I 
108TH CONGRESS 
1ST SESSION 
H. R. 38
To amend title XVIII of the Social Security Act to provide for a voluntary 
outpatient prescription drug benefit program. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 7, 2003
Mrs. CAPITO introduced the following bill; which was referred to the Com-
mittee on the Energy and Commerce, and in addition to the Committee 
on Ways and Means, for a period to be subsequently determined by the 
Speaker, in each case for consideration of such provisions as fall within 
the jurisdiction of the committee concerned 
A BILL 
To amend title XVIII of the Social Security Act to provide 
for a voluntary outpatient prescription drug benefit program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘More Savings, More Choice Prescription Drug Act of 
2003’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
Sec. 2. Establishment of a medicare prescription drug benefit.
‘‘PART D—VOLUNTARY PRESCRIPTION DRUG BENEFIT PROGRAM 
‘‘Sec. 1860A. Benefits; eligibility; enrollment; and coverage period. 
‘‘Sec. 1860B. Requirements for qualified prescription drug coverage. 
‘‘Sec. 1860C. Beneficiary protections for qualified prescription drug coverage. 
‘‘Sec. 1860D. Requirements for prescription drug plan (PDP) sponsors; con-
tracts; establishment of standards. 
‘‘Sec. 1860E. Process for beneficiaries to select qualified prescription drug cov-
erage. 
‘‘Sec. 1860F. Premiums. 
‘‘Sec. 1860G. Premium and cost-sharing subsidies for low-income individuals. 
‘‘Sec. 1860H. Subsidies for all medicare beneficiaries through reinsurance for 
qualified prescription drug coverage. 
‘‘Sec. 1860I. Medicare Prescription Drug Account in federal Supplementary 
Medical Insurance Trust Fund. 
‘‘Sec. 1860J. Definitions; treatment of references to provisions in part C. 
‘‘Sec. 1860K. Medicare Prescription Drug Advisory Committee. 
Sec. 3. Offering 
of 
qualified 
prescription 
drug 
coverage 
under 
the 
Medicare+Choice program. 
Sec. 4. Medicaid amendments. 
Sec. 5. Medigap transition provisions.
SEC. 2. ESTABLISHMENT OF A MEDICARE PRESCRIPTION 
DRUG BENEFIT. 
(a) IN GENERAL.—Title XVIII of the Social Security 
Act is amended—
(1) by redesignating part D as part E; and 
(2) by inserting after part C the following new 
part: 
‘‘PART D—VOLUNTARY PRESCRIPTION DRUG BENEFIT 
PROGRAM 
‘‘SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND 
COVERAGE PERIOD. 
‘‘(a) PROVISION OF QUALIFIED PRESCRIPTION DRUG 
COVERAGE THROUGH ENROLLMENT IN PLANS.—Subject 
to the succeeding provisions of this part, each individual 
who is entitled to benefits under part A or is enrolled
under part B is entitled to obtain qualified prescription 
drug coverage (described in section 1860B(a)) as follows: 
‘‘(1) MEDICARE+CHOICE
PLAN.—If the indi-
vidual is eligible to enroll in a Medicare+Choice plan 
that provides qualified prescription drug coverage 
under section 1851(j), the individual may enroll in 
the plan and obtain coverage through such plan. 
‘‘(2) PRESCRIPTION DRUG PLAN.—If the indi-
vidual is not enrolled in a Medicare+Choice plan 
that provides qualified prescription drug coverage, 
the individual may enroll under this part in a pre-
scription drug plan (as defined in section 1860C(a)). 
Such individuals shall have a choice of such plans under 
section 1860E(d). 
‘‘(b) GENERAL ELECTION PROCEDURES.—
‘‘(1) IN GENERAL.—An individual may elect to 
enroll in a prescription drug plan under this part, or 
elect the option of qualified prescription drug cov-
erage under a Medicare+Choice plan under part C, 
and change such election only in such manner and 
form as may be prescribed by regulations of the Sec-
retary and only during an election period prescribed 
in or under this subsection. 
‘‘(2) ELECTION PERIODS.—
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, the election periods under this 
subsection shall be the same as the coverage 
election periods under the Medicare+Choice 
program under section 1851(e), including—
‘‘(i) annual coordinated election peri-
ods; and 
‘‘(ii) special election periods. 
In applying the last sentence of section 
1851(e)(4) (relating to discontinuance of a 
Medicare+Choice election during the first year 
of eligibility) under this subparagraph, in the 
case of an election described in such section in 
which the individual had elected or is provided 
qualified prescription drug coverage at the time 
of such first enrollment, the individual shall be 
permitted to enroll in a prescription drug plan 
under this part at the time of the election of 
coverage under the original fee-for-service plan. 
‘‘(B) INITIAL ELECTION PERIODS.—
‘‘(i) INDIVIDUALS
CURRENTLY
COV-
ERED.—In the case of an individual who is 
entitled to benefits under part A or en-
rolled under part B as of November 1,
2005, there shall be an initial election pe-
riod of 6 months beginning on that date. 
‘‘(ii) INDIVIDUAL
COVERED
IN
FU-
TURE.—In the case of an individual who is 
first entitled to benefits under part A or 
enrolled under part B after November 1, 
2005, there shall be an initial election pe-
riod which is the same as the initial enroll-
ment period under section 1837(d). 
