‘‘(1) IN GENERAL.—If there is no standard prescrip-
tion drug coverage (as defined in paragraph (2)) offered in
an area, in the case of an individual who is eligible for a
premium subsidy under section 1860G and resides in the
area, the PDP sponsor of any prescription drug plan of-
fered in the area (and any Medicare+Choice organization
that offers qualified prescription drug coverage in the area)
shall accept the benchmark bid amount (under section
1860G(b)(2)) as payment in full for the premium charge
for qualified prescription drug coverage.
‘‘(2) STANDARD PRESCRIPTION DRUG COVERAGE DE-
FINED.—For purposes of this subsection, the term ‘stand-
ard prescription drug coverage’ means qualified prescrip-
tion drug coverage that is standard coverage or that has
an actuarial value equivalent to the actuarial value for
standard coverage.
‘‘SEC. 1860G. PREMIUM AND COST-SHARING SUBSIDIES
FOR LOW-INCOME INDIVIDUALS.
‘‘(a) INCOME-RELATED
SUBSIDIES
FOR
INDIVIDUALS
WITH INCOME BELOW 150 PERCENT OF FEDERAL POVERTY
LEVEL.—
‘‘(1) FULL
PREMIUM
SUBSIDY
AND
REDUCTION
OF
COST-SHARING FOR INDIVIDUALS WITH INCOME BELOW 150
PERCENT OF FEDERAL POVERTY LEVEL.—In the case of a
subsidy eligible individual (as defined in paragraph (4))
who is determined to have income that does not exceed 150
percent of the Federal poverty level, the individual is enti-
tled under this section—
‘‘(A) to an income-related premium subsidy equal
to 100 percent of the amount described in subsection
(b)(1); and
‘‘(B) subject to subsection (c), to the substitution
for the beneficiary cost-sharing described in paragraphs
(1) and (2) of section 1860B(b) (up to the initial cov-
erage limit specified in paragraph (3) of such section)
of amounts that do not exceed $2 for a multiple source
or generic drug (as described in section 1927(k)(7)(A))
and $5 for a non-preferred drug.
‘‘(2) SLIDING SCALE PREMIUM SUBSIDY AND REDUC-
TION OF COST-SHARING FOR INDIVIDUALS WITH INCOME
ABOVE 150, BUT BELOW 175 PERCENT, OF FEDERAL POV-
ERTY LEVEL.—In the case of a subsidy eligible individual
who is determined to have income that exceeds 150 per-
cent, but does not exceed 175 percent, of the Federal pov-
erty level, the individual is entitled under this section to—
‘‘(A) an income-related premium subsidy deter-
mined on a linear sliding scale ranging from 100 per-
cent of the amount described in subsection (b)(1) for
individuals with incomes at 150 percent of such level
to 0 percent of such amount for individuals with in-
comes at 175 percent of such level; and
‘‘(B) subject to subsection (c), to the substitution
for the beneficiary cost-sharing described in paragraphs
(1) and (2) of section 1860B(b) (up to the initial cov-
erage limit specified in paragraph (3) of such section)
of amounts that do not exceed $2 for a multiple source
or generic drug (as described in section 1927(k)(7)(A))
and $5 for a non-preferred drug.
‘‘(3) CONSTRUCTION.—Nothing in this section shall be
construed as preventing a PDP sponsor from reducing to
0 the cost-sharing otherwise applicable to generic drugs.
‘‘(4) DETERMINATION OF ELIGIBILITY.—
‘‘(A) SUBSIDY ELIGIBLE INDIVIDUAL DEFINED.—
For purposes of this section, subject to subparagraph
(D), the term ‘subsidy eligible individual’ means an in-
dividual who—
‘‘(i) is eligible to elect, and has elected, to ob-
tain qualified prescription drug coverage under this
part;
‘‘(ii) has income below 175 percent of the Fed-
eral poverty line; and
‘‘(iii) meets the resources requirement de-
scribed in section 1905(p)(1)(C).
‘‘(B) DETERMINATIONS.—The determination of
whether an individual residing in a State is a subsidy
eligible individual and the amount of such individual’s
income shall be determined under the State medicaid
plan for the State under section 1935(a). In the case
of a State that does not operate such a medicaid plan
(either under title XIX or under a statewide waiver
granted under section 1115), such determination shall
be made under arrangements made by the Adminis-
trator.
‘‘(C) INCOME DETERMINATIONS.—For purposes of
applying this section—
‘‘(i) income shall be determined in the manner
described in section 1905(p)(1)(B); and
‘‘(ii) the term ‘Federal poverty line’ means the
official poverty line (as defined by the Office of
Management and Budget, and revised annually in
accordance with section 673(2) of the Omnibus
Budget Reconciliation Act of 1981) applicable to a
family of the size involved.
‘‘(D) TREATMENT OF TERRITORIAL RESIDENTS.—
In the case of an individual who is not a resident of
the 50 States or the District of Columbia, the indi-
vidual is not eligible to be a subsidy eligible individual
but may be eligible for financial assistance with pre-
scription drug expenses under section 1935(e).
‘‘(E) TREATMENT
OF
CONFORMING
MEDIGAP
POLICIES.—For purposes of this section, the term
‘qualified prescription drug coverage’ includes a medi-
care 
supplemental 
policy 
described 
in 
section
1860H(b)(4).
‘‘(5) INDEXING DOLLAR AMOUNTS.—
‘‘(A) FOR
2006.—The dollar amounts applied
under paragraphs (1)(B) and (2)(B) for 2006 shall be
the dollar amounts specified in such paragraph in-
creased by the annual percentage increase described in
section 1860B(b)(5) for 2006.
‘‘(B) FOR
SUBSEQUENT
YEARS.—The dollar
amounts applied under paragraphs (1)(B) and (2)(B)
for a year after 2006 shall be the amounts (under this
paragraph) applied under paragraph (1)(B) or (2)(B)
for the preceding year increased by the annual percent-
age increase described in section 1860B(b)(5) (relating
to growth in medicare prescription drug costs per bene-
ficiary) for the year involved.
