[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2541 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2541

     To amend title XVIII of the Social Security Act to provide a 
prescription drug benefit for the aged and disabled under the medicare 
program, to enhance the preventive benefits covered under such program, 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 10, 2000

  Mr. Daschle (for himself, Mr. Moynihan, Mr. Kennedy, Mr. Akaka, Mr. 
 Baucus, Mr. Biden, Mr. Bingaman, Mrs. Boxer, Mr. Bryan, Mr. Byrd, Mr. 
Cleland, Mr. Dodd, Mr. Dorgan, Mr. Durbin, Mrs. Feinstein, Mr. Graham, 
   Mr. Harkin, Mr. Hollings, Mr. Inouye, Mr. Johnson, Mr. Kerry, Mr. 
  Lautenberg, Mr. Leahy, Mr. Levin, Mrs. Lincoln, Ms. Mikulski, Mrs. 
 Murray, Mr. Reed, Mr. Reid, Mr. Robb, Mr. Rockefeller, Mr. Sarbanes, 
 Mr. Schumer, and Mr. Wellstone) introduced the following bill; which 
        was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
     To amend title XVIII of the Social Security Act to provide a 
prescription drug benefit for the aged and disabled under the medicare 
program, to enhance the preventive benefits covered under such 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 Expansion 
for Needed Drugs (MEND) Act of 2000''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
               TITLE I--PRESCRIPTION DRUG BENEFIT PROGRAM

Sec. 101. Prescription drug benefit program.
     ``Part D--Prescription Drug Benefit for the Aged and Disabled

        ``Sec. 1860. Establishment of prescription drug benefit program 
                            for the aged and disabled.
        ``Sec. 1860A. Scope of benefits.
        ``Sec. 1860B. Payment of benefits; benefit limits.
        ``Sec. 1860C. Eligibility and enrollment.
        ``Sec. 1860D. Premiums.
        ``Sec. 1860F. Prescription Drug Insurance Account.
        ``Sec. 1860G. Administration of benefits.
        ``Sec. 1860H. Employer incentive program for employment-based 
                            retiree drug coverage.
        ``Sec. 1860I. Appropriations to cover Government contributions.
        ``Sec. 1860J. Prescription drug defined.''.
Sec. 102. Medicaid buy-in of medicare prescription drug coverage for 
                            certain low-income individuals.
        ``Sec. 1860E. Special eligibility, enrollment, and copayment 
                            rules for low-income individuals.''.
Sec. 103. Catastrophic prescription drug coverage benefit.
Sec. 104. Comprehensive immunosuppressive drug coverage for transplant 
                            patients.
Sec. 105. GAO study and biennial reports on competition and savings.
Sec. 106. MedPAC study and annual reports on the pharmaceutical market, 
                            pharmacies, and beneficiary access.
             TITLE II--ENHANCED MEDICARE PREVENTION PROGRAM

Sec. 201. MedPAC biennial report.
Sec. 202. National Institute on Aging study and report.
Sec. 203. Institute of Medicine 5-year medicare prevention benefit 
                            study and report.
Sec. 204. Fast-track consideration of prevention benefit legislation.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Prescription drug coverage was not a standard part of 
        health insurance when the medicare program under title XVIII of 
        the Social Security Act was enacted in 1965. Since 1965, 
        however, drug coverage has become a key component of most 
        private and public health insurance coverage, except for the 
        medicare program.
            (2) At least \2/3\ of medicare beneficiaries have 
        unreliable, inadequate, or no drug coverage at all.
            (3) Seniors who do not have drug coverage typically pay, at 
        a minimum, 15 percent more than people with coverage.
            (4) Medicare beneficiaries at all income levels lack 
        prescription drug coverage, with more than \1/2\ of such 
        beneficiaries having incomes greater than 150 percent of the 
        poverty line.
            (5) The number of private firms offering retiree health 
        coverage is declining.
            (6) Medigap premiums for drugs are too expensive for most 
        beneficiaries and are highest for older senior citizens, who 
        need prescription drug coverage the most and typically have the 
        lowest incomes.
            (7) The management of a medicare prescription drug benefit 
        should mirror the practices employed by private entities in 
        delivering prescription drugs. Discounts should be achieved 
        through competition.
            (8) All medicare beneficiaries should have access to a 
        voluntary, reliable, affordable outpatient drug benefit as part 
        of the medicare program that assists with the high cost of 
        prescription drugs and protects them against excessive out-of-
        pocket costs.
            (9) The addition of a medicare drug benefit should be 
        consistent with an overall plan to strengthen and modernize the 
        medicare program.

               TITLE I--PRESCRIPTION DRUG BENEFIT PROGRAM

SEC. 101. PRESCRIPTION DRUG BENEFIT PROGRAM.

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

     ``Part D--Prescription Drug Benefit for the Aged and Disabled

 ``establishment of prescription drug benefit program for the aged and 
                                disabled

    ``Sec. 1860. (a) In General.--There is established a voluntary 
insurance program to provide prescription drug benefits in accordance 
with the provisions of this part for individuals who are aged or 
disabled or have end-stage renal disease and who elect to enroll under 
such program, to be financed from premium payments by enrollees 
together with contributions from funds appropriated by the Federal 
Government.
    ``(b) Noninterference.--In administering the prescription drug 
benefit program established under this part, the Secretary may not--
            ``(1) require a particular formulary or institute a price 
        structure for benefits;
            ``(2) interfere in any way with negotiations between 
        private entities and drug manufacturers, or wholesalers; or
            ``(3) otherwise interfere with the competitive nature of 
        providing a prescription drug benefit through private entities.

                          ``scope of benefits

    ``Sec. 1860A. (a) In General.--The benefits provided to an 
individual enrolled in the insurance program under this part shall 
consist of--
            ``(1) payments made, in accordance with the provisions of 
        this part, for covered prescription drugs (as specified in 
        subsection (b)) dispensed by any pharmacy participating in the 
        program under this part (and, in circumstances designated by 
        the private entity, by a nonparticipating pharmacy), including 
        any specifically named drug prescribed for the individual by a 
        qualified health care professional regardless of whether the 
        drug is included in a formulary established by the private 
        entity if such drug is certified as medically necessary by such 
        health care professional, up to the benefit limits specified in 
        section 1860B; and
            ``(2) charging by pharmacies of the negotiated price--
                    ``(A) for all covered prescription drugs, without 
                regard to such benefit limit; and
                    ``(B) established with respect to any drugs or 
                classes of drugs described in subparagraphs (A) through 
                (D) or (F) of section 1927(d)(2) that are available to 
                individuals receiving benefits under this title.
    ``(b) Covered Prescription Drugs.--
            ``(1) In general.--Covered prescription drugs, for purposes 
        of this part, include all prescription drugs (as defined in 
        section 1860J(1)), including smoking cessation agents, except 
        as otherwise provided in this subsection.
            ``(2) Exclusions from coverage.--Covered prescription drugs 
        shall not include drugs or classes of drugs described in 
        subparagraphs (A) through (D) and (F) through (H) of section 
        1927(d)(2) unless--
                    ``(A) specifically provided otherwise by the 
                Secretary with respect to a drug in any of such 
                classes; or
                    ``(B) a drug in any of such classes is certified to 
                be medically necessary by a health care professional.
            ``(3) Exclusion of prescription drugs to the extent covered 
        under part a or b.--A drug prescribed for an individual that 
        would otherwise be a covered prescription drug under this part 
        shall not be so considered to the extent that payment for such 
        drug is available under part A or B, including all injectable 
        drugs and biologicals for which payment was made or should have 
        been made by a carrier under section 1861(s)(2) (A) or (B) as 
        of the date of enactment of the Medicare Expansion for Needed 
        Drugs (MEND) Act of 2000. Drugs otherwise covered under part A 
        or B shall be covered under this part to the extent that 
        benefits under part A or B are exhausted.

                 ``payment of benefits; benefit limits

    ``Sec. 1860B. (a) Payment of Benefits.--There shall be paid from 
the Prescription Drug Insurance Account within the Supplementary 
Medical Insurance Trust Fund, in the case of each individual who is 
enrolled in the insurance program under this part and who purchases 
covered prescription drugs in a calendar year, an amount, not to exceed 
50 percent of the applicable limit under subsection (b), equal to 50 
percent of the negotiated price for each such covered prescription drug 
or such higher percentage as is proposed by a private entity pursuant 
to section 1860G(d)(7), if the Secretary finds that such percentage 
will not increase aggregate costs to the Prescription Drug Insurance 
Account.
    ``(b) Benefit Limits.--
            ``(1) Calendar years 2002 through 2009.--For purposes of 
        subsection (a), the limit under this subsection is--
                    ``(A) for each of calendar years 2002, 2003, and 
                2004, $2,000;
                    ``(B) for each of calendar years 2005, 2006, and 
                2007, $3,000;
                    ``(C) for calendar year 2008, $4,000; and
                    ``(D) for calendar year 2009, $5,000.
            ``(2) Calendar year 2010 and subsequent years.--For 
        purposes of subsection (a), the limit under this subsection for 
        calendar year 2010 and each subsequent calendar year is equal 
        to the greater of--
                    ``(A) the limit for the preceding year adjusted by 
                the percentage change in the Consumer Price Index for 
                all urban consumers (U.S. urban average) for the 12-
                month period ending with June of the preceding year; or
                    ``(B) the limit for the preceding year.

