H. R. 1
One Hundred Eighth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday,
the seventh day of January, two thousand and three
An Act
To amend title XVIII of the Social Security Act to provide for a voluntary program
for prescription drug coverage under the Medicare Program, to modernize the
Medicare Program, to amend the Internal Revenue Code of 1986 to allow a
deduction to individuals for amounts contributed to health savings security ac-
counts and health savings accounts, to provide for the disposition of unused
health benefits in cafeteria plans and flexible spending arrangements, and for
other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT;
REFERENCES TO BIPA AND SECRETARY; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Medicare
Prescription Drug, Improvement, and Modernization Act of 2003’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except as other-
wise specifically provided, whenever in division A of 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) BIPA; SECRETARY.—In this Act:
(1) BIPA.—The term ‘‘BIPA’’ means the Medicare, Med-
icaid, and SCHIP Benefits Improvement and Protection Act
of 2000, as enacted into law by section 1(a)(6) of Public Law
106–554.
(2) SECRETARY.—The term ‘‘Secretary’’ means the Secretary
of Health and Human Services.
(d) TABLE OF CONTENTS.—The table of contents for this Act
is as follows:
Sec. 1. Short title; amendments to Social Security Act; references to BIPA and Sec-
retary; table of contents.
TITLE I—MEDICARE PRESCRIPTION DRUG BENEFIT
Sec. 101. Medicare prescription drug benefit.
Sec. 102. Medicare Advantage conforming amendments.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap amendments.
Sec. 105. Additional provisions relating to medicare prescription drug discount card
and transitional assistance program.
Sec. 106. State Pharmaceutical Assistance Transition Commission.
Sec. 107. Studies and reports.
Sec. 108. Grants to physicians to implement electronic prescription drug programs.
Sec. 109. Expanding the work of medicare Quality Improvement Organizations to
include parts C and D.
Sec. 110. Conflict of interest study.
Sec. 111. Study on employment-based retiree health coverage.
H. R. 1—2
TITLE II—MEDICARE ADVANTAGE
Subtitle A—Implementation of Medicare Advantage Program
Sec. 201. Implementation of Medicare Advantage program.
Subtitle B—Immediate Improvements
Sec. 211. Immediate improvements.
Subtitle C—Offering of Medicare Advantage (MA) Regional Plans; Medicare
Advantage Competition
Sec. 221. Establishment of MA regional plans.
Sec. 222. Competition program beginning in 2006.
Sec. 223. Effective date.
Subtitle D—Additional Reforms
Sec. 231. Specialized MA plans for special needs individuals.
Sec. 232. Avoiding duplicative State regulation.
Sec. 233. Medicare MSAs.
Sec. 234. Extension of reasonable cost contracts.
Sec. 235. Two-year extension of municipal health service demonstration projects.
Sec. 236. Payment by PACE providers for medicare and medicaid services fur-
nished by noncontract providers.
Sec. 237. Reimbursement for federally qualified health centers providing services
under MA plans.
Sec. 238. Institute of Medicine evaluation and report on health care performance
measures.
Subtitle E—Comparative Cost Adjustment (CCA) Program
Sec. 241. Comparative Cost Adjustment (CCA) program.
TITLE III—COMBATTING WASTE, FRAUD, AND ABUSE
Sec. 301. Medicare secondary payor (MSP) provisions.
Sec. 302. Payment for durable medical equipment; competitive acquisition of cer-
tain items and services.
Sec. 303. Payment reform for covered outpatient drugs and biologicals.
Sec. 304. Extension of application of payment reform for covered outpatient drugs
and biologicals to other physician specialties.
Sec. 305. Payment for inhalation drugs.
Sec. 306. Demonstration project for use of recovery audit contractors.
Sec. 307. Pilot program for national and State background checks on direct patient
access employees of long-term care facilities or providers.
TITLE IV—RURAL PROVISIONS
Subtitle A—Provisions Relating to Part A Only
Sec. 401. Equalizing urban and rural standardized payment amounts under the
medicare inpatient hospital prospective payment system.
Sec. 402. Enhanced disproportionate share hospital (DSH) treatment for rural hos-
pitals and urban hospitals with fewer than 100 beds.
Sec. 403. Adjustment to the medicare inpatient hospital prospective payment sys-
tem wage index to revise the labor-related share of such index.
Sec. 404. More frequent update in weights used in hospital market basket.
Sec. 405. Improvements to critical access hospital program.
Sec. 406. Medicare inpatient hospital payment adjustment for low-volume hos-
pitals.
Sec. 407. Treatment of missing cost reporting periods for sole community hospitals.
Sec. 408. Recognition of attending nurse practitioners as attending physicians to
serve hospice patients.
Sec. 409. Rural hospice demonstration project.
Sec. 410. Exclusion of certain rural health clinic and federally qualified health cen-
ter services from the prospective payment system for skilled nursing fa-
cilities.
Sec. 410A. Rural community hospital demonstration program.
Subtitle B—Provisions Relating to Part B Only
Sec. 411. Two-year extension of hold harmless provisions for small rural hospitals
and sole community hospitals under the prospective payment system for
hospital outpatient department services.
Sec. 412. Establishment of floor on work geographic adjustment.
Sec. 413. Medicare incentive payment program improvements for physician scar-
city.
H. R. 1—3
Sec. 414. Payment for rural and urban ambulance services.
Sec. 415. Providing appropriate coverage of rural air ambulance services.
Sec. 416. Treatment of certain clinical diagnostic laboratory tests furnished to hos-
pital outpatients in certain rural areas.
Sec. 417. Extension of telemedicine demonstration project.
Sec. 418. Report on demonstration project permitting skilled nursing facilities to be
originating telehealth sites; authority to implement.
Subtitle C—Provisions Relating to Parts A and B
Sec. 421. One-year increase for home health services furnished in a rural area.
Sec. 422. Redistribution of unused resident positions.
Subtitle D—Other Provisions
Sec. 431. Providing safe harbor for certain collaborative efforts that benefit medi-
cally underserved populations.
Sec. 432. Office of Rural Health Policy improvements.
Sec. 433. MedPAC study on rural hospital payment adjustments.
Sec. 434. Frontier extended stay clinic demonstration project.
TITLE V—PROVISIONS RELATING TO PART A
Subtitle A—Inpatient Hospital Services
Sec. 501. Revision of acute care hospital payment updates.
Sec. 502. Revision of the indirect medical education (IME) adjustment percentage.
Sec. 503. Recognition of new medical technologies under inpatient hospital prospec-
tive payment system.
Sec. 504. Increase in Federal rate for hospitals in Puerto Rico.
Sec. 505. Wage index adjustment reclassification reform.
Sec. 506. Limitation on charges for inpatient hospital contract health services pro-
vided to Indians by medicare participating hospitals.
Sec. 507. Clarifications to certain exceptions to medicare limits on physician refer-
rals.
Sec. 508. One-time appeals process for hospital wage index classification.
Subtitle B—Other Provisions
Sec. 511. Payment for covered skilled nursing facility services.
Sec. 512. Coverage of hospice consultation services.
Sec. 513. Study on portable diagnostic ultrasound services for beneficiaries in
skilled nursing facilities.
TITLE VI—PROVISIONS RELATING TO PART B
Subtitle A—Provisions Relating to Physicians’ Services
Sec. 601. Revision of updates for physicians’ services.
Sec. 602. Treatment of physicians’ services furnished in Alaska.
Sec. 603. Inclusion of podiatrists, dentists, and optometrists under private con-
tracting authority.
Sec. 604. GAO study on access to physicians’ services.
Sec. 605. Collaborative demonstration-based review of physician practice expense
geographic adjustment data.
Sec. 606. MedPAC report on payment for physicians’ services.
Subtitle B—Preventive Services
Sec. 611. Coverage of an initial preventive physical examination.
Sec. 612. Coverage of cardiovascular screening blood tests.
Sec. 613. Coverage of diabetes screening tests.
Sec. 614. Improved payment for certain mammography services.
Subtitle C—Other Provisions
Sec. 621. Hospital outpatient department (HOPD) payment reform.
Sec. 622. Limitation of application of functional equivalence standard.
Sec. 623. Payment for renal dialysis services.
Sec. 624. Two-year moratorium on therapy caps; provisions relating to reports.
Sec. 625. Waiver of part B late enrollment penalty for certain military retirees; spe-
cial enrollment period.
Sec. 626. Payment for services furnished in ambulatory surgical centers.
Sec. 627. Payment for certain shoes and inserts under the fee schedule for orthotics
and prosthetics.
Sec. 628. Payment for clinical diagnostic laboratory tests.
Sec. 629. Indexing part B deductible to inflation.
H. R. 1—4
Sec. 630. Five-year authorization of reimbursement for all medicare part B services
furnished by certain Indian hospitals and clinics.
Subtitle D—Additional Demonstrations, Studies, and Other Provisions
Sec. 641. Demonstration project for coverage of certain prescription drugs and
biologicals.
Sec. 642. Extension of coverage of Intravenous Immune Globulin (IVIG) for the
treatment of primary immune deficiency diseases in the home.
Sec. 643. MedPAC study of coverage of surgical first assisting services of certified
registered nurse first assistants.
Sec. 644. MedPAC study of payment for cardio-thoracic surgeons.
Sec. 645. Studies relating to vision impairments.
Sec. 646. Medicare health care quality demonstration programs.
Sec. 647. MedPAC study on direct access to physical therapy services.
Sec. 648. Demonstration project for consumer-directed chronic outpatient services.
Sec. 649. Medicare care management performance demonstration.
Sec. 650. GAO study and report on the propagation of concierge care.
Sec. 651. Demonstration of coverage of chiropractic services under medicare.
TITLE VII—PROVISIONS RELATING TO PARTS A AND B
Subtitle A—Home Health Services
Sec. 701. Update in home health services.
Sec. 702. Demonstration project to clarify the definition of homebound.
Sec. 703. Demonstration project for medical adult day care services.
Sec. 704. Temporary suspension of OASIS requirement for collection of data on
non-medicare and non-medicaid patients.
Sec. 705. MedPAC study on medicare margins of home health agencies.
Sec. 706. Coverage of religious nonmedical health care institution services fur-
nished in the home.
Subtitle B—Graduate Medical Education
Sec. 711. Extension of update limitation on high cost programs.
Sec. 712. Exception to initial residency period for geriatric residency or fellowship
programs.
Sec. 713. Treatment of volunteer supervision.
Subtitle C—Chronic Care Improvement
Sec. 721. Voluntary chronic care improvement under traditional fee-for-service.
Sec. 722. Medicare Advantage quality improvement programs.
Sec. 723. Chronically ill medicare beneficiary research, data, demonstration strat-
egy.
Subtitle D—Other Provisions
Sec. 731. Improvements in national and local coverage determination process to re-
spond to changes in technology.
Sec. 732. Extension of treatment of certain physician pathology services under
medicare.
Sec. 733. Payment for pancreatic islet cell investigational transplants for medicare
beneficiaries in clinical trials.
Sec. 734. Restoration of medicare trust funds.
Sec. 735. Modifications to Medicare Payment Advisory Commission (MedPAC).
Sec. 736. Technical amendments.
TITLE VIII—COST CONTAINMENT
Subtitle A—Cost Containment
Sec. 801. Inclusion in annual report of medicare trustees of information on status
of medicare trust funds.
Sec. 802. Presidential submission of legislation.
Sec. 803. Procedures in the House of Representatives.
Sec. 804. Procedures in the Senate.
Subtitle B—Income-Related Reduction in Part B Premium Subsidy
Sec. 811. Income-related reduction in part B premium subsidy.
TITLE IX—ADMINISTRATIVE IMPROVEMENTS, REGULATORY
REDUCTION, AND CONTRACTING REFORM
Sec. 900. Administrative improvements within the Centers for Medicare & Med-
icaid Services (CMS).
H. R. 1—5
Subtitle A—Regulatory Reform
Sec. 901. Construction; definition of supplier.
Sec. 902. Issuance of regulations.
Sec. 903. Compliance with changes in regulations and policies.
Sec. 904. Reports and studies relating to regulatory reform.
Subtitle B—Contracting Reform
Sec. 911. Increased flexibility in medicare administration.
Sec. 912. Requirements for information security for medicare administrative con-
tractors.
Subtitle C—Education and Outreach
Sec. 921. Provider education and technical assistance.
Sec. 922. Small provider technical assistance demonstration program.
Sec. 923. Medicare Beneficiary Ombudsman.
Sec. 924. Beneficiary outreach demonstration program.
Sec. 925. Inclusion of additional information in notices to beneficiaries about skilled
nursing facility benefits.
Sec. 926. Information on medicare-certified skilled nursing facilities in hospital dis-
charge plans.
Subtitle D—Appeals and Recovery
Sec. 931. Transfer of responsibility for medicare appeals.
Sec. 932. Process for expedited access to review.
Sec. 933. Revisions to medicare appeals process.
Sec. 934. Prepayment review.
Sec. 935. Recovery of overpayments.
Sec. 936. Provider enrollment process; right of appeal.
Sec. 937. Process for correction of minor errors and omissions without pursuing ap-
peals process.
Sec. 938. Prior determination process for certain items and services; advance bene-
ficiary notices.
Sec. 939. Appeals by providers when there is no other party available.
Sec. 940. Revisions to appeals timeframes and amounts.
Sec. 940A. Mediation process for local coverage determinations.
Subtitle E—Miscellaneous Provisions
Sec. 941. Policy development regarding evaluation and management (E & M) docu-
mentation guidelines.
Sec. 942. Improvement in oversight of technology and coverage.
Sec. 943. Treatment of hospitals for certain services under medicare secondary
payor (MSP) provisions.
Sec. 944. EMTALA improvements.
Sec. 945. Emergency Medical Treatment and Labor Act (EMTALA) Technical Advi-
sory Group.
Sec. 946. Authorizing use of arrangements to provide core hospice services in cer-
tain circumstances.
Sec. 947. Application of OSHA bloodborne pathogens standard to certain hospitals.
Sec. 948. BIPA-related technical amendments and corrections.
Sec. 949. Conforming authority to waive a program exclusion.
Sec. 950. Treatment of certain dental claims.
Sec. 951. Furnishing hospitals with information to compute DSH formula.
Sec. 952. Revisions to reassignment provisions.
Sec. 953. Other provisions.
TITLE X—MEDICAID AND MISCELLANEOUS PROVISIONS
Subtitle A—Medicaid Provisions
Sec. 1001. Medicaid disproportionate share hospital (DSH) payments.
Sec. 1002. Clarification of inclusion of inpatient drug prices charged to certain pub-
lic hospitals in the best price exemptions for the medicaid drug rebate
program.
Sec. 1003. Extension of moratorium.
Subtitle B—Miscellaneous Provisions
Sec. 1011. Federal reimbursement of emergency health services furnished to un-
documented aliens.
Sec. 1012. Commission on Systemic Interoperability.
Sec. 1013. Research on outcomes of health care items and services.
Sec. 1014. Health care that works for all Americans: Citizens Health Care Working
Group.
H. R. 1—6
Sec. 1015. Funding start-up administrative costs for medicare reform.
Sec. 1016. Health care infrastructure improvement program.
TITLE XI—ACCESS TO AFFORDABLE PHARMACEUTICALS
Subtitle A—Access to Affordable Pharmaceuticals
Sec. 1101. Thirty-month stay-of-effectiveness period.
Sec. 1102. Forfeiture of 180-day exclusivity period.
Sec. 1103. Bioavailability and bioequivalence.
Sec. 1104. Conforming amendments.
Subtitle B—Federal Trade Commission Review
Sec. 1111. Definitions.
Sec. 1112. Notification of agreements.
Sec. 1113. Filing deadlines.
Sec. 1114. Disclosure exemption.
Sec. 1115. Enforcement.
Sec. 1116. Rulemaking.
Sec. 1117. Savings clause.
Sec. 1118. Effective date.
Subtitle C—Importation of Prescription Drugs
Sec. 1121. Importation of prescription drugs.
Sec. 1122. Study and report on importation of drugs.
Sec. 1123. Study and report on trade in pharmaceuticals.
TITLE XII—TAX INCENTIVES FOR HEALTH AND RETIREMENT
SECURITY
Sec. 1201. Health savings accounts.
Sec. 1202. Exclusion from gross income of certain Federal subsidies for prescription
drug plans.
Sec. 1203. Exception to information reporting requirements related to certain
health arrangements.
TITLE I—MEDICARE PRESCRIPTION
DRUG BENEFIT
SEC. 101. MEDICARE PRESCRIPTION DRUG BENEFIT.
(a) IN GENERAL.—Title XVIII 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
‘‘Subpart 1—Part D Eligible Individuals and Prescription Drug
Benefits
‘‘ELIGIBILITY, ENROLLMENT, AND INFORMATION
‘‘SEC. 1860D–1. (a) PROVISION
OF QUALIFIED PRESCRIPTION
DRUG COVERAGE THROUGH ENROLLMENT IN PLANS.—
‘‘(1) IN GENERAL.—Subject to the succeeding provisions of
this part, each part D eligible individual (as defined in para-
graph (3)(A)) is entitled to obtain qualified prescription drug
coverage (described in section 1860D–2(a)) as follows:
‘‘(A) FEE-FOR-SERVICE ENROLLEES MAY RECEIVE COV-
ERAGE THROUGH A PRESCRIPTION DRUG PLAN.—A part D
eligible individual who is not enrolled in an MA plan may
obtain qualified prescription drug coverage through enroll-
ment in a prescription drug plan (as defined in section
1860D–41(a)(14)).
‘‘(B) MEDICARE ADVANTAGE ENROLLEES.—
H. R. 1—7
‘‘(i) ENROLLEES IN A PLAN PROVIDING QUALIFIED
PRESCRIPTION
DRUG
COVERAGE
RECEIVE
COVERAGE
THROUGH THE PLAN.—A part D eligible individual who
is enrolled in an MA–PD plan obtains such coverage
through such plan.
‘‘(ii) LIMITATION
ON
ENROLLMENT
OF
MA
PLAN
ENROLLEES IN PRESCRIPTION DRUG PLANS.—Except as
provided in clauses (iii) and (iv), a part D eligible
individual who is enrolled in an MA plan may not
enroll in a prescription drug plan under this part.
‘‘(iii) PRIVATE FEE-FOR-SERVICE ENROLLEES IN MA
PLANS NOT PROVIDING QUALIFIED PRESCRIPTION DRUG
COVERAGE PERMITTED TO ENROLL IN A PRESCRIPTION
DRUG
PLAN.—A part D eligible individual who is
enrolled in an MA private fee-for-service plan (as
defined in section 1859(b)(2)) that does not provide
qualified prescription drug coverage may obtain quali-
fied prescription drug coverage through enrollment in
a prescription drug plan.
‘‘(iv) ENROLLEES
IN
MSA
PLANS
PERMITTED
TO
ENROLL
IN
A
PRESCRIPTION
DRUG
PLAN.—A part D
eligible individual who is enrolled in an MSA plan
(as defined in section 1859(b)(3)) may obtain qualified
prescription drug coverage through enrollment in a
prescription drug plan.
‘‘(2) COVERAGE FIRST EFFECTIVE JANUARY 1, 2006.—Coverage
under prescription drug plans and MA–PD plans shall first
be effective on January 1, 2006.
‘‘(3) DEFINITIONS.—For purposes of this part:
‘‘(A) PART D ELIGIBLE INDIVIDUAL.—The term ‘part D
eligible individual’ means an individual who is entitled
to benefits under part A or enrolled under part B.
‘‘(B) MA PLAN.—The term ‘MA plan’ has the meaning
given such term in section 1859(b)(1).
‘‘(C) MA–PD PLAN.—The term ‘MA–PD plan’ means
an MA plan that provides qualified prescription drug cov-
erage.
‘‘(b) ENROLLMENT PROCESS FOR PRESCRIPTION DRUG PLANS.—
‘‘(1) ESTABLISHMENT OF PROCESS.—
‘‘(A) IN
GENERAL.—The Secretary shall establish a
process for the enrollment, disenrollment, termination, and
change of enrollment of part D eligible individuals in
prescription drug plans consistent with this subsection.
‘‘(B) APPLICATION OF MA RULES.—In establishing such
process, the Secretary shall use rules similar to (and coordi-
nated with) the rules for enrollment, disenrollment, termi-
nation, and change of enrollment with an MA–PD plan
under the following provisions of section 1851:
‘‘(i) 
RESIDENCE
REQUIREMENTS.—Section
1851(b)(1)(A), relating to residence requirements.
‘‘(ii) EXERCISE OF CHOICE.—Section 1851(c) (other
than paragraph (3)(A) of such section), relating to exer-
cise of choice.
‘‘(iii) COVERAGE
ELECTION
PERIODS.—Subject to
paragraphs (2) and (3) of this subsection, section
1851(e) (other than subparagraphs (B) and (C) of para-
graph (2) and the second sentence of paragraph (4)
H. R. 1—8
of such section), relating to coverage election periods,
including initial periods, annual coordinated election
periods, special election periods, and election periods
for exceptional circumstances.
‘‘(iv) COVERAGE PERIODS.—Section 1851(f), relating
to effectiveness of elections and changes of elections.
‘‘(v) GUARANTEED
ISSUE
AND
RENEWAL.—Section
1851(g) (other than paragraph (2) of such section and
clause (i) and the second sentence of clause (ii) of
paragraph (3)(C) of such section), relating to guaran-
teed issue and renewal.
‘‘(vi) 
MARKETING
MATERIAL
AND
APPLICATION
FORMS.—Section 1851(h), relating to approval of mar-
keting material and application forms.
In applying clauses (ii), (iv), and (v) of this subparagraph,
any reference to section 1851(e) shall be treated as a ref-
erence to such section as applied pursuant to clause (iii)
of this subparagraph.
‘‘(C) SPECIAL
RULE.—The process established under
subparagraph (A) shall include, in the case of a part D
eligible individual who is a full-benefit dual eligible indi-
vidual (as defined in section 1935(c)(6)) who has failed
to enroll in a prescription drug plan or an MA–PD plan,
for the enrollment in a prescription drug plan that has
a monthly beneficiary premium that does not exceed the
premium assistance available under section 1860D–
14(a)(1)(A)). If there is more than one such plan available,
the Secretary shall enroll such an individual on a random
basis among all such plans in the PDP region. Nothing
in the previous sentence shall prevent such an individual
from declining or changing such enrollment.
‘‘(2) INITIAL ENROLLMENT PERIOD.—
‘‘(A) PROGRAM INITIATION.—In the case of an individual
who is a part D eligible individual as of November 15,
2005, there shall be an initial enrollment period that shall
be the same as the annual, coordinated open election period
described in section 1851(e)(3)(B)(iii), as applied under
paragraph (1)(B)(iii).
‘‘(B) CONTINUING PERIODS.—In the case of an individual
who becomes a part D eligible individual after November
15, 2005, there shall be an initial enrollment period which
is the period under section 1851(e)(1), as applied under
paragraph (1)(B)(iii) of this section, as if ‘entitled to benefits
under part A or enrolled under part B’ were substituted
for ‘entitled to benefits under part A and enrolled under
part B’, but in no case shall such period end before the
period described in subparagraph (A).
‘‘(3) ADDITIONAL SPECIAL ENROLLMENT PERIODS.—The Sec-
retary shall establish special enrollment periods, including the
following:
‘‘(A) INVOLUNTARY LOSS OF CREDITABLE PRESCRIPTION
DRUG COVERAGE.—
‘‘(i) IN GENERAL.—In the case of a part D eligible
individual who involuntarily loses creditable prescrip-
tion drug coverage (as defined in section 1860D–
13(b)(4)).
H. R. 1—9
‘‘(ii) NOTICE.—In establishing special enrollment
periods under clause (i), the Secretary shall take into
account when the part D eligible individuals are pro-
vided notice of the loss of creditable prescription drug
coverage.
‘‘(iii) FAILURE TO PAY PREMIUM.—For purposes of
clause (i), a loss of coverage shall be treated as vol-
untary if the coverage is terminated because of failure
to pay a required beneficiary premium.
‘‘(iv) REDUCTION IN COVERAGE.—For purposes of
clause (i), a reduction in coverage so that the coverage
no longer meets the requirements under section
1860D–13(b)(5) (relating to actuarial equivalence) shall
be treated as an involuntary loss of coverage.
‘‘(B) ERRORS IN ENROLLMENT.—In the case described
in section 1837(h) (relating to errors in enrollment), in
the same manner as such section applies to part B.
