I 

108TH CONGRESS 

1ST SESSION H. R. 38

To amend title XVIII of the Social Security Act to provide for a voluntary 

outpatient prescription drug benefit program. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 7, 2003

Mrs. CAPITO introduced the following bill; which was referred to the Committee on the Energy and Commerce, and in addition to the Committee 

on Ways and Means, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL

To amend title XVIII of the Social Security Act to provide 

for a voluntary outpatient prescription drug benefit program.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘More Savings, More Choice Prescription Drug Act of 

6 2003’’. 

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

8 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Establishment of a medicare prescription drug benefit. 
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‘‘PART D—VOLUNTARY PRESCRIPTION DRUG BENEFIT PROGRAM

‘‘Sec. 1860A. Benefits; eligibility; enrollment; and coverage period. 

‘‘Sec. 1860B. Requirements for qualified prescription drug coverage. 

‘‘Sec. 1860C. Beneficiary protections for qualified prescription drug coverage. 

‘‘Sec. 1860D. Requirements for prescription drug plan (PDP) sponsors; contracts; establishment of standards. 

‘‘Sec. 1860E. Process for beneficiaries to select qualified prescription drug coverage. 

‘‘Sec. 1860F. Premiums. 

‘‘Sec. 1860G. Premium and cost-sharing subsidies for low-income individuals. 

‘‘Sec. 1860H. Subsidies for all medicare beneficiaries through reinsurance for 

qualified prescription drug coverage. 

‘‘Sec. 1860I. Medicare Prescription Drug Account in federal Supplementary 

Medical Insurance Trust Fund. 

‘‘Sec. 1860J. Definitions; treatment of references to provisions in part C. 

‘‘Sec. 1860K. Medicare Prescription Drug Advisory Committee. 

Sec. 3. Offering of qualified prescription drug coverage under the 

Medicare+Choice program. 

Sec. 4. Medicaid amendments. 

Sec. 5. Medigap transition provisions.

1 SEC. 2. ESTABLISHMENT OF A MEDICARE PRESCRIPTION 

2 DRUG BENEFIT. 

3 (a) IN GENERAL.—Title XVIII of the Social Security 

4 Act is amended—

5 (1) by redesignating part D as part E; and 

6 (2) by inserting after part C the following new 

7 part: 

8 ‘‘PART D—VOLUNTARY PRESCRIPTION DRUG BENEFIT

9 PROGRAM

10 ‘‘SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND 

11 COVERAGE PERIOD. 

12 ‘‘(a) PROVISION OF QUALIFIED PRESCRIPTION DRUG

13 COVERAGE THROUGH ENROLLMENT IN PLANS.—Subject 

14 to the succeeding provisions of this part, each individual 

15 who is entitled to benefits under part A or is enrolled 
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1 under part B is entitled to obtain qualified prescription 

2 drug coverage (described in section 1860B(a)) as follows: 

3 ‘‘(1) MEDICARE+CHOICE PLAN.—If the indi4 vidual is eligible to enroll in a Medicare+Choice plan 

5 that provides qualified prescription drug coverage 

6 under section 1851(j), the individual may enroll in 

7 the plan and obtain coverage through such plan. 

8 ‘‘(2) PRESCRIPTION DRUG PLAN.—If the indi9 vidual is not enrolled in a Medicare+Choice plan 

10 that provides qualified prescription drug coverage, 

11 the individual may enroll under this part in a pre12 scription drug plan (as defined in section 1860C(a)). 

13 Such individuals shall have a choice of such plans under 

14 section 1860E(d). 

15 ‘‘(b) GENERAL ELECTION PROCEDURES.—

16 ‘‘(1) IN GENERAL.—An individual may elect to 

17 enroll in a prescription drug plan under this part, or 

18 elect the option of qualified prescription drug cov19 erage under a Medicare+Choice plan under part C, 

20 and change such election only in such manner and 

21 form as may be prescribed by regulations of the Sec22 retary and only during an election period prescribed 

23 in or under this subsection. 

24 ‘‘(2) ELECTION PERIODS.—
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1 ‘‘(A) IN GENERAL.—Except as provided in 

2 this paragraph, the election periods under this 

3 subsection shall be the same as the coverage 

4 election periods under the Medicare+Choice 

5 program under section 1851(e), including—

6 ‘‘(i) annual coordinated election peri7 ods; and 

8 ‘‘(ii) special election periods. 

9 In applying the last sentence of section 

10 1851(e)(4) (relating to discontinuance of a 

11 Medicare+Choice election during the first year 

12 of eligibility) under this subparagraph, in the 

13 case of an election described in such section in 

14 which the individual had elected or is provided 

15 qualified prescription drug coverage at the time 

16 of such first enrollment, the individual shall be 

17 permitted to enroll in a prescription drug plan 

18 under this part at the time of the election of 

19 coverage under the original fee-for-service plan. 

20 ‘‘(B) INITIAL ELECTION PERIODS.—

21 ‘‘(i) INDIVIDUALS CURRENTLY COV22 ERED.—In the case of an individual who is 

23 entitled to benefits under part A or en24 rolled under part B as of November 1, 
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1 2005, there shall be an initial election pe2 riod of 6 months beginning on that date. 

3 ‘‘(ii) INDIVIDUAL COVERED IN FU4 TURE.—In the case of an individual who is 

5 first entitled to benefits under part A or 

6 enrolled under part B after November 1, 

7 2005, there shall be an initial election pe8 riod which is the same as the initial enroll9 ment period under section 1837(d). 

10 ‘‘(C) ADDITIONAL SPECIAL ELECTION PE11 RIODS.—The Secretary shall establish special 

12 election periods—

13 ‘‘(i) in cases of individuals who have 

14 and involuntarily lose prescription drug 

15 coverage described in subsection (c)(2)(C); 

16 ‘‘(ii) in cases described in section 

17 1837(h) (relating to errors in enrollment), 

18 in the same manner as such section applies 

19 to part B; and 

20 ‘‘(iii) in the case of an individual who 

21 meets such exceptional conditions (includ22 ing conditions recognized under section 

23 1851(d)(4)(D)) as the Secretary may pro24 vide. 
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1 ‘‘(c) GUARANTEED ISSUE; COMMUNITY RATING; AND

2 NONDISCRIMINATION.—

3 ‘‘(1) GUARANTEED ISSUE.—

4 ‘‘(A) IN GENERAL.—An eligible individual 

5 who is eligible to elect qualified prescription 

6 drug coverage under a prescription drug plan or 

7 Medicare+Choice plan at a time during which 

8 elections are accepted under this part with re9 spect to the plan shall not be denied enrollment 

10 based on any health status-related factor (de11 scribed in section 2702(a)(1) of the Public 

12 Health Service Act) or any other factor. 

13 ‘‘(B) MEDICARE+CHOICE LIMITATIONS

14 PERMITTED.—The provisions of paragraphs (2) 

15 and (3) (other than subparagraph (C)(i), relat16 ing to default enrollment) of section 1851(g) 

17 (relating to priority and limitation on termi18 nation of election) shall apply to PDP sponsors 

19 under this subsection. 

20 ‘‘(2) COMMUNITY-RATED PREMIUM.—

21 ‘‘(A) IN GENERAL.—In the case of an indi22 vidual who maintains (as determined under sub23 paragraph (C)) continuous prescription drug 

24 coverage since first qualifying to elect prescrip25 tion drug coverage under this part, a PDP 
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1 sponsor or Medicare+Choice organization offer2 ing a prescription drug plan or 

3 Medicare+Choice plan that provides qualified 

4 prescription drug coverage and in which the in5 dividual is enrolled may not deny, limit, or con6 dition the coverage or provision of covered pre7 scription drug benefits or increase the premium 

8 under the plan based on any health status-re9 lated factor described in section 2702(a)(1) of 

10 the Public Health Service Act or any other fac11 tor. 

12 ‘‘(B) LATE ENROLLMENT PENALTY.—In 

13 the case of an individual who does not maintain 

14 such continuous prescription drug coverage, a 

15 PDP sponsor or Medicare+Choice organization 

16 may (notwithstanding any provision in this 

17 title) increase the premium otherwise applicable 

18 or impose a pre-existing condition exclusion 

19 with respect to qualified prescription drug cov20 erage in a manner that reflects additional actu21 arial risk involved. Such a risk shall be estab22 lished through an appropriate actuarial opinion 

23 of the type described in subparagraphs (A) 

24 through (C) of section 2103(c)(4). 
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1 ‘‘(C) CONTINUOUS PRESCRIPTION DRUG

2 COVERAGE.—An individual is considered for 

3 purposes of this part to be maintaining contin4 uous prescription drug coverage on and after a 

5 date if the individual establishes that there is 

6 no period of 63 days or longer on and after 

7 such date (beginning not earlier than January 

8 1, 2006) during all of which the individual did 

9 not have any of the following prescription drug 

10 coverage: 

11 ‘‘(i) COVERAGE UNDER PRESCRIPTION

12 DRUG PLAN OR MEDICARE+CHOICE

13 PLAN.—Qualified prescription drug cov14 erage under a prescription drug plan or 

15 under a Medicare+Choice plan. 

16 ‘‘(ii) MEDICAID PRESCRIPTION DRUG

17 COVERAGE.—Prescription drug coverage 

18 under a medicaid plan under title XIX, in19 cluding through the Program of All-inclu20 sive Care for the Elderly (PACE) under 

21 section 1934, through a social health main22 tenance organization (referred to in section 

23 4104(c) of the Balanced Budget Act of 

24 1997), or through a Medicare+Choice 

25 project that demonstrates the application 
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1 of capitation payment rates for frail elderly 

2 medicare beneficiaries through the use of a 

3 interdisciplinary team and through the 

4 provision of primary care services to such 

5 beneficiaries by means of such a team at 

6 the nursing facility involved. 

7 ‘‘(iii) PRESCRIPTION DRUG COVERAGE

8 UNDER GROUP HEALTH PLAN.—Any out9 patient prescription drug coverage under a 

10 group health plan, including a health bene11 fits plan under the Federal Employees 

12 Health Benefit Plan under chapter 89 of 

13 title 5, United States Code, and a qualified 

14 retiree prescription drug plan as defined in 

15 section 1860H(e)(1). 

16 ‘‘(iv) PRESCRIPTION DRUG COVERAGE

17 UNDER CERTAIN MEDIGAP POLICIES.—

18 Coverage under a medicare supplemental 

19 policy under section 1882 that provides 

20 benefits for prescription drugs (whether or 

21 not such coverage conforms to the stand22 ards for packages of benefits under section 

23 1882(p)(1)), but only if the policy was in 

24 effect on January 1, 2006, and only until 

25 the date such coverage is terminated.
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1 ‘‘(v) STATE PHARMACEUTICAL ASSIST2 ANCE PROGRAM.—Coverage of prescription 

3 drugs under a State pharmaceutical assist4 ance program. 

5 ‘‘(vi) VETERANS’ COVERAGE OF PRE6 SCRIPTION DRUGS.—Coverage of prescrip7 tion drugs for veterans under chapter 17 

8 of title 38, United States Code. 

9 ‘‘(D) CERTIFICATION.—For purposes of 

10 carrying out this paragraph, the certifications 

11 of the type described in sections 2701(e) of the 

12 Public Health Service Act and in section 

13 9801(e) of the Internal Revenue Code shall also 

14 include a statement for the period of coverage 

15 of whether the individual involved had prescrip16 tion drug coverage described in subparagraph 

17 (C). 

18 ‘‘(E) CONSTRUCTION.—Nothing in this 

19 section shall be construed as preventing the 

20 disenrollment of an individual from a prescrip21 tion drug plan or a Medicare+Choice plan 

22 based on the termination of an election de23 scribed in section 1851(g)(3), including for non24 payment of premiums or for other reasons spec25 ified in subsection (d)(3), which takes into ac-
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1 count a grace period described in section 

2 1851(g)(3)(B)(i). 

3 ‘‘(3) NONDISCRIMINATION.—A PDP sponsor of4 fering a prescription drug plan shall not establish a 

5 service area in a manner that would discriminate 

6 based on health or economic status of potential en7 rollees. 

