under subsection (c)) if the prescribing physician de-
termines that the therapeutically similar drug that
is on the formulary is not effective for the enrollee
or has significant adverse effects for the enrollee.
‘‘(g) CONFIDENTIALITY
AND ACCURACY
OF EN-
ROLLEE RECORDS.—An eligible entity shall meet the re-
quirements of section 1852(h) with respect to enrollees
under this part in the same manner as such requirements
apply to a Medicare+Choice organization with respect to
enrollees under part C.
‘‘ANNUAL ENROLLMENT FEE
‘‘SEC. 1860E. (a) AMOUNT.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (c), enrollment under the program under this
part is conditioned upon payment of an annual en-
rollment fee of $25.
‘‘(2) ANNUAL PERCENTAGE INCREASE.—
‘‘(A) IN GENERAL.—In the case of any cal-
endar year beginning after 2003, the dollar
amount in paragraph (1) shall be increased by
an amount equal to—
‘‘(i) such dollar amount; multiplied by
‘‘(ii) the inflation adjustment.
‘‘(B) INFLATION ADJUSTMENT.—For pur-
poses of subparagraph (A)(ii), the inflation ad-
justment for any calendar year is the percent-
age (if any) by which—
‘‘(i) the average per capita aggregate
expenditures for covered outpatient drugs
in the United States for medicare bene-
ficiaries, as determined by the Commis-
sioner for the 12-month period ending in
July of the previous year; exceeds
‘‘(ii) such aggregate expenditures for
the 12-month period ending with July
2003.
‘‘(C) ROUNDING.—If any increase deter-
mined under clause (ii) is not a multiple of $1,
such increase shall be rounded to the nearest
multiple of $1.
‘‘(b) COLLECTION OF ANNUAL ENROLLMENT FEE.—
‘‘(1) IN GENERAL.—Unless the eligible bene-
ficiary makes an election under paragraph (2), the
annual enrollment fee described in subsection (a)
shall be collected and credited to the Federal Sup-
plementary Medical Insurance Trust Fund in the
same manner as the monthly premium determined
under section 1839 is collected and credited to such
Trust Fund under section 1840.
‘‘(2) DIRECT PAYMENT.—An eligible beneficiary
may elect to pay the annual enrollment fee directly
or in any other manner approved by the Commis-
sioner. The Commissioner shall establish procedures
for making such an election.
‘‘(c) WAIVER.—The Commissioner shall waive the en-
rollment fee described in subsection (a) in the case of an
eligible beneficiary whose income is below 200 percent of
the poverty line.
‘‘BENEFITS UNDER THE PROGRAM
‘‘SEC. 
1860F. 
(a) 
ACCESS
TO
NEGOTIATED
PRICES.—
‘‘(1) NEGOTIATED PRICES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each eligible entity with a contract
under this part shall provide each eligible bene-
ficiary enrolled with the entity with access to
negotiated prices (including applicable dis-
counts) for such prescription drugs as the eligi-
ble entity determines appropriate. If such a
beneficiary becomes eligible for the catastrophic
benefit under subsection (b), the negotiated
prices (including applicable discounts) shall con-
tinue to be available to the beneficiary for those
prescription drugs for which payment may not
be made under section 1860H(b). For purposes
of this subparagraph, the term ‘prescription
drugs’ is not limited to covered outpatient
drugs, but does not include any over-the-
counter drug that is not a covered outpatient
drug.
‘‘(B) LIMITATIONS.—
‘‘(i) FORMULARY RESTRICTIONS.—In-
sofar as an eligible entity with a contract
under this part uses a formulary, the nego-
tiated prices (including applicable dis-
counts) for prescription drugs shall only be
available for drugs included in such for-
mulary.
‘‘(ii) AVOIDANCE OF DUPLICATE COV-
ERAGE.—The negotiated prices (including
applicable discounts) for prescription drugs
shall not be available for any drug pre-
scribed for an eligible beneficiary if pay-
ment for the drug is available under part
A or B (but such negotiated prices shall be
available if payment under part A or B is
not available because the beneficiary has
not met the deductible or has exhausted
benefits under part A or B).
‘‘(2) DISCOUNT
CARD.—The Commissioner
shall develop a uniform standard card format to be
issued by each eligible entity that may be used by
an enrolled beneficiary to ensure the access of such
beneficiary to negotiated prices under paragraph (1).
‘‘(3) ENSURING DISCOUNTS IN ALL AREAS.—
The Commissioner shall develop procedures that en-
sure that each eligible beneficiary that resides in an
area where no eligible entity has been awarded a
contract under this part is provided with access to
negotiated prices for prescription drugs (including
applicable discounts).
