734
‘‘(j) AVAILABILITY
OF PRESCRIPTION DRUG 
BENEFITS AND SUBSIDIES.—
‘‘(1) OFFERING OF QUALIFIED PRESCRIP-
TION DRUG COVERAGE.—A Medicare Advan-
tage organization on and after January 1, 
2006—
‘‘(A) may not offer a Medicare Ad-
vantage plan described in section 
1851(a)(2)(A) in an area unless either 
that plan (or another Medicare Ad-
vantage plan offered by the organiza-
tion in that area) includes qualified 
prescription drug coverage; and 
‘‘(B) may not offer the prescrip-
tion drug coverage (other than that 
required under parts A and B) to an 
enrollee under a Medicare Advantage 
plan, unless such drug coverage is at 
least qualified prescription drug cov-
erage and unless the requirements of 
this subsection with respect to such 
coverage are met. 
‘‘(2) REQUIREMENT
FOR
ELECTION
OF 
PART
D
COVERAGE
TO
OBTAIN
QUALIFIED 
PRESCRIPTION
DRUG
COVERAGE.—For pur-
735
poses of this part, an individual who has 
not elected qualified prescription drug 
coverage under section 1860D–1(b) shall 
be treated as being ineligible to enroll in 
a Medicare Advantage plan under this 
part that offers such coverage. 
‘‘(3) COMPLIANCE
WITH
CERTAIN
ADDI-
TIONAL BENEFICIARY PROTECTIONS FOR PRE-
SCRIPTION DRUG COVERAGE.—With respect 
to the offering of qualified prescription 
drug coverage by a Medicare Advantage 
organization under this part on and after 
January 1, 2006, the organization and 
plan shall meet the requirements of sub-
sections (a) through (d) of section 1860D–
3 in the same manner as they apply to a 
PDP sponsor and a prescription drug 
plan under part D and shall submit to the 
Administrator the information described 
in section 1860D–6(a)(2). The Adminis-
trator shall waive such requirements to 
the extent the Administrator determines 
that such requirements duplicate re-
quirements otherwise applicable to the 
organization or plan under this part.
736
‘‘(4) AVAILABILITY
OF
PREMIUM
AND 
COST-SHARING
SUBSIDIES.—In the case of 
low-income individuals who are enrolled 
in a Medicare Advantage plan that pro-
vides qualified prescription drug cov-
erage, premium and cost-sharing sub-
sidies are provided for such coverage 
under section 1860D–7. 
‘‘(5) AVAILABILITY OF DIRECT AND REIN-
SURANCE
SUBSIDIES
TO
REDUCE
BIDS
AND 
PREMIUMS.—Medicare Advantage organi-
zations are provided direct and reinsur-
ance subsidy payments for providing 
qualified 
prescription 
drug 
coverage 
under this part under section 1860D–8. 
‘‘(6) CONSOLIDATION OF DRUG AND NON-
DRUG PREMIUMS.—In the case of a Medi-
care Advantage plan that includes quali-
fied prescription drug coverage, with re-
spect to an enrollee in such plan there 
shall be a single premium for both drug 
and non-drug coverage provided under 
the plan. 
‘‘(7) TRANSITION IN INITIAL ENROLLMENT 
PERIOD.—Notwithstanding any other pro-
737
vision of this part, the annual, coordi-
nated election period under subsection 
(e)(3)(B) for 2006 shall be the 6-month pe-
riod beginning with November 2005. 
‘‘(8) 
QUALIFIED
PRESCRIPTION
DRUG 
COVERAGE; STANDARD COVERAGE.—For pur-
poses of this part, the terms ‘qualified 
prescription drug coverage’ and ‘stand-
ard coverage’ have the meanings given 
such terms in section 1860D–2. 
‘‘(9) SPECIAL RULES FOR PRIVATE FEE-
FOR-SERVICE
PLANS.— With respect to a 
Medicare Advantage plan described in 
section 1851(a)(2)(C) that offers qualified 
prescription drug coverage—
‘‘(A) REQUIREMENTS REGARDING NE-
GOTIATED
PRICES.—Subsections (a)(1) 
and (d)(1) of section 1860D–2 shall not 
be construed to require the plan to 
negotiate prices or discounts but 
shall apply to the extent the plan 
does so. 
‘‘(B) MODIFICATION
OF
PHARMACY 
PARTICIPATION
REQUIREMENT.—If the 
plan provides access, without charg-
738
ing additional copayments, to all 
pharmacies without regard to wheth-
er they are participating pharmacies 
in 
a 
network, 
section 
1860D-
3(c)(1)(A)(iii) shall not apply to the 
plan. 
‘‘(C) DRUG
UTILIZATION
MANAGE-
MENT
PROGRAM
NOT
REQUIRED.—The 
requirements 
of 
section 
1860D-
3(d)(1)(A) shall not apply to the plan. 
‘‘(D) NON-PARTICIPATING PHARMACY 
DISCLOSURE
EXCEPTION.—If the plan 
provides coverage for drugs pur-
chased from all pharmacies, without 
entering into contracts or agreements 
with pharmacies to provide drugs to 
enrollees covered by the plan, section 
1860D-3(d)(5) shall not apply to the 
plan.’’. 
(b) APPLICATION
TO
EFFS PLANS.—Sub-
section (d) of section 1860E–2, as added by 
section 201(a), is amended to read as follows: 
‘‘(d) AVAILABILITY OF PRESCRIPTION DRUG 
BENEFITS AND SUBSIDIES.—
739
‘‘(1) OFFERING OF QUALIFIED PRESCRIP-
TION DRUG COVERAGE.—An EFFS organiza-
tion—
‘‘(A) may not offer an EFFS plan 
in an area unless either that plan (or 
another EFFS plan offered by the or-
ganization in that area) includes 
qualified prescription drug coverage; 
and 
‘‘(B) may not offer the prescrip-
tion drug coverage (other than that 
required under parts A and B) to an 
enrollee under an EFFS plan, unless 
such drug coverage is at least quali-
fied prescription drug coverage and 
unless the requirements of this sub-
section with respect to such coverage 
are met. 
‘‘(2) REQUIREMENT
FOR
ELECTION
OF 
PART
D
COVERAGE
TO
OBTAIN
QUALIFIED 
PRESCRIPTION
DRUG
COVERAGE.—For pur-
poses of this part, an individual who has 
not elected qualified prescription drug 
coverage under section 1860D–1(b) shall 
be treated as being ineligible to enroll in
741
cost-sharing subsidies are provided for 
such coverage under section 1860D–7. 
