In the Senate of the United States,
July 7, 2003.
Resolved, That the bill from the House of Representa-
tives (H.R. 1) entitled ‘‘An Act to amend title XVIII of the
Social Security Act to provide for a voluntary program for
prescription drug coverage under the Medicare Program, to
modernize the Medicare Program, to amend the Internal Rev-
enue Code of 1986 to allow a deduction to individuals for
amounts contributed to health savings security accounts and
health savings accounts, to provide for the disposition of un-
used health benefits in cafeteria plans and flexible spending
arrangements, and for other purposes.’’, do pass with the fol-
lowing
AMENDMENTS:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU-
RITY ACT; REFERENCES TO BIPA AND SEC-
RETARY; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the ‘‘Pre-
scription Drug and Medicare Improvement Act of 2003’’.
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(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except
as otherwise specifically provided, whenever in this Act an
amendment is expressed in terms of an amendment to or
repeal of a section or other provision, the reference shall
be considered to be made to that section or other provision
of the Social Security Act.
(c) BIPA; SECRETARY.—In this Act:
(1) BIPA.—The term ‘‘BIPA’’ means the Medi-
care, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000, as enacted into law by
section 1(a)(6) of Public Law 106–554.
(2) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(d) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; amendments to Social Security Act; references to BIPA and
Secretary; table of contents.
TITLE I—MEDICARE PRESCRIPTION DRUG BENEFIT
Subtitle A—Medicare Voluntary Prescription Drug Delivery Program
Sec. 101. Medicare voluntary prescription drug delivery program.
‘‘PART D—VOLUNTARY PRESCRIPTION DRUG DELIVERY PROGRAM
‘‘Sec. 1860D. Definitions; 
treatment 
of 
references 
to 
provisions 
in
MedicareAdvantage program.
‘‘Subpart 1—Establishment of Voluntary Prescription Drug Delivery Program
‘‘Sec. 1860D–1. Establishment of voluntary prescription drug delivery pro-
gram.
‘‘Sec. 1860D–2. Enrollment under program.
‘‘Sec. 1860D–3. Election of a Medicare Prescription Drug plan.
‘‘Sec. 1860D–4. Providing information to beneficiaries.
‘‘Sec. 1860D–5. Beneficiary protections.
‘‘Sec. 1860D–6. Prescription drug benefits.
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‘‘Sec. 1860D–7. Requirements for entities offering Medicare Prescription
Drug plans; establishment of standards.
‘‘Subpart 2—Prescription Drug Delivery System
‘‘Sec. 1860D–10. Establishment of service areas.
‘‘Sec. 1860D–11. Publication of risk adjusters.
‘‘Sec. 1860D–12. Submission of bids for proposed Medicare Prescription
Drug plans.
‘‘Sec. 1860D–13. Approval of proposed Medicare Prescription Drug plans.
‘‘Sec. 1860D–14. Computation of monthly standard prescription drug cov-
erage premiums.
‘‘Sec. 1860D–15. Computation of monthly national average premium.
‘‘Sec. 1860D–16. Payments to eligible entities.
‘‘Sec. 1860D–17. Computation of monthly beneficiary obligation.
‘‘Sec. 1860D–18. Collection of monthly beneficiary obligation.
‘‘Sec. 1860D–19. Premium and cost-sharing subsidies for low-income indi-
viduals.
‘‘Sec. 1860D–20. Reinsurance payments for expenses incurred in providing
prescription drug coverage above the annual out-of-pocket
threshold.
‘‘Sec. 1860D–21. Direct subsidy for sponsor of a qualified retiree prescrip-
tion drug plan for plan enrollees eligible for, but not en-
rolled in, this part.
‘‘Sec. 1860D–22. Direct subsidies for qualified State offering a State phar-
maceutical assistance program for program enrollees eligi-
ble for, but not enrolled in, this part.
‘‘Subpart 3—Miscellaneous Provisions
‘‘Sec. 1860D–25. Prescription Drug Account in the Federal Supplementary
Medical Insurance Trust Fund.
‘‘Sec. 1860D–26. Other related provisions.
Sec. 102. Study and report on permitting part B only individuals to enroll in
medicare voluntary prescription drug delivery program.
Sec. 103. Rules relating to medigap policies that provide prescription drug cov-
erage.
Sec. 104. Medicaid and other amendments related to low-income beneficiaries.
Sec. 105. Expansion of membership and duties of Medicare Payment Advisory
Commission (MedPAC).
Sec. 106. Study regarding variations in spending and drug utilization.
Sec. 107. Limitation on prescription drug benefits of Members of Congress.
Sec. 108. Protecting seniors with cancer.
Sec. 109. Protecting seniors with cardiovascular disease, cancer, or Alzheimer’s
disease.
Sec. 110. Review and report on current standards of practice for pharmacy serv-
ices provided to patients in nursing facilities.
Sec. 110A. Medication therapy management assessment program.
Subtitle B—Medicare Prescription Drug Discount Card and Transitional
Assistance for Low-Income Beneficiaries
Sec. 111. Medicare prescription drug discount card and transitional assistance
for low-income beneficiaries.
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Subtitle C—Standards for Electronic Prescribing
Sec. 121. Standards for electronic prescribing.
Subtitle D—Other Provisions
Sec. 131. Additional requirements for annual financial report and oversight on
medicare program.
Sec. 132. Trustees’ report on medicare’s unfunded obligations.
Sec. 133. Pharmacy benefit managers transparency requirements.
Sec. 134. Office of the Medicare Beneficiary Advocate.
TITLE II—MEDICAREADVANTAGE
Subtitle A—MedicareAdvantage Competition
Sec. 201. Eligibility, election, and enrollment.
Sec. 202. Benefits and beneficiary protections.
Sec. 203. Payments to MedicareAdvantage organizations.
Sec. 204. Submission of bids; premiums.
Sec. 205. Special rules for prescription drug benefits.
Sec. 206. Facilitating employer participation.
Sec. 207. Administration by the Center for Medicare Choices.
Sec. 208. Conforming amendments.
Sec. 209. Effective date.
Sec. 210. Improvements in MedicareAdvantage benchmark determinations.
Subtitle B—Preferred Provider Organizations
Sec. 211. Establishment of MedicareAdvantage preferred provider program op-
tion.
Subtitle C—Other Managed Care Reforms
Sec. 221. Extension of reasonable cost contracts.
Sec. 222. Specialized Medicare+Choice plans for special needs beneficiaries.
Sec. 223. Payment by PACE providers for medicare and medicaid services fur-
nished by noncontract providers.
Sec. 224. Institute of Medicine evaluation and report on health care performance
measures.
Sec. 225. Expanding the work of medicare quality improvement organizations to
include parts C and D.
Sec. 226. Extension of demonstration for ESRD managed care.
SUBTITLE D—EVALUATION OF ALTERNATIVE PAYMENT AND DELIVERY
SYSTEMS
Sec. 231. Establishment of alternative payment system for preferred provider or-
ganizations in highly competitive regions.
Sec. 232. Fee-for-service modernization projects.
SUBTITLE E—NATIONAL BIPARTISAN COMMISSION ON MEDICARE REFORM
Sec. 241. MedicareAdvantage goal; establishment of Commission.
Sec. 242. National bipartisan commission on medicare reform.
Sec. 243. Congressional consideration of reform proposals.
Sec. 244. Authorization of appropriations.
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TITLE III—CENTER FOR MEDICARE CHOICES
Sec. 301. Establishment of the Center for Medicare Choices.
Sec. 302. Miscellaneous administrative provisions.
TITLE IV—MEDICARE FEE-FOR-SERVICE IMPROVEMENTS
Subtitle A—Provisions Relating to Part A
Sec. 401. Equalizing urban and rural standardized payment amounts under the
medicare inpatient hospital prospective payment system.
Sec. 402. Adjustment to the medicare inpatient hospital PPS wage index to revise
the labor-related share of such index.
Sec. 403. Medicare inpatient hospital payment adjustment for low-volume hos-
pitals.
Sec. 404. Fairness in the medicare disproportionate share hospital (DSH) adjust-
ment for rural hospitals.
Sec. 404A. Medpac study and report regarding medicare Disproportionate Share
Hospital (DSH) adjustment payments.
Sec. 405. Critical access hospital (CAH) improvements.
Sec. 406. Authorizing use of arrangements to provide core hospice services in cer-
tain circumstances.
Sec. 407. Services provided to hospice patients by nurse practitioners, clinical
nurse specialists, and physician assistants.
Sec. 408. Authority to include costs of training of psychologists in payments to
hospitals under medicare.
Sec. 409. Revision of Federal rate for hospitals in Puerto Rico.
Sec. 410. Exception to initial residency period for geriatric residency or fellow-
ship programs.
Sec. 411. Clarification of congressional intent regarding the counting of residents
in a nonprovider setting and a technical amendment regarding
the 3-year rolling average and the IME ratio.
Sec. 412. Limitation on charges for inpatient hospital contract health services
provided to Indians by medicare participating hospitals.
Sec. 413. GAO study and report on appropriateness of payments under the pro-
spective payment system for inpatient hospital services.
Sec. 414. Rural community hospital demonstration program.
Sec. 415. Critical access hospital improvement demonstration program.
Sec. 416. Treatment of grandfathered long-term care hospitals.
Sec. 417. Treatment of certain entities for purposes of payments under the medi-
care program.
Sec. 418. Revision of the indirect medical education (IME) adjustment percent-
age.
Sec. 419. Calculation of wage indices for hospitals.
Sec. 420. Conforming changes regarding federally qualified health centers.
Sec. 420A. Increase for hospitals with disproportionate indigent care revenues.
Sec. 420B. Treatment of grandfathered long-term care hospitals.
Subtitle B—Provisions Relating to Part B
Sec. 421. Establishment of floor on geographic adjustments of payments for physi-
cians’ services.
Sec. 422. Medicare incentive payment program improvements.
Sec. 423. Extension of hold harmless provisions for small rural hospitals and
treatment of certain sole community hospitals to limit decline in
payment under the OPD PPS.
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Sec. 424. Increase in payments for certain services furnished by small rural and
sole community hospitals under medicare prospective payment
system for hospital outpatient department services.
Sec. 425. Temporary increase for ground ambulance services.
Sec. 426. Ensuring appropriate coverage of air ambulance services under ambu-
lance fee schedule.
Sec. 427. Treatment of certain clinical diagnostic laboratory tests furnished by a
sole community hospital.
Sec. 428. Improvement in rural health clinic reimbursement.
Sec. 429. Elimination of consolidated billing for certain services under the medi-
care PPS for skilled nursing facility services.
Sec. 430. Freeze in payments for certain items of durable medical equipment and
certain orthotics; establishment of quality standards and accredi-
tation requirements for DME providers.
Sec. 431. Application of coinsurance and deductible for clinical diagnostic labora-
tory tests.
Sec. 432. Basing medicare payments for covered outpatient drugs on market
prices.
Sec. 433. Indexing part B deductible to inflation.
Sec. 434. Revisions to reassignment provisions.
Sec. 435. Extension of treatment of certain physician pathology services under
medicare.
Sec. 436. Adequate reimbursement for outpatient pharmacy therapy under the
hospital outpatient PPS.
Sec. 437. Limitation of application of functional equivalence standard.
Sec. 438. Medicare coverage of routine costs associated with certain clinical trials.
Sec. 439. Waiver of part B late enrollment penalty for certain military retirees;
special enrollment period.
Sec. 440. Demonstration of coverage of chiropractic services under medicare.
Sec. 441. Medicare health care quality demonstration programs.
Sec. 442. Medicare complex clinical care management payment demonstration.
Sec. 443. Medicare fee-for-service care coordination demonstration program.
Sec. 444. GAO study of geographic differences in payments for physicians’ serv-
ices.
Sec. 445. Improved payment for certain mammography services.
Sec. 446. Improvement of outpatient vision services under Part B.
Sec. 447. GAO study and report on the propagation of concierge care.
Sec. 448. Coverage of marriage and family therapist services and mental health
counselor services under Part B of the medicare program.
Sec. 449. Medicare demonstration project for direct access to physical therapy
services.
Sec. 450.
Demonstration project to clarify the definition of homebound.
Sec. 450A. Demonstration project for exclusion of brachytherapy devices from
prospective payment system for outpatient hospital services.
Sec. 450B. Reimbursement for total body orthotic management for certain nurs-
ing home patients.
Sec. 450C. Authorization of reimbursement for all medicare part B services fur-
nished by certain Indian hospitals and clinics.
Sec. 450D. Coverage of cardiovascular screening tests.
Sec. 450E. Medicare coverage of self-injected biologicals.
Sec. 450F. Extension of medicare secondary payer rules for individuals with end-
stage renal disease.
Sec. 450G. Requiring the Internal Revenue Service to deposit installment agree-
ment and other fees in the Treasury as miscellaneous receipts.
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Sec. 450H. Increasing types of originating telehealth sites and facilitating the
provision of telehealth services across State lines.
Sec. 450I. Demonstration project for coverage of surgical first assisting services
of certified registered nurse first assistants.
Sec. 450J. Equitable treatment for children’s hospitals.
Sec. 450K. Treatment of physicians’ services furnished in Alaska.
Sec. 450L. Demonstration project to examine what weight loss weight manage-
ment services can cost effectively reach the same result as the
NIH Diabetes Primary Prevention Trial study: A 50 percent re-
duction in the risk for type 2 diabetes for individuals who have
impaired glucose tolerance and are obese.
Subtitle C—Provisions Relating to Parts A and B
Sec. 451. Increase for home health services furnished in a rural area.
Sec. 452. Limitation on reduction in area wage adjustment factors under the pro-
spective payment system for home health services.
Sec. 453. Clarifications to certain exceptions to medicare limits on physician re-
ferrals.
Sec. 454. Demonstration program for substitute adult day services.
Sec. 455. MEDPAC study on medicare payments and efficiencies in the health
care system.
Sec. 456. Medicare coverage of kidney disease education services.
Sec. 457. Frontier extended stay clinic demonstration project.
Sec. 458. Improvements in national coverage determination process to respond to
changes in technology.
Sec. 459. Increase in medicare payment for certain home health services.
Sec. 460. Frontier extended stay clinic demonstration project.
Sec. 461. Medicare secondary payor (MSP) provisions.
Sec. 462. Medicare pancreatic islet cell transplant demonstration project.
Sec. 463. Increase in medicare payment for certain home health services.
Sec. 464. Sense of the Senate concerning medicare payment update for physicians
and other health professionals.
TITLE V—MEDICARE APPEALS, REGULATORY, AND CONTRACTING
IMPROVEMENTS
Subtitle A—Regulatory Reform
Sec. 501. Rules for the publication of a final regulation based on the previous
publication of an interim final regulation.
Sec. 502. Compliance with changes in regulations and policies.
Sec. 503. Report on legal and regulatory inconsistencies.
Sec. 504. Streamlining and simplification of medicare regulations.
Subtitle B—Appeals Process Reform
Sec. 511. Submission of plan for transfer of responsibility for medicare appeals.
Sec. 512. Expedited access to judicial review.
Sec. 513. Expedited review of certain provider agreement determinations.
Sec. 514. Revisions to medicare appeals process.
Sec. 515. Hearing rights related to decisions by the Secretary to deny or not
renew a medicare enrollment agreement; consultation before
changing provider enrollment forms.
Sec. 516. Appeals by providers when there is no other party available.
Sec. 517. Provider access to review of local coverage determinations.
Sec. 518. Revisions to appeals timeframes.
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Sec. 519. Elimination of requirement to use Social Security Administration Ad-
ministrative Law Judges.
Sec. 520. Elimination of requirement for de novo review by the departmental ap-
peals board.
Subtitle C—Contracting Reform
Sec. 521. Increased flexibility in medicare administration.
Subtitle D—Education and Outreach Improvements
Sec. 531. Provider education and technical assistance.
Sec. 532. Access to and prompt responses from medicare contractors.
Sec. 533. Reliance on guidance.
Sec. 534. Medicare provider ombudsman.
Sec. 535. Beneficiary outreach demonstration programs.
Subtitle E—Review, Recovery, and Enforcement Reform
Sec. 541. Prepayment review.
Sec. 542. Recovery of overpayments.
Sec. 543. Process for correction of minor errors and omissions on claims without
pursuing appeals process.
Sec. 544. Authority to waive a program exclusion.
SUBTITLE F—OTHER IMPROVEMENTS
Sec. 551. Inclusion of additional information in notices to beneficiaries about
skilled nursing facility and hospital benefits.
Sec. 552. Information on medicare-certified skilled nursing facilities in hospital
discharge plans.
Sec. 553. Evaluation and management documentation guidelines consideration.
Sec. 554. Council for Technology and Innovation.
Sec. 555. Treatment of certain dental claims.
TITLE VI—OTHER PROVISIONS
Sec. 601. Increase in medicaid DSH allotments for fiscal years 2004 and 2005.
Sec. 602. Increase in floor for treatment as an extremely low DSH State under
the medicaid program for fiscal years 2004 and 2005.
Sec. 603. Increased reporting requirements to ensure the appropriateness of pay-
ment adjustments to disproportionate share hospitals under the
medicaid program.
Sec. 604. Clarification of inclusion of inpatient drug prices charged to certain
public hospitals in the best price exemptions for the medicaid
drug rebate program.
Sec. 605. Assistance with coverage of legal immigrants under the medicaid pro-
gram and SCHIP.
Sec. 606. Establishment of consumer ombudsman account.
Sec. 607. GAO study regarding impact of assets test for low-income beneficiaries.
Sec. 608. Health care infrastructure improvement.
Sec. 609. Capital infrastructure revolving loan program.
Sec. 610. Federal reimbursement of emergency health services furnished to un-
documented aliens.
Sec. 611. Increase in appropriation to the health care fraud and abuse control
account.
Sec. 612. Increase in civil penalties under the False Claims Act.
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Sec. 613. Increase in civil monetary penalties under the Social Security Act.
Sec. 614. Extension of customs user fees.
Sec. 615. Reimbursement for federally qualified health centers participating in
medicare managed care.
Sec. 616. Provision of information on advance directives.
Sec. 617. Sense of the Senate regarding implementation of the Prescription Drug
and Medicare Improvement Act of 2003.
Sec. 618. Extension of municipal health service demonstration projects.
Sec. 619. Study on making prescription pharmaceutical information accessible
for blind and visually-impaired individuals.
Sec. 620. Health care that works for all americans-citizens health care working
group.
Sec. 621. GAO study of pharmaceutical price controls and patent protections in
the G–7 countries.
Sec. 622. Sense of the Senate concerning medicare payment update for physicians
and other health professionals.
Sec. 623. Restoration of Federal Hospital Insurance Trust Fund.
Sec. 624. Safety net organizations and Patient Advisory Commission.
Sec. 625. Urban health provider adjustment.
Sec. 626. Committee on drug compounding.
Sec. 627. Sense of the Senate concerning the structure of medicare reform and the
prescription drug benefit.
Sec. 628. Sense of the Senate regarding the establishment of a nationwide perma-
nent lifestyle modification program for medicare beneficiaries.
Sec. 629. Sense of the Senate on payment reductions under medicare physician
fee schedule.
Sec. 630. Temporary suspension of oasis requirement for collection of data on
non-medicare and non-medicaid patients.
Sec. 631. Employer flexibility.
Sec. 632. One Hundred percent FMAP for medical assistance provided to a Na-
tive Hawaiian through a federally-qualified health center or a
Native Hawaiian health care system under the medicaid pro-
gram.
Sec. 633. Extension of moratorium.
Sec. 634. GAO study of pharmaceutical price controls and patent protections in
the G–7 countries.
Sec. 635. Safety Net Organizations and Patient Advisory Commission.
Sec. 636. Establishment of program to prevent abuse of nursing facility residents.
Sec. 637. Office of Rural Health Policy Improvements.
TITLE VII—ACCESS TO AFFORDABLE PHARMACEUTICALS
Sec. 701. Short title.
Sec. 702. 30-month stay-of-effectiveness period.
Sec. 703. Forfeiture of 180-day exclusivity period.
Sec. 704. Bioavailability and bioequivalence.
Sec. 705. Remedies for infringement.
Sec. 706. Conforming amendments.
TITLE VIII—IMPORTATION OF PRESCRIPTION DRUGS
Sec. 801. Importation of prescription drugs.
TITLE IX—DRUG COMPETITION ACT OF 2003
Sec. 901. Short title.
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Sec. 902. Findings.
Sec. 903. Purposes.
Sec. 904. Definitions.
Sec. 905. Notification of agreements.
Sec. 906. Filing deadlines.
Sec. 907. Disclosure exemption.
Sec. 908. Enforcement.
Sec. 909. Rulemaking.
Sec. 910. Savings clause.
Sec. 911. Effective date.
TITLE I—MEDICARE
PRESCRIPTION DRUG BENEFIT
Subtitle 
A—Medicare 
Voluntary
Prescription Drug Delivery Pro-
gram
SEC. 101. MEDICARE VOLUNTARY PRESCRIPTION DRUG DE-
LIVERY PROGRAM.
(a) ESTABLISHMENT.—Title XVIII (42 U.S.C. 1395 et
seq.) is amended by redesignating part D as part E and
by inserting after part C the following new part:
‘‘PART D—VOLUNTARY PRESCRIPTION DRUG DELIVERY
PROGRAM
‘‘DEFINITIONS; TREATMENT OF REFERENCES TO
PROVISIONS IN MEDICAREADVANTAGE PROGRAM
‘‘SEC. 1860D. (a) DEFINITIONS.—In this part:
‘‘(1) 
ADMINISTRATOR.—The 
term 
‘Adminis-
trator’ means the Administrator of the Center for
Medicare Choices as established under section 1808.
‘‘(2) COVERED DRUG.—
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‘‘(A) IN GENERAL.—Except as provided in
subparagraphs (B), (C), and (D), the term ‘cov-
ered drug’ means—
‘‘(i) a drug that may be dispensed only
upon a prescription and that is described in
clause (i) or (ii) of subparagraph (A) of sec-
tion 1927(k)(2); or
‘‘(ii) a biological product described in
clauses (i) through (iii) of subparagraph
(B) of such section; or
‘‘(iii) insulin described in subpara-
graph (C) of such section (including sy-
ringes, and necessary medical supplies asso-
ciated with the administration of insulin,
as defined by the Administrator);
and such term includes a vaccine licensed under
section 351 of the Public Health Service Act and
any use of a covered drug for a medically accept-
ed indication (as defined in section 1927(k)(6)).
‘‘(B) EXCLUSIONS.—
‘‘(i) IN GENERAL.—The term ‘covered
drug’ does not include drugs or classes of
drugs, or their medical uses, which may be
excluded from coverage or otherwise re-
stricted under section 1927(d)(2), other than
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subparagraph (E) thereof (relating to smok-
ing cessation agents), or under section
1927(d)(3).
‘‘(ii) AVOIDANCE OF DUPLICATE COV-
ERAGE.—A drug prescribed for an indi-
vidual that would otherwise be a covered
drug under this part shall not be so consid-
ered if payment for such drug is available
under part A or B, but shall be so consid-
ered if such payment is not available under
part A or B or because benefits under such
parts have been exhausted.
‘‘(C) APPLICATION OF FORMULARY RESTRIC-
TIONS.—A drug prescribed for an individual
that would otherwise be a covered drug under
this part shall not be so considered under a plan
if the plan excludes the drug under a formulary
and such exclusion is not successfully resolved
under subsection (d) or (e)(2) of section 1860D–
5.
‘‘(D) APPLICATION OF GENERAL EXCLUSION
PROVISIONS.—A Medicare Prescription Drug
plan or a MedicareAdvantage plan may exclude
from qualified prescription drug coverage any
covered drug—
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‘‘(i) for which payment would not be
made if section 1862(a) applied to part D;
or
‘‘(ii) which are not prescribed in ac-
cordance with the plan or this part.
Such exclusions are determinations subject to re-
consideration and appeal pursuant to section
1860D–5(e).
‘‘(3) ELIGIBLE BENEFICIARY.—The term ‘eligible
beneficiary’ means an individual who is entitled to,
or enrolled for, benefits under part A and enrolled
under part B (other than a dual eligible individual,
as defined in section 1860D–19(a)(4)(E)).
‘‘(4) ELIGIBLE ENTITY.—The term ‘eligible enti-
ty’ means any risk-bearing entity that the Adminis-
trator determines to be appropriate to provide eligible
beneficiaries with the benefits under a Medicare Pre-
scription Drug plan, including—
‘‘(A) a pharmaceutical benefit management
company;
‘‘(B) a wholesale or retail pharmacist deliv-
ery system;
‘‘(C) an insurer (including an insurer that
offers medicare supplemental policies under sec-
tion 1882);
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‘‘(D) any other risk-bearing entity; or
‘‘(E) any combination of the entities de-
scribed in subparagraphs (A) through (D).
‘‘(5) INITIAL COVERAGE LIMIT.—The term ‘ini-
tial coverage limit’ means the limit as established
under section 1860D–6(c)(3), or, in the case of cov-
erage that is not standard prescription drug coverage,
the comparable limit (if any) established under the
coverage.
