[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1185 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1185

  To amend title XVIII of the Social Security Act to assure access of 
medicare beneficiaries to prescription drug coverage through the SPICE 
                         drug benefit program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 17, 2001

 Mr. Wyden (for himself and Ms. Snowe) 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 assure access of 
medicare beneficiaries to prescription drug coverage through the SPICE 
                         drug benefit 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 ``Seniors 
Prescription Insurance Coverage Equity (SPICE) Act of 2001''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. SPICE drug benefit program.
                  ``Part D--SPICE Drug Benefit Program

        ``Sec. 1860A. Establishment of SPICE drug benefit program.
        ``Sec. 1860B. SPICE prescription drug coverage.
        ``Sec. 1860C. Enrollment under SPICE drug benefit program.
        ``Sec. 1860D. Enrollment in a policy or plan.
        ``Sec. 1860E. Medicare Drug Plan for Noncompetitive Areas.
        ``Sec. 1860F. Selection of private entities to provide basic 
                            coverage.
        ``Sec. 1860G. Providing information to beneficiaries.
        ``Sec. 1860H. Premiums.
        ``Sec. 1860I. Approval for entities offering SPICE prescription 
                            drug coverage.
        ``Sec. 1860J. Payments to entities.
        ``Sec. 1860K. Financial assistance to obtain SPICE prescription 
                            drug coverage.
        ``Sec. 1860L. Employer incentive program for employment-based 
                            retiree drug coverage.
        ``Sec. 1860M. SPICE Board.
        ``Sec. 1860N. SPICE Prescription Drug Account in the Federal 
                            Supplementary Medical Insurance Trust 
                            Fund.''.
Sec. 3. SPICE prescription drug coverage under Medicare+Choice plans.
Sec. 4. Medigap revisions and transition provisions.
Sec. 5. Provision of information on SPICE drug benefit program under 
                            health insurance information, counseling, 
                            and assistance grants.
Sec. 6. Personal Digital Access Technology Demonstration Project.

SEC. 2. SPICE DRUG BENEFIT PROGRAM.

    (a) In General.--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--SPICE Drug Benefit Program

             ``establishment of spice drug benefit program

    ``Sec. 1860A. (a) Access to SPICE Prescription Drug Coverage.--
            ``(1) In general.--Beginning in 2003, the SPICE Board 
        (established under section 1860M) shall provide for a SPICE 
        drug benefit program under which all eligible medicare 
        beneficiaries who voluntarily enroll under this part shall be 
        entitled to obtain SPICE prescription drug coverage (meeting 
        the terms and conditions under this part) as follows:
                    ``(A) Medicare+choice plan.--If the eligible 
                medicare beneficiary is eligible to enroll in a 
                Medicare+Choice plan, the beneficiary may enroll in the 
                plan and obtain SPICE prescription drug coverage (as 
                defined in section 1860B(a)) through such plan.
                    ``(B) Medicare supplemental policy.--If the 
                eligible medicare beneficiary is not enrolled in a 
                Medicare+Choice plan but is enrolled in a medicare 
                supplemental policy, the beneficiary may--
                            ``(i) obtain SPICE prescription drug 
                        coverage through such policy; or
                            ``(ii) waive basic coverage (as defined in 
                        section 1860B(b)) pursuant to section 
                        1860C(a)(3) and obtain financial assistance 
                        pursuant to section 1860K(c) for stop-loss 
                        coverage (as defined in section 1860B(c)) 
                        provided under such policy.
                    ``(C) Medicare drug plan for noncompetitive 
                areas.--If the eligible medicare beneficiary is not 
                enrolled in a Medicare+Choice plan, a medicare 
                supplemental policy, or a basic coverage plan under 
                section 1860F, and there is a Medicare Drug Plan for 
                Noncompetitive Areas available in the area in which the 
                beneficiary resides, the beneficiary may obtain SPICE 
                prescription drug coverage under this part through 
                enrollment in such plan.
                    ``(D) Basic coverage only through a private 
                entity.--If the eligible medicare beneficiary is not 
                enrolled in a Medicare+Choice plan, a medicare 
                supplemental policy, or a Medicare Drug Plan for 
                Noncompetitive Areas, the beneficiary may obtain basic 
                coverage (including financial assistance for such 
                coverage under section 1860K(b) and access to 
                negotiated prices under section 1860B(d)) through 
                enrollment in a plan offered by a private entity with a 
                contract to offer such plan under section 1860F.
            ``(2) Voluntary nature of program.--Nothing in this part 
        shall be construed as requiring an eligible medicare 
        beneficiary to enroll in the program established under this 
        part.
            ``(3) Administration of benefits.--In providing SPICE 
        prescription drug coverage to an eligible medicare beneficiary 
        under this part, an entity offering a medicare supplemental 
        policy, a Medicare+Choice plan, a Medicare Drug Plan for 
        Noncompetitive Areas, or a basic coverage plan under section 
        1860F may--
                    ``(A) directly administer the benefits under such 
                coverage; or
                    ``(B) contract with an entity that meets the 
                applicable requirements under this part to administer 
                such benefits.
    ``(b) Access to Alternative Prescription Drug Coverage.--In the 
case of an eligible medicare beneficiary who has creditable 
prescription drug coverage (as defined in section 1860C(b)(4)) under a 
policy or plan, such beneficiary--
            ``(1) may continue to receive such coverage under such 
        policy or plan and not enroll under this part; and
            ``(2) pursuant to section 1860C(b)(3), is permitted to 
        subsequently enroll under this part and obtain SPICE 
        prescription drug coverage without any penalty if such policy 
        or plan terminated, ceased to provide, or substantially reduced 
        the value of the prescription drug coverage under such plan or 
        policy.
    ``(c) Financial Assistance.--
            ``(1) Under spice drug benefit program.--Under the SPICE 
        drug benefit program, the SPICE Board shall provide financial 
        assistance, with such assistance varying depending upon the 
        income of such beneficiary, for any eligible medicare 
        beneficiary enrolled under this part who voluntarily obtains--
                    ``(A) basic coverage (pursuant to subsection (b) of 
                section 1860K); or
                    ``(B) stop-loss coverage (pursuant to subsection 
                (c) of such section).
            ``(2) Assistance to group health plans that provide 
        prescription drug coverage to eligible medicare 
        beneficiaries.--Pursuant to the Employer Incentive Program 
        established under section 1860L, the SPICE Board shall make 
        payments to employers and other sponsors of employment-based 
        health care coverage to encourage such employers and sponsors 
        to provide adequate prescription drug coverage to retired 
        individuals.
    ``(d) Eligible Medicare Beneficiary Defined.--For purposes of this 
part, the term `eligible medicare beneficiary' means an individual who 
is entitled to benefits under part A and enrolled under part B.
    ``(e) Financing.--The costs of providing benefits under this part 
shall be payable from the SPICE Prescription Drug Account (as 
established under section 1860N) within the Federal Supplementary 
Medical Insurance Trust Fund under section 1841.

