(2) 
CONTRACT
PROVISIONS.—Under 
such
contracts—
(A) such an organization shall be required
to provide for prescription drug coverage de-
scribed in subsection (b)(2)(B);
(B) such an organization shall be paid a
fee negotiated and established by the Adminis-
trator in a manner so that (taking into account
savings in expenditures under parts A and B of
the medicare program) there will be a net re-
duction in expenditures under the medicare pro-
gram as a result of the project; and
(C) such an organization shall guarantee,
through an appropriate arrangement with a re-
insurance company or otherwise, the net reduc-
tion in expenditures described in subparagraph
(B).
(3) PAYMENTS.—Payments to such organiza-
tions shall be made in appropriate proportion from
the Trust Funds established under title XVIII of the
Social Security Act.
(d) DURATION.—The project shall last for not longer
than 3 years.
(e) REPORT.—The Administrator shall submit to
Congress an interim report on the project not later than
2 years after the date it is first implemented and a final
report on the project not later than 6 months after the
date of its completion. Such reports shall include informa-
tion on the impact of the project on costs and health out-
comes and recommendations on the cost-effectiveness of
extending or expanding the project.
TITLE II—MODERNIZATION OF
ADMINISTRATION OF MEDICARE
Subtitle A—Medicare Benefits
Administration
SEC. 201. ESTABLISHMENT OF ADMINISTRATION.
(a) IN GENERAL.—Title XVIII of the Social Security
Act (42 U.S.C. 1395 et seq.) is amended by inserting after
section 1806 the following new section:
‘‘MEDICARE BENEFITS ADMINISTRATION
‘‘SEC. 1807. (a) ESTABLISHMENT.—There is estab-
lished within the Department of Health and Human Serv-
ices an agency to be known as the Medicare Benefits Ad-
ministration.
‘‘(b) 
ADMINISTRATOR
AND
DEPUTY
ADMINIS-
TRATOR.—
‘‘(1) ADMINISTRATOR.—
‘‘(A) IN GENERAL.—The Medicare Bene-
fits Administration shall be headed by an Ad-
ministrator (in this section referred to as the
‘Administrator’) who shall be appointed by the
President, by and with the advice and consent
of the Senate. The Administrator shall be in di-
rect line of authority to the Secretary.
‘‘(B) COMPENSATION.—The Administrator
shall be paid at the rate of basic pay payable
for level III of the Executive Schedule under
section 5314 of title 5, United States Code.
‘‘(C) TERM
OF
OFFICE.—The Adminis-
trator shall be appointed for a term of 5 years.
In any case in which a successor does not take
office at the end of an Administrator’s term of
office, that Administrator may continue in of-
fice until the entry upon office of such a suc-
cessor. An Administrator appointed to a term of
office after the commencement of such term
may serve under such appointment only for the
remainder of such term.
‘‘(D) GENERAL AUTHORITY.—The Admin-
istrator shall be responsible for the exercise of
all powers and the discharge of all duties of the
Administration, and shall have authority and
control over all personnel and activities thereof.
‘‘(E) RULEMAKING AUTHORITY.—The Ad-
ministrator may prescribe such rules and regu-
lations as the Administrator determines nec-
essary or appropriate to carry out the functions
of the Administration. The regulations pre-
scribed by the Administrator shall be subject to
the rulemaking procedures established under
section 553 of title 5, United States Code.
‘‘(F) AUTHORITY TO ESTABLISH ORGANI-
ZATIONAL UNITS.—The Administrator may es-
tablish, alter, consolidate, or discontinue such
organizational units or components within the
Administration as the Administrator considers
necessary or appropriate, except that this sub-
paragraph shall not apply with respect to any
unit, component, or provision provided for by
this section.
‘‘(G) AUTHORITY TO DELEGATE.—The Ad-
ministrator may assign duties, and delegate, or
authorize successive redelegations of, authority
to act and to render decisions, to such officers
and employees of the Administration as the Ad-
ministrator may find necessary. Within the lim-
itations of such delegations, redelegations, or
assignments, all official acts and decisions of
such officers and employees shall have the same
force and effect as though performed or ren-
dered by the Administrator.
‘‘(2) DEPUTY ADMINISTRATOR.—
‘‘(A) IN GENERAL.—There shall be a Dep-
uty Administrator of the Medicare Benefits Ad-
ministration who shall be appointed by the
President, by and with the advice and consent
of the Senate.
