(b), or (d) of section 1840, premiums payable
under this part shall be collected by deduction
from such benefits at the same time and in the
same manner as premiums payable under part
B are collected pursuant to section 1840.
‘‘(B) TRANSFERS
TO
INSURANCE
AC-
COUNT.—The Secretary of the Treasury shall,
from time to time, but not less often than quar-
terly, transfer premiums collected pursuant to
subparagraph (A) to the Insurance Account
from the appropriate funds and accounts de-
scribed in subsections (a)(2), (b)(2), and (d)(2)
of section 1840, on the basis of the certifi-
cations described in such subsections. The
amounts of such transfers shall be appro-
priately adjusted to the extent that prior trans-
fers were too great or too small.
‘‘(2) DIRECT PAYMENTS TO SECRETARY.—
‘‘(A) 
ADDITIONAL
PAYMENT
BY
EN-
ROLLEE.—An individual to whom paragraph
(1) applies (other than an individual receiving
benefits as described in section 1840(d)) and
who estimates that the amount that will be
available for deduction under such paragraph
for any premium payment period will be less
than the amount of the monthly premiums for
such period may (under regulations) pay to the
Secretary the estimated balance, or such great-
er portion of the monthly premium as the indi-
vidual chooses.
‘‘(B) PAYMENTS BY OTHER ENROLLEES.—
An individual enrolled in the program under
this part with respect to whom none of the pre-
ceding provisions of this subsection applies (or
to whom section 1840(c) applies) shall pay pre-
miums to the Secretary at such times and in
such manner as the Secretary shall by regula-
tions prescribe in coordination with the Sec-
retary.
‘‘(C) DEPOSIT
OF
PREMIUMS.—Amounts
paid to the Secretary under this paragraph
shall be deposited in the Treasury to the credit
of the Prescription Drug Insurance Account in
the Supplementary Medical Insurance Trust
Fund.
‘‘SEC. 1860E. SPECIAL ELIGIBILITY, ENROLLMENT, AND CO-
PAYMENT RULES FOR LOW-INCOME INDIVID-
UALS.
‘‘(a) STATE AGREEMENTS FOR COVERAGE.—
‘‘(1) IN GENERAL.—The Secretary shall, at the
request of a State, enter into an agreement with the
State under which all individuals described in para-
graph (2) are enrolled in the program under this
part, without regard to whether any such individual
has previously declined the opportunity to enroll in
such program.
‘‘(2) ELIGIBILITY GROUPS.—The individuals de-
scribed in this paragraph, for purposes of paragraph
(1), are individuals who satisfy section 1860C(a)
and who are—
‘‘(A)(i) eligible individuals within the
meaning of section 1843, and
‘‘(ii) in a coverage group or groups per-
mitted under section 1843 (as selected by the
State and specified in the agreement); or
‘‘(B) qualified medicare drug beneficiaries
(as defined in section 1905(v)(1)).
‘‘(3) COVERAGE PERIOD.—The period of cov-
erage under this part of an individual enrolled under
an agreement under this subsection shall be as fol-
lows:
‘‘(A) INDIVIDUALS
ELIGIBLE
(AT
STATE
OPTION) FOR PART B BUY-IN.—In the case of
an individual described in subsection (a)(2)(A),
the coverage period shall be the same period
that applies (or would apply) pursuant to sec-
tion 1843(d).
‘‘(B) QUALIFIED MEDICARE DRUG BENE-
FICIARIES.—In the case of an individual de-
scribed in subsection (a)(2)(B)—
‘‘(i) the coverage period shall begin on
the latest of—
‘‘(I) January 1, 2002,
‘‘(II) the first day of the third
month following the month in which
the State agreement is entered into;
or
‘‘(III) the first day of the first
month following the month in which
the 
individual 
satisfies 
section
1860C(a); and
‘‘(ii) the coverage period shall end on
the last day of the month in which the in-
dividual is determined by the State to have
become ineligible for medicare drug cost-
sharing.
‘‘(b) SPECIAL PART D ENROLLMENT OPPORTUNITY
FOR INDIVIDUALS LOSING MEDICAID ELIGIBILITY.—In
the case of an individual who—
‘‘(1) satisfies section 1860C(a), and
‘‘(2) loses eligibility for benefits under the State
plan under title XIX after having been enrolled
under such plan or having been determined eligible
for such benefits,
the Secretary (in coordination with the Director) shall pro-
vide an opportunity for enrollment under the program
under this part during the period that begins on the date
that such individual loses such eligibility and ends on the
date specified by the Secretary.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘State’ has the meaning given such term under sec-
tion 1101(a) for purposes of title XIX.