                   ``spice prescription drug coverage

    ``Sec. 1860B. (a) In General.--For purposes of this part, the term 
`SPICE prescription drug coverage' means coverage consisting of the 
following:
            ``(1) Basic coverage.--Basic coverage (as defined in 
        subsection (b)) and access to negotiated prices under 
        subsection (d), except as waived pursuant to section 
        1860C(a)(3).
            ``(2) Stop-loss coverage.--Stop-loss coverage (as defined 
        in subsection (c)).
    ``(b) Basic Coverage.--For purposes of this part, the term `basic 
coverage' means coverage of covered outpatient drugs (as defined in 
subsection (e)) that meets the following requirements:
            ``(1) Deductible.--The coverage has an annual deductible--
                    ``(A) for 2003, that is equal to $350; or
                    ``(B) for a subsequent year, that is equal to the 
                amount specified under this paragraph for the previous 
                year increased by the percentage specified in paragraph 
                (4) for the year involved.
        Any amount determined under subparagraph (B) that is not a 
        multiple of $5 shall be rounded to the nearest multiple of $5.
            ``(2) Coinsurance.--The coverage has coinsurance (for the 
        cost of a covered outpatient drug above the annual deductible 
        specified in paragraph (1) for the year and up to the initial 
        coverage limit specified in paragraph (3) for the year) that 
        does not exceed 25 percent of the cost of such drug.
            ``(3) Initial coverage limit.--
                    ``(A) In general.--The coverage has an initial 
                coverage limit for covered outpatient drugs in a year 
                that is reached when the eligible medicare beneficiary 
                has incurred the applicable amount of out-of-pocket 
                expenses in the year.
                    ``(B) Applicable amount defined.--For purposes of 
                subparagraph (A), the term `applicable amount' means--
                            ``(i) for 2003, $3,000; or
                            ``(ii) for a subsequent year, the amount 
                        specified in this subparagraph for the previous 
                        year, increased by the annual percentage 
                        increase described in paragraph (4) for the 
                        year involved.
                Any amount determined under clause (ii) that is not a 
                multiple of $25 shall be rounded to the nearest 
                multiple of $25.
                    ``(C) Application.--In applying paragraph (1)--
                            ``(i) incurred out-of-pocket expenses shall 
                        only include expenses incurred for the annual 
                        deductible (described in paragraph (1)) and 
                        coinsurance (described in paragraph (2)); and
                            ``(ii) such expenses shall be treated as 
                        incurred without regard to whether the 
                        individual or another person, including a State 
                        program or other third-party coverage, has paid 
                        for such expenses.
            ``(4) Annual percentage increase.--For purposes of this 
        part, the annual percentage increase specified in this 
        paragraph for a year is equal to the annual percentage increase 
        in average per capita aggregate expenditures for benefits under 
        this title, as determined by the Secretary for the 12-month 
        period ending in July of the previous year.
    ``(c) Stop-Loss Coverage.--For purposes of this part, the term 
`stop-loss coverage' means coverage of covered outpatient drugs in a 
year without any coinsurance after the eligible medicare beneficiary 
has reached the initial coverage limit specified in subsection (b)(3) 
for the year.
    ``(d) Access to Negotiated Prices.--Under SPICE prescription drug 
coverage offered under a policy or plan, the entity offering the policy 
or plan (or the administering entity pursuant to subsection (a)(3)(B)) 
shall provide beneficiaries with access to negotiated prices (including 
applicable discounts) used for payment for covered outpatient drugs, 
regardless of the fact that no benefits may be payable under the 
coverage with respect to such drugs because of the application of the 
annual deductible.
    ``(e) Covered Outpatient Drugs Defined.--
            ``(1) In general.--Except as provided in this subsection, 
        for purposes of this part, the term `covered outpatient drug' 
        means--
                    ``(A) a drug that may be dispensed only upon a 
                prescription and that is described in subparagraph 
                (A)(i) or (A)(ii) of section 1927(k)(2); or
                    ``(B) a biological product described in clauses (i) 
                through (iii) of subparagraph (B) of such section or 
insulin described in subparagraph (C) of such section,
        and such term includes any use of a covered outpatient drug for 
        a medically accepted indication (as defined in section 
        1927(k)(6)).
            ``(2) Exclusions.--
                    ``(A) In general.--Such term does not include drugs 
                or classes of drugs, or their medical uses, which may 
                be excluded from coverage or otherwise restricted under 
                section 1927(d)(2), other than subparagraph (E) thereof 
                (relating to smoking cessation agents) and except to 
                the extent otherwise specifically provided by the SPICE 
                Board with respect to a drug in any of such classes.
                    ``(B) Avoidance of duplicate coverage.--A drug 
                prescribed for an individual that would otherwise be a 
                covered outpatient drug under this part shall not be so 
                considered if payment for such drug is available under 
                part A or B or would be available under part B but for 
                the application of a deductible under such part (but 
                shall be so considered if such payment is not available 
                because benefits under part A or B have been 
                exhausted).
            ``(3) Application of formulary restrictions.--A drug 
        prescribed for an individual that would otherwise be a covered 
        outpatient drug under this part shall not be so considered 
        under a policy or plan if the policy or plan excludes the drug 
        under a formulary that meets the requirements of section 
        1860I(c)(3) (including providing an appeal process).
            ``(4) Application of general exclusion provisions.--An 
        entity may exclude from SPICE prescription drug coverage any 
        covered outpatient drug--
                    ``(A) for which payment would not be made if 
                section 1862(a) applied to part D; or
                    ``(B) which are not prescribed in accordance with 
                the policy or plan or this part.
        Such exclusions are determinations subject to reconsideration 
        and appeal pursuant to section 1860I(c)(6).

