NON6 NETWORK MSA PLANS.—The quality assurance 

7 program of an organization with respect to a 

8 MedicareAdvantage private fee-for-service plan 

9 or a nonnetwork MSA plan it offers shall—

10 ‘‘(i) meet the requirements of clauses 

11 (i) through (viii) of subparagraph (A); 

12 ‘‘(ii) insofar as it provides for the es13 tablishment of written protocols for utiliza14 tion review, base such protocols on current 

15 standards of medical practice; and 

16 ‘‘(iii) have mechanisms to evaluate 

17 utilization of services and inform providers 

18 and enrollees of the results of such evalua19 tion. 

20 Such program shall include a separate focus 

21 (with respect to all the elements described in 

22 this subparagraph) on racial and ethnic minori23 ties. 

24 ‘‘(C) DEFINITION OF NONNETWORK MSA

25 PLAN.—In this subsection, the term ‘nonnet-
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1 work MSA plan’ means an MSA plan offered by 

2 a MedicareAdvantage organization that does 

3 not provide benefits required to be provided by 

4 this part, in whole or in part, through a defined 

5 set of providers under contract, or under an6 other arrangement, with the organization. 

7 ‘‘(3) EXTERNAL REVIEW.—

8 ‘‘(A) IN GENERAL.—Each 

9 MedicareAdvantage organization shall, for each 

10 MedicareAdvantage plan it operates, have an 

11 agreement with an independent quality review 

12 and improvement organization approved by the 

13 Secretary to perform functions of the type de14 scribed in paragraphs (4)(B) and (14) of sec15 tion 1154(a) with respect to services furnished 

16 by MedicareAdvantage plans for which payment 

17 is made under this title. The previous sentence 

18 shall not apply to a MedicareAdvantage private 

19 fee-for-service plan or a nonnetwork MSA plan 

20 that does not employ utilization review. 

21 ‘‘(B) NONDUPLICATION OF ACCREDITA22 TION.—Except in the case of the review of qual23 ity complaints, and consistent with subpara24 graph (C), the Secretary shall ensure that the 

25 external review activities conducted under sub-
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1 paragraph (A) are not duplicative of review ac2 tivities conducted as part of the accreditation 

3 process. 

4 ‘‘(C) WAIVER AUTHORITY.—The Secretary 

5 may waive the requirement described in sub6 paragraph (A) in the case of an organization if 

7 the Secretary determines that the organization 

8 has consistently maintained an excellent record 

9 of quality assurance and compliance with other 

10 requirements under this part. 

11 ‘‘(4) TREATMENT OF ACCREDITATION.—

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

13 provide that a MedicareAdvantage organization 

14 is deemed to meet all the requirements de15 scribed in any specific clause of subparagraph 

16 (B) if the organization is accredited (and peri17 odically reaccredited) by a private accrediting 

18 organization under a process that the Secretary 

19 has determined assures that the accrediting or20 ganization applies and enforces standards that 

21 meet or exceed the standards established under 

22 section 1856 to carry out the requirements in 

23 such clause. 
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1 ‘‘(B) REQUIREMENTS DESCRIBED.—The 

2 provisions described in this subparagraph are 

3 the following: 

4 ‘‘(i) Paragraphs (1) and (2) of this 

5 subsection (relating to quality assurance 

6 programs). 

7 ‘‘(ii) Subsection (b) (relating to anti8 discrimination). 

9 ‘‘(iii) Subsection (d) (relating to ac10 cess to services). 

11 ‘‘(iv) Subsection (h) (relating to con12 fidentiality and accuracy of enrollee 

13 records). 

14 ‘‘(v) Subsection (i) (relating to infor15 mation on advance directives). 

16 ‘‘(vi) Subsection (j) (relating to pro17 vider participation rules). 

18 ‘‘(C) TIMELY ACTION ON APPLICATIONS.—

19 The Secretary shall determine, within 210 days 

20 after the date the Secretary receives an applica21 tion by a private accrediting organization and 

22 using the criteria specified in section 

23 1865(b)(2), whether the process of the private 

24 accrediting organization meets the requirements 

25 with respect to any specific clause in subpara-
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1 graph (B) with respect to which the application 

2 is made. The Secretary may not deny such an 

3 application on the basis that it seeks to meet 

4 the requirements with respect to only one, or 

5 more than one, such specific clause. 

6 ‘‘(D) CONSTRUCTION.—Nothing in this 

7 paragraph shall be construed as limiting the au8 thority of the Secretary under section 1857, in9 cluding the authority to terminate contracts 

10 with MedicareAdvantage organizations under 

11 subsection (c)(2) of such section. 

12 ‘‘(5) REPORT TO CONGRESS.—

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

14 submit to Congress a biennial report regarding 

15 how quality assurance programs conducted 

16 under this subsection focus on racial and ethnic 

17 minorities. 

18 ‘‘(B) CONTENTS OF REPORT.—Each such 

19 report shall include the following: 

20 ‘‘(i) A description of the means by 

21 which such programs focus on such racial 

22 and ethnic minorities. 

23 ‘‘(ii) An evaluation of the impact of 

24 such programs on eliminating health dis25 parities and on improving health outcomes, 
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1 continuity and coordination of care, man2 agement of chronic conditions, and con3 sumer satisfaction. 

4 ‘‘(iii) Recommendations on ways to re5 duce clinical outcome disparities among ra6 cial and ethnic minorities. 

7 ‘‘(f) GRIEVANCE MECHANISM.—Each 

8 MedicareAdvantage organization must provide meaningful 

9 procedures for hearing and resolving grievances between 

10 the organization (including any entity or individual 

11 through which the organization provides health care serv12 ices) and enrollees with MedicareAdvantage plans of the 

13 organization under this part. 

14 ‘‘(g) COVERAGE DETERMINATIONS, RECONSIDER15 ATIONS, AND APPEALS.—

16 ‘‘(1) DETERMINATIONS BY ORGANIZATION.—

17 ‘‘(A) IN GENERAL.—A MedicareAdvantage 

18 organization shall have a procedure for making 

19 determinations regarding whether an individual 

20 enrolled with the plan of the organization under 

21 this part is entitled to receive a health service 

22 under this section and the amount (if any) that 

23 the individual is required to pay with respect to 

24 such service. Subject to paragraph (3), such 
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1 procedures shall provide for such determination 

2 to be made on a timely basis. 

3 ‘‘(B) EXPLANATION OF DETERMINA4 TION.—Such a determination that denies cov5 erage, in whole or in part, shall be in writing 

6 and shall include a statement in understandable 

7 language of the reasons for the denial and a de8 scription of the reconsideration and appeals 

9 processes. 

10 ‘‘(2) RECONSIDERATIONS.—

11 ‘‘(A) IN GENERAL.—The organization shall 

12 provide for reconsideration of a determination 

13 described in paragraph (1)(B) upon request by 

14 the enrollee involved. The reconsideration shall 

15 be within a time period specified by the Sec16 retary, but shall be made, subject to paragraph 

17 (3), not later than 60 days after the date of the 

18 receipt of the request for reconsideration. 

19 ‘‘(B) PHYSICIAN DECISION ON CERTAIN

20 RECONSIDERATIONS.—A reconsideration relat21 ing to a determination to deny coverage based 

22 on a lack of medical necessity shall be made 

23 only by a physician with appropriate expertise 

24 in the field of medicine which necessitates treat-
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1 ment who is other than a physician involved in 

2 the initial determination. 

3 ‘‘(3) EXPEDITED DETERMINATIONS AND RE4 CONSIDERATIONS.—

5 ‘‘(A) RECEIPT OF REQUESTS.—

6 ‘‘(i) ENROLLEE REQUESTS.—An en7 rollee in a MedicareAdvantage plan may 

8 request, either in writing or orally, an ex9 pedited determination under paragraph (1) 

10 or an expedited reconsideration under 

11 paragraph (2) by the MedicareAdvantage 

12 organization. 

13 ‘‘(ii) PHYSICIAN REQUESTS.—A physi14 cian, regardless whether the physician is 

15 affiliated with the organization or not, may 

16 request, either in writing or orally, such an 

17 expedited determination or reconsideration. 

18 ‘‘(B) ORGANIZATION PROCEDURES.—

19 ‘‘(i) IN GENERAL.—The 

20 MedicareAdvantage organization shall 

21 maintain procedures for expediting organi22 zation determinations and reconsiderations 

23 when, upon request of an enrollee, the or24 ganization determines that the application 

25 of the normal timeframe for making a de-
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1 termination (or a reconsideration involving 

2 a determination) could seriously jeopardize 

3 the life or health of the enrollee or the en4 rollee’s ability to regain maximum func5 tion. 

6 ‘‘(ii) EXPEDITION REQUIRED FOR

7 PHYSICIAN REQUESTS.—In the case of a 

8 request for an expedited determination or 

9 reconsideration made under subparagraph 

10 (A)(ii), the organization shall expedite the 

11 determination or reconsideration if the re12 quest indicates that the application of the 

13 normal timeframe for making a determina14 tion (or a reconsideration involving a de15 termination) could seriously jeopardize the 

16 life or health of the enrollee or the enroll17 ee’s ability to regain maximum function. 

18 ‘‘(iii) TIMELY RESPONSE.—In cases 

19 described in clauses (i) and (ii), the organi20 zation shall notify the enrollee (and the 

21 physician involved, as appropriate) of the 

22 determination or reconsideration under 

23 time limitations established by the Sec24 retary, but not later than 72 hours of the 

25 time of receipt of the request for the deter-
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1 mination or reconsideration (or receipt of 

2 the information necessary to make the de3 termination or reconsideration), or such 

4 longer period as the Secretary may permit 

5 in specified cases. 

6 ‘‘(4) INDEPENDENT REVIEW OF CERTAIN COV7 ERAGE DENIALS.—The Secretary shall contract with 

8 an independent, outside entity to review and resolve 

9 in a timely manner reconsiderations that affirm de10 nial of coverage, in whole or in part. The provisions 

11 of section 1869(c)(5) shall apply to independent out12 side entities under contract with the Secretary under 

13 this paragraph. 

14 ‘‘(5) APPEALS.—An enrollee with a 

15 MedicareAdvantage plan of a MedicareAdvantage or16 ganization under this part who is dissatisfied by rea17 son of the enrollee’s failure to receive any health 

18 service to which the enrollee believes the enrollee is 

19 entitled and at no greater charge than the enrollee 

20 believes the enrollee is required to pay is entitled, if 

21 the amount in controversy is $100 or more, to a 

22 hearing before the Secretary to the same extent as 

23 is provided in section 205(b), and in any such hear24 ing the Secretary shall make the organization a 

25 party. If the amount in controversy is $1,000 or 
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1 more, the individual or organization shall, upon noti2 fying the other party, be entitled to judicial review 

3 of the Secretary’s final decision as provided in sec4 tion 205(g), and both the individual and the organi5 zation shall be entitled to be parties to that judicial 

6 review. In applying subsections (b) and (g) of section 

7 205 as provided in this paragraph, and in applying 

8 section 205(l) thereto, any reference therein to the 

9 Commissioner of Social Security or the Social Secu10 rity Administration shall be considered a reference 

11 to the Secretary or the Department of Health and 

12 Human Services, respectively. 

13 ‘‘(h) CONFIDENTIALITY AND ACCURACY OF EN14 ROLLEE RECORDS.—Insofar as a MedicareAdvantage or15 ganization maintains medical records or other health in16 formation regarding enrollees under this part, the 

17 MedicareAdvantage organization shall establish proce18 dures—

19 ‘‘(1) to safeguard the privacy of any individ20 ually identifiable enrollee information; 

21 ‘‘(2) to maintain such records and information 

22 in a manner that is accurate and timely; and 

23 ‘‘(3) to assure timely access of enrollees to such 

24 records and information. 
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1 ‘‘(i) INFORMATION ON ADVANCE DIRECTIVES.—Each 

2 MedicareAdvantage organization shall meet the require3 ment of section 1866(f) (relating to maintaining written 

4 policies and procedures respecting advance directives). 

5 ‘‘(j) RULES REGARDING PROVIDER PARTICIPA6 TION.—

7 ‘‘(1) PROCEDURES.—Insofar as a 

8 MedicareAdvantage organization offers benefits 

9 under a MedicareAdvantage plan through agree10 ments with physicians, the organization shall estab11 lish reasonable procedures relating to the participa12 tion (under an agreement between a physician and 

13 the organization) of physicians under such a plan. 

14 Such procedures shall include—

15 ‘‘(A) providing notice of the rules regard16 ing participation; 

17 ‘‘(B) providing written notice of participa18 tion decisions that are adverse to physicians; 

19 and 

20 ‘‘(C) providing a process within the organi21 zation for appealing such adverse decisions, in22 cluding the presentation of information and 

23 views of the physician regarding such decision. 

24 ‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A 

25 MedicareAdvantage organization shall consult with 
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1 physicians who have entered into participation 

2 agreements with the organization regarding the or3 ganization’s medical policy, quality, and medical 

4 management procedures. 

5 ‘‘(3) PROHIBITING INTERFERENCE WITH PRO6 VIDER ADVICE TO ENROLLEES.—

7 ‘‘(A) IN GENERAL.—Subject to subpara8 graphs (B) and (C), a MedicareAdvantage orga9 nization (in relation to an individual enrolled 

10 under a MedicareAdvantage plan offered by the 

11 organization under this part) shall not prohibit 

12 or otherwise restrict a covered health care pro13 fessional (as defined in subparagraph (D)) from 

14 advising such an individual who is a patient of 

15 the professional about the health status of the 

16 individual or medical care or treatment for the 

17 individual’s condition or disease, regardless of 

18 whether benefits for such care or treatment are 

19 provided under the plan, if the professional is 

20 acting within the lawful scope of practice. 

21 ‘‘(B) CONSCIENCE PROTECTION.—Sub22 paragraph (A) shall not be construed as requir23 ing a MedicareAdvantage plan to provide, reim24 burse for, or provide coverage of a counseling or 
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1 referral service if the MedicareAdvantage orga2 nization offering the plan—

3 ‘‘(i) objects to the provision of such 

4 service on moral or religious grounds; and 

5 ‘‘(ii) in the manner and through the 

6 written instrumentalities such 

7 MedicareAdvantage organization deems ap8 propriate, makes available information on 

9 its policies regarding such service to pro10 spective enrollees before or during enroll11 ment and to enrollees within 90 days after 

12 the date that the organization or plan 

13 adopts a change in policy regarding such a 

14 counseling or referral service. 

15 ‘‘(C) CONSTRUCTION.—Nothing in sub16 paragraph (B) shall be construed to affect dis17 closure requirements under State law or under 

18 the Employee Retirement Income Security Act 

19 of 1974. 

20 ‘‘(D) HEALTH CARE PROFESSIONAL DE21 FINED.—For purposes of this paragraph, the 

22 term ‘health care professional’ means a physi23 cian (as defined in section 1861(r)) or other 

24 health care professional if coverage for the pro25 fessional’s services is provided under the 
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1 MedicareAdvantage plan for the services of the 

2 professional. Such term includes a podiatrist, 

3 optometrist, chiropractor, psychologist, dentist, 

4 licensed pharmacist, physician assistant, phys5 ical or occupational therapist and therapy as6 sistant, speech-language pathologist, audiol7 ogist, registered or licensed practical nurse (in8 cluding nurse practitioner, clinical nurse spe9 cialist, certified registered nurse anesthetist, 

10 and certified nurse-midwife), licensed certified 

11 social worker, registered respiratory therapist, 

12 and certified respiratory therapy technician. 

13 ‘‘(4) LIMITATIONS ON PHYSICIAN INCENTIVE

14 PLANS.—

15 ‘‘(A) IN GENERAL.—No 

16 MedicareAdvantage organization may operate 

17 any physician incentive plan (as defined in sub18 paragraph (B)) unless the following require19 ments are met: 

20 ‘‘(i) No specific payment is made di21 rectly or indirectly under the plan to a 

22 physician or physician group as an induce23 ment to reduce or limit medically necessary 

24 services provided with respect to a specific 

25 individual enrolled with the organization. 
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1 ‘‘(ii) If the plan places a physician or 

2 physician group at substantial financial 

3 risk (as determined by the Secretary) for 

4 services not provided by the physician or 

5 physician group, the organization—

6 ‘‘(I) provides stop-loss protection 

7 for the physician or group that is ade8 quate and appropriate, based on 

9 standards developed by the Secretary 

10 that take into account the number of 

11 physicians placed at such substantial 

12 financial risk in the group or under 

13 the plan and the number of individ14 uals enrolled with the organization 

15 who receive services from the physi16 cian or group; and 

17 ‘‘(II) conducts periodic surveys of 

18 both individuals enrolled and individ19 uals previously enrolled with the orga20 nization to determine the degree of 

21 access of such individuals to services 

22 provided by the organization and sat23 isfaction with the quality of such serv24 ices. 
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1 ‘‘(iii) The organization provides the 

2 Secretary with descriptive information re3 garding the plan, sufficient to permit the 

4 Secretary to determine whether the plan is 

5 in compliance with the requirements of this 

6 subparagraph. 

7 ‘‘(B) PHYSICIAN INCENTIVE PLAN DE8 FINED.—In this paragraph, the term ‘physician 

9 incentive plan’ means any compensation ar10 rangement between a MedicareAdvantage orga11 nization and a physician or physician group 

12 that may directly or indirectly have the effect of 

13 reducing or limiting services provided with re14 spect to individuals enrolled with the organiza15 tion under this part. 

16 ‘‘(5) LIMITATION ON PROVIDER INDEMNIFICA17 TION.—A MedicareAdvantage organization may not 

18 provide (directly or indirectly) for a health care pro19 fessional, provider of services, or other entity pro20 viding health care services (or group of such profes21 sionals, providers, or entities) to indemnify the orga22 nization against any liability resulting from a civil 

23 action brought for any damage caused to an enrollee 

24 with a MedicareAdvantage plan of the organization 
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1 under this part by the organization’s denial of medi2 cally necessary care. 

3 ‘‘(6) SPECIAL RULES FOR

4 MEDICAREADVANTAGE PRIVATE FEE-FOR-SERVICE

5 PLANS.—For purposes of applying this part (includ6 ing subsection (k)(1)) and section 1866(a)(1)(O), a 

7 hospital (or other provider of services), a physician 

8 or other health care professional, or other entity fur9 nishing health care services is treated as having an 

10 agreement or contract in effect with a 

11 MedicareAdvantage organization (with respect to an 

12 individual enrolled in a MedicareAdvantage private 

13 fee-for-service plan it offers), if—

14 ‘‘(A) the provider, professional, or other 

15 entity furnishes services that are covered under 

16 the plan to such an enrollee; and 

17 ‘‘(B) before providing such services, the 

18 provider, professional, or other entity —

19 ‘‘(i) has been informed of the individ20 ual’s enrollment under the plan; and 

21 ‘‘(ii) either—

22 ‘‘(I) has been informed of the 

23 terms and conditions of payment for 

24 such services under the plan; or 
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1 ‘‘(II) is given a reasonable oppor2 tunity to obtain information con3 cerning such terms and conditions, 

4 in a manner reasonably designed to effect 

5 informed agreement by a provider. 

6 The previous sentence shall only apply in the ab7 sence of an explicit agreement between such a pro8 vider, professional, or other entity and the 

9 MedicareAdvantage organization. 

10 ‘‘(k) TREATMENT OF SERVICES FURNISHED BY CER11 TAIN PROVIDERS.—

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graph (2), a physician or other entity (other than a 

14 provider of services) that does not have a contract 

15 establishing payment amounts for services furnished 

16 to an individual enrolled under this part with a 

17 MedicareAdvantage organization described in section 

18 1851(a)(2)(A) shall accept as payment in full for 

19 covered services under this title that are furnished to 

20 such an individual the amounts that the physician or 

21 other entity could collect if the individual were not 

22 so enrolled. Any penalty or other provision of law 

23 that applies to such a payment with respect to an 

24 individual entitled to benefits under this title (but 

25 not enrolled with a MedicareAdvantage organization 
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1 under this part) also applies with respect to an indi2 vidual so enrolled. 

3 ‘‘(2) APPLICATION TO MEDICAREADVANTAGE

4 PRIVATE FEE-FOR-SERVICE PLANS.—

5 ‘‘(A) BALANCE BILLING LIMITS UNDER

6 MEDICAREADVANTAGE PRIVATE FEE-FOR-SERV7 ICE PLANS IN CASE OF CONTRACT PRO8 VIDERS.—

9 ‘‘(i) IN GENERAL.—In the case of an 

10 individual enrolled in a MedicareAdvantage 

11 private fee-for-service plan under this part, 

12 a physician, provider of services, or other 

13 entity that has a contract (including 

14 through the operation of subsection (j)(6)) 

15 establishing a payment rate for services 

16 furnished to the enrollee shall accept as 

17 payment in full for covered services under 

18 this title that are furnished to such an in19 dividual an amount not to exceed (includ20 ing any deductibles, coinsurance, copay21 ments, or balance billing otherwise per22 mitted under the plan) an amount equal to 

23 115 percent of such payment rate. 

24 ‘‘(ii) PROCEDURES TO ENFORCE LIM25 ITS.—The MedicareAdvantage organization 
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1 that offers such a plan shall establish pro2 cedures, similar to the procedures de3 scribed in section 1848(g)(1)(A), in order 

4 to carry out clause (i). 

5 ‘‘(iii) ASSURING ENFORCEMENT.—If 

6 the MedicareAdvantage organization fails 

7 to establish and enforce procedures re8 quired under clause (ii), the organization is 

9 subject to intermediate sanctions under 

10 section 1857(g). 

11 ‘‘(B) ENROLLEE LIABILITY FOR NONCON12 TRACT PROVIDERS.—For provisions—

13 ‘‘(i) establishing a minimum payment 

14 rate in the case of noncontract providers 

15 under a MedicareAdvantage private fee16 for-service plan, see section 1852(a)(2); or 

17 ‘‘(ii) limiting enrollee liability in the 

18 case of covered services furnished by such 

19 providers, see paragraph (1) and section 

20 1866(a)(1)(O). 

21 ‘‘(C) INFORMATION ON BENEFICIARY LI22 ABILITY.—

23 ‘‘(i) IN GENERAL.—Each 

24 MedicareAdvantage organization that of25 fers a MedicareAdvantage private fee-for-
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1 service plan shall provide that enrollees 

2 under the plan who are furnished services 

3 for which payment is sought under the 

4 plan are provided an appropriate expla5 nation of benefits (consistent with that 

6 provided under parts A, B, and D, and, if 

7 applicable, under medicare supplemental 

8 policies) that includes a clear statement of 

9 the amount of the enrollee’s liability (in10 cluding any liability for balance billing con11 sistent with this subsection) with respect to 

12 payments for such services. 

13 ‘‘(ii) ADVANCE NOTICE BEFORE RE14 CEIPT OF INPATIENT HOSPITAL SERVICES

15 AND CERTAIN OTHER SERVICES.—In addi16 tion, such organization shall, in its terms 

17 and conditions of payments to hospitals for 

18 inpatient hospital services and for other 

19 services identified by the Secretary for 

20 which the amount of the balance billing 

21 under subparagraph (A) could be substan22 tial, require the hospital to provide to the 

23 enrollee, before furnishing such services 

24 and if the hospital imposes balance billing 

25 under subparagraph (A)—
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1 ‘‘(I) notice of the fact that bal2 ance billing is permitted under such 

3 subparagraph for such services; and 

4 ‘‘(II) a good faith estimate of the 

5 likely amount of such balance billing 

6 (if any), with respect to such services, 

7 based upon the presenting condition 

8 of the enrollee. 

9 ‘‘(l) RETURN TO HOME SKILLED NURSING FACILI10 TIES FOR COVERED POST-HOSPITAL EXTENDED CARE

11 SERVICES.—

12 ‘‘(1) ENSURING RETURN TO HOME SNF.—

13 ‘‘(A) IN GENERAL.—In providing coverage 

14 of post-hospital extended care services, a 

15 MedicareAdvantage plan shall provide for such 

16 coverage through a home skilled nursing facility 

17 if the following conditions are met: 

18 ‘‘(i) ENROLLEE ELECTION.—The en19 rollee elects to receive such coverage 

20 through such facility. 

21 ‘‘(ii) SNF AGREEMENT.—The facility 

22 has a contract with the MedicareAdvantage 

23 organization for the provision of such serv24 ices, or the facility agrees to accept sub25 stantially similar payment under the same 
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1 terms and conditions that apply to simi2 larly situated skilled nursing facilities that 

3 are under contract with the 

4 MedicareAdvantage organization for the 

5 provision of such services and through 

6 which the enrollee would otherwise receive 

7 such services. 

8 ‘‘(B) MANNER OF PAYMENT TO HOME

9 SNF.—The organization shall provide payment 

10 to the home skilled nursing facility consistent 

11 with the contract or the agreement described in 

12 subparagraph (A)(ii), as the case may be. 

13 ‘‘(2) NO LESS FAVORABLE COVERAGE.—The 

14 coverage provided under paragraph (1) (including 

15 scope of services, cost-sharing, and other criteria of 

16 coverage) shall be no less favorable to the enrollee 

17 than the coverage that would be provided to the en18 rollee with respect to a skilled nursing facility the 

19 post-hospital extended care services of which are 

20 otherwise covered under the MedicareAdvantage 

21 plan. 

22 ‘‘(3) RULE OF CONSTRUCTION.—Nothing in 

23 this subsection shall be construed to do the fol24 lowing: 
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1 ‘‘(A) To require coverage through a skilled 

2 nursing facility that is not otherwise qualified 

3 to provide benefits under part A for medicare 

4 beneficiaries not enrolled in a 

5 MedicareAdvantage plan. 

6 ‘‘(B) To prevent a skilled nursing facility 

7 from refusing to accept, or imposing conditions 

8 upon the acceptance of, an enrollee for the re9 ceipt of post-hospital extended care services. 

10 ‘‘(4) DEFINITIONS.—In this subsection: 

11 ‘‘(A) HOME SKILLED NURSING FACIL12 ITY.—The term ‘home skilled nursing facility’ 

13 means, with respect to an enrollee who is enti14 tled to receive post-hospital extended care serv15 ices under a MedicareAdvantage plan, any of 

16 the following skilled nursing facilities: 

17 ‘‘(i) SNF RESIDENCE AT TIME OF AD18 MISSION.—The skilled nursing facility in 

19 which the enrollee resided at the time of 

20 admission to the hospital preceding the re21 ceipt of such post-hospital extended care 

22 services. 

23 ‘‘(ii) SNF IN CONTINUING CARE RE24 TIREMENT COMMUNITY.—A skilled nursing 

25 facility that is providing such services 
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1 through a continuing care retirement com2 munity (as defined in subparagraph (B)) 

3 which provided residence to the enrollee at 

4 the time of such admission. 

5 ‘‘(iii) SNF RESIDENCE OF SPOUSE AT

6 TIME OF DISCHARGE.—The skilled nursing 

7 facility in which the spouse of the enrollee 

8 is residing at the time of discharge from 

9 such hospital. 

10 ‘‘(B) CONTINUING CARE RETIREMENT

11 COMMUNITY.—The term ‘continuing care retire12 ment community’ means, with respect to an en13 rollee in a MedicareAdvantage plan, an arrange14 ment under which housing and health-related 

15 services are provided (or arranged) through an 

16 organization for the enrollee under an agree17 ment that is effective for the life of the enrollee 

18 or for a specified period.’’. 

19 SEC. 203. PAYMENTS TO MEDICAREADVANTAGE ORGANIZA20 TIONS. 

21 Section 1853 (42 U.S.C. 1395w–23) is amended to 

22 read as follows: 

23 ‘‘PAYMENTS TO MEDICAREADVANTAGE ORGANIZATIONS

24 ‘‘SEC. 1853. (a) PAYMENTS TO ORGANIZATIONS.—

25 ‘‘(1) MONTHLY PAYMENTS.—
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1 ‘‘(A) IN GENERAL.—Under a contract 

2 under section 1857 and subject to subsections 

3 (f), (h), and (j) and section 1859(e)(4), the Sec4 retary shall make, to each MedicareAdvantage 

5 organization, with respect to coverage of an in6 dividual for a month under this part in a 

7 MedicareAdvantage payment area, separate 

8 monthly payments with respect to— 

9 ‘‘(i) benefits under the original medi10 care fee-for-service program under parts A 

11 and B in accordance with subsection (d); 

12 and 

13 ‘‘(ii) benefits under the voluntary pre14 scription drug program under part D in 

15 accordance with section 1858A and the 

16 other provisions of this part. 

17 ‘‘(B) SPECIAL RULE FOR END-STAGE

18 RENAL DISEASE.—The Secretary shall establish 

19 separate rates of payment to a 

20 MedicareAdvantage organization with respect to 

21 classes of individuals determined to have end22 stage renal disease and enrolled in a 

23 MedicareAdvantage plan of the organization. 

24 Such rates of payment shall be actuarially 

25 equivalent to rates paid to other enrollees in the 
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1 MedicareAdvantage payment area (or such 

2 other area as specified by the Secretary). In ac3 cordance with regulations, the Secretary shall 

4 provide for the application of the seventh sen5 tence of section 1881(b)(7) to payments under 

6 this section covering the provision of renal di7 alysis treatment in the same manner as such 

8 sentence applies to composite rate payments de9 scribed in such sentence. In establishing such 

10 rates, the Secretary shall provide for appro11 priate adjustments to increase each rate to re12 flect the demonstration rate (including the risk 

13 adjustment methodology associated with such 

14 rate) of the social health maintenance organiza15 tion end-stage renal disease capitation dem16 onstrations (established by section 2355 of the 

17 Deficit Reduction Act of 1984, as amended by 

18 section 13567(b) of the Omnibus Budget Rec19 onciliation Act of 1993), and shall compute 

20 such rates by taking into account such factors 

21 as renal treatment modality, age, and the un22 derlying cause of the end-stage renal disease. 

23 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF

24 ENROLLEES.—
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1 ‘‘(A) IN GENERAL.—The amount of pay2 ment under this subsection may be retroactively 

3 adjusted to take into account any difference be4 tween the actual number of individuals enrolled 

5 with an organization under this part and the 

6 number of such individuals estimated to be so 

7 enrolled in determining the amount of the ad8 vance payment. 

9 ‘‘(B) SPECIAL RULE FOR CERTAIN EN10 ROLLEES.—

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

12 (ii), the Secretary may make retroactive 

13 adjustments under subparagraph (A) to 

14 take into account individuals enrolled dur15 ing the period beginning on the date on 

16 which the individual enrolls with a 

17 MedicareAdvantage organization under a 

18 plan operated, sponsored, or contributed to 

19 by the individual’s employer or former em20 ployer (or the employer or former employer 

21 of the individual’s spouse) and ending on 

22 the date on which the individual is enrolled 

23 in the organization under this part, except 

24 that for purposes of making such retro25 active adjustments under this subpara-
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1 graph, such period may not exceed 90 

2 days. 

3 ‘‘(ii) EXCEPTION.—No adjustment 

4 may be made under clause (i) with respect 

5 to any individual who does not certify that 

6 the organization provided the individual 

7 with the disclosure statement described in 

8 section 1852(c) at the time the individual 

9 enrolled with the organization. 

10 ‘‘(C) EQUALIZATION OF FEDERAL CON11 TRIBUTION.—In applying subparagraph (A), 

12 the Secretary shall ensure that the payment to 

13 the MedicareAdvantage organization for each 

14 individual enrolled with the organization shall 

15 equal the MedicareAdvantage benchmark 

16 amount for the payment area in which that in17 dividual resides (as determined under para18 graph (4)), as adjusted—

19 ‘‘(i) by multiplying the benchmark 

20 amount for that payment area by the ratio 

21 of—

22 ‘‘(I) the payment amount deter23 mined under subsection (d)(4); to 
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1 ‘‘(II) the weighted service area 

2 benchmark amount determined under 

3 subsection (d)(2); and 

4 ‘‘(ii) using such risk adjustment fac5 tor as specified by the Secretary under 

6 subsection (b)(1)(B). 

7 ‘‘(3) COMPREHENSIVE RISK ADJUSTMENT

8 METHODOLOGY.—

9 ‘‘(A) APPLICATION OF METHODOLOGY.—

10 The Secretary shall apply the comprehensive 

11 risk adjustment methodology described in sub12 paragraph (B) to 100 percent of the amount of 

13 payments to plans under subsection (d)(4)(B). 

14 ‘‘(B) COMPREHENSIVE RISK ADJUSTMENT

15 METHODOLOGY DESCRIBED.—The comprehen16 sive risk adjustment methodology described in 

17 this subparagraph is the risk adjustment meth18 odology that would apply with respect to 

19 MedicareAdvantage plans offered by 

20 MedicareAdvantage organizations in 2005, ex21 cept that if such methodology does not apply to 

22 groups of beneficiaries who are aged or disabled 

23 and groups of beneficiaries who have end-stage 

24 renal disease, the Secretary shall revise such 

25 methodology to apply to such groups. 
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1 ‘‘(C) UNIFORM APPLICATION TO ALL

2 TYPES OF PLANS.—Subject to section 

3 1859(e)(4), the comprehensive risk adjustment 

4 methodology established under this paragraph 

5 shall be applied uniformly without regard to the 

6 type of plan. 

7 ‘‘(D) DATA COLLECTION.—In order to 

8 carry out this paragraph, the Secretary shall re9 quire MedicareAdvantage organizations to sub10 mit such data and other information as the Sec11 retary deems necessary. 

12 ‘‘(E) IMPROVEMENT OF PAYMENT ACCU13 RACY.—Notwithstanding any other provision of 

14 this paragraph, the Secretary may revise the 

15 comprehensive risk adjustment methodology de16 scribed in subparagraph (B) from time to time 

17 to improve payment accuracy. 

18 ‘‘(4) ANNUAL CALCULATION OF BENCHMARK

19 AMOUNTS.—For each year, the Secretary shall cal20 culate a benchmark amount for each 

21 MedicareAdvantage payment area for each month 

22 for such year with respect to coverage of the benefits 

23 available under the original medicare fee-for-service 

24 program option equal to the greater of the following 

25 amounts (adjusted as appropriate for the application 
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1 of the risk adjustment methodology under paragraph 

2 (3)): 

‘‘(A) MINIMUM AMOUNT.—1 3 ⁄12 of the an4 nual Medicare+Choice capitation rate deter5 mined under subsection (c)(1)(B) for the pay6 ment area for the year. 

7 ‘‘(B) LOCAL FEE-FOR-SERVICE RATE.—

8 The local fee-for-service rate for such area for 

9 the year (as calculated under paragraph (5)). 

10 ‘‘(5) ANNUAL CALCULATION OF LOCAL FEE11 FOR-SERVICE RATES.—

12 ‘‘(A) IN GENERAL.—Subject to subpara13 graph (B), the term ‘local fee-for-service rate’ 

14 means the amount of payment for a month in 

15 a MedicareAdvantage payment area for benefits 

16 under this title and associated claims processing 

17 costs for an individual who has elected to re18 ceive benefits under the original medicare fee19 for-service program option and not enrolled in 

20 a MedicareAdvantage plan under this part. The 

21 Secretary shall annually calculate such amount 

22 in a manner similar to the manner in which the 

23 Secretary calculated the adjusted average per 

24 capita cost under section 1876. 
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1 ‘‘(B) REMOVAL OF MEDICAL EDUCATION

2 COSTS FROM CALCULATION OF LOCAL FEE-FOR3 SERVICE RATE.—

4 ‘‘(i) IN GENERAL.—In calculating the 

5 local fee-for-service rate under subpara6 graph (A) for a year, the amount of pay7 ment described in such subparagraph shall 

8 be adjusted to exclude from such payment 

9 the payment adjustments described in 

10 clause (ii). 

11 ‘‘(ii) PAYMENT ADJUSTMENTS DE12 SCRIBED.—

13 ‘‘(I) IN GENERAL.—Subject to 

14 subclause (II), the payment adjust15 ments described in this subparagraph 

16 are payment adjustments which the 

17 Secretary estimates are payable dur18 ing the year—

19 ‘‘(aa) for the indirect costs 

20 of medical education under sec21 tion 1886(d)(5)(B); and 

22 ‘‘(bb) for direct graduate 

23 medical education costs under 

24 section 1886(h). 
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1 ‘‘(II) TREATMENT OF PAYMENTS

2 COVERED UNDER STATE HOSPITAL

3 REIMBURSEMENT SYSTEM.—To the 

4 extent that the Secretary estimates 

5 that the amount of the local fee-for6 service rates reflects payments to hos7 pitals reimbursed under section 

8 1814(b)(3), the Secretary shall esti9 mate a payment adjustment that is 

10 comparable to the payment adjust11 ment that would have been made 

12 under clause (i) if the hospitals had 

13 not been reimbursed under such sec14 tion. 

15 ‘‘(b) ANNUAL ANNOUNCEMENT OF PAYMENT FAC16 TORS.—

17 ‘‘(1) ANNUAL ANNOUNCEMENT.—Beginning in 

18 2005, at the same time as the Secretary publishes 

19 the risk adjusters under section 1860D–11, the Sec20 retary shall annually announce (in a manner in21 tended to provide notice to interested parties) the 

22 following payment factors: 

23 ‘‘(A) The benchmark amount for each 

24 MedicareAdvantage payment area (as calculated 

25 under subsection (a)(4)) for the year. 
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1 ‘‘(B) The factors to be used for adjusting 

2 payments under the comprehensive risk adjust3 ment methodology described in subsection 

4 (a)(3)(B) with respect to each 

5 MedicareAdvantage payment area for the year. 

6 ‘‘(2) ADVANCE NOTICE OF METHODOLOGICAL

7 CHANGES.—At least 45 days before making the an8 nouncement under paragraph (1) for a year, the 

9 Secretary shall—

10 ‘‘(A) provide for notice to 

11 MedicareAdvantage organizations of proposed 

12 changes to be made in the methodology from 

13 the methodology and assumptions used in the 

14 previous announcement; and 

15 ‘‘(B) provide such organizations with an 

16 opportunity to comment on such proposed 

17 changes. 

18 ‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each 

19 announcement made under paragraph (1), the Sec20 retary shall include an explanation of the assump21 tions and changes in methodology used in the an22 nouncement in sufficient detail so that 

23 MedicareAdvantage organizations can compute each 

24 payment factor described in paragraph (1). 
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1 ‘‘(c) CALCULATION OF ANNUAL MEDICARE+CHOICE

2 CAPITATION RATES.—

3 ‘‘(1) IN GENERAL.—For purposes of making 

4 payments under this part for years before 2006 and 

5 for purposes of calculating the annual 

6 Medicare+Choice capitation rates under paragraph 

7 (7) beginning with such year, subject to paragraph 

8 (6)(C), each annual Medicare+Choice capitation 

9 rate, for a Medicare+Choice payment area before 

10 2006 or a MedicareAdvantage payment area begin11 ning with such year for a contract year consisting of 

12 a calendar year, is equal to the largest of the 

13 amounts specified in the following subparagraph (A), 

14 (B), or (C): 

15 ‘‘(A) BLENDED CAPITATION RATE.—The 

16 sum of—

17 ‘‘(i) the area-specific percentage (as 

18 specified under paragraph (2) for the year) 

19 of the annual area-specific 

20 Medicare+Choice capitation rate for the 

21 MedicareAdvantage payment area, as de22 termined under paragraph (3) for the year; 

23 and 

24 ‘‘(ii) the national percentage (as speci25 fied under paragraph (2) for the year) of 
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1 the input-price-adjusted annual national 

2 Medicare+Choice capitation rate, as deter3 mined under paragraph (4) for the year, 

4 multiplied by the budget neutrality adjustment 

5 factor determined under paragraph (5). 

6 ‘‘(B) MINIMUM AMOUNT.—12 multiplied 

7 by the following amount: 

8 ‘‘(i) For 1998, $367 (but not to ex9 ceed, in the case of an area outside the 50 

10 States and the District of Columbia, 150 

11 percent of the annual per capita rate of 

12 payment for 1997 determined under sec13 tion 1876(a)(1)(C) for the area). 

14 ‘‘(ii) For 1999 and 2000, the min15 imum amount determined under clause (i) 

16 or this clause, respectively, for the pre17 ceding year, increased by the national per 

18 capita Medicare+Choice growth percentage 

19 described in paragraph (6)(A) applicable to 

20 1999 or 2000, respectively. 

21 ‘‘(iii)(I) Subject to subclause (II), for 

22 2001, for any area in a Metropolitan Sta23 tistical Area with a population of more 

24 than 250,000, $525, and for any other 

25 area $475. 
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1 ‘‘(II) In the case of an area outside 

2 the 50 States and the District of Colum3 bia, the amount specified in this clause 

4 shall not exceed 120 percent of the amount 

5 determined under clause (ii) for such area 

6 for 2000. 

7 ‘‘(iv) For 2002 through 2013, the 

8 minimum amount specified in this clause 

9 (or clause (iii)) for the preceding year in10 creased by the national per capita 

11 Medicare+Choice growth percentage, de12 scribed in paragraph (6)(A) for that suc13 ceeding year. 

14 ‘‘(v) For 2014 and each succeeding 

15 year, the minimum amount specified in 

16 this clause (or clause (iv)) for the pre17 ceding year increased by the percentage in18 crease in the Consumer Price Index for all 

19 urban consumers (U.S. urban average) for 

20 the 12-month period ending with June of 

21 the previous year. 

22 ‘‘(C) MINIMUM PERCENTAGE INCREASE.—

23 ‘‘(i) For 1998, 102 percent of the an24 nual per capita rate of payment for 1997 
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1 determined under section 1876(a)(1)(C) 

2 for the Medicare+Choice payment area. 

3 ‘‘(ii) For 1999 and 2000, 102 percent 

4 of the annual Medicare+Choice capitation 

5 rate under this paragraph for the area for 

6 the previous year. 

7 ‘‘(iii) For 2001, 103 percent of the 

8 annual Medicare+Choice capitation rate 

9 under this paragraph for the area for 

10 2000. 

11 ‘‘(iv) For 2002, 2003, and 2004, 102 

12 percent of the annual Medicare+Choice 

13 capitation rate under this paragraph for 

14 the area for the previous year. 

15 ‘‘(v) For 2005, 103 percent of the an16 nual Medicare+Choice capitation rate 

17 under this paragraph for the area for 

18 2003. 

19 ‘‘(vi) For 2006 and each succeeding 

20 year, 102 percent of the annual 

21 Medicare+Choice capitation rate under 

22 this paragraph for the area for the pre23 vious year, except that such rate shall be 

24 determined by substituting ‘102’ for ‘103’ 

25 in clause (v). 
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1 ‘‘(2) AREA-SPECIFIC AND NATIONAL PERCENT2 AGES.—For purposes of paragraph (1)(A)—

3 ‘‘(A) for 1998, the ‘area-specific percent4 age’ is 90 percent and the ‘national percentage’ 

5 is 10 percent; 

6 ‘‘(B) for 1999, the ‘area-specific percent7 age’ is 82 percent and the ‘national percentage’ 

8 is 18 percent; 

9 ‘‘(C) for 2000, the ‘area-specific percent10 age’ is 74 percent and the ‘national percentage’ 

11 is 26 percent; 

12 ‘‘(D) for 2001, the ‘area-specific percent13 age’ is 66 percent and the ‘national percentage’ 

14 is 34 percent; 

15 ‘‘(E) for 2002, the ‘area-specific percent16 age’ is 58 percent and the ‘national percentage’ 

17 is 42 percent; and 

18 ‘‘(F) for a year after 2002, the ‘area-spe19 cific percentage’ is 50 percent and the ‘national 

20 percentage’ is 50 percent. 

21 ‘‘(3) ANNUAL AREA-SPECIFIC

22 MEDICARE+CHOICE CAPITATION RATE.—

23 ‘‘(A) IN GENERAL.—For purposes of para24 graph (1)(A), subject to subparagraph (B), the 

25 annual area-specific Medicare+Choice capita-
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1 tion rate for a Medicare+Choice payment 

2 area—

3 ‘‘(i) for 1998 is, subject to subpara4 graph (D), the annual per capita rate of 

5 payment for 1997 determined under sec6 tion 1876(a)(1)(C) for the area, increased 

7 by the national per capita 

8 Medicare+Choice growth percentage for 

9 1998 (described in paragraph (6)(A)); or 

10 ‘‘(ii) for a subsequent year is the an11 nual area-specific Medicare+Choice capita12 tion rate for the previous year determined 

13 under this paragraph for the area, in14 creased by the national per capita 

15 Medicare+Choice growth percentage for 

16 such subsequent year. 

17 ‘‘(B) REMOVAL OF MEDICAL EDUCATION

18 FROM CALCULATION OF ADJUSTED AVERAGE

19 PER CAPITA COST.—

20 ‘‘(i) IN GENERAL.—In determining 

21 the area-specific Medicare+Choice capita22 tion rate under subparagraph (A) for a 

23 year (beginning with 1998), the annual per 

24 capita rate of payment for 1997 deter25 mined under section 1876(a)(1)(C) shall be 
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1 adjusted to exclude from the rate the ap2 plicable percent (specified in clause (ii)) of 

3 the payment adjustments described in sub4 paragraph (C). 

5 ‘‘(ii) APPLICABLE PERCENT.—For 

6 purposes of clause (i), the applicable per7 cent for—

8 ‘‘(I) 1998 is 20 percent; 

9 ‘‘(II) 1999 is 40 percent; 

10 ‘‘(III) 2000 is 60 percent; 

11 ‘‘(IV) 2001 is 80 percent; and 

12 ‘‘(V) a succeeding year is 100 

13 percent. 

14 ‘‘(C) PAYMENT ADJUSTMENT.—

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

16 (ii), the payment adjustments described in 

17 this subparagraph are payment adjust18 ments which the Secretary estimates were 

19 payable during 1997—

20 ‘‘(I) for the indirect costs of med21 ical education under section 

22 1886(d)(5)(B); and 

23 ‘‘(II) for direct graduate medical 

24 education costs under section 

25 1886(h). 
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1 ‘‘(ii) TREATMENT OF PAYMENTS COV2 ERED UNDER STATE HOSPITAL REIM3 BURSEMENT SYSTEM.—To the extent that 

4 the Secretary estimates that an annual per 

5 capita rate of payment for 1997 described 

6 in clause (i) reflects payments to hospitals 

7 reimbursed under section 1814(b)(3), the 

8 Secretary shall estimate a payment adjust9 ment that is comparable to the payment 

10 adjustment that would have been made 

11 under clause (i) if the hospitals had not 

12 been reimbursed under such section. 

13 ‘‘(D) TREATMENT OF AREAS WITH HIGHLY

14 VARIABLE PAYMENT RATES.—In the case of a 

15 Medicare+Choice payment area for which the 

16 annual per capita rate of payment determined 

17 under section 1876(a)(1)(C) for 1997 varies by 

18 more than 20 percent from such rate for 1996, 

19 for purposes of this subsection the Secretary 

20 may substitute for such rate for 1997 a rate 

21 that is more representative of the costs of the 

22 enrollees in the area. 

23 ‘‘(4) INPUT-PRICE-ADJUSTED ANNUAL NA24 TIONAL MEDICARE+CHOICE CAPITATION RATE.—
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1 ‘‘(A) IN GENERAL.—For purposes of para2 graph (1)(A), the input-price-adjusted annual 

3 national Medicare+Choice capitation rate for a 

4 Medicare+Choice payment area for a year is 

5 equal to the sum, for all the types of medicare 

6 services (as classified by the Secretary), of the 

7 product (for each such type of service) of—

8 ‘‘(i) the national standardized annual 

9 Medicare+Choice capitation rate (deter10 mined under subparagraph (B)) for the 

11 year; 

12 ‘‘(ii) the proportion of such rate for 

13 the year which is attributable to such type 

14 of services; and 

15 ‘‘(iii) an index that reflects (for that 

16 year and that type of services) the relative 

17 input price of such services in the area 

18 compared to the national average input 

19 price of such services. 

20 In applying clause (iii), the Secretary may, sub21 ject to subparagraph (C), apply those indices 

22 under this title that are used in applying (or 

23 updating) national payment rates for specific 

24 areas and localities. 
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1 ‘‘(B) NATIONAL STANDARDIZED ANNUAL

2 MEDICARE+CHOICE CAPITATION RATE.—In 

3 subparagraph (A)(i), the ‘national standardized 

4 annual Medicare+Choice capitation rate’ for a 

5 year is equal to—

6 ‘‘(i) the sum (for all Medicare+Choice 

7 payment areas) of the product of—

8 ‘‘(I) the annual area-specific 

9 Medicare+Choice capitation rate for 

10 that year for the area under para11 graph (3); and 

12 ‘‘(II) the average number of 

13 medicare beneficiaries residing in that 

14 area in the year, multiplied by the av15 erage of the risk factor weights used 

16 to adjust payments under subsection 

17 (a)(1)(A) for such beneficiaries in 

18 such area; divided by 

19 ‘‘(ii) the sum of the products de20 scribed in clause (i)(II) for all areas for 

21 that year. 

22 ‘‘(5) PAYMENT ADJUSTMENT BUDGET NEU23 TRALITY FACTOR.—For purposes of paragraph 

24 (1)(A), for each year, the Secretary shall determine 

25 a budget neutrality adjustment factor so that the 
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1 aggregate of the payments under this part (other 

2 than those attributable to subsections (a)(3)(C)(iii) 

3 and (i)) shall equal the aggregate payments that 

4 would have been made under this part if payment 

5 were based entirely on area-specific capitation rates. 

6 ‘‘(6) NATIONAL PER CAPITA

7 MEDICARE+CHOICE GROWTH PERCENTAGE DE8 FINED.—

9 ‘‘(A) IN GENERAL.—In this part, the ‘na10 tional per capita Medicare+Choice growth per11 centage’ for a year is the percentage determined 

12 by the Secretary, by March 1st before the be13 ginning of the year involved, to reflect the Sec14 retary’s estimate of the projected per capita 

15 rate of growth in expenditures under this title 

16 for an individual entitled to (or enrolled for) 

17 benefits under part A and enrolled under part 

18 B, reduced by the number of percentage points 

19 specified in subparagraph (B) for the year. Sep20 arate determinations may be made for aged en21 rollees, disabled enrollees, and enrollees with 

22 end-stage renal disease. 

23 ‘‘(B) ADJUSTMENT.—The number of per24 centage points specified in this subparagraph 

25 is—
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1 ‘‘(i) for 1998, 0.8 percentage points; 

2 ‘‘(ii) for 1999, 0.5 percentage points; 

3 ‘‘(iii) for 2000, 0.5 percentage points; 

4 ‘‘(iv) for 2001, 0.5 percentage points; 

5 ‘‘(v) for 2002, 0.3 percentage points; 

6 and 

7 ‘‘(vi) for a year after 2002, 0 percent8 age points. 

9 ‘‘(C) ADJUSTMENT FOR OVER OR UNDER

10 PROJECTION OF NATIONAL PER CAPITA

11 MEDICARE+CHOICE GROWTH PERCENTAGE.—

12 Beginning with rates calculated for 1999, be13 fore computing rates for a year as described in 

14 paragraph (1), the Secretary shall adjust all 

15 area-specific and national Medicare+Choice 

16 capitation rates (and beginning in 2000, the 

17 minimum amount) for the previous year for the 

18 differences between the projections of the na19 tional per capita Medicare+Choice growth per20 centage for that year and previous years and 

21 the current estimate of such percentage for 

22 such years. 

23 ‘‘(7) TRANSITION TO MEDICAREADVANTAGE

24 COMPETITION.—
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1 ‘‘(A) IN GENERAL.—For each year (begin2 ning with 2006) payments to 

3 MedicareAdvantage plans shall not be computed 

4 under this subsection, but instead shall be 

5 based on the payment amount determined 

6 under subsection (d). 

7 ‘‘(B) CONTINUED CALCULATION OF CAPI8 TATION RATES.—For each year (beginning with 

9 2006) the Secretary shall calculate and publish 

10 the annual Medicare+Choice capitation rates 

11 under this subsection and shall use the annual 

12 Medicare+Choice capitation rate determined 

13 under subsection (c)(1) for purposes of deter14 mining the benchmark amount under subsection 

15 (a)(4). 

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

17 AMOUNT.—

18 ‘‘(1) REVIEW OF PLAN BIDS.—The Secretary 

19 shall review each plan bid submitted under section 

20 1854(a) for the coverage of benefits under the origi21 nal medicare fee-for-service program option to en22 sure that such bids are consistent with the require23 ments under this part an are based on the assump24 tions described in section 1854(a)(2)(A)(iii). 
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1 ‘‘(2) DETERMINATION OF WEIGHTED SERVICE

2 AREA BENCHMARK AMOUNTS.—The Secretary shall 

3 calculate a weighted service area benchmark amount 

4 for the benefits under the original medicare fee-for5 service program option for each plan equal to the 

6 weighted average of the benchmark amounts for 

7 benefits under such original medicare fee-for-service 

8 program option for the payment areas included in 

9 the service area of the plan using the assumptions 

10 described in section 1854(a)(2)(A)(iii). 

11 ‘‘(3) COMPARISON TO BENCHMARK.—The Sec12 retary shall determine the difference between each 

13 plan bid (as adjusted under paragraph (1)) and the 

14 weighted service area benchmark amount (as deter15 mined under paragraph (2)) for purposes of deter16 mining—

17 ‘‘(A) the payment amount under para18 graph (4); and 

19 ‘‘(B) the additional benefits required and 

20 MedicareAdvantage monthly basic beneficiary 

21 premiums. 

22 ‘‘(4) DETERMINATION OF PAYMENT AMOUNT

23 FOR ORIGINAL MEDICARE FEE-FOR-SERVICE BENE24 FITS.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the Secretary shall determine the 

3 payment amount for MedicareAdvantage plans 

4 for the benefits under the original medicare fee5 for-service program option as follows: 

6 ‘‘(i) BIDS THAT EQUAL OR EXCEED

7 THE BENCHMARK.—In the case of a plan 

8 bid that equals or exceeds the weighted 

9 service area benchmark amount, the 

10 amount of each monthly payment to a 

11 MedicareAdvantage organization with re12 spect to each individual enrolled in a plan 

13 shall be the weighted service area bench14 mark amount. 

15 ‘‘(ii) BIDS BELOW THE BENCH16 MARK.—In the case of a plan bid that is 

17 less than the weighted service area bench18 mark amount, the amount of each monthly 

19 payment to a MedicareAdvantage organiza20 tion with respect to each individual en21 rolled in a plan shall be the weighted serv22 ice area benchmark amount reduced by the 

23 amount of any premium reduction elected 

24 by the plan under section 1854(d)(1)(A)(i). 
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1 ‘‘(B) APPLICATION OF COMPREHENSIVE

2 RISK ADJUSTMENT METHODOLOGY.—The Sec3 retary shall adjust the amounts determined 

4 under subparagraph (A) using the comprehen5 sive risk adjustment methodology applicable 

6 under subsection (a)(3). 

7 ‘‘(6) ADJUSTMENT FOR NATIONAL COVERAGE

8 DETERMINATIONS AND LEGISLATIVE CHANGES IN

9 BENEFITS.—If the Secretary makes a determination 

10 with respect to coverage under this title or there is 

11 a change in benefits required to be provided under 

12 this part that the Secretary projects will result in a 

13 significant increase in the costs to 

14 MedicareAdvantage organizations of providing bene15 fits under contracts under this part (for periods 

16 after any period described in section 1852(a)(5)), 

17 the Secretary shall appropriately adjust the bench18 mark amounts or payment amounts (as determined 

19 by the Secretary). Such projection and adjustment 

20 shall be based on an analysis by the Secretary of the 

21 actuarial costs associated with the new benefits. 

22 ‘‘(7) BENEFITS UNDER THE ORIGINAL MEDI23 CARE FEE-FOR-SERVICE PROGRAM OPTION DE24 FINED.—For purposes of this part, the term ‘bene25 fits under the original medicare fee-for-service pro-
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1 gram option’ means those items and services (other 

2 than hospice care) for which benefits are available 

3 under parts A and B to individuals entitled to, or 

4 enrolled for, benefits under part A and enrolled 

5 under part B, with cost-sharing for those services as 

6 required under parts A and B or an actuarially 

7 equivalent level of cost-sharing as determined in this 

8 part. 

9 ‘‘(e) MEDICAREADVANTAGE PAYMENT AREA DE10 FINED.—

11 ‘‘(1) IN GENERAL.—In this part, except as pro12 vided in paragraph (3), the term 

13 ‘MedicareAdvantage payment area’ means a county, 

14 or equivalent area specified by the Secretary. 

15 ‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the 

16 case of individuals who are determined to have end 

17 stage renal disease, the MedicareAdvantage payment 

18 area shall be a State or such other payment area as 

19 the Secretary specifies. 

20 ‘‘(3) GEOGRAPHIC ADJUSTMENT.—

21 ‘‘(A) IN GENERAL.—Upon written request 

22 of the chief executive officer of a State for a 

23 contract year (beginning after 2005) made by 

24 not later than February 1 of the previous year, 

25 the Secretary shall make a geographic adjust-
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1 ment to a MedicareAdvantage payment area in 

2 the State otherwise determined under para3 graph (1)—

4 ‘‘(i) to a single statewide 

5 MedicareAdvantage payment area; 

6 ‘‘(ii) to the metropolitan based system 

7 described in subparagraph (C); or 

8 ‘‘(iii) to consolidating into a single 

9 MedicareAdvantage payment area non10 contiguous counties (or equivalent areas 

11 described in paragraph (1)) within a State. 

12 Such adjustment shall be effective for payments 

13 for months beginning with January of the year 

14 following the year in which the request is re15 ceived. 

16 ‘‘(B) BUDGET NEUTRALITY ADJUST17 MENT.—In the case of a State requesting an 

18 adjustment under this paragraph, the Secretary 

19 shall initially (and annually thereafter) adjust 

20 the payment rates otherwise established under 

21 this section for MedicareAdvantage payment 

22 areas in the State in a manner so that the ag23 gregate of the payments under this section in 

24 the State shall not exceed the aggregate pay25 ments that would have been made under this 
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1 section for MedicareAdvantage payment areas 

2 in the State in the absence of the adjustment 

3 under this paragraph. 

4 ‘‘(C) METROPOLITAN BASED SYSTEM.—

5 The metropolitan based system described in this 

6 subparagraph is one in which—

7 ‘‘(i) all the portions of each metropoli8 tan statistical area in the State or in the 

9 case of a consolidated metropolitan statis10 tical area, all of the portions of each pri11 mary metropolitan statistical area within 

12 the consolidated area within the State, are 

13 treated as a single MedicareAdvantage 

14 payment area; and 

15 ‘‘(ii) all areas in the State that do not 

16 fall within a metropolitan statistical area 

17 are treated as a single MedicareAdvantage 

18 payment area. 

19 ‘‘(D) AREAS.—In subparagraph (C), the 

20 terms ‘metropolitan statistical area’, ‘consoli21 dated metropolitan statistical area’, and ‘pri22 mary metropolitan statistical area’ mean any 

23 area designated as such by the Secretary of 

24 Commerce. 
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1 ‘‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING

2 MSA PLANS.—

3 ‘‘(1) IN GENERAL.—If the amount of the 

4 MedicareAdvantage monthly MSA premium (as de5 fined in section 1854(b)(2)(D)) for an MSA plan for 

a year is less than 1 6 ⁄12 of the annual 

7 Medicare+Choice capitation rate applied under this 

8 section for the area and year involved, the Secretary 

9 shall deposit an amount equal to 100 percent of 

10 such difference in a MedicareAdvantage MSA estab11 lished (and, if applicable, designated) by the indi12 vidual under paragraph (2). 

13 ‘‘(2) ESTABLISHMENT AND DESIGNATION OF

14 MEDICAREADVANTAGE MEDICAL SAVINGS ACCOUNT

15 AS REQUIREMENT FOR PAYMENT OF CONTRIBU16 TION.—In the case of an individual who has elected 

17 coverage under an MSA plan, no payment shall be 

18 made under paragraph (1) on behalf of an individual 

19 for a month unless the individual—

20 ‘‘(A) has established before the beginning 

21 of the month (or by such other deadline as the 

22 Secretary may specify) a MedicareAdvantage 

23 MSA (as defined in section 138(b)(2) of the In24 ternal Revenue Code of 1986); and 
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1 ‘‘(B) if the individual has established more 

2 than 1 such MedicareAdvantage MSA, has des3 ignated 1 of such accounts as the individual’s 

4 MedicareAdvantage MSA for purposes of this 

5 part. 

6 Under rules under this section, such an individual 

7 may change the designation of such account under 

8 subparagraph (B) for purposes of this part. 

9 ‘‘(3) LUMP-SUM DEPOSIT OF MEDICAL SAVINGS

10 ACCOUNT CONTRIBUTION.—In the case of an indi11 vidual electing an MSA plan effective beginning with 

12 a month in a year, the amount of the contribution 

13 to the MedicareAdvantage MSA on behalf of the in14 dividual for that month and all successive months in 

15 the year shall be deposited during that first month. 

16 In the case of a termination of such an election as 

17 of a month before the end of a year, the Secretary 

18 shall provide for a procedure for the recovery of de19 posits attributable to the remaining months in the 

20 year. 

21 ‘‘(g) PAYMENTS FROM TRUST FUNDS.—Except as 

22 provided in section 1858A(c) (relating to payments for 

23 qualified prescription drug coverage), the payment to a 

24 MedicareAdvantage organization under this section for in25 dividuals enrolled under this part with the organization 
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1 and payments to a MedicareAdvantage MSA under sub2 section (e)(1) shall be made from the Federal Hospital In3 surance Trust Fund and the Federal Supplementary Med4 ical Insurance Trust Fund in such proportion as the Sec5 retary determines reflects the relative weight that benefits 

6 under part A and under part B represents of the actuarial 

7 value of the total benefits under this title. Monthly pay8 ments otherwise payable under this section for October 

9 2000 shall be paid on the first business day of such month. 

10 Monthly payments otherwise payable under this section 

11 for October 2001 shall be paid on the last business day 

12 of September 2001. Monthly payments otherwise payable 

13 under this section for October 2006 shall be paid on the 

14 first business day of October 2006. 

15 ‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS16 PITAL STAYS.—In the case of an individual who is receiv17 ing inpatient hospital services from a subsection (d) hos18 pital (as defined in section 1886(d)(1)(B)) as of the effec19 tive date of the individual’s—

20 ‘‘(1) election under this part of a 

21 MedicareAdvantage plan offered by a 

22 MedicareAdvantage organization—

23 ‘‘(A) payment for such services until the 

24 date of the individual’s discharge shall be made 

25 under this title through the MedicareAdvantage 
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1 plan or the original medicare fee-for-service 

2 program option (as the case may be) elected be3 fore the election with such organization, 

4 ‘‘(B) the elected organization shall not be 

5 financially responsible for payment for such 

6 services until the date after the date of the indi7 vidual’s discharge; and 

8 ‘‘(C) the organization shall nonetheless be 

9 paid the full amount otherwise payable to the 

10 organization under this part; or 

11 ‘‘(2) termination of election with respect to a 

12 MedicareAdvantage organization under this part—

13 ‘‘(A) the organization shall be financially 

14 responsible for payment for such services after 

15 such date and until the date of the individual’s 

16 discharge; 

17 ‘‘(B) payment for such services during the 

18 stay shall not be made under section 1886(d) or 

19 by any succeeding MedicareAdvantage organiza20 tion; and 

21 ‘‘(C) the terminated organization shall not 

22 receive any payment with respect to the indi23 vidual under this part during the period the in24 dividual is not enrolled. 

25 ‘‘(i) SPECIAL RULE FOR HOSPICE CARE.—
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1 ‘‘(1) INFORMATION.—A contract under this 

2 part shall require the MedicareAdvantage organiza3 tion to inform each individual enrolled under this 

4 part with a MedicareAdvantage plan offered by the 

5 organization about the availability of hospice care 

6 if—

7 ‘‘(A) a hospice program participating 

8 under this title is located within the organiza9 tion’s service area; or 

10 ‘‘(B) it is common practice to refer pa11 tients to hospice programs outside such service 

12 area. 

13 ‘‘(2) PAYMENT.—If an individual who is en14 rolled with a MedicareAdvantage organization under 

15 this part makes an election under section 1812(d)(1) 

16 to receive hospice care from a particular hospice pro17 gram—

18 ‘‘(A) payment for the hospice care fur19 nished to the individual shall be made to the 

20 hospice program elected by the individual by 

21 the Secretary; 

22 ‘‘(B) payment for other services for which 

23 the individual is eligible notwithstanding the in24 dividual’s election of hospice care under section 

25 1812(d)(1), including services not related to the 
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1 individual’s terminal illness, shall be made by 

2 the Secretary to the MedicareAdvantage organi3 zation or the provider or supplier of the service 

4 instead of payments calculated under subsection 

5 (a); and 

6 ‘‘(C) the Secretary shall continue to make 

7 monthly payments to the MedicareAdvantage 

8 organization in an amount equal to the value of 

9 the additional benefits required under section 

10 1854(f)(1)(A).’’. 

11 SEC. 204. SUBMISSION OF BIDS; PREMIUMS. 

12 Section 1854 (42 U.S.C. 1395w–24) is amended to 

13 read as follows: 

14 ‘‘SUBMISSION OF BIDS; PREMIUMS

15 ‘‘SEC. 1854. (a) SUBMISSION OF BIDS BY

16 MEDICAREADVANTAGE ORGANIZATIONS.—

17 ‘‘(1) IN GENERAL.—Not later than the second 

18 Monday in September and except as provided in 

19 paragraph (3), each MedicareAdvantage organiza20 tion shall submit to the Secretary, in such form and 

21 manner as the Secretary may specify, for each 

22 MedicareAdvantage plan that the organization in23 tends to offer in a service area in the following 

24 year—

25 ‘‘(A) notice of such intent and information 

26 on the service area of the plan; 
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1 ‘‘(B) the plan type for each plan; 

2 ‘‘(C) if the MedicareAdvantage plan is a 

3 coordinated care plan (as described in section 

4 1851(a)(2)(A)) or a private fee-for-service plan 

5 (as described in section 1851(a)(2)(C)), the in6 formation described in paragraph (2) with re7 spect to each payment area; 

8 ‘‘(D) the enrollment capacity (if any) in re9 lation to the plan and each payment area; 

10 ‘‘(E) the expected mix, by health status, of 

11 enrolled individuals; and 

12 ‘‘(F) such other information as the Sec13 retary may specify. 

14 ‘‘(2) INFORMATION REQUIRED FOR COORDI15 NATED CARE PLANS AND PRIVATE FEE-FOR-SERVICE

16 PLANS.—For a MedicareAdvantage plan that is a 

17 coordinated care plan (as described in section 

18 1851(a)(2)(A)) or a private fee-for-service plan (as 

19 described in section 1851(a)(2)(C)), the information 

20 described in this paragraph is as follows: 

21 ‘‘(A) INFORMATION REQUIRED WITH RE22 SPECT TO BENEFITS UNDER THE ORIGINAL

23 MEDICARE FEE-FOR-SERVICE PROGRAM OP24 TION.—Information relating to the coverage of 
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1 benefits under the original medicare fee-for2 service program option as follows: 

3 ‘‘(i) The plan bid, which shall consist 

4 of a dollar amount that represents the 

5 total amount that the plan is willing to ac6 cept (not taking into account the applica7 tion of the comprehensive risk adjustment 

8 methodology under section 1853(a)(3)) for 

9 providing coverage of the benefits under 

10 the original medicare fee-for-service pro11 gram option to an individual enrolled in 

12 the plan that resides in the service area of 

13 the plan for a month. 

14 ‘‘(ii) For the enhanced medical bene15 fits package offered—

16 ‘‘(I) the adjusted community rate 

17 (as defined in subsection (g)(3)) of 

18 the package; 

19 ‘‘(II) the portion of the actuarial 

20 value of such benefits package (if any) 

21 that will be applied toward satisfying 

22 the requirement for additional benefits 

23 under subsection (g); 

24 ‘‘(III) the MedicareAdvantage 

25 monthly beneficiary premium for en-
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1 hanced medical benefits (as defined in 

2 subsection (b)(2)(C)); 

3 ‘‘(IV) a description of any cost4 sharing; 

5 ‘‘(V) a description of whether the 

6 amount of the unified deductible has 

7 been lowered or the maximum limita8 tions on out-of-pocket expenses have 

9 been decreased (relative to the levels 

10 used in calculating the plan bid); 

11 ‘‘(VI) such other information as 

12 the Secretary considers necessary. 

13 ‘‘(iii) The assumptions that the 

14 MedicareAdvantage organization used in 

15 preparing the plan bid with respect to 

16 numbers, in each payment area, of enrolled 

17 individuals and the mix, by health status, 

18 of such individuals. 

19 ‘‘(B) INFORMATION REQUIRED WITH RE20 SPECT TO PART D.—The information required 

21 to be submitted by an eligible entity under sec22 tion 1860D–12, including the monthly pre23 miums for standard coverage and any other 

24 qualified prescription drug coverage available to 

25 individuals enrolled under part D. 
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1 ‘‘(C) DETERMINING PLAN COSTS IN2 CLUDED IN PLAN BID.—For purposes of sub3 mitting its plan bid under subparagraph (A)(i) 

4 a MedicareAdvantage plan offered by a 

5 MedicareAdvantage organization satisfies sub6 paragraphs (A) and (C) of section 1852(a)(1) if 

7 the actuarial value of the deductibles, coinsur8 ance, and copayments applicable on average to 

9 individuals enrolled in such plan under this part 

10 with respect to benefits under the original medi11 care fee-for-service program option on which 

12 that bid is based (ignoring any reduction in 

13 cost-sharing offered by such plan as enhanced 

14 medical benefits under paragraph (2)(A)(ii) or 

15 required under clause (ii) or (iii) of subsection 

16 (g)(1)(C)) equals the amount specified in sub17 section (f)(1)(B). 

18 ‘‘(3) REQUIREMENTS FOR MSA PLANS.—For an 

19 MSA plan described in section 1851(a)(2)(B), the 

20 information described in this paragraph is the infor21 mation that such a plan would have been required 

22 to submit under this part if the Prescription Drug 

23 and Medicare Improvements Act of 2003 had not 

24 been enacted. 

25 ‘‘(4) REVIEW.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the Secretary shall review the ad3 justed community rates (as defined in section 

4 1854(g)(3)), the amounts of the 

5 MedicareAdvantage monthly basic premium and 

6 the MedicareAdvantage monthly beneficiary 

7 premium for enhanced medical benefits filed 

8 under this subsection and shall approve or dis9 approve such rates and amounts so submitted. 

10 The Secretary shall review the actuarial as11 sumptions and data used by the 

12 MedicareAdvantage organization with respect to 

13 such rates and amounts so submitted to deter14 mine the appropriateness of such assumptions 

15 and data. 

16 ‘‘(B) EXCEPTION.—The Secretary shall 

17 not review, approve, or disapprove the amounts 

18 submitted under paragraph (3), or, with respect 

19 to a private fee-for-service plan (as described in 

20 section 1851(a)(2)(C)) under subparagraph 

21 (A)(i), (A)(ii)(III), or (B) of paragraph (2). 

22 ‘‘(C) CLARIFICATION OF AUTHORITY RE23 GARDING DISAPPROVAL OF UNREASONABLE

24 BENEFICIARY COST-SHARING.—Under the au25 thority under subparagraph (A), the Secretary 
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1 may disapprove the bid if the Secretary deter2 mines that the deductibles, coinsurance, or co3 payments applicable under the plan discourage 

4 access to covered services or are likely to result 

5 in favorable selection of MedicareAdvantage eli6 gible individuals. 

7 ‘‘(5) APPLICATION OF FEHBP STANDARD; PRO8 HIBITION ON PRICE GOUGING.—Each bid amount 

9 submitted under paragraph (1) for a 

10 MedicareAdvantage plan must reasonably and equi11 tably reflect the cost of benefits provided under that 

12 plan. 

13 ‘‘(b) MONTHLY PREMIUMS CHARGED.—

14 ‘‘(1) IN GENERAL.—

15 ‘‘(A) COORDINATED CARE AND PRIVATE

16 FEE-FOR-SERVICE PLANS.—The monthly 

17 amount of the premium charged to an indi18 vidual enrolled in a MedicareAdvantage plan 

19 (other than an MSA plan) offered by a 

20 MedicareAdvantage organization shall be equal 

21 to the sum of the following: 

22 ‘‘(i) The MedicareAdvantage monthly 

23 basic beneficiary premium (if any). 
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1 ‘‘(ii) The MedicareAdvantage monthly 

2 beneficiary premium for enhanced medical 

3 benefits (if any). 

4 ‘‘(iii) The MedicareAdvantage monthly 

5 obligation for qualified prescription drug 

6 coverage (if any). 

7 ‘‘(B) MSA PLANS.—The rules under this 

8 section that would have applied with respect to 

9 an MSA plan if the Prescription Drug and 

10 Medicare Improvements Act of 2003 had not 

11 been enacted shall continue to apply to MSA 

12 plans after the date of enactment of such Act. 

13 ‘‘(2) PREMIUM TERMINOLOGY.—For purposes 

14 of this part: 

15 ‘‘(A) MEDICAREADVANTAGE MONTHLY

16 BASIC BENEFICIARY PREMIUM.—The term 

17 ‘MedicareAdvantage monthly basic beneficiary 

18 premium’ means, with respect to a 

19 MedicareAdvantage plan, the amount required 

20 to be charged under subsection (d)(2) for the 

21 plan. 

22 ‘‘(B) MEDICAREADVANTAGE MONTHLY

23 BENEFICIARY OBLIGATION FOR QUALIFIED PRE24 SCRIPTION DRUG COVERAGE.—The term 

25 ‘MedicareAdvantage monthly beneficiary obliga-
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1 tion for qualified prescription drug coverage’ 

2 means, with respect to a MedicareAdvantage 

3 plan, the amount determined under section 

4 1858A(d). 

5 ‘‘(C) MEDICAREADVANTAGE MONTHLY

6 BENEFICIARY PREMIUM FOR ENHANCED MED7 ICAL BENEFITS.—The term 

8 ‘MedicareAdvantage monthly beneficiary pre9 mium for enhanced medical benefits’ means, 

10 with respect to a MedicareAdvantage plan, the 

11 amount required to be charged under sub12 section (f)(2) for the plan, or, in the case of an 

13 MSA plan, the amount filed under subsection 

14 (a)(3). 

15 ‘‘(D) MEDICAREADVANTAGE MONTHLY

16 MSA PREMIUM.—The term ‘MedicareAdvantage 

17 monthly MSA premium’ means, with respect to 

18 a MedicareAdvantage plan, the amount of such 

19 premium filed under subsection (a)(3) for the 

20 plan. 

21 ‘‘(c) UNIFORM PREMIUM.—The MedicareAdvantage 

22 monthly basic beneficiary premium, the 

23 MedicareAdvantage monthly beneficiary obligation for 

24 qualified prescription drug coverage, the 

25 MedicareAdvantage monthly beneficiary premium for en-
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1 hanced medical benefits, and the MedicareAdvantage 

2 monthly MSA premium charged under subsection (b) of 

3 a MedicareAdvantage organization under this part may 

4 not vary among individuals enrolled in the plan. Subject 

5 to the provisions of section 1858(h), such requirement 

6 shall not apply to enrollees of a MedicareAdvantage plan 

7 who are enrolled in the plan pursuant to a contractual 

8 agreement between the plan and an employer or other 

9 group health plan that provides employment-based retiree 

10 health coverage (as defined in section 1860D–

11 20(d)(4)(B)) if the premium amount is the same for all 

12 such enrollees under such agreement. 

13 ‘‘(d) DETERMINATION OF PREMIUM REDUCTIONS, 

14 REDUCED COST-SHARING, ADDITIONAL BENEFITS, AND

15 BENEFICIARY PREMIUMS.—

16 ‘‘(1) BIDS BELOW THE BENCHMARK.—If the 

17 Secretary determines under section 1853(d)(3) that 

18 the weighted service area benchmark amount ex19 ceeds the plan bid, the Secretary shall require the 

20 plan to provide additional benefits in accordance 

21 with subsection (g). 

22 ‘‘(2) BIDS ABOVE THE BENCHMARK.—If the 

23 Secretary determines under section 1853(d)(3) that 

24 the plan bid exceeds the weighted service area 

25 benchmark amount (determined under section 
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1 1853(d)(2)), the amount of such excess shall be the 

2 MedicareAdvantage monthly basic beneficiary pre3 mium (as defined in section 1854(b)(2)(A)). 

4 ‘‘(e) TERMS AND CONDITIONS OF IMPOSING PRE5 MIUMS.—Each MedicareAdvantage organization shall per6 mit the payment of any MedicareAdvantage monthly basic 

7 premium, the MedicareAdvantage monthly beneficiary ob8 ligation for qualified prescription drug coverage, and the 

9 MedicareAdvantage monthly beneficiary premium for en10 hanced medical benefits on a monthly basis, may termi11 nate election of individuals for a MedicareAdvantage plan 

12 for failure to make premium payments only in accordance 

13 with section 1851(g)(3)(B)(i), and may not provide for 

14 cash or other monetary rebates as an inducement for en15 rollment or otherwise (other than as an additional benefit 

16 described in subsection (g)(1)(C)(i)). 

17 ‘‘(f) LIMITATION ON ENROLLEE LIABILITY.—

18 ‘‘(1) FOR BENEFITS UNDER THE ORIGINAL

19 MEDICARE FEE-FOR-SERVICE PROGRAM OPTION.—

20 The sum of—

21 ‘‘(A) the MedicareAdvantage monthly basic 

22 beneficiary premium (multiplied by 12) and the 

23 actuarial value of the deductibles, coinsurance, 

24 and copayments (determined on the same basis 

25 as used in determining the plan’s bid under 
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1 paragraph (2)(C)) applicable on average to indi2 viduals enrolled under this part with a 

3 MedicareAdvantage plan described in subpara4 graph (A) of section 1851(a)(2) of an organiza5 tion with respect to required benefits described 

6 in section 1852(a)(1)(A); must equal 

7 ‘‘(B) the actuarial value of the deductibles, 

8 coinsurance, and copayments that would be ap9 plicable on average to individuals who have 

10 elected to receive benefits under the original 

11 medicare fee-for-service program option if such 

12 individuals were not members of a 

13 MedicareAdvantage organization for the year 

14 (adjusted as determined appropriate by the Sec15 retary to account for geographic differences and 

16 for plan cost and utilization differences). 

17 ‘‘(2) FOR ENHANCED MEDICAL BENEFITS.—If 

18 the MedicareAdvantage organization provides to its 

19 members enrolled under this part in a 

20 MedicareAdvantage plan described in subparagraph 

21 (A) of section 1851(a)(2) with respect to enhanced 

22 medical benefits relating to benefits under the origi23 nal medicare fee-for-service program option, the sum 

24 of the MedicareAdvantage monthly beneficiary pre25 mium for enhanced medical benefits (multiplied by 
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1 12) charged and the actuarial value of its 

2 deductibles, coinsurance, and copayments charged 

3 with respect to such benefits for a year must equal 

4 the adjusted community rate (as defined in sub5 section (g)(3)) for such benefits for the year minus 

6 the actuarial value of any additional benefits pursu7 ant to clause (ii), (iii), or (iv) of subsection (g)(2)(C) 

8 that the plan specified under subsection (a)(2)(i)(II). 

9 ‘‘(3) DETERMINATION ON OTHER BASIS.—If the 

10 Secretary determines that adequate data are not 

11 available to determine the actuarial value under 

12 paragraph (1)(A) or (2), the Secretary may deter13 mine such amount with respect to all individuals in 

14 the same geographic area, the State, or in the 

15 United States, eligible to enroll in the 

16 MedicareAdvantage plan involved under this part or 

17 on the basis of other appropriate data. 

18 ‘‘(4) SPECIAL RULE FOR PRIVATE FEE-FOR19 SERVICE PLANS.—With respect to a 

20 MedicareAdvantage private fee-for-service plan 

21 (other than a plan that is an MSA plan), in no event 

22 may—

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

24 coinsurance, and copayments applicable on av25 erage to individuals enrolled under this part 
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1 with such a plan of an organization with re2 spect to required benefits described in subpara3 graphs (A), (C), and (D) of section 1852(a)(1); 

4 exceed 

5 ‘‘(B) the actuarial value of the deductibles, 

6 coinsurance, and copayments that would be ap7 plicable on average to individuals entitled to (or 

8 enrolled for) benefits under part A and enrolled 

9 under part B if they were not members of a 

10 MedicareAdvantage organization for the year. 

11 ‘‘(g) REQUIREMENT FOR ADDITIONAL BENEFITS.—

12 ‘‘(1) REQUIREMENT.—

13 ‘‘(A) IN GENERAL.—Each 

14 MedicareAdvantage organization (in relation to 

15 a MedicareAdvantage plan, other than an MSA 

16 plan, it offers) shall provide that if there is an 

17 excess amount (as defined in subparagraph (B)) 

18 for the plan for a contract year, subject to the 

19 succeeding provisions of this subsection, the or20 ganization shall provide to individuals such ad21 ditional benefits described in subparagraph (C) 

22 as the organization may specify in a value 

23 which the Secretary determines is at least equal 

24 to the adjusted excess amount (as defined in 

25 subparagraph (D)). 
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1 ‘‘(B) EXCESS AMOUNT.—For purposes of 

2 this paragraph, the term ‘excess amount’ 

3 means, for an organization for a plan, is 100 

4 percent of the amount (if any) by which the 

5 weighted service area benchmark amount (de6 termined under section 1853(d)(2)) exceeds the 

7 plan bid (as adjusted under section 

8 1853(d)(1)). 

9 ‘‘(C) ADDITIONAL BENEFITS DE10 SCRIBED.—The additional benefits described in 

11 this subparagraph are as follows: 

12 ‘‘(i) Subject to subparagraph (F), a 

13 monthly part B premium reduction for in14 dividuals enrolled in the plan. 

15 ‘‘(ii) Lowering the amount of the uni16 fied deductible and decreasing the max17 imum limitations on out-of-pocket expenses 

18 for individuals enrolled in the plan. 

19 ‘‘(iii) A reduction in the actuarial 

20 value of plan cost-sharing for plan enroll21 ees. 

22 ‘‘(iv) Subject to subparagraph (E), 

23 such additional benefits as the organization 

24 may specify. 
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1 ‘‘(v) Contributing to the stabilization 

2 fund under paragraph (2). 

3 ‘‘(vi) Any combination of the reduc4 tions and benefits described in clauses (i) 

5 through (v). 

6 ‘‘(D) ADJUSTED EXCESS AMOUNT.—For 

7 purposes of this paragraph, the term ‘adjusted 

8 excess amount’ means, for an organization for 

9 a plan, is the excess amount reduced to reflect 

10 any amount withheld and reserved for the orga11 nization for the year under paragraph (2). 

12 ‘‘(E) RULE FOR APPROVAL OF MEDICAL

13 AND PRESCRIPTION DRUG BENEFITS.—An orga14 nization may not specify any additional benefit 

15 that provides for the coverage of any prescrip16 tion drug (other than that relating to prescrip17 tion drugs covered under the original medicare 

18 fee-for-service program option). 

19 ‘‘(F) PREMIUM REDUCTIONS.—

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

21 (ii), as part of providing any additional 

22 benefits required under subparagraph (A), 

23 a MedicareAdvantage organization may 

24 elect a reduction in its payments under 

25 section 1853(a)(1)(A)(i) with respect to a 
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1 MedicareAdvantage plan and the Secretary 

2 shall apply such reduction to reduce the 

3 premium under section 1839 of each en4 rollee in such plan as provided in section 

5 1840(i). 

6 ‘‘(ii) AMOUNT OF REDUCTION.—The 

7 amount of the reduction under clause (i) 

8 with respect to any enrollee in a 

9 MedicareAdvantage plan—

10 ‘‘(I) may not exceed 125 percent 

11 of the premium described under sec12 tion 1839(a)(3); and 

13 ‘‘(II) shall apply uniformly to 

14 each enrollee of the 

15 MedicareAdvantage plan to which 

16 such reduction applies. 

17 ‘‘(G) UNIFORM APPLICATION.—This para18 graph shall be applied uniformly for all enroll19 ees for a plan. 

20 ‘‘(H) CONSTRUCTION.—Nothing in this 

21 subsection shall be construed as preventing a 

22 MedicareAdvantage organization from providing 

23 enhanced medical benefits (described in section 

24 1852(a)(3)) that are in addition to the health 

25 care benefits otherwise required to be provided 
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1 under this paragraph and from imposing a pre2 mium for such enhanced medical benefits. 

3 ‘‘(2) STABILIZATION FUND.—A 

4 MedicareAdvantage organization may provide that a 

5 part of the value of an excess amount described in 

6 paragraph (1) be withheld and reserved in the Fed7 eral Hospital Insurance Trust Fund and in the Fed8 eral Supplementary Medical Insurance Trust Fund 

9 (in such proportions as the Secretary determines to 

10 be appropriate) by the Secretary for subsequent an11 nual contract periods, to the extent required to pre12 vent undue fluctuations in the additional benefits of13 fered in those subsequent periods by the organiza14 tion in accordance with such paragraph. Any of such 

15 value of the amount reserved which is not provided 

16 as additional benefits described in paragraph (1)(A) 

17 to individuals electing the MedicareAdvantage plan 

18 of the organization in accordance with such para19 graph prior to the end of such periods, shall revert 

20 for the use of such Trust Funds. 

21 ‘‘(3) ADJUSTED COMMUNITY RATE.—For pur22 poses of this subsection, subject to paragraph (4), 

23 the term ‘adjusted community rate’ for a service or 

24 services means, at the election of a 

25 MedicareAdvantage organization, either—
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1 ‘‘(A) the rate of payment for that service 

2 or services which the Secretary annually deter3 mines would apply to an individual electing a 

4 MedicareAdvantage plan under this part if the 

5 rate of payment were determined under a ‘com6 munity rating system’ (as defined in section 

7 1302(8) of the Public Health Service Act, other 

8 than subparagraph (C)); or 

9 ‘‘(B) such portion of the weighted aggre10 gate premium, which the Secretary annually es11 timates would apply to such an individual, as 

12 the Secretary annually estimates is attributable 

13 to that service or services, 

14 but adjusted for differences between the utilization 

15 characteristics of the individuals electing coverage 

16 under this part and the utilization characteristics of 

17 the other enrollees with the plan (or, if the Secretary 

18 finds that adequate data are not available to adjust 

19 for those differences, the differences between the uti20 lization characteristics of individuals selecting other 

21 MedicareAdvantage coverage, or MedicareAdvantage 

22 eligible individuals in the area, in the State, or in 

23 the United States, eligible to elect 

24 MedicareAdvantage coverage under this part and the 

25 utilization characteristics of the rest of the popu-
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1 lation in the area, in the State, or in the United 

2 States, respectively). 

3 ‘‘(4) DETERMINATION BASED ON INSUFFICIENT

4 DATA.—For purposes of this subsection, if the Sec5 retary finds that there is insufficient enrollment ex6 perience to determine the average amount of pay7 ments to be made under this part at the beginning 

8 of a contract period or to determine (in the case of 

9 a newly operated provider-sponsored organization or 

10 other new organization) the adjusted community 

11 rate for the organization, the Secretary may deter12 mine such an average based on the enrollment expe13 rience of other contracts entered into under this part 

14 and may determine such a rate using data in the 

15 general commercial marketplace. 

16 ‘‘(h) PROHIBITION OF STATE IMPOSITION OF PRE17 MIUM TAXES.—No State may impose a premium tax or 

18 similar tax with respect to payments to 

19 MedicareAdvantage organizations under section 1853. 

20 ‘‘(i) PERMITTING USE OF SEGMENTS OF SERVICE

21 AREAS.—The Secretary shall permit a MedicareAdvantage 

22 organization to elect to apply the provisions of this section 

23 uniformly to separate segments of a service area (rather 

24 than uniformly to an entire service area) as long as such 
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1 segments are composed of 1 or more MedicareAdvantage 

2 payment areas.’’. 

3 (b) STUDY AND REPORT ON CLARIFICATION OF AU4 THORITY REGARDING DISAPPROVAL OF UNREASONABLE

5 BENEFICIARY COST-SHARING.—

6 (1) STUDY.—The Secretary, in consultation 

7 with beneficiaries, consumer groups, employers, and 

8 Medicare+Choice organizations, shall conduct a 

9 study to determine the extent to which the cost-shar10 ing structures under Medicare+Choice plans under 

11 part C of title XVIII of the Social Security Act dis12 courage access to covered services or discriminate 

13 based on the health status of Medicare+Choice eligi14 ble individuals (as defined in section 1851(a)(3) of 

15 the Social Security Act (42 U.S.C. 1395w–

16 21(a)(3))). 

17 (2) REPORT.—Not later than December 31, 

18 2004, the Secretary shall submit a report to Con19 gress on the study conducted under paragraph (1) 

20 together with recommendations for such legislation 

21 and administrative actions as the Secretary con22 siders appropriate. 
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1 SEC. 205. SPECIAL RULES FOR PRESCRIPTION DRUG BENE2 FITS. 

3 Part C of title XVIII (42 U.S.C. 1395w–21 et seq.) 

4 is amended by inserting after section 1857 the following 

5 new section: 

6 ‘‘SPECIAL RULES FOR PRESCRIPTION DRUG BENEFITS

7 ‘‘SEC. 1858A. (a) AVAILABILITY.—

8 ‘‘(1) PLANS REQUIRED TO PROVIDE QUALIFIED

9 PRESCRIPTION DRUG COVERAGE TO ENROLLEES.—

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

11 subparagraph (B), on and after January 1, 

12 2006, a MedicareAdvantage organization offer13 ing a MedicareAdvantage plan (except for an 

14 MSA plan) shall make available qualified pre15 scription drug coverage that meets the require16 ments for such coverage under this part and 

17 part D to each enrollee of the plan. 

18 ‘‘(B) PRIVATE FEE-FOR-SERVICE PLANS

19 MAY, BUT ARE NOT REQUIRED TO, PROVIDE

20 QUALIFIED PRESCRIPTION DRUG COVERAGE.—

21 Pursuant to section 1852(a)(2)(D), a private 

22 fee-for-service plan may elect not to provide 

23 qualified prescription drug coverage under part 

24 D to individuals residing in the area served by 

25 the plan. 
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1 ‘‘(2) REFERENCE TO PROVISION PERMITTING

2 ADDITIONAL PRESCRIPTION DRUG COVERAGE.—For 

3 the provisions of part D, made applicable to this 

4 part pursuant to paragraph (1), that permit a plan 

5 to make available qualified prescription drug cov6 erage that includes coverage of covered drugs that 

7 exceeds the coverage required under paragraph (1) 

8 of section 1860D–6 in an area, but only if the 

9 MedicareAdvantage organization offering the plan 

10 also offers a MedicareAdvantage plan in the area 

11 that only provides the coverage that is required 

12 under such paragraph (1), see paragraph (2) of such 

13 section. 

14 ‘‘(3) RULE FOR APPROVAL OF MEDICAL AND

15 PRESCRIPTION DRUG BENEFITS.—Pursuant to sec16 tions 1854(g)(1)(F) and 1852(a)(3)(D), a 

17 MedicareAdvantage organization offering a 

18 MedicareAdvantage plan that provides qualified pre19 scription drug coverage may not make available cov20 erage of any prescription drugs (other than that re21 lating to prescription drugs covered under the origi22 nal medicare fee-for-service program option) to an 

23 enrollee as an additional benefit or as an enhanced 

24 medical benefit. 
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1 ‘‘(b) COMPLIANCE WITH ADDITIONAL BENEFICIARY

2 PROTECTIONS.—With respect to the offering of qualified 

3 prescription drug coverage by a MedicareAdvantage orga4 nization under a MedicareAdvantage plan, the organiza5 tion and plan shall meet the requirements of section 

6 1860D–5, including requirements relating to information 

7 dissemination and grievance and appeals, and such other 

8 requirements under part D that the Secretary determines 

9 appropriate in the same manner as such requirements 

10 apply to an eligible entity and a Medicare Prescription 

11 Drug plan under part D. The Secretary shall waive such 

12 requirements to the extent the Secretary determines that 

13 such requirements duplicate requirements otherwise appli14 cable to the organization or the plan under this part. 

15 ‘‘(c) PAYMENTS FOR PRESCRIPTION DRUGS.—

16 ‘‘(1) PAYMENT OF FULL AMOUNT OF PREMIUM

17 TO ORGANIZATIONS FOR QUALIFIED PRESCRIPTION

18 DRUG COVERAGE.—

19 ‘‘(A) IN GENERAL.—For each year (begin20 ning with 2006), the Secretary shall pay to 

21 each MedicareAdvantage organization offering a 

22 MedicareAdvantage plan that provides qualified 

23 prescription drug coverage, an amount equal to 

24 the full amount of the monthly premium sub25 mitted under section 1854(a)(2)(B) for the 
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1 year, as adjusted using the risk adjusters that 

2 apply to the standard prescription drug cov3 erage published under section 1860D–11. 

4 ‘‘(B) APPLICATION OF PART D RISK COR5 RIDOR, STABILIZATION RESERVE FUND, AND

6 ADMINISTRATIVE EXPENSES PROVISIONS.—The 

7 provisions of subsections (b), (c), and (d) of 

8 section 1860D–16 shall apply to a 

9 MedicareAdvantage organization offering a 

10 MedicareAdvantage plan that provides qualified 

11 prescription drug coverage and payments made 

12 to such organization under subparagraph (A) in 

13 the same manner as such provisions apply to an 

14 eligible entity offering a Medicare Prescription 

15 Drug plan and payments made to such entity 

16 under subsection (a) of section 1860D–16. 

17 ‘‘(2) PAYMENT FROM PRESCRIPTION DRUG AC18 COUNT.—Payment made to MedicareAdvantage or19 ganizations under this subsection shall be made from 

20 the Prescription Drug Account in the Federal Sup21 plementary Medical Insurance Trust Fund under 

22 section 1841. 

23 ‘‘(d) COMPUTATION OF MEDICAREADVANTAGE

24 MONTHLY BENEFICIARY OBLIGATION FOR QUALIFIED

25 PRESCRIPTION DRUG COVERAGE.—In the case of a 
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1 MedicareAdvantage eligible individual receiving qualified 

2 prescription drug coverage under a MedicareAdvantage 

3 plan during a year after 2005, the MedicareAdvantage 

4 monthly beneficiary obligation for qualified prescription 

5 drug coverage of such individual in the year shall be deter6 mined in the same manner as the monthly beneficiary obli7 gation is determined under section 1860D–17 for eligible 

8 beneficiaries enrolled in a Medicare Prescription Drug 

9 plan, except that, for purposes of this subparagraph, any 

10 reference to the monthly plan premium approved by the 

11 Secretary under section 1860D–13 shall be treated as a 

12 reference to the monthly premium for qualified prescrip13 tion drug coverage submitted by the MedicareAdvantage 

14 organization offering the plan under section 

15 1854(a)(2)(A) and approved by the Secretary. 

16 ‘‘(e) COLLECTION OF MEDICAREADVANTAGE

17 MONTHLY BENEFICIARY OBLIGATION FOR QUALIFIED

18 PRESCRIPTION DRUG COVERAGE.—The provisions of sec19 tion 1860D–18, including subsection (b) of such section, 

20 shall apply to the amount of the MedicareAdvantage 

21 monthly beneficiary obligation for qualified prescription 

22 drug coverage (as determined under subsection (d)) re23 quired to be paid by a MedicareAdvantage eligible indi24 vidual enrolled in a MedicareAdvantage plan in the same 

25 manner as such provisions apply to the amount of the 
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1 monthly beneficiary obligation required to be paid by an 

2 eligible beneficiary enrolled in a Medicare Prescription 

3 Drug plan under part D. 

4 ‘‘(f) AVAILABILITY OF PREMIUM SUBSIDY AND COST5 SHARING REDUCTIONS FOR LOW-INCOME ENROLLEES

6 AND REINSURANCE PAYMENTS.—For provisions—

7 ‘‘(1) providing premium subsidies and cost8 sharing reductions for low-income individuals receiv9 ing qualified prescription drug coverage through a 

10 MedicareAdvantage plan, see section 1860D–19; and 

11 ‘‘(2) providing a MedicareAdvantage organiza12 tion with reinsurance payments for certain expenses 

13 incurred in providing qualified prescription drug cov14 erage through a MedicareAdvantage plan, see sec15 tion 1860D–20.’’. 

16 (b) TREATMENT OF REDUCTION FOR PURPOSES OF

17 DETERMINING GOVERNMENT CONTRIBUTION UNDER

18 PART B.—Section 1844(c) (42 U.S.C. 1395w) is amended 

19 by striking ‘‘section 1854(f)(1)(E)’’ and inserting ‘‘section 

20 1854(d)(1)(A)(i)’’. 

21 SEC. 206. FACILITATING EMPLOYER PARTICIPATION. 

22 Section 1858(h) (as added by section 211) is amend23 ed—

24 (1) by inserting ‘‘(including subsection (i) of 

25 such section)’’ after ‘‘section 1857’’; and 
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1 (2) by adding at the end the following new sen2 tence: ‘‘In applying the authority under section 

3 1857(i) pursuant to this subsection, the Adminis4 trator may permit MedicareAdvantage plans to es5 tablish separate premium amounts for enrollees in 

6 an employer or other group health plan that pro7 vides employment-based retiree health coverage (as 

8 defined in section 1860D–20(d)(4)(B)).’’

9 SEC. 207. ADMINISTRATION BY THE CENTER FOR MEDI10 CARE CHOICES. 

11 On and after January 1, 2006, the 

12 MedicareAdvantage program under part C of title XVIII 

13 of the Social Security Act shall be administered by the 

14 Center for Medicare Choices established under section 

15 1808 such title (as added by section 301), and each ref16 erence to the Secretary made in such part shall be deemed 

17 to be a reference to the Administrator of the Center for 

18 Medicare Choices. 

19 SEC. 208. CONFORMING AMENDMENTS. 

20 (a) ORGANIZATIONAL AND FINANCIAL REQUIRE21 MENTS FOR MEDICAREADVANTAGE ORGANIZATIONS; 

22 PROVIDER-SPONSORED ORGANIZATIONS.—Section 1855 

23 (42 U.S.C. 1395w–25) is amended—
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1 (1) in subsection (b), in the matter preceding 

2 paragraph (1), by inserting ‘‘subparagraphs (A), 

3 (B), and (D) of’’ before ‘‘section 1852(A)(1)’’; and 

4 (2) by striking ‘‘Medicare+Choice’’ and insert5 ing ‘‘MedicareAdvantage’’ each place it appears. 

6 (b) ESTABLISHMENT OF PSO STANDARDS.—Section 

7 1856 (42 U.S.C. 1395w–26) is amended by striking 

8 ‘‘Medicare+Choice’’ and inserting ‘‘MedicareAdvantage’’ 

9 each place it appears. 

10 (c) CONTRACTS WITH MEDICAREADVANTAGE ORGA11 NIZATIONS.—Section 1857 (42 U.S.C. 1395w–27) is 

12 amended—

13 (1) in subsection (g)(1)—

14 (A) in subparagraph (B), by striking 

15 ‘‘amount of the Medicare+Choice monthly basic 

16 and supplemental beneficiary premiums’’ and 

17 inserting ‘‘amounts of the MedicareAdvantage 

18 monthly basic premium and MedicareAdvantage 

19 monthly beneficiary premium for enhanced 

20 medical benefits’’; 

21 (B) in subparagraph (F), by striking ‘‘or’’ 

22 after the semicolon at the end; 

23 (C) in subparagraph (G), by adding ‘‘or’’ 

24 after the semicolon at the end; and 
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1 (D) by inserting after subparagraph (G) 

2 the following new subparagraph: 

3 ‘‘(H)(i) charges any individual an amount 

4 in excess of the MedicareAdvantage monthly 

5 beneficiary obligation for qualified prescription 

6 drug coverage under section 1858A(d); 

7 ‘‘(ii) provides coverage for prescription 

8 drugs that is not qualified prescription drug 

9 coverage; 

10 ‘‘(iii) offers prescription drug coverage, but 

11 does not make standard prescription drug cov12 erage available; or 

13 ‘‘(iv) provides coverage for prescription 

14 drugs (other than that relating to prescription 

15 drugs covered under the original medicare fee16 for-service program option described in section 

17 1851(a)(1)(A)(i)) as an enhanced medical ben18 efit under section 1852(a)(3)(D) or as an addi19 tional benefit under section 1854(g)(1)(F),’’; 

20 and 

21 (2) by striking ‘‘Medicare+Choice’’ and insert22 ing ‘‘MedicareAdvantage’’ each place it appears. 

23 (d) DEFINITIONS; MISCELLANEOUS PROVISIONS.—

24 Section 1859 (42 U.S.C. 1395w–28) is amended—
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1 (1) by striking subsection (c) and inserting the 

2 following new subsection: 

3 ‘‘(c) OTHER REFERENCES TO OTHER TERMS.—

4 ‘‘(1) ENHANCED MEDICAL BENEFITS.—The 

5 term ‘enhanced medical benefits’ is defined in sec6 tion 1852(a)(3)(E). 

7 ‘‘(2) MEDICAREADVANTAGE ELIGIBLE INDI8 VIDUAL.—The term ‘MedicareAdvantage eligible in9 dividual’ is defined in section 1851(a)(3). 

10 ‘‘(3) MEDICAREADVANTAGE PAYMENT AREA.—

11 The term ‘MedicareAdvantage payment area’ is de12 fined in section 1853(d). 

13 ‘‘(4) NATIONAL PER CAPITA

14 MEDICARE+CHOICE GROWTH PERCENTAGE.—The 

15 ‘national per capita Medicare+Choice growth per16 centage’ is defined in section 1853(c)(6). 

17 ‘‘(5) MEDICAREADVANTAGE MONTHLY BASIC

18 BENEFICIARY PREMIUM; MEDICAREADVANTAGE

19 MONTHLY BENEFICIARY OBLIGATION FOR QUALI20 FIED PRESCRIPTION DRUG COVERAGE; 

21 MEDICAREADVANTAGE MONTHLY BENEFICIARY PRE22 MIUM FOR ENHANCED MEDICAL BENEFITS.—The 

23 terms ‘MedicareAdvantage monthly basic beneficiary 

24 premium’, ‘MedicareAdvantage monthly beneficiary 

25 obligation for qualified prescription drug coverage’, 
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1 and ‘MedicareAdvantage monthly beneficiary pre2 mium for enhanced medical benefits’ are defined in 

3 section 1854(b)(2). 

4 ‘‘(6) QUALIFIED PRESCRIPTION DRUG COV5 ERAGE.—The term ‘qualified prescription drug cov6 erage’ has the meaning given such term in section 

7 1860D(9). 

8 ‘‘(7) STANDARD PRESCRIPTION DRUG COV9 ERAGE.—The term ‘standard prescription drug cov10 erage’ has the meaning given such term in section 

11 1860D(10).’’; and 

12 (2) by striking ‘‘Medicare+Choice’’ and insert13 ing ‘‘MedicareAdvantage’’ each place it appears. 

14 (e) CONFORMING AMENDMENTS EFFECTIVE BEFORE

15 2006.—

16 (1) EXTENSION OF MSAS.—Section 1851(b)(4) 

17 (42 U.S.C. 1395w–21(b)(4)) is amended by striking 

18 ‘‘January 1, 2003’’ and inserting ‘‘January 1, 

19 2004’’. 

20 (2) CONTINUOUS OPEN ENROLLMENT AND

21 DISENROLLMENT THROUGH 2005.—Section 1851(e) 

22 of the Social Security Act (42 U.S.C. 1395w–21(e)) 

23 is amended—

24 (A) in paragraph (2)(A), by striking 

25 ‘‘THROUGH 2004’’ and ‘‘December 31,2004’’ and 
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1 inserting ‘‘THROUGH 2005’’ and ‘‘December 31, 

2 2005’’, respectively; 

3 (B) in the heading of paragraph (2)(B), by 

4 striking ‘‘DURING 2005’’ and inserting ‘‘DURING

5 2006’’; 

6 (C) in paragraphs (2)(B)(i) and (2)(C)(i), 

7 by striking ‘‘2005’’ and inserting ‘‘2006’’ each 

8 place it appears; 

9 (D) in paragraph (2)(D), by striking 

10 ‘‘2004’’ and inserting ‘‘2005’’; and 

11 (E) in paragraph (4), by striking ‘‘2005’’ 

12 and inserting ‘‘2006’’ each place it appears. 

13 (3) UPDATE IN MINIMUM PERCENTAGE IN14 CREASE.—Section 1853(c)(1)(C) (42 U.S.C. 1395w–

15 23(c)(1)(C)) is amended by striking clause (iv) and 

16 inserting the following new clauses: 

17 ‘‘(iv) For 2002, 2003, and 2004, 102 

18 percent of the annual Medicare+Choice 

19 capitation rate under this paragraph for 

20 the area for the previous year. 

21 ‘‘(v) For 2005, 103 percent of the an22 nual Medicare+Choice capitation rate 

23 under this paragraph for the area for 

24 2003. 
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1 ‘‘(vi) For 2006 and each succeeding 

2 year, 102 percent of the annual 

3 Medicare+Choice capitation rate under 

4 this paragraph for the area for the pre5 vious year, except that such rate shall be 

6 determined by substituting ‘102’ for ‘103’ 

7 in clause (v).’’. 