‘‘(5) AVAILABILITY OF DIRECT AND REIN-
SURANCE
SUBSIDIES
TO
REDUCE
BIDS
AND 
PREMIUMS.—EFFS organizations are pro-
vided direct and reinsurance subsidy 
payments for providing qualified pre-
scription drug coverage under this part 
under section 1860D–8. 
‘‘(6) CONSOLIDATION OF DRUG AND NON-
DRUG PREMIUMS.—In the case of an EFFS 
plan that includes qualified prescription 
drug coverage, with respect to an en-
rollee in such plan there shall be a single 
premium for both drug and non-drug cov-
erage provided under the plan. 
‘‘(7) 
QUALIFIED
PRESCRIPTION
DRUG 
COVERAGE; STANDARD COVERAGE.—For pur-
poses of this part, the terms ‘qualified 
prescription drug coverage’ and ‘stand-
ard coverage’ have the meanings given 
such terms in section 1860D–2.’’. 
(c) 
CONFORMING
AMENDMENTS.—Section 
1851 (42 U.S.C. 1395w–21) is amended—
(1) in subsection (a)(1)—
742
(A) 
by 
inserting 
‘‘(other 
than 
qualified prescription drug benefits)’’ 
after ‘‘benefits’’; 
(B) by striking the period at the 
end of subparagraph (B) and insert-
ing a comma; and 
(C) by adding after and below 
subparagraph (B) the following: 
‘‘and may elect qualified prescription 
drug coverage in accordance with section 
1860D–1.’’; and 
(2) in subsection (g)(1), by inserting 
‘‘and section 1860D–1(c)(2)(B)’’ after ‘‘in 
this subsection’’. 
(d) EFFECTIVE
DATE.—The amendments 
made by this section apply to coverage pro-
vided on or after January 1, 2006.
SEC. 103. MEDICAID AMENDMENTS. 
(a) DETERMINATIONS
OF
ELIGIBILITY
FOR 
LOW-INCOME SUBSIDIES.—
(1) REQUIREMENT.—Section 1902(a) (42 
U.S.C. 1396a(a)) is amended—
(A) by striking ‘‘and’’ at the end of 
paragraph (64);
743
(B) by striking the period at the 
end of paragraph (65) and inserting ‘‘; 
and’’; and 
(C) by inserting after paragraph 
(65) the following new paragraph: 
‘‘(66) provide for making eligibility 
determinations under section 1935(a).’’. 
(2) NEW SECTION.—Title XIX is further 
amended—
(A) by redesignating section 1935 
as section 1936; and 
(B) by inserting after section 1934 
the following new section: 
‘‘SPECIAL PROVISIONS RELATING TO MEDICARE 
PRESCRIPTION DRUG BENEFIT 
‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING 
ELIGIBILITY DETERMINATIONS FOR LOW-INCOME 
SUBSIDIES.—As a condition of its State plan 
under this title under section 1902(a)(66) and 
receipt of any Federal financial assistance 
under section 1903(a), a State shall—
‘‘(1) make determinations of eligibility 
for premium and cost-sharing subsidies 
under (and in accordance with) section 
1860D–7;
744
‘‘(2) inform the Administrator of the 
Medicare Benefits Administration of such 
determinations in cases in which such 
eligibility is established; and 
‘‘(3) otherwise provide such Adminis-
trator with such information as may be 
required to carry out part D of title XVIII 
(including section 1860D–7). 
‘‘(b) PAYMENTS
FOR ADDITIONAL ADMINIS-
TRATIVE COSTS.—
‘‘(1) IN
GENERAL.—The amounts ex-
pended by a State in carrying out sub-
section (a) are, subject to paragraph (2), 
expenditures reimbursable under the ap-
propriate 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 
attrib-
utable to costs incurred during 2005, 
the 
otherwise 
applicable 
Federal
745
matching rate shall be increased by 
10 percent of the percentage other-
wise payable (but for this subsection) 
by the State. 
‘‘(B)(i) For expenditures attrib-
utable to costs incurred during 2006 
and each subsequent year through 
2013, the otherwise applicable Fed-
eral matching rate shall be increased 
by the applicable percent (as defined 
in clause (ii)) of the percentage other-
wise payable (but for this subsection) 
by the State. 
‘‘(ii) For purposes of clause (i), the 
‘applicable percent’ for—
‘‘(I) 2006 is 20 percent; or 
‘‘(II) a subsequent year is the 
applicable 
percent 
under 
this 
clause for the previous year in-
creased by 10 percentage points. 
‘‘(C) 
For 
expenditures 
attrib-
utable to costs incurred after 2013, 
the 
otherwise 
applicable 
Federal 
matching rate shall be increased to 
100 percent.
746
‘‘(2) COORDINATION.—The State shall 
provide the Administrator with such in-
formation as may be necessary to prop-
erly allocate administrative expenditures 
described in paragraph (1) that may oth-
erwise be made for similar eligibility de-
terminations.’’. 
(b) PHASED-IN
FEDERAL
ASSUMPTION
OF 
MEDICAID RESPONSIBILITY
FOR PREMIUM
AND 
COST-SHARING SUBSIDIES FOR DUALLY ELIGIBLE 
INDIVIDUALS.—
(1) IN GENERAL.—Section 1903(a)(1) (42 
U.S.C. 1396b(a)(1)) is amended by insert-
ing before the semicolon the following: ‘‘, 
reduced by the amount computed under 
section 1935(c)(1) for the State and the 
quarter’’. 
(2) AMOUNT DESCRIBED.—Section 1935, 
as inserted by subsection (a)(2), is amend-
ed by adding at the end the following 
new subsection: 
‘‘(c) FEDERAL
ASSUMPTION
OF
MEDICAID 
PRESCRIPTION DRUG COSTS FOR DUALLY-ELIGI-
BLE BENEFICIARIES.—
747
‘‘(1) IN GENERAL.—For purposes of sec-
tion 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 (begin-
ning with 2005) the amount computed 
under this subsection is equal to the 
product of the following: 
‘‘(A) 
MEDICARE
SUBSIDIES.—The 
total amount of payments made in the 
quarter under section 1860D–7 (relat-
ing to premium and cost-sharing pre-
scription drug subsidies for low-in-
come medicare beneficiaries) that are 
attributable to individuals who are 
residents of the State and are entitled 
to benefits with respect to prescribed 
drugs under the State plan under this 
title (including such a plan operating 
under a waiver under section 1115). 
‘‘(B) STATE MATCHING RATE.—A pro-
portion 
computed 
by 
subtracting 
from 100 percent the Federal medical 
assistance percentage (as defined in 
section 1905(b)) applicable to the 
State and the quarter.
748
‘‘(C) PHASE-OUT PROPORTION.—The 
phase-out proportion (as defined in 
paragraph (2)) for the quarter. 
