I
107TH CONGRESS
2D SESSION
H. R. 4988
To amend title XVIII of the Social Security Act to establish the Medicare
Benefits Administration within the Department of Health and Human
Services, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 21, 2002
Mr. TAUZIN introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committee on Energy and
Commerce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to establish
the Medicare Benefits Administration within the Depart-
ment of Health and Human Services, and for other pur-
poses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
TITLE VII—MEDICARE BENEFITS
ADMINISTRATION
SEC. 701. ESTABLISHMENT OF MEDICARE BENEFITS AD-
MINISTRATION.
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et
seq.), as amended by section 105, is amended by inserting
after 1806 the following new section:
‘‘MEDICARE BENEFITS ADMINISTRATION
‘‘SEC. 1808. (a) ESTABLISHMENT.—There is estab-
lished within the Department of Health and Human Serv-
ices an agency to be known as the Medicare Benefits Ad-
ministration.
‘‘(b) ADMINISTRATOR; DEPUTY
ADMINISTRATOR;
CHIEF ACTUARY.—
‘‘(1) ADMINISTRATOR.—
‘‘(A) IN GENERAL.—The Medicare Bene-
fits Administration shall be headed by an ad-
ministrator to be known as the ‘Medicare Bene-
fits Administrator’ (in this section referred to
as the ‘Administrator’) who shall be appointed
by the President, by and with the advice and
consent of the Senate. The Administrator shall
be in direct line of authority to the Secretary.
‘‘(B) COMPENSATION.—The Administrator
shall be paid at the rate of basic pay payable
for level III of the Executive Schedule under
section 5314 of title 5, United States Code.
‘‘(C) TERM
OF
OFFICE.—The Adminis-
trator shall be appointed for a term of 5 years.
In any case in which a successor does not take
office at the end of an Administrator’s term of
office, that Administrator may continue in of-
fice until the entry upon office of such a suc-
cessor. An Administrator appointed to a term of
office after the commencement of such term
may serve under such appointment only for the
remainder of such term.
‘‘(D) GENERAL AUTHORITY.—The Admin-
istrator shall be responsible for the exercise of
all powers and the discharge of all duties of the
Administration, and shall have authority and
control over all personnel and activities thereof.
‘‘(E) RULEMAKING AUTHORITY.—The Ad-
ministrator may prescribe such rules and regu-
lations as the Administrator determines nec-
essary or appropriate to carry out the functions
of the Administration. The regulations pre-
scribed by the Administrator shall be subject to
the rulemaking procedures established under
section 553 of title 5, United States Code.
‘‘(F) AUTHORITY TO ESTABLISH ORGANI-
ZATIONAL UNITS.—The Administrator may es-
tablish, alter, consolidate, or discontinue such
organizational units or components within the
Administration as the Administrator considers
necessary or appropriate, except as specified in
this section.
‘‘(G) AUTHORITY TO DELEGATE.—The Ad-
ministrator may assign duties, and delegate, or
authorize successive redelegations of, authority
to act and to render decisions, to such officers
and employees of the Administration as the Ad-
ministrator may find necessary. Within the lim-
itations of such delegations, redelegations, or
assignments, all official acts and decisions of
such officers and employees shall have the same
force and effect as though performed or ren-
dered by the Administrator.
‘‘(2) DEPUTY ADMINISTRATOR.—
‘‘(A) IN GENERAL.—There shall be a Dep-
uty Administrator of the Medicare Benefits Ad-
ministration who shall be appointed by the
President, by and with the advice and consent
of the Senate.
‘‘(B) COMPENSATION.—The Deputy Ad-
ministrator shall be paid at the rate of basic
pay payable for level IV of the Executive Sched-
ule under section 5315 of title 5, United States
Code.
