I 
108TH CONGRESS 
1ST SESSION H. R. 1568
To amend part B of title XVIII of the Social Security Act to provide 
for a prescription drug benefit with a high deductible at no additional 
premium and access to discount prices on drugs and to provide for 
the operation of such benefit without a deductible for certain low-income 
Medicare beneficiaries. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 2, 2003
Mr. DOOLEY of California (for himself, Mrs. TAUSCHER, Mr. KIND, Mr. 
DAVIS of Florida, Mr. SMITH of Washington, Mr. STENHOLM, Mr. EMAN-
UEL, Mr. COOPER, Mr. HILL, Mr. FORD, Mr. PETERSON of Minnesota, 
Mr. CARDOZA, Mr. CASE, Mr. CRAMER, Mr. MOORE, Ms. HARMAN, Mr. 
MILLER of North Carolina, Mr. DAVIS of Alabama, Mrs. MCCARTHY of 
New York, Mr. ISRAEL, Mr. WU, Mr. MARSHALL, Mr. LUCAS of Ken-
tucky, Mr. MATHESON, and Mr. LARSEN of Washington) introduced the 
following bill; which was referred to the Committee on Energy and Com-
merce, and in addition to the Committee on Ways and Means, for a pe-
riod to be subsequently determined by the Speaker, in each case for con-
sideration of such provisions as fall within the jurisdiction of the com-
mittee concerned 
A BILL 
To amend part B of title XVIII of the Social Security 
Act to provide for a prescription drug benefit with a 
high deductible at no additional premium and access 
to discount prices on drugs and to provide for the oper-
ation of such benefit without a deductible for certain 
low-income Medicare beneficiaries.
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 
‘‘Medicare Rx Now Act of 2003’’. 
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this 
Act an amendment is expressed in terms of an amendment 
to or repeal of a section or other provision, the reference 
shall be considered to be made to that section or other 
provision of the Social Security Act. 
(c) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
Sec. 2. Purpose. 
TITLE I—PART B DRUG BENEFIT WITH HIGH DEDUCTIBLE AND 
NO PREMIUM 
Sec. 101. Inclusion of high-deductible outpatient prescription drug benefit under 
part B. 
Sec. 102. Provision of benefits through medicare approved prescription drug 
plans. 
TITLE II—BENEFITS FOR LOW-INCOME BENEFICIARIES 
Sec. 201. Benefits for low-income beneficiaries. 
Sec. 202. Improving enrollment process under medicaid.
SEC. 2. PURPOSE. 
The purpose of this Act is to provide for outpatient 
prescription drug benefits to medicare beneficiaries in the 
following manner: 
(1) Medicare beneficiaries enrolled under medi-
care part B qualify for outpatient prescription drug
benefits after an annual deductible (initially set at 
$4,000) has been met. This benefit is available with-
out any additional premium. 
(2) There are fixed dollar copayments for this 
coverage, with the average of such copayments equal 
to 20 percent of the benefits and the amount of the 
copayments varying depending upon whether the 
drugs are generic, preferred brand-name, or non-pre-
ferred brand-name drugs. 
(3) The benefits are provided through medicare-
approved prescription drug plans. These plans may 
be current plans, such as Medicare+Choice plans, 
employer-based retiree coverage, medigap plans, 
State assistance programs, medicaid, drug discount 
card plans, and other qualified plans (as determined 
by the Secretary). All of these plans must offer, in 
addition to the high-deductible coverage, discounts 
for prescription drugs both while the annual deduct-
ible is being satisfied and after it is satisfied. 
(4) To assure access to medicare-approved pre-
scription drug plans for all medicare beneficiaries, 
the Secretary will solicit bids for prescription drug 
discount plans that will be available in all geographic 
regions to all medicare beneficiaries.
(5) All pharmacies that comply with electronic 
claims processing standards may provide drugs 
under the program. 
(6) The Act also provides for the availability of 
additional benefits in the form of a waiver of the an-
nual deductible, thereby providing immediate entitle-
ment to prescription drug benefits, for medicare 
beneficiaries who have incomes under 200 percent of 
the poverty line and who are not eligible for med-
icaid prescription drug benefits. 
TITLE I—PART B DRUG BENEFIT 
WITH HIGH DEDUCTIBLE AND 
NO PREMIUM 
SEC. 101. INCLUSION OF HIGH-DEDUCTIBLE OUTPATIENT 
PRESCRIPTION DRUG BENEFIT UNDER PART 
B. 
(a) 
COVERAGE.—Section 
1832(a) 
(42 
U.S.C. 
1395k(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph 
(1); 
(2) by striking the period at the end of para-
graph (2) and inserting ‘‘; and’’; and 
(3) by adding at the end the following new 
paragraph:
‘‘(3) entitlement to have payment made on his 
behalf (subject to the provisions of this part) for 
high-deductible outpatient prescription drug cov-
erage under section 1845.’’. 