‘‘(6) 
MEDICAREADVANTAGE
ORGANIZATION;
MEDICAREADVANTAGE
PLAN.—The 
terms
‘MedicareAdvantage 
organization’ 
and
‘MedicareAdvantage plan’ have the meanings given
such terms in subsections (a)(1) and (b)(1), respec-
tively, of section 1859 (relating to definitions relating
to MedicareAdvantage organizations).
‘‘(7) MEDICARE
PRESCRIPTION
DRUG
PLAN.—
The term ‘Medicare Prescription Drug plan’ means
prescription drug coverage that is offered under a pol-
icy, contract, or plan—
‘‘(A) that has been approved under section
1860D–13; and
‘‘(B) by an eligible entity pursuant to, and
in accordance with, a contract between the Ad-
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ministrator and the entity under section 1860D–
7(b).
‘‘(8) PRESCRIPTION DRUG ACCOUNT.—The term
‘Prescription Drug Account’ means the Prescription
Drug Account (as established under section 1860D–
25) in the Federal Supplementary Medical Insurance
Trust Fund under section 1841.
‘‘(9) QUALIFIED
PRESCRIPTION
DRUG
COV-
ERAGE.—The term ‘qualified prescription drug cov-
erage’ means the coverage described in section 1860D–
6(a)(1).
‘‘(10) STANDARD
PRESCRIPTION
DRUG
COV-
ERAGE.—The term ‘standard prescription drug cov-
erage’ means the coverage described in section 1860D–
6(c).
‘‘(b) APPLICATION OF MEDICAREADVANTAGE PROVI-
SIONS UNDER THIS PART.—For purposes of applying pro-
visions of part C under this part with respect to a Medicare
Prescription Drug plan and an eligible entity, unless other-
wise provided in this part such provisions shall be applied
as if—
‘‘(1) any reference to a MedicareAdvantage plan
included a reference to a Medicare Prescription Drug
plan;
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‘‘(2) any reference to a provider-sponsored orga-
nization included a reference to an eligible entity;
‘‘(3) any reference to a contract under section
1857 included a reference to a contract under section
1860D–7(b); and
‘‘(4) any reference to part C included a reference
to this part.
‘‘Subpart 1—Establishment of Voluntary Prescription
Drug Delivery Program
‘‘ESTABLISHMENT OF VOLUNTARY PRESCRIPTION DRUG
DELIVERY PROGRAM
‘‘SEC. 1860D–1. (a) PROVISION OF BENEFIT.—
‘‘(1) IN GENERAL.—The Administrator shall pro-
vide for and administer a voluntary prescription
drug delivery program under which each eligible bene-
ficiary enrolled under this part shall be provided with
access to qualified prescription drug coverage as fol-
lows:
‘‘(A) MEDICAREADVANTAGE ENROLLEES RE-
CEIVE
COVERAGE
THROUGH
MEDICAREADVANTAGE PLAN.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), an eligible beneficiary who is
enrolled under this part and enrolled in a
MedicareAdvantage 
plan 
offered 
by 
a
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MedicareAdvantage organization shall re-
ceive coverage of benefits under this part
through such plan.
‘‘(ii) EXCEPTION FOR ENROLLEES IN
MEDICAREADVANTAGE MSA PLANS.—An eli-
gible beneficiary who is enrolled under this
part and enrolled in an MSA plan under
part C shall receive coverage of benefits
under this part through enrollment in a
Medicare Prescription Drug plan that is of-
fered in the geographic area in which the
beneficiary resides. For purposes of this
part, the term ‘MSA plan’ has the meaning
given such term in section 1859(b)(3).
‘‘(iii) EXCEPTION FOR ENROLLEES IN
MEDICAREADVANTAGE
PRIVATE
FEE-FOR-
SERVICE
PLANS.—An eligible beneficiary
who is enrolled under this part and enrolled
in a private fee-for-service plan under part
C shall—
‘‘(i) receive benefits under this
part through such plan if the plan pro-
vides qualified prescription drug cov-
erage; and
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‘‘(ii) if the plan does not provide
qualified prescription drug coverage,
receive coverage of benefits under this
part through enrollment in a Medicare
Prescription Drug plan that is offered
in the geographic area in which the
beneficiary resides. For purposes of
this part, the term ‘private fee-for-serv-
ice plan’ has the meaning given such
term in section 1859(b)(2).
‘‘(B) FEE-FOR-SERVICE
ENROLLEES
RE-
CEIVE COVERAGE THROUGH A MEDICARE PRE-
SCRIPTION DRUG PLAN.—An eligible beneficiary
who is enrolled under this part but is not en-
rolled in a MedicareAdvantage plan (except for
an MSA plan or a private fee-for-service plan
that does not provide qualified prescription drug
coverage) shall receive coverage of benefits under
this part through enrollment in a Medicare Pre-
scription Drug plan that is offered in the geo-
graphic area in which the beneficiary resides.
‘‘(2) VOLUNTARY NATURE OF PROGRAM.—Noth-
ing in this part shall be construed as requiring an el-
igible beneficiary to enroll in the program under this
part.
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‘‘(3) SCOPE OF BENEFITS.—Pursuant to section
1860D–6(b)(3)(C), the program established under this
part shall provide for coverage of all therapeutic cat-
egories and classes of covered drugs (although not nec-
essarily for all drugs within such categories and class-
es).
‘‘(4) PROGRAM TO BEGIN IN 2006.—The Adminis-
trator shall establish the program under this part in
a manner so that benefits are first provided beginning
on January 1, 2006.
‘‘(b) ACCESS TO ALTERNATIVE PRESCRIPTION DRUG
COVERAGE.—In the case of an eligible beneficiary who has
creditable prescription drug coverage (as defined in section
1860D–2(b)(1)(F)), such beneficiary—
‘‘(1) may continue to receive such coverage and
not enroll under this part; and
‘‘(2) pursuant to section 1860D–2(b)(1)(C), is
permitted to subsequently enroll under this part with-
out any penalty and obtain access to qualified pre-
scription drug coverage in the manner described in
subsection (a) if the beneficiary involuntarily loses
such coverage.
‘‘(c) FINANCING.—The costs of providing benefits
under this part shall be payable from the Prescription Drug
Account.
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‘‘ENROLLMENT UNDER PROGRAM
‘‘SEC. 1860D–2. (a) ESTABLISHMENT
OF ENROLL-
MENT PROCESS.—
‘‘(1) PROCESS
SIMILAR
TO
PART
B
ENROLL-
MENT.—The Administrator shall establish a process
through which an eligible beneficiary (including an
eligible beneficiary enrolled in a MedicareAdvantage
plan offered by a MedicareAdvantage organization)
may make an election to enroll under this part. Such
process shall be similar to the process for enrollment
in part B under section 1837, including the deeming
provisions of such section.
‘‘(2) CONDITION OF ENROLLMENT.—An eligible
beneficiary must be enrolled under this part in order
to be eligible to receive access to qualified prescription
drug coverage.
‘‘(b) SPECIAL ENROLLMENT PROCEDURES.—
‘‘(1) LATE ENROLLMENT PENALTY.—
‘‘(A) INCREASE IN MONTHLY BENEFICIARY
OBLIGATION.—Subject to the succeeding provi-
sions of this paragraph, in the case of an eligible
beneficiary whose coverage period under this
part began pursuant to an enrollment after the
beneficiary’s initial enrollment period under
part B (determined pursuant to section 1837(d))
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and not pursuant to the open enrollment period
described in paragraph (2), the Administrator
shall establish procedures for increasing the
amount of the monthly beneficiary obligation
under section 1860D–17 applicable to such bene-
ficiary by an amount that the Administrator de-
termines is actuarially sound for each full 12-
month period (in the same continuous period of
eligibility) in which the eligible beneficiary could
have been enrolled under this part but was not
so enrolled.
‘‘(B) PERIODS TAKEN INTO ACCOUNT.—For
purposes of calculating any 12-month period
under subparagraph (A), there shall be taken
into account—
‘‘(i) the months which elapsed between
the close of the eligible beneficiary’s initial
enrollment period and the close of the en-
rollment period in which the beneficiary en-
rolled; and
‘‘(ii) in the case of an eligible bene-
ficiary who reenrolls under this part, the
months which elapsed between the date of
termination of a previous coverage period
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and the close of the enrollment period in
which the beneficiary reenrolled.
‘‘(C) PERIODS NOT TAKEN INTO ACCOUNT.—
‘‘(i) IN
GENERAL.—For purposes of
calculating any 12-month period under sub-
paragraph (A), subject to clause (ii), there
shall not be taken into account months for
which the eligible beneficiary can dem-
onstrate that the beneficiary had creditable
prescription drug coverage (as defined in
subparagraph (F)).
‘‘(ii) BENEFICIARY
MUST
INVOLUN-
TARILY LOSE COVERAGE.—Clause (i) shall
only apply with respect to coverage—
‘‘(I) in the case of coverage de-
scribed in clause (ii) of subparagraph
(F), if the plan terminates, ceases to
provide, or reduces the value of the pre-
scription drug coverage under such
plan to below the actuarial value of
standard prescription drug coverage
(as determined under section 1860D–
6(f));
‘‘(II) in the case of coverage de-
scribed in clause (i), (iii), or (iv) of
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subparagraph (F), if the beneficiary is
involuntarily disenrolled or becomes
ineligible for such coverage; or
‘‘(III) in the case of a beneficiary
with coverage described in clause (v) of
subparagraph (F), if the issuer of the
policy terminates coverage under the
policy.
‘‘(D) PERIODS
TREATED
SEPARATELY.—
Any increase in an eligible beneficiary’s monthly
beneficiary obligation under subparagraph (A)
with respect to a particular continuous period of
eligibility shall not be applicable with respect to
any other continuous period of eligibility which
the beneficiary may have.
‘‘(E) 
CONTINUOUS
PERIOD
OF
ELIGI-
BILITY.—
‘‘(i) IN
GENERAL.—Subject to clause
(ii), for purposes of this paragraph, an eli-
gible beneficiary’s ‘continuous period of eli-
gibility’ is the period that begins with the
first day on which the beneficiary is eligible
to enroll under section 1836 and ends with
the beneficiary’s death.
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‘‘(ii) SEPARATE PERIOD.—Any period
during all of which an eligible beneficiary
satisfied paragraph (1) of section 1836 and
which terminated in or before the month
preceding the month in which the bene-
ficiary attained age 65 shall be a separate
‘continuous period of eligibility’ with re-
spect to the beneficiary (and each such pe-
riod which terminates shall be deemed not
to have existed for purposes of subsequently
applying this paragraph).
‘‘(F) CREDITABLE
PRESCRIPTION
DRUG
COVERAGE DEFINED.—Subject to subparagraph
(G), for purposes of this part, the term ‘cred-
itable prescription drug coverage’ means any of
the following:
‘‘(i) DRUG-ONLY
COVERAGE
UNDER
MEDICAID.—Coverage of covered outpatient
drugs (as defined in section 1927) under
title XIX or a waiver under 1115 that is
provided to an individual who is not a dual
eligible individual (as defined in section
1860D–19(a)(4)(E)).
‘‘(ii) PRESCRIPTION DRUG COVERAGE
UNDER A GROUP HEALTH PLAN.—Any out-
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patient prescription drug coverage under a
group health plan, including a health bene-
fits plan under chapter 89 of title 5, United
States Code (commonly known as the Fed-
eral employees health benefits program),
and a qualified retiree prescription drug
plan 
(as 
defined 
in 
section 
1860D–
20(e)(4)).
‘‘(iii) STATE
PHARMACEUTICAL
AS-
SISTANCE PROGRAM.—Coverage of prescrip-
tion drugs under a State pharmaceutical
assistance program.
‘‘(iv) VETERANS’ COVERAGE OF PRE-
SCRIPTION
DRUGS.—Coverage of prescrip-
tion drugs for veterans, and survivors and
dependents of veterans, under chapter 17 of
title 38, United States Code.
‘‘(v) PRESCRIPTION
DRUG
COVERAGE
UNDER
MEDIGAP
POLICIES.—Coverage
under a medicare supplemental policy
under section 1882 that provides benefits for
prescription drugs (whether or not such cov-
erage conforms to the standards for pack-
ages of benefits under section 1882(p)(1)).
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‘‘(G) REQUIREMENT FOR CREDITABLE COV-
ERAGE.—Coverage 
described 
in 
clauses 
(i)
through (v) of subparagraph (F) shall not be
considered to be creditable coverage under this
part unless the coverage provides coverage of the
cost of prescription drugs the actuarial value of
which (as defined by the Administrator) to the
beneficiary equals or exceeds the actuarial value
of standard prescription drug coverage (as deter-
mined under section 1860D–6(f)).
‘‘(H) DISCLOSURE.—
‘‘(i) IN
GENERAL.—Each entity that
offers coverage of the type described in
clause (ii) (iii), (iv), or (v) of subparagraph
(F) shall provide for disclosure, consistent
with standards established by the Adminis-
trator, of whether the coverage provides cov-
erage of the cost of prescription drugs the
actuarial value of which (as defined by the
Administrator) to the beneficiary equals or
exceeds the actuarial value of standard pre-
scription drug coverage (as determined
under section 1860D–6(f)).
‘‘(ii) WAIVER
OF
LIMITATIONS.—An
individual may apply to the Administrator
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to waive the application of subparagraph
(G) if the individual establishes that the in-
dividual was not adequately informed that
the coverage the beneficiary was enrolled in
did not provide the level of benefits required
in order for the coverage to be considered
creditable coverage under subparagraph (F).
‘‘(2) INITIAL ELECTION PERIODS.—
‘‘(A) OPEN ENROLLMENT PERIOD FOR CUR-
RENT BENEFICIARIES IN WHICH LATE ENROLL-
MENT PROCEDURES DO NOT APPLY.—In the case
of an individual who is an eligible beneficiary as
of November 1, 2005, there shall be an open en-
rollment period of 6 months beginning on that
date under which such beneficiary may enroll
under this part without the application of the
late enrollment procedures established under
paragraph (1)(A).
‘‘(B) INDIVIDUAL COVERED IN FUTURE.—In
the case of an individual who becomes an eligible
beneficiary after such date, there shall be an ini-
tial election period which is the same as the ini-
tial enrollment period under section 1837(d).
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‘‘(3) SPECIAL ENROLLMENT PERIOD FOR BENE-
FICIARIES
WHO
INVOLUNTARILY
LOSE
CREDITABLE
PRESCRIPTION DRUG COVERAGE.—
‘‘(A) ESTABLISHMENT.—The Administrator
shall establish a special open enrollment period
(as described in subparagraph (B)) for an eligi-
ble beneficiary that loses creditable prescription
drug coverage.
‘‘(B) SPECIAL
OPEN
ENROLLMENT
PE-
RIOD.—The special open enrollment period de-
scribed in this subparagraph is the 63-day pe-
riod that begins on—
‘‘(i) in the case of a beneficiary with
coverage described in clause (ii) of para-
graph (1)(F), the later of the date on which
the plan terminates, ceases to provide, or
substantially reduces (as defined by the Ad-
ministrator) the value of the prescription
drug coverage under such plan or the date
the beneficiary is provided with notice of
such termination or reduction;
‘‘(ii) in the case of a beneficiary with
coverage described in clause (i), (iii), or (iv)
of paragraph (1)(F), the later of the date on
which the beneficiary is involuntarily
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disenrolled or becomes ineligible for such
coverage or the date the beneficiary is pro-
vided with notice of such loss of eligibility;
or
‘‘(iii) in the case of a beneficiary with
coverage described in clause (v) of para-
graph (1)(F), the latter of the date on which
the issuer of the policy terminates coverage
under the policy or the date the beneficiary
is provided with notice of such termination.
‘‘(c) PERIOD OF COVERAGE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2) and subject to paragraph (3), an eligible
beneficiary’s coverage under the program under this
part shall be effective for the period provided in sec-
tion 1838, as if that section applied to the program
under this part.
‘‘(2) OPEN AND SPECIAL ENROLLMENT.—
‘‘(A) OPEN ENROLLMENT.—An eligible bene-
ficiary who enrolls under the program under this
part pursuant to subsection (b)(2) shall be enti-
tled to the benefits under this part beginning on
January 1, 2006.
‘‘(B) SPECIAL
ENROLLMENT.—Subject to
paragraph (3), an eligible beneficiary who en-
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rolls under the program under this part pursu-
ant to subsection (b)(3) shall be entitled to the
benefits under this part beginning on the first
day of the month following the month in which
such enrollment occurs.
‘‘(3) LIMITATION.—Coverage under this part
shall not begin prior to January 1, 2006.
‘‘(d) TERMINATION.—
‘‘(1) IN GENERAL.—The causes of termination
specified in section 1838 shall apply to this part in
the same manner as such causes apply to part B.
‘‘(2) COVERAGE TERMINATED BY TERMINATION
OF COVERAGE UNDER PART A OR B.—
‘‘(A) IN
GENERAL.—In addition to the
causes of termination specified in paragraph (1),
the Administrator shall terminate an individ-
ual’s coverage under this part if the individual
is no longer enrolled in both parts A and B.
‘‘(B) EFFECTIVE
DATE.—The termination
described in subparagraph (A) shall be effective
on the effective date of termination of coverage
under part A or (if earlier) under part B.
‘‘(3) PROCEDURES REGARDING TERMINATION OF
A BENEFICIARY UNDER A PLAN.—The Administrator
shall establish procedures for determining the status of
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an eligible beneficiary’s enrollment under this part if
the beneficiary’s enrollment in a Medicare Prescrip-
tion Drug plan offered by an eligible entity under
this part is terminated by the entity for cause (pursu-
ant to procedures established by the Administrator
under section 1860D–3(a)(1)).
‘‘ELECTION OF A MEDICARE PRESCRIPTION DRUG PLAN
‘‘SEC. 1860D–3. (a) IN GENERAL.—
‘‘(1) PROCESS.—
‘‘(A) ELECTION.—
‘‘(i) IN GENERAL.—The Administrator
shall establish a process through which an
eligible beneficiary who is enrolled under
this 
part 
but 
not 
enrolled 
in 
a
MedicareAdvantage plan (except for an
MSA plan or a private fee-for-service plan
that does not provide qualified prescription
drug 
coverage) 
offered 
by 
a
MedicareAdvantage organization—
‘‘(I) shall make an election to en-
roll in any Medicare Prescription
Drug plan that is offered by an eligible
entity and that serves the geographic
area in which the beneficiary resides;
and
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‘‘(II) may make an annual elec-
tion to change the election under this
clause.
‘‘(ii) CLARIFICATION
REGARDING
EN-
ROLLMENT.—The process established under
clause (i) shall include, in the case of an el-
igible beneficiary who is enrolled under this
part but who has failed to make an election
of a Medicare Prescription Drug plan in an
area, for the enrollment in any Medicare
Prescription Drug plan that has been des-
ignated by the Administrator in the area.
The Administrator shall establish a process
for designating a plan or plans in order to
carry out the preceding sentence.
‘‘(B) REQUIREMENTS FOR PROCESS.—In es-
tablishing the process under subparagraph (A),
the Administrator shall—
‘‘(i) use rules similar to the rules for
enrollment, disenrollment, and termination
of enrollment with a MedicareAdvantage
plan under section 1851, including—
‘‘(I) the establishment of special
election periods under subsection (e)(4)
of such section; and
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‘‘(II) the application of the guar-
anteed issue and renewal provisions of
section 1851(g) (other than clause (i)
and the second sentence of clause (ii) of
paragraph (3)(C), relating to default
enrollment); and
‘‘(ii) 
coordinate 
enrollments,
disenrollments, and terminations of enroll-
ment under part C with enrollments,
disenrollments, and terminations of enroll-
ment under this part.
‘‘(2) FIRST ENROLLMENT PERIOD FOR PLAN EN-
ROLLMENT.—The process developed under paragraph
(1) shall ensure that eligible beneficiaries who enroll
under this part during the open enrollment period
under section 1860D–2(b)(2) are permitted to elect an
eligible entity prior to January 1, 2006, in order to
ensure that coverage under this part is effective as of
such date.
‘‘(b) 
ENROLLMENT
IN
A
MEDICAREADVANTAGE
PLAN.—
‘‘(1) IN GENERAL.—An eligible beneficiary who
is enrolled under this part and enrolled in a
MedicareAdvantage plan (except for an MSA plan or
a private fee-for-service plan that does not provide
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qualified prescription drug coverage) offered by a
MedicareAdvantage organization shall receive access
to such coverage under this part through such plan.
‘‘(2) 
RULES.—Enrollment 
in 
a
MedicareAdvantage plan is subject to the rules for en-
rollment in such plan under section 1851.
‘‘(c) INFORMATION TO ENTITIES TO FACILITATE EN-
ROLLMENT.—Notwithstanding any other provision of law,
the Administrator may provide to each eligible entity with
a contract under this part such information about eligible
beneficiaries as the Administrator determines to be nec-
essary to facilitate efficient enrollment by such beneficiaries
with such entities. The Administrator may provide such in-
formation only so long as and to the extent necessary to
carry out such objective.
‘‘PROVIDING INFORMATION TO BENEFICIARIES
‘‘SEC. 1860D–4. (a) ACTIVITIES.—
‘‘(1) IN GENERAL.—The Administrator shall con-
duct activities that are designed to broadly dissemi-
nate information to eligible beneficiaries (and pro-
spective eligible beneficiaries) regarding the coverage
provided under this part.
‘‘(2) SPECIAL
RULE
FOR
FIRST
ENROLLMENT
UNDER THE PROGRAM.—The activities described in
paragraph (1) shall ensure that eligible beneficiaries
are provided with such information at least 30 days
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prior to the first enrollment period described in sec-
tion 1860D–3(a)(2).
‘‘(b) REQUIREMENTS.—
‘‘(1) IN GENERAL.—The activities described in
subsection (a) shall—
‘‘(A) be similar to the activities performed
by the Administrator under section 1851(d);
‘‘(B) be coordinated with the activities per-
formed by—
‘‘(i) the Administrator under such sec-
tion; and
‘‘(ii) the Secretary under section 1804;
and
‘‘(C) provide for the dissemination of infor-
mation comparing the plans offered by eligible
entities under this part that are available to eli-
gible beneficiaries residing in an area.
‘‘(2) COMPARATIVE
INFORMATION.—The com-
parative information described in paragraph (1)(C)
shall include a comparison of the following:
‘‘(A) BENEFITS.—The benefits provided
under the plan and the formularies and griev-
ance and appeals processes under the plan.
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‘‘(B) 
MONTHLY
BENEFICIARY
OBLIGA-
TION.—The monthly beneficiary obligation under
the plan.
‘‘(C) QUALITY
AND
PERFORMANCE.—The
quality and performance of the eligible entity of-
fering the plan.
‘‘(D) 
BENEFICIARY
COST-SHARING.—The
cost-sharing required of eligible beneficiaries
under the plan.
‘‘(E) CONSUMER SATISFACTION SURVEYS.—
The results of consumer satisfaction surveys re-
garding the plan and the eligible entity offering
such plan (conducted pursuant to section
1860D–5(h).
‘‘(F) ADDITIONAL INFORMATION.—Such ad-
ditional information as the Administrator may
prescribe.
‘‘BENEFICIARY PROTECTIONS
‘‘SEC. 1860D–5. (a) DISSEMINATION
OF INFORMA-
TION.—
‘‘(1) GENERAL INFORMATION.—An eligible entity
offering a Medicare Prescription Drug plan shall dis-
close, in a clear, accurate, and standardized form to
each enrollee at the time of enrollment, and at least
annually thereafter, the information described in sec-
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tion 1852(c)(1) relating to such plan. Such informa-
tion includes the following:
‘‘(A) Access to covered drugs, including ac-
cess through pharmacy networks.
‘‘(B) How any formulary used by the entity
functions.
‘‘(C) Copayments, coinsurance, and deduct-
ible requirements.
‘‘(D) Grievance and appeals processes.
The information described in the preceding sentence
shall also be made available on request to prospective
enrollees during open enrollment periods.
‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL
COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA-
TION.—Upon request of an individual eligible to en-
roll in a Medicare Prescription Drug plan, the eligi-
ble entity offering such plan shall provide informa-
tion similar (as determined by the Administrator) to
the information described in subparagraphs (A), (B),
and (C) of section 1852(c)(2) to such individual.
‘‘(3) RESPONSE TO BENEFICIARY QUESTIONS.—
An eligible entity offering a Medicare Prescription
Drug plan shall have a mechanism for providing on
a timely basis specific information to enrollees upon
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request, including information on the coverage of spe-
cific drugs and changes in its formulary.
‘‘(4) CLAIMS INFORMATION.—An eligible entity
offering a Medicare Prescription Drug plan must fur-
nish to enrolled individuals in a form easily under-
standable to such individuals—
‘‘(A) an explanation of benefits (in accord-
ance with section 1806(a) or in a comparable
manner); and
‘‘(B) when prescription drug benefits are
provided under this part, a notice of the benefits
in relation to the initial coverage limit and an-
nual out-of-pocket limit for the current year (ex-
cept that such notice need not be provided more
often than monthly).