8 (4) EFFECTIVE DATE.—The amendments made 

9 by this subsection shall take effect on the date of en10 actment of this Act. 

11 (e) OTHER CONFORMING AMENDMENTS.—

12 (1) CONFORMING MEDICARE CROSS-REF13 ERENCES.—

14 (A) Section 1839(a)(2) (42 U.S.C. 

15 1395r(a)(2)) is amended by striking ‘‘section 

16 1854(f)(1)(E)’’ and inserting ‘‘section 

17 1854(g)(1)(C)(i)’’. 

18 (B) Section 1840(i) (42 U.S.C. 1395s(i)) 

19 is amended by striking ‘‘section 1854(f)(1)(E)’’ 

20 and inserting ‘‘section 1854(g)(1)(C)(i)’’. 

21 (C) Section 1844(c) (42 U.S.C. 1395w(c)) 

22 is amended by striking ‘‘section 1854(f)(1)(E)’’ 

23 and inserting ‘‘section 1854(g)(1)(C)(i)’’. 

24 (D) Section 1876(k)(3)(A) (42 U.S.C. 

25 1395mm(k)(3)(A)) is amended by inserting 
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1 ‘‘(as in effect immediately before the enactment 

2 of the Prescription Drug and Medicare Im3 provements Act of 2003)’’ after section 

4 1853(a). 

5 (F) Section 1876(k)(4) (42 U.S.C. 

6 1395mm(k)(4)(A)) is amended—

7 (i) in subparagraph (A), by striking 

8 ‘‘section 1853(a)(3)(B)’’ and inserting 

9 ‘‘section 1853(a)(3)(D)’’; and 

10 (ii) in subparagraph (B), by striking 

11 ‘‘section 1854(g)’’ and inserting ‘‘section 

12 1854(h)’’. 

13 (G) Section 1876(k)(4)(C) (42 U.S.C. 

14 1395mm(k)(4)(C)) in amended by inserting 

15 ‘‘(as in effect immediately before the enactment 

16 of the Prescription Drug and Medicare Im17 provements Act of 2003)’’ after ‘‘section 

18 1851(e)(6)’’. 

19 (H) Section 1894(d) (42 U.S.C. 

20 1395eee(d)) is amended by adding at the end 

21 the following new paragraph: 

22 ‘‘(3) APPLICATION OF PROVISIONS.—For pur23 poses of paragraphs (1) and (2), the references to 

24 section 1853 and subsection (a)(2) of such section in 

25 such paragraphs shall be deemed to be references to 
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1 those provisions as in effect immediately before the 

2 enactment of the Prescription Drug and Medicare 

3 Improvements Act of 2003.’’. 

4 (2) CONFORMING MEDICARE TERMINOLOGY.—

5 Title XVIII (42 U.S.C. 1395 et seq.), except for 

6 part C of such title (42 U.S.C. 1395w–21 et seq.), 

7 and title XIX (42 U.S.C. 1396 et seq.) are each 

8 amended by striking ‘‘Medicare+Choice’’ and insert9 ing ‘‘MedicareAdvantage’’ each place it appears. 

10 SEC. 209. EFFECTIVE DATE. 

11 (a) IN GENERAL.—Except as provided in section 

12 208(d)(3) and subsection (b), the amendments made by 

13 this title shall apply with respect to plan years beginning 

14 on and after January 1, 2006. 

15 (b) MEDICAREADVANTAGE MSA PLANS.—Notwith16 standing any provision of this title, the Secretary shall 

17 apply the payment and other rules that apply with respect 

18 to an MSA plan described in section 1851(a)(2)(B) of the 

19 Social Security Act (42 U.S.C. 1395w–21(a)(2)(B)) as if 

20 this title had not been enacted. 

21 SEC. 210. IMPROVEMENTS IN MEDICAREADVANTAGE 

22 BENCHMARK DETERMINATIONS. 

23 (a) INCLUSION OF COSTS OF DOD AND VA MILI24 TARY FACILITY SERVICES TO MEDICARE-ELIGIBLE
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1 BENEFICIARIES IN CALCULATION OF

2 MEDICAREADVANTAGE PAYMENT RATES.—

3 (1) FOR PURPOSES OF CALCULATING

4 MEDICARE+CHOICE PAYMENT RATES.—Section 

5 1853(c)(3) (42 U.S.C. 1395w–23(c)(3)), as amended 

6 by section 203, is amended—

7 (A) in subparagraph (A), by striking ‘‘sub8 paragraph (B)’’ and inserting ‘‘subparagraphs 

9 (B) and (E)’’; and 

10 (B) by adding at the end the following new 

11 subparagraph: 

12 ‘‘(E) INCLUSION OF COSTS OF DOD AND

13 VA MILITARY FACILITY SERVICES TO MEDICARE14 ELIGIBLE BENEFICIARIES.—In determining the 

15 area-specific Medicare+Choice capitation rate 

16 under subparagraph (A) for a year (beginning 

17 with 2006), the annual per capita rate of pay18 ment for 1997 determined under section 

19 1876(a)(1)(C) shall be adjusted to include in 

20 the rate the Secretary’s estimate, on a per cap21 ita basis, of the amount of additional payments 

22 that would have been made in the area involved 

23 under this title if individuals entitled to benefits 

24 under this title had not received services from 
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1 facilities of the Department of Defense or the 

2 Department of Veterans Affairs.’’. 

3 (2) FOR PURPOSES OF CALCULATING LOCAL

4 FEE-FOR-SERVICE RATES.—Section 1853(d)(5) (42 

5 U.S.C. 1395w–23(d)(5)), as amended by section 

6 203, is amended—

7 (A) in subparagraph (A), by striking ‘‘sub8 paragraph (B)’’ and inserting ‘‘subparagraphs 

9 (B) and (C)’’; and 

10 (B) by adding at the end the following new 

11 subparagraph: 

12 ‘‘(C) INCLUSION OF COSTS OF DOD AND VA

13 MILITARY FACILITY SERVICES TO MEDICARE14 ELIGIBLE BENEFICIARIES.—In determining the 

15 local fee-for-service rate under subparagraph 

16 (A) for a year (beginning with 2006), the an17 nual per capita rate of payment for 1997 deter18 mined under section 1876(a)(1)(C) shall be ad19 justed to include in the rate the Secretary’s es20 timate, on a per capita basis, of the amount of 

21 additional payments that would have been made 

22 in the area involved under this title if individ23 uals entitled to benefits under this title had not 

24 received services from facilities of the Depart-
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1 ment of Defense or the Department of Veterans 

2 Affairs.’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply with respect to plan years begin5 ning on and after January 1, 2006. 

6 Subtitle B—Preferred Provider 

7 Organizations 

8 SEC. 211. ESTABLISHMENT OF MEDICAREADVANTAGE PRE9 FERRED PROVIDER PROGRAM OPTION. 

10 (a) ESTABLISHMENT OF PREFERRED PROVIDER

11 PROGRAM OPTION.—Section 1851(a)(2) is amended by 

12 adding at the end the following new subparagraph: 

13 ‘‘(D) PREFERRED PROVIDER ORGANIZA14 TION PLANS.—A MedicareAdvantage preferred 

15 provider organization plan under the program 

16 established under section 1858.’’. 

17 (b) PROGRAM SPECIFICATIONS.—Part C of title 

18 XVIII (42 U.S.C. 1395w–21 et seq.) is amended by insert19 ing after section 1857 the following new section: 

20 ‘‘PREFERRED PROVIDER ORGANIZATIONS

21 ‘‘SEC. 1858. (a) ESTABLISHMENT OF PROGRAM.—

22 ‘‘(1) IN GENERAL.—Beginning on January 1, 

23 2006, there is established a preferred provider pro24 gram under which preferred provider organization 

25 plans offered by preferred provider organizations are 
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1 offered to MedicareAdvantage eligible individuals in 

2 preferred provider regions. 

3 ‘‘(2) DEFINITIONS.—

4 ‘‘(A) PREFERRED PROVIDER ORGANIZA5 TION.—The term ‘preferred provider organiza6 tion’ means an entity with a contract under sec7 tion 1857 that meets the requirements of this 

8 section applicable with respect to preferred pro9 vider organizations. 

10 ‘‘(B) PREFERRED PROVIDER ORGANIZA11 TION PLAN.—The term ‘preferred provider or12 ganization plan’ means a MedicareAdvantage 

13 plan that—

14 ‘‘(i) has a network of providers that 

15 have agreed to a contractually specified re16 imbursement for covered benefits with the 

17 organization offering the plan; 

18 ‘‘(ii) provides for reimbursement for 

19 all covered benefits regardless of whether 

20 such benefits are provided within such net21 work of providers; and 

22 ‘‘(iii) is offered by a preferred pro23 vider organization. 

24 ‘‘(C) PREFERRED PROVIDER REGION.—

25 The term ‘preferred provider region’ means—
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1 ‘‘(i) a region established under para2 graph (3); and 

3 ‘‘(ii) a region that consists of the en4 tire United States. 

5 ‘‘(3) PREFERRED PROVIDER REGIONS.—For 

6 purposes of this part the Secretary shall establish 

7 preferred provider regions as follows: 

8 ‘‘(A) There shall be at least 10 regions. 

9 ‘‘(B) Each region must include at least 1 

10 State. 

11 ‘‘(C) The Secretary may not divide States 

12 so that portions of the State are in different re13 gions. 

14 ‘‘(D) To the extent possible, the Secretary 

15 shall include multistate metropolitan statistical 

16 areas in a single region. The Secretary may di17 vide metropolitan statistical areas where it is 

18 necessary to establish regions of such size and 

19 geography as to maximize the participation of 

20 preferred provider organization plans. 

21 ‘‘(E) The Secretary may conform the pre22 ferred provider regions to the service areas es23 tablished under section 1860D–10. 

24 ‘‘(b) ELIGIBILITY, ELECTION, AND ENROLLMENT; 

25 BENEFITS AND BENEFICIARY PROTECTIONS.—
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1 ‘‘(1) IN GENERAL.—Except as provided in the 

2 succeeding provisions of this subsection, the provi3 sions of sections 1851 and 1852 that apply with re4 spect to coordinated care plans shall apply to pre5 ferred provider organization plans offered by a pre6 ferred provider organization. 

7 ‘‘(2) SERVICE AREA.—The service area of a 

8 preferred provider organization plan shall be a pre9 ferred provider region. 

10 ‘‘(3) AVAILABILITY.—Each preferred provider 

11 organization plan must be offered to each 

12 MedicareAdvantage eligible individual who resides in 

13 the service area of the plan. 

14 ‘‘(4) AUTHORITY TO PROHIBIT RISK SELEC15 TION.—The provisions of section 1852(a)(6) shall 

16 apply to preferred provider organization plans. 

17 ‘‘(5) ASSURING ACCESS TO SERVICES IN PRE18 FERRED PROVIDER ORGANIZATION PLANS.—

19 ‘‘(A) IN GENERAL.—In addition to any 

20 other requirements under this section, in the 

21 case of a preferred provider organization plan, 

22 the organization offering the plan must dem23 onstrate to the Secretary that the organization 

24 has sufficient number and range of health care 
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1 professionals and providers willing to provide 

2 services under the terms of the plan. 

3 ‘‘(B) DETERMINATION OF SUFFICIENT AC4 CESS.—The Secretary shall find that an organi5 zation has met the requirement under subpara6 graph (A) with respect to any category of 

7 health care professional or provider if, with re8 spect to that category of provider the plan has 

9 contracts or agreements with a sufficient num10 ber and range of providers within such category 

11 to provide covered services under the terms of 

12 the plan. 

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

14 shall not be construed as restricting—

15 ‘‘(i) the persons from whom enrollees 

16 under such plan may obtain covered bene17 fits; or 

18 ‘‘(ii) the categories of licensed health 

19 professionals or providers from whom en20 rollees under such a plan may obtain cov21 ered benefits if the covered services are 

22 provided to enrollees in a State where 25 

23 percent or more of the population resides 

24 in health professional shortage areas des-
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1 ignated pursuant to section 332 of the 

2 Public Health Service Act. 

3 ‘‘(c) PAYMENTS TO PREFERRED PROVIDER ORGANI4 ZATIONS.—

5 ‘‘(1) PAYMENTS TO ORGANIZATIONS.—

6 ‘‘(A) MONTHLY PAYMENTS.—

7 ‘‘(i) IN GENERAL.—Under a contract 

8 under section 1857 and subject to para9 graph (5), subsection (e), and section 

10 1859(e)(4), the Secretary shall make, to 

11 each preferred provider organization, with 

12 respect to coverage of an individual for a 

13 month under this part in a preferred pro14 vider region, separate monthly payments 

15 with respect to— 

16 ‘‘(I) benefits under the original 

17 medicare fee-for-service program 

18 under parts A and B in accordance 

19 with paragraph (4); and 

20 ‘‘(II) benefits under the vol21 untary prescription drug program 

22 under part D in accordance with sec23 tion 1858A and the other provisions 

24 of this part. 
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1 ‘‘(ii) SPECIAL RULE FOR END-STAGE

2 RENAL DISEASE.—The Secretary shall es3 tablish separate rates of payment applica4 ble with respect to classes of individuals 

5 determined to have end-stage renal disease 

6 and enrolled in a preferred provider orga7 nization plan under this clause that are 

8 similar to the separate rates of payment 

9 described in section 1853(a)(1)(B). 

10 ‘‘(B) ADJUSTMENT TO REFLECT NUMBER

11 OF ENROLLEES.—The Secretary may retro12 actively adjust the amount of payment under 

13 this paragraph in a manner that is similar to 

14 the manner in which payment amounts may be 

15 retroactively adjusted under section 1853(a)(2). 

16 ‘‘(C) COMPREHENSIVE RISK ADJUSTMENT

17 METHODOLOGY.—The Secretary shall apply the 

18 comprehensive risk adjustment methodology de19 scribed in section 1853(a)(3)(B) to 100 percent 

20 of the amount of payments to plans under para21 graph (4)(D)(ii). 

22 ‘‘(D) ADJUSTMENT FOR SPENDING VARI23 ATIONS WITHIN A REGION.—The Secretary 

24 shall establish a methodology for adjusting the 

25 amount of payments to plans under paragraph 
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1 (4)(D)(ii) that achieves the same objective as 

2 the adjustment described in paragraph 

3 1853(a)(2)(C). 

4 ‘‘(2) ANNUAL CALCULATION OF BENCHMARK

5 AMOUNTS FOR PREFERRED PROVIDER REGIONS.—

6 For each year (beginning in 2006), the Secretary 

7 shall calculate a benchmark amount for each pre8 ferred provider region for each month for such year 

9 with respect to coverage of the benefits available 

10 under the original medicare fee-for-service program 

11 option equal to the average of each benchmark 

12 amount calculated under section 1853(a)(4) for each 

13 MedicareAdvantage payment area for the year with14 in such region, weighted by the number of 

15 MedicareAdvantage eligible individuals residing in 

16 each such payment area for the year. 

17 ‘‘(3) ANNUAL ANNOUNCEMENT OF PAYMENT

18 FACTORS.—

19 ‘‘(A) ANNUAL ANNOUNCEMENT.—Begin20 ning in 2005, at the same time as the Secretary 

21 publishes the risk adjusters under section 

22 1860D–11, the Secretary shall annually an23 nounce (in a manner intended to provide notice 

24 to interested parties) the following payment fac25 tors: 
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1 ‘‘(i) The benchmark amount for each 

2 preferred provider region (as calculated 

3 under paragraph (2)(A)) for the year. 

4 ‘‘(ii) The factors to be used for ad5 justing payments described under—

6 ‘‘(I) the comprehensive risk ad7 justment methodology described in 

8 paragraph (1)(C) with respect to each 

9 preferred provider region for the year; 

10 and 

11 ‘‘(II) the methodology used for 

12 adjustment for geographic variations 

13 within such region established under 

14 paragraph (1)(D). 

15 ‘‘(B) ADVANCE NOTICE OF METHODO16 LOGICAL CHANGES.—At least 45 days before 

17 making the announcement under subparagraph 

18 (A) for a year, the Secretary shall—

19 ‘‘(i) provide for notice to preferred 

20 provider organizations of proposed changes 

21 to be made in the methodology from the 

22 methodology and assumptions used in the 

23 previous announcement; and 
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1 ‘‘(ii) provide such organizations with 

2 an opportunity to comment on such pro3 posed changes. 

4 ‘‘(C) EXPLANATION OF ASSUMPTIONS.—In 

5 each announcement made under subparagraph 

6 (A), the Secretary shall include an explanation 

7 of the assumptions and changes in methodology 

8 used in the announcement in sufficient detail so 

9 that preferred provider organizations can com10 pute each payment factor described in such 

11 subparagraph. 

12 ‘‘(4) SECRETARY’S DETERMINATION OF PAY13 MENT AMOUNT FOR BENEFITS UNDER THE ORIGI14 NAL MEDICARE FEE-FOR-SERVICE PROGRAM.—The 

15 Secretary shall determine the payment amount for 

16 plans as follows: 

17 ‘‘(A) REVIEW OF PLAN BIDS.—The Sec18 retary shall review each plan bid submitted 

19 under subsection (d)(1) for the coverage of ben20 efits under the original medicare fee-for-service 

21 program option to ensure that such bids are 

22 consistent with the requirements under this 

23 part and are based on the assumptions de24 scribed in section 1854(a)(2)(A)(iii) that the 
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1 plan used with respect to numbers of enrolled 

2 individuals. 

3 ‘‘(B) DETERMINATION OF PREFERRED

4 PROVIDER REGIONAL BENCHMARK AMOUNTS.—

5 The Secretary shall calculate a preferred pro6 vider regional benchmark amount for that plan 

7 for the benefits under the original medicare fee8 for-service program option for each plan equal 

9 to the regional benchmark adjusted by using 

10 the assumptions described in section 

11 1854(a)(2)(A)(iii) that the plan used with re12 spect to numbers of enrolled individuals. 

13 ‘‘(C) COMPARISON TO BENCHMARK.—The 

14 Secretary shall determine the difference be15 tween each plan bid (as adjusted under sub16 paragraph (A)) and the preferred provider re17 gional benchmark amount (as determined under 

18 subparagraph (B)) for purposes of deter19 mining—

20 ‘‘(i) the payment amount under sub21 paragraph (D); and 

22 ‘‘(ii) the additional benefits required 

23 and MedicareAdvantage monthly basic ben24 eficiary premiums. 
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1 ‘‘(D) DETERMINATION OF PAYMENT

2 AMOUNT.—

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

4 (ii), the Secretary shall determine the pay5 ment amount to a preferred provider orga6 nization for a preferred provider organiza7 tion plan as follows: 

8 ‘‘(I) BIDS THAT EQUAL OR EX9 CEED THE BENCHMARK.—In the case 

10 of a plan bid that equals or exceeds 

11 the preferred provider regional bench12 mark amount, the amount of each 

13 monthly payment to the organization 

14 with respect to each individual en15 rolled in a plan shall be the preferred 

16 provider regional benchmark amount. 

17 ‘‘(II) BIDS BELOW THE BENCH18 MARK.—In the case of a plan bid that 

19 is less than the preferred provider re20 gional benchmark amount, the 

21 amount of each monthly payment to 

22 the organization with respect to each 

23 individual enrolled in a plan shall be 

24 the preferred provider regional bench25 mark amount reduced by the amount 
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1 of any premium reduction elected by 

2 the plan under section 

3 1854(d)(1)(A)(i). 

4 ‘‘(ii) APPLICATION OF ADJUSTMENT

5 METHODOLOGIES.—The Secretary shall ad6 just the amounts determined under sub7 paragraph (A) using the factors described 

8 in paragraph (3)(A)(ii). 

9 ‘‘(E) FACTORS USED IN ADJUSTING BIDS

10 AND BENCHMARKS FOR PREFERRED PROVIDER

11 ORGANIZATIONS AND IN DETERMINING EN12 ROLLEE PREMIUMS.—Subject to subparagraph 

13 (F), in addition to the factors used to adjust 

14 payments to plans described in section 

15 1853(d)(6), the Secretary shall use the adjust16 ment for geographic variation within the region 

17 established under paragraph (1)(D). 

18 ‘‘(F) ADJUSTMENT FOR NATIONAL COV19 ERAGE DETERMINATIONS AND LEGISLATIVE

20 CHANGES IN BENEFITS.—The Secretary shall 

21 provide for adjustments for national coverage 

22 determinations and legislative changes in bene23 fits applicable with respect to preferred provider 

24 organizations in the same manner as the Sec-
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1 retary provides for adjustments under section 

2 1853(d)(7). 

3 ‘‘(5) PAYMENTS FROM TRUST FUND.—The pay4 ment to a preferred provider organization under this 

5 section shall be made from the Federal Hospital In6 surance Trust Fund and the Federal Supplementary 

7 Medical Insurance Trust Fund in a manner similar 

8 to the manner described in section 1853(g). 

9 ‘‘(6) SPECIAL RULE FOR CERTAIN INPATIENT

10 HOSPITAL STAYS.—Rules similar to the rules appli11 cable under section 1853(h) shall apply with respect 

12 preferred provider organizations. 

13 ‘‘(7) SPECIAL RULE FOR HOSPICE CARE.—

14 Rules similar to the rules applicable under section 

15 1853(i) shall apply with respect to preferred pro16 vider organizations. 

17 ‘‘(d) SUBMISSION OF BIDS BY PPOS; PREMIUMS.—

18 ‘‘(1) SUBMISSION OF BIDS BY PREFERRED PRO19 VIDER ORGANIZATIONS.—

20 ‘‘(A) IN GENERAL.—For the requirements 

21 on submissions by MedicareAdvantage preferred 

22 provider organization plans, see section 

23 1854(a)(1). 

24 ‘‘(B) UNIFORM PREMIUMS.—Each bid 

25 amount submitted under subparagraph (A) for 
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1 a preferred provider organization plan in a pre2 ferred provider region may not vary among 

3 MedicareAdvantage eligible individuals residing 

4 in such preferred provider region. 

5 ‘‘(C) APPLICATION OF FEHBP STANDARD; 

6 PROHIBITION ON PRICE GOUGING.—Each bid 

7 amount submitted under subparagraph (A) for 

8 a preferred provider organization plan must 

9 reasonably and equitably reflect the cost of ben10 efits provided under that plan. 

11 ‘‘(D) REVIEW.—The Secretary shall review 

12 the adjusted community rates (as defined in 

13 section 1854(g)(3)), the amounts of the 

14 MedicareAdvantage monthly basic premium and 

15 the MedicareAdvantage monthly beneficiary 

16 premium for enhanced medical benefits filed 

17 under this paragraph and shall approve or dis18 approve such rates and amounts so submitted. 

19 The Secretary shall review the actuarial as20 sumptions and data used by the preferred pro21 vider organization with respect to such rates 

22 and amounts so submitted to determine the ap23 propriateness of such assumptions and data. 

24 ‘‘(E) AUTHORITY TO LIMIT NUMBER OF

25 PLANS IN A REGION.—If there are bids for 
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1 more than 3 preferred provider organization 

2 plans in a preferred provider region, the Sec3 retary shall accept only the 3 lowest-cost cred4 ible bids for that region that meet or exceed the 

5 quality and minimum standards applicable 

6 under this section. 

7 ‘‘(2) MONTHLY PREMIUMS CHARGED.—The 

8 amount of the monthly premium charged to an indi9 vidual enrolled in a preferred provider organization 

10 plan offered by a preferred provider organization 

11 shall be equal to the sum of the following: 

12 ‘‘(A) The MedicareAdvantage monthly 

13 basic beneficiary premium, as defined in section 

14 1854(b)(2)(A) (if any). 

15 ‘‘(B) The MedicareAdvantage monthly ben16 eficiary premium for enhanced medical benefits, 

17 as defined in section 1854(b)(2)(C) (if any). 

18 ‘‘(C) The MedicareAdvantage monthly obli19 gation for qualified prescription drug coverage, 

20 as defined in section 1854(b)(2)(B) (if any). 

21 ‘‘(3) DETERMINATION OF PREMIUM REDUC22 TIONS, REDUCED COST-SHARING, ADDITIONAL BENE23 FITS, AND BENEFICIARY PREMIUMS.—The rules for 

24 determining premium reductions, reduced cost-shar25 ing, additional benefits, and beneficiary premiums 
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1 under section 1854(d) shall apply with respect to 

2 preferred provider organizations. 

3 ‘‘(4) PROHIBITION OF SEGMENTING PRE4 FERRED PROVIDER REGIONS.—The Secretary may 

5 not permit a preferred provider organization to elect 

6 to apply the provisions of this section uniformly to 

7 separate segments of a preferred provider region 

8 (rather than uniformly to an entire preferred pro9 vider region). 

10 ‘‘(e) PORTION OF TOTAL PAYMENTS TO AN ORGANI11 ZATION SUBJECT TO RISK FOR 2 YEARS.—

12 ‘‘(1) NOTIFICATION OF SPENDING UNDER THE

13 PLAN.—

14 ‘‘(A) IN GENERAL.—For 2007 and 2008, 

15 the preferred provider organization offering a 

16 preferred provider organization plan shall notify 

17 the Secretary of the total amount of costs that 

18 the organization incurred in providing benefits 

19 covered under parts A and B of the original 

20 medicare fee-for-service program for all enroll21 ees under the plan in the previous year. 

22 ‘‘(B) CERTAIN EXPENSES NOT IN23 CLUDED.—The total amount of costs specified 

24 in subparagraph (A) may not include—
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1 ‘‘(i) subject to subparagraph (C), ad2 ministrative expenses incurred in providing 

3 the benefits described in such subpara4 graph; or 

5 ‘‘(ii) amounts expended on providing 

6 enhanced medical benefits under section 

7 1852(a)(3)(D). 

8 ‘‘(C) ESTABLISHMENT OF ALLOWABLE AD9 MINISTRATIVE EXPENSES.—For purposes of ap10 plying subparagraph (B)(i), the administrative 

11 expenses incurred in providing benefits de12 scribed in subparagraph (A) under a preferred 

13 provider organization plan may not exceed an 

14 amount determined appropriate by the Adminis15 trator. 

16 ‘‘(2) ADJUSTMENT OF PAYMENT.—

17 ‘‘(A) NO ADJUSTMENT IF COSTS WITHIN

18 RISK CORRIDOR.—If the total amount of costs 

19 specified in paragraph (1)(A) for the plan for 

20 the year are not more than the first threshold 

21 upper limit of the risk corridor (specified in 

22 paragraph (3)(A)(iii)) and are not less than the 

23 first threshold lower limit of the risk corridor 

24 (specified in paragraph (3)(A)(i)) for the plan 

25 for the year, then no additional payments shall 
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1 be made by the Secretary and no reduced pay2 ments shall be made to the preferred provider 

3 organization offering the plan. 

4 ‘‘(B) INCREASE IN PAYMENT IF COSTS

5 ABOVE UPPER LIMIT OF RISK CORRIDOR.—

6 ‘‘(i) IN GENERAL.—If the total 

7 amount of costs specified in paragraph 

8 (1)(A) for the plan for the year are more 

9 than the first threshold upper limit of the 

10 risk corridor for the plan for the year, then 

11 the Secretary shall increase the total of the 

12 monthly payments made to the preferred 

13 provider organization offering the plan for 

14 the year under subsection (c)(1)(A) by an 

15 amount equal to the sum of—

16 ‘‘(I) 50 percent of the amount of 

17 such total costs which are more than 

18 such first threshold upper limit of the 

19 risk corridor and not more than the 

20 second threshold upper limit of the 

21 risk corridor for the plan for the year 

22 (as specified under paragraph 

23 (3)(A)(iv)); and 

24 ‘‘(II) 90 percent of the amount of 

25 such total costs which are more than 
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1 such second threshold upper limit of 

2 the risk corridor. 

3 ‘‘(C) REDUCTION IN PAYMENT IF COSTS

4 BELOW LOWER LIMIT OF RISK CORRIDOR.—If 

5 the total amount of costs specified in paragraph 

6 (1)(A) for the plan for the year are less than 

7 the first threshold lower limit of the risk cor8 ridor for the plan for the year, then the Sec9 retary shall reduce the total of the monthly pay10 ments made to the preferred provider organiza11 tion offering the plan for the year under sub12 section (c)(1)(A) by an amount (or otherwise 

13 recover from the plan an amount) equal to—

14 ‘‘(i) 50 percent of the amount of such 

15 total costs which are less than such first 

16 threshold lower limit of the risk corridor 

17 and not less than the second threshold 

18 lower limit of the risk corridor for the plan 

19 for the year (as specified under paragraph 

20 (3)(A)(ii)); and 

21 ‘‘(ii) 90 percent of the amount of such 

22 total costs which are less than such second 

23 threshold lower limit of the risk corridor. 

24 ‘‘(3) ESTABLISHMENT OF RISK CORRIDORS.—
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1 ‘‘(A) IN GENERAL.—For 2006 and 2007, 

2 the Secretary shall establish a risk corridor for 

3 each preferred provider organization plan. The 

4 risk corridor for a plan for a year shall be equal 

5 to a range as follows: 

6 ‘‘(i) FIRST THRESHOLD LOWER

7 LIMIT.—The first threshold lower limit of 

8 such corridor shall be equal to—

9 ‘‘(I) the target amount described 

10 in subparagraph (B) for the plan; 

11 minus 

12 ‘‘(II) an amount equal to 5 per13 cent of such target amount. 

14 ‘‘(ii) SECOND THRESHOLD LOWER

15 LIMIT.—The second threshold lower limit 

16 of such corridor shall be equal to—

17 ‘‘(I) the target amount described 

18 in subparagraph (B) for the plan; 

19 minus 

20 ‘‘(II) an amount equal to 10 per21 cent of such target amount. 

22 ‘‘(iii) FIRST THRESHOLD UPPER

23 LIMIT.—The first threshold upper limit of 

24 such corridor shall be equal to the sum 

25 of—
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1 ‘‘(I) such target amount; and 

2 ‘‘(II) the amount described in 

3 clause (i)(II). 

4 ‘‘(iv) SECOND THRESHOLD UPPER

5 LIMIT.—The second threshold upper limit 

6 of such corridor shall be equal to the sum 

7 of—

8 ‘‘(I) such target amount; and 

9 ‘‘(II) the amount described in 

10 clause (ii)(II). 

11 ‘‘(B) TARGET AMOUNT DESCRIBED.—The 

12 target amount described in this paragraph is, 

13 with respect to a preferred provider organiza14 tion plan offered by a preferred provider organi15 zation in a year, an amount equal to the sum 

16 of—

17 ‘‘(i) the total monthly payments made 

18 to the organization for enrollees in the 

19 plan for the year under subsection 

20 (c)(1)(A); and 

21 ‘‘(ii) the total MedicareAdvantage 

22 basic beneficiary premiums collected for 

23 such enrollees for the year under sub24 section (d)(2)(A). 
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1 ‘‘(4) PLANS AT RISK FOR ENTIRE AMOUNT OF

2 ENHANCED MEDICAL BENEFITS.—A preferred pro3 vider organization that offers a preferred provider 

4 organization plan that provides enhanced medial 

5 benefits under section 1852(a)(3)(D) shall be at full 

6 financial risk for the provision of such benefits. 

7 ‘‘(5) NO EFFECT ON ELIGIBLE BENE8 FICIARIES.—No change in payments made by reason 

9 of this subsection shall affect the amount of the 

10 MedicareAdvantage basic beneficiary premium that a 

11 beneficiary is otherwise required to pay under the 

12 plan for the year under subsection (d)(2)(A). 

13 ‘‘(6) DISCLOSURE OF INFORMATION.—The pro14 visions of section 1860D–16(b)(7), including sub15 paragraph (B) of such section, shall apply to a pre16 ferred provider organization and a preferred pro17 vider organization plan in the same manner as such 

18 provisions apply to an eligible entity and a Medicare 

19 Prescription Drug plan under part D. 

20 ‘‘(f) ORGANIZATIONAL AND FINANCIAL REQUIRE21 MENTS FOR PREFERRED PROVIDER ORGANIZATIONS.—A 

22 preferred provider organization shall be organized and li23 censed under State law as a risk-bearing entity eligible 

24 to offer health insurance or health benefits coverage in 
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1 each State within the preferred provider region in which 

2 it offers a preferred provider organization plan. 

3 ‘‘(g) INAPPLICABILITY OF PROVIDER-SPONSORED

4 ORGANIZATION SOLVENCY STANDARDS.—The require5 ments of section 1856 shall not apply with respect to pre6 ferred provider organizations. 

7 ‘‘(h) CONTRACTS WITH PREFERRED PROVIDER OR8 GANIZATIONS.—The provisions of section 1857 shall apply 

9 to a preferred provider organization plan offered by a pre10 ferred provider organization under this section.’’. 

11 (c) PREFERRED PROVIDER TERMINOLOGY DE12 FINED.—Section 1859(a) is amended by adding at the end 

13 the following new paragraph: 

14 ‘‘(3) PREFERRED PROVIDER ORGANIZATION; 

15 PREFERRED PROVIDER ORGANIZATION PLAN; PRE16 FERRED PROVIDER REGION.—The terms ‘preferred 

17 provider organization’, ‘preferred provider organiza18 tion plan’, and ‘preferred provider region’ have the 

19 meaning given such terms in section 1858(a)(2).’’. 

20 Subtitle C—Other Managed Care 

21 Reforms 

22 SEC. 221. EXTENSION OF REASONABLE COST CONTRACTS. 

23 (a) FIVE-YEAR EXTENSION.—Section 1876(h)(5)(C) 

24 (42 U.S.C. 1395mm(h)(5)(C)) is amended by striking 

25 ‘‘2004’’ and inserting ‘‘2009’’. 
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1 (b) APPLICATION OF CERTAIN MEDICARE+CHOICE

2 REQUIREMENTS TO COST CONTRACTS EXTENDED OR RE3 NEWED AFTER 2003.—Section 1876(h) (42 U.S.C. 

4 1395mm(h)(5)), as amended by subsection (a), is amend5 ed—

6 (1) by redesignating paragraph (5) as para7 graph (6); and 

8 (2) by inserting after paragraph (4) the fol9 lowing new paragraph: 

10 ‘‘(5) Any reasonable cost reimbursement contract 

11 with an eligible organization under this subsection that is 

12 extended or renewed on or after the date of enactment 

13 of the Prescription Drug and Medicare Improvements Act 

14 of 2003 for plan years beginning on or after January 1, 

15 2004, shall provide that the following provisions of the 

16 Medicare+Choice program under part C (and, on and 

17 after January 1, 2006, the provisions of the 

18 MedicareAdvantage program under such part) shall apply 

19 to such organization and such contract in a substantially 

20 similar manner as such provisions apply to 

21 Medicare+Choice organizations and Medicare+Choice 

22 plans (or, on and after January 1, 2006, 

23 MedicareAdvantage organizations and MedicareAdvantage 

24 plans, respectively) under such part: 
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1 ‘‘(A) Paragraph (1) of section 1852(e) (relating 

2 to the requirement of having an ongoing quality as3 surance program) and paragraph (2)(B) of such sec4 tion (relating to the required elements for such a 

5 program). 

6 ‘‘(B) Section 1852(j)(4) (relating to limitations 

7 on physician incentive plans). 

8 ‘‘(C) Section 1854(c) (relating to the require9 ment of uniform premiums among individuals en10 rolled in the plan). 

11 ‘‘(D) Section 1854(g), or, on and after January 

12 1, 2006, section 1854(h) (relating to restrictions on 

13 imposition of premium taxes with respect to pay14 ments to organizations). 

15 ‘‘(E) Section 1856(b) (regarding compliance 

16 with the standards established by regulation pursu17 ant to such section, including the provisions of para18 graph (3) of such section relating to relation to 

19 State laws). 

20 ‘‘(F) Section 1852(a)(3)(A) (regarding the au21 thority of organizations to include supplemental 

22 health care benefits and, on and after January 1, 

23 2006, enhanced medical benefits under the plan sub24 ject to the approval of the Secretary). 
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1 ‘‘(G) The provisions of part C relating to 

2 timelines for benefit filings, contract renewal, and 

3 beneficiary notification. 

4 ‘‘(H) Section 1854(e), or, on and after January 

5 1, 2006, section 1854(f) (relating to proposed cost6 sharing under the contract being subject to review 

7 by the Secretary).’’. 

8 (c) PERMITTING DEDICATED GROUP PRACTICE

9 HEALTH MAINTENANCE ORGANIZATIONS TO PARTICI10 PATE IN THE MEDICARE COST CONTRACT PROGRAM.—

11 Section 1876(h)(6) of the Social Security Act (42 U.S.C. 

12 1395mm(h)(6)), as redesignated and amended by sub13 sections (a) and (b), is amended—

14 (1) in subparagraph (A), by striking ‘‘After the 

15 date of the enactment’’ and inserting ‘‘Except as 

16 provided in subparagraph (C), after the date of the 

17 enactment’’; 

18 (2) in subparagraph (B), by striking ‘‘subpara19 graph (C)’’ and inserting ‘‘subparagraph (D)’’; 

20 (3) by redesignating subparagraph (C) as sub21 paragraph (D); and 

22 (4) by inserting after subparagraph (B), the 

23 following new subparagraph: 
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1 ‘‘(C) Subject to paragraph (5) and subparagraph 

2 (D), the Secretary shall approve an application to enter 

3 into a reasonable cost contract under this section if—

4 ‘‘(i) the application is submitted to the Sec5 retary by a health maintenance organization (as de6 fined in section 1301(a) of the Public Health Service 

7 Act) that, as of January 1, 2004, and except as pro8 vided in section 1301(b)(3)(B) of such Act, provides 

9 at least 85 percent of the services of a physician 

10 which are provided as basic health services through 

11 a medical group (or groups), as defined in section 

12 1302(4) of such Act; and 

13 ‘‘(ii) the Secretary determines that the organi14 zation meets the requirements applicable to such or15 ganizations and contracts under this section.’’. 

16 SEC. 222. SPECIALIZED MEDICARE+CHOICE PLANS FOR 

17 SPECIAL NEEDS BENEFICIARIES. 

18 (a) TREATMENT AS COORDINATED CARE PLAN.—

19 Section 1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)) is 

20 amended by adding at the end the following new sentence: 

21 ‘‘Specialized Medicare+Choice plans for special needs 

22 beneficiaries (as defined in section 1859(b)(4)) may be 

23 any type of coordinated care plan.’’. 

24 (b) SPECIALIZED MEDICARE+CHOICE PLAN FOR

25 SPECIAL NEEDS BENEFICIARIES DEFINED.—Section 
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1 1859(b) (42 U.S.C. 1395w–28(b)) is amended by adding 

2 at the end the following new paragraph: 

3 ‘‘(4) SPECIALIZED MEDICARE+CHOICE PLANS

4 FOR SPECIAL NEEDS BENEFICIARIES.—

5 ‘‘(A) IN GENERAL.—The term ‘specialized 

6 Medicare+Choice plans for special needs bene7 ficiaries’ means a Medicare+Choice plan that—

8 ‘‘(i) exclusively serves special needs 

9 beneficiaries (as defined in subparagraph 

10 (B)), or 

11 ‘‘(ii) to the extent provided in regula12 tions prescribed by the Secretary, dis13 proportionately serves such special needs 

14 beneficiaries, frail elderly medicare bene15 ficiaries, or both. 

16 ‘‘(B) SPECIAL NEEDS BENEFICIARY.—The 

17 term ‘special needs beneficiary’ means a 

18 Medicare+Choice eligible individual who—

19 ‘‘(i) is institutionalized (as defined by 

20 the Secretary); 

21 ‘‘(ii) is entitled to medical assistance 

22 under a State plan under title XIX; or 

23 ‘‘(iii) meets such requirements as the 

24 Secretary may determine would benefit 

25 from enrollment in such a specialized 
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1 Medicare+Choice plan described in sub2 paragraph (A) for individuals with severe 

3 or disabling chronic conditions.’’. 

4 (c) RESTRICTION ON ENROLLMENT PERMITTED.—

5 Section 1859 (42 U.S.C. 1395w–28) is amended by add6 ing at the end the following new subsection: 

7 ‘‘(f) RESTRICTION ON ENROLLMENT FOR SPECIAL8 IZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS

9 BENEFICIARIES.—In the case of a specialized 

10 Medicare+Choice plan (as defined in subsection (b)(4)), 

11 notwithstanding any other provision of this part and in 

12 accordance with regulations of the Secretary and for peri13 ods before January 1, 2008, the plan may restrict the en14 rollment of individuals under the plan to individuals who 

15 are within 1 or more classes of special needs bene16 ficiaries.’’. 

17 (d) REPORT TO CONGRESS.—Not later than Decem18 ber 31, 2006, the Secretary shall submit to Congress a 

19 report that assesses the impact of specialized 

20 Medicare+Choice plans for special needs beneficiaries on 

21 the cost and quality of services provided to enrollees. Such 

22 report shall include an assessment of the costs and savings 

23 to the medicare program as a result of amendments made 

24 by subsections (a), (b), and (c). 

25 (e) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by 

2 subsections (a), (b), and (c) shall take effect on the 

3 date of enactment of this Act. 

4 (2) DEADLINE FOR ISSUANCE OF REQUIRE5 MENTS FOR SPECIAL NEEDS BENEFICIARIES; TRAN6 SITION.—No later than 1 year after the date of en7 actment of this Act, the Secretary shall issue final 

8 regulations to establish requirements for special 

9 needs beneficiaries under section 1859(b)(4)(B)(iii) 

10 of the Social Security Act, as added by subsection 

11 (b). 

12 SEC. 223. PAYMENT BY PACE PROVIDERS FOR MEDICARE 

13 AND MEDICAID SERVICES FURNISHED BY 

14 NONCONTRACT PROVIDERS. 

15 (a) MEDICARE SERVICES.—

16 (1) MEDICARE SERVICES FURNISHED BY PRO17 VIDERS OF SERVICES.—Section 1866(a)(1)(O) (42 

18 U.S.C. 1395cc(a)(1)(O)) is amended—

19 (A) by striking ‘‘part C or’’ and inserting 

20 ‘‘part C, with a PACE provider under section 

21 1894 or 1934, or’’; 

22 (B) by striking ‘‘(i)’’; 

23 (C) by striking ‘‘and (ii)’’; and 

24 (D) by striking ‘‘members of the organiza25 tion’’ and inserting ‘‘members of the organiza-
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1 tion or PACE program eligible individuals en2 rolled with the PACE provider,’’. 

3 (2) MEDICARE SERVICES FURNISHED BY PHYSI4 CIANS AND OTHER ENTITIES.—Section 1894(b) (42 

5 U.S.C. 1395eee(b)) is amended by adding at the end 

6 the following new paragraphs: 

7 ‘‘(3) TREATMENT OF MEDICARE SERVICES FUR8 NISHED BY NONCONTRACT PHYSICIANS AND OTHER

9 ENTITIES.—

10 ‘‘(A) APPLICATION OF MEDICARE+CHOICE

11 REQUIREMENT WITH RESPECT TO MEDICARE

12 SERVICES FURNISHED BY NONCONTRACT PHY13 SICIANS AND OTHER ENTITIES.—Section 

14 1852(k)(1) (relating to limitations on balance 

15 billing against Medicare+Choice organizations 

16 for noncontract physicians and other entities 

17 with respect to services covered under this title) 

18 shall apply to PACE providers, PACE program 

19 eligible individuals enrolled with such PACE 

20 providers, and physicians and other entities 

21 that do not have a contract establishing pay22 ment amounts for services furnished to such an 

23 individual in the same manner as such section 

24 applies to Medicare+Choice organizations, indi25 viduals enrolled with such organizations, and 
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1 physicians and other entities referred to in such 

2 section. 

3 ‘‘(B) REFERENCE TO RELATED PROVISION

4 FOR NONCONTRACT PROVIDERS OF SERVICES.—

5 For the provision relating to limitations on bal6 ance billing against PACE providers for serv7 ices covered under this title furnished by non8 contract providers of services, see section 

9 1866(a)(1)(O). 

10 ‘‘(4) REFERENCE TO RELATED PROVISION

11 FOR SERVICES COVERED UNDER TITLE XIX BUT

12 NOT UNDER THIS TITLE.—For provisions relat13 ing to limitations on payments to providers par14 ticipating under the State plan under title XIX 

15 that do not have a contract with a PACE pro16 vider establishing payment amounts for services 

17 covered under such plan (but not under this 

18 title) when such services are furnished to enroll19 ees of that PACE provider, see section 

20 1902(a)(66).’’. 

21 (b) MEDICAID SERVICES.—

22 (1) REQUIREMENT UNDER STATE PLAN.—Sec23 tion 1902(a) (42 U.S.C. 1396a(a)) is amended—

24 (A) in paragraph (64), by striking ‘‘and’’ 

25 at the end; 
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1 (B) in paragraph (65), by striking the pe2 riod at the end and inserting ‘‘; and’’; and 

3 (C) by inserting after paragraph (65) the 

4 following new paragraph: 

5 ‘‘(66) provide, with respect to services cov6 ered under the State plan (but not under title 

7 XVIII) that are furnished to a PACE program 

8 eligible individual enrolled with a PACE pro9 vider by a provider participating under the 

10 State plan that does not have a contract with 

11 the PACE provider that establishes payment 

12 amounts for such services, that such partici13 pating provider may not require the PACE pro14 vider to pay the participating provider an 

15 amount greater than the amount that would 

16 otherwise be payable for the service to the par17 ticipating provider under the State plan for the 

18 State where the PACE provider is located (in 

19 accordance with regulations issued by the Sec20 retary).’’. 

21 (2) REFERENCE IN MEDICAID STATUTE.—Sec22 tion 1934(b) (42 U.S.C. 1396u–4(b)) is amended by 

23 adding at the end the following new paragraphs: 
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1 ‘‘(3) TREATMENT OF MEDICARE SERVICES FUR2 NISHED BY NONCONTRACT PHYSICIANS AND OTHER

3 ENTITIES.—

4 ‘‘(A) APPLICATION OF MEDICARE+CHOICE

5 REQUIREMENT WITH RESPECT TO MEDICARE

6 SERVICES FURNISHED BY NONCONTRACT PHY7 SICIANS AND OTHER ENTITIES.—Section 

8 1852(k)(1) (relating to limitations on balance 

9 billing against Medicare+Choice organizations 

10 for noncontract physicians and other entities 

11 with respect to services covered under title 

12 XVIII) shall apply to PACE providers, PACE 

13 program eligible individuals enrolled with such 

14 PACE providers, and physicians and other enti15 ties that do not have a contract establishing 

16 payment amounts for services furnished to such 

17 an individual in the same manner as such sec18 tion applies to Medicare+Choice organizations, 

19 individuals enrolled with such organizations, 

20 and physicians and other entities referred to in 

21 such section. 

22 ‘‘(B) REFERENCE TO RELATED PROVISION

23 FOR NONCONTRACT PROVIDERS OF SERVICES.—

24 For the provision relating to limitations on bal25 ance billing against PACE providers for serv-
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1 ices covered under title XVIII furnished by non2 contract providers of services, see section 

3 1866(a)(1)(O). 

4 ‘‘(4) REFERENCE TO RELATED PROVISION

5 FOR SERVICES COVERED UNDER THIS TITLE

6 BUT NOT UNDER TITLE XVIII.—For provisions 

7 relating to limitations on payments to providers 

8 participating under the State plan under this 

9 title that do not have a contract with a PACE 

10 provider establishing payment amounts for serv11 ices covered under such plan (but not under 

12 title XVIII) when such services are furnished to 

13 enrollees of that PACE provider, see section 

14 1902(a)(66).’’. 

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

16 this section shall apply to services furnished on or after 

17 January 1, 2004. 

18 SEC. 224. INSTITUTE OF MEDICINE EVALUATION AND RE19 PORT ON HEALTH CARE PERFORMANCE 

20 MEASURES. 

21 (a) EVALUATION.—

22 (1) IN GENERAL.—Not later than the date that 

23 is 2 months after the date of enactment of this Act, 

24 the Secretary of Health and Human Services shall 

25 enter into an arrangement under which the Institute 
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1 of Medicine of the National Academy of Sciences (in 

2 this section referred to as the ‘‘Institute’’) shall con3 duct an evaluation of leading health care perform4 ance measures and options to implement policies 

5 that align performance with payment under the 

6 medicare program under title XVIII of the Social 

7 Security Act (42 U.S.C. 1395 et seq.). 

8 (2) SPECIFIC MATTERS EVALUATED.—In con9 ducting the evaluation under paragraph (1), the In10 stitute shall—

11 (A) catalogue, review, and evaluate the va12 lidity of leading health care performance meas13 ures; 

14 (B) catalogue and evaluate the success and 

15 utility of alternative performance incentive pro16 grams in public or private sector settings; and 

17 (C) identify and prioritize options to imple18 ment policies that align performance with pay19 ment under the medicare program that indi20 cate— 

21 (i) the performance measurement set 

22 to be used and how that measurement set 

23 will be updated; 

24 (ii) the payment policy that will re25 ward performance; and 
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1 (iii) the key implementation issues 

2 (such as data and information technology 

3 requirements) that must be addressed. 

4 (3) SCOPE OF HEALTH CARE PERFORMANCE

5 MEASURES.—The health care performance measures 

6 described in paragraph (2)(A) shall encompass a va7 riety of perspectives, including physicians, hospitals, 

8 health plans, purchasers, and consumers. 

9 (4) CONSULTATION WITH MEDPAC.—In evalu10 ating the matters described in paragraph (2)(C), the 

11 Institute shall consult with the Medicare Payment 

12 Advisory Commission established under section 1805 

13 of the Social Security Act (42 U.S.C. 1395b–6). 

14 (b) REPORT.—Not later than the date that is 18 

15 months after the date of enactment of this Act, the Insti16 tute shall submit to the Secretary of Health and Human 

17 Services, the Committees on Ways and Means and Energy 

18 and Commerce of the House of Representatives, and the 

19 Committee on Finance of the Senate a report on the eval20 uation conducted under subsection (a)(1) describing the 

21 findings of such evaluation and recommendations for an 

22 overall strategy and approach for aligning payment with 

23 performance in the original medicare fee-for-service pro24 gram under parts A and B of title XVIII of the Social 

25 Security Act, the Medicare+Choice program under part 
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1 C of such title, and any other programs under such title 

2 XVIII. 

3 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated $1,000,000 for purposes 

5 of conducting the evaluation and preparing the report re6 quired by this section. 

7 SEC. 225. EXPANDING THE WORK OF MEDICARE QUALITY 

8 IMPROVEMENT ORGANIZATIONS TO INCLUDE 

9 PARTS C AND D. 

10 (a) APPLICATION TO MEDICARE MANAGED CARE

11 AND PRESCRIPTION DRUG COVERAGE.—Section 

12 1154(a)(1) (42 U.S.C. 1320c–3(a)(1)) is amended by in13 serting ‘‘, Medicare+Choice organizations and 

14 MedicareAdvantage organizations under part C, and pre15 scription drug card sponsors and eligible entities under 

16 part D’’ after ‘‘under section 1876’’. 

17 (b) PRESCRIPTION DRUG THERAPY QUALITY IM18 PROVEMENT.—Section 1154(a) (42 U.S.C. 1320c–3(a)) is 

19 amended by adding at the end the following new para20 graph: 

21 ‘‘(17) The organization shall execute its respon22 sibilities under subparagraphs (A) and (B) of para23 graph (1) by offering to providers, practitioners, pre24 scription drug card sponsors and eligible entities 

25 under part D, and Medicare+Choice and 
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1 MedicareAdvantage plans under part C quality im2 provement assistance pertaining to prescription drug 

3 therapy. For purposes of this part and title XVIII, 

4 the functions described in this paragraph shall be 

5 treated as a review function.’’. 

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

7 this section shall apply on and after January 1, 2004. 

8 SEC. 226. EXTENSION OF DEMONSTRATION FOR ESRD MAN9 AGED CARE. 

10 The Secretary shall extend without interruption, 

11 through December 31, 2007, the approval of the dem12 onstration project, Contract No. H1021, under the au13 thority of section 2355(b)(1)(B)(iv) of the Deficit Reduc14 tion Act of 1984, as amended by section 13567 of the Om15 nibus Reconciliation Act of 1993. Such approval shall be 

16 subject to the terms and conditions in effect for the 2002 

17 project year with respect to eligible participants and cov18 ered benefits. The Secretary shall set the monthly capita19 tion rate for enrollees on the basis of the reasonable med20 ical and direct administrative costs of providing those ben21 efits to such participants. 
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1 Subtitle D—Evaluation of Alter2 native Payment and Delivery 

3 Systems 

4 SEC. 231. ESTABLISHMENT OF ALTERNATIVE PAYMENT 

5 SYSTEM FOR PREFERRED PROVIDER ORGA6 NIZATIONS IN HIGHLY COMPETITIVE RE7 GIONS. 

8 (a) ESTABLISHMENT OF ALTERNATIVE PAYMENT

9 SYSTEM FOR PREFERRED PROVIDER ORGANIZATIONS IN

10 HIGHLY COMPETITIVE REGIONS.—Section 1858 (as 

11 added by section 211(b)) is amended by adding at the end 

12 the following new subsection: 

13 ‘‘(i) ALTERNATIVE PAYMENT METHODOLOGY FOR

14 HIGHLY COMPETITIVE REGIONS.—

15 ‘‘(1) ANNUAL DETERMINATION AND DESIGNA16 TION.—

17 ‘‘(A) IN 2008.—In 2008, prior to the date 

18 on which the Secretary expects to publish the 

19 risk adjusters under section 1860D–11, the 

20 Secretary shall designate a limited number (but 

21 in no case fewer than 1) of preferred provider 

22 regions (other than the region described in sub23 section (a)(2)(C)(ii)) as highly competitive re24 gions. 
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1 ‘‘(B) SUBSEQUENT YEARS.—For each year 

2 (beginning with 2009) the Secretary may des3 ignate a limited number of preferred provider 

4 regions (other than the region described in sub5 section (a)(2)(C)(ii)) as highly competitive re6 gions in addition to any region designated as a 

7 highly competitive region under subparagraph 

8 (A). 

9 ‘‘(C) CONSIDERATIONS.—In determining 

10 which preferred provider regions to designate as 

11 highly competitive regions under subparagraph 

12 (A) or (B), the Secretary shall consider the fol13 lowing: 

14 ‘‘(i) Whether the application of this 

15 subsection to the preferred provider region 

16 would enhance the participation of pre17 ferred provider organization plans in that 

18 region. 

19 ‘‘(ii) Whether the Secretary antici20 pates that there is likely to be at least 3 

21 bids submitted under subsection (d)(1) 

22 with respect to the preferred provider re23 gion if the Secretary designates such re24 gion as a highly competitive region under 

25 subparagraph (A) or (B). 
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1 ‘‘(iii) Whether the Secretary expects 

2 that MedicareAdvantage eligible individuals 

3 will elect preferred provider organization 

4 plans in the preferred provider region if 

5 the region is designated as a highly com6 petitive region under subparagraph (A) or 

7 (B). 

8 ‘‘(iv) Whether the designation of the 

9 preferred provider region as a highly com10 petitive region will permit compliance with 

11 the limitation described in paragraph (5). 

12 In considering the matters described in clauses 

13 (i) through (iv), the Secretary shall give special 

14 consideration to preferred provider regions 

15 where no bids were submitted under subsection 

16 (d)(1) for the previous year. 

17 ‘‘(2) EFFECT OF DESIGNATION.—If a preferred 

18 provider region is designated as a highly competitive 

19 region under subparagraph (A) or (B) of paragraph 

20 (1)—

21 ‘‘(A) the provisions of this subsection shall 

22 apply to such region and shall supersede the 

23 provisions of this part relating to benchmarks 

24 for preferred provider regions; and 
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1 ‘‘(B) such region shall continue to be a 

2 highly competitive region until such designation 

3 is rescinded pursuant to paragraph (5)(B)(ii). 

4 ‘‘(3) SUBMISSION OF BIDS.—

5 ‘‘(A) IN GENERAL.—Notwithstanding sub6 section (d)(1), for purposes of applying section 

7 1854(a)(2)(A)(i), the plan bid for a highly com8 petitive region shall consist of a dollar amount 

9 that represents the total amount that the plan 

10 is willing to accept (not taking into account the 

11 application of the comprehensive risk adjust12 ment methodology under section 1853(a)(3)) 

13 for providing coverage of only the benefits de14 scribed in section 1852(a)(1)(A) to an indi15 vidual enrolled in the plan that resides in the 

16 service area of the plan for a month. 

17 ‘‘(B) CONSTRUCTION.—Nothing in sub18 paragraph (A) shall be construed as permitting 

19 a preferred provider organization plan not to 

20 provide coverage for the benefits described in 

21 section 1852(a)(1)(C). 

22 ‘‘(4) PAYMENTS TO PREFERRED PROVIDER OR23 GANIZATIONS IN HIGHLY COMPETITIVE AREAS.—

24 With respect to highly competitive regions, the fol25 lowing rules shall apply: 
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1 ‘‘(A) IN GENERAL.—Notwithstanding sub2 section (c), of the plans described in subsection 

3 (d)(1)(E), the Secretary shall substitute the 

4 second lowest bid for the benchmark applicable 

5 under subsection (c)(4). 

6 ‘‘(B) IF THERE ARE FEWER THAN THREE

7 BIDS.—Notwithstanding subsection (c), if there 

8 are fewer than 3 bids in a highly competitive 

9 region for a year, the Secretary shall substitute 

10 the lowest bid for the benchmark applicable 

11 under subsection (c)(4). 

12 ‘‘(5) FUNDING LIMITATION.—

13 ‘‘(A) IN GENERAL.—

14 ‘‘(i) IN GENERAL.—The total amount 

15 expended as a result of the application of 

16 this subsection during the period or year, 

17 as applicable, may not exceed the applica18 ble amount (as defined in clause (ii)). 

19 ‘‘(ii) APPLICABLE AMOUNT DE20 FINED.—In this paragraph, the term ‘ap21 plicable amount’ means—

22 ‘‘(I) for the period beginning on 

23 January 1, 2009, and ending on Sep24 tember 30, 2013, the total amount 

25 that would have been expended under 
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1 this title during the period if this sub2 section had not been enacted plus 

3 $6,000,000,000; and 

4 ‘‘(II) for fiscal year 2014 and 

5 any subsequent fiscal year, the total 

6 amount that would have been ex7 pended under this title during the 

8 year if this subsection had not been 

9 enacted. 

10 ‘‘(B) APPLICATION OF LIMITATION.—If 

11 the Secretary determines that the application of 

12 this subsection will cause expenditures to exceed 

13 the applicable amount, the Secretary shall—

14 ‘‘(i) take appropriate steps to stay 

15 within the applicable amount, including 

16 through providing limitations on enroll17 ment; or 

18 ‘‘(ii) rescind the designation under 

19 subparagraph (A) or (B) of paragraph (1) 

20 of 1 or more preferred provider regions as 

21 highly competitive regions. 

22 ‘‘(C) TRANSITION.—If the Secretary re23 scinds a designation under subparagraph (A) or 

24 (B) of paragraph (1) pursuant to subparagraph 

25 (B)(ii) with respect to a preferred provider re-
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1 gion, the Secretary shall provide for an appro2 priate transition from the payment system ap3 plicable under this subsection to the payment 

4 system described in the other provisions of this 

5 section in that region. Any amount expended by 

6 reason of the preceding sentence shall be con7 sidered to be part of the total amount expended 

8 as a result of the application of this subsection 

9 for purposes of applying the limitation under 

10 subparagraph (A). 

11 ‘‘(D) APPLICATION.—Notwithstanding 

12 paragraph (1)(B), on or after January 1 of the 

13 year in which the fiscal year described in sub14 paragraph (A)(ii)(II) begins, the Secretary may 

15 designate appropriate regions under such para16 graph. 

17 ‘‘(6) LIMITATION OF JUDICIAL REVIEW.—There 

18 shall be no administrative or judicial review under 

19 section 1869, section 1878, or otherwise, of designa20 tions made under subparagraph (A) or (B) of para21 graph (1). 

22 ‘‘(7) SECRETARY REPORTS.—Not later than 

23 April 1 of each year (beginning in 2010), the Sec24 retary shall submit a report to Congress and the 
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1 Comptroller General of the United States that in2 cludes—

3 ‘‘(A) a detailed description of—

4 ‘‘(i) the total amount expended as a 

5 result of the application of this subsection 

6 in the previous year compared to the total 

7 amount that would have been expended 

8 under this title in the year if this sub9 section had not been enacted; 

10 ‘‘(ii) the projections of the total 

11 amount that will be expended as a result 

12 of the application of this subsection in the 

13 year in which the report is submitted com14 pared to the total amount that would have 

15 been expended under this title in the year 

16 if this subsection had not been enacted; 

17 ‘‘(iii) amounts remaining within the 

18 funding limitation specified in paragraph 

19 (5); and 

20 ‘‘(iv) the steps that the Secretary will 

21 take under clauses (i) and (ii) of para22 graph (5)(B) to ensure that the application 

23 of this subsection will not cause expendi24 tures to exceed the applicable amount de25 scribed in paragraph (5)(A); and 
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1 ‘‘(B) a certification from the Chief Actuary 

2 of the Centers for Medicare & Medicaid Serv3 ices that the descriptions under clauses (i), (ii), 

4 (iii), and (iv) of subparagraph (A) are reason5 able, accurate, and based on generally accepted 

6 actuarial principles and methodologies. 

7 ‘‘(8) BIENNIAL GAO REPORTS.—Not later than 

8 January 1, 2011, and biennially thereafter, the 

9 Comptroller General of the United States shall sub10 mit to the Secretary and Congress a report on the 

11 designation of highly competitive regions under this 

12 subsection and the application of the payment sys13 tem under this subsection within such regions. Each 

14 report shall include—

15 ‘‘(A) an evaluation of—

16 ‘‘(i) the quality of care provided to 

17 beneficiaries enrolled in a 

18 MedicareAdvantage preferred provider plan 

19 in a highly competitive region; 

20 ‘‘(ii) the satisfaction of beneficiaries 

21 with benefits under such a plan; 

22 ‘‘(iii) the costs to the medicare pro23 gram for payments made to such plans; 

24 and 
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1 ‘‘(iv) any improvements in the delivery 

2 of health care services under such a plan; 

3 ‘‘(B) a comparative analysis of the bench4 mark system applicable under the other provi5 sions of this section and the payment system 

6 applicable in highly competitive regions under 

7 this subsection; and 

8 ‘‘(C) recommendations for such legislation 

9 or administrative action as the Comptroller 

10 General determines to be appropriate. 

11 ‘‘(9) REPORT ON BUDGET NEUTRALITY FOR

12 FISCAL YEARS AFTER 2013.—

13 ‘‘(A) IN GENERAL.—If the Secretary in14 tends to designate 1 or more regions as highly 

15 competitive regions with respect to calendar 

16 2014 or any subsequent calendar year, the Sec17 retary shall submit a report to Congress indi18 cating such intent no later than April 1 of the 

19 calendar year prior to the calendar year in 

20 which the applicable designation year begins. 

21 ‘‘(B) REQUIREMENTS.—A report sub22 mitted under subparagraph (A) shall— 

23 ‘‘(i) specify the steps (if any) that the 

24 Secretary will take pursuant to paragraph 

25 (5)(B) to ensure that the total amount ex-
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1 pended as a result of the application of 

2 this subsection during the year will not ex3 ceed the applicable amount for the year (as 

4 defined in paragraph (5)(A)(ii)(II)); and 

5 ‘‘(ii) contain a certification from the 

6 Chief Actuary of the Centers for Medicare 

7 and Medicaid Services that such steps will 

8 meet the requirements of paragraph (5)(A) 

9 based on an analysis using generally ac10 cepted actuarial principles and methodolo11 gies.’’. 

12 (b) CONFORMING AMENDMENT.—Section 

13 1858(c)(3)(A)(i) (as added by section 211(b)) is amended 

14 to read as follows: 

15 ‘‘(i) Whether each preferred provider 

16 region has been designated as a highly 

17 competitive region under subparagraph (A) 

18 or (B) of subsection (i)(1) and the bench19 mark amount for any preferred provider 

20 region (as calculated under paragraph 

21 (2)(A)) for the year that has not been des22 ignated as a highly competitive region.’’. 

23 SEC. 232. FEE-FOR-SERVICE MODERNIZATION PROJECTS. 

24 (a) ESTABLISHMENT.—
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1 (1) REVIEW AND REPORT ON RESULTS OF EX2 ISTING DEMONSTRATIONS.—

3 (A) REVIEW.—The Secretary shall conduct 

4 an empirical review of the results of the dem5 onstrations under sections 442, 443, and 444. 

6 (B) REPORT.—Not later than January 1, 

7 2008, the Secretary shall submit a report to 

8 Congress on the empirical review conducted 

9 under subparagraph (A) which shall include es10 timates of the total costs of the demonstrations, 

11 including expenditures as a result of the provi12 sion of services provided to beneficiaries under 

13 the demonstrations that are incidental to the 

14 services provided under the demonstrations, and 

15 all other expenditures under title XVIII of the 

16 Social Security Act. The report shall also in17 clude a certification from the Chief Actuary of 

18 the Centers for Medicare & Medicaid Services 

19 that such estimates are reasonable, accurate, 

20 and based on generally accepted actuarial prin21 ciples and methodologies. 

22 (2) PROJECTS.—Beginning in 2009, the Sec23 retary, based on the empirical review conducted 

24 under paragraph (1), shall establish projects under 

25 which medicare beneficiaries receiving benefits under 
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1 the medicare fee-for-service program under parts A 

2 and B of title XVIII of the Social Security Act are 

3 provided with coverage of enhanced benefits or serv4 ices under such program. The purpose of such 

5 projects is to evaluate whether the provision of such 

6 enhanced benefits or services to such beneficiaries—

7 (A) improves the quality of care provided 

8 to such beneficiaries under the medicare pro9 gram; 

10 (B) improves the health care delivery sys11 tem under the medicare program; and 

12 (C) results in reduced expenditures under 

13 the medicare program. 

14 (2) ENHANCED BENEFITS OR SERVICES.—For 

15 purposes of this section, enhanced benefits or serv16 ices shall include—

17 (A) preventive services not otherwise cov18 ered under title XVIII of the Social Security 

19 Act; 

20 (B) chronic care coordination services; 

21 (C) disease management services; or 

22 (D) other benefits or services that the Sec23 retary determines will improve preventive health 

24 care for medicare beneficiaries, result in im25 proved chronic disease management, and man-
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1 agement of complex, life-threatening, or high2 cost conditions and are consistent with the 

3 goals described in subparagraphs (A), (B), and 

4 (C) of paragraph (1). 

5 (b) PROJECT SITES AND DURATION.—

6 (1) IN GENERAL.—Subject to subsection (e)(2), 

7 the projects under this section shall be conducted—

8 (A) in a region or regions that are com9 parable (as determined by the Secretary) to the 

10 region or regions that are designated as a high11 ly competitive region under subparagraph (A) 

12 or (B) of section 1858(i)(1) of the Social Secu13 rity Act, as added by section 231 of this Act; 

14 and 

15 (B) during the years that a region or re16 gions are designated as such a highly competi17 tive region. 

18 (2) RULE OF CONSTRUCTION.—For purposes of 

19 paragraph (1), a comparable region does not nec20 essarily mean the identical region. 

21 (c) WAIVER AUTHORITY.—The Secretary shall waive 

22 compliance with the requirements of title XVIII of the So23 cial Security Act (42 U.S.C. 1395 et seq.) only to the ex24 tent and for such period as the Secretary determines is 
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1 necessary to provide for enhanced benefits or services con2 sistent with the projects under this section. 

3 (d) BIENNIAL GAO REPORTS.—Not later than Janu4 ary 1, 2011, and biennially thereafter for as long as the 

5 projects under this section are being conducted, the Comp6 troller General of the United States shall submit to the 

7 Secretary and Congress a report that evaluates the 

8 projects. Each report shall include—

9 (1) an evaluation of—

10 (A) the quality of care provided to bene11 ficiaries receiving benefits or services under the 

12 projects; 

13 (B) the satisfaction of beneficiaries receiv14 ing benefits or services under the projects; 

15 (C) the costs to the medicare program 

16 under the projects; and 

17 (D) any improvements in the delivery of 

18 health care services under the projects; and 

19 (2) recommendations for such legislation or ad20 ministrative action as the Comptroller General deter21 mines to be appropriate. 

22 (e) FUNDING.—

23 (1) IN GENERAL.—Payments for the costs of 

24 carrying out the projects under this section shall be 

25 made from the Federal Hospital Insurance Trust 
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1 Fund under section 1817 of the Social Security Act 

2 (42 U.S.C. 1395i) and the Federal Supplementary 

3 Insurance Trust Fund under section 1841 of such 

4 Act (42 U.S.C. 1395t), as determined appropriate 

5 by the Secretary. 

6 (2) LIMITATION.—The total amount expended 

7 under the medicare fee-for-service program under 

8 parts A and B of title XVIII of the Social Security 

9 Act (including all amounts expended as a result of 

10 the projects under this section) during the period or 

11 year, as applicable, may not exceed—

12 (A) for the period beginning on January 1, 

13 2009, and ending on September 30, 2013, an 

14 amount equal to the total amount that would 

15 have been expended under the medicare fee-for16 service program under parts A and B of title 

17 XVIII of the Social Security Act during the pe18 riod if the projects had not been conducted plus 

19 $6,000,000,000; and 

20 (B) for fiscal year 2014 and any subse21 quent fiscal year, an amount equal to the total 

22 amount that would have been expended under 

23 the medicare fee-for-service program under 

24 parts A and B of such title during the year if 

25 the projects had not been conducted. 
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1 (3) MONITORING AND REPORTS.—

2 (A) ONGOING MONITORING BY THE SEC3 RETARY TO ENSURE FUNDING LIMITATION IS

4 NOT VIOLATED.—The Secretary shall contin5 ually monitor expenditures made under title 

6 XVIII of the Social Security Act by reason of 

7 the projects under this section to ensure that 

8 the limitations described in subparagraphs (A) 

9 and (B) of paragraph (2) are not violated. 

10 (B) REPORTS.—Not later than April 1 of 

11 each year (beginning in 2010), the Secretary 

12 shall submit a report to Congress and the 

13 Comptroller General of the United States that 

14 includes—

15 (i) a detailed description of—

16 (I) the total amount expended 

17 under the medicare fee-for-service pro18 gram under parts A and B of title 

19 XVIII of the Social Security Act (in20 cluding all amounts expended as a re21 sult of the projects under this section) 

22 during the previous year compared to 

23 the total amount that would have 

24 been expended under the original 

25 medicare fee-for-service program in 
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1 the year if the projects had not been 

2 conducted; 

3 (II) the projections of the total 

4 amount expended under the medicare 

5 fee-for-service program under parts A 

6 and B of title XVIII of the Social Se7 curity Act (including all amounts ex8 pended as a result of the projects 

9 under this section) during the year in 

10 which the report is submitted com11 pared to the total amount that would 

12 have been expended under the original 

13 medicare fee-for-service program in 

14 the year if the projects had not been 

15 conducted; 

16 (III) amounts remaining within 

17 the funding limitation specified in 

18 paragraph (2); and 

19 (IV) how the Secretary will 

20 change the scope, site, and duration 

21 of the projects in subsequent years in 

22 order to ensure that the limitations 

23 described in subparagraphs (A) and 

24 (B) of paragraph (2) are not violated; 

25 and 
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1 (ii) a certification from the Chief Ac2 tuary of the Centers for Medicare & Med3 icaid Services that the descriptions under 

4 subclauses (I), (II), (III), and (IV) of 

5 clause (i) are reasonable, accurate, and 

6 based on generally accepted actuarial prin7 ciples and methodologies. 

8 (C) REPORT ON BUDGET NEUTRALITY FOR

9 FISCAL YEARS AFTER 2013.—

10 (i) IN GENERAL.—If the Secretary in11 tends to continue the projects under this 

12 section for fiscal year 2014 or any subse13 quent fiscal year, the Secretary shall sub14 mit a report to Congress indicating such 

15 intent no later than April 1 of the year 

16 prior to the year in which the fiscal year 

17 begins. 

18 (ii) REQUIREMENTS.—A report sub19 mitted under clause (i) shall— 

20 (I) specify the steps (if any) that 

21 the Secretary will take pursuant to 

22 paragraph (4) to ensure that the limi23 tations described in paragraph (2)(B) 

24 will not be violated for the year; and 
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1 (II) contain a certification from 

2 the Chief Actuary of the Centers for 

3 Medicare and Medicaid Services that 

4 such steps will meet the requirements 

5 of paragraph (2) based on an analysis 

6 using generally accepted actuarial 

7 principles and methodologies. 

8 (4) APPLICATION OF LIMITATION.—If the Sec9 retary determines that the projects under this sec10 tion will cause the limitations described in subpara11 graphs (A) and (B) of paragraph (2) to be violated, 

12 the Secretary shall take appropriate steps to reduce 

13 spending under the projects, including through re14 ducing the scope, site, and duration of the projects. 

15 (5) AUTHORITY.—Beginning in 2014, the Sec16 retary shall make necessary spending adjustments 

17 (including pro rata reductions in payments to health 

18 care providers under the medicare program) to re19 coup amounts so that the limitations described in 

20 subparagraphs (A) and (B) of paragraph (2) are not 

21 violated. 
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1 Subtitle E—National Bipartisan 

2 Commission on Medicare Reform 

3 SEC. 241. MEDICAREADVANTAGE GOAL; ESTABLISHMENT 

4 OF COMMISSION. 

5 (a) ENROLLMENT GOAL.—It is the goal of this title 

6 that, not later than January 1, 2010, at least 15 percent 

7 of individuals entitled to, or enrolled for, benefits under 

8 part A of title XVIII of the Social Security Act and en9 rolled under part B of such title should be enrolled in a 

10 MedicareAdvantage plan, as determined by the Center for 

11 Medicare Choices. 

12 (b) FAILURE TO ACHIEVE GOAL.—If the goal de13 scribed in subsection (a) is not met by January 1, 2012, 

14 as determined by the Center for Medicare Choices, there 

15 shall be established a commission as described in section 

16 2. 

17 SEC. 242. NATIONAL BIPARTISAN COMMISSION ON MEDI18 CARE REFORM. 

19 (a) ESTABLISHMENT.—Upon a determination under 

20 section 241(b) that the enrollment goal has not been met, 

21 there shall be established a commission to be known as 

22 the National Bipartisan Commission on Medicare Reform 

23 (in this section referred to as the ‘‘Commission’’). 

24 (b) DUTIES OF THE COMMISSION.—The Commission 

25 shall—
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1 (1) review and analyze the long-term financial 

2 condition of the medicare program under title XVIII 

3 of the Social Security Act (42 U.S.C. 1395 et seq.); 

4 (2) identify problems that threaten the financial 

5 integrity of the Federal Hospital Insurance Trust 

6 Fund and the Federal Supplementary Medical In7 surance Trust Fund established under sections 1817 

8 and 1841 of such Act (42 U.S.C. 1395i and 1395t), 

9 including—

10 (A) the financial impact on the medicare 

11 program of the significant increase in the num12 ber of medicare eligible individuals; and 

13 (B) the ability of the Federal Government 

14 to sustain the program into the future; 

15 (3) analyze potential solutions to the problems 

16 identified under paragraph (2) that will ensure both 

17 the financial integrity of the medicare program and 

18 the provision of appropriate benefits under such pro19 gram, including methods used by other nations to 

20 respond to comparable demographic patterns in eli21 gibility for health care benefits for elderly and dis22 abled individuals and trends in employment-related 

23 health care for retirees; 

24 (4) make recommendations to restore the sol25 vency of the Federal Hospital Insurance Trust Fund 
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1 and the financial integrity of the Federal Supple2 mentary Medical Insurance Trust Fund; 

3 (5) make recommendations for establishing the 

4 appropriate financial structure of the medicare pro5 gram as a whole; 

6 (6) make recommendations for establishing the 

7 appropriate balance of benefits covered under, and 

8 beneficiary contributions to, the medicare program; 

9 (7) make recommendations for the time periods 

10 during which the recommendations described in 

11 paragraphs (4), (5) and (6) should be implemented; 

12 (8) make recommendations on the impact of 

13 chronic disease and disability trends on future costs 

14 and quality of services under the current benefit, fi15 nancing, and delivery system structure of the medi16 care program; 

17 (9) make recommendations regarding a com18 prehensive approach to preserve the medicare pro19 gram, including ways to increase the effectiveness of 

20 the MedicareAdvantage program and to increase 

21 MedicareAdvantage enrollment rates; and 

22 (10) review and analyze such other matters as 

23 the Commission determines appropriate. 

24 (c) MEMBERSHIP.—
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1 (1) NUMBER AND APPOINTMENT.—The Com2 mission shall be composed of 17 members, of 

3 whom—

4 (A) four shall be appointed by the Presi5 dent; 

6 (B) six shall be appointed by the Majority 

7 Leader of the Senate, in consultation with the 

8 Minority Leader of the Senate, of whom not 

9 more than 4 shall be of the same political party; 

10 (C) six shall be appointed by the Speaker 

11 of the House of Representatives, in consultation 

12 with the Minority Leader of the House of Rep13 resentatives, of whom not more than 4 shall be 

14 of the same political party; and 

15 (D) one, who shall serve as Chairperson of 

16 the Commission, shall be appointed jointly by 

17 the President, Majority Leader of the Senate, 

18 and the Speaker of the House of Representa19 tives. 

20 (2) DEADLINE FOR APPOINTMENT.—Members 

21 of the Commission shall be appointed by not later 

22 than October 1, 2012. 

23 (3) TERMS OF APPOINTMENT.—The term of 

24 any member appointed under paragraph (1) shall be 

25 for the life of the Commission. 
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1 (4) MEETINGS.—The Commission shall meet at 

2 the call of the Chairperson or a majority of its mem3 bers. 

4 (5) QUORUM.—A quorum for purposes of con5 ducting the business of the Commission shall consist 

6 of 8 members of the Commission, except that 4 

7 members may conduct a hearing under subsection 

8 (e). 

9 (6) VACANCIES.—A vacancy in the membership 

10 of the Commission shall be filled, not later than 30 

11 days after the Commission is given notice of the va12 cancy, in the same manner in which the original ap13 pointment was made. Such a vacancy shall not affect 

14 the power of the remaining members to carry out 

15 the duties of the Commission. 

16 (7) COMPENSATION.—Members of the Commis17 sion shall receive no additional pay, allowances, or 

18 benefits by reason of their service on the Commis19 sion. 

20 (8) EXPENSES.—Each member of the Commis21 sion shall receive travel expenses and per diem in 

22 lieu of subsistence in accordance with sections 5702 

23 and 5703 of title 5, United States Code. 

24 (d) STAFF AND SUPPORT SERVICES.—

25 (1) EXECUTIVE DIRECTOR.—
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1 (A) APPOINTMENT.—The Chairperson 

2 shall appoint an executive director of the Com3 mission. 

4 (B) COMPENSATION.—The executive direc5 tor shall be paid the rate of basic pay for level 

6 V of the Executive Schedule under title 5, 

7 United States Code. 

8 (2) STAFF.—With the approval of the Commis9 sion, the executive director may appoint such per10 sonnel as the executive director considers appro11 priate. 

12 (3) APPLICABILITY OF CIVIL SERVICE LAWS.—

13 The staff of the Commission shall be appointed with14 out regard to the provisions of title 5, United States 

15 Code, governing appointments in the competitive 

16 service, and shall be paid without regard to the pro17 visions of chapter 51 and subchapter III of chapter 

18 53 of such title (relating to classification and Gen19 eral Schedule pay rates). 

20 (4) EXPERTS AND CONSULTANTS.—With the 

21 approval of the Commission, the executive director 

22 may procure temporary and intermittent services 

23 under section 3109(b) of title 5, United States Code. 

24 (5) PHYSICAL FACILITIES.—The Administrator 

25 of the General Services Administration shall locate 
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1 suitable office space for the operation of the Com2 mission. The facilities shall serve as the head3 quarters of the Commission and shall include all 

4 necessary equipment and incidentals required for the 

5 proper functioning of the Commission. 

6 (e) POWERS OF COMMISSION.—

7 (1) HEARINGS AND OTHER ACTIVITIES.—The 

8 Commission may hold such hearings and undertake 

9 such other activities as the Commission determines 

10 to be necessary to carry out its duties under this 

11 section. 

12 (2) STUDIES BY GAO.—Upon the request of the 

13 Commission, the Comptroller General shall conduct 

14 such studies or investigations as the Commission de15 termines to be necessary to carry out its duties 

16 under this section. 

17 (3) COST ESTIMATES BY CONGRESSIONAL

18 BUDGET OFFICE AND OFFICE OF THE CHIEF ACTU19 ARY OF THE CENTERS FOR MEDICARE & MED20 ICAID.—

21 (A) IN GENERAL.—The Director of the 

22 Congressional Budget Office or the Chief Actu23 ary of the Center for Medicare & Medicaid 

24 Services, or both, shall provide to the Commis25 sion, upon the request of the Commission, such 
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1 cost estimates as the Commission determines to 

2 be necessary to carry out its duties under this 

3 section. 

4 (B) REIMBURSEMENTS.—The Commission 

5 shall reimburse the Director of the Congres6 sional Budget Office for expenses relating to 

7 the employment in the office of the Director of 

8 such additional staff as may be necessary for 

9 the Director to comply with requests by the 

10 Commission under subparagraph (A). 

11 (4) DETAIL OF FEDERAL EMPLOYEES.—Upon 

12 the request of the Commission, the head of any Fed13 eral agency is authorized to detail, without reim14 bursement, any of the personnel of such agency to 

15 the Commission to assist the Commission in car16 rying out its duties under this section. Any such de17 tail shall not interrupt or otherwise affect the civil 

18 service status or privileges of the Federal employee. 

19 (5) TECHNICAL ASSISTANCE.—Upon the re20 quest of the Commission, the head of a Federal 

21 agency shall provide such technical assistance to the 

22 Commission as the Commission determines to be 

23 necessary to carry out its duties under this section. 

24 (6) USE OF MAILS.—The Commission may use 

25 the United States mails in the same manner and 
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1 under the same conditions as Federal agencies and 

2 shall, for purposes of the frank, be considered a 

3 commission of Congress as described in section 3215 

4 of title 39, United States Code. 

5 (7) OBTAINING INFORMATION.—The Commis6 sion may secure directly from any Federal agency 

7 information necessary to enable it to carry out its 

8 duties under this section, if the information may be 

9 disclosed under section 552 of title 5, United States 

10 Code. Upon request of the Chairperson of the Com11 mission, the head of each such agency shall furnish 

12 such information to the Commission. 

13 (8) ADMINISTRATIVE SUPPORT SERVICES.—

14 Upon the request of the Commission, the Adminis15 trator of General Services shall provide to the Com16 mission on a reimbursable basis such administrative 

17 support services as the Commission may request. 

18 (9) PRINTING.—For purposes of costs relating 

19 to printing and binding, including the cost of per20 sonnel detailed from the Government Printing Of21 fice, the Commission shall be deemed to be a com22 mittee of Congress. 

23 (f) REPORT.—Not later than April 1, 2014, the Com24 mission shall submit to the President and Congress a re25 port and an implementation bill that shall contain a de-
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1 tailed statement of only those recommendations, findings, 

2 and conclusions of the Commission that receive the ap3 proval of at least 11 members of the Commission. 

4 (g) TERMINATION.—The Commission shall terminate 

5 on the date that is 30 days after the date on which the 

6 report and implementation bill is submitted under sub7 section (f). 

8 SEC. 243. CONGRESSIONAL CONSIDERATION OF REFORM 

9 PROPOSALS. 

10 (a) DEFINITIONS.—In this section: 

11 (1) IMPLEMENTATION BILL.—The term ‘‘imple12 mentation bill’’ means only a bill that is introduced 

13 as provided under subsection (b), and contains the 

14 proposed legislation included in the report submitted 

15 to Congress under section 242(f), without modifica16 tion. 

17 (2) CALENDAR DAY.—The term ‘‘calendar day’’ 

18 means a calendar day other than 1 on which either 

19 House is not in session because of an adjournment 

20 of more than 3 days to a date certain. 

21 (b) INTRODUCTION; REFERRAL; AND REPORT OR

22 DISCHARGE.—

23 (1) INTRODUCTION.—On the first calendar day 

24 on which both Houses are in session immediately fol25 lowing the date on which the report is submitted to 
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1 Congress under section 242(f), a single implementa2 tion bill shall be introduced (by request)—

3 (A) in the Senate by the Majority Leader 

4 of the Senate, for himself and the Minority 

5 Leader of the Senate, or by Members of the 

6 Senate designated by the Majority Leader and 

7 Minority Leader of the Senate; and 

8 (B) in the House of Representatives by the 

9 Speaker of the House of Representatives, for 

10 himself and the Minority Leader of the House 

11 of Representatives, or by Members of the House 

12 of Representatives designated by the Speaker 

13 and Minority Leader of the House of Rep14 resentatives. 

15 (2) REFERRAL.—The implementation bills in16 troduced under paragraph (1) shall be referred to 

17 any appropriate committee of jurisdiction in the 

18 Senate and any appropriate committee of jurisdic19 tion in the House of Representatives. A committee 

20 to which an implementation bill is referred under 

21 this paragraph may report such bill to the respective 

22 House without amendment. 

23 (3) REPORT OR DISCHARGE.—If a committee to 

24 which an implementation bill is referred has not re25 ported such bill by the end of the 15th calendar day 
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1 after the date of the introduction of such bill, such 

2 committee shall be immediately discharged from fur3 ther consideration of such bill, and upon being re4 ported or discharged from the committee, such bill 

5 shall be placed on the appropriate calendar. 

6 (c) FLOOR CONSIDERATION.—

7 (1) IN GENERAL.—When the committee to 

8 which an implementation bill is referred has re9 ported, or has been discharged under subsection 

10 (b)(3), it is at any time thereafter in order (even 

11 though a previous motion to the same effect has 

12 been disagreed to) for any Member of the respective 

13 House to move to proceed to the consideration of the 

14 implementation bill, and all points of order against 

15 the implementation bill (and against consideration of 

16 the implementation bill) are waived. The motion is 

17 highly privileged in the House of Representatives 

18 and is privileged in the Senate. The motion is not 

19 subject to amendment, or to a motion to postpone, 

20 or to a motion to proceed to the consideration of 

21 other business. A motion to reconsider the vote by 

22 which the motion is agreed to or disagreed to shall 

23 not be in order. If a motion to proceed to the consid24 eration of the implementation bill is agreed to, the 
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1 implementation bill shall remain the unfinished busi2 ness of the respective House until disposed of. 

3 (2) AMENDMENTS.—An implementation bill 

4 may not be amended in the Senate or the House of 

5 Representatives. 

6 (3) DEBATE.—Debate on the implementation 

7 bill, and on all debatable motions and appeals in 

8 connection therewith, shall be limited to not more 

9 than 20 hours, which shall be divided equally be10 tween those favoring and those opposing the resolu11 tion. A motion further to limit debate is in order and 

12 not debatable. An amendment to, or a motion to 

13 postpone, or a motion to proceed to the consider14 ation of other business, or a motion to recommit the 

15 implementation bill is not in order. A motion to re16 consider the vote by which the implementation bill is 

17 agreed to or disagreed to is not in order. 

18 (4) VOTE ON FINAL PASSAGE.—Immediately 

19 following the conclusion of the debate on an imple20 mentation bill, and a single quorum call at the con21 clusion of the debate if requested in accordance with 

22 the rules of the appropriate House, the vote on final 

23 passage of the implementation bill shall occur. 

24 (5) RULINGS OF THE CHAIR ON PROCEDURE.—

25 Appeals from the decisions of the Chair relating to 
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1 the application of the rules of the Senate or the 

2 House of Representatives, as the case may be, to the 

3 procedure relating to an implementation bill shall be 

4 decided without debate. 

5 (d) COORDINATION WITH ACTION BY OTHER

6 HOUSE.—If, before the passage by 1 House of an imple7 mentation bill of that House, that House receives from 

8 the other House an implementation bill, then the following 

9 procedures shall apply: 

10 (1) NONREFERRAL.—The implementation bill 

11 of the other House shall not be referred to a com12 mittee. 

13 (2) VOTE ON BILL OF OTHER HOUSE.—With 

14 respect to an implementation bill of the House re15 ceiving the implementation bill—

16 (A) the procedure in that House shall be 

17 the same as if no implementation bill had been 

18 received from the other House; but 

19 (B) the vote on final passage shall be on 

20 the implementation bill of the other House. 

21 (e) RULES OF SENATE AND HOUSE OF REPRESENTA22 TIVES.—This section is enacted by Congress—

23 (1) as an exercise of the rulemaking power of 

24 the Senate and House of Representatives, respec25 tively, and as such it is deemed a part of the rules 
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1 of each House, respectively, but applicable only with 

2 respect to the procedure to be followed in that 

3 House in the case of an implementation bill de4 scribed in subsection (a), and it supersedes other 

5 rules only to the extent that it is inconsistent with 

6 such rules; and 

7 (2) with full recognition of the constitutional 

8 right of either House to change the rules (so far as 

9 relating to the procedure of that House) at any time, 

10 in the same manner, and to the same extent as in 

11 the case of any other rule of that House. 

12 SEC. 244. AUTHORIZATION OF APPROPRIATIONS. 

13 There are authorized to be appropriated such sums 

14 as may be necessary to carry out this subtitle for each 

15 of fiscal years 2012 through 2013. 

16 TITLE III—CENTER FOR 

17 MEDICARE CHOICES 

18 SEC. 301. ESTABLISHMENT OF THE CENTER FOR MEDICARE 

19 CHOICES. 

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

21 seq.), as amended by section 111, is amended by inserting 

22 after 1806 the following new section: 

23 ‘‘ESTABLISHMENT OF THE CENTER FOR MEDICARE

24 CHOICES

25 ‘‘SEC. 1808. (a) ESTABLISHMENT.—By not later 

26 than March 1, 2004, the Secretary shall establish within 
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1 the Department of Health and Human Services the Center 

2 for Medicare Choices, which shall be separate from the 

3 Centers for Medicare & Medicaid Services. 

4 ‘‘(b) ADMINISTRATOR AND DEPUTY ADMINIS5 TRATOR.—

6 ‘‘(1) ADMINISTRATOR.—

7 ‘‘(A) IN GENERAL.—The Center for Medi8 care Choices shall be headed by an Adminis9 trator (in this section referred to as the ‘Ad10 ministrator’) who shall be appointed by the 

11 President, by and with the advice and consent 

12 of the Senate. The Administrator shall report 

13 directly to the Secretary. 

14 ‘‘(B) COMPENSATION.—The Administrator 

15 shall be paid at the rate of basic pay payable 

16 for level III of the Executive Schedule under 

17 section 5314 of title 5, United States Code. 

18 ‘‘(C) TERM OF OFFICE.—The Adminis19 trator shall be appointed for a term of 5 years. 

20 In any case in which a successor does not take 

21 office at the end of an Administrator’s term of 

22 office, that Administrator may continue in of23 fice until the entry upon office of such a suc24 cessor. An Administrator appointed to a term of 

25 office after the commencement of such term 
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1 may serve under such appointment only for the 

2 remainder of such term. 

3 ‘‘(D) GENERAL AUTHORITY.—The Admin4 istrator shall be responsible for the exercise of 

5 all powers and the discharge of all duties of the 

6 Center for Medicare Choices, and shall have au7 thority and control over all personnel and ac8 tivities thereof. 

9 ‘‘(E) RULEMAKING AUTHORITY.—The Ad10 ministrator may prescribe such rules and regu11 lations as the Administrator determines nec12 essary or appropriate to carry out the functions 

13 of the Center for Medicare Choices. The regula14 tions prescribed by the Administrator shall be 

15 subject to the rulemaking procedures estab16 lished under section 553 of title 5, United 

17 States Code. 

18 ‘‘(F) AUTHORITY TO ESTABLISH ORGANI19 ZATIONAL UNITS.—The Administrator may es20 tablish, alter, consolidate, or discontinue such 

21 organizational units or components within the 

22 Center for Medicare Choices as the Adminis23 trator considers necessary or appropriate, ex24 cept that this subparagraph shall not apply 
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1 with respect to any unit, component, or provi2 sion provided for by this section. 

3 ‘‘(G) AUTHORITY TO DELEGATE.—The Ad4 ministrator may assign duties, and delegate, or 

5 authorize successive redelegations of, authority 

6 to act and to render decisions, to such officers 

7 and employees of the Center for Medicare 

8 Choices as the Administrator may find nec9 essary. Within the limitations of such delega10 tions, redelegations, or assignments, all official 

11 acts and decisions of such officers and employ12 ees shall have the same force and effect as 

13 though performed or rendered by the Adminis14 trator. 

15 ‘‘(2) DEPUTY ADMINISTRATOR.—

16 ‘‘(A) IN GENERAL.—There shall be a Dep17 uty Administrator of the Center for Medicare 

18 Choices who shall be appointed by the Adminis19 trator. 

20 ‘‘(B) COMPENSATION.—The Deputy Ad21 ministrator shall be paid at the rate of basic 

22 pay payable for level IV of the Executive Sched23 ule under section 5315 of title 5, United States 

24 Code. 
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1 ‘‘(C) TERM OF OFFICE.—The Deputy Ad2 ministrator shall be appointed for a term of 5 

3 years. In any case in which a successor does not 

4 take office at the end of a Deputy Administra5 tor’s term of office, such Deputy Administrator 

6 may continue in office until the entry upon of7 fice of such a successor. A Deputy Adminis8 trator appointed to a term of office after the 

9 commencement of such term may serve under 

10 such appointment only for the remainder of 

11 such term. 

12 ‘‘(D) DUTIES.—The Deputy Administrator 

13 shall perform such duties and exercise such 

14 powers as the Administrator shall from time to 

15 time assign or delegate. The Deputy Adminis16 trator shall be the Acting Administrator of the 

17 Center for Medicare Choices during the absence 

18 or disability of the Administrator and, unless 

19 the President designates another officer of the 

20 Government as Acting Administrator, in the 

21 event of a vacancy in the office of the Adminis22 trator. 

23 ‘‘(3) SECRETARIAL COORDINATION OF PROGRAM

24 ADMINISTRATION.—The Secretary shall ensure ap25 propriate coordination between the Administrator 
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1 and the Administrator of the Centers for Medicare 

2 & Medicaid Services in carrying out the programs 

3 under this title. 

4 ‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—

5 ‘‘(1) DUTIES.—

6 ‘‘(A) GENERAL DUTIES.—The Adminis7 trator shall carry out parts C and D, includ8 ing—

9 ‘‘(i) negotiating, entering into, and en10 forcing, contracts with plans for the offer11 ing of MedicareAdvantage plans under 

12 part C, including the offering of qualified 

13 prescription drug coverage under such 

14 plans; and 

15 ‘‘(ii) negotiating, entering into, and 

16 enforcing, contracts with eligible entities 

17 for the offering of Medicare Prescription 

18 Drug plans under part D. 

19 ‘‘(B) OTHER DUTIES.—The Administrator 

20 shall carry out any duty provided for under 

21 part C or D, including duties relating to—

22 ‘‘(i) reasonable cost contracts with eli23 gible organizations under section 1876(h); 

24 and 
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1 ‘‘(ii) demonstration projects carried 

2 out in part or in whole under such parts, 

3 including the demonstration project carried 

4 out through a MedicareAdvantage (for5 merly Medicare+Choice) project that dem6 onstrates the application of capitation pay7 ment rates for frail elderly medicare bene8 ficiaries through the use of an interdiscipli9 nary team and through the provision of 

10 primary care services to such beneficiaries 

11 by means of such a team at the nursing fa12 cility involved. 

13 ‘‘(C) NONINTERFERENCE.—In order to 

14 promote competition under parts C and D, the 

15 Administrator, in carrying out the duties re16 quired under this section, may not, to the ex17 tent possible, interfere in any way with negotia18 tions between eligible entities, 

19 MedicareAdvantage organizations, hospitals, 

20 physicians, other entities or individuals fur21 nishing items and services under this title (in22 cluding contractors for such items and serv23 ices), and drug manufacturers, wholesalers, or 

24 other suppliers of covered drugs 
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1 ‘‘(D) ANNUAL REPORTS.—Not later than 

2 March 31 of each year, the Administrator shall 

3 submit to Congress and the President a report 

4 on the administration of the voluntary prescrip5 tion drug delivery program under this part dur6 ing the previous fiscal year. 

7 ‘‘(2) MANAGEMENT STAFF.—

8 ‘‘(A) IN GENERAL.—The Administrator, 

9 with the approval of the Secretary, may employ, 

10 such management staff as determined appro11 priate. Any such manager shall be required to 

12 have demonstrated, by their education and ex13 perience (either in the public or private sector), 

14 superior expertise in the following areas: 

15 ‘‘(i) The review, negotiation, and ad16 ministration of health care contracts. 

17 ‘‘(ii) The design of health care benefit 

18 plans. 

19 ‘‘(iii) Actuarial sciences. 

20 ‘‘(iv) Compliance with health plan 

21 contracts. 

22 ‘‘(v) Consumer education and decision 

23 making. 

24 ‘‘(B) COMPENSATION.—
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1 ‘‘(i) IN GENERAL.—Subject to clause 

2 (ii), the Administrator shall establish the 

3 rate of pay for an individual employed 

4 under subparagraph (A). 

5 ‘‘(ii) MAXIMUM RATE.—In no case 

6 may the rate of compensation determined 

7 under clause (i) exceed the highest rate of 

8 basic pay for the Senior Executive Service 

9 under section 5382(b) of title 5, United 

10 States Code. 

11 ‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS

12 OF THE CENTERS FOR MEDICARE & MEDICAID SERV13 ICES.—

14 ‘‘(A) IN GENERAL.—The Secretary, the 

15 Administrator of the Center for Medicare 

16 Choices, and the Administrator of the Centers 

17 for Medicare & Medicaid Services shall establish 

18 an appropriate transition of responsibility in 

19 order to redelegate the administration of part C 

20 from the Secretary and the Administrator of 

21 the Centers for Medicare & Medicaid Services 

22 to the Administrator of the Center for Medicare 

23 Choices as is appropriate to carry out the pur24 poses of this section. 
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1 ‘‘(B) TRANSFER OF DATA AND INFORMA2 TION.—The Secretary shall ensure that the Ad3 ministrator of the Centers for Medicare & Med4 icaid Services transfers to the Administrator 

5 such information and data in the possession of 

6 the Administrator of the Centers for Medicare 

7 & Medicaid Services as the Administrator re8 quires to carry out the duties described in para9 graph (1). 

10 ‘‘(C) CONSTRUCTION.—Insofar as a re11 sponsibility of the Secretary or the Adminis12 trator of the Centers for Medicare & Medicaid 

13 Services is redelegated to the Administrator 

14 under this section, any reference to the Sec15 retary or the Administrator of the Centers for 

16 Medicare & Medicaid Services in this title or 

17 title XI with respect to such responsibility is 

18 deemed to be a reference to the Administrator. 

19 ‘‘(d) OFFICE OF BENEFICIARY ASSISTANCE.—

20 ‘‘(1) ESTABLISHMENT.—The Secretary shall es21 tablish within the Center for Medicare Choices an 

22 Office of Beneficiary Assistance to carry out func23 tions relating to medicare beneficiaries under this 

24 title, including making determinations of eligibility 

25 of individuals for benefits under this title, providing 
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1 for enrollment of medicare beneficiaries under this 

2 title, and the functions described in paragraph (2). 

3 The Office shall be a separate operating division 

4 within the Center for Medicare Choices. 

5 ‘‘(2) DISSEMINATION OF INFORMATION ON

6 BENEFITS AND APPEALS RIGHTS.—

7 ‘‘(A) DISSEMINATION OF BENEFITS INFOR8 MATION.—The Office of Beneficiary Assistance 

9 shall disseminate to medicare beneficiaries, by 

10 mail, by posting on the Internet site of the Cen11 ter for Medicare Choices, and through the toll12 free telephone number provided for under sec13 tion 1804(b), information with respect to the 

14 following: 

15 ‘‘(i) Benefits, and limitations on pay16 ment (including cost-sharing, stop-loss pro17 visions, and formulary restrictions) under 

18 parts C and D. 

19 ‘‘(ii) Benefits, and limitations on pay20 ment under parts A, and B, including in21 formation on medicare supplemental poli22 cies under section 1882. 

23 ‘‘(iii) Other areas determined to be 

24 appropriate by the Administrator. 
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1 Such information shall be presented in a man2 ner so that medicare beneficiaries may compare 

3 benefits under parts A, B, and D, and medicare 

4 supplemental policies with benefits under 

5 MedicareAdvantage plans under part C. 

6 ‘‘(B) DISSEMINATION OF APPEALS RIGHTS

7 INFORMATION.—The Office of Beneficiary As8 sistance shall disseminate to medicare bene9 ficiaries in the manner provided under subpara10 graph (A) a description of procedural rights (in11 cluding grievance and appeals procedures) of 

12 beneficiaries under the original medicare fee13 for-service program under parts A and B, the 

14 MedicareAdvantage program under part C, and 

15 the voluntary prescription drug delivery pro16 gram under part D. 

17 ‘‘(3) MEDICARE OMBUDSMAN.—

18 ‘‘(A) IN GENERAL.—Within the Office of 

19 Beneficiary Assistance, there shall be a Medi20 care Ombudsman, appointed by the Secretary 

21 from among individuals with expertise and ex22 perience in the fields of health care and advo23 cacy, to carry out the duties described in sub24 paragraph (B). 
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1 ‘‘(B) DUTIES.—The Medicare Ombudsman 

2 shall—

3 ‘‘(i) receive complaints, grievances, 

4 and requests for information submitted by 

5 a medicare beneficiary, with respect to any 

6 aspect of the medicare program; 

7 ‘‘(ii) provide assistance with respect to 

8 complaints, grievances, and requests re9 ferred to in clause (i), including—

10 ‘‘(I) assistance in collecting rel11 evant information for such bene12 ficiaries, to seek an appeal of a deci13 sion or determination made by a fiscal 

14 intermediary, carrier, 

15 MedicareAdvantage organization, an 

16 eligible entity under part D, or the 

17 Secretary; and 

18 ‘‘(II) assistance to such bene19 ficiaries with any problems arising 

20 from disenrollment from a 

21 MedicareAdvantage plan under part C 

22 or a prescription drug plan under part 

23 D; and 

24 ‘‘(iii) submit annual reports to Con25 gress, the Secretary, and the Medicare 
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1 Competitive Policy Advisory Board describ2 ing the activities of the Office, and includ3 ing such recommendations for improve4 ment in the administration of this title as 

5 the Ombudsman determines appropriate. 

6 ‘‘(C) COORDINATION WITH STATE OM7 BUDSMAN PROGRAMS AND CONSUMER ORGANI8 ZATIONS.—The Medicare Ombudsman shall, to 

9 the extent appropriate, coordinate with State 

10 medical Ombudsman programs, and with State11 and community-based consumer organizations, 

12 to—

13 ‘‘(i) provide information about the 

14 medicare program; and 

15 ‘‘(ii) conduct outreach to educate 

16 medicare beneficiaries with respect to man17 ners in which problems under the medicare 

18 program may be resolved or avoided. 

19 ‘‘(e) MEDICARE COMPETITIVE POLICY ADVISORY

20 BOARD.—

21 ‘‘(1) ESTABLISHMENT.—There is established 

22 within the Center for Medicare Choices the Medicare 

23 Competitive Policy Advisory Board (in this section 

24 referred to as the ‘Board’). The Board shall advise, 

25 consult with, and make recommendations to the Ad-
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1 ministrator with respect to the administration of 

2 parts C and D, including the review of payment poli3 cies under such parts. 

4 ‘‘(2) REPORTS.—

5 ‘‘(A) IN GENERAL.—With respect to mat6 ters of the administration of parts C and D, the 

7 Board shall submit to Congress and to the Ad8 ministrator such reports as the Board deter9 mines appropriate. Each such report may con10 tain such recommendations as the Board deter11 mines appropriate for legislative or administra12 tive changes to improve the administration of 

13 such parts, including the stability and solvency 

14 of the programs under such parts and the top15 ics described in subparagraph (B). Each such 

16 report shall be published in the Federal Reg17 ister. 

18 ‘‘(B) TOPICS DESCRIBED.—Reports re19 quired under subparagraph (A) may include the 

20 following topics: 

21 ‘‘(i) FOSTERING COMPETITION.—Rec22 ommendations or proposals to increase 

23 competition under parts C and D for serv24 ices furnished to medicare beneficiaries. 
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1 ‘‘(ii) EDUCATION AND ENROLL2 MENT.—Recommendations for the im3 provement of efforts to provide medicare 

4 beneficiaries information and education on 

5 the program under this title, and specifi6 cally parts C and D, and the program for 

7 enrollment under the title. 

8 ‘‘(iii) QUALITY.—Recommendations 

9 on ways to improve the quality of benefits 

10 provided under plans under parts C and D. 

11 ‘‘(iv) DISEASE MANAGEMENT PRO12 GRAMS.—Recommendations on the incor13 poration of disease management programs 

14 under parts C and D. 

15 ‘‘(v) RURAL ACCESS.—Recommenda16 tions to improve competition and access to 

17 plans under parts C and D in rural areas. 

