I 

108TH CONGRESS 

2D SESSION H. R. 4903

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

accountability in the Medicare Advantage and prescription drug programs. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 22, 2004

Mr. BROWN of Ohio (for himself, Mr. DINGELL, Mr. RANGEL, Mr. STARK, 

and Mr. WAXMAN) introduced the following bill; which was referred to 

the Committee on Ways and Means, and in addition to the Committee 

on Energy and Commerce, 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 improved accountability in the Medicare Advantage 

and prescription drug programs.

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 ‘‘Medicare Advantage and Prescription Drug Account6 ability Act of 2004’’. 

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

8 this Act is as follows:
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Sec. 1. Short title; table of contents. 

Sec. 2. Requirement for reasonable return of benefits. 

Sec. 3. Financial transparency. 

Sec. 4. Beneficiary sign-off. 

Sec. 5. Annual accountability reports. 

Sec. 6. Auditing of actuarial equivalency. 

Sec. 7. Report comparing costs and benefits under Medicare Advantage plans, 

medicare supplemental policies, and fee-for-service medicare.

1 SEC. 2. REQUIREMENT FOR REASONABLE RETURN OF BEN2 EFITS. 

3 (a) MEDICARE ADVANTAGE PLANS.—Section 

4 1857(e) of the Social Security Act (42 U.S.C. 1395w–

5 27(e)) is amended by adding at the end the following new 

6 paragraph: 

7 ‘‘(4) NEGOTIATION FOR LOSS AND ADMINISTRA8 TIVE COST RATIOS.—

9 ‘‘(A) IN GENERAL.—The contract with an 

10 MA organization under this part shall provide 

11 for the following: 

12 ‘‘(i) MINIMUM LOSS RATIO.—Aggre13 gate average benefits that are at least a 

14 minimum ratio of the aggregate average 

15 revenues collected under the contract. 

16 ‘‘(ii) MAXIMUM ADMINISTRATIVE COST

17 RATIO.—Aggregate average administrative 

18 costs that do not exceed a maximum ratio 

19 of the aggregate average revenues collected 

20 under the contract. 
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1 ‘‘(B) ESTABLISHMENT OF RATIOS.—The 

2 ratios under clauses (i) and (ii) of subpara3 graph (A) shall be established by the Secretary. 

4 In establishing such ratios, the Secretary shall 

5 take into account, at a minimum, ratios typical 

6 of those—

7 ‘‘(i) under private health insurance 

8 plans; 

9 ‘‘(ii) under parts A and B of this title; 

10 and 

11 ‘‘(iii) under health benefits plans of12 fered under chapter 89 of title 5, United 

13 States Code (relating to the Federal Em14 ployees Health Benefits Program).’’. 

15 (b) AUDIT OF ADMINISTRATIVE COSTS AND COMPLI16 ANCE WITH THE FEDERAL ACQUISITION REGULATION.—

17 Section 1857(d)(2)(B) of such Act (42 U.S.C. 1395w–

18 27(d)(2)(B)) is amended—

19 (1) by striking ‘‘or (ii)’’ and inserting ‘‘(ii)’’; 

20 and 

21 (2) by inserting before the period at the end the 

22 following: ‘‘, or (iii) to compliance with the require23 ments of subsection (e)(4)(A) and the extent to 

24 which administrative costs comply with the applica-
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1 ble requirements for such costs under the Federal 

2 Acquisition Regulation’’. 

3 (c) APPLICATION TO PRESCRIPTION DRUG PLANS.—

4 The amendments made by subsections (a) and (b) apply, 

5 pursuant to section 1860D–12(b)(3) of the Social Security 

6 Act (42 U.S.C. 1395w–112(b)(3)), to contracts with pre7 scription drug sponsors under part D of title XVIII of 

8 such Act. 

9 (d) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply for contract years beginning after 

11 the date of the enactment of this Act. 