‘‘(5) APPROVAL OF MARKETING MATERIAL AND
APPLICATION
FORMS.—The provisions of section
1851(h) shall apply to marketing material and appli-
cation forms under this part in the same manner as
such provisions apply to marketing material and ap-
plication forms under part C.
‘‘(b) ACCESS TO COVERED DRUGS.—
‘‘(1) ACCESS TO NEGOTIATED PRICES FOR PRE-
SCRIPTION
DRUGS.—An eligible entity offering a
Medicare Prescription Drug plan shall have in place
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procedures to ensure that beneficiaries are not charged
more than the negotiated price of a covered drug.
Such procedures shall include the issuance of a card
(or other technology) that may be used by an enrolled
beneficiary for the purchase of prescription drugs for
which coverage is not otherwise provided under the
Medicare Prescription Drug plan.
‘‘(2) ASSURING PHARMACY ACCESS.—
‘‘(A) IN GENERAL.—An eligible entity offer-
ing a Medicare Prescription Drug plan shall se-
cure the participation in its network of a suffi-
cient number of pharmacies that dispense (other
than by mail order) drugs directly to patients to
ensure convenient access (as determined by the
Administrator and including adequate emer-
gency access) for enrolled beneficiaries, in ac-
cordance with standards established by the Ad-
ministrator under section 1860D–7(g) that en-
sure such convenient access. Such standards shall
take into account reasonable distances to phar-
macy services in urban and rural areas and ac-
cess to pharmacy services of the Indian Health
Service and Indian tribes and tribal organiza-
tions.
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‘‘(B) USE OF POINT-OF-SERVICE SYSTEM.—
An eligible entity offering a Medicare Prescrip-
tion Drug plan shall establish an optional point-
of-service method of operation under which—
‘‘(i) the plan provides access to any or
all pharmacies that are not participating
pharmacies in its network; and
‘‘(ii) the plan may charge beneficiaries
through adjustments in copayments any ad-
ditional costs associated with the point-of-
service option.
The additional copayments so charged shall not
count toward the application of section 1860D–
6(c).
‘‘(C) LEVEL
PLAYING
FIELD.—An eligible
entity offering a Medicare Prescription Drug
plan shall permit enrollees to receive benefits
(which may include a 90-day supply of drugs or
biologicals) through a community pharmacy,
rather than through mail order, and may permit
a differential amount to be paid by such enroll-
ees.
‘‘(3) REQUIREMENTS ON DEVELOPMENT AND AP-
PLICATION OF FORMULARIES.—If an eligible entity of-
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fering a Medicare Prescription Drug plan uses a for-
mulary, the following requirements must be met:
‘‘(A) PHARMACY AND THERAPEUTIC (P&T)
COMMITTEE.—
‘‘(i) IN GENERAL.—The eligible entity
must establish a pharmacy and therapeutic
committee that develops and reviews the for-
mulary.
‘‘(ii) COMPOSITION.—A pharmacy and
therapeutic committee shall include at least
1 academic expert, at least 1 practicing
physician, and at least 1 practicing phar-
macist, all of whom have expertise in the
care of elderly or disabled persons, and a
majority of the members of such committee
shall consist of individuals who are a prac-
ticing physician or a practicing pharmacist
(or both).
‘‘(B) FORMULARY
DEVELOPMENT.—In de-
veloping and reviewing the formulary, the com-
mittee shall base clinical decisions on the
strength of scientific evidence and standards of
practice, including assessing peer-reviewed med-
ical literature, such as randomized clinical
trials, pharmacoeconomic studies, outcomes re-
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search data, and on such other information as
the committee determines to be appropriate.
‘‘(C) INCLUSION OF DRUGS IN ALL THERA-
PEUTIC CATEGORIES AND CLASSES.—
‘‘(i) IN
GENERAL.—The formulary
must include drugs within each therapeutic
category and class of covered drugs (as de-
fined by the Administrator), although not
necessarily for all drugs within such cat-
egories and classes.
‘‘(ii) 
REQUIREMENT.—In 
defining
therapeutic categories and classes of covered
drugs pursuant to clause (i), the Adminis-
trator shall use—
‘‘(I) the compendia referred to sec-
tion 1927(g)(1)(B)(i); and
‘‘(II) other recognized sources of
drug classifications and categorizations
determined appropriate by the Admin-
istrator.
‘‘(D) PROVIDER
EDUCATION.—The com-
mittee shall establish policies and procedures to
educate and inform health care providers con-
cerning the formulary.
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‘‘(E) NOTICE
BEFORE
REMOVING
DRUGS
FROM FORMULARY.—Any removal of a drug from
a formulary shall take effect only after appro-
priate notice is made available to beneficiaries,
physicians, and pharmacists.
‘‘(F) APPEALS AND EXCEPTIONS TO APPLI-
CATION.—The eligible entity must have, as part
of the appeals process under subsection (e), a
process for timely appeals for denials of coverage
based on such application of the formulary.
‘‘(c) COST AND UTILIZATION MANAGEMENT; QUALITY
ASSURANCE; MEDICATION THERAPY MANAGEMENT PRO-
GRAM.—
‘‘(1) IN GENERAL.—An eligible entity shall have
in place the following with respect to covered drugs:
‘‘(A) A cost-effective drug utilization man-
agement program, including incentives to reduce
costs when appropriate.
‘‘(B) Quality assurance measures to reduce
medical errors and adverse drug interactions
and to improve medication use, which—
‘‘(i) shall include a medication therapy
management program described in para-
graph (2); and
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‘‘(ii) may include beneficiary edu-
cation programs, counseling, medication re-
fill reminders, and special packaging.
‘‘(C) A program to control fraud, abuse,
and waste.
Nothing in this section shall be construed as impair-
ing an eligible entity from applying cost management
tools (including differential payments) under all
methods of operation.
‘‘(2) MEDICATION THERAPY MANAGEMENT PRO-
GRAM.—
‘‘(A) IN GENERAL.—A medication therapy
management program described in this para-
graph is a program of drug therapy management
and medication administration that is designed
to assure, with respect to beneficiaries with
chronic diseases (such as diabetes, asthma, hy-
pertension, hyperlipidemia, and congestive heart
failure) or multiple prescriptions, that covered
drugs under the Medicare Prescription Drug
plan are appropriately used to optimize thera-
peutic outcomes through improved medication
use and to achieve therapeutic goals and reduce
the risk of adverse events, including adverse drug
interactions.
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‘‘(B) 
ELEMENTS.—Such 
program 
may
include—
‘‘(i) 
enhanced 
beneficiary 
under-
standing of such appropriate use through
beneficiary education, counseling, and other
appropriate means;
‘‘(ii) increased beneficiary adherence
with 
prescription 
medication 
regimens
through medication refill reminders, special
packaging, and other appropriate means;
and
‘‘(iii) detection of patterns of overuse
and underuse of prescription drugs.
‘‘(C) DEVELOPMENT
OF
PROGRAM
IN
CO-
OPERATION WITH LICENSED PHARMACISTS.—The
program shall be developed in cooperation with
licensed and practicing pharmacists and physi-
cians.
‘‘(D) 
CONSIDERATIONS
IN
PHARMACY
FEES.—The eligible entity offering a Medicare
Prescription Drug plan shall take into account,
in establishing fees for pharmacists and others
providing services under the medication therapy
management program, the resources and time
used in implementing the program.
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‘‘(3) PUBLIC DISCLOSURE OF PHARMACEUTICAL
PRICES FOR EQUIVALENT DRUGS.—The eligible entity
offering a Medicare Prescription Drug plan shall pro-
vide that each pharmacy or other dispenser that ar-
ranges for the dispensing of a covered drug shall in-
form the beneficiary at the time of purchase of the
drug of any differential between the price of the pre-
scribed drug to the enrollee and the price of the lowest
cost generic drug covered under the plan that is thera-
peutically equivalent and bioequivalent.
‘‘(d) GRIEVANCE MECHANISM, COVERAGE DETERMINA-
TIONS, AND RECONSIDERATIONS.—
‘‘(1) IN GENERAL.—An eligible entity shall pro-
vide meaningful procedures for hearing and resolving
grievances between the eligible entity (including any
entity or individual through which the eligible entity
provides covered benefits) and enrollees with Medicare
Prescription Drug plans of the eligible entity under
this part in accordance with section 1852(f).
‘‘(2) APPLICATION
OF
COVERAGE
DETERMINA-
TION
AND
RECONSIDERATION
PROVISIONS.—The re-
quirements of paragraphs (1) through (3) of section
1852(g) shall apply to an eligible entity with respect
to covered benefits under the Medicare Prescription
Drug plan it offers under this part in the same man-
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ner 
as 
such 
requirements 
apply 
to 
a
MedicareAdvantage organization with respect to bene-
fits it offers under a MedicareAdvantage plan under
part C.
‘‘(3) REQUEST
FOR
REVIEW
OF
TIERED
FOR-
MULARY DETERMINATIONS.—In the case of a Medicare
Prescription Drug plan offered by an eligible entity
that provides for tiered cost-sharing for drugs in-
cluded within a formulary and provides lower cost-
sharing for preferred drugs included within the for-
mulary, an individual who is enrolled in the plan
may request coverage of a nonpreferred drug under
the terms applicable for preferred drugs if the pre-
scribing physician determines that the preferred drug
for treatment of the same condition is not as effective
for the individual or has adverse effects for the indi-
vidual.
‘‘(e) APPEALS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the
requirements of paragraphs (4) and (5) of section
1852(g) shall apply to an eligible entity with respect
to drugs not included on any formulary in a manner
that is similar (as determined by the Administrator)
to the manner that such requirements apply to a
MedicareAdvantage organization with respect to bene-
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fits it offers under a MedicareAdvantage plan under
part C.
‘‘(2) FORMULARY
DETERMINATIONS.—An indi-
vidual who is enrolled in a Medicare Prescription
Drug plan offered by an eligible entity may appeal
to obtain coverage for a covered drug that is not on
a formulary of the entity under the terms applicable
for a formulary drug if the prescribing physician de-
termines that the formulary drug for treatment of the
same condition is not as effective for the individual
or has adverse effects for the individual.
‘‘(f) PRIVACY, CONFIDENTIALITY, AND ACCURACY OF
ENROLLEE RECORDS.—Insofar as an eligible entity main-
tains individually identifiable medical records or other
health information regarding eligible beneficiaries enrolled
in the Medicare Prescription Drug plan offered by the enti-
ty, the entity shall have in place procedures to—
‘‘(1) safeguard the privacy of any individually
identifiable beneficiary information in a manner con-
sistent with the Federal regulations (concerning the
privacy of individually identifiable health informa-
tion) promulgated under section 264(c) of the Health
Insurance Portability and Accountability Act of 1996;
‘‘(2) maintain such records and information in
a manner that is accurate and timely;
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‘‘(3) ensure timely access by such beneficiaries to
such records and information; and
‘‘(4) otherwise comply with applicable laws re-
lating to patient privacy and confidentiality.
‘‘(g) UNIFORM MONTHLY PLAN PREMIUM.—An eligible
entity shall ensure that the monthly plan premium for a
Medicare Prescription Drug plan charged under this part
is the same for all eligible beneficiaries enrolled in the plan.
Such requirement shall not apply to enrollees of a Medicare
Prescription Drug plan who are enrolled in the plan pursu-
ant to a contractual agreement between the plan and an
employer or other group health plan that provides employ-
ment-based retiree health coverage (as defined in section
1860D–20(d)(4)(B)) if the premium amount is the same for
all such enrollees under such agreement.
‘‘(h) CONSUMER SATISFACTION SURVEYS.—An eligible
entity shall conduct consumer satisfaction surveys with re-
spect to the plan and the entity. The Administrator shall
establish uniform requirements for such surveys.
‘‘PRESCRIPTION DRUG BENEFITS
‘‘SEC. 1860D–6. (a) REQUIREMENTS.—
‘‘(1) IN GENERAL.—For purposes of this part
and part C, the term ‘qualified prescription drug cov-
erage’ means either of the following:
‘‘(A) STANDARD PRESCRIPTION DRUG COV-
ERAGE WITH ACCESS TO NEGOTIATED PRICES.—
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Standard prescription drug coverage (as defined
in subsection (c)) and access to negotiated prices
under subsection (e).
‘‘(B) ACTUARIALLY EQUIVALENT PRESCRIP-
TION DRUG COVERAGE WITH ACCESS TO NEGO-
TIATED
PRICES.—Coverage of covered drugs
which meets the alternative coverage require-
ments of subsection (d) and access to negotiated
prices under subsection (e), but only if it is ap-
proved by the Administrator as provided under
subsection (d).
‘‘(2) PERMITTING
ADDITIONAL
PRESCRIPTION
DRUG COVERAGE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) and section 1860D–13(c)(2), nothing
in this part shall be construed as preventing
qualified prescription drug coverage from includ-
ing coverage of covered drugs that exceeds the
coverage required under paragraph (1).
‘‘(B) REQUIREMENT.—An eligible entity
may not offer a Medicare Prescription Drug
plan that provides additional benefits pursuant
to subparagraph (A) in an area unless the eligi-
ble entity offering such plan also offers a Medi-
care Prescription Drug plan in the area that
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only provides the coverage of prescription drugs
that is required under paragraph (1).
‘‘(3) COST
CONTROL
MECHANISMS.—In pro-
viding qualified prescription drug coverage, the entity
offering the Medicare Prescription Drug plan or the
MedicareAdvantage plan may use a variety of cost
control mechanisms, including the use of formularies,
tiered copayments, selective contracting with pro-
viders of prescription drugs, and mail order phar-
macies.
‘‘(b) APPLICATION
OF SECONDARY PAYOR PROVI-
SIONS.—The provisions of section 1852(a)(4) shall apply
under this part in the same manner as they apply under
part C.
‘‘(c) STANDARD PRESCRIPTION DRUG COVERAGE.—
For purposes of this part and part C, the term ‘standard
prescription drug coverage’ means coverage of covered drugs
that meets the following requirements:
‘‘(1) DEDUCTIBLE.—
‘‘(A) IN
GENERAL.—The coverage has an
annual deductible—
‘‘(i) for 2006, that is equal to $275; or
‘‘(ii) for a subsequent year, that is
equal to the amount specified under this
paragraph for the previous year increased
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by the percentage specified in paragraph (5)
for the year involved.
‘‘(B) ROUNDING.—Any amount determined
under subparagraph (A)(ii) that is not a mul-
tiple of $1 shall be rounded to the nearest mul-
tiple of $1.
‘‘(2) LIMITS
ON
COST-SHARING.—The coverage
has cost-sharing (for costs above the annual deductible
specified in paragraph (1) and up to the initial cov-
erage limit under paragraph (3)) that is equal to 50
percent or that is actuarially consistent (using proc-
esses established under subsection (f)) with an average
expected payment of 50 percent of such costs.
‘‘(3) INITIAL COVERAGE LIMIT.—
‘‘(A) IN GENERAL.—Subject to paragraph
(4), the coverage has an initial coverage limit on
the maximum costs that may be recognized for
payment purposes (including the annual deduct-
ible)—
‘‘(i) for 2006, that is equal to $4,500;
or
‘‘(ii) for a subsequent year, that is
equal to the amount specified in this para-
graph for the previous year, increased by
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the annual percentage increase described in
paragraph (5) for the year involved.
‘‘(B) ROUNDING.—Any amount determined
under subparagraph (A)(ii) that is not a mul-
tiple of $1 shall be rounded to the nearest mul-
tiple of $1.
‘‘(4) LIMITATION ON OUT-OF-POCKET EXPENDI-
TURES BY BENEFICIARY.—
‘‘(A) IN GENERAL.—The coverage provides
benefits with cost-sharing that is equal to 10 per-
cent after the individual has incurred costs (as
described in subparagraph (C)) for covered drugs
in a year equal to the annual out-of-pocket limit
specified in subparagraph (B).
‘‘(B) ANNUAL OUT-OF-POCKET LIMIT.—
‘‘(i) IN
GENERAL.—For purposes of
this part, the ‘annual out-of-pocket limit’
specified in this subparagraph—
‘‘(I) for 2006, is equal to $3,700;
or
‘‘(II) for a subsequent year, is
equal to the amount specified in this
subparagraph for the previous year,
increased by the annual percentage in-
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crease described in paragraph (5) for
the year involved.
‘‘(ii) ROUNDING.—Any amount deter-
mined under clause (i)(II) that is not a
multiple of $1 shall be rounded to the near-
est multiple of $1.
‘‘(C) APPLICATION.—In applying subpara-
graph (A)—
‘‘(i) incurred costs shall only include
costs incurred, with respect to covered
drugs, for the annual deductible (described
in paragraph (1)), cost-sharing (described
in paragraph (2)), and amounts for which
benefits are not provided because of the ap-
plication of the initial coverage limit de-
scribed in paragraph (3) (including costs
incurred for covered drugs described in sec-
tion 1860D(a)(2)(C)); and
‘‘(ii) such costs shall be treated as in-
curred only if they are paid by the indi-
vidual (or by another individual, such as a
family member, on behalf of the individual),
under section 1860D–19 (but only with re-
spect to the percentage of such costs that the
individual is responsible for under that sec-
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tion), under title XIX, or under a State
pharmaceutical assistance program and the
individual (or other individual) is not re-
imbursed through insurance or otherwise, a
group health plan, or other third-party pay-
ment arrangement for such costs.
‘‘(D) INFORMATION
REGARDING
THIRD-
PARTY
REIMBURSEMENT.—In order to ensure
compliance with the requirements of subpara-
graph (C)(ii), the Administrator is authorized to
establish procedures, in coordination with the
Secretary of Treasury and the Secretary of
Labor, for determining whether costs for individ-
uals are being reimbursed through insurance or
otherwise, a group health plan, or other third-
party payment arrangement, and for alerting
the entities in which such individuals are en-
rolled about such reimbursement arrangements.
An entity with a contract under this part may
also periodically ask individuals enrolled in a
plan offered by the entity whether the individ-
uals have or expect to receive such third-party
reimbursement. A material misrepresentation of
the information described in the preceding sen-
tence by an individual (as defined in standards
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set by the Administrator and determined through
a process established by the Administrator) shall
constitute grounds for termination of enrollment
under section 1860D–2(d).
‘‘(5) ANNUAL PERCENTAGE INCREASE.—For pur-
poses of this part, the annual percentage increase
specified in this paragraph for a year is equal to the
annual percentage increase in average per capita ag-
gregate expenditures for covered drugs in the United
States for beneficiaries under this title, as determined
by the Administrator for the 12-month period ending
in July of the previous year.
‘‘(d) ALTERNATIVE COVERAGE REQUIREMENTS.—A
Medicare Prescription Drug plan or MedicareAdvantage
plan may provide a different prescription drug benefit de-
sign from the standard prescription drug coverage described
in subsection (c) so long as the Administrator determines
(based on an actuarial analysis by the Administrator) that
the following requirements are met and the plan applies
for, and receives, the approval of the Administrator for such
benefit design:
‘‘(1) ASSURING AT LEAST ACTUARIALLY EQUIVA-
LENT PRESCRIPTION DRUG COVERAGE.—
‘‘(A) ASSURING
EQUIVALENT
VALUE
OF
TOTAL COVERAGE.—The actuarial value of the
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total coverage (as determined under subsection
(f)) is at least equal to the actuarial value (as
so determined) of standard prescription drug
coverage.
‘‘(B) ASSURING EQUIVALENT UNSUBSIDIZED
VALUE OF COVERAGE.—The unsubsidized value
of the coverage is at least equal to the unsub-
sidized value of standard prescription drug cov-
erage. For purposes of this subparagraph, the
unsubsidized value of coverage is the amount by
which the actuarial value of the coverage (as de-
termined under subsection (f)) exceeds the actu-
arial value of the amounts associated with the
application of section 1860D–17(c) and reinsur-
ance payments under section 1860D–20 with re-
spect to such coverage.
‘‘(C) ASSURING
STANDARD
PAYMENT
FOR
COSTS AT INITIAL COVERAGE LIMIT.—The cov-
erage is designed, based upon an actuarially rep-
resentative pattern of utilization (as determined
under subsection (f)), to provide for the payment,
with respect to costs incurred that are equal to
the initial coverage limit under subsection (c)(3),
of an amount equal to at least the product of—
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‘‘(i) such initial coverage limit minus
the deductible under subsection (c)(1); and
‘‘(ii) the percentage specified in sub-
section (c)(2).
Benefits other than qualified prescription drug cov-
erage shall not be taken into account for purposes of
this paragraph.
‘‘(2) DEDUCTIBLE AND LIMITATION ON OUT-OF-
POCKET EXPENDITURES BY BENEFICIARIES MAY NOT
VARY.—The coverage may not vary the deductible
under subsection (c)(1) for the year or the limitation
on out-of-pocket expenditures by beneficiaries de-
scribed in subsection (c)(4) for the year.
‘‘(e) ACCESS TO NEGOTIATED PRICES.—
‘‘(1) ACCESS.—
‘‘(A) IN
GENERAL.—Under qualified pre-
scription drug coverage offered by an eligible en-
tity or a MedicareAdvantage organization, the
entity or organization shall provide beneficiaries
with access to negotiated prices used for payment
for covered drugs, regardless of the fact that no
benefits may be payable under the coverage with
respect to such drugs because of the application
of the deductible, any cost-sharing, or an initial
coverage limit (described in subsection (c)(3)).
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For purposes of this part, the term ‘negotiated
prices’ includes all discounts, direct or indirect
subsidies, rebates, or other price concessions or
direct or indirect remunerations.
‘‘(B) MEDICAID RELATED PROVISIONS.—In-
sofar as a State elects to provide medical assist-
ance under title XIX for a drug based on the
prices negotiated under a Medicare Prescription
Drug plan under this part—
‘‘(i) the medical assistance for such a
drug shall be disregarded for purposes of a
rebate agreement entered into under section
1927 which would otherwise apply to the
provision of medical assistance for the drug
under title XIX; and
‘‘(ii) the prices negotiated under a
Medicare Prescription Drug plan with re-
spect 
to 
covered 
drugs, 
under 
a
MedicareAdvantage plan with respect to
such drugs, or under a qualified retiree pre-
scription drug plan (as defined in section
1860D–20(e)(4)) with respect to such drugs,
on behalf of eligible beneficiaries, shall (not-
withstanding any other provision of law)
not be taken into account for the purposes
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of establishing the best price under section
1927(c)(1)(C).
‘‘(2) CARDS OR OTHER TECHNOLOGY.—
‘‘(A) IN GENERAL.—In providing the access
under paragraph (1), the eligible entity or
MedicareAdvantage organization shall issue a
card or use other technology pursuant to section
1860D–5(b)(1).
‘‘(B) NATIONAL STANDARDS.—
‘‘(i) DEVELOPMENT.—The Adminis-
trator shall provide for the development of
national standards relating to a standard-
ized format for the card or other technology
required under subparagraph (A). Such
standards shall be compatible with parts C
and D of title XI and may be based on
standards developed by an appropriate
standard setting organization.
‘‘(ii) CONSULTATION.—In developing
the standards under clause (i), the Adminis-
trator shall consult with the National Coun-
cil for Prescription Drug Programs and
other standard-setting organizations deter-
mined appropriate by the Administrator.
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‘‘(iii) IMPLEMENTATION.—The Admin-
istrator shall implement the standards de-
veloped under clause (i) by January 1,
2008.
‘‘(3) DISCLOSURE.—The eligible entity offering a
Medicare 
Prescription 
Drug 
plan 
and 
the
MedicareAdvantage 
organization 
offering 
a
MedicareAdvantage plan shall disclose to the Admin-
istrator (in a manner specified by the Administrator)
the extent to which discounts, direct or indirect sub-
sidies, rebates, or other price concessions or direct or
indirect remunerations made available to the entity
or organization by a manufacturer are passed
through to enrollees through pharmacies and other
dispensers or otherwise. The provisions of section
1927(b)(3)(D) shall apply to information disclosed to
the Administrator under this paragraph in the same
manner as such provisions apply to information dis-
closed under such section.
‘‘(4) AUDITS AND REPORTS.—To protect against
fraud and abuse and to ensure proper disclosures and
accounting under this part, in addition to any pro-
tections against fraud and abuse provided under sec-
tion 1860D–7(f)(1), the Administrator may periodi-
cally audit the financial statements and records of an
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eligible entity offering a Medicare Prescription Drug
plan and a MedicareAdvantage organization offering
a MedicareAdvantage plan with the auditor of the
Administrator’s choice.
‘‘(f) ACTUARIAL VALUATION; DETERMINATION OF AN-
NUAL PERCENTAGE INCREASES.—
‘‘(1) PROCESSES.—For purposes of this section,
the Administrator shall establish processes and
methods—
‘‘(A) for determining the actuarial valu-
ation of prescription drug coverage, including—
‘‘(i) an actuarial valuation of standard
prescription drug coverage and of the rein-
surance payments under section 1860D–20;
‘‘(ii) the use of generally accepted actu-
arial principles and methodologies; and
‘‘(iii) applying the same methodology
for determinations of alternative coverage
under subsection (d) as is used with respect
to determinations of standard prescription
drug coverage under subsection (c); and
‘‘(B) for determining annual percentage in-
creases described in subsection (c)(5).
