‘‘(i) FISCAL YEAR 2001.—With respect
to fiscal year 2001, the Administrator of
the Health Care Financing Administration
may enter into contracts under this section
without using competitive procedures, as
defined in section 4(5) of the Office of
Federal 
Procurement 
Policy 
Act 
(41
U.S.C. 403(5)), or any other provision of
law requiring competitive bidding.
‘‘(ii) FISCAL YEARS 2002, 2003, AND
2004.—With respect to fiscal years 2002,
2003, and 2004, the Administrator of the
Health Care Financing Administration
shall award contracts under this section
using competitive procedures (as so de-
fined).
‘‘(B) TERM.—Each contract shall be for a
uniform term of at least 1 year, but may be
made automatically renewable from term to
term in the absence of notice of termination by
either party.
‘‘(2) BENEFIT.—The contract shall require the
contractor to provide a low-income medicare bene-
ficiary and, if applicable, a medicare beneficiary with
high drug costs, outpatient prescription drug assist-
ance that is equivalent to the FEHBP-equivalent
benchmark benefit package described in section
2203(b)(2) and provide medication therapy manage-
ment benefits as described in section 2203(a)(3) in
a manner that is consistent with the provisions of
this title as such provisions apply to a State that
provides such assistance. Net aggregate expenditures
for medication therapy management services shall be
consistent with required allocations for such services
under section 2205(c)(6).
‘‘(3) QUALITY
AND
SERVICE
ASSESSMENT.—
The contract shall require the contractor to cooper-
ate with the quality and service assessment meas-
ures implemented in accordance with subsection
(b)(4).
‘‘(4) PAYMENTS.—The contract shall specify
the amount and manner by which payments (includ-
ing any administrative fees) shall be made to the
contractor for the provision of outpatient prescrip-
tion drug assistance to low-income medicare bene-
ficiaries and, if applicable, medicare beneficiaries
with high drug costs.
‘‘(5) ENSURING PATIENT ACCESS AND CHOICE
OF PHARMACY PROVIDERS.—The contract shall re-
quire the contractor—
‘‘(A) to allow any licensed pharmacy or
pharmacist to participate as a pharmacy pro-
vider in providing benefits under this section so
long as the pharmacy or pharmacist is willing
to abide by the terms and conditions the con-
tractor establishes to participate;
‘‘(B) to establish reimbursement rates to
pharmacy providers that are reasonable and
adequate to cover the costs of items and related
pharmacy services, including the costs of the
product, all costs associated with the dispensing
of the product, and the costs of providing medi-
cation therapy management services described
in section 2203(a)(3);
‘‘(C) not to vary pharmacy payment
amounts based upon the size of the entity dis-
pensing the prescription or factors commonly
associated with the size of the entity such as
annual prescription volume; and
‘‘(D) not to vary beneficiary cost-sharing
amounts based upon the source of dispensing or
method of distribution of the prescription.
‘‘(d) FUNDING.—
‘‘(1) 
AGGREGATE
OF
TRANSFERRED
AMOUNTS.—The Secretary, through the Adminis-
trator of the Health Care Financing Administration,
shall use the aggregate of the amounts transferred
and made available under section 2204(d)(1)(A)(i)
for purposes of carrying out the default program es-
tablished under this section. Such aggregate may be
used to provide outpatient prescription drug assist-
ance to any low-income medicare beneficiary, and,
subject to the availability of funds, medicare bene-
ficiary with high drug costs, who resides in a State
described in subsection (a)(1).
‘‘(2) LIMITATION ON ADMINISTRATIVE COSTS.—
Administrative expenditures incurred by the Sec-
retary or the Administrator of the Health Care Fi-
nancing Administration for a fiscal year to carry out
this section (other than administrative fees paid to
a contractor under a contract meeting the require-
ments of subsection (c))—
‘‘(A) shall be paid out of the aggregate
amounts described in paragraph (1); and
‘‘(B) may not exceed an amount equal to
1 percent of all premiums imposed for such fis-
cal year to provide outpatient prescription drug
assistance to low-income medicare beneficiaries
and medicare beneficiaries with high drug costs
under this section.