                      ``eligibility and enrollment

    ``Sec. 1860C. (a) Eligibility.--Every individual who, in or after 
2002, is entitled to hospital insurance benefits under part A or 
enrolled in the medical insurance program under part B is eligible to 
enroll, in accordance with the provisions of this section, in the 
insurance program under this part, during an enrollment period 
prescribed in or under this section, in such manner and form as may be 
prescribed by regulations.
    ``(b) Enrollment.--
            ``(1) In general.--Each individual who satisfies subsection 
        (a) shall be enrolled (or eligible to enroll) in the program 
        under this part in accordance with the provisions of section 
        1837, as if that section applied to this part, except as 
        otherwise explicitly provided in this part.
            ``(2) Single enrollment period.--Except as provided in 
        section 1837(i) (as such section applies to this part), 1860E, 
        or 1860H, or as otherwise explicitly provided, no individual 
        shall be entitled to enroll in the program under this part at 
any time after the initial enrollment period.
            ``(3) Special enrollment period for 2002.--
                    ``(A) In general.--An individual who first 
                satisfies subsection (a) in 2002 may, at any time on or 
                before December 31, 2002--
                            ``(i) enroll in the program under this 
                        part; and
                            ``(ii) enroll or reenroll in such program 
                        after having previously declined or terminated 
                        enrollment in such program.
                    ``(B) Effective date of coverage.--An individual 
                who enrolls under the program under this part pursuant 
                to subparagraph (A) shall be entitled to benefits under 
                this part beginning on the first day of the month 
                following the month in which such enrollment occurs.
    ``(c) Period of Coverage.--
            ``(1) In general.--Except as otherwise provided in this 
        part, an individual's coverage under the program under this 
        part shall be effective for the period provided in section 
        1838, as if that section applied to the program under this 
        part.
            ``(2) Part d coverage terminated by termination of coverage 
        under parts a and b.--In addition to the causes of termination 
        specified in section 1838, an individual's coverage under this 
        part shall be terminated when the individual retains coverage 
        under neither the program under part A nor the program under 
        part B, effective on the effective date of termination of 
        coverage under part A or (if later) under part B.

                               ``premiums

    ``Sec. 1860D. (a) Annual Establishment of Monthly Premium Rates.--
            ``(1) In general.--The Secretary shall, during September of 
        2001 and of each succeeding year, determine and promulgate a 
        monthly premium rate for the succeeding year in accordance with 
        the provisions of this subsection.
            ``(2) Actuarial determinations.--
                    ``(A) Determination of annual benefit costs.--The 
                Secretary shall estimate annually for the succeeding 
                year the amount equal to the total of the benefits that 
                will be payable from the Prescription Drug Insurance 
                Account for prescription drugs dispensed in such 
                calendar year with respect to enrollees in the program 
                under this part. In calculating such amount, the 
                Secretary shall include an appropriate amount for a 
                contingency margin.
                    ``(B) Determination of monthly premium rates.--
                            ``(i) In general.--The Secretary shall 
                        determine the monthly premium rate with respect 
                        to such enrollees for such succeeding year, 
                        which shall be \1/12\ of the share specified in 
                        clause (ii) of the amount determined under 
                        subparagraph (A), divided by the total number 
                        of such enrollees, and rounded (if such rate is 
                        not a multiple of 10 cents) to the nearest 
                        multiple of 10 cents.
                            ``(ii) Enrollee and employer percentage 
                        shares.--The share specified in this clause, 
                        for purposes of clause (i), shall be--
                                    ``(I) one-half, in the case of 
                                premiums paid by an individual enrolled 
                                in the program under this part; and
                                    ``(II) two-thirds, in the case of 
                                premiums paid for such an individual by 
                                a former employer (as defined in 
                                section 1860H(f)(2)).
            ``(3) Publication of assumptions.--The Secretary shall 
        publish, together with the promulgation of the monthly premium 
        rates for the succeeding year, a statement setting forth the 
        actuarial assumptions and bases employed in arriving at the 
        amounts and rates determined under paragraphs (1) and (2).
    ``(b) Payment of Premiums.--
            ``(1) Payments by deduction from social security, railroad 
        retirement benefits, or benefits administered by opm.--
                    ``(A) Deduction from benefits.--In the case of an 
                individual who is entitled to or receiving benefits as 
                described in subsection (a), (b), or (d) of section 
                1840, premiums payable under this part shall be 
                collected by deduction from such benefits at the same 
                time and in the same manner as premiums payable under 
                part B are collected pursuant to section 1840.
                    ``(B) Transfers to prescription drug insurance 
                account.--The Secretary of the Treasury shall, from 
                time to time, but not less often than quarterly, 
                transfer premiums collected pursuant to subparagraph 
                (A) to the Prescription Drug Insurance Account from the 
                appropriate funds and accounts described in subsections 
                (a)(2), (b)(2), and (d)(2) of section 1840, on the 
                basis of the certifications described in such 
                subsections. The amounts of such transfers shall be 
                appropriately adjusted to the extent that prior 
                transfers were too great or too small.
            ``(2) Direct payments to secretary.--
                    ``(A) Additional payment by enrollee.--An 
                individual to whom paragraph (1) applies (other than an 
                individual receiving benefits as described in section 
                1840(d)) and who estimates that the amount that will be 
                available for deduction under such paragraph for any 
                premium payment period will be less than the amount of 
                the monthly premiums for such period may (under 
                regulations) pay to the Secretary the estimated 
                balance, or such greater portion of the monthly premium 
                as the individual chooses.
                    ``(B) Payments by other enrollees.--An individual 
                enrolled in the insurance program under this part with 
                respect to whom none of the preceding provisions of 
                this subsection applies (or to whom section 1840(c) 
                applies) shall pay premiums to the Secretary at such 
times and in such manner as the Secretary shall by regulations 
prescribe.
                    ``(C) Deposit of premiums.--Amounts paid to the 
                Secretary under this paragraph shall be deposited in 
                the Treasury to the credit of the Prescription Drug 
                Insurance Account in the Supplementary Medical 
                Insurance Trust Fund.
    ``(c) Certain Low-Income Individuals.--For rules concerning 
premiums for certain low-income individuals, see section 1860E.

                 ``prescription drug insurance account

    ``Sec. 1860F. (a) Establishment.--There is created within the 
Federal Supplemental Medical Insurance Trust Fund established by 
section 1841 an account to be known as the `Prescription Drug Insurance 
Account' (in this section referred to as the `Account').
    ``(b) Amounts in Account.--
            ``(1) In general.--The Account shall consist of--
                    ``(A) such amounts as may be deposited in, or 
                appropriated to, such fund as provided in this part; 
                and
                    ``(B) such gifts and bequests as may be made as 
                provided in section 201(i)(1).
            ``(2) Separation of funds.--Funds provided under this part 
        to the Account shall be kept separate from all other funds 
        within the Federal Supplemental Medical Insurance Trust Fund.
    ``(c) Payments From Account.--The Managing Trustee shall pay from 
time to time from the Account such amounts as the Secretary certifies 
are necessary to make the payments provided for by this part, and the 
payments with respect to administrative expenses in accordance with 
section 201(g).

