H. R. 1—72
‘‘(A) IN GENERAL.—Each prescription drug card sponsor
that offers an endorsed discount card program shall make
available to discount card eligible individuals (through the
Internet and otherwise) information that the Secretary
identifies as being necessary to promote informed choice
among endorsed discount card programs by such individ-
uals, including information on enrollment fees and nego-
tiated prices for covered discount card drugs charged to
such individuals.
‘‘(B) 
RESPONSE
TO
ENROLLEE
QUESTIONS.—Each
sponsor offering an endorsed discount card program shall
have a mechanism (including a toll-free telephone number)
for providing upon request specific information (such as
negotiated prices and the amount of transitional assistance
remaining available through the program) to discount card
eligible individuals enrolled in the program. The sponsor
shall inform transitional assistance eligible individuals
enrolled in the program of the availability of such toll-
free telephone number to provide information on the
amount of available transitional assistance.
‘‘(C) INFORMATION
ON
BALANCE
OF
TRANSITIONAL
ASSISTANCE
AVAILABLE
AT
POINT-OF-SALE.—Each sponsor
offering an endorsed discount card program shall have
a mechanism so that information on the amount of transi-
tional assistance remaining under subsection (g)(1)(B) is
available (electronically or by telephone) at the point-of-
sale of covered discount card drugs.
‘‘(3) PUBLIC DISCLOSURE OF PHARMACEUTICAL PRICES FOR
EQUIVALENT DRUGS.—
‘‘(A) IN GENERAL.—A prescription drug card sponsor
offering an endorsed discount card program shall provide
that each pharmacy that dispenses a covered discount card
drug shall inform a discount card eligible individual
enrolled in the program of any differential between the
price of the drug to the enrollee and the price of the
lowest priced generic covered discount card drug under
the program that is therapeutically equivalent and bio-
equivalent and available at such pharmacy.
‘‘(B) TIMING OF NOTICE.—
‘‘(i) IN
GENERAL.—Subject to clause (ii), the
information under subparagraph (A) shall be provided
at the time of purchase of the drug involved, or, in
the case of dispensing by mail order, at the time of
delivery of such drug.
‘‘(ii) WAIVER.—The Secretary may waive clause (i)
in such circumstances as the Secretary may specify.
‘‘(e) DISCOUNT CARD FEATURES.—
‘‘(1) 
SAVINGS
TO
ENROLLEES
THROUGH
NEGOTIATED
PRICES.—
‘‘(A) ACCESS TO NEGOTIATED PRICES.—
‘‘(i) IN
GENERAL.—Each prescription drug card
sponsor that offers an endorsed discount card program
shall provide each discount card eligible individual
enrolled in the program with access to negotiated
prices.
H. R. 1—73
‘‘(ii) NEGOTIATED PRICES.—For purposes of this sec-
tion, negotiated prices shall take into account nego-
tiated price concessions, such as discounts, direct or
indirect subsidies, rebates, and direct or indirect remu-
nerations, for covered discount card drugs, and include
any dispensing fees for such drugs.
‘‘(B) ENSURING PHARMACY ACCESS.—Each prescription
drug card sponsor offering an endorsed discount card pro-
gram shall secure the participation in its network of a
sufficient number of pharmacies that dispense (other than
solely by mail order) drugs directly to enrollees to ensure
convenient access to covered discount card drugs at nego-
tiated prices (consistent with rules established by the Sec-
retary). The Secretary shall establish convenient access
rules under this clause that are no less favorable to
enrollees than the standards for convenient access to phar-
macies included in the statement of work of solicitation
(#MDA906–03–R–0002) of the Department of Defense
under the TRICARE Retail Pharmacy (TRRx) as of March
13, 2003.
‘‘(C) PROHIBITION
ON
CHARGES
FOR
REQUIRED
SERV-
ICES.—
‘‘(i) IN GENERAL.—Subject to clause (ii), a prescrip-
tion drug card sponsor (and any pharmacy contracting
with such sponsor for the provision of covered discount
card drugs to individuals enrolled in such sponsor’s
endorsed discount card program) may not charge an
enrollee any amount for any items and services
required to be provided by the sponsor under this
section.
‘‘(ii) CONSTRUCTION.—Nothing in clause (i) shall
be construed to prevent—
‘‘(I) the sponsor from charging the annual
enrollment fee (except in the case of a transitional
assistance eligible individual); and
‘‘(II) the pharmacy dispensing the covered dis-
count card drug, from imposing a charge (con-
sistent with the negotiated price) for the covered
discount card drug dispensed, reduced by the
amount of any transitional assistance made avail-
able.
‘‘(D) INAPPLICABILITY OF MEDICAID BEST PRICE RULES.—
The prices negotiated from drug manufacturers for covered
discount card drugs under an endorsed discount card pro-
gram under this section shall (notwithstanding any other
provision of law) not be taken into account for the purposes
of establishing the best price under section 1927(c)(1)(C).
‘‘(2) REDUCTION OF MEDICATION ERRORS AND ADVERSE DRUG
INTERACTIONS.—Each endorsed discount card program shall
implement a system to reduce the likelihood of medication
errors and adverse drug interactions and to improve medication
use.
‘‘(f) ELIGIBILITY PROCEDURES FOR ENDORSED PROGRAMS AND
TRANSITIONAL ASSISTANCE.—
‘‘(1) DETERMINATIONS.—
H. R. 1—74
‘‘(A) PROCEDURES.—The determination of whether an
individual is a discount card eligible individual or a transi-
tional assistance eligible individual or a special transitional
assistance eligible individual (as defined in subsection (b))
shall be determined under procedures specified by the Sec-
retary consistent with this subsection.
‘‘(B) INCOME AND FAMILY SIZE DETERMINATIONS.—For
purposes of this section, the Secretary shall define the
terms ‘income’ and ‘family size’ and shall specify the
methods and period for which they are determined. If under
such methods income or family size is determined based
on the income or family size for prior periods of time,
the Secretary shall permit (whether through a process of
reconsideration or otherwise) an individual whose income
or family size has changed to elect to have eligibility for
transitional assistance determined based on income or
family size for a more recent period.
‘‘(2) USE OF SELF-CERTIFICATION FOR TRANSITIONAL ASSIST-
ANCE.—
‘‘(A) IN
GENERAL.—Under the procedures specified
under paragraph (1)(A) an individual who wishes to be
treated as a transitional assistance eligible individual or
a special transitional assistance eligible individual under
this section (or another qualified person on such individ-
ual’s behalf) shall certify on the enrollment form under
subsection (c)(1)(B) (or similar form specified by the Sec-
retary), through a simplified means specified by the Sec-
retary and under penalty of perjury or similar sanction
for false statements, as to the amount of the individual’s
income, family size, and individual’s prescription drug cov-
erage (if any) insofar as they relate to eligibility to be
a transitional assistance eligible individual or a special
transitional assistance eligible individual. Such certification
shall be deemed as consent to verification of respective
eligibility under paragraph (3). A certification under this
paragraph may be provided before, on, or after the time
of enrollment under an endorsed program.
‘‘(B) TREATMENT
OF
SELF-CERTIFICATION.—The Sec-
retary shall treat a certification under subparagraph (A)
that is verified under paragraph (3) as a determination
that the individual involved is a transitional assistance
eligible individual or special transitional assistance eligible
individual (as the case may be) for the entire period of
the enrollment of the individual in any endorsed program.
‘‘(3) VERIFICATION.—
‘‘(A) IN
GENERAL.—The Secretary shall establish
methods (which may include the use of sampling and the
use of information described in subparagraph (B)) to verify
eligibility for individuals who seek to enroll in an endorsed
program and for individuals who provide a certification
under paragraph (2).
‘‘(B) 
INFORMATION
DESCRIBED.—The 
information
described in this subparagraph is as follows:
‘‘(i) MEDICAID-RELATED
INFORMATION.—Informa-
tion on eligibility under title XIX and provided to the
Secretary under arrangements between the Secretary
H. R. 1—75
and States in order to verify the eligibility of individ-
uals who seek to enroll in an endorsed program and
of individuals who provide certification under para-
graph (2).
‘‘(ii) SOCIAL
SECURITY
INFORMATION.—Financial
information made available to the Secretary under
arrangements between the Secretary and the Commis-
sioner of Social Security in order to verify the eligibility
of individuals who provide such certification.
‘‘(iii) INFORMATION
FROM
SECRETARY
OF
THE
TREASURY.—Financial information made available to
the Secretary under section 6103(l)(19) of the Internal
Revenue Code of 1986 in order to verify the eligibility
of individuals who provide such certification.
‘‘(C) VERIFICATION IN CASES OF MEDICAID ENROLLEES.—
‘‘(i) IN GENERAL.—Nothing in this section shall be
construed as preventing the Secretary from finding
that a discount card eligible individual meets the
income requirements under subsection (b)(2)(A) if the
individual is within a category of discount card eligible
individuals who are enrolled under title XIX (such
as qualified medicare beneficiaries (QMBs), specified
low-income medicare beneficiaries (SLMBs), and cer-
tain qualified individuals (QI–1s)).
‘‘(ii) 
AVAILABILITY
OF
INFORMATION
FOR
VERIFICATION PURPOSES.—As a condition of provision
of Federal financial participation to a State that is
one of the 50 States or the District of Columbia under
title XIX, for purposes of carrying out this section,
the State shall provide the information it submits to
the Secretary relating to such title in a manner speci-
fied by the Secretary that permits the Secretary to
identify individuals who are described in subsection
(b)(1)(B) or are transitional assistance eligible individ-
uals or special transitional assistance eligible individ-
uals.
‘‘(4) RECONSIDERATION.—
‘‘(A) IN
GENERAL.—The Secretary shall establish a
process under which a discount card eligible individual,
who is determined through the certification and verification
methods under paragraphs (2) and (3) not to be a transi-
tional assistance eligible individual or a special transitional
assistance eligible individual, may request a reconsider-
ation of the determination.
‘‘(B) CONTRACT AUTHORITY.—The Secretary may enter
into a contract to perform the reconsiderations requested
under subparagraph (A).
‘‘(C) COMMUNICATION OF RESULTS.—Under the process
under subparagraph (A) the results of such reconsideration
shall be communicated to the individual and the prescrip-
tion drug card sponsor involved.
‘‘(g) TRANSITIONAL ASSISTANCE.—
‘‘(1) PROVISION
OF
TRANSITIONAL
ASSISTANCE.—An indi-
vidual who is a transitional assistance eligible individual (as
determined under this section) and who is enrolled with an
endorsed program is entitled—
H. R. 1—76
‘‘(A) to have payment made of any annual enrollment
fee charged under subsection (c)(2) for enrollment under
the program; and
‘‘(B) to have payment made, up to the amount specified
in paragraph (2), under such endorsed program of 90 per-
cent (or 95 percent in the case of a special transitional
assistance eligible individual) of the costs incurred for cov-
ered discount card drugs obtained through the program
taking into account the negotiated price (if any) for the
drug under the program.
‘‘(2) LIMITATION ON DOLLAR AMOUNT.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), the
amount specified in this paragraph for a transitional assist-
ance eligible individual—
‘‘(i) for costs incurred during 2004, is $600; or
‘‘(ii) for costs incurred during 2005, is—
‘‘(I) $600, plus
‘‘(II) except as provided in subparagraph (E),
the amount by which the amount available under
this paragraph for 2004 for that individual exceeds
the amount of payment made under paragraph
(1)(B) for that individual for costs incurred during
2004.
‘‘(B) PRORATION.—
‘‘(i) IN GENERAL.—In the case of an individual not
described in clause (ii) with respect to a year, the
Secretary may prorate the amount specified in
subparagraph (A) for the balance of the year involved
in a manner specified by the Secretary.
‘‘(ii) 
INDIVIDUAL
DESCRIBED.—An 
individual
described in this clause is a transitional assistance
eligible individual who—
‘‘(I) with respect to 2004, enrolls in an
endorsed program, and provides a certification
under 
subsection 
(f)(2), 
before 
the 
initial
implementation date of the program under this
section; and
‘‘(II) with respect to 2005, is enrolled in an
endorsed program, and has provided such a certifi-
cation, before February 1, 2005.
‘‘(C) ACCOUNTING FOR AVAILABLE BALANCES IN CASES
OF
CHANGES
IN
PROGRAM
ENROLLMENT.—In the case of
a transitional assistance eligible individual who changes
the endorsed discount card program in which the individual
is enrolled under this section, the Secretary shall provide
a process under which the Secretary provides to the sponsor
of the endorsed program in which the individual enrolls
information concerning the balance of amounts available
on behalf of the individual under this paragraph.
‘‘(D) LIMITATION ON USE OF FUNDS.—Pursuant to sub-
section (a)(2)(C), no assistance shall be provided under
paragraph (1)(B) with respect to covered discount card
drugs dispensed after December 31, 2005.
‘‘(E) NO ROLLOVER PERMITTED IN CASE OF VOLUNTARY
DISENROLLMENT.—Except in such exceptional cases as the
Secretary may provide, in the case of a transitional assist-
ance eligible individual who voluntarily disenrolls from
H. R. 1—77
an endorsed plan, the provisions of subclause (II) of
subparagraph (A)(ii) shall not apply.
‘‘(3) PAYMENT.—The Secretary shall provide a method for
the reimbursement of prescription drug card sponsors for assist-
ance provided under this subsection.
‘‘(4) COVERAGE OF COINSURANCE.—
‘‘(A) WAIVER
PERMITTED
BY
PHARMACY.—Nothing in
this section shall be construed as precluding a pharmacy
from reducing or waiving the application of coinsurance
imposed under paragraph (1)(B) in accordance with section
1128B(b)(3)(G).
‘‘(B) OPTIONAL PAYMENT OF COINSURANCE BY STATE.—
‘‘(i) IN GENERAL.—The Secretary shall establish an
arrangement under which a State may provide for
payment of some or all of the coinsurance under para-
graph (1)(B) for some or all enrollees in the State,
as specified by the State under the arrangement.
Insofar as such a payment arrangement is made with
respect to an enrollee, the amount of the coinsurance
shall be paid directly by the State to the pharmacy
involved.
‘‘(ii) NO FEDERAL MATCHING AVAILABLE UNDER MED-
ICAID OR SCHIP.—Expenditures made by a State for
coinsurance described in clause (i) shall not be treated
as State expenditures for purposes of Federal matching
payments under title XIX or XXI.
‘‘(iii) NOT TREATED AS MEDICARE COST-SHARING.—
Coinsurance described in paragraph (1)(B) shall not
be treated as coinsurance under this title for purposes
of section 1905(p)(3)(B).
‘‘(C) TREATMENT OF COINSURANCE.—The amount of any
coinsurance imposed under paragraph (1)(B), whether paid
or waived under this paragraph, shall not be taken into
account in applying the limitation in dollar amount under
paragraph (2).
‘‘(5) ENSURING ACCESS TO TRANSITIONAL ASSISTANCE FOR
QUALIFIED RESIDENTS OF LONG-TERM CARE FACILITIES AND AMER-
ICAN INDIANS.—
‘‘(A) RESIDENTS OF LONG-TERM CARE FACILITIES.—The
Secretary shall establish procedures and may waive
requirements of this section as necessary to negotiate
arrangements with sponsors to provide arrangements with
pharmacies that support long-term care facilities in order
to ensure access to transitional assistance for transitional
assistance eligible individuals who reside in long-term care
facilities.
‘‘(B) AMERICAN INDIANS.—The Secretary shall establish
procedures and may waive requirements of this section
to ensure that, for purposes of providing transitional assist-
ance, pharmacies operated by the Indian Health Service,
Indian tribes and tribal organizations, and urban Indian
organizations (as defined in section 4 of the Indian Health
Care Improvement Act) have the opportunity to participate
in the pharmacy networks of at least two endorsed pro-
grams in each of the 50 States and the District of Columbia
where such a pharmacy operates.
H. R. 1—78
‘‘(6) NO IMPACT ON BENEFITS UNDER OTHER PROGRAMS.—
The availability of negotiated prices or transitional assistance
under this section shall not be treated as benefits or otherwise
taken into account in determining an individual’s eligibility
for, or the amount of benefits under, any other Federal program.
‘‘(7) DISREGARD FOR PURPOSES OF PART C.—Nonuniformity
of benefits resulting from the implementation of this section
(including the provision or nonprovision of transitional assist-
ance and the payment or waiver of any enrollment fee under
this section) shall not be taken into account in applying section
1854(f).
‘‘(h) QUALIFICATION OF PRESCRIPTION DRUG CARD SPONSORS
AND ENDORSEMENT OF DISCOUNT CARD PROGRAMS; BENEFICIARY
PROTECTIONS.—
‘‘(1) PRESCRIPTION
DRUG
CARD
SPONSOR
AND
QUALIFICA-
TIONS.—
‘‘(A) PRESCRIPTION DRUG CARD SPONSOR AND SPONSOR
DEFINED.—For purposes of this section, the terms ‘prescrip-
tion drug card sponsor’ and ‘sponsor’ mean any nongovern-
mental entity that the Secretary determines to be appro-
priate to offer an endorsed discount card program under
this section, which may include—
‘‘(i) a pharmaceutical benefit management com-
pany;
‘‘(ii) a wholesale or retail pharmacy delivery
system;
‘‘(iii) an insurer (including an insurer that offers
medicare supplemental policies under section 1882);
‘‘(iv) an organization offering a plan under part
C; or
‘‘(v) any combination of the entities described in
clauses (i) through (iv).
‘‘(B) ADMINISTRATIVE QUALIFICATIONS.—Each endorsed
discount card program shall be operated directly, or
through arrangements with an affiliated organization (or
organizations), by one or more entities that have dem-
onstrated experience and expertise in operating such a
program or a similar program and that meets such business
stability and integrity requirements as the Secretary may
specify.
‘‘(C) ACCOUNTING FOR TRANSITIONAL ASSISTANCE.—The
sponsor of an endorsed discount card program shall have
arrangements satisfactory to the Secretary to account for
the assistance provided under subsection (g) on behalf of
transitional assistance eligible individuals.
‘‘(2) APPLICATIONS FOR PROGRAM ENDORSEMENT.—
‘‘(A) SUBMISSION.—Each prescription drug card sponsor
that seeks endorsement of a prescription drug discount
card program under this section shall submit to the Sec-
retary, at such time and in such manner as the Secretary
may specify, an application containing such information
as the Secretary may require.
‘‘(B) APPROVAL; COMPLIANCE WITH APPLICABLE REQUIRE-
MENTS.—The Secretary shall review the application sub-
mitted under subparagraph (A) and shall determine
whether to endorse the prescription drug discount card
H. R. 1—79
program. The Secretary may not endorse such a program
unless—
‘‘(i) the program and prescription drug card sponsor
offering the program comply with the applicable
requirements under this section; and
‘‘(ii) the sponsor has entered into a contract with
the Secretary to carry out such requirements.
‘‘(C) TERMINATION OF ENDORSEMENT AND CONTRACTS.—
An endorsement of an endorsed program and a contract
under subparagraph (B) shall be for the duration of the
program under this section (including any transition
applicable under subsection (a)(2)(C)(ii)), except that the
Secretary may, with notice and for cause (as defined by
the Secretary), terminate such endorsement and contract.
‘‘(D) ENSURING CHOICE OF PROGRAMS.—
‘‘(i) IN GENERAL.—The Secretary shall ensure that
there is available to each discount card eligible indi-
vidual a choice of at least 2 endorsed programs (each
offered by a different sponsor).
‘‘(ii) LIMITATION ON NUMBER.—The Secretary may
limit (but not below 2) the number of sponsors in
a State that are awarded contracts under this para-
graph.
‘‘(3) SERVICE AREA ENCOMPASSING ENTIRE STATES.—Except
as provided in paragraph (9), if a prescription drug card sponsor
that offers an endorsed program enrolls in the program individ-
uals residing in any part of a State, the sponsor must permit
any discount card eligible individual residing in any portion
of the State to enroll in the program.
‘‘(4) SAVINGS TO MEDICARE BENEFICIARIES.—Each prescrip-
tion drug card sponsor that offers an endorsed discount card
program shall pass on to discount card eligible individuals
enrolled in the program negotiated prices on covered discount
card drugs, including discounts negotiated with pharmacies
and manufacturers, to the extent disclosed under subsection
(i)(1).
‘‘(5) GRIEVANCE MECHANISM.—Each prescription drug card
sponsor shall provide meaningful procedures for hearing and
resolving grievances between the sponsor (including any entity
or individual through which the sponsor carries out the
endorsed discount card program) and enrollees in endorsed
discount card programs of the sponsor under this section in
a manner similar to that required under section 1852(f).
‘‘(6) CONFIDENTIALITY OF ENROLLEE RECORDS.—
‘‘(A) IN GENERAL.—For purposes of the program under
this section, the operations of an endorsed program are
covered functions and a prescription drug card sponsor
is a covered entity for purposes of applying part C of
title XI and all regulatory provisions promulgated there-
under, including regulations (relating to privacy) adopted
pursuant to the authority of the Secretary under section
264(c) of the Health Insurance Portability and Account-
ability Act of 1996 (42 U.S.C. 1320d–2 note).
‘‘(B) WAIVER AUTHORITY.—In order to promote partici-
pation of sponsors in the program under this section, the
Secretary may waive such relevant portions of regulations
relating to privacy referred to in subparagraph (A), for
H. R. 1—80
such appropriate, limited period of time, as the Secretary
specifies.
‘‘(7) LIMITATION ON PROVISION AND MARKETING OF PRODUCTS
AND
SERVICES.—The sponsor of an endorsed discount card
program—
‘‘(A) may provide under the program—
‘‘(i) a product or service only if the product or
service is directly related to a covered discount card
drug; or
‘‘(ii) a discount price for nonprescription drugs;
and
‘‘(B) may, to the extent otherwise permitted under
paragraph (6) (relating to application of HIPAA require-
ments), market a product or service under the program
only if the product or service is directly related to—
‘‘(i) a covered discount card drug; or
‘‘(ii) a drug described in subparagraph (A)(ii) and
the marketing consists of information on the discounted
price made available for the drug involved.
‘‘(8) ADDITIONAL
PROTECTIONS.—Each endorsed discount
card program shall meet such additional requirements as the
Secretary identifies to protect and promote the interest of dis-
count card eligible individuals, including requirements that
ensure that discount card eligible individuals enrolled in
endorsed discount card programs are not charged more than
the lower of the price based on negotiated prices or the usual
and customary price.
‘‘(9) SPECIAL RULES FOR CERTAIN ORGANIZATIONS.—
‘‘(A) IN GENERAL.—In the case of an organization that
is offering a plan under part C or enrollment under a
reasonable cost reimbursement contract under section
1876(h) that is seeking to be a prescription drug card
sponsor under this section, the organization may elect to
apply the special rules under subparagraph (B) with respect
to enrollees in any plan described in section 1851(a)(2)(A)
that it offers or under such contract and an endorsed
discount card program it offers, but only if it limits enroll-
ment under such program to individuals enrolled in such
plan or under such contract.
‘‘(B) SPECIAL
RULES.—The special rules under this
subparagraph are as follows:
‘‘(i) LIMITATION
ON
ENROLLMENT.—The sponsor
limits enrollment under this section under the
endorsed discount card program to discount card
eligible individuals who are enrolled in the part C
plan involved or under the reasonable cost reimburse-
ment contract involved and is not required nor per-
mitted to enroll other individuals under such program.
‘‘(ii) PHARMACY ACCESS.—Pharmacy access require-
ments under subsection (e)(1)(B) are deemed to be
met if the access is made available through a pharmacy
network (and not only through mail order) and the
network used by the sponsor is approved by the Sec-
retary.
‘‘(iii) SPONSOR REQUIREMENTS.—The Secretary may
waive the application of such requirements for a
sponsor as the Secretary determines to be duplicative
H. R. 1—81
or to conflict with a requirement of the organization
under part C or section 1876 (as the case may be)
or to be necessary in order to improve coordination
of this section with the benefits under such part or
section.
‘‘(i) DISCLOSURE AND OVERSIGHT.—
‘‘(1) DISCLOSURE.—Each prescription drug card sponsor
offering an endorsed discount card program shall disclose to
the Secretary (in a manner specified by the Secretary) informa-
tion relating to program performance, use of prescription drugs
by discount card eligible individuals enrolled in the program,
the extent to which negotiated price concessions described in
subsection (e)(1)(A)(ii) made available to the entity by a manu-
facturer are passed through to enrollees through pharmacies
or otherwise, and such other information as the Secretary may
specify. The provisions of section 1927(b)(3)(D) shall apply to
drug pricing data reported under the previous sentence (other
than data in aggregate form).
‘‘(2) OVERSIGHT; AUDIT AND INSPECTION AUTHORITY.—The
Secretary shall provide appropriate oversight to ensure compli-
ance of endorsed discount card programs and their sponsors
with the requirements of this section. The Secretary shall have
the right to audit and inspect any books and records of a
prescription discount card sponsor (and of any affiliated
organization referred to in subsection (h)(1)(B)) that pertain
to the endorsed discount card program under this section,
including amounts payable to the sponsor under this section.