             ``enrollment under spice drug benefit program

    ``Sec. 1860C. (a) Establishment of Process.--
            ``(1) Establishment.--
                    ``(A) In general.--The SPICE Board, in consultation 
                with the Secretary, the National Association of 
                Insurance Commissioners, issuers of medicare 
                supplemental policies, and Medicare+Choice 
                organizations, shall establish a process through which 
                an eligible medicare beneficiary (including an eligible 
                medicare beneficiary enrolled in a Medicare+Choice 
                plan) may enroll under this part.
                    ``(B) Similar to part b.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the process established under 
                        subparagraph (A) shall be similar to the 
                        process for enrollment in part B under section 
                        1837.
                            ``(ii) Beneficiary must affirmatively 
                        enroll.--Notwithstanding section 1837(f), such 
                        process shall require that an eligible medicare 
                        beneficiary affirmatively enroll under this 
                        part rather than deeming the beneficiary to be 
                        so enrolled if certain requirements are met.
            ``(2) Requirement of enrollment.--An eligible medicare 
        beneficiary must enroll under this part in order to be eligible 
        to receive SPICE prescription drug coverage, including 
        financial assistance for basic and stop-loss coverage under 
        section 1860K.
            ``(3) Waiver of basic coverage for medigap enrollees.--
                    ``(A) In general.--The process established under 
                paragraph (1) shall permit a beneficiary enrolled under 
                this part and enrolled under a medicare supplemental 
                policy to--
                            ``(i) waive the basic coverage available 
                        under this part; and
                            ``(ii) rescind such waiver in order to 
                        obtain such coverage.
                    ``(B) Rules.--If a beneficiary waives basic 
                coverage pursuant to subparagraph (A)(i), the following 
                rules shall apply:
                            ``(i) Such waiver shall not effect the 
                        stop-loss coverage that the beneficiary 
                        receives under the medicare supplemental 
                        policy, including the entitlement to financial 
                        assistance under section 1860K(c) for such 
                        coverage.
                            ``(ii) The beneficiary shall not be liable 
                        for the basic monthly premium under section 
                        1860H(a).
                            ``(iii) The beneficiary shall not receive 
                        basic coverage but shall be entitled to 
                        negotiated prices for covered outpatient drugs 
                        as if the beneficiary had not waived such 
                        coverage.
                            ``(iv) If the beneficiary subsequently 
                        rescinds such waiver pursuant to subparagraph 
                        (A)(ii), the beneficiary shall be subject to 
                        the late enrollment penalty under subsection 
                        (b).
    ``(b) Late Enrollment Penalty.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, in the case of an eligible medicare 
        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 subsection (c), the SPICE Board shall establish 
        procedures for increasing the amount of the basic monthly 
        premium under section 1860H(a) applicable to such beneficiary--
                    ``(A) by an amount that is equal to 25 percent of 
                such premium for each full 12-month period (in the same 
                continuous period of eligibility) in which the eligible 
                medicare beneficiary could have been enrolled under 
                this part but was not so enrolled; or
                    ``(B) if determined appropriate by the SPICE Board, 
                by an amount that the SPICE Board determines is 
actuarily sound for each such period.
            ``(2) Periods taken into account.--For purposes of 
        calculating any 12-month period under paragraph (1), there 
        shall be taken into account--
                    ``(A) the months which elapsed between the close of 
                the eligible medicare beneficiary's initial enrollment 
                period and the close of the enrollment period in which 
                the beneficiary enrolled;
                    ``(B) in the case of an eligible medicare 
                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; 
                and
                    ``(C) in the case of an eligible medicare 
                beneficiary who is enrolled under this part but has 
                waived basic coverage pursuant to subsection (a)(3), 
                the months which elapsed between the effective date of 
                such waiver and the effective date of the rescission of 
                such waiver.
            ``(3) Periods not taken into account.--
                    ``(A) In general.--For purposes of calculating any 
                12-month period under paragraph (1), subject to 
                subparagraph (B), there shall not be taken into account 
                months for which the eligible medicare beneficiary can 
                demonstrate that the beneficiary--
                            ``(i) met such exceptional conditions 
                        (including conditions recognized under section 
                        1851(e)(4)(D)) as the SPICE Board may provide; 
                        or
                            ``(ii) had creditable prescription drug 
                        coverage (as defined in paragraph (4)).
                    ``(B) Application.--The exception described in 
                subparagraph (A)(ii) shall only apply with respect to a 
                coverage period the enrollment for which occurs before 
                the end of the 63-day period that begins on the first 
                day of the month which includes the date on which the 
                policy or plan involved terminates, ceases to provide, 
                or substantially reduces the value of the prescription 
                drug coverage under such policy or plan.
            ``(4) Prescription drug coverage.--For purposes of this 
        part, the term `creditable prescription drug coverage' means 
        any of the following:
                    ``(A) Medicaid prescription drug coverage.--
                Prescription drug coverage under a medicaid plan under 
                title XIX, including through the Program of All-
                inclusive Care for the Elderly (PACE) under section 
                1934, through a social health maintenance organization 
                (referred to in section 4104(c) of the Balanced Budget 
                Act of 1997), or through a Medicare+Choice project that 
                demonstrates the application of capitation payment 
                rates for frail elderly medicare beneficiaries through 
                the use of a interdisciplinary team and through the 
                provision of primary care services to such 
                beneficiaries by means of such a team at the nursing 
                facility involved.
                    ``(B) Prescription drug coverage under group health 
                plan.--Any outpatient prescription drug coverage under 
                a group health plan, including a health benefits plan 
                under the Federal Employees Health Benefit Plan under 
                chapter 89 of title 5, United States Code, and a 
                qualified retiree prescription drug plan as defined in 
                section 1860L(e)(3).
                    ``(C) Prescription drug coverage under certain 
                medigap policies.--Coverage under a medicare 
                supplemental policy under section 1882 that provides 
                benefits for prescription drugs but only if the policy 
                was in effect on December 31, 2002, and only until the 
                date such coverage is terminated.
                    ``(D) State pharmaceutical assistance program.--
                Coverage of prescription drugs under a State 
                pharmaceutical assistance program.
                    ``(E) Veterans' coverage of prescription drugs.--
                Coverage of prescription drugs for veterans under 
                chapter 17 of title 38, United States Code.
            ``(5) Periods treated separately.--Any increase in an 
        eligible medicare beneficiary's basic monthly premium under 
        paragraph (1) 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.
            ``(6) Continuous period of eligibility.--
                    ``(A) In general.--Subject to subparagraph (B), for 
                purposes of this subsection, an eligible medicare 
                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 this part and ends with the beneficiary's death.
                    ``(B) Separate period.--Any period during all of 
                which an eligible medicare beneficiary satisfied 
                paragraph (1) of section 1836 and which terminated 
                during 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).
    ``(c) Open Enrollment Period for Current Beneficiaries in Which 
Late Enrollment Procedures Do Not Apply.--The SPICE Board shall 
establish an applicable period, which shall begin on the date on which 
the SPICE Board first begins to accept enrollments under this part, 
during which any eligible medicare beneficiary may enroll under this 
part without the application of the late enrollment procedures 
established under subsection (b)(1).
    ``(d) Period of Coverage.--
            ``(1) In general.--Except as provided in paragraph (2), an 
        eligible medicare 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.
            ``(2) Open enrollment.--An eligible medicare beneficiary 
        who enrolls under the program under this part pursuant to 
        subsection (c) 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.
            ``(3) Rescission of waiver.--The SPICE Board shall 
        establish procedures regarding coverage periods for an eligible 
        medicare beneficiary enrolled under this part who previously 
        waived basic coverage under subsection (a)(3) and now wishes to 
        rescind such waiver.
            ``(4) Limitation.--Coverage under this part shall not begin 
        prior to January 1, 2003.
    ``(e) Termination.--
            ``(1) In general.--The causes of termination specified in 
        section 1838 shall apply to this part in the same manner as 
        they apply to part B.
            ``(2) Coverage terminated by termination of coverage under 
        parts a and b.--
                    ``(A) In general.--In addition to the causes of 
                termination described in paragraph (1), the SPICE Board 
                shall terminate an individual's coverage under this 
                part if the individual is no longer enrolled in either 
                part A or
                B.
                    ``(B) Effective date.--The termination described in 
                subparagraph (A) shall be effective on the effective 
                date of termination of coverage under part A or (if 
                earlier) under part B.
            ``(3) Procedures regarding termination of a beneficiary 
        under a plan or policy.--The SPICE Board shall establish 
        procedures for determining the status of an eligible medicare 
        beneficiary's enrollment under this part if the beneficiary's 
        enrollment in a medicare supplemental policy, a Medicare+Choice 
        plan, a Medicare Drug Plan for Noncompetitive Areas, or a basic 
        coverage plan under section 1860F is terminated by the entity 
        offering such policy or plan for cause (under the applicable 
        requirements established under this title).

                    ``enrollment in a policy or plan

    ``Sec. 1860D. (a) Enrollment in Medicare Drug Plan for 
Noncompetitive Areas.--The SPICE Board shall establish a process 
through which an eligible medicare beneficiary who is enrolled under 
this part (but not enrolled in a medicare supplemental policy, a 
Medicare+Choice plan, or a basic coverage plan under section 1860F) and 
resides in an area in which a Medicare Drug Plan for Noncompetitive 
Areas is available may enroll in such plan. Such process shall include 
rules for enrollment, disenrollment, and termination of enrollment in 
such plan.
    ``(b) Enrollment in a Medicare Supplemental Policy or a 
Medicare+Choice Plan.--Enrollment in a medicare supplemental policy or 
a Medicare+Choice plan is subject to the rules for enrollment in such 
policy or plan under sections 1882 and 1851, respectively.
    ``(c) Enrollment in a Basic Coverage Plan Offered by a Private 
Entity With a Contract Under This Part.--The SPICE Board shall 
establish a process through which an eligible medicare beneficiary who 
is enrolled under this part (but not enrolled in a medicare 
supplemental policy, a Medicare+Choice plan, or a Medicare Drug Plan 
for Noncompetitive Areas) may enroll in a basic coverage plan offered 
by a private entity with a contract under section 1860F to offer such 
plan. Such process shall include rules for enrollment, disenrollment, 
and termination of enrollment in such plan.
    ``(d) Coordination of Enrollments, Disenrollments, and Terminations 
of Enrollments.--The SPICE Board shall establish procedures for 
coordinating enrollments, disenrollments and terminations of 
enrollments under plans described in subsections (a) and (c) with 
enrollments, disenrollments and terminations of enrollments under part 
C.

             ``medicare drug plan for noncompetitive areas

    ``Sec. 1860E. (a) In General.--The SPICE Board shall provide for a 
Medicare Drug Plan for Noncompetitive Areas that--
            ``(1) provides enrollees with SPICE prescription drug 
        coverage; and
            ``(2) is available to eligible medicare beneficiaries 
        residing in an area that has been designated by the SPICE Board 
        as a noncompetition area.
    ``(b) Designation of Noncompetition Area.--
            ``(1) In general.--The SPICE Board shall establish 
        procedures for designating areas as noncompetition areas.
            ``(2) Noncompetition area defined.--
                    ``(A) In general.--For purposes of this section, 
                the term `noncompetition area' means an area in which 
                only 1 or no medicare supplemental policy is available 
                to eligible medicare beneficiaries residing in the 
                area.
                    ``(B) Construction regarding multiple policies 
                offered by single issuer.--If there is an entity that 
                offers more that 1 type of medicare supplemental policy 
                in an area, then that area is not a noncompetition area 
                for purposes of this section.
    ``(c) Contracts.--In order to provide the Medicare Drug Plan for 
Noncompetitive Areas under this section, the SPICE Board shall do 1 of 
the following:
            ``(1) Single contract that covers all noncompetition 
        areas.--Enter into a contract with 1 entity to administer and 
        deliver the benefits under the plan in every designated 
        noncompetition area.
            ``(2) Multiple contracts.--Enter into a contract with 1 
        entity to administer and deliver the benefits under the plan in 
        1 or more (but less than all) of the designated noncompetition 
        areas.
    ``(d) Bidding Process.--
            ``(1) In general.--The SPICE Board shall establish 
        procedures under which the SPICE Board accepts bids submitted 
        by entities and awards a contract (or contracts pursuant to 
        subsection (c)(2)) to an entity in order to administer and 
        deliver the benefits under the Medicare Drug Plan for 
        Noncompetitive Areas to eligible medicare beneficiaries.
            ``(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 section.
    ``(e) Requirements for Entities.--
            ``(1) In general.--The SPICE Board may not award a contract 
        to an entity under this section unless the entity meets such 
        terms and conditions as the SPICE Board shall specify, 
        including the following:
                    ``(A) The terms and conditions described in section 
                1860I(c).
                    ``(B) The entity meets the quality and financial 
                standards specified by the SPICE Board.
                    ``(C) The entity meets applicable State licensure 
                requirements.
            ``(2) Premiums.--The terms and conditions specified under 
        paragraph (1) shall--
                    ``(A) permit an entity with a contract under this 
                section to require that beneficiaries enrolled in the 
                plan covered by the contract pay a premium for benefits 
                provided under the contract; and
                    ``(B) except as provided in section 1860H(b)(3) 
                (relating to an increased premium for delayed 
                enrollment under this part), require that the amount of 
                any such premium is the same for all beneficiaries 
                enrolled in the plan.