‘‘(C) ADDITIONAL SPECIAL ELECTION PE-
RIODS.—The Secretary shall establish special 
election periods—
‘‘(i) in cases of individuals who have 
and involuntarily lose prescription drug 
coverage described in subsection (c)(2)(C); 
‘‘(ii) in cases described in section 
1837(h) (relating to errors in enrollment), 
in the same manner as such section applies 
to part B; and 
‘‘(iii) in the case of an individual who 
meets such exceptional conditions (includ-
ing conditions recognized under section 
1851(d)(4)(D)) as the Secretary may pro-
vide.
‘‘(c) GUARANTEED ISSUE; COMMUNITY RATING; AND 
NONDISCRIMINATION.—
‘‘(1) GUARANTEED ISSUE.—
‘‘(A) IN GENERAL.—An eligible individual 
who is eligible to elect qualified prescription 
drug coverage under a prescription drug plan or 
Medicare+Choice plan at a time during which 
elections are accepted under this part with re-
spect to the plan shall not be denied enrollment 
based on any health status-related factor (de-
scribed in section 2702(a)(1) of the Public 
Health Service Act) or any other factor. 
‘‘(B) 
MEDICARE+CHOICE
LIMITATIONS 
PERMITTED.—The provisions of paragraphs (2) 
and (3) (other than subparagraph (C)(i), relat-
ing to default enrollment) of section 1851(g) 
(relating to priority and limitation on termi-
nation of election) shall apply to PDP sponsors 
under this subsection. 
‘‘(2) COMMUNITY-RATED PREMIUM.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who maintains (as determined under sub-
paragraph (C)) continuous prescription drug 
coverage since first qualifying to elect prescrip-
tion drug coverage under this part, a PDP
sponsor or Medicare+Choice organization offer-
ing 
a 
prescription 
drug 
plan 
or 
Medicare+Choice plan that provides qualified 
prescription drug coverage and in which the in-
dividual is enrolled may not deny, limit, or con-
dition the coverage or provision of covered pre-
scription drug benefits or increase the premium 
under the plan based on any health status-re-
lated factor described in section 2702(a)(1) of 
the Public Health Service Act or any other fac-
tor. 
‘‘(B) LATE
ENROLLMENT
PENALTY.—In 
the case of an individual who does not maintain 
such continuous prescription drug coverage, a 
PDP sponsor or Medicare+Choice organization 
may (notwithstanding any provision in this 
title) increase the premium otherwise applicable 
or impose a pre-existing condition exclusion 
with respect to qualified prescription drug cov-
erage in a manner that reflects additional actu-
arial risk involved. Such a risk shall be estab-
lished through an appropriate actuarial opinion 
of the type described in subparagraphs (A) 
through (C) of section 2103(c)(4).
‘‘(C) CONTINUOUS
PRESCRIPTION
DRUG 
COVERAGE.—An individual is considered for 
purposes of this part to be maintaining contin-
uous prescription drug coverage on and after a 
date if the individual establishes that there is 
no period of 63 days or longer on and after 
such date (beginning not earlier than January 
1, 2006) during all of which the individual did 
not have any of the following prescription drug 
coverage: 
‘‘(i) COVERAGE UNDER PRESCRIPTION 
DRUG
PLAN
OR
MEDICARE+CHOICE 
PLAN.—Qualified prescription drug cov-
erage under a prescription drug plan or 
under a Medicare+Choice plan. 
‘‘(ii) MEDICAID PRESCRIPTION DRUG 
COVERAGE.—Prescription drug coverage 
under a medicaid plan under title XIX, in-
cluding through the Program of All-inclu-
sive Care for the Elderly (PACE) under 
section 1934, through a social health main-
tenance organization (referred to in section 
4104(c) of the Balanced Budget Act of 
1997), or through a Medicare+Choice 
project that demonstrates the application
of capitation payment rates for frail elderly 
medicare beneficiaries through the use of a 
interdisciplinary team and through the 
provision of primary care services to such 
beneficiaries by means of such a team at 
the nursing facility involved. 
‘‘(iii) PRESCRIPTION DRUG COVERAGE 
UNDER GROUP HEALTH PLAN.—Any out-
patient prescription drug coverage under a 
group health plan, including a health bene-
fits plan under the Federal Employees 
Health Benefit Plan under chapter 89 of 
title 5, United States Code, and a qualified 
retiree prescription drug plan as defined in 
section 1860H(e)(1). 
‘‘(iv) PRESCRIPTION DRUG COVERAGE 
UNDER
CERTAIN
MEDIGAP
POLICIES.—
Coverage under a medicare supplemental 
policy under section 1882 that provides 
benefits for prescription drugs (whether or 
not such coverage conforms to the stand-
ards for packages of benefits under section 
1882(p)(1)), but only if the policy was in 
effect on January 1, 2006, and only until 
the date such coverage is terminated.
‘‘(v) STATE PHARMACEUTICAL ASSIST-
ANCE PROGRAM.—Coverage of prescription 
drugs under a State pharmaceutical assist-
ance program. 
‘‘(vi) VETERANS’ COVERAGE OF PRE-
SCRIPTION DRUGS.—Coverage of prescrip-
tion drugs for veterans under chapter 17 
of title 38, United States Code. 
‘‘(D) CERTIFICATION.—For purposes of 
carrying out this paragraph, the certifications 
of the type described in sections 2701(e) of the 
Public Health Service Act and in section 
9801(e) of the Internal Revenue Code shall also 
include a statement for the period of coverage 
of whether the individual involved had prescrip-
tion drug coverage described in subparagraph 
(C). 