‘‘(C) EXCEPTIONAL CIRCUMSTANCES.—In the case of part
D eligible individuals who meet such exceptional conditions
(in addition to those conditions applied under paragraph
(1)(B)(iii)) as the Secretary may provide.
‘‘(D) MEDICAID COVERAGE.—In the case of an individual
(as determined by the Secretary) who is a full-benefit dual
eligible individual (as defined in section 1935(c)(6)).
‘‘(E) DISCONTINUANCE
OF
MA–PD
ELECTION
DURING
FIRST YEAR OF ELIGIBILITY.—In the case of a part D eligible
individual who discontinues enrollment in an MA–PD plan
under the second sentence of section 1851(e)(4) at the time
of the election of coverage under such sentence under the
original medicare fee-for-service program.
‘‘(4) INFORMATION TO FACILITATE ENROLLMENT.—
‘‘(A) IN GENERAL.—Notwithstanding any other provi-
sion of law but subject to subparagraph (B), the Secretary
may provide to each PDP sponsor and MA organization
such identifying information about part D eligible individ-
uals as the Secretary determines to be necessary to facili-
tate efficient marketing of prescription drug plans and
MA–PD plans to such individuals and enrollment of such
individuals in such plans.
‘‘(B) LIMITATION.—
‘‘(i) PROVISION
OF
INFORMATION.—The Secretary
may provide the information under subparagraph (A)
only to the extent necessary to carry out such subpara-
graph.
‘‘(ii) USE OF INFORMATION.—Such information pro-
vided by the Secretary to a PDP sponsor or an MA
organization may be used by such sponsor or organiza-
tion only to facilitate marketing of, and enrollment
of part D eligible individuals in, prescription drug plans
and MA–PD plans.
‘‘(5) REFERENCE TO ENROLLMENT PROCEDURES FOR MA–PD
PLANS.—For rules applicable to enrollment, disenrollment,
termination, and change of enrollment of part D eligible individ-
uals in MA–PD plans, see section 1851.
‘‘(6) REFERENCE TO PENALTIES FOR LATE ENROLLMENT.—
Section 1860D–13(b) imposes a late enrollment penalty for part
D eligible individuals who—
H. R. 1—10
‘‘(A) enroll in a prescription drug plan or an MA–
PD plan after the initial enrollment period described in
paragraph (2); and
‘‘(B) fail to maintain continuous creditable prescription
drug coverage during the period of non-enrollment.
‘‘(c) PROVIDING INFORMATION TO BENEFICIARIES.—
‘‘(1) ACTIVITIES.—The Secretary shall conduct activities that
are designed to broadly disseminate information to part D
eligible individuals (and prospective part D eligible individuals)
regarding the coverage provided under this part. Such activities
shall ensure that such information is first made available at
least 30 days prior to the initial enrollment period described
in subsection (b)(2)(A).
‘‘(2) REQUIREMENTS.—The activities described in paragraph
(1) shall—
‘‘(A) be similar to the activities performed by the Sec-
retary under section 1851(d), including dissemination
(including through the toll-free telephone number 1–800–
MEDICARE) of comparative information for prescription
drug plans and MA–PD plans; and
‘‘(B) be coordinated with the activities performed by
the Secretary under such section and under section 1804.
‘‘(3) COMPARATIVE INFORMATION.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), the
comparative information referred to in paragraph (2)(A)
shall include a comparison of the following with respect
to qualified prescription drug coverage:
‘‘(i) BENEFITS.—The benefits provided under the
plan.
‘‘(ii) 
MONTHLY
BENEFICIARY
PREMIUM.—The
monthly beneficiary premium under the plan.
‘‘(iii) QUALITY
AND
PERFORMANCE.—The quality
and performance under the plan.
‘‘(iv) 
BENEFICIARY
COST-SHARING.—The 
cost-
sharing required of part D eligible individuals under
the plan.
‘‘(v) 
CONSUMER
SATISFACTION
SURVEYS.—The
results of consumer satisfaction surveys regarding the
plan conducted pursuant to section 1860D–4(d).
‘‘(B) EXCEPTION
FOR
UNAVAILABILITY
OF
INFORMA-
TION.—The Secretary is not required to provide compara-
tive information under clauses (iii) and (v) of subparagraph
(A) with respect to a plan—
‘‘(i) for the first plan year in which it is offered;
and
‘‘(ii) for the next plan year if it is impracticable
or the information is otherwise unavailable.
‘‘(4) INFORMATION
ON
LATE
ENROLLMENT
PENALTY.—The
information disseminated under paragraph (1) shall include
information concerning the methodology for determining the
late enrollment penalty under section 1860D–13(b).
‘‘PRESCRIPTION DRUG BENEFITS
‘‘SEC. 1860D–2. (a) REQUIREMENTS.—
‘‘(1) IN GENERAL.—For purposes of this part and part C,
the term ‘qualified prescription drug coverage’ means either
of the following:
H. R. 1—11
‘‘(A) STANDARD
PRESCRIPTION
DRUG
COVERAGE
WITH
ACCESS
TO
NEGOTIATED
PRICES.—Standard prescription
drug coverage (as defined in subsection (b)) and access
to negotiated prices under subsection (d).
‘‘(B) ALTERNATIVE PRESCRIPTION DRUG COVERAGE WITH
AT LEAST ACTUARIALLY EQUIVALENT BENEFITS AND ACCESS
TO NEGOTIATED PRICES.—Coverage of covered part D drugs
which meets the alternative prescription drug coverage
requirements of subsection (c) and access to negotiated
prices under subsection (d), but only if the benefit design
of such coverage is approved by the Secretary, as provided
under subsection (c).
‘‘(2) PERMITTING SUPPLEMENTAL PRESCRIPTION DRUG COV-
ERAGE.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), quali-
fied prescription drug coverage may include supplemental
prescription drug coverage consisting of either or both of
the following:
‘‘(i) CERTAIN REDUCTIONS IN COST-SHARING.—
‘‘(I) IN GENERAL.—A reduction in the annual
deductible, a reduction in the coinsurance percent-
age, or an increase in the initial coverage limit
with respect to covered part D drugs, or any com-
bination thereof, insofar as such a reduction or
increase increases the actuarial value of benefits
above the actuarial value of basic prescription drug
coverage.
‘‘(II) CONSTRUCTION.—Nothing in this para-
graph shall be construed as affecting the applica-
tion of subsection (c)(3).
‘‘(ii) OPTIONAL DRUGS.—Coverage of any product
that would be a covered part D drug but for the applica-
tion of subsection (e)(2)(A).
‘‘(B) REQUIREMENT.—A PDP sponsor may not offer a
prescription drug plan that provides supplemental prescrip-
tion drug coverage pursuant to subparagraph (A) in an
area unless the sponsor also offers a prescription drug
plan in the area that only provides basic prescription drug
coverage.
‘‘(3) BASIC PRESCRIPTION DRUG COVERAGE.—For purposes
of this part and part C, the term ‘basic prescription drug
coverage’ means either of the following:
‘‘(A) Coverage that meets the requirements of para-
graph (1)(A).
‘‘(B) Coverage that meets the requirements of para-
graph (1)(B) but does not have any supplemental prescrip-
tion drug coverage described in paragraph (2)(A).
‘‘(4) APPLICATION OF SECONDARY PAYOR PROVISIONS.—The
provisions of section 1852(a)(4) shall apply under this part
in the same manner as they apply under part C.
‘‘(5) CONSTRUCTION.—Nothing in this subsection shall be
construed as changing the computation of incurred costs under
subsection (b)(4).
‘‘(b) STANDARD PRESCRIPTION DRUG COVERAGE.—For purposes
of this part and part C, the term ‘standard prescription drug cov-
erage’ means coverage of covered part D drugs that meets the
following requirements:
H. R. 1—12
‘‘(1) DEDUCTIBLE.—
‘‘(A) IN
GENERAL.—The coverage has an annual
deductible—
‘‘(i) for 2006, that is equal to $250; or
‘‘(ii) for a subsequent year, that is equal to the
amount specified under this paragraph for the previous
year increased by the percentage specified in para-
graph (6) for the year involved.
‘‘(B) 
ROUNDING.—Any 
amount 
determined 
under
subparagraph (A)(ii) that is not a multiple of $5 shall
be rounded to the nearest multiple of $5.
‘‘(2) BENEFIT STRUCTURE.—
‘‘(A) 25 PERCENT
COINSURANCE.—The coverage has
coinsurance (for costs above the annual deductible specified
in paragraph (1) and up to the initial coverage limit under
paragraph (3)) that is—
‘‘(i) equal to 25 percent; or
‘‘(ii) actuarially equivalent (using processes and
methods established under section 1860D–11(c)) to an
average expected payment of 25 percent of such costs.
‘‘(B) USE OF TIERS.—Nothing in this part shall be con-
strued as preventing a PDP sponsor or an MA organization
from applying tiered copayments under a plan, so long
as such tiered copayments are consistent with subpara-
graph (A)(ii).
‘‘(3) INITIAL COVERAGE LIMIT.—
‘‘(A) IN GENERAL.—Except as provided in paragraph
(4), the coverage has an initial coverage limit on the max-
imum costs that may be recognized for payment purposes
(including the annual deductible)—
‘‘(i) for 2006, that is equal to $2,250; or
‘‘(ii) for a subsequent year, that is equal to the
amount specified in this paragraph for the previous
year, increased by the annual percentage increase
described in paragraph (6) for the year involved.
‘‘(B) 
ROUNDING.—Any 
amount 
determined 
under
subparagraph (A)(ii) that is not a multiple of $10 shall
be rounded to the nearest multiple of $10.
‘‘(4) PROTECTION AGAINST HIGH OUT-OF-POCKET EXPENDI-
TURES.—
‘‘(A) IN GENERAL.—
‘‘(i) IN GENERAL.—The coverage provides benefits,
after the part D eligible individual has incurred costs
(as described in subparagraph (C)) for covered part
D drugs in a year equal to the annual out-of-pocket
threshold specified in subparagraph (B), with cost-
sharing that is equal to the greater of—
‘‘(I) a copayment of $2 for a generic drug or
a preferred drug that is a multiple source drug
(as defined in section 1927(k)(7)(A)(i)) and $5 for
any other drug; or
‘‘(II) coinsurance that is equal to 5 percent.
‘‘(ii) ADJUSTMENT OF AMOUNT.—For a year after
2006, the dollar amounts specified in clause (i)(I) shall
be equal to the dollar amounts specified in this
subparagraph for the previous year, increased by the
annual percentage increase described in paragraph (6)
H. R. 1—13
for the year involved. Any amount established under
this clause that is not a multiple of a 5 cents shall
be rounded to the nearest multiple of 5 cents.
‘‘(B) ANNUAL OUT-OF-POCKET THRESHOLD.—
‘‘(i) IN GENERAL.—For purposes of this part, the
‘annual out-of-pocket threshold’ specified in this
subparagraph—
‘‘(I) for 2006, is equal to $3,600; or
‘‘(II) for a subsequent year, is equal to the
amount specified in this subparagraph for the pre-
vious year, increased by the annual percentage
increase described in paragraph (6) for the year
involved.
‘‘(ii) ROUNDING.—Any amount determined under
clause (i)(II) that is not a multiple of $50 shall be
rounded to the nearest multiple of $50.
‘‘(C) APPLICATION.—In applying subparagraph (A)—
‘‘(i) incurred costs shall only include costs incurred
with respect to covered part D drugs for the annual
deductible described in paragraph (1), for cost-sharing
described in paragraph (2), and for amounts for which
benefits are not provided because of the application
of the initial coverage limit described in paragraph
(3), but does not include any costs incurred for covered
part D drugs which are not included (or treated as
being included) in the plan’s formulary; and
‘‘(ii) such costs shall be treated as incurred only
if they are paid by the part D eligible individual (or
by another person, such as a family member, on behalf
of the individual), under section 1860D–14, or under
a State Pharmaceutical Assistance Program and the
part D eligible individual (or other person) is not
reimbursed through insurance or otherwise, a group
health plan, or other third-party payment arrangement
(other than under such section or such a Program)
for such costs.
‘‘(D) INFORMATION REGARDING THIRD-PARTY REIMBURSE-
MENT.—
‘‘(i) PROCEDURES FOR EXCHANGING INFORMATION.—
In order to accurately apply the requirements of
subparagraph (C)(ii), the Secretary is authorized to
establish procedures, in coordination with the Sec-
retary of the Treasury and the Secretary of Labor—
‘‘(I) for determining whether costs for part D
eligible individuals are being reimbursed through
insurance or otherwise, a group health plan, or
other third-party payment arrangement; and
‘‘(II) for alerting the PDP sponsors and MA
organizations that offer the prescription drug plans
and MA–PD plans in which such individuals are
enrolled about such reimbursement arrangements.
‘‘(ii) AUTHORITY TO REQUEST INFORMATION FROM
ENROLLEES.—A PDP sponsor or an MA organization
may periodically ask part D eligible individuals
enrolled in a prescription drug plan or an MA–PD
plan offered by the sponsor or organization whether
such individuals have or expect to receive such third-
H. R. 1—14
party reimbursement. A material misrepresentation of
the information described in the preceding sentence
by an individual (as defined in standards set by the
Secretary and determined through a process estab-
lished by the Secretary) shall constitute grounds for
termination of enrollment in any plan under section
1851(g)(3)(B) (and as applied under this part under
section 1860D–1(b)(1)(B)(v)) for a period specified by
the Secretary.
‘‘(5) CONSTRUCTION.—Nothing in this part shall be con-
strued as preventing a PDP sponsor or an MA organization
offering an MA–PD plan from reducing to zero the cost-sharing
otherwise applicable to preferred or generic drugs.
‘‘(6) ANNUAL PERCENTAGE INCREASE.—The annual percent-
age increase specified in this paragraph for a year is equal
to the annual percentage increase in average per capita aggre-
gate expenditures for covered part D drugs in the United States
for part D eligible individuals, as determined by the Secretary
for the 12-month period ending in July of the previous year
using such methods as the Secretary shall specify.
‘‘(c) ALTERNATIVE PRESCRIPTION DRUG COVERAGE REQUIRE-
MENTS.—A prescription drug plan or an MA–PD plan may provide
a different prescription drug benefit design from standard prescrip-
tion drug coverage so long as the Secretary determines (consistent
with section 1860D–11(c)) that the following requirements are met
and the plan applies for, and receives, the approval of the Secretary
for such benefit design:
‘‘(1) ASSURING
AT
LEAST
ACTUARIALLY
EQUIVALENT
COV-
ERAGE.—
‘‘(A) ASSURING
EQUIVALENT
VALUE
OF
TOTAL
COV-
ERAGE.—The actuarial value of the total coverage is at
least equal to the actuarial value of standard prescription
drug coverage.
‘‘(B) ASSURING
EQUIVALENT
UNSUBSIDIZED
VALUE
OF
COVERAGE.—The unsubsidized value of the coverage is at
least equal to the unsubsidized value of standard prescrip-
tion drug coverage. For purposes of this subparagraph,
the unsubsidized value of coverage is the amount by which
the actuarial value of the coverage exceeds the actuarial
value of the subsidy payments under section 1860D–15
with respect to such coverage.
‘‘(C) ASSURING STANDARD PAYMENT FOR COSTS AT INI-
TIAL
COVERAGE
LIMIT.—The coverage is designed, based
upon an actuarially representative pattern of utilization,
to provide for the payment, with respect to costs incurred
that are equal to the initial coverage limit under subsection
(b)(3) for the year, of an amount equal to at least the
product of—
‘‘(i) the amount by which the initial coverage limit
described in subsection (b)(3) for the year exceeds the
deductible described in subsection (b)(1) for the year;
and
‘‘(ii) 100 percent minus the coinsurance percentage
specified in subsection (b)(2)(A)(i).
‘‘(2) MAXIMUM
REQUIRED
DEDUCTIBLE.—The deductible
under the coverage shall not exceed the deductible amount
specified under subsection (b)(1) for the year.
H. R. 1—15
‘‘(3) SAME
PROTECTION
AGAINST
HIGH
OUT-OF-POCKET
EXPENDITURES.—The coverage provides the coverage required
under subsection (b)(4).
‘‘(d) ACCESS TO NEGOTIATED PRICES.—
‘‘(1) ACCESS.—
‘‘(A) IN GENERAL.—Under qualified prescription drug
coverage offered by a PDP sponsor offering a prescription
drug plan or an MA organization offering an MA–PD plan,
the sponsor or organization shall provide enrollees with
access to negotiated prices used for payment for covered
part D drugs, regardless of the fact that no benefits may
be payable under the coverage with respect to such drugs
because of the application of a deductible or other cost-
sharing or an initial coverage limit (described in subsection
(b)(3)).
‘‘(B) NEGOTIATED PRICES.—For purposes of this part,
negotiated prices shall take into account negotiated price
concessions, such as discounts, direct or indirect subsidies,
rebates, and direct or indirect remunerations, for covered
part D drugs, and include any dispensing fees for such
drugs.
‘‘(C) MEDICAID-RELATED PROVISIONS.—The prices nego-
tiated by a prescription drug plan, by an MA–PD plan
with respect to covered part D drugs, or by a qualified
retiree prescription drug plan (as defined in section 1860D–
22(a)(2)) with respect to such drugs on behalf of part D
eligible individuals, shall (notwithstanding any other provi-
sion of law) not be taken into account for the purposes
of establishing the best price under section 1927(c)(1)(C).
‘‘(2) DISCLOSURE.—A PDP sponsor offering a prescription
drug plan or an MA organization offering an MA–PD plan
shall disclose to the Secretary (in a manner specified by the
Secretary) the aggregate negotiated price concessions described
in paragraph (1)(B) made available to the sponsor or organiza-
tion by a manufacturer which are passed through in the form
of lower subsidies, lower monthly beneficiary prescription drug
premiums, and lower prices through pharmacies and other
dispensers. The provisions of section 1927(b)(3)(D) apply to
information disclosed to the Secretary under this paragraph.
‘‘(3) AUDITS.—To protect against fraud and abuse and to
ensure proper disclosures and accounting under this part and
in accordance with section 1857(d)(2)(B) (as applied under sec-
tion 1860D–12(b)(3)(C)), the Secretary may conduct periodic
audits, directly or through contracts, of the financial statements
and records of PDP sponsors with respect to prescription drug
plans and MA organizations with respect to MA–PD plans.
‘‘(e) COVERED PART D DRUG DEFINED.—
‘‘(1) IN GENERAL.—Except as provided in this subsection,
for purposes of this part, the term ‘covered part D drug’
means—
‘‘(A) a drug that may be dispensed only upon a prescrip-
tion and that is described in subparagraph (A)(i), (A)(ii),
or (A)(iii) 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 subparagraph (C) of such section and medical supplies
H. R. 1—16
associated with the injection of insulin (as defined in regu-
lations of the Secretary),
and such term includes a vaccine licensed under section 351
of the Public Health Service Act and any use of a covered
part D 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 medical uses, which may be
excluded from coverage or otherwise restricted under sec-
tion 1927(d)(2), other than subparagraph (E) of such section
(relating to smoking cessation agents), or under section
1927(d)(3).
‘‘(B) MEDICARE
COVERED
DRUGS.—A drug prescribed
for a part D eligible individual that would otherwise be
a covered part D drug under this part shall not be so
considered if payment for such drug as so prescribed and
dispensed or administered with respect to that individual
is available (or would be available but for the application
of a deductible) under part A or B for that individual.
‘‘(3) APPLICATION OF GENERAL EXCLUSION PROVISIONS.—A
prescription drug plan or an MA–PD plan may exclude from
qualified prescription drug coverage any covered part D drug—
‘‘(A) for which payment would not be made if section
1862(a) applied to this part; or
‘‘(B) which is not prescribed in accordance with the
plan or this part.
Such exclusions are determinations subject to reconsideration
and appeal pursuant to subsections (g) and (h), respectively,
of section 1860D–4.
‘‘ACCESS TO A CHOICE OF QUALIFIED PRESCRIPTION DRUG COVERAGE
‘‘SEC. 1860D–3. (a) ASSURING ACCESS TO A CHOICE OF COV-
ERAGE.—
‘‘(1) CHOICE OF AT LEAST TWO PLANS IN EACH AREA.—The
Secretary shall ensure that each part D eligible individual
has available, consistent with paragraph (2), a choice of enroll-
ment in at least 2 qualifying plans (as defined in paragraph
(3)) in the area in which the individual resides, at least one
of which is a prescription drug plan. In any such case in
which such plans are not available, the part D eligible indi-
vidual shall be given the opportunity to enroll in a fallback
prescription drug plan.
‘‘(2) REQUIREMENT FOR DIFFERENT PLAN SPONSORS.—The
requirement in paragraph (1) is not satisfied with respect to
an area if only one entity offers all the qualifying plans in
the area.
‘‘(3) QUALIFYING PLAN DEFINED.—For purposes of this sec-
tion, the term ‘qualifying plan’ means—
‘‘(A) a prescription drug plan; or
‘‘(B) 
an 
MA–PD 
plan 
described 
in 
section
1851(a)(2)(A)(i) that provides—
‘‘(i) basic prescription drug coverage; or
‘‘(ii) qualified prescription drug coverage that pro-
vides supplemental prescription drug coverage so long
as there is no MA monthly supplemental beneficiary
premium applied under the plan, due to the application
H. R. 1—17
of a credit against such premium of a rebate under
section 1854(b)(1)(C).
‘‘(b) FLEXIBILITY IN RISK ASSUMED AND APPLICATION OF FALL-
BACK PLAN.—In order to ensure access pursuant to subsection (a)
in an area—
‘‘(1) the Secretary may approve limited risk plans under
section 1860D–11(f) for the area; and
‘‘(2) only if such access is still not provided in the area
after applying paragraph (1), the Secretary shall provide for
the offering of a fallback prescription drug plan for that area
under section 1860D–11(g).
‘‘BENEFICIARY PROTECTIONS FOR QUALIFIED PRESCRIPTION DRUG
COVERAGE
‘‘SEC. 1860D–4. (a) DISSEMINATION OF INFORMATION.—
‘‘(1) GENERAL INFORMATION.—
‘‘(A) APPLICATION OF MA 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, insofar as the
Secretary determines appropriate with respect to benefits
provided under this part, and including the information
described in subparagraph (B).
‘‘(B) DRUG
SPECIFIC
INFORMATION.—The information
described in this subparagraph is information concerning
the following:
‘‘(i) Access to specific covered part D drugs,
including access through pharmacy networks.
‘‘(ii) How any formulary (including any tiered for-
mulary structure) used by the sponsor functions,
including a description of how a part D eligible indi-
vidual may obtain information on the formulary con-
sistent with paragraph (3).
‘‘(iii) Beneficiary cost-sharing requirements and
how a part D eligible individual may obtain informa-
tion on such requirements, including tiered or other
copayment level applicable to each drug (or class of
drugs), consistent with paragraph (3).
‘‘(iv) The medication therapy management program
required under subsection (c).
‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL COVERAGE,
UTILIZATION, AND GRIEVANCE INFORMATION.—Upon request of
a part D eligible individual who is eligible to enroll in a
prescription drug plan, the PDP sponsor offering such plan
shall provide information similar (as determined by the Sec-
retary) to the information described in subparagraphs (A), (B),
and (C) of section 1852(c)(2) to such individual.
‘‘(3) PROVISION OF SPECIFIC INFORMATION.—
‘‘(A) RESPONSE TO BENEFICIARY QUESTIONS.—Each PDP
sponsor offering a prescription drug plan shall have a
mechanism for providing specific information on a timely
basis to enrollees upon request. Such mechanism shall
include access to information through the use of a toll-
free telephone number and, upon request, the provision
of such information in writing.
H. R. 1—18
‘‘(B) AVAILABILITY OF INFORMATION ON CHANGES IN FOR-
MULARY THROUGH THE INTERNET.—A PDP sponsor offering
a prescription drug plan shall make available on a timely
basis through an Internet website information on specific
changes in the formulary under the plan (including changes
to tiered or preferred status of covered part D drugs).
‘‘(4) CLAIMS
INFORMATION.—A PDP sponsor offering a
prescription drug plan must furnish to each enrollee in a form
easily understandable to such enrollees—
‘‘(A) an explanation of benefits (in accordance with
section 1806(a) or in a comparable manner); and
‘‘(B) when prescription drug benefits are provided
under this part, a notice of the benefits in relation to—
‘‘(i) the initial coverage limit for the current year;
and
‘‘(ii) the annual out-of-pocket threshold for the cur-
rent year.
