[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4680 Reported in House (RH)]






                                                 Union Calendar No. 396
106th CONGRESS
  2d Session
                                H. R. 4680

                      [Report No. 106-703, Part I]

   To amend title XVIII of the Social Security Act to provide for a 
  voluntary program for prescription drug coverage under the Medicare 
  Program, to modernize the Medicare Program, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 15, 2000

 Mr. Thomas (for himself, Mr. Burr of North Carolina, Mr. Peterson of 
Minnesota, Mr. Bliley, and Mr. Hall of Texas) introduced the following 
  bill; which was referred to the Committee on Ways and Means, and in 
addition to the Committee on Commerce, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

                             June 27, 2000

    Reported from the Committee on Ways and Means with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                             June 27, 2000

 Referral to the Commitee on Commerce extended for a period ending not 
                        later than June 27, 2000

                             June 27, 2000

    Additional sponsors: Mr. Kuykendall, Mr. Martinez, and Mr. Rogan

                             June 27, 2000

  Committee on Commerce discharged; committed to the Committee of the 
    Whole House on the State of the Union and ordered to be printed
 [For text of introduced bill, see copy of bill as introduced on June 
                               15, 2000]

_______________________________________________________________________

                                 A BILL


 
   To amend title XVIII of the Social Security Act to provide for a 
  voluntary program for prescription drug coverage under the Medicare 
  Program, to modernize the Medicare Program, and for other purposes.

    Be it enacted by the Senate and House of Representatives 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 ``Medicare Rx 2000 
Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

Sec. 101. Establishment of a medicare prescription drug benefit.

         ``Part D--Voluntary Prescription Drug Benefit Program

        ``Sec. 1860A. Benefits; eligibility; enrollment; and coverage 
                            period.
        ``Sec. 1860B. Requirements for qualified prescription drug 
                            coverage.
        ``Sec. 1860C. Beneficiary protections for qualified 
                            prescription drug coverage.
        ``Sec. 1860D. Requirements for prescription drug plan (PDP) 
                            sponsors; contracts; establishment of 
                            standards.
        ``Sec. 1860E. Process for beneficiaries to select qualified 
                            prescription drug coverage.
        ``Sec. 1860F. Premiums.
        ``Sec. 1860G. Premium and cost-sharing subsidies for low-income 
                            individuals.
        ``Sec. 1860H. Subsidies for all medicare beneficiaries through 
                            reinsurance for qualified prescription drug 
                            coverage.
        ``Sec. 1860I. Medicare Prescription Drug Account in Federal 
                            Supplementary Medical Insurance Trust Fund.
        ``Sec. 1860J. Definitions; treatment of references to 
                            provisions in part C.''
Sec. 102. Offering of qualified prescription drug coverage under the 
                            Medicare+Choice program.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap transition provisions.
Sec. 105. Demonstration project for disease management for severely 
                            chronically ill medicare beneficiaries.

         TITLE II--MODERNIZATION OF ADMINISTRATION OF MEDICARE

              Subtitle A--Medicare Benefits Administration

Sec. 201. Establishment of administration.
        ``Sec. 1807. Medicare Benefits Administration.''
Sec. 202. Miscellaneous administrative provisions.

   Subtitle B--Oversight of Financial Sustainability of the Medicare 
                                Program

Sec. 211. Additional requirements for annual financial report and 
                            oversight on medicare program.

      Subtitle C--Changes in Medicare Coverage and Appeals Process

Sec. 221. Revisions to medicare appeals process.
Sec. 222. Provisions with respect to limitations on liability of 
                            beneficiaries.
Sec. 223. Waivers of liability for cost sharing amounts.
Sec. 224. Elimination of motions by the Secretary on decisions of the 
                            Provider Reimbursement Review Board.

  TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B 
                              DRUG BENEFIT

                  Subtitle A--Medicare+Choice Reforms

Sec. 301. Increase in national per capita Medicare+Choice growth 
                            percentage in 2001 and 2002.
Sec. 302. Permanently removing application of budget neutrality 
                            beginning in 2002.
Sec. 303. Increasing minimum payment amount.
Sec. 304. Allowing movement to 50:50 percent blend in 2002.
Sec. 305. Increased update for payment areas with only one or no 
                            Medicare+Choice contracts.
Sec. 306. Permitting higher negotiated rates in certain Medicare+Choice 
                            payment areas below national average.
Sec. 307. 10-year phase in of risk adjustment based on data from all 
                            settings.

 Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals

Sec. 311. Preservation of coverage of drugs and biologicals under part 
                            B of the medicare program.
Sec. 312. GAO report on part B payment for drugs and biologicals and 
                            related services.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

SEC. 101. ESTABLISHMENT OF A MEDICARE PRESCRIPTION DRUG BENEFIT.

    (a) In General.--Title XVIII of the Social Security Act is 
amended--
            (1) by redesignating part D as part E; and
            (2) by inserting after part C the following new part:

         ``Part D--Voluntary Prescription Drug Benefit Program

``SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND COVERAGE PERIOD.

    ``(a) Provision of Qualified Prescription Drug Coverage Through 
Enrollment in Plans.--Subject to the succeeding provisions of this 
part, each individual who is enrolled under part B is entitled to 
obtain qualified prescription drug coverage (described in section 
1860B(a)) as follows:
            ``(1) Medicare+choice plan.--If the individual is eligible 
        to enroll in a Medicare+Choice plan that provides qualified 
        prescription drug coverage under section 1851(j), the 
        individual may enroll in the plan and obtain coverage through 
        such plan.
            ``(2) Prescription drug plan.--If the individual is not 
        enrolled in a Medicare+Choice plan that provides qualified 
        prescription drug coverage, the individual may enroll under 
        this part in a prescription drug plan (as defined in section 
        1860C(a)).
Such individuals shall have a choice of such plans under section 
1860E(d).
    ``(b) General Election Procedures.--
            ``(1) In general.--An individual may elect to enroll in a 
        prescription drug plan under this part, or elect the option of 
        qualified prescription drug coverage under a Medicare+Choice 
        plan under part C, and change such election only in such manner 
        and form as may be prescribed by regulations of the 
        Administrator of the Medicare Benefits Administration 
        (appointed under section 1807(b)) (in this part referred to as 
        the `Medicare Benefits Administrator') and only during an 
        election period prescribed in or under this subsection.
            ``(2) Election periods.--
                    ``(A) In general.--Except as provided in this 
                paragraph, the election periods under this subsection 
                shall be the same as the coverage election periods 
                under the Medicare+Choice program under section 
                1851(e), including--
                            ``(i) annual coordinated election periods; 
                        and
                            ``(ii) special election periods.
                In applying the last sentence of section 1851(e)(4) 
                (relating to discontinuance of a Medicare+Choice 
                election during the first year of eligibility) under 
                this subparagraph, in the case of an election described 
                in such section in which the individual had elected or 
                is provided qualified prescription drug coverage at the 
                time of such first enrollment, the individual shall be 
                permitted to enroll in a prescription drug plan under 
                this part at the time of the election of coverage under 
                the original fee-for-service plan.
                    ``(B) Initial election periods.--
                            ``(i) Individuals currently covered.--In 
                        the case of an individual who is enrolled under 
                        part B as of November 1, 2002, there shall be 
                        an initial election period of 6 months 
                        beginning on that date.
                            ``(ii) Individual covered in future.--In 
                        the case of an individual who is first enrolled 
                        under part B after November 1, 2002, there 
                        shall be an initial election period which is 
                        the same as the initial enrollment period under 
                        section 1837(d).
                    ``(C) Additional special election periods.--The 
                Medicare Benefits Administrator shall establish special 
                election periods--
                            ``(i) in cases of individuals who have and 
                        involuntarily lose prescription drug coverage 
                        described in subsection (c)(2)(C);
                            ``(ii) in cases described in section 
                        1837(h) (relating to errors in enrollment), in 
                        the same manner as such section applies to part 
                        B; and
                            ``(iii) in the case of an individual who 
                        meets such exceptional conditions (including 
                        conditions recognized under section 
                        1851(d)(4)(D)) as the Administrator may 
                        provide.
                    ``(D) One-time enrollment permitted for current 
                part a only beneficiaries.--In the case of an 
                individual who as of November 1, 2002--
                            ``(i) is entitled to benefits under part A; 
                        and
                            ``(ii) is not (and has not previously been) 
                        enrolled under part B;
                the individual shall be eligible to enroll in a 
                prescription drug plan under this part but only during 
                the period described in subparagraph (B)(i). If the 
                individual enrolls in such a plan, the individual may 
                change such enrollment under this part, but the 
                individual may not enroll in a Medicare+Choice plan 
                under part C unless the individual enrolls under part 
                B. Nothing in this subparagraph shall be construed as 
                providing for coverage under a prescription drug plan 
                of benefits that are excluded because of the 
                application of section 1860B(f)(2)(B).
    ``(c) Guaranteed Issue; Community Rating; and Nondiscrimination.--
            ``(1) Guaranteed issue.--
                    ``(A) In general.--An eligible individual who is 
                eligible to elect qualified prescription drug coverage 
                under a prescription drug plan or Medicare+Choice plan 
                at a time during which elections are accepted under 
                this part with respect to the plan shall not be denied 
                enrollment based on any health status-related factor 
                (described in section 2702(a)(1) of the Public Health 
                Service Act) or any other factor.
                    ``(B) Medicare+choice limitations permitted.--The 
                provisions of paragraphs (2) and (3) (other than 
                subparagraph (C)(i), relating to default enrollment) of 
                section 1851(g) (relating to priority and limitation on 
                termination of election) shall apply to PDP sponsors 
                under this subsection.
            ``(2) Community-rated premium.--
                    ``(A) In general.--In the case of an individual who 
                maintains (as determined under subparagraph (C)) 
                continuous prescription drug coverage since first 
                qualifying to elect prescription drug coverage under 
                this part, a PDP sponsor or Medicare+Choice 
                organization offering a prescription drug plan or 
                Medicare+Choice plan that provides qualified 
                prescription drug coverage and in which the individual 
                is enrolled may not deny, limit, or condition the 
                coverage or provision of covered prescription drug 
                benefits or increase the premium under the plan based 
                on any health status-related factor described in 
                section 2702(a)(1) of the Public Health Service Act or 
                any other factor.
                    ``(B) Late enrollment penalty.--In the case of an 
                individual who does not maintain such continuous 
                prescription drug coverage, a PDP sponsor or 
                Medicare+Choice organization may (notwithstanding any 
                provision in this title) increase the premium otherwise 
                applicable or impose a pre-existing condition exclusion 
                with respect to qualified prescription drug coverage in 
                a manner that reflects additional actuarial risk 
                involved. Such a risk shall be established through an 
                appropriate actuarial opinion of the type described in 
                subparagraphs (A) through (C) of section 2103(c)(4).
                    ``(C) Continuous prescription drug coverage.--An 
                individual is considered for purposes of this part to 
                be maintaining continuous prescription drug coverage on 
                and after a date if the individual establishes that 
                there is no period of 63 days or longer on and after 
                such date (beginning not earlier than January 1, 2003) 
                during all of which the individual did not have any of 
                the following prescription drug coverage:
                            ``(i) Coverage under prescription drug plan 
                        or medicare+choice plan.--Qualified 
                        prescription drug coverage under a prescription 
                        drug plan or under a Medicare+Choice plan.
                            ``(ii) Medicaid prescription drug 
                        coverage.--Prescription drug coverage under a 
                        medicaid plan under title XIX, including 
                        through the Program of All-inclusive Care for 
                        the Elderly (PACE) under section 1934, through 
                        a social health maintenance organization 
                        (referred to in section 4104(c) of the Balanced 
                        Budget Act of 1997), or through a 
                        Medicare+Choice project that demonstrates the 
                        application of capitation payment rates for 
                        frail elderly medicare beneficiaries through 
                        the use of a interdisciplinary team and through 
                        the provision of primary care services to such 
                        beneficiaries by means of such a team at the 
                        nursing facility involved.
                            ``(iii) Prescription drug coverage under 
                        group health plan.--Any outpatient prescription 
                        drug coverage under a group health plan, 
                        including a health benefits plan under the 
                        Federal Employees Health Benefit Plan under 
                        chapter 89 of title 5, United States Code, and 
                        a qualified retiree prescription drug plan as 
                        defined in section 1860H(f)(1).
                            ``(iv) Prescription drug coverage under 
                        certain medigap policies.--Coverage under a 
                        medicare supplemental policy under section 1882 
                        that provides benefits for prescription drugs 
                        (whether or not such coverage conforms to the 
                        standards for packages of benefits under 
                        section 1882(p)(1)), but only if the policy was 
                        in effect on January 1, 2003, and only until 
                        the date such coverage is terminated.
                            ``(v) State pharmaceutical assistance 
                        program.--Coverage of prescription drugs under 
                        a State pharmaceutical assistance program.
                            ``(vi) Veterans' coverage of prescription 
                        drugs.--Coverage of prescription drugs for 
                        veterans under chapter 17 of title 38, United 
                        States Code.
                    ``(D) Certification.--For purposes of carrying out 
                this paragraph, the certifications of the type 
                described in sections 2701(e) of the Public Health 
                Service Act and in section 9801(e) of the Internal 
                Revenue Code shall also include a statement for the 
                period of coverage of whether the individual involved 
                had prescription drug coverage described in 
                subparagraph (C).
                    ``(E) Construction.--Nothing in this section shall 
                be construed as preventing the disenrollment of an 
                individual from a prescription drug plan or a 
                Medicare+Choice plan based on the termination of an 
                election described in section 1851(g)(3), including for 
                non-payment of premiums or for other reasons specified 
                in subsection (d)(3), which takes into account a grace 
                period described in section 1851(g)(3)(B)(i).
            ``(3) Nondiscrimination.--A PDP sponsor offering a 
        prescription drug plan shall not establish a service area in a 
        manner that would discriminate based on health or economic 
        status of potential enrollees.
    ``(d) Effective Date of Elections.--
            ``(1) In general.--Except as provided in this section, the 
        Medicare Benefits Administrator shall provide that elections 
        under subsection (b) take effect at the same time as the 
        Secretary provides that similar elections under section 1851(e) 
        take effect under section 1851(f).
            ``(2) No election effective before 2003.--In no case shall 
        any election take effect before January 1, 2003.
            ``(3) Termination.--The Medicare Benefits Administrator 
        shall provide for the termination of an election in the case 
        of--
                    ``(A) termination of coverage under part B (other 
                than the case of an individual described in subsection 
                (b)(2)(D) (relating to part A only individuals)); and
                    ``(B) termination of elections described in section 
                1851(g)(3) (including failure to pay required 
                premiums).

``SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG COVERAGE.