‘‘(b) CATASTROPHIC BENEFIT.—
‘‘(1) IN GENERAL.—Subject to paragraph (4)
(relating to eligibility for the catastrophic benefit)
and any formulary used by the eligible entity with
which the eligible beneficiary is enrolled, the cata-
strophic benefit shall be administered as follows:
‘‘(A) BENEFICIARIES
WITH
ANNUAL
IN-
COMES BELOW 200 PERCENT OF THE POVERTY
LINE.—In the case of an eligible beneficiary
whose modified adjusted gross income (as de-
fined in paragraph (4)(E)) is below 200 percent
of the poverty line, the beneficiary shall not be
responsible for making a payment for a covered
outpatient drug provided to the beneficiary in
a year to the extent that the out-of-pocket ex-
penses of the beneficiary for such drug, when
added to the out-of-pocket expenses of the bene-
ficiary for covered outpatient drugs previously
provided in the year, exceed $1,200.
‘‘(B) BENEFICIARIES
WITH
ANNUAL
IN-
COMES BETWEEN 200 AND 400 PERCENT OF THE
POVERTY LINE.—In the case of an eligible ben-
eficiary whose modified adjusted gross income
(as so defined) exceeds 200 percent, but does
not exceed 400 percent, of the poverty line, the
beneficiary shall not be responsible for making
a payment for a covered outpatient drug pro-
vided to the beneficiary in a year to the extent
that the out-of-pocket expenses of the bene-
ficiary for such drug, when added to the out-of-
pocket expenses of the beneficiary for covered
outpatient drugs previously provided in the
year, exceed $2,500.
‘‘(C) BENEFICIARIES
WITH
ANNUAL
IN-
COMES ABOVE 400 PERCENT OF THE POVERTY
LINE.—In the case of an eligible beneficiary
whose modified adjusted gross income (as so
defined) exceeds 400 percent of the poverty
line, the beneficiary shall not be responsible for
making a payment for a covered outpatient
drug provided to the beneficiary in a year to the
extent that the out-of-pocket expenses of the
beneficiary for such drug, when added to the
out-of-pocket expenses of the beneficiary for
covered outpatient drugs previously provided in
the year, exceed $5,000.
‘‘(2) ANNUAL PERCENTAGE INCREASE.—
‘‘(A) IN GENERAL.—In the case of any cal-
endar year after 2003, the dollar amounts in
paragraph (1) shall be increased by an amount
equal to—
‘‘(i) such dollar amount; multiplied by
‘‘(ii) the inflation adjustment deter-
mined under section 1860E(a)(2)(B) for
such calendar year.
‘‘(B) ROUNDING.—If any increase deter-
mined under subparagraph (A) is not a multiple
of $1, such increase shall be rounded to the
nearest multiple of $1.
‘‘(3) ELIGIBLE ENTITY NOT AT RISK FOR CATA-
STROPHIC BENEFIT.—
‘‘(A) IN
GENERAL.—The Commissioner,
and not the eligible entity, shall be at risk for
the provision of the catastrophic benefit under
this subsection.
‘‘(B) PROVISIONS RELATING TO PAYMENTS
TO ELIGIBLE ENTITIES.—For provisions relat-
ing to payments to eligible entities for admin-
istering the catastrophic benefit under this sub-
section, see section 1860H.
‘‘(4) CATASTROPHIC BENEFIT NOT AVAILABLE
TO CERTAIN HIGH INCOME INDIVIDUALS.—
‘‘(A) IN GENERAL.—An eligible beneficiary
enrolled under this part whose modified ad-
justed gross income for a taxable year exceeds
600 percent of the poverty line shall not be eli-
gible for the catastrophic benefit under this
subsection.
‘‘(B) BENEFICIARY STILL ELIGIBLE FOR
DISCOUNT BENEFIT.—Nothing in subparagraph
(A) shall be construed as affecting the eligibility
of a beneficiary described in such subparagraph
for the benefits under subsection (a).
‘‘(C) PROCEDURES
FOR
DETERMINING
MODIFIED ADJUSTED GROSS INCOME.—
‘‘(i) IN GENERAL.—The Commissioner
shall establish procedures for determining
the modified adjusted gross income of eligi-
ble beneficiaries enrolled under this part.
‘‘(ii) CONSULTATION.—The Commis-
sioner shall consult with the Secretary of
the Treasury in making the determinations
described in clause (i).
‘‘(iii) 
DISCLOSURE
OF
INFORMA-
TION.—Notwithstanding section 6103(a) of
the Internal Revenue Code of 1986, the
Secretary of the Treasury may, upon writ-
ten request from the Commissioner, dis-
close to officers and employees of the
Medicare Prescription Drug Agency such
return information as is necessary to make
the determinations described in clause (i).
Return information disclosed under the
preceding sentence may be used by officers
and employees of the Medicare Prescrip-
tion Drug Agency only for the purposes of,
and to the extent necessary in, making
such determinations.