Notices under subparagraph (B) need not be provided more
often than as specified by the Secretary and notices under
subparagraph (B)(ii) shall take into account the application
of section 1860D–2(b)(4)(C) to the extent practicable, as
specified by the Secretary.
‘‘(b) ACCESS TO COVERED PART D DRUGS.—
‘‘(1) ASSURING PHARMACY ACCESS.—
‘‘(A) PARTICIPATION
OF
ANY
WILLING
PHARMACY.—A
prescription drug plan shall permit the participation of
any pharmacy that meets the terms and conditions under
the plan.
‘‘(B) DISCOUNTS ALLOWED FOR NETWORK PHARMACIES.—
For covered part D drugs dispensed through in-network
pharmacies, a prescription drug plan may, notwithstanding
subparagraph (A), reduce coinsurance or copayments for
part D eligible individuals enrolled in the plan below the
level otherwise required. In no case shall such a reduction
result in an increase in payments made by the Secretary
under section 1860D–15 to a plan.
‘‘(C) CONVENIENT ACCESS FOR NETWORK PHARMACIES.—
‘‘(i) IN GENERAL.—The PDP sponsor of the prescrip-
tion drug plan shall secure the participation in its
network of a sufficient number of pharmacies that
dispense (other than by mail order) drugs directly to
patients to ensure convenient access (consistent with
rules established by the Secretary).
‘‘(ii) APPLICATION
OF
TRICARE
STANDARDS.—The
Secretary shall establish rules for convenient access
to in-network pharmacies under this subparagraph
that are no less favorable to enrollees than the rules
for convenient access to pharmacies included in the
statement of work of solicitation (#MDA906–03–R–
0002) of the Department of Defense under the
TRICARE Retail Pharmacy (TRRx) as of March 13,
2003.
‘‘(iii) ADEQUATE EMERGENCY ACCESS.—Such rules
shall include adequate emergency access for enrollees.
‘‘(iv) CONVENIENT
ACCESS
IN
LONG-TERM
CARE
FACILITIES.—Such rules may include standards with
respect to access for enrollees who are residing in
H. R. 1—19
long-term care facilities and for pharmacies operated
by the Indian Health Service, Indian tribes and tribal
organizations, and urban Indian organizations (as
defined in section 4 of the Indian Health Care Improve-
ment Act).
‘‘(D) LEVEL
PLAYING
FIELD.—Such a sponsor shall
permit enrollees to receive benefits (which may include
a 90-day supply of drugs or biologicals) through a pharmacy
(other than a mail order pharmacy), with any differential
in charge paid by such enrollees.
‘‘(E) NOT REQUIRED TO ACCEPT INSURANCE RISK.—The
terms and conditions under subparagraph (A) may not
require participating pharmacies to accept insurance risk
as a condition of participation.
‘‘(2) USE OF STANDARDIZED TECHNOLOGY.—
‘‘(A) IN GENERAL.—The PDP sponsor of a prescription
drug plan shall issue (and reissue, as appropriate) such
a card (or other technology) that may be used by an enrollee
to assure access to negotiated prices under section 1860D–
2(d).
‘‘(B) STANDARDS.—
‘‘(i) IN GENERAL.—The Secretary shall provide for
the development, adoption, or recognition of standards
relating to a standardized format for the card or other
technology required under subparagraph (A). Such
standards shall be compatible with part C of title XI
and may be based on standards developed by an appro-
priate standard setting organization.
‘‘(ii) CONSULTATION.—In developing the standards
under clause (i), the Secretary shall consult with the
National Council for Prescription Drug Programs and
other standard setting organizations determined appro-
priate by the Secretary.
‘‘(iii) 
IMPLEMENTATION.—The 
Secretary 
shall
develop, adopt, or recognize the standards under clause
(i) by such date as the Secretary determines shall
be sufficient to ensure that PDP sponsors utilize such
standards beginning January 1, 2006.
‘‘(3) REQUIREMENTS ON DEVELOPMENT AND APPLICATION OF
FORMULARIES.—If a PDP sponsor of a prescription drug plan
uses a formulary (including the use of tiered cost-sharing),
the following requirements must be met:
‘‘(A) DEVELOPMENT AND REVISION BY A PHARMACY AND
THERAPEUTIC (P&T) COMMITTEE.—
‘‘(i) IN GENERAL.—The formulary must be devel-
oped and reviewed by a pharmacy and therapeutic
committee. A majority of the members of such com-
mittee shall consist of individuals who are practicing
physicians or practicing pharmacists (or both).
‘‘(ii) INCLUSION OF INDEPENDENT EXPERTS.—Such
committee shall include at least one practicing physi-
cian and at least one practicing pharmacist, each of
whom—
‘‘(I) is independent and free of conflict with
respect to the sponsor and plan; and
‘‘(II) has expertise in the care of elderly or
disabled persons.
H. R. 1—20
‘‘(B) FORMULARY
DEVELOPMENT.—In developing and
reviewing the formulary, the committee shall—
‘‘(i) base clinical decisions on the strength of sci-
entific evidence and standards of practice, including
assessing peer-reviewed medical literature, such as
randomized clinical trials, pharmacoeconomic studies,
outcomes research data, and on such other information
as the committee determines to be appropriate; and
‘‘(ii) take into account whether including in the
formulary (or in a tier in such formulary) particular
covered part D drugs has therapeutic advantages in
terms of safety and efficacy.
‘‘(C) INCLUSION OF DRUGS IN ALL THERAPEUTIC CAT-
EGORIES AND CLASSES.—
‘‘(i) IN
GENERAL.—The formulary must include
drugs within each therapeutic category and class of
covered part D drugs, although not necessarily all
drugs within such categories and classes.
‘‘(ii) MODEL
GUIDELINES.—The Secretary shall
request the United States Pharmacopeia to develop,
in consultation with pharmaceutical benefit managers
and other interested parties, a list of categories and
classes that may be used by prescription drug plans
under this paragraph and to revise such classification
from time to time to reflect changes in therapeutic
uses of covered part D drugs and the additions of
new covered part D drugs.
‘‘(iii) LIMITATION
ON
CHANGES
IN
THERAPEUTIC
CLASSIFICATION.—The PDP sponsor of a prescription
drug plan may not change the therapeutic categories
and classes in a formulary other than at the beginning
of each plan year except as the Secretary may permit
to take into account new therapeutic uses and newly
approved covered part D drugs.
‘‘(D) PROVIDER
AND
PATIENT
EDUCATION.—The PDP
sponsor shall establish policies and procedures to educate
and inform health care providers and enrollees concerning
the formulary.
‘‘(E) NOTICE BEFORE REMOVING DRUG FROM FORMULARY
OR CHANGING PREFERRED OR TIER STATUS OF DRUG.—Any
removal of a covered part D drug from a formulary and
any change in the preferred or tiered cost-sharing status
of such a drug shall take effect only after appropriate
notice is made available (such as under subsection (a)(3))
to the Secretary, affected enrollees, physicians, pharmacies,
and pharmacists.
‘‘(F) PERIODIC EVALUATION OF PROTOCOLS.—In connec-
tion with the formulary, the sponsor of a prescription drug
plan shall provide for the periodic evaluation and analysis
of treatment protocols and procedures.
The requirements of this paragraph may be met by a PDP
sponsor directly or through arrangements with another entity.
‘‘(c) COST AND UTILIZATION MANAGEMENT; QUALITY ASSURANCE;
MEDICATION THERAPY MANAGEMENT PROGRAM.—
‘‘(1) IN GENERAL.—The PDP sponsor shall have in place,
directly or through appropriate arrangements, with respect to
covered part D drugs, the following:
H. R. 1—21
‘‘(A) A cost-effective drug utilization management pro-
gram, including incentives to reduce costs when medically
appropriate, such as through the use of multiple source
drugs (as defined in section 1927(k)(7)(A)(i)).
‘‘(B) Quality assurance measures and systems to reduce
medication errors and adverse drug interactions and
improve medication use.
‘‘(C) A medication therapy management program
described in paragraph (2).
‘‘(D) A program to control fraud, abuse, and waste.
Nothing in this section shall be construed as impairing a PDP
sponsor from utilizing cost management tools (including dif-
ferential payments) under all methods of operation.
‘‘(2) MEDICATION THERAPY MANAGEMENT PROGRAM.—
‘‘(A) DESCRIPTION.—
‘‘(i) IN GENERAL.—A medication therapy manage-
ment program described in this paragraph is a program
of drug therapy management that may be furnished
by a pharmacist and that is designed to assure, with
respect to targeted beneficiaries described in clause
(ii), that covered part D drugs under the prescription
drug plan are appropriately used to optimize thera-
peutic outcomes through improved medication use, and
to reduce the risk of adverse events, including adverse
drug interactions. Such a program may distinguish
between services in ambulatory and institutional set-
tings.
‘‘(ii) TARGETED
BENEFICIARIES
DESCRIBED.—Tar-
geted beneficiaries described in this clause are part
D eligible individuals who—
‘‘(I) have multiple chronic diseases (such as
diabetes, asthma, hypertension, hyperlipidemia,
and congestive heart failure);
‘‘(II) are taking multiple covered part D drugs;
and
‘‘(III) are identified as likely to incur annual
costs for covered part D drugs that exceed a level
specified by the Secretary.
‘‘(B) ELEMENTS.—Such program may include elements
that promote—
‘‘(i) enhanced enrollee understanding to promote
the appropriate use of medications by enrollees and
to reduce the risk of potential adverse events associated
with medications, through beneficiary education, coun-
seling, and other appropriate means;
‘‘(ii) increased enrollee adherence with prescription
medication 
regimens 
through 
medication 
refill
reminders, special packaging, and other compliance
programs and other appropriate means; and
‘‘(iii) detection of adverse drug events and patterns
of overuse and underuse of prescription drugs.
‘‘(C) DEVELOPMENT OF PROGRAM IN COOPERATION WITH
LICENSED PHARMACISTS.—Such program shall be developed
in cooperation with licensed and practicing pharmacists
and physicians.
H. R. 1—22
‘‘(D) COORDINATION WITH CARE MANAGEMENT PLANS.—
The Secretary shall establish guidelines for the coordina-
tion of any medication therapy management program under
this paragraph with respect to a targeted beneficiary with
any care management plan established with respect to
such beneficiary under a chronic care improvement pro-
gram under section 1807.
‘‘(E) CONSIDERATIONS IN PHARMACY FEES.—The PDP
sponsor of a prescription drug plan shall take into account,
in establishing fees for pharmacists and others providing
services under such plan, the resources used, and time
required to, implement the medication therapy manage-
ment program under this paragraph. Each such sponsor
shall disclose to the Secretary upon request the amount
of any such management or dispensing fees. The provisions
of section 1927(b)(3)(D) apply to information disclosed
under this subparagraph.
‘‘(d) CONSUMER SATISFACTION SURVEYS.—In order to provide
for comparative information under section 1860D–1(c)(3)(A)(v), the
Secretary shall conduct consumer satisfaction surveys with respect
to PDP sponsors and prescription drug plans in a manner similar
to the manner such surveys are conducted for MA organizations
and MA plans under part C.
‘‘(e) ELECTRONIC PRESCRIPTION PROGRAM.—
‘‘(1) APPLICATION OF STANDARDS.—As of such date as the
Secretary may specify, but not later than 1 year after the
date of promulgation of final standards under paragraph (4)(D),
prescriptions and other information described in paragraph
(2)(A) for covered part D drugs prescribed for part D eligible
individuals that are transmitted electronically shall be trans-
mitted only in accordance with such standards under an elec-
tronic prescription drug program that meets the requirements
of paragraph (2).
‘‘(2) PROGRAM
REQUIREMENTS.—Consistent with uniform
standards established under paragraph (3)—
‘‘(A) PROVISION
OF
INFORMATION
TO
PRESCRIBING
HEALTH CARE PROFESSIONAL AND DISPENSING PHARMACIES
AND
PHARMACISTS.—An electronic prescription drug pro-
gram shall provide for the electronic transmittal to the
prescribing health care professional and to the dispensing
pharmacy and pharmacist of the prescription and informa-
tion on eligibility and benefits (including the drugs included
in the applicable formulary, any tiered formulary structure,
and any requirements for prior authorization) and of the
following information with respect to the prescribing and
dispensing of a covered part D drug:
‘‘(i) Information on the drug being prescribed or
dispensed and other drugs listed on the medication
history, including information on drug-drug inter-
actions, warnings or cautions, and, when indicated,
dosage adjustments.
‘‘(ii) Information on the availability of lower cost,
therapeutically appropriate alternatives (if any) for the
drug prescribed.
‘‘(B) APPLICATION TO MEDICAL HISTORY INFORMATION.—
Effective on and after such date as the Secretary specifies
and after the establishment of appropriate standards to
H. R. 1—23
carry out this subparagraph, the program shall provide
for the electronic transmittal in a manner similar to the
manner under subparagraph (A) of information that relates
to the medical history concerning the individual and related
to a covered part D drug being prescribed or dispensed,
upon request of the professional or pharmacist involved.
‘‘(C) LIMITATIONS.—Information shall only be disclosed
under subparagraph (A) or (B) if the disclosure of such
information is permitted under the Federal regulations
(concerning the privacy of individually identifiable health
information) promulgated under section 264(c) of the
Health Insurance Portability and Accountability Act of
1996.
‘‘(D) TIMING.—To the extent feasible, the information
exchanged under this paragraph shall be on an interactive,
real-time basis.
‘‘(3) STANDARDS.—
‘‘(A) IN GENERAL.—The Secretary shall provide con-
sistent with this subsection for the promulgation of uniform
standards relating to the requirements for electronic
prescription drug programs under paragraph (2).
‘‘(B) OBJECTIVES.—Such standards shall be consistent
with the objectives of improving—
‘‘(i) patient safety;
‘‘(ii) the quality of care provided to patients; and
‘‘(iii) efficiencies, including cost savings, in the
delivery of care.
‘‘(C) DESIGN CRITERIA.—Such standards shall—
‘‘(i) be designed so that, to the extent practicable,
the standards do not impose an undue administrative
burden on prescribing health care professionals and
dispensing pharmacies and pharmacists;
‘‘(ii) be compatible with standards established
under part C of title XI, standards established under
subsection 
(b)(2)(B)(i), 
and 
with 
general 
health
information technology standards; and
‘‘(iii) be designed so that they permit electronic
exchange of drug labeling and drug listing information
maintained by the Food and Drug Administration and
the National Library of Medicine.
‘‘(D) PERMITTING USE OF APPROPRIATE MESSAGING.—
Such standards shall allow for the messaging of information
only if it relates to the appropriate prescribing of drugs,
including quality assurance measures and systems referred
to in subsection (c)(1)(B).
‘‘(E) PERMITTING PATIENT DESIGNATION OF DISPENSING
PHARMACY.—
‘‘(i) IN GENERAL.—Consistent with clause (ii), such
standards shall permit a part D eligible individual
to designate a particular pharmacy to dispense a pre-
scribed drug.
‘‘(ii) NO CHANGE IN BENEFITS.—Clause (i) shall not
be construed as affecting—
‘‘(I) the access required to be provided to phar-
macies by a prescription drug plan; or
H. R. 1—24
‘‘(II) the application of any differences in bene-
fits or payments under such a plan based on the
pharmacy dispensing a covered part D drug.
‘‘(4) DEVELOPMENT, PROMULGATION, AND MODIFICATION OF
STANDARDS.—
‘‘(A) INITIAL
STANDARDS.—Not later than September
1, 2005, the Secretary shall develop, adopt, recognize, or
modify initial uniform standards relating to the require-
ments for electronic prescription drug programs described
in paragraph (2) taking into consideration the recommenda-
tions (if any) from the National Committee on Vital and
Health Statistics (as established under section 306(k) of
the Public Health Service Act (42 U.S.C. 242k(k))) under
subparagraph (B).
‘‘(B) ROLE
OF
NCVHS.—The National Committee on
Vital and Health Statistics shall develop recommendations
for uniform standards relating to such requirements in
consultation with the following:
‘‘(i) Standard setting organizations (as defined in
section 1171(8))
‘‘(ii) Practicing physicians.
‘‘(iii) Hospitals.
‘‘(iv) Pharmacies.
‘‘(v) Practicing pharmacists.
‘‘(vi) Pharmacy benefit managers.
‘‘(vii) State boards of pharmacy.
‘‘(viii) State boards of medicine.
‘‘(ix) Experts on electronic prescribing.
‘‘(x) Other appropriate Federal agencies.
‘‘(C) PILOT PROJECT TO TEST INITIAL STANDARDS.—
‘‘(i) IN GENERAL.—During the 1-year period that
begins on January 1, 2006, the Secretary shall conduct
a pilot project to test the initial standards developed
under subparagraph (A) prior to the promulgation of
the final uniform standards under subparagraph (D)
in order to provide for the efficient implementation
of the requirements described in paragraph (2).
‘‘(ii) EXCEPTION.—Pilot testing of standards is not
required under clause (i) where there already is ade-
quate industry experience with such standards, as
determined by the Secretary after consultation with
effected standard setting organizations and industry
users.
‘‘(iii) VOLUNTARY PARTICIPATION OF PHYSICIANS AND
PHARMACIES.—In order to conduct the pilot project
under clause (i), the Secretary shall enter into agree-
ments with physicians, physician groups, pharmacies,
hospitals, PDP sponsors, MA organizations, and other
appropriate entities under which health care profes-
sionals electronically transmit prescriptions to dis-
pensing pharmacies and pharmacists in accordance
with such standards.
‘‘(iv) EVALUATION AND REPORT.—
‘‘(I) EVALUATION.—The Secretary shall conduct
an evaluation of the pilot project conducted under
clause (i).
H. R. 1—25
‘‘(II) REPORT
TO
CONGRESS.—Not later than
April 1, 2007, the Secretary shall submit to Con-
gress a report on the evaluation conducted under
subclause (I).
‘‘(D) FINAL
STANDARDS.—Based upon the evaluation
of the pilot project under subparagraph (C)(iv)(I) and not
later than April 1, 2008, the Secretary shall promulgate
uniform standards relating to the requirements described
in paragraph (2).
‘‘(5) RELATION TO STATE LAWS.—The standards promulgated
under this subsection shall supersede any State law or regula-
tion that—
‘‘(A) is contrary to the standards or restricts the ability
to carry out this part; and
‘‘(B) pertains to the electronic transmission of medica-
tion history and of information on eligibility, benefits, and
prescriptions with respect to covered part D drugs under
this part.
‘‘(6) ESTABLISHMENT OF SAFE HARBOR.—The Secretary, in
consultation with the Attorney General, shall promulgate regu-
lations that provide for a safe harbor from sanctions under
paragraphs (1) and (2) of section 1128B(b) and an exception
to the prohibition under subsection (a)(1) of section 1877 with
respect to the provision of nonmonetary remuneration (in the
form of hardware, software, or information technology and
training services) necessary and used solely to receive and
transmit electronic prescription information in accordance with
the standards promulgated under this subsection—
‘‘(A) in the case of a hospital, by the hospital to mem-
bers of its medical staff;
‘‘(B) in the case of a group practice (as defined in
section 1877(h)(4)), by the practice to prescribing health
care professionals who are members of such practice; and
‘‘(C) in the case of a PDP sponsor or MA organization,
by the sponsor or organization to pharmacists and phar-
macies participating in the network of such sponsor or
organization, and to prescribing health care professionals.
‘‘(f) GRIEVANCE MECHANISM.—Each PDP sponsor shall provide
meaningful procedures for hearing and resolving grievances
between the sponsor (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).
‘‘(g) COVERAGE DETERMINATIONS AND RECONSIDERATIONS.—
‘‘(1) APPLICATION
OF
COVERAGE
DETERMINATION
AND
RECONSIDERATION PROVISIONS.—A PDP sponsor shall meet the
requirements of paragraphs (1) through (3) 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 an MA organization with respect to
benefits it offers under an MA plan under part C.
‘‘(2) REQUEST FOR A DETERMINATION FOR THE TREATMENT
OF TIERED FORMULARY DRUG.—In the case of a prescription
drug plan offered by a PDP sponsor that provides for tiered
cost-sharing for drugs included within a formulary and provides
lower cost-sharing for preferred drugs included within the for-
mulary, a part D eligible individual who is enrolled in the
H. R. 1—26
plan may request an exception to the tiered cost-sharing struc-
ture. Under such an exception, a nonpreferred drug could be
covered under the terms applicable for preferred drugs if the
prescribing physician determines that the preferred drug for
treatment of the same condition either would not be as effective
for the individual or would have adverse effects for the indi-
vidual or both. A PDP sponsor shall have an exceptions process
under this paragraph consistent with guidelines established
by the Secretary for making a determination with respect to
such a request. Denial of such an exception shall be treated
as a coverage denial for purposes of applying subsection (h).
‘‘(h) APPEALS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), a PDP sponsor
shall meet the requirements of paragraphs (4) and (5) of section
1852(g) with respect to benefits (including a determination
related to the application of tiered cost-sharing described in
subsection (g)(2)) in a manner similar (as determined by the
Secretary) to the manner such requirements apply to an MA
organization with respect to benefits under the original medi-
care fee-for-service program option it offers under an MA plan
under part C. In applying this paragraph only the part D
eligible individual shall be entitled to bring such an appeal.
‘‘(2) LIMITATION IN CASES ON NONFORMULARY DETERMINA-
TIONS.—A part D eligible individual who is enrolled in a
prescription drug plan offered by a PDP sponsor may appeal
under paragraph (1) a determination not to provide for coverage
of a covered part D drug that is not on the formulary under
the plan only if the prescribing physician determines that all
covered part D drugs on any tier of the formulary for treatment
of the same condition would not be as effective for the individual
as the nonformulary drug, would have adverse effects for the
individual, or both.
‘‘(3) TREATMENT OF NONFORMULARY DETERMINATIONS.—If
a PDP sponsor determines that a plan provides coverage for
a covered part D drug that is not on the formulary of the
plan, the drug shall be treated as being included on the for-
mulary for purposes of section 1860D–2(b)(4)(C)(i).
‘‘(i) PRIVACY, CONFIDENTIALITY, AND ACCURACY OF ENROLLEE
RECORDS.—The provisions of section 1852(h) shall apply to a PDP
sponsor and prescription drug plan in the same manner as it
applies to an MA organization and an MA plan.
‘‘(j) TREATMENT OF ACCREDITATION.—Subparagraph (A) of sec-
tion 1852(e)(4) (relating to treatment of accreditation) shall apply
to a PDP sponsor under this part with respect to the following
requirements, in the same manner as it applies to an MA organiza-
tion with respect to the requirements in subparagraph (B) (other
than clause (vii) thereof) of such section:
‘‘(1) Subsection (b) of this section (relating to access to
covered part D drugs).
‘‘(2) Subsection (c) of this section (including quality assur-
ance and medication therapy management).
‘‘(3) Subsection (i) of this section (relating to confidentiality
and accuracy of enrollee records).
‘‘(k) PUBLIC
DISCLOSURE
OF
PHARMACEUTICAL
PRICES
FOR
EQUIVALENT DRUGS.—
‘‘(1) IN GENERAL.—A PDP sponsor offering a prescription
drug plan shall provide that each pharmacy that dispenses
H. R. 1—27
a covered part D drug shall inform an enrollee of any differen-
tial between the price of the drug to the enrollee and the
price of the lowest priced generic covered part D drug under
the plan that is therapeutically equivalent and bioequivalent
and available at such pharmacy.
‘‘(2) TIMING OF NOTICE.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), the
information under paragraph (1) shall be provided at the
time of purchase of the drug involved, or, in the case
of dispensing by mail order, at the time of delivery of
such drug.
‘‘(B) WAIVER.—The Secretary may waive subparagraph
(A) in such circumstances as the Secretary may specify.
‘‘Subpart 2—Prescription Drug Plans; PDP Sponsors; Financing
‘‘PDP REGIONS; SUBMISSION OF BIDS; PLAN APPROVAL
‘‘SEC. 1860D–11. (a) ESTABLISHMENT OF PDP REGIONS; SERVICE
AREAS.—
‘‘(1) COVERAGE OF ENTIRE PDP REGION.—The service area
for a prescription drug plan shall consist of an entire PDP
region established under paragraph (2).
‘‘(2) ESTABLISHMENT OF PDP REGIONS.—
‘‘(A) IN GENERAL.—The Secretary shall establish, and
may revise, PDP regions in a manner that is consistent
with the requirements for the establishment and revision
of MA regions under subparagraphs (B) and (C) of section
1858(a)(2).
