[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1135 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1135

      To amend title XVIII of the Social Security Act to provide 
 comprehensive reform of the medicare program, including the provision 
    of coverage of outpatient prescription drugs under such program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 28, 2001

  Mr. Graham (for himself, Mr. Chafee, Mr. Conrad, Mrs. Lincoln, Mr. 
   Miller, Mr. Rockefeller, Mr. Bingaman, Mr. Kerry, and Mr. Carper) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
      To amend title XVIII of the Social Security Act to provide 
 comprehensive reform of the medicare program, including the provision 
    of coverage of outpatient prescription drugs under such program.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Reform 
Act of 2001''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
            TITLE I--MEDICARE MANAGEMENT AND ADMINISTRATION

     Subtitle A--Transfer of Responsibility for National Coverage 
  Determinations and Establishment of the Medicare Coverage Commission

Sec. 101. Transfer of responsibility for national coverage 
                            determinations and establishment of the 
                            Medicare Coverage Commission.
    Subtitle B--Centers for Medicare & Medicaid Services Leadership

Sec. 111. Salary increase for the CMS Administrator.
Sec. 112. Addition of political appointee positions.
Sec. 113. Hiring flexibility for scientific and clinical experts.
      Subtitle C--Increased Funding for Improved Customer Service

Sec. 121. Increased funding for improved customer service.
Subtitle D--Private Sector Purchasing and Quality Improvement Tools for 
                           Original Medicare

Sec. 131. Care coordination services.
Sec. 132. Disease management services.
Sec. 133. Competitive acquisition of items and services.
Sec. 134. Provider and physician collaborations.
Sec. 135. Preferred participants.
Sec. 136. Simplified center payments.
Sec. 137. Conforming changes to physician group practice demonstration 
                            and administrative provisions.
Sec. 138. Increased flexibility in contracting for medicare claims 
                            processing.
                 TITLE II--MEDICARE+CHOICE COMPETITION

Sec. 201. Revision of Medicare+Choice competitive bidding demonstration 
                            project.
    TITLE III--MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM

Sec. 301. Medicare outpatient prescription drug benefit program.
         ``Part D--Outpatient Prescription Drug Benefit Program

``Sec. 1860. Definitions.
``Sec. 1860A. Establishment of outpatient prescription drug benefit 
                            program.
``Sec. 1860B. Enrollment.
``Sec. 1860C. Providing information to beneficiaries.
``Sec. 1860D. Premiums.
``Sec. 1860E. Outpatient prescription drug benefits.
``Sec. 1860F. Entities eligible to provide outpatient drug benefit.
``Sec. 1860G. Minimum standards for eligible entities.
``Sec. 1860H. Payments.
``Sec. 1860I. Employer incentive program for employment-based retiree 
                            drug coverage.
``Sec. 1860J. Prescription drug account in the Federal Supplementary 
                            Medical Insurance Trust Fund.
``Sec. 1860K. Medicare Prescription Drug Advisory Committee.''.
Sec. 302. Part D benefits under Medicare+Choice plans.
Sec. 303. Reporting requirements for Secretary of the Treasury 
                            regarding sliding scale part D premium.
Sec. 304. Additional assistance for low-income beneficiaries.
Sec. 305. Medigap revisions.
Sec. 306. Studies and report to Congress.
                      TITLE IV--MEDICARE WELLNESS

Sec. 400. Definitions.
             Subtitle A--Healthy Seniors Promotion Program

Sec. 401. Definitions.
Sec. 402. Working Group on Disease Self-Management and Health 
                            Promotion.
Sec. 403. Healthy seniors promotion grants.
Sec. 404. Disease self-management demonstration projects.
      Subtitle B--Medicare Coverage of Preventive Health Benefits

Sec. 411. Therapy and counseling for cessation of tobacco use.
Sec. 412. Counseling for post-menopausal women.
Sec. 413. Screening for diminished visual acuity.
Sec. 414. Screening for hearing impairment.
Sec. 415. Screening for cholesterol.
Sec. 416. Screening for hypertension.
Sec. 417. Expansion of eligibility for bone mass measurement.
Sec. 418. Coverage of medical nutrition therapy services for 
                            beneficiaries with cardiovascular diseases.
Sec. 419. Elimination of deductibles and coinsurance for existing 
                            preventive health benefits.
Sec. 420. Program integrity.
Sec. 421. Promotion of preventive health benefits.
 Subtitle C--National Falls Prevention Education and Awareness Campaign

Sec. 431. National falls prevention education and awareness campaign.
    Subtitle D--Clinical Depression Screening Demonstration Projects

Sec. 441. Clinical depression screening demonstration projects.
    Subtitle E--Medicare Health Education and Risk Appraisal Program

Sec. 451. Medicare health education and risk appraisal program.
 Subtitle F--Studies, Evaluations, and Reports in the Field of Disease 
                       Prevention and the Elderly

Sec. 461. MedPAC evaluation and report on medicare benefit package in 
                            relation to private sector benefit 
                            packages.
Sec. 462. National Institute on Aging study and report on ways to 
                            improve the quality of life of elderly.
Sec. 463. Institute of Medicine medicare prevention benefit study and 
                            report.
Sec. 464. Fast-track consideration of prevention benefit legislation.
Subtitle G--Informatics Systems Grant Program for Hospitals and Skilled 
                           Nursing Facilities

Sec. 471. Informatics systems grant program for hospitals and skilled 
                            nursing facilities.
                    TITLE V--MEDICARE SUSTAINABILITY

Sec. 501. Indexing part B deductible to inflation.
Sec. 502. Income-related reduction in medicare subsidy for part B 
                            premium.

            TITLE I--MEDICARE MANAGEMENT AND ADMINISTRATION

     Subtitle A--Transfer of Responsibility for National Coverage 
  Determinations and Establishment of the Medicare Coverage Commission

SEC. 101. TRANSFER OF RESPONSIBILITY FOR NATIONAL COVERAGE 
              DETERMINATIONS AND ESTABLISHMENT OF THE MEDICARE COVERAGE 
              COMMISSION.

    (a) Responsibility and Establishment.--Title XVIII of the Social 
Security Act (42 U.S.C. 1395 et seq.) is amended by inserting after 
section 1869 the following new sections:

                   ``national coverage determinations

    ``Sec. 1869A. (a) Responsibility.--
            ``(1) In general.--
                    ``(A) Sole responsibility.--Beginning in 2003, the 
                Medicare Coverage Commission established under section 
                1869B (in this section referred to as the `Commission') 
                shall have sole responsibility for making national 
                coverage determinations under this title.
                    ``(B) Local coverage determinations.--The Secretary 
                shall continue to have responsibility for local 
                coverage determinations in accordance with section 
                1869(f).
            ``(2) Procedures.--
                    ``(A) In general.--The Commission shall establish 
                procedures for making national coverage determinations 
                under this title.
                    ``(B) Requirements.--The procedures established 
                under subparagraph (A) shall ensure that, in making 
                national coverage determinations--
                            ``(i) meetings of advisory committees 
                        established under section 1869B(f) with respect 
                        to the determination are made on the record;
                            ``(ii) the Commission considers applicable 
                        information (including clinical experience and 
                        medical, technical, and scientific evidence) 
                        with respect to the subject matter of the 
                        determination;
                            ``(iii) the Commission provides a clear 
                        statement of--
                                    ``(I) the basis for the 
                                determination (including responses to 
                                comments received from the public); and
                                    ``(II) the assumptions underlying 
                                that basis; and
                            ``(iv) the Commission makes available to 
                        the public the data (other than proprietary 
                        data) considered in making the determination.
            ``(3) Definition of national coverage determination.--For 
        purposes of this section, the term `national coverage 
        determination' means a determination by the Commission with 
        respect to whether or not a particular item or service is 
        covered nationally under this title, but does not include a 
        determination of what code, if any, is assigned to a particular 
        item or service covered under this title or a determination 
        with respect to the amount of payment made for a particular 
        item or service so covered.
    ``(b) Review of National Coverage Determinations.--
            ``(1) In general.--Review of any national coverage 
        determination shall be subject to the following limitations:
                    ``(A) Such a determination shall not be reviewed by 
                any administrative law judge.
                    ``(B) Such a determination shall not be held 
                unlawful or set aside on the ground that a requirement 
                of section 553 of title 5, United States Code, relating 
                to publication in the Federal Register or opportunity 
                for public comment, was not satisfied.
                    ``(C) Upon the filing of a complaint by an 
                aggrieved person (as described in paragraph (4)), such 
                a determination shall be reviewed by the Appeals Board 
                of the Commission. In conducting such a review, the 
                Appeals Board--
                            ``(i) shall review the record and shall 
                        permit discovery and the taking of evidence to 
                        evaluate the reasonableness of the 
                        determination, if the Board determines that the 
                        record is incomplete or lacks adequate 
                        information to support the validity of the 
                        determination;
                            ``(ii) may, as appropriate, consult with 
                        appropriate scientific and clinical experts; 
                        and
                            ``(iii) shall defer only to the reasonable 
                        findings of fact, reasonable interpretations of 
                        law, and reasonable applications of fact to law 
                        by the Commission.
                    ``(D) A decision of the Appeals Board constitutes a 
                final agency action and is subject to judicial review.
            ``(2) No material issues of fact in dispute.--In the case 
        of a determination that may otherwise be subject to review 
        under paragraph (1)(C), where the moving party alleges that--
                    ``(A) there are no material issues of fact in 
                dispute; and
                    ``(B) the only issue of law is the 
                constitutionality of a provision of this title, or that 
                a regulation, determination, or ruling by the 
                Commission is invalid,
        the moving party may seek review by a court of competent 
        jurisdiction without filing a complaint under such paragraph 
        and without otherwise exhausting other administrative remedies.
            ``(3) Pending national coverage determinations.--
                    ``(A) In general.--In the event that the Commission 
                has not issued a national coverage or noncoverage 
                determination with respect to a particular type or 
                class of items or services, an aggrieved person (as 
                described in paragraph (4)) may submit to the 
                Commission a request to make such a determination with 
                respect to such items or services. By not later than 
                the end of the 90-day period that begins on the date 
                the Commission receives such a request (notwithstanding 
                the receipt by the Commission of new evidence (if any) 
                during such 90-day period), the Commission shall take 1 
                of the following actions:
                            ``(i) Issue a national coverage 
                        determination, with or without limitations.
                            ``(ii) Issue a national noncoverage 
                        determination.
                            ``(iii) Issue a determination that no 
                        national coverage or noncoverage determination 
                        is appropriate as of the end of such 90-day 
                        period with respect to national coverage of 
                        such items or services.
                            ``(iv) Issue a notice that--
                                    ``(I) states that the Commission 
                                has not completed a review of the 
                                request for a national coverage 
                                determination; and
                                    ``(II) includes an identification 
                                of the remaining steps in the 
                                Commission's review process and a 
                                deadline by which the Commission will 
                                complete the review and take an action 
                                described in clause (i), (ii), or 
                                (iii).
                    ``(B) Deemed action by the commission.--In the case 
                of an action described in subparagraph (A)(iv), if the 
                Commission fails to take an action referred to in such 
                subparagraph by the deadline specified by the 
                Commission under such subparagraph, then the Commission 
                is deemed to have taken an action described in 
                subparagraph (A)(iii) as of the deadline.
                    ``(C) Explanation of determination.--When issuing a 
                determination under subparagraph (A), the Commission 
                shall include an explanation of the basis for the 
                determination. An action taken under such subparagraph 
                (other than clause (iv) of such subparagraph) is deemed 
                to be a national coverage determination for purposes of 
                review under paragraph (1).
            ``(4) Standing.--An action under this subsection seeking 
        review of a national coverage determination may be initiated 
        by--
                    ``(A) an individual who is entitled to benefits 
                under part A, or enrolled under part B, or both, and 
                who is in need of the items or services that are the 
                subject of the coverage determination; and
                    ``(B) any other aggrieved party that has a 
                financial interest in the coverage determination.
            ``(5) Publication on the internet of decisions of hearings 
        of the commission.--Each decision of a hearing by the 
        Commission with respect to a national coverage determination 
        shall be made public, and the Commission shall coordinate with 
        the Secretary for the publication of each decision on the 
        Medicare Internet site of the Department of Health and Human 
        Services. The Commission shall remove from such decision any 
        information that would identify any individual, provider of 
        services, or supplier.
            ``(6) Annual report to congress on national coverage 
        determinations.--
                    ``(A) In general.--Not later than December 1 of 
                each year, beginning in 2003, the Commission shall 
                submit to Congress a report that sets forth a detailed 
                compilation of--
                            ``(i) the actual time periods that were 
                        necessary to complete national coverage 
                        determinations that were made in the previous 
                        fiscal year for items or services not 
                        previously covered as a benefit under this 
                        title; and
                            ``(ii) the basis for each such 
                        determination.
                    ``(B) Publication of reports on the internet.--The 
                Commission shall coordinate with the Secretary for the 
                publication of each report submitted under subparagraph 
                (A) on the Medicare Internet site of the Department of 
                Health and Human Services.
            ``(7) Construction.--Nothing in this subsection shall be 
        construed as permitting administrative or judicial review 
        pursuant to this section insofar as such review is explicitly 
        prohibited or restricted under another provision of law.
    ``(c) Communication Between Commission and Secretary.--
            ``(1) Notification.--If the Commission or the Appeals Board 
        of the Commission after a review of a determination makes a 
        determination that a particular item or service is covered 
        nationally under this title, the Commission shall immediately 
        notify the Secretary of such determination.
            ``(2) Implementation by secretary.--Upon being notified by 
        the Commission that a determination has been made under this 
        section that a particular item or service is covered nationally 
        under this title, the Secretary shall implement such coverage 
        in a timely manner.

                     ``medicare coverage commission

    ``Sec. 1869B. (a) Establishment.--There is established a Medicare 
Coverage Commission (in this section referred to as the `Commission'). 
The Commission shall be an independent establishment (as defined in 
section 104 of title 5, United States Code).
    ``(b) Structure and Membership.--
            ``(1) Structure.--
                    ``(A) In general.--The Commission shall be composed 
                of 7 members appointed by the President, by and with 
                the advice and consent of the Senate.
                    ``(B) Restriction.--No member of the Commission may 
                serve in any other office of the Federal Government 
                while a member of the Commission.
            ``(2) Membership.--
                    ``(A) In general.--The members of the Commission 
                shall be chosen on the basis of their integrity, 
                impartiality, and good judgment, and shall be 
                individuals who are, by reason of their education, 
                experience, and clinical, medical, technical, and 
                scientific expertise, exceptionally qualified to 
                perform the duties of the members of the Commission.
                    ``(B) Terms of appointment.--The terms of members 
                of the Commission shall be for 3 years.
                    ``(C) Vacancies.--Any member appointed to fill a 
                vacancy occurring before the expiration of the term for 
                which the member's predecessor was appointed shall be 
                appointed only for the remainder of that term. A member 
                may serve after the expiration of that member's term 
                until a successor has taken office.
                    ``(D) Limitation on number of terms.--Any person 
                appointed as a member of the Commission shall not be 
                eligible for reappointment to the Commission after 
                having served 2 terms.
                    ``(E) Chairperson.--The President shall designate a 
                member of the Commission, at the time of appointment of 
                the member, as chairperson for that term of 
                appointment, except that in the case of any vacancy of 
                the chairperson, the President may designate another 
                member for the remainder of that member's term.
    ``(c) Duties.--
            ``(1) In general.--The Commission shall be responsible for 
        making national coverage determinations (as defined in section 
        1869A(a)(3)) under this title, including at the request of 
        medicare beneficiaries or their representatives, Federal 
        Government agencies, including the Centers for Medicare & 
        Medicaid Services, manufacturers and suppliers, and providers 
        for such a determination.
            ``(2) Establishment of appeals board.--The Commission shall 
        establish an Appeals Board for purposes of providing review of 
        national coverage determinations under section 1869B(b).
            ``(3) Other specific duties.--In order to carry out the 
        duties described in paragraph (1), the Commission may do the 
        following if determined appropriate:
                    ``(A) Commission technology assessments and 
                studies.
                    ``(B) Request that technology assessments and 
                related studies be conducted by other Federal agencies 
                pursuant to subsection (g).
                    ``(C) Establish advisory committees pursuant to 
                subsection (f) as appropriate to evaluate new 
                procedures.
                    ``(D) Review conflicting local coverage 
                determinations (as defined in section 1869(f)(1)(B)) 
                and determine whether a national coverage determination 
                is necessary or desirable.
    ``(d) Operation of the Commission.--
            ``(1) Meetings.--The Commission shall meet at the call of 
        its chairperson not less often than quarterly.
            ``(2) Quorum.--A quorum shall consist of 4 members of the 
        Commission, except that the Commission may establish a lesser 
        quorum to conduct hearings.
    ``(e) Commission Personnel Matters.--
            ``(1) Members.--
                    ``(A) Compensation.--Membership on the Commission 
                is not a full-time position. Each member of the 
                Commission shall be compensated at a rate equal to the 
                per diem equivalent of the rate provided for level IV 
                of the Executive Schedule under section 5315 of title 
                5, United States Code.
                    ``(B) Travel expenses.--The members of the 
                Commission shall be allowed travel expenses, including 
                per diem in lieu of subsistence, at rates authorized 
                for employees of agencies under subchapter I of chapter 
                57 of title 5, United States Code, while away from 
                their homes or regular places of business in the 
                performance of service for the Commission.
            ``(2) Staff and support services.--
                    ``(A) Executive director.--The Chairperson shall 
                appoint an executive director of the Commission who 
                shall be paid at a rate specified by the Commission.
                    ``(B) Staff.--With the approval of the Commission, 
                the executive director may appoint such personnel as 
                the executive director considers appropriate.
                    ``(C) Inapplicability of civil service laws.--The 
                staff of the Commission shall be appointed without 
                regard to the provisions of title 5, United States 
                Code, governing appointments in the competitive 
                service, and shall be paid without regard to the 
                provisions of chapter 51 and subchapter III of chapter 
                53 of such title (relating to classification and 
                General Schedule pay rates).
                    ``(D) Experts and consultants.--With the approval 
                of the Commission, the executive director may procure 
                temporary and intermittent services under section 
                3109(b) of title 5, United States Code.
            ``(3) Transfer of personnel, assets, etc.--For purposes of 
        the Commission carrying out its duties, the Secretary and the 
        Commission may provide for the transfer to the Commission of 
        such civil service personnel employed by the Department of 
        Health and Human Services, and such resources and assets of the 
        Department used in carrying out this title, as the Commission 
        requires.
    ``(f) Appointment of Advisory Committees.--
            ``(1) In general.--The Commission may appoint such advisory 
        committees as the Commission determines appropriate to advise 
        and consult the Commission in carrying out the duties of the 
        Commission.
            ``(2) Inapplicability of civil service laws.--The advisory 
        committees shall be appointed without regard to the provisions 
        of title 5, United States Code, governing appointments in the 
        competitive service.
            ``(3) Travel expenses.--The members of the committees shall 
        serve without compensation, except that such members shall be 
        allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        in the performance of services for the committee.
            ``(4) Report on advisory committees.--The Commission shall 
        include in the annual report to Congress described in section 
        1869A(b)(6) the number of committees appointed under subsection 
        (f) during the preceding year and the membership and activities 
        of each such committee.
    ``(g) Authority To Request That Federal Agencies Conduct 
Assessments and Studies.--The Commission may request any Federal 
department or agency to conduct a technology assessment or a related 
study that the Commission determines is necessary in order to carry out 
its duties under this section.
    ``(h) Funding of Commission.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.''.
    (b) Conforming Amendments.--
            (1) BIPA provisions.--
                    (A) Section 1869(c)(3)(B)(ii)(I) of the Social 
                Security Act, as added by section 521 of the Medicare, 
                Medicaid, and SCHIP Benefits Improvement and Protection 
                Act of 2000 (114 Stat. 2763A-534), as enacted into law 
                by section 1(a)(6) of Public Law 106-554, is amended by 
                striking ``If the Secretary has made a national 
                coverage determination pursuant to the requirements 
                established under the third sentence of section 
                1862(a)'' and inserting ``If the Medicare Coverage 
                Commission has made a national coverage determination 
                pursuant to the requirements established under section 
                1869A''.
                    (B) Section 1869(f) of the Social Security Act, as 
                added by section 522(a) of the Medicare, Medicaid, and 
                SCHIP Benefits Improvement and Protection Act of 2000 
                (114 Stat. 2763A-543), as so enacted into law, is 
                amended to read as follows:
    ``(f) Review of Local Coverage Determinations.--
            ``(1) Review.--
                    ``(A) In general.--Review of any local coverage 
                determination shall be subject to the following 
                limitations:
                            ``(i) Upon the filing of a complaint by an 
                        aggrieved party, such a determination shall be 
                        reviewed by an administrative law judge of the 
                        Social Security Administration. The 
                        administrative law judge--
                                    ``(I) shall review the record and 
                                shall permit discovery and the taking 
                                of evidence to evaluate the 
                                reasonableness of the determination, if 
                                the administrative law judge determines 
                                that the record is incomplete or lacks 
                                adequate information to support the 
                                validity of the determination;
                                    ``(II) may, as appropriate, consult 
                                with appropriate scientific and 
                                clinical experts; and
                                    ``(III) shall defer only to the 
                                reasonable findings of fact, reasonable 
                                interpretations of law, and reasonable 
                                applications of fact to law by the 
                                Secretary.
                            ``(ii) Upon the filing of a complaint by an 
                        aggrieved party, a decision of an 
                        administrative law judge under clause (i) shall 
                        be reviewed by the Departmental Appeals Board 
                        of the Department of Health and Human Services.
                            ``(iii) The Secretary shall implement a 
                        decision of the administrative law judge or the 
                        Departmental Appeals Board within 30 days of 
                        receipt of such decision.
                            ``(iv) A decision of the Departmental 
                        Appeals Board constitutes a final agency action 
                        and is subject to judicial review.
                    ``(B) Definition of local coverage determination.--
                For purposes of this section, the term `local coverage 
                determination' means a determination by a fiscal 
                intermediary or a carrier under part A or B, as 
                applicable, respecting whether or not a particular item 
                or service is covered on an intermediary- or carrier-
                wide basis under such parts, in accordance with section 
                1862(a)(1)(A).
            ``(2) No material issues of fact in dispute.--In the case 
        of a determination that may otherwise be subject to review 
        under paragraph (1)(A)(i), where the moving party alleges 
        that--
                    ``(A) there are no material issues of fact in 
                dispute, and
                    ``(B) the only issue of law is the 
                constitutionality of a provision of this title, or that 
                a regulation, determination, or ruling by the Secretary 
                is invalid,
        the moving party may seek review by a court of competent 
        jurisdiction without filing a complaint under such paragraph 
        and without otherwise exhausting other administrative remedies.
            ``(3) Standing.--An action under this subsection seeking 
        review of a local coverage determination may be initiated only 
        by an individual who is entitled to benefits under part A, or 
        enrolled under part B, or both, and who is in need of the items 
        or services that are the subject of the coverage determination.
            ``(4) Construction.--Nothing in this subsection shall be 
        construed as permitting administrative or judicial review 
        pursuant to this section insofar as such review is explicitly 
        prohibited or restricted under another provision of law.''.
                    (C) Section 1862(a) of the Social Security Act (42 
                U.S.C. 1395y(a)), as amended by section 522(b) of the 
                Medicare, Medicaid, and SCHIP Benefits Improvement and 
                Protection Act of 2000 (114 Stat. 2763A-546), as so 
                enacted into law, is amended by striking the third 
                sentence.
                    (D) Section 1114 of the Social Security Act (42 
                U.S.C. 1314), as amended by section 522(c) of the 
                Medicare, Medicaid, and SCHIP Benefits Improvement and 
                Protection Act of 2000 (114 Stat. 2763A-546), as so 
                enacted into law, is amended by striking subsection 
                (i).
            (2) Medicare+choice.--Section 1853(c)(7) of the Social 
        Security Act (42 U.S.C. 1395w-23(c)(7)) is amended by inserting 
        ``or the Medicare Coverage Commission'' after ``If the 
        Secretary''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to--
            (1) the responsibility for making national coverage 
        determinations;
            (2) a review of any national or local coverage 
        determination filed;
            (3) a request to make such a determination made; and
            (4) a national coverage determination made,
on or after January 1, 2003.

    Subtitle B--Centers for Medicare & Medicaid Services Leadership

SEC. 111. SALARY INCREASE FOR THE CMS ADMINISTRATOR.

    (a) In General.--Section 5314 of title 5, United States Code, is 
amended by adding at the end the following:
            ``Administrator of the Centers for Medicare & Medicaid 
        Services.''.
    (b) Conforming Amendment.--Section 5315 of title 5, United States 
Code, is amended by striking ``Administrator of the Health Care 
Financing Administration.''.
    (c) Effective Date.--The amendments made by this subsection take 
effect on January 1, 2002.

SEC. 112. ADDITION OF POLITICAL APPOINTEE POSITIONS.

    (a) Establishment of Positions.--Section 1117 of the Social 
Security Act (42 U.S.C. 1317) is amended by adding at the end the 
following new subsection:
    ``(c) Additional Appointees.--
            ``(1) Appointment.--In addition to the Administrator of the 
        Centers for Medicare & Medicaid Services, there shall be in 
        such Centers 9 individuals who shall be appointed by the 
        President.
            ``(2) Duties and powers.--The individuals appointed under 
        paragraph (1) shall perform such duties and exercise such 
        powers as the Administrator of the Centers for Medicare & 
        Medicaid Services shall from time to time assign or 
        delegate.''.
    (b) Conforming Amendments.--Section 1117 of the Social Security Act 
(42 U.S.C. 1317) is amended--
            (1) in subsection (a), by striking ``The Administrator of 
        the Health Care Financing Administration'' and inserting 
        ``Administrator.--The Administrator of the Centers for Medicare 
        & Medicaid Services'';
            (2) in subsection (b)--
                    (A) by striking ``(b)(1) There is established in 
                the Health Care Financing Administration'' and 
                inserting ``(b) Chief Actuary.--
            ``(1) Appointment.--There is established in the Centers for 
        Medicare & Medicaid Services'';
                    (B) in the second sentence of paragraph (1), by 
                striking ``of such Administration'' and inserting ``of 
                such Centers''; and
                    (C) in paragraph (2), by striking ``The Chief 
                Actuary'' and inserting ``Compensation.--The Chief 
                Actuary''; and
                    (D) by realigning paragraph (2) so as to align the 
                left margin of such paragraph with the left margin of 
                paragraph (1); and
            (3) by amending the heading to read as follows:

   ``organization of the centers for medicare & medicaid services''.

SEC. 113. HIRING FLEXIBILITY FOR SCIENTIFIC AND CLINICAL EXPERTS.