Such processes shall take into account any effect that
providing actuarially equivalent prescription drug
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coverage rather than standard prescription drug cov-
erage has on drug utilization.
‘‘(2) USE OF OUTSIDE ACTUARIES.—Under the
processes under paragraph (1)(A), eligible entities
and MedicareAdvantage organizations may use actu-
arial opinions certified by independent, qualified ac-
tuaries to establish actuarial values, but the Adminis-
trator shall determine whether such actuarial values
meet the requirements under subsection (c)(1).
‘‘REQUIREMENTS FOR ENTITIES OFFERING MEDICARE PRE-
SCRIPTION DRUG PLANS; ESTABLISHMENT OF STAND-
ARDS
‘‘SEC. 1860D–7. (a) GENERAL REQUIREMENTS.—An
eligible entity offering a Medicare Prescription Drug plan
shall meet the following requirements:
‘‘(1) LICENSURE.—Subject to subsection (c), the
entity is organized and licensed under State law as
a risk-bearing entity eligible to offer health insurance
or health benefits coverage in each State in which it
offers a Medicare Prescription Drug plan.
‘‘(2) ASSUMPTION OF FINANCIAL RISK.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) and subsections (d)(2) and (e) of sec-
tion 1860D–13, to the extent that the entity is at
risk pursuant to such section 1860D–16, the en-
tity assumes financial risk on a prospective basis
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for the benefits that it offers under a Medicare
Prescription Drug plan and that is not covered
under section 1860D–20.
‘‘(B) REINSURANCE
PERMITTED.—To the
extent that the entity is at risk pursuant to sec-
tion 1860D–16, the entity may obtain insurance
or make other arrangements for the cost of cov-
erage provided to any enrolled member under
this part.
‘‘(3) SOLVENCY FOR UNLICENSED ENTITIES.—In
the case of an eligible entity that is not described in
paragraph (1) and for which a waiver has been ap-
proved under subsection (c), such entity shall meet
solvency standards established by the Administrator
under subsection (d).
‘‘(b) CONTRACT REQUIREMENTS.—The Administrator
shall not permit an eligible beneficiary to elect a Medicare
Prescription Drug plan offered by an eligible entity under
this part, and the entity shall not be eligible for payments
under section 1860D–16 or 1860D–20, unless the Adminis-
trator has entered into a contract under this subsection with
the entity with respect to the offering of such plan. Such
a contract with an entity may cover more than 1 Medicare
Prescription Drug plan. Such contract shall provide that
the entity agrees to comply with the applicable requirements
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and standards of this part and the terms and conditions
of payment as provided for in this part.
‘‘(c) WAIVER OF CERTAIN REQUIREMENTS IN ORDER
TO ENSURE BENEFICIARY CHOICE.—
‘‘(1) IN GENERAL.—In the case of an eligible en-
tity that seeks to offer a Medicare Prescription Drug
plan in a State, the Administrator shall waive the re-
quirement of subsection (a)(1) that the entity be li-
censed in that State if the Administrator determines,
based on the application and other evidence presented
to the Administrator, that any of the grounds for ap-
proval of the application described in paragraph (2)
have been met.
‘‘(2) GROUNDS FOR APPROVAL.—The grounds for
approval under this paragraph are the grounds for
approval described in subparagraphs (B), (C), and
(D) of section 1855(a)(2), and also include the appli-
cation by a State of any grounds other than those re-
quired under Federal law.
‘‘(3) APPLICATION OF WAIVER PROCEDURES.—
With respect to an application for a waiver (or a
waiver granted) under this subsection, the provisions
of subparagraphs (E), (F), and (G) of section
1855(a)(2) shall apply.
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‘‘(4) REFERENCES
TO
CERTAIN
PROVISIONS.—
For purposes of this subsection, in applying the pro-
visions of section 1855(a)(2) under this subsection to
Medicare Prescription Drug plans and eligible
entities—
‘‘(A) any reference to a waiver application
under section 1855 shall be treated as a reference
to a waiver application under paragraph (1);
and
‘‘(B) any reference to solvency standards
were treated as a reference to solvency standards
established under subsection (d).
‘‘(d) SOLVENCY STANDARDS FOR NON-LICENSED ENTI-
TIES.—
‘‘(1) ESTABLISHMENT
AND
PUBLICATION.—The
Administrator, in consultation with the National As-
sociation of Insurance Commissioners, shall establish
and publish, by not later than January 1, 2005, fi-
nancial solvency and capital adequacy standards for
entities described in paragraph (2).
‘‘(2) COMPLIANCE WITH STANDARDS.—An eligi-
ble entity that is not licensed by a State under sub-
section (a)(1) and for which a waiver application has
been approved under subsection (c) shall meet sol-
vency and capital adequacy standards established
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under paragraph (1). The Administrator shall estab-
lish certification procedures for such eligible entities
with respect to such solvency standards in the manner
described in section 1855(c)(2).
‘‘(e) LICENSURE DOES NOT SUBSTITUTE FOR OR CON-
STITUTE CERTIFICATION.—The fact that an entity is li-
censed in accordance with subsection (a)(1) or has a waiver
application approved under subsection (c) does not deem
the eligible entity to meet other requirements imposed under
this part for an eligible entity.
‘‘(f) 
INCORPORATION
OF
CERTAIN
MEDICAREADVANTAGE CONTRACT REQUIREMENTS.—The
following provisions of section 1857 shall apply, subject to
subsection (c)(4), to contracts under this section in the same
manner as they apply to contracts under section 1857(a):
‘‘(1) PROTECTIONS AGAINST FRAUD AND BENE-
FICIARY PROTECTIONS.—Section 1857(d).
‘‘(2) 
INTERMEDIATE
SANCTIONS.—Section
1857(g), except that in applying such section—
‘‘(A) the reference in section 1857(g)(1)(B)
to section 1854 is deemed a reference to this
part; and
‘‘(B) the reference in section 1857(g)(1)(F)
to section 1852(k)(2)(A)(ii) shall not be applied.
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‘‘(3) PROCEDURES FOR TERMINATION.—Section
1857(h).
‘‘(g) OTHER STANDARDS.—The Administrator shall
establish by regulation other standards (not described in
subsection (d)) for eligible entities and Medicare Prescrip-
tion Drug plans consistent with, and to carry out, this part.
The Administrator shall publish such regulations by Janu-
ary 1, 2005.
‘‘(h) PERIODIC REVIEW AND REVISION OF STAND-
ARDS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the
Administrator shall periodically review the standards
established under this section and, based on such re-
view, may revise such standards if the Administrator
determines such revision to be appropriate.
‘‘(2) PROHIBITION
OF
MIDYEAR
IMPLEMENTA-
TION
OF
SIGNIFICANT
NEW
REGULATORY
REQUIRE-
MENTS.—The Administrator may not implement,
other than at the beginning of a calendar year, regu-
lations under this section that impose new, signifi-
cant regulatory requirements on an eligible entity or
a Medicare Prescription Drug plan.
‘‘(h) RELATION TO STATE LAWS.—
‘‘(1) IN
GENERAL.—The standards established
under this part shall supersede any State law or reg-
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ulation (including standards described in paragraph
(2)) with respect to Medicare Prescription Drug plans
which are offered by eligible entities under this
part—
‘‘(A) to the extent such law or regulation is
inconsistent with such standards; and
‘‘(B) in the same manner as such laws and
regulations 
are 
superseded 
under 
section
1856(b)(3).
‘‘(2) STANDARDS SPECIFICALLY SUPERSEDED.—
State standards relating to the following are super-
seded under this section:
‘‘(A) Benefit requirements, including re-
quirements relating to cost-sharing and the
structure of formularies.
‘‘(B) Premiums.
‘‘(C) Requirements relating to inclusion or
treatment of providers.
‘‘(D) Coverage determinations (including
related appeals and grievance processes).
‘‘(E) Requirements relating to marketing
materials and summaries and schedules of bene-
fits regarding a Medicare Prescription Drug
plan.
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‘‘(3) PROHIBITION
OF
STATE
IMPOSITION
OF
PREMIUM TAXES.—No State may impose a premium
tax or similar tax with respect to—
‘‘(A) monthly beneficiary obligations paid
to the Administrator for Medicare Prescription
Drug plans under this part; or
‘‘(B) any payments made by the Adminis-
trator under this part to an eligible entity offer-
ing such a plan.
‘‘Subpart 2—Prescription Drug Delivery System
‘‘ESTABLISHMENT OF SERVICE AREAS
‘‘SEC. 1860D–10. (a) ESTABLISHMENT.—
‘‘(1) INITIAL ESTABLISHMENT.—Not later than
April 15, 2005, the Administrator shall establish and
publish the service areas in which Medicare Prescrip-
tion Drug plans may offer benefits under this part.
‘‘(2) PERIODIC REVIEW AND REVISION OF SERV-
ICE AREAS.—The Administrator shall periodically re-
view the service areas applicable under this section
and, based on such review, may revise such service
areas if the Administrator determines such revision to
be appropriate.
‘‘(b) REQUIREMENTS FOR ESTABLISHMENT OF SERV-
ICE AREAS.—
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‘‘(1) IN GENERAL.—The Administrator shall es-
tablish the service areas under subsection (a) in a
manner that—
‘‘(A) maximizes the availability of Medicare
Prescription Drug plans to eligible beneficiaries;
and
‘‘(B) minimizes the ability of eligible enti-
ties offering such plans to favorably select eligible
beneficiaries.
‘‘(2) ADDITIONAL REQUIREMENTS.—The Admin-
istrator shall establish the service areas under sub-
section (a) consistent with the following requirements:
‘‘(A) There shall be at least 10 service areas.
‘‘(B) Each service area must include at
least 1 State.
‘‘(C) The Administrator may not divide
States so that portions of the State are in dif-
ferent service areas.
‘‘(D) To the extent possible, the Adminis-
trator shall include multistate metropolitan sta-
tistical areas in a single service area. The Ad-
ministrator may divide metropolitan statistical
areas where it is necessary to establish service
areas of such size and geography as to maximize
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the participation of Medicare Prescription Drug
plans.
‘‘(3) MAY
CONFORM
TO
MEDICAREADVANTAGE
PREFERRED PROVIDER REGIONS.—The Administrator
may conform the service areas established under this
section to the preferred provider regions established
under section 1858(a)(3).
‘‘PUBLICATION OF RISK ADJUSTERS
‘‘SEC. 1860D–11. (a) PUBLICATION.—Not later than
April 15 of each year (beginning in 2005), the Adminis-
trator shall publish the risk adjusters established under sub-
section (b) to be used in computing—
‘‘(1) the amount of payment to Medicare Pre-
scription Drug plans in the subsequent year under
section 1860D–16(a), insofar as it is attributable to
standard prescription drug coverage (or actuarially
equivalent prescription drug coverage); and
‘‘(2) 
the 
amount 
of 
payment 
to
MedicareAdvantage plans in the subsequent year
under section 1858A(c), insofar as it is attributable
to standard prescription drug coverage (or actuarially
equivalent prescription drug coverage).
‘‘(b) ESTABLISHMENT OF RISK ADJUSTERS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the
Administrator shall establish an appropriate method-
ology for adjusting the amount of payment to plans
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referred to in subsection (a) to take into account vari-
ation in costs based on the differences in actuarial
risk of different enrollees being served. Any such risk
adjustment shall be designed in a manner as to not
result in a change in the aggregate payments de-
scribed in paragraphs (1) and (2) of subsection (a).
‘‘(2) 
CONSIDERATIONS.—In 
establishing 
the
methodology under paragraph (1), the Administrator
may take into account the similar methodologies used
under section 1853(a)(3) to adjust payments to
MedicareAdvantage organizations.
‘‘(3) DATA COLLECTION.—In order to carry out
this subsection, the Administrator shall require—
‘‘(A) eligible entities to submit data regard-
ing drug claims that can be linked at the bene-
ficiary level to part A and part B data and such
other information as the Administrator deter-
mines necessary; and
‘‘(B) MedicareAdvantage organizations (ex-
cept MSA plans or a private fee-for-service plan
that does not provide qualified prescription drug
coverage) to submit data regarding drug claims
that can be linked to other data that such orga-
nizations are required to submit to the Adminis-
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trator and such other information as the Admin-
istrator determines necessary.
‘‘SUBMISSION OF BIDS FOR PROPOSED MEDICARE
PRESCRIPTION DRUG PLANS
‘‘SEC. 1860D–12. (a) SUBMISSION.—
‘‘(1) IN GENERAL.—Each eligible entity that in-
tends to offer a Medicare Prescription Drug plan in
an area in a year (beginning with 2006) shall submit
to the Administrator, at such time in the previous
year and in such manner as the Administrator may
specify, such information as the Administrator may
require, including the information described in sub-
section (b).
‘‘(2) ANNUAL
SUBMISSION.—An eligible entity
shall submit the information required under para-
graph (1) with respect to a Medicare Prescription
Drug plan that the entity intends to offer on an an-
nual basis.
‘‘(b) INFORMATION DESCRIBED.—The information de-
scribed in this subsection includes information on each of
the following:
‘‘(1) The benefits under the plan (as required
under section 1860D–6).
‘‘(2) The actuarial value of the qualified pre-
scription drug coverage.
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‘‘(3) The amount of the monthly plan premium
under the plan, including an actuarial certification
of—
‘‘(A) the actuarial basis for such monthly
plan premium;
‘‘(B) the portion of such monthly plan pre-
mium attributable to standard prescription drug
coverage or actuarially equivalent prescription
drug coverage and, if applicable, to benefits that
are in addition to such coverage; and
‘‘(C) the reduction in such monthly plan
premium resulting from the payments provided
under section 1860D–20.
‘‘(4) The service area for the plan.
‘‘(5) Whether the entity plans to use any funds
in the plan stabilization reserve fund in the Prescrip-
tion Drug Account that are available to the entity to
stabilize or reduce the monthly plan premium sub-
mitted under paragraph (3), and if so, the amount in
such reserve fund that is to be used.
‘‘(6) Such other information as the Adminis-
trator may require to carry out this part.
‘‘(c) OPTIONS REGARDING SERVICE AREAS.—
‘‘(1) IN GENERAL.—The service area of a Medi-
care Prescription Drug plan shall be either—
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‘‘(A) the entire area of 1 of the service areas
established by the Administrator under section
1860D–10; or
‘‘(B) the entire area covered by the medicare
program.
‘‘(2) RULE OF CONSTRUCTION.—Nothing in this
part shall be construed as prohibiting an eligible enti-
ty from submitting separate bids in multiple service
areas as long as each bid is for a single service area.
‘‘APPROVAL OF PROPOSED MEDICARE PRESCRIPTION DRUG
PLANS
‘‘SEC. 1860D–13. (a) APPROVAL.—
‘‘(1) IN GENERAL.—The Administrator shall re-
view the information filed under section 1860D–12
and shall approve or disapprove the Medicare Pre-
scription Drug plan.
‘‘(2) REQUIREMENTS FOR APPROVAL.—The Ad-
ministrator may not approve a Medicare Prescription
Drug plan unless the following requirements are met:
‘‘(A) COMPLIANCE WITH REQUIREMENTS.—
The plan and the entity offering the plan comply
with the requirements under this part.
‘‘(B) APPLICATION OF FEHBP STANDARD.—
(i) The portion of the monthly plan premium
submitted under section 1860D–12(b) that is at-
tributable to standard prescription drug coverage
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reasonably and equitably reflects the actuarial
value of the standard prescription drug coverage
less the actuarial value of the reinsurance pay-
ments under section 1860D–20 and the amount
of any funds in the plan stabilization reserve
fund in the Prescription Drug Account used to
stabilize or reduce the monthly plan premium.
‘‘(ii) If the plan provides additional pre-
scription drug coverage pursuant to section
1860D–6(a)(2), the monthly plan premium rea-
sonably and equitably reflects the actuarial value
of the coverage provided less the actuarial value
of the reinsurance payments under section
1860D–20 and the amount of any funds in the
plan stabilization reserve fund in the Prescrip-
tion Drug Account used to stabilize or reduce the
monthly plan premium.
‘‘(b) NEGOTIATION.—In exercising the authority under
subsection (a), the Administrator shall have the authority
to—
‘‘(1) negotiate the terms and conditions of the
proposed monthly plan premiums submitted and
other terms and conditions of a proposed plan; and
‘‘(2) disapprove, or limit enrollment in, a pro-
posed plan based on—
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‘‘(A) the costs to beneficiaries under the
plan;
‘‘(B) the quality of the coverage and benefits
under the plan;
‘‘(C) the adequacy of the network under the
plan;
‘‘(D) the average aggregate projected cost of
covered drugs under the plan relative to other
Medicare 
Prescription 
Drug 
plans 
and
MedicareAdvantage plans; or
‘‘(E) other factors determined appropriate
by the Administrator.
‘‘(c) SPECIAL RULES FOR APPROVAL.—The Adminis-
trator may approve a Medicare Prescription Drug plan
submitted under section 1860D–12 only if the benefits
under such plan—
‘‘(1) include the required benefits under section
1860D–6(a)(1); and
‘‘(2) are not designed in such a manner that the
Administrator finds is likely to result in favorable se-
lection of eligible beneficiaries.
‘‘(d) ACCESS TO COMPETITIVE COVERAGE.—
‘‘(1) NUMBER
OF
CONTRACTS.—The Adminis-
trator, consistent with the requirements of this part
and the goal of containing costs under this title, shall,
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with respect to a year, approve at least 2 contracts
to offer a Medicare Prescription Drug plan in each
service area (established under section 1860D–10) for
the year.
‘‘(2) AUTHORITY TO REDUCE RISK TO ENSURE
ACCESS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), if the Administrator determines, with
respect to an area, that the access required under
paragraph (1) is not going to be provided in the
area during the subsequent year, the Adminis-
trator shall—
‘‘(i) adjust the percents specified in
paragraphs (2) and (4) of section 1860D–
16(b) in an area in a year; or
‘‘(ii) increase the percent specified in
section 1860D–20(c)(1) in an area in a
year.
The administrator shall exercise the authority
under the preceding sentence only so long as
(and to the extent) necessary to assure the access
guaranteed under paragraph (1).
‘‘(B) REQUIREMENTS FOR USE OF AUTHOR-
ITY.—In exercising authority under subpara-
graph (A), the Administrator—
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‘‘(i) shall not provide for the full un-
derwriting of financial risk for any eligible
entity;
‘‘(ii) shall not provide for any under-
writing of financial risk for a public eligi-
ble entity with respect to the offering of a
nationwide Medicare Prescription Drug
plan; and
‘‘(iii) shall seek to maximize the as-
sumption of financial risk by eligible enti-
ties to ensure fair competition among Medi-
care Prescription Drug plans.
‘‘(C) REQUIREMENT
TO
ACCEPT
FULL-
RISK QUALIFIED BIDS BEFORE EXERCISING AU-
THORITY.—The Administrator may not exercise
the authority under subparagraph (A) with re-
spect to an area and year if 2 or more qualified
bids are submitted by eligible entities to offer a
Medicare Prescription Drug plan in the area for
the year under paragraph (1) before the applica-
tion of subparagraph (A).
‘‘(D) REPORTS.—The Administrator, in
each annual report to Congress under section
1808(c)(1)(D), shall include information on the
exercise of authority under subparagraph (A).
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The Administrator also shall include such rec-
ommendations as may be appropriate to limit
the exercise of such authority.
‘‘(e) GUARANTEED ACCESS.—
‘‘(1) ACCESS.—In order to assure access to quali-
fied prescription drug coverage in an area, the Ad-
ministrator shall take the following steps:
‘‘(A) DETERMINATION.—Not later than Sep-
tember 1 of each year (beginning in 2005) and
for each area (established under section 1860D–
10), the Administrator shall make a determina-
tion as to whether the access required under sub-
section (d)(1) is going to be provided in the area
during the subsequent year. Such determination
shall be made after the Administrator has exer-
cised the authority under subsection (d)(2).
‘‘(B) CONTRACT WITH AN ENTITY TO PRO-
VIDE COVERAGE IN AN AREA.—Subject to para-
graph (3), if the Administrator makes a deter-
mination under subparagraph (A) that the ac-
cess required under subsection (d)(1) is not going
to be provided in an area during the subsequent
year, the Administrator shall enter into a con-
tract with an entity to provide eligible bene-
ficiaries enrolled under this part (and not, ex-
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cept for an MSA plan or a private fee-for-service
plan that does not provide qualified prescription
drug coverage enrolled in a MedicareAdvantage
plan) and residing in the area with standard
prescription drug coverage (including access to
negotiated prices for such beneficiaries pursuant
to section 1860D–6(e)) during the subsequent
year. An entity may be awarded a contract for
more than 1 of the areas for which the Adminis-
trator is required to enter into a contract under
this paragraph but the Administrator may enter
into only 1 such contract in each such area.
‘‘(C) REQUIREMENT TO ACCEPT 2 REDUCED-
RISK QUALIFIED BIDS BEFORE ENTERING INTO
CONTRACT.—The Administrator may not enter
into a contract under subparagraph (B) with re-
spect to an area and year if 2 or more qualified
bids are submitted by eligible entities to offer a
Medicare Prescription Drug plan in the area for
the year after the Administrator has exercised
the authority under subsection (d)(2) in the area
for the year.
‘‘(D) ENTITY
REQUIRED
TO
MEET
BENE-
FICIARY
PROTECTION
AND
OTHER
REQUIRE-
MENTS.—An entity with a contract under sub-
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paragraph (B) shall meet the requirements de-
scribed in section 1860D–5 and such other re-
quirements determined appropriate by the Ad-
ministrator.
‘‘(E) COMPETITIVE
PROCEDURES.—Com-
petitive procedures (as defined in section 4(5) of
the Office of Federal Procurement Policy Act (41
U.S.C. 403(5))) shall be used to enter into a con-
tract under subparagraph (B).
‘‘(2) MONTHLY
BENEFICIARY
OBLIGATION
FOR
ENROLLMENT.—
‘‘(A) IN GENERAL.—In the case of an eligi-
ble beneficiary receiving access to qualified pre-
scription drug coverage through enrollment with
an entity with a contract under paragraph
(1)(B), the monthly beneficiary obligation of
such beneficiary for such enrollment shall be an
amount equal to the applicable percent (as deter-
mined under section 1860D–17(c)) of the month-
ly national average premium (as computed
under section 1860D–15) for the area for the
year, as adjusted using the geographic adjuster
under subparagraph (B).
‘‘(B) ESTABLISHMENT OF GEOGRAPHIC AD-
JUSTER.—The Administrator shall establish an
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appropriate 
methodology 
for 
adjusting 
the
monthly beneficiary obligation (as computed
under subparagraph (A)) for the year in an area
to take into account differences in drug prices
among areas. In establishing such methodology,
the Administrator may take into account dif-
ferences in drug utilization between eligible bene-
ficiaries in an area and eligible beneficiaries in
other areas and the results of the ongoing study
required under section 106 of the Prescription
Drug and Medicare Improvement Act of 2003.
Any such adjustment shall be applied in a man-
ner so as to not result in a change in the aggre-
gate payments made under this part that would
have been made if the Administrator had not ap-
plied such adjustment.
‘‘(3) PAYMENTS UNDER THE CONTRACT.—
‘‘(A) IN GENERAL.—A contract entered into
under paragraph (1)(B) shall provide for—
‘‘(i) payment for the negotiated costs of
covered drugs provided to eligible bene-
ficiaries enrolled with the entity; and
‘‘(ii) payment of prescription manage-
ment fees that are tied to performance re-
quirements established by the Administrator
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for the management, administration, and
delivery of the benefits under the contract.
‘‘(B) PERFORMANCE REQUIREMENTS.—The
performance requirements established by the Ad-
ministrator pursuant to subparagraph (A)(ii)
shall include the following:
‘‘(i) The entity contains costs to the
Prescription Drug Account and to eligible
beneficiaries enrolled under this part and
with the entity.
‘‘(ii) The entity provides such bene-
ficiaries with quality clinical care.
‘‘(iii) The entity provides such bene-
ficiaries with quality services.
‘‘(C) ENTITY ONLY AT RISK TO THE EXTENT
OF THE FEES TIED TO PERFORMANCE REQUIRE-
MENTS.—An entity with a contract under para-
graph (1)(B) shall only be at risk for the provi-
sion of benefits under the contract to the extent
that the management fees paid to the entity are
tied to performance requirements under subpara-
graph (A)(ii).
‘‘(4) ELIGIBLE ENTITY THAT SUBMITTED A BID
FOR THE AREA NOT ELIGIBLE TO BE AWARDED THE
CONTRACT.—An eligible entity that submitted a bid to
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offer a Medicare Prescription Drug plan for an area
for a year under section 1860D–12, including a bid
submitted after the Administrator has exercised the
authority under subsection (d)(2), may not be award-
ed a contract under paragraph (1)(B) for that area
and year. The previous sentence shall apply to an en-
tity that was awarded a contract under paragraph
(1)(B) for the area in the previous year and sub-
mitted such a bid under section 1860D–12 for the
year.