    ``selection of private entities to provide basic coverage plans

    ``Sec. 1860F. (a) Selection of Entities.--
            ``(1) In general.--The SPICE Board shall establish 
        procedures under which the SPICE Board--
                    ``(A) accepts bids submitted by private entities 
                for the basic coverage 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 medicare 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 section.
    ``(b) Areas for Contracts.--
            ``(1) In general.--The SPICE Board shall determine the 
        areas to award contracts under this section.
            ``(2) No administrative or judicial review.--The 
        determination of contract areas under paragraph (1) shall not 
        be subject to administrative or judicial review.
            ``(3) Multiple contracts.--If determined appropriate, the 
        SPICE Board may award more than 1 contract in a contract area.
    ``(c) Requirements for Entities.--
            ``(1) In general.--The SPICE Board may not award a contract 
        to a private entity under this section unless the entity meets 
        such terms and conditions as the SPICE Board shall specify, 
        including the following:
                    ``(A) The terms and conditions described in section 
                1860I(c).
                    ``(B) The entity meets the quality and financial 
                standards specified by the SPICE Board.
                    ``(C) The entity meets applicable State licensure 
                requirements.
                    ``(D) Under the plan, the entity will provide basic 
                coverage with access to negotiated prices.
    ``(d) Private Entity Defined.--For purposes of this part, the term 
`private entity' means any private entity that the SPICE Board 
determines to be appropriate to provide basic coverage plans to 
eligible medicare beneficiaries under this part, including--
            ``(1) a pharmacy benefit management company;
            ``(2) a retail pharmacy delivery system;
            ``(3) a health plan or insurer;
            ``(4) any other private entity approved by the SPICE Board; 
        or
            ``(5) any combination of the entities described in 
        paragraphs (1) through (4) approved by the SPICE Board.

                ``providing information to beneficiaries

    ``Sec. 1860G. (a) Activities.--
            ``(1) In general.--The SPICE Board shall provide for 
        activities that are designed to broadly disseminate information 
        to eligible medicare beneficiaries (and prospective eligible 
        medicare beneficiaries) on the SPICE drug benefit program under 
        this part.
            ``(2) Late enrollment penalties to be well publicized.--The 
        SPICE Board shall ensure that information on the sanctions for 
        delayed enrollment under section 1860C(b) and on the 
        possibility of increased premiums for stop-loss coverage under 
        section 1860H(b)(3) are well publicized.
            ``(3) Special rule for initial enrollment under the 
        program.--
                    ``(A) Consultation.--The SPICE Board shall consult 
                with the Secretary, issuers of medicare supplemental 
                policies, State insurance commissioners, 
                Medicare+Choice organizations, and interested consumer 
                organizations in developing the activities described in 
                paragraph (1) that will be used to provide information 
                regarding the initial enrollment under this part during 
                the period described in section 1860C(c).
                    ``(B) Timeframe.--The activities described in 
                paragraph (1) shall ensure that eligible medicare 
                beneficiaries (and prospective eligible medicare 
                beneficiaries) are provided with such information not 
                later that December 1, 2002, in order to ensure that 
                coverage under this part may be effective as of January 
                1, 2003.
            ``(4) Coordination with activities performed by the 
        secretary.--The SPICE Board shall work with the Secretary to 
        ensure that the activities provided under this subsection are 
        coordinated with the activities performed by the Secretary that 
        provide information with respect to benefits under this title 
        to eligible medicare beneficiaries and prospective eligible 
        medicare beneficiaries.
    ``(b) Requirements.--
            ``(1) In general.--The activities described in subsection 
        (a) shall--
                    ``(A) be similar to the activities performed under 
                section 1851 (including the approval of policy 
                marketing materials and maintaining a toll-free number 
                and an Internet site); and
                    ``(B) include provisions to ensure that consumer 
                counselors are available to provide face-to-face 
                counseling to eligible medicare beneficiaries (and 
                prospective eligible medicare beneficiaries) on the 
                SPICE drug benefit program under this part.
            ``(2) Contracts to provide consumer counseling.--The SPICE 
        Board may contract with private entities to provide the 
        consumer counseling described in paragraph (1)(B).
    ``(c) Coordination With Other Information.--The SPICE Board shall, 
in cooperation with the Secretary, enter into such arrangements as may 
be appropriate to disseminate the information referred to in subsection 
(a) in coordination with materials distributed by the Secretary to 
medicare beneficiaries, including the medicare handbook under section 
1804 and materials distributed under section 1851(d).

                               ``premiums

    ``Sec. 1860H. (a) Premium for Basic Coverage for All 
Beneficiaries.--
            ``(1) Annual establishment of basic monthly premium 
        rates.--The SPICE Board shall, during September of each year 
        (beginning in 2002), determine and promulgate a basic monthly 
        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 for basic coverage.--The SPICE 
                Board shall estimate annually for the succeeding year 
                the amount equal to the total of the benefits 
                (including financial assistance provided under 
                subsections (b) and (c) of section 1860K and payments 
                made to sponsors under section 1860L) and 
                administrative costs that will be payable from the 
                SPICE Prescription Drug Account within the Federal 
                Supplementary Medical Insurance Trust Fund for 
                providing benefits under this part in such calendar 
                year.
                    ``(B) Determination of basic monthly premium 
                rates.--
                            ``(i) In general.--The SPICE Board shall 
                        determine the basic monthly premium rate for 
                        such succeeding year, which shall be \1/12\ of 
                        the amount determined under subparagraph (A), 
                        divided by the average total number of 
                        enrollees under this part who have not waived 
                        basic coverage under section 1860C(a)(3) (as 
                        estimated for the year), and rounded (if such 
                        rate is not a multiple of 10 cents) to the 
                        nearest multiple of 10 cents.
                            ``(ii) Premium reduced by amount of 
                        financial assistance.--The amount that shall be 
                        charged a beneficiary for basic coverage under 
                        this part is the basic monthly premium 
                        determined under clause (i), reduced by the 
                        amount of the financial assistance for basic 
                        coverage determined for the beneficiary under 
                        section 1860K(b).
            ``(3) Publication of assumptions.--The SPICE Board shall 
        publish, together with the promulgation of the basic monthly 
        premium rates for the succeeding year, a statement setting 
        forth the actuarial assumptions and bases employed in arriving 
        at the amounts and rates determined under paragraphs (1) and 
        (2).
            ``(4) Collection of premiums.--Any basic monthly premium 
        applicable to an eligible medicare beneficiary pursuant to this 
        subsection, after application of the reduction described in 
        paragraph (2)(B)(ii) and any increase for late enrollment under 
        section 1860C(b), shall be collected and credited to the SPICE 
        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) Premiums for Stop-Loss Coverage.--
            ``(1) Beneficiary responsible for making payment directly 
        to entity.--Subject to paragraph (2), any eligible medicare 
        beneficiary who is receiving stop-loss coverage, either through 
        enrollment in a medicare supplemental policy, a Medicare+Choice 
        plan, or a Medicare Drug Plan for Noncompetitive Areas, shall 
        be responsible for making payments for any premiums required 
        under the policy or plan for such coverage directly to the 
        entity offering such policy or plan.
            ``(2) Premium reduced by amount of financial assistance.--
        The entity offering such policy or plan shall reduce the 
        premium described in paragraph (1) by the amount of the 
        financial assistance for stop-loss coverage determined for the 
        beneficiary under section 1860K(c).
            ``(3) Increase in premium for late enrollment or for lack 
        of continuous stop-loss coverage.--In the case of an eligible 
        medicare beneficiary who is subject to a late enrollment 
        penalty under section 1860C or who has not had continuous stop-
        loss coverage under this part because the beneficiary was 
        enrolled in a basic coverage plan under section 1860F, the 
        entity offering the medicare supplemental policy, the 
        Medicare+Choice plan, or the Medicare Drug Plan for 
        Noncompetitive Areas in which the beneficiary is enrolled may, 
        notwithstanding any provision in this title, increase the 
        portion of the premium attributable to stop-loss coverage that 
        is otherwise applicable to such beneficiary for such enrollment 
        in a manner that reflects the additional actuarial risk 
        involved. Such a risk shall be established through an 
        appropriate actuarial opinion of the type described in 
subparagraphs (A) through (C) of section 2103(c)(4).

