[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 803 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 803
To amend title XVIII of the Social Security Act to make the Medicare
Program more competitive and efficient, to extend the solvency of the
Medicare Program, to provide for a prescription drug benefit under the
Medicare Program, to improve quality of care, to make medicare
supplemental insurance (Medigap) more affordable, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 28, 2001
Mr. Stark introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on Energy
and Commerce, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend title XVIII of the Social Security Act to make the Medicare
Program more competitive and efficient, to extend the solvency of the
Medicare Program, to provide for a prescription drug benefit under the
Medicare Program, to improve quality of care, to make medicare
supplemental insurance (Medigap) more affordable, 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; REFERENCES IN ACT; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Medicare
Modernization and Solvency Act of 2001''.
(b) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in this Act an amendment is expressed
in terms of an amendment to or repeal of a section or other provision,
the reference shall be considered to be made to that section or other
provision of the Social Security Act.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; references in act; table of contents.
TITLE I--MAKING MEDICARE MORE COMPETITIVE AND EFFICIENT
Subtitle A--Competitive Defined Benefit
Sec. 101. Competitive defined benefit.
Subtitle B--Medicare Fee for Service Quality Improvement
Sec. 111. Care coordination services.
Sec. 112. Establishment of medicare home health care case managers for
long term home health spells of illness.
Sec. 113. Additional payment amount to rural providers of services who
furnish preventive and case manager
services.
Sec. 114. Disease management services.
Sec. 115. Provider and physician collaboration to furnish a bundled,
coordinated set of services.
Sec. 116. Demonstration projects to increase quality of information
provided to medicare beneficiaries with
respect to treatment options.
Sec. 117. Administration of certain private sector purchasing and
quality improvement programs.
Sec. 118. Reports to Congress on private sector purchasing and quality
improvement programs.
Subtitle C--Immediate and Long-Term Payment Reforms for Medicare Fee
for Service
Sec. 121. Competitive acquisition of items and services.
Sec. 122. Preferred participants.
Sec. 123. Program to improve outcomes and reduce patient morbidity and
mortality.
Sec. 124. Authority to impose sustainable growth rate limitations on
payment for certain medicare items and
services.
Sec. 125. Authority to negotiate payment rates in certain areas (most
favored customer authority) and expand
inherent reasonableness authority.
Sec. 126. Authorization of basing medicare payment for hospital
outpatient department services on payment
rates for similar services provided outside
the hospital setting.
Sec. 127. Medicare single, unified prospective payment system for post-
care hospital services.
Sec. 128. Medicare payment adjustment to reflect deviations from
generally accepted practice in overserving
or underserving medicare beneficiaries.
Sec. 129. Promoting the use of cost effective medicare noninstitutional
services through waiver of benefit
limitations.
Sec. 130. Increased flexibility in contracting for medicare claims
processing.
Sec. 131. Special provisions for funding of activities related to
certain overpayment recoveries and provider
enrollment and reverification of
eligibility.
Sec. 132. Establishment of medicare administrative fee for submission
of paper claims.
Subtitle D--Long-Term Hospital Provisions
Sec. 141. Findings and purposes of subtitle.
Sec. 142. Reductions in medicare capital payments in case of excess bed
supply in hospitals without a plan of
adjustment.
Sec. 143. Special payments to essential hospitals and development of
economic recovery plan.
Sec. 144. Uniform hospital cost reporting.
Sec. 145. Medicare payments for inpatient hospital services involving
emergency care; National Conference on
Emergency Care.
TITLE II--MODERNIZING MEDICARE BENEFITS
Subtitle A--Prescription Drug Benefit
Sec. 201. Optional medicare outpatient prescription medicine program
under title XVIII.
``Part D--Prescription Medicine Benefit for the Aged and Disabled
``Sec. 1859. Eligibility; optional enrollment; coverage.
``Sec. 1859A. Benefits.
``Sec. 1859B. Premiums.
``Sec. 1859C. Federal Medicare Prescription Medicine Trust
Fund.
``Sec. 1859D. Administration; quality assurance.
``Sec. 1859E. Compensation for employers covering retiree
medicine costs.
``Sec. 1859F. Promotion of pharmaceutical research on break-
through medicines while providing program
cost containment.
``Sec. 1859G. Coordination with comprehensive State
prescription drug programs.
Sec. 202. Provision of medicare outpatient prescription drug coverage
under the Medicare+Choice program.
Sec. 203. Transitional assistance for low income beneficiaries.
Sec. 204. Medigap revisions.
Sec. 205. Rate reduction for medicare eligible Federal annuitants.
Sec. 206. Part B payment for outpatient drugs based on actual
acquisition cost.
Sec. 207. Coverage of home infusion drug therapy services.
Sec. 208. Expansion of membership of MedPAC to 19.
Sec. 209. GAO ongoing studies and reports on program; miscellaneous
reports.
Subtitle B--Improving Benefits and Preventive Services
Sec. 221. Authority to provide preventive services under part B of the
medicare program.
Sec. 222. Smoking cessation demonstration.
Sec. 223. Outreach to prevent blindness.
Sec. 224. Coverage of substitute adult day care services under
medicare.
Subtitle C--Rationalizing Payments and Cost Sharing and Medigap
Sec. 231. Extension of buy-down of copayment on hospital outpatient
services.
Sec. 232. Indexing deductible to inflation.
Sec. 233. Medicare direct supplemental insurance option.
Sec. 234. Increasing access to medigap for disabled and ESRD
beneficiaries.
Subtitle D--Improved Assistance to Low-Income Beneficiaries
Sec. 241. Increase in slmb eligibility to 135 percent of poverty;
presumptive enrollment.
Sec. 242. Mechanism promoting provision of medicare cost-sharing
assistance to individuals who become
eligible for such assistance.
Subtitle E--Medicare Early Access and Tax Credits
Part I--Access to Medicare Benefits for Individuals 62-to-65 Years of
Age
Sec. 251. Access to medicare benefits for individuals 62-to-65 years of
age.
``Part E--Purchase of Medicare Benefits by Certain Individuals Age 62-
to-65 Years of Age
``Sec. 1860. Program benefits; eligibility.
``Sec. 1860A. Enrollment process; coverage.
``Sec. 1860B. Premiums.
``Sec. 1860C. Payment of premiums.
``Sec. 1860D. Medicare early access trust fund.
``Sec. 1860E. Oversight and accountability.
``Sec. 1860F. Administration and miscellaneous.
Part II--Access to Medicare Benefits for Displaced Workers 55-to-62
Years of Age
Sec. 252. Access to medicare benefits for displaced workers 55-to-62
years of age.
subpart a--amendments to the employee retirement income security act of
1974
Sec. 253. Cobra continuation benefits for certain retired workers who
subpart b--amendments to the public health service act
Sec. 254. Cobra continuation benefits for certain retired workers who
subpart c--amendments to the internal revenue code of 1986
Sec. 255. Cobra continuation benefits for certain retired workers who
lose retiree health coverage.
Part IV--50 Percent Credit Against Income Tax for Medicare Buy-in
Premiums and for Certain Cobra Continuation Coverage Premiums
Sec. 256. 50 percent credit for medicare buy-in premiums and for
certain cobra continuation coverage
premiums.
TITLE III--PROTECTING AND EXTENDING MEDICARE SOLVENCY
Subtitle A--Dedication of 20 Percent of Projected Budget Surplus to
Medicare
Sec. 301. Transfers to extend medicare solvency.
Sec. 302. Medicare solvency debt reduction reserve.
Sec. 303. Protection of medicare solvency debt reduction reserve.
Subtitle B--Additional Revenues
Sec. 311. Increased Federal excise taxes on tobacco products.
Sec. 312. Tobacco settlement deposit.
Sec. 313. Excess profits from medicare tax.
Sec. 314. Medicare part B percent subsidy included in gross income.
Sec. 315. Dedication of Federal estate and gift tax receipts, tobacco
tax receipts, and other revenues to
Medicare.
TITLE I--MAKING MEDICARE MORE COMPETITIVE AND EFFICIENT
Subtitle A--Competitive Defined Benefit
SEC. 101. COMPETITIVE DEFINED BENEFIT.
(a) Payments to Medicare+Choice Organizations Based on Risk-
Adjusted Bids.--
(1) In general.--Section 1853(a)(1) (42 U.S.C. 1395w-
23(a)(1)) is amended by striking ``the Secretary shall make''
and all that follows and inserting ``the Secretary shall make,
to each Medicare+Choice organization, with respect to coverage
of an individual for a month under this part in a
Medicare+Choice payment area, separate monthly payments with
respect to benefits under parts A and B combined, and (as
applicable) with respect to benefits under part D, as
determined in accordance with this section.''.
(2) Annual determination and announcement of payment
factors.--
(A) In general.--Section 1853(b) (42 U.S.C. 1395w-
23(b)) is amended--
(i) in paragraph (1), by striking ``the
calendar year concerned'' and all that follows
and inserting ``the calendar year concerned,
the following factors, as defined in paragraph
(4):
``(A) national monthly per capita costs,
``(B) the benchmark amount for each payment area,
and
``(C) the health status and demographic adjustment
factors to be used in making payment for individual
enrollees.'';
(ii) in paragraph (3), by striking
``monthly adjusted'' and all that follows and
inserting ``such estimates, factors, and
amounts''; and
(iii) by adding at the end the following
new paragraphs:
``(4) Factors used in adjusting bids for medicare+choice
organizations and in determining enrollee premiums.--
``(A) In general.--Subject to paragraph (5), the
Secretary shall use, for purposes of adjusting plan
bids and determining enrollee premiums under this part,
the factors specified in this paragraph, which
factors--
``(i) shall be calculated separately for
benefits under parts A and B combined, and
under part D; and
``(ii) shall be calculated separately for--
``(I) beneficiaries who are aged or
disabled; and
``(II) beneficiaries who have end
stage renal disease until such time as
the Secretary establishes an integrated
risk adjustment system for the groups
specified in subclause (I) and this
subclause.
``(B) National monthly per capita costs.--
``(i) In general.--The term `national
monthly per capita costs' means (subject to
clause (ii)) the projected national, monthly,
per capita costs of benefits under this title
and associated claims processing costs for
individuals entitled to benefits under part A
and individuals enrolled in the program under
part B.
``(ii) Exclusion of dsh and gme costs.--The
calculation of costs under clause (i) shall not
take into account any amounts attributable to--
``(I) payment adjustments under
section 1886(d)(5)(F) for hospitals
serving a significantly
disproportionate number of low income
patients;
``(II) payments for costs of
graduate medical education under
section 1886(h); or
``(III) payments for indirect costs
of medical education under section
1886(d)(5)(B).
``(C) Benchmark amount.--
``(i) The term `benchmark amount' means,
for a payment area, an amount equal to the
greater of--
``(I) except as provided in clause
(ii), \1/12\ of the annual
Medicare+Choice capitation rate that
would have applied in that payment area
under section 1853(c) (as in effect
prior to the enactment of the Medicare
Modernization and Solvency Act of
2001); or
``(II) the product of 96 percent of
national monthly per capita costs and
the ratio, for a previous period, of--
``(aa) monthly per capita
costs of Medicare benefits for
individuals entitled to
benefits under part A and
individuals enrolled in the
program under part B in that
payment area (adjusted for
relative risk due to health
status and demographic
adjustment factors) to--
``(bb) the weighted average
for all payment areas of such
monthly per capita costs.
``(ii) If the amount calculated under
clause (i)(I) for a year for all payment areas
is equal to either the minimum amount or the
blended capitation rate, for all subsequent
years the Secretary shall not calculate the
rates described in that clause and the amount
under such clause instead shall be equal to the
product of 96 percent of national monthly per
capita costs and the ratio of--
``(I) the annual Medicare+Choice
capitation rate for the last year that
such rates were calculated under such
clause to--
``(II) the weighted average of the
area-specific Medicare+Choice
capitation rates for that same year.
``(D) Health status and demographic adjustment
factors.--The term `health status and demographic
adjustment factors' means health status and such other
risk factors as age, disability status, gender,
institutional status, and such other factors as the
Secretary determines to be appropriate, so as to ensure
actuarial equivalence. The Secretary may add to,
modify, or substitute for such factors, if such changes
will improve the determination of actuarial
equivalence, and in that event will make comparable
adjustments to the benchmark amounts.''.
(B) Conforming amendment.--Section 1853(c)(7) (42
U.S.C. 1395w-23(c)(7)) is relocated and redesignated as
section 1853(b)(5), indented accordingly, and amended
by striking all that follows ``shall adjust
appropriately'' and inserting ``national monthly per
capita costs for the following year''.
(3) Submission of bids by medicare+choice organizations.--
(A) In general.--Section 1853(c) (42 U.S.C. 1395w-
23(c)) is amended to read as follows:
``(c) Submission of Bids by Medicare+Choice Organizations.--
``(1) In general.--Each Medicare+Choice organization shall
submit to the Secretary, in a form and manner specified by the
Secretary and for each Medicare+Choice plan which it intends to
offer in a service area in the following year--
``(A) by July 1, notice of such intent and
information on the service area and plan type for each
plan; and
``(B) by August 1--
``(i) the information described in
paragraph (2) for the type of plan involved;
and
``(ii) the enrollment capacity (if any) in
relation to the plan and area.
``(2) Information required for competitive plans.--The
information described in this paragraph, which shall be
submitted separately for combined part A and part B benefits,
and for part D benefits, is as follows:
``(A) The monthly plan bid for the provision of
benefits.
``(B) The actuarial value of the reduction in cost-
sharing for Medicare benefits included in each plan bid
(which value shall not exceed 15 percent of the value
of the balance of the bid).
``(C) A description of the cost-sharing for
Medicare benefits that will apply and the actuarial
value of such cost-sharing.
``(D) For each supplemental benefits package
offered (if any), the adjusted community rate of the
package, the monthly supplemental premium, a
description of cost-sharing and such other information
as the Secretary considers necessary.
``(E) The assumptions used with respect to numbers,
in each payment area, of--
``(i) enrolled individuals who are aged or
disabled; and
``(ii) enrolled individuals who have end-
stage renal disease.''.
(B) Conforming amendments.--
(i) Paragraphs (3) and (5) of section
1854(a) (42 U.S.C. 1395w-24(a)) are relocated
and redesignated as paragraphs (3) and (4),
respectively, of section 1853(c) (42 U.S.C.
1395w-23(c)), as amended.
(ii) Section 1853(c)(3)(B) (42 U.S.C.
1395w-23(c)(3)(B)), as redesignated, is amended
by striking ``beneficiary''.
(iii) Section 1853(c)(4)(B) (42 U.S.C.
1395w-23(c)(3)(B)), as redesignated, is amended
by striking ``or subparagraphs (A)(ii) and (B)
of paragraph (4)''.
(4) Secretary's determination of payment amount.--Section
1853 (42 U.S.C. 1395w-23) is further amended--
(A) by redesignating subsections (d) through (h) as
subsections (e) through (i), respectively; and
(B) by inserting after subsection (c) the following
new subsection:
``(d) Secretary's Determination of Payment Amount.--
``(1) Conversion to normalized bids.--The Secretary shall
adjust each monthly plan bid submitted under subsection (c) for
the relative risk of enrollees in such plan based on health
status and demographic adjustment factors.
``(2) Comparison to plan benchmark amount.--
``(A) Determination of plan benchmark.--The
Secretary shall determine, using the plan enrollment
assumptions included in the organization's bid, a plan
benchmark amount for each plan equal to--
``(i) (until such time as the Secretary
establishes an integrated risk adjustment
system for individuals who are aged or disabled
and for individuals who have end-stage renal
disease)--
``(I) the product of the weighted
average of the benchmark amounts for
the payment areas included in the
plan's service area for individuals who
are aged or disabled and the number of
such individuals in the plan, plus
``(II) the product of the weighted
average of the benchmark amounts for
the payment areas included in the
plan's service area for individuals who
have end-stage renal disease and the
number of such individuals in the plan,
(divided by the total number of individuals in
subclauses (I) and (II); and
``(ii) (after such time) the weighted
average of the benchmark amounts for the
payment areas included in the plan's service
area.
``(B) Comparison to benchmark; determination of
payment amount.--The monthly payment to a
Medicare+Choice organization with respect to each
individual enrolled in a plan shall be set as follows:
``(i) If bid does not exceed benchmark.--If
the normalized bid determined under paragraph
(1) does not exceed the plan benchmark amount
determined under subparagraph (A), the monthly
payment shall be the normalized bid, adjusted
to account for the health status and
demographic adjustment factors of the
individual enrollee.
``(ii) If bid exceeds benchmark.--If the
normalized bid determined under paragraph (1)
exceeds the plan benchmark amount determined
under subparagraph (B), the monthly payment
shall be the normalized bid, adjusted as
described in clause (i), minus the monthly
excess premium determined under section
1854.''.
(b) Premiums.--
(1) Determination of premium amount.--Section 1854 (42
U.S.C. 1395-4) is amended--
(A) by striking subsection (a) and redesignating
subsections (b) and (c) as subsections (a) and (b),
respectively; and
(B) by adding after subsection (b) as redesignated
the following new subsection:
``(c) Determination of Medicare Premium Reduction and Excess
Premium.--
``(1) In general.--Subject to paragraph (2), the Secretary
shall subtract the normalized bid (determined under section
1853(d)(1)) from the plan's benchmark amount (determined under
section 1853(d)(2)) to determine the Medicare premium reduction
or monthly excess premium for plan enrollees.
``(2) Adjustment.--If the difference between the normalized
bid and the plan's benchmark amount--
``(A) is a positive amount, 75 percent of that
amount shall be equal to--
``(i) the monthly Medicare premium
reduction for individuals enrolled in the plan
(up to the entire amount of the premium for
part B or part D, as applicable); and
``(ii) the remainder, if any, under clause
(i) shall be equal to the additional reduction
in the actuarial value of plan cost-sharing for
plan enrollees; or
``(B) is a negative amount, the absolute value of
that amount shall equal the monthly excess premium for
individuals enrolled in the plan.''.
(2) Limitation on enrollee liability.--
(A) For basic benefits.--Section 1854(e)(1) (42
U.S.C. 1395w-4(e)(1)) is amended to read as follows:
``(1) For basic benefits.--The sum of--
``(A) the actuarial value of the deductibles,
coinsurance, and copayments applicable on average to
individuals enrolled under this part with a
Medicare+Choice plan described in section 1851(a)(2)(A)
or (C) of an organization with respect to benefits
described in section 1852(a)(1);
``(B) the reduction in cost sharing included in the
plan bid;
``(C) the portion, if any, of the monthly
supplemental premium that is in lieu of plan cost-
sharing for Medicare benefits; and
``(D) any additional reduction in cost-sharing
under subsection (c)(2)(A) (determined separately with
respect to benefits under parts A and B, and benefits
under part D) must equal the actuarial value of the
deductibles, coinsurance, and copayments that would be
applicable on average to individuals entitled to such
benefits if they were not members of a Medicare+Choice
organization for the year (adjusted as determined
appropriate by the Secretary to account for geographic
differences and for plan cost and utilization
differences).''.
(B) For supplemental benefits.--Section 1854(e)(2)
(42 U.S.C. 1395w-4(e)(2)) is amended--
(i) by striking ``section 1851(a)(2)(A)''
and inserting ``subparagraph (A) or (C) of
section 1851(a)(2)'';
(ii) by striking ``(multiplied by 12)'';
and
(iii) by striking ``may not exceed'' and
inserting ``must equal''.
(c) Other Changes in Plan Design.--
(1) Allowing plans to include cost sharing reduction in
their basic benefits.--Section 1852(a)(1)(B) (42 U.S.C. 1395w-
22(a)(1)(B)) is amended to read as follows:
``(B) at plan option, reduction in cost-sharing for
part A and part B benefits, or part D benefits, that
would otherwise be applicable (the actuarial value of
such reduction however shall not exceed 15 percent of
the value of the portion of the bid related to combined
part A and part B benefits, or part D benefits, as
applicable).''.
(2) Elimination of mandatory supplemental benefits.--
Section 1852(a)(3) (42 U.S.C. 1395w-22(a)(3)) is amended by
striking subparagraph (A) and redesignating subparagraphs (B)
and (C) and subparagraphs (A) and (B), respectively.
(d) Conforming Amendments.--
(1) Premium reductions.--
(A) Under part b.--
(i) Section 1839(a)(2) (42 U.S.C.
1395r(a)(2)) is amended by striking ``shall''
and all that follows and inserting ``shall be
the amount determined under paragraph (3),
adjusted as required in accordance with
subsections (b), (c), and (f), and thereafter
further modified as required to comply with
section 1854(c)(2)(A).''.
(ii) Section 1840 (42 U.S.C. 1395s) is
amended by adding at the end the following:
``(i) The Secretary shall provide for necessary adjustments of the
Medicare premium for Medicare+Choice enrollees determined under section
1854(c)(2)(A). This premium adjustment may be provided directly or as
an adjustment to Social Security, Railroad Retirement and Civil Service
Retirement benefits, as appropriate, as the Secretary determines
feasible with the concurrence of such agencies.''.
(B) Under part d.--
(i) Section 1859D(a)(2)(B) is amended by
inserting ``thereafter further modified as
required to comply with section
1854(c)(2)(A),'' before ``and rounded''.
(ii) Section 1859D(b)(1) is amended by
adding at the end the following new
subparagraph:
``(C) The Secretary shall provide for necessary
adjustments of the Medicare premium for Medicare+Choice
enrollees determined under section 1854(c)(2)(A). This
premium adjustment may be provided directly or as an
adjustment to Social Security, Railroad Retirement and
Civil Service Retirement benefits, as appropriate, as
the Secretary determines feasible with the concurrence
of such agencies.''.
(2) Appropriations for government contribution.--Section
1844(a)(1) (42 U.S.C. 1395w(a)(1)) is amended by adding after
subparagraph (B) the following new subparagraph:
``(C) an adjustment for the Government contribution
to reflect the savings to the Trust Fund from
enrollment in Medicare+Choice plans by beneficiaries
who receive monthly Medicare premium reductions in
accordance with section 1854(c)(2)(A).''.
(3) Section 1851(b)(1)(B) (42 U.S.C. 1395w-21(b)(1)(B)) is
amended by striking ``section 1852(a)(1)(A)'' and inserting
``section 1852(a)(1)''.
(4) Section 1851(d)(2)(A) (42 U.S.C. 1395w-21(d)(2)(A)) is
amended by striking ``At least 15 days before'' and inserting
``Before''.
(5) Part C is amended by striking ``beneficiary'' each time
it appears immediately before ``premium'' or ``premiums'', and
by striking ``beneficiary'' each time it appears immediately
before ``premium'' or ``premiums''.
(6) Section 1851(d)(4)(B) (42 U.S.C. 1395w-21(d)(4)(B)) is
amended--
(A) by inserting ``(i)'' after ``premi-
ums.--''; and
(B) by inserting before the period ``; and (ii) the
reduction in the part B and part D premiums, if any''.
(7) Section 1851(d)(4)(E) (42 U.S.C. 1395w-21(d)(4)(E)) is
amended by striking ``includes mandatory supplemental benefits
in its base benefit package or''.
(8) Section 1852(a)(5) (42 U.S.C. 1395w-22(a)(5)) is
amended by striking ``the annual Medicare+Choice capitation
rate'' and inserting ``the national monthly per capita costs''.
(9) Section 1852(c)(1)(F) (42 U.S.C. 1395w-22(c)(1)(F)) is
amended by striking clause (i) and redesignating clauses (ii)
and (iii) as clauses (i) and (ii), respectively.
(10) Section 1853(a)(1)(B) (42 U.S.C. 1395w-23(a)(1)(B)) is
amended by striking the first and second sentences.
(11) Section 1853(e)(3)(B) (42 U.S.C. 1395w-23(e)(3)(B)),
as redesignated, is amended--
(A) in the caption, by striking ``Budget
Neutrality''; and
(B) by striking ``adjust the payment rates'' and
all that follows through ``that would have been made''
and inserting ``adjust the benchmark amounts otherwise
established under this section for Medicare+Choice
payment areas in the State in a manner so that the
weighted average of the benchmark amounts under this
section in the State equals the weighted average of
benchmark amounts that would have been applicable''.
(12) Section 1853(i)(2) (42 U.S.C. 1395w-23(i)(2)), as
redesignated, is amended--
(A) by inserting ``and'' at the end of subparagraph
(A);
(B) by striking ``; and'' at the end of
subparagraph (B) and inserting a period; and
(C) by striking subparagraph (C).
(13)(A) Section 1854(a)(2)(A) (42 U.S.C. 1395w-4(a)(2)(A)),
as redesignated, is amended by striking ``the amount authorized
to be charged'' and all that follows and inserting ``the amount
required to be charged under subsection (c)(2)(B) for the
plan.''.
(B) Section 1854(a)(2)(B) (42 U.S.C. 1395w-4(a)(2)(B)), as
redesignated, is amended--
(i) by striking ``or Medicare+Choice fee-for-
service plan'', and
(ii) by striking ``or (4)(B)''.
(14) Section 1854(e) (42 U.S.C. 1395w-4(e)) is amended by
striking paragraph (4).
(15)(A) Paragraphs (3) and (4) of section 1854(f) (42
U.S.C. 1395w-4(f)) are relocated and redesignated as paragraphs
(4) and (5) of subsection (e).
(B) Section 1854(e)(4) (42 U.S.C. 1395w-4(e)(4)), as so
redesignated, is amended by striking ``subject to paragraph
(4)'' and inserting ``subject to paragraph (5)''.
(C) Section 1854 (42 U.S.C. 1395w-4) is amended by striking
subsection (f).
(16) Section 1858(c), as redesignated by section 201, is
amended by striking paragraph (3) and redesignating paragraph
(4) as paragraph (3).
(e) Extending Minimum Medicare+Choice Contract Period to 2 Years.--
(1) In general.--Section 1857(c)(1) (42 U.S.C. 1395w-
27(c)(1)) is amended by striking ``1 year'' and inserting ``2
years''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to contracts entered into on or after the date of
the enactment of this Act.
(f) Medicare+Choice Payment Areas.--
(1) In general.--Section 1853(d)(1) (42 U.S.C. 1395w-
23(d)(1)) is amended to read as follows:
``(1) In general.--In this part, except as provided in
paragraph (3), the term `Medicare+Choice payment area' means a
contiguous area with similar costs and patterns of medical
practice, which may be a multi-county, single country,
metropolitan statistical area, or other combination of
geographic units, as specified by the Secretary. The Secretary
shall specify such payment areas in a manner that is designed
to minimize payment variability from year to year and payment
discrepancies across similar geographic units.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on January 1, 2003.
(g) Effective Date.--The amendments made by this section (other
than subsections (e) and (f)) shall be effective for 2005 and
succeeding years.
Subtitle B--Medicare Fee for Service Quality Improvement
SEC. 111. CARE COORDINATION SERVICES.
(a) Program Authorized.--Title XVIII (42 U.S.C. 1395 et seq.), as
amended by section 412 of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000, as enacted into law by section
1(a)(6) of Public Law 106-554, is amended by adding after section 1866B
the following new section:
``SEC. 1866C. CARE COORDINATION SERVICES.
``(a) In General.--
``(1) Purpose.--The purpose of this section is to provide
assistance to a beneficiary with a non-chronic serious illness
or injury to obtain the appropriate level and mix of follow-up
care.
``(2) Program authority.--Beginning in 2004, the Secretary
may implement a care coordination services program in
accordance with the provisions of this section under which, in
appropriate circumstances, eligible individuals may elect to
have health care services covered under this title managed and
coordinated by a designated care coordinator.
``(3) Administration by contract.--Except as otherwise
specifically provided, the Secretary may administer the program
under this section in accordance with section 1866F.
``(b) Eligibility Criteria; Identification and Notification of
Eligible Individuals.--
``(1) Individual eligibility criteria.--The Secretary shall
specify criteria to be used in making a determination as to
whether an individual with a non-chronic spell of illness or
injury may appropriately be enrolled in the care coordination
services program under this section, which shall include at
least a finding by the Secretary that for cohorts of
individuals with characteristics identified by the Secretary,
professional management and coordination of care can reasonably
be expected to improve processes or outcomes of health care. The
Secretary shall give priority attention to identifying those cohorts of
individuals who, if they receive care coordination services under this
section, such services are likely to--
``(A) reduce total expenditures under the program
with respect to the individual and illness or injury,
or
``(B) not increase such total expenditures with
respect to the individual and illness or injury that
the Secretary determines would have been made without
the provision of care coordination services under this
section.
``(2) Procedures to facilitate enrollment.--The Secretary
shall develop and implement procedures designed to facilitate
enrollment of eligible individuals in the program under this
section.
``(c) Enrollment of Individuals.--
``(1) Secretary's determination of eligibility.--The
Secretary shall determine the eligibility for services under
this section of individuals who are enrolled in the program
under this section and who make application for such services
in such form and manner as the Secretary may prescribe.
``(2) Enrollment period.--
``(A) Effective date and duration.--Enrollment of
an individual in the program under this section shall
be effective as of the first day of the month following
the month in which the Secretary approves the
individual's application under paragraph (1), shall
remain in effect for one 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.
``(B) 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.
``(d) Program.--The care coordination services program under this
section shall include the following elements:
``(1) Basic care coordination services.--
``(A) In general.--Subject to the cost-
effectiveness criteria specified in subsection (b)(1),
except as otherwise provided in this section, enrolled
individuals shall receive services described in section
1905(t)(1) and may receive additional items and
services as described in subparagraph (B).
``(B) Additional benefits.--The Secretary may
specify additional benefits for which payment would not
otherwise be made under this title that may be
available to individuals enrolled in the program under
this section (subject to an assessment by the care
coordinator of an individual's circumstance and need
for such benefits) in order to encourage enrollment in,
or to improve the effectiveness of, such program.
``(2) Care coordination 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 care coordinator, or coordinated through the
care coordination 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.
``(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 and may limit such reduction or
elimination to particular service areas.
``(e) Care Coordinators.--
``(1) Conditions of participation.--In order to be
qualified to furnish care coordination services under this
section, an individual or entity shall--
``(A) be a health care professional or entity
(which may include physicians, physician group
practices, or other health care professionals or
entities the Secretary may find appropriate) meeting
such conditions as the Secretary may specify;
``(B) have entered into a care coordination
agreement; and
``(C) meet such criteria as the Secretary may
establish (which may include experience in the
provision of care coordination or primary care
physician's services).
``(2) Agreement term; payment.--
``(A) Duration and renewal.--A care coordination
agreement under this subsection shall be for one year
and may be renewed if the Secretary is satisfied that
the care coordinator continues to meet the conditions
of participation specified in paragraph (1).
``(B) Payment for services.--The Secretary may
negotiate or otherwise establish payment terms and
rates for services described in subsection (d)(1).
``(C) Terms.--In addition to such other terms as
the Secretary may require, an agreement under this
section shall include the terms specified in
subparagraphs (A) through (C) of section 1905(t)(3).''.
(b) Coverage of Care Coordination Services as a Part B Medical
Service.--
(1) In general.--Section 1861(s) (42 U.S.C. 1395x(s)) is
amended--
(A) in the second sentence, by redesignating
paragraphs (16) and (17) as clauses (i) and (ii); and
(B) in the first sentence--
(i) by striking ``and'' at the end of
paragraph (14);
(ii) by striking the period at the end of
paragraph (15) and inserting ``; and''; and
(iii) by adding after paragraph (15) the
following new paragraph:
``(16) care coordination services furnished in accordance
with section 1866C.''.
(2) Conforming amendments.--Sections 1864(a) 1902(a)(9)(C),
and 1915(a)(1)(B)(ii)(I) of such Act (42 U.S.C. 1395aa(a),
1396a(a)(9)(C), and 1396n(a)(1)(B)(ii)(I)) are each amended by
striking ``paragraphs (16) and (17)'' each place it appears and
inserting ``clauses (i) and (ii) of the second sentence''.
(3) Part b coinsurance and deductible not applicable to
care coordination services.--
(A) Coinsurance.--Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)), as amended by sections 105 and 223 of the
Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, as enacted into law by section
1(a)(6) of Public Law 106-554, is amended--
(i) by striking ``and'' at the end of
subparagraph (T); and
(ii) by inserting before the final
semicolon ``, and (V) with respect to care
coordination services described in section
1861(s)(16), the amounts paid shall be 100
percent of the payment amount established under
section 1866C''.
(B) Deductible.--Section 1833(b) (42 U.S.C.
1395l(b)) is amended--
(i) by striking ``and'' at the end of
paragraph (5); and
(ii) by inserting before the final period
``, and (7) such deductible shall not apply
with respect to care coordination services (as
described in section 1861(s)(16))''.
SEC. 112. ESTABLISHMENT OF MEDICARE HOME HEALTH CARE CASE MANAGERS FOR
LONG TERM HOME HEALTH SPELLS OF ILLNESS.
(a) Requirement for Case Management Plan for Beneficiaries
Requiring Extended Home Health Services.--
(1) In general.--Section 1861(m) (42 U.S.C. 1395x(m)) is
amended, in the matter preceding paragraph (1), by inserting
after ``under a plan (for furnishing such items and services to
such individual) established and periodically reviewed by a
physician'' the following: ``and, in the case of such services
furnished (or likely to be required to be furnished) for an
extended period (as defined by the Secretary in regulations),
under a home health case management plan (as defined in
subsection (ww)(2)) established by a home health case manager
(as defined in subsection (ww)(1)) in consultation with the
physician and, if available, the family of the individual for
an individual who is not participating in a case or disease
management program under any other provision of this Act''.
