I 
108TH CONGRESS 
1ST SESSION H. R. 3189
To amend title XVIII of the Social Security Act and the Employee Retirement 
Income Security Act of 1974 to improve access to health insurance 
and Medicare benefits for individuals ages 55 to 65 to be fully funded 
through premiums and anti-fraud provisions, to amend title XIX of 
the Social Security Act to provide financial assistance for those individ-
uals who are too poor to afford the premiums, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 25, 2003
Mr. PALLONE introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committees on Energy 
and Commerce, and Education and the Workforce, for a period to be sub-
sequently determined by the Speaker, in each case for consideration of 
such provisions as fall within the jurisdiction of the committee concerned 
A BILL 
To amend title XVIII of the Social Security Act and the 
Employee Retirement Income Security Act of 1974 to 
improve access to health insurance and Medicare benefits 
for individuals ages 55 to 65 to be fully funded through 
premiums and anti-fraud provisions, to amend title XIX 
of the Social Security Act to provide financial assistance 
for those individuals who are too poor to afford the 
premiums, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Early Medicare Access and Affordability Act of 2003’’. 
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents. 
TITLE I—ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62 
TO 65 YEARS OF AGE 
Sec. 101. Access to Medicare benefits for individuals 62 to 65 years of age. 
‘‘PART D—PURCHASE OF MEDICARE BENEFITS BY CERTAIN INDIVIDUALS 
AGE 62 TO 65 YEARS OF AGE 
‘‘Sec. 1859. Program benefits; eligibility. 
‘‘Sec. 1859A. Enrollment process; coverage. 
‘‘Sec. 1859B. Premiums. 
‘‘Sec. 1859C. Payment of premiums. 
‘‘Sec. 1859D. Medicare Early Access Trust Fund. 
‘‘Sec. 1859E. Oversight and accountability. 
‘‘Sec. 1859F. Administration and miscellaneous. 
TITLE II—ACCESS TO MEDICARE BENEFITS FOR DISPLACED 
WORKERS 55 TO 62 YEARS OF AGE 
Sec. 201. Access to Medicare benefits for displaced workers 55 to 62 years of 
age. 
TITLE III—COBRA PROTECTION FOR EARLY RETIREES 
Subtitle A—Amendments to the Employee Retirement Income Security Act of 
1974
Sec. 301. COBRA continuation benefits for certain retired workers who lose re-
tiree health coverage. 
Subtitle B—Amendments to the Public Health Service Act 
Sec. 311. COBRA continuation benefits for certain retired workers who lose re-
tiree health coverage. 
Subtitle C—Amendments to the Internal Revenue Code of 1986
Sec. 321. COBRA continuation benefits for certain retired workers who lose re-
tiree health coverage. 
TITLE IV—FINANCING
Sec. 401. Reference to financing provisions. 
TITLE V—PROVISION OF PREMIUM ASSISTANCE FOR LOW-IN-
COME INDIVIDUALS PURCHASING EARLY COVERAGE UNDER 
THE MEDICARE PROGRAM 
Sec. 501. Provision of premium assistance for low-income individuals purchasing 
early coverage under the Medicare program.
TITLE I—ACCESS TO MEDICARE 
BENEFITS FOR INDIVIDUALS 
62 TO 65 YEARS OF AGE 
SEC. 101. ACCESS TO MEDICARE BENEFITS FOR INDIVID-
UALS 62 TO 65 YEARS OF AGE. 
(a) IN GENERAL.—Title XVIII of the Social Security 
Act (42 U.S.C. 1395 et seq.) is amended—
(1) by redesignating section 1859 and part D 
as section 1858 and part E, respectively; and 
(2) by inserting after such section the following 
new part:
‘‘PART D—PURCHASE OF MEDICARE BENEFITS BY 
CERTAIN INDIVIDUALS AGE 62 TO 65 YEARS OF AGE 
‘‘SEC. 1859. PROGRAM BENEFITS; ELIGIBILITY. 
‘‘(a) ENTITLEMENT TO MEDICARE BENEFITS FOR 
ENROLLED INDIVIDUALS.—
‘‘(1) IN
GENERAL.—An individual enrolled 
under this part is entitled to the same benefits 
under this title as an individual entitled to benefits 
under part A and enrolled under part B. 
‘‘(2) DEFINITIONS.—For purposes of this part:
‘‘(A) FEDERAL OR STATE COBRA CONTINU-
ATION PROVISION.—The term ‘Federal or State 
COBRA continuation provision’ has the mean-
ing given the term ‘COBRA continuation provi-
sion’ in section 2791(d)(4) of the Public Health 
Service Act and includes a comparable State 
program, as determined by the Secretary. 
‘‘(B) FEDERAL HEALTH INSURANCE PRO-
GRAM DEFINED.—The term ‘Federal health in-
surance program’ means any of the following: 
‘‘(i) MEDICARE.—Part A or part B of 
this title (other than by reason of this 
part). 
‘‘(ii) MEDICAID.—A State plan under 
title XIX. 
‘‘(iii) FEHBP.—The Federal employ-
ees health benefit program under chapter 
89 of title 5, United States Code. 
‘‘(iv) 
TRICARE.—The 
TRICARE 
program (as defined in section 1072(7) of 
title 10, United States Code). 
‘‘(v) ACTIVE DUTY MILITARY.—Health 
benefits under title 10, United States 
Code, to an individual as a member of the 
uniformed services of the United States.
‘‘(C) GROUP
HEALTH
PLAN.—The term 
‘group health plan’ has the meaning given such
term in section 2791(a)(1) of the Public Health 
Service Act.
‘‘(b) ELIGIBILITY OF INDIVIDUALS AGE 62 TO 65 
YEARS OF AGE.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
an individual who meets the following requirements 
with respect to a month is eligible to enroll under 
this part with respect to such month: 
‘‘(A) AGE.—As of the last day of the 
month, the individual has attained 62 years of 
age, but has not attained 65 years of age. 
‘‘(B) MEDICARE
ELIGIBILITY
(BUT
FOR 
AGE).—The individual would be eligible for ben-
efits under part A or part B for the month if 
the individual were 65 years of age. 
‘‘(C) 
NOT
ELIGIBLE
FOR
COVERAGE 
UNDER
GROUP
HEALTH
PLANS
OR
FEDERAL 
HEALTH
INSURANCE
PROGRAMS.—The indi-
vidual is not eligible for benefits or coverage 
under a Federal health insurance program (as 
defined in subsection (a)(2)(B)) or under a 
group health plan (other than such eligibility 
merely through a Federal or State COBRA con-
tinuation provision) as of the last day of the 
month involved.
‘‘(2) LIMITATION
ON
ELIGIBILITY
IF
TERMI-
NATED ENROLLMENT.—If an individual described in 
paragraph (1) enrolls under this part and coverage 
of the individual is terminated under section 
1859A(d) (other than because of age), the individual 
is not again eligible to enroll under this subsection 
unless the following requirements are met: 
‘‘(A) NEW
COVERAGE
UNDER
GROUP 
HEALTH
PLAN
OR
FEDERAL
HEALTH
INSUR-
ANCE PROGRAM.—After the date of termination 
of coverage under such section, the individual 
obtains coverage under a group health plan or 
under a Federal health insurance program. 
‘‘(B) SUBSEQUENT
LOSS
OF
NEW
COV-
ERAGE.—The individual subsequently loses eli-
gibility for the coverage described in subpara-
graph (A) and exhausts any eligibility the indi-
vidual may subsequently have for coverage 
under a Federal or State COBRA continuation 
provision. 
‘‘(3) CHANGE
IN
HEALTH
PLAN
ELIGIBILITY 
DOES NOT AFFECT COVERAGE.—In the case of an 
individual who is eligible for and enrolls under this
‘‘(1) INDIVIDUALS 62 TO 65 YEARS OF AGE.—In 
the case of individuals eligible to enroll under this 
part under section 1859(b)—
‘‘(A) INITIAL
ENROLLMENT
PERIOD.—If 
the individual is eligible to enroll under such 
section for July 2005, the enrollment period 
shall begin on May 1, 2005, and shall end on 
August 31, 2005. Any such enrollment before 
July 1, 2005, is conditioned upon compliance 
with the conditions of eligibility for July 2005. 