‘‘(B) RELATION TO MA REGIONS.—To the extent prac-
ticable, PDP regions shall be the same as MA regions
under section 1858(a)(2). The Secretary may establish PDP
regions which are not the same as MA regions if the
Secretary determines that the establishment of different
regions under this part would improve access to benefits
under this part.
‘‘(C) AUTHORITY FOR TERRITORIES.—The Secretary shall
establish, and may revise, PDP regions for areas in States
that are not within the 50 States or the District of
Columbia.
‘‘(3) NATIONAL PLAN.—Nothing in this subsection shall be
construed as preventing a prescription drug plan from being
offered in more than one PDP region (including all PDP
regions).
‘‘(b) SUBMISSION OF BIDS, PREMIUMS, AND RELATED INFORMA-
TION.—
‘‘(1) IN GENERAL.—A PDP sponsor shall submit to the Sec-
retary information described in paragraph (2) with respect to
each prescription drug plan it offers. Such information shall
be submitted at the same time and in a similar manner to
the manner in which information described in paragraph (6)
of section 1854(a) is submitted by an MA organization under
paragraph (1) of such section.
‘‘(2) INFORMATION DESCRIBED.—The information described
in this paragraph is information on the following:
‘‘(A) COVERAGE PROVIDED.—The prescription drug cov-
erage provided under the plan, including the deductible
and other cost-sharing.
H. R. 1—28
‘‘(B) ACTUARIAL
VALUE.—The actuarial value of the
qualified prescription drug coverage in the region for a
part D eligible individual with a national average risk
profile for the factors described in section 1860D–15(c)(1)(A)
(as specified by the Secretary).
‘‘(C) BID.—Information on the bid, including an actu-
arial certification of—
‘‘(i) the basis for the actuarial value described in
subparagraph (B) assumed in such bid;
‘‘(ii) the portion of such bid attributable to basic
prescription drug coverage and, if applicable, the por-
tion of such bid attributable to supplemental benefits;
‘‘(iii) assumptions regarding the reinsurance sub-
sidy payments provided under section 1860D–15(b)
subtracted from the actuarial value to produce such
bid; and
‘‘(iv) administrative expenses assumed in the bid.
‘‘(D) SERVICE AREA.—The service area for the plan.
‘‘(E) LEVEL OF RISK ASSUMED.—
‘‘(i) IN
GENERAL.—Whether the PDP sponsor
requires a modification of risk level under clause (ii)
and, if so, the extent of such modification. Any such
modification shall apply with respect to all prescription
drug plans offered by a PDP sponsor in a PDP region.
This subparagraph shall not apply to an MA–PD plan.
‘‘(ii) RISK LEVELS DESCRIBED.—A modification of
risk level under this clause may consist of one or
more of the following:
‘‘(I) 
INCREASE
IN
FEDERAL
PERCENTAGE
ASSUMED
IN
INITIAL
RISK
CORRIDOR.—An equal
percentage point increase in the percents applied
under subparagraphs (B)(i), (B)(ii)(I), (C)(i), and
(C)(ii)(I) of section 1860D–15(e)(2). In no case shall
the application of previous sentence prevent the
application of a higher percentage under section
1869D–15(e)(2)(B)(iii).
‘‘(II) 
INCREASE
IN
FEDERAL
PERCENTAGE
ASSUMED
IN
SECOND
RISK
CORRIDOR.—An equal
percentage point increase in the percents applied
under subparagraphs (B)(ii)(II) and (C)(ii)(II) of
section 1860D–15(e)(2).
‘‘(III) DECREASE IN SIZE OF RISK CORRIDORS.—
A decrease in the threshold risk percentages speci-
fied in section 1860D–15(e)(3)(C).
‘‘(F) ADDITIONAL INFORMATION.—Such other informa-
tion as the Secretary may require to carry out this part.
‘‘(3) PAPERWORK REDUCTION FOR OFFERING OF PRESCRIPTION
DRUG PLANS NATIONALLY OR IN MULTI-REGION AREAS.—The Sec-
retary shall establish requirements for information submission
under this subsection in a manner that promotes the offering
of such plans in more than one PDP region (including all
regions) through the filing of consolidated information.
‘‘(c) ACTUARIAL VALUATION.—
‘‘(1) PROCESSES.—For purposes of this part, the Secretary
shall establish processes and methods for determining the actu-
arial valuation of prescription drug coverage, including—
H. R. 1—29
‘‘(A) an actuarial valuation of standard prescription
drug coverage under section 1860D–2(b);
‘‘(B) actuarial valuations relating to alternative
prescription drug coverage under section 1860D–2(c)(1);
‘‘(C) an actuarial valuation of the reinsurance subsidy
payments under section 1860D–15(b);
‘‘(D) the use of generally accepted actuarial principles
and methodologies; and
‘‘(E) applying the same methodology for determinations
of actuarial valuations under subparagraphs (A) and (B).
‘‘(2) ACCOUNTING FOR DRUG UTILIZATION.—Such processes
and methods for determining actuarial valuation shall take
into account the effect that providing alternative prescription
drug coverage (rather than standard prescription drug coverage)
has on drug utilization.
‘‘(3) RESPONSIBILITIES.—
‘‘(A) PLAN RESPONSIBILITIES.—PDP sponsors and MA
organizations are responsible for the preparation and
submission of actuarial valuations required under this part
for prescription drug plans and MA–PD plans they offer.
‘‘(B) USE OF OUTSIDE ACTUARIES.—Under the processes
and methods established under paragraph (1), PDP spon-
sors offering prescription drug plans and MA organizations
offering MA–PD plans may use actuarial opinions certified
by independent, qualified actuaries to establish actuarial
values.
‘‘(d) REVIEW OF INFORMATION AND NEGOTIATION.—
‘‘(1) REVIEW OF INFORMATION.—The Secretary shall review
the information filed under subsection (b) for the purpose of
conducting negotiations under paragraph (2).
‘‘(2) NEGOTIATION
REGARDING
TERMS
AND
CONDITIONS.—
Subject to subsection (i), in exercising the authority under
paragraph (1), the Secretary—
‘‘(A) has the authority to negotiate the terms and condi-
tions of the proposed bid submitted and other terms and
conditions of a proposed plan; and
‘‘(B) has authority similar to the authority of the
Director of the Office of Personnel Management with
respect to health benefits plans under chapter 89 of title
5, United States Code.
‘‘(e) APPROVAL OF PROPOSED PLANS.—
‘‘(1) IN GENERAL.—After review and negotiation under sub-
section (d), the Secretary shall approve or disapprove the
prescription drug plan.
‘‘(2) REQUIREMENTS
FOR
APPROVAL.—The Secretary may
approve a prescription drug plan only if the following require-
ments are met:
‘‘(A) COMPLIANCE WITH REQUIREMENTS.—The plan and
the PDP sponsor offering the plan comply with the require-
ments under this part, including the provision of qualified
prescription drug coverage.
‘‘(B) 
ACTUARIAL
DETERMINATIONS.—The 
Secretary
determines that the plan and PDP sponsor meet the
requirements under this part relating to actuarial deter-
minations, including such requirements under section
1860D–2(c).
‘‘(C) APPLICATION OF FEHBP STANDARD.—
H. R. 1—30
‘‘(i) IN GENERAL.—The Secretary determines that
the portion of the bid submitted under subsection (b)
that is attributable to basic prescription drug coverage
is supported by the actuarial bases provided under
such subsection and reasonably and equitably reflects
the revenue requirements (as used for purposes of sec-
tion 1302(8)(C) of the Public Health Service Act) for
benefits provided under that plan, less the sum (deter-
mined on a monthly per capita basis) of the actuarial
value of the reinsurance payments under section
1860D–15(b).
‘‘(ii) SUPPLEMENTAL
COVERAGE.—The Secretary
determines that the portion of the bid submitted under
subsection (b) that is attributable to supplemental
prescription drug coverage pursuant to section 1860D–
2(a)(2) is supported by the actuarial bases provided
under such subsection and reasonably and equitably
reflects the revenue requirements (as used for purposes
of section 1302(8)(C) of the Public Health Service Act)
for such coverage under the plan.
‘‘(D) PLAN DESIGN.—
‘‘(i) IN GENERAL.—The Secretary does not find that
the design of the plan and its benefits (including any
formulary and tiered formulary structure) are likely
to substantially discourage enrollment by certain part
D eligible individuals under the plan.
‘‘(ii) 
USE
OF
CATEGORIES
AND
CLASSES
IN
FORMULARIES.—The Secretary may not find that the
design of categories and classes within a formulary
violates clause (i) if such categories and classes are
consistent with guidelines (if any) for such categories
and classes established by the United States Pharma-
copeia.
‘‘(f) APPLICATION OF LIMITED RISK PLANS.—
‘‘(1) CONDITIONS FOR APPROVAL OF LIMITED RISK PLANS.—
The Secretary may only approve a limited risk plan (as defined
in paragraph (4)(A)) for a PDP region if the access requirements
under section 1860D–3(a) would not be met for the region
but for the approval of such a plan (or a fallback prescription
drug plan under subsection (g)).
‘‘(2) RULES.—The following rules shall apply with respect
to the approval of a limited risk plan in a PDP region:
‘‘(A) LIMITED EXERCISE OF AUTHORITY.—Only the min-
imum number of such plans may be approved in order
to meet the access requirements under section 1860D–
3(a).
‘‘(B) MAXIMIZING ASSUMPTION OF RISK.—The Secretary
shall provide priority in approval for those plans bearing
the highest level of risk (as computed by the Secretary),
but the Secretary may take into account the level of the
bids submitted by such plans.
‘‘(C) NO
FULL
UNDERWRITING
FOR
LIMITED
RISK
PLANS.—In no case may the Secretary approve a limited
risk plan under which the modification of risk level provides
for no (or a de minimis) level of financial risk.
H. R. 1—31
‘‘(3) ACCEPTANCE
OF
ALL
FULL
RISK
CONTRACTS.—There
shall be no limit on the number of full risk plans that are
approved under subsection (e).
‘‘(4) RISK-PLANS DEFINED.—For purposes of this subsection:
‘‘(A) LIMITED RISK PLAN.—The term ‘limited risk plan’
means a prescription drug plan that provides basic
prescription drug coverage and for which the PDP sponsor
includes a modification of risk level described in subpara-
graph (E) of subsection (b)(2) in its bid submitted for the
plan under such subsection. Such term does not include
a fallback prescription drug plan.
‘‘(B) FULL RISK PLAN.—The term ‘full risk plan’ means
a prescription drug plan that is not a limited risk plan
or a fallback prescription drug plan.
‘‘(g) GUARANTEEING ACCESS TO COVERAGE.—
‘‘(1) SOLICITATION OF BIDS.—
‘‘(A) IN GENERAL.—Separate from the bidding process
under subsection (b), the Secretary shall provide for a
process for the solicitation of bids from eligible fallback
entities (as defined in paragraph (2)) for the offering in
all fallback service areas (as defined in paragraph (3))
in one or more PDP regions of a fallback prescription
drug plan (as defined in paragraph (4)) during the contract
period specified in paragraph (5).
‘‘(B) ACCEPTANCE OF BIDS.—
‘‘(i) IN
GENERAL.—Except as provided in this
subparagraph, the provisions of subsection (e) shall
apply with respect to the approval or disapproval of
fallback prescription drug plans. The Secretary shall
enter into contracts under this subsection with eligible
fallback entities for the offering of fallback prescription
drug plans so approved in fallback service areas.
‘‘(ii) LIMITATION
OF
PLAN
FOR
ALL
FALLBACK
SERVICE AREAS IN A PDP REGION.—With respect to all
fallback service areas in any PDP region for a contract
period, the Secretary shall approve the offering of only
1 fallback prescription drug plan.
‘‘(iii) 
COMPETITIVE
PROCEDURES.—Competitive
procedures (as defined in section 4(5) of the Office
of Federal Procurement Policy Act (41 U.S.C. 403(5)))
shall be used to enter into a contract under this sub-
section. The provisions of subsection (d) of section
1874A shall apply to a contract under this section
in the same manner as they apply to a contract under
such section.
‘‘(iv) TIMING.—The Secretary shall approve a fall-
back prescription drug plan for a PDP region in a
manner so that, if there are any fallback service areas
in the region for a year, the fallback prescription drug
plan is offered at the same time as prescription drug
plans would otherwise be offered.
‘‘(V) NO NATIONAL FALLBACK PLAN.—The Secretary
shall not enter into a contract with a single fallback
entity for the offering of fallback plans throughout
the United States.
‘‘(2) ELIGIBLE FALLBACK ENTITY.—For purposes of this sec-
tion, the term ‘eligible fallback entity’ means, with respect
H. R. 1—32
to all fallback service areas in a PDP region for a contract
period, an entity that—
‘‘(A) meets the requirements to be a PDP sponsor (or
would meet such requirements but for the fact that the
entity is not a risk-bearing entity); and
‘‘(B) does not submit a bid under section 1860D–11(b)
for any prescription drug plan for any PDP region for
the first year of such contract period.
For purposes of subparagraph (B), an entity shall be treated
as submitting a bid with respect to a prescription drug plan
if the entity is acting as a subcontractor of a PDP sponsor
that is offering such a plan. The previous sentence shall not
apply to entities that are subcontractors of an MA organization
except insofar as such organization is acting as a PDP sponsor
with respect to a prescription drug plan.
‘‘(3) FALLBACK SERVICE AREA.—For purposes of this sub-
section, the term ‘fallback service area’ means, for a PDP region
with respect to a year, any area within such region for which
the Secretary determines before the beginning of the year that
the access requirements of the first sentence of section 1860D–
3(a) will not be met for part D eligible individuals residing
in the area for the year.
‘‘(4) FALLBACK PRESCRIPTION DRUG PLAN.—For purposes of
this part, the term ‘fallback prescription drug plan’ means
a prescription drug plan that—
‘‘(A) only offers the standard prescription drug coverage
and access to negotiated prices described in section 1860D–
2(a)(1)(A) and does not include any supplemental prescrip-
tion drug coverage; and
‘‘(B) meets such other requirements as the Secretary
may specify.
‘‘(5) PAYMENTS UNDER THE CONTRACT.—
‘‘(A) IN GENERAL.—A contract entered into under this
subsection shall provide for—
‘‘(i) payment for the actual costs (taking into
account negotiated price concessions described in sec-
tion 1860D–2(d)(1)(B)) of covered part D drugs provided
to part D eligible individuals enrolled in a fallback
prescription drug plan offered by the entity; and
‘‘(ii) payment of management fees that are tied
to performance measures established by the Secretary
for the management, administration, and delivery of
the benefits under the contract.
‘‘(B) 
PERFORMANCE
MEASURES.—The 
performance
measures established by the Secretary pursuant to
subparagraph (A)(ii) shall include at least measures for
each of the following:
‘‘(i) COSTS.—The entity contains costs to the Medi-
care Prescription Drug Account and to part D eligible
individuals enrolled in a fallback prescription drug
plan offered by the entity through mechanisms such
as generic substitution and price discounts.
‘‘(ii) QUALITY PROGRAMS.—The entity provides such
enrollees with quality programs that avoid adverse
drug reactions and overutilization and reduce medical
errors.
H. R. 1—33
‘‘(iii) CUSTOMER
SERVICE.—The entity provides
timely and accurate delivery of services and pharmacy
and beneficiary support services.
‘‘(iv) BENEFIT ADMINISTRATION AND CLAIMS ADJU-
DICATION.—The entity provides efficient and effective
benefit administration and claims adjudication.
‘‘(6) MONTHLY BENEFICIARY PREMIUM.—Except as provided
in section 1860D–13(b) (relating to late enrollment penalty)
and subject to section 1860D–14 (relating to low-income assist-
ance), the monthly beneficiary premium to be charged under
a fallback prescription drug plan offered in all fallback service
areas in a PDP region shall be uniform and shall be equal
to 25.5 percent of an amount equal to the Secretary’s estimate
of the average monthly per capita actuarial cost, including
administrative expenses, under the fallback prescription drug
plan of providing coverage in the region, as calculated by the
Chief Actuary of the Centers for Medicare & Medicaid Services.
In calculating such administrative expenses, the Chief Actuary
shall use a factor that is based on similar expenses of prescrip-
tion drug plans that are not fallback prescription drug plans.
‘‘(7) GENERAL CONTRACT TERMS AND CONDITIONS.—
‘‘(A) IN GENERAL.—Except as may be appropriate to
carry out this section, the terms and conditions of contracts
with eligible fallback entities offering fallback prescription
drug plans under this subsection shall be the same as
the terms and conditions of contracts under this part for
prescription drug plans.
‘‘(B) PERIOD OF CONTRACT.—
‘‘(i) IN GENERAL.—Subject to clause (ii), a contract
approved for a fallback prescription drug plan for fall-
back service areas for a PDP region under this section
shall be for a period of 3 years (except as may be
renewed after a subsequent bidding process).
‘‘(ii) LIMITATION.—A fallback prescription drug
plan may be offered under a contract in an area for
a year only if that area is a fallback service area
for that year.
‘‘(C) ENTITY NOT PERMITTED TO MARKET OR BRAND FALL-
BACK
PRESCRIPTION
DRUG
PLANS.—An eligible fallback
entity with a contract under this subsection may not engage
in any marketing or branding of a fallback prescription
drug plan.
‘‘(h) ANNUAL REPORT
ON USE
OF LIMITED RISK PLANS
AND
FALLBACK PLANS.—The Secretary shall submit to Congress an
annual report that describes instances in which limited risk plans
and fallback prescription drug plans were offered under subsections
(f) and (g). The Secretary shall include in such report such rec-
ommendations as may be appropriate to limit the need for the
provision of such plans and to maximize the assumption of financial
risk under section subsection (f).
‘‘(i) NONINTERFERENCE.—In order to promote competition under
this part and in carrying out this part, the Secretary—
‘‘(1) may not interfere with the negotiations between drug
manufacturers and pharmacies and PDP sponsors; and
‘‘(2) may not require a particular formulary or institute
a price structure for the reimbursement of covered part D
drugs.
H. R. 1—34
‘‘(j) COORDINATION OF BENEFITS.—A PDP sponsor offering a
prescription drug plan shall permit State Pharmaceutical Assistance
Programs and Rx plans under sections 1860D–23 and 1860D–24
to coordinate benefits with the plan and, in connection with such
coordination with such a Program, not to impose fees that are
unrelated to the cost of coordination.
‘‘REQUIREMENTS FOR AND CONTRACTS WITH PRESCRIPTION DRUG
PLAN (PDP) SPONSORS
‘‘SEC. 1860D–12. (a) GENERAL
REQUIREMENTS.—Each PDP
sponsor of a prescription drug plan shall meet the following require-
ments:
‘‘(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 FINANCIAL RISK FOR UNSUBSIDIZED COV-
ERAGE.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), to the
extent that the entity is at risk the entity assumes financial
risk on a prospective basis for benefits that it offers under
a prescription drug plan and that is not covered under
section 1860D–15(b).
‘‘(B) REINSURANCE PERMITTED.—The plan sponsor may
obtain insurance or make other arrangements for the cost
of coverage provided to any enrollee to the extent that
the sponsor is at risk for providing such coverage.
‘‘(3) SOLVENCY FOR UNLICENSED SPONSORS.—In the case
of a PDP sponsor that is not described in paragraph (1) and
for which a waiver has been approved under subsection (c),
such sponsor shall meet solvency standards established by the
Secretary under subsection (d).
‘‘(b) CONTRACT REQUIREMENTS.—
‘‘(1) IN
GENERAL.—The Secretary shall not permit the
enrollment under section 1860D–1 in a prescription drug plan
offered by a PDP sponsor under this part, and the sponsor
shall not be eligible for payments under section 1860D–14
or 1860D–15, unless the Secretary has entered into a contract
under this subsection 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 standards of this part and the
terms and conditions of payment as provided for in this part.
‘‘(2) LIMITATION ON ENTITIES OFFERING FALLBACK PRESCRIP-
TION DRUG PLANS.—The Secretary shall not enter into a contract
with a PDP sponsor for the offering of a prescription drug
plan (other than a fallback prescription drug plan) in a PDP
region for a year if the sponsor—
‘‘(A) submitted a bid under section 1860D–11(g) for
such year (as the first year of a contract period under
such section) to offer a fallback prescription drug plan
in any PDP region;
‘‘(B) offers a fallback prescription drug plan in any
PDP region during the year; or
‘‘(C) offered a fallback prescription drug plan in that
PDP region during the previous year.
H. R. 1—35
For purposes of this paragraph, an entity shall be treated
as submitting a bid with respect to a prescription drug plan
or offering a fallback prescription drug plan if the entity is
acting as a subcontractor of a PDP sponsor that is offering
such a plan. The previous sentence shall not apply to entities
that are subcontractors of an MA organization except insofar
as such organization is acting as a PDP sponsor with respect
to a prescription drug plan.
‘‘(3) INCORPORATION OF CERTAIN MEDICARE ADVANTAGE CON-
TRACT REQUIREMENTS.—Except as otherwise provided, the fol-
lowing provisions of section 1857 shall apply to contracts under
this section in the same manner as they apply to contracts
under section 1857(a):
‘‘(A) MINIMUM ENROLLMENT.—Paragraphs (1) and (3)
of section 1857(b), except that—
‘‘(i) the Secretary may increase the minimum
number of enrollees required under such paragraph
(1) as the Secretary determines appropriate; and
‘‘(ii) the requirement of such paragraph (1) shall
be waived during the first contract year with respect
to an organization in a region.
‘‘(B) CONTRACT PERIOD AND EFFECTIVENESS.—Section
1857(c), except that in applying paragraph (4)(B) of such
section any reference to payment amounts under section
1853 shall be deemed payment amounts under section
1860D–15.
‘‘(C) PROTECTIONS
AGAINST
FRAUD
AND
BENEFICIARY
PROTECTIONS.—Section 1857(d).
‘‘(D) ADDITIONAL CONTRACT TERMS.—Section 1857(e);
except that section 1857(e)(2) shall apply as specified to
PDP sponsors and payments under this part to an MA–
PD plan shall be treated as expenditures made under part
D.
‘‘(E) INTERMEDIATE SANCTIONS.—Section 1857(g) (other
than paragraph (1)(F) of such section), except that in
applying such section the reference in section 1857(g)(1)(B)
to section 1854 is deemed a reference to this part.
‘‘(F) PROCEDURES FOR TERMINATION.—Section 1857(h).
‘‘(c) WAIVER OF CERTAIN REQUIREMENTS TO EXPAND CHOICE.—
‘‘(1) AUTHORIZING WAIVER.—
‘‘(A) 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 application and other evidence presented to
the Secretary, that any of the grounds for approval of
the application described in paragraph (2) have been met.
‘‘(B) APPLICATION OF REGIONAL PLAN WAIVER RULE.—
In addition to the waiver available under subparagraph
(A), the provisions of section 1858(d) shall apply to PDP
sponsors under this part in a manner similar to the manner
in which such provisions apply to MA organizations under
part C, except that no application shall be required under
paragraph (1)(B) of such section in the case of a State
that does not provide a licensing process for such a sponsor.
‘‘(2) GROUNDS FOR APPROVAL.—
H. R. 1—36
‘‘(A) IN
GENERAL.—The grounds for approval under
this paragraph are—
‘‘(i) subject to subparagraph (B), the grounds for
approval described in subparagraphs (B), (C), and (D)
of section 1855(a)(2); and
‘‘(ii) the application by a State of any grounds
other than those required under Federal law.
‘‘(B) 
SPECIAL
RULES.—In 
applying 
subparagraph
(A)(i)—
‘‘(i) the ground of approval described in section
1855(a)(2)(B) is deemed to have been met if the State
does not have a licensing process in effect with respect
to the PDP sponsor; and
‘‘(ii) for plan years beginning before January 1,
2008, if the State does have such a licensing process
in effect, such ground for approval described in such
section is deemed to have been met upon submission
of an application described in such section.
‘‘(3) APPLICATION OF WAIVER PROCEDURES.—With respect
to an application for a waiver (or a waiver granted) under
paragraph (1)(A) of this subsection, the provisions of subpara-
graphs (E), (F), and (G) of section 1855(a)(2) shall apply, except
that clauses (i) and (ii) of such subparagraph (E) shall not
apply in the case of a State that does not have a licensing
process described in paragraph (2)(B)(i) in effect.