(2) Definitions.--Section 1861 (42 U.S.C. 1395x), as
amended by sections 102 and 105 of the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000, as
enacted into law by section 1(a)(6) of Public Law 106-554, is
amended by adding at the end the following new subsection:
``Home Health Case Manager
``(ww)(1) The term `home health case manager' means a public agency
or private organization (or a subdivision thereof) that--
``(A) develops, coordinates, and monitors the delivery of
home health services by home health agencies to an individual;
``(B) has experience and expertise in the furnishing of
home health services; and
``(C) meets such other standards as the Secretary finds
necessary for the effective and efficient development and
oversight of home health case management plans and to ensure
the health and safety of individuals furnished services under
such a plan.
``(2) The term `home health case management plan' means a
structured plan for the delivery of home health services that is
developed by a home health case manager, after consultation with the
physician and, if available, the family of the individual involved.
``(3) The term `home health case manager services' means the
development, coordination, and monitoring of a home health case
management plan for an individual furnished (or likely to be required
to be furnished) home health services for an extended period (as
defined by the Secretary in regulations under subsection (m)) and
includes the periodic review of such a plan.''.
(3) Guidance on initiation of case manager services.--The
Secretary of Health and Human Services shall provide guidance
on the process or processes that may be used to identify
Medicare beneficiaries requiring home health services for
extended periods and to develop home health case management
plans on a timely basis.
(4) Limitation on referrals.--Section 1877 of the Social
Security Act (42 U.S.C. 1395nn) shall apply to a referral by a
home health case manager to a home health agency in the same
manner as such section applies to a referral by a physician to
an entity described in section 1877(a)(2) of such Act.
(b) Coverage of and Payment for Home Health Case Manager
Services.--
(1) Part a.--
(A) Coverage.--Section 1812(a)(3) (42 U.S.C.
1395d(a)(3)) is amended by inserting before the
semicolon ``, and home health case manager services (as
defined in section 1861(ww)(3))''.
(B) Eligibility.--Section 1814(a)(2)(C) (42 U.S.C.
1395f(a)(2)(C)) is amended by inserting ``and, in the
case of such services furnished (or likely to
be required to be furnished) for an extended period (as defined by the
Secretary under section 1861(m)), under a home health case management
plan that has been established and periodically reviewed by a home
health case manager'' after ``is periodically reviewed by a
physician''.
(C) Payment.--Section 1812 (42 U.S.C. 1395d) is
amended by adding at the end the following new
subsection:
``(h)(1) Payment under this part for home health case manager
services (as defined in section 1861(ww)(3)) shall be made pursuant to
the fee schedule established by the Secretary under section 1834(n).
``(2) Payment may be made under this title for home health case
manager services with respect to an individual only--
``(A) for the initial development of the home health case
management plan for the individual, and
``(B) for the subsequent review and modification of such
plan, as provided by the Secretary in regulations.''.
(2) Part b.--
(A) Coverage.--Section 1832(a)(2)(A) (42 U.S.C.
1395k(a)(2)(A)) is amended by inserting before the
semicolon ``, and home health case manager services (as
defined in section 1861(ww)(3))''.
(B) Eligibility.--Section 1835(a)(2) (42 U.S.C.
1395n(a)(2)) is amended by inserting ``and, in the case
of such services furnished (or likely to be required to
be furnished) for an extended period (as defined by the
Secretary under section 1861(m)), under a home health
case management plan that has been established and
periodically reviewed by a home health case manager''
after ``is periodically reviewed by a physician''.
(C) Payment.--Section 1833 (42 U.S.C. 1395l) is
amended--
(i) in subsection (a)(2)--
(I) by striking ``and'' at the end
of subparagraph (F);
(II) by adding ``and'' at the end
of subparagraph (G); and
(III) by adding after subparagraph
(G) the following new subparagraph:
``(H) subject to subsection (u), with respect to
home health case manager services (as defined in
section 1861(ww)(3), the amount determined under the
fee schedule established under section 1834(n);'', and
(ii) by adding at the end the following new
subsection:
``(u) Payment may be made under this title for home health case
manager services with respect to an individual only--
``(1) for the initial development of the home health case
management plan for the individual, and
``(2) for the subsequent review and modification of such
plan, as provided by the Secretary in regulations.''.
(3) Establishment of fee schedule.--Section 1834 (42 U.S.C.
1395m), as amended by section 223 of the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000, as
enacted into law by section 1(a)(6) of Public Law 106-554, is
amended by adding at the end the following new section:
``(n) Establishment of Fee Schedule for Home Health Case Manager
Services.--
``(1) In general.--The Secretary shall establish a fee
schedule for payment for home health case manager services.
Such schedule may provide for rates that differ for such
services that comprise the establishment of a home health case
management plan and that comprise review and modification of
such a plan.
``(2) Considerations.--In establishing such fee schedule,
the Secretary shall consider appropriate regional and
operational differences and adjustments to payment rates to
account for inflation and other relevant factors.
``(3) Consultation.--In establishing the fee schedule for
home health case manager services under this subsection, the
Secretary shall consult with appropriate organizations
representing individuals and entities who furnish referral
services for home health services and share with such
organizations relevant data in establishing such schedule.
``(4) Alternative payment under competitive bidding.--
``(A) In general.--Notwithstanding the preceding
provisions of this subsection, the Secretary may, by
region, use a competitive process to contract with home
health case managers for furnishing home health case
manager services.
``(B) Payment.--Payment under this paragraph shall
be made on the basis of negotiated all-inclusive rates.
The amount of payment made by the Secretary to a home
health case manager for home health case manager
services under this title for services covered under a
contract shall be less than the aggregate amount of the
payments that the Secretary would have otherwise made
for the services.
``(C) Contract period.--A contract period shall be
three years (subject to renewal), as long as the entity
continues to meet quality and other contractual
standards.''.
(c) Effective Date.--The amendments made by this section apply with
respect to home health services furnished on or after October 1, 2004.
SEC. 113. ADDITIONAL PAYMENT AMOUNT TO RURAL PROVIDERS OF SERVICES WHO
FURNISH PREVENTIVE AND CASE MANAGER SERVICES.
(a) Authority To Provide Additional Payment for Rural Case Manager
Services.--
(1) Findings.--The Congress finds as follows:
(A) Medicare beneficiaries who live in rural and
frontier areas receive fewer preventive care services.
(B) Medicare+Choice plans that offer preventive
care services and other additional benefits are not
likely to be established in rural or frontier areas.
(C) Long travel distances and times create special
problems for providers of services and physicians to
follow up on courses of treatment for medicare
beneficiaries residing in rural areas who require
additional case management and other services.
(2) Authority.--In the case of a provider of services or a
physician that furnishes services to Medicare beneficiaries in
a rural area, the Secretary of Health and Human Services may
provide for an additional payment under the Medicare Program
for rural case manager services furnished by such provider or
physician to Medicare beneficiaries.
(b) Requirement for Rural Case Management Plan.--No payment may be
made under subsection (a) for rural case manager services furnished to
a Medicare beneficiary unless such provider or physician establishes,
and periodically reviews, a rural case management plan for furnishing
preventive services and items and services for the treatment of the
illness or injury of the Medicare beneficiary. The Secretary shall
establish such standards as the Secretary finds necessary for the
effective and efficient development and oversight of rural case manager
services and rural case management plans to ensure the health and
safety of Medicare beneficiaries furnished services under such a plan.
(c) Payment.--
(1) In general.--Payment may be made under this section for
rural case manager services with respect to a Medicare
beneficiary only--
(A) for the initial development of the rural case
management plan for the individual, and
(B) for the subsequent review and modification of
such plan, as provided by the Secretary in regulations.
(2) Payment under fee schedule.--Payment under this section
for rural case manager services shall be made pursuant to the
fee schedule established by the Secretary.
(3) Establishment of fee schedule.--
(A) In general.--The Secretary shall establish a
fee schedule for payment for rural case manager
services. Such schedule may provide for rates that
differ for such services that comprise the
establishment of a rural case management plan and that
comprise review and modification of such a plan.
(B) Considerations.--In establishing such fee
schedule, the Secretary shall consider appropriate
regional and operational differences and adjustments to
payment rates to account for travel and transportation
of the provider and beneficiary, inflation, and other
relevant factors.
(C) Consultation.--In establishing the fee schedule
for rural case manager services under this subsection,
the Secretary shall consult with appropriate
organizations representing individuals and entities who
furnish referral services in rural areas for health
care items and services furnished and share with such
organizations relevant data in establishing such
schedule.
(d) Guidance on Initiation of Case Manager Services.--The Secretary
of Health and Human Services shall provide guidance on the process or
processes that may be used to develop rural case management plans on a
timely basis.
(e) Limitation on Referrals.--Section 1877 of the Social Security
Act (42 U.S.C. 1395nn) shall apply to a referral by a rural case
manager to a rural agency in the same manner as such section applies to
a referral by a physician to an entity described in section 1877(a)(2)
of such Act.
(f) Definitions.--In this section:
(1) The term ``rural case manager services'' means the
development, coordination, and monitoring of a rural case
management plan for an individual furnished items and services
for the prevention of illness and for the diagnosis and
treatment of an illness or injury, and includes such home
visits as are medically necessary and the periodic review of
such a plan.
(2) The term ``rural case management plan'' means a
structured plan for the delivery of items and services that is
developed by a rural case manager, after consultation with the
physician and, if available, the family of the individual
involved.
(3) The term ``provider of service'' has the meaning given
that term in section 1861(u) of the Social Security Act (42
U.S.C. 1395x(u)).
(4) The term ``physician'' has the meaning given that term
in section 1861(r) of such Act (42 U.S.C. 1395x(r)).
(5) The term ``rural area'' means an area designated as a
rural area under section 1886(d)(2)(D) of such Act (42 U.S.C.
1395ww(d)(2)(D)).
(6) The term ``Medicare beneficiary'' means an individual
entitled to benefits under part A of title XVIII of such Act,
or enrolled under part B of such title, or both.
(7) The term ``Medicare Program'' means the insurance
program established under title XVIII of the Social Security
Act.
(g) Effective Date.--This section shall take effect on January 1,
2004, and apply with respect to rural services furnished on or after
January 1, 2004.
SEC. 114. DISEASE MANAGEMENT SERVICES.
(a) Program Authorized.--Title XVIII (42 U.S.C. 1395 et seq.), as
previously amended by this subtitle, is further amended by adding after
section 1866C the following new section:
``SEC. 1866D. DISEASE MANAGEMENT SERVICES.
``(a) In General.--
``(1) Purpose.--The purpose of this section is to assist
beneficiaries with a chronic or advanced illness or injury to
obtain the appropriate level and mix of follow-up care.
``(2) Program authority.--Beginning in 2004, the Secretary
may implement a program in accordance with the provisions of
this section under which certain eligible individuals may, in
appropriate circumstances, receive disease management services
for chronic and advanced illness from entities designated by
the Secretary with respect to diagnoses that the Secretary
determines are amenable to such management.
``(3) Administration by contract.--Except as otherwise
specifically provided, the Secretary may administer the program
under this section in accordance with section 1866F.
``(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, schizophrenia,
or any other diagnosis (physical or mental), if the
Secretary has determined with respect to such diagnoses
that there is evidence that the provision of disease
management services, over clinically relevant time-
periods, to cohorts of individuals with such diagnoses
can reasonably be expected to improve processes or
outcomes of health care for the Medicare population and
to reduce aggregate costs to the programs under this
title.
``(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 title.
``(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 one 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 entity managing
benefits for the individual under part D);
``(D) patient education and counseling, including
advanced illness counseling (as defined in subsection
(j));
``(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) such other quality standards, including
patient satisfaction, as the Secretary may find
appropriate; and
``(C) a requirement that the organization meet such
licensure and other accreditation standards 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 ten 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.
``(j) Advanced Illness Counseling Defined.--For purposes of this
section, the term `advanced illness counseling' means counseling to
individuals (and a spouse or principal caregiver of such an individual)
with advanced, chronic, or terminal illnesses about treatment options
available from various providers, including (where appropriate) hospice
programs.''.
(b) Coverage of Disease Management Services as a Part B Medical
Service.--
(1) In general.--Section 1861(s), as amended by section
111, is further amended--
(A) by striking ``and'' at the end of paragraph
(15);
(B) by striking the period at the end of paragraph
(16) and inserting ``and''; and
(C) by adding after paragraph (16) the following
new paragraph:
``(17) disease management services furnished in accordance
with section 1866D.''.
(2) Part b coinsurance and deductible not applicable to
disease management services.--
(A) Coinsurance.--Section 1833(a)(1)(T) (42 U.S.C.
1395l(a)(1)(T)), as added by section 111(b)(2)(A), is
amended to read as follows: ``(T) with respect to care
coordination services described in section 1861(s)(16)
and disease management services described in section
1861(s)(17), the amounts paid shall be 100 percent of
the payment amounts established under sections 1866C
and 1866D, respectively;''.
(B) Deductible.--Section 1833(b) (42 U.S.C.
1395l(b)), as amended by section 111(b)(2)(A), is
further amended by inserting before the final period
``or to disease management services (as described in
section 1861(s)(17))''.
SEC. 115. PROVIDER AND PHYSICIAN COLLABORATION TO FURNISH A BUNDLED,
COORDINATED SET OF SERVICES.
Title XVIII (42 U.S.C. 1395 et seq.), as previously amended by this
subtitle, is further amended by adding after section 1866D the
following new section:
``SEC. 1866E. PROVIDER AND PHYSICIAN COLLABORATIONS.
``(a) In General.--
``(1) Purpose.--The purpose of this section is to assist a
beneficiary with a complex or sophisticated illness or injury
to obtain a coordinated, high quality bundled package of items
and services under this title.
``(2) Program authority.--Beginning in 2004, the Secretary
may enter into agreements with specific quality providers,
suppliers, or other individuals or entities for the furnishing
of bundled items and services in selected sites of service or
related to specific medical conditions or needs for an episode
of care. The services may include any items or services covered
under this title that the Secretary determines to be
appropriate, including post-hospital services.
``(3) Administration by contract.--Except as otherwise
specifically provided, the Secretary may administer the program
under this section in accordance with section 1866F.
``(b) Basis of Selection.--The Secretary shall select entities for
agreements under this section on the basis of ability to provide
services more efficiently, to provide improved coordination of care, to
offer additional benefits, and to meet quality and other standards and
beneficiary protections and other requirements set by the Secretary.
``(c) Payment.--Payment under this section shall be made on the
basis of all-inclusive rates. The all-inclusive rate paid to an entity
for bundled items and services furnished during an episode of care
under this section shall be less than the estimated amount of the
payments that the Secretary would have otherwise made for the items and
services.
``(d) Term of Agreement.--Agreements under this section shall be
for periods that the Secretary may determine.
``(e) Incentives to Beneficiaries for Use of Contracting
Entities.--Notwithstanding any other provision of law, entities under a
contract under this section may furnish additional services or waive
part or all beneficiary cost sharing (such as deductibles, copayments,
and coinsurance) with respect to any of the items or services furnished
under this section.
``(f) Beneficiary Election.--An individual entitled to benefits
under this title who elects to obtain services under an agreement under
this section shall agree to receive under such agreement all benefits
related to the episode of care covered by the agreement (subject to
such exceptions for emergency services and as the Secretary otherwise
may specify).''.
SEC. 116. DEMONSTRATION PROJECTS TO INCREASE QUALITY OF INFORMATION
PROVIDED TO MEDICARE BENEFICIARIES WITH RESPECT TO
TREATMENT OPTIONS.
(a) Establishment of Project.--
(1) In general.--Not later than January 1, 2003, the
Secretary of Health and Human Services shall establish
demonstration projects (in this section referred to as the
``projects'') under which the Secretary shall furnish to
providers of services and physicians participating in the
Medicare Program under title XVIII of the Social Security Act
informational videotapes (as described in subsection (b)) to
present to a Medicare beneficiary diagnosed with a particular
disease, injury, or advanced illness (as identified by the
Secretary pursuant to subsection (c)) before the beneficiary
elects a course of treatment for that disease, injury, or
advanced illness. The Secretary shall furnish such
informational videotapes at no cost to such providers and
physicians.
(2) Project areas.--The projects shall be conducted in five
separate counties of which 3 shall be in urban areas and 2
shall be in rural areas.
(b) Informational Videotape Described.--
(1) In general.--The Institute of Medicine, in consultation
with the National Institutes of Health and other medical
experts (as determined by the Secretary), shall develop a
videotape presentation to provide a Medicare beneficiary
diagnosed as having the disease, injury, or advanced illness
identified under subsection (c) with the following information:
(A) A description of the disease, injury, or
advanced illness.
(B) The possible courses of treatment for the
disease, injury, or advanced illness.
(C) The likely consequences of each such course of
treatment or of the decision not to pursue any course
of treatment.
(2) Concluding statement.--Any such videotape presentation
shall conclude with a statement that the Medicare beneficiary
may elect any course of treatment or not to pursue any course
of treatment, that the Medicare beneficiary should consult with
a physician, and that the Medicare beneficiary may seek a
referral to a physician who furnishes services consisting of
the course of treatment that the beneficiary elects.
(3) Updating of videotape.--Any such videotape presentation
shall be updated to reflect new findings based on the best
scientific evidence available, as determined by the Institute
of Medicine, in consultation with the National Institutes of
Health and such other medical experts, about the disease,
injury, or advanced illness, and various courses of treatment.
(c) Selection of Disease, Injury, or Advanced Illness.--
(1) In general.--For purposes of selecting a particular
disease, injury, or advanced illness for which an informational
videotape shall be provided under the projects, the Secretary
shall identify diseases, injuries, or advanced illnesses for
which there is a wide variation in treatment of that disease,
injury, or advanced illness throughout the United States.
(2) Mandatory designation of prostate enlargement for one
project.--The disease, injury, or advanced illness for which an
informational videotape is provided in one of the projects
conducted under this section shall be benign and malignant prostate
enlargement.
(d) Payment.--(1) The Secretary shall establish a payment amount to
be made to a provider of services or a physician under title XVIII of
the Social Security Act to reflect services consisting of the
presentation of an informational videotape to and consultation with a
Medicare beneficiary after such presentation.
(2) For purposes of the payment amount under paragraph (1), no
payment may be made for the purchase or rental of equipment or office
space for purposes of making such presentation.
(e) Waiver Authority.--The Secretary may waive such requirements of
title XVIII of such Act as may be necessary for the purposes of
carrying out the project.
(f) Reports.--Not later than June 1, 2006, the Secretary shall
submit to Congress a report on the following matters:
(1) A description of courses of treatment for the diseases,
injuries, or advanced illnesses identified under subsection (c)
selected by Medicare beneficiaries during the three year period
ending on December 31, 2005.
(2) A comparison between courses of treatment described in
paragraph (1) and courses of treatment selected by the Medicare
beneficiaries participating in the project.
(3) An analysis of the effect on costs to the Medicare
program due to any change in selection of courses of treatment.
(g) Duration.--A demonstration project under this section shall be
conducted for a 3-year period.
SEC. 117. ADMINISTRATION OF CERTAIN PRIVATE SECTOR PURCHASING AND
QUALITY IMPROVEMENT PROGRAMS.
Title XVIII (42 U.S.C. 1395 et seq.), as amended by this subtitle,
is further amended by adding after section 1866E the following new
section:
``SEC. 1866F. GENERAL PROVISIONS FOR ADMINISTRATION OF CERTAIN PRIVATE
SECTOR PURCHASING AND QUALITY IMPROVEMENT PROGRAMS.
``(a) In General.--Except as otherwise specifically provided, the
provisions of this section apply to the programs under the following
provisions of this title:
``(1) section 1866C (care coordination services);
``(2) section 1866D (disease management services);
``(3) section 1866E (provider and physician
collaborations);
``(4) section 1866G (competitive acquisition of items and
services);
``(5) section 1866H (preferred participants); and
``(6) section 1866I (program to improve outcomes and reduce
patient morbidity and mortality).
``(b) Provisions Generally Applicable to Designated Programs.--The
following provisions apply to programs specified in subsection (a),
except as otherwise specifically provided:
``(1) Beneficiary eligibility.--Except as otherwise
provided by the Secretary, an individual shall only be eligible
to receive benefits under a program specified in subsection (a)
if such individual--
``(A) is enrolled in under the program under part
B;
``(B) is not enrolled in a Medicare+Choice plan
under part C, an eligible organization under a contract
under section 1876 (or a similar organization operating
under a demonstration project authority), an
organization with an agreement under section
1833(a)(1)(A), or a PACE program under section 1894;
and
``(C) in the case of the programs specified in
paragraphs (1), (2), (4), and (6) of subsection (a), is
entitled to benefits under part A.
``(2) Secretary's discretion as to scope of program.--The
Secretary may limit the implementation of a program specified
in subsection (a) to--
``(A) a geographic area (or areas) that the
Secretary designates for purposes of the program, based
upon such criteria as the Secretary finds appropriate;
``(B) a subgroup (or subgroups) of beneficiaries or
individuals and entities furnishing items or services
(otherwise eligible to participate in the program),
selected on the basis of the number of such
participants that the Secretary finds consistent with
the effective and efficient implementation of the
program;
``(C) an element (or elements) of the program that
the Secretary determines to be suitable for
implementation; or
``(D) any combination of any of the limits
described in subparagraphs (A) through (C).
``(3) Voluntary receipt of items and services.--Except as
provided in the authority for the program specified in
subsection (a)(3), items and services shall be furnished to an
individual under the programs specified in subsection (a) only
at the individual's election.
``(4) Agreements.--The Secretary is authorized to enter
into agreements with individuals and entities to furnish health
care items and services to beneficiaries under the programs
specified in subsection (a).
``(5) Program standards and criteria.--The Secretary shall
establish performance standards for the programs specified in
subsection (a) including, as applicable, standards for quality
of health care items and services, cost-effectiveness,
beneficiary satisfaction, and such other factors as the
Secretary finds appropriate. The eligibility of individuals or
entities for the initial award, continuation, and renewal of
agreements to provide health care items and services under the
program shall be conditioned, at a minimum, on performance that
meets or exceeds such standards.
``(6) Administrative review of adverse decision.--
``(A) Decisions affecting individuals and entities
furnishing services under programs.--An individual or
entity furnishing services under a program specified in
subsection (a) shall be entitled to a review by the
program administrator (or, if the Secretary has not
contracted with a program administrator, by the
Secretary) of a decision not to enter into, or to
terminate, or not to renew, an agreement with the
individual or entity to provide health care items or
services under such program.
``(B) Decisions affecting beneficiaries under care
coordination services or disease management services
programs.--
``(i) Determination of ineligibility.--An
individual shall be entitled to a review by the
program administrator (or, if the Secretary has
not contracted with a program administrator, by
the Secretary) of a determination that the
individual does not meet the criteria for
eligibility to participate in a program
specified in paragraph (1) or (2) of subsection
(a).
``(ii) Denial of payment for items or
services.--A beneficiary shall be entitled to a
reconsideration or appeal of a denial of
payment under section 1866C(d)(2) or 1866D(e)
in accordance with the provisions of section
1869, as if such section applied to this
clause.
``(7) Secretary's review of marketing materials.--An
agreement with an individual or entity furnishing services
under a program specified in subsection (a) shall require the
individual or entity to guarantee that it will not distribute
materials marketing items or services under such program
without the Secretary's prior review and approval;
``(8) Payment in full.--
``(A) In general.--Except as provided in
subparagraph (B), an individual or entity receiving
payment from the Secretary under a contract or
agreement under a program specified in subsection (a)
shall agree to accept such payment as payment in full,
and such payment shall be in lieu of any payments to
which the individual or entity would otherwise be
entitled under this title.
``(B) Collection of deductibles and coinsurance.--
Such individual or entity may collect any applicable
deductible or coinsurance amount from a beneficiary.
``(c) Contracts for Program Administration.--
``(1) In general.--The Secretary may administer a program
specified in subsection (a) through a contract with a program
administrator in accordance with the provisions of this
subsection.
``(2) Scope of program administrator contracts.--A contract
under this subsection may, at the Secretary's discretion,
relate to administration of any or all of the programs
specified in subsection (a). The Secretary may enter into such
contracts for a limited geographic area, or on a regional or
national basis.
``(3) Eligible contractors.--The Secretary may contract for
the administration of the program with--
``(A) an entity that, under a contract under
section 1816 or 1842, determines the amount of and
makes payments for health care items and services
furnished under this title; or
``(B) any other entity with substantial experience
in managing the type of program concerned.
``(4) Contract award, duration, and renewal.--
``(A) In general.--A contract under this
subsection shall be for an initial term of up to three
years, renewable for additional terms of up to three
years.
``(B) Noncompetitive award and renewal for entities
administering part a or part b payments.--The Secretary
may enter or renew a contract under this subsection
with an entity described in paragraph (3)(A) without
regard to the requirements of section 5 of title 41,
United States Code.
``(5) Applicability of federal acquisition regulation.--The
Federal Acquisition Regulation shall apply to program
administration contracts under this subsection.
``(6) Performance standards.--The Secretary shall establish
performance standards for the program administrator including,
as applicable, standards for the quality and cost-effectiveness
of the program administered, and such other factors as the
Secretary finds appropriate. The eligibility of entities for
the initial award, continuation, and renewal of program
administration contracts shall be conditioned, at a minimum, on
performance that meets or exceeds such standards.
``(7) Functions of program administrator.--A program
administrator shall perform any or all of the following
functions, as specified by the Secretary:
``(A) Agreements with individuals or entities
furnishing health care items and services.--Determine
the qualifications of individuals or entities seeking
to enter or renew agreements to provide services under
a program specified in subsection (a), and as
appropriate enter or renew (or refuse to enter or
renew) such agreements on behalf of the Secretary.
``(B) Establishment of payment rates.--Negotiate or
otherwise establish, subject to the Secretary's
approval, payment rates for covered health care items
and services.
``(C) Payment of claims or fees.--Administer
payments for health care items or services furnished
under any such program.
``(D) Payment of bonuses.--Using such guidelines as
the Secretary shall establish, and subject to the
approval of the Secretary, make bonus payments
as described in subsection (d)(2)(A)(ii) to individuals and entities
furnishing items or services for which payment may be made under any
such program.
``(E) List of program participants.--Maintain and
regularly update a list of individuals or entities with
agreements to provide health care items and services
under any such program, and ensure that such list, in
electronic and hard copy formats, is readily available,
as applicable, to--
``(i) individuals residing in the service
area who are entitled to benefits under part A
or enrolled in the program under part B;
``(ii) the entities responsible under
sections 1816 and 1842 for administering
payments for health care items and services
furnished; and
``(iii) individuals and entities providing
health care items and services in the service
area.
``(F) Beneficiary enrollment.--Determine
eligibility of individuals to enroll under a program
specified in subsection (a) and provide enrollment-
related services (but only if the Secretary finds that
the program administrator has no conflict of interest
caused by a financial relationship with any individual
or entity furnishing items or services for which
payment may be made under any such program, or any
other conflict of interest with respect to such
function).
``(G) Oversight.--Monitor the compliance of
individuals and entities with agreements under any such
program with the conditions of participation.
``(H) Administrative review.--Conduct reviews of
adverse determinations specified in subparagraph (A)
and in subsection (b)(6).
``(I) Review of marketing materials.--Conduct a
review of marketing materials proposed by an individual
or entity furnishing services under any such program.
``(J) Additional functions.--Perform such other
functions as the Secretary may specify.
``(8) Limitation of liability.--The provisions of section
1157(b) shall apply with respect to activities of contractors
and their officers, employees, and agents under a contract
under this subsection.
``(9) Information sharing.--Notwithstanding section 1106
and section 552a of title 5, United States Code, the Secretary
is authorized to disclose to an entity with a program
administration contract under this subsection such information
(including medical information) on individuals receiving health
care items and services under the program as the entity may
require to carry out its responsibilities under the contract.
Nothing in this paragraph shall be construed as exempting such
an entity from maintaining the confidentiality of such
information consistent with applicable privacy laws.
``(d) Rules Applicable to Both Program Agreements and Program
Administration Contracts.--
``(1) Records, reports, and audits.--The Secretary is
authorized to require individuals and entities with agreements
to provide health care items or services under programs
specified under subsection (a), and entities with program
administration contracts under subsection (c), to maintain
adequate records, to afford the Secretary access to such
records (including for audit purposes), and to furnish such
reports and other materials (including audited financial
statements and performance data) as the Secretary may require
for purposes of implementation, oversight, and evaluation of
such program and of individuals' and entities' effectiveness in
performance of such agreements or contracts.
``(2) Bonuses.--Notwithstanding any other provision of law,
but subject to subparagraph (B)(ii), the Secretary may make
bonus payments under a program specified in subsection (a) from
the Health Insurance and Supplementary Medical Insurance Trust
Funds in amounts that do not exceed 50 percent of the savings
to such Trust Funds attributable to such programs (or in the
case of the program specified in subsection (a)(7), in amounts
authorized under such program), in accordance with the
following:
``(A) Payments to program administrators.--The
Secretary may make bonus payments under each program
specified in subsection (a) to program administrators.
``(B) Payments to individuals and entities
furnishing services.--
``(i) In general.--Subject to clause (ii),
the Secretary may make bonus payments to
individuals or entities furnishing items or
services for which payment may be made under
the programs specified in paragraphs (1), (2),
and (5) of subsection (a), or may authorize a
program administrator to make such bonus
payments in accordance with such guidelines as
the Secretary shall establish and subject to
the Secretary's approval.
``(ii) Limitations.--The Secretary may
limit bonus payments under clause (i) to
particular service areas, types of individuals
or entities furnishing items or services under
a program, or kinds of items or services, and
may condition such payments on the achievement
of such standards related to efficiency,
improvement in processes or outcomes of care,
or such other factors as the Secretary
determines to be appropriate.
``(3) Antidiscrimination limitation.--
``(A) In general.--The Secretary shall not enter
into an agreement with an individual or entity to
provide health care items or services under a program
specified under subsection (a), or with an entity to
administer such a program, unless such individual or
entity guarantees that it will not deny, limit, or
condition the coverage or provision of benefits under
such program, for individuals eligible to be enrolled
under such program, based on any health status-related
factor described in section 2702(a)(1) of the Public Health Service
Act.
``(B) Construction.--Subparagraph (A) shall not be
construed to prohibit such individual or entity from
taking any action explicitly authorized by the
provisions of section 1866C (care coordination
services) or section 1866D (disease management
services).
``(e) Limitations on Judicial Review.--The following actions and
determinations with respect to a program specified in subsection (a)
shall not be subject to review by a judicial or administrative
tribunal:
``(1) A limitation on the implementation of a program under
subsection (b)(2).
``(2) The establishment of program participation standards
under subsection (b)(5); or the denial or termination of, or
refusal to renew, an agreement with an individual or entity to
provide health care items and services under the program.
``(3) The determination of a beneficiary's eligibility
under subsection (b)(6)(B).
``(4) The establishment of program administration contract
performance standards under subsection (c)(6); or the refusal
to renew a program administration contract; or the
noncompetitive award or renewal of a program administration
contract under subsection (c)(4)(B).
``(5) The establishment of payment rates, through
negotiation or otherwise, under a program agreement or a
program administration contract.
``(6) A determination with respect to a program (where
specifically authorized by the program authority or by
subsection (d)(2))--
``(A) as to whether cost savings have been
achieved, and the amount of savings;
``(B) as to whether, to whom, and in what amounts
bonuses will be paid; or
``(C) as to whether to reduce or eliminate
beneficiary cost-sharing.
``(f) Application Limited to Parts A and B.--None of the provisions
of this section or of the programs specified in subsection (a) shall
apply to the programs under parts C and D.''.
(b) Exception to Limits on Physician Referrals.--Section 1877(b)
(42 U.S.C. 1395nn(b)) is amended--
(1) by redesignating paragraph (4) as paragraph (5); and
(2) by inserting after paragraph (3) the following new
paragraph:
``(4) Private sector purchasing and quality improvement
tools for original medicare.--In the case of a designated
health service, if the designated health service is--
``(A) included in the services under section 1866C,
1866D, 1866E, or 1866I; and
``(B) is provided by an individual or entity
meeting such criteria related to quality assurance,
financial disclosure, and other factors as the
Secretary may find appropriate.''.
SEC. 118. REPORTS TO CONGRESS ON PRIVATE SECTOR PURCHASING AND QUALITY
IMPROVEMENT PROGRAMS.
Not later than five years after the date of the enactment of the
Medicare Modernization and Solvency Act of 2001, and biennially
thereafter for six years, the Secretary of Health and Human Services
shall report to the Congress on the use of authorities enacted by
sections 111, 114, 115, 121, 122, and 123 of this Act. Each report
shall address the impact of the use of those authorities on quality,
access, and expenditures under the programs under title XVIII of the
Social Security Act.
Subtitle C--Immediate and Long-term Payment Reforms for Medicare Fee
for Service
SEC. 121. COMPETITIVE ACQUISITION OF ITEMS AND SERVICES.
(a) Program Authorized.--Title XVIII (42 U.S.C. 1395 et seq.), as
previously amended by part B, is further amended by inserting after
section 1866F the following new section:
``SEC. 1866G. COMPETITIVE ACQUISITION OF ITEMS AND SERVICES.
``(a) In General.--
``(1) Program authority.--The Secretary shall implement a
program to purchase, on behalf of individuals enrolled under
this part certain competitively priced quality items and
services for which payment may be made under part B.
``(2) Administration by contract.--Except as otherwise
specifically provided, the Secretary may administer the program
under this section in accordance with section 1866F.
``(b) Establishment of Competitive Acquisition Areas.--
``(1) In general.--The Secretary shall establish one or
more competitive acquisition areas for agreement award purposes
for the furnishing under part B of the items and services
described in subsection (d) after 2004. The Secretary may
establish different competitive acquisition areas under this
subsection for different classes of items and services or may
establish a single, national competition for non-complex items.
``(2) Criteria for establishment.--The competitive
acquisition areas established under paragraph (1) shall be
chosen based on the availability and accessibility of
individuals and entities able to furnish items and services,
and the estimated savings to be realized by the use
of competitive acquisition in the furnishing of items and services in
the area.
