I 
108TH CONGRESS 
1ST SESSION H. R. 2469
To amend the Social Security Act to modify the Medicare Program. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 12, 2003
Mr. TERRY (for himself, Mr. TANCREDO, Mrs. MUSGRAVE, Mr. SESSIONS, Mr. 
MANZULLO, and Mr. JENKINS) introduced the following bill; which was 
referred to the Committee on Ways and Means, and in addition to the 
Committee on Energy and Commerce, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions 
as fall within the jurisdiction of the committee concerned 
A BILL 
To amend the Social Security Act to modify the Medicare 
Program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Medicare Reform Act of 2003’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows:
Sec. 1. Short title; table of contents. 
Sec. 2. Establishment of Medicare premium support system.
‘‘TITLE XXII—ESTABLISHMENT OF MEDICARE PREMIUM 
SUPPORT SYSTEM 
‘‘Sec. 2200. Construction; references; general definitions. 
‘‘PART A—PREMIUM SUPPORT SYSTEM 
‘‘Sec. 2201. Offering of benefits through Medicare plans. 
‘‘Sec. 2202. Standard and high option Medicare plans. 
‘‘Sec. 2203. Submission of benefit packages and premium rates for Medi-
care plans. 
‘‘Sec. 2204. Government contribution toward coverage and beneficiary pre-
mium. 
‘‘Sec. 2205. Subsidized premiums for low-income individuals to enroll in 
high option Medicare plans. 
‘‘Sec. 2206. Relation to certain laws; treatment of current plans. 
‘‘PART B—MEDICARE TRUST FUND 
‘‘Sec. 2211. Medicare Trust Fund. 
‘‘Sec. 2212. Programmatic insolvency and limitation on general revenue fi-
nancing. 
Sec. 3. Conforming amendments to the Internal Revenue Code of 1986.
SEC. 2. ESTABLISHMENT OF MEDICARE PREMIUM SUP-
PORT SYSTEM. 
The Social Security Act is amended by adding at the 
end the following: 
‘‘TITLE XXII—ESTABLISHMENT OF MEDICARE 
PREMIUM SUPPORT SYSTEM 
‘‘SEC. 2200. CONSTRUCTION; REFERENCES; GENERAL DEFI-
NITIONS. 
‘‘(a) CONSTRUCTION OF TITLE.—The provisions of 
this title shall be construed to modify and supersede the 
provisions and operation of title XVIII to the extent such 
provisions are inconsistent with the provisions of this title. 
‘‘(b) REFERENCES TO MEDICARE PROVISIONS.—Any 
reference in any law or regulation (other than in this title) 
to any provision of title XVIII is deemed a reference to
such provision as modified through the operation of this 
title. 
‘‘(c) 
DEFINITIONS
RELATING
TO
MEDICARE 
PLANS.—
‘‘(1) MEDICARE
PLAN.—The term ‘Medicare 
plan’ means a health benefits plan which the Sec-
retary permits to be offered by an entity that is li-
censed under State law to provide health benefits 
plans in the State involved to Medicare beneficiaries 
under this title. 
‘‘(2) HIGH OPTION MEDICARE PLAN.—The term 
‘high option Medicare plan’ means a Medicare plan 
that includes stop loss coverage consistent with sec-
tion 2202(b). 
‘‘(3) STANDARD
MEDICARE
PLAN.—The term 
‘standard Medicare plan’ means a Medicare plan 
that is not a high option Medicare plan. 
‘‘(4) FEHBP.—The term ‘FEHBP’ means the 
Federal Employees Health Benefits program under 
chapter 89 of title 5, United States Code. 
‘‘(d) OTHER GENERAL DEFINITIONS.—For purposes 
of this title: 
‘‘(1) 
MEDICARE
BENEFICIARY.—The 
term 
‘Medicare beneficiary’ means an individual entitled
to benefits under part A of title XVIII, enrolled for 
benefits under part B of such title, or both. 
‘‘(2) MEDICARE
TRUST
FUND.—The term 
‘Medicare Trust Fund’ means such trust fund as es-
tablished under section 2211.
‘‘PART A—PREMIUM SUPPORT SYSTEM 
‘‘SEC. 2201. OFFERING OF BENEFITS THROUGH MEDICARE 
PLANS. 
‘‘(a) ELECTION OF COVERAGE THROUGH A MEDI-
CARE PLAN.—
‘‘(1) CONTINUED ENTITLEMENT TO MEDICARE 
BENEFITS.—Effective January 1, 2008, in accord-
ance with this title, Medicare beneficiaries shall con-
tinue to be entitled to receive benefits under title 
XVIII (as modified by this title) and with respect to 
medicare beneficiaries first eligible for benefits on or 
after January 1, 2008, shall only receive such bene-
fits through enrollment in a Medicare plan. 