‘‘(B) SUBSEQUENT PERIODS.—If the indi-
vidual is eligible to enroll under such section for 
a month after July 2005, the enrollment period 
shall begin on the first day of the second month 
before the month in which the individual first is 
eligible to so enroll and shall end four months 
later. Any such enrollment before the first day 
of the third month of such enrollment period is 
conditioned upon compliance with the condi-
tions of eligibility for such third month. 
‘‘(2) AUTHORITY
TO
CORRECT
FOR
GOVERN-
MENT ERRORS.—The provisions of section 1837(h) 
apply with respect to enrollment under this part in 
the same manner as they apply to enrollment under 
part B.
‘‘(c) DATE COVERAGE BEGINS.—
‘‘(1) IN GENERAL.—The period during which 
an individual is entitled to benefits under this part 
shall begin as follows, but in no case earlier than 
July 1, 2005:
‘‘(A) In the case of an individual who en-
rolls (including pre-enrolls) before the month in 
which the individual satisfies eligibility for en-
rollment under section 1859, the first day of 
such month of eligibility. 
‘‘(B) In the case of an individual who en-
rolls during or after the month in which the in-
dividual first satisfies eligibility for enrollment 
under such section, the first day of the fol-
lowing month. 
‘‘(2) AUTHORITY
TO
PROVIDE
FOR
PARTIAL 
MONTHS
OF
COVERAGE.—Under regulations, the 
Secretary may, in the Secretary’s discretion, provide 
for coverage periods that include portions of a 
month in order to avoid lapses of coverage. 
‘‘(3) LIMITATION ON PAYMENTS.—No payments 
may be made under this title with respect to the ex-
penses of an individual enrolled under this part un-
less such expenses were incurred by such individual
during a period which, with respect to the individual, 
is a coverage period under this section. 
‘‘(d) TERMINATION OF COVERAGE.—
‘‘(1) IN
GENERAL.—An individual’s coverage 
period under this part shall continue until the indi-
vidual’s enrollment has been terminated at the ear-
liest of the following: 
‘‘(A) GENERAL PROVISIONS.—
‘‘(i) NOTICE.—The individual files no-
tice (in a form and manner prescribed by 
the Secretary) that the individual no 
longer wishes to participate in the insur-
ance program under this part. 
‘‘(ii) NONPAYMENT OF PREMIUMS.—
The individual fails to make payment of 
premiums required for enrollment under 
this part. 
‘‘(iii) MEDICARE
ELIGIBILITY.—The 
individual becomes entitled to benefits 
under part A or enrolled under part B 
(other than by reason of this part). 
‘‘(B) TERMINATION BASED ON AGE.—The 
individual attains 65 years of age. 
‘‘(2) EFFECTIVE DATE OF TERMINATION.—
‘‘(A) NOTICE.—The termination of a cov-
erage period under paragraph (1)(A)(i) shall 
take effect at the close of the month following 
for which the notice is filed.
‘‘(B) NONPAYMENT
OF
PREMIUM.—The 
termination of a coverage period under para-
graph (1)(A)(ii) shall take effect on a date de-
termined under regulations, which may be de-
termined so as to provide a grace period in 
which overdue premiums may be paid and cov-
erage continued. The grace period determined 
under the preceding sentence shall not exceed 
60 days; except that it may be extended for an 
additional 30 days in any case where the Sec-
retary determines that there was good cause for 
failure to pay the overdue premiums within 
such 60-day period. 
‘‘(C) AGE
OR
MEDICARE
ELIGIBILITY.—
The termination of a coverage period under 
paragraph (1)(A)(iii) or (1)(B) shall take effect 
as of the first day of the month in which the 
individual attains 65 years of age or becomes 
entitled to benefits under part A or enrolled for 
benefits under part B (other than by reason of 
this part).
‘‘SEC. 1859B. PREMIUMS. 
‘‘(a) AMOUNT OF MONTHLY PREMIUMS.—
‘‘(1) BASE
MONTHLY
PREMIUMS.—The Sec-
retary shall, during September of each year (begin-
ning with 2004), determine the following premium 
rates which shall apply with respect to coverage pro-
vided under this title for any month in the suc-
ceeding year: 
‘‘(A) BASE MONTHLY PREMIUM FOR INDI-
VIDUALS 62 YEARS OF AGE OR OLDER.—A base 
monthly premium for individuals 62 years of 
age or older, equal to 1⁄12 of the base annual 
premium rate computed under subsection (b) 
for each premium area. 
‘‘(2) DEFERRED MONTHLY PREMIUMS FOR IN-
DIVIDUALS 62 YEARS OF AGE OR OLDER.—The Sec-
retary shall, during September of each year (begin-
ning with 2004), determine under subsection (c) the 
amount of deferred monthly premiums that shall 
apply with respect to individuals who first obtain 
coverage under this part under section 1859(b) in 
the succeeding year. 
‘‘(3) ESTABLISHMENT OF PREMIUM AREAS.—
For purposes of this part, the term ‘premium area’ 
means such an area as the Secretary shall specify to 
carry out this part. The Secretary from time to time
may change the boundaries of such premium areas. 
The Secretary shall seek to minimize the number of 
such areas specified under this paragraph.
‘‘(b) BASE ANNUAL PREMIUM FOR INDIVIDUALS 62 
YEARS OF AGE OR OLDER.—
‘‘(1) NATIONAL, PER
CAPITA
AVERAGE.—The 
Secretary shall estimate the average, annual per 
capita amount that would be payable under this title 
with respect to individuals residing in the United 
States who meet the requirement of section 
1859(b)(1)(A) as if all such individuals were eligible 
for (and enrolled) under this title during the entire 
year (and assuming that section 1862(b)(2)(A)(i) 
did not apply). 
‘‘(2) GEOGRAPHIC
ADJUSTMENT.—The Sec-
retary shall adjust the amount determined under 
paragraph (1) for each premium area (specified 
under subsection (a)(3)) in order to take into ac-
count such factors as the Secretary deems appro-
priate and shall limit the maximum premium under 
this paragraph in a premium area to assure partici-
pation in all areas throughout the United States. 
‘‘(3) BASE ANNUAL PREMIUM.—The base an-
nual premium under this subsection for months in a 
year for individuals 62 years of age or older residing
coverage of the group under this part under section 
1859(b) the amount by which—
‘‘(A) the amount estimated under para-
graph (1); exceeds 
‘‘(B) the average, annual per capita 
amount of premiums that will be payable for 
months during the year under section 1859C(a) 
for individuals in such group (including pre-
miums that would be payable if there were no 
terminations in enrollment under clause (i) or 
(ii) of section 1859A(d)(1)(A)). 
‘‘(3) ACTUARIAL COMPUTATION OF DEFERRED 
MONTHLY
PREMIUM
RATES.—The Secretary shall 
determine deferred monthly premium rates for indi-
viduals in such group in a manner so that—
‘‘(A) the estimated actuarial value of such 
premiums payable under section 1859C(b), is 
equal to 
‘‘(B) the estimated actuarial present value 
of the differences described in paragraph (2). 
Such rate shall be computed for each individual in 
the group in a manner so that the rate is based on 
the number of months between the first month of 
coverage based on enrollment under section 1859(b)
and the month in which the individual attains 65 
years of age.
‘‘(4) DETERMINANTS OF ACTUARIAL PRESENT 
VALUES.—The actuarial present values described in 
paragraph (3) shall reflect—
‘‘(A) the estimated probabilities of survival 
at ages 62 through 84 for individuals enrolled 
during the year; and 
‘‘(B) the estimated effective average inter-
est rates that would be earned on investments 
held in the trust funds under this title during 
the period in question. 
‘‘SEC. 1859C. PAYMENT OF PREMIUMS. 
‘‘(a) PAYMENT OF BASE MONTHLY PREMIUM.—
‘‘(1) IN GENERAL.—The Secretary shall provide 
for payment and collection of the base monthly pre-
mium, determined under section 1859B(a)(1) for the 
age (and age cohort, if applicable) of the individual 
involved and the premium area in which the indi-
vidual principally resides, in the same manner as for 
payment of monthly premiums under section 1840, 
except that, for purposes of applying this section, 
any reference in such section to the Federal Supple-
mentary Medical Insurance Trust Fund is deemed a
reference to the Trust Fund established under sec-
tion 1859D. 