‘‘(2) PHASE-OUT PROPORTION.—For pur-
poses of paragraph (1)(C), the ‘phase-out 
proportion’ for a calendar quarter in—
‘‘(A) 2006 is 93-1⁄3 percent; 
‘‘(B) a subsequent year before 
2021, is the phase-out proportion for 
calendar quarters in the previous 
year decreased by 6-2⁄3
percentage 
points; or 
‘‘(C) a year after 2020 is 0 per-
cent.’’. 
(c) MEDICAID
PROVIDING
WRAP-AROUND 
BENEFITS.—Section 1935, as so inserted and 
amended, is further amended by adding at the 
end the following new subsection: 
‘‘(d) ADDITIONAL PROVISIONS.—
‘‘(1) MEDICAID AS SECONDARY PAYOR.—
In the case of an individual who is enti-
tled to qualified prescription drug cov-
erage under a prescription drug plan 
under part D of title XVIII (or under a 
MA-EFFS Rx plan under part C or E of
749
such title) and medical assistance for pre-
scribed drugs under this title, medical as-
sistance shall continue to be provided 
under this title (other than for copay-
ment amounts specified in section 1860D–
7(a)(1)(B), notwithstanding section 1916) 
for prescribed drugs to the extent pay-
ment is not made under the prescription 
drug plan or MA-EFFS Rx plan selected 
by the individual. 
‘‘(2) CONDITION.—A State may require, 
as a condition for the receipt of medical 
assistance under this title with respect to 
prescription drug benefits for an indi-
vidual eligible to obtain qualified pre-
scription drug coverage described in 
paragraph (1), that the individual elect 
qualified 
prescription 
drug 
coverage 
under section 1860D–1.’’. 
(d) TREATMENT OF TERRITORIES.—
(1) IN
GENERAL.—Section 1935, as so 
inserted and amended, is further amend-
ed—
(A) in subsection (a) in the matter 
preceding paragraph (1), by inserting
750
‘‘subject to subsection (e)’’ after ‘‘sec-
tion 1903(a)’’; 
(B) in subsection (c)(1), by insert-
ing ‘‘subject to subsection (e)’’ after 
‘‘1903(a)(1)’’; and 
(C) by adding at the end the fol-
lowing new subsection: 
‘‘(e) TREATMENT OF TERRITORIES.—
‘‘(1) IN
GENERAL.—In the case of a 
State, other than the 50 States and the 
District of Columbia—
‘‘(A) the previous provisions of 
this section shall not apply to resi-
dents of such State; and 
‘‘(B) if the State establishes a plan 
described in paragraph (2) (for pro-
viding medical assistance with re-
spect to the provision of prescription 
drugs to medicare beneficiaries), the 
amount otherwise determined under 
section 1108(f) (as increased under 
section 1108(g)) for the State shall be 
increased by the amount specified in 
paragraph (3).
751
‘‘(2) PLAN.—The plan described in this 
paragraph is a plan that—
‘‘(A) provides medical assistance 
with respect to the provision of cov-
ered outpatient drugs (as defined in 
section 
1860D–2(f)) 
to 
low-income 
medicare beneficiaries; and 
‘‘(B) 
assures 
that 
additional 
amounts received by the State that 
are attributable to the operation of 
this subsection are used only for such 
assistance. 
‘‘(3) INCREASED AMOUNT.—
‘‘(A) IN
GENERAL.—The amount 
specified in this paragraph for a 
State for a year is equal to the prod-
uct 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 section 
for all such States.
752
‘‘(B) AGGREGATE AMOUNT.—The ag-
gregate amount specified in this sub-
paragraph for—
‘‘(i) 
2006, 
is 
equal 
to 
$25,000,000; or 
‘‘(ii) a subsequent year, is 
equal to the aggregate amount 
specified in this subparagraph for 
the previous year increased by 
annual percentage increase speci-
fied in section 1860D–2(b)(5) for 
the year involved. 
‘‘(4) REPORT.—The Administrator shall 
submit to Congress a report on the appli-
cation of this subsection and may include 
in the report such recommendations as 
the Administrator deems appropriate.’’. 
(2) CONFORMING AMENDMENT.—Section 
1108(f) (42 U.S.C. 1308(f)) is amended by 
inserting ‘‘and section 1935(e)(1)(B)’’ after 
‘‘Subject to subsection (g)’’. 
(e) AMENDMENT
TO BEST PRICE.—Section 
1927(c)(1)(C)(i) (42 U.S.C. 1396r–8(c)(1)(C)(i)) is 
amended—
753
(1) by striking ‘‘and’’ at the end of 
subclause (III); 
(2) by striking the period at the end 
of subclause (IV) and inserting ‘‘; and’’; 
and 
(3) by adding at the end the following 
new subclause: 
‘‘(V) any prices charged 
which are negotiated by a 
prescription drug plan under 
part D of title XVIII, by a MA-
EFFS Rx plan under part C or 
E of such title with respect to 
covered outpatient drugs, or 
by a qualified retiree pre-
scription drug plan (as de-
fined in section 1860D–8(f)(1)) 
with respect to such drugs on 
behalf of individuals entitled 
to benefits under part A or 
enrolled under part B of such 
title.’’.
754
SEC. 104. MEDIGAP TRANSITION. 
(a) IN GENERAL.—Section 1882 (42 U.S.C. 
1395ss) is amended by adding at the end the 
following new subsection: 
‘‘(v) COVERAGE OF PRESCRIPTION DRUGS.—
‘‘(1) 
IN
GENERAL.—Notwithstanding 
any other provision of law, except as pro-
vided in paragraph (3) no new medicare 
supplemental policy that provides cov-
erage of expenses for prescription drugs 
may be issued under this section on or 
after January 1, 2006, to an individual 
unless it replaces a medicare supple-
mental policy that was issued to that in-
dividual and that provided some cov-
erage of expenses for prescription drugs. 
Nothing in this subsection shall be con-
strued as preventing the policy holder of 
a medicare supplemental policy issued 
before January 1, 2006, from continuing 
to receive benefits under such policy on 
and after such date. 
‘‘(2) ISSUANCE OF SUBSTITUTE POLICIES 
FOR BENEFICIARIES ENROLLED WITH A PLAN 
UNDER PART D.—
755
‘‘(A) IN GENERAL.—The issuer of a 
medicare supplemental policy—
‘‘(i) may not deny or condition 
the issuance or effectiveness of a 
medicare 
supplemental 
policy 
that has a benefit package classi-
fied as ‘A’, ‘B’, ‘C’, ‘D’, ‘E’, ‘F’, or ‘G’ 
(under the standards established 
under subsection (p)(2)) and that 
is offered and is available for 
issuance to new enrollees by such 
issuer; 
‘‘(ii) may not discriminate in 
the pricing of such policy, be-
cause of health status, claims ex-
perience, receipt of health care, 
or medical condition; and 
‘‘(iii) may not impose an ex-
clusion of benefits based on a pre-
existing condition under such pol-
icy, 
in the case of an individual described 
in subparagraph (B) who seeks to en-
roll under the policy not later than 63 
days after the date of the termination
756
of enrollment described in such para-
graph and who submits evidence of 
the 
date 
of 
termination 
or 
disenrollment along with the applica-
tion for such medicare supplemental 
policy. 