‘‘(2) ELECTION FOR CERTAIN MEDICARE BENE-
FICIARIES TO RETAIN CURRENT MEDICARE BENE-
FITS PROGRAM.—In the case of a medicare bene-
ficiary who was first eligible for benefits under title 
XVIII before January 1, 2008, such beneficiaries 
may make a one-time, irrevocable election, in a form 
and manner determined by the Secretary to continue
to receive benefits for items and services for which 
payment may be made under title XVIII. 
‘‘(3) ENROLLMENT
PROCESS.—The Secretary 
shall establish a process for the enrollment of Medi-
care beneficiaries under Medicare plans that is 
based, except as the Secretary may provide, upon 
the process for enrollment for health plans under 
FEHBP, including provision of information and 
open enrollment and disenrollment opportunities. 
‘‘(4) CONTRACT PERIOD.—Each contract under 
this part with an entity offering a Medicare plan 
shall be for a term of at least 2 years, as determined 
by the Secretary, and may be made automatically re-
newable from term to term in the absence of notice 
by either party of intention to terminate at the end 
of the current term. 
‘‘(5) PLAN
PERIOD.—The plan period for a 
Medicare plan offered by an entity with a contract 
under paragraph (4) shall be a term of 2 years. 
‘‘(b) BENEFICIARY
PROTECTIONS
AND
OTHER 
QUALIFICATIONS FOR MEDICARE PLANS.—In order to be 
offered as a Medicare plan under this part, except as pro-
vided in this title, the plan and the entity offering the plan 
shall meet the requirements applicable to health benefits 
plans and qualified carriers under FEHBP, including—
‘‘(1) the offering and scope of benefits; 
‘‘(2) protections for beneficiaries enrolled in the 
plans; and 
‘‘(3) requirements for financial solvency. 
‘‘(c) SELECTION OF PLANS.—
‘‘(1) IN GENERAL.—With respect to each plan 
period under subsection (a)(5), a medicare bene-
ficiary shall be deemed to have elected to remain en-
rolled in the medicare plan in which the beneficiary 
was enrolled during the prior plan period. 
‘‘(2) DEFAULT.—In the case of a medicare ben-
eficiary who fails to enroll in a medicare plan for a 
plan period, the Secretary shall provide for enroll-
ment of the beneficiary under a medicare plan of-
fered in the State in which the beneficiary resides 
that the Secretary determines to be appropriate. 
‘‘(d) EXCLUSIVE PAYMENT METHODOLOGY.—Except 
as provided in subsection (a)(2) and other provisions of 
this title, for items and services furnished on or after Jan-
uary 1, 2008—
‘‘(1) payment to an entity offering a Medicare 
plan in the amounts provided under this title shall 
be instead of any amounts that may be otherwise 
payable under title XVIII; and
‘‘(2) only the entity offering the Medicare plan 
is eligible to receive payment for items and services 
under such title. 
‘‘SEC. 2202. STANDARD AND HIGH OPTION MEDICARE 
PLANS. 
‘‘(a) BENEFITS UNDER STANDARD PLANS.—Subject 
to section 2203(b)(2), the Secretary may approve benefits 
submitted under section 2203(a)(1) with respect to a 
standard plan only if the plan include benefits for the 
items and services described in subsection (d). 
‘‘(b) BENEFITS UNDER HIGH OPTION PLANS.—The 
Secretary may approve the benefits submitted under sec-
tion 2203(a)(1) with respect to a high option Medicare 
plan only if the plan includes benefits required for a stand-
ard plan under subsection (a) and also includes—
‘‘(1) rates of beneficiary deductible, cost-shar-
ing, and coinsurance requirements that are lower 
than such rates applicable under standard plans 
under subsection (a); and 
‘‘(2) stop-loss coverage benefits that are de-
signed to limit the application of beneficiary cost-
sharing for covered benefits in a year after incurring 
out-of-pocket covered expenditures that exceed a 
limit applicable to health benefits plans under 
FEHBP.
‘‘(c) REQUIREMENT TO OFFER HIGH OPTION MEDI-
CARE PLAN.—The Secretary may not approve the offering 
of a standard Medicare plan by an entity under this title 
in an area unless the entity also offers a high option Medi-
care plan in that area that the Secretary approves under 
this title. 
‘‘(d) BENEFITS DESCRIBED.—For purposes of this 
part, a Medicare plan shall provide for coverage for the 
following items and services that are medically necessary 
and appropriate: 
‘‘(1) Hospital services, including inpatient, out-
patient, and 24-hour a day emergency services. 
‘‘(2) Services of health professionals, such as 
physicians services and services that would be physi-
cians services if furnished by a physician but are 
provided by any other licensed health care profes-
sional. 
‘‘(3) Emergency and ambulatory medical and 
surgical services furnished by a facility that is not 
a hospital. 
‘‘(4) Clinical preventive services. 
‘‘(5) Services for pregnant women. 
‘‘(6) Hospice care. 
‘‘(7) Home health care and home infusion drug 
therapy services.
‘‘(8) Extended care services, as defined in sec-
tion 1861(h). 
