patients served by such providers and shall take into
account, to the extent practicable, the medical out-
comes resulting from such practices.
(2) DISSEMINATION
OF
INFORMATION.—The
Secretary shall establish a method for disseminating
summary information to the public on the clinical
profiles established under paragraph (1). No infor-
mation that identifies (or permits the identification
of) an individual patient shall be disseminated.
(b) AUTHORITY
TO
MAKE
PAYMENT
ADJUST-
MENTS.—For items and services furnished on or after
January 1, 2003, the Secretary of Health and Human
Services may adjust the amount of the payments made
under the medicare program to such health care providers
in order to encourage their provision of services in a medi-
cally appropriate manner and to discourage significant de-
viations in underservice or overservice from generally ac-
cepted norms of medical practice. Such adjustments shall
be made on the basis of provider profiles established under
subsection (a) and shall be made only after—
(1) taking into account variations among pro-
viders in the case mix and severity of patients
served; and
(2) the Secretary determines that discouraging
particular patterns of overservice will not adversely
affect outcomes or quality of care.
(c) SCHEDULE TO REDUCE OVERPAYMENTS.—
(1) IN GENERAL.—For items and services fur-
nished on or after January 1, 2004, the Secretary
shall annually reduce overpayments to providers by
five percent of the overpayment amount (as defined
in paragraph (2)). Such reduction shall be adminis-
tered through a percentage reduction in the pro-
viders’ applicable payment methodology.
(2) OVERPAYMENT AMOUNT DEFINED.—In this
subsection, the term ‘‘overpayment amount’’ means
a health care provider’s payment profile minus the
median national payment profiles for similar health
care providers, adjusted for variations in case mix
and severity of patients served.
SEC. 4. ADJUSTMENT IN MEDICARE+CHOICE PAYMENT
RATES TO OVERPAID COUNTIES.
(a) IN GENERAL.—Section 1853(c)(1)(C) of the So-
cial Security Act (42 U.S.C. 1395w–23(c)(1)(C)) is
amended—
(1) in clause (ii), by striking ‘‘For a subsequent
year,’’ and inserting ‘‘Subject to clause (iii), for a
subsequent year,’’; and
(2) by adding at the end the following new
clause:
‘‘(iii) In the case of a year beginning
after 1999 for which the Secretary deter-
mines there is an overpaid payment area
(as defined in paragraph (8)), the fol-
lowing:
‘‘(I) In the case of such overpaid
payment area, 100.5 percent of the
annual Medicare+Choice capitation
rate under this paragraph for the area
for the previous year.
‘‘(II) In the case of a payment
area that is not an overpaid payment
area, 102 percent of the annual
Medicare+Choice 
capitation 
rate
under this paragraph for the area for
the previous year.’’.
(b) OVERPAID PAYMENT AREA DEFINED.—Section
1853(c) of such Act (42 U.S.C. 1395w–23(c)) is amended
by adding at the end the following new paragraph:
‘‘(8) OVERPAID PAYMENT AREA DEFINED.—For
purposes of paragraph (1)(C)(iii), the term ‘overpaid
payment area’ means a Medicare+Choice payment
area for a year for which the annual per capita rate
of payment for such area exceeds the mean of the
annual per capita rates of payments for all
Medicare+Choice payment areas for that year by
more than two standard deviations, such mean de-
termined without regard to the number of Medicare
beneficiaries in such payment areas.’’.
(c) ALLOCATION OF SAVINGS TO UNDERPAID COUN-
TIES.—For a contract year consisting of a calendar year
beginning on or after January 1, 2000, for which the Sec-
retary of Health and Human Services has determined
there is an overpaid payment area (as defined in section
1853(c)(8)), as added by subsection (b), the Secretary
shall adjust the annual per capita rate of payment for
Medicare+Choice payment areas described in section
1853(c)(1)(C)(iii)(II), as added by subsection (a), to in-
crease the blended capitation rate applicable to such areas
under section 1853(c)(1)(A) (in such pro rata manner as
the Secretary determines appropriate) by an aggregate
amount equal to the aggregate amount of reductions in
payments attributable to section 1853(c)(1)(C)(iii)(I), as
added by subsection (a).
SEC. 5. PROVISION OF EMERGENCY OUTPATIENT PRE-
SCRIPTION DRUG COVERAGE FOR MEDICARE
BENEFICIARIES LOSING DRUG COVERAGE
UNDER MEDICARE+CHOICE PLANS.
(a) TEMPORARY COVERAGE OF OUTPATIENT PRE-
SCRIPTION DRUGS FOR MEDICARE BENEFICIARIES LOS-
ING
PRESCRIPTION
DRUG
COVERAGE
UNDER
MEDICARE+CHOICE PLANS.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall provide for coverage of out-
patient prescription drugs to eligible Medicare bene-
ficiaries under this section. The Secretary shall pro-
vide for such coverage by entering into agreements
with eligible organizations to furnish such coverage.
(2) TERM
OF
EMERGENCY
COVERAGE.—The
Secretary shall provide coverage of outpatient pre-
scription drugs to an eligible Medicare beneficiary
under this section for the 18-month period beginning
on the date the eligible Medicare beneficiary loses
coverage of outpatient prescription drugs under the
Medicare+Choice plan in which the beneficiary is
enrolled.
(3) COST-SHARING.—The Secretary shall im-
pose the following cost-sharing requirements under
coverage of outpatient prescription drugs furnished
under this section:
(A) Benefits under this section shall not
begin until the eligible medicare beneficiary has
met a $50 deductible.