    ``(a) Requirements.--
            ``(1) In general.--For purposes of this part and part C, 
        the term `qualified prescription drug coverage' means either of 
        the following:
                    ``(A) Standard coverage with access to negotiated 
                prices.--Standard coverage (as defined in subsection 
                (b)) and access to negotiated prices under subsection 
                (d).
                    ``(B) Actuarially equivalent coverage with access 
                to negotiated prices.--Coverage of covered outpatient 
                drugs which meets the alternative coverage requirements 
                of subsection (c) and access to negotiated prices under 
                subsection (d).
            ``(2) Permitting additional outpatient prescription drug 
        coverage.--
                    ``(A) In general.--Subject to subparagraph (B), 
                nothing in this part shall be construed as preventing 
                qualified prescription drug coverage from including 
                coverage of covered outpatient drugs that exceeds the 
                coverage required under paragraph (1), but any such 
                additional coverage shall be limited to coverage of 
                covered outpatient drugs.
                    ``(B) Disapproval authority.--The Medicare Benefits 
                Administrator shall review the offering of qualified 
                prescription drug coverage under this part or part C. 
                If the Administrator finds that, in the case of a 
                qualified prescription drug coverage under a 
                prescription drug plan or a Medicare+Choice plan, that 
                the organization or sponsor offering the coverage is 
                purposefully engaged in activities intended to result 
                in favorable selection of those eligible medicare 
                beneficiaries obtaining coverage through the plan, the 
                Administrator may terminate the contract with the 
                sponsor or organization under this part or part C.
            ``(3) Application of secondary payor provisions.--The 
        provisions of section 1852(a)(4) shall apply under this part in 
        the same manner as they apply under part C.
    ``(b) Standard Coverage.--For purposes of this part, the `standard 
coverage' is coverage of covered outpatient drugs (as defined in 
subsection (f)) that meets the following requirements:
            ``(1) Deductible.--The coverage has an annual deductible--
                    ``(A) for 2003, that is equal to $250; or
                    ``(B) for a subsequent year, that is equal to the 
                amount specified under this paragraph for the previous 
                year increased by the percentage specified in paragraph 
                (5) for the year involved.
        Any amount determined under subparagraph (B) that is not a 
        multiple of $5 shall be rounded to the nearest multiple of $5.
            ``(2) Limits on cost-sharing.--The coverage has cost-
        sharing (for costs above the annual deductible specified in 
        paragraph (1) and up to the initial coverage limit under 
        paragraph (3)) that is equal to 50 percent or that is 
        actuarially consistent (using processes established under 
        subsection (e)) with an average expected payment of 50 percent 
        of such costs.
            ``(3) Initial coverage limit.--Subject to paragraph (4), 
        the coverage has an initial coverage limit on the maximum costs 
        that may be recognized for payment purposes (above the annual 
        deductible)--
                    ``(A) for 2003, that is equal to $2,100; or
                    ``(B) for a subsequent year, that is equal to the 
                amount specified in this paragraph for the previous 
                year, increased by the annual percentage increase 
                described in paragraph (5) for the year involved.
        Any amount determined under subparagraph (B) that is not a 
        multiple of $25 shall be rounded to the nearest multiple of 
        $25.
            ``(4) Limitation on out-of-pocket expenditures by 
        beneficiary.--
                    ``(A) In general.--Notwithstanding paragraph (3), 
                the coverage provides benefits without any cost-sharing 
                after the individual has incurred costs (as described 
                in subparagraph (C)) for covered outpatient drugs in a 
                year equal to the annual out-of-pocket limit specified 
                in subparagraph (B).
                    ``(B) Annual out-of-pocket limit.--For purposes of 
                this part, the `annual out-of-pocket limit' specified 
                in this subparagraph--
                            ``(i) for 2003, is equal to $6,000; or
                            ``(ii) for a subsequent year, is equal to 
                        the amount specified in this subparagraph for 
                        the previous year, increased by the annual 
                        percentage increase described in paragraph (5) 
                        for the year involved.
                Any amount determined under clause (ii) that is not a 
                multiple of $100 shall be rounded to the nearest 
                multiple of $100.
                    ``(C) Application.--In applying subparagraph (A)--
                            ``(i) incurred costs shall only include 
                        costs incurred for the annual deductible 
                        (described in paragraph (1)), cost-sharing 
                        (described in paragraph (2)), and amounts for 
                        which benefits are not provided because of the 
                        application of the initial coverage limit 
                        described in paragraph (3); and
                            ``(ii) such costs shall be treated as 
                        incurred without regard to whether the 
                        individual or another person, including a State 
                        program or other third-party coverage, has paid 
                        for such costs.
            ``(5) Annual percentage increase.--For purposes of this 
        part, the annual percentage increase specified in this 
        paragraph for a year is equal to the annual percentage increase 
        in average per capita aggregate expenditures for covered 
        outpatient drugs in the United States for medicare 
        beneficiaries, as determined by the Medicare Benefits 
        Administrator for the 12-month period ending in July of the 
        previous year.
    ``(c) Alternative Coverage Requirements.--A prescription drug plan 
or Medicare+Choice plan may provide a different prescription drug 
benefit design from the standard coverage described in subsection (b) 
so long as the following requirements are met:
            ``(1) Assuring at least actuarially equivalent coverage.--
                    ``(A) Assuring equivalent value of total 
                coverage.--The actuarial value of the total coverage 
                (as determined under subsection (e)) is at least equal 
                to the actuarial value (as so determined) of standard 
                coverage.
                    ``(B) Assuring equivalent unsubsidized value of 
                coverage.--The unsubsidized value of the coverage is at 
                least equal to the unsubsidized value of standard 
                coverage. For purposes of this subparagraph, the 
                unsubsidized value of coverage is the amount by which 
                the actuarial value of the coverage (as determined 
                under subsection (e)) exceeds the actuarial value of 
                the reinsurance subsidy payments under section 1860H 
                with respect to such coverage.
                    ``(C) Assuring standard payment for costs at 
                initial coverage limit.--The coverage is designed, 
                based upon an actuarially representative pattern of 
                utilization (as determined under subsection (e)), to 
                provide for the payment, with respect to costs incurred 
                that are equal to the sum of the deductible under 
                subsection (b)(1) and the initial coverage limit under 
                subsection (b)(3), of an amount equal to at least such 
                initial coverage limit multiplied by the percentage 
                specified in subsection (b)(2).
            ``(2) Limitation on out-of-pocket expenditures by 
        beneficiaries.--The coverage provides the limitation on out-of-
        pocket expenditures by beneficiaries described in subsection 
        (b)(4).
    ``(d) Access to Negotiated Prices.--Under qualified prescription 
drug coverage offered by a PDP sponsor or a Medicare+Choice 
organization, the sponsor or organization shall provide beneficiaries 
with access to negotiated prices (including applicable discounts) used 
for payment for covered outpatient drugs, regardless of the fact that 
no benefits may be payable under the coverage with respect to such 
drugs because of the application of cost-sharing or an initial coverage 
limit (described in subsection (b)(3)). Insofar as a State elects to 
provide medical assistance under title XIX for a drug based on the 
prices negotiated by a prescription drug plan under this part, the 
requirements of section 1927 shall not apply to such drugs.
    ``(e) Actuarial Valuation; Determination of Annual Percentage 
Increases.--
            ``(1) Processes.--For purposes of this section, the 
        Medicare Benefits Administrator shall establish processes and 
        methods--
                    ``(A) for determining the actuarial valuation of 
                prescription drug coverage, including--
                            ``(i) an actuarial valuation of standard 
                        coverage and of the reinsurance subsidy 
                        payments under section 1860H;
                            ``(ii) the use of generally accepted 
                        actuarial principles and methodologies; and
                            ``(iii) applying the same methodology for 
                        determinations of alternative coverage under 
                        subsection (c) as is used with respect to 
                        determinations of standard coverage under 
                        subsection (b); and
                    ``(B) for determining annual percentage increases 
                described in subsection (b)(5).
            ``(2) Use of outside actuaries.--Under the processes under 
        paragraph (1)(A), PDP sponsors and Medicare+Choice 
        organizations may use actuarial opinions certified by 
        independent, qualified actuaries to establish actuarial values.
    ``(f) Covered Outpatient Drugs Defined.--
            ``(1) In general.--Except as provided in this subsection, 
        for purposes of this part, the term `covered outpatient drug' 
        means--
                    ``(A) a drug that may be dispensed only upon a 
                prescription and that is described in subparagraph 
                (A)(i) or (A)(ii) of section 1927(k)(2); or
                    ``(B) a biological product or insulin described in 
                subparagraph (B) or (C) of such section;
        and such term includes any use of a covered outpatient drug for 
        a medically accepted indication (as defined in section 
        1927(k)(6)).
            ``(2) Exclusions.--
                    ``(A) In general.--Such term does not include drugs 
                or classes of drugs, or their medical uses, which may 
                be excluded from coverage or otherwise restricted under 
                section 1927(d)(2), other than subparagraph (E) thereof 
                (relating to smoking cessation agents).
                    ``(B) Avoidance of duplicate coverage.--A drug 
                prescribed for an individual that would otherwise be a 
                covered outpatient drug under this part shall not be so 
                considered if payment for such drug is available under 
                part A or B (but shall be so considered if such payment 
                is not available because benefits under part A or B 
                have been exhausted), without regard to whether the 
                individual is entitled to benefits under part A or 
                enrolled under part B.
            ``(3) Application of formulary restrictions.--A drug 
        prescribed for an individual that would otherwise be a covered 
        outpatient drug under this part shall not be so considered 
        under a plan if the plan excludes the drug under a formulary 
        that meets the requirements of section 1860C(f)(2) (including 
        providing an appeal process).
            ``(4) Application of general exclusion provisions.--A 
        prescription drug plan or Medicare+Choice plan may exclude from 
        qualified prescription drug coverage any covered outpatient 
        drug--
                    ``(A) for which payment would not be made if 
                section 1862(a) applied to part D; or
                    ``(B) which are not prescribed in accordance with 
                the plan or this part.
        Such exclusions are determinations subject to reconsideration 
        and appeal pursuant to section 1860C(f).
            ``(5) Study on inclusion of drugs treating morbid 
        obesity.--The Medicare Policy Advisory Board shall provide for 
        a study on removing the exclusion under paragraph (2)(A) for 
        coverage of agents used for weight loss in the case of morbidly 
        obese individuals. The Board shall report to Congress on the 
        results of the study not later than March 1, 2002.

``SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED PRESCRIPTION DRUG 
              COVERAGE.

    ``(a) Guaranteed Issue Community-Related Premiums and 
Nondiscrimination.--For provisions requiring guaranteed issue, 
community-rated premiums, and nondiscrimination, see sections 
1860A(c)(1), 1860A(c)(2), and 1860F(b).
    ``(b) Dissemination of Information.--
            ``(1) General information.--A PDP sponsor shall disclose, 
        in a clear, accurate, and standardized form to each enrollee 
        with a prescription drug plan offered by the sponsor under this 
        part at the time of enrollment and at least annually 
        thereafter, the information described in section 1852(c)(1) 
        relating to such plan. Such information includes the following:
                    ``(A) Access to covered outpatient drugs, including 
                access through pharmacy networks.
                    ``(B) How any formulary used by the sponsor 
                functions.
                    ``(C) Co-payments and deductible requirements.
                    ``(D) Grievance and appeals procedures.
            ``(2) Disclosure upon request of general coverage, 
        utilization, and grievance information.--Upon request of an 
        individual eligible to enroll under a prescription drug plan, 
        the PDP sponsor shall provide the information described in 
        section 1852(c)(2) (other than subparagraph (D)) to such 
        individual.
            ``(3) Response to beneficiary questions.--Each PDP sponsor 
        offering a prescription drug plan shall have a mechanism for 
        providing specific information to enrollees upon request. The 
        sponsor shall make available, through an Internet website and 
        in writing upon request, information on specific changes in its 
        formulary.
            ``(4) Claims information.--Each PDP sponsor offering a 
        prescription drug plan must furnish to enrolled individuals in 
        a form easily understandable to such individuals an explanation 
        of benefits (in accordance with section 1806(a) or in a 
        comparable manner) and a notice of the benefits in relation to 
        initial coverage limit and annual out-of-pocket limit for the 
        current year, whenever prescription drug benefits are provided 
        under this part (except that such notice need not be provided 
        more often than monthly).
    ``(c) Access to Covered Benefits.--
            ``(1) Assuring pharmacy access.--The PDP sponsor of the 
        prescription drug plan shall secure the participation of 
        sufficient numbers of pharmacies (which may include mail order 
        pharmacies) to ensure convenient access (including adequate 
        emergency access) for enrolled beneficiaries, in accordance 
        with standards established under section 1860D(e) that ensure 
        such convenient access. Nothing in this paragraph shall be 
        construed as requiring the participation of (or permitting the 
        exclusion of) all pharmacies in any area under a plan.
            ``(2) Access to negotiated prices for prescription drugs.--
        The PDP sponsor of a prescription drug plan shall issue such a 
        card that may be used by an enrolled beneficiary to assure 
        access to negotiated prices under section 1860B(d) for the 
        purchase of prescription drugs for which coverage is not 
        otherwise provided under the prescription drug plan.
            ``(3) Requirements on development and application of 
        formularies.--Insofar as a PDP sponsor of a prescription drug 
        plan uses a formulary, the following requirements must be met:
                    ``(A) Formulary committee.--The sponsor must 
                establish a pharmaceutical and therapeutic committee 
                that develops the formulary. Such committee shall 
                include at least one physician and at least one 
                pharmacist.
                    ``(B) Inclusion of drugs in all therapeutic 
                categories.--The formulary must include drugs within 
                all therapeutic categories and classes of covered 
                outpatient drugs (although not necessarily for all 
                drugs within such categories and classes).
                    ``(C) Appeals and exceptions to application.--The 
                PDP sponsor must have, as part of the appeals process 
                under subsection (f)(2), a process for appeals for 
                denials of coverage based on such application of the 
                formulary.
    ``(d) Cost and Utilization Management; Quality Assurance; 
Medication Therapy Management Program.--
            ``(1) In general.--The PDP sponsor shall have in place--
                    ``(A) an effective cost and drug utilization 
                management program, including appropriate incentives to 
                use generic drugs, when appropriate;
                    ``(B) quality assurance measures and systems to 
                reduce medical errors and adverse drug interactions, 
                including a medication therapy management program 
                described in paragraph (2); and
                    ``(C) a program to control fraud, abuse, and waste.
            ``(2) Medication therapy management program.--
                    ``(A) In general.--A medication therapy management 
                program described in this paragraph is a program of 
                drug therapy management and medication administration 
                that is designed to assure that covered outpatient 
                drugs under the prescription drug plan are 
                appropriately used to achieve therapeutic goals and 
                reduce the risk of adverse events, including adverse 
                drug interactions.
                    ``(B) Elements.--Such program may include--
                            ``(i) enhanced beneficiary understanding of 
                        such appropriate use through beneficiary 
                        education, counseling, and other appropriate 
                        means; and
                            ``(ii) increased beneficiary adherence with 
                        prescription medication regimens through 
                        medication refill reminders, special packaging, 
                        and other appropriate means.
                    ``(C) Development of program in cooperation with 
                licensed pharmacists.--The program shall be developed 
                in cooperation with licensed pharmacists and 
                physicians.
                    ``(D) Considerations in pharmacy fees.--The PDP 
                sponsor of a prescription drug program shall take into 
                account, in establishing fees for pharmacists and 
                others providing services under the medication therapy 
                management program, the resources and time used in 
                implementing the program.
            ``(3) Treatment of accreditation.--Section 1852(e)(4) 
        (relating to treatment of accreditation) shall apply to 
        prescription drug plans under this part with respect to the 
        following requirements, in the same manner as they apply to 
        Medicare+Choice plans under part C with respect to the 
        requirements described in a clause of section 1852(e)(4)(B):
                    ``(A) Paragraph (1) (including quality assurance), 
                including medication therapy management program under 
                paragraph (2).
                    ``(B) Subsection (c)(1) (relating to access to 
                covered benefits).
                    ``(C) Subsection (g) (relating to confidentiality 
                and accuracy of enrollee records).
            ``(4) Public disclosure of pharmaceutical prices for 
        generic equivalent drugs.--Each PDP sponsor shall provide that 
        each pharmacy or other dispenser that arranges for the 
        dispensing of a covered outpatient drug shall inform the 
        beneficiary at the time of purchase of the drug of any 
        differential between the price of the prescribed drug to the 
        enrollee and the price of the lowest cost generic drug that is 
        therapeutically and pharmaceutically equivalent and 
        bioequivalent.
    ``(e) Grievance Mechanism.--Each PDP sponsor shall provide 
meaningful procedures for hearing and resolving grievances between the 
organization (including any entity or individual through which the 
sponsor provides covered benefits) and enrollees with prescription drug 
plans of the sponsor under this part in accordance with section 
1852(f).
    ``(f) Coverage Determinations, Reconsiderations, and Appeals.--
            ``(1) In general.--A PDP sponsor shall meet the 
        requirements of section 1852(g) with respect to covered 
        benefits under the prescription drug plan it offers under this 
        part in the same manner as such requirements apply to a 
        Medicare+Choice organization with respect to benefits it offers 
        under a Medicare+Choice plan under part C.
            ``(2) Appeals of formulary determinations.--Under the 
        appeals process under paragraph (1) an individual who is 
        enrolled in a prescription drug plan offered by a PDP sponsor 
        may appeal to obtain coverage for a covered outpatient drug 
        that is not on the formulary of the sponsor (established under 
        subsection (c)) if the prescribing physician determines that 
        the therapeutically similar drug that is on the formulary is 
        not as effective for the enrollee or has significant adverse 
        effects for the enrollee.
    ``(g) Confidentiality and Accuracy of Enrollee Records.--A PDP 
sponsor shall meet the requirements of section 1852(h) with respect to 
enrollees under this part in the same manner as such requirements apply 
to a Medicare+Choice organization with respect to enrollees under part 
C.

``SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG PLAN (PDP) SPONSORS; 
              CONTRACTS; ESTABLISHMENT OF STANDARDS.

    ``(a) General Requirements.--Each PDP sponsor of a prescription 
drug plan shall meet the following requirements:
            ``(1) Licensure.--Subject to subsection (c), the sponsor is 
        organized and licensed under State law as a risk-bearing entity 
        eligible to offer health insurance or health benefits coverage 
        in each State in which it offers a prescription drug plan.
            ``(2) Assumption of full financial risk.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                section 1860E(d)(2), the entity assumes full financial 
                risk on a prospective basis for qualified prescription 
                drug coverage that it offers under a prescription drug 
                plan and that is not covered under reinsurance under 
                section 1860H.
                    ``(B) Reinsurance permitted.--The entity may obtain 
                insurance or make other arrangements for the cost of 
                coverage provided to any enrolled member under this 
                part.
            ``(3) Solvency for unlicensed sponsors.--In the case of a 
        sponsor that is not described in paragraph (1), the sponsor 
        shall meet solvency standards established by the Medicare 
        Benefits Administrator under subsection (d).
    ``(b) Contract Requirements.--
            ``(1) In general.--The Medicare Benefits Administrator 
        shall not permit the election under section 1860A of a 
        prescription drug plan offered by a PDP sponsor under this 
        part, and the sponsor shall not be eligible for payments under 
        section 1860G or 1860H, unless the Administrator has entered 
        into a contract under this subsection with the sponsor with 
        respect to the offering of such plan. Such a contract with a 
        sponsor may cover more than 1 prescription drug plan. Such 
        contract shall provide that the sponsor agrees to comply with 
        the applicable requirements and standards of this part and the 
        terms and conditions of payment as provided for in this part.
            ``(2) Negotiation regarding terms and conditions.--The 
        Medicare Benefits Administrator shall have the same authority 
        to negotiate the terms and conditions of prescription drug 
        plans under this part as the Director of the Office of 
        Personnel Management has with respect to health benefits plans 
        under chapter 89 of title 5, United States Code. In negotiating 
        the terms and conditions regarding premiums for which 
        information is submitted under section 1860F(a)(2), the 
        Administrator shall take into account the reinsurance subsidy 
        payments under section 1860H and the adjusted community rate 
        (as defined in section 1854(f)(3)) for the benefits covered.
            ``(3) Incorporation of certain medicare+choice contract 
        requirements.--The following provisions of section 1857 shall 
        apply, subject to subsection (c)(5), to contracts under this 
        section in the same manner as they apply to contracts under 
        section 1857(a):
                    ``(A) Minimum enrollment.--Paragraphs (1) and (3) 
                of section 1857(b).
                    ``(B) Contract period and effectiveness.--
                Paragraphs (1) through (3) and (5) of section 1857(c).
                    ``(C) Protections against fraud and beneficiary 
                protections.--Section 1857(d).
                    ``(D) Additional contract terms.--Section 1857(e); 
                except that in applying section 1857(e)(2) under this 
                part--
                            ``(i) such section shall be applied 
                        separately to costs relating to this part (from 
                        costs under part C);
                            ``(ii) in no case shall the amount of the 
                        fee established under this subparagraph for a 
                        plan exceed 20 percent of the maximum amount of 
                        the fee that may be established under 
                        subparagraph (B) of such section; and
                            ``(iii) no fees shall be applied under this 
                        subparagraph with respect to Medicare+Choice 
                        plans.
                    ``(E) Intermediate sanctions.--Section 1857(g).
                    ``(F) Procedures for termination.--Section 1857(h).
            ``(4) Rules of application for intermediate sanctions.--In 
        applying paragraph (3)(E)--
                    ``(A) the reference in section 1857(g)(1)(B) to 
                section 1854 is deemed a reference to this part; and
                    ``(B) the reference in section 1857(g)(1)(F) to 
                section 1852(k)(2)(A)(ii) shall not be applied.
    ``(c) Waiver of Certain Requirements to Expand Choice.--
            ``(1) In general.--In the case of an entity that seeks to 
        offer a prescription drug plan in a State, the Medicare 
        Benefits Administrator shall waive the requirement of 
        subsection (a)(1) that the entity be licensed in that State if 
        the Administrator determines, based on the application and 
        other evidence presented to the Administrator, that any of the 
        grounds for approval of the application described in paragraph 
        (2) has been met.
            ``(2) Grounds for approval.--The grounds for approval under 
        this paragraph are the grounds for approval described in 
        subparagraph (B), (C), and (D) of section 1855(a)(2), and also 
        include the application by a State of any grounds other than 
        those required under Federal law.
            ``(3) Application of waiver procedures.--With respect to an 
        application for a waiver (or a waiver granted) under this 
        subsection, the provisions of subparagraphs (E), (F), and (G) 
        of section 1855(a)(2) shall apply.
            ``(4) Licensure does not substitute for or constitute 
        certification.--The fact that an entity is licensed in 
        accordance with subsection (a)(1) does not deem the entity to 
        meet other requirements imposed under this part for a PDP 
        sponsor.
            ``(5) References to certain provisions.--For purposes of 
        this subsection, in applying provisions of section 1855(a)(2) 
        under this subsection to prescription drug plans and PDP 
        sponsors--
                    ``(A) any reference to a waiver application under 
                section 1855 shall be treated as a reference to a 
                waiver application under paragraph (1); and
                    ``(B) any reference to solvency standards shall be 
                treated as a reference to solvency standards 
                established under subsection (d).
    ``(d) Solvency Standards for Non-Licensed Sponsors.--
            ``(1) Establishment.--The Medicare Benefits Administrator 
        shall establish, by not later than October 1, 2001, financial 
        solvency and capital adequacy standards that an entity that 
        does not meet the requirements of subsection (a)(1) must meet 
        to qualify as a PDP sponsor under this part.
            ``(2) Compliance with standards.--Each PDP sponsor that is 
        not licensed by a State under subsection (a)(1) and for which a 
        waiver application has been approved under subsection (c) shall 
        meet solvency and capital adequacy standards established under 
        paragraph (1). The Medicare Benefits Administrator shall 
        establish certification procedures for such PDP sponsors with 
        respect to such solvency standards in the manner described in 
        section 1855(c)(2).
    ``(e) Other Standards.--The Medicare Benefits Administrator shall 
establish by regulation other standards (not described in subsection 
(d)) for PDP sponsors and plans consistent with, and to carry out, this 
part. The Administrator shall publish such regulations by October 1, 
2001. In order to carry out this requirement in a timely manner, the 
Administrator may promulgate regulations that take effect on an interim 
basis, after notice and pending opportunity for public comment.
    ``(f) Relation to State Laws.--
            ``(1) In general.--The standards established under this 
        section shall supersede any State law or regulation (including 
        standards described in paragraph (2)) with respect to 
        prescription drug plans which are offered by PDP sponsors under 
        this part to the extent such law or regulation is inconsistent 
        with such standards.
            ``(2) Standards specifically superseded.--State standards 
        relating to the following are superseded under this subsection:
                    ``(A) Benefit requirements.
                    ``(B) Requirements relating to inclusion or 
                treatment of providers.
                    ``(C) Coverage determinations (including related 
                appeals and grievance processes).
                    ``(D) Establishment and regulation of premiums.
            ``(3) Prohibition of state imposition of premium taxes.--No 
        State may impose a premium tax or similar tax with respect to 
        premiums paid to PDP sponsors for prescription drug plans under 
        this part, or with respect to any payments made to such a 
        sponsor by the Medicare Benefits Administrator under this part.

``SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED 
              PRESCRIPTION DRUG COVERAGE.

    ``(a) In General.--The Medicare Benefits Administrator, through the 
Office of Beneficiary Assistance, shall establish, based upon and 
consistent with the procedures used under part C (including section 
1851), a process for the selection of the prescription drug plan or 
Medicare+Choice plan which offer qualified prescription drug coverage 
through which eligible individuals elect qualified prescription drug 
coverage under this part.
    ``(b) Elements.--Such process shall include the following:
            ``(1) Annual, coordinated election periods, in which such 
        individuals can change the qualifying plans through which they 
        obtain coverage, in accordance with section 1860A(b)(2).
            ``(2) Active dissemination of information to promote an 
        informed selection among qualifying plans based upon price, 
        quality, and other features, in the manner described in (and in 
        coordination with) section 1851(d), including the provision of 
        annual comparative information, maintenance of a toll-free 
        hotline, and the use of non-federal entities.
            ``(3) Coordination of elections through filing with a 
        Medicare+Choice organization or a PDP sponsor, in the manner 
        described in (and in coordination with) section 1851(c)(2).
    ``(c) Medicare+Choice Enrollee In Plan Offering Prescription Drug 
Coverage May Only Obtain Benefits Through the Plan.--An individual who 
is enrolled under a Medicare+Choice plan that offers qualified 
prescription drug coverage may only elect to receive qualified 
prescription drug coverage under this part through such plan.
    ``(d) Assuring Access to a Choice of Qualified Prescription Drug 
Coverage.--
            ``(1) Choice of at least 2 plans in each area.--
                    ``(A) In general.--The Medicare Benefits 
                Administrator shall assure that each individual who is 
                enrolled under part B and who is residing in an area 
                has available, consistent with subparagraph (B), a 
                choice of enrollment in at least 2 qualifying plans (as 
                defined in paragraph (5)) in the area in which the 
                individual resides, at least one of which is a 
                prescription drug plan.
                    ``(B) Requirement for different plan sponsors.--The 
                requirement in subparagraph (A) is not satisfied with 
                respect to an area if only one PDP sponsor or 
                Medicare+Choice organization offers all the qualifying 
                plans in the area.
            ``(2) Guaranteeing access to coverage.--In order to assure 
        access under paragraph (1) and consistent with paragraph (3), 
        the Medicare Benefits Administrator may provide financial 
        incentives (including partial underwriting of risk) for a PDP 
        sponsor to expand the service area under an existing 
        prescription drug plan to adjoining or additional areas or to 
        establish such a plan (including offering such a plan on a 
        regional or nationwide basis), but only so long as (and to the 
        extent) necessary to assure the access guaranteed under 
        paragraph (1).
            ``(3) Limitation on authority.--In exercising authority 
        under this subsection, the Medicare Benefits Administrator--
                    ``(A) shall not provide for the full underwriting 
                of financial risk for any PDP sponsor;
                    ``(B) shall not provide for any underwriting of 
                financial risk for a public PDP sponsor with respect to 
                the offering of a nationwide prescription drug plan; 
                and
                    ``(C) shall seek to maximize the assumption of 
                financial risk by PDP sponsors or Medicare+Choice 
                organizations.
            ``(4) Reports.--The Medicare Benefits Administrator shall, 
        in each annual report to Congress under section 1807(f), 
        include information on the exercise of authority under this 
        subsection. The Administrator also shall include such 
        recommendations as may be appropriate to minimize the exercise 
        of such authority, including minimizing the assumption of 
        financial risk.
            ``(5) Qualifying plan defined.--For purposes of this 
        subsection, the term `qualifying plan' means a prescription 
        drug plan or a Medicare+Choice plan that includes qualified 
        prescription drug coverage.

``SEC. 1860F. PREMIUMS.

    ``(a) Submission of Premiums and Related Information.--
            ``(1) In general.--Each PDP sponsor shall submit to the 
        Medicare Benefits Administrator information of the type 
        described in paragraph (2) in the same manner as information is 
        submitted by a Medicare+Choice organization under section 
        1854(a)(1).
            ``(2) Type of information.--The information described in 
        this paragraph is the following:
                    ``(A) Information on the qualified prescription 
                drug coverage to be provided.
                    ``(B) Information on the actuarial value of the 
                coverage.
                    ``(C) Information on the monthly premium to be 
                charged for the coverage, including an actuarial 
                certification of--
                            ``(i) the actuarial basis for such premium;
                            ``(ii) the portion of such premium 
                        attributable to benefits in excess of standard 
                        coverage; and
                            ``(iii) the reduction in such premium 
                        resulting from the reinsurance subsidy payments 
                        provided under section 1860H.
                    ``(D) Such other information as the Medicare 
                Benefits Administrator may require to carry out this 
                part.
            ``(3) Review.--The Medicare Benefits Administrator shall 
        review the information filed under paragraph (2) for the 
        purpose of conducting negotiations under section 1860D(b)(2).
    ``(b) Uniform Premium.--The premium for a prescription drug plan 
charged under this section may not vary among individuals enrolled in 
the plan in the same service area, except as is permitted under section 
1860A(c)(2)(B) (relating to late enrollment penalties).
    ``(c) Terms and Conditions for Imposing Premiums.--The provisions 
of section 1854(d) shall apply under this part in the same manner as 
they apply under part C, and, for this purpose, the reference in such 
section to section 1851(g)(3)(B)(i) is deemed a reference to section 
1860A(d)(3)(B) (relating to failure to pay premiums required under this 
part).
    ``(d) Acceptance of Reference Premium as Full Premium if No 
Standard (or Equivalent) Coverage in an Area.--
            ``(1) In general.--If there is no standard prescription 
        drug coverage (as defined in paragraph (2)) offered in an area, 
        in the case of an individual who is eligible for a premium 
        subsidy under section 1860G and resides in the area, the PDP 
        sponsor of any prescription drug plan offered in the area (and 
        any Medicare+Choice organization that offers qualified 
        prescription drug coverage in the area) shall accept the 
        reference premium under section 1860G(b)(2) as payment in full 
        for the premium charge for qualified prescription drug 
        coverage.
            ``(2) Standard prescription drug coverage defined.--For 
        purposes of this subsection, the term `standard prescription 
        drug coverage' means qualified prescription drug coverage that 
        is standard coverage or that has an actuarial value equivalent 
        to the actuarial value for standard coverage.

``SEC. 1860G. PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-INCOME 
              INDIVIDUALS.

    ``(a) In General.--
            ``(1) Full premium subsidy and reduction of cost-sharing 
        for individuals with income below 135 percent of federal 
        poverty level.--In the case of a subsidy eligible individual 
        (as defined in paragraph (3)) who is determined to have income 
        that does not exceed 135 percent of the Federal poverty level, 
        the individual is entitled under this section--
                    ``(A) to a premium subsidy equal to 100 percent of 
                the amount described in subsection (b)(1); and
                    ``(B) subject to subsection (c), to the 
                substitution for the beneficiary cost-sharing described 
                in paragraphs (1) and (2) of section 1860B(b) (up to 
                the initial coverage limit specified in paragraph (3) 
                of such section) of amounts that are nominal.
            ``(2) Sliding scale premium subsidy for individuals with 
        income above 135, but below 150 percent, of federal poverty 
        level.--In the case of a subsidy eligible individual who is 
        determined to have income that exceeds 135 percent, but does 
        not exceed 150 percent, of the Federal poverty level, the 
        individual is entitled under this section to a premium subsidy 
        determined on a linear sliding scale ranging from 100 percent 
        of the amount described in subsection (b)(1) for individuals 
        with incomes at 135 percent of such level to 0 percent of such 
        amount for individuals with incomes at 150 percent of such 
        level.
            ``(3) Determination of eligibility.--
                    ``(A) Subsidy eligible individual defined.--For 
                purposes of this section, subject to subparagraph (D), 
                the term `subsidy eligible individual' means an 
                individual who--
                            ``(i) is eligible to elect, and has 
                        elected, to obtain qualified prescription drug 
                        coverage under this part;
                            ``(ii) has income below 150 percent of the 
                        Federal poverty line; and
                            ``(iii) meets the resources requirement 
                        described in section 1905(p)(1)(C).
                    ``(B) Determinations.--The determination of whether 
                an individual residing in a State is a subsidy eligible 
                individual and the amount of such individual's income 
                shall be determined under the State medicaid plan for 
                the State under section 1935(a). In the case of a State 
                that does not operate such a medicaid plan (either 
                under title XIX or under a statewide waiver granted 
                under section 1115), such determination shall be made 
                under arrangements made by the Medicare Benefits 
                Administrator.
                    ``(C) Income determinations.--For purposes of 
                applying this section--
                            ``(i) income shall be determined in the 
                        manner described in section 1905(p)(1)(B); and
                            ``(ii) the term `Federal poverty line' 
                        means the 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) applicable to a family of the size 
                        involved.
                    ``(D) Treatment of territorial residents.--In the 
                case of an individual who is not a resident of the 50 
                States or the District of Columbia, the individual is 
                not eligible to be a subsidy eligible individual but 
                may be eligible for financial assistance with 
                prescription drug expenses under section 1935(e).
    ``(b) Premium Subsidy Amount.--
            ``(1) In general.--The premium subsidy amount described in 
        this subsection for an individual residing in an area is the 
        reference premium (as defined in paragraph (2)) for qualified 
        prescription drug coverage offered by the prescription drug 
        plan or the Medicare+Choice plan in which the individual is 
        enrolled.
            ``(2) Reference premium defined.--For purposes of this 
        subsection, the term `reference premium' means, with respect to 
        qualified prescription drug coverage offered under--
                    ``(A) a prescription drug plan that--
                            ``(i) provides standard coverage (or 
                        alternative prescription drug coverage the 
                        actuarial value is equivalent to that of 
                        standard coverage), the premium imposed for 
                        enrollment under the plan under this part 
                        (determined without regard to any subsidy under 
                        this section or any late enrollment penalty 
                        under section 1860A(c)(2)(B)); or
                            ``(ii) provides alternative prescription 
                        drug coverage the actuarial value of which is 
                        greater than that of standard coverage, the 
                        premium described in clause (i) multiplied by 
                        the ratio of (I) the actuarial value of 
                        standard coverage, to (II) the actuarial value 
                        of the alternative coverage; or
                    ``(B) a Medicare+Choice plan, the standard premium 
                computed under section 1851(j)(4)(A)(iii), determined 
                without regard to any reduction effected under section 
                1851(j)(4)(B).
    ``(c) Rules in Applying Cost-Sharing Subsidies.--
            ``(1) In general.--In applying subsection (a)(1)(B)--
                    ``(A) the maximum amount of subsidy that may be 
                provided with respect to an enrollee for a year may not 
                exceed 95 percent of the maximum cost-sharing described 
                in such subsection that may be incurred for standard 
                coverage;
                    ``(B) the Medicare Benefits Administrator shall 
                determine what is `nominal' taking into account the 
                rules applied under section 1916(a)(3); and
                    ``(C) nothing in this part shall be construed as 
                preventing a plan or provider from waiving or reducing 
                the amount of cost-sharing otherwise applicable.
            ``(2) Limitation on charges.--In the case of an individual 
        receiving cost-sharing subsidies under subsection (a)(1)(B), 
        the PDP sponsor may not charge more than a nominal amount in 
        cases in which the cost-sharing subsidy is provided under such 
        subsection.
    ``(d) Administration of Subsidy Program.--The Medicare Benefits 
Administrator shall provide a process whereby, in the case of an 
individual who is determined to be a subsidy eligible individual and 
who is enrolled in prescription drug plan or is enrolled in a 
Medicare+Choice plan under which qualified prescription drug coverage 
is provided--
            ``(1) the Administrator provides for a notification of the 
        PDP sponsor or Medicare+Choice organization involved that the 
        individual is eligible for a subsidy and the amount of the 
        subsidy under subsection (a);
            ``(2) the sponsor or organization involved reduces the 
        premiums or cost-sharing otherwise imposed by the amount of the 
        applicable subsidy and submits to the Administrator information 
        on the amount of such reduction; and
            ``(3) the Administrator periodically and on a timely basis 
        reimburses the sponsor or organization for the amount of such 
        reductions.
The reimbursement under paragraph (3) with respect to cost-sharing 
subsidies may be computed on a capitated basis, taking into account the 
actuarial value of the subsidies and with appropriate adjustments to 
reflect differences in the risks actually involved.
    ``(e) Relation to Medicaid Program.--
            ``(1) In general.--For provisions providing for eligibility 
        determinations, and additional financing, under the medicaid 
        program, see section 1935.
            ``(2) Medicaid providing wrap around benefits.--The 
        coverage provided under this part is primary payor to benefits 
        for prescribed drugs provided under the medicaid program under 
        title XIX.

``SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES THROUGH 
              REINSURANCE FOR QUALIFIED PRESCRIPTION DRUG COVERAGE.

    ``(a) Reinsurance Subsidy Payment.--In order to reduce premium 
levels applicable to qualified prescription drug coverage for all 
medicare beneficiaries, to reduce adverse selection among prescription 
drug plans and Medicare+Choice plans that provide qualified 
prescription drug coverage, and to promote the participation of PDP 
sponsors under this part, the Medicare Benefits Administrator shall 
provide in accordance with this section for payment to a qualifying 
entity (as defined in subsection (b)) of the reinsurance payment amount 
(as defined in subsection (c)) for excess costs incurred in providing 
qualified prescription drug coverage--
            ``(1) for individuals enrolled with a prescription drug 
        plan under this part;
            ``(2) for individuals enrolled with a Medicare+Choice plan 
        that provides qualified prescription drug coverage under part 
        C; and
            ``(3) for medicare primary individuals (described in 
        subsection (f)(3)(D)) who are enrolled in a qualified retiree 
        prescription drug plan.
This section constitutes budget authority in advance of appropriations 
Acts and represents the obligation of the Administrator to provide for 
the payment of amounts provided under this section.
    ``(b) Qualifying Entity Defined.--For purposes of this section, the 
term `qualifying entity' means any of the following that has entered 
into an agreement with the Administrator to provide the Administrator 
with such information as may be required to carry out this section:
            ``(1) A PDP sponsor offering a prescription drug plan under 
        this part.
            ``(2) A Medicare+Choice organization that provides 
        qualified prescription drug coverage under a Medicare+Choice 
        plan under part C.
            ``(3) The sponsor of a qualified retiree prescription drug 
        plan (as defined in subsection (f)).
    ``(c) Reinsurance Payment Amount.--
            ``(1) In general.--Subject to subsection (d)(2) and 
        paragraph (4), the reinsurance payment amount under this 
        subsection for a qualifying covered individual (as defined in 
        subsection (g)(1)) for a coverage year (as defined in 
        subsection (g)(2)) is equal to the sum of the following:
                    ``(A) For the portion of the individual's gross 
                covered prescription drug costs (as defined in 
                paragraph (3)) for the year that exceeds $1,250, but 
                does not exceed $1,350, an amount equal to 30 percent 
                of the allowable costs (as defined in paragraph (2)) 
                attributable to such gross covered prescription drug 
                costs.
                    ``(B) For the portion of the individual's gross 
                covered prescription drug costs for the year that 
                exceeds $1,350, but does not exceed $1,450, an amount 
                equal to 50 percent of the allowable costs attributable 
                to such gross covered prescription drug costs.
                    ``(C) For the portion of the individual's gross 
                covered prescription drug costs for the year that 
                exceeds $1,450, but does not exceed $1,550, an amount 
                equal to 70 percent of the allowable costs attributable 
                to such gross covered prescription drug costs.
                    ``(D) For the portion of the individual's gross 
                covered prescription drug costs for the year that 
                exceeds $1,550, but does not exceed $2,350, an amount 
                equal to 90 percent of the allowable costs attributable 
                to such gross covered prescription drug costs.
                    ``(E) For the portion of the individual's gross 
                covered prescription drug costs for the year that 
                exceeds $7,050, an amount equal to 90 percent of the 
                allowable costs attributable to such gross covered 
                prescription drug costs.
            ``(2) Allowable costs.--For purposes of this section, the 
        term `allowable costs' means, with respect to gross covered 
        prescription drug costs under a plan described in subsection 
        (b) offered by a qualifying entity, the part of such costs that 
        are actually paid under the plan, but in no case more than the 
        part of such costs that would have been paid under the plan if 
        the prescription drug coverage under the plan were standard 
        coverage.
            ``(3) Gross covered prescription drug costs.--For purposes 
        of this section, the term `gross covered prescription drug 
        costs' means, with respect to an enrollee with a qualifying 
        entity under a plan described in subsection (b) during a 
        coverage year, the costs incurred under the plan for covered 
        prescription drugs dispensed during the year, including costs 
        relating to the deductible, whether paid by the enrollee or 
        under the plan, regardless of whether the coverage under the 
        plan exceeds standard coverage and regardless of when the 
        payment for such drugs is made.
            ``(4) Indexing dollar amounts.--
                    ``(A) Amounts for 2003.--The dollar amounts applied 
                under paragraph (1) for 2003 shall be the dollar 
                amounts specified in such paragraph.
                    ``(B) For 2004.--The dollar amounts applied under 
                paragraph (1) for 2004 shall be the dollar amounts 
                specified in such paragraph increased by the annual 
                percentage increase described in section 1860B(b)(5) 
                for 2004.
                    ``(C) For subsequent years.--The dollar amounts 
                applied under paragraph (1) for a year after 2004 shall 
                be the amounts (under this paragraph) applied under 
                paragraph (1) for the preceding year increased by the 
                annual percentage increase described in section 
                1860B(b)(5) for the year involved.
                    ``(D) Rounding.--Any amount, determined under the 
                preceding provisions of this paragraph for a year, 
                which is not a multiple of $5 shall be rounded to the 
                nearest multiple of $5.
    ``(d) Adjustment of Payments.--
            ``(1) In general.--The Medicare Benefits Administrator 
        shall estimate--
                    ``(A) the total payments to be made (without regard 
                to this subsection) during a year under this section; 
                and
                    ``(B) the total payments to be made by qualifying 
                entities for standard coverage under plans described in 
                subsection (b) during the year.
            ``(2) Adjustment of payments.--The Administrator shall 
        proportionally adjust the payments made under this section for 
        a coverage year in such manner so that the total of the 
        payments made for the year under this section is equal to 35 
        percent of the total payments described in paragraph (1)(B) 
        during the year.
    ``(e) Payment Methods.--
            ``(1) In general.--Payments under this section shall be 
        based on such a method as the Medicare Benefits Administrator 
        determines. The Administrator may establish a payment method by 
        which interim payments of amounts under this section are made 
        during a year based on the Administrator's best estimate of 
        amounts that will be payable after obtaining all of the 
        information.
            ``(2) Source of payments.--Payments under this section 
        shall be made from the Medicare Prescription Drug Account.
    ``(f) Qualified Retiree Prescription Drug Plan Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified retiree prescription drug plan' means employment-
        based retiree health coverage (as defined in paragraph (3)(A)) 
        if, with respect to an individual enrolled (or eligible to be 
        enrolled) under this part who is covered under the plan, the 
        following requirements are met:
                    ``(A) Assurance.--The sponsor of the plan shall 
                annually attest, and provide such assurances as the 
                Medicare Benefits Administrator may require, that the 
                coverage meets the requirements for qualified 
                prescription drug coverage.
                    ``(B) Audits.--The sponsor (and the plan) shall 
                maintain, and afford the Medicare Benefits 
                Administrator access to, such records as the 
                Administrator may require for purposes of audits and 
                other oversight activities necessary to ensure the 
                adequacy of prescription drug coverage, the accuracy of 
                payments made, and such other matters as may be 
                appropriate.
                    ``(C) Provision of certification of prescription 
                drug coverage.--The sponsor of the plan shall provide 
                for issuance of certifications of the type described in 
                section 1860A(c)(2)(D).
                    ``(D) Other requirements.--The sponsor of the plan 
                shall comply with such other requirements as the 
                Medicare Benefits Administrator finds necessary to 
                administer the program under this section.
            ``(2) Limitation on benefit eligibility.--No payment shall 
        be provided under this section with respect to an individual 
        who is enrolled under a qualified retiree prescription drug 
        plan unless the individual is a medicare primary individual 
        who--
                    ``(A) is covered under the plan; and
                    ``(B) is eligible to obtain qualified prescription 
                drug coverage under section 1860A but did not elect 
                such coverage under this part (either through a 
                prescription drug plan or through a Medicare+Choice 
                plan).
            ``(3) Definitions.--As used in this section:
                    ``(A) Employment-based retiree health coverage.--
                The term `employment-based retiree health coverage' 
                means health insurance or other coverage of health care 
                costs for medicare primary individuals (or for such 
                individuals and their spouses and dependents) based on 
                their status as former employees or labor union 
                members.
                    ``(B) Employer.--The term `employer' has the 
                meaning given such term by section 3(5) of the Employee 
                Retirement Income Security Act of 1974 (except that 
                such term shall include only employers of two or more 
                employees).
                    ``(C) Sponsor.--The term `sponsor' means a plan 
                sponsor, as defined in section 3(16)(B) of the Employee 
                Retirement Income Security Act of 1974.
                    ``(D) Medicare primary individual.--The term 
                `medicare primary individual' means, with respect to a 
                plan, an individual who is covered under the plan and 
                with respect to whom the plan is not a primary plan (as 
                defined in section 1862(b)(2)(A)).
    ``(g) General Definitions.--For purposes of this section:
            ``(1) Qualifying covered individual.--The term `qualifying 
        covered individual' means an individual who--
                    ``(A) is enrolled with a prescription drug plan 
                under this part;
                    ``(B) is enrolled with a Medicare+Choice plan that 
                provides qualified prescription drug coverage under 
                part C; or
                    ``(C) is covered as a medicare primary individual 
                under a qualified retiree prescription drug plan.
            ``(2) Coverage year.--The term `coverage year' means a 
        calendar year in which covered outpatient drugs are dispensed 
        if a claim for payment is made under the plan for such drugs, 
        regardless of when the claim is paid.

