[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5219 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 5219

 To amend part B of title XVIII of the Social Security Act to provide 
  for a chronic disease prescription drug benefit and for coverage of 
        disease management services under the Medicare Program.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 25, 2002

   Mr. Cardin (for himself, Mrs. Morella, and Ms. Hooley of Oregon) 
 introduced the following bill; which was referred to the Committee on 
   Energy and Commerce, and in addition to the Committee on Ways and 
 Means, for a period to be subsequently determined by the Speaker, in 
   each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To amend part B of title XVIII of the Social Security Act to provide 
  for a chronic disease prescription drug benefit and for coverage of 
        disease management services under the Medicare Program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Essential Medicines for Medicare Act 
of 2002''.

SEC. 2. MEDICARE CHRONIC DISEASE PRESCRIPTION DRUG BENEFIT.

    (a) Coverage.--
            (1) In general.--Section 1832(a)(2) of the Social Security 
        Act (42 U.S.C. 1395k(a)(2)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (I);
                    (B) by striking the period at the end of 
                subparagraph (J) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(K) subject to subsection (b), prescription drugs 
                for treatment of certain chronic conditions (as defined 
                in section 1861(uu)(1)).''.
            (2) Provision of benefits through existing non-medicaid 
        state prescription drug benefit programs.--Section 1832 of such 
        Act (42 U.S.C. 1395k) is further amended--
                    (1) by redesignating subsection (b) as subsection 
                (c); and
                    (2) by inserting after subsection (a) the following 
                new subsection:
    ``(b)(1) Prescription drug benefits shall not be available under 
subsection (a)(2)(K) to an individual to the extent that the individual 
receives benefits for the prescription drugs under a State non-medicaid 
prescription drug benefit program if the following requirements are 
met:
            ``(A) The program is sponsored or financially underwritten 
        by a State, but Federal financial assistance under title XIX is 
        not available for expenditures under the program.
            ``(B) The program is in operation as of May 1, 2002.
            ``(C) The State elects to receive payment (described in 
        paragraph (2)) for providing benefits under this subsection.
            ``(D) The deductible and coinsurance applicable do not 
        exceed the deductible and coinsurance otherwise applicable to 
        the prescription drug benefit described in subsection 
        (a)(2)(K).
    ``(2) The Secretary shall provide for payment to a State that 
operates a program that meets the requirements of paragraph (1) of an 
amount (agreed to by the State) that does not exceed the Secretary's 
estimate of the amount of payment that would have been made under this 
part (taking into account the application of a deductible and 
coinsurance) for prescription drugs for which coverage is provided 
under such program, if this subsection did not apply.''.
    (b) Definition of Benefit.--
            (1) In general.--Section 1861 of such Act (42 U.S.C. 1395x) 
        is amended by adding at the end the following new subsection:

    ``Prescription Drugs for Treatment of Certain Chronic Conditions

    ``(uu)(1) The term `prescription drugs for treatment of certain 
chronic conditions' means, subject to paragraph (3), prescription drugs 
described in paragraph (2) that have been shown to have a demonstrable 
effect in treating any of the following conditions (in the case of an 
individual who has been diagnosed by a physician as having that 
condition):
            ``(A) Hypertension.
            ``(B) Diabetes.
            ``(C) Congestive or ischemic heart disease.
            ``(D) Major depression.
            ``(E) Rheumatoid arthritis.
    ``(2) Prescription drugs described in this paragraph are--
            ``(A) a prescription drug that meets the requirement of 
        clause (i), (ii), or (iii) of section 1927(k)(2)(A);
            ``(B) a biological product described in section 
        1927(k)(2)(B); or
            ``(C) insulin described in section 1927(k)(2)(C).
    ``(3) The term `prescription drugs for treatment of certain chronic 
conditions' does not include any product--
            ``(A) which may be distributed to individuals without a 
        prescription;
            ``(B) when furnished as part of, or as incident to, a 
        diagnostic service or any other item or service for which 
        payment may be made under this title;
            ``(C) that was covered under this title on the day before 
        the date of enactment of the Essential Medicines for Medicare 
        Act of 2002; or
            ``(D) that is a therapeutically equivalent replacement for 
        a product described in subparagraph (B) or (C), as determined 
        by the Secretary.''.
            (2) Process for identification of covered drugs.--The 
        Secretary of Health and Human Services shall implement a 
        process for the timely identification of prescription drugs for 
        treatment of certain chronic conditions that should be covered 
        under section 1861(uu) of the Social Security Act, as added by 
        paragraph (1). Under such process--
                    (A) within 60 days after the date of the enactment 
                of this Act, the Agency for Healthcare Research and 
                Quality shall complete an initial review of the 
                available data on the prevalence of conditions 
                described in such section in the population of medicare 
                beneficiaries, the adequacy of data demonstrating the 
                effectiveness of different prescription drugs in 
                treating such conditions, and the severity of potential 
                complications in using such drugs;
                    (B) within 6 months after the date of the enactment 
                of this Act, the Secretary shall specify by rule the 
                initial prescription drugs that shall be covered under 
                such section;
                    (C) thereafter the Secretary, taking into 
                consideration recommendations made under subsection 
                (e), may by rule change the prescription drugs that are 
                so covered; and
                    (D) the Secretary may, on an emergency basis, 
                provide for the replacement of a prescription drug on 
                the list if another drug (for the treatment of the same 
                condition) is recalled.
