I
106TH CONGRESS
1ST SESSION
H. R. 2782
To amend title XVIII of the Social Security Act to assure access of Medicare
beneficiaries to prescription drug coverage through the SPICE drug
benefit program.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 5, 1999
Mr. PALLONE (for himself and Mrs. ROUKEMA) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Commerce, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To amend title XVIII of the Social Security Act to assure
access of Medicare beneficiaries to prescription drug cov-
erage through the SPICE drug benefit program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Seniors 
Prescription 
Insurance 
Coverage 
Equity
(SPICE) Act of 1999’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. SPICE drug benefit program.
‘‘PART D—SPICE DRUG BENEFIT PROGRAM
‘‘Sec. 1860A. Establishment of SPICE drug benefit program.
‘‘Sec. 1860B. Requirements for offering SPICE drug benefit coverage.
‘‘Sec. 1860C. Enrollment process for SPICE drug benefit coverage.
‘‘Sec. 1860D. Financial assistance to obtain SPICE prescription drug cov-
erage
‘‘Sec. 1860E. SPICE Board.
‘‘Sec. 1860F. SPICE Trust Fund.
Sec. 3. Conforming changes to medigap.
Sec. 4. Provision of information on SPICE drug benefit program under health
insurance information, counseling, and assistance grants.
Sec. 5. Funding through taxes on tobacco products.
SEC. 2. SPICE DRUG BENEFIT PROGRAM.
Title XVIII of the Social Security Act (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—SPICE DRUG BENEFIT PROGRAM
‘‘ESTABLISHMENT OF SPICE DRUG BENEFIT PROGRAM
‘‘SEC. 1860A. (a) IN GENERAL.—Under this part,
the SPICE Board (established under section 1860E) shall
provide for a SPICE drug benefit program under which—
‘‘(1) all eligible medicare beneficiaries shall be
provided access to SPICE prescription drug cov-
erage (meeting the conditions of section 1860B)
through either enrollment in a Medicare+Choice
plan, enrollment in a SPICE medicare supplemental
policy, or coverage under a group health plan; and
‘‘(2) there is financial assistance provided under
section 1860D for beneficiaries who voluntarily ob-
‘‘(3) ARRANGEMENTS.—The SPICE Board
shall, in cooperation with the Secretary, enter into
such arrangements as may be appropriate to dis-
seminate widely to eligible medicare beneficiaries in-
formation about the SPICE drug benefit program in
connection with materials distributed by the Sec-
retary to medicare beneficiaries, including in the
medicare handbook under section 1804 and in mate-
rials distributed under section 1851(d).
‘‘(d) 
ELIGIBLE
MEDICARE
BENEFICIARY
DE-
FINED.—For purposes of this part, the term ‘eligible
medicare beneficiary’ means an individual who is entitled
to benefits under part A and enrolled under part B.
‘‘REQUIREMENTS FOR OFFERING SPICE DRUG BENEFIT
COVERAGE
‘‘SEC. 1860B. (a) REQUIREMENT FOR APPROVAL OF
NAIC MODEL REVISIONS.—
‘‘(1) IN GENERAL.—
‘‘(A) CONDITION
FOR
OFFERING
SPICE
MEDICARE
SUPPLEMENTAL
POLICY.—On or
after the effective date of this provision, it is
unlawful to issue or sell a medicare supple-
mental policy (as defined in section 1882(g))
that provides coverage of outpatient prescrip-
tion drugs in a State unless—
‘‘(i) the State has adopted the Na-
tional Association of Insurance Commis-
sioners 
revisions 
under 
section
1882(v)(1)(A) that have been approved by
the SPICE Board under this section; and
‘‘(ii) the coverage is offered consistent
with section 1860C.
The penalties described in clause (ii) of section
1882(d)(3)(A) shall apply to whoever violates
this subparagraph in the same manner as they
apply to whoever violates such section.
‘‘(B) CONDITION FOR RECEIPT OF SPICE
FINANCIAL ASSISTANCE.—No payment of finan-
cial assistance with respect to coverage of an el-
igible medicare beneficiary under SPICE pre-
scription drug coverage which is offered either
as a SPICE medicare supplemental policy, as
part of the benefits under a Medicare+Choice
plan, or as part of the benefits under a group
health plan, shall be made unless—
‘‘(i) an application with respect to
such coverage has been approved by the
SPICE Board under this section; and
‘‘(ii) in the case of a SPICE medicare
supplemental policy or a Medicare+Choice
plan, the coverage is offered consistent
with section 1860C.