``(c) Awarding of Agreements in Competitive Acquisition Areas.--
``(1) In general.--The Secretary shall conduct a
competition among individuals and entities supplying items and
services described in subsection (d) for each competitive
acquisition area established under subsection (b) for each
class of items and services.
``(2) Conditions for awarding agreement.--The Secretary may
not enter an agreement with any entity under the competition
conducted pursuant to paragraph (1) to furnish an item or
service unless the Secretary finds that the entity meets
quality standards specified by the Secretary, and that the
aggregate amounts to be paid under the agreement are expected
to be less than the aggregate amounts that would otherwise be
paid.
``(3) Terms of agreement.--An agreement entered into with
an entity under the competition conducted pursuant to paragraph
(1) is subject to terms and conditions that the Secretary may
specify.
``(d) Services Described.--The items and services to which this
section applies are all items and services described in paragraphs (5)
through (9) of section 1861(s) (other than custom fabricated
prostheses, as defined by the Secretary), and such other items or
services reimbursed under this title as the Secretary may specify.''.
(b) Items and Services To Be Furnished Only Through Competitive
Acquisition.--Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
(1) by striking ``or'' at the end of paragraph (20),
(2) by striking the period at the end of paragraph (21) and
inserting ``; or'', and
(3) by adding after paragraph (21) the following:
``(22) where the expenses are for an item or service
furnished in a competitive acquisition area (as established by
the Secretary under section 1866G(a)) by an entity other than
an entity with which the Secretary has entered into an
agreement under section 1866G(c) for the furnishing of such an
item or service in that area, except in such cases of emergency
or urgent need as the Secretary shall prescribe.''.
(c) Effective Date.--The amendments made by subsections (a) and (b)
apply to items and services furnished after 2004.
SEC. 122. PREFERRED PARTICIPANTS.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as
previously amended by this subtitle, is further amended by inserting
after section 1866G the following new section:
``SEC. 1866H. PREFERRED PARTICIPANTS.
``(a) Program Authority.--
``(1) In general.--
``(A) Discretionary authority.--Beginning in 2004,
the Secretary may implement a preferred participant
program, under which the Secretary enters into
agreements for the furnishing of health care items and
services by individuals and entities participating in
the program under part A or B of this title that
provide high-quality, efficient health care.
``(B) Mandatory implementation.--Beginning in 2010,
the Secretary of Health and Human Services shall
implement such a program in any geographic area (which
may include a hospital referral region, as defined by
the latest determination of the Center for the
Evaluative Clinical Services of the Dartmouth Medical
School) where the intensity of pattern of practice
(represented by the number of services) and cost of
service is determined to be in the most expensive 10
percent of the nation, as adjusted for severity and
other factors of the population as the Secretary
determines to be appropriate.
``(2) Limitation.--The Secretary shall not implement the
program under this section with respect to a service area, or
with respect to a category of individuals and entities
furnishing items and services in such service area, unless the
Secretary estimates that to do so will improve the quality and
reduce the cost of the programs under this title.
``(3) Administration by contract.--Except as otherwise
specifically provided, the Secretary shall administer the
program under this section in accordance with section 1866F.
``(b) Preferred Participant Agreement.--
``(1) Criteria and terms.--In order to be eligible to
participate in the program under part A or B as a preferred
participant, an individual or entity shall meet the following
conditions:
``(A) Participation criteria.--The individual or
entity shall meet the criteria established by the
Secretary under section 1866F(b)(5) (relating to
quality, cost-effectiveness, categories of participants
in service area, and such other standards or criteria
as the Secretary may establish).
``(B) Payment rate.--The individual or entity shall
agree to accept payment, for covered health care items
and services furnished during the term of the
agreement, at the rates established under this section
(which may include rates in effect under part A or B,
discounted rates, or such other rates as the Secretary
may find appropriate).
``(2) Duration.--A preferred participant agreement under this
section shall be for a calendar year (or, in the case of an
agreement commencing after the first day of January (or such
later date as the Secretary may specify), for the remainder of
such calendar year), and shall be annually renewable, at the
option of the participant, while the participant continues to
meet all applicable conditions of participation.
``(c) Option To Reduce Cost Sharing.--Notwithstanding any other
provision of law, subject to the cost-effectiveness criteria specified
in subsection (a)(2), the Secretary may--
``(1) 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 section, and may limit such reduction or
elimination to particular service areas; and
``(2) permit individuals or entities under an agreement
under this section to waive part or all of such beneficiary
cost sharing.''.
(b) Definitions.--Section 1861 (42 U.S.C. 1395x), as amended by
section 112, is amended by adding at the end the following new
subsection:
``(xx) Preferred Participant.--The term `preferred participant'
means an individual or entity that furnishes health care items or
services under part A or B and that has in effect an agreement under
section 1866H(b).''.
SEC. 123. PROGRAM TO IMPROVE OUTCOMES AND REDUCE PATIENT MORBIDITY AND
MORTALITY.
Title XVIII (42 U.S.C. 1395 et seq.), as previously amended by this
subtitle, is further amended by inserting after section 1866H the
following new section:
``SEC. 1866I. PROGRAM TO IMPROVE OUTCOMES AND REDUCE PATIENT MORBIDITY
AND MORTALITY.
``(a) In General.--
``(1) Competition to furnish bundled items and services.--
Beginning in 2004, the Secretary shall use a competitive
process to enter into agreements with specific hospitals or
other entities for the furnishing of bundled groups of items
and services related to certain surgical procedures, and of
other bundled groups of items and services (unrelated to
surgical procedures) specified by the Secretary furnished
during an episode of care (as defined by the Secretary). Such
items and services may include any items or services covered
under this title that the Secretary determines to be
appropriate. The Secretary shall give special emphasis to
including under this program those procedures where the
Secretary determines evidence exists that morbidity and
mortality of beneficiaries can be reduced by the use of the
program.
``(2) Administration by contract.--Except as otherwise
specifically provided, the Secretary may administer the program
under this section in accordance with section 1866F.
``(b) Eligibility Criteria.--In order to be eligible for an
agreement under this section, an entity shall--
``(1) meet quality standards established by the Secretary;
``(2) implement an ongoing quality assurance program
approved by the Secretary; and
``(3) meet such other requirements as the Secretary may
establish.
``(c) Payment.--
``(1) In general.--The Secretary shall establish criteria
for identifying the health care items and services furnished by
a center with an agreement under this section during an episode
of care that are to be bundled together and for which payment
shall be made on the basis of an all-inclusive rate.
``(2) Payment limitation.--
``(A) Limitation on aggregate payments to
entities.--The estimated amount of aggregate payments
to all entities under this section for a year shall be
less than the estimated amount of aggregate payments
that the Secretary would otherwise have made for such
year, adjusted for changes in the number of individuals
receiving services.
``(B) Limitation on payments to particular
entities.--In no case shall the all-inclusive rate paid
to an entity for items and services furnished during an
episode of care under this section exceed the estimated
amount of the payments that the Secretary would
otherwise have made for such items and services.
``(d) Agreement Period.--An agreement period shall be for up to
three years (subject to renewal).
``(e) Incentives for Use of Centers.--Notwithstanding any other
provision of law, the Secretary may permit entities under an agreement
under this section to furnish additional services (including family and
caregiver support services) or to waive part or all beneficiary cost
sharing (such as deductibles, copayments, and coinsurance) with respect
to any of the items or services furnished under this section.
``(f) Beneficiary Election.--Notwithstanding any other provision of
this title, an individual who voluntarily elects to receive items and
services under an arrangement described in subsection (a)(1) with
respect to an episode of care shall not be entitled to payment under
this title for any such item or service furnished with respect to such
episode of care other than through such arrangement, subject to such
exceptions as the Secretary may prescribe for emergency medical
services as described in section 1852(d)(3) and other cases of urgent
need.''.
SEC. 124. AUTHORITY TO IMPOSE SUSTAINABLE GROWTH RATE LIMITATIONS ON
PAYMENT FOR CERTAIN MEDICARE ITEMS AND SERVICES.
(a) In General.--In the case of unusual increases in costs to the
medicare program (as determined by the Secretary of Health and Human
Services) attributable to unjustified increases in the amount or
intensity of items and services furnished under the program, the
Secretary shall modify the payment update and/or methodology with
respect to such items and services from the update and/or methodology
which permitted or resulted in such unusual increases in costs to an
update and/or methodology that imposes a sustainable growth rate for
such items and services similar to the sustainable growth rate applied
with respect to payment for physicians services under section 1848(f)
of the Social Security Act (42 U.S.C. 1395w-4(f)).
(b) Authority To Vary by Region.--Any sustainable growth rate
recommended by the Secretary may provide for the determination of such
rate on a uniform national basis, by Metropolitan Statistical Area, by
State, or by any other region that the Secretary determines
appropriate.
SEC. 125. AUTHORITY TO NEGOTIATE PAYMENT RATES IN CERTAIN AREAS (MOST
FAVORED CUSTOMER AUTHORITY) AND EXPAND INHERENT
REASONABLENESS AUTHORITY.
(a) Findings; Purpose.--
(1) Finding.--The Congress finds as follows:
(A) The medicare program is the largest single
purchaser of health care services in the United States.
(B) It is inappropriate for the medicare program to
in effect subsidize lower prices offered by providers
of services and suppliers to smaller volume purchasers
of health care services.
(2) Purpose.--The purpose of this section is to require the
treatment of the medicare program as a preferred or volume
buyer of health care services in the United States by requiring
the Secretary of Health and Human Services to negotiate a lower
rate for items and services for which reimbursement is made
under the program.
(b) Mandate To Negotiate.--In the case of a service area (as
determined by the Secretary) where payment rates under the medicare
program for items and services furnished exceed the rates charged by
such health care provider for such items and services for which payment
is made other than under the medicare program, the Secretary shall
negotiate a similar, lower customer rate with such health care provider
for such items and services under the medicare program.
(c) Adjustment.--In negotiating such similar, lower customer rate
under subsection (a), the Secretary shall take into account costs
uniquely associated with the provision of items and services under the
medicare program.
(d) Waiver Authority.--The Secretary may waive such requirements of
title XVIII of the Social Security Act as may be necessary for the
purposes of carrying out this Act.
(e) Definitions.--In this section:
(1) Medicare program.--The term ``medicare program'' means
the program established under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.).
(2) Health care provider.--The term ``health care
provider'' means a provider of services, a physician, or a
supplier who furnishes items or services for which payment is
made under the medicare program.
(3) Provider of services.--The term ``provider of
services'' has the meaning given that term under section
1861(u) of the Social Security Act (42 U.S.C. 1395x(u)).
(4) Physician.--The term ``physician'' has the meaning
given that term under section 1861(r) of such Act (42 U.S.C.
1395x(r)).
(f) Section 1842(b)(8) is amended to strike ``15 percent'' each
place it appears and substitute ``30 percent''.
SEC. 126. AUTHORIZATION OF BASING MEDICARE PAYMENT FOR HOSPITAL
OUTPATIENT DEPARTMENT SERVICES ON PAYMENT RATES FOR
SIMILAR SERVICES PROVIDED OUTSIDE THE HOSPITAL SETTING.
(a) In General.--Section 1833(t)(1) (42 U.S.C. 1395l(t)(1)) is
amended--
(1) in subparagraph (A), by inserting ``subject to
subparagraph (C),'' after ``1999,'', and
(2) by adding at the end the following new
subparagraph:
``(C) Use of rates in non-hospital settings.--The
Secretary shall review differentials in total medicare
payments for non-inpatient services furnished in and
outside hospitals. With respect to covered OPD services
furnished on or after January 1, 2010, where the
Secretary determines that there is no danger to quality
of care or outcomes, the Secretary shall adjust payment
rates for covered OPD services (including any facility-
related component to such services) to pay no more than
the lowest rate in any setting for similar services.''.
(b) Conforming Amendment.--The fifth sentence of section
1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) is amended by inserting ``,
or in the case described in section 1833(t)(1)(C), the coinsurance
amount that would otherwise apply with respect to the provision of the
similar services referred to in such section'' before the period at the
end.
SEC. 127. MEDICARE SINGLE, UNIFIED PROSPECTIVE PAYMENT SYSTEM FOR POST-
CARE HOSPITAL SERVICES.
(a) Development of Payment System.--
(1) In general.--By not later than January 1, 2010, the
Secretary of Health and Human Services shall develop and
transmit to Congress a plan to provide for a single, unified
system for the payment under a prospective payment system for
post-acute care hospital services (including professional
services) within a course of treatment under the Medicare
Program under title XVIII of the Social Security Act.
(2) Adjustments for area variations in costs and
outliers.--Such a system shall provide for appropriate
adjustments to take into account--
(A) appropriate variations in the costs of wages
and such other input costs as the Secretary finds
appropriate; and
(B) outliers that reflect bona fide variations in
the case mix and severity of patients being served.
(b) Implementation.--Unless Congress provides otherwise, the
Secretary shall implement the system developed under subsection (a) for
items and services furnished on or after January 1, 2012.
(c) Relation to Current Payment Methodologies.--The system under
this section shall be designed and implemented so as to supersede the
various different prospective payment system for such services, which
use different payment, risk adjustment, and other criteria, under the
Medicare Program.
SEC. 128. MEDICARE PAYMENT ADJUSTMENT TO REFLECT DEVIATIONS FROM
GENERALLY ACCEPTED PRACTICE IN OVERSERVING OR
UNDERSERVING MEDICARE BENEFICIARIES.
(a) Findings.--The Congress finds as follows:
(1) The intensity and cost of the practice of medicine
varies by more than 200 percent across various regions of the
United States and, in the case of certain medical procedures,
by that percent or more among some adjoining counties.
(2) Such variations in cost and intensity do not appear to
be related to the severity of illness or the underlying health
of the population of the United States.
(3) If the pattern of practice of medicine in the State of
Minnesota (one of the States with the highest quality of health
of residents) were adopted nationwide, the financial stability
of the medicare program would be assured.
(4) For both quality of care and financial purposes, it is
the purpose of this section to encourage best patterns of
practice of medicine.
(b) Establishment of Practice Profiles.--
(1) In general.--By not later than January 1, 2010, the
Secretary of Health and Human Services shall establish clinical
profiles of the practice patterns of health care providers
(including both institutional providers, health care
professionals, and Medicare+Choice organizations) providing
items and services under the Medicare program under title XVIII
of the Social Security Act in order to determine how their
practice patterns compare to each other, on a local, State, and
national basis. In establishing such profiles, the Secretary
shall take into account differences in the case mix and
severity of patients served by such providers and shall take
into account, to the extent practicable, the medical outcomes
resulting from such practices.
(2) Dissemination of information.--The Secretary shall
establish a method for disseminating summary information to the
public on the clinical profiles established under paragraph
(1). No information that identifies (or permits the
identification of) an individual patient shall be disseminated.
(c) Authority To Make Payment Adjustments.--For items and services
furnished on or after January 1, 2020, the Secretary of Health and
Human Services may adjust the amount of the payments made under the
Medicare program to health care providers in order to encourage their
provision of services in a medically appropriate manner and to
discourage significant deviations in underservice or overservice from
generally accepted norms of best medical practice. Such adjustments
shall be made on the basis of provider profiles established under
subsection (b) and shall be made only after taking into account
variations among providers in the case mix and severity of patients
served.
(d) Requirement To Make Payment Adjustments.--
(1) In general.--For items and services furnished on or
after January 1, 2025, the Secretary of Health and Human
Services shall reduce by 10 percent the amount of the payments
made under the Medicare program to health care providers
described in paragraph (2).
(2) Health care providers described.--For purposes of
paragraph (1), a health care provider described in this
paragraph is a provider--
(A) that furnishes services in a hospital referral
region (as defined by the latest determination of the
Center for the Evaluative Clinical Services of the
Dartmouth Medical School where the intensity of pattern
of practice (as represented by the number of services)
and the cost of services is determined by the Secretary
to be in the most expensive 20 percent of all such
services in the United States, as adjusted for severity
and such other factors as the Secretary determines
appropriate;
(B) with respect to which the Secretary is unable
to identify improved quality care or outcomes as a
result of such higher intensity services or costs;
(C) that has a pattern of practice which is among
the top 20 percent of providers in the region in terms
of intensity and costs; and
(D) that does not serve a patient population that
is preponderately among the 20 percent most severely
ill in the region.
SEC. 129. PROMOTING THE USE OF COST EFFECTIVE MEDICARE NONINSTITUTIONAL
SERVICES THROUGH WAIVER OF BENEFIT LIMITATIONS.
(a) In General.--If the Secretary of Health and Human Services
estimates that treatment in a non-hospital or non-institutional setting
under the medicare program under title XVIII of the Social Security Act
is likely to provide similar or better quality care and outcomes at a
lower cost to the program, the Secretary of Health and Human Services
may waive requirements described in subsection (b) which discourage or
prevent treatment in such a setting.
(b) Requirements Waivable.--
(1) In general.--Subject to paragraph (2), the requirements
that may be waived include the following:
(A) The requirement, for the receipt of benefits
for extended care services, that the services be post-
hospital extended care services.
(B) Cost sharing (including deductibles,
coinsurance, and copayments) that may be applicable.
(2) Nonwaivable provisions.--The Secretary of Health and
Human Services may not under this section provide for coverage
of services for which no payment is otherwise provided under
the medicare program.
(c) Limitation.--The Secretary may not provide for such a waiver in
the case of an individual unless there are satisfactory assurances that
the medicare beneficiary has not received (and is not likely to
receive) medicare benefits for hospital services for the treatment with
respect to which the waiver applies.
SEC. 130. INCREASED FLEXIBILITY IN CONTRACTING FOR MEDICARE CLAIMS
PROCESSING.
(a) Carriers To Include Entities That Are Not Insurance
Companies.--
(1) The matter in section 1842(a) (42 U.S.C. 1395u(a))
preceding paragraph (1) is amended by striking ``with
carriers'' and inserting ``with agencies and organizations
(referred to as carriers)''.
(2) Section 1842(f) (42 U.S.C. 1395u(f)) is repealed.
(b) Secretarial Flexibility in Contracting for and in Assigning
Fiscal Intermediary and Carrier Functions.--
(1) Section 1816 (42 U.S.C. 1395h) is amended by striking
everything after the heading but before subsection (b) and
inserting the following:
``Sec. 1816. (a)(1) The Secretary may enter into contracts with
agencies or organizations to perform any or all of the following
functions, or parts of those functions (or, to the extent provided in a
contract, to secure performance thereof by other organizations):
``(A) Determine (subject to the provisions of section 1878
and to such review by the Secretary as may be provided for by
the contracts) the amount of the payments required pursuant to
this part to be made to providers of services.
``(B) Make payments described in subparagraph (A).
``(C) Provide consultative services to institutions or
agencies to enable them to establish and maintain fiscal
records necessary for purposes of this part and otherwise to
qualify as providers of services.
``(D) Serve as a center for, and communicate to individuals
entitled to benefits under this part and to providers of
services, any information or instructions furnished to the
agency or organization by the Secretary, and serve as a channel
of communication from individuals entitled to benefits under
this part and from providers of services to the Secretary.
``(E) Make such audits of the records of providers of
services as may be necessary to insure that proper payments are
made under this part.
``(F) Perform the functions described in subsection (d).
``(G) Perform such other functions as are necessary to
carry out the purposes of this part.
``(2) As used in this title and title XI, the term `fiscal
intermediary' means an agency or organization with a contract under
this section.''.
(2) Subsections (d) and (e) of section 1816 (42 U.S.C.
1395h) are amended to read as follows:
``(d) Each provider of services shall have a fiscal intermediary
that--
``(1) acts as a single point of contact for the provider of
services under this part,
``(2) makes its services sufficiently available to meet the
needs of the provider of services, and
``(3) is responsible and accountable for arranging the
resolution of issues raised under this part by the provider of
services.
``(e) The Secretary, in evaluating the performance of a fiscal
intermediary, may solicit comments from providers of services.''.
(3)(A) Section 1816(b)(1)(A) (42 U.S.C. 1395h(b)(1)(A)) is
amended by striking ``after applying the standards, criteria,
and procedures'' and inserting ``after evaluating the ability
of the agency or organization to fulfill the contract
performance requirements''.
(B) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1)) is amended
to read as follows:
``(f)(1) The Secretary may consult with Medicare+Choice
organizations under part C of this title, providers of services and
other persons who furnish items or services for which payment may be
made under this title, and organizations and agencies performing
functions necessary to carry out the purposes of this part with respect
to performance requirements for contracts under subsection (a).''.
(C) The second sentence of section 1842(b)(2)(A) (42 U.S.C.
1395u(b)(2)(A)) is amended to read as follows: ``The Secretary
may consult with Medicare+Choice organizations under part C of
this title, providers of services and other persons who furnish
items or services for which payment may be made under this
title, and organizations and agencies performing functions
necessary to carry out the purposes of this part with respect
to performance requirements for contracts under subsection
(a).''.
(D) Section 1842(b)(2)(A) (42 U.S.C. 1395u(b)(2)(A)) is
amended by striking the third sentence.
(E) The matter in section 1842(b)(2)(B) (42 U.S.C.
1395u(b)(2)(B)) preceding clause (i) is amended by striking
``establish standards'' and inserting ``develop contract
performance requirements''.
(F) Section 1842(b)(2)(D) (42 U.S.C. 1395u(b)(2)(D)) is
amended by striking ``standards and criteria'' each place it
occurs and inserting ``contract performance requirements''.
(4)(A) The matter in section 1816(b) (42 U.S.C. 1395h(b))
preceding paragraph (1) is amended by striking ``an agreement''
and inserting ``a contract''.
(B) Paragraphs (1)(B) and (2)(A) of section 1816(b) (42
U.S.C. 1395h(b)) are each amended by striking ``agreement'' and
inserting ``contract''.
(C) The first sentence of section 1816(c)(1) (42 U.S.C.
1395h(c)(1)) is amended by striking ``An agreement'' and
inserting ``A contract''.
(D) The last sentence of section 1816(c)(1) (42 U.S.C.
1395h(c)(1)) is amended by striking ``an agreement'' and
inserting ``a contract''.
(E) The matter in section 1816(c)(2)(A) (42 U.S.C.
1395h(c)(2)(A)) preceding clause (i) is amended by striking
``agreement'' and inserting ``contract''.
(F) Section 1816(c)(3)(A) (42 U.S.C. 1395h(c)(3)(A)) is
amended by striking ``agreement'' and inserting ``contract''.
(G) Section 1816(h) (42 U.S.C. 1395h(h)) is amended--
(i) by striking ``An agreement'' and inserting ``A
contract'', and
(ii) by striking ``the agreement'' each place it
occurs and inserting ``the contract''.
(H) Section 1816(i)(1) (42 U.S.C. 1395h(i)(1)) is amended
by striking ``an agreement'' and inserting ``a contract''.
(I) Section 1816(j) (42 U.S.C. 1395h(j)) is amended by
striking ``An agreement'' and inserting ``A contract''.
(J) Section 1816(k) (42 U.S.C. 1395h(k)) is amended by
striking ``An agreement'' and inserting ``A contract''.
(K) Section 1816(l) (42 U.S.C. 1395h(l)) is amended by
striking ``an agreement'' and inserting ``a contract''.
(L) The matter in section 1842(a) (42 U.S.C. 1395u(a))
preceding paragraph (1) is amended by striking ``agreements''
and inserting ``contracts''.
(M) Section 1842(h)(3)(A) (42 U.S.C. 1395u(h)(3)(A)) is
amended by striking ``an agreement'' and inserting ``a
contract''.
(5)(A) The matter in section 1816(c)(2)(A) (42 U.S.C.
1395h(c)(2)(A)) preceding clause (i) is amended by inserting
``that provides for making payments under this part'' after
``this section''.
(B) Section 1816(c)(3)(A) (42 U.S.C. 1395h(c)(3)(A)) is
amended by inserting ``that provides for making payments under
this part'' after ``this section''.
(C) Section 1816(k) (42 U.S.C. 1395h(k)) is amended by
inserting ``(as appropriate)'' after ``submit''.
(D) The matter in section 1842(a) (42 U.S.C. 1395u(a))
preceding paragraph (1) is amended by striking ``some or all of
the following functions'' and inserting ``any or all of the
following functions, or parts of those functions''.
(E) The first sentence of section 1842(b)(2)(C) (42 U.S.C.
1395u(b)(2)(C)) is amended by inserting ``(as appropriate)''
after ``carriers''.
(F) The matter preceding subparagraph (A) in the first
sentence of section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is
amended by inserting ``(as appropriate)'' after ``contract''.
(G) The matter in section 1842(b)(7)(A) (42 U.S.C.
1395u(b)(7)(A)) preceding clause (i) is amended by striking
``the carrier'' and inserting ``a carrier''.
(H) The matter in section 1842(b)(11)(A) (42 U.S.C.
1395u(b)(11)(A)) preceding clause (i) is amended by inserting
``(as appropriate)'' after ``each carrier''.
(I) The first sentence of section 1842(h)(2) (42 U.S.C.
1395u(h)(2)) is amended by inserting ``(as appropriate)'' after
``shall''.
(J) Section 1842(h)(5)(A) (42 U.S.C. 1395u(h)(5)(A)) is
amended by inserting ``(as appropriate)'' after ``carriers''.
(6)(A) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is
amended by striking ``hospital, rural primary care hospital,
skilled nursing facility, home health agency, hospice program,
comprehensive outpatient rehabilitation facility, or
rehabilitation agency'' and inserting ``provider of services''.
(B) The matter in section 1816(j) (42 U.S.C. 1395h(j))
preceding paragraph (1) is amended by striking ``for home
health services, extended care services, or post-hospital
extended care services''.
(7) Section 1842(a)(3) (42 U.S.C. 1395u(a)(3)) is amended
by inserting ``(to and from individuals enrolled under this
part and to and from physicians and other entities that furnish
items and services)'' after ``communication''.
(8) The matter in section 1842(a) (42 U.S.C. 1395u(a))
preceding paragraph (1), as amended by subsection (b)(4)(L), is
amended by striking ``carriers with which contracts'' and
inserting ``single contracts under section 1816 and this
section together, or separate contracts with eligible agencies
and organizations with which contracts''.
(c) Elimination of Special Provisions for Terminations of
Contracts.--
(1) The matter in section 1816(b) (42 U.S.C. 1395h(b))
preceding paragraph (1) is amended by striking ``or renew''.
(2) The last sentence of section 1816(c)(1) (42 U.S.C.
1395h(c)(1)) is amended by striking ``or renewing''.
(3) Section 1816(g) (42 U.S.C. 1395h(g)) is repealed.
(4) The last sentence of section 1842(b)(2)(A) (42 U.S.C.
1395u(b)(2)(A)) is amended by striking ``or renewing''.
(5) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by
striking paragraph (5).
(d) Repeal of Fiscal Intermediary Requirements That Are Not Cost-
Effective.--Section 1816(f)(2) (42 U.S.C. 1395h(f)(2)) is amended to
read as follows:
``(2) The contract performance requirements described in paragraph
(1) shall include, with respect to claims for services furnished under
this part by any provider of services other than a hospital, whether
such agency or organization is able to process 75 percent of
reconsiderations within 60 days and 90 percent of reconsiderations
within 90 days.''.
(e) Repeal of Cost Reimbursement Requirements.--
(1) The first sentence of section 1816(c)(1) (42 U.S.C.
1395h(c)(1)) is amended--
(A) by striking the comma after ``appropriate'' and
inserting ``and'', and
(B) by striking everything after ``subsection (a)''
up to the period.
(2) Section 1816(c)(1) (42 U.S.C. 1395h(c)(1)) is further
amended by striking the second and third sentences.
(3) The first sentence of section 1842(c)(1) (42 U.S.C.
1395h(c)(1)) is amended--
(A) by striking ``shall provide'' the first place
it occurs and inserting ``may provide'', and
(B) by striking everything after ``this part'' up
to the period.
(4) Section 1842(c)(1) (42 U.S.C. 1395h(c)(1)) is further
amended by striking the remaining sentences.
(5) Section 2326(a) of the Deficit Reduction Act of 1984
(42 U.S.C. 1395h note) is repealed.
(f) Secretarial Flexibility With Respect To Renewing Contracts and
Transfer of Functions.--
(1) Section 1816(c) (42 U.S.C. 1395h(c)) is amended by
adding at the end the following:
``(4)(A) Except as provided in laws with general
applicability to Federal acquisition and procurement or in
subparagraph (B), the Secretary shall use competitive
procedures when entering into contracts under this section.
``(B)(i) The Secretary may renew a contract with a fiscal
intermediary under this section from term to term without
regard to section 5 of title 41, United States Code, or any
other provision of law requiring competition, if the fiscal
intermediary has met or exceeded the performance requirements
established in the current contract.
``(ii) Functions may be transferred among fiscal
intermediaries without regard to any provision of law requiring
competition. However, the Secretary shall ensure that
performance quality is considered in such transfers.''.
(2) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by
striking everything before paragraph (2) and inserting the
following:
``(b)(1)(A) Except as provided in laws with general applicability
to Federal acquisition and procurement or in subparagraph (B), the
Secretary shall use competitive procedures when entering into contracts
under this section.
``(B)(i) The Secretary may renew a contract with a carrier under
subsection (a) from term to term without regard to section 5 of title
41, United States Code, or any other provision of law requiring
competition, if the carrier has met or exceeded the performance
requirements established in the current contract.
``(ii) Functions may be transferred among carriers without regard
to any provision of law requiring competition. However, the Secretary
shall ensure that performance quality is considered in such
transfers.''.
(g) Waiver of Competitive Requirements for Initial Contracts.--
(1) Contracts under section 1816(a) of the Social Security
Act (42 U.S.C. 1395h(a)) or 1842(a) of such Act (42 U.S.C.
1395u(a)) whose periods begin before or during the one year
period that begins on the first day of the fourth calendar
month that begins after the date of enactment of this section
may be entered into without regard to any provision of law
requiring competition.
(2) The amendments made by subsection (f) apply to
contracts whose periods begin after the end of the one year
period specified in paragraph (1) of this subsection.
(h) Effective Dates.--
(1) The amendments made by subsection (c) apply to
contracts whose periods end at, or after, the end of the sixth
calendar month that begins after the date of enactment of this
section.
(2) The amendments made by subsections (a), (b), (d), and
(e) apply to contracts whose periods begin after the sixth
calendar month that begins after the date of enactment of this
section.
SEC. 131. SPECIAL PROVISIONS FOR FUNDING OF ACTIVITIES RELATED TO
CERTAIN OVERPAYMENT RECOVERIES AND PROVIDER ENROLLMENT
AND REVERIFICATION OF ELIGIBILITY.
(a) Funding Available Under the Medicare Integrity Program (MIP)
Appropriation for Provider Enrollment Activities Performed by Fiscal
Intermediaries and Carriers.--Section 1817(k)(4) (42 U.S.C.
1395i(k)(4)) is amended--
(1) in subparagraph (A), by inserting ``and the activities
specified in subparagraph (C)'' after ``the Medicare Integrity
Program under section 1893''; and
(2) by adding at the end the following new subparagraph:
``(C)(i) Of the amounts appropriated under
subparagraph (A), the amounts specified in clause (iii)
shall be available to the Secretary for payment of the
costs of the activities described in clause (ii) which
are performed by entities with contracts under section
1816 or 1842.
``(ii) For purposes of clause (i), the activities
specified in this paragraph are--
``(I) determinations as to whether
overpayments were made to an individual or
entity furnishing items or services for which
payment may be made under this title and
recovery of any such overpayments; and
``(II) activities related to enrolling such
individuals and entities under the program
under this title, including establishing
billing privileges and records systems,
processing applications, background
investigations, and related activities.
``(iii) For purposes of clause (i), the amount
specified under this clause is the lesser of the
amounts necessary to perform the activities described
in clause (ii) or--
``(I) for fiscal year 2003, $14,000,000;
and
``(II) for fiscal years 2004 and 2005, the
amount for the preceding year, increased by 30
percent of the difference between the maximum
amount specified in subparagraph (B) for such
year and the maximum amount so specified for
the preceding year.
``(iv) Amounts available under this subparagraph
for the activities described in clause (ii) shall be in
addition to any amounts that may otherwise be available
to carry out such activities.''.
(b) Additional Functions To Be Performed by MIP Contractors.--
(1) Reverification of eligibility function.--Section
1893(b) (42 U.S.C. 1395ddd(b)) is amended by adding at the end
the following new paragraph:
``(6) activities related to reverifying the eligibility of
individuals and entities described in paragraph (1) to
participate under the program under this title, and related
activities.''.
(2) Provider enrollment and overpayment recovery functions
added as mip contractor functions after phase-in period.--
Section 1893(b) (42 U.S.C. 1395ddd(b)) is amended by adding at
the end the following new paragraphs:
``(7) Activities related to enrolling individuals and
entities described in paragraph (1) under the program under
this title, including establishing billing privileges and
records systems, processing applications, background
investigations, and related activities.
``(8) Determinations with respect to overpayments made
under this title that are discovered pursuant to the
performance of an activity described in paragraph (1) or (2),
and recovery of any such overpayments.''.
(3) Effective dates.--The amendment made by paragraph (1)
shall be effective on and after October 1, 2002. The amendment
made by paragraph (2) shall be effective on and after October
1, 2005.
SEC. 132. ESTABLISHMENT OF MEDICARE ADMINISTRATIVE FEE FOR SUBMISSION
OF PAPER CLAIMS.
(a) Imposition of Fee.--Notwithstanding any other provision of law,
the Secretary of Health and Human Services shall establish (in the form
of a separate fee or reduction of payment otherwise made under the
medicare program under title XVIII of the Social Security Act) an
administrative fee of $1 for the submission of a claim in a paper or
non-electronic form for items or services for which payment is sought
under such title.