‘‘(2) PERIOD OF PAYMENT.—In the case of an 
individual who participates in the program estab-
lished by this title, the base monthly premium shall 
be payable for the period commencing with the first 
month of the individual’s coverage period and ending 
with the month in which the individual’s coverage 
under this title terminates. 
‘‘(b) PAYMENT OF DEFERRED PREMIUM FOR INDI-
VIDUALS COVERED AFTER ATTAINING AGE 62.—
‘‘(1) RATE OF PAYMENT.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is covered under this part for a 
month pursuant to an enrollment under section 
1859(b), subject to subparagraph (B), the indi-
vidual is liable for payment of a deferred pre-
mium in each month during the period de-
scribed in paragraph (2) in an amount equal to 
the full deferred monthly premium rate deter-
mined 
for 
the 
individual 
under 
section 
1859B(c). 
‘‘(B) SPECIAL
RULES
FOR
THOSE
WHO 
DISENROLL EARLY.—
‘‘(i) IN GENERAL.—If such an individ-
ual’s enrollment under such section is ter-
minated under clause (i) or (ii) of section 
1859A(d)(1)(A), subject to clause (ii), the 
amount of the deferred premium otherwise 
established under this paragraph shall be 
pro-rated to reflect the number of months 
of coverage under this part under such en-
rollment compared to the maximum num-
ber of months of coverage that the indi-
vidual would have had if the enrollment 
were not so terminated. 
‘‘(ii) ROUNDING
TO
12-MONTH
MIN-
IMUM
COVERAGE
PERIODS.—In applying 
clause (i), the number of months of cov-
erage (if not a multiple of 12) shall be 
rounded to the next highest multiple of 12 
months, except that in no case shall this 
clause result in a number of months of 
coverage exceeding the maximum number 
of months of coverage that the individual 
would have had if the enrollment were not 
so terminated. 
‘‘(2) PERIOD
OF
PAYMENT.—The period de-
scribed in this paragraph for an individual is the pe-
riod beginning with the first month in which the in-
dividual has attained 65 years of age and ending 
with the month before the month in which the indi-
vidual attains 85 years of age. 
‘‘(3) COLLECTION.—In the case of an individual 
who is liable for a premium under this subsection, 
the amount of the premium shall be collected in the
same manner as the premium for enrollment under 
such part is collected under section 1840, except 
that any reference in such section to the Federal 
Supplementary Medical Insurance Trust Fund is 
deemed to be a reference to the Medicare Early Ac-
cess Trust Fund established under section 1859D. 
‘‘(c) APPLICATION OF CERTAIN PROVISIONS.—The 
provisions of section 1840 (other than subsection (h)) 
shall apply to premiums collected under this section in the 
same manner as they apply to premiums collected under 
part B, except that any reference in such section to the 
Federal Supplementary Medical Insurance Trust Fund is 
deemed a reference to the Trust Fund established under 
section 1859D. 
‘‘SEC. 1859D. MEDICARE EARLY ACCESS TRUST FUND. 
‘‘(a) ESTABLISHMENT OF TRUST FUND.—
‘‘(1) IN GENERAL.—There is hereby created on 
the books of the Treasury of the United States a
trust fund to be known as the ‘Medicare Early Ac-
cess Trust Fund’ (in this section referred to as the
‘Trust Fund’). The Trust Fund shall consist of such 
gifts and bequests as may be made as provided in 
section 201(i)(1) and such amounts as may be de-
posited in, or appropriated to, such fund as provided 
in this title.
‘‘(2) PREMIUMS.—Premiums collected under 
section 1859B shall be transferred to the Trust 
Fund. 
‘‘(3) TRANSFER OF SAVINGS FROM NEW FRAUD 
AND ABUSE INITIATIVES.—
‘‘(A) IN GENERAL.—There is hereby trans-
ferred to the Trust Fund from the Federal 
Hospital Insurance Trust Fund and from the 
Federal 
Supplementary 
Medical 
Insurance 
Trust Fund amounts equivalent to the amounts 
(specified under subparagraph (B)) of the re-
ductions in expenditures under such respective 
trust fund as may be attributable to the enact-
ment of the Medicare Fraud and Overpayment 
Act of 2003. 
‘‘(B) USE OF CBO ESTIMATES.—For each 
fiscal year during the 10-fiscal-year period be-
ginning with fiscal year 2005, the amounts
under subparagraph (A) shall be the amounts 
described in such subparagraph as determined
by the Congressional Budget Office at the time 
of, and in connection with, the enactment of the 
Early Medicare Access and Affordability Act of 
2003. For subsequent fiscal years, the amounts 
under subparagraph (A) shall be the amount 
determined under this subparagraph for the 
previous fiscal year increased by the same per-
centage as the percentage increase in aggregate 
expenditures under this title from the second 
previous fiscal year to the previous fiscal year. 
‘‘(b) INCORPORATION OF PROVISIONS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
subsections (b) through (i) of section 1841 shall 
apply with respect to the Trust Fund and this title 
in the same manner as they apply with respect to 
the Federal Supplementary Medical Insurance Trust 
Fund and part B, respectively. 
‘‘(2) MISCELLANEOUS REFERENCES.—In apply-
ing provisions of section 1841 under paragraph 
(1)—
‘‘(A) any reference in such section to ‘this 
part’ is construed to refer to this part D;
‘‘(B) any reference in section 1841(h) to 
section 1840(d) and in section 1841(i) to sec-
tions 1840(b)(1) and 1842(g) are deemed ref-
erences to comparable authority exercised under 
this part; and 
‘‘(C) payments may be made under section 
1841(g) to the Trust Funds under sections 
1817 and 1841 as reimbursement to such funds 
for payments they made for benefits provided 
under this part. 
‘‘SEC. 1859E. OVERSIGHT AND ACCOUNTABILITY. 
‘‘(a) THROUGH ANNUAL REPORTS OF TRUSTEES.—
The Board of Trustees of the Medicare Early Access 
Trust Fund under section 1859D(b)(1) shall report on an 
annual basis to Congress concerning the status of the 
Trust Fund and the need for adjustments in the program 
under this part to maintain financial solvency of the pro-
gram under this part. 
‘‘(b) PERIODIC GAO REPORTS.—The Comptroller 
General of the United States shall periodically submit to 
Congress reports on the adequacy of the financing of cov-
erage provided under this part. The Comptroller General 
shall include in such report such recommendations for ad-
justments in such financing and coverage as the Comp-
troller General deems appropriate in order to maintain fi-
nancial solvency of the program under this part. 
‘‘SEC. 1859F. ADMINISTRATION AND MISCELLANEOUS. 
‘‘(a) TREATMENT FOR PURPOSES OF TITLE.—Ex-
cept as otherwise provided in this part—
‘‘(1) individuals enrolled under this part shall 
be treated for purposes of this title as though the in-
dividual were entitled to benefits under part A and 
enrolled under part B; and 
‘‘(2) benefits described in section 1859 shall be 
payable under this title to such individuals in the 
same manner as if such individuals were so entitled 
and enrolled. 
‘‘(b) NOT TREATED AS MEDICARE PROGRAM FOR 
PURPOSES OF MEDICAID PROGRAM.—For purposes of ap-
plying title XIX (including the provision of Medicare cost-
sharing assistance under such title), an individual who is 
enrolled under this part shall not be treated as being enti-
tled to benefits under this title. 
‘‘(c) NOT TREATED AS MEDICARE PROGRAM FOR 
PURPOSES OF COBRA CONTINUATION PROVISIONS.—In 
applying a COBRA continuation provision (as defined in 
section 2791(d)(4) of the Public Health Service Act), any 
reference to an entitlement to benefits under this title
shall not be construed to include entitlement to benefits 
under this title pursuant to the operation of this part.’’.
(b) CONFORMING AMENDMENTS TO SOCIAL SECU-
RITY ACT PROVISIONS.—
(1) Section 201(i)(1) of the Social Security Act 
(42 U.S.C. 401(i)(1)) is amended by striking ‘‘or the 
Federal Supplementary Medical Insurance Trust 
Fund’’ and inserting ‘‘the Federal Supplementary 
Medical Insurance Trust Fund, and the Medicare 
Early Access Trust Fund’’.