   ``approval for entities offering spice prescription drug coverage

    ``Sec. 1860I. (a) Approval.--No payments may be made to an entity 
offering a policy or plan that provides SPICE prescription drug 
coverage under section 1860J unless the entity has been approved by the 
SPICE Board.
    ``(b) Procedures.--
            ``(1) In general.--The SPICE Board shall establish 
        procedures for approving entities that offer policies and plans 
        that provide SPICE prescription drug coverage under this part, 
        including an entity with a contract under section 1860F.
            ``(2) Coordination.--The procedures established under 
        subparagraph (A) shall be coordinated with--
                    ``(A) in the case of the approval of medicare 
                supplemental policies, the procedures for approval of 
                such policies under State law; and
                    ``(B) in the case of the approval of 
                Medicare+Choice plans, the procedures established by 
                the Secretary for approval of such plans under part C.
    ``(c) Terms and Conditions.--The SPICE Board may not approve an 
entity under subsection (b) unless the entity, with respect to such 
policy or plan, meets such terms and conditions as the SPICE Board 
shall specify, including the following:
            ``(1) Dissemination of information.--
                    ``(A) General information.--The entity shall 
                disclose, in a clear, accurate, and standardized form 
                to each enrollee under the policy or plan at the time 
                of enrollment and at least annually thereafter, the 
                information described in section 1852(c)(1) relating to 
                such policy or plan. Such information shall include the 
                following:
                            ``(i) Access to covered outpatient drugs, 
                        including access through pharmacy networks.
                            ``(ii) How any formulary used by the entity 
                        functions.
                            ``(iii) Coinsurance and deductible 
                        requirements.
                            ``(iv) Grievance and appeals procedures.
                    ``(B) Disclosure upon request of general coverage, 
                utilization, and grievance information.--Upon request 
                of an individual eligible to enroll under the policy or 
                plan, the entity shall provide the information 
                described in section 1852(c)(2) (other than 
                subparagraph (D)) to such individual.
                    ``(C) Response to beneficiary questions.--The 
                entity shall have a mechanism for providing specific 
                information regarding the policy or plan to enrollees 
                upon request and shall make available, through the 
                Internet website described in paragraph (7) and in 
                writing upon request, information on specific changes 
                in its formulary.
                    ``(D) Claims information.--The entity shall furnish 
                to each enrollee under the plan or policy in a form 
                easily understandable to such enrollees an explanation 
                of benefits (in accordance with section 1806(a) or in a 
                comparable manner) and a notice regarding how close the 
                enrollee is to getting stop-loss coverage for the year, 
                whenever prescription drug benefits are provided under 
                this part (except that such notice need not be provided 
                more often than monthly).
            ``(2) Access to covered benefits.--
                    ``(A) Assuring pharmacy access.--The entity shall 
                secure the participation of sufficient numbers of 
                pharmacies to ensure convenient access (including 
                adequate emergency access) for enrollees under the 
                policy or plan. Nothing in the preceding sentence shall 
                be construed as requiring the participation of all 
                pharmacies in any area under a policy or plan.
                    ``(B) Access to negotiated prices for prescription 
                drugs.--The entity shall issue a card that may be used 
                by an enrollee under the policy or plan to assure 
                access to negotiated prices pursuant to section 
                1860B(d).
            ``(3) Formularies.--If an eligible entity uses a formulary 
        under the policy or plan, such entity shall--
                    ``(A) establish the formulary based on the medical 
                needs of eligible medicare beneficiaries;
                    ``(B) ensure that the formulary includes drugs 
                within all therapeutic categories and classes of 
                covered outpatient drugs (although not necessarily for 
                all drugs within such categories and classes);
                    ``(C) have in place an appeals process--
                            ``(i) under which any eligible medicare 
                        beneficiary could receive any medically 
                        necessary covered outpatient drug that is not 
                        on the formulary;
                            ``(ii) that does not impose a significant 
                        financial burden on an eligible medicare 
                        beneficiary or delay the provision of medically 
                        necessary covered outpatient drugs to such a 
                        beneficiary; and
                            ``(iii) that provides for at least a level 
                        of protection that is similar to or better than 
                        the level of protection provided with respect 
                        to benefits under Medicare+Choice plans under 
                        part C; and
                    ``(D) provide notification to enrollees of any 
                change in the formulary at least 60 days prior to such 
                change.
            ``(4) Cost and utilization management; quality assurance; 
        medication therapy management program.--
                    ``(A) In general.--The entity shall have in place--
                            ``(i) an effective cost and drug 
                        utilization management program, including 
                        appropriate incentives to use generic drugs 
                        when appropriate;
                            ``(ii) quality assurance measures and 
                        systems to reduce medical errors and adverse 
                        drug interactions, including a medication 
                        therapy management program described in 
                        subparagraph (B); and
                            ``(iii) a program to control fraud, abuse, 
                        and waste.
                    ``(B) Medication therapy management program.--
                            ``(i) In general.--A medication therapy 
                        management program described in this 
                        subparagraph is a program of drug therapy 
                        management and medication administration that 
                        is designed to assure that covered outpatient 
                        drugs under the policy or plan are 
                        appropriately used to achieve therapeutic goals 
                        and reduce the risk of adverse events, 
                        including adverse drug interactions.
                            ``(ii) Elements.--Such program may 
                        include--
                                    ``(I) enhanced beneficiary 
                                understanding of such appropriate use 
                                through beneficiary education, 
                                counseling, and other appropriate 
                                means; and
                                    ``(II) increased beneficiary 
                                adherence with prescription medication 
                                regimens through medication refill 
                                reminders, special packaging, and other 
                                appropriate means.
                            ``(iii) Development of program in 
                        cooperation with licensed pharmacists.--The 
                        program shall be developed in cooperation with 
                        licensed pharmacists and physicians.
                            ``(iv) Considerations in pharmacy fees.--
                        The entity shall take into account, in 
                        establishing fees for pharmacists and others 
                        providing services under the medication therapy 
                        management program, the resources and time used 
                        in implementing the program.
                    ``(C) Treatment of accreditation.--Section 
                1852(e)(4) (relating to treatment of accreditation) 
                shall apply to policies and plans under this part with 
                respect to the following requirements, in the same 
                manner as they apply to Medicare+Choice plans under 
                part C with respect to the requirements described in a 
                clause of section 1852(e)(4)(B):
                            ``(i) Subparagraph (A) (including quality 
                        assurance), including medication therapy 
                        management program under subparagraph (B).
                            ``(ii) Paragraph (2)(A) (relating to access 
                        to covered benefits).
                            ``(iii) Paragraph (8) (relating to 
                        confidentiality and accuracy of enrollee 
                        records).
            ``(5) Grievance mechanism.--The entity shall provide 
        meaningful procedures for hearing and resolving grievances 
        between the entity (including any entity or individual through 
        which the entity provides covered benefits) and enrollees of 
        the policy or plan under this part in accordance with section 
        1852(f).
            ``(6) Coverage determinations, reconsiderations, and 
        appeals.--The entity shall meet the requirements of section 
        1852(g) with respect to covered benefits under the policy or 
        plan it offers under this part in the same manner as such 
        requirements apply to a Medicare+Choice organization with 
        respect to benefits it offers under a Medicare+Choice plan 
        under part C.
            ``(7) Provide information on the internet.--The entity 
        shall maintain a web site on the Internet that provides 
        eligible medicare beneficiaries with information regarding any 
        policy or plan offered by the entity that provides SPICE 
        prescription drug coverage.
            ``(8) Confidentiality and accuracy of enrollee records.--
        The entity shall meet the requirements of section 1852(h) with 
        respect to enrollees under this part in the same manner as such 
        requirements apply to a Medicare+Choice organization with 
        respect to enrollees under part C.
    ``(d) SPICE Board Models for Formularies.--
            ``(1) Model.--The SPICE Board may issue models for 
        formularies for use in providing covered outpatient drugs under 
        this part. Such models, and any revised models (pursuant to 
        paragraph (3)) shall meet the requirements of subparagraphs (A) 
        and (B) of subsection (c)(3).
            ``(2) Effect of compliance with a model.--If the SPICE 
        Board determines that a formulary used by an entity offering a 
        policy or plan that provides SPICE prescription drug coverage 
        is in compliance with a model formulary issued under paragraph 
        (1), or the revised model (as the case may be), then the entity 
        shall be deemed to meet the requirements of subparagraphs (A) 
        and (B) of subsection (c)(3).
            ``(3) Revisions of models.--
                    ``(A) In general.--The SPICE Board may periodically 
                (but not more frequently than annually) revise any 
                model established under this subsection.
                    ``(B) Period to comply with revision.--If the SPICE 
                Board revises a model formulary pursuant to 
                subparagraph (A), the SPICE Board shall provide for an 
                appropriate period of time for entities who were in 
                compliance with such model before such revision to 
                comply with the revised model.
    ``(e) Rule of Construction Regarding Cost-Effective Provision of 
Benefits.--Nothing in this part shall be construed as preventing an 
entity that provides SPICE prescription drug coverage under a policy or 
plan from employing mechanisms to provide such coverage economically, 
including the use of--
            ``(1) formularies (pursuant to subsection (c)(3));
            ``(2) alternative methods of distribution;
            ``(3) generic drug substitution;
            ``(4) pharmacy networks; and
            ``(4) mail order pharmacies.