‘‘(B) INDIVIDUAL COVERED.—An in-
dividual described in this subpara-
graph is an individual who—
‘‘(i) enrolls in a prescription 
drug plan under part D; and 
‘‘(ii) at the time of such enroll-
ment was enrolled and terminates 
enrollment in a medicare supple-
mental policy which has a benefit 
package classified as ‘H’, ‘I’, or ‘J’ 
under the standards referred to 
in subparagraph (A)(i) or termi-
nates enrollment in a policy to 
which such standards do not 
apply but which provides benefits 
for prescription drugs. 
‘‘(C) 
ENFORCEMENT.—The 
provi-
sions of paragraph (4) of subsection 
(s) shall apply with respect to the re-
757
quirements of this paragraph in the 
same manner as they apply to the re-
quirements of such subsection. 
‘‘(3) 
NEW
STANDARDS.—In 
applying 
subsection (p)(1)(E) (including permitting 
the NAIC to revise its model regulations 
in response to changes in law) with re-
spect to the change in benefits resulting 
from title I of the Medicare Prescription 
Drug and Modernization Act of 2003, with 
respect to policies issued to individuals 
who are enrolled in a plan under part D, 
the changes in standards shall only pro-
vide for substituting (for the benefit 
packages 
described 
in 
paragraph 
(2)(B)(ii) that included coverage for pre-
scription drugs) two benefit packages 
that may provide for coverage of cost-
sharing (other than the prescription drug 
deductible) with respect to qualified pre-
scription drug coverage under such part. 
The two benefit packages shall be con-
sistent with the following: 
‘‘(A) FIRST NEW POLICY.—The pol-
icy described in this subparagraph
758
has the following benefits, notwith-
standing any other provision of this 
section relating to a core benefit 
package: 
‘‘(i) Coverage of 50 percent of 
the cost-sharing otherwise appli-
cable under parts A and B, except 
coverage of 100 percent of any 
cost-sharing otherwise applicable 
for preventive benefits. 
‘‘(ii) No coverage of the part B 
deductible. 
‘‘(iii) Coverage for all hospital 
coinsurance for long stays (as in 
the current core benefit package). 
‘‘(iv) A limitation on annual 
out-of-pocket expenditures under 
parts A and B to $4,000 in 2005 
(or, in a subsequent year, to such 
limitation for the previous year 
increased by an appropriate infla-
tion adjustment specified by the 
Secretary). 
‘‘(B) SECOND NEW POLICY.—The pol-
icy described in this subparagraph
759
has the same benefits as the policy 
described in subparagraph (A), ex-
cept as follows: 
‘‘(i) Substitute ‘75 percent’ for 
‘50 percent’ in clause (i) of such 
subparagraph. 
‘‘(ii) 
Substitute 
‘$2,000’ 
for 
‘$4,000’ in clause (iv) of such sub-
paragraph. 
‘‘(4) CONSTRUCTION.—Any provision in 
this section or in a medicare supple-
mental policy relating to guaranteed re-
newability of coverage shall be deemed to 
have been met through the offering of 
other coverage under this subsection.’’. 
(b) NAIC REPORT TO CONGRESS ON MEDIGAP 
MODERNIZATION.—The Secretary shall request 
the National Association of Insurance Com-
missioners to submit to Congress, not later 
than 18 months after the date of the enact-
ment of this Act, a report that includes rec-
ommendations on the modernization of cov-
erage under the medigap program under sec-
tion 1882 of the Social Security Act (42 U.S.C. 
1395ss).
760
SEC. 105. MEDICARE PRESCRIPTION DRUG DISCOUNT 
CARD ENDORSEMENT PROGRAM. 
(a) IN GENERAL.—Title XVIII is amended 
by inserting after section 1806 the following 
new sections: 
‘‘MEDICARE PRESCRIPTION DRUG DISCOUNT CARD 
ENDORSEMENT PROGRAM 
‘‘SEC. 1807. (a) ESTABLISHMENT
OF PRO-
GRAM.—
‘‘(1) IN
GENERAL.—The Secretary (or 
the Medicare Benefits Administrator pur-
suant to section 1809(c)(3)(C)) shall estab-
lish a program to endorse prescription 
drug discount card programs (each such 
program referred to as an ‘endorsed pro-
gram’) that meet the requirements of this 
section in order to provide access to pre-
scription drug discounts for medicare 
beneficiaries 
throughout 
the 
United 
States. The Secretary shall make avail-
able to medicare beneficiaries informa-
tion regarding endorsed programs under 
this section. 
‘‘(2) LIMITED
PERIOD
OF
OPERATION.—
The Secretary shall begin the program 
under this section as soon as possible,
761
but in no case later than 90 days after the 
date of the enactment of this section. The 
Secretary shall provide for an appro-
priate transition and discontinuation of 
such program at the time medicare pre-
scription 
drug 
benefits 
first 
become 
available under part D. 
‘‘(b) REQUIREMENTS
FOR CARD ENDORSE-
MENT PROGRAM.—The Secretary may not en-
dorse a prescription drug discount card pro-
gram under this section unless the program 
meets the following requirements: 
‘‘(1) 
SAVINGS
TO
MEDICARE
BENE-
FICIARIES.—The program passes on to 
medicare beneficiaries who enroll in the 
program discounts, rebates, and other 
price concessions on prescription drugs, 
including 
discounts 
negotiated 
with 
pharmacies and manufacturers. 
‘‘(2) PROHIBITION ON APPLICATION ONLY 
TO MAIL ORDER.—The program applies to 
drugs that are available other than solely 
through mail order. 
‘‘(3) BENEFICIARY SERVICES.—The pro-
gram provides pharmaceutical support
762
services, such as education and coun-
seling, and services to prevent adverse 
drug interactions. 
‘‘(4) 
INFORMATION.—The 
program 
makes available to medicare beneficiaries 
through the Internet and otherwise infor-
mation, including information on enroll-
ment 
fees, 
prices 
charged 
to 
bene-
ficiaries, and services offered under the 
program, that the Secretary identifies as 
being necessary to provide for informed 
choice by beneficiaries among endorsed 
programs. 