‘‘(E) CONSTRUCTION.—Nothing in this 
section shall be construed as preventing the 
disenrollment of an individual from a prescrip-
tion drug plan or a Medicare+Choice plan 
based on the termination of an election de-
scribed in section 1851(g)(3), including for non-
payment of premiums or for other reasons spec-
ified in subsection (d)(3), which takes into ac-
count a grace period described in section 
1851(g)(3)(B)(i). 
‘‘(3) NONDISCRIMINATION.—A PDP sponsor of-
fering a prescription drug plan shall not establish a 
service area in a manner that would discriminate 
based on health or economic status of potential en-
rollees. 
‘‘(d) EFFECTIVE DATE OF ELECTIONS.—
‘‘(1) IN GENERAL.—Except as provided in this 
section, the Secretary shall provide that elections 
under subsection (b) take effect at the same time as 
the Secretary provides that similar elections under 
section 1851(e) take effect under section 1851(f). 
‘‘(2) NO ELECTION EFFECTIVE BEFORE 2006.—
In no case shall any election take effect before Janu-
ary 1, 2006. 
‘‘(3) TERMINATION.—The Secretary shall pro-
vide for the termination of an election in the case 
of—
‘‘(A) termination of coverage under part B 
(in the case of an individual not entitled to ben-
efits under part A); and 
‘‘(B) termination of elections described in 
section 1851(g)(3) (including failure to pay re-
quired premiums).
‘‘SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIP-
TION DRUG COVERAGE. 
‘‘(a) REQUIREMENTS.—
‘‘(1) IN GENERAL.—For purposes of this part 
and part C, the term ‘qualified prescription drug 
coverage’ means either of the following: 
‘‘(A) STANDARD COVERAGE WITH ACCESS 
TO
NEGOTIATED
PRICES.—Standard coverage 
(as defined in subsection (b)) and access to ne-
gotiated prices under subsection (d). 
‘‘(B) ACTUARIALLY
EQUIVALENT
COV-
ERAGE
WITH
ACCESS
TO
NEGOTIATED 
PRICES.—Coverage of covered outpatient drugs 
which meets the alternative coverage require-
ments of subsection (c) and access to negotiated 
prices under subsection (d). 
‘‘(2) PERMITTING
ADDITIONAL
OUTPATIENT 
PRESCRIPTION DRUG COVERAGE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), nothing in this part shall be con-
strued as preventing qualified prescription drug 
coverage from including coverage of covered 
outpatient drugs that exceeds the coverage re-
quired under paragraph (1), but any such addi-
tional coverage shall be limited to coverage of 
covered outpatient drugs.
‘‘(B) 
DISAPPROVAL
AUTHORITY.—The 
Secretary shall review the offering of qualified 
prescription drug coverage under this part or 
part C. If the Secretary finds that, in the case 
of a qualified prescription drug coverage under 
a prescription drug plan or a Medicare+Choice 
plan, that the organization or sponsor offering 
the coverage is purposefully engaged in activi-
ties intended to result in favorable selection of 
those eligible medicare beneficiaries obtaining 
coverage through the plan, the Secretary may 
terminate the contract with the sponsor or or-
ganization under this part or part C. 
‘‘(3) APPLICATION OF SECONDARY PAYOR PRO-
VISIONS.—The provisions of section 1852(a)(4) shall 
apply under this part in the same manner as they 
apply under part C. 
‘‘(b) STANDARD COVERAGE.—For purposes of this 
part, the ‘standard coverage’ is coverage of covered out-
patient drugs (as defined in subsection (f)) that meets the 
following requirements: 
‘‘(1) DEDUCTIBLE.—The coverage has an an-
nual deductible that is equal to $100.
‘‘(2) LIMITS ON COST-SHARING.—The coverage 
has cost-sharing (for incurred costs above the annual 
deductible specified in paragraph (1))—
‘‘(A) of 25 percent to the extent that the 
incurred expenses (including incurred out-of-
pocket expenses) for covered outpatient drugs 
under this part in the year do not exceed 
$2,000; 
‘‘(B) of 50 percent to the extent such in-
curred expenses exceed $2,000 but the true out-
of-pocket expenses do not exceed $5,000; and 
‘‘(C) of 0 percent to the extent such true 
out-of-pocket expenses exceed $5,000. 
‘‘(3) OUT-OF-POCKET
EXPENSES
DEFINED.—
For purposes of paragraph (2), the term ‘out-of-
pocket expenses’ means expenses incurred as a re-
sult of the application of the deductible under para-
graph (1) and the coinsurance required under this 
subsection. 
‘‘(4) TRUE
OUT-OF-POCKET
EXPENSES
DE-
FINED.—For purposes of paragraph (2), the term 
‘true out-of-pocket expenses’ means out-of-pocket ex-
penses insofar as there is no third party reimburse-
ment made. 
‘‘(5) INFLATION ADJUSTMENT.—
‘‘(A) IN GENERAL.—In the case of any cal-
endar year beginning after 2006, each of the 
dollar amounts in paragraphs (1) and (2) shall 
be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the percentage (if any) by which 
the amount of average per capita expendi-
tures under this part in the preceding cal-
endar year exceeds the amount of such ex-
penditures in 2006. 
‘‘(B) ROUNDING.—Any amount determined 
under paragraph (1) or (2) that is not a mul-
tiple of $5 or $25, respectively, shall be round-
ed to the nearest multiple of $5 or $25, respec-
tively. 