                         ``payments to entities

    ``Sec. 1860J. (a) Payments for Administering Basic Coverage.--
            ``(1) In general.--The SPICE Board shall establish 
        procedures for making payments to an entity offering a medicare 
        supplemental policy, a Medicare+Choice plan, a Medicare Drug 
        Plan for Noncompetitive Areas, or a basic coverage plan under 
        section 1860F for--
                    ``(A) in accordance with the provisions of this 
                part, the costs of covered outpatient drugs provided 
                under basic coverage to eligible medicare 
                beneficiaries--
                            ``(i) enrolled under such policy or plan 
                        and under this part; and
                            ``(ii) entitled to such coverage; and
                    ``(B) pursuant to paragraph (2), administering the 
                basic coverage on behalf of beneficiaries described in 
                subparagraph (A).
            ``(2) Administrative fee.--
                    ``(A) Procedures.--The procedures established 
                pursuant to paragraph (1) shall provide for payment to 
                the entity of an administrative fee for each 
                prescription filled by the entity for an eligible 
                medicare beneficiary enrolled in the policy or plan 
                offered by such entity. Subject to paragraph (3), the 
                entity shall not be at risk for providing basic 
                coverage for a beneficiary.
                    ``(B) Amount.--The fee described in paragraph (1) 
                shall be--
                            ``(i) negotiated by the SPICE Board; and
                            ``(ii) consistent with such fees paid under 
                        private sector pharmaceutical benefit 
                        contracts.
                    ``(C) Reduction of administrative costs.--The SPICE 
                Board shall work with entities receiving payments under 
                this section on ways to control the administrative 
                costs associated with providing basic coverage under 
                this part.
            ``(3) Risk corridors tied to performance measures and other 
        incentives for entity providing medicare drug plan for 
        noncompetitive areas.--In the case of payments to an entity 
        with a contract to provide a Medicare Drug Plan for 
        Noncompetitive Areas, the procedures established under 
        paragraph (1) may include the use of--
                    ``(A) risk corridors tied to performance measures 
                that have been agreed to between the entity and the 
                SPICE Board under the contract; and
                    ``(B) any other incentives that the SPICE Board 
                determines appropriate.
            ``(4) Secondary payer provisions.--The provisions of 
        section 1862(b) shall apply to basic coverage provided under 
        this part.
    ``(b) Payment of Financial Assistance to Entities for Provision of 
Stop-Loss Coverage.--
            ``(1) In general.--The SPICE Board shall establish 
        procedures for making financial assistance payments for stop-
        loss coverage to an entity offering a medicare supplemental 
        policy, a Medicare+Choice plan, or a Medicare Drug Plan for 
        Noncompetitive Areas on behalf of an eligible medicare 
        beneficiary enrolled in such policy or plan and under this 
        part.
            ``(2) Amount of financial assistance payment.--The amount 
        of the financial assistance payments on behalf of an eligible 
        medicare beneficiary for stop-loss coverage is equal to the 
        amount determined for the beneficiary under section 1860K(c).
            ``(3) Entity providing stop-loss coverage at risk.--The 
        entity providing stop-loss coverage, and not the SPICE Board, 
        shall be at risk for the provision of such coverage.

   ``financial assistance to obtain spice prescription drug coverage

    ``Sec. 1860K. (a) In General.--The SPICE Board shall provide 
financial assistance, in accordance with this section, with respect to 
eligible medicare beneficiaries who have SPICE prescription drug 
coverage through enrollment in a medicare supplemental policy, a 
Medicare+Choice plan, a Medicare Drug Plan for Noncompetitive Areas, or 
a basic coverage plan under section 1860F.
    ``(b) Assistance for Basic Coverage.--
            ``(1) In general.--The amount of financial assistance with 
        respect to an eligible medicare beneficiary for basic coverage 
        is equal to the following percentage of the basic monthly 
        premium determined under subsection (a) of section 1860H 
        (without regard to any increase for late enrollment under 
        subsection (b) of such section):
                    ``(A) 100 percent if income below 150 percent of 
                poverty.--In the case of an eligible medicare 
                beneficiary who applies for enhanced financial 
                assistance under subsection (d) and whose income (as 
                determined under such subsection) does not exceed 150 
                percent of the poverty line, the percentage is 100 
                percent.
                    ``(B) Other percent if income between 150 and 175 
                percent of poverty.--In the case of an eligible 
                medicare beneficiary who applies for enhanced financial 
                assistance under subsection (d) and whose income (as 
                determined under such subsection) is greater than 150 
                percent, but does not exceed 175 percent, of the 
                poverty line, the SPICE Board shall specify the 
                percentage consistent with the following rules:
                            ``(i) Range.--The percentage may not exceed 
                        100 percent nor be less than 25 percent.
                            ``(ii) Sliding scale.--The percentage may 
                        not be higher for eligible medicare 
                        beneficiaries whose income is higher.
                    ``(C) 25 percent for other beneficiaries.--In the 
                case of any other eligible medicare beneficiary, the 
                percentage is 25 percent.
            ``(2) Form of assistance.--Financial assistance under this 
        subsection shall be provided in the form of a reduction of the 
        basic monthly premium pursuant to section 1860H(a)(2)(B)(ii).
    ``(c) Assistance for Stop-Loss Coverage.--
            ``(1) Amount.--
                    ``(A) In general.--The amount of financial 
                assistance for stop-loss coverage with respect to an 
                eligible medicare beneficiary enrolled under this part 
                and in a medicare supplemental policy, a 
                Medicare+Choice plan, or a Medicare Drug Plan for 
                Noncompetitive Areas for stop-loss coverage is equal to 
                the following percentage of the national average 
                medigap stop-loss monthly premium for the region in 
                which the beneficiary resides (as determined under 
                paragraph (2)):
                            ``(i) 100 percent if income below 150 
                        percent of poverty.--In the case of an eligible 
                        medicare beneficiary described in subsection 
                        (b)(1)(A), the percentage is 100 percent.
                            ``(ii) Other percent if income between 150 
                        and 175 percent of poverty.--In the case of an 
                        eligible medicare beneficiary described in 
                        subsection (b)(1)(B), the SPICE Board shall 
                        specify the percentage consistent with the 
                        rules described in clauses (i) and (ii) of such 
                        subsection.
                            ``(iii) 25 percent for other 
                        beneficiaries.--In the case of any other 
                        eligible medicare beneficiary, the percentage 
                        is 25 percent.
                    ``(B) Form of assistance.--Financial assistance 
                under this subsection for beneficiaries shall be 
                provided in the form of a payment to the entity 
                offering the policy or plan in which the beneficiary is 
                receiving stop-loss coverage pursuant to section 
                1860J(b).
            ``(2) Establishment of national average medigap stop-loss 
        monthly premium.--
                    ``(A) In general.--The SPICE Board shall, during 
                September of each year (beginning in 2002), estimate a 
                national average medigap stop-loss monthly premium for 
                each region (as determined by the Board) of the total 
                geographic area served by the programs under this part 
                that will be applicable for the succeeding year.
                    ``(B) Definition of national average medigap stop-
                loss monthly premium.--For purposes of subparagraph 
                (A), the term `national average medigap stop-loss 
                monthly premium' means, with respect to a region, the 
                average of the portion of the monthly premiums charged 
                by medicare supplemental policies in that region for 
                providing stop-loss coverage to beneficiaries enrolled 
                under this part.
            ``(3) Limitations.--
                    ``(A) Financial assistance may not exceed 
                premium.--In the case of financial assistance provided 
                under this subsection with respect to stop-loss 
                coverage provided under a policy or plan, the amount of 
                the financial assistance may not exceed the amount of 
                the portion of the premium charged for enrollment in 
                the policy or plan that is related to the provision of 
                stop-loss coverage.
                    ``(B) Entity must reduce premium.--No financial 
                assistance shall be made available with respect to 
                stop-loss coverage provided by an entity to an eligible 
                medicare beneficiary unless the entity provides 
                assurances satisfactory to the SPICE Board that the 
                entity shall reduce the amount otherwise charged the 
                beneficiary for such coverage by an amount equal to the 
                amount of such assistance.
    ``(d) Application for Enhanced Financial Assistance.--
            ``(1) In general.--The SPICE Board shall establish 
        procedures under which a beneficiary who desires enhanced 
        financial assistance under this section may voluntarily apply 
        for an income determination.
            ``(2) Requirements regarding information.--
                    ``(A) Information from beneficiary.--The procedures 
                established under paragraph (1) shall require the 
                beneficiary to submit with the application for enhanced 
                financial assistance such information that the SPICE 
                Board determines necessary to make the income 
                determination with respect to such beneficiary.
                    ``(B) Information from other government agencies.--
                Under the procedures established under paragraph (1), 
                if an individual voluntarily applies for enhanced 
                financial assistance under this section, the individual 
                is deemed to have consented to the SPICE Board seeking 
                and using income-related information from other 
                Government agencies in order to make the income 
                determination with respect to such beneficiary.
                    ``(C) Restriction on use of information.--
                Information obtained under subparagraph (A) or (B) may 
                be used by officers and employees of the SPICE Board 
                only for the purposes of, and to the extent necessary 
                in, carrying out their responsibilities under this 
                part.
            ``(3) Periodic redeterminations.--Such income 
        determinations shall be valid for a period (of not less than 1 
        year) specified by the SPICE Board.
    ``(e) Income Determinations.--The SPICE Board shall establish 
procedures for making income determinations under this section.
    ``(f) Poverty Line.--In this section, the term `poverty line' means 
the income official poverty line (as defined by the Office of 
Management and Budget, and revised annually in accordance with section 
673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to 
a family of the size involved.