‘‘(B) COMPENSATION.—The Deputy Ad-
ministrator shall be paid at the rate of basic
pay payable for level IV of the Executive Sched-
ule under section 5315 of title 5, United States
Code.
‘‘(C) TERM OF OFFICE.—The Deputy Ad-
ministrator shall be appointed for a term of 5
years. In any case in which a successor does not
take office at the end of a Deputy Administra-
tor’s term of office, such Deputy Administrator
may continue in office until the entry upon of-
fice of such a successor. A Deputy Adminis-
trator appointed to a term of office after the
commencement of such term may serve under
such appointment only for the remainder of
such term.
‘‘(D) DUTIES.—The Deputy Administrator
shall perform such duties and exercise such
powers as the Administrator shall from time to
time assign or delegate. The Deputy Adminis-
trator shall be Acting Administrator of the Ad-
ministration during the absence or disability of
the Administrator and, unless the President
designates another officer of the Government as
Acting Administrator, in the event of a vacancy
in the office of the Administrator.
‘‘(3) SECRETARIAL COORDINATION OF PROGRAM
ADMINISTRATION.—The Secretary shall ensure ap-
propriate coordination between the Administrator
and the Administrator of the Health Care Financing
Administration in carrying out the programs under
this title.
‘‘(c) DUTIES; ADMINISTRATIVE PROVISIONS.—
‘‘(1) DUTIES.—
‘‘(A) GENERAL
DUTIES.—The Adminis-
trator shall carry out parts C and D,
including—
‘‘(i) negotiating, entering into, and en-
forcing, contracts with plans for the offer-
ing of Medicare+Choice plans under part
C, including the offering of qualified pre-
scription drug coverage under such plans;
and
‘‘(ii) negotiating, entering into, and
enforcing, contracts with PDP sponsors for
the offering of prescription drug plans
under part D.
‘‘(B) OTHER DUTIES.—The Administrator
shall carry out any duty provided for under
part C or part D, including demonstration
projects carried out in part or in whole under
such parts, the programs of all-inclusive care
for the elderly (PACE program) under section
1894, the social health maintenance organiza-
tion (SHMO) demonstration projects (referred
to in section 4104(c) of the Balanced Budget
Act of 1997), and through a Medicare+Choice
project that demonstrates the application of
capitation payment rates for frail elderly medi-
care beneficiaries through the use of a inter-
disciplinary team and through the provision of
primary care services to such beneficiaries by
means of such a team at the nursing facility in-
volved).
‘‘(C) 
NONINTERFERENCE.—In 
carrying
out its duties with respect to the provision of
qualified prescription drug coverage to bene-
ficiaries under this title, the Administrator may
not—
‘‘(i) require a particular formulary or
institute a price structure for the reim-
bursement of covered outpatient drugs;
‘‘(ii) interfere in any way with nego-
tiations 
between 
PDP 
sponsors 
and
Medicare+Choice organizations and drug
manufacturers, wholesalers, or other sup-
pliers of covered outpatient drugs; and
‘‘(iii) otherwise interfere with the
competitive nature of providing such cov-
erage through such sponsors and organiza-
tions.
‘‘(D) ANNUAL REPORTS.—Not later March
31 of each year, the Administrator shall submit
to Congress and the President a report on the
administration of parts C and D during the
previous fiscal year.
‘‘(2) STAFF.—
‘‘(A) IN
GENERAL.—The Administrator,
with the approval of the Secretary, may employ,
without regard to chapter 31 of title 5, United
States Code, such officers and employees as are
necessary to administer the activities to be car-
ried out through the Medicare Benefits Admin-
istration.
‘‘(B) FLEXIBILITY WITH RESPECT TO COM-
PENSATION.—
‘‘(i) IN GENERAL.—The staff of the
Medicare Benefits Administration shall,
subject to clause (ii), be paid without re-
gard to the provisions of chapter 51 and
chapter 53 of such title (relating to classi-
fication and schedule pay rates).
‘‘(ii) MAXIMUM
RATE.—In no case
may the rate of compensation determined
under clause (i) exceed the rate of basic
pay payable for level IV of the Executive
Schedule under section 5315 of title 5,
United States Code.