18 ‘‘(C) MAINTAINING INDEPENDENCE OF

19 BOARD.—The Board shall directly submit to 

20 Congress reports required under subparagraph 

21 (A). No officer or agency of the United States 

22 may require the Board to submit to any officer 

23 or agency of the United States for approval, 

24 comments, or review, prior to the submission to 

25 Congress of such reports. 
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1 ‘‘(3) DUTY OF ADMINISTRATOR.—With respect 

2 to any report submitted by the Board under para3 graph (2)(A), not later than 90 days after the report 

4 is submitted, the Administrator shall submit to Con5 gress and the President an analysis of recommenda6 tions made by the Board in such report. Each such 

7 analysis shall be published in the Federal Register. 

8 ‘‘(4) MEMBERSHIP.—

9 ‘‘(A) APPOINTMENT.—Subject to the suc10 ceeding provisions of this paragraph, the Board 

11 shall consist of 7 members to be appointed as 

12 follows: 

13 ‘‘(i) Three members shall be ap14 pointed by the President. 

15 ‘‘(ii) Two members shall be appointed 

16 by the Speaker of the House of Represent17 atives, with the advice of the chairman and 

18 the ranking minority member of the Com19 mittees on Ways and Means and on En20 ergy and Commerce of the House of Rep21 resentatives. 

22 ‘‘(iii) Two members shall be appointed 

23 by the President pro tempore of the Senate 

24 with the advice of the chairman and the 
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1 ranking minority member of the Com2 mittee on Finance of the Senate. 

3 ‘‘(B) QUALIFICATIONS.—The members 

4 shall be chosen on the basis of their integrity, 

5 impartiality, and good judgment, and shall be 

6 individuals who are, by reason of their edu7 cation and experience in health care benefits 

8 management, exceptionally qualified to perform 

9 the duties of members of the Board. 

10 ‘‘(C) PROHIBITION ON INCLUSION OF FED11 ERAL EMPLOYEES.—No officer or employee of 

12 the United States may serve as a member of 

13 the Board. 

14 ‘‘(5) COMPENSATION.—Members of the Board 

15 shall receive, for each day (including travel time) 

16 they are engaged in the performance of the functions 

17 of the Board, compensation at rates not to exceed 

18 the daily equivalent to the annual rate in effect for 

19 level IV of the Executive Schedule under section 

20 5315 of title 5, United States Code. 

21 ‘‘(6) TERMS OF OFFICE.—

22 ‘‘(A) IN GENERAL.—The term of office of 

23 members of the Board shall be 3 years. 
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1 ‘‘(B) TERMS OF INITIAL APPOINTEES.—As 

2 designated by the President at the time of ap3 pointment, of the members first appointed—

4 ‘‘(i) one shall be appointed for a term 

5 of 1 year; 

6 ‘‘(ii) three shall be appointed for 

7 terms of 2 years; and 

8 ‘‘(iii) three shall be appointed for 

9 terms of 3 years. 

10 ‘‘(C) REAPPOINTMENTS.—Any person ap11 pointed as a member of the Board may not 

12 serve for more than 8 years. 

13 ‘‘(D) VACANCY.—Any member appointed 

14 to fill a vacancy occurring before the expiration 

15 of the term for which the member’s predecessor 

16 was appointed shall be appointed only for the 

17 remainder of that term. A member may serve 

18 after the expiration of that member’s term until 

19 a successor has taken office. A vacancy in the 

20 Board shall be filled in the manner in which the 

21 original appointment was made. 

22 ‘‘(7) CHAIR.—The Chair of the Board shall be 

23 elected by the members. The term of office of the 

24 Chair shall be 3 years. 
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1 ‘‘(8) MEETINGS.—The Board shall meet at the 

2 call of the Chair, but in no event less than 3 times 

3 during each fiscal year. 

4 ‘‘(9) DIRECTOR AND STAFF.—

5 ‘‘(A) APPOINTMENT OF DIRECTOR.—The 

6 Board shall have a Director who shall be ap7 pointed by the Chair. 

8 ‘‘(B) IN GENERAL.—With the approval of 

9 the Board, the Director may appoint such addi10 tional personnel as the Director considers ap11 propriate. 

12 ‘‘(C) ASSISTANCE FROM THE ADMINIS13 TRATOR.—The Administrator shall make avail14 able to the Board such information and other 

15 assistance as it may require to carry out its 

16 functions. 

17 ‘‘(10) CONTRACT AUTHORITY.—The Board may 

18 contract with and compensate government and pri19 vate agencies or persons to carry out its duties 

20 under this subsection, without regard to section 

21 3709 of the Revised Statutes (41 U.S.C. 5). 

22 ‘‘(f) FUNDING.—There is authorized to be appro23 priated, in appropriate part from the Federal Hospital In24 surance Trust Fund and from the Federal Supplementary 

25 Medical Insurance Trust Fund (including the Prescription 
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1 Drug Account), such sums as are necessary to carry out 

2 this section.’’. 

3 (b) USE OF CENTRAL, TOLL-FREE NUMBER (1–800–

4 MEDICARE).—Section 1804(b) (42 U.S.C. 1395b–2(b)) 

5 is amended by adding at the end the following: ‘‘By not 

6 later than 1 year after the date of the enactment of the 

7 Prescription Drug and Medicare Improvement Act of 

8 2003, the Secretary shall provide, through the toll-free 

9 number 1–800–MEDICARE, for a means by which indi10 viduals seeking information about, or assistance with, such 

11 programs who phone such toll-free number are transferred 

12 (without charge) to appropriate entities for the provision 

13 of such information or assistance. Such toll-free number 

14 shall be the toll-free number listed for general information 

15 and assistance in the annual notice under subsection (a) 

16 instead of the listing of numbers of individual contrac17 tors.’’. 

18 SEC. 302. MISCELLANEOUS ADMINISTRATIVE PROVISIONS. 

19 (a) ADMINISTRATOR AS MEMBER AND CO-SEC20 RETARY OF THE BOARD OF TRUSTEES OF THE MEDICARE

21 TRUST FUNDS.—The fifth sentence of sections 1817(b) 

22 and 1841(b) (42 U.S.C. 1395i(b), 1395t(b)) are each 

23 amended by striking ‘‘shall serve as the Secretary’’ and 

24 inserting ‘‘and the Administrator of the Center for Medi25 care Choices shall serve as the Co-Secretaries’’. 
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1 (b) INCREASE IN GRADE TO EXECUTIVE LEVEL III 

2 FOR THE ADMINISTRATOR OF THE CENTERS FOR MEDI3 CARE & MEDICAID SERVICES.—

4 (1) IN GENERAL.—Section 5314 of title 5, 

5 United States Code, is amended by adding at the 

6 end the following: 

7 ‘‘Administrator of the Centers for Medicare & 

8 Medicaid Services.’’. 

9 (2) CONFORMING AMENDMENT.—Section 5315 

10 of such title is amended by striking ‘‘Administrator 

11 of the Health Care Financing Administration.’’. 

12 (3) EFFECTIVE DATE.—The amendments made 

13 by this subsection take effect on March 1, 2004. 

14 TITLE IV—MEDICARE FEE-FOR15 SERVICE IMPROVEMENTS 

16 Subtitle A—Provisions Relating to 

17 Part A 

18 SEC. 401. EQUALIZING URBAN AND RURAL STANDARDIZED 

19 PAYMENT AMOUNTS UNDER THE MEDICARE 

20 INPATIENT HOSPITAL PROSPECTIVE PAY21 MENT SYSTEM. 

22 (a) IN GENERAL.—Section 1886(d)(3)(A)(iv) (42 

23 U.S.C. 1395ww(d)(3)(A)(iv)) is amended—
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1 (1) by striking ‘‘(iv) For discharges’’ and in2 serting ‘‘(iv)(I) Subject to subclause (II), for dis3 charges’’; and 

4 (2) by adding at the end the following new sub5 clause: 

6 ‘‘(II) For discharges occurring in a fiscal year 

7 (beginning with fiscal year 2004), the Secretary 

8 shall compute a standardized amount for hospitals 

9 located in any area within the United States and 

10 within each region equal to the standardized amount 

11 computed for the previous fiscal year under this sub12 paragraph for hospitals located in a large urban area 

13 (or, beginning with fiscal year 2005, for applicable 

14 for all hospitals in the previous fiscal year) increased 

15 by the applicable percentage increase under sub16 section (b)(3)(B)(i) for the fiscal year involved.’’. 

17 (b) APPLICATION TO SUBSECTION (D) PUERTO RICO

18 HOSPITALS.—Section 1886(d)(9) (42 U.S.C. 

19 1395ww(d)(9)) is amended—

20 (1) in subparagraph (A)—

21 (A) in clause (i), by striking ‘‘and’’ after 

22 the comma at the end; 

23 (B) in clause (ii)—
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1 (i) in the matter preceding subclause 

2 (I), by inserting ‘‘and before October 1, 

3 2003’’ after ‘‘October 1, 1997’’; and 

4 (ii) in the matter following clause 

5 (III), by striking the period at the end and 

6 inserting ‘‘, and’’; and 

7 (iii) by adding at the end the fol8 lowing new clause: 

9 ‘‘(iii) for discharges in a fiscal year beginning 

10 on or after October 1, 2003, 50 percent of the na11 tional standardized rate (determined under para12 graph (3)(D)(iii)) for hospitals located in any area.’’; 

13 (2) in subparagraph (C)—

14 (A) in clause (i)—

15 (i) by striking ‘‘(i) The Secretary’’ 

16 and inserting ‘‘(i)(I) For discharges in a 

17 fiscal year after fiscal year 1988 and be18 fore fiscal year 2004, the Secretary; and 

19 (ii) by adding at the end the fol20 lowing: 

21 ‘‘(II) For discharges in fiscal year 2004, the 

22 Secretary shall compute an average standardized 

23 amount for hospitals located in any area of Puerto 

24 Rico that is equal to the average standardized 

25 amount computed under subclause (I) for fiscal year 
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1 2003 for hospitals in an urban area, increased by 

2 the applicable percentage increase under subsection 

3 (b)(3)(B) for fiscal year 2004. 

4 ‘‘(III) For discharges in a fiscal year after fis5 cal year 2004, the Secretary shall compute an aver6 age standardized amount for hospitals located in any 

7 are of Puerto Rico that is equal to the average 

8 standardized amount computed under subclause (II) 

9 or this subclause for the previous fiscal year, in10 creased by the applicable percentage increase under 

11 subsection (b)(3)(B), adjusted to reflect the most re12 cent case mix data.’’; 

13 (B) in clause (ii), by inserting ‘‘(or for fis14 cal year 2004 and thereafter, the standardized 

15 amount)’’ after ‘‘each of the average standard16 ized amounts’’; and 

17 (C) in clause (iii)(I), by striking ‘‘for hos18 pitals located in an urban or rural area, respec19 tively’’. 

20 (c) CONFORMING AMENDMENTS.—

21 (1) COMPUTING DRG-SPECIFIC RATES.—Section 

22 1886(d)(3)(D) (42 U.S.C. 1395ww(d)(3)(D)) is 

23 amended—

24 (A) in the heading, by striking ‘‘IN DIF25 FERENT AREAS’’; 
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1 (B) in the matter preceding clause (i), by 

2 striking ‘‘, each of’’; 

3 (C) in clause (i)—

4 (i) in the matter preceding subclause 

5 (I), by inserting ‘‘for fiscal years before fis6 cal year 2004,’’ before ‘‘for hospitals’’; and 

7 (ii) in subclause (II), by striking 

8 ‘‘and’’ after the semicolon at the end; 

9 (D) in clause (ii)—

10 (i) in the matter preceding subclause 

11 (I), by inserting ‘‘for fiscal years before fis12 cal year 2004,’’ before ‘‘for hospitals’’; and 

13 (ii) in subclause (II), by striking the 

14 period at the end and inserting ‘‘; and’’; 

15 and 

16 (E) by adding at the end the following new 

17 clause: 

18 ‘‘(iii) for a fiscal year beginning after fiscal 

19 year 2003, for hospitals located in all areas, to 

20 the product of—

21 ‘‘(I) the applicable standardized 

22 amount (computed under subparagraph 

23 (A)), reduced under subparagraph (B), 

24 and adjusted or reduced under subpara25 graph (C) for the fiscal year; and 
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1 ‘‘(II) the weighting factor (determined 

2 under paragraph (4)(B)) for that diag3 nosis-related group.’’. 

4 (2) TECHNICAL CONFORMING SUNSET.—Section 

5 1886(d)(3) (42 U.S.C. 1395ww(d)(3)) is amended—

6 (A) in the matter preceding subparagraph 

7 (A), by inserting ‘‘, for fiscal years before fiscal 

8 year 1997,’’ before ‘‘a regional adjusted DRG 

9 prospective payment rate’’; and 

10 (B) in subparagraph (D), in the matter 

11 preceding clause (i), by inserting ‘‘, for fiscal 

12 years before fiscal year 1997,’’ before ‘‘a re13 gional DRG prospective payment rate for each 

14 region,’’. 

15 SEC. 402. ADJUSTMENT TO THE MEDICARE INPATIENT HOS16 PITAL PPS WAGE INDEX TO REVISE THE 

17 LABOR-RELATED SHARE OF SUCH INDEX. 

18 (a) IN GENERAL.—Section 1886(d)(3)(E) (42 U.S.C. 

19 1395ww(d)(3)(E)) is amended—

20 (1) by striking ‘‘WAGE LEVELS.—The Sec21 retary’’ and inserting ‘‘WAGE LEVELS.—

22 ‘‘(i) IN GENERAL.—Except as provided in 

23 clause (ii), the Secretary’’; and 

24 (2) by adding at the end the following new 

25 clause: 
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1 ‘‘(ii) ALTERNATIVE PROPORTION TO BE

2 ADJUSTED BEGINNING IN FISCAL YEAR 2005.—

3 ‘‘(I) IN GENERAL.—Except as pro4 vided in subclause (II), for discharges oc5 curring on or after October 1, 2004, the 

6 Secretary shall substitute ‘62 percent’ for 

7 the proportion described in the first sen8 tence of clause (i). 

9 ‘‘(II) HOLD HARMLESS FOR CERTAIN

10 HOSPITALS.—If the application of sub11 clause (I) would result in lower payments 

12 to a hospital than would otherwise be 

13 made, then this subparagraph shall be ap14 plied as if this clause had not been en15 acted.’’. 

16 (b) WAIVING BUDGET NEUTRALITY.—Section 

17 1886(d)(3)(E) (42 U.S.C. 1395ww(d)(3)(E)), as amended 

18 by subsection (a), is amended by adding at the end of 

19 clause (i) the following new sentence: ‘‘The Secretary shall 

20 apply the previous sentence for any period as if the 

21 amendments made by section 402(a) of the Prescription 

22 Drug and Medicare Improvement Act of 2003 had not 

23 been enacted.’’. 
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1 SEC. 403. MEDICARE INPATIENT HOSPITAL PAYMENT AD2 JUSTMENT FOR LOW-VOLUME HOSPITALS. 

3 Section 1886(d) (42 U.S.C. 1395ww(d)) is amended 

4 by adding at the end the following new paragraph: 

5 ‘‘(12) PAYMENT ADJUSTMENT FOR LOW-VOL6 UME HOSPITALS.—

7 ‘‘(A) PAYMENT ADJUSTMENT.—

8 ‘‘(i) IN GENERAL.—Notwithstanding 

9 any other provision of this section, for each 

10 cost reporting period (beginning with the 

11 cost reporting period that begins in fiscal 

12 year 2005), the Secretary shall provide for 

13 an additional payment amount to each low14 volume hospital (as defined in clause (iii)) 

15 for discharges occurring during that cost 

16 reporting period which is equal to the ap17 plicable percentage increase (determined 

18 under clause (ii)) in the amount paid to 

19 such hospital under this section for such 

20 discharges. 

21 ‘‘(ii) APPLICABLE PERCENTAGE IN22 CREASE.—The Secretary shall determine a 

23 percentage increase applicable under this 

24 paragraph that ensures that—

25 ‘‘(I) no percentage increase in 

26 payments under this paragraph ex-
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1 ceeds 25 percent of the amount of 

2 payment that would (but for this 

3 paragraph) otherwise be made to a 

4 low-volume hospital under this section 

5 for each discharge; 

6 ‘‘(II) low-volume hospitals that 

7 have the lowest number of discharges 

8 during a cost reporting period receive 

9 the highest percentage increases in 

10 payments due to the application of 

11 this paragraph; and 

12 ‘‘(III) the percentage increase in 

13 payments to any low-volume hospital 

14 due to the application of this para15 graph is reduced as the number of 

16 discharges per cost reporting period 

17 increases. 

18 ‘‘(iii) LOW-VOLUME HOSPITAL DE19 FINED.—For purposes of this paragraph, 

20 the term ‘low-volume hospital’ means, for a 

21 cost reporting period, a subsection (d) hos22 pital (as defined in paragraph (1)(B)) 

23 other than a critical access hospital (as de24 fined in section 1861(mm)(1)) that— 
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1 ‘‘(I) the Secretary determines 

2 had an average of less than 2,000 dis3 charges (determined with respect to 

4 all patients and not just individuals 

5 receiving benefits under this title) 

6 during the 3 most recent cost report7 ing periods for which data are avail8 able that precede the cost reporting 

9 period to which this paragraph ap10 plies; and 

11 ‘‘(II) is located at least 15 miles 

12 from a like hospital (or is deemed by 

13 the Secretary to be so located by rea14 son of such factors as the Secretary 

15 determines appropriate, including the 

16 time required for an individual to 

17 travel to the nearest alternative source 

18 of appropriate inpatient care (after 

19 taking into account the location of 

20 such alternative source of inpatient 

21 care and any weather or travel condi22 tions that may affect such travel 

23 time). 

24 ‘‘(B) PROHIBITING CERTAIN REDUC25 TIONS.—Notwithstanding subsection (e), the 
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1 Secretary shall not reduce the payment 

2 amounts under this section to offset the in3 crease in payments resulting from the applica4 tion of subparagraph (A).’’. 

5 SEC. 404. FAIRNESS IN THE MEDICARE DISPROPOR6 TIONATE SHARE HOSPITAL (DSH) ADJUST7 MENT FOR RURAL HOSPITALS. 

8 (a) EQUALIZING DSH PAYMENT AMOUNTS.—

9 (1) IN GENERAL.—Section 1886(d)(5)(F)(vii) 

10 (42 U.S.C. 1395ww(d)(5)(F)(vii)) is amended by in11 serting ‘‘, and, after October 1, 2004, for any other 

12 hospital described in clause (iv),’’ after ‘‘clause 

13 (iv)(I)’’ in the matter preceding subclause (I). 

14 (2) CONFORMING AMENDMENTS.—Section 

15 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) is 

16 amended—

17 (A) in clause (iv)—

18 (i) in subclause (II)—

19 (I) by inserting ‘‘and before Oc20 tober 1, 2004,’’ after ‘‘April 1, 

21 2001,’’; and 

22 (II) by inserting ‘‘or, for dis23 charges occurring on or after October 

24 1, 2004, is equal to the percent deter25 mined in accordance with the applica-
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1 ble formula described in clause (vii)’’ 

2 after ‘‘clause (xiii)’’; 

3 (ii) in subclause (III)—

4 (I) by inserting ‘‘and before Oc5 tober 1, 2004,’’ after ‘‘April 1, 

6 2001,’’; and 

7 (II) by inserting ‘‘or, for dis8 charges occurring on or after October 

9 1, 2004, is equal to the percent deter10 mined in accordance with the applica11 ble formula described in clause (vii)’’ 

12 after ‘‘clause (xii)’’; 

13 (iii) in subclause (IV)— 

14 (I) by inserting ‘‘and before Oc15 tober 1, 2004,’’ after ‘‘April 1, 

16 2001,’’; and 

17 (II) by inserting ‘‘or, for dis18 charges occurring on or after October 

19 1, 2004, is equal to the percent deter20 mined in accordance with the applica21 ble formula described in clause (vii)’’ 

22 after ‘‘clause (x) or (xi)’’; 

23 (iv) in subclause (V)—
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1 (I) by inserting ‘‘and before Oc2 tober 1, 2004,’’ after ‘‘April 1, 

3 2001,’’; and 

4 (II) by inserting ‘‘or, for dis5 charges occurring on or after October 

6 1, 2004, is equal to the percent deter7 mined in accordance with the applica8 ble formula described in clause (vii)’’ 

9 after ‘‘clause (xi)’’; and 

10 (v) in subclause (VI)— 

11 (I) by inserting ‘‘and before Oc12 tober 1, 2004,’’ after ‘‘April 1, 

13 2001,’’; and 

14 (II) by inserting ‘‘or, for dis15 charges occurring on or after October 

16 1, 2004, is equal to the percent deter17 mined in accordance with the applica18 ble formula described in clause (vii)’’ 

19 after ‘‘clause (x)’’; 

20 (B) in clause (viii), by striking ‘‘The for21 mula’’ and inserting ‘‘For discharges occurring 

22 before October 1, 2004, the formula’’; and 

23 (C) in each of clauses (x), (xi), (xii), and 

24 (xiii), by striking ‘‘For purposes’’ and inserting 
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1 ‘‘With respect to discharges occurring before 

2 October 1, 2004, for purposes’’. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to discharges occurring on or after 

5 October 1, 2004. 

6 SEC. 404A. MEDPAC STUDY AND REPORT REGARDING MEDI7 CARE DISPROPORTIONATE SHARE HOSPITAL 

8 (DSH) ADJUSTMENT PAYMENTS. 

9 (a) STUDY.—The Medicare Payment Advisory Com10 mission established under section 1805 of the Social Secu11 rity Act (42 U.S.C. 1395b–6) (in this section referred to 

12 as ‘‘MedPAC’’) shall conduct a study to determine, with 

13 respect to additional payment amounts paid to subsection 

14 (d) hospitals under section 1886(d)(5)(F) of the Social Se15 curity Act (42 U.S.C. 1395ww(d)(5)(F))—

16 (1) whether such payments should be made in 

17 the same manner as payments are made with respect 

18 to graduate medical education under title XVIII and 

19 with respect to hospitals that serve a dispropor20 tionate share of low-income patients under the med21 icaid program; and 

22 (2) whether to add costs attributable to uncom23 pensated care to the formula for determining such 

24 payment amounts. 
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1 (b) REPORT.—Not later than 1 year after the date 

2 of enactment of this Act, MedPAC shall submit a report 

3 to Congress on the study conducted under subsection (a), 

4 together with such recommendations for legislation as 

5 MedPAC determines are appropriate. 

6 SEC. 405. CRITICAL ACCESS HOSPITAL (CAH) IMPROVE7 MENTS. 

8 (a) PERMITTING CAHS TO ALLOCATE SWING BEDS

9 AND ACUTE CARE INPATIENT BEDS SUBJECT TO A

10 TOTAL LIMIT OF 25 BEDS.—

11 (1) IN GENERAL.—Section 1820(c)(2)(B)(iii) 

12 (42 U.S.C. 1395i–4(c)(2)(B)(iii)) is amended to 

13 read as follows: 

14 ‘‘(iii) provides not more than a total 

15 of 25 extended care service beds (pursuant 

16 to an agreement under subsection (f)) and 

17 acute care inpatient beds (meeting such 

18 standards as the Secretary may establish) 

19 for providing inpatient care for a period 

20 that does not exceed, as determined on an 

21 annual, average basis, 96 hours per pa22 tient;’’. 

23 (2) CONFORMING AMENDMENT.—Section 

24 1820(f) (42 U.S.C. 1395i–4(f)) is amended by strik25 ing ‘‘and the number of beds used at any time for 
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1 acute care inpatient services does not exceed 15 

2 beds’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall with respect to designations 

5 made on or after October 1, 2004. 

6 (b) ELIMINATION OF THE ISOLATION TEST FOR

7 COST-BASED CAH AMBULANCE SERVICES.—

8 (1) ELIMINATION.—

9 (A) IN GENERAL.—Section 1834(l)(8) (42 

10 U.S.C. 1395m(l)(8)), as added by section 

11 205(a) of BIPA (114 Stat. 2763A–482), is 

12 amended by striking the comma at the end of 

13 subparagraph (B) and all that follows and in14 serting a period. 

15 (B) EFFECTIVE DATE.—The amendment 

16 made by subparagraph (A) shall apply to serv17 ices furnished on or after January 1, 2005. 

18 (2) TECHNICAL CORRECTION.—Section 1834(l) 

19 (42 U.S.C. 1395m(l)) is amended by redesignating 

20 paragraph (8), as added by section 221(a) of BIPA 

21 (114 Stat. 2763A–486), as paragraph (9). 

22 (c) COVERAGE OF COSTS FOR CERTAIN EMERGENCY

23 ROOM ON-CALL PROVIDERS.—

24 (1) IN GENERAL.—Section 1834(g)(5) (42 

25 U.S.C. 1395m(g)(5)) is amended—
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1 (A) in the heading—

2 (i) by inserting ‘‘CERTAIN’’ before 

3 ‘‘EMERGENCY’’; and 

4 (ii) by striking ‘‘PHYSICIANS’’ and in5 serting ‘‘PROVIDERS’’; 

6 (B) by striking ‘‘emergency room physi7 cians who are on-call (as defined by the Sec8 retary)’’ and inserting ‘‘physicians, physician 

9 assistants, nurse practitioners, and clinical 

10 nurse specialists who are on-call (as defined by 

11 the Secretary) to provide emergency services’’; 

12 and 

13 (C) by striking ‘‘physicians’ services’’ and 

14 inserting ‘‘services covered under this title’’. 

15 (2) EFFECTIVE DATE.—The amendments made 

16 by paragraph (1) shall apply to costs incurred for 

17 services provided on or after January 1, 2005. 

18 (d) AUTHORIZATION OF PERIODIC INTERIM PAY19 MENT (PIP).—

20 (1) IN GENERAL.—Section 1815(e)(2) (42 

21 U.S.C. 1395g(e)(2)) is amended—

22 (A) in subparagraph (C), by striking 

23 ‘‘and’’ after the semicolon at the end; 

24 (B) in subparagraph (D), by adding ‘‘and’’ 

25 after the semicolon at the end; and 
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1 (C) by inserting after subparagraph (D) 

2 the following new subparagraph: 

3 ‘‘(E) inpatient critical access hospital services;’’. 

4 (2) EFFECTIVE DATE.—The amendments made 

5 by paragraph (1) shall apply to payments for inpa6 tient critical access facility services furnished on or 

7 after January 1, 2005. 

8 (e) EXCLUSION OF NEW CAHS FROM PPS HOS9 PITAL WAGE INDEX CALCULATION.—Section 

10 1886(d)(3)(E)(i) (42 U.S.C. 1395ww(d)(3)(E)(i)), as 

11 amended by section 402, is amended by inserting after the 

12 first sentence the following new sentence: ‘‘In calculating 

13 the hospital wage levels under the preceding sentence ap14 plicable with respect to cost reporting periods beginning 

15 on or after January 1, 2004, the Secretary shall exclude 

16 the wage levels of any facility that became a critical access 

17 hospital prior to the cost reporting period for which such 

18 hospital wage levels are calculated.’’. 

19 (f) PROVISIONS RELATED TO CERTAIN RURAL

20 GRANTS.—

21 (1) SMALL RURAL HOSPITAL IMPROVEMENT

22 PROGRAM.—Section 1820(g) (42 U.S.C. 1395i–4(g)) 

23 is amended—
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1 (A) by redesignating paragraph (3)(F) as 

2 paragraph (5) and redesignating and indenting 

3 appropriately; and 

4 (B) by inserting after paragraph (3) the 

5 following new paragraph: 

6 ‘‘(4) SMALL RURAL HOSPITAL IMPROVEMENT

7 PROGRAM.—

8 ‘‘(A) GRANTS TO HOSPITALS.—The Sec9 retary may award grants to hospitals that have 

10 submitted applications in accordance with sub11 paragraph (B) to assist eligible small rural hos12 pitals (as defined in paragraph (3)(B)) in meet13 ing the costs of reducing medical errors, in14 creasing patient safety, protecting patient pri15 vacy, and improving hospital quality and per16 formance. 

17 ‘‘(B) APPLICATION.—A hospital seeking a 

18 grant under this paragraph shall submit an ap19 plication to the Secretary on or before such 

20 date and in such form and manner as the Sec21 retary specifies. 

22 ‘‘(C) AMOUNT OF GRANT.—A grant to a 

23 hospital under this paragraph may not exceed 

24 $50,000. 
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1 ‘‘(D) USE OF FUNDS.—A hospital receiv2 ing a grant under this paragraph may use the 

3 funds for the purchase of computer software 

4 and hardware, the education and training of 

5 hospital staff, and obtaining technical assist6 ance.’’. 

7 (2) AUTHORIZATION FOR APPROPRIATIONS.—

8 Section 1820(j) (42 U.S.C. 1395i–4(j)) is amended 

9 to read as follows: 

10 ‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—

11 ‘‘(1) HI TRUST FUND.—There are authorized to 

12 be appropriated from the Federal Hospital Insur13 ance Trust Fund for making grants to all States 

14 under—

15 ‘‘(A) subsection (g), $25,000,000 in each 

16 of the fiscal years 1998 through 2002; and 

17 ‘‘(B) paragraphs (1) and (2) of subsection 

18 (g), $40,000,000 in each of the fiscal years 

19 2004 through 2008. 

20 ‘‘(2) GENERAL REVENUES.—There are author21 ized to be appropriated from amounts in the Treas22 ury not otherwise appropriated for making grants to 

23 all States under subsection (g)(4), $25,000,000 in 

24 each of the fiscal years 2004 through 2008.’’. 
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1 (3) REQUIREMENT THAT STATES AWARDED

2 GRANTS CONSULT WITH THE STATE HOSPITAL ASSO3 CIATION AND RURAL HOSPITALS ON THE MOST AP4 PROPRIATE WAYS TO USE SUCH GRANTS.—

5 (A) IN GENERAL.—Section 1820(g) (42 

6 U.S.C. 1395i–4(g)), as amended by paragraph 

7 (1), is amended by adding at the end the fol8 lowing new paragraph: 

9 ‘‘(6) REQUIRED CONSULTATION FOR STATES

10 AWARDED GRANTS.—A State awarded a grant under 

11 paragraph (1) or (2) shall consult with the hospital 

12 association of such State and rural hospitals located 

13 in such State on the most appropriate ways to use 

14 the funds under such grant.’’. 

15 (B) EFFECTIVE DATE AND APPLICA16 TION.—The amendment made by subparagraph 

17 (A) shall take effect on the date of enactment 

18 of this Act and shall apply to grants awarded 

19 on or after such date and to grants awarded 

20 prior to such date to the extent that funds 

21 under such grants have not been obligated as of 

22 such date. 

23 (g) EXCLUSION OF CERTAIN BEDS FROM BED

24 COUNT AND REMOVAL OF BARRIERS TO ESTABLISHMENT

25 OF DISTINCT PART UNITS.—
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1 (1) EXCLUSION OF CERTAIN BEDS FROM BED

2 COUNT.—Section 1820(c)(2) (42 U.S.C. 1395i–

3 4(c)(2)) is amended by adding at the end the fol4 lowing: 

5 ‘‘(E) EXCLUSION OF CERTAIN BEDS FROM

6 BED COUNT.—In determining the number of 

7 beds of a facility for purposes of applying the 

8 bed limitations referred to in subparagraph 

9 (B)(iii) and subsection (f), the Secretary shall 

10 not take into account any bed of a distinct part 

11 psychiatric or rehabilitation unit (described in 

12 the matter following clause (v) of section 

13 1886(d)(1)(B)) of the facility, except that the 

14 total number of beds that are not taken into ac15 count pursuant to this subparagraph with re16 spect to a facility shall not exceed 25.’’. 

17 (2) REMOVING BARRIERS TO ESTABLISHMENT

18 OF DISTINCT PART UNITS BY CRITICAL ACCESS HOS19 PITALS.—Section 1886(d)(1)(B) (42 U.S.C. 

20 195ww(d)(1)(B)) is amended by striking ‘‘a distinct 

21 part of the hospital (as defined by the Secretary)’’ 

22 in the matter following cause (v) and inserting ‘‘a 

23 distinct part (as defined by the Secretary) of the 

24 hospital or of a critical access hospital’’. 
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1 (3) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to determinations with 

3 respect to distinct part unit status, and with respect 

4 to designations, that are made on or after October 

5 1, 2003. 

6 SEC. 406. AUTHORIZING USE OF ARRANGEMENTS TO PRO7 VIDE CORE HOSPICE SERVICES IN CERTAIN 

8 CIRCUMSTANCES. 

9 (a) IN GENERAL.—Section 1861(dd)(5) (42 U.S.C. 

10 1395x(dd)(5)) is amended by adding at the end the fol11 lowing: 

12 ‘‘(D) In extraordinary, exigent, or other non-routine 

13 circumstances, such as unanticipated periods of high pa14 tient loads, staffing shortages due to illness or other 

15 events, or temporary travel of a patient outside a hospice 

16 program’s service area, a hospice program may enter into 

17 arrangements with another hospice program for the provi18 sion by that other program of services described in para19 graph (2)(A)(ii)(I). The provisions of paragraph 

20 (2)(A)(ii)(II) shall apply with respect to the services pro21 vided under such arrangements. 

22 ‘‘(E) A hospice program may provide services de23 scribed in paragraph (1)(A) other than directly by the pro24 gram if the services are highly specialized services of a 

25 registered professional nurse and are provided non-rou-
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1 tinely and so infrequently so that the provision of such 

2 services directly would be impracticable and prohibitively 

3 expensive.’’. 

4 (b) CONFORMING PAYMENT PROVISION.—Section 

5 1814(i) (42 U.S.C. 1395f(i)) is amended by adding at the 

6 end the following new paragraph: 

7 ‘‘(4) In the case of hospice care provided by a hospice 

8 program under arrangements under section 

9 1861(dd)(5)(D) made by another hospice program, the 

10 hospice program that made the arrangements shall bill 

11 and be paid for the hospice care.’’. 

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

13 this section shall apply to hospice care provided on or after 

14 October 1, 2004. 

15 SEC. 407. SERVICES PROVIDED TO HOSPICE PATIENTS BY 

16 NURSE PRACTITIONERS, CLINICAL NURSE 

17 SPECIALISTS, AND PHYSICIAN ASSISTANTS. 

18 (a) IN GENERAL.—Section 1812(d)(2)(A) (42 U.S.C. 

19 1395d(d)(2)(A) in the matter following clause (i)(II), is 

20 amended—

21 (1) by inserting ‘‘or services described in sec22 tion 1861(s)(2)(K)’’ after ‘‘except that clause (i) 

23 shall not apply to physicians’ services’’; and 

24 (2) by inserting ‘‘, or by a physician assistant, 

25 nurse practitioner, or clinical nurse specialist whom 
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1 is not an employee of the hospice program, and who 

2 the individual identifies as the health care provider 

3 having the most significant role in the determination 

4 and delivery of medical care to the individual at the 

5 time the individual makes an election to receive hos6 pice care,’’ after the ‘‘(if not an employee of the hos7 pice program)’’. 

8 (b) PERMITTING NURSE PRACTITIONERS, PHYSICIAN

9 ASSISTANTS, AND CLINICAL NURSE SPECIALIST TO RE10 VIEW HOSPICE PLANS OF CARE.—Section 1814(a)(7)(B) 

11 is amended by inserting ‘‘(or by a physician assistant, 

12 nurse practitioner or clinical nurse specialist who is not 

13 an employee of the hospice program, and whom the indi14 vidual identifies as the health care provider having the 

15 most significant role in the determination and delivery of 

16 medical care to the individual at the time the individual 

17 makes an election to receive hospice care)’’ after ‘‘and is 

18 periodically reviewed by the individual’s attending physi19 cian’’. 

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

21 this section shall apply to hospice care furnished on or 

22 after October 1, 2004. 
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1 SEC. 408. AUTHORITY TO INCLUDE COSTS OF TRAINING OF 

2 PSYCHOLOGISTS IN PAYMENTS TO HOS3 PITALS UNDER MEDICARE. 

4 Effective for cost reporting periods beginning on or 

5 after October 1, 2004, for purposes of payments to hos6 pitals under the medicare program under title XVIII of 

7 the Social Security Act for costs of approved educational 

8 activities (as defined in section 413.85 of title 42 of the 

9 Code of Federal Regulations), such approved educational 

10 activities shall include professional educational training 

11 programs, recognized by the Secretary, for psychologists. 

12 SEC. 409. REVISION OF FEDERAL RATE FOR HOSPITALS IN 

13 PUERTO RICO. 

14 Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is 

15 amended—

16 (1) in subparagraph (A)—

17 (A) in clause (i), by striking ‘‘for dis18 charges beginning on or after October 1, 1997, 

19 50 percent (and for discharges between October 

20 1, 1987, and September 30, 1997, 75 percent)’’ 

21 and inserting ‘‘the applicable Puerto Rico per22 centage (specified in subparagraph (E))’’; and 

23 (B) in clause (ii), by striking ‘‘for dis24 charges beginning in a fiscal year beginning on 

25 or after October 1, 1997, 50 percent (and for 

26 discharges between October 1, 1987, and Sep-
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1 tember 30, 1997, 25 percent)’’ and inserting 

2 ‘‘the applicable Federal percentage (specified in 

3 subparagraph (E))’’; and 

4 (2) by adding at the end the following new sub5 paragraph: 

6 ‘‘(E) For purposes of subparagraph (A), for dis7 charges occurring—

8 ‘‘(i) between October 1, 1987, and September 

9 30, 1997, the applicable Puerto Rico percentage is 

10 75 percent and the applicable Federal percentage is 

11 25 percent; 

12 ‘‘(ii) on or after October 1, 1997, and before 

13 October 1, 2004, the applicable Puerto Rico percent14 age is 50 percent and the applicable Federal per15 centage is 50 percent; 

16 ‘‘(iii) on or after October 1, 2004, and before 

17 October 1, 2009, the applicable Puerto Rico percent18 age is 0 percent and the applicable Federal percent19 age is 100 percent; and 

20 ‘‘(iv) on or after October 1, 2009, the applica21 ble Puerto Rico percentage is 50 percent and the ap22 plicable Federal percentage is 50 percent.’’. 
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1 SEC. 410. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR 

2 GERIATRIC RESIDENCY OR FELLOWSHIP 

3 PROGRAMS. 

4 (a) CLARIFICATION OF CONGRESSIONAL INTENT.—

5 Congress intended section 1886(h)(5)(F)(ii) of the Social 

6 Security Act (42 U.S.C. 1395ww(h)(5)(F)(ii)), as added 

7 by section 9202 of the Consolidated Omnibus Budget Rec8 onciliation Act of 1985 (Public Law 99–272), to provide 

9 an exception to the initial residency period for geriatric 

10 residency or fellowship programs such that, where a par11 ticular approved geriatric training program requires a 

12 resident to complete 2 years of training to initially become 

13 board eligible in the geriatric specialty, the 2 years spent 

14 in the geriatric training program are treated as part of 

15 the resident’s initial residency period, but are not counted 

16 against any limitation on the initial residency period. 

17 (b) INTERIM FINAL REGULATORY AUTHORITY AND

18 EFFECTIVE DATE.—The Secretary shall promulgate in19 terim final regulations consistent with the congressional 

20 intent expressed in this section after notice and pending 

21 opportunity for public comment to be effective for cost re22 porting periods beginning on or after October 1, 2003. 
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1 SEC. 411. CLARIFICATION OF CONGRESSIONAL INTENT RE2 GARDING THE COUNTING OF RESIDENTS IN A 

3 NONPROVIDER SETTING AND A TECHNICAL 

4 AMENDMENT REGARDING THE 3-YEAR ROLL5 ING AVERAGE AND THE IME RATIO. 

6 (a) CLARIFICATION OF REQUIREMENTS FOR COUNT7 ING RESIDENTS TRAINING IN NONPROVIDER SETTING.—

8 (1) D–GME.—Section 1886(h)(4)(E) (42 

9 U.S.C. 1395ww(h)(4)(E)) is amended by adding at 

10 the end the following new sentence: For purposes of 

11 the preceding sentence time shall only be counted 

12 from the effective date of a written agreement be13 tween the hospital and the entity owning or oper14 ating a nonprovider setting. The effective date of 

15 such written agreement shall be determined in ac16 cordance with generally accepted accounting prin17 ciples. All, or substantially all, of the costs for the 

18 training program in that setting shall be defined as 

19 the residents’ stipends and benefits and other costs, 

20 if any, as determined by the parties.’’. 

21 (2) IME.—Section 1886(d)(5)(B)(iv) (42 

22 U.S.C. 1395ww(d)(5)(B)(iv)) is amended by adding 

23 at the end the following new sentence: For purposes 

24 of the preceding sentence time shall only be counted 

25 from the effective date of a written agreement be26 tween the hospital and the entity owning or oper-
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1 ating a nonprovider setting. The effective date of 

2 such written agreement shall be determined in ac3 cordance with generally accepted accounting prin4 ciples. All, or substantially all, of the costs for the 

5 training program in that setting shall be defined as 

6 the residents’ stipends and benefits and other costs, 

7 if any, as determined by the parties.’’. 

8 (b) LIMITING ONE-YEAR LAG IN THE INDIRECT

9 MEDICAL EDUCATION (IME) RATIO AND THREE-YEAR

10 ROLLING AVERAGE IN RESIDENT COUNT FOR IME AND

11 FOR DIRECT GRADUATE MEDICAL EDUCATION (D–GME) 

12 TO MEDICAL RESIDENCY PROGRAMS.—

13 (1) IME RATIO AND IME ROLLING AVERAGE.—

14 Section 1886(d)(5)(B)(vi) of the Social Security Act 

15 (42 U.S.C. 1395ww(d)(5)(B)(vi)) is amended by 

16 adding at the end the following new sentence: ‘‘For 

17 cost reporting periods beginning during fiscal years 

18 beginning on or after October 1, 2004, subclauses 

19 (I) and (II) shall be applied only with respect to a 

20 hospital’s approved medical residency training pro21 grams in the fields of allopathic and osteopathic 

22 medicine.’’. 

23 (2) D–GME ROLLING AVERAGE.—Section 

24 1886(h)(4)(G) of the Social Security Act (42 U.S.C. 
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1 1395ww(h)(4)(G)) is amended by adding at the end 

2 the following new clause: 

3 ‘‘(iv) APPLICATION FOR FISCAL YEAR

4 2004 AND SUBSEQUENT YEARS.—For cost 

5 reporting periods beginning during fiscal 

6 years beginning on or after October 1, 

7 2004, clauses (i) through (iii) shall be ap8 plied only with respect to a hospital’s ap9 proved medical residency training program 

10 in the fields of allopathic and osteopathic 

11 medicine.’’. 

12 SEC. 412. LIMITATION ON CHARGES FOR INPATIENT HOS13 PITAL CONTRACT HEALTH SERVICES PRO14 VIDED TO INDIANS BY MEDICARE PARTICI15 PATING HOSPITALS. 

16 (a) IN GENERAL.—Section 1866(a)(1) (42 U.S.C. 

17 1395cc(a)(1)) is amended—

18 (1) in subparagraph (R), by striking ‘‘and’’ at 

19 the end; 

20 (2) in subparagraph (S), by striking the period 

21 and inserting ‘‘, and’’; and 

22 (3) by adding at the end the following new sub23 paragraph: 

24 ‘‘(T) in the case of hospitals which furnish 

25 inpatient hospital services for which payment 
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1 may be made under this title, to be a partici2 pating provider of medical care—

3 ‘‘(i) under the contract health services 

4 program funded by the Indian Health 

5 Service and operated by the Indian Health 

6 Service, an Indian tribe, or tribal organiza7 tion (as those terms are defined in section 

8 4 of the Indian Health Care Improvement 

9 Act), with respect to items and services 

10 that are covered under such program and 

11 furnished to an individual eligible for such 

12 items and services under such program; 

13 and 

14 ‘‘(ii) under a program funded by the 

15 Indian Health Service and operated by an 

16 urban Indian organization with respect to 

17 the purchase of items and services for an 

18 eligible urban Indian (as those terms are 

19 defined in such section 4), 

20 in accordance with regulations promulgated by 

21 the Secretary regarding admission practices, 

22 payment methodology, and rates of payment 

23 (including the acceptance of no more than such 

24 payment rate as payment in full for such items 

25 and services).’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply as of a date specified by the Sec3 retary of Health and Human Services (but in no case later 

4 than 6 months after the date of enactment of this Act) 

5 to medicare participation agreements in effect (or entered 

6 into) on or after such date. 

7 SEC. 413. GAO STUDY AND REPORT ON APPROPRIATENESS 

8 OF PAYMENTS UNDER THE PROSPECTIVE 

9 PAYMENT SYSTEM FOR INPATIENT HOSPITAL 

10 SERVICES. 

11 (a) STUDY.—The Comptroller General of the United 

12 States, using the most current data available, shall con13 duct a study to determine—

14 (1) the appropriate level and distribution of 

15 payments in relation to costs under the prospective 

16 payment system under section 1886 of the Social 

17 Security Act (42 U.S.C. 1395ww) for inpatient hos18 pital services furnished by subsection (d) hospitals 

19 (as defined in subsection (d)(1)(B) of such section); 

20 and 

21 (2) whether there is a need to adjust such pay22 ments under such system to reflect legitimate dif23 ferences in costs across different geographic areas, 

24 kinds of hospitals, and types of cases. 
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1 (b) REPORT.—Not later than 24 months after the 

2 date of enactment of this Act, the Comptroller General 

3 of the United States shall submit to Congress a report 

4 on the study conducted under subsection (a) together with 

5 such recommendations for legislative and administrative 

6 action as the Comptroller General determines appropriate. 

7 SEC. 414. RURAL COMMUNITY HOSPITAL DEMONSTRATION 

8 PROGRAM. 

9 (a) ESTABLISHMENT OF RURAL COMMUNITY HOS10 PITAL (RCH) DEMONSTRATION PROGRAM.—

11 (1) IN GENERAL.—The Secretary shall establish 

12 a demonstration program to test the feasibility and 

13 advisability of the establishment of rural community 

14 hospitals that furnish rural community hospital serv15 ices to medicare beneficiaries. 

16 (2) DESIGNATION OF RCHS.—

17 (A) APPLICATION.—Each hospital that is 

18 located in a demonstration area described in 

19 subparagraph (C) that desires to participate in 

20 the demonstration program under this section 

21 shall submit an application to the Secretary at 

22 such time, in such manner, and containing such 

23 information as the Secretary may require. 

24 (B) DESIGNATION.—The Secretary shall 

25 designate any hospital that is located in a dem-
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1 onstration area described in subparagraph (C), 

2 submits an application in accordance with sub3 paragraph (A), and meets the other require4 ments of this section as a rural community hos5 pital for purposes of the demonstration pro6 gram. 

7 (C) DEMONSTRATION AREAS.—There shall 

8 be four demonstration areas within this pro9 gram. Two of these demonstration areas de10 scribed in this subparagraph shall include Kan11 sas and Nebraska. 

12 (3) DURATION.—The Secretary shall conduct 

13 the demonstration program under this section for a 

14 5-year period. 

15 (4) IMPLEMENTATION.—The Secretary shall 

16 implement the demonstration program not later than 

17 January 1, 2005, but may not implement the pro18 gram before October 1, 2004. 

19 (b) PAYMENT.—

20 (1) INPATIENT HOSPITAL SERVICES.—The 

21 amount of payment under the demonstration pro22 gram for inpatient hospital services furnished in a 

23 rural community hospital, other than such services 

24 furnished in a psychiatric or rehabilitation unit of 

25 the hospital which is a distinct part, is, at the elec-
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1 tion of the hospital in the application referred to in 

2 subsection (a)(2)(A)—

3 (A) the reasonable costs of providing such 

4 services, without regard to the amount of the 

5 customary or other charge; or 

6 (B) the amount of payment provided for 

7 under the prospective payment system for inpa8 tient hospital services under section 1886(d) of 

9 the Social Security Act (42 U.S.C. 1395ww(d)). 

10 (2) OUTPATIENT SERVICES.—The amount of 

11 payment under the demonstration program for out12 patient services furnished in a rural community hos13 pital is, at the election of the hospital in the applica14 tion referred to in subsection (a)(2)(A)—

15 (A) the reasonable costs of providing such 

16 services, without regard to the amount of the 

17 customary or other charge and any limitation 

18 under section 1861(v)(1)(U) of the Social Secu19 rity Act (42 U.S.C. 1395x(v)(1)(U)); or 

20 (B) the amount of payment provided for 

21 under the prospective payment system for cov22 ered OPD services under section 1833(t) of the 

23 Social Security Act (42 U.S.C. 1395l(t)). 

24 (3) HOME HEALTH SERVICES.—In determining 

25 payments under the demonstration program for 
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1 home health services furnished by a qualified RCH2 based home health agency (as defined in paragraph 

3 (2))—

4 (A) the agency may make a one-time elec5 tion to waive application of the prospective pay6 ment system established under section 1895 of 

7 the Social Security Act (42 U.S.C. 1395fff) to 

8 such services furnished by the agency; and 

9 (B) in the case of such an election, pay10 ment shall be made on the basis of the reason11 able costs incurred in furnishing such services 

12 as determined under section 1861(v) of the So13 cial Security Act (42 U.S.C. 1395x(v)), but 

14 without regard to the amount of the customary 

15 or other charges with respect to such services or 

16 the limitations established under paragraph 

17 (1)(L) of such section. 

18 (4) CONSOLIDATED BILLING.—The Secretary 

19 shall permit consolidated billing under section 

20 1842(b)(6)(E) of the Social Security Act (42 U.S.C. 

21 1395u(b)(6)(E)). 

22 (5) EXEMPTION FROM 30 PERCENT REDUCTION

23 IN REIMBURSEMENT FOR BAD DEBT.—In deter24 mining the reasonable costs for rural community 
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1 hospitals, section 1861(v)(1)(T) of the Social Secu2 rity Act (42 U.S.C. 1395x(v)(1)(T)) shall not apply. 

3 (6) BENEFICIARY COST-SHARING FOR OUT4 PATIENT SERVICES.—The amounts of beneficiary 

5 cost-sharing for outpatient services furnished in a 

6 rural community hospital under the demonstration 

7 program shall be as follows: 

8 (A) For items and services that would have 

9 been paid under section 1833(t) of the Social 

10 Security Act (42 U.S.C. 1395l(t)) if provided 

11 by a hospital, the amount of cost-sharing deter12 mined under paragraph (8) of such section. 

13 (B) For items and services that would 

14 have been paid under section 1833(h) of such 

15 Act (42 U.S.C. 1395l(h)) if furnished by a pro16 vider or supplier, no cost-sharing shall apply. 

17 (C) For all other items and services, the 

18 amount of cost-sharing that would apply to the 

19 item or service under the methodology that 

20 would be used to determine payment for such 

21 item or service if provided by a physician, pro22 vider, or supplier, as the case may be. 

23 (7) RETURN ON EQUITY.—

24 (A) IN GENERAL.—Notwithstanding sub25 paragraph (P)(i) and (S)(i) of section 
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1 1861(v)(1) of the Social Security Act (42 

2 U.S.C. 1395x(v)(1)) and section 1886(g)(2) of 

3 such Act (42 U.S.C. 1395ww(g)(2)), in deter4 mining the reasonable costs of the services de5 scribed in subclause (II) furnished by a rural 

6 community hospital for payment of a return on 

7 equity capital at a rate of return equal to 150 

8 percent of the average specified in section 

9 1861(v)(1)(P)(i) of such Act (42 U.S.C. 

10 1395x(v)(1)(P)(i)). 

11 (B) SERVICES DESCRIBED.—The services 

12 referred to in subclause (I) are rural commu13 nity hospital services. 

14 (C) DISREGARD OF PROPRIETARY PRO15 VIDER STATUS.—Payment under the dem16 onstration program shall be made without re17 gard to whether a provider is a proprietary pro18 vider. 

19 (8) REMOVING BARRIERS TO ESTABLISHMENT

20 OF DISTINCT PART UNITS BY RCH FACILITIES.—

21 Notwithstanding section 1886(d)(1)(B) of the Social 

22 Security Act (42 U.S.C. 1395ww(d)(1)(B)), the Sec23 retary shall permit rural community hospitals to es24 tablish distinct part units for purposes of applying 

25 such section. 
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1 (c) FUNDING.—

2 (1) IN GENERAL.—The Secretary shall provide 

3 for the transfer from the Federal Hospital Insurance 

4 Trust Fund under section 1817 of the Social Secu5 rity Act (42 U.S.C. 1395i) and the Federal Supple6 mentary Insurance Trust Fund established under 

7 section 1841 of such Act (42 U.S.C. 1395t), in such 

8 proportion as the Secretary determines to be appro9 priate, of such funds as are necessary for the costs 

10 of carrying out the demonstration program under 

11 this section. 

12 (2) BUDGET NEUTRALITY.—In conducting the 

13 demonstration program under this section, the Sec14 retary shall ensure that the aggregate payments 

15 made by the Secretary do not exceed the amount 

16 which the Secretary would have paid if the dem17 onstration program under this section was not im18 plemented. 

19 (d) WAIVER AUTHORITY.—The Secretary may waive 

20 such requirements of titles XI and XVIII of the Social 

21 Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as 

22 may be necessary for the purpose of carrying out the dem23 onstration program under this section. 

24 (e) REPORT.—Not later than 6 months after the 

25 completion of the demonstration program under this sec-
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1 tion, the Secretary shall submit to Congress a report on 

2 such program, together with recommendations for such 

3 legislation and administrative action as the Secretary de4 termines to be appropriate. 

5 (f) DEFINITIONS.—In this section: 

6 (1) RURAL COMMUNITY HOSPITAL.—

7 (A) IN GENERAL.—The term ‘‘rural com8 munity hospital’’ means a hospital (as defined 

9 in section 1861(e) of the Social Security Act 

10 (42 U.S.C. 1395x(e))) that—

11 (i) is located in a rural area (as de12 fined in section 1886(d)(2)(D) of such Act 

13 (42 U.S.C. 1395ww(d)(2)(D))) or treated 

14 as being so located pursuant to section 

15 1886(d)(8)(E) of such Act (42 U.S.C. 

16 1395ww(d)(8)(E)); 

17 (ii) subject to subparagraph (B), has 

18 less than 51 acute care inpatient beds, as 

19 reported in its most recent cost report; 

20 (iii) makes available 24-hour emer21 gency care services; 

22 (iv) subject to subparagraph (C), has 

23 a provider agreement in effect with the 

24 Secretary and is open to the public as of 

25 January 1, 2003; and 
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1 (v) applies to the Secretary for such 

2 designation. 

3 (B) TREATMENT OF PSYCHIATRIC AND RE4 HABILITATION UNITS.—For purposes of para5 graph (1)(B), beds in a psychiatric or rehabili6 tation unit of the hospital which is a distinct 

7 part of the hospital shall not be counted. 

8 (C) TYPES OF HOSPITALS THAT MAY PAR9 TICIPATE.—Subparagraph (1)(D) shall not be 

10 construed to prohibit any of the following from 

11 qualifying as a rural community hospital: 

12 (i) A replacement facility (as defined 

13 by the Secretary in regulations in effect on 

14 January 1, 2003) with the same service 

15 area (as defined by the Secretary in regu16 lations in effect on such date). 

17 (ii) A facility obtaining a new provider 

18 number pursuant to a change of owner19 ship. 

20 (iii) A facility which has a binding 

21 written agreement with an outside, unre22 lated party for the construction, recon23 struction, lease, rental, or financing of a 

24 building as of January 1, 2003. 
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1 (D) INCLUSION OF CAHS.—Nothing in this 

2 subsection shall be construed as prohibiting a 

3 critical access hospital from qualifying as a 

4 rural community hospital if the critical access 

5 hospital meets the conditions otherwise applica6 ble to hospitals under section 1861(e) of the 

7 Social Security Act (42 U.S.C. 1395x(e)) and 

8 section 1866 of such Act (42 U.S.C. 1395cc). 

9 (2) QUALIFIED RCH-BASED HOME HEALTH

10 AGENCY DEFINED.—The term ‘‘qualified RCH-based 

11 home health agency’’ is a home health agency that 

12 is a provider-based entity (as defined in section 404 

13 of the Medicare, Medicaid, and SCHIP Benefits Im14 provement and Protection Act of 2000 (Public Law 

15 106–554; Appendix F, 114 Stat. 2763A–506)) of a 

16 rural community hospital that is located—

17 (A) in a county in which no main or 

18 branch office of another home health agency is 

19 located; or 

20 (B) at least 35 miles from any main or 

21 branch office of another home health agency. 

22 SEC. 415. CRITICAL ACCESS HOSPITAL IMPROVEMENT 

23 DEMONSTRATION PROGRAM. 

24 (a) ESTABLISHMENT OF CRITICAL ACCESS HOS25 PITAL DEMONSTRATION PROGRAM.—
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1 (1) IN GENERAL.—The Secretary shall establish 

2 a demonstration program to test various methods to 

3 improve the critical access hospital program under 

4 section 1820 of the Social Security Act (42 U.S.C. 

5 1395i–4). 

6 (2) CRITICAL ACCESS HOSPITAL IMPROVE7 MENT.—In conducting the demonstration program 

8 under this section, the Secretary shall apply rules 

9 with respect to critical access hospitals participating 

10 in the program as follows: 

11 (A) EXCLUSION OF CERTAIN BEDS FROM

12 BED COUNT.—In determining the number of 

13 beds of a facility for purposes of applying the 

14 bed limitations referred to in subsections 

15 (c)(2)(B)(iii) and (f) of section 1820 of the So16 cial Security Act (42 U.S.C. 1395i–4), the Sec17 retary shall not take into account any bed of a 

18 distinct part psychiatric or rehabilitation unit 

19 (described in the matter following clause (v) of 

20 section 1886(d)(1)(B) of such Act (42 U.S.C. 

21 1395ww(d)(1)(B))) of the facility, except that 

22 the total number of beds that are not taken 

23 into account pursuant to this subparagraph 

24 with respect to a facility shall not exceed 10. 
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1 (B) EXCLUSION FROM HOME HEALTH

2 PPS.—Notwithstanding section 1895 of the So3 cial Security Act (42 U.S.C. 1395fff), in deter4 mining payments under the demonstration pro5 gram for home health services furnished by a 

6 home health agency that is owned and operated 

7 by a critical access hospital participating in the 

8 demonstration program—

9 (i) the agency may make an election 

10 to waive application of the prospective pay11 ment system established under such sec12 tion to such services furnished by the 

13 agency; and 

14 (ii) in the case of such an election, 

15 payment shall be made on the basis of the 

16 reasonable costs incurred in furnishing 

17 such services as determined under section 

18 1861(v), but without regard to the amount 

19 of the customary or other charges with re20 spect to such services or the limitations es21 tablished under paragraph (1)(L) of such 

22 section. 

23 (C) EXEMPTION OF CAH FACILITIES FROM

24 PPS.—Notwithstanding section 1888(e) of the 

25 Social Security Act (42 U.S.C. 1395yy(e)), in 
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1 determining payments under this part for cov2 ered skilled nursing facility services furnished 

3 by a skilled nursing facility that is a distinct 

4 part unit of a critical access hospital partici5 pating in the demonstration program or is 

6 owned and operated by a critical access hospital 

7 participating in the demonstration program—

8 (i) the prospective payment system es9 tablished under such section shall not 

10 apply; and 

11 (ii) payment shall be made on the 

12 basis of the reasonable costs incurred in 

13 furnishing such services as determined 

14 under section 1861(v) of such Act (42 

15 U.S.C. 1395x(v)), but without regard to 

16 the amount of the customary or other 

17 charges with respect to such services. 

18 (D) CONSOLIDATED BILLING.—The Sec19 retary shall permit consolidated billing under 

20 section 1842(b)(6)(E) of the Social Security 

21 Act (42 U.S.C. 1395u(b)(6)(E)). 

22 (E) EXEMPTION OF CERTAIN DISTINCT

23 PART PSYCHIATRIC OR REHABILITATION UNITS

24 FROM COST LIMITS.—Notwithstanding section 

25 1886(b) of the Social Security Act (42 U.S.C. 
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1 1395ww(b)), in determining payments under 

2 the demonstration program for inpatient hos3 pital services furnished by a distinct part psy4 chiatric or rehabilitation unit (described in the 

5 matter following section 1886(d)(1)(B)(v) of 

6 such Act (42 U.S.C. 1395ww(d)(1)(B)(v))) of a 

7 critical access hospital participating in the dem8 onstration program—

9 (i) the limits imposed under the pre10 ceding paragraphs of this subsection shall 

11 not apply; and 

12 (ii) payment shall be made on the 

13 basis of the reasonable costs incurred in 

14 furnishing such services as determined 

15 under section 1861(v) of such Act (42 

16 U.S.C. 1395x(v)), but without regard to 

17 the amount of the customary or other 

18 charges with respect to such services. 

19 (F) RETURN ON EQUITY.—

20 (i) IN GENERAL.—Notwithstanding 

21 subparagraph (P)(i) and (S)(i) of section 

22 1861(v)(1) of the Social Security Act (42 

23 U.S.C. 1395x(v)(1)) and section 

24 1886(g)(2) of such Act (42 U.S.C. 

25 1395ww(g)(2)), in determining the reason-
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1 able costs of the services described in sub2 clause (II) furnished by a critical access 

3 hospital participating in the demonstration 

4 program for payment of a return on equity 

5 capital at a rate of return equal to 150 

6 percent of the average specified in section 

7 1861(v)(1)(P)(i) of such Act (42 U.S.C. 

8 1395x(v)(1)(P)(i)). 

9 (ii) SERVICES DESCRIBED.—The serv10 ices referred to in subclause (I) are inpa11 tient critical access hospital services, out12 patient critical access hospital services, ex13 tended care services, posthospital extended 

14 care services, home health services, ambu15 lance services, and inpatient hospital serv16 ices. 

17 (iii) DISREGARD OF PROPRIETARY

18 PROVIDER STATUS.—Payment under the 

19 demonstration program shall be made 

20 without regard to whether a provider is a 

21 proprietary provider. 

22 (G) REMOVING BARRIERS TO ESTABLISH23 MENT OF DISTINCT PART UNITS BY CAH FA24 CILITIES.—Notwithstanding section 

25 1886(d)(1)(B) of the Social Security Act (42 
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1 U.S.C. 1395ww(d)(1)(B)), the Secretary shall 

2 permit critical access hospitals participating in 

3 the demonstration program to establish distinct 

4 part units for purposes of applying such sec5 tion. 

6 (3) PARTICIPATION OF CAHS.—

7 (A) APPLICATION.—Each critical access 

8 hospital that is located in a demonstration area 

9 described in subparagraph (C) that desires to 

10 participate in the demonstration program under 

11 this section shall submit an application to the 

12 Secretary at such time, in such manner, and 

13 containing such information as the Secretary 

14 may require. 

15 (B) PARTICIPATION.—The Secretary shall 

16 permit any critical access hospital that is lo17 cated in a demonstration area described in sub18 paragraph (C), submits an application in ac19 cordance with subparagraph (A), and meets the 

20 other requirements of this section to participate 

21 in the demonstration program. 

22 (C) DEMONSTRATION AREAS.—There shall 

23 be four demonstration areas within this pro24 gram. Two of these demonstration areas de-
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1 scribed in this subparagraph shall include Kan2 sas and Nebraska. 

3 (4) DURATION.—The Secretary shall conduct 

4 the demonstration program under this section for a 

5 5-year period. 

6 (5) IMPLEMENTATION.—The Secretary shall 

7 implement the demonstration program not later than 

8 January 1, 2005, but may not implement the pro9 gram before October 1, 2004. 

10 (b) FUNDING.—

11 (1) IN GENERAL.—The Secretary shall provide 

12 for the transfer from the Federal Hospital Insurance 

13 Trust Fund under section 1817 of the Social Secu14 rity Act (42 U.S.C. 1395i) and the Federal Supple15 mentary Insurance Trust Fund established under 

16 section 1841 of such Act (42 U.S.C. 1395t), in such 

17 proportion as the Secretary determines to be appro18 priate, of such funds as are necessary for the costs 

19 of carrying out the demonstration program under 

20 this section. 

21 (2) BUDGET NEUTRALITY.—In conducting the 

22 demonstration program under this section, the Sec23 retary shall ensure that the aggregate payments 

24 made by the Secretary do not exceed the amount 

25 which the Secretary would have paid if the dem-
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1 onstration program under this section was not im2 plemented. 

3 (c) WAIVER AUTHORITY.—The Secretary may waive 

4 such requirements of titles XI and XVIII of the Social 

5 Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as 

6 may be necessary for the purpose of carrying out the dem7 onstration program under this section. 

8 (d) REPORT.—Not later than 6 months after the 

9 completion of the demonstration program under this sec10 tion, the Secretary shall submit to Congress a report on 

11 such program, together with recommendations for such 

12 legislation and administrative action as the Secretary de13 termines to be appropriate. 

14 SEC. 416. TREATMENT OF GRANDFATHERED LONG-TERM 

15 CARE HOSPITALS. 

16 (a) IN GENERAL.—The last sentence of section 

17 1886(d)(1)(B) is amended by inserting ‘‘, and the Sec18 retary may not impose any special conditions on the oper19 ation, size, number of beds, or location of any hospital so 

20 classified for continued participation under this title or 

21 title XIX or for continued classification as a hospital de22 scribed in clause (iv)’’ before the period at the end. 

23 (b) TREATMENT OF PROPOSED REVISION.—The Sec24 retary shall not adopt the proposed revision to section 

25 412.22(f) of title 42, Code of Federal Regulations con-
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1 tained in 68 Federal Register 27154 (May 19, 2003) or 

2 any revision reaching the same or substantially the same 

3 result as such revision. 

4 (c) EFFECTIVE DATE.—The amendment made by, 

5 and provisions of, this section shall apply to cost reporting 

6 periods ending on or after December 31, 2002. 

7 SEC. 417. TREATMENT OF CERTAIN ENTITIES FOR PUR8 POSES OF PAYMENTS UNDER THE MEDICARE 

9 PROGRAM. 

10 (a) PAYMENTS TO HOSPITALS.—

11 (1) IN GENERAL.—Notwithstanding any other 

12 provision of law, effective for discharges occurring 

13 on or after October 1, 2003, for purposes of making 

14 payments to hospitals (as defined in section 1886(d) 

15 and 1833(t) of the Social Security Act (42 U.S.C. 

16 1395(d)) under the medicare program under title 

17 XVIII of such Act (42 U.S.C. 1395 et seq.), Iredell 

18 County, North Carolina, and Rowan County, North 

19 Carolina, are deemed to be located in the Charlotte20 Gastonia-Rock Hill, North Carolina, South Carolina 

21 Metropolitan Statistical Area. 

22 (2) BUDGET NEUTRAL WITHIN NORTH CARO23 LINA.—The Secretary shall adjust the area wage 

24 index referred to in paragraph (1) with respect to 

25 payments to hospitals located in North Carolina in 
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1 a manner which assures that the total payments 

2 made under section 1886(d) of the Social Security 

3 Act (42 U.S.C., 1395(ww)(d)) in a fiscal year for 

4 the operating cost of inpatient hospital services are 

5 not greater or less than the total of such payments 

6 that would have been made in the year if this sub7 section had not been enacted. 

8 (b) PAYMENTS TO SKILLED NURSING FACILITIES

9 AND HOME HEALTH AGENCIES.—

10 (1) IN GENERAL.—Notwithstanding any other 

11 provision of law, effective beginning October 1, 

12 2003, for purposes of making payments to skilled 

13 nursing facilities (SNFs) and home health agencies 

14 (as defined in sections 1861(j) and 1861(o) of the 

15 Social Security Act (42 U.S.C. 1395x(j); 1395x(o)) 

16 under the medicare program under title XVIII of 

17 such Act, Iredell County, North Carolina, and 

18 Rowan County, North Carolina, are deemed to be lo19 cated in the Charlotte-Gastonia-Rock Hill, North 

20 Carolina, South Carolina Metropolitan Statistical 

21 Area. 

22 (2) APPLICATION AND BUDGET NEUTRAL WITH23 IN NORTH CAROLINA.—Effective for fiscal year 

24 2004, the skilled nursing facility PPS and home 

25 health PPS rates for Iredell County, North Carolina, 
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1 and Rowan County, North Carolina, will be updated 

2 by the prefloor, prereclassified hospital wage index 

3 available for the Charlotte-Gastonia-Rock Hill, 

4 North Carolina, South Carolina Metropolitan Statis5 tical Area. This subsection shall be implemented in 

6 a budget neutral manner, using a methodology that 

7 ensures that the total amount of expenditures for 

8 skilled nursing facility services and home health 

9 services in a year does not exceed the total amount 

10 of expenditures that would have been made in the 

11 year if this subsection had not been enacted. Re12 quired adjustments by reason of the preceding sen13 tence shall be done with respect to skilled nursing 

14 facilities and home health agencies located in North 

15 Carolina. 

16 (c) CONSTRUCTION.—The provisions of this section 

17 shall have no effect on the amount of payments made 

18 under title XVIII of the Social Security Act to entities 

19 located in States other than North Carolina. 

20 SEC. 418. REVISION OF THE INDIRECT MEDICAL EDU21 CATION (IME) ADJUSTMENT PERCENTAGE. 

22 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42 

23 U.S.C. 1395ww(d)(5)(B)(ii)) is amended—

24 (1) in subclause (VI), by striking ‘‘and’’ after 

25 the semicolon at the end; 
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1 (2) in subclause (VII)—

2 (A) by striking ‘‘on or after October 1, 

3 2002’’ and inserting ‘‘during fiscal year 2003’’; 

4 and 

5 (B) by striking the period at the end and 

6 inserting a semicolon; and 

7 (3) by adding at the end the following new sub8 clauses: 

9 ‘‘(VIII) during each of fiscal years 2004 

10 and 2005, ‘c’ is equal to 1.36; and 

11 ‘‘(IX) on or after October 1, 2005, ‘c’ is 

12 equal to 1.355.’’. 

13 (b) CONFORMING AMENDMENT RELATING TO DE14 TERMINATION OF STANDARDIZED AMOUNT.—Section 

15 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 

16 amended—

17 (1) by striking ‘‘1999 or’’ and inserting 

18 ‘‘1999,’’; and 

19 (2) by inserting ‘‘, or the Prescription Drug 

20 and Medicare Improvement Act of 2003’’ after 

21 ‘‘2000’’. 

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

23 this section shall apply to discharges occurring on or after 

24 October 1, 2003. 
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1 SEC. 419. CALCULATION OF WAGE INDICES FOR HOS2 PITALS. 

3 Notwithstanding any other provision of law, in the 

4 calculation of a wage index in a State for purposes of mak5 ing payments for discharges occurring during fiscal year 

6 2004, the Secretary may waive such other criteria for re7 classification, as deemed appropriate by the Secretary. 

8 SEC. 420. CONFORMING CHANGES REGARDING FEDERALLY 

9 QUALIFIED HEALTH CENTERS. 

10 Section 1833(a)(3) (42 U.S.C. 1395l(a)(3)) is 

11 amended by inserting ‘‘(which regulations shall exclude 

12 any cost incurred for the provision of services pursuant 

13 to a contract with an eligible entity (as defined in section 

14 1860D(4)) operating a Medicare Prescription Drug plan 

15 or with an entity with a contract under section 1860D–

16 13(e), for which payment is made by the entity)’’ after 

17 ‘‘the Secretary may prescribe in regulations’’. 

18 SEC. 420A. INCREASE FOR HOSPITALS WITH DISPROPOR19 TIONATE INDIGENT CARE REVENUES. 

20 (a) DISPROPORTIONATE SHARE ADJUSTMENT PER21 CENTAGE.—Section 1886(d)(5)(F)(iii) (42 U.S.C. 

22 1395ww(d)(5)(F)(iii)) is amended by striking ‘‘35 per23 cent’’ and inserting ‘‘35 percent (or, for discharges occur24 ring on or after October 1, 2003, 40 percent)’’. 

25 (b) CAPITAL COSTS.—Section 1886(g)(1)(B) (42 

26 U.S.C. 1395ww(g)(1)(B)) is amended—
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1 (1) in clause (iii), by striking ‘‘and’’ at the end; 

2 (2) in clause (iv), by striking the period at the 

3 end and inserting ‘‘, and’’; and 

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

5 clause: 

6 ‘‘(v) in the case of cost reporting periods begin7 ning on or after October 1, 2003, shall provide for 

8 a disproportionate share adjustment in the same 

9 manner as section 1886(d)(5)(F)(iii).’’. 

10 SEC. 420B. TREATMENT OF GRANDFATHERED LONG-TERM 

11 CARE HOSPITALS. 

12 (a) IN GENERAL.—The last sentence of section 

13 1886(d)(1)(B) is amended by inserting ‘‘, and the Sec14 retary may not impose any special conditions on the oper15 ation, size, number of beds, or location of any hospital so 

16 classified for continued participation under this title or 

17 title XIX or for continued classification as a hospital de18 scribed in clause (iv)’’ before the period at the end. 

19 (b) TREATMENT OF PROPOSED REVISION.—The Sec20 retary shall not adopt the proposed revision to section 

21 412.22(f) of title 42, Code of Federal Regulations con22 tained in 68 Federal Register 27154 (May 19, 2003) or 

23 any revision reaching the same or substantially the same 

24 result as such revision. 
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1 (c) EFFECTIVE DATE.—The amendment made by, 

2 and provisions of, this section shall apply to cost reporting 

3 periods ending on or after December 31, 2002. 

4 Subtitle B—Provisions Relating to 

5 Part B 

6 SEC. 421. ESTABLISHMENT OF FLOOR ON GEOGRAPHIC AD7 JUSTMENTS OF PAYMENTS FOR PHYSICIANS’

8 SERVICES. 

9 Section 1848(e)(1) (42 U.S.C. 1395w–4(e)(1)) is 

10 amended—

11 (1) in subparagraph (A), by striking ‘‘subpara12 graphs (B) and (C)’’ and inserting ‘‘subparagraphs 

13 (B), (C), (E), and (F)’’; and 

14 (2) by adding at the end the following new sub15 paragraphs: 

16 ‘‘(E) FLOOR FOR WORK GEOGRAPHIC INDI17 CES.—

18 ‘‘(i) IN GENERAL.—For purposes of 

19 payment for services furnished on or after 

20 January 1, 2004, and before January 1, 

21 2008, after calculating the work geo22 graphic indices in subparagraph (A)(iii), 

23 the Secretary shall increase the work geo24 graphic index to the work floor index for 
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1 any locality for which such geographic 

2 index is less than the work floor index. 

3 ‘‘(ii) WORK FLOOR INDEX.—For pur4 poses of clause (i), the term ‘applicable 

5 floor index’ means—

6 ‘‘(I) 0.980 with respect to serv7 ices furnished during 2004; and 

8 ‘‘(II) 1.000 for services furnished 

9 during 2005, 2006, and 2007. 

10 ‘‘(F) FLOOR FOR PRACTICE EXPENSE AND

11 MALPRACTICE GEOGRAPHIC INDICES.—For pur12 poses of payment for services furnished on or 

13 after January 1, 2005, and before January 1, 

14 2008, after calculating the practice expense and 

15 malpractice indices in clauses (i) and (ii) of 

16 subparagraph (A) and in subparagraph (B), the 

17 Secretary shall increase any such index to 1.00 

18 for any locality for which such index is less 

19 than 1.00.’’. 

20 SEC. 422. MEDICARE INCENTIVE PAYMENT PROGRAM IM21 PROVEMENTS. 

22 (a) PROCEDURES FOR SECRETARY, AND NOT PHYSI23 CIANS, TO DETERMINE WHEN BONUS PAYMENTS UNDER

24 MEDICARE INCENTIVE PAYMENT PROGRAM SHOULD BE
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1 MADE.—Section 1833(m) (42 U.S.C. 1395l(m)) is amend2 ed—

3 (1) by inserting ‘‘(1)’’ after ‘‘(m)’’; and 

4 (2) by adding at the end the following new 

5 paragraph: 

6 ‘‘(2) The Secretary shall establish procedures under 

7 which the Secretary, and not the physician furnishing the 

8 service, is responsible for determining when a payment is 

9 required to be made under paragraph (1).’’. 

10 (b) EDUCATIONAL PROGRAM REGARDING THE MEDI11 CARE INCENTIVE PAYMENT PROGRAM.—The Secretary 

12 shall establish and implement an ongoing educational pro13 gram to provide education to physicians under the medi14 care program on the medicare incentive payment program 

15 under section 1833(m) of the Social Security Act (42 

16 U.S.C. 1395l(m)). 

17 (c) ONGOING GAO STUDY AND ANNUAL REPORT ON

18 THE MEDICARE INCENTIVE PAYMENT PROGRAM.—

19 (1) ONGOING STUDY.—The Comptroller Gen20 eral of the United States shall conduct an ongoing 

21 study on the medicare incentive payment program 

22 under section 1833(m) of the Social Security Act 

23 (42 U.S.C. 1395l(m)). Such study shall focus on 

24 whether such program increases the access of medi25 care beneficiaries who reside in an area that is des-
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1 ignated (under section 332(a)(1)(A) of the Public 

2 Health Service Act (42 U.S.C. 254e(a)(1)(A))) as a 

3 health professional shortage area to physicians’ serv4 ices under the medicare program. 

5 (2) ANNUAL REPORTS.—Not later than 1 year 

6 after the date of enactment of this Act, and annually 

7 thereafter, the Comptroller General of the United 

8 States shall submit to Congress a report on the 

9 study conducted under paragraph (1), together with 

10 recommendations as the Comptroller General con11 siders appropriate. 

12 SEC. 423. EXTENSION OF HOLD HARMLESS PROVISIONS 

13 FOR SMALL RURAL HOSPITALS AND TREAT14 MENT OF CERTAIN SOLE COMMUNITY HOS15 PITALS TO LIMIT DECLINE IN PAYMENT 

16 UNDER THE OPD PPS. 

17 (a) SMALL RURAL HOSPITALS.—Section 

18 1833(t)(7)(D)(i) (42 U.S.C. 1395l(t)(7)(D)(i)) is amend19 ed by inserting ‘‘and during 2006’’ after ‘‘2004,’’. 

20 (b) SOLE COMMUNITY HOSPITALS.—Section 

21 1833(t)(7)(D) (42 U.S.C. 1395l(t)(7)(D)) is amended by 

22 adding at the end the following: 

23 ‘‘(iii) TEMPORARY TREATMENT FOR

24 SOLE COMMUNITY HOSPITALS.—In the 

25 case of a sole community hospital (as de-
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1 fined in section 1886(d)(5)(D)(iii)) located 

2 in a rural area, for covered OPD services 

3 furnished in 2006, for which the PPS 

4 amount is less than the pre-BBA amount, 

5 the amount of payment under this sub6 section shall be increased by the amount of 

7 such difference.’’. 

8 SEC. 424. INCREASE IN PAYMENTS FOR CERTAIN SERVICES 

9 FURNISHED BY SMALL RURAL AND SOLE 

10 COMMUNITY HOSPITALS UNDER MEDICARE 

11 PROSPECTIVE PAYMENT SYSTEM FOR HOS12 PITAL OUTPATIENT DEPARTMENT SERVICES. 

13 (a) INCREASE.—

14 (1) IN GENERAL.—In the case of an applicable 

15 covered OPD service (as defined in paragraph (2)) 

16 that is furnished by a hospital described in clause (i) 

17 or (iii) of paragraph (7)(D) of section 1833(t) of the 

18 Social Security Act (42 U.S.C. 1395l(t)), as amend19 ed by section 424, on or after January 1, 2005, and 

20 before January 1, 2008, the Secretary shall increase 

21 the medicare OPD fee schedule amount (as deter22 mined under paragraph (4)(A) of such section) that 

23 is applicable for such service in that year (deter24 mined without regard to any increase under this sec25 tion in a previous year) by 5 percent. 
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1 (2) APPLICABLE COVERED OPD SERVICES DE2 FINED.—For purposes of this section, the term ‘‘ap3 plicable covered OPD service’’ means a covered clinic 

4 or emergency room visit that is classified within the 

5 groups of covered OPD services (as defined in para6 graph (1)(B) of section 1833(t) of the Social Secu7 rity Act (42 U.S.C. 1395l(t))) established under 

8 paragraph (2)(B) of such section. 

9 (b) NO EFFECT ON COPAYMENT AMOUNT.—The Sec10 retary shall compute the copayment amount for applicable 

11 covered OPD services under section 1833(t)(8)(A) of the 

12 Social Security Act (42 U.S.C. 1395l(t)(8)(A)) as if this 

13 section had not been enacted. 

14 (c) NO EFFECT ON INCREASE UNDER HOLD HARM15 LESS OR OUTLIER PROVISIONS.—The Secretary shall 

16 apply the temporary hold harmless provision under clause 

17 (i) and (iii) of paragraph (7)(D) of section 1833(t) of the 

18 Social Security Act (42 U.S.C. 1395l(t)) and the outlier 

19 provision under paragraph (5) of such section as if this 

20 section had not been enacted. 

21 (d) WAIVING BUDGET NEUTRALITY AND NO REVI22 SION OR ADJUSTMENTS.—The Secretary shall not make 

23 any revision or adjustment under subparagraph (A), (B), 

24 or (C) of section 1833(t)(9) of the Social Security Act (42 
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1 U.S.C. 1395l(t)(9)) because of the application of sub2 section (a)(1). 

3 (e) NO EFFECT ON PAYMENTS AFTER INCREASE PE4 RIOD ENDS.—The Secretary shall not take into account 

5 any payment increase provided under subsection (a)(1) in 

6 determining payments for covered OPD services (as de7 fined in paragraph (1)(B) of section 1833(t) of the Social 

8 Security Act (42 U.S.C. 1395l(t))) under such section that 

9 are furnished after January 1, 2008. 

10 (f) TECHNICAL AMENDMENT.—Section 

11 1833(t)(2)(B) (42 U.S.C. 1395l(t)(2)(B)) is amended by 

12 inserting ‘‘(and periodically revise such groups pursuant 

13 to paragraph (9)(A))’’ after ‘‘establish groups’’. 

14 SEC. 425. TEMPORARY INCREASE FOR GROUND AMBU15 LANCE SERVICES. 

16 Section 1834(l) (42 U.S.C. 1395m(l)), as amended 

17 by section 405(b)(2), is amended by adding at the end 

18 the following new paragraphs: 

19 ‘‘(10) TEMPORARY INCREASE FOR GROUND AM20 BULANCE SERVICES.—

21 ‘‘(A) IN GENERAL.—Notwithstanding any 

22 other provision of this subsection, in the case of 

23 ground ambulance services furnished on or 

24 after January 1, 2005, and before January 1, 
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1 2008, for which the transportation originates 

2 in—

3 ‘‘(i) a rural area described in para4 graph (9) or in a rural census tract de5 scribed in such paragraph, the fee schedule 

6 established under this section shall provide 

7 that the rate for the service otherwise es8 tablished, after application of any increase 

9 under such paragraph, shall be increased 

10 by 5 percent; and 

11 ‘‘(ii) an area not described in clause 

12 (i), the fee schedule established under this 

13 section shall provide that the rate for the 

14 service otherwise established shall be in15 creased by 2 percent. 

16 ‘‘(B) APPLICATION OF INCREASED PAY17 MENTS AFTER 2007.—The increased payments 

18 under subparagraph (A) shall not be taken into 

19 account in calculating payments for services 

20 furnished on or after the period specified in 

21 such subparagraph. 

22 ‘‘(11) CONVERSION FACTOR ADJUSTMENTS.—

23 The Secretary shall not adjust downward the conver24 sion factor in any year because of an evaluation of 

25 the prior year conversion factor.’’. 
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1 SEC. 426. ENSURING APPROPRIATE COVERAGE OF AIR AM2 BULANCE SERVICES UNDER AMBULANCE FEE 

3 SCHEDULE. 

4 (a) COVERAGE.—Section 1834(l) (42 U.S.C. 

5 1395m(l)), as amended by section 426, is amended by 

6 adding at the end the following new paragraph: 

7 ‘‘(11) ENSURING APPROPRIATE COVERAGE OF

8 AIR AMBULANCE SERVICES.—

9 ‘‘(A) IN GENERAL.—The regulations de10 scribed in section 1861(s)(7) shall ensure that 

11 air ambulance services (as defined in subpara12 graph (C)) are reimbursed under this sub13 section at the air ambulance rate if the air am14 bulance service— 

15 ‘‘(i) is medically necessary based on 

16 the health condition of the individual being 

17 transported at or immediately prior to the 

18 time of the transport; and 

19 ‘‘(ii) complies with equipment and 

20 crew requirements established by the Sec21 retary. 

22 ‘‘(B) MEDICALLY NECESSARY.—An air 

23 ambulance service shall be considered to be 

24 medically necessary for purposes of subpara25 graph (A)(i) if such service is requested—
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1 ‘‘(i) by a physician or a hospital in ac2 cordance with the physician’s or hospital’s 

3 responsibilities under section 1867 (com4 monly known as the Emergency Medical 

5 Treatment and Active Labor Act); 

6 ‘‘(ii) as a result of a protocol estab7 lished by a State or regional emergency 

8 medical service (EMS) agency; 

9 ‘‘(iii) by a physician, nurse practi10 tioner, physician assistant, registered 

11 nurse, or emergency medical responder 

12 who reasonably determines or certifies that 

13 the patient’s condition is such that the 

14 time needed to transport the individual by 

15 land or the lack of an appropriate ground 

16 ambulance, significantly increases the med17 ical risks for the individual; or 

18 ‘‘(iv) by a Federal or State agency to 

19 relocate patients following a natural dis20 aster, an act of war, or a terrorist attack. 

21 ‘‘(C) AIR AMBULANCE SERVICES DE22 FINED.—For purposes of this paragraph, the 

23 term ‘air ambulance service’ means fixed wing 

24 and rotary wing air ambulance services.’’. 
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1 (b) CONFORMING AMENDMENT.—Section 1861(s)(7) 

2 (42 U.S.C. 1395x(s)(7)) is amended by inserting ‘‘, sub3 ject to section 1834(l)(11),’’ after ‘‘but’’. 

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

5 this section shall apply to services furnished on or after 

6 January 1, 2005. 

7 SEC. 427. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC 

8 LABORATORY TESTS FURNISHED BY A SOLE 

9 COMMUNITY HOSPITAL. 

10 Notwithstanding subsections (a), (b), and (h) of sec11 tion 1833 of the Social Security Act (42 U.S.C. 1395l) 

12 and section 1834(d)(1) of such Act (42 U.S.C. 

13 1395m(d)(1)), in the case of a clinical diagnostic labora14 tory test covered under part B of title XVIII of such Act 

15 that is furnished in 2005 or 2006 by a sole community 

16 hospital (as defined in section 1886(d)(5)(D)(iii) of such 

17 Act (42 U.S.C. 1395ww(d)(5)(D)(iii))) as part of services 

18 furnished to patients of the hospital, the following rules 

19 shall apply: 

20 (1) PAYMENT BASED ON REASONABLE COSTS.—

21 The amount of payment for such test shall be 100 

22 percent of the reasonable costs of the hospital in fur23 nishing such test. 

24 (2) NO BENEFICIARY COST-SHARING.—Notwith25 standing section 432, no coinsurance, deductible, co-
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1 payment, or other cost-sharing otherwise applicable 

2 under such part B shall apply with respect to such 

3 test. 

4 SEC. 428. IMPROVEMENT IN RURAL HEALTH CLINIC REIM5 BURSEMENT. 

6 Section 1833(f) (42 U.S.C. 1395l(f)) is amended—

7 (1) in paragraph (1), by striking ‘‘, and’’ at the 

8 end and inserting a semicolon; 

9 (2) in paragraph (2)—

10 (A) by striking ‘‘in a subsequent year’’ and 

11 inserting ‘‘in 1989 through 2004’’; and 

12 (B) by striking the period at the end and 

13 inserting a semicolon; and 

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

15 paragraphs: 

16 ‘‘(3) in 2005, at $80 per visit; and 

17 ‘‘(4) in a subsequent year, at the limit estab18 lished under this subsection for the previous year in19 creased by the percentage increase in the MEI (as 

20 so defined) applicable to primary care services (as so 

21 defined) furnished as of the first day of that year.’’. 
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1 SEC. 429. ELIMINATION OF CONSOLIDATED BILLING FOR 

2 CERTAIN SERVICES UNDER THE MEDICARE 

3 PPS FOR SKILLED NURSING FACILITY SERV4 ICES. 

5 (a) CERTAIN RURAL HEALTH CLINIC AND FEDER6 ALLY QUALIFIED HEALTH CENTER SERVICES.—Section 

7 1888(e) (42 U.S.C. 1395yy(e)) is amended—

8 (1) in paragraph (2)(A)(i)(II), by striking 

9 ‘‘clauses (ii) and (iii)’’ and inserting ‘‘clauses (ii), 

10 (iii), and (iv)’’; and 

11 (2) by adding at the end of paragraph (2)(A) 

12 the following new clause: 

13 ‘‘(iv) EXCLUSION OF CERTAIN RURAL

14 HEALTH CLINIC AND FEDERALLY QUALI15 FIED HEALTH CENTER SERVICES.—Serv16 ices described in this clause are—

17 ‘‘(I) rural health clinic services 

18 (as defined in paragraph (1) of sec19 tion 1861(aa)); and 

20 ‘‘(II) Federally qualified health 

21 center services (as defined in para22 graph (3) of such section); 

23 that would be described in clause (ii) if 

24 such services were furnished by a physician 

25 or practitioner not affiliated with a rural 
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1 health clinic or a Federally qualified health 

2 center.’’. 

3 (b) CERTAIN SERVICES FURNISHED BY AN ENTITY

4 JOINTLY OWNED BY HOSPITALS AND CRITICAL ACCESS

5 HOSPITALS.—For purposes of applying section 

6 411.15(p)–(3)(iii) of title 42 of the Code of Federal Regu7 lations, the Secretary shall treat an entity that is 100 per8 cent owned as a joint venture by 2 Medicare-participating 

9 hospitals or critical access hospitals as a Medicare-partici10 pating hospital or a critical access hospital. 

11 (c) TECHNICAL AMENDMENTS.—Sections 

12 1842(b)(6)(E) and 1866(a)(1)(H)(ii) (42 U.S.C. 

13 1395u(b)(6)(E); 1395cc(a)(1)(H)(ii)) are each amended 

14 by striking ‘‘section 1888(e)(2)(A)(ii)’’ and inserting 

15 ‘‘clauses (ii), (iii), and (iv) of section 1888(e)(2)(A)’’. 

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

17 this section and the provision of subsection (b) shall apply 

18 to services furnished on or after January 1, 2005. 

19 SEC. 430. FREEZE IN PAYMENTS FOR CERTAIN ITEMS OF 

20 DURABLE MEDICAL EQUIPMENT AND CER21 TAIN ORTHOTICS; ESTABLISHMENT OF QUAL22 ITY STANDARDS AND ACCREDITATION RE23 QUIREMENTS FOR DME PROVIDERS. 

24 (a) FREEZE FOR DME.—Section 1834(a)(14) (42 

25 U.S.C. 1395m(a)(14)) is amended—
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1 (1) in subparagraph (E), by striking ‘‘and’’ at 

2 the end; 

3 (2) in subparagraph (F)—

4 (A) by striking ‘‘a subsequent year’’ and 

5 inserting ‘‘2003’’; and 

6 (B) by striking ‘‘the previous year.’’ and 

7 inserting ‘‘2002;’’; and 

8 (3) by adding at the end the following new sub9 paragraphs: 

10 ‘‘(G) for each of the years 2004 through 

11 2010—

12 ‘‘(i) in the case of class III medical 

13 devices described in section 513(a)(1)(C) 

14 of the Federal Food, Drug, and Cosmetic 

15 Act (21 U.S.C. 360(c)(1)(C)), the percent16 age increase described in subparagraph 

17 (B) for the year involved; and 

18 ‘‘(ii) in the case of covered items not 

19 described in clause (i), 0 percentage points; 

20 and 

21 ‘‘(H) for a subsequent year, the percentage 

22 increase described in subparagraph (B) for the 

23 year involved.’’. 
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1 (b) FREEZE FOR OFF-THE-SHELF ORTHOTICS.—

2 Section 1834(h)(4)(A) of the Social Security Act (42 

3 U.S.C. 1395m(h)(4)(A)) is amended—

4 (1) in clause (vii), by striking ‘‘and’’ at the end; 

5 (2) in clause (viii), by striking ‘‘a subsequent 

6 year’’ and inserting ‘‘2003’’; and 

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

8 clauses: 

9 ‘‘(ix) for each of the years 2004 

10 through 2010—

11 ‘‘(I) in the case of orthotics that 

12 have not been custom-fabricated, 0 

13 percent; and 

14 ‘‘(II) in the case of prosthetics, 

15 prosthetic devices, and custom-fab16 ricated orthotics, the percentage in17 crease described in clause (viii) for the 

18 year involved; and 

19 ‘‘(x) for 2011 and each subsequent 

20 year, the percentage increase described in 

21 clause (viii) for the year involved;’’. 

22 (c) ESTABLISHMENT OF QUALITY STANDARDS AND

23 ACCREDITATION REQUIREMENTS FOR DURABLE MED24 ICAL EQUIPMENT PROVIDERS.—Section 1834(a) (42 

25 U.S.C. 1395m(a)) is amended—
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1 (1) by redesignating paragraph (17), as added 

2 by section 4551(c)(1) of the Balanced Budget Act of 

3 1997 (111 Stat. 458), as paragraph (19); and 

4 (2) by adding at the end the following new 

5 paragraph: 

6 ‘‘(20) IDENTIFICATION OF QUALITY STAND7 ARDS.—

8 ‘‘(A) IN GENERAL.—Subject to subpara9 graph (C), the Secretary shall establish and im10 plement quality standards for providers of dura11 ble medical equipment throughout the United 

12 States that are developed by recognized inde13 pendent accreditation organizations (as des14 ignated under subparagraph (B)(i)) and with 

15 which such providers shall be required to com16 ply in order to—

17 ‘‘(i) participate in the program under 

18 this title; 

19 ‘‘(ii) furnish any item or service de20 scribed in subparagraph (D) for which 

21 payment is made under this part; and 

22 ‘‘(iii) receive or retain a provider or 

23 supplier number used to submit claims for 

24 reimbursement for any item or service de-
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1 scribed in subparagraph (D) for which 

2 payment may be made under this title. 

3 ‘‘(B) DESIGNATION OF INDEPENDENT AC4 CREDITATION ORGANIZATIONS.—

5 ‘‘(i) IN GENERAL.—Not later that the 

6 date that is 6 months after the date of en7 actment of the Prescription Drug and 

8 Medicare Improvement Act of 2003, the 

9 Secretary shall designate independent ac10 creditation organizations for purposes of 

11 subparagraph (A). 

12 ‘‘(ii) CONSULTATION.—In determining 

13 which independent accreditation organiza14 tions to designate under clause (i), the 

15 Secretary shall consult with an expert out16 side advisory panel composed of an appro17 priate selection of representatives of physi18 cians, practitioners, suppliers, and manu19 facturers to review (and advise the Sec20 retary concerning) selection of accrediting 

21 organizations and the quality standards of 

22 such organizations. 

23 ‘‘(C) QUALITY STANDARDS.—The quality 

24 standards described in subparagraph (A) may 

25 not be less stringent than the quality standards 
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1 that would otherwise apply if this paragraph 

2 did not apply and shall include consumer serv3 ices standards. 

4 ‘‘(D) ITEMS AND SERVICES DESCRIBED.—

5 The items and services described in this sub6 paragraph are covered items (as defined in 

7 paragraph (13)) for which payment may other8 wise be made under this subsection, other than 

9 items used in infusion, and inhalation drugs 

10 used in conjunction with durable medical equip11 ment. 

12 ‘‘(E) PHASED-IN IMPLEMENTATION.—The 

13 application of the quality standards described in 

14 subparagraph (A) shall be phased-in over a pe15 riod that does not exceed 3 years.’’. 

16 SEC. 431. APPLICATION OF COINSURANCE AND DEDUCT17 IBLE FOR CLINICAL DIAGNOSTIC LABORA18 TORY TESTS. 

19 (a) COINSURANCE.—

20 (1) IN GENERAL.—Section 1833(a) (42 U.S.C. 

21 1395l(a)) is amended—

22 (A) in paragraph (1)(D)(i), by striking 

23 ‘‘(or 100 percent, in the case of such tests for 

24 which payment is made on an assignment-re25 lated basis)’’; and 
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1 (B) in paragraph (2)(D)(i), by striking 

2 ‘‘(or 100 percent, in the case of such tests for 

3 which payment is made on an assignment-re4 lated basis or to a provider having an agree5 ment under section 1866)’’. 

6 (2) CONFORMING AMENDMENT.—The third sen7 tence of section 1866(a)(2)(A) of the Social Security 

8 Act (42 U.S.C. 1395cc(a)(2)(A) is amended by 

9 striking ‘‘and with respect to clinical diagnostic lab10 oratory tests for which payment is made under part 

11 B’’. 

12 (b) DEDUCTIBLE.—Section 1833(b) of the Social Se13 curity Act (42 U.S.C. 1395l(b)) is amended—

14 (1) by striking paragraph (3); and 

15 (2) by redesignating paragraphs (4), (5), and 

16 (6) as paragraphs (3), (4), and (5), respectively. 

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

18 this section shall apply to tests furnished on or after Janu19 ary 1, 2004. 

20 SEC. 432. BASING MEDICARE PAYMENTS FOR COVERED 

21 OUTPATIENT DRUGS ON MARKET PRICES. 

22 (a) MEDICARE MARKET BASED PAYMENT

23 AMOUNT.—Section 1842(o) (42 U.S.C. 1395u(o)) is 

24 amended—
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1 (1) in paragraph (1), by striking ‘‘equal to 95 

2 percent of the average wholesale price.’’ and insert3 ing ‘‘equal to—

4 ‘‘(A) in the case of a drug or biological fur5 nished prior to January 1, 2004, 95 percent of the 

6 average wholesale price; and 

7 ‘‘(B) in the case of a drug or biological fur8 nished on or after January 1, 2004, the payment 

9 amount specified in—

10 ‘‘(i) in the case of such a drug or biological 

11 that is first available for payment under this 

12 part on or before April 1, 2003, paragraph (4); 

13 and 

14 ‘‘(ii) in the case of such a drug or biologi15 cal that is first available for payment under this 

16 part after such date, paragraph (5).’’; and 

17 (2) by adding at the end the following new 

18 paragraphs: 

19 ‘‘(4)(A) Subject to subparagraph (C), the payment 

20 amount specified in this paragraph for a year for a drug 

21 or biological is an amount equal to the lesser of—

22 ‘‘(i) the average wholesale price for the drug or 

23 biological; or 

24 ‘‘(ii) the amount determined under subpara25 graph (B) 
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1 ‘‘(B)(i) Subject to clause (ii), the amount determined 

2 under this subparagraph is an amount equal to—

3 ‘‘(I) in the case of a drug or biological fur4 nished in 2004, 85 percent of the average wholesale 

5 price for the drug or biological (determined as of 

6 April 1, 2003); and 

7 ‘‘(II) in the case of a drug or biological fur8 nished in 2005 or a subsequent year, the amount de9 termined under this subparagraph for the previous 

10 year increased by the percentage increase in the con11 sumer price index for medical care for the 12-month 

12 period ending with June of the previous year. 

13 ‘‘(ii) In the case of a vaccine described in subpara14 graph (A) or (B) of section 1861(s)(10), the amount de15 termined under this subparagraph is an amount equal to 

16 the average wholesale price for the drug or biological. 

17 ‘‘(C)(i) The Secretary shall establish a process under 

18 which the Secretary determines, for such drugs or 

19 biologicals as the Secretary determines appropriate, 

20 whether the widely available market price to physicians or 

21 suppliers for the drug or biological furnished in a year 

22 is different from the payment amount established under 

23 subparagraph (B) for the year. Such determination shall 

24 be based on the information described in clause (ii) as the 

25 Secretary determines appropriate. 
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1 ‘‘(ii) The information described in this clause is the 

2 following information: 

3 ‘‘(I) Any report on drug or biological market 

4 prices by the Inspector General of the Department 

5 of Health and Human Services or the Comptroller 

6 General of the United States that is made available 

7 after December 31, 1999. 

8 ‘‘(II) A review of drug or biological market 

9 prices by the Secretary, which may include informa10 tion on such market prices from insurers, private 

11 health plans, manufacturers, wholesalers, distribu12 tors, physician supply houses, specialty pharmacies, 

13 group purchasing arrangements, physicians, sup14 pliers, or any other source the Secretary determines 

15 appropriate. 

16 ‘‘(III) Data and information submitted by the 

17 manufacturer of the drug or biological or by another 

18 entity. 

19 ‘‘(IV) Other data and information as deter20 mined appropriate by the Secretary. 

21 ‘‘(iii) If the Secretary makes a determination under 

22 clause (i) with respect to the widely available market price 

23 for a drug or biological for a year, the following provisions 

24 shall apply: 
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1 ‘‘(I) Subject to clause (iv), the amount deter2 mined under this subparagraph shall be substituted 

3 for the amount determined under subparagraph (B) 

4 for purposes of applying subparagraph (A)(ii)(I) for 

5 the year and all subsequent years. 

6 ‘‘(II) The Secretary may make subsequent de7 terminations under clause (i) with respect to the 

8 widely available market price for the drug or biologi9 cal. 

10 ‘‘(III) If the Secretary does not make a subse11 quent determination under clause (i) with respect to 

12 the widely available market price for the drug or bio13 logical for a year, the amount determined under this 

14 subparagraph shall be an amount equal to the 

15 amount determined under this subparagraph for the 

16 previous year increased by the percentage increase 

17 described in subparagraph (B)(i)(II) for the year in18 volved. 

19 ‘‘(iv) If the first determination made under clause (i) 

20 with respect to the widely available market price for a 

21 drug or biological would result in a payment amount in 

22 a year that is more than 15 percent less than the amount 

23 determined under subparagraph (B) for the drug or bio24 logical for the previous year (or, for 2004, the payment 

25 amount determined under paragraph (1)(A), determined 
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1 as of April 1, 2003), the Secretary shall provide for a tran2 sition to the amount determined under clause (i) so that 

3 the payment amount is reduced in annual increments 

4 equal to 15 percent of the payment amount in such pre5 vious year until the payment amount is equal to the 

6 amount determined under clause (i), as increased each 

7 year by the percentage increase described in subparagraph 

8 (B)(i)(II) for the year. The preceding sentence shall not 

9 apply to a drug or biological where a generic version of 

10 the drug or biological first enters the market on or after 

11 January 1, 2004 (even if the generic version of the drug 

12 or biological is not marketed under the chemical name of 

13 such drug or biological). 

14 ‘‘(5) In the case of a drug or biological that is first 

15 available for payment under this part after April 1, 2003, 

16 the following rules shall apply: 

17 ‘‘(A) As a condition of obtaining a code to re18 port such new drug or biological and to receive pay19 ment under this part, a manufacturer shall provide 

20 the Secretary (in a time, manner, and form ap21 proved by the Secretary) with data and information 

22 on prices at which the manufacturer estimates phy23 sicians and suppliers will be able to routinely obtain 

24 the drug or biological in the market during the first 

25 year that the drug or biological is available for pay-
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1 ment under this part and such additional informa2 tion that the manufacturer determines appropriate. 

3 ‘‘(B) During the year that the drug or biologi4 cal is first available for payment under this part, the 

5 manufacturer of the drug or biological shall provide 

6 the Secretary (in a time, manner, and form ap7 proved by the Secretary) with updated information 

8 on the actual market prices paid by such physicians 

9 or suppliers for the drug or biological in the year. 

10 ‘‘(C) The amount specified in this paragraph 

11 for a drug or biological for the year described in 

12 subparagraph (B) is equal to an amount determined 

13 by the Secretary based on the information provided 

14 under subparagraph (A) and other information that 

15 the Secretary determines appropriate. 

16 ‘‘(D) The amount specified in this paragraph 

17 for a drug or biological for the year after the year 

18 described in subparagraph (B) is equal to an 

19 amount determined by the Secretary based on the 

20 information provided under subparagraph (B) and 

21 other information that the Secretary determines ap22 propriate. 

23 ‘‘(E) The amount specified in this paragraph 

24 for a drug or biological for the year beginning after 
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1 the year described in subparagraph (D) and each 

2 subsequent year is equal to the lesser of—

3 ‘‘(i) the average wholesale price for the 

4 drug or biological; or 

5 ‘‘(ii) the amount determined—

6 ‘‘(I) by the Secretary under paragraph 

7 (4)(C)(i) with respect to the widely avail8 able market price for the drug or biological 

9 for the year, if such paragraph was applied 

10 by substituting ‘the payment determined 

11 under paragraph (5)(E)(ii)(II) for the 

12 year’ for ‘established under subparagraph 

13 (B) for the year’; and 

14 ‘‘(II) if no determination described in 

15 subclause (I) is made for the drug or bio16 logical for the year, under this subpara17 graph with respect to the drug or biological 

18 for the previous year increased by the per19 centage increase described in paragraph 

20 (4)(B)(i)(II) for the year involved.’’. 