‘‘(2) ESTABLISHMENT OF APPLICATION PROC-
ESS.—
‘‘(A) IN
GENERAL.—The SPICE Board
shall establish—
‘‘(i) procedures regarding the informa-
tion to be included in applications under
this section and for the time and manner
in which such applications should be sub-
mitted;
‘‘(ii) conditions (consistent with this
part) for the approval of such applications;
and
‘‘(iii) the period (in no case less than
1 year) for which approval of such an ap-
plication is valid.
‘‘(B) DISAPPROVAL.—The SPICE Board
may disapprove (or revoke the approval) of such
an application if the Board finds that, in the
case of a SPICE medicare supplemental policy
or Medicare+Choice plan, that the entity offer-
ing the SPICE prescription drug coverage is
purposefully engaged in activities intended to
result in favorable selection of those eligible
medicare 
beneficiaries 
obtaining 
coverage
through the policy or plan.
‘‘(b) SPICE PRESCRIPTION DRUG COVERAGE DE-
FINED.—For purposes of this title, the term ‘SPICE pre-
scription drug coverage’ means coverage of outpatient pre-
scription drugs that the SPICE Board determines meets
the following requirements:
‘‘(1) 
BENEFIT
LEVEL.—The 
benefits
provided—
‘‘(A) are limited to outpatient prescription
drugs;
‘‘(B) include at least the threshold benefits
specified under subsection (c); and
‘‘(C) do not include benefits for prescrip-
tion drugs for which benefits are otherwise
available (directly or when furnished as part of,
or as an incident to, another item or service)
under part A or B.
‘‘(2) ACCESSIBILITY.—The benefits are acces-
sible and convenient to all eligible medicare bene-
ficiaries who have such coverage and provide for ac-
cess on a timely basis to new outpatient prescription
drugs and they become available.
‘‘(3) NO
PRE-EXISTING
CONDITION
EXCLU-
SIONS.—There are no pre-existing condition exclu-
sions or similar exclusions applied with respect to
the coverage.
‘‘(4) LIMITS
ON
FORMULARIES.—If the cov-
erage uses a formulary, the formulary meets the re-
quirements of subsection (d).
‘‘(c) THRESHOLD BENEFIT LEVEL.—
‘‘(1) IN GENERAL.—The SPICE Board shall re-
quest the National Association of Insurance Com-
missioners to revise the model standards for medi-
care supplemental policies pursuant to section
1882(v) for the purpose of—
‘‘(A) defining the term ‘outpatient pre-
scription drugs’; and
‘‘(B) specifying a threshold level of benefits
for SPICE prescription drug coverage.
‘‘(2) CONSIDERATIONS.—
‘‘(A) DEFINITION.—In establishing a defi-
nition under paragraph (1)(A), the Board shall
request that the National Association of Insur-
ance Commissioners take into account the defi-
nition of covered outpatient drugs under section
1927(k)(2) (which includes biological products
and insulin).
‘‘(B) 
THRESHOLD.—In 
specifying 
the
threshold level under paragraph (1)(B), the
Board shall request that the National Associa-
tion of Insurance Commissioners—
‘‘(i) take into account the level of such
coverage (including deductibles and other
cost-sharing) applied under health plans
offered under the Federal Employees
Health Benefits Program (under chapter
89 of title 5, United States Code) and
under other large group health plans; and
‘‘(ii) permit (if determined appro-
priate) optional coverage of drugs (except
for agents used to promote smoking ces-
sation) for which coverage may be excluded
or restricted under section 1927(d)(2).
‘‘(3) CONSTRUCTION.—Nothing in this part
shall be construed as preventing SPICE prescription
drug coverage from providing benefits for outpatient
prescription drugs in excess of the threshold speci-
fied under this subsection.
‘‘(d) FORMULARY REQUIREMENTS.—
‘‘(1) IN GENERAL.—A formulary meets the re-
quirements of this subsection only if—
‘‘(A) such formulary is based on the med-
ical needs of eligible medicare beneficiaries;
‘‘(B) the entity offering the coverage has
in place an appeals process for any eligible
medicare beneficiary to receive any medically
necessary outpatient prescription drug that is
not on the formulary;
‘‘(C) such procedures do not impose a sig-
nificant financial burden on an eligible medicare
beneficiary or delay the provision of medically
necessary outpatient prescription drugs to such
a beneficiary; and
‘‘(D) the entity offering the coverage pro-
vides notification to enrollees of any change in
the formulary and such notification is provided
at least 60 days prior to such change.