(b) DESCRIPTION OF HIGH-DEDUCTIBLE PRESCRIP-
TION DRUG BENEFIT.—Title XVIII is amended by insert-
ing after section 1844 the following new section: 
‘‘OUTPATIENT PRESCRIPTION DRUG COVERAGE 
‘‘SEC. 1845. (a) HIGH-DEDUCTIBLE OUTPATIENT 
PRESCRIPTION DRUG COVERAGE DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this part, 
the term ‘high-deductible outpatient prescription 
drug coverage’ means payment of—
‘‘(A) expenses for covered outpatient pre-
scription drugs incurred in a year after the in-
dividual has incurred expenses for such drugs 
in the year of an amount equal to the annual 
deductible specified in paragraph (2); reduced 
by 
‘‘(B) cost-sharing described in paragraph 
(3). 
‘‘(2) ANNUAL DEDUCTIBLE.—
‘‘(A) IN GENERAL.—The annual deductible 
under this paragraph—
‘‘(i) for 2005 is equal to $4,000; and
sponsible for a copayment for the drug in an 
amount equal to the following (or, if less, the 
price for the drug negotiated pursuant to sub-
section (c)(5)): 
‘‘(i) GENERIC DRUGS.—In the case of 
a generic covered outpatient drug, the base 
copayment amount specified in accordance 
with subparagraph (B) for each prescrip-
tion (as defined by the Secretary) of such 
drug. 
‘‘(ii) 
PREFERRED
BRAND
NAME 
DRUGS.—In the case of a preferred brand 
name covered outpatient drug, 4 times the 
copayment amount applied under clause (i) 
for each prescription (as so defined) of 
such drug. 
‘‘(iii) NONPREFERRED
BRAND
NAME 
DRUG.—In the case of a nonpreferred 
brand name covered outpatient drug, 150 
percent of the copayment amount applied 
under clause (ii) for each prescription (as 
so defined) of such drug. 
‘‘(B) ESTABLISHMENT
OF
BASE
COPAY-
MENT AMOUNT CONSISTENT WITH 80:20 BEN-
EFIT
RATIO.—For each year beginning with
2005 the Secretary shall establish a base copay-
ment amount in a manner consistent with the 
principle (subject to reasonable rounding rules) 
that the ratio of the aggregate amount of bene-
fits provided under this section to the aggregate 
copayments under this paragraph for each year 
should be approximately equal to 80 to 20. 
‘‘(C) DISCOUNTS ALLOWED FOR NETWORK 
PHARMACIES.—A medicare-approved prescrip-
tion drug plan may reduce copayments for its 
designees below the level otherwise provided 
under this paragraph, but in no case shall such 
a reduction result in an increase in payments 
made by the Secretary under this section to a 
plan. 
‘‘(D) TREATMENT
OF
MEDICALLY
NEC-
ESSARY
NONPREFERRED
DRUGS.—A nonpre-
ferred brand name drug shall be treated as a 
preferred brand name drug under this para-
graph if such nonpreferred drug is determined 
(pursuant to procedures established under sub-
section (c)(6)) to be medically necessary. 
‘‘(E) REQUIREMENT FOR DESIGNATION OF 
PREFERRED
BRAND
NAME
DRUGS.—Within 
each category of therapeutic-equivalent covered
outpatient prescription drugs (as defined by the 
Secretary), each medicare-approved prescription 
drug plan shall provide for the designation of 
at least one preferred brand name covered out-
patient drug. 
‘‘(4) PAYMENT OF BENEFITS BEYOND DEDUCT-
IBLE.—
‘‘(A) IN GENERAL.—There shall be paid 
from the Federal Supplementary Medical Insur-
ance Trust Fund, in the case of each individual 
who is covered under the insurance program es-
tablished by this part and incurs expenses for 
covered outpatient prescription drugs with re-
spect to which benefits are payable under this 
section, amounts equal to the amounts provided 
under paragraph (1). 
‘‘(B) 
COUNTING
OF
INCURRED
EX-
PENSES.—Expenses with respect to covered 
outpatient prescription drugs under this section 
shall—
‘‘(i) be treated as incurred regardless 
of whether they are reimbursed by a third-
party payor; 
‘‘(ii) not be treated as incurred unless 
the expenses were incurred during a period
in which the individual was covered under 
this part; and 
‘‘(iii) not be treated as incurred unless 
information concerning the transaction giv-
ing rise to such expenses has been elec-
tronically transmitted by the pharmacy or 
other entity dispensing the covered out-
patient prescription drugs to the medicare-
approved prescription drug plan consistent 
with electronic claims standards estab-
lished under subsection (c)(3).’’. 
SEC. 102. PROVISION OF BENEFITS THROUGH MEDICARE 
APPROVED PRESCRIPTION DRUG PLANS. 
(a) IN GENERAL.—Section 1845 of the Social Secu-
rity Act, as inserted by section 101(a), is further amended 
by adding at the end the following: 
‘‘(b) PROVISION OF BENEFITS THROUGH A MEDI-
CARE APPROVED PRESCRIPTION DRUG PLAN.—
‘‘(1) IN GENERAL.—In the case of an individual 
entitled to benefits for high-deductible outpatient 
prescription drug coverage under this section, the in-
dividual shall obtain such benefits through a medi-
care-approved prescription drug plan that is des-
ignated under this subsection.