(b) Exception Authority.--The Secretary--
(1) shall waive the imposition of a fee under subsection
(a) in cases in which there is no method available for the
submission of claims other than in a written form; and
(2) may waive the imposition of such a fee in such unusual
cases as the Secretary finds appropriate.
(c) Effective Date.--Subsection (a) applies to claims submitted on
or after January 1, 2005.
(d) The Secretary shall make available at no charge, public domain
software to facilitate the filing of electronic forms and claims under
title XVIII and XIX of the Social Security Act.
Subtitle D--Long-Term Hospital Provisions
SEC. 141. FINDINGS AND PURPOSES OF SUBTITLE.
(a) Findings.--Congress finds the following:
(1) The use of inpatient hospital services has been
declining, and is likely to continue to decline, with the
advent of new pharmaceuticals, technologies, and outpatient
services.
(2) In many areas hospitals are often half occupied.
(3) The quality of care among hospitals may vary
significantly, with evidence that complicated and difficult
procedures carried out in a hospital that does not perform a
large volume of such procedures may create problems with
outcomes.
(4) Regions and communities expect a full range of quality
medical services in an area so as to ensure that hospitalized
individuals are near family and friends--a goal which may
compound the quality outcomes problem described in paragraph
(3).
(5) Hospitals have been, and increasingly will be, faced,
with cost control pressures from public and private programs.
(6) Hospital emergency rooms furnish essential life-saving
services and must be available in all areas. But they
frequently provide uncompensated care, which increases
financial pressure on hospitals.
(7) There are approximately 3 million rural residents
living more than 30 minutes from the nearest emergency room,
and it is increasingly clear that the nation needs a
coordinated emergency room (ER) policy.
(8) There is a need for a major increase in medical
information technology investment so as to improve quality,
reduce paperwork, and ensure the best patterns of practice.
(b) Purpose.--It is the purpose of this subtitle to use medicare to
encourage the development of a national hospital policy that delivers
more efficient and better quality care, ensures access to emergency
room services to all citizens in a timely manner, and provides
necessary regional quality hospital services.
SEC. 142. REDUCTIONS IN MEDICARE CAPITAL PAYMENTS IN CASE OF EXCESS BED
SUPPLY IN HOSPITALS WITHOUT A PLAN OF ADJUSTMENT.
(a) In General.--Notwithstanding any other provision of law, the
Secretary of Health and Human Services may, for cost reporting periods
and discharges occurring on or after October 1, 2005, reduce by 25
percent medicare capital payments for a hospital located in a hospital
catchment area if--
(1) the hospital bed ratio for the area for that type of
hospital is higher than the national average hospital bed ratio
for that type of hospital; and
(2) the average hospital occupancy rate for the hospital is
below the average hospital occupancy rate for that type of
hospital.
(b) Limitation on Amount of Reduction.--The reduction in payment
under subsection (a) may not exceed 25 percent of the amount of the
medicare capital payments.
(c) Exceptions.--The Secretary shall not make a reduction under
subsection (a) insofar as the Secretary determines that such reduction
would be inappropriate as--
(1) it would adversely effect an ongoing plan for the
hospital to reduce the number of acute care inpatient hospital
beds, whether directly or through closure or merger with
another hospital and such plan has been developed through
public hearings, with community input, and has a schedule for
implementation;
(2) additional capacity will be required to meet the needs
of an underserved population, such as a growing suburban area
and the governor of the State attests to such requirement; or
(3) the hospital has been certified as a critical access
hospital under section 1820(e) of the Social Security Act (42
U.S.C. 1395i-4(e)) and is part of a State rural health care
plan.
(d) Definitions.--For purposes of this section:
(1) PPS hospital; pps-exempt hospital.--The term ``PPS
hospital'' has the meaning given the term ``subsection (d)
hospital'' in section 1886(d)(1)(B) of the Social Security Act
(42 U.S.C. 1395ww(d)(1)(B)), and the term ``PPS-exempt
hospital'' means a hospital other than a PPS hospital.
(2) Type of hospital.--The term ``type of hospital'' means
PPS hospitals and each type of hospital described in a clause
of section 1886(d)(1)(B) of the Social Security Act (42 U.S.C.
1395ww(d)(1)(B)).
(3) Hospital catchment area.--The term ``hospital catchment
area'' means a standard metropolitan statistical area or such
area as the Secretary determines appropriate.
(4) Hospital bed ratio.--
(A) In general.--The term ``hospital bed ratio''
means, for an area and a type of hospital and as
determined by the Secretary, the ratio of--
(i) the number of licensed inpatient
hospital beds for that type of hospital in the
area, to
(ii) the population of the area.
(B) Case mix adjustment authority.--In determining
a hospital bed ratio, the Secretary may provide for
such adjustment as may be appropriate to take into
account differences in the case mix of the population
served by the hospital.
(5) Hospital occupancy rate.--The term ``hospital occupancy
rate'' means, for a hospital and period and as determined by
the Secretary, the average number of inpatient beds in the
hospital which are occupied on any day in that period, divided
by the average total number of licensed inpatient beds in the
hospital on any day in that period.
(6) Medicare capital payments.--The term ``medicare capital
payments'' means payments to a hospital under section 1886 of
the Social Security Act (42 U.S.C. 1395ww) for capital-related
costs, and includes payments under section 1886(g) of such Act,
but does not include payments for a return on equity capital.
(7) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
SEC. 143. SPECIAL PAYMENTS TO ESSENTIAL HOSPITALS AND DEVELOPMENT OF
ECONOMIC RECOVERY PLAN.
(a) In General.--Section 1886(g) (42 U.S.C. 1395ww(g)) is amended
by adding at the end the following:
``(5)(A) Effective beginning October 1, 2003, in the case of a
deemed hospital (as defined in subparagraph (B)), the Secretary shall
increase all payments for all services provided under this title by
such deemed hospital (including in-patient, out-patient, skilled
nursing facility, home health agency, hospice, and end-stage renal
disease, and other covered services provided by such deemed hospital)
by 10 percent for a period of 5 fiscal years, subject to the conditions
under paragraph (6).
``(B) For purposes of this paragraph and paragraphs (6) and (7), a
`deemed hospital' is a hospital in a hospital referral region--
``(i) that is defined by the The Center for the Evaluative
Clinical Sciences, Dartmouth Medical School (popularly known as
the `Dartmouth Atlas of Health Care'), and as may be updated by
such Center, except that the Secretary may by regulation
provide for criteria to adjust the hospitals to be included or
excluded from such a hospital referral region;
``(ii) that has 75 percent of the hospitals in the region,
for the last completed cost report period, having had negative
medicare operating margins and negative total operating
margins; and
``(iii) that has a medicare-eligible beneficiary patient
discharge percentage for hospitals in the region exceeding 40
percent;
but only if the hospital had agreed to participate in the development
of a cooperative economic recovery plan described in paragraph (6).
Such hospitals in a referral region shall be deemed to be essential
hospitals necessary for the delivery of health care to all medicare and
other residents of the region.
``(6)(A) Within one year of receiving deemed status and higher
medicare payments under paragraph (5), each hospital in the referral
region, either individually or (notwithstanding any other provision of
law) cooperatively, shall submit an economic recovery plan to the
Secretary for long-range (post-deemed status) financial viability after
the end of increased payments under paragraph (5). The Secretary shall
offer assistance in the development of such plan or plans.
``(B) Such plan may include capital payments and operating payments
to--
``(i) right-size capacity;
``(ii) coordinate and share high cost services;
``(iii) ensure a viable regional emergency room network and
access;
``(iv) convert unused acute care beds to skilled nursing
facility, intermediate care facility, or assisted living
facility support facilities;
``(v) assist in the conversion of unused acute care beds to
psychiatric, long-term care, or rehabilitation care hospital
services as are determined to be in short supply;
``(vi) finance the development and implementation of
medical information technology systems that are compatible
within the region and the nation and which improve quality of
care and reduce paperwork cost and burdens; and
``(vii) such other adjustments to the current acute care
hospital facility as shall ensure the long-term economic
viability of the facility and the continuation of essential
health care services to the community.
``(C) The Secretary shall review such economic recovery plans,
provide assistance in the improvement and modification of such plans,
and within one year of receipt of a plan which the Secretary determines
has a reasonable opportunity of ensuring the long term viability of the
facility or facilities, the Secretary shall further increase the
Medicare payment increases described in paragraph (5) by such
additional amount as to ensure the successful completion of the
economic recovery plan or plans under this paragraph.
``(7) Notwithstanding any other provision of law, the additional
payments made to deemed hospitals under paragraphs (5) and (6) shall
not result in payment reductions to any non-deemed hospital or provider
under this title.''.
SEC. 144. UNIFORM HOSPITAL COST REPORTING.
Each hospital, as a requirement under a participation agreement
under section 1866(a) of the Social Security Act (42 U.S.C. 1395cc(a))
for each cost reporting period beginning during or after fiscal year
2003, shall provide for the reporting of cost information to the
Secretary of Health and Human Services with respect to any hospital
care provided in a uniform manner consistent with standards established
by the Secretary to carry out section 4007(c) of the Omnibus Budget
Reconciliation Act of 1987 and in an electronic form consistent with
standards established by the Secretary.
SEC. 145. MEDICARE PAYMENTS FOR INPATIENT HOSPITAL SERVICES INVOLVING
EMERGENCY CARE; NATIONAL CONFERENCE ON EMERGENCY CARE.
(a) MedPAC Report on DRG Weighting Factors.--The Medicare Payment
Advisory Commission shall submit a report to Congress and the Secretary
of Health and Human Services, by January 1, 2003, on whether the DRG
weighting factors under section 1886(d)(4)(B) of the Social Security
Act for diagnosis-related groups associated with emergency care are
adequate to cover the costs of emergency room use within discharges
classified within such groups.
(b) Adjustment of Weighting Factors.--Taking into account the
report submitted under subsection (a), the Secretary of Health and
Human Services shall make appropriate adjustments in the DRG weighting
factors described in subsection (a) for discharges occurring on or
after January 1, 2004, as may be appropriate to ensure that hospital
emergency room costs attributable to medicare patients are
appropriately covered.
(c) National Conference on ER Policy.--Not later than 1 year after
the date of the enactment of this Act, the Secretary of Health and
Human Services shall convene a National Conference on the State of
Emergency Room Care and Access in the United States. Such conference
shall explore the current state of emergency room care, future trends,
and make recommendations on whether a national emergency room policy
should be developed to ensure timely access to emergency rooms for all
residents of the United States. The conference shall be open to the
public and the Secretary shall appoint up to 30 members of the public,
the provider community, and other stakeholders to participate in the
development of the conference report and shall designate one to serve
as chairman.
TITLE II--MODERNIZING MEDICARE BENEFITS
Subtitle A--Prescription Drug Benefit
SEC. 201. OPTIONAL MEDICARE OUTPATIENT PRESCRIPTION MEDICINE PROGRAM
UNDER TITLE XVIII.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) is amended--
(1) by redesignating section 1859 and part D as section
1858 and part E, respectively; and
(2) by inserting after part C the following new part:
``Part D--Prescription Medicine Benefit for the Aged and Disabled
``eligibility; optional enrollment; coverage
``Sec. 1859. (a) Eligibility.--Each individual who is enrolled
under this part is eligible to enroll in accordance with this section
for outpatient prescription medicine benefits under this part.
``(b) Optional Enrollment.--
``(1) In general.--An individual may enroll under this part
only in such manner and form as may be prescribed by
regulations, and only during an enrollment period prescribed in
or under this subsection.
``(2) Initial enrollment period.--
``(A) Individuals currently covered.--In the case
of an individual who satisfies subsection (a) as of
November 1, 2003, the initial general enrollment period
shall begin on August 1, 2003, and shall end on March
1, 2004.
``(B) Individual covered in future.--In the case of
an individual who first satisfies subsection (a) on or
after November 1, 2003, the individual's initial
enrollment period shall begin on the first day of the
third month before the month in which such individual
first satisfies such paragraph and shall end seven
months later. The Secretary shall apply rules similar
to the rule described in the second sentence of section
1837(d).
``(3) Special enrollment periods (without premium
penalty).--
``(A) Employer coverage at time of initial general
enrollment period.--In the case of an individual who--
``(i) at the time the individual first
satisfies subsection (a) is enrolled in a group
health plan by reason of the individual's (or
the individual's spouse's) current employment
status, and
``(ii) has elected not to enroll (or to be
deemed enrolled) under this subsection during
the individual's initial enrollment period,
there shall be a special enrollment period of 6 months
beginning with the first month that includes the date
of the individual's (or individual's spouse's)
retirement from or termination of current employment
status with the employer that sponsors the plan.
``(B) Dropping of retiree prescription medicine
coverage.--In the case of an individual who--
``(i) at the time the individual first
satisfies subsection (a) is enrolled in a group
health plan that provides outpatient
prescription medicine coverage other than by
reason of the individual's (or the individual's
spouse's) current employee; and
``(ii) has elected not to enroll (or to be
deemed enrolled) under this subsection during
the individual's initial enrollment period,
there shall be a special enrollment period of 6 months
beginning with the first month that includes the date
that the plan substantially terminates outpatient
prescription medicine coverage and ending 6 months
later.
``(C) Loss of medicare+choice prescription medicine
coverage.--In the case of an individual who is enrolled
under part C in a Medicare+Choice plan that provides
prescription medicine benefits that are at least
equivalent to (or greater than) the benefits made
available under this part, if such enrollment is
terminated because of the termination of the plan,
there shall be a special enrollment period of 6 months
beginning with the first month that includes the date
that such plan is terminated and ending 6 months later.
``(D) Loss of medicaid prescription medicine
coverage.--In the case of an individual who--
``(i) satisfies subsection (a);
``(ii) loses eligibility for prescription
medicine benefits under a State plan after
having been enrolled (or determined to be
eligible) for such benefits under such plan;
and
``(iii) is not otherwise enrolled under
this subsection at the time of such loss of
eligibility,
there shall be a special enrollment period specified by
the Secretary beginning with the first month that
includes the date that the individual loses such
eligibility.
``(4) Late enrollment with premium penalty.--The Secretary
shall permit an individual who satisfies subsection (a) to
enroll other than during the initial enrollment period under
paragraph (2) or a special enrollment period under paragraph
(3). But, in the case of such an enrollment, the amount of the
monthly premium of the individual is subject to an increase
under section 1859B(a)(2).
``(5) Information.--
``(A) In general.--The Secretary shall broadly
distribute information to eligible beneficiaries on the
benefits provided under this part. The Secretary shall
periodically make available information on the cost
differentials to enrollees for the use of generic
medicines and other medicines.
``(B) Toll-free hotline.--The Secretary shall
maintain a toll-free telephone hotline (which may be a
hotline already used by the Secretary under this title)
for purposes of providing assistance to beneficiaries
in the program under this part, including responding to
questions concerning coverage, enrollment, benefits,
grievances and appeals procedures, and other aspects of
such program.
``(6) Enrollee defined.--For purposes of this part, the
term `enrollee' means an individual enrolled for benefits under
this part.
``(c) Coverage Period.--
``(1) In general.--The period during which an individual is
entitled to benefits under this part (in this subsection
referred to as the individual's `coverage period') shall begin
on such a date as the Secretary shall establish consistent with
the type of coverage rules described in subsections (a) and (e)
of section 1838, except that in no case shall a coverage period
begin before January 1, 2004. No payments may be made under
this part with respect to the expenses of an individual unless
such expenses were incurred by such individual during a period
which, with respect to the individual, is a coverage period.
``(2) Termination.--The Secretary shall provide for the
application of provisions under this subsection similar to the
provisions in section 1838(b).
``benefits
``Sec. 1859A. (a) In General.--Subject to the succeeding provisions
of this section, the benefits provided to an enrollee by the program
under this part shall consist of entitlement to have payment made on
the individual's behalf for covered outpatient prescription medicines.
``(b) Covered Outpatient Medicine Defined.--
``(1) In general.--Except as provided in paragraph (2), for
purposes of this part the term `covered outpatient medicine'
means any of the following products:
``(A) A medicine which may be dispensed only upon
prescription, and--
``(i) which is approved for safety and
effectiveness as a prescription medicine under
section 505 of the Federal Food, Drug, and
Cosmetic Act;
``(ii)(I) which was commercially used or
sold in the United States before the date of
enactment of the Drug Amendments of 1962 or
which is identical, similar, or related (within
the meaning of section 310.6(b)(1) of title 21
of the Code of Federal Regulations) to such a
medicine, and (II) which has not been the
subject of a final determination by the
Secretary that it is a `new drug' (within the
meaning of section 201(p) of the Federal Food,
Drug, and Cosmetic Act) or an action brought by
the Secretary under section 301, 302(a), or
304(a) of such Act to enforce section 502(f) or
505(a) of such Act; or
``(iii)(I) which is described in section
107(c)(3) of the Drug Amendments of 1962 and
for which the Secretary has determined there is
a compelling justification for its medical
need, or is identical, similar, or related
(within the meaning of section 310.6(b)(1) of
title 21 of the Code of Federal Regulations) to
such a medicine, and (II) for which the
Secretary has not issued a notice of an
opportunity for a hearing under section 505(e)
of the Federal Food, Drug, and Cosmetic Act on
a proposed order of the Secretary to withdraw
approval of an application for such medicine
under such section because the Secretary has
determined that the medicine is less than
effective for all conditions of use prescribed,
recommended, or suggested in its labeling.
``(B) A biological product which--
``(i) may only be dispensed upon
prescription;
``(ii) is licensed under section 351 of the
Public Health Service Act; and
``(iii) is produced at an establishment
licensed under such section to produce such
product.
``(C) Insulin approved under appropriate Federal
law, and needles, syringes, and disposable pumps for
the administration of such insulin.
``(D) A prescribed medicine or biological product
that would meet the requirements of subparagraph (A) or
(B) but that is available over-the-counter in addition
to being available upon prescription.
``(E) Smoking cessation agents (as specified by the
Secretary)
``(2) Exclusion.--The term `covered outpatient medicine'
does not include any product--
``(A) except as provided in paragraphs (1)(D) and
(1)(E), 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 the enactment of the Medicare
Modernization and Solvency Act of 2001; or
``(D) that is a therapeutically equivalent
replacement for a product described in subparagraph (B)
or (C), as determined by the Secretary.
``(c) Payment of Benefits.--
``(1) In general.--Subject to paragraphs (2) and (3), there
shall be paid from the Federal Medicare Prescription Medicine
Trust Fund, in the case of each enrollee who incurs expenses
for medicines with respect to which benefits are payable under
this part, amounts equal to the price for which the medicine is
made available under this part (consistent with subsection (d)
and including a reasonable dispensing fee). In no case shall
the reimbursement for a prescribed nonformulary medicine
without a restrictive prescription be more than the lowest
reimbursement for a formulary medicine in the therapeutic class
of the prescribed medicine.
``(2) Cost-sharing.--
``(A) Deductible.--The amount of payment under
paragraph (1) for expenses incurred in a year,
beginning with 2004, shall be reduced by an annual
deductible equal to $250.
``(B) Application of limited coinsurance.--The
amount of payment under paragraph (1) for expenses
incurred in a year shall be reduced (subject to the
stop-loss limit under subparagraph (C)) by coinsurance
equal to 20 percent of the price or other amount
described in paragraph (1) (except as the Secretary may
otherwise provide under section 1859D(c)).
``(C) Reduction in coinsurance for costs exceeding
an amount.--
``(i) In general.--Subject to clause (ii),
once an enrollee has incurred aggregate cost-
sharing under subparagraph (B) (including cost-
sharing under part B attributable to outpatient
prescription drugs or biologicals) equal to
$2,000 for expenses in a year, the coinsurance
under subparagraph (B) shall be reduced from 20
percent to 5 percent.
``(ii) Continued application of coinsurance
for certain unnecessarily expensive drugs.--The
reduction in coinsurance under clause (i) shall
not apply to a prescribed formulary medicine
without a restricted prescription that is more
expensive than the lowest cost medicine in the
same therapeutic class.
``(D) Inflation adjustment.--
``(i) In general.--In the case of any year
beginning after 2004, each of the dollar
amounts in subparagraphs (A) and (C) shall be
increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the percentage change
estimated by the Secretary for the
period beginning with 2004 and ending
with the year involved as provided
under section 1859F.
``(ii) Rounding.--If any dollar amount
after being increased under clause (i) is not a
multiple of $10, such dollar amount shall be
rounded to the nearest multiple of $10.
``(3) Application of catastrophic limit to part b cost-
sharing for other drugs.--In addition to payments under
paragraph (1), there shall be paid from the Federal Medicare
Prescription Medicine Trust Fund, in the case of each enrollee
who incurs out-of-pocket expenses for outpatient prescription
medicines with respect to which benefits are payable under part
B, amounts equivalent to the amount of the reduction in cost-
sharing that would have been made under subparagraph (B) of
paragraph (2) if the payment had been made for the drug under
this part rather than under part B.
``(4) Application of pricing system under part b.--For
purposes of making payment under part B for medicines that
would be covered outpatient medicines but for the exclusion
under subparagraph (B) or (C) of subsection (b)(2), the
Secretary may elect to apply the payment basis used for payment
of covered outpatient medicines under this part instead of the
payment basis otherwise used under such part, if it results in
a lower cost to the program.
``(d) Availability of Prescription Medicines at Reasonable
Prices.--In order to establish reasonable prices for covered
prescription medicines under this part, the Secretary may use a
competitive bidding system, contract with appropriate fiscal
intermediaries or carriers (in this section referred to as
`contractors'), or use such other private sector practices (including
negotiations with medicine manufacturers, wholesalers, and pharmacies)
as may be appropriate to assure adequate reimbursement in order to have
the participation of sufficient numbers of pharmacies to ensure
convenient access (including adequate emergency access) to covered
prescription medicines. The prices established under this subsection
shall not be subject to administrative or judicial review.
``(e) Agreements with Any Willing Pharmacy.--
``(1) In general.--The Secretary (and any contractor) shall
enter into a participation agreement with any willing pharmacy
that meets the requirements of this subsection and section
1859D to furnish covered prescription medicines to individuals
enrolled under this part.
``(2) Terms of agreement.--An agreement under this
subsection shall include the following terms and conditions:
``(A) Licensing.--The pharmacy shall meet (and
throughout the contract period continue to meet) all
applicable State and local licensing requirements.
``(B) Access and quality standards.--The pharmacy
shall comply with such standards as the Secretary (and
such a contractor) shall establish concerning the
quality of, and enrolled individuals' access to,
pharmacy services under this part.
``(C) Adherence to established prices.--The total
charge for each medicine dispensed by the pharmacy to
an enrolled individual under this part, without regard
to whether the individual is financially responsible
for any or all of such charge, shall not exceed the
price established under subsection (d) with respect to
such medicine plus a reasonable dispensing fee
determined contractually with the Secretary (or
contractor).
``premiums
``Sec. 1859B. (a) Amount of Premium.--
(1) In general.--The provisions of subsections (a)(1),
(a)(2), (a)(3), (c), and (f) of section 1839 shall apply under
this part to all enrollees in the same manner as they apply
under part B to individuals 65 years of age or older enrolled
under such part.
``(2) Late enrollment penalty.--
``(A) In general.--In the case of a late enrollment
described in section 1859A(b)(4), subject to the
succeeding provisions of this paragraph, the Secretary
shall establish procedures for increasing the amount of
the monthly premium under this section applicable to
such enrollee--
``(i) by an amount that is equal to 10
percent of such premium for each full 12-month
period (in the same continuous period of
eligibility) in which the enrollee could have
been enrolled under this part but was not so
enrolled; or
``(ii) if determined appropriate by the
Secretary, by an amount that the Secretary
determines is actuarially sound for each such
period.
``(B) Periods taken into account.--For purposes of
calculating any 12-month period under subparagraph (A),
there shall be taken into account--
``(i) the months which elapsed between the
close of the enrollee's initial enrollment
period and the close of the enrollment period
in which the enrollee enrolled; and
``(ii) in the case of an enrollee who
reenrolls under this part, the months which
elapsed between the date of termination of a
previous coverage period and the close of the
enrollment period in which the enrollee
reenrolled.
``(C) Periods not taken into account.--
``(i) In general.--For purposes of
calculating any 12-month period under
subparagraph (A), subject to clause (ii), there
shall not be taken into account months for
which the enrollee can demonstrate that the
enrollee was covered under a group health plan
that provides coverage of the cost of
prescription drugs whose actuarial value (as
defined by the Secretary) to the enrollee
equals or exceeds the actuarial value of the
benefits provided to an individual enrolled in
the outpatient prescription drug benefit
program under this part.
``(ii) Application.--This subparagraph
shall only apply with respect to a coverage
period the enrollment for which occurs before
the end of the 60-day period that begins on the
first day of the month which includes the date on which the plan
terminates, ceases to provide, or reduces the value of the prescription
drug coverage under such plan to below the value of the coverage
provided under the program under this part.
``(D) Periods treated separately.--Any increase in
an enrollee's monthly premium under subparagraph (A)
with respect to a particular continuous period of
eligibility shall not be applicable with respect to any
other continuous period of eligibility which the
enrollee may have.
``(E) Continuous period of eligibility.--
``(i) In general.--Subject to clause (ii),
for purposes of this paragraph, an enrollee's
`continuous period of eligibility' is the
period that begins with the first day on which
the enrollee is eligible to enroll under
section 1859A and ends with the enrollee's
death.
``(ii) Separate period.--Any period during
all of which an enrollee satisfied section
1859A(a) and which terminated in or before the
month preceding the month in which the
beneficiary attained age 65 shall be a separate
`continuous period of eligibility' with respect
to the enrollee (and each such period which
terminates shall be deemed not to have existed
for purposes of subsequently applying this
paragraph).
``(b) Payment of Premium.--The provisions of section 1840 shall
apply to enrollees in the same manner as they apply to individuals
enrolled under part B.
``(c) Government Contribution.--The provisions of section
1844(a)(1) shall apply to enrollees under this part in the same manner
as they apply under part B to individuals 65 years of age or older
enrolled under part B.
``(d) References.--For purposes of this section, any reference in a
section referred to in a previous subsection to the Federal
Supplementary Medical Insurance Trust Fund is deemed a reference to the
Federal Medicare Prescription Medicine Trust Fund.
``federal medicare prescription medicine trust fund
``Sec. 1859C. (a) Establishment.--There is hereby created on the
books of the Treasury of the United States a trust fund to be known as
the `Federal Medicare Prescription Medicine Trust Fund' (in this
section referred to as the `Trust Fund'). The Trust Fund shall consist
of such gifts and bequests as may be made as provided in section
201(i)(1), and such amounts as may be deposited in, or appropriated to,
such fund as provided in this part, including all manufacturer rebates
as provided under section 1859F(b).
``(b) Application of SMI Trust Fund Provisions.--The provisions of
subsections (b) through (i) of section 1841 shall apply to this part
and the Trust Fund in the same manner as they apply to part B and the
Federal Supplementary Medical Insurance Trust Fund, respectively.
``administration; quality assurance
``Sec. 1859D. (a) In General.--The Secretary is responsible for the
administration of this part and may enter into contracts with
appropriate contractors (including State and local governments and
agencies of such governments) on a national or regional basis to
administer the program under this part in a manner similar to the
administration under part B. The Secretary shall provide for only one
contractor for each region, but may allow multiple specialty
contractors in a region (such as a State or unit of local government
serving a low-income population in an area) and may, in the case of
multiple contractors in a region, require them to coordinate coverage
and services in that region. Such contracts shall have such terms and
conditions as the Secretary shall specify and shall be for such terms
(not to exceed 5 years) as the Secretary shall specify consistent with
this part.
``(b) Quality and Financial Standards and Programs.--In
consultation with appropriate contractors with expertise in
prescribing, dispensing, and the appropriate use of prescription
medicines, the Secretary shall establish standards and programs for the
administration of this part to ensure appropriate prescribing,
dispensing, and utilization of outpatient medicines under this part, to
avoid adverse medicine reactions, and to continually reduce errors in
the delivery of medically appropriate covered benefits. Such standards
and programs shall be applied to any administrative agreements
described in subsection (a) the Secretary enters into. Such standards
and programs shall include the following:
``(1) On-line review.--A requirement for on-line
prospective review available 24 hours a day and 7 days a week
in order to evaluate each prescription for medicine therapy
problems due to duplication, interaction, or incorrect dosage
or duration of therapy.
``(2) Enrollee guidelines.--Consistent with State law,
application of guidelines for counseling enrollees regarding--
``(A) the proper use of prescribed covered
outpatient medicines; and
``(B) interactions and contra-indications.
``(3) Education.--Application of methods to identify and
educate providers, pharmacists, and enrollees regarding--
``(A) instances or patterns concerning the
unnecessary or inappropriate prescribing or dispensing
of covered outpatient medicines;
``(B) instances or patterns of substandard care;
``(C) potential adverse reactions to covered
outpatient medicines;
``(D) inappropriate use of antibiotics;
``(E) appropriate use of generic products; and
``(F) the importance of using covered outpatient
medicines in accordance with the instruction of
prescribing providers.
``(4) Coordination.--Coordination with State prescription
drug programs, contractors, 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 medicines 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.
``(5) Cost data.--
``(A) Requiring contracted private carriers
administering a prescription medicine plan to make
prescription medicine cost data available to the
Secretary.
``(B) With respect to section 1859A(d)(1),
requiring private contractors--
``(i) to maintain its prescription medicine
cost data and certify the prescription medicine
cost data is current, accurate, and complete,
and reflects all discounts that would affect
the level of payments from the Federal Medicare
Prescription Drug Trust Fund to the carrier,
``(ii) to make such prescription medicine
cost data available for review and audit by the
Secretary, and
``(iii) to certify that the carrier has met
the requirements of subsection (c).
``(C) Requiring that all private administrative
contractors require participating pharmacists,
physicians, and manufacturers--
``(i) to maintain their prescription
medicine cost data,
``(ii) to make such prescription medicine
cost data available for review and audit by the
Secretary, and
``(iii) to certify that the prescription
medicine cost data is current, accurate, and
complete, and reflects all discounts obtained
by the pharmacist or physician in the
purchasing of covered outpatient medicines that
were provided to the individual enrolled under
the prescription medicine plan.
``(D) The Secretary, either directly or through a
contractor, shall define, compile, and make public on
the Internet in an easily comparable form, the average
manufacturer price of all medicines covered under this
title.
``(E) Discounts referred to in subparagraphs (B)
and (C) shall include all volume discounts,
manufacturer rebates, prompt payment discounts, free
goods, in-kind services, or any other thing of
financial value provided explicitly or implicitly in
exchange for the purchase of a covered prescription
medicine.
``(6) Procedures to compensate pharmacists for
counseling.--The Secretary shall publish procedures for
compensating pharmacists for providing the counseling described
in paragraph (2).
``(c) Rules Relating to Provision of Benefits.--
``(1) Provision of benefits.--
``(A) In general.--In providing benefits under this
part, the Secretary (directly or through contracts)
shall employ mechanisms to provide benefits
economically, including the use of--
``(i) formularies (consistent with
paragraph (2));
``(ii) automatic generic medicine
substitution (unless the physician specifies
otherwise, in which case a 30-day prescription
may be dispensed pending a consultation with
the physician on whether a generic substitute
can be dispensed in the future);
``(iii) tiered copayments (which may
include copayments at a rate higher than 20
percent) to encourage the use of the lowest
cost, on-formulary product in cases where there
is no restrictive prescription (described in
subparagraph (C)(i)); and
``(iv) therapeutic interchange.
``(B) Construction.--Nothing in this subsection
shall be construed to prevent the Secretary (directly
or through contracts) from using incentives (including
a lower or higher beneficiary coinsurance) to encourage
enrollees to select generic or other cost-effective
medicines, so long as--
``(i) such incentives are designed not to
result in any increase in the aggregate
expenditures under the Federal Medicare
Prescription Medicine Trust Fund;
``(ii) the average coinsurance charged to
all beneficiaries by the Secretary (directly or
through contractors) shall seek to approximate
20 percent for on-formulary medicines;
``(iii) a beneficiary's coinsurance shall
be no greater than 20 percent if the
prescription is a restrictive prescription; and
``(iv) the reimbursement for a prescribed
nonformulary medicine without a restrictive
prescription in no case shall be more than the
lowest reimbursement for a formulary medicine
in the therapeutic class of the prescribed
medicine.
``(C) Restrictive prescription.--For purposes of
this section:
``(i) Written prescriptions.--In the case
of a written prescription for a medicine, it is
a restrictive prescription only if the
prescription indicates, in the writing of the
physician or other qualified person prescribing
the medicine and with an appropriate phrase
(such as `brand medically necessary')
recognized by the Secretary, that a particular
medicine product must be dispensed and a brief
explanation of why a restrictive prescription
is necessary. Such explanation may cite
literature, approved by the Food and Drug
Administration, that references adverse
reactions of the formulary drug.
``(ii) Telephone prescriptions.--In the
case of a prescription issued by telephone for
a medicine, it is a restrictive prescription
only if the prescription cannot be longer than
30 days and the physician or other qualified
person prescribing the medicine (through use of such an appropriate
phrase) states that a particular medicine product must be dispensed,
and the physician or other qualified person submits to the pharmacy
involved, within 30 days after the date of the telephone prescription,
a written confirmation from the physician or other qualified person
prescribing the medicine and which indicates with such appropriate
phrase that the particular medicine product was required to have been
dispensed and a brief explanation of why a restrictive prescription is
necessary. Such explanation may cite literature, approved by the Food
and Drug Administration, that references adverse reactions of the
formulary drug. Such written confirmation is required to refill the
prescription.
``(iii) Review of restrictive
prescriptions.--The advisory committee
(established under paragraph (2)(A)) may decide
to review a restrictive prescription and, if
so, it may approve or disapprove such
restrictive prescription and, if it
disapproves, upon request of the prescribing
physician or the enrollee, must provide for a
review by an independent contractor of such
decision within 48 hours of the time of
submission of the prescription, to determine
whether the prescription is an eligible benefit
under this part. The Secretary shall ensure
that independent contractors so used are
completely independent of the contractor or its
advisory committee.
