‘‘(A) provides such information as the Sec-
retary may require in order to determine eligi-
bility under section 1860D–1(b) and the appro-
priate category of benefits under subsection 
(c)(2)(A); and 
‘‘(B) authorizes in a form and manner 
specified by the Secretary the verification of the 
individual’s income and prescription drug cov-
erage status by the Secretary through arrange-
ments with States or otherwise. 
An arrangement with a State under subparagraph 
(B) shall provide for the payment by the Secretary 
under this part of the State’s reasonable costs of 
conducting verifications under such arrangement. 
‘‘(2) PENALTIES FOR PROVISION OF FALSE IN-
FORMATION.—The provision of false information 
under paragraph (1)(A) is subject to criminal pen-
alties under section 1128B. 
‘‘(3) PROCEDURES
FOR
DETERMINING
IN-
COME.—The Secretary shall establish procedures for 
determining the income of individuals seeking enroll-
ment under this part. 
‘‘(4) DISCLOSURE OF INFORMATION.—Notwith-
standing section 6103(a) of the Internal Revenue 
Code of 1986, the Secretary of the Treasury may,
upon written request from the Secretary, disclose to 
the Secretary such return information as is nec-
essary to make the determinations described in sub-
paragraph (A). Return information disclosed under 
the preceding sentence may be used by the Secretary 
only for the purposes of, and to the extent necessary 
in, making such determinations. 
‘‘(5) INFORMATION REGARDING PRESCRIPTION 
DRUG
COVERAGE.—In order to verify compliance 
with the eligibility requirement of section 1860D–
1(b)(1)(B), the Secretary is authorized to establish 
procedures, in coordination with the Secretary of 
Treasury and the Secretary of Labor, for deter-
mining whether eligible beneficiaries have prescrip-
tion drug coverage through insurance or otherwise, 
or under a group health plan or other third-party 
payment arrangement, and for alerting the Secretary 
about such coverage or arrangements. The Secretary 
may also periodically ask eligible beneficiaries en-
rolled under this part whether the beneficiaries are 
eligible or have such coverage. A material misrepre-
sentation of the information described in the pre-
ceding sentence by a beneficiary (as defined in 
standards set by the Secretary and determined 
through a process established by the Secretary) shall
constitute grounds for termination of enrollment 
under section 1860D–2(a)(1)(C). 
‘‘(e) CAPPED APPROPRIATIONS TO COVER PROGRAM 
EXPENDITURES.—
‘‘(1) IN
GENERAL.—For the purpose of car-
rying out this part, there is appropriated, out of any 
money in the Treasury not otherwise appropriated to 
the Medicare Safety Net Prescription Drug Account 
in the Federal Supplementary Medical Insurance 
Trust Fund established under section 1841 the fol-
lowing amounts: 
‘‘(A) $18,000,000,000 for fiscal year 2005. 
‘‘(B) $19,000,000,000 for fiscal year 2006. 
‘‘(C) $20,000,000,000 for fiscal year 2007. 
‘‘(D) $21,000,000,000 for fiscal year 
2008. 
‘‘(E) $22,000,000,000 for fiscal year 2009. 
‘‘(F) $23,000,000,000 for fiscal year 2010. 
‘‘(G) $24,000,000,000 for fiscal year 2011.
‘‘(H) $25,000,000,000 for fiscal year 
2012. 
‘‘(I) $28,000,000,000 for fiscal year 2013. 
‘‘(2) AVAILABILITY
ON
A
CALENDAR
YEAR 
BASIS.—The amounts appropriated under paragraph 
(1) for a fiscal year are authorized for obligation
during the calendar year beginning in such fiscal 
year. 
‘‘(3) ASSURANCE
OF
MAINTENANCE
OF
PRO-
GRAM WITHIN FUNDING LIMITATIONS.—
‘‘(A) ANNUAL
ESTIMATION.—Before the 
beginning of each year beginning with 2005), 
the Secretary shall estimate—
‘‘(i) the aggregate expenditures that 
will be made under this part for that year 
(without regard to any adjustment under 
this paragraph); and 
‘‘(ii) the cumulative aggregate expend-
itures that were made under this part for 
previous years (beginning with 2005). 
‘‘(B) ADJUSTMENT.—If the Secretary esti-
mates under subparagraph (A)(i) for a year 
that such estimated aggregate expenditures will 
exceed the amount authorized for obligation 
during the year under paragraph (2) (as re-
duced by the amount by which the cumulative 
aggregate expenditures for previous years under 
subparagraph (A)(ii) are less than the amounts 
authorized for obligations during the respective 
years under paragraph (2)), the Secretary shall 
take such of the following actions for that year
(or, at the Secretary’s discretion, for the period, 
not to exceed 4 years, including that year) as 
will eliminate any such excess: 
‘‘(i) An increase in the catastrophic 
coverage 
threshold 
under 
subsection 
(b)(1)(C). 
‘‘(ii) A decrease in the Federal con-
tribution amounts under subsection (c)(2). 
‘‘PRESCRIPTION DRUG ACCOUNTS 
‘‘SEC. 1860D–5. (a) ESTABLISHMENT
OF
AC-
COUNTS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish and maintain for each eligible beneficiary who is 
enrolled under this part at the time of enrollment a 
prescription drug account (in this section referred to 
as an ‘account’). 
‘‘(2) ACCOUNTHOLDER DEFINED.—In this sec-
tion, the term ‘accountholder’ means an individual 
for whom an account or reserve account has been es-
tablished under this section. 
‘‘(3) EXPENDITURES
FROM
ACCOUNT.—Noth-
ing in this section shall be construed as requiring 
the Federal Government to obligate funds for 
amounts in any account until such time as a with-
drawal from such account is authorized under this 
section.
