To amend title XVIII of the Social Security Act to provide for a direct Medicare supplemental insurance option.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Direct Supplemental 
Insurance Option Act of 2002''.

SEC. 2. MEDICARE DIRECT SUPPLEMENTAL INSURANCE OPTION.

    (a) In General.--Title XVIII of the Social Security Act is amended 
by inserting after section 1882 the following new section:

            ``medicare direct supplemental insurance option

    ``Sec. 1882A. (a) In General.--The Secretary shall provide for the 
offering under this section of a voluntary program to supplement the 
benefits provided to individuals under parts A and B of this title.
    ``(b) Eligibility; Enrollment.--The Secretary shall provide 
procedures for the enrollment under the program under this section of 
individuals who are entitled to benefits under part A and enrolled 
under part B, but who are not enrolled in Medicare+Choice plan under 
part C (or in a plan under section 1876). Such procedures shall be 
consistent with the following:
            ``(1) There shall be an initial enrollment period during 
        the last calendar quarter of 2003 that permits all individuals 
        who are eligible to enroll at that time under this subsection 
        may enroll and obtain benefits effective on January 1, 2004.
            ``(2) For individuals who are not eligible to enroll at 
        such time but who become eligible subsequently, there shall be 
        an individual enrollment period which is the 6-month period 
        described in section 1882(s)(2)(A).
            ``(3) The Secretary shall permit eligible individuals to 
        enroll at other times (and not less frequently than annually) 
        in a uniform manner, but such enrollment is subject to a late 
        enrollment penalty under subsection (d)(2)(B).
    ``(c) Benefits.--
            ``(1) In general.--The benefits provided under the program 
        under this section shall consist of payment of the cost of 
        deductibles, copayments, and other cost-sharing amounts 
        (including amounts attributable to and permitted as balance 
        billing) otherwise imposed or permitted under this title, 
        subject to an annual deductible of $100.
            ``(2) Administration.--The Secretary shall coordinate 
        payment of benefits under this part with those under parts A 
        and B and may, for such purpose, enter into appropriate 
        arrangements with qualified entities (which may include fiscal 
        intermediaries and carriers).
            ``(3) No pre-existing condition limitations.--The benefits 
        under this section shall not be subject to any pre-existing 
        condition or similar underwriting limitation.
    ``(d) Premiums.--
            ``(1) Actuarial cost.--The Secretary shall, during 
        September of each year beginning with 2003, determine a monthly 
        actuarial rate for all enrollees under this section, which rate 
        shall be applicable for months in the succeeding calendar year. 
        Such actuarial rate shall be the amount the Secretary estimates 
        to be necessary so that the aggregate amount for such calendar 
        year with respect to those enrollees will equal the total 
        amount which the Secretary estimates will be payable under this 
        section for benefits accrued (including services performed and 
        related administrative costs incurred) in such calendar year 
        under the program under this section. In calculating the 
        monthly actuarial rate, the Secretary shall make adjustments to 
        take into account errors in estimations under this paragraph 
        for previous years and shall include an appropriate amount for 
        a contingency margin.
            ``(2) Premium.--
                    ``(A) In general.--The monthly premium of each 
                individual enrolled under this section for a month in a 
                year shall be the monthly actuarial rate determined 
                under paragraph (1) for months in such year. Such 
                premium shall be community-rated and shall not vary 
                among enrollees based upon the age, place of residence, 
                or any other factors, except as provided under 
                subparagraph (B).
                    ``(B) Penalty for late enrollment.--In the case of 
                an individual who does not enroll under this section in 
                a time period provided under paragraph (1) or (2) of 
                subsection (b), the Secretary shall increase the 
                monthly premium (in a manner similar to that applied 
                under part B pursuant to section 1839(b)) of 10 percent 
                for each full 12 months in which the individual could 
                have been but was not so enrolled. In applying such an 
                increase--
                            ``(i) the aggregate percentage increase may 
                        not exceed 100 percent; and
                            ``(ii) periods of time in which an 
                        individual is enrolled under an employee 
                        welfare benefit plan described in section 
                        1882(s)(3)(B)(i), under a Medicare+Choice plan, 
                        with an organization described in section 
                        1882(s)(3)(B)(iii), or under a PACE program 
                        under section 1894 shall not be taken into 
                        account.
            ``(3) Collection.--The Secretary shall provide for the 
        collection of premiums for enrollees under this part in the 
        same manner as premiums under part B are collected under 
        section 1840, except that any reference in such section to the 
        Federal Supplementary Medical Insurance Trust Fund shall be 
        deemed a reference to an account (to be known as the `Direct 
        Medicare Supplemental Insurance Account') to be established in 
        the Treasury by the Secretary to carry out the program under 
        this section. Amounts in such account may be invested and draw 
        interest in the same manner as such Trust Fund under section 
        1840(c).
            ``(4) Use of funds.--Premium amounts deposited into the 
        account established under paragraph (3) shall be available 
        without regard to appropriations to the Secretary to make 
        payment for benefits and administrative costs incurred in 
        carrying out this section.
    ``(e) Nonduplication of Coverage.--For purposes of applying section 
1882(d)(3)(A), coverage under this section shall be treated as coverage 
under a medicare supplemental policy.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act and shall apply to 
benefits for months beginning with January 2004.

Summary: Medicare Direct Supplemental Insurance Option Act of 2002 - Amends title XVIII (Medicare) of the Social Security Act (SSA) to direct the Secretary of Health and Human Services to provide procedures for enrollment of beneficiaries in a voluntary program to supplement Medicare benefits under parts A (Hospital Insurance) and B (Supplementary Medical Insurance). Limits eligibility for such Medicare direct supplemental insurance option to individuals who are entitled to part A benefits and enrolled under part B, but who are not enrolled in a Medicare+Choice plan under part C. Provides for payment under the direct supplemental insurance option of the cost of deductibles, copayments, and other cost-sharing amounts, subject to an annual deductible of $100.