            (3) Construction.--Nothing in this section (or the 
        amendments made by this section) shall be construed--
                    (A) as preventing medicare beneficiaries from 
                purchasing prescription drugs not identified under 
                paragraph (2), including through coverage under a group 
                health plan or medicare supplemental policy; and
                    (B) the coverage under a medicare supplemental 
                policy of prescription drugs for conditions not 
                specified on the list compiled under paragraph (2) 
                shall not be considered to duplicate benefits under 
                title XVIII of such Act, for purposes of applying 
                section 1882(d)(3) of such Act (42 U.S.C. 
                1395ss(d)(3)).
    (c) Selection of Entities To Provide Drug Benefit; Payment.--
            (1) In general.--Part B of title XVIII of the Social 
        Security Act is amended by adding at the end the following new 
        section:

``SEC. 1849. SELECTION OF ENTITIES TO PROVIDE OUTPATIENT DRUG BENEFIT; 
              PAYMENT.

    ``(a) Establishment of Bidding Process.--
            ``(1) In general.--The Secretary shall establish procedures 
        under which the Secretary accepts bids from eligible entities 
        and awards contracts to such entities in order to provide 
        covered outpatient drugs to eligible beneficiaries in an area. 
        Such contracts may be awarded based on shared risk, capitation, 
        or performance.
            ``(2) Area.--
                    ``(A) Regional basis.--
                            ``(i) In general.--Subject to clause (ii), 
                        the contract entered into between the Secretary 
                        and an eligible entity shall require the 
                        eligible entity to provide covered outpatient 
                        drugs on a regional basis.
                            ``(ii) Partial regional basis.--
                                    ``(I) In general.--If determined 
                                appropriate by the Secretary, the 
                                Secretary may permit such to be 
                                provided in a partial region determined 
                                appropriate by the Secretary.
                                    ``(II) Requirements.--If the 
                                Secretary permits coverage pursuant to 
                                subclause (I), the Secretary shall 
                                ensure that the partial region in which 
                                coverage is provided is at least the 
                                size of the commercial service area of 
                                the eligible entity for that area and 
                                is not smaller than a State.
                    ``(B) Determination.--In determining coverage areas 
                under this section, the Secretary shall--
                            ``(i) take into account the number of 
                        eligible beneficiaries in an area in order to 
                        encourage participation by eligible entities; 
                        and
                            ``(ii) ensure that there are at least 10 
                        different regions in the United States.
                    ``(C) No administrative or judicial review.--The 
                determination of coverage areas under this part shall 
                not be subject to administrative or judicial review.
            ``(3) Submission of bids.--
                    ``(A) Submission.--
                            ``(i) In general.--Subject to clause (ii), 
                        each eligible entity desiring to offer a plan 
                        under this part in an area shall submit a bid 
                        with respect to such plan to the Secretary at 
                        such time, in such manner, and accompanied by 
                        such information as the Secretary may 
                        reasonably require.
                            ``(ii) Bid that covers multiple areas.--The 
                        Secretary shall permit an eligible entity to 
                        submit a single bid for multiple areas if the 
                        bid is applicable to all such areas.
                    ``(B) Required information.--The bids described in 
                subparagraph (A) shall include--
                            ``(i) a proposal for the estimated prices 
                        of covered outpatient drugs and the projected 
                        annual increases in such prices, including 
                        differentials between formulary and 
                        nonformulary prices, if applicable;
                            ``(ii) a statement regarding the amount 
                        that the entity will charge the Secretary for 
                        administering and delivering the benefits under 
                        the contract;
                            ``(iii) a detailed description of access to 
                        pharmacy services provided under the plan; and
                            ``(iv) such other information that the 
                        Secretary determines is necessary in order to 
                        carry out this part, including information 
                        relating to the bidding process under this 
                        part.
            ``(4) Access.--The Secretary shall ensure that--
                    ``(A) an eligible entity complies with the access 
                requirements described in subsection (f)(5);
                    ``(B) if an eligible entity employs formularies 
                pursuant to subsection (f)(6)(A), such entity complies 
                with the requirements of subsection (f)(6)(B);
                    ``(C) an eligible entity makes available to each 
                beneficiary covered under the contract at least one 
                drug in each therapeutic class from those approved by 
                the Secretary for the treatment of certain chronic 
                conditions and at least one generic equivalent for each 
                drug, if available; and
                    ``(D) an eligible entity makes available to each 
                such beneficiary alternative prescription drugs for the 
                treatment of certain chronic conditions when a 
                physician certifies that, because of a drug allergy or 
                other documented medical condition, that none of the 
                drugs approved by the Secretary for the treatment of 
                these conditions can adequately treat the patient and 
                that these drugs are medically necessary.