‘‘(C) TERM OF OFFICE.—The Deputy Ad-
ministrator shall be appointed for a term of 5
years. In any case in which a successor does not
take office at the end of a Deputy Administra-
tor’s term of office, such Deputy Administrator
may continue in office until the entry upon of-
fice of such a successor. A Deputy Adminis-
trator appointed to a term of office after the
commencement of such term may serve under
such appointment only for the remainder of
such term.
‘‘(D) DUTIES.—The Deputy Administrator
shall perform such duties and exercise such
powers as the Administrator shall from time to
time assign or delegate. The Deputy Adminis-
trator shall be Acting Administrator of the Ad-
ministration during the absence or disability of
the Administrator and, unless the President
designates another officer of the Government as
Acting Administrator, in the event of a vacancy
in the office of the Administrator.
‘‘(3) CHIEF ACTUARY.—
‘‘(A) IN GENERAL.—There is established in
the Administration the position of Chief Actu-
ary. The Chief Actuary shall be appointed by,
and in direct line of authority to, the Adminis-
trator of such Administration. The Chief Actu-
ary shall be appointed from among individuals
who have demonstrated, by their education and
experience, superior expertise in the actuarial
sciences. The Chief Actuary may be removed
only for cause.
‘‘(B) COMPENSATION.—The Chief Actuary
shall be compensated at the highest rate of
basic pay for the Senior Executive Service
under section 5382(b) of title 5, United States
Code.
‘‘(C) DUTIES.—The Chief Actuary shall
exercise such duties as are appropriate for the
office of the Chief Actuary and in accordance
with professional standards of actuarial inde-
pendence.
‘‘(4) SECRETARIAL COORDINATION OF PROGRAM
ADMINISTRATION.—The Secretary shall ensure ap-
propriate coordination between the Administrator
and the Administrator of the Centers for Medicare
& Medicaid Services in carrying out the programs
under this title.
‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—
‘‘(1) DUTIES.—
‘‘(A) GENERAL
DUTIES.—The Adminis-
trator shall carry out parts C and D,
including—
‘‘(i) negotiating, entering into, and en-
forcing, contracts with plans for the offer-
ing of Medicare+Choice plans under part
C, including the offering of qualified pre-
scription drug coverage under such plans;
and
‘‘(ii) negotiating, entering into, and
enforcing, contracts with PDP sponsors for
the offering of prescription drug plans
under part D.
‘‘(B) OTHER DUTIES.—The Administrator
shall carry out any duty provided for under
part C or part D, including demonstration
projects carried out in part or in whole under
such parts, the programs of all-inclusive care
for the elderly (PACE program) under section
1894, the social health maintenance organiza-
tion (SHMO) demonstration projects (referred
to in section 4104(c) of the Balanced Budget
Act of 1997), and through a Medicare+Choice
project that demonstrates the application of
capitation payment rates for frail elderly medi-
care beneficiaries through the use of a inter-
disciplinary team and through the provision of
primary care services to such beneficiaries by
means of such a team at the nursing facility in-
volved).
‘‘(C) PRESCRIPTION
DRUG
CARD.—The
Administrator shall carry out section 1807 (re-
lating to the medicare prescription drug dis-
count card endorsement program).
‘‘(D) 
NONINTERFERENCE.—In 
carrying
out its duties with respect to the provision of
qualified prescription drug coverage to bene-
ficiaries under this title, the Administrator may
not—
‘‘(i) require a particular formulary or
institute a price structure for the reim-
bursement of covered outpatient drugs;
‘‘(ii) interfere in any way with nego-
tiations 
between 
PDP 
sponsors 
and
Medicare+Choice organizations and drug
manufacturers, wholesalers, or other sup-
pliers of covered outpatient drugs; and
‘‘(iii) otherwise interfere with the
competitive nature of providing such cov-
erage through such sponsors and organiza-
tions.
‘‘(E) ANNUAL REPORTS.—Not later March
31 of each year, the Administrator shall submit
to Congress and the President a report on the
administration of parts C and D during the
previous fiscal year.