‘‘(5) TERM OF CONTRACT.—A contract entered
into under paragraph (1)(B) shall be for a 1-year pe-
riod. Such contract may provide for renewal at the
discretion of the Administrator if the Administrator
is required to enter into a contract under such para-
graph with respect to the area covered by such con-
tract for the subsequent year.
‘‘(6) ENTITY NOT PERMITTED TO MARKET OR
BRAND THE CONTRACT.—An entity with a contract
under paragraph (1)(B) may not engage in any mar-
keting or branding of such contract.
‘‘(7) RULES FOR AREAS WHERE ONLY 1 COM-
PETITIVELY BID PLAN WAS APPROVED.—In the case of
an area where (before the application of this sub-
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section) only 1 Medicare Prescription Drug plan was
approved for a year—
‘‘(A) the plan may (at the option of the
plan) be offered in the area for the year (under
rules applicable to such plans under this part
and not under this subsection);
‘‘(B) eligible beneficiaries described in para-
graph (1)(B) may receive access to qualified pre-
scription drug coverage through enrollment in
the plan or with an entity with a contract under
paragraph (1)(B); and
‘‘(C) for purposes of applying section
1860D–3(a)(1)(A)(ii), such plan shall be the
plan designated in the area under such section.
‘‘(f) TWO-YEAR CONTRACTS.—Except for a contract
entered into under subsection (e)(1)(B), a contract approved
under this part shall be for a 2-year period.
‘‘COMPUTATION OF MONTHLY STANDARD PRESCRIPTION
DRUG COVERAGE PREMIUMS
‘‘SEC. 1860D–14. (a) IN GENERAL.—For each year
(beginning with 2006), the Administrator shall compute a
monthly standard prescription drug coverage premium for
each Medicare Prescription Drug plan approved under sec-
tion 1860D–13 and for each MedicareAdvantage plan.
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‘‘(b) REQUIREMENTS.—The monthly standard pre-
scription drug coverage premium for a plan for a year shall
be equal to—
‘‘(1) in the case of a plan offered by an eligible
entity or MedicareAdvantage organization that pro-
vides standard prescription drug coverage or an actu-
arially equivalent prescription drug coverage and
does not provide additional prescription drug cov-
erage pursuant to section 1860D–6(a)(2), the monthly
plan premium approved for the plan under section
1860D–13 for the year; and
‘‘(2) in the case of a plan offered by an eligible
entity or MedicareAdvantage organization that pro-
vides additional prescription drug coverage pursuant
to section 1860D–6(a)(2)—
‘‘(A) an amount that reflects only the actu-
arial value of the standard prescription drug
coverage offered under the plan; or
‘‘(B) if determined appropriate by the Ad-
ministrator, the monthly plan premium ap-
proved under section 1860D–13 for the year for
the Medicare Prescription Drug plan (or, if ap-
plicable, the MedicareAdvantage plan) that, as
required under section 1860D–6(a)(2)(B) for a
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Medicare Prescription Drug plans and a
MedicareAdvantage plan—
‘‘(i) is offered by such entity or organi-
zation in the same area as the plan; and
‘‘(ii) does not provide additional pre-
scription drug coverage pursuant to such
section.
‘‘COMPUTATION OF MONTHLY NATIONAL AVERAGE PREMIUM
‘‘SEC. 1860D–15. (a) COMPUTATION.—
‘‘(1) IN
GENERAL.—For each year (beginning
with 2006) the Administrator shall compute a month-
ly national average premium equal to the average of
the monthly standard prescription drug coverage pre-
mium for each Medicare Prescription Drug plan and
each MedicareAdvantage plan (as computed under
section 1860D–14). Such premium may be adjusted
pursuant to any methodology determined under sub-
section (b), as determined appropriate by the Admin-
istrator.
‘‘(2) WEIGHTED
AVERAGE.—The monthly na-
tional average premium computed under paragraph
(1) shall be a weighted average, with the weight for
each plan being equal to the average number of bene-
ficiaries enrolled under such plan in the previous
year.
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‘‘(b) GEOGRAPHIC ADJUSTMENT.—The Administrator
shall establish an appropriate methodology for adjusting the
monthly national average premium (as computed under
subsection (a)) for the year in an area to take into account
differences in prices for covered drugs among different
areas. In establishing such methodology, the Administrator
may take into account differences in drug utilization be-
tween eligible beneficiaries in that area and other eligible
beneficiaries and the results of the ongoing study required
under section 106 of the Prescription Drug and Medicare
Improvement Act of 2003. Any such adjustment shall be ap-
plied in a manner as to not result in a change in aggregate
payments made under this part than would have been made
if the Administrator had not applied such adjustment.
‘‘(c) SPECIAL RULE FOR 2006.—For purposes of ap-
plying this section for 2006, the Administrator shall estab-
lish procedures for determining the weighted average under
subsection (a)(2) for 2005.
‘‘PAYMENTS TO ELIGIBLE ENTITIES
‘‘SEC. 1860D–16. (a) PAYMENT OF MONTHLY PLAN
PREMIUMS.—For each year (beginning with 2006), the Ad-
ministrator shall pay to each entity offering a Medicare
Prescription Drug plan in which an eligible beneficiary is
enrolled an amount equal to the full amount of the monthly
plan premium approved for the plan under section 1860D–
13 on behalf of each eligible beneficiary enrolled in such
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plan for the year, as adjusted using the risk adjusters that
apply to the standard prescription drug coverage published
under section 1860D–11.
‘‘(b) PORTION
OF TOTAL PAYMENTS
OF MONTHLY
PLAN PREMIUMS SUBJECT TO RISK.—
‘‘(1) NOTIFICATION
OF
SPENDING
UNDER
THE
PLAN.—
‘‘(A) IN GENERAL.—For each year (begin-
ning in 2007), the eligible entity offering a
Medicare Prescription Drug plan shall notify the
Administrator of the following:
‘‘(i) TOTAL ACTUAL COSTS.—The total
amount of costs that the entity incurred in
providing standard prescription drug cov-
erage (or prescription drug coverage that is
actuarially equivalent pursuant to section
1860D–6(a)(1)(B)) for all enrollees under
the plan in the previous year.
‘‘(ii) AMOUNTS RESULTING IN ACTUAL
COSTS.—With respect to the total amount
under clause (i) for the year—
‘‘(I) the aggregate amount of pay-
ments made by the entity to phar-
macies and other entities with respect
to such coverage for such enrollees; and
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‘‘(II) the aggregate amount of dis-
counts, direct or indirect subsidies, re-
bates, or other price concessions or di-
rect or indirect remunerations made to
the entity with respect to such coverage
for such enrollees.
‘‘(B) CERTAIN EXPENSES NOT INCLUDED.—
The amount under subparagraph (A)(i) may not
include—
‘‘(i) administrative expenses incurred
in providing the coverage described in sub-
paragraph (A)(i);
‘‘(ii) amounts expended on providing
additional prescription drug coverage pur-
suant to section 1860D–6(a)(2);
‘‘(iii) amounts expended for which the
entity is subsequently provided with rein-
surance payments under section 1860D–20;
or
‘‘(iv) discounts, direct or indirect sub-
sidies, rebates, or other price concessions or
direct or indirect remunerations made to
the entity with respect to coverage described
in subparagraph (A)(i).
‘‘(2) ADJUSTMENT OF PAYMENT.—
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‘‘(A) NO ADJUSTMENT IF ALLOWABLE COSTS
WITHIN RISK CORRIDOR.—If the allowable costs
(specified in paragraph (3)) for the plan for the
year are not more than the first threshold upper
limit of the risk corridor (specified in paragraph
(4)(A)(iii)) and are not less than the first thresh-
old lower limit of the risk corridor (specified in
paragraph (4)(A)(i)) for the plan for the year,
then no additional payments shall be made by
the Administrator and no payments shall be
made by (or collected from) the eligible entity of-
fering the plan.
‘‘(B) INCREASE IN PAYMENT IF ALLOWABLE
COSTS
ABOVE
UPPER
LIMIT
OF
RISK
COR-
RIDOR.—
‘‘(i) IN
GENERAL.—If the allowable
costs for the plan for the year are more than
the first threshold upper limit of the risk
corridor for the plan for the year, then the
Administrator shall increase the total of the
monthly payments made to the entity offer-
ing the plan for the year under subsection
(a) by an amount equal to the sum of—
‘‘(I) the applicable percent (as de-
fined in subparagraph (D)) of such al-
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lowable costs which are more than such
first threshold upper limit of the risk
corridor and not more than the second
threshold upper limit of the risk cor-
ridor for the plan for the year (as spec-
ified under paragraph (4)(A)(iv)); and
‘‘(II) 90 percent of such allowable
costs which are more than such second
threshold upper limit of the risk cor-
ridor.
‘‘(ii) SPECIAL
TRANSITIONAL
COR-
RIDOR FOR 2006 AND 2007.—If the Adminis-
trator determines with respect to 2006 or
2007 that at least 60 percent of Medicare
Prescription 
Drug 
plans 
and
MedicareAdvantage Plans (excluding MSA
plans or private fee-for-service plans that do
not provide qualified prescription drug cov-
erage) have allowable costs for the plan for
the year that are more than the first thresh-
old upper limit of the risk corridor for the
plan for the year and that such plans rep-
resent at least 60 percent of eligible bene-
ficiaries enrolled under this part, clause
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(i)(I) shall be applied by substituting ‘90
percent’ for ‘applicable percent’.
‘‘(C) PLAN PAYMENT IF ALLOWABLE COSTS
BELOW LOWER LIMIT OF RISK CORRIDOR.—If the
allowable costs for the plan for the year are less
than the first threshold lower limit of the risk
corridor for the plan for the year, then the entity
offering the plan shall a make a payment to the
Administrator of an amount (or the Adminis-
trator shall otherwise recover from the plan an
amount) equal to—
‘‘(i) the applicable percent (as so de-
fined) of such allowable costs which are less
than such first threshold lower limit of the
risk corridor and not less than the second
threshold lower limit of the risk corridor for
the plan for the year (as specified under
paragraph (4)(A)(ii)); and
‘‘(ii) 90 percent of such allowable costs
which are less than such second threshold
lower limit of the risk corridor.
‘‘(D) APPLICABLE PERCENT DEFINED.—For
purposes of this paragraph, the term ‘applicable
percent’ means—
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‘‘(i) for 2006 and 2007, 75 percent;
and
‘‘(ii) for 2008 and subsequent years, 50
percent.
‘‘(3) ESTABLISHMENT OF ALLOWABLE COSTS.—
For each year, the Administrator shall establish the
allowable costs for each Medicare Prescription Drug
plan for the year. The allowable costs for a plan for
a year shall be equal to the amount described in
paragraph (1)(A)(i) for the plan for the year.
‘‘(4) ESTABLISHMENT OF RISK CORRIDORS.—
‘‘(A) IN GENERAL.—For each year (begin-
ning with 2006), the Administrator shall estab-
lish a risk corridor for each Medicare Prescrip-
tion Drug plan. The risk corridor for a plan for
a year shall be equal to a range as follows:
‘‘(i) 
FIRST
THRESHOLD
LOWER
LIMIT.—The first threshold lower limit of
such corridor shall be equal to—
‘‘(I) the target amount described
in subparagraph (B) for the plan;
minus
‘‘(II) an amount equal to the first
threshold risk percentage for the plan
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(as determined under subparagraph
(C)(i)) of such target amount.
‘‘(ii) 
SECOND
THRESHOLD
LOWER
LIMIT.—The second threshold lower limit of
such corridor shall be equal to—
‘‘(I) the target amount described
in subparagraph (B) for the plan;
minus
‘‘(II) an amount equal to the sec-
ond threshold risk percentage for the
plan (as determined under subpara-
graph (C)(ii)) of such target amount.
‘‘(iii) 
FIRST
THRESHOLD
UPPER
LIMIT.—The first threshold upper limit of
such corridor shall be equal to the sum of—
‘‘(I) such target amount; and
‘‘(II) the amount described in
clause (i)(II).
‘‘(iv) 
SECOND
THRESHOLD
UPPER
LIMIT.—The second threshold upper limit of
such corridor shall be equal to the sum of—
‘‘(I) such target amount; and
‘‘(II) the amount described in
clause (ii)(II).
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‘‘(B) TARGET
AMOUNT
DESCRIBED.—The
target amount described in this paragraph is,
with respect to a Medicare Prescription Drug
plan offered by an eligible entity in a year—
‘‘(i) in the case of a plan offered by an
eligible entity that provides standard pre-
scription drug coverage or actuarially
equivalent prescription drug coverage and
does not provide additional prescription
drug coverage pursuant to section 1860D–
6(a)(2), an amount equal to the total of the
monthly plan premiums paid to such entity
for such plan for the year pursuant to sub-
section (a), reduced by the percentage speci-
fied in subparagraph (D); and
‘‘(ii) in the case of a plan offered by
an eligible entity that provides additional
prescription drug coverage pursuant to sec-
tion 1860D–6(a)(2), an amount equal to the
total of the monthly plan premiums paid to
such entity for such plan for the year pur-
suant to subsection (a) that are related to
standard prescription drug coverage (deter-
mined using the rules under section 1860D–
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14(b)), reduced by the percentage specified
in subparagraph (D).
‘‘(C) FIRST AND SECOND THRESHOLD RISK
PERCENTAGE DEFINED.—
‘‘(i) FIRST
THRESHOLD
RISK
PER-
CENTAGE.—Subject to clause (iii), for pur-
poses of this section, the first threshold risk
percentage is—
‘‘(I) for 2006 and 2007, and 2.5
percent;
‘‘(II) for 2008 through 2011, 5
percent; and
‘‘(III) for 2012 and subsequent
years, a percentage established by the
Administrator, but in no case less than
5 percent.
‘‘(ii) SECOND THRESHOLD RISK PER-
CENTAGE.—Subject to clause (iii), for pur-
poses of this section, the second threshold
risk percentage is—
‘‘(I) for 2006 and 2007, 5.0 per-
cent;
‘‘(II) for 2008 through 2011, 10
percent
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‘‘(III) for 2012 and subsequent
years, a percentage established by the
Administrator that is greater than the
percent established for the year under
clause (i)(III), but in no case less than
10 percent.
‘‘(iii) REDUCTION OF RISK PERCENT-
AGE TO ENSURE 2 PLANS IN AN AREA.—
Pursuant to paragraph (2) of section
1860D–13(d), the Administrator may re-
duce the applicable first or second threshold
risk percentage in an area in a year in
order to ensure the access to plans required
under paragraph (1) of such section.
‘‘(D) TARGET AMOUNT NOT TO INCLUDE AD-
MINISTRATIVE EXPENSES NEGOTIATED BETWEEN
THE ADMINISTRATOR AND THE ENTITY OFFERING
THE PLAN.—For each year (beginning in 2006),
the Administrator and the entity offering a
Medicare Prescription Drug plan shall negotiate,
as part of the negotiation process described in
section 1860D–13(b) during the previous year,
the percentage of the payments to the entity
under subsection (a) with respect to the plan
that are attributable and reasonably incurred for
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administrative expenses for providing standard
prescription drug coverage or actuarially equiva-
lent prescription drug coverage in the year.
‘‘(5) PLANS AT RISK FOR ENTIRE AMOUNT OF
ADDITIONAL PRESCRIPTION DRUG COVERAGE.—An el-
igible entity that offers a Medicare Prescription Drug
plan that provides additional prescription drug cov-
erage pursuant to section 1860D–6(a)(2) shall be at
full financial risk for the provision of such additional
coverage.
‘‘(6) NO EFFECT ON ELIGIBLE BENEFICIARIES.—
No change in payments made by reason of this sub-
section shall affect the beneficiary obligation under
section 1860D–17 for the year in which such change
in payments is made.
‘‘(7) DISCLOSURE OF INFORMATION.—
‘‘(A) IN
GENERAL.—Each contract under
this part shall provide that—
‘‘(i) the entity offering a Medicare Pre-
scription Drug plan shall provide the Ad-
ministrator with such information as the
Administrator determines is necessary to
carry out this section; and
‘‘(ii) the Administrator shall have the
right to inspect and audit any books and
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records of the eligible entity that pertain to
the information regarding costs provided to
the Administrator under paragraph (1).
‘‘(B) RESTRICTION
ON
USE
OF
INFORMA-
TION.—Information disclosed or obtained pursu-
ant to the provisions of this section may be used
by officers and employees of the Department of
Health and Human Services only for the pur-
poses of, and to the extent necessary in, carrying
out this section.
‘‘(c) STABILIZATION RESERVE FUND.—
‘‘(1) ESTABLISHMENT.—
‘‘(A) IN
GENERAL.—There is established,
within the Prescription Drug Account, a sta-
bilization reserve fund in which the Adminis-
trator shall deposit amounts on behalf of eligible
entities in accordance with paragraph (2) and
such amounts shall be made available by the Sec-
retary for the use of eligible entities in contract
year 2008 and subsequent contract years in ac-
cordance with paragraph (3).
‘‘(B) REVERSION OF UNUSED AMOUNTS.—
Any amount in the stabilization reserve fund es-
tablished under subparagraph (A) that is not ex-
pended by an eligible entity in accordance with
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paragraph (3) or that was deposited for the use
of an eligible entity that no longer has a contract
under this part shall revert for the use of the
Prescription Drug Account.
‘‘(2) DEPOSIT OF AMOUNTS FOR 5 YEARS.—
‘‘(A) IN GENERAL.—If the target amount for
a Medicare Prescription Drug plan for 2006,
2007, 2008, 2009, or 2010 (as determined under
subsection (b)(4)(B)) exceeds the applicable costs
for the plan for the year by more than 3 percent,
then—
‘‘(i) the entity offering the plan shall
make a payment to the Administrator of an
amount (or the Administrator shall other-
wise recover from the plan an amount)
equal to the portion of such excess that is in
excess of 3 percent of the target amount;
and
‘‘(ii) the Administrator shall deposit
an amount equal to the amount collected or
otherwise recovered under clause (i) in the
stabilization reserve fund on behalf of the el-
igible entity offering such plan.
‘‘(B) APPLICABLE COSTS.—For purposes of
subparagraph (A), the term ‘applicable costs’
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means, with respect to a Medicare Prescription
Drug plan and year, an amount equal the sum
of—
‘‘(i) the allowable costs for the plan
and year (as determined under subsection
(b)(3)(A); and
‘‘(ii) the total amount by which month-
ly payments to the plan were reduced (or
otherwise recovered from the plan) for the
year under subsection (b)(2)(C).
‘‘(3) USE OF RESERVE FUND TO STABILIZE OR
REDUCE MONTHLY PLAN PREMIUMS.—
‘‘(A) IN GENERAL.—For any contract year
beginning after 2007, an eligible entity offering
a Medicare Prescription Drug plan may use
funds in the stabilization reserve fund in the
Prescription Drug Account that were deposited
in such fund on behalf of the entity to stabilize
or reduce monthly plan premiums submitted
under section 1860D–12(b)(3).
‘‘(B) 
PROCEDURES.—The 
Administrator
shall establish procedures for—
‘‘(i) reducing monthly plan premiums
submitted under section 1860D–12(b)(3)
pursuant to subparagraph (A); and
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‘‘(ii) making payments from the plan
stabilization reserve fund in the Prescrip-
tion Drug Account to eligible entities that
inform the Secretary under section 1860D–
12(b)(5) of the entity’s intent to use funds
in such reserve fund to reduce such pre-
miums.
‘‘(d) PORTION OF PAYMENTS OF MONTHLY PLAN PRE-
MIUMS ATTRIBUTABLE
TO ADMINISTRATIVE EXPENSES
TIED TO PERFORMANCE REQUIREMENTS.—
‘‘(1) IN GENERAL.—The Administrator shall es-
tablish procedures to adjust the portion of the pay-
ments made to an entity under subsection (a) that are
attributable to administrative expenses (as deter-
mined pursuant to subsection (b)(4)(D)) to ensure
that the entity meets the performance requirements
described in clauses (ii) and (iii) of section 1860D–
13(e)(4)(B).
‘‘(2) NO EFFECT ON ELIGIBLE BENEFICIARIES.—
No change in payments made by reason of this sub-
section shall affect the beneficiary obligation under
section 1860D–17 for the year in which such change
in payments is made.
‘‘(e) PAYMENT TERMS.—
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‘‘(1) ADMINISTRATOR PAYMENTS.—Payments to
an entity offering a Medicare Prescription Drug plan
under this section shall be made in a manner deter-
mined by the Administrator and based upon the man-
ner in which payments are made under section
1853(a) (relating to payments to MedicareAdvantage
organizations).
‘‘(2) PLAN PAYMENTS.—The Administrator shall
establish a process for collecting (or other otherwise
recovering) amounts that an entity offering a Medi-
care Prescription Drug plan is required to make to
the Administrator under this section.
‘‘(f) PAYMENTS TO MEDICAREADVANTAGE PLANS.—
For provisions related to payments to MedicareAdvantage
organizations offering MedicareAdvantage plans for quali-
fied prescription drug coverage made available under the
plan, see section 1858A(c).
‘‘(g) SECONDARY PAYER PROVISIONS.—The provisions
of section 1862(b) shall apply to the benefits provided under
this part.
‘‘COMPUTATION OF MONTHLY BENEFICIARY OBLIGATION
‘‘SEC. 1860D–17. (a) BENEFICIARIES ENROLLED IN A
MEDICARE PRESCRIPTION DRUG PLAN.—In the case of an
eligible beneficiary enrolled under this part and in a Medi-
care Prescription Drug plan, the monthly beneficiary obli-
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gation for enrollment in such plan in a year shall be deter-
mined as follows:
‘‘(1) MONTHLY PLAN PREMIUM EQUALS MONTHLY
NATIONAL AVERAGE PREMIUM.—If the amount of the
monthly plan premium approved by the Adminis-
trator under section 1860D–13 for a Medicare Pre-
scription Drug plan for the year is equal to the
monthly national average premium (as computed
under section 1860D–15) for the area for the year, the
monthly beneficiary obligation of the eligible bene-
ficiary in that year shall be an amount equal to the
applicable percent (as determined in subsection (c)) of
the amount of such monthly national average pre-
mium.
‘‘(2) MONTHLY
PLAN
PREMIUM
LESS
THAN
MONTHLY
NATIONAL
AVERAGE
PREMIUM.—If the
amount of the monthly plan premium approved by
the Administrator under section 1860D–13 for the
Medicare Prescription Drug plan for the year is less
than the monthly national average premium (as com-
puted under section 1860D–15) for the area for the
year, the monthly beneficiary obligation of the eligible
beneficiary in that year shall be an amount equal
to—
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‘‘(A) the applicable percent of the amount of
such monthly national average premium; minus
‘‘(B) the amount by which such monthly
national average premium exceeds the amount of
the monthly plan premium approved by the Ad-
ministrator for the plan.
‘‘(3) MONTHLY PLAN PREMIUM EXCEEDS MONTH-
LY NATIONAL AVERAGE PREMIUM.—If the amount of
the monthly plan premium approved by the Adminis-
trator under section 1860D–13 for a Medicare Pre-
scription Drug plan for the year exceeds the monthly
national average premium (as computed under sec-
tion 1860D–15) for the area for the year, the monthly
beneficiary obligation of the eligible beneficiary in
that year shall be an amount equal to the sum of—
‘‘(A) the applicable percent of the amount of
such monthly national average premium; plus
‘‘(B) the amount by which the monthly plan
premium approved by the Administrator for the
plan exceeds the amount of such monthly na-
tional average premium.
‘‘(b) 
BENEFICIARIES
ENROLLED
IN
A
MEDICAREADVANTAGE PLAN.—In the case of an eligible
beneficiary that is enrolled in a MedicareAdvantage plan
(except for an MSA plan or a private fee-for-service plan
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that does not provide qualified prescription drug coverage),
the Medicare monthly beneficiary obligation for qualified
prescription drug coverage shall be determined pursuant to
section 1858A(d).
‘‘(c) APPLICABLE PERCENT.—For purposes of this sec-
tion, except as provided in section 1860D–19 (relating to
premium subsidies for low-income individuals), the appli-
cable percent for any year is the percentage equal to a
fraction—
‘‘(1) the numerator of which is 30 percent; and
‘‘(2) the denominator of which is 100 percent
minus a percentage equal to—
‘‘(A) the total reinsurance payments which
the Administrator estimates will be made under
section 1860D–20 to qualifying entities described
in subsection (e)(3) of such section during the
year; divided by
‘‘(B) the sum of—
‘‘(i) the amount estimated under sub-
paragraph (A) for the year; and
‘‘(ii) the total payments which the Ad-
ministrator estimates will be made under
sections 1860D–16 and 1858A(c) during the
year that relate to standard prescription
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drug coverage (or actuarially equivalent
prescription drug coverage).
‘‘COLLECTION OF MONTHLY BENEFICIARY OBLIGATION
‘‘SEC. 1860D–18. (a) COLLECTION
OF AMOUNT
IN
SAME MANNER AS PART B PREMIUM.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the
amount of the monthly beneficiary obligation (deter-
mined under section 1860D–17) applicable to an eli-
gible beneficiary under this part (after application of
any increase under section 1860D–2(b)(1)(A)) shall
be collected and credited to the Prescription Drug Ac-
count in the same manner as the monthly premium
determined under section 1839 is collected and cred-
ited to the Federal Supplementary Medical Insurance
Trust Fund under section 1840.