‘‘SEC. 1860F. PRESCRIPTION DRUG INSURANCE ACCOUNT.
‘‘(a) IN GENERAL.—There is created within the Fed-
eral Supplemental Medical Insurance Trust Fund estab-
lished by section 1841 an account to be known as the ‘Pre-
scription Drug Insurance Account’ (hereafter in this sec-
tion referred to as the ’Account’). The Account shall con-
sist of such gifts and bequests as may be made as provided
in section 201(i)(1), and such amounts as may be depos-
ited in, or appropriated to, such fund as provided in this
part. Funds provided under this part to the Account shall
be kept separate from all other funds within the Federal
Supplemental Medical Insurance Trust Fund.
‘‘(b) PAYMENTS FROM ACCOUNT.—The Managing
Trustee shall pay from time to time from the Account such
amounts as the Director certifies are necessary to make
the payments provided for by this part, and the payments
with respect to administrative expenses in accordance with
section 201(g), including expenses of the Director and the
Secretary in carry out this part. Any reference in such
section to the Secretary in relation to carrying out this
part shall be construed to include a reference to the Direc-
tor.
‘‘(c) CONSTRUCTION.—Nothing in this part shall be
construed as authorizing any expenditures from the Ac-
count for activities under chapter 89 of title 5, United
States Code (relating to the Federal employees health ben-
efits program). No funds appropriated to carry out such
chapter shall be used to carry out this part.
‘‘SEC. 1860G. ADMINISTRATION OF BENEFITS.
‘‘(a) IN GENERAL.—The Director shall provide for
administration of the benefits under this part through con-
tracts with benefit managers approved in accordance with
subsection (b) for enrolled individuals (other than such in-
dividuals enrolled in a Medicare+Choice program under
part C) in accordance with the provisions of this section.
‘‘(b) APPROVAL OF BENEFIT MANAGERS.—
‘‘(1) AWARD AND DURATION OF CONTRACT.—
Each contract shall be awarded for a period of not
less than three nor more than five years.
‘‘(2) ELIGIBLE
ENTITIES.—Any entity that
meets the following criteria is eligible to serve as a
benefit manager:
‘‘(A) TYPE.—The entity shall be any entity
that the Director determines is capable of ad-
ministering a prescription drug benefit pro-
gram.
‘‘(B) 
PERFORMANCE
CAPABILITY.—The
entity shall have sufficient expertise, personnel,
and resources to perform effectively and effi-
ciently the benefit administration functions.
‘‘(C) INTEGRITY; FISCAL
SOUNDNESS.—
The entity and its officers, directors, agents,
and managing employees shall have a satisfac-
tory record of professional competence and pro-
fessional and financial integrity, and the entity
shall have financial resources the Director de-
termines to be adequate to perform services
under the contract without risk of insolvency.
‘‘(D) BENEFICIARY
PROTECTIONS.—The
entity shall have in place safeguards to protect
beneficiaries who receive benefits under this
part through the entity, including the following
protections:
‘‘(i) CONFIDENTIALITY
OF
HEALTH
INFORMATION.—Have in effect systems to
safeguard the confidentiality of health care
information on enrolled individuals, which
comply with section 1106 and with section
552a of title 5, United States Code, and
meet such additional standards as the Di-
rector may prescribe.
‘‘(ii) GRIEVANCE AND APPEALS PRO-
CEDURES.—Have in place such procedures
as the Director may specify for hearing
and resolving grievances and appeals
brought by enrolled individuals against the
benefit manager or a pharmacy concerning
benefits under this part, which shall, to the
extent the Director finds necessary and ap-
propriate, include procedures equivalent to
those specified in subsections (f) and (g) of
section 1852.
‘‘(iii) CLINICAL
QUALITY.—Have in
place systems for improving clinical qual-
ity, including the prevention of drug-drug
interactions, assessment of clinical rel-
evance, monitoring and improving compli-
ance, and adoption of information tech-
nologies proven to reduce prescription er-
rors.
‘‘(iv) NONDISCRIMINATION
IN
ELEC-
TIONS.—Not to refuse elections, except as
may be specifically permitted under section
1860B(c)(3).