``SEC. 1860I. MEDICARE PRESCRIPTION DRUG ACCOUNT IN FEDERAL 
              SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND.

    ``(a) In General.--There is created within the Federal 
Supplementary Medical Insurance Trust Fund established by section 1841 
an account to be known as the `Medicare Prescription Drug Account' (in 
this section referred to as the `Account'). The Account shall consist 
of such gifts and bequests as may be made as provided in section 
201(i)(1), and such amounts as may be deposited 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 Supplementary Medical Insurance Trust Fund.
    ``(b) Payments From Account.--
            ``(1) In general.--The Managing Trustee shall pay from time 
        to time from the Account such amounts as the Medicare Benefits 
        Administrator certifies are necessary to make--
                    ``(A) payments under section 1860G (relating to 
                low-income subsidy payments);
                    ``(B) payments under section 1860H (relating to 
                reinsurance subsidy payments); and
                    ``(C) payments with respect to administrative 
                expenses under this part in accordance with section 
                201(g).
            ``(2) Transfers to medicaid account for increased 
        administrative costs.--The Managing Trustee shall transfer from 
        time to time from the Account to the Grants to States for 
        Medicaid account amounts the Secretary certifies are 
        attributable to increases in payment resulting from the 
        application of a higher Federal matching percentage under 
        section 1935(b).
            ``(3) Treatment in relation to part b premium.--Amounts 
        payable from the Account shall not be taken into account in 
        computing actuarial rates or premium amounts under section 
        1839.
    ``(c) Deposits Into Account.--
            ``(1) Medicaid transfer.--There is hereby transferred to 
        the Account, from amounts appropriated for Grants to States for 
        Medicaid, amounts equivalent to the aggregate amount of the 
        reductions in payments under section 1903(a)(1) attributable to 
        the application of section 1935(c).
            ``(2) Appropriations to cover government contributions.--
        There are authorized to be appropriated from time to time, out 
        of any moneys in the Treasury not otherwise appropriated, to 
        the Account, an amount equivalent to the amount of payments 
        made from the Account under subsection (b), reduced by the 
        amount transferred to the Account under paragraph (1).

``SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES TO PROVISIONS IN 
              PART C.

    ``(a) Definitions.--For purposes of this part:
            ``(1) Covered outpatient drugs.--The term `covered 
        outpatient drugs' is defined in section 1860B(f).
            ``(2) Initial coverage limit.--The term `initial coverage 
        limit' means the such limit as established under section 
        1860B(b)(3), or, in the case of coverage that is not standard 
        coverage, the comparable limit (if any) established under the 
        coverage.
            ``(3) Medicare prescription drug account.--The term 
        `Medicare Prescription Drug Account' means the Account in the 
        Federal Supplementary Medical Insurance Trust Fund created 
        under section 1860I(a).
            ``(4) PDP sponsor.--The term `PDP sponsor' means an entity 
        that is certified under this part as meeting the requirements 
        and standards of this part for such a sponsor.
            ``(5) Prescription drug plan.--The term `prescription drug 
        plan' means health benefits coverage that--
                    ``(A) is offered under a policy, contract, or plan 
                by a PDP sponsor pursuant to, and in accordance with, a 
                contract between the Medicare Benefits Administrator 
                and the sponsor under section 1860D(b);
                    ``(B) provides qualified prescription drug 
                coverage; and
                    ``(C) meets the applicable requirements of the 
                section 1860C for a prescription drug plan.
            ``(6) Qualified prescription drug coverage.--The term 
        `qualified prescription drug coverage' is defined in section 
        1860B(a).
            ``(7) Standard coverage.--The term `standard coverage' is 
        defined in section 1860B(b).
    ``(b) Application of Medicare+Choice Provisions Under This Part.--
For purposes of applying provisions of part C under this part with 
respect to a prescription drug plan and a PDP sponsor, unless otherwise 
provided in this part such provisions shall be applied as if--
            ``(1) any reference to a Medicare+Choice plan included a 
        reference to a prescription drug plan;
            ``(2) any reference to a provider-sponsored organization 
        included a reference to a PDP sponsor;
            ``(3) any reference to a contract under section 1857 
        included a reference to a contract under section 1860D(b); and
            ``(4) any reference to part C included a reference to this 
        part.''.
    (b) Conforming Amendments to Federal Supplementary Medical 
Insurance Trust Fund.--Section 1841 of the Social Security Act (42 
U.S.C. 1395t) is amended--
            (1) in the last sentence of subsection (a)--
                    (A) by striking ``and'' before ``such amounts'', 
                and
                    (B) by inserting before the period the following: 
                ``and such amounts as may be deposited in, or 
                appropriated to, the Medicare Prescription Drug Account 
                established by section 1860I''; and
            (2) in subsection (g), by inserting after ``by this part,'' 
        the following: ``the payments provided for under part D (in 
        which case the payments shall come from the Medicare 
        Prescription Drug Account in the Trust Fund),''.
    (c) Additional Conforming Changes.--
            (1) Conforming references to previous part d.--Any 
        reference in law (in effect before the date of the enactment of 
        this Act) to part D of title XVIII of the Social Security Act 
        is deemed a reference to part E of such title (as in effect 
        after such date).
            (2) Secretarial submission of legislative proposal.--Not 
        later than 6 months after the date of the enactment of this 
        Act, the Secretary of Health and Human Services shall submit to 
        the appropriate committees of Congress a legislative proposal 
        providing for such technical and conforming amendments in the 
        law as are required by the provisions of this subtitle.

SEC. 102. OFFERING OF QUALIFIED PRESCRIPTION DRUG COVERAGE UNDER THE 
              MEDICARE+CHOICE PROGRAM.

    (a) In General.--Section 1851 of the Social Security Act (42 U.S.C. 
1395w-21) is amended by adding at the end the following new subsection:
    ``(j) Availability of Prescription Drug Benefits.--
            ``(1) In general.--A Medicare+Choice organization may not 
        offer prescription drug coverage (other than that required 
        under parts A and B) to an enrollee under a Medicare+Choice 
        plan unless such drug coverage is at least qualified 
        prescription drug coverage and unless the requirements of this 
        subsection with respect to such coverage are met.
            ``(2) Compliance with additional beneficiary protections.--
        With respect to the offering of qualified prescription drug 
        coverage by a Medicare+Choice organization under a 
        Medicare+Choice plan, the organization and plan shall meet the 
        requirements of section 1860C, including requirements relating 
        to information dissemination and grievance and appeals, in the 
        same manner as they apply to a PDP sponsor and a prescription 
        drug plan under part D. The Medicare Benefits Administrator 
        shall waive such requirements to the extent the Administrator 
        determines that such requirements duplicate requirements 
        otherwise applicable to the organization or plan under this 
        part.
            ``(3) Treatment of coverage.--Except as provided in this 
        subsection, qualified prescription drug coverage offered under 
        this subsection shall be treated under this part in the same 
        manner as supplemental health care benefits described in 
        section 1852(a)(3)(A).
            ``(4) Availability of premium and cost-sharing subsidies 
        for low-income enrollees and reinsurance subsidy payments for 
        organizations.--For provisions--
                    ``(A) providing premium and cost-sharing subsidies 
                to low-income individuals receiving qualified 
                prescription drug coverage through a Medicare+Choice 
                plan, see section 1860G; and
                    ``(B) providing a Medicare+Choice organization with 
                reinsurance subsidy payments for providing qualified 
                prescription drug coverage under this part, see section 
                1860H.
            ``(5) Specification of separate and standard premium.--
                    ``(A) In general.--For purposes of applying section 
                1854 and section 1860G(b)(2)(B) with respect to 
                qualified prescription drug coverage offered under this 
                subsection under a plan, the Medicare+Choice 
                organization shall compute and publish the following:
                            ``(i) Separate prescription drug premium.--
                        A premium for prescription drug benefits that 
                        constitute qualified prescription drug coverage 
                        that is separate from other coverage under the 
                        plan.
                            ``(ii) Portion of coverage attributable to 
                        standard benefits.--The ratio of the actuarial 
                        value of standard coverage to the actuarial 
                        value of the qualified prescription drug 
                        coverage offered under the plan.
                            ``(iii) Portion of premium attributable to 
                        standard benefits.--A standard premium equal to 
                        the product of the premium described in clause 
                        (i) and the ratio under clause (ii).
                The premium under clause (i) shall be compute without 
                regard to any reduction in the premium permitted under 
                subparagraph (B).
                    ``(B) Reduction of premiums allowed.--Nothing in 
                this subsection shall be construed as preventing a 
                Medicare+Choice organization from reducing the amount 
                of a premium charged for prescription drug coverage 
                because of the application of section 1854(f)(1)(A) to 
                other coverage.
                    ``(C) Acceptance of reference premium as full 
                premium if no standard (or equivalent) coverage in an 
                area.--For requirement to accept reference premium as 
                full premium if there is no standard (or equivalent) 
                coverage in the area of a Medicare+Choice plan, see 
                section 1860F(d).
            ``(6) Transition in initial enrollment period.--
        Notwithstanding any other provision of this part, the annual, 
        coordinated election period under subsection (e)(3)(B) for 2003 
        shall be the 6-month period beginning with November 2002.
            ``(7) Qualified prescription drug coverage; standard 
        coverage.--For purposes of this part, the terms `qualified 
        prescription drug coverage' and `standard coverage' have the 
        meanings given such terms in section 1860B.''.
    (b) Conforming Amendments.--Section 1851 of such Act (42 U.S.C. 
1395w-21) is amended--
            (1) in subsection (a)(1)--
                    (A) by inserting ``(other than qualified 
                prescription drug benefits)'' after ``benefits'';
                    (B) by striking the period at the end of 
                subparagraph (B) and inserting a comma; and
                    (C) by adding after and below subparagraph (B) the 
                following:
        ``and may elect qualified prescription drug coverage in 
        accordance with section 1860A.''; and
            (2) in subsection (g)(1), by inserting ``and section 
        1860A(c)(2)(B)'' after ``in this subsection''.
    (c) Effective Date.--The amendments made by this section apply to 
coverage provided on or after January 1, 2003.

SEC. 103. MEDICAID AMENDMENTS.

    (a) Determinations of Eligibility for Low-Income Subsidies.--
            (1) Requirement.--Section 1902 of the Social Security Act 
        (42 U.S.C. 1396a) is amended--
                    (A) in subsection (a)--
                            (i) by striking ``and'' at the end of 
                        paragraph (64);
                            (ii) by striking the period at the end of 
                        paragraph (65) and inserting ``; and''; and
                            (iii) by inserting after paragraph (65) the 
                        following new paragraph:
            ``(66) provide for making eligibility determinations under 
        section 1935(a).''.
            (2) New section.--Title XIX of such Act is further 
        amended--
                    (A) by redesignating section 1935 as section 1936; 
                and
                    (B) by inserting after section 1934 the following 
                new section:

  ``special provisions relating to medicare prescription drug benefit

    ``Sec. 1935. (a) Requirement for Making Eligibility Determinations 
for Low-Income Subsidies.--As a condition of its State plan under this 
title under section 1902(a)(66) and receipt of any Federal financial 
assistance under section 1903(a), a State shall--
            ``(1) make determinations of eligibility for premium and 
        cost-sharing subsidies under (and in accordance with) section 
        1860G;
            ``(2) inform the Administrator of the Medicare Benefits 
        Administration of such determinations in cases in which such 
        eligibility is established; and
            ``(3) otherwise provide such Administrator with such 
        information as may be required to carry out part D of title 
        XVIII (including section 1860G).
    ``(b) Payments for Additional Administrative Costs.--
            ``(1) In general.--The amounts expended by a State in 
        carrying out subsection (a) are, subject to paragraph (2), 
        expenditures reimbursable under the appropriate paragraph of 
        section 1903(a); except that, notwithstanding any other 
        provision of such section, the applicable Federal matching 
        rates with respect to such expenditures under such section 
        shall be increased as follows:
                    ``(A) For expenditures attributable to costs 
                incurred during 2003, the otherwise applicable Federal 
                matching rate shall be increased by 20 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(B) For expenditures attributable to costs 
                incurred during 2004, the otherwise applicable Federal 
                matching rate shall be increased by 40 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(C) For expenditures attributable to costs 
                incurred during 2005, the otherwise applicable Federal 
                matching rate shall be increased by 60 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(D) For expenditures attributable to costs 
                incurred during 2006, the otherwise applicable Federal 
                matching rate shall be increased by 80 percent of the 
                percentage otherwise payable (but for this subsection) 
                by the State.
                    ``(E) For expenditures attributable to costs 
                incurred after 2006, the otherwise applicable Federal 
                matching rate shall be increased to 100 percent.
            ``(2) Coordination.--The State shall provide the Secretary 
        with such information as may be necessary to properly allocate 
        administrative expenditures described in paragraph (1) that may 
        otherwise be made for similar eligibility determinations.''.
    (b) Phased-In Federal Assumption of Medicaid Responsibility for 
Premium and Cost-Sharing Subsidies for Dually Eligible Individuals.--
            (1) In general.--Section 1903(a)(1) of the Social Security 
        Act (42 U.S.C. 1396b(a)(1)) is amended by inserting before the 
        semicolon the following: ``, reduced by the amount computed 
        under section 1935(c)(1) for the State and the quarter''.
            (2) Amount described.--Section 1935 of such Act, as 
        inserted by subsection (a)(2), is amended by adding at the end 
        the following new subsection:
    ``(c) Federal Assumption of Medicaid Prescription Drug Costs for 
Dually-Eligible Beneficiaries.--
            ``(1) In general.--For purposes of section 1903(a)(1), for 
        a State that is one of the 50 States or the District of 
        Columbia for a calendar quarter in a year (beginning with 2003) 
        the amount computed under this subsection is equal to the 
        product of the following:
                    ``(A) Medicare subsidies.--The total amount of 
                payments made in the quarter under section 1860G 
                (relating to premium and cost-sharing prescription drug 
                subsidies for low-income medicare beneficiaries) that 
                are attributable to individuals who are residents of 
                the State and are entitled to benefits with respect to 
                prescribed drugs under the State plan under this title 
                (including such a plan operating under a waiver under 
                section 1115).
                    ``(B) State matching rate.--A proportion computed 
                by subtracting from 100 percent the Federal medical 
                assistance percentage (as defined in section 1905(b)) 
                applicable to the State and the quarter.
                    ``(C) Phase-out proportion.--The phase-out 
                proportion (as defined in paragraph (2)) for the 
                quarter.
            ``(2) Phase-out proportion.--For purposes of paragraph 
        (1)(C), the `phase-out proportion' for a calendar quarter in--
                    ``(A) 2003 is 80 percent;
                    ``(B) 2004 is 60 percent;
                    ``(C) 2005 is 40 percent;
                    ``(D) 2006 is 20 percent; or
                    ``(E) a year after 2006 is 0 percent.''.
    (c) Medicaid Providing Wrap-Around Benefits.--Section 1935 of such 
Act, as so inserted and amended, is further amended by adding at the 
end the following new subsection:
    ``(d) Additional Provisions.--
            ``(1) Medicaid as secondary payor.--In the case of an 
        individual dually entitled to qualified prescription drug 
        coverage under a prescription drug plan under part D of title 
        XVIII (or under a Medicare+Choice plan under part C of such 
        title) and medical assistance for prescribed drugs under this 
        title, medical assistance shall continue to be provided under 
        this title for prescribed drugs to the extent payment is not 
        made under the prescription drug plan or the Medicare+Choice 
        plan selected by the individual.
            ``(2) Condition.--A State may require, as a condition for 
        the receipt of medical assistance under this title with respect 
        to prescription drug benefits for an individual eligible to 
        obtain qualified prescription drug coverage described in 
        paragraph (1), that the individual elect qualified prescription 
        drug coverage under section 1860A.''.
    (d) Treatment of Territories.--
            (1) In general.--Section 1935 of such Act, as so inserted 
        and amended, is further amended--
                    (A) in subsection (a) in the matter preceding 
                paragraph (1), by inserting ``subject to subsection 
                (e)'' after ``section 1903(a)'';
                    (B) in subsection (c)(1), by inserting ``subject to 
                subsection (e)'' after ``1903(a)(1)''; and
                    (C) by adding at the end the following new 
                subsection:
    ``(e) Treatment of Territories.--
            ``(1) In general.--In the case of a State, other than the 
        50 States and the District of Columbia--
                    ``(A) the previous provisions of this section shall 
                not apply to residents of such State; and
                    ``(B) if the State establishes a plan described in 
                paragraph (2) (for providing medical assistance with 
                respect to the provision of prescription drugs to 
                medicare beneficiaries), the amount otherwise 
                determined under section 1108(f) (as increased under 
                section 1108(g)) for the State shall be increased by 
                the amount specified in paragraph (3).
            ``(2) Plan.--The plan described in this paragraph is a plan 
        that--
                    ``(A) provides medical assistance with respect to 
                the provision of covered outpatient drugs (as defined 
                in section 1860B(f)) to low-income medicare 
                beneficiaries; and
                    ``(B) assures that additional amounts received by 
                the State that are attributable to the operation of 
                this subsection are used only for such assistance.
            ``(3) Increased amount.--
                    ``(A) In general.--The amount specified in this 
                paragraph for a State for a year is equal to the 
                product of--
                            ``(i) the aggregate amount specified in 
                        subparagraph (B); and
                            ``(ii) the amount specified in section 
                        1108(g)(1) for that State, divided by the sum 
                        of the amounts specified in such section for 
                        all such States.
                    ``(B) Aggregate amount.--The aggregate amount 
                specified in this subparagraph for--
                            ``(i) 2003, is equal to $20,000,000; or
                            ``(ii) a subsequent year, is equal to the 
                        aggregate amount specified in this subparagraph 
                        for the previous year increased by annual 
                        percentage increase specified in section 
                        1860(b)(5) for the year involved.
            ``(4) Report.--The Secretary shall submit to Congress a 
        report on the application of this subsection and may include in 
        the report such recommendations as the Secretary deems 
        appropriate.''.
            (2) Conforming amendment.--Section 1108(f) of such Act is 
        amended by inserting ``and section 1935(e)(1)(B)'' after 
        ``Subject to subsection (g)''.