‘‘(5) DEMONSTRATED EXPERIENCE.—The 
program is operated directly, or through 
arrangements with affiliated organiza-
tion, by an entity that has demonstrated 
experience and expertise in operating 
such a program or a similar program. 
‘‘(6) QUALITY
ASSURANCE.—Such oper-
ating entity has in place adequate proce-
dures for assuring quality service under 
the program. 
‘‘(7) ENROLLMENT FEES.—The program 
may charge an annual enrollment fee, but
763
the amount of such annual fee may not 
exceed $30. A State may pay some or all 
of the fee for individuals residing in the 
State. 
‘‘(8) CONFIDENTIALITY
PROTECTIONS.—
The program implements policies and 
procedures to safeguard the use and dis-
closure of program beneficiaries’ individ-
ually identifiable health information in a 
manner consistent with the Federal regu-
lations (concerning the privacy of indi-
vidually identifiable health information) 
promulgated under section 264(c) of the 
Health Insurance Portability and Ac-
countability Act of 1996. 
‘‘(9) 
PERIODIC
REPORTS
TO
SEC-
RETARY.—The entity operating the pro-
gram shall submit to the Secretary peri-
odic reports on performance, utilization, 
finances, and such other matters as the 
Secretary may specify. 
‘‘(10) ADDITIONAL BENEFICIARY PROTEC-
TIONS.—The program meets such addi-
tional requirements as the Secretary 
identifies to protect and promote the in-
764
terest of medicare beneficiaries, includ-
ing requirements that ensure that bene-
ficiaries are not charged more than the 
lower of the negotiated retail price or the 
usual and customary price. 
The prices negotiated by a prescription drug 
discount card program endorsed under this 
section shall (notwithstanding any other pro-
vision of law) not be taken into account for 
the purposes of establishing the best price 
under section 1927(c)(1)(C). 
‘‘(c) PROGRAM OPERATION.—The Secretary 
shall operate the program under this section 
consistent with the following: 
‘‘(1) 
PROMOTION
OF
INFORMED 
CHOICE.—In order to promote informed 
choice among endorsed prescription drug 
discount card programs, the Secretary 
shall provide for the dissemination of in-
formation which compares the prices and 
services of such programs in a manner 
coordinated with the dissemination of 
educational information on Medicare Ad-
vantage plans under part C.
765
‘‘(2) OVERSIGHT.—The Secretary shall 
provide appropriate oversight to ensure 
compliance of endorsed programs with 
the requirements of this section, includ-
ing verification and disclosure (upon re-
quest) of the discounts and services pro-
vided, the amount of dispensing fees rec-
ognized, and audits under section 1860D–
2(d)(3). 
‘‘(3) USE OF MEDICARE TOLL-FREE NUM-
BER.—The 
Secretary 
shall 
provide 
through the 1-800-medicare toll free tele-
phone number for the receipt and re-
sponse to inquiries and complaints con-
cerning the program and programs en-
dorsed under this section. 
‘‘(4) SANCTIONS
FOR
ABUSIVE
PRAC-
TICES.—The Secretary may implement in-
termediate sanctions or may revoke the 
endorsement of a program in the case of 
a program that the Secretary determines 
no longer meets the requirements of this 
section or that has engaged in false or 
misleading marketing practices.
766
‘‘(5) ENROLLMENT PRACTICES.—A medi-
care beneficiary may not be enrolled in 
more than one endorsed program at any 
time. A medicare beneficiary may change 
the endorsed program in which the bene-
ficiary is enrolled, but may not make 
such change until the beneficiary has 
been enrolled in a program for a min-
imum period of time specified by the Sec-
retary. 
‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—
There are authorized to be appropriated such 
sums as may be necessary to carry out this 
section. 
‘‘(e) INTERIM, FINAL REGULATORY AUTHOR-
ITY.—In order to carry out this section in a 
timely manner, the Secretary may promulgate 
regulations that take effect on an interim 
basis, after notice and pending opportunity 
for public comment. 
‘‘TRANSITIONAL PRESCRIPTION DRUG ASSISTANCE 
PROGRAM FOR LOW-INCOME BENEFICIARIES 
‘‘SEC. 1807A. (a) PURPOSE.—The purpose of 
this section is to provide low-income medi-
care beneficiaries with incomes below 150 
percent of the Federal poverty level imme-
767
diate assistance in the purchase of covered 
outpatient prescription drugs during the pe-
riod before the program under part D be-
comes effective. 
‘‘(b) APPROPRIATIONS.—For the purpose of 
carrying out this section, there is appro-
priated, out of any money in the Treasury not 
otherwise appropriated—
‘‘(1) 
for 
fiscal 
year 
2004, 
$2,000,000,000; and 
‘‘(2) 
for 
fiscal 
year 
2005, 
$3,000,000,000. 
‘‘(c) ELIGIBILITY.—
‘‘(1) IN GENERAL.—The Secretary shall 
establish eligibility standards consistent 
with this subsection. 
‘‘(2) SPECIFICS.—In no case shall an in-
dividual be eligible for assistance under 
this section unless the individual—
‘‘(A) is entitled to benefits under 
part A or enrolled under part B; 
‘‘(B) has income that is at or 
below 150 percent of the Federal pov-
erty line;
768
‘‘(C) meets the resources require-
ment 
described 
in 
section 
1905(p)(1)(C); 
‘‘(D) is enrolled under a prescrip-
tion drug discount card program 
under section 1807 (or under an alter-
native 
program 
authorized 
under 
subsection (d)(2)); and 
‘‘(E) is not eligible for coverage of, 
or assistance for, outpatient prescrip-
tion drugs under any of the following: 
‘‘(i) A medicaid plan under 
title XIX (including under any 
waiver approved under section 
1115). 
‘‘(ii) 
Enrollment 
under 
a 
group health plan or health insur-
ance coverage. 
‘‘(iii) 
Enrollment 
under 
a 
medicare supplemental insurance 
policy. 
‘‘(iv) Chapter 55 of title 10, 
United States Code (relating to 
medical and dental care for mem-
bers of the uniformed services).
769
‘‘(v) Chapter 17 of title 38, 
United States Code (relating to 
Veterans’ medical care). 
‘‘(vi) Enrollment under a plan 
under chapter 89 of title 5, United 
States Code (relating to the Fed-
eral employees’ health benefits 
program). 
‘‘(vii) The Indian Health Care 
Improvement Act (25 U.S.C. 1601 
et seq.). 
‘‘(d) FORM OF ASSISTANCE.—
‘‘(1) IN
GENERAL.—Subject to para-
graph (2), the assistance under this sec-
tion to an eligible individual shall be in 
such form as the Secretary shall specify, 
including the use of a debit card mecha-
nism to pay for drugs purchased through 
the use of the prescription drug discount 
card program to eligible individuals who 
are enrolled in such program. 