‘‘(b) PREMIUM SUBSIDY AMOUNT.—
‘‘(1) IN GENERAL.—The premium subsidy amount de-
scribed in this subsection for an individual residing in an
area is the benchmark bid amount (as defined in paragraph
(2)) for qualified prescription drug coverage offered by the
prescription drug plan or the Medicare+Choice plan in
which the individual is enrolled.
‘‘(2) BENCHMARK BID AMOUNT DEFINED.—For pur-
poses of this subsection, the term ‘benchmark bid amount’
means, with respect to qualified prescription drug coverage
offered under—
‘‘(A) a prescription drug plan that—
‘‘(i) provides standard coverage (or alternative
prescription drug coverage the actuarial value is
equivalent to that of standard coverage), the bid
amount for enrollment under the plan under this
part (determined without regard to any subsidy
under this section or any late enrollment penalty
under section 1860A(c)(2)(B)); or
‘‘(ii) provides alternative prescription drug
coverage the actuarial value of which is greater
than that of standard coverage, the bid amount de-
scribed in clause (i) multiplied by the ratio of (I)
the actuarial value of standard coverage, to (II) the
actuarial value of the alternative coverage; or
‘‘(B) a Medicare+Choice plan, the portion of the
bid amount that is attributable to statutory drug bene-
fits (described in section 1853(a)(1)(A)(ii)(II)).
‘‘(c) RULES IN APPLYING COST-SHARING SUBSIDIES.—
‘‘(1) IN GENERAL.—In applying subsections (a)(1)(B)
and (a)(2)(B), nothing in this part shall be construed as
preventing a plan or provider from waiving or reducing the
amount of cost-sharing otherwise applicable.
‘‘(2) LIMITATION ON CHARGES.—In the case of an in-
dividual receiving cost-sharing subsidies under subsection
(a)(1)(B) or (a)(2)(B), the PDP sponsor may not charge
more than $5 per prescription.
‘‘(3) APPLICATION OF INDEXING RULES.—The provi-
sions of subsection (a)(4) shall apply to the dollar amount
specified in paragraph (2) in the same manner as they
apply to the dollar amounts specified in subsections
(a)(1)(B) and (a)(2)(B).
‘‘(d) ADMINISTRATION OF SUBSIDY PROGRAM.—The Ad-
ministrator shall provide a process whereby, in the case of an
individual who is determined to be a subsidy eligible individual
and who is enrolled in prescription drug plan or is enrolled in
a Medicare+Choice plan under which qualified prescription
drug coverage is provided—
‘‘(1) the Administrator provides for a notification of
the PDP sponsor or Medicare+Choice organization in-
volved that the individual is eligible for a subsidy and the
amount of the subsidy under subsection (a);
‘‘(2) the sponsor or organization involved reduces the
premiums or cost-sharing otherwise imposed by the amount
of the applicable subsidy and submits to the Administrator
information on the amount of such reduction; and
‘‘(3) the Administrator periodically and on a timely
basis reimburses the sponsor or organization for the
amount of such reductions.
The reimbursement under paragraph (3) with respect to cost-
sharing subsidies may be computed on a capitated basis, taking
into account the actuarial value of the subsidies and with ap-
propriate adjustments to reflect differences in the risks actually
involved.
‘‘(e) RELATION TO MEDICAID PROGRAM.—
‘‘(1) IN GENERAL.—For provisions providing for eligi-
bility determinations, and additional financing, under the
medicaid program, see section 1935.
‘‘(2) MEDICAID
PROVIDING
WRAP
AROUND
BENE-
FITS.—The coverage provided under this part is primary
payor to benefits for prescribed drugs provided under the
medicaid program under title XIX.
‘‘(3) COORDINATION.—The Administrator shall de-
velop and implement a plan for the coordination of pre-
scription drug benefits under this part with the benefits
provided under the medicaid program under title XIX, with
particular attention to insuring coordination of payments
and prevention of fraud and abuse. In developing and im-
plementing such plan, the Administrator shall involve the
Secretary, the States, the data processing industry, phar-
macists, and pharmaceutical manufacturers, and other ex-
perts.
‘‘SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENE-
FICIARIES FOR QUALIFIED PRESCRIPTION
DRUG COVERAGE.
‘‘(a) SUBSIDY PAYMENT.—In order to reduce premium
levels applicable to qualified prescription drug coverage for all
medicare beneficiaries, to reduce adverse selection among pre-
scription drug plans and Medicare+Choice plans that provide
qualified prescription drug coverage, and to promote the par-
ticipation of PDP sponsors under this part, the Administrator
shall provide in accordance with this section for payment to a
qualifying entity (as defined in subsection (b)) of the following
subsidies:
‘‘(1) DIRECT SUBSIDY.—In the case of an individual
enrolled in a prescription drug plan, Medicare+Choice
plan, or qualified retiree prescription drug plan, a direct
subsidy equal to a percentage (specified by the Adminis-
trator consistent with subsection (d)(2)) of an amount
equal to the actuarial value of the standard drug coverage
provided under the respective plan.
‘‘(2) SUBSIDY THROUGH REINSURANCE.—The reinsur-
ance payment amount (as defined in subsection (c)) for ex-
cess costs incurred in providing qualified prescription drug
coverage—
‘‘(A) for individuals enrolled with a prescription
drug plan under this part;
‘‘(B) 
for 
individuals 
enrolled 
with 
a
Medicare+Choice plan that provides qualified prescrip-
tion drug coverage under part C; and
‘‘(C) for individuals who are enrolled in a qualified
retiree prescription drug plan.
This section constitutes budget authority in advance of appro-
priations Acts and represents the obligation of the Adminis-
trator to provide for the payment of amounts provided under
this section.
‘‘(b) QUALIFYING ENTITY DEFINED.—For purposes of
this section, the term ‘qualifying entity’ means any of the fol-
lowing that has entered into an agreement with the Adminis-
trator to provide the Administrator with such information as
may be required to carry out this section:
‘‘(1) A PDP sponsor offering a prescription drug plan
under this part.
‘‘(2) A Medicare+Choice organization that provides
qualified 
prescription 
drug 
coverage 
under 
a
Medicare+Choice plan under part C.