    Section 1117 of the Social Security Act (42 U.S.C. 1317), as 
amended by section 112(a), is amended by adding at the end the 
following new subsection:
    ``(d) Hiring Flexibility for Scientific and Clinical Experts.--
            ``(1) In general.--The Administrator of the Centers for 
        Medicare & Medicaid Services may appoint such individuals with 
        scientific or clinical expertise as the Administrator 
        determines appropriate.
            ``(2) Inapplicability of civil service laws.--The 
        Administrator may appoint an individual described in paragraph 
        (1) without regard to the provisions of title 5, United States 
        Code, governing appointments in the competitive service, and 
        may provide that such an individual is paid without regard to 
        the provisions of chapter 51 and subchapter III of chapter 53 
        of such title (relating to classification and General Schedule 
        pay rates).''.

      Subtitle C--Increased Funding for Improved Customer Service

SEC. 121. INCREASED FUNDING FOR IMPROVED CUSTOMER SERVICE.

    (a) Purposes.--The purposes of this section are--
            (1) to provide for an annual authorization of appropriation 
        for the program management budget of the Centers for Medicare & 
        Medicaid Services that is based on the growth in expenditures 
        under the medicare program under title XVIII of the Social 
        Security Act; and
            (2) to provide sufficient funding to ensure that the 
        Centers for Medicare & Medicaid Services has the resources to 
        provide improved services to medicare beneficiaries and 
        providers under the medicare program and build the analytical 
        and institutional infrastructure necessary for a competitive 
        health care delivery system through such measures as--
                    (A) placing representatives of the medicare program 
                in social security field offices;
                    (B) establishing customer services positions at the 
                regional offices of the Centers for Medicare & Medicaid 
                Services for providers under the medicare program;
                    (C) increasing the amount and availability of 
                grants for health insurance information, counseling, 
                and assistance under section 4360 of the Omnibus Budget 
                Reconciliation Act of 1990 (42 U.S.C. 1395b-4);
                    (D) updating information technology systems;
                    (E) expanding the provider relations and training 
                functions of fiscal intermediaries and carriers under 
                the medicare program; and
                    (F) hiring staff to develop--
                            (i) improved mechanisms for risk adjusting 
                        payments under the medicare program;
                            (ii) improved mechanisms to measure the 
                        quality of entities with a contract under part 
                        C or D (as added by section 301) of the 
                        medicare program and plans offered by such 
                        entities;
                            (iii) improved systems for providing 
                        information regarding the medicare program to 
                        medicare beneficiaries and potential medicare 
                        beneficiaries; and
                            (iv) methods for determining which 
                        geographic cost differences are related to the 
                        quality of care provided and which are related 
                        to other factors.
    (b) Authorization of Appropriations.--Title XVIII of the Social 
Security Act (42 U.S.C. 1395 et seq.) is amended by adding at the end 
the following new section:

      ``authorization of appropriations for cms program management

    ``Sec. 1897. There are authorized to be appropriated for carrying 
out part A, B, and C the following amounts:
            ``(1) For fiscal year 2002, $2,408,934,900; and
            ``(2) For each subsequent fiscal year, the amount 
        appropriated under this section for the previous fiscal year 
        increased by the percentage increase in outlays under this 
        title (determined without regard to amounts appropriated under 
        this section) for such subsequent year.

Subtitle D--Private Sector Purchasing and Quality Improvement Tools for 
                           Original Medicare

SEC. 131. CARE COORDINATION SERVICES.

    (a) Program Authorized.--Title XVIII of the Social Security Act (42 
U.S.C. 1395 et seq.) is amended--
            (1) by redesignating section 1866B, as added by section 412 
        of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
        Protection Act of 2000 (114 Stat. 2763A-509), as enacted into 
        law by section 1(a)(6) of Public Law 106-554), as section 
        1866M; and
            (2) by inserting after section 1866A (as added by such 
        section 412) the following new section:

                      ``care coordination services

    ``Sec. 1866B. (a) In General.--
            ``(1) Program authority.--The Secretary, beginning in 2003, 
        shall 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.
            ``(2) Administration by contract.--Except as otherwise 
        specifically provided, the Secretary may administer the program 
        under this section in accordance with section 1866M, including 
        subsection (b)(2) of such section (relating to the discretion 
        of the Secretary as to the scope of the program).
    ``(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 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 each 
        cohort 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.
            ``(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 1 month (or such longer period as 
                the Secretary may specify), and shall be automatically 
                renewed for additional periods, unless terminated in 
                accordance with such procedures as the Secretary shall 
                establish by regulation.
                    ``(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.--Except as otherwise provided in 
                this section, each enrolled individual--
                            ``(i) shall receive the case management-
                        related services described in section 
                        1905(t)(1), assessment services (as defined by 
                        the Secretary), and such other care 
                        coordination services as the Secretary may 
                        specify; and
                            ``(ii) may receive any additional item or 
                        service specified under 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) Authority of the secretary to require care 
        coordination.--Notwithstanding any other provision of this 
        title, the Secretary may provide that an individual enrolled in 
        the program under this section is 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, 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 the care coordination services and other 
        benefits described in paragraph (1)) 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--
                            ``(i)(I) a physician; or
                            ``(II) a health care professional (other 
                        than a physician) who meets such conditions as 
                        the Secretary may specify; or
                            ``(ii) an entity (which may include 
                        physicians, physician group practices, and any 
                        other health care professional or entity that 
                        the Secretary determines is appropriate) that 
                        meets 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 1 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) of the Social Security Act 
        (42 U.S.C. 1395x(s)) is amended--
                    (A) in the second sentence, by redesignating 
                paragraphs (16) and (17) as clauses (i) and (ii), 
                respectively; and
                    (B) in the first sentence--
                            (i) in paragraph (14), by striking ``and'' 
                        at the end;
                            (ii) in paragraph (15), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by inserting after paragraph (15) the 
                        following new paragraph:
            ``(16) care coordination services furnished in accordance 
        with section 1866B.''.
            (2) Part b coinsurance and deductible not applicable to 
        care coordination services.--
                    (A) Coinsurance.--Section 1833(a)(1) of the Social 
                Security Act (42 U.S.C. 1395l(a)(1)), as amended by 
                section 223(c) of the Medicare, Medicaid, and SCHIP 
                Benefits Improvement and Protection Act of 2000 (114 
                Stat. 2763A-489), as enacted into law by section 
                1(a)(6) of Public Law 106-554, is amended--
                            (i) by striking ``and (U)'' and inserting 
                        ``(U)''; and
                            (ii) by inserting before the semicolon at 
                        the end the following: ``, and (V) with respect 
                        to care coordination services described in 
                        section 1861(s)(16), the amounts paid shall be 
                        100 percent of the payment amount established 
                        under section 1866B''.
                    (B) Deductible.--The first sentence of section 
                1833(b) of the Social Security Act (42 U.S.C. 1395l(b)) 
                is amended--
                            (i) by striking ``and (6)'' and inserting 
                        ``(6)''; and
                            (ii) by inserting before the period at the 
                        end the following: ``, and (7) such deductible 
                        shall not apply with respect to care 
                        coordination services (as described in section 
                        1861(s)(16))''.

SEC. 132. DISEASE MANAGEMENT SERVICES.

    (a) Program Authorized.--Title XVIII of the Social Security Act (42 
U.S.C. 1395 et seq.), as amended by section 131(a), is amended by 
inserting after section 1866B the following new section:

                     ``disease management services

    ``Sec. 1866C. (a) In General.--
            ``(1) Program authority.--The Secretary, beginning in 2003, 
        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 
        from entities designated by the Secretary with respect to 
        diagnoses that the Secretary determines are amenable to such 
        management.
            ``(2) Administration by contract.--Except as otherwise 
        specifically provided, the Secretary may administer the program 
        under this section in accordance with section 1866M, including 
        subsection (b)(2) of such section (relating to the discretion 
        of the Secretary as to the scope of the program).
    ``(b) Individuals Who May Receive Disease Management Services.--No 
individual shall be eligible for enrollment in a disease management 
program under this section unless the Secretary finds the following 
with respect to the individual:
            ``(1) Diagnosis and related characteristics.--
                    ``(A) In general.--The individual has been 
                diagnosed with congestive heart failure, chronic 
                obstructive pulmonary disease, diabetes, or any other 
                diagnosis, 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 1 month (or such longer period as the Secretary may 
        specify), and shall be automatically renewed for additional 
        periods, unless terminated in accordance with such procedures 
        as the Secretary shall establish by regulation.
            ``(2) Limitation on reenrollment.--The Secretary may 
        establish limits on an individual's eligibility to reenroll in 
        the program under this section if the individual has 
        disenrolled from the program more than once during a specified 
        time period.
    ``(e) Disease Management Requirement.--Notwithstanding any other 
provision of this title, the Secretary may provide that an individual 
enrolled in the program under this section may be entitled to payment 
under this title for any specified health care items or services only 
if the items or services have been furnished by the disease management 
organization, or coordinated through the disease management services 
program. Under such provision, the Secretary shall prescribe exceptions 
for emergency medical services as described in section 1852(d)(3), and 
other exceptions determined by the Secretary for the delivery of timely 
and needed care.
    ``(f) Disease Management Services.--
            ``(1) In general.--Subject to the cost-effectiveness 
        criteria specified in subsection (b)(1), disease management 
        services provided to an individual under this section may 
        include--
                    ``(A) initial and periodic health screening and 
                assessment;
                    ``(B) management (including coordination with other 
                providers) of, and referral for, medical and other 
                health services related to the managed diagnosis (which 
                may include referral for provision of such services by 
                the disease management organization);
                    ``(C) monitoring and control of medications 
                (including coordination with the entity managing 
                benefits for the individual under part D);
                    ``(D) patient education and counseling;
                    ``(E) nursing or other health professional home 
                visits, as appropriate;
                    ``(F) providing access for consultations by 
                telephone with physicians or other appropriate medical 
                professionals, including 24-hour availability for 
                emergency consultations;
                    ``(G) managing and facilitating the transition to 
                other care arrangements in preparation for termination 
                of the disease management enrollment; and
                    ``(H) such other services for which payment would 
                not otherwise be made under this title as the Secretary 
                shall determine to be appropriate.
            ``(2) Variations in service packages.--The types and 
        combinations of disease management services furnished under 
        agreements under this section may vary (as permitted or 
        required by the Secretary) according to the types of diagnoses, 
        conditions, patient profiles being managed, expertise of the 
        disease management organization, and other factors the 
        Secretary finds appropriate.
            ``(3) Reduction or elimination of cost-sharing.--
        Notwithstanding any other provision of law, subject to the 
        cost-effectiveness criteria specified in subsection (b)(1), the 
        Secretary may provide for the reduction or elimination of 
        beneficiary cost-sharing (such as deductibles, copayments, and 
        coinsurance) with respect to any of the items or services 
        furnished under this title (other than those furnished under a 
        service package developed under paragraph (2)), and may limit 
        such reduction or elimination to particular service areas.
    ``(g) Agreements With Disease Management Organizations.--
            ``(1) Entities eligible.--Entities qualified to enter into 
        agreements with the Secretary for the provision of disease 
        management services under this section include entities that 
        have demonstrated the ability to meet the performance standards 
        and other criteria established by the Secretary with respect 
        to--
                    ``(A) the management of each diagnosis and 
                condition with respect to which the entity, if 
                designated, would furnish disease management services 
                under this section; and
                    ``(B) the implementation of each disease management 
                approach that the entity, if designated, would 
                implement under this section.
            ``(2) Conditions of participation.--In order to be eligible 
        to provide disease management services under this section, an 
        entity shall--
                    ``(A) have in effect an agreement with the 
                Secretary setting forth such obligations of the entity 
as a disease management organization under this section as the 
Secretary shall prescribe;
                    ``(B) meet the standards established by the 
                Secretary under subsection (h); and
                    ``(C) meet such other conditions as the Secretary 
                may establish.
            ``(3) Secretary's option for noncompetitive designation.--
        The Secretary may designate an entity to provide disease 
        management services under this section without regard to the 
        requirements of section 5 of title 41, United States Code.
    ``(h) Standards.--
            ``(1) Quality.--The Secretary shall establish standards 
        for, and procedures for assessing, the quality of care provided 
        by disease management organizations under this section, which 
        shall include--
                    ``(A) performance standards with respect to the 
                processes or outcomes of health care or the health 
                status of enrolled individuals, including procedures 
                for establishing a baseline and measuring changes in 
                health care processes or health outcomes with respect 
                to managed diseases or health conditions;
                    ``(B) a requirement that the organization meet such 
                licensure and other accreditation standards as the 
                Secretary may find appropriate; and
                    ``(C) such other quality standards, including 
                patient satisfaction, as the Secretary may find 
                appropriate.
            ``(2) Cost management.--The Secretary shall establish a 
        performance standard with respect to management or reduction of 
        the aggregate costs of health care items and services related 
        to managed health conditions furnished to enrolled individuals, 
        including procedures for establishing a baseline and measuring 
        changes in costs for such items and services.
    ``(i) Payment.--
            ``(1) Terms of payment.--The Secretary may negotiate or 
        otherwise establish payment terms and rates for service 
        packages developed under subsection (f)(2).
            ``(2) Withholding of payments.--An agreement under 
        subsection (g) may provide that the Secretary may withhold up 
        to 10 percent of the amount due a disease management 
        organization under the basis of payment established under 
        paragraph (1) until such time as such organization meets a 
        standard or standards specified in such agreement.''.
    (b) Coverage of Disease Management Services as a Part B Medical 
Service.--
            (1) In general.--Section 1861(s) of the Social Security Act 
        (42 U.S.C. 1395x(s)), as amended by section 131(b)(1), is 
        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 inserting after paragraph (16) the following 
                new paragraph:
            ``(17) disease management services furnished in accordance 
        with section 1866C.''.
            (2) Part b coinsurance and deductible not applicable to 
        disease management services.--
                    (A) Coinsurance.--Section 1833(a)(1)(V) of the 
                Social Security Act (42 U.S.C. 1395l(a)(1)(V)), as 
                added by section 131(b)(2)(A), is amended to read as 
                follows: ``(V) 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 1866B and 1866C, 
                respectively;''.
                    (B) Deductible.--The first sentence of section 
                1833(b) of the Social Security Act (42 U.S.C. 
                1395l(b)), as amended by section 131(b)(2)(B), is 
                amended by inserting before the period at the end the 
                following: ``or to disease management services (as 
                described in section 1861(s)(17))''.

SEC. 133. COMPETITIVE ACQUISITION OF ITEMS AND SERVICES.

    (a) Program Authorized.--Title XVIII of the Social Security Act (42 
U.S.C. 1395 et seq.), as amended by section 132, is amended by 
inserting after section 1866C the following new section:

            ``competitive acquisition of items and services

    ``Sec. 1866D. (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 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 1866M, including 
        subsection (b)(2) of such section (relating to the discretion 
        of the Secretary as to the scope of the program).
    ``(b) Establishment of Competitive Acquisition Areas.--
            ``(1) In general.--The Secretary shall establish 
        competitive acquisition areas for agreement award purposes for 
        the furnishing under part B of the items and services described 
        in subsection (d) after 2003. The Secretary may establish 
        different competitive acquisition areas under this subsection 
        for different classes of items and services.
            ``(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 (3) 
and (5) through (9) of section 1861(s) (other than custom fabricated 
prostheses, as defined by the Secretary), and such other items or 
services as the Secretary may specify.''.
    (b) Items and Services To Be Furnished Only Through Competitive 
Acquisition.--Section 1862(a) of the Social Security Act (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 inserting after paragraph (21) the following new 
        paragraph:
            ``(22) where the expenses are for an item or service 
        furnished in a competitive acquisition area (as established by 
        the Secretary under section 1866D(a)) by an entity other than 
        an entity with which the Secretary has entered into an 
        agreement under section 1866D(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 this section apply to 
items and services furnished after 2003.

SEC. 134. PROVIDER AND PHYSICIAN COLLABORATIONS.

    Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.), as 
amended by section 133, is amended by inserting after section 1866D the 
following new section:

                ``provider and physician collaborations

    ``Sec. 1866E. (a) In General.--
            ``(1) Program authority.--The Secretary may enter into 
        agreements with specific 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.
            ``(2) Administration by contract.--Except as otherwise 
        specifically provided, the Secretary may administer the program 
        under this section in accordance with section 1866M, including 
        subsection (b)(2) of such section (relating to the discretion 
        of the Secretary as to the scope of the program).
    ``(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. 135. PREFERRED PARTICIPANTS.

    (a) In General.--Title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.), as amended by section 134, is amended by inserting after 
section 1866E the following new section:

                        ``preferred participants

    ``Sec. 1866F. (a) Program Authority.--
            ``(1) In general.--The Secretary shall implement beginning 
        in 2003, 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.
            ``(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 reduce the cost and 
        improve the quality 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 1866M, 
        including subsection (b)(2) of such section (relating to the 
        discretion of the Secretary as to the scope of the program).
    ``(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 1866M(b)(5) (relating to 
                quality, cost-effectiveness, categories of participants 
                in each 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 of the Social Security Act (42 
U.S.C. 1395x), as amended by section 105 of the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act of 2000 (114 Stat. 2763A-
471), 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:
    ``(ww) 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 1866F(b).''.

SEC. 136. SIMPLIFIED CENTER PAYMENTS.

    Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.), as 
amended by section 135, is amended by inserting after section 1866F the 
following new section:

                      `simplified center payments

    ``Sec. 1866G. (a) In General.--
            ``(1) Competition to furnish bundled items and services.--
        The Secretary, beginning in 2003, 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.
            ``(2) Administration by contract.--Except as otherwise 
        specifically provided, the Secretary may administer the program 
        under this section in accordance with section 1866M, including 
        subsection (b)(2) of such section (relating to the discretion 
        of the Secretary as to the scope of the program).
    ``(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 3 
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 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. 137. CONFORMING CHANGES TO PHYSICIAN GROUP PRACTICE DEMONSTRATION 
              AND ADMINISTRATIVE PROVISIONS.

    (a) Conforming Change to Physician Group Practice Demonstration.--
Section 1866A(a)(2), as added by section 412 of the Medicare, Medicaid, 
and SCHIP Benefits Improvement and Protection Act of 2000 (114 Stat. 
2763A-509), as enacted into law by section 1(a)(6) of Public Law 106-
554, is amended by striking ``1866B'' and inserting ``1866M, including 
subsection (b)(2) of such section (relating to the discretion of the 
Secretary as to the scope of the program)''.
    (b) Conforming Changes to Administrative Provisions.--Section 1866M 
(as redesignated by section 131(a)(1)) is amended to read as follows:

   ``general provisions for administration of certain private sector 
              purchasing and quality improvement programs

    ``Sec. 1866M. (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 1866A (demonstration of application of 
        physician volume increases to group practices).
            ``(2) Section 1866B (care coordination services).
            ``(3) Section 1866C (disease management services).
            ``(4) Section 1866D (competitive acquisition of items and 
        services).
            ``(5) Section 1866E (provider and physician 
        collaborations).
            ``(6) Section 1866F (preferred participants).
            ``(7) Section 1866G (simplified center payments).
    ``(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), (3), (5), and (7) 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)(4), 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 (2) or (3) 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 1866B(d)(2) or 
                        1866C(e)(2) in accordance with the provisions 
                        of section 1852(g), as if such section applied 
                        to this clause. In applying such section 
                        1852(g), any reference to a Medicare+Choice 
                        organization is construed to refer to the 
                        program administrator or, if the Secretary has 
                        not contracted with a program administrator, to 
                        the Secretary.
            ``(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 3 
                years, renewable for additional terms of up to 3 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.
    ``(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)(1), 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), 
                        (3), and (6) 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 1866B (care coordination 
                services) or section 1866C (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) Limiting 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.
    ``(g) Reports to Congress.--Not later than 2 years after the date 
of enactment of this section, and biennially thereafter for 6 years, 
the Secretary shall report to Congress on the use of authorities under 
each of sections 1866A through 1866G. Each report shall address the 
impact of the use of those authorities on expenditures, access, and 
quality under the programs under this title.''.
    (b) Exception to Limits on Physician Referrals.--Section 1877(b) of 
the Social Security Act (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 1866B, 
                1866C, 1866E, or 1866G; and
                    ``(B) 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. 138. INCREASED FLEXIBILITY IN CONTRACTING FOR MEDICARE CLAIMS 
              PROCESSING.

    (a) Carriers To Include Entities That Are Not Insurance 
Companies.--Section 1842 of the Social Security Act (42 U.S.C. 1395u) 
is amended--
            (1) in subsection (a), in the matter preceding paragraph 
        (1), by striking ``with carriers'' and inserting ``with 
        agencies and organizations (in this section referred to as 
        `carriers')''; and
            (2) by repealing subsection (f).
    (b) Secretarial Flexibility in Contracting for and in Assigning 
Fiscal Intermediary and Carrier Functions.--
            (1) Authority to enter into contracts.--
                    (A) In general.--Section 1816(a) of the Social 
                Security Act (42 U.S.C. 1395h(a)) is amended to read as 
                follows:
    ``(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) to--
            ``(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 ensure that proper payments are 
        made under this part;
            ``(F) perform the functions described by subsection (d); 
        and
            ``(G) perform such other functions as are necessary to 
        carry out the purposes of this part.
    ``(2) In this title and title XI, the term `fiscal intermediary' 
means an agency or organization with a contract under this section.''.
                    (B) Prerequisites for contracts.--Section 
                1816(b)(1)(A) of the Social Security Act (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''.
                    (C) Duties of fiscal intermediaries; rights of 
                providers.--Section 1816(d) of the Social Security Act 
                (42 U.S.C. 1395h(d)) is 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.''.
                    (D) Solicitation of comments for performance 
                evaluations.--Section 1816(e) of the Social Security 
                Act (42 U.S.C. 1395h(e)) is amended to read as follows:
    ``(e) The Secretary, in evaluating the performance of a fiscal 
intermediary, may solicit comments from providers of services.''.
                    (E) Consultation with respect to performance 
                requirements for fiscal intermediaries.--Section 
                1816(f)(1) of the Social Security Act (42 U.S.C. 
                1395h(f)) is amended to read as follows:
    ``(f)(1) With respect to the establishment of contract performance 
requirements, the Secretary may consult with--
            ``(A) Medicare+Choice organizations under part C of this 
        title;
            ``(B) providers of services and other persons who furnish 
        items or services for which payment may be made under this 
        title; and
            ``(C) organizations and agencies performing functions 
        necessary to carry out the purposes of this part.''.
                    (F) Consultation with respect to performance 
                requirements for carriers.--Section 1842(b)(2) of the 
                Social Security Act (42 U.S.C. 1395u(b)(2)) is 
                amended--
                            (i) in subparagraph (A)--
                                    (I) by inserting ``(i)'' before 
                                ``No such contract'';
                                    (II) by striking the second 
                                sentence and inserting the following 
                                new clause:
    ``(ii) With respect to the establishment of contract performance 
requirements, the Secretary may consult with--
            ``(I) Medicare+Choice organizations under part C of this 
        title;
            ``(II) providers of services and other persons who furnish 
        items or services for which payment may be made under this 
        title; and
            ``(III) organizations and agencies performing functions 
        necessary to carry out the purposes of this part.'';
                                    (III) by striking the third 
                                sentence; and
                                    (IV) by striking the fourth 
                                sentence and inserting the following 
                                new clause:
    ``(iii) The Secretary may not require, as a condition of entering 
into a contract under this section or under section 1871, that a 
carrier match data obtained other than in its activities under this 
part with data used in the administration of this part for purposes of 
identifying situations in which section 1862(b) may apply.'';
                            (ii) in subparagraph (B), in the matter 
                        preceding clause (i), by striking ``establish 
                        standards'' and inserting ``develop contract 
                        performance requirements''; and
                            (iii) in subparagraph (D), by striking 
                        ``standards and criteria'' each place it 
                        appears and inserting ``contract performance 
                        requirements''.
            (2) Conforming amendments.--
                    (A) Prerequisites for contracts.--Section 1816(b) 
                of the Social Security Act (42 U.S.C. 1395h(b)) is 
                amended--
                            (i) in the matter preceding paragraph (1), 
                        by striking ``an agreement'' and inserting ``a 
                        contract'';
                            (ii) in paragraph (1)(B), by striking 
                        ``agreement'' and inserting ``contract''; and
                            (iii) in paragraph (2)(A), by striking 
                        ``agreement'' and inserting ``contract''.
                    (B) Terms and conditions of contracts; prompt 
                payment of claims.--Section 1816(c) of the Social 
                Security Act (42 U.S.C. 1395h(c)) is amended--
                            (i) in paragraph (1)--
                                    (I) in the first sentence, by 
                                striking ``An agreement'' and inserting 
                                ``A contract''; and
                                    (II) in the last sentence, by 
                                striking ``an agreement'' and inserting 
                                ``a contract'';
                            (ii) in paragraph (2)--
                                    (I) in subparagraph (A), in the 
                                matter preceding clause (i), by 
                                striking ``Each agreement under this 
                                section'' and inserting ``Each contract 
                                under this section that provides for 
                                making payments under this part''; and
                                    (II) in subparagraph (C), 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 
                                (as defined in section 1861(u))''; and
                            (iii) in paragraph (3)(A), by striking 
                        ``agreement under this section'' and inserting 
                        ``contract under this section that provides for 
                        making payments under this part''.
                    (C) Surety bonds.--Section 1816(h) of the Social 
                Security Act (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 appears and inserting ``the 
                        contract''.
                    (D) Limitation on liability for certifying and 
                disbursing officers.--Section 1816(i)(1) of the Social 
                Security Act (42 U.S.C. 1395h(i)(1)) is amended by 
                striking ``an agreement'' and inserting ``a contract''.
                    (E) Denial of claim; notification and 
                reconsideration.--Section 1816(j) of the Social 
                Security Act (42 U.S.C. 1395h(j)) is amended in the 
                matter preceding paragraph (1)--
                            (i) by striking ``An agreement'' and 
                        inserting ``A contract''; and
                            (ii) by striking ``for home health 
                        services, extended care services, or post-
                        hospital extended care services''.
                    (F) Annual reporting requirement on erroneous 
                payment recovery.--Section 1816(k) of the Social 
                Security Act (42 U.S.C. 1395h(k)) is amended--
                            (i) by striking ``An agreement'' and 
                        inserting ``A contract''; and
                            (ii) by inserting ``(as appropriate)'' 
                        after ``submit''.
                    (G) Coordination with medicare integrity program.--
                Section 1816(l) of the Social Security Act (42 U.S.C. 
                1395h(l)) is amended by striking ``an agreement'' and 
inserting ``a contract''.
                    (H) Authority to enter into contracts with 
                carriers.--Section 1842(a) of the Social Security Act 
                (42 U.S.C. 1395u(a)) is amended--
                            (i) in the matter preceding paragraph (1)--
                                    (I) by striking ``carriers with 
                                which agreements'' and inserting 
                                ``single contracts under section 1816 
                                and this section together, or separate 
                                contracts with eligible agencies and 
                                organizations with which contracts''; 
                                and
                                    (II) by striking ``some or all of 
                                the following functions'' and inserting 
                                ``any or all of the following 
                                functions, or parts of those 
                                functions''; and
                            (ii) in paragraph (3), 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''.
                    (I) Applicability of competitive bidding 
                provisions; findings as to financial responsibilities; 
                contractual duties.--Section 1842(b) of the Social 
                Security Act (42 U.S.C. 1395u(b)) is amended--
                            (i) in paragraph (2)(C), in the first 
                        sentence, by inserting ``(as appropriate)'' 
                        after ``carriers'';
                            (ii) in paragraph (3), in the matter 
                        preceding subparagraph (A), by inserting ``(as 
                        appropriate)'' after ``contract'';
                            (iii) in paragraph (7)(A), in the matter 
                        preceding clause (i), by striking ``the 
                        carrier'' and inserting ``a carrier''; and
                            (iv) in paragraph (11)(A), in the matter 
                        preceding clause (i), by inserting ``(as 
                        appropriate)'' after ``each carrier''.
                    (J) Participating physician or supplier; contracts 
                with the secretary; payment of claims on assignment.--
                Section 1842(h) of the Social Security Act (42 U.S.C. 
                1395u(h)) is amended--
                            (i) in paragraph (2), in the first 
                        sentence--
                                    (I) by striking ``an agreement'' 
                                and inserting ``a contract''; and
                                    (II) by inserting ``(as 
                                appropriate)'' after ``shall'';
                            (ii) in paragraph (3)(A), by striking ``an 
                        agreement'' and inserting ``a contract'';
                            (iii) in paragraph (3)(B), in the third 
                        sentence, by striking ``agreements'' and 
                        inserting ``contracts'';
                            (iv) in paragraph (5)(A), by inserting 
                        ``(as appropriate)'' after ``carriers''; and
                            (v) in paragraph (8)--
                                    (I) by striking ``an agreement'' 
                                and inserting ``a contract''; and
                                    (II) by striking ``such agreement'' 
                                and inserting ``such contract''.
    (c) Elimination of Special Provisions for Terminations of 
Contracts.--
            (1) Fiscal intermediaries.--Section 1816 of the Social 
        Security Act (42 U.S.C. 1395h) is amended--
                    (A) in subsection (b), in the matter preceding 
                paragraph (1), by striking ``or renew'';
                    (B) in subsection (c)(1), in the last sentence, by 
                striking ``or renewing''; and
                    (C) by repealing subsection (g).
            (2) Carriers.--Section 1842(b) of the Social Security Act 
        (42 U.S.C. 1395u(b)) is amended by repealing paragraph (5).
    (d) Repeal of Fiscal Intermediary Requirements That Are Not Cost-
Effective.--Section 1816(f)(2) of the Social Security Act (42 U.S.C. 
1395h(f)(2)) is amended--
            (1) in the matter preceding subparagraph (A), by striking 
        ``standards and criteria established under'' and inserting 
        ``contract performance requirements described in''; and
            (2) by striking subparagraph (A) and inserting the 
        following new subparagraph:
            ``(A) with respect to claims for services furnished under 
        this part by any provider of services (as defined in section 
        1861(u)) 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; and''.
    (e) Repeal of Cost Reimbursement Requirements.--
            (1) Fiscal intermediaries.--Section 1816(c)(1) of the 
        Social Security Act (42 U.S.C. 1395h(c)(1)) is amended--
                    (A) in the first sentence--
                            (i) by striking the comma after 
                        ``appropriate'' and inserting ``and''; and
                            (ii) by striking ``, and shall provide for 
                        payment'' and all that follows before the 
                        period; and
                    (B) by striking the second and third sentences.
            (2) Carriers.--Section 1842(c)(1) of the Social Security 
        Act (42 U.S.C. 1395u(c)(1)) is amended--
                    (A) in the first sentence--
                            (i) by striking ``section shall provide'' 
                        and inserting ``section may provide''; and
                            (ii) by striking ``, and shall provide'' 
                        and all that follows before the period; and
                    (B) by striking the second and third sentences.
            (3) Conforming amendment to deficit reduction act.--
        Subsection (a) of section 2326 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) Fiscal intermediaries.--Section 1816(c) of the Social 
        Security Act (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) Carriers.--Section 1842(b)(1) of the Social Security 
        Act (42 U.S.C. 1395u(b)(1)) is amended to read as follows:
    ``(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.--
Contracts that have periods that begin before or during the 1-year 
period that begins on the first day of the fourth calendar month that 
begins after the date of enactment of this Act may be entered into 
under section 1816(a) or 1842(a) of the Social Security Act (42 U.S.C. 
1395h(a) and 1395u(a)) without regard to any provision of law requiring 
the use of competitive procedures.
    (h) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section apply to contracts 
        that have periods beginning after the third calendar month that 
        begins after the date of enactment of this Act.
            (2) Elimination of special provisions for terminations of 
        contracts.--The amendments made by subsection (c) apply to 
        contracts that have periods ending on or after the end of the 
        third calendar month that begins after the date of enactment of 
        this Act.
            (3) Secretarial flexibility with respect to renewing 
        contracts and transfer of functions.--The amendments made by 
        subsection (f) apply to contracts that have periods that begin 
        after the end of the 1-year period specified in subsection (g).