‘‘(2) STAFF.—
‘‘(A) IN
GENERAL.—The Administrator,
with the approval of the Secretary, may employ,
without regard to chapter 31 of title 5, United
States Code, other than sections 3110 and
3112, such officers and employees as are nec-
essary to administer the activities to be carried
out through the Medicare Benefits Administra-
tion. The Administrator shall employ staff with
appropriate and necessary expertise in negoti-
ating contracts in the private sector.
‘‘(B) FLEXIBILITY WITH RESPECT TO COM-
PENSATION.—
‘‘(i) IN GENERAL.—The staff of the
Medicare Benefits Administration shall,
subject to clause (ii), be paid without re-
gard to the provisions of chapter 51 (other
than section 5101) and chapter 53 (other
than section 5301) of such title (relating to
classification and schedule pay rates).
‘‘(ii) MAXIMUM
RATE.—In no case
may the rate of compensation determined
under clause (i) exceed the rate of basic
pay payable for level IV of the Executive
Schedule under section 5315 of title 5,
United States Code.
‘‘(C) LIMITATION ON FULL-TIME EQUIVA-
LENT STAFFING FOR CURRENT CMS FUNCTIONS
BEING TRANSFERRED.—The Administrator may
not employ under this paragraph a number of
full-time equivalent employees, to carry out
functions that were previously conducted by the
Centers for Medicare & Medicaid Services and
that are conducted by the Administrator by rea-
son of this section, that exceeds the number of
such full-time equivalent employees authorized
to be employed by the Centers for Medicare &
Medicaid Services to conduct such functions as
of the date of the enactment of this Act.
‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS
OF THE CENTERS FOR MEDICARE & MEDICAID SERV-
ICES.—
‘‘(A) IN
GENERAL.—The Secretary, the
Administrator, and the Administrator of the
Centers for Medicare & Medicaid Services shall
establish an appropriate transition of responsi-
bility in order to redelegate the administration
of part C from the Secretary and the Adminis-
trator of the Centers for Medicare & Medicaid
Services to the Administrator as is appropriate
to carry out the purposes of this section.
‘‘(B) TRANSFER OF DATA AND INFORMA-
TION.—The Secretary shall ensure that the Ad-
ministrator of the Centers for Medicare & Med-
icaid Services transfers to the Administrator of
the Medicare Benefits Administration such in-
formation and data in the possession of the Ad-
ministrator of the Centers for Medicare & Med-
icaid Services as the Administrator of the Medi-
care Benefits Administration requires to carry
out the duties described in paragraph (1).
‘‘(C) CONSTRUCTION.—Insofar as a re-
sponsibility of the Secretary or the Adminis-
trator of the Centers for Medicare & Medicaid
Services is redelegated to the Administrator
under this section, any reference to the Sec-
retary or the Administrator of the Centers for
Medicare & Medicaid Services in this title or
title XI with respect to such responsibility is
deemed to be a reference to the Administrator.
‘‘(d) OFFICE OF BENEFICIARY ASSISTANCE.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish within the Medicare Benefits Administration
an Office of Beneficiary Assistance to coordinate
functions relating to outreach and education of
medicare beneficiaries under this title, including the
functions described in paragraph (2). The Office
shall be separate operating division within the Ad-
ministration.
‘‘(2) DISSEMINATION
OF
INFORMATION
ON
BENEFITS AND APPEALS RIGHTS.—
‘‘(A) DISSEMINATION OF BENEFITS INFOR-
MATION.—The Office of Beneficiary Assistance
shall disseminate, directly or through contract,
to medicare beneficiaries, by mail, by posting on
the Internet site of the Medicare Benefits Ad-
ministration and through a toll-free telephone
number, information with respect to the fol-
lowing:
‘‘(i) Benefits, and limitations on pay-
ment (including cost-sharing, stop-loss pro-
visions, and formulary restrictions) under
parts C and D.