8 ‘‘(d) EFFECTIVE DATE OF ELECTIONS.—

9 ‘‘(1) IN GENERAL.—Except as provided in this 

10 section, the Secretary shall provide that elections 

11 under subsection (b) take effect at the same time as 

12 the Secretary provides that similar elections under 

13 section 1851(e) take effect under section 1851(f). 

14 ‘‘(2) NO ELECTION EFFECTIVE BEFORE 2006.—

15 In no case shall any election take effect before Janu16 ary 1, 2006. 

17 ‘‘(3) TERMINATION.—The Secretary shall pro18 vide for the termination of an election in the case 

19 of—

20 ‘‘(A) termination of coverage under part B 

21 (in the case of an individual not entitled to ben22 efits under part A); and 

23 ‘‘(B) termination of elections described in 

24 section 1851(g)(3) (including failure to pay re25 quired premiums). 
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1 ‘‘SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIP2 TION DRUG COVERAGE. 

3 ‘‘(a) REQUIREMENTS.—

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

5 and part C, the term ‘qualified prescription drug 

6 coverage’ means either of the following: 

7 ‘‘(A) STANDARD COVERAGE WITH ACCESS

8 TO NEGOTIATED PRICES.—Standard coverage 

9 (as defined in subsection (b)) and access to ne10 gotiated prices under subsection (d). 

11 ‘‘(B) ACTUARIALLY EQUIVALENT COV12 ERAGE WITH ACCESS TO NEGOTIATED

13 PRICES.—Coverage of covered outpatient drugs 

14 which meets the alternative coverage require15 ments of subsection (c) and access to negotiated 

16 prices under subsection (d). 

17 ‘‘(2) PERMITTING ADDITIONAL OUTPATIENT

18 PRESCRIPTION DRUG COVERAGE.—

19 ‘‘(A) IN GENERAL.—Subject to subpara20 graph (B), nothing in this part shall be con21 strued as preventing qualified prescription drug 

22 coverage from including coverage of covered 

23 outpatient drugs that exceeds the coverage re24 quired under paragraph (1), but any such addi25 tional coverage shall be limited to coverage of 

26 covered outpatient drugs. 
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1 ‘‘(B) DISAPPROVAL AUTHORITY.—The 

2 Secretary shall review the offering of qualified 

3 prescription drug coverage under this part or 

4 part C. If the Secretary finds that, in the case 

5 of a qualified prescription drug coverage under 

6 a prescription drug plan or a Medicare+Choice 

7 plan, that the organization or sponsor offering 

8 the coverage is purposefully engaged in activi9 ties intended to result in favorable selection of 

10 those eligible medicare beneficiaries obtaining 

11 coverage through the plan, the Secretary may 

12 terminate the contract with the sponsor or or13 ganization under this part or part C. 

14 ‘‘(3) APPLICATION OF SECONDARY PAYOR PRO15 VISIONS.—The provisions of section 1852(a)(4) shall 

16 apply under this part in the same manner as they 

17 apply under part C. 

18 ‘‘(b) STANDARD COVERAGE.—For purposes of this 

19 part, the ‘standard coverage’ is coverage of covered out20 patient drugs (as defined in subsection (f)) that meets the 

21 following requirements: 

22 ‘‘(1) DEDUCTIBLE.—The coverage has an an23 nual deductible that is equal to $100. 
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1 ‘‘(2) LIMITS ON COST-SHARING.—The coverage 

2 has cost-sharing (for incurred costs above the annual 

3 deductible specified in paragraph (1))—

4 ‘‘(A) of 25 percent to the extent that the 

5 incurred expenses (including incurred out-of6 pocket expenses) for covered outpatient drugs 

7 under this part in the year do not exceed 

8 $2,000; 

9 ‘‘(B) of 50 percent to the extent such in10 curred expenses exceed $2,000 but the true out11 of-pocket expenses do not exceed $5,000; and 

12 ‘‘(C) of 0 percent to the extent such true 

13 out-of-pocket expenses exceed $5,000. 

14 ‘‘(3) OUT-OF-POCKET EXPENSES DEFINED.—

15 For purposes of paragraph (2), the term ‘out-of16 pocket expenses’ means expenses incurred as a re17 sult of the application of the deductible under para18 graph (1) and the coinsurance required under this 

19 subsection. 

20 ‘‘(4) TRUE OUT-OF-POCKET EXPENSES DE21 FINED.—For purposes of paragraph (2), the term 

22 ‘true out-of-pocket expenses’ means out-of-pocket ex23 penses insofar as there is no third party reimburse24 ment made. 

25 ‘‘(5) INFLATION ADJUSTMENT.—
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1 ‘‘(A) IN GENERAL.—In the case of any cal2 endar year beginning after 2006, each of the 

3 dollar amounts in paragraphs (1) and (2) shall 

4 be increased by an amount equal to—

5 ‘‘(i) such dollar amount, multiplied by 

6 ‘‘(ii) the percentage (if any) by which 

7 the amount of average per capita expendi8 tures under this part in the preceding cal9 endar year exceeds the amount of such ex10 penditures in 2006. 

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

12 under paragraph (1) or (2) that is not a mul13 tiple of $5 or $25, respectively, shall be round14 ed to the nearest multiple of $5 or $25, respec15 tively. 

16 ‘‘(c) ALTERNATIVE COVERAGE REQUIREMENTS.—A 

17 prescription drug plan or Medicare+Choice plan may pro18 vide a different prescription drug benefit design from the 

19 standard coverage described in subsection (b) so long as 

20 the following requirements are met: 

21 ‘‘(1) ASSURING AT LEAST ACTUARIALLY EQUIV22 ALENT COVERAGE.—

23 ‘‘(A) ASSURING EQUIVALENT VALUE OF

24 TOTAL COVERAGE.—The actuarial value of the 

25 total coverage (as determined under subsection 
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1 (e)) is at least equal to the actuarial value (as 

2 so determined) of standard 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 coverage. 

7 For purposes of this subparagraph, the unsub8 sidized value of coverage is the amount by 

9 which the actuarial value of the coverage (as 

10 determined under subsection (e)) exceeds the 

11 actuarial value of the reinsurance subsidy pay12 ments under section 1860H with respect to 

13 such coverage. 

14 ‘‘(C) ASSURING STANDARD PAYMENT FOR

15 COSTS IN INITIAL BENEFIT RANGE.—The cov16 erage is designed, based upon an actuarially 

17 representative pattern of utilization (as deter18 mined under subsection (e)), to provide for the 

19 payment, with respect to costs incurred in the 

20 range described in subsection (b)(2)(A), of an 

21 amount equal to at least 75 percent of the ap22 plicable dollar amount under such subsection 

23 (as adjusted under subsection (b)(5)). 

24 ‘‘(2) LIMITATION ON TRUE OUT-OF-POCKET EX25 PENDITURES BY BENEFICIARIES.—The coverage 
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1 provides the limitation on true out-of-pocket expend2 itures by beneficiaries described in subsection 

3 (b)(2)(C). 

4 ‘‘(d) ACCESS TO NEGOTIATED PRICES.—Under 

5 qualified prescription drug coverage offered by a PDP 

6 sponsor or a Medicare+Choice organization, the sponsor 

7 or organization shall provide beneficiaries with access to 

8 negotiated prices (including applicable discounts) used for 

9 payment for covered outpatient drugs, regardless of the 

10 fact that no benefits may be payable under the coverage 

11 with respect to such drugs because of the application of 

12 cost-sharing or an initial coverage limit (described in sub13 section (b)(3)). Insofar as a State elects to provide medical 

14 assistance under title XIX for a drug based on the prices 

15 negotiated by a prescription drug plan under this part, 

16 the requirements of section 1927 shall not apply to such 

17 drugs. 

18 ‘‘(e) ACTUARIAL VALUATION; DETERMINATION OF

19 ANNUAL PERCENTAGE INCREASES.—

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

21 the Secretary shall establish processes and meth22 ods—

23 ‘‘(A) for determining the actuarial valu24 ation of prescription drug coverage, including—
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1 ‘‘(i) an actuarial valuation of standard 

2 coverage and of the reinsurance subsidy 

3 payments under section 1860H; 

4 ‘‘(ii) the use of generally accepted ac5 tuarial principles and methodologies; and 

6 ‘‘(iii) applying the same methodology 

7 for determinations of alternative coverage 

8 under subsection (c) as is used with re9 spect to determinations of standard cov10 erage under subsection (b); and 

11 ‘‘(B) for determining annual percentage in12 creases described in subsection (b)(5). 

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

14 processes under paragraph (1)(A), PDP sponsors 

15 and Medicare+Choice organizations may use actu16 arial opinions certified by independent, qualified ac17 tuaries to establish actuarial values. 

18 ‘‘(f) COVERED OUTPATIENT DRUGS DEFINED.—

19 ‘‘(1) IN GENERAL.—Except as provided in this 

20 subsection, for purposes of this part, the term ‘cov21 ered outpatient drug’ means—

22 ‘‘(A) a drug that may be dispensed only 

23 upon a prescription and that is described in 

24 subparagraph (A)(i) or (A)(ii) of section 

25 1927(k)(2); or 
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1 ‘‘(B) a biological product described in 

2 clauses (i) through (iii) of subparagraph (B) of 

3 such section or insulin described in subpara4 graph (C) of such section, 

5 and such term includes any use of a covered out6 patient drug for a medically accepted indication (as 

7 defined in section 1927(k)(6)). 

8 ‘‘(2) EXCLUSIONS.—

9 ‘‘(A) IN GENERAL.—Such term does not 

10 include drugs or classes of drugs, or their med11 ical uses, which may be excluded from coverage 

12 or otherwise restricted under section 

13 1927(d)(2), other than subparagraph (E) there14 of (relating to smoking cessation agents) and 

15 except to the extent otherwise specifically pro16 vided by the Secretary with respect to a drug 

17 in any of such classes. 

18 ‘‘(B) AVOIDANCE OF DUPLICATE COV19 ERAGE.—A drug prescribed for an individual 

20 that would otherwise be a covered outpatient 

21 drug under this part shall not be so considered 

22 if payment for such drug is available under part 

23 A or B (but shall be so considered if such pay24 ment is not available because benefits under 

25 part A or B have been exhausted), without re-
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1 gard to whether the individual is entitled to 

2 benefits under part A or enrolled under part B. 

3 ‘‘(3) APPLICATION OF FORMULARY RESTRIC4 TIONS.—A drug prescribed for an individual that 

5 would otherwise be a covered outpatient drug under 

6 this part shall not be so considered under a plan if 

7 the plan excludes the drug under a formulary that 

8 meets the requirements of section 1860C(f)(2) (in9 cluding providing an appeal process). 

10 ‘‘(4) APPLICATION OF GENERAL EXCLUSION

11 PROVISIONS.—A prescription drug plan or 

12 Medicare+Choice plan may exclude from qualified 

13 prescription drug coverage any covered outpatient 

14 drug—

15 ‘‘(A) for which payment would not be 

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

17 ‘‘(B) which are not prescribed in accord18 ance with the plan or this part. 

19 Such exclusions are determinations subject to recon20 sideration and appeal pursuant to section 1860C(f). 

21 ‘‘SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED 

22 PRESCRIPTION DRUG COVERAGE. 

23 ‘‘(a) GUARANTEED ISSUE COMMUNITY-RELATED

24 PREMIUMS AND NONDISCRIMINATION.—For provisions re25 quiring guaranteed issue, community-rated premiums, and 
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1 nondiscrimination, see sections 1860A(c)(1), 1860A(c)(2), 

2 and 1860F(b). 

3 ‘‘(b) DISSEMINATION OF INFORMATION.—

4 ‘‘(1) GENERAL INFORMATION.—A PDP sponsor 

5 shall disclose, in a clear, accurate, and standardized 

6 form to each enrollee with a prescription drug plan 

7 offered by the sponsor under this part at the time 

8 of enrollment and at least annually thereafter, the 

9 information described in section 1852(c)(1) relating 

10 to such plan. Such information includes the fol11 lowing: 

12 ‘‘(A) Access to covered outpatient drugs, 

13 including access through pharmacy networks. 