            ``(5) Duration of contracts.--Each contract under this 
        section shall be for a term of at least 2 years but not more 
        than 5 years, as determined by the Secretary.
    ``(b) Enrollment.--
            ``(1) In general.--The Secretary shall establish a process 
        through which an eligible beneficiary shall make an election to 
        enroll with any eligible entity that has been awarded a 
        contract under this section and serves the geographic area in 
        which the beneficiary resides. In establishing such process, 
        the Secretary shall use rules similar to the rules for 
        enrollment and disenrollment with a Medicare+Choice plan under 
        section 1851.
            ``(2) Requirement of enrollment.--An eligible beneficiary 
        not enrolled in a Medicare+Choice plan under part C must enroll 
        with an eligible entity under this section in order to be 
        eligible to receive covered outpatient drugs under this title.
            ``(3) Enrollment in absence of election by eligible 
        beneficiary.--In the case of an eligible beneficiary that fails 
        to make an election pursuant to paragraph (1), the Secretary 
        shall provide, pursuant to procedures developed by the 
        Secretary, for the enrollment of such beneficiary with an 
        eligible entity that has a contract under this section that 
        covers the area in which such beneficiary resides.
            ``(4) Areas not covered by contracts.--The Secretary shall 
        develop procedures for the provision of covered outpatient 
        drugs under this title to eligible beneficiaries that reside in 
        an area that is not covered by any contract under this section.
            ``(5) Beneficiaries residing in different locations.--The 
        Secretary shall develop procedures to ensure that an eligible 
        beneficiary that resides in different regions in a year is 
        provided benefits under this section throughout the entire 
        year.
    ``(c) Awarding of Contracts.--
            ``(1) Number of contracts.--The Secretary shall, consistent 
        with the requirements of this part and the goal of containing 
        costs under this title, award in a competitive manner at least 
        2 contracts to offer a plan in an area, unless only 1 bidding 
        entity (and the plan offered by the entity) meet the minimum 
        standards specified under this part and by the Secretary.
            ``(2) Determination.--In determining which of the eligible 
        entities that submitted bids that meet the minimum standards 
        specified under this part and by the Secretary to award a 
        contract, the Secretary shall consider the comparative merits 
        of each bid, as determined on the basis of the past performance 
        of the entity and other relevant factors, with respect to--
                    ``(A) how well the entity (and the plan offered by 
                the entity) meet such minimum standards;
                    ``(B) the amount that the entity will charge the 
                Secretary for administering and delivering the benefits 
                under the contract;
                    ``(C) the proposed negotiated prices of covered 
                outpatient drugs and annual increases in such prices;
                    ``(D) prior experience of the entity in 
                administering a prescription drug benefit program;
                    ``(E) effectiveness of the entity and plan in 
                containing costs through pricing incentives and 
                utilization management; and
                    ``(F) such other factors as the Secretary deems 
                necessary to evaluate the merits of each bid.
            ``(3) Exception to conflict of interest rules.--In awarding 
        contracts under this part, the Secretary may waive conflict of 
        interest laws 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--
                            ``(i) purposes of the programs under this 
                        title; or
                            ``(ii) best interests of beneficiaries 
                        enrolled under this part; and
                    ``(B) permits a sufficient level of competition for 
                such contracts, promotes efficiency of benefits 
                administration, or otherwise serves the objectives of 
                the program under this part.
            ``(4) No administrative or judicial review.--The 
        determination of the Secretary to award or not award a contract 
        to an eligible entity with respect to a plan under this part 
        shall not be subject to administrative or judicial review.
    ``(d) Approval of Marketing Material and Application Forms.--The 
provisions of section 1851(h) shall apply to marketing material and 
application forms under this part in the same manner as such provisions 
apply to marketing material and application forms under part C.
    ``(e) Providing Information to Beneficiaries.--The Secretary shall 
provide for activities under this section to broadly disseminate 
information to medicare beneficiaries on the coverage provided under 
this section. Such activities shall be similar to the activities 
performed by the Secretary under section 1851(d).
    ``(f) Payments to Eligible Entities.--
            ``(1) In general.--The Secretary shall establish procedures 
        for making payments to an eligible entity under a contract 
        consistent with this subsection.
            ``(2) Risk requirement.--A portion of payments made to an 
        eligible entity under this section shall be based on 
        performance goals established by the Secretary, including the 
        following:
                    ``(A) Quality service.--The entity provides 
                eligible beneficiaries enrolled in the plan that is 
                covered by the contract under this part with quality 
                services, as measured by such factors as--
                            ``(i) sustained pharmacy network access;
                            ``(ii) timeliness and accuracy of service 
                        delivery in claims processing and card 
                        production;
                            ``(iii) pharmacy and member service support 
                        access;
                            ``(iv) response time in mail delivery 
                        service; and
                            ``(v) timely action with regard to appeals 
                        and current beneficiary service surveys.