‘‘(ii) Benefits, and limitations on pay-
ment under parts A and B, including in-
formation on medicare supplemental poli-
cies under section 1882.
Such information shall be presented in a man-
ner so that medicare beneficiaries may compare
benefits under parts A, B, D, and medicare
supplemental 
policies 
with 
benefits 
under
Medicare+Choice plans under part C.
‘‘(B) DISSEMINATION OF APPEALS RIGHTS
INFORMATION.—The Office of Beneficiary As-
sistance shall disseminate to medicare bene-
ficiaries in the manner provided under subpara-
graph (A) a description of procedural rights (in-
cluding grievance and appeals procedures) of
beneficiaries under the original medicare fee-
for-service program under parts A and B, the
Medicare+Choice program under part C, and
the Voluntary Prescription Drug Benefit Pro-
gram under part D.
‘‘(e) MEDICARE POLICY ADVISORY BOARD.—
‘‘(1) ESTABLISHMENT.—There is established
within the Medicare Benefits Administration the
Medicare Policy Advisory Board (in this section re-
ferred to the ‘Board’). The Board shall advise, con-
sult with, and make recommendations to the Admin-
istrator of the Medicare Benefits Administration
with respect to the administration of parts C and D,
including the review of payment policies under such
parts.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—With respect to mat-
ters of the administration of parts C and D, the
Board shall submit to Congress and to the Ad-
ministrator of the Medicare Benefits Adminis-
tration such reports as the Board determines
appropriate. Each such report may contain such
recommendations as the Board determines ap-
propriate 
for 
legislative 
or 
administrative
changes to improve the administration of such
parts, including the topics described in subpara-
graph (B). Each such report shall be published
in the Federal Register.
‘‘(B) TOPICS
DESCRIBED.—Reports re-
quired under subparagraph (A) may include the
following topics:
‘‘(i) FOSTERING COMPETITION.—Rec-
ommendations or proposals to increase
competition under parts C and D for serv-
ices furnished to medicare beneficiaries.
‘‘(ii) 
EDUCATION
AND
ENROLL-
MENT.—Recommendations for the im-
provement to efforts to provide medicare
beneficiaries information and education on
the program under this title, and specifi-
cally parts C and D, and the program for
enrollment under the title.
‘‘(iii) IMPLEMENTATION OF RISK-AD-
JUSTMENT.—Evaluation of the implemen-
tation under section 1853(a)(3)(C) of the
risk adjustment methodology to payment
rates 
under 
that 
section 
to
Medicare+Choice organizations offering
Medicare+Choice plans that accounts for
variations in per capita costs based on
health status and other demographic fac-
tors.
‘‘(iv) DISEASE
MANAGEMENT
PRO-
GRAMS.—Recommendations on the incor-
poration of disease management programs
under parts C and D.
‘‘(v) RURAL
ACCESS.—Recommenda-
tions to improve competition and access to
plans under parts C and D in rural areas.
‘‘(C) MAINTAINING
INDEPENDENCE
OF
BOARD.—The Board shall directly submit to
Congress reports required under subparagraph
(A). No officer or agency of the United States
may require the Board to submit to any officer
or agency of the United States for approval,
comments, or review, prior to the submission to
Congress of such reports.
‘‘(3) DUTY OF ADMINISTRATOR OF MEDICARE
BENEFITS ADMINISTRATION.—With respect to any
report submitted by the Board under paragraph
(2)(A), not later than 90 days after the report is
submitted, the Administrator of the Medicare Bene-
fits Administration shall submit to Congress and the
President an analysis of recommendations made by
the Board in such report. Each such analysis shall
be published in the Federal Register.
‘‘(4) MEMBERSHIP.—
‘‘(A) APPOINTMENT.—Subject to the suc-
ceeding provisions of this paragraph, the Board
shall consist of seven members to be appointed
as follows:
‘‘(i) Three members shall be ap-
pointed by the President.