‘‘(D) DEFINITION OF MODIFIED ADJUSTED
GROSS INCOME.—In this paragraph, the term
‘modified adjusted gross income’ means ad-
justed gross income (as defined in section 62 of
the Internal Revenue Code of 1986)—
‘‘(i) determined without regard to sec-
tions 135, 911, 931, and 933 of such
Code; and
‘‘(ii) increased by the amount of inter-
est received or accrued by the taxpayer
during the taxable year which is exempt
from tax under such Code.
‘‘(5) ENSURING
CATASTROPHIC
BENEFIT
IN
ALL AREAS.—The Commissioner shall develop proce-
dures for the provision of the catastrophic benefit
under this subsection to each eligible beneficiary
that resides in an area where there are no eligible
entities that have been awarded a contract under
this part.
‘‘SELECTION OF ENTITIES TO PROVIDE PRESCRIPTION
DRUG COVERAGE
‘‘SEC. 1860G. (a) ESTABLISHMENT
OF BIDDING
PROCESS.—The Commissioner shall establish a process
under which the Commissioner accepts bids from eligible
entities and awards contracts to the entities to provide the
benefits under this part to eligible beneficiaries in an area.
‘‘(b) SUBMISSION OF BIDS.—Each eligible entity de-
siring to enter into a contract under this part shall submit
a bid to the Commissioner at such time, in such manner,
and accompanied by such information as the Commis-
sioner may reasonably require.
‘‘(c) AWARDING OF CONTRACTS.—
‘‘(1) IN
GENERAL.—The Commissioner shall,
consistent with the requirements of this part and the
goal of containing medicare program costs, award at
least 2 contracts in each area, unless only 1 bidding
entity meets the terms and conditions specified by
the Commissioner under paragraph (2).
‘‘(2) TERMS AND CONDITIONS.—The Commis-
sioner shall not award a contract to an eligible entity
under this section unless the Commissioner finds
that the eligible entity is in compliance with such
terms and conditions as the Commissioner shall
specify.
‘‘(3) COMPARATIVE
MERITS.—In determining
which of the eligible entities that submitted bids that
meet the terms and conditions specified by the Com-
missioner under paragraph (2) to award a contract,
the Commissioner shall consider the comparative
merits of each of the bids.
‘‘PAYMENTS TO ELIGIBLE ENTITIES FOR ADMINISTERING
THE CATASTROPHIC BENEFIT
‘‘SEC. 1860H. (a) IN GENERAL.—The Commissioner
shall establish procedures for making payments to an eligi-
ble entity under a contract entered into under this part
for—
‘‘(1) providing covered outpatient prescription
drugs to beneficiaries eligible for the catastrophic
benefit in accordance with subsection (b); and
‘‘(2) costs incurred by the entity in admin-
istering the catastrophic benefit in accordance with
subsection (c).
‘‘(b) PAYMENT
FOR COVERED OUTPATIENT PRE-
SCRIPTION DRUGS.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (c) and subject to paragraph (2), the Com-
missioner may only pay an eligible entity for covered
outpatient drugs furnished by the eligible entity to
an eligible beneficiary enrolled with such entity
under this part that is eligible for the catastrophic
benefit under section 1860F(b).
‘‘(2) LIMITATIONS.—
‘‘(A) FORMULARY RESTRICTIONS.—Insofar
as an eligible entity with a contract under this
part uses a formulary, the Commissioner may
not make any payment for a covered outpatient
drug that is not included in such formulary.
‘‘(B) NEGOTIATED PRICES.—The Commis-
sioner may not pay an amount for a covered
outpatient drug furnished to an eligible bene-
ficiary that exceeds the negotiated price (includ-
ing applicable discounts) that the beneficiary
would have been responsible for under section
1860F(a).
‘‘(c) PAYMENT FOR ADMINISTRATIVE COSTS.—
‘‘(1) PROCEDURES.—The procedures estab-
lished under subsection (a)(1) shall provide for pay-
ment to the eligible entity of an administrative fee
for each prescription filled by the entity for an eligi-
ble beneficiary—
‘‘(A) who is enrolled with the entity; and
‘‘(B) to whom subparagraph (A), (B), or
(C) of section 1860F(b)(1) applies with respect
to a covered outpatient drug.
‘‘(2) AMOUNT.—The fee described in paragraph
(1) shall be—
‘‘(A) negotiated by the Commissioner; and
‘‘(B) consistent with such fees paid under
private sector pharmaceutical benefit contracts.
‘‘(d) SECONDARY PAYER PROVISIONS.—The provi-
sions of section 1862(b) shall apply to the benefits pro-
vided under this part.
‘‘DETERMINATION OF INCOME LEVELS
‘‘SEC. 1860I. (a) PROCEDURES.—The Commissioner
shall establish procedures for determining the income lev-
els of eligible beneficiaries for purposes of sections
1860E(c) and 1860F(b).
‘‘(b) PERIODIC REDETERMINATIONS.—Such income
determinations shall be valid for a period (of not less than
1 year) specified by the Commissioner.