‘‘(3) The sponsor of a qualified retiree prescription
drug plan (as defined in subsection (f)).
‘‘(c) REINSURANCE PAYMENT AMOUNT.—
‘‘(1) IN GENERAL.—Subject to subsection (d)(2) and
paragraph (4), the reinsurance payment amount under this
subsection for a qualifying covered individual (as defined in
subsection (g)(1)) for a coverage year (as defined in sub-
section (g)(2)) is equal to the sum of the following:
‘‘(A) For the portion of the individual’s gross cov-
ered prescription drug costs (as defined in paragraph
(3)) for the year that exceeds the initial copayment
threshold specified in section 1860B(b)(2)(C), but does
not exceed the initial coverage limit specified in section
1860B(b)(3), an amount equal to 30 percent of the al-
lowable costs (as defined in paragraph (2)) attributable
to such gross covered prescription drug costs.
‘‘(B) For the portion of the individual’s gross cov-
ered prescription drug costs for the year that exceeds
the 
annual 
out-of-pocket 
threshold 
specified 
in
1860B(b)(4)(B), an amount equal to 80 percent of the
allowable costs attributable to such gross covered pre-
scription drug costs.
‘‘(2) ALLOWABLE COSTS.—For purposes of this sec-
tion, the term ‘allowable costs’ means, with respect to gross
covered prescription drug costs under a plan described in
subsection (b) offered by a qualifying entity, the part of
such costs that are actually paid (net of average percentage
rebates) under the plan, but in no case more than the part
of such costs that would have been paid under the plan if
the prescription drug coverage under the plan were stand-
ard coverage.
‘‘(3) GROSS COVERED PRESCRIPTION DRUG COSTS.—
For purposes of this section, the term ‘gross covered pre-
scription drug costs’ means, with respect to an enrollee
with a qualifying entity under a plan described in sub-
section (b) during a coverage year, the costs incurred under
the plan (including costs attributable to administrative
costs) for covered prescription drugs dispensed during the
year, including costs relating to the deductible, whether
paid by the enrollee or under the plan, regardless of wheth-
er the coverage under the plan exceeds standard coverage
and regardless of when the payment for such drugs is
made.
‘‘(4) INDEXING DOLLAR AMOUNTS.—
‘‘(A) AMOUNTS
FOR
2005.—The dollar amounts
applied under paragraph (1) for 2005 shall be the dol-
lar amounts specified in such paragraph.
‘‘(B) FOR
2006.—The dollar amounts applied
under paragraph (1) for 2006 shall be the dollar
amounts specified in such paragraph increased by the
annual percentage increase described in section
1860B(b)(5) for 2006.
‘‘(C) FOR
SUBSEQUENT
YEARS.—The dollar
amounts applied under paragraph (1) for a year after
2006 shall be the amounts (under this paragraph) ap-
plied under paragraph (1) for the preceding year in-
creased by the annual percentage increase described in
section 1860B(b)(5) (relating to growth in medicare
prescription drug costs per beneficiary) for the year in-
volved.
‘‘(D) ROUNDING.—Any amount, determined under
the preceding provisions of this paragraph for a year,
which is not a multiple of $10 shall be rounded to the
nearest multiple of $10.
‘‘(d) ADJUSTMENT OF PAYMENTS.—
‘‘(1) ESTIMATION OF PAYMENTS.—The Administrator
shall estimate—
‘‘(A) the total payments to be made (without re-
gard to this subsection) during a year under this sec-
tion; and
‘‘(B) the total payments to be made by qualifying
entities for standard coverage under plans described in
subsection (b) during the year.
‘‘(2) ADJUSTMENT.—The Administrator shall propor-
tionally adjust the payments made under this section for a
coverage year in such manner so that—
‘‘(A) the total of the payments made for the year
under this section is equal to 65 percent of the total
payments described in paragraph (1)(B) during the
year; and
‘‘(B) the ratio of the total of the payments made
for direct subsidies under subsection (a)(1) for the year
to the total of the payments made for reinsurance sub-
sidies for the year under subsection (a)(2) is equal to
the ratio of 35 to 30.
‘‘(3) RISK ADJUSTMENT.—To the extent the Adminis-
trator determines it appropriate to avoid risk selection, the
payments made for direct subsidies under subsection (a)(1)
are subject to adjustment based upon risk factors specified
by the Administrator.
‘‘(e) PAYMENT METHODS.—
‘‘(1) IN GENERAL.—Payments under this section shall
be based on such a method as the Administrator deter-
mines. The Administrator may establish a payment method
by which interim payments of amounts under this section
are made during a year based on the Administrator’s best
estimate of amounts that will be payable after obtaining all
of the information.
‘‘(2) SOURCE OF PAYMENTS.—Payments under this
section shall be made from the Medicare Prescription Drug
Trust Fund.
‘‘(f) QUALIFIED RETIREE PRESCRIPTION DRUG PLAN DE-
FINED.—
‘‘(1) IN GENERAL.—For purposes of this section, the
term ‘qualified retiree prescription drug plan’ means em-
ployment-based retiree health coverage (as defined in para-
graph (3)(A)) if, with respect to an individual enrolled (or
eligible to be enrolled) under this part who is covered under
the plan, the following requirements are met:
‘‘(A) ASSURANCE.—The sponsor of the plan shall
annually attest, and provide such assurances as the Ad-
ministrator may require, that the coverage meets or ex-
ceeds the requirements for qualified prescription drug
coverage.
‘‘(B) AUDITS.—The sponsor (and the plan) shall
maintain, and afford the Administrator access to, such
records as the Administrator may require for purposes
of audits and other oversight activities necessary to en-
sure the adequacy of prescription drug coverage, and
the accuracy of payments made.
‘‘(C) PROVISION OF CERTIFICATION OF PRESCRIP-
TION DRUG COVERAGE.—The sponsor of the plan shall
provide for issuance of certifications of the type de-
scribed in section 1860A(c)(2)(D).
