701
‘‘(i) provides standard cov-
erage (or alternative prescription 
drug coverage the actuarial value 
of which is equivalent to that of 
standard coverage), the premium 
amount for enrollment under the 
plan under this part (determined 
without regard to any subsidy 
under this section or any late en-
rollment penalty under section 
1860D–1(c)(2)(B)); or 
‘‘(ii) provides alternative pre-
scription drug coverage the actu-
arial value of which is greater 
than that of standard coverage, 
the premium amount described in 
clause (i) multiplied by the ratio 
of (I) the actuarial value of stand-
ard coverage, to (II) the actuarial 
value of the alternative coverage; 
or 
‘‘(B) a MA-EFFS Rx plan, the por-
tion of the premium amount that is 
attributable to statutory drug bene-
702
fits 
(described 
in 
section 
1853(a)(1)(A)(ii)(II)). 
‘‘(c) RULES IN APPLYING COST-SHARING SUB-
SIDIES.—
‘‘(1) IN
GENERAL.—In applying sub-
section (a)(1)(B), nothing in this part 
shall be construed as preventing a plan 
or provider from waiving or reducing the 
amount of cost-sharing otherwise appli-
cable. 
‘‘(2) LIMITATION
ON
CHARGES.—In the 
case of an individual receiving cost-shar-
ing subsidies under subsection (a)(1)(B), 
the PDP sponsor or entity offering a MA-
EFFS Rx plan may not charge more than 
$5 per prescription. 
‘‘(3) APPLICATION OF INDEXING RULES.—
The provisions of subsection (a)(5) 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). 
‘‘(d) ADMINISTRATION
OF
SUBSIDY
PRO-
GRAM.—The Administrator shall provide a 
process whereby, in the case of an individual
703
who is determined to be a subsidy eligible in-
dividual and who is enrolled in prescription 
drug plan or is enrolled in a MA-EFFS Rx 
plan—
‘‘(1) the Administrator provides for a 
notification of the PDP sponsor or the en-
tity offering the MA-EFFS Rx plan in-
volved that the individual is eligible for a 
subsidy and the amount of the subsidy 
under subsection (a); 
‘‘(2) the sponsor or entity involved re-
duces the premiums or cost-sharing oth-
erwise imposed by the amount of the ap-
plicable subsidy and submits to the Ad-
ministrator information on the amount of 
such reduction; and 
‘‘(3) the Administrator periodically 
and on a timely basis reimburses the 
sponsor or entity for the amount of such 
reductions. 
The reimbursement under paragraph (3) with 
respect to cost-sharing subsidies may be com-
puted on a capitated basis, taking into ac-
count the actuarial value of the subsidies and
704
with appropriate adjustments to reflect dif-
ferences in the risks actually involved. 
‘‘(e) RELATION TO MEDICAID PROGRAM.—
‘‘(1) IN GENERAL.—For provisions pro-
viding for eligibility determinations, and 
additional financing, under the medicaid 
program, see section 1935. 
‘‘(2) MEDICAID PROVIDING WRAP AROUND 
BENEFITS.—The coverage provided under 
this part is primary payor to benefits for 
prescribed drugs provided under the 
medicaid program under title XIX con-
sistent with section 1935(d)(1). 
‘‘(3) 
COORDINATION.—The 
Adminis-
trator shall develop and implement a 
plan for the coordination of prescription 
drug benefits under this part with the 
benefits provided under the medicaid 
program under title XIX, with particular 
attention to insuring coordination of pay-
ments and prevention of fraud and abuse. 
In developing and implementing such 
plan, the Administrator shall involve the 
Secretary, the States, the data processing 
industry, 
pharmacists, 
and 
pharma-
705
ceutical manufacturers, and other ex-
perts.
‘‘SEC. 1860D–8. SUBSIDIES FOR ALL MEDICARE BENE-
FICIARIES FOR QUALIFIED PRESCRIPTION 
DRUG COVERAGE. 
‘‘(a) SUBSIDY PAYMENT.—In order to reduce 
premium levels applicable to qualified pre-
scription drug coverage for all medicare bene-
ficiaries consistent with an overall subsidy 
level of 73 percent, to reduce adverse selec-
tion among prescription drug plans and MA-
EFFS Rx plans, and to promote the participa-
tion of PDP sponsors under this part, the Ad-
ministrator 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 enrollee enrolled for a month in a pre-
scription drug plan or a MA-EFFS Rx 
plan, a direct subsidy equal to 43 percent 
of the national average monthly bid 
amount (computed under subsection (g)) 
for that month.
706
‘‘(2) SUBSIDY THROUGH REINSURANCE.—
In the case of an enrollee enrolled for a 
month in a prescription drug plan or a 
MA-EFFS Rx plan, the reinsurance pay-
ment amount (as defined in subsection 
(c)), which in the aggregate is 30 percent 
of the total payments made by qualifying 
entities for standard coverage under the 
respective plan, for excess costs incurred 
in providing qualified prescription drug 
coverage—
‘‘(A) for enrollees with a prescrip-
tion drug plan under this part; and 
‘‘(B) for enrollees with a MA-EFFS 
Rx plan. 