‘‘(2) PROCEDURES FOR SPONSOR TO PAY OBLIGA-
TION ON BEHALF OF RETIREE.—The Administrator
shall establish procedures under which an eligible ben-
eficiary enrolled in a Medicare Prescription Drug
plan may elect to have the sponsor (as defined in
paragraph (5) of section 1860D–20(e)) of employ-
ment-based retiree health coverage (as defined in
paragraph (4)(B) of such section) in which the bene-
ficiary is enrolled pay the amount of the monthly
beneficiary obligation applicable to the beneficiary
under this part directly to the Administrator.
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‘‘(b) INFORMATION NECESSARY FOR COLLECTION.—In
order to carry out subsection (a), the Administrator shall
transmit to the Commissioner of Social Security—
‘‘(1) by the beginning of each year, the name, so-
cial security account number, monthly beneficiary ob-
ligation owed by each individual enrolled in a Medi-
care Prescription Drug plan for each month during
the year, and other information determined appro-
priate by the Administrator; and
‘‘(2) periodically throughout the year, informa-
tion to update the information previously transmitted
under this paragraph for the year.
‘‘(c) COLLECTION FOR BENEFICIARIES ENROLLED IN
A MEDICAREADVANTAGE PLAN.—For provisions related to
the collection of the monthly beneficiary obligation for
qualified 
prescription 
drug 
coverage 
under 
a
MedicareAdvantage plan, see section 1858A(e).
‘‘PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-
INCOME INDIVIDUALS
‘‘SEC. 1860D–19. (a) AMOUNT OF SUBSIDIES.—
‘‘(1) FULL PREMIUM SUBSIDY AND REDUCTION
OF COST-SHARING FOR QUALIFIED MEDICARE BENE-
FICIARIES.—In the case of a qualified medicare bene-
ficiary (as defined in paragraph (4)(A))—
‘‘(A) section 1860D–17 shall be applied—
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‘‘(i) in subsection (c), by substituting
‘0 percent’ for the applicable percent that
would otherwise apply under such sub-
section; and
‘‘(ii) in subsection (a)(3)(B), by sub-
stituting ‘the amount of the monthly plan
premium for the Medicare Prescription
Drug plan with the lowest monthly plan
premium in the area that the beneficiary
resides’ for ‘the amount of such monthly na-
tional average premium’, but only if there
is no Medicare Prescription Drug plan of-
fered in the area in which the individual re-
sides that has a monthly plan premium for
the year that is equal to or less than the
monthly national average premium (as
computed under section 1860D–15) for the
area for the year;
‘‘(B) the annual deductible applicable under
section 1860D–6(c)(1) in a year shall be reduced
to $0;
‘‘(C) section 1860D–6(c)(2) shall be applied
by substituting ‘2.5 percent’ for ‘50 percent’ each
place it appears;
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‘‘(D) such individual shall be responsible for
cost-sharing for the cost of any covered drug pro-
vided in the year (after the individual has
reached the initial coverage limit described in
section 1860D–6(c)(3) and before the individual
has reached the annual out-of-pocket limit under
section 1860D–6(c)(4)(A)), that is equal to 5.0
percent; and
‘‘(E) section 1860D–6(c)(4)(A) shall be ap-
plied by substituting ‘2.5 percent’ for ‘10 per-
cent’.
In no case may the application of subparagraph (A)
result in a monthly beneficiary obligation that is
below 0.
‘‘(2) FULL PREMIUM SUBSIDY AND REDUCTION
OF COST-SHARING FOR SPECIFIED LOW INCOME MEDI-
CARE
BENEFICIARIES
AND
QUALIFYING
INDIVID-
UALS.—In the case of a specified low income medicare
beneficiary (as defined in paragraph (4)(B)) or a
qualifying individual (as defined in paragraph
(4)(C))—
‘‘(A) section 1860D–17 shall be applied—
‘‘(i) in subsection (c), by substituting
‘0 percent’ for the applicable percent that
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would otherwise apply under such sub-
section; and
‘‘(ii) in subsection (a)(3)(B), by sub-
stituting ‘the amount of the monthly plan
premium for the Medicare Prescription
Drug plan with the lowest monthly plan
premium in the area that the beneficiary
resides’ for ‘the amount of such monthly na-
tional average premium’, but only if there
is no Medicare Prescription Drug plan of-
fered in the area in which the individual re-
sides that has a monthly plan premium for
the year that is equal to or less than the
monthly national average premium (as
computed under section 1860D–15) for the
area for the year;
‘‘(B) the annual deductible applicable under
section 1860D–6(c)(1) in a year shall be reduced
to $0;
‘‘(C) section 1860D–6(c)(2) shall be applied
by substituting ‘5.0 percent’ for ‘50 percent’ each
place it appears;
‘‘(D) such individual shall be responsible for
cost-sharing for the cost of any covered drug pro-
vided in the year (after the individual has
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reached the initial coverage limit described in
section 1860D–6(c)(3) and before the individual
has reached the annual out-of-pocket limit under
section 1860D–6(c)(4)(A)), that is equal to 10.0
percent; and
‘‘(E) section 1860D–6(c)(4)(A) shall be ap-
plied by substituting ‘2.5 percent’ for ‘10 per-
cent’.
In no case may the application of subparagraph (A)
result in a monthly beneficiary obligation that is
below 0.
‘‘(3) SLIDING SCALE PREMIUM SUBSIDY AND RE-
DUCTION
OF
COST-SHARING
FOR
SUBSIDY-ELIGIBLE
INDIVIDUALS.—
‘‘(A) IN GENERAL.—In the case of a sub-
sidy-eligible individual (as defined in paragraph
(4)(D))—
‘‘(i) 
section 
1860D–17 
shall 
be
applied—
‘‘(I) in subsection (c), by sub-
stituting ‘subsidy percent’ for the ap-
plicable percentage that would other-
wise apply under such subsection; and
‘‘(II) in subparagraphs (A) and
(B) of subsection (a)(3), by sub-
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stituting ‘the amount of the monthly
plan premium for the Medicare Pre-
scription Drug plan with the lowest
monthly plan premium in the area
that the beneficiary resides’ for ‘the
amount of such monthly national aver-
age premium’, but only if there is no
Medicare Prescription Drug plan of-
fered in the area in which the indi-
vidual resides that has a monthly plan
premium for the year that is equal to
or less than the monthly national aver-
age premium (as computed under sec-
tion 1860D–15) for the area for the
year; and
‘‘(ii) the annual deductible applicable
under section 1860D–6(c)(1)—
‘‘(I) for 2006, shall be reduced to
$50; and
‘‘(II) for a subsequent year, shall
be reduced to the amount specified
under this clause for the previous year
increased by the percentage specified in
section 1860D–6(c)(5) for the year in-
volved;
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‘‘(iii) section 1860D–6(c)(2) shall be
applied by substituting ‘10.0 percent’ for
‘50 percent’ each place it appears;
‘‘(iv) such individual shall be respon-
sible for cost-sharing for the cost of any cov-
ered drug provided in the year (after the in-
dividual has reached the initial coverage
limit described in section 1860D–6(c)(3)
and before the individual has reached the
annual out-of-pocket limit under section
1860D–6(c)(4)(A)), that is equal to 20.0
percent; and
‘‘(v) such individual shall be respon-
sible for the cost-sharing described in section
1860D–6(c)(4)(A).
In no case may the application of clause (i) re-
sult in a monthly beneficiary obligation that is
below 0.
‘‘(B) SUBSIDY
PERCENT
DEFINED.—For
purposes of subparagraph (A)(i), the term ‘sub-
sidy percent’ means, with respect to a State, a
percent determined on a linear sliding scale
ranging from—
‘‘(i) 0 percent with respect to a sub-
sidy-eligible individual residing in the
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State whose income does not exceed 135 per-
cent of the poverty line; to
‘‘(ii) the highest percentage that would
otherwise apply under section 1860D–17 in
the service area in which the subsidy-eligible
individual resides, in the case of a subsidy-
eligible individual residing in the State
whose income equals 160 percent of the pov-
erty line.
‘‘(4) DEFINITIONS.—In this part:
‘‘(A) QUALIFIED MEDICARE BENEFICIARY.—
Subject to subparagraph (H), the term ‘qualified
medicare beneficiary’ means an individual
who—
‘‘(i) is enrolled under this part, includ-
ing an individual who is enrolled under a
MedicareAdvantage plan;
‘‘(ii) is eligible for medicare cost-shar-
ing described in section 1905(p)(3) under
the State plan under title XIX (or under a
waiver of such plan), on the basis of being
described in section 1905(p)(1), as deter-
mined under such plan (or under a waiver
of plan); and
‘‘(iii) is not—
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‘‘(I) a specified low-income medi-
care beneficiary;
‘‘(II) a qualifying individual; or
‘‘(III) a dual eligible individual.
‘‘(B) SPECIFIED
LOW
INCOME
MEDICARE
BENEFICIARY.—Subject to subparagraph (H), the
term ‘specified low income medicare beneficiary’
means an individual who—
‘‘(i) is enrolled under this part, includ-
ing an individual who is enrolled under a
MedicareAdvantage plan;
‘‘(ii) is eligible for medicare cost-shar-
ing described in section 1905(p)(3)(A)(ii)
under the State plan under title XIX (or
under a waiver of such plan), on the basis
of 
being 
described 
in 
section
1902(a)(10)(E)(iii), as determined under
such plan (or under a waiver of plan); and
‘‘(iii) is not—
‘‘(I) a qualified medicare bene-
ficiary;
‘‘(II) a qualifying individual; or
‘‘(III) a dual eligible individual.
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‘‘(C) QUALIFYING INDIVIDUAL.—Subject to
subparagraph (H), the term ‘qualifying indi-
vidual’ means an individual who—
‘‘(i) is enrolled under this part, includ-
ing an individual who is enrolled under a
MedicareAdvantage plan;
‘‘(ii) is eligible for medicare cost-shar-
ing described in section 1905(p)(3)(A)(ii)
under the State plan under title XIX (or
under a waiver of such plan), on the basis
of 
being 
described 
in 
section
1902(a)(10)(E)(iv) (without regard to any
termination of the application of such sec-
tion under title XIX), as determined under
such plan (or under a waiver of such plan);
and
‘‘(iii) is not—
‘‘(I) a qualified medicare bene-
ficiary;
‘‘(II) a specified low-income medi-
care beneficiary; or
‘‘(III) a dual eligible individual.
‘‘(D) SUBSIDY-ELIGIBLE INDIVIDUAL.—Sub-
ject to subparagraph (H), the term ‘subsidy-eligi-
ble individual’ means an individual—
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‘‘(i) who is enrolled under this part,
including an individual who is enrolled
under a MedicareAdvantage plan;
‘‘(ii) whose income is less than 160
percent of the poverty line; and
‘‘(iii) who is not—
‘‘(I) a qualified medicare bene-
ficiary;
‘‘(II) a specified low-income medi-
care beneficiary;
‘‘(III) a qualifying individual; or
‘‘(IV) a dual eligible individual.
‘‘(E) DUAL ELIGIBLE INDIVIDUAL.—
‘‘(i) IN GENERAL.—The term ‘dual eli-
gible individual’ means an individual who
is—
‘‘(I) enrolled under title XIX or
under a waiver under section 1115 of
the requirements of such title for med-
ical assistance that is not less than the
medical assistance provided to an indi-
vidual 
described 
in 
section
1902(a)(10)(A)(i) and includes covered
outpatient drugs (as such term is de-
fined for purposes of section 1927); and
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‘‘(II) entitled to benefits under
part A and enrolled under part B.
‘‘(ii) 
INCLUSION
OF
MEDICALLY
NEEDY.—Such term includes an individual
described in section 1902(a)(10)(C).
‘‘(F) POVERTY
LINE.—The term ‘poverty
line’ has the meaning given such term in section
673(2) of the Community Services Block Grant
Act (42 U.S.C. 9902(2)), including any revision
required by such section.
‘‘(G) ELIGIBILITY
DETERMINATIONS.—Be-
ginning on November 1, 2005, the determination
of whether an individual residing in a State is
an individual described in subparagraph (A),
(B), (C), (D), or (E) and, for purposes of para-
graph (3), the amount of an individual’s income,
shall be determined under the State medicaid
plan for the State under section 1935(a). In the
case of a State that does not operate such a med-
icaid plan (either under title XIX or under a
statewide waiver granted under section 1115),
such determination shall be made under arrange-
ments made by the Administrator.
‘‘(H) NONAPPLICATION TO DUAL ELIGIBLE
INDIVIDUALS AND TERRITORIAL RESIDENTS.—In
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the case of an individual who is a dual eligible
individual or an individual who is not a resi-
dent of the 50 States or the District of
Columbia—
‘‘(i) the subsidies provided under this
section shall not apply; and
‘‘(ii) in the case of such an individual
who is not a resident of the 50 States or the
District of Columbia, such individual may
be provided with medical assistance for cov-
ered outpatient drugs (as such term is de-
fined for purposes of section 1927) in ac-
cordance with section 1935 under the State
medicaid program under title XIX.
‘‘(I) UPDATE
OF
ASSET
OR
RESOURCE
TEST.—With respect to eligibility determinations
for premium and cost-sharing subsidies under
this section that are made on or after January
1, 2009, such determinations shall be made (to
the extent a State, as of such date, has not al-
ready eliminated the application of an asset or
resource test under section 1905(p)(1)(C)) in ac-
cordance with the following:
‘‘(i) SELF-DECLARATION OF VALUE.—
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‘‘(I) IN GENERAL.—A State shall
permit an individual applying for
such subsidies to declare and certify by
signature under penalty of perjury on
the application form that the value of
the individual’s assets or resources (or
the combined value of the individual’s
assets or resources and the assets or re-
sources of the individual’s spouse), as
determined under section 1613 for pur-
poses of the supplemental security in-
come program, does not exceed $10,000
($20,000 in the case of the combined
value of the individual’s assets or re-
sources and the assets or resources of
the individual’s spouse).
‘‘(II) ANNUAL ADJUSTMENT.—Be-
ginning on January 1, 2010, and for
each 
subsequent 
year, 
the 
dollar
amounts specified in subclause (I) for
the preceding year shall be increased
by the percentage increase in the Con-
sumer Price Index for all urban con-
sumers (U.S. urban average) for the
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12-month period ending with June of
the previous year.
‘‘(ii) METHODOLOGY
FLEXIBILITY.—
Nothing in clause (i) shall be construed as
prohibiting a State in making eligibility
determinations for premium and cost-shar-
ing subsidies under this section from using
asset or resource methodologies that are less
restrictive than the methodologies used
under 1613 for purposes of the supplemental
security income program.
‘‘(J) DEVELOPMENT
OF
MODEL
DECLARA-
TION FORM.—The Secretary shall—
‘‘(i) develop a model, simplified appli-
cation form for individuals to use in mak-
ing a self-declaration of assets or resources
in accordance with subparagraph (I)(i);
and
‘‘(ii) provide such form to States and,
for purposes of outreach under section 1144,
the Commissioner of Social Security.’’.
‘‘(b) RULES
IN
APPLYING
COST-SHARING
SUB-
SIDIES.—Nothing in this section shall be construed as pre-
venting an eligible entity offering a Medicare Prescription
Drug plan or a MedicareAdvantage organization offering
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a MedicareAdvantage plan from waiving or reducing the
amount of the deductible or other cost-sharing otherwise ap-
plicable pursuant to section 1860D–6(a)(2).
‘‘(c) ADMINISTRATION OF SUBSIDY PROGRAM.—The
Administrator shall establish a process whereby, in the case
of an individual eligible for a cost-sharing subsidy under
subsection (a) who is enrolled in a Medicare Prescription
Drug plan or a MedicareAdvantage plan—
‘‘(1) the Administrator provides for a notifica-
tion of the eligible entity or MedicareAdvantage orga-
nization involved that the individual is eligible for a
cost-sharing subsidy and the amount of the subsidy
under such subsection;
‘‘(2) the entity or organization involved reduces
the cost-sharing otherwise imposed by the amount of
the applicable subsidy and submits to the Adminis-
trator information on the amount of such reduction;
and
‘‘(3) the Administrator periodically and on a
timely basis reimburses the entity or organization for
the amount of such reductions.
The reimbursement under paragraph (3) may be computed
on a capitated basis, taking into account the actuarial
value of the subsidies and with appropriate adjustments to
reflect differences in the risks actually involved.
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‘‘(d) RELATION TO MEDICAID PROGRAM.—For provi-
sions providing for eligibility determinations and addi-
tional Federal payments for expenditures related to pro-
viding prescription drug coverage for dual eligible individ-
uals and territorial residents under the medicaid program,
see section 1935.
‘‘REINSURANCE PAYMENTS FOR EXPENSES INCURRED IN
PROVIDING
PRESCRIPTION
DRUG
COVERAGE
ABOVE
THE ANNUAL OUT-OF-POCKET THRESHOLD
‘‘SEC. 1860D–20. (a) REINSURANCE PAYMENTS.—
‘‘(1) IN GENERAL.—Subject to section 1860D–
21(b), the Administrator shall provide in accordance
with this section for payment to a qualifying entity
of the reinsurance payment amount (as specified in
subsection (c)(1)) for costs incurred by the entity in
providing prescription drug coverage for a qualifying
covered individual after the individual has reached
the annual out-of-pocket threshold specified in section
1860D–6(c)(4)(B) for the year.
‘‘(2) BUDGET
AUTHORITY.—This section con-
stitutes budget authority in advance of appropria-
tions Acts and represents the obligation of the Admin-
istrator to provide for the payment of amounts pro-
vided under this section.
‘‘(b) NOTIFICATION OF SPENDING UNDER THE PLAN
FOR COSTS INCURRED IN PROVIDING PRESCRIPTION DRUG
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COVERAGE ABOVE THE ANNUAL OUT-OF-POCKET THRESH-
OLD.—
‘‘(1) IN GENERAL.—Each qualifying entity shall
notify the Administrator of the following with respect
to a qualifying covered individual for a coverage
year:
‘‘(A) TOTAL
ACTUAL
COSTS.—The total
amount (if any) of costs that the qualifying enti-
ty incurred in providing prescription drug cov-
erage for the individual in the year after the in-
dividual had reached the annual out-of-pocket
threshold specified in section 1860D–6(c)(4)(B)
for the year.
‘‘(B) AMOUNTS
RESULTING
IN
ACTUAL
COSTS.—With respect to the total amount under
subparagraph (A) for the year—
‘‘(i) the aggregate amount of payments
made by the entity to pharmacies and other
entities with respect to such coverage for
such enrollees; and
‘‘(ii) the aggregate amount of dis-
counts, direct or indirect subsidies, rebates,
or other price concessions or direct or indi-
rect remunerations made to the entity with
respect to such coverage for such enrollees.
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‘‘(2) CERTAIN EXPENSES NOT INCLUDED.—The
amount under paragraph (1)(A) may not include—
‘‘(A) administrative expenses incurred in
providing the coverage described in paragraph
(1)(A);
‘‘(B) amounts expended on providing addi-
tional prescription drug coverage pursuant to
section 1860D–6(a)(2); or
‘‘(C) discounts, direct or indirect subsidies,
rebates, or other price concessions or direct or in-
direct remunerations made to the entity with re-
spect to coverage described in paragraph (1)(A).
‘‘(3) RESTRICTION ON USE OF INFORMATION.—
The restriction specified in section 1860D–16(b)(7)(B)
shall apply to information disclosed or obtained pur-
suant to the provisions of this section.
‘‘(c) REINSURANCE PAYMENT AMOUNT.—
‘‘(1) IN
GENERAL.—The reinsurance payment
amount under this subsection for a qualifying covered
individual for a coverage year is an amount equal to
80 percent (or 65 percent with respect to a qualifying
covered individual described in subsection (e)(2)(D))
of the allowable costs (as specified in paragraph (2))
incurred by the qualifying entity with respect to the
individual and year.
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‘‘(2) ESTABLISHMENT OF ALLOWABLE COSTS.—
In the case of a qualifying entity that has incurred
costs described in subsection (b)(1)(A) with respect to
a qualifying covered individual for a coverage year,
the Administrator shall establish the allowable costs
for the individual and year. Such allowable costs
shall be equal to the amount described in such sub-
section for the individual and year.
‘‘(d) PAYMENT METHODS.—
‘‘(1) IN GENERAL.—Payments under this section
shall be based on such a method as the Administrator
determines. The Administrator may establish a pay-
ment method by which interim payments of amounts
under this section are made during a year based on
the Administrator’s best estimate of amounts that will
be payable after obtaining all of the information.
‘‘(2) SOURCE OF PAYMENTS.—Payments under
this section shall be made from the Prescription Drug
Account.
‘‘(e) DEFINITIONS.—In this section:
‘‘(1) COVERAGE YEAR.—The term ‘coverage year’
means a calendar year in which covered drugs are
dispensed if a claim for payment is made under the
plan for such drugs, regardless of when the claim is
paid.
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‘‘(2) QUALIFYING
COVERED
INDIVIDUAL.—The
term ‘qualifying covered individual’ means an indi-
vidual who—
‘‘(A) is enrolled in this part and in a Medi-
care Prescription Drug plan;
‘‘(B) is enrolled in this part and in a
MedicareAdvantage plan (except for an MSA
plan or a private fee-for-service plan that does
not provide qualified prescription drug cov-
erage);
‘‘(C) is eligible for, but not enrolled in, the
program under this part, and is covered under
a qualified retiree prescription drug plan; or
‘‘(D) is eligible for, but not enrolled in, the
program under this part, and is covered under
a qualified State pharmaceutical assistance pro-
gram.
‘‘(3) QUALIFYING ENTITY.—The term ‘qualifying
entity’ means any of the following that has entered
into an agreement with the Administrator to provide
the Administrator with such information as may be
required to carry out this section:
‘‘(A) An eligible entity offering a Medicare
Prescription Drug plan under this part.
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‘‘(B) A MedicareAdvantage organization of-
fering a MedicareAdvantage plan under part C
(except for an MSA plan or a private fee-for-
service plan that does not provide qualified pre-
scription drug coverage).
‘‘(C) The sponsor of a qualified retiree pre-
scription drug plan.
‘‘(D) A State offering a qualified State
pharmaceutical assistance program.
‘‘(4) QUALIFIED RETIREE PRESCRIPTION DRUG
PLAN.—
‘‘(A) IN GENERAL.—The term ‘qualified re-
tiree prescription drug plan’ means employment-
based retiree health coverage if, with respect to a
qualifying covered individual who is covered
under the plan, the following requirements are
met:
‘‘(i) 
ATTESTATION
OF
ACTUARIAL
VALUE OF COVERAGE.—The sponsor of the
plan shall, annually or at such other time
as the Administrator may require, provide
the Administrator an attestation, in accord-
ance with the procedures established under
section 1860D–6(f), that the actuarial value
of prescription drug coverage under the
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plan is at least equal to the actuarial value
of standard prescription drug coverage.
‘‘(ii) AUDITS.—The sponsor of the
plan, or an administrator of the plan des-
ignated by the sponsor, shall maintain (and
afford the Administrator access to) such
records as the Administrator may require
for purposes of audits and other oversight
activities necessary to ensure the adequacy
of prescription drug coverage and the accu-
racy of payments made under this part to
and by the plan.
‘‘(B) 
EMPLOYMENT-BASED
RETIREE
HEALTH
COVERAGE.—The term ‘employment-
based retiree health coverage’ means health in-
surance or other coverage, whether provided by
voluntary insurance coverage or pursuant to
statutory or contractual obligation, of health care
costs for retired individuals (or for such individ-
uals and their spouses and dependents) based on
their status as former employees or labor union
members.
‘‘(5) QUALIFIED STATE
PHARMACEUTICAL
AS-
SISTANCE PROGRAM.—
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‘‘(A) IN
GENERAL.—The term ‘qualified
State pharmaceutical assistance program’ means
a State pharmaceutical assistance program if,
with respect to a qualifying covered individual
who is covered under the program, the following
requirements are met:
‘‘(i) ASSURANCE.—The State offering
the program shall, annually or at such
other times as the Administrator may re-
quire, provide the Administrator an attesta-
tion that, in accordance with the procedures
established 
under 
section 
1860D–6(f),
that—
‘‘(I) the actuarial value of pre-
scription drug coverage under the pro-
gram is at least equal to the actuarial
value of standard prescription drug
coverage; and
‘‘(II) the actuarial value of sub-
sidies to individuals provided under
the program are at least equal to the
actuarial value of the subsidies that
would apply under section 1860D–19
if the individual was enrolled under
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this part rather than under the pro-
gram.
‘‘(ii) DISCLOSURE OF INFORMATION.—
The State complies with the requirements
described in clauses (i) and (ii) of section
1860D–16(b)(7)(A).
‘‘(B) STATE PHARMACEUTICAL ASSISTANCE
PROGRAM.—For purposes of subparagraph (A),
the term ‘State pharmaceutical assistance pro-
gram’ means a program—
‘‘(i) that is in operation as of the date
of enactment of the Prescription Drug and
Medicare Improvement Act of 2003;
‘‘(ii) that is sponsored and financed by
a State; and
‘‘(iii) that provides coverage for out-
patient drugs for individuals in the State
who meet income- and resource-related
qualifications specified under such program.