(2) Section 201(g)(1)(A) of such Act (42 
U.S.C. 401(g)(1)(A)) is amended by striking ‘‘and 
the Federal Supplementary Medical Insurance Trust 
Fund established by title XVIII’’ and inserting ‘‘, 
the Federal Supplementary Medical Insurance Trust 
Fund, and the Medicare Early Access Trust Fund 
established by title XVIII’’. 
(3) Section 1820(i) of such Act (42 U.S.C. 
1395i–4(i)) is amended by striking ‘‘part D’’ and in-
serting ‘‘part E’’. 
(4) Part C of title XVIII of such Act is amend-
ed—
(A) in section 1851(a)(2)(B) (42 U.S.C. 
1395w–21(a)(2)(B)), by striking ‘‘1859(b)(3)’’ 
and inserting ‘‘1858(b)(3);
(B) in section 1851(a)(2)(C) (42 U.S.C. 
1395w–21(a)(2)(C)), by striking ‘‘1859(b)(2)’’ 
and inserting ‘‘1858(b)(2)’’;
(C) in section 1852(a)(1) (42 U.S.C. 
1395w–22(a)(1)), by striking ‘‘1859(b)(3)’’ and 
inserting ‘‘1858(b)(3); 
(D) 
in 
section 
1852(a)(3)(B)(ii) 
(42 
U.S.C. 1395w–22(a)(3)(B)(ii)), by striking 
‘‘1859(b)(2)(B)’’ 
and 
inserting 
‘‘1858(b)(2)(B)’’; 
(E) in section 1853(a)(1)(A) (42 U.S.C. 
1395w–23(a)(1)(A)), by striking ‘‘1859(e)(4)’’ 
and inserting ‘‘1858(e)(4)’’; and 
(F) in section 1853(a)(3)(D) (42 U.S.C. 
1395w–23(a)(3)(D)), by striking ‘‘1859(e)(4)’’ 
and inserting ‘‘1858(e)(4)’’. 
(5) Section 1853(c) of such Act (42 U.S.C. 
1395w–23(c)) is amended—
(A) in paragraph (1), by striking ‘‘or (7)’’ 
and inserting ‘‘, (7), or (8)’’, and 
(B) by adding at the end the following: 
‘‘(8) ADJUSTMENT FOR EARLY ACCESS.—In ap-
plying this subsection with respect to individuals en-
titled to benefits under part D, the Secretary shall 
provide for an appropriate adjustment in the
Medicare+Choice capitation rate as may be appro-
priate to reflect differences between the population
served under such part and the population under 
parts A and B.’’. 
(c) OTHER CONFORMING AMENDMENTS.—
(1) Section 138(b)(4) of the Internal Revenue 
Code of 1986 is amended by striking ‘‘1859(b)(3)’’ 
and inserting ‘‘1858(b)(3)’’. 
(2)(A) Section 602(2)(D)(ii) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1162(2)) is amended by inserting ‘‘(not including an 
individual who is so entitled pursuant to enrollment 
under section 1859A)’’ after ‘‘Social Security Act’’. 
(B) Section 2202(2)(D)(ii) of the Public Health 
Service Act (42 U.S.C. 300bb–2(2)(D)(ii)) is amend-
ed by inserting ‘‘(not including an individual who is 
so entitled pursuant to enrollment under section 
1859A of such Act)’’ after ‘‘Social Security Act’’. 
(C) Section 4980B(f)(2)(B)(i)(V) of the Inter-
nal Revenue Code of 1986 is amended by inserting 
‘‘(not including an individual who is so entitled pur-
suant to enrollment under section 1859A of such 
Act)’’ after ‘‘Social Security Act’’.
TITLE II—ACCESS TO MEDICARE 
BENEFITS 
FOR 
DISPLACED 
WORKERS 55 TO 62 YEARS OF 
AGE 
SEC. 201. ACCESS TO MEDICARE BENEFITS FOR DISPLACED 
WORKERS 55 TO 62 YEARS OF AGE. 
(a) ELIGIBILITY.—Section 1859 of the Social Secu-
rity Act, as inserted by section 101(a)(2), is amended by 
adding at the end the following new subsection:
‘‘(c) DISPLACED WORKERS AND SPOUSES.—
‘‘(1) DISPLACED WORKERS.—Subject to para-
graph (3), an individual who meets the following re-
quirements with respect to a month is eligible to en-
roll under this part with respect to such month: 
‘‘(A) AGE.—As of the last day of the 
month, the individual has attained 55 years of 
age, but has not attained 62 years of age. 
‘‘(B) MEDICARE
ELIGIBILITY
(BUT
FOR 
AGE).—The individual would be eligible for ben-
efits under part A or part B for the month if 
the individual were 65 years of age. 
‘‘(C) LOSS OF EMPLOYMENT-BASED COV-
ERAGE.—
‘‘(i) ELIGIBLE
FOR
UNEMPLOYMENT 
COMPENSATION.—The individual meets the
requirements relating to period of covered 
employment and conditions of separation 
from employment to be eligible for unem-
ployment compensation (as defined in sec-
tion 85(b) of the Internal Revenue Code of 
1986), based on a separation from employ-
ment occurring on or after January 1, 
2004. The previous sentence shall not be 
construed as requiring the individual to be 
receiving such unemployment compensa-
tion. 
‘‘(ii) LOSS
OF
EMPLOYMENT-BASED 
COVERAGE.—Immediately before the time 
of such separation of employment, the indi-
vidual was covered under a group health 
plan on the basis of such employment, and, 
because of such loss, is no longer eligible 
for coverage under such plan (including 
such eligibility based on the application of 
a Federal or State COBRA continuation 
provision) as of the last day of the month 
involved. 
‘‘(iii) PREVIOUS
CREDITABLE
COV-
ERAGE FOR AT LEAST 1 YEAR.—As of the 
date on which the individual loses coverage
described in clause (ii), the aggregate of 
the periods of creditable coverage (as de-
termined under section 2701(c) of the 
Public Health Service Act) is 12 months or 
longer. 
‘‘(D) EXHAUSTION OF AVAILABLE COBRA 
CONTINUATION BENEFITS.—
‘‘(i) IN GENERAL.—In the case of an 
individual described in clause (ii) for a 
month described in clause (iii)—
‘‘(I) the individual (or spouse) 
elected coverage described in clause 
(ii); and 
‘‘(II) the individual (or spouse) 
has continued such coverage for all 
months described in clause (iii) in 
which the individual (or spouse) is eli-
gible for such coverage. 
‘‘(ii) INDIVIDUALS TO WHOM COBRA 
CONTINUATION
COVERAGE
MADE
AVAIL-
ABLE.—An individual described in this 
clause is an individual—
‘‘(I) who was offered coverage 
under a Federal or State COBRA 
continuation provision at the time of
loss of coverage eligibility described in 
subparagraph (C)(ii); or 
‘‘(II) whose spouse was offered 
such coverage in a manner that per-
mitted coverage of the individual at 
such time. 
‘‘(iii) MONTHS
OF
POSSIBLE
COBRA 
CONTINUATION COVERAGE.—A month de-
scribed in this clause is a month for which 
an individual described in clause (ii) could 
have had coverage described in such clause 
as of the last day of the month if the indi-
vidual (or the spouse of the individual, as 
the case may be) had elected such coverage 
on a timely basis. 
‘‘(E) 
NOT
ELIGIBLE
FOR
COVERAGE 
UNDER
FEDERAL
HEALTH
INSURANCE
PRO-
GRAM OR GROUP HEALTH PLANS.—The indi-
vidual is not eligible for benefits or coverage 
under a Federal health insurance program or 
under a group health plan (whether on the 
basis of the individual’s employment or employ-
ment of the individual’s spouse) as of the last 
day of the month involved.
‘‘(2) SPOUSE OF DISPLACED WORKER.—Subject 
to paragraph (3), an individual who meets the fol-
lowing requirements with respect to a month is eligi-
ble to enroll under this part with respect to such 
month: 
‘‘(A) AGE.—As of the last day of the 
month, the individual has not attained 62 years 
of age. 