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

    ``Sec. 1860L. (a) Program Authority.--The SPICE Board shall 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 SPICE Board 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 
                SPICE Board 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 basic coverage under the 
                        SPICE prescription drug coverage under this 
                        part.
            ``(2) Beneficiary information.--The sponsor shall report to 
        the SPICE Board, 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 SPICE Board 
        access to, such records as the SPICE Board 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 SPICE Board 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 SPICE Board 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 SPICE 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 25 percent of the basic monthly 
        premium amount payable by an eligible medicare beneficiary 
        enrolled under this part, as set for the calendar year pursuant 
        to section 1860H(a) and without application of and financial 
        assistance for such premium under section 1860K(b).
            ``(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 SPICE Board 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 coverage 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 or other coverage of health care costs 
        included in employment-based retiree health coverage that--
                    ``(A) provides coverage of the cost of prescription 
                drugs whose actuarial value (as defined by the SPICE 
                Board) to each retired beneficiary equals or exceeds 
                the actuarial value of the basic coverage provided to 
                an individual enrolled in the SPICE 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.

                             ``spice board

    ``Sec. 1860M. (a) Establishment.--There is established within the 
Department of Health and Human Services, a Seniors Prescription 
Insurance Coverage Equity Office, which shall be--
            ``(1) outside of the Centers for Medicare & Medicaid 
        Services; and
            ``(2) run by a board to be known as the SPICE Board.
    ``(b) Duties.--
            ``(1) Administration of spice drug benefit program.--
                    ``(A) In general.--The SPICE Board shall administer 
                the SPICE drug benefit program under this part.
                    ``(B) Noninterference.--In carrying out its duty 
                under subparagraph (A), the SPICE Board may not--
                            ``(i) require a particular formulary or 
                        institute a price structure for the 
                        reimbursement of covered outpatient drugs;
                            ``(ii) interfere in any way with 
                        negotiations between entities providing SPICE 
                        prescription drug coverage under part D and 
                        drug manufacturers, wholesalers, or other 
                        suppliers of covered outpatient drugs; and
                            ``(iii) otherwise interfere with the 
                        competitive nature of providing such coverage 
                        through such entities.
            ``(2) Ongoing studies.--The SPICE Board shall conduct 
        ongoing studies of the following issues:
                    ``(A) The administration of this part.
                    ``(B) The provision of information about the 
                program under the health insurance information, 
                counseling, and assistance grants under section 4360 of 
                the Omnibus Budget Reconciliation Act of 1990.
                    ``(C) Ways in which drug utilization can be used to 
                provide better overall care for eligible medicare 
                beneficiaries.
                    ``(D) Savings and potential savings in Federal 
                health care programs which may occur, or can be 
                attributed to, eligible medicare beneficiary access to, 
                and utilization of, covered outpatient drugs.
                    ``(E) Trends in premium increases and factors that 
                contribute to changes in premiums.
                    ``(F) Integration of the SPICE drug benefit program 
                into a reformed medicare program.
                    ``(G) The ability of eligible medicare 
                beneficiaries to afford SPICE prescription drug 
                coverage.
                    ``(H) The impact of the program on the prescription 
                drug benefits offered under group health plans.
                    ``(I) The appropriateness of the levels of 
                financial assistance provided under this part.
            ``(3) Annual report.--
                    ``(A) In general.--Not later than June 1 of each 
                year (beginning with 2004), the SPICE Board shall 
                submit an annual report to Congress on the program 
                under this part.
                    ``(B) Information on studies.--Such report shall 
                include a detailed statement on the issues studied 
                under paragraph (2).
                    ``(C) Recommendations.--Such report shall include 
                such recommendations for legislation and administrative 
                actions as the SPICE Board considers appropriate.
            ``(4) Provision of recommendations and information to 
        secretary.--The SPICE Board shall provide recommendations and 
        necessary information regarding the SPICE drug benefit program 
        to the Secretary in order for the Secretary to--
                    ``(A) integrate such information with information 
                regarding the other programs under this title; and
                    ``(B) provide health insurance information, 
                counseling, and assistance grants under section 4360 of 
                the Omnibus Budget Reconciliation Act of 1990.
    ``(c) Demonstration Project Authority.--
            ``(1) In general.--Subject to paragraph (2), the SPICE 
        Board shall have the authority to conduct demonstration 
        projects for the purpose of demonstrating ways to improve the 
        quality of services provided under the SPICE drug benefit 
        program, including ways to reduce medical errors.
            ``(2) Consultation with secretary.--The SPICE Board shall 
        consult with the Secretary before conducting any demonstration 
        project.
    ``(d) Membership of SPICE Board.--
            ``(1) Number and appointment.--
                    ``(A) In general.--The SPICE Board shall be 
                composed of 7 members appointed by the President, by 
                and with the advice and consent of the Senate.
                    ``(B) Specific representatives.--In making 
                appointments under subparagraph (A), the President 
                shall ensure that the following groups are represented 
                on the SPICE Board:
                            ``(i) Consumers.
                            ``(ii) Private health plan insurers 
                        (including insurers that offer fee-for-service 
                        and managed care plans) with expertise in the 
                        quality, scope, and marketing of health care 
                        services.
                            ``(iii) Certified geriatric pharmacists.
                            ``(iv) The Centers for Medicare & Medicaid 
                        Services.
                            ``(v) State insurance commissioners.
                    ``(C) Secretary of hhs.--In addition to the 7 
                members appointed under subparagraph (A), the Secretary 
                shall be a nonvoting, ex officio member of the SPICE 
                Board.
            ``(2) Deadline for initial appointment.--The initial 
        members of the SPICE Board shall be appointed by not later than 
        6 months after the date of enactment of this section.
            ``(3) Terms.--
                    ``(A) In general.--The terms of the members of the 
                SPICE Board shall be for 6 years, except that of the 
                members first appointed--
                            ``(i) three shall be appointed for terms of 
                        6 years;
                            ``(ii) two shall be appointed for terms of 
                        4 years; and
                            ``(iii) two shall be appointed for terms of 
                        2 years.
                    ``(B) 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.
            ``(4) Chairperson.--The President shall designate the 
        chairperson of the SPICE Board, except that the representative 
        from the Centers for Medicare & Medicaid Services may not be 
        designated as chairperson.
    ``(e) Operation of the Board.--
            ``(1) Meetings.--The SPICE Board shall meet at the call of 
        the chairperson or upon the written request of a majority of 
        its members.
            ``(2) Quorum.--A majority of the members of the SPICE Board 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    ``(f) Powers of the SPICE Board.--
            ``(1) Hearings.--The SPICE Board may hold such hearings, 
        sit and act at such times and places, take such testimony, and 
        receive such evidence as the SPICE Board considers advisable to 
        carry out the purposes of this part.
            ``(2) Information from federal agencies.--Upon request of 
        the chairperson of the SPICE Board, the head of any Federal 
        department or agency shall furnish such information to the 
        SPICE Board as is necessary to carry out the functions of the 
        SPICE Board under this part.
            ``(3) Postal services.--The SPICE Board may use the United 
        States mails in the same manner and under the same conditions 
        as other departments and agencies of the Federal Government.
            ``(4) Gifts.--The SPICE Board may accept, use, and dispose 
        of gifts or donations of services or property.
    ``(g) Board Personnel Matters.--
            ``(1) Members.--
                    ``(A) Compensation.--Each member of the SPICE Board 
                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 SPICE 
                Board. All members of the SPICE Board 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 SPICE 
                Board 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 SPICE Board.
                    ``(C) Removal.--The President may remove a member 
                of the SPICE Board only for neglect of duty or 
                malfeasance in office.
            ``(2) Staff.--
                    ``(A) In general.--The chairperson of the SPICE 
                Board may, without regard to the civil service laws and 
                regulations, appoint and terminate an executive 
                director and such other additional personnel as may be 
                necessary to enable the SPICE Board to perform its 
                duties. The employment of an executive director shall 
                be subject to confirmation by the SPICE Board.
                    ``(B) Compensation.--The chairperson of the SPICE 
                Board may fix the compensation of the executive 
                director and other personnel without regard to the 
                provisions of chapter 51 and subchapter III of chapter 
                53 of title 5, United States Code, relating to 
                classification of positions and General Schedule pay 
                rates, except that the rate of pay for the executive 
                director and other personnel may not exceed the rate 
                payable for level V of the Executive Schedule under 
                section 5316 of such title.
                    ``(C) Detail of government employees.--Any Federal 
                Government employee may be detailed to the SPICE Board 
                without further reimbursement, and such detail shall be 
                without interruption or loss of civil service status or 
                privilege.
                    ``(D) Procurement of temporary and intermittent 
                services.--The chairperson of the SPICE Board may 
                procure temporary and intermittent services under 
                section 3109(b) of title 5, United States Code, at 
                rates for individuals which do not exceed the daily 
                equivalent of the annual rate of basic pay prescribed 
                for level V of the Executive Schedule under section 
                5316 of such title.