‘‘(2) LIMITATION ON BENEFIT ELIGIBILITY.—No pay-
ment shall be provided under this section with respect to
an individual who is enrolled under a qualified retiree pre-
scription drug plan unless the individual is—
‘‘(A) enrolled under this part;
‘‘(B) is covered under the plan; and
‘‘(C) is eligible to obtain qualified prescription
drug coverage under section 1860A but did not elect
such coverage under this part (either through a pre-
scription drug plan or through a Medicare+Choice
plan).
‘‘(3) DEFINITIONS.—As used in this section:
‘‘(A) EMPLOYMENT-BASED RETIREE HEALTH COV-
ERAGE.—The term ‘employment-based retiree health
coverage’ means health insurance or other coverage of
health care costs for individuals enrolled under this
part (or for such individuals and their spouses and de-
pendents) based on their status as former employees or
labor union members.
‘‘(B) SPONSOR.—The term ‘sponsor’ means a plan
sponsor, as defined in section 3(16)(B) of the Em-
ployee Retirement Income Security Act of 1974.
‘‘(g) GENERAL DEFINITIONS.—For purposes of this sec-
tion:
‘‘(1) QUALIFYING COVERED INDIVIDUAL.—The term
‘qualifying covered individual’ means an individual who—
‘‘(A) is enrolled with a prescription drug plan
under this part;
‘‘(B) is enrolled with a Medicare+Choice plan that
provides qualified prescription drug coverage under
part C; or
‘‘(C) is enrolled for benefits under this title and is
covered under a qualified retiree prescription drug plan.
‘‘(2) COVERAGE
YEAR.—The term ‘coverage year’
means a calendar year in which covered outpatient drugs
are dispensed if a claim for payment is made under the
plan for such drugs, regardless of when the claim is paid.
‘‘SEC. 1860I. MEDICARE PRESCRIPTION DRUG TRUST
FUND.
‘‘(a) IN GENERAL.—There is created on the books of the
Treasury of the United States a trust fund to be known as the
‘Medicare Prescription Drug Trust Fund’ (in this section re-
ferred to as the ‘Trust Fund’). The Trust Fund shall consist
of such gifts and bequests as may be made as provided in sec-
tion 201(i)(1), and such amounts as may be deposited in, or
appropriated to, such fund as provided in this part. Except as
otherwise provided in this section, the provisions of subsections
(b) through (i) of section 1841 shall apply to the Trust Fund
in the same manner as they apply to the Federal Supple-
mentary Medical Insurance Trust Fund under such section.
‘‘(b) PAYMENTS FROM TRUST FUND.—
‘‘(1) IN GENERAL.—The Managing Trustee shall pay
from time to time from the Trust Fund such amounts as
the Administrator certifies are necessary to make—
‘‘(A) payments under section 1860G (relating to
low-income subsidy payments);
‘‘(B) payments under section 1860H (relating to
subsidy payments); and
‘‘(C) payments with respect to administrative ex-
penses under this part in accordance with section
201(g).
‘‘(2) TRANSFERS
TO
MEDICAID
ACCOUNT
FOR
IN-
CREASED ADMINISTRATIVE COSTS.—The Managing Trustee
shall transfer from time to time from the Trust Fund to
the Grants to States for Medicaid account amounts the Ad-
ministrator certifies are attributable to increases in pay-
ment resulting from the application of a higher Federal
matching percentage under section 1935(b).
‘‘(c) DEPOSITS INTO TRUST FUND.—
‘‘(1) LOW-INCOME TRANSFER.—There is hereby trans-
ferred to the Trust Fund, from amounts appropriated for
Grants to States for Medicaid, amounts equivalent to the
aggregate amount of the reductions in payments under sec-
tion 1903(a)(1) attributable to the application of section
1935(c).
‘‘(2) APPROPRIATIONS TO COVER GOVERNMENT CON-
TRIBUTIONS.—There are authorized to be appropriated
from time to time, out of any moneys in the Treasury not
otherwise appropriated, to the Trust Fund, an amount
equivalent to the amount of payments made from the Trust
Fund under subsection (b), reduced by the amount trans-
ferred to the Trust Fund under paragraph (1).
‘‘(d) RELATION TO SOLVENCY REQUIREMENTS.—Any pro-
vision of law that relates to the solvency of the Trust Fund
under this part shall take into account the Trust Fund and
amounts receivable by, or payable from, the Trust Fund.
‘‘SEC. 
1860J. 
DEFINITIONS; 
TREATMENT 
OF 
REF-
ERENCES TO PROVISIONS IN PART C.
‘‘(a) DEFINITIONS.—For purposes of this part:
‘‘(1) COVERED OUTPATIENT DRUGS.—The term ‘cov-
ered outpatient drugs’ is defined in section 1860B(f).
‘‘(2) INITIAL COVERAGE LIMIT.—The term ‘initial cov-
erage limit’ means such limit as established under section
1860B(b)(3), or, in the case of coverage that is not stand-
ard coverage, the comparable limit (if any) established
under the coverage.
‘‘(3) MEDICARE PRESCRIPTION DRUG TRUST FUND.—
The term ‘Medicare Prescription Drug Trust Fund’ means
the Trust Fund created under section 1860I(a).
‘‘(4) PDP SPONSOR.—The term ‘PDP sponsor’ means
an entity that is certified under this part as meeting the
requirements and standards of this part for such a sponsor.
‘‘(5) PRESCRIPTION DRUG PLAN.—The term ‘prescrip-
tion drug plan’ means health benefits coverage that—
‘‘(A) is offered under a policy, contract, or plan by
a PDP sponsor pursuant to, and in accordance with, a
contract between the Administrator and the sponsor
under section 1860D(b);
‘‘(B) provides qualified prescription drug coverage;
and
‘‘(C) meets the applicable requirements of the sec-
tion 1860C for a prescription drug plan.
‘‘(6) QUALIFIED
PRESCRIPTION
DRUG
COVERAGE.—
The term ‘qualified prescription drug coverage’ is defined
in section 1860B(a).
‘‘(7) STANDARD COVERAGE.—The term ‘standard cov-
erage’ is defined in section 1860B(b).