                 TITLE II--MEDICARE+CHOICE COMPETITION

SEC. 201. REVISION OF MEDICARE+CHOICE COMPETITIVE BIDDING DEMONSTRATION 
              PROJECT.

    (a) Areas in Florida.--Section 4011 of the Balanced Budget Act of 
1997 (42 U.S.C. 1395w-23 note) is amended--
            (1) by striking subsection (b)(2)(B) and inserting the 
        following:
                    ``(B) Location of designation.--Of the 4 areas 
                recommended under subparagraph (A)--
                            ``(i) 2 shall be in Florida; and
                            ``(ii) 3 shall be in urban areas and 1 
                        shall be in a rural area.''; and
            (2) in subsection (c), by adding at the end the following 
        new paragraph:
            ``(3) Implementation of project in areas in florida.--The 
        Secretary shall ensure that the areas in Florida designated 
        pursuant to subsection (b)(2)(B)(i) be the first 2 areas in 
        which the project is implemented.''.
    (b) Budget Neutrality During 5-Fiscal-Year Period.--Section 4011(g) 
of the Balanced Budget Act of 1997 (42 U.S.C. 1395w-23 note) is 
amended--
            (1) by striking ``for a fiscal year'' and inserting ``for 
        any 5-fiscal-year period''; and
            (2) by inserting ``for such period'' after ``4001,''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of section 533 of the Medicare, 
Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (Appendix F, 
113 Stat. 1501A-389), as enacted into law by section 1000(a)(6) of 
Public Law 106-113.

    TITLE III--MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM

SEC. 301. MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM.

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

         ``Part D--Outpatient Prescription Drug Benefit Program

                             ``definitions

    ``Sec. 1860. In this part:
            ``(1) Covered outpatient drug.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `covered outpatient drug' 
                means any of the following products:
                            ``(i) A drug which may be dispensed only 
                        upon prescription, and--
                                    ``(I) which is approved for safety 
                                and effectiveness as a prescription 
                                drug under section 505 of the Federal 
                                Food, Drug, and Cosmetic Act;
                                    ``(II)(aa) 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 drug, and (bb) 
                                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)(aa) 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 
                                drug, and (bb) 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 drug under such section because the 
Secretary has determined that the drug is less than effective for all 
conditions of use prescribed, recommended, or suggested in its 
labeling.
                            ``(ii) 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.
                            ``(iii) Insulin approved under appropriate 
                        Federal law, including needles, syringes, and 
                        disposable pumps for the administration of such 
                        insulin.
                            ``(iv) A prescribed drug or biological 
                        product that would meet the requirements of 
                        clause (i) or (ii) except that it is available 
                        over-the-counter in addition to being available 
                        upon prescription.
                    ``(B) Exclusion.--The term `covered outpatient 
                drug' does not include any product--
                            ``(i) except as provided in subparagraph 
                        (A)(iv), which may be distributed to 
                        individuals without a prescription;
                            ``(ii) for which payment is available under 
                        part A or B or would be available under part B 
                        but for the application of a deductible under 
                        such part (unless payment for such product is 
                        not available because benefits under part A or 
                        B have been exhausted), determined without 
                        regard to whether the beneficiary involved is 
                        entitled to benefits under part A or enrolled 
                        under part B; or
                            ``(iii) except for agents used to promote 
                        smoking cessation, for which coverage may be 
                        excluded or restricted under section 
                        1927(d)(2).
            ``(2) Eligible beneficiary.--The term `eligible 
        beneficiary' means an individual that is entitled to benefits 
        under part A or enrolled under part B.
            ``(3) Eligible entity.--The term `eligible entity' means 
        any entity that the Secretary determines to be appropriate to 
        provide eligible beneficiaries with covered outpatient drugs 
        under a plan under this part, including--
                    ``(A) a pharmacy benefit management company;
                    ``(B) a retail pharmacy delivery system;
                    ``(C) a health plan or insurer;
                    ``(D) a State (through mechanisms established under 
                a State plan under title XIX);
                    ``(E) any other entity approved by the Secretary; 
                or
                    ``(F) any combination of the entities described in 
                subparagraphs (A) through (E) if the Secretary 
                determines that such combination--
                            ``(i) increases the scope or efficiency of 
                        the provision of benefits under this part; and
                            ``(ii) is not anticompetitive.
            ``(4) Medicare+choice organization; medicare+choice plan.--
        The terms `Medicare+Choice organization' and `Medicare+Choice 
        plan' have the meanings given such terms in subsections (a)(1) 
        and (b)(1), respectively, of section 1859 (relating to 
        definitions relating to Medicare+Choice organizations).
            ``(5) Prescription drug account.--The term `Prescription 
        Drug Account' means the Prescription Drug Account (as 
        established under section 1860J) in the Federal Supplementary 
        Medical Insurance Trust Fund under section 1841.

    ``establishment of outpatient prescription drug benefit program

    ``Sec. 1860A. (a) Provision of Benefit.--
            ``(1) In general.--Beginning in 2004, the Secretary shall 
        provide for and administer an outpatient prescription drug 
        benefit program under which each eligible beneficiary enrolled 
        under this part shall be provided with coverage of covered 
        outpatient drugs as follows:
                    ``(A) Medicare+choice plan.--If the eligible 
                beneficiary is eligible to enroll in a Medicare+Choice 
                plan, the beneficiary may enroll in such a plan and 
                obtain coverage of covered outpatient drugs through 
                such plan.
                    ``(B) Medicare prescription drug plan.--If the 
                eligible beneficiary is not enrolled in a 
                Medicare+Choice plan, the beneficiary shall obtain 
                coverage of covered outpatient drugs through enrollment 
                in a plan offered by an eligible entity with a contract 
                under this part.
            ``(2) Voluntary nature of program.--Nothing in this part 
        shall be construed as requiring an eligible beneficiary to 
        enroll in the program established under this part.
            ``(3) Scope of benefits.--The program established under 
        this part shall provide for coverage of all therapeutic classes 
        of covered outpatient drugs.
    ``(b) Access to Alternative Prescription Drug Coverage.--In the 
case of an eligible beneficiary who has creditable prescription drug 
coverage (as defined in section 1860B(a)(2)(A)(vi)), such beneficiary--
            ``(1) may continue to receive such coverage and not enroll 
        under this part; and
            ``(2) pursuant to section 1860B(a)(2)(A)(iii), is permitted 
        to subsequently enroll under this part without any penalty and 
        obtain coverage of covered outpatient drugs in the manner 
        described in subsection (a) if the beneficiary involuntarily 
        loses such coverage.
    ``(c) Financing.--The costs of providing benefits under this part 
shall be payable from the Prescription Drug Account.

                              ``enrollment

    ``Sec. 1860B. (a) Enrollment Under This Part.--
            ``(1) Establishment of process.--
                    ``(A) In general.--The Secretary shall establish a 
                process through which an eligible beneficiary 
                (including an eligible beneficiary enrolled in a 
                Medicare+Choice plan offered by a Medicare+Choice 
                organization) may make an election to enroll under this 
                part. Such process shall be similar to the process for 
                enrollment in part B under section 1837, including the 
                deeming provisions of such section.
                    ``(B) Requirement of enrollment.--An eligible 
                beneficiary must enroll under this part in order to be 
                eligible to receive covered outpatient drugs under this 
                title.
            ``(2) Enrollment procedures.--
                    ``(A) Late enrollment penalty.--
                            ``(i) In general.--Subject to the 
                        succeeding provisions of this subparagraph, in 
                        the case of an eligible beneficiary whose 
                        coverage period under this part began pursuant 
                        to an enrollment after the beneficiary's 
                        initial enrollment period under part B 
                        (determined pursuant to section 1837(d)) and 
                        not pursuant to the open enrollment period 
                        described in subparagraph (B), the Secretary 
                        shall establish procedures for increasing the 
                        amount of the monthly part D premium under 
                        section 1860D applicable to such beneficiary--
                                    ``(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 eligible beneficiary 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 actuarily sound 
                                for each such period.
                            ``(ii) Periods taken into account.--For 
                        purposes of calculating any 12-month period 
                        under clause (i), there shall be taken into 
                        account--
                                    ``(I) the months which elapsed 
                                between the close of the eligible 
                                beneficiary's initial enrollment period 
                                and the close of the enrollment period 
                                in which the beneficiary enrolled; and
                                    ``(II) in the case of an eligible 
                                beneficiary 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 
                                beneficiary reenrolled.
                            ``(iii) Periods not taken into account.--
                                    ``(I) In general.--For purposes of 
                                calculating any 12-month period under 
                                clause (i), subject to subclause (II), 
                                there shall not be taken into account 
                                months for which the eligible 
                                beneficiary can demonstrate that the 
                                beneficiary had creditable prescription 
                                drug coverage (as defined in 
                                subparagraph (vi)).
                                    ``(II) Application.--This clause 
                                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--
                                            ``(aa) in the case of a 
                                        beneficiary with coverage 
                                        described in subclause (II) of 
                                        clause (vi), 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 actuarial value of 
                                        the coverage provided under the 
                                        program under this part; or
                                            ``(bb) in the case of a 
                                        beneficiary with coverage 
                                        described in subclause (I), 
                                        (III), or (IV) of clause (vi), 
                                        the date on which the 
                                        beneficiary loses eligibility 
                                        for such coverage.
                            ``(iv) Periods treated separately.--Any 
                        increase in an eligible beneficiary's monthly 
                        part D premium under clause (i) with respect to 
                        a particular continuous period of eligibility 
                        shall not be applicable with respect to any 
                        other continuous period of eligibility which 
                        the beneficiary may have.
                            ``(v) Continuous period of eligibility.--
                                    ``(I) In general.--Subject to 
                                subclause (II), for purposes of this 
                                subparagraph, an eligible beneficiary's 
                                `continuous period of eligibility' is 
                                the period that begins with the first 
                                day on which the beneficiary is 
                                eligible to enroll under section 1836 
                                and ends with the beneficiary's death.
                                    ``(II) Separate period.--Any period 
                                during all of which an eligible 
                                beneficiary satisfied paragraph (1) of 
                                section 1836 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 
                                beneficiary (and each such period which 
                                terminates shall be deemed not to have 
                                existed for purposes of subsequently 
                                applying this subparagraph).
                            ``(vi) Creditable prescription drug 
                        coverage defined.--For purposes of this part, 
                        the term `creditable prescription drug 
                        coverage' means any of the following:
                                    ``(I) Medicaid prescription drug 
                                coverage.--Prescription drug coverage 
                                under a medicaid plan under title XIX, 
                                including through the Program of All-
                                inclusive Care for the Elderly (PACE) 
                                under section 1934 and through a social 
                                health maintenance organization 
                                (referred to in section 4104(c) of the 
                                Balanced Budget Act of 1997).
                                    ``(II) Prescription drug coverage 
                                under a group health plan.--
                                Prescription drug coverage under a 
                                group health plan, including a health 
                                benefits plan under the Federal 
                                Employees Health Benefit Program under 
                                chapter 89 of title 5, United States 
                                Code, and a qualified 
retiree prescription drug plan as defined in section 1860I(e)(3), that 
provides coverage of the cost of prescription drugs the actuarial value 
of which (as defined by the Secretary) to the beneficiary equals or 
exceeds the actuarial value of the benefits provided to an individual 
enrolled in the outpatient prescription drug benefit program under this 
part.
                                    ``(III) State pharmaceutical 
                                assistance program.--Coverage of 
                                prescription drugs under a State 
                                pharmaceutical assistance program.
                                    ``(IV) Veterans' coverage of 
                                prescription drugs.--Coverage of 
                                prescription drugs for veterans, and 
                                survivors and dependents of veterans, 
                                under chapter 17 of title 38, United 
                                States Code.
                    ``(B) Open enrollment period for current 
                beneficiaries in which late enrollment procedures do 
                not apply.--The Secretary shall establish an applicable 
                period, which shall begin on the date on which the 
                Secretary first begins to accept elections for 
                enrollment under this part, during which any eligible 
                beneficiary may enroll under this part without the 
                application of the late enrollment procedures 
                established under subparagraph (A)(i).
            ``(3) Period of coverage.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B) and subject to subparagraph (C), an 
                eligible beneficiary's coverage under the program under 
                this part shall be effective for the period provided in 
                section 1838, as if that section applied to the program 
                under this part.
                    ``(B) Open enrollment.--Subject to subparagraph 
                (C), an eligible beneficiary who enrolls under the 
                program under this part pursuant to paragraph (2)(B) 
                shall be entitled to the benefits under this part 
                beginning on the first day of the month following the 
                month in which such enrollment occurs.
                    ``(C) Limitation.--Coverage under this part shall 
                not begin prior to January 1, 2004.
            ``(4) Termination.--
                    ``(A) In general.--The causes of termination 
                specified in section 1838 shall apply to this part in 
                the same manner as such causes apply to part B.
                    ``(B) Coverage terminated by termination of 
                coverage under parts a and b.--
                            ``(i) In general.--In addition to the 
                        causes of termination specified in subparagraph 
                        (A), the Secretary shall terminate an 
                        individual's coverage under this part if the 
                        individual is no longer enrolled in either part 
                        A or B.
                            ``(ii) Effective date.--The termination 
                        described in clause (i) shall be effective on 
                        the effective date of termination of coverage 
                        under part A or (if later) under part B.
                    ``(C) Procedures regarding termination of a 
                beneficiary under a plan.--The Secretary shall 
                establish procedures for determining the status of an 
                eligible beneficiary's enrollment under this part if 
                the beneficiary's enrollment in a plan offered by an 
                eligible entity under this part is terminated by the 
                entity for cause (pursuant to procedures established by 
                the Secretary under subsection (b)(1)).
    ``(b) Enrollment in a Plan.--
            ``(1) Process.--
                    ``(A) In general.--The Secretary shall establish a 
                process through which an eligible beneficiary who is 
                enrolled under this part but not enrolled in a 
                Medicare+Choice plan offered by a Medicare+Choice 
                organization shall make an annual election to enroll in 
                any plan offered by an eligible entity that has been 
                awarded a contract under this part and serves the 
                geographic area in which the beneficiary resides.
                    ``(B) Rules.--In establishing the process under 
                subparagraph (A), the Secretary shall--
                            ``(i) use rules similar to the rules for 
                        enrollment, disenrollment, and termination of 
                        enrollment with a Medicare+Choice plan under 
                        section 1851, including--
                                    ``(I) the establishment of special 
                                election periods under subsection 
                                (e)(4) of such section; and
                                    ``(II) the application of the 
                                guaranteed issue and renewal provisions 
                                of section 1851(g) (other than 
                                paragraph (3)(C)(i), relating to 
                                default enrollment); and
                            ``(ii) coordinate enrollments, 
                        disenrollments, and terminations of enrollment 
                        under part C with enrollments, disenrollments, 
                        and terminations of enrollment under this part.
            ``(2) Medicare+choice enrollees.--An eligible beneficiary 
        who is enrolled under this part and enrolled in a 
        Medicare+Choice plan offered by a Medicare+Choice organization 
        shall receive coverage of covered outpatient drugs under this 
        part through such plan.
    ``(c) First Enrollment Period.--The processes developed under 
subsections (a) and (b) shall ensure that eligible beneficiaries are 
permitted to enroll under this part and with an eligible entity prior 
to January 1, 2004, in order to ensure that coverage under this part is 
effective as of such date.
    ``(d) Enrollment in a Medicare+Choice Plan.--Enrollment in a 
Medicare+Choice plan is subject to the rules for enrollment in such 
plan under section 1851.

                ``providing information to beneficiaries

    ``Sec. 1860C. (a) Activities.--
            ``(1) In general.--The Secretary shall conduct activities 
        that are designed to broadly disseminate information to 
        eligible beneficiaries (and prospective eligible beneficiaries) 
        regarding the coverage provided under this part.
            ``(2) Special rule for first enrollment under the 
        program.--To the extent practicable, the activities described 
        in paragraph (1) shall ensure that eligible beneficiaries are 
        provided with such information at least 30 days prior to the 
        first enrollment period described in section 1860B(c).
    ``(b) Requirements.--
            ``(1) In general.--The activities described in subsection 
        (a) shall--
                    ``(A) be similar to the activities performed by the 
                Secretary under section 1851(d);
                    ``(B) be coordinated with the activities performed 
                by the Secretary under such section and under section 
                1804; and
                    ``(C) provide for the dissemination of information 
                comparing the plans offered by eligible entities under 
                this part that are available to eligible beneficiaries 
                residing in an area.
            ``(2) Comparative information.--The comparative information 
        described in paragraph (1)(C) shall include a comparison of the 
        following:
                    ``(A) Benefits.--The benefits provided under the 
                plan, including the prices beneficiaries will be 
                charged for covered outpatient drugs, any preferred 
                pharmacy networks used by the eligible entity under the 
                plan, and the formularies and appeals processes under 
                the plan.
                    ``(B) Quality and performance.--To the extent 
                available, the quality and performance of the eligible 
                entity offering the plan.
                    ``(C) Beneficiary cost-sharing.--The cost-sharing 
                required of eligible beneficiaries under the plan.
                    ``(D) Consumer satisfaction surveys.--To the extent 
                available, the results of consumer satisfaction surveys 
                regarding the plan and the eligible entity offering 
                such plan.
                    ``(E) Additional information.--Such additional 
                information as the Secretary may prescribe.
            ``(3) Information standards.--The Secretary shall develop 
        standards to ensure that the information provided to eligible 
        beneficiaries under this part is complete, accurate, and 
        uniform.
    ``(c) Use of Medicare Consumer Coalitions To Provide Information.--
            ``(1) In general.--The Secretary may contract with Medicare 
        Consumer Coalitions to conduct the informational activities--
                    ``(A) under this section;
                    ``(B) under section 1851(d); and
                    ``(C) under section 1804.
            ``(2) Selection of coalitions.--If the Secretary determines 
        the use of Medicare Consumer Coalitions to be appropriate, the 
        Secretary shall--
                    ``(A) develop and disseminate, in such areas as the 
                Secretary determines appropriate, a request for 
                proposals for Medicare Consumer Coalitions to contract 
                with the Secretary in order to conduct any of the 
                informational activities described in paragraph (1); 
                and
                    ``(B) select a proposal of a Medicare Consumer 
                Coalition to conduct the informational activities in 
                each such area, with a preference for broad 
                participation by organizations with experience in 
                providing information to beneficiaries under this 
                title.
            ``(3) Payment to medicare consumer coalitions.--The 
        Secretary shall make payments to Medicare Consumer Coalitions 
        contracting under this subsection in such amounts and in such 
        manner as the Secretary determines appropriate.
            ``(4) Authorization of appropriations.--There are 
        authorized to be appropriated to the Secretary such sums as may 
        be necessary to contract with Medicare Consumer Coalitions 
        under this section.
            ``(5) Medicare consumer coalition defined.--In this 
        subsection, the term `Medicare Consumer Coalition' means an 
        entity that is a nonprofit organization operated under the 
        direction of a board of directors that is primarily composed of 
        beneficiaries under this title.