‘‘(3) 
EMPLOYER
AND
UNION
FLEXI-
BILITY.—In the case of an individual who 
is a participant or beneficiary in a quali-
fied retiree prescription drug plan (as de-
fined in subsection (f)(1)) and who is not 
enrolled in a prescription drug plan or in 
a MA-EFFS Rx plan, the special subsidy 
payments under subsection (f)(3). 
This section constitutes budget authority in 
advance of appropriations Acts and rep-
707
resents the obligation of the Administrator to 
provide for the payment of amounts provided 
under this section. In applying the percent-
ages under paragraphs (1) and (2), there shall 
be taken into account under the respective 
paragraphs the portion of the employer and 
union special subsidy payments under sub-
section (f)(3) that reflect payments that would 
have been made under the respective para-
graphs if such paragraphs had applied to 
qualified retiree prescription drug plans in-
stead of paragraph (3). 
‘‘(b) QUALIFYING
ENTITY
DEFINED.—For 
purposes of this section, the term ‘qualifying 
entity’ means any of the following that has en-
tered 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 pre-
scription drug plan under this part. 
‘‘(2) An entity that offers a MA-EFFS 
Rx plan.
708
‘‘(3) The sponsor of a qualified retiree 
prescription drug plan (as defined in sub-
section (f)). 
‘‘(c) REINSURANCE PAYMENT AMOUNT.—
‘‘(1) IN
GENERAL.—Subject to sub-
section (d)(1)(B) and paragraph (4), the 
reinsurance payment amount under this 
subsection for a qualifying covered indi-
vidual (as defined in paragraph (5)) for a 
coverage year (as defined in subsection 
(h)(2)) is equal to the sum of the fol-
lowing: 
‘‘(A) REINSURANCE BETWEEN INITIAL 
REINSURANCE THRESHOLD AND THE INI-
TIAL COVERAGE LIMIT.—For the portion 
of the individual’s gross covered pre-
scription drug costs (as defined in 
paragraph (3)) for the year that ex-
ceeds the initial reinsurance thresh-
old specified in paragraph (4), but 
does not exceed the initial coverage 
limit 
specified 
in 
section 
1860D–
2(b)(3), an amount equal to 20 percent 
of the allowable costs (as defined in
709
paragraph (2)) attributable to such 
gross covered prescription drug costs. 
‘‘(B) REINSURANCE
ABOVE
ANNUAL 
OUT-OF-POCKET
THRESHOLD.—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 1860D–
2(b)(4)(B), an amount equal to 80 per-
cent of the allowable costs attrib-
utable to such gross covered prescrip-
tion drug costs. 
‘‘(2) ALLOWABLE COSTS.—For purposes 
of this section, the term ‘allowable costs’ 
means, with respect to gross covered pre-
scription drug costs under a plan de-
scribed in subsection (b) offered by a 
qualifying entity, the part of such costs 
that are actually paid (net of discounts, 
chargebacks, and average percentage re-
bates) 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 standard coverage.
710
‘‘(3) 
GROSS
COVERED
PRESCRIPTION 
DRUG
COSTS.—For purposes of this sec-
tion, the term ‘gross covered prescription 
drug costs’ means, with respect to an en-
rollee with a qualifying entity under a 
plan described in subsection (b) during a 
coverage year, the costs incurred under 
the plan (including costs attributable to 
administrative costs) for covered pre-
scription drugs dispensed during the 
year, including costs relating to the de-
ductible, whether paid by the enrollee or 
under the plan, regardless of whether the 
coverage under the plan exceeds stand-
ard coverage and regardless of when the 
payment for such drugs is made. 
‘‘(4) INITIAL REINSURANCE THRESHOLD.—
The initial reinsurance threshold speci-
fied in this paragraph—
‘‘(A) for 2006, is equal to $1,000; or 
‘‘(B) for a subsequent year, is 
equal to the payment threshold speci-
fied in this paragraph for the pre-
vious year, increased by the annual 
percentage increase described in sec-
711
tion 1860D–2(b)(5) for the year in-
volved. 
Any amount determined under subpara-
graph (B) that is not a multiple of $10 
shall be rounded to the nearest multiple 
of $10.
‘‘(5) QUALIFYING
COVERED
INDIVIDUAL 
DEFINED.—For 
purposes 
of 
this 
sub-
section, the term ‘qualifying covered indi-
vidual’ means an individual who—
‘‘(A) is enrolled with a prescrip-
tion drug plan under this part; or 
‘‘(B) is enrolled with a MA-EFFS 
Rx plan. 
‘‘(d) ADJUSTMENT OF PAYMENTS.—
‘‘(1) ADJUSTMENT OF REINSURANCE PAY-
MENTS TO ASSURE 30 PERCENT LEVEL OF SUB-
SIDY THROUGH REINSURANCE.—
‘‘(A) ESTIMATION
OF
PAYMENTS.—
The Administrator shall estimate—
‘‘(i) the total payments to be 
made (without regard to this sub-
section) during a year under sub-
sections (a)(2) and (c); and