‘‘(3) QUALIFIED RETIREE PRESCRIPTION DRUG
PLAN.—The term ‘qualified retiree prescription drug
plan’ means health insurance coverage included in
employment-based retiree health coverage that—
‘‘(A) provides coverage of the cost of pre-
scription drugs whose actuarial value (as de-
fined by the Director) to each retired bene-
ficiary equals or exceeds the actuarial value of
the benefits provided to an individual enrolled
in the program under this part; and
‘‘(B) does not deny, limit, or condition the
coverage or provision of prescription drug bene-
fits for retired individuals based on age or any
health status-related factor described in section
2702(a)(1) of the Public Health Service Act.
‘‘(4) SPONSOR.—The term ‘sponsor’ means
plan sponsor as defined in section 3(16) of the Em-
ployer Retirement Income Security Act of 1974.
‘‘(g) APPROPRIATIONS TO COVER INCENTIVES FOR
EMPLOYMENT-BASED
RETIREE
DRUG
COVERAGE.—
There are authorized to be appropriated from time to
time, out of any moneys in the Treasury not otherwise
appropriated such sums as may be necessary for payment
of incentive payments under subsection (c).
‘‘SEC. 1860I. APPROPRIATIONS TO COVER GOVERNMENT
CONTRIBUTIONS.
‘‘There are authorized to be appropriated from time
to time, out of any moneys in the Treasury not otherwise
appropriated, to the Prescription Drug Insurance Ac-
count, a Government contribution equal to—
‘‘(1) the aggregate premiums payable for a
month pursuant to section 1860D(a)(2) by individ-
uals enrolled in the program under this part, plus
‘‘(2) one-half the aggregate premiums payable
for a month pursuant to such section for such indi-
viduals by former employers.
‘‘SEC. 1860J. DEFINITION.
‘‘As used in this part, the term ‘prescription drug’
means—
‘‘(A) a drug that may be dispensed only upon
a prescription, and that is described in subpara-
graph (A)(i), (A)(ii), or (B) of section 1927(k)(2);
and
‘‘(B) insulin certified under section 506 of the
Federal Food, Drug, and Cosmetic Act, and needles,
syringes, and disposable pumps for the administra-
tion of such insulin.’’.
(b) STUDY OF ANNUAL OPEN ENROLLMENT.—
(1) STUDY.—During 2002 and 2003, the Direc-
tor of the Office of Personnel Management shall
study the feasibility and advisability of establishing
an annual open enrollment period for the program
under part D (as added by subsection (a)). Such
study shall reflect data reported by benefit managers
administering benefits under such part and shall
include—
(A) a review of the costs, effectiveness, and
administrative feasibility of an annual open en-
rollment period for beneficiaries who previously
declined 
enrollment 
or 
who 
previously
disenrolled and desire to re-enroll;
(B) an evaluation of a premium penalty for
late enrollment based on actuarially determined
costs to the program of late enrollment; and
(C) a projection of the costs to the pro-
gram under such part through 2010 of an an-
nual open enrollment period.
(2) REPORT.—The Director shall prepare a re-
port setting forth the outcome of the study, and may
include in the report a recommendation as to wheth-
er an annual open enrollment period should be im-
plemented under such part.
(c) AMENDMENTS
TO
MEDICARE+CHOICE
PRO-
GRAM.—Part C of title XVIII of the Social Security Act
is amended by inserting after section 1857 the following
new section:
‘‘COVERAGE OF PRESCRIPTION DRUGS
‘‘SEC. 1858. (a) AVAILABILITY.—
‘‘(1) IN GENERAL.—In accordance with rules
established by the Director of the Office of Per-
sonnel Management, in coordination with the Sec-
retary, each Medicare+Choice plan shall provide, to
each individual enrolled under part D, prescription
drug benefits described in part D (or equivalent ben-
efits as authorized by the Director).
‘‘(2) SPECIAL RULE FOR PROVISION OF PART D
BENEFITS.—In no event may a Medicare+Choice or-
ganization include as part of a plan for such benefits
a requirement that an enrollee pay a deductible or
pay a higher coinsurance percentage than the per-
centage applicable under part D for the expenses in-
volved.