                               ``premiums

    ``Sec. 1860D. (a) Annual Establishment of Monthly Part D Premium 
Rates.--
            ``(1) In general.--The Secretary shall, during September of 
        each year (beginning in 2003), determine and promulgate a 
        monthly part D premium rate for the succeeding year in 
        accordance with the provisions of this subsection.
            ``(2) Actuarial determinations.--
                    ``(A) Determination of annual benefit and 
                administrative costs.--The Secretary shall estimate 
                annually for the succeeding year the amount equal to 
                the total of the benefits and administrative costs that 
will be payable from the Prescription Drug Account for providing 
covered outpatient drugs in such calendar year with respect to 
enrollees in the program under this part.
                    ``(B) Determination of monthly part d premium 
                rates.--
                            ``(i) In general.--The Secretary shall 
                        determine the monthly part D premium rate for 
                        such succeeding year, which shall be \1/12\ of 
                        the applicable share of--
                                    ``(I) the amount determined under 
                                subparagraph (A); divided by
                                    ``(II) the total number of 
                                enrollees under this part,
                        rounded (if such rate is not a multiple of 10 
                        cents) to the nearest multiple of 10 cents.
                            ``(ii) Definition of applicable share.--For 
                        purposes of clause (i), the term `applicable 
                        share' means--
                                    ``(I) one-half, in the case of 
                                premiums paid by an eligible 
                                beneficiary enrolled in the program 
                                under this part; and
                                    ``(II) two-thirds, in the case of 
                                premiums paid for such a beneficiary by 
                                an employer (as defined in section 
                                1860I(e)(2)) with which the beneficiary 
                                was formerly employed.
            ``(3) Publication of assumptions.--The Secretary shall 
        publish, together with the promulgation of the monthly part D 
        premium rates for the succeeding year, a statement setting 
        forth the actuarial assumptions and bases employed in arriving 
        at the amounts and rates determined under paragraphs (1) and 
        (2).
            ``(4) Collection of part d premium.--The monthly part D 
        premium applicable to an eligible beneficiary under this part 
        (after application of any increase under subsection (b) or 
        under section 1860B(a)(2)(A)) shall be collected and credited 
        to the Prescription Drug Account in the same manner as the 
        monthly premium determined under section 1839 is collected and 
        credited to the Federal Supplementary Medical Insurance Trust 
        Fund under section 1840.
    ``(b) Sliding Scale Premium.--
            ``(1) Increase.--
                    ``(A) Amount.--
                            ``(i) In general.--Except as provided in 
                        paragraph (4), in the case of an eligible 
                        beneficiary whose modified adjusted gross 
                        income for a taxable year ending with or within 
                        a calendar year (as initially determined by the 
                        Secretary in accordance with paragraph (2)) 
                        exceeds the threshold amount, the Secretary 
                        shall increase the amount of the monthly part D 
                        premium for such individual established under 
                        subsection (a) by an amount which bears the 
                        same ratio to such premium as such excess bears 
                        to an amount equal to \1/3\ of the applicable 
                        threshold amount under subparagraph (B).
                            ``(ii) Limitation.--In no event shall the 
                        increase described in clause (i) exceed an 
                        amount equal to 50 percent of the monthly part 
                        D premium established under subsection (a).
                    ``(B) Definition of threshold amount.--For purposes 
                of this subsection, the term `threshold amount' means--
                            ``(i) except as otherwise provided in this 
                        subparagraph, $75,000;
                            ``(ii) $150,000 in the case of a joint 
                        return; and
                            ``(iii) zero in the case of a taxpayer 
                        who--
                                    ``(I) is married at the close of 
                                the taxable year but does not file a 
                                joint return for such year; and
                                    ``(II) does not live apart from his 
                                spouse at all times during the taxable 
                                year.
                    ``(C) Inflation adjustment for threshold amount.--
                            ``(i) In general.--In the case of any 
                        calendar year beginning after 2004, each of the 
                        dollar amounts in clauses (i) and (ii) of 
                        subparagraph (B) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the percentage (if any) by 
                                which the average of the Consumer Price 
                                Index for all urban consumers (United 
                                States city average) for the 12-month 
                                period ending with June of the 
                                preceding calendar year, exceeds such 
                                average for the 12-month period ending 
                                with June 2003.
                            ``(ii) Rounding.--If any dollar amount 
                        after being increased under clause (i) is not a 
                        multiple of $5, such dollar amount shall be 
                        rounded to the nearest multiple of $5.
                    ``(D) Definition of modified adjusted gross 
                income.--For purposes of this subsection, the term 
                `modified adjusted gross income' means adjusted gross 
                income (as defined in section 62 of the Internal 
                Revenue Code of 1986)--
                            ``(i) determined without regard to sections 
                        135, 911, 931, and 933 of such Code; and
                            ``(ii) increased by the amount of interest 
                        received or accrued by the taxpayer during the 
                        taxable year which is exempt from tax under 
                        such Code.
                    ``(E) Definition of joint return.--For purposes of 
                this subsection, the term `joint return' has the 
                meaning given the term in section 7701(a)(38) of the 
                Internal Revenue Code of 1986.
            ``(2) Determination of modified adjusted gross income.--The 
        Secretary shall make an initial determination of the amount of 
        an eligible beneficiary's modified adjusted gross income for a 
        taxable year ending with or within a calendar year for purposes 
        of this subsection as follows:
                    ``(A) Notice.--Not later than September 1 of the 
                year preceding the year, the Secretary shall provide 
                notice to each eligible beneficiary whom the Secretary 
                finds (on the basis of the beneficiary's actual 
                modified adjusted gross income for the most recent 
                taxable year for which such information is available or 
                other information provided to the Secretary by the 
                Secretary of the Treasury) will be subject to an 
                increase under this subsection that the beneficiary 
                will be subject to such an increase, and shall include 
                in such notice the Secretary's estimate of the 
                beneficiary's modified adjusted gross income for the 
                year.
                    ``(B) Calculation based on information provided by 
                beneficiary.--If, during the 60-day period beginning on 
                the date notice is provided to an eligible beneficiary 
                under subparagraph (A), the beneficiary provides the 
                Secretary with appropriate information (as determined 
                by the Secretary) on the beneficiary's anticipated 
                modified adjusted gross income for the year, the amount 
                initially determined by the Secretary under this 
                paragraph with respect to the beneficiary shall be 
                based on the information provided by the beneficiary.
                    ``(C) Calculation based on notice amount if no 
                information is provided by the beneficiary or if the 
                secretary determines that the provided information is 
                not appropriate.--The amount initially determined by 
                the Secretary under this paragraph with respect to an 
                eligible beneficiary shall be the amount included in 
                the notice provided to the beneficiary under 
                subparagraph (A) if--
                            ``(i) the beneficiary does not provide the 
                        Secretary with information under subparagraph 
                        (B); or
                            ``(ii) the Secretary determines that the 
                        information provided by the beneficiary to the 
                        Secretary under such subparagraph is not 
                        appropriate.
            ``(3) Adjustments.--
                    ``(A) In general.--If the Secretary determines (on 
                the basis of final information provided by the 
                Secretary of the Treasury) that the amount of an 
                eligible beneficiary's actual modified adjusted gross 
                income for a taxable year ending with or within a 
                calendar year is less than or greater than the amount 
                initially determined by the Secretary under paragraph 
                (2), the Secretary shall increase or decrease the 
                amount of the beneficiary's monthly part D premium 
                under this part (as the case may be) for months during 
                the following calendar year by an amount equal to \1/
                12\ of the difference between--
                            ``(i) the total amount of all monthly part 
                        D premiums paid by the beneficiary under this 
                        part during the previous calendar year; and
                            ``(ii) the total amount of all such 
                        premiums which would have been paid by the 
                        beneficiary during the previous calendar year 
                        if the amount of the beneficiary's modified 
                        adjusted gross income initially determined 
                        under paragraph (2) were equal to the actual 
                        amount of the beneficiary's modified adjusted 
                        gross income determined under this paragraph.
                    ``(B) Interest.--
                            ``(i) Increase.--In the case of an eligible 
                        beneficiary for whom the amount initially 
                        determined by the Secretary under paragraph (2) 
                        is based on information provided by the 
                        beneficiary under subparagraph (B) of such 
                        paragraph, if the Secretary determines under 
                        subparagraph (A) that the amount of the 
                        beneficiary's actual modified adjusted gross 
                        income for a taxable year is greater than the 
                        amount initially determined under paragraph 
                        (2), the Secretary shall increase the amount 
                        otherwise determined for the year under 
                        subparagraph (A) by an amount of interest equal 
                        to the sum of the amounts determined under 
                        clause (ii) for each of the months described in 
                        such clause.
                            ``(ii) Computation.--Interest shall be 
                        computed for any month in an amount determined 
                        by applying the underpayment rate established 
                        under section 6621 of the Internal Revenue Code 
                        of 1986 (compounded daily) to any portion of 
                        the difference between the amount initially 
                        determined under paragraph (2) and the amount 
                        determined under subparagraph (A) for the 
                        period beginning on the first day of the month 
                        beginning after the eligible beneficiary 
                        provided information to the Secretary under 
                        subparagraph (B) of paragraph (2) and ending 30 
                        days before the first month for which the 
                        beneficiary's monthly part D premium is 
                        increased under this paragraph.
                            ``(iii) Exception.--Interest shall not be 
                        imposed under this subparagraph if the amount 
                        of the eligible beneficiary's modified adjusted 
                        gross income provided by the beneficiary under 
                        subparagraph (B) of paragraph (2) was not less 
                        than the beneficiary's modified adjusted gross 
                        income determined on the basis of information 
                        shown on the return of tax imposed by chapter 1 
                        of the Internal Revenue Code of 1986 for the 
                        taxable year involved.
                    ``(C) Steps to recover amounts due from previously 
                enrolled beneficiaries.--In the case of an eligible 
                beneficiary who is not enrolled under this part for any 
                calendar year for which the beneficiary's monthly part 
                D premium under this part for months during the year 
                would be increased pursuant to subparagraph (A) if the 
                beneficiary were enrolled under this part for the year, 
                the Secretary may take such steps as the Secretary 
                considers appropriate to recover from the beneficiary 
                the total amount by which the beneficiary's monthly 
                part D premium under this part for months during the 
                year would have been increased under subparagraph (A) 
                if the beneficiary were enrolled under this part for 
                the year.
                    ``(D) Deceased beneficiary.--In the case of a 
                deceased eligible beneficiary for whom the amount of 
                the monthly part D premium under this part for months 
                in a year would have been decreased pursuant to 
                subparagraph (A) if the beneficiary were not deceased, 
                the Secretary shall make a payment to the beneficiary's 
                surviving spouse (or, in the case of an eligible 
                beneficiary who does not have a surviving spouse, to 
the beneficiary's estate) in an amount equal to the difference 
between--
                            ``(i) the total amount by which the 
                        beneficiary's premium would have been decreased 
                        for all months during the year pursuant to 
                        subparagraph (A); and
                            ``(ii) the amount (if any) by which the 
                        beneficiary's premium was decreased for months 
                        during the year pursuant to subparagraph (A).
            ``(4) Waiver by secretary.--The Secretary may waive the 
        imposition of all or part of the increase of the premium or all 
        or part of any interest due under this subsection for any 
        period if the Secretary determines that a gross injustice would 
        otherwise result without such waiver.
            ``(5) Transfer to prescription drug account.--The Secretary 
        shall transfer amounts received pursuant to this subsection to 
        the Prescription Drug Account.

                ``outpatient prescription drug benefits

    ``Sec. 1860E. (a) Requirement.--A plan offered by an eligible 
entity under this part shall provide eligible beneficiaries enrolled in 
such plan with--
            ``(1) coverage of covered outpatient prescription drugs 
        with the cost-sharing described in subsection (b); and
            ``(2) access to negotiated prices for such drugs under 
        subsection (c).
    ``(b) Cost-Sharing.--
            ``(1) Deductible.--
                    ``(A) In general.--Subject to subparagraph (B), 
                there is an annual deductible that is equal to $250.
                    ``(B) Waiver of deductible for generic drugs.--
                            ``(i) In general.--An eligible entity 
                        offering a plan under this part may provide, 
                        with respect to such plan, that generic drugs 
                        are not subject to the deductible described in 
                        subparagraph (A) if the Secretary determines 
                        that the waiver of the deductible--
                                    ``(I) is tied to the performance 
                                goals described in section 
                                1860H(b)(1)(C); and
                                    ``(II) will not result in an 
                                increase in the expenditures made from 
                                the Prescription Drug Account.
                            ``(ii) Credit for amounts paid.--If the 
                        deductible is waived pursuant to clause (i), 
                        any coinsurance paid by an eligible beneficiary 
                        for the generic drug shall be credited toward 
                        the annual deductible.
            ``(2) Coinsurance.--
                    ``(A) Establishment.--
                            ``(i) In general.--Subject to subparagraph 
                        (B) and subparagraphs (A)(i) and (B) of section 
                        1860G(b)(4), if any covered outpatient drug is 
                        provided to an eligible beneficiary in a year 
                        after the beneficiary has met any deductible 
                        requirement under paragraph (1) for the year, 
                        the beneficiary shall be responsible for making 
                        payments for the drug in an amount equal to the 
                        applicable percentage of the cost of the drug.
                            ``(ii) Applicable percentage defined.--For 
                        purposes of clause (i), the `applicable 
                        percentage' means, with respect to any covered 
                        outpatient drug provided to an eligible 
                        beneficiary in a year--
                                    ``(I) 50 percent to the extent the 
                                out-of-pocket expenses of the 
                                beneficiary for such drug, when added 
                                to the out-of-pocket expenses of the 
                                beneficiary for covered outpatient 
                                drugs previously provided in the year, 
                                do not exceed $3,500;
                                    ``(II) 25 percent to the extent 
                                such expenses, when so added, exceed 
                                $3,500 but do not exceed $4,000; and
                                    ``(III) 0 percent to the extent 
                                such expenses, when so added, would 
                                exceed $4,000.
                            ``(iii) Out-of-pocket expenses defined.--
                        For purposes of clause (ii), the term `out-of-
                        pocket expenses' means expenses incurred as a 
                        result of the application of the deductible 
                        under paragraph (1) and the coinsurance 
                        required under this subsection.
                    ``(B) Reduction by eligible entity.--An eligible 
                entity offering a plan under this part may reduce the 
                applicable percentage that an eligible beneficiary 
                enrolled in the plan is subject to under subparagraph 
                (A) if the Secretary determines that such reduction--
                            ``(i) is tied to the performance goals 
                        described in section 1860H(b)(1)(C); and
                            ``(ii) will not result in an increase in 
                        the expenditures made from the Prescription 
                        Drug Account.
            ``(3) Inflation Adjustment.--
                    ``(A) In general.--In the case of any calendar year 
                beginning after 2004, each of the dollar amounts in 
                paragraphs (1)(A) and (2)(A)(ii) shall be increased by 
                an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the percentage (if any) by which the 
                        amount of average per capita expenditures under 
                        this part in the preceding calendar year 
                        exceeds the amount of such expenditures in 
                        2004.
                    ``(B) Rounding.--If any dollar amount after being 
                increased under subparagraph (A) is not a multiple of 
                $5, such dollar amount shall be rounded to the nearest 
                multiple of $5.
    ``(c) Access to Negotiated Prices.--Under a plan offered by an 
eligible entity with a contract under this part, the eligible entity 
offering such plan shall provide eligible beneficiaries enrolled in 
such plan with access to negotiated prices (including applicable 
discounts) used for payment for covered outpatient drugs, regardless of 
the fact that no benefits or only partial benefits may be payable under 
the coverage with respect to such drugs because of the application of 
the deductible under subsection (b)(1) or the coinsurance under 
subsection (b)(2).

         ``entities eligible to provide outpatient drug benefit

    ``Sec. 1860F. (a) Establishment of Panels of Plans Available in an 
Area.--
            ``(1) In general.--The Secretary shall establish procedures 
        under which the Secretary--
                    ``(A) accepts bids submitted by eligible entities 
                for the plans which such entities intend to offer in an 
                area established under subsection (b); and
                    ``(B) awards contracts to such entities to provide 
                such plans to eligible beneficiaries in the area.
            ``(2) Competitive procedures.--Competitive procedures (as 
        defined in section 4(5) of the Office of Federal Procurement 
        Policy Act (41 U.S.C. 403(5))) shall be used to enter into 
        contracts under this part.
    ``(b) Area for Contracts.--
            ``(1) Regional basis.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B) and subject to paragraph (2), the 
                contract entered into between the Secretary and an 
                eligible entity with respect to a plan shall require 
                the eligible entity to provide coverage of covered 
                outpatient drugs under the plan in a region determined 
                by the Secretary under paragraph (2).
                    ``(B) Partial regional basis.--
                            ``(i) In general.--If determined 
                        appropriate by the Secretary, the Secretary may 
                        permit the coverage described in subparagraph 
                        (A) to be provided in a partial region 
                        determined appropriate by the Secretary.
                            ``(ii) Requirements.--If the Secretary 
                        permits coverage pursuant to clause (i), the 
                        Secretary shall ensure that the partial region 
                        in which coverage is provided is--
                                    ``(I) at least the size of the 
                                commercial service area of the eligible 
                                entity for that area; and
                                    ``(II) not smaller than a State.
            ``(2) Determination.--
                    ``(A) In general.--In determining regions for 
                contracts under this part, the Secretary shall--
                            ``(i) take into account the number of 
                        eligible beneficiaries in an area in order to 
                        encourage participation by eligible entities; 
                        and
                            ``(ii) ensure that there are at least 10 
                        different regions in the United States.
                    ``(B) No administrative or judicial review.--The 
                determination of coverage areas under this part shall 
                not be subject to administrative or judicial review.
    ``(c) Submission of Bids.--
            ``(1) Submission.--
                    ``(A) In general.--Subject to subparagraph (B), 
                each eligible entity desiring to offer a plan under 
                this part in an area shall submit a bid with respect to 
                such plan to the Secretary at such time, in such 
                manner, and accompanied by such information as the 
                Secretary may reasonably require.
                    ``(B) Bid that covers multiple areas.--The 
                Secretary shall permit an eligible entity to submit a 
                single bid for multiple areas if the bid is applicable 
                to all such areas.
            ``(2) Required information.--The bids described in 
        paragraph (1) shall include--
                    ``(A) a proposal for the estimated prices of 
                covered outpatient drugs and the projected annual 
                increases in such prices, including differentials 
                between formulary and nonformulary prices, if 
                applicable;
                    ``(B) a statement regarding the amount that the 
                entity will charge the Secretary for administering and 
                delivering the benefits under the contract;
                    ``(C) a statement regarding whether the entity will 
                waive the deductible for generic drugs pursuant to 
                section 1860E(b)(1)(B), and if so, how such waiver is 
                tied to the performance goals described in section 
                1860H(b)(1)(C);
                    ``(D) a statement regarding whether the entity will 
                reduce the applicable coinsurance percentage pursuant 
                to section 1860E(b)(2)(B) and if so, the amount of such 
                reduction and how such reduction is tied to the 
                performance goals described in section 1860H(b)(1)(C);
                    ``(E) a detailed description of the performance 
                goals for which the administrative fee of the entity 
                will be subject to risk pursuant to section 
                1860H(b)(1)(C);
                    ``(F) a detailed description of access to pharmacy 
                services provided under the plan, including information 
                regarding--
                            ``(i) whether the entity will use a 
                        preferred pharmacy network under the plan;
                            ``(ii) if a preferred pharmacy network is 
                        used, whether the entity will offer access to 
                        pharmacies that are outside such network, and 
                        if such access is provided, the increased 
                        coinsurance that beneficiaries will be subject 
                        to if they obtain drugs at such pharmacies;
                    ``(G) if the entity utilizes a formulary, a 
                detailed description of the procedures and standards 
                the entity will use for--
                            ``(i) adding new drugs to a therapeutic 
                        class within the formulary; and
                            ``(ii) determining when and how often the 
                        formulary should be modified;
                    ``(H) a detailed description of any ownership or 
                shared financial interests with other entities involved 
                in the delivery of the benefit as proposed under the 
                plan;
                    ``(I) a detailed description of the entity's 
                estimated marketing and advertising expenditures 
                related to enrolling and retaining eligible 
                beneficiaries; and
                    ``(J) such other information that the Secretary 
                determines is necessary in order to carry out this 
                part, including information relating to the bidding 
                process under this part.
    ``(d) Access to Benefits in Certain Areas.--
            ``(1) Areas not covered by contracts.--The Secretary shall 
        develop procedures for the provision of covered outpatient 
        drugs under this part to each eligible beneficiary enrolled 
        under this part that resides in an area that is not covered by 
        any contract under this part.
            ``(2) Beneficiaries residing in different locations.--The 
        Secretary shall develop procedures to ensure that each eligible 
        beneficiary enrolled under this part that resides in different 
        areas in a year is provided the benefits under this part 
        throughout the entire year.
    ``(e) Awarding of Contracts.--
            ``(1) Number of contracts.--The Secretary shall, consistent 
        with the requirements of this part and the goal of containing 
        costs under this title, award in a competitive manner at least 
        2 contracts to offer a plan in an area, unless only 1 bidding 
        entity (and the plan offered by the entity) meet the minimum 
        standards specified under this part and by the Secretary.
            ``(2) Determination.--In determining which of the eligible 
        entities that submitted bids that meet the minimum standards 
        specified under this part and by the Secretary to award a 
        contract, the Secretary shall consider the comparative merits 
        of each bid, as determined on the basis of the past performance 
        of the entity and other relevant factors, with respect to--
                    ``(A) how well the entity (and the plan offered by 
                the entity) meet such minimum standards;
                    ``(B) the amount that the entity will charge the 
                Secretary for administering and delivering the benefits 
                under the contract;
                    ``(C) the performance goals for which the 
                administrative fee of the entity will be subject to 
                risk pursuant to section 1860H(b)(1)(C);
                    ``(D) the proposed negotiated prices of covered 
                outpatient drugs and annual increases in such prices;
                    ``(E) the factors described in section 1860C(b)(2);
                    ``(F) prior experience of the entity in 
                administering a prescription drug benefit program;
                    ``(G) effectiveness of the entity and plan in 
                containing costs through pricing incentives and 
                utilization management; and
                    ``(H) such other factors as the Secretary deems 
                necessary to evaluate the merits of each bid.
            ``(3) Exception to conflict of interest rules.--In awarding 
        contracts under this part, the Secretary may waive conflict of 
        interest laws generally applicable to Federal acquisitions 
        (subject to such safeguards as the Secretary may find necessary 
        to impose) in circumstances where the Secretary finds that such 
        waiver--
                    ``(A) is not inconsistent with the--
                            ``(i) purposes of the programs under this 
                        title; or
                            ``(ii) best interests of beneficiaries 
                        enrolled under this part; and
                    ``(B) permits a sufficient level of competition for 
                such contracts, promotes efficiency of benefits 
                administration, or otherwise serves the objectives of 
                the program under this part.
            ``(4) No administrative or judicial review.--The 
        determination of the Secretary to award or not award a contract 
        to an eligible entity with respect to a plan under this part 
        shall not be subject to administrative or judicial review.
    ``(f) Approval of Marketing Material and Application Forms.--The 
provisions of section 1851(h) shall apply to marketing material and 
application forms under this part in the same manner as such provisions 
apply to marketing material and application forms under part C.
    ``(g) Duration of Contracts.--Each contract awarded under this part 
shall be for a term of at least 2 years but not more than 5 years, as 
determined by the Secretary.

               ``minimum standards for eligible entities

    ``Sec. 1860G. (a) In General.--The Secretary shall not award a 
contract to an eligible entity under this part unless the Secretary 
finds that the eligible entity agrees to comply with such terms and 
conditions as the Secretary shall specify, including the following:
            ``(1) Quality and financial standards.--The eligible entity 
        meets the quality and financial standards specified by the 
        Secretary.
            ``(2) Procedures to ensure proper utilization, compliance, 
        and avoidance of adverse drug reactions.--The eligible entity 
        has in place drug utilization review procedures to ensure--
                    ``(A) the appropriate utilization by eligible 
                beneficiaries enrolled in the plan covered by the 
                contract of the benefits to be provided under the plan; 
                and
                    ``(B) the avoidance of adverse drug reactions among 
                such beneficiaries, including problems due to 
                therapeutic duplication, drug-disease 
                contraindications, drug-drug interactions (including 
                serious interactions with nonprescription or over-the-
                counter drugs), incorrect drug dosage or duration of 
                drug treatment, drug-allergy interactions, and clinical 
                abuse and misuse.
            ``(3) Patient protections.--
                    ``(A) Access.--
                            ``(i) In general.--The eligible entity 
                        ensures that the covered outpatient drugs are 
                        accessible and convenient to eligible 
                        beneficiaries enrolled in the plan covered by 
                        the contract, including by offering the 
                        services 24 hours a day and 7 days a week for 
                        emergencies.
                            ``(ii) Preferred pharmacy networks.--If the 
                        eligible entity utilizes a preferred pharmacy 
                        network, the network complies with the 
                        standards under subsection (b)(3).
                    ``(B) Ensuring that beneficiaries are not 
                overcharged.--The eligible entity has procedures in 
                place to ensure that--
                            ``(i) the total charge for each covered 
                        outpatient drug dispensed to an eligible 
                        beneficiary enrolled in the plan covered by the 
                        contract does not exceed the negotiated price 
                        for the drug (as reported to the Secretary 
                        pursuant to paragraph (5)(A)); and
                            ``(ii) the retail pharmacy dispensing the 
                        drug does not charge (or collect from) such 
                        beneficiary an amount that exceeds the 
                        beneficiary's obligation (as determined in 
                        accordance with the provisions of this part) of 
                        the negotiated price.
                    ``(C) Retail pharmacy meets minimum quality and 
                technology standards.--The eligible entity ensures that 
                any retail pharmacy that it contracts with to deliver 
                benefits under this part meets minimum quality and 
                technology standards (as established by the Secretary).
                    ``(D) Continuity of care.--
                            ``(i) In general.--The eligible entity 
                        ensures that, in the case of an eligible 
                        beneficiary who loses coverage under this part 
                        with such entity under circumstances that would 
                        permit a special election period (as 
                        established by the Secretary under section 
                        1860B(b)(1)), the entity will continue to 
                        provide coverage under this part to such 
                        beneficiary until the beneficiary enrolls and 
                        receives such coverage with another eligible 
                        entity under this part or, if eligible, with a 
                        Medicare+Choice organization.
                            ``(ii) Limited period.--In no event shall 
                        an eligible entity be required to provide the 
                        extended coverage required under clause (i) 
                        beyond the date which is 30 days after the 
                        coverage with such entity would have terminated 
                        but for this subparagraph.
                    ``(E) Procedures regarding the determination of 
                drugs that are medically necessary.--The eligible 
                entity has in place procedures to determine if a drug 
                is medically necessary to prevent or slow the 
                deterioration of, or improve or maintain, the health of 
                an eligible beneficiary enrolled in the plan that is 
                covered by the contract. Such procedures shall require 
                that such determinations are based on professional 
                medical judgment, the medical condition of the 
                beneficiary, and other medical evidence.
                    ``(F) Procedures regarding denials of care.--The 
                eligible entity has in place procedures to ensure--
                            ``(i) a timely internal and external review 
                        and resolution of denials of coverage (in whole 
                        or in part) and complaints (including those 
                        regarding the use of formularies under 
                        subsection (b)) by eligible beneficiaries 
                        enrolled in the plan that is covered by the 
                        contract, or by providers, pharmacists, and 
                        other individuals acting on behalf of each such 
                        beneficiary (with the beneficiary's consent) in 
                        accordance with requirements (as established by 
                        the Secretary) that are comparable to such 
                        requirements for Medicare+Choice organizations 
                        under part C; and
                            ``(ii) that eligible beneficiaries are 
                        provided with information regarding the appeals 
                        procedures under this part at the time of 
                        enrollment with the entity.
                    ``(G) Procedures regarding patient 
                confidentiality.--Insofar as an eligible entity 
                maintains individually identifiable medical records or 
                other health information regarding eligible 
                beneficiaries enrolled in the plan that is covered by 
                the contract, the entity has in place procedures to--
                            ``(i) safeguard the privacy of any 
                        individually identifiable beneficiary 
                        information;
                            ``(ii) maintain such records and 
                        information in a manner that is accurate and 
                        timely;
                            ``(iii) ensure timely access by such 
                        beneficiaries to such records and information; 
                        and
                            ``(iv) otherwise comply with applicable 
                        laws relating to patient confidentiality.
                    ``(H) Procedures regarding transfer of medical 
                records.--
                            ``(i) In general.--The eligible entity has 
                        in place procedures for the timely transfer of 
                        records and information described in 
                        subparagraph (G) (with respect to a beneficiary 
                        who loses coverage under this part with the 
                        entity and enrolls with another entity 
                        (including a Medicare+Choice organization) 
                        under this part) to such other entity.
                            ``(ii) Patient confidentiality.--The 
                        procedures described in clause (i) shall comply 
                        with the patient confidentiality procedures 
                        described in subparagraph (G).
                    ``(I) Procedures regarding medical errors.--The 
                eligible entity has in place procedures for working 
                with the Secretary to deter medical errors related to 
                the provision of covered outpatient drugs.
            ``(4) Procedures to control fraud, abuse, and waste.--The 
        eligible entity has in place procedures to control fraud, 
        abuse, and waste.
            ``(5) Reporting requirements.--
                    ``(A) In general.--The eligible entity provides the 
                Secretary with reports containing information regarding 
                the following:
                            ``(i) The prices that the eligible entity 
                        is paying for covered outpatient drugs.
                            ``(ii) The prices that eligible 
                        beneficiaries enrolled in the plan that is 
                        covered by the contract will be charged for 
                        covered outpatient drugs.
                            ``(iii) The administrative costs of 
                        providing such benefits.
                            ``(iv) Utilization of such benefits.
                            ``(v) Marketing and advertising 
                        expenditures related to enrolling and retaining 
                        eligible beneficiaries.
                    ``(B) Timeframe for submitting reports.--
                            ``(i) In general.--The eligible entity 
                        shall submit a report described in subparagraph 
                        (A) to the Secretary within 3 months after the 
                        end of each 12-month period in which the 
                        eligible entity has a contract under this part. 
                        Such report shall contain information 
                        concerning the benefits provided during such 
                        12-month period.
                            ``(ii) Last year of contract.--In the case 
                        of the last year of a contract under this part, 
                        the Secretary may require that a report 
                        described in subparagraph (A) be submitted 3 
                        months prior to the end of the contract. Such 
                        report shall contain information concerning the 
                        benefits provided between the period covered by 
                        the most recent report under this subparagraph 
                        and the date that a report is submitted under 
                        this clause.
                    ``(C) Confidentiality of information.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of law and subject to clause 
                        (ii), information disclosed by an eligible 
                        entity pursuant to subparagraph (A) (except for 
                        information described in clause (ii) of such 
                        subparagraph) is confidential and shall only be 
                        used by the Secretary for the purposes of, and 
                        to the extent necessary, to carry out this 
                        part.
                            ``(ii) Utilization data.--Subject to 
                        patient confidentiality laws, the Secretary 
                        shall make information disclosed by an eligible 
                        entity pursuant to subparagraph (A)(iv) 
                        (regarding utilization data) available for 
                        research purposes. The Secretary may charge a 
                        reasonable fee for making such information 
                        available.
            ``(6) Approval of marketing material and application 
        forms.--The eligible entity complies with the requirements 
        described in section 1860F(f).
            ``(7) Records and audits.--The eligible entity maintains 
        adequate records related to the administration of the benefit 
        under this part and affords the Secretary access to such 
        records for auditing purposes.
    ``(b) Special Rules Regarding Cost-Effective Provision of 
Benefits.--
            ``(1) In general.--In providing the benefits under a 
        contract under this part, an eligible entity may--
                    ``(A) employ mechanisms to provide the benefits 
                economically, including the use of--
                            ``(i) formularies (pursuant to paragraph 
                        (2));
                            ``(ii) alternative methods of distribution;
                            ``(iii) preferred pharmacy networks 
                        (pursuant to paragraph (3)); and
                            ``(iv) generic drug substitution;
                    ``(B) use mechanisms to encourage eligible 
                beneficiaries to select cost-effective drugs or less 
                costly means of receiving drugs, including the use of 
                pharmacy incentive programs, therapeutic interchange 
                programs, and disease management programs; and
                    ``(C) encourage pharmacy providers to--
                            ``(i) inform beneficiaries of the 
                        differentials in price between generic and 
                        nongeneric drug equivalents; and
                            ``(ii) provide medication therapy 
                        management programs in order to enhance 
                        beneficiaries' understanding of the appropriate 
                        use of medications and to reduce the risk of 
                        potential adverse events associated with 
                        medications.
            ``(2) Formularies.--If an eligible entity uses a formulary 
        under this part, such formulary shall comply with standards 
established by the Secretary in consultation with the Medicare 
Prescription Drug Advisory Committee established under section 1860K. 
Such standards shall require that the eligible entity--
                    ``(A) use a pharmacy and therapeutic committee 
                (that meets the standards for a pharmacy and 
                therapeutic committee established by the Secretary in 
                consultation with such Medicare Prescription Drug 
                Advisory Committee) to develop and implement the 
                formulary;
                    ``(B) include in the formulary--
                            ``(i) at least 1 drug from each therapeutic 
                        class (as defined by the Secretary in 
                        consultation with such Medicare Prescription 
                        Drug Advisory Committee);
                            ``(ii) if there is more than 1 drug 
                        available in a therapeutic class, at least 2 
                        drugs from such class unless determined 
                        clinically inappropriate in accordance with 
                        standards established by the Secretary; and
                            ``(iii) if there are more than 2 drugs 
                        available in a therapeutic class, at least 2 
                        drugs from such class and a generic drug 
                        substitute if available unless determined 
                        clinically inappropriate in accordance with 
                        standards established by the Secretary;
                    ``(C) develop procedures for the modification of 
                the formulary, including for the addition of new drugs 
                to an existing therapeutic class;
                    ``(D) provide for coverage of nonformulary drugs 
                when determined (pursuant to subparagraph (E) or (F)(i) 
                of subsection (a)(3)) to be medically necessary to 
                prevent or slow the deterioration of, or improve or 
                maintain, the health of an eligible beneficiary;
                    ``(E) disclose to current and prospective 
                beneficiaries and to providers in the service area the 
                nature of the formulary restrictions, including 
                information regarding the drugs included in the 
                formulary, coinsurance, and any difference in the cost-
                sharing for different types of drugs; and
                    ``(F) provide a reasonable amount of notice to 
                beneficiaries enrolled in the plan that is covered by 
                the contract under this part of any change in the 
                formulary.
            ``(3) Preferred pharmacy networks.--
                    ``(A) In general.--If an eligible entity uses a 
                preferred pharmacy network to deliver benefits under 
                this part, such network shall meet minimum access 
                standards established by the Secretary.
                    ``(B) Standards.--In establishing standards under 
                subparagraph (A), the Secretary shall take into account 
                reasonable distances to pharmacy services in both urban 
                and rural areas.
            ``(4) Construction.--
                    ``(A) Formularies.--Nothing in this part shall be 
                construed as precluding an eligible entity from--
                            ``(i) requiring cost-sharing for 
                        nonformulary drugs that is higher than the 
                        cost-sharing established in section 
                        1860E(b)(2), except that such entity shall 
                        provide for coverage of a nonformulary drug at 
                        the same cost-sharing level as a drug within 
                        the formulary if such nonformulary drug is 
                        determined (pursuant to subparagraph (E) or 
                        (F)(i) of subsection (a)(3)) to be medically 
                        necessary to prevent or slow the deterioration 
                        of, or improve or maintain, the health of an 
                        eligible beneficiary;
                            ``(ii) educating prescribing providers, 
                        pharmacists, and beneficiaries about the 
                        medical and cost benefits of formulary drugs 
                        (including generic drugs); or
                            ``(iii) requesting prescribing providers to 
                        consider a formulary drug prior to dispensing 
                        of a nonformulary drug, as long as such request 
                        does not unduly delay the provision of the 
                        drug.
                    ``(B) Preferred pharmacy networks.--Nothing in this 
                part shall be construed as precluding the entity from 
                requiring cost-sharing for a covered outpatient drug 
                that is higher than the cost-sharing established in 
                section 1860E(b)(2) if the drug was obtained at a 
                pharmacy that is not in such network.