‘‘(3) SANCTIONS
FOR
ABUSIVE
PRACTICES.—The Secretary
may implement intermediate sanctions or may revoke the
endorsement of a program offered by a sponsor under this
section if the Secretary determines that the sponsor or the
program no longer meets the applicable requirements of this
section or that the sponsor has engaged in false or misleading
marketing practices. The Secretary may impose a civil money
penalty in an amount not to exceed $10,000 for conduct that
a party knows or should know is a violation of this section.
The provisions of section 1128A (other than subsections (a)
and (b) and the second sentence of subsection (f)) shall apply
to a civil money penalty under the previous sentence in the
same manner as such provisions apply to a penalty or pro-
ceeding under section 1128A(a).
‘‘(j) TREATMENT OF TERRITORIES.—
‘‘(1) IN GENERAL.—The Secretary may waive any provision
of this section (including subsection (h)(2)(D)) in the case of
a resident of a State (other than the 50 States and the District
of Columbia) insofar as the Secretary determines it is necessary
to secure access to negotiated prices for discount card eligible
individuals (or, at the option of the Secretary, individuals
described in subsection (b)(1)(A)(i)).
‘‘(2) TRANSITIONAL ASSISTANCE.—
‘‘(A) IN GENERAL.—In the case of a State, other than
the 50 States and the District of Columbia, if the State
establishes a plan described in subparagraph (B) (for pro-
viding transitional assistance with respect to the provision
of prescription drugs to some or all individuals residing
in the State who are described in subparagraph (B)(i)),
the Secretary shall pay to the State for the entire period
H. R. 1—82
of the operation of this section an amount equal to the
amount allotted to the State under subparagraph (C).
‘‘(B) PLAN.—The plan described in this subparagraph
is a plan that—
‘‘(i) provides transitional assistance with respect
to the provision of covered discount card drugs to some
or all individuals who are entitled to benefits under
part A or enrolled under part B, who reside in the
State, and who have income below 135 percent of the
poverty line; and
‘‘(ii) assures that amounts received by the State
under this paragraph are used only for such assistance.
‘‘(C) ALLOTMENT LIMIT.—The amount described in this
subparagraph for a State is equal to $35,000,000 multiplied
by the ratio (as estimated by the Secretary) of—
‘‘(i) the number of individuals who are entitled
to benefits under part A or enrolled under part B
and who reside in the State (as determined by the
Secretary as of July 1, 2003), to
‘‘(ii) the sum of such numbers for all States to
which this paragraph applies.
‘‘(D) CONTINUED
AVAILABILITY
OF
FUNDS.—Amounts
made available to a State under this paragraph which
are not used under this paragraph shall be added to the
amount available to that State for purposes of carrying
out section 1935(e).
‘‘(k) FUNDING.—
‘‘(1) 
ESTABLISHMENT
OF
TRANSITIONAL
ASSISTANCE
ACCOUNT.—
‘‘(A) IN GENERAL.—There is created within the Federal
Supplementary Medical Insurance Trust Fund established
by section 1841 an account to be known as the ‘Transitional
Assistance Account’ (in this subsection referred to as the
‘Account’).
‘‘(B) FUNDS.—The Account shall consist of such gifts
and bequests as may be made as provided in section
201(i)(1), accrued interest on balances in the Account, and
such amounts as may be deposited in, or appropriated
to, the Account as provided in this subsection.
‘‘(C) SEPARATE FROM REST OF TRUST FUND.—Funds pro-
vided under this subsection to the Account shall be kept
separate from all other funds within the Federal Supple-
mentary Medical Insurance Trust Fund, but shall be
invested, and such investments redeemed, in the same
manner as all other funds and investments within such
Trust Fund.
‘‘(2) PAYMENTS FROM ACCOUNT.—
‘‘(A) IN GENERAL.—The Managing Trustee shall pay
from time to time from the Account such amounts as the
Secretary certifies are necessary to make payments for
transitional assistance provided under subsections (g) and
(j)(2).
‘‘(B) TREATMENT IN RELATION TO PART B PREMIUM.—
Amounts payable from the Account shall not be taken
into account in computing actuarial rates or premium
amounts under section 1839.
H. R. 1—83
‘‘(3) APPROPRIATIONS TO COVER BENEFITS.—There are appro-
priated to the Account in a fiscal year, out of any moneys
in the Treasury not otherwise appropriated, an amount equal
to the payments made from the Account in the year.
‘‘(4) FOR ADMINISTRATIVE EXPENSES.—There are authorized
to be appropriated to the Secretary such sums as may be
necessary to carry out the Secretary’s responsibilities under
this section.
‘‘(5) TRANSFER OF ANY REMAINING BALANCE TO MEDICARE
PRESCRIPTION DRUG ACCOUNT.—Any balance remaining in the
Account after the Secretary determines that funds in the
Account are no longer necessary to carry out the program
under this section shall be transferred and deposited into the
Medicare Prescription Drug Account under section 1860D–16.
‘‘(6) CONSTRUCTION.—Nothing in this section shall be con-
strued as authorizing the Secretary to provide for payment
(other than payment of an enrollment fee on behalf of a transi-
tional assistance eligible individual under subsection (g)(1)(A))
to a sponsor for administrative expenses incurred by the
sponsor in carrying out this section (including in administering
the transitional assistance provisions of subsections (f) and
(g)).
‘‘Subpart 5—Definitions and Miscellaneous Provisions
‘‘DEFINITIONS; TREATMENT OF REFERENCES TO PROVISIONS IN PART C
‘‘SEC. 1860D–41. (a) DEFINITIONS.—For purposes of this part:
‘‘(1) BASIC PRESCRIPTION DRUG COVERAGE.—The term ‘basic
prescription drug coverage’ is defined in section 1860D–2(a)(3).
‘‘(2) COVERED PART D DRUG.—The term ‘covered part D
drug’ is defined in section 1860D–2(e).
‘‘(3) CREDITABLE PRESCRIPTION DRUG COVERAGE.—The term
‘creditable prescription drug coverage’ has the meaning given
such term in section 1860D–13(b)(4).
‘‘(4) PART D ELIGIBLE INDIVIDUAL.—The term ‘part D eligible
individual’ has the meaning given such term in section 1860D–
1(a)(4)(A).
‘‘(5) FALLBACK PRESCRIPTION DRUG PLAN.—The term ‘fall-
back prescription drug plan’ has the meaning given such term
in section 1860D–11(g)(4).
‘‘(6) INITIAL COVERAGE LIMIT.—The term ‘initial coverage
limit’ means such limit as established under section 1860D–
2(b)(3), or, in the case of coverage that is not standard prescrip-
tion drug coverage, the comparable limit (if any) established
under the coverage.
‘‘(7) INSURANCE RISK.—The term ‘insurance risk’ means,
with respect to a participating pharmacy, risk of the type
commonly assumed only by insurers licensed by a State and
does not include payment variations designed to reflect perform-
ance-based measures of activities within the control of the
pharmacy, such as formulary compliance and generic drug
substitution.
‘‘(8) MA PLAN.—The term ‘MA plan’ has the meaning given
such term in section 1860D–1(a)(4)(B).
‘‘(9) MA–PD PLAN.—The term ‘MA–PD plan’ has the
meaning given such term in section 1860D–1(a)(4)(C).
H. R. 1—84
‘‘(10) MEDICARE PRESCRIPTION DRUG ACCOUNT.—The term
‘Medicare Prescription Drug Account’ means the Account cre-
ated under section 1860D–16(a).
‘‘(11) PDP APPROVED BID.—The term ‘PDP approved bid’
has the meaning given such term in section 1860D–13(a)(6).
‘‘(12) PDP REGION.—The term ‘PDP region’ means such
a region as provided under section 1860D–11(a)(2).
‘‘(13) PDP SPONSOR.—The term ‘PDP sponsor’ means a
nongovernmental entity that is certified under this part as
meeting the requirements and standards of this part for such
a sponsor.
‘‘(14) PRESCRIPTION
DRUG
PLAN.—The term ‘prescription
drug plan’ means prescription drug coverage that is offered—
‘‘(A) under a policy, contract, or plan that has been
approved under section 1860D–11(e); and
‘‘(B) by a PDP sponsor pursuant to, and in accordance
with, a contract between the Secretary and the sponsor
under section 1860D–12(b).
‘‘(15) QUALIFIED PRESCRIPTION DRUG COVERAGE.—The term
‘qualified prescription drug coverage’ is defined in section
1860D–2(a)(1).
‘‘(16) STANDARD PRESCRIPTION DRUG COVERAGE.—The term
‘standard prescription drug coverage’ is defined in section
1860D–2(b).
‘‘(17) STATE PHARMACEUTICAL ASSISTANCE PROGRAM.—The
term ‘State Pharmaceutical Assistance Program’ has the
meaning given such term in section 1860D–23(b).
‘‘(18) SUBSIDY
ELIGIBLE
INDIVIDUAL.—The term ‘subsidy
eligible individual’ has the meaning given such term in section
1860D–14(a)(3)(A).
‘‘(b) APPLICATION OF PART C PROVISIONS UNDER THIS PART.—
For purposes of applying provisions of part C under this part
with respect to a prescription drug plan and a PDP sponsor, unless
otherwise provided in this part such provisions shall be applied
as if—
‘‘(1) any reference to an MA plan included a reference
to a prescription drug plan;
‘‘(2) any reference to an MA organization or a provider-
sponsored organization included a reference to a PDP sponsor;
‘‘(3) any reference to a contract under section 1857 included
a reference to a contract under section 1860D–12(b);
‘‘(4) any reference to part C included a reference to this
part; and
‘‘(5) any reference to an election period under section 1851
were a reference to an enrollment period under section 1860D–
1.
‘‘MISCELLANEOUS PROVISIONS
‘‘SEC. 1860D–42. (a) ACCESS TO COVERAGE IN TERRITORIES.—
The Secretary may waive such requirements of this part, including
section 1860D–3(a)(1), insofar as the Secretary determines it is
necessary to secure access to qualified prescription drug coverage
for part D eligible individuals residing in a State (other than
the 50 States and the District of Columbia).
‘‘(b) APPLICATION OF DEMONSTRATION AUTHORITY.—The provi-
sions of section 402 of the Social Security Amendments of 1967
(Public Law 90–248) shall apply with respect to this part and
H. R. 1—85
part C in the same manner it applies with respect to parts A
and B, except that any reference with respect to a Trust Fund
in relation to an experiment or demonstration project relating to
prescription drug coverage under this part shall be deemed a ref-
erence to the Medicare Prescription Drug Account within the Fed-
eral Supplementary Medical Insurance Trust Fund.’’.
(b) SUBMISSION OF LEGISLATIVE PROPOSAL.—Not later than 6
months after the date of the enactment of this Act, the Secretary
shall submit to the appropriate committees of Congress a legislative
proposal providing for such technical and conforming amendments
in the law as are required by the provisions of this title and
title II.
(c) STUDY ON TRANSITIONING PART B PRESCRIPTION DRUG COV-
ERAGE.—Not later than January 1, 2005, the Secretary shall submit
a report to Congress that makes recommendations regarding
methods for providing benefits under subpart 1 of part D of title
XVIII of the Social Security Act for outpatient prescription drugs
for which benefits are provided under part B of such title.
(d) REPORT ON PROGRESS IN IMPLEMENTATION OF PRESCRIPTION
DRUG BENEFIT.—Not later than March 1, 2005, the Secretary shall
submit a report to Congress on the progress that has been made
in implementing the prescription drug benefit under this title. The
Secretary shall include in the report specific steps that have been
taken, and that need to be taken, to ensure a timely start of
the program on January 1, 2006. The report shall include rec-
ommendations regarding an appropriate transition from the pro-
gram under section 1860D–31 of the Social Security Act to prescrip-
tion drug benefits under subpart 1 of part D of title XVIII of
such Act.
(e) ADDITIONAL CONFORMING CHANGES.—
(1) CONFORMING REFERENCES TO PREVIOUS PART D.—Any
reference in law (in effect before the date of the enactment
of this Act) to part D of title XVIII of the Social Security
Act is deemed a reference to part E of such title (as in effect
after such date).
(2) CONFORMING AMENDMENT PERMITTING WAIVER OF COST-
SHARING.—Section 1128B(b)(3) (42 U.S.C. 1320a–7b(b)(3)) is
amended—
(A) by striking ‘‘and’’ at the end of subparagraph (E);
(B) by striking the period at the end of subparagraph
(F) and inserting ‘‘; and’’; and
(C) by adding at the end the following new subpara-
graph:
‘‘(G) the waiver or reduction by pharmacies (including phar-
macies of the Indian Health Service, Indian tribes, tribal
organizations, and urban Indian organizations) of any cost-
sharing imposed under part D of title XVIII, if the conditions
described in clauses (i) through (iii) of section 1128A(i)(6)(A)
are met with respect to the waiver or reduction (except that,
in the case of such a waiver or reduction on behalf of a subsidy
eligible individual (as defined in section 1860D–14(a)(3)), sec-
tion 1128A(i)(6)(A) shall be applied without regard to clauses
(ii) and (iii) of that section).’’.
(3) MEDICARE PRESCRIPTION DRUG ACCOUNT.—
(A) Section 201(g) (42 U.S.C. 401(g)) is amended—
(i) in paragraph (1)(B)(i)(V), by inserting ‘‘(and,
of such portion, the portion of such costs which should
H. R. 1—86
have been borne by the Medicare Prescription Drug
Account in such Trust Fund)’’ after ‘‘Trust Fund’’; and
(ii) in paragraph (1)(B)(ii)(III), by inserting ‘‘(and,
of such portion, the portion of such costs which should
have been borne by the Medicare Prescription Drug
Account in such Trust Fund)’’ after ‘‘Trust Fund’’.
(B) Section 201(i)(1) (42 U.S.C. 401(i)(1)) is amended
by inserting ‘‘(and for the Medicare Prescription Drug
Account and the Transitional Assistance Account in such
Trust Fund)’’ after ‘‘Federal Supplementary Medical Insur-
ance Trust Fund’’.
(C) Section 1841 (42 U.S.C. 1395t) is amended—
(i) in the last sentence of subsection (a)—
(I) by striking ‘‘and’’ before ‘‘such amounts’’;
and
(II) by inserting before the period the fol-
lowing: ‘‘, and such amounts as may be deposited
in, or appropriated to, the Medicare Prescription
Drug Account established by section 1860D–16’’;
(ii) in subsection (g), by adding at the end the
following: ‘‘The payments provided for under part D,
other than under section 1860D–31(k)(2), shall be made
from the Medicare Prescription Drug Account in the
Trust Fund.’’;
(iii) in subsection (h), by inserting ‘‘or pursuant
to section 1860D–13(c)(1) or 1854(d)(2)(A) (in which
case payments shall be made in appropriate part from
the Medicare Prescription Drug Account in the Trust
Fund)’’ after ‘‘1840(d)’’; and
(iv) in subsection (i), by inserting after ‘‘and section
1842(g)’’ the following: ‘‘and pursuant to sections
1860D–13(c)(1) and 1854(d)(2)(A) (in which case pay-
ments shall be made in appropriate part from the
Medicare Prescription Drug Account in the Trust
Fund)’’.
(D) 
Section 
1853(f) 
(42 
U.S.C. 
1395w–23(f)) 
is
amended—
(i) in the heading by striking ‘‘TRUST FUND’’ and
inserting ‘‘TRUST FUNDS’’; and
(ii) by inserting after the first sentence the fol-
lowing: ‘‘Payments to MA organizations for statutory
drug benefits provided under this title are made from
the Medicare Prescription Drug Account in the Federal
Supplementary Medical Insurance Trust Fund.’’.
(4) APPLICATION OF CONFIDENTIALITY FOR DRUG PRICING
DATA.—Section 1927(b)(3)(D) (42 U.S.C. 1396r–8(b)(3)(D)) is
amended by adding after and below clause (iii) the following:
‘‘The previous sentence shall also apply to information dis-
closed under section 1860D–2(d)(2) or 1860D–4(c)(2)(E).’’.
(5) CLARIFICATION OF TREATMENT OF PART A ENROLLEES.—
Section 1818(a) (42 U.S.C. 1395i–2(a)) is amended by adding
at the end the following: ‘‘Except as otherwise provided, any
reference to an individual entitled to benefits under this part
includes an individual entitled to benefits under this part
pursuant to an enrollment under this section or section 1818A.’’.
(6) DISCLOSURE.—Section 6103(l)(7)(D)(ii) of the Internal
Revenue Code of 1986 is amended by inserting ‘‘or subsidies
H. R. 1—87
provided under section 1860D–14 of such Act’’ after ‘‘Social
Security Act’’.
(7) EXTENSION OF STUDY AUTHORITY.—Section 1875(b) (42
U.S.C. 1395ll(b)) is amended by striking ‘‘the insurance pro-
grams under parts A and B’’ and inserting ‘‘this title’’.
(8) CONFORMING AMENDMENTS RELATING TO FACILITATION
OF ELECTRONIC PRESCRIBING.—
(A) 
Section 
1128B(b)(3)(C) 
(42 
U.S.C. 
1320a–
7b(b)(3)(C)) is amended by inserting ‘‘or in regulations
under section 1860D–3(e)(6)’’ after ‘‘1987’’.
(B) Section 1877(b) (42 U.S.C. 1395nn(b)) is amended
by adding at the end the following new paragraph:
‘‘(5) ELECTRONIC PRESCRIBING.—An exception established
by regulation under section 1860D–3(e)(6).’’.
(9) OTHER
CHANGES.—Section 1927(g)(1)(B)(i) (42 U.S.C.
1396r–8(g)(1)(B)(i)) is amended—
(A) by adding ‘‘and’’ at the end of subclause (II); and
(B) by striking subclause (IV).
SEC. 102. MEDICARE ADVANTAGE CONFORMING AMENDMENTS.
(a) CONFORMING AMENDMENTS TO ENROLLMENT PROCESS.—
(1) 
EXTENDING
OPEN
ENROLLMENT
PERIODS.—Section
1851(e) (42 U.S.C. 1395w–21(e)) is amended—
(A) in paragraph (2), by striking ‘‘2004’’ and ‘‘2005’’
and inserting ‘‘2005’’ and ‘‘2006’’ each place it appears;
and
(B) in paragraph (4), by striking ‘‘2005’’ and inserting
‘‘2006’’ each place it appears.
(2) ESTABLISHMENT
OF
SPECIAL
ANNUAL, COORDINATED
ELECTION
PERIOD
FOR
MONTHS
BEGINNING
NOVEMBER
15,
2005.—Section 1851(e)(3)(B) (42 U.S.C. 1395w–21(e)(3)(B)) is
amended to read as follows:
‘‘(B) ANNUAL, COORDINATED
ELECTION
PERIOD.—For
purposes of this section, the term ‘annual, coordinated elec-
tion period’ means—
‘‘(i) with respect to a year before 2002, the month
of November before such year;
‘‘(ii) with respect to 2002, 2003, 2004, and 2005,
the period beginning on November 15 and ending on
December 31 of the year before such year;
‘‘(iii) with respect to 2006, the period beginning
on November 15, 2005, and ending on May 15, 2006;
and
‘‘(iv) with respect to 2007 and succeeding years,
the period beginning on November 15 and ending on
December 31 of the year before such year.’’.
(3) SPECIAL
INFORMATION
CAMPAIGN.—Section 1851(e)(3)
(42 U.S.C. 1395w–21(e)(3)) is amended—
(A) in subparagraph (C), by inserting ‘‘and during the
period described in subparagraph (B)(iii)’’ after ‘‘(beginning
with 1999)’’; and
(B) in subparagraph (D)—
(i) in the heading by striking ‘‘CAMPAIGN IN 1998’’
and inserting ‘‘CAMPAIGNS’’; and
(ii) by adding at the end the following: ‘‘During
the period described in subparagraph (B)(iii), the Sec-
retary shall provide for an educational and publicity
H. R. 1—88
campaign to inform MA eligible individuals about the
availability of MA plans (including MA–PD plans)
offered in different areas and the election process pro-
vided under this section.’’.
(4) COORDINATING INITIAL ENROLLMENT PERIODS.—Section
1851(e)(1) (42 U.S.C. 1395w–21(e)(1)) is amended by adding
at the end the following new sentence: ‘‘If any portion of an
individual’s initial enrollment period under part B occurs after
the end of the annual, coordinated election period described
in paragraph (3)(B)(iii), the initial enrollment period under
this part shall further extend through the end of the individual’s
initial enrollment period under part B.’’.
(5) COORDINATION OF EFFECTIVENESS OF ELECTIONS DURING
ANNUAL
COORDINATED
ELECTION
PERIOD
FOR
2006.—Section
1851(f)(3) (42 U.S.C. 1395w–21(f)(3)) is amended by inserting
‘‘, other than the period described in clause (iii) of such sub-
section’’ after ‘‘subsection (e)(3)(B)’’.
(6) LIMITATION ON ONE-CHANGE RULE TO SAME TYPE OF
PLAN.—Section 
1851(e)(2) 
(42 
U.S.C. 
1395w–21(e)(2)) 
is
amended—
(A) in subparagraph (B)(i), by inserting ‘‘, subpara-
graph (C)(iii),’’ after ‘‘clause (ii)’’;
(B) in subparagraph (C)(i), by striking ‘‘clause (ii)’’
and inserting ‘‘clauses (ii) and (iii)’’; and
(C) by adding at the end of subparagraph (C) the
following new clause:
‘‘(iii) LIMITATION
ON
EXERCISE
OF
RIGHT
WITH
RESPECT TO PRESCRIPTION DRUG COVERAGE.—Effective
for plan years beginning on or after January 1, 2006,
in applying clause (i) (and clause (i) of subparagraph
(B)) in the case of an individual who—
‘‘(I) is enrolled in an MA plan that does provide
qualified prescription drug coverage, the individual
may exercise the right under such clause only
with respect to coverage under the original fee-
for-service plan or coverage under another MA
plan that does not provide such coverage and may
not exercise such right to obtain coverage under
an MA–PD plan or under a prescription drug plan
under part D; or
‘‘(II) is enrolled in an MA–PD plan, the indi-
vidual may exercise the right under such clause
only with respect to coverage under another MA–
PD plan (and not an MA plan that does not provide
qualified prescription drug coverage) or under the
original fee-for-service plan and coverage under
a prescription drug plan under part D.’’.
(b) PROMOTION
OF E-PRESCRIBING
BY MA PLANS.—Section
1852(j) (42 U.S.C. 1395w–22(j)) is amended by adding at the end
the following new paragraph:
‘‘(7) PROMOTION OF E-PRESCRIBING BY MA PLANS.—
‘‘(A) IN GENERAL.—An MA–PD plan may provide for
a separate payment or otherwise provide for a differential
payment for a participating physician that prescribes cov-
ered part D drugs in accordance with an electronic prescrip-
tion drug program that meets standards established under
section 1860D–4(e).
H. R. 1—89
‘‘(B) CONSIDERATIONS.—Such payment may take into
consideration the costs of the physician in implementing
such a program and may also be increased for those partici-
pating physicians who significantly increase—
‘‘(i) formulary compliance;
‘‘(ii) lower cost, therapeutically equivalent alter-
natives;
‘‘(iii) reductions in adverse drug interactions; and
‘‘(iv) efficiencies in filing prescriptions through
reduced administrative costs.
‘‘(C) STRUCTURE.—Additional or increased payments
under this subsection may be structured in the same
manner as medication therapy management fees are struc-
tured under section 1860D–4(c)(2)(E).’’.
(c) OTHER CONFORMING AMENDMENTS.—
(1) Section 1851(a)(1) (42 U.S.C. 1395w–21(a)(1)) is
amended—
(A) by inserting ‘‘(other than qualified prescription drug
benefits)’’ after ‘‘benefits’’;
(B) by striking the period at the end of subparagraph
(B) and inserting a comma; and
(C) by adding after and below subparagraph (B) the
following:
‘‘and may elect qualified prescription drug coverage in accord-
ance with section 1860D–1.’’.
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply on and after January 1, 2006.
SEC. 103. MEDICAID AMENDMENTS.
(a) DETERMINATIONS
OF ELIGIBILITY
FOR LOW-INCOME SUB-
SIDIES.—
(1) REQUIREMENT.—Section 1902(a) (42 U.S.C. 1396a(a))
is amended—
(A) by striking ‘‘and’’ at the end of paragraph (64);
(B) by striking the period at the end of paragraph
(65) and inserting ‘‘; and’’; and
(C) by inserting after paragraph (65) the following
new paragraph:
‘‘(66) provide for making eligibility determinations under
section 1935(a).’’.
(2) NEW SECTION.—Title XIX is further amended—
(A) by redesignating section 1935 as section 1936; and
(B) by inserting after section 1934 the following new
section:
‘‘SPECIAL PROVISIONS RELATING TO MEDICARE PRESCRIPTION DRUG
BENEFIT
‘‘SEC. 1935. (a) REQUIREMENTS
RELATING
TO
MEDICARE
PRESCRIPTION DRUG LOW-INCOME SUBSIDIES AND MEDICARE TRANSI-
TIONAL PRESCRIPTION DRUG ASSISTANCE.—As a condition of its State
plan under this title under section 1902(a)(66) and receipt of any
Federal financial assistance under section 1903(a), a State shall
do the following:
‘‘(1) INFORMATION FOR TRANSITIONAL PRESCRIPTION DRUG
ASSISTANCE VERIFICATION.—The State shall provide the Sec-
retary 
with 
information 
to 
carry 
out 
section 
1860D–
31(f)(3)(B)(i).