14 ‘‘(B) How any formulary used by the spon15 sor functions. 

16 ‘‘(C) Co-payments and deductible require17 ments. 

18 ‘‘(D) Grievance and appeals procedures. 

19 ‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL

20 COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA21 TION.—Upon request of an individual eligible to en22 roll under a prescription drug plan, the PDP spon23 sor shall provide the information described in section 

24 1852(c)(2) (other than subparagraph (D)) to such 

25 individual. 
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1 ‘‘(3) RESPONSE TO BENEFICIARY QUESTIONS.—

2 Each PDP sponsor offering a prescription drug plan 

3 shall have a mechanism for providing specific infor4 mation to enrollees upon request. The sponsor shall 

5 make available, through an Internet website and in 

6 writing upon request, information on specific 

7 changes in its formulary. 

8 ‘‘(4) CLAIMS INFORMATION.—Each PDP spon9 sor offering a prescription drug plan must furnish to 

10 enrolled individuals in a form easily understandable 

11 to such individuals an explanation of benefits (in ac12 cordance with section 1806(a) or in a comparable 

13 manner) and a notice of the benefits in relation to 

14 initial coverage limit and annual out-of-pocket limit 

15 for the current year, whenever prescription drug 

16 benefits are provided under this part (except that 

17 such notice need not be provided more often than 

18 monthly). 

19 ‘‘(c) ACCESS TO COVERED BENEFITS.—

20 ‘‘(1) ASSURING PHARMACY ACCESS.—The PDP 

21 sponsor of the prescription drug plan shall secure 

22 the participation of sufficient numbers of pharmacies 

23 (which may include mail order pharmacies) to en24 sure convenient access (including adequate emer25 gency access) for enrolled beneficiaries, in accord-
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1 ance with standards established under section 

2 1860D(e) that ensure such convenient access. Noth3 ing in this paragraph shall be construed as requiring 

4 the participation of (or permitting the exclusion of) 

5 all pharmacies in any area under a plan. 

6 ‘‘(2) PREFERRED PHARMACY NETWORKS.—

7 ‘‘(A) IN GENERAL.—If a PDP sponsor 

8 uses a preferred pharmacy network to deliver 

9 benefits under this part, such network shall 

10 meet minimum access standards established by 

11 the Secretary. 

12 ‘‘(B) STANDARDS.—In establishing stand13 ards under subparagraph (A), the Secretary 

14 shall take into account reasonable distances to 

15 pharmacy services in both urban and rural 

16 areas. 

17 ‘‘(C) ASSURING PHARMACY ACCESS.—Such 

18 standards shall require that each PDP sponsor 

19 include in any preferred pharmacy network any 

20 pharmacy that agrees to the terms and condi21 tions established by the sponsor for such par22 ticipation in such network. 

23 ‘‘(3) ACCESS TO NEGOTIATED PRICES FOR PRE24 SCRIPTION DRUGS.—The PDP sponsor of a prescrip25 tion drug plan shall issue such a card that may be 
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1 used by an enrolled beneficiary to assure access to 

2 negotiated prices under section 1860B(d) for the 

3 purchase of prescription drugs for which coverage is 

4 not otherwise provided under the prescription drug 

5 plan. 

6 ‘‘(4) REQUIREMENTS ON DEVELOPMENT AND

7 APPLICATION OF FORMULARIES.—Insofar as a PDP 

8 sponsor of a prescription drug plan uses a for9 mulary, the following requirements must be met: 

10 ‘‘(A) FORMULARY COMMITTEE.—The spon11 sor must establish a pharmaceutical and thera12 peutic committee that develops the formulary. 

13 Such committee shall include at least one physi14 cian and at least one pharmacist. 

15 ‘‘(B) INCLUSION OF DRUGS IN ALL THERA16 PEUTIC CATEGORIES.—The formulary must in17 clude drugs within all therapeutic categories 

18 and classes of covered outpatient drugs (al19 though not necessarily for all drugs within such 

20 categories and classes). 

21 ‘‘(C) APPEALS AND EXCEPTIONS TO APPLI22 CATION.—The PDP sponsor must have, as part 

23 of the appeals process under subsection (f)(2), 

24 a process for appeals for denials of coverage 

25 based on such application of the formulary.
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1 ‘‘(d) COST AND UTILIZATION MANAGEMENT; QUAL2 ITY ASSURANCE; MEDICATION THERAPY MANAGEMENT

3 PROGRAM.—

4 ‘‘(1) IN GENERAL.—The PDP sponsor shall 

5 have in place—

6 ‘‘(A) an effective cost and drug utilization 

7 management program, including appropriate in8 centives to use generic drugs, when appropriate; 

9 ‘‘(B) quality assurance measures and sys10 tems to reduce medical errors and adverse drug 

11 interactions, including a medication therapy 

12 management program described in paragraph 

13 (2); and 

14 ‘‘(C) a program to control fraud, abuse, 

15 and waste. 

16 ‘‘(2) MEDICATION THERAPY MANAGEMENT PRO17 GRAM.—

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

19 management program described in this para20 graph is a program of drug therapy manage21 ment and medication administration that is de22 signed to assure that covered outpatient drugs 

23 under the prescription drug plan are appro24 priately used to achieve therapeutic goals and 
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1 reduce the risk of adverse events, including ad2 verse drug interactions. 

3 ‘‘(B) ELEMENTS.—Such program may in4 clude—

5 ‘‘(i) enhanced beneficiary under6 standing of such appropriate use through 

7 beneficiary education, counseling, and 

8 other appropriate means; and 

9 ‘‘(ii) increased beneficiary adherence 

10 with prescription medication regimens 

11 through medication refill reminders, special 

12 packaging, and other appropriate means. 

13 ‘‘(C) DEVELOPMENT OF PROGRAM IN CO14 OPERATION WITH LICENSED PHARMACISTS.—

15 The program shall be developed in cooperation 

16 with licensed pharmacists and physicians. 

17 ‘‘(D) CONSIDERATIONS IN PHARMACY

18 FEES.—The PDP sponsor of a prescription 

19 drug program shall take into account, in estab20 lishing fees for pharmacists and others pro21 viding services under the medication therapy 

22 management program, the resources and time 

23 used in implementing the program. 

24 ‘‘(3) TREATMENT OF ACCREDITATION.—Section 

25 1852(e)(4) (relating to treatment of accreditation) 
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1 shall apply to prescription drug plans under this 

2 part with respect to the following requirements, in 

3 the same manner as they apply to Medicare+Choice 

4 plans under part C with respect to the requirements 

5 described in a clause of section 1852(e)(4)(B): 

6 ‘‘(A) Paragraph (1) (including quality as7 surance), including medication therapy manage8 ment program under paragraph (2). 

9 ‘‘(B) Subsection (c)(1) (relating to access 

10 to covered benefits). 

11 ‘‘(C) Subsection (g) (relating to confiden12 tiality and accuracy of enrollee records). 

13 ‘‘(4) PUBLIC DISCLOSURE OF PHARMACEUTICAL

14 PRICES FOR GENERIC EQUIVALENT DRUGS.—Each 

15 PDP sponsor shall provide that each pharmacy or 

16 other dispenser that arranges for the dispensing of 

17 a covered outpatient drug shall inform the bene18 ficiary at the time of purchase of the drug of any 

19 differential between the price of the prescribed drug 

20 to the enrollee and the price of the lowest cost ge21 neric drug that is therapeutically and pharmaceuti22 cally equivalent and bioequivalent. 

23 ‘‘(e) GRIEVANCE MECHANISM.—Each PDP sponsor 

24 shall provide meaningful procedures for hearing and re25 solving grievances between the organization (including any 
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1 entity or individual through which the sponsor provides 

2 covered benefits) and enrollees with prescription drug 

3 plans of the sponsor under this part in accordance with 

4 section 1852(f). 

5 ‘‘(f) COVERAGE DETERMINATIONS, RECONSIDER6 ATIONS, AND APPEALS.—

7 ‘‘(1) IN GENERAL.—A PDP sponsor shall meet 

8 the requirements of section 1852(g) with respect to 

9 covered benefits under the prescription drug plan it 

10 offers under this part in the same manner as such 

11 requirements apply to a Medicare+Choice organiza12 tion with respect to benefits it offers under a 

13 Medicare+Choice plan under part C. 

14 ‘‘(2) APPEALS OF FORMULARY DETERMINA15 TIONS.—Under the appeals process under paragraph 

16 (1) an individual who is enrolled in a prescription 

17 drug plan offered by a PDP sponsor may appeal to 

18 obtain coverage for a covered outpatient drug that 

19 is not on the formulary of the sponsor (established 

20 under subsection (c)) if the prescribing physician de21 termines that the therapeutically similar drug that is 

22 on the formulary is not as effective for the enrollee 

23 or has significant adverse effects for the enrollee. 

24 ‘‘(g) CONFIDENTIALITY AND ACCURACY OF EN25 ROLLEE RECORDS.—A PDP sponsor shall meet the re-
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1 quirements of section 1852(h) with respect to enrollees 

2 under this part in the same manner as such requirements 

3 apply to a Medicare+Choice organization with respect to 

4 enrollees under part C. 

5 ‘‘SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG 

6 PLAN (PDP) SPONSORS; CONTRACTS; ESTAB7 LISHMENT OF STANDARDS. 

8 ‘‘(a) GENERAL REQUIREMENTS.—Each PDP sponsor 

9 of a prescription drug plan shall meet the following re10 quirements: 

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

12 the sponsor is organized and licensed under State 

13 law as a risk-bearing entity eligible to offer health 

14 insurance or health benefits coverage in each State 

15 in which it offers a prescription drug plan. 

16 ‘‘(2) ASSUMPTION OF FULL FINANCIAL RISK.—

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B) and section 1860E(d)(2), the entity 

19 assumes full financial risk on a prospective 

20 basis for qualified prescription drug coverage 

21 that it offers under a prescription drug plan 

22 and that is not covered under reinsurance 

23 under section 1860H.

24 ‘‘(B) REINSURANCE PERMITTED.—The en25 tity may obtain insurance or make other ar-
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1 rangements for the cost of coverage provided to 

2 any enrolled member under this part. 

3 ‘‘(3) SOLVENCY FOR UNLICENSED SPONSORS.—

4 In the case of a sponsor that is not described in 

5 paragraph (1), the sponsor shall meet solvency 

6 standards established by the Secretary under sub7 section (d). 

8 ‘‘(b) CONTRACT REQUIREMENTS.—

9 ‘‘(1) IN GENERAL.—The Secretary shall not 

10 permit the election under section 1860A of a pre11 scription drug plan offered by a PDP sponsor under 

12 this part, and the sponsor shall not be eligible for 

13 payments under section 1860G or 1860H, unless the 

14 Secretary has entered into a contract under this sub15 section with the sponsor with respect to the offering 

16 of such plan. Such a contract with a sponsor may 

17 cover more than one prescription drug plan. Such 

18 contract shall provide that the sponsor agrees to 

19 comply with the applicable requirements and stand20 ards of this part and the terms and conditions of 

21 payment as provided for in this part. 

22 ‘‘(2) NEGOTIATION REGARDING TERMS AND

23 CONDITIONS.—The Secretary shall have the same 

24 authority to negotiate the terms and conditions of 

25 prescription drug plans under this part as the Direc-
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1 tor of the Office of Personnel Management has with 

2 respect to health benefits plans under chapter 89 of 

3 title 5, United States Code. In negotiating the terms 

4 and conditions regarding premiums for which infor5 mation is submitted under section 1860F(a)(2), the 

6 Secretary shall take into account the reinsurance 

7 subsidy payments under section 1860H and the ad8 justed community rate (as defined in section 

9 1854(f)(3)) for the benefits covered. 

10 ‘‘(3) INCORPORATION OF CERTAIN

11 MEDICARE+CHOICE CONTRACT REQUIREMENTS.—

12 The following provisions of section 1857 shall apply, 

13 subject to subsection (c)(5), to contracts under this 

14 section in the same manner as they apply to con15 tracts under section 1857(a): 

16 ‘‘(A) MINIMUM ENROLLMENT.—Para17 graphs (1) and (3) of section 1857(b). 