                      ``administration of benefits

    ``Sec. 1860G. (a) In General.--The Secretary shall provide for 
administration of the benefits under this part through a contract with 
a private entity designated in accordance with subsection (c), for 
enrolled individuals residing in each service area designated pursuant 
to subsection (b) (other than such individuals enrolled in a 
Medicare+Choice program under part C), in accordance with the 
provisions of this section.
    ``(b) Designation of Service Areas.--
            ``(1) In general.--The Secretary shall divide the total 
        geographic area served by the programs under this title into at 
        least 15 service areas for purposes of administration of 
        benefits under this part.
            ``(2) Considerations.--In determining or adjusting the 
        number and boundaries of service areas under this subsection, 
        the Secretary shall seek to ensure that--
                    ``(A) there is a reasonable level of competition 
                among entities eligible to contract to administer the 
                benefit program under this section for each area;
                    ``(B) the designation of areas is consistent with 
                the goal of securing contracts under this section with 
                respect to the maximum feasible number of areas so 
                designated; and
                    ``(C) the designation of areas will foster the 
                existence of a sufficient number of entities that are 
                eligible and willing to administer the benefits under 
                this part.
    ``(c) Designation of Private Entity.--
            ``(1) Award and duration of contract.--
                    ``(A) Competitive award.--Each contract for a 
                service area shall be awarded competitively in 
                accordance with section 5 of title 41, United States 
                Code, for a period (subject to subparagraph (B)) of not 
                less than 2 nor more than 5 years.
                    ``(B) Review.--A contract for a service area shall 
                be subject to an evaluation after 2 years.
            ``(2) Eligible private entities.--A private entity eligible 
        for consideration as a private entity responsible for 
        administering the prescription drug benefit program under this 
        part in a service area shall meet at least the following 
        criteria:
                    ``(A) Type.--The private entity shall be capable of 
                administering a prescription drug benefit program, and 
                may be a prescription drug vendor, wholesale and retail 
                pharmacist delivery system, health care provider or 
                insurer, any other type of entity as the Secretary may 
                specify, or a consortium of such entities.
                    ``(B) Performance capability.--The entity shall 
                have sufficient expertise, personnel, and resources to 
                perform effectively the benefit administration 
                functions for such area.
                    ``(C) Financial integrity.--The entity and its 
                officers, directors, agents, and managing employees 
                shall have a satisfactory record of professional 
                competence and professional and financial integrity, 
                and the entity shall have adequate financial resources 
                to perform services under the contract without risk of 
                insolvency.
            ``(3) Proposal requirements.--
                    ``(A) In general.--An entity's proposal for award 
                or renewal of a contract under this section shall 
                include such material and information as the Secretary 
                may require.
                    ``(B) Specific information.--A proposal described 
                in subparagraph (A) shall include a detailed 
                description of--
                            ``(i) the schedule of negotiated prices 
                        that will be charged to enrollees;
                            ``(ii) how the entity will deter medical 
                        errors that are related to prescription drugs; 
                        and
                            ``(iii) proposed contracts with local 
                        pharmacy providers designed to ensure access, 
                        including compensation for local pharmacists' 
                        services.
            ``(4) Exceptions to conflict of interest rules.--In 
        awarding contracts under this subsection, the Secretary may 
        waive conflict of interest rules generally applicable to 
        Federal acquisitions (subject to such safeguards as the 
        Secretary may find necessary to impose) in circumstances where 
        the Secretary finds that such waiver--
                    ``(A) is not inconsistent with the purposes of the 
                programs under this title and the best interests of 
                enrolled individuals; and
                    ``(B) will permit a sufficient level of competition 
                for such contracts, promote efficiency of benefits 
                administration, or otherwise serve the objectives of 
                the program under this part.
            ``(5) Maximizing competition.--In awarding contracts under 
        this section, the Secretary shall give consideration to the 
        need to maintain sufficient numbers of entities eligible and 
        willing to administer benefits under this part to ensure 
        vigorous competition for such contracts.
    ``(d) Functions of Private Entity.--The private entity for a 
service area shall (or in the case of the function described in 
paragraph (7), may) perform the following functions:
            ``(1) Participation agreements, prices, and fees.--
                    ``(A) Privately negotiated prices.--Each private 
                entity shall establish, through negotiations with drug 
                manufacturers and wholesalers and pharmacies, a 
                schedule of prices for covered prescription drugs.
                    ``(B) Agreements with pharmacies.--Each private 
                entity shall enter into participation agreements under 
                subsection (e) with pharmacies, that include terms 
                that--
                            ``(i) secure the participation of 
                        sufficient numbers of pharmacies to ensure 
                        convenient access (including adequate emergency 
                        access); and
                            ``(ii) permit the participation of any 
                        pharmacy in the service area that meets the 
                        participation requirements described in 
                        subsection (e).
                    ``(C) Lists of prices and participating 
                pharmacies.--Each private entity shall ensure that the 
                negotiated prices established under subparagraph (A) 
                and the list of pharmacies with agreements under 
                subsection (e) are regularly updated and readily 
                available in the service area to health care 
                professionals authorized to prescribe drugs, 
                participating pharmacies, and enrolled individuals.
            ``(2) Payment and coordination of benefits.--
                    ``(A) Payment.--Each private entity shall--
                            ``(i) administer claims for payment of 
                        benefits under this part;
                            ``(ii) determine amounts of benefit 
                        payments to be made; and
                            ``(iii) receive, disburse, and account for 
                        funds used in making such payments, including 
                        through the activities specified in the 
                        provisions of this paragraph.
                    ``(B) Coordination.--Each private entity shall 
                coordinate with the Secretary, other private entities, 
                pharmacies, and other relevant entities as necessary to 
                ensure appropriate coordination of benefits with 
                respect to enrolled individuals, including coordination 
                of access to and payment for covered prescription drugs 
                according to an individual's in-service area plan 
                provisions, when such individual is traveling outside 
                the home service area, and under such other 
                circumstances as the Secretary may specify.
                    ``(C) Explanation of benefits.--Each private entity 
                shall furnish to enrolled individuals an explanation of 
                benefits in accordance with section 1806(a), and a 
                notice of the balance of benefits remaining 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).
            ``(3) Cost and utilization management; quality assurance.--
        Each private entity shall have in place effective cost and 
        utilization management, quality assurance measures, and systems 
        to reduce medical errors, including at least the following, 
        together with such additional measures as the Secretary may 
        specify:
                    ``(A) Drug utilization review.--A drug utilization 
                review program conforming to the standards provided in 
                section 1927(g)(2) (with such modifications as the 
                Secretary finds appropriate).
                    ``(B) Fraud and abuse control.--Activities to 
                control fraud, abuse, and waste.
            ``(4) Education and information activities.--Each private 
        entity shall have in place mechanisms for disseminating 
        educational and informational materials to enrolled individuals 
        and health care providers designed to encourage effective and 
        cost-effective use of prescription drug benefits and to ensure 
        that enrolled individuals understand their rights and 
        obligations under the program.
            ``(5) Beneficiary protections.--
                    ``(A) Confidentiality of health information.--Each 
                private entity shall have in effect systems to 
                safeguard the confidentiality of health care 
                information on enrolled individuals, which comply with 
                section 1106 and with section 552a of title 5, United 
                States Code, and meet such additional standards as the 
                Secretary may prescribe.
                    ``(B) Grievance and appeal procedures.--Each 
                private entity have in place such procedures as the 
                Secretary may specify for hearing and resolving 
                grievances and appeals brought by enrolled individuals 
                against the private entity or a pharmacy concerning 
                benefits under this part, which shall, to the extent 
                the Secretary finds necessary and appropriate, include 
                procedures equivalent to those specified in subsections 
                (f) and (g) of section 1852.
            ``(6) Records, reports, and audits of private entities.--
                    ``(A) Records and audits.--Each private entity 
                shall maintain adequate records, and afford the 
                Secretary access to such records (including for audit 
                purposes).
                    ``(B) Reports.--Each private entity shall make such 
                reports and submissions of financial and utilization 
                data as the Secretary may require taking into account 
                standard commercial practices.
            ``(7) Proposal for alternative coinsurance amount.--
                    ``(A) Submission.--Each private entity may submit a 
                proposal for increased Government cost-sharing for 
                generic prescription drugs, prescription drugs on the 
                private entity's formulary, or prescription drugs 
                obtained through mail order pharmacies.
                    ``(B) Contents.--The proposal submitted under 
                subparagraph (A) shall contain evidence that such 
                increased cost-sharing would not result in an increase 
                in aggregate costs to the Account, including an 
                analysis of differences in projected drug utilization 
                patterns by beneficiaries whose cost-sharing would be 
                reduced under the proposal and those making the cost-
                sharing payments that would otherwise apply.
            ``(8) Other requirements.--Each private entity shall meet 
        such other requirements as the Secretary may specify.
    ``(e) Pharmacy Participation Agreements.--
            ``(1) In general.--A pharmacy that meets the requirements 
        of this subsection shall be eligible to enter an agreement with 
        a private entity to furnish covered prescription drugs and 
        pharmacists' services to enrolled individuals residing in the 
        service area.
            ``(2) Terms of agreement.--An agreement under this 
        subsection shall include the following terms and requirements:
                    ``(A) Licensing.--The pharmacy and pharmacists 
                shall meet (and throughout the contract period will 
                continue to meet) all applicable State and local 
                licensing requirements.
                    ``(B) Limitation on charges.--Pharmacies 
                participating under this part shall not charge an 
                enrolled individual more than the negotiated price for 
                an individual drug as established under subsection 
                (d)(1), regardless of whether such individual has 
                attained the benefit limit under section 1860B(b), and 
                shall not charge an enrolled individual more than the 
                individual's share of the negotiated price as 
                determined under the provisions of this part.
                    ``(C) Performance standards.--The pharmacy shall 
                comply with performance standards relating to--
                            ``(i) measures for quality assurance, 
                        reduction of medical errors, and participation 
                        in the drug utilization review program 
                        described in subsection (d)(3)(A);
                            ``(ii) systems to ensure compliance with 
                        the confidentiality standards applicable under 
                        subsection (d)(5)(A); and
                            ``(iii) other requirements as the Secretary 
                        may impose to ensure integrity, efficiency, and 
                        the quality of the program.
    ``(f) Flexibility in Assigning Workload Among Private Entities.--
During the period after the Secretary has given notice of intent to 
terminate a contract with a private entity, the Secretary may transfer 
responsibilities of the private entity under such contract to another 
private entity.
    ``(g) Special Attention to Rural and Hard-To-Serve Areas.--
            ``(1) In general.--The Secretary shall ensure that all 
        beneficiaries have access to the full range of pharmaceuticals 
        under this part, and shall give special attention to access, 
        pharmacist counseling, and delivery in rural and hard-to-serve 
areas (as the Secretary may define by regulation).
            ``(2) Special attention defined.--For purposes of paragraph 
        (1), the term `special attention' may include bonus payments to 
        retail pharmacists in rural areas, extra payments to the 
        private entity for the cost of rapid delivery of 
        pharmaceuticals, and any other actions the Secretary determines 
        are necessary to ensure full access to rural and hard-to-serve 
        beneficiaries.
            ``(3) GAO report.--Not later than 2 years after the 
        implementation of this part the Comptroller General of the 
        United States shall submit to Congress a report on the access 
        of medicare beneficiaries to pharmaceuticals and pharmacists' 
        services in rural and hard-to-serve areas under this part 
        together with any recommendations of the Comptroller General 
        regarding any additional steps the Secretary may need to take 
        to ensure the access of medicare beneficiaries to 
        pharmaceuticals and pharmacists' services in such areas under 
        this part.
    ``(h) Incentives for Cost and Utilization Management and Quality 
Improvement.--The Secretary is authorized to include in a contract 
awarded under subsection (c) such incentives for cost and utilization 
management and quality improvement as the Secretary may deem 
appropriate, including--
            ``(1) bonus and penalty incentives to encourage 
        administrative efficiency;
            ``(2) incentives under which private entities share in any 
        benefit savings achieved;
            ``(3) risk-sharing arrangements related to benefit 
        payments; and
            ``(4) any other incentive that the Secretary deems 
        appropriate and likely to be effective in managing costs or 
        utilization.