‘‘(2) DESIGNATION
PROCESS.—The Secretary 
shall provide for a process for designation of medi-
care-approved prescription drug plans consistent 
with the following: 
‘‘(A) FREQUENCY
OF
DESIGNATIONS.—
The Secretary shall permit individuals, on an 
annual basis and at such other times during a 
year as the Secretary may specify, to change 
the plan designated. 
‘‘(B) DISSEMINATION OF INFORMATION.—
The Secretary shall provide for the dissemina-
tion of information on designation of plans 
under this subsection. Such dissemination may 
be coordinated with the dissemination of infor-
mation on Medicare+Choice plan selection 
under part C. 
‘‘(C) DEFAULT ASSIGNMENT.—In the case 
of an individual who is enrolled under this part 
who has not otherwise designated a medicare-
approved prescription drug plan, the Secretary 
shall assign the individual to an appropriate 
prescription drug discount card plan serving the 
area in which the individual resides. 
‘‘(D) DEEMED
DESIGNATION.—The Sec-
retary may deem an individual who is enrolled
in a medicare-approved prescription drug plan 
described in subparagraph (A) through (E) of 
subsection (c)(2) as having designated such 
plan, but shall permit the individual to des-
ignate a prescription drug discount card plan 
instead. The Secretary shall establish rules in 
cases where an individual is enrolled in more 
than one such plan. 
‘‘(3) DESIGNEE DEFINED.—In this section, the 
term ‘designee’ means such an individual who makes 
such a designation and, with respect to a plan, an 
individual who has designated that plan under this 
subsection. 
‘‘(c) MEDICARE-APPROVED
PRESCRIPTION
DRUG 
PLANS.—
‘‘(1) IN GENERAL.—For purposes of this part, 
the term ‘medicare-approved prescription drug plan’ 
means a health plan or program described in para-
graph (2) that—
‘‘(A) provides at least high-deductible out-
patient prescription drug coverage to designees 
of that plan or program; 
‘‘(B) meets the applicable requirements of 
paragraph (3) and succeeding paragraphs of 
this subsection with respect to such designees;
‘‘(C) has entered into an agreement with 
the Secretary to provide and exchange electroni-
cally such information as the Secretary may re-
quire for the administration of the program of 
benefits under this section; and 
‘‘(D) meets such additional requirements 
as the Secretary may specify, including requir-
ing the provision of appropriate periodic audits. 
‘‘(2) TYPES OF PLANS AND PROGRAMS THAT 
MAY QUALIFY.—The types of plans and programs 
that may qualify as a medicare-approved prescrip-
tion drug plan are the following: 
‘‘(A) A Medicare+Choice plan. 
‘‘(B) A group health plan, including a re-
tirement health benefits plan, that provides pre-
scription drug coverage. 
‘‘(C) A State plan under title XIX. 
‘‘(D) A health benefits plan under the Fed-
eral employees’ health benefits program under 
chapter 89 of title 5, United States Code. 
‘‘(E) A medicare supplemental policy. 
‘‘(F) State pharmaceutical assistance pro-
gram. 
‘‘(G) A prescription drug discount card 
plan (described in subsection (d)).
‘‘(H) Any other prescription drug plan 
that is determined to meet such requirements 
as the Secretary establishes. 
‘‘(3) ADMINISTRATION THROUGH CARD-BASED 
ELECTRONIC MECHANISM.—
‘‘(A) USE
OF
MEDICARE
PRESCRIPTION 
DRUG
CARD.—Claims for benefits under this 
section under a medicare-approved prescription 
drug plan may only be made electronically 
through the use of an electronic prescription 
card system (in this paragraph referred to as 
the ‘system’). 
‘‘(B) STANDARDS FOR ELECTRONIC PRE-
SCRIPTION CARD SYSTEM.—The Secretary shall 
establish standards for the system, including 
the following: 
‘‘(i) CARDS.—Standards for claims 
cards to be used by designees under the 
system. 
‘‘(ii) COORDINATION OF ELECTRONIC 
INFORMATION.—Standards for the real-
time transmittal among pharmacies, medi-
care-approved prescription drug plans, and 
the Secretary (including an appropriate 
data clearinghouse operated by or under
contract with the Secretary) of information 
on expenses incurred for covered out-
patient prescription drugs by designees. 
‘‘(iii) CONFIDENTIALITY.—Standards 
that assure the confidentiality of individ-
ually identifiable information of designees 
and that are consistent with the regula-
tions promulgated under section 264(c) of 
the Health Insurance Portability and Ac-
countability Act of 1996. 
‘‘(4) ACCEPTANCE OF CLAIMS THROUGH ALL 
QUALIFYING
PHARMACIES.—A 
medicare-approved 
prescription drug plan shall provide for acceptance 
and process of claims for designees from any phar-
macy that meets standards the Secretary has estab-
lished under paragraph (3) to carry out real-time 
transmittal of claims to such plans and that provides 
for disclosure, in the case of dispensing of a brand 
name drug to a designee, of information on the 
availability of generic equivalents at reduced cost to 
the designee. 