18 ‘‘(B) CONTRACT PERIOD AND EFFECTIVE19 NESS.—Paragraphs (1) through (3) and (5) of 

20 section 1857(c). 

21 ‘‘(C) PROTECTIONS AGAINST FRAUD AND

22 BENEFICIARY PROTECTIONS.—Section 1857(d). 

23 ‘‘(D) ADDITIONAL CONTRACT TERMS.—

24 Section 1857(e); except that in applying section 

25 1857(e)(2) under this part—
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1 ‘‘(i) such section shall be applied sepa2 rately to costs relating to this part (from 

3 costs under part C); 

4 ‘‘(ii) in no case shall the amount of 

5 the fee established under this subpara6 graph for a plan exceed 20 percent of the 

7 maximum amount of the fee that may be 

8 established under subparagraph (B) of 

9 such section; and 

10 ‘‘(iii) no fees shall be applied under 

11 this subparagraph with respect to 

12 Medicare+Choice plans. 

13 ‘‘(E) INTERMEDIATE SANCTIONS.—Section 

14 1857(g). 

15 ‘‘(F) PROCEDURES FOR TERMINATION.—

16 Section 1857(h). 

17 ‘‘(4) RULES OF APPLICATION FOR INTER18 MEDIATE SANCTIONS.—In applying paragraph 

19 (3)(E)—

20 ‘‘(A) the reference in section 

21 1857(g)(1)(B) to section 1854 is deemed a ref22 erence to this part; and 

23 ‘‘(B) the reference in section 

24 1857(g)(1)(F) to section 1852(k)(2)(A)(ii) shall 

25 not be applied. 
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1 ‘‘(c) WAIVER OF CERTAIN REQUIREMENTS TO EX2 PAND CHOICE.—

3 ‘‘(1) IN GENERAL.—In the case of an entity 

4 that seeks to offer a prescription drug plan in a 

5 State, the Secretary shall waive the requirement of 

6 subsection (a)(1) that the entity be licensed in that 

7 State if the Secretary determines, based on the ap8 plication and other evidence presented to the Sec9 retary, that any of the grounds for approval of the 

10 application described in paragraph (2) has been met. 

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

12 for approval under this paragraph are the grounds 

13 for approval described in subparagraph (B), (C), 

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

15 application by a State of any grounds other than 

16 those required under Federal law. 

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

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

19 waiver granted) under this subsection, the provisions 

20 of subparagraphs (E), (F), and (G) of section 

21 1855(a)(2) shall apply. 

22 ‘‘(4) LICENSURE DOES NOT SUBSTITUTE FOR

23 OR CONSTITUTE CERTIFICATION.—The fact that an 

24 entity is licensed in accordance with subsection 

25 (a)(1) does not deem the entity to meet other re-
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1 quirements imposed under this part for a PDP spon2 sor. 

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

4 For purposes of this subsection, in applying provi5 sions of section 1855(a)(2) under this subsection to 

6 prescription drug plans and PDP sponsors—

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

8 under section 1855 shall be treated as a ref9 erence to a waiver application under paragraph 

10 (1); and 

11 ‘‘(B) any reference to solvency standards 

12 shall be treated as a reference to solvency 

13 standards established under subsection (d). 

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

15 SPONSORS.—

16 ‘‘(1) ESTABLISHMENT.—The Secretary shall es17 tablish, by not later than October 1, 2004, financial 

18 solvency and capital adequacy standards that an en19 tity that does not meet the requirements of sub20 section (a)(1) must meet to qualify as a PDP spon21 sor under this part. 

22 ‘‘(2) COMPLIANCE WITH STANDARDS.—Each 

23 PDP sponsor that is not licensed by a State under 

24 subsection (a)(1) and for which a waiver application 

25 has been approved under subsection (c) shall meet 
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1 solvency and capital adequacy standards established 

2 under paragraph (1). The Secretary shall establish 

3 certification procedures for such PDP sponsors with 

4 respect to such solvency standards in the manner de5 scribed in section 1855(c)(2). 

6 ‘‘(e) OTHER STANDARDS.—The Secretary shall es7 tablish by regulation other standards (not described in 

8 subsection (d)) for PDP sponsors and plans consistent 

9 with, and to carry out, this part. The Secretary shall pub10 lish such regulations by October 1, 2004. In order to carry 

11 out this requirement in a timely manner, the Secretary 

12 may promulgate regulations that take effect on an interim 

13 basis, after notice and pending opportunity for public com14 ment. 

15 ‘‘(f) RELATION TO STATE LAWS.—

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

17 under this section shall supersede any State law or 

18 regulation (including standards described in para19 graph (2)) with respect to prescription drug plans 

20 which are offered by PDP sponsors under this part 

21 to the extent such law or regulation is inconsistent 

22 with such standards. 

23 ‘‘(2) STANDARDS SPECIFICALLY SUPER24 SEDED.—State standards relating to the following 

25 are superseded under this subsection: 
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1 ‘‘(A) Benefit requirements. 

2 ‘‘(B) Requirements relating to inclusion or 

3 treatment of providers. 

4 ‘‘(C) Coverage determinations (including 

5 related appeals and grievance processes). 

6 ‘‘(D) Establishment and regulation of pre7 miums. 

8 ‘‘(3) PROHIBITION OF STATE IMPOSITION OF

9 PREMIUM TAXES.—No State may impose a premium 

10 tax or similar tax with respect to premiums paid to 

11 PDP sponsors for prescription drug plans under this 

12 part, or with respect to any payments made to such 

13 a sponsor by the Secretary under this part. 

14 ‘‘SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT 

15 QUALIFIED PRESCRIPTION DRUG COVERAGE. 

16 ‘‘(a) IN GENERAL.—The Secretary shall establish, 

17 based upon and consistent with the procedures used under 

18 part C (including section 1851), a process for the selection 

19 of the prescription drug plan or Medicare+Choice plan 

20 which offer qualified prescription drug coverage through 

21 which eligible individuals elect qualified prescription drug 

22 coverage under this part. 

23 ‘‘(b) ELEMENTS.—Such process shall include the fol24 lowing: 
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1 ‘‘(1) Annual, coordinated election periods, in 

2 which such individuals can change the qualifying 

3 plans through which they obtain coverage, in accord4 ance with section 1860A(b)(2). 

5 ‘‘(2) Active dissemination of information to pro6 mote an informed selection among qualifying plans 

7 based upon price, quality, and other features, in the 

8 manner described in (and in coordination with) sec9 tion 1851(d), including the provision of annual com10 parative information, maintenance of a toll-free hot11 line, and the use of non-Federal entities. 

12 ‘‘(3) Coordination of elections through filing 

13 with a Medicare+Choice organization or a PDP 

14 sponsor, in the manner described in (and in coordi15 nation with) section 1851(c)(2). 

16 ‘‘(c) MEDICARE+CHOICE ENROLLEE IN PLAN OF17 FERING PRESCRIPTION DRUG COVERAGE MAY ONLY OB18 TAIN BENEFITS THROUGH THE PLAN.—An individual 

19 who is enrolled under a Medicare+Choice plan that offers 

20 qualified prescription drug coverage may only elect to re21 ceive qualified prescription drug coverage under this part 

22 through such plan. 

23 ‘‘(d) ASSURING ACCESS TO A CHOICE OF QUALIFIED

24 PRESCRIPTION DRUG COVERAGE.—
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1 ‘‘(1) CHOICE OF AT LEAST TWO PLANS IN EACH

2 AREA.—

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

4 assure that each individual who is entitled to 

5 benefits under part A or is enrolled under part 

6 B and who is residing in an area has available, 

7 consistent with subparagraph (B), a choice of 

8 enrollment in at least two qualifying plans (as 

9 defined in paragraph (5)) in the area in which 

10 the individual resides, at least one of which is 

11 a prescription drug plan. 

12 ‘‘(B) REQUIREMENT FOR DIFFERENT

13 PLAN SPONSORS.—The requirement in subpara14 graph (A) is not satisfied with respect to an 

15 area if only one PDP sponsor or 

16 Medicare+Choice organization offers all the 

17 qualifying plans in the area. 

18 ‘‘(2) GUARANTEEING ACCESS TO COVERAGE.—

19 In order to assure access under paragraph (1) and 

20 consistent with paragraph (3), the Secretary may 

21 provide financial incentives (including partial under22 writing of risk) for a PDP sponsor to expand the 

23 service area under an existing prescription drug plan 

24 to adjoining or additional areas or to establish such 

25 a plan (including offering such a plan on a regional 
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1 or nationwide basis), but only so long as (and to the 

2 extent) necessary to assure the access guaranteed 

3 under paragraph (1). 

4 ‘‘(3) LIMITATION ON AUTHORITY.—In exer5 cising authority under this subsection, the Sec6 retary—

7 ‘‘(A) shall not provide for the full under8 writing of financial risk for any PDP sponsor; 

9 ‘‘(B) shall not provide for any under10 writing of financial risk for a public PDP spon11 sor with respect to the offering of a nationwide 

12 prescription drug plan; and 

13 ‘‘(C) shall seek to maximize the assump14 tion of financial risk by PDP sponsors or 

15 Medicare+Choice organizations. 

16 ‘‘(4) REPORTS.—The Secretary shall, in each 

17 annual report to Congress under section 1807(f), in18 clude information on the exercise of authority under 

19 this subsection. The Secretary also shall include 

20 such recommendations as may be appropriate to 

21 minimize the exercise of such authority, including 

22 minimizing the assumption of financial risk.

23 ‘‘(5) QUALIFYING PLAN DEFINED.—For pur24 poses of this subsection, the term ‘qualifying plan’ 

25 means a prescription drug plan or a 
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1 Medicare+Choice plan that includes qualified pre2 scription drug coverage. 

3 ‘‘SEC. 1860F. PREMIUMS. 

4 ‘‘(a) SUBMISSION OF PREMIUMS AND RELATED IN5 FORMATION.—

6 ‘‘(1) IN GENERAL.—Each PDP sponsor shall 

7 submit to the Secretary information of the type de8 scribed in paragraph (2) in the same manner as in9 formation is submitted by a Medicare+Choice orga10 nization under section 1854(a)(1). 

11 ‘‘(2) TYPE OF INFORMATION.—The information 

12 described in this paragraph is the following: 

13 ‘‘(A) Information on the qualified prescrip14 tion drug coverage to be provided. 

15 ‘‘(B) Information on the actuarial value of 

16 the coverage. 

17 ‘‘(C) Information on the monthly premium 

18 to be charged for the coverage, including an ac19 tuarial certification of—

20 ‘‘(i) the actuarial basis for such pre21 mium; 

22 ‘‘(ii) the portion of such premium at23 tributable to benefits in excess of standard 

24 coverage; and 
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1 ‘‘(iii) the reduction in such premium 

2 resulting from the reinsurance subsidy 

3 payments provided under section 1860H. 

4 ‘‘(D) Such other information as the Sec5 retary may require to carry out this part. 

6 ‘‘(3) REVIEW.—The Secretary shall review the 

7 information filed under paragraph (2) for the pur8 pose of conducting negotiations under section 

9 1860D(b)(2). 

10 ‘‘(4) LIMITATIONS ON PREMIUMS.—

11 ‘‘(A) $35 MONTHLY PREMIUM FOR 2006.—

12 In no case may the monthly premium of a PDP 

13 plan for months in 2006 exceed $35. 

14 ‘‘(B) MONTHLY PREMIUM LIMITATION FOR

15 SUBSEQUENT YEARS.—In no case may the 

16 monthly premium of a PDP plan for months in 

17 a year after 2006 exceed the dollar limitation 

18 specified in this paragraph for the preceding 

19 year adjusted by the annual percentage change 

20 in the increase in the consumer price index for 

21 all urban consumers (U.S. city average) as esti22 mated by the Secretary for the 12-month period 

23 ending with the midpoint of previous year. If 

24 any dollar amount after being adjusted under 

25 this subparagraph is not a multiple of $1, such 
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1 dollar amount shall be rounded to the nearest 

2 multiple of $1. 