                               ``payments

    ``Sec. 1860H. (a) Procedures for Payments to Eligible Entities.--
The Secretary shall establish procedures for making payments to each 
eligible entity with a contract under this part for the administration 
and delivery of the benefits under this part.
    ``(b) Requirements for Procedures.--
            ``(1) In general.--The procedures established under 
        subsection (a) shall provide for the following:
                    ``(A) Administrative payment.--Payment of 
                administrative fees for such administration and 
                delivery.
                    ``(B) Reimbursement for costs of drugs provided.--
                Payments for the costs of covered outpatient drugs 
                provided to eligible beneficiaries enrolled under this 
                part and in a plan offered by the eligible entity.
                    ``(C) Risk requirement.--An adjustment of a 
                percentage (determined under paragraph (2)) of the 
                administrative fee payments made to an eligible entity 
                to ensure that the entity, in administering and 
                delivering the benefits under this part, pursues 
                performance goals established by the Secretary, 
                including the following:
                            ``(i) Quality service.--The entity provides 
                        eligible beneficiaries enrolled in the plan 
                        that is covered by the contract under this part 
                        with quality services, as measured by such 
                        factors as sustained pharmacy network access, 
                        timeliness and accuracy of service delivery in 
                        claims processing and card production, pharmacy 
                        and member service support access, response 
time in mail delivery service, and timely action with regard to appeals 
and current beneficiary service surveys.
                            ``(ii) Quality clinical care.--The entity 
                        provides such beneficiaries with quality 
                        clinical care, as measured by such factors as 
                        providing--
                                    ``(I) notification to such 
                                beneficiaries and to providers in order 
                                to prevent adverse drug reactions; and
                                    ``(II) specific clinical 
                                suggestions to improve health and 
                                patient and prescriber education as 
                                appropriate.
                            ``(iii) Control of medicare costs.--The 
                        entity contains costs to the Prescription Drug 
                        Account, as measured by generic substitution 
                        rates, price discounts, and other factors 
                        determined appropriate by the Secretary that do 
                        not reduce the access of beneficiaries to 
                        medically necessary covered outpatient drugs.
            ``(2) Percentage of payment tied to risk.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall determine the percentage of the 
                administrative payments to an eligible entity that will 
                be tied to the performance goals described in paragraph 
                (1)(C).
                    ``(B) Limitation on risk to ensure program 
                stability.--In order to provide for program stability, 
                the Secretary may not establish a percentage to be 
                adjusted under this subsection at a level that 
                jeopardizes the ability of an eligible entity to 
                administer and deliver the benefits under this part or 
                administer and deliver such benefits in a quality 
                manner.
            ``(3) Risk adjustment of payments based on enrollees in 
        plan.--To the extent that an eligible entity is at risk under 
        this subsection, the procedures established under subsection 
        (a) may include a methodology for risk adjusting the payments 
        made to such entity based on the differences in actuarial risk 
        of different enrollees being served if the Secretary determines 
        such adjustments to be necessary and appropriate.
    ``(c) Payments to Medicare+Choice Organizations.--For provisions 
related to payments to Medicare+Choice organizations for the 
administration and delivery of benefits under this part to eligible 
beneficiaries enrolled in a Medicare+Choice plan offered by the 
organization, see section 1853(c)(8).
    ``(d) Secondary Payer Provisions.--The provisions of section 
1862(b) shall apply to the benefits provided under this part.

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

    ``Sec. 1860I. (a) Program Authority.--The Secretary is authorized 
to develop and implement a program under this section to be known as 
the `Employer Incentive Program' that encourages employers and other 
sponsors of employment-based health care coverage to provide adequate 
prescription drug benefits to retired individuals by subsidizing, in 
part, the sponsor's cost of providing coverage under qualifying plans.
    ``(b) Sponsor Requirements.--In order to be eligible to receive an 
incentive payment under this section with respect to coverage of an 
individual under a qualified retiree prescription drug plan (as defined 
in subsection (e)(3)), a sponsor shall meet the following requirements:
            ``(1) Assurances.--The sponsor shall--
                    ``(A) annually attest, and provide such assurances 
                as the Secretary may require, that the coverage offered 
                by the sponsor is a qualified retiree prescription drug 
                plan, and will remain such a plan for the duration of 
                the sponsor's participation in the program under this 
                section; and
                    ``(B) guarantee that it will give notice to the 
                Secretary and covered retirees--
                            ``(i) at least 120 days before terminating 
                        its plan; and
                            ``(ii) immediately upon determining that 
                        the actuarial value of the prescription drug 
                        benefit under the plan falls below the 
                        actuarial value of the outpatient prescription 
                        drug benefit under this part.
            ``(2) Beneficiary information.--The sponsor shall report to 
        the Secretary, for each calendar quarter for which it seeks an 
        incentive payment under this section, the names and social 
        security numbers of all retirees (and their spouses and 
        dependents) covered under such plan during such quarter and the 
        dates (if less than the full quarter) during which each such 
        individual was covered.
            ``(3) Audits.--The sponsor and the employment-based retiree 
        health coverage plan seeking incentive payments 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 drug coverage, the accuracy 
        of incentive payments made, and such other matters as may be 
        appropriate.
            ``(4) Other requirements.--The sponsor shall provide such 
        other information, and comply with such other requirements, as 
        the Secretary may find necessary to administer the program 
        under this section.
    ``(c) Incentive Payments.--
            ``(1) In general.--A sponsor that meets the requirements of 
        subsection (b) with respect to a quarter in a calendar year 
        shall be entitled to have payment made by the Secretary on a 
        quarterly basis (to the sponsor or, at the sponsor's direction, 
        to the appropriate employment-based health plan) of an 
        incentive payment, in the amount determined in paragraph (2), 
        for each retired individual (or spouse) who--
                    ``(A) was covered under the sponsor's qualified 
                retiree prescription drug plan during such quarter; and
                    ``(B) was eligible for but was not enrolled in the 
                outpatient prescription drug benefit program under this 
                part.
            ``(2) Amount of incentive.--The payment under this section 
        with respect to each individual described in paragraph (1) for 
        a month shall be equal to \2/3\ of the monthly part D premium 
        amount payable by an eligible beneficiary enrolled under this 
        part, as set for the calendar year pursuant to section 
        1860D(a)(2).
            ``(3) Payment date.--The incentive under this section with 
        respect to a calendar quarter shall be payable as of the end of 
        the next succeeding calendar quarter.
    ``(d) Civil Money Penalties.--A sponsor, health plan, or other 
entity that the Secretary determines has, directly or through its 
agent, provided information in connection with a request for an 
incentive payment under this section that the entity knew or should 
have known to be false shall be subject to a civil monetary penalty in 
an amount up to 3 times the total incentive amounts under subsection 
(c) that were paid (or would have been payable) on the basis of such 
information.
    ``(e) Definitions.--In this section:
            ``(1) Employment-based retiree health coverage.--The term 
        `employment-based retiree health coverage' means health 
        insurance or other coverage of health care costs for retired 
        individuals (or for such individuals and their spouses and 
        dependents) based on their status as former employees or labor 
        union members.
            ``(2) Employer.--The term `employer' has the meaning given 
        the term in section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (except that such term shall include only 
        employers of 2 or more employees).
            ``(3) Qualified retiree prescription drug plan.--The term 
        `qualified retiree prescription drug plan' means health 
        insurance coverage included in employment-based retiree health 
        coverage that--
                    ``(A) provides coverage of the cost of prescription 
                drugs whose actuarial value (as defined by the 
                Secretary) to each retired beneficiary equals or 
                exceeds the actuarial value of the benefits provided to 
                an individual enrolled in the outpatient prescription 
                drug benefit program under this part; and
                    ``(B) does not deny, limit, or condition the 
                coverage or provision of prescription drug benefits for 
                retired individuals based on age or any health status-
                related factor described in section 2702(a)(1) of the 
                Public Health Service Act.
            ``(4) Sponsor.--The term `sponsor' has the meaning given 
        the term `plan sponsor' in section 3(16)(B) of the Employer 
        Retirement Income Security Act of 1974.
    ``(f) Authorization of Appropriations.--There are authorized to be 
appropriated from time to time, out of any moneys in the Treasury not 
otherwise appropriated, such sums as may be necessary to carry out the 
program under this section.

   ``prescription drug account in the federal supplementary medical 
                          insurance trust fund

    ``Sec. 1860J. (a) Establishment.--
            ``(1) In general.--There is created within the Federal 
        Supplementary Medical Insurance Trust Fund established by 
        section 1841 an account to be known as the `Prescription Drug 
        Account' (in this section referred to as the `Account').
            ``(2) Funds.--The Account shall consist of such gifts and 
        bequests as may be made as provided in section 201(i)(1), and 
        such amounts as may be deposited in, or appropriated to, the 
        account as provided in this part.
            ``(3) Separate from rest of trust fund.--Funds provided 
        under this part to the Account shall be kept separate from all 
        other funds within the Federal Supplementary Medical Insurance 
        Trust Fund.
    ``(b) Payments From Account.--
            ``(1) In general.--The Managing Trustee shall pay from time 
        to time from the Account such amounts as the Secretary 
        certifies are necessary to make payments to operate the program 
        under this part, including payments to eligible entities under 
        section 1860H and payments with respect to administrative 
        expenses under this part in accordance with section 201(g).
            ``(2) Transfer to part a and b trust funds for 
        medicare+choice payments.--The Managing Trustee shall establish 
        procedures for the transfer of funds from the Account, in an 
        amount determined appropriate by the Secretary, to the Federal 
        Hospital Insurance Trust Fund and the Federal Supplementary 
        Medical Insurance Trust Fund in order to reimburse such trust 
        funds for payments to Medicare+Choice organizations for the 
        provision of covered outpatient drugs pursuant to section 
        1853(c)(8).
            ``(3) Treatment in relation to part b premium.--Amounts 
        payable from the Account shall not be taken into account in 
        computing actuarial rates or premium amounts under section 
        1839.
    ``(c) Appropriations To Cover Benefits and Administrative Costs.--
There are appropriated to the Account in a fiscal year, out of any 
moneys in the Treasury not otherwise appropriated, an amount equal to 
the amount by which the benefits and administrative costs of providing 
the benefits under this part in the year exceed the premiums collected 
under section 1860D(a)(4) for the year.

            ``medicare prescription drug advisory committee

    ``Sec. 1860K. (a) Establishment of Committee.--There is established 
a Medicare Prescription Drug Advisory Committee (in this section 
referred to as the `Committee').
    ``(b) Functions of Committee.--On and after March 1, 2002, the 
Committee shall advise the Secretary on policies related to--
            ``(1) the development of guidelines for the implementation 
        and administration of the outpatient prescription drug benefit 
        program under this part; and
            ``(2) the development of--
                    ``(A) standards for a pharmacy and therapeutics 
                committee required of eligible entities under section 
                1860G(b)(2)(A);
                    ``(B) standards required of eligible entities under 
                subparagraphs (E) and (F) of section 1860G(a)(3) for 
                determining if a drug is medically necessary to prevent 
                or slow the deterioration of, or improve or maintain, 
                the health of an eligible beneficiary;
                    ``(C) standards for--
                            ``(i) defining therapeutic classes; and
                            ``(ii) adding new therapeutic classes to a 
                        formulary;
                    ``(D) procedures to evaluate the bids submitted by 
                eligible entities under this part; and
                    ``(E) procedures to ensure that eligible entities 
                with a contract under this part are in compliance with 
                the requirements under this part.
    ``(c) Structure and Membership of the Committee.--
            ``(1) Structure.--The Committee shall be composed of 19 
        members who shall be appointed by the Secretary.
            ``(2) Membership.--
                    ``(A) In general.--The members of the Committee 
                shall be chosen on the basis of their integrity, 
                impartiality, and good judgment, and shall be 
                individuals who are, by reason of their education, 
                experience, and attainments, exceptionally qualified to 
                perform the duties of members of the Committee.
                    ``(B) Specific members.--Of the members appointed 
                under paragraph (1)--
                            ``(i) nine shall be chosen to represent 
                        physicians;
                            ``(ii) four shall be chosen to represent 
                        pharmacists;
                            ``(iii) one shall be chosen to represent 
                        the Centers for Medicare & Medicaid Services;
                            ``(iv) four shall be chosen to represent 
                        actuaries, pharmacoeconomists, researchers, and 
                        other appropriate experts; and
                            ``(v) one shall be chosen to represent 
                        emerging drug technologies.
    ``(d) Terms of Appointment.--Each member of the Committee shall 
serve for a term determined appropriate by the Secretary. The terms of 
service of the members initially appointed shall begin on January 1, 
2002.
    ``(e) Chairperson.--The Secretary shall designate a member of the 
Committee as Chairperson. The term as Chairperson shall be for a 1-year 
period.
    ``(f) Committee Personnel Matters.--
            ``(1) Members.--
                    ``(A) Compensation.--Each member of the Committee 
                who is not an officer or employee of the Federal 
                Government shall be compensated at a rate equal to the 
                daily equivalent of the annual rate of basic pay 
                prescribed for level IV of the Executive Schedule under 
                section 5315 of title 5, United States Code, for each 
                day (including travel time) during which such member is 
                engaged in the performance of the duties of the 
                Committee. All members of the Committee who are 
                officers or employees of the United States shall serve 
                without compensation in addition to that received for 
                their services as officers or employees of the United 
                States.
                    ``(B) Travel expenses.--The members of the 
                Committee shall be allowed travel expenses, including 
                per diem in lieu of subsistence, at rates authorized 
                for employees of agencies under subchapter I of chapter 
                57 of title 5, United States Code, while away from 
                their homes or regular places of business in the 
                performance of services for the Committee.
            ``(2) Staff.--The Committee may appoint such personnel as 
        the Committee considers appropriate.
    ``(g) Operation of the Committee.--
            ``(1) Meetings.--The Committee shall meet at the call of 
        the Chairperson (after consultation with the other members of 
        the Committee) not less often than quarterly to consider a 
        specific agenda of issues, as determined by the Chairperson 
        after such consultation.
            ``(2) Quorum.--Ten members of the Committee shall 
        constitute a quorum for purposes of conducting business.
    ``(h) Federal Advisory Committee Act.--Section 14 of the Federal 
Advisory Committee Act (5 U.S.C. App.) shall not apply to the 
Committee.
    ``(i) Transfer of Personnel, Resources, and Assets.--For purposes 
of carrying out its duties, the Secretary and the Committee may provide 
for the transfer to the Committee of such civil service personnel in 
the employ of the Department of Health and Human Services (including 
the Centers for Medicare & Medicaid Services), and such resources and 
assets of the Department used in carrying out this title, as the 
Committee requires.
    ``(j) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.''.
    (b) Exclusions From Coverage.--
            (1) Application to part d.--Section 1862(a) of the Social 
        Security Act (42 U.S.C. 1395y(a)) is amended in the matter 
        preceding paragraph (1) by striking ``part A or part B'' and 
        inserting ``part A, B, or D''.
            (2) Prescription drugs not excluded from coverage if 
        reasonable and necessary.--Section 1862(a)(1) of the Social 
        Security Act (42 U.S.C. 1395y(a)(1)) is amended--
                    (A) in subparagraph (H), by striking ``and'' at the 
                end;
                    (B) in subparagraph (I), by striking the semicolon 
                at the end and inserting ``, and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(J) in the case of prescription drugs covered 
                under part D, which are not reasonable and necessary to 
                prevent or slow the deterioration of, or improve or 
                maintain, the health of eligible beneficiaries;''.
    (c) Conforming Amendments to Federal Supplementary Medical 
Insurance Trust Fund.--Section 1841 of the Social Security Act (42 
U.S.C. 1395t) is amended--
            (1) in the last sentence of subsection (a)--
                    (A) by striking ``and'' before ``such amounts''; 
                and
                    (B) by inserting before the period the following: 
                ``, and such amounts as may be deposited in, or 
                appropriated to, the Prescription Drug Account 
                established by section 1860J'';
            (2) in subsection (g), by inserting after ``by this part,'' 
        the following: ``the payments provided for under part D (in 
        which case the payments shall be made from the Prescription 
        Drug Account in the Trust Fund),'';
            (3) in subsection (h), by inserting after ``1840(d)'' the 
        following: ``and section 1860D(a)(4) (in which case the 
        payments shall be made from the Prescription Drug Account in 
        the Trust Fund)''; and
            (4) in subsection (i), by inserting after ``section 
        1840(b)(1)'' the following: ``, section 1860D(a)(4) (in which 
        case the payments shall be made from the Prescription Drug 
        Account in the Trust Fund),''.
    (d) Conforming References to Previous Part D.--
            (1) In general.--Any reference in law (in effect before the 
        date of enactment of this Act) to part D of title XVIII of the 
        Social Security Act is deemed a reference to part E of such 
        title (as in effect after such date).
            (2) Secretarial submission of legislative proposal.--Not 
        later than 6 months after the date of enactment of this Act, 
        the Secretary of Health and Human Services shall submit to the 
        appropriate committees of Congress a legislative proposal 
        providing for such technical and conforming amendments in the 
        law as are required by the provisions of this title.

SEC. 302. PART D BENEFITS UNDER MEDICARE+CHOICE PLANS.

    (a) Eligibility, Election, and Enrollment.--Section 1851 of the 
Social Security Act (42 U.S.C. 1395w-21) is amended--
            (1) in subsection (a)(1)(A), by striking ``parts A and B'' 
        and inserting ``parts A, B, and D''; and
            (2) in subsection (i)(1), by striking ``parts A and B'' and 
        inserting ``parts A, B, and D''.
    (b) Voluntary Beneficiary Enrollment for Drug Coverage.--Section 
1852(a)(1)(A) of the Social Security Act (42 U.S.C. 1395w-22(a)(1)(A)) 
is amended by inserting ``(and under part D to individuals also 
enrolled under that part)'' after ``parts A and B''.
    (c) Access to Services.--Section 1852(d)(1) of the Social Security 
Act (42 U.S.C. 1395w-22(d)(1)) is amended--
            (1) in subparagraph (D), by striking ``and'' at the end;
            (2) in subparagraph (E), by striking the period at the end 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(F) in the case of covered outpatient drugs (as 
                defined in section 1860(1)) provided to individuals 
                enrolled under part D, the organization complies with 
                the access requirements applicable under part D.''.
    (d) Payments to Organizations.--Section 1853(a)(1)(A) of the Social 
Security Act (42 U.S.C. 1395w-23(a)(1)(A)) is amended--
            (1) by inserting ``determined separately for the benefits 
        under parts A and B and under part D (for individuals enrolled 
        under that part)'' after ``as calculated under subsection 
        (c)'';
            (2) by striking ``that area, adjusted for such risk 
        factors'' and inserting ``that area. In the case of payment for 
        the benefits under parts A and B, such payment shall be 
        adjusted for such risk factors as''; and
            (3) by inserting before the last sentence the following: 
        ``In the case of the payments for the benefits under part D, 
        such payment shall be adjusted for the risk factors of each 
        enrollee as the Secretary determines to be feasible and 
        appropriate to ensure actuarial equivalence.''.
    (e) Calculation of Annual Medicare+Choice Capitation Rates.--
Section 1853(c) of the Social Security Act (42 U.S.C. 1395w-23(c)) is 
amended--
            (1) in paragraph (1), in the matter preceding subparagraph 
        (A), by inserting ``for benefits under parts A and B'' after 
        ``capitation rate''; and
            (2) by adding at the end the following new paragraph:
            ``(8) Payment for part d benefits.--The Secretary shall 
        determine a capitation rate for part D benefits (for 
        individuals enrolled under such part) as follows:
                    ``(A) Drugs dispensed in 2004.--In the case of 
                prescription drugs dispensed in 2004, the capitation 
                rate shall be based on the projected national per 
                capita costs for prescription drug benefits under part 
                D and associated claims processing costs for 
                beneficiaries enrolled under part D and not enrolled 
                with a Medicare+Choice organization under this part.
                    ``(B) Drugs dispensed in subsequent years.--In the 
                case of prescription drugs dispensed in a subsequent 
                year, the capitation rate shall be equal to the 
                capitation rate for the preceding year increased by the 
                Secretary's estimate of the projected per capita rate 
                of annual growth in expenditures under this title for 
                an individual enrolled under part D for such subsequent 
                year.''.
    (f) Limitation on Enrollee Liability.--Section 1854(e) of the 
Social Security Act (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.--With respect to 
        outpatient prescription drug benefits under part D, a 
        Medicare+Choice organization may not require that an enrollee 
        pay a deductible or a coinsurance percentage that exceeds the 
        deductible or coinsurance percentage applicable for such 
        benefits for an eligible beneficiary under part D.''.
    (g) Requirement for Additional Benefits.--Section 1854(f)(1) of the 
Social Security Act (42 U.S.C. 1395w-24(f)(1)) is amended by adding at 
the end the following new sentence: ``Such determination shall be made 
separately for the benefits under parts A and B and for prescription 
drug benefits under part D.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to items and services provided under a Medicare+Choice plan on or 
after January 1, 2004.