``employer incentive program for employment-based retiree drug coverage

    ``Sec. 1860H. (a) Program Authority.--The Secretary is authorized 
to develop and implement a program under this section called the 
`Employer Incentive Program' that encourages employers and other 
sponsors of employment-based health care coverage to provide adequate 
prescription drug benefits to retired individuals and to maintain such 
existing benefit programs, by subsidizing, in part, the sponsor's cost 
of providing coverage under qualifying plans.
    ``(b) Sponsor Requirements.--In order to be eligible to receive an 
incentive payment under this section with respect to coverage of an 
individual under a qualified retiree prescription drug plan (as defined 
in subsection (f)(3)), a sponsor shall meet the following requirements:
            ``(1) Assurances.--The sponsor shall--
                    ``(A) annually attest, and provide such assurances 
                as the Secretary may require, that the coverage offered 
                by the sponsor is a qualified retiree prescription drug 
                plan, and will remain such a plan for the duration of 
                the sponsor's participation in the program under this 
                section; and
                    ``(B) guarantee that it will give notice to the 
                Secretary and covered retirees--
                            ``(i) at least 120 days before terminating 
                        its plan; and
                            ``(ii) immediately upon determining that 
                        the actuarial value of the prescription drug 
                        benefit under the plan falls below the 
                        actuarial value of the insurance benefit under 
                        this part.
            ``(2) Other requirements.--The sponsor shall provide such 
        information, and comply with such requirements, including 
        information requirements to ensure the integrity of the 
        program, as the Secretary may find necessary to administer the 
        program under this section.
    ``(c) Incentive Payment.--
            ``(1) In general.--A sponsor that meets the requirements of 
        subsection (b) with respect to a quarter in a calendar year 
        shall have payment made by the Secretary on a quarterly basis 
        (to the sponsor or, at the sponsor's direction, to the 
        appropriate employment-based health plan) of an incentive 
        payment, in the amount determined as described in paragraph 
        (2), for each retired individual (or spouse) who--
                    ``(A) was covered under the sponsor's qualified 
                retiree prescription drug plan during such quarter; and
                    ``(B) was eligible for but was not enrolled in the 
                insurance program under this part.
            ``(2) Amount of incentive.--The payment under this section 
        with respect to each individual described in paragraph (1) for 
        a month shall be equal to \2/3\ of the monthly premium amount 
        payable by an enrolled individual, as set for the calendar year 
        pursuant to section 1860D(a)(2).
            ``(3) Payment date.--The incentive under this section with 
        respect to a calendar quarter shall be payable as of the end of 
        the next succeeding calendar quarter.
    ``(d) Civil Money Penalties.--A sponsor, health plan, or other 
entity that the Secretary determines has, directly or through its 
agent, provided information in connection with a request for an 
incentive payment under this section that the entity knew or should 
have known to be false shall be subject to a civil monetary penalty in 
an amount up to 3 times the total incentive amounts under subsection 
(c) that were paid (or would have been payable) on the basis of such 
information.
    ``(e) Part D Enrollment for Certain Individuals Covered by 
Employment-Based Retiree Health Coverage Plans.--
            ``(1) Eligible individuals.--An individual shall be given 
        the opportunity to enroll in the program under this part during 
        the period specified in paragraph (2) if--
                    ``(A) the individual declined enrollment in the 
                program under this part at the time the individual 
                first satisfied section 1860C(a);
                    ``(B) at that time, the individual was covered 
                under a qualified retiree prescription drug plan for 
                which an incentive payment was paid under this section; 
                and
                    ``(C)(i) the sponsor subsequently ceased to offer 
                such plan; or
                    ``(ii) the value of prescription drug coverage 
                under such plan became less than the value of the 
                coverage under the program under this part.
            ``(2) Special enrollment period.--An individual described 
        in paragraph (1) shall be eligible to enroll in the program 
        under this part during the 6-month period beginning on the 
        first day of the month in which--
                    ``(A) the individual receives a notice that 
                coverage under such plan has terminated (in the 
                circumstance described in paragraph (1)(C)(i)) or 
                notice that a claim has been denied because of such a 
                termination; or
                    ``(B) the individual received notice of the change 
                in benefits (in the circumstance described in paragraph 
                (1)(C)(ii)).
    ``(f) Definitions.--In this section:
            ``(1) Employment-based retiree health coverage.--The term 
        `employment-based retiree health coverage' means health 
        insurance or other coverage of health care costs for retired 
        individuals (or for such individuals and their spouses and 
        dependents) based on their status as former employees or labor 
        union members.
            ``(2) Employer.--The term `employer' has the meaning given 
        to such term by section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (except that such term shall include only 
        employers of 2 or more employees).
            ``(3) Qualified retiree prescription drug plan.--The term 
        `qualified retiree prescription drug plan' means health 
        insurance coverage included in employment-based retiree health 
        coverage that--
                    ``(A) provides coverage of the cost of prescription 
                drugs whose actuarial value to each retired beneficiary 
                equals or exceeds the actuarial value of the benefits 
                provided to an individual enrolled in the program under 
                this part; and
                    ``(B) does not deny, limit, or condition the 
                coverage or provision of prescription drug benefits for 
                retired individuals based on age or any health status-
                related factor described in section 2702(a)(1) of the 
                Public Health Service Act.
            ``(4) Sponsor.--The term `sponsor' has the meaning given 
        the term `plan sponsor' by section 3(16)(B) of the Employee 
        Retirement Income Security Act of 1974.

           ``appropriations to cover government contributions

    ``Sec. 1860I. (a) In General.--There are authorized to be 
appropriated from time to time, out of any moneys in the Treasury not 
otherwise appropriated, to the Prescription Drug Insurance Account, a 
Government contribution equal to--
            ``(1) the aggregate premiums payable for a month pursuant 
        to section 1860D(a)(2) by individuals enrolled in the program 
        under this part; plus
            ``(2) one-half the aggregate premiums payable for a month 
        pursuant to such section for such individuals by former 
        employers.
    ``(b) Appropriations To Cover Incentives for Employment-Based 
Retiree Drug Coverage.--There are authorized to be appropriated to the 
Prescription Drug Insurance Account from time to time, out of any 
moneys in the Treasury not otherwise appropriated such sums as may be 
necessary for payment of incentive payments under section 1860H(c).