‘‘(9) Ambulance services, including ground, air, 
and water transportation, as appropriate. 
‘‘(10) Outpatient laboratory, radiology, and di-
agnostic services. 
‘‘(11) 
Outpatient 
prescription 
drugs 
and 
biologicals. 
‘‘(12) Outpatient rehabilitation services, includ-
ing outpatient occupational therapy, physical ther-
apy, and speech pathology services. 
‘‘(13) Durable medical equipment and pros-
thetic and orthotic devices. 
‘‘(14) Vision care, to the same extent such serv-
ices are a covered benefit under title XVIII as of the 
date of the enactment of this Act. 
‘‘(e) SCOPE
OF BENEFITS.—Each Medicare plan 
shall establish the scope of benefits applicable under the 
plan, subject to approval by the Secretary, including the 
scope of outpatient prescription drugs under the plan, any 
formulary restrictions for such drugs, and any copayment 
structure under such formulary (if any). 
‘‘(f) PAPERWORK REDUCTION.—Each Medicare plan 
shall comply with the provisions of part C of title XI, relat-
ing to administrative simplification and paperwork reduc-
tion with respect to health care transactions for health 
care providers submitting claims to health plans. 
‘‘(g) LICENSURE.—Each entity offering a Medicare 
plan shall be licensed under State law to provide health 
benefits plans in the State. 
‘‘SEC. 2203. SUBMISSION OF BENEFIT PACKAGES AND PRE-
MIUM RATES FOR MEDICARE PLANS. 
‘‘(a) IN GENERAL.—Each entity that intends to offer 
a Medicare plan in a year (beginning with 2008) in a State 
shall submit to the Secretary, at such time (before the be-
ginning of each open enrollment period for each year) and 
in such manner as the Secretary specifies, such informa-
tion as the Secretary may require to carry out title XVIII 
(as modified by this title). Such information shall include 
information on each of the following: 
‘‘(1) BENEFITS.—A description of the benefits 
under the plan. 
‘‘(2) PREMIUM BID.—The premium proposed to 
be charged for enrollment under the plan. 
‘‘(b) REVIEW AND APPROVAL BY SECRETARY.—
‘‘(1) IN GENERAL.—The Secretary shall review 
the benefits and premium bids submitted under sub-
section (a). 
‘‘(2) AUTHORITY
TO
NEGOTIATE.—The Sec-
retary may negotiate with the entities offering such
plans regarding such terms and conditions but may 
approve such a submission only if the Secretary 
finds that it complies with the requirements of this 
section and section 2202. The terms and conditions 
with respect to which the Secretary may negotiate 
include—
‘‘(A) the scope of benefits offered under 
the plan; 
‘‘(B) the premium bid for the benefits so 
offered; and 
‘‘(C) the assumptions of the entities offer-
ing the plan with respect to cost, risk, geo-
graphic variation, and projected number of en-
rollees. 
‘‘(3) SPECIAL RULE FOR HIGH OPTION MEDI-
CARE PLANS.—If information is submitted to estab-
lish that a Medicare plan is a high option Medicare 
plan, the Secretary shall determine whether or not 
the plan meets the requirements to be a high option 
Medicare plan. 
‘‘(4) BENEFIT APPROVAL.—Subject to section 
2202, the following applies to approval by the Sec-
retary of benefits submitted under subsection (a)(1): 
‘‘(A) IN
GENERAL.—The Secretary may 
approve benefits submitted under subsection
(a)(1) only if the benefits are not designed in 
such a manner that the Secretary finds that it 
is likely to result in favorable selection of bene-
ficiaries. 
‘‘(B) VARIATION IN COST-SHARING.—For 
purposes of meeting the requirement of section 
2202, the Secretary shall permit reasonable 
variation in cost-sharing so long as actuarial 
equivalence of total cost-sharing for the benefits 
described in such section is maintained. Noth-
ing in this subparagraph shall be construed as 
preventing a Medicare plan from providing, as 
an additional benefit, a lower level of cost-shar-
ing from that otherwise described in title XVIII 
(as modified by this title). 
‘‘(5) PREMIUM APPROVAL.—The Secretary may 
approve premiums submitted under subsection (a)(2) 
only if the Secretary finds that the premium rates 
are adequate in terms of actuarial soundness to as-
sure the financial solvency of the entity offering the 
plan. 
‘‘(6) STATEWIDE SERVICE AREA.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), for purposes of this title, a
State shall be the service area for a Medicare 
plan. 
‘‘(B) 
DISCRETION
TO
ESTABLISH 
MULTISTATE
AREAS.—If the Secretary deter-
mines that medicare plans will not be offered in 
a State for a plan period, the Secretary may 
provide for a multistate service area to ensure 
the offering of such plans in such State during 
such plan period. 
‘‘(c) PROVIDING INFORMATION TO PROMOTE IN-
FORMED CHOICE.—The Secretary shall provide for activi-
ties to broadly disseminate information to medicare bene-
ficiaries (and prospective medicare beneficiaries) on the 
coverage options under medicare plans provided under this 
title in order to promote an active, informed selection 
among such options. 