SEC. 303. REPORTING REQUIREMENTS FOR SECRETARY OF THE TREASURY 
              REGARDING SLIDING SCALE PART D PREMIUM.

    (a) In General.--Subsection (l) of section 6103 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 return information to carry out 
        sliding scale medicare part d premium.--
                    ``(A) In general.--The Secretary may, upon written 
                request from the Secretary of Health and Human 
                Services, disclose to officers and employees of the 
                Department of Health and Human Services return 
                information with respect to a taxpayer who is required 
                to pay a monthly part D premium under part D of the 
                medicare program. Such return information shall be 
                limited to--
                            ``(i) taxpayer identity information with 
                        respect to such taxpayer,
                            ``(ii) the filing status of such taxpayer,
                            ``(iii) the adjusted gross income of such 
                        taxpayer,
                            ``(iv) the amounts excluded from such 
                        taxpayer's gross income under sections 135 and 
                        911,
                            ``(v) the interest received or accrued 
                        during the taxable year which is exempt from 
                        the tax imposed by chapter 1 to the extent such 
                        information is available, and
                            ``(vi) the amounts excluded from such 
                        taxpayer's gross income under sections 931 and 
                        933 to the extent such information is 
                        available.
                    ``(B) Restriction on use of disclosed 
                information.--Return information disclosed under 
                subparagraph (A) may be used by officers and employees 
                of the Department of Health and Human Services only for 
                the purposes of, and to the extent necessary in, 
                establishing the appropriate monthly part D premium 
                under part D of the medicare program.''.
    (b) Conforming Amendment.--Paragraphs (3)(A) and (4) of section 
6103(p) of such Code are each amended by striking ``or (17)'' each 
place it appears and inserting ``(17), or (18)''.

SEC. 304. ADDITIONAL ASSISTANCE FOR LOW-INCOME BENEFICIARIES.

    (a) Inclusion in Medicare Cost-Sharing.--Section 1905(p)(3) of the 
Social Security Act (42 U.S.C. 1396d(p)(3)) is amended--
            (1) in subparagraph (A)--
                    (A) in clause (i), by striking ``and'' at the end;
                    (B) in clause (ii), by inserting ``and'' at the 
                end; and
                    (C) by adding at the end the following new clause:
            ``(iii) premiums under section 1860D(a).'';
            (2) in subparagraph (B), by striking ``section 1813'' and 
        inserting ``sections 1813 and 1860E(b)(2)''; and
            (3) in subparagraph (C), by striking ``section 1813 and 
        section 1833(b)'' and inserting ``sections 1813, 1833(b), and 
        1860E(b)(1)''.
    (b) Expansion of Medical Assistance.--Section 1902(a)(10)(E) of the 
Social Security Act (42 U.S.C. 1396a(a)(10)(E)) is amended--
            (1) in clause (iii)--
                    (A) by striking ``section 1905(p)(3)(A)(ii)'' and 
                inserting ``clauses (ii) and (iii) of section 
                1905(p)(3)(A), for the coinsurance described in section 
                1860E(b)(2), and for the deductible described in 
                section 1860E(b)(1)''; and
                    (B) by striking ``and'' at the end;
            (2) by redesignating clause (iv) as clause (vi); and
            (3) by inserting after clause (iii) the following new 
        clauses:
                    ``(iv) for making medical assistance available for 
                medicare cost-sharing described in section 
                1905(p)(3)(A)(iii), for the coinsurance described in 
                section 1860E(b)(2), and for the deductible described 
                in section 1860E(b)(1) for individuals who would be 
                qualified medicare beneficiaries described in section 
                1905(p)(1) but for the fact that their income exceeds 
                120 percent but does not exceed 135 percent of such 
                official poverty line for a family of the size 
                involved;
                    ``(v) for making medical assistance available for 
                medicare cost-sharing described in section 
                1905(p)(3)(A)(iii) on a linear sliding scale based on 
                the income of such individuals 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 does not exceed 150 percent of 
                such official poverty line for a family of the size 
                involved; and''.
    (c) Nonapplicability of Payment Differential Requirements to 
Medicare Part D Cost-Sharing.--Section 1902(n)(2) of the Social 
Security Act (42 U.S.C. 1396a(n)(2)) is amended by adding at the end 
the following new sentence: ``The preceding sentence shall not apply to 
coinsurance described in section 1860E(b)(2) or deductibles described 
in section 1860E(b)(1).''.
    (d) 100 Percent Federal Medical Assistance Percentage.--The first 
sentence of section 1905(b) of the Social Security Act (42 U.S.C. 
1396d(b)) is amended--
            (1) by striking ``and'' before ``(4)''; and
            (2) by inserting before the period at the end the 
        following: ``, and (5) the Federal medical assistance 
        percentage shall be 100 percent with respect to medical 
        assistance provided under clauses (iv) and (v) of section 
        1902(a)(10)(E)''.
    (e) Treatment of Territories.--Section 1108(g) of such Act (42 
U.S.C. 1308(g)) is amended by adding at the end the following new 
paragraph:
    ``(3) Notwithstanding the preceding provisions of this subsection, 
with respect to fiscal year 2004 and any fiscal year thereafter, the 
amount otherwise determined under this subsection (and subsection (f)) 
for the fiscal year for a Commonwealth or territory shall be increased 
by the ratio (as estimated by the Secretary) of--
            ``(A) the aggregate amount of payments made to the 50 
        States and the District of Columbia for the fiscal year under 
        title XIX that are attributable to making medical assistance 
        available for individuals described in clauses (i), (iii), 
        (iv), and (v) of section 1902(a)(10)(E) for payment of medicare 
        cost-sharing that consists of premiums under section 1860D(a), 
        coinsurance described in section 1860E(b)(2), or deductibles 
        described in section 1860E(b)(1); to
            ``(B) the aggregate amount of total payments made to such 
        States and District for the fiscal year under such title.''.
    (f) Conforming Amendments.--Section 1933 of the Social Security Act 
(42 U.S.C. 1396u-3) is amended--
            (1) in subsection (a), by striking ``section 
        1902(a)(10)(E)(iv)'' and inserting ``section 
        1902(a)(10)(E)(vi)'';
            (2) in subsection (c)(2)(A)--
                    (A) in clause (i), by striking ``section 
                1902(a)(10)(E)(iv)(I)'' and inserting ``section 
                1902(a)(10)(E)(vi)(I)''; and
                    (B) in clause (ii), by striking ``section 
                1902(a)(10)(E)(iv)(II)'' and inserting ``section 
                1902(a)(10)(E)(vi)(II)'';
            (3) in subsection (d), by striking ``section 
        1902(a)(10)(E)(iv)'' and inserting ``section 
        1902(a)(10)(E)(vi)''; and
            (4) in subsection (e), by striking ``section 
        1902(a)(10)(E)(iv)'' and inserting ``section 
        1902(a)(10)(E)(vi)''.
    (g) Effective Date.--The amendments made by this section shall 
apply for medical assistance provided under section 1902(a)(10)(E) of 
the Social Security Act (42 U.S.C. 1396a(a)(10)(E)) on and after 
January 1, 2004.

SEC. 305. MEDIGAP REVISIONS.

    Section 1882 of the Social Security Act (42 U.S.C. 1395ss) is 
amended by adding at the end the following new subsection:
    ``(v) Modernized Benefit Packages for Medicare Supplemental 
Policies.--
            ``(1) Revision of benefit packages.--
                    ``(A) In general.--Notwithstanding subsection (p), 
                the benefit packages classified as `H', `I', and `J' 
                under the standards established by subsection (p)(2) 
                (including the benefit package classified as `J' with a 
                high deductible feature, as described in subsection 
                (p)(11)) shall be revised so that--
                            ``(i) the coverage of outpatient 
                        prescription drugs available under such benefit 
                        packages is replaced with coverage 
of outpatient prescription drugs that complements but does not 
duplicate the coverage of outpatient prescription drugs that is 
otherwise available under this title;
                            ``(ii) the revised benefit packages provide 
                        a range of coverage options for outpatient 
                        prescription drugs for beneficiaries, but do 
                        not provide coverage for--
                                    ``(I) the deductible under section 
                                1860E(b)(1); or
                                    ``(II) more than 90 percent of the 
                                coinsurance applicable to an individual 
                                under section 1860E(b)(2);
                            ``(iii) uniform language and definitions 
                        are used with respect to such revised benefits;
                            ``(iv) uniform format is used in the policy 
                        with respect to such revised benefits;
                            ``(v) such revised standards meet any 
                        additional requirements imposed by the Medicare 
                        Reform Act of 2001; and
                            ``(vi) except as revised under the 
                        preceding clauses or as provided under 
                        subsection (p)(1)(E), the benefit packages are 
                        identical to the benefit packages that were 
                        available on the date of enactment of the 
                        Medicare Reform Act of 2001.
                    ``(B) Manner of revision.--The benefit packages 
                revised under this section shall be revised in the 
                manner described in subparagraph (E) of subsection 
                (p)(1), except that for purposes of subparagraph (C) of 
                such subsection, the standards established under this 
                subsection shall take effect not later than January 1, 
                2004.
            ``(2) Construction of benefits in other medicare 
        supplemental policies.--Nothing in the benefit packages 
        classified as `A' through `G' under the standards established 
        by subsection (p)(2) (including the benefit package classified 
        as `F' with a high deductible feature, as described in 
        subsection (p)(11)) shall be construed as providing coverage 
        for benefits for which payment may be made under part D.
            ``(3) Guaranteed issuance and renewal of revised 
        policies.--The provisions of subsections (q) and (s), including 
        provisions of subsection (s)(3) (relating to special enrollment 
        periods in cases of termination or disenrollment), shall apply 
        to medicare supplemental policies revised under this subsection 
        in the same manner as such provisions apply to medicare 
        supplemental policies issued under the standards established 
        under subsection (p).
            ``(4) Opportunity of current policyholders to purchase 
        revised policies.--
                    ``(A) In general.--No medicare supplemental policy 
                of an issuer with a benefit package that is revised 
                under paragraph (1) shall be deemed to meet the 
                standards in subsection (c) unless the issuer--
                            ``(i) provides written notice during the 
                        60-day period immediately preceding the period 
                        established for the open enrollment period 
                        established under section 1860B(b)(2)(B), to 
                        each individual who is a policyholder or 
                        certificate holder of a medicare supplemental 
                        policy issued by that issuer (at the most 
                        recent available address of that individual) of 
                        the offer described in clause (ii) and of the 
                        fact that, so long as such individual retains 
                        coverage under such policy, the individual 
                        shall be ineligible for coverage of outpatient 
                        prescription drugs under part D; and
                            ``(ii) offers the policyholder or 
                        certificate holder under the terms described in 
                        subparagraph (B), during at least the period 
                        established under section 1860B(b)(2)(B), a 
                        medicare supplemental policy with the benefit 
                        package that the Secretary determines is most 
                        comparable to the policy in which the 
                        individual is enrolled with coverage effective 
                        as of the date on which the individual is first 
                        entitled to benefits under part D.
                    ``(B) Terms of offer described.--The terms 
                described in this subparagraph are terms which do not--
                            ``(i) deny or condition the issuance or 
                        effectiveness of a medicare supplemental policy 
                        described in subparagraph (A)(ii) that is 
                        offered and is available for issuance to new 
                        enrollees by such issuer;
                            ``(ii) discriminate in the pricing of such 
                        policy because of health status, claims 
                        experience, receipt of health care, or medical 
                        condition; or
                            ``(iii) impose an exclusion of benefits 
                        based on a preexisting condition under such 
                        policy.
            ``(5) Elimination of obsolete policies with no 
        grandfathering.--Except as provided in subparagraph (B), no 
        person may sell, issue, or renew a medicare supplemental policy 
        with a benefit package that is classified as `H', `I', or `J' 
        (or with a benefit package classified as `J' with a high 
        deductible feature) that has not been revised under this 
        subsection on or after January 1, 2004.
            ``(6) Penalties.--Each penalty under this section shall 
        apply with respect to policies revised under this subsection as 
        if such policies were issued under the standards established 
        under subsection (p), including the penalties under subsections 
        (a), (d), (p)(8), (p)(9), (q)(5), (r)(6)(A), (s)(4), and 
        (t)(2)(D).''.

SEC. 306. STUDIES AND REPORT TO CONGRESS.

    (a) Studies.--The Secretary of Health and Human Services shall 
conduct a study to determine the feasibility and advisability of--
            (1) establishing a uniform format for pharmacy benefit 
        cards provided to beneficiaries by eligible entities under the 
        outpatient prescription drug benefit program under part D of 
title XVIII of the Social Security Act (as added by section 301); and
            (2) developing systems to electronically transfer 
        prescriptions under such program from the prescriber to the 
        pharmacist.
    (b) Report.--Not later than 2 years after the date of enactment of 
this Act, the Secretary of Health and Human Services shall submit to 
Congress a report on the results of the studies conducted under 
subsection (a), together with any recommendations for legislation that 
the Secretary determines to be appropriate as a result of such studies.

                      TITLE IV--MEDICARE WELLNESS

SEC. 400. DEFINITIONS.

    In this title:
            (1) Medicare beneficiary.--The term ``medicare 
        beneficiary'' means any individual who is entitled to benefits 
        under part A or enrolled under part B of the medicare program, 
        including any individual enrolled in a Medicare+Choice plan 
        offered by a Medicare+Choice organization under part C of such 
        program.
            (2) Medicare program.--The term ``medicare program'' means 
        the health benefits program under title XVIII of the Social 
        Security Act (42 U.S.C. 1395 et seq.).
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

             Subtitle A--Healthy Seniors Promotion Program

SEC. 401. DEFINITIONS.

    In this subtitle:
            (1) Cost-effective benefit.--The term ``cost-effective 
        benefit'' means a benefit or technique that has--
                    (A) been subject to peer review;
                    (B) been described in scientific journals; and
                    (C) demonstrated value as measured by unit costs 
                relative to health outcomes achieved.
            (2) Cost-saving benefit.--The term ``cost-saving benefit'' 
        means a benefit or technique that has--
                    (A) been subject to peer review;
                    (B) been described in scientific journals; and
                    (C) caused a net reduction in health care costs for 
                medicare beneficiaries.
            (3) Eligible entity.--The term ``eligible entity'' means an 
        entity that the Working Group (as defined in paragraph (6)) 
        determines has demonstrated expertise regarding health 
        promotion and disease prevention among medicare beneficiaries.
            (4) Medically effective.--The term ``medically effective'' 
        means, with respect to a benefit or technique, that the benefit 
        or technique has been--
                    (A) subject to peer review;
                    (B) described in scientific journals; and
                    (C) determined to achieve an intended goal under 
                normal programmatic conditions.
            (5) Medically efficacious.--The term ``medically 
        efficacious'' means, with respect to a benefit or technique, 
        that the benefit or technique has been--
                    (A) subject to peer review;
                    (B) described in scientific journals; and
                    (C) determined to achieve an intended goal under 
                controlled conditions.
            (6) Working group.--The term ``Working Group'' means the 
        Working Group on Disease Self-Management and Health Promotion 
        established under section 402.

SEC. 402. WORKING GROUP ON DISEASE SELF-MANAGEMENT AND HEALTH 
              PROMOTION.

    (a) Establishment.--There is established within the Department of 
Health and Human Services a Working Group on Disease Self-Management 
and Health Promotion.
    (b) Composition.--
            (1) In general.--Subject to paragraph (2), the Working 
        Group shall be composed of 5 members as follows:
                    (A) The Administrator of the Centers for Medicare & 
                Medicaid Services.
                    (B) The Director of the Centers for Disease Control 
                and Prevention.
                    (C) The Director of the Agency for Healthcare 
                Research and Quality.
                    (D) The Assistant Secretary for Aging.
                    (E) The Director of the National Institutes of 
                Health.
            (2) Alternative membership.--Any member of the Working 
        Group described in a subparagraph of paragraph (1) may appoint 
        an individual who is an officer or employee of the Federal 
        Government to serve as a member of the Working Group instead of 
        the member described in such subparagraph.
    (c) Duties.--The duties of the Working Group are as follows:
            (1) Healthy seniors promotion grants.--The Working Group 
        shall establish general policies and criteria with respect to 
        the functions of the Secretary under section 403, including--
                    (A) priorities for the approval of applications 
                submitted under subsection (c) of such section;
                    (B) procedures for monitoring and evaluating 
                research efforts conducted under such section; and
                    (C) such other matters relating to the grant 
                program established under such section as are 
                recommended by the Working Group and approved by the 
                Secretary.
            (2) Disease self-management demonstration projects.--The 
        Working Group shall establish general policies and criteria 
        with respect to the functions of the Secretary under section 
        404, including--
                    (A) the identification of medical conditions for 
                which a demonstration project under such section may be 
                implemented;
                    (B) the prioritization of the conditions identified 
                under subparagraph (A) based on the potential for the 
                self-management of such condition to be medically 
                effective and for such self-management to be a cost-
                effective benefit or cost-saving benefit;
                    (C) the identification of target individuals (as 
                defined in section 404(a)(2));
                    (D) the development of procedures for selecting 
                areas in which such a demonstration project may be 
                implemented; and
                    (E) such other matters relating to such 
                demonstration projects as are recommended by the 
                Working Group and approved by the Secretary.
    (d) Chairperson.--The Secretary shall designate 1 of the members of 
the Working Group to be the chairperson of the Group.
    (e) Quorum.--A majority of the members of the Working Group shall 
constitute a quorum, but, subject to subsection (f), a lesser number of 
members may hold meetings.
    (f) Meetings.--The Working Group shall meet at the call of the 
chairperson, except that--
            (1) it shall meet not less than 4 times each year; and
            (2) it shall meet upon the written request of a majority of 
        the members.
    (g) Compensation of Members.--Each member of the Working Group 
shall serve without compensation in addition to that received for their 
service as an officer or employee of the Federal Government.
    (h) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary for the purpose of carrying 
out this section.

SEC. 403. HEALTHY SENIORS PROMOTION GRANTS.

    (a) Program Authorized.--The Secretary, using the general policies 
and criteria established by the Working Group under section 402(c)(1) 
and in accordance with the provisions of this section, is authorized to 
make grants to eligible entities (as defined in section 401(3)) to pay 
for the costs of the activities described in subsection (b).
    (b) Use of Funds.--An eligible entity may use payments received 
under this section in any fiscal year to conduct a program to--
            (1) study whether using different types of providers of 
        care and alternative settings (including community-based senior 
        centers) for the implementation of a successful health 
        promotion and disease prevention strategy, including the 
        implications regarding the payment of such providers, is 
        medically efficacious or medically effective;
            (2) determine the most effective means of educating 
        medicare beneficiaries, either directly or through providers of 
        care, regarding the importance of health promotion and disease 
        prevention among such beneficiaries;
            (3) identify incentives that would increase the use of new 
        and existing preventive health benefits and healthy behaviors 
        by medicare beneficiaries;
            (4) promote--
                    (A) the use of preventive health benefits by 
                medicare beneficiaries, including such services that 
                are covered under the medicare program;
                    (B) the proper use by medicare beneficiaries of 
                prescription and over-the-counter drugs in order to 
                reduce the number of hospital stays and physician 
                visits that are a result of improper use of such drugs; 
                and
                    (C) the utilization by medicare beneficiaries of 
                the steps (including exercise, maintenance of a proper 
                diet, and the utilization of accident prevention 
                techniques) that research has shown to promote and 
                safeguard individual health; and
            (5) address other topics designated by the Secretary.
    (c) Application.--
            (1) In general.--Each eligible entity that desires to 
        receive a grant under this section shall submit an application 
        to the Secretary, at such time, in such manner, and accompanied 
        by such additional information as the Secretary may reasonably 
        require.
            (2) Contents.--Each application submitted under paragraph 
        (1) shall--
                    (A) describe the activities for which assistance 
                under this section is sought;
                    (B) describe how such activities will--
                            (i) reflect the medical, behavioral, and 
                        social aspects of care for medicare 
                        beneficiaries;
                            (ii) lead to the development of cost-
                        effective benefits and cost-saving benefits; 
                        and
                            (iii) impact the quality of life of 
                        medicare beneficiaries;
                    (C) provide assurances that such activities will 
                focus on broad medicare populations rather than unique 
                local medicare populations;
                    (D) provide evidence that the eligible entity meets 
                the general policies and criteria established by the 
                Working Group under section 402(c)(1);
                    (E) provide assurances that the eligible entity 
                will take such steps as may be available to the entity 
                in order to continue the activities for which the 
                entity is making application after the period for which 
                assistance is sought; and
                    (F) provide such additional assurances as the 
                Secretary determines to be essential to ensure 
                compliance with the requirements of this subtitle.
            (3) Joint application.--A consortium of eligible entities 
        may file a joint application under the provisions of paragraph 
        (1).
    (d) Approval of Application.--The Secretary shall approve 
applications in accordance with the general policies and criteria 
established by the Working Group under section 402(c)(1).
    (e) Payments.--Subject to amounts appropriated under subsection 
(g), the Secretary shall pay to each eligible entity having an 
application approved under subsection (d) the cost of the activities 
described in the application.
    (f) Evaluation and Report.--
            (1) Evaluation.--The Secretary shall conduct an annual 
        evaluation of grants made under this section to determine--
                    (A) the results of the activities conducted under 
                the programs for which grants were made under this 
                section;
                    (B) the extent to which research assisted under 
                this section has improved or expanded the general 
                research for health promotion and disease prevention 
                among medicare beneficiaries and identified practical 
                interventions based upon such research;
                    (C) a list of specific recommendations based upon 
                the activities conducted under the programs for which 
                grants were made under this section which show promise 
                as practical interventions for health promotion and 
                disease prevention among medicare beneficiaries;
                    (D) whether or not, as a result of the activities 
                conducted under the programs for which grants were made 
                under this section, certain health promotion and 
                disease prevention benefits or education efforts should 
                be added to the medicare program, including discussions 
                of quality of life, translating the applied research 
                results into a benefit under the medicare program, and 
                whether each additional benefit would be a cost-
                effective benefit or a cost-saving benefit for each 
                proposed addition; and
                    (E) how best to increase utilization of existing 
                and recommended health promotion and disease prevention 
                services, such as an education and public awareness 
                campaign, providing financial incentives for providers 
                of care and medicare beneficiaries, or utilizing other 
                administrative means.
            (2) Annual report.--Not later than December 31, 2003, and 
        annually thereafter through 2005, the Secretary, in 
        consultation with the Working Group, shall submit a report to 
        Congress on the evaluation conducted under paragraph (1), 
        together with such recommendations for such legislation and 
        administrative actions as the Secretary considers appropriate.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated for the purpose of carrying out this section $50,000,000 
for each of fiscal years 2002, 2003, 2004, and 2005.

SEC. 404. DISEASE SELF-MANAGEMENT DEMONSTRATION PROJECTS.

    (a) Demonstration Projects.--
            (1) In general.--The Secretary shall conduct demonstration 
        projects for the purpose of promoting disease self-management 
        for conditions identified by the Working Group under section 
        402(c)(2) for target individuals (as defined in paragraph (2)).
            (2) Target individual defined.--In this section, the term 
        ``target individual'' means an individual who--
                    (A) is at risk for, or has, 1 or more of the 
                conditions identified by the Working Group under 
                section 402(c)(2); and
                    (B) is enrolled under the original medicare fee-
                for-service program under parts A and B of title XVIII 
                of the Social Security Act (42 U.S.C. 1395c et seq.; 
                1395j et seq.) or is enrolled under the Medicare+Choice 
                program under part C of title XVIII of such Act (42 
                U.S.C. 1395w-21 et seq.).
    (b) Number; Project Areas; Duration.--
            (1) Number.--Not later than 2 years after the date of 
        enactment of this Act, the Secretary shall implement a series 
        of demonstration projects to carry out the purpose described in 
        subsection (a)(1).
            (2) Project areas.--The Secretary shall implement the 
        demonstration projects described in paragraph (1) in urban, 
        suburban, and rural areas.
            (3) Duration.--The demonstration projects under this 
        section shall be conducted during the 3-year period beginning 
        on the date on which the initial demonstration project is 
        implemented.
    (c) Report to Congress.--
            (1) In general.--Not later than 18 months after the 
        conclusion of the demonstration projects under this section, 
        the Secretary shall submit a report to Congress on such 
        projects.
            (2) Contents of report.--The report required under 
        paragraph (1) shall include the following:
                    (A) A description of the demonstration projects.
                    (B) An evaluation of--
                            (i) whether each benefit provided under the 
                        demonstration projects is a cost-effective 
                        benefit or a cost-saving benefit;
                            (ii) the level of the disease self-
                        management attained by target individuals under 
                        the demonstration projects; and
                            (iii) the satisfaction of target 
                        individuals under the demonstration projects.
                    (C) Recommendations of the Secretary regarding 
                whether to conduct the demonstration projects on a 
                permanent basis.
                    (D) Such recommendations for legislation and 
                administrative action as the Secretary determines to be 
                appropriate.
                    (E) Any other information regarding the 
                demonstration projects that the Secretary determines to 
                be appropriate.
    (d) Funding.--The Secretary shall provide for the transfer from the 
Federal Hospital Insurance Trust Fund under section 1817 of the Social 
Security Act (42 U.S.C. 1395i) an amount not to exceed $30,000,000 for 
the costs of carrying out this section.

      Subtitle B--Medicare Coverage of Preventive Health Benefits

SEC. 411. THERAPY AND COUNSELING FOR CESSATION OF TOBACCO USE.