‘‘(3) AVAILABILITY OF PRICES.—Each contract
under section 1857 shall provide that enrollees enti-
tled to benefits made available under this section
who exhaust the plan’s prescription drug benefits
will continue to have access to prescription drugs at
prices equivalent to the total combined cost of such
drugs to the plan and the enrollee prior to such ex-
haustion of benefits.
‘‘(b) INFORMATION.—Information respecting the
benefits made available under subsection (a) shall be pro-
vided in the same manner as information on other benefits
provided under this part is made available.
‘‘(c) PAYMENT.—
‘‘(1) 
IN
GENERAL.—In 
the 
case 
of 
a
Medicare+Choice plan that provides prescription
drug coverage described in subsection (a), the
amount of monthly payment otherwise made to the
Medicare+Choice organization offering the plan
under section 1853 shall be increased by the amount
described in paragraph (2). Such payments shall be
made in the same manner and time as the amount
otherwise paid under section 1853, but such amount
shall be payable from the Prescription Drug Insur-
ance Account in the Federal Supplementary Medical
Insurance Trust Fund.
‘‘(2) AMOUNT.—The amount described in this
paragraph is the monthly premium rate under sec-
tion 1860D(a)(2)(B), but subject to adjustment
under paragraph (3). Such amount shall be uniform
geographically and shall not vary based on the
Medicare+Choice payment area involved.
‘‘(3) RISK ADJUSTMENT.—The Director of the
Office of Personnel Management may establish a
methodology for the adjustment of the payment
amount under this subsection in a budget-neutral
manner that takes into account the relative risks for
use 
of 
outpatient 
prescription 
drugs 
by
Medicare+Choice enrollees.
‘‘(d) SEPARATE APPLICATION OF ACR TO PRESCRIP-
TION DRUG COVERAGE.—In applying section 1854 with
respect to prescription drug benefits provided under this
section, the Secretary shall apply the provisions of such
section (including the computation of the adjusted commu-
nity rate) separately with respect to such benefits.’’.
(d) MEDIGAP CHANGES.—For purposes of applying
section 1882(p)(1)(E) of the Social Security Act (42
U.S.C. 1395ss(p)(1)(E))—
(1) the Secretary of Health and Human Serv-
ices shall be deemed to have made the determination
described in such section; and
(2) in modifying standards under such section,
notwithstanding 
the 
provisions 
of 
section
1882(p)(3)(A) of such Act, any coverage for out-
patient prescription drugs shall be designed in a
manner that does not substantially eliminate any
cost-sharing with respect to prescription drug cov-
erage.
(e) CONFORMING AMENDMENTS.—
(1) 
AMENDMENTS
TO
FEDERAL
SUPPLE-
MENTARY HEALTH INSURANCE TRUST FUND.—Sec-
tion 1841 (42 U.S.C. 1395t) is amended—
(A) in the last sentence of subsection (a)—
(i) by striking ‘‘and such amounts’’
and replacing it with ‘‘such amounts’’; and
(ii) by adding the following before the
period: ‘‘and such amounts as may be de-
posited in, or appropriated to, the Pre-
scription Drug Insurance Account estab-
lished by section 1860F’’;
(B) in subsection (g), by inserting after
‘‘by this part,’’ the following: ‘‘the payments
provided for under part D (in which case the
payments shall come from the Prescription
Drug Insurance Account in the Supplementary
Medical Insurance Trust Fund),’’;
(C) in subsection (h), by adding at the end
of the first sentence: ‘‘and section 1860D(b)(4)
(in which case the payments shall come from
the Prescription Drug Insurance Account in the
Supplementary 
Medical 
Insurance 
Trust
Fund)’’; and
(D) in subsection (i), by inserting after
‘‘section 1840(b)(1)’’ the following: ‘‘, section
1860D(b)(2) (in which case the payments shall
come from the Prescription Drug Insurance Ac-
count in the Supplementary Medical Insurance
Trust Fund),’’.
(2) EXCLUSIONS FROM COVERAGE.—
(A) APPLICATION
TO
PART
D.—Section
1862(a) (42 U.S.C. 1395y(a)) is amended in
the matter preceding paragraph (1) by striking
‘‘part A or part B’’ and inserting ‘‘part A, B,
or D’’.