                    ``(B) Quality clinical care.--The entity provides 
                such beneficiaries with quality clinical care, as 
                measured by such factors as providing--
                            ``(i) notification to such beneficiaries 
                        and to providers in order to prevent adverse 
                        drug reactions; and
                            ``(ii) specific clinical suggestions to 
                        improve health and patient and prescriber 
                        education as appropriate.
                    ``(C) Control of medicare costs.--The entity 
                contains costs to the Federal Supplementary Medical 
                Insurance Trust Fund as measured by generic 
                substitution rates, price discounts, and other factors 
                determined appropriate by the Secretary that do not 
                reduce the access of beneficiaries to medically 
                necessary covered outpatient drugs.
            ``(3) Percentage of payment tied to risk.--
                    ``(A) In general.--The Secretary shall determine 
                the percentage of the administrative payments to an 
                eligible entity that will be tied to the performance 
                goals.
                    ``(B) Limitation on risk to ensure program 
                stability.--In order to provide for program stability, 
                the Secretary may not establish a percentage to be 
                adjusted under this subsection at a level that 
                jeopardizes the ability of an eligible entity to 
                administer and deliver the benefits under this part or 
                administer and deliver such benefits in a quality 
                manner.
    ``(g) Cost-Sharing.--
            ``(1) Annual deductible.--Benefits under this section shall 
        not begin in a year until the eligible beneficiary has met a 
        $250 deductible.
            ``(2) Copayment.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                eligible beneficiary shall be responsible for making 
                payments in an amount not greater than 20 percent of 
                the cost (as stated in the contract) of any covered 
                outpatient drug that is provided to the beneficiary. 
                Pursuant to subsection (a)(4)(B), an eligible entity 
                may reduce the payment amount that an eligible 
                beneficiary is responsible for making to the entity.
                    ``(B) No copayment for generics.--The copayment 
                amount under subparagraph (A) shall be zero in the case 
                of a covered outpatient drug that is a drug approved 
                under section 505(j) of the Federal Food Drug and 
                Cosmetic Act.
    ``(h) Conditions for Awarding Contract.--The Secretary shall not 
award a contract to an eligible entity under subsection (a) unless the 
Secretary finds that the eligible entity is in compliance with such 
terms and conditions as the Secretary shall specify, including the 
following:
            ``(1) Quality and financial standards.--The eligible entity 
        meets quality and financial standards specified by the 
        Secretary.
            ``(2) Information.--The eligible entity provides the 
        Secretary with information that the Secretary determines is 
        necessary in order to carry out the bidding process under this 
        section, including data needed to implement subsection (a)(6) 
        and data regarding utilization, expenditures, and costs.
            ``(3) Education.--The eligible entity establishes 
        educational programs that meet the criteria established by the 
        Secretary pursuant to subsection (i)(1).
            ``(4) Procedures to ensure proper utilization and to avoid 
        adverse drug reactions.--The eligible entity has in place 
        procedures to ensure the--
                    ``(A) appropriate utilization by eligible 
                beneficiaries of the benefits to be provided under the 
                contract; and
                    ``(B) the avoidance of adverse drug reactions among 
                such beneficiaries, including problems due to 
                therapeutic duplication, drug-disease 
                contraindications, drug-drug interactions (including 
                serious interactions with nonprescription or over-the-
                counter drugs), incorrect drug dosage or duration of 
                drug treatment, drug-allergy interactions, and clinical 
                abuse and misuse.
            ``(5) Patient protections.--
                    ``(A) Access.--The eligible entity ensures that the 
                covered outpatient drugs are accessible and convenient 
                to eligible beneficiaries covered under the contract, 
                including by offering the services in the following 
                manner:
                            ``(i) Services during emergencies.--The 
                        offering of services 24 hours a day and 7 days 
                        a week for emergencies.
                            ``(ii) Contracts with retail pharmacies.--
                        The offering of services--
                                    ``(I) at a sufficient (as 
                                determined by the Secretary) number of 
                                retail pharmacies; and
                                    ``(II) to the extent feasible, at 
                                retail pharmacies located throughout 
                                the eligible entity's service area.
                    ``(B) Ensuring that beneficiaries are not 
                overcharged.--The eligible entity has procedures in 
                place to ensure that--
                            ``(i) the total charge for each covered 
                        outpatient drug dispensed to an eligible 
                        beneficiary enrolled in the plan covered by the 
                        contract does not exceed the negotiated price 
                        for the drug; and
                            ``(ii) the retail pharmacy dispensing the 
                        drug does not charge (or collect from) such 
                        beneficiary an amount that exceeds the 
                        beneficiary's obligation (as determined in 
                        accordance with the provisions of this part) of 
                        the negotiated price.
                    ``(C) Retail pharmacy meets minimum quality and 
                technology standards.--The eligible entity ensures that 
                any retail pharmacy that it contracts with to deliver 
                benefits under this part meets minimum quality and 
                technology standards (as established by the Secretary).