                      ``prescription drug defined

    ``Sec. 1860J. As used in this part, the term `prescription drug' 
means--
            ``(1) a drug that may be dispensed only upon a 
        prescription, and that is described in subparagraph (A)(i), 
        (A)(ii), or (B) of section 1927(k)(2); and
            ``(2) insulin certified under section 506 of the Federal 
        Food, Drug, and Cosmetic Act, and needles, syringes, and 
        disposable pumps for the administration of such insulin.''.
    (b) Study of Annual Open Enrollment.--
            (1) Study.--During 2002 and 2003, the Secretary shall 
        conduct a study on the feasibility and advisability of 
        establishing an annual open enrollment period for the program 
        under part D (as added by subsection (a)). Such study shall 
        reflect data reported by private entities administering 
        benefits under such part and shall include--
                    (A) a review of the costs, effectiveness, and 
                administrative feasibility of an annual open enrollment 
                period for beneficiaries who--
                            (i) previously declined enrollment; or
                            (ii) who previously disenrolled and desire 
                        to reenroll;
                    (B) an evaluation of a premium penalty for late 
                enrollment based on actuarially determined costs to the 
                program of late enrollment; and
                    (C) a projection of the costs if open enrollment 
                was allowed without a penalty.
            (2) Report.--The Secretary shall prepare a report setting 
        forth the outcome of the study and may include in the report a 
        recommendation as to whether an annual open enrollment period 
        should be implemented under such part.
    (c) Conforming Amendments.--
            (1) Amendments to federal supplementary health insurance 
        trust fund.--Section 1841 of the Social Security Act (42 U.S.C. 
        1395t) is amended--
                    (A) in the last sentence of subsection (a)--
                            (i) by striking ``and'' after ``section 
                        201(i)(1)''; and
                            (ii) by inserting before the period the 
                        following: ``, and such amounts as may be 
                        deposited in, or appropriated to, the 
                        Prescription Drug Insurance Account established 
                        by section 1860F'';
                    (B) 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 Prescription Drug Insurance Account in the 
                Supplementary Medical Insurance Trust Fund),'';
                    (C) in the first sentence of subsection (h), by 
                inserting before the period the following: ``and 
                section 1860D(b)(4) (in which case the payments shall 
                come from the Prescription Drug Insurance Account in 
                the Supplementary Medical Insurance Trust Fund)''; and
                    (D) in the first sentence of subsection (i)--
                            (i) by striking ``and'' after ``section 
                        1840(b)(1)''; and
                            (ii) by inserting before the period the 
                        following: ``, section 1860D(b)(2) (in which 
                        case the payments shall come from the 
                        Prescription Drug Insurance Account in the 
                        Supplementary Medical Insurance Trust Fund)''.
            (2) Prescription drug option under medicare+choice plans.--
                    (A) Eligibility, election, and enrollment.--Section 
                1851 of the Social Security Act (42 U.S.C. 1395w-21) is 
                amended--
                            (i) in subsection (a)(1)(A), by striking 
                        ``parts A and B'' inserting ``parts A, B, and 
                        D''; and
                            (ii) in subsection (i)(1), by striking 
                        ``parts A and B'' and inserting ``parts A, B, 
                        and D''.
                    (B) Voluntary beneficiary enrollment for drug 
                coverage.--Section 1852(a)(1)(A) of such Act (42 U.S.C. 
                1395w-22(a)(1)(A)) is amended by inserting ``(and under 
                part D to individuals also enrolled under that part)'' 
                after ``parts A and B''.
                    (C) Access to services.--Section 1852(d)(1) of such 
                Act (42 U.S.C. 1395w-22(d)(1)) is amended--
                            (i) in subparagraph (D), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (E), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(F) the plan for prescription drug benefits under 
                part D guarantees coverage of any specifically named 
                covered prescription drug for an enrollee, when 
                prescribed by a physician in accordance with the 
                provisions of such part, regardless of whether such 
                drug would otherwise be covered under an applicable 
                formulary or discount arrangement.''.
                    (D) Payments to organizations.--Section 
                1853(a)(1)(A) of such Act (42 U.S.C. 1395w-23(a)(1)(A)) 
                is amended--
                            (i) by inserting ``determined separately 
                        for benefits under parts A and B and under part 
                        D (for individuals enrolled under that part)'' 
                        after ``as calculated under subsection (c)'';
                            (ii) by striking ``that area, adjusted for 
                        such risk factors'' and inserting ``that area. 
                        In the case of payment for benefits under parts 
                        A and B, such payment shall be adjusted for 
                        such risk factors as''; and
                            (iii) by inserting before the last sentence 
                        the following: ``In the case of the payments 
                        for benefits under part D, such payment shall 
                        initially be adjusted for the risk factors of 
                        each enrollee as the Secretary determines to be 
                        feasible and appropriate. By 2006, the 
                        adjustments would be for the same risk factors 
                        applicable for benefits under parts A and B.''.
                    (E) Calculation of annual medicare +choice 
                capitation rates.--Section 1853(c) of such Act (42 
                U.S.C. 1395w-23(c)) is amended--
                            (i) in paragraph (1), in the matter 
                        preceding subparagraph (A), by inserting ``for 
                        benefits under parts A and B'' after 
                        ``capitation rate'';
                            (ii) in paragraph (6)(A), by striking 
                        ``rate of growth in expenditures under this 
                        title'' and inserting ``rate of growth in 
                        expenditures for benefits available under parts 
                        A and B''; and
                            (iii) by adding at the end the following 
                        new paragraph:
            ``(8) Payment for prescription drugs.--The Secretary shall 
        determine a capitation rate for prescription drugs--
                    ``(A) dispensed in 2002, which is based on the 
                projected national per capita costs for prescription 
                drug benefits under part D and associated claims 
                processing costs for beneficiaries under the original 
                medicare fee-for-service program; and
                    ``(B) dispensed in each subsequent year, which 
                shall be equal to the rate for the previous year 
                updated by the Secretary's estimate of the projected 
                per capita rate of growth in expenditures under this 
                title for an individual enrolled under part D.''.
                    (F) Limitation on enrollee liability.--Section 
                1854(e) of such Act (42 U.S.C. 1395w-24(e)) is amended 
                by adding at the end the following new paragraph:
            ``(5) Special rule for provision of part d benefits.--In no 
        event may a Medicare+Choice organization include as part of a 
        plan for prescription drug benefits under part D a requirement 
        that an enrollee pay a deductible, or a coinsurance percentage 
        that exceeds 50 percent.''.
                    (G) Requirement for additional benefits.--Section 
                1854(f)(1) of such Act (42 U.S.C. 1395w-24(f)(1)) is 
                amended by adding at the end the following new 
                sentence: ``Such determination shall be made separately 
                for benefits under parts A and B and for prescription 
                drug benefits under part D.''.
                    (H) Protections against fraud and beneficiary 
                protections.--Section 1857(d) is amended by adding at 
the end the following new paragraph:
            ``(6) Availability of negotiated prices.--Each contract 
        under this section shall provide that enrollees who exhaust 
        prescription drug benefits under the plan will continue to have 
        access to prescription drugs at negotiated prices equivalent to 
        the total combined cost of such drugs to the plan and the 
        enrollee prior to such exhaustion of benefits.''.
            (3) Exclusions from coverage.--
                    (A) Application to part d.--Section 1862(a) of the 
                Social Security Act (42 U.S.C. 1395y(a)) is amended in 
                the matter preceding paragraph (1) by striking ``part A 
                or part B'' and inserting ``part A, B, or D''.
                    (B) Prescription drugs not excluded from coverage 
                if appropriately prescribed.--Section 1862(a)(1) of 
                such Act (42 U.S.C. 1395y(a)(1)) is amended--
                            (i) in subparagraph (H), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (I), by striking the 
                        semicolon at the end and inserting ``, and''; 
                        and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(J) in the case of prescription drugs covered 
                under part D, which are not prescribed in accordance 
                with such part;''.

SEC. 102. MEDICAID BUY-IN OF MEDICARE PRESCRIPTION DRUG COVERAGE FOR 
              CERTAIN LOW-INCOME INDIVIDUALS.