‘‘(5) REQUIREMENT TO NEGOTIATE DISCOUNTS 
AND GENERIC EQUIVALENTS.—A medicare-approved 
prescription drug plan shall provide designees of the 
plan with the following:
‘‘(A) NEGOTIATED PRICES.—Access to ne-
gotiated prices (including applicable discounts) 
used for payment for covered outpatient drugs, 
regardless of the fact that no benefits or only 
partial benefits may be payable with respect to 
such drugs because of the application of the de-
ductible under subsection (a)(2) or copayment 
under subsection (a)(3). 
‘‘(B) GENERIC
EQUIVALENTS.—Informa-
tion on the availability of generic equivalents at 
reduced cost to such designees. 
‘‘(6) TREATMENT OF NONPREFERRED BRAND 
NAME DRUGS.—
‘‘(A) PROCEDURES
REGARDING
THE
DE-
TERMINATION OF DRUGS THAT ARE MEDICALLY 
NECESSARY.—
‘‘(i) IN
GENERAL.—A medicare-ap-
proved prescription drug plan shall have in 
place procedures on a case-by-case basis to 
treat a nonpreferred brand name drug as 
a preferred brand name drug for purposes 
of subsection (a) if the nonpreferred brand 
name drug is determined—
‘‘(I) to be not as effective for the 
designee in preventing or slowing the
deterioration of, or improving or 
maintaining, the health of the indi-
vidual; or 
‘‘(II) to have a significant ad-
verse effect on the individual. 
‘‘(ii) REQUIREMENT.—The procedures 
under clause (i) shall require that deter-
minations under such clause are based on 
professional medical judgment, the medical 
condition of the enrollee, and other medical 
evidence. 
‘‘(B) PROCEDURES
REGARDING
APPEAL 
RIGHTS
WITH
RESPECT
TO
DENIALS
OF 
CARE.—Such a plan shall have in place proce-
dures to ensure a timely internal review (and 
timely independent external review) for resolu-
tion of denials of coverage in accordance with 
the medical exigencies of the case in accordance 
with requirements established by the Secretary 
that are comparable to such requirements for 
Medicare+Choice organizations under part C 
and to ensure notice to designees regarding 
such procedures. A designee shall have the fur-
ther right to an appeal of such a denial of cov-
erage in the same manner as is provided under
section 1852(g)(5) in the case of a failure to re-
ceive health services under a Medicare+Choice 
plan. 
‘‘(7) PROMPT PAYMENT OF PHARMACIES FOR 
COVERED
BENEFITS.—Medicare-approved prescrip-
tion drug plans shall provide for payment to quali-
fying pharmacies of benefits under subsection (a)(4) 
promptly in accordance with rules no less generous 
than 
the 
rules 
applicable 
under 
section 
1842(c)(2)(B). 
‘‘(8) EDUCATION.—Medicare-approved prescrip-
tion drug plans shall apply methods to identify and 
educate providers, pharmacists, and designees re-
garding—
‘‘(A) instances or patterns concerning the 
unnecessary or inappropriate prescribing or dis-
pensing of covered outpatient prescription 
drugs; 
‘‘(B) instances or patterns of substandard 
care; 
‘‘(C) potential adverse reactions to covered 
outpatient prescription drugs; 
‘‘(D) inappropriate use of antibiotics; 
‘‘(E) appropriate use of generic products; 
and
‘‘(F) the importance of using covered out-
patient prescription drugs in accordance with 
the instruction of prescribing providers. 
‘‘(9) NOT AT FINANCIAL RISK.—The entity of-
fering a medicare-approved prescription drug plan 
shall not be at financial risk for the provision of 
high-deductible prescription drug coverage under the 
plan to designees, but there shall be performance in-
centives (based on risk corridors negotiated between 
the entity and the Secretary and subject to audit) in 
relation to the administration of the contract and 
the entity’s ability to reduce costs through appro-
priate incentive mechanisms. 
‘‘(10) PROVISION OF DATA.—The entity offer-
ing such a plan shall provide the Secretary with such 
information as is required to make payments to the 
entity under this section. 
‘‘(d) 
PRESCRIPTION
DRUG
DISCOUNT
CARD 
PLANS.—
‘‘(1) SOLICITATION
OF
BIDS.—The Secretary 
shall solicit bids from entities to offer prescription 
drug discount card plans to individuals enrolled 
under this part either nationwide or in large geo-
graphic areas. The Secretary shall award bids in a 
manner so that such plans are offered in all areas
of the United States. The Secretary may not award 
a contract based on such a bid to an entity with re-
spect to a plan unless the entity and plan meet the 
applicable requirements to be a medicare-approved 
prescription drug plan under this section. 
‘‘(2) LIMITATION ON BENEFITS.—The entity of-
fering a prescription drug discount card plan shall 
not offer (or charge for) benefits to designees of the 
plan in addition to high-deductible prescription drug 
coverage, access to negotiated prices, and other ben-
efits required under this section and, in the case of 
subsidy eligible individuals, benefits under subsection 
(h). 