‘‘(6) SPONSOR.—The term ‘sponsor’ means a
plan sponsor, as defined in section 3(16)(B) of the
Employee Retirement Income Security Act of 1974.
‘‘(f) DISTRIBUTION
OF
REINSURANCE
PAYMENT
AMOUNTS.—
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‘‘(1) IN GENERAL.—Any sponsor meeting the re-
quirements of subsection (e)(3) with respect to a quar-
ter in a calendar year, but which is not an employer,
shall distribute the reinsurance payments received for
such quarter under subsection (c) to the employers
contributing to the qualified retiree prescription drug
plan maintained by such sponsor during that quar-
ter, in the manner described in paragraphs (2) and
(3).
‘‘(2) ALLOCATION.—The reinsurance payments to
be distributed pursuant to paragraph (1) shall be al-
located proportionally among all employers who con-
tribute to the plan during the quarter with respect to
which the payments are received. The share allocated
to each employer contributing to the plan during a
quarter shall be determined by multiplying the total
reinsurance payments received by the sponsor for the
quarter by a fraction, the numerator of which is the
total contributions made by an employer for that
quarter, and the denominator of which is the total
contributions required to be made to the plan by all
employers for that quarter. Any share allocated to an
employer required to contribute for a quarter who
does not make the contributions required for that
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quarter on or before the date due shall be retained by
the sponsor for the benefit of the plan as a whole.
‘‘(3) TIMING.—Reinsurance payments required
to be distributed to employers pursuant to this sub-
section shall be distributed as soon as practicable
after received by the sponsor, but in no event later
than the end of the quarter immediately following the
quarter in which such reinsurance payments are re-
ceived by the sponsor.
‘‘(4) REGULATIONS.—The Secretary shall pro-
mulgate regulations providing that any sponsor sub-
ject to the requirements of this subsection who fails to
meet such requirements shall not be eligible for a pay-
ment under this section.
‘‘DIRECT SUBSIDY FOR SPONSOR OF A QUALIFIED RETIREE
PRESCRIPTION DRUG PLAN FOR PLAN ENROLLEES EL-
IGIBLE FOR, BUT NOT ENROLLED IN, THIS PART
‘‘SEC. 1860D–21. (a) DIRECT SUBSIDY.—
‘‘(1) IN GENERAL.—The Administrator shall pro-
vide for the payment to a sponsor of a qualified re-
tiree prescription drug plan (as defined in section
1860D–20(e)(4)) for each qualifying covered indi-
vidual (described in subparagraph (C) of section
1860D–20(e)(2)) enrolled in the plan for each month
for which such individual is so enrolled.
‘‘(2) AMOUNT OF PAYMENT.—
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‘‘(A) IN GENERAL.—The amount of the pay-
ment under paragraph (1) shall be an amount
equal to the direct subsidy percent determined
for the year of the monthly national average pre-
mium for the area for the year (determined
under section 1860D–15), as adjusted using the
risk adjusters that apply to the standard pre-
scription drug coverage published under section
1860D–11.
‘‘(B) DIRECT SUBSIDY PERCENT.—For pur-
poses of subparagraph (A), the term ‘direct sub-
sidy percent’ means the percentage equal to—
‘‘(i) 100 percent; minus
‘‘(ii) the applicable percent for the year
(as determined under section 1860D–17(c).
‘‘(b) PAYMENT METHODS.—
‘‘(1) IN GENERAL.—Payments under this section
shall be based on such a method as the Administrator
determines. The Administrator may establish a pay-
ment method by which interim payments of amounts
under this section are made during a year based on
the Administrator’s best estimate of amounts that will
be payable after obtaining all of the information.
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‘‘(2) SOURCE OF PAYMENTS.—Payments under
this section shall be made from the Prescription Drug
Account.
‘‘DIRECT SUBSIDIES FOR QUALIFIED STATE OFFERING A
STATE PHARMACEUTICAL ASSISTANCE PROGRAM FOR
PROGRAM ENROLLEES ELIGIBLE FOR, BUT NOT EN-
ROLLED IN, THIS PART
‘‘SEC. 1860D–22. (a) DIRECT SUBSIDY.—
‘‘(1) IN GENERAL.—The Administrator shall pro-
vide for the payment to a State offering a qualified
State pharmaceutical assistance program (as defined
in section 1860D–20(e)(6)) for each qualifying cov-
ered individual (described in subparagraph (D) of
section 1860D–(e)(2)) enrolled in the program for
each month for which such individual is so enrolled.
‘‘(2) AMOUNT OF PAYMENT.—
‘‘(A) IN GENERAL.—The amount of the pay-
ment under paragraph (1) shall be an amount
equal to the amount of payment for the area and
year made under section 1860D–21(a)(2).
‘‘(b) ADDITIONAL SUBSIDY.—
‘‘(1) IN GENERAL.—The Administrator shall pro-
vide for the payment to a State offering a qualified
State pharmaceutical program (as defined in section
1860D–20(e)(6)) for each applicable low-income indi-
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vidual enrolled in the program for each month for
which such individual is so enrolled.
‘‘(2) AMOUNT OF PAYMENT.—
‘‘(A) IN GENERAL.—The amount of the pay-
ment under paragraph (1) shall be the amount
the Administrator estimates would have been
made to an entity or organization under section
1860D–19 with respect to the applicable low-in-
come individual if such individual was enrolled
in this part and under a Medicare Prescription
Drug plan or a MedicareAdvantage plan.
‘‘(B) MAXIMUM
PAYMENTS.—In no case
may the amount of the payment determined
under subparagraph (A) with respect to an ap-
plicable low-income individual exceed, as esti-
mated 
by 
the 
Administrator, 
the 
average
amounts made in a year under section 1860D–
19 on behalf of an eligible beneficiary enrolled
under this part with income that is the same as
the income of the applicable low-income indi-
vidual.
‘‘(3) APPLICABLE
LOW-INCOME
INDIVIDUAL.—
For purposes of this subsection, the term ‘applicable
low-income individual’ means an individual who is
both—
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‘‘(A) a qualifying covered individual (de-
scribed in subparagraph (D) of section 1860D–
(e)(2)); and
‘‘(B) a qualified medicare beneficiary, a
specified low income medicare beneficiary, or a
subsidy-eligible individual, as such terms are de-
fined in section 1860D–19(a)(4).
‘‘(c) PAYMENT METHODS.—
‘‘(1) IN GENERAL.—Payments under this section
shall be based on such a method as the Administrator
determines. The Administrator may establish a pay-
ment method by which interim payments of amounts
under this section are made during a year based on
the Administrator’s best estimate of amounts that will
be payable after obtaining all of the information.
‘‘(2) SOURCE OF PAYMENTS.—Payments under
this section shall be made from the Prescription Drug
Account.
‘‘(d) CONSTRUCTION.—Nothing in this section or sec-
tion 1860D–20 shall effect the provisions of section 1860D–
26(b).
‘‘Subpart 3—Miscellaneous Provisions
‘‘PRESCRIPTION DRUG ACCOUNT IN THE FEDERAL
SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND
‘‘SEC. 1860D–25. (a) ESTABLISHMENT.—
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‘‘(1) IN GENERAL.—There is created within the
Federal Supplementary Medical Insurance Trust
Fund established by section 1841 an account to be
known as the ‘Prescription Drug Account’ (in this
section referred to as the ‘Account’).
‘‘(2) FUNDS.—The Account shall consist of such
gifts and bequests as may be made as provided in sec-
tion 201(i)(1), and such amounts as may be deposited
in, or appropriated to, the Account as provided in
this part.
‘‘(3) SEPARATE FROM REST OF TRUST FUND.—
Funds provided under this part to the Account shall
be kept separate from all other funds within the Fed-
eral Supplementary Medical Insurance Trust Fund.
‘‘(b) PAYMENTS FROM ACCOUNT.—
‘‘(1) IN GENERAL.—The Managing Trustee shall
pay from time to time from the Account such
amounts as the Secretary certifies are necessary to
make payments to operate the program under this
part, including—
‘‘(A) payments to eligible entities under sec-
tion 1860D–16;
‘‘(B) payments under 1860D–19 for low-in-
come subsidy payments for cost-sharing;
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‘‘(C) reinsurance payments under section
1860D–20;
‘‘(D) payments to sponsors of qualified re-
tiree prescription drug plans under section
1860D–21;
‘‘(E) payments to MedicareAdvantage orga-
nizations for the provision of qualified prescrip-
tion drug coverage under section 1858A(c); and
‘‘(F) payments with respect to administra-
tive expenses under this part in accordance with
section 201(g).
‘‘(2) TREATMENT IN RELATION TO PART B PRE-
MIUM.—Amounts payable from the Account shall not
be taken into account in computing actuarial rates or
premium amounts under section 1839.
‘‘(c) APPROPRIATIONS TO COVER BENEFITS AND AD-
MINISTRATIVE COSTS.—There are appropriated to the Ac-
count in a fiscal year, out of any moneys in the Treasury
not otherwise appropriated, an amount equal to the pay-
ments and transfers made from the Account in the year.
‘‘OTHER RELATED PROVISIONS
‘‘SEC. 1860D–26. (a) RESTRICTION ON ENROLLMENT
IN A MEDICARE PRESCRIPTION DRUG PLAN OFFERED BY
A SPONSOR OF EMPLOYMENT-BASED RETIREE HEALTH
COVERAGE.—
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‘‘(1) IN GENERAL.—In the case of a Medicare
Prescription Drug plan offered by an eligible entity
that is a sponsor (as defined in paragraph (5) of sec-
tion 1860D–20(e)) of employment-based retiree health
coverage (as defined in paragraph (4)(B) of such sec-
tion), notwithstanding any other provision of this
part and in accordance with regulations of the Ad-
ministrator, the entity offering the plan may restrict
the enrollment of eligible beneficiaries enrolled under
this part to eligible beneficiaries who are enrolled in
such coverage.
‘‘(2) LIMITATION.—The sponsor of the employ-
ment-based retiree health coverage described in para-
graph (1) may not offer enrollment in the Medicare
Prescription Drug plan described in such paragraph
based on the health status of eligible beneficiaries en-
rolled for such coverage.
‘‘(b) COORDINATION WITH STATE PHARMACEUTICAL
ASSISTANCE PROGRAMS.—
‘‘(1) IN GENERAL.—An eligible entity offering a
Medicare 
Prescription 
Drug 
plan, 
or 
a
MedicareAdvantage 
organization 
offering 
a
MedicareAdvantage plan (other than an MSA plan or
a private fee-for-service plan that does not provide
qualified prescription drug coverage), may enter into
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an agreement with a State pharmaceutical assistance
program described in paragraph (2) to coordinate the
coverage provided under the plan with the assistance
provided under the State pharmaceutical assistance
program.
‘‘(2) STATE PHARMACEUTICAL ASSISTANCE PRO-
GRAM DESCRIBED.—For purposes of paragraph (1), a
State pharmaceutical assistance program described in
this paragraph is a program that has been established
pursuant to a waiver under section 1115 or otherwise.
‘‘(c) REGULATIONS TO CARRY OUT THIS PART.—
‘‘(1) AUTHORITY FOR INTERIM FINAL REGULA-
TIONS.—The Secretary may promulgate initial regu-
lations implementing this part in interim final form
without prior opportunity for public comment.
‘‘(2) FINAL REGULATIONS.—A final regulation
reflecting public comments must be published within
1 year of the interim final regulation promulgated
under paragraph (1).’’.
‘‘(d) WAIVER AUTHORITY.—The Secretary shall have
authority similar to the waiver authority under section
1857(i) to facilitate the offering of Medicare Prescription
Drug plans by employer or other group health plans as part
of employment-based retiree health coverage (as defined in
section 1860D–20(d)(4)(B)), including the authority to es-
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tablish separate premium amounts for enrollees in a Medi-
care Prescription Drug plan by reason of such coverage.’’.
(b) CONFORMING AMENDMENTS TO FEDERAL SUPPLE-
MENTARY MEDICAL INSURANCE TRUST FUND.—Section
1841 (42 U.S.C. 1395t) is amended—
(1) in the last sentence of subsection (a)—
(A) 
by 
striking 
‘‘and’’ 
before 
‘‘such
amounts’’; and
(B) by inserting before the period the fol-
lowing: ‘‘, and such amounts as may be depos-
ited in, or appropriated to, the Prescription
Drug Account established by section 1860D–25’’;
(2) in subsection (g), by inserting after ‘‘by this
part,’’ the following: ‘‘the payments provided for
under part D (in which case the payments shall be
made from the Prescription Drug Account in the
Trust Fund),’’;
(3) in subsection (h), by inserting after
‘‘1840(d)’’ the following: ‘‘and sections 1860D–18 and
1858A(e) (in which case the payments shall be made
from the Prescription Drug Account in the Trust
Fund)’’; and
(4) in subsection (i), by inserting after ‘‘section
1840(b)(1)’’ the following: ‘‘, sections 1860D–18 and
1858A(e) (in which case the payments shall be made
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from the Prescription Drug Account in the Trust
Fund),’’.
(c) CONFORMING REFERENCES TO PREVIOUS PART
D.—Any reference in law (in effect before the date of enact-
ment of this Act) to part D of title XVIII of the Social
Security Act is deemed a reference to part F of such title
(as in effect after such date).
(d) SUBMISSION
OF LEGISLATIVE PROPOSAL.—Not
later than 6 months after the date of the enactment of this
Act, the Secretary shall submit to the appropriate commit-
tees of Congress a legislative proposal providing for such
technical and conforming amendments in the law as are
required by the provisions of this Act.
SEC. 102. STUDY AND REPORT ON PERMITTING PART B
ONLY INDIVIDUALS TO ENROLL IN MEDICARE
VOLUNTARY PRESCRIPTION DRUG DELIVERY
PROGRAM.
(a) STUDY.—The Administrator of the Center for
Medicare Choices (as established under section 1808 of the
Social Security Act, as added by section 301(a)) shall con-
duct a study on the need for rules relating to permitting
individuals who are enrolled under part B of title XVIII
of the Social Security Act but are not entitled to benefits
under part A of such title to buy into the medicare vol-
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untary prescription drug delivery program under part D
of such title (as so added).
(b) REPORT.—Not later than January 1, 2005, the Ad-
ministrator of the Center for Medicare Choices shall submit
a report to Congress on the study conducted under sub-
section (a), together with any recommendations for legisla-
tion that the Administrator determines to be appropriate
as a result of such study.
SEC. 103. RULES RELATING TO MEDIGAP POLICIES THAT
PROVIDE PRESCRIPTION DRUG COVERAGE.
(a) RULES RELATING TO MEDIGAP POLICIES THAT
PROVIDE PRESCRIPTION DRUG COVERAGE.—Section 1882
(42 U.S.C. 1395ss) is amended by adding at the end the
following new subsection:
‘‘(v) RULES RELATING TO MEDIGAP POLICIES THAT
PROVIDE PRESCRIPTION DRUG COVERAGE.—
‘‘(1) PROHIBITION ON SALE, ISSUANCE, AND RE-
NEWAL
OF
POLICIES
THAT
PROVIDE
PRESCRIPTION
DRUG COVERAGE TO PART D ENROLLEES.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of law, on or after January 1,
2006, no medicare supplemental policy that pro-
vides coverage of expenses for prescription drugs
may be sold, issued, or renewed under this sec-
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tion to an individual who is enrolled under part
D.
‘‘(B) PENALTIES.—The penalties described
in subsection (d)(3)(A)(ii) shall apply with re-
spect to a violation of subparagraph (A).
‘‘(2) ISSUANCE OF SUBSTITUTE POLICIES IF THE
POLICYHOLDER
OBTAINS
PRESCRIPTION
DRUG
COV-
ERAGE UNDER PART D.—
‘‘(A) IN GENERAL.—The issuer of a medi-
care supplemental policy—
‘‘(i) may not deny or condition the
issuance or effectiveness of a medicare sup-
plemental policy that has a benefit package
classified as ‘A’, ‘B’, ‘C’, ‘D’, ‘E’, ‘F’ (in-
cluding the benefit package classified as ‘F’
with a high deductible feature, as described
in subsection (p)(11)), or ‘G’ (under the
standards 
established 
under 
subsection
(p)(2)) and that is offered and is available
for issuance to new enrollees by such issuer;
‘‘(ii) may not discriminate in the pric-
ing of such policy, because of health status,
claims experience, receipt of health care, or
medical condition; and
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‘‘(iii) may not impose an exclusion of
benefits based on a pre-existing condition
under such policy,
in the case of an individual described in sub-
paragraph (B) who seeks to enroll under the pol-
icy during the open enrollment period established
under section 1860D–2(b)(2) and who submits
evidence that they meet the requirements under
subparagraph (B) along with the application for
such medicare supplemental policy.
‘‘(B) INDIVIDUAL
DESCRIBED.—An indi-
vidual described in this subparagraph is an in-
dividual who—
‘‘(i) enrolls in the medicare prescrip-
tion drug delivery program under part D;
and
‘‘(ii) at the time of such enrollment
was enrolled and terminates enrollment in
a medicare supplemental policy which has a
benefit package classified as ‘H’, ‘I’, or ‘J’
(including the benefit package classified as
‘J’ with a high deductible feature, as de-
scribed in section 1882(p)(11)) under the
standards referred to in subparagraph
(A)(i) or terminates enrollment in a policy
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to which such standards do not apply but
which provides benefits for prescription
drugs.
‘‘(C) ENFORCEMENT.—The provisions of
subparagraph (A) shall be enforced as though
they were included in subsection (s).
‘‘(3) NOTICE
REQUIRED
TO
BE
PROVIDED
TO
CURRENT POLICYHOLDERS WITH PRESCRIPTION DRUG
COVERAGE.—No medicare supplemental policy of an
issuer shall be deemed to meet the standards in sub-
section (c) unless the issuer provides written notice
during the 60-day period immediately preceding the
period established for the open enrollment period es-
tablished under section 1860D–2(b)(2), to each indi-
vidual who is a policyholder or certificate holder of
a medicare supplemental policy issued by that issuer
that provides some coverage of expenses for prescrip-
tion drugs (at the most recent available address of
that individual) of—
‘‘(A) the ability to enroll in a new medicare
supplemental policy pursuant to paragraph (2);
and
‘‘(B) the fact that, so long as such indi-
vidual retains coverage under such policy, the
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individual shall be ineligible for coverage of pre-
scription drugs under part D.’’.
(b) RULE OF CONSTRUCTION
(1) IN GENERAL.—
Nothing in this Act shall be construed to require an issuer
of a medicare supplemental policy under section 1882 of
the Social Security Act (42 U.S.C. 1395rr) to participate
as an eligible entity under part D of such Act, as added
by section 101, as a condition for issuing such policy.
(2) PROHIBITION ON STATE REQUIREMENT.—A
State may not require an issuer of a medicare supple-
mental policy under section 1882 of the Social Secu-
rity Act (42 U.S.C. 1395rr) to participate as an eligi-
ble entity under part D of such Act, as added by sec-
tion 101, as a condition for issuing such policy.
SEC. 104. MEDICAID AND OTHER AMENDMENTS RELATED
TO LOW-INCOME BENEFICIARIES.
(a) DETERMINATIONS OF ELIGIBILITY FOR LOW-IN-
COME SUBSIDIES.—Section 1902(a) (42 U.S.C. 1396a(a))
is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(64);
(2) by striking the period at the end of para-
graph (65) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (65) the fol-
lowing new paragraph:
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‘‘(66) provide for making eligibility determina-
tions under section 1935(a).’’.
(b) NEW SECTION.—
(1) IN GENERAL.—Title XIX (42 U.S.C. 1396 et
seq.) is amended—
(A) by redesignating section 1935 as section
1936; and
(B) by inserting after section 1934 the fol-
lowing new section:
‘‘SPECIAL PROVISIONS RELATING TO MEDICARE
PRESCRIPTION DRUG BENEFIT
‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI-
BILITY DETERMINATIONS FOR LOW-INCOME SUBSIDIES.—
As a condition of its State plan under this title under sec-
tion 1902(a)(66) and receipt of any Federal financial as-
sistance under section 1903(a), a State shall satisfy the fol-
lowing:
‘‘(1) DETERMINATION OF ELIGIBILITY FOR TRAN-
SITIONAL
PRESCRIPTION
DRUG
ASSISTANCE
CARD
PROGRAM
FOR
ELIGIBLE
LOW-INCOME
BENE-
FICIARIES.—For purposes of section 1807A, submit to
the Secretary an eligibility plan under which the
State—
‘‘(A) establishes eligibility standards con-
sistent with the provisions of that section;
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‘‘(B) establishes procedures for providing
presumptive eligibility for eligible low-income
beneficiaries (as defined in section 1807A(i)(2))
under that section;
‘‘(C) makes determinations of eligibility
and income for purposes of identifying eligible
low-income beneficiaries (as so defined) under
that section; and
‘‘(D) communicates to the Secretary deter-
minations of eligibility or discontinuation of eli-
gibility under that section for purposes of noti-
fying prescription drug card sponsors under that
section of the identity of eligible medicare low-
income beneficiaries.
‘‘(2) DETERMINATION OF ELIGIBILITY FOR PRE-
MIUM AND COST-SHARING SUBSIDIES UNDER PART D
OF TITLE XVIII FOR LOW-INCOME INDIVIDUALS.—Be-
ginning November 1, 2005, for purposes of section
1860D–19—
‘‘(A) make determinations of eligibility for
premium and cost-sharing subsidies under and
in accordance with such section;
‘‘(B) establish procedures for providing pre-
sumptive eligibility for individuals eligible for
subsidies under that section;
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‘‘(C) inform the Administrator of the Center
for Medicare Choices of such determinations in
cases in which such eligibility is established; and
‘‘(D) otherwise provide such Administrator
with such information as may be required to
carry out part D of title XVIII (including sec-
tion 1860D–19).
‘‘(3) AGREEMENT TO ESTABLISH INFORMATION
AND ENROLLMENT SITES AT SOCIAL SECURITY FIELD
OFFICES.—Enter into an agreement with the Com-
missioner of Social Security to use all Social Security
field offices located in the State as information and
enrollment sites for making the eligibility determina-
tions required under paragraphs (1) and (2).
‘‘(4) SCREEN AND ENROLL INDIVIDUALS ELIGI-
BLE FOR MEDICARE COST-SHARING.—As part of mak-
ing an eligibility determination required under para-
graph (1) or (2), screen an individual who applies for
such a determination for eligibility for medical assist-
ance for any medicare cost-sharing described in sec-
tion 1905(p)(3) and, if the individual is eligible for
any such medicare cost-sharing, enroll the individual
under the State plan (or under a waiver of such
plan).
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‘‘(b) 
FEDERAL
SUBSIDY
OF
ADMINISTRATIVE
COSTS.—
‘‘(1) ENHANCED MATCH FOR ELIGIBILITY DETER-
MINATIONS.—Subject to paragraphs (2) and (4), with
respect to calendar quarters beginning on or after
January 1, 2004, the amounts expended by a State
in carrying out subsection (a) are expenditures reim-
bursable under section 1903(a)(7) except that, in ap-
plying such section with respect to such expenditures
incurred for—
‘‘(A) such calendar quarters occurring in
fiscal year 2004 or 2005, ‘75 percent’ shall be
substituted for ‘50 per centum’;
‘‘(B) calendar quarters occurring in fiscal
year 2006, ‘70 percent’ shall be substituted for
‘50 per centum’;
‘‘(C) calendar quarters occurring in fiscal
year 2007, ‘65 percent’ shall be substituted for
‘50 per centum’; and
‘‘(D) calendar quarters occurring in fiscal
year 2008 or any fiscal year thereafter, ‘60 per-
cent’ shall be substituted for ‘50 per centum’.
‘‘(2) 100 PERCENT MATCH FOR ELIGIBILITY DE-
TERMINATIONS
FOR
SUBSIDY-ELIGIBLE
INDIVID-
UALS.—In the case of amounts expended by a State
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on or after November 1, 2005, to determine whether
an individual is a subsidy-eligible individual for pur-
poses of section 1860D–19, such expenditures shall be
reimbursed under section 1903(a)(7) by substituting
‘100 percent’ for ‘50 per centum’.
‘‘(3) ENHANCED MATCH FOR UPDATES OR IM-
PROVEMENTS
TO
ELIGIBILITY
DETERMINATION
SYS-
TEMS.—With respect to calendar quarters occurring
in fiscal year 2004, 2005, or 2006, the Secretary, in
addition to amounts otherwise paid under section
1903(a), shall pay to each State which has a plan ap-
proved under this title, for each such quarter an
amount equal to 90 percent of so much of the sums
expended during such quarter as are attributable to
the design, development, acquisition, or installation of
improved eligibility determination systems (including
hardware and software for such systems) in order to
carry out the requirements of subsection (a) and sec-
tion 1807A(h)(1). No payment shall be made to a
State under the preceding sentence unless the State’s
improved eligibility determination system—
‘‘(A) satisfies such standards for improve-
ment as the Secretary may establish; and
‘‘(B) complies, and is compatible, with the
standards established under part C of title XI
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and any regulations promulgated under section
264(c) of the Health Insurance Portability and
Accountability Act of 1996 (42 U.S.C. 1320d–2
note).