            ``(6) Rules relating to provision of benefits.--
                    ``(A) Provision of benefits.--In providing benefits 
                under a contract under this section, an eligible entity 
                may--
                            ``(i) employ mechanisms to provide benefits 
                        economically, including the use of--
                                    ``(I) formularies (pursuant to 
                                subparagraph (B));
                                    ``(II) alternative methods of 
                                distribution; and
                                    ``(III) generic drug substitution; 
                                and
                            ``(ii) use incentives to encourage eligible 
                        beneficiaries to select less costly means of 
                        receiving drugs.
                    ``(B) Formularies.--If an eligible entity uses a 
                formulary to contain costs under this Act--
                            ``(i) the eligible entity shall--
                                    ``(I) ensure participation of 
                                practicing physicians and pharmacists 
                                in the development of the formulary;
                                    ``(II) include in the formulary at 
                                least 1 drug from each therapeutic 
                                class from the drugs identified under 
                                section 2(b)(2) of the Essential 
                                Medicines for Medicare Act of 2002 and 
                                provide at least 1 generic equivalent, 
                                if available;
                                    ``(III) provide for coverage of 
                                otherwise covered non-formulary drugs 
                                when recommended by prescribing 
                                providers; and
                                    ``(IV) disclose to current and 
                                prospective beneficiaries and to 
                                providers in the service area the 
                                nature of the formulary restrictions, 
                                including information regarding the 
                                drugs included in the formulary, 
                                copayment amounts, and any difference 
                                in the cost-sharing for different types 
                                of drugs; but
                            ``(ii) nothing shall preclude an entity 
                        from--
                                    ``(I) requiring higher cost-sharing 
                                for drugs provided under clause 
                                (i)(III), subject to limits established 
                                in subsection (g)(2)(A), except that an 
                                entity shall provide for coverage of a 
                                nonformulary drug on the same basis as 
                                a drug within the formulary if such 
                                nonformulary drug is determined by the 
                                prescribing provider to be medically 
                                indicated;
                                    ``(II) educating prescribing 
                                providers, pharmacists, and 
                                beneficiaries about medical and cost 
                                benefits of formulary products; and
                                    ``(III) requesting prescribing 
                                providers to consider a formulary 
                                product prior to dispensing of a 
                                nonformulary drug, as long as such 
                                request does not unduly delay the 
                                provision of the drug.
            ``(7) Procedures to compensate pharmacists for 
        counseling.--The eligible entity shall compensate pharmacists 
        for providing the counseling described in subsection (i)(2)(B).
            ``(8) Clinical outcomes.--
                    ``(A) Requirement.--The eligible entity shall 
                comply with clinical quality standards as determined by 
                the Secretary.
                    ``(B) Development of standards.--The Secretary, in 
                consultation with appropriate medical specialty 
                societies, shall develop clinical quality standards 
                that are applicable to eligible entities. Such 
                standards shall be based on current standards of care.
            ``(9) Procedures regarding denials of care.--The eligible 
        entity has in place procedures to ensure--
                    ``(A) the timely review and resolution of denials 
                of care and complaints (including those regarding the 
                use of formularies under paragraph (6)) by enrollees, 
                or providers, pharmacists, and other individuals acting 
                on behalf of such individual (with the individual's 
                consent) in accordance with requirements (as 
                established by the Secretary) that are comparable to 
                such requirements for Medicare+Choice organizations 
                under part C;
                    ``(B) that beneficiaries are provided with 
                information regarding the appeals procedures under this 
section at the time of enrollment; and
                    ``(C) that providers receive information on the 
                entity's procedures for coverage of otherwise covered 
                non-formulary and alternative prescription drugs for 
                treatment of certain chronic conditions.
    ``(i) Educational Requirements To Ensure Appropriate Utilization.--
            ``(1) Establishment of program criteria.--The Secretary 
        shall establish a model for comprehensive educational programs 
        in order to assure the appropriate--
                    ``(A) prescribing and dispensing of covered 
                outpatient drugs under this section; and
                    ``(B) use of such drugs by eligible beneficiaries.
            ``(2) Elements of model.--The model established under 
        paragraph (1) shall include the following elements:
                    ``(A) On-line prospective review available 24 hours 
                a day and 7 days a week in order to evaluate each 
                prescription for drug therapy problems due to 
                duplication, interaction, or incorrect dosage or 
                duration of therapy.
                    ``(B) Consistent with State law, guidelines for 
                counseling eligible beneficiaries enrolled under a 
                contract under this section regarding--
                            ``(i) the proper use of prescribed covered 
                        outpatient drugs; and
                            ``(ii) interactions and contra-indications.