12 SEC. 3. FINANCIAL TRANSPARENCY. 

13 (a) MEDICARE ADVANTAGE PLANS.—Section 

14 1851(d) of the Social Security Act (42 U.S.C. 1395w–

15 21(d)) is amended by adding at the end the following new 

16 paragraph: 

17 ‘‘(8) FINANCIAL TRANSPARENCY.—

18 ‘‘(A) IN GENERAL.—Each MA organization 

19 shall provide annually to the Secretary (in a 

20 form and manner specified by the Secretary), 

21 with respect to each MA plan it offers and not 

22 later than 6 months after the end of each con23 tract year, information describing the organiza24 tion’s compliance with the requirements of sec25 tion 1857(e)(4) and a functional listing of the 
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1 organization’s administrative costs (by category 

2 of such costs, including, at a minimum, mar3 keting costs and claims processing costs), prof4 its, and investment income (as defined by the 

5 Secretary), as a ratio of aggregate average reve6 nues collected under the contract for that year. 

7 ‘‘(B) PUBLICATION.—The Secretary shall 

8 publish the information provided under sub9 paragraph (A) for each MA plan.’’. 

10 (b) CONFORMING APPLICATION TO PRESCRIPTION

11 DRUG PLANS.—Section 1860D–11(b)(2) of the Social Se12 curity Act (42 U.S.C. 1395w–111(b)(2)) is amended by 

13 redesignating subparagraph (F) as subparagraph (G) and 

14 by inserting after subparagraph (E) the following new 

15 subparagraph: 

16 ‘‘(F) PERIODIC AUDITING.—Information 

17 with respect to the prescription drug plan of the 

18 type described in section 1851(d)(8) with re19 spect to an MA plan.’’. 

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

21 this section shall apply to reporting of information for con22 tract years to which the amendments made by section 2 

23 apply.
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1 SEC. 4. BENEFICIARY SIGN-OFF. 

2 (a) MEDICARE ADVANTAGE PLANS.—Section 

3 1851(c)(2) of the Social Security Act (42 U.S.C. 1395w–

4 21(c)(2)) is amended by adding at the end the following 

5 new subparagraph: 

6 ‘‘(C) BENEFICIARY SIGN-OFF IN ELECTION

7 PROCESS.—An election to enroll with an MA 

8 plan shall not be effective unless the election 

9 form is signed by the individual and specifically 

10 acknowledges each of the following: 

11 ‘‘(i) The premiums, cost-sharing re12 quirements, and benefits under the plan 

13 may change at the beginning of each 12-

14 month contract period. 

15 ‘‘(ii) The individual may lose coverage 

16 of the individual’s physician or other pro17 vider at the beginning of each such period. 

18 ‘‘(iii) The plan may be terminated at 

19 the beginning of any such period. 

20 ‘‘(iv) Premiums and benefits under 

21 the plan may vary based on the county or 

22 other MA area in which the plan is of23 fered.’’. 

24 (b) APPLICATION TO PRESCRIPTION DRUG PLANS.—

25 The amendment made by subsection (a) applies, pursuant 

26 to section 1860D–1(b)(1)(B)(ii) of the Social Security Act 
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1 (42 U.S.C. 1395w–101(b)(1)(B)(ii)), to prescription drug 

2 plans under part D of title XVIII of such Act. 

3 (c) EFFECTIVE DATE.—The amendment made by 

4 subsection (a) shall apply to elections made on or after 

5 the date specified by the Secretary of Health and Human 

6 Services, but in no case later than 60 days after the date 

7 of the enactment of this Act. 

8 SEC. 5. ANNUAL ACCOUNTABILITY REPORTS. 

9 (a) MEDICARE ADVANTAGE ACCOUNTABILITY RE10 PORT.—Section 1856 of the Social Security Act (42 

11 U.S.C. 1395w–26) is amended—

12 (1) by amending the heading to read as follows: 

13 ‘‘ESTABLISHMENT OF STANDARDS; ANNUAL

14 ACCOUNTABILITY REPORT’’; 

15 and 

16 (2) by adding at the end the following new sub17 section: 

18 ‘‘(c) ANNUAL ACCOUNTABILITY REPORT.—

19 ‘‘(1) IN GENERAL.—The Secretary shall com20 pile, and transmit to Congress, at the end of each 

21 year (beginning with 2004), an annual Medicare Ad22 vantage accountability report. 