‘‘(c) ALTERNATIVE COVERAGE REQUIREMENTS.—A 
prescription drug plan or Medicare+Choice plan may pro-
vide a different prescription drug benefit design from the 
standard coverage described in subsection (b) so long as 
the following requirements are met: 
‘‘(1) ASSURING AT LEAST ACTUARIALLY EQUIV-
ALENT COVERAGE.—
‘‘(A) ASSURING
EQUIVALENT
VALUE
OF 
TOTAL COVERAGE.—The actuarial value of the 
total coverage (as determined under subsection
(e)) is at least equal to the actuarial value (as 
so determined) of standard coverage. 
‘‘(B) 
ASSURING
EQUIVALENT
UNSUB-
SIDIZED
VALUE
OF
COVERAGE.—The unsub-
sidized value of the coverage is at least equal to 
the unsubsidized value of standard coverage. 
For purposes of this subparagraph, the unsub-
sidized value of coverage is the amount by 
which the actuarial value of the coverage (as 
determined under subsection (e)) exceeds the 
actuarial value of the reinsurance subsidy pay-
ments under section 1860H with respect to 
such coverage. 
‘‘(C) ASSURING STANDARD PAYMENT FOR 
COSTS IN INITIAL BENEFIT RANGE.—The cov-
erage is designed, based upon an actuarially 
representative pattern of utilization (as deter-
mined under subsection (e)), to provide for the 
payment, with respect to costs incurred in the 
range described in subsection (b)(2)(A), of an 
amount equal to at least 75 percent of the ap-
plicable dollar amount under such subsection 
(as adjusted under subsection (b)(5)). 
‘‘(2) LIMITATION ON TRUE OUT-OF-POCKET EX-
PENDITURES
BY
BENEFICIARIES.—The coverage
provides the limitation on true out-of-pocket expend-
itures by beneficiaries described in subsection 
(b)(2)(C). 
‘‘(d) ACCESS
TO
NEGOTIATED
PRICES.—Under 
qualified prescription drug coverage offered by a PDP 
sponsor or a Medicare+Choice organization, the sponsor 
or organization shall provide beneficiaries with access to 
negotiated prices (including applicable discounts) used for 
payment for covered outpatient drugs, regardless of the 
fact that no benefits may be payable under the coverage 
with respect to such drugs because of the application of 
cost-sharing or an initial coverage limit (described in sub-
section (b)(3)). Insofar as a State elects to provide medical 
assistance under title XIX for a drug based on the prices 
negotiated by a prescription drug plan under this part, 
the requirements of section 1927 shall not apply to such 
drugs. 
‘‘(e) ACTUARIAL VALUATION; DETERMINATION OF 
ANNUAL PERCENTAGE INCREASES.—
‘‘(1) PROCESSES.—For purposes of this section, 
the Secretary shall establish processes and meth-
ods—
‘‘(A) for determining the actuarial valu-
ation of prescription drug coverage, including—
‘‘(i) an actuarial valuation of standard 
coverage and of the reinsurance subsidy 
payments under section 1860H; 
‘‘(ii) the use of generally accepted ac-
tuarial principles and methodologies; and 
‘‘(iii) applying the same methodology 
for determinations of alternative coverage 
under subsection (c) as is used with re-
spect to determinations of standard cov-
erage under subsection (b); and 
‘‘(B) for determining annual percentage in-
creases described in subsection (b)(5). 
‘‘(2) USE OF OUTSIDE ACTUARIES.—Under the 
processes under paragraph (1)(A), PDP sponsors 
and Medicare+Choice organizations may use actu-
arial opinions certified by independent, qualified ac-
tuaries to establish actuarial values. 
‘‘(f) COVERED OUTPATIENT DRUGS DEFINED.—
‘‘(1) IN GENERAL.—Except as provided in this 
subsection, for purposes of this part, the term ‘cov-
ered outpatient drug’ means—
‘‘(A) a drug that may be dispensed only 
upon a prescription and that is described in 
subparagraph (A)(i) or (A)(ii) of section 
1927(k)(2); or
‘‘(B) a biological product described in 
clauses (i) through (iii) of subparagraph (B) of 
such section or insulin described in subpara-
graph (C) of such section, 
and such term includes any use of a covered out-
patient drug for a medically accepted indication (as 
defined in section 1927(k)(6)). 
‘‘(2) EXCLUSIONS.—
‘‘(A) IN GENERAL.—Such term does not 
include drugs or classes of drugs, or their med-
ical uses, which may be excluded from coverage 
or 
otherwise 
restricted 
under 
section 
1927(d)(2), other than subparagraph (E) there-
of (relating to smoking cessation agents) and 
except to the extent otherwise specifically pro-
vided by the Secretary with respect to a drug 
in any of such classes. 
‘‘(B) AVOIDANCE
OF
DUPLICATE
COV-
ERAGE.—A drug prescribed for an individual 
that would otherwise be a covered outpatient 
drug under this part shall not be so considered 
if payment for such drug is available under part 
A or B (but shall be so considered if such pay-
ment is not available because benefits under 
part A or B have been exhausted), without re-
gard to whether the individual is entitled to 
benefits under part A or enrolled under part B. 
‘‘(3) APPLICATION
OF
FORMULARY
RESTRIC-
TIONS.—A drug prescribed for an individual that 
would otherwise be a covered outpatient drug under 
this part shall not be so considered under a plan if 
the plan excludes the drug under a formulary that 
meets the requirements of section 1860C(f)(2) (in-
cluding providing an appeal process). 