21 (b) ADJUSTMENTS TO PAYMENT AMOUNTS FOR AD22 MINISTRATION OF DRUGS AND BIOLOGICALS.—

23 (1) ADJUSTMENT IN PHYSICIAN PRACTICE EX24 PENSE RELATIVE VALUE UNITS.—Section 

25 1848(c)(2) (42 U.S.C. 1395w–4(c)(2)) is amended—
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1 (A) in subparagraph (B)—

2 (i) in clause (ii)(II), by striking ‘‘The 

3 adjustments’’ and inserting ‘‘Subject to 

4 clause (iv), the adjustments’’; and 

5 (ii) by adding at the end the following 

6 new clause: 

7 ‘‘(iv) EXEMPTION FROM BUDGET

8 NEUTRALITY IN 2004.—Any additional ex9 penditures under this part that are attrib10 utable to subparagraph (H) shall not be 

11 taken into account in applying clause 

12 (ii)(II) for 2004.’’; and 

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

14 subparagraph: 

15 ‘‘(H) ADJUSTMENTS IN PRACTICE EX16 PENSE RELATIVE VALUE UNITS FOR DRUG AD17 MINISTRATION SERVICES FOR 2004.—In estab18 lishing the physician fee schedule under sub19 section (b) with respect to payments for services 

20 furnished in 2004, the Secretary shall, in deter21 mining practice expense relative value units 

22 under this subsection, utilize a survey sub23 mitted to the Secretary as of January 1, 2003, 

24 by a physician specialty organization pursuant 

25 to section 212 of the Medicare, Medicaid, and 
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1 SCHIP Balanced Budget Refinement Act of 

2 1999 if the survey—

3 ‘‘(i) covers practice expenses for on4 cology administration services; and 

5 ‘‘(ii) meets criteria established by the 

6 Secretary for acceptance of such surveys.’’. 

7 (2) PAYMENT FOR MULTIPLE CHEMOTHERAPY

8 AGENTS FURNISHED ON A SINGLE DAY THROUGH

9 THE PUSH TECHNIQUE.—

10 (A) REVIEW OF POLICY.—The Secretary 

11 shall review the policy, as in effect on the date 

12 of enactment of this Act, with respect to pay13 ment under section 1848 of the Social Security 

14 Act (42 U.S.C. 1395w–4) for the administra15 tion of more than 1 anticancer 

16 chemotherapeutic agent to an individual on a 

17 single day through the push technique. 

18 (B) MODIFICATION OF POLICY.—After 

19 conducting the review under subparagraph (A), 

20 the Secretary shall modify such payment policy 

21 if the Secretary determines such modification to 

22 be appropriate. 

23 (C) EXEMPTION FROM BUDGET NEU24 TRALITY UNDER PHYSICIAN FEE SCHEDULE.—

25 If the Secretary modifies such payment policy 
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1 pursuant to subparagraph (B), any increased 

2 expenditures under title XVIII of the Social Se3 curity Act resulting from such modification 

4 shall be treated as additional expenditures at5 tributable to subparagraph (H) of section 

6 1848(c)(2) of the Social Security Act (42 

7 U.S.C. 1395w–4(c)(2)), as added by paragraph 

8 (1)(B), for purposes of applying the exemption 

9 to budget neutrality under subparagraph 

10 (B)(iv) of such section, as added by paragraph 

11 (1)(A). 

12 (3) TREATMENT OF OTHER SERVICES CUR13 RENTLY IN THE NONPHYSICIAN WORK POOL.—The 

14 Secretary shall make adjustments to the nonphysi15 cian work pool methodology (as such term is used in 

16 the final rule promulgated by the Secretary in the 

17 Federal Register on December 31, 2002 (67 Fed. 

18 Reg. 251)), for the determination of practice ex19 pense relative value units under the physician fee 

20 schedule under section 1848(c)(2)(C)(ii) of the So21 cial Security Act (42 U.S.C. 1395w–4(c)(2)(C)(ii)), 

22 so that the practice expense relative value units for 

23 services determined under such methodology are not 

24 disproportionately reduced relative to the practice 

25 expense relative value units of services not deter-
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1 mined under such methodology, as a result of the 

2 amendments to such Act made by paragraph (1). 

3 (4) ADMINISTRATION OF BLOOD CLOTTING FAC4 TORS.—Section 1842(o) (42 U.S.C. 1395u(o)), as 

5 amended by subsection (a)(2), is amended by adding 

6 at the end the following new paragraph: 

7 ‘‘(6)(A) Subject to subparagraph (B), in the case of 

8 clotting factors furnished on or after January 1, 2004, 

9 the Secretary shall, after reviewing the January 2003 re10 port to Congress by the Comptroller General of the United 

11 States entitled ‘Payment for Blood Clotting Factor Ex12 ceeds Providers Acquisition Cost’ (GAO–03–184), provide 

13 for a separate payment for the administration of such 

14 blood clotting factors in an amount that the Secretary de15 termines to be appropriate. 

16 ‘‘(B) In determining the separate payment amount 

17 under subparagraph (A) for blood clotting factors fur18 nished in 2004, the Secretary shall ensure that the total 

19 amount of payments under this part (as estimated by the 

20 Secretary) for such factors under paragraphs (4) and (5) 

21 and such separate payments for such factors does not ex22 ceed the total amount of payments that would have been 

23 made for such factors under this part (as estimated by 

24 the Secretary) if the amendments made by section 433 
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1 of the Prescription Drug and Medicare Improvement Act 

2 of 2003 had not been enacted. 

3 ‘‘(C) The separate payment amount under this sub4 paragraph for blood clotting factors furnished in 2005 or 

5 a subsequent year shall be equal to the separate payment 

6 amount determined under this paragraph for the previous 

7 year increased by the percentage increase described in 

8 paragraph (4)(B)(i)(II) for the year involved.’’. 

9 (5) INCREASE IN COMPOSITE RATE FOR END

10 STAGE RENAL DISEASE FACILITIES.—Section 

11 1881(b) (42 U.S.C. 1395rr(b) is amended—

12 (A) in paragraph (7), by adding at the end 

13 the following new sentence: ‘‘In the case of di14 alysis services furnished in 2004 or a subse15 quent year, the composite rate for such services 

16 shall be determined under paragraph (12).’’; 

17 and 

18 (B) by adding at the end the following new 

19 paragraph: 

20 ‘‘(12)(A) In the case of dialysis services furnished 

21 during 2004, the composite rate for such services shall be 

22 the composite rate that would otherwise apply under para23 graph (7) for the year increased by an amount to ensure 

24 (as estimated by the Secretary) that—

25 ‘‘(i) the sum of the total amount of—
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1 ‘‘(I) the composite rate payments for such 

2 services for the year, as increased under this 

3 paragraph; and 

4 ‘‘(II) the payments for drugs and 

5 biologicals (other than erythropoetin) furnished 

6 in connection with the furnishing of renal dialy7 sis services and separately billed by renal dialy8 sis facilities under paragraphs (4) and (5) of 

9 section 1842(o) for the year; is equal to 

10 ‘‘(ii) the sum of the total amount of the com11 posite rate payments under paragraph (7) for the 

12 year and the payments for the separately billed 

13 drugs and biologicals described in clause (i)(II) that 

14 would have been made if the amendments made by 

15 section 433 of the Prescription Drug and Medicare 

16 Improvement Act of 2003 had not been enacted. 

17 ‘‘(B) Subject to subparagraph (E), in the case of di18 alysis services furnished in 2005, the composite rate for 

19 such services shall be an amount equal to the composite 

20 rate established under subparagraph (A), increased by 

21 0.05 percent and further increased by 1.6 percent. 

22 ‘‘(C) Subject to subparagraph (E), in the case of di23 alysis services furnished in 2006, the composite rate for 

24 such services shall be an amount equal to the composite 
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1 rate established under subparagraph (B), increased by 

2 0.05 percent and further increased by 1.6 percent. 

3 ‘‘(D) Subject to subparagraph (E), in the case of di4 alysis services furnished in 2007 and all subsequent years, 

5 the composite rate for such services shall be an amount 

6 equal to the composite rate established under this para7 graph for the previous year, increased by 0.05 percent. 

8 ‘‘(E) If the Secretary implements a reduction in the 

9 payment amount under paragraph (4)(C) or (5) for a drug 

10 or biological described in subparagraph (A)(i)(II) for a 

11 year after 2004, the Secretary shall, as estimated by the 

12 Secretary—

13 ‘‘(i) increase the composite rate for dialysis 

14 services furnished in such year in the same manner 

15 that the composite rate for such services for 2004 

16 was increased under subparagraph (A); and 

17 ‘‘(ii) increase the percentage increase under 

18 subparagraph (C) or (D) (as applicable) for years 

19 after the year described in clause (i) to ensure that 

20 such increased percentage would result in expendi21 tures equal to the sum of the total composite rate 

22 payments for such services for such years and the 

23 total payments for drugs and biologicals described in 

24 subparagraph (A)(i)(II) is equal to the sum of the 

25 total amount of the composite rate payments under 
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1 this paragraph for such years and the payments for 

2 the drugs and biologicals described in subparagraph 

3 (A)(i)(II) that would have been made if the reduc4 tion in payment amount described in subparagraph 

5 had not been made. 

6 ‘‘(F) There shall be no administrative or judicial re7 view under section 1869, section 1878, or otherwise, of 

8 determinations of payment amounts, methods, or adjust9 ments under this paragraph.’’. 

10 (6) HOME INFUSION DRUGS.—Section 1842(o) 

11 (42 U.S.C. 1395u(o)), as amended by subsection 

12 (a)(2) and paragraph (4), is amended by adding at 

13 the end the following new paragraph: 

14 ‘‘(7)(A) Subject to subparagraph (B), in the case of 

15 infusion drugs and biologicals furnished through an item 

16 of durable medical equipment covered under section 

17 1861(n) on or after January 1, 2004, the Secretary may 

18 make separate payments for furnishing such drugs and 

19 biologicals in an amount determined by the Secretary if 

20 the Secretary determines such separate payment to be ap21 propriate. 

22 ‘‘(B) In determining the amount of any separate pay23 ment under subparagraph (A) for a year, the Secretary 

24 shall ensure that the total amount of payments under this 

25 part for such infusion drugs and biologicals for the year 
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1 and such separate payments for the year does not exceed 

2 the total amount of payments that would have been made 

3 under this part for the year for such infusion drugs and 

4 biologicals if section 433 of the Prescription Drug and 

5 Medicare Improvement Act of 2003 had not been en6 acted.’’. 

7 (7) INHALATION DRUGS.—Section 1842(o) (42 

8 U.S.C. 1395u(o)), as amended by subsection (a)(2) 

9 and paragraphs (4) and (6), is amended by adding 

10 at the end the following new paragraph: 

11 ‘‘(8)(A) Subject to subparagraph (B), in the case of 

12 inhalation drugs and biologicals furnished through durable 

13 medical equipment covered under section 1861(n) on or 

14 after January 1, 2004, the Secretary may increase pay15 ments for such equipment under section 1834(a) and may 

16 make separate payments for furnishing such drugs and 

17 biologicals if the Secretary determines such increased or 

18 separate payments are necessary to appropriately furnish 

19 such equipment and drugs and biologicals to beneficiaries. 

20 ‘‘(B) The total amount of any increased payments 

21 and separate payments under subparagraph (A) for a year 

22 may not exceed an amount equal to 10 percent of the 

23 amount (as estimated by the Secretary) by which—

24 ‘‘(i) the total amount of payments that would 

25 have been made for such drugs and biologicals for 
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1 the year if section 433 of the Prescription Drug and 

2 Medicare Improvement Act of 2003 had not been en3 acted; exceeds 

4 ‘‘(ii) the total amount of payments for such 

5 drugs and biologicals under paragraphs (4) and 

6 (5).’’. 

7 (8) PHARMACY DISPENSING FEE FOR CERTAIN

8 DRUGS AND BIOLOGICALS.—Section 1842(o)(2) (42 

9 U.S.C. 1395u(o)(2)) is amended to read as follows: 

10 ‘‘(2) If payment for a drug or biological is made to 

11 a licensed pharmacy approved to dispense drugs or 

12 biologicals under this part, the Secretary—

13 ‘‘(A) in the case of an immunosuppressive drug 

14 described in subparagraph (J) of section 1861(s)(2) 

15 and an oral drug described in subparagraph (Q) or 

16 (T) of such section, shall pay a dispensing fee deter17 mined appropriate by the Secretary (less the applica18 ble deductible and coinsurance amounts) to the 

19 pharmacy; and 

20 ‘‘(B) in the case of a drug or biological not de21 scribed in subparagraph (A), may pay a dispensing 

22 fee determined appropriate by the Secretary (less 

23 the applicable deductible and coinsurance amounts) 

24 to the pharmacy.’’. 
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1 (9) PAYMENT FOR CHEMOTHERAPY DRUGS

2 PURCHASED BUT NOT ADMINISTERED BY PHYSI3 CIANS.—Section 1842(o) (42 U.S.C. 1395u(o)), as 

4 amended by subsection (a)(2) and paragraphs (4), 

5 (6) and (7), is amended by adding at the end the 

6 following new paragraph: 

7 ‘‘(9)(A) Subject to subparagraph (B), the Sec8 retary may increase (in an amount determined ap9 propriate) the amount of payments to physicians for 

10 anticancer chemotherapeutic drugs or biologicals 

11 that would otherwise be made under this part in 

12 order to compensate such physicians for anticancer 

13 chemotherapeutic drugs or biologicals that are pur14 chased by physicians with a reasonable intent to ad15 minister to an individual enrolled under this part 

16 but which cannot be administered to such individual 

17 despite the reasonable efforts of the physician. 

18 ‘‘(B) The total amount of increased payments 

19 made under subparagraph (A) in a year (as esti20 mated by the Secretary) may not exceed an amount 

21 equal to 1 percent of the total amount of payments 

22 made under paragraphs (4) and (5) for such 

23 anticancer chemotherapeutic drugs or biologicals fur24 nished by physicians in such year (as estimated by 

25 the Secretary).’’. 
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1 (c) LINKAGE OF REVISED DRUG PAYMENTS AND IN2 CREASES FOR DRUG ADMINISTRATION.—The Secretary 

3 shall not implement the revisions in payment amounts for 

4 a category of drug or biological as a result of the amend5 ments made by subsection (a) unless the Secretary concur6 rently implements the adjustments to payment amounts 

7 for administration of such category of drug or biological 

8 for which the Secretary is required to make an adjust9 ment, as specified in the amendments made by, and provi10 sions of, subsection (b). 

11 (d) PROHIBITION OF ADMINISTRATIVE AND JUDI12 CIAL REVIEW.—

13 (1) DRUGS.—Section 1842(o) (42 U.S.C. 

14 1395u(o)), as amended by subsection (a)(2) and 

15 paragraphs (4), (6), (7), and (9) of subsection (b), 

16 is amended by adding at the end the following new 

17 paragraph: 

18 ‘‘(10) There shall be no administrative or judicial re19 view under section 1869, section 1878, or otherwise, of 

20 determinations of payment amounts, methods, or adjust21 ments under paragraph (2) or paragraphs (4) through 

22 (9).’’. 

23 (2) PHYSICIAN FEE SCHEDULE.—Section 

24 1848(i)(1) (42 U.S.C. 1395w–4(i)(1)) is amended—
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1 (A) in subparagraph (D), by striking 

2 ‘‘and’’ at the end; 

3 (B) in subparagraph (E), by striking the 

4 period at the end and inserting ‘‘, and’’; and 

5 (C) by adding at the end the following new 

6 subparagraph: 

7 ‘‘(F) adjustments in practice expense rel8 ative value units under subsection (c)(2)(H).’’. 

9 (3) MULTIPLE CHEMOTHERAPY AGENTS AND

10 OTHER SERVICES CURRENTLY ON THE NON-PHYSI11 CIAN WORK POOL.—There shall be no administrative 

12 or judicial review under section 1869, section 1878, 

13 or otherwise, of determinations of payment amounts, 

14 methods, or adjustments under paragraphs (2) and 

15 (3) of subsection (b). 

16 (e) STUDIES AND REPORTS.—

17 (1) GAO STUDY AND REPORT ON BENEFICIARY

18 ACCESS TO DRUGS AND BIOLOGICALS.—

19 (A) STUDY.—The Comptroller General of 

20 the United States shall conduct a study that ex21 amines the impact the provisions of, and the 

22 amendments made by, this section have on ac23 cess by medicare beneficiaries to drugs and 

24 biologicals covered under the medicare program. 
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1 (B) REPORT.—Not later than January 1, 

2 2006, the Comptroller General shall submit a 

3 report to Congress on the study conducted 

4 under subparagraph (A) together with such rec5 ommendations as the Comptroller General de6 termines to be appropriate. 

7 (2) STUDY AND REPORT BY THE HHS INSPEC8 TOR GENERAL ON MARKET PRICES OF DRUGS AND

9 BIOLOGICALS.—

10 (A) STUDY.—The Inspector General of the 

11 Department of Health and Human Services 

12 shall conduct 1 or more studies that—

13 (i) examine the market prices that 

14 drugs and biologicals covered under the 

15 medicare program are widely available to 

16 physicians and suppliers; and 

17 (ii) compare such widely available 

18 market prices to the payment amount for 

19 such drugs and biologicals under section 

20 1842(o) of the Social Security Act (42 

21 U.S.C. 1395u(o). 

22 (B) REQUIREMENT.—In conducting the 

23 study under subparagraph (A), the Inspector 

24 General shall focus on those drugs and 

25 biologicals that represent the largest portions of 
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1 expenditures under the medicare program for 

2 drugs and biologicals. 

3 (C) REPORT.—The Inspector General shall 

4 prepare a report on any study conducted under 

5 subparagraph (A). 

6 SEC. 433. INDEXING PART B DEDUCTIBLE TO INFLATION. 

7 The first sentence of section 1833(b) (42 U.S.C. 

8 1395l(b)) is amended by striking ‘‘and $100 for 1991 and 

9 subsequent years’’ and inserting the following: ‘‘, $100 for 

10 1991 through 2005, $125 for 2006, and for 2007 and 

11 thereafter, the amount in effect for the previous year, in12 crease by the percentage increase in the consumer price 

13 index for all urban consumers (U.S. city average) for the 

14 12-month period ending with June of the previous year, 

15 rounded to the nearest dollar’’. 

16 SEC. 434. REVISIONS TO REASSIGNMENT PROVISIONS. 

17 (a) IN GENERAL.—Section 1842(b)(6)(A)(ii) (42 

18 U.S.C. 1395u(b)(6)(A)(ii)) is amended to read as follows: 

19 ‘‘(ii) where the service was provided under a contractual 

20 arrangement between such physician or other person and 

21 an entity (as defined by the Secretary), to the entity if 

22 under such arrangement such entity submits the bill for 

23 such service and such arrangement meets such program 

24 integrity and other safeguards as the Secretary may deter25 mine to be appropriate,’’. 
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1 (b) CONFORMING AMENDMENT.—The second sen2 tence of section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is 

3 amended by striking ‘‘except to an employer or facility as 

4 described in clause (A)’’ and inserting ‘‘except to an em5 ployer or entity as described in subparagraph (A)’’. 

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

7 this section shall apply to payments made on or after the 

8 date of enactment of this Act. 

9 SEC. 435. EXTENSION OF TREATMENT OF CERTAIN PHYSI10 CIAN PATHOLOGY SERVICES UNDER MEDI11 CARE. 

12 Section 542(c) of BIPA (114 Stat. 2763A–551) is 

13 amended by inserting ‘‘, and for services furnished during 

14 2005’’ before the period at the end. 

15 SEC. 436. ADEQUATE REIMBURSEMENT FOR OUTPATIENT 

16 PHARMACY THERAPY UNDER THE HOSPITAL 

17 OUTPATIENT PPS. 

18 (a) SPECIAL RULES FOR DRUGS AND

19 BIOLOGICALS.—Section 1833(t) (42 U.S.C. 1395(t)) is 

20 amended—

21 (1) by redesignating paragraph (13) as para22 graph (14); and 

23 (2) by inserting after paragraph (12) the fol24 lowing new paragraph: 
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1 ‘‘(13) SPECIAL RULES FOR CERTAIN DRUGS

2 AND BIOLOGICALS.—

3 ‘‘(A) BEFORE 2007.—

4 ‘‘(i) IN GENERAL.—Notwithstanding 

5 paragraph (6), but subject to clause (ii), 

6 with respect to a separately payable drug 

7 or biological described in subparagraph 

8 (D) furnished on or after January 1, 2005, 

9 and before January 1, 2007, hospitals 

10 shall be reimbursed as follows: 

11 ‘‘(I) DRUGS AND BIOLOGICALS

12 FURNISHED AS PART OF A CURRENT

13 OPD SERVICE.—The amount of pay14 ment for a drug or biological de15 scribed in subparagraph (D) provided 

16 as a part of a service that was a cov17 ered OPD service on May 1, 2003, 

18 shall be the applicable percentage (as 

19 defined in subparagraph (C)) of the 

20 average wholesale price for the drug 

21 or biological that would have been de22 termined under section 1842(o) on 

23 such date. 

24 ‘‘(II) DRUGS AND BIOLOGICALS

25 FURNISHED AS PART OF OTHER OPD
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1 SERVICES.—The amount of payment 

2 for a drug or biological described in 

3 subparagraph (D) provided as part of 

4 any other covered OPD service shall 

5 be the applicable percentage (as de6 fined in subparagraph (C)) of the av7 erage wholesale price that would have 

8 been determined under section 

9 1842(o) on May 1, 2003, if payment 

10 for such a drug or biological could 

11 have been made under this part on 

12 that date. 

13 ‘‘(ii) UPDATE FOR 2006.—For 2006, 

14 the amounts determined under clauses (i) 

15 and (ii) shall be the amount established for 

16 2005 increased by the percentage increase 

17 in the Consumer Price Index for all urban 

18 consumers (U.S. urban average) for the 

19 12-month period ending with June of the 

20 previous year. 

21 ‘‘(B) AFTER 2007.—

22 ‘‘(i) ONGOING STUDY AND REPORTS

23 ON ADEQUATE REIMBURSEMENTS.—

24 ‘‘(I) STUDY.—The Secretary 

25 shall contract with an eligible organi-
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1 zation (as defined in subclause (IV)) 

2 to conduct a study to determine the 

3 hospital acquisition, pharmacy serv4 ices, and handling costs for each indi5 vidual drug or biological described in 

6 subparagraph (D). 

7 ‘‘(II) STUDY REQUIREMENTS.—

8 The study conducted under subclause 

9 (I) shall—

10 ‘‘(aa) be accurate to within 

11 3 percent of true mean hospital 

12 acquisition and handling costs for 

13 each drug and biological at the 

14 95 percent confidence level; 

15 ‘‘(bb) begin not later than 

16 January 1, 2005; and 

17 ‘‘(cc) be updated annually 

18 for changes in hospital costs and 

19 the addition of newly marketed 

20 products. 

21 ‘‘(III) REPORTS.—Not later than 

22 January 1 of each year (beginning 

23 with 2006), the Secretary shall submit 

24 to Congress a report on the study 

25 conducted under clause (i) together 
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1 with recommendations for such legis2 lative or administrative action as the 

3 Secretary determines to be appro4 priate. 

5 ‘‘(IV) ELIGIBLE ORGANIZATION

6 DEFINED.—In this clause, the term 

7 ‘eligible organization’ means a private, 

8 nonprofit organization within the 

9 meaning of section 501(c) of the In10 ternal Revenue Code. 

11 ‘‘(ii) ESTABLISHMENT OF PAYMENT

12 METHODOLOGY.—Notwithstanding para13 graph (6), the Secretary, in establishing a 

14 payment methodology on or after the date 

15 of enactment of the Prescription Drug and 

16 Medicare Improvement Act of 2003, shall 

17 take into consideration the findings of the 

18 study conducted under clause (i)(I) in de19 termining payment amounts for each drug 

20 and biological provided as part of a covered 

21 OPD service furnished on or after January 

22 1, 2007. 

23 ‘‘(C) APPLICABLE PERCENTAGE DE24 FINED.—In this paragraph, the term ‘applicable 

25 percentage’ means— 
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1 ‘‘(i) with respect to a biological prod2 uct (approved under a biologics license ap3 plication under section 351 of the Public 

4 Health Service Act), a single source drug 

5 (as defined in section 1927(k)(7)(A)(iv)), 

6 or an orphan product designated under 

7 section 526 of the Food, Drug, and Cos8 metic Act to which the prospective pay9 ment system established under this sub10 section did not apply under the final rule 

11 for 2003 payments under such system, 94 

12 percent; 

13 ‘‘(ii) with respect to an innovator mul14 tiple source drug (as defined in section 

15 1927(k)(7)(A)(ii)), 91 percent; and 

16 ‘‘(iii) with respect to a noninnovator 

17 multiple source drug (as defined in as de18 fined in section 1927(k)(7)(A)(iii)), 71 per19 cent. 

20 ‘‘(D) DRUGS AND BIOLOGICALS DE21 SCRIBED.—A drug or biological described in 

22 this paragraph is any drug or biological—

23 ‘‘(i) for which the amount of payment 

24 was determined under paragraph (6) prior 

25 to January 1, 2005; and 
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1 ‘‘(ii)(I) which is assigned to a drug 

2 specific ambulatory payment classification 

3 on or after the date of enactment of the 

4 Prescription Drug and Medicare Improve5 ment Act of 2003; or 

6 ‘‘(II) that would have been reimbursed 

7 under paragraph (6) but for the applica8 tion of this paragraph.’’. 

9 (b) EXCEPTIONS TO BUDGET NEUTRALITY REQUIRE10 MENT.—Section 1833(t)(9)(B) (42 U.S.C. 

11 1395l(t)(9)(B)) is amended by adding at the end the fol12 lowing: ‘‘In determining the budget neutrality adjustment 

13 required by the preceding sentence for fiscal years 2005 

14 and 2006, the Secretary shall not take into account any 

15 expenditures that would not have been made but for the 

16 application of paragraph (13).’’. 

17 SEC. 437. LIMITATION OF APPLICATION OF FUNCTIONAL 

18 EQUIVALENCE STANDARD. 

19 Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amend20 ed by adding at the end the following new subparagraph: 

21 ‘‘(F) LIMITATION OF APPLICATION OF

22 FUNCTIONAL EQUIVALENCE STANDARD.—

23 ‘‘(i) IN GENERAL.—The Secretary 

24 may not publish regulations that apply a 
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1 functional equivalence standard to a drug 

2 or biological under this paragraph. 

3 ‘‘(ii) APPLICATION.—Paragraph (1) 

4 shall apply to the application of a func5 tional equivalence standard to a drug or bi6 ological on or after the date of enactment 

7 of the Prescription Drug and Medicare Im8 provement Act of 2003 unless—

9 ‘‘(I) such application was being 

10 made to such drug or biological prior 

11 to such date of enactment; and 

12 ‘‘(II) the Secretary applies such 

13 standard to such drug or biological 

14 only for the purpose of determining 

15 eligibility of such drug or biological 

16 for additional payments under this 

17 paragraph and not for the purpose of 

18 any other payments under this title. 

19 ‘‘(iii) RULE OF CONSTRUCTION.—

20 Nothing in this subparagraph shall be con21 strued to effect the Secretary’s authority 

22 to deem a particular drug to be identical to 

23 another drug if the 2 products are phar24 maceutically equivalent and bioequvalent, 
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1 as determined by the Commissioner of 

2 Food and Drugs. 

3 SEC. 438. MEDICARE COVERAGE OF ROUTINE COSTS ASSO4 CIATED WITH CERTAIN CLINICAL TRIALS. 

5 (a) IN GENERAL.—With respect to the coverage of 

6 routine costs of care for beneficiaries participating in a 

7 qualifying clinical trial, as set forth on the date of the en8 actment of this Act in National Coverage Determination 

9 30–1 of the Medicare Coverage Issues Manual, the Sec10 retary shall deem clinical trials conducted in accordance 

11 with an investigational device exemption approved under 

12 section 520(g) of the Federal Food, Drug, and Cosmetic 

13 Act (42 U.S.C. 360j(g)) to be automatically qualified for 

14 such coverage. 

15 (b) RULE OF CONSTRUCTION.—Nothing in this sec16 tion shall be construed as authorizing or requiring the Sec17 retary to modify the regulations set forth on the date of 

18 the enactment of this Act at subpart B of part 405 of 

19 title 42, Code of Federal Regulations, or subpart A of part 

20 411 of such title, relating to coverage of, and payment 

21 for, a medical device that is the subject of an investiga22 tional device exemption by the Food and Drug Adminis23 tration (except as may be necessary to implement sub24 section (a)). 
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1 (c) LIMITATION OF EXPENDITURES IN YEARS PRIOR

2 TO 2014.—

3 (1) IN GENERAL.—The Secretary shall ensure 

4 that the total amount of expenditures under title 

5 XVIII of the Social Security Act (including amounts 

6 expended by reason of this section) in a year prior 

7 to 2014 does not exceed the sum of—

8 (A) the total amount of expenditures under 

9 such title XVIII that would have made if this 

10 section had not been enacted; and 

11 (B) the applicable amount. 

12 (2) APPLICABLE AMOUNT.—For purposes of 

13 paragraph (1), the term ‘‘applicable amount’’ 

14 means—

15 (A) for 2005, $32,000,000; 

16 (B) for 2006, $34,000,000; 

17 (C) for 2007, $36,000,000; 

18 (D) for 2008, $38,000,000; 

19 (E) for 2009, $40,000,000; 

20 (F) for 2010, $42,000,000; 

21 (G) for 2011, $44,000,000; 

22 (H) for 2012, $48,000,000; and 

23 (I) for 2013, $50,000,000. 

24 (3) STEPS TO ENSURE FUNDING LIMITATION

25 NOT VIOLATED.—If the Secretary determines that 
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1 the application of this section will result in the fund2 ing limitation described in paragraph (1) being vio3 lated for any year, the Secretary shall take appro4 priate steps to stay within such funding limitation, 

5 including through limiting the number of clinical 

6 trials deemed under subsection (a) and only covering 

7 a portion of the routine costs described in such sub8 section. 

9 (d) EFFECTIVE DATE.—This section shall apply to 

10 clinical trials begun on or after January 1, 2005. 

11 SEC. 439. WAIVER OF PART B LATE ENROLLMENT PENALTY 

12 FOR CERTAIN MILITARY RETIREES; SPECIAL 

13 ENROLLMENT PERIOD. 

14 (a) WAIVER OF PENALTY.—

15 (1) IN GENERAL.—Section 1839(b) (42 U.S.C. 

16 1395r(b)) is amended by adding at the end the fol17 lowing new sentence: ‘‘No increase in the premium 

18 shall be effected for a month in the case of an indi19 vidual who is 65 years of age or older, who enrolls 

20 under this part during 2002, 2003, 2004, or 2005 

21 and who demonstrates to the Secretary before De22 cember 31, 2005, that the individual is a covered 

23 beneficiary (as defined in section 1072(5) of title 10, 

24 United States Code). The Secretary shall consult 
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1 with the Secretary of Defense in identifying individ2 uals described in the previous sentence.’’. 

3 (2) EFFECTIVE DATE.—The amendment made 

4 by paragraph (1) shall apply to premiums for 

5 months beginning with January 2005. The Secretary 

6 shall establish a method for providing rebates of pre7 mium penalties paid for months on or after January 

8 2005 for which a penalty does not apply under such 

9 amendment but for which a penalty was previously 

10 collected. 

11 (b) MEDICARE PART B SPECIAL ENROLLMENT PE12 RIOD.—

13 (1) IN GENERAL.—In the case of any individual 

14 who, as of the date of enactment of this Act, is 65 

15 years of age or older, is eligible to enroll but is not 

16 enrolled under part B of title XVIII of the Social 

17 Security Act, and is a covered beneficiary (as de18 fined in section 1072(5) of title 10, United States 

19 Code), the Secretary shall provide for a special en20 rollment period during which the individual may en21 roll under such part. Such period shall begin 1 year 

22 after the date of the enactment of this Act and shall 

23 end on December 31, 2005. 

24 (2) COVERAGE PERIOD.—In the case of an indi25 vidual who enrolls during the special enrollment pe-
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1 riod provided under paragraph (1), the coverage pe2 riod under part B of title XVIII of the Social Secu3 rity Act shall begin on the first day of the month 

4 following the month in which the individual enrolls. 

5 SEC. 440. DEMONSTRATION OF COVERAGE OF CHIRO6 PRACTIC SERVICES UNDER MEDICARE. 

7 (a) DEFINITIONS.—In this section: 

8 (1) CHIROPRACTIC SERVICES.—The term 

9 ‘‘chiropractic services’’ has the meaning given that 

10 term by the Secretary for purposes of the dem11 onstration projects, but shall include, at a min12 imum—

13 (A) care for neuromusculoskeletal condi14 tions typical among eligible beneficiaries; and 

15 (B) diagnostic and other services that a 

16 chiropractor is legally authorized to perform by 

17 the State or jurisdiction in which such treat18 ment is provided. 

19 (2) DEMONSTRATION PROJECT.—The term 

20 ‘‘demonstration project’’ means a demonstration 

21 project established by the Secretary under sub22 section (b)(1). 

23 (3) ELIGIBLE BENEFICIARY.—The term ‘‘eligi24 ble beneficiary’’ means an individual who is enrolled 

25 under part B of the medicare program. 
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1 (4) MEDICARE PROGRAM.—The term ‘‘medicare 

2 program’’ means the health benefits program under 

3 title XVIII of the Social Security Act (42 U.S.C. 

4 1395 et seq.). 

5 (b) DEMONSTRATION OF COVERAGE OF CHIRO6 PRACTIC SERVICES UNDER MEDICARE.—

7 (1) ESTABLISHMENT.—The Secretary shall es8 tablish demonstration projects in accordance with 

9 the provisions of this section for the purpose of eval10 uating the feasibility and advisability of covering 

11 chiropractic services under the medicare program (in 

12 addition to the coverage provided for services con13 sisting of treatment by means of manual manipula14 tion of the spine to correct a subluxation described 

15 in section 1861(r)(5) of the Social Security Act (42 

16 U.S.C. 1395x(r)(5))). 

17 (2) NO PHYSICIAN APPROVAL REQUIRED.—In 

18 establishing the demonstration projects, the Sec19 retary shall ensure that an eligible beneficiary who 

20 participates in a demonstration project, including an 

21 eligible beneficiary who is enrolled for coverage 

22 under a Medicare+Choice plan (or, on and after 

23 January 1, 2006, under a MedicareAdvantage plan), 

24 is not required to receive approval from a physician 
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1 or other health care provider in order to receive a 

2 chiropractic service under a demonstration project. 

3 (3) CONSULTATION.—In establishing the dem4 onstration projects, the Secretary shall consult with 

5 chiropractors, organizations representing chiroprac6 tors, eligible beneficiaries, and organizations rep7 resenting eligible beneficiaries. 

8 (4) PARTICIPATION.—Any eligible beneficiary 

9 may participate in the demonstration projects on a 

10 voluntary basis. 

11 (c) CONDUCT OF DEMONSTRATION PROJECTS.—

12 (1) DEMONSTRATION SITES.—

13 (A) SELECTION OF DEMONSTRATION

14 SITES.—The Secretary shall conduct dem15 onstration projects at 6 demonstration sites. 

16 (B) GEOGRAPHIC DIVERSITY.—Of the sites 

17 described in subparagraph (A)—

18 (i) 3 shall be in rural areas; and 

19 (ii) 3 shall be in urban areas. 

20 (C) SITES LOCATED IN HPSAS.—At least 1 

21 site described in clause (i) of subparagraph (B) 

22 and at least 1 site described in clause (ii) of 

23 such subparagraph shall be located in an area 

24 that is designated under section 332(a)(1)(A) of 

25 the Public Health Service Act (42 U.S.C. 
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1 254e(a)(1)(A)) as a health professional short2 age area. 

3 (2) IMPLEMENTATION; DURATION.—

4 (A) IMPLEMENTATION.—The Secretary 

5 shall not implement the demonstration projects 

6 before October 1, 2004. 

7 (B) DURATION.—The Secretary shall com8 plete the demonstration projects by the date 

9 that is 3 years after the date on which the first 

10 demonstration project is implemented. 

11 (d) EVALUATION AND REPORT.—

12 (1) EVALUATION.—The Secretary shall conduct 

13 an evaluation of the demonstration projects—

14 (A) to determine whether eligible bene15 ficiaries who use chiropractic services use a 

16 lesser overall amount of items and services for 

17 which payment is made under the medicare pro18 gram than eligible beneficiaries who do not use 

19 such services; 

20 (B) to determine the cost of providing pay21 ment for chiropractic services under the medi22 care program; 

23 (C) to determine the satisfaction of eligible 

24 beneficiaries participating in the demonstration 
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1 projects and the quality of care received by such 

2 beneficiaries; and 

3 (D) to evaluate such other matters as the 

4 Secretary determines is appropriate. 

5 (2) REPORT.—Not later than the date that is 

6 1 year after the date on which the demonstration 

7 projects conclude, the Secretary shall submit to Con8 gress a report on the evaluation conducted under 

9 paragraph (1) together with such recommendations 

10 for legislation or administrative action as the Sec11 retary determines is appropriate. 

12 (e) WAIVER OF MEDICARE REQUIREMENTS.—The 

13 Secretary shall waive compliance with such requirements 

14 of the medicare program to the extent and for the period 

15 the Secretary finds necessary to conduct the demonstra16 tion projects. 

17 (f) FUNDING.—

18 (1) DEMONSTRATION PROJECTS.—

19 (A) IN GENERAL.—Subject to subpara20 graph (B) and paragraph (2), the Secretary 

21 shall provide for the transfer from the Federal 

22 Supplementary Insurance Trust Fund under 

23 section 1841 of the Social Security Act (42 

24 U.S.C. 1395t) of such funds as are necessary 
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1 for the costs of carrying out the demonstration 

2 projects under this section. 

3 (B) LIMITATION.—In conducting the dem4 onstration projects under this section, the Sec5 retary shall ensure that the aggregate payments 

6 made by the Secretary under the medicare pro7 gram do not exceed the amount which the Sec8 retary would have paid under the medicare pro9 gram if the demonstration projects under this 

10 section were not implemented. 

11 (2) EVALUATION AND REPORT.—There are au12 thorized to be appropriated such sums as are nec13 essary for the purpose of developing and submitting 

14 the report to Congress under subsection (d). 

15 SEC. 441. MEDICARE HEALTH CARE QUALITY DEMONSTRA16 TION PROGRAMS. 

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

18 inserting after section 1866B the following new section: 

19 ‘‘HEALTH CARE QUALITY DEMONSTRATION PROGRAM

20 ‘‘SEC. 1866C. (a) DEFINITIONS.—In this section: 

21 ‘‘(1) BENEFICIARY.—The term ‘beneficiary’ 

22 means a beneficiary who is enrolled in the original 

23 medicare fee-for-service program under parts A and 

24 B or a beneficiary in a staff model or dedicated 

25 group model health maintenance organization under 

26 the Medicare+Choice program (or, on and after 
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1 January 1, 2006, under the MedicareAdvantage pro2 gram) under part C. 

3 ‘‘(2) HEALTH CARE GROUP.—

4 ‘‘(A) IN GENERAL.—The term ‘health care 

5 group’ means—

6 ‘‘(i) a group of physicians that is or7 ganized at least in part for the purpose of 

8 providing physician’s services under this 

9 title; 

10 ‘‘(ii) an integrated health care delivery 

11 system that delivers care through coordi12 nated hospitals, clinics, home health agen13 cies, ambulatory surgery centers, skilled 

14 nursing facilities, rehabilitation facilities 

15 and clinics, and employed, independent, or 

16 contracted physicians; or 

17 ‘‘(iii) an organization representing re18 gional coalitions of groups or systems de19 scribed in clause (i) or (ii). 

20 ‘‘(B) INCLUSION.—As the Secretary deter21 mines appropriate, a health care group may in22 clude a hospital or any other individual or enti23 ty furnishing items or services for which pay24 ment may be made under this title that is affili25 ated with the health care group under an ar-
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1 rangement structured so that such hospital, in2 dividual, or entity participates in a demonstra3 tion project under this section. 

4 ‘‘(3) PHYSICIAN.—Except as otherwise provided 

5 for by the Secretary, the term ‘physician’ means any 

6 individual who furnishes services that may be paid 

7 for as physicians’ services under this title. 

8 ‘‘(b) DEMONSTRATION PROJECTS.—The Secretary 

9 shall establish a 5-year demonstration program under 

10 which the Secretary shall approve demonstration projects 

11 that examine health delivery factors that encourage the 

12 delivery of improved quality in patient care, including—

13 ‘‘(1) the provision of incentives to improve the 

14 safety of care provided to beneficiaries; 

15 ‘‘(2) the appropriate use of best practice guide16 lines by providers and services by beneficiaries; 

17 ‘‘(3) reduced scientific uncertainty in the deliv18 ery of care through the examination of variations in 

19 the utilization and allocation of services, and out20 comes measurement and research; 

21 ‘‘(4) encourage shared decision making between 

22 providers and patients; 

23 ‘‘(5) the provision of incentives for improving 

24 the quality and safety of care and achieving the effi25 cient allocation of resources; 
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1 ‘‘(6) the appropriate use of culturally and eth2 nically sensitive health care delivery; and 

3 ‘‘(7) the financial effects on the health care 

4 marketplace of altering the incentives for care deliv5 ery and changing the allocation of resources. 

6 ‘‘(c) ADMINISTRATION BY CONTRACT.—

7 ‘‘(1) IN GENERAL.—Except as otherwise pro8 vided in this section, the Secretary may administer 

9 the demonstration program established under this 

10 section in a manner that is similar to the manner in 

11 which the demonstration program established under 

12 section 1866A is administered in accordance with 

13 section 1866B. 

14 ‘‘(2) ALTERNATIVE PAYMENT SYSTEMS.—A 

15 health care group that receives assistance under this 

16 section may, with respect to the demonstration 

17 project to be carried out with such assistance, in18 clude proposals for the use of alternative payment 

19 systems for items and services provided to bene20 ficiaries by the group that are designed to—

21 ‘‘(A) encourage the delivery of high quality 

22 care while accomplishing the objectives de23 scribed in subsection (b); and 
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1 ‘‘(B) streamline documentation and report2 ing requirements otherwise required under this 

3 title. 

4 ‘‘(3) BENEFITS.—A health care group that re5 ceives assistance under this section may, with re6 spect to the demonstration project to be carried out 

7 with such assistance, include modifications to the 

8 package of benefits available under the traditional 

9 fee-for-service program under parts A and B or the 

10 package of benefits available through a staff model 

11 or a dedicated group model health maintenance or12 ganization under part C. The criteria employed 

13 under the demonstration program under this section 

14 to evaluate outcomes and determine best practice 

15 guidelines and incentives shall not be used as a basis 

16 for the denial of medicare benefits under the dem17 onstration program to patients against their wishes 

18 (or if the patient is incompetent, against the wishes 

19 of the patient’s surrogate) on the basis of the pa20 tient’s age or expected length of life or of the pa21 tient’s present or predicted disability, degree of med22 ical dependency, or quality of life. 

23 ‘‘(d) ELIGIBILITY CRITERIA.—To be eligible to re24 ceive assistance under this section, an entity shall—

25 ‘‘(1) be a health care group; 
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1 ‘‘(2) meet quality standards established by the 

2 Secretary, including—

3 ‘‘(A) the implementation of continuous 

4 quality improvement mechanisms that are 

5 aimed at integrating community-based support 

6 services, primary care, and referral care; 

7 ‘‘(B) the implementation of activities to in8 crease the delivery of effective care to bene9 ficiaries; 

10 ‘‘(C) encouraging patient participation in 

11 preference-based decisions; 

12 ‘‘(D) the implementation of activities to 

13 encourage the coordination and integration of 

14 medical service delivery; and 

15 ‘‘(E) the implementation of activities to 

16 measure and document the financial impact on 

17 the health care marketplace of altering the in18 centives of health care delivery and changing 

19 the allocation of resources; and 

20 ‘‘(3) meet such other requirements as the Sec21 retary may establish. 

22 ‘‘(e) WAIVER AUTHORITY.—The Secretary may waive 

23 such requirements of titles XI and XVIII as may be nec24 essary to carry out the purposes of the demonstration pro25 gram established under this section. 
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1 ‘‘(f) BUDGET NEUTRALITY.—With respect to the 5-

2 year period of the demonstration program under sub3 section (b), the aggregate expenditures under this title for 

4 such period shall not exceed the aggregate expenditures 

5 that would have been expended under this title if the pro6 gram established under this section had not been imple7 mented. 

8 ‘‘(g) NOTICE REQUIREMENTS.—In the case of an in9 dividual that receives health care items or services under 

10 a demonstration program carried out under this section, 

11 the Secretary shall ensure that such individual is notified 

12 of any waivers of coverage or payment rules that are appli13 cable to such individual under this title as a result of the 

14 participation of the individual in such program. 

15 ‘‘(h) PARTICIPATION AND SUPPORT BY FEDERAL

16 AGENCIES.—In carrying out the demonstration program 

17 under this section, the Secretary may direct—

18 ‘‘(1) the Director of the National Institutes of 

19 Health to expand the efforts of the Institutes to 

20 evaluate current medical technologies and improve 

21 the foundation for evidence-based practice; 

22 ‘‘(2) the Administrator of the Agency for 

23 Healthcare Research and Quality to, where possible 

24 and appropriate, use the program under this section 

25 as a laboratory for the study of quality improvement 
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1 strategies and to evaluate, monitor, and disseminate 

2 information relevant to such program; and 

3 ‘‘(3) the Administrator of the Centers for Medi4 care & Medicaid Services and the Administrator of 

5 the Center for Medicare Choices to support linkages 

6 of relevant medicare data to registry information 

7 from participating health care groups for the bene8 ficiary populations served by the participating 

9 groups, for analysis supporting the purposes of the 

10 demonstration program, consistent with the applica11 ble provisions of the Health Insurance Portability 

12 and Accountability Act of 1996. 

13 ‘‘(i) IMPLEMENTATION.—The Secretary shall not im14 plement the demonstration program before October 1, 

15 2004.’’. 

16 SEC. 442. MEDICARE COMPLEX CLINICAL CARE MANAGE17 MENT PAYMENT DEMONSTRATION. 

18 (a) ESTABLISHMENT.—

19 (1) IN GENERAL.—The Secretary shall establish 

20 a demonstration program to make the medicare pro21 gram more responsive to needs of eligible bene22 ficiaries by promoting continuity of care, helping 

23 stabilize medical conditions, preventing or mini24 mizing acute exacerbations of chronic conditions, 
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1 and reducing adverse health outcomes, such as ad2 verse drug interactions related to polypharmacy. 

3 (2) SITES.—The Secretary shall designate 6 

4 sites at which to conduct the demonstration program 

5 under this section, of which at least 3 shall be in an 

6 urban area and at least 1 shall be in a rural area. 

7 One of the sites shall be located in the State of Ar8 kansas. 

9 (3) DURATION.—The Secretary shall conduct 

10 the demonstration program under this section for a 

11 3-year period. 

12 (4) IMPLEMENTATION.—The Secretary shall 

13 not implement the demonstration program before 

14 October 1, 2004. 

15 (b) PARTICIPANTS.—Any eligible beneficiary who re16 sides in an area designated by the Secretary as a dem17 onstration site under subsection (a)(2) may participate in 

18 the demonstration program under this section if such ben19 eficiary identifies a principal care physician who agrees to 

20 manage the complex clinical care of the eligible beneficiary 

21 under the demonstration program. 

22 (c) PRINCIPAL CARE PHYSICIAN RESPONSIBIL23 ITIES.—The Secretary shall enter into an agreement with 

24 each principal care physician who agrees to manage the 

25 complex clinical care of an eligible beneficiary under sub-
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1 section (b) under which the principal care physician 

2 shall—

3 (1) serve as the primary contact of the eligible 

4 beneficiary in accessing items and services for which 

5 payment may be made under the medicare program; 

6 (2) maintain medical information related to 

7 care provided by other health care providers who 

8 provide health care items and services to the eligible 

9 beneficiary, including clinical reports, medication 

10 and treatments prescribed by other physicians, hos11 pital and hospital outpatient services, skilled nursing 

12 home care, home health care, and medical equipment 

13 services; 

14 (3) monitor and advocate for the continuity of 

15 care of the eligible beneficiary and the use of evi16 dence-based guidelines; 

17 (4) promote self-care and family caregiver in18 volvement where appropriate; 

19 (5) have appropriate staffing arrangements to 

20 conduct patient self-management and other care co21 ordination activities as specified by the Secretary; 

22 (6) refer the eligible beneficiary to community 

23 services organizations and coordinate the services of 

24 such organizations with the care provided by health 

25 care providers; and 
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1 (7) meet such other complex care management 

2 requirements as the Secretary may specify. 

3 (d) COMPLEX CLINICAL CARE MANAGEMENT FEE.—

4 (1) PAYMENT.—Under an agreement entered 

5 into under subsection (c), the Secretary shall pay to 

6 each principal care physician, on behalf of each eligi7 ble beneficiary under the care of that physician, the 

8 complex clinical care management fee developed by 

9 the Secretary under paragraph (2). 

10 (2) DEVELOPMENT OF FEE.—The Secretary 

11 shall develop a complex care management fee under 

12 this paragraph that is paid on a monthly basis and 

13 which shall be payment in full for all the functions 

14 performed by the principal care physician under the 

15 demonstration program, including any functions per16 formed by other qualified practitioners acting on be17 half of the physician, appropriate staff under the su18 pervision of the physician, and any other person 

19 under a contract with the physician, including any 

20 person who conducts patient self-management and 

21 caregiver education under subsection (c)(4). 

22 (e) FUNDING.—

23 (1) IN GENERAL.—The Secretary shall provide 

24 for the transfer from the Federal Supplementary In25 surance Trust Fund established under section 1841 
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1 of the Social Security Act (42 U.S.C. 1395t) of such 

2 funds as are necessary for the costs of carrying out 

3 the demonstration program under this section. 

4 (2) BUDGET NEUTRALITY.—In conducting the 

5 demonstration program under this section, the Sec6 retary shall ensure that the aggregate payments 

7 made by the Secretary do not exceed the amount 

8 which the Secretary would have paid if the dem9 onstration program under this section was not im10 plemented. 

11 (f) WAIVER AUTHORITY.—The Secretary may waive 

12 such requirements of titles XI and XVIII of the Social 

13 Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as 

14 may be necessary for the purpose of carrying out the dem15 onstration program under this section. 

16 (g) REPORT.—Not later than 6 months after the 

17 completion of the demonstration program under this sec18 tion, the Secretary shall submit to Congress a report on 

19 such program, together with recommendations for such 

20 legislation and administrative action as the Secretary de21 termines to be appropriate. 

22 (h) DEFINITIONS.—In this section: 

23 (1) ACTIVITY OF DAILY LIVING.—The term ‘‘ac24 tivity of daily living’’ means eating, toiling, transfer25 ring, bathing, dressing, and continence. 
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1 (2) CHRONIC CONDITION.—The term ‘‘chronic 

2 condition’’ means a biological, physical, or mental 

3 condition that is likely to last a year or more, for 

4 which there is no known cure, for which there is a 

5 need for ongoing medical care, and which may affect 

6 an individual’s ability to carry out activities of daily 

7 living or instrumental activities of daily living, or 

8 both. 

9 (3) ELIGIBLE BENEFICIARY.—The term ‘‘eligi10 ble beneficiary’’ means any individual who—

11 (A) is enrolled for benefits under part B of 

12 the medicare program; 

13 (B) has at least 4 complex medical condi14 tions (one of which may be cognitive impair15 ment); and 

16 (C) has—

17 (i) an inability to self-manage their 

18 care; or 

19 (ii) a functional limitation defined as 

20 an impairment in 1 or more activity of 

21 daily living or instrumental activity of daily 

22 living. 

23 (4) INSTRUMENTAL ACTIVITY OF DAILY LIV24 ING.—The term ‘‘instrumental activity of daily liv25 ing’’ means meal preparation, shopping, house-
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1 keeping, laundry, money management, telephone 

2 use, and transportation use. 

3 (5) MEDICARE PROGRAM.—The term ‘‘medicare 

4 program’’ means the health care program under title 

5 XVIII of the Social Security Act (42 U.S.C. 1395 et 

6 seq.). 

7 (6) PRINCIPAL CARE PHYSICIAN.—The term 

8 ‘‘principal care physician’’ means the physician with 

9 primary responsibility for overall coordination of the 

10 care of an eligible beneficiary (as specified in a writ11 ten plan of care) who may be a primary care physi12 cian or a specialist. 

13 SEC. 443. MEDICARE FEE-FOR-SERVICE CARE COORDINA14 TION DEMONSTRATION PROGRAM. 

15 (a) ESTABLISHMENT.—

16 (1) IN GENERAL.—The Secretary shall establish 

17 a demonstration program to contract with qualified 

18 care management organizations to provide health 

19 risk assessment and care management services to el20 igible beneficiaries who receive care under the origi21 nal medicare fee-for-service program under parts A 

22 and B of title XVIII of the Social Security Act to 

23 eligible beneficiaries. 

24 (2) SITES.—The Secretary shall designate 6 

25 sites at which to conduct the demonstration program 
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1 under this section. In selecting sites under this para2 graph, the Secretary shall give preference to sites lo3 cated in rural areas. 

4 (3) DURATION.—The Secretary shall conduct 

5 the demonstration program under this section for a 

6 5-year period. 

7 (4) IMPLEMENTATION.—The Secretary shall 

8 not implement the demonstration program before 

9 October 1, 2004. 

10 (b) PARTICIPANTS.—Any eligible beneficiary who re11 sides in an area designated by the Secretary as a dem12 onstration site under subsection (a)(2) may participate in 

13 the demonstration program under this section if such ben14 eficiary identifies a care management organization who 

15 agrees to furnish care management services to the eligible 

16 beneficiary under the demonstration program. 

17 (c) CONTRACTS WITH CMOS.—

18 (1) IN GENERAL.—The Secretary shall enter 

19 into a contract with care management organizations 

20 to provide care management services to eligible bene21 ficiaries residing in the area served by the care man22 agement organization. 

23 (2) CANCELLATION.—The Secretary may cancel 

24 a contract entered into under paragraph (1) if the 

25 care management organization does not meet nego-
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1 tiated savings or quality outcomes targets for the 

2 year. 

3 (3) NUMBER OF CMOS.—The Secretary may 

4 contract with more than 1 care management organi5 zation in a geographic area. 

6 (d) PAYMENT TO CMOS.—

7 (1) PAYMENT.—Under an contract entered into 

8 under subsection (c), the Secretary shall pay care 

9 management organizations a fee for which the care 

10 management organization is partially at risk based 

11 on bids submitted by care management organiza12 tions. 

13 (2) PORTION OF PAYMENT AT RISK.—The Sec14 retary shall establish a benchmark for quality and 

15 cost against which the results of the care manage16 ment organization are to be measured. The Sec17 retary may not pay a care management organization 

18 the portion of the fee described in paragraph (1) 

19 that is at risk unless the Secretary determines that 

20 the care management organization has met the 

21 agreed upon savings and outcomes targets for the 

22 year. 

23 (e) FUNDING.—

24 (1) IN GENERAL.—The Secretary shall provide 

25 for the transfer from the Federal Hospital Insurance 
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1 Trust Fund under section 1817 of the Social Secu2 rity Act (42 U.S.C. 1395i) and the Federal Supple3 mentary Insurance Trust Fund established under 

4 section 1841 of such Act (42 U.S.C. 1395t), in such 

5 proportion as the Secretary determines to be appro6 priate, of such funds as are necessary for the costs 

7 of carrying out the demonstration program under 

8 this section. 

9 (2) BUDGET NEUTRALITY.—In conducting the 

10 demonstration program under this section, the Sec11 retary shall ensure that the aggregate payments 

12 made by the Secretary do not exceed the amount 

13 which the Secretary would have paid if the dem14 onstration program under this section was not im15 plemented. 

16 (f) WAIVER AUTHORITY.—

17 (1) IN GENERAL.—The Secretary may waive 

18 such requirements of titles XI and XVIII of the So19 cial Security Act (42 U.S.C. 1301 et seq.; 1395 et 

20 seq.) as may be necessary for the purpose of car21 rying out the demonstration program under this sec22 tion. 

23 (2) WAIVER OF MEDIGAP PREEMPTIONS.—The 

24 Secretary shall waive any provision of section 1882 

25 of the Social Security Act that would prevent an in-
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1 surance carrier described in subsection (h)(3)(D) 

2 from participating in the demonstration program 

3 under this section. 

4 (g) REPORT.—Not later than 6 months after the 

5 completion of the demonstration program under this sec6 tion, the Secretary shall submit to Congress a report on 

7 such program, together with recommendations for such 

8 legislation and administrative action as the Secretary de9 termines to be appropriate. 

10 (h) DEFINITIONS.—In this section: 

11 (1) CARE MANAGEMENT SERVICES.—The term 

12 ‘‘care management services’’ means services that are 

13 furnished to an eligible beneficiary (as defined in 

14 paragraph (2)) by a care management organization 

15 (as defined in paragraph (3)) in accordance with 

16 guidelines established by the Secretary that are con17 sistent with guidelines established by the American 

18 Geriatrics Society. 

19 (2) ELIGIBLE BENEFICIARY.—The term ‘‘eligi20 ble beneficiary’’ means an individual who is—

21 (A) entitled to (or enrolled for) benefits 

22 under part A and enrolled for benefits under 

23 part B of the Social Security Act (42 U.S.C. 

24 1395c et seq.; 1395j et seq.); 
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1 (B) not enrolled with a Medicare+Choice 

2 plan or a MedicareAdvantage plan under part 

3 C; and 

4 (C) at high-risk (as defined by the Sec5 retary, but including eligible beneficiaries with 

6 multiple sclerosis or another disabling chronic 

7 condition, eligible beneficiaries residing in a 

8 nursing home or at risk for nursing home place9 ment, or eligible beneficiaries eligible for assist10 ance under a State plan under title XIX). 

11 (3) CARE MANAGEMENT ORGANIZATION.—The 

12 term ‘‘care management organization’’ means an or13 ganization that meets such qualifications as the Sec14 retary may specify and includes any of the following: 

15 (A) A physician group practice, hospital, 

16 home health agency, or hospice program. 

17 (B) A disease management organization. 

18 (C) A Medicare+Choice or 

19 MedicareAdvantage organization. 

20 (D) Insurance carriers offering medicare 

21 supplemental policies under section 1882 of the 

22 Social Security Act (42 U.S.C. 1395ss). 

23 (E) Such other entity as the Secretary de24 termines to be appropriate. 
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1 SEC. 444. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN 

2 PAYMENTS FOR PHYSICIANS’ SERVICES. 

3 (a) STUDY.—The Comptroller General of the United 

4 States shall conduct a study of differences in payment 

5 amounts under the physician fee schedule under section 

6 1848 of the Social Security Act (42 U.S.C. 1395w–4) for 

7 physicians’ services in different geographic areas. Such 

8 study shall include—

9 (1) an assessment of the validity of the geo10 graphic adjustment factors used for each component 

11 of the fee schedule; 

12 (2) an evaluation of the measures used for such 

13 adjustment, including the frequency of revisions; 

14 (3) an evaluation of the methods used to deter15 mine professional liability insurance costs used in 

16 computing the malpractice component, including a 

17 review of increases in professional liability insurance 

18 premiums and variation in such increases by State 

19 and physician specialty and methods used to update 

20 the geographic cost of practice index and relative 

21 weights for the malpractice component; 

22 (4) an evaluation of whether there is a sound 

23 economic basis for the implementation of the adjust24 ment under subparagraphs (E) and (F) of section 

25 1848(e)(1) of the Social Security Act (42 U.S.C. 
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1 1395w–4(e)(1)), as added by section 421, in those 

2 areas in which the adjustment applies; 

3 (5) an evaluation of the effect of such adjust4 ment on physician location and retention in areas af5 fected by such adjustment, taking into account—

6 (A) differences in recruitment costs and re7 tention rates for physicians, including special8 ists, between large urban areas and other areas; 

9 and 

10 (B) the mobility of physicians, including 

11 specialists, over the last decade; 

12 (6) an evaluation of the appropriateness of ex13 tending such adjustment or making such adjustment 

14 permanent; 

15 (7) an evaluation of the adjustment of the work 

16 geographic practice cost index required under section 

17 1848(e)(1)(A)(iii) of the Social Security Act (42 

U.S.C. 1395w–4(e)(1)(A)(iii)) to reflect 1 18 ⁄4 of the 

19 area cost difference in physician work; 

20 (8) an evaluation of the effect of the adjust21 ment described in paragraph (7) on physician loca22 tion and retention in higher than average cost-of-liv23 ing areas, taking into account difference in recruit24 ment costs and retention rates for physicians, in25 cluding specialists; and 
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1 (9) an evaluation of the appropriateness of the 

1 2 ⁄4 adjustment for the work geographic practice cost 

3 index.’’. 

4 (b) REPORT.—Not later than 1 year after the date 

5 of enactment of this Act, the Comptroller General of the 

6 United States shall submit to Congress a report on the 

7 study conducted under subsection (a). The report shall in8 clude recommendations regarding the use of more current 

9 data in computing geographic cost of practice indices as 

10 well as the use of data directly representative of physi11 cians’ costs (rather than proxy measures of such costs). 

12 SEC. 445. IMPROVED PAYMENT FOR CERTAIN MAMMOG13 RAPHY SERVICES. 

14 (a) EXCLUSION FROM OPD FEE SCHEDULE.—Sec15 tion 1833(t)(1)(B)(iv) (42 U.S.C. 13951(t)(1)(B)(iv)) is 

16 amended by inserting before the period at the end the fol17 lowing: ‘‘and does not include screening mammography (as 

18 defined in section 1861(jj)) and unilateral and bilateral 

19 diagnostic mammography’’. 

20 (b) EFFECTIVE DATE.—The amendment made by 

21 subsection (a) shall apply to mammography performed on 

22 or after January 1, 2005. 
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1 SEC. 446. IMPROVEMENT OF OUTPATIENT VISION SERV2 ICES UNDER PART B. 

3 (a) COVERAGE UNDER PART B.—Section 1861(s)(2) 

4 (42 U.S.C. 1395x(s)(2)) is amended—

5 (1) in subparagraph (U), by striking ‘‘and’’ 

6 after the semicolon at the end; 

7 (2) in subparagraph (V)(iii), by adding ‘‘and’’ 

8 after the semicolon at the end; and 

9 (3) by adding at the end the following new sub10 paragraph: 

11 ‘‘(W) vision rehabilitation services (as defined 

12 in subsection (ww)(1));’’. 

13 (b) SERVICES DESCRIBED.—Section 1861 (42 U.S.C. 

14 1395x) is amended by adding at the end the following new 

15 subsection: 

16 ‘‘Vision Rehabilitation Services; Vision Rehabilitation 

17 Professional 

18 ‘‘(ww)(1)(A) The term ‘vision rehabilitation services’ 

19 means rehabilitative services (as determined by the Sec20 retary in regulations) furnished—

21 ‘‘(i) to an individual diagnosed with a vision im22 pairment (as defined in paragraph (6)); 

23 ‘‘(ii) pursuant to a plan of care established by 

24 a qualified physician (as defined in subparagraph 

25 (C)) or by a qualified occupational therapist that is 

26 periodically reviewed by a qualified physician; 
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1 ‘‘(iii) in an appropriate setting (including the 

2 home of the individual receiving such services if 

3 specified in the plan of care); and 

4 ‘‘(iv) by any of the following individuals: 

5 ‘‘(I) A qualified physician. 

6 ‘‘(II) A qualified occupational therapist. 

7 ‘‘(III) A vision rehabilitation professional 

8 (as defined in paragraph (2)) while under the 

9 general supervision (as defined in subparagraph 

10 (D)) of a qualified physician. 

11 ‘‘(B) In the case of vision rehabilitation services fur12 nished by a vision rehabilitation professional, the plan of 

13 care may only be established and reviewed by a qualified 

14 physician. 

15 ‘‘(C) The term ‘qualified physician’ means—

16 ‘‘(i) a physician (as defined in subsection 

17 (r)(1)) who is an ophthalmologist; or 

18 ‘‘(ii) a physician (as defined in subsection (r)(4) 

19 (relating to a doctor of optometry)). 

20 ‘‘(D) The term ‘general supervision’ means, with re21 spect to a vision rehabilitation professional, overall direc22 tion and control of that professional by the qualified physi23 cian who established the plan of care for the individual, 

24 but the presence of the qualified physician is not required 
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1 during the furnishing of vision rehabilitation services by 

2 that professional to the individual. 

3 ‘‘(2) The term ‘vision rehabilitation professional’ 

4 means any of the following individuals: 

5 ‘‘(A) An orientation and mobility specialist (as 

6 defined in paragraph (3)). 

7 ‘‘(B) A rehabilitation teacher (as defined in 

8 paragraph (4)). 

9 ‘‘(C) A low vision therapist (as defined in para10 graph (5)). 

11 ‘‘(3) The term ‘orientation and mobility specialist’ 

12 means an individual who—

13 ‘‘(A) if a State requires licensure or certifi14 cation of orientation and mobility specialists, is li15 censed or certified by that State as an orientation 

16 and mobility specialist; 

17 ‘‘(B)(i) holds a baccalaureate or higher degree 

18 from an accredited college or university in the 

19 United States (or an equivalent foreign degree) with 

20 a concentration in orientation and mobility; and 

21 ‘‘(ii) has successfully completed 350 hours of 

22 clinical practicum under the supervision of an ori23 entation and mobility specialist and has furnished 

24 not less than 9 months of supervised full-time ori25 entation and mobility services; 
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1 ‘‘(C) has successfully completed the national ex2 amination in orientation and mobility administered 

3 by the Academy for Certification of Vision Rehabili4 tation and Education Professionals; and 

5 ‘‘(D) meets such other criteria as the Secretary 

6 establishes. 

7 ‘‘(4) The term ‘rehabilitation teacher’ means an indi8 vidual who—

9 ‘‘(A) if a State requires licensure or certifi10 cation of rehabilitation teachers, is licensed or cer11 tified by the State as a rehabilitation teacher; 

12 ‘‘(B)(i) holds a baccalaureate or higher degree 

13 from an accredited college or university in the 

14 United States (or an equivalent foreign degree) with 

15 a concentration in rehabilitation teaching, or holds 

16 such a degree in a health field; and 

17 ‘‘(ii) has successfully completed 350 hours of 

18 clinical practicum under the supervision of a reha19 bilitation teacher and has furnished not less than 9 

20 months of supervised full-time rehabilitation teach21 ing services; 

22 ‘‘(C) has successfully completed the national ex23 amination in rehabilitation teaching administered by 

24 the Academy for Certification of Vision Rehabilita25 tion and Education Professionals; and 
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1 ‘‘(D) meets such other criteria as the Secretary 

2 establishes. 

3 ‘‘(5) The term ‘low vision therapist’ means an indi4 vidual who—

5 ‘‘(A) if a State requires licensure or certifi6 cation of low vision therapists, is licensed or certified 

7 by the State as a low vision therapist; 

8 ‘‘(B)(i) holds a baccalaureate or higher degree 

9 from an accredited college or university in the 

10 United States (or an equivalent foreign degree) with 

11 a concentration in low vision therapy, or holds such 

12 a degree in a health field; and 

13 ‘‘(ii) has successfully completed 350 hours of 

14 clinical practicum under the supervision of a physi15 cian, and has furnished not less than 9 months of 

16 supervised full-time low vision therapy services; 

17 ‘‘(C) has successfully completed the national ex18 amination in low vision therapy administered by the 

19 Academy for Certification of Vision Rehabilitation 

20 and Education Professionals; and 

21 ‘‘(D) meets such other criteria as the Secretary 

22 establishes. 

23 ‘‘(6) The term ‘vision impairment’ means vision loss 

24 that constitutes a significant limitation of visual capability 

25 resulting from disease, trauma, or a congenital or degen-
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1 erative condition that cannot be corrected by conventional 

2 means, including refractive correction, medication, or sur3 gery, and that is manifested by 1 or more of the following: 

4 ‘‘(A) Best corrected visual acuity of less than 

5 20/60, or significant central field defect. 

6 ‘‘(B) Significant peripheral field defect includ7 ing homonymous or heteronymous bilateral visual 

8 field defect or generalized contraction or constriction 

9 of field. 

10 ‘‘(C) Reduced peak contrast sensitivity in con11 junction with a condition described in subparagraph 

12 (A) or (B). 

13 ‘‘(D) Such other diagnoses, indications, or other 

14 manifestations as the Secretary may determine to be 

15 appropriate.’’. 

16 (c) PAYMENT UNDER PART B.—

17 (1) PHYSICIAN FEE SCHEDULE.—Section 

18 1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended 

19 by inserting ‘‘(2)(W),’’ after ‘‘(2)(S),’’. 

20 (2) CARVE OUT FROM HOSPITAL OUTPATIENT

21 DEPARTMENT PROSPECTIVE PAYMENT SYSTEM.—

22 Section 1833(t)(1)(B)(iv) (42 U.S.C. 

23 1395l(t)(1)(B)(iv)) is amended by inserting ‘‘vision 

24 rehabilitation services (as defined in section 

25 1861(ww)(1)) or’’ after ‘‘does not include’’. 
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1 (3) CLARIFICATION OF BILLING REQUIRE2 MENTS.—The first sentence of section 1842(b)(6) of 

3 such Act (42 U.S.C. 1395u(b)(6)) is amended—

4 (A) by striking ‘‘and’’ before ‘‘(G)’’; and 

5 (B) by inserting before the period the fol6 lowing: ‘‘, and (H) in the case of vision rehabili7 tation services (as defined in section 

8 1861(ww)(1)) furnished by a vision rehabilita9 tion professional (as defined in section 

10 1861(ww)(2)) while under the general super11 vision (as defined in section 1861(ww)(1)(D)) 

12 of a qualified physician (as defined in section 

13 1861(ww)(1)(C)), payment shall be made to (i) 

14 the qualified physician or (ii) the facility (such 

15 as a rehabilitation agency, a clinic, or other fa16 cility) through which such services are fur17 nished under the plan of care if there is a con18 tractual arrangement between the vision reha19 bilitation professional and the facility under 

20 which the facility submits the bill for such serv21 ices’’. 

22 (d) PLAN OF CARE.—Section 1835(a)(2) (42 U.S.C. 

23 1395n(a)(2)) is amended—

24 (1) in subparagraph (E), by striking ‘‘and’’ 

25 after the semicolon at the end; 
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1 (2) in subparagraph (F), by striking the period 

2 at the end and inserting ‘‘; and’’; and 

3 (3) by inserting after subparagraph (F) the fol4 lowing new subparagraph: 

5 ‘‘(G) in the case of vision rehabilitation 

6 services, (i) such services are or were required 

7 because the individual needed vision rehabilita8 tion services, (ii) an individualized, written plan 

9 for furnishing such services has been estab10 lished (I) by a qualified physician (as defined in 

11 section 1861(ww)(1)(C)), (II) by a qualified oc12 cupational therapist, or (III) in the case of such 

13 services furnished by a vision rehabilitation pro14 fessional, by a qualified physician, (iii) the plan 

15 is periodically reviewed by the qualified physi16 cian, and (iv) such services are or were fur17 nished while the individual is or was under the 

18 care of the qualified physician.’’. 

19 (e) RELATIONSHIP TO REHABILITATION ACT OF

20 1973.—The provision of vision rehabilitation services 

21 under the medicare program under title XVIII (42 U.S.C. 

22 1395 et seq.) shall not be taken into account for any pur23 pose under the Rehabilitation Act of 1973 (29 U.S.C. 701 

24 et seq.). 

25 (f) EFFECTIVE DATE.—
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1 (1) INTERIM, FINAL REGULATIONS.—The Sec2 retary shall publish a rule under this section in the 

3 Federal Register by not later than 180 days after 

4 the date of enactment of this Act to carry out the 

5 provisions of this section. Such rule shall be effective 

6 and final immediately on an interim basis, but is 

7 subject to change and revision after public notice 

8 and opportunity for a period for public comment of 

9 not less than 60 days. 

10 (2) CONSULTATION.—The Secretary shall con11 sult with the National Vision Rehabilitation Cooper12 ative, the Association for Education and Rehabilita13 tion of the Blind and Visually Impaired, the Acad14 emy for Certification of Vision Rehabilitation and 

15 Education Professionals, the American Academy of 

16 Ophthalmology, the American Occupational Therapy 

17 Association, the American Optometric Association, 

18 and such other qualified professional and consumer 

19 organizations as the Secretary determines appro20 priate in promulgating regulations to carry out this 

21 section. 

22 SEC. 447. GAO STUDY AND REPORT ON THE PROPAGATION 

23 OF CONCIERGE CARE. 

24 (a) STUDY.—
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1 (1) IN GENERAL.—The Comptroller General of 

2 the United States shall conduct a study on concierge 

3 care (as defined in paragraph (2)) to determine the 

4 extent to which such care—

5 (A) is used by medicare beneficiaries (as 

6 defined in section 1802(b)(5)(A) of the Social 

7 Security Act (42 U.S.C. 1395a(b)(5)(A))); and 

8 (B) has impacted upon the access of medi9 care beneficiaries (as so defined) to items and 

10 services for which reimbursement is provided 

11 under the medicare program under title XVIII 

12 of the Social Security Act (42 U.S.C. 1395 et 

13 seq.). 

14 (2) CONCIERGE CARE.—In this section, the 

15 term ‘‘concierge care’’ means an arrangement under 

16 which, as a prerequisite for the provision of a health 

17 care item or service to an individual, a physician, 

18 practitioner (as described in section 1842(b)(18)(C) 

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

20 1395u(b)(18)(C))), or other individual—

21 (A) charges a membership fee or another 

22 incidental fee to an individual desiring to re23 ceive the health care item or service from such 

24 physician, practitioner, or other individual; or 
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1 (B) requires the individual desiring to re2 ceive the health care item or service from such 

3 physician, practitioner, or other individual to 

4 purchase an item or service. 

5 (b) REPORT.—Not later than the date that is 12 

6 months after the date of enactment of this Act, the Comp7 troller General of the United States shall submit to Con8 gress a report on the study conducted under subsection 

9 (a)(1) together with such recommendations for legislative 

10 or administrative action as the Comptroller General deter11 mines to be appropriate. 

12 SEC. 448. COVERAGE OF MARRIAGE AND FAMILY THERA13 PIST SERVICES AND MENTAL HEALTH COUN14 SELOR SERVICES UNDER PART B OF THE 

15 MEDICARE PROGRAM. 

16 (a) COVERAGE OF SERVICES.—

17 (1) IN GENERAL.—Section 1861(s)(2) (42 

18 U.S.C. 1395x(s)(2)) is amended—

19 (A) in subparagraph (U), by striking 

20 ‘‘and’’ after the semicolon at the end; 

21 (B) in subparagraph (V)(iii), by inserting 

22 ‘‘and’’ after the semicolon at the end; and 

23 (C) by adding at the end the following new 

24 subparagraph: 
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1 ‘‘(W) marriage and family therapist services (as 

2 defined in subsection (ww)(1)) and mental health 

3 counselor services (as defined in subsection 

4 (ww)(3));’’. 

5 (2) DEFINITIONS.—Section 1861 (42 U.S.C. 

6 1395x) is amended by adding at the end the fol7 lowing new subsection: 

8 ‘‘Marriage and Family Therapist Services; Marriage and 

9 Family Therapist; Mental Health Counselor Serv10 ices; Mental Health Counselor 

11 ‘‘(ww)(1) The term ‘marriage and family therapist 

12 services’ means services performed by a marriage and 

13 family therapist (as defined in paragraph (2)) for the diag14 nosis and treatment of mental illnesses, which the mar15 riage and family therapist is legally authorized to perform 

16 under State law (or the State regulatory mechanism pro17 vided by State law) of the State in which such services 

18 are performed, as would otherwise be covered if furnished 

19 by a physician or as an incident to a physician’s profes20 sional service, but only if no facility or other provider 

21 charges or is paid any amounts with respect to the fur22 nishing of such services. 

23 ‘‘(2) The term ‘marriage and family therapist’ means 

24 an individual who—
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1 ‘‘(A) possesses a master’s or doctoral degree 

2 which qualifies for licensure or certification as a 

3 marriage and family therapist pursuant to State 

4 law; 

5 ‘‘(B) after obtaining such degree has performed 

6 at least 2 years of clinical supervised experience in 

7 marriage and family therapy; and 

8 ‘‘(C) in the case of an individual performing 

9 services in a State that provides for licensure or cer10 tification of marriage and family therapists, is li11 censed or certified as a marriage and family thera12 pist in such State. 

13 ‘‘(3) The term ‘mental health counselor services’ 

14 means services performed by a mental health counselor (as 

15 defined in paragraph (4)) for the diagnosis and treatment 

16 of mental illnesses which the mental health counselor is 

17 legally authorized to perform under State law (or the 

18 State regulatory mechanism provided by the State law) of 

19 the State in which such services are performed, as would 

20 otherwise be covered if furnished by a physician or as inci21 dent to a physician’s professional service, but only if no 

22 facility or other provider charges or is paid any amounts 

23 with respect to the furnishing of such services. 

24 ‘‘(4) The term ‘mental health counselor’ means an 

25 individual who—
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1 ‘‘(A) possesses a master’s or doctor’s degree in 

2 mental health counseling or a related field; 

3 ‘‘(B) after obtaining such a degree has per4 formed at least 2 years of supervised mental health 

5 counselor practice; and 

6 ‘‘(C) in the case of an individual performing 

7 services in a State that provides for licensure or cer8 tification of mental health counselors or professional 

9 counselors, is licensed or certified as a mental health 

10 counselor or professional counselor in such State.’’. 

11 (3) PROVISION FOR PAYMENT UNDER PART

12 B.—Section 1832(a)(2)(B) (42 U.S.C. 

13 1395k(a)(2)(B)) is amended by adding at the end 

14 the following new clause: 

15 ‘‘(v) marriage and family therapist 

16 services and mental health counselor serv17 ices;’’. 

18 (4) AMOUNT OF PAYMENT.—Section 1833(a)(1) 

19 (42 U.S.C. 1395l(a)(1)) is amended—

20 (A) by striking ‘‘and (U)’’ and inserting 

21 ‘‘(U)’’; and 

22 (B) by inserting before the semicolon at 

23 the end the following: ‘‘, and (V) with respect 

24 to marriage and family therapist services and 

25 mental health counselor services under section 
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1 1861(s)(2)(W), the amounts paid shall be 80 

2 percent of the lesser of the actual charge for 

3 the services or 75 percent of the amount deter4 mined for payment of a psychologist under sub5 paragraph (L)’’. 

6 (5) EXCLUSION OF MARRIAGE AND FAMILY

7 THERAPIST SERVICES AND MENTAL HEALTH COUN8 SELOR SERVICES FROM SKILLED NURSING FACILITY

9 PROSPECTIVE PAYMENT SYSTEM.—Section 

10 1888(e)(2)(A)(ii) (42 U.S.C. 1395yy(e)(2)(A)(ii)), as 

11 amended in section 301(a), is amended by inserting 

12 ‘‘marriage and family therapist services (as defined 

13 in subsection (ww)(1)), mental health counselor serv14 ices (as defined in section 1861(ww)(3)),’’ after 

15 ‘‘qualified psychologist services,’’. 

16 (6) INCLUSION OF MARRIAGE AND FAMILY

17 THERAPISTS AND MENTAL HEALTH COUNSELORS AS

18 PRACTITIONERS FOR ASSIGNMENT OF CLAIMS.—Sec19 tion 1842(b)(18)(C) (42 U.S.C. 1395u(b)(18)(C)) is 

20 amended by adding at the end the following new 

21 clauses: 

22 ‘‘(vii) A marriage and family therapist (as de23 fined in section 1861(ww)(2)). 

24 ‘‘(viii) A mental health counselor (as defined in 

25 section 1861(ww)(4)).’’. 
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1 (b) COVERAGE OF CERTAIN MENTAL HEALTH SERV2 ICES PROVIDED IN CERTAIN SETTINGS.—

3 (1) RURAL HEALTH CLINICS AND FEDERALLY

4 QUALIFIED HEALTH CENTERS.—Section 

5 1861(aa)(1)(B) (42 U.S.C. 1395x(aa)(1)(B)) is 

6 amended by striking ‘‘or by a clinical social worker 

7 (as defined in subsection (hh)(1)),’’ and inserting ‘‘, 

8 by a clinical social worker (as defined in subsection 

9 (hh)(1)), by a marriage and family therapist (as de10 fined in subsection (ww)(2)), or by a mental health 

11 counselor (as defined in subsection (ww)(4)),’’. 

12 (2) HOSPICE PROGRAMS.—Section 

13 1861(dd)(2)(B)(i)(III) (42 U.S.C. 

14 1395x(dd)(2)(B)(i)(III)) is amended by inserting ‘‘or 

15 a marriage and family therapist (as defined in sub16 section (ww)(2))’’ after ‘‘social worker’’. 

17 (c) AUTHORIZATION OF MARRIAGE AND FAMILY

18 THERAPISTS TO DEVELOP DISCHARGE PLANS FOR POST19 HOSPITAL SERVICES.—Section 1861(ee)(2)(G) (42 

20 U.S.C. 1395x(ee)(2)(G)) is amended by inserting ‘‘mar21 riage and family therapist (as defined in subsection 

22 (ww)(2)),’’ after ‘‘social worker,’’. 

23 (d) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply with respect to services furnished 

25 on or after January 1, 2004. 
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1 SEC. 449. MEDICARE DEMONSTRATION PROJECT FOR DI2 RECT ACCESS TO PHYSICAL THERAPY SERV3 ICES. 

4 (a) IN GENERAL.—The Secretary shall conduct a 

5 demonstration project under this section (in this section 

6 referred to as the ‘‘project’’) to demonstrate the impact 

7 of allowing medicare fee-for-service beneficiaries direct ac8 cess to outpatient physical therapy services and physical 

9 therapy services furnished as comprehensive rehabilitation 

10 facility services on—

11 (1) costs under the medicare program under 

12 title XVIII of the Social Security Act; and 

13 (2) the satisfaction of beneficiaries receiving 

14 such services. 

15 (b) DEADLINE FOR ESTABLISHMENT; DURATION; 

16 SITES.—

17 (1) DEADLINE.—The Secretary shall establish 

18 the project not later than 1 year after the date of 

19 enactment of this Act. 

20 (2) DURATION; SITES.—The project shall—

21 (A) be conducted for a period of 3 years; 

22 (B) include sites in at least 5 States; and 

23 (C) to the extent feasible, be conducted on 

24 a statewide basis in each State included under 

25 subparagraph (B). 
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1 (3) EARLY TERMINATION.—Notwithstanding 

2 paragraph (2)(A), the Secretary may terminate the 

3 operation of the project at a site before the end of 

4 the 3-year period specified in such paragraph if the 

5 Secretary determines, based on actual data, that the 

6 total amount expended for all services under this 

7 title for individuals at such site for a 12-month pe8 riod are greater than the total amount that would 

9 have been expended for such services for such indi10 viduals for such period but for the operation of the 

11 project at such site. 

12 (c) WAIVER OF MEDICARE REQUIREMENTS.—The 

13 Secretary shall waive compliance with such requirements 

14 of the medicare program under title XVIII of the Social 

15 Security Act to the extent and for the period the Secretary 

16 finds necessary to conduct the demonstration project. 

17 (d) EVALUATIONS AND REPORTS.—

18 (1) EVALUATIONS.—

19 (A) IN GENERAL.—The Secretary shall 

20 conduct interim and final evaluations of the 

21 project. 

22 (B) FOCUS.—The evaluations conducted 

23 under paragraph (1) shall—

24 (i) focus on the impact of the project 

25 on program costs under title XVIII of the 
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1 Social Security Act and patient satisfaction 

2 with health care items and services for 

3 which payment is made under such title; 

4 and 

5 (ii) include comparisons, with respect 

6 to episodes of care involving direct access 

7 to physical therapy services and episodes of 

8 care involving a physician referral for such 

9 services, of—

10 (I) the average number of claims 

11 paid per episode for outpatient phys12 ical therapy services and physical 

13 therapy services furnished as com14 prehensive outpatient rehabilitation 

15 facility services; 

16 (II) the average number of physi17 cian office visits per episode; and 

18 (III) the average expenditures 

19 under such title per episode. 

20 (2) INTERIM AND FINAL REPORTS.—The Sec21 retary shall submit to the Committee on Finance of 

22 the Senate and the Committees on Ways and Means 

23 and Energy and Commerce of the House of Rep24 resentatives reports on the evaluations conducted 

25 under paragraph (1) by—
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1 (A) in the case of the report on the interim 

2 evaluation, not later than the end of the second 

3 year the project has been in operation; and 

4 (B) in the case of the report on the final 

5 evaluation, not later than 180 days after the 

6 closing date of the project. 

7 (3) FUNDING FOR EVALUATION.—There are au8 thorized to be appropriated such sums as may be 

9 necessary to provide for the evaluations and reports 

10 required by this subsection. 

11 (e) DEFINITIONS.—In this section: 

12 (1) COMPREHENSIVE OUTPATIENT REHABILITA13 TION SERVICES.—Subject to paragraph (2), the term 

14 ‘‘comprehensive outpatient rehabilitation services’’ 

15 has the meaning given to such term in section 

16 1861(cc) of the Social Security Act (42 U.S.C. 

17 1395x(cc)). 

18 (2) DIRECT ACCESS.—The term ‘‘direct access’’ 

19 means, with respect to outpatient physical therapy 

20 services and physical therapy services furnished as 

21 comprehensive outpatient rehabilitation facility serv22 ices, coverage of and payment for such services in 

23 accordance with the provisions of title XVIII of the 

24 Social Security Act, except that sections 1835(a)(2), 

25 1861(p), and 1861(cc) of such Act (42 U.S.C. 
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1 1395n(a)(2), 1395x(p), and 1395x(cc), respectively) 

2 shall be applied—

3 (A) without regard to any requirement 

4 that—

5 (i) an individual be under the care of 

6 (or referred by) a physician; or 

7 (ii) services be provided under the su8 pervision of a physician; and 

9 (B) by allowing a physician or a qualified 

10 physical therapist to satisfy any requirement 

11 for—

12 (i) certification and recertification; 

13 and 

14 (ii) establishment and periodic review 

15 of a plan of care. 

16 (3) FEE-FOR-SERVICE MEDICARE BENE17 FICIARY.—The term ‘‘fee-for-service medicare bene18 ficiary’’ means an individual who—

19 (A) is enrolled under part B of title XVIII 

20 of the Social Security Act (42 U.S.C. 1395j et 

21 seq.); and 

22 (B) is not enrolled in—

23 (i) a Medicare+Choice plan under 

24 part C of such title (42 U.S.C. 1395w–21 

25 et seq.); 
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1 (ii) a plan offered by an eligible orga2 nization under section 1876 of such Act 

3 (42 U.S.C. 1395mm); 

4 (iii) a program of all-inclusive care for 

5 the elderly (PACE) under section 1894 of 

6 such Act (42 U.S.C. 1395eee); or 

7 (iv) a social health maintenance orga8 nization (SHMO) demonstration project 

9 established under section 4018(b) of the 

10 Omnibus Budget Reconciliation Act of 

11 1987 (Public Law 100–203). 

12 (4) OUTPATIENT PHYSICAL THERAPY SERV13 ICES.—Subject to paragraph (2), the term ‘‘out14 patient physical therapy services’’ has the meaning 

15 given to such term in section 1861(p) of the Social 

16 Security Act (42 U.S.C. 1395x(p)), except that such 

17 term shall not include the speech-language pathology 

18 services described in the fourth sentence of such sec19 tion. 

20 (5) PHYSICIAN.—The term ‘‘physician’’ has the 

21 meaning given to such term in section 1861(r)(1) of 

22 such Act (42 U.S.C. 1395x(r)(1)). 

23 (6) QUALIFIED PHYSICAL THERAPIST.—The 

24 term ‘‘qualified physical therapist’’ has the meaning 

25 given to such term for purposes of section 1861(p) 
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1 of such Act (42 U.S.C. 1395x(p)), as in effect on 

2 the date of enactment of this Act. 

3 SEC. 450. DEMONSTRATION PROJECT TO CLARIFY THE 

4 DEFINITION OF HOMEBOUND. 

5 (a) DEMONSTRATION PROJECT.—Not later than 180 

6 days after the date of enactment of this Act, the Secretary 

7 shall conduct a two-year demonstration project under part 

8 B of title XVIII of the Social Security Act under which 

9 medicare beneficiaries with chronic conditions described in 

10 subsection (b) are deemed to be homebound for purposes 

11 of receiving home health services under the medicare pro12 gram. 

13 (b) MEDICARE BENEFICIARY DESCRIBED.—For pur14 poses of subsection (a), a medicare beneficiary is eligible 

15 to be deemed to be homebound, without regard to the pur16 pose, frequency, or duration of absences from the home, 

17 if the beneficiary—

18 (1) has been certified by one physician as an in19 dividual who has a permanent and severe condition 

20 that will not improve; 

21 (2) requires the individual to receive assistance 

22 from another individual with at least 3 out of the 5 

23 activities of daily living for the rest of the individ24 ual’s life; 
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1 (3) requires 1 or more home health services to 

2 achieve a functional condition that gives the indi3 vidual the ability to leave home; and 

4 (4) requires technological assistance or the as5 sistance of another person to leave the home. 

6 (c) DEMONSTRATION PROJECT SITES.—The dem7 onstration project established under this section shall be 

8 conducted in 3 States selected by the Secretary to rep9 resent the Northeast, Midwest, and Western regions of the 

10 United States. 

11 (d) LIMITATION ON NUMBER OF PARTICIPANTS.—

12 The aggregate number of such beneficiaries that may par13 ticipate in the project may not exceed 15,000. 

14 (e) DATA.—The Secretary shall collect such data on 

15 the demonstration project with respect to the provision of 

16 home health services to medicare beneficiaries that relates 

17 to quality of care, patient outcomes, and additional costs, 

18 if any, to the medicare program. 

19 (f) REPORT TO CONGRESS.—Not later than 1 year 

20 after the date of the completion of the demonstration 

21 project under this section, the Secretary shall submit to 

22 Congress a report on the project using the data collected 

23 under subsection (e) and shall include—
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1 (1) an examination of whether the provision of 

2 home health services to medicare beneficiaries under 

3 the project—

4 (A) adversely effects the provision of home 

5 health services under the medicare program; or 

6 (B) directly causes an unreasonable in7 crease of expenditures under the medicare pro8 gram for the provision of such services that is 

9 directly attributable to such clarification; 

10 (2) the specific data evidencing the amount of 

11 any increase in expenditures that is a directly attrib12 utable to the demonstration project (expressed both 

13 in absolute dollar terms and as a percentage) above 

14 expenditures that would otherwise have been in15 curred for home health services under the medicare 

16 program; and 

17 (3) specific recommendations to exempt perma18 nently and severely disabled homebound beneficiaries 

19 from restrictions on the length, frequency and pur20 pose of their absences from the home to qualify for 

21 home health services without incurring additional 

22 unreasonable costs to the medicare program. 

23 (g) WAIVER AUTHORITY.—The Secretary shall waive 

24 compliance with the requirements of title XVIII of the So25 cial Security Act (42 U.S.C. 1395 et seq.) to such extent 
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1 and for such period as the Secretary determines is nec2 essary to conduct demonstration projects. 

3 (h) CONSTRUCTION.—Nothing in this section shall be 

4 construed as waiving any applicable civil monetary pen5 alty, criminal penalty, or other remedy available to the 

6 Secretary under title XI or title XVIII of the Social Secu7 rity Act for acts prohibited under such titles, including 

8 penalties for false certifications for purposes of receipt of 

9 items or services under the medicare program. 

10 (i) AUTHORIZATION OF APPROPRIATIONS.—Pay11 ments for the costs of carrying out the demonstration 

12 project under this section shall be made from the Federal 

13 Supplementary Insurance Trust Fund under section 1841 

14 of such Act (42 U.S.C. 1395t). 

15 (j) DEFINITIONS.—In this section: 

16 (1) MEDICARE BENEFICIARY.—The term 

17 ‘‘medicare beneficiary’’ means an individual who is 

18 enrolled under part B of title XVIII of the Social 

19 Security Act. 

20 (2) HOME HEALTH SERVICES.—The term 

21 ‘‘home health services’’ has the meaning given such 

22 term in section 1861(m) of the Social Security Act 

23 (42 U.S.C. 1395x(m)). 
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1 (3) ACTIVITIES OF DAILY LIVING DEFINED.—

2 The term ‘‘activities of daily living’’ means eating, 

3 toileting, transferring, bathing, and dressing. 

4 (4) SECRETARY.—The term ‘‘Secretary’’ means 

5 the Secretary of Health and Human Services. 

6 SEC. 450A. DEMONSTRATION PROJECT FOR EXCLUSION OF 

7 BRACHYTHERAPY DEVICES FROM PROSPEC8 TIVE PAYMENT SYSTEM FOR OUTPATIENT 

9 HOSPITAL SERVICES. 

10 (a) DEMONSTRATION PROJECT.—The Secretary shall 

11 conduct a demonstration project under part B of title 

12 XVIII of the Social Security Act under which 

13 brachytherapy devices shall be excluded from the prospec14 tive payment system for outpatient hospital services under 

15 the medicare program and, notwithstanding section 

16 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)), 

17 the amount of payment for a device of brachytherapy fur18 nished under the demonstration project shall be equal to 

19 the hospital’s charges for each device furnished, adjusted 

20 to cost. 

21 (b) SPECIFICATION OF GROUPS FOR

22 BRACHYTHERAPY DEVICES.—The Secretary shall create 

23 additional groups of covered OPD services that classify de24 vices of brachytherapy furnished under the demonstration 

25 project separately from the other services (or group of 
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1 services) paid for under section 1833(t) of the Social Secu2 rity Act (42 U.S.C. 1395l(t)) in a manner reflecting the 

3 number, isotope, and radioactive intensity of such devices 

4 furnished, including separate groups for palladium–103 

5 and iodine–125 devices. 

6 (c) DURATION.—The Secretary shall conduct the 

7 demonstration project under this section for the 3-year pe8 riod beginning on the date that is 90 days after the date 

9 of enactment of this Act. 

10 (d) REPORT.—Not later than January 1, 2007, the 

11 Secretary shall submit to Congress a report on the dem12 onstration project conducted under this section. The re13 port shall include an evaluation of patient outcomes under 

14 the demonstration project, as well as an analysis of the 

15 cost effectiveness of the demonstration project. 

16 (e) WAIVER AUTHORITY.—The Secretary shall waive 

17 compliance with the requirements of title XVIII of the So18 cial Security Act to such extent and for such period as 

19 the Secretary determines is necessary to conduct the dem20 onstration project under this section. 

21 (f) FUNDING.—

22 (1) IN GENERAL.—The Secretary shall provide 

23 for the transfer from the Federal Supplementary In24 surance Trust Fund established under section 1841 

25 of the Social Security Act (42 U.S.C. 1395t) of such 
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1 funds as are necessary for the costs of carrying out 

2 the demonstration project under this section. 

3 (2) BUDGET NEUTRALITY.—In conducting the 

4 demonstration project under this section, the Sec5 retary shall ensure that the aggregate payments 

6 made by the Secretary do not exceed the amount 

7 which the Secretary would have paid if the dem8 onstration project under this section was not imple9 mented. 

10 SEC. 450B. REIMBURSEMENT FOR TOTAL BODY ORTHOTIC 

11 MANAGEMENT FOR CERTAIN NURSING HOME 

12 PATIENTS. 

13 (a) IN GENERAL.—Not later than 60 days after the 

14 date of the enactment of this Act, the Secretary shall issue 

15 product codes that qualified practioners and suppliers may 

16 use to receive reimbursement under section 1834(h) of the 

17 Social Security Act (42 U.S.C. 1395m(h)) for qualified 

18 total body orthotic management devices used for the treat19 ment of nonambulatory individuals with severe musculo20 skeletal conditions who are in the full-time care of skilled 

21 nursing facilities (as defined in section 1861(j) of such 

22 Act (42 U.S.C. 1395x(j))). In issuing such codes, the Sec23 retary shall take all steps necessary to prevent fraud and 

24 abuse. 
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1 (b) QUALIFIED TOTAL BODY ORTHOTIC MANAGE2 MENT DEVICE.—For purposes of this section, the term 

3 ‘‘qualified total body orthotic management device’’ means 

4 a medically-prescribed device which—

5 (1) consists of custom fitted individual braces 

6 with adjustable points at the hips, knee, ankle, 

7 elbow, and wrist, but only if—

8 (A) the individually adjustable braces are 

9 attached to a frame which is an integral compo10 nent of the device and cannot function or be 

11 used apart from the frame; and 

12 (B) the frame is designed such that it 

13 serves no purpose without the braces; and 

14 (2) is designed to—

15 (A) improve function; 

16 (B) retard progression of musculoskeletal 

17 deformity; or 

18 (C) restrict, eliminate, or assist in the 

19 functioning of lower and upper extremities and 

20 pelvic, spinal, and cervical regions of the body 

21 affected by injury, weakness, or deformity, 

22 of an individual for whom stabilization of affected 

23 areas of the body, or relief of pressure points, is re24 quired for medical reasons. 
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1 SEC. 450C. AUTHORIZATION OF REIMBURSEMENT FOR ALL 

2 MEDICARE PART B SERVICES FURNISHED BY 

3 CERTAIN INDIAN HOSPITALS AND CLINICS. 

4 (a) IN GENERAL.—Section 1880(e) (42 U.S.C. 

5 1395qq(e)) is amended—

6 (1) in paragraph (1)(A), by striking ‘‘for serv7 ices described in paragraph (2)’’ and inserting ‘‘for 

8 all items and services for which payment may be 

9 made under such part’’; 

10 (2) by striking paragraph (2); and 

11 (3) by redesignating paragraph (3) as para12 graph (2). 

13 (b) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to items and services furnished on 

15 or after October 1, 2004. 

16 SEC. 450D. COVERAGE OF CARDIOVASCULAR SCREENING 

17 TESTS. 

18 (a) COVERAGE.—Section 1861(s)(2) of the Social Se19 curity Act (42 U.S.C. 1395x(s)(2)) is amended—

20 (1) in subparagraph (U), by striking ‘‘and’’ at 

21 the end; 

22 (2) in subparagraph (V)(iii), by inserting ‘‘and’’ 

23 at the end; and 

24 (3) by adding at the end the following new sub25 paragraph: 
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1 ‘‘(W) cardiovascular screening tests (as de2 fined in subsection (ww)(1));’’. 

3 (b) SERVICES DESCRIBED.—Section 1861 of the So4 cial Security Act (42 U.S.C. 1395x) is amended by adding 

5 at the end the following new subsection: 

6 ‘‘Cardiovascular Screening Tests 

7 ‘‘(ww)(1) The term ‘cardiovascular screening tests’ 

8 means the following diagnostic tests for the early detection 

9 of cardiovascular disease: 

10 ‘‘(A) Tests for the determination of cholesterol 

11 levels. 

12 ‘‘(B) Tests for the determination of lipid levels 

13 of the blood. 

14 ‘‘(C) Such other tests for cardiovascular disease 

15 as the Secretary may approve. 

16 ‘‘(2)(A) Subject to subparagraph (B), the Secretary 

17 shall establish standards, in consultation with appropriate 

18 organizations, regarding the frequency and type of cardio19 vascular screening tests. 

20 ‘‘(B) With respect to the frequency of cardiovascular 

21 screening tests approved by the Secretary under subpara22 graph (A), in no case may the frequency of such tests be 

23 more often than once every 2 years.’’. 

24 (c) FREQUENCY.—Section 1862(a)(1) of the Social 

25 Security Act (42 U.S.C. 1395y(a)(1)) is amended—
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1 (1) by striking ‘‘and’’ at the end of subpara2 graph (H); 

3 (2) by striking the semicolon at the end of sub4 paragraph (I) and inserting ‘‘, and’’; and 

5 (3) by adding at the end the following new sub6 paragraph: 

7 ‘‘(J) in the case of a cardiovascular screening 

8 test (as defined in section 1861(ww)(1)), which is 

9 performed more frequently than is covered under 

10 section 1861(ww)(2).’’. 

11 (d) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to tests furnished on or after Janu13 ary 1, 2005. 

14 SEC. 450E. MEDICARE COVERAGE OF SELF-INJECTED 

15 BIOLOGICALS. 

16 (a) COVERAGE.—

17 (1) IN GENERAL.—Section 1861(s)(2) (42 

18 U.S.C. 1395x(s)(2)) is amended—

19 (A) in subparagraph (U), by striking 

20 ‘‘and’’ at the end; 

21 (B) in subparagraph (V), by inserting 

22 ‘‘and’’ at the end; and 

23 (C) by adding at the end the following new 

24 subparagraph: 
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1 ‘‘(W)(i) a self-injected biological (which is ap2 proved by the Food and Drug Administration) that 

3 is prescribed as a complete replacement for a drug 

4 or biological (including the same biological for which 

5 payment is made under this title when it is fur6 nished incident to a physicians’ service) that would 

7 otherwise be described in subparagraph (A) or (B) 

8 and that is furnished during 2004 or 2005; and 

9 ‘‘(ii) a self-injected drug that is used to treat 

10 multiple sclerosis;’’. 

11 (2) CONFORMING AMENDMENT.—Subpara12 graphs (A) and (B) of section 1861(s)(2) of the So13 cial Security Act (42 U.S.C. 1395x(s)(2)) are each 

14 amended by inserting ‘‘, except for any drug or bio15 logical described in subparagraph (W),’’ after 

16 ‘‘which’’. 

17 (b) EFFECTIVE DATE.—The amendments made by 

18 subsection (a) shall apply to drugs and biologicals fur19 nished on or after January 1, 2004 and before January 

20 1, 2006. 

21 SEC. 450F. EXTENSION OF MEDICARE SECONDARY PAYER 

22 RULES FOR INDIVIDUALS WITH END-STAGE 

23 RENAL DISEASE. 

24 Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is 

25 amended—
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1 (1) in the last sentence, by inserting ‘‘, and be2 fore January 1, 2004’’ after ‘‘prior to such date)’’; 

3 and 

4 (2) by adding at the end the following new sen5 tence: ‘‘Effective for items and services furnished on 

6 or after January 1, 2004 (with respect to periods 

7 beginning on or after June 1, 2002), clauses (i) and 

8 (ii) shall be applied by substituting ‘36-month’ for 

9 ‘12-month’ each place it appears in the first sen10 tence. 

11 SEC. 450G. REQUIRING THE INTERNAL REVENUE SERVICE 

12 TO DEPOSIT INSTALLMENT AGREEMENT AND 

13 OTHER FEES IN THE TREASURY AS MIS14 CELLANEOUS RECEIPTS. 

15 Notwithstanding any other provision of law, the Sec16 retary of the Treasury is required to deposit in the Treas17 ury as miscellaneous receipts any fee receipts, including 

18 fees from installment agreements and restructured install19 ment agreements, collected under the authority provided 

20 by Section 3 of the Administrative Provisions of the Inter21 nal Revenue Service of Public Law 103–329, the Treas22 ury, Postal Service and General Government Appropria23 tions Act, 1995. Fees collected under this section shall be 

24 available for use by the Internal Revenue Service only to 
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1 the extent that such authority is provided in advance in 

2 an appropriations Act. 

3 SEC. 450H INCREASING TYPES OF ORIGINATING TELE4 HEALTH SITES AND FACILITATING THE PRO5 VISION OF TELEHEALTH SERVICES ACROSS 

6 STATE LINES. 

7 (a) INCREASING TYPES OF ORIGINATING SITES.—

8 Section 1834(m)(4)(C)(ii) (42 U.S.C. 

9 1395m(m)(4)(C)(ii)) is amended by adding at the end the 

10 following new subclauses: 

11 ‘‘(VI) A skilled nursing facility 

12 (as defined in section 1819(a)). 

13 ‘‘(VII) An assisted-living facility 

14 (as defined by the Secretary). 

15 ‘‘(VIII) A board-and-care home 

16 (as defined by the Secretary). 

17 ‘‘(IX) A county of community 

18 health clinic (as defined by the Sec19 retary). 

20 ‘‘(X) A community mental health 

21 center (as described in section 

22 1861(ff)(2)(B)). 

23 ‘‘(XI) A long-term care facility 

24 (as defined by the Secretary). 
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1 ‘‘(XII) A facility operated by the 

2 Indian Health Service or by an Indian 

3 tribe, tribal organization, or an urban 

4 Indian organization (as such terms 

5 are defined in section 4 of the Indian 

6 Health Care Improvement Act (25 

7 U.S.C. 1603)) directly, or under con8 tract or other arrangement.’’. 

9 (b) FACILITATING THE PROVISION OF TELEHEALTH

10 SERVICES ACROSS STATE LINES.—

11 (1) IN GENERAL.—For purposes of expediting 

12 the provision of telehealth services for which pay13 ment is made under the medicare program under 

14 section 1834(m) of the Social Security Act (42 

15 U.S.C. 1395m(m)), across State lines, the Secretary 

16 shall, in consultation with representatives of States, 

17 physicians, health care practitioners, and patient ad18 vocates, encourage and facilitate the adoption of 

19 State provisions allowing for multistate practitioner 

20 licensure across State lines. 