``(2) Requirements with respect to formularies.--If the
Secretary uses or permits the use of a formulary by a
contractor to contain costs under this part, the Secretary or
contractor shall--
``(A) use an advisory committee (or a therapeutics
committee) comprised of licensed practicing physicians,
pharmacists, and other health care practitioners to
develop the formulary, except that no person (or
immediate family member) who has a conflict of interest
with any pharmaceutical manufacturer (such as any
financial tie to a manufacturer of a covered drug)
shall serve on the advisory committee;
``(B) include in the formulary at least 1 medicine
from each therapeutic class and, if available, a
generic equivalent thereof; and
``(C) disclose to current and prospective enrollees
and to participating providers and pharmacies in the
service area the nature of the formulary restrictions,
including information regarding the medicines included
in the formulary and any difference in cost-sharing
amounts.
``(3) Construction.--Nothing in this subsection shall
preclude the Secretary (or an administering entity under a
contract with the Secretary) from--
``(A) educating prescribing providers, pharmacists,
and enrollees about medical and cost benefits of
formulary products;
``(B) requesting prescribing providers to consider
a formulary product prior to dispensing of a
nonformulary medicine, as long as such request does not
unduly delay the provision of the medicine;
``(C) requiring pharmacists (or contractors) to
substitute a generic medicine equivalent for a
prescribed medicine, except when the prescribed
medicine has a restrictive prescription;
``(D) using mechanisms to encourage eligible
beneficiaries to select cost-effective medicines or
less costly means of receiving or administering
medicines, including the use of therapeutic interchange
programs, disease management programs, and notification
to the beneficiary that a more affordable generic
medicine equivalent was not selected by the prescribing
provider and a statement of the lost cost savings to
the beneficiary;
``(E) using a competitive bidding system for each
therapeutic medicine class in order to include only the
most cost-effective medicines on the formulary;
``(F) comparing medicine prices of OECD countries
in an effort to include the most cost-effective
medicines on the formulary and, in compliance with laws
governing the importation and re-importation of
pharmaceuticals, obtaining pharmaceuticals from the
lowest cost source that is approved for safety by the
Food and Drug Administration; and
``(G) establishing performance standards, or
monetary bonuses or penalties, or both, if the
specified performance standards are not met, including
the time taken to answer member and pharmacy inquiries
(written or by telephone), the accuracy of responses,
claims processing accuracy, online system availability,
appeal procedure turnaround time, system availability,
and the accuracy and timeliness of reports.
To encourage responsiveness to beneficiary concerns, penalties
or incentive bonuses, or both, may be used based on the level
of beneficiary satisfaction with their services, as measured by
beneficiary satisfaction surveys and interviews.
``(4) Incentives for cost and utilization management and
quality improvement.--
``(A) In general.--The Secretary shall include in a
contract awarded under subsection (b) with a contractor
such incentives for cost and utilization management and
quality improvement as the Secretary may deem
appropriate.
``(B) Risk corridors tied to performance measures
and other incentives.--The incentives under
subparagraph (A) shall include a risk corridor under
which--
``(i) there is a 50 percent sharing of all
savings (as determined based on the
difference between the contract bid per beneficiary and the costs per
beneficiary) greater than 5 percent; and
``(ii) a 50 percent sharing of all losses
(as so determined) greater than 105 percent of
the contract bid per beneficiary.
``(C) Other incentives.--Such incentives may also
include--
``(i) financial incentives under which
savings derived from the substitution of
generic medicines in lieu of nongeneric
medicines are made available to carriers,
pharmacies, beneficiaries, and the Federal
Medicare Prescription Medicine Trust Fund; and
``(ii) any other incentive that the
Secretary deems appropriate and likely to be
effective in managing costs or utilization.
``(D) Adjustment based on actuarial risk.--To the
extent that incentives under this paragraph are
established, the Secretary may include a methodology
for adjusting the payments made based on differences in
the actuarial risk of different enrollees being served
if the Secretary determines such adjustments to be
necessary and appropriate.
``(d) Confidentiality.--The Secretary shall ensure that the
confidentiality of individually identifiable health information used
under this part is protected, consistent with the Secretary's
guidelines of September 11, 1997, the Privacy Rule published in the
Federal Register on December 28, 2000, or any subsequent comprehensive
and more protective set of confidentiality standards enacted into law
or promulgated by the Secretary. Nothing in this subsection shall be
construed as preventing the coordination of data with a State
prescription drug program so long as such program has in place
confidentiality standards that are equal to or exceed the standards
used by the Secretary.
``(e) Procedures Regarding Denials of Care.--The Secretary shall
establish guidelines for--
``(1) the timely review and resolution of denials of care
and grievances (including those regarding the use of
formularies under subsection (c)) 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, including expedited appeals; and
``(2) providing enrollees with information regarding such
grievances and appeals procedures at the time of enrollment
under this part and annually thereafter.
``(f) Fraud and Abuse Safeguards.--The Secretary, through the
Office of the Inspector General, is authorized and directed to issue
regulations establishing appropriate safeguards to prevent fraud and
abuse. Such safeguards, at a minimum, should include compliance
programs, certification data, and recordkeeping practices. In
developing such regulations, the Secretary shall consult with the
Attorney General and other law enforcement and regulatory agencies.
``(g) Guaranteed Access to Medicines in Rural and Hard-To-Serve
Areas.--The Secretary shall ensure that all beneficiaries have
guaranteed 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, including through the use of
incentives such as bonus payments to retail pharmacists in rural areas
and extra payments to the benefit administrator for the cost of rapid
delivery of pharmaceuticals and any other actions necessary.
``compensation for employers covering retiree medicine costs
``Sec. 1859E. (a) In General.--In the case of an individual who is
eligible to be enrolled under this part and is a participant or
beneficiary under a group health plan that provides outpatient
prescription medicine coverage the actuarial value of which is not less
than the actuarial value of the coverage provided under this part, the
Secretary shall make payments to such plan subject to the provisions of
this section. Such payments shall be treated as payments under this
part for purposes of sections 1859C and 1859B(c). In applying the
previous sentence with respect to section 1859B(c), the amount of the
Government contribution referred to in section 1844(a)(1)(A) is deemed
to be equal to the aggregate amount of the payments made under this
section.
``(b) Requirements.--To receive payment under this section, a group
health plan shall comply with the following requirements:
``(1) Compliance with requirements.--The group health plan
shall comply with the requirements of this Act and other
reasonable, necessary, and related requirements that are needed
to administer this section, as determined by the Secretary.
``(2) Maintenance of current benefits.--In the case of a
group health plan that is in existence prior to the date of the
enactment of this section and that provides medicine coverage
to retirees that is equal to or greater than the medicine
coverage provided under this part, the plan shall reimburse or
otherwise arrange to compensate beneficiaries for the portion
of such premium for at least 1 year from the date that the
group health plan begins participation under this section.
``(3) Maintenance of current benefits under certain
collective bargaining agreements.--In the case of a group
health plan that, on the date of the enactment of this section,
was providing medicine coverage in excess of that provided
under this part to eligible beneficiaries under a collective
bargaining agreement (other than pursuant to a labor management
plan operating under the Labor-Management Relations Act, 1947
(popularly known as the Taft-Hartley Act)), the plan shall
continue to provide such excess coverage to such eligible
beneficiaries until the later of 4 years after the date of the
enactment of this section or the expiration of any
contractual obligation to provide such excess coverage that existed as
of such date of enactment.
``(4) Annual assurances and notice before termination.--The
sponsor of the plan shall--
``(A) annually attest, and provide such assurances
as the Secretary may require, that the coverage offered
under the group health plan meets the requirements of
this section and will continue to meet such
requirements 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 enrollees--
``(i) at least 120 days before terminating
its plan, and
``(ii) immediately upon determining that
the actuarial value of the prescription
medicine benefit under the plan falls below the
actuarial value required under subsection (a).
``(5) Beneficiary information.--The sponsor of the plan
shall report to the Secretary, for each calendar quarter for
which it seeks a payment under this section, the names and
social security numbers of all enrollees described in
subsection (a) covered under such plan during such quarter and
the dates (if less than the full quarter) during which each
such individual was covered.
``(6) Audits.--The sponsor or plan seeking payment under
this section shall agree to maintain, and to afford the
Secretary access to, such records as the Secretary may require
for purposes of audits and other oversight activities necessary
to ensure the adequacy of prescription medicine coverage, the
accuracy of payments made, and such other matters as may be
appropriate.
``(c) Payment.--
``(1) In general.--The sponsor of a group health plan that
meets the requirements of subsection (b) with respect to a
quarter in a calendar year shall be entitled to have payment
made on a quarterly basis of the amount specified in paragraph
(2) for each individual described in subsection (a) who during
the quarter is covered under the plan and was not enrolled in
the insurance program under this part.
``(2) Amount of payment.--The amount of the payment for a
quarter shall approximate, for each such covered individual,
\2/3\ of the portion of the premium under subsection (a) of
section 1859B that is not payable by the individual under such
section for months in the quarter.
``promotion of pharmaceutical research on break-through medicines while
providing program cost containment
``Sec. 1859F. (a) Monitoring Expenditures.--The Secretary shall
monitor expenditures under this part. On October 1, 2004, the Secretary
shall estimate total expenditures under this part for 2004.
``(b) Establishment of Sustainable Growth Rate.--
``(1) In general.--The Secretary shall establish a
sustainable growth rate prescription medicine target system for
expenditures under this part for each year after 2004.
``(2) Initial computation.--Such target shall equal the
amount of total expenditures estimated for 2004 adjusted by the
Secretary's estimate of a sustainable growth rate (in this
section referred to as an `SGR') percentage between 2004 and
2005. Such SGR shall be estimated based on the following:
``(A) Reasonable changes in the cost of production
or price of covered pharmaceuticals, but in no event
more than the rate of increase in the consumer price
index for all urban consumers for the period involved.
``(B) Population enrolled in this part, both in
numbers and in average age and severity of chronic and
acute illnesses.
``(C) Appropriate changes in utilization of
pharmaceuticals, as determined by the Drug Review Board
(established under subsection (c)(3)) and based on best
estimates of utilization change if there were no
direct-to-consumer advertising or promotions to
providers.
``(D) Productivity index of manufacturers and
distributors.
``(E) Percentage of products with patent and market
exclusivity protection versus products without patent
protection and changes in the availability of generic
substitutes.
``(F) Such other factors as the Secretary may
determine are appropriate.
In no event may the sustainable growth rate exceed 120 percent
of the estimated per capita growth in total spending under this
title.
``(3) Computation for subsequent years.--In October of 2005
and each year thereafter, for purposes of setting the SGRs for
the succeeding year, the Secretary shall adjust each current
year's estimated expenditures by the estimated SGR for the
succeeding year, further adjusted for corrections in earlier
estimates and the receipt of additional data on previous years
spending as follows:
``(A) Error estimates.--An adjustment (up or down)
for errors in the estimate of total expenditures under
this part for the previous year.
``(B) Costs.--An adjustment (up or down) for
corrections in the cost of production of prescriptions
covered under this part between the current calendar
year and the previous year.
``(C) Target.--An adjustment for any amount (over
or under) that expenditures in the current year under
this part are estimated to differ from the target
amount set for the year. If expenditures in the current
year are estimated to be--
``(i) less than the target amount, future
target amounts will be adjusted downward; or
``(ii) more than the target amount, the
Secretary shall notify all pharmaceutical
manufacturers with sales of pharmaceutical
prescription medicine products to medicare
beneficiaries under this part, of a rebate requirement (except as
provided in this subparagraph) to be deposited in the Federal Medicare
Prescription Medicine Trust Fund.
``(D) Rebate determination.--The amount of the
rebate described in subparagraph (C)(ii) may vary among
manufacturers and shall be based on the manufacturer's
estimated contribution to the expenditure above the
target amount, taking into consideration such factors
as--
``(i) above average increases in the cost
of the manufacturer's product;
``(ii) increases in utilization due to
promotion activities of the manufacturer,
wholesaler, or retailer;
``(iii) launch prices of new drugs at the
same or higher prices as similar drugs already
in the marketplace (so-called `me too' or
`copy-cat' drugs);
``(iv) the role of the manufacturer in
delaying the entry of generic products into the
market; and
``(v) such other actions by the
manufacturer that the Secretary may determine
has contributed to the failure to meet the SGR
target.
The rebates shall be established under such
subparagraph so that the total amount of the rebates is
estimated to ensure that the amount the target for the
current year is estimated to be exceeded is recovered
in lower spending in the subsequent year; except that,
no rebate shall be made in any manufacturer's product
which the Food and Drug Administration has determined
is a breakthrough medicine (as determined under
subsection (c)) or an orphan medicine.
``(c) Breakthrough Medicines.--
``(1) Determination.--For purposes of this section, a
medicine is a `breakthrough medicine' if the Drug Review Board
(established under paragraph (3)) determines--
``(A) it is a new product that will make a
significant and major improvement by reducing physical
or mental illness, reducing mortality, or reducing
disability; and
``(B) that no other product is available to
beneficiaries that achieves similar results for the
same condition at a lower cost.
``(2) Condition.--An exemption from rebates under
subsection (b)(3) for a breakthrough medicine shall continue as
long as the medicine is certified as a breakthrough medicine
but shall be limited to 7 calendar years from 2004 or 7
calendar years from the date of the initial determination under
paragraph (1), whichever is later.
``(3) Drug review board.--The Drug Review Board under this
paragraph shall consist of the Commissioner of Food and Drugs,
the Directors of the National Institutes of Health, the
Director of the National Science Foundation, and 10 experts in
pharmaceuticals, medical research, and clinical care, selected
by the Commissioner of Food and Drugs from the faculty of
academic medical centers, except that no person who has (or who
has an immediate family member that has) any conflict of
interest with any pharmaceutical manufacturer shall serve on
the Board.
``(d) No Review.--The Secretary's determination of the rebate
amounts under this section, and the Drug Review Board's determination
of what is a breakthrough drug, are not subject to administrative or
judicial review.
``coordination with comprehensive state prescription drug programs
``Sec. 1859G. (a) In General.--In the case of a comprehensive
State-funded prescription drug program (in this section referred to as
a `State program') that is in existence on the date of the enactment of
this part, the State shall have the option of electing to use the
program as a wrap-around program to supplement and coordinate the
benefits with the benefits provided under this part consistent with
this section. In the case of a State that makes such an election, the
Secretary shall require pharmaceutical benefit managers and other
contracting entities to coordinate with the State program in a manner
to ensure that the State program supplements (and does not supplant)
the program under this part.
``(b) Deeming.--The State program may provide that individuals who
are enrolled in the State program and who are eligible to enroll in the
program under this part but are not enrolled in the program under this
part (or in a Medicare+Choice plan) are deemed enrolled in the program
under this part.
``(c) Coordination of Benefits.--The State program may coordinate
benefits in a manner so that it is a payor of last resort, including
payment after payment may be made under this part or under a
Medicare+Choice plan, including for individuals for whom the State
elects to buy-in to this part or such a plan.
``(d) Requirement for Emergency Dispensing.--The State program may
require a pharmaceutical benefit manager to authorize dispensing of a
72-hour emergency supply of a medication for which a prior
authorization is otherwise required to a person enrolled in a State
program. The cost for such emergency supply shall be treated as a
benefit under this part.
``(e) Treatment as Pharmaceutical Benefit Manager.--The State
program may elect to treat itself as a contracting entity under this
part with respect to individuals enrolled (or eligible to be enrolled)
under the State program. In the case of such an election, the State
shall maintain its existing eligibility criteria as well as existing
benefit structure so long as such criteria and structure provide a
standard benefit equal to or greater than the benefit provided under
this part.
``(f) Confidentiality.--The Secretary shall waive any
confidentiality requirements relating to the sharing of enrollment data
between a State program and the Secretary in order to implement this
section.''.
(b) Conforming Amendments.--(1) Part C of title XVIII of such Act
is amended--
(A) in section 1851(a)(2)(B) (42 U.S.C. 1395w-21(a)(2)(B)),
by striking ``1859(b)(3)'' and inserting ``1858(b)(3)'';
(B) in section 1851(a)(2)(C) (42 U.S.C. 1395w-21(a)(2)(C)),
by striking ``1859(b)(2)'' and inserting ``1858(b)(2)'';
(C) in section 1852(a)(1) (42 U.S.C. 1395w-22(a)(1)), by
striking ``1859(b)(3)'' and inserting ``1858(b)(3)'';
(D) in section 1852(a)(3)(B)(ii) (42 U.S.C. 1395w-
22(a)(3)(B)(ii)), by striking ``1859(b)(2)(B)'' and inserting
``1858(b)(2)(B)'';
(E) in section 1853(a)(1)(A) (42 U.S.C. 1395w-23(a)(1)(A)),
by striking ``1859(e)(4)'' and inserting ``1858(e)(4)''; and
(F) in section 1853(a)(3)(D) (42 U.S.C. 1395w-23(a)(3)(D)),
by striking ``1859(e)(4)'' and inserting ``1858(e)(4)''.
(2) Section 138(b)(4) of the Internal Revenue Code of 1986 is
amended by striking ``1859(b)(3)'' and inserting ``1858(b)(3)''.
SEC. 202. PROVISION OF MEDICARE OUTPATIENT PRESCRIPTION DRUG COVERAGE
UNDER THE MEDICARE+CHOICE PROGRAM.
(a) Requiring Availability of an Actuarially Equivalent
Prescription Medicine Benefit.--Section 1851 (42 U.S.C. 1395w-21) is
amended by adding at the end the following new subsection:
``(j) Availability of Prescription Medicine Benefits.--
``(1) In general.--Notwithstanding any other provision of
this part, each Medicare+Choice organization that makes
available a Medicare+Choice plan described in section
1851(a)(2)(A) shall make available such a plan that offers
coverage of covered outpatient medicines that is at least
actuarially equivalent to the benefits provided under part D.
Information respecting such benefits shall be made available in
the same manner as information on other benefits provided under
this part is made available. Nothing in this paragraph shall be
construed as requiring the offering of such coverage separate
from coverage that includes benefits under parts A and B.
``(2) Treatment of prescription drug enrollees.--In the
case of a Medicare+Choice eligible individual who is enrolled
under part D, the benefits described in paragraph (1) shall be
treated in the same manner as benefits described in part B for
purposes of coverage and payment and any reference in this part
to the Federal Supplementary Medical Insurance Trust Fund shall
be deemed, with respect to such benefits, to be a reference to
the Federal Medicare Prescription Medicine Trust Fund.''.
(b) Application of Quality Standards.--Section 1852(e)(2)(A) (42
U.S.C. 1395w-22(e)(2)(A)) is amended--
(1) by striking ``and'' at the end of clause (xi);
(2) by striking the period at the end of clause (xii) and
inserting ``, and''; and
(3) by adding at the end the following new clause:
``(xiii) comply with the standards, and
apply the programs, under section 1859D(b) for
covered outpatient medicines under the plan.''.
(c) Payment Separate From Payment for Part A and B Benefits.--
Section 1853 (42 U.S.C. 1395w-23) is amended--
(1) in subsection (a)(1)(A), by striking ``and (i)'' and
inserting ``(i), and (j)''; and
(2) by adding at the end the following new subsection:
``(j) Payment for Prescription Medicine Coverage Option.--
``(1) In general.--In the case of a Medicare+Choice plan
that provides prescription medicine benefits described in
section 1851(j)(1), the amount of payment otherwise made to the
Medicare+Choice organization offering the plan shall be
increased by the amount described in paragraph (2). Such
payments shall be made in the same manner and time as the
amount otherwise paid, but such amount shall be payable from
the Federal Medicare Prescription Medicine Trust Fund.
``(2) Amount.--The amount described in this paragraph is
twice the actuarial rate computed under section 1859B(a) (based
upon the provisions of section 1839(a)(1)), but subject to
adjustment under paragraph (3). Such amount shall be uniform
geographically and shall not vary based on the Medicare+Choice
payment area involved.
``(3) Risk adjustment.--The Secretary shall establish a
methodology for the adjustment of the payment amount under this
subsection in a manner that takes into account the relative
risks for use of outpatient prescription medicines by
Medicare+Choice enrollees. Such methodology shall be designed
in a manner so that the total payments under this title
(including part D) are not changed as a result of the
application of such methodology.''.
(d) Separate Application of Adjusted Community Rate (ACR).--Section
1854 (42 U.S.C. 1395w-24) is amended by adding at the end the
following:
``(i) Application to Prescription Medicine Coverage.--The Secretary
shall apply the previous provisions of this section (including the
computation of the adjusted community rate) separately with respect to
prescription medicine benefits described in section 1851(j)(1).''.
(e) Conforming Amendments.--
(1) Section 1851 (42 U.S.C. 1395w-21) is amended--
(A) in subsection (a)(1)(A), by striking ``parts A
and B'' and inserting ``parts A, B, and D''; and
(B) in subsection (i) by inserting ``(and, if
applicable, part D)'' after ``parts A and B''.
(2) Section 1852(a)(1)(A) (42 U.S.C. 1395w-22(a)(1)(A)) is
amended by inserting ``(and under part D to individuals also
enrolled under such part)'' after ``parts A and B''.
(3) Section 1852(d)(1) (42 U.S.C. 1395w-22(d)(1)) is
amended--
(A) by striking ``and'' at the end of subparagraph
(D);
(B) by striking the period at the end of
subparagraph (E) and inserting ``; and''; and
(C) by adding at the end the following:
``(F) the plan for part D benefits guarantees
coverage of any specifically named prescription
medicine for an enrollee, when prescribed by a
physician in accordance with the provisions of such
part, regardless of whether such medicine would
otherwise be covered under an applicable formulary or
discount arrangement, but only to the extent that it
would be required to be covered under part D.
In carrying out subparagraph (F), a Medicare+Choice
organization has the same authority to establish formularies as
contracting entities have under part D, but subject to an
independent contractor appeal or other appeal process that
would be applicable to determinations by such a contracting
entity.''.
(4) Section 1854(e) (42 U.S.C. 1395w-24(e)) is amended by
adding at the end the following new paragraph:
``(5) Special rule for part d benefits.--In no event may a
Medicare+Choice organization include as part of a plan for part
D benefits a requirement that an enrollee pay a deductible or a
coinsurance percentage that exceeds 20 percent, except as
provided in section 1859A(c).''.
SEC. 203. TRANSITIONAL ASSISTANCE FOR LOW INCOME BENEFICIARIES.
(a) QMB Coverage of Premiums and Cost-Sharing.--Section 1905(p)(3)
(42 U.S.C. 1396d(p)(3)) is amended--
(1) in subparagraph (A)--
(A) by striking ``and'' at the end of clause (i),
(B) by adding ``and'' at the end of clause (ii),
and
(C) by adding at the end the following new clause:
``(iii) premiums under section 1859B(a).'';
(2) in subparagraph (B), by inserting ``and section
1859A(b)(1)(B)'' after ``1813''; and
(3) in subparagraph (C), by striking ``and section
1833(b)'' and inserting ``, section 1833(b), and section
1859A(b)(1)(A)''.
(b) Expanded SLMB Eligibility.--Section 1902(a)(10)(E) (42 U.S.C.
1396a(a)(10)(E)) is amended--
(1) by striking ``and'' at the end of clause (iii);
(2) by adding ``and'' at the end of clause (iv); and
(2) by adding at the end the following new clause:
``(v)(I) for making medical assistance available
for medicare cost sharing described in section
1905(p)(3)(A)(iii) and medicare cost-sharing described
in section 1905(p)(3)(B) but only insofar as it relates
to benefits provided under part D of title XVIII,
subject to section 1905(p)(4), for individuals who
would be qualified medicare beneficiaries described in
section 1905(p)(1) but for the fact that their income
exceeds 100 percent, but is less than 135 percent, of
the official poverty line (referred to in such section)
for a family of the size involved; and
``(II) subject to section 1905(p)(4), for
individuals who would be qualified medicare
beneficiaries described in section 1905(p)(1) but for
the fact that their income exceeds 135 percent, but is
less than 150 percent, of the official poverty line
(referred to in such section) for a family of the size
involved, for making medical assistance available for a
portion of the medicare cost sharing described in
section 1905(p)(3)(A)(iii), such portion determined on
a sliding scale related to income;''.
(c) Federal Financing.--The second sentence of section 1905(b) (42
U.S.C. 1396d(b)) is amended by inserting before the period at the end
the following: ``and with respect to amounts expended that are
attributable to section 1902(a)(10)(E)(v)''.
(d) Alternative Enrollment Methods.--Section 1902 (42 U.S.C. 1396a)
is amended by adding at the end the following new subsection:
``(aa) In the process of enrolling low-income individuals for
medicare cost-sharing under this title, the Secretary shall use the
system provided under section 154 of the Social Security Act Amendments
of 1994 for newly eligible medicare beneficiaries and shall apply a
similar system for other medicare beneficiaries. Such system shall use
existing Federal Government databases to identify eligibility. Such
system shall not require that beneficiaries apply for, or enroll
through, State medicaid systems in order to obtain medical assistance
for medicare cost-sharing under this title.''.
(e) Effective Date.--The amendments made by this section apply to
medical assistance for premiums and cost-sharing incurred on or after
January 1, 2004, with regard to whether regulations to implement such
amendments are promulgated by such date.
SEC. 204. MEDIGAP REVISIONS.
(a) Required Coverage of Covered Outpatient Medicines.--Section
1882(p)(2)(B) (42 U.S.C. 1395ss(p)(2)(B)) is amended by inserting
before ``and'' at the end the following: ``including a requirement that
an appropriate number of policies provide coverage of medicines which
complements but does not duplicate the medicine benefits that
beneficiaries are otherwise eligible for benefits under part D of this
title (with the Secretary and the National Association of Insurance
Commissioners determining the appropriate level of medicine benefits
that each benefit package must provide and ensuring that policies
providing such coverage are affordable for beneficiaries and include at
least a 5 percent copayment per prescription);''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on January 1, 2004.
(c) Transition Provisions.--
(1) In general.--If the Secretary of Health and Human
Services identifies a State as requiring a change to its
statutes or regulations to conform its regulatory program to the
amendments made by this section, the State regulatory program shall not
be considered to be out of compliance with the requirements of section
1882 of the Social Security Act due solely to failure to make such
change until the date specified in paragraph (4).
(2) NAIC standards.--If, within 9 months after the date of
enactment of this Act, the National Association of Insurance
Commissioners (in this subsection referred to as the ``NAIC'')
modifies its NAIC Model Regulation relating to section 1882 of
the Social Security Act (referred to in such section as the
1991 NAIC Model Regulation, as subsequently modified) to
conform to the amendments made by this section, such revised
regulation incorporating the modifications shall be considered
to be the applicable NAIC model regulation (including the
revised NAIC model regulation and the 1991 NAIC Model
Regulation) for the purposes of such section.
(3) Secretary standards.--If the NAIC does not make the
modifications described in paragraph (2) within the period
specified in such paragraph, the Secretary of Health and Human
Services shall make the modifications described in such
paragraph and such revised regulation incorporating the
modifications shall be considered to be the appropriate
regulation for the purposes of such section.
(4) Date specified.--
(A) In general.--Subject to subparagraph (B), the
date specified in this paragraph for a State is the
earlier of--
(i) the date the State changes its statutes
or regulations to conform its regulatory
program to the changes made by this section; or
(ii) 1 year after the date the NAIC or the
Secretary first makes the modifications under
paragraph (2) or (3), respectively.
(B) Additional legislative action required.--In the
case of a State which the Secretary identifies as--
(i) requiring State legislation (other than
legislation appropriating funds) to conform its
regulatory program to the changes made in this
section; but
(ii) having a legislature which is not
scheduled to meet in 2002 in a legislative
session in which such legislation may be
considered;
the date specified in this paragraph is the first day
of the first calendar quarter beginning after the close
of the first legislative session of the State
legislature that begins on or after January 1, 2002.
For purposes of the previous sentence, in the case of a
State that has a 2-year legislative session, each year
of such session shall be deemed to be a separate
regular session of the State legislature.
SEC. 205. RATE REDUCTION FOR MEDICARE ELIGIBLE FEDERAL ANNUITANTS.
(a) In General.--
(1) The Office of Personnel Management shall, in
consultation with carriers offering health benefits plans
contracted pursuant to section 8902 of title 5, United States
Code, reduce the rates charged medicare eligible individuals
participating in such health benefit plans, by the amount,
prorated for each covered medicare eligible individual, of the
estimated cost of medical services and supplies which, but for
the amendments made by this subtitle, would have been payable
by such plans.
(2) The reduced rates as provided under paragraph (1),
shall apply as of the effective dates of the respective
amendments.
(b) Authorization of Availability of Employee Health Benefits Fund
for Rate Reduction.--Funds in the Employees Health Benefits Fund
established under section 8909 of title 5, United States Code, are
available without fiscal year limitation for costs incurred by the
Office of Personnel Management in making rate reductions provided under
this section.
(c) Definition.--For purposes of this section, The term ``medicare
eligible individual'' means any annuitant, survivor of an annuitant, or
former spouse of an annuitant--
(1) who is--
(A) otherwise eligible for benefits under chapter
89 of title 5, United States Code; and
(B) enrolled for benefits under part D of title
XVIII of the Social Security Act; and
(2) for whom benefits paid under title XVIII of the Social
Security Act are the primary source of health care benefits.
SEC. 206. PART B PAYMENT FOR OUTPATIENT DRUGS BASED ON ACTUAL
ACQUISITION COST.
(a) In General.--Section 1842(o)(1) (42 U.S.C. 1395u(o)(1)) is
amended by striking ``95 percent of the average wholesale price'' and
inserting ``the actual acquisition cost to the physician, supplier, or
other person, plus such dispensing fee as the Secretary determines is
necessary to cover the efficient administration of the drug by the
physician, supplier, or other person''.
(b) Effective Date.--The amendment made by subsection (a) applies
to drugs provided on or after January 1, 2002.
SEC. 207. COVERAGE OF HOME INFUSION DRUG THERAPY SERVICES.
(a) In General.--Section 1832(a)(2)(A) (42 U.S.C. 1395k(a)(2)(A))
is amended by inserting ``and home infusion drug therapy services''
before the semicolon.
(b) Home Infusion Drug Therapy Services Defined.--Section 1861 of
such Act (42 U.S.C. 1395x), as amended by sections 102(b) and 105(b) of
the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000, as enacted into law by section 1(a)(6) of Public Law 106-
554, is amended by adding at the end the following new subsection:
``Home Infusion Drug Therapy Services
``(ww)(1) The term `home infusion drug therapy services' means the
items and services described in paragraph (2) furnished to an
individual who is under the care of a physician--
``(A) in a setting described in paragraph (4)(A)(ii),
``(B) by a qualified home infusion drug therapy provider
(as defined in paragraph (3)) or by others under arrangements
with them made by that provider, and
``(C) under a plan established and periodically reviewed by
a physician.
``(2) The items and services described in this paragraph are such
nursing, pharmacy, and related services (including medical supplies,
intravenous fluids, delivery, and equipment) as are necessary to
conduct safely and effectively a drug regimen through use of a covered
home infusion drug (as defined in paragraph (4)), but do not include
such covered home infusion drugs.
``(3) The term `qualified home infusion drug therapy provider'
means any entity that the Secretary determines meets the following
requirements (or, in the case of a home health agency or an entity with
respect to which the only items and services described in paragraph (2)
furnished by the entity are enteral nutrition therapy services, meets
any of the following requirements which the Secretary considers
appropriate):
``(A) The entity is capable of providing or arranging for
the items and services described in paragraph (2) and covered
home infusion drugs.
``(B) The entity maintains clinical records on all
patients.
``(C) The entity adheres to written protocols and policies
with respect to the provision of items and services.
``(D) The entity makes services available (as needed) seven
days a week on a 24-hour basis.
``(E) The entity coordinates all service with the patient's
physician.
``(F) The entity conducts a quality assessment and
assurance program, including drug regimen review and
coordination of patient care.
``(G) The entity assures that only trained personnel
provide covered home infusion drugs (and any other service for
which training is required to provide the service safely).
``(H) The entity assumes responsibility for the quality of
services provided by others under arrangements with the entity.
``(I) In the case of an entity in any State in which State
or applicable local law provides for the licensing of entities
of this nature, the entity (i) is licensed pursuant to such
law, or (ii) is approved, by the agency of such State or
locality responsible for licensing entities of this nature, as
meeting the standards established for such licensing.
``(J) The entity meets such other requirements as the
Secretary may determine are necessary to assure the safe and
effective provision of home infusion drug therapy services and
the efficient administration of the home infusion drug therapy
benefit.
``(4)(A) The term `covered home infusion drug' means a covered
outpatient drug dispensed to an individual that--
``(i) is administered intravenously, subcutaneously, or
epidurally, using an access device that is inserted into the
body and an infusion device to control the rate of flow of the
drug (or through other means of administration determined by
the Secretary);
``(ii) is administered--
``(I) in the individual's home,
``(II) an institution used as the individual's
home, but only if the drug is administered during an
inpatient day for which payment is not made to the
institution under part A for inpatient or extended care
services furnished to the individual, or
``(III) in a facility other than the individual's
home if the administration of the drug at the facility
is determined by the Secretary to be cost-effective (in
accordance with such criteria as the Secretary may
establish); and
``(iii) with respect to a drug furnished in a home
setting--
``(I) is an antibiotic drug and the Secretary has
not determined, for the specific drug or the indication
to which the drug is applied, that the drug cannot
generally be administered safely and effectively in
such a setting, or
``(II) is not an antibiotic drug and the Secretary
has determined, for the specific drug or the indication
to which the drug is applied, that the drug can
generally be administered safely and effectively in
such a setting.