    (a) State Option To Buy-In Dually Eligible Individuals.--
            (1) Coverage of premiums as medical assistance.--Section 
        1905(a) of the Social Security Act (42 U.S.C. 1396d) is amended 
        in the second sentence of the flush matter at the end by 
        striking ``premiums under part B'' the first place it appears 
        and inserting ``premiums under parts B and D''.
            (2) State commitment to continue participation in part d 
        after benefit limit reached.--Section 1902(a) of such Act (42 
        U.S.C. 1396a) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (64);
                    (B) by striking the period at the end of paragraph 
                (65)(B) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(66) provide that in the case of any individual whose 
        eligibility for medical assistance is not limited to medicare 
        or medicare drug cost-sharing and for whom the State elects to 
        pay premiums under part D of title XVIII pursuant to section 
        1860E, the State will purchase all prescription drugs for such 
        individual in accordance with the provisions of such part D, 
        without regard to whether the benefit limit for such individual 
        under section 1860B(b) has been reached.''.
    (b) Medicare Cost-Sharing Required for Qualified Medicare 
Beneficiaries.--Section 1905(p)(3) of the Social Security Act (42 
U.S.C. 1396d(p)(3)) is amended--
            (1) in subparagraph (A)--
                    (A) in clause (i), by striking ``and'' at the end;
                    (B) in clause (ii), by inserting ``and'' at the 
                end; and
                    (C) by adding at the end the following new clause:
                            ``(iii) premiums under section 1860D.''; 
                        and
            (2) in subparagraph (D)--
                    (A) by inserting ``(i)'' after ``(D)''; and
                    (B) by adding at the end the following:
                    ``(ii) The difference between the amount that is 
                paid under section 1860B and the amount that would be 
                paid under such section if any reference to `50 
                percent' therein were deemed a reference to `100 
                percent' (or, if the Secretary approves a higher 
                percentage under such section, if such percentage were 
                deemed to be 100 percent).''.
    (c) Medicare Drug Cost-Sharing Required for Medicare-Eligible 
Individuals With Incomes Between 100 and 150 Percent of Poverty Line.--
            (1) Definitions of eligible beneficiaries and coverage.--
        Section 1905 of the Social Security Act (42 U.S.C. 1396d) is 
        amended by adding at the end the following new subsection:
    ``(x)(1) The term `qualified medicare drug beneficiary' means an 
individual--
            ``(A) who is entitled to hospital insurance benefits under 
        part A of title XVIII (including an individual entitled to such 
        benefits pursuant to an enrollment under section 1818, but not 
        including an individual entitled to such benefits only pursuant 
        to an enrollment under section 1818A);
            ``(B) whose income (as determined under section 1612 for 
        purposes of the supplemental security income program, except as 
        provided in subsection (p)(2)(D)) is above 100 percent but 
        below 150 percent of 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; and
            ``(C) whose resources (as determined under section 1613 for 
        purposes of the supplemental security income program) do not 
        exceed twice the maximum amount of resources that an individual 
        may have and obtain benefits under that program.
    ``(2) The term `medicare drug cost-sharing' means the following 
costs incurred with respect to a qualified medicare drug beneficiary, 
without regard to whether the costs incurred were for items and 
services for which medical assistance is otherwise available under the 
plan:
            ``(A) In the case of a qualified medicare drug beneficiary 
        whose income (as determined under paragraph (1)) is less than 
        135 percent of the official poverty line--
                    ``(i) premiums under section 1860D; and
                    ``(ii) the difference between the amount that is 
                paid under section 1860B and the amount that would be 
                paid under such section if any reference to `50 
                percent' therein were deemed a reference to `100 
                percent' (or, if the Secretary approves a higher 
                percentage under such section, if such percentage were 
                deemed to be 100 percent).
            ``(B) In the case of a qualified medicare drug beneficiary 
        whose income (as determined under paragraph (1)) is at least 
        135 percent but less than 150 percent of the official poverty 
        line, a percentage of premiums under section 1860D, determined 
        on a linear sliding scale ranging from 100 percent for 
        individuals with incomes at 135 percent of such line to 0 
        percent for individuals with incomes at 150 percent of such 
        line.
    ``(3) In the case of any State which is providing medical 
assistance to its residents under a waiver granted under section 1115, 
the Secretary shall require the State to meet the requirement of 
section 1902(a)(10)(E) in the same manner as the State would be 
required to meet such requirement if the State had in effect a plan 
approved under this title.''.
            (2) State plan requirement.--Section 1902(a)(10)(E) of the 
        Social Security Act (42 U.S.C. 1396a(a)(10)(E)) is amended--
                    (A) in clause (iii), by striking ``and'' at the 
                end; and
                    (B) by adding at the end the following new clause:
                    ``(v) for making medical assistance available for 
                medicare drug cost-sharing (as defined in section 
                1905(x)(2)) for qualified medicare drug beneficiaries 
                described in section 1905(x)(1); and''.
            (3) 100 percent federal matching of state medical 
        assistance costs for medicare drug cost-sharing.--Section 
        1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) is 
        amended--
                    (A) by redesignating paragraph (7) as paragraph 
                (8); and
                    (B) by inserting after paragraph (6) the following 
                new paragraph:
            ``(7) except in the case of amounts expended for an 
        individual whose eligibility for medical assistance is not 
        limited to medicare or medicare drug cost-sharing, an amount 
        equal to 100 percent of amounts as expended as medicare drug 
        cost-sharing for qualified medicare drug beneficiaries (as 
        defined in section 1905(x)); plus''.
    (d) Medicaid Drug Price Rebates Unavailable With Respect to Drugs 
Purchased Through Medicare Buy-In.--Section 1927 of the Social Security 
Act (42 U.S.C. 1396r-8) is amended by adding at the end the following 
new subsection:
    ``(l) Drugs Purchased Through Medicare Buy-In.--The provisions of 
this section shall not apply to prescription drugs purchased under part 
D of title XVIII pursuant to an agreement with the Secretary under 
section 1860E (including any drugs so purchased after the limit under 
section 1860B(b) has been exceeded).''.
    (e) Amendments to Medicare Part D.--Part D of title XVIII of the 
Social Security Act (as added by section 2) is amended by inserting 
after section 1860D the following new section:

 ``special eligibility, enrollment, and copayment rules for low-income 
                              individuals

    ``Sec. 1860E. (a) State Agreements for Coverage.--
            ``(1) In general.--The Secretary shall, at the request of a 
        State, enter into an agreement with the State under which all 
        individuals described in paragraph (2) are enrolled in the 
        program under this part, without regard to whether any such 
        individual has previously declined the opportunity to enroll in 
        such program.
            ``(2) Eligibility groups.--The individuals described in 
        this paragraph, for purposes of paragraph (1), are individuals 
        who satisfy section 1860C(a) and who are--
                    ``(A)(i) eligible individuals within the meaning of 
                section 1843; and
                    ``(ii) in a coverage group or groups permitted 
                under section 1843 (as selected by the State and 
                specified in the agreement); or
                    ``(B) qualified medicare drug beneficiaries (as 
                defined in section 1905(v)(1)).
            ``(3) Coverage period.--The period of coverage under this 
        part of an individual enrolled under an agreement under this 
        subsection shall be as follows:
                    ``(A) Individuals eligible (at state option) for 
                part b buy-in.--In the case of an individual described 
                in subsection (a)(2)(A), the coverage period shall be 
                the same period that applies (or would apply) pursuant 
                to section 1843(d).
                    ``(B) Qualified medicare drug beneficiaries.--In 
                the case of an individual described in subsection 
                (a)(2)(B)--
                            ``(i) the coverage period shall begin on 
                        the latest of--
                                    ``(I) January 1, 2002;
                                    ``(II) the first day of the third 
                                month following the month in which the 
                                State agreement is entered into; or
                                    ``(III) the first day of the first 
                                month following the month in which the 
                                individual satisfies section 1860C(a); 
                                and
                            ``(ii) the coverage period shall end on the 
                        last day of the month in which the individual 
                        is determined by the State to have become 
                        ineligible for medicare drug cost-sharing.
    ``(b) Special Part D Enrollment Opportunity for Individuals Losing 
Medicaid Eligibility.--In the case of an individual who--
            ``(1) satisfies section 1860C(a); and
            ``(2) loses eligibility for benefits under the State plan 
        under title XIX after having been enrolled under such plan or 
having been determined eligible for such benefits;
the Secretary shall provide an opportunity for enrollment under the 
program under this part during the period that begins on the date that 
such individual loses such eligibility and ends on the date specified 
by the Secretary.
    ``(c) Definition.--For purposes of this section, the term `State' 
has the meaning given such term under section 1101(a) for purposes of 
title XIX.''.
    (f) Removal of Sunset Date for Cost-Sharing in Medicare Part B 
Premiums for Certain Qualifying Individuals.--
            (1) In general.--Section 1902(a)(10)(E)(iv) of the Social 
        Security Act (42 U.S.C. 1396a(a)(10)(E)(iv))is amended to read 
        as follows--
                            ``(iv) subject to section 1905(p)(4), for 
                        making medical assistance available for 
                        medicare cost-sharing described in section 
                        1905(p)(3)(A)(ii) for individuals who would be 
                        qualified medicare beneficiaries described in 
                        section 1905(p)(1) but for the fact that their 
                        income exceeds the income level established by 
                        the State under section 1905(p)(2) and is at 
                        least 120 percent, but less than 135 percent, 
                        of the official poverty line (referred to in 
                        such section) for a family of the size involved 
                        and who are not otherwise eligible for medical 
                        assistance under the State plan;''.
            (2) Relocation of provision requiring 100 percent federal 
        matching of state medical assistance costs for certain 
        qualifying individuals.--Section 1903(a) of the Social Security 
        Act (42 U.S.C. 1396b(a)), as amended by subsection (c)(3), is 
        amended--
                    (A) by redesignating paragraph (8) as paragraph 
                (9); and
                    (B) by inserting after paragraph (7) the following 
                new paragraph:
            ``(8) an amount equal to 100 percent of amounts as expended 
        as medicare drug cost-sharing for individuals described in 
        section 1903(a)(10)(E)(iv); plus''.
            (3) Repeal of section 1933.--Section 1933 is repealed.
            (4) Effective date.--The amendments made by this subsection 
        shall take effect on January 1, 2002.