‘‘(4) APPLICATION
OF
GENERAL
EXCLUSION 
PROVISIONS.—A 
prescription 
drug 
plan 
or 
Medicare+Choice plan may exclude from qualified 
prescription drug coverage any covered outpatient 
drug—
‘‘(A) for which payment would not be 
made if section 1862(a) applied to part D; or 
‘‘(B) which are not prescribed in accord-
ance with the plan or this part. 
Such exclusions are determinations subject to recon-
sideration and appeal pursuant to section 1860C(f). 
‘‘SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED 
PRESCRIPTION DRUG COVERAGE. 
‘‘(a) GUARANTEED
ISSUE
COMMUNITY-RELATED 
PREMIUMS AND NONDISCRIMINATION.—For provisions re-
quiring guaranteed issue, community-rated premiums, and
nondiscrimination, see sections 1860A(c)(1), 1860A(c)(2), 
and 1860F(b). 
‘‘(b) DISSEMINATION OF INFORMATION.—
‘‘(1) GENERAL INFORMATION.—A PDP sponsor 
shall disclose, in a clear, accurate, and standardized 
form to each enrollee with a prescription drug plan 
offered by the sponsor under this part at the time 
of enrollment and at least annually thereafter, the 
information described in section 1852(c)(1) relating 
to such plan. Such information includes the fol-
lowing: 
‘‘(A) Access to covered outpatient drugs, 
including access through pharmacy networks. 
‘‘(B) How any formulary used by the spon-
sor functions. 
‘‘(C) Co-payments and deductible require-
ments. 
‘‘(D) Grievance and appeals procedures. 
‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL 
COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA-
TION.—Upon request of an individual eligible to en-
roll under a prescription drug plan, the PDP spon-
sor shall provide the information described in section 
1852(c)(2) (other than subparagraph (D)) to such 
individual.
‘‘(3) RESPONSE TO BENEFICIARY QUESTIONS.—
Each PDP sponsor offering a prescription drug plan 
shall have a mechanism for providing specific infor-
mation to enrollees upon request. The sponsor shall 
make available, through an Internet website and in 
writing upon request, information on specific 
changes in its formulary. 
‘‘(4) CLAIMS INFORMATION.—Each PDP spon-
sor offering a prescription drug plan must furnish to 
enrolled individuals in a form easily understandable 
to such individuals an explanation of benefits (in ac-
cordance with section 1806(a) or in a comparable 
manner) and a notice of the benefits in relation to 
initial coverage limit and annual out-of-pocket limit 
for the current year, whenever prescription drug 
benefits are provided under this part (except that 
such notice need not be provided more often than 
monthly). 
‘‘(c) ACCESS TO COVERED BENEFITS.—
‘‘(1) ASSURING PHARMACY ACCESS.—The PDP 
sponsor of the prescription drug plan shall secure 
the participation of sufficient numbers of pharmacies 
(which may include mail order pharmacies) to en-
sure convenient access (including adequate emer-
gency access) for enrolled beneficiaries, in accord-
ance with standards established under section 
1860D(e) that ensure such convenient access. Noth-
ing in this paragraph shall be construed as requiring 
the participation of (or permitting the exclusion of) 
all pharmacies in any area under a plan. 
‘‘(2) PREFERRED PHARMACY NETWORKS.—
‘‘(A) IN
GENERAL.—If a PDP sponsor 
uses a preferred pharmacy network to deliver 
benefits under this part, such network shall 
meet minimum access standards established by 
the Secretary. 
‘‘(B) STANDARDS.—In establishing stand-
ards under subparagraph (A), the Secretary 
shall take into account reasonable distances to 
pharmacy services in both urban and rural 
areas. 
‘‘(C) ASSURING PHARMACY ACCESS.—Such 
standards shall require that each PDP sponsor 
include in any preferred pharmacy network any 
pharmacy that agrees to the terms and condi-
tions established by the sponsor for such par-
ticipation in such network. 
‘‘(3) ACCESS TO NEGOTIATED PRICES FOR PRE-
SCRIPTION DRUGS.—The PDP sponsor of a prescrip-
tion drug plan shall issue such a card that may be
used by an enrolled beneficiary to assure access to 
negotiated prices under section 1860B(d) for the 
purchase of prescription drugs for which coverage is 
not otherwise provided under the prescription drug 
plan. 
‘‘(4) REQUIREMENTS
ON
DEVELOPMENT
AND 
APPLICATION OF FORMULARIES.—Insofar as a PDP 
sponsor of a prescription drug plan uses a for-
mulary, the following requirements must be met: 
‘‘(A) FORMULARY COMMITTEE.—The spon-
sor must establish a pharmaceutical and thera-
peutic committee that develops the formulary. 
Such committee shall include at least one physi-
cian and at least one pharmacist. 
‘‘(B) INCLUSION OF DRUGS IN ALL THERA-
PEUTIC CATEGORIES.—The formulary must in-
clude drugs within all therapeutic categories 
and classes of covered outpatient drugs (al-
though not necessarily for all drugs within such 
categories and classes). 
‘‘(C) APPEALS AND EXCEPTIONS TO APPLI-
CATION.—The PDP sponsor must have, as part 
of the appeals process under subsection (f)(2), 
a process for appeals for denials of coverage 
based on such application of the formulary.
‘‘(d) COST AND UTILIZATION MANAGEMENT; QUAL-
ITY ASSURANCE; MEDICATION THERAPY MANAGEMENT 
PROGRAM.—
‘‘(1) IN
GENERAL.—The PDP sponsor shall 
have in place—
‘‘(A) an effective cost and drug utilization 
management program, including appropriate in-
centives to use generic drugs, when appropriate; 
‘‘(B) quality assurance measures and sys-
tems to reduce medical errors and adverse drug 
interactions, including a medication therapy 
management program described in paragraph 
(2); and 
‘‘(C) a program to control fraud, abuse, 
and waste. 