‘‘(2) THROUGH ALTERNATIVE STATE PRO-
GRAM.—A State may apply to the Sec-
retary for authorization to provide the 
assistance under this section to an eligi-
770
ble individual through a State pharma-
ceutical assistance program or private 
program of pharmaceutical assistance. 
The Secretary shall not authorize the use 
of such a program unless the Secretary 
finds that the program—
‘‘(A) was in existence before the 
date of the enactment of this section; 
and 
‘‘(B) is reasonably designed to 
provide for pharmaceutical assist-
ance for a number of individuals, and 
in a scope, that is not less than the 
number of individuals, and minimum 
required amount, that would occur if 
the provisions of this paragraph had 
not applied in the State. 
‘‘(3) RELATIONSHIP TO DISCOUNTS.—The 
assistance provided under this section is 
in addition to the discount otherwise 
available to individuals enrolled in pre-
scription drug discount card programs 
who are not eligible individuals. 
‘‘(4) LIMITATION ON ASSISTANCE.—
771
‘‘(A) IN
GENERAL.—The assistance 
under this section for an eligible indi-
vidual shall be limited to assistance—
‘‘(i) 
for 
covered 
outpatient 
drugs (as defined for purposes of 
part D) and for enrollment fees 
imposed under prescription drug 
discount card programs; and 
‘‘(ii) for expenses incurred—
‘‘(I) on and after the date 
the individual is both enrolled 
in the prescription drug dis-
count card program and de-
termined to be an eligible in-
dividual under this section; 
and 
‘‘(II) before the date bene-
fits are first available under 
the program under part D. 
‘‘(B) AUTHORITY.—The Secretary 
shall take such steps as may be nec-
essary to assure compliance with the 
expenditure limitations described in 
subsection (b).
772
‘‘(e) PAYMENT
OF
FEDERAL
SUBSIDY
TO 
SPONSORS.—
‘‘(1) IN
GENERAL.—Insofar as assist-
ance is provided under this section 
through programs under section 1807, the 
Secretary shall make payment (within 
the amounts under subsection (b), less 
the administrative costs relating to deter-
minations of eligibility) to the sponsor of 
the prescription drug discount card pro-
gram (or to a State or other entity oper-
ating an alternative program under sub-
section (d)(2)) in which an eligible indi-
vidual is enrolled of the amount of the as-
sistance provided by the sponsor pursu-
ant to this section. 
‘‘(2) PERIODIC
PAYMENTS.—Payments 
under this subsection shall be made on a 
monthly or other periodic installment 
basis, based upon estimates of the Sec-
retary and shall be reduced or increased 
to the extent of any overpayment or un-
derpayment which the Secretary deter-
mines was made under this section for 
any prior period and with respect to
773
which adjustment has not already been 
made under this paragraph. 
‘‘(f) DEFINITIONS.—For purposes of this 
section: 
‘‘(1) ELIGIBLE
INDIVIDUAL.—The term 
‘eligible individual’ means an individual 
who is determined by a State to be eligi-
ble for assistance under this section. 
‘‘(2) 
PRESCRIPTION
DRUG
DISCOUNT 
CARD
PROGRAM.—The term ‘prescription 
drug discount card program’ means such 
a program that is endorsed under section 
1807. 
‘‘(3) 
SPONSOR.—The 
term 
‘sponsor’ 
means the sponsor of a prescription drug 
discount card program, or, in the case of 
an alternative program authorized under 
subsection (d)(2), the State or other enti-
ty operating the program.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
1927(c)(1)(C)(i)(V) 
(42 
U.S.C. 
1396r–
8(c)(1)(C)(i)(V)), as added by section 103(e), is 
amended by striking ‘‘or by a qualified retiree 
prescription drug plan (as defined in section 
1860D–8(f)(1))’’ and inserting ‘‘by a qualified
774
retiree prescription drug plan (as defined in 
section 1860D–8(f)(1)), or by a prescription 
drug discount card program endorsed under 
section 1807’’. 
SEC. 106. DISCLOSURE OF RETURN INFORMATION FOR 
PURPOSES OF CARRYING OUT MEDICARE 
CATASTROPHIC PRESCRIPTION DRUG PRO-
GRAM. 
(a) IN GENERAL.—Subsection (l) of section 
6103 of the Internal Revenue Code of 1986 (re-
lating to disclosure of returns and return in-
formation for purposes other than tax admin-
istration) is amended by adding at the end the 
following new paragraph: 
‘‘(19) DISCLOSURE OF RETURN INFORMA-
TION FOR PURPOSES OF CARRYING OUT MEDI-
CARE
CATASTROPHIC
PRESCRIPTION
DRUG 
PROGRAM.—
‘‘(A) IN
GENERAL.—The Secretary 
may, upon written request from the 
Secretary of Health and Human Serv-
ices under section 1860D–2(b)(4)(E)(i) 
of the Social Security Act, disclose to 
officers and employees of the Depart-
ment of Health and Human Services
775
with respect to a specified taxpayer 
for the taxable year specified by the 
Secretary of Health and Human Serv-
ices in such request—
‘‘(i) the taxpayer identity in-
formation with respect to such 
taxpayer, and 
‘‘(ii) the adjusted gross income 
of such taxpayer for the taxable 
year 
(or, 
if 
less, 
the 
income 
threshold limit specified in sec-
tion 1860D–2(b)(4)(D)(ii) for the 
calendar year specified by such 
Secretary in such request). 
‘‘(B) 
SPECIFIED
TAXPAYER.—For 
purposes of this paragraph, the term 
‘specified taxpayer’ means any tax-
payer who—
‘‘(i) is identified by the Sec-
retary of Health and Human Serv-
ices in the request referred to in 
subparagraph (A), and 
‘‘(ii) either—
‘‘(I) has an adjusted gross 
income for the taxable year
776
referred to in subparagraph 
(A) in excess of the income 
threshold specified in section 
1860D–2(b)(4)(D)(ii) 
of 
such 
Act for the calendar year re-
ferred to in such subpara-
graph, or 
‘‘(II) is identified by such 
Secretary 
under 
subpara-
graph (A) as being an indi-
vidual who elected to use 
more 
recent 
information 
under 
section 
1860D–
2(b)(4)(D)(v) of such Act. 
‘‘(C) JOINT RETURNS.—In the case 
of a joint return, the Secretary shall, 
for purposes of applying this para-
graph, treat each spouse as a sepa-
rate taxpayer having an adjusted 
gross income equal to one-half of the 
adjusted gross income determined 
with respect to such return. 