    (a) Coverage.--Section 1861(s)(2) of the Social Security Act (42 
U.S.C. 1395x(s)(2)), as amended by section 105(a) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(114 Stat. 2763A-471), as enacted into law by section 1(a)(6) of Public 
Law 106-554, is amended--
            (1) in subparagraph (U), by striking ``and'' at the end;
            (2) in subparagraph (V), by inserting ``and'' at the end; 
        and
            (3) by adding at the end the following new subparagraph:
            ``(W) supplemental preventive health services (as defined 
        in subsection (ww));''.
    (b) Services Described.--Section 1861 of the Social Security Act 
(42 U.S.C. 1395x), as amended by section 115(b), is amended by adding 
at the end the following new subsection:

               ``Supplemental Preventive Health Services

    ``(xx) The term `supplemental preventive health services' means the 
following:
            ``(1)(A) Therapy and counseling for cessation of tobacco 
        use for individuals who use tobacco products or who are being 
        treated for tobacco use that is furnished--
                    ``(i) by or under the supervision of a physician; 
                or
                    ``(ii) by any other health care professional who--
                            ``(I) is legally authorized to furnish such 
                        services under State law (or the State 
                        regulatory mechanism provided by State law) of 
                        the State in which the services are furnished; 
                        and
                            ``(II) is authorized to receive payment for 
                        other services under this title or is 
                        designated by the Secretary for this purpose.
            ``(B) Subject to subparagraph (C), such term is limited 
        to--
                    ``(i) therapy and counseling services recommended 
                in `Treating Tobacco Use and Dependence: A Clinical 
                Practice Guideline', published by the Public Health 
                Service in June 2000, or any subsequent modification of 
                such Guideline; and
                    ``(ii) such other therapy and counseling services 
                that the Secretary recognizes to be effective.
            ``(C) Such term shall not include coverage for drugs or 
        biologicals that are not otherwise covered under this title.''.
    (c) Payment and Elimination of Cost-Sharing for All Supplemental 
Preventive Health Services.--
            (1) Payment and elimination of coinsurance.--Section 
        1833(a)(1) of the Social Security Act (42 U.S.C. 1395l(a)(1)), 
        as amended by sections 111(b)(2)(A) and 112(b)(2)(A), is 
        amended--
                    (A) in subparagraph (N), by inserting ``other than 
                supplemental preventive health services (as defined in 
                section 1861(xx))'' after ``(as defined in section 
                1848(j)(3))'';
                    (B) by striking ``and'' before ``(V)''; and
                    (C) by inserting before the semicolon at the end 
                the following: ``, and (W) with respect to supplemental 
                preventive health services (as defined in section 
                1861(xx)), the amount paid shall be 100 percent of the 
                lesser of the actual charge for the services or the 
                amount determined under the payment basis determined 
                under section 1848 by the Secretary for the particular 
                supplemental preventive health service involved''.
            (2) Payment under physician fee schedule.--Section 
        1848(j)(3) (42 U.S.C. 1395w-4(j)(3)) is amended by inserting 
        ``(2)(W),'' after ``(2)(S),''.
            (3) Elimination of coinsurance in outpatient hospital 
        settings.--The third sentence of section 1866(a)(2)(A) of the 
        Social Security Act (42 U.S.C. 1395cc(a)(2)(A)) is amended by 
        inserting after ``1861(s)(10)(A)'' the following: ``, with 
        respect to supplemental preventive health services (as defined 
        in section 1861(xx)),''.
            (4) Elimination of deductible.--The first sentence of 
        section 1833(b) of the Social Security Act (42 U.S.C. 
        1395l(b)), as amended by section 111(b)(2)(B), is amended--
                    (A) by striking ``and'' before ``(7)''; and
                    (B) by inserting before the period the following: 
                ``, and (8) such deductible shall not apply with 
                respect to supplemental preventive health services (as 
                defined in section 1861(xx))''.
    (d) Application of Limits on Billing.--Section 1842(b)(18)(C) of 
the Social Security Act (42 U.S.C. 1395u(b)(18)(C)), as amended by 
section 105(d) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (114 Stat. 2763A-472), as 
enacted into law by section 1(a)(6) of Public Law 106-554, is amended 
by adding at the end the following new clause:
            ``(vii) Any health care professional designated under 
        section 1861(xx)(1)(A)(ii)(II) to perform therapy and 
        counseling for cessation of tobacco use.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after the day that is 1 year after 
the date of enactment of this Act.

SEC. 412. COUNSELING FOR POST-MENOPAUSAL WOMEN.

    (a) Coverage.--Section 1861(xx) of the Social Security Act (42 
U.S.C. 1395x(s)(2)), as added by section 411(b), is amended by adding 
at the end the following new paragraph:
            ``(2)(A) Counseling for post-menopausal women.
            ``(B) For purposes of subparagraph (A), the term 
        `counseling for post-menopausal women' means counseling 
        provided to a post-menopausal woman regarding--
                    ``(i) the symptoms, risk factors, and conditions 
                associated with menopause;
                    ``(ii) appropriate treatment options for post-
                menopausal women, including hormone replacement 
                therapy; and
                    ``(iii) other interventions that can be implemented 
                to prevent or delay the onset of health risks 
                associated with menopause.
            ``(C) Such term does not include coverage for drugs or 
        biologicals that are not otherwise covered under this title.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to services furnished on or after the day that is 1 year after the date 
of enactment of this Act.

SEC. 413. SCREENING FOR DIMINISHED VISUAL ACUITY.

    (a) Coverage.--Section 1861(xx) of the Social Security Act (42 
U.S.C. 1395x(s)(2)), as amended by section 412(a), is amended by adding 
at the end the following new paragraph:
            ``(3)(A) Screening for diminished visual acuity.
            ``(B) For purposes of subparagraph (A), the term `screening 
        for diminished visual acuity' means a screening for diminished 
        visual acuity that is furnished by or under the supervision of 
        an optometrist or ophthalmologist who is legally authorized to 
        furnish such services under State law (or the State regulatory 
        mechanism provided by State law) of the State in which the 
        services are furnished.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to services furnished on or after the day that is 1 year after the date 
of enactment of this Act.

SEC. 414. SCREENING FOR HEARING IMPAIRMENT.

    (a) Coverage.--Section 1861(xx) of the Social Security Act (42 
U.S.C. 1395x(s)(2)), as amended by section 413(a), is amended by adding 
at the end the following new paragraph:
            ``(4)(A) Screening for hearing impairment.
            ``(B) For purposes of subparagraph (A), the term `screening 
        for hearing impairment' means the following services:
                    ``(i) A screening for hearing impairment using 
                periodic questions that is furnished by--
                            ``(I) a physician, including an 
                        otolaryngologist;
                            ``(II) a qualified audiologist (as defined 
                        in subsection (ll)(3)(B)); or
                            ``(III) any other health care professional 
                        who is legally authorized to furnish such 
                        screening under State law (or the State 
                        regulatory mechanism provided by State law) of 
                        the State in which the screening is furnished.
                    ``(ii) If the answers to such questions indicate 
                potential hearing impairment, an otoscopic examination 
                and an audiometric screening test that are furnished by 
                an otolaryngologist or a qualified audiologist (as so 
                defined).
                    ``(iii) If the results of such examination or test 
                indicate a need for assistive listening devices 
                (whether or not such examination or test was based on a 
                screening or was diagnostic), counseling about such 
                devices that is furnished by an otolaryngologist or a 
                qualified audiologist (as so defined).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to services furnished on or after the day that is 1 year after the date 
of enactment of this Act.

SEC. 415. SCREENING FOR CHOLESTEROL.

    (a) Coverage.--Section 1861(xx) of the Social Security Act (42 
U.S.C. 1395x(s)(2)), as amended by section 414(a), is amended by adding 
at the end the following new paragraph:
            ``(5)(A) Screening for cholesterol if the individual 
        involved has not had such a screening during the preceding 5 
        years.
            ``(B) Notwithstanding subparagraph (A), payment may be made 
        under this part for a screening for cholesterol with respect to 
        an individual even if the individual has had such a screening 
        during the preceding 5 years if the individual exhibits major 
        risk factors for coronary heart disease or a stroke, including, 
        but not limited to, smoking, hypertension, and diabetes.''.
    (b) Conforming Amendment.--Section 1862(a)(1) of the Social 
Security Act (42 U.S.C. 1395y(a)(1)), as amended by section 301(b)(2), 
is amended--
            (1) in subparagraph (I), by striking ``and'' at the end;
            (2) in subparagraph (J), by striking the semicolon at the 
        end and inserting ``, and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(K) in the case of a screening for cholesterol, 
                which is performed more frequently than is covered 
                under section 1861(xx)(5);''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after the day that is 1 year after 
the date of enactment of this Act.

SEC. 416. SCREENING FOR HYPERTENSION.

    (a) Coverage.--Section 1861(xx) of the Social Security Act (42 
U.S.C. 1395x(s)(2)), as amended by section 415(a), is amended by adding 
at the end the following new paragraph:
            ``(6)(A) Screening for hypertension if the individual 
        involved has not had such a screening during the preceding 2 
        years.
            ``(B) Notwithstanding subparagraph (A), payment may be made 
        under this part for a screening for hypertension with respect 
        to an individual even if the individual has had such a 
        screening during the preceding 2 years if the individual has a 
        history of, or is at risk for, hypertension.''.
    (b) Conforming Amendment.--Section 1862(a)(1) of the Social 
Security Act (42 U.S.C. 1395y(a)(1)), as amended by section 415(b), is 
amended--
            (1) in subparagraph (J), by striking ``and'' at the end;
            (2) in subparagraph (K), by striking the semicolon at the 
        end and inserting ``, and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(L) in the case of a screening for hypertension, 
                which is performed more frequently than is covered 
                under section 1861(xx)(6);''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after the day that is 1 year after 
the date of enactment of this Act.

SEC. 417. EXPANSION OF ELIGIBILITY FOR BONE MASS MEASUREMENT.

    (a) Expansion.--Section 1861(rr)(2) of the Social Security Act (42 
U.S.C. 1395x(rr)(2)) is amended to read as follows:
    ``(2) For purposes of this subsection, the term `qualified 
individual' means an individual who is (in accordance with regulations 
prescribed by the Secretary)--
            ``(A) an estrogen-deficient woman (including those 
        receiving hormone replacement therapy);
            ``(B) an individual with low trauma or fragility fractures 
        (including vertebral abnormalities and hip, rib, wrist, pelvic, 
        or proximal humeral fractures);
            ``(C) an individual receiving long-term medications that 
        have associations to bone loss or osteoporosis (including 
        glucocorticoid therapy and androgen deprivation therapy);
            ``(D) an individual with a long-term medical condition that 
        has association to osteoporosis (including primary 
        hyperparathyroidism);
            ``(E) a man with risk factors for osteoporosis such as 
        hypogonadism; and
            ``(F) an individual being monitored to assess the response 
        to, or efficacy of, an approved osteoporosis therapy.''.
    (b) Reference to Elimination of Coinsurance and Waiver of 
Application of Deductible.--For the elimination of the coinsurance for 
bone mass measurement and for the waiver of the application of the part 
B deductible for such measurement, see section 419.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to services furnished on or after the day that is 1 year after 
the date of enactment of this Act.

SEC. 418. COVERAGE OF MEDICAL NUTRITION THERAPY SERVICES FOR 
              BENEFICIARIES WITH CARDIOVASCULAR DISEASES.

    (a) In General.--Section 1861(s)(2)(V) of the Social Security Act 
(42 U.S.C. 1395x(s)(2)(V)), as added by section 105(a) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(114 Stat. 2763A-471), as enacted into law by section 1(a)(6) of Public 
Law 106-554, is amended to read as follows:
            ``(V) medical nutrition therapy services (as defined in 
        subsection (vv)(1)) in the case of a beneficiary--
                    ``(i) with a cardiovascular disease (including 
                congestive heart failure, arteriosclerosis, 
                hyperlipidemia, hypertension, and 
                hypercholesterolemia), diabetes, or a renal disease (or 
                a combination of such conditions) who--
                            ``(I) has not received diabetes outpatient 
                        self-management training services within a time 
                        period determined by the Secretary;
                            ``(II) is not receiving maintenance 
                        dialysis for which payment is made under 
                        section 1881; and
                            ``(III) meets such other criteria 
                        determined by the Secretary after consideration 
                        of protocols established by dietitian or 
                        nutrition professional organizations; or
                    ``(ii) with a combination of such conditions who--
                            ``(I) is not described in clause (i) 
                        because of the application of subclause (I) or 
                        (II) of such clause;
                            ``(II) receives such medical nutrition 
                        therapy services in a coordinated manner (as 
                        determined appropriate by the Secretary) with 
                        any services described in such subclauses that 
                        the beneficiary is receiving; and
                            ``(III) meets such other criteria 
                        determined by the Secretary after consideration 
                        of protocols established by dietitian or 
                        nutrition professional organizations;''.
    (b) Elimination of Coinsurance.--Section 1833(a)(1)(T) of the 
Social Security Act (42 U.S.C. 1395l(a)(1)(T)), as added by section 
105(c)(2) of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (114 Stat. 2763A-472), as enacted into law by 
section 1(a)(6) of Public Law 106-554, is amended by striking ``80 
percent'' and inserting ``100 percent''.
    (c) Reference To Waiver of Application of Deductible.--For the 
waiver of the application of the part B deductible for medical 
nutrition therapy services, see section 419.
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of section 105 of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(114 Stat. 2763A-471), as enacted into law by section 1(a)(6) of Public 
Law 106-554.

SEC. 419. ELIMINATION OF DEDUCTIBLES AND COINSURANCE FOR EXISTING 
              PREVENTIVE HEALTH BENEFITS.

    (a) In General.--Section 1833 of the Social Security Act (42 U.S.C. 
1395l) is amended by inserting after subsection (o) the following new 
subsection:
    ``(p) Deductibles and Coinsurance Waived for Preventive Health 
Items and Services.--The Secretary may not require the payment of any 
deductible or coinsurance under subsection (a) or (b), respectively, of 
any individual enrolled for coverage under this part for any of the 
following preventive health items and services:
            ``(1) Blood-testing strips, lancets, and blood glucose 
        monitors for individuals with diabetes described in section 
        1861(n).
            ``(2) Diabetes outpatient self-management training services 
        (as defined in section 1861(qq)(1)).
            ``(3) Pneumococcal, influenza, and hepatitis B vaccines and 
        administration described in section 1861(s)(10).
            ``(4) Screening mammography (as defined in section 
        1861(jj)).
            ``(5) Screening pap smear and screening pelvic exam (as 
        defined in paragraphs (1) and (2) of section 1861(nn), 
        respectively).
            ``(6) Bone mass measurement (as defined in section 
        1861(rr)(1)).
            ``(7) Prostate cancer screening test (as defined in section 
        1861(oo)(1)).
            ``(8) Colorectal cancer screening test (as defined in 
        section 1861(pp)(1)).
            ``(9) Screening for glaucoma (as defined in section 
        1861(uu)).
            ``(10) Medical nutrition therapy services (as defined in 
        section 1861(vv)(1)).''.
    (b) Waiver of Coinsurance.--
            (1) In general.--Section 1833(a)(1)(B) of the Social 
        Security Act (42 U.S.C. 1395l(a)(1)(B)) is amended to read as 
        follows: ``(B) with respect to preventive health items and 
        services described in subsection (p), the amounts paid shall be 
        100 percent of the fee schedule or other basis of payment under 
        this title for the particular item or service,''.
            (2) Elimination of coinsurance in outpatient hospital 
        settings.--The third sentence of section 1866(a)(2)(A) of the 
        Social Security Act (42 U.S.C. 1395cc(a)(2)(A)), as amended by 
        section 411(c)(3), is amended by inserting after ``section 
1861(xx)'' the following: ``and preventive health items and services 
described in section 1833(p)''.
    (c) Waiver of Application of Deductible.--Section 1833(b)(1) of the 
Social Security Act (42 U.S.C. 1395l(b)(1)) is amended to read as 
follows: ``(1) such deductible shall not apply with respect to 
preventive health items and services described in subsection (p),''.
    (d) Adding ``Lancet'' to Definition of DME.--Section 1861(n) of the 
Social Security Act (42 U.S.C. 1395x(n)) is amended by striking 
``blood-testing strips and blood glucose monitors'' and inserting 
``blood-testing strips, lancets, and blood glucose monitors''.
    (e) Conforming Amendments.--
            (1) Elimination of coinsurance for clinical diagnostic 
        laboratory tests.--Paragraphs (1)(D)(i) and (2)(D)(i) of 
        section 1833(a) of the Social Security Act (42 U.S.C. 
        1395l(a)), as amended by section 201(b)(1) of the Medicare, 
        Medicaid, and SCHIP Benefits Improvement and Protection Act of 
        2000 (114 Stat. 2763A-481), as enacted into law by section 
        1(a)(6) of Public Law 106-554, are each amended by inserting 
        ``or which are described in subsection (p)'' after 
        ``assignment-related basis''.
            (2) Elimination of coinsurance for certain dme.--Section 
        1834(a)(1)(A) of the Social Security Act (42 U.S.C. 
        1395m(a)(1)(A)) is amended by inserting ``(or 100 percent, in 
        the case of such an item described in section 1833(p))'' after 
        ``80 percent''.
            (3) Elimination of deductibles and coinsurance for 
        colorectal cancer screening tests.--Section 1834(d) of the 
        Social Security Act (42 U.S.C. 1395m(d)) is amended--
                    (A) in paragraph (2)(C)--
                            (i) by striking ``(C) Facility payment 
                        limit.--'' and all that follows through 
                        ``Notwithstanding subsections'' and inserting 
                        the following:
                    ``(C) Facility payment limit.--Notwithstanding 
                subsections'';
                            (ii) by striking ``(I) in accordance'' and 
                        inserting the following:
                            ``(i) in accordance'';
                            (iii) by striking ``(II) are performed'' 
                        and all that follows through ``payment under'' 
                        and inserting the following:
                            ``(ii) are performed in an ambulatory 
                        surgical center or hospital outpatient 
                        department,
                payment under''; and
                            (iv) by striking clause (ii); and
                    (B) in paragraph (3)(C)--
                            (i) by striking ``(C) Facility payment 
                        limit.--'' and all that follows through 
                        ``Notwithstanding subsections'' and inserting 
                        the following:
                    ``(C) Facility payment limit.--Notwithstanding 
                subsections''; and
                            (ii) by striking clause (ii).
    (f) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after the day that is 1 year after 
the date of enactment of this Act.

SEC. 420. PROGRAM INTEGRITY.

    The Secretary, in consultation with the Inspector General of the 
Department of Health and Human Services, shall integrate supplemental 
preventive health services (as defined in section 1861(xx) of the 
Social Security Act (as added by the preceding provisions of this 
subtitle)) with existing program integrity measures.

SEC. 421. PROMOTION OF PREVENTIVE HEALTH BENEFITS.

    In order to promote the use by medicare beneficiaries of preventive 
health benefits, including preventive health services (as defined in 
section 1861(xx) of the Social Security Act (as added by the preceding 
provisions of this subtitle)) and preventive health items and services 
described in section 1833(p) of such Act (as added by section 419), the 
Secretary shall do the following:
            (1) Medicare handbook and other annual notices.--Include in 
        any medicare handbook and any other annual notice provided to 
        medicare beneficiaries a detailed description of--
                    (A) the preventive health benefits that are covered 
                under the medicare program; and
                    (B) the importance of using such benefits.
            (2) Fiscal intermediaries and carriers.--Require that 
        fiscal intermediaries with a contract under section 1816 of the 
        Social Security Act (42 U.S.C. 1395h) and carriers with a 
        contract under section 1842 of such Act (42 U.S.C. 1395u) 
        include preventive health benefits messages on Medicare Summary 
        Notice Statements and Explanations of Medicare Benefits 
        distributed by such entities.
            (3) Medicare part b statement.--Regularly include 
        preventive health benefits messages on the medicare part B 
        statement.
            (4) Medicare+choice plans.--Require that Medicare+Choice 
        organizations offering a Medicare+Choice plan disclose under 
        section 1852(c)(1)(B) of the Social Security Act (42 U.S.C. 
        1395w-22(c)(1)(B)) information regarding the preventive health 
        benefits that are covered under the plan.
            (5) Other activities.--Conduct activities in addition to 
        those described in paragraphs (1) through (4) that the 
        Secretary determines to be useful in disseminating information 
        to medicare beneficiaries regarding--
                    (A) the preventive health benefits that are covered 
                under the medicare program;
                    (B) the importance of using such benefits; and
                    (C) general health promotion.

 Subtitle C--National Falls Prevention Education and Awareness Campaign

SEC. 431. NATIONAL FALLS PREVENTION EDUCATION AND AWARENESS CAMPAIGN.

    (a) In General.--The Director of the Centers for Disease Control 
and Prevention, in consultation with the Administrator of the Centers 
for Medicare & Medicaid Services, shall conduct a national falls 
prevention and awareness campaign to reduce fall-related injuries among 
medicare beneficiaries.
    (b) Report to Congress.--
            (1) In general.--The Director of the Centers for Disease 
        Control and Prevention, in consultation with the Administrator 
        of the Centers for Medicare & Medicaid Services, shall submit 
        to Congress a report on the campaign conducted under this 
        section.
            (2) Deadline for report.--The report required under 
        paragraph (1) shall be submitted not later than the earlier 
        of--
                    (A) 6 months after the campaign is completed; or
                    (B) 3 years after the campaign is implemented.
            (3) Contents of report.--The report required under 
        paragraph (1) shall include the following:
                    (A) A description of the campaign.
                    (B) An evaluation of--
                            (i) whether the campaign has effectively 
                        reached its target population; and
                            (ii) the cost-effectiveness of the 
                        campaign.
                    (C) An assessment of whether the campaign has been 
                effective, as measured by whether--
                            (i) the target population has adopted the 
                        interventions suggested in the campaign, and if 
                        not, the reasons why such interventions have 
                        not been adopted; and
                            (ii) the fall rates among the target 
                        population have decreased since the campaign 
                        was implemented, and if not, the reasons why 
                        such fall rates have not decreased.
                    (D) Any other information regarding the campaign 
                that the Director of the Centers for Disease Control 
                and Prevention determines to be appropriate.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary for the purpose of carrying 
out this section.

    Subtitle D--Clinical Depression Screening Demonstration Projects

SEC. 441. CLINICAL DEPRESSION SCREENING DEMONSTRATION PROJECTS.

    (a) Definitions.--In this section:
            (1) Demonstration project.--The term ``demonstration 
        project'' means a demonstration project established under 
        subsection (b)(1).
            (2) Eligible beneficiary.--The term ``eligible 
        beneficiary'' means an individual enrolled for benefits under 
        part B who is not enrolled in any of the following:
                    (A) A Medicare+Choice plan under part C of title 
                XVIII of the Social Security Act (42 U.S.C. 1395w-21 et 
                seq.).
                    (B) A plan offered by an eligible organization 
                under section 1876 of such Act (42 U.S.C. 1395mm).
                    (C) A program of all-inclusive care for the elderly 
                (PACE) under section 1894 of such Act (42 U.S.C. 
                1395eee).
                    (D) A social health maintenance organization (SHMO) 
                demonstration project established under section 4018(b) 
                of the Omnibus Budget Reconciliation Act of 1987 
                (Public Law 100-203).
                    (E) A health care prepayment plan under section 
                1833(a)(1)(A) of the Social Security Act (42 U.S.C. 
                1395l(a)(1)(A)).
            (3) Part b.--The term ``part B'' means part B of the 
        original medicare fee-for-service program under title XVIII of 
        the Social Security Act (42 U.S.C. 1395j et seq.).
            (4) Qualified health professional.--The term ``qualified 
        health professional'' means an individual that--
                    (A) is--
                            (i) a physician (as defined in section 
                        1861(r)(1) of the Social Security Act (42 
                        U.S.C. 1395x(r)(1)));
                            (ii) a nurse practitioner (as defined in 
                        section 1861(aa)(5) of such Act (42 U.S.C. 
                        1395x(aa)(5))); or
                            (iii) a mental health care professional 
                        (including a clinical social worker, as defined 
                        in section 1861(hh) of such Act (42 U.S.C. 
                        1395x(hh))) that is licensed to perform mental 
                        health services by the State in which a 
                        screening for clinical depression is furnished 
                        under a demonstration project; and
                    (B) has an agreement in effect with the Secretary 
                under which the professional agrees to accept the 
                amount determined by the Secretary under subsection 
                (b)(4) as full payment for such screening and to accept 
                an assignment described in section 1842(b)(3)(B)(ii) of 
                the Social Security Act (42 U.S.C. 1395u(b)(3)(B)(ii)) 
                with respect to payment for each screening furnished by 
                the professional to an eligible beneficiary 
                participating in a demonstration project.
            (5) Screening for clinical depression.--
                    (A) In general.--The term ``screening for clinical 
                depression'' means a consultation during which--
                            (i) a self-administered written screening 
                        test (or an alternative format for such test 
                        pursuant to subsection (b)(3)(B)) is made 
                        available to an eligible beneficiary; and
                            (ii) a qualified health professional--
                                    (I) interprets the results of such 
                                test;
                                    (II) discusses the beneficiary's 
                                responses to the questions on the test 
                                with the beneficiary;
                                    (III) assesses the beneficiary's 
                                risk of clinical depression; and
                                    (IV) if the qualified health 
                                professional determines that the 
                                beneficiary is at high risk for 
                                clinical depression, refers the 
                                eligible beneficiary for a full 
                                diagnostic evaluation and such 
                                additional treatment as may be 
                                required.
                    (B) Construction.--Nothing in subparagraph 
                (A)(ii)(IV) shall be construed as prohibiting a 
                qualified health professional performing the screening 
                for clinical depression with respect to an individual 
                from directly providing the diagnostic evaluation and 
                additional treatment described in such subparagraph to 
                such individual if legally authorized under State law 
                to do so.
            (6) Self-administered written screening test.--The term 
        ``self-administered written screening test'' means an 
        instrument on which an eligible beneficiary writes answers to 
        questions designed to enable a qualified health professional to 
        establish the level of risk of such eligible beneficiary for 
        clinical depression.
    (b) Demonstration Projects.--
            (1) In general.--The Secretary shall establish and conduct 
        demonstration projects for the purpose of evaluating the 
        efficacy of providing screenings for clinical depression as a 
        benefit under part B to eligible beneficiaries through 
        qualified health professionals in accordance with the 
        requirements of this section.
            (2) Number, project areas, duration.--
                    (A) Number.--The Secretary shall establish no fewer 
                than 6 and no more than 10 demonstration projects.
                    (B) Project areas.--
                            (i) In general.--The Secretary shall 
                        conduct demonstration projects in geographic 
                        areas that include urban, suburban, and rural 
                        areas.
                            (ii) Selection.--The Secretary shall select 
                        the geographic areas described in clause (i) in 
                        a manner that--
                                    (I) ensures geographic diversity 
                                and a mix of screening sites (including 
                                physicians' offices, hospital 
                                outpatient departments, community 
                                mental health centers, and skilled 
                                nursing facilities); and
                                    (II) gives preference to areas with 
                                a high concentration of eligible 
                                beneficiaries.
                    (C) Duration.--The demonstration projects under 
                this section shall be conducted during the 3-year 
                period beginning on the date on which the initial 
                demonstration project is implemented.
            (3) Identification and distribution of self-administered 
        tests.--
                    (A) In general.--The Secretary, in consultation 
                with professionals experienced in conducting large-
                scale depression screening projects, shall--
                            (i) establish or identify a self-
                        administered written screening test to be used 
                        in conducting the demonstration projects; and
                            (ii) not later than the date that is 3 
                        months before the date on which a demonstration 
                        project is implemented in a geographic area, 
                        distribute such test to each qualified health 
                        professional that provides services in such 
                        area in which the Secretary conducts a 
                        demonstration project, together with guidelines 
                        for making the test available to eligible 
                        beneficiaries.
                    (B) Alternative formats for test.--The Secretary 
                shall also establish and distribute alternative formats 
                for the self-administered written screening test under 
                subparagraph (A) which shall be available for use when 
                circumstances do not permit an individual to complete 
                the self-administered written screening test.
            (4) Payment for screenings for clinical depression.--
                    (A) In general.--Subject to subparagraph (C), the 
                Secretary shall provide for payment of the reasonable 
                charges for each screening for clinical depression 
                furnished to an eligible beneficiary by a qualified 
                health professional from the amounts transferred under 
                subsection (d).
                    (B) Waiver of coinsurance and deductibles.--The 
                Secretary may not require the payment of any deductible 
                or coinsurance by any eligible beneficiary for a 
                screening for clinical depression furnished under a 
                demonstration project.
                    (C) Frequency limitation.--No payment may be made 
                under this section for a screening for clinical 
                depression if such a screening is performed with 
                respect to an eligible beneficiary within the year 
                after a previous screening of such beneficiary.
            (5) Waiver authority.--The Secretary may waive such 
        requirements under title XVIII of the Social Security Act (42 
        U.S.C. 1395 et seq.) as the Secretary determines necessary to 
        carry out the demonstration projects under this section.
    (c) Reports to Congress.--
            (1) Interim report.--
                    (A) In general.--Not later than 2 years after the 
                Secretary implements the initial demonstration project, 
                the Secretary shall submit to Congress a report 
                regarding the demonstration projects conducted under 
                this section.
                    (B) Contents of report.--The report submitted under 
                subparagraph (A) shall contain--
                            (i) a description of the demonstration 
                        projects conducted under this section;
                            (ii) an evaluation of--
                                    (I) whether screening for clinical 
                                depression is a cost-effective benefit 
                                or a cost-saving benefit; and
                                    (II) the level of satisfaction of 
                                eligible beneficiaries to whom such a 
                                screening is furnished under the 
                                demonstration project; and
                            (iii) any other information regarding the 
                        demonstration projects that the Secretary 
                        determines to be appropriate.
            (2) Final report.--Not later than 1 year after the 
        conclusion of the demonstration projects, the Secretary shall 
        submit a final report to Congress on the demonstration projects 
        containing the recommendations of the Secretary regarding 
        whether to conduct the demonstration projects on a permanent 
        basis, together with such recommendations for legislation and 
        administrative action as the Secretary considers appropriate.
    (d) Funding.--The Secretary shall provide for the transfer from the 
Federal Hospital Insurance Trust Fund under section 1817 of the Social 
Security Act (42 U.S.C. 1395i) an amount not to exceed $30,000,000 for 
the costs of carrying out the demonstration projects under this 
section.