‘‘(e) PAYMENT OF PLANS.—
‘‘(1) IN GENERAL.—The Secretary shall pro-
vide, in the contract entered into between the Sec-
retary and entities that offer medicare-approved pre-
scription drug plans, for payment to the plans for 
high-deductible prescription drug coverage offered 
through the plan, including expanded coverage for 
low-income individuals under subsection (g) and tak-
ing into account performance incentives described in 
paragraph (2). In addition, in the case of prescrip-
tion drug discount card plans, the Secretary shall 
provide for payment of administrative costs in car-
rying out the contract (taking into account the per-
formance incentives described in paragraph (2)), 
based on rates negotiated between the Secretary and 
the entity in the solicitation process under sub-
section (d). 
‘‘(2) INCENTIVES FOR COST AND UTILIZATION 
MANAGEMENT
AND
QUALITY
IMPROVEMENT.—The 
Secretary shall include in the contract such financial 
or other performance incentives for cost and utiliza-
tion management and quality improvement as the 
Secretary may deem appropriate. 
‘‘(f) COVERED OUTPATIENT PRESCRIPTION DRUGS 
DEFINED.—
‘‘(1) IN GENERAL.—Except as provided in this 
subsection, for purposes of this section, the term 
‘covered outpatient prescription 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 a vaccine licensed under sec-
tion 351 of the Public Health Service Act and any 
use of a covered outpatient drug for a medically ac-
cepted 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), or 
under section 1927(d)(3), as the Secretary may 
specify and does not include such other medi-
cines, classes, and uses as the Secretary may 
specify consistent with the goals of providing 
quality care and containing costs under this 
section. 
‘‘(B) AVOIDANCE
OF
DUPLICATE
COV-
ERAGE.—A drug prescribed for an individual 
that would otherwise be a covered outpatient 
prescription drug under this section shall not be 
so considered if payment for such drug is avail-
able under part A or under this part (other 
than under this section).’’. 
(b) NO EFFECT ON PART B PREMIUM.—
(1) IN GENERAL.—Section 1839(a) (42 U.S.C. 
1395r(a)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(5) Notwithstanding the previous provisions of this 
subsection, in computing actuarial rates there shall not be 
taken into account benefits and administrative costs that 
are attributable to the prescription drug coverage provided 
under section 1845.’’. 
(2) 
GOVERNMENT
CONTRIBUTION.—Section 
1844(a)(1) (42 U.S.C. 1395w(a)(1)) is amended—
(A) by striking ‘‘plus’’ at the end of sub-
paragraph (A); 
(B) by striking ‘‘; plus’’ at the end of sub-
paragraph (B) and inserting ‘‘, plus’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) a Government contribution equal to the 
aggregate amounts expended from the Trust Fund 
for benefits and administrative expenses attributable 
to the prescription drug coverage provided under 
section 1845; plus’’. 
(c) 
MEDICARE
AS
PRIMARY
PAYOR.—Section 
1862(b) (42 U.S.C. 1395y(b)) is amended by adding at 
the end the following new paragraph:
‘‘(7) EXCEPTION FOR OUTPATIENT PRESCRIP-
TION DRUG BENEFIT.—The previous provisions of 
this subsection shall not apply to benefits provided 
under section 1845.’’. 
TITLE II—BENEFITS FOR LOW-
INCOME BENEFICIARIES 
SEC. 201. BENEFITS FOR LOW-INCOME BENEFICIARIES. 
(a) IN GENERAL.—Section 1845, as inserted by sec-
tion 101(b), is amended by adding at the end the following 
new subsection: 
‘‘(g) FIRST DOLLAR COVERAGE FOR CERTAIN LOW-
INCOME INDIVIDUALS.—
‘‘(1) IN GENERAL.—In the case of a subsidy eli-
gible individual (as defined in paragraph (2)), this 
section shall be applied as if the annual deductible 
were equal to zero but, with respect to costs incurred 
before the amount of the annual deductible other-
wise applicable, the following copayment amounts 
shall apply: 
‘‘(A) 20 PERCENT COPAYMENT FOR INDI-
VIDUALS WITH INCOMES UP TO 135 PERCENT 
OF POVERTY.—For subsidy eligible individuals 
with income that does not exceed 135 percent 
of the poverty line, the copayment amounts 
shall be the copayments amounts specified in
subsection (a)(3), which reflects an average 
benefit percentage of 80 percent. 
‘‘(B) 30 PERCENT COPAYMENT FOR INDI-
VIDUALS WITH INCOMES BETWEEN 135 AND 150 
PERCENT
OF
POVERTY.—For subsidy eligible 
individuals with income that exceeds 135 per-
cent (but does not exceed 150 percent) of the 
poverty line, the copayment amounts shall be 
the copayments amounts specified in subsection 
(a)(3) increased by 50 percent, which reflects 
an average benefit percentage of 70 percent. 