                    ``(C) Methods to identify and educate providers, 
                pharmacists, and eligible beneficiaries regarding--
                            ``(i) instances or patterns concerning the 
                        unnecessary or inappropriate prescribing or 
                        dispensing of covered outpatient drugs;
                            ``(ii) instances or patterns of substandard 
                        care;
                            ``(iii) potential adverse reactions to 
                        covered outpatient drugs;
                            ``(iv) inappropriate use of antibiotics;
                            ``(v) appropriate use of generic products; 
                        and
                            ``(vi) the importance of using covered 
                        outpatient drugs in accordance with the 
                        instruction of prescribing providers.
    ``(j) Protection of Patient Confidentiality.--Insofar as an 
eligible organization maintains individually identifiable medical 
records or other health information regarding enrollees under a 
contract entered into under this section, the organization shall--
            ``(1) safeguard the privacy of any individually 
        identifiable enrollee information;
            ``(2) maintain such records and information in a manner 
        that is accurate and timely;
            ``(3) assure timely access of such enrollees to such 
        records and information; and
            ``(4) otherwise comply with applicable laws relating to 
        patient confidentiality.
    ``(k) Definitions.--In this section:
            ``(1) Covered outpatient drug.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `covered outpatient drug' 
                means prescription drugs for treatment of certain 
                chronic conditions (as defined in section 1861(uu)(1)).
                    ``(B) Exclusion.--The term `covered outpatient 
                drug' does not include any product--
                            ``(i) which may be distributed to 
                        individuals without a prescription;
                            ``(ii) when furnished as part of, or as 
                        incident to, a diagnostic service or any other 
                        item or service for which payment may be made 
                        under this title;
                            ``(iii) that was covered under this title 
                        on the day before the date of enactment of the 
                        Essential Medicines for Medicare Act of 2002; 
                        or
                            ``(iv) that is a therapeutically equivalent 
                        replacement for a product described in clause 
                        (ii) or (iii), as determined by the Secretary.
            ``(2) Eligible beneficiary.--The term `eligible 
        beneficiary' means an individual that is enrolled under part B 
        of this title.
            ``(3) Eligible entity.--The term `eligible entity' means 
        any entity that the Secretary determines to be appropriate, 
        including--
                    ``(A) pharmaceutical benefit management companies;
                    ``(B) wholesale and retail pharmacist delivery 
                systems;
                    ``(C) insurers;
                    ``(D) other entities; or
                    ``(E) any combination of the entities described in 
                subparagraphs (A) through (D).''.
            (2) No application to regular part b deductible.--Section 
        1833(b) of such Act (42 U.S.C. 1395l(b)) is amended--
                    (A) in paragraph (1), by inserting ``or for 
                prescription drugs for treatment of certain chronic 
                conditions'' after ``section 1861(s)(10)(A)''; and
                    (B) in paragraph (2), by inserting ``and shall not 
                apply with respect to prescription drugs for treatment 
                of certain chronic conditions' after ``section 
                1861(kk)))''.
            (3) Payment conforming amendment.--Section 1832(a) of such 
        Act (42 U.S.C. 1395k(a)) is amended--
                    (A) in paragraph (2)(A), by striking ``and (I)'' 
                and inserting ``(I), and (K)'';
                    (B) by striking ``and'' at the end of paragraph 
                (8);
                    (C) by striking the period at the end of 
                subparagraph (9) and inserting ``; and''; and
                    (D) by adding at the end the following new 
                paragraph:
            ``(10) with respect to prescription drugs for treatment of 
        certain chronic conditions, the amounts provided under section 
        1849;''.
    (d) Analysis of Benefit.--
            (1) In general.--The Secretary of Health and Human Services 
        shall enter into an arrangement with the Institute of Medicine 
        of the National Academy of Sciences under which the Institute 
        on an ongoing basis collects and analyzes data, and submits 
        annual reports to the Secretary and Congress, on--
                    (A) the effectiveness of the benefits provided 
                under the amendments made by this section in reducing 
                demand for acute medical services;
                    (B) the annual cost of the benefits and the annual 
                savings in acute medical services; and
                    (C) additional diagnoses, and additional 
                prescription drugs, for which such benefits should be 
                provided, using the criteria described in section 
                2(b)(2)(A) of this Act.
            (2) Consultation.--In carrying out paragraph (1)(C), the 
        Secretary shall establish a process through which health care 
        providers, advocacy groups, and other interested parties may 
        submit evidence to the Institute of Medicine and the Institute 
        shall consider such evidence.
            (3) Considerations.--Analyses under this subsection shall 
        consider both the short term and long term benefits, and costs 
        to the medicare program of any change in benefits.
            (4) Secretarial recommendations.--The Secretary, taking 
        into account the annual reports submitted under this 
        subsection, may submit to Congress recommendations regarding 
        changes in the chronic conditions for which prescription drug 
        coverage is available under the medicare program.
            (5) Hearings.--The Committee on Ways and Means and the 
        Committee on Commerce of the House of Representatives and the 
        Committee on Finance of the Senate shall conduct hearings to 
        consider the reports and recommendations submitted under this 
        subsection before making any change in covered prescription 
        drug benefits under the medicare program.