    Subtitle E--Medicare Health Education and Risk Appraisal Program

SEC. 451. MEDICARE HEALTH EDUCATION AND RISK APPRAISAL PROGRAM.

    Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) is 
amended by adding at the end the following new section:

         ``medicare health education and risk appraisal program

    ``Sec. 1897. (a) Establishment.--Not later than 18 months after the 
date of the conclusion of the demonstration projects conducted under 
subsection (b)(1), the Secretary shall implement the demonstration 
project that the Secretary identifies as being the most effective 
project under subsection (c)(2)(C) on a nationwide and permanent basis.
    ``(b) Demonstration Projects.--
            ``(1) Establishment.--Not later than 1 year after the date 
        of enactment of this Act, the Secretary, in consultation with 
        the Centers for Medicare & Medicaid Services, the Centers for 
        Disease Control and Prevention, and the Agency for Healthcare 
        Research and Quality, shall conduct a demonstration project for 
        the purpose of developing a comprehensive and systematic model 
        for delivering health promotion and disease prevention services 
        that--
                    ``(A) through self-assessment identifies--
                            ``(i) behavioral risk factors, such as 
                        tobacco use, physical inactivity, alcohol use, 
                        and depression, among target individuals;
                            ``(ii) needed medicare clinical preventive 
                        and screening health benefits among target 
                        individuals; and
                            ``(iii) functional and self-management 
                        information the Secretary determines to be 
                        appropriate;
                    ``(B) provides ongoing followup to reduce risk 
                factors and promote the appropriate use of preventive 
                and screening health benefits;
                    ``(C) improves clinical outcomes, satisfaction, 
                quality of life, and appropriate use by target 
                individuals of items and services covered under the 
                medicare program; and
                    ``(D) provides target individuals with information 
                regarding the adoption of healthy behaviors.
            ``(2) Self-assessment and provision of information.--The 
        Secretary shall conduct the demonstration projects established 
        under paragraph (1) in the following manner:
                    ``(A) Self-assessment.--
                            ``(i) In general.--The Secretary shall test 
                        different--
                                    ``(I) methods of making self-
                                assessments available to each target 
                                individual;
                                    ``(II) methods of encouraging each 
                                target individual to participate in the 
                                self-assessment; and
                                    ``(III) methods for processing 
                                responses to the self-assessment.
                            ``(ii) Contents.--A self-assessment made 
                        available under clause (i) shall include--
                                    ``(I) questions regarding 
                                behavioral risk factors;
                                    ``(II) questions regarding needed 
                                preventive screening health services;
                                    ``(III) questions regarding the 
                                target individual's preferences for 
                                receiving follow-up information; and
                                    ``(IV) other information that the 
                                Secretary determines appropriate.
                    ``(B) Provision of information.--After each target 
                individual completes the self-assessment, the Secretary 
                shall ensure that the target individual is provided 
                with such information as the Secretary determines 
                appropriate, which may include--
                            ``(i) information regarding the results of 
                        the self-assessment;
                            ``(ii) recommendations regarding any 
                        appropriate behavior modification based on the 
                        self-assessment;
                            ``(iii) information regarding how to access 
                        behavior modification assistance that promotes 
                        healthy behavior, including information on 
                        nurse hotlines, counseling services, provider 
                        services, and case-management services;
                            ``(iv) information, feedback, support, and 
                        recommendations regarding any need for clinical 
                        preventive and screening health services or 
                        treatment; and
                            ``(v) referrals to available community 
                        resources in order to assist the target 
                        individual in reducing health risks.
            ``(3) Project areas and duration.--
                    ``(A) Project areas.--The Secretary shall implement 
                the demonstration projects in geographic areas that 
                include urban, suburban, and rural areas.
                    ``(B) Duration.--The Secretary shall conduct the 
                demonstration projects during the 3-year period 
                beginning on the date on which the first demonstration 
                project is implemented.
    ``(c) Report to Congress.--
            ``(1) In general.--Not later than 1 year after the date on 
        which the demonstration projects conclude, the Secretary shall 
        submit to Congress a report on such projects.
            ``(2) Contents of report.--The report submitted under 
        paragraph (1) shall--
                    ``(A) describe the demonstration projects conducted 
                under this section;
                    ``(B) identify the demonstration project that is 
                the most effective; and
                    ``(C) contain such other information regarding the 
                demonstration projects as the Secretary determines 
                appropriate.
            ``(3) Measurement of effectiveness.--For purposes of 
        paragraph (2)(B), in identifying the demonstration project that 
        is the most effective, the Secretary shall consider--
                    ``(A) how successful the project was at--
                            ``(i) reaching target individuals and 
                        engaging them in an assessment of the risk 
                        factors of such individuals;
                            ``(ii) educating target individuals on 
                        healthy behaviors and getting such individuals 
                        to modify their behaviors in order to diminish 
                        the risk of chronic disease; and
                            ``(iii) ensuring that target individuals 
                        were provided with necessary information;
                    ``(B) the cost-effectiveness of the demonstration 
                project; and
                    ``(C) the degree of beneficiary satisfaction under 
                the demonstration projects.
    ``(d) Waiver Authority.--The Secretary may waive such requirements 
under this title as the Secretary determines necessary to carry out the 
demonstration projects under this section.
    ``(e) Funding.--There are authorized to be appropriated $25,000,000 
for carrying out the demonstration project under this section.
    ``(f) Definitions.--In this section:
            ``(1) Target individual.--The term `target individual' 
        means each individual that is--
                    ``(A) entitled to benefits under part A or enrolled 
                under part B, including an individual enrolled under 
                the Medicare+Choice program under part C; or
                    ``(B) between the ages of 50 and 64 who is not a 
                beneficiary under this title.
            ``(2) Major behavioral risk factor.--The term `major 
        behavioral risk factor' includes--
                    ``(A) the lack of proper nutrition;
                    ``(B) the use of alcohol;
                    ``(C) the lack of regular exercise;
                    ``(D) the use of tobacco;
                    ``(E) depression; and
                    ``(F) any other risk factor identified by the 
                Secretary.''.

 Subtitle F--Studies, Evaluations, and Reports In the Field of Disease 
                       Prevention and the Elderly

SEC. 461. MEDPAC EVALUATION AND REPORT ON MEDICARE BENEFIT PACKAGE IN 
              RELATION TO PRIVATE SECTOR BENEFIT PACKAGES.

    (a) In General.--Section 1805(b) of the Social Security Act (42 
U.S.C. 1395b-6(b)), as amended by section 544(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(114 Stat. 2763A-551), as enacted into law by section 1(a)(6) of Public 
Law 106-554, is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (C), by striking ``and'' at the 
                end;
                    (B) in subparagraph (D), by striking the period and 
                inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(E) on the date that is 3 years after the date of 
                enactment of the Medicare Reform Act of 2001, and each 
                successive 3-year anniversary thereafter, submit the 
                report described in paragraph (8)(C) to Congress.''; 
                and
            (2) by adding at the end the following new paragraph:
            ``(8) Evaluation of medicare benefit package in relation to 
        private sector benefit packages.--
                    ``(A) Evaluation.--The Commission shall evaluate--
                            ``(i) the benefit package offered under the 
                        medicare program under this title; and
                            ``(ii) the degree to which such benefit 
                        package compares to the benefit packages 
                        offered by health benefit programs available in 
                        the private sector to individuals over age 55.
                    ``(B) Issues.--In conducting the evaluation under 
                subparagraph (A)(ii), the Commission shall address the 
                following issues:
                            ``(i) Whether the benefit packages 
                        available under the programs are--
                                    ``(I) similar;
                                    ``(II) appropriate for the 
                                enrollees of the programs (based on 
                                what experts recommend for such 
                                enrollees);
                                    ``(III) actuarially equivalent; and
                                    ``(IV) comprehensive.
                            ``(ii) The financial liabilities of 
                        enrollees of the programs and whether such 
                        liabilities are appropriate.
                            ``(iii) The ability of enrollees of the 
                        programs to take advantage of benefits under 
                        the programs.
                    ``(C) Report.--The Commission shall submit a report 
                to Congress that shall contain--
                            ``(i) a detailed statement of the findings 
                        and conclusions of the Commission regarding the 
                        evaluation conducted under subparagraph (A);
                            ``(ii) the recommendations of the 
                        Commission regarding changes in the benefit 
                        package offered under the medicare program 
                        under this title that would keep the program 
                        modern and competitive in relation to health 
                        benefit packages offered by health benefit 
                        programs available in the private sector to 
                        individuals over age 55; and
                            ``(iii) the recommendations of the 
                        Commission for such legislation and 
                        administrative actions as it considers 
                        appropriate.''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 462. NATIONAL INSTITUTE ON AGING STUDY AND REPORT ON WAYS TO 
              IMPROVE THE QUALITY OF LIFE OF ELDERLY.

    (a) Studies.--The Director of the National Institute on Aging, in 
consultation with the Working Group on Disease Self-Management and 
Health Promotion (established in section 402) and the United States 
Preventive Services Task Force, shall conduct 1 or more studies 
focusing on ways to--
            (1) improve quality of life for the elderly; and
            (2) develop better ways to prevent or delay the onset of 
        age-related functional decline and disease and disability among 
        the elderly.
    (b) Reports.--
            (1) Report for each study.--The Director of the National 
        Institute on Aging, in consultation with the Working Group on 
        Disease Self-Management and Health Promotion and the United 
        States Preventive Services Task Force, shall submit a report to 
        the Secretary regarding each study conducted under subsection 
        (a), together with a detailed statement of research findings 
        and conclusions that are scientifically valid and are 
        demonstrated to prevent or delay the onset of chronic illness 
        or disability among the elderly.
            (2) Timing for submitting reports.--Each report regarding a 
        study that is required to be submitted pursuant to paragraph 
        (1) shall be submitted by not later than the earlier of--
                    (A) the date that is 18 months after the completion 
                of the study involved; or
                    (B) January 1, 2008.
    (c) Transmission to Institute of Medicine.--Upon receipt of each 
report described in subsection (b), the Secretary shall transmit such 
report to the Institute of Medicine of the National Academy of Sciences 
for consideration in its effort to conduct the comprehensive study of 
current literature and best practices in the field of health promotion 
and disease prevention among the medicare beneficiaries described in 
section 463.
    (d) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        for the purpose of carrying out this section such sums as may 
        be necessary for the period of fiscal years 2002 through 2008.
            (2) Availability.--Any sums appropriated under the 
        authorization contained in this subsection shall remain 
        available, without fiscal year limitation, until September 30, 
        2008.

SEC. 463. INSTITUTE OF MEDICINE MEDICARE PREVENTION BENEFIT STUDY AND 
              REPORT.

    (a) Study.--
            (1) In general.--The Secretary shall contract with the 
        Institute of Medicine of the National Academy of Sciences to--
                    (A) conduct a comprehensive study of current 
                literature and best practices in the field of health 
                promotion and disease prevention among medicare 
                beneficiaries, including the issues described in 
                paragraph (2); and
                    (B) submit the report described in subsection (b).
            (2) Issues studied.--The study required under paragraph (1) 
        shall include an assessment of--
                    (A) whether each health promotion and disease 
                prevention benefit covered under the medicare program 
                is--
                            (i) medically effective (as defined in 
                        section 401(4)); and
                            (ii) a cost-effective benefit (as defined 
                        in section 401(2)) or a cost-saving benefit (as 
                        defined in section 401(3));
                    (B) utilization by medicare beneficiaries of such 
                benefits (including any barriers to or incentives to 
                increase utilization);
                    (C) quality of life issues associated with such 
                benefits; and
                    (D) health promotion and disease prevention 
                benefits that are not covered under the medicare 
                program that would affect all medicare beneficiaries.
    (b) Reports.--
            (1) Three-year report.--On the date that is 3 years after 
        the date of enactment of this Act, and each successive 3-year 
        anniversary thereafter, the Institute of Medicine of the 
        National Academy of Sciences shall submit to the President a 
        report that contains--
                    (A) a detailed statement of the findings and 
                conclusions of the study conducted under subsection 
                (a); and
                    (B) the recommendations for legislation described 
                in paragraph (3).
            (2) Interim report based on new guidelines.--If the United 
        States Preventive Services Task Force or the Task Force on 
        Community Preventive Services establishes new guidelines 
        regarding preventive health benefits for medicare beneficiaries 
more than 1 year prior to the date that a report described in paragraph 
(1) is due to be submitted to the President, then not later than 6 
months after the date such new guidelines are established, the 
Institute of Medicine of the National Academy of Sciences shall submit 
to the President a report that contains a detailed description of such 
new guidelines. Such report may also contain recommendations for 
legislation described in paragraph (3).
            (3) Recommendations for legislation.--The Institute of 
        Medicine of the National Academy of Sciences, in consultation 
        with the United States Preventive Services Task Force and the 
        Task Force on Community Preventive Services, shall develop 
        recommendations in legislative form that--
                    (A) prioritize the preventive health benefits under 
                the medicare program; and
                    (B) modify such benefits, including adding new 
                benefits under such program, based on the study 
                conducted under subsection (a).
    (c) Transmission to Congress.--
            (1) In general.--On the day on which the report described 
        in paragraph (1) of subsection (b) (or paragraph (2) of such 
        subsection if the report contains recommendations in 
        legislative form described in subsection (b)(3)) is submitted 
        to the President, the President shall transmit the report and 
        recommendations to Congress.
            (2) Delivery.--Copies of the report and recommendations in 
        legislative form required to be transmitted to Congress under 
        paragraph (1) shall be delivered--
                    (A) to both Houses of Congress on the same day;
                    (B) to the Clerk of the House of Representatives if 
                the House is not in session; and
                    (C) to the Secretary of the Senate if the Senate is 
                not in session.

SEC. 464. FAST-TRACK CONSIDERATION OF PREVENTION BENEFIT LEGISLATION.

    (a) Rules of House of Representatives and Senate.--This section is 
enacted by Congress--
            (1) as an exercise of the rulemaking power of the House of 
        Representatives and the Senate, respectively, and is deemed a 
        part of the rules of each House of Congress, but--
                    (A) is applicable only with respect to the 
                procedure to be followed in that House of Congress in 
                the case of an implementing bill (as defined in 
                subsection (d)); and
                    (B) supersedes other rules only to the extent that 
                such rules are inconsistent with this section; and
            (2) with full recognition of the constitutional right of 
        either House of Congress to change the rules (so far as 
        relating to the procedure of that House of Congress) at any 
        time, in the same manner and to the same extent as in the case 
        of any other rule of that House of Congress.
    (b) Introduction and Referral.--
            (1) Introduction.--
                    (A) In general.--Subject to paragraph (2), on the 
                day on which the President transmits the report 
                pursuant to section 463(c) to the House of 
                Representatives and the Senate, the recommendations in 
                legislative form transmitted by the President with 
                respect to such report shall be introduced as a bill 
                (by request) in the following manner:
                            (i) House of representatives.--In the House 
                        of Representatives, by the Majority Leader, for 
                        himself and the Minority Leader, or by Members 
                        of the House of Representatives designated by 
                        the Majority Leader and Minority Leader.
                            (ii) Senate.--In the Senate, by the 
                        Majority Leader, for himself and the Minority 
                        Leader, or by Members of the Senate designated 
                        by the Majority Leader and Minority Leader.
                    (B) Special rule.--If either House of Congress is 
                not in session on the day on which such recommendations 
                in legislative form are transmitted, the 
                recommendations in legislative form shall be introduced 
                as a bill in that House of Congress, as provided in 
                subparagraph (A), on the first day thereafter on which 
                that House of Congress is in session.
            (2) Referral.--Such bills shall be referred by the 
        presiding officers of the respective Houses to the appropriate 
        committee, or, in the case of a bill containing provisions 
        within the jurisdiction of 2 or more committees, jointly to 
        such committees for consideration of those provisions within 
        their respective jurisdictions.
    (c) Consideration.--After the recommendations in legislative form 
have been introduced as a bill and referred under subsection (b), such 
implementing bill shall be considered in the same manner as an 
implementing bill is considered under subsections (d), (e), (f), and 
(g) of section 151 of the Trade Act of 1974 (19 U.S.C. 2191). The 
implementing bill shall be subject to all congressional budget points 
of order, including points of order under the Congressional Budget Act 
of 1974.
    (d) Implementing Bill Defined.--In this section, the term 
``implementing bill'' means only the recommendations in legislative 
form of the Institute of Medicine of the National Academy of Sciences 
described in section 463(b)(3), transmitted by the President to the 
House of Representatives and the Senate under section 463(c), and 
introduced and referred as provided in subsection (b) as a bill of 
either House of Congress.
    (e) Counting of Days.--For purposes of this section, any period of 
days referred to in section 151 of the Trade Act of 1974 shall be 
computed by excluding--
            (1) the days on which either House of Congress is not in 
        session because of an adjournment of more than 3 days to a day 
        certain or an adjournment of Congress sine die; and
            (2) any Saturday and Sunday, not excluded under paragraph 
        (1), when either House is not in session.

Subtitle G--Informatics Systems Grant Program for Hospitals and Skilled 
                           Nursing Facilities

SEC. 471. INFORMATICS SYSTEMS GRANT PROGRAM FOR HOSPITALS AND SKILLED 
              NURSING FACILITIES.

    (a) Grants.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall 
        establish a program to make grants to eligible entities that 
        have submitted applications in accordance with subsection (b) 
        for the purpose of assisting such entities in offsetting the 
        costs related to purchasing, leasing, developing, and 
        implementing standardized clinical health care informatics 
        systems designed to improve patient safety and reduce adverse 
        events and health care complications resulting from medication 
        errors.
            (2) Duration.--The authority of the Secretary to make 
        grants under this section shall terminate on September 30, 
        2011.
            (3) Costs defined.--For purposes of this section, the term 
        ``costs'' shall include total expenditures incurred for--
                    (A) purchasing, leasing, and installing computer 
                software and hardware, including handheld computer 
                technologies;
                    (B) making improvements to existing computer 
                software and hardware;
                    (C) purchasing or leasing communications 
                capabilities necessary for clinical data access, 
                storage, and exchange; and
                    (D) providing education and training to eligible 
                entity staff on computer patient safety information 
                systems.
            (4) Eligible entity defined.--For purposes of this section, 
        the term ``eligible entity'' means the following entities:
                    (A) Hospital.--A hospital (as defined in section 
                1861(e) of the Social Security Act (42 U.S.C. 
                1395x(e))).
                    (B) Skilled nursing facility.--A skilled nursing 
                facility (as defined in section 1819(a) of such Act (42 
                U.S.C. 1395i-3(e))).
    (b) Application.--An eligible entity seeking a grant under this 
section shall submit an application to the Secretary at such time, in 
such form and manner, and containing such information as the Secretary 
specifies.
    (c) Special Consideration for Eligible Entities That Serve a Large 
Number of Medicare and Medicaid Eligible Individuals.--In awarding 
grants under this section, the Secretary shall give special 
consideration to eligible entities in which individuals that are 
eligible for benefits under the medicare program under title XVIII of 
the Social Security Act or the medicaid program under title XIX of such 
Act make up a high percentage of the total patient population of the 
entity.
    (d) Limitation on Amount of Grant.--
            (1) In general.--A grant awarded under this section may not 
        exceed the lesser of--
                    (A) an amount equal to the applicable percentage of 
                the costs incurred by the eligible entity for the 
                project for which the entity is seeking funding under 
                this section; or
                    (B) in the case of a grant made to--
                            (i) a hospital, $750,000; or
                            (ii) a skilled nursing facility, $200,000.
            (2) Applicable percentage.--For purposes of paragraph 
        (1)(A), the term ``applicable percentage'' means, with respect 
        to an eligible entity, the percentage of total net revenues for 
        such period as determined appropriate by the Secretary for the 
        entity that consists of net revenues from the medicare program 
        under title XVIII of the Social Security Act.
    (e) Eligible Entity Required To Furnish Secretary With 
Information.--An eligible entity receiving a grant under this section 
shall furnish the Secretary with such information as the Secretary may 
require to--
            (1) evaluate the project for which the grant is made; and
            (2) ensure that funding provided under the grant is 
        expended for the purposes for which it is made.
    (f) Reports.--
            (1) Interim reports.--
                    (A) In general.--The Secretary shall submit, at 
                least annually, a report to the Committee on Ways and 
                Means of the House of Representatives and the Committee 
                on Finance of the Senate on the grant program 
                established under this section.
                    (B) Contents.--A report submitted pursuant to 
                subparagraph (A) shall include information on--
                            (i) the number of grants made;
                            (ii) the nature of the projects for which 
                        funding is provided under the grant program;
                            (iii) the geographic distribution of grant 
                        recipients; and
                            (iv) such other matters as the Secretary 
                        determines appropriate.
            (2) Final report.--Not later than 180 days after the 
        completion of all of the projects for which a grant is made 
        under this section, the Secretary shall submit a final report 
        to the committees referred to in paragraph (1)(A) on the grant 
        program established under this section, together with such 
        recommendations for legislation and administrative action as 
        the Secretary determines appropriate.
    (g) Authorization of Appropriations.--
            (1) Authorization.--
                    (A) Hospitals.--There are authorized to be 
                appropriated from the Federal Hospital Insurance Trust 
                Fund under section 1817 of the Social Security Act (42 
                U.S.C. 1395i) $93,000,000, for each of the fiscal years 
                2002 through 2011, for the purpose of making grants 
                under this section to eligible entities that are 
                hospitals.
                    (B) Skilled nursing facilities.--There are 
                authorized to be appropriated from the Federal Hospital 
                Insurance Trust Fund under section 1817 of the Social 
                Security Act (42 U.S.C. 1395i) $4,500,000, for each of 
                the fiscal years 2002 through 2011, for the purpose of 
                making grants under this section to eligible entities 
                that are skilled nursing facilities.
            (2) Availability.--Any amounts appropriated pursuant to the 
        authority contained in subparagraph (A) or (B) of paragraph (1) 
        shall remain available, without fiscal year limitation, through 
        September 30, 2011.

                    TITLE V--MEDICARE SUSTAINABILITY

SEC. 501. INDEXING PART B DEDUCTIBLE TO INFLATION.

    The first sentence of section 1833(b) of the Social Security Act 
(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. 502. INCOME-RELATED REDUCTION IN MEDICARE SUBSIDY FOR PART B 
              PREMIUM.

    (a) In General.--Section 1839 of the Social Security Act (42 U.S.C. 
1395r) is amended by adding at the end the following new subsection:
    ``(h)(1)(A) Notwithstanding the previous subsections of this 
section, and subject to paragraph (2), in the case of an individual 
whose modified adjusted gross income for a taxable year ending with or 
within a calendar year exceeds the threshold amount, the Secretary 
shall increase the amount of the monthly premium for such individual 
for months in the calendar year by the amount which bears the same 
ratio to the monthly actuarial rate for enrollees age 65 and over (as 
determined under subsection (a)(1)) for that year as such excess bears 
to an amount equal to \1/3\ of the applicable threshold amount).
    ``(B) In no event shall the increase described in subparagraph (A) 
exceed an amount equal to the monthly actuarial rate for enrollees age 
65 and over (as determined under subsection (a)(1)) for the year.
    ``(2) For purposes of this subsection--
            ``(A) the threshold amount, the modified adjusted gross 
        income, and joint return shall be determined under section 
        1860D(b)(1); and
            ``(B) rules similar to the rules of paragraphs (2) through 
        (5) of section 1860D(b) shall apply to this subsection.''.
    (b) Conforming Amendments.--
            (1) In general.--Section 1839 of the Social Security Act 
        (42 U.S.C. 1395r) is amended--
                    (A) in subsection (a)(2), as amended by section 
                606(a)(2)(B)(i) of the Medicare, Medicaid, and SCHIP 
                Benefits Improvement and Protection Act of 2000 (114 
                Stat. 2763A-557), as enacted into law by section 
                1(a)(6) of Public Law 106-554), by striking ``and (f)'' 
                and inserting ``(f), and (h)'';
                    (B) in subsection (b), by inserting ``(and as 
                increased under subsection (h))'' after ``subsection 
                (a)''; and
                    (C) in subsection (f), by striking ``if an 
                individual'' and inserting the following: ``if an 
                individual (other than an individual subject to an 
                increase in the monthly premium under this section 
                pursuant to subsection (h))''.
            (2) Payment to secretary.--Section 1840(c) of the Social 
        Security Act (42 U.S.C. 1395s(c)) is amended by inserting ``or 
        an individual determines that the estimate of modified adjusted 
        gross income used in determining whether the individual is 
        subject to an increase in the monthly premium under section 
        1839 pursuant to subsection (h) of such section (or in 
        determining the amount of such increase) is too low and results 
        in a portion of the premium not being deducted,'' before ``he 
        may''.
    (c) Reporting Requirements for Secretary of the Treasury.--
Paragraph (18) of section 6103(l) of the Internal Revenue Code of 1986, 
as added by section 304(a), is amended--
            (1) in the heading, by inserting ``and income-related 
        reduction in subsidy for medicare part b premium after ``part d 
        premium'';
            (2) in subparagraph (A), in the matter preceding clause 
        (i), by striking ``part D'' and inserting ``part B or D''; and
            (3) in subparagraph (B), by striking ``part D'' and 
        inserting ``part B or D''.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to the monthly premium under section 1839 of the Social 
Security Act (42 U.S.C. 1395r) for months beginning with January 2004.
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