‘‘(C) 50 PERCENT COPAYMENT FOR INDI-
VIDUALS WITH INCOMES ABOVE 150 PERCENT 
OF POVERTY.—For subsidy eligible individuals 
with income that exceeds 150 percent of the 
poverty line, the copayment amounts shall be 
the copayments amounts specified in subsection 
(a)(3) increased by 150 percent, which reflects 
an average benefit percentage of 50 percent. 
‘‘(2) DETERMINATION OF ELIGIBILITY.—
‘‘(A) SUBSIDY ELIGIBLE INDIVIDUAL DE-
FINED.—For purposes of this subsection, sub-
ject to subparagraph (D), the term ‘subsidy eli-
gible individual’ means an individual who—
‘‘(i) is enrolled under this part;
‘‘(ii) has income below 150 percent 
(or such higher percent, not to exceed 200 
percent, as a State may specify under sub-
paragraph (B)) of the Federal poverty line; 
and 
‘‘(iii) is not eligible for medical assist-
ance with respect to prescription drugs 
under title XIX. 
For purposes of this section, an individual shall not 
be treated as eligible for medical assistance with re-
spect to prescription drugs under title XIX (includ-
ing under a waiver under section 1115) only if, with 
respect to such assistance, the individual is charged 
a copayment greater than a nominal amount (as de-
scribed in section 1916(a)(3)) and there is no 
monthly or similar dollar limit established for the 
amount of such assistance over any period of time. 
‘‘(B) COVERAGE OF INDIVIDUALS WITH IN-
COME
UP
TO
200
PERCENT
OF
POVERTY
AT 
STATE OPTION.—One of the 50 States or the 
District of Columbia may, at its option and 
subject to section 1935(c), specify a percent of 
income, that exceeds 150 percent but does not 
exceed 200 percent, that will apply for purposes
of this subsection to individuals residing in the 
State. 
‘‘(C) DETERMINATIONS.—The determina-
tion of whether an individual residing in a State 
is a subsidy eligible individual shall be deter-
mined under the State medicaid plan for the 
State under section 1935(a) or by the Social 
Security Administration. There are authorized 
to be appropriated to the Social Security Ad-
ministration such sums as may be necessary for 
the determination of eligibility under this sub-
paragraph. 
‘‘(D) 
INCOME
DETERMINATIONS.—For 
purposes of applying this subsection—
‘‘(i) income shall be determined in the 
manner no less restrictive than 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.
‘‘(E) TREATMENT OF TERRITORIAL RESI-
DENTS.—In the case of an individual who is not 
a resident of the 50 States or the District of 
Columbia, the individual is not eligible to be a 
subsidy eligible individual but may be eligible 
for financial assistance with prescription drug 
expenses under section 1935(f). 
‘‘(3) 
ADMINISTRATION
OF
SUBSIDY
PRO-
GRAM.—The Secretary shall provide a process 
whereby, in the case of an individual who is deter-
mined to be a subsidy eligible individual and who is 
enrolled in a medicare-approved prescription drug 
plan—
‘‘(A) the Secretary provides for a notifica-
tion of the entity offering the plan that the in-
dividual is eligible for a subsidy under para-
graph (1); 
‘‘(B) such entity adjusts the benefits for 
prescription drug coverage accordingly and sub-
mits to the Secretary information on the 
amount of such benefits provided; and 
‘‘(C) the Secretary periodically and on a 
timely basis reimburses the entity for the 
amount of such benefits (including reasonable 
related administrative costs) that are provided
only because of the application of this sub-
section. 
‘‘(4) RELATION TO MEDICAID PROGRAM.—
‘‘(A) IN
GENERAL.—For provisions pro-
viding for eligibility determinations, and addi-
tional financing, under the medicaid program, 
see section 1935. 
‘‘(B) COORDINATION.—The Secretary shall 
develop and implement a plan for the coordina-
tion of prescription drug benefits under this 
part with the benefits provided under the med-
icaid program under title XIX, with particular 
attention to insuring coordination of payments 
and prevention of fraud and abuse. In devel-
oping and implementing such plan, the Sec-
retary shall involve the States, the data proc-
essing industry, pharmacists, and pharma-
ceutical manufacturers, and other experts and 
representatives of low-income medicare bene-
ficiaries. 
‘‘(C) EXEMPTION.—Section 1902(n) shall 
not apply with respect to coverage of cost-shar-
ing imposed under paragraph (1) or under sub-
section (a)(3).’’. 
(b) MEDICAID AMENDMENTS.—
(1) DETERMINATIONS
OF
ELIGIBILITY
FOR 
LOW-INCOME SUBSIDIES.—
(A) REQUIREMENT.—Section 1902(a) (42 
U.S.C. 1396a(a)) is amended—
(i) by striking ‘‘and’’ at the end of 
paragraph (64); 
(ii) by striking the period at the end 
of paragraph (65) and inserting ‘‘; and’’; 
and 
(iii) by inserting after paragraph (65) 
the following new paragraph: 
‘‘(66) provide for making eligibility determina-
tions under sections 1845(g) and 1935(a).’’. 