‘‘(b) APPLICATION
OF MEDICARE+CHOICE 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 a Medicare+Choice plan in-
cluded a reference to a prescription drug plan;
‘‘(2) any reference to a provider-sponsored organiza-
tion 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(b);
and
‘‘(4) any reference to part C included a reference to
this part.’’.
(b) 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 So-
cial 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 subpara-
graph (F) and inserting ‘‘; and’’; and
(C) by adding at the end the following new sub-
paragraph:
‘‘(G) the waiver or reduction of any cost-sharing im-
posed under part D of title XVIII.’’.
(3) SUBMISSION
OF
LEGISLATIVE
PROPOSAL.—Not
later than 6 months after the date of the enactment of this
Act, the Secretary of Health and Human Services shall
submit to the appropriate committees of Congress a legisla-
tive proposal providing for such technical and conforming
amendments in the law as are required by the provisions
of this subtitle.
(c) STUDY
ON TRANSITIONING PART B PRESCRIPTION
DRUG COVERAGE.—Not later than January 1, 2004, the Medi-
care Benefits Administrator shall submit a report to Congress
that makes recommendations regarding methods for providing
benefits under part D of title XVIII of the Social Security Act
for outpatient prescription drugs for which benefits are pro-
vided under part B of such title.
SEC. 102. OFFERING OF QUALIFIED PRESCRIPTION
DRUG 
COVERAGE 
UNDER 
THE
MEDICARE+CHOICE PROGRAM.
(a) IN GENERAL.—Section 1851 (42 U.S.C. 1395w–21) is
amended by adding at the end the following new subsection:
‘‘(j) AVAILABILITY OF PRESCRIPTION DRUG BENEFITS.—
‘‘(1) OFFER OF QUALIFIED PRESCRIPTION DRUG COV-
ERAGE.—
‘‘(A) IN GENERAL.—A Medicare+Choice organiza-
tion may not offer prescription drug coverage (other
than that required under parts A and B) to an enrollee
under a Medicare+Choice plan unless such drug cov-
erage is at least qualified prescription drug coverage
and unless the requirements of this subsection with re-
spect to such coverage are met.
‘‘(B) CONSTRUCTION.—Nothing in this subsection
shall be construed as—
‘‘(i) requiring a Medicare+Choice plan to in-
clude coverage of qualified prescription drug cov-
erage; or
‘‘(ii) permitting a Medicare+Choice organiza-
tion from providing such coverage to an individual
who has not elected such coverage under section
1860A(b).
For purposes of this part, an individual who has not
elected qualified prescription drug coverage under sec-
tion 1860A(b) shall be treated as being ineligible to en-
roll in a Medicare+Choice plan under this part that of-
fers such coverage.
‘‘(2) COMPLIANCE
WITH
ADDITIONAL
BENEFICIARY
PROTECTIONS.—With respect to the offering of qualified
prescription drug coverage by a Medicare+Choice organiza-
tion under a Medicare+Choice plan, the organization and
plan shall meet the requirements of section 1860C, includ-
ing requirements relating to information dissemination and
grievance and appeals, in the same manner as they apply
to a PDP sponsor and a prescription drug plan under part
D and shall submit to the Administrator the information
described in section 1860F(a)(2). The Administrator shall
waive such requirements to the extent the Administrator
determines that such requirements duplicate requirements
otherwise applicable to the organization or plan under this
part.
‘‘(3) AVAILABILITY OF PREMIUM AND COST-SHARING
SUBSIDIES FOR LOW-INCOME ENROLLEES AND DIRECT AND
REINSURANCE SUBSIDY PAYMENTS FOR ORGANIZATIONS.—
For provisions—
‘‘(A) providing premium and cost-sharing subsidies
to low-income individuals receiving qualified prescrip-
tion drug coverage through a Medicare+Choice plan,
see section 1860G; and
‘‘(B) providing a Medicare+Choice organization
with direct and insurance subsidy payments for pro-
viding qualified prescription drug coverage under this
part, see section 1860H.
‘‘(4) TRANSITION IN INITIAL ENROLLMENT PERIOD.—
Notwithstanding any other provision of this part, the an-
nual, coordinated election period under subsection (e)(3)(B)
for 2005 shall be the 6-month period beginning with No-
vember 2004.
‘‘(5) QUALIFIED
PRESCRIPTION
DRUG
COVERAGE;
STANDARD
COVERAGE.—For purposes of this part, the
terms ‘qualified prescription drug coverage’ and ‘standard
coverage’ have the meanings given such terms in section
1860B.’’.
(b) CONFORMING
AMENDMENTS.—Section 1851 (42
U.S.C. 1395w–21) is amended—
(1) in subsection (a)(1)—
(A) by inserting ‘‘(other than qualified prescrip-
tion drug benefits)’’ after ‘‘benefits’’;
(B) by striking the period at the end of subpara-
graph (B) and inserting a comma; and
(C) by adding after and below subparagraph (B)
the following:
‘‘and may elect qualified prescription drug coverage in ac-
cordance with section 1860A.’’; and
(2) in subsection (g)(1), by inserting ‘‘and section
1860A(c)(2)(B)’’ after ‘‘in this subsection’’.
(c) EFFECTIVE DATE.—The amendments made by this
section apply to coverage provided on or after January 1, 2005.
SEC. 103. MEDICAID AMENDMENTS.
(a) DETERMINATIONS OF ELIGIBILITY FOR LOW-INCOME
SUBSIDIES.—
(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) REQUIREMENT FOR MAKING ELIGIBILITY
DETERMINATIONS FOR LOW-INCOME SUBSIDIES.—As a condi-
tion 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—
‘‘(1) make determinations of eligibility for premium
and cost-sharing subsidies under (and in accordance with)
section 1860G;
‘‘(2) inform the Administrator of the Medicare Bene-
fits Administration of such determinations in cases in
which such eligibility is established; and
‘‘(3) otherwise provide such Administrator with such
information as may be required to carry out part D of title
XVIII (including section 1860G).