3 ‘‘(b) UNIFORM PREMIUM.—The premium for a pre4 scription drug plan charged under this section may not 

5 vary among individuals enrolled in the plan in the same 

6 service area, except as is permitted under section 

7 1860A(c)(2)(B) (relating to late enrollment penalties). 

8 ‘‘(c) TERMS AND CONDITIONS FOR IMPOSING PRE9 MIUMS.—The provisions of section 1854(d) shall apply 

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

11 part C, and, for this purpose, the reference in such section 

12 to section 1851(g)(3)(B)(i) is deemed a reference to sec13 tion 1860A(d)(3)(B) (relating to failure to pay premiums 

14 required under this part). 

15 ‘‘(d) ACCEPTANCE OF REFERENCE PREMIUM AS

16 FULL PREMIUM IF NO STANDARD (OR EQUIVALENT) 

17 COVERAGE IN AN AREA.—

18 ‘‘(1) IN GENERAL.—If there is no standard pre19 scription drug coverage (as defined in paragraph 

20 (2)) offered in an area, in the case of an individual 

21 who is eligible for a premium subsidy under section 

22 1860G and resides in the area, the PDP sponsor of 

23 any prescription drug plan offered in the area (and 

24 any Medicare+Choice organization that offers quali25 fied prescription drug coverage in the area) shall ac-
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1 cept the reference premium under section 

2 1860G(b)(2) as payment in full for the premium 

3 charge for qualified prescription drug coverage. 

4 ‘‘(2) STANDARD PRESCRIPTION DRUG COV5 ERAGE DEFINED.—For purposes of this subsection, 

6 the term ‘standard prescription drug coverage’ 

7 means qualified prescription drug coverage that is 

8 standard coverage or that has an actuarial value 

9 equivalent to the actuarial value for standard cov10 erage. 

11 ‘‘SEC. 1860G. PREMIUM AND COST-SHARING SUBSIDIES FOR 

12 LOW-INCOME INDIVIDUALS. 

13 ‘‘(a) IN GENERAL.—

14 ‘‘(1) FULL PREMIUM SUBSIDY AND REDUCTION

15 OF COST-SHARING FOR INDIVIDUALS WITH INCOME

16 BELOW 135 PERCENT OF FEDERAL POVERTY

17 LEVEL.—In the case of a subsidy eligible individual 

18 (as defined in paragraph (4)) who is determined to 

19 have income that does not exceed 150 percent of the 

20 Federal poverty level, the individual is entitled under 

21 this section—

22 ‘‘(A) to a premium subsidy equal to 100 

23 percent of the amount described in subsection 

24 (b)(1); and 
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1 ‘‘(B) subject to subsection (c), to the sub2 stitution for the beneficiary cost-sharing de3 scribed in section 1860B(b)(2)) of amounts 

4 that are nominal. 

5 ‘‘(2) PREMIUM SUBSIDY ONLY FOR INDIVID6 UALS WITH INCOME ABOVE 150, BUT BELOW 175

7 PERCENT, OF FEDERAL POVERTY LEVEL.—In the 

8 case of a subsidy eligible individual who is deter9 mined to have income that exceeds 150 percent, but 

10 does not exceed 175 percent, of the Federal poverty 

11 level, the individual is entitled under this section to 

12 a premium subsidy equal to 100 percent of the 

13 amount described in subsection (b)(1). 

14 ‘‘(3) SLIDING SCALE PREMIUM SUBSIDY FOR

15 INDIVIDUALS WITH INCOME ABOVE 175, BUT BELOW

16 200 PERCENT, OF FEDERAL POVERTY LEVEL.—In 

17 the case of a subsidy eligible individual who is deter18 mined to have income that exceeds 175 percent, but 

19 does not exceed 200 percent, of the Federal poverty 

20 level, the individual is entitled under this section to 

21 a premium subsidy determined on a linear sliding 

22 scale ranging from 100 percent of the amount de23 scribed in subsection (b)(1) for individuals with in24 comes at 175 percent of such level to 0 percent of 
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1 such amount for individuals with incomes at 200 

2 percent of such level. 

3 ‘‘(4) DETERMINATION OF ELIGIBILITY.—

4 ‘‘(A) SUBSIDY ELIGIBLE INDIVIDUAL DE5 FINED.—For purposes of this section, subject 

6 to subparagraph (D), the term ‘subsidy eligible 

7 individual’ means an individual who—

8 ‘‘(i) is eligible to elect, and has elect9 ed, to obtain qualified prescription drug 

10 coverage under this part; and 

11 ‘‘(ii) has income below 200 percent of 

12 the Federal poverty line. 

13 ‘‘(B) DETERMINATIONS.—The determina14 tion of whether an individual residing in a State 

15 is a subsidy eligible individual and the amount 

16 of such individual’s income shall be determined 

17 under the State medicaid plan for the State 

18 under section 1935(a). In the case of a State 

19 that does not operate such a medicaid plan (ei20 ther under title XIX or under a statewide waiv21 er granted under section 1115), such deter22 mination shall be made under arrangements 

23 made by the Secretary. 

24 ‘‘(C) INCOME DETERMINATIONS.—For pur25 poses of applying this section—
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1 ‘‘(i) income shall be determined in the 

2 manner described in section 

3 1905(p)(1)(B); and 

4 ‘‘(ii) the term ‘Federal poverty line’ 

5 means the official poverty line (as defined 

6 by the Office of Management and Budget, 

7 and revised annually in accordance with 

8 section 673(2) of the Omnibus Budget 

9 Reconciliation Act of 1981) applicable to a 

10 family of the size involved. 

11 ‘‘(D) TREATMENT OF TERRITORIAL RESI12 DENTS.—In the case of an individual who is not 

13 a resident of the 50 States or the District of 

14 Columbia, the individual is not eligible to be a 

15 subsidy eligible individual but may be eligible 

16 for financial assistance with prescription drug 

17 expenses under section 1935(e). 

18 ‘‘(b) PREMIUM SUBSIDY AMOUNT.—

19 ‘‘(1) IN GENERAL.—The premium subsidy 

20 amount described in this subsection for an individual 

21 residing in an area is the reference premium (as de22 fined in paragraph (2)) for qualified prescription 

23 drug coverage offered by the prescription drug plan 

24 or the Medicare+Choice plan in which the individual 

25 is enrolled. 
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1 ‘‘(2) REFERENCE PREMIUM DEFINED.—For 

2 purposes of this subsection, the term ‘reference pre3 mium’ means, with respect to qualified prescription 

4 drug coverage offered under—

5 ‘‘(A) a prescription drug plan that—

6 ‘‘(i) provides standard coverage (or al7 ternative prescription drug coverage the 

8 actuarial value is equivalent to that of 

9 standard coverage), the premium imposed 

10 for enrollment under the plan under this 

11 part (determined without regard to any 

12 subsidy under this section or any late en13 rollment penalty under section 

14 1860A(c)(2)(B)); or 

15 ‘‘(ii) provides alternative prescription 

16 drug coverage the actuarial value of which 

17 is greater than that of standard coverage, 

18 the premium described in clause (i) multi19 plied by the ratio of (I) the actuarial value 

20 of standard coverage, to (II) the actuarial 

21 value of the alternative coverage; or 

22 ‘‘(B) a Medicare+Choice plan, the stand23 ard premium computed under section 

24 1851(j)(5)(A)(iii), determined without regard to 
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1 any reduction effected under section 

2 1851(j)(5)(B). 

3 ‘‘(c) RULES IN APPLYING COST-SHARING SUB4 SIDIES.—

5 ‘‘(1) IN GENERAL.—In applying subsection 

6 (a)(1)(B)—

7 ‘‘(A) the maximum amount of subsidy that 

8 may be provided with respect to an enrollee for 

9 a year may not exceed 95 percent of the max10 imum cost-sharing described in such subsection 

11 that may be incurred for standard coverage; 

12 ‘‘(B) the Secretary shall determine what is 

13 ‘nominal’ taking into account the rules applied 

14 under section 1916(a)(3); and 

15 ‘‘(C) nothing in this part shall be con16 strued as preventing a plan or provider from 

17 waiving or reducing the amount of cost-sharing 

18 otherwise applicable. 

19 ‘‘(2) LIMITATION ON CHARGES.—In the case of 

20 an individual receiving cost-sharing subsidies under 

21 subsection (a)(1)(B), the PDP sponsor may not 

22 charge more than a nominal amount in cases in 

23 which the cost-sharing subsidy is provided under 

24 such subsection. 
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1 ‘‘(d) ADMINISTRATION OF SUBSIDY PROGRAM.—The 

2 Secretary shall provide a process whereby, in the case of 

3 an individual who is determined to be a subsidy eligible 

4 individual and who is enrolled in prescription drug plan 

5 or is enrolled in a Medicare+Choice plan under which 

6 qualified prescription drug coverage is provided—

7 ‘‘(1) the Secretary provides for a notification of 

8 the PDP sponsor or Medicare+Choice organization 

9 involved that the individual is eligible for a subsidy 

10 and the amount of the subsidy under subsection (a); 

11 ‘‘(2) the sponsor or organization involved re12 duces the premiums or cost-sharing otherwise im13 posed by the amount of the applicable subsidy and 

14 submits to the Secretary information on the amount 

15 of such reduction; and 

16 ‘‘(3) the Secretary periodically and on a timely 

17 basis reimburses the sponsor or organization for the 

18 amount of such reductions. 

19 The reimbursement under paragraph (3) with respect to 

20 cost-sharing subsidies may be computed on a capitated 

21 basis, taking into account the actuarial value of the sub22 sidies and with appropriate adjustments to reflect dif23 ferences in the risks actually involved. 

24 ‘‘(e) RELATION TO MEDICAID PROGRAM.—
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1 ‘‘(1) IN GENERAL.—For provisions providing 

2 for eligibility determinations, and additional financ3 ing, under the medicaid program, see section 1935. 

4 ‘‘(2) MEDICAID PROVIDING WRAP AROUND BEN5 EFITS.—The coverage provided under this part is 

6 primary payor to benefits for prescribed drugs pro7 vided under the medicaid program under title XIX. 

8 ‘‘SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENE9 FICIARIES THROUGH REINSURANCE FOR 

10 QUALIFIED PRESCRIPTION DRUG COVERAGE. 

11 ‘‘(a) REINSURANCE SUBSIDY PAYMENT.—In order to 

12 reduce premium levels applicable to qualified prescription 

13 drug coverage for all medicare beneficiaries, to reduce ad14 verse selection among prescription drug plans and 

15 Medicare+Choice plans that provide qualified prescription 

16 drug coverage, and to promote the participation of PDP 

17 sponsors under this part, the Secretary shall provide in 

18 accordance with this section for payment to a qualifying 

19 entity (as defined in subsection (b)) of the reinsurance 

20 payment amount (as defined in subsection (c)) for excess 

21 costs incurred in providing qualified prescription drug cov22 erage—

23 ‘‘(1) for individuals enrolled with a prescription 

24 drug plan under this part; 
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1 ‘‘(2) for individuals enrolled with a 

2 Medicare+Choice plan that provides qualified pre3 scription drug coverage under part C; and 

4 ‘‘(3) for medicare primary individuals (de5 scribed in subsection (e)(3)(D)) who are enrolled in 

6 a qualified retiree prescription drug plan. 

7 This section constitutes budget authority in advance of ap8 propriations Acts and represents the obligation of the Sec9 retary to provide for the payment of amounts provided 

10 under this section. 

11 ‘‘(b) QUALIFYING ENTITY DEFINED.—For purposes 

12 of this section, the term ‘qualifying entity’ means any of 

13 the following that has entered into an agreement with the 

14 Secretary to provide the Secretary with such information 

15 as may be required to carry out this section: 

16 ‘‘(1) A PDP sponsor offering a prescription 

17 drug plan under this part. 

18 ‘‘(2) A Medicare+Choice organization that pro19 vides qualified prescription drug coverage under a 

20 Medicare+Choice plan under part C. 

21 ‘‘(3) The sponsor of a qualified retiree prescrip22 tion drug plan (as defined in subsection (e)). 