‘‘SEC. 2204. GOVERNMENT CONTRIBUTION TOWARD COV-
ERAGE AND BENEFICIARY PREMIUM. 
‘‘(a) PREMIUM SUPPORT PAYMENT
BY GOVERN-
MENT.—Except as provided in subsection (d), the amount 
of payment to an entity offering a Medicare plan in a 
State for a Medicare beneficiary (other than a qualified 
low-income Medicare beneficiary, as defined in section 
2115(a)) residing in the State who is enrolled in the plan 
for a year is equal to the bid amount determined or nego-
tiated, as the case may be, by the Secretary under section 
2203. 
‘‘(b) COMPUTATION
AND COLLECTION
OF BENE-
FICIARY PREMIUM.—
‘‘(1) COMPUTATION
OF
TOTAL
BENEFICIARY 
PREMIUM.—
‘‘(A) IN GENERAL.—For purposes of this 
section, the amount of the total beneficiary pre-
mium for a Medicare beneficiary enrolled in a 
Medicare plan is equal 30 percent (or in the 
case of an individual to whom subsection (c) ap-
plies, the means-tested premium percentage de-
termined under such subsection) of the amount 
of payment to the entity offering the Medicare 
plan under subsection (a). 
‘‘(B) NO
APPLICATION
TO
QUALIFIED 
LOW-INCOME
MEDICARE
BENEFICIARIES.—For 
provisions relating to computation of bene-
ficiary premiums for qualified low-income Medi-
care beneficiaries, see section 2205(b).
‘‘(2) COLLECTION OF AMOUNT IN SAME MAN-
NER AS PART B PREMIUM.—
‘‘(A) IN
GENERAL.—The amount of the 
total beneficiary premium under paragraph (1) 
shall be paid to the Medicare Trust Fund in the
same manner as monthly premiums under part 
B of title XVIII were payable to the credit of 
the Federal Supplementary Medical Insurance 
Trust Fund under section 1840 (as in effect as 
of the date of the enactment of this title). 
‘‘(B) COLLECTION.—In order to carry out 
subparagraph (A), the Secretary shall transmit 
to the Commissioner of Social Security—
‘‘(i) at the beginning of each year, in-
formation on the name, social security ac-
count number, and the total beneficiary 
premium owed by each individual enrolled 
in a Medicare plan for months in the year; 
and 
‘‘(ii) periodically throughout the year, 
information to update the information pre-
viously transmitted under this subpara-
graph during the year. 
‘‘(c) MEANS-TESTED PREMIUM PERCENTAGE.—
‘‘(1) INCREASE IN PREMIUM AMOUNT.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), in the case of an Medicare bene-
ficiary whose modified adjusted gross income 
for a taxable year ending with or within a cal-
endar year (as initially determined by the Sec-
retary in accordance with paragraph (2)) is 
equal to or greater than 300 percent of the offi-
cial poverty line (referred to in section 
1905(p)(2)(A)), the Secretary shall increase the 
amount of the total beneficiary premium under 
subsection (b) for months in the calendar year 
by 10 percent for each multiple of 100 percent 
by which such individual’s income exceeds 200 
percent of such poverty line. 
‘‘(B) 
UPPER
LIMIT
ON
PREMIUM 
AMOUNT.—In no case may the application of 
subparagraph (A) result in a premium contribu-
tion amount under subsection (b) of greater 
than 70 percent of the amount of payment to 
the entity offering the Medicare plan under sub-
section (a). 
‘‘(2) DETERMINATION OF INCOME.—The Sec-
retary shall make an initial determination of the 
amount of an individual’s modified adjusted gross 
income for a taxable year ending with or within a 
calendar year for purposes of this subsection as fol-
lows: 
‘‘(A) 
SECRETARY’S
ESTIMATE
OF 
AMOUNT.—Not later than September 1 of the 
year preceding the year, the Secretary shall
provide notice to each individual whom the Sec-
retary finds (on the basis of the individual’s ac-
tual modified adjusted gross income for the 
most recent taxable year for which such infor-
mation is available or other information pro-
vided to the Secretary by the Secretary of the 
Treasury) will be subject to an increase under 
this subsection that the individual will be sub-
ject to such an increase, and shall include in 
such notice the Secretary’s estimate of the indi-
vidual’s modified adjusted gross income for the 
year. 
‘‘(B) MODIFICATION OF SECRETARY’S ES-
TIMATE.—If, during the 30-day period begin-
ning on the date notice is provided to an indi-
vidual under subparagraph (A), the individual 
provides the Secretary with information on the 
individual’s anticipated modified adjusted gross 
income for the year, the amount initially deter-
mined by the Secretary under this paragraph 
with respect to the individual shall be based on 
the information provided by the individual. 