‘‘(B) MARRIED TO DISPLACED WORKER.—
The individual is the spouse of an individual at 
the time the individual enrolls under this part 
under paragraph (1) and loses coverage de-
scribed in paragraph (1)(C)(ii) because the in-
dividual’s spouse lost such coverage. 
‘‘(C) MEDICARE
ELIGIBILITY
(BUT
FOR 
AGE); EXHAUSTION OF ANY COBRA CONTINU-
ATION COVERAGE; AND NOT ELIGIBLE FOR COV-
ERAGE UNDER FEDERAL HEALTH INSURANCE 
PROGRAM OR GROUP HEALTH PLAN.—The indi-
vidual meets the requirements of subparagraphs 
(B), (D), and (E) of paragraph (1). 
‘‘(3) CHANGE
IN
HEALTH
PLAN
ELIGIBILITY 
AFFECTS
CONTINUED
ELIGIBILITY.—For provision 
that terminates enrollment under this section in the 
case of an individual who becomes eligible for cov-
erage under a group health plan or under a Federal 
health 
insurance 
program, 
see 
section 
1859A(d)(1)(C). 
‘‘(4) REENROLLMENT PERMITTED.—Nothing in 
this subsection shall be construed as preventing an 
individual who, after enrolling under this subsection, 
terminates such enrollment from subsequently re-
enrolling under this subsection if the individual is el-
igible to enroll under this subsection at that time.’’. 
(b) ENROLLMENT.—Section 1859A of such Act, as 
so inserted, is amended—
(1) in subsection (a)—
(A) by striking ‘‘and’’ at the end of para-
graph (1), 
(B) by striking the period at the end of 
paragraph (2) and inserting ‘‘; and’’, and 
(C) by adding at the end the following new 
paragraph: 
‘‘(3) individuals whose coverage under this part 
would terminate because of subsection (d)(1)(B)(ii) 
are provided notice and an opportunity to continue 
enrollment 
in 
accordance 
with 
section 
1859E(c)(1).’’;
(2) in subsection (b), by inserting after ‘‘Not-
withstanding any other provision of law, (1)’’ the fol-
lowing: 
‘‘(2) DISPLACED WORKERS AND SPOUSES.—In 
the case of individuals eligible to enroll under this 
part under section 1859(c), the following rules 
apply: 
‘‘(A) INITIAL
ENROLLMENT
PERIOD.—If 
the individual is first eligible to enroll under 
such section for July 2005, the enrollment pe-
riod shall begin on May 1, 2005, and shall end 
on August 31, 2005. Any such enrollment be-
fore July 1, 2005, is conditioned upon compli-
ance with the conditions of eligibility for July 
2005.
‘‘(B) SUBSEQUENT PERIODS.—If the indi-
vidual is eligible to enroll under such section for 
a month after July 2005, the enrollment period 
based on such eligibility shall begin on the first 
day of the second month before the month in 
which the individual first is eligible to so enroll 
(or reenroll) and shall end four months later.’’; 
(3) in subsection (d)(1), by amending subpara-
graph (B) to read as follows: 
‘‘(B) TERMINATION BASED ON AGE.—
‘‘(i) AT
AGE
65.—Subject to clause 
(ii), the individual attains 65 years of age. 
‘‘(ii) AT
AGE
FOR
DISPLACED 
WORKERS AND SPOUSES.—In the case of 
an individual enrolled under this part pur-
suant to section 1859(c), subject to sub-
section (a)(1), the individual attains 62 
years of age.’’; 
(4) in subsection (d)(1), by adding at the end 
the following new subparagraph: 
‘‘(C) OBTAINING ACCESS TO EMPLOYMENT-
BASED COVERAGE OR FEDERAL HEALTH INSUR-
ANCE
PROGRAM
FOR
INDIVIDUALS
UNDER
YEARS OF AGE.—In the case of an individual 
who has not attained 62 years of age, the indi-
vidual is covered (or eligible for coverage) as a 
participant or beneficiary under a group health 
plan or under a Federal health insurance pro-
gram.’’; 
(5) in subsection (d)(2), by amending subpara-
graph (C) to read as follows: 
‘‘(C) AGE OR MEDICARE ELIGIBILITY.—
‘‘(i) IN
GENERAL.—The termination 
of a coverage period under paragraph 
(1)(A)(iii) or (1)(B)(i) shall take effect as
of the first day of the month in which the 
individual attains 65 years of age or be-
comes entitled to benefits under part A or 
enrolled for benefits under part B. 
‘‘(ii) DISPLACED WORKERS.—The ter-
mination of a coverage period under para-
graph (1)(B)(ii) shall take effect as of the 
first day of the month in which the indi-
vidual attains 62 years of age, unless the 
individual has enrolled under this part pur-
suant to section 1859(b) and section 
1859E(c)(1).’’; and 
(6) in subsection (d)(2), by adding at the end 
the following new subparagraph: 
‘‘(D) ACCESS TO COVERAGE.—The termi-
nation of a coverage period under paragraph 
(1)(C) shall take effect on the date on which 
the individual is eligible to begin a period of 
creditable coverage (as defined in section 
2701(c) of the Public Health Service Act) 
under a group health plan or under a Federal 
health insurance program.’’. 
(c) PREMIUMS.—Section 1859B of such Act, as so 
inserted, is amended—
(1) in subsection (a)(1), by adding at the end 
the following: 
‘‘(B) BASE MONTHLY PREMIUM FOR INDI-
VIDUALS UNDER 62 YEARS OF AGE.—A base 
monthly premium for individuals under 62 
years of age, equal to 1⁄12 of the base annual 
premium rate computed under subsection (d)(3) 
for each premium area and age cohort.’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(d) BASE MONTHLY PREMIUM FOR INDIVIDUALS 
UNDER 62 YEARS OF AGE.—
‘‘(1) NATIONAL, PER CAPITA AVERAGE FOR AGE 
GROUPS.—
‘‘(A) ESTIMATE
OF
AMOUNT.—The Sec-
retary shall estimate the average, annual per 
capita amount that would be payable under this 
title with respect to individuals residing in the 
United States who meet the requirement of sec-
tion 1859(c)(1)(A) within each of the age co-
horts established under subparagraph (B) as if 
all such individuals within such cohort were eli-
gible for (and enrolled) under this title during 
the entire year (and assuming that section 
1862(b)(2)(A)(i) did not apply).
‘‘(B) AGE
COHORTS.—For purposes of 
subparagraph (A), the Secretary shall establish 
separate age cohorts in 5 year age increments 
for individuals who have not attained 60 years 
of age and a separate cohort for individuals who 
have attained 60 years of age. 
‘‘(2) GEOGRAPHIC
ADJUSTMENT.—The Sec-
retary shall adjust the amount determined under 
paragraph (1)(A) for each premium area (specified 
under subsection (a)(3)) in the same manner and to 
the same extent as the Secretary provides for adjust-
ments under subsection (b)(2). 
‘‘(3) BASE ANNUAL PREMIUM.—The base an-
nual premium under this subsection for months in a
year for individuals in an age cohort under para-
graph (1)(B) in a premium area is equal to 165 per-
cent of the average, annual per capita amount esti-
mated under paragraph (1) for the age cohort and 
year, adjusted for such area under paragraph (2). 
‘‘(4) PRO-RATION OF PREMIUMS TO REFLECT 
COVERAGE DURING A PART OF A MONTH.—If the 
Secretary provides for coverage of portions of a 
month under section 1859A(c)(2), the Secretary 
shall pro-rate the premiums attributable to such cov-
erage under this section to reflect the portion of the 
month so covered.’’. 
(d) ADMINISTRATIVE PROVISIONS.—Section 1859F 
of such Act, as so inserted, is amended by adding at the 
end the following: 
‘‘(d) ADDITIONAL ADMINISTRATIVE PROVISIONS.—
‘‘(1) PROCESS FOR CONTINUED ENROLLMENT 
OF DISPLACED WORKERS WHO ATTAIN 62 YEARS OF 
AGE.—The Secretary shall provide a process for the 
continuation of enrollment of individuals whose en-
rollment under section 1859(c) would be terminated 
upon attaining 62 years of age. Under such process 
such individuals shall be provided appropriate and 
timely notice before the date of such termination 
and of the requirement to enroll under this part pur-
suant to section 1859(b) in order to continue entitle-
ment to benefits under this title after attaining 62 
years of age. 