23 ‘‘(c) REINSURANCE PAYMENT AMOUNT.—

24 ‘‘(1) IN GENERAL.—Subject to paragraph (3), 

25 the reinsurance payment amount under this sub-
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1 section for a qualifying covered individual (as de2 fined in subsection (f)(1)) for a coverage year (as 

3 defined in subsection (f)(2)) is equal to such per4 centages, at such attachment points, as the Sec5 retary may specify in order to provide that the total 

6 of the payments made for the year under this sec7 tion is equal to 65 percent of the total payments de8 scribed in paragraph (2)(B) during the year. The 

9 Secretary shall adjust such percentages and attach10 ment points each year. 

11 ‘‘(2) PAYMENT COMPUTATIONS.—The Secretary 

12 shall estimate—

13 ‘‘(A) the total payments to be made (with14 out regard to this subsection) during a year 

15 under this section; and 

16 ‘‘(B) the total payments to be made by 

17 qualifying entities for standard coverage under 

18 plans described in subsection (b) during the 

19 year. 

20 ‘‘(3) ADJUSTMENT OF PAYMENTS.—In lieu of, 

21 or in addition to, the adjustment made under para22 graph (1), the Secretary may provide for such pay23 ment adjustments (or direct subsidy payments) to 

24 PDP sponsors as the Secretary may specify in order 

25 to assure participation of PDP sponsors under this 
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1 part consistent with the limitations on premiums 

2 under section 1860F(a)(4). 

3 ‘‘(d) PAYMENT METHODS.—

4 ‘‘(1) IN GENERAL.—Payments under this sec5 tion shall be based on such a method as the Sec6 retary determines. The Secretary may establish a 

7 payment method by which interim payments of 

8 amounts under this section are made during a year 

9 based on the Secretary’s best estimate of amounts 

10 that will be payable after obtaining all of the infor11 mation. 

12 ‘‘(2) SOURCE OF PAYMENTS.—Payments under 

13 this section shall be made from the Medicare Pre14 scription Drug Account. 

15 ‘‘(e) QUALIFIED RETIREE PRESCRIPTION DRUG

16 PLAN DEFINED.—

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, the term ‘qualified retiree prescription drug 

19 plan’ means employment-based retiree health cov20 erage (as defined in paragraph (3)(A)) if, with re21 spect to an individual enrolled (or eligible to be en22 rolled) under this part who is covered under the 

23 plan, the following requirements are met: 

24 ‘‘(A) ASSURANCE.—The sponsor of the 

25 plan shall annually attest, and provide such as-
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1 surances as the Secretary may require, that the 

2 coverage meets the requirements for qualified 

3 prescription drug coverage. 

4 ‘‘(B) AUDITS.—The sponsor (and the plan) 

5 shall maintain, and afford the Secretary access 

6 to, such records as the Secretary may require 

7 for purposes of audits and other oversight ac8 tivities necessary to ensure the adequacy of pre9 scription drug coverage, the accuracy of pay10 ments made, and such other matters as may be 

11 appropriate. 

12 ‘‘(C) PROVISION OF CERTIFICATION OF

13 PRESCRIPTION DRUG COVERAGE.—The sponsor 

14 of the plan shall provide for issuance of certifi15 cations of the type described in section 

16 1860A(c)(2)(D). 

17 ‘‘(D) OTHER REQUIREMENTS.—The spon18 sor of the plan shall comply with such other re19 quirements as the Secretary finds necessary to 

20 administer the program under this section.

21 ‘‘(2) LIMITATION ON BENEFIT ELIGIBILITY.—

22 No payment shall be provided under this section 

23 with respect to an individual who is enrolled under 

24 a qualified retiree prescription drug plan unless the 

25 individual is a medicare primary individual who—
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1 ‘‘(A) is covered under the plan; and 

2 ‘‘(B) is eligible to obtain qualified prescrip3 tion drug coverage under section 1860A but did 

4 not elect such coverage under this part (either 

5 through a prescription drug plan or through a 

6 Medicare+Choice plan). 

7 ‘‘(3) DEFINITIONS.—As used in this section: 

8 ‘‘(A) EMPLOYMENT-BASED RETIREE

9 HEALTH COVERAGE.—The term ‘employment10 based retiree health coverage’ means health in11 surance or other coverage of health care costs 

12 for medicare primary individuals (or for such 

13 individuals and their spouses and dependents) 

14 based on their status as former employees or 

15 labor union members. 

16 ‘‘(B) EMPLOYER.—The term ‘employer’ 

17 has the meaning given such term by section 

18 3(5) of the Employee Retirement Income Secu19 rity Act of 1974 (except that such term shall 

20 include only employers of two or more employ21 ees). 

22 ‘‘(C) SPONSOR.—The term ‘sponsor’ 

23 means a plan sponsor, as defined in section 

24 3(16)(B) of the Employee Retirement Income 

25 Security Act of 1974. 
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1 ‘‘(D) MEDICARE PRIMARY INDIVIDUAL.—

2 The term ‘medicare primary individual’ means, 

3 with respect to a plan, an individual who is cov4 ered under the plan and with respect to whom 

5 the plan is not a primary plan (as defined in 

6 section 1862(b)(2)(A)). 

7 ‘‘(f) GENERAL DEFINITIONS.—For purposes of this 

8 section: 

9 ‘‘(1) QUALIFYING COVERED INDIVIDUAL.—The 

10 term ‘qualifying covered individual’ means an indi11 vidual who—

12 ‘‘(A) is enrolled with a prescription drug 

13 plan under this part; 

14 ‘‘(B) is enrolled with a Medicare+Choice 

15 plan that provides qualified prescription drug 

16 coverage under part C; or 

17 ‘‘(C) is covered as a medicare primary in18 dividual under a qualified retiree prescription 

19 drug plan. 

20 ‘‘(2) COVERAGE YEAR.—The term ‘coverage 

21 year’ means a calendar year in which covered out22 patient drugs are dispensed if a claim for payment 

23 is made under the plan for such drugs, regardless of 

24 when the claim is paid. 
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1 ‘‘SEC. 1860I. MEDICARE PRESCRIPTION DRUG ACCOUNT IN 

2 FEDERAL SUPPLEMENTARY MEDICAL INSUR3 ANCE TRUST FUND. 

4 ‘‘(a) IN GENERAL.—There is created within the Fed5 eral Supplementary Medical Insurance Trust Fund estab6 lished by section 1841 an account to be known as the 

7 ‘Medicare Prescription Drug Account’ (in this section re8 ferred to as the ‘Account’). The Account shall consist of 

9 such gifts and bequests as may be made as provided in 

10 section 201(i)(1), and such amounts as may be deposited 

11 in, or appropriated to, such fund as provided in this part. 

12 Funds provided under this part to the Account shall be 

13 kept separate from all other funds within the Federal Sup14 plementary Medical Insurance Trust Fund. 

15 ‘‘(b) PAYMENTS FROM ACCOUNT.—

16 ‘‘(1) IN GENERAL.—The Managing Trustee 

17 shall pay from time to time from the Account such 

18 amounts as the Secretary certifies are necessary to 

19 make—

20 ‘‘(A) payments under section 1860G (relat21 ing to low-income subsidy payments); 

22 ‘‘(B) payments under section 1860H (re23 lating to reinsurance subsidy payments); and 

24 ‘‘(C) payments with respect to administra25 tive expenses under this part in accordance with 

26 section 201(g). 
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1 ‘‘(2) TRANSFERS TO MEDICAID ACCOUNT FOR

2 INCREASED ADMINISTRATIVE COSTS.—The Man3 aging Trustee shall transfer from time to time from 

4 the Account to the Grants to States for Medicaid ac5 count amounts the Secretary certifies are attrib6 utable to increases in payment resulting from the 

7 application of a higher Federal matching percentage 

8 under section 1935(b). 

9 ‘‘(3) TREATMENT IN RELATION TO PART B PRE10 MIUM.—Amounts payable from the Account shall not 

11 be taken into account in computing actuarial rates 

12 or premium amounts under section 1839. 

13 ‘‘(c) DEPOSITS INTO ACCOUNT.—

14 ‘‘(1) MEDICAID TRANSFER.—There is hereby 

15 transferred to the Account, from amounts appro16 priated for Grants to States for Medicaid, amounts 

17 equivalent to the aggregate amount of the reductions 

18 in payments under section 1903(a)(1) attributable to 

19 the application of section 1935(c). 

20 ‘‘(2) APPROPRIATIONS TO COVER GOVERNMENT

21 CONTRIBUTIONS.—There are authorized to be appro22 priated from time to time, out of any moneys in the 

23 Treasury not otherwise appropriated, to the Ac24 count, an amount equivalent to the amount of pay25 ments made from the Account under subsection (b), 
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1 reduced by the amount transferred to the Account 

2 under paragraph (1). 

3 ‘‘SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES 

4 TO PROVISIONS IN PART C. 

5 ‘‘(a) DEFINITIONS.—For purposes of this part: 

6 ‘‘(1) COVERED OUTPATIENT DRUGS.—The term 

7 ‘covered outpatient drugs’ is defined in section 

8 1860B(f). 

9 ‘‘(2) INITIAL COVERAGE LIMIT.—The term ‘ini10 tial coverage limit’ means the such limit as estab11 lished under section 1860B(b)(3), or, in the case of 

12 coverage that is not standard coverage, the com13 parable limit (if any) established under the coverage. 

14 ‘‘(3) MEDICARE PRESCRIPTION DRUG AC15 COUNT.—The term ‘Medicare Prescription Drug Ac16 count’ means the Account in the Federal Supple17 mentary Medical Insurance Trust Fund created 

18 under section 1860I(a).

19 ‘‘(4) PDP SPONSOR.—The term ‘PDP sponsor’ 

20 means an entity that is certified under this part as 

21 meeting the requirements and standards of this part 

22 for such a sponsor. 

23 ‘‘(5) PRESCRIPTION DRUG PLAN.—The term 

24 ‘prescription drug plan’ means health benefits cov25 erage that—
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1 ‘‘(A) is offered under a policy, contract, or 

2 plan by a PDP sponsor pursuant to, and in ac3 cordance with, a contract between the Secretary 

4 and the sponsor under section 1860D(b); 

5 ‘‘(B) provides qualified prescription drug 

6 coverage; and 

7 ‘‘(C) meets the applicable requirements of 

8 the section 1860C for a prescription drug plan. 

9 ‘‘(6) QUALIFIED PRESCRIPTION DRUG COV10 ERAGE.—The term ‘qualified prescription drug cov11 erage’ is defined in section 1860B(a). 

12 ‘‘(7) STANDARD COVERAGE.—The term ‘stand13 ard coverage’ is defined in section 1860B(b). 

14 ‘‘(b) APPLICATION OF MEDICARE+CHOICE PROVI15 SIONS UNDER THIS PART.—For purposes of applying pro16 visions of part C under this part with respect to a pre17 scription drug plan and a PDP sponsor, unless otherwise 

18 provided in this part such provisions shall be applied as 

19 if—

20 ‘‘(1) any reference to a Medicare+Choice plan 

21 included a reference to a prescription drug plan; 

22 ‘‘(2) any reference to a provider-sponsored or23 ganization included a reference to a PDP sponsor; 
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1 ‘‘(3) any reference to a contract under section 

2 1857 included a reference to a contract under sec3 tion 1860D(b); and 

4 ‘‘(4) any reference to part C included a ref5 erence to this part. 

6 ‘‘MEDICARE PRESCRIPTION DRUG ADVISORY COMMITTEE

7 ‘‘SEC. 1860K. (a) ESTABLISHMENT OF COM8 MITTEE.—There is established a Medicare Prescription 

9 Drug Advisory Committee (in this section referred to as 

10 the ‘Committee’). 

11 ‘‘(b) FUNCTIONS OF COMMITTEE.—The Committee 

12 shall advise the Secretary on policies related to the devel13 opment of standards and guidelines for the implementa14 tion and administration of the outpatient prescription 

15 drug benefit program under this part. 