SEC. 104. MEDIGAP TRANSITION PROVISIONS.

    (a) In General.--Notwithstanding any other provision of law, no new 
medicare supplemental policy that provides coverage of expenses for 
prescription drugs may be issued under section 1882 of the Social 
Security Act on or after January 1, 2003, to an individual unless it 
replaces a medicare supplemental policy that was issued to that 
individual and that provided some coverage of expenses for prescription 
drugs.
    (b) Issuance of Substitute Policies if Obtain Prescription Drug 
Coverage Through Medicare.--
            (1) In general.--The issuer of a medicare supplemental 
        policy--
                    (A) may not deny or condition the issuance or 
                effectiveness of a medicare supplemental policy that 
                has a benefit package classified as ``A'', ``B'', 
                ``C'', ``D'', ``E'', ``F'', or ``G'' (under the 
                standards established under subsection (p)(2) of 
                section 1882 of the Social Security Act, 42 U.S.C. 
                1395ss) and that is offered and is available for 
                issuance to new enrollees by such issuer;
                    (B) may not discriminate in the pricing of such 
                policy, because of health status, claims experience, 
                receipt of health care, or medical condition; and
                    (C) may not impose an exclusion of benefits based 
                on a pre-existing condition under such policy,
        in the case of an individual described in paragraph (2) who 
        seeks to enroll under the policy not later than 63 days after 
        the date of the termination of enrollment described in such 
        paragraph and who submits evidence of the date of termination 
        or disenrollment along with the application for such medicare 
        supplemental policy.
            (2) Individual covered.--An individual described in this 
        paragraph is an individual who--
                    (A) enrolls in a prescription drug plan under part 
                D of title XVIII of the Social Security Act; and
                    (B) at the time of such enrollment was enrolled and 
                terminates enrollment in a medicare supplemental policy 
                which has a benefit package classified as ``H'', ``I'', 
                or ``J'' under the standards referred to in paragraph 
                (1)(A) or terminates enrollment in a policy to which 
                such standards do not apply but which provides benefits 
                for prescription drugs.
            (3) Enforcement.--The provisions of paragraph (1) shall be 
        enforced as though they were included in section 1882(s) of the 
        Social Security Act (42 U.S.C. 1395ss(s)).
            (4) Definitions.--For purposes of this subsection, the term 
        ``medicare supplemental policy'' has the meaning given such 
        term in section 1882(g) of the Social Security Act (42 U.S.C. 
        1395ss(g)).

SEC. 105. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR SEVERELY 
              CHRONICALLY ILL MEDICARE BENEFICIARIES.

    (a) In General.--The Administrator of the Medicare Benefits 
Administration (in this section referred to as the ``Administrator'') 
shall conduct a demonstration project under this section (in this 
section referred to as the ``project'') to demonstrate the impact on 
costs and health outcomes of applying disease management to medicare 
beneficiaries with diagnosed, advanced-stage congestive heart failure, 
diabetes, or coronary heart disease.
    (b) Voluntary Participation.--
            (1) Eligibility.--Medicare beneficiaries are eligible to 
        participate in the project only if--
                    (A) they meet specific medical criteria 
                demonstrating the appropriate diagnosis and the 
                advanced nature of their disease;
                    (B) their physicians approve of participation in 
                the project; and
                    (C) they are not enrolled in a Medicare+Choice 
                plan.
            (2) Benefits.--A beneficiary who is enrolled in the project 
        shall be eligible--
                    (A) for disease management services related to 
                their chronic health condition; and
                    (B) if the beneficiary--
                            (i) is enrolled in a prescription drug plan 
                        under part D of title XVIII of the Social 
                        Security Act, for payment of any premiums for 
                        such plan, any deductible or cost-sharing, and 
                        any amounts not covered under the plan because 
                        of the application of an initial coverage 
                        limit; or
                            (ii) is not enrolled in such a plan, for 
                        payment for all costs for prescription drugs 
                        without regard to whether or not they relate to 
                        the chronic health condition;
                except that the project may provide for modest cost-
                sharing with respect to prescription drug coverage.
            (3) Treatment as qualifying coverage for purposes of 
        continuous coverage.--For purposes of applying section 
        1860A(c)(2)(C) of the Social Security Act, coverage under the 
        project shall be treated as coverage under a prescription drug 
        plan under part D of title XVIII of such Act.
    (c) Contracts with Disease Management Organizations.--
            (1) In general.--The Administrator shall carry out the 
        project through contracts with up to 3 disease management 
        organizations. The Administrator shall not enter into such a 
        contract with an organization unless the organization 
        demonstrates that it can produce improved health outcomes and 
        reduce aggregate medicare expenditures consistent with 
        paragraph (2).
            (2) Contract provisions.--Under such contracts--
                    (A) such an organization shall be required to 
                provide for prescription drug coverage described in 
                subsection (b)(2)(B);
                    (B) such an organization shall be paid a fee 
                negotiated and established by the Administrator in a 
                manner so that (taking into account savings in 
                expenditures under parts A and B of the medicare 
                program) there will be a net reduction in expenditures 
                under the medicare program as a result of the project; 
                and
                    (C) such an organization shall guarantee, through 
                an appropriate arrangement with a reinsurance company 
                or otherwise, the net reduction in expenditures 
                described in subparagraph (B).
            (3) Payments.--Payments to such organizations shall be made 
        in appropriate proportion from the Trust Funds established 
        under title XVIII of the Social Security Act.
    (d) Duration.--The project shall last for not longer than 3 years.
    (e) Report.--The Administrator shall submit to Congress an interim 
report on the project not later than 2 years after the date it is first 
implemented and a final report on the project not later than 6 months 
after the date of its completion. Such reports shall include 
information on the impact of the project on costs and health outcomes 
and recommendations on the cost-effectiveness of extending or expanding 
the project.

         TITLE II--MODERNIZATION OF ADMINISTRATION OF MEDICARE

              Subtitle A--Medicare Benefits Administration

SEC. 201. ESTABLISHMENT OF ADMINISTRATION.

    (a) In General.--Title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.) is amended by inserting after section 1806 the following 
new section:

                   ``medicare benefits administration

    ``Sec. 1807. (a) Establishment.--There is established within the 
Department of Health and Human Services an agency to be known as the 
Medicare Benefits Administration.
    ``(b) Administrator and Deputy Administrator.--
            ``(1) Administrator.--
                    ``(A) In general.--The Medicare Benefits 
                Administration shall be headed by an Administrator (in 
                this section referred to as the `Administrator') who 
                shall be appointed by the President, by and with the 
                advice and consent of the Senate. The Administrator 
                shall be in direct line of authority to the Secretary.
                    ``(B) Compensation.--The Administrator shall be 
                paid at the rate of basic pay payable for level III of 
                the Executive Schedule under section 5314 of title 5, 
                United States Code.
                    ``(C) Term of office.--The Administrator shall be 
                appointed for a term of 5 years. In any case in which a 
                successor does not take office at the end of an 
                Administrator's term of office, that Administrator may 
                continue in office until the entry upon office of such 
                a successor. An Administrator appointed to a term of 
                office after the commencement of such term may serve 
                under such appointment only for the remainder of such 
                term.
                    ``(D) General Authority.--The Administrator shall 
                be responsible for the exercise of all powers and the 
                discharge of all duties of the Administration, and 
                shall have authority and control over all personnel and 
                activities thereof.
                    ``(E) Rulemaking authority.--The Administrator may 
                prescribe such rules and regulations as the 
                Administrator determines necessary or appropriate to 
                carry out the functions of the Administration. The 
                regulations prescribed by the Administrator shall be 
                subject to the rulemaking procedures established under 
                section 553 of title 5, United States Code.
                    ``(F) Authority to establish organizational 
                units.--The Administrator may establish, alter, 
                consolidate, or discontinue such organizational units 
                or components within the Administration as the 
                Administrator considers necessary or appropriate, 
                except that this subparagraph shall not apply with 
                respect to any unit, component, or provision provided 
                for by this section.
                    ``(G) Authority to delegate.--The Administrator may 
                assign duties, and delegate, or authorize successive 
                redelegations of, authority to act and to render 
                decisions, to such officers and employees of the 
                Administration as the Administrator may find necessary. 
                Within the limitations of such delegations, 
                redelegations, or assignments, all official acts and 
                decisions of such officers and employees shall have the 
                same force and effect as though performed or rendered 
                by the Administrator.
            ``(2) Deputy administrator.--
                    ``(A) In general.--There shall be a Deputy 
                Administrator of the Medicare Benefits Administration 
                who shall be appointed by the President, by and with 
                the advice and consent of the Senate.
                    ``(B) Compensation.--The Deputy Administrator shall 
                be paid at the rate of basic pay payable for level IV 
                of the Executive Schedule under section 5315 of title 
                5, United States Code.
                    ``(C) Term of office.--The Deputy Administrator 
                shall be appointed for a term of 5 years. In any case 
                in which a successor does not take office at the end of 
                a Deputy Administrator's term of office, such Deputy 
                Administrator may continue in office until the entry 
                upon office of such a successor. A Deputy Administrator 
                appointed to a term of office after the commencement of 
                such term may serve under such appointment only for the 
                remainder of such term.
                    ``(D) Duties.--The Deputy Administrator shall 
                perform such duties and exercise such powers as the 
                Administrator shall from time to time assign or 
                delegate. The Deputy Administrator shall be Acting 
                Administrator of the Administration during the absence 
                or disability of the Administrator and, unless the 
                President designates another officer of the Government 
                as Acting Administrator, in the event of a vacancy in 
                the office of the Administrator.
            ``(3) Secretarial coordination of program administration.--
        The Secretary shall ensure appropriate coordination between the 
        Administrator and the Administrator of the Health Care 
        Financing Administration in carrying out the programs under 
        this title.
    ``(c) Duties; Administrative Provisions.--
            ``(1) Duties.--
                    ``(A) General duties.--The Administrator shall 
                carry out parts C and D, including--
                            ``(i) negotiating, entering into, and 
                        enforcing, contracts with plans for the 
                        offering of Medicare+Choice plans under part C, 
                        including the offering of qualified 
                        prescription drug coverage under such plans; 
                        and
                            ``(ii) negotiating, entering into, and 
                        enforcing, contracts with PDP sponsors for the 
                        offering of prescription drug plans under part 
                        D.
                    ``(B) Other duties.--The Administrator shall carry 
                out any duty provided for under part C or part D, 
                including demonstration projects carried out in part or 
                in whole under such parts, the programs of all-
                inclusive care for the elderly (PACE program) under 
                section 1894, the social health maintenance 
                organization (SHMO) demonstration projects (referred to 
                in section 4104(c) of the Balanced Budget Act of 1997), 
                and through a Medicare+Choice project that demonstrates 
                the application of capitation payment rates for frail 
                elderly medicare beneficiaries through the use of a 
                interdisciplinary team and through the provision of 
                primary care services to such beneficiaries by means of 
                such a team at the nursing facility involved).
                    ``(C) Noninterference.--In carrying out its duties 
                with respect to the provision of qualified prescription 
                drug coverage to beneficiaries under this title, the 
                Administrator may not--
                            ``(i) require a particular formulary or 
                        institute a price structure for the 
                        reimbursement of covered outpatient drugs;
                            ``(ii) interfere in any way with 
                        negotiations between PDP sponsors and 
                        Medicare+Choice organizations and drug 
                        manufacturers, wholesalers, or other suppliers 
                        of covered outpatient drugs; and
                            ``(iii) otherwise interfere with the 
                        competitive nature of providing such coverage 
                        through such sponsors and organizations.
                    ``(D) Annual reports.--Not later March 31 of each 
                year, the Administrator shall submit to Congress and 
                the President a report on the administration of parts C 
                and D during the previous fiscal year.
            ``(2) Staff.--
                    ``(A) In general.--The Administrator, with the 
                approval of the Secretary, may employ, without regard 
                to chapter 31 of title 5, United States Code, such 
                officers and employees as are necessary to administer 
                the activities to be carried out through the Medicare 
                Benefits Administration.
                    ``(B) Flexibility with respect to compensation.--
                            ``(i) In general.--The staff of the 
                        Medicare Benefits Administration shall, subject 
                        to clause (ii), be paid without regard to the 
                        provisions of chapter 51 and chapter 53 of such 
                        title (relating to classification and schedule 
                        pay rates).
                            ``(ii) Maximum rate.--In no case may the 
                        rate of compensation determined under clause 
                        (i) exceed the rate of basic pay payable for 
                        level IV of the Executive Schedule under 
                        section 5315 of title 5, United States Code.
                    ``(C) Limitation on full-time equivalent staffing 
                for current hcfa functions being transferred.--The 
                Administrator may not employ under this paragraph a 
                number of full-time equivalent employees, to carry out 
                functions that were previously conducted by the Health 
                Care Financing Administration and that are conducted by 
                the Administrator by reason of this section, that 
                exceeds the number of such full-time equivalent 
                employees authorized to be employed by the Health Care 
                Financing Administration to conduct such functions as 
                of the date of the enactment of this Act.
            ``(3) Redelegation of certain functions of the health care 
        financing administration.--
                    ``(A) In general.--The Secretary, the 
                Administrator, and the Administrator of the Health Care 
                Financing Administration shall establish an appropriate 
                transition of responsibility in order to redelegate the 
                administration of part C from the Secretary and the 
                Administrator of the Health Care Financing 
                Administration to the Administrator as is appropriate 
                to carry out the purposes of this section.
                    ``(B) Transfer of data and information.--The 
                Secretary shall ensure that the Administrator of the 
                Health Care Financing Administration transfers to the 
                Administrator of the Medicare Benefits Administration 
                such information and data in the possession of the 
                Administrator of the Health Care Financing 
                Administration as the Administrator of the Medicare 
                Benefits Administration requires to carry out the 
                duties described in paragraph (1).
                    ``(C) Construction.--Insofar as a responsibility of 
                the Secretary or the Administrator of the Health Care 
                Financing Administration is redelegated to the 
                Administrator under this section, any reference to the 
                Secretary or the Administrator of the Health Care 
                Financing Administration in this title or title XI with 
                respect to such responsibility is deemed to be a 
                reference to the Administrator.
    ``(d) Office of Beneficiary Assistance.--
            ``(1) Establishment.--The Secretary shall establish within 
        the Medicare Benefits Administration an Office of Beneficiary 
        Assistance to carry out functions relating to medicare 
        beneficiaries under this title, including making determinations 
        of eligibility of individuals for benefits under this title, 
        providing for enrollment of medicare beneficiaries under this 
        title, and the functions described in paragraph (2). The Office 
        shall be separate operating division within the Administration.
            ``(2) Dissemination of information on benefits and appeals 
        rights.--
                    ``(A) Dissemination of benefits information.--The 
                Office of Beneficiary Assistance shall disseminate to 
                medicare beneficiaries, by mail, by posting on the 
                Internet site of the Medicare Benefits Administration 
                and through the toll-free telephone number provided for 
                under section 1804(b), information with respect to the 
                following:
                            ``(i) Benefits, and limitations on payment 
                        (including cost-sharing, stop-loss provisions, 
                        and formulary restrictions) under parts C and 
                        D.
                            ``(ii) Benefits, and limitations on payment 
                        under parts A and B, including information on 
                        medicare supplemental policies under section 
                        1882.
                Such information shall be presented in a manner so that 
                medicare beneficiaries may compare benefits under parts 
                A, B, D, and medicare supplemental policies with 
                benefits under Medicare+Choice plans under part C.
                    ``(B) Dissemination of appeals rights 
                information.--The Office of Beneficiary Assistance 
                shall disseminate to medicare beneficiaries in the 
                manner provided under subparagraph (A) a description of 
                procedural rights (including grievance and appeals 
                procedures) of beneficiaries under the original 
                medicare fee-for-service program under parts A and B, 
                the Medicare+Choice program under part C, and the 
                Voluntary Prescription Drug Benefit Program under part 
                D.
            ``(3) Medicare ombudsman.--
                    ``(A) In general.--Within the Office of Beneficiary 
                Assistance, there shall be a Medicare Ombudsman, 
                appointed by the Secretary from among individuals with 
                expertise and experience in the fields of health care 
                and advocacy, to carry out the duties described in 
                subparagraph (B).
                    ``(B) Duties.--The Medicare Ombudsman shall--
                            ``(i) receive complaints, grievances, and 
                        requests for information submitted by a 
                        medicare beneficiary, with respect to any 
                        aspect of the medicare program;
                            ``(ii) provide assistance with respect to 
                        complaints, grievances, and requests referred 
                        to in clause (i), including--
                                    ``(I) assistance in collecting 
                                relevant information for such 
                                beneficiaries, to seek an appeal of a 
                                decision or determination made by a 
                                fiscal intermediary, carrier, 
                                Medicare+Choice organization, a PDP 
                                sponsor under part D, or the Secretary; 
                                and
                                    ``(II) assistance to such 
                                beneficiaries with any problems arising 
                                from disenrollment from a 
                                Medicare+Choice plan under part C or a 
                                prescription drug plan under part D; 
                                and
                            ``(iii) submit annual reports to Congress, 
                        the Secretary, and the Medicare Policy Advisory 
                        Board describing the activities of the Office, 
                        and including such recommendations for 
                        improvement in the administration of this title 
                        as the Ombudsman determines appropriate.
                    ``(C) Coordination with state ombudsman programs 
                and consumer organizations.--The Medicare Ombudsman 
                shall, to the extent appropriate, coordinate with State 
                medical Ombudsman programs, and with State- and 
                community-based consumer organizations, to--
                            ``(i) provide information about the 
                        medicare program; and
                            ``(ii) conduct outreach to educate medicare 
                        beneficiaries with respect to manners in which 
                        problems under the medicare program may be 
                        resolved or avoided.
    ``(e) Medicare Policy Advisory Board.--
            ``(1) Establishment.--There is established within the 
        Medicare Benefits Administration the Medicare Policy Advisory 
        Board (in this section referred to the `Board'). The Board 
        shall advise, consult with, and make recommendations to the 
        Administrator of the Medicare Benefits Administration with 
        respect to the administration of parts C and D, including the 
        review of payment policies under such parts.
            ``(2) Reports.--
                    ``(A) In general.--With respect to matters of the 
                administration of parts C and D, the Board shall submit 
                to Congress and to the Administrator of the Medicare 
                Benefits Administration such reports as the Board 
                determines appropriate. Each such report may contain 
                such recommendations as the Board determines 
                appropriate for legislative or administrative changes 
                to improve the administration of such parts, including 
                the topics described in subparagraph (B). Each such 
                report shall be published in the Federal Register.
                    ``(B) Topics described.--Reports required under 
                subparagraph (A) may include the following topics:
                            ``(i) Fostering competition.--
                        Recommendations or proposals to increase 
                        competition under parts C and D for services 
                        furnished to medicare beneficiaries.
                            ``(ii) Education and enrollment.--
                        Recommendations for the improvement to efforts 
                        to provide medicare beneficiaries information 
                        and education on the program under this title, 
                        and specifically parts C and D, and the program 
                        for enrollment under the title.
                            ``(iii) Implementation of risk-
                        adjustment.--Evaluation of the implementation 
                        under section 1853(a)(3)(C) of the risk 
                        adjustment methodology to payment rates under 
                        that section to Medicare+Choice organizations 
                        offering Medicare+Choice plans that accounts 
                        for variations in per capita costs based on 
                        health status and other demographic factors.
                            ``(iv) Disease management programs.--
                        Recommendations on the incorporation of disease 
                        management programs under parts C and D.
                            ``(v) Rural access.--Recommendations to 
                        improve competition and access to plans under 
                        parts C and D in rural areas.
                    ``(C) Maintaining independence of board.--The Board 
                shall directly submit to Congress reports required 
                under subparagraph (A). No officer or agency of the 
                United States may require the Board to submit to any 
                officer or agency of the United States for approval, 
                comments, or review, prior to the submission to 
                Congress of such reports.
            ``(3) Duty of administrator of medicare benefits 
        administration.--With respect to any report submitted by the 
        Board under paragraph (2)(A), not later than 90 days after the 
        report is submitted, the Administrator of the Medicare Benefits 
        Administration shall submit to Congress and the President an 
        analysis of recommendations made by the Board in such report. 
        Each such analysis shall be published in the Federal Register.
            ``(4) Membership.--
                    ``(A) Appointment.--Subject to the succeeding 
                provisions of this paragraph, the Board shall consist 
                of 7 members to be appointed as follows:
                            ``(i) 3 members shall be appointed by the 
                        President.
                            ``(ii) 2 members shall be appointed by the 
                        Speaker of the House of Representatives, with 
                        the advice of the chairman and the ranking 
                        minority member of the Committees on Ways and 
                        Means and on Commerce of the House of 
                        Representatives.
                            ``(iii) 2 members shall be appointed by the 
                        President pro tempore of the Senate with the 
                        advice of the chairman and the ranking minority 
                        member of the Senate Committee on Finance.
                    ``(B) Qualifications.--The members shall be chosen 
                on the basis of their integrity, impartiality, and good 
                judgment, and shall be individuals who are, by reason 
                of their education and experience in health care 
                benefits management, exceptionally qualified to perform 
                the duties of members of the Board.
                    ``(C) Prohibition on inclusion of federal 
                employees.--No officer or employee of the United States 
                may serve as a member of the Board.
            ``(5) Compensation.--Members of the Board shall receive, 
        for each day (including travel time) they are engaged in the 
        performance of the functions of the board, compensation at 
        rates not to exceed the daily equivalent to the annual rate in 
        effect for level IV of the Executive Schedule under section 
        5315 of title 5, United States Code.
            ``(6) Terms of office.--
                    ``(A) In general.--The term of office of members of 
                the Board shall be 3 years.
                    ``(B) Terms of initial appointees.--As designated 
                by the President at the time of appointment, of the 
                members first appointed--
                            ``(i) 1 shall be appointed for a term of 1 
                        year;
                            ``(ii) 3 shall be appointed for terms of 2 
                        years; and
                            ``(iii) 3 shall be appointed for terms of 3 
                        years.
                    ``(C) Reappointments.--Any person appointed as a 
                member of the Board may not serve for more than 8 
                years.
                    ``(D) Vacancy.--Any member appointed to fill a 
                vacancy occurring before the expiration of the term for 
                which the member's predecessor was appointed shall be 
                appointed only for the remainder of that term. A member 
                may serve after the expiration of that member's term 
                until a successor has taken office. A vacancy in the 
                Board shall be filled in the manner in which the 
                original appointment was made.
            ``(7) Chair.--The Chair of the Board shall be elected by 
        the members. The term of office of the Chair shall be 3 years.
            ``(8) Meetings.--The Board shall meet at the call of the 
        Chair, but in no event less than 3 times during each fiscal 
        year.
            ``(9) Director and staff.--
                    ``(A) Appointment of director.--The Board shall 
                have a Director who shall be appointed by the Chair.
                    ``(B) In general.--With the approval of the Board, 
                the Director may appoint, without regard to chapter 31 
                of title 5, United States Code, such additional 
                personnel as the Director considers appropriate.
                    ``(C) Flexibility with respect to compensation.--
                            ``(i) In general.--The Director and staff 
                        of the Board shall, subject to clause (ii), be 
                        paid without regard to the provisions of 
                        chapter 51 and chapter 53 of such title 
                        (relating to classification and schedule pay 
                        rates).
                            ``(ii) Maximum rate.--In no case may the 
                        rate of compensation determined under clause 
                        (i) exceed the rate of basic pay payable for 
                        level IV of the Executive Schedule under 
                        section 5315 of title 5, United States Code.
                    ``(D) Assistance from the administrator of the 
                medicare benefits administration.--The Administrator of 
                the Medicare Benefits Administration shall make 
                available to the Board such information and other 
                assistance as it may require to carry out its 
                functions.
            ``(10) Contract authority.--The Board may contract with and 
        compensate government and private agencies or persons to carry 
        out its duties under this subsection, without regard to section 
        3709 of the Revised Statutes (41 U.S.C. 5).
    ``(f) Funding.--There is authorized to be appropriated, in 
appropriate part from the Federal Hospital Insurance Trust Fund and 
from the Federal Supplementary Medical Insurance Trust Fund (including 
the Medicare Prescription Drug Account), such sums as are necessary to 
carry out this section.''.
    (b) Effective Date.--
            (1) In general.--The amendment made by subsection (a) shall 
        take effect on the date of the enactment of this Act.
            (2) Timing of initial appointments.--The Administrator and 
        Deputy Administrator of the Medicare Benefits Administration 
        may not be appointed before March 1, 2001.
            (3) Duties with respect to eligibility determinations and 
        enrollment.--The Administrator of the Medicare Benefits 
        Administration shall carry out enrollment under title XVIII of 
        the Social Security Act, make eligibility determinations under 
        such title, and carry out part C of such title for years 
        beginning or after January 1, 2003.