‘‘(2) ARRANGEMENTS WITH STATES FOR DE-
TERMINATIONS RELATING TO UNEMPLOYMENT COM-
PENSATION ELIGIBILITY.—The Secretary may pro-
vide for appropriate arrangements with States for 
the determination of whether individuals in the State 
meet or would meet the requirements of section 
1859(c)(1)(C)(i).’’.
(e) CONFORMING AMENDMENT
TO HEADING
TO 
PART.—The heading of part D of title XVIII of the Social 
Security Act, as so inserted, is amended by striking ‘‘62’’ 
and inserting ‘‘55’’.
TITLE III—COBRA PROTECTION 
FOR EARLY RETIREES 
Subtitle A—Amendments to the 
Employee 
Retirement 
Income 
Security Act of 1974
SEC. 301. COBRA CONTINUATION BENEFITS FOR CERTAIN 
RETIRED 
WORKERS 
WHO 
LOSE 
RETIREE 
HEALTH COVERAGE. 
(a) 
ESTABLISHMENT
OF
NEW
QUALIFYING 
EVENT.—
(1) IN GENERAL.—Section 603 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 
1163) is amended by inserting after paragraph (6) 
the following new paragraph: 
‘‘(7) The termination or substantial reduction 
in benefits (as defined in section 607(7)) of group 
health plan coverage as a result of plan changes or 
termination in the case of a covered employee who 
is a qualified retiree.’’.
(2) QUALIFIED
RETIREE; QUALIFIED
BENE-
FICIARY; 
AND
SUBSTANTIAL
REDUCTION
DE-
FINED.—Section 607 of such Act (29 U.S.C. 1167) 
is amended—
(A) in paragraph (3)—
(i) in subparagraph (A), by inserting 
‘‘except as otherwise provided in this para-
graph,’’ after ‘‘means,’’; and 
(ii) by adding at the end the following 
new subparagraph: 
‘‘(D) SPECIAL RULE FOR QUALIFYING RE-
TIREES AND DEPENDENTS.—In the case of a 
qualifying event described in section 603(7), the 
term ‘qualified beneficiary’ means a qualified 
retiree and any other individual who, on the day 
before such qualifying event, is a beneficiary 
under the plan on the basis of the individual’s 
relationship to such qualified retiree.’’; and 
(B) by adding at the end the following new 
paragraphs: 
‘‘(6) QUALIFIED RETIREE.—The term ‘qualified 
retiree’ means, with respect to a qualifying event de-
scribed in section 603(7), a covered employee who, 
at the time of the event—
‘‘(A) has attained 55 years of age; and
‘‘(B) was receiving group health coverage 
under the plan by reason of the retirement of 
the covered employee. 
‘‘(7) SUBSTANTIAL
REDUCTION.—The term 
‘substantial reduction’—
‘‘(A) means, as determined under regula-
tions of the Secretary and with respect to a 
qualified beneficiary, a reduction in the average 
actuarial value of benefits under the plan 
(through reduction or elimination of benefits, 
an increase in premiums, deductibles, copay-
ments, and coinsurance, or any combination 
thereof), since the date of commencement of 
coverage of the beneficiary by reason of the re-
tirement of the covered employee (or, if later, 
January 6, 2004), in an amount equal to at 
least 50 percent of the total average actuarial 
value of the benefits under the plan as of such 
date (taking into account an appropriate ad-
justment to permit comparison of values over 
time); and 
‘‘(B) includes an increase in premiums re-
quired to an amount that exceeds the premium 
level described in the fourth sentence of section 
602(3).’’
(b) DURATION OF COVERAGE THROUGH AGE 65.—
Section 602(2)(A) of such Act (29 U.S.C. 1162(2)(A)) is 
amended—
(1) in clause (ii), by inserting ‘‘or 603(7)’’ after 
‘‘603(6)’’; 
(2) in clause (iv), by striking ‘‘or 603(6)’’ and 
inserting ‘‘, 603(6), or 603(7)’’; 
(3) by redesignating clause (iv) as clause (vi); 
(4) by redesignating clause (v) as clause (iv) 
and by moving such clause to immediately follow 
clause (iii); and 
(5) by inserting after such clause (iv) the fol-
lowing new clause: 
‘‘(v) SPECIAL RULE FOR CERTAIN DE-
PENDENTS IN CASE OF TERMINATION OR 
SUBSTANTIAL
REDUCTION
OF
RETIREE
HEALTH
COVERAGE.—In the case of a 
qualifying 
event 
described 
in 
section 
603(7), in the case of a qualified bene-
ficiary described in section 607(3)(D) who 
is not the qualified retiree or spouse of 
such retiree, the later of—
‘‘(I) the date that is 36 months 
after the earlier of the date the quali-
fied retiree becomes entitled to bene-
fits under title XVIII of the Social Se-
curity Act, or the date of the death of 
the qualified retiree; or 
‘‘(II) the date that is 36 months 
after the date of the qualifying 
event.’’. 
(c) TYPE OF COVERAGE IN CASE OF TERMINATION 
OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV-
ERAGE.—Section 602(1) of such Act (29 U.S.C. 1162(1)) 
is amended—
(1) by striking ‘‘The coverage’’ and inserting 
the following: 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the coverage’’; and 
(2) by adding at the end the following: 
‘‘(B) CERTAIN RETIREES.—In the case of 
a qualifying event described in section 603(7), 
in applying the first sentence of subparagraph 
(A) and the fourth sentence of paragraph (3), 
the coverage offered that is the most prevalent 
coverage option (as determined under regula-
tions of the Secretary) continued under the 
group health plan (or, if none, under the most 
prevalent other plan offered by the same plan 
sponsor) shall be treated as the coverage de-
scribed in such sentence, or (at the option of 
the plan and qualified beneficiary) such other 
coverage option as may be offered and elected 
by the qualified beneficiary involved.’’.
(d) INCREASED LEVEL OF PREMIUMS PERMITTED.—
Section 602(3) of such Act (29 U.S.C. 1162(3)) is amend-
ed by adding at the end the following new sentence: ‘‘In 
the case of an individual provided continuation coverage 
by reason of a qualifying event described in section 
603(7), any reference in subparagraph (A) of this para-
graph to ‘102 percent of the applicable premium’ is 
deemed a reference to ‘125 percent of the applicable pre-
mium for employed individuals (and their dependents, if 
applicable) for the coverage option referred to in para-
graph (1)(B)’.’’. 
(e) NOTICE.—Section 606(a) of such Act (29 U.S.C. 
1166) is amended—
(1) in paragraph (4)(A), by striking ‘‘or (6)’’ 
and inserting ‘‘(6), or (7)’’; and 
(2) by adding at the end the following: 
‘‘The notice under paragraph (4) in the case of a quali-
fying event described in section 603(7) shall be provided 
at least 90 days before the date of the qualifying event.’’. 
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by 
this section (other than subsection (e)(2)) shall 
apply to qualifying events occurring on or after Jan-
uary 6, 2004. In the case of a qualifying event oc-
curring on or after such date and before the date of 
the enactment of this Act, such event shall be 
deemed (for purposes of such amendments) to have 
occurred on the date of the enactment of this Act. 
(2) ADVANCE NOTICE OF TERMINATIONS AND 
REDUCTIONS.—The amendment made by subsection 
(e)(2) shall apply to qualifying events occurring 
after the date of the enactment of this Act, except 
that in no case shall notice be required under such 
amendment before such date. 
Subtitle B—Amendments to the 
Public Health Service Act 
SEC. 311. COBRA CONTINUATION BENEFITS FOR CERTAIN 
RETIRED 
WORKERS 
WHO 
LOSE 
RETIREE 
HEALTH COVERAGE. 
(a) 
ESTABLISHMENT
OF
NEW
QUALIFYING 
EVENT.—
(1) IN GENERAL.—Section 2203 of the Public 
Health Service Act (42 U.S.C. 300bb–3) is amended 
by inserting after paragraph (5) the following new 
paragraph:
‘‘(6) The termination or substantial reduction 
in benefits (as defined in section 2208(6)) of group 
health plan coverage as a result of plan changes or 
termination in the case of a covered employee who 
is a qualified retiree.’’.