‘‘(4) REFERENCES
TO
CERTAIN
PROVISIONS.—In applying
provisions of section 1855(a)(2) under paragraphs (2) and (3)
of this subsection to prescription drug plans and PDP
sponsors—
‘‘(A) any reference to a waiver application under section
1855 shall be treated as a reference to a waiver application
under paragraph (1)(A) of this subsection; and
‘‘(B) any reference to solvency standards shall be
treated as a reference to solvency standards established
under subsection (d) of this section.
‘‘(d) SOLVENCY STANDARDS FOR NON-LICENSED ENTITIES.—
‘‘(1) ESTABLISHMENT AND PUBLICATION.—The Secretary, in
consultation with the National Association of Insurance
Commissioners, shall establish and publish, by not later than
January 1, 2005, financial solvency and capital adequacy stand-
ards for entities described in paragraph (2).
‘‘(2) COMPLIANCE WITH STANDARDS.—A 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 sponsors with respect to such solvency
standards in the manner described in section 1855(c)(2).
‘‘(e) LICENSURE DOES NOT SUBSTITUTE
FOR
OR CONSTITUTE
CERTIFICATION.—The fact that a PDP sponsor is licensed in accord-
ance with subsection (a)(1) or has a waiver application approved
under subsection (c) does not deem the sponsor to meet other
requirements imposed under this part for a sponsor.
‘‘(f) PERIODIC REVIEW AND REVISION OF STANDARDS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the Secretary
may periodically review the standards established under this
H. R. 1—37
section and, based on such review, may revise such standards
if the Secretary determines such revision to be appropriate.
‘‘(2) PROHIBITION OF MIDYEAR IMPLEMENTATION OF SIGNIFI-
CANT
NEW
REGULATORY
REQUIREMENTS.—The Secretary may
not implement, other than at the beginning of a calendar year,
regulations under this section that impose new, significant
regulatory requirements on a PDP sponsor or a prescription
drug plan.
‘‘(g) PROHIBITION OF STATE IMPOSITION OF PREMIUM TAXES;
RELATION TO STATE LAWS.—The provisions of sections 1854(g) and
1856(b)(3) shall apply with respect to PDP sponsors and prescription
drug plans under this part in the same manner as such sections
apply to MA organizations and MA plans under part C.
‘‘PREMIUMS; LATE ENROLLMENT PENALTY
‘‘SEC. 1860D–13. (a) MONTHLY BENEFICIARY PREMIUM.—
‘‘(1) COMPUTATION.—
‘‘(A) IN GENERAL.—The monthly beneficiary premium
for a prescription drug plan is the base beneficiary premium
computed under paragraph (2) as adjusted under this para-
graph.
‘‘(B) ADJUSTMENT TO REFLECT DIFFERENCE BETWEEN
BID AND NATIONAL AVERAGE BID.—
‘‘(i) ABOVE
AVERAGE
BID.—If for a month the
amount of the standardized bid amount (as defined
in paragraph (5)) exceeds the amount of the adjusted
national average monthly bid amount (as defined in
clause (iii)), the base beneficiary premium for the
month shall be increased by the amount of such excess.
‘‘(ii) BELOW
AVERAGE
BID.—If for a month the
amount of the adjusted national average monthly bid
amount for the month exceeds the standardized bid
amount, the base beneficiary premium for the month
shall be decreased by the amount of such excess.
‘‘(iii) ADJUSTED NATIONAL AVERAGE MONTHLY BID
AMOUNT DEFINED.—For purposes of this subparagraph,
the term ‘adjusted national average monthly bid
amount’ means the national average monthly bid
amount computed under paragraph (4), as adjusted
under section 1860D–15(c)(2).
‘‘(C) INCREASE FOR SUPPLEMENTAL PRESCRIPTION DRUG
BENEFITS.—The 
base 
beneficiary 
premium 
shall 
be
increased by the portion of the PDP approved bid that
is attributable to supplemental prescription drug benefits.
‘‘(D) INCREASE FOR LATE ENROLLMENT PENALTY.—The
base beneficiary premium shall be increased by the amount
of any late enrollment penalty under subsection (b).
‘‘(E) DECREASE
FOR
LOW-INCOME
ASSISTANCE.—The
monthly beneficiary premium is subject to decrease in the
case of a subsidy eligible individual under section 1860D–
14.
‘‘(F) UNIFORM PREMIUM.—Except as provided in sub-
paragraphs (D) and (E), the monthly beneficiary premium
for a prescription drug plan in a PDP region is the same
for all part D eligible individuals enrolled in the plan.
H. R. 1—38
‘‘(2) BASE BENEFICIARY PREMIUM.—The base beneficiary pre-
mium under this paragraph for a prescription drug plan for
a month is equal to the product—
‘‘(A) the beneficiary premium percentage (as specified
in paragraph (3)); and
‘‘(B) the national average monthly bid amount (com-
puted under paragraph (4)) for the month.
‘‘(3) BENEFICIARY PREMIUM PERCENTAGE.—For purposes of
this subsection, the beneficiary premium percentage for any
year is the percentage equal to a fraction—
‘‘(A) the numerator of which is 25.5 percent; and
‘‘(B) the denominator of which is 100 percent minus
a percentage equal to—
‘‘(i) the total reinsurance payments which the Sec-
retary estimates are payable under section 1860D–
15(b) with respect to the coverage year; divided by
‘‘(ii) the sum of—
‘‘(I) the amount estimated under clause (i) for
the year; and
‘‘(II) the total payments which the Secretary
estimates will be paid to prescription drug plans
and MA–PD plans that are attributable to the
standardized bid amount during the year, taking
into account amounts paid by the Secretary and
enrollees.
‘‘(4) COMPUTATION
OF
NATIONAL
AVERAGE
MONTHLY
BID
AMOUNT.—
‘‘(A) IN GENERAL.—For each year (beginning with 2006)
the Secretary shall compute a national average monthly
bid amount equal to the average of the standardized bid
amounts (as defined in paragraph (5)) for each prescription
drug plan and for each MA–PD plan described in section
1851(a)(2)(A)(i). Such average does not take into account
the bids submitted for MSA plans, MA private fee-for-
service plan, and specialized MA plans for special needs
individuals, PACE programs under section 1894 (pursuant
to section 1860D–21(f)), and under reasonable cost
reimbursement contracts under section 1876(h) (pursuant
to section 1860D–21(e)).
‘‘(B) WEIGHTED AVERAGE.—
‘‘(i) IN GENERAL.—The monthly national average
monthly bid amount computed under subparagraph
(A) for a year shall be a weighted average, with the
weight for each plan being equal to the average number
of part D eligible individuals enrolled in such plan
in the reference month (as defined in section
1858(f)(4)).
‘‘(ii) SPECIAL
RULE
FOR
2006.—For purposes of
applying this paragraph for 2006, the Secretary shall
establish procedures for determining the weighted
average under clause (i) for 2005.
‘‘(5) STANDARDIZED BID AMOUNT DEFINED.—For purposes
of this subsection, the term ‘standardized bid amount’ means
the following:
‘‘(A) PRESCRIPTION DRUG PLANS.—
H. R. 1—39
‘‘(i) BASIC COVERAGE.—In the case of a prescription
drug plan that provides basic prescription drug cov-
erage, the PDP approved bid (as defined in paragraph
(6)).
‘‘(ii) SUPPLEMENTAL COVERAGE.—In the case of a
prescription drug plan that provides supplemental
prescription drug coverage, the portion of the PDP
approved bid that is attributable to basic prescription
drug coverage.
‘‘(B) MA–PD PLANS.—In the case of an MA–PD plan,
the portion of the accepted bid amount that is attributable
to basic prescription drug coverage.
‘‘(6) PDP APPROVED BID DEFINED.—For purposes of this
part, the term ‘PDP approved bid’ means, with respect to a
prescription drug plan, the bid amount approved for the plan
under this part.
‘‘(b) LATE ENROLLMENT PENALTY.—
‘‘(1) IN GENERAL.—Subject to the succeeding provisions of
this subsection, in the case of a part D eligible individual
described in paragraph (2) with respect to a continuous period
of eligibility, there shall be an increase in the monthly bene-
ficiary premium established under subsection (a) in an amount
determined under paragraph (3).
‘‘(2) INDIVIDUALS SUBJECT TO PENALTY.—A part D eligible
individual described in this paragraph is, with respect to a
continuous period of eligibility, an individual for whom there
is a continuous period of 63 days or longer (all of which in
such continuous period of eligibility) beginning on the day
after the last date of the individual’s initial enrollment period
under section 1860D–1(b)(2) and ending on the date of enroll-
ment under a prescription drug plan or MA–PD plan during
all of which the individual was not covered under any creditable
prescription drug coverage.
‘‘(3) AMOUNT OF PENALTY.—
‘‘(A) IN GENERAL.—The amount determined under this
paragraph for a part D eligible individual for a continuous
period of eligibility is the greater of—
‘‘(i) an amount that the Secretary determines is
actuarially sound for each uncovered month (as defined
in subparagraph (B)) in the same continuous period
of eligibility; or
‘‘(ii) 1 percent of the base beneficiary premium
(computed under subsection (a)(2)) for each such uncov-
ered month in such period.
‘‘(B) UNCOVERED
MONTH
DEFINED.—For purposes of
this subsection, the term ‘uncovered month’ means, with
respect to a part D eligible individual, any month beginning
after the end of the initial enrollment period under section
1860D–1(b)(2) unless the individual can demonstrate that
the individual had creditable prescription drug coverage
(as defined in paragraph (4)) for any portion of such month.
‘‘(4) CREDITABLE PRESCRIPTION DRUG COVERAGE DEFINED.—
For purposes of this part, the term ‘creditable prescription
drug coverage’ means any of the following coverage, but only
if the coverage meets the requirement of paragraph (5):
H. R. 1—40
‘‘(A) COVERAGE UNDER PRESCRIPTION DRUG PLAN OR
MA–PD
PLAN.—Coverage under a prescription drug plan
or under an MA–PD plan.
‘‘(B) MEDICAID.—Coverage under a medicaid plan
under title XIX or under a waiver under section 1115.
‘‘(C) GROUP HEALTH PLAN.—Coverage under a group
health plan, including a health benefits plan under chapter
89 of title 5, United States Code (commonly known as
the Federal employees health benefits program), and a
qualified retiree prescription drug plan (as defined in sec-
tion 1860D–22(a)(2)).
‘‘(D) STATE PHARMACEUTICAL ASSISTANCE PROGRAM.—
Coverage under a State pharmaceutical assistance program
described in section 1860D–23(b)(1).
‘‘(E) VETERANS’ COVERAGE OF PRESCRIPTION DRUGS.—
Coverage for veterans, and survivors and dependents of
veterans, under chapter 17 of title 38, United States Code.
‘‘(F) PRESCRIPTION
DRUG
COVERAGE
UNDER
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)).
‘‘(G) MILITARY COVERAGE (INCLUDING TRICARE).—Cov-
erage under chapter 55 of title 10, United States Code.
‘‘(H) OTHER COVERAGE.—Such other coverage as the
Secretary determines appropriate.
‘‘(5) ACTUARIAL
EQUIVALENCE
REQUIREMENT.—Coverage
meets the requirement of this paragraph only if the coverage
is determined (in a manner specified by the Secretary) to pro-
vide coverage of the cost of prescription drugs the actuarial
value of which (as defined by the Secretary) to the individual
equals or exceeds the actuarial value of standard prescription
drug coverage (as determined under section 1860D–11(c)).
‘‘(6) PROCEDURES TO DOCUMENT CREDITABLE PRESCRIPTION
DRUG COVERAGE.—
‘‘(A) IN GENERAL.—The Secretary shall establish proce-
dures (including the form, manner, and time) for the docu-
mentation 
of 
creditable 
prescription 
drug 
coverage,
including procedures to assist in determining whether cov-
erage meets the requirement of paragraph (5).
‘‘(B) DISCLOSURE
BY
ENTITIES
OFFERING
CREDITABLE
PRESCRIPTION DRUG COVERAGE.—
‘‘(i) IN GENERAL.—Each entity that offers prescrip-
tion drug coverage of the type described in subpara-
graphs (B) through (H) of paragraph (4) shall provide
for disclosure, in a form, manner, and time consistent
with standards established by the Secretary, to the
Secretary and part D eligible individuals of whether
the coverage meets the requirement of paragraph (5)
or whether such coverage is changed so it no longer
meets such requirement.
‘‘(ii) DISCLOSURE OF NON-CREDITABLE COVERAGE.—
In the case of such coverage that does not meet such
requirement, the disclosure to part D eligible individ-
uals under this subparagraph shall include information
regarding the fact that because such coverage does
not meet such requirement there are limitations on
H. R. 1—41
the periods in a year in which the individuals may
enroll under a prescription drug plan or an MA–PD
plan and that any such enrollment is subject to a
late enrollment penalty under this subsection.
‘‘(C) WAIVER OF REQUIREMENT.—In the case of a part
D eligible individual who was enrolled in prescription drug
coverage of the type described in subparagraphs (B)
through (H) of paragraph (4) which is not creditable
prescription drug coverage because it does not meet the
requirement of paragraph (5), the individual may apply
to the Secretary to have such coverage treated as creditable
prescription drug coverage if the individual establishes that
the individual was not adequately informed that such cov-
erage did not meet such requirement.
‘‘(7) CONTINUOUS PERIOD OF ELIGIBILITY.—
‘‘(A) IN
GENERAL.—Subject to subparagraph (B), for
purposes of this subsection, the term ‘continuous period
of eligibility’ means, with respect to a part D eligible indi-
vidual, the period that begins with the first day on which
the individual is eligible to enroll in a prescription drug
plan under this part and ends with the individual’s death.
‘‘(B) SEPARATE PERIOD.—Any period during all of which
a part D eligible individual is entitled to hospital insurance
benefits under part A and—
‘‘(i) which terminated in or before the month pre-
ceding the month in which the individual attained
age 65; or
‘‘(ii) for which the basis for eligibility for such
entitlement changed between section 226(b) and section
226(a), between 226(b) and section 226A, or between
section 226A and section 226(a),
shall be a separate continuous period of eligibility with
respect to the individual (and each such period which termi-
nates shall be deemed not to have existed for purposes
of subsequently applying this paragraph).
‘‘(c) COLLECTION OF MONTHLY BENEFICIARY PREMIUMS.—
‘‘(1) IN GENERAL.—Subject to paragraphs (2) and (3), the
provisions of section 1854(d) shall apply to PDP sponsors and
premiums (and any late enrollment penalty) under this part
in the same manner as they apply to MA organizations and
beneficiary premiums under part C, except that any reference
to a Trust Fund is deemed for this purpose a reference to
the Medicare Prescription Drug Account.
‘‘(2) CREDITING OF LATE ENROLLMENT PENALTY.—
‘‘(A) PORTION ATTRIBUTABLE TO INCREASED ACTUARIAL
COSTS.—With respect to late enrollment penalties imposed
under subsection (b), the Secretary shall specify the portion
of such a penalty that the Secretary estimates is attrib-
utable to increased actuarial costs assumed by the PDP
sponsor or MA organization (and not taken into account
through risk adjustment provided under section 1860D–
15(c)(1) or through reinsurance payments under section
1860D–15(b)) as a result of such late enrollment.
‘‘(B) COLLECTION THROUGH WITHHOLDING.—In the case
of a late enrollment penalty that is collected from a part
D eligible individual in the manner described in section
1854(d)(2)(A), the Secretary shall provide that only the
H. R. 1—42
portion of such penalty estimated under subparagraph (A)
shall be paid to the PDP sponsor or MA organization
offering the part D plan in which the individual is enrolled.
‘‘(C) COLLECTION BY PLAN.—In the case of a late enroll-
ment penalty that is collected from a part D eligible indi-
vidual in a manner other than the manner described in
section 1854(d)(2)(A), the Secretary shall establish proce-
dures for reducing payments otherwise made to the PDP
sponsor or MA organization by an amount equal to the
amount of such penalty less the portion of such penalty
estimated under subparagraph (A).
‘‘(3) FALLBACK PLANS.—In applying this subsection in the
case of a fallback prescription drug plan, paragraph (2) shall
not apply and the monthly beneficiary premium shall be col-
lected in the manner specified in section 1854(d)(2)(A) (or such
other manner as may be provided under section 1840 in the
case of monthly premiums under section 1839).
‘‘PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME
INDIVIDUALS
‘‘SEC. 1860D–14. (a) INCOME-RELATED SUBSIDIES FOR INDIVID-
UALS WITH INCOME UP TO 150 PERCENT OF POVERTY LINE.—
‘‘(1) INDIVIDUALS WITH INCOME BELOW 135 PERCENT OF POV-
ERTY LINE.—In the case of a subsidy eligible individual (as
defined in paragraph (3)) who is determined to have income
that is below 135 percent of the poverty line applicable to
a family of the size involved and who meets the resources
requirement described in paragraph (3)(D) or who is covered
under this paragraph under paragraph (3)(B)(i), the individual
is entitled under this section to the following:
‘‘(A) FULL PREMIUM SUBSIDY.—An income-related pre-
mium subsidy equal to—
‘‘(i) 100 percent of the amount described in sub-
section (b)(1), but not to exceed the premium amount
specified in subsection (b)(2)(B); plus
‘‘(ii) 80 percent of any late enrollment penalties
imposed under section 1860D–13(b) for the first 60
months in which such penalties are imposed for that
individual, and 100 percent of any such penalties for
any subsequent month.
‘‘(B) ELIMINATION OF DEDUCTIBLE.—A reduction in the
annual deductible applicable under section 1860D–2(b)(1)
to $0.
‘‘(C) CONTINUATION OF COVERAGE ABOVE THE INITIAL
COVERAGE LIMIT.—The continuation of coverage from the
initial coverage limit (under paragraph (3) of section
1860D–2(b)) for expenditures incurred through the total
amount of expenditures at which benefits are available
under paragraph (4) of such section, subject to the reduced
cost-sharing described in subparagraph (D).
‘‘(D) REDUCTION
IN
COST-SHARING
BELOW
OUT-OF-
POCKET THRESHOLD.—
‘‘(i) INSTITUTIONALIZED INDIVIDUALS.—In the case
of an individual who is a full-benefit dual eligible indi-
vidual and who is an institutionalized individual or
H. R. 1—43
couple (as defined in section 1902(q)(1)(B)), the elimi-
nation of any beneficiary coinsurance described in sec-
tion 1860D–2(b)(2) (for all amounts through the total
amount of expenditures at which benefits are available
under section 1860D–2(b)(4)).
‘‘(ii) LOWEST INCOME DUAL ELIGIBLE INDIVIDUALS.—
In the case of an individual not described in clause
(i) who is a full-benefit dual eligible individual and
whose income does not exceed 100 percent of the pov-
erty line applicable to a family of the size involved,
the substitution for the beneficiary coinsurance
described in section 1860D–2(b)(2) (for all amounts
through the total amount of expenditures at which
benefits are available under section 1860D–2(b)(4)) of
a copayment amount that does not exceed $1 for a
generic drug or a preferred drug that is a multiple
source drug (as defined in section 1927(k)(7)(A)(i)) and
$3 for any other drug, or, if less, the copayment amount
applicable to an individual under clause (iii).
‘‘(iii) OTHER INDIVIDUALS.—In the case of an indi-
vidual not described in clause (i) or (ii), the substitution
for the beneficiary coinsurance described in section
1860D–2(b)(2) (for all amounts through the total
amount of expenditures at which benefits are available
under section 1860D–2(b)(4)) of a copayment amount
that does not exceed the copayment amount specified
under section 1860D–2(b)(4)(A)(i)(I) for the drug and
year involved.
‘‘(E) ELIMINATION
OF
COST-SHARING
ABOVE
ANNUAL
OUT-OF-POCKET THRESHOLD.—The elimination of any cost-
sharing imposed under section 1860D–2(b)(4)(A).
‘‘(2) OTHER INDIVIDUALS WITH INCOME BELOW 150 PERCENT
OF POVERTY LINE.—In the case of a subsidy eligible individual
who is not described in paragraph (1), the individual is entitled
under this section to the following:
‘‘(A) SLIDING
SCALE
PREMIUM
SUBSIDY.—An income-
related premium subsidy determined on a linear sliding
scale ranging from 100 percent of the amount described
in paragraph (1)(A) for individuals with incomes at or
below 135 percent of such level to 0 percent of such amount
for individuals with incomes at 150 percent of such level.
‘‘(B) REDUCTION OF DEDUCTIBLE.—A reduction in the
annual deductible applicable under section 1860D–2(b)(1)
to $50.
‘‘(C) CONTINUATION OF COVERAGE ABOVE THE INITIAL
COVERAGE LIMIT.—The continuation of coverage from the
initial coverage limit (under paragraph (3) of section
1860D–2(b)) for expenditures incurred through the total
amount of expenditures at which benefits are available
under paragraph (4) of such section, subject to the reduced
coinsurance described in subparagraph (D).
‘‘(D) REDUCTION
IN
COST-SHARING
BELOW
OUT-OF-
POCKET THRESHOLD.—The substitution for the beneficiary
coinsurance described in section 1860D–2(b)(2) (for all
amounts above the deductible under subparagraph (B)
through the total amount of expenditures at which benefits
are available under section 1860D–2(b)(4)) of coinsurance
H. R. 1—44
of ‘15 percent’ instead of coinsurance of ‘25 percent’ in
section 1860D–2(b)(2).
‘‘(E) REDUCTION OF COST-SHARING ABOVE ANNUAL OUT-
OF-POCKET
THRESHOLD.—Subject to subsection (c), the
substitution for the cost-sharing imposed under section
1860D–2(b)(4)(A) of a copayment or coinsurance not to
exceed the copayment or coinsurance amount specified
under section 1860D–2(b)(4)(A)(i)(I) for the drug and year
involved.
‘‘(3) DETERMINATION OF ELIGIBILITY.—
‘‘(A) SUBSIDY ELIGIBLE INDIVIDUAL DEFINED.—For pur-
poses of this part, subject to subparagraph (F), the term
‘subsidy eligible individual’ means a part D eligible indi-
vidual who—
‘‘(i) is enrolled in a prescription drug plan or MA–
PD plan;
‘‘(ii) has income below 150 percent of the poverty
line applicable to a family of the size involved; and
‘‘(iii) meets the resources requirement described
in subparagraph (D) or (E).
‘‘(B) DETERMINATIONS.—
‘‘(i) IN GENERAL.—The determination of whether
a part D eligible individual residing in a State is a
subsidy eligible individual and whether the individual
is described in paragraph (1) shall be determined under
the State plan under title XIX for the State under
section 1935(a) or by the Commissioner of Social Secu-
rity. There are authorized to be appropriated to the
Social Security Administration such sums as may be
necessary for the determination of eligibility under
this subparagraph.
‘‘(ii) EFFECTIVE
PERIOD.—Determinations under
this subparagraph shall be effective beginning with
the month in which the individual applies for a deter-
mination that the individual is a subsidy eligible indi-
vidual and shall remain in effect for a period specified
by the Secretary, but not to exceed 1 year.
‘‘(iii) REDETERMINATIONS
AND
APPEALS
THROUGH
MEDICAID.—Redeterminations 
and 
appeals, 
with
respect to eligibility determinations under clause (i)
made under a State plan under title XIX, shall be
made in accordance with the frequency of, and manner
in which, redeterminations and appeals of eligibility
are made under such plan for purposes of medical
assistance under such title.
‘‘(iv) REDETERMINATIONS
AND
APPEALS
THROUGH
COMMISSIONER.—With respect to eligibility determina-
tions under clause (i) made by the Commissioner of
Social Security—
‘‘(I) redeterminations shall be made at such
time or times as may be provided by the Commis-
sioner; and
‘‘(II) the Commissioner shall establish proce-
dures for appeals of such determinations that are
similar to the procedures described in the third
sentence of section 1631(c)(1)(A).
H. R. 1—45
‘‘(v) TREATMENT
OF
MEDICAID
BENEFICIARIES.—
Subject to subparagraph (F), the Secretary—
‘‘(I) shall provide that part D eligible individ-
uals who are full-benefit dual eligible individuals
(as defined in section 1935(c)(6)) or who are recipi-
ents of supplemental security income benefits
under title XVI shall be treated as subsidy eligible
individuals described in paragraph (1); and
‘‘(II) may provide that part D eligible individ-
uals not described in subclause (I) who are deter-
mined for purposes of the State plan under title
XIX to be eligible for medical assistance under
clause (i), (iii), or (iv) of section 1902(a)(10)(E) are
treated as being determined to be subsidy eligible
individuals described in paragraph (1).