‘‘(C) DEFAULT INCOME AMOUNT.—If an 
individual does not provide the Secretary with 
information under subparagraph (B), the
amount initially determined by the Secretary 
under this paragraph with respect to the indi-
vidual shall be the amount included in the no-
tice provided to the individual under subpara-
graph (A). 
‘‘(3) ADJUSTMENT OF PREMIUMS TO ACCOUNT 
FOR MISESTIMATION.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines (on the basis of final information pro-
vided by the Secretary of the Treasury) that 
the amount of an individual’s actual modified 
adjusted gross income for a taxable year ending 
with or within a calendar year is less than or 
greater than the amount initially determined by 
the Secretary under paragraph (3), the Sec-
retary shall increase or decrease the amount of 
the individual’s monthly premium under this 
section (as the case may be) for months during 
the following calendar year by an amount equal 
to 1⁄12 of the difference between—
‘‘(i) the total amount of all monthly 
premiums paid by the individual under this 
section during the previous calendar year; 
and
‘‘(ii) the total amount of all such pre-
miums which would have been paid by the 
individual during the previous calendar 
year if the amount of the individual’s 
modified adjusted gross income initially de-
termined under paragraph (3) were equal 
to the actual amount of the individual’s 
modified adjusted gross income determined 
under this paragraph. 
‘‘(B) 
APPLICATION
OF
INTEREST 
CHARGE.—
‘‘(i) IN GENERAL.—In the case of an 
individual for whom the amount initially 
determined by the Secretary under para-
graph (3) is based on information provided 
by the individual under subparagraph (B) 
of such paragraph, if the Secretary deter-
mines under subparagraph (A) that the 
amount of the individual’s actual modified 
adjusted gross income for a taxable year is 
greater than the amount initially deter-
mined under paragraph (3), the Secretary 
shall increase the amount otherwise deter-
mined for the year under subparagraph 
(A) by interest in an amount equal to the
sum of the amounts determined under 
clause (ii) for each of the months described 
in clause (ii). 
‘‘(ii) COMPUTATION
OF
INTEREST 
CHARGE.—Interest shall be computed for 
any month in an amount determined by 
applying the underpayment rate estab-
lished under section 6621 of the Internal 
Revenue Code of 1986 (compounded daily) 
to any portion of the difference between 
the amount initially determined under 
paragraph (3) and the amount determined 
under subparagraph (A) for the period be-
ginning on the first day of the month be-
ginning after the individual provided infor-
mation to the Secretary under subpara-
graph (B) of paragraph (3) and ending 30 
days before the first month for which the 
individual’s monthly premium is increased 
under this paragraph. 
‘‘(iii) 
WAIVER
OF
INTEREST 
CHARGE.—Interest shall not be imposed 
under this subparagraph if the amount of 
the individual’s modified adjusted gross in-
come provided by the individual under sub-
under this section for months in a year would 
have been decreased pursuant to subparagraph 
(A) if the individual were not deceased, the Sec-
retary shall make a payment to the individual’s 
surviving spouse (or, in the case of an indi-
vidual who does not have a surviving spouse, to 
the individual’s estate) in an amount equal to 
the difference between—
‘‘(i) the total amount by which the in-
dividual’s premium would have been de-
creased for all months during the year pur-
suant to subparagraph (A); and 
‘‘(ii) the amount (if any) by which the 
individual’s premium was decreased for 
months during the year pursuant to sub-
paragraph (A). 
‘‘(4) MODIFIED ADJUSTED GROSS INCOME DE-
FINED.—In this subsection, the term ‘modified ad-
justed gross income’ means adjusted gross income 
(as defined in section 62 of the Internal Revenue 
Code of 1986)—
‘‘(A) determined without regard to sections 
135, 911, 931, and 933 of such Code, and 
‘‘(B) increased by the amount of interest 
received or accrued by the taxpayer during the
taxable year which is exempt from tax under 
such Code. 
‘‘(d) PAYMENT TERMS.—Payment under this section 
or section 2205(c) to an entity offering a Medicare plan 
shall be made in a manner determined by the Secretary 
and based upon the manner in which payments are made 
to qualified carriers under FEHBP for health benefits 
plans. 
‘‘(e) SPECIAL ADJUSTMENT FOR MEDICARE BENE-
FICIARIES WITH END-STAGE RENAL DISEASE.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
the amount of payment to an entity offering a Medi-
care plan for a Medicare beneficiary under sub-
section (a) shall be increased by 20 percent for each 
Medicare beneficiary who is diagnosed with end-
stage renal disease. 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to a Medicare beneficiary who develops end-
stage renal disease while enrolled in a Medicare 
plan. 
‘‘SEC. 2205. SUBSIDIZED PREMIUMS FOR LOW-INCOME INDI-
VIDUALS TO ENROLL IN HIGH OPTION MEDI-
CARE PLANS. 
‘‘(a) QUALIFIED LOW-INCOME MEDICARE BENE-
FICIARY DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this part, 
the term ‘qualified low-income Medicare beneficiary’ 
means a Medicare beneficiary whose income (as de-
termined for purposes of section 1905(p)) does not 
exceed 200 percent of the official poverty line (re-
ferred to in paragraph (2)(A) of such section) appli-
cable to a family of the size involved and who is en-
rolled in a high option Medicare plan. 