‘‘(2) MEDICATION THERAPY MANAGEMENT PRO-
GRAM.—
‘‘(A) IN GENERAL.—A medication therapy 
management program described in this para-
graph is a program of drug therapy manage-
ment and medication administration that is de-
signed to assure that covered outpatient drugs 
under the prescription drug plan are appro-
priately used to achieve therapeutic goals and
reduce the risk of adverse events, including ad-
verse drug interactions. 
‘‘(B) ELEMENTS.—Such program may in-
clude—
‘‘(i) 
enhanced 
beneficiary 
under-
standing of such appropriate use through 
beneficiary 
education, 
counseling, 
and 
other appropriate means; and 
‘‘(ii) increased beneficiary adherence 
with 
prescription 
medication 
regimens 
through medication refill reminders, special 
packaging, and other appropriate means. 
‘‘(C) DEVELOPMENT OF PROGRAM IN CO-
OPERATION
WITH
LICENSED
PHARMACISTS.—
The program shall be developed in cooperation 
with licensed pharmacists and physicians. 
‘‘(D) 
CONSIDERATIONS
IN
PHARMACY 
FEES.—The PDP sponsor of a prescription 
drug program shall take into account, in estab-
lishing fees for pharmacists and others pro-
viding services under the medication therapy 
management program, the resources and time 
used in implementing the program. 
‘‘(3) TREATMENT OF ACCREDITATION.—Section 
1852(e)(4) (relating to treatment of accreditation)
shall apply to prescription drug plans under this 
part with respect to the following requirements, in 
the same manner as they apply to Medicare+Choice 
plans under part C with respect to the requirements 
described in a clause of section 1852(e)(4)(B): 
‘‘(A) Paragraph (1) (including quality as-
surance), including medication therapy manage-
ment program under paragraph (2). 
‘‘(B) Subsection (c)(1) (relating to access 
to covered benefits). 
‘‘(C) Subsection (g) (relating to confiden-
tiality and accuracy of enrollee records). 
‘‘(4) PUBLIC DISCLOSURE OF PHARMACEUTICAL 
PRICES FOR GENERIC EQUIVALENT DRUGS.—Each 
PDP sponsor shall provide that each pharmacy or 
other dispenser that arranges for the dispensing of 
a covered outpatient drug shall inform the bene-
ficiary at the time of purchase of the drug of any 
differential between the price of the prescribed drug 
to the enrollee and the price of the lowest cost ge-
neric drug that is therapeutically and pharmaceuti-
cally equivalent and bioequivalent. 
‘‘(e) GRIEVANCE MECHANISM.—Each PDP sponsor 
shall provide meaningful procedures for hearing and re-
solving grievances between the organization (including any
entity or individual through which the sponsor provides 
covered benefits) and enrollees with prescription drug 
plans of the sponsor under this part in accordance with 
section 1852(f). 
‘‘(f) COVERAGE
DETERMINATIONS, RECONSIDER-
ATIONS, AND APPEALS.—
‘‘(1) IN GENERAL.—A PDP sponsor shall meet 
the requirements of section 1852(g) with respect to 
covered benefits under the prescription drug plan it 
offers under this part in the same manner as such 
requirements apply to a Medicare+Choice organiza-
tion with respect to benefits it offers under a 
Medicare+Choice plan under part C. 
‘‘(2) APPEALS
OF
FORMULARY
DETERMINA-
TIONS.—Under the appeals process under paragraph 
(1) an individual who is enrolled in a prescription 
drug plan offered by a PDP sponsor may appeal to 
obtain coverage for a covered outpatient drug that 
is not on the formulary of the sponsor (established 
under subsection (c)) if the prescribing physician de-
termines that the therapeutically similar drug that is 
on the formulary is not as effective for the enrollee 
or has significant adverse effects for the enrollee. 
‘‘(g) CONFIDENTIALITY
AND ACCURACY
OF EN-
ROLLEE RECORDS.—A PDP sponsor shall meet the re-
quirements of section 1852(h) with respect to enrollees 
under this part in the same manner as such requirements 
apply to a Medicare+Choice organization with respect to 
enrollees under part C. 
‘‘SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG 
PLAN (PDP) SPONSORS; CONTRACTS; ESTAB-
LISHMENT OF STANDARDS. 
‘‘(a) GENERAL REQUIREMENTS.—Each PDP sponsor 
of a prescription drug plan shall meet the following re-
quirements: 
‘‘(1) LICENSURE.—Subject to subsection (c), 
the sponsor is organized and licensed under State 
law as a risk-bearing entity eligible to offer health 
insurance or health benefits coverage in each State 
in which it offers a prescription drug plan. 
‘‘(2) ASSUMPTION OF FULL FINANCIAL RISK.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) and section 1860E(d)(2), the entity 
assumes full financial risk on a prospective 
basis for qualified prescription drug coverage 
that it offers under a prescription drug plan 
and that is not covered under reinsurance 
under section 1860H.
‘‘(B) REINSURANCE PERMITTED.—The en-
tity may obtain insurance or make other ar-
rangements for the cost of coverage provided to 
any enrolled member under this part. 