Insofar as the Secretary determines that the eligibility
requirements under the State plan for medical assist-
ance referred to in subclause (II) are substantially
the same as the requirements for being treated as
a subsidy eligible individual described in paragraph
(1), the Secretary shall provide for the treatment
described in such subclause.
‘‘(C) 
INCOME
DETERMINATIONS.—For 
purposes 
of
applying this section—
‘‘(i) in the case of a part D eligible individual
who is not treated as a subsidy eligible individual
under subparagraph (B)(v), income shall be determined
in the manner described in section 1905(p)(1)(B), with-
out regard to the application of section 1902(r)(2); and
‘‘(ii) the term ‘poverty line’ has the meaning given
such term in section 673(2) of the Community Services
Block Grant Act (42 U.S.C. 9902(2)), including any
revision required by such section.
Nothing in clause (i) shall be construed to affect the applica-
tion of section 1902(r)(2) for the determination of eligibility
for medical assistance under title XIX.
‘‘(D) RESOURCE
STANDARD
APPLIED
TO
FULL
LOW-
INCOME
SUBSIDY
TO
BE
BASED
ON
THREE
TIMES
SSI
RESOURCE STANDARD.—The resources requirement of this
subparagraph is that an individual’s resources (as deter-
mined under section 1613 for purposes of the supplemental
security income program) do not exceed—
‘‘(i) for 2006 three times the maximum amount
of resources that an individual may have and obtain
benefits under that program; and
‘‘(ii) for a subsequent year the resource limitation
established under this clause for the previous year
increased by the annual percentage increase in the
consumer price index (all items; U.S. city average)
as of September of such previous year.
Any resource limitation established under clause (ii) that
is not a multiple of $10 shall be rounded to the nearest
multiple of $10.
‘‘(E) ALTERNATIVE RESOURCE STANDARD.—
‘‘(i) IN
GENERAL.—The resources requirement of
this subparagraph is that an individual’s resources
(as determined under section 1613 for purposes of the
H. R. 1—46
supplemental 
security 
income 
program) 
do 
not
exceed—
‘‘(I) for 2006, $10,000 (or $20,000 in the case
of the combined value of the individual’s assets
or resources and the assets or resources of the
individual’s spouse); and
‘‘(II) for a subsequent year the dollar amounts
specified in this subclause (or subclause (I)) for
the previous year increased by the annual percent-
age increase in the consumer price index (all items;
U.S. city average) as of September of such previous
year.
Any dollar amount established under subclause (II)
that is not a multiple of $10 shall be rounded to
the nearest multiple of $10.
‘‘(ii) USE
OF
SIMPLIFIED
APPLICATION
FORM
AND
PROCESS.—The Secretary, jointly with the Commis-
sioner of Social Security, shall—
‘‘(I) develop a model, simplified application
form and process consistent with clause (iii) for
the determination and verification of a part D
eligible individual’s assets or resources under this
subparagraph; and
‘‘(II) provide such form to States.
‘‘(iii) DOCUMENTATION
AND
SAFEGUARDS.—Under
such process—
‘‘(I) the application form shall consist of an
attestation under penalty of perjury regarding the
level of assets or resources (or combined assets
and resources in the case of a married part D
eligible individual) and valuations of general
classes of assets or resources;
‘‘(II) such form shall be accompanied by copies
of recent statements (if any) from financial institu-
tions in support of the application; and
‘‘(III) matters attested to in the application
shall be subject to appropriate methods of
verification.
‘‘(iv) METHODOLOGY
FLEXIBILITY.—The Secretary
may permit a State in making eligibility determina-
tions for premium and cost-sharing subsidies under
this section to use the same asset or resource meth-
odologies that are used with respect to eligibility for
medical assistance for medicare cost-sharing described
in section 1905(p) so long as the Secretary determines
that the use of such methodologies will not result in
any significant differences in the number of individuals
determined to be subsidy eligible individuals.
‘‘(F) TREATMENT OF TERRITORIAL RESIDENTS.—In the
case of a part D eligible 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 under
this section but may be eligible for financial assistance
with prescription drug expenses under section 1935(e).
‘‘(4) INDEXING DOLLAR AMOUNTS.—
H. R. 1—47
‘‘(A) COPAYMENT FOR LOWEST INCOME DUAL ELIGIBLE
INDIVIDUALS.—The dollar amounts applied under para-
graph (1)(D)(ii)—
‘‘(i) for 2007 shall be the dollar amounts specified
in such paragraph increased by the annual percentage
increase in the consumer price index (all items; U.S.
city average) as of September of such previous year;
or
‘‘(ii) for a subsequent year shall be the dollar
amounts specified in this clause (or clause (i)) for the
previous year increased by the annual percentage
increase in the consumer price index (all items; U.S.
city average) as of September of such previous year.
Any amount established under clause (i) or (ii), that is
based on an increase of $1 or $3, that is not a multiple
of 5 cents or 10 cents, respectively, shall be rounded to
the nearest multiple of 5 cents or 10 cents, respectively.
‘‘(B) 
REDUCED
DEDUCTIBLE.—The 
dollar 
amount
applied under paragraph (2)(B)—
‘‘(i) for 2007 shall be the dollar amount specified
in such paragraph increased by the annual percentage
increase described in section 1860D–2(b)(6) for 2007;
or
‘‘(ii) for a subsequent year shall be the dollar
amount specified in this clause (or clause (i)) for the
previous year increased by the annual percentage
increase described in section 1860D–2(b)(6) for the year
involved.
Any amount established under clause (i) or (ii) that is
not a multiple of $1 shall be rounded to the nearest mul-
tiple of $1.
‘‘(b) PREMIUM SUBSIDY AMOUNT.—
‘‘(1) IN GENERAL.—The premium subsidy amount described
in this subsection for a subsidy eligible individual residing
in a PDP region and enrolled in a prescription drug plan
or MA–PD plan is the low-income benchmark premium amount
(as defined in paragraph (2)) for the PDP region in which
the individual resides or, if greater, the amount specified in
paragraph (3).
‘‘(2) LOW-INCOME BENCHMARK PREMIUM AMOUNT DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the
term ‘low-income benchmark premium amount’ means,
with respect to a PDP region in which—
‘‘(i) all prescription drug plans are offered by the
same PDP sponsor, the weighted average of the
amounts described in subparagraph (B)(i) for such
plans; or
‘‘(ii) there are prescription drug plans offered by
more than one PDP sponsor, the weighted average
of amounts described in subparagraph (B) for prescrip-
tion drug plans and MA–PD plans described in section
1851(a)(2)(A)(i) offered in such region.
‘‘(B) PREMIUM
AMOUNTS
DESCRIBED.—The premium
amounts described in this subparagraph are, in the case
of—
H. R. 1—48
‘‘(i) a prescription drug plan that is a basic
prescription drug plan, the monthly beneficiary pre-
mium for such plan;
‘‘(ii) a prescription drug plan that provides alter-
native prescription drug coverage the actuarial value
of which is greater than that of standard prescription
drug coverage, the portion of the monthly beneficiary
premium that is attributable to basic prescription drug
coverage; and
‘‘(iii) an MA–PD plan, the portion of the MA
monthly prescription drug beneficiary premium that
is attributable to basic prescription drug benefits
(described in section 1852(a)(6)(B)(ii)).
The premium amounts described in this subparagraph do
not include any amounts attributable to late enrollment
penalties under section 1860D–13(b).
‘‘(3) ACCESS TO 0 PREMIUM PLAN.—In no case shall the
premium subsidy amount under this subsection for a PDP
region be less than the lowest monthly beneficiary premium
for a prescription drug plan that offers basic prescription drug
coverage in the region.
‘‘(c) ADMINISTRATION OF SUBSIDY PROGRAM.—
‘‘(1) IN GENERAL.—The Secretary shall provide a process
whereby, in the case of a part D eligible individual who is
determined to be a subsidy eligible individual and who is
enrolled in a prescription drug plan or is enrolled in an MA–
PD plan—
‘‘(A) the Secretary provides for a notification of the
PDP sponsor or the MA organization offering the plan
involved that the individual is eligible for a subsidy and
the amount of the subsidy under subsection (a);
‘‘(B) the sponsor or organization involved reduces the
premiums or cost-sharing otherwise imposed by the amount
of the applicable subsidy and submits to the Secretary
information on the amount of such reduction;
‘‘(C) the Secretary periodically and on a timely basis
reimburses the sponsor or organization for the amount
of such reductions; and
‘‘(D) the Secretary ensures the confidentiality of
individually identifiable information.
In applying subparagraph (C), the Secretary shall compute
reductions based upon imposition under subsections (a)(1)(D)
and (a)(2)(E) of unreduced copayment amounts applied under
such subsections.
‘‘(2) USE OF CAPITATED FORM OF PAYMENT.—The reimburse-
ment under this section with respect to cost-sharing subsidies
may be computed on a capitated basis, taking into account
the actuarial value of the subsidies and with appropriate adjust-
ments to reflect differences in the risks actually involved.
‘‘(d) RELATION TO MEDICAID PROGRAM.—For special provisions
under the medicaid program relating to medicare prescription drug
benefits, see section 1935.
‘‘SUBSIDIES FOR PART D ELIGIBLE INDIVIDUALS FOR QUALIFIED
PRESCRIPTION DRUG COVERAGE
‘‘SEC. 1860D–15. (a) SUBSIDY PAYMENT.—In order to reduce
premium levels applicable to qualified prescription drug coverage
H. R. 1—49
for part D eligible individuals consistent with an overall subsidy
level of 74.5 percent for basic prescription drug coverage, to reduce
adverse selection among prescription drug plans and MA–PD plans,
and to promote the participation of PDP sponsors under this part
and MA organizations under part C, the Secretary shall provide
for payment to a PDP sponsor that offers a prescription drug
plan and an MA organization that offers an MA–PD plan of the
following subsidies in accordance with this section:
‘‘(1) DIRECT SUBSIDY.—A direct subsidy for each part D
eligible individual enrolled in a prescription drug plan or MA–
PD plan for a month equal to—
‘‘(A) the amount of the plan’s standardized bid amount
(as defined in section 1860D–13(a)(5)), adjusted under sub-
section (c)(1), reduced by
‘‘(B) the base beneficiary premium (as computed under
paragraph (2) of section 1860D–13(a) and as adjusted under
paragraph (1)(B) of such section).
‘‘(2) SUBSIDY
THROUGH
REINSURANCE.—The reinsurance
payment amount (as defined in subsection (b)).
This section constitutes budget authority in advance of appropria-
tions Acts and represents the obligation of the Secretary to provide
for the payment of amounts provided under this section.
‘‘(b) REINSURANCE PAYMENT AMOUNT.—
‘‘(1) IN GENERAL.—The reinsurance payment amount under
this subsection for a part D eligible individual enrolled in
a prescription drug plan or MA–PD plan for a coverage year
is an amount equal to 80 percent of the allowable reinsurance
costs (as specified in paragraph (2)) attributable to that portion
of gross covered prescription drug costs as specified in para-
graph (3) incurred in the coverage year after such individual
has incurred costs that exceed the annual out-of-pocket
threshold specified in section 1860D–2(b)(4)(B).
‘‘(2) ALLOWABLE REINSURANCE COSTS.—For purposes of this
section, the term ‘allowable reinsurance costs’ means, with
respect to gross covered prescription drug costs under a
prescription drug plan offered by a PDP sponsor or an MA–
PD plan offered by an MA organization, the part of such costs
that are actually paid (net of discounts, chargebacks, and aver-
age percentage rebates) by the sponsor or organization or by
(or on behalf of) an enrollee under the plan, but in no case
more than the part of such costs that would have been paid
under the plan if the prescription drug coverage under the
plan were basic prescription drug coverage, or, in the case
of a plan providing supplemental prescription drug coverage,
if such coverage were standard prescription drug coverage.
‘‘(3) GROSS COVERED PRESCRIPTION DRUG COSTS.—For pur-
poses of this section, the term ‘gross covered prescription drug
costs’ means, with respect to a part D eligible individual
enrolled in a prescription drug plan or MA–PD plan during
a coverage year, the costs incurred under the plan, not including
administrative costs, but including costs directly related to
the dispensing of covered part D drugs during the year and
costs relating to the deductible. Such costs shall be determined
whether they are paid by the individual or under the plan,
regardless of whether the coverage under the plan exceeds
basic prescription drug coverage.
H. R. 1—50
‘‘(4) COVERAGE YEAR DEFINED.—For purposes of this section,
the term ‘coverage year’ means a calendar year in which covered
part D drugs are dispensed if the claim for such drugs (and
payment on such claim) is made not later than such period
after the end of such year as the Secretary specifies.
‘‘(c) ADJUSTMENTS RELATING TO BIDS.—
‘‘(1) HEALTH STATUS RISK ADJUSTMENT.—
‘‘(A) ESTABLISHMENT
OF
RISK
ADJUSTORS.—The Sec-
retary shall establish an appropriate methodology for
adjusting the standardized bid amount under subsection
(a)(1)(A) to take into account variation in costs for basic
prescription drug coverage among prescription drug plans
and MA–PD plans based on the differences in actuarial
risk of different enrollees being served. Any such risk
adjustment shall be designed in a manner so as not to
result in a change in the aggregate amounts payable to
such plans under subsection (a)(1) and through that portion
of the monthly beneficiary prescription drug premiums
described in subsection (a)(1)(B) and MA monthly prescrip-
tion drug beneficiary premiums.
‘‘(B) CONSIDERATIONS.—In establishing the method-
ology under subparagraph (A), the Secretary may take
into account the similar methodologies used under section
1853(a)(3) to adjust payments to MA organizations for bene-
fits under the original medicare fee-for-service program
option.
‘‘(C) DATA
COLLECTION.—In order to carry out this
paragraph, the Secretary shall require—
‘‘(i) PDP sponsors to submit data regarding drug
claims that can be linked at the individual level to
part A and part B data and such other information
as the Secretary determines necessary; and
‘‘(ii) MA organizations that offer MA–PD plans
to submit data regarding drug claims that can be
linked at the individual level to other data that such
organizations are required to submit to the Secretary
and such other information as the Secretary deter-
mines necessary.
‘‘(D) PUBLICATION.—At the time of publication of risk
adjustment factors under section 1853(b)(1)(B)(i)(II), the
Secretary shall publish the risk adjusters established under
this paragraph for the succeeding year.
‘‘(2) GEOGRAPHIC ADJUSTMENT.—
‘‘(A) IN
GENERAL.—Subject to subparagraph (B), for
purposes of section 1860D–13(a)(1)(B)(iii), the Secretary
shall establish an appropriate methodology for adjusting
the national average monthly bid amount (computed under
section 1860D–13(a)(4)) to take into account differences
in prices for covered part D drugs among PDP regions.
‘‘(B) DE MINIMIS RULE.—If the Secretary determines
that the price variations described in subparagraph (A)
among PDP regions are de minimis, the Secretary shall
not provide for adjustment under this paragraph.
‘‘(C) BUDGET NEUTRAL ADJUSTMENT.—Any adjustment
under this paragraph shall be applied in a manner so
as to not result in a change in the aggregate payments
H. R. 1—51
made under this part that would have been made if the
Secretary had not applied such adjustment.
‘‘(d) PAYMENT METHODS.—
‘‘(1) IN GENERAL.—Payments under this section shall be
based on such a method as the Secretary determines. The
Secretary may establish a payment method by which interim
payments of amounts under this section are made during a
year based on the Secretary’s best estimate of amounts that
will be payable after obtaining all of the information.
‘‘(2) REQUIREMENT FOR PROVISION OF INFORMATION.—
‘‘(A) REQUIREMENT.—Payments under this section to
a PDP sponsor or MA organization are conditioned upon
the furnishing to the Secretary, in a form and manner
specified by the Secretary, of such information as may
be required to carry out this section.
‘‘(B) RESTRICTION ON USE OF INFORMATION.—Informa-
tion disclosed or obtained pursuant to subparagraph (A)
may be used by officers, employees, and contractors of
the Department of Health and Human Services only for
the purposes of, and to the extent necessary in, carrying
out this section.
‘‘(3) SOURCE OF PAYMENTS.—Payments under this section
shall be made from the Medicare Prescription Drug Account.
‘‘(4) APPLICATION OF ENROLLEE ADJUSTMENT.—The provi-
sions of section 1853(a)(2) shall apply to payments to PDP
sponsors under this section in the same manner as they apply
to payments to MA organizations under section 1853(a).
‘‘(e) PORTION OF TOTAL PAYMENTS TO A SPONSOR OR ORGANIZA-
TION SUBJECT TO RISK (APPLICATION OF RISK CORRIDORS).—
‘‘(1) COMPUTATION OF ADJUSTED ALLOWABLE RISK CORRIDOR
COSTS.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the
term ‘adjusted allowable risk corridor costs’ means, for
a plan for a coverage year (as defined in subsection (b)(4))—
‘‘(i) the allowable risk corridor costs (as defined
in subparagraph (B)) for the plan for the year, reduced
by
‘‘(ii) the sum of (I) the total reinsurance payments
made under subsection (b) to the sponsor of the plan
for the year, and (II) the total subsidy payments made
under section 1860D–14 to the sponsor of the plan
for the year.
‘‘(B) ALLOWABLE RISK CORRIDOR COSTS.—For purposes
of this subsection, the term ‘allowable risk corridor costs’
means, with respect to a prescription drug plan offered
by a PDP sponsor or an MA–PD plan offered by an MA
organization, the part of costs (not including administrative
costs, but including costs directly related to the dispensing
of covered part D drugs during the year) incurred by the
sponsor or organization under the plan that are actually
paid (net of discounts, chargebacks, and average percentage
rebates) by the sponsor or organization under the plan,
but in no case more than the part of such costs that
would have been paid under the plan if the prescription
drug coverage under the plan were basic prescription drug
coverage, or, in the case of a plan providing supplemental
prescription drug coverage, if such coverage were basic
H. R. 1—52
prescription drug coverage taking into account the adjust-
ment under section 1860D–11(c)(2). In computing allowable
costs under this paragraph, the Secretary shall compute
such costs based upon imposition under paragraphs (1)(D)
and (2)(E) of section 1860D–14(a) of the maximum amount
of copayments permitted under such paragraphs.
‘‘(2) ADJUSTMENT OF PAYMENT.—
‘‘(A) NO
ADJUSTMENT
IF
ADJUSTED
ALLOWABLE
RISK
CORRIDOR COSTS WITHIN RISK CORRIDOR.—If the adjusted
allowable risk corridor costs (as defined in paragraph (1))
for the plan for the year are at least equal to the first
threshold lower limit of the risk corridor (specified in para-
graph (3)(A)(i)), but not greater than the first threshold
upper limit of the risk corridor (specified in paragraph
(3)(A)(iii)) for the plan for the year, then no payment adjust-
ment shall be made under this subsection.
‘‘(B) INCREASE IN PAYMENT IF ADJUSTED ALLOWABLE
RISK CORRIDOR COSTS ABOVE UPPER LIMIT OF RISK COR-
RIDOR.—
‘‘(i) COSTS BETWEEN FIRST AND SECOND THRESHOLD
UPPER LIMITS.—If the adjusted allowable risk corridor
costs for the plan for the year are greater than the
first threshold upper limit, but not greater than the
second threshold upper limit, of the risk corridor for
the plan for the year, the Secretary shall increase
the total of the payments made to the sponsor or
organization offering the plan for the year under this
section by an amount equal to 50 percent (or, for
2006 and 2007, 75 percent or 90 percent if the condi-
tions described in clause (iii) are met for the year)
of the difference between such adjusted allowable risk
corridor costs and the first threshold upper limit of
the risk corridor.
‘‘(ii) COSTS
ABOVE
SECOND
THRESHOLD
UPPER
LIMITS.—If the adjusted allowable risk corridor costs
for the plan for the year are greater than the second
threshold upper limit of the risk corridor for the plan
for the year, the Secretary shall increase the total
of the payments made to the sponsor or organization
offering the plan for the year under this section by
an amount equal to the sum of—
‘‘(I) 50 percent (or, for 2006 and 2007, 75 per-
cent or 90 percent if the conditions described in
clause (iii) are met for the year) of the difference
between the second threshold upper limit and the
first threshold upper limit; and
‘‘(II) 80 percent of the difference between such
adjusted allowable risk corridor costs and the
second threshold upper limit of the risk corridor.
‘‘(iii) CONDITIONS
FOR
APPLICATION
OF
HIGHER
PERCENTAGE
FOR
2006
AND
2007.—The conditions
described in this clause are met for 2006 or 2007
if the Secretary determines with respect to such year
that—
‘‘(I) at least 60 percent of prescription drug
plans and MA–PD plans to which this subsection
applies have adjusted allowable risk corridor costs
H. R. 1—53
for the plan for the year that are more than the
first threshold upper limit of the risk corridor for
the plan for the year; and
‘‘(II) such plans represent at least 60 percent
of part D eligible individuals enrolled in any
prescription drug plan or MA–PD plan.
‘‘(C) REDUCTION IN PAYMENT IF ADJUSTED ALLOWABLE
RISK CORRIDOR COSTS BELOW LOWER LIMIT OF RISK COR-
RIDOR.—
‘‘(i) COSTS BETWEEN FIRST AND SECOND THRESHOLD
LOWER LIMITS.—If the adjusted allowable risk corridor
costs for the plan for the year are less than the first
threshold lower limit, but not less than the second
threshold lower limit, of the risk corridor for the plan
for the year, the Secretary shall reduce the total of
the payments made to the sponsor or organization
offering the plan for the year under this section by
an amount (or otherwise recover from the sponsor or
organization an amount) equal to 50 percent (or, for
2006 and 2007, 75 percent) of the difference between
the first threshold lower limit of the risk corridor and
such adjusted allowable risk corridor costs.
‘‘(ii) COSTS
BELOW
SECOND
THRESHOLD
LOWER
LIMIT.—If the adjusted allowable risk corridor costs
for the plan for the year are less the second threshold
lower limit of the risk corridor for the plan for the
year, the Secretary shall reduce the total of the pay-
ments made to the sponsor or organization offering
the plan for the year under this section by an amount
(or otherwise recover from the sponsor or organization
an amount) equal to the sum of—
‘‘(I) 50 percent (or, for 2006 and 2007, 75 per-
cent) of the difference between the first threshold
lower limit and the second threshold lower limit;
and
‘‘(II) 80 percent of the difference between the
second threshold upper limit of the risk corridor
and such adjusted allowable risk corridor costs.
‘‘(3) ESTABLISHMENT OF RISK CORRIDORS.—
‘‘(A) IN GENERAL.—For each plan year the Secretary
shall establish a risk corridor for each prescription drug
plan and each MA–PD plan. The risk corridor for a plan
for a year shall be equal to a range as follows:
‘‘(i) FIRST
THRESHOLD
LOWER
LIMIT.—The first
threshold lower limit of such corridor shall be equal
to—
‘‘(I) the target amount described in subpara-
graph (B) for the plan; minus
‘‘(II) an amount equal to the first threshold
risk percentage for the plan (as determined under
subparagraph (C)(i)) of such target amount.
‘‘(ii) SECOND THRESHOLD LOWER LIMIT.—The second
threshold lower limit of such corridor shall be equal
to—
‘‘(I) the target amount described in subpara-
graph (B) for the plan; minus
H. R. 1—54
‘‘(II) an amount equal to the second threshold
risk percentage for the plan (as determined under
subparagraph (C)(ii)) of such target amount.
‘‘(iii) FIRST
THRESHOLD
UPPER
LIMIT.—The first
threshold upper limit of such corridor shall be equal
to the sum of—
‘‘(I) such target amount; and
‘‘(II) the amount described in clause (i)(II).
‘‘(iv) SECOND THRESHOLD UPPER LIMIT.—The second
threshold upper limit of such corridor shall be equal
to the sum of—
‘‘(I) such target amount; and
‘‘(II) the amount described in clause (ii)(II).
‘‘(B) TARGET AMOUNT DESCRIBED.—The target amount
described in this paragraph is, with respect to a prescrip-
tion drug plan or an MA–PD plan in a year, the total
amount of payments paid to the PDP sponsor or MA–
PD organization for the plan for the year, taking into
account amounts paid by the Secretary and enrollees, based
upon the standardized bid amount (as defined in section
1860D–13(a)(5) and as risk adjusted under subsection
(c)(1)), reduced by the total amount of administrative
expenses for the year assumed in such standardized bid.