‘‘APPROPRIATIONS
‘‘SEC. 1860J. There are authorized to be appro-
priated from time to time, out of any moneys in the Treas-
ury not otherwise appropriated, to the Federal Supple-
mentary Medical Insurance Trust Fund established under
section 1841, an amount equal to the amount by which
the benefits and administrative costs of providing the ben-
efits under this part exceed the enrollment fees collected
under section 1860E.
‘‘SUBPART 2—ESTABLISHMENT OF THE MEDICARE
PRESCRIPTION DRUG AGENCY
‘‘MEDICARE PRESCRIPTION DRUG AGENCY
‘‘SEC. 1860S. (a) ESTABLISHMENT.—There is estab-
lished, as an independent agency in the executive branch
of the Government, a Medicare Prescription Drug Agency
(in this part referred to as the ‘Agency’).
‘‘(b) DUTY.—It shall be the duty of the Agency to
administer the Medicare Outpatient Prescription Drug
Discount and Security Program under subpart 1.
‘‘COMMISSIONER; DEPUTY COMMISSIONER; OTHER
OFFICERS
‘‘SEC. 1860T. (a) COMMISSIONER
OF MEDICARE
PRESCRIPTION DRUGS.—
‘‘(1) APPOINTMENT.—There shall be in the
Agency a Commissioner of Medicare Prescription
Drugs (in this subpart referred to as the ‘Commis-
sioner’) who shall be appointed by the President, by
and with the advice and consent of the Senate.
‘‘(2) COMPENSATION.—The Commissioner shall
be compensated at the rate provided for level I of
the Executive Schedule.
‘‘(3) TERM.—
‘‘(A) IN
GENERAL.—The Commissioner
shall be appointed for a term of 6 years.
‘‘(B) CONTINUANCE
IN
OFFICE.—In any
case in which a successor does not take office
at the end of a Commissioner’s term of office,
such Commissioner may continue in office until
the appointment of a successor.
‘‘(C) DELAYED APPOINTMENTS.—A Com-
missioner appointed to a term of office after the
commencement of such term may serve under
such appointment only for the remainder of
such term.
‘‘(D) REMOVAL.—An individual serving in
the office of Commissioner may be removed
from office only under a finding by the Presi-
dent of neglect of duty or malfeasance in office.
‘‘(4) RESPONSIBILITIES.—The Commissioner
shall be responsible for the exercise of all powers
and the discharge of all duties of the Agency, and
shall have authority and control over all personnel
and activities thereof.
‘‘(5) PROMULGATION OF RULES AND REGULA-
TIONS.—
‘‘(A) IN
GENERAL.—The Commissioner
may prescribe such rules and regulations as the
Commissioner determines necessary or appro-
priate to carry out the functions of the Agency.
‘‘(B) RULEMAKING.—The regulations pre-
scribed by the Commissioner shall be subject to
the rulemaking procedures established under
section 553 of title 5, United States Code.
‘‘(6) DELEGATION OF AUTHORITY.—
‘‘(A) IN
GENERAL.—The Commissioner
may assign duties, and delegate, or authorize
successive redelegations of, authority to act and
to render decisions, to such officers and employ-
ees of the Agency as the Commissioner may
find necessary.
‘‘(B) EFFECT
OF
DELEGATION.—Within
the limitations of such delegations, redelega-
tions, or assignments, all official acts and deci-
sions of such officers and employees shall have
the same force and effect as though performed
or rendered by the Commissioner.
‘‘(7) CONSULTATION
WITH
SECRETARY
OF
HEALTH
AND
HUMAN
SERVICES.—The Commis-
sioner and the Secretary shall consult, on an ongo-
ing basis, to ensure the coordination of the programs
administered by the Commissioner with the pro-
grams administered by the Secretary under this title
and under title XIX.
‘‘(b) DEPUTY COMMISSIONER OF MEDICARE PRE-
SCRIPTION DRUGS.—
‘‘(1) APPOINTMENT.—There shall be in the
Agency a Deputy Commissioner of Medicare Pre-
scription Drugs (in this subpart referred to as the
‘Deputy Commissioner’) who shall be appointed by
the President, by and with the advice and consent
of the Senate.
‘‘(2) TERM.—
‘‘(A) IN GENERAL.—The Deputy Commis-
sioner shall be appointed for a term of 6 years.
‘‘(B) CONTINUANCE
IN
OFFICE.—In any
case in which a successor does not take office
at the end of a Deputy Commissioner’s term of
office, such Deputy Commissioner may continue
in office until the entry upon office of such a
successor.
‘‘(C) DELAYED APPOINTMENT.—A Deputy
Commissioner appointed to a term of office
after the commencement of such term may
serve under such appointment only for the re-
mainder of such term.