(2) QUALIFIED
RETIREE; QUALIFIED
BENE-
FICIARY; 
AND
SUBSTANTIAL
REDUCTION
DE-
FINED.—Section 2208 of such Act (42 U.S.C. 
300bb–8) is amended—
(A) in paragraph (3)—
(i) in subparagraph (A), by inserting 
‘‘except as otherwise provided in this para-
graph,’’ after ‘‘means,’’; and 
(ii) by adding at the end the following 
new subparagraph: 
‘‘(C) SPECIAL RULE FOR QUALIFYING RE-
TIREES AND DEPENDENTS.—In the case of a 
qualifying event described in section 2203(6), 
the term ‘qualified beneficiary’ means a quali-
fied retiree and any other individual who, on 
the day before such qualifying event, is a bene-
ficiary under the plan on the basis of the indi-
vidual’s relationship to such qualified retiree.’’; 
and
(B) by adding at the end the following new 
paragraphs: 
‘‘(5) QUALIFIED RETIREE.—The term ‘qualified 
retiree’ means, with respect to a qualifying event de-
scribed in section 2203(6), a covered employee who, 
at the time of the event—
‘‘(A) has attained 55 years of age; and 
‘‘(B) was receiving group health coverage 
under the plan by reason of the retirement of 
the covered employee. 
‘‘(6) SUBSTANTIAL
REDUCTION.—The term 
‘substantial reduction’—
‘‘(A) means, as determined under regula-
tions of the Secretary of Labor and with respect
to a qualified beneficiary, a reduction in the av-
erage actuarial value of benefits under the plan 
(through reduction or elimination of benefits, 
an increase in premiums, deductibles, copay-
ments, and coinsurance, or any combination 
thereof), since the date of commencement of 
coverage of the beneficiary by reason of the re-
tirement of the covered employee (or, if later, 
January 6, 2004), in an amount equal to at 
least 50 percent of the total average actuarial 
value of the benefits under the plan as of such
date (taking into account an appropriate ad-
justment to permit comparison of values over 
time); and 
‘‘(B) includes an increase in premiums re-
quired to an amount that exceeds the premium 
level described in the fourth sentence of section 
2202(3).’’. 
(b) DURATION OF COVERAGE THROUGH AGE 65.—
Section 2202(2)(A) of such Act (42 U.S.C. 300bb–
2(2)(A)) is amended—
(1) by redesignating clause (iii) as clause (iv); 
and 
(2) by inserting after clause (ii) the following 
new clause: 
‘‘(iii) SPECIAL
RULE
FOR
CERTAIN 
DEPENDENTS
IN
CASE
OF
TERMINATION 
OR SUBSTANTIAL REDUCTION OF RETIREE 
HEALTH
COVERAGE.—In the case of a 
qualifying 
event 
described 
in 
section 
2203(6), in the case of a qualified bene-
ficiary described in section 2208(3)(C) who 
is not the qualified retiree or spouse of 
such retiree, the later of—
‘‘(I) the date that is 36 months 
after the earlier of the date the quali-
fied retiree becomes entitled to bene-
fits under title XVIII of the Social Se-
curity Act, or the date of the death of 
the qualified retiree; or 
‘‘(II) the date that is 36 months 
after the date of the qualifying 
event.’’. 
(c) TYPE OF COVERAGE IN CASE OF TERMINATION 
OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV-
ERAGE.—Section 2202(1) of such Act (42 U.S.C. 300bb–
2(1)) is amended—
(1) by striking ‘‘The coverage’’ and inserting 
the following: 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the coverage’’; and 
(2) by adding at the end the following: 
‘‘(B) CERTAIN RETIREES.—In the case of 
a qualifying event described in section 2203(6), 
in applying the first sentence of subparagraph 
(A) and the fourth sentence of paragraph (3), 
the coverage offered that is the most prevalent 
coverage option (as determined under regula-
tions of the Secretary of Labor) continued 
under the group health plan (or, if none, under 
the most prevalent other plan offered by the
same plan sponsor) shall be treated as the cov-
erage described in such sentence, or (at the op-
tion of the plan and qualified beneficiary) such 
other coverage option as may be offered and 
elected by the qualified beneficiary involved.’’.
(d) INCREASED LEVEL OF PREMIUMS PERMITTED.—
Section 2202(3) of such Act (42 U.S.C. 300bb–2(3)) is 
amended by adding at the end the following new sentence: 
‘‘In the case of an individual provided continuation cov-
erage by reason of a qualifying event described in section 
2203(6), any reference in subparagraph (A) of this para-
graph to ‘102 percent of the applicable premium’ is 
deemed a reference to ‘125 percent of the applicable pre-
mium for employed individuals (and their dependents, if 
applicable) for the coverage option referred to in para-
graph (1)(B)’.’’. 
(e) NOTICE.—Section 2206(a) of such Act (42 U.S.C. 
300bb–6(a)) is amended—
(1) in paragraph (4)(A), by striking ‘‘or (4)’’ 
and inserting ‘‘(4), or (6)’’; and 
(2) by adding at the end the following: 
‘‘The notice under paragraph (4) in the case of a quali-
fying event described in section 2203(6) shall be provided 
at least 90 days before the date of the qualifying event.’’. 
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by 
this section (other than subsection (e)(2)) shall 
apply to qualifying events occurring on or after Jan-
uary 6, 2004. In the case of a qualifying event oc-
curring on or after such date and before the date of 
the enactment of this Act, such event shall be 
deemed (for purposes of such amendments) to have 
occurred on the date of the enactment of this Act. 
(2) ADVANCE NOTICE OF TERMINATIONS AND 
REDUCTIONS.—The amendment made by subsection 
(e)(2) shall apply to qualifying events occurring 
after the date of the enactment of this Act, except 
that in no case shall notice be required under such 
amendment before such date. 
Subtitle C—Amendments to the 
Internal Revenue Code of 1986
SEC. 321. COBRA CONTINUATION BENEFITS FOR CERTAIN 
RETIRED 
WORKERS 
WHO 
LOSE 
RETIREE 
HEALTH COVERAGE. 
(a) 
ESTABLISHMENT
OF
NEW
QUALIFYING 
EVENT.—
(1) IN GENERAL.—Section 4980B(f)(3) of the 
Internal Revenue Code of 1986 is amended by in-
serting after subparagraph (F) the following new 
subparagraph:
‘‘(G) The termination or substantial reduc-
tion in benefits (as defined in subsection (g)(6)) 
of group health plan coverage as a result of 
plan changes or termination in the case of a 
covered employee who is a qualified retiree.’’.
(2) QUALIFIED
RETIREE; QUALIFIED
BENE-
FICIARY; 
AND
SUBSTANTIAL
REDUCTION
DE-
FINED.—Section 4980B(g) of such Code is amend-
ed—
(A) in paragraph (1)—
(i) in subparagraph (A), by inserting 
‘‘except as otherwise provided in this para-
graph,’’ after ‘‘means,’’; and 
(ii) by adding at the end the following 
new subparagraph: 
‘‘(E) SPECIAL RULE FOR QUALIFYING RE-
TIREES AND DEPENDENTS.—In the case of a 
qualifying 
event 
described 
in 
subsection 
(f)(3)(G), the term ‘qualified beneficiary’ means 
a qualified retiree and any other individual who, 
on the day before such qualifying event, is a 
beneficiary under the plan on the basis of the 
individual’s relationship to such qualified re-
tiree.’’; and
(B) by adding at the end the following new 
paragraphs: 
‘‘(5) QUALIFIED RETIREE.—The term ‘qualified 
retiree’ means, with respect to a qualifying event de-
scribed in subsection (f)(3)(G), a covered employee 
who, at the time of the event—
‘‘(A) has attained 55 years of age; and 
‘‘(B) was receiving group health coverage 
under the plan by reason of the retirement of 
the covered employee. 