SEC. 202. MISCELLANEOUS ADMINISTRATIVE PROVISIONS.

    (a) Administrator as Member of the Board of Trustees of the 
Medicare Trust Funds.--Section 1817(b) and section 1841(b) of the 
Social Security Act (42 U.S.C. 1395i(b), 1395t(b)) are each amended by 
striking ``and the Secretary of Health and Human Services, all ex 
officio,'' and inserting ``the Secretary of Health and Human Services, 
and the Administrator of the Medicare Benefits Administration, all ex 
officio,''.
    (b) Increase in Grade to Executive Level III for the Administrator 
of the Health Care Financing Administration.--
            (1) In general.--Section 5314 of title 5, United States 
        Code, by adding at the end the following:
            ``Administrator of the Health Care Financing 
        Administration.''.
            (2) Conforming amendment.--Section 5315 of such title is 
        amended by striking ``Administrator of the Health Care 
        Financing Administration.''.
            (3) Effective date.--The amendments made by this subsection 
        take effect on March 1, 2001.

   Subtitle B--Oversight of Financial Sustainability of the Medicare 
                                Program

SEC. 211. ADDITIONAL REQUIREMENTS FOR ANNUAL FINANCIAL REPORT AND 
              OVERSIGHT ON MEDICARE PROGRAM.

    (a) In General.--Section 1817 of the Social Security Act (42 U.S.C. 
1395i) is amended by adding at the end the following new subsection:
    ``(l) Combined Report on Operation and Status of the Trust Fund and 
the Federal Supplementary Medical Insurance Trust Fund.--
            ``(1) In general.--In addition to the duty of the Board of 
        Trustees to report to Congress under subsection (b), on the 
        date the Board submits the report required under subsection 
        (b)(2), the Board shall submit to Congress a report on the 
        operation and status of the Trust Fund and the Federal 
        Supplementary Medical Insurance Trust Fund established under 
        section 1841 (in this subsection referred to as the `Trust 
        Funds'). Such report shall included the following information:
                    ``(A) Overall spending from the general fund of the 
                treasury.--A statement of total amounts obligated 
                during the preceding fiscal year from the General 
                Revenues of the Treasury to the Trust Funds for payment 
                for benefits covered under this title, stated in terms 
                of the total amount and in terms of the percentage such 
                amount bears to all other amounts obligated from such 
                General Revenues during such fiscal year.
                    ``(B) Historical overview of spending.--From the 
                date of the inception of the program of insurance under 
                this title through the fiscal year involved, a 
                statement of the total amounts referred to in 
                subparagraph (A).
                    ``(C) 10-year and 50-year projections.--An estimate 
                of total amounts referred to in subparagraph (A) 
                required to be obligated for payment for benefits 
                covered under this title for each of the 10 fiscal 
                years succeeding the fiscal year involved and for the 
                50-year period beginning with the succeeding fiscal 
                year.
                    ``(D) Relation to gdp growth.--A comparison of the 
                rate of growth of the total amounts referred to in 
                subparagraph (A) to the rate of growth in the gross 
                domestic product for the same period.
            ``(2) Publication.--Each report submitted under paragraph 
        (1) shall be published by the Committee on Ways and Means as a 
        public document and shall be made available by such Committee 
        on the Internet.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to fiscal years beginning on or after the date of 
the enactment of this Act.
    (c) Congressional Hearings.--It is the sense of Congress that the 
committees of jurisdiction shall hold hearings on the reports submitted 
under section 1817(l) of the Social Security Act.

      Subtitle C--Changes in Medicare Coverage and Appeals Process

SEC. 221. REVISIONS TO MEDICARE APPEALS PROCESS.

    (a) Conduct of Reconsiderations of Determinations by Independent 
Contractors.--Section 1869 of the Social Security Act (42 U.S.C. 
1395ff) is amended to read as follows:

