A bill to amend title XVIII of the Social Security Act to establish Medicare Health Savings Accounts.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Health Savings Accounts Act 
of 2006''.

SEC. 2. ESTABLISHMENT OF MEDICARE HEALTH SAVINGS ACCOUNTS.

    (a) Establishment.--
            (1) In general.--Title XVIII of the Social Security Act (42 
        U.S.C. 1395 et seq.) is amended--
                    (A) by redesignating part E as part F; and
                    (B) by inserting after part D the following new 
                part:

               ``Part E--Medicare Health Savings Accounts

   ``entitlement to elect to receive benefits under medicare health 
                            savings accounts

    ``Sec. 1860E-1.  (a) In General.--The Secretary shall establish 
procedures under which each eligible beneficiary (as defined in 
subsection (b)) shall be entitled to elect to receive benefits under a 
Medicare Health Savings Account under this part instead of benefits 
under parts A, B, or D.
    ``(b) Eligible Beneficiary Described.--An eligible beneficiary 
described in this subsection is an individual who--
            ``(1) is entitled to benefits under part A or enrolled 
        under part B;
            ``(2) has a health savings account (as defined in 
        subsection (d) of section 223 of the Internal Revenue Code of 
        1986), or certifies that they will use funds provided under 
        this part to establish such an account; and
            ``(3) is enrolled under a high deductible health plan (as 
        defined in subsection (c)(2) of such section, except that 
        section 223(c)(2)(A)(ii)(I) of such Code shall be applied by 
        substituting `the amount in effect under clause (i)(I)' for 
        `$5,000').
    ``(c) Benefits To Be Available in 2007.--The Secretary shall 
establish the procedures under subsection (a) in a manner such that 
Medicare Health Savings Accounts are available for years beginning on 
or after January 1, 2007.
    ``(d) Preservation of Original Medicare Fee-for-Service Benefits.--
Nothing in this part shall be construed to limit the right of an 
individual who is entitled to benefits under part A or enrolled under 
part B to receive benefits under such part (or under part C or D) if an 
election to receive benefits under Medicare Health Savings Accounts 
under this part is not in effect with respect to such individual.
    ``(e) Rule of Construction.--Nothing in this part shall be 
construed as preventing an individual from depositing personal funds 
(subject to the contribution limitations under section 223 of the 
Internal Revenue Code of 1986) into a Medicare Health Savings Account.

               ``medicare health savings accounts program

    ``Sec. 1860E-2.  (a) In General.--The Secretary shall establish a 
program to be known as the Medicare Health Savings Accounts program (in 
this part referred to as the `Medicare HSA program').
    ``(b) Amount Provided to Enrollees.--
            ``(1) Amount.--The Secretary shall establish procedures to 
        ensure that, for each plan year an individual is enrolled in 
        the Medicare HSA program, the Secretary shall provide to such 
        individual an amount that is equal to 95 percent of the annual 
        MA capitation rate (as calculated under section 1853(c)(1)) 
        with respect to that individual for the Medicare Advantage 
        payment area the individual is in.
            ``(2) Permissible use of amount.--The Secretary shall 
        establish procedures to ensure that the amount provided under 
        paragraph (1) is used only for the following purposes:
                    ``(A) As a contribution into a health savings 
                account established by such individual, as described in 
                paragraph (2) of section 1860E-1(b).
                    ``(B) For payment of premiums for enrollment of 
                such individual under a high deductible health plan 
                described in paragraph (3) of such section.
            ``(3) Notification of amount provided.--The Secretary shall 
        ensure that, not later than the date that is 90 days before the 
        date on which payment of the amount provided under paragraph 
        (1) is made to an individual enrolled in the Medicare HSA 
        program, such individual receives notification of such amount. 
        Such information shall be made available on the website of the 
        Centers for Medicare & Medicaid Services (based on the age and 
        geographic location of the beneficiary) and through 1-800-
        MEDICARE.
            ``(4) Payment.--Payment of the amount provided under 
        paragraph (1) shall be made from the Federal Hospital Insurance 
        Trust Fund and the Federal Supplementary Medical Insurance 
        Trust Fund (including the Medicare Prescription Drug Account 
        within such Trust Fund) in such proportion as the Secretary 
        determines appropriate.
            ``(5) Recovery of amount provided in case of termination.--
                    ``(A) In general.--In the case of a termination of 
                an election to receive benefits under this part as of a 
                month before the end of a plan year, the Secretary 
                shall provide for a procedure for the recovery of 
                amounts provided attributable to the remaining months 
                in such year.
                    ``(B) Penalty.--
                            ``(i) In general.--In addition to the 
                        amount recovered under subparagraph (A), if the 
                        Secretary determines there was fraud involved 
                        in such termination, the Secretary may apply a 
                        civil money penalty of not more than 25 percent 
                        of the amount recovered.
                            ``(ii) Civil money penalty.--The provisions 
                        of section 1128A (other than subsections (a) 
                        and (b)) shall apply to a civil money penalty 
                        under this subparagraph in the same manner as 
                        they apply to a civil money penalty or 
                        proceeding under section 1128A(a).
    ``(c) Payment for Items and Services.--The Secretary shall 
establish procedures under which providers of services and suppliers 
(as defined in sections 1861(u) and 1861(d), respectively) are required 
to accept as payment for items and services provided to an individual 
enrolled in the Medicare HSA program under this part the amount that 
would otherwise be paid under the original Medicare fee-for-service 
program under parts A and B.

   ``election of benefits under medicare hsa program; termination of 
                                election

    ``Sec. 1860E-3.  The Secretary shall establish procedures for the 
election of benefits, and the termination of such election, as 
appropriate, under the Medicare HSA program.''.
            (2) Conforming references to previous part e.--Any 
        reference in law (in effect before the date of the enactment of 
        this Act) to part E of title XVIII of the Social Security Act 
        is deemed a reference to part F of such title (as in effect 
        after such date).
    (b) Amendment of Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (7) of section 223(b) of the 
        Internal Revenue Code of 1986 (relating to medicare eligible 
        individuals) is amended to read as follows:
            ``(7) Medicare eligible individuals.--The limitation under 
        this subsection for any month with respect to an individual 
        shall be zero for any month such individual is entitled to 
        benefits under part A, B, or D of title XVIII of the Social 
        Security Act.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning on or after January 1, 
        2007.
    (c) Sunset of MSA Provisions.--Section 1851(a)(2)(B) of the Social 
Security Act (42 U.S.C. 1395w-21(a)(2)(B)) is amended--
            (1) by striking ``MSA.-- An MSA plan,'' and inserting the 
        following: ``MSA.--
                            ``(i) Subject to clause (ii), an MSA 
                        plan,''; and
            (2) by inserting after clause (i), as added by paragraph 
        (1), the following new clause:
                            ``(ii) Beginning on January 1, 2007, the 
                        plan described in clause (i) shall not be 
                        available as a Medicare Advantage plan under 
                        this part.''.

Summary: Medicare Health Savings Accounts Act of 2006 - Amends title XVIII (Medicare) of the Social Security Act to establish a new part E (Medicare Health Savings Accounts) under which the Secretary of Health and Human Services shall establish procedures entitling each eligible beneficiary to elect to receive benefits under a Medicare Health Savings Account (HSA) instead of benefits under Medicare parts A (Hospital Insurance), B (Supplementary Medical Insurance), or D (Voluntary Prescription Drug Benefit Program).

Amends the Internal Revenue Code to conform to this Act.