``(B) Not later than January 1, 2004, (and periodically
thereafter), the Secretary shall publish a list of the drugs, and
indications for such drugs, that are covered home infusion drugs, with
respect to which home infusion drug therapy may be provided under this
title.''.
(c) Payment.--
(1) In general.--Section 1833 (42 U.S.C. 1395l) is
amended--
(A) in subsection (a)(2)(B), by striking ``or (E)''
and inserting ``(E), or (F)'',
(B) in subsection (a)(2)(F), by striking ``and'' at
the end,
(C) in subsection (a)(2)(G), by striking the
semicolon and inserting ``; and'',
(D) by inserting after subsection (a)(2)(G) the
following new subparagraph:
``(H) with respect to home infusion drug therapy
services, the amounts described in section 1834(n);'',
and
(E) in the first sentence of subsection (b), by
striking ``, (3)'' and inserting ``and home infusion
drug therapy services, (3)''.
(2) Amount described.--Section 1834, as amended by section
223(b) of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000, as enacted into law by
section 1(a)(6) of Public Law 106-554, is amended by adding at
the end the following new subsection:
``(n) Home infusion Drug Therapy Services.--
``(1) In general.--With respect to home infusion drug
therapy services, payment under this part shall be made in an
amount equal to the lesser of the actual charges for such
services or the fee schedule established under paragraph (2).
Payment for drugs so infused shall be made based on actual
acquisition costs consistent with section 1842(o) (as amended
by section 206 of the Medicare Modernization and Solvency Act
of 2001).
``(2) Establishment of fee schedule.--
``(A) In general.--The Secretary shall establish by
regulation before the beginning of 2004 and each
succeeding year a fee schedule for home infusion drug
therapy services for which payment is made under this
part.
``(B) Adjustment for services furnished by
institutions.--The fee schedule established by the
Secretary under subparagraph (A) shall provide for
adjustments in the case of home infusion drug therapy
services for which payment is made under this part that
are furnished by a provider of services to avoid
duplicative payments under this title for the service
costs associated with such services.''.
(d) Certification.--Section 1835(a)(2) (42 U.S.C. 1395n(a)(2)) is
amended--
(1) by striking ``and'' at the end of subparagraph (E),
(2) by striking the period at the end of subparagraph (F)
and inserting ``; and'', and
(3) by inserting after subparagraph (F) the following:
``(G) in the case of home infusion drug therapy
services, (i) such services are or were required
because the individual needed such services for the
administration of a covered home infusion drug, (ii) a
plan for furnishing such services has been established
and is reviewed periodically by a physician, and (iii)
such services are or were furnished while the
individual is or was under the care of a physician.''.
(e) Certification of Home Infusion Drug Therapy Providers;
Intermediate Sanctions for Noncompliance.--
(1) Treatment as provider of services.--Section 1861(u) (42
U.S.C. 1395x(u)) is amended by inserting ``home infusion drug
therapy provider,'' after ``hospice program,''.
(2) Consultation with state agencies and other
organizations.--Section 1863 (42 U.S.C. 1395z) is amended by
striking ``and (dd)(2)'' and inserting ``(dd)(2), and
(ww)(3)''.
(3) Use of state agencies in determining compliance.--
Section 1864(a) (42 U.S.C. 1395aa(a)) is amended--
(A) in the first sentence, by striking ``an agency
is a hospice program'' and inserting ``an agency or
entity is a hospice program or a home infusion drug
therapy provider,''; and
(B) in the second sentence--
(i) by striking ``institution or agency''
and inserting ``institution, agency, or
entity'', and
(ii) by striking ``or hospice program'' and
inserting ``hospice program, or home infusion
drug therapy provider''.
(4) Application of intermediate sanctions.--Section 1846
(42 U.S.C. 1395w-2) is amended--
(A) in the heading, by adding ``and for qualified
home infusion drug therapy providers'' at the end,
(B) in subsection (a), by inserting ``or that a
qualified home infusion drug therapy provider that is
certified for participation under this title no longer
substantially meets the requirements of section
1861(ww)(3)'' after ``under this part'', and
(C) in subsection (b)(2)(A)(iv), by inserting ``or
home infusion drug therapy services'' after ``clinical
diagnostic laboratory tests''.
(f) Use of Regional Intermediaries in Administration of Benefit.--
Section 1816 (42 U.S.C. 1395h) is amended by adding at the end the
following new subsection:
``(m) With respect to carrying out functions relating to payment
for home infusion drug therapy services and covered home infusion
drugs, the Secretary shall enter into contracts with agencies or
organizations under this section to perform such functions on a
regional basis.''.
(g) Conforming Amendments.--(1) Section 1834(h)(4)(B) (42 U.S.C.
1395m(h)(4)(B)) is amended by striking ``parenteral'' and all that
follows through ``and does not include''.
(2) Section 1861(n) (42 U.S.C. 1395x(n)) is amended by adding at
the end the following: ``Such term does not include any home infusion
drug therapy services described in section 1861(ww) or any covered
outpatient drug used as a supply related to the furnishing of an item
of durable medical equipment.''.
(3) Section 1861(s)(8) (42 U.S.C. 1395x(s)(8)) is amended by
inserting after ``dental'' the following: ``devices or enteral and
parenteral nutrients, supplies, and equipment''.
(h) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 2004.
SEC. 208. EXPANSION OF MEMBERSHIP OF MEDPAC TO 19.
(a) In General.--Section 1805(c) (42 U.S.C. 1395b-6(c)) is
amended--
(1) in paragraph (1), by striking ``17'' and inserting
``19''; and
(2) in paragraph (2)(B), by inserting ``experts in the area
of pharmacology and prescription medicine benefit programs,''
after ``other health professionals,''.
(b) Initial Terms of Additional Members.--
(1) In general.--For purposes of staggering the initial
terms of members of the Medicare Payment Advisory Commission
under section 1805(c)(3) of the Social Security Act (42 U.S.C.
1395b-6(c)(3)), the initial terms of the 2 additional members
of the Commission provided for by the amendment under
subsection (a)(1) are as follows:
(A) One member shall be appointed for 1 year.
(B) One member shall be appointed for 2 years.
(2) Commencement of terms.--Such terms shall begin on
January 1, 2002.
(c) Duty to Review SGR System.--Section 1805(b)(2) of such Act (42
U.S.C. 1395b-6(b)(2)) is amended by adding at the end the following new
subparagraph:
``(D) Examination of sgr system.--Specifically, the
Commission shall review the sustainable growth rate
prescription medicine target system established under
section 1859F(b).''.
SEC. 209. GAO ONGOING STUDIES AND REPORTS ON PROGRAM; MISCELLANEOUS
REPORTS.
(a) Ongoing Study.--The Comptroller General of the United States
shall conduct an ongoing study and analysis of the prescription
medicine benefit program under part D of the Medicare Program under
title XVIII of the Social Security Act (as added by section 201 of this
subtitle), including an analysis of each of the following:
(1) The extent to which the administering entities have
achieved volume-based discounts similar to the favored price
paid by other large purchasers.
(2) Whether access to the benefits under such program are
in fact available to all beneficiaries, with special attention
given to access for beneficiaries living in rural and hard-to-
serve areas.
(3) The success of such program in reducing medication
error and adverse medicine reactions and improving quality of
care, and whether it is probable that the program has resulted
in savings through reduced hospitalizations and morbidity due
to fewer (A) medication errors, (B) adverse medicine reactions,
and (C) illnesses and injuries caused by medications no longer
foregone for financial reasons.
(4) Whether patient medical record confidentiality is being
maintained and safeguarded.
(5) Such other issues as the Comptroller General may
consider.
(b) Reports.--The Comptroller General shall issue such reports on
the results of the ongoing study described in subsection (a) as the
Comptroller General shall deem appropriate and shall notify Congress on
a timely basis of significant problems in the operation of the
prescription medicine program and the need for legislative adjustments
and improvements.
(c) Miscellaneous Studies and Reports.--
(1) Study on methods to encourage additional research on
breakthrough pharmaceuticals.--
(A) In general.--The Secretary of Health and Human
Services shall seek the advice of the Secretary of the
Treasury on possible tax and trade law changes to
encourage increased original research on new
pharmaceutical breakthrough products designed to
address disease and illness.
(B) Report.--Not later than January 1, 2004, the
Secretary shall submit to Congress a report on such
study. The report shall include recommended methods to
encourage the pharmaceutical industry to devote more
resources to research and development of new covered
products than it devotes to overhead expenses.
(2) Study on pharmaceutical sales practices and impact on
costs and quality of care.--
(A) In general.--The Secretary of Health and Human
Services shall conduct a study on the methods used by
the pharmaceutical industry to advertise and sell to consumers and
educate and sell to providers.
(B) Report.--Not later than January 1, 2004, the
Secretary shall submit to Congress a report on such
study. The report shall include the estimated direct
and indirect costs of the sales methods used, the
quality of the information conveyed, and whether such
sales efforts lead (or could lead) to inappropriate
prescribing. Such report may include legislative and
regulatory recommendations to encourage more
appropriate education and prescribing practices.
(3) Study on cost of pharmaceutical research.--
(A) In general.--The Secretary of Health and Human
Services shall conduct a study on the costs of the
pharmaceutical research and the role that the taxpayer
provides in encouraging such research.
(B) Report.--Not later than January 1, 2004, the
Secretary shall submit to Congress a report on such
study. The report shall include a description of the
full range of taxpayer-assisted programs impacting
pharmaceutical research, including tax, trade,
Government research, and regulatory assistance. The
report may also include legislative and regulatory
recommendations that are designed to ensure that the
taxpayer's investment in pharmaceutical research
results in the availability of pharmaceuticals at
reasonable prices.
(4) Report on pharmaceutical prices in major foreign
nations.--Not later than January 1, 2004, the Secretary of
Health and Human Services shall submit to Congress a report on
the retail price of major pharmaceutical products in various
developed nations, compared to prices for the same or similar
products in the United States. The report shall include a
description of the principal reasons for any price differences
that may exist.
(5) Study on reduced error and paperwork through physician
electronic submission of prescriptions.--The Secretary shall
study and report within 2 years on what steps can be taken to
use electronic prescribing, hand-held computers, and improved
software resources to--
(A) reduce prescription errors, the prescribing of
inappropriate or contraindicated medicines, and to make
available a patient's prescription history;
(B) reduce paperwork;
(C) enable physicians to quickly and accurately
determine whether a particular patient's medicine is on
or off-formulary; and
(D) what the approximate cost to medicare and to
patients is of various electronic and information
technology options available to providers to improve
the quality and safety of the delivery of the
prescription drug benefit under this subtitle.
(6) Study on ways to reduce costs of pharmaceuticals and
finance a medicare prescription drug benefit, without reducing
research on innovative pharmaceuticals.--The Secretary, in
coordination with the Secretary of the Treasury, shall study
and report on how much revenue could be raised for the
financing of the medicare outpatient prescription medicine
program, how much medicine prices could be reduced for
beneficiaries and for such program, and what the impact on the
ability to conduct research on innovative pharmaceuticals would
be if--
(A) tax incentives and export incentives were
eliminated on the sale of United States manufactured
pharmaceuticals sold to developed nations at a lower
cost than offered for sale in the United States;
(B) tax deductions for the cost of direct to
consumer advertising, gifts, and other direct lobbying
of physicians (generally know as detailing) were
denied;
(C) a tax at a 100 percent rate was imposed on any
income received by a pharmaceutical company as payment
for withholding a generic pharmaceutical product
approved by the Food and Drug Administration from the
marketplace; and
(D) tax deductions on amounts spent on marketing
and advertising in excess of research were denied.
Subtitle B--Improving Benefits and Preventive Services
SEC. 221. AUTHORITY TO PROVIDE PREVENTIVE SERVICES UNDER PART B OF THE
MEDICARE PROGRAM.
(a) Preventive Services Benefit.--Section 1861(s), as amended by
sections 111 and 114, is further amended--
(1) by striking ``and'' at the end of paragraph (16);
(2) by striking the period at the end of paragraph (17) and
inserting ``and''; and
(3) by inserting after paragraph (17) the following new
paragraph:
``(18) qualified preventive services, as defined in
subsection (yy).''.
(b) Definition of Preventive Services.--Section 1861 (42 U.S.C.
1395x), as amended by sections 112 and 122, is further amended by
adding at the end the following new subsection:
``Qualified Preventive Services
``(yy)(1) Subject to paragraph (2), the term `qualified preventive
services' means items and services determined by the Secretary to be
reasonable and necessary for the prevention or early detection of an
illness or disability.
``(2) An item or service described in paragraph (1) shall be
qualified as a preventive service if the Secretary determines by
authoritative evidence that the provision of such item or service is
cost effective. In determining if such an item or service is cost
effective, the Secretary shall consider the following:
``(A) Whether furnishing such an item or service for an
illness or disability results in reductions in estimated
expenditures under the Social Security Act for the illness or
disability, or avoids treatment in a more expensive setting.
``(B) Whether the item or service improves the health of
the individual for whom the item or service is furnished.
``(C) In the case of an individual entitled to benefits
under this title by reason of section 226(b), whether the item
or service facilitates the return to work of the individual.''.
(c) Payment for Preventive Services.--Section 1834 (42 U.S.C.
1395m) is amended by inserting after subsection (d) the following new
subsection:
``(e) Alternative Payment for Preventive Services.--
``(1) General payment rule.--
``(A) Qualified preventive services.--The Secretary
shall establish by regulation a payment amount for
qualified preventive services, as defined in section
1861(yy).
``(B) Other preventive services.--The Secretary may
establish by regulation a payment amount for each type
of preventive service described in subparagraphs (A)
through (J) of paragraph (5).
``(2) Payment amount.--In the case of a preventive service
described in paragraph (5) that may be performed as a
diagnostic or therapeutic service under this title, the payment
amount under this subsection for a service performed as a
preventive service shall be the same as the payment amount
established under this title for such service performed as a
diagnostic or therapeutic service.
``(3) Manner of payment.--In the case of a preventive
service described in paragraph (6) that may be performed as a
diagnostic or therapeutic service under this title, the
Secretary shall apply the same method of payment under this
subsection for a service performed as a preventive service as
the Secretary applies under this title for such service
performed as a diagnostic or therapeutic service.
``(4) Prohibition on balance billing.--The provisions of
subparagraphs (A) and (B) of section 1842(b)(18) shall apply to
the furnishing of preventive services described in paragraph
(5) for which payment is made under this subsection in the same
manner as such subparagraphs apply to services furnished by a
practitioner described in subparagraph (C) of such section.
``(5) Preventive services described.--For purposes of this
subsection, the preventive services described in this paragraph
are any of the following services:
``(A) Antigens (under section 1861(s)(2)(G)).
``(B) Prostate cancer screening tests (as defined
in section 1861(oo)).
``(C) Colorectal cancer screening tests (as defined
in section 1861(pp)).
``(D) Diabetes outpatient self-management training
services (as defined in section 1861(qq)).
``(E)(i) Pneumococcal vaccine and its
administration and influenza vaccine and its
administration (under section 1861(s)(10)(A)).
``(ii) Hepatitis B vaccine and its administration
(under section 1861(s)(10)(B)).
``(F) Screening mammography (as defined in section
1861(jj)).
``(G) Screening pap smear and screening pelvic exam
(as defined in paragraphs (1) and (2), respectively, of
section 1861(nn)).
``(H) Bone mass measurement (as defined in section
1861(rr)).
``(I) Screening for glaucoma (as defined in section
1861(uu).
``(J) Qualified preventive services (as defined in
section 1861(yy)).''.
(d) Exclusion From Coverage Conforming Amendment.--Section
1862(a)(1)(B) (42 U.S.C. 1395y(a)(1)(B)) is amended by striking
``section 1861(s)(10)'' and inserting ``section 1834(e)(5)''.
(e) Waiver of Deductible.--Section 1833(b) (42 U.S.C. 1395l(b)) is
amended in clause (1) to read as follows: ``(1) such deductible shall
not apply with respect to preventive service described in section
1834(e)(5)''.
(f) Waiver of Cost-Sharing.--Section 1833(a)(1)(B) (42 U.S.C.
1395l(a)(1)(B)) is amended by inserting ``subject to section 1834(e),''
before ``the amounts paid shall be 100 percent of the reasonable
charges for such items and services,''.
(g) Additional Conforming Amendments.--(1) Section 1833(a)(2)(G)
(42 U.S.C. 1395l(a)(2)(G)) is amended by inserting ``subject to section
1834(e),'' before ``with respect to items and services''.
(2) Section 1834(c)(1)(C) (42 U.S.C. 1395m(c)) is amended by
striking ``the amount of the payment'' and inserting ``except as
provided by the Secretary under subsection (e), the amount of the
payment''.
(3) Section 1834(d) (42 U.S.C. 1395m(d)) is amended--
(A) in paragraph (1)(A), by striking ``The payment amount''
and inserting ``Except as provided by the Secretary under
subsection (e), the payment amount''; and
(B) in paragraphs (2)(A) and (3)(A), by striking ``payment
under section 1848'' each place it appears and inserting
``except as provided by the Secretary under subsection (e),
payment under section 1848''.
(4) Section 1848(g)(2)(C) (42 U.S.C. 1395w-4(g)(2)(C)) is amended--
(A) by striking ``For'' and inserting ``(i) Subject to
clause (ii), for''; and
(B) by adding at the end the following new clause:
``(ii) For physicians' services consisting of
preventive services (as described in section
1834(e)(5)) furnished on or after January 1, 2003, the
`limiting charge' shall be 100 percent of the
recognized payment amount under this part for
nonparticipating physicians or for nonparticipating
suppliers or other persons.''.
(5) Section 1848(g)(2)(D) (42 U.S.C. 1395w-4(g)(2)(D)) is amended
by striking ``the fee schedule amount determined under subsection (a)''
and all that follows and inserting ``the fee schedule amount determined
under subsection (a), in the case of preventive services (as described
in section 1834(e)(5)) the amount determined by the Secretary under
section 1834(e), or, if payment under this part is made on a basis
other than the fee schedule under this section or other than the amount
established under section 1834(e) with respect to such preventive
services, 95 percent of the other payment basis.''.
(f) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 2004.
SEC. 222. SMOKING CESSATION DEMONSTRATION.
(a) In General.--The Secretary of Health and Human Services
(hereinafter in this section referred to as the ``Secretary'') shall,
either directly or through grants, contracts, or cooperative
agreements, carry out a demonstration project testing a variety of
smoking cessation services for medicare beneficiaries, for the purpose
of identifying the most successful and cost-effective approaches.
(b) Design of Demonstration.--
(1) In general.--The Secretary shall determine the design,
implementation, and evaluation of the demonstration under this
section, subject to the provisions of this section.
(2) Services included.--Services under the demonstration
may include an initial patient assessment, counseling services,
and any pharmacotherapy for smoking cessation approved by the
Food and Drug Administration, and such other services as the
Secretary may authorize. Services may be furnished by a person
or entity that provides other services for which payment may be
made under title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.), as well as by health educators and other
professionals in categories designated by the Secretary who
meet applicable certification and licensing requirements of
State and local law.
(3) Scope and duration.--Demonstration projects under this
section shall be conducted at a minimum of four sites and shall
not exceed five years in duration.
(c) Notwithstanding any provision of such title XVIII or any other
provision of law, in the case of smoking cessation items and services
furnished to a medicare beneficiary under a demonstration conducted by
the Secretary under this section by an individual or entity authorized
by the Secretary to participate in such demonstration--
(1) such items and services shall be deemed to be health
care items and services covered under the insurance programs
under such title XVIII for purposes of payment from the Federal
Health Insurance and Federal Supplementary Medical Insurance
Trust Funds;
(2) persons and entities furnishing smoking cessation items
and services under a demonstration under this section shall be
entitled to be paid from such Trust Funds an amount equal to
the lesser of the actual cost of such items and services or the
payment amount prescribed for such items or services under a
fee schedule established by the Secretary; and
(3) the Secretary shall waive all coinsurance and
deductibles under such title XVIII for smoking cessation items
and services furnished under such demonstration.
(d) Waiver Authority.--The Secretary is authorized to waive the
requirements of such title XVIII to the extent and for the period the
Secretary finds necessary to conduct the demonstration under this
section.
(e) Funding.--The Secretary shall provide for the transfer from the
Federal Health Insurance and Federal Supplementary Insurance Trust Fund
of such funds as are necessary for the costs of carrying out and
evaluating the demonstration projects under this section.
(f) Evaluation; Report to Congress; Implementation.--
(1) In general.--Upon conclusion of the demonstration, the
Secretary shall cause the demonstration to be evaluated and
shall submit to Congress a report on the following:
(A) A description of the demonstration.
(B) An assessment of--
(i) patient outcomes, including smoking
``quit'' rates;
(ii) the cost-effectiveness of the
demonstration; and
(iii) the quality of the services furnished
through the demonstration, including measures
of beneficiary and provider satisfaction.
(C) Any other information that the Secretary
determines to be appropriate.
(2) Implementation.--The Secretary may implement, on a
permanent basis, the part or parts of the demonstration project
that the Secretary determines to be successful.
SEC. 223. OUTREACH TO PREVENT BLINDNESS.
(a) In General.--Not later than July 1, 2003, the Secretary of
Health and Human Services shall establish no fewer than 3
demonstrations of ophthalmic care outreach in underserved communities
designed to reduce the level of eye disease and to prevent blindness
among medicare beneficiaries.
(b) Duration.--The duration of the demonstrations shall be for 3
years, except that the Secretary may extend or expand the
demonstrations if the Secretary determines that the demonstrations have
succeeded in reducing the level of blindness and eye disease in the
communities serviced by 20 percent or more.
(c) Communities To Be Served.--The communities to be served under
the demonstrations shall be medically underserved urban and rural areas
(under section 330 of the Public Health Service Act (42 U.S.C. 254b))
with rates of preventable and treatable blindness 3 or more times the
average rate of such blindness.
(d) Provider Networks.--Providers selected to participate in the
demonstrations shall be a nonprofit network institute or group practice
of ophthalmic care professionals located in the areas to be served.
Such professionals shall include a number of minority professionals to
reflect the population of the area served and shall offer a substantial
level (as defined by the Secretary) of uncompensated care to others in
the community.
(e) Payments.--Payment to providers under the demonstrations shall
include payment of the 20 percent copayment in cases in which the
provide waives collection of the copayment from the beneficiary because
of the income status of the beneficiary. Payment amounts shall include
reasonable costs (as determined by the Secretary) for follow-up
pharmaceuticals, eyeglasses, lenses (contract and intraocular),
specialized ophthalmic diagnostic and therapeutic equipment, and
telehealth equipment, insofar as payment is not otherwise made by the
beneficiary.
SEC. 224. COVERAGE OF SUBSTITUTE ADULT DAY CARE SERVICES UNDER
MEDICARE.
(a) Substitute Adult Day Care Services Benefit.--
(1) In general.--Section 1861(m) (42 U.S.C. 1395x(m)) is
amended--
(A) in the matter preceding paragraph (1), by
inserting ``or paragraph (8)'' after ``paragraph (7)'';
(B) in paragraph (6), by striking ``and'' at the
end;
(C) in paragraph (7), by adding ``and'' at the end;
and
(D) by inserting after paragraph (7), the following
new paragraph:
``(8) substitute adult day care services (as defined in
subsection (zz));''.
(2) Substitute adult day care services defined.--Section
1861 (42 U.S.C. 1395x), as amended by sections 112, 122, and
221, is further amended by adding at the end the following new
subsection:
``Substitute Adult Day Care Services; Adult Day Care Facility
``(zz)(1)(A) The term `substitute adult day care services' means
the items and services described in subparagraph (B) furnished to an
individual by an adult day care facility as a part of a plan under
subsection (m) substituting such services for a portion of the items
and services described in subparagraph (B)(i) furnished by a home
health agency under the plan, as determined by the physician
establishing the plan.
``(B) The items and services described in this subparagraph are the
following items and services:
``(i) Items and services described in paragraphs (1)
through (7) of subsection (m).
``(ii) Transportation of the individual to and from the
adult day care facility in connection with any such item or
service.
``(iii) Meals.
``(iv) A program of supervised activities designed to
promote physical and mental health and furnished to the
individual by the adult day care facility in a group setting
for a period of not fewer than four and not greater than twelve
hours per day.
``(v) A medication management program (as defined in
subparagraph (C)).
``(C) For purposes of subparagraph (B)(v), the term `medication
management program' means a program of education and services (that
meets such criteria as the Secretary determines appropriate) to
minimize--
``(i) unnecessary or inappropriate use of prescription
drugs; and
``(ii) adverse events due to unintended prescription drug-
to-drug interactions.
``(2)(A) Except as provided in subparagraph (B), the term `adult
day care facility' means a public agency or private organization, or a
subdivision of such an agency or organization, that--
``(i) is engaged in providing skilled nursing services and
other therapeutic services;
``(ii) meets such standards established by the Secretary to
assure quality of care and such other requirements as the
Secretary finds necessary in the interest of the health and
safety of individuals who are furnished services in the
facility;
``(iii) provides the items and services described in
paragraph (1)(B); and
``(iv) meets the requirements of paragraphs (2) through (8)
of subsection (o).
``(B) The Secretary may waive the requirement of a surety bond
under paragraph (7) of subsection (o) in the case of an agency or
organization that provides a comparable surety bond under State law.
``(C) For purposes of payment for home health services consisting
of substitute adult day care services furnished under this title, any
reference to a home health agency is deemed to be a reference to an
adult day care facility.''.
(3) Conforming amendments.--Sections 1814(a)(2)(C) and
1835(a)(2)(A)(i) (42 U.S.C. 1395f(a)(2)(C) and 42 U.S.C.
1395f(a)(2)(C)) are each amended by striking ``section
1861(m)(7)'' and inserting ``paragraph (7) or (8) of section
1861(m)''.
(b) Payment for Substitute Adult Day Care Services Under the Home
Health Prospective Payment System.--Section 1895 (42 U.S.C. 1395fff),
as amended by section 504(a) of the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000 (as enacted into law by
section 1(a)(6) of Public Law 106-554), is amended--
(1) in the first sentence of paragraph (b)(1), by inserting
after ``home health services'' the following: ``or home health
services consisting of substitute adult day care services.'';
and
(2) by adding at the end the following new subsection:
``(f) Limitation on Payment for Substitute Adult Day Care
Services.--
``(1) General limitation.--With respect to home health
services consisting of substitute adult day care services, no
payment may be made under this section for home health services
consisting of substitute adult day care services described in
clauses (ii) through (v) of section 1861(zz)(1)(B).
``(2) Limitation on balance billing.--An adult day care
facility shall accept as payment in full for substitute adult
day care services (including those services described in
clauses (ii) through (v) of section 1861(zz)(1)(B)) furnished
by the facility to an individual entitled to benefits under
this title the amount of payment provided under this section
for home health services consisting of substitute adult day
care services.''.
(c) Effective Date.--The amendments made by this section shall
apply to items and services furnished on or after January 1, 2003.
Subtitle C--Rationalizing Payments and Cost Sharing and Medigap
SEC. 231. EXTENSION OF BUY-DOWN OF COPAYMENT ON HOSPITAL OUTPATIENT
SERVICES.
Section 1833(t)(8)(C)(ii) (42 U.S.C. 1395l(t)(8)(C)(ii)), as
amended by section 111(a) of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000, as enacted into law by section
1(a)(6) of Public Law 106-554, is amended by striking subclause (V) and
inserting the following:
``(V) For procedures performed in
2006, 40 percent.
``(VI) For procedures performed in
2007, 35 percent.
``(VII) For procedures performed in
2008, 30 percent.
``(VIII) For procedures performed
in 2009, 25 percent; and.
``(IX) For procedures performed in
2010 and thereafter, 20 percent.''.
SEC. 232. INDEXING DEDUCTIBLE TO INFLATION.
Section 1833(b) (42 U.S.C. 1395l(b)) is amended by inserting after
``1991 and subsequent years'' the following: ``, adjusted annually,
effective January 1 of each year beginning in 2004, by a percentage
increase or decrease equal to the percentage increase or decrease in
the consumer price index for all urban consumers (U.S. city average)
for the 12-month period ending with June of the previous year, rounded
to the nearest dollar''.
SEC. 233. MEDICARE DIRECT SUPPLEMENTAL INSURANCE OPTION.
(a) In General.--Title XVIII is amended by inserting after section
1882 the following new section:
``medicare direct supplemental insurance option
``Sec. 1882A. (a) In General.--The Secretary shall provide for the
offering under this section of a voluntary program to supplement the
benefits provided to individuals under parts A and B of this title.
``(b) Eligibility; Enrollment.--The Secretary shall provide
procedures for the enrollment under the program under this section of
individuals who are entitled to benefits under part A and enrolled
under part B, but who are not enrolled in Medicare+Choice plan under
part C (or in a plan under section 1876). Such procedures shall be
similar in timing and manner to the procedures by which individuals are
permitted to enroll in Medicare+Choice plans under part C, except that
the Secretary shall provide for an initial enrollment period during
2001 that permits benefits to be first made available under the program
for months beginning with January 2003.
``(c) Benefits.--
``(1) In general.--Subject to paragraph (2), the benefits
provided under the program under this section shall consist of
payment of the cost of deductibles, copayments, and other cost-
sharing amounts (including amounts attributable to and
permitted as balance billing) otherwise imposed or permitted
under this title, subject to an annual deductible of $500.
``(2) Nominal copayment.--
``(A) In general.--With respect to each part B
service furnished to an enrollee under this section
during 2003, the enrollee shall pay a nominal copayment
of $5.
``(B) Outyears.--For 2004 and each subsequent year,
the amount of nominal copayment applicable for each
part B service under this paragraph is equal to the
amount of copayment for the previous year adjusted by a
percentage increase or decrease equal to the percentage
increase or decrease in the Consumer Price Index for
All Urban Consumers (United States city average). Any
amount determined under this subparagraph that is not a
multiple of $1 shall be rounded to the nearest multiple
of $1.
``(C) Counting nominal copayments toward the annual
deductible.--A nominal copayment payable by an enrollee
under this paragraph in a year shall count toward the
annual deductible applicable under paragraph (1) for
that year.
``(3) Administration.--The Secretary shall coordinate
payment of benefits under this part with those under parts A
and B and may, for such purpose, enter into appropriate
arrangements with qualified entities (which may include fiscal
intermediaries and carriers).
``(d) Premiums.--
``(1) Actuarial cost.--The Secretary shall, during
September of each year beginning with 2002, determine a monthly
actuarial rate for all enrollees under this section, which rate
shall be applicable for months in the succeeding calendar year.
Such actuarial rate shall be the amount the Secretary estimates
to be necessary so that the aggregate amount for such calendar
year with respect to those enrollees will equal the total
amount which the Secretary estimates will be payable under this
section for benefits accrued (including services performed and
related administrative costs incurred) in such calendar year
under the program under this section. In calculating the
monthly actuarial rate, the Secretary shall make adjustments to
take into account errors in estimations under this paragraph
for previous years and shall include an appropriate amount for
a contingency margin.
``(2) Premium.--The monthly premium of each individual
enrolled under this section for a month in a year shall be the
monthly actuarial rate determined under paragraph (1) for
months in such year. Such premium shall not vary among
enrollees based upon the age, place of residence, or any other
factors.
``(3) Collection.--The Secretary shall provide for the
collection of premiums for enrollees under this part in the
same manner as premiums under part B are collected under section 1840,
except that any reference in such section to the Federal Supplementary
Medical Insurance Trust Fund shall be deemed a reference to an account
(to be known as the ``Direct Medicare Supplemental Insurance Account'')
to be established in the Treasury by the Secretary to carry out the
program under this section. Amounts in such account may be invested and
draw interest in the same manner as such Trust Fund under section
1840(c).
``(4) Use of funds.--Premium amounts deposited into the
account established under paragraph (3) shall be available
without regard to appropriations to the Secretary to make
payment for benefits and administrative costs incurred in
carrying out this section.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act and shall apply to
benefits for months beginning with January 2003.
Subtitle D--Improved Assistance to Low-Income Beneficiaries
SEC. 241. INCREASE IN SLMB ELIGIBILITY TO 135 PERCENT OF POVERTY;
PRESUMPTIVE ENROLLMENT.
(a) Increase in SLMB Eligibility to 135 Percent of Poverty.--
Section 1902(a)(10)(E)(iii) (42 U.S.C. 1396a(a)(10)(E)(iii)) is amended
by striking ``120 percent in 1995 and years thereafter'' and inserting
``120 percent in 1995 through 2003 and 135 percent in 2004 and years
thereafter''.
(b) Presumptive Enrollment.--Title XVIII is amended by inserting
after section 1806 the following new section:
``voluntary provision of information to establish presumptive
eligibility; application of presumptive eligibility
``Sec. 1807. (a) At the time an individual first applies for old-
age and survivors insurance benefit payments or disability insurance
benefit payments under title II, the Commissioner of Social Security
shall ask the individual to voluntarily disclose and attest to
information on expected annual income and assets. If, on the basis of
such attestation, the Commissioner determines that the individual
qualifies for medical assistance for medicare cost-sharing under title
XIX (either as a qualified medicare beneficiary, special low-income
medicare beneficiary, or otherwise), the Commissioner--
``(1) shall transmit, to the State agency responsible for
administration of such title in the State in which the
individual resides, a certification of such eligibility; and
``(2) may, at the State's option, conduct audits to
determine the individual's eligibility for such assistance.
``(b) Unless otherwise determined under such an audit, an
individual certified under subsection (a)(1) (so long as the individual
is eligible for benefits under title XVIII and notwithstanding any
other provision of law) shall be treated as having had an application
approved for the medical assistance under title XIX with respect to
medicare cost-sharing based on the levels of income and assets
certified by the Commissioner. Such an individual need not apply
separately for such benefit and the individual is not required to
reapply to qualify for such benefits.''.
(c) Effective Date.--The amendments made by this section shall be
effective on and after January 1, 2004.