‘‘(3) PROPOSAL
REQUIREMENTS.—An entity’s
proposal for award or renewal of a contract under
this section shall—
‘‘(A) include a cost proposal setting forth
the entity’s proposed charges for administration
of the prescription drug benefit;
‘‘(B) include a proposal for the prices of
drugs and annual increases in such prices, in-
cluding differentials between formulary and
non-formulary prices, if applicable (and at the
entity’s election, include a proposal described in
subsection (d)(8));
‘‘(C) specify details of proposed cost and
utilization management, prescription error re-
duction, clinical quality, and quality assurance
measures;
‘‘(D) be accompanied by such information
as the Director may require on the entity’s past
performance;
‘‘(E) disclose ownership and shared finan-
cial interests with other entities involved in the
delivery of the benefit as proposed;
‘‘(F) include such other material and infor-
mation as the Director may require; and
‘‘(G) specify a mechanism to control gov-
ernment and beneficiary costs once the stop-loss
provision is triggered.
‘‘(4) EXCEPTIONS TO CONFLICT OF INTEREST
RULES.—In awarding contracts under this sub-
section, the Director may waive conflict of interest
rules generally applicable to Federal acquisitions
(subject to such safeguards as the Director may find
necessary to impose) in circumstances where the Di-
rector finds that such waiver—
‘‘(A) is not inconsistent with the purposes
of the programs under this title and the best in-
terests of enrolled individuals; and
‘‘(B) will permit a sufficient level of com-
petition for such contracts, promote efficiency
of benefits administration, or otherwise serve
the objectives of the program under this part.
‘‘(c) FUNCTIONS OF BENEFIT MANAGER.—The ben-
efit manager shall (or in the case of the function described
in paragraph (8), may) perform some or all of the fol-
lowing functions, as specified by the Director:
‘‘(1) PARTICIPATION
AGREEMENTS, 
PRICES,
AND FEES.—
‘‘(A) 
SCHEDULE
OF
COVERED
DRUG
PRICES.—Establish a schedule of prices for cov-
ered prescription drugs for beneficiaries. Such
prices shall not be subject to administrative or
judicial review.
‘‘(B) AGREEMENTS WITH PHARMACIES.—
Enter into participation agreements with quali-
fying pharmacies on terms that—
‘‘(i) secure the participation of suffi-
cient numbers of pharmacies to ensure
convenient 
access 
(including 
adequate
emergency access) for enrolled individuals
obtaining benefits through the entity; and
‘‘(ii) permit the participation of any
pharmacy that meets the participation re-
quirements described in subsection (e).
‘‘(C) LISTS OF PRICES AND PARTICIPATING
PHARMACIES.—Ensure that the prices estab-
lished under subparagraph (A), formulary re-
strictions, and the list of participating phar-
macies are regularly updated and readily avail-
able to health care professionals authorized to
prescribe drugs, participating pharmacies, and
enrolled individuals.
‘‘(2) TRACKING OF COVERED ENROLLED INDI-
VIDUALS.—Maintain accurate, updated records of all
enrolled individuals (other than individuals enrolled
in a plan under part C) who are receiving benefits
through the entity.
‘‘(3) PAYMENT AND COORDINATION OF BENE-
FITS.—
‘‘(A) IN GENERAL.—Administer claims for
payment of benefits under this part; determine
amounts of benefit payments to be made; and
receive, disburse, and account for funds used in
making such payments, including through the
activities specified in the provisions of this
paragraph.
‘‘(B) COORDINATION
AND
PAYMENT
OF
BENEFITS.—Coordinate 
with 
the 
Director,
other benefit managers, pharmacies and other
relevant entities as necessary to ensure appro-
priate coordination of benefits with respect to
enrolled individuals, including coordination of
access to and payment for covered prescription
drugs according to an individual’s plan provi-
sions, when such individual is traveling outside
the home service area, and under such other
circumstances as the Director may specify.
‘‘(C) EXPLANATION OF BENEFITS.—Fur-
nish to enrolled individuals receiving benefits
through the entity an explanation of benefits in
accordance with section 1806(a), and a notice
of the balance of benefits remaining for the cur-
rent year, whenever prescription drug benefits
are provided under this part (except that such
notice need not be provided more often than
monthly).
‘‘(4) COST
AND
UTILIZATION
MANAGEMENT;
QUALITY ASSURANCE.—Have in place effective cost
and utilization management, quality assurance meas-
ures, and systems to reduce prescription errors, in-
cluding at least the following, together with such ad-
ditional measures as the Director may specify:
‘‘(A) DRUG UTILIZATION REVIEW.—A drug
utilization review program conforming to the
standards provided in section 1927(g)(2) (with
such modifications as the Director finds appro-