            (6) Funding.--From funds appropriated to the Department of 
        Health and Human Services for each fiscal year (beginning with 
        fiscal year 2004), the Secretary shall provide for such funding 
        as the Secretary determines necessary for the conduct of the 
        analyses conducted under this subsection.
    (e) Effective Date.--Benefits shall first be made available under 
the amendments made by this section for prescription drugs furnished on 
or after January 1, 2004.

SEC. 3. MEDICAID COVERAGE OF MEDICARE PRESCRIPTION DRUG COST SHARING 
              FOR SLMBS.

    Section 1902(a)(10)(E)(iii) of the Social Security Act (42 U.S.C. 
1396a(a)(10)(E)(iii)) by inserting ``and medicare cost-sharing 
described in subparagraphs (B) and (C) of section 1905(p)(3) with 
respect to the deductible and copayment described in section 1849(g)'' 
after ``section 1905(p)(4),''.

SEC. 4. DISEASE MANAGEMENT SERVICES.

    Title XVIII of the Social Security Act is amended by inserting 
after section 1866B the following new section:

                     ``disease management services

    ``Sec. 1866C. (a) In General.--
            ``(1) Program authority.--The Secretary, beginning January 
        1, 2003, may implement a program (in this section referred to 
        as the `program') in accordance with the provisions of this 
        section under which certain eligible individuals may, in 
        appropriate circumstances, receive disease management services 
        from entities designated by the Secretary with respect to 
        diagnoses that the Secretary determines are amenable to such 
        management.
            ``(2) Administration by contract.--Except as otherwise 
        specifically provided, the Secretary may administer the program 
        under this section in accordance with section 1866B, including 
        subsection (b)(2) of such section (relating to the discretion 
        of the Secretary as to the scope of the program).
    ``(b) Individuals Who May Receive Disease Management Services.--No 
individual shall be eligible for enrollment in a disease management 
program under this section unless the Secretary finds the following 
with respect to the individual:
            ``(1) Diagnosis and related characteristics.--
                    ``(A) In general.--The individual has been 
                diagnosed with congestive heart failure, chronic 
                obstructive pulmonary disease, diabetes, hypertension, 
                rheumatoid arthritis, or major depression.
                    ``(B) Additional factors.--Where required by the 
                Secretary, the individual also has certain clinical 
                characteristics or conditions, exhibits certain 
                patterns of utilization, or manifests other factors 
                indicating the need for and potential effectiveness of 
                disease management.
            ``(2) Referral by qualified individual or entity.--The 
        individual has been referred for consideration for such 
        services by an individual or entity furnishing health care 
        items or services, or by an entity administering benefits under 
        this act.
    ``(c) Procedures to Facilitate Enrollment.--The Secretary shall 
develop and implement procedures designed to facilitate enrollment of 
eligible individuals in the program under this section.
    ``(d) Enrollment of Individuals With Disease Management 
Organizations.--
            ``(1) Effective date and duration.--Enrollment of an 
        individual in the program under this section shall remain in 
        effect for 1 month (or such longer period as the Secretary may 
        specify), and shall be automatically renewed for additional 
        periods, unless terminated in accordance with such procedures 
        as the Secretary shall establish by regulation.
            ``(2) Limitation on reenrollment.--The Secretary may 
        establish limits on an individual's eligibility to reenroll in 
        the program under this section if the individual has 
disenrolled from the program more than once during a specified time 
period.
    ``(e) Disease Management Requirement.--Notwithstanding any other 
provision of this title, the Secretary may provide that an individual 
enrolled in the program under this section may be entitled to payment 
under this title for any specified health care items or services only 
if the items or services have been furnished by the disease management 
organization, or coordinated through the disease management services 
program. Under such provision, the Secretary shall prescribe exceptions 
for emergency medical services as described in section 1852(d)(3), and 
other exceptions determined by the Secretary for the delivery of timely 
and needed care.
    ``(f) Disease Management Services.--
            ``(1) In general.--Subject to the cost-effectiveness 
        criteria specified in subsection (b)(1), disease management 
        services provided to an individual under this section may 
        include--
                    ``(A) initial and periodic health screening and 
                assessment;
                    ``(B) management (including coordination with other 
                providers) of, and referral for, medical and other 
                health services related to the managed diagnosis (which 
                may include referral for provision of such services by 
                the disease management organization);
                    ``(C) monitoring and control of medications 
                (including coordination with the whatever entity may be 
                managing prescription drug benefit for the individual 
                under this title);
                    ``(D) patient education and counseling;
                    ``(E) nursing or other health professional home 
                visits, as appropriate;
                    ``(F) providing access for consultations by 
                telephone with physicians or other appropriate medical 
                professionals, including 24-hour availability for 
                emergency consultations;
                    ``(G) managing and facilitating the transition to 
                other care arrangements in preparation for termination 
                of the disease management enrollment; and
                    ``(H) such other services for which payment would 
                not otherwise be made under this title as the Secretary 
                shall determine to be appropriate.