H. R. 1—90
‘‘(2) ELIGIBILITY
DETERMINATIONS
FOR
LOW-INCOME
SUB-
SIDIES.—The State shall—
‘‘(A) make determinations of eligibility for premium
and cost-sharing subsidies under and in accordance with
section 1860D–14;
‘‘(B) inform the Secretary of such determinations in
cases in which such eligibility is established; and
‘‘(C) otherwise provide the Secretary with such
information as may be required to carry out part D, other
than subpart 4, of title XVIII (including section 1860D–
14).
‘‘(3) SCREENING
FOR
ELIGIBILITY, AND
ENROLLMENT
OF,
BENEFICIARIES
FOR
MEDICARE
COST-SHARING.—As part of
making an eligibility determination required under paragraph
(2) for an individual, the State shall make a determination
of the individual’s eligibility for medical assistance for any
medicare cost-sharing described in section 1905(p)(3) and, if
the individual is eligible for any such medicare cost-sharing,
offer enrollment to the individual under the State plan (or
under a waiver of such plan).
‘‘(b) REGULAR FEDERAL SUBSIDY OF ADMINISTRATIVE COSTS.—
The amounts expended by a State in carrying out subsection (a)
are expenditures reimbursable under the appropriate paragraph
of section 1903(a).’’.
(b) PHASED-IN FEDERAL ASSUMPTION OF MEDICAID RESPONSI-
BILITY FOR PREMIUM AND COST-SHARING SUBSIDIES FOR DUALLY
ELIGIBLE INDIVIDUALS.—Section 1935, as inserted by subsection
(a)(2), is amended by adding at the end the following new sub-
section:
‘‘(c) FEDERAL ASSUMPTION OF MEDICAID PRESCRIPTION DRUG
COSTS FOR DUALLY ELIGIBLE INDIVIDUALS.—
‘‘(1) PHASED-DOWN STATE CONTRIBUTION.—
‘‘(A) IN GENERAL.—Each of the 50 States and the Dis-
trict of Columbia for each month beginning with January
2006 shall provide for payment under this subsection to
the Secretary of the product of—
‘‘(i) the amount computed under paragraph (2)(A)
for the State and month;
‘‘(ii) the total number of full-benefit dual eligible
individuals (as defined in paragraph (6)) for such State
and month; and
‘‘(iii) the factor for the month specified in para-
graph (5).
‘‘(B) FORM AND MANNER OF PAYMENT.—Payment under
subparagraph (A) shall be made in a manner specified
by the Secretary that is similar to the manner in which
State payments are made under an agreement entered
into under section 1843, except that all such payments
shall be deposited into the Medicare Prescription Drug
Account in the Federal Supplementary Medical Insurance
Trust Fund.
‘‘(C) COMPLIANCE.—If a State fails to pay to the Sec-
retary an amount required under subparagraph (A),
interest shall accrue on such amount at the rate provided
under section 1903(d)(5). The amount so owed and
applicable interest shall be immediately offset against
amounts otherwise payable to the State under section
H. R. 1—91
1903(a), in accordance with the Federal Claims Collection
Act of 1996 and applicable regulations.
‘‘(D) DATA MATCH.—The Secretary shall perform such
periodic data matches as may be necessary to identify
and compute the number of full-benefit dual eligible
individuals for purposes of computing the amount under
subparagraph (A).
‘‘(2) AMOUNT.—
‘‘(A) IN GENERAL.—The amount computed under this
paragraph for a State described in paragraph (1) and for
a month in a year is equal to—
‘‘(i) 1⁄12 of the product of—
‘‘(I) the base year State medicaid per capita
expenditures for covered part D drugs for full-
benefit dual eligible individuals (as computed
under paragraph (3)); and
‘‘(II) a proportion equal to 100 percent minus
the Federal medical assistance percentage (as
defined in section 1905(b)) applicable to the State
for the fiscal year in which the month occurs;
and
‘‘(ii) increased for each year (beginning with 2004
up to and including the year involved) by the applicable
growth factor specified in paragraph (4) for that year.
‘‘(B) NOTICE.—The Secretary shall notify each State
described in paragraph (1) not later than October 15 before
the beginning of each year (beginning with 2006) of the
amount computed under subparagraph (A) for the State
for that year.
‘‘(3) BASE YEAR STATE MEDICAID PER CAPITA EXPENDITURES
FOR COVERED PART D DRUGS FOR FULL-BENEFIT DUAL ELIGIBLE
INDIVIDUALS.—
‘‘(A) IN GENERAL.—For purposes of paragraph (2)(A),
the ‘base year State medicaid per capita expenditures for
covered part D drugs for full-benefit dual eligible individ-
uals’ for a State is equal to the weighted average (as
weighted under subparagraph (C)) of—
‘‘(i) the gross per capita medicaid expenditures for
prescription drugs for 2003, determined under subpara-
graph (B); and
‘‘(ii) the estimated actuarial value of prescription
drug benefits provided under a capitated managed care
plan per full-benefit dual eligible individual for 2003,
as determined using such data as the Secretary deter-
mines appropriate.
‘‘(B) GROSS PER CAPITA MEDICAID EXPENDITURES FOR
PRESCRIPTION DRUGS.—
‘‘(i) IN GENERAL.—The gross per capita medicaid
expenditures for prescription drugs for 2003 under this
subparagraph is equal to the expenditures, including
dispensing fees, for the State under this title during
2003 for covered outpatient drugs, determined per full-
benefit-dual-eligible-individual for such individuals not
receiving medical assistance for such drugs through
a medicaid managed care plan.
‘‘(ii) DETERMINATION.—In determining the amount
under clause (i), the Secretary shall—
H. R. 1—92
‘‘(I) use data from the Medicaid Statistical
Information System (MSIS) and other available
data;
‘‘(II) exclude expenditures attributable to cov-
ered outpatient prescription drugs that are not
covered part D drugs (as defined in section 1860D–
2(e)); and
‘‘(III) reduce such expenditures by the product
of such portion and the adjustment factor
(described in clause (iii)).
‘‘(iii) ADJUSTMENT FACTOR.—The adjustment factor
described in this clause for a State is equal to the
ratio for the State for 2003 of—
‘‘(I) aggregate payments under agreements
under section 1927; to
‘‘(II) the gross expenditures under this title
for covered outpatient drugs referred to in clause
(i).
Such factor shall be determined based on information
reported by the State in the medicaid financial
management reports (form CMS–64) for the 4 quarters
of calendar year 2003 and such other data as the
Secretary may require.
‘‘(C) WEIGHTED AVERAGE.—The weighted average under
subparagraph (A) shall be determined taking into account—
‘‘(i) with respect to subparagraph (A)(i), the aver-
age number of full-benefit dual eligible individuals in
2003 who are not described in clause (ii); and
‘‘(ii) with respect to subparagraph (A)(ii), the aver-
age number of full-benefit dual eligible individuals in
such year who received in 2003 medical assistance
for covered outpatient drugs through a medicaid man-
aged care plan.
‘‘(4) APPLICABLE GROWTH FACTOR.—The applicable growth
factor under this paragraph for—
‘‘(A) each of 2004, 2005, and 2006, is the average
annual percent change (to that year from the previous
year) of the per capita amount of prescription drug expendi-
tures (as determined based on the most recent National
Health Expenditure projections for the years involved); and
‘‘(B) a succeeding year, is the annual percentage
increase specified in section 1860D–2(b)(6) for the year.
‘‘(5) FACTOR.—The factor under this paragraph for a
month—
‘‘(A) in 2006 is 90 percent;
‘‘(B) in 2007 is 881⁄3 percent;
‘‘(C) in 2008 is 862⁄3 percent;
‘‘(D) in 2009 is 85 percent;
‘‘(E) in 2010 is 831⁄3 percent;
‘‘(F) in 2011 is 812⁄3 percent;
‘‘(G) in 2012 is 80 percent;
‘‘(H) in 2013 is 781⁄3 percent;
‘‘(I) in 2014 is 762⁄3 percent; or
‘‘(J) after December 2014, is 75 percent.
‘‘(6) FULL-BENEFIT DUAL ELIGIBLE INDIVIDUAL DEFINED.—
H. R. 1—93
‘‘(A) IN GENERAL.—For purposes of this section, the
term ‘full-benefit dual eligible individual’ means for a State
for a month an individual who—
‘‘(i) has coverage for the month for covered part
D drugs under a prescription drug plan under part
D of title XVIII, or under an MA–PD plan under part
C of such title; and
‘‘(ii) is determined eligible by the State for medical
assistance for full benefits under this title for such
month under section 1902(a)(10)(A) or 1902(a)(10)(C),
by reason of section 1902(f), or under any other cat-
egory of eligibility for medical assistance for full bene-
fits under this title, as determined by the Secretary.
‘‘(B) TREATMENT
OF
MEDICALLY
NEEDY
AND
OTHER
INDIVIDUALS
REQUIRED
TO
SPEND
DOWN.—In applying
subparagraph (A) in the case of an individual determined
to be eligible by the State for medical assistance under
section 1902(a)(10)(C) or by reason of section 1902(f), the
individual shall be treated as meeting the requirement
of subparagraph (A)(ii) for any month if such medical assist-
ance is provided for in any part of the month.’’.
(c) MEDICAID COORDINATION WITH MEDICARE PRESCRIPTION
DRUG BENEFITS.—Section 1935, as so inserted and amended, is
further amended by adding at the end the following new subsection:
‘‘(d) COORDINATION OF PRESCRIPTION DRUG BENEFITS.—
‘‘(1) MEDICARE AS PRIMARY PAYOR.—In the case of a part
D eligible individual (as defined in section 1860D–1(a)(3)(A))
who is described in subsection (c)(6)(A)(ii), notwithstanding any
other provision of this title, medical assistance is not available
under this title for such drugs (or for any cost-sharing
respecting such drugs), and the rules under this title relating
to the provision of medical assistance for such drugs shall
not apply. The provision of benefits with respect to such drugs
shall not be considered as the provision of care or services
under the plan under this title. No payment may be made
under section 1903(a) for prescribed drugs for which medical
assistance is not available pursuant to this paragraph.
‘‘(2) COVERAGE
OF
CERTAIN
EXCLUDABLE
DRUGS.—In the
case of medical assistance under this title with respect to
a covered outpatient drug (other than a covered part D drug)
furnished to an individual who is enrolled in a prescription
drug plan under part D of title XVIII or an MA–PD plan
under part C of such title, the State may elect to provide
such medical assistance in the manner otherwise provided in
the case of individuals who are not full-benefit dual eligible
individuals or through an arrangement with such plan.’’.
(d) TREATMENT OF TERRITORIES.—
(1) IN GENERAL.—Section 1935, as so inserted and amended,
is further amended—
(A) in subsection (a) in the matter preceding paragraph
(1), by inserting ‘‘subject to subsection (e)’’ after ‘‘section
1903(a)’’;
(B) in subsection (c)(1), by inserting ‘‘subject to sub-
section (e)’’ after ‘‘1903(a)(1)’’; and
(C) by adding at the end the following new subsection:
‘‘(e) TREATMENT OF TERRITORIES.—
H. R. 1—94
‘‘(1) IN GENERAL.—In the case of a State, other than the
50 States and the District of Columbia—
‘‘(A) the previous provisions of this section shall not
apply to residents of such State; and
‘‘(B) if the State establishes and submits to the Sec-
retary a plan described in paragraph (2) (for providing
medical assistance with respect to the provision of prescrip-
tion drugs to part D eligible individuals), the amount other-
wise determined under section 1108(f) (as increased under
section 1108(g)) for the State shall be increased by the
amount for the fiscal period specified in paragraph (3).
‘‘(2) PLAN.—The Secretary shall determine that a plan is
described in this paragraph if the plan—
‘‘(A) provides medical assistance with respect to the
provision of covered part D drugs (as defined in section
1860D–2(e)) to low-income part D eligible individuals;
‘‘(B) provides assurances that additional amounts
received by the State that are attributable to the operation
of this subsection shall be used only for such assistance
and related administrative expenses and that no more than
10 percent of the amount specified in paragraph (3)(A)
for the State for any fiscal period shall be used for such
administrative expenses; and
‘‘(C) meets such other criteria as the Secretary may
establish.
‘‘(3) INCREASED AMOUNT.—
‘‘(A) IN GENERAL.—The amount specified in this para-
graph for a State for a year is equal to the product of—
‘‘(i) the aggregate amount specified in subpara-
graph (B); and
‘‘(ii) the ratio (as estimated by the Secretary) of—
‘‘(I) the number of individuals who are entitled
to benefits under part A or enrolled under part
B and who reside in the State (as determined
by the Secretary based on the most recent avail-
able data before the beginning of the year); to
‘‘(II) the sum of such numbers for all States
that submit a plan described in paragraph (2).
‘‘(B) AGGREGATE
AMOUNT.—The aggregate amount
specified in this subparagraph for—
‘‘(i) the last 3 quarters of fiscal year 2006, is equal
to $28,125,000;
‘‘(ii) fiscal year 2007, is equal to $37,500,000; or
‘‘(iii) a subsequent year, is equal to the aggregate
amount specified in this subparagraph for the previous
year increased by annual percentage increase specified
in section 1860D–2(b)(6) for the year involved.
‘‘(4) REPORT.—The Secretary shall submit to Congress a
report on the application of this subsection and may include
in the report such recommendations as the Secretary deems
appropriate.’’.
(2) CONFORMING AMENDMENT.—Section 1108(f) (42 U.S.C.
1308(f)) is amended by inserting ‘‘and section 1935(e)(1)(B)’’
after ‘‘Subject to subsection (g)’’.
(e) AMENDMENT TO BEST PRICE.—
(1) IN GENERAL.—Section 1927(c)(1)(C)(i) (42 U.S.C. 1396r–
8(c)(1)(C)(i)) is amended—
H. R. 1—95
(A) by striking ‘‘and’’ at the end of subclause (III);
(B) by striking the period at the end of subclause
(IV) and inserting a semicolon; and
(C) by adding at the end the following new subclauses:
‘‘(V) the prices negotiated from drug manufac-
turers for covered discount card drugs under an
endorsed discount card program under section
1860D–31; and
‘‘(VI) any prices charged which are negotiated
by a prescription drug plan under part D of title
XVIII, by an MA–PD plan under part C of such
title with respect to covered part D drugs or by
a qualified retiree prescription drug plan (as
defined in section 1860D–22(a)(2)) with respect to
such drugs on behalf of individuals entitled to
benefits under part A or enrolled under part B
of such title.’’.
(2) IN GENERAL.—Section 1927(c)(1)(C)(i)(VI) of the Social
Security Act, as added by paragraph (1), shall apply to prices
charged for drugs dispensed on or after January 1, 2006.
(f) EXTENSION OF MEDICARE COST-SHARING FOR PART B PRE-
MIUM FOR QUALIFYING INDIVIDUALS THROUGH SEPTEMBER 2004.—
(1) IN
GENERAL.—Section 1902(a)(10)(E)(iv) (42 U.S.C.
1396a(a)(10)(E)(iv)), as amended by section 401(a) of Public
Law 108–89, is amended by striking ‘‘ending with March 2004’’
and inserting ‘‘ending with September 2004’’.
(2) TOTAL AMOUNT AVAILABLE FOR ALLOCATION.—Section
1933(g) (42 U.S.C. 1396u–3(g)), as added by section 401(c) of
Public Law 108–89, is amended—
(A) in the matter preceding paragraph (1), by striking
‘‘March 31, 2004’’ and inserting ‘‘September 30, 2004’’; and
(B) in paragraph (2), by striking ‘‘$100,000,000’’ and
inserting ‘‘$300,000,000’’.
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to calendar quarters beginning on or after
April 1, 2004.
(g) OUTREACH BY THE COMMISSIONER OF SOCIAL SECURITY.—
Section 1144 (42 U.S.C. 1320b–14) is amended—
(1) in the section heading, by inserting ‘‘AND SUBSIDIES
FOR LOW-INCOME INDIVIDUALS UNDER TITLE XVIII’’ after ‘‘COST-
SHARING’’;
(2) in subsection (a)—
(A) in paragraph (1)—
(i) in subparagraph (A), by inserting ‘‘for the
transitional assistance under section 1860D–31(f), or
for premium and cost-sharing subsidies under section
1860D–14’’ before the semicolon; and
(ii) in subparagraph (B), by inserting ‘‘, program,
and subsidies’’ after ‘‘medical assistance’’; and
(B) in paragraph (2)—
(i) in the matter preceding subparagraph (A), by
inserting ‘‘, the transitional assistance under section
1860D–31(f), or premium and cost-sharing subsidies
under section 1860D–14’’ after ‘‘assistance’’; and
(ii) in subparagraph (A), by striking ‘‘such eligi-
bility’’ and inserting ‘‘eligibility for medicare cost-
sharing under the medicaid program’’; and
H. R. 1—96
(3) in subsection (b)—
(A) in paragraph (1)(A), by inserting ‘‘, for transitional
assistance under section 1860D–31(f), or for premium and
cost-sharing subsidies for low-income individuals under sec-
tion 1860D–14’’ after ‘‘1933’’; and
(B) in paragraph (2), by inserting ‘‘, program, and
subsidies’’ after ‘‘medical assistance’’.
SEC. 104. MEDIGAP AMENDMENTS.
(a) RULES RELATING
TO MEDIGAP POLICIES THAT PROVIDE
PRESCRIPTION DRUG COVERAGE.—
(1) IN
GENERAL.—Section 1882 (42 U.S.C. 1395ss) is
amended by adding at the end the following new subsection:
‘‘(v) RULES RELATING
TO MEDIGAP POLICIES THAT PROVIDE
PRESCRIPTION DRUG COVERAGE.—
‘‘(1) PROHIBITION
ON
SALE, ISSUANCE, AND
RENEWAL
OF
NEW POLICIES THAT PROVIDE PRESCRIPTION DRUG COVERAGE.—
‘‘(A) IN GENERAL.—Notwithstanding any other provi-
sion of law, on or after January 1, 2006, a medigap Rx
policy (as defined in paragraph (6)(A)) may not be sold,
issued, or renewed under this section—
‘‘(i) to an individual who is a part D enrollee (as
defined in paragraph (6)(B)); or
‘‘(ii) except as provided in subparagraph (B), to
an individual who is not a part D enrollee.
‘‘(B) CONTINUATION
PERMITTED
FOR
NON-PART
D
ENROLLEES.—Subparagraph (A)(ii) shall not apply to the
renewal of a medigap Rx policy that was issued before
January 1, 2006.
‘‘(C) CONSTRUCTION.—Nothing in this subsection shall
be construed as preventing the offering on and after
January 1, 2006, of ‘H’, ‘I’, and ‘J’ policies described in
paragraph (2)(D)(i) if the benefit packages are modified
in accordance with paragraph (2)(C).
‘‘(2) ELIMINATION OF DUPLICATIVE COVERAGE UPON PART
D ENROLLMENT.—
‘‘(A) IN GENERAL.—In the case of an individual who
is covered under a medigap Rx policy and enrolls under
a part D plan—
‘‘(i) before the end of the initial part D enrollment
period, the individual may—
‘‘(I) enroll in a medicare supplemental policy
without prescription drug coverage under para-
graph (3); or
‘‘(II) continue the policy in effect subject to
the modification described in subparagraph (C)(i);
or
‘‘(ii) after the end of such period, the individual
may continue the policy in effect subject to such modi-
fication.
‘‘(B) NOTICE REQUIRED TO BE PROVIDED TO CURRENT
POLICYHOLDERS WITH MEDIGAP RX POLICY.—No medicare
supplemental policy of an issuer shall be deemed to meet
the standards in subsection (c) unless the issuer provides
written notice (in accordance with standards of the Sec-
retary established in consultation with the National
Association of Insurance Commissioners) during the 60-
H. R. 1—97
day period immediately preceding the initial part D enroll-
ment period, to each individual who is a policyholder or
certificate holder of a medigap Rx policy (at the most
recent available address of that individual) of the following:
‘‘(i) If the individual enrolls in a plan under part
D during the initial enrollment period under section
1860D–1(b)(2)(A), the individual has the option of—
‘‘(I) continuing enrollment in the individual’s
current plan, but the plan’s coverage of prescrip-
tion drugs will be modified under subparagraph
(C)(i); or
‘‘(II) enrolling in another medicare supple-
mental policy pursuant to paragraph (3).
‘‘(ii) If the individual does not enroll in a plan
under part D during such period, the individual may
continue enrollment in the individual’s current plan
without change, but—
‘‘(I) the individual will not be guaranteed the
option of enrollment in another medicare supple-
mental policy pursuant to paragraph (3); and
‘‘(II) if the current plan does not provide cred-
itable prescription drug coverage (as defined in
section 1860D–13(b)(4)), notice of such fact and
that there are limitations on the periods in a year
in which the individual may enroll under a part
D plan and any such enrollment is subject to a
late enrollment penalty.
‘‘(iii) Such other information as the Secretary may
specify (in consultation with the National Association
of Insurance Commissioners), including the potential
impact of such election on premiums for medicare
supplemental policies.
‘‘(C) MODIFICATION.—
‘‘(i) IN GENERAL.—The policy modification described
in this subparagraph is the elimination of prescription
coverage for expenses of prescription drugs incurred
after the effective date of the individual’s coverage
under a part D plan and the appropriate adjustment
of premiums to reflect such elimination of coverage.
‘‘(ii) CONTINUATION OF RENEWABILITY AND APPLICA-
TION
OF
MODIFICATION.—No medicare supplemental
policy of an issuer shall be deemed to meet the stand-
ards in subsection (c) unless the issuer—
‘‘(I) continues renewability of medigap Rx poli-
cies that it has issued, subject to subclause (II);
and
‘‘(II) applies the policy modification described
in clause (i) in the cases described in clauses (i)(II)
and (ii) of subparagraph (A).
‘‘(D) REFERENCES TO RX POLICIES.—
‘‘(i) H, I, AND J POLICIES.—Any reference to a ben-
efit package classified as ‘H’, ‘I’, or ‘J’ (including the
benefit package classified as ‘J’ with a high deductible
feature, as described in subsection (p)(11)) under the
standards established under subsection (p)(2) shall be
construed as including a reference to such a package
as modified under subparagraph (C) and such packages
H. R. 1—98
as modified shall not be counted as a separate benefit
package under such subsection.
‘‘(ii) APPLICATION IN WAIVERED STATES.—Except for
the modification provided under subparagraph (C), the
waivers previously in effect under subsection (p)(2)
shall continue in effect.
‘‘(3) AVAILABILITY OF SUBSTITUTE POLICIES WITH GUARAN-
TEED ISSUE.—
‘‘(A) IN GENERAL.—The issuer of a medicare supple-
mental policy—
‘‘(i) may not deny or condition the issuance or
effectiveness of a medicare supplemental policy that
has a benefit package classified as ‘A’, ‘B’, ‘C’, or ‘F’
(including the benefit package classified as ‘F’ with
a high deductible feature, as described in subsection
(p)(11)), under the standards established under sub-
section (p)(2), or a benefit package described in
subparagraph (A) or (B) of subsection (w)(2) and that
is offered and is available for issuance to new enrollees
by such issuer;
‘‘(ii) may not discriminate in the pricing of such
policy, because of health status, claims experience,
receipt of health care, or medical condition; and
‘‘(iii) may not impose an exclusion of benefits based
on a pre-existing condition under such policy,
in the case of an individual described in subparagraph
(B) who seeks to enroll under the policy not later than
63 days after the effective date of the individual’s coverage
under a part D plan.
‘‘(B) INDIVIDUAL COVERED.—An individual described in
this subparagraph with respect to the issuer of a medicare
supplemental policy is an individual who—
‘‘(i) enrolls in a part D plan during the initial
part D enrollment period;
‘‘(ii) at the time of such enrollment was enrolled
in a medigap Rx policy issued by such issuer; and
‘‘(iii) terminates enrollment in such policy and sub-
mits evidence of such termination along with the
application for the policy under subparagraph (A).
‘‘(C) SPECIAL RULE FOR WAIVERED STATES.—For pur-
poses of applying this paragraph in the case of a State
that provides for offering of benefit packages other than
under the classification referred to in subparagraph (A)(i),
the references to benefit packages in such subparagraph
are deemed references to comparable benefit packages
offered in such State.
‘‘(4) ENFORCEMENT.—
‘‘(A) PENALTIES
FOR
DUPLICATION.—The penalties
described in subsection (d)(3)(A)(ii) shall apply with respect
to a violation of paragraph (1)(A).
‘‘(B) GUARANTEED ISSUE.—The provisions of paragraph
(4) of subsection (s) shall apply with respect to the require-
ments of paragraph (3) in the same manner as they apply
to the requirements of such subsection.