(B) The eligible Medicare beneficiary shall
pay coinsurance in the amount of 10 percent.
(4) PAYMENT.—The Secretary shall provide for
payment for such coverage under this section from
the Emergency Reserve Outpatient Prescription
Drug Account established under subsection (b).
(b) ACCOUNT FOR EMERGENCY OUTPATIENT PRE-
SCRIPTION DRUG BENEFIT IN SMI TRUST FUND.—
(1) ESTABLISHMENT.—There is hereby estab-
lished in the Federal Supplementary Medical Insur-
ance Trust Fund under section 1841 of the Social
Security Act (42 U.S.C. 1395t) an expenditure ac-
count to be known as the ‘‘Emergency Reserve Out-
patient Prescription Drug Account’’.
(2) CREDITING
OF
FUNDS.—The Managing
Trustee shall credit to the Emergency Reserve Out-
patient Prescription Drug Account such amounts as
may be deposited in the Federal Supplementary
Medical Insurance Trust Fund as follows:
(A) Amounts appropriated to the account.
(B) Amounts equal to the annual out-
standing balance of the Health Care Fraud and
Abuse Control Account under section 1817(k)
of the Social Security Act (42 U.S.C. 1395i(k))
at the end of each fiscal year that the Secretary
determines may be made available to the Emer-
gency Reserve Outpatient Prescription Drug
Account.
(C) Amounts attributable to reductions in
payments to providers under section 3(c) of this
Act.
(3) USE
OF
FUNDS.—Funds credited to the
Outpatient Prescription Drug Account may only be
used to pay for outpatient prescription drugs fur-
nished under this section.
(c) DEFINITIONS.—In this section:
(1) ELIGIBLE
MEDICARE
BENEFICIARY.—The
term ‘‘eligible Medicare beneficiary’’ means an
individual—
(A) who is enrolled in a Medicare+Choice
plan under part C of title XVIII of the Social
Security Act;
(B) who requires outpatient prescription
drugs for an extended period of time for the
treatment of a condition, as determined by a
physician; and
(C)(i) whose enrollment in such plan is ter-
minated or may not be renewed for the next
contract year because the plan has been termi-
nated or will not be offered in such contract
year; or
(ii) whose coverage of outpatient prescrip-
tion drugs under such plan has been termi-
nated, significantly reduced, or no longer pro-
vides for the coverage of a particular outpatient
prescription drug required as specified under
subparagraph (B).
(2) COVERED OUTPATIENT DRUG.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘‘covered outpatient
drug’’ means any of the following products:
(i) A drug which may be dispensed
only upon prescription, and—
(I) which is approved for safety
and effectiveness as a prescription
drug under section 505 of the Federal
Food, Drug, and Cosmetic Act;
(II)(aa) which was commercially
used or sold in the United States be-
fore the date of enactment of the
Drug Amendments of 1962 or which
is identical, similar, or related (within
the meaning of section 310.6(b)(1) of
title 21 of the Code of Federal Regu-
lations) to such a drug, and (bb)
which has not been the subject of a
final determination by the Secretary
that it is a ‘‘new drug’’ (within the
meaning of section 201(p) of the Fed-
eral Food, Drug, and Cosmetic Act)
or an action brought by the Secretary
under section 301, 302(a), or 304(a)
of such Act to enforce section 502(f)
or 505(a) of such Act; or
(III)(aa) which is described in
section 107(c)(3) of the Drug Amend-
ments of 1962 and for which the Sec-
retary has determined there is a com-
pelling justification for its medical
need, or is identical, similar, or re-
lated (within the meaning of section
310.6(b)(1) of title 21 of the Code of
Federal Regulations) to such a drug,
and (bb) for which the Secretary has
not issued a notice of an opportunity
for a hearing under section 505(e) of
the Federal Food, Drug, and Cos-
metic Act on a proposed order of the
Secretary to withdraw approval of an
application for such drug under such
section because the Secretary has de-
termined that the drug is less than ef-
fective for all conditions of use pre-
scribed, recommended, or suggested in
its labeling.
(ii) A biological product which—
(I) may only be dispensed upon
prescription;
(II) is licensed under section 351
of the Public Health Service Act; and
(III) is produced at an establish-
ment licensed under such section to
produce such product.
(iii) Insulin approved under appro-
priate Federal law.
(iv) A prescribed drug or biological
product that would meet the requirements
of clause (i) or (ii) but that is available
over-the-counter in addition to being avail-
able upon prescription.
(B) EXCLUSION.—The term ‘‘covered out-
patient drug’’ does not include any product—
(i) except as provided in subparagraph
(A)(iv), which may be distributed to indi-
viduals without a prescription;
(ii) when furnished as part of, or as
incident to, a diagnostic service or any
other item or service for which payment
may be made under title XVIII of the So-
cial Security Act; or
(iii) that is a therapeutically equiva-
lent replacement for a product described in
clause (i) or (ii), as determined by the Sec-
retary.
(3) ELIGIBLE ORGANIZATION.—The term ‘‘eligi-
ble organization’’ means any organization that the
Secretary determines to be appropriate, including—
(A) pharmaceutical benefit management
companies;
(B) wholesale and retail pharmacist deliv-
ery systems;
(C) insurers;
(D) other organizations; or
(E) any combination of the entities de-
scribed in subparagraphs (A) through (D).
(4) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
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