‘‘(4) COORDINATION.—The State shall provide
the Secretary with such information as may be nec-
essary to properly allocate expenditures described in
paragraph (1), (2), or (3) that may otherwise be
made for similar eligibility determinations or expend-
itures.
‘‘(c) FEDERAL PAYMENT OF MEDICARE PART B PRE-
MIUM FOR STATES PROVIDING PRESCRIPTION DRUG COV-
ERAGE FOR DUAL ELIGIBLE INDIVIDUALS.—
‘‘(1) IN
GENERAL.—Subject to paragraph (4)
and notwithstanding section 1905(b), in the case of a
State that provides medical assistance for covered
drugs 
(as 
such 
term 
is 
defined 
in 
section
1860D(a)(2)) to dual eligible individuals under this
title that satisfies the minimum standards described
in paragraph (2), the Federal medical assistance per-
centage shall be 100 percent for medicare cost-sharing
described in section 1905(p)(3)(A)(ii) (relating to pre-
miums under section 1839) for individuals—
‘‘(A) who are dual eligible individuals or
qualified medicare beneficiaries; and
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‘‘(B) whose income is at least the income re-
quired for an individual to be an eligible indi-
vidual under section 1611 for purposes of the
supplemental security income program (as deter-
mined under section 1612), but does not exceed
100 percent of the poverty line (as defined in sec-
tion 2110(c)(5)) applicable to a family of the
size involved.
‘‘(2) MINIMUM
STANDARDS
DESCRIBED.—For
purposes of paragraph (1), the minimum standards
described in this paragraph are the following:
‘‘(A) In providing medical assistance for
dual eligible individuals for such covered drugs,
the State satisfies the requirements of this title
(including limitations on cost-sharing imposed
under section 1916) applicable to the provision
of medical assistance for prescribed drugs to dual
eligible individuals.
‘‘(B) In providing medical assistance for
dual eligible individuals for such covered drugs,
the State provides such individuals with bene-
ficiary protections that the Secretary determines
are equivalent to the beneficiary protections ap-
plicable under section 1860D–5 to eligible enti-
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ties offering a Medicare Prescription Drug plan
under part D of title XVIII.
‘‘(C) In providing medical assistance for
dual eligible individuals for such covered drugs,
the State does not impose a limitation on the
number of prescriptions an individual may have
filled.
‘‘(3) NONAPPLICATION.—Section 1927(d)(2)(E)
shall not apply to a State for purposes of providing
medical assistance for covered drugs (as such term is
defined in section 1860D(a)(2)) to dual eligible indi-
viduals that satisfies the minimum standards de-
scribed in paragraph (2).
‘‘(4) LIMITATION.—Paragraph (1) shall not
apply to any State before January 1, 2006.
‘‘(d) FEDERAL PAYMENT OF MEDICARE PART A COST-
SHARING FOR CERTAIN STATES.—
‘‘(1) IN
GENERAL.—Subject to paragraph (2)
and notwithstanding section 1905(b), in the case of a
State that, as of the date of enactment of the Prescrip-
tion Drug and Medicare Improvement Act of 2003,
provides medical assistance for individuals described
in section 1902(a)(10)(A)(ii))(X), the Federal medical
assistance percentage shall be 100 percent for medi-
care cost-sharing described in subparagraphs (B) and
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(C) of section 1905(p)(3) (relating to coinsurance and
deductibles established under title XVIII) for the indi-
viduals provided medical assistance under section
1902(a)(10)(A)(ii)(X), but only—
‘‘(A) with respect to such medicare cost-
sharing that is incurred under part A of title
XVIII; and
‘‘(B) for so long as the State elects to pro-
vide 
medical 
assistance 
under 
section
1902(a)(10)(A)(ii)(X).
‘‘(2) LIMITATION.—Paragraph (1) shall not
apply to any State before January 1, 2006.
‘‘(e) TREATMENT OF TERRITORIES.—
‘‘(1) IN GENERAL.—In the case of a State, other
than the 50 States and the District of Columbia—
‘‘(A) the previous provisions of this section
shall not apply to residents of such State; and
‘‘(B) if the State establishes a plan de-
scribed in paragraph (2), the amount otherwise
determined under section 1108(f) (as increased
under section 1108(g)) for the State shall be fur-
ther increased by the amount specified in para-
graph (3).
‘‘(2) PLAN.—The plan described in this para-
graph is a plan that—
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‘‘(A) provides medical assistance with re-
spect to the provision of covered drugs (as de-
fined in section 1860D(a)(2)) to individuals de-
scribed in subparagraph (A), (B), (C), or (D) of
section 1860D–19(a)(3); and
‘‘(B) ensures that additional amounts re-
ceived by the State that are attributable to the
operation of this subsection are used only for
such assistance.
‘‘(3) INCREASED AMOUNT.—
‘‘(A) IN GENERAL.—The amount specified
in this paragraph for a State for a fiscal year
is equal to the product of—
‘‘(i) the aggregate amount specified in
subparagraph (B); and
‘‘(ii) the amount specified in section
1108(g)(1) for that State, divided by the
sum of the amounts specified in such section
for all such States.
‘‘(B) AGGREGATE AMOUNT.—The aggregate
amount specified in this subparagraph for—
‘‘(i) the last 3 quarters of fiscal year
2006, is equal to $37,500,000;
‘‘(ii) fiscal year 2007, is equal to
$50,000,000; and
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‘‘(iii) any subsequent fiscal year, is
equal to the aggregate amount specified in
this subparagraph for the previous fiscal
year increased by the annual percentage in-
crease specified in section 1860D–6(c)(5) for
the calendar year beginning in such fiscal
year.
‘‘(4) NONAPPLICATION.—Section 1927(d)(2)(E)
shall not apply to a State described in paragraph (1)
for purposes of providing medical assistance described
in paragraph (2)(A).
‘‘(5) REPORT.—The Secretary shall submit to
Congress a report on the application of this subsection
and may include in the report such recommendations
as the Secretary deems appropriate.
‘‘(f) DEFINITIONS.—For purposes of this section, the
terms ‘qualified medicare beneficiary’, ‘subsidy-eligible in-
dividual’, and ‘dual eligible individual’ have the meanings
given such terms in subparagraphs (A), (D), and (E), re-
spectively, of section 1860D–19(a)(4).’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 1905(b) (42 U.S.C. 1396d(b)) is
amended by inserting ‘‘and subsections (c)(1)
and (d)(1) of section 1935’’ after ‘‘1933(d)’’.
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(B) Section 1108(f) (42 U.S.C. 1308(f)) is
amended 
by 
inserting 
‘‘and 
section
1935(e)(1)(B)’’ after ‘‘Subject to subsection (g)’’.
(3) TRANSFER
OF
FEDERALLY
ASSUMED
POR-
TIONS OF MEDICARE COST-SHARING.—
(A) TRANSFER OF ASSUMPTION OF PART B
PREMIUM FOR STATES PROVIDING PRESCRIPTION
DRUG COVERAGE FOR DUAL ELIGIBLE INDIVID-
UALS TO THE FEDERAL SUPPLEMENTARY MED-
ICAL INSURANCE TRUST FUND.—Section 1841(f)
(42 U.S.C. 1395t(f)) is amended—
(i) by inserting ‘‘(1)’’ after ‘‘(f)’’; and
(ii) by adding at the end the following
new paragraph:
‘‘(2) There shall be transferred periodically (but not
less often than once each fiscal year) to the Trust Fund from
the Treasury amounts which the Secretary of Health and
Human Services shall have certified are equivalent to the
amounts determined under section 1935(c)(1) with respect
to all States for a fiscal year.’’.
(B) TRANSFER OF ASSUMPTION OF PART A
COST-SHARING
FOR
CERTAIN
STATES.—Section
1817(g) (42 U.S.C. 1395i(g)) is amended—
(i) by inserting ‘‘(1)’’ after ‘‘(g)’’; and
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(ii) by adding at the end the following
new paragraph:
‘‘(2) There shall be transferred periodically (but not
less often than once each fiscal year) to the Trust Fund from
the Treasury amounts which the Secretary of Health and
Human Services shall have certified are equivalent to the
amounts determined under section 1935(d)(1) with respect
to certain States for a fiscal year.’’.
(4) AMENDMENT
TO
BEST
PRICE.—Section
1927(c)(1)(C)(i) (42 U.S.C. 1396r–8(c)(1)(C)(i)), as
amended by section 111(b), is amended—
(A) by striking ‘‘and’’ at the end of sub-
clause (IV);
(B) by striking the period at the end of sub-
clause (V) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
subclause:
‘‘(VI) any prices charged which
are negotiated under a Medicare Pre-
scription Drug plan under part D of
title XVIII with respect to covered
drugs, under a MedicareAdvantage
plan under part C of such title with
respect to such drugs, or under a quali-
fied retiree prescription drug plan (as
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defined in section 1860D–20(f)(1))
with respect to such drugs, on behalf of
eligible beneficiaries (as defined in sec-
tion 1860D(a)(3).’’.
(c) EXTENSION
OF MEDICARE COST-SHARING
FOR
PART
B 
PREMIUM
FOR
QUALIFYING
INDIVIDUALS
THROUGH 2008.—
(1) IN
GENERAL.—Section 1902(a)(10)(E)(iv)
(42 U.S.C. 1396a(a)(10)(E)(iv)) is amended to read
as follows:
‘‘(iv) 
subject 
to 
sections 
1933 
and
1905(p)(4), for making medical assistance avail-
able (but only for premiums payable with respect
to months during the period beginning with Jan-
uary 1998, and ending with December 2008) for
medicare 
cost-sharing 
described 
in 
section
1905(p)(3)(A)(ii) for individuals who would be
qualified medicare beneficiaries described in sec-
tion 1905(p)(1) but for the fact that their income
exceeds the income level established by the State
under section 1905(p)(2) and is at least 120 per-
cent, but less than 135 percent, of the official
poverty line (referred to in such section) for a
family of the size involved and who are not oth-
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erwise eligible for medical assistance under the
State plan;’’.
(2) TOTAL
AMOUNT
AVAILABLE
FOR
ALLOCA-
TION.—Section 1933(c) (42 U.S.C. 1396u–3(c)) is
amended—
(A) in paragraph (1)—
(i) in subparagraph (D), by striking
‘‘and’’ at the end;
(ii) in subparagraph (E)—
(I) by striking ‘‘fiscal year 2002’’
and inserting ‘‘each of fiscal years
2002 through 2008’’; and
(II) by striking the period and in-
serting ‘‘; and’’; and
(iii) by adding at the end the following
new subparagraph:
‘‘(F) the first quarter of fiscal year 2009,
$100,000,000.’’; and
(B) in paragraph (2)(A), by striking ‘‘the
sum 
of’’ 
and 
all 
that 
follows 
through
‘‘1902(a)(10)(E)(iv)(II) in the State; to’’ and in-
serting ‘‘twice the total number of individuals
described in section 1902(a)(10)(E)(iv) in the
State; to’’.
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(d) OUTREACH BY THE COMMISSIONER OF SOCIAL SE-
CURITY.—Section 1144 (42 U.S.C. 1320b–14) is amended—
(1) in the section heading, by inserting ‘‘AND
SUBSIDIES
FOR
LOW-INCOME
INDIVIDUALS
UNDER
TITLE XVIII’’ after ‘‘COST-SHARING’’;
(2) in subsection (a)—
(A) in paragraph (1)—
(i) in subparagraph (A), by inserting
‘‘for the transitional prescription drug as-
sistance card program under section 1807A,
or for premium and cost-sharing subsidies
under section 1860D–19’’ before the semi-
colon; and
(ii) in subparagraph (B), by inserting
‘‘, program, and subsidies’’ after ‘‘medical
assistance’’; and
(B) in paragraph (2)—
(i) in the matter preceding subpara-
graph (A), by inserting ‘‘, the transitional
prescription drug assistance card program
under section 1807A, or premium and cost-
sharing subsidies under section 1860D–19’’
after ‘‘assistance’’; and
(ii) in subparagraph (A), by striking
‘‘such eligibility’’ and inserting ‘‘eligibility
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for medicare cost-sharing under the med-
icaid program’’; and
(3) in subsection (b)—
(A) in paragraph (1)(A), by inserting ‘‘, for
the transitional prescription drug assistance
card program under section 1807A, or for pre-
mium and cost-sharing subsidies for low-income
individuals under section 1860D–19’’ after
‘‘1933’’;
(B) in paragraph (2), by inserting ‘‘, pro-
gram, and subsidies’’ after ‘‘medical assistance’’;
and
(C) by adding at the end the following:
‘‘(3) AGREEMENTS TO ESTABLISH INFORMATION
AND ENROLLMENT SITES AT SOCIAL SECURITY FIELD
OFFICES.—
‘‘(A) IN GENERAL.—The Commissioner shall
enter into an agreement with each State oper-
ating a State plan under title XIX (including
under a waiver of such plan) to establish infor-
mation and enrollment sites within all the So-
cial Security field offices located in the State for
purposes of—
‘‘(i) the State determining the eligi-
bility of individuals residing in the State
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for medical assistance for payment of the
cost of medicare cost-sharing under the med-
icaid 
program 
pursuant 
to 
sections
1902(a)(10)(E) and 1933, the transitional
prescription drug assistance card program
under section 1807A, or premium and cost-
sharing subsidies under section 1860D–19;
and
‘‘(ii) enrolling individuals who are de-
termined eligible for such medical assist-
ance, program, or subsidies in the State
plan (or waiver), the transitional prescrip-
tion drug assistance card program under
section 1807A, or the appropriate category
for premium and cost-sharing subsidies
under section 1860D–19.
‘‘(B) AGREEMENT
TERMS.—The Secretary
and the Commissioner jointly shall develop terms
for the State agreements required under subpara-
graph (A) that shall specify the responsibilities
of the State and the Commissioner in the estab-
lishment and operation of such sites.
‘‘(C) 
AUTHORIZATION
OF
APPROPRIA-
TIONS.—There are authorized to be appropriated
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to the Commissioner, such sums as may be nec-
essary to carry out this paragraph.’’.
(e) REPORT REGARDING VOLUNTARY ENROLLMENT OF
DUAL ELIGIBLE INDIVIDUALS IN PART D.—Not later than
January 1, 2005, the Secretary shall submit a report to
Congress that contains such recommendations for legisla-
tion as the Secretary determines are necessary in order to
establish a voluntary option for dual eligible individuals
(as defined in 1860D–19(a)(4)(E) of the Social Security
Act (as added by section 101)) to enroll under part D of
title XVIII of such Act for prescription drug coverage.
SEC. 105. EXPANSION OF MEMBERSHIP AND DUTIES OF
MEDICARE PAYMENT ADVISORY COMMISSION
(MEDPAC).
(a) EXPANSION OF MEMBERSHIP.—
(1) IN GENERAL.—Section 1805(c) (42 U.S.C.
1395b–6(c)) is amended—
(A) in paragraph (1), by striking ‘‘17’’ and
inserting ‘‘19’’; and
(B) in paragraph (2)(B), by inserting ‘‘ex-
perts in the area of pharmacology and prescrip-
tion drug benefit programs,’’ after ‘‘other health
professionals,’’.
(2) INITIAL TERMS OF ADDITIONAL MEMBERS.—
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(A) IN
GENERAL.—For purposes of stag-
gering the initial terms of members of the Medi-
care Payment Advisory Commission under sec-
tion 1805(c)(3) of the Social Security Act (42
U.S.C. 1395b–6(c)(3)), the initial terms of the 2
additional members of the Commission provided
for by the amendment under paragraph (1)(A)
are as follows:
(i) One member shall be appointed for
1 year.
(ii) One member shall be appointed for
2 years.
(B) COMMENCEMENT
OF
TERMS.—Such
terms shall begin on January 1, 2005.
(b) EXPANSION OF DUTIES.—Section 1805(b)(2) (42
U.S.C. 1395b–6(b)(2)) is amended by adding at the end the
following new subparagraph:
‘‘(D) VOLUNTARY PRESCRIPTION DRUG DE-
LIVERY PROGRAM.—Specifically, the Commission
shall review, with respect to the voluntary pre-
scription drug delivery program under part D,
competition among eligible entities offering
Medicare Prescription Drug plans and bene-
ficiary access to such plans and covered drugs,
particularly in rural areas. As part of such re-
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view, the Commission shall hold 3 field hearings
in 2007.’’.
SEC. 106. STUDY REGARDING VARIATIONS IN SPENDING
AND DRUG UTILIZATION.
(a) STUDY.—The Secretary shall study on an ongoing
basis variations in spending and drug utilization under
part D of title XVIII of the Social Security Act for covered
drugs to determine the impact of such variations on pre-
miums imposed by eligible entities offering Medicare Pre-
scription Drug plans under that part. In conducting such
study, the Secretary shall examine the impact of geographic
adjustments of the monthly national average premium
under section 1860D–15 of such Act on—
(1) maximization of competition under part D of
title XVIII of such Act; and
(2) the ability of eligible entities offering Medi-
care Prescription Drug plans to contain costs for cov-
ered drugs.
(b) REPORT.—Beginning with 2007, the Secretary
shall submit annual reports to Congress on the study re-
quired under subsection (a).
SEC. 107. LIMITATION ON PRESCRIPTION DRUG BENEFITS
OF MEMBERS OF CONGRESS.
(a) LIMITATION ON BENEFITS.—Notwithstanding any
other provision of law, during calendar year 2004, the actu-
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arial value of the prescription drug benefit of any Member
of Congress enrolled in a health benefits plan under chapter
89 of title 5, United States Code, may not exceed the actu-
arial value of any prescription drug benefit under title
XVIII of the Social Security Act passed by the 1st session
of the 108th Congress and enacted in law.
(b) REGULATIONS.—The Office of Personnel Manage-
ment shall promulgate regulations to carry out this section.
SEC. 108. PROTECTING SENIORS WITH CANCER.
Any eligible beneficiary (as defined in section 1860D(3)
of the Social Security Act) who is diagnosed with cancer
shall be protected from high prescription drug costs in the
following manner:
(1) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN IN-
COME BELOW 100 PERCENT OF THE FEDERAL POV-
ERTY LINE.—If the individual is a qualified medicare
beneficiary (as defined in section 1860D–19(a)(4) of
such Act), such individual shall receive the full pre-
mium subsidy and reduction of cost-sharing described
in section 1860D–19(a)(1) of such Act, including the
payment of—
(A) no deductible;
(B) no monthly beneficiary premium for at
least one Medicare Prescription Drug plan avail-
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able in the area in which the individual resides;
and
(C) reduced cost-sharing described in sub-
paragraphs (C), (D), and (E) of section 1860D–
19(a)(1) of such Act.
(2) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN IN-
COME BETWEEN 100 AND 135 PERCENT OF THE FED-
ERAL POVERTY LINE.—If the individual is a specified
low income medicare beneficiary (as defined in para-
graph 1860D–19(4)(B) of such Act) or a qualifying
individual (as defined in paragraph 1860D–19(4)(C)
of such Act) who is diagnosed with cancer, such indi-
vidual shall receive the full premium subsidy and re-
duction of cost-sharing described in section 1860D–
19(a)(2) of such Act, including payment of—
(A) no deductible;
(B) no monthly premium for any Medicare
Prescription Drug plan described paragraph (1)
or (2) of section 1860D–17(a) of such Act; and
(C) reduced cost-sharing described in sub-
paragraphs (C), (D), and (E) of section 1860D–
19(a)(2) of such Act.
(3) SUBSIDY-ELIGIBLE
INDIVIDUALS
WITH
IN-
COME BETWEEN 135 PERCENT AND 160 PERCENT OF
THE FEDERAL POVERTY LEVEL.—If the individual is
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a subsidy-eligible individual (as defined in section
1860D–19(a)(4)(D) of such Act) who is diagnosed
with cancer, such individual shall receive sliding scale
premium subsidy and reduction of cost-sharing for
subsidy-eligible individuals, including payment of—
(A) for 2006, a deductible of only $50;
(B) only a percentage of the monthly pre-
mium 
(as 
described 
in 
section 
1860D–
19(a)(3)(A)(i)); and
(C) 
reduced 
cost-sharing 
described 
in
clauses (iii), (iv), and (v) of section 1860D–
19(a)(3)(A).
(4) ELIGIBLE
BENEFICIARIES
WITH
INCOME
ABOVE
160
PERCENT
OF
THE
FEDERAL
POVERTY
LEVEL.—If an individual is an eligible beneficiary
(as defined in section 1860D(3) of such Act), is not
described in paragraphs (1) through (3), and is diag-
nosed with cancer, such individual shall have access
to qualified prescription drug coverage (as described
in section 1860D–6(a)(1) of such Act), including pay-
ment of—
(A) for 2006, a deductible of $275;
(B) the limits on cost-sharing described sec-
tion 1860D–6(c)(2) of such Act up to, for 2006,
an initial coverage limit of $4,500; and
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(C) for 2006, an annual out-of-pocket limit
of $3,700 with 10 percent cost-sharing after that
limit is reached.
SEC. 109. PROTECTING SENIORS WITH CARDIOVASCULAR
DISEASE, CANCER, OR ALZHEIMER’S DISEASE.
Any eligible beneficiary (as defined in section 1860D(3)
of the Social Security Act) who is diagnosed with cardio-
vascular disease, cancer, diabetes or Alzheimer’s disease
shall be protected from high prescription drug costs in the
following manner:
(1) SUBSIDY ELIGIBLE INDIVIDUALS WITH AN IN-
COME BELOW 100 PERCENT OF THE FEDERAL POV-
ERTY LINE.—If the individual is a qualified medicare
beneficiary (as defined in section 1860D–19(a)(4) of
such Act), such individual shall receive the full pre-
mium subsidy and reduction of cost-sharing described
in section 1860D–19(a)(1) of such Act, including the
payment of—
(A) no deductible;
(B) no monthly beneficiary premium for at
least one Medicare Prescription Drug plan avail-
able in the area in which the individual resides;
and
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(B) the limits on cost-sharing described sec-
tion 1860D–6(c)(2) of such Act up to, for 2006,
an initial coverage limit of $4,500; and
(C) for 2006, an annual out-of-pocket limit
of $3,700 with 10 percent cost-sharing after that
limit is reached.
SEC. 110. REVIEW AND REPORT ON CURRENT STANDARDS
OF PRACTICE FOR PHARMACY SERVICES PRO-
VIDED TO PATIENTS IN NURSING FACILITIES.
(a) REVIEW.—
(1) IN GENERAL.—The Secretary shall conduct a
thorough review of the current standards of practice
for pharmacy services provided to patients in nursing
facilities.
(2) SPECIFIC
MATTERS
REVIEWED.—In con-
ducting the review under paragraph (1), the Sec-
retary shall—
(A) assess the current standards of practice,
clinical services, and other service requirements
generally used for pharmacy services in long-
term care settings; and
(B) evaluate the impact of those standards
with respect to patient safety, reduction of medi-
cation errors and quality of care.
(b) REPORT.—
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(1) IN GENERAL.—Not later than the date that
is 18 months after the date of enactment of this Act,
the Secretary shall submit a report to Congress on the
study conducted under subsection (a)(1), together with
any recommendations for legislation that the Admin-
istrator determines to be appropriate as a result of
such study.
(2) CONTENTS.—The report submitted under
paragraph (1) shall contain—
(A) a detailed description of the plans of the
Secretary to implement the provisions of this Act
in a manner consistent with applicable State
and Federal laws designed to protect the safety
and quality of care of nursing facility patients;
and
(B) recommendations regarding necessary
actions and appropriate reimbursement to en-
sure the provision of prescription drugs to medi-
care beneficiaries residing in nursing facilities
in a manner consistent with existing patient
safety and quality of care standards under ap-
plicable State and Federal laws.
SEC. 110A. MEDICATION THERAPY MANAGEMENT ASSESS-
MENT PROGRAM.
(a) ESTABLISHMENT.—
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(1) IN GENERAL.—The Secretary shall establish
an assessment program to contract with qualified
pharmacists to provide medication therapy manage-
ment services to eligible beneficiaries who receive care
under the original medicare fee-for-service program
under parts A and B of title XVIII of the Social Se-
curity Act to eligible beneficiaries.
(2) SITES.—The Secretary shall designate 6 geo-
graphic areas, each containing not less than 3 sites,
at which to conduct the assessment program under
this section. At least 2 geographic areas designated
under this paragraph shall be located in rural areas.
(3) DURATION.—The Secretary shall conduct the
assessment program under this section for a 1-year
period.
(4) IMPLEMENTATION.—The Secretary shall im-
plement the program not later than January 1, 2005,
but may not implement the assessment program be-
fore October 1, 2004.
(b) PARTICIPANTS.—Any eligible beneficiary who re-
sides in an area designated by the Secretary as an assess-
ment site under subsection (a)(2) may participate in the
assessment program under this section if such beneficiary
identifies a qualified pharmacist who agrees to furnish