‘‘(ii) Two members shall be appointed
by the Speaker of the House of Represent-
atives, with the advice of the chairmen and
the ranking minority members of the Com-
mittees on Ways and Means and on En-
ergy and Commerce of the House of Rep-
resentatives.
‘‘(iii) Two members shall be appointed
by the President pro tempore of the Senate
with the advice of the chairman and the
ranking minority member of the Senate
Committee on Finance.
‘‘(B) 
QUALIFICATIONS.—The 
members
shall be chosen on the basis of their integrity,
impartiality, and good judgment, and shall be
individuals who are, by reason of their edu-
cation and experience in health care benefits
management, exceptionally qualified to perform
the duties of members of the Board.
‘‘(C) PROHIBITION ON INCLUSION OF FED-
ERAL EMPLOYEES.—No officer or employee of
the United States may serve as a member of
the Board.
‘‘(5) COMPENSATION.—Members of the Board
shall receive, for each day (including travel time)
they are engaged in the performance of the functions
of the board, compensation at rates not to exceed
the daily equivalent to the annual rate in effect for
level IV of the Executive Schedule under section
5315 of title 5, United States Code.
‘‘(6) TERMS OF OFFICE.—
‘‘(A) IN GENERAL.—The term of office of
members of the Board shall be 3 years.
‘‘(B) TERMS OF INITIAL APPOINTEES.—As
designated by the President at the time of ap-
pointment, of the members first appointed—
‘‘(i) one shall be appointed for a term
of 1 year;
‘‘(ii) three shall be appointed for
terms of 2 years; and
‘‘(iii) three shall be appointed for
terms of 3 years.
‘‘(C) REAPPOINTMENTS.—Any person ap-
pointed as a member of the Board may not
serve for more than 8 years.
‘‘(D) VACANCY.—Any member appointed
to fill a vacancy occurring before the expiration
of the term for which the member’s predecessor
was appointed shall be appointed only for the
remainder of that term. A member may serve
after the expiration of that member’s term until
a successor has taken office. A vacancy in the
Board shall be filled in the manner in which the
original appointment was made.
‘‘(7) CHAIR.—The Chair of the Board shall be
elected by the members. The term of office of the
Chair shall be 3 years.
‘‘(8) MEETINGS.—The Board shall meet at the
call of the Chair, but in no event less than three
times during each fiscal year.
‘‘(9) DIRECTOR AND STAFF.—
‘‘(A) APPOINTMENT
OF
DIRECTOR.—The
Board shall have a Director who shall be ap-
pointed by the Chair.
‘‘(B) IN GENERAL.—With the approval of
the Board, the Director may appoint, without
regard to chapter 31 of title 5, United States
Code, such additional personnel as the Director
considers appropriate.
‘‘(C) FLEXIBILITY WITH RESPECT TO COM-
PENSATION.—
‘‘(i) IN GENERAL.—The Director and
staff of the Board shall, subject to clause
(ii), be paid without regard to the provi-
sions of chapter 51 and chapter 53 of such
title (relating to classification and schedule
pay rates).
‘‘(ii) MAXIMUM
RATE.—In no case
may the rate of compensation determined
under clause (i) exceed the rate of basic
pay payable for level IV of the Executive
Schedule under section 5315 of title 5,
United States Code.
‘‘(D) ASSISTANCE
FROM
THE
ADMINIS-
TRATOR OF THE MEDICARE BENEFITS ADMINIS-
TRATION.—The Administrator of the Medicare
Benefits Administration shall make available to
the Board such information and other assist-
ance as it may require to carry out its func-
tions.
‘‘(10) CONTRACT AUTHORITY.—The Board may
contract with and compensate government and pri-
vate agencies or persons to carry out its duties
under this subsection, without regard to section
3709 of the Revised Statutes (41 U.S.C. 5).