(2) NEW SECTION.—Title XIX of such Act is 
further amended—
(A) by redesignating section 1935 as sec-
tion 1936; and 
(B) by inserting after section 1934 the fol-
lowing new section: 
‘‘SPECIAL PROVISIONS RELATING TO MEDICARE 
PRESCRIPTION DRUG BENEFIT 
‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI-
BILITY DETERMINATIONS FOR LOW-INCOME SUBSIDY.—
‘‘(1) IN GENERAL.—As a condition of its State 
plan under this title under section 1902(a)(66) and
receipt of any Federal financial assistance under sec-
tion 1903(a), a State shall—
‘‘(A) make determinations of eligibility for 
subsidies under (and in accordance with) sec-
tion 1845(g); 
‘‘(B) inform the Secretary of such deter-
minations in cases in which such eligibility is 
established; and 
‘‘(C) otherwise provide the Secretary with 
such information as may be required to carry 
out section 1845. 
‘‘(2) STATE OPTION FOR COVERAGE OF ADDI-
TIONAL
LOW-INCOME
INDIVIDUALS.—A State may 
elect under paragraph (2)(B) of section 1845(g) to 
cover additional low-income medicare beneficiaries 
under the prescription drug subsidy program pro-
vided under such subsection, subject to contribution 
under subsection (c). 
‘‘(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 paragraph 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 
incurred 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 incurred during 2006 and each subse-
quent year through 2013, the otherwise applica-
ble 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 ‘appli-
cable percent’ for—
‘‘(I) 2006 is 20 percent; or 
‘‘(II) a subsequent year is the applica-
ble percent under this clause for the pre-
vious year increased by 10 percentage 
points. 
‘‘(C) For expenditures attributable to costs 
incurred after 2013, the otherwise applicable
Federal matching rate shall be increased to 100 
percent. 
‘‘(2) COORDINATION.—The State shall provide 
the Secretary with such information as may be nec-
essary to properly allocate administrative expendi-
tures described in paragraph (1) that may otherwise 
be made for similar eligibility determinations. 
‘‘(c) STATE CONTRIBUTION AT SCHIP MATCHING 
RATE TOWARDS ADDITIONAL LOW-INCOME SUBSIDIES 
FOR OPTIONAL SUBSIDY ELIGIBLE INDIVIDUALS COV-
ERED UNDER STATE OPTION.—In the case of a State that 
specifies a percent of income under section 1845(g)(2)(B) 
for a quarter, the amount of payment made to the State 
under section 1903(a)(1) for the quarter shall be reduced 
by the product of—
‘‘(1) 100 percent less the enhanced FMAP de-
scribed in section 2105(b) for that State and quar-
ter; and 
‘‘(2) the additional amount of payment made 
under section 1845 because of the application of 
such specification.’’. 
(b) PHASED-IN FEDERAL ASSUMPTION OF MEDICAID 
RESPONSIBILITY FOR COST-SHARING SUBSIDIES FOR DU-
ALLY 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(d)(1) for the 
State and the quarter’’. 
(2) AMOUNT DESCRIBED.—Section 1935, as in-
serted by subsection (a)(2), is amended by adding at 
the end the following new subsection: 
‘‘(d) FEDERAL ASSUMPTION
OF MEDICAID PRE-
SCRIPTION DRUG COSTS FOR DUALLY-ELIGIBLE BENE-
FICIARIES.—
‘‘(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 (beginning with 2005) the amount com-
puted under this subsection is equal to the product 
of the following: 
‘‘(A) MEDICARE BENEFITS FOR MEDICAID 
ELIGIBLES.—The total amount of payments 
made in the quarter because of the operation of 
section 1845 that are attributable to individuals 
who are residents of the State and are eligible 
for medical assistance with respect to prescrip-
tion drugs under this title.
‘‘(B) STATE MATCHING RATE.—A propor-
tion computed 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 quarter. 
‘‘(2) PHASE-OUT PROPORTION.—For purposes 
of paragraph (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.’’. 
(3) MEDICAID PROVIDING WRAP-AROUND BENE-
FITS.—Section 1935, as so inserted and amended, is 
further amended by adding at the end the following 
new subsection: 
‘‘(e) MEDICAID AS SECONDARY PAYOR.—In the case 
of an individual who is entitled to benefits under part B 
of title XVIII and is eligible for medical assistance with 
respect to prescribed drugs under this title, medical assist-
ance shall continue to be provided under this title for pre-
scribed drugs to the extent payment is not made under 
such part B, without regard to section 1902(n)(2).’’. 
(d) TREATMENT OF TERRITORIES.—
(1) IN GENERAL.—Section 1935 of such Act, as 
so inserted and amended, is further amended—
(A) in subsection (a) in the matter pre-
ceding paragraph (1), by inserting ‘‘subject to 
subsection (f)’’ after ‘‘section 1903(a)’’; 
(B) in subsection (c)(1), by inserting ‘‘sub-
ject to subsection (f)’’ after ‘‘1903(a)(1)’’; and 
(C) by adding at the end the following new 
subsection: 
‘‘(f) TREATMENT OF TERRITORIES.—
‘‘(1) IN
GENERAL.—In the case of a State, 
other than the 50 States and the District of Colum-
bia—
‘‘(A) the previous provisions of this section 
shall not apply to residents of such State; and 
‘‘(B) if the State establishes a plan de-
scribed in paragraph (2) (for providing medical 
assistance with respect to the provision of pre-
scription drugs to medicare beneficiaries under 
section 1845(g)), the amount otherwise deter-
mined under section 1108(f) (as increased
under section 1108(g)) for the State shall be in-
creased by the amount specified in paragraph 
(3). 