                       ``determinations; appeals

    ``Sec. 1869. (a) Initial Determinations.--The Secretary shall 
promulgate regulations and make initial determinations with respect to 
benefits under part A or part B in accordance with those regulations 
for the following:
            ``(1) The initial determination of whether an individual is 
        entitled to benefits under such parts.
            ``(2) The initial determination of the amount of benefits 
        available to the individual under such parts.
            ``(3) Any other initial determination with respect to a 
        claim for benefits under such parts, including an initial 
        determination by the Secretary that payment may not be made, or 
        may no longer be made, for an item or service under such parts, 
        an initial determination made by a utilization and quality 
        control peer review organization under section 1154(a)(2), and 
        an initial determination made by an entity pursuant to a 
        contract with the Secretary to administer provisions of this 
        title or title XI.
    ``(b) Appeal Rights.--
            ``(1) In general.--
                    ``(A) Reconsideration of initial determination.--
                Subject to subparagraph (D), any individual 
                dissatisfied with any initial determination under 
                subsection (a) shall be entitled to reconsideration of 
                the determination, and, subject to subparagraphs (D) 
                and (E), a hearing thereon by the Secretary to the same 
                extent as is provided in section 205(b) and to judicial 
                review of the Secretary's final decision after such 
                hearing as is provided in section 205(g).
                    ``(B) Representation by provider or supplier.--
                            ``(i) In general.--Sections 206(a), 1102, 
                        and 1871 shall not be construed as authorizing 
                        the Secretary to prohibit an individual from 
                        being represented under this section by a 
                        person that furnishes or supplies the 
                        individual, directly or indirectly, with 
                        services or items, solely on the basis that the 
                        person furnishes or supplies the individual 
                        with such a service or item.
                            ``(ii) Mandatory waiver of right to payment 
                        from beneficiary.--Any person that furnishes 
                        services or items to an individual may not 
                        represent an individual under this section with 
                        respect to the issue described in section 
                        1879(a)(2) unless the person has waived any 
                        rights for payment from the beneficiary with 
                        respect to the services or items involved in 
                        the appeal.
                            ``(iii) Prohibition on payment for 
                        representation.--If a person furnishes services 
                        or items to an individual and represents the 
                        individual under this section, the person may 
                        not impose any financial liability on such 
                        individual in connection with such 
                        representation.
                            ``(iv) Requirements for representatives of 
                        a beneficiary.--The provisions of section 
                        205(j) and section 206 (regarding 
                        representation of claimants) shall apply to 
                        representation of an individual with respect to 
                        appeals under this section in the same manner 
                        as they apply to representation of an 
                        individual under those sections.
                    ``(C) Succession of rights in cases of 
                assignment.--The right of an individual to an appeal 
                under this section with respect to an item or service 
                may be assigned to the provider of services or supplier 
                of the item or service upon the written consent of such 
                individual using a standard form established by the 
                Secretary for such an assignment.
                    ``(D) Time limits for appeals.--
                            ``(i) Reconsiderations.--Reconsideration 
                        under subparagraph (A) shall be available only 
                        if the individual described subparagraph (A) 
                        files notice with the Secretary to request 
                        reconsideration by not later than 180 days 
                        after the individual receives notice of the 
                        initial determination under subsection (a) or 
                        within such additional time as the Secretary 
                        may allow.
                            ``(ii) Hearings conducted by the 
                        secretary.--The Secretary shall establish in 
                        regulations time limits for the filing of a 
                        request for a hearing by the Secretary in 
                        accordance with provisions in sections 205 and 
                        206.
                    ``(E) Amounts in controversy.--
                            ``(i) In general.--A hearing (by the 
                        Secretary) shall not be available to an 
                        individual under this section if the amount in 
                        controversy is less than $100, and judicial 
                        review shall not be available to the individual 
                        if the amount in controversy is less than 
                        $1,000.
                            ``(ii) Aggregation of claims.--In 
                        determining the amount in controversy, the 
                        Secretary, under regulations, shall allow 2 or 
                        more appeals to be aggregated if the appeals 
                        involve--
                                    ``(I) the delivery of similar or 
                                related services to the same individual 
                                by one or more providers of services or 
                                suppliers, or
                                    ``(II) common issues of law and 
                                fact arising from services furnished to 
                                2 or more individuals by one or more 
                                providers of services or suppliers.
                    ``(F) Expedited proceedings.--
                            ``(i) Expedited determination.--In the case 
                        of an individual who--
                                    ``(I) has received notice by a 
                                provider of services that the provider 
                                of services plans to terminate services 
                                provided to an individual and a 
                                physician certifies that failure to 
                                continue the provision of such services 
                                is likely to place the individual's 
                                health at significant risk, or
                                    ``(II) has received notice by a 
                                provider of services that the provider 
                                of services plans to discharge the 
                                individual from the provider of 
                                services,
                        the individual may request, in writing or 
                        orally, an expedited determination or an 
                        expedited reconsideration of an initial 
                        determination made under subsection (a), as the 
                        case may be, and the Secretary shall provide 
                        such expedited determination or expedited 
                        reconsideration.
                            ``(ii) Expedited hearing.--In a hearing by 
                        the Secretary under this section, in which the 
                        moving party alleges that no material issues of 
                        fact are in dispute, the Secretary shall make 
                        an expedited determination as to whether any 
                        such facts are in dispute and, if not, shall 
                        render a decision expeditiously.
                    ``(G) Reopening and revision of determinations.--
                The Secretary may reopen or revise any initial 
                determination or reconsidered determination described 
                in this subsection under guidelines established by the 
                Secretary in regulations.
            ``(2) Review of coverage determinations.--
                    ``(A) National coverage determinations.--
                            ``(i) In general.--Review of any national 
                        coverage determination shall be subject to the 
                        following limitations:
                                    ``(I) Such a determination shall 
                                not be reviewed by any administrative 
                                law judge.
                                    ``(II) Such a determination shall 
                                not be held unlawful or set aside on 
                                the ground that a requirement of 
                                section 553 of title 5, United States 
                                Code, or section 1871(b) of this title, 
                                relating to publication in the Federal 
                                Register or opportunity for public 
                                comment, was not satisfied.
                                    ``(III) Upon the filing of a 
                                complaint by an aggrieved party, such a 
                                determination shall be reviewed by the 
                                Departmental Appeals Board of the 
                                Department of Health and Human 
                                Services. In conducting such a review, 
                                the Departmental Appeals Board shall 
                                review the record and shall permit 
                                discovery and the taking of evidence to 
                                evaluate the reasonableness of the 
                                determination. In reviewing such a 
                                determination, the Departmental Appeals 
                                Board shall defer only to the 
                                reasonable findings of fact, reasonable 
                                interpretations of law, and reasonable 
                                applications of fact to law by the 
                                Secretary.
                                    ``(IV) A decision of the 
                                Departmental Appeals Board constitutes 
                                a final agency action and is subject to 
                                judicial review.
                            ``(ii) Definition of national coverage 
                        determination.--For purposes of this section, 
                        the term `national coverage determination' 
                        means a determination by the Secretary 
                        respecting whether or not a particular item or 
                        service is covered nationally under this title, 
                        including such a determination under 
                        1862(a)(1).
            ``(B) Local coverage determination.--In the case of a local 
        coverage determination made by a fiscal intermediary or a 
        carrier under part A or part B respecting whether a particular 
        type or class of items or services is covered under such parts, 
        the following limitations apply:
                    ``(i) Upon the filing of a complaint by an 
                aggrieved party, such a determination shall be reviewed 
                by an administrative law judge of the Social Security 
                Administration. The administrative law judge shall 
                review the record and shall permit discovery and the 
                taking of evidence to evaluate the reasonableness of 
                the determination. In reviewing such a determination, 
                the administrative law judge shall defer only to the 
                reasonable findings of fact, reasonable interpretations 
                of law, and reasonable applications of fact to law by 
                the Secretary.
                    ``(ii) Such a determination may be reviewed by the 
                Departmental Appeals Board of the Department of Health 
                and Human Services.
                    ``(iii) A decision of the Departmental Appeals 
                Board constitutes a final agency action and is subject 
                to judicial review.
            ``(C) No material issues of fact in dispute.--In the case 
        of review of a determination under subparagraph (A)(i)(III) or 
        (B)(i) where the moving party alleges that there are no 
        material issues of fact in dispute, and alleges that the only 
        issue is the constitutionality of a provision of this title, or 
        that a regulation, determination, or ruling by the Secretary is 
        invalid, the moving party may seek review by a court of 
        competent jurisdiction.
            ``(D) Pending national coverage determinations.--
                    ``(i) In general.--In the event the Secretary has 
                not issued a national coverage or noncoverage 
                determination with respect to a particular type or 
                class of items or services, an affected party may 
                submit to the Secretary a request to make such a 
                determination with respect to such items or services. 
                By not later than the end of the 90-day period 
                beginning on the date the Secretary receives such a 
                request, the Secretary shall take one of the following 
                actions:
                            ``(I) Issue a national coverage 
                        determination, with or without limitations.
                            ``(II) Issue a national noncoverage 
                        determination.
                            ``(III) Issue a determination that no 
                        national coverage or noncoverage determination 
                        is appropriate as of the end of such 90-day 
                        period with respect to national coverage of 
                        such items or services.
                            ``(IV) Issue a notice that states that the 
                        Secretary has not completed a review of the 
                        request for a national coverage determination 
                        and that includes an identification of the 
                        remaining steps in the Secretary's review 
                        process and a deadline by which the Secretary 
                        will complete the review and take an action 
                        described in subclause (I), (II), or (III).
                    ``(ii) In the case of an action described in clause 
                (i)(IV), if the Secretary fails to take an action 
                referred to in such clause by the deadline specified by 
                the Secretary under such clause, then the Secretary is 
                deemed to have taken an action described in clause 
                (i)(III) as of the deadline.
                    ``(iii) When issuing a determination under clause 
                (i), the Secretary shall include an explanation of the 
                basis for the determination. An action taken under 
                clause (i) (other than subclause (IV)) is deemed to be 
                a national coverage determination for purposes of 
                review under subparagraph (A).
            ``(E) Annual report on national coverage determinations.--
                    ``(i) In general.--Not later than December 1 of 
                each year, beginning in 2001, the Secretary shall 
                submit to Congress a report that sets forth a detailed 
                compilation of the actual time periods that were 
                necessary to complete and fully implement national 
                coverage determinations that were made in the previous 
                fiscal year for items, services, or medical devices not 
                previously covered as a benefit under this title, 
                including, with respect to each new item, service, or 
                medical device, a statement of the time taken by the 
                Secretary to make the necessary coverage, coding, and 
                payment determinations, including the time taken to 
                complete each significant step in the process of making 
                such determinations.
                    ``(ii) Publication of reports on the internet.--The 
                Secretary shall publish each report submitted under 
                clause (i) on the medicare Internet site of the 
                Department of Health and Human Services.
            ``(3) Publication on the internet of decisions of hearings 
        of the secretary.--Each decision of a hearing by the Secretary 
        shall be made public, and the Secretary shall publish each 
        decision on the Medicare Internet site of the Department of 
        Health and Human Services. The Secretary shall remove from such 
        decision any information that would identify any individual, 
        provider of services, or supplier.
            ``(4) Limitation on review of certain regulations.--A 
        regulation or instruction which relates to a method for 
        determining the amount of payment under part B and which was 
        initially issued before January 1, 1981, shall not be subject 
        to judicial review.
            ``(5) Standing.--An action under this section seeking 
        review of a coverage determination (with respect to items and 
        services under this title) may be initiated only by one (or 
        more) of the following aggrieved persons, or classes of 
        persons:
                    ``(A) Individuals entitled to benefits under part 
                A, or enrolled under part B, or both, who are in need 
                of the items or services that are the subject of the 
                coverage determination.
                    ``(B) Persons, or classes of persons, who make, 
                manufacture, offer, supply, make available, or provide 
                such items and services.
    ``(c) Conduct of Reconsiderations by Independent Contractors.--
            ``(1) In general.--The Secretary shall enter into contracts 
        with qualified independent contractors to conduct 
        reconsiderations of initial determinations made under 
        paragraphs (2) and (3) of subsection (a). Contracts shall be 
        for an initial term of three years and shall be renewable on a 
        triennial basis thereafter.
            ``(2) Qualified independent contractor.--For purposes of 
        this subsection, the term `qualified independent contractor' 
        means an entity or organization that is independent of any 
        organization under contract with the Secretary that makes 
        initial determinations under subsection (a), and that meets the 
        requirements established by the Secretary consistent with 
        paragraph (3).
            ``(3) Requirements.--Any qualified independent contractor 
        entering into a contract with the Secretary under this 
        subsection shall meet the following requirements:
                    ``(A) In general.--The qualified independent 
                contractor shall perform such duties and functions and 
                assume such responsibilities as may be required under 
                regulations of the Secretary promulgated to carry out 
                the provisions of this subsection, and such additional 
                duties, functions, and responsibilities as provided 
                under the contract.
                    ``(B) Determinations.--The qualified independent 
                contractor shall determine, on the basis of such 
                criteria, guidelines, and policies established by the 
                Secretary and published under subsection (d)(2)(D), 
                whether payment shall be made for items or services 
                under part A or part B and the amount of such payment. 
                Such determination shall constitute the conclusive 
                determination on those issues for purposes of payment 
                under such parts for fiscal intermediaries, carriers, 
                and other entities whose determinations are subject to 
                review by the contractor; except that payment may be 
                made if--
                            ``(i) such payment is allowed by reason of 
                        section 1879;
                            ``(ii) in the case of inpatient hospital 
                        services or extended care services, the 
                        qualified independent contractor determines 
                        that additional time is required in order to 
                        arrange for postdischarge care, but payment may 
                        be continued under this clause for not more 
                        than 2 days, and only in the case in which the 
                        provider of such services did not know and 
                        could not reasonably have been expected to know 
                        (as determined under section 1879) that payment 
                        would not otherwise be made for such services 
                        under part A or part B prior to notification by 
                        the qualified independent contractor under this 
                        subsection;
                            ``(iii) such determination is changed as 
                        the result of any hearing by the Secretary or 
                        judicial review of the decision under this 
                        section; or
                            ``(iv) such payment is authorized under 
                        section 1861(v)(1)(G).
                    ``(C) Deadlines for decisions.--
                            ``(i) Determinations.--The qualified 
                        independent contractor shall conduct and 
                        conclude a determination under subparagraph (B) 
                        or an appeal of an initial determination, and 
                        mail the notice of the decision by not later 
                        than the end of the 45-day period beginning on 
                        the date a request for reconsideration has been 
                        timely filed.
                            ``(ii) Consequences of failure to meet 
                        deadline.--In the case of a failure by the 
                        qualified independent contractor to mail the 
                        notice of the decision by the end of the period 
                        described in clause (i), the party requesting 
                        the reconsideration or appeal may request a 
                        hearing before an administrative law judge, 
                        notwithstanding any requirements for a 
                        reconsidered determination for purposes of the 
                        party's right to such hearing.
                            ``(iii) Expedited reconsiderations.--The 
                        qualified independent contractor shall perform 
                        an expedited reconsideration under subsection 
                        (b)(1)(F) of a notice from a provider of 
                        services or supplier that payment may not be 
                        made for an item or service furnished by the 
                        provider of services or supplier, of a decision 
                        by a provider of services to terminate services 
                        furnished to an individual, or in accordance 
                        with the following:
                                    ``(I) Deadline for decision.--
                                Notwithstanding section 216(j), not 
                                later than 1 day after the date the 
                                qualified independent contractor has 
                                received a request for such 
                                reconsideration and has received such 
                                medical or other records needed for 
                                such reconsideration, the qualified 
                                independent contractor shall provide 
                                notice (by telephone and in writing) to 
                                the individual and the provider of 
                                services and attending physician of the 
                                individual of the results of the 
                                reconsideration. Such reconsideration 
                                shall be conducted regardless of 
                                whether the provider of services or 
                                supplier will charge the individual for 
                                continued services or whether the 
                                individual will be liable for payment 
                                for such continued services.
                                    ``(II) Consultation with 
                                beneficiary.--In such reconsideration, 
                                the qualified independent contractor 
                                shall solicit the views of the 
                                individual involved.
                    ``(D) Limitation on individual reviewing 
                determinations.--
                            ``(i) Physicians.--No physician under the 
                        employ of a qualified independent contractor 
                        may review--
                                    ``(I) determinations regarding 
                                health care services furnished to a 
                                patient if the physician was directly 
                                responsible for furnishing such 
                                services; or
                                    ``(II) determinations regarding 
                                health care services provided in or by 
                                an institution, organization, or 
                                agency, if the physician or any member 
                                of the physician's family has, directly 
                                or indirectly, a significant financial 
                                interest in such institution, 
                                organization, or agency.
                            ``(ii) Physician's family described.--For 
                        purposes of this paragraph, a physician's 
                        family includes the physician's spouse (other 
                        than a spouse who is legally separated from the 
                        physician under a decree of divorce or separate 
                        maintenance), children (including stepchildren 
                        and legally adopted children), grandchildren, 
                        parents, and grandparents.
                    ``(E) Explanation of determinations.--Any 
                determination of a qualified independent contractor 
                shall be in writing, and shall include a detailed 
                explanation of the determination as well as a 
                discussion of the pertinent facts and applicable 
                regulations applied in making such determination.
                    ``(F) Notice requirements.--Whenever a qualified 
                independent contractor makes a determination under this 
                subsection, the qualified independent contractor shall 
                promptly notify such individual and the entity 
                responsible for the payment of claims under part A or 
                part B of such determination.
                    ``(G) Dissemination of information.--Each qualified 
                independent contractor shall, using the methodology 
                established by the Secretary under subsection (d)(4), 
                make available all determinations of such qualified 
                independent contractors to fiscal intermediaries (under 
                section 1816), carriers (under section 1842), peer 
                review organizations (under part B of title XI), 
                Medicare+Choice organizations offering Medicare+Choice 
                plans under part C, and other entities under contract 
                with the Secretary to make initial determinations under 
                part A or part B or title XI.
                    ``(H) Ensuring consistency in determinations.--Each 
                qualified independent contractor shall monitor its 
                determinations to ensure the consistency of its 
                determinations with respect to requests for 
                reconsideration of similar or related matters.
                    ``(I) Data collection.--
                            ``(i) In general.--Consistent with the 
                        requirements of clause (ii), a qualified 
                        independent contractor shall collect such 
                        information relevant to its functions, and keep 
                        and maintain such records in such form and 
                        manner as the Secretary may require to carry 
                        out the purposes of this section and shall 
                        permit access to and use of any such 
                        information and records as the Secretary may 
                        require for such purposes.
                            ``(ii) Type of data collected.--Each 
                        qualified independent contractor shall keep 
                        accurate records of each decision made, 
                        consistent with standards established by the 
                        Secretary for such purpose. Such records shall 
                        be maintained in an electronic database in a 
                        manner that provides for identification of the 
                        following:
                                    ``(I) Specific claims that give 
                                rise to appeals.
                                    ``(II) Situations suggesting the 
                                need for increased education for 
                                providers of services, physicians, or 
                                suppliers.
                                    ``(III) Situations suggesting the 
                                need for changes in national or local 
                                coverage policy.
                                    ``(IV) Situations suggesting the 
                                need for changes in local medical 
                                review policies.
                            ``(iii) Annual reporting.--Each qualified 
                        independent contractor shall submit annually to 
                        the Secretary (or otherwise as the Secretary 
                        may request) records maintained under this 
                        paragraph for the previous year.
                    ``(J) Hearings by the secretary.--The qualified 
                independent contractor shall (i) prepare such 
                information as is required for an appeal of its 
                reconsidered determination to the Secretary for a 
                hearing, including as necessary, explanations of issues 
                involved in the determination and relevant policies, 
                and (ii) participate in such hearings as required by 
                the Secretary.
            ``(4) Number of qualified independent contractors.--The 
        Secretary shall enter into contracts with not fewer than 12 
        qualified independent contractors under this subsection.
            ``(5) Limitation on qualified independent contractor 
        liability.--No qualified independent contractor having a 
        contract with the Secretary under this subsection and no person 
        who is employed by, or who has a fiduciary relationship with, 
        any such qualified independent contractor or who furnishes 
        professional services to such qualified independent contractor, 
        shall be held by reason of the performance of any duty, 
        function, or activity required or authorized pursuant to this 
        subsection or to a valid contract entered into under this 
        subsection, to have violated any criminal law, or to be civilly 
        liable under any law of the United States or of any State (or 
        political subdivision thereof) provided due care was exercised 
        in the performance of such duty, function, or activity.
    ``(d) Administrative Provisions.--
            ``(1) Outreach.--The Secretary shall perform such outreach 
        activities as are necessary to inform individuals entitled to 
        benefits under this title and providers of services and 
        suppliers with respect to their rights of, and the process for, 
        appeals made under this section. The Secretary shall use the 
        toll-free telephone number maintained by the Secretary (1-800-
        MEDICAR(E)) (1-800-633-4227) to provide information regarding 
        appeal rights and respond to inquiries regarding the status of 
        appeals.
            ``(2) Guidance for reconsiderations and hearings.--
                    ``(A) Regulations.--Not later than 1 year after the 
                date of the enactment of this section, the Secretary 
                shall promulgate regulations governing the processes of 
                reconsiderations of determinations by the Secretary and 
                qualified independent contractors and of hearings by 
                the Secretary. Such regulations shall include such 
                specific criteria and provide such guidance as required 
                to ensure the adequate functioning of the 
                reconsiderations and hearings processes and to ensure 
                consistency in such processes.
                    ``(B) Deadlines for administrative action.--
                            ``(i) Hearing by administrative law 
                        judge.--
                                    ``(II) In general.--Except as 
                                provided in subclause (II), an 
                                administrative law judge shall conduct 
                                and conclude a hearing on a decision of 
                                a qualified independent contractor 
                                under subsection (c) and render a 
                                decision on such hearing by not later 
                                than the end of the 90-day period 
                                beginning on the date a request for 
                                hearing has been timely filed.
                                    ``(II) Waiver of deadline by party 
                                seeking hearing.--The 90-day period 
                                under subclause (i) shall not apply in 
                                the case of a motion or stipulation by 
                                the party requesting the hearing to 
                                waive such period.
                            ``(ii) Departmental appeals board review.--
                        The Departmental Appeals Board of the 
                        Department of Health and Human Services shall 
                        conduct and conclude a review of the decision 
                        on a hearing described in subparagraph (B) and 
                        make a decision or remand the case to the 
                        administrative law judge for reconsideration by 
                        not later than the end of the 90-day period 
                        beginning on the date a request for review has 
                        been timely filed.
                            ``(iii) Consequences of failure to meet 
                        deadlines.--In the case of a failure by an 
                        administrative law judge to render a decision 
                        by the end of the period described in clause 
                        (ii), the party requesting the hearing may 
                        request a review by the Departmental Appeals 
                        Board of the Department of Health and Human 
                        Services, notwithstanding any requirements for 
                        a hearing for purposes of the party's right to 
                        such a review.
                            ``(iv) DAB hearing procedure.--In the case 
                        of a request described in clause (iii), the 
                        Departmental Appeals Board shall review the 
                        case de novo.
                    ``(C) Policies.--The Secretary shall provide such 
                specific criteria and guidance, including all 
                applicable national and local coverage policies and 
                rationale for such policies, as is necessary to assist 
                the qualified independent contractors to make informed 
                decisions in considering appeals under this section. 
                The Secretary shall furnish to the qualified 
                independent contractors the criteria and guidance 
                described in this paragraph in a published format, 
                which may be an electronic format.
                    ``(D) Publication of medicare coverage policies on 
                the internet.--The Secretary shall publish national and 
                local coverage policies under this title on an Internet 
                site maintained by the Secretary.
                    ``(E) Effect of failure to publish policies.--
                            ``(i) National and local coverage 
                        policies.--Qualified independent contractors 
                        shall not be bound by any national or local 
                        medicare coverage policy established by the 
                        Secretary that is not published on the Internet 
                        site under subparagraph (D).
                            ``(ii) Other policies.--With respect to 
                        policies established by the Secretary other 
                        than the policies described in clause (i), 
                        qualified independent contractors shall not be 
                        bound by such policies if the Secretary does 
                        not furnish to the qualified independent 
                        contractor the policies in a published format 
                        consistent with subparagraph (C).
            ``(3) Continuing education requirement for qualified 
        independent contractors and administrative law judges.--
                    ``(A) In general.--The Secretary shall provide to 
                each qualified independent contractor, and, in 
                consultation with the Commissioner of Social Security, 
                to administrative law judges that decide appeals of 
                reconsiderations of initial determinations or other 
                decisions or determinations under this section, such 
                continuing education with respect to policies of the 
                Secretary under this title or part B of title XI as is 
                necessary for such qualified independent contractors 
                and administrative law judges to make informed 
                decisions with respect to appeals.
                    ``(B) Monitoring of decisions by qualified 
                independent contractors and administrative law 
                judges.--The Secretary shall monitor determinations 
                made by all qualified independent contractors and 
                administrative law judges under this section and shall 
                provide continuing education and training to such 
                qualified independent contractors and administrative 
                law judges to ensure consistency of determinations with 
                respect to appeals on similar or related matters. To 
                ensure such consistency, the Secretary shall provide 
                for administration and oversight of qualified 
                independent contractors and, in consultation with the 
                Commissioner of Social Security, administrative law 
                judges through a central office of the Department of 
                Health and Human Services. Such administration and 
                oversight may not be delegated to regional offices of 
                the Department.
            ``(4) Dissemination of determinations.--The Secretary shall 
        establish a methodology under which qualified independent 
        contractors shall carry out subsection (c)(3)(G).
            ``(5) Survey.--Not less frequently than every 5 years, the 
        Secretary shall conduct a survey of a valid sample of 
        individuals entitled to benefits under this title, providers of 
        services, and suppliers to determine the satisfaction of such 
        individuals or entities with the process for appeals of 
        determinations provided for under this section and education 
        and training provided by the Secretary with respect to that 
        process. The Secretary shall submit to Congress a report 
        describing the results of the survey, and shall include any 
        recommendations for administrative or legislative actions that 
        the Secretary determines appropriate.
            ``(6) Report to congress.--The Secretary shall submit to 
        Congress an annual report describing the number of appeals for 
        the previous year, identifying issues that require 
        administrative or legislative actions, and including any 
        recommendations of the Secretary with respect to such actions. 
        The Secretary shall include in such report an analysis of 
        determinations by qualified independent contractors with 
        respect to inconsistent decisions and an analysis of the causes 
        of any such inconsistencies.''.
    (b) Applicability of Requirements and Limitations on Liability of 
Qualified Independent Contractors to Medicare+Choice Independent 
Appeals Contractors.--Section 1852(g)(4) of the Social Security Act (42 
U.S.C. 1395w-22(e)(3)) is amended by adding at the end the following: 
``The provisions of section 1869(c)(5) shall apply to independent 
outside entities under contract with the Secretary under this 
paragraph.''.
    (c) Conforming Amendment to Review by the Provider Reimbursement 
Review Board.--Section 1878(g) of the Social Security Act (42 U.S.C. 
1395oo(g)) is amended by adding at the end the following new paragraph:
    ``(3) Findings described in paragraph (1) and determinations and 
other decisions described in paragraph (2) may be reviewed or appealed 
under section 1869.''.