‘‘(C) FIRST AND SECOND THRESHOLD RISK PERCENTAGE
DEFINED.—
‘‘(i) FIRST THRESHOLD RISK PERCENTAGE.—Subject
to clause (iii), for purposes of this section, the first
threshold risk percentage is—
‘‘(I) for 2006 and 2007, and 2.5 percent;
‘‘(II) for 2008 through 2011, 5 percent; and
‘‘(III) for 2012 and subsequent years, a
percentage established by the Secretary, but in
no case less than 5 percent.
‘‘(ii) SECOND THRESHOLD RISK PERCENTAGE.—Sub-
ject to clause (iii), for purposes of this section, the
second threshold risk percentage is—
‘‘(I) for 2006 and 2007, 5 percent;
‘‘(II) for 2008 through 2011, 10 percent; and
‘‘(III) for 2012 and subsequent years, a
percentage established by the Secretary that is
greater than the percent established for the year
under clause (i)(III), but in no case less than 10
percent.
‘‘(iii) REDUCTION OF RISK PERCENTAGE TO ENSURE
PLANS
IN
AN
AREA.—Pursuant to section 1860D–
11(b)(2)(E)(ii), a PDP sponsor may submit a bid that
requests a decrease in the applicable first or second
threshold risk percentages or an increase in the per-
cents applied under paragraph (2).
‘‘(4) PLANS AT RISK FOR ENTIRE AMOUNT OF SUPPLEMENTAL
PRESCRIPTION
DRUG
COVERAGE.—A PDP sponsor and MA
organization that offers a plan that provides supplemental
prescription drug benefits shall be at full financial risk for
the provision of such supplemental benefits.
‘‘(5) NO EFFECT ON MONTHLY PREMIUM.—No adjustment
in payments made by reason of this subsection shall affect
H. R. 1—55
the monthly beneficiary premium or the MA monthly prescrip-
tion drug beneficiary premium.
‘‘(f) DISCLOSURE OF INFORMATION.—
‘‘(1) IN GENERAL.—Each contract under this part and under
part C shall provide that—
‘‘(A) the PDP sponsor offering a prescription drug plan
or an MA organization offering an MA–PD plan shall pro-
vide the Secretary with such information as the Secretary
determines is necessary to carry out this section; and
‘‘(B) the Secretary shall have the right in accordance
with section 1857(d)(2)(B) (as applied under section 1860D–
12(b)(3)(C)) to inspect and audit any books and records
of a PDP sponsor or MA organization that pertain to the
information regarding costs provided to the Secretary under
subparagraph (A).
‘‘(2) RESTRICTION ON USE OF INFORMATION.—Information
disclosed or obtained pursuant to the provisions of this section
may be used by officers, employees, and contractors of the
Department of Health and Human Services only for the pur-
poses of, and to the extent necessary in, carrying out this
section.
‘‘(g) PAYMENT FOR FALLBACK PRESCRIPTION DRUG PLANS.—In
lieu of the amounts otherwise payable under this section to a
PDP sponsor offering a fallback prescription drug plan (as defined
in section 1860D–3(c)(4)), the amount payable shall be the amounts
determined under the contract for such plan pursuant to section
1860D–11(g)(5).
‘‘MEDICARE PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL
SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND
‘‘SEC. 1860D–16. (a) ESTABLISHMENT
AND
OPERATION
OF
ACCOUNT.—
‘‘(1) ESTABLISHMENT.—There is created within the Federal
Supplementary Medical Insurance Trust Fund established by
section 1841 an account to be known as the ‘Medicare Prescrip-
tion Drug Account’ (in this section referred to as the ‘Account’).
‘‘(2) FUNDING.—The Account shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1),
accrued interest on balances in the Account, and such amounts
as may be deposited in, or appropriated to, such Account as
provided in this part.
‘‘(3) SEPARATE FROM REST OF TRUST FUND.—Funds provided
under this part to the Account shall be kept separate from
all other funds within the Federal Supplementary Medical
Insurance Trust Fund, but shall be invested, and such invest-
ments redeemed, in the same manner as all other funds and
investments within such Trust Fund.
‘‘(b) PAYMENTS FROM ACCOUNT.—
‘‘(1) IN GENERAL.—The Managing Trustee shall pay from
time to time from the Account such amounts as the Secretary
certifies are necessary to make payments to operate the pro-
gram under this part, including—
‘‘(A) payments under section 1860D–14 (relating to low-
income subsidy payments);
‘‘(B) payments under section 1860D–15 (relating to sub-
sidy payments and payments for fallback plans);
H. R. 1—56
‘‘(C) payments to sponsors of qualified retiree prescrip-
tion drug plans under section 1860D–22(a); and
‘‘(D) payments with respect to administrative expenses
under this part in accordance with section 201(g).
‘‘(2) TRANSFERS
TO
MEDICAID
ACCOUNT
FOR
INCREASED
ADMINISTRATIVE COSTS.—The Managing Trustee shall transfer
from time to time from the Account to the Grants to States
for Medicaid account amounts the Secretary certifies are attrib-
utable to increases in payment resulting from the application
of section 1935(b).
‘‘(3) PAYMENTS OF PREMIUMS WITHHELD.—The Managing
Trustee shall make payment to the PDP sponsor or MA
organization involved of the premiums (and the portion of late
enrollment penalties) that are collected in the manner described
in section 1854(d)(2)(A) and that are payable under a prescrip-
tion drug plan or MA–PD plan offered by such sponsor or
organization.
‘‘(4) TREATMENT
IN
RELATION
TO
PART
B
PREMIUM.—
Amounts payable from the Account shall not be taken into
account in computing actuarial rates or premium amounts
under section 1839.
‘‘(c) DEPOSITS INTO ACCOUNT.—
‘‘(1) LOW-INCOME TRANSFER.—Amounts paid under section
1935(c) (and any amounts collected or offset under paragraph
(1)(C) of such section) are deposited into the Account.
‘‘(2) AMOUNTS
WITHHELD.—Pursuant to sections 1860D–
13(c) and 1854(d) (as applied under this part), amounts that
are withheld (and allocated) to the Account are deposited into
the Account.
‘‘(3) APPROPRIATIONS
TO
COVER
GOVERNMENT
CONTRIBU-
TIONS.—There are authorized to be appropriated from time
to time, out of any moneys in the Treasury not otherwise
appropriated, to the Account, an amount equivalent to the
amount of payments made from the Account under subsection
(b) plus such amounts as the Managing Trustee certifies is
necessary to maintain an appropriate contingency margin,
reduced by the amounts deposited under paragraph (1) or sub-
section (a)(2).
‘‘(4) INITIAL FUNDING AND RESERVE.—In order to assure
prompt payment of benefits provided under this part and the
administrative expenses thereunder during the early months
of the program established by this part and to provide an
initial contingency reserve, there are authorized to be appro-
priated to the Account, out of any moneys in the Treasury
not otherwise appropriated, such amount as the Secretary cer-
tifies are required, but not to exceed 10 percent of the estimated
total expenditures from such Account in 2006.
‘‘(5) TRANSFER OF ANY REMAINING BALANCE FROM TRANSI-
TIONAL ASSISTANCE ACCOUNT.—Any balance in the Transitional
Assistance Account that is transferred under section 1860D–
31(k)(5) shall be deposited into the Account.
H. R. 1—57
‘‘Subpart 3—Application to Medicare Advantage Program and
Treatment of Employer-Sponsored Programs and Other Prescrip-
tion Drug Plans
‘‘APPLICATION TO MEDICARE ADVANTAGE PROGRAM AND RELATED
MANAGED CARE PROGRAMS
‘‘SEC. 1860D–21. (a) SPECIAL RULES RELATING TO OFFERING
OF QUALIFIED PRESCRIPTION DRUG COVERAGE.—
‘‘(1) IN
GENERAL.—An MA organization on and after
January 1, 2006—
‘‘(A) may not offer an MA plan described in section
1851(a)(2)(A) in an area unless either that plan (or another
MA plan offered by the organization in that same service
area) includes required prescription drug coverage (as
defined in paragraph (2)); and
‘‘(B) may not offer prescription drug coverage (other
than that required under parts A and B) to an enrollee—
‘‘(i) under an MSA plan; or
‘‘(ii) under another MA plan unless such drug cov-
erage under such other plan provides qualified
prescription drug coverage and unless the require-
ments of this section with respect to such coverage
are met.
‘‘(2) QUALIFYING
COVERAGE.—For purposes of paragraph
(1)(A), the term ‘required coverage’ means with respect to an
MA–PD plan—
‘‘(A) basic prescription drug coverage; or
‘‘(B) qualified prescription drug coverage that provides
supplemental prescription drug coverage, so long as there
is no MA monthly supplemental beneficiary premium
applied under the plan (due to the application of a credit
against 
such 
premium 
of 
a 
rebate 
under 
section
1854(b)(1)(C)).
‘‘(b) APPLICATION OF DEFAULT ENROLLMENT RULES.—
‘‘(1) 
SEAMLESS
CONTINUATION.—In 
applying 
section
1851(c)(3)(A)(ii), an individual who is enrolled in a health bene-
fits plan shall not be considered to have been deemed to make
an election into an MA–PD plan unless such health benefits
plan provides any prescription drug coverage.
‘‘(2) MA CONTINUATION.—In applying section 1851(c)(3)(B),
an individual who is enrolled in an MA plan shall not be
considered to have been deemed to make an election into an
MA–PD plan unless—
‘‘(A) for purposes of the election as of January 1, 2006,
the MA plan provided as of December 31, 2005, any
prescription drug coverage; or
‘‘(B) for periods after January 1, 2006, such MA plan
is an MA–PD plan.
‘‘(3) DISCONTINUANCE OF MA–PD ELECTION DURING FIRST
YEAR OF ELIGIBILITY.—In applying the second sentence of sec-
tion 1851(e)(4) in the case of an individual who is electing
to discontinue enrollment in an MA–PD plan, the individual
shall be permitted to enroll in a prescription drug plan under
part D at the time of the election of coverage under the original
medicare fee-for-service program.
‘‘(4) RULES REGARDING ENROLLEES IN MA PLANS NOT PRO-
VIDING QUALIFIED PRESCRIPTION DRUG COVERAGE.—In the case
H. R. 1—58
of an individual who is enrolled in an MA plan (other than
an MSA plan) that does not provide qualified prescription drug
coverage, if the organization offering such coverage discontinues
the offering with respect to the individual of all MA plans
that do not provide such coverage—
‘‘(i) the individual is deemed to have elected the
original medicare fee-for-service program option, unless
the individual affirmatively elects to enroll in an MA–
PD plan; and
‘‘(ii) in the case of such a deemed election, the
disenrollment shall be treated as an involuntary termi-
nation of the MA plan described in subparagraph (B)(ii)
of section 1882(s)(3) for purposes of applying such sec-
tion.
The information disclosed under section 1852(c)(1) for individ-
uals who are enrolled in such an MA plan shall include informa-
tion regarding such rules.
‘‘(c) APPLICATION OF PART D RULES FOR PRESCRIPTION DRUG
COVERAGE.—With respect to the offering of qualified prescription
drug coverage by an MA organization under this part on and
after January 1, 2006—
‘‘(1) IN GENERAL.—Except as otherwise provided, the provi-
sions of this part shall apply under part C with respect to
prescription drug coverage provided under MA–PD plans in
lieu of the other provisions of part C that would apply to
such coverage under such plans.
‘‘(2) WAIVER.—The Secretary shall waive the provisions
referred to in paragraph (1) to the extent the Secretary deter-
mines that such provisions duplicate, or are in conflict with,
provisions otherwise applicable to the organization or plan
under part C or as may be necessary in order to improve
coordination of this part with the benefits under this part.
‘‘(3) TREATMENT
OF
MA
OWNED
AND
OPERATED
PHAR-
MACIES.—The Secretary may waive the requirement of section
1860D–4(b)(1)(C) in the case of an MA–PD plan that provides
access (other than mail order) to qualified prescription drug
coverage through pharmacies owned and operated by the MA
organization, if the Secretary determines that the organization’s
pharmacy network is sufficient to provide comparable access
for enrollees under the plan.
‘‘(d) SPECIAL RULES FOR PRIVATE FEE-FOR-SERVICE PLANS THAT
OFFER PRESCRIPTION DRUG COVERAGE.—With respect to an MA
plan described in section 1851(a)(2)(C) that offers qualified prescrip-
tion drug coverage, on and after January 1, 2006, the following
rules apply:
‘‘(1) REQUIREMENTS REGARDING NEGOTIATED PRICES.—Sub-
sections (a)(1) and (d)(1) of section 1860D–2 and section 1860D–
4(b)(2)(A) shall not be construed to require the plan to provide
negotiated prices (described in subsection (d)(1)(B) of such sec-
tion), but shall apply to the extent the plan does so.
‘‘(2) MODIFICATION OF PHARMACY ACCESS STANDARD AND
DISCLOSURE REQUIREMENT.—If the plan provides coverage for
drugs purchased from all pharmacies, without charging addi-
tional cost-sharing, and without regard to whether they are
participating pharmacies in a network or have entered into
contracts or agreements with pharmacies to provide drugs to
H. R. 1—59
enrollees covered by the plan, subsections (b)(1)(C) and (k)
of section 1860D–4 shall not apply to the plan.
‘‘(3) DRUG UTILIZATION MANAGEMENT PROGRAM AND MEDICA-
TION
THERAPY
MANAGEMENT
PROGRAM
NOT
REQUIRED.—The
requirements of subparagraphs (A) and (C) of section 1860D–
4(c)(1) shall not apply to the plan.
‘‘(4) APPLICATION OF REINSURANCE.—The Secretary shall
determine the amount of reinsurance payments under section
1860D–15(b) using a methodology that—
‘‘(A) bases such amount on the Secretary’s estimate
of the amount of such payments that would be payable
if the plan were an MA–PD plan described in section
1851(a)(2)(A)(i) and the previous provisions of this sub-
section did not apply; and
‘‘(B) takes into account the average reinsurance pay-
ments made under section 1860D–15(b) for populations
of similar risk under MA–PD plans described in such sec-
tion.
‘‘(5) EXEMPTION
FROM
RISK
CORRIDOR
PROVISIONS.—The
provisions of section 1860D–15(e) shall not apply.
‘‘(6) EXEMPTION FROM NEGOTIATIONS.—Subsections (d) and
(e)(2)(C) of section 1860D–11 shall not apply and the provisions
of section 1854(a)(5)(B) prohibiting the review, approval, or
disapproval of amounts described in such section shall apply
to the proposed bid and terms and conditions described in
section 1860D–11(d).
‘‘(7) TREATMENT OF INCURRED COSTS WITHOUT REGARD TO
FORMULARY.—The exclusion of costs incurred for covered part
D drugs which are not included (or treated as being included)
in a plan’s formulary under section 1860D–2(b)(4)(B)(i) shall
not apply insofar as the plan does not utilize a formulary.
‘‘(e) APPLICATION TO REASONABLE COST REIMBURSEMENT CON-
TRACTORS.—
‘‘(1) IN GENERAL.—Subject to paragraphs (2) and (3) and
rules established by the Secretary, in the case of an organiza-
tion that is providing benefits under a reasonable cost
reimbursement contract under section 1876(h) and that elects
to provide qualified prescription drug coverage to a part D
eligible individual who is enrolled under such a contract, the
provisions of this part (and related provisions of part C) shall
apply to the provision of such coverage to such enrollee in
the same manner as such provisions apply to the provision
of such coverage under an MA–PD local plan described in
section 1851(a)(2)(A)(i) and coverage under such a contract
that so provides qualified prescription drug coverage shall be
deemed to be an MA–PD local plan.
‘‘(2) LIMITATION ON ENROLLMENT.—In applying paragraph
(1), the organization may not enroll part D eligible individuals
who are not enrolled under the reasonable cost reimbursement
contract involved.
‘‘(3) BIDS NOT INCLUDED IN DETERMINING NATIONAL AVER-
AGE MONTHLY BID AMOUNT.—The bid of an organization offering
prescription drug coverage under this subsection shall not be
taken into account in computing the national average monthly
bid amount and low-income benchmark premium amount under
this part.
‘‘(f) APPLICATION TO PACE.—
H. R. 1—60
‘‘(1) IN GENERAL.—Subject to paragraphs (2) and (3) and
rules established by the Secretary, in the case of a PACE
program under section 1894 that elects to provide qualified
prescription drug coverage to a part D eligible individual who
is enrolled under such program, the provisions of this part
(and related provisions of part C) shall apply to the provision
of such coverage to such enrollee in a manner that is similar
to the manner in which such provisions apply to the provision
of such coverage under an MA–PD local plan described in
section 1851(a)(2)(A)(ii) and a PACE program that so provides
such coverage may be deemed to be an MA–PD local plan.
‘‘(2) LIMITATION ON ENROLLMENT.—In applying paragraph
(1), the organization may not enroll part D eligible individuals
who are not enrolled under the PACE program involved.
‘‘(3) BIDS NOT INCLUDED IN DETERMINING STANDARDIZED
BID AMOUNT.—The bid of an organization offering prescription
drug coverage under this subsection is not be taken into account
in computing any average benchmark bid amount and low-
income benchmark premium amount under this part.
‘‘SPECIAL RULES FOR EMPLOYER-SPONSORED PROGRAMS
‘‘SEC. 1860D–22. (a) SUBSIDY PAYMENT.—
‘‘(1) IN GENERAL.—The Secretary shall provide in accord-
ance with this subsection for payment to the sponsor of a
qualified retiree prescription drug plan (as defined in paragraph
(2)) of a special subsidy payment equal to the amount specified
in paragraph (3) for each qualified covered retiree under the
plan (as defined in paragraph (4)). This subsection constitutes
budget authority in advance of appropriations Acts and rep-
resents the obligation of the Secretary to provide for the pay-
ment of amounts provided under this section.
‘‘(2) 
QUALIFIED
RETIREE
PRESCRIPTION
DRUG
PLAN
DEFINED.—For purposes of this subsection, the term ‘qualified
retiree prescription drug plan’ means employment-based retiree
health coverage (as defined in subsection (c)(1)) if, with respect
to a part D eligible individual who is a participant or beneficiary
under such coverage, the following requirements are met:
‘‘(A) ATTESTATION
OF
ACTUARIAL
EQUIVALENCE
TO
STANDARD COVERAGE.—The sponsor of the plan provides
the Secretary, annually or at such other time as the Sec-
retary may require, with an attestation that the actuarial
value of prescription drug coverage under the plan (as
determined using the processes and methods described in
section 1860D–11(c)) is at least equal to the actuarial value
of standard prescription drug coverage.
‘‘(B) AUDITS.—The sponsor of the plan, or an adminis-
trator of the plan designated by the sponsor, shall maintain
(and afford the Secretary access to) such records as the
Secretary may require for purposes of audits and other
oversight activities necessary to ensure the adequacy of
prescription drug coverage and the accuracy of payments
made under this section. The provisions of section 1860D–
2(d)(3) shall apply to such information under this section
(including such actuarial value and attestation) in a
manner similar to the manner in which they apply to
financial records of PDP sponsors and MA organizations.
H. R. 1—61
‘‘(C) PROVISION OF DISCLOSURE REGARDING PRESCRIP-
TION DRUG COVERAGE.—The sponsor of the plan shall pro-
vide for disclosure of information regarding prescription
drug 
coverage 
in 
accordance 
with 
section 
1860D–
13(b)(6)(B).
‘‘(3) EMPLOYER AND UNION SPECIAL SUBSIDY AMOUNTS.—
‘‘(A) IN GENERAL.—For purposes of this subsection, the
special subsidy payment amount under this paragraph for
a qualifying covered retiree for a coverage year enrolled
with the sponsor of a qualified retiree prescription drug
plan is, for the portion of the retiree’s gross covered retiree
plan-related prescription drug costs (as defined in subpara-
graph (C)(ii)) for such year that exceeds the cost threshold
amount specified in subparagraph (B) and does not exceed
the cost limit under such subparagraph, an amount equal
to 28 percent of the allowable retiree costs (as defined
in subparagraph (C)(i)) attributable to such gross covered
prescription drug costs.
‘‘(B) COST THRESHOLD AND COST LIMIT APPLICABLE.—
‘‘(i) IN GENERAL.—Subject to clause (ii)—
‘‘(I) the cost threshold under this subpara-
graph is equal to $250 for plan years that end
in 2006; and
‘‘(II) the cost limit under this subparagraph
is equal to $5,000 for plan years that end in 2006.
‘‘(ii) INDEXING.—The cost threshold and cost limit
amounts specified in subclauses (I) and (II) of clause
(i) for a plan year that ends after 2006 shall be adjusted
in the same manner as the annual deductible and
the annual out-of-pocket threshold, respectively, are
annually adjusted under paragraphs (1) and (4)(B) of
section 1860D–2(b).
‘‘(C) DEFINITIONS.—For purposes of this paragraph:
‘‘(i) ALLOWABLE RETIREE COSTS.—The term ‘allow-
able retiree costs’ means, with respect to gross covered
prescription drug costs under a qualified retiree
prescription drug plan by a plan sponsor, the part
of such costs that are actually paid (net of discounts,
chargebacks, and average percentage rebates) by the
sponsor or by or on behalf of a qualifying covered
retiree under the plan.
‘‘(ii) 
GROSS
COVERED
RETIREE
PLAN-RELATED
PRESCRIPTION DRUG COSTS.—For purposes of this sec-
tion, the term ‘gross covered retiree plan-related
prescription drug costs’ means, with respect to a quali-
fying covered retiree enrolled in a qualified retiree
prescription drug plan during a coverage year, the
costs incurred under the plan, not including adminis-
trative costs, but including costs directly related to
the dispensing of covered part D drugs during the
year. Such costs shall be determined whether they
are paid by the retiree or under the plan.
‘‘(iii) COVERAGE YEAR.—The term ‘coverage year’ has
the meaning given such term in section 1860D–15(b)(4).
‘‘(4) QUALIFYING COVERED RETIREE DEFINED.—For purposes
of this subsection, the term ‘qualifying covered retiree’ means
a part D eligible individual who is not enrolled in a prescription
H. R. 1—62
drug plan or an MA–PD plan but is covered under a qualified
retiree prescription drug plan.
‘‘(5) PAYMENT
METHODS, INCLUDING
PROVISION
OF
NEC-
ESSARY INFORMATION.—The provisions of section 1860D–15(d)
(including paragraph (2), relating to requirement for provision
of information) shall apply to payments under this subsection
in a manner similar to the manner in which they apply to
payment under section 1860D–15(b).
‘‘(6) CONSTRUCTION.—Nothing in this subsection shall be
construed as—
‘‘(A) precluding a part D eligible individual who is
covered under employment-based retiree health coverage
from enrolling in a prescription drug plan or in an MA–
PD plan;
‘‘(B) precluding such employment-based retiree health
coverage or an employer or other person from paying all
or any portion of any premium required for coverage under
a prescription drug plan or MA–PD plan on behalf of such
an individual;
‘‘(C) preventing such employment-based retiree health
coverage from providing coverage—
‘‘(i) that is better than standard prescription drug
coverage to retirees who are covered under a qualified
retiree prescription drug plan; or
‘‘(ii) that is supplemental to the benefits provided
under a prescription drug plan or an MA–PD plan,
including benefits to retirees who are not covered under
a qualified retiree prescription drug plan but who are
enrolled in such a prescription drug plan or MA–PD
plan; or
‘‘(D) preventing employers to provide for flexibility in
benefit design and pharmacy access provisions, without
regard to the requirements for basic prescription drug cov-
erage, so long as the actuarial equivalence requirement
of paragraph (2)(A) is met.
‘‘(b) APPLICATION OF MA WAIVER AUTHORITY.—The provisions
of section 1857(i) shall apply with respect to prescription drug
plans in relation to employment-based retiree health coverage in
a manner similar to the manner in which they apply to an MA
plan in relation to employers, including authorizing the establish-
ment of separate premium amounts for enrollees in a prescription
drug plan by reason of such coverage and limitations on enrollment
to part D eligible individuals enrolled under such coverage.
‘‘(c) DEFINITIONS.—For purposes of this section:
‘‘(1) EMPLOYMENT-BASED RETIREE HEALTH COVERAGE.—The
term ‘employment-based retiree health coverage’ means health
insurance or other coverage of health care costs (whether pro-
vided by voluntary insurance coverage or pursuant to statutory
or contractual obligation) for part D eligible individuals (or
for such individuals and their spouses and dependents) under
a group health plan based on their status as retired participants
in such plan.