‘‘(3) COMPENSATION.—The Deputy Commis-
sioner shall be compensated at the rate provided for
level II of the Executive Schedule.
‘‘(4) DUTIES.—
‘‘(A) IN GENERAL.—The Deputy Commis-
sioner shall perform such duties and exercise
such powers as the Commissioner shall from
time to time assign or delegate.
‘‘(B) ACTING COMMISSIONER.—The Dep-
uty Commissioner shall be Acting Commissioner
of the Agency during the absence or disability
of the Commissioner, unless the President des-
ignates another officer of the Government as
Acting Commissioner, in the event of a vacancy
in the office of the Commissioner.
‘‘(c) CHIEF ACTUARY.—
‘‘(1) APPOINTMENT.—
‘‘(A) IN GENERAL.—There shall be in the
Agency a Chief Actuary, who shall be appointed
by, and in direct line of authority to, the Com-
missioner.
‘‘(B) QUALIFICATIONS.—The Chief Actu-
ary shall be appointed from individuals who
have demonstrated, by their education and ex-
perience, superior expertise in the actuarial
sciences.
‘‘(C) DUTIES.—The Chief Actuary shall
serve as the chief actuarial officer of the Agen-
cy, and shall exercise such duties as are appro-
priate for the office of the Chief Actuary and
in accordance with professional standards of ac-
tuarial independence.
‘‘(2) COMPENSATION.—The Chief Actuary shall
be compensated at the highest rate of basic pay for
the Senior Executive Service under section 5382(b)
of title 5, United States Code.
‘‘ADMINISTRATIVE DUTIES OF THE COMMISSIONER
‘‘SEC. 1860U. (a) PERSONNEL.—
‘‘(1) IN
GENERAL.—The Commissioner may
employ, without regard to chapter 31 of title 5,
United States Code, such officers and employees as
are necessary to administer the activities to be car-
ried out through the Medicare Prescription Drug
Agency.
‘‘(2) FLEXIBILITY
WITH
RESPECT
TO
CIVIL
SERVICE LAWS.—
‘‘(A) IN GENERAL.—The staff of the Medi-
care Prescription Drug Agency shall be ap-
pointed without regard to the provisions of title
5, United States Code, governing appointments
in the competitive service, and, subject to sub-
paragraph (B), shall be paid without regard to
the provisions of chapters 51 and 53 of such
title (relating to classification and schedule pay
rates).
‘‘(B) MAXIMUM
RATE.—In no case may
the rate of compensation determined under sub-
paragraph (A) exceed the rate of basic pay pay-
able for level IV of the Executive Schedule
under section 5315 of title 5, United States
Code.
‘‘(b) BUDGETARY MATTERS.—
‘‘(1) SUBMISSION OF ANNUAL BUDGET.—The
Commissioner shall prepare an annual budget for
the Agency, which shall be submitted by the Presi-
dent to Congress without revision, together with the
President’s annual budget for the Agency.
‘‘(2) APPROPRIATIONS REQUESTS.—
‘‘(A) STAFFING AND PERSONNEL.—Appro-
priations requests for staffing and personnel of
the Agency shall be based upon a comprehen-
sive workforce plan, which shall be established
and revised from time to time by the Commis-
sioner.
‘‘(B) ADMINISTRATIVE
EXPENSES.—Ap-
propriations for administrative expenses of the
Agency are authorized to be provided on a bien-
nial basis.
‘‘(c) SEAL OF OFFICE.—
‘‘(1) IN
GENERAL.—The Commissioner shall
cause a Seal of Office to be made for the Agency of
such design as the Commissioner shall approve.
‘‘(2) JUDICIAL NOTICE.—Judicial notice shall
be taken of the seal made under paragraph (1).
‘‘(d) DATA EXCHANGES.—
‘‘(1) DISCLOSURE OF RECORDS AND OTHER IN-
FORMATION.—Notwithstanding any other provision
of law (including subsections (b), (o), (p), (q), (r),
and (u) of section 552a of title 5, United States
Code)—
‘‘(A) the Secretary shall disclose to the
Commissioner any record or information re-
quested in writing by the Commissioner for the
purpose of administering any program adminis-
tered by the Commissioner, if records or infor-
mation of such type were disclosed to the Ad-
ministrator of the Health Care Financing Ad-
ministration in the Department of Health and
Human Services under applicable rules, regula-
tions, and procedures in effect before the date
of enactment of the Medicare Rx Drug Dis-
count and Security Act of 2001; and
‘‘(B) the Commissioner shall disclose to
the Secretary or to any State any record or in-
formation requested in writing by the Secretary
to be so disclosed for the purpose of admin-
istering any program administered by the Sec-
retary, if records or information of such type
were so disclosed under applicable rules, regula-
tions, and procedures in effect before the date
of enactment of the Medicare Rx Drug Dis-
count and Security Act of 2001.