‘‘(5) CONSTRUCTION.—Any provision in this section or in
a medicare supplemental policy relating to guaranteed renew-
ability of coverage shall be deemed to have been met with
H. R. 1—99
respect to a part D enrollee through the continuation of the
policy subject to modification under paragraph (2)(C) or the
offering of a substitute policy under paragraph (3). The previous
sentence shall not be construed to affect the guaranteed renew-
ability of such a modified or substitute policy.
‘‘(6) DEFINITIONS.—For purposes of this subsection:
‘‘(A) MEDIGAP RX POLICY.—The term ‘medigap Rx policy’
means a medicare supplemental policy—
‘‘(i) which has a benefit package classified as ‘H’,
‘I’, or ‘J’ (including the benefit package classified as
‘J’ with a high deductible feature, as described in sub-
section (p)(11)) under the standards established under
subsection (p)(2), without regard to this subsection;
and
‘‘(ii) to which such standards do not apply (or to
which such standards have been waived under sub-
section (p)(6)) but which provides benefits for prescrip-
tion drugs.
Such term does not include a policy with a benefit package
as classified under clause (i) which has been modified under
paragraph (2)(C)(i).
‘‘(B) PART D ENROLLEE.—The term ‘part D enrollee’
means an individual who is enrolled in a part D plan.
‘‘(C) PART
D
PLAN.—The term ‘part D plan’ means
a prescription drug plan or an MA–PD plan (as defined
for purposes of part D).
‘‘(D) INITIAL PART D ENROLLMENT PERIOD.—The term
‘initial part D enrollment period’ means the initial enroll-
ment period described in section 1860D–1(b)(2)(A).’’.
(2) CONFORMING
CURRENT
GUARANTEED
ISSUE
PROVISIONS.—
(A) EXTENDING GUARANTEED ISSUE POLICY FOR INDIVID-
UALS ENROLLED IN MEDIGAP RX POLICIES WHO TRY MEDICARE
ADVANTAGE.—Subsection (s)(3)(C)(ii) of such section is
amended—
(i) by striking ‘‘(ii) Only’’ and inserting ‘‘(ii)(I) Sub-
ject to subclause (II), only’’; and
(ii) by adding at the end the following new sub-
clause:
‘‘(II) If the medicare supplemental policy referred to in subpara-
graph (B)(v) was a medigap Rx policy (as defined in subsection
(v)(6)(A)), a medicare supplemental policy described in this subpara-
graph is such policy in which the individual was most recently
enrolled as modified under subsection (v)(2)(C)(i) or, at the election
of the individual, a policy referred to in subsection (v)(3)(A)(i).’’.
(B) 
CONFORMING
AMENDMENT.—Section
1882(s)(3)(C)(iii) is amended by inserting ‘‘and subject to
subsection (v)(1)’’ after ‘‘subparagraph (B)(vi)’’.
(b) DEVELOPMENT
OF NEW STANDARDS
FOR MEDIGAP POLI-
CIES.—
(1) IN GENERAL.—Section 1882 (42 U.S.C. 1395ss) is further
amended by adding at the end the following new subsection:
‘‘(w) DEVELOPMENT OF NEW STANDARDS FOR MEDICARE SUPPLE-
MENTAL POLICIES.—
‘‘(1) IN GENERAL.—The Secretary shall request the National
Association of Insurance Commissioners to review and revise
the standards for benefit packages under subsection (p)(1),
taking into account the changes in benefits resulting from
H. R. 1—100
enactment of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 and to otherwise update stand-
ards to reflect other changes in law included in such Act.
Such revision shall incorporate the inclusion of the 2 benefit
packages described in paragraph (2). Such revisions shall be
made consistent with the rules applicable under subsection
(p)(1)(E) with the reference to the ‘1991 NAIC Model Regulation’
deemed a reference to the NAIC Model Regulation as published
in the Federal Register on December 4, 1998, and as subse-
quently updated by the National Association of Insurance
Commissioners to reflect previous changes in law (and sub-
section (v)) and the reference to ‘date of enactment of this
subsection’ deemed a reference to the date of enactment of
the Medicare Prescription Drug, Improvement, and Moderniza-
tion Act of 2003. To the extent practicable, such revision shall
provide for the implementation of revised standards for benefit
packages as of January 1, 2006.
‘‘(2) NEW
BENEFIT
PACKAGES.—The benefit packages
described in this paragraph are the following (notwithstanding
any other provision of this section relating to a core benefit
package):
‘‘(A) FIRST NEW BENEFIT PACKAGE.—A benefit package
consisting of the following:
‘‘(i) Subject to clause (ii), coverage of 50 percent
of the cost-sharing otherwise applicable under parts
A and B, except there shall be no coverage of the
part B deductible and coverage of 100 percent of any
cost-sharing otherwise applicable for preventive bene-
fits.
‘‘(ii) Coverage for all hospital inpatient coinsurance
and 365 extra lifetime days of coverage of inpatient
hospital services (as in the current core benefit pack-
age).
‘‘(iii) A limitation on annual out-of-pocket expendi-
tures under parts A and B to $4,000 in 2006 (or,
in a subsequent year, to such limitation for the pre-
vious year increased by an appropriate inflation adjust-
ment specified by the Secretary).
‘‘(B) SECOND NEW BENEFIT PACKAGE.—A benefit pack-
age consisting of the benefit package described in subpara-
graph (A), except as follows:
‘‘(i) Substitute ‘75 percent’ for ‘50 percent’ in clause
(i) of such subparagraph.
‘‘(ii) Substitute ‘$2,000’ for ‘$4,000’ in clause (iii)
of such subparagraph.’’.
(2) CONFORMING AMENDMENTS.—Section 1882 (42 U.S.C.
1395ss) is amended—
(A) in subsection (g)(1), by inserting ‘‘a prescription
drug plan under part D or’’ after ‘‘but does not include’’;
and
(B) in subsection (o)(1), by striking ‘‘subsection (p)’’
and inserting ‘‘subsections (p), (v), and (w)’’.
(c) RULE OF CONSTRUCTION.—
(1) IN GENERAL.—Nothing in this Act shall be construed
to require an issuer of a medicare supplemental policy under
section 1882 of the Social Security Act (42 U.S.C. 1395rr) to
participate as a PDP sponsor under part D of title XVIII of
H. R. 1—101
such Act, as added by section 101, as a condition for issuing
such policy.
(2) PROHIBITION
ON
STATE
REQUIREMENT.—A State may
not require an issuer of a medicare supplemental policy under
section 1882 of the Social Security Act (42 U.S.C. 1395rr) to
participate as a PDP sponsor under such part D as a condition
for issuing such policy.
SEC. 
105. 
ADDITIONAL 
PROVISIONS 
RELATING 
TO 
MEDICARE
PRESCRIPTION DRUG DISCOUNT CARD AND TRANSI-
TIONAL ASSISTANCE PROGRAM.
(a) EXCLUSION
OF COSTS FROM DETERMINATION
OF PART B
MONTHLY
PREMIUM.—Section 1839(g) (42 U.S.C. 1395r(g)) is
amended—
(1) by striking ‘‘attributable to the application of section’’
and inserting ‘‘attributable to—
‘‘(1) the application of section’’;
(2) by striking the period and inserting ‘‘; and’’; and
(3) by adding at the end the following new paragraph:
‘‘(2) the medicare prescription drug discount card and
transitional assistance program under section 1860D–31.’’.
(b) APPLICATION
OF
CONFIDENTIALITY
FOR
DRUG
PRICING
DATA.—The last sentence of section 1927(b)(3)(D) (42 U.S.C. 1396r–
8(b)(3)(D)), as added by section 101(e)(4), is amended by inserting
‘‘and drug pricing data reported under the first sentence of section
1860D–31(i)(1)’’ after ‘‘section 1860D–4(c)(2)(E)’’.
(c) RULES
FOR IMPLEMENTATION.—The following rules shall
apply to the medicare prescription drug discount card and transi-
tional assistance program under section 1860D–31 of the Social
Security Act, as added by section 101(a):
(1) In promulgating regulations pursuant to subsection
(a)(2)(B) of such section 1860D–31—
(A) section 1871(a)(3) of the Social Security Act (42
U.S.C. 1395hh(a)(3)), as added by section 902(a)(1), shall
not apply;
(B) chapter 35 of title 44, United States Code, shall
not apply; and
(C) sections 553(d) and 801(a)(3)(A) of title 5, United
States Code, shall not apply.
(2) Section 1857(c)(5) of the Social Security Act (42 U.S.C.
1395w–27(c)(5)) shall apply with respect to section 1860D–
31 of such Act, as added by section 101(a), in the same manner
as it applies to part C of title XVIII of such Act.
(3) The administration of such program shall be made
without regard to chapter 35 of title 44, United States Code.
(4)(A) There shall be no judicial review of a determination
not to endorse, or enter into a contract, with a prescription
drug card sponsor under section 1860D–31 of the Social Security
Act.
(B) In the case of any order issued to enjoin any provision
of section 1860D–31 of the Social Security Act (or of any provi-
sion of this section), such order shall not affect any other
provision of such section (or of this section) and all such provi-
sions shall be treated as severable.
(d) CONFORMING AMENDMENTS TO FEDERAL SMI TRUST FUND
FOR TRANSITIONAL ASSISTANCE ACCOUNT.—Section 1841 (42 U.S.C.
1395t), as amended by section 101(e)(3)(C), is amended—
H. R. 1—102
(1) in the last sentence of subsection (a), by inserting after
‘‘section 1860D–16’’ the following: ‘‘or the Transitional Assist-
ance Account established by section 1860D–31(k)(1)’’; and
(2) in subsection (g), by adding at the end the following:
‘‘The payments provided for under section 1860D–31(k)(2) shall
be made from the Transitional Assistance Account in the Trust
Fund.’’.
(e) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF
PROVIDING TRANSITIONAL ASSISTANCE UNDER MEDICARE DISCOUNT
CARD PROGRAM.—
(1) IN
GENERAL.—Subsection (l) of section 6103 of the
Internal Revenue Code of 1986 (relating to disclosure of returns
and return information for purposes other than tax administra-
tion) is amended by adding at the end the following new para-
graph:
‘‘(19) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES
OF PROVIDING TRANSITIONAL ASSISTANCE UNDER MEDICARE DIS-
COUNT CARD PROGRAM.—
‘‘(A) IN GENERAL.—The Secretary, upon written request
from the Secretary of Health and Human Services pursuant
to carrying out section 1860D–31 of the Social Security
Act, shall disclose to officers, employees, and contractors
of the Department of Health and Human Services with
respect to a taxpayer for the applicable year—
‘‘(i)(I) whether the adjusted gross income, as modi-
fied in accordance with specifications of the Secretary
of Health and Human Services for purposes of carrying
out such section, of such taxpayer and, if applicable,
such taxpayer’s spouse, for the applicable year, exceeds
the amounts specified by the Secretary of Health and
Human Services in order to apply the 100 and 135
percent of the poverty lines under such section, (II)
whether the return was a joint return, and (III) the
applicable year, or
‘‘(ii) if applicable, the fact that there is no return
filed for such taxpayer for the applicable year.
‘‘(B) DEFINITION OF APPLICABLE YEAR.—For the pur-
poses of this subsection, the term ‘applicable year’ means
the most recent taxable year for which information is avail-
able in the Internal Revenue Service’s taxpayer data
information systems, or, if there is no return filed for
such taxpayer for such year, the prior taxable year.
‘‘(C) RESTRICTION
ON
USE
OF
DISCLOSED
INFORMA-
TION.—Return information disclosed under this paragraph
may be used only for the purposes of determining eligibility
for and administering transitional assistance under section
1860D–31 of the Social Security Act.’’.
(2) CONFIDENTIALITY.—Paragraph (3) of section 6103(a) of
such Code is amended by striking ‘‘or (16)’’ and inserting ‘‘(16),
or (19)’’.
(3) PROCEDURES AND RECORDKEEPING RELATED TO DISCLO-
SURES.—Subsection (p)(4) of section 6103 of such Code is
amended by striking ‘‘(l)(16) or (17)’’ each place it appears
and inserting ‘‘(l)(16), (17), or (19)’’.
(4) UNAUTHORIZED DISCLOSURE OR INSPECTION.—Paragraph
(2) of section 7213(a) of such Code is amended by striking
‘‘or (16)’’ and inserting ‘‘(16), or (19)’’.
H. R. 1—103
SEC. 106. STATE PHARMACEUTICAL ASSISTANCE TRANSITION COMMIS-
SION.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—There is established, as of the first day
of the third month beginning after the date of the enactment
of this Act, a State Pharmaceutical Assistance Transition
Commission (in this section referred to as the ‘‘Commission’’)
to develop a proposal for addressing the unique transitional
issues facing State pharmaceutical assistance programs, and
program participants, due to the implementation of the vol-
untary prescription drug benefit program under part D of title
XVIII of the Social Security Act, as added by section 101.
(2) DEFINITIONS.—For purposes of this section:
(A) STATE
PHARMACEUTICAL
ASSISTANCE
PROGRAM
DEFINED.—The term ‘‘State pharmaceutical assistance pro-
gram’’ means a program (other than the medicaid program)
operated by a State (or under contract with a State) that
provides as of the date of the enactment of this Act financial
assistance to medicare beneficiaries for the purchase of
prescription drugs.
(B) 
PROGRAM
PARTICIPANT.—The 
term 
‘‘program
participant’’ means a low-income medicare beneficiary who
is a participant in a State pharmaceutical assistance pro-
gram.
(b) COMPOSITION.—The Commission shall include the following:
(1) A representative of each Governor of each State that
the Secretary identifies as operating on a statewide basis a
State pharmaceutical assistance program that provides for eligi-
bility and benefits that are comparable or more generous than
the low-income assistance eligibility and benefits offered under
section 1860D–14 of the Social Security Act.
(2) Representatives from other States that the Secretary
identifies have in operation other State pharmaceutical assist-
ance programs, as appointed by the Secretary.
(3) Representatives of organizations that have an inherent
interest in program participants or the program itself, as
appointed by the Secretary but not to exceed the number of
representatives under paragraphs (1) and (2).
(4) Representatives of Medicare Advantage organizations,
pharmaceutical benefit managers, and other private health
insurance plans, as appointed by the Secretary.
(5) The Secretary (or the Secretary’s designee) and such
other members as the Secretary may specify.
The Secretary shall designate a member to serve as Chair of the
Commission and the Commission shall meet at the call of the
Chair.
(c) DEVELOPMENT OF PROPOSAL.—The Commission shall develop
the proposal described in subsection (a) in a manner consistent
with the following principles:
(1) Protection of the interests of program participants in
a manner that is the least disruptive to such participants
and that includes a single point of contact for enrollment and
processing of benefits.
(2) Protection of the financial and flexibility interests of
States so that States are not financially worse off as a result
of the enactment of this title.
(3) Principles of medicare modernization under this Act.
H. R. 1—104
(d) REPORT.—By not later than January 1, 2005, the Commis-
sion shall submit to the President and Congress a report that
contains a detailed proposal (including specific legislative or
administrative recommendations, if any) and such other rec-
ommendations as the Commission deems appropriate.
(e) SUPPORT.—The Secretary shall provide the Commission with
the administrative support services necessary for the Commission
to carry out its responsibilities under this section.
(f) TERMINATION.—The Commission shall terminate 30 days
after the date of submission of the report under subsection (d).
SEC. 107. STUDIES AND REPORTS.
(a) STUDY REGARDING REGIONAL VARIATIONS IN PRESCRIPTION
DRUG SPENDING.—
(1) IN GENERAL.—The Secretary shall conduct a study that
examines variations in per capita spending for covered part
D drugs under part D of title XVIII of the Social Security
Act among PDP regions and, with respect to such spending,
the amount of such variation that is attributable to—
(A) price variations (described in section 1860D–
15(c)(2) of such Act); and
(B) differences in per capita utilization that is not
taken into account in the health status risk adjustment
provided under section 1860D–15(c)(1) of such Act.
(2) REPORT
AND
RECOMMENDATIONS.—Not later than
January 1, 2009, the Secretary shall submit to Congress a
report on the study conducted under paragraph (1). Such report
shall include—
(A) information regarding the extent of geographic vari-
ation described in paragraph (1)(B);
(B) an analysis of the impact on direct subsidies under
section 1860D–15(a)(1) of the Social Security Act in dif-
ferent PDP regions if such subsidies were adjusted to take
into account the variation described in subparagraph (A);
and
(C) recommendations regarding the appropriateness of
applying an additional geographic adjustment factor under
section 1860D–15(c)(2) that reflects some or all of the vari-
ation described in subparagraph (A).
(b) REVIEW AND REPORT ON CURRENT STANDARDS OF PRACTICE
FOR PHARMACY SERVICES PROVIDED
TO PATIENTS
IN NURSING
FACILITIES.—
(1) REVIEW.—
(A) IN GENERAL.—Not later than 12 months after the
date of the enactment of this Act, the Secretary shall
conduct a thorough review of the current standards of
practice for pharmacy services provided to patients in
nursing facilities.
(B) SPECIFIC MATTERS REVIEWED.—In conducting the
review under subparagraph (A), the Secretary shall—
(i) assess the current standards of practice, clinical
services, and other service requirements generally used
for pharmacy services in long-term care settings; and
(ii) evaluate the impact of those standards with
respect to patient safety, reduction of medication errors
and quality of care.
(2) REPORT.—
H. R. 1—105
(A) IN GENERAL.—Not later than the date that is 18
months after the date of the enactment of this Act, the
Secretary shall submit a report to Congress on the study
conducted under paragraph (1)(A).
(B) CONTENTS.—The report submitted under subpara-
graph (A) shall contain—
(i) a description of the plans of the Secretary to
implement the provisions of this Act in a manner con-
sistent with applicable State and Federal laws designed
to protect the safety and quality of care of nursing
facility patients; and
(ii) recommendations regarding necessary actions
and appropriate reimbursement to ensure the provision
of prescription drugs to medicare beneficiaries residing
in nursing facilities in a manner consistent with
existing patient safety and quality of care standards
under applicable State and Federal laws.
(c) IOM STUDY ON DRUG SAFETY AND QUALITY.—
(1) IN GENERAL.—The Secretary shall enter into a contract
with the Institutes of Medicine of the National Academies of
Science (such Institutes referred to in this subsection as the
‘‘IOM’’) to carry out a comprehensive study (in this subsection
referred to as the ‘‘study’’) of drug safety and quality issues
in order to provide a blueprint for system-wide change.
(2) OBJECTIVES.—
(A) The study shall develop a full understanding of
drug safety and quality issues through an evidence-based
review of literature, case studies, and analysis. This review
will consider the nature and causes of medication errors,
their impact on patients, the differences in causation,
impact, and prevention across multiple dimensions of
health care delivery-including patient populations, care set-
tings, clinicians, and institutional cultures.
(B) The study shall attempt to develop credible esti-
mates of the incidence, severity, costs of medication errors
that can be useful in prioritizing resources for national
quality improvement efforts and influencing national
health care policy.
(C) The study shall evaluate alternative approaches
to reducing medication errors in terms of their efficacy,
cost-effectiveness, appropriateness in different settings and
circumstances, 
feasibility, 
institutional 
barriers 
to
implementation, associated risks, and the quality of evi-
dence supporting the approach.
(D) The study shall provide guidance to consumers,
providers, payers, and other key stakeholders on high-
priority strategies to achieve both short-term and long-
term drug safety goals, to elucidate the goals and expected
results of such initiatives and support the business case
for them, and to identify critical success factors and key
levers for achieving success.
(E) The study shall assess the opportunities and key
impediments to broad nationwide implementation of medi-
cation error reductions, and to provide guidance to policy-
makers and government agencies (including the Food and
Drug Administration, the Centers for Medicare & Medicaid
H. R. 1—106
Services, and the National Institutes of Health) in pro-
moting a national agenda for medication error reduction.
(F) The study shall develop an applied research agenda
to evaluate the health and cost impacts of alternative inter-
ventions, and to assess collaborative public and private
strategies for implementing the research agenda through
AHRQ and other government agencies.
(3) CONDUCT OF STUDY.—
(A) EXPERT COMMITTEE.—In conducting the study, the
IOM shall convene a committee of leading experts and
key stakeholders in pharmaceutical management and drug
safety, including clinicians, health services researchers,
pharmacists, system administrators, payer representatives,
and others.
(B) COMPLETION.—The study shall be completed within
an 18-month period.
(4) REPORT.—A report on the study shall be submitted
to Congress upon the completion of the study.
(5) AUTHORIZATION OF APPROPRIATIONS.—There are author-
ized to be appropriated to carry out this section such sums
as may be necessary.
(d) STUDY OF MULTI-YEAR CONTRACTS.—
(1) IN GENERAL.—The Secretary shall provide for a study
on the feasibility and advisability of providing for contracting
with PDP sponsors and MA organizations under parts C and
D of title XVIII on a multi-year basis.
(2) REPORT.—Not later than January 1, 2007, the Secretary
shall submit to Congress a report on the study under paragraph
(1). The report shall include such recommendations as the
Secretary deems appropriate.
(e) GAO STUDY REGARDING IMPACT OF ASSETS TEST FOR SUB-
SIDY ELIGIBLE INDIVIDUALS.—
(1) STUDY.—The Comptroller General of the United States
shall conduct a study to determine the extent to which drug
utilization and access to covered part D drugs under part
D of title XVIII of the Social Security Act by subsidy eligible
individuals differs from such utilization and access for individ-
uals who would qualify as such subsidy eligible individuals
but for the application of section 1860D–14(a)(3)(A)(iii) of such
Act.
(2) REPORT.—Not later than September 30, 2007, the Comp-
troller General shall submit a report to Congress on the study
conducted under paragraph (1) that includes such recommenda-
tions for legislation as the Comptroller General determines
are appropriate.
(f) STUDY ON MAKING PRESCRIPTION PHARMACEUTICAL INFORMA-
TION ACCESSIBLE
FOR BLIND
AND VISUALLY-IMPAIRED INDIVID-
UALS.—
(1) STUDY.—
(A) IN
GENERAL.—The Secretary shall undertake a
study of how to make prescription pharmaceutical informa-
tion, including drug labels and usage instructions, acces-
sible to blind and visually-impaired individuals.
(B) STUDY TO INCLUDE EXISTING AND EMERGING TECH-
NOLOGIES.—The study under subparagraph (A) shall
include a review of existing and emerging technologies,
including assistive technology, that makes essential
H. R. 1—107
information on the content and prescribed use of pharma-
ceutical medicines available in a usable format for blind
and visually-impaired individuals.
(2) REPORT.—
(A) IN GENERAL.—Not later than 18 months after the
date of the enactment of this Act, the Secretary shall
submit a report to Congress on the study required under
paragraph (1).
(B) CONTENTS OF REPORT.—The report required under
paragraph (1) shall include recommendations for the
implementation of usable formats for making prescription
pharmaceutical information available to blind and visually-
impaired individuals and an estimate of the costs associated
with the implementation of each format.
SEC. 108. GRANTS TO PHYSICIANS TO IMPLEMENT ELECTRONIC
PRESCRIPTION DRUG PROGRAMS.
(a) IN GENERAL.—The Secretary is authorized to make grants
to physicians for the purpose of assisting such physicians to imple-
ment electronic prescription drug programs that comply with the
standards promulgated or modified under section 1860D–4(e) of
the Social Security Act, as inserted by section 101(a).
(b) AWARDING OF GRANTS.—
(1) APPLICATION.—No grant may be made under this section
except pursuant to a grant application that is submitted and
approved in a time, manner, and form specified by the Sec-
retary.
(2) CONSIDERATIONS
AND
PREFERENCES.—In awarding
grants under this section, the Secretary shall—
(A) give special consideration to physicians who serve
a disproportionate number of medicare patients; and
(B) give preference to physicians who serve a rural
or underserved area.
(3) LIMITATION ON GRANTS.—Only 1 grant may be awarded
under this section with respect to any physician or group prac-
tice of physicians.
(c) TERMS AND CONDITIONS.—
(1) IN GENERAL.—Grants under this section shall be made
under such terms and conditions as the Secretary specifies
consistent with this section.
(2) USE OF GRANT FUNDS.—Funds provided under grants
under this section may be used for any of the following:
(A) For purchasing, leasing, and installing computer
software and hardware, including handheld computer tech-
nologies.
(B) Making upgrades and other improvements to
existing computer software and hardware to enable e-pre-
scribing.
(C) Providing education and training to eligible physi-
cian staff on the use of technology to implement the elec-
tronic transmission of prescription and patient information.
(3) PROVISION OF INFORMATION.—As a condition for the
awarding of a grant under this section, an applicant shall
provide to the Secretary such information as the Secretary
may require in order to—
(A) evaluate the project for which the grant is made;
and
H. R. 1—108
(B) ensure that funding provided under the grant is
expended only for the purposes for which it is made.
(4) AUDIT.—The Secretary shall conduct appropriate audits
of grants under this section.