‘‘(D) RESTRICTION
ON
USE
OF
DIS-
CLOSED
INFORMATION.—Return infor-
mation disclosed under subparagraph
777
(A) may be used by officers and em-
ployees of the Department of Health 
and Human Services only for the pur-
pose of administering the prescrip-
tion drug benefit under title XVIII of 
the Social Security Act. Such officers 
and employees may disclose the an-
nual out-of-pocket threshold which 
applies to an individual under such 
part to the entity that offers the plan 
referred 
to 
in 
section 
1860D–
2(b)(4)(E)(ii) of such Act in which 
such individual is enrolled. Such 
sponsor may use such information 
only for purposes of administering 
such benefit.’’. 
(b) CONFIDENTIALITY.—Paragraph (3) of 
section 6103(a) of such Code is amended by 
striking ‘‘or (16)’’ and inserting ‘‘(16), or (19)’’. 
(c) PROCEDURES AND RECORDKEEPING RE-
LATED TO DISCLOSURES.—Subsection (p)(4) of 
section 6103 of such Code is amended by strik-
ing ‘‘any other person described in subsection 
(l)(16) or (17)’’ each place it appears and in-
778
serting ‘‘any other person described in sub-
section (l)(16), (17), or (19)’’. 
(d) 
UNAUTHORIZED
DISCLOSURE.—Para-
graph (2) of section 7213(a) of such Code is 
amended by striking ‘‘or (16)’’ and inserting 
‘‘(16), or (19)’’. 
(e) UNAUTHORIZED INSPECTION.—Subpara-
graph (B) of section 7213A(a)(1) of such Code 
is amended by inserting ‘‘or (19)’’ after ‘‘sub-
section (l)(18)’’.
SEC. 107. STATE PHARMACEUTICAL ASSISTANCE TRANSI-
TION COMMISSION. 
(a) ESTABLISHMENT.—
(1) IN GENERAL.—There is established, 
as of the first day of the third month be-
ginning after the date of the enactment of 
this Act, a State Pharmaceutical Assist-
ance Transition Commission (in this sec-
tion referred to as the ‘‘Commission’’) to 
develop a proposal for addressing the 
unique transitional issues facing State 
pharmaceutical assistance programs, and 
program participants, due to the imple-
mentation of the medicare prescription
779
drug program under part D of title XVIII 
of the Social Security Act. 
(2) DEFINITIONS.—For purposes of this 
section: 
(A) STATE PHARMACEUTICAL ASSIST-
ANCE
PROGRAM
DEFINED.—The term 
‘‘State pharmaceutical assistance pro-
gram’’ means a program (other than 
the medicaid program) operated by a 
State (or under contract with a State) 
that provides as of the date of the en-
actment of this Act assistance to low-
income medicare beneficiaries for the 
purchase of prescription drugs. 
(B) PROGRAM
PARTICIPANT.—The 
term ‘‘program participant’’ means a 
low-income medicare beneficiary who 
is a participant in a State pharma-
ceutical assistance program. 
(b) COMPOSITION.—The Commission shall 
include the following: 
(1) A representative of each governor 
of each State that the Secretary identifies 
as operating on a statewide basis a State 
pharmaceutical assistance program that
780
provides for eligibility and benefits that 
are comparable or more generous than 
the low-income assistance eligibility and 
benefits offered under part D of title 
XVIII of the Social Security Act. 
(2) Representatives from other States 
that the Secretary identifies have in op-
eration other State pharmaceutical as-
sistance programs, as appointed by the 
Secretary. 
(3) Representatives of organizations 
that have an inherent interest in pro-
gram participants or the program itself, 
as appointed by the Secretary but not to 
exceed the number of representatives 
under paragraphs (1) and (2). 
(4) Representatives of Medicare Ad-
vantage organizations and other private 
health insurance plans, as appointed by 
the Secretary. 
(5) The Secretary (or the Secretary’s 
designee) and such other members as the 
Secretary may specify
781
The Secretary shall designate a member to 
serve as chair of the Commission and the 
Commission shall meet at the call of the chair. 
(c) DEVELOPMENT OF PROPOSAL.—The Com-
mission shall develop the proposal described 
in subsection (a) in a manner consistent with 
the following principles: 
(1) Protection of the interests of pro-
gram participants in a manner that is the 
least disruptive to such participants and 
that includes a single point of contact for 
enrollment and processing of benefits. 
(2) Protection of the financial and 
flexibility interests of States so that 
States are not financially worse off as a 
result of the enactment of this title. 
(3) Principles of medicare moderniza-
tion provided under title II of this Act. 
(d) REPORT.—By not later than January 1, 
2005, the Commission shall submit to the 
President and the Congress a report that con-
tains a detailed proposal (including specific 
legislative or administrative recommenda-
tions, if any) and such other recommenda-
tions as the Commission deems appropriate.
782
(e) SUPPORT.—The Secretary shall provide 
the Commission with the administrative sup-
port services necessary for the Commission to 
carry out its responsibilities under this sec-
tion. 
(f) TERMINATION.—The Commission shall 
terminate 30 days after the date of submission 
of the report under subsection (d).
TITLE II—MEDICARE ENHANCED 
FEE-FOR-SERVICE AND MEDI-
CARE 
ADVANTAGE 
PRO-
GRAMS; MEDICARE COMPETI-
TION 
SEC. 200. MEDICARE MODERNIZATION AND REVITALIZA-
TION. 
This title provides for—
(1) establishment of the medicare en-
hanced fee-for-service (EFFS) program 
under which medicare beneficiaries are 
provided access to a range of enhanced 
fee-for-service (EFFS) plans that may use 
preferred provider networks to offer an 
enhanced range of benefits; 
(2) establishment of a Medicare Ad-
vantage program that offers improved
783
managed care plans with coordinated 
care; and 
(3) competitive bidding, in the style of 
the Federal Employees Health Benefits 
program (FEHBP), among enhanced fee-
for-service plans and Medicare Advan-
tage plans in order to promote greater ef-
ficiency and responsiveness to medicare 
beneficiaries.
Subtitle A—Medicare Enhanced 
Fee-for-Service Program 
SEC. 201. ESTABLISHMENT OF ENHANCED FEE-FOR-SERV-
ICE (EFFS) PROGRAM UNDER MEDICARE. 
(a) IN GENERAL.—Title XVIII, as amended 
by section 101(a), is amended—
(1) by redesignating part E as part F; 
and 
(2) by inserting after part D the fol-
lowing new part:
‘‘PART E—ENHANCED FEE-FOR-SERVICE 
PROGRAM 
‘‘OFFERING OF ENHANCED FEE-FOR-SERVICE 
PLANS THROUGHOUT THE UNITED STATES 
‘‘SEC. 1860E–1. (a) ESTABLISHMENT OF PRO-
GRAM.—
784
‘‘(1) IN
GENERAL.—The Administrator 
shall establish under this part beginning 
January 1, 2006, an enhanced fee-for-
service program under which enhanced 
fee-for-service plans (as defined in sub-
section (b)) are offered to EFFS-eligible 
individuals (as so defined) in EFFS re-
gions throughout the United States. 