‘‘(2) EXCHANGE OF OTHER DATA.—The Com-
missioner and the Secretary shall periodically review
the need for exchanges of information not referred
to in paragraph (1) and shall enter into such agree-
ments as may be necessary and appropriate to pro-
vide information to each other or to States in order
to meet the programmatic needs of the requesting
agencies.
‘‘(3) ROUTINE USE.—
‘‘(A) IN GENERAL.—Any disclosure from a
system of records (as defined in section
552a(a)(5) of title 5, United States Code) pur-
suant to this subsection shall be made as a rou-
tine use under subsection (b)(3) of section 552a
of such title (unless otherwise authorized under
such section 552a).
‘‘(B) COMPUTERIZED
COMPARISON.—Any
computerized comparison of records, including
matching programs, between the Commissioner
and the Secretary shall be conducted in accord-
ance with subsections (o), (p), (q), (r), and (u)
of section 552a of title 5, United States Code.
‘‘(4) TIMELY ACTION.—The Commissioner and
the Secretary shall each ensure that timely action is
taken to establish any necessary routine uses for dis-
closures required under paragraph (1) or agreed to
under paragraph (2).
‘‘MEDICARE COMPETITION AND PRESCRIPTION DRUG
ADVISORY BOARD
‘‘SEC. 1860V. (a) ESTABLISHMENT OF BOARD.—
There is established a Medicare Prescription Drug Advi-
sory Board (in this section referred to as the ‘Board’).
‘‘(b) ADVICE ON POLICIES; REPORTS.—
‘‘(1) ADVICE ON POLICIES.—On and after the
date the Commissioner takes office, the Board shall
advise the Commissioner on policies relating to the
Medicare Outpatient Prescription Drug Discount
and Security Program under subpart 1.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—With respect to mat-
ters of the administration of subpart 1, the
Board shall submit to Congress and to the
Commissioner of Medicare Prescription Drugs
such reports as the Board determines appro-
priate. Each such report may contain such rec-
ommendations as the Board determines appro-
priate for legislative or administrative changes
to improve the administration of such subpart.
Each such report shall be published in the Fed-
eral Register.
‘‘(B) MAINTAINING
INDEPENDENCE
OF
BOARD.—The Board shall directly submit to
Congress reports required under subparagraph
(A). No officer or agency of the United States
may require the Board to submit to any officer
or agency of the United States for approval,
comments, or review, prior to the submission to
Congress of such reports.
‘‘(c) STRUCTURE
AND
MEMBERSHIP
OF
THE
BOARD.—
‘‘(1) MEMBERSHIP.—The Board shall be com-
posed of 7 members who shall be appointed as fol-
lows:
‘‘(A) PRESIDENTIAL APPOINTMENTS.—
‘‘(i) IN
GENERAL.—Three members
shall be appointed by the President, by and
with the advice and consent of the Senate.
‘‘(ii) LIMITATION.—Not more than 2
such members may be from the same polit-
ical party.
‘‘(B) SENATORIAL
APPOINTMENTS.—Two
members (each member from a different polit-
ical party) shall be appointed by the President
pro tempore of the Senate with the advice of
the Chairman and the Ranking Minority Mem-
ber of the Committee on Finance of the Senate.
‘‘(C) CONGRESSIONAL
APPOINTMENTS.—
Two members (each member from a different
political party) shall be appointed by the Speak-
er of the House of Representatives, with the ad-
vice of the Chairman and the Ranking Minority
Member of the Committee on Ways and Means
of the House of Representatives.
‘‘(2) QUALIFICATIONS.—The members shall be
chosen on the basis of their integrity, impartiality,
and good judgment, and shall be individuals who
are, by reason of their education, experience, and at-
tainments, exceptionally qualified to perform the du-
ties of members of the Board.
‘‘(d) TERMS OF APPOINTMENT.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
each member of the Board shall serve for a term of
6 years.
‘‘(2) CONTINUANCE IN OFFICE AND STAGGERED
TERMS.—
‘‘(A) CONTINUANCE IN OFFICE.—A mem-
ber appointed to a term of office after the com-
mencement of such term may serve under such
appointment only for the remainder of such
term.
‘‘(B) STAGGERED TERMS.—The terms of
service of the members initially appointed under
this section shall begin on January 1, 2002,
and expire as follows:
‘‘(i) PRESIDENTIAL APPOINTMENTS.—
The terms of service of the members ini-
tially appointed by the President shall ex-
pire as designated by the President at the
time of nomination, 1 each at the end of—
‘‘(I) 2 years;
‘‘(II) 4 years; and
‘‘(III) 6 years.
‘‘(ii) SENATORIAL
APPOINTMENTS.—
The terms of service of members initially
appointed by the President pro tempore of
the Senate shall expire as designated by
the President pro tempore of the Senate at
the time of nomination, 1 each at the end
of—
‘‘(I) 3 years; and
‘‘(II) 6 years.