(5) MATCHING REQUIREMENT.—The applicant for a grant
under this section shall agree, with respect to the costs to
be incurred by the applicant in implementing an electronic
prescription drug program, to make available (directly or
through donations from public or private entities) non-Federal
contributions toward such costs in an amount that is not less
than 50 percent of such costs. Non-Federal contributions under
the previous sentence may be in cash or in kind, fairly evalu-
ated, including plant, equipment, or services. Amounts provided
by the Federal Government, or services assisted or subsidized
to any significant extent by the Federal Government, may
not be included in determining the amount of such contribu-
tions.
(d) AUTHORIZATION OF APPROPRIATIONS.—There are authorized
to be appropriated to carry out this section $50,000,000 for fiscal
year 2007 and such sums as may be necessary for each of fiscal
years 2008 and 2009.
SEC. 109. EXPANDING THE WORK OF MEDICARE QUALITY IMPROVE-
MENT ORGANIZATIONS TO INCLUDE PARTS C AND D.
(a) APPLICATION TO MEDICARE MANAGED CARE AND PRESCRIP-
TION DRUG COVERAGE.—Section 1154(a)(1) (42 U.S.C. 1320c–3(a)(1))
is amended by inserting ‘‘, to Medicare Advantage organizations
pursuant to contracts under part C, and to prescription drug spon-
sors pursuant to contracts under part D’’ after ‘‘under section 1876’’.
(b) PRESCRIPTION DRUG THERAPY QUALITY IMPROVEMENT.—Sec-
tion 1154(a) (42 U.S.C. 1320c–3(a)) is amended by adding at the
end the following new paragraph:
‘‘(17) The organization shall execute its responsibilities
under subparagraphs (A) and (B) of paragraph (1) by offering
to providers, practitioners, Medicare Advantage organizations
offering Medicare Advantage plans under part C, and prescrip-
tion drug sponsors offering prescription drug plans under part
D quality improvement assistance pertaining to prescription
drug therapy. For purposes of this part and title XVIII, the
functions described in this paragraph shall be treated as a
review function.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply on and after January 1, 2004.
(d) IOM STUDY OF QIOS.—
(1) IN GENERAL.—The Secretary shall request the Institute
of Medicine of the National Academy of Sciences to conduct
an evaluation of the program under part B of title XI of the
Social Security Act. The study shall include a review of the
following:
(A) An overview of the program under such part.
(B) The duties of organizations with contracts with
the Secretary under such part.
(C) The extent to which quality improvement organiza-
tions improve the quality of care for medicare beneficiaries.
(D) The extent to which other entities could perform
such quality improvement functions as well as, or better
than, quality improvement organizations.
H. R. 1—109
(E) The effectiveness of reviews and other actions con-
ducted by such organizations in carrying out those duties.
(F) The source and amount of funding for such
organizations.
(G) The conduct of oversight of such organizations.
(2) REPORT TO CONGRESS.—Not later than June 1, 2006,
the Secretary shall submit to Congress a report on the results
of the study described in paragraph (1), including any rec-
ommendations for legislation.
(3) INCREASED COMPETITION.—If the Secretary finds based
on the study conducted under paragraph (1) that other entities
could improve quality in the medicare program as well as,
or better than, the current quality improvement organizations,
then the Secretary shall provide for such increased competition
through the addition of new types of entities which may perform
quality improvement functions.
SEC. 110. CONFLICT OF INTEREST STUDY.
(a) STUDY.—The Federal Trade Commission shall conduct a
study of differences in payment amounts for pharmacy services
provided to enrollees in group health plans that utilize pharmacy
benefit managers. Such study shall include the following:
(1) An assessment of the differences in costs incurred by
such enrollees and plans for prescription drugs dispensed by
mail-order pharmacies owned by pharmaceutical benefit man-
agers compared to mail-order pharmacies not owned by pharma-
ceutical benefit managers, and community pharmacies.
(2) Whether such plans are acting in a manner that maxi-
mizes competition and results in lower prescription drug prices
for enrollees.
(b) REPORT.—Not later than 18 months after the date of the
enactment of this Act, the Commission shall submit to Congress
a report on the study conducted under subsection (a). Such report
shall include recommendations regarding any need for legislation
to ensure the fiscal integrity of the voluntary prescription drug
benefit program under part D of title XVIII, as added by section
101, that may be appropriated as the result of such study.
(c) EXEMPTION FROM PAPERWORK REDUCTION ACT.—Chapter
35 of title 44, United States Code, shall not apply to the collection
of information under subsection (a).
SEC. 111. STUDY ON EMPLOYMENT-BASED RETIREE HEALTH COV-
ERAGE.
(a) STUDY.—The Comptroller General of the United States shall
conduct an initial and final study under this subsection to examine
trends in employment-based retiree health coverage (as defined
in 1860D–22(c)(1) of the Social Security Act, as added by section
101), including coverage under the Federal Employees Health Bene-
fits Program (FEHBP), and the options and incentives available
under this Act which may have an effect on the voluntary provision
of such coverage.
(b) CONTENT OF INITIAL STUDY.—The initial study under this
section shall consider the following:
(1) Trends in employment-based retiree health coverage
prior to the date of the enactment of this Act.
(2) The opinions of sponsors of employment-based retiree
health coverage concerning which of the options available under
this Act they are most likely to utilize for the provision of
H. R. 1—110
health coverage to their medicare-eligible retirees, including
an assessment of the administrative burdens associated with
the available options.
(3) The likelihood of sponsors of employment-based retiree
health coverage to maintain or adjust their levels of retiree
health benefits beyond coordination with medicare, including
for prescription drug coverage, provided to medicare-eligible
retirees after the date of the enactment of this Act.
(4) The factors that sponsors of employment-based retiree
health coverage expect to consider in making decisions about
any changes they may make in the health coverage provided
to medicare-eligible retirees.
(5) Whether the prescription drug plan options available,
or the health plan options available under the Medicare Advan-
tage program, are likely to cause employers and other entities
that did not provide health coverage to retirees prior to the
date of the enactment of this Act to provide supplemental
coverage or contributions toward premium expenses for medi-
care-eligible retirees who may enroll in such options in the
future.
(c) CONTENTS OF FINAL STUDY.—The final study under this
section shall consider the following:
(1) Changes in the trends in employment-based retiree
health coverage since the completion of the initial study by
the Comptroller General.
(2) Factors contributing to any changes in coverage levels.
(3) The number and characteristics of sponsors of employ-
ment-based retiree health coverage who receive the special
subsidy payments under section 1860D–22 of the Social Secu-
rity Act, as added by section 101, for the provision of prescrip-
tion drug coverage to their medicare-eligible retirees that is
the same or greater actuarial value as the prescription drug
coverage available to other medicare beneficiaries without
employment-based retiree health coverage.
(4) The extent to which sponsors of employment-based
retiree health coverage provide supplemental health coverage
or contribute to the premiums for medicare-eligible retirees
who enroll in a prescription drug plan or an MA–PD plan.
(5) Other coverage options, including tax-preferred retire-
ment or health savings accounts, consumer-directed health
plans, or other vehicles that sponsors of employment-based
retiree health coverage believe would assist retirees with their
future health care needs and their willingness to sponsor such
alternative plan designs.
(6) The extent to which employers or other entities that
did not provide employment-based retiree health coverage prior
to the date of the enactment of this Act provided some form
of coverage or financial assistance for retiree health care needs
after the date of the enactment of this Act.
(7) Recommendations by employers, benefits experts, aca-
demics, and others on ways that the voluntary provision of
employment-based retiree health coverage may be improved
and expanded.
(d) REPORTS.—The Comptroller General shall submit a report
to Congress on—
(1) the initial study under subsection (b) not later than
1 year after the date of the enactment of this Act; and
H. R. 1—111
(2) the final study under subsection (c) not later than
January 1, 2007.
(e) CONSULTATION.—The Comptroller General shall consult with
sponsors of employment-based retiree health coverage, benefits
experts, human resources professionals, employee benefits consult-
ants, and academics with experience in health benefits and survey
research in the development and design of the initial and final
studies under this section.
TITLE II—MEDICARE ADVANTAGE
Subtitle A—Implementation of Medicare
Advantage Program
SEC. 201. IMPLEMENTATION OF MEDICARE ADVANTAGE PROGRAM.
(a) IN GENERAL.—There is hereby established the Medicare
Advantage program. The Medicare Advantage program shall consist
of the program under part C of title XVIII of the Social Security
Act (as amended by this Act).
(b) REFERENCES.—Subject to subsection (c), any reference to
the program under part C of title XVIII of the Social Security
Act shall be deemed a reference to the Medicare Advantage program
and, with respect to such part, any reference to ‘‘Medicare+Choice’’
is deemed a reference to ‘‘Medicare Advantage’’ and ‘‘MA’’.
(c) TRANSITION.—In order to provide for an orderly transition
and avoid beneficiary and provider confusion, the Secretary shall
provide for an appropriate transition in the use of the terms
‘‘Medicare+Choice’’ and ‘‘Medicare Advantage’’ (or ‘‘MA’’) in ref-
erence to the program under part C of title XVIII of the Social
Security Act. Such transition shall be fully completed for all mate-
rials for plan years beginning not later than January 1, 2006.
Before the completion of such transition, any reference to ‘‘Medicare
Advantage’’ or ‘‘MA’’ shall be deemed to include a reference to
‘‘Medicare+Choice’’.
Subtitle B—Immediate Improvements
SEC. 211. IMMEDIATE IMPROVEMENTS.
(a) EQUALIZING PAYMENTS WITH FEE-FOR-SERVICE.—
(1) IN
GENERAL.—Section 1853(c)(1) (42 U.S.C. 1395w–
23(c)(1)) is amended by adding at the end the following:
‘‘(D) 100 PERCENT OF FEE-FOR-SERVICE COSTS.—
‘‘(i) IN GENERAL.—For each year specified in clause
(ii), the adjusted average per capita cost for the year
involved, determined under section 1876(a)(4) and
adjusted as appropriate for the purpose of risk adjust-
ment, for the MA payment area for individuals who
are not enrolled in an MA plan under this part for
the year, but adjusted to exclude costs attributable
to payments under section 1886(h).
‘‘(ii) PERIODIC REBASING.—The provisions of clause
(i) shall apply for 2004 and for subsequent years as
the Secretary shall specify (but not less than once
every 3 years).
H. R. 1—112
‘‘(iii) INCLUSION OF COSTS OF VA AND DOD MILITARY
FACILITY
SERVICES
TO
MEDICARE-ELIGIBLE
BENE-
FICIARIES.—In determining the adjusted average per
capita cost under clause (i) for a year, such cost shall
be adjusted to include the Secretary’s estimate, on
a per capita basis, of the amount of additional pay-
ments that would have been made in the area involved
under this title if individuals entitled to benefits under
this title had not received services from facilities of
the Department of Defense or the Department of Vet-
erans Affairs.’’.
(2) CONFORMING
AMENDMENT.—Such section is further
amended, in the matter before subparagraph (A), by striking
‘‘or (C)’’ and inserting ‘‘(C), or (D)’’.
(b) CHANGE
IN
BUDGET
NEUTRALITY
FOR
BLEND.—Section
1853(c) (42 U.S.C. 1395w–23(c)) is amended—
(1) in paragraph (1)(A), by inserting ‘‘(for a year other
than 2004)’’ after ‘‘multiplied’’; and
(2) in paragraph (5), by inserting ‘‘(other than 2004)’’ after
‘‘for each year’’.
(c) INCREASING MINIMUM PERCENTAGE INCREASE TO NATIONAL
GROWTH RATE.—
(1) IN
GENERAL.—Section 1853(c)(1) (42 U.S.C. 1395w–
23(c)(1)) is amended—
(A) in subparagraph (A), by striking ‘‘The sum’’ and
inserting ‘‘For a year before 2005, the sum’’;
(B) in subparagraph (B)(iv), by striking ‘‘and each suc-
ceeding year’’ and inserting ‘‘, 2003, and 2004’’;
(C) in subparagraph (C)(iv), by striking ‘‘and each suc-
ceeding year’’ and inserting ‘‘and 2003’’; and
(D) by adding at the end of subparagraph (C) the
following new clause:
‘‘(v) For 2004 and each succeeding year, the greater
of—
‘‘(I) 102 percent of the annual MA capitation
rate under this paragraph for the area for the
previous year; or
‘‘(II) the annual MA capitation rate under this
paragraph for the area for the previous year
increased by the national per capita MA growth
percentage, described in paragraph (6) for that
succeeding year, but not taking into account any
adjustment under paragraph (6)(C) for a year
before 2004.’’.
(2) CONFORMING
AMENDMENT.—Section 1853(c)(6)(C) (42
U.S.C. 1395w–23(c)(6)(C)) is amended by inserting before the
period at the end the following: ‘‘, except that for purposes
of paragraph (1)(C)(v)(II), no such adjustment shall be made
for a year before 2004’’.
(d) INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY
SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES IN CALCULATION
OF PAYMENT RATES.—Section 1853(c)(3) (42 U.S.C. 1395w–23(c)(3))
is amended—
(1) in subparagraph (A), by striking ‘‘subparagraph (B)’’
and inserting ‘‘subparagraphs (B) and (E)’’; and
(2) by adding at the end the following new subparagraph:
H. R. 1—113
‘‘(E) INCLUSION OF COSTS OF DOD AND VA MILITARY
FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES.—
In determining the area-specific MA capitation rate under
subparagraph (A) for a year (beginning with 2004), the
annual per capita rate of payment for 1997 determined
under section 1876(a)(1)(C) shall be adjusted to include
in the rate the Secretary’s estimate, on a per capita basis,
of the amount of additional payments that would have
been made in the area involved under this title if individ-
uals entitled to benefits under this title had not received
services from facilities of the Department of Defense or
the Department of Veterans Affairs.’’.
(e) EXTENDING SPECIAL RULE FOR CERTAIN INPATIENT HOSPITAL
STAYS TO REHABILITATION HOSPITALS AND LONG-TERM CARE HOS-
PITALS.—
(1) IN GENERAL.—Section 1853(g) (42 U.S.C. 1395w–23(g))
is amended—
(A) in the matter preceding paragraph (1), by inserting
‘‘, 
a 
rehabilitation 
hospital 
described 
in 
section
1886(d)(1)(B)(ii) or a distinct part rehabilitation unit
described in the matter following clause (v) of section
1886(d)(1)(B), or a long-term care hospital (described in
section 1886(d)(1)(B)(iv))’’ after ‘‘1886(d)(1)(B))’’; and
(B) in paragraph (2)(B), by inserting ‘‘or other payment
provision under this title for inpatient services for the
type of facility, hospital, or unit involved, described in
the matter preceding paragraph (1), as the case may be,’’
after ‘‘1886(d)’’.
(2) EFFECTIVE DATE.—The amendments made by paragraph
(1) shall apply to contract years beginning on or after January
1, 2004.
(f) MEDPAC STUDY OF AAPCC.—
(1) STUDY.—The Medicare Payment Advisory Commission
shall conduct a study that assesses the method used for deter-
mining the adjusted average per capita cost (AAPCC) under
section 1876(a)(4) of the Social Security Act (42 U.S.C.
1395mm(a)(4)) as applied under section 1853(c)(1)(A) of such
Act (as amended by subsection (a)). Such study shall include
an examination of—
(A) the bases for variation in such costs between dif-
ferent areas, including differences in input prices, utiliza-
tion, and practice patterns;
(B) the appropriate geographic area for payment of
MA local plans under the Medicare Advantage program
under part C of title XVIII of such Act; and
(C) the accuracy of risk adjustment methods in
reflecting differences in costs of providing care to different
groups of beneficiaries served under such program.
(2) REPORT.—Not later than 18 months after the date of
the enactment of this Act, the Commission shall submit to
Congress a report on the study conducted under paragraph
(1).
(g) REPORT ON IMPACT OF INCREASED FINANCIAL ASSISTANCE
TO MEDICARE ADVANTAGE PLANS.—Not later than July 1, 2006,
the Secretary shall submit to Congress a report that describes
the impact of additional financing provided under this Act and
other Acts (including the Medicare, Medicaid, and SCHIP Balanced
H. R. 1—114
Budget Refinement Act of 1999 and BIPA) on the availability of
Medicare Advantage plans in different areas and its impact on
lowering premiums and increasing benefits under such plans.
(h) MEDPAC STUDY
AND
REPORT
ON
CLARIFICATION
OF
AUTHORITY REGARDING DISAPPROVAL
OF UNREASONABLE BENE-
FICIARY COST-SHARING.—
(1) STUDY.—The Medicare Payment Advisory Commission,
in consultation with beneficiaries, consumer groups, employers,
and organizations offering plans under part C of title XVIII
of the Social Security Act, shall conduct a study to determine
the extent to which the cost-sharing structures under such
plans affect access to covered services or select enrollees based
on the health status of eligible individuals described in section
1851(a)(3) of the Social Security Act (42 U.S.C. 1395w–21(a)(3)).
(2) REPORT.—Not later than December 31, 2004, the
Commission shall submit a report to Congress on the study
conducted under paragraph (1) together with recommendations
for such legislation and administrative actions as the Commis-
sion considers appropriate.
(i) IMPLEMENTATION OF PROVISIONS.—
(1) ANNOUNCEMENT OF REVISED MEDICARE ADVANTAGE PAY-
MENT RATES.—Within 6 weeks after the date of the enactment
of this Act, the Secretary shall determine, and shall announce
(in a manner intended to provide notice to interested parties)
MA capitation rates under section 1853 of the Social Security
Act (42 U.S.C. 1395w–23) for 2004, revised in accordance with
the provisions of this section.
(2) TRANSITION TO REVISED PAYMENT RATES.—The provi-
sions of section 604 of BIPA (114 Stat. 2763A–555) (other
than subsection (a)) shall apply to the provisions of subsections
(a) through (d) of this section for 2004 in the same manner
as the provisions of such section 604 applied to the provisions
of BIPA for 2001.
(3) SPECIAL RULE FOR PAYMENT RATES IN 2004.—
(A) JANUARY
AND
FEBRUARY.—Notwithstanding the
amendments made by subsections (a) through (d), for pur-
poses of making payments under section 1853 of the Social
Security Act (42 U.S.C. 1395w–23) for January and Feb-
ruary 2004, the annual capitation rate for a payment area
shall be calculated and the excess amount under section
1854(f)(1)(B) of such Act (42 U.S.C. 1395w–24(f)(1)(B)) shall
be determined as if such amendments had not been
enacted.
(B) MARCH THROUGH DECEMBER.—Notwithstanding the
amendments made by subsections (a) through (d), for pur-
poses of making payments under section 1853 of the Social
Security Act (42 U.S.C. 1395w–23) for March through
December 2004, the annual capitation rate for a payment
area shall be calculated and the excess amount under sec-
tion 1854(f)(1)(B) of such Act (42 U.S.C. 1395w–24(f)(1)(B))
shall be determined, in such manner as the Secretary esti-
mates will ensure that the total of such payments with
respect to 2004 is the same as the amounts that would
have been if subparagraph (A) had not been enacted.
(C) CONSTRUCTION.—Subparagraphs (A) and (B) shall
not be taken into account in computing such capitation
rate for 2005 and subsequent years.
H. R. 1—115
(4) PLANS REQUIRED TO PROVIDE NOTICE OF CHANGES IN
PLAN BENEFITS.—In the case of an organization offering a plan
under part C of title XVIII of the Social Security Act that
revises its submission of the information described in section
1854(a)(1) of such Act (42 U.S.C. 1395w–23(a)(1)) for a plan
pursuant to the application of paragraph (2), if such revision
results in changes in beneficiary premiums, beneficiary cost-
sharing, or benefits under the plan, then by not later than
3 weeks after the date the Secretary approves such submission,
the organization offering the plan shall provide each beneficiary
enrolled in the plan with written notice of such changes.
(5) LIMITATION ON REVIEW.—There shall be no administra-
tive or judicial review under section 1869 or section 1878 of
the Social Security Act (42 U.S.C. 1395ff and 1395oo), or other-
wise of any determination made by the Secretary under this
subsection or the application of the payment rates determined
pursuant to this subsection.
(j) ADDITIONAL AMENDMENTS.—Section 1852(d)(4) (42 U.S.C.
1395w–22(d)(4)) is amended—
(1) in subparagraph (B), by inserting ‘‘(other than deemed
contracts or agreements under subsection (j)(6))’’ after ‘‘the
plan has contracts or agreements’’; and
(2) in the last sentence, by inserting before the period
at the end the following: ‘‘, except that, if a plan entirely
meets such requirement with respect to a category of health
care professional or provider on the basis of subparagraph
(B), it may provide for a higher beneficiary copayment in the
case of health care professionals and providers of that category
who do not have contracts or agreements (other than deemed
contracts or agreements under subsection (j)(6)) to provide cov-
ered services under the terms of the plan’’.
Subtitle C—Offering of Medicare Advan-
tage (MA) Regional Plans; Medicare Ad-
vantage Competition
SEC. 221. ESTABLISHMENT OF MA REGIONAL PLANS.
(a) OFFERING OF MA REGIONAL PLANS.—
(1) IN GENERAL.—Section 1851(a)(2)(A) is amended—
(A) by striking ‘‘COORDINATED CARE PLANS.—Coordi-
nated’’ and inserting the following: ‘‘COORDINATED CARE
PLANS (INCLUDING REGIONAL PLANS).—
‘‘(i) IN GENERAL.—Coordinated’’;
(B) by inserting ‘‘regional or local’’ before ‘‘preferred
provider organization plans’’; and
(C) by inserting ‘‘ (including MA regional plans)’’ after
‘‘preferred provider organization plans’’.
(2) MORATORIUM
ON
NEW
LOCAL
PREFERRED
PROVIDER
ORGANIZATION
PLANS.—The Secretary shall not permit the
offering of a local preferred provider organization plan under
part C of title XVIII of the Social Security Act during 2006
or 2007 in a service area unless such plan was offered under
such part (including under a demonstration project under such
part) in such area as of December 31, 2005.
(b) DEFINITION OF MA REGIONAL PLAN; MA LOCAL PLAN.—
H. R. 1—116
(1) IN GENERAL.—Section 1859(b) (42 U.S.C. 1395w–29(b))
is amended by adding at the end the following new paragraphs:
‘‘(4) MA REGIONAL
PLAN.—The term ‘MA regional plan’
means an MA plan described in section 1851(a)(2)(A)(i)—
‘‘(A) that has a network of providers that have agreed
to a contractually specified reimbursement for covered
benefits with the organization offering the plan;
‘‘(B) that provides for reimbursement for all covered
benefits regardless of whether such benefits are provided
within such network of providers; and
‘‘(C) the service area of which is one or more entire
MA regions.
‘‘(5) MA LOCAL PLAN.—The term ‘MA local plan’ means
an MA plan that is not an MA regional plan.’’.
(2) CONSTRUCTION.—Nothing in part C of title XVIII of
the Social Security Act shall be construed as preventing an
MSA plan or MA private fee-for-service plan from having a
service area that covers one or more MA regions or the entire
nation.
(c) RULES FOR MA REGIONAL PLANS.—Part C of title XVIII
(42 U.S.C. 1395w–21 et seq.) is amended by inserting after section
1857 the following new section:
‘‘SPECIAL RULES FOR MA REGIONAL PLANS
‘‘SEC. 1858. (a) REGIONAL SERVICE AREA; ESTABLISHMENT OF
MA REGIONS.—
‘‘(1) COVERAGE OF ENTIRE MA REGION.—The service area
for an MA regional plan shall consist of an entire MA region
established under paragraph (2) and the provisions of section
1854(h) shall not apply to such a plan.
‘‘(2) ESTABLISHMENT OF MA REGIONS.—
‘‘(A) MA REGION.—For purposes of this title, the term
‘MA region’ means such a region within the 50 States
and the District of Columbia as established by the Sec-
retary under this paragraph.
‘‘(B) ESTABLISHMENT.—
‘‘(i) 
INITIAL
ESTABLISHMENT.—Not 
later 
than
January 1, 2005, the Secretary shall first establish
and publish MA regions.
‘‘(ii) PERIODIC REVIEW AND REVISION OF SERVICE
AREAS.—The Secretary may periodically review MA
regions under this paragraph and, based on such
review, may revise such regions if the Secretary deter-
mines such revision to be appropriate.
‘‘(C) REQUIREMENTS FOR MA REGIONS.—The Secretary
shall establish, and may revise, MA regions under this
paragraph in a manner consistent with the following:
‘‘(i) NUMBER OF REGIONS.—There shall be no fewer
than 10 regions, and no more than 50 regions.
‘‘(ii) MAXIMIZING
AVAILABILITY
OF
PLANS.—The
regions shall maximize the availability of MA regional
plans to all MA eligible individuals without regard
to health status, especially those residing in rural
areas.
‘‘(D) MARKET
SURVEY
AND
ANALYSIS.—Before estab-
lishing MA regions, the Secretary shall conduct a market
survey and analysis, including an examination of current
H. R. 1—117
insurance markets, to determine how the regions should
be established.
‘‘(3) NATIONAL PLAN.—Nothing in this subsection shall be
construed as preventing an MA regional plan from being offered
in more than one MA region (including all regions).