‘‘(C) LIMITATION ON FULL-TIME EQUIVA-
LENT
STAFFING
FOR
CURRENT
HCFA
FUNC-
TIONS
BEING
TRANSFERRED.—The Adminis-
trator may not employ under this paragraph a
number of full-time equivalent employees, to
carry out functions that were previously con-
ducted by the Health Care Financing Adminis-
tration and that are conducted by the Adminis-
trator by reason of this section, that exceeds
the number of such full-time equivalent employ-
ees authorized to be employed by the Health
Care Financing Administration to conduct such
functions as of the date of the enactment of
this Act.
‘‘(3) REDELEGATION OF CERTAIN FUNCTIONS
OF
THE
HEALTH
CARE
FINANCING
ADMINISTRA-
TION.—
‘‘(A) IN
GENERAL.—The Secretary, the
Administrator, and the Administrator of the
Health Care Financing Administration shall es-
tablish an appropriate transition of responsi-
bility in order to redelegate the administration
of part C from the Secretary and the Adminis-
trator of the Health Care Financing Adminis-
tration to the Administrator as is appropriate
to carry out the purposes of this section.
‘‘(B) TRANSFER OF DATA AND INFORMA-
TION.—The Secretary shall ensure that the Ad-
ministrator of the Health Care Financing Ad-
ministration transfers to the Administrator of
the Medicare Benefits Administration such in-
formation and data in the possession of the Ad-
ministrator of the Health Care Financing Ad-
ministration as the Administrator of the Medi-
care Benefits Administration requires to carry
out the duties described in paragraph (1).
‘‘(C) CONSTRUCTION.—Insofar as a re-
sponsibility of the Secretary or the Adminis-
trator of the Health Care Financing Adminis-
tration is redelegated to the Administrator
under this section, any reference to the Sec-
retary or the Administrator of the Health Care
Financing Administration in this title or title
XI with respect to such responsibility is deemed
to be a reference to the Administrator.
‘‘(d) OFFICE OF BENEFICIARY ASSISTANCE.—
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish within the Medicare Benefits Administration
an Office of Beneficiary Assistance to carry out
functions relating to medicare beneficiaries under
this title, including making determinations of eligi-
bility of individuals for benefits under this title, pro-
viding for enrollment of medicare beneficiaries under
this title, and the functions described in paragraph
(2). The Office shall be separate operating division
within the Administration.
‘‘(2) DISSEMINATION
OF
INFORMATION
ON
BENEFITS AND APPEALS RIGHTS.—
100
‘‘(A) DISSEMINATION OF BENEFITS INFOR-
MATION.—The Office of Beneficiary Assistance
shall disseminate to medicare beneficiaries, by
mail, by posting on the Internet site of the
Medicare Benefits Administration and through
the toll-free telephone number provided for
under section 1804(b), information with respect
to the following:
‘‘(i) Benefits, and limitations on pay-
ment (including cost-sharing, stop-loss pro-
visions, and formulary restrictions) under
parts C and D.
‘‘(ii) Benefits, and limitations on pay-
ment under parts A and B, including in-
formation on medicare supplemental poli-
cies under section 1882.
Such information shall be presented in a man-
ner so that medicare beneficiaries may compare
benefits under parts A, B, D, and medicare
supplemental 
policies 
with 
benefits 
under
Medicare+Choice plans under part C.
‘‘(B) DISSEMINATION OF APPEALS RIGHTS
INFORMATION.—The Office of Beneficiary As-
sistance shall disseminate to medicare bene-
ficiaries in the manner provided under subpara-
101
graph (A) a description of procedural rights (in-
cluding grievance and appeals procedures) of
beneficiaries under the original medicare fee-
for-service program under parts A and B, the
Medicare+Choice program under part C, and
the Voluntary Prescription Drug Benefit Pro-
gram under part D.
‘‘(3) MEDICARE OMBUDSMAN.—
‘‘(A) IN GENERAL.—Within the Office of
Beneficiary Assistance, there shall be a Medi-
care Ombudsman, appointed by the Secretary
from among individuals with expertise and ex-
perience in the fields of health care and advo-
cacy, to carry out the duties described in sub-
paragraph (B).
‘‘(B) DUTIES.—The Medicare Ombudsman
shall—
‘‘(i) receive complaints, grievances,
and requests for information submitted by
a medicare beneficiary, with respect to any
aspect of the medicare program;
‘‘(ii) provide assistance with respect to
complaints, grievances, and requests re-
ferred to in clause (i), including—