16 ‘‘(c) STRUCTURE AND MEMBERSHIP OF THE COM17 MITTEE.—

18 ‘‘(1) STRUCTURE.—The Committee shall be 

19 composed of 19 members, of whom—

20 ‘‘(A) 12 shall be appointed by the Sec21 retary; 

22 ‘‘(B) 3 shall be appointed by the President; 

23 ‘‘(C) 2 shall be appointed by the Speaker 

24 of the House of Representatives; and 

25 ‘‘(D) 2 shall be appointed by the Majority 

26 Leader of the Senate. 
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1 ‘‘(2) MEMBERSHIP.—

2 ‘‘(A) IN GENERAL.—The members of the 

3 Committee shall be chosen on the basis of their 

4 integrity, impartiality, and good judgment, and 

5 shall be individuals who are, by reason of their 

6 education, experience, and attainments, excep7 tionally qualified to perform the duties of mem8 bers of the Committee. 

9 ‘‘(B) SPECIFIC MEMBERS.—Of the mem10 bers appointed under paragraph (1)(A)—

11 ‘‘(i) 4 shall be chosen to represent 

12 physicians; 

13 ‘‘(ii) 3 shall be chosen to represent 

14 pharmacists; 

15 ‘‘(iii) 1 shall be chosen to represent 

16 the Centers for Medicare & Medicaid Serv17 ices; 

18 ‘‘(iv) 3 shall be chosen to represent 

19 actuaries, pharmacoeconomists, research20 ers, and other appropriate experts; and 

21 ‘‘(v) 1 shall be chosen to represent 

22 emerging drug technologies. 

23 ‘‘(d) TERMS OF APPOINTMENT.—Each member of 

24 the Committee shall serve for a term determined appro-
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1 priate by the Secretary. The terms of service of the mem2 bers initially appointed shall begin on January 1, 2004. 

3 ‘‘(e) CHAIRPERSON.—The Secretary shall designate 

4 a member of the Committee as Chairperson. The term as 

5 Chairperson shall be for a 1-year period. 

6 ‘‘(f) COMMITTEE PERSONNEL MATTERS.—

7 ‘‘(1) MEMBERS.—

8 ‘‘(A) COMPENSATION.—Each member of 

9 the Committee who is not an officer or em10 ployee of the Federal Government shall be com11 pensated at a rate equal to the daily equivalent 

12 of the annual rate of basic pay prescribed for 

13 level IV of the Executive Schedule under section 

14 5315 of title 5, United States Code, for each 

15 day (including travel time) during which such 

16 member is engaged in the performance of the 

17 duties of the Committee. All members of the 

18 Committee who are officers or employees of the 

19 United States shall serve without compensation 

20 in addition to that received for their services as 

21 officers or employees of the United States. 

22 ‘‘(B) TRAVEL EXPENSES.—The members 

23 of the Committee shall be allowed travel ex24 penses, including per diem in lieu of subsist25 ence, at rates authorized for employees of agen-
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1 cies under subchapter I of chapter 57 of title 5, 

2 United States Code, while away from their 

3 homes or regular places of business in the per4 formance of services for the Committee. 

5 ‘‘(2) STAFF.—The Committee may appoint 

6 such personnel as the Committee considers appro7 priate. 

8 ‘‘(g) OPERATION OF THE COMMITTEE.—

9 ‘‘(1) MEETINGS.—The Committee shall meet at 

10 the call of the Chairperson (after consultation with 

11 the other members of the Committee) not less often 

12 than quarterly to consider a specific agenda of 

13 issues, as determined by the Chairperson after such 

14 consultation. 

15 ‘‘(2) QUORUM.—Ten members of the Com16 mittee shall constitute a quorum for purposes of 

17 conducting business.

18 ‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—Section 

19 14 of the Federal Advisory Committee Act (5 U.S.C. 

20 App.) shall not apply to the Committee. 

21 ‘‘(i) TRANSFER OF PERSONNEL, RESOURCES, AND

22 ASSETS.—For purposes of carrying out its duties, the Sec23 retary and the Committee may provide for the transfer 

24 to the Committee of such civil service personnel in the em25 ploy of the Department of Health and Human Services 
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1 (including the Centers for Medicare & Medicaid Services), 

2 and such resources and assets of the Department used in 

3 carrying out this title, as the Committee requires. 

4 ‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There 

5 are authorized to be appropriated such sums as may be 

6 necessary to carry out the purposes of this section.’’. 

7 (b) CONFORMING AMENDMENTS TO FEDERAL SUP8 PLEMENTARY MEDICAL INSURANCE TRUST FUND.—Sec9 tion 1841 of the Social Security Act (42 U.S.C. 1395t) 

10 is amended—

11 (1) in the last sentence of subsection (a)—

12 (A) by striking ‘‘and’’ before ‘‘such 

13 amounts’’; and 

14 (B) by inserting before the period the fol15 lowing: ‘‘and such amounts as may be deposited 

16 in, or appropriated to, the Medicare Prescrip17 tion Drug Account established by section 

18 1860I’’; and 

19 (2) in subsection (g), by inserting after ‘‘by this 

20 part,’’ the following: ‘‘the payments provided for 

21 under part D (in which case the payments shall 

22 come from the Medicare Prescription Drug Account 

23 in the Trust Fund),’’. 

24 (c) ADDITIONAL CONFORMING CHANGES.—
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1 (1) CONFORMING REFERENCES TO PREVIOUS

2 PART D.—Any reference in law (in effect before the 

3 date of the enactment of this Act) to part D of title 

4 XVIII of the Social Security Act is deemed a ref5 erence to part E of such title (as in effect after such 

6 date). 

7 (2) SECRETARIAL SUBMISSION OF LEGISLATIVE

8 PROPOSAL.—Not later than 6 months after the date 

9 of the enactment of this Act, the Secretary of 

10 Health and Human Services shall submit to the ap11 propriate committees of Congress a legislative pro12 posal providing for such technical and conforming 

13 amendments in the law as are required by the provi14 sions of this subtitle. 

15 SEC. 3. OFFERING OF QUALIFIED PRESCRIPTION DRUG 

16 COVERAGE UNDER THE MEDICARE+CHOICE 

17 PROGRAM. 

18 (a) IN GENERAL.—Section 1851 of the Social Secu19 rity Act (42 U.S.C. 1395w–21) is amended by adding at 

20 the end the following new subsection: 

21 ‘‘(j) AVAILABILITY OF PRESCRIPTION DRUG BENE22 FITS.—

23 ‘‘(1) IN GENERAL.—A Medicare+Choice orga24 nization may not offer prescription drug coverage 

25 (other than that required under parts A and B) to 
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1 an enrollee under a Medicare+Choice plan unless 

2 such drug coverage is at least qualified prescription 

3 drug coverage and unless the requirements of this 

4 subsection with respect to such coverage are met. 

5 ‘‘(2) COMPLIANCE WITH ADDITIONAL BENE6 FICIARY PROTECTIONS.—With respect to the offer7 ing of qualified prescription drug coverage by a 

8 Medicare+Choice organization under a 

9 Medicare+Choice plan, the organization and plan 

10 shall meet the requirements of section 1860C, in11 cluding requirements relating to information dis12 semination and grievance and appeals, in the same 

13 manner as they apply to a PDP sponsor and a pre14 scription drug plan under part D. The Secretary 

15 shall waive such requirements to the extent the Sec16 retary determines that such requirements duplicate 

17 requirements otherwise applicable to the organiza18 tion or plan under this part. 

19 ‘‘(3) TREATMENT OF COVERAGE.—Except as 

20 provided in this subsection, qualified prescription 

21 drug coverage offered under this subsection shall be 

22 treated under this part in the same manner as sup23 plemental health care benefits described in section 

24 1852(a)(3)(A). 
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1 ‘‘(4) AVAILABILITY OF PREMIUM AND COST2 SHARING SUBSIDIES FOR LOW-INCOME ENROLLEES

3 AND REINSURANCE SUBSIDY PAYMENTS FOR ORGA4 NIZATIONS.—For provisions—

5 ‘‘(A) providing premium and cost-sharing 

6 subsidies to low-income individuals receiving 

7 qualified prescription drug coverage through a 

8 Medicare+Choice plan, see section 1860G; and 

9 ‘‘(B) providing a Medicare+Choice organi10 zation with reinsurance subsidy payments for 

11 providing qualified prescription drug coverage 

12 under this part, see section 1860H. 

13 ‘‘(5) SPECIFICATION OF SEPARATE AND STAND14 ARD PREMIUM.—

15 ‘‘(A) IN GENERAL.—For purposes of ap16 plying section 1854 and section 1860G(b)(2)(B) 

17 with respect to qualified prescription drug cov18 erage offered under this subsection under a 

19 plan, the Medicare+Choice organization shall 

20 compute and publish the following: 

21 ‘‘(i) SEPARATE PRESCRIPTION DRUG

22 PREMIUM.—A premium for prescription 

23 drug benefits that constitute qualified pre24 scription drug coverage that is separate 

25 from other coverage under the plan. Such 
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1 premium shall be established consistent 

2 with the limitations described in section 

3 1860F(a)(4). 

4 ‘‘(ii) PORTION OF COVERAGE ATTRIB5 UTABLE TO STANDARD BENEFITS.—The 

6 ratio of the actuarial value of standard 

7 coverage to the actuarial value of the 

8 qualified prescription drug coverage offered 

9 under the plan. 

10 ‘‘(iii) PORTION OF PREMIUM ATTRIB11 UTABLE TO STANDARD BENEFITS.—A 

12 standard premium equal to the product of 

13 the premium described in clause (i) and 

14 the ratio under clause (ii). 

15 The premium under clause (i) shall be compute 

16 without regard to any reduction in the premium 

17 permitted under subparagraph (B).

18 ‘‘(B) REDUCTION OF PREMIUMS AL19 LOWED.—Nothing in this subsection shall be 

20 construed as preventing a Medicare+Choice or21 ganization from reducing the amount of a pre22 mium charged for prescription drug coverage 

23 because of the application of section 

24 1854(f)(1)(A) to other coverage. 
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1 ‘‘(C) ACCEPTANCE OF REFERENCE PRE2 MIUM AS FULL PREMIUM IF NO STANDARD (OR

3 EQUIVALENT) COVERAGE IN AN AREA.—For re4 quirement to accept reference premium as full 

5 premium if there is no standard (or equivalent) 

6 coverage in the area of a Medicare+Choice 

7 plan, see section 1860F(d). 

8 ‘‘(6) TRANSITION IN INITIAL ENROLLMENT PE9 RIOD.—Notwithstanding any other provision of this 

10 part, the annual, coordinated election period under 

11 subsection (e)(3)(B) for 2004 shall be the 6-month 

12 period beginning with November 2003. 

13 ‘‘(7) QUALIFIED PRESCRIPTION DRUG COV14 ERAGE; STANDARD COVERAGE.—For purposes of 

15 this part, the terms ‘qualified prescription drug cov16 erage’ and ‘standard coverage’ have the meanings 

17 given such terms in section 1860B.’’. 

18 (b) CONFORMING AMENDMENTS.—Section 1851 of 

19 such Act (42 U.S.C. 1395w–21) is amended—

20 (1) in subsection (a)(1)—

21 (A) by inserting ‘‘(other than qualified pre22 scription drug benefits)’’ after ‘‘benefits’’; 

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

24 subparagraph (B) and inserting a comma; and 
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1 (C) by adding after and below subpara2 graph (B) the following: 

3 ‘‘and may elect qualified prescription drug coverage 

4 in accordance with section 1860A.’’; and 

5 (2) in subsection (g)(1), by inserting ‘‘and sec6 tion 1860A(c)(2)(B)’’ after ‘‘in this subsection’’. 

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

8 this section apply to coverage provided on or after January 

9 1, 2006. 