SEC. 103. CATASTROPHIC PRESCRIPTION DRUG COVERAGE BENEFIT.

    (a) Recommendations With Respect to a Medicare Catastrophic Drug 
Benefit.--
            (1) In general.--Not later than 6 months after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services (in this section referred to as the ``Secretary'') 
        shall submit to the Committee on Finance of the Senate and the 
        Committee on Ways and Means and the Committee on Commerce of 
        the House of Representatives detailed recommendations on 
        structuring a catastrophic drug benefit for medicare 
        beneficiaries.
            (2) Recommendations described.--The recommendations under 
        paragraph (1) shall--
                    (A) ensure coverage of the costs of prescription 
                drugs above a specified level of out-of-pocket 
                expenditures;
                    (B) conform to the administrative structure 
                established in this Act;
                    (C) have a projected cost that does not exceed the 
                amounts described in subsection (b)(3)(A); and
                    (D) take effect no later than January 1, 2003.
            (3) Final regulations.--
                    (A) In general.--If legislation of a medicare 
                catastrophic drug benefit is not enacted that meets the 
                requirements of paragraph (2) by June 1, 2001, the 
                Secretary of Health and Human Services shall promulgate 
                final regulations containing such standards no later 
                than January 1, 2002.
                    (B) Certification by omb and hcfa.--A final 
                regulation promulgated by the Secretary under 
                subparagraph (A) shall not take effect unless the 
                Director of the Office of Management and Budget and the 
                Chief Actuary of the Health Care Financing 
                Administration certify that aggregate Federal expenses 
                incurred in providing the catastrophic drug benefit 
                under this section will not exceed $50,000,000,000 
                between fiscal years 2003 and 2010. If either 
                certification is not provided, the Secretary shall 
                submit a revised recommendation on structuring a 
                catastrophic drug benefit to the appropriate committees 
                of Congress under paragraph (1) no later than 30 days 
                after the Secretary receives a notification that such 
                certification will not be provided.
    (b) Catastrophic Prescription Drug Coverage Reserve Fund.--
            (1) Establishment of reserve fund.--There is established a 
        reserve fund which shall be known as the ``Catastrophic 
        Prescription Drug Coverage Reserve Fund'' (in this subsection 
        referred to as the ``Reserve Fund'').
            (2) Amounts in reserve fund.--Subject to subparagraph (B), 
        the Reserve Fund shall consist of such amounts as are 
        appropriated to the Reserve Fund under paragraph (3).
            (3) Appropriation to reserve fund.--
                    (A) In general.--
                            (i) Fiscal years 2003 through 2010.--There 
                        are appropriated to the Reserve Fund for the 
                        period beginning with fiscal year 2003 and 
                        ending with fiscal year 2010, $50,000,000,000.
                            (ii) Subsequent fiscal years.--There are 
                        authorized to be appropriated to the Reserve 
                        Fund for each subsequent fiscal year, such sums 
                        as may be necessary to carry out the provisions 
                        of this section.
                    (B) Availability.--Sums appropriated under 
                subparagraph (A)(i) shall remain available, without 
                fiscal year limitation, until expended.

SEC. 104. COMPREHENSIVE IMMUNOSUPPRESSIVE DRUG COVERAGE FOR TRANSPLANT 
              PATIENTS.

    (a) Revision of Medicare Coverage for Immunosuppressive Drugs.--
            (1) In general.--Section 1861(s)(2)(J) of the Social 
        Security Act (42 U.S.C. 1395x(s)(2)(J)) (as amended by section 
        227(a) of the Medicare, Medicaid, and SCHIP Balanced Budget 
        Refinement Act of 1999 (113 Stat. 1501A-354), as enacted into 
        law by section 1000(a)(6) of Public Law 106-113) is amended by 
        striking ``, to an individual who receives'' and all that 
        follows before the semicolon at the end and inserting ``to an 
        individual who has received an organ transplant''.
            (2) Conforming amendments.--
                    (A) Section 1832 of the Social Security Act (42 
                U.S.C. 1395k) (as amended by section 227(b) of the 
                Medicare, Medicaid, and SCHIP Balanced Budget 
                Refinement Act of 1999 (113 Stat. 1501A-354), as 
                enacted into law by section 1000(a)(6) of Public Law 
                106-113) is amended--
                            (i) by striking subsection (b); and
                            (ii) by redesignating subsection (c) as 
                        subsection (b).
                    (B) Subsections (c) and (d) of section 227 of the 
                Medicare, Medicaid, and SCHIP Balanced Budget 
                Refinement Act of 1999 (113 Stat. 1501A-355), as 
                enacted into law by section 1000(a)(6) of Public Law 
                106-113, are repealed.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to drugs furnished on or after the date of 
        enactment of this Act.
    (b) Extension of Certain Secondary Payer Requirements.--Section 
1862(b)(1)(C) of the Social Security Act (42 U.S.C. 1395y(b)(1)(C)) is 
amended by adding at the end the following: ``With regard to 
immunosuppressive drugs furnished on or after the date of enactment of 
the Medicare Expansion for Needed Drugs (MEND) Act of 2000, this 
subparagraph shall be applied without regard to any time limitation.''.

SEC. 105. GAO STUDY AND BIENNIAL REPORTS ON COMPETITION AND SAVINGS.

    (a) Ongoing Study.--The Comptroller General of the United States 
shall conduct an ongoing study and analysis of the prescription drug 
benefit program under part D of the medicare program under title XVIII 
of the Social Security Act (as added by this title), including an 
analysis of--
            (1) the extent to which the competitive bidding process 
        under such program fosters maximum competition and efficiency; 
        and
            (2) the savings to the medicare program resulting from such 
        prescription drug benefit program, including the reduction in 
        the number or length of hospital visits.
    (b) Initial Report.--Not later than September 1, 2001, the 
Comptroller General shall submit to Congress a report on the extent to 
which the competitive bidding process under the prescription drug 
benefit program under part D of the medicare program under title XVIII 
of the Social Security Act (as added by this title) is expected to 
foster maximum competition and efficiency.
    (c) Biennial Reports.--Not later than January 1, 2004, and 
biennially thereafter, the Comptroller General of the United States 
shall submit to Congress a report on the results of the study conducted 
under this section, together with any recommendations for legislation 
that the Comptroller General determines to be appropriate as a result 
of such study.

SEC. 106. MEDPAC STUDY AND ANNUAL REPORTS ON THE PHARMACEUTICAL MARKET, 
              PHARMACIES, AND BENEFICIARY ACCESS.

    (a) Ongoing Study.--The Medicare Payment Advisory Commission 
established under section 1805 of the Social Security Act (42 U.S.C. 
1395b-6) shall conduct an ongoing study and analysis of the 
prescription drug benefit program under part D of the Social Security 
Act (as added by this title), including an analysis of the impact of 
the prescription drug benefit program on--
            (1) the pharmaceutical market, including costs and pricing 
        of pharmaceuticals, beneficiary access to such pharmaceuticals, 
        and trends in research and development;
            (2) franchise, independent, and rural pharmacies; and
            (3) beneficiary access to prescription drugs, including an 
        assessment of--
                    (A) out-of-pocket spending;
                    (B) generic and brand-name utilization; and
                    (C) pharmacists' services.
    (b) Report.--Not later than January 1, 2004, and annually 
thereafter, the Medicare Payment Advisory Commission shall submit to 
Congress a report on the results of the study conducted under this 
section, together with any recommendations for legislation that such 
Commission determines to be appropriate as a result of such study.