(B) PRESCRIPTION DRUGS NOT EXCLUDED
FROM
COVERAGE
IF
APPROPRIATELY
PRE-
SCRIBED.—Section 
1862(a)(1) 
(42 
U.S.C.
1395y(a)(1)) is amended—
(i) by striking ‘‘and’’ at the end of
subparagraph (H);
(ii) by striking the semicolon at the
end of subparagraph (I) and inserting ‘‘,
and’’; and
(iii) by adding after subparagraph (I)
the following new subparagraph:
‘‘(J) in the case of prescription drugs cov-
ered under part D, which are not prescribed in
accordance with such part;
SEC. 3. MEDICAID BUY-IN OF MEDICARE PRESCRIPTION
DRUG COVERAGE FOR CERTAIN LOW-INCOME
INDIVIDUALS.
(a) STATE OPTION TO BUY-IN DUALLY ELIGIBLE
INDIVIDUALS.—
(1) COVERAGE OF PREMIUMS AS MEDICAL AS-
SISTANCE.—Section 1905(a) (42 U.S.C. 1396d(a))
is amended in the fourth sentence by striking
‘‘under part B’’ the first place it appears and insert-
ing ‘‘under parts B and D’’.
(2) STATE
COMMITMENT
TO
CONTINUE
PAR-
TICIPATION
IN
PART
D
AFTER
BENEFIT
LIMIT
REACHED.—Section 1902(a) (42 U.S.C. 1396a(a))
is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (64);
(B) by striking the period at the end of
paragraph (65) and inserting ‘‘; and’’; and
(C) by adding after paragraph (65) the fol-
lowing new paragraph:
‘‘(66) that, in the case of any individual whose
eligibility for medical assistance is not limited to
medicare or medicare drug cost sharing and for
whom the State elects to pay premiums under part
D of title XVIII pursuant to section 1860E, the
State will purchase all prescription drugs for such
individual in accordance with the provisions of such
part D, without regard to whether the benefit limit
for such individual under section 1860B(b) has been
reached.’’.
(b) MEDICARE
COST
SHARING
REQUIRED
FOR
QUALIFIED
MEDICARE
BENEFICIARIES.—Section
1905(p)(3) (42 U.S.C. 1396d(p)(3)) is amended—
(1) in subparagraph (A)—
(A) by striking ‘‘and’’ at the end of clause
(i);
(B) by inserting ‘‘and’’ at the end of clause
(ii); and
(C) by adding after clause (ii) the fol-
lowing:
‘‘(iii) 
premiums 
under 
section
1860D,’’;
(2) in subparagraph (D)—
(A) by inserting ‘‘(i)’’ after ‘‘(D)’’; and
(B) by adding at the end the following:
‘‘(ii) The difference between the
amount that is paid under section 1860B
and the amount that would be paid under
such section if any reference to ‘50 per-
cent’ therein were deemed a reference to
‘100 percent’ (or, if the Director approves
a higher percentage under such section, if
any reference to such percentage were
deemed to be multiplied by two).
(c) MEDICARE DRUG COST SHARING REQUIRED FOR
MEDICARE-ELIGIBLE INDIVIDUALS WITH INCOMES BE-
TWEEN 100 AND 150 PERCENT OF POVERTY LINE.—
(1) DEFINITIONS OF ELIGIBLE BENEFICIARIES
AND COVERAGE.—Section 1905 (42 U.S.C. 1396d)
is amended by adding at the end the following new
subsection:
‘‘(v)(1) The term ‘qualified medicare drug bene-
ficiary’ means an individual—
‘‘(A) who is entitled to hospital insurance bene-
fits under part A of title XVIII (including an indi-
vidual entitled to such benefits pursuant to an en-
rollment under section 1818, but not including an
individual entitled to such benefits only pursuant to
an enrollment under section 1818A),
‘‘(B) whose income (as determined under sec-
tion 1612 for purposes of the supplemental security
income program, except as provided in subsection
(p)(2)(D)) is above 100 percent but below 150 per-
cent of the official poverty line (as defined by the
Office of Management and Budget, and revised an-
nually in accordance with section 673(2) of the Om-
nibus Budget Reconciliation Act of 1981) applicable
to a family of the size involved; and
‘‘(C) whose resources (as determined under sec-
tion 1613 for purposes of the supplemental security
income program) do not exceed twice the maximum
amount of resources that an individual may have
and obtain benefits under that program.