SEC. 242. MECHANISM PROMOTING PROVISION OF MEDICARE COST-SHARING
ASSISTANCE TO INDIVIDUALS WHO BECOME ELIGIBLE FOR SUCH
ASSISTANCE.
(a) In General.--Part A of title XI is amended by adding at the end
the following new section:
``promoting provision of medicare cost-sharing assistance under
medicaid program for identified low-income medicare beneficiaries
``Sec. 1150A. (a) Requirement for Data Match.--
``(1) Requesting matching information.--The Commissioner of
Social Security shall, not less often than annually beginning
with 2002, transmit to the Secretary of the Treasury a list of
the names and taxpayer identification numbers (TIN) of medicare
beneficiaries (as defined in section 6103(l)(18) of the
Internal Revenue Code of 1986) and request that such Secretary
disclose to the Secretary of Health and Human Services the
information described in subparagraph (A) of such section.
``(2) Specification of income levels.--The Secretary shall
specify--
``(A) the items that will be included in
determination of income for purposes of applying this
section and section 6103(l)(18)(A)(i) of the Internal
Revenue Code of 1986; and
``(B) the levels of such income (based upon a
percentage of the Federal poverty guidelines) that
individuals may have and qualify for medical assistance
under section 1902(a)(10)(E)(i) of the Social Security
Act (relating to assistance for medicare cost-sharing
benefits under the Medicaid program).
``(b) Notice to Individuals Identified.--
``(1) Initial eligibility.--The Secretary promptly shall
provide for an appropriate notice to each individual identified
under subsection (a) who is described in section
6103(l)(18)(A)(i), of the following:
``(A) Subject to subparagraph (B), the individual
is deemed eligible for some form of medical assistance
for some medicare cost-sharing under clause (i) or
(iii) of section 1902(a)(10)(E), depending on the
individual's level of income.
``(B) By accepting such assistance the individual
is obligated to notify the Secretary if the individual
is not eligible for such assistance due to--
``(i) the individual having tax-exempt
income;
``(ii) the individual having countable
assets in excess of the maximum permissible
assets, if the individual resides in a State
that imposes an asset test for such
eligibility; or
``(iii) the individual otherwise is not
eligible for such assistance.
``(C) If the individual accepts such assistance
notwithstanding that the individual is not eligible,
the individual is liable to the State for the amount of
medical assistance provided (with interest).
``(2) Continued eligibility.--The Secretary shall provide
for an appropriate notice to each individual identified under
subsection (a) who is described in section 6103(l)(18)(A)(ii),
of the following: `Unless the individual declines coverage or
indicates otherwise, the individual will be enrolled for the
appropriate assistance with medicare cost-sharing under the
State plan operated under title XIX for the State in which the
individual resides.'
``(c) Notice to State.--In the case of an individual who is
identified under this section and resides in a State, the Secretary
shall provide for appropriate notice to the State of the individual's
eligibility or termination of eligibility (as the case may be) for
medical assistance under clause (i) or (iii) of section 1902(a)(10)(E),
as the case may be.''.
(b) Conforming Amendment to Medicaid Program.--Section 1902 (42
U.S.C. 1396a), as amended by section 702(b) of the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000, as enacted
into law by section 1(a)(6) of Public Law 106-554, is amended by adding
at the end the following:
``(cc) A State shall treat an individual who is identified under
section 1150A(b) as being eligible for medical assistance under clause
(i) or (ii) of subsection (a)(10)(E) as being so eligible, until the
Secretary notifies the State otherwise, with respect to medical
assistance for items and services furnished on or after the date of the
notice.''.
(c) Authorization of Disclosure.--Section 6103(l) of the Internal
Revenue Code of 1986 (relating to disclosure of returns and return
information for purposes other than tax administration) is amended by
adding at the end the following new paragraph:
``(18) Disclosure of certain information in order to
qualify for medicare cost-sharing assistance.--
``(A) In general.--The Secretary shall, upon
written request from the Commissioner of Social
Security, disclose to the Secretary of Health and Human
Services, whether with respect to any medicare
beneficiary (as defined in paragraph (12)(E)(i))
identified by the Commissioner--
``(i) there has not been filed an income
tax return for the most recent period for which
the Secretary has information; or there has
been such a return filed and the amount of the
gross income (or the sum of such elements of
gross income as the Secretary of Health and
Human Services may specify) is below such level
(or levels) as such Secretary may specify to
carry out section 1150A(b) of the Social
Security Act, treating the number of dependents
as the size of the family involved; and
``(ii) whether, for such an individual who
qualified for medicare cost-sharing assistance
described in section 1150A at any time in the
previous year, the individual is still
described in clause (i).
``(B) Disclosure by health care financing
administration.--With respect to information disclosed
under subparagraph (A), the Administrator of the Health
Care Financing Administration may disclose to the
appropriate officials of a State responsible for
administration of a State plan under title XIX of the
Social Security Act the name, address, and TIN of the
preliminary eligibility determination.
``(C) Special rules.--
``(i) Restrictions on disclosure.--
Information may be disclosed under this
paragraph only for purposes of, and to the
extent necessary in, determining the extent to
which an individual beneficiary is entitled to
medical assistance under a State plan under
title XIX of the Social Security Act for some
or all medicare cost-sharing.
``(ii) Timely responses to requests.--Any
request made under subparagraph (A) shall be
complied with as soon as possible but in no
event later than 60 days after the date the
request was made.''.
Subtitle E--Medicare Early Access and Tax Credits
PART I--ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-TO-65 YEARS OF
AGE
SEC. 251. ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-TO-65 YEARS OF
AGE.
(a) In General.--Title XVIII, as amended by section 201, is
amended--
(1) by redesignating part E as part F; and
(2) by inserting after part D the following new part:
``Part E--Purchase of Medicare Benefits by Certain Individuals Age 62-
to-65 Years of Age
``SEC. 1860. PROGRAM BENEFITS; ELIGIBILITY.
``(a) Entitlement to Medicare Benefits for Enrolled Individuals.--
``(1) In general.--An individual enrolled under this part
is entitled to the same benefits under this title as an
individual entitled to benefits under part A and enrolled under
part B.
``(2) Definitions.--For purposes of this part:
``(A) Federal or state cobra continuation
provision.--The term `Federal or State COBRA
continuation provision' has the meaning given the term
`COBRA continuation provision' in section 2791(d)(4) of
the Public Health Service Act and includes a comparable
State program, as determined by the Secretary.
``(B) Federal health insurance program defined.--
The term `Federal health insurance program' means any
of the following:
``(i) Medicare.--Part A or part B of this
title (other than by reason of this part).
``(ii) Medicaid.--A State plan under title
XIX.
``(iii) FEHBP.--The Federal employees
health benefit program under chapter 89 of
title 5, United States Code.
``(iv) TRICARE.--The TRICARE program (as
defined in section 1072(7) of title 10, United
States Code).
``(v) Active duty military.--Health
benefits under title 10, United States Code, to
an individual as a member of the uniformed
services of the United States.
``(C) Group health plan.--The term `group health
plan' has the meaning given such term in section
2791(a)(1) of the Public Health Service Act.
``(b) Eligibility of Individuals Age 62-to-65 Years of Age.--
``(1) In general.--Subject to paragraph (2), an individual
who meets the following requirements with respect to a month is
eligible to enroll under this part with respect to such month:
``(A) Age.--As of the last day of the month, the
individual has attained 62 years of age, but has not
attained 65 years of age.
``(B) Medicare eligibility (but for age).--The
individual would be eligible for benefits under part A
or part B for the month if the individual were 65 years
of age.
``(C) Not eligible for coverage under group health
plans or federal health insurance programs.--The
individual is not eligible for benefits or coverage
under a Federal health insurance program (as defined in
subsection (a)(2)(B)) or under a group health plan
(other than such eligibility merely through a Federal
or State COBRA continuation provision) as of the last
day of the month involved.
``(2) Limitation on eligibility if terminated enrollment.--
If an individual described in paragraph (1) enrolls under this
part and coverage of the individual is terminated under section
1860A(d) (other than because of age), the individual is not
again eligible to enroll under this subsection unless the
following requirements are met:
``(A) New coverage under group health plan or
federal health insurance program.--After the date of
termination of coverage under such section, the
individual obtains coverage under a group health plan
or under a Federal health insurance program.
``(B) Subsequent loss of new coverage.--The
individual subsequently loses eligibility for the
coverage described in subparagraph (A) and exhausts any
eligibility the individual may subsequently have for
coverage under a Federal or State COBRA continuation
provision.
``(3) Change in health plan eligibility does not affect
coverage.--In the case of an individual who is eligible for and
enrolls under this part under this subsection, the individual's
continued entitlement to benefits under this part shall not be
affected by the individual's subsequent eligibility for
benefits or coverage described in paragraph (1)(C), or
entitlement to such benefits or coverage.
``SEC. 1860A. ENROLLMENT PROCESS; COVERAGE.
``(a) In General.--An individual may enroll in the program
established under this part only in such manner and form as may be
prescribed by regulations, and only during an enrollment period
prescribed by the Secretary consistent with the provisions of this
section. Such regulations shall provide a process under which--
``(1) individuals eligible to enroll as of a month are
permitted to pre-enroll during a prior month within an
enrollment period described in subsection (b); and
``(2) each individual seeking to enroll under section
1860(b) is notified, before enrolling, of the deferred monthly
premium amount the individual will be liable for under section
1860C(b) upon attaining 65 years of age as determined under
section 1860B(c)(3).
``(b) Enrollment Periods.--
``(1) Individuals 62-to-65 years of age.--In the case of
individuals eligible to enroll under this part under section
1860(b)--
``(A) Initial enrollment period.--If the individual
is eligible to enroll under such section for January
2002, the enrollment period shall begin on November 1,
2001, and shall end on February 28, 2002. Any such
enrollment before January 1, 2002, is conditioned upon
compliance with the conditions of eligibility for
January 2002.
``(B) Subsequent periods.--If the individual is
eligible to enroll under such section for a month after
January 2002, the enrollment period shall begin on the
first day of the second month before the month in which
the individual first is eligible to so enroll and shall
end four months later. Any such enrollment before the
first day of the third month of such enrollment period
is conditioned upon compliance with the conditions of
eligibility for such third month.
``(2) Authority to correct for government errors.--The
provisions of section 1837(h) apply with respect to enrollment
under this part in the same manner as they apply to enrollment
under part B.
``(c) Date Coverage Begins.--
``(1) In general.--The period during which an individual is
entitled to benefits under this part shall begin as follows,
but in no case earlier than January 1, 2002:
``(A) In the case of an individual who enrolls
(including pre-enrolls) before the month in which the
individual satisfies eligibility for enrollment under
section 1860, the first day of such month of
eligibility.
``(B) In the case of an individual who enrolls
during or after the month in which the individual first
satisfies eligibility for enrollment under such
section, the first day of the following month.
``(2) Authority to provide for partial months of
coverage.--Under regulations, the Secretary may, in the
Secretary's discretion, provide for coverage periods that
include portions of a month in order to avoid lapses of
coverage.
``(3) Limitation on payments.--No payments may be made
under this title with respect to the expenses of an individual
enrolled under this part unless such expenses were incurred by
such individual during a period which, with respect to the
individual, is a coverage period under this section.
``(d) Termination of Coverage.--
``(1) In general.--An individual's coverage period under
this part shall continue until the individual's enrollment has
been terminated at the earliest of the following:
``(A) General provisions.--
``(i) Notice.--The individual files notice
(in a form and manner prescribed by the
Secretary) that the individual no longer wishes
to participate in the insurance program under
this part.
``(ii) Nonpayment of premiums.--The
individual fails to make payment of premiums
required for enrollment under this part.
``(iii) Medicare eligibility.--The
individual becomes entitled to benefits under
part A or enrolled under part B (other than by
reason of this part).
``(B) Termination based on age.--The individual
attains 65 years of age.
``(2) Effective date of termination.--
``(A) Notice.--The termination of a coverage period
under paragraph (1)(A)(i) shall take effect at the
close of the month following for which the notice is
filed.
``(B) Nonpayment of premium.--The termination of a
coverage period under paragraph (1)(A)(ii) shall take
effect on a date determined under regulations, which
may be determined so as to provide a grace period in
which overdue premiums may be paid and coverage
continued. The grace period determined under the
preceding sentence shall not exceed 60 days; except
that it may be extended for an additional 30 days in
any case where the Secretary determines that there was
good cause for failure to pay the overdue premiums
within such 60-day period.
``(C) Age or medicare eligibility.--The termination
of a coverage period under paragraph (1)(A)(iii) or
(1)(B) shall take effect as of the first day of the
month in which the individual attains 65 years of age
or becomes entitled to benefits under part A or
enrolled for benefits under part B (other than by
reason of this part).
``SEC. 1860B. PREMIUMS.
``(a) Amount of Monthly Premiums.--
``(1) Base monthly premiums.--The Secretary shall, during
September of each year (beginning with 1998), determine the
following premium rates which shall apply with respect to
coverage provided under this title for any month in the
succeeding year:
``(A) Base monthly premium for individuals 62 years
of age or older.--A base monthly premium for
individuals 62 years of age or older, equal to \1/12\
of the base annual premium rate computed under
subsection (b) for each premium area.
``(2) Deferred monthly premiums for individuals 62 years of
age or older.--The Secretary shall, during September of each
year (beginning with 2001), determine under subsection (c) the
amount of deferred monthly premiums that shall apply with
respect to individuals who first obtain coverage under this
part under section 1860(b) in the succeeding year.
``(3) Establishment of premium areas.--For purposes of this
part, the term `premium area' means such an area as the
Secretary shall specify to carry out this part. The Secretary
from time to time may change the boundaries of such premium
areas. The Secretary shall seek to minimize the number of such
areas specified under this paragraph.
``(b) Base Annual Premium for Individuals 62 Years of Age or
Older.--
``(1) National, per capita average.--The Secretary shall
estimate the average, annual per capita amount that would be
payable under this title with respect to individuals residing
in the United States who meet the requirement of section
1860(b)(1)(A) as if all such individuals were eligible for (and
enrolled) under this title during the entire year (and assuming
that section 1862(b)(2)(A)(i) did not apply).
``(2) Geographic adjustment.--The Secretary shall adjust
the amount determined under paragraph (1) for each premium area
(specified under subsection (a)(3)) in order to take into
account such factors as the Secretary deems appropriate and
shall limit the maximum premium under this paragraph in a
premium area to assure participation in all areas throughout
the United States.
``(3) Base annual premium.--The base annual premium under
this subsection for months in a year for individuals 62 years
of age or older residing in a premium area is equal to the
average, annual per capita amount estimated under paragraph (1)
for the year, adjusted for such area under paragraph (2).
``(c) Deferred Premium Rate for Individuals 62 Years of Age or
Older.--The deferred premium rate for individuals with a group of
individuals who obtain coverage under section 1860(b) in a year shall
be computed by the Secretary as follows:
``(1) Estimation of national, per capita annual average
expenditures for enrollment group.--The Secretary shall
estimate the average, per capita annual amount that will be
paid under this part for individuals in such group during the
period of enrollment under section 1860(b). In making such
estimate for coverage beginning in a year before 2005, the
Secretary may base such estimate on the average, per capita
amount that would be payable if the program had been in
operation over a previous period of at least 4 years.
``(2) Difference between estimated expenditures and
estimated premiums.--Based on the characteristics of
individuals in such group, the Secretary shall estimate during
the period of coverage of the group under this part under
section 1860(b) the amount by which--
``(A) the amount estimated under paragraph (1);
exceeds
``(B) the average, annual per capita amount of
premiums that will be payable for months during the
year under section 1860C(a) for individuals in such
group (including premiums that would be payable if
there were no terminations in enrollment under clause
(i) or (ii) of section 1860A(d)(1)(A)).
``(3) Actuarial computation of deferred monthly premium
rates.--The Secretary shall determine deferred monthly premium
rates for individuals in such group in a manner so that--
``(A) the estimated actuarial value of such
premiums payable under section 1860C(b), is equal to
``(B) the estimated actuarial present value of the
differences described in paragraph (2).
Such rate shall be computed for each individual in the group in
a manner so that the rate is based on the number of months
between the first month of coverage based on enrollment under
section 1860(b) and the month in which the individual attains
65 years of age.
``(4) Determinants of actuarial present values.--The
actuarial present values described in paragraph (3) shall
reflect--
``(A) the estimated probabilities of survival at
ages 62 through 84 for individuals enrolled during the
year; and
``(B) the estimated effective average interest
rates that would be earned on investments held in the
trust funds under this title during the period in
question.
``SEC. 1860C. PAYMENT OF PREMIUMS.
``(a) Payment of Base Monthly Premium.--
``(1) In general.--The Secretary shall provide for payment
and collection of the base monthly premium, determined under
section 1860B(a)(1) for the age (and age cohort, if applicable)
of the individual involved and the premium area in which the
individual principally resides, in the same manner as for
payment of monthly premiums under section 1840, except that,
for purposes of applying this section, any reference in such
section to the Federal Supplementary Medical Insurance Trust
Fund is deemed a reference to the Trust Fund established under
section 1860D.
``(2) Period of payment.--In the case of an individual who
participates in the program established by this title, the base
monthly premium shall be payable for the period commencing with
the first month of the individual's coverage period and ending
with the month in which the individual's coverage under this
title terminates.
``(b) Payment of Deferred Premium for Individuals Covered After
Attaining Age 62.--
``(1) Rate of payment.--
``(A) In general.--In the case of an individual who
is covered under this part for a month pursuant to an
enrollment under section 1860(b), subject to
subparagraph (B), the individual is liable for payment
of a deferred premium in each month during the period
described in paragraph (2) in an amount equal to the
full deferred monthly premium rate determined for the
individual under section 1860B(c).
``(B) Special rules for those who disenroll
early.--
``(i) In general.--If such an individual's
enrollment under such section is terminated
under clause (i) or (ii) of section
1860A(d)(1)(A), subject to clause (ii), the
amount of the deferred premium otherwise
established under this paragraph shall be pro-
rated to reflect the number of months of
coverage under this part under such enrollment
compared to the maximum number of months of
coverage that the individual would have had if
the enrollment were not so terminated.
``(ii) Rounding to 12-month minimum
coverage periods.--In applying clause (i), the
number of months of coverage (if not a multiple
of 12) shall be rounded to the next highest
multiple of 12 months, except that in no case
shall this clause result in a number of months
of coverage exceeding the maximum number of
months of coverage that the individual would
have had if the enrollment were not so
terminated.
``(2) Period of payment.--The period described in this
paragraph for an individual is the period beginning with the
first month in which the individual has attained 65 years of
age and ending with the month before the month in which the
individual attains 85 years of age.
``(3) Collection.--In the case of an individual who is
liable for a premium under this subsection, the amount of the
premium shall be collected in the same manner as the premium
for enrollment under such part is collected under section 1840,
except that any reference in such section to the Federal
Supplementary Medical Insurance Trust Fund is deemed to be a
reference to the Medicare Early Access Trust Fund established under
section 1860D.
``(c) Application of Certain Provisions.--The provisions of section
1840 (other than subsection (h)) shall apply to premiums collected
under this section in the same manner as they apply to premiums
collected under part B, except that any reference in such section to
the Federal Supplementary Medical Insurance Trust Fund is deemed a
reference to the Trust Fund established under section 1860D.
``SEC. 1860D. MEDICARE EARLY ACCESS TRUST FUND.
``(a) Establishment of Trust Fund.--
``(1) In general.--There is hereby created on the books of
the Treasury of the United States a trust fund to be known as
the `Medicare Early Access Trust Fund' (in this section
referred to as the `Trust Fund'). The Trust Fund shall consist
of such gifts and bequests as may be made as provided in
section 201(i)(1) and such amounts as may be deposited in, or
appropriated to, such fund as provided in this title.
``(2) Premiums.--Premiums collected under section 1860B
shall be transferred to the Trust Fund.
``(b) Incorporation of Provisions.--
``(1) In general.--Subject to paragraph (2), subsections
(b) through (i) of section 1841 shall apply with respect to the
Trust Fund and this title in the same manner as they apply with
respect to the Federal Supplementary Medical Insurance Trust
Fund and part B, respectively.
``(2) Miscellaneous references.--In applying provisions of
section 1841 under paragraph (1)--
``(A) any reference in such section to `this part'
is construed to refer to this part E;
``(B) any reference in section 1841(h) to section
1840(d) and in section 1841(i) to sections 1840(b)(1)
and 1842(g) are deemed references to comparable
authority exercised under this part; and
``(C) payments may be made under section 1841(g) to
the Trust Funds under sections 1817 and 1841 as
reimbursement to such funds for payments they made for
benefits provided under this part.
``SEC. 1860E. OVERSIGHT AND ACCOUNTABILITY.
``(a) Through Annual Reports of Trustees.--The Board of Trustees of
the Medicare Early Access Trust Fund under section 1860D(b)(1) shall
report on an annual basis to Congress concerning the status of the
Trust Fund and the need for adjustments in the program under this part
to maintain financial solvency of the program under this part.
``(b) Periodic GAO Reports.--The Comptroller General of the United
States shall periodically submit to Congress reports on the adequacy of
the financing of coverage provided under this part. The Comptroller
General shall include in such report such recommendations for
adjustments in such financing and coverage as the Comptroller General
deems appropriate in order to maintain financial solvency of the
program under this part.
``SEC. 1860F. ADMINISTRATION AND MISCELLANEOUS.
``(a) Treatment for Purposes of Title.--Except as otherwise
provided in this part--
``(1) individuals enrolled under this part shall be treated
for purposes of this title as though the individual were
entitled to benefits under part A and enrolled under part B;
and
``(2) benefits described in section 1860 shall be payable
under this title to such individuals in the same manner as if
such individuals were so entitled and enrolled.
``(b) Not Treated As Medicare Program for Purposes of Medicaid
Program.--For purposes of applying title XIX (including the provision
of medicare cost-sharing assistance under such title), an individual
who is enrolled under this part shall not be treated as being entitled
to benefits under this title.
``(c) Not Treated As Medicare Program for Purposes of COBRA
Continuation Provisions.--In applying a COBRA continuation provision
(as defined in section 2791(d)(4) of the Public Health Service Act),
any reference to an entitlement to benefits under this title shall not
be construed to include entitlement to benefits under this title
pursuant to the operation of this part.''.
(b) Conforming Amendments to Social Security Act Provisions.--
(1) Section 201(i)(1) of the Social Security Act (42 U.S.C.
401(i)(1)) is amended by striking ``or the Federal
Supplementary Medical Insurance Trust Fund'' and inserting
``the Federal Supplementary Medical Insurance Trust Fund, and
the Medicare Early Access Trust Fund''.
(2) Section 201(g)(1)(A) of such Act (42 U.S.C.
401(g)(1)(A)) is amended by striking ``and the Federal
Supplementary Medical Insurance Trust Fund established by title
XVIII'' and inserting
``, the Federal Supplementary Medical Insurance Trust Fund, and
the Medicare Early Access Trust Fund established by title
XVIII''.
(3) Section 1820(i) of such Act (42 U.S.C. 1395i-4(i)) is
amended by striking ``part D'' and inserting ``part F''.
(4) Section 1853(c) of such Act (42 U.S.C. 1395w-23(c)) is
amended--
(A) in paragraph (1), by striking ``or (7)'' and
inserting ``, (7), or (8)'', and
(B) by adding at the end the following:
``(8) Adjustment for early access.--In applying this
subsection with respect to individuals entitled to benefits
under part E, the Secretary shall provide for an appropriate
adjustment in the Medicare+Choice capitation rate as may be
appropriate to reflect differences between the population
served under such part and the population under parts A and
B.''.
(c) Other Conforming Amendments.--
(2)(A) Section 602(2)(D)(ii) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1162(2)) is amended by
inserting ``(not including an individual who is so entitled
pursuant to enrollment under section 1860A)'' after ``Social
Security Act''.
(B) Section 2202(2)(D)(ii) of the Public Health Service Act
(42 U.S.C. 300bb-2(2)(D)(ii)) is amended by inserting ``(not
including an individual who is so entitled pursuant to
enrollment under section 1860A)'' after ``Social Security
Act''.
(C) Section 4980B(f)(2)(B)(i)(V) of the Internal Revenue
Code of 1986 is amended by inserting ``(not including an
individual who is so entitled pursuant to enrollment under
section 1860A)'' after ``Social Security Act''.
PART II--ACCESS TO MEDICARE BENEFITS FOR DISPLACED WORKERS 55-TO-62
YEARS OF AGE
SEC. 252. ACCESS TO MEDICARE BENEFITS FOR DISPLACED WORKERS 55-TO-62
YEARS OF AGE.
(a) Eligibility.--Section 1860, as inserted by section 251(a)(2),
is amended by adding at the end the following new subsection:
``(c) Displaced Workers and Spouses.--
``(1) Displaced workers.--Subject to paragraph (3), an
individual who meets the following requirements with respect to
a month is eligible to enroll under this part with respect to
such month:
``(A) Age.--As of the last day of the month, the
individual has attained 55 years of age, but has not
attained 62 years of age.
``(B) Medicare eligibility (but for age).--The
individual would be eligible for benefits under part A
or part B for the month if the individual were 65 years
of age.
``(C) Loss of employment-based coverage.--
``(i) Eligible for unemployment
compensation.--The individual meets the
requirements relating to period of covered
employment and conditions of separation from
employment to be eligible for unemployment
compensation (as defined in section 85(b) of
the Internal Revenue Code of 1986), based on a
separation from employment occurring on or
after July 1, 2001. The previous sentence shall
not be construed as requiring the individual to
be receiving such unemployment compensation.
``(ii) Loss of employment-based coverage.--
Immediately before the time of such separation
of employment, the individual was covered under
a group health plan on the basis of such
employment, and, because of such loss, is no
longer eligible for coverage under such plan
(including such eligibility based on the
application of a Federal or State COBRA
continuation provision) as of the last day of
the month involved.
``(iii) Previous creditable coverage for at
least 1 year.--As of the date on which the
individual loses coverage described in clause
(ii), the aggregate of the periods of
creditable coverage (as determined under
section 2701(c) of the Public Health Service
Act) is 12 months or longer.
``(D) Exhaustion of available cobra continuation
benefits.--
``(i) In general.--In the case of an
individual described in clause (ii) for a month
described in clause (iii)--
``(I) the individual (or spouse)
elected coverage described in clause
(ii); and
``(II) the individual (or spouse)
has continued such coverage for all
months described in clause (iii) in
which the individual (or spouse) is
eligible for such coverage.
``(ii) Individuals to whom cobra
continuation coverage made available.--An
individual described in this clause is an
individual--
``(I) who was offered coverage
under a Federal or State COBRA
continuation provision at the time of
loss of coverage eligibility described
in subparagraph (C)(ii); or
``(II) whose spouse was offered
such coverage in a manner that
permitted coverage of the individual at
such time.
``(iii) Months of possible cobra
continuation coverage.--A month described in
this clause is a month for which an individual
described in clause (ii) could have had
coverage described in such clause as of the
last day of the month if the individual (or the spouse of the
individual, as the case may be) had elected such coverage on a timely
basis.
``(E) Not eligible for coverage under federal
health insurance program or group health plans.--The
individual is not eligible for benefits or coverage
under a Federal health insurance program or under a
group health plan (whether on the basis of the
individual's employment or employment of the
individual's spouse) as of the last day of the month
involved.
``(2) Spouse of displaced worker.--Subject to paragraph
(3), an individual who meets the following requirements with
respect to a month is eligible to enroll under this part with
respect to such month:
``(A) Age.--As of the last day of the month, the
individual has not attained 62 years of age.
``(B) Married to displaced worker.--The individual
is the spouse of an individual at the time the
individual enrolls under this part under paragraph (1)
and loses coverage described in paragraph (1)(C)(ii)
because the individual's spouse lost such coverage.
``(C) Medicare eligibility (but for age);
exhaustion of any cobra continuation coverage; and not
eligible for coverage under federal health insurance
program or group health plan.--The individual meets the
requirements of subparagraphs (B), (D), and (E) of
paragraph (1).
``(3) Change in health plan eligibility affects continued
eligibility.--For provision that terminates enrollment under
this section in the case of an individual who becomes eligible for
coverage under a group health plan or under a Federal health insurance
program, see section 1860A(d)(1)(C).
``(4) Reenrollment permitted.--Nothing in this subsection
shall be construed as preventing an individual who, after
enrolling under this subsection, terminates such enrollment
from subsequently reenrolling under this subsection if the
individual is eligible to enroll under this subsection at that
time.''.
(b) Enrollment.--Section 1860A, as so inserted, is amended--
(1) in subsection (a), by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``; and'', and by adding at the end the
following new paragraph:
``(3) individuals whose coverage under this part would
terminate because of subsection (d)(1)(B)(ii) are provided
notice and an opportunity to continue enrollment in accordance
with section 1860E(c)(1).'';
(2) in subsection (b), by inserting after Notwithstanding
any other provision of law, (1) the following:
``(2) Displaced workers and spouses.--In the case of
individuals eligible to enroll under this part under section
1860(c), the following rules apply:
``(A) Initial enrollment period.--If the individual
is first eligible to enroll under such section for
January 2002, the enrollment period shall begin on
November 1, 2001, and shall end on February 28, 2002.
Any such enrollment before January 1, 2002, is
conditioned upon compliance with the conditions of
eligibility for January 2002.
``(B) Subsequent periods.--If the individual is
eligible to enroll under such section for a month after
January 2002, the enrollment period based on such
eligibility shall begin on the first day of the second
month before the month in which the individual first is
eligible to so enroll (or reenroll) and shall end four
months later.'';
(3) in subsection (d)(1), by amending subparagraph (B) to
read as follows:
``(B) Termination based on age.--
``(i) At age 65.--Subject to clause (ii),
the individual attains 65 years of age.
``(ii) At age 62 for displaced workers and
spouses.--In the case of an individual enrolled
under this part pursuant to section 1860(c),
subject to subsection (a)(1), the individual
attains 62 years of age.'';
(4) in subsection (d)(1), by adding at the end the
following new subparagraph:
``(C) Obtaining access to employment-based coverage
or federal health insurance program for individuals
under 62 years of age.--In the case of an individual
who has not attained 62 years of age, the individual is
covered (or eligible for coverage) as a participant or
beneficiary under a group health plan or under a
Federal health insurance program.'';
(5) in subsection (d)(2), by amending subparagraph (C) to
read as follows:
``(C) Age or medicare eligibility.--
``(i) In general.--The termination of a
coverage period under paragraph (1)(A)(iii) or
(1)(B)(i) shall take effect as of the first day
of the month in which the individual attains 65
years of age or becomes entitled to benefits
under part A or enrolled for benefits under
part B.
``(ii) Displaced workers.--The termination
of a coverage period under paragraph (1)(B)(ii)
shall take effect as of the first day of the
month in which the individual attains 62 years
of age, unless the individual has enrolled
under this part pursuant to section 1860(b) and
section 1860E(c)(1).''; and
(6) in subsection (d)(2), by adding at the end the
following new subparagraph:
``(D) Access to coverage.--The termination of a
coverage period under paragraph (1)(C) shall take
effect on the date on which the individual is eligible
to begin a period of creditable coverage (as defined in
section 2701(c) of the Public Health Service Act) under
a group health plan or under a Federal health insurance
program.''.
(c) Premiums.--Section 1860B, as so inserted, is amended--
(1) in subsection (a)(1), by adding at the end the
following:
``(B) Base monthly premium for individuals under 62
years of age.--A base monthly premium for individuals
under 62 years of age, equal to \1/12\ of the base
annual premium rate computed under subsection (d)(3)
for each premium area and age cohort.''; and
(2) by adding at the end the following new subsection:
``(d) Base Monthly Premium for Individuals Under 62 Years of Age.--
``(1) National, per capita average for age groups.--
``(A) Estimate of amount.--The Secretary shall
estimate the average, annual per capita amount that
would be payable under this title with respect to
individuals residing in the United States who meet the
requirement of section 1860(c)(1)(A) within each of the
age cohorts established under subparagraph (B) as if
all such individuals within such cohort were eligible
for (and enrolled) under this title during the entire
year (and assuming that section 1862(b)(2)(A)(i) did
not apply).
``(B) Age cohorts.--For purposes of subparagraph
(A), the Secretary shall establish separate age cohorts
in 5 year age increments for individuals who have not
attained 60 years of ages and a separate cohort for individuals who
have attained 60 years of age.
``(2) Geographic adjustment.--The Secretary shall adjust
the amount determined under paragraph (1)(A) for each premium
area (specified under subsection (a)(3)) in the same manner and
to the same extent as the Secretary provides for adjustments
under subsection (b)(2).
``(3) Base annual premium.--The base annual premium under
this subsection for months in a year for individuals in an age
cohort under paragraph (1)(B) in a premium area is equal to 165
percent of the average, annual per capita amount estimated
under paragraph (1) for the age cohort and year, adjusted for
such area under paragraph (2).
``(4) Pro-ration of premiums to reflect coverage during a
part of a month.--If the Secretary provides for coverage of
portions of a month under section 1860A(c)(2), the Secretary
shall pro-rate the premiums attributable to such coverage under
this section to reflect the portion of the month so covered.''.
(d) Administrative Provisions.--Section 1860F, as so inserted, is
amended by adding at the end the following:
``(d) Additional Administrative Provisions.--
``(1) Process for continued enrollment of displaced workers
who attain 62 years of age.--The Secretary shall provide a
process for the continuation of enrollment of individuals whose
enrollment under section 1860(c) would be terminated upon
attaining 62 years of age. Under such process such individuals
shall be provided appropriate and timely notice before the date
of such termination and of the requirement to enroll under this
part pursuant to section 1860(b) in order to continue
entitlement to benefits under this title after attaining 62
years of age.