‘‘(iii) 
CONGRESSIONAL
APPOINT-
MENTS.—The terms of service of members
initially appointed by the Speaker of the
House of Representatives shall expire as
designated by the Speaker of the House of
Representatives at the time of nomination,
1 each at the end of—
‘‘(I) 4 years; and
‘‘(II) 5 years.
‘‘(C) REAPPOINTMENTS.—Any person ap-
pointed as a member of the Board may not
serve for more than 8 years.
‘‘(D) VACANCIES.—Any member appointed
to fill a vacancy occurring before the expiration
of the term for which the member’s predecessor
was appointed shall be appointed only for the
remainder of that term. A member may serve
after the expiration of that member’s term until
a successor has taken office. A vacancy in the
Board shall be filled in the manner in which the
original appointment was made.
‘‘(e) CHAIRPERSON.—A member of the Board shall
be designated by the President to serve as Chairperson
for a term of 4 years, coincident with the term of the
President, or until the designation of a successor.
‘‘(f) EXPENSES AND PER DIEM.—Members of the
Board shall serve without compensation, except that, while
serving on business of the Board away from their homes
or regular places of business, members may be allowed
travel expenses, including per diem in lieu of subsistence,
as authorized by section 5703 of title 5, United States
Code, for persons in the Government employed intermit-
tently.
‘‘(g) MEETING.—
‘‘(1) IN GENERAL.—The Board shall meet at
the call of the Chairperson (in consultation with the
other members of the Board) not less than 4 times
each year to consider a specific agenda of issues, as
determined by the Chairperson in consultation with
the other members of the Board.
‘‘(2) QUORUM.—Four members of the Board
(not more than 3 of whom may be of the same polit-
ical party) shall constitute a quorum for purposes of
conducting business.
‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—The
Board shall be exempt from the provisions of the Federal
Advisory Committee Act (5 U.S.C. App.).
‘‘(i) PERSONNEL.—
‘‘(1) STAFF DIRECTOR.—The Board shall, with-
out regard to the provisions of title 5, United States
Code, relating to the competitive service, appoint a
Staff Director who shall be paid at a rate equivalent
to a rate established for the Senior Executive Serv-
ice under section 5382 of title 5, United States
Code.
‘‘(2) STAFF.—
‘‘(A) IN GENERAL.—The Board may em-
ploy, without regard to chapter 31 of title 5,
United States Code, such officers and employ-
ees as are necessary to administer the activities
to be carried out by the Board.
‘‘(B) FLEXIBILITY
WITH
RESPECT
TO
CIVIL SERVICE LAWS.—
‘‘(i) IN GENERAL.—The staff of the
Board shall be appointed without regard to
the provisions of title 5, United States
Code, governing appointments in the com-
petitive service, and, subject to clause (ii),
shall be paid without regard to the provi-
sions of chapters 51 and 53 of such title
(relating to classification and schedule pay
rates).
‘‘(ii) MAXIMUM
RATE.—In no case
may the rate of compensation determined
under clause (i) exceed the rate of basic
pay payable for level IV of the Executive
Schedule under section 5315 of title 5,
United States Code.
‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated, out of the Federal Sup-
plemental Medical Insurance Trust Fund established
under section 1841, and the general fund of the Treasury,
such sums as are necessary to carry out the purposes of
this section.’’.
(b) CONFORMING REFERENCES TO PREVIOUS PART
D.—
(1) IN GENERAL.—Any reference in law (in ef-
fect before the date of enactment of this Act) to part
D of title XVIII of the Social Security Act is deemed
a reference to part E of such title (as in effect after
such date).
(2) SECRETARIAL SUBMISSION OF LEGISLATIVE
PROPOSAL.—Not later than 6 months after the date
of enactment of this section, the Secretary of Health
and Human Services shall submit to the appropriate
committees of Congress a legislative proposal pro-
viding for such technical and conforming amend-
ments in the law as are required by the provisions
of this section.
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall take effect on the date of enact-
ment of this Act.
(2) TIMING OF INITIAL APPOINTMENTS.—The
Commissioner and Deputy Commissioner of Medi-
care Prescription Drugs may not be appointed be-
fore March 1, 2002.
SEC. 3. COMMISSIONER AS MEMBER OF THE BOARD OF
TRUSTEES OF THE MEDICARE TRUST FUNDS.
(a) IN GENERAL.—Section 1841(b) of the Social Se-
curity Act (42 U.S.C. 1395t(b)) is amended by striking
‘‘and the Secretary of Health and Human Services, all ex
officio,’’ and inserting ‘‘, the Secretary of Health and
Human Services, and the Commissioner of Medicare Pre-
scription Drugs, all ex officio,’’.
(b) EFFECTIVE DATE.—The amendment made by
this subsection shall take effect on March 1, 2002.
SEC. 4. EXCLUSION OF PART D COSTS FROM DETERMINA-
TION OF PART B MONTHLY PREMIUM.