‘‘(2) ANNUAL ELIGIBILITY DETERMINATION BY 
STATES.—The Secretary shall establish an arrange-
ment with each State (as defined under section 
1861(x) for purposes of title XVIII) under which the 
State provides for the determination of whether a 
Medicare beneficiary in the State is a qualified low-
income Medicare beneficiary. A determination that a 
Medicare beneficiary is a qualified low-income Medi-
care beneficiary shall remain valid for a period of 12 
months but is conditioned upon continuing enroll-
ment in a high option Medicare plan. 
‘‘(b) PAYMENT BY GOVERNMENT ON BEHALF OF 
QUALIFIED LOW-INCOME MEDICARE BENEFICIARIES.—
‘‘(1) AMOUNT.—The amount of payment to an 
entity offering a Medicare plan for a qualified low-
income Medicare beneficiary who is enrolled in the 
plan for a year is equal to—
‘‘(A) in the case of a plan that is the low-
est cost high option plan offered in the State, 
the full premium for the plan determined or ne-
gotiated, as the case may be, by the Secretary 
under section 2203; and
‘‘(B) in the case of a plan that is not the 
lowest cost high option plan, the full premium 
for the plan described in subparagraph (A). 
If a qualified low-income Medicare beneficiary elects a 
plan referred to in subparagraph (B), the beneficiary is 
responsible for payment, in the manner prescribed in sub-
section (c), of any premium in excess of the amount pay-
able by the Secretary under such subparagraph. 
‘‘(2) GEOGRAPHIC AND RISK ADJUSTMENT.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary shall establish an ap-
propriate methodology for adjusting the amount 
paid under paragraph (1) to take into account, 
in a budget neutral manner, appropriate vari-
ations in costs—
‘‘(i) based on provision of items and 
services in different geographic areas; and 
‘‘(ii) based on differences in the actu-
arial risk of different enrollees being 
served.
‘‘(B) CONSIDERATIONS.—The provisions of 
section 2204(b)(2)(B) shall apply to estab-
lishing adjustors under subparagraph (A) in the 
same manner as they apply to establishing ad-
justors under section 2204(b)(2)(A), except 
that the population for which such adjustors is 
computed and applicable shall be the population 
of qualified low-income Medicare beneficiaries. 
‘‘(c) COLLECTION OF BENEFICIARY PREMIUM (IF 
ANY).—The provisions of section 2204 apply to collection 
of premiums under subsection (b)(1)(B) in the same man-
ner as they apply to collection of premiums under section 
2204(b)(2). 
‘‘(d) CONSTRUCTION RELATIVE TO OTHER BENE-
FITS.—
‘‘(1) NO REQUIREMENT FOR STATE MEDICAID 
PAYMENT.—Nothing in this section shall be con-
strued as requiring a State, under its plan under 
title XIX, to pay any part of the additional subsidy 
provided under this section to qualified low-income 
Medicare beneficiaries. 
‘‘(2) NO MEDICAID MATCHING FOR PAYMENT.—
Insofar as this section applies to an individual, not-
withstanding any other provision of law, a State 
plan under title XIX is not required to provide med-
ical assistance with respect to Medicare cost-sharing 
described in section 1905(p)(3)(A) and Federal fi-
nancial assistance shall not be available under sec-
tion 1903 with respect to such medical assistance. 
‘‘(3) NONDUPLICATION OF PRESCRIPTION DRUG 
BENEFITS.—In the case of prescription drugs pro-
vided to a qualified low-income Medicare beneficiary 
enrolled in a high option Medicare plan to the extent 
the beneficiary is covered under a State-funded pre-
scription drug program, the entity offering the plan 
may charge or authorize the provider of such serv-
ices to charge, in accordance with the charges al-
lowed under the program—
‘‘(A) the State program for payment for 
the drugs; or 
‘‘(B) such beneficiary to the extent that 
the beneficiary has been paid under such pro-
gram for such drugs. 
‘‘SEC. 2206. RELATION TO CERTAIN LAWS; TREATMENT OF 
CURRENT PLANS. 
‘‘(a) IN GENERAL.—Effective January 1, 2008, the 
following provisions of law are modified as follows, in 
order to reflect the policies specified in this part: 
‘‘(1) CHANGE IN PAYMENT RULES.—Payment 
rates established under sections 2204 and 2205 shall
supersede the payment rates and amounts applicable 
under parts A, B, C, and D of title XVIII in the 
case of individuals enrolled in a medicare plan under 
this title. 
‘‘(2) ELIMINATION OF ADJUSTED COMMUNITY 
RATE RULES.—Section 1854(f)(1)(A) (relating to re-
quiring additional benefits) no longer applies in the 
case of individuals enrolled in a medicare plan under 
this title. 
