under this part) as to whether or not such an
individual has met the prescription drug de-
ductible 
established 
under 
section
1834(d)(1)(A) for a year; and
‘‘(K) will enter into such contracts with organi-
zations described in subsection (f)(3) as the Sec-
retary determines may be necessary to implement
and operate (and for related functions with respect
to) the electronic system established under sub-
section (o)(4) for covered outpatient drugs under
this part;’’.
(3) SPECIAL CONTRACT PROVISIONS FOR ELEC-
TRONIC CLAIMS SYSTEM.—
(A) PAYMENT
ON
OTHER
THAN
A
COST
BASIS.—Section 1842(c)(1)(A) of such Act (42
U.S.C. 1395u(c)(1)(A)) is amended—
(i) 
by 
inserting 
‘‘(i)’’ 
after
‘‘(c)(1)(A)’’;
(ii) in the first sentence, by inserting
‘‘, except as provided in clause (ii),’’ after
‘‘under this part, and’’; and
(iii) by adding at the end the follow-
ing new clause:
‘‘(ii) To the extent that a contract under this section
provides for implementation and operation (and related
functions) of the electronic system established under sub-
section (o)(4) for covered outpatient drugs, the Secretary
may provide for payment for such activities based on any
method of payment determined by the Secretary to be ap-
propriate.’’.
(B) APPLICATION
OF
DIFFERENT
PER-
FORMANCE
STANDARDS.—The Secretary of
Health and Human Services, before entering
into contracts under section 1842 of the Social
Security Act with respect to the implementation
and operation (and related functions) of the
electronic system for covered outpatient drugs,
shall establish standards with respect to per-
formance with respect to such activities. The
provisions of section 1153(e)(2) and paragraphs
(1) and (2) of section 1153(h) of such Act shall
apply to such activities in the same manner as
they apply to contracts with peer review organi-
zations, instead of the requirements of the last
2 sentences of section 1842(b)(2) of such Act.
(C) USE OF REGIONAL CARRIERS.—Section
1842(b)(2)(A) 
of 
such 
Act 
(42 
U.S.C.
1395u(b)(2)(A)) is amended by adding at the
end the following new sentence: ‘‘With respect
to activities relating to implementation and op-
eration (and related functions) of the electronic
system established under subsection (o)(4), the
Secretary may enter into contracts with carriers
under this section to perform such activities on
a regional basis.’’.
(4) DELAY IN APPLICATION OF COORDINATED
BENEFITS WITH MEDIGAP.—The provisions of sub-
paragraph (B) of section 1842(h)(3) of the Social
Security Act shall not apply to covered outpatient
drugs (other than drugs described in section
1861(s)(2)(J) of such Act as of the date of the en-
actment of this Act) dispensed before January 1,
1996.
(5) BATCH PROMPT PROCESSING OF CLAIMS.—
Section 1842(c) (42 U.S.C. 1395u(c)) is amended—
(A) in paragraphs (2)(A) and (3)(A), by
striking ‘‘Each’’ and inserting ‘‘Except as pro-
vided in paragraph (3), each’’;
(B) by adding at the end the following new
paragraph:
‘‘(4)(A) Each contract under this section which pro-
vides for the disbursement of funds, as described in sub-
section (a)(1)(B), with respect to claims for payment for
covered outpatient drugs shall provide for a payment cycle
under which each carrier will, on a monthly basis, make