‘‘(e) TERMINATION.—Except as provided in section
2201(d)(2), the program established under this section
shall terminate on September 30, 2004.
‘‘SEC. 2210. DEFINITIONS.
‘‘In this title:
‘‘(1) COST-SHARING.—The term ‘cost-sharing’
means a deductible, coinsurance, copayment, or simi-
lar charge, and includes an enrollment fee.
‘‘(2) OUTPATIENT PRESCRIPTION DRUG ASSIST-
ANCE.—
‘‘(A) IN GENERAL.—The term ‘outpatient
prescription drug assistance’ means, subject to
subparagraph (B), payment for part or all of
the cost of coverage of self-administered out-
patient prescription drugs and biologicals (in-
cluding insulin and insulin supplies) for low-in-
come medicare beneficiaries and, if applicable,
medicare beneficiaries with high drug costs.
‘‘(B) EXCLUSIONS.—Such term does not
include payment or coverage with respect to—
‘‘(i) items covered under title XVIII;
or
‘‘(ii) items for which coverage is not
available under a State plan under title
XIX.
‘‘(3) OUTPATIENT PRESCRIPTION DRUG ASSIST-
ANCE PLAN; PLAN.—Unless the context otherwise re-
quires, the terms ‘outpatient prescription drug as-
sistance plan’ and ‘plan’ mean an outpatient pre-
scription drug assistance plan approved under sec-
tion 2206.
‘‘(4) GROUP HEALTH PLAN; GROUP HEALTH IN-
SURANCE COVERAGE; ETC.—The terms ‘group health
plan’, ‘group health insurance coverage’, and ‘health
insurance coverage’ have the meanings given such
terms in section 2791 of the Public Health Service
Act (42 U.S.C. 300gg–91).
‘‘(5) POVERTY LINE.—The term ‘poverty line’
has the meaning given such term in section 673(2)
of the Community Services Block Grant Act (42
U.S.C. 9902(2)), including any revision required by
such section.
‘‘(6) PREEXISTING
CONDITION
EXCLUSION.—
The term ‘preexisting condition exclusion’ has the
meaning given such term in section 2701(b)(1)(A) of
the 
Public 
Health 
Service 
Act 
(42 
U.S.C.
300gg(b)(1)(A)).
‘‘(7) STATE.—The term ‘State’ has the mean-
ing given such term for purposes of title XIX.’’.
(b) CONFORMING AMENDMENTS.—
(1) 
DEFINITION
OF
STATE.—Section
1101(a)(1) of the Social Security Act (42 U.S.C.
1301(a)(1)) is amended in the first and fourth sen-
tences, by striking ‘‘and XXI’’ each place it appears
and inserting ‘‘XXI, and XXII’’.
(2) TREATMENT AS STATE HEALTH CARE PRO-
GRAM.—Section 1128(h) of such Act (42 U.S.C.
1320a–7(h)) is amended—
(A) in paragraph (3), by striking ‘‘or’’ at
the end;
(B) in paragraph (4), by striking the pe-
riod at the end and inserting ‘‘, or’’; and
(C) by adding at the end the following new
paragraph:
‘‘(5) an outpatient prescription drug assistance
plan approved under title XXII.’’.
SEC. 3. ELECTION BY LOW-INCOME MEDICARE BENE-
FICIARIES AND MEDICARE BENEFICIARIES
WITH 
HIGH 
DRUG 
COSTS 
TO 
SUSPEND
MEDIGAP INSURANCE.
Section 1882(q) of the Social Security Act (42 U.S.C.
1395ss(q)) is amended—
(1) in paragraph (5)(C), by striking ‘‘this para-
graph or paragraph (6)’’ and inserting ‘‘this para-
graph, or paragraph (6) or (7)’’; and