21 (2) DEFINITIONS.—In this subsection: 

22 (A) TELEHEALTH SERVICE.—The term 

23 ‘‘telehealth service’’ has the meaning given that 

24 term in subparagraph (F)(i) of section 
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1 1834(m)(4) of the Social Security Act (42 

2 U.S.C. 1395m(m)(4)). 

3 (B) PHYSICIAN, PRACTITIONER.—The 

4 terms ‘‘physician’’ and ‘‘practitioner’’ have the 

5 meaning given those terms in subparagraphs 

6 (D) and (E), respectively, of such section. 

7 (C) MEDICARE PROGRAM.—The term 

8 ‘‘medicare program’’ means the program of 

9 health insurance administered by the Secretary 

10 under title XVIII of the Social Security Act (42 

11 U.S.C. 1395 et seq.). 

12 SEC. 450I. DEMONSTRATION PROJECT FOR COVERAGE OF 

13 SURGICAL FIRST ASSISTING SERVICES OF 

14 CERTIFIED REGISTERED NURSE FIRST AS15 SISTANTS. 

16 (a) DEMONSTRATION PROJECT.—The Secretary shall 

17 conduct a demonstration project under part B of title 

18 XVIII of the Social Security Act under which payment is 

19 made for surgical first assisting services furnished by a 

20 certified registered nurse first assistant to medicare bene21 ficiaries. 

22 (b) DEFINITIONS.—In this section: 

23 (1) SURGICAL FIRST ASSISTING SERVICES.—

24 The term ‘‘surgical first assisting services’’ means 

25 services consisting of first assisting a physician with 
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1 surgery and related preoperative, intraoperative, and 

2 postoperative care (as determined by the Secretary) 

3 furnished by a certified registered nurse first assist4 ant (as defined in paragraph (2)) which the certified 

5 registered nurse first assistant is legally authorized 

6 to perform by the State in which the services are 

7 performed. 

8 (2) CERTIFIED REGISTERED NURSE FIRST AS9 SISTANT.—The term ‘‘certified registered nurse first 

10 assistant’’ means an individual who—

11 (A) is a registered nurse and is licensed to 

12 practice nursing in the State in which the surgical 

13 first assisting services are performed; 

14 (B) has completed a minimum of 2,000 hours 

15 of first assisting a physician with surgery and re16 lated preoperative, intraoperative, and postoperative 

17 care; and 

18 (C) is certified as a registered nurse first assist19 ant by an organization recognized by the Secretary. 

20 (c) PAYMENT RATES.—Payment under the dem21 onstration project for surgical first assisting services fur22 nished by a certified registered nurse first assistant shall 

23 be made at the rate of 80 percent of the lesser of the ac24 tual charge for the services or 85 percent of the amount 

25 determined under the fee schedule established under sec-
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1 tion 1848(b) of the Social Security Act (42 U.S.C. 1395w–

2 4(b)) for the same services if furnished by a physician. 

3 (d) DEMONSTRATION PROJECT SITES.—The project 

4 established under this section shall be conducted in 5 

5 States selected by the Secretary. 

6 (e) DURATION.—The Secretary shall conduct the 

7 demonstration project for the 3-year period beginning on 

8 the date that is 90 days after the date of the enactment 

9 of this Act. 

10 (f) REPORT.—Not later than January 1, 2007, the 

11 Secretary shall submit to Congress a report on the project. 

12 The report shall include an evaluation of patient outcomes 

13 under the project, as well as an analysis of the cost effec14 tiveness of the project. 

15 (g) FUNDING.—

16 (1) IN GENERAL.—The Secretary shall provide 

17 for the transfer from the Federal Supplementary In18 surance Trust Fund established under section 1841 

19 of the Social Security Act (42 U.S.C. 1395t) of such 

20 funds as are necessary for the costs of carrying out 

21 the project under this section. 

22 (2) BUDGET NEUTRALITY.—In conducting the 

23 project under this section, the Secretary shall ensure 

24 that the aggregate payments made by the Secretary 

25 do not exceed the amount which the Secretary would 
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1 have paid if the project under this section was not 

2 implemented. 

3 (i) WAIVER AUTHORITY.—The Secretary shall waive 

4 compliance with the requirements of title XVIII of the So5 cial Security Act to such extent and for such period as 

6 the Secretary determines is necessary to conduct dem7 onstration projects. 

8 SEC. 450J. EQUITABLE TREATMENT FOR CHILDREN’S HOS9 PITALS. 

10 (a) IN GENERAL.—Section 1833(t)(7)(D)(ii) (42 

11 U.S.C. 1395l(t)(7)(D)(ii)) is amended to read as follows: 

12 ‘‘(ii) PERMANENT TREATMENT FOR

13 CANCER HOSPITALS AND CHILDREN’S HOS14 PITALS.—

15 ‘‘(I) IN GENERAL.—Subject to 

16 subclause (II), in the case of a hos17 pital described in clause (iii) or (v) of 

18 section 1886(d)(1)(B), for covered 

19 OPD services for which the PPS 

20 amount is less than the pre-BBA 

21 amount, the amount of payment 

22 under this subsection shall be in23 creased by the amount of such dif24 ference. 
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1 ‘‘(II) SPECIAL RULE FOR CER2 TAIN CHILDREN’S HOSPITALS.—In the 

3 case of a hospital described in section 

4 1886(d)(1)(B)(iii) that is located in a 

5 State with a reimbursement system 

6 under section 1814(b)(3), but that is 

7 not reimbursed under such system, for 

8 covered OPD services furnished on or 

9 after October 1, 2003, and for which 

10 the PPS amount is less than the 

11 greater of the pre-BBA amount or the 

12 reasonable operating and capital costs 

13 without reductions of the hospital in 

14 providing such services, the amount of 

15 payment under this subsection shall 

16 be increased by the amount of such 

17 difference.’’. 

18 SEC. 450K. TREATMENT OF PHYSICIANS’ SERVICES FUR19 NISHED IN ALASKA. 

20 Section 1848(b) (42 U.S.C. 1395w–4(b)) is amend21 ed—

22 (1) in paragraph (1), in the matter preceding 

23 subparagraph (A), by striking ‘‘paragraph (2)’’ and 

24 inserting ‘‘paragraphs (2) and (4)’’; and 
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1 (2) by adding at the end the following new 

2 paragraph: 

3 ‘‘(4) TREATMENT OF PHYSICIANS’ SERVICES

4 FURNISHED IN ALASKA.—

5 ‘‘(A) IN GENERAL.—With respect to physi6 cians’ services furnished in Alaska on or after 

7 January 1, 2004, and before January 1, 2006, 

8 the fee schedule for such services shall be deter9 mined as follows: 

10 ‘‘(i) Subject to clause (ii), the pay11 ment amount for a service furnished in a 

12 year shall be an amount equal to—

13 ‘‘(I) in the case of services fur14 nished in calendar year 2004, 90 per15 cent of the VA Alaska fee schedule 

16 amount for the service for fiscal year 

17 2001; and 

18 ‘‘(II) in the case of services fur19 nished in calendar year 2005, the 

20 amount determined under subclause 

21 (I) for 2004, increased by the annual 

22 update determined under subsection 

23 (d) for the year involved. 

24 ‘‘(ii) In the case of a service for which 

25 there was no VA Alaska fee schedule 
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1 amount for fiscal year 2001, the payment 

2 amount shall be an amount equal to the 

3 sum of—

4 ‘‘(I) the amount of payment for 

5 the service that would otherwise apply 

6 under this section; plus 

7 ‘‘(II) an amount equal to the ap8 plicable percent (as described in sub9 paragraph (C)) of the amount de10 scribed in subclause (I). 

11 ‘‘(B) VA ALASKA FEE SCHEDULE

12 AMOUNT.—For purposes of this paragraph, the 

13 term ‘VA Alaska fee schedule amount’ means 

14 the amount that was paid by the Department of 

15 Veterans Affairs in Alaska in fiscal year 2001 

16 for non-Department of Veterans Affairs physi17 cians’ services associated with either outpatient 

18 or inpatient care provided to individuals eligible 

19 for hospital care or medical services under 

20 chapter 17 of title 38, United States Code, at 

21 a non-Department facility (as that term is de22 fined in section 1701(4) of such title 38. 

23 ‘‘(C) APPLICABLE PERCENT.—For pur24 poses of this paragraph, the term ‘applicable 

25 percent’ means the weighted average percentage 
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1 (based on claims under this section) by which 

2 the fiscal year 2001 VA Alaska fee schedule 

3 amount for physicians’ services exceeded the 

4 amount of payment for such services under this 

5 section that applied in Alaska in 2001.’’. 

6 SEC. 450L. DEMONSTRATION PROJECT TO EXAMINE WHAT 

7 WEIGHT LOSS WEIGHT MANAGEMENT SERV8 ICES CAN COST EFFECTIVELY REACH THE 

9 SAME RESULT AS THE NIH DIABETES PRI10 MARY PREVENTION TRIAL STUDY: A 50 PER11 CENT REDUCTION IN THE RISK FOR TYPE 2 

12 DIABETES FOR INDIVIDUALS WHO HAVE IM13 PAIRED GLUCOSE TOLERANCE AND ARE 

14 OBESE. 

15 (a) IN GENERAL.—Inasmuch as the NIH Diabetes 

16 Primary Prevention Trial study proved that the risk of 

17 type 2 diabetes could be cut in half when the Institute 

18 of Medicine definition of successful weight loss (5 percent 

19 weight loss maintained for a year) is achieved by individ20 uals at risk for type 2 diabetes due to obesity and impaired 

21 glucose tolerance, the Secretary shall conduct a dem22 onstration project to examine the cost effectiveness and 

23 health benefits of providing group weight loss manage24 ment services to achieve the same result for beneficiaries 

25 under the medicare program under title XVIII of the So-
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1 cial Security Act who are obese and have impaired glucose 

2 tolerance. 

3 (b) LIMITATION.—The cost of the group weight loss 

4 management services provided under subsection (a) shall 

5 not exceed the cost per recipient per year of the medical 

6 nutritional therapy benefit currently available to medicare 

7 beneficiaries. 

8 (c) SCOPE OF SERVICES.—

9 (1) DURATION.—The project shall be conducted 

10 for a period of 2 fiscal years. 

11 (2) SITES.—The Secretary shall designate the 

12 sites at which to conduct the demonstration program 

13 under this section. In selecting sites under this para14 graph, the Secretary shall give preference to sites lo15 cated in—

16 (A) rural areas; or 

17 (B) areas that have a high concentration 

18 of Native Americans with type 2 diabetes. 

19 (3) FUNDING.—

20 (A) IN GENERAL.—Subject to subpara21 graph (B), the Secretary shall provide for the 

22 transfer from the Federal Supplementary In23 surance Trust Fund established under section 

24 1841 of such Act (42 U.S.C. 1395t) of such 

25 funds as are necessary for the costs of carrying 
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1 out the demonstration program under this sec2 tion. 

3 (B) LIMITATION.—The total amount of the 

4 payments that may be made under this section 

5 shall not exceed $2,500,000 for each fiscal year 

6 in which the project is conducted under para7 graph (1). 

8 (d) COVERAGE AS MEDICARE PART B SERVICES.—

9 (1) IN GENERAL.—Subject to the succeeding 

10 provisions of this subsection, medical nutrition ther11 apy services furnished under the project shall be 

12 considered to be services covered under part B of 

13 title XVIII of the Social Security Act (42 U.S.C. 

14 1395j et seq.). 

15 (2) PAYMENT.—Payment for such services shall 

16 be made at a rate of 80 percent of the lesser of the 

17 actual charge for the services or 85 percent of the 

18 fee schedule amount provided under section 1848 of 

19 the Social Security Act (42 U.S.C. 139w–4) for the 

20 same services if such services were furnished by a 

21 physician. 

22 (3) APPLICATION OF LIMITS OF BILLING.—The 

23 provisions of section 1842(b)(18) of the Social Secu24 rity Act (42 U.S.C. 1395u(b)(18)) shall apply to a 

25 group weight loss management professional fur-
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1 nishing services under the project in the same man2 ner as they to a practitioner described in subpara3 graph (C) of such section furnishing services under 

4 title XVIII of such Act. 

5 (e) REPORTS.—The Secretary shall submit to the 

6 Committee on Ways and Means and the Committee on 

7 Commerce of the House of Representatives and the Com8 mittee on Finance of the Senate interim reports on the 

9 project and a final report on the project not later than 

10 the date that is 6 months after the date on which the 

11 project concludes. The final report shall include an evalua12 tion of the impact of the use of group weight loss manage13 ment services as part of medical nutrition therapy on 

14 medicare beneficiaries and on the medicare program, in15 cluding any impact on reducing costs under the program 

16 and improving the health of beneficiaries. 

17 (f) DEFINITIONS.—For purposes of this section: 

18 (1) The term ‘‘obesity’’ means that an indi19 vidual has a Body Mass Index (BMI) of 30 and 

20 above. 

21 (2) GROUP WEIGHT LOSS MANAGEMENT SERV22 ICES.—The term ‘‘group weight loss management 

23 services’’ means comprehensive services furnished to 

24 individuals who have been diagnosed and referred by 
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1 a physician as having impaired glucose tolerance and 

2 who are obese that consist of—

3 (A) assessment and treatment based on 

4 the needs of individuals as determined by a 

5 group weight loss management professional; or 

6 (B) a specific program or method that has 

7 demonstrated its efficacy to produce and main8 tain weight loss through results published in 

9 peer-reviewed scientific journals using recog10 nized research methods and statistical analysis 

11 that provides—

12 (i) assessment of current body weight 

13 and recording of weight status at each 

14 meeting session; 

15 (ii) provision of a healthy eating plan; 

16 (iii) provision of an activity plan; 

17 (iv) provision of a behavior modifica18 tion plan; and 

19 (v) a weekly group support meeting. 

20 (3) GROUP WEIGHT LOSS MANAGEMENT PRO21 FESSIONAL.—The term ‘‘group weight loss manage22 ment professional’’ means an individual who has 

23 completed training to provide a program or method 

24 that has completed clinical trials and has dem-
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1 onstrated its efficacy through publications in peer2 reviewed scientific journals who— 

3 (A)(i) holds a baccalaureate or higher de4 gree granted by a regionally accredited college 

5 or university in the United States (or an equiv6 alent foreign degree) in nutrition social work, 

7 psychology with experience in behavioral modi8 fication methods to reduce obesity; or 

9 (ii) has completed a curriculum of training 

10 for a specific behavioral based weight manage11 ment program as described in section (4)(A)(2) 

12 and recommended in the NIH Clinical Guide13 lines on Identification, Evaluation, and Treat14 ment of Overweight and Obesity in Adults, 

15 chapter 4, section H, parts 1, 2, 3, 4, and pur16 suant to guidelines by the Secretary; and 

17 (B)(i) is licensed or certified as a group 

18 weight loss management professional by the 

19 State in which the services are performed; or 

20 (ii) is certified by an organization that 

21 meets such criteria as the Secretary establishes 

22 with— 

23 (I) national organizations representing 

24 consumers such as the American Obesity 

25 Association and the elderly; and 
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1 (II) such other organizations as the 

2 Secretary determines appropriate. 

3 Subtitle C—Provisions Relating to 

4 Parts A and B 

5 SEC. 451. INCREASE FOR HOME HEALTH SERVICES FUR6 NISHED IN A RURAL AREA. 

7 (a) IN GENERAL.—In the case of home health serv8 ices furnished in a rural area (as defined in section 

9 1886(d)(2)(D) of the Social Security Act (42 U.S.C. 

10 1395ww(d)(2)(D))) on or after October 1, 2004, and be11 fore October 1, 2006, the Secretary shall increase the pay12 ment amount otherwise made under section 1895 of such 

13 Act (42 U.S.C. 1395fff ) for such services by 5 percent. 

14 (b) WAIVING BUDGET NEUTRALITY.—The Secretary 

15 shall not reduce the standard prospective payment amount 

16 (or amounts) under section 1895 of the Social Security 

17 Act (42 U.S.C. 1395fff ) applicable to home health services 

18 furnished during a period to offset the increase in pay19 ments resulting from the application of subsection (a). 

20 (c) NO EFFECT ON SUBSEQUENT PERIODS.—The 

21 payment increase provided under subsection (a) for a pe22 riod under such subsection—

23 (1) shall not apply to episodes and visits ending 

24 after such period; and 
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1 (2) shall not be taken into account in calcu2 lating the payment amounts applicable for episodes 

3 and visits occurring after such period. 

4 SEC. 452. LIMITATION ON REDUCTION IN AREA WAGE AD5 JUSTMENT FACTORS UNDER THE PROSPEC6 TIVE PAYMENT SYSTEM FOR HOME HEALTH 

7 SERVICES. 

8 Section 1895(b)(4)(C) (42 U.S.C. 1395fff(b)(4)(C)) 

9 is amended—

10 (1) by striking ‘‘FACTORS.—The Secretary’’ and 

11 inserting ‘‘FACTORS.—

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

13 (ii), the Secretary’’; and 

14 (2) by adding at the end the following new 

15 clause: 

16 ‘‘(ii) LIMITATION ON REDUCTION IN

17 FISCAL YEAR 2005 AND 2006.—For fiscal 

18 years 2005 and 2006, the area wage ad19 justment factor applicable to home health 

20 services furnished in an area in the fiscal 

21 year may not be more that 3 percent less 

22 than the area wage adjustment factor ap23 plicable to home health services for the 

24 area for the previous year.’’. 
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1 SEC. 453. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO 

2 MEDICARE LIMITS ON PHYSICIAN REFER3 RALS. 

4 (a) LIMITS ON PHYSICIAN REFERRALS.—

5 (1) OWNERSHIP AND INVESTMENT INTERESTS

6 IN WHOLE HOSPITALS.—

7 (A) IN GENERAL.—Section 1877(d)(3) (42 

8 U.S.C. 1395nn(d)(3)) is amended—

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

10 subparagraph (A); and 

11 (ii) by redesignating subparagraph 

12 (B) as subparagraph (C) and inserting 

13 after subparagraph (A) the following: 

14 ‘‘(B) the hospital is not a specialty hospital 

15 (as defined in subsection (h)(7)); and’’. 

16 (B) DEFINITION.—Section 1877(h) (42 

17 U.S.C. 1395nn(h)) is amended by adding at the 

18 end the following: 

19 ‘‘(7) SPECIALTY HOSPITAL.—

20 ‘‘(A) IN GENERAL.—For purposes of this 

21 section, except as provided in subparagraph 

22 (B), the term ‘specialty hospital’ means a hos23 pital that is primarily or exclusively engaged in 

24 the care and treatment of one of the following: 

25 ‘‘(i) patients with a cardiac condition; 
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1 ‘‘(ii) patients with an orthopedic con2 dition; 

3 ‘‘(iii) patients receiving a surgical pro4 cedure; or 

5 ‘‘(iv) any other specialized category of 

6 patients or cases that the Secretary des7 ignates as inconsistent with the purpose of 

8 permitting physician ownership and invest9 ment interests in a hospital under this sec10 tion. 

11 ‘‘(B) EXCEPTION.—For purposes of this 

12 section, the term ‘specialty hospital’ does not 

13 include any hospital—

14 ‘‘(i) determined by the Secretary—

15 ‘‘(I) to be in operation before 

16 June 12, 2003; or 

17 ‘‘(II) under development as of 

18 such date; 

19 ‘‘(ii) for which the number of beds 

20 and the number of physician investors at 

21 any time on or after such date is no great22 er than the number of such beds or inves23 tors as of such date; and 

24 ‘‘(iii) that meets such other require25 ments as the Secretary may specify.’’. 
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1 (2) OWNERSHIP AND INVESTMENT INTERESTS

2 IN A RURAL PROVIDER.—Section 1877(d)(2) (42 

3 U.S.C. 1395nn(d)(2)) is amended to read as follows: 

4 ‘‘(2) RURAL PROVIDERS.—In the case of des5 ignated health services furnished in a rural area (as 

6 defined in section 1886(d)(2)(D)) by an entity, if—

7 ‘‘(A) substantially all of the designated 

8 health services furnished by the entity are fur9 nished to individuals residing in such a rural 

10 area; 

11 ‘‘(B) the entity is not a specialty hospital 

12 (as defined in subsection (h)(7)); and 

13 ‘‘(C) the Secretary determines, with re14 spect to such entity, that such services would 

15 not be available in such area but for the owner16 ship or investment interest.’’. 

17 (b) EFFECTIVE DATE.—Subject to paragraph (2), 

18 the amendments made by this section shall apply to refer19 rals made for designated health services on or after Janu20 ary 1, 2004. 

21 (c) APPLICATION OF EXCEPTION FOR HOSPITALS

22 UNDER DEVELOPMENT.—For purposes of section 

23 1877(h)(7)(B)(i)(II) of the Social Security Act, as added 

24 by subsection (a)(1)(B), in determining whether a hospital 
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1 is under development as of June 12, 2003, the Secretary 

2 shall consider—

3 (1) whether architectural plans have been com4 pleted, funding has been received, zoning require5 ments have been met, and necessary approvals from 

6 appropriate State agencies have been received; and 

7 (2) any other evidence the Secretary determines 

8 would indicate whether a hospital is under develop9 ment as of such date. 

10 SEC. 454. DEMONSTRATION PROGRAM FOR SUBSTITUTE 

11 ADULT DAY SERVICES. 

12 (a) ESTABLISHMENT.—The Secretary shall establish 

13 a demonstration program (in this section referred to as 

14 the ‘‘demonstration program’’) under which the Secretary 

15 provides eligible medicare beneficiaries with coverage 

16 under the medicare program of substitute adult day serv17 ices furnished by an adult day services facility. 

18 (b) PAYMENT RATE FOR SUBSTITUTE ADULT DAY

19 SERVICES.—

20 (1) PAYMENT RATE.—For purposes of making 

21 payments to an adult day services facility for sub22 stitute adult day services under the demonstration 

23 program, the following rules shall apply: 

24 (A) ESTIMATION OF PAYMENT AMOUNT.—

25 The Secretary shall estimate the amount that 
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1 would otherwise be payable to a home health 

2 agency under section 1895 of the Social Secu3 rity Act (42 U.S.C. 1395fff) for all home health 

4 services described in subsection (i)(4)(B)(i) 

5 under the plan of care. 

6 (B) AMOUNT OF PAYMENT.—Subject to 

7 paragraph (3)(B), the total amount payable for 

8 substitute adult day services under the plan of 

9 care is equal to 95 percent of the amount esti10 mated to be payable under subparagraph (A). 

11 (2) LIMITATION ON BALANCE BILLING.—Under 

12 the demonstration program, an adult day services 

13 facility shall accept as payment in full for substitute 

14 adult day services (including those services described 

15 in clauses (ii) through (iv) of subsection (i)(4)(B)) 

16 furnished by the facility to an eligible medicare ben17 eficiary the amount of payment provided under the 

18 demonstration program for home health services 

19 consisting of substitute adult services. 

20 (3) ADJUSTMENT IN CASE OF OVERUTILIZA21 TION OF SUBSTITUTE ADULT DAY SERVICES TO EN22 SURE BUDGET NEUTRALITY.—The Secretary shall 

23 monitor the expenditures under the demonstration 

24 program and under title XVIII of the Social Secu25 rity Act for home health services. If the Secretary 
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1 estimates that the total expenditures under the dem2 onstration program and under such title XVIII for 

3 home health services for a period determined by the 

4 Secretary exceed expenditures that would have been 

5 made under such title XVIII for home health serv6 ices for such period if the demonstration program 

7 had not been conducted, the Secretary shall adjust 

8 the rate of payment to adult day services facilities 

9 under paragraph (1)(B) in order to eliminate such 

10 excess. 

11 (c) DEMONSTRATION PROGRAM SITES.—The dem12 onstration program shall be conducted in not more than 

13 3 sites selected by the Secretary. 

14 (d) DURATION; IMPLEMENTATION.—

15 (1) DURATION.—The Secretary shall conduct 

16 the demonstration program for a period of 3 years. 

17 (2) IMPLEMENTATION.—The Secretary may not 

18 implement the demonstration program before Octo19 ber 1, 2004. 

20 (e) VOLUNTARY PARTICIPATION.—Participation of 

21 eligible medicare beneficiaries in the demonstration pro22 gram shall be voluntary. 

23 (f) WAIVER AUTHORITY.—

24 (1) IN GENERAL.—Except as provided in para25 graph (2), the Secretary may waive such require-
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1 ments of titles XI and XVIII of the Social Security 

2 Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may 

3 be necessary for the purposes of carrying out the 

4 demonstration program. 

5 (2) MAY NOT WAIVE ELIGIBILITY REQUIRE6 MENTS FOR HOME HEALTH SERVICES.—The Sec7 retary may not waive the beneficiary eligibility re8 quirements for home health services under title 

9 XVIII of the Social Security Act. 

10 (g) EVALUATION AND REPORT.—

11 (1) EVALUATION.—The Secretary shall conduct 

12 an evaluation of the clinical and cost effectiveness of 

13 the demonstration program. 

14 (2) REPORT.—Not later than 30 months after 

15 the commencement of the demonstration program, 

16 the Secretary shall submit to Congress a report on 

17 the evaluation conducted under paragraph (1) and 

18 shall include in the report the following: 

19 (A) An analysis of the patient outcomes 

20 and costs of furnishing care to the eligible 

21 medicare beneficiaries participating in the dem22 onstration program as compared to such out23 comes and costs to such beneficiaries receiving 

24 only home health services under title XVIII of 
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1 the Social Security Act for the same health con2 ditions. 

3 (B) Such recommendations regarding the 

4 extension, expansion, or termination of the pro5 gram as the Secretary determines appropriate. 

6 (i) DEFINITIONS.—In this section: 

7 (1) ADULT DAY SERVICES FACILITY.—

8 (A) IN GENERAL.—Except as provided in 

9 subparagraphs (B) and (C), the term ‘‘adult 

10 day services facility’’ means a public agency or 

11 private organization, or a subdivision of such an 

12 agency or organization, that—

13 (i) is engaged in providing skilled 

14 nursing services and other therapeutic 

15 services directly or under arrangement 

16 with a home health agency; 

17 (ii) provides the items and services de18 scribed in paragraph (4)(B); and 

19 (iii) meets the requirements of para20 graphs (2) through (8) of subsection (o). 

21 (B) INCLUSION.—Notwithstanding sub22 paragraph (A), the term ‘‘adult day services fa23 cility’’ shall include a home health agency in 

24 which the items and services described in 
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1 clauses (ii) through (iv) of paragraph (4)(B) 

2 are provided—

3 (i) by an adult day services program 

4 that is licensed or certified by a State, or 

5 accredited, to furnish such items and serv6 ices in the State; and 

7 (ii) under arrangements with that 

8 program made by such agency. 

9 (C) WAIVER OF SURETY BOND.—The Sec10 retary may waive the requirement of a surety 

11 bond under section 1861(o)(7) of the Social Se12 curity Act (42 U.S.C. 1395x(o)(7)) in the case 

13 of an agency or organization that provides a 

14 comparable surety bond under State law. 

15 (2) ELIGIBLE MEDICARE BENEFICIARY.—The 

16 term ‘‘eligible medicare beneficiary’’ means an indi17 vidual eligible for home health services under title 

18 XVIII of the Social Security Act. 

19 (3) HOME HEALTH AGENCY.—The term ‘‘home 

20 health agency’’ has the meaning given such term in 

21 section 1861(o) of the Social Security Act (42 

22 U.S.C. 1395x(o)). 

23 (4) SUBSTITUTE ADULT DAY SERVICES.—

24 (A) IN GENERAL.—The term ‘‘substitute 

25 adult day services’’ means the items and serv-
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1 ices described in subparagraph (B) that are fur2 nished to an individual by an adult day services 

3 facility as a part of a plan under section 

4 1861(m) of the Social Security Act (42 U.S.C. 

5 1395x(m)) that substitutes such services for 

6 some or all of the items and services described 

7 in subparagraph (B)(i) furnished by a home 

8 health agency under the plan, as determined by 

9 the physician establishing the plan. 

10 (B) ITEMS AND SERVICES DESCRIBED.—

11 The items and services described in this sub12 paragraph are the following items and services: 

13 (i) Items and services described in 

14 paragraphs (1) through (7) of such section 

15 1861(m). 

16 (ii) Meals. 

17 (iii) A program of supervised activities 

18 designed to promote physical and mental 

19 health and furnished to the individual by 

20 the adult day services facility in a group 

21 setting for a period of not fewer than 4 

22 and not greater than 12 hours per day. 

23 (iv) A medication management pro24 gram (as defined in subparagraph (C)). 
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1 (C) MEDICATION MANAGEMENT PRO2 GRAM.—For purposes of subparagraph (B)(iv), 

3 the term ‘‘medication management program’’ 

4 means a program of services, including medi5 cine screening and patient and health care pro6 vider education programs, that provides services 

7 to minimize—

8 (i) unnecessary or inappropriate use 

9 of prescription drugs; and 

10 (ii) adverse events due to unintended 

11 prescription drug-to-drug interactions. 

12 SEC. 455. MEDPAC STUDY ON MEDICARE PAYMENTS AND 

13 EFFICIENCIES IN THE HEALTH CARE SYSTEM. 

14 Not later than 18 months after the date of enactment 

15 of this Act, the Medicare Payment Advisory Commission 

16 established under section 1805 of the Social Security Act 

17 (42 U.S.C. 1395b–6) shall provide Congress with rec18 ommendations to recognize and reward, within payment 

19 methodologies for physicians and hospitals established 

20 under the medicare program under title XVIII of the So21 cial Security Act, efficiencies, and the lower utilization of 

22 services created by the practice of medicine in historically 

23 efficient and low-cost areas. Measures of efficiency recog24 nized in accordance with the preceding sentence shall in25 clude—
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1 (1) shorter hospital stays than the national av2 erage; 

3 (2) fewer physician visits than the national av4 erage; 

5 (3) fewer laboratory tests than the national av6 erage; 

7 (4) a greater utilization of hospice services than 

8 the national average; and 

9 (5) the efficacy of disease management and pre10 ventive health services. 

11 SEC. 456. MEDICARE COVERAGE OF KIDNEY DISEASE EDU12 CATION SERVICES. 

13 (a) COVERAGE OF KIDNEY DISEASE EDUCATION

14 SERVICES.—

15 (1) IN GENERAL.—Section 1861 of the Social 

16 Security Act (42 U.S.C.1395x) is amended—

17 (A) in subsection (s)(2)—

18 (i) in subparagraph (U), by striking 

19 ‘‘and’’ at the end; 

20 (ii) in subparagraph (V)(iii), by add21 ing ‘‘and’’ at the end; and 

22 (iii) by adding at the end the fol23 lowing new subparagraph: 

24 ‘‘(W) kidney disease education services (as de25 fined in subsection (ww));’’; and 
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1 (B) by adding at the end the following new 

2 subsection: 

3 ‘‘Kidney Disease Education Services 

4 ‘‘(ww)(1) The term ‘kidney disease education serv5 ices’ means educational services that are—

6 ‘‘(A) furnished to an individual with kidney dis7 ease who, according to accepted clinical guidelines 

8 identified by the Secretary, will require dialysis or a 

9 kidney transplant; 

10 ‘‘(B) furnished, upon the referral of the physi11 cian managing the individual’s kidney condition, by 

12 a qualified person (as defined in paragraph (2)); and 

13 ‘‘(C) designed— 

14 ‘‘(i) to provide comprehensive information 

15 regarding—

16 ‘‘(I) the management of comorbidities; 

17 ‘‘(II) the prevention of uremic com18 plications; and 

19 ‘‘(III) each option for renal replace20 ment therapy (including peritoneal dialysis, 

21 hemodialysis (including vascular access op22 tions), and transplantation); and 

23 ‘‘(ii) to ensure that the individual has the 

24 opportunity to actively participate in the choice 

25 of therapy. 
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1 ‘‘(2) The term ‘qualified person’ means—

2 ‘‘(A) a physician (as described in subsection 

3 (r)(1)); 

4 ‘‘(B) an individual who—

5 ‘‘(i) is—

6 ‘‘(I) a registered nurse; 

7 ‘‘(II) a registered dietitian or nutri8 tion professional (as defined in subsection 

9 (vv)(2)); 

10 ‘‘(III) a clinical social worker (as de11 fined in subsection (hh)(1)); 

12 ‘‘(IV) a physician assistant, nurse 

13 practitioner, or clinical nurse specialist (as 

14 those terms are defined in subsection 

15 (aa)(5)); or 

16 ‘‘(V) a transplant coordinator; and 

17 ‘‘(ii) meets such requirements related to 

18 experience and other qualifications that the 

19 Secretary finds necessary and appropriate for 

20 furnishing the services described in paragraph 

21 (1); or 

22 ‘‘(C) a renal dialysis facility subject to the re23 quirements of section 1881(b)(1) with personnel 

24 who—
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1 ‘‘(i) provide the services described in para2 graph (1); and 

3 ‘‘(ii) meet the requirements of subpara4 graph (A) or (B). 

5 ‘‘(3) The Secretary shall develop the requirements 

6 under paragraph (2)(B)(ii) after consulting with physi7 cians, health educators, professional organizations, accred8 iting organizations, kidney patient organizations, dialysis 

9 facilities, transplant centers, network organizations de10 scribed in section 1881(c)(2), and other knowledgeable 

11 persons. 

12 ‘‘(4) In promulgating regulations to carry out this 

13 subsection, the Secretary shall ensure that such regula14 tions ensure that each beneficiary who is entitled to kidney 

15 disease education services under this title receives such 

16 services in a timely manner that ensures that the bene17 ficiary receives the maximum benefit of those services. 

18 ‘‘(5) The Secretary shall monitor the implementation 

19 of this subsection to ensure that beneficiaries who are eli20 gible for kidney disease education services receive such 

21 services in the manner described in paragraph (4).’’. 

22 (2) PAYMENT UNDER PHYSICIAN FEE SCHED23 ULE.—Section 1848(j)(3) of such Act (42 U.S.C. 

24 1395w–4(j)(3)) is amended by inserting ‘‘, (2)(W)’’, 

25 after ‘‘(2)(S)’’. 
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1 (3) PAYMENT TO RENAL DIALYSIS FACILI2 TIES.—Section 1881(b) of such Act (42 U.S.C. 

3 1395rr(b)), as amended by section 433(b)(5), is fur4 ther amended by adding at the end the following 

5 new paragraph: 

6 ‘‘(13) For purposes of paragraph (7), the single 

7 composite weighted formulas determined under such 

8 paragraph shall not take into account the amount of 

9 payment for kidney disease education services (as 

10 defined in section 1861(ww)). Instead, payment for 

11 such services shall be made to the renal dialysis fa12 cility on an assignment-related basis under section 

13 1848.’’. 

14 (4) ANNUAL REPORT TO CONGRESS.—Not later 

15 than April 1, 2004, and annually thereafter, the 

16 Secretary of Health and Human Services shall sub17 mit to Congress a report on the number of medicare 

18 beneficiaries who are entitled to kidney disease edu19 cation services (as defined in section 1861(ww) of 

20 the Social Security Act, as added by paragraph (1)) 

21 under title XVIII of such Act and who receive such 

22 services, together with such recommendations for 

23 legislative and administrative action as the Secretary 

24 determines to be appropriate to fulfill the legislative 
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1 intent that resulted in the enactment of that sub2 section. 

3 (b) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to services furnished on or after 

5 January 1, 2004. 

6 SEC. 457. FRONTIER EXTENDED STAY CLINIC DEMONSTRA7 TION PROJECT. 

8 (a) AUTHORITY TO CONDUCT DEMONSTRATION

9 PROJECT.—The Secretary shall waive such provisions of 

10 the medicare program established under title XVIII of the 

11 Social Security Act (42 U.S.C. 1395 et seq.) as are nec12 essary to conduct a demonstration project under which 

13 frontier extended stay clinics described in subsection (b) 

14 in isolated rural areas are treated as providers of items 

15 and services under the medicare program. 

16 (b) CLINICS DESCRIBED.—A frontier extended stay 

17 clinic is described in this subsection if the clinic—

18 (1) is located in a community where the closest 

19 short-term acute care hospital or critical access hos20 pital is at least 75 miles away from the community 

21 or is inaccessible by public road; and 

22 (2) is designed to address the needs of—

23 (A) seriously or critically ill or injured pa24 tients who, due to adverse weather conditions or 
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1 other reasons, cannot be transferred quickly to 

2 acute care referral centers; or 

3 (B) patients who need monitoring and ob4 servation for a limited period of time. 

5 (c) DEFINITIONS.—In this section, the terms ‘‘hos6 pital’’ and ‘‘critical access hospital’’ have the meanings 

7 given such terms in subsections (e) and (mm), respec8 tively, of section 1861 of the Social Security Act (42 

9 U.S.C. 1395x). 

10 SEC. 458. IMPROVEMENTS IN NATIONAL COVERAGE DETER11 MINATION PROCESS TO RESPOND TO 

12 CHANGES IN TECHNOLOGY. 

13 (a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) 

14 is amended—

15 (A) in the third sentence of subsection (a) 

16 by inserting ‘‘consistent with subsection (j)’’ 

17 after ‘‘the Secretary shall ensure’’; and 

18 (B) by adding at the end the following new 

19 subsection: 

20 ‘‘(j) NATIONAL COVERAGE DETERMINATION PROC21 ESS.—

22 ‘‘(1) TIMEFRAME FOR DECISIONS ON REQUESTS

23 FOR NATIONAL COVERAGE DETERMINATIONS.—In 

24 the case of a request for a national coverage deter25 mination that—
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1 ‘‘(A) does not require a technology assess2 ment from an outside entity or deliberation 

3 from the Medicare Coverage Advisory Com4 mittee, the decision on the request shall be 

5 made not later than 6 months after the date of 

6 the request; or 

7 ‘‘(B) requires such an assessment or delib8 eration and in which a clinical trial is not re9 quested, the decision on the request shall be 

10 made not later than 9 months after the date of 

11 the request. 

12 ‘‘(2) PROCESS FOR PUBLIC COMMENT IN NA13 TIONAL COVERAGE DETERMINATIONS.—At the end 

14 of the 6-month period (with respect to a request 

15 under paragraph (1)(A)) or 9-month period (with re16 spect to a request under paragraph (1)(B)) that be17 gins on the date a request for a national coverage 

18 determination is made, the Secretary shall—

19 ‘‘(A) make a draft of proposed decision on 

20 the request available to the public through the 

21 Medicare Internet site of the Department of 

22 Health and Human Services or other appro23 priate means; 

24 ‘‘(B) provide a 30-day period for public 

25 comment on such draft; 
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1 ‘‘(C) make a final decision on the request 

2 within 60 days of the conclusion of the 30-day 

3 period referred to under subparagraph (B); 

4 ‘‘(D) include in such final decision sum5 maries of the public comments received and re6 sponses thereto; 

7 ‘‘(E) make available to the public the clin8 ical evidence and other data used in making 

9 such a decision when the decision differs from 

10 the recommendations of the Medicare Coverage 

11 Advisory Committee; and 

12 ‘‘(F) in the case of a decision to grant the 

13 coverage determination, assign a temporary or 

14 permanent code and implement the coverage de15 cision at the end of the 60-day period referred 

16 to in subparagraph (C). 

17 ‘‘(3) NATIONAL COVERAGE DETERMINATION

18 DEFINED.—For purposes of this subsection, the 

19 term ‘national coverage determination’ has the 

20 meaning given such term in section 1869(f)(1)(B).’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to national coverage determina23 tions as of January 1, 2004. 
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1 SEC. 459. INCREASE IN MEDICARE PAYMENT FOR CERTAIN 

2 HOME HEALTH SERVICES. 

3 (a) IN GENERAL.—Section 1895 of the Social Secu4 rity Act (42 U.S.C. 1395fff) is amended by adding at the 

5 end the following: 

6 ‘‘(f) INCREASE IN PAYMENT FOR SERVICES FUR7 NISHED IN A RURAL AREA.—

8 ‘‘(1) IN GENERAL.—In the case of home health 

9 services furnished in a rural area (as defined in sec10 tion 1886(d)(2)(D)) on or after October 1, 2004 and 

11 before October 1, 2006, the Secretary shall increase 

12 the payment amount otherwise made under this sec13 tion for such services by 10 percent. 

14 ‘‘(2) WAIVER OF BUDGET NEUTRALITY.—The 

15 Secretary shall not reduce the standard prospective 

16 payment amount (or amounts) under this section ap17 plicable to home health services furnished during 

18 any period to offset the increase in payments result19 ing from the application of paragraph (1).’’. 

20 (b) PAYMENT ADJUSTMENT.—Section 1895(b)(5) of 

21 the Social Security Act (42 U.S.C. 1395fff(b)(5)) is 

22 amended by adding at the end the following: ‘‘Notwith23 standing this paragraph, the total amount of the addi24 tional payments or payment adjustments made under this 

25 paragraph may not exceed, with respect to fiscal year 

26 2004, 3 percent, and, with respect to fiscal years 2005 
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1 and 2006, 4 percent, of the total payments projected or 

2 estimated to be made based on the prospective payment 

3 system under this subsection in the year involved.’’. 

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

5 this section shall apply to services furnished on or after 

6 October 1, 2003. 

7 SEC. 460. FRONTIER EXTENDED STAY CLINIC DEMONSTRA8 TION PROJECT. 

9 (a) AUTHORITY TO CONDUCT DEMONSTRATION

10 PROJECT.—The Secretary shall waive such provisions of 

11 the medicare program established under title XVIII of the 

12 Social Security Act (42 U.S.C. 1395 et seq.) as are nec13 essary to conduct a demonstration project under which 

14 frontier extended stay clinics described in subsection (b) 

15 in isolated rural areas are treated as providers of items 

16 and services under the medicare program. 

17 (b) CLINICS DESCRIBED.—A frontier extended stay 

18 clinic is described in this subsection if the clinic—

19 (1) is located in a community where the closest 

20 short-term acute care hospital or critical access hos21 pital is at least 75 miles away from the community 

22 or is inaccessible by public road; and 

23 (2) is designed to address the needs of—

24 (A) seriously or critically ill or injured pa25 tients who, due to adverse weather conditions or 
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1 other reasons, cannot be transferred quickly to 

2 acute care referral centers; or 

3 (B) patients who need monitoring and ob4 servation for a limited period of time. 

5 (c) DEFINITIONS.—In this section, the terms ‘‘hos6 pital’’ and ‘‘critical access hospital’’ have the meanings 

7 given such terms in subsections (e) and (mm), respec8 tively, of section 1861 of the Social Security Act (42 

9 U.S.C. 1395x). 

10 SEC. 461. MEDICARE SECONDARY PAYOR (MSP) PROVI11 SIONS. 

12 (a) TECHNICAL AMENDMENT CONCERNING SEC13 RETARY’S AUTHORITY TO MAKE CONDITIONAL PAYMENT

14 WHEN CERTAIN PRIMARY PLANS DO NOT PAY PROMPT15 LY.—

16 (1) IN GENERAL.—Section 1862(b)(2) (42 

17 U.S.C. 1395y(b)(2)) is amended—

18 (A) in subparagraph (A)(ii), by striking 

19 ‘‘promptly (as determined in accordance with 

20 regulations)’’; 

21 (B) in subparagraph (B)—

22 (i) by redesignating clauses (i) 

23 through (iii) as clauses (ii) through (iv), 

24 respectively; and 
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1 (ii) by inserting before clause (ii), as 

2 so redesignated, the following new clause: 

3 ‘‘(i) AUTHORITY TO MAKE CONDI4 TIONAL PAYMENT.—The Secretary may 

5 make payment under this title with respect 

6 to an item or service if a primary plan de7 scribed in subparagraph (A)(ii) has not 

8 made or cannot reasonably be expected to 

9 make payment with respect to such item or 

10 service promptly (as determined in accord11 ance with regulations). Any such payment 

12 by the Secretary shall be conditioned on 

13 reimbursement to the appropriate Trust 

14 Fund in accordance with the succeeding 

15 provisions of this subsection.’’. 

16 (2) EFFECTIVE DATE.—The amendments made 

17 by paragraph (1) shall be effective as if included in 

18 the enactment of title III of the Medicare and Med19 icaid Budget Reconciliation Amendments of 1984 

20 (Public Law 98-369). 

21 (b) CLARIFYING AMENDMENTS TO CONDITIONAL

22 PAYMENT PROVISIONS.—Section 1862(b)(2) (42 U.S.C. 

23 1395y(b)(2)) is further amended—

24 (1) in subparagraph (A), in the matter fol25 lowing clause (ii), by inserting the following sentence 
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1 at the end: ‘‘An entity that engages in a business, 

2 trade, or profession shall be deemed to have a self3 insured plan if it carries its own risk (whether by a 

4 failure to obtain insurance, or otherwise) in whole or 

5 in part.’’; 

6 (2) in subparagraph (B)(ii), as redesignated by 

7 subsection (a)(2)(B)—

8 (A) by striking the first sentence and in9 serting the following: ‘‘A primary plan, and an 

10 entity that receives payment from a primary 

11 plan, shall reimburse the appropriate Trust 

12 Fund for any payment made by the Secretary 

13 under this title with respect to an item or serv14 ice if it is demonstrated that such primary plan 

15 has or had a responsibility to make payment 

16 with respect to such item or service. A primary 

17 plan’s responsibility for such payment may be 

18 demonstrated by a judgment, a payment condi19 tioned upon the recipient’s compromise, waiver, 

20 or release (whether or not there is a determina21 tion or admission of liability) of payment for 

22 items or services included in a claim against the 

23 primary plan or the primary plan’s insured, or 

24 by other means.’’; and 
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1 (B) in the final sentence, by striking ‘‘on 

2 the date such notice or other information is re3 ceived’’ and inserting ‘‘on the date notice of, or 

4 information related to, a primary plan’s respon5 sibility for such payment or other information is 

6 received’’; and 

7 (3) in subparagraph (B)(iii), , as redesignated 

8 by subsection (a)(2)(B), by striking the first sen9 tence and inserting the following: ‘‘In order to re10 cover payment made under this title for an item or 

11 service, the United States may bring an action 

12 against any or all entities that are or were required 

13 or responsible (directly, as an insurer or self-insurer, 

14 as a third-party administrator, as an employer that 

15 sponsors or contributes to a group health plan, or 

16 large group health plan, or otherwise) to make pay17 ment with respect to the same item or service (or 

18 any portion thereof) under a primary plan. The 

19 United States may, in accordance with paragraph 

20 (3)(A) collect double damages against any such enti21 ty. In addition, the United States may recover under 

22 this clause from any entity that has received pay23 ment from a primary plan or from the proceeds of 

24 a primary plan’s payment to any entity.’’. 
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1 (c) CLERICAL AMENDMENTS.—Section 1862(b) (42 

2 U.S.C. 1395y(b)) is amended—

3 (1) in paragraph (1)(A), by moving the indenta4 tion of clauses (ii) through (v) 2 ems to the left; and 

5 (2) in paragraph (3)(A), by striking ‘‘such’’ be6 fore ‘‘paragraphs’’. 

7 SEC. 462. MEDICARE PANCREATIC ISLET CELL TRANS8 PLANT DEMONSTRATION PROJECT. 

9 (a) ESTABLISHMENT.—In order to test the appro10 priateness of pancreatic islet cell transplantation, not later 

11 than 120 days after the date of the enactment of this Act, 

12 the Secretary shall establish a demonstration project 

13 which the Secretary, provides for payment under the medi14 care program under title XVIII of the Social Security Act 

15 for pancreatic islet cell transplantation and related items 

16 and services in the case of medicare beneficiaries who have 

17 type I (juvenile) diabetes and have end stage renal disease. 

18 (b) DURATION OF PROJECT.—The authority of the 

19 Secretary to conduct the demonstration project under this 

20 section shall terminate on the date that is 5 years after 

21 the date of the establishment of the project. 

22 (c) EVALUATION AND REPORT.—The Secretary shall 

23 conduct an evaluation of the outcomes of the demonstra24 tion project. Not later than 120 days after the date of 

25 the termination of the demonstration project under sub-
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1 section (b), the Secretary shall submit to Congress a re2 port on the project, including recommendations for such 

3 legislative and administrative action as the Secretary 

4 deems appropriate. 

5 (d) PAYMENT METHODOLOGY.—The Secretary shall 

6 establish an appropriate payment methodology for the pro7 vision of items and services under the demonstration 

8 project, which may include a payment methodology that 

9 bundles, to the maximum extent feasible, payment for all 

10 such items and services. 

11 SEC. 463. INCREASE IN MEDICARE PAYMENT FOR CERTAIN 

12 HOME HEALTH SERVICES. 

13 (a) IN GENERAL.—Section 1895 of the Social Secu14 rity Act (42 U.S.C. 1395fff) is amended by adding at the 

15 end the following: 

16 ‘‘(f) INCREASE IN PAYMENT FOR SERVICES FUR17 NISHED IN A RURAL AREA.—

18 ‘‘(1) IN GENERAL.—In the case of home health 

19 services furnished in a rural area (as defined in sec20 tion 1886(d)(2)(D)) on or after October 1, 2004, 

21 and before October 1, 2006, the Secretary shall in22 crease the payment amount otherwise made under 

23 this section for such services by 10 percent. 

24 ‘‘(2) WAIVER OF BUDGET NEUTRALITY.—The 

25 Secretary shall not reduce the standard prospective 
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1 payment amount (or amounts) under this section ap2 plicable to home health services furnished during 

3 any period to offset the increase in payments result4 ing from the application of paragraph (1).’’. 

5 (b) PAYMENT ADJUSTMENT.—Section 1895(b)(5) of 

6 the Social Security Act (42 U.S. C. 1395fff(b)(5)) is 

7 amended by adding at the end the following: ‘‘Notwith8 standing this paragraph, the total amount of the addi9 tional payments or payment adjustments made under this 

10 paragraph may not exceed, with respect to fiscal year 

11 2004, 3 percent, and, with respect to fiscal years 2005 

12 and 2006, 4 percent, of the total payments projected or 

13 estimated to be made based on the prospective payment 

14 system under this subsection in the year involved.’’. 

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

16 this section shall apply to services furnished on or after 

17 October 1, 2003. 

18 SEC. 464. SENSE OF THE SENATE CONCERNING MEDICARE 

19 PAYMENT UPDATE FOR PHYSICIANS AND 

20 OTHER HEALTH PROFESSIONALS. 

21 (a) FINDINGS.—The Senate makes the following 

22 findings: 

23 (1) The formula by which medicare payments 

24 are updated each year for services furnished by phy-
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1 sicians and other health professionals is fundamen2 tally flawed. 

3 (2) The flawed physician payment update for4 mula is causing a continuing physician payment cri5 sis, and, without congressional action, medicare pay6 ment rates for physicians and other practitioners are 

7 predicted to fall by 4.2 percent in 2004. 

8 (3) A physician payment cut in 2004 would the 

9 fifth cut since 1991, and would be on top of a 5.4 

10 percent cut in 2002, with additional cuts estimated 

11 for 2005, 2006, and 2007. From 1991 through 

12 2003, payment rates for physicians and health pro13 fessionals fell 14 percent behind practice cost infla14 tion as measured by medicare’s own conservative es15 timates. 

16 (4) The sustainable growth rate (SGR) expendi17 ture target, which is the basis for the physician pay18 ment update, is linked to the gross domestic product 

19 and penalizes physicians and other practitioners for 

20 volume increases that they cannot control and that 

21 the government actively promotes through new cov22 erage decisions, quality improvement activities, and 

23 other initiatives that, while beneficial to patients, are 

24 not reflected in the SGR. 
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1 (b) SENSE OF THE SENATE.—It is the sense of the 

2 Senate that medicare beneficiary access to quality care 

3 may be compromised if Congress does not take action to 

4 prevent cuts in 2004 and the following years that result 

5 from the SGR formula. 

6 TITLE V—MEDICARE APPEALS, 

7 REGULATORY, AND CON8 TRACTING IMPROVEMENTS 

9 Subtitle A—Regulatory Reform 

10 SEC. 501. RULES FOR THE PUBLICATION OF A FINAL REGU11 LATION BASED ON THE PREVIOUS PUBLICA12 TION OF AN INTERIM FINAL REGULATION. 

13 (a) IN GENERAL.—Section 1871(a) (42 U.S.C. 

14 1395hh(a)) is amended by adding at the end the following 

15 new paragraph: 

16 ‘‘(3)(A) With respect to the publication of a final reg17 ulation based on the previous publication of an interim 

18 final regulation—

19 ‘‘(i) subject to subparagraph (B), the Secretary 

20 shall publish the final regulation within the 12-

21 month period that begins on the date of publication 

22 of the interim final regulation; 

23 ‘‘(ii) if a final regulation is not published by the 

24 deadline established under this paragraph, the in25 terim final regulation shall not continue in effect un-
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1 less the Secretary publishes a notice described in 

2 subparagraph (B) by such deadline; and 

3 ‘‘(iii) the final regulation shall include responses 

4 to comments submitted in response to the interim 

5 final regulation. 

6 ‘‘(B) If the Secretary determines before the deadline 

7 otherwise established in this paragraph that there is good 

8 cause, specified in a notice published before such deadline, 

9 for delaying the deadline otherwise applicable under this 

10 paragraph, the deadline otherwise established under this 

11 paragraph shall be extended for such period (not to exceed 

12 12 months) as the Secretary specifies in such notice.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 subsection (a) shall take effect on the date of enactment 

15 of this Act and shall apply to interim final regulations 

16 published on or after such date. 

17 (c) STATUS OF PENDING INTERIM FINAL REGULA18 TIONS.—Not later than 6 months after the date of enact19 ment of this Act, the Secretary shall publish a notice in 

20 the Federal Register that provides the status of each in21 terim final regulation that was published on or before the 

22 date of enactment of this Act and for which no final regu23 lation has been published. Such notice shall include the 

24 date by which the Secretary plans to publish the final reg25 ulation that is based on the interim final regulation. 
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1 SEC. 502. COMPLIANCE WITH CHANGES IN REGULATIONS 

2 AND POLICIES. 

3 (a) NO RETROACTIVE APPLICATION OF SUB4 STANTIVE CHANGES.—

5 (1) IN GENERAL.—Section 1871 (42 U.S.C. 

6 1395hh) is amended by adding at the end the fol7 lowing new subsection: 

8 ‘‘(d)(1)(A) A substantive change in regulations, man9 ual instructions, interpretative rules, statements of policy, 

10 or guidelines of general applicability under this title shall 

11 not be applied (by extrapolation or otherwise) retroactively 

12 to items and services furnished before the effective date 

13 of the change, unless the Secretary determines that—

14 ‘‘(i) such retroactive application is necessary to 

15 comply with statutory requirements; or 

16 ‘‘(ii) failure to apply the change retroactively 

17 would be contrary to the public interest.’’. 

18 (2) EFFECTIVE DATE.—The amendment made 

19 by paragraph (1) shall apply to substantive changes 

20 issued on or after the date of enactment of this Act. 

21 (b) TIMELINE FOR COMPLIANCE WITH SUBSTANTIVE

22 CHANGES AFTER NOTICE.—

23 (1) IN GENERAL.—Section 1871(d)(1), as 

24 added by subsection (a), is amended by adding at 

25 the end the following: 
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1 ‘‘(B) A compliance action may be made against a pro2 vider of services, physician, practitioner, or other supplier 

3 with respect to noncompliance with such a substantive 

4 change only for items and services furnished on or after 

5 the effective date of the change. 

6 ‘‘(C)(i) Except as provided in clause (ii), a sub7 stantive change may not take effect before the date that 

8 is the end of the 30-day period that begins on the date 

9 that the Secretary has issued or published, as the case 

10 may be, the substantive change. 

11 ‘‘(ii) The Secretary may provide for a substantive 

12 change to take effect on a date that precedes the end of 

13 the 30-day period under clause (i) if the Secretary finds 

14 that waiver of such 30-day period is necessary to comply 

15 with statutory requirements or that the application of such 

16 30-day period is contrary to the public interest. If the Sec17 retary provides for an earlier effective date pursuant to 

18 this clause, the Secretary shall include in the issuance or 

19 publication of the substantive change a finding described 

20 in the first sentence, and a brief statement of the reasons 

21 for such finding.’’. 

22 (2) EFFECTIVE DATE.—The amendment made 

23 by paragraph (1) shall apply to compliance actions 

24 undertaken on or after the date of enactment of this 

25 Act. 
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1 SEC. 503. REPORT ON LEGAL AND REGULATORY INCON2 SISTENCIES. 

3 Section 1871 (42 U.S.C. 1395hh), as amended by 

4 section 502(a)(1), is amended by adding at the end the 

5 following new subsection: 

6 ‘‘(e)(1) Not later than 2 years after the date of enact7 ment of this subsection, and every 3 years thereafter, the 

8 Secretary shall submit to Congress a report with respect 

9 to the administration of this title and areas of inconsist10 ency or conflict among the various provisions under law 

11 and regulation. 

12 ‘‘(2) In preparing a report under paragraph (1), the 

13 Secretary shall collect—

14 ‘‘(A) information from beneficiaries, providers 

15 of services, physicians, practitioners, and other sup16 pliers with respect to such areas of inconsistency 

17 and conflict; and 

18 ‘‘(B) information from medicare contractors 

19 that tracks the nature of all communications and 

20 correspondence. 

21 ‘‘(3) A report under paragraph (1) shall include a de22 scription of efforts by the Secretary to reduce such incon23 sistency or conflicts, and recommendations for legislation 

24 or administrative action that the Secretary determines ap25 propriate to further reduce such inconsistency or con26 flicts.’’. 
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1 SEC. 504. STREAMLINING AND SIMPLIFICATION OF MEDI2 CARE REGULATIONS. 

3 (a) IN GENERAL.—The Secretary of Health and 

4 Human Services shall conduct an analysis of the regula5 tions issued under title XVIII of the Social Security Act 

6 and related laws in order to determine how such regula7 tions may be streamlined and simplified to increase the 

8 efficiency and effectiveness of the medicare program with9 out harming beneficiaries or providers and to decrease the 

10 burdens the medicare payment systems impose on both 

11 beneficiaries and providers. 

12 (b) REDUCTION IN REGULATIONS.—The Secretary, 

13 after completion of the analysis under subsection (a), shall 

14 direct the rewriting of the regulations described in sub15 section (a) in such a manner as to—

16 (1) reduce the number of words comprising all 

17 regulations by at least two-thirds by October 1, 

18 2004, and 

19 (2) ensure the simple, effective, and efficient 

20 operation of the medicare program. 

21 (c) APPLICATION OF THE PAPERWORK REDUCTION

22 ACT.—The Secretary shall apply the provisions of chapter 

23 35 of title 44, United States Code (commonly known as 

24 the ‘‘Paperwork Reduction Act’’) to the provisions of this 

25 Act to ensure that any regulations issued to implement 

26 this Act are written in plain language, are streamlined, 
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1 promote the maximum efficiency and effectiveness of the 

2 medicare and medicaid programs without harming bene3 ficiaries or providers, and minimize the burdens the pay4 ment systems affected by this Act impose on both bene5 ficiaries and providers. 

6 (d) FEASIBILITY.—If the Secretary determines that 

7 the two-thirds reduction in words by October 1, 2004 re8 quired in subsection (b)(1) is not feasible, he shall inform 

9 Congress in writing by July 1, 2004 of the reasons for 

10 its unfeasibility. He shall then establish a feasible reduc11 tion to be achieved by January 1, 2005. 

12 Subtitle B—Appeals Process 

13 Reform 

14 SEC. 511. SUBMISSION OF PLAN FOR TRANSFER OF RE15 SPONSIBILITY FOR MEDICARE APPEALS. 

16 (a) SUBMISSION OF TRANSITION PLAN.—

17 (1) IN GENERAL.—Not later than April 1, 

18 2004, the Commissioner of Social Security and the 

19 Secretary shall develop and transmit to Congress 

20 and the Comptroller General of the United States a 

21 plan under which the functions of administrative law 

22 judges responsible for hearing cases under title 

23 XVIII of the Social Security Act (and related provi24 sions in title XI of such Act) are transferred from 

25 the responsibility of the Commissioner and the So-
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1 cial Security Administration to the Secretary and 

2 the Department of Health and Human Services. 

3 (2) CONTENTS.—The plan shall include infor4 mation on the following: 

5 (A) WORKLOAD.—The number of such ad6 ministrative law judges and support staff re7 quired now and in the future to hear and decide 

8 such cases in a timely manner, taking into ac9 count the current and anticipated claims vol10 ume, appeals, number of beneficiaries, and stat11 utory changes. 

12 (B) COST PROJECTIONS AND FINANC13 ING.—Funding levels required for fiscal year 

14 2005 and subsequent fiscal years to carry out 

15 the functions transferred under the plan and 

16 how such transfer should be financed. 

17 (C) TRANSITION TIMETABLE.—A timetable 

18 for the transition. 

19 (D) REGULATIONS.—The establishment of 

20 specific regulations to govern the appeals proc21 ess. 

22 (E) CASE TRACKING.—The development of 

23 a unified case tracking system that will facili24 tate the maintenance and transfer of case spe25 cific data across both the fee-for-service and 
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1 managed care components of the medicare pro2 gram. 

3 (F) FEASIBILITY OF PRECEDENTIAL AU4 THORITY.—The feasibility of developing a proc5 ess to give decisions of the Departmental Ap6 peals Board in the Department of Health and 

7 Human Services addressing broad legal issues 

8 binding, precedential authority. 

9 (G) ACCESS TO ADMINISTRATIVE LAW

10 JUDGES.—The feasibility of—

11 (i) filing appeals with administrative 

12 law judges electronically; and 

13 (ii) conducting hearings using tele- or 

14 video-conference technologies. 

15 (H) INDEPENDENCE OF ADMINISTRATIVE

16 LAW JUDGES.—The steps that should be taken 

17 to ensure the independence of administrative 

18 law judges, including ensuring that such judges 

19 are in an office that is functionally and oper20 ationally separate from the Centers for Medi21 care & Medicaid Services and the Center for 

22 Medicare Choices. 

23 (I) GEOGRAPHIC DISTRIBUTION.—The 

24 steps that should be taken to provide for an ap25 propriate geographic distribution of administra-
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1 tive law judges throughout the United States to 

2 ensure timely access to such judges. 

3 (J) HIRING.—The steps that should be 

4 taken to hire administrative law judges (and 

5 support staff). 

6 (K) PERFORMANCE STANDARDS.—The es7 tablishment of performance standards for ad8 ministrative law judges with respect to timelines 

9 for decisions in cases under title XVIII of the 

10 Social Security Act. 

11 (L) SHARED RESOURCES.—The feasibility 

12 of the Secretary entering into such arrange13 ments with the Commissioner of Social Security 

14 as may be appropriate with respect to trans15 ferred functions under the plan to share office 

16 space, support staff, and other resources, with 

17 appropriate reimbursement. 

18 (M) TRAINING.—The training that should 

19 be provided to administrative law judges with 

20 respect to laws and regulations under title 

21 XVIII of the Social Security Act. 

22 (3) ADDITIONAL INFORMATION.—The plan may 

23 also include recommendations for further congres24 sional action, including modifications to the require25 ments and deadlines established under section 1869 
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1 of the Social Security Act (as amended by sections 

2 521 and 522 of BIPA (114 Stat. 2763A–534) and 

3 this Act). 

4 (b) GAO EVALUATION.—The Comptroller General of 

5 the United States shall—

6 (1) evaluate the plan submitted under sub7 section (a); and 

8 (2) not later than 6 months after such submis9 sion, submit to Congress, the Commissioner of So10 cial Security, and the Secretary a report on such 

11 evaluation. 

12 (c) SUBMISSION OF GAO REPORT REQUIRED BE13 FORE PLAN IMPLEMENTATION.—The Commissioner of 

14 Social Security and the Secretary may not implement the 

15 plan developed under subsection (a) before the date that 

16 is 6 months after the date the report required under sub17 section (b)(2) is submitted to the Commissioner and the 

18 Secretary. 

19 SEC. 512. EXPEDITED ACCESS TO JUDICIAL REVIEW. 

20 (a) IN GENERAL.—Section 1869(b) (42 U.S.C. 

21 1395ff(b)) is amended—

22 (1) in paragraph (1)(A), by inserting ‘‘, subject 

23 to paragraph (2),’’ before ‘‘to judicial review of the 

24 Secretary’s final decision’’; and 
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1 (2) by adding at the end the following new 

2 paragraph: 

3 ‘‘(2) EXPEDITED ACCESS TO JUDICIAL RE4 VIEW.—

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

6 establish a process under which a provider of 

7 services or supplier that furnishes an item or 

8 service or a beneficiary who has filed an appeal 

9 under paragraph (1) (other than an appeal filed 

10 under paragraph (1)(F)(i)) may obtain access 

11 to judicial review when a review entity (de12 scribed in subparagraph (D)), on its own mo13 tion or at the request of the appellant, deter14 mines that the Departmental Appeals Board 

15 does not have the authority to decide the ques16 tion of law or regulation relevant to the matters 

17 in controversy and that there is no material 

18 issue of fact in dispute. The appellant may 

19 make such request only once with respect to a 

20 question of law or regulation for a specific mat21 ter in dispute in a case of an appeal. 

22 ‘‘(B) PROMPT DETERMINATIONS.—If, after 

23 or coincident with appropriately filing a request 

24 for an administrative hearing, the appellant re25 quests a determination by the appropriate re-
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1 view entity that the Departmental Appeals 

2 Board does not have the authority to decide the 

3 question of law or regulations relevant to the 

4 matters in controversy and that there is no ma5 terial issue of fact in dispute, and if such re6 quest is accompanied by the documents and 

7 materials as the appropriate review entity shall 

8 require for purposes of making such determina9 tion, such review entity shall make a determina10 tion on the request in writing within 60 days 

11 after the date such review entity receives the re12 quest and such accompanying documents and 

13 materials. Such a determination by such review 

14 entity shall be considered a final decision and 

15 not subject to review by the Secretary. 

16 ‘‘(C) ACCESS TO JUDICIAL REVIEW.—

17 ‘‘(i) IN GENERAL.—If the appropriate 

18 review entity—

19 ‘‘(I) determines that there are no 

20 material issues of fact in dispute and 

21 that the only issues to be adjudicated 

22 are ones of law or regulation that the 

23 Departmental Appeals Board does not 

24 have authority to decide; or 
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1 ‘‘(II) fails to make such deter2 mination within the period provided 

3 under subparagraph (B); 

4 then the appellant may bring a civil action 

5 as described in this subparagraph. 

6 ‘‘(ii) DEADLINE FOR FILING.—Such 

7 action shall be filed, in the case described 

8 in—

9 ‘‘(I) clause (i)(I), within 60 days 

10 of the date of the determination de11 scribed in such clause; or 

12 ‘‘(II) clause (i)(II), within 60 

13 days of the end of the period provided 

14 under subparagraph (B) for the deter15 mination. 

16 ‘‘(iii) VENUE.—Such action shall be 

17 brought in the district court of the United 

18 States for the judicial district in which the 

19 appellant is located (or, in the case of an 

20 action brought jointly by more than 1 ap21 plicant, the judicial district in which the 

22 greatest number of applicants are located) 

23 or in the District Court for the District of 

24 Columbia. 
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1 ‘‘(iv) INTEREST ON ANY AMOUNTS IN

2 CONTROVERSY.—Where a provider of serv3 ices or supplier is granted judicial review 

4 pursuant to this paragraph, the amount in 

5 controversy (if any) shall be subject to an6 nual interest beginning on the first day of 

7 the first month beginning after the 60-day 

8 period as determined pursuant to clause 

9 (ii) and equal to the rate of interest on ob10 ligations issued for purchase by the Fed11 eral Supplementary Medical Insurance 

12 Trust Fund for the month in which the 

13 civil action authorized under this para14 graph is commenced, to be awarded by the 

15 reviewing court in favor of the prevailing 

16 party. No interest awarded pursuant to the 

17 preceding sentence shall be deemed income 

18 or cost for the purposes of determining re19 imbursement due providers of services, 

20 physicians, practitioners, and other sup21 pliers under this Act. 

22 (D) REVIEW ENTITY DEFINED.—For pur23 poses of this subsection, the term ‘review entity’ 

24 means an entity of up to 3 qualified reviewers 
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1 drawn from existing appeals levels other than 

2 the redetermination level. 

3 (b) APPLICATION TO PROVIDER AGREEMENT DETER4 MINATIONS.—Section 1866(h)(1) (42 U.S.C. 

5 1395cc(h)(1)) is amended—

6 (1) by inserting ‘‘(A)’’ after ‘‘(h)(1)’’; and 

7 (2) by adding at the end the following new sub8 paragraph: 

9 ‘‘(B) An institution or agency described in subpara10 graph (A) that has filed for a hearing under subparagraph 

11 (A) shall have expedited access to judicial review under 

12 this subparagraph in the same manner as providers of 

13 services, suppliers, and beneficiaries may obtain expedited 

14 access to judicial review under the process established 

15 under section 1869(b)(2). Nothing in this subparagraph 

16 shall be construed to affect the application of any remedy 

17 imposed under section 1819 during the pendency of an 

18 appeal under this subparagraph.’’. 

19 (c) GAO STUDY AND REPORT ON ACCESS TO JUDI20 CIAL REVIEW.—

21 (1) STUDY.—The Comptroller General of the 

22 United States shall conduct a study on the access of 

23 medicare beneficiaries and health care providers to 

24 judicial review of actions of the Secretary and the 

25 Department of Health and Human Services with re-
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1 spect to items and services under title XVIII of the 

2 Social Security Act subsequent to February 29, 

3 2000, the date of the decision of Shalala, Secretary 

4 of Health and Human Services, et al. v. Illinois 

5 Council on Long Term Care, Inc. (529 U.S. 1 

6 (2000)). 

7 (2) REPORT.—Not later than 1 year after the 

8 date of enactment of this Act, the Comptroller Gen9 eral shall submit to Congress a report on the study 

10 conducted under paragraph (1) together with such 

11 recommendations as the Comptroller General deter12 mines to be appropriate. 

13 (d) CONFORMING AMENDMENT.—Section 

14 1869(b)(1)(F)(ii) (42 U.S.C. 1395ff(b)(1)(F)(ii)) is 

15 amended to read as follows: 

16 ‘‘(ii) REFERENCE TO EXPEDITED AC17 CESS TO JUDICIAL REVIEW.—For the pro18 vision relating to expedited access to judi19 cial review, see paragraph (2).’’. 

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

21 this section shall apply to appeals filed on or after October 

22 1, 2004. 
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1 SEC. 513. EXPEDITED REVIEW OF CERTAIN PROVIDER 

2 AGREEMENT DETERMINATIONS. 

3 (a) TERMINATION AND CERTAIN OTHER IMMEDIATE

4 REMEDIES.—

5 (1) IN GENERAL.—The Secretary shall develop 

6 and implement a process to expedite proceedings 

7 under sections 1866(h) of the Social Security Act 

8 (42 U.S.C. 1395cc(h)) in which—

9 (A) the remedy of termination of participa10 tion has been imposed; 

11 (B) a sanction described in clause (i) or 

12 (iii) of section 1819(h)(2)(B) of such Act (42 

13 U.S.C. 1395i–3(h)(2)(B)) has been imposed, 

14 but only if such sanction has been imposed on 

15 an immediate basis; or 

16 (C) the Secretary has required a skilled 

17 nursing facility to suspend operations of a 

18 nurse aide training program. 

19 (2) PRIORITY FOR CASES OF TERMINATION.—

20 Under the process described in paragraph (1), pri21 ority shall be provided in cases of termination de22 scribed in subparagraph (A) of such paragraph. 

23 (b) INCREASED FINANCIAL SUPPORT.—In addition 

24 to any amounts otherwise appropriated, to reduce by 50 

25 percent the average time for administrative determina26 tions on appeals under section 1866(h) of the Social Secu-
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1 rity Act (42 U.S.C. 1395cc(h)), there are authorized to 

2 be appropriated (in appropriate part from the Federal 

3 Hospital Insurance Trust Fund and the Federal Supple4 mentary Medical Insurance Trust Fund) to the Secretary 

5 such sums for fiscal year 2004 and each subsequent fiscal 

6 year as may be necessary to increase the number of ad7 ministrative law judges (and their staffs) at the Depart8 mental Appeals Board of the Department of Health and 

9 Human Services and to educate such judges and staff on 

10 long-term care issues. 

11 SEC. 514. REVISIONS TO MEDICARE APPEALS PROCESS. 

12 (a) TIMEFRAMES FOR THE COMPLETION OF THE

13 RECORD.—Section 1869(b) (42 U.S.C. 1395ff(b)), as 

14 amended by section 512(a)(2), is amended by adding at 

15 the end the following new paragraph: 

16 ‘‘(3) TIMELY COMPLETION OF THE RECORD.—

17 ‘‘(A) DEADLINE.—Subject to subpara18 graph (B), the deadline to complete the record 

19 in a hearing before an administrative law judge 

20 or a review by the Departmental Appeals Board 

21 is 90 days after the date the request for the re22 view or hearing is filed. 

23 ‘‘(B) EXTENSIONS FOR GOOD CAUSE.—

24 The person filing a request under subparagraph 

25 (A) may request an extension of such deadline 
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1 for good cause. The administrative law judge, 

2 in the case of a hearing, and the Departmental 

3 Appeals Board, in the case of a review, may ex4 tend such deadline based upon a finding of 

5 good cause to a date specified by the judge or 

6 Board, as the case may be. 

7 ‘‘(C) DELAY IN DECISION DEADLINES

8 UNTIL COMPLETION OF RECORD.—Notwith9 standing any other provision of this section, the 

10 deadlines otherwise established under sub11 section (d) for the making of determinations in 

12 hearings or review under this section are 90 

13 days after the date on which the record is com14 plete. 

15 ‘‘(D) COMPLETE RECORD DESCRIBED.—

16 For purposes of this paragraph, a record is 

17 complete when the administrative law judge, in 

18 the case of a hearing, or the Departmental Ap19 peals Board, in the case of a review, has re20 ceived—

21 ‘‘(i) written or testimonial evidence, or 

22 both, submitted by the person filing the re23 quest, 

24 ‘‘(ii) written or oral argument, or 

25 both, 
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1 ‘‘(iii) the decision of, and the record 

2 for, the prior level of appeal, and 

3 ‘‘(iv) such other evidence as such 

4 judge or Board, as the case may be, deter5 mines is required to make a determination 

6 on the request.’’. 

7 (b) USE OF PATIENTS’ MEDICAL RECORDS.—Section 

8 1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)) is amend9 ed by inserting ‘‘(including the medical records of the indi10 vidual involved)’’ after ‘‘clinical experience’’. 

11 (c) NOTICE REQUIREMENTS FOR MEDICARE AP12 PEALS.— 

13 (1) INITIAL DETERMINATIONS AND REDETER14 MINATIONS.—Section 1869(a) (42 U.S.C. 1395ff(a)) 

15 is amended by adding at the end the following new 

16 paragraph: 

17 ‘‘(4) REQUIREMENTS OF NOTICE OF DETER18 MINATIONS AND REDETERMINATIONS.—A written 

19 notice of a determination on an initial determination 

20 or on a redetermination, insofar as such determina21 tion or redetermination results in a denial of a claim 

22 for benefits, shall be provided in printed form and 

23 written in a manner to be understood by the bene24 ficiary and shall include—
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1 ‘‘(A) the reasons for the determination, in2 cluding, as appropriate—

3 ‘‘(i) upon request in the case of an 

4 initial determination, the provision of the 

5 policy, manual, or regulation that resulted 

6 in the denial; and 

7 ‘‘(ii) in the case of a redetermination, 

8 a summary of the clinical or scientific evi9 dence used in making the determination 

10 (as appropriate); 

11 ‘‘(B) the procedures for obtaining addi12 tional information concerning the determination 

13 or redetermination; and 

14 ‘‘(C) notification of the right to seek a re15 determination or otherwise appeal the deter16 mination and instructions on how to initiate 

17 such a redetermination or appeal under this 

18 section.’’. 

19 (2) RECONSIDERATIONS.—Section 

20 1869(c)(3)(E) (42 U.S.C. 1395ff(c)(3)(E)) is 

21 amended to read as follows: 

22 ‘‘(E) EXPLANATION OF DECISION.—Any 

23 decision with respect to a reconsideration of a 

24 qualified independent contractor shall be in 
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1 writing in a manner to be understood by the 

2 beneficiary and shall include—

3 ‘‘(i) to the extent appropriate, a de4 tailed explanation of the decision as well as 

5 a discussion of the pertinent facts and ap6 plicable regulations applied in making such 

7 decision; 

8 ‘‘(ii) a notification of the right to ap9 peal such determination and instructions 

10 on how to initiate such appeal under this 

11 section; and 

12 ‘‘(iii) in the case of a determination of 

13 whether an item or service is reasonable 

14 and necessary for the diagnosis or treat15 ment of illness or injury (under section 

16 1862(a)(1)(A)) an explanation of the med17 ical or scientific rationale for the deci18 sion.’’. 

19 (3) APPEALS.—Section 1869(d) (42 U.S.C. 

20 1395ff(d)) is amended—

21 (A) in the heading, by inserting ‘‘; NO22 TICE’’ after ‘‘SECRETARY’’; and 

23 (B) by adding at the end the following new 

24 paragraph: 
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1 ‘‘(4) NOTICE.—Notice of the decision of an ad2 ministrative law judge shall be in writing in a man3 ner to be understood by the beneficiary and shall in4 clude—

5 ‘‘(A) the specific reasons for the deter6 mination (including, to the extent appropriate, 

7 a summary of the clinical or scientific evidence 

8 used in making the determination); 

9 ‘‘(B) the procedures for obtaining addi10 tional information concerning the decision; and 

11 ‘‘(C) notification of the right to appeal the 

12 decision and instructions on how to initiate 

13 such an appeal under this section.’’. 

14 (4) PREPARATION OF RECORD FOR APPEAL.—

15 Section 1869(c)(3)(J) (42 U.S.C. 1395ff(c)(3)(J)) is 

16 amended by striking ‘‘such information as is re17 quired for an appeal’’ and inserting ‘‘the record for 

18 the appeal’’. 

19 (d) QUALIFIED INDEPENDENT CONTRACTORS.—

20 (1) ELIGIBILITY REQUIREMENTS OF QUALIFIED

21 INDEPENDENT CONTRACTORS.—Section 1869(c) (42 

22 U.S.C. 1395ff(c)) is amended—

23 (A) in paragraph (2)—

24 (i) by inserting ‘‘(except in the case of 

25 a utilization and quality control peer re-
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1 view organization, as defined in section 

2 1152)’’ after ‘‘means an entity or organi3 zation that’’; and 

4 (ii) by striking the period at the end 

5 and inserting the following: ‘‘and meets the 

6 following requirements: 

7 ‘‘(A) GENERAL REQUIREMENTS.—

8 ‘‘(i) The entity or organization has 

9 (directly or through contracts or other ar10 rangements) sufficient medical, legal, and 

11 other expertise (including knowledge of the 

12 program under this title) and sufficient 

13 staffing to carry out duties of a qualified 

14 independent contractor under this section 

15 on a timely basis. 

16 ‘‘(ii) The entity or organization has 

17 provided assurances that it will conduct ac18 tivities consistent with the applicable re19 quirements of this section, including that it 

20 will not conduct any activities in a case un21 less the independence requirements of sub22 paragraph (B) are met with respect to the 

23 case. 
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1 ‘‘(iii) The entity or organization meets 

2 such other requirements as the Secretary 

3 provides by regulation. 

4 ‘‘(B) INDEPENDENCE REQUIREMENTS.—

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

6 (ii), an entity or organization meets the 

7 independence requirements of this sub8 paragraph with respect to any case if the 

9 entity—

10 ‘‘(I) is not a related party (as de11 fined in subsection (g)(5)); 

12 ‘‘(II) does not have a material fa13 milial, financial, or professional rela14 tionship with such a party in relation 

15 to such case; and 

16 ‘‘(III) does not otherwise have a 

17 conflict of interest with such a party 

18 (as determined under regulations). 

19 ‘‘(ii) EXCEPTION FOR COMPENSA20 TION.—Nothing in clause (i) shall be con21 strued to prohibit receipt by a qualified 

22 independent contractor of compensation 

23 from the Secretary for the conduct of ac24 tivities under this section if the compensa25 tion is provided consistent with clause (iii). 
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1 ‘‘(iii) LIMITATIONS ON ENTITY COM2 PENSATION.—Compensation provided by 

3 the Secretary to a qualified independent 

4 contractor in connection with reviews 

5 under this section shall not be contingent 

6 on any decision rendered by the contractor 

7 or by any reviewing professional.’’; and 

8 (B) in paragraph (3)(A), by striking ‘‘, 

9 and shall have sufficient training and expertise 

10 in medical science and legal matters to make 

11 reconsiderations under this subsection’’. 

12 (2) ELIGIBILITY REQUIREMENTS FOR REVIEW13 ERS.—Section 1869 (42 U.S.C. 1395ff) is amend14 ed—

15 (A) by amending subsection (c)(3)(D) to 

16 read as follows: 

17 ‘‘(D) QUALIFICATIONS OF REVIEWERS.—

18 The requirements of subsection (g) shall be met 

19 (relating to qualifications of reviewing profes20 sionals).’’; and 

21 (B) by adding at the end the following new 

22 subsection: 

23 ‘‘(g) QUALIFICATIONS OF REVIEWERS.—
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1 ‘‘(1) IN GENERAL.—In reviewing determina2 tions under this section, a qualified independent con3 tractor shall assure that—

4 ‘‘(A) each individual conducting a review 

5 shall meet the qualifications of paragraph (2); 

6 ‘‘(B) compensation provided by the con7 tractor to each such reviewer is consistent with 

8 paragraph (3); and 

9 ‘‘(C) in the case of a review by a panel de10 scribed in subsection (c)(3)(B) composed of 

11 physicians or other health care professionals 

12 (each in this subsection referred to as a ‘review13 ing professional’), each reviewing professional 

14 meets the qualifications described in paragraph 

15 (4). 

16 ‘‘(2) INDEPENDENCE.—

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B), each individual conducting a review 

19 in a case shall—

20 ‘‘(i) not be a related party (as defined 

21 in paragraph (5)); 

22 ‘‘(ii) not have a material familial, fi23 nancial, or professional relationship with 

24 such a party in the case under review; and 
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1 ‘‘(iii) not otherwise have a conflict of 

2 interest with such a party (as determined 

3 under regulations). 

4 ‘‘(B) EXCEPTION.—Nothing in subpara5 graph (A) shall be construed to—

6 ‘‘(i) prohibit an individual, solely on 

7 the basis of affiliation with a fiscal inter8 mediary, carrier, or other contractor, from 

9 serving as a reviewing professional if—

10 ‘‘(I) a nonaffiliated individual is 

11 not reasonably available; 

12 ‘‘(II) the affiliated individual is 

13 not involved in the provision of items 

14 or services in the case under review; 

15 ‘‘(III) the fact of such an affili16 ation is disclosed to the Secretary and 

17 the beneficiary (or authorized rep18 resentative) and neither party objects; 

19 and 

20 ‘‘(IV) the affiliated individual is 

21 not an employee of the intermediary, 

22 carrier, or contractor and does not 

23 provide services exclusively or pri24 marily to or on behalf of such inter25 mediary, carrier, or contractor; 
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1 ‘‘(ii) prohibit an individual who has 

2 staff privileges at the institution where the 

3 treatment involved takes place from serv4 ing as a reviewer merely on the basis of 

5 such affiliation if the affiliation is disclosed 

6 to the Secretary and the beneficiary (or 

7 authorized representative), and neither 

8 party objects; or 

9 ‘‘(iii) prohibit receipt of compensation 

10 by a reviewing professional from a con11 tractor if the compensation is provided 

12 consistent with paragraph (3). 

13 ‘‘(3) LIMITATIONS ON REVIEWER COMPENSA14 TION.—Compensation provided by a qualified inde15 pendent contractor to a reviewer in connection with 

16 a review under this section shall not be contingent 

17 on the decision rendered by the reviewer. 

18 ‘‘(4) LICENSURE AND EXPERTISE.—Each re19 viewing professional shall be a physician (allopathic 

20 or osteopathic) or health care professional who—

21 ‘‘(A) is appropriately credentialed or li22 censed in 1 or more States to deliver health 

23 care services; and 
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1 ‘‘(B) has medical expertise in the field of 

2 practice that is appropriate for the items or 

3 services at issue. 

4 ‘‘(5) RELATED PARTY DEFINED.—For purposes 

5 of this section, the term ‘related party’ means, with 

6 respect to a case under this title involving an indi7 vidual beneficiary, any of the following: 

8 ‘‘(A) The Secretary, the medicare adminis9 trative contractor involved, or any fiduciary, of10 ficer, director, or employee of the Department 

11 of Health and Human Services, or of such con12 tractor. 

13 ‘‘(B) The individual (or authorized rep14 resentative). 

15 ‘‘(C) The health care professional that pro16 vides the items or services involved in the case. 

17 ‘‘(D) The institution at which the items or 

18 services (or treatment) involved in the case are 

19 provided. 

20 ‘‘(E) The manufacturer of any drug or 

21 other item that is included in the items or serv22 ices involved in the case. 

23 ‘‘(F) Any other party determined under 

24 any regulations to have a substantial interest in 

25 the case involved.’’. 
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1 (3) NUMBER OF QUALIFIED INDEPENDENT

2 CONTRACTORS.—Section 1869(c)(4) (42 U.S.C. 

3 1395ff(c)(4)) is amended by striking ‘‘12’’ and in4 serting ‘‘4’’. 

5 (e) IMPLEMENTATION OF CERTAIN BIPA RE6 FORMS.—

7 (1) DELAY IN CERTAIN BIPA REFORMS.—Sec8 tion 521(d) of BIPA (114 Stat. 2763A–543) is 

9 amended to read as follows: 

10 ‘‘(d) EFFECTIVE DATE.—

11 ‘‘(1) IN GENERAL.—Except as specified in 

12 paragraph (2), the amendments made by this section 

13 shall apply with respect to initial determinations 

14 made on or after December 1, 2004. 

15 ‘‘(2) EXPEDITED PROCEEDINGS AND RECONSID16 ERATION REQUIREMENTS.—For the following provi17 sions, the amendments made by subsection (a) shall 

18 apply with respect to initial determinations made on 

19 or after October 1, 2003: 

20 ‘‘(A) Subsection (b)(1)(F)(i) of section 

21 1869 of the Social Security Act. 

22 ‘‘(B) Subsection (c)(3)(C)(iii) of such sec23 tion. 

24 ‘‘(C) Subsection (c)(3)(C)(iv) of such sec25 tion to the extent that it applies to expedited 
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1 reconsiderations under subsection (c)(3)(C)(iii) 

2 of such section. 

3 ‘‘(3) TRANSITIONAL USE OF PEER REVIEW OR4 GANIZATIONS TO CONDUCT EXPEDITED RECONSID5 ERATIONS UNTIL QICS ARE OPERATIONAL.—Expe6 dited reconsiderations of initial determinations under 

7 section 1869(c)(3)(C)(iii) of the Social Security Act 

8 shall be made by peer review organizations until 

9 qualified independent contractors are available for 

10 such expedited reconsiderations.’’. 

11 (2) CONFORMING AMENDMENTS.—Section 

12 521(c) of BIPA (114 Stat. 2763A–543) and section 

13 1869(c)(3)(C)(iii)(III) of the Social Security Act (42 

14 U.S.C. 1395ff(c)(3)(C)(iii)(III)), as added by section 

15 521 of BIPA, are repealed. 

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

17 this section shall be effective as if included in the enact18 ment of the respective provisions of subtitle C of title V 

19 of BIPA, 114 Stat. 2763A–534. 

20 (g) TRANSITION.—In applying section 1869(g) of the 

21 Social Security Act (as added by subsection (d)(2)), any 

22 reference to a medicare administrative contractor shall be 

23 deemed to include a reference to a fiscal intermediary 

24 under section 1816 of the Social Security Act (42 U.S.C. 
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1 1395h) and a carrier under section 1842 of such Act (42 

2 U.S.C. 1395u). 

3 SEC. 515. HEARING RIGHTS RELATED TO DECISIONS BY 

4 THE SECRETARY TO DENY OR NOT RENEW A 

5 MEDICARE ENROLLMENT AGREEMENT; CON6 SULTATION BEFORE CHANGING PROVIDER 

7 ENROLLMENT FORMS. 

8 (a) HEARING RIGHTS.—

9 (1) IN GENERAL.—Section 1866 (42 U.S.C. 

10 1395cc) is amended by adding at the end the fol11 lowing new subsection: 

12 ‘‘(j) HEARING RIGHTS IN CASES OF DENIAL OR

13 NONRENEWAL.—The Secretary shall establish by regula14 tion procedures under which—

15 ‘‘(1) there are deadlines for actions on applica16 tions for enrollment (and, if applicable, renewal of 

17 enrollment); and 

18 ‘‘(2) providers of services, physicians, practi19 tioners, and suppliers whose application to enroll 

20 (or, if applicable, to renew enrollment) are denied 

21 are provided a mechanism to appeal such denial and 

22 a deadline for consideration of such appeals.’’. 

23 (2) EFFECTIVE DATE.—The Secretary shall 

24 provide for the establishment of the procedures 
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1 under the amendment made by paragraph (1) within 

2 18 months after the date of enactment of this Act. 

3 (b) CONSULTATION BEFORE CHANGING PROVIDER

4 ENROLLMENT FORMS.—Section 1871 (42 U.S.C. 

5 1395hh), as amended by sections 502 and 503, is amend6 ed by adding at the end the following new subsection: 

7 ‘‘(f) The Secretary shall consult with providers of 

8 services, physicians, practitioners, and suppliers before 

9 making changes in the provider enrollment forms required 

10 of such providers, physicians, practitioners, and suppliers 

11 to be eligible to submit claims for which payment may be 

12 made under this title.’’. 

13 SEC. 516. APPEALS BY PROVIDERS WHEN THERE IS NO 

14 OTHER PARTY AVAILABLE. 

15 (a) IN GENERAL.—Section 1870 (42 U.S.C. 1395gg) 

16 is amended by adding at the end the following new sub17 section: 

18 ‘‘(h) Notwithstanding subsection (f) or any other pro19 vision of law, the Secretary shall permit a provider of serv20 ices, physician, practitioner, or other supplier to appeal 

21 any determination of the Secretary under this title relating 

22 to services rendered under this title to an individual who 

23 subsequently dies if there is no other party available to 

24 appeal such determination.’’. 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall take effect on the date of enactment 

3 of this Act and shall apply to items and services furnished 

4 on or after such date. 

5 SEC. 517. PROVIDER ACCESS TO REVIEW OF LOCAL COV6 ERAGE DETERMINATIONS. 

7 (a) PROVIDER ACCESS TO REVIEW OF LOCAL COV8 ERAGE DETERMINATIONS.—Section 1869(f)(5) (42 

9 U.S.C. 1395ff(f)(5)) is amended to read as follows: 

10 ‘‘(5) AGGRIEVED PARTY DEFINED.—In this sec11 tion, the term ‘aggrieved party’ means—

12 ‘‘(A) with respect to a national coverage 

13 determination, an individual entitled to benefits 

14 under part A, or enrolled under part B, or both, 

15 who is in need of the items or services that are 

16 the subject of the coverage determination; and 

17 ‘‘(B) with respect to a local coverage deter18 mination—

19 ‘‘(i) an individual who is entitled to 

20 benefits under part A, or enrolled under 

21 part B, or both, who is adversely affected 

22 by such a determination; or 

23 ‘‘(ii) a provider of services, physician, 

24 practitioner, or supplier that is adversely 

25 affected by such a determination.’’. 
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1 (b) CLARIFICATION OF LOCAL COVERAGE DETER2 MINATION DEFINITION.—Section 1869(f)(2)(B) (42 

3 U.S.C. 1395ff(f)(2)(B)) is amended by inserting ‘‘, includ4 ing, where appropriate, the specific requirements and clin5 ical indications relating to the medical necessity of an item 

6 or service’’ before the period at the end. 

7 (c) REQUEST FOR LOCAL COVERAGE DETERMINA8 TIONS BY PROVIDERS.—Section 1869 (42 U.S.C. 1395ff), 

9 as amended by section 514(d)(2)(B), is amended by add10 ing at the end the following new subsection: 

11 ‘‘(h) REQUEST FOR LOCAL COVERAGE DETERMINA12 TIONS BY PROVIDERS.—

13 ‘‘(1) ESTABLISHMENT OF PROCESS.—The Sec14 retary shall establish a process under which a pro15 vider of services, physician, practitioner, or supplier 

16 who certifies that they meet the requirements estab17 lished in paragraph (3) may request a local coverage 

18 determination in accordance with the succeeding 

19 provisions of this subsection. 

20 ‘‘(2) PROVIDER LOCAL COVERAGE DETERMINA21 TION REQUEST DEFINED.—In this subsection, the 

22 term ‘provider local coverage determination request’ 

23 means a request, filed with the Secretary, at such 

24 time and in such form and manner as the Secretary 

25 may specify, that the Secretary, pursuant to para-
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1 graph (4)(A), require a fiscal intermediary, carrier, 

2 or program safeguard contractor to make or revise 

3 a local coverage determination under this section 

4 with respect to an item or service. 

5 ‘‘(3) REQUEST REQUIREMENTS.—Under the 

6 process established under paragraph (1), by not 

7 later than 30 days after the date on which a pro8 vider local coverage determination request is filed 

9 under paragraph (1), the Secretary shall determine 

10 whether such request establishes that—

11 ‘‘(A) there have been at least 5 reversals of 

12 redeterminations made by a fiscal intermediary 

13 or carrier after a hearing before an administra14 tive law judge on claims submitted by the pro15 vider in at least 2 different cases before an ad16 ministrative law judge; 

17 ‘‘(B) each reversal described in subpara18 graph (A) involves substantially similar mate19 rial facts; 

20 ‘‘(C) each reversal described in subpara21 graph (A) involves the same medical necessity 

22 issue; and 

23 ‘‘(D) at least 50 percent of the total num24 ber of claims submitted by such provider within 

25 the past year involving the substantially similar 
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1 material facts described in subparagraph (B) 

2 and the same medical necessity issue described 

3 in subparagraph (C) have been denied and have 

4 been reversed by an administrative law judge. 

5 ‘‘(4) APPROVAL OR REJECTION OF REQUEST.—

6 ‘‘(A) APPROVAL OF REQUEST.—If the Sec7 retary determines that subparagraphs (A) 

8 through (D) of paragraph (3) have been satis9 fied, the Secretary shall require the fiscal inter10 mediary, carrier, or program safeguard con11 tractor identified in the provider local coverage 

12 determination request, to make or revise a local 

13 coverage determination with respect to the item 

14 or service that is the subject of the request not 

15 later than the date that is 210 days after the 

16 date on which the Secretary makes the deter17 mination. Such fiscal intermediary, carrier, or 

18 program safeguard contractor shall retain the 

19 discretion to determine whether or not, and/or 

20 the circumstances under which, to cover the 

21 item or service for which a local coverage deter22 mination is requested. Nothing in this sub23 section shall be construed to require a fiscal 

24 intermediary, carrier or program safeguard con25 tractor to develop a local coverage determina-
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1 tion that is inconsistent with any national cov2 erage determination, or any coverage provision 

3 in this title or in regulation, manual, or inter4 pretive guidance of the Secretary. 

5 ‘‘(B) REJECTION OF REQUEST.—If the 

6 Secretary determines that subparagraphs (A) 

7 through (D) of paragraph (3) have not been 

8 satisfied, the Secretary shall reject the provider 

9 local coverage determination request and shall 

10 notify the provider of services, physician, practi11 tioner, or supplier that filed the request of the 

12 reason for such rejection and no further pro13 ceedings in relation to such request shall be 

14 conducted.’’. 

15 (d) STUDY AND REPORT ON THE USE OF CONTRAC16 TORS TO MONITOR MEDICARE APPEALS.—

17 (1) STUDY.—The Secretary shall conduct a 

18 study on the feasibility and advisability of requiring 

19 fiscal intermediaries and carriers to monitor and 

20 track—

21 (A) the subject matter and status of claims 

22 denied by the fiscal intermediary or carrier (as 

23 applicable) that are appealed under section 

24 1869 of the Social Security Act (42 U.S.C. 

25 1395ff), as added by section 522 of BIPA (114 
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1 Stat. 2763A–543) and amended by this Act; 

2 and 

3 (B) any final determination made with re4 spect to such claims. 

5 (2) REPORT.—Not later than the date that is 

6 1 year after the date of enactment of this Act, the 

7 Secretary shall submit to Congress a report on the 

8 study conducted under paragraph (1) together with 

9 such recommendations for legislation and adminis10 trative action as the Commission determines appro11 priate. 

12 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

13 are authorized to be appropriated such sums as are nec14 essary to carry out the amendments made by subsections 

15 (a), (b), and (c). 

16 (f) EFFECTIVE DATES.—

17 (1) PROVIDER ACCESS TO REVIEW OF LOCAL

18 COVERAGE DETERMINATIONS.—The amendments 

19 made by subsections (a) and (b) shall apply to—

20 (A) any review of any local coverage deter21 mination filed on or after October 1, 2003; 

22 (B) any request to make such a determina23 tion made on or after such date; or 

24 (C) any local coverage determination made 

25 on or after such date. 
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1 (2) PROVIDER LOCAL COVERAGE DETERMINA2 TION REQUESTS.—The amendment made by sub3 section (c) shall apply with respect to provider local 

4 coverage determination requests (as defined in sec5 tion 1869(h)(2) of the Social Security Act, as added 

6 by subsection (c)) filed on or after the date of enact7 ment of this Act. 

8 SEC. 518. REVISIONS TO APPEALS TIMEFRAMES. 

9 Section 1869 (42 U.S.C. 1395ff) is amended—

10 (1) in subsection (a)(3)(C)(ii), by striking ‘‘30-

11 day period’’ each place it appears and inserting ‘‘60-

12 day period’’; 

13 (2) in subsection (c)(3)(C)(i), by striking ‘‘30-

14 day period’’ and inserting ‘‘60-day period’’; 

15 (3) in subsection (d)(1)(A), by striking ‘‘90-day 

16 period’’ and inserting ‘‘120-day period’’; and 

17 (4) in subsection (d)(2)(A), by striking ‘‘90-day 

18 period’’ and inserting ‘‘120-day period’’. 

19 SEC. 519. ELIMINATION OF REQUIREMENT TO USE SOCIAL 

20 SECURITY ADMINISTRATION ADMINISTRA21 TIVE LAW JUDGES. 

22 The first sentence of section 1869(f)(2)(A)(i) (42 

23 U.S.C. 1395ff(f)(2)(A)(i)) is amended by striking ‘‘of the 

24 Social Security Administration’’. 
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1 SEC. 520. ELIMINATION OF REQUIREMENT FOR DE NOVO 

2 REVIEW BY THE DEPARTMENTAL APPEALS 

3 BOARD. 

4 Section 1869(d)(2) (42 U.S.C. 1395ff(d)(2)) is 

5 amended to read as follows: 

6 ‘‘(2) DEPARTMENTAL APPEALS BOARD RE7 VIEW.—The Departmental Appeals Board of the De8 partment of Health and Human Services shall con9 duct and conclude a review of the decision on a 

10 hearing described in paragraph (1) and make a deci11 sion or remand the case to the administrative law 

12 judge for reconsideration by not later than the end 

13 of the 90-day period beginning on the date a request 

14 for review has been timely filed.’’. 

15 Subtitle C—Contracting Reform 

16 SEC. 521. INCREASED FLEXIBILITY IN MEDICARE ADMINIS17 TRATION. 

18 (a) CONSOLIDATION AND FLEXIBILITY IN MEDICARE

19 ADMINISTRATION.—

20 (1) IN GENERAL.—Title XVIII is amended by 

21 inserting after section 1874 the following new sec22 tion: 

23 ‘‘CONTRACTS WITH MEDICARE ADMINISTRATIVE

24 CONTRACTORS

25 ‘‘SEC. 1874A. (a) AUTHORITY.—
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1 ‘‘(1) AUTHORITY TO ENTER INTO CON2 TRACTS.—The Secretary may enter into contracts 

3 with any eligible entity to serve as a medicare ad4 ministrative contractor with respect to the perform5 ance of any or all of the functions described in para6 graph (4) or parts of those functions (or, to the ex7 tent provided in a contract, to secure performance 

8 thereof by other entities). 

9 ‘‘(2) ELIGIBILITY OF ENTITIES.—An entity is 

10 eligible to enter into a contract with respect to the 

11 performance of a particular function described in 

12 paragraph (4) only if—

13 ‘‘(A) the entity has demonstrated capa14 bility to carry out such function; 

15 ‘‘(B) the entity complies with such conflict 

16 of interest standards as are generally applicable 

17 to Federal acquisition and procurement; 

18 ‘‘(C) the entity has sufficient assets to fi19 nancially support the performance of such func20 tion; and 

21 ‘‘(D) the entity meets such other require22 ments as the Secretary may impose. 

23 ‘‘(3) MEDICARE ADMINISTRATIVE CONTRACTOR

24 DEFINED.—For purposes of this title and title XI—
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1 ‘‘(A) IN GENERAL.—The term ‘medicare 

2 administrative contractor’ means an agency, or3 ganization, or other person with a contract 

4 under this section. 

5 ‘‘(B) APPROPRIATE MEDICARE ADMINIS6 TRATIVE CONTRACTOR.—With respect to the 

7 performance of a particular function in relation 

8 to an individual entitled to benefits under part 

9 A or enrolled under part B, or both, a specific 

10 provider of services, physician, practitioner, fa11 cility, or supplier (or class of such providers of 

12 services, physicians, practitioners, facilities, or 

13 suppliers), the ‘appropriate’ medicare adminis14 trative contractor is the medicare administra15 tive contractor that has a contract under this 

16 section with respect to the performance of that 

17 function in relation to that individual, provider 

18 of services, physician, practitioner, facility, or 

19 supplier or class of provider of services, physi20 cian, practitioner, facility, or supplier. 

21 ‘‘(4) FUNCTIONS DESCRIBED.—The functions 

22 referred to in paragraphs (1) and (2) are payment 

23 functions (including the function of developing local 

24 coverage determinations, as defined in section 
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1 1869(f)(2)(B)), provider services functions, and ben2 eficiary services functions as follows: 

3 ‘‘(A) DETERMINATION OF PAYMENT

4 AMOUNTS.—Determining (subject to the provi5 sions of section 1878 and to such review by the 

6 Secretary as may be provided for by the con7 tracts) the amount of the payments required 

8 pursuant to this title to be made to providers 

9 of services, physicians, practitioners, facilities, 

10 suppliers, and individuals. 

11 ‘‘(B) MAKING PAYMENTS.—Making pay12 ments described in subparagraph (A) (including 

13 receipt, disbursement, and accounting for funds 

14 in making such payments). 

15 ‘‘(C) BENEFICIARY EDUCATION AND AS16 SISTANCE.—Serving as a center for, and com17 municating to individuals entitled to benefits 

18 under part A or enrolled under part B, or both, 

19 with respect to education and outreach for 

20 those individuals, and assistance with specific 

21 issues, concerns, or problems of those individ22 uals. 

23 ‘‘(D) PROVIDER CONSULTATIVE SERV24 ICES.—Providing consultative services to insti25 tutions, agencies, and other persons to enable 
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1 them to establish and maintain fiscal records 

2 necessary for purposes of this title and other3 wise to qualify as providers of services, physi4 cians, practitioners, facilities, or suppliers. 

5 ‘‘(E) COMMUNICATION WITH PRO6 VIDERS.—Serving as a center for, and commu7 nicating to providers of services, physicians, 

8 practitioners, facilities, and suppliers, any infor9 mation or instructions furnished to the medi10 care administrative contractor by the Secretary, 

11 and serving as a channel of communication 

12 from such providers, physicians, practitioners, 

13 facilities, and suppliers to the Secretary. 

14 ‘‘(F) PROVIDER EDUCATION AND TECH15 NICAL ASSISTANCE.—Performing the functions 

16 described in subsections (e) and (f), relating to 

17 education, training, and technical assistance to 

18 providers of services, physicians, practitioners, 

19 facilities, and suppliers. 

20 ‘‘(G) ADDITIONAL FUNCTIONS.—Per21 forming such other functions, including (subject 

22 to paragraph (5)) functions under the Medicare 

23 Integrity Program under section 1893, as are 

24 necessary to carry out the purposes of this title. 

25 ‘‘(5) RELATIONSHIP TO MIP CONTRACTS.—
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1 ‘‘(A) NONDUPLICATION OF ACTIVITIES.—

2 In entering into contracts under this section, 

3 the Secretary shall assure that activities of 

4 medicare administrative contractors do not du5 plicate activities carried out under contracts en6 tered into under the Medicare Integrity Pro7 gram under section 1893. The previous sen8 tence shall not apply with respect to the activity 

9 described in section 1893(b)(5) (relating to 

10 prior authorization of certain items of durable 

11 medical equipment under section 1834(a)(15)). 

12 ‘‘(B) CONSTRUCTION.—An entity shall not 

13 be treated as a medicare administrative con14 tractor merely by reason of having entered into 

15 a contract with the Secretary under section 

16 1893. 