‘‘(2) The term ‘medicare drug cost-sharing’ means
the following costs incurred with respect to a qualified
medicare drug beneficiary, without regard to whether the
costs incurred were for items and services for which med-
ical assistance is otherwise available under the plan:
‘‘(A) In the case of a qualified medicare drug
beneficiary whose income (as determined under
paragraph (1)) is less than 135 percent of the offi-
cial poverty line—
‘‘(i) premiums under section 1860D; and
‘‘(ii) the difference between the amount
that is paid under section 1860B and the
amount that would be paid under such section
if there were no coinsurance.
‘‘(B) In the case of a qualified medicare drug
beneficiary whose income (as determined under
paragraph (1)) is at least 135 percent but less than
150 percent of the official poverty line, a percentage
of premiums under section 1860D, determined on a
linear sliding scale ranging from 100 percent for in-
dividuals with incomes at 135 percent of such line
to 0 percent for individuals with incomes at 150 per-
cent of such line.
‘‘(3) In the case of any State which is providing med-
ical assistance to its residents under a waiver granted
under section 1115, the Secretary shall require the State
to meet the requirement of section 1902(a)(10)(E) in the
same manner as the State would be required to meet such
requirement if the State had in effect a plan approved
under this title.’’.
(2) 
STATE
PLAN
REQUIREMENT.—Section
1902(a)(10)(E) (42 U.S.C. 1396(a)(10)(E)) is
amended—
(A) by striking ‘‘and’’ at the end of clause
(iii);
(B) by adding at the end the following new
clause:
‘‘(v) for making medical assistance
available for medicare drug cost sharing
(as defined in section 1905(v)(2)) for
qualified medicare drug beneficiaries de-
scribed in section 1905(v)(1); and’’.
(3) 100 PERCENT
FEDERAL
MATCHING
OF
STATE MEDICAL ASSISTANCE COSTS FOR MEDICARE
DRUG COST SHARING.—Section 1903(a) (42 U.S.C.
1396b(a)) is amended—
(A) by redesignating paragraph (7) as
paragraph (8); and
(B) by adding after paragraph (6) the fol-
lowing new paragraph:
‘‘(7) an amount equal to 100 percent of
amounts as expended as medicare drug cost sharing
for qualified medicare drug beneficiaries (as defined
in section 1905(v)) (except that this paragraph shall
not apply to amounts expended with respect to any
individual whose eligibility for medical assistance is
not limited to medicare or medicare drug cost shar-
ing); and’’.
(d) MEDICAID DRUG PRICE REBATES UNAVAILABLE
WITH RESPECT TO DRUGS PURCHASED THROUGH MEDI-
CARE BUY-IN.—Section 1927 (42 U.S.C. 1396r–8) is
amended by adding at the end the following new sub-
section:
‘‘(l) DRUGS PURCHASED THROUGH MEDICARE BUY-
IN.—The provisions of this section shall not apply to pre-
scription drugs purchased under part D of title XVIII pur-
suant to an agreement with the Director under section
1860E (including any drugs so purchased after the initial
benefit limit under section 1860B(b) has been exceeded).’’.
(e) EFFECTIVE DATE.—The amendments made by
this section apply to prescription drugs purchased on or
after January 1, 2002.
SEC. 4. MEDPAC STUDIES ON BENEFIT MANAGERS.
(a) STUDIES.—The Medicare Payment Advisory
Commission shall conduct a study on—
(1) the ability of benefit managers to improve
quality and reduce costs and to assume risk;
(2) strategies to improve risk assumption by
such managers;
(3) the likely effect of allowing benefit man-
agers to vary aspects of the benefit package (such as
type of cost-sharing, premium levels, and stop-loss
provisions) based on costs, utilization, and access;
and
(4) the use of the stop-loss provision, including
analysis of benefit manager data on beneficiary utili-
zation and the effectiveness of cost constraints once
the stop-loss is triggered.
(b) REPORTS.—The Commission shall submit a re-
port to Congress not later than 1 year after the date of
the enactment of this Act on the studies under subsection
(a).
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