‘‘(b) USE OF ACCOUNTS.—
‘‘(1) IN GENERAL.—Amounts credited to an ac-
count shall only be used for the purchase of covered 
outpatient 
drugs 
for 
the 
accountholder. 
Any 
amounts remaining at the end of a year remain 
available for expenditures in succeeding years so 
long as the eligible beneficiary remains enrolled 
under this part. 
‘‘(2) TREATMENT
OF
WITHDRAWALS.—The 
withdrawal of any amounts from an account in ac-
cordance with this section shall not be subject to in-
come or other tax. 
‘‘(c) AMOUNTS CREDITED IN ACCOUNT.—
‘‘(1) IN GENERAL.—The Secretary shall credit 
to a prescription drug account of an eligible bene-
ficiary Federal contributions described in section 
1860D–4(c) in accordance with paragraph (2). 
‘‘(2) TIMING
AND
AMOUNT
OF
DEPOSIT.—In 
the case of an eligible beneficiary who is enrolled 
under this part at the beginning of a year, the entire 
annual Federal contribution amount under section 
1860D–4(c)(2) shall be made into the beneficiary’s 
account at the beginning of the year. In the case of 
an eligible beneficiary who is enrolled under this 
part after the beginning of a year, the amount of
such contribution shall be pro-rated by the Secretary 
and deposited into the beneficiary’s account at the 
time of enrollment. 
‘‘(3) TREATMENT
OF
CONTRIBUTIONS.—Such 
contributions shall not be treated as income for pur-
poses of chapter 1 of the Internal Revenue Code of 
1986. 
‘‘SAFETY
NET
PRESCRIPTION
DRUG
ACCOUNT
IN
THE 
FEDERAL
SUPPLEMENTARY
MEDICAL
INSURANCE 
TRUST FUND 
‘‘SEC. 1860D–6. (a) ESTABLISHMENT.—
‘‘(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 ‘Safety Net Prescription Drug Ac-
count’ (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 section 201(i)(1), and such amounts as may be 
deposited in, or appropriated to, the Account as pro-
vided 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 
Federal 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 payments with respect to administra-
tive expenses under this part in accordance with sec-
tion 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 
ADMINISTRATIVE COSTS.—There are appropriated to the 
Account in a fiscal year, out of any moneys in the Treas-
ury not otherwise appropriated, an amount equal to the 
payments and transfers made from the Account in the 
year.
‘‘DEFINITIONS 
‘‘SEC. 1860D–7. In this part: 
‘‘(1) COVERED OUTPATIENT DRUG.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the term ‘covered outpatient 
drug’ means—
‘‘(i) a drug that may be dispensed 
only upon a prescription and that is de-
scribed in clause (i) or (ii) of subparagraph 
(A) of section 1927(k)(2); or 
‘‘(ii) a biological product or insulin de-
scribed in subparagraph (B) or (C) of such 
section. 
‘‘(B) EXCLUSIONS.—
‘‘(i) IN GENERAL.—The term ‘covered 
outpatient drug’ does not include drugs or 
classes of drugs, or their medical uses, 
which may be excluded from coverage or 
otherwise 
restricted 
under 
section 
1927(d)(2), other than those restricted 
under subparagraph (E) of such section 
(relating to smoking cessation agents). 
‘‘(ii) AVOIDANCE OF DUPLICATE COV-
ERAGE.—A drug prescribed for an indi-
vidual that would otherwise be a covered 
outpatient drug under this part shall not 
be considered to be such a drug if payment 
for the drug is available under part A or 
B (but such drug shall be so considered if 
such payment is not available because the 
eligible beneficiary has exhausted benefits 
under part A or B), without regard to
whether the individual is entitled to bene-
fits under part A or enrolled under part B. 
‘‘(2) POVERTY LINE.—The term ‘poverty line’ 
means the income official poverty line (as defined by 
the Office of Management and Budget, and revised 
annually in accordance with section 673(2) of the 
Omnibus Budget Reconciliation Act of 1981) appli-
cable to a family of the size involved.’’. 
(b) CONFORMING REFERENCES TO PREVIOUS PART 
D.—
(1) IN GENERAL.—Any reference in law (in ef-
fect before the date of enactment of this Act) to part 
D of title XVIII of the Social Security Act is deemed 
a reference to part F of such title (as in effect after 
such date). 
(2) SECRETARIAL SUBMISSION OF LEGISLATIVE 
PROPOSAL.—Not later than 6 months after the date 
of enactment of this section, the Secretary of Health 
and Human Services shall submit to the appropriate 
committees of Congress a legislative proposal pro-
viding for such technical and conforming amend-
ments in the law as are required by the provisions 
of this section.
SEC. 3. EXCLUSION OF PART D COSTS FROM DETERMINA-
TION OF PART B MONTHLY PREMIUM. 
Section 1839(g) of the Social Security Act (42 U.S.C. 
1395r(g)) is amended—
(1) by striking ‘‘attributable to the application 
of section’’ and inserting ‘‘attributable to—
‘‘(1) the application of section’’;
(2) by striking the period and inserting ‘‘; 
and’’; and 
(3) by adding at the end the following new 
paragraph:
‘‘(2) the Medicare Safety Net Outpatient Pre-
scription Drug Program under part D.’’.
SEC. 4. MEDICAID AMENDMENTS. 
(a) VERIFICATION
OF ELIGIBILITY
FOR PART D 
BENEFITS.—
(1) 
REQUIREMENT.—Section 
1902(a) 
(42 
U.S.C. 1396a(a)) is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (64); 
(B) by striking the period at the end of 
paragraph (65) and inserting ‘‘; and’’; and 
(C) by inserting after paragraph (65) the 
following new paragraph: 
‘‘(66) provide for verification of income under 
section 1860D–4(d)(1)(B).’’.