‘‘(2) EFFS REGIONS.—For purposes of 
this part the Administrator shall estab-
lish EFFS regions throughout the United 
States by dividing the entire United 
States into at least 10 such regions. Be-
fore establishing such regions, the Ad-
ministrator shall conduct a market sur-
vey and analysis, including an examina-
tion of current insurance markets, to de-
termine how the regions should be estab-
lished. The regions shall be established in 
a manner to take into consideration 
maximizing full access for all EFFS-eligi-
ble individuals, especially those residing 
in rural areas. 
‘‘(b) DEFINITIONS.—For purposes of this 
part:
785
‘‘(1) EFFS ORGANIZATION.—The ‘EFFS 
organization’ means an entity that the 
Administrator certifies as meeting the re-
quirements and standards applicable to 
such organization under this part. 
‘‘(2) ENHANCED FEE-FOR-SERVICE PLAN; 
EFFS PLAN.—The terms ‘enhanced fee-for-
service plan’ and ‘EFFS plan’ mean 
health benefits coverage offered under a 
policy, contract, or plan by an EFFS orga-
nization pursuant to and in accordance 
with a contract pursuant to section 
1860E–4(c), but only if the plan provides 
either fee-for-service coverage described 
in the following subparagraph (A) or pre-
ferred provider coverage described in the 
following subparagraph (B): 
‘‘(A) FEE-FOR-SERVICE COVERAGE.—
The plan—
‘‘(i) reimburses hospitals, phy-
sicians, and other providers at a 
rate determined by the plan on a 
fee-for-service basis without plac-
ing the provider at financial risk;
786
‘‘(ii) does not vary such rates 
for such a provider based on utili-
zation relating to such provider; 
and 
‘‘(iii) does not restrict the se-
lection of providers among those 
who are lawfully authorized to 
provide the covered services and 
agree to accept the terms and 
conditions of payment established 
by the plan. 
‘‘(B) PREFERRED
PROVIDER
COV-
ERAGE.—The plan—
‘‘(i) has a network of pro-
viders that have agreed to a con-
tractually 
specified 
reimburse-
ment for covered benefits with 
the 
organization 
offering 
the 
plan; and 
‘‘(ii) provides for reimburse-
ment for all covered benefits re-
gardless of whether such benefits 
are provided within such network 
of providers.
787
‘‘(3) EFFS ELIGIBLE
INDIVIDUAL.—The 
term ‘EFFS eligible individual’ means an 
eligible individual described in section 
1851(a)(3). 
‘‘(4) EFFS REGION.—The term ‘EFFS 
region’ means a region established under 
subsection (a)(2). 
‘‘(c) APPLICATION OF CERTAIN ELIGIBILITY, 
ENROLLMENT, ETC. REQUIREMENTS.—The provi-
sions of section 1851 (other than subsection 
(h)(4)(A)) shall apply to EFFS plans offered by 
an EFFS organization in an EFFS region, in-
cluding subsection (g) (relating to guaranteed 
issue and renewal). 
‘‘OFFERING OF ENHANCED FEE-FOR-SERVICE 
(EFFS) PLANS 
‘‘SEC. 1860E–2. (a) PLAN REQUIREMENTS.—
No EFFS plan may be offered under this part 
in an EFFS region unless the requirements of 
this part are met with respect to the plan and 
EFFS organization offering the plan. 
‘‘(b) AVAILABLE TO ALL EFFS BENEFICIARIES 
IN
THE ENTIRE REGION.—With respect to an 
EFFS plan offered in an EFFS region—
788
‘‘(1) IN
GENERAL.—The plan must be 
offered to all EFFS-eligible individuals 
residing in the region. 
‘‘(2) ASSURING
ACCESS
TO
SERVICES.—
The plan shall comply with the require-
ments of section 1852(d)(4). 
‘‘(c) BENEFITS.—
‘‘(1) IN
GENERAL.—Each EFFS plan 
shall provide to members enrolled in the 
plan under this part benefits, through 
providers and other persons that meet 
the applicable requirements of this title 
and part A of title XI—
‘‘(A) for the items and services de-
scribed in section 1852(a)(1); 
‘‘(B) that are uniform for the plan 
for all EFFS eligible individuals re-
siding in the same EFFS region; 
‘‘(C) that include a single deduct-
ible applicable to benefits under 
parts A and B and include a cata-
strophic limit on out-of-pocket ex-
penditures for such covered benefits; 
and
795
of paragraph (1)(A), the average per cap-
ita monthly savings referred to in such 
paragraph for an EFFS plan and year is 
computed as follows: 
‘‘(A) DETERMINATION
OF
REGION-
WIDE AVERAGE RISK ADJUSTMENT.—
‘‘(i) IN
GENERAL.—The Medi-
care Benefits Administrator shall 
determine, at the same time rates 
are promulgated under section 
1853(b)(1) (beginning with 2006), 
for each EFFS region the average 
of the risk adjustment factors de-
scribed in subsection (c)(3) to be 
applied to enrollees under this 
part in that region. In the case of 
an EFFS region in which an EFFS 
plan was offered in the previous 
year, the Administrator may com-
pute such average based upon 
risk adjustment factors applied 
under subsection (c)(3) in that re-
gion in a previous year. 
‘‘(ii) TREATMENT
OF
NEW
RE-
GIONS.—In the case of a region in
802
erence to the EFFS monthly prescrip-
tion drug beneficiary premium (as de-
fined in paragraph (3)(B)); and 
‘‘(C) 
a 
Medicare 
Advantage 
monthly 
supplemental 
beneficiary 
premium is deemed a reference to the 
EFFS monthly supplemental bene-
ficiary premium (as defined in para-
graph (3)(C)). 
‘‘(3) DEFINITIONS.—For purposes of 
this part: 
‘‘(A) EFFS MONTHLY
BASIC
BENE-
FICIARY
PREMIUM.—The term ‘EFFS 
monthly basic beneficiary premium’ 
means, with respect to an EFFS 
plan—
‘‘(i) 
described 
in 
section 
1860E–3(c)(1)(A) (relating to plans 
providing rebates), zero; or 
‘‘(ii) 
described 
in 
section 
1860E–3(c)(1)(B), the amount (if 
any) by which the unadjusted 
EFFS statutory non-drug monthly 
bid amount exceeds the EFFS re-
gion-specific 
non-drug 
monthly