            ``(2) Variations in service packages.--The types and 
        combinations of disease management services furnished under 
        agreements under this section may vary (as permitted or 
        required by the Secretary) according to the types of diagnoses, 
        conditions, patient profiles being managed, expertise of the 
        disease management organization, and other factors the 
        Secretary finds appropriate.
            ``(3) Reduction or elimination of cost-sharing.--
        Notwithstanding any other provision of law, subject to the 
        cost-effectiveness criteria specified in subsection (b)(1), the 
        Secretary may provide for the reduction or elimination of 
        beneficiary cost-sharing (such as deductibles, copayments, and 
        coinsurance) with respect to any of the items or services 
        furnished under this title (other than those furnished under a 
        service package developed under paragraph (2)), and may limit 
        such reduction or elimination to particular service areas.
    ``(g) Agreements With Disease Management Organizations.--
            ``(1) Entities eligible.--Entities qualified to enter into 
        agreements with the Secretary for the provision of disease 
        management services under this section include entities that 
        have demonstrated the ability to meet the performance standards 
        and other criteria established by the Secretary with respect 
        to--
                    ``(A) the management of each diagnosis and 
                condition with respect to which the entity, if 
                designated, would furnish disease management services 
                under this section; and
                    ``(B) the implementation of each disease management 
                approach that the entity, if designated, would 
                implement under this section.
            ``(2) Conditions of participation.--In order to be eligible 
        to provide disease management services under this section, an 
        entity shall--
                    ``(A) have in effect an agreement with the 
                Secretary setting forth such obligations of the entity 
                as a disease management organization under this section 
                as the Secretary shall prescribe;
                    ``(B) meet the standards established by the 
                Secretary under subsection (h); and
                    ``(C) meet such other conditions as the Secretary 
                may establish.
            ``(3) Secretary's option for noncompetitive designation.--
        The Secretary may designate an entity to provide disease 
        management services under this section without regard to the 
        requirements of section 5 of title 41, United States Code.
    ``(h) Standards.--
            ``(1) Quality.--The Secretary shall establish standards 
        for, and procedures for assessing, the quality of care provided 
        by disease management organizations under this section, which 
        shall include--
                    ``(A) performance standards with respect to the 
                processes or outcomes of health care or the health 
                status of enrolled individuals, including procedures 
                for establishing a baseline and measuring changes in 
                health care processes or health outcomes with respect 
                to managed diseases or health conditions;
                    ``(B) a requirement that the organization meet such 
                licensure and other accreditation standards as the 
                Secretary may find appropriate; and
                    ``(C) such other quality standards, including 
                patient satisfaction, as the Secretary may find 
                appropriate.
            ``(2) Cost management.--The Secretary shall establish a 
        performance standard with respect to management or reduction of 
        the aggregate costs of health care items and services related 
        to managed health conditions furnished to enrolled individuals, 
        including procedures for establishing a baseline and measuring 
changes in costs for such items and services.
    ``(i) Payment.--
            ``(1) Terms of payment.--The Secretary may negotiate or 
        otherwise establish payment terms and rates for service 
        packages developed under subsection (f)(2).
            ``(2) Withholding of payments.--An agreement under 
        subsection (g) may provide that the Secretary may withhold up 
        to 10 percent of the amount due a disease management 
        organization under the basis of payment established under 
        paragraph (1) until such time as such organization meets a 
        standard or standards specified in such agreement.''.
    (b) Coverage of Disease Management Services as a Part B Medical 
Service.--
            (1) In general.--Section 1861(s) of the Social Security Act 
        (42 U.S.C. 1395x(s)) is amended--
                    (A) in the second sentence, by redesignating 
                paragraphs (16) and (17) as clauses (i) and (ii), 
                respectively; and
                    (B) in the first sentence--
                            (i) in paragraph (14), by striking ``and'' 
                        at the end;
                            (ii) in paragraph (15), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by inserting after paragraph (15) the 
                        following new paragraph:
            ``(16) disease management services furnished in accordance 
        with section 1866C.''.
            (2) Part b coinsurance and deductible not applicable to 
        disease management services.--
                    (A) Coinsurance.--Section 1833(a)(1) of such Act 
                (42 U.S.C. 1395l(a)(1)) is amended--
                            (i) by striking ``and (U)'' and inserting 
                        ``(U)''; and
                            (ii) by inserting before the semicolon at 
                        the end the following: ``, and (V) with respect 
                        to disease management services described in 
                        section 1861(s)(16), the amounts paid shall be 
                        100 percent of the payment amounts established 
                        under section 1866C''.
                    (B) Deductible.--The first sentence of section 
                1833(b) of such Act (42 U.S.C. 1395l(b)) is amended--
                            (i) by striking ``and (6)'' and inserting 
                        ``(6)''; and
                            (ii) by inserting before the period at the 
                        end the following: ``, and (7) such deductible 
                        shall not apply with respect to disease 
                        management services (as described in section 
                        1861(s)(16))''.
                                 <all>