17 ‘‘(6) APPLICATION OF FEDERAL ACQUISITION

18 REGULATION.—Except to the extent inconsistent 

19 with a specific requirement of this title, the Federal 

20 Acquisition Regulation applies to contracts under 

21 this title. 

22 ‘‘(b) CONTRACTING REQUIREMENTS.—

23 ‘‘(1) USE OF COMPETITIVE PROCEDURES.—

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

25 laws with general applicability to Federal acqui-
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1 sition and procurement, the Federal Acquisition 

2 Regulation, or in subparagraph (B), the Sec3 retary shall use competitive procedures when 

4 entering into contracts with medicare adminis5 trative contractors under this section. 

6 ‘‘(B) RENEWAL OF CONTRACTS.—The Sec7 retary may renew a contract with a medicare 

8 administrative contractor under this section 

9 from term to term without regard to section 5 

10 of title 41, United States Code, or any other 

11 provision of law requiring competition, if the 

12 medicare administrative contractor has met or 

13 exceeded the performance requirements applica14 ble with respect to the contract and contractor, 

15 except that the Secretary shall provide for the 

16 application of competitive procedures under 

17 such a contract not less frequently than once 

18 every 6 years. 

19 ‘‘(C) TRANSFER OF FUNCTIONS.—The 

20 Secretary may transfer functions among medi21 care administrative contractors without regard 

22 to any provision of law requiring competition. 

23 The Secretary shall ensure that performance 

24 quality is considered in such transfers. The Sec25 retary shall provide notice (whether in the Fed-
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1 eral Register or otherwise) of any such transfer 

2 (including a description of the functions so 

3 transferred and contact information for the 

4 contractors involved) to providers of services, 

5 physicians, practitioners, facilities, and sup6 pliers affected by the transfer. 

7 ‘‘(D) INCENTIVES FOR QUALITY.—The 

8 Secretary may provide incentives for medicare 

9 administrative contractors to provide quality 

10 service and to promote efficiency. 

11 ‘‘(2) COMPLIANCE WITH REQUIREMENTS.—No 

12 contract under this section shall be entered into with 

13 any medicare administrative contractor unless the 

14 Secretary finds that such medicare administrative 

15 contractor will perform its obligations under the con16 tract efficiently and effectively and will meet such 

17 requirements as to financial responsibility, legal au18 thority, and other matters as the Secretary finds 

19 pertinent. 

20 ‘‘(3) PERFORMANCE REQUIREMENTS.—

21 ‘‘(A) DEVELOPMENT OF SPECIFIC PER22 FORMANCE REQUIREMENTS.—The Secretary 

23 shall develop contract performance require24 ments to carry out the specific requirements ap25 plicable under this title to a function described 
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1 in subsection (a)(4) and shall develop standards 

2 for measuring the extent to which a contractor 

3 has met such requirements. In developing such 

4 performance requirements and standards for 

5 measurement, the Secretary shall consult with 

6 providers of services, organizations representa7 tive of beneficiaries under this title, and organi8 zations and agencies performing functions nec9 essary to carry out the purposes of this section 

10 with respect to such performance requirements. 

11 The Secretary shall make such performance re12 quirements and measurement standards avail13 able to the public. 

14 ‘‘(B) CONSIDERATIONS.—The Secretary 

15 shall include, as 1 of the standards, provider 

16 and beneficiary satisfaction levels. 

17 ‘‘(C) INCLUSION IN CONTRACTS.—All con18 tractor performance requirements shall be set 

19 forth in the contract between the Secretary and 

20 the appropriate medicare administrative con21 tractor. Such performance requirements—

22 ‘‘(i) shall reflect the performance re23 quirements published under subparagraph 

24 (A), but may include additional perform25 ance requirements; 
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1 ‘‘(ii) shall be used for evaluating con2 tractor performance under the contract; 

3 and 

4 ‘‘(iii) shall be consistent with the writ5 ten statement of work provided under the 

6 contract. 

7 ‘‘(4) INFORMATION REQUIREMENTS.—The Sec8 retary shall not enter into a contract with a medi9 care administrative contractor under this section un10 less the contractor agrees—

11 ‘‘(A) to furnish to the Secretary such time12 ly information and reports as the Secretary may 

13 find necessary in performing his functions 

14 under this title; and 

15 ‘‘(B) to maintain such records and afford 

16 such access thereto as the Secretary finds nec17 essary to assure the correctness and verification 

18 of the information and reports under subpara19 graph (A) and otherwise to carry out the pur20 poses of this title. 

21 ‘‘(5) SURETY BOND.—A contract with a medi22 care administrative contractor under this section 

23 may require the medicare administrative contractor, 

24 and any of its officers or employees certifying pay25 ments or disbursing funds pursuant to the contract, 
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1 or otherwise participating in carrying out the con2 tract, to give surety bond to the United States in 

3 such amount as the Secretary may deem appro4 priate. 

5 ‘‘(6) RETAINING DIVERSITY OF LOCAL COV6 ERAGE DETERMINATIONS.—A contract with a medi7 care administrative contractor under this section to 

8 perform the function of developing local coverage de9 terminations (as defined in section 1869(f)(2)(B)) 

10 shall provide that the contractor shall—

11 ‘‘(A) designate at least 1 different indi12 vidual to serve as medical director for each 

13 State for which such contract performs such 

14 function; 

15 ‘‘(B) utilize such medical director in the 

16 performance of such function; and 

17 ‘‘(C) appoint a contractor advisory com18 mittee with respect to each such State to pro19 vide a formal mechanism for physicians in the 

20 State to be informed of, and participate in, the 

21 development of a local coverage determination 

22 in an advisory capacity. 

23 ‘‘(c) TERMS AND CONDITIONS.—

24 ‘‘(1) IN GENERAL.—Subject to subsection 

25 (a)(6), a contract with any medicare administrative 
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1 contractor under this section may contain such 

2 terms and conditions as the Secretary finds nec3 essary or appropriate and may provide for advances 

4 of funds to the medicare administrative contractor 

5 for the making of payments by it under subsection 

6 (a)(4)(B). 

7 ‘‘(2) PROHIBITION ON MANDATES FOR CERTAIN

8 DATA COLLECTION.—The Secretary may not require, 

9 as a condition of entering into, or renewing, a con10 tract under this section, that the medicare adminis11 trative contractor match data obtained other than in 

12 its activities under this title with data used in the 

13 administration of this title for purposes of identi14 fying situations in which the provisions of section 

15 1862(b) may apply. 

16 ‘‘(d) LIMITATION ON LIABILITY OF MEDICARE AD17 MINISTRATIVE CONTRACTORS AND CERTAIN OFFICERS.—

18 ‘‘(1) CERTIFYING OFFICER.—No individual des19 ignated pursuant to a contract under this section as 

20 a certifying officer shall, in the absence of the reck21 less disregard of the individual’s obligations or the 

22 intent by that individual to defraud the United 

23 States, be liable with respect to any payments cer24 tified by the individual under this section. 
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1 ‘‘(2) DISBURSING OFFICER.—No disbursing of2 ficer shall, in the absence of the reckless disregard 

3 of the officer’s obligations or the intent by that offi4 cer to defraud the United States, be liable with re5 spect to any payment by such officer under this sec6 tion if it was based upon an authorization (which 

7 meets the applicable requirements for such internal 

8 controls established by the Comptroller General) of 

9 a certifying officer designated as provided in para10 graph (1) of this subsection. 

11 ‘‘(3) LIABILITY OF MEDICARE ADMINISTRATIVE

12 CONTRACTOR.—No medicare administrative con13 tractor shall be liable to the United States for a pay14 ment by a certifying or disbursing officer unless, in 

15 connection with such a payment, the medicare ad16 ministrative contractor acted with reckless disregard 

17 of its obligations under its medicare administrative 

18 contract or with intent to defraud the United States. 

19 ‘‘(4) RELATIONSHIP TO FALSE CLAIMS ACT.—

20 Nothing in this subsection shall be construed to limit 

21 liability for conduct that would constitute a violation 

22 of sections 3729 through 3731 of title 31, United 

23 States Code (commonly known as the ‘‘False Claims 

24 Act’’). 

25 ‘‘(5) INDEMNIFICATION BY SECRETARY.—
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1 ‘‘(A) IN GENERAL.—Notwithstanding any 

2 other provision of law and subject to the suc3 ceeding provisions of this paragraph, in the case 

4 of a medicare administrative contractor (or a 

5 person who is a director, officer, or employee of 

6 such a contractor or who is engaged by the con7 tractor to participate directly in the claims ad8 ministration process) who is made a party to 

9 any judicial or administrative proceeding aris10 ing from, or relating directly to, the claims ad11 ministration process under this title, the Sec12 retary may, to the extent specified in the con13 tract with the contractor, indemnify the con14 tractor (and such persons). 

15 ‘‘(B) CONDITIONS.—The Secretary may 

16 not provide indemnification under subparagraph 

17 (A) insofar as the liability for such costs arises 

18 directly from conduct that is determined by the 

19 Secretary to be criminal in nature, fraudulent, 

20 or grossly negligent. 

21 ‘‘(C) SCOPE OF INDEMNIFICATION.—In22 demnification by the Secretary under subpara23 graph (A) may include payment of judgments, 

24 settlements (subject to subparagraph (D)), 
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1 awards, and costs (including reasonable legal 

2 expenses). 

3 ‘‘(D) WRITTEN APPROVAL FOR SETTLE4 MENTS.—A contractor or other person de5 scribed in subparagraph (A) may not propose to 

6 negotiate a settlement or compromise of a pro7 ceeding described in such subparagraph without 

8 the prior written approval of the Secretary to 

9 negotiate a settlement. Any indemnification 

10 under subparagraph (A) with respect to 

11 amounts paid under a settlement are condi12 tioned upon the Secretary’s prior written ap13 proval of the final settlement. 

14 ‘‘(E) CONSTRUCTION.—Nothing in this 

15 paragraph shall be construed—

16 ‘‘(i) to change any common law immu17 nity that may be available to a medicare 

18 administrative contractor or person de19 scribed in subparagraph (A); or 

20 ‘‘(ii) to permit the payment of costs 

21 not otherwise allowable, reasonable, or allo22 cable under the Federal Acquisition Regu23 lations.’’. 

24 (2) CONSIDERATION OF INCORPORATION OF

25 CURRENT LAW STANDARDS.—In developing contract 
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1 performance requirements under section 1874A(b) 

2 of the Social Security Act (as added by paragraph 

3 (1)) the Secretary shall consider inclusion of the per4 formance standards described in sections 1816(f)(2) 

5 of such Act (relating to timely processing of recon6 siderations and applications for exemptions) and sec7 tion 1842(b)(2)(B) of such Act (relating to timely 

8 review of determinations and fair hearing requests), 

9 as such sections were in effect before the date of en10 actment of this Act. 

11 (b) CONFORMING AMENDMENTS TO SECTION 1816 

12 (RELATING TO FISCAL INTERMEDIARIES).—Section 1816 

13 (42 U.S.C. 1395h) is amended as follows: 

14 (1) The heading is amended to read as follows: 

15 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF

16 PART A’’. 

17 (2) Subsection (a) is amended to read as fol18 lows: 

19 ‘‘(a) The administration of this part shall be con20 ducted through contracts with medicare administrative 

21 contractors under section 1874A.’’. 

22 (3) Subsection (b) is repealed. 

23 (4) Subsection (c) is amended—

24 (A) by striking paragraph (1); and 

25 (B) in each of paragraphs (2)(A) and 

26 (3)(A), by striking ‘‘agreement under this sec-
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1 tion’’ and inserting ‘‘contract under section 

2 1874A that provides for making payments 

3 under this part’’. 

4 (5) Subsections (d) through (i) are repealed. 

5 (6) Subsections (j) and (k) are each amended—

6 (A) by striking ‘‘An agreement with an 

7 agency or organization under this section’’ and 

8 inserting ‘‘A contract with a medicare adminis9 trative contractor under section 1874A with re10 spect to the administration of this part’’; and 

11 (B) by striking ‘‘such agency or organiza12 tion’’ and inserting ‘‘such medicare administra13 tive contractor’’ each place it appears. 

14 (7) Subsection (l) is repealed. 

15 (c) CONFORMING AMENDMENTS TO SECTION 1842 

16 (RELATING TO CARRIERS).—Section 1842 (42 U.S.C. 

17 1395u) is amended as follows: 

18 (1) The heading is amended to read as follows: 

19 ‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF

20 PART B’’. 

21 (2) Subsection (a) is amended to read as fol22 lows: 

23 ‘‘(a) The administration of this part shall be con24 ducted through contracts with medicare administrative 

25 contractors under section 1874A.’’. 

26 (3) Subsection (b) is amended—
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1 (A) by striking paragraph (1); 

2 (B) in paragraph (2)—

3 (i) by striking subparagraphs (A) and 

4 (B); 

5 (ii) in subparagraph (C), by striking 

6 ‘‘carriers’’ and inserting ‘‘medicare admin7 istrative contractors’’; and 

8 (iii) by striking subparagraphs (D) 

9 and (E); 

10 (C) in paragraph (3)—

11 (i) in the matter before subparagraph 

12 (A), by striking ‘‘Each such contract shall 

13 provide that the carrier’’ and inserting 

14 ‘‘The Secretary’’; 

15 (ii) by striking ‘‘will’’ the first place it 

16 appears in each of subparagraphs (A), (B), 

17 (F), (G), (H), and (L) and inserting 

18 ‘‘shall’’; 

19 (iii) in subparagraph (B), in the mat20 ter before clause (i), by striking ‘‘to the 

21 policyholders and subscribers of the car22 rier’’ and inserting ‘‘to the policyholders 

23 and subscribers of the medicare adminis24 trative contractor’’; 
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1 (iv) by striking subparagraphs (C), 

2 (D), and (E); 

3 (v) in subparagraph (H)—

4 (I) by striking ‘‘if it makes deter5 minations or payments with respect to 

6 physicians’ services,’’; and 

7 (II) by striking ‘‘carrier’’ and in8 serting ‘‘medicare administrative con9 tractor’’; 

10 (vi) by striking subparagraph (I); 

11 (vii) in subparagraph (L), by striking 

12 the semicolon and inserting a period; 

13 (viii) in the first sentence, after sub14 paragraph (L), by striking ‘‘and shall con15 tain’’ and all that follows through the pe16 riod; and 

17 (ix) in the seventh sentence, by insert18 ing ‘‘medicare administrative contractor,’’ 

19 after ‘‘carrier,’’; 

20 (D) by striking paragraph (5); 

21 (E) in paragraph (6)(D)(iv), by striking 

22 ‘‘carrier’’ and inserting ‘‘medicare administra23 tive contractor’’; and 
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1 (F) in paragraph (7), by striking ‘‘the car2 rier’’ and inserting ‘‘the Secretary’’ each place 

3 it appears. 

4 (4) Subsection (c) is amended—

5 (A) by striking paragraph (1); 

6 (B) in paragraph (2), by striking ‘‘contract 

7 under this section which provides for the dis8 bursement of funds, as described in subsection 

9 (a)(1)(B),’’ and inserting ‘‘contract under sec10 tion 1874A that provides for making payments 

11 under this part’’; 

12 (C) in paragraph (3)(A), by striking ‘‘sub13 section (a)(1)(B)’’ and inserting ‘‘section 

14 1874A(a)(3)(B)’’; 

15 (D) in paragraph (4), by striking ‘‘carrier’’ 

16 and inserting ‘‘medicare administrative con17 tractor’’; 

18 (E) in paragraph (5), by striking ‘‘contract 

19 under this section which provides for the dis20 bursement of funds, as described in subsection 

21 (a)(1)(B), shall require the carrier’’ and ‘‘car22 rier responses’’ and inserting ‘‘contract under 

23 section 1874A that provides for making pay24 ments under this part shall require the medi-
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1 care administrative contractor’’ and ‘‘contractor 

2 responses’’, respectively; and 

3 (F) by striking paragraph (6). 

4 (5) Subsections (d), (e), and (f) are repealed. 

5 (6) Subsection (g) is amended by striking ‘‘car6 rier or carriers’’ and inserting ‘‘medicare administra7 tive contractor or contractors’’. 

8 (7) Subsection (h) is amended—

9 (A) in paragraph (2)—

10 (i) by striking ‘‘Each carrier having 

11 an agreement with the Secretary under 

12 subsection (a)’’ and inserting ‘‘The Sec13 retary’’; and 

14 (ii) by striking ‘‘Each such carrier’’ 

15 and inserting ‘‘The Secretary’’; 

16 (B) in paragraph (3)(A)—

17 (i) by striking ‘‘a carrier having an 

18 agreement with the Secretary under sub19 section (a)’’ and inserting ‘‘medicare ad20 ministrative contractor having a contract 

21 under section 1874A that provides for 

22 making payments under this part’’; and 

23 (ii) by striking ‘‘such carrier’’ and in24 serting ‘‘such contractor’’; 

25 (C) in paragraph (3)(B)—
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1 (i) by striking ‘‘a carrier’’ and insert2 ing ‘‘a medicare administrative contractor’’ 

3 each place it appears; and 

4 (ii) by striking ‘‘the carrier’’ and in5 serting ‘‘the contractor’’ each place it ap6 pears; and 

7 (D) in paragraphs (5)(A) and (5)(B)(iii), 

8 by striking ‘‘carriers’’ and inserting ‘‘medicare 

9 administrative contractors’’ each place it ap10 pears. 

11 (8) Subsection (l) is amended—

12 (A) in paragraph (1)(A)(iii), by striking 

13 ‘‘carrier’’ and inserting ‘‘medicare administra14 tive contractor’’; and 

15 (B) in paragraph (2), by striking ‘‘carrier’’ 

16 and inserting ‘‘medicare administrative con17 tractor’’. 

18 (9) Subsection (p)(3)(A) is amended by striking 

19 ‘‘carrier’’ and inserting ‘‘medicare administrative 

20 contractor’’. 

21 (10) Subsection (q)(1)(A) is amended by strik22 ing ‘‘carrier’’. 

23 (d) EFFECTIVE DATE; TRANSITION RULE.—

24 (1) EFFECTIVE DATE.—
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1 (A) IN GENERAL.—Except as otherwise 

2 provided in this subsection, the amendments 

3 made by this section shall take effect on Octo4 ber 1, 2005, and the Secretary is authorized to 

5 take such steps before such date as may be nec6 essary to implement such amendments on a 

7 timely basis. 

8 (B) CONSTRUCTION FOR CURRENT CON9 TRACTS.—Such amendments shall not apply to 

10 contracts in effect before the date specified 

11 under subparagraph (A) that continue to retain 

12 the terms and conditions in effect on such date 

13 (except as otherwise provided under this title, 

14 other than under this section) until such date 

15 as the contract is let out for competitive bid16 ding under such amendments. 

17 (C) DEADLINE FOR COMPETITIVE BID18 DING.—The Secretary shall provide for the let19 ting by competitive bidding of all contracts for 

20 functions of medicare administrative contrac21 tors for annual contract periods that begin on 

22 or after October 1, 2011. 

23 (2) GENERAL TRANSITION RULES.—

24 (A) AUTHORITY TO CONTINUE TO ENTER

25 INTO NEW AGREEMENTS AND CONTRACTS AND
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1 WAIVER OF PROVIDER NOMINATION PROVISIONS

2 DURING TRANSITION.—Prior to the date speci3 fied in paragraph (1)(A), the Secretary may, 

4 consistent with subparagraph (B), continue to 

5 enter into agreements under section 1816 and 

6 contracts under section 1842 of the Social Se7 curity Act (42 U.S.C. 1395h, 1395u). The Sec8 retary may enter into new agreements under 

9 section 1816 during the time period without re10 gard to any of the provider nomination provi11 sions of such section. 

12 (B) APPROPRIATE TRANSITION.—The Sec13 retary shall take such steps as are necessary to 

14 provide for an appropriate transition from 

15 agreements under section 1816 and contracts 

16 under section 1842 of the Social Security Act 

17 (42 U.S.C. 1395h, 1395u) to contracts under 

18 section 1874A, as added by subsection (a)(1). 

19 (3) AUTHORIZING CONTINUATION OF MIP AC20 TIVITIES UNDER CURRENT CONTRACTS AND AGREE21 MENTS AND UNDER TRANSITION CONTRACTS.—The 

22 provisions contained in the exception in section 

23 1893(d)(2) of the Social Security Act (42 U.S.C. 

24 1395ddd(d)(2)) shall continue to apply notwith25 standing the amendments made by this section, and 
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1 any reference in such provisions to an agreement or 

2 contract shall be deemed to include agreements and 

3 contracts entered into pursuant to paragraph (2)(A). 

4 (e) REFERENCES.—On and after the effective date 

5 provided under subsection (d)(1), any reference to a fiscal 

6 intermediary or carrier under title XI or XVIII of the So7 cial Security Act (or any regulation, manual instruction, 

8 interpretative rule, statement of policy, or guideline issued 

9 to carry out such titles) shall be deemed a reference to 

10 an appropriate medicare administrative contractor (as 

11 provided under section 1874A of the Social Security Act). 

12 (f) SECRETARIAL SUBMISSION OF LEGISLATIVE PRO13 POSAL.—Not later than 6 months after the date of enact14 ment of this Act, the Secretary shall submit to the appro15 priate committees of Congress a legislative proposal pro16 viding for such technical and conforming amendments in 

17 the law as are required by the provisions of this section. 

18 (g) REPORTS ON IMPLEMENTATION.—

19 (1) PROPOSAL FOR IMPLEMENTATION.—At 

20 least 1 year before the date specified in subsection 

21 (d)(1)(A), the Secretary shall submit a report to 

22 Congress and the Comptroller General of the United 

23 States that describes a plan for an appropriate tran24 sition. The Comptroller General shall conduct an 

25 evaluation of such plan and shall submit to Con-
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1 gress, not later than 6 months after the date the re2 port is received, a report on such evaluation and 

3 shall include in such report such recommendations 

4 as the Comptroller General deems appropriate. 

5 (2) STATUS OF IMPLEMENTATION.—The Sec6 retary shall submit a report to Congress not later 

7 than October 1, 2008, that describes the status of 

8 implementation of such amendments and that in9 cludes a description of the following: 

10 (A) The number of contracts that have 

11 been competitively bid as of such date. 

12 (B) The distribution of functions among 

13 contracts and contractors. 

14 (C) A timeline for complete transition to 

15 full competition. 

16 (D) A detailed description of how the Sec17 retary has modified oversight and management 

18 of medicare contractors to adapt to full com19 petition. 

20 Subtitle D—Education and 

21 Outreach Improvements 

22 SEC. 531. PROVIDER EDUCATION AND TECHNICAL ASSIST23 ANCE. 

24 (a) COORDINATION OF EDUCATION FUNDING.—
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1 (1) IN GENERAL.—The Social Security Act is 

2 amended by inserting after section 1888 the fol3 lowing new section: 

4 ‘‘PROVIDER EDUCATION AND TECHNICAL ASSISTANCE

5 ‘‘SEC. 1889. (a) COORDINATION OF EDUCATION

6 FUNDING.—The Secretary shall coordinate the edu7 cational activities provided through medicare contractors 

8 (as defined in subsection (e), including under section 

9 1893) in order to maximize the effectiveness of Federal 

10 education efforts for providers of services, physicians, 

11 practitioners, and suppliers.’’. 

12 (2) EFFECTIVE DATE.—The amendment made 

13 by paragraph (1) shall take effect on the date of en14 actment of this Act. 

15 (b) INCENTIVES TO IMPROVE CONTRACTOR PER16 FORMANCE.—

17 (1) IN GENERAL.—Section 1874A, as added by 

18 section 521(a)(1), is amended by adding at the end 

19 the following new subsection: 

20 ‘‘(e) INCENTIVES TO IMPROVE CONTRACTOR PER21 FORMANCE IN PROVIDER EDUCATION AND OUTREACH.—

22 ‘‘(1) METHODOLOGY TO MEASURE CONTRACTOR

23 ERROR RATES.—In order to give medicare contrac24 tors (as defined in paragraph (3)) an incentive to 

25 implement effective education and outreach pro26 grams for providers of services, physicians, practi-
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1 tioners, and suppliers, the Secretary shall develop 

2 and implement by October 1, 2004, a methodology 

3 to measure the specific claims payment error rates 

4 of such contractors in the processing or reviewing of 

5 medicare claims. 

6 ‘‘(2) GAO REVIEW OF METHODOLOGY.—The 

7 Comptroller General of the United States shall re8 view, and make recommendations to the Secretary, 

9 regarding the adequacy of such methodology. 

10 ‘‘(3) MEDICARE CONTRACTOR DEFINED.—For 

11 purposes of this subsection, the term ‘medicare con12 tractor’ includes a medicare administrative con13 tractor, a fiscal intermediary with a contract under 

14 section 1816, and a carrier with a contract under 

15 section 1842.’’. 

16 (2) REPORT.—The Secretary shall submit to 

17 Congress a report that describes how the Secretary 

18 intends to use the methodology developed under sec19 tion 1874A(e)(1) of the Social Security Act, as 

20 added by paragraph (1), in assessing medicare con21 tractor performance in implementing effective edu22 cation and outreach programs, including whether to 

23 use such methodology as a basis for performance bo24 nuses. 
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1 (c) IMPROVED PROVIDER EDUCATION AND TRAIN2 ING.—

3 (1) INCREASED FUNDING FOR ENHANCED EDU4 CATION AND TRAINING THROUGH MEDICARE INTEG5 RITY PROGRAM.—Section 1817(k)(4) (42 U.S.C. 

6 1395i(k)(4)) is amended—

7 (A) in subparagraph (A), by striking ‘‘sub8 paragraph (B)’’ and inserting ‘‘subparagraphs 

9 (B) and (C)’’; 

10 (B) in subparagraph (B), by striking ‘‘The 

11 amount appropriated’’ and inserting ‘‘Subject 

12 to subparagraph (C), the amount appro13 priated’’; and 

14 (C) by adding at the end the following new 

15 subparagraph: 

16 ‘‘(C) ENHANCED PROVIDER EDUCATION

17 AND TRAINING.—

18 ‘‘(i) IN GENERAL.—In addition to the 

19 amount appropriated under subparagraph 

20 (B), the amount appropriated under sub21 paragraph (A) for a fiscal year (beginning 

22 with fiscal year 2004) is increased by 

23 $35,000,000. 

24 ‘‘(ii) USE.—The funds made available 

25 under this subparagraph shall be used only 
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1 to increase the conduct by medicare con2 tractors of education and training of pro3 viders of services, physicians, practitioners, 

4 and suppliers regarding billing, coding, and 

5 other appropriate items and may also be 

6 used to improve the accuracy, consistency, 

7 and timeliness of contractor responses to 

8 written and phone inquiries from providers 

9 of services, physicians, practitioners, and 

10 suppliers.’’. 

11 (2) TAILORING EDUCATION AND TRAINING FOR

12 SMALL PROVIDERS OR SUPPLIERS.—

13 (A) IN GENERAL.—Section 1889, as added 

14 by subsection (a), is amended by adding at the 

15 end the following new subsection: 

16 ‘‘(b) TAILORING EDUCATION AND TRAINING ACTIVI17 TIES FOR SMALL PROVIDERS OR SUPPLIERS.—

18 ‘‘(1) IN GENERAL.—Insofar as a medicare con19 tractor conducts education and training activities, it 

20 shall take into consideration the special needs of 

21 small providers of services or suppliers (as defined in 

22 paragraph (2)). Such education and training activi23 ties for small providers of services and suppliers may 

24 include the provision of technical assistance (such as 

25 review of billing systems and internal controls to de-
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1 termine program compliance and to suggest more ef2 ficient and effective means of achieving such compli3 ance). 

4 ‘‘(2) SMALL PROVIDER OF SERVICES OR SUP5 PLIER.—In this subsection, the term ‘small provider 

6 of services or supplier’ means—

7 ‘‘(A) an institutional provider of services 

8 with fewer than 25 full-time-equivalent employ9 ees; or 

10 ‘‘(B) a physician, practitioner, or supplier 

11 with fewer than 10 full-time-equivalent employ12 ees.’’. 

13 (B) EFFECTIVE DATE.—The amendment 

14 made by subparagraph (A) shall take effect on 

15 January 1, 2004. 

16 (d) ADDITIONAL PROVIDER EDUCATION PROVI17 SIONS.—

18 (1) IN GENERAL.—Section 1889, as added by 

19 subsection (a) and as amended by subsection (c)(2), 

20 is amended by adding at the end the following new 

21 subsections: 

22 ‘‘(c) ENCOURAGEMENT OF PARTICIPATION IN EDU23 CATION PROGRAM ACTIVITIES.—A medicare contractor 

24 may not use a record of attendance at (or failure to at25 tend) educational activities or other information gathered 
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1 during an educational program conducted under this sec2 tion or otherwise by the Secretary to select or track pro3 viders of services, physicians, practitioners, or suppliers 

4 for the purpose of conducting any type of audit or prepay5 ment review. 

6 ‘‘(d) CONSTRUCTION.—Nothing in this section or sec7 tion 1893(g) shall be construed as providing for disclosure 

8 by a medicare contractor—

9 ‘‘(1) of the screens used for identifying claims 

10 that will be subject to medical review; or 

11 ‘‘(2) of information that would compromise 

12 pending law enforcement activities or reveal findings 

13 of law enforcement-related audits. 

14 ‘‘(e) DEFINITIONS.—For purposes of this section and 

15 section 1817(k)(4)(C), the term ‘medicare contractor’ in16 cludes the following: 

17 ‘‘(1) A medicare administrative contractor with 

18 a contract under section 1874A, a fiscal inter19 mediary with a contract under section 1816, and a 

20 carrier with a contract under section 1842. 

21 ‘‘(2) An eligible entity with a contract under 

22 section 1893. 

23 Such term does not include, with respect to activities of 

24 a specific provider of services, physician, practitioner, or 

25 supplier an entity that has no authority under this title 
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1 or title XI with respect to such activities and such provider 

2 of services, physician, practitioner, or supplier.’’. 

3 (2) EFFECTIVE DATE.—The amendment made 

4 by paragraph (1) shall take effect on the date of en5 actment of this Act. 

6 SEC. 532. ACCESS TO AND PROMPT RESPONSES FROM 

7 MEDICARE CONTRACTORS. 

8 (a) IN GENERAL.—Section 1874A, as added by sec9 tion 521(a)(1) and as amended by section 531(b)(1), is 

10 amended by adding at the end the following new sub11 section: 

12 ‘‘(f) COMMUNICATING WITH BENEFICIARIES AND

13 PROVIDERS.—

14 ‘‘(1) COMMUNICATION PROCESS.—The Sec15 retary shall develop a process for medicare contrac16 tors to communicate with beneficiaries and with pro17 viders of services, physicians, practitioners, and sup18 pliers under this title. 

19 ‘‘(2) RESPONSE TO WRITTEN INQUIRIES.—Each 

20 medicare contractor (as defined in paragraph (5)) 

21 shall provide general written responses (which may 

22 be through electronic transmission) in a clear, con23 cise, and accurate manner to inquiries by bene24 ficiaries, providers of services, physicians, practi25 tioners, and suppliers concerning the programs 
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1 under this title within 45 business days of the date 

2 of receipt of such inquiries. 

3 ‘‘(3) RESPONSE TO TOLL-FREE LINES.—The 

4 Secretary shall ensure that medicare contractors 

5 provide a toll-free telephone number at which bene6 ficiaries, providers, physicians, practitioners, and 

7 suppliers may obtain information regarding billing, 

8 coding, claims, coverage, and other appropriate in9 formation under this title. 

10 ‘‘(4) MONITORING OF CONTRACTOR RE11 SPONSES.—

12 ‘‘(A) IN GENERAL.—Each medicare con13 tractor shall, consistent with standards devel14 oped by the Secretary under subparagraph 

15 (B)—

16 ‘‘(i) maintain a system for identifying 

17 who provides the information referred to in 

18 paragraphs (2) and (3); and 

19 ‘‘(ii) monitor the accuracy, consist20 ency, and timeliness of the information so 

21 provided. 

22 ‘‘(B) DEVELOPMENT OF STANDARDS.—

23 ‘‘(i) IN GENERAL.—The Secretary 

24 shall establish (and publish in the Federal 

25 Register) standards regarding the accu-
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1 racy, consistency, and timeliness of the in2 formation provided in response to inquiries 

3 under this subsection. Such standards shall 

4 be consistent with the performance require5 ments established under subsection (b)(3). 

6 ‘‘(ii) EVALUATION.—In conducting 

7 evaluations of individual medicare contrac8 tors, the Secretary shall consider the re9 sults of the monitoring conducted under 

10 subparagraph (A) taking into account as 

11 performance requirements the standards 

12 established under clause (i). The Secretary 

13 shall, in consultation with organizations 

14 representing providers of services, sup15 pliers, and individuals entitled to benefits 

16 under part A or enrolled under part B, or 

17 both, establish standards relating to the 

18 accuracy, consistency, and timeliness of the 

19 information so provided. 

20 ‘‘(C) DIRECT MONITORING.—Nothing in 

21 this paragraph shall be construed as preventing 

22 the Secretary from directly monitoring the ac23 curacy, consistency, and timeliness of the infor24 mation so provided. 
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1 ‘‘(5) MEDICARE CONTRACTOR DEFINED.—For 

2 purposes of this subsection, the term ‘medicare con3 tractor’ has the meaning given such term in sub4 section (e)(3).’’. 

5 (b) EFFECTIVE DATE.—The amendment made by 

6 subsection (a) shall take effect October 1, 2004. 

7 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

8 are authorized to be appropriated such sums as are nec9 essary to carry out section 1874A(f) of the Social Security 

10 Act, as added by subsection (a). 

11 SEC. 533. RELIANCE ON GUIDANCE. 

12 (a) IN GENERAL.—Section 1871(d), as added by sec13 tion 502(a), is amended by adding at the end the following 

14 new paragraph: 

15 ‘‘(2) If—

16 ‘‘(A) a provider of services, physician, practi17 tioner, or other supplier follows written guidance 

18 provided—

19 ‘‘(i) by the Secretary; or 

20 ‘‘(ii) by a medicare contractor (as defined 

21 in section 1889(e) and whether in the form of 

22 a written response to a written inquiry under 

23 section 1874A(f)(1) or otherwise) acting within 

24 the scope of the contractor’s contract authority, 
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1 in response to a written inquiry with respect to the 

2 furnishing of items or services or the submission of 

3 a claim for benefits for such items or services; 

4 ‘‘(B) the Secretary determines that—

5 ‘‘(i) the provider of services, physician, 

6 practitioner, or supplier has accurately pre7 sented the circumstances relating to such items, 

8 services, and claim to the Secretary or the con9 tractor in the written guidance; and 

10 ‘‘(ii) there is no indication of fraud or 

11 abuse committed by the provider of services, 

12 physician, practitioner, or supplier against the 

13 program under this title; and 

14 ‘‘(C) the guidance was in error; 

15 the provider of services, physician, practitioner, or supplier 

16 shall not be subject to any penalty or interest under this 

17 title (or the provisions of title XI insofar as they relate 

18 to this title) relating to the provision of such items or serv19 ice or such claim if the provider of services, physician, 

20 practitioner, or supplier reasonably relied on such guid21 ance. In applying this paragraph with respect to guidance 

22 in the form of general responses to frequently asked ques23 tions, the Secretary retains authority to determine the ex24 tent to which such general responses apply to the par25 ticular circumstances of individual claims.’’. 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall apply to penalties imposed on or after 

3 the date of enactment of this Act. 

4 SEC. 534. MEDICARE PROVIDER OMBUDSMAN. 

5 (a) MEDICARE PROVIDER OMBUDSMAN.—Section 

6 1868 (42 U.S.C. 1395ee) is amended—

7 (1) by adding at the end of the heading the fol8 lowing: ‘‘; MEDICARE PROVIDER OMBUDSMAN’’; 

9 (2) by inserting ‘‘PRACTICING PHYSICIANS AD10 VISORY COUNCIL.—(1)’’ after ‘‘(a)’’; 

11 (3) in paragraph (1), as so redesignated under 

12 paragraph (2), by striking ‘‘in this section’’ and in13 serting ‘‘in this subsection’’; 

14 (4) by redesignating subsections (b) and (c) as 

15 paragraphs (2) and (3), respectively; and 

16 (5) by adding at the end the following new sub17 section: 

18 ‘‘(b) MEDICARE PROVIDER OMBUDSMAN.—

19 ‘‘(1) IN GENERAL.—By not later than 1 year 

20 after the date of enactment of the Prescription Drug 

21 and Medicare Improvement Act of 2003, the Sec22 retary shall appoint a Medicare Provider Ombuds23 man. 

24 ‘‘(2) DUTIES.—The Medicare Provider Om25 budsman shall—
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1 ‘‘(A) provide assistance, on a confidential 

2 basis, to entities and individuals providing items 

3 and services, including covered drugs under 

4 part D, under this title with respect to com5 plaints, grievances, and requests for informa6 tion concerning the programs under this title 

7 (including provisions of title XI insofar as they 

8 relate to this title and are not administered by 

9 the Office of the Inspector General of the De10 partment of Health and Human Services) and 

11 in the resolution of unclear or conflicting guid12 ance given by the Secretary and medicare con13 tractors to such providers of services and sup14 pliers regarding such programs and provisions 

15 and requirements under this title and such pro16 visions; and 

17 ‘‘(B) submit recommendations to the Sec18 retary for improvement in the administration of 

19 this title and such provisions, including—

20 ‘‘(i) recommendations to respond to 

21 recurring patterns of confusion in this title 

22 and such provisions (including rec23 ommendations regarding suspending impo24 sition of sanctions where there is wide-
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1 spread confusion in program administra2 tion), and 

3 ‘‘(ii) recommendations to provide for 

4 an appropriate and consistent response (in5 cluding not providing for audits) in cases 

6 of self-identified overpayments by providers 

7 of services and suppliers. 

8 ‘‘(3) STAFF.—The Secretary shall provide the 

9 Medicare Provider Ombudsman with appropriate 

10 staff.’’. 

11 (b) FUNDING.—There are authorized to be appro12 priated to the Secretary (in appropriate part from the 

13 Federal Hospital Insurance Trust Fund and the Federal 

14 Supplementary Medical Insurance Trust Fund (including 

15 the Prescription Drug Account)) to carry out the provi16 sions of subsection (b) of section 1868 of the Social Secu17 rity Act (42 U.S.C. 1395ee) (relating to the Medicare Pro18 vider Ombudsman), as added by subsection (a)(5), such 

19 sums as are necessary for fiscal year 2004 and each suc20 ceeding fiscal year. 

21 SEC. 535. BENEFICIARY OUTREACH DEMONSTRATION PRO22 GRAMS. 

23 (a) DEMONSTRATION ON THE PROVISION OF ADVICE

24 AND ASSISTANCE TO MEDICARE BENEFICIARIES AT
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1 LOCAL OFFICES OF THE SOCIAL SECURITY ADMINISTRA2 TION.—

3 (1) ESTABLISHMENT.—The Secretary shall es4 tablish a demonstration program (in this subsection 

5 referred to as the ‘‘demonstration program’’) under 

6 which medicare specialists employed by the Depart7 ment of Health and Human Services provide advice 

8 and assistance to medicare beneficiaries at the loca9 tion of existing local offices of the Social Security 

10 Administration. 

11 (2) LOCATIONS.—

12 (A) IN GENERAL.—The demonstration pro13 gram shall be conducted in at least 6 offices or 

14 areas. Subject to subparagraph (B), in selecting 

15 such offices and areas, the Secretary shall pro16 vide preference for offices with a high volume of 

17 visits by medicare beneficiaries. 

18 (B) ASSISTANCE FOR RURAL BENE19 FICIARIES.—The Secretary shall provide for the 

20 selection of at least 2 rural areas to participate 

21 in the demonstration program. In conducting 

22 the demonstration program in such rural areas, 

23 the Secretary shall provide for medicare special24 ists to travel among local offices in a rural area 

25 on a scheduled basis. 
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1 (3) DURATION.—The demonstration program 

2 shall be conducted over a 3-year period. 

3 (4) EVALUATION AND REPORT.—

4 (A) EVALUATION.—The Secretary shall 

5 provide for an evaluation of the demonstration 

6 program. Such evaluation shall include an anal7 ysis of—

8 (i) utilization of, and beneficiary satis9 faction with, the assistance provided under 

10 the program; and 

11 (ii) the cost-effectiveness of providing 

12 beneficiary assistance through out-sta13 tioning medicare specialists at local social 

14 security offices. 

15 (B) REPORT.—The Secretary shall submit 

16 to Congress a report on such evaluation and 

17 shall include in such report recommendations 

18 regarding the feasibility of permanently out-sta19 tioning Medicare specialists at local social secu20 rity offices. 

21 (b) DEMONSTRATION ON PROVIDING PRIOR DETER22 MINATIONS.—

23 (1) ESTABLISHMENT.—By not later than 1 

24 year after the date of enactment of this Act, the 

25 Secretary shall establish a demonstration project to 
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1 test the administrative feasibility of providing a 

2 process for medicare beneficiaries and entities and 

3 individuals furnishing such beneficiaries with items 

4 and services under title XVIII of the Social Security 

5 Act program to make a request for, and receive, a 

6 determination (after an advance beneficiary notice is 

7 issued with respect to the item or service involved 

8 but before such item or service is furnished to the 

9 beneficiary) as to whether the item or service is cov10 ered under such title consistent with the applicable 

11 requirements of section 1862(a)(1)(A) of such Act 

12 (42 U.S.C. 1395y(a)(1)(A)) (relating to medical ne13 cessity). 

14 (2) EVALUATION AND REPORT.—

15 (A) EVALUATION.—The Secretary shall 

16 provide for an evaluation of the demonstration 

17 program conducted under paragraph (1). 

18 (B) REPORT.—By not later than January 

19 1, 2006, the Secretary shall submit to Congress 

20 a report on such evaluation together with rec21 ommendations for such legislation and adminis22 trative actions as the Secretary considers appro23 priate. 
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1 Subtitle E—Review, Recovery, and 

2 Enforcement Reform 

3 SEC. 541. PREPAYMENT REVIEW. 

4 (a) IN GENERAL.—Section 1874A, as added by sec5 tion 521(a)(1) and as amended by sections 531(b)(1) and 

6 532(a), is amended by adding at the end the following new 

7 subsection: 

8 ‘‘(g) CONDUCT OF PREPAYMENT REVIEW.—

9 ‘‘(1) STANDARDIZATION OF RANDOM PREPAY10 MENT REVIEW.—A medicare administrative con11 tractor shall conduct random prepayment review 

12 only in accordance with a standard protocol for ran13 dom prepayment audits developed by the Secretary. 

14 ‘‘(2) LIMITATIONS ON INITIATION OF NON15 RANDOM PREPAYMENT REVIEW.—A medicare admin16 istrative contractor may not initiate nonrandom pre17 payment review of a provider of services, physician, 

18 practitioner, or supplier based on the initial identi19 fication by that provider of services, physician, prac20 titioner, or supplier of an improper billing practice 

21 unless there is a likelihood of sustained or high level 

22 of payment error (as defined by the Secretary). 

23 ‘‘(3) TERMINATION OF NONRANDOM PREPAY24 MENT REVIEW.—The Secretary shall establish proto25 cols or standards relating to the termination, includ-
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1 ing termination dates, of nonrandom prepayment re2 view. Such regulations may vary such a termination 

3 date based upon the differences in the circumstances 

4 triggering prepayment review. 

5 ‘‘(4) CONSTRUCTION.—Nothing in this sub6 section shall be construed as preventing the denial of 

7 payments for claims actually reviewed under a ran8 dom prepayment review. In the case of a provider of 

9 services, physician, practitioner, or supplier with re10 spect to which amounts were previously overpaid, 

11 nothing in this subsection shall be construed as lim12 iting the ability of a medicare administrative con13 tractor to request the periodic production of records 

14 or supporting documentation for a limited sample of 

15 submitted claims to ensure that the previous prac16 tice is not continuing. 

17 ‘‘(5) RANDOM PREPAYMENT REVIEW DE18 FINED.—For purposes of this subsection, the term 

19 ‘random prepayment review’ means a demand for 

20 the production of records or documentation absent 

21 cause with respect to a claim.’’. 

22 (b) EFFECTIVE DATE.—

23 (1) IN GENERAL.—Except as provided in this 

24 subsection, the amendment made by subsection (a) 
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1 shall take effect on the date of enactment of this 

2 Act. 

3 (2) DEADLINE FOR PROMULGATION OF CER4 TAIN REGULATIONS.—The Secretary shall first issue 

5 regulations under section 1874A(g) of the Social Se6 curity Act, as added by subsection (a), by not later 

7 than 1 year after the date of enactment of this Act. 

8 (3) APPLICATION OF STANDARD PROTOCOLS

9 FOR RANDOM PREPAYMENT REVIEW.—Section 

10 1874A(g)(1) of the Social Security Act, as added by 

11 subsection (a), shall apply to random prepayment re12 views conducted on or after such date (not later 

13 than 1 year after the date of enactment of this Act) 

14 as the Secretary shall specify. The Secretary shall 

15 develop and publish the standard protocol under 

16 such section by not later than 1 year after the date 

17 of enactment of this Act. 

18 SEC. 542. RECOVERY OF OVERPAYMENTS. 

19 (a) IN GENERAL.—Section 1874A, as added by sec20 tion 521(a)(1) and as amended by sections 531(b)(1), 

21 532(a), and 541(a), is amended by adding at the end the 

22 following new subsection: 

23 ‘‘(h) RECOVERY OF OVERPAYMENTS.—

24 ‘‘(1) USE OF REPAYMENT PLANS.—
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1 ‘‘(A) IN GENERAL.—If the repayment, 

2 within the period otherwise permitted by a pro3 vider of services, physician, practitioner, or 

4 other supplier, of an overpayment under this 

5 title meets the standards developed under sub6 paragraph (B), subject to subparagraph (C), 

7 and the provider, physician, practitioner, or 

8 supplier requests the Secretary to enter into a 

9 repayment plan with respect to such overpay10 ment, the Secretary shall enter into a plan with 

11 the provider, physician, practitioner, or supplier 

12 for the offset or repayment (at the election of 

13 the provider, physician, practitioner, or sup14 plier) of such overpayment over a period of at 

15 least 1 year, but not longer than 3 years. Inter16 est shall accrue on the balance through the pe17 riod of repayment. The repayment plan shall 

18 meet terms and conditions determined to be ap19 propriate by the Secretary. 

20 ‘‘(B) DEVELOPMENT OF STANDARDS.—

21 The Secretary shall develop standards for the 

22 recovery of overpayments. Such standards 

23 shall—

24 ‘‘(i) include a requirement that the 

25 Secretary take into account (and weigh in 
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1 favor of the use of a repayment plan) the 

2 reliance (as described in section 

3 1871(d)(2)) by a provider of services, phy4 sician, practitioner, and supplier on guid5 ance when determining whether a repay6 ment plan should be offered; and 

7 ‘‘(ii) provide for consideration of the 

8 financial hardship imposed on a provider of 

9 services, physician, practitioner, or supplier 

10 in considering such a repayment plan. 

11 In developing standards with regard to financial 

12 hardship with respect to a provider of services, 

13 physician, practitioner, or supplier, the Sec14 retary shall take into account the amount of the 

15 proposed recovery as a proportion of payments 

16 made to that provider, physician, practitioner, 

17 or supplier. 

18 ‘‘(C) EXCEPTIONS.—Subparagraph (A) 

19 shall not apply if—

20 ‘‘(i) the Secretary has reason to sus21 pect that the provider of services, physi22 cian, practitioner, or supplier may file for 

23 bankruptcy or otherwise cease to do busi24 ness or discontinue participation in the 

25 program under this title; or 
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1 ‘‘(ii) there is an indication of fraud or 

2 abuse committed against the program. 

3 ‘‘(D) IMMEDIATE COLLECTION IF VIOLA4 TION OF REPAYMENT PLAN.—If a provider of 

5 services, physician, practitioner, or supplier fails 

6 to make a payment in accordance with a repay7 ment plan under this paragraph, the Secretary 

8 may immediately seek to offset or otherwise re9 cover the total balance outstanding (including 

10 applicable interest) under the repayment plan. 

11 ‘‘(E) RELATION TO NO FAULT PROVI12 SION.—Nothing in this paragraph shall be con13 strued as affecting the application of section 

14 1870(c) (relating to no adjustment in the cases 

15 of certain overpayments). 

16 ‘‘(2) LIMITATION ON RECOUPMENT.—

17 ‘‘(A) NO RECOUPMENT UNTIL RECONSID18 ERATION EXERCISED.—In the case of a pro19 vider of services, physician, practitioner, or sup20 plier that is determined to have received an 

21 overpayment under this title and that seeks a 

22 reconsideration of such determination by a 

23 qualified independent contractor under section 

24 1869(c), the Secretary may not take any action 

25 (or authorize any other person, including any 
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1 Medicare contractor, as defined in subpara2 graph (C)) to recoup the overpayment until the 

3 date the decision on the reconsideration has 

4 been rendered. 

5 ‘‘(B) PAYMENT OF INTEREST.—

6 ‘‘(i) RETURN OF RECOUPED AMOUNT

7 WITH INTEREST IN CASE OF REVERSAL.—

8 Insofar as such determination on appeal 

9 against the provider of services, physician, 

10 practitioner, or supplier is later reversed, 

11 the Secretary shall provide for repayment 

12 of the amount recouped plus interest for 

13 the period in which the amount was re14 couped. 

15 ‘‘(ii) INTEREST IN CASE OF AFFIRMA16 TION.—Insofar as the determination on 

17 such appeal is against the provider of serv18 ices, physician, practitioner, or supplier, in19 terest on the overpayment shall accrue on 

20 and after the date of the original notice of 

21 overpayment. 

22 ‘‘(iii) RATE OF INTEREST.—The rate 

23 of interest under this subparagraph shall 

24 be the rate otherwise applicable under this 

25 title in the case of overpayments. 
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1 ‘‘(C) MEDICARE CONTRACTOR DEFINED.—

2 For purposes of this subsection, the term ‘medi3 care contractor’ has the meaning given such 

4 term in section 1889(e). 

5 ‘‘(3) PAYMENT AUDITS.—

6 ‘‘(A) WRITTEN NOTICE FOR POST-PAY7 MENT AUDITS.—Subject to subparagraph (C), if 

8 a medicare contractor decides to conduct a 

9 post-payment audit of a provider of services, 

10 physician, practitioner, or supplier under this 

11 title, the contractor shall provide the provider of 

12 services, physician, practitioner, or supplier 

13 with written notice (which may be in electronic 

14 form) of the intent to conduct such an audit. 

15 ‘‘(B) EXPLANATION OF FINDINGS FOR ALL

16 AUDITS.—Subject to subparagraph (C), if a 

17 medicare contractor audits a provider of serv18 ices, physician, practitioner, or supplier under 

19 this title, the contractor shall—

20 ‘‘(i) give the provider of services, phy21 sician, practitioner, or supplier a full re22 view and explanation of the findings of the 

23 audit in a manner that is understandable 

24 to the provider of services, physician, prac25 titioner, or supplier and permits the devel-
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1 opment of an appropriate corrective action 

2 plan; 

3 ‘‘(ii) inform the provider of services, 

4 physician, practitioner, or supplier of the 

5 appeal rights under this title as well as 

6 consent settlement options (which are at 

7 the discretion of the Secretary); and 

8 ‘‘(iii) give the provider of services, 

9 physician, practitioner, or supplier an op10 portunity to provide additional information 

11 to the contractor. 

12 ‘‘(C) EXCEPTION.—Subparagraphs (A) 

13 and (B) shall not apply if the provision of no14 tice or findings would compromise pending law 

15 enforcement activities, whether civil or criminal, 

16 or reveal findings of law enforcement-related 

17 audits. 

18 ‘‘(4) NOTICE OF OVER-UTILIZATION OF

19 CODES.—The Secretary shall establish, in consulta20 tion with organizations representing the classes of 

21 providers of services, physicians, practitioners, and 

22 suppliers, a process under which the Secretary pro23 vides for notice to classes of providers of services, 

24 physicians, practitioners, and suppliers served by a 

25 medicare contractor in cases in which the contractor 
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1 has identified that particular billing codes may be 

2 overutilized by that class of providers of services, 

3 physicians, practitioners, or suppliers under the pro4 grams under this title (or provisions of title XI inso5 far as they relate to such programs). 

6 ‘‘(5) STANDARD METHODOLOGY FOR PROBE

7 SAMPLING.—The Secretary shall establish a stand8 ard methodology for medicare administrative con9 tractors to use in selecting a sample of claims for re10 view in the case of an abnormal billing pattern. 

11 ‘‘(6) CONSENT SETTLEMENT REFORMS.—

12 ‘‘(A) IN GENERAL.—The Secretary may 

13 use a consent settlement (as defined in sub14 paragraph (D)) to settle a projected overpay15 ment. 

16 ‘‘(B) OPPORTUNITY TO SUBMIT ADDI17 TIONAL INFORMATION BEFORE CONSENT SET18 TLEMENT OFFER.—Before offering a provider 

19 of services, physician, practitioner, or supplier a 

20 consent settlement, the Secretary shall—

21 ‘‘(i) communicate to the provider of 

22 services, physician, practitioner, or supplier 

23 in a nonthreatening manner that, based on 

24 a review of the medical records requested 

25 by the Secretary, a preliminary evaluation 
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1 of those records indicates that there would 

2 be an overpayment; and 

3 ‘‘(ii) provide for a 45-day period dur4 ing which the provider of services, physi5 cian, practitioner, or supplier may furnish 

6 additional information concerning the med7 ical records for the claims that had been 

8 reviewed. 

9 ‘‘(C) CONSENT SETTLEMENT OFFER.—The 

10 Secretary shall review any additional informa11 tion furnished by the provider of services, physi12 cian, practitioner, or supplier under subpara13 graph (B)(ii). Taking into consideration such 

14 information, the Secretary shall determine if 

15 there still appears to be an overpayment. If so, 

16 the Secretary—

17 ‘‘(i) shall provide notice of such deter18 mination to the provider of services, physi19 cian, practitioner, or supplier, including an 

20 explanation of the reason for such deter21 mination; and 

22 ‘‘(ii) in order to resolve the overpay23 ment, may offer the provider of services, 

24 physician, practitioner, or supplier—
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1 ‘‘(I) the opportunity for a statis2 tically valid random sample; or 

3 ‘‘(II) a consent settlement. 

4 The opportunity provided under clause (ii)(I) 

5 does not waive any appeal rights with respect to 

6 the alleged overpayment involved. 

7 ‘‘(D) CONSENT SETTLEMENT DEFINED.—

8 For purposes of this paragraph, the term ‘con9 sent settlement’ means an agreement between 

10 the Secretary and a provider of services, physi11 cian, practitioner, or supplier whereby both par12 ties agree to settle a projected overpayment 

13 based on less than a statistically valid sample of 

14 claims and the provider of services, physician, 

15 practitioner, or supplier agrees not to appeal 

16 the claims involved.’’. 

17 (b) EFFECTIVE DATES AND DEADLINES.—

18 (1) Not later than 1 year after the date of en19 actment of this Act, the Secretary shall first—

20 (A) develop standards for the recovery of 

21 overpayments under section 1874A(h)(1)(B) of 

22 the Social Security Act, as added by subsection 

23 (a); 

24 (B) establish the process for notice of over25 utilization of billing codes under section 
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1 1874A(h)(4) of the Social Security Act, as 

2 added by subsection (a); and 

3 (C) establish a standard methodology for 

4 selection of sample claims for abnormal billing 

5 patterns under section 1874A(h)(5) of the So6 cial Security Act, as added by subsection (a). 

7 (2) Section 1874A(h)(2) of the Social Security 

8 Act, as added by subsection (a), shall apply to ac9 tions taken after the date that is 1 year after the 

10 date of enactment of this Act. 

11 (3) Section 1874A(h)(3) of the Social Security 

12 Act, as added by subsection (a), shall apply to audits 

13 initiated after the date of enactment of this Act. 

14 (4) Section 1874A(h)(6) of the Social Security 

15 Act, as added by subsection (a), shall apply to con16 sent settlements entered into after the date of enact17 ment of this Act. 

18 SEC. 543. PROCESS FOR CORRECTION OF MINOR ERRORS 

19 AND OMISSIONS ON CLAIMS WITHOUT PUR20 SUING APPEALS PROCESS. 

21 (a) IN GENERAL.—The Secretary shall develop, in 

22 consultation with appropriate medicare contractors (as de23 fined in section 1889(e) of the Social Security Act, as 

24 added by section 531(d)(1)) and representatives of pro25 viders of services, physicians, practitioners, facilities, and 
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1 suppliers, a process whereby, in the case of minor errors 

2 or omissions (as defined by the Secretary) that are de3 tected in the submission of claims under the programs 

4 under title XVIII of such Act, a provider of services, phy5 sician, practitioner, facility, or supplier is given an oppor6 tunity to correct such an error or omission without the 

7 need to initiate an appeal. Such process shall include the 

8 ability to resubmit corrected claims. 

9 (b) DEADLINE.—Not later than 1 year after the date 

10 of enactment of this Act, the Secretary shall first develop 

11 the process under subsection (a). 

12 SEC. 544. AUTHORITY TO WAIVE A PROGRAM EXCLUSION. 

13 The first sentence of section 1128(c)(3)(B) (42 

14 U.S.C. 1320a–7(c)(3)(B)) is amended to read as follows: 

15 ‘‘Subject to subparagraph (G), in the case of an exclusion 

16 under subsection (a), the minimum period of exclusion 

17 shall be not less than 5 years, except that, upon the re18 quest of an administrator of a Federal health care pro19 gram (as defined in section 1128B(f)) who determines 

20 that the exclusion would impose a hardship on bene21 ficiaries of that program, the Secretary may, after con22 sulting with the Inspector General of the Department of 

23 Health and Human Services, waive the exclusion under 

24 subsection (a)(1), (a)(3), or (a)(4) with respect to that 

25 program in the case of an individual or entity that is the 
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1 sole community physician or sole source of essential spe2 cialized services in a community.’’. 

3 Subtitle F—Other Improvements 

4 SEC. 551. INCLUSION OF ADDITIONAL INFORMATION IN NO5 TICES TO BENEFICIARIES ABOUT SKILLED 

6 NURSING FACILITY AND HOSPITAL BENE7 FITS. 

8 (a) IN GENERAL.—The Secretary shall provide that 

9 in medicare beneficiary notices provided (under section 

10 1806(a) of the Social Security Act, 42 U.S.C. 1395b–7(a)) 

11 with respect to the provision of post-hospital extended care 

12 services and inpatient hospital services under part A of 

13 title XVIII of the Social Security Act, there shall be in14 cluded information on the number of days of coverage of 

15 such services remaining under such part for the medicare 

16 beneficiary and spell of illness involved. 

17 (b) EFFECTIVE DATE.—Subsection (a) shall apply to 

18 notices provided during calendar quarters beginning more 

19 than 6 months after the date of enactment of this Act. 

20 SEC. 552. INFORMATION ON MEDICARE-CERTIFIED 

21 SKILLED NURSING FACILITIES IN HOSPITAL 

22 DISCHARGE PLANS. 

23 (a) AVAILABILITY OF DATA.—The Secretary shall 

24 publicly provide information that enables hospital dis25 charge planners, medicare beneficiaries, and the public to 
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1 identify skilled nursing facilities that are participating in 

2 the medicare program. 

3 (b) INCLUSION OF INFORMATION IN CERTAIN HOS4 PITAL DISCHARGE PLANS.—

5 (1) IN GENERAL.—Section 1861(ee)(2)(D) (42 

6 U.S.C. 1395x(ee)(2)(D)) is amended—

7 (A) by striking ‘‘hospice services’’ and in8 serting ‘‘hospice care and post-hospital ex9 tended care services’’; and 

10 (B) by inserting before the period at the 

11 end the following: ‘‘and, in the case of individ12 uals who are likely to need post-hospital ex13 tended care services, the availability of such 

14 services through facilities that participate in the 

15 program under this title and that serve the area 

16 in which the patient resides’’. 

17 (2) EFFECTIVE DATE.—The amendments made 

18 by paragraph (1) shall apply to discharge plans 

19 made on or after such date as the Secretary shall 

20 specify, but not later than 6 months after the date 

21 the Secretary provides for availability of information 

22 under subsection (a). 
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1 SEC. 553. EVALUATION AND MANAGEMENT DOCUMENTA2 TION GUIDELINES CONSIDERATION. 

3 The Secretary shall ensure, before making changes 

4 in documentation guidelines for, or clinical examples of, 

5 or codes to report evaluation and management physician 

6 services under title XVIII of Social Security Act, that the 

7 process used in developing such guidelines, examples, or 

8 codes was widely consultative among physicians, reflects 

9 a broad consensus among specialties, and would allow 

10 verification of reported and furnished services. 

11 SEC. 554. COUNCIL FOR TECHNOLOGY AND INNOVATION. 

12 Section 1868 (42 U.S.C. 1395ee), as amended by sec13 tion 534(a), is amended by adding at the end the following 

14 new subsection: 

15 ‘‘(c) COUNCIL FOR TECHNOLOGY AND INNOVA16 TION.—

17 ‘‘(1) ESTABLISHMENT.—The Secretary shall es18 tablish a Council for Technology and Innovation 

19 within the Centers for Medicare & Medicaid Services 

20 (in this section referred to as ‘CMS’). 

21 ‘‘(2) COMPOSITION.—The Council shall be com22 posed of senior CMS staff and clinicians and shall 

23 be chaired by the Executive Coordinator for Tech24 nology and Innovation (appointed or designated 

25 under paragraph (4)). 
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1 ‘‘(3) DUTIES.—The Council shall coordinate the 

2 activities of coverage, coding, and payment processes 

3 under this title with respect to new technologies and 

4 procedures, including new drug therapies, and shall 

5 coordinate the exchange of information on new tech6 nologies between CMS and other entities that make 

7 similar decisions. 

8 ‘‘(4) EXECUTIVE COORDINATOR FOR TECH9 NOLOGY AND INNOVATION.—The Secretary shall ap10 point (or designate) a noncareer appointee (as de11 fined in section 3132(a)(7) of title 5, United States 

12 Code) who shall serve as the Executive Coordinator 

13 for Technology and Innovation. Such executive coor14 dinator shall report to the Administrator of CMS, 

15 shall chair the Council, shall oversee the execution of 

16 its duties, and shall serve as a single point of con17 tact for outside groups and entities regarding the 

18 coverage, coding, and payment processes under this 

19 title.’’. 

20 SEC. 555. TREATMENT OF CERTAIN DENTAL CLAIMS. 

21 (a) IN GENERAL.—Section 1862 (42 U.S.C. 1395y) 

22 is amended by adding after subsection (g) the following 

23 new subsection: 

24 ‘‘(h)(1) Subject to paragraph (2), a group health plan 

25 (as defined in subsection (a)(1)(A)(v)) providing supple-
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1 mental or secondary coverage to individuals also entitled 

2 to services under this title shall not require a medicare 

3 claims determination under this title for dental benefits 

4 specifically excluded under subsection (a)(12) as a condi5 tion of making a claims determination for such benefits 

6 under the group health plan. 

7 ‘‘(2) A group health plan may require a claims deter8 mination under this title in cases involving or appearing 

9 to involve inpatient dental hospital services or dental serv10 ices expressly covered under this title pursuant to actions 

11 taken by the Secretary.’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 subsection (a) shall take effect on the date that is 60 days 

14 after the date of enactment of this Act. 

15 TITLE VI—OTHER PROVISIONS 

16 SEC. 601. INCREASE IN MEDICAID DSH ALLOTMENTS FOR 

17 FISCAL YEARS 2004 AND 2005. 

18 (a) IN GENERAL.—Section 1923(f)(4) (42 U.S.C. 

19 1396r–4(f)(4)) is amended—

20 (1) in the paragraph heading, by striking ‘‘FIS21 CAL YEARS 2001 AND 2002’’ and inserting ‘‘CERTAIN

22 FISCAL YEARS’’; 

23 (2) in subparagraph (A)—

24 (A) in clause (i)—
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1 (i) by striking ‘‘paragraph (2)’’ and 

2 inserting ‘‘paragraphs (2) and (3)’’; and 

3 (ii) by striking ‘‘and’’ at the end; 

4 (B) in clause (ii), by striking the period 

5 and inserting a semicolon; and 

6 (C) by adding at the end the following: 

7 ‘‘(iii) for fiscal year 2004, shall be the 

8 DSH allotment determined under para9 graph (3) for that fiscal year increased by 

10 the amount equal to the product of 0.50 

11 and the difference between—

12 ‘‘(I) the amount that the DSH 

13 allotment would be if the DSH allot14 ment for the State determined under 

15 clause (ii) were increased, subject to 

16 subparagraph (B) and paragraph (5), 

17 by the percentage change in the Con18 sumer Price Index for all urban con19 sumers (all items; U.S. city average) 

20 for each of fiscal years 2002 and 

21 2003; and 

22 ‘‘(II) the DSH allotment deter23 mined under paragraph (3) for the 

24 State for fiscal year 2004; and 
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1 ‘‘(iv) for fiscal year 2005, shall be the 

2 DSH allotment determined under para3 graph (3) for that fiscal year increased by 

4 the amount equal to the product of 0.50 

5 and the difference between—

6 ‘‘(I) the amount that the DSH 

7 allotment would be if the DSH allot8 ment for the State determined under 

9 clause (ii) were increased, subject to 

10 subparagraph (B) and paragraph (5), 

11 by the percentage change in the Con12 sumer Price Index for all urban con13 sumers (all items; U.S. city average) 

14 for each of fiscal years 2002, 2003, 

15 and 2004; and 

16 ‘‘(II) the DSH allotment deter17 mined under paragraph (3) for the 

18 State for fiscal year 2005.’’; and 

19 (3) in subparagraph (C)—

20 (A) in the subparagraph heading, by strik21 ing ‘‘AFTER FISCAL YEAR 2002’’ and inserting 

22 ‘‘FOR OTHER FISCAL YEARS’’; and 

23 (B) by striking ‘‘2003 or’’ and inserting 

24 ‘‘2003, fiscal year 2006, or’’. 
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1 (b) DSH ALLOTMENT FOR THE DISTRICT OF CO2 LUMBIA.—Section 1923(f)(4) (42 U.S.C. 1396r–4(f)(4)), 

3 as amended by paragraph (1), is amended—

4 (1) in subparagraph (A), by inserting ‘‘and ex5 cept as provided in subparagraph (C)’’ after ‘‘para6 graph (2)’’; 

7 (2) by redesignating subparagraph (C) as sub8 paragraph (D); and 

9 (3) by inserting after subparagraph (B) the fol10 lowing: 

11 ‘‘(C) DSH ALLOTMENT FOR THE DISTRICT

12 OF COLUMBIA.—

13 ‘‘(i) IN GENERAL.—Notwithstanding 

14 subparagraph (A), the DSH allotment for 

15 the District of Columbia for fiscal year 

16 2004, shall be determined by substituting 

17 ‘‘49’’ for ‘‘32’’ in the item in the table con18 tained in paragraph (2) with respect to the 

19 DSH allotment for FY 00 (fiscal year 

20 2000) for the District of Columbia, and 

21 then increasing such allotment, subject to 

22 subparagraph (B) and paragraph (5), by 

23 the percentage change in the Consumer 

24 Price Index for all urban consumers (all 
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1 items; U.S. city average) for each of fiscal 

2 years 2000, 2001, 2002, and 2003. 

3 ‘‘(ii) NO APPLICATION TO ALLOT4 MENTS AFTER FISCAL YEAR 2004.—The 

5 DSH allotment for the District of Colum6 bia for fiscal year 2003, fiscal year 2005, 

7 or any succeeding fiscal year shall be de8 termined under paragraph (3) without re9 gard to the DSH allotment determined 

10 under clause (i).’’. 

11 (c) CONFORMING AMENDMENT.—Section 1923(f)(3) 

12 of such Act (42 U.S.C. 1396r–4(f)(3)) is amended by in13 serting ‘‘, paragraph (4),’’ after ‘‘subparagraph (B)’’. 

14 (d) URBAN HEALTH PROVIDER ADJUSTMENT.—

15 (1) IN GENERAL.—Beginning with fiscal year 

16 2004, notwithstanding section 1923(f) of the Social 

17 Security Act (42 U.S.C. 1396r–4(f)) and subject to 

18 paragraph (3), with respect to a State, payment ad19 justments made under title XIX of the Social Secu20 rity Act (42 U.S.C. 1396 et seq.) to a hospital de21 scribed in paragraph (2) shall be made without re22 gard to the DSH allotment limitation for the State 

23 determined under section 1923(f) of that Act (42 

24 U.S.C. 1396r–4(f)). 
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1 (2) HOSPITAL DESCRIBED.—A hospital is de2 scribed in this paragraph if the hospital—

3 (A) is owned or operated by a State (as de4 fined for purposes of title XIX of the Social Se5 curity Act), or by an instrumentality or a mu6 nicipal governmental unit within a State (as so 

7 defined) as of January 1, 2003; and 

8 (B) is located in Marion County, Indiana. 

9 (3) LIMITATION.—The payment adjustment de10 scribed in paragraph (1) for fiscal year 2004 and 

11 each fiscal year thereafter shall not exceed 175 per12 cent of the costs of furnishing hospital services de13 scribed in section 1923(g)(1)(A) of the Social Secu14 rity Act (42 U.S.C. 1396r–4(g)(1)(A)). 

15 SEC. 602. INCREASE IN FLOOR FOR TREATMENT AS AN EX16 TREMELY LOW DSH STATE UNDER THE MED17 ICAID PROGRAM FOR FISCAL YEARS 2004 AND 

18 2005. 

19 (a) IN GENERAL.—Section 1923(f)(5) (42 U.S.C. 

20 1396r–4(f)(5)) is amended—

21 (1) by striking ‘‘In the case of’’ and inserting 

22 the following: 

23 ‘‘(A) IN GENERAL.—In the case of’’; and 

24 (2) by adding at the end the following: 
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1 ‘‘(B) INCREASE IN FLOOR FOR FISCAL

2 YEARS 2004 AND 2005.—

3 ‘‘(i) FISCAL YEAR 2004.—In the case 

4 of a State in which the total expenditures 

5 under the State plan (including Federal 

6 and State shares) for disproportionate 

7 share hospital adjustments under this sec8 tion for fiscal year 2000, as reported to the 

9 Administrator of the Centers for Medicare 

10 & Medicaid Services as of August 31, 

11 2003, is greater than 0 but less than 3 

12 percent of the State’s total amount of ex13 penditures under the State plan for med14 ical assistance during the fiscal year, the 

15 DSH allotment for fiscal year 2004 shall 

16 be increased to 3 percent of the State’s 

17 total amount of expenditures under such 

18 plan for such assistance during such fiscal 

19 year. 

20 ‘‘(ii) FISCAL YEAR 2005.—In the case 

21 of a State in which the total expenditures 

22 under the State plan (including Federal 

23 and State shares) for disproportionate 

24 share hospital adjustments under this sec25 tion for fiscal year 2001, as reported to the 
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1 Administrator of the Centers for Medicare 

2 & Medicaid Services as of August 31, 

3 2004, is greater than 0 but less than 3 

4 percent of the State’s total amount of ex5 penditures under the State plan for med6 ical assistance during the fiscal year, the 

7 DSH allotment for fiscal year 2005 shall 

8 be the DSH allotment determined for the 

9 State for fiscal year 2004 (under clause (i) 

10 or paragraph (4) (as applicable)), in11 creased by the percentage change in the 

12 consumer price index for all urban con13 sumers (all items; U.S. city average) for 

14 fiscal year 2004. 

15 ‘‘(iii) NO APPLICATION TO ALLOT16 MENTS AFTER FISCAL YEAR 2005.—The 

17 DSH allotment for any State for fiscal 

18 year 2006 or any succeeding fiscal year 

19 shall be determined under this subsection 

20 without regard to the DSH allotments de21 termined under this subparagraph.’’. 

22 (b) ALLOTMENT ADJUSTMENT.—

23 (1) IN GENERAL.—Section 1923(f) of the Social 

24 Security Act (42 U.S.C. 1396r–4(f)) is amended—
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1 (A) by redesignating paragraph (6) as 

2 paragraph (7); and 

3 (B) by inserting after paragraph (5) the 

4 following: 

5 ‘‘(6) ALLOTMENT ADJUSTMENT.—Only with re6 spect to fiscal year 2004 or 2005, if a statewide 

7 waiver under section 1115 that was implemented on 

8 January 1, 1994, is revoked or terminated before 

9 the end of either such fiscal year, the Secretary 

10 shall—

11 ‘‘(A) permit the State whose waiver was 

12 revoked or terminated to submit an amendment 

13 to its State plan that would describe the meth14 odology to be used by the State (after the effec15 tive date of such revocation or termination) to 

16 identify and make payments to disproportionate 

17 share hospitals, including children’s hospitals 

18 and institutions for mental diseases or other 

19 mental health facilities (other than State-owned 

20 institutions or facilities), on the basis of the 

21 proportion of patients served by such hospitals 

22 that are low-income patients with special needs; 

23 and 

24 ‘‘(B) provide for purposes of this sub25 section for computation of an appropriate DSH 
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1 allotment for the State for fiscal year 2004 or 

2 2005 (or both) that provides for the maximum 

3 amount (permitted consistent with paragraph 

4 (3)(B)(ii)) that does not result in greater ex5 penditures under this title than would have 

6 been made if such waiver had not been revoked 

7 or terminated.’’. 

8 (2) TREATMENT OF INSTITUTIONS FOR MENTAL

9 DISEASES.—Section 1923(h)(1) of the Social Secu10 rity Act (42 U.S.C. 1396r–4(h)(1)) is amended—

11 (A) in paragraph (1), in the matter pre12 ceding subparagraph (A), by inserting ‘‘(subject 

13 to paragraph (3))’’ after ‘‘the lesser of the fol14 lowing’’; and 

15 (B) by adding at the end the following new 

16 paragraph: 

17 ‘‘(3) SPECIAL RULE.—The limitation of para18 graph (1) shall not apply in the case of a State to 

19 which subsection (f)(6) applies.’’. 

20 (3) APPLICATION TO HAWAII.—Section 1923(f) 

21 (42 U.S.C. 1396r–4(f)), as amended by paragraph 

22 (1), is amended—

23 (A) by redesignating paragraph (7) as 

24 paragraph (8); and 
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1 (B) by inserting after paragraph (6), the 

2 following: 

3 ‘‘(7) TREATMENT OF HAWAII AS A LOW-DSH

4 STATE.—The Secretary shall compute a DSH allot5 ment for the State of Hawaii for each of fiscal years 

6 2004 and 2005 in the same manner as DSH allot7 ments are determined with respect to those States to 

8 which paragraph (5) applies (but without regard to 

9 the requirement under such paragraph that total ex10 penditures under the State plan for disproportionate 

11 share hospital adjustments for any fiscal year ex12 ceeds 0).’’. 

13 SEC. 603. INCREASED REPORTING REQUIREMENTS TO EN14 SURE THE APPROPRIATENESS OF PAYMENT 

15 ADJUSTMENTS TO DISPROPORTIONATE 

16 SHARE HOSPITALS UNDER THE MEDICAID 

17 PROGRAM. 

18 Section 1923 (42 U.S.C. 1396r–4) is amended by 

19 adding at the end the following new subsection: 

20 ‘‘(j) ANNUAL REPORTS REGARDING PAYMENT AD21 JUSTMENTS.—With respect to fiscal year 2004 and each 

22 fiscal year thereafter, the Secretary shall require a State, 

23 as a condition of receiving a payment under section 

24 1903(a)(1) with respect to a payment adjustment made 

25 under this section, to submit an annual report that—
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1 ‘‘(1) identifies each disproportionate share hos2 pital that received a payment adjustment under this 

3 section for the preceding fiscal year and the amount 

4 of the payment adjustment made to such hospital 

5 for the preceding fiscal year; and 

6 ‘‘(2) includes such other information as the 

7 Secretary determines necessary to ensure the appro8 priateness of the payment adjustments made under 

9 this section for the preceding fiscal year.’’. 

10 SEC. 604. CLARIFICATION OF INCLUSION OF INPATIENT 

11 DRUG PRICES CHARGED TO CERTAIN PUBLIC 

12 HOSPITALS IN THE BEST PRICE EXEMPTIONS 

13 FOR THE MEDICAID DRUG REBATE PRO14 GRAM. 

15 (a) IN GENERAL.—Section 1927(c)(1)(C)(i)(I) of the 

16 Social Security Act (42 U.S.C. 1396r–8(c)(1)(C)(i)(I)) is 

17 amended by inserting before the semicolon the following: 

18 ‘‘(including inpatient prices charged to hospitals described 

19 in section 340B(a)(4)(L) of the Public Health Service 

20 Act)’’. 

21 (b) ANTI-DIVERSION PROTECTION.—Section 

22 1927(c)(1)(C) of the Social Security Act (42 U.S.C. 

23 1396r–8(c)(1)(C)) is amended by adding at the end the 

24 following: 
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1 ‘‘(iii) APPLICATION OF AUDITING AND

2 RECORDKEEPING REQUIREMENTS.—With 

3 respect to a covered entity described in 

4 section 340B(a)(4)(L) of the Public Health 

5 Service Act, any drug purchased for inpa6 tient use shall be subject to the auditing 

7 and recordkeeping requirements described 

8 in section 340B(a)(5)(C) of the Public 

9 Health Service Act.’’. 

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

11 this section take effect on October 1, 2003. 

12 SEC. 605. ASSISTANCE WITH COVERAGE OF LEGAL IMMI13 GRANTS UNDER THE MEDICAID PROGRAM 

14 AND SCHIP. 

15 (a) MEDICAID PROGRAM.—Section 1903(v) (42 

16 U.S.C. 1396b(v)) is amended—

17 (1) in paragraph (1), by striking ‘‘paragraph 

18 (2)’’ and inserting ‘‘paragraphs (2) and (4)’’; and 

19 (2) by adding at the end the following new 

20 paragraph: 

21 ‘‘(4)(A) With respect to any or all of fiscal years 2005 

22 through 2007, a State may elect (in a plan amendment 

23 under this title) to provide medical assistance under this 

24 title (including under a waiver authorized by the Sec25 retary) for aliens who are lawfully residing in the United 
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1 States (including battered aliens described in section 

2 431(c) of such Act) and who are otherwise eligible for such 

3 assistance, within either or both of the following eligibility 

4 categories: 

5 ‘‘(i) PREGNANT WOMEN.—Women during preg6 nancy (and during the 60-day period beginning on 

7 the last day of the pregnancy). 

8 ‘‘(ii) CHILDREN.—Children (as defined under 

9 such plan), including optional targeted low-income 

10 children described in section 1905(u)(2)(B). 

11 ‘‘(B)(i) In the case of a State that has elected to pro12 vide medical assistance to a category of aliens under sub13 paragraph (A), no debt shall accrue under an affidavit of 

14 support against any sponsor of such an alien on the basis 

15 of provision of assistance to such category and the cost 

16 of such assistance shall not be considered as an unreim17 bursed cost. 

18 ‘‘(ii) The provisions of sections 401(a), 402(b), 403, 

19 and 421 of the Personal Responsibility and Work Oppor20 tunity Reconciliation Act of 1996 shall not apply to a 

21 State that makes an election under subparagraph (A).’’. 

22 (b) SCHIP.—Section 2107(e)(1) (42 U.S.C. 

23 1397gg(e)(1)) is amended by redesignating subparagraphs 

24 (C) and (D) as subparagraph (D) and (E), respectively, 
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1 and by inserting after subparagraph (B) the following new 

2 subparagraph: 

3 ‘‘(C) Section 1903(v)(4) (relating to op4 tional coverage of categories of permanent resi5 dent alien children), but only if the State has 

6 elected to apply such section to the category of 

7 children under title XIX and only with respect 

8 to any or all of fiscal years 2005 through 

9 2007.’’. 

10 SEC. 606. ESTABLISHMENT OF CONSUMER OMBUDSMAN AC11 COUNT. 

12 (a) IN GENERAL.—Section 1817 (42 U.S.C. 1395i) 

13 is amended by adding at the end the following new sub14 section: 

15 ‘‘(i) CONSUMER OMBUDSMAN ACCOUNT.—

16 ‘‘(1) ESTABLISHMENT.—There is hereby estab17 lished in the Trust Fund an expenditure account to 

18 be known as the ‘Consumer Ombudsman Account’ 

19 (in this subsection referred to as the ‘Account’). 

20 ‘‘(2) APPROPRIATED AMOUNTS TO ACCOUNT

21 FOR HEALTH INSURANCE INFORMATION, COUN22 SELING, AND ASSISTANCE GRANTS.—

23 ‘‘(A) IN GENERAL.—There are hereby ap24 propriated to the Account from the Trust Fund 

25 for each fiscal year beginning with fiscal year 
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1 2005, the amount described in subparagraph 

2 (B) for such fiscal year for the purpose of mak3 ing grants under section 4360 of the Omnibus 

4 Budget Reconciliation Act of 1990. 

5 ‘‘(B) AMOUNT DESCRIBED.—For purposes 

6 of subparagraph (A), the amount described in 

7 this subparagraph for a fiscal year is the 

8 amount equal to the product of—

9 ‘‘(i) $1; and 

10 ‘‘(ii) the total number of individuals 

11 receiving benefits under this title for the 

12 calendar year ending on December 31 of 

13 the preceding fiscal year.’’. 

14 (b) CONFORMING AMENDMENT.—Section 4360(g) of 

15 the Omnibus Budget Reconciliation Act of 1990 (42 

16 U.S.C. 1395b–4(g)) is amended to read as follows: 

17 ‘‘(g) FUNDING.—The Secretary shall use amounts 

18 appropriated to the Consumer Ombudsman Account in ac19 cordance with section 1817(i) of the Social Security Act 

20 for a fiscal year for making grants under this section for 

21 that fiscal year.’’. 

22 SEC. 607. GAO STUDY REGARDING IMPACT OF ASSETS TEST 

23 FOR LOW-INCOME BENEFICIARIES. 

24 (a) STUDY.—The Comptroller General of the United 

25 States shall conduct a study to determine the extent to 
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1 which drug utilization and access to covered drugs for an 

2 individual described in subsection (b) differs from the drug 

3 utilization and access to covered drugs of an individual 

4 who qualifies for the transitional assistance prescription 

5 drug card program under section 1807A of the Social Se6 curity Act (as added by section 111) or for the premiums 

7 and cost-sharing subsidies applicable to a qualified medi8 care beneficiary, a specified low-income medicare bene9 ficiary, or a qualifying individual under section 1860D–

10 19 of the Social Security Act (as added by section 101). 

11 (b) INDIVIDUAL DESCRIBED.—An individual is de12 scribed in this subsection if the individual does not qualify 

13 for the transitional assistance prescription drug card pro14 gram under section 1807A of the Social Security Act or 

15 for the premiums and cost-sharing subsidies applicable to 

16 a qualified medicare beneficiary, a specified low-income 

17 medicare beneficiary, or a qualifying individual under sec18 tion 1860D–19 of the Social Security Act solely as a result 

19 of the application of an assets test to the individual. 

20 (c) REPORT.—Not later than September 30, 2007, 

21 the Comptroller General shall submit a report to Congress 

22 on the study conducted under subsection (a) that includes 

23 such recommendations for legislation as the Comptroller 

24 General determines are appropriate. 

25 (d) DEFINITIONS.—In this section: 
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1 (1) COVERED DRUGS.—The term ‘‘covered 

2 drugs’’ has the meaning given that term in section 

3 1860D(a)(D) of the Social Security Act. 

4 (2) QUALIFIED MEDICARE BENEFICIARY; SPECI5 FIED LOW-INCOME MEDICARE BENEFICIARY; QUALI6 FYING INDIVIDUAL.—The terms ‘‘qualified medicare 

7 beneficiary’’, ‘‘specified low-income medicare bene8 ficiary’’ and ‘‘qualifying individual’’ have the mean9 ing given those terms under section 1860D–19 of 

10 the Social Security Act. 

11 SEC. 608. HEALTH CARE INFRASTRUCTURE IMPROVEMENT. 

12 At the end of the Social Security Act, add the fol13 lowing new title: 

14 ‘‘TITLE XXII—HEALTH CARE IN15 FRASTRUCTURE IMPROVE16 MENT 

17 ‘‘SEC. 2201. DEFINITIONS. 

18 ‘‘In this title, the following definitions apply: 

19 ‘‘(1) ELIGIBLE PROJECT COSTS.—The term ‘eli20 gible project costs’ means amounts substantially all 

21 of which are paid by, or for the account of, an obli22 gor in connection with a project, including the cost 

23 of—

24 ‘‘(A) development phase activities, includ25 ing planning, feasibility analysis, revenue fore-
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1 casting, environmental study and review, per2 mitting, architectural engineering and design 

3 work, and other preconstruction activities; 

4 ‘‘(B) construction, reconstruction, rehabili5 tation, replacement, and acquisition of facilities 

6 and real property (including land related to the 

7 project and improvements to land), environ8 mental mitigation, construction contingencies, 

9 and acquisition of equipment; 

10 ‘‘(C) capitalized interest necessary to meet 

11 market requirements, reasonably required re12 serve funds, capital issuance expenses, and 

13 other carrying costs during construction; 

14 ‘‘(D) major medical equipment determined 

15 to be appropriate by the Secretary; and 

16 ‘‘(E) refinancing projects or activities that 

17 are otherwise eligible for financial assistance 

18 under subparagraphs (A) through (D). 

19 ‘‘(2) FEDERAL CREDIT INSTRUMENT.—The 

20 term ‘Federal credit instrument’ means a secured 

21 loan, loan guarantee, or line of credit authorized to 

22 be made available under this title with respect to a 

23 project. 

24 ‘‘(3) INVESTMENT-GRADE RATING.—The term 

25 ‘investment-grade rating’ means a rating category of 
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1 BBB minus, Baa3, or higher assigned by a rating 

2 agency to project obligations offered into the capital 

3 markets. 

4 ‘‘(4) LENDER.—The term ‘lender’ means any 

5 non-Federal qualified institutional buyer (as defined 

6 in section 230.144A(a) of title 17, Code of Federal 

7 Regulations (or any successor regulation), known as 

8 Rule 144A(a) of the Securities and Exchange Com9 mission and issued under the Securities Act of 1933 

10 (15 U.S.C. 77a et seq.)), including—

11 ‘‘(A) a qualified retirement plan (as de12 fined in section 4974(c) of the Internal Revenue 

13 Code of 1986) that is a qualified institutional 

14 buyer; and 

15 ‘‘(B) a governmental plan (as defined in 

16 section 414(d) of the Internal Revenue Code of 

17 1986) that is a qualified institutional buyer. 

18 ‘‘(5) LINE OF CREDIT.—The term ‘line of cred19 it’ means an agreement entered into by the Sec20 retary with an obligor under section 2204 to provide 

21 a direct loan at a future date upon the occurrence 

22 of certain events. 

23 ‘‘(6) LOAN GUARANTEE.—The term ‘loan guar24 antee’ means any guarantee or other pledge by the 

25 Secretary to pay all or part of the principal of and 
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1 interest on a loan or other debt obligation issued by 

2 an obligor and funded by a lender. 

3 ‘‘(7) LOCAL SERVICER.—The term ‘local 

4 servicer’ means a State or local government or any 

5 agency of a State or local government that is re6 sponsible for servicing a Federal credit instrument 

7 on behalf of the Secretary. 

8 ‘‘(8) OBLIGOR.—The term ‘obligor’ means a 

9 party primarily liable for payment of the principal of 

10 or interest on a Federal credit instrument, which 

11 party may be a corporation, partnership, joint ven12 ture, trust, or governmental entity, agency, or in13 strumentality. 

14 ‘‘(9) PROJECT.—The term ‘project’ means any 

15 project that is designed to improve the health care 

16 infrastructure, including the construction, renova17 tion, or other capital improvement of any hospital, 

18 medical research facility, or other medical facility or 

19 the purchase of any equipment to be used in a hos20 pital, research facility, or other medical research fa21 cility. 

22 ‘‘(10) PROJECT OBLIGATION.—The term 

23 ‘project obligation’ means any note, bond, debenture, 

24 lease, installment sale agreement, or other debt obli25 gation issued or entered into by an obligor in con-
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1 nection with the financing of a project, other than 

2 a Federal credit instrument. 

3 ‘‘(11) RATING AGENCY.—The term ‘rating 

4 agency’ means a bond rating agency identified by 

5 the Securities and Exchange Commission as a Na6 tionally Recognized Statistical Rating Organization. 

7 ‘‘(12) SECURED LOAN.—The term ‘secured 

8 loan’ means a direct loan or other debt obligation 

9 issued by an obligor and funded by the Secretary in 

10 connection with the financing of a project under sec11 tion 2203. 

12 ‘‘(13) STATE.—The term ‘State’ has the mean13 ing given the term in section 101 of title 23, United 

14 States Code. 

15 ‘‘(14) SUBSIDY AMOUNT.—The term ‘subsidy 

16 amount’ means the amount of budget authority suf17 ficient to cover the estimated long-term cost to the 

18 Federal Government of a Federal credit instrument, 

19 calculated on a net present value basis, excluding 

20 administrative costs and any incidental effects on 

21 governmental receipts or outlays in accordance with 

22 the provisions of the Federal Credit Reform Act of 

23 1990 (2 U.S.C. 661 et seq.). 
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1 ‘‘(15) SUBSTANTIAL COMPLETION.—The term 

2 ‘substantial completion’ means the opening of a 

3 project to patients or for research purposes. 

4 ‘‘SEC. 2202. DETERMINATION OF ELIGIBILITY AND PROJECT 

5 SELECTION. 

6 ‘‘(a) ELIGIBILITY.—To be eligible to receive financial 

7 assistance under this title, a project shall meet the fol8 lowing criteria: 

9 ‘‘(1) APPLICATION.—A State, a local servicer 

10 identified under section 2205(a), or the entity un11 dertaking a project shall submit a project application 

12 to the Secretary. 

13 ‘‘(2) ELIGIBLE PROJECT COSTS.—To be eligible 

14 for assistance under this title, a project shall have 

15 total eligible project costs that are reasonably antici16 pated to equal or exceed $40,000,000. 

17 ‘‘(3) SOURCES OF REPAYMENTS.—Project fi18 nancing shall be repayable, in whole or in part, from 

19 reliable revenue sources as described in the applica20 tion submitted under paragraph (1). 

21 ‘‘(4) PUBLIC SPONSORSHIP OF PRIVATE ENTI22 TIES.—In the case of a project that is undertaken 

23 by an entity that is not a State or local government 

24 or an agency or instrumentality of a State or local 

25 government, the project that the entity is under-
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1 taking shall be publicly sponsored or sponsored by 

2 an entity that is described in section 501(c)(3) of 

3 the Internal Revenue Code of 1986 and exempt from 

4 tax under section 501(a) of such Code. 

5 ‘‘(b) SELECTION AMONG ELIGIBLE PROJECTS.—

6 ‘‘(1) ESTABLISHMENT.—The Secretary shall es7 tablish criteria for selecting among projects that 

8 meet the eligibility criteria specified in subsection 

9 (a). 

10 ‘‘(2) SELECTION CRITERIA.—

11 ‘‘(A) IN GENERAL.—The selection criteria 

12 shall include the following: 

13 ‘‘(i) The extent to which the project is 

14 nationally or regionally significant, in 

15 terms of expanding or improving the 

16 health care infrastructure of the United 

17 States or the region or in terms of the 

18 medical benefit that the project will have. 

19 ‘‘(ii) The creditworthiness of the 

20 project, including a determination by the 

21 Secretary that any financing for the 

22 project has appropriate security features, 

23 such as a rate covenant, credit enhance24 ment requirements, or debt services cov25 erages, to ensure repayment. 
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1 ‘‘(iii) The extent to which assistance 

2 under this title would foster innovative 

3 public-private partnerships and attract pri4 vate debt or equity investment. 

5 ‘‘(iv) The likelihood that assistance 

6 under this title would enable the project to 

7 proceed at an earlier date than the project 

8 would otherwise be able to proceed. 

9 ‘‘(v) The extent to which the project 

10 uses or results in new technologies. 

11 ‘‘(vi) The amount of budget authority 

12 required to fund the Federal credit instru13 ment made available under this title. 

14 ‘‘(vii) The extent to which the project 

15 helps maintain or protect the environment. 

16 ‘‘(B) SPECIFIC REQUIREMENTS.—The se17 lection criteria shall require that a project ap18 plicant—

19 ‘‘(i) be engaged in research in the 

20 causes, prevention, and treatment of can21 cer; 

22 ‘‘(ii) be designated as a cancer center 

23 for the National Cancer Institute or be 

24 designated by the State as the official can25 cer institute of the State; and 
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1 ‘‘(iii) be located in a State that, on 

2 the date of enactment of this title, has a 

3 population of less than 3,000,000 individ4 uals. 

5 ‘‘(C) RATING LETTER.—For purposes of 

6 subparagraph (A)(ii), the Secretary shall re7 quire each project applicant to provide a rating 

8 letter from at least 1 rating agency indicating 

9 that the project’s senior obligations have the 

10 potential to achieve an investment-grade rating 

11 with or without credit enhancement. 

12 ‘‘SEC. 2203. SECURED LOANS. 

13 ‘‘(a) IN GENERAL.—

14 ‘‘(1) AGREEMENTS.—Subject to paragraphs (2) 

15 through (4), the Secretary may enter into agree16 ments with 1 or more obligors to make secured 

17 loans, the proceeds of which shall be used—

18 ‘‘(A) to finance eligible project costs; 

19 ‘‘(B) to refinance interim construction fi20 nancing of eligible project costs; or 

21 ‘‘(C) to refinance existing debt or prior 

22 project obligations; 

23 of any project selected under section 2202. 

24 ‘‘(2) LIMITATION ON REFINANCING OF INTERIM

25 CONSTRUCTION FINANCING.—A loan under para-
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1 graph (1) shall not refinance interim construction fi2 nancing under paragraph (1)(B) later than 1 year 

3 after the date of substantial completion of the 

4 project. 

5 ‘‘(3) RISK ASSESSMENT.—Before entering into 

6 an agreement for a secured loan under this sub7 section, the Secretary, in consultation with each rat8 ing agency providing a rating letter under section 

9 2202(b)(2)(B), shall determine an appropriate cap10 ital reserve subsidy amount for each secured loan, 

11 taking into account such letter. 

12 ‘‘(4) INVESTMENT-GRADE RATING REQUIRE13 MENT.—The funding of a secured loan under this 

14 section shall be contingent on the project’s senior 

15 obligations receiving an investment-grade rating, ex16 cept that—

17 ‘‘(A) the Secretary may fund an amount of 

18 the secured loan not to exceed the capital re19 serve subsidy amount determined under para20 graph (3) prior to the obligations receiving an 

21 investment-grade rating; and 

22 ‘‘(B) the Secretary may fund the remain23 ing portion of the secured loan only after the 

24 obligations have received an investment-grade 

25 rating by at least 1 rating agency. 
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1 ‘‘(b) TERMS AND LIMITATIONS.—

2 ‘‘(1) IN GENERAL.—A secured loan under this 

3 section with respect to a project shall be on such 

4 terms and conditions and contain such covenants, 

5 representations, warranties, and requirements (in6 cluding requirements for audits) as the Secretary de7 termines appropriate. 

8 ‘‘(2) MAXIMUM AMOUNT.—The amount of the 

9 secured loan shall not exceed 100 percent of the rea10 sonably anticipated eligible project costs. 

11 ‘‘(3) PAYMENT.—The secured loan—

12 ‘‘(A) shall—

13 ‘‘(i) be payable, in whole or in part, 

14 from reliable revenue sources; and 

15 ‘‘(ii) include a rate covenant, coverage 

16 requirement, or similar security feature 

17 supporting the project obligations; and 

18 ‘‘(B) may have a lien on revenues de19 scribed in subparagraph (A) subject to any lien 

20 securing project obligations. 

21 ‘‘(4) INTEREST RATE.—The interest rate on the 

22 secured loan shall be not less than the yield on mar23 ketable United States Treasury securities of a simi24 lar maturity to the maturity of the secured loan on 

25 the date of execution of the loan agreement. 
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1 ‘‘(5) MATURITY DATE.—The final maturity 

2 date of the secured loan shall be not later than 30 

3 years after the date of substantial completion of the 

4 project. 

5 ‘‘(6) NONSUBORDINATION.—The secured loan 

6 shall not be subordinated to the claims of any holder 

7 of project obligations in the event of bankruptcy, in8 solvency, or liquidation of the obligor. 

9 ‘‘(7) FEES.—The Secretary may establish fees 

10 at a level sufficient to cover all or a portion of the 

11 costs to the Federal Government of making a se12 cured loan under this section. 

13 ‘‘(c) REPAYMENT.—

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

15 a repayment schedule for each secured loan under 

16 this section based on the projected cash flow from 

17 project revenues and other repayment sources. 

18 ‘‘(2) COMMENCEMENT.—Scheduled loan repay19 ments of principal or interest on a secured loan 

20 under this section shall commence not later than 5 

21 years after the date of substantial completion of the 

22 project. 

23 ‘‘(3) SOURCES OF REPAYMENT FUNDS.—The 

24 sources of funds for scheduled loan repayments 
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1 under this section shall include any revenue gen2 erated by the project. 

3 ‘‘(4) DEFERRED PAYMENTS.—

4 ‘‘(A) AUTHORIZATION.—If, at any time 

5 during the 10 years after the date of substan6 tial completion of the project, the project is un7 able to generate sufficient revenues to pay the 

8 scheduled loan repayments of principal and in9 terest on the secured loan, the Secretary may, 

10 subject to subparagraph (C), allow the obligor 

11 to add unpaid principal and interest to the out12 standing balance of the secured loan. 

13 ‘‘(B) INTEREST.—Any payment deferred 

14 under subparagraph (A) shall—

15 ‘‘(i) continue to accrue interest in ac16 cordance with subsection (b)(4) until fully 

17 repaid; and 

18 ‘‘(ii) be scheduled to be amortized 

19 over the remaining term of the loan begin20 ning not later than 10 years after the date 

21 of substantial completion of the project in 

22 accordance with paragraph (1). 

23 ‘‘(C) CRITERIA.—

24 ‘‘(i) IN GENERAL.—Any payment de25 ferral under subparagraph (A) shall be 
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1 contingent on the project meeting criteria 

2 established by the Secretary. 

3 ‘‘(ii) REPAYMENT STANDARDS.—The 

4 criteria established under clause (i) shall 

5 include standards for reasonable assurance 

6 of repayment. 

7 ‘‘(5) PREPAYMENT.—

8 ‘‘(A) USE OF EXCESS REVENUES.—Any 

9 excess revenues that remain after satisfying 

10 scheduled debt service requirements on the 

11 project obligations and secured loan and all de12 posit requirements under the terms of any trust 

13 agreement, bond resolution, reimbursement 

14 agreement, credit agreement, loan agreement, 

15 or similar agreement securing project obliga16 tions may be applied annually to prepay the se17 cured loan without penalty. 

18 ‘‘(B) USE OF PROCEEDS OF REFI19 NANCING.—The secured loan may be prepaid at 

20 any time without penalty, regardless of whether 

21 such repayment is from the proceeds of refi22 nancing from non-Federal funding sources. 

23 ‘‘(6) FORGIVENESS OF INDEBTEDNESS.—The 

24 Secretary may forgive a loan secured under this title 

25 under terms and conditions that are analogous to 
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1 the loan forgiveness provision for student loans 

2 under part D of title IV of the Higher Education 

3 Act of 1965 (20 U.S.C. 1087a et seq.), except that 

4 the Secretary shall condition such forgiveness on the 

5 establishment by the project of—

6 ‘‘(A) an outreach program for cancer pre7 vention, early diagnosis, and treatment that 

8 provides services to a substantial majority of 

9 the residents of a State or region, including 

10 residents of rural areas; 

11 ‘‘(B) an outreach program for cancer pre12 vention, early diagnosis, and treatment that 

13 provides services to multiple Indian tribes; and 

14 ‘‘(C)(i) unique research resources (such as 

15 population databases); or 

16 ‘‘(ii) an affiliation with an entity that has 

17 unique research resources. 

18 ‘‘(d) SALE OF SECURED LOANS.—

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

20 as soon as practicable after substantial completion of 

21 a project and after notifying the obligor, the Sec22 retary may sell to another entity or reoffer into the 

23 capital markets a secured loan for the project if the 

24 Secretary determines that the sale or reoffering can 

25 be made on favorable terms. 
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1 ‘‘(2) CONSENT OF OBLIGOR.—In making a sale 

2 or reoffering under paragraph (1), the Secretary 

3 may not change the original terms and conditions of 

4 the secured loan without the written consent of the 

5 obligor. 

6 ‘‘(e) LOAN GUARANTEES.—

7 ‘‘(1) IN GENERAL.—The Secretary may provide 

8 a loan guarantee to a lender in lieu of making a se9 cured loan if the Secretary determines that the 

10 budgetary cost of the loan guarantee is substantially 

11 the same as that of a secured loan. 

12 ‘‘(2) TERMS.—The terms of a guaranteed loan 

13 shall be consistent with the terms set forth in this 

14 section for a secured loan, except that the rate on 

15 the guaranteed loan and any prepayment features 

16 shall be negotiated between the obligor and the lend17 er, with the consent of the Secretary. 

18 ‘‘SEC. 2204. LINES OF CREDIT. 

19 ‘‘(a) IN GENERAL.—

20 ‘‘(1) AGREEMENTS.—Subject to paragraphs (2) 

21 through (4), the Secretary may enter into agree22 ments to make available lines of credit to 1 or more 

23 obligors in the form of direct loans to be made by 

24 the Secretary at future dates on the occurrence of 
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1 certain events for any project selected under section 

2 2202. 

3 ‘‘(2) USE OF PROCEEDS.—The proceeds of a 

4 line of credit made available under this section shall 

5 be available to pay debt service on project obliga6 tions issued to finance eligible project costs, extraor7 dinary repair and replacement costs, operation and 

8 maintenance expenses, and costs associated with un9 expected Federal or State environmental restrictions. 

10 ‘‘(3) RISK ASSESSMENT.—Before entering into 

11 an agreement for a secured loan under this sub12 section, the Secretary, in consultation with each rat13 ing agency providing a rating letter under section 

14 2202(b)(2)(B), shall determine an appropriate sub15 sidy amount for each secured loan, taking into ac16 count such letter. 

17 ‘‘(4) INVESTMENT-GRADE RATING REQUIRE18 MENT.—The funding of a line of credit under this 

19 section shall be contingent on the project’s senior 

20 obligations receiving an investment-grade rating 

21 from at least 1 rating agency. 

22 ‘‘(b) TERMS AND LIMITATIONS.—

23 ‘‘(1) IN GENERAL.—A line of credit under this 

24 section with respect to a project shall be on such 

25 terms and conditions and contain such covenants, 
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1 representations, warranties, and requirements (in2 cluding requirements for audits) as the Secretary de3 termines appropriate. 

4 ‘‘(2) MAXIMUM AMOUNTS.—

5 ‘‘(A) TOTAL AMOUNT.—The total amount 

6 of the line of credit shall not exceed 33 percent 

7 of the reasonably anticipated eligible project 

8 costs. 

9 ‘‘(B) 1-YEAR DRAWS.—The amount drawn 

10 in any 1 year shall not exceed 20 percent of the 

11 total amount of the line of credit. 

12 ‘‘(3) DRAWS.—Any draw on the line of credit 

13 shall represent a direct loan and shall be made only 

14 if net revenues from the project (including capital15 ized interest, any debt service reserve fund, and any 

16 other available reserve) are insufficient to pay the 

17 costs specified in subsection (a)(2). 

18 ‘‘(4) INTEREST RATE.—The interest rate on a 

19 direct loan resulting from a draw on the line of cred20 it shall be not less than the yield on 30-year market21 able United States Treasury securities as of the date 

22 on which the line of credit is obligated. 

23 ‘‘(5) SECURITY.—The line of credit—

24 ‘‘(A) shall—
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1 ‘‘(i) be payable, in whole or in part, 

2 from reliable revenue sources; and 

3 ‘‘(ii) include a rate covenant, coverage 

4 requirement, or similar security feature 

5 supporting the project obligations; and 

6 ‘‘(B) may have a lien on revenues de7 scribed in subparagraph (A) subject to any lien 

8 securing project obligations. 

9 ‘‘(6) PERIOD OF AVAILABILITY.—The line of 

10 credit shall be available during the period beginning 

11 on the date of substantial completion of the project 

12 and ending not later than 10 years after that date. 

13 ‘‘(7) RIGHTS OF THIRD-PARTY CREDITORS.—

14 ‘‘(A) AGAINST FEDERAL GOVERNMENT.—A 

15 third-party creditor of the obligor shall not have 

16 any right against the Federal Government with 

17 respect to any draw on the line of credit. 

18 ‘‘(B) ASSIGNMENT.—An obligor may as19 sign the line of credit to 1 or more lenders or 

20 to a trustee on the lenders’ behalf. 

21 ‘‘(8) NONSUBORDINATION.—A direct loan 

22 under this section shall not be subordinated to the 

23 claims of any holder of project obligations in the 

24 event of bankruptcy, insolvency, or liquidation of the 

25 obligor. 
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1 ‘‘(9) FEES.—The Secretary may establish fees 

2 at a level sufficient to cover all or a portion of the 

3 costs to the Federal Government of providing a line 

4 of credit under this section. 