‘‘(2) PLAN.—The plan described in this para-
graph is a plan that—
‘‘(A) provides medical assistance under 
section 1845(g) with respect to the provision of 
covered outpatient drugs to low-income medi-
care beneficiaries whose income does not exceed 
an income level specified under the plan; and 
‘‘(B) assures that additional amounts re-
ceived 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 
subparagraph (B); and 
‘‘(ii) the amount specified in section 
1108(g)(1) for that State, divided by the 
sum of the amounts specified in such sec-
tion for all such States.
‘‘(B) AGGREGATE
AMOUNT.—The aggre-
gate amount specified in this subparagraph 
for—
‘‘(i) 2005, is equal to $25,000,000; or 
‘‘(ii) a subsequent year, is equal to the 
aggregate amount specified in this sub-
paragraph for the previous year increased 
by annual percentage increase specified in 
section 1845(a)(2)(B) for the year in-
volved. 
‘‘(4) REPORT.—The Secretary shall submit to 
Congress a report on the application of this sub-
section and may include in the report such rec-
ommendations as the Secretary deems appropriate.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
1108(f) (42 U.S.C. 1308(f)) is amended by inserting 
‘‘and section 1935(f)(1)(B)’’ after ‘‘Subject to sub-
section (g)’’. 
SEC. 202. IMPROVING ENROLLMENT PROCESS UNDER MED-
ICAID. 
(a) AUTOMATIC REENROLLMENT WITHOUT NEED 
TO REAPPLY.—
(1) IN GENERAL.—Section 1905(p) (42 U.S.C. 
1396d(p)) is amended—
(A) by redesignating paragraph (6) as 
paragraph (9); and 
(B) by inserting after paragraph (5), the 
following new paragraph: 
‘‘(6) In the case of an individual who has been deter-
mined to qualify as a qualified medicare beneficiary or to 
be eligible for benefits under section 1902(a)(10)(E)(iii), 
the individual shall be deemed to continue to be so quali-
fied or eligible without the need for any annual or periodic 
application unless and until the individual notifies the 
State that the individual’s eligibility conditions have 
changed so that the individual is no longer so qualified 
or eligible.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
1902(e)(8) (42 U.S.C. 1396a(e)(8)) is amended by 
striking the second sentence. 
(b) USE OF SIMPLIFIED APPLICATION PROCESS.—
Such section 1905(p) is further amended by adding at the 
end the following new paragraph: 
‘‘(7) A State shall permit individuals to apply to qual-
ify as a qualified medicare beneficiary or for benefits 
under section 1902(a)(10)(E)(iii) through the use of the 
simplified application form developed under section 
1905(p)(5)(A) and shall permit such an application to be 
made over the telephone, the Internet, or by mail, without
the need for an interview in person by the applicant or 
a representative of the applicant.’’. 
(c) ROLE OF SOCIAL SECURITY OFFICES.—
(1) ENROLLMENT AND PROVISION OF INFORMA-
TION AT SOCIAL SECURITY OFFICES.—Such section 
is further amended by adding at the end the fol-
lowing new paragraph: 
‘‘(8) The Commissioner of Social Security shall pro-
vide, through local offices of the Social Security Adminis-
tration—
‘‘(A) for the enrollment under State plans 
under this title for appropriate medicare cost-shar-
ing benefits for individuals who qualify as a qualified 
medicare beneficiary or for benefits under section 
1902(a)(10)(E)(iii); and 
‘‘(B) for providing oral and written notice of 
the availability of such benefits.’’. 
(2) 
CLARIFYING
AMENDMENT.—Section 
1902(a)(5) (42 U.S.C. 1396a(a)(5)) is amended by 
inserting ‘‘as provided in section 1905(p)(10)’’ be-
fore ‘‘except’’. 
(d) OUTSTATIONING OF STATE ELIGIBILITY WORK-
ERS AT SSA FIELD OFFICES.—Section 1902(a)(55) (42 
U.S.C. 1396a(a)(55)) is amended—
(1) by striking ‘‘subsection (a)(10)(A)(i)(IV), 
(a)(10)(A)(i)(VI), 
(a)(10)(A)(i)(VII), 
or 
(a)(10)(A)(ii)(IX)’’ 
and 
inserting 
‘‘paragraph 
(10)(A)(i)(IV), 
(10)(A)(i)(VI), 
(10)(A)(i)(VII), 
(10)(A)(ii)(IX), or (10)(E)’’; and 
(2) in subparagraph (A), by inserting ‘‘and in 
the case of applications of individuals for medical as-
sistance under paragraph (10)(E), at locations that 
include field offices of the Social Security Adminis-
tration’’.
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