‘‘(b) APPLICATION OF SINGLE DEDUCTIBLE AND CATASTROPHIC
LIMIT ON OUT-OF-POCKET EXPENSES.—An MA regional plan shall
include the following:
‘‘(1) SINGLE
DEDUCTIBLE.—Any deductible for benefits
under the original medicare fee-for-service program option shall
be a single deductible (instead of a separate inpatient hospital
deductible and a part B deductible) and may be applied differen-
tially for in-network services and may be waived for preventive
or other items and services.
‘‘(2) CATASTROPHIC LIMIT.—
‘‘(A) IN-NETWORK.—A catastrophic limit on out-of-
pocket expenditures for in-network benefits under the
original medicare fee-for-service program option.
‘‘(B) TOTAL.—A catastrophic limit on out-of-pocket
expenditures for all benefits under the original medicare
fee-for-service program option.
‘‘(c) PORTION OF TOTAL PAYMENTS TO AN ORGANIZATION SUBJECT
TO RISK FOR 2006 AND 2007.—
‘‘(1) APPLICATION OF RISK CORRIDORS.—
‘‘(A) IN
GENERAL.—This subsection shall only apply
to MA regional plans offered during 2006 or 2007.
‘‘(B) NOTIFICATION OF ALLOWABLE COSTS UNDER THE
PLAN.—In the case of an MA organization that offers an
MA regional plan in an MA region in 2006 or 2007, the
organization shall notify the Secretary, before such date
in the succeeding year as the Secretary specifies, of—
‘‘(i) its total amount of costs that the organization
incurred in providing benefits covered under the
original medicare fee-for-service program option for all
enrollees under the plan in the region in the year
and the portion of such costs that is attributable to
administrative expenses described in subparagraph
(C); and
‘‘(ii) its total amount of costs that the organization
incurred in providing rebatable integrated benefits (as
defined in subparagraph (D)) and with respect to such
benefits the portion of such costs that is attributable
to administrative expenses described in subparagraph
(C) and not described in clause (i) of this subparagraph.
‘‘(C) ALLOWABLE COSTS DEFINED.—For purposes of this
subsection, the term ‘allowable costs’ means, with respect
to an MA regional plan for a year, the total amount of
costs described in subparagraph (B) for the plan and year,
reduced by the portion of such costs attributable to adminis-
trative expenses incurred in providing the benefits
described in such subparagraph.
‘‘(D) REBATABLE INTEGRATED BENEFITS.—For purposes
of this subsection, the term ‘rebatable integrated benefits’
means such non-drug supplemental benefits under sub-
clause (I) of section 1854(b)(1)(C)(ii) pursuant to a rebate
under such section that the Secretary determines are
H. R. 1—118
integrated with the benefits described in subparagraph
(B)(i).
‘‘(2) ADJUSTMENT OF PAYMENT.—
‘‘(A) NO ADJUSTMENT IF ALLOWABLE COSTS WITHIN 3
PERCENT OF TARGET AMOUNT.—If the allowable costs for
the plan for the year are at least 97 percent, but do not
exceed 103 percent, of the target amount for the plan
and year, there shall be no payment adjustment under
this subsection for the plan and year.
‘‘(B) INCREASE IN PAYMENT IF ALLOWABLE COSTS ABOVE
103 PERCENT OF TARGET AMOUNT.—
‘‘(i) COSTS BETWEEN 103 AND 108 PERCENT OF TAR-
GET AMOUNT.—If the allowable costs for the plan for
the year are greater than 103 percent, but not greater
than 108 percent, of the target amount for the plan
and year, the Secretary shall increase the total of
the monthly payments made to the organization
offering the plan for the year under section 1853(a)
by an amount equal to 50 percent of the difference
between such allowable costs and 103 percent of such
target amount.
‘‘(ii) COSTS
ABOVE
108
PERCENT
OF
TARGET
AMOUNT.—If the allowable costs for the plan for the
year are greater than 108 percent of the target amount
for the plan and year, the Secretary shall increase
the total of the monthly payments made to the
organization offering the plan for the year under sec-
tion 1853(a) by an amount equal to the sum of—
‘‘(I) 2.5 percent of such target amount; and
‘‘(II) 80 percent of the difference between such
allowable costs and 108 percent of such target
amount.
‘‘(C) REDUCTION
IN
PAYMENT
IF
ALLOWABLE
COSTS
BELOW 97 PERCENT OF TARGET AMOUNT.—
‘‘(i) COSTS BETWEEN 92 AND 97 PERCENT OF TARGET
AMOUNT.—If the allowable costs for the plan for the
year are less than 97 percent, but greater than or
equal to 92 percent, of the target amount for the plan
and year, the Secretary shall reduce the total of the
monthly payments made to the organization offering
the plan for the year under section 1853(a) by an
amount (or otherwise recover from the plan an amount)
equal to 50 percent of the difference between 97 percent
of the target amount and such allowable costs.
‘‘(ii) 
COSTS
BELOW
PERCENT
OF
TARGET
AMOUNT.—If the allowable costs for the plan for the
year are less than 92 percent of the target amount
for the plan and year, the Secretary shall reduce the
total of the monthly payments made to the organization
offering the plan for the year under section 1853(a)
by an amount (or otherwise recover from the plan
an amount) equal to the sum of—
‘‘(I) 2.5 percent of such target amount; and
‘‘(II) 80 percent of the difference between 92
percent of such target amount and such allowable
costs.
H. R. 1—119
‘‘(D) TARGET AMOUNT DESCRIBED.—For purposes of this
paragraph, the term ‘target amount’ means, with respect
to an MA regional plan offered by an organization in a
year, an amount equal to—
‘‘(i) the sum of—
‘‘(I) the total monthly payments made to the
organization for enrollees in the plan for the year
that are attributable to benefits under the original
medicare fee-for-service program option (as defined
in section 1852(a)(1)(B));
‘‘(II) the total of the MA monthly basic bene-
ficiary premium collectable for such enrollees for
the year; and
‘‘(III) the total amount of the rebates under
section 1854(b)(1)(C)(ii) that are attributable to
rebatable integrated benefits; reduced by
‘‘(ii) the amount of administrative expenses
assumed in the bid insofar as the bid is attributable
to benefits described in clause (i)(I) or (i)(III).
‘‘(3) DISCLOSURE OF INFORMATION.—
‘‘(A) IN GENERAL.—Each contract under this part shall
provide—
‘‘(i) that an MA organization offering an MA
regional plan shall provide the Secretary with such
information as the Secretary determines is necessary
to carry out this subsection; and
‘‘(ii) that, pursuant to section 1857(d)(2)(B), the
Secretary has the right to inspect and audit any books
and records of the organization that pertain to the
information regarding costs provided to the Secretary
under paragraph (1)(B).
‘‘(B) RESTRICTION ON USE OF INFORMATION.—Informa-
tion disclosed or obtained pursuant to the provisions of
this subsection may be used by officers, employees, and
contractors of the Department of Health and Human Serv-
ices only for the purposes of, and to the extent necessary
in, carrying out this subsection.
‘‘(d) ORGANIZATIONAL AND FINANCIAL REQUIREMENTS.—
‘‘(1) IN GENERAL.—In the case of an MA organization that
is offering an MA regional plan in an MA region and—
‘‘(A) meets the requirements of section 1855(a)(1) with
respect to at least one such State in such region; and
‘‘(B) with respect to each other State in such region
in which it does not meet requirements, it demonstrates
to the satisfaction of the Secretary that it has filed the
necessary application to meet such requirements,
the Secretary may waive such requirement with respect to
each State described in subparagraph (B) for such period of
time as the Secretary determines appropriate for the timely
processing of such an application by the State (and, if such
application is denied, through the end of such plan year as
the Secretary determines appropriate to provide for a transi-
tion).
‘‘(2) SELECTION OF APPROPRIATE STATE.—In applying para-
graph (1) in the case of an MA organization that meets the
requirements of section 1855(a)(1) with respect to more than
one State in a region, the organization shall select, in a manner
H. R. 1—120
specified by the Secretary among such States, one State the
rules of which shall apply in the case of the States described
in paragraph (1)(B).
‘‘(e) STABILIZATION FUND.—
‘‘(1) ESTABLISHMENT.—The Secretary shall establish under
this subsection an MA Regional Plan Stabilization Fund (in
this subsection referred to as the ‘Fund’) which shall be avail-
able for two purposes:
‘‘(A) PLAN ENTRY.—To provide incentives to have MA
regional plans offered in each MA region under paragraph
(3).
‘‘(B) PLAN RETENTION.—To provide incentives to retain
MA regional plans in certain MA regions with below-
national-average MA market penetration under paragraph
(4).
‘‘(2) FUNDING.—
‘‘(A) INITIAL FUNDING.—
‘‘(i) IN GENERAL.—There shall be available to the
Fund, for expenditures from the Fund during the
period beginning on January 1, 2007, and ending on
December 31, 2013, a total of $10,000,000,000.
‘‘(ii) PAYMENT FROM TRUST FUNDS.—Such amount
shall be available to the Fund, as expenditures are
made from the Fund, from the Federal Hospital Insur-
ance Trust Fund and the Federal Supplementary Med-
ical Insurance Trust Fund in the proportion specified
in section 1853(f).
‘‘(B) ADDITIONAL FUNDING FROM SAVINGS.—
‘‘(i) IN GENERAL.—There shall also be made avail-
able to the Fund, 50 percent of savings described in
clause (ii).
‘‘(ii) SAVINGS.—The savings described in this clause
are 25 percent of the average per capita savings
described in section 1854(b)(4)(C) for which monthly
rebates are provided under section 1854(b)(1)(C) in
the fiscal year involved that are attributable to MA
regional plans.
‘‘(iii) AVAILABILITY.—Funds made available under
this subparagraph shall be transferred into a special
account in the Treasury from the Federal Hospital
Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund in the proportion speci-
fied in section 1853(f) on a monthly basis.
‘‘(C) OBLIGATIONS.—Amounts in the Fund shall be
available in advance of appropriations to MA regional plans
in qualifying MA regions only in accordance with paragraph
(5).
‘‘(D) ORDERING.—Expenditures from the Fund shall
first be made from amounts made available under subpara-
graph (A).
‘‘(3) PLAN ENTRY FUNDING.—
‘‘(A) IN
GENERAL.—Funding is available under this
paragraph for a year only as follows:
‘‘(i) NATIONAL PLAN.—For a national bonus pay-
ment described in subparagraph (B) for the offering
by a single MA organization of an MA regional plan
in each MA region in the year, but only if there was
H. R. 1—121
not such a plan offered in each such region in the
previous year. Funding under this clause is only avail-
able with respect to any individual MA organization
for a single year, but may be made available to more
than one such organization in the same year.
‘‘(ii) REGIONAL PLANS.—Subject to clause (iii), for
an increased amount under subparagraph (C) for an
MA regional plan offered in an MA region which did
not have any MA regional plan offered in the prior
year.
‘‘(iii) LIMITATION ON REGIONAL PLAN FUNDING IN
CASE OF NATIONAL PLAN.—In no case shall there be
any payment adjustment under subparagraph (C) for
a year for which a national payment adjustment is
made under subparagraph (B).
‘‘(B) NATIONAL BONUS PAYMENT.—The national bonus
payment under this subparagraph shall—
‘‘(i) be available to an MA organization only if
the organization offers MA regional plans in every
MA region;
‘‘(ii) be available with respect to all MA regional
plans of the organization regardless of whether any
other MA regional plan is offered in any region; and
‘‘(iii) subject to amounts available under paragraph
(5) for a year, be equal to 3 percent of the benchmark
amount otherwise applicable for each MA regional plan
offered by the organization.
‘‘(C) REGIONAL PAYMENT ADJUSTMENT.—
‘‘(i) IN GENERAL.—The increased amount under this
subparagraph for an MA regional plan in an MA region
for a year shall be an amount, determined by the
Secretary, based on the bid submitted for such plan
(or plans) and shall be available to all MA regional
plans offered in such region and year. Such amount
may be based on the mean, mode, or median, or other
measure of such bids and may vary from region to
region. The Secretary may not limit the number of
plans or bids in a region.
‘‘(ii) MULTI-YEAR FUNDING.—
‘‘(I) IN GENERAL.—Subject to amounts avail-
able under paragraph (5), funding under this
subparagraph shall be available for a period deter-
mined by the Secretary.
‘‘(II) REPORT.—If the Secretary determines
that funding will be provided for a second consecu-
tive year with respect to an MA region, the Sec-
retary shall submit to the Congress a report that
describes the underlying market dynamics in the
region and that includes recommendations con-
cerning changes in the payment methodology
otherwise provided for MA regional plans under
this part.
‘‘(iii) APPLICATION TO ALL PLANS IN A REGION.—
Funding under this subparagraph with respect to an
MA region shall be made available with respect to
all MA regional plans offered in the region.
H. R. 1—122
‘‘(iv) LIMITATION ON AVAILABILITY OF PLAN RETEN-
TION FUNDING IN NEXT YEAR.—If an increased amount
is made available under this subparagraph with
respect to an MA region for a period determined by
the Secretary under clause (ii)(I), in no case shall
funding be available under paragraph (4) with respect
to MA regional plans offered in the region in the year
following such period.
‘‘(D) APPLICATION.—Any additional payment under this
paragraph provided for an MA regional plan for a year
shall be treated as if it were an addition to the benchmark
amount otherwise applicable to such plan and year, but
shall not be taken into account in the computation of
any benchmark amount for any subsequent year.
‘‘(4) PLAN RETENTION FUNDING.—
‘‘(A) IN
GENERAL.—Funding is available under this
paragraph for a year with respect to MA regional plans
offered in an MA region for the increased amount specified
in subparagraph (B) but only if the region meets the
requirements of subparagraphs (C) and (E).
‘‘(B) PAYMENT INCREASE.—The increased amount under
this subparagraph for an MA regional plan in an MA
region for a year shall be an amount, determined by the
Secretary, that does not exceed the greater of—
‘‘(i) 3 percent of the benchmark amount applicable
in the region; or
‘‘(ii) such amount as (when added to the benchmark
amount applicable to the region) will result in the
ratio of—
‘‘(I) such additional amount plus the bench-
mark 
amount 
computed 
under 
section
1854(b)(4)(B)(i) for the region and year, to the
adjusted average per capita cost for the region
and year, as estimated by the Secretary under
section 1876(a)(4) and adjusted as appropriate for
the purpose of risk adjustment; being equal to
‘‘(II) the weighted average of such benchmark
amounts for all the regions and such year, to the
average per capita cost for the United States and
such year, as estimated by the Secretary under
section 1876(a)(4) and adjusted as appropriate for
the purpose of risk adjustment.
‘‘(C) REGIONAL REQUIREMENTS.—The requirements of
this subparagraph for an MA region for a year are as
follows:
‘‘(i) NOTIFICATION OF PLAN EXIT.—The Secretary
has received notice (in such form and manner as the
Secretary specifies) before a year that one or more
MA regional plans that were offered in the region
in the previous year will not be offered in the suc-
ceeding year.
‘‘(ii) REGIONAL PLANS AVAILABLE FROM FEWER THAN
2 MA ORGANIZATIONS IN THE REGION.—The Secretary
determines that if the plans referred to in clause (i)
are not offered in the year, fewer than 2 MA organiza-
tions will be offering MA regional plans in the region
in the year involved.
H. R. 1—123
‘‘(iii) PERCENTAGE ENROLLMENT IN MA REGIONAL
PLANS BELOW NATIONAL AVERAGE.—For the previous
year, the Secretary determines that the average
percentage of MA eligible individuals residing in the
region who are enrolled in MA regional plans is less
than the average percentage of such individuals in
the United States enrolled in such plans.
‘‘(D) APPLICATION.—Any additional payment under this
paragraph provided for an MA regional plan for a year
shall be treated as if it were an addition to the benchmark
amount otherwise applicable to such plan and year, but
shall not be taken into account in the computation of
any benchmark amount for any subsequent year.
‘‘(E) 2-CONSECUTIVE-YEAR LIMITATION.—
‘‘(i) IN GENERAL.—In no case shall any funding
be available under this paragraph in an MA region
in a period of consecutive years that exceeds 2 years.
‘‘(ii) REPORT.—If the Secretary determines that
funding will be provided under this paragraph for a
second consecutive year with respect to an MA region,
the Secretary shall submit to the Congress a report
that describes the underlying market dynamics in the
region and that includes recommendations concerning
changes in the payment methodology otherwise pro-
vided for MA regional plans under this part.
‘‘(5) FUNDING LIMITATION.—
‘‘(A) IN GENERAL.—The total amount expended from
the Fund as a result of the application of this subsection
through the end of a calendar year may not exceed the
amount available to the Fund as of the first day of such
year. For purposes of this subsection, amounts that are
expended under this title insofar as such amounts would
not have been expended but for the application of this
subsection shall be counted as amounts expended as a
result of such application.
‘‘(B) APPLICATION OF LIMITATION.—The Secretary may
obligate funds from the Fund for a year only if the Sec-
retary determines (and the Chief Actuary of the Centers
for Medicare & Medicaid Services and the appropriate
budget officer certify) that there are available in the Fund
at the beginning of the year sufficient amounts to cover
all such obligations incurred during the year consistent
with subparagraph (A). The Secretary shall take such steps,
in connection with computing additional payment amounts
under paragraphs (3) and (4) and including limitations
on enrollment in MA regional plans receiving such pay-
ments, as will ensure that sufficient funds are available
to make such payments for the entire year. Funds shall
only be made available from the Fund pursuant to an
apportionment made in accordance with applicable proce-
dures.
‘‘(6) SECRETARY REPORTS.—Not later than April 1 of each
year (beginning in 2008), the Secretary shall submit a report
to Congress and the Comptroller General of the United States
that includes—
‘‘(A) a detailed description of—
H. R. 1—124
‘‘(i) the total amount expended as a result of the
application of this subsection in the previous year com-
pared to the total amount that would have been
expended under this title in the year if this subsection
had not been enacted;
‘‘(ii) the projections of the total amount that will
be expended as a result of the application of this sub-
section in the year in which the report is submitted
compared to the total amount that would have been
expended under this title in the year if this subsection
had not been enacted;
‘‘(iii) amounts remaining within the funding limita-
tion specified in paragraph (5); and
‘‘(iv) the steps that the Secretary will take under
paragraph (5)(B) to ensure that the application of this
subsection will not cause expenditures to exceed the
amount available in the Fund; and
‘‘(B) a certification from the Chief Actuary of the Cen-
ters for Medicare & Medicaid Services that the description
provided under subparagraph (A) is reasonable, accurate,
and based on generally accepted actuarial principles and
methodologies.
‘‘(7) BIENNIAL GAO REPORTS.—Not later than January 1
of 2009, 2011, 2013, and 2015, the Comptroller General of
the United States shall submit to the Secretary and Congress
a report on the application of additional payments under this
subsection. Each report shall include—
‘‘(A) an evaluation of—
‘‘(i) the quality of care provided to individuals
enrolled in MA regional plans for which additional
payments were made under this subsection;
‘‘(ii) the satisfaction of such individuals with bene-
fits under such a plan;
‘‘(iii) the costs to the medicare program for pay-
ments made to such plans; and
‘‘(iv) any improvements in the delivery of health
care services under such a plan;
‘‘(B) a comparative analysis of the performance of MA
regional plans receiving payments under this subsection
with MA regional plans not receiving such payments; and
‘‘(C) recommendations for such legislation or adminis-
trative action as the Comptroller General determines to
be appropriate.
‘‘(f) COMPUTATION OF APPLICABLE MA REGION-SPECIFIC NON-
DRUG MONTHLY BENCHMARK AMOUNTS.—
‘‘(1) COMPUTATION FOR REGIONS.—For purposes of section
1853(j)(2) and this section, subject to subsection (e), the term
‘MA region-specific non-drug monthly benchmark amount’
means, with respect to an MA region for a month in a year,
the sum of the 2 components described in paragraph (2) for
the region and year. The Secretary shall compute such bench-
mark amount for each MA region before the beginning of each
annual, coordinated election period under section 1851(e)(3)(B)
for each year (beginning with 2006).
‘‘(2) 2 COMPONENTS.—For purposes of paragraph (1), the
2 components described in this paragraph for an MA region
and a year are the following:
H. R. 1—125
‘‘(A) STATUTORY COMPONENT.—The product of the fol-
lowing:
‘‘(i) 
STATUTORY
REGION-SPECIFIC
NON-DRUG
AMOUNT.—The 
statutory 
region-specific 
non-drug
amount (as defined in paragraph (3)) for the region
and year.
‘‘(ii) STATUTORY
NATIONAL
MARKET
SHARE.—The
statutory national market share percentage, deter-
mined under paragraph (4) for the year.
‘‘(B) PLAN-BID
COMPONENT.—The product of the fol-
lowing:
‘‘(i) WEIGHTED
AVERAGE
OF
MA
PLAN
BIDS
IN
REGION.—The weighted average of the plan bids for
the region and year (as determined under paragraph
(5)(A)).
‘‘(ii) NON-STATUTORY MARKET SHARE.—1 minus the
statutory national market share percentage, deter-
mined under paragraph (4) for the year.
‘‘(3) STATUTORY REGION-SPECIFIC NON-DRUG AMOUNT.—For
purposes of paragraph (2)(A)(i), the term ‘statutory region-spe-
cific non-drug amount’ means, for an MA region and year,
an amount equal the sum (for each MA local area within
the region) of the product of—
‘‘(A) MA area-specific non-drug monthly benchmark
amount under section 1853(j)(1)(A) for that area and year;
and
‘‘(B) the number of MA eligible individuals residing
in the local area, divided by the total number of MA eligible
individuals residing in the region.
‘‘(4) COMPUTATION OF STATUTORY MARKET SHARE PERCENT-
AGE.—
‘‘(A) IN GENERAL.—The Secretary shall determine for
each year a statutory national market share percentage
that is equal to the proportion of MA eligible individuals
nationally who were not enrolled in an MA plan during
the reference month.
‘‘(B) REFERENCE MONTH DEFINED.—For purposes of this
part, the term ‘reference month’ means, with respect to
a year, the most recent month during the previous year
for which the Secretary determines that data are available
to compute the percentage specified in subparagraph (A)
and other relevant percentages under this part.
‘‘(5) DETERMINATION OF WEIGHTED AVERAGE MA BIDS FOR
A REGION.—
‘‘(A) IN GENERAL.—For purposes of paragraph (2)(B)(i),
the weighted average of plan bids for an MA region and
a year is the sum, for MA regional plans described in
subparagraph (D) in the region and year, of the products
(for each such plan) of the following:
‘‘(i) MONTHLY
MA
STATUTORY
NON-DRUG
BID
AMOUNT.—The unadjusted MA statutory non-drug
monthly bid amount for the plan.
‘‘(ii) 
PLAN’S
SHARE
OF
MA
ENROLLMENT
IN
REGION.—The factor described in subparagraph (B) for
the plan.
‘‘(B) PLAN’S SHARE OF MA ENROLLMENT IN REGION.—
H. R. 1—126
‘‘(i) IN GENERAL.—Subject to the succeeding provi-
sions of this subparagraph, the factor described in
this subparagraph for a plan is equal to the number
of individuals described in subparagraph (C) for such
plan, divided by the total number of such individuals
for all MA regional plans described in subparagraph
(D) for that region and year.
‘‘(ii) SINGLE PLAN RULE.—In the case of an MA
region in which only a single MA regional plan is
being offered, the factor described in this subparagraph
shall be equal to 1.
‘‘(iii) EQUAL DIVISION AMONG MULTIPLE PLANS IN
YEAR IN WHICH PLANS ARE FIRST AVAILABLE.—In the
case of an MA region in the first year in which any
MA regional plan is offered, if more than one MA
regional plan is offered in such year, the factor
described in this subparagraph for a plan shall (as
specified by the Secretary) be equal to—
‘‘(I) 1 divided by the number of such plans
offered in such year; or
‘‘(II) a factor for such plan that is based upon
the organization’s estimate of projected enrollment,
as reviewed and adjusted by the Secretary to
ensure reasonableness and as is certified by the
Chief Actuary of the Centers for Medicare & Med-
icaid Services.
‘‘(C) COUNTING
OF
INDIVIDUALS.—For purposes of
subparagraph (B)(i), the Secretary shall count for each
MA regional plan described in subparagraph (D) for an
MA region and year, the number of individuals who reside
in the region and who were enrolled under such plan
under this part during the reference month.
‘‘(D) PLANS COVERED.—For an MA region and year,
an MA regional plan described in this subparagraph is
an MA regional plan that is offered in the region and
year and was offered in the region in the reference month.
‘‘(g) ELECTION
OF
UNIFORM
COVERAGE
DETERMINATION.—
Instead of applying section 1852(a)(2)(C) with respect to an MA
regional plan, the organization offering the plan may elect to have
a local coverage determination for the entire MA region be the
local coverage determination applied for any part of such region
(as selected by the organization).