‘‘(2) SPONSOR.—The term ‘sponsor’ means a plan sponsor,
as defined in section 3(16)(B) of the Employee Retirement
Income Security Act of 1974, in relation to a group health
plan, except that, in the case of a plan maintained jointly
by one employer and an employee organization and with respect
H. R. 1—63
to which the employer is the primary source of financing, such
term means such employer.
‘‘(3) GROUP HEALTH PLAN.—The term ‘group health plan’
includes such a plan as defined in section 607(1) of the
Employee Retirement Income Security Act of 1974 and also
includes the following:
‘‘(A) FEDERAL AND STATE GOVERNMENTAL PLANS.—Such
a plan established or maintained for its employees by the
Government of the United States, by the government of
any State or political subdivision thereof, or by any agency
or instrumentality of any of the foregoing, including a
health benefits plan offered under chapter 89 of title 5,
United States Code.
‘‘(B) COLLECTIVELY
BARGAINED
PLANS.—Such a plan
established or maintained under or pursuant to one or
more collective bargaining agreements.
‘‘(C) CHURCH
PLANS.—Such a plan established and
maintained for its employees (or their beneficiaries) by
a church or by a convention or association of churches
which is exempt from tax under section 501 of the Internal
Revenue Code of 1986.
‘‘STATE PHARMACEUTICAL ASSISTANCE PROGRAMS
‘‘SEC. 1860D–23. (a) REQUIREMENTS FOR BENEFIT COORDINA-
TION.—
‘‘(1) IN GENERAL.—Before July 1, 2005, the Secretary shall
establish consistent with this section requirements for prescrip-
tion drug plans to ensure the effective coordination between
a part D plan (as defined in paragraph (5)) and a State Pharma-
ceutical Assistance Program (as defined in subsection (b)) with
respect to—
‘‘(A) payment of premiums and coverage; and
‘‘(B) payment for supplemental prescription drug bene-
fits,
for part D eligible individuals enrolled under both types of
plans.
‘‘(2) COORDINATION
ELEMENTS.—The requirements under
paragraph (1) shall include requirements relating to coordina-
tion of each of the following:
‘‘(A) Enrollment file sharing.
‘‘(B) The processing of claims, including electronic proc-
essing.
‘‘(C) Claims payment.
‘‘(D) Claims reconciliation reports.
‘‘(E) Application of the protection against high out-
of-pocket expenditures under section 1860D–2(b)(4).
‘‘(F) Other administrative processes specified by the
Secretary.
Such requirements shall be consistent with applicable law to
safeguard the privacy of any individually identifiable bene-
ficiary information.
‘‘(3) USE OF LUMP SUM PER CAPITA METHOD.—Such require-
ments shall include a method for the application by a part
D plan of specified funding amounts from a State Pharma-
ceutical Assistance Program for enrolled individuals for supple-
mental prescription drug benefits.
H. R. 1—64
‘‘(4) CONSULTATION.—In establishing requirements under
this subsection, the Secretary shall consult with State Pharma-
ceutical Assistance Programs, MA organizations, States,
pharmaceutical benefit managers, employers, representatives
of part D eligible individuals, the data processing experts, phar-
macists, pharmaceutical manufacturers, and other experts.
‘‘(5) PART D PLAN DEFINED.—For purposes of this section
and section 1860D–24, the term ‘part D plan’ means a prescrip-
tion drug plan and an MA–PD plan.
‘‘(b) STATE PHARMACEUTICAL ASSISTANCE PROGRAM.—For pur-
poses of this part, the term ‘State Pharmaceutical Assistance Pro-
gram’ means a State program—
‘‘(1) which provides financial assistance for the purchase
or provision of supplemental prescription drug coverage or bene-
fits on behalf of part D eligible individuals;
‘‘(2) which, in determining eligibility and the amount of
assistance to part D eligible individuals under the Program,
provides assistance to such individuals in all part D plans
and does not discriminate based upon the part D plan in
which the individual is enrolled; and
‘‘(3) which satisfies the requirements of subsections (a)
and (c).
‘‘(c) RELATION TO OTHER PROVISIONS.—
‘‘(1) MEDICARE AS PRIMARY PAYOR.—The requirements of
this section shall not change or affect the primary payor status
of a part D plan.
‘‘(2) USE OF A SINGLE CARD.—A card that is issued under
section 1860D–4(b)(2)(A) for use under a part D plan may
also be used in connection with coverage of benefits provided
under a State Pharmaceutical Assistance Program and, in such
case, may contain an emblem or symbol indicating such connec-
tion.
‘‘(3) OTHER PROVISIONS.—The provisions of section 1860D–
24(c) shall apply to the requirements under this section.
‘‘(4) SPECIAL
TREATMENT
UNDER
OUT-OF-POCKET
RULE.—
In applying section 1860D–2(b)(4)(C)(ii), expenses incurred
under a State Pharmaceutical Assistance Program may be
counted toward the annual out-of-pocket threshold.
‘‘(5) CONSTRUCTION.—Nothing in this section shall be con-
strued as requiring a State Pharmaceutical Assistance Program
to coordinate or provide financial assistance with respect to
any part D plan.
‘‘(d) FACILITATION
OF TRANSITION
AND COORDINATION WITH
STATE PHARMACEUTICAL ASSISTANCE PROGRAMS.—
‘‘(1) TRANSITIONAL GRANT PROGRAM.—The Secretary shall
provide payments to State Pharmaceutical Assistance Programs
with an application approved under this subsection.
‘‘(2) USE
OF
FUNDS.—Payments under this section may
be used by a Program for any of the following:
‘‘(A) Educating part D eligible individuals enrolled in
the Program about the prescription drug coverage available
through part D plans under this part.
‘‘(B) Providing technical assistance, phone support, and
counseling for such enrollees to facilitate selection and
enrollment in such plans.
H. R. 1—65
‘‘(C) Other activities designed to promote the effective
coordination of enrollment, coverage, and payment between
such Program and such plans.
‘‘(3) ALLOCATION OF FUNDS.—Of the amount appropriated
to carry out this subsection for a fiscal year, the Secretary
shall allocate payments among Programs that have applications
approved under paragraph (4) for such fiscal year in proportion
to the number of enrollees enrolled in each such Program
as of October 1, 2003.
‘‘(4) APPLICATION.—No payments may be made under this
subsection except pursuant to an application that is submitted
and approved in a time, manner, and form specified by the
Secretary.
‘‘(5) FUNDING.—Out of any funds in the Treasury not other-
wise appropriated, there are appropriated for each of fiscal
years 2005 and 2006, $62,500,000 to carry out this subsection.
‘‘COORDINATION REQUIREMENTS FOR PLANS PROVIDING PRESCRIPTION
DRUG COVERAGE
‘‘SEC. 1860D–24. (a) APPLICATION OF BENEFIT COORDINATION
REQUIREMENTS TO ADDITIONAL PLANS.—
‘‘(1) IN GENERAL.—The Secretary shall apply the coordina-
tion requirements established under section 1860D–23(a) to
Rx plans described in subsection (b) in the same manner as
such requirements apply to a State Pharmaceutical Assistance
Program.
‘‘(2) APPLICATION TO TREATMENT OF CERTAIN OUT-OF-POCKET
EXPENDITURES.—To the extent specified by the Secretary, the
requirements referred to in paragraph (1) shall apply to proce-
dures established under section 1860D–2(b)(4)(D).
‘‘(3) USER FEES.—
‘‘(A) IN GENERAL.—The Secretary may impose user fees
for the transmittal of information necessary for benefit
coordination under section 1860D–2(b)(4)(D) in a manner
similar to the manner in which user fees are imposed
under section 1842(h)(3)(B), except that the Secretary may
retain a portion of such fees to defray the Secretary’s
costs in carrying out procedures under section 1860D–
2(b)(4)(D).
‘‘(B) APPLICATION.—A user fee may not be imposed
under subparagraph (A) with respect to a State Pharma-
ceutical Assistance Program.
‘‘(b) RX PLAN.—An Rx plan described in this subsection is
any of the following:
‘‘(1) MEDICAID PROGRAMS.—A State plan under title XIX,
including such a plan operating under a waiver under section
1115, if it meets the requirements of section 1860D–23(b)(2).
‘‘(2) GROUP
HEALTH
PLANS.—An employer group health
plan.
‘‘(3) FEHBP.—The Federal employees health benefits plan
under chapter 89 of title 5, United States Code.
‘‘(4) MILITARY COVERAGE (INCLUDING TRICARE).—Coverage
under chapter 55 of title 10, United States Code.
‘‘(5) OTHER
PRESCRIPTION
DRUG
COVERAGE.—Such other
health benefit plans or programs that provide coverage or finan-
cial assistance for the purchase or provision of prescription
H. R. 1—66
drug coverage on behalf of part D eligible individuals as the
Secretary may specify.
‘‘(c) RELATION TO OTHER PROVISIONS.—
‘‘(1) USE OF COST MANAGEMENT TOOLS.—The requirements
of this section shall not impair or prevent a PDP sponsor
or MA organization from applying cost management tools
(including differential payments) under all methods of oper-
ation.
‘‘(2) NO AFFECT ON TREATMENT OF CERTAIN OUT-OF-POCKET
EXPENDITURES.—The requirements of this section shall not
affect the application of the procedures established under sec-
tion 1860D–2(b)(4)(D).
‘‘Subpart 4—Medicare Prescription Drug Discount Card and
Transitional Assistance Program
‘‘MEDICARE PRESCRIPTION DRUG DISCOUNT CARD AND TRANSITIONAL
ASSISTANCE PROGRAM
‘‘SEC. 1860D–31. (a) ESTABLISHMENT OF PROGRAM.—
‘‘(1) IN GENERAL.—The Secretary shall establish a program
under this section—
‘‘(A) to endorse prescription drug discount card pro-
grams that meet the requirements of this section in order
to provide access to prescription drug discounts through
prescription drug card sponsors for discount card eligible
individuals throughout the United States; and
‘‘(B) to provide for transitional assistance for transi-
tional assistance eligible individuals enrolled in such
endorsed programs.
‘‘(2) PERIOD OF OPERATION.—
‘‘(A) IMPLEMENTATION DEADLINE.—The Secretary shall
implement the program under this section so that discount
cards and transitional assistance are first available by
not later than 6 months after the date of the enactment
of this section.
‘‘(B) EXPEDITING
IMPLEMENTATION.—The Secretary
shall promulgate regulations to carry out the program
under this section which may be effective and final imme-
diately on an interim basis as of the date of publication
of the interim final regulation. If the Secretary provides
for an interim final regulation, the Secretary shall provide
for a period of public comments on such regulation after
the date of publication. The Secretary may change or revise
such regulation after completion of the period of public
comment.
‘‘(C) TERMINATION AND TRANSITION.—
‘‘(i) IN GENERAL.—Subject to clause (ii)—
‘‘(I) the program under this section shall not
apply to covered discount card drugs dispensed
after December 31, 2005; and
‘‘(II) transitional assistance shall be available
after such date to the extent the assistance relates
to drugs dispensed on or before such date.
‘‘(ii) TRANSITION.—In the case of an individual who
is enrolled in an endorsed discount card program as
H. R. 1—67
of December 31, 2005, during the individual’s transi-
tion period (if any) under clause (iii), in accordance
with transition rules specified by the Secretary—
‘‘(I) such endorsed program may continue to
apply to covered discount card drugs dispensed
to the individual under the program during such
transition period;
‘‘(II) no annual enrollment fee shall be
applicable during the transition period;
‘‘(III) during such period the individual may
not change the endorsed program plan in which
the individual is enrolled; and
‘‘(IV) the balance of any transitional assistance
remaining on January 1, 2006, shall remain avail-
able for drugs dispensed during the individual’s
transition period.
‘‘(iii) TRANSITION
PERIOD.—The transition period
under this clause for an individual is the period begin-
ning on January 1, 2006, and ending in the case of
an individual who—
‘‘(I) is enrolled in a prescription drug plan
or an MA–PD plan before the last date of the
initial enrollment period under section 1860D–
1(b)(2)(A), on the effective date of the individual’s
coverage under such part; or
‘‘(II) is not so enrolled, on the last day of
such initial period.
‘‘(3) VOLUNTARY NATURE OF PROGRAM.—Nothing in this sec-
tion shall be construed as requiring a discount card eligible
individual to enroll in an endorsed discount card program under
this section.
‘‘(4) GLOSSARY AND DEFINITIONS OF TERMS.—For purposes
of this section:
‘‘(A) COVERED DISCOUNT CARD DRUG.—The term ‘cov-
ered discount card drug’ has the meaning given the term
‘covered part D drug’ in section 1860D–2(e).
‘‘(B) DISCOUNT CARD ELIGIBLE INDIVIDUAL.—The term
‘discount card eligible individual’ is defined in subsection
(b)(1)(A).
‘‘(C) ENDORSED DISCOUNT CARD PROGRAM; ENDORSED
PROGRAM.—The terms ‘endorsed discount card program’
and ‘endorsed program’ mean a prescription drug discount
card program that is endorsed (and for which the sponsor
has a contract with the Secretary) under this section.
‘‘(D) 
NEGOTIATED
PRICE.—Negotiated 
prices 
are
described in subsection (e)(1)(A)(ii).
‘‘(E) PRESCRIPTION DRUG CARD SPONSOR; SPONSOR.—
The terms ‘prescription drug card sponsor’ and ‘sponsor’
are defined in subsection (h)(1)(A).
‘‘(F) STATE.—The term ‘State’ has the meaning given
such term for purposes of title XIX.
‘‘(G) TRANSITIONAL ASSISTANCE ELIGIBLE INDIVIDUAL.—
The term ‘transitional assistance eligible individual’ is
defined in subsection (b)(2).
‘‘(b) ELIGIBILITY FOR DISCOUNT CARD AND FOR TRANSITIONAL
ASSISTANCE.—For purposes of this section:
‘‘(1) DISCOUNT CARD ELIGIBLE INDIVIDUAL.—
H. R. 1—68
‘‘(A) IN GENERAL.—The term ‘discount card eligible indi-
vidual’ means an individual who—
‘‘(i) is entitled to benefits, or enrolled, under part
A or enrolled under part B; and
‘‘(ii) subject to paragraph (4), is not an individual
described in subparagraph (B).
‘‘(B) INDIVIDUAL DESCRIBED.—An individual described
in this subparagraph is an individual described in subpara-
graph (A)(i) who is enrolled under title XIX (or under
a waiver under section 1115 of the requirements of such
title) and is entitled to any medical assistance for out-
patient prescribed drugs described in section 1905(a)(12).
‘‘(2) TRANSITIONAL ASSISTANCE ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B), the
term ‘transitional assistance eligible individual’ means a
discount card eligible individual who resides in one of the
50 States or the District of Columbia and whose income
(as determined under subsection (f)(1)(B)) is not more than
135 percent of the poverty line (as defined in section 673(2)
of the Community Services Block Grant Act, 42 U.S.C.
9902(2), including any revision required by such section)
applicable to the family size involved (as determined under
subsection (f)(1)(B)).
‘‘(B) 
EXCLUSION
OF
INDIVIDUALS
WITH
CERTAIN
PRESCRIPTION
DRUG
COVERAGE.—Such term does not
include an individual who has coverage of, or assistance
for, covered discount card drugs under any of the following:
‘‘(i) A group health plan or health insurance cov-
erage (as such terms are defined in section 2791 of
the Public Health Service Act), other than coverage
under a plan under part C and other than coverage
consisting only of excepted benefits (as defined in such
section).
‘‘(ii) Chapter 55 of title 10, United States Code
(relating to medical and dental care for members of
the uniformed services).
‘‘(iii) A plan under chapter 89 of title 5, United
States Code (relating to the Federal employees’ health
benefits program).
‘‘(3) SPECIAL
TRANSITIONAL
ASSISTANCE
ELIGIBLE
INDI-
VIDUAL.—The term ‘special transitional assistance eligible indi-
vidual’ means a transitional assistance eligible individual whose
income (as determined under subsection (f)(1)(B)) is not more
than 100 percent of the poverty line (as defined in section
673(2) of the Community Services Block Grant Act, 42 U.S.C.
9902(2), including any revision required by such section)
applicable to the family size involved (as determined under
subsection (f)(1)(B)).
‘‘(4) TREATMENT OF MEDICAID MEDICALLY NEEDY.—For pur-
poses of this section, the Secretary shall provide for appropriate
rules for the treatment of medically needy individuals described
in section 1902(a)(10)(C) as discount card eligible individuals
and as transitional assistance eligible individuals.
‘‘(c) ENROLLMENT AND ENROLLMENT FEES.—
‘‘(1) ENROLLMENT PROCESS.—The Secretary shall establish
a process through which a discount card eligible individual
H. R. 1—69
is enrolled and disenrolled in an endorsed discount card pro-
gram under this section consistent with the following:
‘‘(A) CONTINUOUS OPEN ENROLLMENT.—Subject to the
succeeding provisions of this paragraph and subsection
(h)(9), a discount card eligible individual who is not enrolled
in an endorsed discount card program and is residing in
a State may enroll in any such endorsed program—
‘‘(i) that serves residents of the State; and
‘‘(ii) at any time beginning on the initial enrollment
date, specified by the Secretary, and before January
1, 2006.
‘‘(B) USE OF STANDARD ENROLLMENT FORM.—An enroll-
ment in an endorsed program shall only be effected through
completion of a standard enrollment form specified by the
Secretary. Each sponsor of an endorsed program shall
transmit to the Secretary (in a form and manner specified
by the Secretary) information on individuals who complete
such enrollment forms and, to the extent provided under
subsection (f), information regarding certification as a
transitional assistance eligible individual.
‘‘(C) ENROLLMENT ONLY IN ONE PROGRAM.—
‘‘(i) IN GENERAL.—Subject to clauses (ii) and (iii),
a discount card eligible individual may be enrolled
in only one endorsed discount card program under
this section.
‘‘(ii) CHANGE
IN
ENDORSED
PROGRAM
PERMITTED
FOR
2005.—The Secretary shall establish a process,
similar to (and coordinated with) the process for
annual, coordinated elections under section 1851(e)(3)
during 2004, under which an individual enrolled in
an endorsed discount card program may change the
endorsed program in which the individual is enrolled
for 2005.
‘‘(iii) 
ADDITIONAL
EXCEPTIONS.—The 
Secretary
shall permit an individual to change the endorsed dis-
count card program in which the individual is enrolled
in the case of an individual who changes residence
to be outside the service area of such program and
in such other exceptional cases as the Secretary may
provide (taking into account the circumstances for spe-
cial election periods under section 1851(e)(4)). Under
the previous sentence, the Secretary may consider a
change in residential setting (such as placement in
a nursing facility) or enrollment in or disenrollment
from a plan under part C through which the individual
was enrolled in an endorsed program to be an excep-
tional circumstance.
‘‘(D) DISENROLLMENT.—
‘‘(i) VOLUNTARY.—An individual may voluntarily
disenroll from an endorsed discount card program at
any time. In the case of such a voluntary disenrollment,
the individual may not enroll in another endorsed pro-
gram, except under such exceptional circumstances as
the Secretary may recognize under subparagraph
(C)(iii) or during the annual coordinated enrollment
period provided under subparagraph (C)(ii).
H. R. 1—70
‘‘(ii) INVOLUNTARY.—An individual who is enrolled
in an endorsed discount card program and not a transi-
tional assistance eligible individual may be disenrolled
by the sponsor of the program if the individual fails
to pay any annual enrollment fee required under the
program.
‘‘(E) APPLICATION TO CERTAIN ENROLLEES.—In the case
of a discount card eligible individual who is enrolled in
a plan described in section 1851(a)(2)(A) or under a reason-
able cost reimbursement contract under section 1876(h)
that is offered by an organization that also is a prescription
discount card sponsor that offers an endorsed discount
card program under which the individual may be enrolled
and that has made an election to apply the special rules
under subsection (h)(9)(B) for such an endorsed program,
the individual may only enroll in such an endorsed discount
card program offered by that sponsor.
‘‘(2) ENROLLMENT FEES.—
‘‘(A) IN GENERAL.—Subject to the succeeding provisions
of this paragraph, a prescription drug card sponsor may
charge an annual enrollment fee for each discount card
eligible individual enrolled in an endorsed discount card
program offered by such sponsor. The annual enrollment
fee for either 2004 or 2005 shall not be prorated for portions
of a year. There shall be no annual enrollment fee for
a year after 2005.
‘‘(B) AMOUNT.—No annual enrollment fee charged
under subparagraph (A) may exceed $30.
‘‘(C) UNIFORM ENROLLMENT FEE.—A prescription drug
card sponsor shall ensure that the annual enrollment fee
(if any) for an endorsed discount card program is the same
for all discount card eligible individuals enrolled in the
program and residing in the State.
‘‘(D) COLLECTION.—The annual enrollment fee (if any)
charged for enrollment in an endorsed program shall be
collected by the sponsor of the program.
‘‘(E) PAYMENT OF FEE FOR TRANSITIONAL ASSISTANCE
ELIGIBLE
INDIVIDUALS.—Under subsection (g)(1)(A), the
annual enrollment fee (if any) otherwise charged under
this paragraph with respect to a transitional assistance
eligible individual shall be paid by the Secretary on behalf
of such individual.
‘‘(F) OPTIONAL PAYMENT OF FEE BY STATE.—
‘‘(i) IN GENERAL.—The Secretary shall establish an
arrangement under which a State may provide for
payment of some or all of the enrollment fee for some
or all enrollees who are not transitional assistance
eligible individuals in the State, as specified by the
State under the arrangement. Insofar as such a pay-
ment arrangement is made with respect to an enrollee,
the amount of the enrollment fee shall be paid directly
by the State to the sponsor.
‘‘(ii) NO FEDERAL MATCHING AVAILABLE UNDER MED-
ICAID OR SCHIP.—Expenditures made by a State for
enrollment fees described in clause (i) shall not be
treated as State expenditures for purposes of Federal
matching payments under title XIX or XXI.
H. R. 1—71
‘‘(G) RULES IN CASE OF CHANGES IN PROGRAM ENROLL-
MENT DURING A YEAR.—The Secretary shall provide special
rules in the case of payment of an annual enrollment
fee for a discount card eligible individual who changes
the endorsed program in which the individual is enrolled
during a year.
‘‘(3) ISSUANCE OF DISCOUNT CARD.—Each prescription drug
card sponsor of an endorsed discount card program shall issue,
in a standard format specified by the Secretary, to each discount
card eligible individual enrolled in such program a card that
establishes proof of enrollment and that can be used in a
coordinated manner to identify the sponsor, program, and indi-
vidual for purposes of the program under this section.
‘‘(4) PERIOD OF ACCESS.—In the case of a discount card
eligible individual who enrolls in an endorsed program, access
to negotiated prices and transitional assistance, if any, under
such endorsed program shall take effect on such date as the
Secretary shall specify.
‘‘(d) PROVISION OF INFORMATION ON ENROLLMENT AND PROGRAM
FEATURES.—
‘‘(1) SECRETARIAL RESPONSIBILITIES.—
‘‘(A) IN
GENERAL.—The Secretary shall provide for
activities under this subsection to broadly disseminate
information to discount card eligible individuals (and
prospective eligible individuals) regarding—
‘‘(i) enrollment in endorsed discount card pro-
grams; and
‘‘(ii) the features of the program under this section,
including the availability of transitional assistance.
‘‘(B) PROMOTION
OF
INFORMED
CHOICE.—In order to
promote informed choice among endorsed prescription drug
discount card programs, the Secretary shall provide for
the dissemination of information which—
‘‘(i) compares the annual enrollment fee and other
features of such programs, which may include compara-
tive prices for covered discount card drugs; and
‘‘(ii) includes educational materials on the varia-
bility of discounts on prices of covered discount card
drugs under an endorsed program.
The dissemination of information under clause (i) shall,
to the extent practicable, be coordinated with the dissemi-
nation of educational information on other medicare
options.
‘‘(C) SPECIAL
RULE
FOR
INITIAL
ENROLLMENT
DATE
UNDER THE PROGRAM.—To the extent practicable, the Sec-
retary shall ensure, through the activities described in
subparagraphs (A) and (B), that discount card eligible
individuals are provided with such information at least
30 days prior to the initial enrollment date specified under
subsection (c)(1)(A)(ii).
‘‘(D) USE OF MEDICARE TOLL-FREE NUMBER.—The Sec-
retary shall provide through the toll-free telephone number
1–800–MEDICARE for the receipt and response to inquiries
and complaints concerning the program under this section
and endorsed programs.
‘‘(2) PRESCRIPTION DRUG CARD SPONSOR RESPONSIBILITIES.—