5 ‘‘(10) RELATIONSHIP TO OTHER CREDIT IN6 STRUMENTS.—A project that receives a line of credit 

7 under this section also shall not receive a secured 

8 loan or loan guarantee under section 2203 of an 

9 amount that, combined with the amount of the line 

10 of credit, exceeds 100 percent of eligible project 

11 costs. 

12 ‘‘(c) REPAYMENT.—

13 ‘‘(1) TERMS AND CONDITIONS.—The Secretary 

14 shall establish repayment terms and conditions for 

15 each direct loan under this section based on the pro16 jected cash flow from project revenues and other re17 payment sources. 

18 ‘‘(2) TIMING.—All scheduled repayments of 

19 principal or interest on a direct loan under this sec20 tion shall commence not later than 5 years after the 

21 end of the period of availability specified in sub22 section (b)(6) and be fully repaid, with interest, by 

23 the date that is 25 years after the end of the period 

24 of availability specified in subsection (b)(6). 
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1 ‘‘(3) SOURCES OF REPAYMENT FUNDS.—The 

2 sources of funds for scheduled loan repayments 

3 under this section shall include reliable revenue 

4 sources. 

5 ‘‘SEC. 2205. PROJECT SERVICING. 

6 ‘‘(a) REQUIREMENT.—The State in which a project 

7 that receives financial assistance under this title is located 

8 may identify a local servicer to assist the Secretary in 

9 servicing the Federal credit instrument made available 

10 under this title. 

11 ‘‘(b) AGENCY; FEES.—If a State identifies a local 

12 servicer under subsection (a), the local servicer—

13 ‘‘(1) shall act as the agent for the Secretary; 

14 and 

15 ‘‘(2) may receive a servicing fee, subject to ap16 proval by the Secretary. 

17 ‘‘(c) LIABILITY.—A local servicer identified under 

18 subsection (a) shall not be liable for the obligations of the 

19 obligor to the Secretary or any lender. 

20 ‘‘(d) ASSISTANCE FROM EXPERT FIRMS.—The Sec21 retary may retain the services of expert firms in the field 

22 of project finance to assist in the underwriting and serv23 icing of Federal credit instruments. 
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1 ‘‘SEC. 2206. STATE AND LOCAL PERMITS. 

2 ‘‘The provision of financial assistance under this title 

3 with respect to a project shall not—

4 ‘‘(1) relieve any recipient of the assistance of 

5 any obligation to obtain any required State or local 

6 permit or approval with respect to the project; 

7 ‘‘(2) limit the right of any unit of State or local 

8 government to approve or regulate any rate of re9 turn on private equity invested in the project; or 

10 ‘‘(3) otherwise supersede any State or local law 

11 (including any regulation) applicable to the construc12 tion or operation of the project. 

13 ‘‘SEC. 2207. REGULATIONS. 

14 ‘‘The Secretary may issue such regulations as the 

15 Secretary determines appropriate to carry out this title. 

16 ‘‘SEC. 2208. FUNDING. 

17 ‘‘(a) FUNDING.—

18 ‘‘(1) IN GENERAL.—There are authorized to be 

19 appropriated to carry out this title, $49,000,000 to 

20 remain available during the period beginning on July 

21 1, 2004 and ending on September 30, 2008. 

22 ‘‘(2) ADMINISTRATIVE COSTS.—From funds 

23 made available under paragraph (1), the Secretary 

24 may use, for the administration of this title, not 

25 more than $2,000,000 for each of fiscal years 2004 

26 through 2008. 
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1 ‘‘(b) CONTRACT AUTHORITY.—Notwithstanding any 

2 other provision of law, approval by the Secretary of a Fed3 eral credit instrument that uses funds made available 

4 under this title shall be deemed to be acceptance by the 

5 United States of a contractual obligation to fund the Fed6 eral credit instrument. 

7 ‘‘(c) AVAILABILITY.—Amounts appropriated under 

8 this section shall be available for obligation on July 1, 

9 2004. 

10 ‘‘SEC. 2209. REPORT TO CONGRESS. 

11 ‘‘Not later than 4 years after the date of enactment 

12 of this title, the Secretary shall submit to Congress a re13 port summarizing the financial performance of the 

14 projects that are receiving, or have received, assistance 

15 under this title, including a recommendation as to whether 

16 the objectives of this title are best served—

17 ‘‘(1) by continuing the program under the au18 thority of the Secretary; 

19 ‘‘(2) by establishing a Government corporation 

20 or Government-sponsored enterprise to administer 

21 the program; or 

22 ‘‘(3) by phasing out the program and relying on 

23 the capital markets to fund the types of infrastruc24 ture investments assisted by this title without Fed25 eral participation.’’. 
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1 SEC. 609. CAPITAL INFRASTRUCTURE REVOLVING LOAN 

2 PROGRAM. 

3 (a) IN GENERAL.—Part A of title XVI of the Public 

4 Health Service Act (42 U.S.C. 300q et seq.) is amended 

5 by adding at the end the following new section: 

6 ‘‘CAPITAL INFRASTRUCTURE REVOLVING LOAN PROGRAM

7 ‘‘SEC. 1603. (a) AUTHORITY TO MAKE AND GUAR8 ANTEE LOANS.—

9 ‘‘(1) AUTHORITY TO MAKE LOANS.—The Sec10 retary may make loans from the fund established 

11 under section 1602(d) to any rural entity for 

12 projects for capital improvements, including—

13 ‘‘(A) the acquisition of land necessary for 

14 the capital improvements; 

15 ‘‘(B) the renovation or modernization of 

16 any building; 

17 ‘‘(C) the acquisition or repair of fixed or 

18 major movable equipment; and 

19 ‘‘(D) such other project expenses as the 

20 Secretary determines appropriate. 

21 ‘‘(2) AUTHORITY TO GUARANTEE LOANS.—

22 ‘‘(A) IN GENERAL.—The Secretary may 

23 guarantee the payment of principal and interest 

24 for loans made to rural entities for projects for 

25 any capital improvement described in paragraph 

26 (1) to any non-Federal lender. 
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1 ‘‘(B) INTEREST SUBSIDIES.—In the case 

2 of a guarantee of any loan made to a rural enti3 ty under subparagraph (A), the Secretary may 

4 pay to the holder of such loan, for and on be5 half of the project for which the loan was made, 

6 amounts sufficient to reduce (by not more than 

7 3 percent) the net effective interest rate other8 wise payable on such loan. 

9 ‘‘(b) AMOUNT OF LOAN.—The principal amount of 

10 a loan directly made or guaranteed under subsection (a) 

11 for a project for capital improvement may not exceed 

12 $5,000,000. 

13 ‘‘(c) FUNDING LIMITATIONS.—

14 ‘‘(1) GOVERNMENT CREDIT SUBSIDY EXPO15 SURE.—The total of the Government credit subsidy 

16 exposure under the Credit Reform Act of 1990 scor17 ing protocol with respect to the loans outstanding at 

18 any time with respect to which guarantees have been 

19 issued, or which have been directly made, under sub20 section (a) may not exceed $50,000,000 per year. 

21 ‘‘(2) TOTAL AMOUNTS.—Subject to paragraph 

22 (1), the total of the principal amount of all loans di23 rectly made or guaranteed under subsection (a) may 

24 not exceed $250,000,000 per year. 
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1 ‘‘(d) CAPITAL ASSESSMENT AND PLANNING

2 GRANTS.—

3 ‘‘(1) NONREPAYABLE GRANTS.—Subject to 

4 paragraph (2), the Secretary may make a grant to 

5 a rural entity, in an amount not to exceed $50,000, 

6 for purposes of capital assessment and business 

7 planning. 

8 ‘‘(2) LIMITATION.—The cumulative total of 

9 grants awarded under this subsection may not ex10 ceed $2,500,000 per year. 

11 ‘‘(e) TERMINATION OF AUTHORITY.—The Secretary 

12 may not directly make or guarantee any loan under sub13 section (a) or make a grant under subsection (d) after 

14 September 30, 2008.’’. 

15 (b) RURAL ENTITY DEFINED.—Section 1624 of the 

16 Public Health Service Act (42 U.S.C. 300s–3) is amended 

17 by adding at the end the following new paragraph: 

18 ‘‘(14)(A) The term ‘rural entity’ includes—

19 ‘‘(i) a rural health clinic, as defined in sec20 tion 1861(aa)(2) of the Social Security Act; 

21 ‘‘(ii) any medical facility with at least 1 

22 bed, but with less than 50 beds, that is located 

23 in—

24 ‘‘(I) a county that is not part of a 

25 metropolitan statistical area; or 
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1 ‘‘(II) a rural census tract of a metro2 politan statistical area (as determined 

3 under the most recent modification of the 

4 Goldsmith Modification, originally pub5 lished in the Federal Register on February 

6 27, 1992 (57 Fed. Reg. 6725)); 

7 ‘‘(iii) a hospital that is classified as a 

8 rural, regional, or national referral center under 

9 section 1886(d)(5)(C) of the Social Security 

10 Act; and 

11 ‘‘(iv) a hospital that is a sole community 

12 hospital (as defined in section 

13 1886(d)(5)(D)(iii) of the Social Security Act). 

14 ‘‘(B) For purposes of subparagraph (A), the 

15 fact that a clinic, facility, or hospital has been geo16 graphically reclassified under the medicare program 

17 under title XVIII of the Social Security Act shall not 

18 preclude a hospital from being considered a rural en19 tity under clause (i) or (ii) of subparagraph (A).’’. 

20 (c) CONFORMING AMENDMENTS.—Section 1602 of 

21 the Public Health Service Act (42 U.S.C. 300q–2) is 

22 amended—

23 (1) in subsection (b)(2)(D), by inserting ‘‘or 

24 1603(a)(2)(B)’’ after ‘‘1601(a)(2)(B)’’; and 

25 (2) in subsection (d)—
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1 (A) in paragraph (1)(C), by striking ‘‘sec2 tion 1601(a)(2)(B)’’ and inserting ‘‘sections 

3 1601(a)(2)(B) and 1603(a)(2)(B)’’; and 

4 (B) in paragraph (2)(A), by inserting ‘‘or 

5 1603(a)(2)(B)’’ after ‘‘1601(a)(2)(B)’’. 

6 SEC. 610. FEDERAL REIMBURSEMENT OF EMERGENCY 

7 HEALTH SERVICES FURNISHED TO UNDOCU8 MENTED ALIENS. 

9 (a) TOTAL AMOUNT AVAILABLE FOR ALLOTMENT.—

10 There is appropriated, out of any funds in the Treasury 

11 not otherwise appropriated, $250,000,000 for each of fis12 cal years 2005 through 2008, for the purpose of making 

13 allotments under this section to States described in para14 graph (1) or (2) of subsection (b). Funds appropriated 

15 under the preceding sentence shall remain available until 

16 expended. 

17 (b) STATE ALLOTMENTS.—

18 (1) BASED ON PERCENTAGE OF UNDOCU19 MENTED ALIENS.—

20 (A) IN GENERAL.—Out of the amount ap21 propriated under subsection (a) for a fiscal 

22 year, the Secretary shall use $167,000,000 of 

23 such amount to make allotments for such fiscal 

24 year in accordance with subparagraph (B). 
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1 (B) FORMULA.—The amount of the allot2 ment for each State for a fiscal year shall be 

3 equal to the product of—

4 (i) the total amount available for al5 lotments under this paragraph for the fis6 cal year; and 

7 (ii) the percentage of undocumented 

8 aliens residing in the State with respect to 

9 the total number of such aliens residing in 

10 all States, as determined by the Statistics 

11 Division of the Immigration and Natu12 ralization Service, as of January 2003, 

13 based on the 2000 decennial census. 

14 (2) BASED ON NUMBER OF UNDOCUMENTED

15 ALIEN APPREHENSION STATES.—

16 (A) IN GENERAL.—Out of the amount ap17 propriated under subsection (a) for a fiscal 

18 year, the Secretary shall use $83,000,000 of 

19 such amount to make allotments for such fiscal 

20 year for each of the 6 States with the highest 

21 number of undocumented alien apprehensions 

22 for such fiscal year. 

23 (B) DETERMINATION OF ALLOTMENTS.—

24 The amount of the allotment for each State de25 scribed in subparagraph (A) for a fiscal year 
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1 shall bear the same ratio to the total amount 

2 available for allotments under this paragraph 

3 for the fiscal year as the ratio of the number 

4 of undocumented alien apprehensions in the 

5 State in that fiscal year bears to the total of 

6 such numbers for all such States for such fiscal 

7 year. 

8 (C) DATA.—For purposes of this para9 graph, the highest number of undocumented 

10 alien apprehensions for a fiscal year shall be 

11 based on the 4 most recent quarterly apprehen12 sion rates for undocumented aliens in such 

13 States, as reported by the Immigration and 

14 Naturalization Service. 

15 (3) RULE OF CONSTRUCTION.—Nothing in this 

16 section shall be construed as prohibiting a State that 

17 is described in both of paragraphs (1) and (2) from 

18 receiving an allotment under both paragraphs for a 

19 fiscal year. 

20 (c) USE OF FUNDS.—

21 (1) AUTHORITY TO MAKE PAYMENTS.—From 

22 the allotments made for a State under subsection (b) 

23 for a fiscal year, the Secretary shall pay directly to 

24 local governments, hospitals, or other providers lo25 cated in the State (including providers of services re-
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1 ceived through an Indian Health Service facility 

2 whether operated by the Indian Health Service or by 

3 an Indian tribe or tribal organization) that provide 

4 uncompensated emergency health services furnished 

5 to undocumented aliens during that fiscal year, and 

6 to the State, such amounts (subject to the total 

7 amount available from such allotments) as the local 

8 governments, hospitals, providers, or State dem9 onstrate were incurred for the provision of such 

10 services during that fiscal year. 

11 (2) LIMITATION ON STATE USE OF FUNDS.—

12 Funds paid to a State from allotments made under 

13 subsection (b) for a fiscal year may only be used for 

14 making payments to local governments, hospitals, or 

15 other providers for costs incurred in providing emer16 gency health services to undocumented aliens or for 

17 State costs incurred with respect to the provision of 

18 emergency health services to such aliens. 

19 (3) INCLUSION OF COSTS INCURRED WITH RE20 SPECT TO CERTAIN ALIENS.—Uncompensated emer21 gency health services furnished to aliens who have 

22 been allowed to enter the United States for the sole 

23 purpose of receiving emergency health services may 

24 be included in the determination of costs incurred by 
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1 a State, local government, hospital, or other provider 

2 with respect to the provision of such services. 

3 (d) APPLICATIONS; ADVANCE PAYMENTS.—

4 (1) DEADLINE FOR ESTABLISHMENT OF APPLI5 CATION PROCESS.—24 (A) IN GENERAL.—Not 

6 later than September 1, 2004, the Secretary shall 

7 establish a process under which States, local govern8 ments, hospitals, or other providers located in the 

9 State may apply for payments from allotments made 

10 under subsection (b) for a fiscal year for uncompen11 sated emergency health services furnished to un12 documented aliens during that fiscal year. 

13 (B) INCLUSION OF MEASURES TO COMBAT

14 FRAUD.—The Secretary shall include in the 

15 process established under subparagraph (A) 

16 measures to ensure that fraudulent payments 

17 are not made from the allotments determined 

18 under subsection (b). 

19 (2) ADVANCE PAYMENT; RETROSPECTIVE AD20 JUSTMENT.—The process established under para21 graph (1) shall allow for making payments under 

22 this section for each quarter of a fiscal year on the 

23 basis of advance estimates of expenditures submitted 

24 by applicants for such payments and such other in25 vestigation as the Secretary may find necessary, and 
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1 for making reductions or increases in the payments 

2 as necessary to adjust for any overpayment or un3 derpayment for prior quarters of such fiscal year. 

4 (e) DEFINITIONS.—In this section: 

5 (1) HOSPITAL.—The term ‘‘hospital’’ has the 

6 meaning given such term in section 1861(e) of the 

7 Social Security Act (42 U.S.C. 1395x(e)). 

8 (2) INDIAN TRIBE; TRIBAL ORGANIZATION.—

9 The terms ‘‘Indian tribe’’ and ‘‘tribal organization’’ 

10 have the meanings given such terms in section 4 of 

11 the Indian Health Care Improvement Act (25 U.S.C. 

12 1603). 

13 (3) PROVIDER.—The term ‘‘provider’’ includes 

14 a physician, any other health care professional li15 censed under State law, and any other entity that 

16 furnishes emergency health services, including ambu17 lance services. 

18 (4) SECRETARY.—The term ‘‘Secretary’’ means 

19 the Secretary of Health and Human Services. 

20 (5) STATE.—The term ‘‘State’’ means the 50 

21 States and the District of Columbia. 
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1 SEC. 611. INCREASE IN APPROPRIATION TO THE HEALTH 

2 CARE FRAUD AND ABUSE CONTROL AC3 COUNT. 

4 Section 1817(k)(3)(A) (42 U.S.C. 1395i(k)(3)(A)) is 

5 amended—

6 (1) in clause (i)—

7 (A) in subclause (II), by striking ‘‘and’’ at 

8 the end; and 

9 (B) by striking subclause (III), and insert10 ing the following new subclauses: 

11 ‘‘(III) for fiscal year 2004, the 

12 limit for fiscal year 2003 increased by 

13 $10,000,000; 

14 ‘‘(IV) for fiscal year 2005, the 

15 limit for fiscal year 2003 increased by 

16 $15,000,000; 

17 ‘‘(V) for fiscal year 2006, the 

18 limit for fiscal year 2003 increased by 

19 $25,000,000; and 

20 ‘‘(VI) for each fiscal year after 

21 fiscal year 2006, the limit for fiscal 

22 year 2003.’’; and 

23 (2) in clause (ii)—

24 (A) in subclause (VI), by striking ‘‘and’’ at 

25 the end; 

26 (B) in subclause (VII)—
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1 (i) by striking ‘‘each fiscal year after 

2 fiscal year 2002’’ and inserting ‘‘fiscal year 

3 2003’’; and 

4 (ii) by striking the period and insert5 ing a semicolon; and 

6 (3) by adding at the end the following: 

7 ‘‘(VIII) for fiscal year 2004, 

8 $170,000,000; 

9 ‘‘(IX) for fiscal year 2005, 

10 $175,000,000; 

11 ‘‘(X) for fiscal year 2006, 

12 $185,000,000; and 

13 ‘‘(XI) for each fiscal year after 

14 fiscal year 2006, not less than 

15 $150,000,000 and not more than 

16 $160,000,000.’’. 

17 SEC. 612. INCREASE IN CIVIL PENALTIES UNDER THE 

18 FALSE CLAIMS ACT. 

19 (a) IN GENERAL.—Section 3729(a) of title 31, 

20 United States Code, is amended—

21 (1) by striking ‘‘$5,000’’ and inserting 

22 ‘‘$7,500’’; and 

23 (2) by striking ‘‘$10,000’’ and inserting 

24 ‘‘$15,000’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) shall apply to violations occurring on or 

3 after January 1, 2004. 

4 SEC. 613. INCREASE IN CIVIL MONETARY PENALTIES 

5 UNDER THE SOCIAL SECURITY ACT. 

6 (a) IN GENERAL.—Section 1128A(a) (42 U.S.C. 

7 1320a–7a(a)), in the matter following paragraph (7), is 

8 amended—

9 (1) by striking ‘‘$10,000’’ each place it appears 

10 and inserting ‘‘$12,500’’; 

11 (2) by striking ‘‘$15,000’’ and inserting 

12 ‘‘$18,750’’; and 

13 (3) striking ‘‘$50,000’’ and inserting 

14 ‘‘$62,500’’. 

15 (b) EFFECTIVE DATE.—The amendments made by 

16 subsection (a) shall apply to violations occurring on or 

17 after January 1, 2004. 

18 SEC. 614. EXTENSION OF CUSTOMS USER FEES. 

19 Section 13031(j)(3) of the Consolidated Omnibus 

20 Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) 

21 is amended by striking ‘‘September 30, 2003’’ and insert22 ing ‘‘September 30, 2013’’. 
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1 SEC. 615. REIMBURSEMENT FOR FEDERALLY QUALIFIED 

2 HEALTH CENTERS PARTICIPATING IN MEDI3 CARE MANAGED CARE. 

4 (a) REIMBURSEMENT.—

5 (1) IN GENERAL.—Section 1833(a)(3) (42 

6 U.S.C. 1395l(a)(3)) is amended to read as follows: 

7 ‘‘(3) in the case of services described in section 

8 1832(a)(2)(D)—

9 ‘‘(A) except as provided in subparagraph 

10 (B), the costs which are reasonable and related 

11 to the cost of furnishing such services or which 

12 are based on such other tests of reasonableness 

13 as the Secretary may prescribe in regulations, 

14 including those authorized under section 

15 1861(v)(1)(A), less the amount a provider may 

16 charge as described in clause (ii) of section 

17 1866(a)(2)(A), but in no case may the payment 

18 for such services (other than for items and serv19 ices described in section 1861(s)(10)(A)) exceed 

20 80 percent of such costs; or 

21 ‘‘(B) with respect to the services described 

22 in clause (ii) of section 1832(a)(2)(D) that are 

23 furnished to an individual enrolled with a 

24 MedicareAdvantage plan under part C pursuant 

25 to a written agreement described in section 

26 1853(j), the amount by which—
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1 ‘‘(i) the amount of payment that 

2 would have otherwise been provided under 

3 subparagraph (A) (calculated as if ‘100 

4 percent’ were substituted for ‘80 percent’ 

5 in such subparagraph) for such services if 

6 the individual had not been so enrolled; ex7 ceeds 

8 ‘‘(ii) the amount of the payments re9 ceived under such written agreement for 

10 such services (not including any financial 

11 incentives provided for in such agreement 

12 such as risk pool payments, bonuses, or 

13 withholds), 

14 less the amount the Federally qualified health 

15 center may charge as described in section 

16 1857(e)(3)(C);’’. 

17 (b) CONTINUATION OF MEDICAREADVANTAGE

18 MONTHLY PAYMENTS.—

19 (1) IN GENERAL.—Section 1853 (42 U.S.C. 

20 1395w–23), as amended by this Act, is amended by 

21 adding at the end the following new subsection: 

22 ‘‘(j) PAYMENT RULE FOR FEDERALLY QUALIFIED

23 HEALTH CENTER SERVICES.—If an individual who is en24 rolled with a MedicareAdvantage plan under this part re25 ceives a service from a Federally qualified health center 
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1 that has a written agreement with such plan for providing 

2 such a service (including any agreement required under 

3 section 1857(e)(3))—

4 ‘‘(1) the Secretary shall pay the amount deter5 mined under section 1833(a)(3)(B) directly to the 

6 Federally qualified health center not less frequently 

7 than quarterly; and 

8 ‘‘(2) the Secretary shall not reduce the amount 

9 of the monthly payments to the MedicareAdvantage 

10 plan made under section 1853(a) as a result of the 

11 application of paragraph (1).’’. 

12 (2) CONFORMING AMENDMENTS.—

13 (A) Paragraphs (1) and (2) of section 

14 1851(i) (42 U.S.C. 1395w–21(i)(1)), as amend15 ed by this Act, are each amended by inserting 

16 ‘‘1853(j),’’ after ‘‘1853(i),’’. 

17 (B) Section 1853(c)(5) is amended by 

18 striking ‘‘subsections (a)(3)(C)(iii) and (i)’’ and 

19 inserting ‘‘subsections (a)(3)(C)(iii), (i), and 

20 (j)(1)’’. 

21 (c) ADDITIONAL MEDICAREADVANTAGE CONTRACT

22 REQUIREMENTS.—Section 1857(e) (42 U.S.C. 1395w–

23 27(e)) is amended by adding at the end the following new 

24 paragraph: 
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1 ‘‘(3) AGREEMENTS WITH FEDERALLY QUALI2 FIED HEALTH CENTERS.—

3 ‘‘(A) PAYMENT LEVELS AND AMOUNTS.—A 

4 contract under this part shall require the 

5 MedicareAdvantage plan to provide, in any con6 tract between the plan and a Federally qualified 

7 health center, for a level and amount of pay8 ment to the Federally qualified health center 

9 for services provided by such health center that 

10 is not less than the level and amount of pay11 ment that the plan would make for such serv12 ices if the services had been furnished by a pro13 vider of services that was not a Federally quali14 fied health center. 

15 ‘‘(B) COST-SHARING.—Under the written 

16 agreement described in subparagraph (A), a 

17 Federally qualified health center must accept 

18 the MedicareAdvantage contract price plus the 

19 Federal payment provided for in section 

20 1833(a)(3)(B) as payment in full for services 

21 covered by the contract, except that such a 

22 health center may collect any amount of cost23 sharing permitted under the contract under this 

24 part, so long as the amounts of any deductible, 
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1 coinsurance, or copayment comply with the re2 quirements under section 1854(e).’’. 

3 (d) SAFE HARBOR FROM ANTIKICKBACK PROHIBI4 TION.—Section 1128B(b)(3) (42 U.S.C. 1320a–7b(b)(3)) 

5 is amended—

6 (1) in subparagraph (E), by striking ‘‘and’’ 

7 after the semicolon at the end; 

8 (2) in subparagraph (F), by striking the period 

9 at the end and inserting ‘‘; and’’; and 

10 (3) by adding at the end the following new sub11 paragraph: 

12 ‘‘(G) any remuneration between a Feder13 ally qualified health center (or an entity con14 trolled by such a health center) and a 

15 MedicareAdvantage plan pursuant to the writ16 ten agreement described in section 1853(j).’’. 

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

18 this section shall apply to services provided on or after 

19 January 1, 2006, and contract years beginning on or after 

20 such date. 

21 SEC. 616. PROVISION OF INFORMATION ON ADVANCE DI22 RECTIVES. 

23 Section 1804(c) of the Social Security Act (42 U.S.C. 

24 1395b-2(c)) is amended—
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1 (1) by redesignating paragraphs (1) through 

2 (4) as subparagraphs (A) through (D), respectively; 

3 (2) in the matter preceding subparagraph (A), 

4 as so redesignated, by striking ‘‘The notice’’ and in5 serting ‘‘(1) The notice’’; and 

6 (3) by adding at the end the following: 

7 ‘‘(2)(A) The Secretary shall annually provide each 

8 medicare beneficiary with information concerning advance 

9 directives. Such information shall be provided by the Sec10 retary as part of the Medicare and You handbook that 

11 is provided to each such beneficiary. Such handbook shall 

12 include a separate section on advanced directives and spe13 cific details on living wills and the durable power of attor14 ney for health care. The Secretary shall ensure that the 

15 introductory letter that accompanies such handbook con16 tain a statement concerning the inclusion of such informa17 tion. 

18 ‘‘(B) In this section: 

19 ‘‘(i) The term ‘advance directive’ has the mean20 ing given such term in section 1866(f)(3). 

21 ‘‘(ii) The term ‘medicare beneficiary’ means an 

22 individual who is entitled to, or enrolled for, benefits 

23 under part A or enrolled under part B, of this 

24 title.’’. 
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1 SEC. 617. SENSE OF THE SENATE REGARDING IMPLEMEN2 TATION OF THE PRESCRIPTION DRUG AND 

3 MEDICARE IMPROVEMENT ACT OF 2003. 

4 (a) IN GENERAL.—It is the sense of the Senate that 

5 the Committee on Finance of the Senate should hold not 

6 less than 4 hearings to monitor implementation of the Pre7 scription Drug and Medicare Improvement Act of 2003 

8 (hereinafter in this section referred to as the ‘‘Act’’) dur9 ing which the Secretary or his designee should testify be10 fore the Committee. 

11 (b) INITIAL HEARING.—It is the sense of the Senate 

12 that the first hearing described in subsection (a) should 

13 be held not later than 60 days after the date of the enact14 ment the Act. At the hearing, the Secretary or his des15 ignee should submit written testimony and testify before 

16 the Committee on Finance of the Senate on the following 

17 issues: 

18 (1) The progress toward implementation of the 

19 prescription drug discount card under section 111 of 

20 the Act. 

21 (2) Development of the blueprint that will di22 rect the implementation of the provisions of the Act, 

23 including the implementation of title I (Medicare 

24 Prescription Drug Benefit), title II 

25 (MedicareAdvantage), and title III (Center for Medi26 care Choices) of the Act. 
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1 (3) Any problems that will impede the timely 

2 implementation of the Act. 

3 (4) The overall progress toward implementation 

4 of the Act. 

5 (c) SUBSEQUENT HEARINGS.—It is the sense of the 

6 Senate that the additional hearings described in sub7 section (a) should be held in each of May 2004, October 

8 2004, and May 2005. At each hearing, the Secretary or 

9 his designee should submit written testimony and testify 

10 before the Committee on Finance of the Senate on the 

11 following issues: 

12 (1) Progress on implementation of title I (Medi13 care Prescription Drug Benefit), title II 

14 (MedicareAdvantage), and title III (Center for Medi15 care Choices) of the Act. 

16 (2) Any problems that will impede timely imple17 mentation of the Act. 

18 SEC. 618. EXTENSION OF MUNICIPAL HEALTH SERVICE 

19 DEMONSTRATION PROJECTS. 

20 The last sentence of section 9215(a) of the Consoli21 dated Omnibus Budget Reconciliation Act of 1985 (42 

22 U.S.C. 1395b–1 note), as previously amended, is amended 

23 by striking ‘‘December 31, 2004, and inserting ‘‘December 

24 31, 2006. 
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1 SEC. 619. STUDY ON MAKING PRESCRIPTION PHARMA2 CEUTICAL INFORMATION ACCESSIBLE FOR 

3 BLIND AND VISUALLY-IMPAIRED INDIVID4 UALS. 

5 (a) STUDY.—

6 (1) IN GENERAL.—The Secretary of Health and 

7 Human Services shall undertake a study of how to 

8 make prescription pharmaceutical information, in9 cluding drug labels and usage instructions, acces10 sible to blind and visually-impaired individuals. 

11 (2) STUDY TO INCLUDE EXISTING AND EMERG12 ING TECHNOLOGIES.—The study under paragraph 

13 (1) shall include a review of existing and emerging 

14 technologies, including assistive technology, that 

15 makes essential information on the content and pre16 scribed use of pharmaceutical medicines available in 

17 a usable format for blind and visually-impaired indi18 viduals. 

19 (b) REPORT.—

20 (1) IN GENERAL.—Not later than 18 months 

21 after the date of the enactment of this Act, the Sec22 retary of Health and Human Services shall submit 

23 a report to Congress on the study required under 

24 subsection (a). 

25 (2) CONTENTS OF REPORT.—The report re26 quired under subsection (a) shall include rec-
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1 ommendations for the implementation of usable for2 mats for making prescription pharmaceutical infor3 mation available to blind and visually-impaired indi4 viduals and an estimate of the costs associated with 

5 the implementation of each format. 

6 SEC. 620. HEALTH CARE THAT WORKS FOR ALL AMERI7 CANS-CITIZENS HEALTH CARE WORKING 

8 GROUP. 

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

10 (1) In order to improve the health care system, 

11 the American public must engage in an informed na12 tional public debate to make choices about the serv13 ices they want covered, what health care coverage 

14 they want, and how they are willing to pay for cov15 erage. 

16 (2) More than a trillion dollars annually is 

17 spent on the health care system, yet—

18 (A) 41,000,000 Americans are uninsured; 

19 (B) insured individuals do not always have 

20 access to essential, effective services to improve 

21 and maintain their health; and 

22 (C) employers, who cover over 170,000,000 

23 Americans, find providing coverage increasingly 

24 difficult because of rising costs and double digit 

25 premium increases. 
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1 (3) Despite increases in medical care spending 

2 that are greater than the rate of inflation, popu3 lation growth, and Gross Domestic Product growth, 

4 there has not been a commensurate improvement in 

5 our health status as a nation. 

6 (4) Health care costs for even just 1 member 

7 of a family can be catastrophic, resulting in medical 

8 bills potentially harming the economic stability of 

9 the entire family. 

10 (5) Common life occurrences can jeopardize the 

11 ability of a family to retain private coverage or jeop12 ardize access to public coverage. 

13 (6) Innovations in health care access, coverage, 

14 and quality of care, including the use of technology, 

15 have often come from States, local communities, and 

16 private sector organizations, but more creative poli17 cies could tap this potential. 

18 (7) Despite our Nation’s wealth, the health care 

19 system does not provide coverage to all Americans 

20 who want it. 

21 (b) PURPOSES.—The purposes of this Act are— 

22 (1) to provide for a nationwide public debate 

23 about improving the health care system to provide 

24 every American with the ability to obtain quality, af25 fordable health care coverage; and 
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1 (2) to provide for a vote by Congress on the 

2 recommendations that result from the debate. 

3 (c) ESTABLISHMENT.—The Secretary, acting 

4 through the Agency for Healthcare Research and Quality, 

5 shall establish an entity to be known as the Citizens’ 

6 Health Care Working Group (referred to in this Act as 

7 the ‘‘Working Group’’). 

8 (d) APPOINTMENT.—Not later than 45 days after the 

9 date of enactment of this Act, the Speaker and Minority 

10 Leader of the House of Representatives and the Majority 

11 Leader and Minority Leader of the Senate (in this section 

12 referred to as the ‘‘leadership’’) shall each appoint individ13 uals to serve as members of the Working Group in accord14 ance with subsections (e), (f), and (g). 

15 (e) MEMBERSHIP CRITERIA.—

16 (1) APPOINTED MEMBERS.—

17 (A) SEPARATE APPOINTMENTS.—The 

18 Speaker of the House of Representatives jointly 

19 with the Minority Leader of the House of Rep20 resentatives, and the Majority Leader of the 

21 Senate jointly with the Minority Leader of the 

22 Senate, shall each appoint 1 member of the 

23 Working Group described in subparagraphs 

24 (A), (G), (J), (K), and (M) of paragraph (2). 
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1 (B) JOINT APPOINTMENTS.—Members of 

2 the Working Group described in subparagraphs 

3 (B), (C), (D), (E), (F), (I), and (N) of para4 graph (2) shall be appointed jointly by the lead5 ership. 

6 (C) COMBINED APPOINTMENTS.—Members 

7 of the Working Group described in subpara8 graphs (H) and (L) shall be appointed in the 

9 following manner: 

10 (i) One member of the Working 

11 Group in each of such subparagraphs shall 

12 be appointed jointly by the leadership. 

13 (ii) The remaining appointments of 

14 the members in each of such subpara15 graphs shall be divided equally such that 

16 the Speaker of the House of Representa17 tives jointly with the Minority Leader of 

18 the House of Representatives, and the Ma19 jority Leader of the Senate jointly with the 

20 Minority Leader of the Senate each ap21 point an equal number of members. 

22 (2) CATEGORIES OF APPOINTED MEMBERS.—

23 Members of the Working Group shall be appointed 

24 as follows: 
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1 (A) 2 members shall be patients or family 

2 members of patients who, at least 1 year prior 

3 to the date of enactment of this Act, have had 

4 no health insurance. 

5 (B) 1 member shall be a representative of 

6 children. 

7 (C) 1 member shall be a representative of 

8 the mentally ill. 

9 (D) 1 member shall be a representative of 

10 the disabled. 

11 (E) 1 member shall be over the age of 65 

12 and a beneficiary under the medicare program 

13 established under title XVIII of the Social Se14 curity Act (42 U.S.C. 1395 et seq.). 

15 (F) 1 member shall be a recipient of bene16 fits under the medicaid program under title 

17 XIX of the Social Security Act (42 U.S.C. 1396 

18 et seq.). 

19 (G) 2 members shall be State health offi20 cials. 

21 (H) 3 members shall be employers, includ22 ing—

23 (i) 1 large employer (an employer who 

24 employed 50 or more employees on busi25 ness days during the preceding calendar 
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1 year and who employed at least 50 employ2 ees on the first of the year); 

3 (ii) 1 small employer (an employer 

4 who employed an average of at least 2 em5 ployees but less than 50 employees on 

6 business days in the preceding calendar 

7 year and who employs at least 2 employees 

8 on the first of the year); and 

9 (iii) 1 multi-state employer. 

10 (I) 1 member shall be a representative of 

11 labor. 

12 (J) 2 members shall be health insurance 

13 issuers. 

14 (K) 2 members shall be health care pro15 viders. 

16 (L) 5 members shall be appointed as fol17 lows: 

18 (i) 1 economist. 

19 (ii) 1 academician. 

20 (iii) 1 health policy researcher. 

21 (iv) 1 individual with expertise in 

22 pharmacoeconomics. 

23 (v) 1 health technology expert. 

24 (M) 2 members shall be representatives of 

25 community leaders who have developed State or 
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1 local community solutions to the problems ad2 dressed by the Working Group. 

3 (N) 1 member shall be a representative of 

4 a medical school. 

5 (3) SECRETARY.—The Secretary, or the des6 ignee of the Secretary, shall be a member of the 

7 Working Group. 

8 (f) PROHIBITED APPOINTMENTS.—Members of the 

9 Working Group shall not include members of Congress or 

10 other elected government officials (Federal, State, or 

11 local) other than those individuals specified in subsection 

12 (e). To the extent possible, individuals appointed to the 

13 Working Group shall have used the health care system 

14 within the previous 2 years and shall not be paid employ15 ees or representatives of associations or advocacy organi16 zations involved in the health care system. 

17 (g) APPOINTMENT CRITERIA.—

18 (1) HOUSE OF REPRESENTATIVES.—The 

19 Speaker and Minority Leader of the House of Rep20 resentatives shall make the appointments described 

21 in subsection (d) in consultation with the chair22 person and ranking member of the following commit23 tees of the House of Representatives: 

24 (A) The Committee on Ways and Means. 
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1 (B) The Committee on Energy and Com2 merce. 

3 (C) The Committee on Education and the 

4 Workforce. 

5 (2) SENATE.—The Majority Leader and Minor6 ity Leader of the Senate shall make the appoint7 ments described in subsection (d) in consultation 

8 with the chairperson and ranking member of the fol9 lowing committees of the Senate: 

10 (A) The Committee on Finance. 

11 (B) The Committee on Health, Education, 

12 Labor, and Pensions. 

13 (h) PERIOD OF APPOINTMENT.—Members of the 

14 Working Group shall be appointed for a term of 2 years. 

15 Such term is renewable and any vacancies shall not affect 

16 the power and duties of the Working Group but shall be 

17 filled in the same manner as the original appointment. 

18 (i) APPOINTMENT OF THE CHAIRPERSON.—Not later 

19 than 15 days after the date on which all members of the 

20 Working Group have been appointed under subsection (d), 

21 the leadership shall make a joint designation of the chair22 person of the Working Group. If the leadership fails to 

23 make such designation within such time period, the Work24 ing Group Members shall, not later than 10 days after 
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1 the end of such time period, designate a chairperson by 

2 majority vote. 

3 (j) SUBCOMMITTEES.—The Working Group may es4 tablish subcommittees if doing so increases the efficiency 

5 of the Working Group in completing its tasks. 

6 (k) DUTIES.—

7 (1) HEARINGS.—Not later than 90 days after 

8 the date of appointment of the chairperson under 

9 subsection (i), the Working Group shall hold hear10 ings to examine—

11 (A) the capacity of the public and private 

12 health care systems to expand coverage options; 

13 (B) the cost of health care and the effec14 tiveness of care provided at all stages of dis15 ease; 

16 (C) innovative State strategies used to ex17 pand health care coverage and lower health care 

18 costs; 

19 (D) local community solutions to accessing 

20 health care coverage; 

21 (E) efforts to enroll individuals currently 

22 eligible for public or private health care cov23 erage; 

24 (F) the role of evidence-based medical 

25 practices that can be documented as restoring, 
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1 maintaining, or improving a patient’s health, 

2 and the use of technology in supporting pro3 viders in improving quality of care and lowering 

4 costs; and 

5 (G) strategies to assist purchasers of 

6 health care, including consumers, to become 

7 more aware of the impact of costs, and to lower 

8 the costs of health care. 

9 (2) ADDITIONAL HEARINGS.—The Working 

10 Group may hold additional hearings on subjects 

11 other than those listed in paragraph (1) so long as 

12 such hearings are determined to be necessary by the 

13 Working Group in carrying out the purposes of this 

14 Act. Such additional hearings do not have to be 

15 completed within the time period specified in para16 graph (1) but shall not delay the other activities of 

17 the Working Group under this section. 

18 (3) THE HEALTH REPORT TO THE AMERICAN

19 PEOPLE.—Not later than 90 days after the hearings 

20 described in paragraphs (1) and (2) are completed, 

21 the Working Group shall prepare and make available 

22 to health care consumers through the Internet and 

23 other appropriate public channels, a report to be en24 titled, ‘‘The Health Report to the American People’’. 
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1 Such report shall be understandable to the general 

2 public and include—

3 (A) a summary of—

4 (i) health care and related services 

5 that may be used by individuals through6 out their life span; 

7 (ii) the cost of health care services 

8 and their medical effectiveness in providing 

9 better quality of care for different age 

10 groups; 

11 (iii) the source of coverage and pay12 ment, including reimbursement, for health 

13 care services; 

14 (iv) the reasons people are uninsured 

15 or underinsured and the cost to taxpayers, 

16 purchasers of health services, and commu17 nities when Americans are uninsured or 

18 underinsured; 

19 (v) the impact on health care out20 comes and costs when individuals are 

21 treated in all stages of disease; 

22 (vi) health care cost containment 

23 strategies; and 

24 (vii) information on health care needs 

25 that need to be addressed; 
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1 (B) examples of community strategies to 

2 provide health care coverage or access; 

3 (C) information on geographic-specific 

4 issues relating to health care; 

5 (D) information concerning the cost of 

6 care in different settings, including institu7 tional-based care and home and community8 based care; 

9 (E) a summary of ways to finance health 

10 care coverage; and 

11 (F) the role of technology in providing fu12 ture health care including ways to support the 

13 information needs of patients and providers. 

14 (4) COMMUNITY MEETINGS.—

15 (A) IN GENERAL.—Not later than 1 year 

16 after the date of enactment of this Act, the 

17 Working Group shall initiate health care com18 munity meetings throughout the United States 

19 (in this section referred to as ‘‘community 

20 meetings’’). Such community meetings may be 

21 geographically or regionally based and shall be 

22 completed within 180 days after the initiation 

23 of the first meeting. 

24 (B) NUMBER OF MEETINGS.—The Work25 ing Group shall hold a sufficient number of 
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1 community meetings in order to receive infor2 mation that reflects—

3 (i) the geographic differences through4 out the United States; 

5 (ii) diverse populations; and 

6 (iii) a balance among urban and rural 

7 populations. 

8 (C) MEETING REQUIREMENTS.—

9 (i) FACILITATOR.—A State health of10 ficer may be the facilitator at the commu11 nity meetings. 

12 (ii) ATTENDANCE.—At least 1 mem13 ber of the Working Group shall attend and 

14 serve as chair of each community meeting. 

15 Other members may participate through 

16 interactive technology. 

17 (iii) TOPICS.—The community meet18 ings shall, at a minimum, address the fol19 lowing issues: 

20 (I) The optimum way to balance 

21 costs and benefits so that affordable 

22 health coverage is available to as 

23 many people as possible. 

24 (II) The identification of services 

25 that provide cost-effective, essential 
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1 health care services to maintain and 

2 improve health and which should be 

3 included in health care coverage. 

4 (III) The cost of providing in5 creased benefits. 

6 (IV) The mechanisms to finance 

7 health care coverage, including defin8 ing the appropriate financial role for 

9 individuals, businesses, and govern10 ment. 

11 (iv) INTERACTIVE TECHNOLOGY.—

12 The Working Group may encourage public 

13 participation in community meetings 

14 through interactive technology and other 

15 means as determined appropriate by the 

16 Working Group. 

17 (D) INTERIM REQUIREMENTS.—Not later 

18 than 180 days after the date of completion of 

19 the community meetings, the Working Group 

20 shall prepare and make available to the public 

21 through the Internet and other appropriate 

22 public channels, an interim set of recommenda23 tions on health care coverage and ways to im24 prove and strengthen the health care system 

25 based on the information and preferences ex-
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1 pressed at the community meetings. There shall 

2 be a 90-day public comment period on such rec3 ommendations. 

4 (l) RECOMMENDATIONS.—Not later than 120 days 

5 after the expiration of the public comment period de6 scribed in subsection (k)(4)(D), the Working Group shall 

7 submit to Congress and the President a final set of rec8 ommendations. 

9 (m) ADMINISTRATION.—

10 (1) EXECUTIVE DIRECTOR.—There shall be an 

11 Executive Director of the Working Group who shall 

12 be appointed by the chairperson of the Working 

13 Group in consultation with the members of the 

14 Working Group. 

15 (2) COMPENSATION.—While serving on the 

16 business of the Working Group (including travel 

17 time), a member of the Working Group shall be enti18 tled to compensation at the per diem equivalent of 

19 the rate provided for level IV of the Executive 

20 Schedule under section 5315 of title 5, United 

21 States Code, and while so serving away from home 

22 and the member’s regular place of business, a mem23 ber may be allowed travel expenses, as authorized by 

24 the chairperson of the Working Group. For purposes 

25 of pay and employment benefits, rights, and privi-
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1 leges, all personnel of the Working Group shall be 

2 treated as if they were employees of the Senate. 

3 (3) INFORMATION FROM FEDERAL AGENCIES.—

4 The Working Group may secure directly from any 

5 Federal department or agency such information as 

6 the Working Group considers necessary to carry out 

7 this Act. Upon request of the Working Group, the 

8 head of such department or agency shall furnish 

9 such information. 

10 (4) POSTAL SERVICES.—The Working Group 

11 may use the United States mails in the same man12 ner and under the same conditions as other depart13 ments and agencies of the Federal Government. 

14 (n) DETAIL.—Not more than 10 Federal Government 

15 employees employed by the Department of Labor and 10 

16 Federal Government employees employed by the Depart17 ment of Health and Human Services may be detailed to 

18 the Working Group under this section without further re19 imbursement. Any detail of an employee shall be without 

20 interruption or loss of civil service status or privilege. 

21 (o) TEMPORARY AND INTERMITTENT SERVICES.—

22 The chairperson of the Working Group may procure tem23 porary and intermittent services under section 3109(b) of 

24 title 5, United States Code, at rates for individuals which 

25 do not exceed the daily equivalent of the annual rate of 
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1 basic pay prescribed for level V of the Executive Schedule 

2 under section 5316 of such title. 

3 (p) ANNUAL REPORT.—Not later than 1 year after 

4 the date of enactment of this Act, and annually thereafter 

5 during the existence of the Working Group, the Working 

6 Group shall report to Congress and make public a detailed 

7 description of the expenditures of the Working Group used 

8 to carry out its duties under this section. 

9 (q) SUNSET OF WORKING GROUP.—The Working 

10 Group shall terminate when the report described in sub11 section (l) is submitted to Congress. 

12 (r) ADMINISTRATION REVIEW AND COMMENTS.—Not 

13 later than 45 days after receiving the final recommenda14 tions of the Working Group under subsection (l), the 

15 President shall submit a report to Congress which shall 

16 contain—

17 (1) additional views and comments on such rec18 ommendations; and 

19 (2) recommendations for such legislation and 

20 administrative actions as the President considers ap21 propriate. 

22 (s) REQUIRED CONGRESSIONAL ACTION.—Not later 

23 than 45 days after receiving the report submitted by the 

24 President under subsection (r), each committee of jurisdic25 tion of Congress shall hold at least 1 hearing on such re-
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1 port and on the final recommendations of the Working 

2 Group submitted under subsection (l). 

3 (t) AUTHORIZATION OF APPROPRIATIONS.—

4 (1) IN GENERAL.—There are authorized to be 

5 appropriated to carry out this Act, other than sub6 section (k)(3), $3,000,000 for each of fiscal years 

7 2004, 2005, and 2006. 

8 (2) HEALTH REPORT TO THE AMERICAN PEO9 PLE.—There are authorized to be appropriated for 

10 the preparation and dissemination of the Health Re11 port to the American People described in subsection 

12 (k)(3), such sums as may be necessary for the fiscal 

13 year in which the report is required to be submitted. 

14 SEC. 621. GAO STUDY OF PHARMACEUTICAL PRICE CON15 TROLS AND PATENT PROTECTIONS IN THE G–

16 7 COUNTRIES. 

17 (a) STUDY.—The Comptroller General of the United 

18 States shall conduct a study of price controls imposed on 

19 pharmaceuticals in France, Germany, Italy, Japan, the 

20 United Kingdom and Canada to review the impact such 

21 regulations have on consumers, including American con22 sumers, and on innovation in medicine. Such study shall 

23 include—

24 (1) the pharmaceutical price control structure 

25 in each country for a wide range of pharmaceuticals, 
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1 compared with average pharmaceutical prices paid 

2 by Americans covered by private sector health insur3 ance; 

4 (2) the proportion of the cost for innovation 

5 borne by American consumers, compared with con6 sumers in the other six countries; 

7 (3) a review of how closely the observed prices 

8 in regulated markets correspond to the prices that 

9 efficiently distribute common costs of production 

10 (‘‘Ramsey prices’’); 

11 (4) a review of any peer-reviewed literature that 

12 might show the health consequences to patients in 

13 the listed countries that result from the absence or 

14 delayed introduction of medicines, including the cost 

15 of not having access to medicines, in terms of lower 

16 life expectancy and lower quality of health; 

17 (5) the impact on American consumers, in 

18 terms of reduced research into new or improved 

19 pharmaceuticals (including the cost of delaying the 

20 introduction of a significant advance in certain 

21 major diseases), if similar price controls were adopt22 ed in the United States; 

23 (6) the existing standards under international 

24 conventions, including the World Trade Organization 

25 and the North American Free Trade Agreement, re-
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1 garding regulated pharmaceutical prices, including 

2 any restrictions on anti-competitive laws that might 

3 apply to price regulations and how economic harm 

4 caused to consumers in markets without price regu5 lations may be remedied; 

6 (7) in parallel trade regimes, how much of the 

7 price difference between countries in the European 

8 Union is captured by middlemen and how much goes 

9 to benefit patients and health systems where parallel 

10 importing is significant; and 

11 (8) how much cost is imposed on the owner of 

12 a property right from counterfeiting and from inter13 national violation of intellectual property rights for 

14 prescription medicines. 

15 (b) REPORT.—Not later than 1 year after the date 

16 of enactment of this Act, the Comptroller General of the 

17 United States shall submit to Congress a report on the 

18 study conducted under subsection (a). 

19 SEC. 622. SENSE OF THE SENATE CONCERNING MEDICARE 

20 PAYMENT UPDATE FOR PHYSICIANS AND 

21 OTHER HEALTH PROFESSIONALS. 

22 (a) FINDINGS.—The Senate makes the following 

23 findings: 

24 (1) The formula by which medicare payments 

25 are updated each year for services furnished by phy-
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1 sicians and other health professionals is fundamen2 tally flawed. 

3 (2) The flawed physician payment update for4 mula is causing a continuing physician payment cri5 sis, and, without congressional action, medicare pay6 ment rates for physicians and other practitioners are 

7 predicted to fall by 4.2 percent in 2004. 

8 (3) A physician payment cut in 2004 would be 

9 the fifth cut since 1991, and would be on top of a 

10 5.4 percent cut in 2002, with additional cuts esti11 mated for 2005, 2006, and 2007; from 1991–2003, 

12 payment rates for physicians and health profes13 sionals fell 14 percent behind practice cost inflation 

14 as measured by medicare’s own conservative esti15 mates. 

16 (4) The sustainable growth rate (SGR) expendi17 ture target, which is the basis for the physician pay18 ment update, is linked to the gross domestic product 

19 and penalizes physicians and other practitioners for 

20 volume increases that they cannot control and that 

21 the Government actively promotes through new cov22 erage decisions, quality improvement activities and 

23 other initiatives that, while beneficial to patients, are 

24 not reflected in the SGR. 
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1 (b) SENSE OF THE SENATE.—It is the sense of the 

2 Senate that medicare beneficiary access to quality care 

3 may be compromised if Congress does not take action to 

4 prevent cuts next year and the following that result from 

5 the SGR formula. 

6 SEC. 623. RESTORATION OF FEDERAL HOSPITAL INSUR7 ANCE TRUST FUND. 

8 (a) DEFINITIONS.—In this section: 

9 (1) CLERICAL ERROR.—The term ‘‘clerical 

10 error’’ means the failure that occurred on April 15, 

11 2001, to have transferred the correct amount from 

12 the general fund of the Treasury to the Trust Fund. 

13 (2) TRUST FUND.—The term ‘‘Trust Fund’’ 

14 means the Federal Hospital Insurance Trust Fund 

15 established under section 1817 of the Social Security 

16 Act (42 U.S.C. 1395i). 

17 (b) CORRECTION OF TRUST FUND HOLDINGS.—

18 (1) IN GENERAL.—Not later than 120 days 

19 after the date of enactment of this Act, the Sec20 retary of the Treasury shall take the actions de21 scribed in paragraph (2) with respect to the Trust 

22 Fund with the goal being that, after such actions 

23 are taken, the holdings of the Trust Fund will rep24 licate, to the extent practicable in the judgment of 

25 the Secretary of the Treasury, in consultation with 
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1 the Secretary of Health and Human Services, the 

2 holdings that would have been held by the Trust 

3 Fund if the clerical error had not occurred. 

4 (2) OBLIGATIONS ISSUED AND REDEEMED.—

5 The Secretary of the Treasury shall—

6 (A) issue to the Trust Fund obligations 

7 under chapter 31 of title 31, United States 

8 Code, that bear issue dates, interest rates, and 

9 maturity dates that are the same as those for 

10 the obligations that—

11 (i) would have been issued to the 

12 Trust Fund if the clerical error had not oc13 curred; or 

14 (ii) were issued to the Trust Fund 

15 and were redeemed by reason of the cler16 ical error; and 

17 (B) redeem from the Trust Fund obliga18 tions that would have been redeemed from the 

19 Trust Fund if the clerical error had not oc20 curred. 

21 (c) APPROPRIATION.—Not later than 120 days after 

22 the date of enactment of this Act, there is appropriated 

23 to the Trust Fund, out of any money in the Treasury not 

24 otherwise appropriated, an amount determined by the Sec25 retary of the Treasury, in consultation with the Secretary 
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1 of Health and Human Services, to be equal to the interest 

2 income lost by the Trust Fund through the date on which 

3 the appropriation is being made as a result of the clerical 

4 error. 

5 SEC. 624. SAFETY NET ORGANIZATIONS AND PATIENT ADVI6 SORY COMMISSION. 

7 (a) IN GENERAL.—Title XI (42 U.S.C. 1320 et seq.) 

8 is amended by adding at the end the following new part: 

9 ‘‘PART D—SAFETY NET ORGANIZATIONS AND PATIENT

10 ADVISORY COMMISSION

11 ‘‘SAFETY NET ORGANIZATIONS AND PATIENT ADVISORY

12 COMMISSION

13 ‘‘SEC. 1181. (a) ESTABLISHMENT.—There is hereby 

14 established the Safety Net Organizations and Patient Ad15 visory Commission (in this section referred to as the ‘Com16 mission’). 

17 ‘‘(b) REVIEW OF HEALTH CARE SAFETY NET PRO18 GRAMS AND REPORTING REQUIREMENTS.—

19 ‘‘(1) REVIEW.—The Commission shall conduct 

20 an ongoing review of the health care safety net pro21 grams (as described in paragraph (3)(C)) by—

22 ‘‘(A) monitoring each health care safety 

23 net program to document and analyze the ef24 fects of changes in these programs on the core 

25 health care safety net; 
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1 ‘‘(B) evaluating the impact of the Emer2 gency Medical Treatment and Labor Act, the 

3 Health Insurance Portability and Accountability 

4 Act of 1996, the Balanced Budget Act of 1997, 

5 the Medicare, Medicaid, and SCHIP Balanced 

6 Budget Refinement Act of 1999, the Medicare, 

7 Medicaid, and SCHIP Benefits Protection and 

8 Improvement Act of 2000, Prescription Drug 

9 and Medicare Improvement Act of 2003, and 

10 other forces on the capacity of the core health 

11 care safety net to continue their roles in the 

12 core health care safety net system to care for 

13 uninsured individuals, medicaid beneficiaries, 

14 and other vulnerable populations; 

15 ‘‘(C) monitoring existing data sets to as16 sess the status of the core health care safety 

17 net and health outcomes for vulnerable popu18 lations; 

19 ‘‘(D) wherever possible, linking and inte20 grating existing data systems to enhance the 

21 ability of the core health care safety net to 

22 track changes in the status of the core health 

23 care safety net and health outcomes for vulner24 able populations; 
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1 ‘‘(E) supporting the development of new 

2 data systems where existing data are insuffi3 cient or inadequate; 

4 ‘‘(F) developing criteria and indicators of 

5 impending core health care safety net failure; 

6 ‘‘(G) establishing an early-warning system 

7 to identify impending failures of core health 

8 care safety net systems and providers; 

9 ‘‘(H) providing accurate and timely infor10 mation to Federal, State, and local policy11 makers on the indicators that may lead to the 

12 failure of the core health care safety net and an 

13 estimate of the projected consequences of such 

14 failures and the impact of such a failure on the 

15 community; 

16 ‘‘(I) monitoring and providing oversight for 

17 the transition of individuals receiving supple18 mental security income benefits, medical assist19 ance under title XIX, or child health assistance 

20 under title XXI who enroll with a managed care 

21 entity (as defined in section 1932(a)(1)(B)), in22 cluding the review of—

23 ‘‘(i) the degree to which health plans 

24 have the capacity (including case manage25 ment and management information system 
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1 infrastructure) to provide quality managed 

2 care services to such an individual; 

3 ‘‘(ii) the degree to which these plans 

4 may be overburdened by adverse selection; 

5 and 

6 ‘‘(iii) the degree to which emergency 

7 departments are used by enrollees of these 

8 plans; and 

9 ‘‘(J) identifying and disseminating the best 

10 practices for more effective application of the 

11 lessons that have been learned. 

12 ‘‘(2) REPORTS.—

13 ‘‘(A) ANNUAL REPORTS.—Not later than 

14 June 1 of each year (beginning with 2005), the 

15 Commission shall, based on the review con16 ducted under paragraph (1), submit to the ap17 propriate committees of Congress a report on—

18 ‘‘(i) the health care needs of the unin19 sured; and 

20 ‘‘(ii) the financial and infrastructure 

21 stability of the Nation’s core health care 

22 safety net. 

23 ‘‘(B) AGENDA AND ADDITIONAL RE24 VIEWS.—
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1 ‘‘(i) AGENDA.—The Chair of the 

2 Commission shall consult periodically with 

3 the Chairpersons and Ranking Minority 

4 Members of the appropriate committees of 

5 Congress regarding the Commission’s 

6 agenda and progress toward achieving the 

7 agenda. 

8 ‘‘(ii) ADDITIONAL REVIEWS.—The 

9 Commission shall conduct additional re10 views and submit additional reports to the 

11 appropriate committees of Congress on 

12 topics relating to the health care safety net 

13 programs under the following cir14 cumstances: 

15 ‘‘(I) If requested by the Chair16 persons or Ranking Minority Members 

17 of such committees. 

18 ‘‘(II) If the Commission deems 

19 such additional reviews and reports 

20 appropriate. 

21 ‘‘(C) AVAILABILITY OF REPORTS.—The 

22 Commission shall transmit to the Comptroller 

23 General and the Secretary a copy of each report 

24 submitted under this subsection and shall make 

25 such reports available to the public. 
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1 ‘‘(3) DEFINITIONS.—In this section: 

2 ‘‘(A) APPROPRIATE COMMITTEES OF CON3 GRESS.—The term ‘appropriate committees of 

4 Congress’ means the Committees on Ways and 

5 Means and Energy and Commerce of the House 

6 of Representatives and the Committees on Fi7 nance and Health, Education, Labor, and Pen8 sions of the Senate. 

9 ‘‘(B) CORE HEALTH CARE SAFETY NET.—

10 The term ‘core health care safety net’ means 

11 any health care provider that—

12 ‘‘(i) by legal mandate or explicitly 

13 adopted mission, offers access to health 

14 care services to patients, regardless of the 

15 ability of the patient to pay for such serv16 ices; and 

17 ‘‘(ii) has a case mix that is substan18 tially comprised of patients who are unin19 sured, covered under the medicaid pro20 gram, covered under any other public 

21 health care program, or are otherwise vul22 nerable populations. 

23 Such term includes disproportionate share hos24 pitals, Federally qualified health centers, other 

25 Federal, State, and locally supported clinics, 
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1 rural health clinics, local health departments, 

2 and providers covered under the Emergency 

3 Medical Treatment and Labor Act. 

4 ‘‘(C) HEALTH CARE SAFETY NET PRO5 GRAMS.—The term ‘health care safety net pro6 grams’ includes the following: 

7 ‘‘(i) MEDICAID.—The medicaid pro8 gram under title XIX. 

9 ‘‘(ii) SCHIP.—The State children’s 

10 health insurance program under title XXI. 

11 ‘‘(iii) MATERNAL AND CHILD HEALTH

12 SERVICES BLOCK GRANT PROGRAM.—The 

13 maternal and child health services block 

14 grant program under title V. 

15 ‘‘(iv) FQHC PROGRAMS.—Each feder16 ally funded program under which a health 

17 center (as defined in section 330(1) of the 

18 Public Health Service Act), a Federally 

19 qualified health center (as defined in sec20 tion 1861(aa)(4)), or a Federally-qualified 

21 health center (as defined in section 

22 1905(l)(2)(B)) receives funds. 

23 ‘‘(v) RHC PROGRAMS.—Each feder24 ally funded program under which a rural 
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1 health clinic (as defined in section 

2 1861(aa)(4) or 1905(l)(1)) receives funds. 

3 ‘‘(vi) DSH PAYMENT PROGRAMS.—

4 Each federally funded program under 

5 which a disproportionate share hospital re6 ceives funds. 

7 ‘‘(vii) EMERGENCY MEDICAL TREAT8 MENT AND ACTIVE LABOR ACT.—All care 

9 provided under section 1867 for the unin10 sured, underinsured, beneficiaries under 

11 title XIX, and other vulnerable individuals. 

12 ‘‘(viii) OTHER HEALTH CARE SAFETY

13 NET PROGRAMS.—Such term also includes 

14 any other health care program that the 

15 Commission determines to be appropriate. 

16 ‘‘(D) VULNERABLE POPULATIONS.—The 

17 term ‘vulnerable populations’ includes unin18 sured and underinsured individuals, low-income 

19 individuals, farm workers, homeless individuals, 

20 individuals with disabilities, individuals with 

21 HIV or AIDS, and such other individuals as the 

22 Commission may designate. 

23 ‘‘(c) MEMBERSHIP.—

24 ‘‘(1) NUMBER AND APPOINTMENT.—The Com25 mission shall be composed of 13 members appointed 
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1 by the Comptroller General of the United States (in 

2 this section referred to as the ‘Comptroller Gen3 eral’), in consultation with the appropriate commit4 tees of Congress. 

5 ‘‘(2) QUALIFICATIONS.—

6 ‘‘(A) IN GENERAL.—The membership of 

7 the Commission shall include individuals with 

8 national recognition for their expertise in health 

9 finance and economics, health care safety net 

10 research and program management, actuarial 

11 science, health facility management, health 

12 plans and integrated delivery systems, reim13 bursement of health facilities, allopathic and os14 teopathic medicine (including emergency medi15 cine), and other providers of health services, 

16 and other related fields, who provide a mix of 

17 different professionals, broad geographic rep18 resentation, and a balance between urban and 

19 rural representatives. 

20 ‘‘(B) INCLUSION.—The membership of the 

21 Commission shall include health professionals, 

22 employers, third-party payers, individuals 

23 skilled in the conduct and interpretation of bio24 medical, health services, and health economics 

25 research and expertise in outcomes and effec-
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1 tiveness research and technology assessment. 

2 Such membership shall also include recipients 

3 of care from core health care safety net and in4 dividuals who provide and manage the delivery 

5 of care by the core health care safety net. 

6 ‘‘(C) MAJORITY NONPROVIDERS.—Individ7 uals who are directly involved in the provision, 

8 or management of the delivery, of items and 

9 services covered under the health care safety 

10 net programs shall not constitute a majority of 

11 the membership of the Commission. 

12 ‘‘(D) ETHICAL DISCLOSURE.—The Comp13 troller General shall establish a system for pub14 lic disclosure by members of the Commission of 

15 financial and other potential conflicts of interest 

16 relating to such members. 

17 ‘‘(3) TERMS.—

18 ‘‘(A) IN GENERAL.—The terms of mem19 bers of the Commission shall be for 3 years ex20 cept that of the members first appointed, the 

21 Comptroller General shall designate—

22 ‘‘(i) four to serve a term of 1 year; 

23 ‘‘(ii) four to serve a term of 2 years; 

24 and 

25 ‘‘(iii) five to serve a term of 3 years. 
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1 ‘‘(B) VACANCIES.—

2 ‘‘(i) IN GENERAL.—A vacancy in the 

3 Commission shall be filled in the same 

4 manner in which the original appointment 

5 was made. 

6 ‘‘(ii) APPOINTMENT.—Any member 

7 appointed to fill a vacancy occurring before 

8 the expiration of the term for which the 

9 member’s predecessor was appointed shall 

10 be appointed only for the remainder of that 

11 term. 

12 ‘‘(iii) TERMS.—A member may serve 

13 after the expiration of that member’s term 

14 until a successor has taken office. 

15 ‘‘(4) COMPENSATION.—

16 ‘‘(A) MEMBERS.—While serving on the 

17 business of the Commission (including travel 

18 time), a member of the Commission—

19 ‘‘(i) shall be entitled to compensation 

20 at the per diem equivalent of the rate pro21 vided for level IV of the Executive Sched22 ule under section 5315 of title 5, United 

23 States Code; and 

24 ‘‘(ii) while so serving away from home 

25 and the member’s regular place of busi-
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1 ness, may be allowed travel expenses, as 

2 authorized by the Commission. 

3 ‘‘(B) TREATMENT.—For purposes of pay 

4 (other than pay of members of the Commission) 

5 and employment benefits, rights, and privileges, 

6 all personnel of the Commission shall be treated 

7 as if they were employees of the United States 

8 Senate. 

9 ‘‘(5) CHAIR; VICE CHAIR.—The Comptroller 

10 General shall designate a member of the Commis11 sion, at the time of appointment of the member as 

12 Chair and a member as Vice Chair for that term of 

13 appointment, except that in the case of vacancy of 

14 the Chair or Vice Chair, the Comptroller General 

15 may designate another member for the remainder of 

16 that member’s term. 

17 ‘‘(6) MEETINGS.—The Commission shall meet 

18 at the call of the Chair or upon the written request 

19 of a majority of its members. 

20 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CON21 SULTANTS.—Subject to such review as the Comptroller 

22 General determines necessary to ensure the efficient ad23 ministration of the Commission, the Commission may—

24 ‘‘(1) employ and fix the compensation of an Ex25 ecutive Director (subject to the approval of the 
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1 Comptroller General) and such other personnel as 

2 may be necessary to carry out the duties of the 

3 Commission under this section (without regard to 

4 the provisions of title 5, United States Code, gov5 erning appointments in the competitive service); 

6 ‘‘(2) seek such assistance and support as may 

7 be required in the performance of the duties of the 

8 Commission under this section from appropriate 

9 Federal departments and agencies; 

10 ‘‘(3) enter into contracts or make other ar11 rangements, as may be necessary for the conduct of 

12 the work of the Commission (without regard to sec13 tion 3709 of the Revised Statutes (41 U.S.C. 5)); 

14 ‘‘(4) make advance, progress, and other pay15 ments which relate to the work of the Commission; 

16 ‘‘(5) provide transportation and subsistence for 

17 persons serving without compensation; and 

18 ‘‘(6) prescribe such rules and regulations as it 

19 deems necessary with respect to the internal organi20 zation and operation of the Commission. 

21 ‘‘(e) POWERS.—

22 ‘‘(1) OBTAINING OFFICIAL DATA.—

23 ‘‘(A) IN GENERAL.—The Commission may 

24 secure directly from any department or agency 

25 of the United States information necessary for 
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1 the Commission to carry the duties under this 

2 section. 

3 ‘‘(B) REQUEST OF CHAIR.—Upon request 

4 of the Chair, the head of that department or 

5 agency shall furnish that information to the 

6 Commission on an agreed upon schedule. 

7 ‘‘(2) DATA COLLECTION.—In order to carry out 

8 the duties of the Commission under this section, the 

9 Commission shall—

10 ‘‘(A) use existing information, both pub11 lished and unpublished, where possible, collected 

12 and assessed either by the staff of the Commis13 sion or under other arrangements made in ac14 cordance with this section; 

15 ‘‘(B) carry out, or award grants or con16 tracts for, original research and experimen17 tation, where existing information is inad18 equate; and 

19 ‘‘(C) adopt procedures allowing any inter20 ested party to submit information for the Com21 mission’s use in making reports and rec22 ommendations. 

23 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The 

24 Comptroller General shall have unrestricted access 

25 to all deliberations, records, and nonproprietary data 
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1 that pertains to the work of the Commission, imme2 diately upon request. The expense of providing such 

3 information shall be borne by the General Account4 ing Office. 

5 ‘‘(4) PERIODIC AUDIT.—The Commission shall 

6 be subject to periodic audit by the Comptroller Gen7 eral. 

8 ‘‘(f) APPLICATION OF FACA.—Section 14 of the 

9 Federal Advisory Committee Act (5 U.S.C. App.) does not 

10 apply to the Commission. 

11 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—

12 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The 

13 Commission shall submit requests for appropriations 

14 in the same manner as the Comptroller General sub15 mits requests for appropriations, but amounts ap16 propriated for the Commission shall be separate 

17 from amounts appropriated for the Comptroller Gen18 eral. 

19 ‘‘(2) AUTHORIZATION.—There are authorized to 

20 be appropriated such sums as may be necessary to 

21 carry out the provisions of this section.’’. 

22 (b) EFFECTIVE DATE.—The Comptroller General of 

23 the United States shall appoint the initial members of the 

24 Safety Net Organizations and Patient Advisory Commis-
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1 sion established under subsection (a) not later than June 

2 1, 2004. 

3 SEC. 625. URBAN HEALTH PROVIDER ADJUSTMENT. 

4 (a) IN GENERAL.—Beginning with fiscal year 2004, 

5 notwithstanding section 1923(f) of the Social Security Act 

6 (42 U.S.C. 1396r–4(f)) and subject to subsection (c), with 

7 respect to a State, payment adjustments made under title 

8 XIX of the Social Security Act (42 U.S.C. 1396 et seq.) 

9 to a hospital described in subsection (b) shall be made 

10 without regard to the DSH allotment limitation for the 

11 State determined under section 1923(f) of that Act (42 

12 U.S.C. 1396r–4(f)). 

13 (b) HOSPITAL DESCRIBED.—A hospital is described 

14 in this subsection if the hospital—

15 (1) is owned or operated by a State (as defined 

16 for purposes of title XIX of the Social Security Act), 

17 or by an instrumentality or a municipal govern18 mental unit within a State (as so defined) as of Jan19 uary 1, 2003; and 

20 (2) is located in Marion County, Indiana. 

21 (c) LIMITATION.—The payment adjustment described 

22 in subsection (a) for fiscal year 2004 and each fiscal year 

23 thereafter shall not exceed 175 percent of the costs of fur24 nishing hospital services described in section 
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1 1923(g)(1)(A) of the Social Security Act (42 U.S.C. 

2 1396r–4(g)(1)(A)). 

3 SEC. 626. COMMITTEE ON DRUG COMPOUNDING. 

4 (a) ESTABLISHMENT.—The Secretary of Health and 

5 Human Services shall establish an Committee on Drug 

6 Compounding (referred to in this section as the ‘‘Com7 mittee’’) within the Food and Drug Administration on 

8 drug compounding to ensure that patients are receiving 

9 necessary, safe and accurate dosages of compounded 

10 drugs. 

11 (b) MEMBERSHIP.—The membership of the Advisory 

12 Committee shall be appointed by the Secretary of Health 

13 and Human Services and shall include representatives 

14 of—

15 (1) the National Association of Boards of Phar16 macy; 

17 (2) pharmacy groups; 

18 (3) physician groups; 

19 (4) consumer and patient advocate groups; 

20 (5) the United States Pharmacopoeia; and 

21 (6) other individuals determined appropriate by 

22 the Secretary. 

23 (c) REPORT AND RECOMMENDATIONS.—Not later 

24 than 1 year after the date of enactment of this Act, the 

25 Committee shall submit to the Secretary a report con-
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1 cerning the recommendations of the Committee to improve 

2 and protect patient safety. 

3 (d) TERMINATION.—The Committee shall terminate 

4 on the date that is 1 year after the date of enactment 

5 of this Act. 

6 SEC. 627. SENSE OF THE SENATE CONCERNING THE STRUC7 TURE OF MEDICARE REFORM AND THE PRE8 SCRIPTION DRUG BENEFIT. 

9 (a) FINDINGS.—The Senate makes the following 

10 findings: 

11 (1) America’s seniors deserve a fiscally-strong 

12 medicare system that fulfills its promise to them and 

13 future retirees. 

14 (2) The impending retirement of the ‘‘baby 

15 boom’’ generation will dramatically increase the 

16 costs of providing medicare benefits. Medicare costs 

17 will double relative to the size of the economy from 

18 2 percent of GDP today to 4 percent in 2025 and 

19 double again to 8 percent of GDP in 2075. This 

20 growth will accelerate substantially when Congress 

21 adds a necessary prescription drug benefit. 

22 (3) Medicare’s current structure does not have 

23 the flexibility to quickly adapt to rapid advances in 

24 modern health care. Medicare lags far behind other 

25 insurers in providing prescription drug coverage, dis-
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1 ease management programs, and host of other ad2 vances. Reforming medicare to create a more self3 adjusting, innovative structure is essential to im4 prove medicare’s efficiency and the quality of the 

5 medical care it provides. 

6 (4) Private-sector choice for medicare bene7 ficiaries would provide two key benefits: It would be 

8 tailored to the needs of America’s seniors, not the 

9 Government, and would create a powerful incentive 

10 for private-sector medicare plans to provide the best 

11 quality health care to seniors at the most affordable 

12 price. 

13 (5) The method by which the national preferred 

14 provider organizations in the Federal Employees 

15 Health Benefits Program have been reimbursed has 

16 proven to be a reliable and successful mechanism for 

17 providing Members of Congress and Federal employ18 ees with excellent health care choices. 

19 (6) Unlike the medicare payment system, which 

20 has had to be changed by Congress every few years, 

21 the Federal Employees Health Benefits Program 

22 has existed for 43 years with minimal changes from 

23 Congress. 

24 (b) SENSE OF THE SENATE.—It is the sense of the 

25 Senate that medicare reform legislation should: 
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1 (1) Ensure that prescription drug coverage is 

2 directed to those who need it most. 

3 (2) Provide that Government contributions used 

4 to support MedicareAdvantage plans are based on 

5 market principles beginning in 2006 to ensure the 

6 long- and short-term viability of such options for 

7 America’s seniors. 

8 (3) Develop a payment system for the 

9 MedicareAdvantage preferred provider organizations 

10 similar to the payment system used for the national 

11 preferred provider organizations in the Federal Em12 ployees Health Benefits Program. 

13 (4) Limit the addition of new unfunded obliga14 tions in the medicare program so that the long-term 

15 solvency of this important program is not further 

16 jeopardized. 

17 (5) Incorporate private sector, market-based 

18 elements, that do not rely on the inefficient medicare 

19 price control structure. 

20 (6) Keep the cost of structural changes and 

21 new benefits within the $400,000,000,000 provided 

22 for under the current Congressional Budget Resolu23 tion for implementing medicare reform and pro24 viding a prescription drug benefit. 
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1 (7) Preserve the current employer-sponsored re2 tiree health plans and not design a benefit which has 

3 the unintended consequences of supplanting private 

4 coverage. 

5 (8) Incorporate regulatory reform proposals to 

6 eliminate red tape and reduce costs. 

7 (9) Restore the right of medicare beneficiaries 

8 and their doctors to work together to provide serv9 ices, allow private fee for service plans to set their 

10 own premiums, and permit seniors to add their own 

11 dollars beyond the Government contribution. 

12 SEC. 628. SENSE OF THE SENATE REGARDING THE ESTAB13 LISHMENT OF A NATIONWIDE PERMANENT 

14 LIFESTYLE MODIFICATION PROGRAM FOR 

15 MEDICARE BENEFICIARIES. 

16 (a) FINDINGS.—Congress finds that: 

17 (1) Heart disease kills more than 500,000 

18 Americans per year. 

19 (2) The number and costs of interventions for 

20 the treatment of coronary disease are rising and cur21 rently cost the health care system $58,000,000,000 

22 annually. 

23 (3) The Medicare Lifestyle Modification Pro24 gram has been operating throughout 12 States and 
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1 has been demonstrated to reduce the need for coro2 nary procedures by 88 percent per year. 

3 (4) The Medicare Lifestyle Modification Pro4 gram is less expensive to deliver than interventional 

5 cardiac procedures and could reduce cardiovascular 

6 expenditures by $36,000,000,000 annually. 

7 (5) Lifestyle choices such as diet and exercise 

8 affect heart disease and heart disease outcomes by 

9 50 percent or greater. 

10 (6) Intensive lifestyle interventions which in11 clude teams of nurses, doctors, exercise physiolo12 gists, registered dietitians, and behavioral health cli13 nicians have been demonstrated to reduce heart dis14 ease risk factors and enhance heart disease out15 comes dramatically. 

16 (7) The National Institutes of Health estimates 

17 that 17,000,000 Americans have diabetes and the 

18 Centers for Disease Control and Prevention esti19 mates that the number of Americans who have a di20 agnosis of diabetes increased 61 percent in the last 

21 decade and is expected to more than double by 

22 2050. 

23 (8) Lifestyle modification programs are supe24 rior to medication therapy for treating diabetes. 
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1 (9) Individuals with diabetes are now consid2 ered to have coronary disease at the date of diag3 nosis of their diabetic state. 

4 (10) The Medicare Lifestyle Modification Pro5 gram has been an effective lifestyle program for the 

6 reversal and treatment of heart disease. 

7 (11) Men with prostate cancer have shown sig8 nificant improvement in prostate cancer markers 

9 using a similar approach in lifestyle modification. 

10 (12) These lifestyle changes are therefore likely 

11 to affect other chronic disease states, in addition to 

12 heart disease. 

13 (b) SENSE OF THE SENATE.—It is the sense of the 

14 Senate that—

15 (1) the Secretary of Health and Human Serv16 ices should carry out the demonstration project 

17 known as the Lifestyle Modification Program Dem18 onstration, as described in the Health Care Financ19 ing Administration Memorandum of Understanding 

20 entered into on November 13, 2000, on a permanent 

21 basis; 

22 (2) the project should include as many Medi23 care beneficiaries as would like to participate in the 

24 project on a voluntary basis; and 
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1 (3) the project should be conducted on a na2 tional basis. 

3 SEC. 629. SENSE OF THE SENATE ON PAYMENT REDUC4 TIONS UNDER MEDICARE PHYSICIAN FEE 

5 SCHEDULE. 

6 (a) FINDINGS.—Congress finds that—

7 (1) the fees medicare pays physicians were re8 duced by 5.4 percent across-the-board in 2002; 

9 (2) recent action by Congress narrowly averted 

10 another across-the-board reduction of 4.4 percent for 

11 2003; 

12 (3) based on current projections, the Centers 

13 for Medicare & Medicaid Services (CMS) estimates 

14 that, absent legislative or administrative action, fees 

15 will be reduced across-the-board once again in 2004 

16 by 4.2 percent; 

17 (4) the prospect of continued payment reduc18 tions under the medicare physician fee schedule for 

19 the foreseeable future threatens to destabilize an im20 portant element of the program, namely physician 

21 participation and willingness to accept medicare pa22 tients; 

23 (5) the primary source of this instability is the 

24 sustainable growth rate (SGR), a system of annual 
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1 spending targets for physicians’ services under medi2 care; 

3 (6) the SGR system has a number of defects 

4 that result in unrealistically low spending targets, 

5 such as the use of the increase in the gross domestic 

6 product (GDP) as a proxy for increases in the vol7 ume and intensity of services provided by physicians, 

8 no tolerance for variance between growth in medi9 care beneficiary health care costs and our Nation’s 

10 GDP, and a requirement for immediate recoupment 

11 of the difference; 

12 (7) both administrative and legislative action 

13 are needed to return stability to the physician pay14 ment system; 

15 (8) using the discretion given to it by medicare 

16 law, CMS has included expenditures for prescription 

17 drugs and biologicals administered incident to physi18 cians’ services under the annual spending targets 

19 without making appropriate adjustments to the tar20 gets to reflect price increases in these drugs and 

21 biologicals or the growing reliance on such therapies 

22 in the treatment of medicare patients; 

23 (9) between 1996 and 2002, annual medicare 

24 spending on these drugs grew from $1,800,000,000 
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1 to $6,200,000,000, or from $55 per beneficiary to 

2 an estimated $187 per beneficiary; 

3 (10) although physicians are responsible for 

4 prescribing these drugs and biologicals, neither the 

5 price of the drugs and biologicals, nor the standards 

6 of care that encourage their use, are within the con7 trol of physicians; and 

8 (11) SGR target adjustments have not been 

9 made for cost increases due to new coverage deci10 sions and new rules and regulations. 

11 (b) SENSE OF THE SENATE.—It is the sense of the 

12 Senate that—

13 (1) the Center for Medicare & Medicaid Serv14 ices (CMS) should use its discretion to exclude drugs 

15 and biologicals administered incident to physician 

16 services from the sustainable growth rate (SGR) sys17 tem; 

18 (2) CMS should use its discretion to make SGR 

19 target adjustments for new coverage decisions and 

20 new rules and regulations; and 

21 (3) in order to provide ample time for Congress 

22 to consider more fundamental changes to the SGR 

23 system, the conferees on the Prescription Drug and 

24 Medicare Improvement Act of 2003 should include 

25 in the conference agreement a provision to establish 
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1 a minimum percentage update in physician fees for 

2 the next 2 years and should consider adding provi3 sions that would mitigate the swings in payment, 

4 such as establishing multi-year adjustments to re5 coup the variance and creating ‘‘tolerance’’ corridors 

6 for variations around the update target trend. 

7 SEC. 630. TEMPORARY SUSPENSION OF OASIS REQUIRE8 MENT FOR COLLECTION OF DATA ON NON9 MEDICARE AND NON-MEDICAID PATIENTS. 

10 (a) IN GENERAL.—During the period described in 

11 subsection (b), the Secretary may not require, under sec12 tion 4602(e) of the Balanced Budget Act of 1997 or other13 wise under OASIS, a home health agency to gather or sub14 mit information that relates to an individual who is not 

15 eligible for benefits under either title XVIII or title XIX 

16 of the Social Security Act (such information in this section 

17 referred to as ‘‘non-medicare/medicaid OASIS informa18 tion’’). 

19 (b) PERIOD OF SUSPENSION.—The period described 

20 in this subsection—

21 (1) begins on the date of the enactment of this 

22 Act; and 

23 (2) ends on the last day of the 2nd month be24 ginning after the date as of which the Secretary has 

25 published final regulations regarding the collection 
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1 and use by the Centers for Medicare & Medicaid 

2 Services of non-medicare/medicaid OASIS informa3 tion following the submission of the report required 

4 under subsection (c). 

5 (c) REPORT.—

6 (1) STUDY.—The Secretary shall conduct a 

7 study on how non-medicare/medicaid OASIS infor8 mation is and can be used by large home health 

9 agencies. Such study shall examine—

10 (A) whether there are unique benefits from 

11 the analysis of such information that cannot be 

12 derived from other information available to, or 

13 collected by, such agencies; and 

14 (B) the value of collecting such informa15 tion by small home health agencies compared to 

16 the administrative burden related to such collec17 tion. 

18 In conducting the study the Secretary shall obtain 

19 recommendations from quality assessment experts in 

20 the use of such information and the necessity of 

21 small, as well as large, home health agencies col22 lecting such information. 

23 (2) REPORT.—The Secretary shall submit to 

24 Congress a report on the study conducted under 
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1 paragraph (1) by not later than 18 months after the 

2 date of the enactment of this Act. 

3 (d) CONSTRUCTION.—Nothing in this section shall be 

4 construed as preventing home health agencies from col5 lecting non-medicare/medicaid OASIS information for 

6 their own use. 

7 SEC. 631. EMPLOYER FLEXIBILITY. 

8 (a) MEDICARE.—Nothing in part D of title XVIII of 

9 the Social Security Act, as added by section 101, shall be 

10 construed as— 

11 (1) preventing employment-based retiree health 

12 coverage (as defined in section 1860D–20(e)(4)(B) 

13 of such Act, as so added) from providing coverage 

14 that is supplemental to the benefits provided under 

15 a Medicare Prescription Drug plan under such part 

16 or a MedicareAdvantage plan under part C of such 

17 title, as amended by this Act; or 

18 (2) requiring employment-based retiree health 

19 coverage (as so defined) that provides medical bene20 fits to retired participants who are not eligible for 

21 medical benefits under title XVIII of the Social Se22 curity Act or under a plan maintained by a State or 

23 an agency thereof to provide medical benefits, or the 

24 same medical benefits, to retired participants who 

25 are so eligible. 
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1 (b) ADEA.—

2 (1) IN GENERAL.—Section 4(l) of the Age Dis3 crimination in Employment Act of 1967 (29 U.S.C. 

4 623(l)) is amended by adding at the end the fol5 lowing: 

6 ‘‘(4) An employee benefit plan (as defined in 

7 section 3(3) of the Employee Retirement Income Se8 curity Act of 1974 (29 U.S.C. 1002(3))) shall not be 

9 treated as violating subsection (a), (b), (c), or (e) 

10 solely because the plan provides medical benefits to 

11 retired participants who are not eligible for medical 

12 benefits under title XVIII of the Social Security Act 

13 (42 U.S.C. 1395 et seq.) or under a plan maintained 

14 by a State or an agency thereof, but does not pro15 vide medical benefits, or the same medical benefits, 

16 to retired participants who are so eligible.’’

17 (2) EFFECTIVE DATE.—The amendment made 

18 by this subsection shall apply as of the date of the 

19 enactment of this Act. 
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1 SEC. 632. ONE HUNDRED PERCENT FMAP FOR MEDICAL AS2 SISTANCE PROVIDED TO A NATIVE HAWAIIAN 

3 THROUGH A FEDERALLY-QUALIFIED HEALTH 

4 CENTER OR A NATIVE HAWAIIAN HEALTH 

5 CARE SYSTEM UNDER THE MEDICAID PRO6 GRAM. 

7 (a) MEDICAID.—Section 1905(b) of the Social Secu8 rity Act (42 U.S.C. 1396d(b)) is amended, in the third 

9 sentence, by inserting ‘‘, and with respect to medical as10 sistance provided to a Native Hawaiian (as defined in sec11 tion 12 of the Native Hawaiian Health Care Improvement 

12 Act) through a federally-qualified health center or a Na13 tive Hawaiian health care system (as so defined) whether 

14 directly, by referral, or under contract or other arrange15 ment between a federally-qualified health center or a Na16 tive Hawaiian health care system and another health care 

17 provider’’ before the period. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section applies to medical assistance provided on or 

20 after the date of enactment of this Act. 

21 SEC. 633. EXTENSION OF MORATORIUM. 

22 (a) IN GENERAL.—Section 6408(a)(3) of the Omni23 bus Budget Reconciliation Act of 1989, as amended by 

24 section 13642 of the Omnibus Budget Reconciliation Act 

25 of 1993 and section 4758 of the Balanced Budget Act of 

26 1997, is amended—
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1 (1) by striking ‘‘until December 31, 2002’’, and 

2 (2) by striking ‘‘Kent Community Hospital 

3 Complex in Michigan or.’’

4 (b) EFFECTIVE DATES.—

5 (1) PERMANENT EXTENSION.—The amendment 

6 made by subsection (a)(1) shall take effect as if in7 cluded in the amendment made by section 4758 of 

8 the Balanced Budget Act of 1997. 

9 (2) MODIFICATION.—The amendment made by 

10 subsection (a)(2) shall take effect on the date of en11 actment of this Act. 

12 SEC. 634. GAO STUDY OF PHARMACEUTICAL PRICE CON13 TROLS AND PATENT PROTECTIONS IN THE G–

14 7 COUNTRIES. 

15 (a) STUDY.—The Comptroller General of the United 

16 States shall conduct a study of price controls imposed on 

17 pharmaceuticals in France, Germany, Italy, Japan, the 

18 United Kingdom and Canada to review the impact such 

19 regulations have on consumers, including American con20 sumers, and on innovation in medicine. The study shall 

21 include the following: 

22 (1) The pharmaceutical price control structure 

23 in each country for a wide range of pharmaceuticals, 

24 compared with average pharmaceutical prices paid 
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1 by Americans covered by private sector health insur2 ance. 

3 (2) The proportion of the cost for innovation 

4 borne by American consumers, compared with con5 sumers in the other 6 countries. 

6 (3) A review of how closely the observed prices 

7 in regulated markets correspond to the prices that 

8 efficiently distribute common costs of production 

9 (‘‘Ramsey prices’’). 

10 (4) A review of any peer-reviewed literature 

11 that might show the health consequences to patients 

12 in the listed countries that result from the absence 

13 or delayed introduction of medicines, including the 

14 cost of not having access to medicines, in terms of 

15 lower life expectancy and lower quality of health. 

16 (5) The impact on American consumers, in 

17 terms of reduced research into new or improved 

18 pharmaceuticals (including the cost of delaying the 

19 introduction of a significant advance in certain 

20 major diseases), if similar price controls were adopt21 ed in the United States. 

22 (6) The existing standards under international 

23 conventions, including the World Trade Organization 

24 and the North American Free Trade Agreement, re25 garding regulated pharmaceutical prices, including 
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1 any restrictions on anti-competitive laws that might 

2 apply to price regulations and how economic harm 

3 caused to consumers in markets without price regu4 lations may be remedied. 

5 (7) In parallel trade regimes, how much of the 

6 price difference between countries in the European 

7 Union is captured by middlemen and how much goes 

8 to benefit patients and health systems where parallel 

9 importing is significant. 

10 (8) How much cost is imposed on the owner of 

11 a property right from counterfeiting and from inter12 national violations of intellectual property rights for 

13 prescription medicines. 

14 (b) REPORT.—Not later than 1 year after the date 

15 of enactment of this Act, the Comptroller General of the 

16 United States shall submit to Congress a report on the 

17 study conducted under subsection (a). 

18 SEC. 635. SAFETY NET ORGANIZATIONS AND PATIENT ADVI19 SORY COMMISSION. 

20 (a) IN GENERAL.—Title XI (42 U.S.C. 1320 et seq.) 

21 is amended by adding at the end the following new part: 
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1 ‘‘PART D—SAFETY NET ORGANIZATIONS AND PATIENT

2 ADVISORY COMMISSION

3 ‘‘SAFETY NET ORGANIZATIONS AND PATIENT ADVISORY

4 COMMISSION

5 ‘‘SEC. 1181. (a) ESTABLISHMENT.—There is hereby 

6 established the Safety Net Organizations and Patient Ad7 visory Commission (in this section referred to as the ‘Com8 mission’). 

9 ‘‘(b) REVIEW OF HEALTH CARE SAFETY NET PRO10 GRAMS AND REPORTING REQUIREMENTS.—

11 ‘‘(1) REVIEW.—The Commission shall conduct 

12 an ongoing review of the health care safety net pro13 grams (as described in paragraph (3)(C)) by—

14 ‘‘(A) monitoring each health care safety 

15 net program to document and analyze the ef16 fects of changes in these programs on the core 

17 health care safety net; 

18 ‘‘(B) evaluating the impact of the Emer19 gency Medical Treatment and Labor Act, the 

20 Health Insurance Portability and Accountability 

21 Act of 1996, the Balanced Budget Act of 1997, 

22 the Medicare, Medicaid, and SCHIP Balanced 

23 Budget Refinement Act of 1999, the Medicare, 

24 Medicaid, and SCHIP Benefits Protection and 

25 Improvement Act of 2000, Prescription Drug 
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1 and Medicare Improvement Act of 2003, and 

2 other forces on the capacity of the core health 

3 care safety net to continue their roles in the 

4 core health care safety net system to care for 

5 uninsured individuals, medicaid beneficiaries, 

6 and other vulnerable populations; 

7 ‘‘(C) monitoring existing data sets to as8 sess the status of the core health care safety 

9 net and health outcomes for vulnerable popu10 lations; 

11 ‘‘(D) wherever possible, linking and inte12 grating existing data systems to enhance the 

13 ability of the core health care safety net to 

14 track changes in the status of the core health 

15 care safety net and health outcomes for vulner16 able populations; 

17 ‘‘(E) supporting the development of new 

18 data systems where existing data are insuffi19 cient or inadequate; 

20 ‘‘(F) developing criteria and indicators of 

21 impending core health care safety net failure; 

22 ‘‘(G) establishing an early-warning system 

23 to identify impending failures of core health 

24 care safety net systems and providers; 
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1 ‘‘(H) providing accurate and timely infor2 mation to Federal, State, and local policy3 makers on the indicators that may lead to the 

4 failure of the core health care safety net and an 

5 estimate of the projected consequences of such 

6 failures and the impact of such a failure on the 

7 community; 

8 ‘‘(I) monitoring and providing oversight for 

9 the transition of individuals receiving supple10 mental security income benefits, medical assist11 ance under title XIX, or child health assistance 

12 under title XXI who enroll with a managed care 

13 entity (as defined in section 1932(a)(1)(B)), in14 cluding the review of—

15 ‘‘(i) the degree to which health plans 

16 have the capacity (including case manage17 ment and management information system 

18 infrastructure) to provide quality managed 

19 care services to such an individual; 

20 ‘‘(ii) the degree to which these plans 

21 may be overburdened by adverse selection; 

22 and 

23 ‘‘(iii) the degree to which emergency 

24 departments are used by enrollees of these 

25 plans; and 
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1 ‘‘(J) identifying and disseminating the best 

2 practices for more effective application of the 

3 lessons that have been learned. 

4 ‘‘(2) REPORTS.—

5 ‘‘(A) ANNUAL REPORTS.—Not later than 

6 June 1 of each year (beginning with 2005), the 

7 Commission shall, based on the review con8 ducted under paragraph (1), submit to the ap9 propriate committees of Congress a report on—

10 ‘‘(i) the health care needs of the unin11 sured; and 

12 ‘‘(ii) the financial and infrastructure 

13 stability of the Nation’s core health care 

14 safety net. 

15 ‘‘(B) AGENDA AND ADDITIONAL RE16 VIEWS.—

17 ‘‘(i) AGENDA.—The Chair of the 

18 Commission shall consult periodically with 

19 the Chairpersons and Ranking Minority 

20 Members of the appropriate committees of 

21 Congress regarding the Commission’s 

22 agenda and progress toward achieving the 

23 agenda. 

24 ‘‘(ii) ADDITIONAL REVIEWS.—The 

25 Commission shall conduct additional re-
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1 views and submit additional reports to the 

2 appropriate committees of Congress on 

3 topics relating to the health care safety net 

4 programs under the following cir5 cumstances: 

6 ‘‘(I) If requested by the Chair7 persons or Ranking Minority Members 

8 of such committees. 

9 ‘‘(II) If the Commission deems 

10 such additional reviews and reports 

11 appropriate. 

12 ‘‘(C) AVAILABILITY OF REPORTS.—The 

13 Commission shall transmit to the Comptroller 

14 General and the Secretary a copy of each report 

15 submitted under this subsection and shall make 

16 such reports available to the public. 

17 ‘‘(3) DEFINITIONS.—In this section: 

18 ‘‘(A) APPROPRIATE COMMITTEES OF CON19 GRESS.—The term ‘appropriate committees of 

20 Congress’ means the Committees on Ways and 

21 Means and Energy and Commerce of the House 

22 of Representatives and the Committees on Fi23 nance and Health, Education, Labor, and Pen24 sions of the Senate. 
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1 ‘‘(B) CORE HEALTH CARE SAFETY NET.—

2 The term ‘core health care safety net’ means 

3 any health care provider that—

4 ‘‘(i) by legal mandate or explicitly 

5 adopted mission, offers access to health 

6 care services to patients, regardless of the 

7 ability of the patient to pay for such serv8 ices; and 

9 ‘‘(ii) has a case mix that is substan10 tially comprised of patients who are unin11 sured, covered under the medicaid pro12 gram, covered under any other public 

13 health care program, or are otherwise vul14 nerable populations. 

15 Such term includes disproportionate share hos16 pitals, Federally qualified health centers, other 

17 Federal, State, and locally supported clinics, 

18 rural health clinics, local health departments, 

19 and providers covered under the Emergency 

20 Medical Treatment and Labor Act. 

21 ‘‘(C) HEALTH CARE SAFETY NET PRO22 GRAMS.—The term ‘health care safety net pro23 grams’ includes the following: 

24 ‘‘(i) MEDICAID.—The medicaid pro25 gram under title XIX. 
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1 ‘‘(ii) SCHIP.—The State children’s 

2 health insurance program under title XXI. 

3 ‘‘(iii) MATERNAL AND CHILD HEALTH

4 SERVICES BLOCK GRANT PROGRAM.—The 

5 maternal and child health services block 

6 grant program under title V. 

7 ‘‘(iv) FQHC PROGRAMS.—Each feder8 ally funded program under which a health 

9 center (as defined in section 330(1) of the 

10 Public Health Service Act), a Federally 

11 qualified health center (as defined in sec12 tion 1861(aa)(4)), or a Federally-qualified 

13 health center (as defined in section 

14 1905(l)(2)(B)) receives funds. 

15 ‘‘(v) RHC PROGRAMS.—Each feder16 ally funded program under which a rural 

17 health clinic (as defined in section 

18 1861(aa)(4) or 1905(l)(1)) receives funds. 

19 ‘‘(vi) DSH PAYMENT PROGRAMS.—

20 Each federally funded program under 

21 which a disproportionate share hospital re22 ceives funds. 

23 ‘‘(vii) EMERGENCY MEDICAL TREAT24 MENT AND ACTIVE LABOR ACT.—All care 

25 provided under section 1867 for the unin-
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1 sured, underinsured, beneficiaries under 

2 title XIX, and other vulnerable individuals. 

3 ‘‘(viii) OTHER HEALTH CARE SAFETY

4 NET PROGRAMS.—Such term also includes 

5 any other health care program that the 

6 Commission determines to be appropriate. 

7 ‘‘(D) VULNERABLE POPULATIONS.—The 

8 term ‘vulnerable populations’ includes unin9 sured and underinsured individuals, low-income 

10 individuals, farm workers, homeless individuals, 

11 individuals with disabilities, individuals with 

12 HIV or AIDS, and such other individuals as the 

13 Commission may designate. 

14 ‘‘(c) MEMBERSHIP.—

15 ‘‘(1) NUMBER AND APPOINTMENT.—The Com16 mission shall be composed of 13 members appointed 

17 by the Comptroller General of the United States (in 

18 this section referred to as the ‘Comptroller Gen19 eral’), in consultation with the appropriate commit20 tees of Congress. 

21 ‘‘(2) QUALIFICATIONS.—

22 ‘‘(A) IN GENERAL.—The membership of 

23 the Commission shall include individuals with 

24 national recognition for their expertise in health 

25 finance and economics, health care safety net 
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1 research and program management, actuarial 

2 science, health facility management, health 

3 plans and integrated delivery systems, reim4 bursement of health facilities, allopathic and os5 teopathic medicine (including emergency medi6 cine), and other providers of health services, 

7 and other related fields, who provide a mix of 

8 different professionals, broad geographic rep9 resentation, and a balance between urban and 

10 rural representatives. 

11 ‘‘(B) INCLUSION.—The membership of the 

12 Commission shall include health professionals, 

13 employers, third-party payers, individuals 

14 skilled in the conduct and interpretation of bio15 medical, health services, and health economics 

16 research and expertise in outcomes and effec17 tiveness research and technology assessment. 

18 Such membership shall also include recipients 

19 of care from core health care safety net and in20 dividuals who provide and manage the delivery 

21 of care by the core health care safety net. 

22 ‘‘(C) MAJORITY NONPROVIDERS.—Individ23 uals who are directly involved in the provision, 

24 or management of the delivery, of items and 

25 services covered under the health care safety 
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1 net programs shall not constitute a majority of 

2 the membership of the Commission. 

3 ‘‘(D) ETHICAL DISCLOSURE.—The Comp4 troller General shall establish a system for pub5 lic disclosure by members of the Commission of 

6 financial and other potential conflicts of interest 

7 relating to such members. 

8 ‘‘(3) TERMS.—

9 ‘‘(A) IN GENERAL.—The terms of mem10 bers of the Commission shall be for 3 years ex11 cept that of the members first appointed, the 

12 Comptroller General shall designate—

13 ‘‘(i) four to serve a term of 1 year; 

14 ‘‘(ii) four to serve a term of 2 years; 

15 and 

16 ‘‘(iii) five to serve a term of 3 years. 

17 ‘‘(B) VACANCIES.—

18 ‘‘(i) IN GENERAL.—A vacancy in the 

19 Commission shall be filled in the same 

20 manner in which the original appointment 

21 was made. 

22 ‘‘(ii) APPOINTMENT.—Any member 

23 appointed to fill a vacancy occurring before 

24 the expiration of the term for which the 

25 member’s predecessor was appointed shall 
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1 be appointed only for the remainder of that 

2 term. 

3 ‘‘(iii) TERMS.—A member may serve 

4 after the expiration of that member’s term 

5 until a successor has taken office. 

6 ‘‘(4) COMPENSATION.—

7 ‘‘(A) MEMBERS.—While serving on the 

8 business of the Commission (including travel 

9 time), a member of the Commission—

10 ‘‘(i) shall be entitled to compensation 

11 at the per diem equivalent of the rate pro12 vided for level IV of the Executive Sched13 ule under section 5315 of title 5, United 

14 States Code; and 

15 ‘‘(ii) while so serving away from home 

16 and the member’s regular place of busi17 ness, may be allowed travel expenses, as 

18 authorized by the Commission. 

19 ‘‘(B) TREATMENT.—For purposes of pay 

20 (other than pay of members of the Commission) 

21 and employment benefits, rights, and privileges, 

22 all personnel of the Commission shall be treated 

23 as if they were employees of the United States 

24 Senate. 
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1 ‘‘(5) CHAIR; VICE CHAIR.—The Comptroller 

2 General shall designate a member of the Commis3 sion, at the time of appointment of the member as 

4 Chair and a member as Vice Chair for that term of 

5 appointment, except that in the case of vacancy of 

6 the Chair or Vice Chair, the Comptroller General 

7 may designate another member for the remainder of 

8 that member’s term. 

9 ‘‘(6) MEETINGS.—The Commission shall meet 

10 at the call of the Chair or upon the written request 

11 of a majority of its members. 

12 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CON13 SULTANTS.—Subject to such review as the Comptroller 

14 General determines necessary to ensure the efficient ad15 ministration of the Commission, the Commission may—

16 ‘‘(1) employ and fix the compensation of an Ex17 ecutive Director (subject to the approval of the 

18 Comptroller General) and such other personnel as 

19 may be necessary to carry out the duties of the 

20 Commission under this section (without regard to 

21 the provisions of title 5, United States Code, gov22 erning appointments in the competitive service); 

23 ‘‘(2) seek such assistance and support as may 

24 be required in the performance of the duties of the 
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1 Commission under this section from appropriate 

2 Federal departments and agencies; 

3 ‘‘(3) enter into contracts or make other ar4 rangements, as may be necessary for the conduct of 

5 the work of the Commission (without regard to sec6 tion 3709 of the Revised Statutes (41 U.S.C. 5)); 

7 ‘‘(4) make advance, progress, and other pay8 ments which relate to the work of the Commission; 

9 ‘‘(5) provide transportation and subsistence for 

10 persons serving without compensation; and 

11 ‘‘(6) prescribe such rules and regulations as it 

12 deems necessary with respect to the internal organi13 zation and operation of the Commission. 

14 ‘‘(e) POWERS.—

15 ‘‘(1) OBTAINING OFFICIAL DATA.—

16 ‘‘(A) IN GENERAL.—The Commission may 

17 secure directly from any department or agency 

18 of the United States information necessary for 

19 the Commission to carry the duties under this 

20 section. 

21 ‘‘(B) REQUEST OF CHAIR.—Upon request 

22 of the Chair, the head of that department or 

23 agency shall furnish that information to the 

24 Commission on an agreed upon schedule. 
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1 ‘‘(2) DATA COLLECTION.—In order to carry out 

2 the duties of the Commission under this section, the 

3 Commission shall—

4 ‘‘(A) use existing information, both pub5 lished and unpublished, where possible, collected 

6 and assessed either by the staff of the Commis7 sion or under other arrangements made in ac8 cordance with this section; 

9 ‘‘(B) carry out, or award grants or con10 tracts for, original research and experimen11 tation, where existing information is inad12 equate; and 

13 ‘‘(C) adopt procedures allowing any inter14 ested party to submit information for the Com15 mission’s use in making reports and rec16 ommendations. 