             TITLE II--ENHANCED MEDICARE PREVENTION PROGRAM

SEC. 201. MEDPAC BIENNIAL REPORT.

    (a) In General.--Section 1805(b) of the Social Security Act (42 
U.S.C. 1395b-6(b)) is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (C), by striking ``and'' at the 
                end;
                    (B) in subparagraph (D), by striking the period and 
                inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(E) by not later than January 1, 2002, and 
                biennially thereafter, submit the report to Congress 
                described in paragraph (7).''; and
            (2) by adding at the end the following new paragraph:
            ``(7) Evaluation of actuarial equivalence of medicare and 
        private sector benefit packages.--
                    ``(A) Evaluation.--The Commission shall--
                            ``(i) evaluate the benefit package offered 
                        under the medicare program under this title; 
                        and
                            ``(ii) determine the degree to which such 
                        benefit package is actuarially equivalent to 
                        that offered by health benefit programs 
                        available in the private sector to individuals 
                        over age 65.
                    ``(B) Report.--The Commission shall submit a report 
                to Congress that shall contain--
                            ``(i) a detailed statement of the findings 
                        and conclusions of the Commission regarding the 
                        evaluation conducted under subparagraph (A);
                            ``(ii) the recommendations of the 
                        Commission regarding changes in the benefit 
                        package offered under the medicare program 
                        under this title that would keep the program 
                        modern and competitive in relation to health 
                        benefit programs available in the private 
                        sector; and
                            ``(iii) the recommendations of the 
                        Commission for such legislation and 
                        administrative actions as it considers 
                        appropriate.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 202. NATIONAL INSTITUTE ON AGING STUDY AND REPORT.

    (a) Studies.--The Director of the National Institute on Aging shall 
conduct 1 or more studies focusing on ways to--
            (1) improve quality of life for the elderly;
            (2) develop better ways to prevent or delay the onset of 
        age-related functional decline and disease and disability among 
        the elderly; and
            (3) develop means of assessing the long-term development of 
        cost-effective benefits and cost-savings benefits for health 
        promotion and disease prevention among the elderly.
    (b) Report.--Not later than January 1, 2006, the Director of the 
National Institute on Aging shall submit a report to the Secretary 
regarding each study conducted under subsection (a) and containing a 
detailed statement of research findings and conclusions that are 
scientifically valid and are demonstrated to prevent or delay the onset 
of chronic illness or disability among the elderly.
    (c) Transmission to Institute of Medicine.--Upon receipt of each 
report described in subsection (b), the Secretary shall transmit such 
report to the Institute of Medicine of the National Academy of Sciences 
for consideration in its effort to conduct the comprehensive study of 
current literature and best practices in the field of health promotion 
and disease prevention among the medicare beneficiaries described in 
section 204.
    (d) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        $100,000,000 for fiscal years 2001 through 2006 to carry out 
        the purposes of this section.
            (2) Availability.--Any sums appropriated under the 
        authorization contained in this subsection shall remain 
        available, without fiscal year limitation, until September 30, 
        2005.

SEC. 203. INSTITUTE OF MEDICINE 5-YEAR MEDICARE PREVENTION BENEFIT 
              STUDY AND REPORT.

    (a) Study.--
            (1) In general.--The Secretary shall contract with the 
        Institute of Medicine of the National Academy of Sciences to 
        conduct a comprehensive study of current literature and best 
        practices in the field of health promotion and disease 
        prevention among medicare beneficiaries including the issues 
described in paragraph (2) and to submit the report described in 
subsection (b).
            (2) Issues studied.--The study required under paragraph (1) 
        shall include an assessment of--
                    (A) whether each covered benefit is--
                            (i) medically effective; and
                            (ii) a cost-effective benefit or a cost-
                        saving benefit;
                    (B) utilization of covered benefits (including any 
                barriers to or incentives to increase utilization); and
                    (C) quality of life issues associated with both 
                health promotion and disease prevention benefits 
                covered under the medicare program and those that are 
                not covered under such program that would affect all 
                medicare beneficiaries.
    (b) Report.--
            (1) In general.--Not later than 5 years after the date of 
        enactment of this section, and every fifth year thereafter, the 
        Institute of Medicine of the National Academy of Sciences shall 
        submit to the President a report that contains a detailed 
        statement of the findings and conclusions of the study 
        conducted under subsection (a) and the recommendations for 
        legislation described in paragraph (2).
            (2) Recommendations for legislation.--The Institute of 
        Medicine of the National Academy of Sciences, in consultation 
        with the Partnership for Prevention, shall develop 
        recommendations in legislative form that--
                    (A) prioritize the preventive benefits under the 
                medicare program; and
                    (B) modify preventive benefits offered under the 
                medicare program based on the study conducted under 
                subsection (a).
    (c) Transmission to Congress.--
            (1) In general.--On the day on which the report described 
        in subsection (b) is submitted to the President, the President 
        shall transmit the report and recommendations in legislative 
        form described in subsection (b)(2) to Congress.
            (2) Delivery.--Copies of the report and recommendations in 
        legislative form required to be transmitted to Congress under 
        paragraph (1) shall be delivered--
                    (A) to both Houses of Congress on the same day;
                    (B) to the Clerk of the House of Representatives if 
                the House of Representatives is not in session; and
                    (C) to the Secretary of the Senate if the Senate is 
                not in session.

SEC. 204. FAST-TRACK CONSIDERATION OF PREVENTION BENEFIT LEGISLATION.

    (a) Rules of House of Representatives and Senate.--This section is 
enacted by Congress--
            (1) as an exercise of the rulemaking power of the House of 
        Representatives and the Senate, respectively, and is deemed a 
        part of the rules of each House of Congress, but--
                    (A) is applicable only with respect to the 
                procedure to be followed in that House of Congress in 
                the case of an implementing bill (as defined in 
                subsection (d)); and
                    (B) supersedes other rules only to the extent that 
                such rules are inconsistent with this section; and
            (2) with full recognition of the constitutional right of 
        either House of Congress to change the rules (so far as 
        relating to the procedure of that House of Congress) at any 
        time, in the same manner and to the same extent as in the case 
        of any other rule of that House of Congress.
    (b) Introduction and Referral.--
            (1) Introduction.--
                    (A) In general.--Subject to paragraph (2), on the 
                day on which the President transmits the report 
                pursuant to section 203(c) to the House of 
                Representatives and the Senate, the recommendations in 
                legislative form transmitted by the President with 
                respect to such report shall be introduced as a bill 
                (by request) in the following manner:
                            (i) House of representatives.--In the House 
                        of Representatives, by the Majority Leader, for 
                        himself and the Minority Leader, or by Members 
                        of the House of Representatives designated by 
                        the Majority Leader and Minority Leader.
                            (ii) Senate.--In the Senate, by the 
                        Majority Leader, for himself and the Minority 
                        Leader, or by Members of the Senate designated 
                        by the Majority Leader and Minority Leader.
                    (B) Special rule.--If either House of Congress is 
                not in session on the day on which such recommendations 
                in legislative form are transmitted, the 
                recommendations in legislative form shall be introduced 
                as a bill in that House of Congress, as provided in 
                subparagraph (A), on the first day thereafter on which 
                that House of Congress is in session.
            (2) Referral.--Such bills shall be referred by the 
        presiding officers of the respective Houses to the appropriate 
        committee, or, in the case of a bill containing provisions 
        within the jurisdiction of 2 or more committees, jointly to 
        such committees for consideration of those provisions within 
        their respective jurisdictions.
    (c) Consideration.--After the recommendations in legislative form 
have been introduced as a bill and referred under subsection (b), such 
implementing bill shall be considered in the same manner as an 
implementing bill is considered under subsections (d), (e), (f), and 
(g) of section 151 of the Trade Act of 1974 (19 U.S.C. 2191).
    (d) Implementing Bill Defined.--In this section, the term 
``implementing bill'' means only the recommendations in legislative 
form of the Institute of Medicine of the National Academy of Sciences 
described in section 203(b)(2), transmitted by the President to the 
House of Representatives and the Senate under section 203(c), and 
introduced and referred as provided in subsection (b) as a bill of 
either House of Congress.
    (e) Counting of Days.--For purposes of this section, any period of 
days referred to in section 151 of the Trade Act of 1974 shall be 
computed by excluding--
            (1) the days on which either House of Congress is not in 
        session because of an adjournment of more than 3 days to a day 
        certain or an adjournment of Congress sine die; and
            (2) any Saturday and Sunday, not excluded under paragraph 
        (1), when either House is not in session.
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