‘‘(2) APPEAL PROCESS.—The appeals process
established under paragraph (1)(B) shall provide for
at least a level of protection that is similar to or bet-
ter than the level of protection provided with respect
to benefits under Medicare+Choice plans under
part C.
‘‘(e) USE OF COST CONTAINMENT MECHANISMS.—
Nothing in this part shall be construed as preventing an
entity offering SPICE prescription drug coverage from
using reasonable cost containment methods, such as
formularies, mail order services, and generic drug substi-
‘‘(B) experiences a significant adverse in-
come level change (as defined by the SPICE
Board) which changes the level of financial as-
sistance available under section 1860D; and
‘‘(3) provide for coordination with the Secretary
with respect to such enrollment, disenrollment, and
changes in enrollment under par C.
‘‘FINANCIAL ASSISTANCE TO OBTAIN SPICE
PRESCRIPTION DRUG COVERAGE
‘‘SEC. 1860D. (a) IN GENERAL.—The SPICE Board
shall provide financial assistance, in accordance with this
section, with respect to eligible medicare beneficiaries who
have SPICE prescription drug coverage through enroll-
ment in a SPICE medicare supplemental policy, in a
Medicare+Choice plan that includes such coverage, or in
a group health plan that includes such coverage.
‘‘(b) AMOUNT OF ASSISTANCE.—
‘‘(1) IN GENERAL.—Subject to subsections (e)
and (f) and paragraph (2), the amount of financial
assistance with respect to an eligible medicare bene-
ficiary is equal to the following percentage of the ap-
plicable cost (as defined in subsection (g)(1)) of the
SPICE prescription drug coverage :
‘‘(A) 100 PERCENT IF INCOME BELOW 150
PERCENT OF POVERTY.—In the case of an eligi-
ble medicare beneficiary who applies for en-
hanced financial assistance under subsection (c)
and whose income (as verified under such sub-
section) does not exceed 150 percent of the pov-
erty line, the percentage is 100 percent.
‘‘(B) OTHER
PERCENT
IF
INCOME
BE-
TWEEN 150 AND 175 PERCENT OF POVERTY.—
In the case of an eligible medicare beneficiary
who applies for enhanced financial assistance
under subsection (c) and whose income (as
verified under such subsection) is greater than
150 percent, but does not exceed 175 percent,
of the poverty line, the SPICE Board shall
specify the percentage consistent with the fol-
lowing rules:
‘‘(i) RANGE.—The percentage may
not exceed 100 percent nor be less than
the percentage specified under subpara-
graph (C).
‘‘(ii) SLIDING
SCALE.—The percent-
age may not be higher for eligible medicare
beneficiaries whose income is higher.
‘‘(iii) WITHIN
AVAILABLE
FUNDS.—
The percentage is established in a manner
that is consistent with the amount of funds
available for financial assistance under this
section.
‘‘(C) 25 PERCENT
FOR
OTHER
BENE-
FICIARIES.—In the case of any other eligible
medicare beneficiary, the percentage is 25 per-
cent.
‘‘(2) LIMITATION IN CASE OF COVERAGE PRO-
VIDED THROUGH A MEDICARE+CHOICE PLAN.—In
the case of financial assistance provided under this
section with respect to SPICE prescription drug cov-
erage provided through a Medicare+Choice plan, the
amount of the financial assistance may not exceed
the amount of the portion of the premium charged
for enrollment in the plan that is related to out-
patient prescription drugs.
‘‘(c) APPLICATION FOR ENHANCED FINANCIAL AS-
SISTANCE.—
‘‘(1) IN GENERAL.—The SPICE Board shall es-
tablish procedures under which an individual who
desires enhanced financial assistance under this sec-
tion may voluntarily apply for an income determina-
tion.
‘‘(2) INCOME VERIFICATION.—
‘‘(A) IN GENERAL.—Under the procedures
established under paragraph (1), if an indi-
vidual voluntarily applies for an income deter-
mination under this subsection, the individual is
deemed to have consented to the SPICE Board
seeking and using income-related information
from other Government agencies in order to
verify the individual’s income.