SEC. 222. PROVISIONS WITH RESPECT TO LIMITATIONS ON LIABILITY OF 
              BENEFICIARIES.

    (a) Expansion of Limitation of Liability Protection for 
Beneficiaries With Respect to Medicare Claims Not Paid or Paid 
Incorrectly.--
            (1) In general.--Section 1879 of the Social Security Act 
        (42 U.S.C. 1395pp) is amended by adding at the end the 
        following new subsections:
    ``(i) Notwithstanding any other provision of this Act, an 
individual who is entitled to benefits under this title and is 
furnished a service or item is not liable for repayment to the 
Secretary of amounts with respect to such benefits--
            ``(1) subject to paragraph (2), in the case of a claim for 
        such item or service that is incorrectly paid by the Secretary; 
        and
            ``(2) in the case of payments made to the individual by the 
        Secretary with respect to any claim under paragraph (1), the 
        individual shall be liable for repayment of such amount only up 
        to the amount of payment received by the individual from the 
        Secretary.
    ``(j)(1) An individual who is entitled to benefits under this title 
and is furnished a service or item is not liable for payment of amounts 
with respect to such benefits in the following cases:
            ``(A) In the case of a benefit for which an initial 
        determination has not been made by the Secretary under 
        subsection (a) whether payment may be made under this title for 
        such benefit.
            ``(B) In the case of a claim for such item or service that 
        is--
                    ``(i) improperly submitted by the provider of 
                services or supplier; or
                    ``(ii) rejected by an entity under contract with 
                the Secretary to review or pay claims for services and 
                items furnished under this title, including an entity 
                under contract with the Secretary under section 1857.
    ``(2) The limitation on liability under paragraph (1) shall not 
apply if the individual signs a waiver provided by the Secretary under 
subsection (l) of protections under this paragraph, except that any 
such waiver shall not apply in the case of a denial of a claim for 
noncompliance with applicable regulations or procedures under this 
title or title XI.
    ``(k) An individual who is entitled to benefits under this title 
and is furnished services by a provider of services is not liable for 
payment of amounts with respect to such services prior to noon of the 
first working day after the date the individual receives the notice of 
determination to discharge and notice of appeal rights under paragraph 
(1), unless the following conditions are met:
            ``(1) The provider of services shall furnish a notice of 
        discharge and appeal rights established by the Secretary under 
        subsection (l) to each individual entitled to benefits under 
        this title to whom such provider of services furnishes 
        services, upon admission of the individual to the provider of 
        services and upon notice of determination to discharge the 
        individual from the provider of services, of the individual's 
        limitations of liability under this section and rights of 
        appeal under section 1869.
            ``(2) If the individual, prior to discharge from the 
        provider of services, appeals the determination to discharge 
        under section 1869 not later than noon of the first working day 
        after the date the individual receives the notice of 
        determination to discharge and notice of appeal rights under 
        paragraph (1), the provider of services shall, by the close of 
        business of such first working day, provide to the Secretary 
        (or qualified independent contractor under section 1869, as 
        determined by the Secretary) the records required to review the 
        determination.
    ``(l) The Secretary shall develop appropriate standard forms for 
individuals entitled to benefits under this title to waive limitation 
of liability protections under subsection (j) and to receive notice of 
discharge and appeal rights under subsection (k). The forms developed 
by the Secretary under this subsection shall clearly and in plain 
language inform such individuals of their limitations on liability, 
their rights under section 1869(a) to obtain an initial determination 
by the Secretary of whether payment may be made under part A or part B 
for such benefit, and their rights of appeal under section 1869(b), and 
shall inform such individuals that they may obtain further information 
or file an appeal of the determination by use of the toll-free 
telephone number (1-800-MEDICAR(E)) (1-800-633-4227) maintained by the 
Secretary. The forms developed by the Secretary under this subsection 
shall be the only manner in which such individuals may waive such 
protections under this title or title XI.
    ``(m) An individual who is entitled to benefits under this title 
and is furnished an item or service is not liable for payment of cost 
sharing amounts of more than $50 with respect to such benefits unless 
the individual has been informed in advance of being furnished the item 
or service of the estimated amount of the cost sharing for the item or 
service using a standard form established by the Secretary.''.
            (2) Conforming amendment.--Section 1870(a) of the Social 
        Security Act (42 U.S.C. 1395gg(a)) is amended by striking ``Any 
        payment under this title'' and inserting ``Except as provided 
        in section 1879(i), any payment under this title''.
    (b) Inclusion of Beneficiary Liability Information in Explanation 
of Medicare Benefits.--Section 1806(a) of the Social Security Act (42 
U.S.C. 1395b-7(a)) is amended--
            (1) in paragraph (1), by striking ``and'' at the end;
            (2) by redesignating paragraph (2) as paragraph (3); and
            (3) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) lists with respect to each item or service furnished 
        the amount of the individual's liability for payment;'';
            (4) in paragraph (3), as so redesignated, by striking the 
        period at the end and inserting ``; and''; and
            (5) by adding at the end the following new paragraph:
            ``(4) includes the toll-free telephone number (1-800-
        MEDICAR(E)) (1-800-633-4227) for information and questions 
        concerning the statement, liability of the individual for 
        payment, and appeal rights.''.

SEC. 223. WAIVERS OF LIABILITY FOR COST SHARING AMOUNTS.

    (a) In General.--Section 1128A(i)(6)(A) of the Social Security Act 
(42 U.S.C. 1320a-7a(i)(6)(A)) is amended by striking clauses (i) 
through (iii) and inserting the following:
                            ``(i) the waiver is offered as a part of a 
                        supplemental insurance policy or retiree health 
                        plan;
                            ``(ii) the waiver is not offered as part of 
                        any advertisement or solicitation, other than 
                        in conjunction with a policy or plan described 
                        in clause (i);
                            ``(iii) the person waives the coinsurance 
                        and deductible amount after the beneficiary 
                        informs the person that payment of the 
                        coinsurance or deductible amount would pose a 
                        financial hardship for the individual; or
                            ``(iv) the person determines that the 
                        coinsurance and deductible amount would not 
                        justify the costs of collection.''.
    (b) Conforming Amendment.--Section 1128B(b) of the Social Security 
Act (42 U.S.C. 1320a-7b(b)) is amended by adding at the end the 
following new paragraph:
            ``(4) In this section, the term `remuneration' includes the 
        meaning given such term in section 1128A(i)(6).''.

SEC. 224. ELIMINATION OF MOTIONS BY THE SECRETARY ON DECISIONS OF THE 
              PROVIDER REIMBURSEMENT REVIEW BOARD.

    Section 1878(f)(1) of such Act (42 U.S.C. 1395oo(f)(1)) is 
amended--
            (1) in the first sentence, by striking ``unless the 
        Secretary, on his own motion, and within 60 days after the 
        provider of services is notified of the Board's decision, 
        reverses, affirms, or modifies the Board's decision'';
            (2) in the second sentence, by striking ``, or of any 
        reversal, affirmance, or modification by the Secretary,'' and 
        ``or of any reversal, affirmance, or modification by the 
        Secretary''; and
            (3) in the fifth sentence, by striking ``and not subject to 
        review by the Secretary''.

  TITLE III--MEDICARE+CHOICE REFORMS; PRESERVATION OF MEDICARE PART B 
                              DRUG BENEFIT

                  Subtitle A--Medicare+Choice Reforms

SEC. 301. INCREASE IN NATIONAL PER CAPITA MEDICARE+CHOICE GROWTH 
              PERCENTAGE IN 2001 AND 2002.

    Section 1853(c)(6)(B) of the Social Security Act (42 U.S.C. 1395w-
23(c)(6)(B)) is amended--
            (1) in clause (iv), by striking ``for 2001, 0.5 percentage 
        points'' and inserting ``for 2001, 0 percentage points''; and
            (2) in clause (v), by striking ``for 2002, 0.3 percentage 
        points'' and inserting ``for 2002, 0 percentage points''.

SEC. 302. PERMANENTLY REMOVING APPLICATION OF BUDGET NEUTRALITY 
              BEGINNING IN 2002.

    Section 1853(c) of the Social Security Act (42 U.S.C. 1395w-23(c)) 
is amended--
            (1) in paragraph (1)(A), in the matter following clause 
        (ii), by inserting ``(for years before 2002)'' after 
        ``multiplied''; and
            (2) in paragraph (5), by inserting ``(before 2002)'' after 
        ``for each year''.

SEC. 303. INCREASING MINIMUM PAYMENT AMOUNT.

    (a) In General.--Section 1853(c)(1)(B)(ii) of the Social Security 
Act (42 U.S.C. 1395w-23(c)(1)(B)(ii)) is amended--
            (1) by striking ``(ii) For a succeeding year'' and 
        inserting ``(ii)(I) Subject to subclause (II), for a succeeding 
        year''; and
            (2) by adding at the end the following new subclause:
                            ``(II) For 2002 for any of the 50 States 
                        and the District of Columbia, $450.''.
    (b) Effective Date.--The amendments made by subsection (a) apply to 
years beginning with 2002.

SEC. 304. ALLOWING MOVEMENT TO 50:50 PERCENT BLEND IN 2002.

    Section 1853(c)(2) of the Social Security Act (42 U.S.C. 1395w-
23(c)(2)) is amended--
            (1) by striking the period at the end of subparagraph (F) 
        and inserting a semicolon; and
            (2) by adding after and below subparagraph (F) the 
        following:
        ``except that a Medicare+Choice organization may elect to apply 
        subparagraph (F) (rather than subparagraph (E)) for 2002.''.

SEC. 305. INCREASED UPDATE FOR PAYMENT AREAS WITH ONLY ONE OR NO 
              MEDICARE+CHOICE CONTRACTS.

    (a) In General.--Section 1853(c)(1)(C)(ii) of the Social Security 
Act (42 U.S.C. 1395w-23(c)(1)(C)(ii)) is amended--
            (1) by striking ``(ii) For a subsequent year'' and 
        inserting ``(ii)(I) Subject to subclause (II), for a subsequent 
        year''; and
            (2) by adding at the end the following new subclause:
                            ``(II) During 2002, 2003, 2004, and 2005, 
                        in the case of a Medicare+Choice payment area 
                        in which there is no more than 1 contract 
                        entered into under this part as of July 1 
                        before the beginning of the year, 102.5 percent 
                        of the annual Medicare+Choice capitation rate 
                        under this paragraph for the area for the 
                        previous year.''.
    (b) Construction.--The amendments made by subsection (a) do not 
affect the payment of a first time bonus under section 1853(i) of the 
Social Security Act (42 U.S.C. 1395w-23(i)).

SEC. 306. PERMITTING HIGHER NEGOTIATED RATES IN CERTAIN MEDICARE+CHOICE 
              PAYMENT AREAS BELOW NATIONAL AVERAGE.

    Section 1853(c)(1) of the Social Security Act (42 U.S.C. 1395w-
23(c)(1)) is amended--
            (1) in the matter before subparagraph (A), by striking ``or 
        (C)'' and inserting ``(C), or (D)''; and
            (2) by adding at the end the following new subparagraph:
                    ``(D) Permitting higher rates through 
                negotiation.--
                            ``(i) In general.--For each year beginning 
                        with 2004, in the case of a Medicare+Choice 
                        payment area for which the Medicare+Choice 
                        capitation rate under this paragraph would 
                        otherwise be less than the United States per 
                        capita cost (USPCC), as calculated by the 
                        Secretary, a Medicare+Choice organization may 
                        negotiate with the Medicare Benefits 
                        Administrator an annual per capita rate that--
                                    ``(I) reflects an annual rate of 
                                increase up to the rate of increase 
                                specified in clause (ii);
                                    ``(II) takes into account audited 
                                current data supplied by the 
                                organization on its adjusted community 
                                rate (as defined in section 
                                1854(f)(3)); and
                                    ``(III) does not exceed the United 
                                States per capita cost, as projected by 
                                the Secretary for the year involved.
                            ``(ii) Maximum rate described.--The rate of 
                        increase specified in this clause for a year is 
                        the rate of inflation in private health 
                        insurance for the year involved, as projected 
                        by the Medicare Benefits Administrator, and 
                        includes such adjustments as may be necessary--
                                    ``(I) to reflect the demographic 
                                characteristics in the population under 
                                this title; and
                                    ``(II) to eliminate the costs of 
                                prescription drugs.
                            ``(iii) Adjustments for over or under 
                        projections.--If subparagraph is applied to an 
                        organization and payment area for a year, in 
                        applying this subparagraph for a subsequent 
                        year the provisions of paragraph (6)(C) shall 
                        apply in the same manner as such provisions 
                        apply under this paragraph.''.

SEC. 307. 10-YEAR PHASE IN OF RISK ADJUSTMENT BASED ON DATA FROM ALL 
              SETTINGS.

    Section 1853(a)(3)(C)(ii) of the Social Security Act (42 U.S.C. 
1395w-23(c)(1)(C)(ii)) is amended--
            (1) by striking the period at the end of subclause (II) and 
        inserting a semicolon; and
            (2) by adding after and below subclause (II) the following:
                        ``and, beginning in 2004, insofar as such risk 
                        adjustment is based on data from all settings, 
                        the methodology shall be phased in equal 
                        increments over a 10 year period, beginning 
                        with 2004 or (if later) the first year in which 
                        such data is used.''.

 Subtitle B--Preservation of Medicare Coverage of Drugs and Biologicals

SEC. 311. PRESERVATION OF COVERAGE OF DRUGS AND BIOLOGICALS UNDER PART 
              B OF THE MEDICARE PROGRAM.

    (a) In General.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)) is amended, in each of subparagraphs (A) and (B), 
by striking ``(including drugs and biologicals which cannot, as 
determined in accordance with regulations, be self-administered)'' and 
inserting ``(including injectable and infusable drugs and biologicals 
which are not usually self-administered by the patient)''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
to drugs and biologicals administered on or after October 1, 2000.

SEC. 312. GAO REPORT ON PART B PAYMENT FOR DRUGS AND BIOLOGICALS AND 
              RELATED SERVICES.

    (a) In General.--The Comptroller General of the United States shall 
conduct a study to quantify the extent to which reimbursement for drugs 
and biologicals under the current medicare payment methodology 
(provided under section 1842 (o) of the Social Security Act (42 U.S.C. 
1395u(o)) overpays for the cost of such drugs and biologicals compared 
to the average acquisition cost paid by physicians or other suppliers 
of such drugs
    (B) Elements.--The study shall also assess the consequences of 
changing the current medicare payment methodology to a payment 
methodology that is based on the average acquisition cost of the drugs. 
The study shall, at a minimum, assess the effects of such a reduction 
on--
            (1) the delivery of health care services to Medicare 
        beneficiaries with cancer;
            (2) total Medicare expenditures, including an estimate of 
        the number of patients who would, as a result of the payment 
        reduction, receive chemotherapy in a hospital rather than in a 
        physician's office;
            (3) the delivery of dialysis services;
            (4) the delivery of vaccines;
            (5) the administration in physician offices of drugs other 
        than cancer therapy drugs; and
            (6) the effect on the delivery of drug therapies by 
        hospital outpatient departments of changing the average 
        wholesale price as the basis for Medicare pass-through payments 
        to such departments, as included in the Medicare, Medicaid, and 
        SCHIP Balanced Budget Refinement Act of 1999.
    (c) Payment for Related Professional Services.--The study shall 
also include a review of the extent to which other payment 
methodologies under part B of the medicare program, if any, intended to 
reimburse physician and other suppliers of drugs and biologicals 
described in subsection (a) for costs incurred in handling, storing and 
administering such drugs and biologicals are inadequate to cover such 
costs and whether an additional payment would be required to cover 
these costs under the average acquisition cost methodology.
    (d) Consideration of Issues in Implementing an Average Acquisition 
Cost Methodology.--The study shall assess possible means by which a 
payment method based on average acquisition cost could be implemented, 
including at least the following:
            (1) Identification of possible bases for determining the 
        average acquisition cost of drugs, such as surveys of 
        wholesaler catalog prices, and determination of the advantages, 
        disadvantages, and costs (to the government and public) of each 
        possible approach.
            (2) The impact on individual providers and practitioners if 
        average or median prices are used as the payment basis.
            (3) Methods for updating and keeping current the prices 
        used as the payment basis.
    (e) Coordination with BBRA Study.--The Comptroller General shall 
conduct the study under this section in coordination with the study 
provided for under section 213(a) of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999 (113 Stat. 1501A-350), as 
enacted into law by section 1000(a)(6) of Public Law 106-113.
    (f) Report.--Not later than 6 months after the date of the 
enactment of this Act, the Comptroller General shall submit a report on 
the study conducted under this section, as well as the study referred 
to in subsection (e). Such report shall include recommendations 
regarding such changes in the medicare reimbursement policies described 
in subsections (a) and (c) as the Comptroller General deems 
appropriate, as well as the recommendations described in section 213(b) 
of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999.




                                                 Union Calendar No. 396

106th CONGRESS

  2d Session

                               H. R. 4680

                      [Report No. 106-703, Part I]

_______________________________________________________________________

                                 A BILL

   To amend title XVIII of the Social Security Act to provide for a 
  voluntary program for prescription drug coverage under the Medicare 
  Program, to modernize the Medicare Program, and for other purposes.

_______________________________________________________________________

                             June 27, 2000

    Reported from the Committee on Ways and Means with an amendment

                             June 27, 2000

Referral to the Committee on Commerce extended for a period ending not 
                        later than June 27, 2000

                             June 27, 2000

  Committee on Commerce discharged; committed to the Committee of the 
    Whole House on the State of the Union, and ordered to be printed