10 SEC. 4. MEDICAID AMENDMENTS. 

11 (a) DETERMINATIONS OF ELIGIBILITY FOR LOW-IN12 COME SUBSIDIES.—

13 (1) REQUIREMENT.—Section 1902 of the Social 

14 Security Act (42 U.S.C. 1396a) is amended—

15 (A) in subsection (a)—

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

17 paragraph (64); 

18 (ii) by striking the period at the end 

19 of paragraph (65) and inserting ‘‘; and’’; 

20 and 

21 (iii) by inserting after paragraph (65) 

22 the following new paragraph: 

23 ‘‘(66) provide for making eligibility determina24 tions under section 1935(a).’’. 
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1 (2) NEW SECTION.—Title XIX of such Act is 

2 further amended—

3 (A) by redesignating section 1935 as sec4 tion 1936; and 

5 (B) by inserting after section 1934 the fol6 lowing new section: 

7 ‘‘SPECIAL PROVISIONS RELATING TO MEDICARE

8 PRESCRIPTION DRUG BENEFIT

9 ‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI10 BILITY DETERMINATIONS FOR LOW-INCOME SUB11 SIDIES.—As a condition of its State plan under this title 

12 under section 1902(a)(66) and receipt of any Federal fi13 nancial assistance under section 1903(a), a State shall—

14 ‘‘(1) make determinations of eligibility for pre15 mium and cost-sharing subsidies under (and in ac16 cordance with) section 1860G; 

17 ‘‘(2) inform the Secretary of such determina18 tions in cases in which such eligibility is established; 

19 and 

20 ‘‘(3) otherwise provide such Secretary with such 

21 information as may be required to carry out part D 

22 of title XVIII (including section 1860G). 

23 ‘‘(b) PAYMENTS FOR ADDITIONAL ADMINISTRATIVE

24 COSTS.—

25 ‘‘(1) IN GENERAL.—The amounts expended by 

26 a State in carrying out subsection (a) are, subject to 
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1 paragraph (2), expenditures reimbursable under the 

2 appropriate paragraph of section 1903(a); except 

3 that, notwithstanding any other provision of such 

4 section, the applicable Federal matching rates with 

5 respect to such expenditures under such section shall 

6 be increased as follows: 

7 ‘‘(A) For expenditures attributable to costs 

8 incurred during 2006, the otherwise applicable 

9 Federal matching rate shall be increased by 20 

10 percent of the percentage otherwise payable 

11 (but for this subsection) by the State. 

12 ‘‘(B) For expenditures attributable to costs 

13 incurred during 2007, the otherwise applicable 

14 Federal matching rate shall be increased by 40 

15 percent of the percentage otherwise payable 

16 (but for this subsection) by the State. 

17 ‘‘(C) For expenditures attributable to costs 

18 incurred during 2008, the otherwise applicable 

19 Federal matching rate shall be increased by 60 

20 percent of the percentage otherwise payable 

21 (but for this subsection) by the State. 

22 ‘‘(D) For expenditures attributable to costs 

23 incurred during 2009, the otherwise applicable 

24 Federal matching rate shall be increased by 80 
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1 percent of the percentage otherwise payable 

2 (but for this subsection) by the State. 

3 ‘‘(E) For expenditures attributable to costs 

4 incurred after 2010, the otherwise applicable 

5 Federal matching rate shall be increased to 100 

6 percent. 

7 ‘‘(2) COORDINATION.—The State shall provide 

8 the Secretary with such information as may be nec9 essary to properly allocate administrative expendi10 tures described in paragraph (1) that may otherwise 

11 be made for similar eligibility determinations.’’.

12 (b) PHASED-IN FEDERAL ASSUMPTION OF MEDICAID

13 RESPONSIBILITY FOR PREMIUM AND COST-SHARING SUB14 SIDIES FOR DUALLY ELIGIBLE INDIVIDUALS.—

15 (1) IN GENERAL.—Section 1903(a)(1) of the 

16 Social Security Act (42 U.S.C. 1396b(a)(1)) is 

17 amended by inserting before the semicolon the fol18 lowing: ‘‘, reduced by the amount computed under 

19 section 1935(c)(1) for the State and the quarter’’. 

20 (2) AMOUNT DESCRIBED.—Section 1935 of 

21 such Act, as inserted by subsection (a)(2), is amend22 ed by adding at the end the following new sub23 section: 
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1 ‘‘(c) FEDERAL ASSUMPTION OF MEDICAID PRE2 SCRIPTION DRUG COSTS FOR DUALLY-ELIGIBLE BENE3 FICIARIES.—

4 ‘‘(1) IN GENERAL.—For purposes of section 

5 1903(a)(1), for a State that is one of the 50 States 

6 or the District of Columbia for a calendar quarter 

7 in a year (beginning with 2006) the amount com8 puted under this subsection is equal to the product 

9 of the following: 

10 ‘‘(A) MEDICARE SUBSIDIES.—The total 

11 amount of payments made in the quarter under 

12 section 1860G (relating to premium and cost13 sharing prescription drug subsidies for low-in14 come medicare beneficiaries) that are attrib15 utable to individuals who are residents of the 

16 State and are entitled to benefits with respect 

17 to prescribed drugs under the State plan under 

18 this title (including such a plan operating under 

19 a waiver under section 1115). 

20 ‘‘(B) STATE MATCHING RATE.—A propor21 tion computed by subtracting from 100 percent 

22 the Federal medical assistance percentage (as 

23 defined in section 1905(b)) applicable to the 

24 State and the quarter. 
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1 ‘‘(C) PHASE-OUT PROPORTION.—The 

2 phase-out proportion (as defined in paragraph 

3 (2)) for the quarter. 

4 ‘‘(2) PHASE-OUT PROPORTION.—For purposes 

5 of paragraph (1)(C), the ‘phase-out proportion’ for 

6 a calendar quarter in—

7 ‘‘(A) 2006 is 80 percent; 

8 ‘‘(B) 2007 is 60 percent; 

9 ‘‘(C) 2008 is 40 percent; 

10 ‘‘(D) 2009 is 20 percent; or 

11 ‘‘(E) a year after 2009 is 0 percent.’’. 

12 (c) MEDICAID PROVIDING WRAP-AROUND BENE13 FITS.—Section 1935 of such Act, as so inserted and 

14 amended, is further amended by adding at the end the 

15 following new subsection: 

16 ‘‘(d) ADDITIONAL PROVISIONS.—

17 ‘‘(1) MEDICAID AS SECONDARY PAYOR.—In the 

18 case of an individual dually entitled to qualified pre19 scription drug coverage under a prescription drug 

20 plan under part D of title XVIII (or under a 

21 Medicare+Choice plan under part C of such title) 

22 and medical assistance for prescribed drugs under 

23 this title, medical assistance shall continue to be pro24 vided under this title for prescribed drugs to the ex25 tent payment is not made under the prescription 
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1 drug plan or the Medicare+Choice plan selected by 

2 the individual. 

3 ‘‘(2) CONDITION.—A State may require, as a 

4 condition for the receipt of medical assistance under 

5 this title with respect to prescription drug benefits 

6 for an individual eligible to obtain qualified prescrip7 tion drug coverage described in paragraph (1), that 

8 the individual elect qualified prescription drug cov9 erage under section 1860A.’’. 

10 (d) TREATMENT OF TERRITORIES.—

11 (1) IN GENERAL.—Section 1935 of such Act, as 

12 so inserted and amended, is further amended—

13 (A) in subsection (a) in the matter pre14 ceding paragraph (1), by inserting ‘‘subject to 

15 subsection (e)’’ after ‘‘section 1903(a)’’; 

16 (B) in subsection (c)(1), by inserting ‘‘sub17 ject to subsection (e)’’ after ‘‘1903(a)(1)’’; and 

18 (C) by adding at the end the following new 

19 subsection: 

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) (for providing medical 

3 assistance with respect to the provision of pre4 scription drugs to medicare beneficiaries), the 

5 amount otherwise determined under section 

6 1108(f) (as increased under section 1108(g)) 

7 for the State shall be increased by the amount 

8 specified in paragraph (3). 

9 ‘‘(2) PLAN.—The plan described in this para10 graph is a plan that—

11 ‘‘(A) provides medical assistance with re12 spect to the provision of covered outpatient 

13 drugs (as defined in section 1860B(f)) to low14 income medicare beneficiaries; and 

15 ‘‘(B) assures that additional amounts re16 ceived by the State that are attributable to the 

17 operation of this subsection are used only for 

18 such assistance. 

19 ‘‘(3) INCREASED AMOUNT.—

20 ‘‘(A) IN GENERAL.—The amount specified 

21 in this paragraph for a State for a year is equal 

22 to the product of—

23 ‘‘(i) the aggregate amount specified in 

24 subparagraph (B); and 
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1 ‘‘(ii) the amount specified in section 

2 1108(g)(1) for that State, divided by the 

3 sum of the amounts specified in such sec4 tion for all such States. 

5 ‘‘(B) AGGREGATE AMOUNT.—The aggre6 gate amount specified in this subparagraph 

7 for—

8 ‘‘(i) 2006, is equal to $20,000,000; or 

9 ‘‘(ii) a subsequent year, is equal to the 

10 aggregate amount specified in this sub11 paragraph for the previous year increased 

12 by annual percentage increase specified in 

13 section 1860B(b)(5) for the year involved. 

14 ‘‘(4) REPORT.—The Secretary shall submit to 

15 Congress a report on the application of this sub16 section and may include in the report such rec17 ommendations as the Secretary deems appropriate.’’. 

18 (2) CONFORMING AMENDMENT.—Section 

19 1108(f) of such Act is amended by inserting ‘‘and 

20 section 1935(e)(1)(B)’’ after ‘‘Subject to subsection 

21 (g)’’. 

22 SEC. 5. MEDIGAP TRANSITION PROVISIONS. 

23 (a) IN GENERAL.—Notwithstanding any other provi24 sion of law, no new medicare supplemental policy that pro25 vides coverage of expenses for prescription drugs may be 
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1 issued under section 1882 of the Social Security Act on 

2 or after January 1, 2006, to an individual unless it re3 places a medicare supplemental policy that was issued to 

4 that individual and that provided some coverage of ex5 penses for prescription drugs. 

6 (b) ISSUANCE OF SUBSTITUTE POLICIES IF OBTAIN

7 PRESCRIPTION DRUG COVERAGE THROUGH MEDICARE.—

8 (1) IN GENERAL.—The issuer of a medicare 

9 supplemental policy—

10 (A) may not deny or condition the issuance 

11 or effectiveness of a medicare supplemental pol12 icy that has a benefit package classified as ‘‘A’’, 

13 ‘‘B’’, ‘‘C’’, ‘‘D’’, ‘‘E’’, ‘‘F’’, or ‘‘G’’ (under the 

14 standards established under subsection (p)(2) of 

15 section 1882 of the Social Security Act, 42 

16 U.S.C. 1395ss) and that is offered and is avail17 able for issuance to new enrollees by such 

18 issuer; 

19 (B) may not discriminate in the pricing of 

20 such policy, because of health status, claims ex21 perience, receipt of health care, or medical con22 dition; and 

23 (C) may not impose an exclusion of bene24 fits based on a pre-existing condition under 

25 such policy, 
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1 in the case of an individual described in paragraph 

2 (2) who seeks to enroll under the policy not later 

3 than 63 days after the date of the termination of en4 rollment described in such paragraph and who sub5 mits evidence of the date of termination or 

6 disenrollment along with the application for such 

7 medicare supplemental policy. 

8 (2) INDIVIDUAL COVERED.—An individual de9 scribed in this paragraph is an individual who—

10 (A) enrolls in a prescription drug plan 

11 under part D of title XVIII of the Social Secu12 rity Act; and 

13 (B) at the time of such enrollment was en14 rolled and terminates enrollment in a medicare 

15 supplemental policy which has a benefit pack16 age classified as ‘‘H’’, ‘‘I’’, or ‘‘J’’ under the 

17 standards referred to in paragraph (1)(A) or 

18 terminates enrollment in a policy to which such 

19 standards do not apply but which provides ben20 efits for prescription drugs. 

21 (3) ENFORCEMENT.—The provisions of para22 graph (1) shall be enforced as though they were in23 cluded in section 1882(s) of the Social Security Act 

24 (42 U.S.C. 1395ss(s)). 
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1 (4) DEFINITIONS.—For purposes of this sub2 section, the term ‘‘medicare supplemental policy’’ 

3 has the meaning given such term in section 1882(g) 

4 of the Social Security Act (42 U.S.C. 1395ss(g)).

Æ