‘‘(B) RESTRICTION ON USE OF INFORMA-
TION.—Information obtained under subpara-
graph (A) may be used by officers and employ-
ees of the SPICE Board only for the purposes
of, and to the extent necessary in, carrying out
their responsibilities under this part.
‘‘(3) PERIODIC REDETERMINATIONS.—Such in-
come determinations shall be valid for a period (of
not less than 1 year) specified by the SPICE Board.
‘‘(d) FORM OF ASSISTANCE.—
‘‘(1) IN GENERAL.—Financial assistance under
this section shall be provided in the form of a pay-
ment to the issuer of the SPICE medicare supple-
mental policy involved, the Medicare+Choice organi-
zation offering the Medicare+Choice plan involved,
or the sponsor of the group health plan involved, of
the amount of the subsidy. Such payment shall be
in a manner and time provided for by the SPICE
Board.
‘‘(2) ADDITIONAL REQUIREMENT.—No financial
assistance shall be made available with respect to
SPICE prescription drug coverage provided by an
entity to an eligible medicare beneficiary unless the
entity provides assurances satisfactory to the SPICE
Board that the entity shall reduce the amount other-
wise charged the beneficiary for such coverage by an
amount equal to the amount of such assistance.
‘‘(3) SPECIAL RULE WHERE NO OR LOW PRE-
MIUM CHARGED.—The SPICE Board shall establish
appropriate procedures to assure that eligible medi-
care beneficiaries who obtain SPICE prescription
drug coverage through enrollment in a group health
plan which does not impose a premium or imposes
a premium that is less than the amount of the finan-
cial assistance otherwise provided, are provided the
benefit of some of such financial assistance.
‘‘(e) LATE ENROLLMENT PENALTY.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
the SPICE Board shall establish procedures for re-
ducing the amount of financial assistance provided
under this section on behalf of an eligible medicare
beneficiary if the beneficiary fails to obtain and
maintain SPICE prescription drug coverage during
periods in which the beneficiary is eligible to obtain
such coverage. Such procedures may be similar to
the part B late enrollment penalty provisions under
section 1839(b) and shall not take into account peri-
ods before the first period in which financial assist-
ance is made available under this section.
‘‘(2) EXCEPTION.—The late enrollment proce-
dures established pursuant to paragraph (1) shall
not apply to an eligible medicare beneficiary who is
enrolled under Medicare+Choice plan or a group
health plan that provides outpatient prescription
drug coverage and the plan terminates or ceases to
provide such coverage to the beneficiary, but only
if—
‘‘(A) the beneficiary seeks to enroll under
a plan or policy that offers SPICE prescription
drug coverage at the next opportunity that is
available to the beneficiary after the effective
date of the termination of such coverage; and
‘‘(B) submits evidence of the effective date
of the termination of such coverage.
‘‘(f) ADJUSTMENT OF FINANCIAL ASSISTANCE IF IN-
SUFFICIENT FUNDING.—
‘‘(1) LIMITATION
OF
ASSISTANCE
TO
FUNDS
AVAILABLE.—In no case shall the amount of finan-
cial assistance provided under this section exceed the
amount of funds available for such assistance under
the SPICE Trust Fund.
‘‘(2) REQUIRED ADJUSTMENT.—If the SPICE
Board determines under section 1860E(b)(3)(C)
that the amount in the SPICE Trust Fund in the
next year will be insufficient to cover the costs of
providing financial assistance under this section in
such year—
‘‘(A) the SPICE Board shall first reduce
the percentage specified in subsection (b)(3) to
such lower percentage (but not below 10 per-
cent) as may be required, and to adjust the per-
centage specified under subsection (b)(2) to re-
flect such reduction;
‘‘(B) if such percentage reductions are not
sufficient to reduce the costs to comply with
paragraph (1), the SPICE Board shall next re-
duce the income thresholds (as a percentage of
the poverty line) under subsection (b) as may
be further required; and
‘‘(C) if such previous reductions are still
not sufficient to reduce the costs to comply with
paragraph (1), the SPICE Board shall imme-
diately report to Congress and suspend the pro-
vision of financial assistance under this section
during such year.
