Requires each prescription drug plan sponsor offering a prescription drug plan, and each Medicare Advantage organization offering an Medicare Advantage-Prescription Drug Plan (MA-PD plan), to: (1) provide minimum standard transition coverage; (2) furnish each enrollee with annual notices of any changes in formulary or other restrictions or drug coverage limitations; and (3) require application of intermediate sanctions to protect against fraud and abuse.

Amends SSA: (1) title XVIII part C (Medicare+Choice) to allow changes of enrollment in prescription drug plans and MA-PD plans to be made once each year outside the annual coordinated election period, or twice a year; and (2) title XIX (Medicaid) to prohibit conditioning Medicaid eligibility on enrollment in Medicare part D or any other creditable coverage.

Directs the Medicare Payment Advisory Commission (MEDPAC) to study and report to Congress on the extent to which full-benefit dual eligible individuals were enrolled (by assignment or otherwise) in the most appropriate part D prescription drug plans.

Directs the Secretary of Health and Human Services to reimburse covered third parties during 2006 for 100% of covered part D drugs which a prescription drug plan or MA-PD plan enrollee reasonably expected would have been covered but were not because the enrollee was unable to access on a timely basis prescription drug benefits to which he or she was entitled. Directs the Secretary to establish a process for recovering such reimbursed costs from prescription drug plans and MA-PD plans if they should have incurred them.