``(2) Arrangements with states for determinations relating
to unemployment compensation eligibility.--The Secretary may
provide for appropriate arrangements with States for the
determination of whether individuals in the State meet or would
meet the requirements of section 1860(c)(1)(C)(i).''.
(e) Conforming Amendment to Heading to Part.--The heading of part E
of title XVIII, as so inserted, is amended by striking ``62'' and
inserting ``55''.
PART III--COBRA PROTECTION FOR EARLY RETIREES
Subpart A--Amendments to the Employee Retirement Income Security Act of
1974
SEC. 253. COBRA CONTINUATION BENEFITS FOR CERTAIN RETIRED WORKERS WHO
LOSE RETIREE HEALTH COVERAGE.
(a) Establishment of New Qualifying Event.--
(1) In general.--Section 603 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1163) is amended by
inserting after paragraph (6) the following new paragraph:
``(7) The termination or substantial reduction in benefits
(as defined in section 607(7)) of group health plan coverage as
a result of plan changes or termination in the case of a
covered employee who is a qualified retiree.''.
(2) Qualified retiree; qualified beneficiary; and
substantial reduction defined.--Section 607 of such Act (29
U.S.C. 1167) is amended--
(A) in paragraph (3)--
(i) in subparagraph (A), by inserting
``except as otherwise provided in this
paragraph,'' after ``means,''; and
(ii) by adding at the end the following new
subparagraph:
``(D) Special rule for qualifying retirees and
dependents.--In the case of a qualifying event
described in section 603(7), the term `qualified
beneficiary' means a qualified retiree and any other
individual who, on the day before such qualifying
event, is a beneficiary under the plan on the basis of
the individual's relationship to such qualified
retiree.''; and
(B) by adding at the end the following new
paragraphs:
``(6) Qualified retiree.--The term `qualified retiree'
means, with respect to a qualifying event described in section
603(7), a covered employee who, at the time of the event--
``(A) has attained 55 years of age; and
``(B) was receiving group health coverage under the
plan by reason of the retirement of the covered
employee.
``(7) Substantial reduction.--The term `substantial
reduction'--
``(A) means, as determined under regulations of the
Secretary and with respect to a qualified beneficiary,
a reduction in the average actuarial value of benefits
under the plan (through reduction or elimination of
benefits, an increase in premiums, deductibles,
copayments, and coinsurance, or any combination
thereof), since the date of commencement of coverage of
the beneficiary by reason of the retirement of the
covered employee (or, if later, January 6, 2001), in an
amount equal to at least 50 percent of the total
average actuarial value of the benefits under the plan
as of such date (taking into account an appropriate
adjustment to permit comparison of values over time);
and
``(B) includes an increase in premiums required to
an amount that exceeds the premium level described in
the fourth sentence of section 602(3).''.
(b) Duration of Coverage Through Age 65.--Section 602(2)(A) of such
Act (29 U.S.C. 1162(2)(A)) is amended--
(1) in clause (ii), by inserting ``or 603(7)'' after
``603(6)'';
(2) in clause (iv), by striking ``or 603(6)'' and inserting
``, 603(6), or 603(7)'';
(3) by redesignating clause (iv) as clause (vi);
(4) by redesignating clause (v) as clause (iv) and by
moving such clause to immediately follow clause (iii); and
(5) by inserting after such clause (iv) the following new
clause:
``(v) Special rule for certain dependents
in case of termination or substantial reduction
of retiree health coverage.--In the case of a
qualifying event described in section 603(7),
in the case of a qualified beneficiary
described in section 607(3)(D) who is not the
qualified retiree or spouse of such retiree,
the later of--
``(I) the date that is 36 months
after the earlier of the date the
qualified retiree becomes entitled to
benefits under title XVIII of the
Social Security Act, or the date of the
death of the qualified retiree; or
``(II) the date that is 36 months
after the date of the qualifying
event.''.
(c) Type of Coverage in Case of Termination or Substantial
Reduction of Retiree Health Coverage.--Section 602(1) of such Act (29
U.S.C. 1162(1)) is amended--
(1) by striking ``The coverage'' and inserting the
following:
``(A) In general.--Except as provided in
subparagraph (B), the coverage''; and
(2) by adding at the end the following:
``(B) Certain retirees.--In the case of a
qualifying event described in section 603(7), in
applying the first sentence of subparagraph (A) and the
fourth sentence of paragraph (3), the coverage offered
that is the most prevalent coverage option (as
determined under regulations of the Secretary)
continued under the group health plan (or, if none,
under the most prevalent other plan offered by the same
plan sponsor) shall be treated as the coverage
described in such sentence, or (at the option of the
plan and qualified beneficiary) such other coverage
option as may be offered and elected by the qualified
beneficiary involved.''.
(d) Increased Level of Premiums Permitted.--Section 602(3) of such
Act (29 U.S.C. 1162(3)) is amended by adding at the end the following
new sentence: ``In the case of an individual provided continuation
coverage by reason of a qualifying event described in section 603(7),
any reference in subparagraph (A) of this paragraph to `102 percent of
the applicable premium' is deemed a reference to `125 percent of the
applicable premium for employed individuals (and their dependents, if
applicable) for the coverage option referred to in paragraph
(1)(B)'.''.
(e) Notice.--Section 606(a) of such Act (29 U.S.C. 1166) is
amended--
(1) in paragraph (4)(A), by striking ``or (6)'' and
inserting ``(6), or (7)''; and
(2) by adding at the end the following:
``The notice under paragraph (4) in the case of a qualifying event
described in section 603(7) shall be provided at least 90 days before
the date of the qualifying event.''.
(f) Effective Dates.--
(1) In general.--The amendments made by this section (other
than subsection (e)(2)) shall apply to qualifying events
occurring on or after January 6, 2001. In the case of a
qualifying event occurring on or after such date and before the
date of the enactment of this Act, such event shall be deemed
(for purposes of such amendments) to have occurred on the date
of the enactment of this Act.
(2) Advance notice of terminations and reductions.--The
amendment made by subsection (e)(2) shall apply to qualifying
events occurring after the date of the enactment of this Act,
except that in no case shall notice be required under such
amendment before such date.
Subpart B--Amendments to the Public Health Service Act
SEC. 254. COBRA CONTINUATION BENEFITS FOR CERTAIN RETIRED WORKERS WHO
LOSE RETIREE HEALTH COVERAGE.
(a) Establishment of New Qualifying Event.--
(1) In general.--Section 2203 of the Public Health Service
Act (42 U.S.C. 300bb-3) is amended by inserting after paragraph
(5) the following new paragraph:
``(6) The termination or substantial reduction in benefits
(as defined in section 2208(6)) of group health plan coverage
as a result of plan changes or termination in the case of a
covered employee who is a qualified retiree.''.
(2) Qualified retiree; qualified beneficiary; and
substantial reduction defined.--Section 2208 of such Act (42
U.S.C. 300bb-8) is amended--
(A) in paragraph (3)--
(i) in subparagraph (A), by inserting
``except as otherwise provided in this
paragraph,'' after ``means,''; and
(ii) by adding at the end the following new
subparagraph:
``(C) Special rule for qualifying retirees and
dependents.--In the case of a qualifying event
described in section 2203(6), the term `qualified
beneficiary' means a qualified retiree and any other
individual who, on the day before such qualifying
event, is a beneficiary under the plan on the basis of
the individual's relationship to such qualified
retiree.''; and
(B) by adding at the end the following new
paragraphs:
``(5) Qualified retiree.--The term `qualified retiree'
means, with respect to a qualifying event described in section
2203(6), a covered employee who, at the time of the event--
``(A) has attained 55 years of age; and
``(B) was receiving group health coverage under the
plan by reason of the retirement of the covered
employee.
``(6) Substantial reduction.--The term `substantial
reduction'--
``(A) means, as determined under regulations of the
Secretary of Labor and with respect to a qualified
beneficiary, a reduction in the average actuarial value
of benefits under the plan (through reduction or
elimination of benefits, an increase in premiums,
deductibles, copayments, and coinsurance, or any
combination thereof), since the date of commencement of
coverage of the beneficiary by reason of the retirement
of the covered employee (or, if later, January 6,
2001), in an amount equal to at least 50 percent of the
total average actuarial value of the benefits under the
plan as of such date (taking into account an
appropriate adjustment to permit comparison of values
over time); and
``(B) includes an increase in premiums required to
an amount that exceeds the premium level described in
the fourth sentence of section 2202(3).''.
(b) Duration of Coverage Through Age 65.--Section 2202(2)(A) of
such Act (42 U.S.C. 300bb-2(2)(A)) is amended--
(1) by redesignating clause (iii) as clause (iv); and
(2) by inserting after clause (ii) the following new
clause:
``(iii) Special rule for certain dependents
in case of termination or substantial reduction
of retiree health coverage.--In the case of a
qualifying event described in section 2203(6),
in the case of a qualified beneficiary
described in section 2208(3)(C) who is not the
qualified retiree or spouse of such retiree,
the later of--
``(I) the date that is 36 months
after the earlier of the date the
qualified retiree becomes entitled to
benefits under title XVIII of the
Social Security Act, or the date of the
death of the qualified retiree; or
``(II) the date that is 36 months
after the date of the qualifying
event.''.
(c) Type of Coverage in Case of Termination or Substantial
Reduction of Retiree Health Coverage.--Section 2202(1) of such Act (42
U.S.C. 300bb-2(1)) is amended--
(1) by striking ``The coverage'' and inserting the
following:
``(A) In general.--Except as provided in
subparagraph (B), the coverage''; and
(2) by adding at the end the following:
``(B) Certain retirees.--In the case of a
qualifying event described in section 2203(6), in
applying the first sentence of subparagraph (A) and the
fourth sentence of paragraph (3), the coverage offered
that is the most prevalent coverage option (as
determined under regulations of the Secretary of Labor)
continued under the group health plan (or, if none,
under the most prevalent other plan offered by the same
plan sponsor) shall be treated as the coverage
described in such sentence, or (at the option of the
plan and qualified beneficiary) such other coverage
option as may be offered and elected by the qualified
beneficiary involved.''.
(d) Increased Level of Premiums Permitted.--Section 2202(3) of such
Act (42 U.S.C. 300bb-2(3)) is amended by adding at the end the
following new sentence: ``In the case of an individual provided
continuation coverage by reason of a qualifying event described in
section 2203(6), any reference in subparagraph (A) of this paragraph to
`102 percent of the applicable premium' is deemed a reference to `125
percent of the applicable premium for employed individuals (and their
dependents, if applicable) for the coverage option referred to in
paragraph (1)(B)'.''.
(e) Notice.--Section 2206(a) of such Act (42 U.S.C. 300bb-6(a)) is
amended--
(1) in paragraph (4)(A), by striking ``or (4)'' and
inserting ``(4), or (6)''; and
(2) by adding at the end the following:
``The notice under paragraph (4) in the case of a qualifying event
described in section 2203(6) shall be provided at least 90 days before
the date of the qualifying event.''.
(f) Effective Dates.--
(1) In general.--The amendments made by this section (other
than subsection (e)(2)) shall apply to qualifying events
occurring on or after January 6, 2001. In the case of a
qualifying event occurring on or after such date and before the
date of the enactment of this Act, such event shall be deemed
(for purposes of such amendments) to have occurred on the date
of the enactment of this Act.
(2) Advance notice of terminations and reductions.--The
amendment made by subsection (e)(2) shall apply to qualifying
events occurring after the date of the enactment of this Act,
except that in no case shall notice be required under such
amendment before such date.
Subpart C--Amendments to the Internal Revenue Code of 1986
SEC. 255. COBRA CONTINUATION BENEFITS FOR CERTAIN RETIRED WORKERS WHO
LOSE RETIREE HEALTH COVERAGE.
(a) Establishment of New Qualifying Event.--
(1) In general.--Section 4980B(f)(3) of the Internal
Revenue Code of 1986 is amended by inserting after subparagraph
(F) the following new subparagraph:
``(G) The termination or substantial reduction in
benefits (as defined in subsection (g)(6)) of group
health plan coverage as a result of plan changes or
termination in the case of a covered employee who is a
qualified retiree.''.
(2) Qualified retiree; qualified beneficiary; and
substantial reduction defined.--Section 4980B(g) of such Code
is amended--
(A) in paragraph (1)--
(i) in subparagraph (A), by inserting
``except as otherwise provided in this
paragraph,'' after ``means,''; and
(ii) by adding at the end the following new
subparagraph:
``(E) Special rule for qualifying retirees and
dependents.--In the case of a qualifying event
described in subsection (f)(3)(G), the term `qualified
beneficiary' means a qualified retiree and any other
individual who, on the day before such qualifying
event, is a beneficiary under the plan on the basis of
the individual's relationship to such qualified
retiree.''; and
(B) by adding at the end the following new
paragraphs:
``(5) Qualified retiree.--The term `qualified retiree'
means, with respect to a qualifying event described in
subsection (f)(3)(G), a covered employee who, at the time of
the event--
``(A) has attained 55 years of age; and
``(B) was receiving group health coverage under the
plan by reason of the retirement of the covered
employee.
``(6) Substantial reduction.--The term `substantial
reduction'--
``(A) means, as determined under regulations of the
Secretary of Labor and with respect to a qualified
beneficiary, a reduction in the average actuarial value
of benefits under the plan (through reduction or
elimination of benefits, an increase in premiums,
deductibles, copayments, and coinsurance, or any
combination thereof), since the date of commencement of
coverage of the beneficiary by reason of the retirement
of the covered employee (or, if later, January 6,
2001), in an amount equal to at least 50 percent of the
total average actuarial value of the benefits under the
plan as of such date (taking into account an
appropriate adjustment to permit comparison of values
over time); and
``(B) includes an increase in premiums required to
an amount that exceeds the premium level described in
the fourth sentence of subsection (f)(2)(C).''.
(b) Duration of Coverage Through Age 65.--Section 4980B(f)(2)(B)(i)
of such Code is amended--
(1) in subclause (II), by inserting ``or (3)(G)'' after
``(3)(F)'';
(2) in subclause (IV), by striking ``or (3)(F)'' and
inserting ``, (3)(F), or (3)(G)'';
(3) by redesignating subclause (IV) as subclause (VI);
(4) by redesignating subclause (V) as subclause (IV) and by
moving such clause to immediately follow subclause (III); and
(5) by inserting after such subclause (IV) the following
new subclause:
``(V) Special rule for certain
dependents in case of termination or
substantial reduction of retiree health
coverage.--In the case of a qualifying
event described in paragraph (3)(G), in
the case of a qualified beneficiary
described in subsection (g)(1)(E) who
is not the qualified retiree or spouse
of such retiree, the later of--
``(a) the date that is 36
months after the earlier of the
date the qualified retiree
becomes entitled to benefits
under title XVIII of the Social
Security Act, or the date of
the death of the qualified
retiree; or
``(b) the date that is 36
months after the date of the
qualifying event.''.
(c) Type of Coverage in Case of Termination or Substantial
Reduction of Retiree Health Coverage.--Section 4980B(f)(2)(A) of such
Code is amended--
(1) by striking ``The coverage'' and inserting the
following:
``(i) In general.--Except as provided in
clause (ii), the coverage''; and
(2) by adding at the end the following:
``(ii) Certain retirees.--In the case of a
qualifying event described in paragraph (3)(G),
in applying the first sentence of clause (i)
and the fourth sentence of subparagraph (C),
the coverage offered that is the most prevalent
coverage option (as determined under
regulations of the Secretary of Labor)
continued under the group health plan (or, if
none, under the most prevalent other plan
offered by the same plan sponsor) shall be
treated as the coverage described in such
sentence, or (at the option of the plan and
qualified beneficiary) such other coverage
option as may be offered and elected by the
qualified beneficiary involved.''.
(d) Increased Level of Premiums Permitted.--Section 4980B(f)(2)(C)
of such Code is amended by adding at the end the following new
sentence: ``In the case of an individual provided continuation coverage
by reason of a qualifying event described in paragraph (3)(G), any
reference in clause (i) of this subparagraph to `102 percent of the
applicable premium' is deemed a reference to `125 percent of the
applicable premium for employed individuals (and their dependents, if
applicable) for the coverage option referred to in subparagraph
(A)(ii)'.''.
(e) Notice.--Section 4980B(f)(6) of such Code is amended--
(1) in subparagraph (D)(i), by striking ``or (F)'' and
inserting ``(F), or (G)''; and
(2) by adding at the end the following:
``The notice under subparagraph (D)(i) in the case of a qualifying
event described in paragraph (3)(G) shall be provided at least 90 days
before the date of the qualifying event.''.
(f) Effective Dates.--
(1) In general.--The amendments made by this section (other
than subsection (e)(2)) shall apply to qualifying events
occurring on or after January 6, 2001. In the case of a
qualifying event occurring on or after such date and before the
date of the enactment of this Act, such event shall be deemed
(for purposes of such amendments) to have occurred on the date
of the enactment of this Act.
(2) Advance notice of terminations and reductions.--The
amendment made by subsection (e)(2) shall apply to qualifying
events occurring after the date of the enactment of this Act,
except that in no case shall notice be required under such
amendment before such date.
PART IV--50 PERCENT CREDIT AGAINST INCOME TAX FOR MEDICARE BUY-IN
PREMIUMS AND FOR CERTAIN COBRA CONTINUATION COVERAGE PREMIUMS
SEC. 256. 50 PERCENT CREDIT FOR MEDICARE BUY-IN PREMIUMS AND FOR
CERTAIN COBRA CONTINUATION COVERAGE PREMIUMS.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to nonrefundable
personal credits) is amended by inserting after section 25A the
following new section:
``SEC. 25B. MEDICARE BUY-IN PREMIUMS AND CERTAIN COBRA CONTINUATION
COVERAGE PREMIUMS.
``(a) In General.--In the case of an individual, there shall be
allowed as a credit against the tax imposed by this chapter for the
taxable year an amount equal to 50 percent of the amount paid during
such year as--
``(1) qualified continuation health coverage premiums, and
``(2) medicare buy-in coverage premiums.
``(b) Definitions.--For purposes of this section--
``(1) Qualified continuation health coverage premiums.--The
term `qualified continuation health coverage premiums' means,
for any period, premiums paid for continuation coverage (as
defined in section 4980B(f)) under a group health plan for such
period but only if failure to offer such coverage to the
taxpayer for such period would constitute a failure by such
health plan to meet the requirements of section 4980B(f) and
only if the continuation coverage is provided because of a
qualifying event described in section 4980B(f)(3)(G).
``(2) Medicare buy-in coverage premiums.--The term
`medicare buy-in coverage premiums' means premiums paid under
part E of title XVIII of the Social Security Act.''
(b) Clerical Amendment.--The table of sections for subpart A of
part IV of subchapter A of chapter 1 of such Code is amended by
inserting after the item relating to section 25A the following new
item:
``Sec. 25B. Medicare buy-in premiums and certain COBRA
continuation coverage premiums.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
TITLE III--PROTECTING AND EXTENDING MEDICARE SOLVENCY
Subtitle A--Dedication of 20 Percent of Projected Budget Surplus to
Medicare
SEC. 301. TRANSFERS TO EXTEND MEDICARE SOLVENCY.
Section 1817 (42 U.S.C. 1395i) is amended by adding at the end the
following new subsection:
``(l) Additional Appropriation to Federal Hospital Insurance Trust
Fund.--
``(1) Findings.--The Congress finds as follows:
``(A) The number of individuals eligible for
benefits under the medicare program will approximately
double (from about 40,000,000 to 80,000,000) between
2000 and 2030.
``(B) It is expected that there will be major new
high technology services available to medicare
beneficiaries that may be priced accordingly.
``(C) It is essential that additional resources be
made available to finance the medicare program in the
future.
``(2) Amount of additional appropriation.--In addition to
any other amounts appropriated to the Trust Fund, there is
hereby appropriated to the Trust Fund, out of any moneys in the
Treasury not otherwise appropriated, 20 percent of the on-
budget surplus, as estimated by the Congressional Budget Office
in January 2001 (adjusted to exclude surpluses in the Federal
Hospital Insurance Trust Fund), as follows:
``(A) for fiscal year 2002, $21,200,000,000;
``(B) for fiscal year 2003, $26,400,000,000;
``(C) for fiscal year 2004, $31,000,000,000;
``(D) for fiscal year 2005, $34,400,000,000;
``(E) for fiscal year 2006, $44,600,000,000;
``(F) for fiscal year 2007, $55,000,000,000;
``(G) for fiscal year 2008, $63,600,000,000;
``(H) for fiscal year 2009, $75,600,000,000;
``(I) for fiscal year 2010, $89,400,000,000;
``(J) for fiscal year 2011, $104,800,000,000; and
``(K) for any subsequent fiscal year through fiscal
year 2015, 20 percent of any such adjusted on-budget
surplus.
``(3) Transfer of funds.--The amounts appropriated for each
fiscal year by paragraph (2) shall be transferred from the
general fund in the Treasury to the Trust Fund in equal monthly
installments on the first business day of each month.''.
SEC. 302. MEDICARE SOLVENCY DEBT REDUCTION RESERVE.
(a) In General.--The transfers under section 1817(l) of the Social
Security Act shall be known as the Medicare Solvency Debt Reduction
Reserve.
(b) Points of Order To Protect Reserve.--
(1) Section 301 of the Congressional Budget Act of 1974 is
amended by adding at the end the following:
``(j) Point of Order To Protect Medicare Solvency Debt Reduction
Reserve.--It shall not be in order in the House of Representatives or
the Senate to consider any concurrent resolution on the budget (or
amendment, motion, or conference report on the resolution) that would
allocate any amount of, or assume a reduction in the Medicare Solvency
Debt Reduction Reserve.''.
(2) Section 311(a) of the Congressional Budget Act of 1974
is amended by adding at the end the following:
``(4) Enforcement of medicare solvency reserve.--It shall
not be in order in the House of Representatives or the Senate
to consider any bill, joint resolution, amendment, motion, or
conference report that would cause a decrease in the level of
the Medicare Solvency Debt Reduction Reserve.''.
(c) Super Majority Requirement.--
(1) Section 904(c)(2) of the Congressional Budget Act of
1974 is amended by inserting ``301(j),'' after ``301(i),''.
(2) Section 904(d)(3) of the Congressional Budget Act of
1974 is amended by inserting ``301(j),'' after ``301(i),''.
SEC. 303. PROTECTION OF MEDICARE SOLVENCY DEBT REDUCTION RESERVE.
(a) Reduction of Medicare Solvency Transfers Not To Be Counted as
Pay-As-You-Go Offset.--Any provision of legislation that would reduce,
repeal, or reverse the transfers to the Hospital Insurance Trust Fund
under section 1817(l) of the Social Security Act shall not be counted
on the pay-as-you-go scorecard and shall not be included in any pay-as-
you-go estimates made by the Congressional Budget Office or the Office
of Management and Budget under section 252 of the Balanced Budget and
Emergency Deficit Control Act of 1985.
(b) Conforming Change.--Section 252 of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended, in paragraph (4) of
subsection (d), by--
(1) striking ``and'' after subparagraph (A),
(2) striking the period after the subparagraph (B) and
inserting ``; and'', and
(3) adding the following:
``(C) provisions that reduce, repeal, or reverse
transfers under section 1817(l) of the Social Security
Act.''.
(c) Medicare Solvency Transfers Reduce On-Budget Surplus.--The
transfers under section 1817(l) of the Social Security Act, known as
the ``Medicare Solvency Debt Reduction Reserve'', shall be treated for
purposes of the President's budget under title 31, United States Code,
the Balanced Budget and Emergency Deficit Control Act of 1985, and the
Congressional Budget Act of 1974 as reductions to the on-budget surplus
(or increases in the on-budget deficit).
Subtitle B--Additional Revenues
SEC. 311. INCREASED FEDERAL EXCISE TAXES ON TOBACCO PRODUCTS.
(a) In General.--Section 5701 of the Internal Revenue Code of 1986
(relating to rate of tax on tobacco products) is amended to read as
follows:
``SEC. 5701. RATE OF TAX.
``(a) Cigars.--On cigars, manufactured in or imported into the
United States, there shall be imposed the following taxes:
``(1) Small cigars.--On cigars, weighing not more than 3
pounds per thousand, $4.406 per thousand.
``(2) Large cigars.--On cigars weighing more than 3 pounds
per thousand, a tax equal to 49.99 percent of the price for
which sold but not more than $98.75 per thousand.
Cigars not exempt from tax under this chapter which are removed but not
intended for sale shall be taxed at the same rate as similar cigars
removed for sale.
``(b) Cigarettes.--On cigarettes, manufactured in or imported into
the United States, there shall be imposed the following taxes:
``(1) Small cigarettes.--On cigarettes, weighing not more
than 3 pounds per thousand, $47.00 per thousand.
``(2) Large cigarettes.--On cigarettes, weighing more than
3 pounds per thousand, $98.70 per thousand.
Cigarettes described in paragraph (2), if more than 6\1/2\ inches in
length, shall be taxable at the rate under paragraph (1) by treating
each 2\3/4\ inches (or fraction thereof) of the length of each as 1
cigarette.
``(c) Cigarette Papers.--On cigarette papers, manufactured in or
imported into the United States, there shall be imposed a tax of 2.9
cents for each 50 papers or fractional part thereof; except that
cigarette papers which measure more than 6\1/2\ inches in length shall
be taxable at the rate prescribed by treating each 2\3/4\ inches (or
fraction thereof) of the length of each as 1 cigarette paper.
``(d) Cigarette Tubes.--On cigarette tubes, manufactured in or
imported into the United States, there shall be imposed a tax of 5.9
cents for each 50 tubes or fractional part thereof; except that
cigarette tubes which measure more than 6\1/2\ inches in length shall
be taxable at the rate prescribed by treating each 2\3/4\ inches (or
fraction thereof) of the length of each as 1 cigarette tube.
``(e) Smokeless Tobacco.--
``(1) Snuff.--On snuff, manufactured in or imported into
the United States, there shall be imposed a tax of $1.41 per
pound (and a proportionate tax at the like rate on all
fractional parts of a pound).
``(2) Chewing tobacco.--On chewing tobacco, manufactured in
or imported into the United States, there shall be imposed a
tax of 47 cents (and a proportionate tax at the like rate on all
fractional parts of a pound).
``(f) Pipe Tobacco.--On pipe tobacco, manufactured in or imported
into the United States, there shall be imposed a tax of $2.64 per pound
(and a proportionate tax at the like rate on all fractional parts of a
pound).
``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco,
manufactured in or imported into the United States, there shall be
imposed a tax $2.64 per pound (and a proportionate tax at the like rate
on all fractional parts of a pound).
``(h) Imported Tobacco Products and Cigarette Papers and Tubes.--
The taxes imposed by this section on tobacco products and cigarette
papers and tubes imported into the United States shall be in addition
to any import duties imposed on such articles, unless such import
duties are imposed in lieu of internal revenue tax.''.
(b) Effective Date.--The amendments made by this section shall take
effect on January 1, 2002.
(c) Floor Stocks Taxes.--
(1) Imposition of tax.--On tobacco products and cigarette
papers and tubes manufactured in or imported into the United
States which are removed before January 1, 2002, and held on
such date for sale by any person, there is hereby imposed a tax
in an amount equal to the excess of--
(A) the tax which would be imposed under section
5701 of the Internal Revenue Code of 1986 on the
article if the article had been removed on such date,
over
(B) the prior tax (if any) imposed under section
5701 of such Code on such article.
(2) Authority to exempt cigarettes held in vending
machines.--To the extent provided in regulations prescribed by
the Secretary, no tax shall be imposed by paragraph (1) on
cigarettes held for retail sale on January 1, 2002, by any
person in any vending machine. If the Secretary provides such a
benefit with respect to any person, the Secretary may reduce
the $500 amount in paragraph (3) with respect to such person.
(3) Credit against tax.--Each person shall be allowed as a
credit against the taxes imposed by paragraph (1) an amount
equal to $500. Such credit shall not exceed the amount of taxes
imposed by paragraph (1) for which such person is liable.
(4) Liability for tax and method of payment.--
(A) Liability for tax.--A person holding cigarettes
on January 1, 2002, to which any tax imposed by
paragraph (1) applies shall be liable for such tax.
(B) Method of payment.--The tax imposed by
paragraph (1) shall be paid in such manner as the
Secretary shall prescribe by regulations.
(C) Time for payment.--The tax imposed by paragraph
(1) shall be paid on or before April 1, 2000.
(5) Articles in foreign trade zones.--Notwithstanding the
Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any
other provision of law, any article which is located in a
foreign trade zone on January 1, 2002, shall be subject to the
tax imposed by paragraph (1) if--
(A) internal revenue taxes have been determined, or
customs duties liquidated, with respect to such article
before such date pursuant to a request made under the
1st proviso of section 3(a) of such Act, or
(B) such article is held on such date under the
supervision of a customs officer pursuant to the 2d
proviso of such section 3(a).
(6) Definitions.--For purposes of this subsection--
(A) In general.--Terms used in this subsection
which are also used in section 5702 of the Internal
Revenue Code of 1986 shall have the respective meanings
such terms have in such section, as amended by this
Act.
(B) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury or the Secretary's delegate.
(7) Controlled groups.--Rules similar to the rules of
section 5061(e)(3) of such Code shall apply for purposes of
this subsection.
(8) Other laws applicable.--All provisions of law,
including penalties, applicable with respect to the taxes
imposed by section 5701 of such Code shall, insofar as
applicable and not inconsistent with the provisions of this
subsection, apply to the floor stocks taxes imposed by
paragraph (1), to the same extent as if such taxes were imposed
by such section 5701. The Secretary may treat any person who
bore the ultimate burden of the tax imposed by paragraph (1) as
the person to whom a credit or refund under such provisions may
be allowed or made.
SEC. 312. TOBACCO SETTLEMENT DEPOSIT.
Amounts that are recovered by the United States in the civil action
brought on September 22, 1999, under the Racketeer Influenced and
Corrupt Organizations Act (RICO) in the United States District Court
for the District of Columbia against the industry engaged in the
production and sale of tobacco products and persons engaged in public
relations and lobbying for such industry and that are attributable to
the expenditures of the Department of Health and Human Services for
tobacco-related illnesses shall be deposited in the Federal Hospital
Insurance Trust Fund established under section 1817 of the Social
Security Act (42 U.S.C. 1395i).
SEC. 313. EXCESS PROFITS FROM MEDICARE TAX.
(a) In General.--Subchapter A of chapter 1 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new part:
``PART VIII--EXCESS PROFITS OF PHARMACEUTICAL COMPANIES
``Sec. 59B. Imposition of tax.
``SEC. 59B. IMPOSITION OF TAX.
``(a) In General.--In the case of any person who manufactures or
produces any article reimbursed under part D of title XVIII of the
Social Security Act, there is hereby imposed (in addition to any other
tax imposed by this title) a tax equal to 50 percent of the excess
profit on the sale of such article by such person.
``(b) Excess Profit.--For purposes of subsection (a), the term
`excess profit' means, with respect to an article, the amount by which
the costs associated with the sale of such article (including gifts,
other than samples of the article, provided to physicians) exceeds
twice the research and development costs properly allocable to such
article.''
(b) Clerical Amendment.--The table of parts for subchapter A of
chapter 1 of such Code is amended by adding at the end the following
new item:
``Part VIII. Excess profits of
pharmaceutical companies.''
(c) Effective Date.--The amendments made by this section shall take
effect on January 1, 2004.
SEC. 314. MEDICARE PART B PERCENT SUBSIDY INCLUDED IN GROSS INCOME.
(a) In General.--Part II of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to items specifically included
in gross income) is amended by adding at the end the following new
section:
``SEC. 91. MEDICARE PART B SUBSIDY.
``(a) In General.--Gross income includes the applicable percentage
of the Medicare part B subsidy with respect to premiums under part B of
title XVIII of the Social Security Act which are paid by the taxpayer
during the taxable year.
``(b) Applicable Percentage.--For purposes of this section, the
applicable percentage for any taxable year is the applicable percentage
determined under the following table for the calendar year in which
such taxable year begins.
Applicable
Calendar year percentage
2005.......................................... 10
2006.......................................... 20
2007.......................................... 30
2008.......................................... 40
2009.......................................... 50
2010.......................................... 60
2011.......................................... 70
2012.......................................... 80
2014.......................................... 90
2015 or thereafter............................ 100.''
(b) Clerical Amendment.--The table of sections for part II of
subchapter B of chapter 1 of such Code is amended by adding at the end
the following new item:
``Sec. 91. Medicare part B subsidy.''
(c) Effective Date.--The amendments made by this section shall
apply with respect to taxable years beginning after December 31, 2004.
SEC. 315. DEDICATION OF FEDERAL ESTATE AND GIFT TAX RECEIPTS, TOBACCO
TAX RECEIPTS AND OTHER REVENUES TO MEDICARE.
(a) Transfer to Federal Hospital Insurance Trust Fund.--Section
1817(a) (42 U.S.C. 1395i(a)) is amended--
(1) by striking ``and'' at the end of paragraph (1), and
(2) by striking the period at the end of paragraph (2) and
inserting a semicolin, and
(3) by inserting after paragraph (2) the following new
paragraphs:
``(3) the taxes imposed by subtitle B of the Internal
Revenue Code of 1986 (relating to estate and gift taxes)
reported to the Secretary of the Treasury or his delegate on
tax returns under subtitle F of such Code;
``(4) the taxes imposed by chapter 52 of such Code
(relating to cigars, cigarettes, smokeless tobacco, pipe
tobacco, and cigarette papers and tubes) as so reported;
``(5) the taxes imposed by section 59B of such Code
(relating to excess profits of pharmaceutical companies) as so
reported; and
``(6) the increase in tax liabilities under chapter 1 of
such Code which is attributable to section 91 of such Code
(relating to medicare part B subsidy).''
(b) Effective Date.--The amendments made by this section apply to
taxes imposed after the date of the enactment of this Act.
<all>