Section 1839(g) of the Social Security Act (42 U.S.C.
1395r(g)) is amended—
(1) by striking ‘‘attributable to the application
of section’’ and inserting ‘‘attributable to—
‘‘(1) the application of section’’;
(2) by striking the period and inserting ‘‘;
and’’; and
(3) by adding at the end the following new
paragraph:
‘‘(2) the Voluntary Medicare Outpatient Pre-
scription Drug Discount and Security Program
under part D.’’.
SEC. 5. MEDIGAP REVISIONS.
Section 1882 of the Social Security Act (42 U.S.C.
1395ss) is amended by adding at the end the following
new subsection:
‘‘(v) MODERNIZATION OF MEDICARE SUPPLEMENTAL
POLICIES.—
‘‘(1) PROMULGATION
OF
MODEL
REGULA-
TION.—
‘‘(A) 
NAIC 
MODEL
REGULATION.—If,
within 9 months after the date of enactment of
the Medicare Rx Drug Discount and Security
Act of 2001, the National Association of Insur-
ance Commissioners (in this subsection referred
to as the ‘NAIC’) changes the 1991 NAIC
Model Regulation (described in subsection (p))
to revise the benefit package classified as ‘J’
under the standards established by subsection
(p)(2) (including the benefit package classified
as ‘J’ with a high deductible feature, as de-
scribed in subsection (p)(11)) so that—
‘‘(i) the coverage for outpatient pre-
scription drugs available under such ben-
efit package is replaced with coverage for
outpatient prescription drugs that com-
plements but does not duplicate the bene-
fits for outpatient prescription drugs that
beneficiaries are otherwise entitled to
under this title;
‘‘(ii) a uniform format is used in the
policy with respect to such revised benefits;
and
‘‘(iii) such revised standards meet any
additional requirements imposed by the
Medicare Rx Drug Discount and Security
Act of 2001;
subsection (g)(2)(A) shall be applied in each
State, effective for policies issued to policy hold-
ers on and after January 1, 2003, as if the ref-
erence to the Model Regulation adopted on
June 6, 1979, were a reference to the 1991
NAIC Model Regulation as changed under this
subparagraph (such changed regulation referred
to in this section as the ‘2003 NAIC Model
Regulation’).
‘‘(B) REGULATION BY THE SECRETARY.—
If the NAIC does not make the changes in the
1991 NAIC Model Regulation within the 9-
month period specified in subparagraph (A), the
Secretary shall promulgate, not later than 9
months after the end of such period, a regula-
tion and subsection (g)(2)(A) shall be applied in
each State, effective for policies issued to policy
holders on and after January 1, 2003, as if the
reference to the Model Regulation adopted on
June 6, 1979, were a reference to the 1991
NAIC Model Regulation as changed by the Sec-
retary under this subparagraph (such changed
regulation referred to in this section as the
‘2003 Federal Regulation’).
‘‘(C) 
CONSULTATION
WITH
WORKING
GROUP.—In promulgating standards under this
paragraph, the NAIC or Secretary shall consult
with a working group similar to the working
group described in subsection (p)(1)(D).
‘‘(D) MODIFICATION
OF
STANDARDS
IF
MEDICARE
BENEFITS
CHANGE.—If benefits
under part D of this title are changed and the
Secretary determines, in consultation with the
NAIC, that changes in the 2003 NAIC Model
Regulation or 2003 Federal Regulation are
needed to reflect such changes, the preceding
provisions of this paragraph shall apply to the
modification of standards previously established
in the same manner as they applied to the
original establishment of such standards.
‘‘(2) CONSTRUCTION OF BENEFITS IN OTHER
MEDICARE
SUPPLEMENTAL
POLICIES.—Nothing in
the benefit packages classified as ‘A’ through ‘I’
under the standards established by subsection (p)(2)
(including the benefit package classified as ‘F’ with
a high deductible feature, as described in subsection
(p)(11)) shall be construed as providing coverage for
benefits for which payment may be made under part
D.
‘‘(3) APPLICATION OF PROVISIONS AND CON-
FORMING REFERENCES.—
‘‘(A) APPLICATION OF PROVISIONS.—The
provisions of paragraphs (4) through (10) of
subsection (p) shall apply under this section,
except that—
‘‘(i) any reference to the model regu-
lation applicable under that subsection
shall be deemed to be a reference to the
applicable 2003 NAIC Model Regulation or
2003 Federal Regulation; and
‘‘(ii) any reference to a date under
such paragraphs of subsection (p) shall be
deemed to be a reference to the appro-
priate date under this subsection.
‘‘(B) OTHER REFERENCES.—Any reference
to a provision of subsection (p) or a date appli-
cable under such subsection shall also be con-
sidered to be a reference to the appropriate pro-
vision or date under this subsection.’’.
Æ