‘‘(h) ASSURING NETWORK ADEQUACY.—
‘‘(1) IN GENERAL.—For purposes of enabling MA organiza-
tions that offer MA regional plans to meet applicable provider
access requirements under section 1852 with respect to such
plans, the Secretary may provide for payment under this section
to an essential hospital that provides inpatient hospital services
to enrollees in such a plan where the MA organization offering
the plan certifies to the Secretary that the organization was
unable to reach an agreement between the hospital and the
organization regarding provision of such services under the
plan. Such payment shall be available only if—
‘‘(A) the organization provides assurances satisfactory
to the Secretary that the organization will make payment
to the hospital for inpatient hospital services of an amount
that is not less than the amount that would be payable
H. R. 1—127
to the hospital under section 1886 with respect to such
services; and
‘‘(B) with respect to specific inpatient hospital services
provided to an enrollee, the hospital demonstrates to the
satisfaction of the Secretary that the hospital’s costs of
such services exceed the payment amount described in
subparagraph (A).
‘‘(2) PAYMENT AMOUNTS.—The payment amount under this
subsection for inpatient hospital services provided by a sub-
section (d) hospital to an enrollee in an MA regional plan
shall be, subject to the limitation of funds under paragraph
(3), the amount (if any) by which—
‘‘(A) the amount of payment that would have been
paid for such services under this title if the enrollees were
covered under the original medicare fee-for-service program
option and the hospital were a critical access hospital;
exceeds
‘‘(B) the amount of payment made for such services
under paragraph (1)(A).
‘‘(3) AVAILABLE AMOUNTS.—There shall be available for pay-
ments under this subsection—
‘‘(A) in 2006, $25,000,000; and
‘‘(B) in each succeeding year the amount specified in
this paragraph for the preceding year increased by the
market basket percentage increase (as defined in section
1886(b)(3)(B)(iii)) for the fiscal year ending in such suc-
ceeding year.
Payments under this subsection shall be made from the Federal
Hospital Insurance Trust Fund.
‘‘(4) ESSENTIAL
HOSPITAL.—In this subsection, the term
‘essential hospital’ means, with respect to an MA regional plan
offered by an MA organization, a subsection (d) hospital (as
defined in section 1886(d)) that the Secretary determines, based
upon an application filed by the organization with the Sec-
retary, is necessary to meet the requirements referred to in
paragraph (1) for such plan.’’.
(d) CONFORMING AMENDMENTS.—
(1) RELATING TO MA REGIONS.—Section 1853(d) (42 U.S.C.
1395w–23(d)) is amended—
(A) by amending the heading to read as follows: ‘‘MA
PAYMENT AREA; MA LOCAL AREA; MA REGION DEFINED’’;
(B) by redesignating paragraphs (2) and (3) as para-
graphs (3) and (4), respectively;
(C) by amending paragraph (1) to read as follows:
‘‘(1) MA PAYMENT AREA.—In this part, except as provided
in this subsection, the term ‘MA payment area’ means—
‘‘(A) with respect to an MA local plan, an MA local
area (as defined in paragraph (2)); and
‘‘(B) with respect to an MA regional plan, an MA
region (as established under section 1858(a)(2)).’’;
(D) by inserting after paragraph (1) the following new
paragraph:
‘‘(2) MA LOCAL AREA.—The term ‘MA local area’ means
a county or equivalent area specified by the Secretary.’’; and
(E) in paragraph (4), as so redesignated—
(i) in subparagraph (A), by inserting ‘‘for MA local
plans’’ after ‘‘paragraph (1)’’;
H. R. 1—128
(ii) in subparagraph (A)(iii), by striking ‘‘paragraph
(1)’’ and inserting ‘‘paragraph (1)(A)’’; and
(iii) in subparagraph (B)—
(I) by inserting ‘‘with respect to MA local
plans’’ after ‘‘established under this section’’;
(II) by inserting ‘‘for such plans’’ after ‘‘pay-
ments under this section’’; and
(III) by inserting ‘‘for such plans’’ after ‘‘made
under this section’’.
(2) MA LOCAL AREA DEFINED.—Section 1859(c) (42 U.S.C.
1395w–29(c)) is amended by adding at the end the following:
‘‘(5) MA LOCAL AREA.—The term ‘MA local area’ is defined
in section 1853(d)(2).’’.
(3) APPLICATION OF SPECIAL BENEFIT RULES TO PPOS AND
REGIONAL PLANS.—Section 1852(a) (42 U.S.C. 1395w–22(a)) is
amended—
(A) in paragraph (1), by inserting ‘‘and except as pro-
vided in paragraph (6) for MA regional plans’’ after ‘‘MSA
plans’’; and
(B) by adding at the end the following new paragraph:
‘‘(6) SPECIAL BENEFIT RULES FOR REGIONAL PLANS.—In the
case of an MA plan that is an MA regional plan, benefits
under the plan shall include the benefits described in para-
graphs (1) and (2) of section 1858(b).’’.
(4) APPLICATION OF CAPITATION RATES TO LOCAL AREAS.—
Section 1853(c)(1) (42 U.S.C. 1395w–23(c)(1)) is amended by
inserting 
‘‘that 
is 
an 
MA 
local 
area’’ 
after 
‘‘for 
a
Medicare+Choice payment area’’.
(5) NETWORK
ADEQUACY
HOSPITAL
PAYMENTS.—Section
1851(i)(2) (42 U.S.C. 1395w–21(i)(2)) is amended by inserting
‘‘1858(h),’’ after ‘‘1857(f)(2),’’.
SEC. 222. COMPETITION PROGRAM BEGINNING IN 2006.
(a) SUBMISSION OF BIDDING AND REBATE INFORMATION BEGIN-
NING IN 2006.—
(1) IN GENERAL.—Section 1854 (42 U.S.C. 1395w–24) is
amended—
(A) by amending paragraph (1) of subsection (a) to
read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) INITIAL SUBMISSION.—Not later than the second
Monday in September of 2002, 2003, and 2004 (or the
first Monday in June of each subsequent year), each MA
organization shall submit to the Secretary, in a form and
manner specified by the Secretary and for each MA plan
for the service area (or segment of such an area if permitted
under subsection (h)) in which it intends to be offered
in the following year the following:
‘‘(i) The information described in paragraph (2),
(3), (4), or (6)(A) for the type of plan and year involved.
‘‘(ii) The plan type for each plan.
‘‘(iii) The enrollment capacity (if any) in relation
to the plan and area.
‘‘(B) BENEFICIARY REBATE INFORMATION.—In the case
of a plan required to provide a monthly rebate under sub-
section (b)(1)(C) for a year, the MA organization offering
the plan shall submit to the Secretary, in such form and
H. R. 1—129
manner and at such time as the Secretary specifies,
information on—
‘‘(i) the manner in which such rebate will be pro-
vided under clause (ii) of such subsection; and
‘‘(ii) the MA monthly prescription drug beneficiary
premium (if any) and the MA monthly supplemental
beneficiary premium (if any).
‘‘(C) PAPERWORK
REDUCTION
FOR
OFFERING
OF
MA
REGIONAL PLANS NATIONALLY OR IN MULTI-REGION AREAS.—
The Secretary shall establish requirements for information
submission under this subsection in a manner that pro-
motes the offering of MA regional plans in more than
one region (including all regions) through the filing of
consolidated information.’’; and
(B) by adding at the end of subsection (a) the following:
‘‘(6) SUBMISSION OF BID AMOUNTS BY MA ORGANIZATIONS
BEGINNING IN 2006.—
‘‘(A) INFORMATION TO BE SUBMITTED.—For an MA plan
(other than an MSA plan) for a plan year beginning on
or after January 1, 2006, the information described in
this subparagraph is as follows:
‘‘(i) The monthly aggregate bid amount for the
provision of all items and services under the plan,
which amount shall be based on average revenue
requirements (as used for purposes of section 1302(8)
of the Public Health Service Act) in the payment area
for an enrollee with a national average risk profile
for the factors described in section 1853(a)(1)(C) (as
specified by the Secretary).
‘‘(ii) The proportions of such bid amount that are
attributable to—
‘‘(I) the provision of benefits under the original
medicare fee-for-service program option (as defined
in section 1852(a)(1)(B));
‘‘(II) the provision of basic prescription drug
coverage; and
‘‘(III) the provision of supplemental health care
benefits.
‘‘(iii) The actuarial basis for determining the
amount under clause (i) and the proportions described
in clause (ii) and such additional information as the
Secretary may require to verify such actuarial bases
and the projected number of enrollees in each MA
local area.
‘‘(iv) A description of deductibles, coinsurance, and
copayments applicable under the plan and the actu-
arial value of such deductibles, coinsurance, and copay-
ments, described in subsection (e)(4)(A).
‘‘(v) With respect to qualified prescription drug
coverage, the information required under section
1860D–4, as incorporated under section 1860D–
11(b)(2), with respect to such coverage.
In the case of a specialized MA plan for special needs
individuals, the information described in this subparagraph
is such information as the Secretary shall specify.
‘‘(B) ACCEPTANCE AND NEGOTIATION OF BID AMOUNTS.—
H. R. 1—130
‘‘(i) AUTHORITY.—Subject to clauses (iii) and (iv),
the Secretary has the authority to negotiate regarding
monthly bid amounts submitted under subparagraph
(A) (and the proportions described in subparagraph
(A)(ii)), including supplemental benefits provided under
subsection (b)(1)(C)(ii)(I) and in exercising such
authority the Secretary shall have authority similar
to the authority of the Director of the Office of Per-
sonnel Management with respect to health benefits
plans under chapter 89 of title 5, United States Code.
‘‘(ii) APPLICATION OF FEHBP STANDARD.—Subject to
clause (iv), the Secretary may only accept such a bid
amount or proportion if the Secretary determines that
such amount and proportions are supported by the
actuarial bases provided under subparagraph (A) and
reasonably and equitably reflects the revenue require-
ments (as used for purposes of section 1302(8) of the
Public Health Service Act) of benefits provided under
that plan.
‘‘(iii) NONINTERFERENCE.—In order to promote
competition under this part and part D and in carrying
out such parts, the Secretary may not require any
MA organization to contract with a particular hospital,
physician, or other entity or individual to furnish items
and services under this title or require a particular
price structure for payment under such a contract to
the extent consistent with the Secretary’s authority
under this part.
‘‘(iv) EXCEPTION.—In the case of a plan described
in section 1851(a)(2)(C), the provisions of clauses (i)
and (ii) shall not apply and the provisions of paragraph
(5)(B), prohibiting the review, approval, or disapproval
of amounts described in such paragraph, shall apply
to the negotiation and rejection of the monthly bid
amounts and the proportions referred to in subpara-
graph (A).’’.
(2) DEFINITION OF BENEFITS UNDER THE ORIGINAL MEDICARE
FEE-FOR-SERVICE
PROGRAM
OPTION.—Section 1852(a)(1) (42
U.S.C. 1395w–22(a)(1)) is amended—
(A) by striking ‘‘IN GENERAL.—Except’’ and inserting
‘‘REQUIREMENT.—
‘‘(A) IN GENERAL.—Except’’; and
(B) by striking ‘‘title XI’’ and all that follows and
inserting the following: ‘‘title XI, benefits under the original
medicare fee-for-service program option (and, for plan years
before 2006, additional benefits required under section
1854(f)(1)(A)).
‘‘(B) BENEFITS
UNDER
THE
ORIGINAL
MEDICARE
FEE-
FOR-SERVICE PROGRAM OPTION DEFINED.—
‘‘(i) IN GENERAL.—For purposes of this part, the
term ‘benefits under the original medicare fee-for-
service program option’ means those items and services
(other than hospice care) for which benefits are avail-
able under parts A and B to individuals entitled to
benefits under part A and enrolled under part B, with
cost-sharing for those services as required under parts
H. R. 1—131
A and B or an actuarially equivalent level of cost-
sharing as determined in this part.
‘‘(ii) SPECIAL RULE FOR REGIONAL PLANS.—In the
case of an MA regional plan in determining an actuari-
ally equivalent level of cost-sharing with respect to
benefits under the original medicare fee-for-service pro-
gram option, there shall only be taken into account,
with respect to the application of section 1858(b)(2),
such expenses only with respect to subparagraph (A)
of such section.’’.
(3) CONFORMING AMENDMENT RELATING TO SUPPLEMENTAL
HEALTH
BENEFITS.—Section 1852(a)(3) (42 U.S.C. 1395w–
22(a)(3)) is amended by adding at the end the following: ‘‘Such
benefits may include reductions in cost-sharing below the actu-
arial value specified in section 1854(e)(4)(B).’’.
(b) PROVIDING FOR BENEFICIARY SAVINGS FOR CERTAIN PLANS.—
(1) BENEFICIARY REBATES.—Section 1854(b)(1) (42 U.S.C.
1395w–24(b)(1)) is amended—
(A) in subparagraph (A), by striking ‘‘The monthly
amount’’ and inserting ‘‘Subject to the rebate under
subparagraph (C), the monthly amount (if any)’’; and
(B) by adding at the end the following new subpara-
graph:
‘‘(C) BENEFICIARY REBATE RULE.—
‘‘(i) REQUIREMENT.—The MA plan shall provide to
the enrollee a monthly rebate equal to 75 percent
of the average per capita savings (if any) described
in paragraph (3)(C) or (4)(C), as applicable to the plan
and year involved.
‘‘(ii) FORM OF REBATE.—A rebate required under
this subparagraph shall be provided through the
application of the amount of the rebate toward one
or more of the following:
‘‘(I) PROVISION OF SUPPLEMENTAL HEALTH CARE
BENEFITS AND PAYMENT FOR PREMIUM FOR SUPPLE-
MENTAL BENEFITS.—The provision of supplemental
health care benefits described in section 1852(a)(3)
in a manner specified under the plan, which may
include the reduction of cost-sharing otherwise
applicable as well as additional health care bene-
fits which are not benefits under the original medi-
care fee-for-service program option, or crediting
toward an MA monthly supplemental beneficiary
premium (if any).
‘‘(II) PAYMENT FOR PREMIUM FOR PRESCRIPTION
DRUG
COVERAGE.—Crediting 
toward 
the 
MA
monthly prescription drug beneficiary premium.
‘‘(III) PAYMENT
TOWARD
PART
B
PREMIUM.—
Crediting toward the premium imposed under part
B (determined without regard to the application
of subsections (b), (h), and (i) of section 1839).
‘‘(iii) DISCLOSURE RELATING TO REBATES.—The plan
shall disclose to the Secretary information on the form
and amount of the rebate provided under this subpara-
graph or the actuarial value in the case of supple-
mental health care benefits.
H. R. 1—132
‘‘(iv) APPLICATION
OF
PART
B
PREMIUM
REDUC-
TION.—Insofar as an MA organization elects to provide
a rebate under this subparagraph under a plan as
a credit toward the part B premium under clause
(ii)(III), the Secretary shall apply such credit to reduce
the premium under section 1839 of each enrollee in
such plan as provided in section 1840(i).’’.
(2) 
REVISION
OF
PREMIUM
TERMINOLOGY.—Section
1854(b)(2) (42 U.S.C. 1395w–24(b)(2)) is amended—
(A) in the heading, by inserting ‘‘AND BID’’ after ‘‘PRE-
MIUM’’;
(B) by redesignating subparagraph (C) as subpara-
graph (D);
(C) by striking subparagraphs (A) and (B) and inserting
the following:
‘‘(A) MA MONTHLY BASIC BENEFICIARY PREMIUM.—The
term ‘MA monthly basic beneficiary premium’ means, with
respect to an MA plan—
‘‘(i) described in section 1853(a)(1)(B)(i) (relating
to plans providing rebates), zero; or
‘‘(ii) described in section 1853(a)(1)(B)(ii), the
amount (if any) by which the unadjusted MA statutory
non-drug monthly bid amount (as defined in subpara-
graph (E)) exceeds the applicable unadjusted MA area-
specific non-drug monthly benchmark amount (as
defined in section 1853(j)).
‘‘(B) MA MONTHLY
PRESCRIPTION
DRUG
BENEFICIARY
PREMIUM.—The term ‘MA monthly prescription drug bene-
ficiary premium’ means, with respect to an MA plan, the
base beneficiary premium (as determined under section
1860D–13(a)(2) and as adjusted under section 1860D–
13(a)(1)(B)), less the amount of rebate credited toward such
amount under section 1854(b)(1)(C)(ii)(II).
‘‘(C) MA MONTHLY
SUPPLEMENTAL
BENEFICIARY
PRE-
MIUM.—The term ‘MA monthly supplemental beneficiary
premium’ means, with respect to an MA plan, the portion
of the aggregate monthly bid amount submitted under
clause (i) of subsection (a)(6)(A) for the year that is attrib-
utable under clause (ii)(III) of such subsection to the provi-
sion of supplemental health care benefits, less the amount
of rebate credited toward such portion under section
1854(b)(1)(C)(ii)(I).’’; and
(D) by adding at the end the following:
‘‘(E) UNADJUSTED MA STATUTORY NON-DRUG MONTHLY
BID
AMOUNT.—The term ‘unadjusted MA statutory non-
drug monthly bid amount’ means the portion of the bid
amount submitted under clause (i) of subsection (a)(6)(A)
for the year that is attributable under clause (ii)(I) of
such subsection to the provision of benefits under the
original medicare fee-for-service program option (as defined
in section 1852(a)(1)(B)).’’.
(3) COMPUTATION OF SAVINGS.—Section 1854(b) (42 U.S.C.
1395w–24(b)) is further amended by adding at the end the
following new paragraphs:
‘‘(3) COMPUTATION
OF
AVERAGE
PER
CAPITA
MONTHLY
SAVINGS FOR LOCAL PLANS.—For purposes of paragraph (1)(C)(i),
H. R. 1—133
the average per capita monthly savings referred to in such
paragraph for an MA local plan and year is computed as follows:
‘‘(A) DETERMINATION
OF
STATEWIDE
AVERAGE
RISK
ADJUSTMENT FOR LOCAL PLANS.—
‘‘(i) IN GENERAL.—Subject to clause (iii), the Sec-
retary shall determine, at the same time rates are
promulgated under section 1853(b)(1) (beginning with
2006) for each State, the average of the risk adjustment
factors to be applied under section 1853(a)(1)(C) to
payment for enrollees in that State for MA local plans.
‘‘(ii) TREATMENT
OF
STATES
FOR
FIRST
YEAR
IN
WHICH LOCAL PLAN OFFERED.—In the case of a State
in which no MA local plan was offered in the previous
year, the Secretary shall estimate such average. In
making such estimate, the Secretary may use average
risk adjustment factors applied to comparable States
or applied on a national basis.
‘‘(iii) AUTHORITY TO DETERMINE RISK ADJUSTMENT
FOR AREAS OTHER THAN STATES.—The Secretary may
provide for the determination and application of risk
adjustment factors under this subparagraph on the
basis of areas other than States or on a plan-specific
basis.
‘‘(B) DETERMINATION
OF
RISK
ADJUSTED
BENCHMARK
AND RISK-ADJUSTED BID FOR LOCAL PLANS.—For each MA
plan offered in a local area in a State, the Secretary shall—
‘‘(i) adjust the applicable MA area-specific non-
drug monthly benchmark amount (as defined in section
1853(j)(1)) for the area by the average risk adjustment
factor computed under subparagraph (A); and
‘‘(ii) adjust the unadjusted MA statutory non-drug
monthly bid amount by such applicable average risk
adjustment factor.
‘‘(C) DETERMINATION OF AVERAGE PER CAPITA MONTHLY
SAVINGS.—The 
average 
per 
capita 
monthly 
savings
described in this subparagraph for an MA local plan is
equal to the amount (if any) by which—
‘‘(i) the risk-adjusted benchmark amount computed
under subparagraph (B)(i); exceeds
‘‘(ii) the risk-adjusted bid computed under subpara-
graph (B)(ii).
‘‘(4) COMPUTATION
OF
AVERAGE
PER
CAPITA
MONTHLY
SAVINGS
FOR
REGIONAL
PLANS.—For purposes of paragraph
(1)(C)(i), the average per capita monthly savings referred to
in such paragraph for an MA regional plan and year is com-
puted as follows:
‘‘(A) DETERMINATION
OF
REGIONWIDE
AVERAGE
RISK
ADJUSTMENT FOR REGIONAL PLANS.—
‘‘(i) IN GENERAL.—The Secretary shall determine,
at the same time rates are promulgated under section
1853(b)(1) (beginning with 2006) for each MA region
the average of the risk adjustment factors to be applied
under section 1853(a)(1)(C) to payment for enrollees
in that region for MA regional plans.
‘‘(ii) TREATMENT OF REGIONS FOR FIRST YEAR IN
WHICH REGIONAL PLAN OFFERED.—In the case of an
MA region in which no MA regional plan was offered
H. R. 1—134
in the previous year, the Secretary shall estimate such
average. In making such estimate, the Secretary may
use average risk adjustment factors applied to com-
parable regions or applied on a national basis.
‘‘(iii) AUTHORITY TO DETERMINE RISK ADJUSTMENT
FOR AREAS OTHER THAN REGIONS.—The Secretary may
provide for the determination and application of risk
adjustment factors under this subparagraph on the
basis of areas other than MA regions or on a plan-
specific basis.
‘‘(B) DETERMINATION
OF
RISK-ADJUSTED
BENCHMARK
AND RISK-ADJUSTED BID FOR REGIONAL PLANS.—For each
MA regional plan offered in a region, the Secretary shall—
‘‘(i) adjust the applicable MA area-specific non-
drug monthly benchmark amount (as defined in section
1853(j)(2)) for the region by the average risk adjust-
ment factor computed under subparagraph (A); and
‘‘(ii) adjust the unadjusted MA statutory non-drug
monthly bid amount by such applicable average risk
adjustment factor.
‘‘(C) DETERMINATION OF AVERAGE PER CAPITA MONTHLY
SAVINGS.—The 
average 
per 
capita 
monthly 
savings
described in this subparagraph for an MA regional plan
is equal to the amount (if any) by which—
‘‘(i) the risk-adjusted benchmark amount computed
under subparagraph (B)(i); exceeds
‘‘(ii) the risk-adjusted bid computed under subpara-
graph (B)(ii).’’.
(c) COLLECTION
OF PREMIUMS.—Section 1854(d) (42 U.S.C.
1395w–24(d)) is amended—
(1) by striking ‘‘PREMIUMS.—Each’’ and inserting ‘‘PRE-
MIUMS.—
‘‘(1) IN GENERAL.—Each’’; and
(2) by adding at the end the following new paragraphs:
‘‘(2) BENEFICIARY’S
OPTION
OF
PAYMENT
THROUGH
WITH-
HOLDING FROM SOCIAL SECURITY PAYMENT OR USE OF ELEC-
TRONIC FUNDS TRANSFER MECHANISM.—In accordance with regu-
lations, an MA organization shall permit each enrollee, at the
enrollee’s option, to make payment of premiums (if any) under
this part to the organization through—
‘‘(A) withholding from benefit payments in the manner
provided under section 1840 with respect to monthly pre-
miums under section 1839;
‘‘(B) an electronic funds transfer mechanism (such as
automatic charges of an account at a financial institution
or a credit or debit card account); or
‘‘(C) such other means as the Secretary may specify,
including payment by an employer or under employment-
based retiree health coverage (as defined in section 1860D–
22(c)(1)) on behalf of an employee or former employee (or
dependent).
All premium payments that are withheld under subparagraph
(A) shall be credited to the appropriate Trust Fund (or Account
thereof), as specified by the Secretary, under this title and
shall be paid to the MA organization involved. No charge may
be imposed under an MA plan with respect to the election
H. R. 1—135
of the payment option described in subparagraph (A). The Sec-
retary shall consult with the Commissioner of Social Security
and the Secretary of the Treasury regarding methods for allo-
cating premiums withheld under subparagraph (A) among the
appropriate Trust Funds and Account.
‘‘(3) INFORMATION NECESSARY FOR COLLECTION.—In order
to carry out paragraph (2)(A) with respect to an enrollee who
has elected such paragraph to apply, the Secretary shall
transmit to the Commissioner of Social Security—
‘‘(A) by the beginning of each year, the name, social
security account number, consolidated monthly beneficiary
premium described in paragraph (4) owed by such enrollee
for each month during the year, and other information
determined appropriate by the Secretary, in consultation
with the Commissioner of Social Security; and
‘‘(B) periodically throughout the year, information to
update the information previously transmitted under this
paragraph for the year.
‘‘(4) CONSOLIDATED
MONTHLY
BENEFICIARY
PREMIUM.—In
the case of an enrollee in an MA plan, the Secretary shall
provide a mechanism for the consolidation of—
‘‘(A) the MA monthly basic beneficiary premium (if
any);
‘‘(B) the MA monthly supplemental beneficiary pre-
mium (if any); and
‘‘(C) the MA monthly prescription drug beneficiary pre-
mium (if any).’’.