‘‘(b) 
PAYMENTS
FOR
ADDITIONAL
ADMINISTRATIVE
COSTS.—
‘‘(1) IN GENERAL.—The amounts expended by a State
in carrying out subsection (a) are, subject to paragraph
(2), expenditures reimbursable under the appropriate para-
graph of section 1903(a); except that, notwithstanding any
other provision of such section, the applicable Federal
matching rates with respect to such expenditures under
such section shall be increased as follows (but in no case
shall the rate as so increased exceed 100 percent):
‘‘(A) For expenditures attributable to costs in-
curred during 2005, the otherwise applicable Federal
matching rate shall be increased by 10 percent of the
percentage otherwise payable (but for this subsection)
by the State.
‘‘(B)(i) For expenditures attributable to costs in-
curred during 2006 and each subsequent year through
2013, the otherwise applicable Federal matching rate
shall be increased by the applicable percent (as defined
in clause (ii)) of the percentage otherwise payable (but
for this subsection) by the State.
‘‘(ii) For purposes of clause (i), the ‘applicable
percent’ for—
‘‘(I) 2006 is 20 percent; or
‘‘(II) a subsequent year is the applicable per-
cent under this clause for the previous year in-
creased by 10 percentage points.
‘‘(C) For expenditures attributable to costs in-
curred after 2013, the otherwise applicable Federal
matching rate shall be increased to 100 percent.
‘‘(2) COORDINATION.—The State shall provide the Ad-
ministrator with such information as may be necessary to
properly allocate administrative expenditures described in
paragraph (1) that may otherwise be made for similar eligi-
bility determinations.’’.
(b) PHASED-IN FEDERAL ASSUMPTION OF MEDICAID RE-
SPONSIBILITY FOR PREMIUM AND COST-SHARING SUBSIDIES
FOR DUALLY ELIGIBLE INDIVIDUALS.—
(1) IN
GENERAL.—Section 1903(a)(1) (42 U.S.C.
1396b(a)(1)) is amended by inserting before the semicolon
the following: ‘‘, reduced by the amount computed under
section 1935(c)(1) for the State and the quarter’’.
(2) AMOUNT DESCRIBED.—Section 1935, as inserted
by subsection (a)(2), is amended by adding at the end the
following new subsection:
‘‘(c) FEDERAL ASSUMPTION OF MEDICAID PRESCRIPTION
DRUG COSTS FOR DUALLY-ELIGIBLE BENEFICIARIES.—
‘‘(1) 
IN
GENERAL.—For 
purposes 
of 
section
1903(a)(1), for a State that is one of the 50 States or the
District of Columbia for a calendar quarter in a year (be-
ginning with 2005) the amount computed under this sub-
section is equal to the product of the following:
‘‘(A) MEDICARE SUBSIDIES.—The total amount of
payments made in the quarter under section 1860G
(relating to premium and cost-sharing prescription
drug subsidies for low-income medicare beneficiaries)
that are attributable to individuals who are residents of
the State and are entitled to benefits with respect to
prescribed drugs under the State plan under this title
(including such a plan operating under a waiver under
section 1115).
‘‘(B) STATE MATCHING RATE.—A proportion com-
puted by subtracting from 100 percent the Federal
medical assistance percentage (as defined in section
1905(b)) applicable to the State and the quarter.
‘‘(C) PHASE-OUT
PROPORTION.—The phase-out
proportion (as defined in paragraph (2)) for the quar-
ter.
‘‘(2) PHASE-OUT PROPORTION.—For purposes of para-
graph (1)(C), the ‘phase-out proportion’ for a calendar
quarter in—
‘‘(A) 2005 is 90 percent;
‘‘(B) a subsequent year before 2014, is the phase-
out proportion for calendar quarters in the previous
year decreased by 10 percentage points; or
‘‘(C) a year after 2013 is 0 percent.’’.
(c) MEDICAID PROVIDING WRAP-AROUND BENEFITS.—
Section 1935, as so inserted and amended, is further amended
by adding at the end the following new subsection:
‘‘(d) ADDITIONAL PROVISIONS.—
‘‘(1) MEDICAID AS SECONDARY PAYOR.—In the case of
an individual who is entitled to qualified prescription drug
coverage under a prescription drug plan under part D of
title XVIII (or under a Medicare+Choice plan under part
C of such title) and medical assistance for prescribed drugs
under this title, medical assistance shall continue to be pro-
vided under this title for prescribed drugs to the extent
payment is not made under the prescription drug plan or
the Medicare+Choice plan selected by the individual.
‘‘(2) CONDITION.—A State may require, as a condition
for the receipt of medical assistance under this title with
respect to prescription drug benefits for an individual eligi-
ble to obtain qualified prescription drug coverage described
in paragraph (1), that the individual elect qualified pre-
scription drug coverage under section 1860A.’’.
(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 para-
graph (1), by inserting ‘‘subject to subsection (e)’’ after
‘‘section 1903(a)’’;
(B) in subsection (c)(1), by inserting ‘‘subject to
subsection (e)’’ after ‘‘1903(a)(1)’’; and
(C) by adding at the end the following new sub-
section:
‘‘(e) TREATMENT OF TERRITORIES.—
‘‘(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 a plan described in
paragraph (2) (for providing medical assistance with
respect to the provision of prescription drugs to medi-
care beneficiaries), the amount otherwise determined
under section 1108(f) (as increased under section
1108(g)) for the State shall be increased by the
amount specified in paragraph (3).
‘‘(2) PLAN.—The plan described in this paragraph is
a plan that—
‘‘(A) provides medical assistance with respect to
the provision of covered outpatient drugs (as defined in
section 1860B(f)) to low-income medicare beneficiaries;
and
‘‘(B) assures that additional amounts received by
the State that are attributable to the operation of this
subsection are used only for such assistance.
‘‘(3) INCREASED AMOUNT.—
‘‘(A) IN GENERAL.—The amount specified in this
paragraph for a State for a year is equal to the product
of—
‘‘(i) the aggregate amount specified in sub-
paragraph (B); and
‘‘(ii) 
the 
amount 
specified 
in 
section
1108(g)(1) for that State, divided by the sum of
the amounts specified in such section for all such
States.