‘‘(3) ELIMINATION
OF
PREMIUM
REGULA-
TIONS.—Section 1854(e) (relating to regulations of 
Medicare+Choice premiums) no longer applies in 
the case of individuals enrolled in a medicare plan 
under this title. 
‘‘(4) PART B PREMIUM.—No separate premium 
is payable under section 1839 in the case of individ-
uals enrolled in a medicare plan under this title. 
‘‘(5) MEDICAID
PREMIUM
ASSISTANCE.—Sec-
tions 1902(a)(10)(E) and 1905(p)(3)(A), insofar as 
they require the provision of medical assistance for 
Medicare 
cost-sharing 
described 
in 
section 
1905(p)(3)(A) for qualified low-income Medicare 
beneficiaries, no longer apply in the case of individ-
uals enrolled in a medicare plan under this title.
‘‘(6) ELIMINATION
OF
RESTRICTION
ON
EN-
ROLLMENT UNDER CERTAIN PLANS.—Subparagraph 
(B) of section 1851(a)(3) no longer applies in the 
case of individuals enrolled in a medicare plan under 
this title. 
The fact that a provision is not cited in this subsection 
does not indicate that the provision is not modified under 
this title in some manner consistent with section 2200(a). 
‘‘(b) RELATION TO STATE LAWS.—Any standard es-
tablished under this title or by the Secretary pursuant to 
this title shall supersede any State law or regulation with 
respect to Medicare plans which are offered by entities 
under this title to the extent such law or regulation is in-
consistent with such standards. 
‘‘PART B—MEDICARE TRUST FUND 
‘‘SEC. 2211. MEDICARE TRUST FUND. 
‘‘(a) ESTABLISHMENT.—Effective January 1, 2008, 
there is created on the books of the Treasury of the United 
States a trust fund to be known as the Medicare Trust 
Fund. 
‘‘(b) AMOUNTS IN MEDICARE TRUST FUND.—
‘‘(1) IN GENERAL.—The Medicare Trust Fund 
shall consist of the following amounts:
‘‘(A) Amounts deposited in, or appro-
priated to, the Medicare Trust Fund as pro-
vided in this title. 
‘‘(B) Any gifts and bequests made to the 
Medicare Trust Fund as provided in section 
201(i)(1).
‘‘(2) APPROPRIATION OF HOSPITAL INSURANCE 
TAXES.—
‘‘(A) IN GENERAL.—Beginning January 1, 
2008, and for each subsequent year, there is 
appropriated to the Medicare Trust Fund, out 
of moneys in the Treasury not otherwise appro-
priated, an amount equal to such percent of the 
taxes described in paragraphs (1) and (2) of 
section 1817(a) that the Secretary estimates re-
flects the relative weight that benefits under 
part A represents of the actuarial value of the 
total benefits under this title. 
‘‘(B) TRANSFER.—The amounts appro-
priated pursuant to subparagraph (A) shall be 
transferred from time to time from the general 
fund in the Treasury to the Medicare Trust 
Fund. The amount to be transferred under this 
paragraph shall be determined on the basis of 
estimates by the Secretary of the Treasury of
the taxes, described in such paragraph, paid to 
or deposited into the Treasury. The Secretary 
of the Treasury shall make adjustments in 
amounts subsequently transferred to the extent 
that prior estimates were in excess of, or were 
less than, such taxes. 
‘‘(3) GENERAL REVENUE CONTRIBUTION.—Be-
ginning January 1, 2008, and for each subsequent 
year, there is appropriated to the Medicare Trust 
Fund, out of moneys in the Treasury not otherwise 
appropriated, from time to time, an amount equal to 
the amount by which the aggregate expenditures 
under this title (including payments made to Medi-
care plans under section 2204) exceed the sum of—
‘‘(A) the amount appropriated under para-
graph (2) for the period involved; 
‘‘(B) the premiums collected under sections 
2204(b)(2) and 2205(c) for such period; and 
‘‘(C) the fees collected under section 2206 
for such period. 
‘‘(4) APPLICATION TO OBLIGATIONS OF, AND 
AMOUNTS
OWED
TO, THE
PART
A
AND
B
TRUST 
FUNDS.—
‘‘(A) CERTIFICATION.—Beginning January 
1, 2008, the Secretary shall periodically certify
to the Board of Trustees of the Medicare Trust 
Fund any amounts that would otherwise be—
‘‘(i) payable from the Federal Hos-
pital Insurance Trust Fund or the Federal 
Supplementary Medical Insurance Trust 
Fund for items and services provided prior 
to such date; or 
‘‘(ii) due to such trust funds for items 
and services provided prior to such date. 
‘‘(B) TRANSFERS AND DEPOSITS.—
‘‘(i) TRANSFERS.—If Secretary cer-
tifies an amount pursuant to subparagraph 
(A)(i), the Board of Trustees of the Medi-
care Trust Fund shall transfer to the Sec-
retary from such trust fund an amount 
equal to the amount certified. 