‘‘(3) SOLVENCY FOR UNLICENSED SPONSORS.—
In the case of a sponsor that is not described in 
paragraph (1), the sponsor shall meet solvency 
standards established by the Secretary under sub-
section (d). 
‘‘(b) CONTRACT REQUIREMENTS.—
‘‘(1) IN
GENERAL.—The Secretary shall not 
permit the election under section 1860A of a pre-
scription drug plan offered by a PDP sponsor under 
this part, and the sponsor shall not be eligible for 
payments under section 1860G or 1860H, unless the 
Secretary has entered into a contract under this sub-
section with the sponsor with respect to the offering 
of such plan. Such a contract with a sponsor may 
cover more than one prescription drug plan. Such 
contract shall provide that the sponsor agrees to 
comply with the applicable requirements and stand-
ards of this part and the terms and conditions of 
payment as provided for in this part. 
‘‘(2) NEGOTIATION
REGARDING
TERMS
AND 
CONDITIONS.—The Secretary shall have the same 
authority to negotiate the terms and conditions of 
prescription drug plans under this part as the Direc-
tor of the Office of Personnel Management has with 
respect to health benefits plans under chapter 89 of 
title 5, United States Code. In negotiating the terms 
and conditions regarding premiums for which infor-
mation is submitted under section 1860F(a)(2), the 
Secretary shall take into account the reinsurance 
subsidy payments under section 1860H and the ad-
justed community rate (as defined in section 
1854(f)(3)) for the benefits covered. 
‘‘(3) 
INCORPORATION
OF
CERTAIN 
MEDICARE+CHOICE
CONTRACT
REQUIREMENTS.—
The following provisions of section 1857 shall apply, 
subject to subsection (c)(5), to contracts under this 
section in the same manner as they apply to con-
tracts under section 1857(a): 
‘‘(A) 
MINIMUM
ENROLLMENT.—Para-
graphs (1) and (3) of section 1857(b). 
‘‘(B) CONTRACT PERIOD AND EFFECTIVE-
NESS.—Paragraphs (1) through (3) and (5) of 
section 1857(c). 
‘‘(C) PROTECTIONS AGAINST FRAUD AND 
BENEFICIARY PROTECTIONS.—Section 1857(d). 
‘‘(D) ADDITIONAL
CONTRACT
TERMS.—
Section 1857(e); except that in applying section 
1857(e)(2) under this part—
‘‘(i) such section shall be applied sepa-
rately to costs relating to this part (from 
costs under part C); 
‘‘(ii) in no case shall the amount of 
the fee established under this subpara-
graph for a plan exceed 20 percent of the 
maximum amount of the fee that may be 
established under subparagraph (B) of 
such section; and 
‘‘(iii) no fees shall be applied under 
this 
subparagraph 
with 
respect 
to 
Medicare+Choice plans. 
‘‘(E) INTERMEDIATE SANCTIONS.—Section 
1857(g). 
‘‘(F) PROCEDURES
FOR
TERMINATION.—
Section 1857(h). 
‘‘(4) RULES
OF
APPLICATION
FOR
INTER-
MEDIATE
SANCTIONS.—In 
applying 
paragraph 
(3)(E)—
‘‘(A) 
the 
reference 
in 
section 
1857(g)(1)(B) to section 1854 is deemed a ref-
erence to this part; and 
‘‘(B) 
the 
reference 
in 
section 
1857(g)(1)(F) to section 1852(k)(2)(A)(ii) shall 
not be applied.
‘‘(c) WAIVER OF CERTAIN REQUIREMENTS TO EX-
PAND CHOICE.—
‘‘(1) IN GENERAL.—In the case of an entity 
that seeks to offer a prescription drug plan in a 
State, the Secretary shall waive the requirement of 
subsection (a)(1) that the entity be licensed in that 
State if the Secretary determines, based on the ap-
plication and other evidence presented to the Sec-
retary, that any of the grounds for approval of the 
application described in paragraph (2) has been met. 
‘‘(2) GROUNDS FOR APPROVAL.—The grounds 
for approval under this paragraph are the grounds 
for approval described in subparagraph (B), (C), 
and (D) of section 1855(a)(2), and also include the 
application by a State of any grounds other than 
those required under Federal law. 
‘‘(3) APPLICATION OF WAIVER PROCEDURES.—
With respect to an application for a waiver (or a 
waiver granted) under this subsection, the provisions 
of subparagraphs (E), (F), and (G) of section 
1855(a)(2) shall apply. 
‘‘(4) LICENSURE DOES NOT SUBSTITUTE FOR 
OR CONSTITUTE CERTIFICATION.—The fact that an 
entity is licensed in accordance with subsection 
(a)(1) does not deem the entity to meet other re-
quirements imposed under this part for a PDP spon-
sor. 
‘‘(5) REFERENCES TO CERTAIN PROVISIONS.—
For purposes of this subsection, in applying provi-
sions of section 1855(a)(2) under this subsection to 
prescription drug plans and PDP sponsors—
‘‘(A) any reference to a waiver application 
under section 1855 shall be treated as a ref-
erence to a waiver application under paragraph 
(1); and 
‘‘(B) any reference to solvency standards 
shall be treated as a reference to solvency 
standards established under subsection (d). 
‘‘(d) SOLVENCY STANDARDS
FOR NON-LICENSED 
SPONSORS.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish, by not later than October 1, 2004, financial 
solvency and capital adequacy standards that an en-
tity that does not meet the requirements of sub-
section (a)(1) must meet to qualify as a PDP spon-
sor under this part. 