‘‘(B) 
AGGREGATE
AMOUNT.—The 
aggregate
amount specified in this subparagraph for—
‘‘(i) 2005, is equal to $20,000,000; or
‘‘(ii) a subsequent year, is equal to the aggre-
gate amount specified in this subparagraph for the
previous year increased by annual percentage in-
crease specified in section 1860B(b)(5) for the year
involved.
‘‘(4) REPORT.—The Administrator shall submit to
Congress a report on the application of this subsection and
may include in the report such recommendations as the Ad-
ministrator 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)’’.
SEC. 104. MEDIGAP TRANSITION.
(a) IN GENERAL.—Section 1882 (42 U.S.C. 1395ss) is
amended by adding at the end the following new subsection:
‘‘(v) COVERAGE OF PRESCRIPTION DRUGS.—
‘‘(1) IN GENERAL.—Notwithstanding any other provi-
sion of law, except as provided in paragraph (3) no new
medicare supplemental policy that provides coverage of ex-
penses for prescription drugs may be issued under this sec-
tion on or after January 1, 2005, to an individual unless
it replaces a medicare supplemental policy that was issued
to that individual and that provided some coverage of ex-
penses for prescription drugs.
‘‘(2) ISSUANCE OF SUBSTITUTE POLICIES IF OBTAIN
PRESCRIPTION DRUG COVERAGE UNDER PART D.—
‘‘(A) IN GENERAL.—The issuer of a medicare sup-
plemental 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’, ‘D’,
‘E’, ‘F’, or ‘G’ (under the standards established
under subsection (p)(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 experi-
ence, 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 date of the termination of enrollment
described in such paragraph and who submits evidence
of the date of termination or disenrollment along with
the application for such medicare supplemental policy.
‘‘(B) INDIVIDUAL
COVERED.—An individual de-
scribed in this subparagraph is an individual who—
‘‘(i) enrolls in a prescription drug plan under
part D; and
‘‘(ii) at the time of such enrollment was en-
rolled and terminates enrollment in a medicare sup-
plemental policy which has a benefit package classi-
fied as ‘H’, ‘I’, or ‘J’ under the standards referred
to in subparagraph (A)(i) or terminates enrollment
in a policy to which such standards do not apply
but which provides benefits for prescription drugs.
‘‘(C) ENFORCEMENT.—The provisions of para-
graph (4) of subsection (s) shall apply with respect to
the requirements of this paragraph in the same manner
as they apply to the requirements of such subsection.
‘‘(3) 
NEW
STANDARDS.—In 
applying 
subsection
(p)(1)(E) (including permitting the NAIC to revise its
model regulations in response to changes in law) with re-
spect to the change in benefits resulting from title I of the
Medicare Modernization and Prescription Drug Act of
2002, with respect to policies issued to individuals who are
enrolled under part D, the changes in standards shall pro-
vide for at least two benefit packages (other than the core
benefit package) that may provide for coverage of cost-
sharing with respect to qualified prescription drug coverage
under such part, except that such coverage may not cover
the prescription drug deductible under such part. Two ben-
efit packages shall be consistent with the following:
‘‘(A) FIRST NEW POLICY.—The policy described in
this subparagraph has the following benefits, notwith-
standing any other provision of this section relating to
a core benefit package:
‘‘(i) Coverage of 50 percent of the cost-sharing
otherwise applicable, except coverage of 100 per-
cent of any cost-sharing otherwise applicable for
preventive benefits.
‘‘(ii) No coverage of the part B deductible.
‘‘(iii) Coverage for all hospital coinsurance for
long stays (as in the current core benefit package).
‘‘(iv) A limitation on annual out-of-pocket ex-
penditures to $4,000 in 2005 (or, in a subsequent
year, to such limitation for the previous year in-
creased by an appropriate inflation adjustment
specified by the Secretary).
‘‘(B) SECOND NEW POLICY.—The policy described
in this subparagraph has the same benefits as the pol-
icy described in subparagraph (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
(iv) of such subparagraph.
‘‘(4) CONSTRUCTION.—Any provision in this section or
in a medicare supplemental policy relating to guaranteed
renewability of coverage shall be deemed to have been met
through the offering of other coverage under this sub-
section.’’.
SEC. 105. MEDICARE PRESCRIPTION DRUG DISCOUNT
CARD ENDORSEMENT PROGRAM.
Title XVIII is amended by inserting after section 1806 the
following new section:
‘‘MEDICARE PRESCRIPTION DRUG DISCOUNT CARD
ENDORSEMENT PROGRAM
‘‘SEC. 1807. (a) IN GENERAL.—The Secretary (or the
Medicare 
Benefits 
Administrator 
pursuant 
to 
section
1808(c)(3)(C)) shall establish a program—
‘‘(1) to endorse prescription drug discount card pro-
grams that meet the requirements of this section; and
‘‘(2) to make available to medicare beneficiaries infor-
mation regarding such endorsed programs.
‘‘(b) REQUIREMENTS FOR ENDORSEMENT.—The Secretary
may not endorse a prescription drug discount card program
under this section unless the program meets the following re-
quirements:
‘‘(1) SAVINGS
TO
MEDICARE
BENEFICIARIES.—The
program passes on to medicare beneficiaries who enroll in
the program discounts on prescription drugs, including dis-
counts negotiated with manufacturers.
‘‘(2) PROHIBITION ON APPLICATION ONLY TO MAIL
ORDER.—The program applies to drugs that are available
other than solely through mail order.
‘‘(3) BENEFICIARY SERVICES.—The program provides
pharmaceutical support services, such as education and
counseling, and services to prevent adverse drug inter-
actions.
‘‘(4) INFORMATION.—The program makes available to
medicare beneficiaries through the Internet and otherwise
information, including information on enrollment fees,
prices charged to beneficiaries, and services offered under
the program, that the Secretary identifies as being nec-
essary to provide for informed choice by beneficiaries
among endorsed programs.
‘‘(5) DEMONSTRATED EXPERIENCE.—The entity oper-
ating the program has demonstrated experience and exper-
tise in operating such a program or a similar program.
‘‘(6) QUALITY ASSURANCE.—The entity has in place
adequate procedures for assuring quality service under the
program.