‘‘(f) FUNDING.—There is authorized to be appro-
priated, in appropriate part from the Federal Hospital In-
surance Trust Fund and from the Federal Supplementary
Medical Insurance Trust Fund (including the Medicare
Prescription Drug Account), such sums as are necessary
to carry out this section.’’.
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall take effect on the date of the en-
actment of this Act.
(2) TIMING OF INITIAL APPOINTMENTS.—The
Administrator and Deputy Administrator of the
Medicare Benefits Administration may not be ap-
pointed before March 1, 2003.
(3) DUTIES WITH RESPECT TO ELIGIBILITY DE-
TERMINATIONS
AND
ENROLLMENT.—The Adminis-
trator of the Medicare Benefits Administration shall
carry out enrollment under title XVIII of the Social
Security Act, make eligibility determinations under
such title, and carry out part C of such title for
years beginning or after January 1, 2005.
(4) TRANSITION.—Before the date the Adminis-
trator of the Medicare Benefits Administration is
appointed and assumes responsibilities under this
section and section 1807 of the Social Security Act,
the Secretary of Health and Human Services shall
provide for the conduct of any responsibilities of
such Administrator that are otherwise provided
under law.
(c) 
MISCELLANEOUS
ADMINISTRATIVE
PROVI-
SIONS.—
(1) ADMINISTRATOR
AS
MEMBER
OF
THE
BOARD
OF
TRUSTEES
OF
THE
MEDICARE
TRUST
FUNDS.—Section 1817(b) and section 1841(b) (42
U.S.C. 1395i(b), 1395t(b)) are each amended by
striking ‘‘and the Secretary of Health and Human
Services, all ex officio,’’ and inserting ‘‘the Secretary
of Health and Human Services, and the Adminis-
trator of the Medicare Benefits Administration, all
ex officio,’’.
(2) INCREASE IN GRADE TO EXECUTIVE LEVEL
III FOR THE ADMINISTRATOR OF THE CENTERS FOR
MEDICARE & MEDICAID SERVICES; LEVEL FOR MEDI-
CARE BENEFITS ADMINISTRATOR.—
(A) IN GENERAL.—Section 5314 of title 5,
United States Code, by adding at the end the
following:
‘‘Administrator of the Centers for Medi-
care & Medicaid Services.
‘‘Administrator of the Medicare Benefits
Administration.’’.
(B) CONFORMING
AMENDMENT.—Section
5315 of such title is amended by striking ‘‘Ad-
ministrator of the Health Care Financing Ad-
ministration.’’.
(C) EFFECTIVE DATE.—The amendments
made by this paragraph take effect on January
1, 2003.
SEC. 702. PHARMACY GRANT PROGRAM.
(a) IN GENERAL.—The Administrator of the Medi-
care Benefits Administration shall establish a grant pro-
gram to assist pharmacies in implementing the new pre-
scription drug benefit under part D of title XVIII of the
Social Security Act.
(b) USE OF FUNDS.—Grants may be provided under
the program to assist pharmacies—
(1) in complying with requirements relating to
electronic prescribing;
(2) in prospective drug utilization review; and
(3) in developing innovative medication therapy
management programs using information tech-
nology.
(c) CONDITION FOR RECEIPT.—A pharmacy shall not
be awarded a grant under the program unless the phar-
macy demonstrates how it will operate a program that will
work effectively with patients to reduce adverse drug reac-
tions and medical errors.
(d) PRIORITIES.—In awarding grants under the pro-
gram, the Administrator shall take into account and give
priority to the needs of small and rural pharmacies and
to pharmacies which service underserved areas.
(e) APPROPRIATION.—For the purpose of making
grants under this section, there is appropriated, out of any
money in the Treasury not otherwise appropriated,
$150,000,000 for each of the fiscal years 2004 through
2007. The appropriation under the preceding sentence for
a fiscal year is made on October 1 of the fiscal year. No
grant shall be awarded under this section before January
1, 2004.
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