23 ‘‘(2) CONTENTS.—Each annual accountability 

24 report shall include the following: 
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1 ‘‘(A) A detailed analysis of geographic var2 iation in cost-sharing and premiums among MA 

3 plans. 

4 ‘‘(B) A comparison of the use of amounts 

5 paid to MA plans for benefit payments, admin6 istrative costs, and profits with the amounts ex7 pended under the fee-for-service programs 

8 under parts A and B for benefit payments and 

9 administrative expenses. 

10 ‘‘(C) Recommendations for legislative 

11 changes to the Medicare Advantage program, or 

12 the fee-for-service programs under parts A and 

13 B, to assure that medicare beneficiaries under 

14 both programs have access to comparable bene15 fits at comparable cost and that Government 

16 subsidies under the two programs are equiva17 lent. 

18 ‘‘(D) The results of audits conducted 

19 under section 1857(d) and enforcement actions 

20 taken in response to findings of inappropriate 

21 expenditures of funds under this part.’’. 

22 (b) PRESCRIPTION DRUG ACCOUNTABILITY RE23 PORT.—Section 1860D–12 of such Act (42 U.S.C. 

24 1395w–112) is amended by adding at the end the fol25 lowing new subsection: 
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1 ‘‘(h) ANNUAL ACCOUNTABILITY REPORT.—

2 ‘‘(1) IN GENERAL.—The Secretary shall com3 pile, and transmit to Congress, at the end of each 

4 year (beginning with 2006), an annual prescription 

5 drug accountability report. 

6 ‘‘(2) CONTENTS.—Each annual accountability 

7 report shall include the same types of information 

8 (as specified by the Secretary) with respect to pre9 scription drug plans as are provided under subpara10 graphs (A), (B), and (D) of section 1856(c)(2) with 

11 respect to MA plans.’’. 

12 SEC. 6. AUDITING OF ACTUARIAL EQUIVALENCY. 

13 (a) MEDICARE ADVANTAGE PLANS.—Section 

14 1854(a)(5) of the Social Security Act (42 U.S.C. 1395w–

15 24(a)(5)) is amended by adding at the end the following 

16 new subparagraph: 

17 ‘‘(B) PERIODIC AUDITS OF ACTUARIAL

18 EQUIVALENCY DETERMINATIONS.—In the case 

19 of MA plans that provide for an actuarially 

20 equivalent level of benefits under this part, the 

21 Inspector General of the Department of Health 

22 and Human Services shall periodically audit a 

23 representative sample of the determinations 

24 made by the Secretary regarding such actuarial 

25 equivalency to ensure that the Secretary is only 
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1 approving plans with benefits that are actuari2 ally equivalent.’’. 

3 (b) APPLICATION TO PRESCRIPTION DRUG PLANS.—

4 Section 1860D–11(e) of the Social Security Act (42 

5 U.S.C. 1395w–111(e)) is amended by adding at the end 

6 the following new paragraph: 

7 ‘‘(3) PERIODIC AUDITING OF ACTUARIAL

8 EQUIVALENCY DETERMINATIONS.—The provisions of 

9 section 1854(a)(5)(B) shall apply with respect to de10 terminations of actuarial equivalence of benefits 

11 under prescription drug plans in the same manner 

12 as they apply to determinations of actuarial equiva13 lence of benefits under MA plans.’’. 

14 SEC. 7. REPORT COMPARING COSTS AND BENEFITS UNDER 

15 MEDICARE ADVANTAGE PLANS, MEDICARE 

16 SUPPLEMENTAL POLICIES, AND FEE-FOR17 SERVICE MEDICARE. 

18 Not later than 1 year after the date of the enactment 

19 of this Act, the Secretary of Health and Human Services 

20 shall submit to Congress a report that compares the aver21 age benefit payments, administrative costs, profits, and in22 vestment income (expressed as a percentage of revenues 

23 collected) for MA plans with such average for the fee-for-
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1 service programs under parts A and B and for group and 

2 individual medicare supplemental policies.

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