‘‘(g) DEFINITIONS.—For purposes of this section:
‘‘(1) APPLICABLE COST.—The term ‘applicable
cost’ means, with respect to SPICE prescription
drug coverage provided under—
‘‘(A) a SPICE medicare supplemental pol-
icy, is the premium charged for the policy;
‘‘(B) a Medicare+Choice plan, is the actu-
arial value of the portion of the adjusted com-
munity rate for the plan that is related to pro-
viding such coverage, as determined by the
SPICE Board in consultation with the Sec-
retary; or
‘‘(C) a group health plan, is the actuarial
value of the portion of the applicable premium
for the plan that is related to providing such
coverage, as determined by the SPICE Board
taking into account the applicable premium for
such plan (as defined in section 604(1) of the
Employee Retirement Income Security Act of
1974).
‘‘(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.
‘‘SPICE BOARD
‘‘SEC. 1860E. (a) ESTABLISHMENT.—There is estab-
lished within the Department of Health and Human Serv-
ices a Seniors Prescription Insurance Coverage Equity Of-
fice, which shall be—
‘‘(1) outside of the Health Care Financing Ad-
ministration; and
‘‘(2) run by a board to be known as the SPICE
Board.
‘‘(b) DUTIES.—
‘‘(1) IN
GENERAL.—The SPICE Board shall
administer the SPICE drug benefit program under
this part.
‘‘(2) ONGOING
STUDIES.—The SPICE Board
shall conduct ongoing studies of the following issues:
‘‘(A) The administration of this part.
‘‘(B) The provision of information about
the program under the health insurance infor-
mation, counseling, and assistance grants under
section 4360 of the Omnibus Budget Reconcili-
ation Act of 1990.
‘‘(C) Ways in which drug utilization can be
used to provide better overall care for eligible
medicare beneficiaries.
‘‘(D) Savings and potential savings in Fed-
eral health care programs which may occur, or
can be attributed to, eligible medicare bene-
ficiary access to, and utilization of, outpatient
prescription drugs.
‘‘(E) Trends in premium increases and fac-
tors that contribute to changes in premiums.
‘‘(F) Integration of the SPICE drug ben-
efit program into a reformed medicare program.
‘‘(G) The ability of eligible medicare bene-
ficiaries to afford SPICE prescription drug cov-
erage.
‘‘(H) The impact of the program on the
prescription 
drug 
benefits 
offered 
under
Medicare+Choice plans and group health plans.
‘‘(I) The appropriateness of the levels of fi-
nancial assistance provided in the case of eligi-
ble medicare beneficiaries who obtain assistance
through SPICE prescription drug coverage pro-
vided under Medicare+Choice plans or group
health plans.
‘‘(3) ANNUAL REPORT.—
‘‘(A) IN GENERAL.—Not later than June 1
of each year (beginning with 2001), the SPICE
Board shall submit an annual report to Con-
gress on the program under this part.
‘‘(B) INFORMATION
ON
STUDIES.—Such
report shall include a detailed statement on the
issues studied under paragraph (2).
‘‘(C) DETAILED FINANCIAL PROJECTIONS
AND
REQUIRED
ADJUSTMENTS
IN
FINANCIAL
ASSISTANCE.—Such report shall include—
‘‘(i) the report on the financial status
of the SPICE Trust Fund under section
1860F; and
‘‘(ii) a statement if, based on such
status, a reduction in financial assistance
for the subsequent year is required under
section 1860D(f) and, if so, the manner in
which such reductions will be made.
Such report may include recommendations re-
garding increases in financial assistance that
should be made in a subsequent year, to the ex-
tent they may be made consistent with section
1860D(f)(1).
‘‘(D) RECOMMENDATIONS.—Such report
shall include such other recommendations for
legislation and administrative actions as the
SPICE Board considers appropriate.
‘‘(4) STUDY AND REPORT REGARDING EXPAN-
SION.—
‘‘(A) STUDY.—The SPICE Board, in con-
sultation with the National Association of In-
surance Commissioners, shall conduct a study
on—
‘‘(i) permitting a benefit package
under section 1882 of the Social Security
Act (other than the outpatient prescription
drug only package established under sub-
section (v)(1)(A) of such section) to offer
outpatient prescription drugs; and
‘‘(ii) providing financial assistance
under this part on behalf of eligible medi-
care beneficiaries receiving coverage under
such a benefit package.
‘‘(B) REPORT.—Not later than 1 year
after all of the members of the SPICE Board
are appointed under subsection (c), the SPICE
Board shall submit a detailed report to Con-
gress on the study conducted pursuant to sub-
paragraph (A), together with any recommenda-