17 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The 

18 Comptroller General shall have unrestricted access 

19 to all deliberations, records, and nonproprietary data 

20 that pertains to the work of the Commission, imme21 diately upon request. The expense of providing such 

22 information shall be borne by the General Account23 ing Office. 
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1 ‘‘(4) PERIODIC AUDIT.—The Commission shall 

2 be subject to periodic audit by the Comptroller Gen3 eral. 

4 ‘‘(f) APPLICATION OF FACA.—Section 14 of the 

5 Federal Advisory Committee Act (5 U.S.C. App.) does not 

6 apply to the Commission. 

7 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—

8 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The 

9 Commission shall submit requests for appropriations 

10 in the same manner as the Comptroller General sub11 mits requests for appropriations, but amounts ap12 propriated for the Commission shall be separate 

13 from amounts appropriated for the Comptroller Gen14 eral. 

15 ‘‘(2) AUTHORIZATION.—There are authorized to 

16 be appropriated such sums as may be necessary to 

17 carry out the provisions of this section.’’. 

18 (b) EFFECTIVE DATE.—The Comptroller General of 

19 the United States shall appoint the initial members of the 

20 Safety Net Organizations and Patient Advisory Commis21 sion established under subsection (a) not later than June 

22 1, 2004. 

23 SEC. 636. ESTABLISHMENT OF PROGRAM TO PREVENT 

24 ABUSE OF NURSING FACILITY RESIDENTS. 

25 (a) IN GENERAL.—
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1 (1) SCREENING OF SKILLED NURSING FACILITY

2 AND NURSING FACILITY PROVISIONAL EMPLOY3 EES.—

4 (A) MEDICARE PROGRAM.—Section 

5 1819(b) (42 U.S.C. 1395i–3(b)) is amended by 

6 adding at the end the following: 

7 ‘‘(8) SCREENING OF SKILLED NURSING FACIL8 ITY WORKERS.—

9 ‘‘(A) BACKGROUND CHECKS OF PROVI10 SIONAL EMPLOYEES.—Subject to subparagraph 

11 (B)(ii), after a skilled nursing facility selects an 

12 individual for a position as a skilled nursing fa13 cility worker, the facility, prior to employing 

14 such worker in a status other than a provisional 

15 status to the extent permitted under subpara16 graph (B)(ii), shall—

17 ‘‘(i) give such worker written notice 

18 that the facility is required to perform 

19 background checks with respect to provi20 sional employees; 

21 ‘‘(ii) require, as a condition of employ22 ment, that such worker—

23 ‘‘(I) provide a written statement 

24 disclosing any conviction for a rel-
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1 evant crime or finding of patient or 

2 resident abuse; 

3 ‘‘(II) provide a statement signed 

4 by the worker authorizing the facility 

5 to request the search and exchange of 

6 criminal records; 

7 ‘‘(III) provide in person to the 

8 facility a copy of the worker’s finger9 prints or thumb print, depending 

10 upon available technology; and 

11 ‘‘(IV) provide any other identi12 fication information the Secretary 

13 may specify in regulation; 

14 ‘‘(iii) initiate a check of the data col15 lection system established under section 

16 1128E in accordance with regulations pro17 mulgated by the Secretary to determine 

18 whether such system contains any disquali19 fying information with respect to such 

20 worker; and 

21 ‘‘(iv) if that system does not contain 

22 any such disqualifying information—

23 ‘‘(I) request through the appro24 priate State agency that the State ini25 tiate a State and national criminal 
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1 background check on such worker in 

2 accordance with the provisions of sub3 section (e)(6); and 

4 ‘‘(II) submit to such State agen5 cy the information described in sub6 clauses (II) through (IV) of clause (ii) 

7 not more than 7 days (excluding Sat8 urdays, Sundays, and legal public 

9 holidays under section 6103(a) of title 

10 5, United States Code) after comple11 tion of the check against the system 

12 initiated under clause (iii). 

13 ‘‘(B) PROHIBITION ON HIRING OF ABUSIVE

14 WORKERS.—

15 ‘‘(i) IN GENERAL.—A skilled nursing 

16 facility may not knowingly employ any 

17 skilled nursing facility worker who has any 

18 conviction for a relevant crime or with re19 spect to whom a finding of patient or resi20 dent abuse has been made. 

21 ‘‘(ii) PROVISIONAL EMPLOYMENT.—

22 After complying with the requirements of 

23 clauses (i), (ii), and (iii) of subparagraph 

24 (A), a skilled nursing facility may provide 

25 for a provisional period of employment for 
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1 a skilled nursing facility worker pending 

2 completion of the check against the data 

3 collection system described under subpara4 graph (A)(iii) and the background check 

5 described under subparagraph (A)(iv). 

6 Subject to clause (iii), such facility shall 

7 maintain direct supervision of the covered 

8 individual during the worker’s provisional 

9 period of employment. 

10 ‘‘(iii) EXCEPTION FOR SMALL RURAL

11 SKILLED NURSING FACILITIES.—In the 

12 case of a small rural skilled nursing facility 

13 (as defined by the Secretary), the Sec14 retary shall provide, by regulation after 

15 consultation with providers of skilled nurs16 ing facility services and entities rep17 resenting beneficiaries of such services, for 

18 an appropriate level of supervision with re19 spect to any provisional employees em20 ployed by the facility in accordance with 

21 clause (ii). Such regulation should encour22 age the provision of direct supervision of 

23 such employees whenever practicable with 

24 respect to such a facility and if such super-
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1 vision would not impose an unreasonable 

2 cost or other burden on the facility. 

3 ‘‘(C) REPORTING REQUIREMENTS.—A 

4 skilled nursing facility shall report to the State 

5 any instance in which the facility determines 

6 that a skilled nursing facility worker has com7 mitted an act of resident neglect or abuse or 

8 misappropriation of resident property in the 

9 course of employment by the facility. 

10 ‘‘(D) USE OF INFORMATION.—

11 ‘‘(i) IN GENERAL.—A skilled nursing 

12 facility that obtains information about a 

13 skilled nursing facility worker pursuant to 

14 clauses (iii) and (iv) of subparagraph (A) 

15 may use such information only for the pur16 pose of determining the suitability of the 

17 worker for employment. 

18 ‘‘(ii) IMMUNITY FROM LIABILITY.—A 

19 skilled nursing facility that, in denying em20 ployment for an individual selected for hir21 ing as a skilled nursing facility worker (in22 cluding during the period described in sub23 paragraph (B)(ii)), reasonably relies upon 

24 information about such individual provided 

25 by the State pursuant to subsection (e)(6) 
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1 or section 1128E shall not be liable in any 

2 action brought by such individual based on 

3 the employment determination resulting 

4 from the information. 

5 ‘‘(iii) CRIMINAL PENALTY.—Whoever 

6 knowingly violates the provisions of clause 

7 (i) shall be fined in accordance with title 

8 18, United States Code, imprisoned for not 

9 more than 2 years, or both. 

10 ‘‘(E) CIVIL PENALTY.—

11 ‘‘(i) IN GENERAL.—A skilled nursing 

12 facility that violates the provisions of this 

13 paragraph shall be subject to a civil pen14 alty in an amount not to exceed—

15 ‘‘(I) for the first such violation, 

16 $2,000; and 

17 ‘‘(II) for the second and each 

18 subsequent violation within any 5-year 

19 period, $5,000. 

20 ‘‘(ii) KNOWING RETENTION OF WORK21 ER.—In addition to any civil penalty under 

22 clause (i), a skilled nursing facility that—

23 ‘‘(I) knowingly continues to em24 ploy a skilled nursing facility worker 
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1 in violation of subparagraph (A) or 

2 (B); or 

3 ‘‘(II) knowingly fails to report a 

4 skilled nursing facility worker under 

5 subparagraph (C), 

6 shall be subject to a civil penalty in an 

7 amount not to exceed $5,000 for the first 

8 such violation, and $10,000 for the second 

9 and each subsequent violation within any 

10 5-year period. 

11 ‘‘(F) DEFINITIONS.—In this paragraph: 

12 ‘‘(i) CONVICTION FOR A RELEVANT

13 CRIME.—The term ‘conviction for a rel14 evant crime’ means any Federal or State 

15 criminal conviction for—

16 ‘‘(I) any offense described in 

17 paragraphs (1) through (4) of section 

18 1128(a); and 

19 ‘‘(II) such other types of offenses 

20 as the Secretary may specify in regu21 lations, taking into account the sever22 ity and relevance of such offenses, and 

23 after consultation with representatives 

24 of long-term care providers, represent25 atives of long-term care employees, 
951

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1 consumer advocates, and appropriate 

2 Federal and State officials. 

3 ‘‘(ii) DISQUALIFYING INFORMATION.—

4 The term ‘disqualifying information’ means 

5 information about a conviction for a rel6 evant crime or a finding of patient or resi7 dent abuse. 

8 ‘‘(iii) FINDING OF PATIENT OR RESI9 DENT ABUSE.—The term ‘finding of pa10 tient or resident abuse’ means any sub11 stantiated finding by a State agency under 

12 subsection (g)(1)(C) or a Federal agency 

13 that a skilled nursing facility worker has 

14 committed—

15 ‘‘(I) an act of patient or resident 

16 abuse or neglect or a misappropriation 

17 of patient or resident property; or 

18 ‘‘(II) such other types of acts as 

19 the Secretary may specify in regula20 tions. 

21 ‘‘(iv) SKILLED NURSING FACILITY

22 WORKER.—The term ‘skilled nursing facil23 ity worker’ means any individual (other 

24 than a volunteer) that has access to a pa25 tient of a skilled nursing facility under an 
952

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1 employment or other contract, or both, 

2 with such facility. Such term includes indi3 viduals who are licensed or certified by the 

4 State to provide such services, and non5 licensed individuals providing such services, 

6 as defined by the Secretary, including 

7 nurse assistants, nurse aides, home health 

8 aides, and personal care workers and at9 tendants.’’. 

10 (B) MEDICAID PROGRAM.—Section 

11 1919(b) (42 U.S.C. 1396r(b)) is amended by 

12 adding at the end the following new paragraph: 

13 ‘‘(8) SCREENING OF NURSING FACILITY WORK14 ERS.—

15 ‘‘(A) BACKGROUND CHECKS ON PROVI16 SIONAL EMPLOYEES.—Subject to subparagraph 

17 (B)(ii), after a nursing facility selects an indi18 vidual for a position as a nursing facility work19 er, the facility, prior to employing such worker 

20 in a status other than a provisional status to 

21 the extent permitted under subparagraph 

22 (B)(ii), shall—

23 ‘‘(i) give the worker written notice 

24 that the facility is required to perform 
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1 background checks with respect to provi2 sional employees; 

3 ‘‘(ii) require, as a condition of employ4 ment, that such worker—

5 ‘‘(I) provide a written statement 

6 disclosing any conviction for a rel7 evant crime or finding of patient or 

8 resident abuse; 

9 ‘‘(II) provide a statement signed 

10 by the worker authorizing the facility 

11 to request the search and exchange of 

12 criminal records; 

13 ‘‘(III) provide in person to the 

14 facility a copy of the worker’s finger15 prints or thumb print, depending 

16 upon available technology; and 

17 ‘‘(IV) provide any other identi18 fication information the Secretary 

19 may specify in regulation; 

20 ‘‘(iii) initiate a check of the data col21 lection system established under section 

22 1128E in accordance with regulations pro23 mulgated by the Secretary to determine 

24 whether such system contains any disquali-
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1 fying information with respect to such 

2 worker; and 

3 ‘‘(iv) if that system does not contain 

4 any such disqualifying information—

5 ‘‘(I) request through the appro6 priate State agency that the State ini7 tiate a State and national criminal 

8 background check on such worker in 

9 accordance with the provisions of sub10 section (e)(8); and 

11 ‘‘(II) submit to such State agen12 cy the information described in sub13 clauses (II) through (IV) of clause (ii) 

14 not more than 7 days (excluding Sat15 urdays, Sundays, and legal public 

16 holidays under section 6103(a) of title 

17 5, United States Code) after comple18 tion of the check against the system 

19 initiated under clause (iii). 

20 ‘‘(B) PROHIBITION ON HIRING OF ABUSIVE

21 WORKERS.—

22 ‘‘(i) IN GENERAL.—A nursing facility 

23 may not knowingly employ any nursing fa24 cility worker who has any conviction for a 

25 relevant crime or with respect to whom a 
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1 finding of patient or resident abuse has 

2 been made. 

3 ‘‘(ii) PROVISIONAL EMPLOYMENT.—

4 After complying with the requirements of 

5 clauses (i), (ii), and (iii) of subparagraph 

6 (A), a nursing facility may provide for a 

7 provisional period of employment for a 

8 nursing facility worker pending completion 

9 of the check against the data collection 

10 system described under subparagraph 

11 (A)(iii) and the background check de12 scribed under subparagraph (A)(iv). Sub13 ject to clause (iii), such facility shall main14 tain direct supervision of the worker dur15 ing the worker’s provisional period of em16 ployment. 

17 ‘‘(iii) EXCEPTION FOR SMALL RURAL

18 NURSING FACILITIES.—

19 ‘‘(I) IN GENERAL.—In the case 

20 of a small rural nursing facility (as 

21 defined by the Secretary), the Sec22 retary shall provide, by regulation 

23 after consultation with providers of 

24 nursing facility services and entities 

25 representing beneficiaries of such 
956

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1 services, for an appropriate level of 

2 supervision with respect to any provi3 sional employees employed by the fa4 cility in accordance with clause (ii). 

5 Such regulation should encourage the 

6 provision of direct supervision of such 

7 employees whenever practicable with 

8 respect to such a facility and if such 

9 supervision would not impose an un10 reasonable cost or other burden on the 

11 facility. 

12 ‘‘(C) REPORTING REQUIREMENTS.—A 

13 nursing facility shall report to the State any in14 stance in which the facility determines that a 

15 nursing facility worker has committed an act of 

16 resident neglect or abuse or misappropriation of 

17 resident property in the course of employment 

18 by the facility. 

19 ‘‘(D) USE OF INFORMATION.—

20 ‘‘(i) IN GENERAL.—A nursing facility 

21 that obtains information about a nursing 

22 facility worker pursuant to clauses (iii) and 

23 (iv) of subparagraph (A) may use such in24 formation only for the purpose of deter-
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1 mining the suitability of the worker for 

2 employment. 

3 ‘‘(ii) IMMUNITY FROM LIABILITY.—A 

4 nursing facility that, in denying employ5 ment for an individual selected for hiring 

6 as a nursing facility worker (including dur7 ing the period described in subparagraph 

8 (B)(ii)), reasonably relies upon information 

9 about such individual provided by the 

10 State pursuant to subsection (e)(6) or sec11 tion 1128E shall not be liable in any ac12 tion brought by such individual based on 

13 the employment determination resulting 

14 from the information. 

15 ‘‘(iii) CRIMINAL PENALTY.—Whoever 

16 knowingly violates the provisions of clause 

17 (i) shall be fined in accordance with title 

18 18, United States Code, imprisoned for not 

19 more than 2 years, or both. 

20 ‘‘(E) CIVIL PENALTY.—

21 ‘‘(i) IN GENERAL.—A nursing facility 

22 that violates the provisions of this para23 graph shall be subject to a civil penalty in 

24 an amount not to exceed—
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1 ‘‘(I) for the first such violation, 

2 $2,000; and 

3 ‘‘(II) for the second and each 

4 subsequent violation within any 5-year 

5 period, $5,000. 

6 ‘‘(ii) KNOWING RETENTION OF WORK7 ER.—In addition to any civil penalty under 

8 clause (i), a nursing facility that—

9 ‘‘(I) knowingly continues to em10 ploy a nursing facility worker in viola11 tion of subparagraph (A) or (B); or 

12 ‘‘(II) knowingly fails to report a 

13 nursing facility worker under subpara14 graph (C), 

15 shall be subject to a civil penalty in an 

16 amount not to exceed $5,000 for the first 

17 such violation, and $10,000 for the second 

18 and each subsequent violation within any 

19 5-year period. 

20 ‘‘(F) DEFINITIONS.—In this paragraph: 

21 ‘‘(i) CONVICTION FOR A RELEVANT

22 CRIME.—The term ‘conviction for a rel23 evant crime’ means any Federal or State 

24 criminal conviction for—
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1 ‘‘(I) any offense described in 

2 paragraphs (1) through (4) of section 

3 1128(a); and 

4 ‘‘(II) such other types of offenses 

5 as the Secretary may specify in regu6 lations, taking into account the sever7 ity and relevance of such offenses, and 

8 after consultation with representatives 

9 of long-term care providers, represent10 atives of long-term care employees, 

11 consumer advocates, and appropriate 

12 Federal and State officials. 

13 ‘‘(ii) DISQUALIFYING INFORMATION.—

14 The term ‘disqualifying information’ means 

15 information about a conviction for a rel16 evant crime or a finding of patient or resi17 dent abuse. 

18 ‘‘(iii) FINDING OF PATIENT OR RESI19 DENT ABUSE.—The term ‘finding of pa20 tient or resident abuse’ means any sub21 stantiated finding by a State agency under 

22 subsection (g)(1)(C) or a Federal agency 

23 that a nursing facility worker has com24 mitted—
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1 ‘‘(I) an act of patient or resident 

2 abuse or neglect or a misappropriation 

3 of patient or resident property; or 

4 ‘‘(II) such other types of acts as 

5 the Secretary may specify in regula6 tions. 

7 ‘‘(iv) NURSING FACILITY WORKER.—

8 The term ‘nursing facility worker’ means 

9 any individual (other than a volunteer) 

10 that has access to a patient of a nursing 

11 facility under an employment or other con12 tract, or both, with such facility. Such 

13 term includes individuals who are licensed 

14 or certified by the State to provide such 

15 services, and nonlicensed individuals pro16 viding such services, as defined by the Sec17 retary, including nurse assistants, nurse 

18 aides, home health aides, and personal care 

19 workers and attendants.’’. 

20 (2) FEDERAL RESPONSIBILITIES.—

21 (A) DEVELOPMENT OF STANDARD FED22 ERAL AND STATE BACKGROUND CHECK

23 FORM.—The Secretary of Health and Human 

24 Services, in consultation with the Attorney Gen25 eral and representatives of appropriate State 
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1 agencies, shall develop a model form that a pro2 visional employee at a nursing facility may com3 plete and Federal and State agencies may use 

4 to conduct the criminal background checks re5 quired under sections 1819(b)(8) and 

6 1919(b)(8) of the Social Security Act (42 

7 U.S.C. 1395i–3(b), 1396r(b)) (as added by this 

8 section). 

9 (B) PERIODIC EVALUATION.—The Sec10 retary of Health and Human Services, in con11 sultation with the Attorney General, periodically 

12 shall evaluate the background check system im13 posed under sections 1819(b)(8) and 

14 1919(b)(8) of the Social Security Act (42 

15 U.S.C. 1395i–3(b), 1396r(b)) (as added by this 

16 section) and shall implement changes, as nec17 essary, based on available technology, to make 

18 the background check system more efficient and 

19 able to provide a more immediate response to 

20 long-term care providers using the system. 

21 (3) NO PREEMPTION OF STRICTER STATE

22 LAWS.—Nothing in section 1819(b)(8) or 1919(b)(8) 

23 of the Social Security Act (42 U.S.C. 1395i–3(b)(8), 

24 1396r(b)(8)) (as so added) shall be construed to su25 persede any provision of State law that—
962

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1 (A) specifies a relevant crime for purposes 

2 of prohibiting the employment of an individual 

3 at a long-term care facility (as defined in sec4 tion 1128E(g)(6) of the Social Security Act (as 

5 added by subsection (e)) that is not included in 

6 the list of such crimes specified in such sections 

7 or in regulations promulgated by the Secretary 

8 of Health and Human Services to carry out 

9 such sections; or 

10 (B) requires a long-term care facility (as 

11 so defined) to conduct a background check prior 

12 to employing an individual in an employment 

13 position that is not included in the positions for 

14 which a background check is required under 

15 such sections. 

16 (4) TECHNICAL AMENDMENTS.—Effective as if 

17 included in the enactment of section 941 of BIPA 

18 (114 Stat. 2763A–585), sections 1819(b) and 

19 1919(b) (42 U.S.C. 1395i–3(b), 1396r(b)), as 

20 amended by such section 941 are each amended by 

21 redesignating the paragraph (8) added by such sec22 tion as paragraph (9). 

23 (b) FEDERAL AND STATE REQUIREMENTS CON24 CERNING BACKGROUND CHECKS.—
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1 (1) MEDICARE.—Section 1819(e) (42 U.S.C. 

2 1395i–3(e)) is amended by adding at the end the 

3 following: 

4 ‘‘(6) FEDERAL AND STATE REQUIREMENTS

5 CONCERNING CRIMINAL BACKGROUND CHECKS ON

6 SKILLED NURSING FACILITY EMPLOYEES.—

7 ‘‘(A) IN GENERAL.—Upon receipt of a re8 quest by a skilled nursing facility pursuant to 

9 subsection (b)(8) that is accompanied by the in10 formation described in subclauses (II) through 

11 (IV) of subsection (b)(8)(A)(ii), a State, after 

12 checking appropriate State records and finding 

13 no disqualifying information (as defined in sub14 section (b)(8)(F)(ii)), shall immediately submit 

15 such request and information to the Attorney 

16 General and shall request the Attorney General 

17 to conduct a search and exchange of records 

18 with respect to the individual as described in 

19 subparagraph (B). 

20 ‘‘(B) SEARCH AND EXCHANGE OF

21 RECORDS BY ATTORNEY GENERAL.—Upon re22 ceipt of a submission pursuant to subparagraph 

23 (A), the Attorney General shall direct a search 

24 of the records of the Federal Bureau of Inves25 tigation for any criminal history records cor-
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1 responding to the fingerprints and other posi2 tive identification information submitted. The 

3 Attorney General shall provide any cor4 responding information resulting from the 

5 search to the State. 

6 ‘‘(C) STATE REPORTING OF INFORMATION

7 TO SKILLED NURSING FACILITY.—Upon receipt 

8 of the information provided by the Attorney 

9 General pursuant to subparagraph (B), the 

10 State shall—

11 ‘‘(i) review the information to deter12 mine whether the individual has any con13 viction for a relevant crime (as defined in 

14 subsection (b)(8)(F)(i)); 

15 ‘‘(ii) immediately report to the skilled 

16 nursing facility in writing the results of 

17 such review; and 

18 ‘‘(iii) in the case of an individual with 

19 a conviction for a relevant crime, report 

20 the existence of such conviction of such in21 dividual to the database established under 

22 section 1128E. 

23 ‘‘(D) FEES FOR PERFORMANCE OF CRIMI24 NAL BACKGROUND CHECKS.—

25 ‘‘(i) AUTHORITY TO CHARGE FEES.—
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1 ‘‘(I) ATTORNEY GENERAL.—The 

2 Attorney General may charge a fee to 

3 any State requesting a search and ex4 change of records pursuant to this 

5 paragraph and subsection (b)(8) for 

6 conducting the search and providing 

7 the records. The amount of such fee 

8 shall not exceed the lesser of the ac9 tual cost of such activities or $50. 

10 Such fees shall be available to the At11 torney General, or, in the Attorney 

12 General’s discretion, to the Federal 

13 Bureau of Investigation until ex14 pended. 

15 ‘‘(II) STATE.—A State may 

16 charge a skilled nursing facility a fee 

17 for initiating the criminal background 

18 check under this paragraph and sub19 section (b)(8), including fees charged 

20 by the Attorney General, and for per21 forming the review and report re22 quired by subparagraph (C). The 

23 amount of such fee shall not exceed 

24 the actual cost of such activities. 
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1 ‘‘(ii) PROHIBITION ON CHARGING.—

2 An entity may not impose on a provisional 

3 employee or an employee any charges re4 lating to the performance of a background 

5 check under this paragraph. 

6 ‘‘(E) REGULATIONS.—

7 ‘‘(i) IN GENERAL.—In addition to the 

8 Secretary’s authority to promulgate regula9 tions under this title, the Attorney Gen10 eral, in consultation with the Secretary, 

11 may promulgate such regulations as are 

12 necessary to carry out the Attorney Gen13 eral’s responsibilities under this paragraph 

14 and subsection (b)(9), including regula15 tions regarding the security confidentiality, 

16 accuracy, use, destruction, and dissemina17 tion of information, audits and record18 keeping, and the imposition of fees. 

19 ‘‘(ii) APPEAL PROCEDURES.—The At20 torney General, in consultation with the 

21 Secretary, shall promulgate such regula22 tions as are necessary to establish proce23 dures by which a provisional employee or 

24 an employee may appeal or dispute the ac25 curacy of the information obtained in a 
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1 background check conducted under this 

2 paragraph. Appeals shall be limited to in3 stances in which a provisional employee or 

4 an employee is incorrectly identified as the 

5 subject of the background check, or when 

6 information about the provisional employee 

7 or employee has not been updated to re8 flect changes in the provisional employee’s 

9 or employee’s criminal record. 

10 ‘‘(F) REPORT.—Not later than 2 years 

11 after the date of enactment of this paragraph, 

12 the Attorney General shall submit a report to 

13 Congress on—

14 ‘‘(i) the number of requests for 

15 searches and exchanges of records made 

16 under this section; 

17 ‘‘(ii) the disposition of such requests; 

18 and 

19 ‘‘(iii) the cost of responding to such 

20 requests.’’. 

21 (2) MEDICAID.—Section 1919(e) (42 U.S.C. 

22 1396r(e)) is amended by adding at the end the fol23 lowing: 
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1 ‘‘(8) FEDERAL AND STATE REQUIREMENTS

2 CONCERNING CRIMINAL BACKGROUND CHECKS ON

3 NURSING FACILITY EMPLOYEES.—

4 ‘‘(A) IN GENERAL.—Upon receipt of a re5 quest by a nursing facility pursuant to sub6 section (b)(8) that is accompanied by the infor7 mation described in subclauses (II) through 

8 (IV) of subsection (b)(8)(A)(ii), a State, after 

9 checking appropriate State records and finding 

10 no disqualifying information (as defined in sub11 section (b)(8)(F)(ii)), shall immediately submit 

12 such request and information to the Attorney 

13 General and shall request the Attorney General 

14 to conduct a search and exchange of records 

15 with respect to the individual as described in 

16 subparagraph (B). 

17 ‘‘(B) SEARCH AND EXCHANGE OF

18 RECORDS BY ATTORNEY GENERAL.—Upon re19 ceipt of a submission pursuant to subparagraph 

20 (A), the Attorney General shall direct a search 

21 of the records of the Federal Bureau of Inves22 tigation for any criminal history records cor23 responding to the fingerprints and other posi24 tive identification information submitted. The 

25 Attorney General shall provide any cor-
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1 responding information resulting from the 

2 search to the State. 

3 ‘‘(C) STATE REPORTING OF INFORMATION

4 TO NURSING FACILITY.—Upon receipt of the in5 formation provided by the Attorney General 

6 pursuant to subparagraph (B), the State 

7 shall—

8 ‘‘(i) review the information to deter9 mine whether the individual has any con10 viction for a relevant crime (as defined in 

11 subsection (b)(8)(F)(i)); 

12 ‘‘(ii) immediately report to the nurs13 ing facility in writing the results of such 

14 review; and 

15 ‘‘(iii) in the case of an individual with 

16 a conviction for a relevant crime, report 

17 the existence of such conviction of such in18 dividual to the database established under 

19 section 1128E. 

20 ‘‘(D) FEES FOR PERFORMANCE OF CRIMI21 NAL BACKGROUND CHECKS.—

22 ‘‘(i) AUTHORITY TO CHARGE FEES.—

23 ‘‘(I) ATTORNEY GENERAL.—The 

24 Attorney General may charge a fee to 

25 any State requesting a search and ex-
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1 change of records pursuant to this 

2 paragraph and subsection (b)(8) for 

3 conducting the search and providing 

4 the records. The amount of such fee 

5 shall not exceed the lesser of the ac6 tual cost of such activities or $50. 

7 Such fees shall be available to the At8 torney General, or, in the Attorney 

9 General’s discretion, to the Federal 

10 Bureau of Investigation, until ex11 pended. 

12 ‘‘(II) STATE.—A State may 

13 charge a nursing facility a fee for ini14 tiating the criminal background check 

15 under this paragraph and subsection 

16 (b)(8), including fees charged by the 

17 Attorney General, and for performing 

18 the review and report required by sub19 paragraph (C). The amount of such 

20 fee shall not exceed the actual cost of 

21 such activities. 

22 ‘‘(ii) PROHIBITION ON CHARGING.—

23 An entity may not impose on a provisional 

24 employee or an employee any charges re-
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1 lating to the performance of a background 

2 check under this paragraph. 

3 ‘‘(E) REGULATIONS.—

4 ‘‘(i) IN GENERAL.—In addition to the 

5 Secretary’s authority to promulgate regula6 tions under this title, the Attorney Gen7 eral, in consultation with the Secretary, 

8 may promulgate such regulations as are 

9 necessary to carry out the Attorney Gen10 eral’s responsibilities under this paragraph 

11 and subsection (b)(8), including regula12 tions regarding the security, confiden13 tiality, accuracy, use, destruction, and dis14 semination of information, audits and rec15 ordkeeping, and the imposition of fees. 

16 ‘‘(ii) APPEAL PROCEDURES.—The At17 torney General, in consultation with the 

18 Secretary, shall promulgate such regula19 tions as are necessary to establish proce20 dures by which a provisional employee or 

21 an employee may appeal or dispute the ac22 curacy of the information obtained in a 

23 background check conducted under this 

24 paragraph. Appeals shall be limited to in25 stances in which a provisional employee or 
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1 an employee is incorrectly identified as the 

2 subject of the background check, or when 

3 information about the provisional employee 

4 or employee has not been updated to re5 flect changes in the provisional employee’s 

6 or employee’s criminal record. 

7 ‘‘(F) REPORT.—Not later than 2 years 

8 after the date of enactment of this paragraph, 

9 the Attorney General shall submit a report to 

10 Congress on—

11 ‘‘(i) the number of requests for 

12 searches and exchanges of records made 

13 under this section; 

14 ‘‘(ii) the disposition of such requests; 

15 and 

16 ‘‘(iii) the cost of responding to such 

17 requests.’’. 

18 (c) APPLICATION TO OTHER ENTITIES PROVIDING

19 HOME HEALTH OR LONG-TERM CARE SERVICES.—

20 (1) MEDICARE.—Part D of title XVIII (42 

21 U.S.C. 1395x et seq.) is amended by adding at the 

22 end the following: 
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1 ‘‘APPLICATION OF SKILLED NURSING FACILITY PREVEN2 TIVE ABUSE PROVISIONS TO ANY PROVIDER OF

3 SERVICES OR OTHER ENTITY PROVIDING HOME

4 HEALTH OR LONG-TERM CARE SERVICES

5 ‘‘SEC. 1897. (a) IN GENERAL.—The requirements of 

6 subsections (b)(8) and (e)(6) of section 1819 shall apply 

7 to any provider of services or any other entity that is eligi8 ble to be paid under this title for providing home health 

9 services, hospice care (including routine home care and 

10 other services included in hospice care under this title), 

11 or long-term care services to an individual entitled to bene12 fits under part A or enrolled under part B, including an 

13 individual provided with a Medicare+Choice plan offered 

14 by a Medicare+Choice organization under part C (in this 

15 section referred to as a ‘medicare beneficiary’). 

16 ‘‘(b) SUPERVISION OF PROVISIONAL EMPLOYEES.—

17 ‘‘(1) IN GENERAL.—With respect to an entity 

18 that provides home health services, such entity shall 

19 be considered to have satisfied the requirements of 

20 section 1819(b)(8)(B)(ii) or 1919(b)(8)(B)(ii) if the 

21 entity meets such requirements for supervision of 

22 provisional employees of the entity as the Secretary 

23 shall, by regulation, specify in accordance with para24 graph (2). 
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1 ‘‘(2) REQUIREMENTS.—The regulations re2 quired under paragraph (1) shall provide the fol3 lowing: 

4 ‘‘(A) Supervision of a provisional employee 

5 shall consist of ongoing, good faith, verifiable 

6 efforts by the supervisor of the provisional em7 ployee to conduct monitoring and oversight ac8 tivities to ensure the safety of a medicare bene9 ficiary. 

10 ‘‘(B) For purposes of subparagraph (A), 

11 monitoring and oversight activities may include 

12 (but are not limited to) the following: 

13 ‘‘(i) Follow-up telephone calls to the 

14 medicare beneficiary. 

15 ‘‘(ii) Unannounced visits to the medi16 care beneficiary’s home while the provi17 sional employee is serving the medicare 

18 beneficiary. 

19 ‘‘(iii) To the extent practicable, lim20 iting the provisional employee’s duties to 

21 serving only those medicare beneficiaries in 

22 a home or setting where another family 

23 member or resident of the home or setting 

24 of the medicare beneficiary is present. 
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1 ‘‘(C) In promulgating such regulations, the 

2 Secretary shall take into account the staffing 

3 and geographic issues faced by small rural enti4 ties (as defined by the Secretary) that provide 

5 home health services, hospice care (including 

6 routine home care and other services included 

7 in hospice care under this title), or other long8 term care services. Such regulations should en9 courage the provision of monitoring and over10 sight activities whenever practicable with re11 spect to such an entity, and if such activities 

12 would not impose an unreasonable cost or other 

13 burden on the entity.’’. 

14 (2) MEDICAID.—Section 1902(a) (42 U.S.C. 

15 1396a), as amended by section 104(a), is amend16 ed—

17 (A) in paragraph (65), by striking ‘‘and’’ 

18 at the end; 

19 (B) in paragraph (66), by striking the pe20 riod and inserting ‘‘; and’’; and 

21 (C) by inserting after paragraph (66) the 

22 following: 

23 ‘‘(67) provide that any entity that is eligible to 

24 be paid under the State plan for providing home 

25 health services, hospice care (including routine home 
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1 care and other services included in hospice care 

2 under title XVIII), or long-term care services for 

3 which medical assistance is available under the State 

4 plan to individuals requiring long-term care complies 

5 with the requirements of subsections (b)(8) and 

6 (e)(8) of section 1919 and section 1897(b) (in the 

7 same manner as such section applies to a medicare 

8 beneficiary).’’. 

9 (3) EXPANSION OF STATE NURSE AIDE REG10 ISTRY.—

11 (A) MEDICARE.—Section 1819 (42 U.S.C. 

12 1395i–3) is amended—

13 (i) in subsection (e)(2)—

14 (I) in the paragraph heading, by 

15 striking ‘‘NURSE AIDE REGISTRY’’ and 

16 inserting ‘‘EMPLOYEE REGISTRY’’; 

17 (II) in subparagraph (A)—

18 (aa) by striking ‘‘By not 

19 later than January 1, 1989, the’’ 

20 and inserting ‘‘The’’; 

21 (bb) by striking ‘‘a registry 

22 of all individuals’’ and inserting 

23 ‘‘a registry of (i) all individuals’’; 

24 and 
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1 (cc) by inserting before the 

2 period the following: ‘‘, (ii) all 

3 other skilled nursing facility em4 ployees with respect to whom the 

5 State has made a finding de6 scribed in subparagraph (B), and 

7 (iii) any employee of any provider 

8 of services or any other entity 

9 that is eligible to be paid under 

10 this title for providing home 

11 health services, hospice care (in12 cluding routine home care and 

13 other services included in hospice 

14 care under this title), or long15 term care services and with re16 spect to whom the entity has re17 ported to the State a finding of 

18 patient neglect or abuse or a mis19 appropriation of patient prop20 erty’’; and 

21 (III) in subparagraph (C), by 

22 striking ‘‘a nurse aide’’ and inserting 

23 ‘‘an individual’’; and 

24 (ii) in subsection (g)(1)—
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1 (I) by striking the first sentence 

2 of subparagraph (C) and inserting the 

3 following: ‘‘The State shall provide, 

4 through the agency responsible for 

5 surveys and certification of skilled 

6 nursing facilities under this sub7 section, for a process for the receipt 

8 and timely review and investigation of 

9 allegations of neglect and abuse and 

10 misappropriation of resident property 

11 by a nurse aide or a skilled nursing 

12 facility employee of a resident in a 

13 skilled nursing facility, by another in14 dividual used by the facility in pro15 viding services to such a resident, or 

16 by an individual described in sub17 section (e)(2)(A)(iii).’’; and 

18 (II) in the fourth sentence of 

19 subparagraph (C), by inserting ‘‘or 

20 described in subsection (e)(2)(A)(iii)’’ 

21 after ‘‘used by the facility’’; and 

22 (III) in subparagraph (D)—

23 (aa) in the subparagraph 

24 heading, by striking ‘‘NURSE

25 AIDE’’; and 
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1 (bb) in clause (i), in the 

2 matter preceding subclause (I), 

3 by striking ‘‘a nurse aide’’ and 

4 inserting ‘‘an individual’’; and 

5 (cc) in clause (i)(I), by strik6 ing ‘‘nurse aide’’ and inserting 

7 ‘‘individual’’. 

8 (B) MEDICAID.—Section 1919 (42 U.S.C. 

9 1396r) is amended—

10 (i) in subsection (e)(2)—

11 (I) in the paragraph heading, by 

12 striking ‘‘NURSE AIDE REGISTRY’’ and 

13 inserting ‘‘EMPLOYEE REGISTRY’’; 

14 (II) in subparagraph (A)—

15 (aa) by striking ‘‘By not 

16 later than January 1, 1989, the’’ 

17 and inserting ‘‘The’’; 

18 (bb) by striking ‘‘a registry 

19 of all individuals’’ and inserting 

20 ‘‘a registry of (i) all individuals’’; 

21 and 

22 (cc) by inserting before the 

23 period the following: ‘‘, (ii) all 

24 other nursing facility employees 

25 with respect to whom the State 
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1 has made a finding described in 

2 subparagraph (B), and (iii) any 

3 employee of an entity that is eli4 gible to be paid under the State 

5 plan for providing home health 

6 services, hospice care (including 

7 routine home care and other 

8 services included in hospice care 

9 under title XVIII), or long-term 

10 care services and with respect to 

11 whom the entity has reported to 

12 the State a finding of patient ne13 glect or abuse or a misappropria14 tion of patient property’’; and 

15 (III) in subparagraph (C), by 

16 striking ‘‘a nurse aide’’ and inserting 

17 ‘‘an individual’’; and 

18 (ii) in subsection (g)(1)—

19 (I) by striking the first sentence 

20 of subparagraph (C) and inserting the 

21 following: ‘‘The State shall provide, 

22 through the agency responsible for 

23 surveys and certification of nursing 

24 facilities under this subsection, for a 

25 process for the receipt and timely re-
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1 view and investigation of allegations 

2 of neglect and abuse and misappro3 priation of resident property by a 

4 nurse aide or a nursing facility em5 ployee of a resident in a nursing facil6 ity, by another individual used by the 

7 facility in providing services to such a 

8 resident, or by an individual described 

9 in subsection (e)(2)(A)(iii).’’; and 

10 (II) in the fourth sentence of 

11 subparagraph (C), by inserting ‘‘or 

12 described in subsection (e)(2)(A)(iii)’’ 

13 after ‘‘used by the facility’’; and 

14 (III) in subparagraph (D)—

15 (aa) in the subparagraph 

16 heading, by striking ‘‘NURSE

17 AIDE’’; and 

18 (bb) in clause (i), in the 

19 matter preceding subclause (I), 

20 by striking ‘‘a nurse aide’’ and 

21 inserting ‘‘an individual’’; and 

22 (cc) in clause (i)(I), by strik23 ing ‘‘nurse aide’’ and inserting 

24 ‘‘individual’’. 
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1 (d) REIMBURSEMENT OF COSTS FOR BACKGROUND

2 CHECKS.—The Secretary of Health and Human Services 

3 shall reimburse nursing facilities, skilled nursing facilities, 

4 and other entities for costs incurred by the facilities and 

5 entities in order to comply with the requirements imposed 

6 under sections 1819(b)(8) and 1919(b)(8) of such Act (42 

7 U.S.C. 1395i–3(b)(8), 1396r(b)(8)), as added by this sec8 tion. 

9 (e) INCLUSION OF ABUSIVE ACTS WITHIN A LONG10 TERM CARE FACILITY OR PROVIDER IN THE NATIONAL

11 HEALTH CARE FRAUD AND ABUSE DATA COLLECTION

12 PROGRAM.—

13 (1) IN GENERAL.—Section 1128E(g)(1)(A) (42 

14 U.S.C. 1320a–7e(g)(1)(A)) is amended—

15 (A) by redesignating clause (v) as clause 

16 (vi); and 

17 (B) by inserting after clause (iv), the fol18 lowing: 

19 ‘‘(v) A finding of abuse or neglect of 

20 a patient or a resident of a long-term care 

21 facility, or misappropriation of such a pa22 tient’s or resident’s property.’’. 

23 (2) COVERAGE OF LONG-TERM CARE FACILITY

24 OR PROVIDER EMPLOYEES.—Section 1128E(g)(2) 

25 (42 U.S.C. 1320a–7e(g)(2)) is amended by inserting 
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1 ‘‘, and includes any individual of a long-term care 

2 facility or provider (other than any volunteer) that 

3 has access to a patient or resident of such a facility 

4 under an employment or other contract, or both, 

5 with the facility or provider (including individuals 

6 who are licensed or certified by the State to provide 

7 services at the facility or through the provider, and 

8 nonlicensed individuals, as defined by the Secretary, 

9 providing services at the facility or through the pro10 vider, including nurse assistants, nurse aides, home 

11 health aides, individuals who provide home care, and 

12 personal care workers and attendants)’’ before the 

13 period. 

14 (3) REPORTING BY LONG-TERM CARE FACILI15 TIES OR PROVIDERS.—

16 (A) IN GENERAL.—Section 1128E(b)(1) 

17 (42 U.S.C. 1320a–7e(b)(1)) is amended by 

18 striking ‘‘and health plan’’ and inserting ‘‘, 

19 health plan, and long-term care facility or pro20 vider’’. 

21 (B) CORRECTION OF INFORMATION.—Sec22 tion 1128E(c)(2) (42 U.S.C. 1320a–7e(c)(2)) is 

23 amended by striking ‘‘and health plan’’ and in24 serting ‘‘, health plan, and long-term care facil25 ity or provider’’. 
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1 (4) ACCESS TO REPORTED INFORMATION.—Sec2 tion 1128E(d)(1) (42 U.S.C. 1320a–7e(d)(1)) is 

3 amended by striking ‘‘and health plans’’ and insert4 ing ‘‘, health plans, and long-term care facilities or 

5 providers’’. 

6 (5) MANDATORY CHECK OF DATABASE BY

7 LONG-TERM CARE FACILITIES OR PROVIDERS.—Sec8 tion 1128E(d) (42 U.S.C. 1320a–7e(d)) is amended 

9 by adding at the end the following: 

10 ‘‘(3) MANDATORY CHECK OF DATABASE BY

11 LONG-TERM CARE FACILITIES OR PROVIDERS.—A 

12 long-term care facility or provider shall check the 

13 database maintained under this section prior to hir14 ing under an employment or other contract, or both, 

15 (other than in a provisional status) any individual as 

16 an employee of such a facility or provider who will 

17 have access to a patient or resident of the facility or 

18 provider (including individuals who are licensed or 

19 certified by the State to provide services at the facil20 ity or through the provider, and nonlicensed individ21 uals, as defined by the Secretary, that will provide 

22 services at the facility or through the provider, in23 cluding nurse assistants, nurse aides, home health 

24 aides, individuals who provide home care, and per25 sonal care workers and attendants).’’. 
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1 (6) DEFINITION OF LONG-TERM CARE FACILITY

2 OR PROVIDER.—Section 1128E(g) (42 U.S.C. 

3 1320a–7e(g)) is amended by adding at the end the 

4 following: 

5 ‘‘(6) LONG-TERM CARE FACILITY OR PRO6 VIDER.—The term ‘long-term care facility or pro7 vider’ means a skilled nursing facility (as defined in 

8 section 1819(a)), a nursing facility (as defined in 

9 section 1919(a)), a home health agency, a provider 

10 of hospice care (as defined in section 1861(dd)(1)), 

11 a long-term care hospital (as described in section 

12 1886(d)(1)(B)(iv)), an intermediate care facility for 

13 the mentally retarded (as defined in section 

14 1905(d)), or any other facility or entity that pro15 vides, or is a provider of, long-term care services, 

16 home health services, or hospice care (including rou17 tine home care and other services included in hospice 

18 care under title XVIII), and receives payment for 

19 such services under the medicare program under 

20 title XVIII or the medicaid program under title 

21 XIX.’’. 

22 (7) AUTHORIZATION OF APPROPRIATIONS.—

23 There is authorized to be appropriated to carry out 

24 the amendments made by this subsection, 

25 $10,200,000 for fiscal year 2004. 
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1 (f) PREVENTION AND TRAINING DEMONSTRATION

2 PROJECT.—

3 (1) ESTABLISHMENT.—The Secretary of Health 

4 and Human Services shall establish a demonstration 

5 program to provide grants to develop information on 

6 best practices in patient abuse prevention training 

7 (including behavior training and interventions) for 

8 managers and staff of hospital and health care fa9 cilities. 

10 (2) ELIGIBILITY.—To be eligible to receive a 

11 grant under paragraph (1), an entity shall be a pub12 lic or private nonprofit entity and prepare and sub13 mit to the Secretary of Health and Human Services 

14 an application at such time, in such manner, and 

15 containing such information as the Secretary may 

16 require. 

17 (3) USE OF FUNDS.—Amounts received under a 

18 grant under this subsection shall be used to—

19 (A) examine ways to improve collaboration 

20 between State health care survey and provider 

21 certification agencies, long-term care ombuds22 man programs, the long-term care industry, 

23 and local community members; 

24 (B) examine patient care issues relating to 

25 regulatory oversight, community involvement, 
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1 and facility staffing and management with a 

2 focus on staff training, staff stress manage3 ment, and staff supervision; 

4 (C) examine the use of patient abuse pre5 vention training programs by long-term care en6 tities, including the training program developed 

7 by the National Association of Attorneys Gen8 eral, and the extent to which such programs are 

9 used; and 

10 (D) identify and disseminate best practices 

11 for preventing and reducing patient abuse. 

12 (4) AUTHORIZATION OF APPROPRIATIONS.—

13 There is authorized to be appropriated such sums as 

14 may be necessary to carry out this subsection. 

15 (g) EFFECTIVE DATE.—

16 (1) IN GENERAL.—With respect to a skilled 

17 nursing facility (as defined in section 1819(a) of the 

18 Social Security Act (42 U.S.C. 1395i–3(a)) or a 

19 nursing facility (as defined in section 1919(a) of the 

20 Social Security Act (42 U.S.C. 1396r(a)), this sec21 tion and the amendments made by this section shall 

22 take effect on the date that is the earlier of—

23 (A) 6 months after the effective date of 

24 final regulations promulgated to carry out this 

25 section and such amendments; or 
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1 (B) January 1, 2006. 

2 (2) LONG-TERM CARE FACILITIES AND PRO3 VIDERS.—With respect to a long-term care facility 

4 or provider (as defined in section 1128E(g)(6) of the 

5 Social Security Act (42 U.S.C. 1320a–7e(g)(6)) (as 

6 added by subsection (e)), this section and the 

7 amendments made by this section shall take effect 

8 on the date that is the earlier of—

9 (A) 18 months after the effective date of 

10 final regulations promulgated to carry out this 

11 section and such amendments; or 

12 (B) January 1, 2007. 

13 SEC. 637. OFFICE OF RURAL HEALTH POLICY IMPROVE14 MENTS. 

15 Section 711(b) (42 U.S.C. 912(b)) is amended—

16 (1) in paragraph (3), by striking ‘‘and’’ after 

17 the comma at the end; 

18 (2) in paragraph (4), by inserting ‘‘and’’ after 

19 the comma at the end; and 

20 (3) by inserting after paragraph (4) the fol21 lowing new paragraph: 

22 ‘‘(5) administer grants, cooperative agreements, 

23 and contracts to provide technical assistance and 

24 other activities as necessary to support activities re25 lated to improving health care in rural areas.’’. 
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1 TITLE VII—ACCESS TO AFFORD2 ABLE PHARMACEUTICALS 

3 SEC. 701. SHORT TITLE. 

4 This title may be cited as the ‘‘Greater Access to Af5 fordable Pharmaceuticals Act’’. 

6 SEC. 702. 30-MONTH STAY-OF-EFFECTIVENESS PERIOD. 

7 (a) ABBREVIATED NEW DRUG APPLICATIONS.—Sec8 tion 505(j) of the Federal Food, Drug, and Cosmetic Act 

9 (21 U.S.C. 355(j)) is amended— 

10 (1) in paragraph (2), by striking subparagraph 

11 (B) and inserting the following: 

12 ‘‘(B) NOTICE OF OPINION THAT PATENT IS INVALID

13 OR WILL NOT BE INFRINGED.—

14 ‘‘(i) AGREEMENT TO GIVE NOTICE.—An appli15 cant that makes a certification described in subpara16 graph (A)(vii)(IV) shall include in the application a 

17 statement that the applicant will give notice as re18 quired by this subparagraph. 

19 ‘‘(ii) TIMING OF NOTICE.—An applicant that 

20 makes a certification described in subparagraph 

21 (A)(vii)(IV) shall give notice as required under this 

22 subparagraph—

23 ‘‘(I) if the certification is in the applica24 tion, not later than 20 days after the date of 

25 the postmark on the notice with which the Sec-
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1 retary informs the applicant that the applica2 tion has been filed; or 

3 ‘‘(II) if the certification is in an amend4 ment or supplement to the application, at the 

5 time at which the applicant submits the amend6 ment or supplement, regardless of whether the 

7 applicant has already given notice with respect 

8 to another such certification contained in the 

9 application or in an amendment or supplement 

10 to the application. 

11 ‘‘(iii) RECIPIENTS OF NOTICE.—An applicant 

12 required under this subparagraph to give notice shall 

13 give notice to—

14 ‘‘(I) each owner of the patent that is the 

15 subject of the certification (or a representative 

16 of the owner designated to receive such a no17 tice); and 

18 ‘‘(II) the holder of the approved applica19 tion under subsection (b) for the drug that is 

20 claimed by the patent or a use of which is 

21 claimed by the patent (or a representative of 

22 the holder designated to receive such a notice). 

23 ‘‘(iv) CONTENTS OF NOTICE.—A notice required 

24 under this subparagraph shall—
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1 ‘‘(I) state that an application that contains 

2 data from bioavailability or bioequivalence stud3 ies has been submitted under this subsection for 

4 the drug with respect to which the certification 

5 is made to obtain approval to engage in the 

6 commercial manufacture, use, or sale of the 

7 drug before the expiration of the patent re8 ferred to in the certification; and 

9 ‘‘(II) include a detailed statement of the 

10 factual and legal basis of the opinion of the ap11 plicant that the patent is invalid or will not be 

12 infringed.’’; and 

13 (2) in paragraph (5)—

14 (A) in subparagraph (B)—

15 (i) by striking ‘‘under the following’’ 

16 and inserting ‘‘by applying the following to 

17 each certification made under paragraph 

18 (2)(A)(vii)’’; and 

19 (ii) in clause (iii)—

20 (I) in the first sentence, by strik21 ing ‘‘unless’’ and all that follows and 

22 inserting ‘‘unless, before the expira23 tion of 45 days after the date on 

24 which the notice described in para25 graph (2)(B) is received, an action is 
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1 brought for infringement of the patent 

2 that is the subject of the certification 

3 and for which information was sub4 mitted to the Secretary under sub5 section (b)(1) or (c)(2) before the date 

6 on which the application (excluding an 

7 amendment or supplement to the ap8 plication), which the Secretary later 

9 determines to be substantially com10 plete, was submitted.’’; and 

11 (II) in the second sentence—

12 (aa) by striking subclause 

13 (I) and inserting the following: 

14 ‘‘(I) if before the expiration of such period 

15 the district court decides that the patent is in16 valid or not infringed (including any substantive 

17 determination that there is no cause of action 

18 for patent infringement or invalidity), the ap19 proval shall be made effective on—

20 ‘‘(aa) the date on which the court en21 ters judgment reflecting the decision; or 

22 ‘‘(bb) the date of a settlement order 

23 or consent decree signed and entered by 

24 the court stating that the patent that is 
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1 the subject of the certification is invalid or 

2 not infringed;’’; 

3 (bb) by striking subclause 

4 (II) and inserting the following: 

5 ‘‘(II) if before the expiration of such period 

6 the district court decides that the patent has 

7 been infringed—

8 ‘‘(aa) if the judgment of the district 

9 court is appealed, the approval shall be 

10 made effective on—

11 ‘‘(AA) the date on which the 

12 court of appeals decides that the pat13 ent is invalid or not infringed (includ14 ing any substantive determination 

15 that there is no cause of action for 

16 patent infringement or invalidity); or 

17 ‘‘(BB) the date of a settlement 

18 order or consent decree signed and 

19 entered by the court of appeals stat20 ing that the patent that is the subject 

21 of the certification is invalid or not in22 fringed; or 

23 ‘‘(bb) if the judgment of the district 

24 court is not appealed or is affirmed, the 

25 approval shall be made effective on the 
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1 date specified by the district court in a 

2 court order under section 271(e)(4)(A) of 

3 title 35, United States Code;’’; 

4 (cc) in subclause (III), by 

5 striking ‘‘on the date of such 

6 court decision.’’ and inserting ‘‘as 

7 provided in subclause (I); or’’; 

8 and 

9 (dd) by inserting after sub10 clause (III) the following: 

11 ‘‘(IV) if before the expiration of such pe12 riod the court grants a preliminary injunction 

13 prohibiting the applicant from engaging in the 

14 commercial manufacture or sale of the drug 

15 until the court decides the issues of patent va16 lidity and infringement and if the court decides 

17 that such patent has been infringed, the ap18 proval shall be made effective as provided in 

19 subclause (II).’’; 

20 (B) by redesignating subparagraphs (C) 

21 and (D) as subparagraphs (E) and (F), respec22 tively; and 

23 (C) by inserting after subparagraph (B) 

24 the following: 
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1 ‘‘(C) CIVIL ACTION TO OBTAIN PATENT

2 CERTAINTY.—

3 ‘‘(i) DECLARATORY JUDGMENT AB4 SENT INFRINGEMENT ACTION.—If an 

5 owner of the patent or the holder of the 

6 approved application under subsection (b) 

7 for the drug that is claimed by the patent 

8 or a use of which is claimed by the patent 

9 does not bring a civil action against the 

10 applicant for infringement of the patent on 

11 or before the date that is 45 days after the 

12 date on which the notice given under para13 graph (2)(B) was received, the applicant 

14 may bring a civil action against the owner 

15 or holder (but not against any owner or 

16 holder that has brought such a civil action 

17 against that applicant, unless that civil ac18 tion was dismissed without prejudice) for a 

19 declaratory judgment under section 2201 

20 of title 28, United States Code, that the 

21 patent is invalid or will not be infringed by 

22 the drug for which the applicant seeks ap23 proval. 

24 ‘‘(ii) COUNTERCLAIM TO INFRINGE25 MENT ACTION.—
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1 ‘‘(I) IN GENERAL.—If an owner 

2 of the patent or the holder of the ap3 proved application under subsection 

4 (b) for the drug that is claimed by the 

5 patent or a use of which is claimed by 

6 the patent brings a patent infringe7 ment action against the applicant, the 

8 applicant may assert a counterclaim 

9 seeking an order requiring the holder 

10 to correct or delete the patent infor11 mation submitted by the holder under 

12 subsection (b) or (c) on the ground 

13 that the patent does not claim ei14 ther—

15 ‘‘(aa) the drug for which the 

16 application was approved; or 

17 ‘‘(bb) an approved method 

18 of using the drug. 

19 ‘‘(II) NO INDEPENDENT CAUSE

20 OF ACTION.—Subclause (I) does not 

21 authorize the assertion of a claim de22 scribed in subclause (I) in any civil 

23 action or proceeding other than a 

24 counterclaim described in subclause 

25 (I). 
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1 ‘‘(iii) NO DAMAGES.—An applicant 

2 shall not be entitled to damages in a civil 

3 action under subparagraph (i) or a coun4 terclaim under subparagraph (ii).’’. 

5 (b) APPLICATIONS GENERALLY.—Section 505 of the 

6 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) 

7 is amended—

8 (1) in subsection (b), by striking paragraph (3) 

9 and inserting the following: 

10 ‘‘(3) NOTICE OF OPINION THAT PATENT IS INVALID

11 OR WILL NOT BE INFRINGED.—

12 ‘‘(A) AGREEMENT TO GIVE NOTICE.—An appli13 cant that makes a certification described in para14 graph (2)(A)(iv) shall include in the application a 

15 statement that the applicant will give notice as re16 quired by this paragraph. 

17 ‘‘(B) TIMING OF NOTICE.—An applicant that 

18 makes a certification described in paragraph 

19 (2)(A)(iv) shall give notice as required under this 

20 paragraph—

21 ‘‘(i) if the certification is in the applica22 tion, not later than 20 days after the date of 

23 the postmark on the notice with which the Sec24 retary informs the applicant that the applica25 tion has been filed; or 
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1 ‘‘(ii) if the certification is in an amend2 ment or supplement to the application, at the 

3 time at which the applicant submits the amend4 ment or supplement, regardless of whether the 

5 applicant has already given notice with respect 

6 to another such certification contained in the 

7 application or in an amendment or supplement 

8 to the application. 

9 ‘‘(C) RECIPIENTS OF NOTICE.—An applicant 

10 required under this paragraph to give notice shall 

11 give notice to—

12 ‘‘(i) each owner of the patent that is the 

13 subject of the certification (or a representative 

14 of the owner designated to receive such a no15 tice); and 

16 ‘‘(ii) the holder of the approved application 

17 under this subsection for the drug that is 

18 claimed by the patent or a use of which is 

19 claimed by the patent (or a representative of 

20 the holder designated to receive such a notice). 

21 ‘‘(D) CONTENTS OF NOTICE.—A notice re22 quired under this paragraph shall—

23 ‘‘(i) state that an application that contains 

24 data from bioavailability or bioequivalence stud25 ies has been submitted under this subsection for 
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1 the drug with respect to which the certification 

2 is made to obtain approval to engage in the 

3 commercial manufacture, use, or sale of the 

4 drug before the expiration of the patent re5 ferred to in the certification; and 

6 ‘‘(ii) include a detailed statement of the 

7 factual and legal basis of the opinion of the ap8 plicant that the patent is invalid or will not be 

9 infringed.’’; and 

10 (2) in subsection (c)(3)—

11 (A) in the first sentence, by striking 

12 ‘‘under the following’’ and inserting ‘‘by apply13 ing the following to each certification made 

14 under subsection (b)(2)(A)(iv)’’; 

15 (B) in subparagraph (C)—

16 (i) in the first sentence, by striking 

17 ‘‘unless’’ and all that follows and inserting 

18 ‘‘unless, before the expiration of 45 days 

19 after the date on which the notice de20 scribed in subsection (b)(3) is received, an 

21 action is brought for infringement of the 

22 patent that is the subject of the certifi23 cation and for which information was sub24 mitted to the Secretary under paragraph 

25 (2) or subsection (b)(1) before the date on 
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1 which the application (excluding an amend2 ment or supplement to the application) was 

3 submitted.’’; 

4 (ii) in the second sentence—

5 (I) by striking ‘‘paragraph 

6 (3)(B)’’ and inserting ‘‘subsection 

7 (b)(3)’’; 

8 (II) by striking clause (i) and in9 serting the following: 

10 ‘‘(i) if before the expiration of such period 

11 the district court decides that the patent is in12 valid or not infringed (including any substantive 

13 determination that there is no cause of action 

14 for patent infringement or invalidity), the ap15 proval shall be made effective on—

16 ‘‘(I) the date on which the court en17 ters judgment reflecting the decision; or 

18 ‘‘(II) the date of a settlement order or 

19 consent decree signed and entered by the 

20 court stating that the patent that is the 

21 subject of the certification is invalid or not 

22 infringed;’’; 

23 (III) by striking clause (ii) and 

24 inserting the following: 
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1 ‘‘(ii) if before the expiration of such period 

2 the district court decides that the patent has 

3 been infringed—

4 ‘‘(I) if the judgment of the district 

5 court is appealed, the approval shall be 

6 made effective on—

7 ‘‘(aa) the date on which the court 

8 of appeals decides that the patent is 

9 invalid or not infringed (including any 

10 substantive determination that there 

11 is no cause of action for patent in12 fringement or invalidity); or 

13 ‘‘(bb) the date of a settlement 

14 order or consent decree signed and 

15 entered by the court of appeals stat16 ing that the patent that is the subject 

17 of the certification is invalid or not in18 fringed; or 

19 ‘‘(II) if the judgment of the district 

20 court is not appealed or is affirmed, the 

21 approval shall be made effective on the 

22 date specified by the district court in a 

23 court order under section 271(e)(4)(A) of 

24 title 35, United States Code;’’; 
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1 (IV) in clause (iii), by striking 

2 ‘‘on the date of such court decision.’’ 

3 and inserting ‘‘as provided in clause 

4 (i); or’’; and 

5 (V) by inserting after clause (iii), 

6 the following: 

7 ‘‘(iv) if before the expiration of such period 

8 the court grants a preliminary injunction pro9 hibiting the applicant from engaging in the 

10 commercial manufacture or sale of the drug 

11 until the court decides the issues of patent va12 lidity and infringement and if the court decides 

13 that such patent has been infringed, the ap14 proval shall be made effective as provided in 

15 clause (ii).’’; and 

16 (iii) in the third sentence, by striking 

17 ‘‘paragraph (3)(B)’’ and inserting ‘‘sub18 section (b)(3)’’; 

19 (C) by redesignating subparagraph (D) as 

20 subparagraph (E); and 

21 (D) by inserting after subparagraph (C) 

22 the following: 

23 ‘‘(D) CIVIL ACTION TO OBTAIN PATENT

24 CERTAINTY.—
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1 ‘‘(i) DECLARATORY JUDGMENT AB2 SENT INFRINGEMENT ACTION.—If an 

3 owner of the patent or the holder of the 

4 approved application under subsection (b) 

5 for the drug that is claimed by the patent 

6 or a use of which is claimed by the patent 

7 does not bring a civil action against the 

8 applicant for infringement of the patent on 

9 or before the date that is 45 days after the 

10 date on which the notice given under sub11 section (b)(3) was received, the applicant 

12 may bring a civil action against the owner 

13 or holder (but not against any owner or 

14 holder that has brought such a civil action 

15 against that applicant, unless that civil ac16 tion was dismissed without prejudice) for a 

17 declaratory judgment under section 2201 

18 of title 28, United States Code, that the 

19 patent is invalid or will not be infringed by 

20 the drug for which the applicant seeks ap21 proval. 

22 ‘‘(ii) COUNTERCLAIM TO INFRINGE23 MENT ACTION.—

24 ‘‘(I) IN GENERAL.—If an owner 

25 of the patent or the holder of the ap-
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1 proved application under subsection 

2 (b) for the drug that is claimed by the 

3 patent or a use of which is claimed by 

4 the patent brings a patent infringe5 ment action against the applicant, the 

6 applicant may assert a counterclaim 

7 seeking an order requiring the holder 

8 to correct or delete the patent infor9 mation submitted by the holder under 

10 subsection (b) or this subsection on 

11 the ground that the patent does not 

12 claim either—

13 ‘‘(aa) the drug for which the 

14 application was approved; or 

15 ‘‘(bb) an approved method 

16 of using the drug. 

17 ‘‘(II) NO INDEPENDENT CAUSE

18 OF ACTION.—Subclause (I) does not 

19 authorize the assertion of a claim de20 scribed in subclause (I) in any civil 

21 action or proceeding other than a 

22 counterclaim described in subclause 

23 (I). 

24 ‘‘(iii) NO DAMAGES.—An applicant 

25 shall not be entitled to damages in a civil 
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1 action under clause (i) or a counterclaim 

2 under clause (ii).’’. 

3 (c) INFRINGEMENT ACTIONS.—Section 271(e) of title 

4 35, United States Code, is amended by adding at the end 

5 the following: 

6 ‘‘(5) The filing of an application described in 

7 paragraph (2) that includes a certification under 

8 subsection (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of sec9 tion 505 of the Federal Food, Drug, and Cosmetic 

10 Act (21 U.S.C. 355), and the failure of the owner 

11 of the patent to bring an action for infringement of 

12 a patent that is the subject of the certification be13 fore the expiration of 45 days after the date on 

14 which the notice given under subsection (b)(3) or 

15 (j)(2)(B) of that section is received, shall establish 

16 an actual controversy between the applicant and the 

17 patent owner sufficient to confer subject matter ju18 risdiction in the courts of the United States in any 

19 action brought by the applicant under section 2201 

20 of title 28 for a declaratory judgment that any pat21 ent that is the subject of the certification is invalid 

22 or not infringed.’’. 

23 (d) APPLICABILITY.—

24 (1) IN GENERAL.—Except as provided in para25 graphs (2) and (3), the amendments made by sub-
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1 sections (a), (b), and (c) apply to any proceeding 

2 under section 505 of the Federal Food, Drug, and 

3 Cosmetic Act (21 U.S.C. 355) that is pending on or 

4 after the date of enactment of this Act regardless of 

5 the date on which the proceeding was commenced or 

6 is commenced. 

7 (2) NOTICE OF OPINION THAT PATENT IS IN8 VALID OR WILL NOT BE INFRINGED.—The amend9 ments made by subsections (a)(1) and (b)(1) apply 

10 with respect to any certification under subsection 

11 (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of 

12 the Federal Food, Drug, and Cosmetic Act (21 

13 U.S.C. 355) after the date of enactment of this Act 

14 in an application filed under subsection (b)(2) or (j) 

15 of that section or in an amendment or supplement 

16 to an application filed under subsection (b)(2) or (j) 

17 of that section. 

18 (3) EFFECTIVE DATE OF APPROVAL.—The 

19 amendments made by subsections (a)(2)(A)(ii)(I) 

20 and (b)(2)(B)(i) apply with respect to any patent in21 formation submitted under subsection (b)(1) or 

22 (c)(2) of section 505 of the Federal Food, Drug, and 

23 Cosmetic Act (21 U.S.C. 355) made after the date 

24 of enactment of this Act. 
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1 SEC. 703. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD. 

2 (a) IN GENERAL.—Section 505(j)(5) of the Federal 

3 Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)) (as 

4 amended by section 702) is amended—

5 (1) in subparagraph (B), by striking clause (iv) 

6 and inserting the following: 

7 ‘‘(iv) 180-DAY EXCLUSIVITY PERIOD.—

8 ‘‘(I) DEFINITIONS.—In this paragraph: 

9 ‘‘(aa) 180-DAY EXCLUSIVITY PE10 RIOD.—The term ‘180-day exclusivity pe11 riod’ means the 180-day period ending on 

12 the day before the date on which an appli13 cation submitted by an applicant other 

14 than a first applicant could become effec15 tive under this clause. 

16 ‘‘(bb) FIRST APPLICANT.—The term 

17 ‘first applicant’ means an applicant that, 

18 on the first day on which a substantially 

19 complete application containing a certifi20 cation described in paragraph 

21 (2)(A)(vii)(IV) is submitted for approval of 

22 a drug, submits a substantially complete 

23 application containing a certification de24 scribed in paragraph (2)(A)(vii)(IV) for 

25 the drug. 
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1 ‘‘(cc) SUBSTANTIALLY COMPLETE AP2 PLICATION.—As used in this subsection, 

3 the term ‘substantially complete applica4 tion’ means an application under this sub5 section that on its face is sufficiently com6 plete to permit a substantive review and 

7 contains all the information required by 

8 paragraph (2)(A). 

9 ‘‘(dd) TENTATIVE APPROVAL.—

10 ‘‘(AA) IN GENERAL.—The term 

11 ‘tentative approval’ means notification 

12 to an applicant by the Secretary that 

13 an application under this subsection 

14 meets the requirements of paragraph 

15 (2)(A), but cannot receive effective 

16 approval because the application does 

17 not meet the requirements of this sub18 paragraph, there is a period of exclu19 sivity for the listed drug under sub20 paragraph (E) or section 505A, or 

21 there is a 7-year period of exclusivity 

22 for the listed drug under section 527. 

23 ‘‘(BB) LIMITATION.—A drug 

24 that is granted tentative approval by 

25 the Secretary is not an approved drug 
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1 and shall not have an effective ap2 proval until the Secretary issues an 

3 approval after any necessary addi4 tional review of the application. 

5 ‘‘(II) EFFECTIVENESS OF APPLICATION.—

6 Subject to subparagraph (D), if the application 

7 contains a certification described in paragraph 

8 (2)(A)(vii)(IV) and is for a drug for which a 

9 first applicant has submitted an application 

10 containing such a certification, the application 

11 shall be made effective on the date that is 180 

12 days after the date of the first commercial mar13 keting of the drug (including the commercial 

14 marketing of the listed drug) by any first appli15 cant.’’; and 

16 (2) by inserting after subparagraph (C) the fol17 lowing: 

18 ‘‘(D) FORFEITURE OF 180-DAY EXCLU19 SIVITY PERIOD.—

20 ‘‘(i) DEFINITION OF FORFEITURE

21 EVENT.—In this subparagraph, the term 

22 ‘forfeiture event’, with respect to an appli23 cation under this subsection, means the oc24 currence of any of the following: 
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1 ‘‘(I) FAILURE TO MARKET.—The 

2 first applicant fails to market the 

3 drug by the later of—

4 ‘‘(aa) the earlier of the date 

5 that is— 

6 ‘‘(AA) 75 days after the 

7 date on which the approval 

8 of the application of the first 

9 applicant is made effective 

10 under subparagraph (B)(iii); 

11 or 

12 ‘‘(BB) 30 months after 

13 the date of submission of 

14 the application of the first 

15 applicant; or 

16 ‘‘(bb) with respect to the 

17 first applicant or any other appli18 cant (which other applicant has 

19 received tentative approval), the 

20 date that is 75 days after the 

21 date as of which, as to each of 

22 the patents with respect to which 

23 the first applicant submitted a 

24 certification qualifying the first 

25 applicant for the 180-day exclu-
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1 sivity period under subparagraph 

2 (B)(iv), at least 1 of the fol3 lowing has occurred: 

4 ‘‘(AA) In an infringe5 ment action brought against 

6 that applicant with respect 

7 to the patent or in a declar8 atory judgment action 

9 brought by that applicant 

10 with respect to the patent, a 

11 court enters a final decision 

12 from which no appeal (other 

13 than a petition to the Su14 preme Court for a writ of 

15 certiorari) has been or can 

16 be taken that the patent is 

17 invalid or not infringed. 

18 ‘‘(BB) In an infringe19 ment action or a declaratory 

20 judgment action described in 

21 subitem (AA), a court signs 

22 a settlement order or con23 sent decree that enters a 

24 final judgment that includes 
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1 a finding that the patent is 

2 invalid or not infringed. 

3 ‘‘(CC) The patent ex4 pires. 

5 ‘‘(DD) The patent is 

6 withdrawn by the holder of 

7 the application approved 

8 under subsection (b). 

9 ‘‘(II) WITHDRAWAL OF APPLICA10 TION.—The first applicant withdraws 

11 the application or the Secretary con12 siders the application to have been 

13 withdrawn as a result of a determina14 tion by the Secretary that the applica15 tion does not meet the requirements 

16 for approval under paragraph (4). 

17 ‘‘(III) AMENDMENT OF CERTIFI18 CATION.—The first applicant amends 

19 or withdraws the certification for all 

20 of the patents with respect to which 

21 that applicant submitted a certifi22 cation qualifying the applicant for the 

23 180-day exclusivity period. 

24 ‘‘(IV) FAILURE TO OBTAIN TEN25 TATIVE APPROVAL.—The first appli-
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1 cant fails to obtain tentative approval 

2 of the application within 30 months 

3 after the date on which the applica4 tion is filed, unless the failure is 

5 caused by a change in or a review of 

6 the requirements for approval of the 

7 application imposed after the date on 

8 which the application is filed. 

9 ‘‘(V) AGREEMENT WITH AN10 OTHER APPLICANT, THE LISTED DRUG

11 APPLICATION HOLDER, OR A PATENT

12 OWNER.—The first applicant enters 

13 into an agreement with another appli14 cant under this subsection for the 

15 drug, the holder of the application for 

16 the listed drug, or an owner of the 

17 patent that is the subject of the cer18 tification under paragraph 

19 (2)(A)(vii)(IV), the Federal Trade 

20 Commission or the Attorney General 

21 files a complaint, and there is a final 

22 decision of the Federal Trade Com23 mission or the court with regard to 

24 the complaint from which no appeal 

25 (other than a petition to the Supreme 
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1 Court for a writ of certiorari) has 

2 been or can be taken that the agree3 ment has violated the antitrust laws 

4 (as defined in section 1 of the Clayton 

5 Act (15 U.S.C. 12), except that the 

6 term includes section 5 of the Federal 

7 Trade Commission Act (15 U.S.C. 45) 

8 to the extent that that section applies 

9 to unfair methods of competition). 

10 ‘‘(VI) EXPIRATION OF ALL PAT11 ENTS.—All of the patents as to which 

12 the applicant submitted a certification 

13 qualifying it for the 180-day exclu14 sivity period have expired. 

15 ‘‘(ii) FORFEITURE.—The 180-day ex16 clusivity period described in subparagraph 

17 (B)(iv) shall be forfeited by a first appli18 cant if a forfeiture event occurs with re19 spect to that first applicant. 

20 ‘‘(iii) SUBSEQUENT APPLICANT.—If 

21 all first applicants forfeit the 180-day ex22 clusivity period under clause (ii)—

23 ‘‘(I) approval of any application 

24 containing a certification described in 

25 paragraph (2)(A)(vii)(IV) shall be 
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1 made effective in accordance with sub2 paragraph (B)(iii); and 

3 ‘‘(II) no applicant shall be eligi4 ble for a 180-day exclusivity period.’’. 

5 (b) EFFECTIVE DATE.—

6 (1) IN GENERAL.—Except as provided in para7 graph (2), the amendment made by subsection (a) 

8 shall be effective only with respect to an application 

9 filed under section 505(j) of the Federal Food, 

10 Drug, and Cosmetic Act (21 U.S.C. 355(j)) after the 

11 date of enactment of this Act for a listed drug for 

12 which no certification under section 

13 505(j)(2)(A)(vii)(IV) of that Act was made before 

14 the date of enactment of this Act. 

15 (2) COLLUSIVE AGREEMENTS.—If a forfeiture 

16 event described in section 505(j)(5)(D)(i)(V) of that 

17 Act occurs in the case of an applicant, the applicant 

18 shall forfeit the 180-day period under section 

19 505(j)(5)(B)(iv) of that Act without regard to when 

20 the first certification under section 

21 505(j)(2)(A)(vii)(IV) of that Act for the listed drug 

22 was made. 

23 (3) DECISION OF A COURT WHEN THE 180-DAY

24 EXCLUSIVITY PERIOD HAS NOT BEEN TRIGGERED.—

25 With respect to an application filed before, on, or 
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1 after the date of enactment of this Act for a listed 

2 drug for which a certification under section 

3 505(j)(2)(A)(vii)(IV) of that Act was made before 

4 the date of enactment of this Act and for which nei5 ther of the events described in subclause (I) or (II) 

6 of section 505(j)(5)(B)(iv) of that Act (as in effect 

7 on the day before the date of enactment of this Act) 

8 has occurred on or before the date of enactment of 

9 this Act, the term ‘‘decision of a court’’ as used in 

10 clause (iv) of section 505(j)(5)(B) of that Act means 

11 a final decision of a court from which no appeal 

12 (other than a petition to the Supreme Court for a 

13 writ of certiorari) has been or can be taken. 

14 SEC. 704. BIOAVAILABILITY AND BIOEQUIVALENCE. 

15 (a) IN GENERAL.—Section 505(j)(8) of the Federal 

16 Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(8)) is 

17 amended—

18 (1) by striking subparagraph (A) and inserting 

19 the following: 

20 ‘‘(A)(i) The term ‘bioavailability’ means the 

21 rate and extent to which the active ingredient or 

22 therapeutic ingredient is absorbed from a drug and 

23 becomes available at the site of drug action. 

24 ‘‘(ii) For a drug that is not intended to be ab25 sorbed into the bloodstream, the Secretary may as-
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1 sess bioavailability by scientifically valid measure2 ments intended to reflect the rate and extent to 

3 which the active ingredient or therapeutic ingredient 

4 becomes available at the site of drug action.’’; and 

5 (2) by adding at the end the following: 

6 ‘‘(C) For a drug that is not intended to be ab7 sorbed into the bloodstream, the Secretary may es8 tablish alternative, scientifically valid methods to 

9 show bioequivalence if the alternative methods are 

10 expected to detect a significant difference between 

11 the drug and the listed drug in safety and thera12 peutic effect.’’. 

13 (b) EFFECT OF AMENDMENT.—The amendment 

14 made by subsection (a) does not alter the standards for 

15 approval of drugs under section 505(j) of the Federal 

16 Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)). 

17 SEC. 705. REMEDIES FOR INFRINGEMENT. 

18 Section 287 of title 35, United States Code, is 

19 amended by adding at the end the following: 

20 ‘‘(d) CONSIDERATION.—In making a determination 

21 with respect to remedy brought for infringement of a pat22 ent that claims a drug or a method or using a drug, the 

23 court shall consider whether information on the patent 

24 was filed as required under 21 U.S.C. 355 (b) or (c), and, 

25 if such information was required to be filed but was not, 
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1 the court may refuse to award treble damages under sec2 tion 284.’’. 

3 SEC. 706. CONFORMING AMENDMENTS. 

4 Section 505A of the Federal Food, Drug, and Cos5 metic Act (21 U.S.C. 355a) is amended—

6 (1) in subsections (b)(1)(A)(i) and (c)(1)(A)(i), 

7 by striking ‘‘(j)(5)(D)(ii)’’ each place it appears and 

8 inserting ‘‘(j)(5)(F)(ii)’’; 

9 (2) in subsections (b)(1)(A)(ii) and 

10 (c)(1)(A)(ii), by striking ‘‘(j)(5)(D)’’ each place it 

11 appears and inserting ‘‘(j)(5)(F)’’; and 

12 (3) in subsections (e) and (l), by striking 

13 ‘‘505(j)(5)(D)’’ each place it appears and inserting 

14 ‘‘505(j)(5)(F)’’. 

15 TITLE VIII—IMPORTATION OF 

16 PRESCRIPTION DRUGS 

17 SEC. 801. IMPORTATION OF PRESCRIPTION DRUGS. 

18 (a) IN GENERAL.—Chapter VIII of the Federal 

19 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.) 

20 is amended by striking section 804 and inserting the fol21 lowing: 

22 ‘‘SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS. 

23 ‘‘(a) DEFINITIONS.—In this section: 

24 ‘‘(1) IMPORTER.—The term ‘importer’ means a 

25 pharmacist or wholesaler. 
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1 ‘‘(2) PHARMACIST.—The term ‘pharmacist’ 

2 means a person licensed by a State to practice phar3 macy, including the dispensing and selling of pre4 scription drugs. 

5 ‘‘(3) PRESCRIPTION DRUG.—The term ‘pre6 scription drug’ means a drug subject to section 

7 503(b), other than—

8 ‘‘(A) a controlled substance (as defined in 

9 section 102 of the Controlled Substances Act 

10 (21 U.S.C. 802)); 

11 ‘‘(B) a biological product (as defined in 

12 section 351 of the Public Health Service Act 

13 (42 U.S.C. 262)); 

14 ‘‘(C) an infused drug (including a peri15 toneal dialysis solution); 

16 ‘‘(D) an intravenously injected drug; or 

17 ‘‘(E) a drug that is inhaled during surgery. 

18 ‘‘(4) QUALIFYING LABORATORY.—The term 

19 ‘qualifying laboratory’ means a laboratory in the 

20 United States that has been approved by the Sec21 retary for the purposes of this section. 

22 ‘‘(5) WHOLESALER.—

23 ‘‘(A) IN GENERAL.—The term ‘wholesaler’ 

24 means a person licensed as a wholesaler or dis-
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1 tributor of prescription drugs in the United 

2 States under section 503(e)(2)(A). 

3 ‘‘(B) EXCLUSION.—The term ‘wholesaler’ 

4 does not include a person authorized to import 

5 drugs under section 801(d)(1). 

6 ‘‘(b) REGULATIONS.—The Secretary, after consulta7 tion with the United States Trade Representative and the 

8 Commissioner of Customs, shall promulgate regulations 

9 permitting pharmacists and wholesalers to import pre10 scription drugs from Canada into the United States. 

11 ‘‘(c) LIMITATION.—The regulations under subsection 

12 (b) shall—

13 ‘‘(1) require that safeguards be in place to en14 sure that each prescription drug imported under the 

15 regulations complies with section 505 (including 

16 with respect to being safe and effective for the in17 tended use of the prescription drug), with sections 

18 501 and 502, and with other applicable require19 ments of this Act; 

20 ‘‘(2) require that an importer of a prescription 

21 drug under the regulations comply with subsections 

22 (d)(1) and (e); and 

23 ‘‘(3) contain any additional provisions deter24 mined by the Secretary to be appropriate as a safe-
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1 guard to protect the public health or as a means to 

2 facilitate the importation of prescription drugs. 

3 ‘‘(d) INFORMATION AND RECORDS.—

4 ‘‘(1) IN GENERAL.—The regulations under sub5 section (b) shall require an importer of a prescrip6 tion drug under subsection (b) to submit to the Sec7 retary the following information and documentation: 

8 ‘‘(A) The name and quantity of the active 

9 ingredient of the prescription drug. 

10 ‘‘(B) A description of the dosage form of 

11 the prescription drug. 

12 ‘‘(C) The date on which the prescription 

13 drug is shipped. 

14 ‘‘(D) The quantity of the prescription drug 

15 that is shipped. 

16 ‘‘(E) The point of origin and destination of 

17 the prescription drug. 

18 ‘‘(F) The price paid by the importer for 

19 the prescription drug. 

20 ‘‘(G) Documentation from the foreign sell21 er specifying—

22 ‘‘(i) the original source of the pre23 scription drug; and 
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1 ‘‘(ii) the quantity of each lot of the 

2 prescription drug originally received by the 

3 seller from that source. 

4 ‘‘(H) The lot or control number assigned 

5 to the prescription drug by the manufacturer of 

6 the prescription drug. 

7 ‘‘(I) The name, address, telephone number, 

8 and professional license number (if any) of the 

9 importer. 

10 ‘‘(J)(i) In the case of a prescription drug 

11 that is shipped directly from the first foreign 

12 recipient of the prescription drug from the 

13 manufacturer: 

14 ‘‘(I) Documentation demonstrating 

15 that the prescription drug was received by 

16 the recipient from the manufacturer and 

17 subsequently shipped by the first foreign 

18 recipient to the importer. 

19 ‘‘(II) Documentation of the quantity 

20 of each lot of the prescription drug re21 ceived by the first foreign recipient dem22 onstrating that the quantity being im23 ported into the United States is not more 

24 than the quantity that was received by the 

25 first foreign recipient. 
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1 ‘‘(III)(aa) In the case of an initial im2 ported shipment, documentation dem3 onstrating that each batch of the prescrip4 tion drug in the shipment was statistically 

5 sampled and tested for authenticity and 

6 degradation. 

7 ‘‘(bb) In the case of any subsequent 

8 shipment, documentation demonstrating 

9 that a statistically valid sample of the ship10 ment was tested for authenticity and deg11 radation. 

12 ‘‘(ii) In the case of a prescription drug 

13 that is not shipped directly from the first for14 eign recipient of the prescription drug from the 

15 manufacturer, documentation demonstrating 

16 that each batch in each shipment offered for 

17 importation into the United States was statis18 tically sampled and tested for authenticity and 

19 degradation. 

20 ‘‘(K) Certification from the importer or 

21 manufacturer of the prescription drug that the 

22 prescription drug—

23 ‘‘(i) is approved for marketing in the 

24 United States; and 
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1 ‘‘(ii) meets all labeling requirements 

2 under this Act. 

3 ‘‘(L) Laboratory records, including com4 plete data derived from all tests necessary to 

5 ensure that the prescription drug is in compli6 ance with established specifications and stand7 ards. 

8 ‘‘(M) Documentation demonstrating that 

9 the testing required by subparagraphs (J) and 

10 (L) was conducted at a qualifying laboratory. 

11 ‘‘(N) Any other information that the Sec12 retary determines is necessary to ensure the 

13 protection of the public health. 

14 ‘‘(2) MAINTENANCE BY THE SECRETARY.—The 

15 Secretary shall maintain information and docu16 mentation submitted under paragraph (1) for such 

17 period of time as the Secretary determines to be nec18 essary. 

19 ‘‘(e) TESTING.—The regulations under subsection (b) 

20 shall require—

21 ‘‘(1) that testing described in subparagraphs 

22 (J) and (L) of subsection (d)(1) be conducted by the 

23 importer or by the manufacturer of the prescription 

24 drug at a qualified laboratory; 
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1 ‘‘(2) if the tests are conducted by the im2 porter—

3 ‘‘(A) that information needed to—

4 ‘‘(i) authenticate the prescription drug 

5 being tested; and 

6 ‘‘(ii) confirm that the labeling of the 

7 prescription drug complies with labeling re8 quirements under this Act; 

9 be supplied by the manufacturer of the pre10 scription drug to the pharmacist or wholesaler; 

11 and 

12 ‘‘(B) that the information supplied under 

13 subparagraph (A) be kept in strict confidence 

14 and used only for purposes of testing or other15 wise complying with this Act; and 

16 ‘‘(3) may include such additional provisions as 

17 the Secretary determines to be appropriate to pro18 vide for the protection of trade secrets and commer19 cial or financial information that is privileged or 

20 confidential. 

21 ‘‘(f) REGISTRATION OF FOREIGN SELLERS.—Any es22 tablishment within Canada engaged in the distribution of 

23 a prescription drug that is imported or offered for impor24 tation into the United States shall register with the Sec-
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1 retary the name and place of business of the establish2 ment. 

3 ‘‘(g) SUSPENSION OF IMPORTATION.—The Secretary 

4 shall require that importations of a specific prescription 

5 drug or importations by a specific importer under sub6 section (b) be immediately suspended on discovery of a 

7 pattern of importation of that specific prescription drug 

8 or by that specific importer of drugs that are counterfeit 

9 or in violation of any requirement under this section, until 

10 an investigation is completed and the Secretary deter11 mines that the public is adequately protected from coun12 terfeit and violative prescription drugs being imported 

13 under subsection (b). 

14 ‘‘(h) APPROVED LABELING.—The manufacturer of a 

15 prescription drug shall provide an importer written au16 thorization for the importer to use, at no cost, the ap17 proved labeling for the prescription drug. 

18 ‘‘(i) PROHIBITION OF DISCRIMINATION.—

19 ‘‘(1) IN GENERAL.—It shall be unlawful for a 

20 manufacturer of a prescription drug to discriminate 

21 against, or cause any other person to discriminate 

22 against, a pharmacist or wholesaler that purchases 

23 or offers to purchase a prescription drug from the 

24 manufacturer or from any person that distributes a 
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1 prescription drug manufactured by the drug manu2 facturer. 

3 ‘‘(2) DISCRIMINATION.—For the purposes of 

4 paragraph (1), a manufacturer of a prescription 

5 drug shall be considered to discriminate against a 

6 pharmacist or wholesaler if the manufacturer enters 

7 into a contract for sale of a prescription drug, places 

8 a limit on supply, or employs any other measure, 

9 that has the effect of—

10 ‘‘(A) providing pharmacists or wholesalers 

11 access to prescription drugs on terms or condi12 tions that are less favorable than the terms or 

13 conditions provided to a foreign purchaser 

14 (other than a charitable or humanitarian orga15 nization) of the prescription drug; or 

16 ‘‘(B) restricting the access of pharmacists 

17 or wholesalers to a prescription drug that is 

18 permitted to be imported into the United States 

19 under this section. 

20 ‘‘(j) CHARITABLE CONTRIBUTIONS.—Notwith21 standing any other provision of this section, section 

22 801(d)(1) continues to apply to a prescription drug that 

23 is donated or otherwise supplied at no charge by the man24 ufacturer of the drug to a charitable or humanitarian or-
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1 ganization (including the United Nations and affiliates) 

2 or to a government of a foreign country. 

3 ‘‘(k) WAIVER AUTHORITY FOR IMPORTATION BY IN4 DIVIDUALS.—

5 ‘‘(1) DECLARATIONS.—Congress declares that 

6 in the enforcement against individuals of the prohi7 bition of importation of prescription drugs and de8 vices, the Secretary should—

9 ‘‘(A) focus enforcement on cases in which 

10 the importation by an individual poses a signifi11 cant threat to public health; and 

12 ‘‘(B) exercise discretion to permit individ13 uals to make such importations in cir14 cumstances in which—

15 ‘‘(i) the importation is clearly for per16 sonal use; and 

17 ‘‘(ii) the prescription drug or device 

18 imported does not appear to present an 

19 unreasonable risk to the individual. 

20 ‘‘(2) WAIVER AUTHORITY.—

21 ‘‘(A) IN GENERAL.—The Secretary may 

22 grant to individuals, by regulation or on a case23 by-case basis, a waiver of the prohibition of im24 portation of a prescription drug or device or 

25 class of prescription drugs or devices, under 
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1 such conditions as the Secretary determines to 

2 be appropriate. 

3 ‘‘(B) GUIDANCE ON CASE-BY-CASE WAIV4 ERS.—The Secretary shall publish, and update 

5 as necessary, guidance that accurately describes 

6 circumstances in which the Secretary will con7 sistently grant waivers on a case-by-case basis 

8 under subparagraph (A), so that individuals 

9 may know with the greatest practicable degree 

10 of certainty whether a particular importation 

11 for personal use will be permitted. 

12 ‘‘(3) DRUGS IMPORTED FROM CANADA.—In 

13 particular, the Secretary shall by regulation grant 

14 individuals a waiver to permit individuals to import 

15 into the United States a prescription drug that—

16 ‘‘(A) is imported from a licensed pharmacy 

17 for personal use by an individual, not for resale, 

18 in quantities that do not exceed a 90-day sup19 ply; 

20 ‘‘(B) is accompanied by a copy of a valid 

21 prescription; 

22 ‘‘(C) is imported from Canada, from a sell23 er registered with the Secretary; 

24 ‘‘(D) is a prescription drug approved by 

25 the Secretary under chapter V; 
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1 ‘‘(E) is in the form of a final finished dos2 age that was manufactured in an establishment 

3 registered under section 510; and 

4 ‘‘(F) is imported under such other condi5 tions as the Secretary determines to be nec6 essary to ensure public safety. 

7 ‘‘(l) STUDIES; REPORTS.—

8 ‘‘(1) BY THE INSTITUTE OF MEDICINE OF THE

9 NATIONAL ACADEMY OF SCIENCES.—

10 ‘‘(A) STUDY.—

11 ‘‘(i) IN GENERAL.—The Secretary 

12 shall request that the Institute of Medicine 

13 of the National Academy of Sciences con14 duct a study of—

15 ‘‘(I) importations of prescription 

16 drugs made under the regulations 

17 under subsection (b); and 

18 ‘‘(II) information and docu19 mentation submitted under subsection 

20 (d). 

21 ‘‘(ii) REQUIREMENTS.—In conducting 

22 the study, the Institute of Medicine shall—

23 ‘‘(I) evaluate the compliance of 

24 importers with the regulations under 

25 subsection (b); 
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1 ‘‘(II) compare the number of 

2 shipments under the regulations 

3 under subsection (b) during the study 

4 period that are determined to be 

5 counterfeit, misbranded, or adulter6 ated, and compare that number with 

7 the number of shipments made during 

8 the study period within the United 

9 States that are determined to be 

10 counterfeit, misbranded, or adulter11 ated; and 

12 ‘‘(III) consult with the Secretary, 

13 the United States Trade Representa14 tive, and the Commissioner of Patents 

15 and Trademarks to evaluate the effect 

16 of importations under the regulations 

17 under subsection (b) on trade and 

18 patent rights under Federal law. 

19 ‘‘(B) REPORT.—Not later than 2 years 

20 after the effective date of the regulations under 

21 subsection (b), the Institute of Medicine shall 

22 submit to Congress a report describing the find23 ings of the study under subparagraph (A). 

24 ‘‘(2) BY THE COMPTROLLER GENERAL.—
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1 ‘‘(A) STUDY.—The Comptroller General of 

2 the United States shall conduct a study to de3 termine the effect of this section on the price of 

4 prescription drugs sold to consumers at retail. 

5 ‘‘(B) REPORT.—Not later than 18 months 

6 after the effective date of the regulations under 

7 subsection (b), the Comptroller General of the 

8 United States shall submit to Congress a report 

9 describing the findings of the study under sub10 paragraph (A). 

11 ‘‘(m) CONSTRUCTION.—Nothing in this section limits 

12 the authority of the Secretary relating to the importation 

13 of prescription drugs, other than with respect to section 

14 801(d)(1) as provided in this section. 

15 ‘‘(n) EFFECTIVENESS OF SECTION.—

16 ‘‘(1) IN GENERAL.—If, after the date that is 1 

17 year after the effective date of the regulations under 

18 subsection (b) and before the date that is 18 months 

19 after the effective date, the Secretary submits to 

20 Congress a certification that, in the opinion of the 

21 Secretary, based on substantial evidence obtained 

22 after the effective date, the benefits of implementa23 tion of this section do not outweigh any detriment 

24 of implementation of this section, this section shall 

25 cease to be effective as of the date that is 30 days 
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1 after the date on which the Secretary submits the 

2 certification. 

3 ‘‘(2) PROCEDURE.—The Secretary shall not 

4 submit a certification under paragraph (1) unless, 

5 after a hearing on the record under sections 556 and 

6 557 of title 5, United States Code, the Secretary—

7 ‘‘(A)(i) determines that it is more likely 

8 than not that implementation of this section 

9 would result in an increase in the risk to the 

10 public health and safety; 

11 ‘‘(ii) identifies specifically, in qualitative 

12 and quantitative terms, the nature of the in13 creased risk; 

14 ‘‘(iii) identifies specifically the causes of 

15 the increased risk; and 

16 ‘‘(iv)(I) considers whether any measures 

17 can be taken to avoid, reduce, or mitigate the 

18 increased risk; and 

19 ‘‘(II) if the Secretary determines that any 

20 measures described in subclause (I) would re21 quire additional statutory authority, submits to 

22 Congress a report describing the legislation that 

23 would be required; 

24 ‘‘(B) identifies specifically, in qualitative 

25 and quantitative terms, the benefits that would 
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1 result from implementation of this section (in2 cluding the benefit of reductions in the cost of 

3 covered products to consumers in the United 

4 States, allowing consumers to procure needed 

5 medication that consumers might not otherwise 

6 be able to procure without foregoing other ne7 cessities of life); and 

8 ‘‘(C)(i) compares in specific terms the det9 riment identified under subparagraph (A) with 

10 the benefits identified under subparagraph (B); 

11 and 

12 ‘‘(ii) determines that the benefits do not 

13 outweigh the detriment. 

14 ‘‘(o) AUTHORIZATION OF APPROPRIATIONS.—There 

15 are authorized to be appropriated such sums as are nec16 essary to carry out this section.’’. 

17 (b) CONFORMING AMENDMENTS.—The Federal 

18 Food, Drug, and Cosmetic Act is amended—

19 (1) in section 301(aa) (21 U.S.C. 331(aa)), by 

20 striking ‘‘covered product in violation of section 

21 804’’ and inserting ‘‘prescription drug in violation of 

22 section 804’’; and 

23 (2) in section 303(a)(6) (21 U.S.C. 333(a)(6), 

24 by striking ‘‘covered product pursuant to section 
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1 804(a)’’ and inserting ‘‘prescription drug under sec2 tion 804(b)’’. 

3 (c) CONDITIONS.—This section shall become effective 

4 only if the Secretary of Health and Human Services cer5 tifies to the Congress that the implementation of this sec6 tion will—

7 (1) pose no additional risk to the public’s health 

8 and safety; and 

9 (2) result in a significant reduction in the cost 

10 of covered products to the American consumer. 

11 TITLE IX—DRUG COMPETITION 

12 ACT OF 2003

13 SEC. 901. SHORT TITLE. 

14 This title may be cited as the ‘‘Drug Competition Act 

15 of 2003’’. 

16 SEC. 902. FINDINGS. 

17 Congress finds that—

18 (1) prescription drug prices are increasing at an 

19 alarming rate and are a major worry of many senior 

20 citizens and American families; 

21 (2) there is a potential for companies with pat22 ent rights regarding brand name drugs and compa23 nies which could manufacture generic versions of 

24 such drugs to enter into financial deals that could 

25 tend to restrain trade and greatly reduce competi-
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1 tion and increase prescription drug expenditures for 

2 American citizens; and 

3 (3) enhancing competition among these compa4 nies can significantly reduce prescription drug ex5 penditures for Americans. 

6 SEC. 903. PURPOSES. 

7 The purposes of this title are—

8 (1) to provide timely notice to the Department 

9 of Justice and the Federal Trade Commission re10 garding agreements between companies with patent 

11 rights regarding brand name drugs and companies 

12 which could manufacture generic versions of such 

13 drugs; and 

14 (2) by providing timely notice, to enhance the 

15 effectiveness and efficiency of the enforcement of the 

16 antitrust and competition laws of the United States. 

17 SEC. 904. DEFINITIONS. 

18 In this title: 

19 (1) ANDA.—The term ‘‘ANDA’’ means an Ab20 breviated New Drug Application, as defined under 

21 section 201(aa) of the Federal Food, Drug, and Cos22 metic Act (21 U.S.C. 321(aa)). 

23 (2) ASSISTANT ATTORNEY GENERAL.—The 

24 term ‘‘Assistant Attorney General’’ means the As-
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1 sistant Attorney General in charge of the Antitrust 

2 Division of the Department of Justice. 

3 (3) BRAND NAME DRUG.—The term ‘‘brand 

4 name drug’’ means a drug approved under section 

5 505(c) of the Federal Food, Drug, and Cosmetic Act 

6 (21 U.S.C. 355(c)). 

7 (4) BRAND NAME DRUG COMPANY.—The term 

8 ‘‘brand name drug company’’ means the party that 

9 received Food and Drug Administration approval to 

10 market a brand name drug pursuant to an NDA, 

11 where that drug is the subject of an ANDA, or a 

12 party owning or controlling enforcement of any pat13 ent listed in the Approved Drug Products With 

14 Therapeutic Equivalence Evaluations of the Food 

15 and Drug Administration for that drug, under sec16 tion 505(b) of the Federal Food, Drug, and Cos17 metic Act (21 U.S.C. 355(b)). 

18 (5) COMMISSION.—The term ‘‘Commission’’ 

19 means the Federal Trade Commission. 

20 (6) GENERIC DRUG.—The term ‘‘generic drug’’ 

21 means a product that the Food and Drug Adminis22 tration has approved under section 505(j) of the 

23 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

24 355(j)). 
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1 (7) GENERIC DRUG APPLICANT.—The term 

2 ‘‘generic drug applicant’’ means a person who has 

3 filed or received approval for an ANDA under sec4 tion 505(j) of the Federal Food, Drug, and Cosmetic 

5 Act (21 U.S.C. 355(j)). 

6 (8) NDA.—The term ‘‘NDA’’ means a New 

7 Drug Application, as defined under section 505(b) et 

8 seq. of the Federal Food, Drug, and Cosmetic Act 

9 (21 U.S.C. 355(b) et seq.) 

10 SEC. 905. NOTIFICATION OF AGREEMENTS. 

11 (a) IN GENERAL.—

12 (1) REQUIREMENT.—A generic drug applicant 

13 that has submitted an ANDA containing a certifi14 cation under section 505(j)(2)(vii)(IV) of the Fed15 eral Food, Drug, and Cosmetic Act (21 U.S.C. 

16 355(j)(2)(vii)(IV)) and a brand name drug company 

17 that enter into an agreement described in paragraph 

18 (2), prior to the generic drug that is the subject of

19 the application entering the market, shall each file 

20 the agreement as required by subsection (b). 

21 (2) DEFINITION.—An agreement described in 

22 this paragraph is an agreement regarding—

23 (A) the manufacture, marketing or sale of 

24 the brand name drug that is the subject of the 

25 generic drug applicant’s ANDA; 
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1 (B) the manufacture, marketing or sale of 

2 the generic drug that is the subject of the ge3 neric drug applicant’s ANDA; or 

4 (C) the 180-day period referred to in sec5 tion 505(j)(5)(B)(iv) of the Federal Food, 

6 Drug, and Cosmetic Act (21 U.S.C. 

7 355(j)(5)(B)(iv)) as it applies to such ANDA or 

8 to any other ANDA based on the same brand 

9 name drug. 

10 (b) FILING.—

11 (1) AGREEMENT.—The generic drug applicant 

12 and the brand name drug company entering into an 

13 agreement described in subsection (a)(2) shall file 

14 with the Assistant Attorney General and the Com15 mission the text of any such agreement, except that 

16 the generic drug applicant and the brand-name drug 

17 company shall not be required to file an agreement 

18 that solely concerns—

19 (A) purchase orders for raw material sup20 plies; 

21 (B) equipment and facility contracts; 

22 (C) employment or consulting contracts; or 

23 (D) packaging and labeling contracts. 

24 (2) OTHER AGREEMENTS.—The generic drug 

25 applicant and the brand name drug company enter-
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1 ing into an agreement described in subsection (a)(2) 

2 shall file with the Assistant Attorney General and 

3 the Commission the text of any other agreements 

4 not described in subsection (a)(2) between the ge5 neric drug applicant and the brand name drug com6 pany which are contingent upon, provide a contin7 gent condition for, or are otherwise related to an 

8 agreement which must be filed under this title. 

9 (3) DESCRIPTION.—In the event that any 

10 agreement required to be filed by paragraph (1) or 

11 (2) has not been reduced to text, both the generic 

12 drug applicant and the brand name drug company 

13 shall file written descriptions of the non-textual 

14 agreement or agreements that must be filed suffi15 cient to reveal all of the terms of the agreement or 

16 agreements. 

17 SEC. 906. FILING DEADLINES. 

18 Any filing required under section 5 shall be filed with 

19 the Assistant Attorney General and the Commission not 

20 later than 10 business days after the date the agreements 

21 are executed. 

22 SEC. 907. DISCLOSURE EXEMPTION. 

23 Any information or documentary material filed with 

24 the Assistant Attorney General or the Commission pursu25 ant to this title shall be exempt from disclosure under sec-
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1 tion 552 of title 5, and no such information or documen2 tary material may be made public, except as may be rel3 evant to any administrative or judicial action or pro4 ceeding. Nothing in this section is intended to prevent dis5 closure to either body of Congress or to any duly author6 ized committee or subcommittee of the Congress. 

7 SEC. 908. ENFORCEMENT. 

8 (a) CIVIL PENALTY.—Any brand name drug com9 pany or generic drug applicant which fails to comply with 

10 any provision of this title shall be liable for a civil penalty 

11 of not more than $11,000, for each day during which such 

12 entity is in violation of this title. Such penalty may be 

13 recovered in a civil action brought by the United States, 

14 or brought by the Commission in accordance with the pro15 cedures established in section 16(a)(1) of the Federal 

16 Trade Commission Act (15 U.S.C. 56(a)). 

17 (b) COMPLIANCE AND EQUITABLE RELIEF.—If any 

18 brand name drug company or generic drug applicant fails 

19 to comply with any provision of this title, the United 

20 States district court may order compliance, and may grant 

21 such other equitable relief as the court in its discretion 

22 determines necessary or appropriate, upon application of 

23 the Assistant Attorney General or the Commission. 
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1 SEC. 909. RULEMAKING. 

2 The Commission, with the concurrence of the Assist3 ant Attorney General and by rule in accordance with sec4 tion 553 of title 5 United States Code, consistent with 

5 the purposes of this title—

6 (1) may define the terms used in this title; 

7 (2) may exempt classes of persons or agree8 ments from the requirements of this title; and 

9 (3) may prescribe such other rules as may be 

10 necessary and appropriate to carry out the purposes 

11 of this title. 

12 SEC. 910. SAVINGS CLAUSE. 

13 Any action taken by the Assistant Attorney General 

14 or the Commission, or any failure of the Assistant Attor15 ney General or the Commission to take action, under this 

16 title shall not bar any proceeding or any action with re17 spect to any agreement between a brand name drug com18 pany and a generic drug applicant at any time under any 

19 other provision of law, nor shall any filing under this title 

20 constitute or create a presumption of any violation of any 

21 antitrust or competition laws. 

22 SEC. 911. EFFECTIVE DATE. 

23 This title shall—

24 (1) take effect 30 days after the date of enact25 ment of this title; and 
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1 (2) shall apply to agreements described in sec2 tion 905 that are entered into 30 days after the date 

3 of enactment of this title.

Passed the Senate June 27 (legislative day, June 

26), 2003. 

Attest:

Secretary. 

108TH CONGRESS 

1ST SESSION S. 1

AN ACT

To amend title XVIII of the Social Security Act to 

provide for a voluntary prescription drug benefit under the medicare program and to strengthen and improve the medicare program, and for other purposes.