‘‘(2) COMPLIANCE
WITH
STANDARDS.—Each 
PDP sponsor that is not licensed by a State under 
subsection (a)(1) and for which a waiver application 
has been approved under subsection (c) shall meet
solvency and capital adequacy standards established 
under paragraph (1). The Secretary shall establish 
certification procedures for such PDP sponsors with 
respect to such solvency standards in the manner de-
scribed in section 1855(c)(2). 
‘‘(e) OTHER STANDARDS.—The Secretary shall es-
tablish by regulation other standards (not described in 
subsection (d)) for PDP sponsors and plans consistent 
with, and to carry out, this part. The Secretary shall pub-
lish such regulations by October 1, 2004. In order to carry 
out this requirement in a timely manner, the Secretary 
may promulgate regulations that take effect on an interim 
basis, after notice and pending opportunity for public com-
ment. 
‘‘(f) RELATION TO STATE LAWS.—
‘‘(1) IN GENERAL.—The standards established 
under this section shall supersede any State law or 
regulation (including standards described in para-
graph (2)) with respect to prescription drug plans 
which are offered by PDP sponsors under this part 
to the extent such law or regulation is inconsistent 
with such standards. 
‘‘(2) 
STANDARDS
SPECIFICALLY
SUPER-
SEDED.—State standards relating to the following 
are superseded under this subsection:
‘‘(A) Benefit requirements. 
‘‘(B) Requirements relating to inclusion or 
treatment of providers. 
‘‘(C) Coverage determinations (including 
related appeals and grievance processes). 
‘‘(D) Establishment and regulation of pre-
miums. 
‘‘(3) PROHIBITION OF STATE IMPOSITION OF 
PREMIUM TAXES.—No State may impose a premium 
tax or similar tax with respect to premiums paid to 
PDP sponsors for prescription drug plans under this 
part, or with respect to any payments made to such 
a sponsor by the Secretary under this part. 
‘‘SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT 
QUALIFIED PRESCRIPTION DRUG COVERAGE. 
‘‘(a) IN GENERAL.—The Secretary shall establish, 
based upon and consistent with the procedures used under 
part C (including section 1851), a process for the selection 
of the prescription drug plan or Medicare+Choice plan 
which offer qualified prescription drug coverage through 
which eligible individuals elect qualified prescription drug 
coverage under this part. 
‘‘(b) ELEMENTS.—Such process shall include the fol-
lowing:
‘‘(1) Annual, coordinated election periods, in 
which such individuals can change the qualifying 
plans through which they obtain coverage, in accord-
ance with section 1860A(b)(2). 
‘‘(2) Active dissemination of information to pro-
mote an informed selection among qualifying plans 
based upon price, quality, and other features, in the 
manner described in (and in coordination with) sec-
tion 1851(d), including the provision of annual com-
parative information, maintenance of a toll-free hot-
line, and the use of non-Federal entities. 
‘‘(3) Coordination of elections through filing 
with a Medicare+Choice organization or a PDP 
sponsor, in the manner described in (and in coordi-
nation with) section 1851(c)(2). 
‘‘(c) MEDICARE+CHOICE ENROLLEE IN PLAN OF-
FERING PRESCRIPTION DRUG COVERAGE MAY ONLY OB-
TAIN BENEFITS THROUGH
THE PLAN.—An individual 
who is enrolled under a Medicare+Choice plan that offers 
qualified prescription drug coverage may only elect to re-
ceive qualified prescription drug coverage under this part 
through such plan. 
‘‘(d) ASSURING ACCESS TO A CHOICE OF QUALIFIED 
PRESCRIPTION DRUG COVERAGE.—
‘‘(d) ADMINISTRATION OF SUBSIDY PROGRAM.—The 
Secretary 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 Secretary provides for a notification of 
the PDP sponsor or Medicare+Choice organization 
involved that the individual is eligible for a subsidy 
and the amount of the subsidy under subsection (a); 
‘‘(2) the sponsor or organization involved re-
duces the premiums or cost-sharing otherwise im-
posed by the amount of the applicable subsidy and 
submits to the Secretary information on the amount 
of such reduction; and 
‘‘(3) the Secretary 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 sub-
sidies and with appropriate adjustments to reflect dif-
ferences in the risks actually involved. 
‘‘(e) RELATION TO MEDICAID PROGRAM.—
‘‘(4) AVAILABILITY
OF
PREMIUM
AND
COST-
SHARING SUBSIDIES FOR LOW-INCOME ENROLLEES 
AND REINSURANCE SUBSIDY PAYMENTS FOR ORGA-
NIZATIONS.—For provisions—
‘‘(A) providing premium and cost-sharing 
subsidies to low-income individuals receiving 
qualified prescription drug coverage through a 
Medicare+Choice plan, see section 1860G; and 
‘‘(B) providing a Medicare+Choice organi-
zation with reinsurance subsidy payments for 
providing qualified prescription drug coverage 
under this part, see section 1860H. 
‘‘(5) SPECIFICATION OF SEPARATE AND STAND-
ARD PREMIUM.—
‘‘(A) IN GENERAL.—For purposes of ap-
plying section 1854 and section 1860G(b)(2)(B) 
with respect to qualified prescription drug cov-
erage offered under this subsection under a 
plan, the Medicare+Choice organization shall 
compute and publish the following: 
‘‘(i) SEPARATE
PRESCRIPTION
DRUG 
PREMIUM.—A premium for prescription 
drug benefits that constitute qualified pre-
scription drug coverage that is separate 
from other coverage under the plan. Such