(d) COMPUTATION
OF MA AREA-SPECIFIC NON-DRUG BENCH-
MARK.—Section 1853 (42 U.S.C. 1395w–23) is amended by adding
at the end the following new subsection:
‘‘(j) COMPUTATION OF BENCHMARK AMOUNTS.—For purposes of
this part, the term ‘MA area-specific non-drug monthly benchmark
amount’ means for a month in a year—
‘‘(1) with respect to—
‘‘(A) a service area that is entirely within an MA local
area, an amount equal to 1⁄12 of the annual MA capitation
rate under section 1853(c)(1) for the area for the year,
adjusted as appropriate for the purpose of risk adjustment;
or
‘‘(B) a service area that includes more than one MA
local area, an amount equal to the average of the amounts
described in subparagraph (A) for each such local MA area,
weighted by the projected number of enrollees in the plan
residing in the respective local MA areas (as used by the
plan for purposes of the bid and disclosed to the Secretary
under section 1854(a)(6)(A)(iii)), adjusted as appropriate
for the purpose of risk adjustment; or
‘‘(2) with respect to an MA region for a month in a year,
the MA region-specific non-drug monthly benchmark amount,
as defined in section 1858(f) for the region for the year.’’.
(e) PAYMENT OF PLANS BASED ON BID AMOUNTS.—
(1) IN
GENERAL.—Section 1853(a)(1) (42 U.S.C. 1395w–
23(a)(1)) (42 U.S.C. 1395w–23) is amended—
(A) by redesignating subparagraph (B) as subpara-
graph (H); and
H. R. 1—136
(B) in subparagraph (A), by striking ‘‘in an amount’’
and all that follows and inserting the following: ‘‘in an
amount determined as follows:
‘‘(i) PAYMENT BEFORE 2006.—For years before 2006,
the payment amount shall be equal to 1⁄12 of the annual
MA capitation rate (as calculated under subsection
(c)(1)) with respect to that individual for that area,
adjusted under subparagraph (C) and reduced by the
amount of any reduction elected under section
1854(f )(1)(E).
‘‘(ii) PAYMENT
FOR
ORIGINAL
FEE-FOR-SERVICE
BENEFITS BEGINNING WITH 2006.—For years beginning
with 2006, the amount specified in subparagraph (B).
‘‘(B) PAYMENT AMOUNT FOR ORIGINAL FEE-FOR-SERVICE
BENEFITS BEGINNING WITH 2006.—
‘‘(i) PAYMENT OF BID FOR PLANS WITH BIDS BELOW
BENCHMARK.—In the case of a plan for which there
are average per capita monthly savings described in
section 1854(b)(3)(C) or 1854(b)(4)(C), as the case may
be, the amount specified in this subparagraph is equal
to the unadjusted MA statutory non-drug monthly bid
amount, adjusted under subparagraph (C) and (if
applicable) under subparagraphs (F) and (G), plus the
amount (if any) of any rebate under subparagraph
(E).
‘‘(ii) PAYMENT OF BENCHMARK FOR PLANS WITH BIDS
AT OR ABOVE BENCHMARK.—In the case of a plan for
which there are no average per capita monthly savings
described in section 1854(b)(3)(C) or 1854(b)(4)(C), as
the case may be, the amount specified in this subpara-
graph is equal to the MA area-specific non-drug
monthly benchmark amount, adjusted under subpara-
graph (C) and (if applicable) under subparagraphs (F)
and (G).
‘‘(iii) PAYMENT OF BENCHMARK FOR MSA PLANS.—
Notwithstanding clauses (i) and (ii), in the case of
an MSA plan, the amount specified in this subpara-
graph is equal to the MA area-specific non-drug
monthly benchmark amount, adjusted under subpara-
graph (C).
‘‘(C) DEMOGRAPHIC
ADJUSTMENT, INCLUDING
ADJUST-
MENT FOR HEALTH STATUS.—The Secretary shall adjust the
payment amount under subparagraph (A)(i) and the
amount specified under subparagraph (B)(i), (B)(ii), and
(B)(iii) for such risk factors as age, disability status, gender,
institutional status, and such other factors as the Secretary
determines to be appropriate, including adjustment for
health status under paragraph (3), so as to ensure actuarial
equivalence. The Secretary may add to, modify, or sub-
stitute for such adjustment factors if such changes will
improve the determination of actuarial equivalence.
‘‘(D) SEPARATE
PAYMENT
FOR
FEDERAL
DRUG
SUB-
SIDIES.—In the case of an enrollee in an MA–PD plan,
the MA organization offering such plan also receives—
‘‘(i) subsidies under section 1860D–15 (other than
under subsection (g)); and
H. R. 1—137
‘‘(ii) reimbursement for premium and cost-sharing
reductions for low-income individuals under section
1860D–14(c)(1)(C).
‘‘(E) PAYMENT OF REBATE FOR PLANS WITH BIDS BELOW
BENCHMARK.—In the case of a plan for which there are
average per capita monthly savings described in section
1854(b)(3)(C) or 1854(b)(4)(C), as the case may be, the
amount specified in this subparagraph is the amount of
the monthly rebate computed under section 1854(b)(1)(C)(i)
for that plan and year (as reduced by the amount of any
credit provided under section 1854(b)(1)(C)(iv)).
‘‘(F) ADJUSTMENT FOR INTRA-AREA VARIATIONS.—
‘‘(i) INTRA-REGIONAL VARIATIONS.—In the case of
payment with respect to an MA regional plan for an
MA region, the Secretary shall also adjust the amounts
specified under subparagraphs (B)(i) and (B)(ii) in a
manner to take into account variations in MA local
payment rates under this part among the different
MA local areas included in such region.
‘‘(ii) INTRA-SERVICE AREA VARIATIONS.—In the case
of payment with respect to an MA local plan for a
service area that covers more than one MA local area,
the Secretary shall also adjust the amounts specified
under subparagraphs (B)(i) and (B)(ii) in a manner
to take into account variations in MA local payment
rates under this part among the different MA local
areas included in such service area.
‘‘(G) ADJUSTMENT
RELATING
TO
RISK
ADJUSTMENT.—
The Secretary shall adjust payments with respect to MA
plans as necessary to ensure that—
‘‘(i) the sum of—
‘‘(I) 
the 
monthly 
payment 
made 
under
subparagraph (A)(ii); and
‘‘(II) the MA monthly basic beneficiary pre-
mium under section 1854(b)(2)(A); equals
‘‘(ii) the unadjusted MA statutory non-drug
monthly bid amount, adjusted in the manner described
in subparagraph (C) and, for an MA regional plan,
subparagraph (F).’’.
(f) 
CONFORMING
CHANGES
TO
ANNUAL
ANNOUNCEMENT
PROCESS.—Section 1853(b) (42 U.S.C. 1395w–23(b)(1)) is amended—
(1) by amending paragraph (1) to read as follows:
‘‘(1) ANNUAL ANNOUNCEMENTS.—
‘‘(A) FOR
2005.—The Secretary shall determine, and
shall announce (in a manner intended to provide notice
to interested parties), not later than the second Monday
in May of 2004, with respect to each MA payment area,
the following:
‘‘(i) MA CAPITATION RATES.—The annual MA capi-
tation rate for each MA payment area for 2005.
‘‘(ii) ADJUSTMENT FACTORS.—The risk and other
factors to be used in adjusting such rates under sub-
section (a)(1)(C) for payments for months in 2005.
‘‘(B) FOR 2006 AND SUBSEQUENT YEARS.—For a year
after 2005—
‘‘(i) INITIAL ANNOUNCEMENT.—The Secretary shall
determine, and shall announce (in a manner intended
H. R. 1—138
to provide notice to interested parties), not later than
the first Monday in April before the calendar year
concerned, with respect to each MA payment area,
the following:
‘‘(I) MA CAPITATION
RATES; MA
LOCAL
AREA
BENCHMARK.—The annual MA capitation rate for
each MA payment area for the year.
‘‘(II) ADJUSTMENT
FACTORS.—The risk and
other factors to be used in adjusting such rates
under subsection (a)(1)(C) for payments for months
in such year.
‘‘(ii) REGIONAL BENCHMARK ANNOUNCEMENT.—The
Secretary shall determine, and shall announce (in a
manner intended to provide notice to interested par-
ties), on a timely basis before the calendar year con-
cerned, with respect to each MA region and each MA
regional plan for which a bid was submitted under
section 1854, the MA region-specific non-drug monthly
benchmark amount for that region for the year
involved.’’; and
(2) in paragraph (3), by striking ‘‘in the announcement’’
and all that follows and inserting ‘‘in such announcement.’’.
(g) OTHER AMENDMENTS RELATING
TO PREMIUMS
AND BID
AMOUNTS.—
(1) IN GENERAL.—Section 1854 (42 U.S.C. 1395w–24) is
amended—
(A) by amending the section heading to read as follows:
‘‘PREMIUMS AND BID AMOUNTS’’;
(B) in the heading of subsection (a), by inserting ‘‘,
BID AMOUNTS,’’ after ‘‘PREMIUMS’’;
(C) in subsection (a)(2)—
(i) by inserting ‘‘BEFORE 2006’’ after ‘‘FOR COORDI-
NATED CARE PLANS’’; and
(ii) by inserting ‘‘for a year before 2006’’ after
‘‘section 1851(a)(2)(A)’’;
(D) in subsection (a)(3), by striking ‘‘described’’ and
inserting ‘‘for any year’’;
(E) in subsection (a)(4)—
(i) by inserting ‘‘BEFORE 2006’’ after ‘‘FOR PRIVATE
FEE-FOR-SERVICE PLANS’’; and
(ii) by inserting ‘‘for a year before 2006’’ after
‘‘section 1852(a)(1)(A)’’;
(F) in subsection (a)(5)(A), by inserting ‘‘paragraphs
(2) and (4) of’’ after ‘‘filed under’’;
(G) in subsection (a)(5)(B), by inserting after ‘‘para-
graph (3) or’’ the following: ‘‘, in the case of an MA private
fee-for-service plan,’’; and
(H) in subsection (b)(1)(A) by striking ‘‘and’’ and
inserting a comma and by inserting before the period at
the end the following: ‘‘, and, if the plan provides qualified
prescription drug coverage, the MA monthly prescription
drug beneficiary premium’’.
(2) UNIFORMITY.—Section 1854(c) (42 U.S.C. 1395w–24(c))
is amended to read as follows:
‘‘(c) UNIFORM PREMIUM
AND BID AMOUNTS.—Except as per-
mitted under section 1857(i), the MA monthly bid amount submitted
H. R. 1—139
under subsection (a)(6), the amounts of the MA monthly basic,
prescription drug, and supplemental beneficiary premiums, and
the MA monthly MSA premium charged under subsection (b) of
an MA organization under this part may not vary among individuals
enrolled in the plan.’’.
(3) PREMIUMS.—Section 1854(d)(1) (42 U.S.C. 1395w–
24(d)(1)), as amended by subsection (c)(1), is amended by
inserting ‘‘, prescription drug,’’ after ‘‘basic’’.
(4) LIMITATION ON ENROLLEE LIABILITY.—Section 1854(e)
(42 U.S.C. 1395w–24(e)) is amended—
(A) in paragraph (1), by striking ‘‘.—In’’ and inserting
‘‘BEFORE 2006.—For periods before 2006, in’’;
(B) in paragraph (2), by striking ‘‘.—If’’ and insert
‘‘BEFORE 2006.—For periods before 2006, if’’;
(C) in paragraph (3), by striking ‘‘or (2)’’ and inserting
‘‘, (2), or (4)’’; and
(D) in paragraph (4)—
(i) by inserting ‘‘AND FOR BASIC BENEFITS BEGIN-
NING IN 2006’’ after ‘‘PLANS’’;
(ii) in the matter before subparagraph (A), by
inserting ‘‘and for periods beginning with 2006, with
respect 
to 
an 
MA 
plan 
described 
in 
section
1851(a)(2)(A)’’ after ‘‘MSA plan)’’;
(iii) in subparagraph (A), by striking ‘‘required
benefits described in section 1852(a)(1)’’ and inserting
‘‘benefits under the original medicare fee-for-service
program option’’; and
(iv) in subparagraph (B), by inserting ‘‘with respect
to such benefits’’ after ‘‘would be applicable’’.
(5) MODIFICATION
OF
ACR
PROCESS.—Section 1854(f) (42
U.S.C. 1395w–24(f)) is amended—
(A) in the heading, by inserting ‘‘BEFORE 2006’’ after
‘‘ADDITIONAL BENEFITS’’; and
(B) in paragraph (1)(A), by striking ‘‘Each’’ and
inserting ‘‘For years before 2006, each’’.
(h) PLAN INCENTIVES.—Section 1852(j)(4) (42 U.S.C. 1395w–
22(j)(4)) is amended—
(1) by inserting ‘‘the organization provides assurances satis-
factory to the Secretary that’’ after ‘‘unless’’;
(2) in clause (ii)—
(A) by striking ‘‘the organization—’’ and all that follows
through ‘‘(I) provides’’ and inserting ‘‘the organization pro-
vides’’;
(B) by striking ‘‘, and’’ and inserting a period; and
(C) by striking subclause (II); and
(3) by striking clause (iii).
(i) CONTINUATION OF TREATMENT OF ENROLLEES WITH END-
STAGE RENAL DISEASE.—Section 1853(a)(1)(H), as redesignated
under subsection (d)(1)(A), is amended—
(1) by amending the second sentence to read as follows:
‘‘Such rates of payment shall be actuarially equivalent to rates
that would have been paid with respect to other enrollees
in the MA payment area (or such other area as specified by
the Secretary) under the provisions of this section as in effect
before the date of the enactment of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003.’’; and
H. R. 1—140
(2) by adding at the end the following new sentence: ‘‘The
Secretary may apply the competitive bidding methodology pro-
vided for in this section, with appropriate adjustments to
account for the risk adjustment methodology applied to end
stage renal disease payments.’’.
(j) FACILITATION OF EMPLOYER SPONSORSHIP OF MA PLANS.—
Section 1857(i) (42 U.S.C. 1395w–27(i)) is amended—
(1) by designating the matter following the heading as
a paragraph (1) with the heading ‘‘CONTRACTS
WITH
MA
ORGANIZATIONS.—’’ and appropriate indentation; and
(2) by adding at the end the following new paragraph:
‘‘(2) EMPLOYER
SPONSORED
MA
PLANS.—To facilitate the
offering of MA plans by employers, labor organizations, or
the trustees of a fund established by one or more employers
or labor organizations (or combination thereof ) to furnish bene-
fits to the entity’s employees, former employees (or combination
thereof ) or members or former members (or combination
thereof ) of the labor organizations, the Secretary may waive
or modify requirements that hinder the design of, the offering
of, or the enrollment in such MA plans. Notwithstanding section
1851(g), an MA plan described in the previous sentence may
restrict the enrollment of individuals under this part to individ-
uals who are beneficiaries and participants in such plan.’’.
(k) EXPANSION
OF MEDICARE BENEFICIARY EDUCATION
AND
INFORMATION CAMPAIGN.—Section 1857(e)(2) (42 U.S.C. 1395w–
27(e)(2)) is amended—
(1) in subparagraph (A) by inserting ‘‘and a PDP sponsor
under part D’’ after ‘‘organization’’;
(2) in subparagraph (B)—
(A) by inserting ‘‘and each PDP sponsor with a contract
under part D’’ after ‘‘contract under this part’’;
(B) by inserting ‘‘or sponsor’s’’ after ‘‘organization’s’’;
and
(C) by inserting ‘‘, section 1860D–1(c),’’ after ‘‘informa-
tion)’’;
(3) in subparagraph (C)—
(A) by inserting ‘‘and ending with fiscal year 2005’’
after ‘‘beginning with fiscal year 2001’’;
(B) by inserting ‘‘and for each fiscal year beginning
with fiscal year 2006 an amount equal to $200,000,000,’’
after ‘‘$100,000,000,’’; and
(C) by inserting ‘‘and section 1860D–12(b)(3)(D)’’ after
‘‘under this paragraph’’;
(4) in subparagraph (D)—
(A) in clause (i) by inserting ‘‘and section 1860D–1(c)’’
after ‘‘section 1851’’;
(B) in clause (ii)(III), by striking ‘‘and’’ at the end
of subclause (III);
(C) in clause (ii)(IV), by striking ‘‘each succeeding fiscal
year.’’ and inserting ‘‘each succeeding fiscal year before
fiscal year 2006; and’’; and
(D) in clause (ii), by adding at the end the following
new subclause:
‘‘(V) the applicable portion (as defined in subpara-
graph (F)) of $200,000,000 in fiscal year 2006 and
each succeeding fiscal year.’’; and
(5) by adding at the end the following new subparagraph:
H. R. 1—141
‘‘(F) APPLICABLE PORTION DEFINED.—In this paragraph,
the term ‘applicable portion’ means, for a fiscal year—
‘‘(i) with respect to MA organizations, the Sec-
retary’s estimate of the total proportion of expenditures
under this title that are attributable to expenditures
made under this part (including payments under part
D that are made to such organizations); or
‘‘(ii) with respect to PDP sponsors, the Secretary’s
estimate of the total proportion of expenditures under
this title that are attributable to expenditures made
to such sponsors under part D.’’.
(l) CONFORMING AMENDMENTS.—
(1) PROTECTION AGAINST BENEFICIARY SELECTION.—Section
1852(b)(1)(A) (42 U.S.C. 1395w–22(b)(1)(A)) is amended by
adding at the end the following: ‘‘The Secretary shall not
approve a plan of an organization if the Secretary determines
that the design of the plan and its benefits are likely to substan-
tially discourage enrollment by certain MA eligible individuals
with the organization.’’.
(2) RELATING TO REBATES.—
(A) Section 1839(a)(2) (42 U.S.C. 1395r(a)(2)) is
amended by striking ‘‘80 percent of any reduction elected
under section 1854(f )(1)(E)’’ and inserting ‘‘any credit pro-
vided under section 1854(b)(1)(C)(ii)(III)’’.
(B) The first sentence of section 1840(i) (42 U.S.C.
1395s(i)) is amended by inserting ‘‘and to reflect any credit
provided under section 1854(b)(1)(C)(iv)’’ after ‘‘section
1854(f )(1)(E)’’.
(C) Section 1844(c) (42 U.S.C. 1395w(c)) is amended
by inserting ‘‘or any credits provided under section
1854(b)(1)(C)(iv)’’ after ‘‘section 1854(f )(1)(E)’’.
(3) OTHER
CONFORMING
AND
TECHNICAL
AMENDMENTS.—
(A) Section 1851(b)(1) (42 U.S.C. 1395w–21(b)(1)) is
amended—
(i) in subparagraph (B), by striking ‘‘a plan’’ and
inserting ‘‘an MA local plan’’;
(ii) in subparagraph (B), by striking ‘‘basic benefits
described in section 1852(a)(1)(A)’’ and inserting ‘‘bene-
fits under the original medicare fee-for-service program
option’’; and
(iii) in subparagraph (C), by striking ‘‘in a
Medicare+Choice plan’’ and inserting ‘‘in an MA local
plan’’.
(B) Section 1851(d) (42 U.S.C. 1395w–21(d)) is
amended—
(i) in paragraph (3), by adding at the end the
following new subparagraph:
‘‘(F) CATASTROPHIC
COVERAGE
AND
SINGLE
DEDUCT-
IBLE.—In the case of an MA regional plan, a description
of 
the 
catastrophic 
coverage 
and 
single 
deductible
applicable under the plan.’’;
(ii) in paragraph (4)(A)(ii), by inserting ‘‘, including
information on the single deductible (if applicable)
under section 1858(b)(1)’’ after ‘‘cost sharing’’;
(iii) 
in 
paragraph 
(4)(B)(i), 
by 
striking
‘‘Medicare+Choice monthly basic’’ and all that follows
H. R. 1—142
and inserting ‘‘monthly amount of the premium
charged to an individual.’’; and
(iv) by amending subparagraph (E) of subsection
(d)(4) to read as follows:
‘‘(E) SUPPLEMENTAL
BENEFITS.—Supplemental health
care benefits, including any reductions in cost-sharing
under section 1852(a)(3) and the terms and conditions
(including premiums) for such benefits.’’.
(C) Section 1857(d)(1) (42 U.S.C. 1395w–27(d)(1)) is
amended by striking ‘‘, costs, and computation of the
adjusted community rate’’ and inserting ‘‘and costs,
including allowable costs under section 1858(c)’’.
(D) 
Section 
1851(a)(3)(B)(ii) 
(42 
U.S.C. 
1395w–
21(a)(3)(B)(ii)) 
is 
amended 
by 
striking 
‘‘section
1851(e)(4)(A)’’ and inserting ‘‘subsection (e)(4)(A)’’.
(E) Section 1851(f)(1) (42 U.S.C. 1395w–21(f)(1)) is
amended by striking ‘‘subsection (e)(1)(A)’’ and inserting
‘‘subsection (e)(1)’’.
SEC. 223. EFFECTIVE DATE.
(a) EFFECTIVE DATE.—The amendments made by this subtitle
shall apply with respect to plan years beginning on or after January
1, 2006.
(b) ISSUANCE OF REGULATIONS.—The Secretary shall revise the
regulations previously promulgated to carry out part C of title
XVIII of the Social Security Act to carry out the provisions of
this Act.
Subtitle D—Additional Reforms
SEC. 231. SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS.
(a) 
TREATMENT
AS
COORDINATED
CARE
PLAN.—Section
1851(a)(2)(A) (42 U.S.C. 1395w–21(a)(2)(A)), as amended by section
221(a), is amended by adding at the end the following new clause:
‘‘(ii) SPECIALIZED
MA
PLANS
FOR
SPECIAL
NEEDS
INDIVIDUALS.—Specialized MA plans for special needs
individuals (as defined in section 1859(b)(6)) may be
any type of coordinated care plan.’’.
(b) SPECIALIZED MA PLAN FOR SPECIAL NEEDS INDIVIDUALS
DEFINED.—Section 1859(b) (42 U.S.C. 1395w–29(b)), as amended
by section 221(b), is amended by adding at the end the following
new paragraph:
‘‘(6) SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVID-
UALS.—
‘‘(A) IN GENERAL.—The term ‘specialized MA plan for
special needs individuals’ means an MA plan that exclu-
sively serves special needs individuals (as defined in
subparagraph (B)).
‘‘(B) SPECIAL
NEEDS
INDIVIDUAL.—The term ‘special
needs individual’ means an MA eligible individual who—
‘‘(i) is institutionalized (as defined by the Sec-
retary);
‘‘(ii) is entitled to medical assistance under a State
plan under title XIX; or
‘‘(iii) meets such requirements as the Secretary
may determine would benefit from enrollment in such
H. R. 1—143
a specialized MA plan described in subparagraph (A)
for individuals with severe or disabling chronic condi-
tions.
The 
Secretary 
may 
waive 
application 
of 
section
1851(a)(3)(B) in the case of an individual described in
clause (i), (ii), or (iii) of this subparagraph and may apply
rules similar to the rules of section 1894(c)(4) for continued
eligibility of special needs individuals.’’.
(c) RESTRICTION
ON ENROLLMENT PERMITTED.—Section 1859
(42 U.S.C. 1395w–29) is amended by adding at the end the following
new subsection:
‘‘(f) RESTRICTION ON ENROLLMENT FOR SPECIALIZED MA PLANS
FOR SPECIAL NEEDS INDIVIDUALS.—In the case of a specialized
MA plan for special needs individuals (as defined in subsection
(b)(6)), notwithstanding any other provision of this part and in
accordance with regulations of the Secretary and for periods before
January 1, 2009, the plan may restrict the enrollment of individuals
under the plan to individuals who are within one or more classes
of special needs individuals.’’.
(d) AUTHORITY TO DESIGNATE OTHER PLANS AS SPECIALIZED
MA PLANS.—In promulgating regulations to carry out section
1851(a)(2)(A)(ii) of the Social Security Act (as added by subsection
(a)) and section 1859(b)(6) of such Act (as added by subsection
(b)), 
the 
Secretary 
may 
provide 
(notwithstanding 
section
1859(b)(6)(A) of such Act) for the offering of specialized MA plans
for special needs individuals by MA plans that disproportionately
serve special needs individuals.
(e) REPORT TO CONGRESS.—Not later than December 31, 2007,
the Secretary shall submit to Congress a report that assesses the
impact of specialized MA plans for special needs individuals on
the cost and quality of services provided to enrollees. Such report
shall include an assessment of the costs and savings to the medicare
program as a result of amendments made by subsections (a), (b),
and (c).
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by subsections
(a), (b), and (c) shall take effect upon the date of the enactment
of this Act.
(2) DEADLINE FOR ISSUANCE OF REQUIREMENTS FOR SPECIAL
NEEDS INDIVIDUALS; TRANSITION.—No later than 1 year after
the date of the enactment of this Act, the Secretary shall
issue final regulations to establish requirements for special
needs individuals under section 1859(b)(6)(B)(iii) of the Social
Security Act, as added by subsection (b).
SEC. 232. AVOIDING DUPLICATIVE STATE REGULATION.
(a) IN GENERAL.—Section 1856(b)(3) (42 U.S.C. 1395w–26(b)(3))
is amended to read as follows:
‘‘(3) RELATION TO STATE LAWS.—The standards established
under this part shall supersede any State law or regulation
(other than State licensing laws or State laws relating to plan
solvency) with respect to MA plans which are offered by MA
organizations under this part.’’.
(b) CONFORMING
AMENDMENT.—Section 1854(g) (42 U.S.C.
1395w–24(g)) is amended by inserting ‘‘or premiums paid to such
organizations under this part’’ after ‘‘section 1853’’.