‘‘(7) ADDITIONAL BENEFICIARY PROTECTIONS.—The
program meets such additional requirements as the Sec-
retary identifies to protect and promote the interest of
medicare beneficiaries, including requirements that ensure
that beneficiaries are not charged more than the lower of
the negotiated retail price or the usual and customary
price.
‘‘(c) PROGRAM OPERATION.—The Secretary shall operate
the program under this section consistent with the following:
‘‘(1) PROMOTION OF INFORMED CHOICE.—In order to
promote informed choice among endorsed prescription drug
discount card programs, the Secretary shall provide for the
dissemination of information which compares the costs and
benefits of such programs in a manner coordinated with
the 
dissemination 
of 
educational 
information 
on
Medicare+Choice plans under part C.
‘‘(2) OVERSIGHT.—The Secretary shall provide appro-
priate oversight to ensure compliance of endorsed programs
with the requirements of this section, including verification
of the discounts and services provided.
‘‘(3) USE OF MEDICARE TOLL-FREE NUMBER.—The
Secretary shall provide through the 1-800-medicare toll free
telephone number for the receipt and response to inquiries
and complaints concerning the program and programs en-
dorsed under this section.
‘‘(4) DISQUALIFICATION FOR ABUSIVE PRACTICES.—
The Secretary shall revoke the endorsement of a program
that the Secretary determines no longer meets the require-
ments of this section or that has engaged in false or mis-
leading marketing practices.
‘‘(5) ENROLLMENT
PRACTICES.—A medicare bene-
ficiary may not be enrolled in more than one endorsed pro-
gram at any time.
‘‘(d) TRANSITION.—The Secretary shall provide for an ap-
propriate transition and discontinuation of the program under
this section at the time prescription drug benefits first become
available under part D.
‘‘(e) AUTHORIZATION
OF APPROPRIATIONS.—There are
authorized to be appropriated such sums as may be necessary
to carry out the program under this section.’’.
TITLE II—MEDICARE+CHOICE RE-
VITALIZATION 
AND
MEDICARE+CHOICE 
COMPETI-
TION PROGRAM
Subtitle A—Medicare+Choice
Revitalization
SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.
(a) EQUALIZING PAYMENTS BETWEEN FEE-FOR-SERVICE
AND MEDICARE+CHOICE.—
(1) IN
GENERAL.—Section 1853(c)(1) (42 U.S.C.
1395w–23(c)(1)) is amended by adding at the end the fol-
lowing:
‘‘(D) BASED ON 100 PERCENT OF FEE-FOR-SERV-
ICE COSTS.—
‘‘(i) IN GENERAL.—For 2003 and 2004, the
adjusted average per capita cost for the year in-
volved, determined under section 1876(a)(4) for the
Medicare+Choice payment area for services cov-
ered under parts A and B for individuals entitled
128
(1) in subclause (I)—
(A) by striking ‘‘AND
2002’’ and inserting
‘‘THROUGH 2012’’;
(B) by striking ‘‘during fiscal year 2001 or fiscal
year 2002’’ and inserting ‘‘during the period beginning
with fiscal year 2001 and ending with fiscal year
2012’’; and
(C) by striking ‘‘subject to subclause (III),’’;
(2) by striking subclause (II); and
(3) in subclause (III)—
(A) by redesignating such subclause as subclause
(II); and
(B) by striking ‘‘or (II)’’.
SEC. 612. REDISTRIBUTION OF UNUSED RESIDENT POSI-
TIONS.
(a) 
IN
GENERAL.—Section 
1886(h)(4) 
(42 
U.S.C.
1395ww(h)(4)) is amended—
(1) in subparagraph (F), by inserting ‘‘subject to sub-
paragraph (I),’’ after ‘‘October 1, 1997,’’;
(2) in subparagraph (H), by inserting ‘‘subject to sub-
paragraph (I),’’ after ‘‘subparagraphs (F) and (G),’’; and
(3) by adding at the end the following new subpara-
graph:
‘‘(I) REDISTRIBUTION OF UNUSED RESIDENT PO-
SITIONS.—
‘‘(i) REDUCTION IN LIMIT BASED ON UNUSED
POSITIONS.—
‘‘(I) IN GENERAL.—If a hospital’s resident
level (as defined in clause (iii)(I)) is less than
the otherwise applicable resident limit (as de-
fined in clause (iii)(II)) for each of the ref-
erence periods (as defined in subclause (II)),
effective for cost reporting periods beginning on
or after January 1, 2003, the otherwise appli-
cable resident limit shall be reduced by 75 per-
cent of the difference between such limit and
167
(c) CONFORMING AMENDMENTS TO SECTION 1842 (RE-
LATING TO CARRIERS).—Section 1842 (42 U.S.C. 1395u) is
amended as follows:
(1) The heading is amended to read as follows:
‘‘PROVISIONS RELATING TO THE ADMINISTRATION OF PART B’’.
(2) Subsection (a) is amended to read as follows:
‘‘(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.’’.
(3) Subsection (b) is amended—
(A) by striking paragraph (1);
(B) in paragraph (2)—
(i) by striking subparagraphs (A) and (B);
(ii) in subparagraph (C), by striking ‘‘car-
riers’’ and inserting ‘‘medicare administrative con-
tractors’’; and
(iii) by striking subparagraphs (D) and (E);
(C) in paragraph (3)—
(i) in the matter before subparagraph (A), by
striking ‘‘Each such contract shall provide that the
carrier’’ and inserting ‘‘The Secretary’’;
(ii) by striking ‘‘will’’ the first place it appears
in each of subparagraphs (A), (B), (F), (G), (H),
and (L) and inserting ‘‘shall’’;
(iii) in subparagraph (B), in the matter before
clause (i), by striking ‘‘to the policyholders and
subscribers of the carrier’’ and inserting ‘‘to the
policyholders and subscribers of the medicare ad-
ministrative contractor’’;
(iv) by striking subparagraphs (C), (D), and
(E);
(v) in subparagraph (H)—
(I) by striking ‘‘if it makes determinations
or payments with respect to physicians’ serv-
ices,’’; and
(II) by striking ‘‘carrier’’ and inserting
‘‘medicare administrative contractor’’;