‘‘(ii) DEPOSITS.—If Secretary certifies 
an amount pursuant to subparagraph 
(A)(ii), the Secretary shall deposit in the 
Medicare Trust Fund an amount equal to 
the amount certified. 
‘‘(c) APPLICATION
OF HI TRUST FUND PROVI-
SIONS.—Subject to other provisions of this title, the provi-
sions of subsections (b) through (i) of section 1817 shall 
apply to title XVIII (as modified by this title) and the
Medicare Trust Fund in the same manner as they apply 
to part A of title XVIII and the Federal Hospital Insur-
ance Trust Fund, respectively. 
‘‘SEC. 2212. PROGRAMMATIC INSOLVENCY AND LIMITATION 
ON GENERAL REVENUE FINANCING. 
‘‘(a) ANNUAL DETERMINATIONS.—In addition to any 
other duties, the Board of Trustees of the Medicare Trust 
Fund (in this section referred to as the ‘Board of Trust-
ees’) shall determine and report to Congress as part of 
its annual report each year the following: 
‘‘(1) The percentage of total expenditures from 
the Medicare Trust Fund that is financed by the 
general revenue contributions described in section 
2211(b)(3). 
‘‘(2) The first fiscal year (if any) that the Medi-
care Trust Fund is projected to become program-
matically insolvent (as defined in subsection (b)). 
‘‘(3) The first fiscal year (if any) in which the 
amounts in the Medicare Trust Fund will be insuffi-
cient to pay for the total expenses incurred under 
title XVIII (as revised by this title). 
‘‘(4) Recommendations to preclude the program 
from becoming programmatically insolvent. 
‘‘(b) PROGRAMMATIC INSOLVENCY DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this part, 
the Medicare Trust Fund shall be deemed to be 
‘programmatically insolvent’ for a fiscal year if the 
amount appropriated to the Medicare Trust Fund 
under section 2211(b)(3) would exceed 40 percent of 
the amount described in paragraph (2). 
‘‘(2) NET
EXPENDITURES
ON
BASIC
BENE-
FITS.—The amount described in this paragraph is, 
as estimated by the Board of Trustees in consulta-
tion with the Secretary and the Secretary of the 
Treasury, the total expenditures from the Medicare 
Trust Fund in the fiscal year involved, reduced by 
an amount equal to the administrative expenses of 
the Secretary for that fiscal year.’’. 
SEC. 3. CONFORMING AMENDMENTS TO THE INTERNAL 
REVENUE CODE OF 1986. 
(a) REPORTING REQUIREMENTS FOR SECRETARY OF 
THE TREASURY.—
(1) IN
GENERAL.—Subsection (l) of section 
6103 of the Internal Revenue Code of 1986 (relating 
to confidentiality and disclosure of returns and re-
turn information) is amended by adding at the end 
the following new paragraph:
‘‘(19) DISCLOSURE OF RETURN INFORMATION 
TO
CARRY
OUT
INCOME-RELATED
REDUCTION
IN 
MEDICARE PART B PREMIUM.—
‘‘(A) IN
GENERAL.—The Secretary may, 
upon written request from the Secretary of 
Health and Human Services, disclose to officers 
and employees of the Centers for Medicare & 
Medicaid Services return information with re-
spect to a taxpayer who is required to pay a 
monthly premium under section 1839 of the So-
cial Security Act. Such return information shall 
be limited to—
‘‘(i) taxpayer identity information 
with respect to such taxpayer, 
‘‘(ii) the filing status of such tax-
payer, 
‘‘(iii) the adjusted gross income of 
such taxpayer, 
‘‘(iv) the amounts excluded from such 
taxpayer’s gross income under sections 135 
and 911, 
‘‘(v) the interest received or accrued 
during the taxable year which is exempt 
from the tax imposed by chapter 1 to the 
extent such information is available, and
‘‘(vi) the amounts excluded from such 
taxpayer’s gross income by sections 931 
and 933 to the extent such information is 
available. 
‘‘(B) RESTRICTION ON USE OF DISCLOSED 
INFORMATION.—Return information disclosed 
under subparagraph (A) may be used by offi-
cers and employees of the Centers for Medicare 
& Medicaid Services only for the purposes of, 
and to the extent necessary in, establishing the 
appropriate monthly premium under section 
1839 of the Social Security Act.’’
(2) CONFORMING
AMENDMENT.—Paragraphs 
(3)(A) and (4) of section 6103(p) of such Code are 
each amended by striking ‘‘or (14)’’ each place it ap-
pears and inserting ‘‘(14), or (19)’’. 
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by 
subsection (a) shall apply to the monthly premium 
under section 2204 of the Social Security Act for 
months beginning with January 2008. 
(2) INFORMATION
FOR
PRIOR
YEARS.—The 
Secretary of Health and Human Services may re-
quest information under section 6013(l)(15) of the
Social Security Act (as added by subsection (c)) for 
taxable years beginning after December 31, 2007.
Æ