‘‘(6) SUBSTANTIAL
REDUCTION.—The term 
‘substantial reduction’—
‘‘(A) means, as determined under regula-
tions of the Secretary of Labor and with respect 
to a qualified beneficiary, a reduction in the av-
erage actuarial value of benefits under the plan 
(through reduction or elimination of benefits, 
an increase in premiums, deductibles, copay-
ments, and coinsurance, or any combination 
thereof), since the date of commencement of 
coverage of the beneficiary by reason of the re-
tirement of the covered employee (or, if later, 
January 6, 2004), in an amount equal to at 
least 50 percent of the total average actuarial 
value of the benefits under the plan as of such
date (taking into account an appropriate ad-
justment to permit comparison of values over 
time); and 
‘‘(B) includes an increase in premiums re-
quired to an amount that exceeds the premium 
level described in the fourth sentence of sub-
section (f)(2)(C).’’. 
(b) DURATION OF COVERAGE THROUGH AGE 65.—
Section 4980B(f)(2)(B)(i) of such Code is amended—
(1) in subclause (II), by inserting ‘‘or (3)(G)’’ 
after ‘‘(3)(F)’’; 
(2) in subclause (IV), by striking ‘‘or (3)(F)’’ 
and inserting ‘‘, (3)(F), or (3)(G)’’; 
(3) by redesignating subclause (IV) as sub-
clause (VI); 
(4) by redesignating subclause (V) as subclause 
(IV) and by moving such clause to immediately fol-
low subclause (III); and 
(5) by inserting after such subclause (IV) the 
following new subclause: 
‘‘(V) SPECIAL
RULE
FOR
CER-
TAIN DEPENDENTS IN CASE OF TER-
MINATION
OR
SUBSTANTIAL
REDUC-
TION
OF
RETIREE
HEALTH
COV-
ERAGE.—In the case of a qualifying
event described in paragraph (3)(G), 
in the case of a qualified beneficiary 
described in subsection (g)(1)(E) who 
is not the qualified retiree or spouse 
of such retiree, the later of—
‘‘(a) the date that is 36 
months after the earlier of the 
date the qualified retiree becomes 
entitled to benefits under title 
XVIII of the Social Security Act, 
or the date of the death of the 
qualified retiree; or 
‘‘(b) the date that is 36 
months after the date of the 
qualifying event.’’. 
(c) TYPE OF COVERAGE IN CASE OF TERMINATION 
OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV-
ERAGE.—Section 4980B(f)(2)(A) of such Code is amend-
ed—
(1) by striking ‘‘The coverage’’ and inserting 
the following: 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the coverage’’; and 
(2) by adding at the end the following:
viduals (and their dependents, if applicable) for the cov-
erage option referred to in subparagraph (A)(ii)’.’’. 
(e) NOTICE.—Section 4980B(f)(6) of such Code is 
amended—
(1) in subparagraph (D)(i), by striking ‘‘or 
(F)’’ and inserting ‘‘(F), or (G)’’; and 
(2) by adding at the end the following: 
‘‘The notice under subparagraph (D)(i) in the case of a 
qualifying event described in paragraph (3)(G) shall be 
provided at least 90 days before the date of the qualifying 
event.’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by 
this section (other than subsection (e)(2)) shall 
apply to qualifying events occurring on or after Jan-
uary 6, 2004. In the case of a qualifying event oc-
curring on or after such date and before the date of 
the enactment of this Act, such event shall be 
deemed (for purposes of such amendments) to have 
occurred on the date of the enactment of this Act. 
(2) ADVANCE NOTICE OF TERMINATIONS AND 
REDUCTIONS.—The amendment made by subsection 
(e)(2) shall apply to qualifying events occurring 
after the date of the enactment of this Act, except
that in no case shall notice be required under such 
amendment before such date. 
TITLE IV—FINANCING 
SEC. 401. REFERENCE TO FINANCING PROVISIONS. 
Any increase in payments under the medicare pro-
gram under title XVIII of the Social Security Act that 
results from the enactment of this Act shall be offset by 
reductions in payments under such program pursuant to 
the anti-fraud and anti-abuse provisions enacted as part 
of the Medicare Fraud and Overpayment Act of 1998.
TITLE V—PROVISION OF PRE-
MIUM ASSISTANCE FOR LOW-
INCOME INDIVIDUALS PUR-
CHASING EARLY COVERAGE 
UNDER THE MEDICARE PRO-
GRAM
SEC. 501. PROVISION OF PREMIUM ASSISTANCE FOR LOW-
INCOME INDIVIDUALS PURCHASING EARLY 
COVERAGE 
UNDER 
THE 
MEDICARE 
PRO-
GRAM. 
(a) IN GENERAL.—Section 1902(a)(10) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)) is amended—
(1) in subparagraph (E)—
(A) by striking ‘‘and’’ at the end of clause 
(iii), and
(B) by adding at the end the following new 
clause: 
‘‘(v) for making medical assistance avail-
able consistent with section 1916(d)(2) for 
medicare cost-sharing described in section 
1905(p)(3)(A)(iii) for individuals who have en-
rolled for benefits under part D of title XVIII, 
whose income (as determined in the same man-
ner as income is determined under section 
1905(p) for qualified medicare beneficiaries) 
does not exceed 200 percent of the official pov-
erty line (referred to in such section) applicable 
to a family of the size involved, and who are not 
otherwise entitled to medical assistance under 
the plan;’’; and 
(2) in the matter following subparagraph (G)—
(A) by striking ‘‘and’’ before ‘‘(XIV)’’, and 
(B) by inserting before the semicolon at 
the end the following: ‘‘, and (XV) the medical 
assistance made available to an individual de-
scribed in subparagraph (E)(v) shall be limited 
to medical assistance for medicare cost-sharing 
described in the last sentence of section 
1905(p)(3)’’.
(b) 
SLIDING
SCALE
FOR
BENEFITS.—Section 
1916(d) of such Act (42 U.S.C. 1396o(d)) is amended—
(1) by inserting ‘‘(1)’’ after ‘‘(d)’’, and 
(2) by adding at the end the following: 
‘‘(2) With respect to an individual described in sec-
tion 1902(a)(10)(E)(v), the State plan of a State shall 
provide for the charging of a premium (expressed as a per-
centage of the medicare cost-sharing described in the last 
sentence of paragraph (3) of section 1905(p)(3) provided 
with respect to the individual) according to a sliding scale 
under which such percentage increases from 10 percent 
to 100 percent, in reasonable increments (as determined 
by the Secretary), as the individual’s income increases 
from 100 percent of the official poverty line (referred to 
in such section) to 200 percent of such poverty line.’’. 
(c) 100 PERCENT FEDERAL MEDICAL ASSISTANCE 
PERCENTAGE.—The first sentence of section 1905(b) of 
such Act (42 U.S.C. 1396d(b)) is amended—
(1) by striking ‘‘and’’ before ‘‘(4)’’, and 
(2) by inserting before the period at the end the 
following: ‘‘, and (5) the Federal medical assistance 
percentage shall be 100 percent with respect to med-
ical 
assistance 
provided 
under 
section 
1902(a)(10)(E)(v)’’.
(d) MEDICARE COST-SHARING INCLUDING BUY-IN 
PREMIUM.—Section 1905(p)(3) of such Act (42 U.S.C. 
1396d(p)(3)) is amended by adding at the end the fol-
lowing: ‘‘Such term also includes premiums under part D 
of title XVIII but only with respect to individuals de-
scribed in section 1902(a)(10)(E)(v).’’. 
(e) TREATMENT OF TERRITORIES.—Section 1108(g) 
of such Act (42 U.S.C. 1308(g)) is amended by adding 
at the end the following new paragraph: 
‘‘(3) Notwithstanding the preceding provisions of this 
subsection, with respect to fiscal year 2005 and any fiscal 
year thereafter, the amount otherwise determined under 
this subsection (and subsection (f)) for the fiscal year for 
a Commonwealth or territory shall be increased by the 
ratio (as estimated by the Secretary) of—
‘‘(A) the aggregate amount of payments made 
to the 50 States and the District of Columbia for 
the fiscal year under title XIX that are attributable 
to the amendments made by the Early Medicare Ac-
cess and Affordability Act of 2003; to 
‘‘(B) the aggregate amount of total payments 
made to such States and District for the fiscal year 
under such title.’’.