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

    ``Sec. 1860N. (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 `SPICE 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, such 
        fund 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 SPICE Board 
        certifies are necessary to make payments to operate the program 
        under this part, including payments to entities under section 
        1860J, payments to sponsors under section 1860L, and payments 
        with respect to administrative expenses under this part in 
        accordance with section 201(g).
            ``(2) 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 Government Contribution.--There are 
authorized to be appropriated from time to time, out of any moneys in 
the Treasury not otherwise appropriated, to the Account an amount equal 
to the amount by which the benefits and administrative costs of 
providing the benefits under this part exceed the premiums collected 
under section 1860H(a)(4).''.
    (b) Conforming Amendments to Federal Supplementary Medical 
Insurance Trust Fund.--Section 1841 of the Social Security Act (42 
U.S.C. 1395t) is amended--
            (1) in the last sentence of subsection (a)--
                    (A) by striking ``and'' before ``such amounts''; 
                and
                    (B) by inserting before the period the following: 
                ``, and such amounts as may be deposited in, or 
                appropriated to, the SPICE Prescription Drug Account 
                established by section 1860N''; and
            (2) in subsection (g), by inserting after ``by this part,'' 
        the following: ``the payments provided for under part D (in 
        which case the payments shall be made from the SPICE 
        Prescription Drug Account in the Trust Fund),''.
    (c) Additional Conforming Changes.--
            (1) Conforming references to previous part d.--Any 
        reference in law (in effect before the date of 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 Act.

SEC. 3. SPICE PRESCRIPTION DRUG COVERAGE UNDER MEDICARE+CHOICE PLANS.

    (a) Special Rules.--Section 1851 of the Social Security Act (42 
U.S.C. 1395w-21) is amended by adding at the end the following new 
subsection:
    ``(j) Rules for Provision of SPICE Prescription Drug Coverage.--
            ``(1) Plan required to provide coverage if beneficiary 
        enrolled in part d.--
                    ``(A) In general.--In the case of an individual 
                that is enrolled in a Medicare+Choice plan and enrolled 
                under part D, the basic benefits required to be 
                provided under section 1852(a)(1)(A) shall include 
                SPICE prescription drug coverage (as defined in section 
                1860B(a)) under the terms and conditions for such 
                coverage established under part D, including the terms 
                and conditions described in section 1860I(c).
                    ``(B) Voluntary enrollment in part D.--An 
                individual enrolled in a Medicare+Choice plan shall not 
                be required to enroll under part D.
            ``(2) Limitation on enrollee liability.--In the case of an 
        individual described in paragraph (1)(A), with respect to SPICE 
        prescription drug coverage, a Medicare+Choice organization may 
        not require that such individual pay a deductible or a 
        coinsurance percentage that exceeds the deductible or 
        coinsurance percentage applicable for such coverage pursuant to 
        part D.
            ``(3) Premium for stop-loss coverage.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                Medicare+Choice organization offering a Medicare+Choice 
                plan on behalf of an individual described in paragraph 
                (1)(A) may require the individual to pay a premium for 
                stop-loss coverage (as defined in section 1860B(c). Any 
                such premium shall be considered to be part of the 
                Medicare+Choice monthly basic premium (as defined in 
                section 1854(b)(2)(A)) that the individual is 
                responsible for.
                    ``(B) Organization required to reduce premium by 
                amount of financial assistance.--A Medicare+Choice 
                organization receiving a payment for financial 
                assistance for stop-loss coverage on behalf of an 
                individual described in paragraph (1)(A) pursuant to 
                subsection (b) of section 1860J shall reduce any 
                premium described in subparagraph (A) by the amount of 
                such financial assistance.
            ``(4) Payments to organization for spice prescription drug 
        coverage pursuant to part d rules.--The SPICE Board 
        (established under section 1860M) shall make payments to a 
        Medicare+Choice organization offering a Medicare+Choice plan on 
        behalf of an individual described in paragraph (1)(A) pursuant 
        to the payment mechanisms described in subsections (a) and (b) 
        of section 1860J. Such payments shall be coordinated with 
        payments made to such organization under section 1853.
            ``(5) Coordinated enrollment.--The Secretary shall work 
        with the SPICE Board to coordinate enrollment under this part 
        with enrollment under part D.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to items and services provided under a Medicare+Choice plan on or after 
January 1, 2003.

SEC. 4. MEDIGAP REVISIONS AND TRANSITION PROVISIONS.

    (a) Establishment of SPICE Medigap Policies.--Section 1882 of the 
Social Security Act (42 U.S.C. 1395ss) is amended by adding at the end 
the following new subsection:
    ``(v) SPICE Medigap Policies.--
            ``(1) Revision of benefit packages.--
                    ``(A) In general.--Notwithstanding subsection (p), 
                the benefit packages established under such subsection 
                shall be revised so that--
                            ``(i) if the policyholder is enrolled under 
                        part D, basic coverage (as defined in section 
                        1860B(b)) is available as part of each benefit 
                        package;
                            ``(ii) each benefit package includes stop-
                        loss coverage (as defined in section 1860B(c)) 
                        in the core group of basic benefits described 
                        in subsection (p)(2)(B);
                            ``(iii) no benefit package (including each 
                        benefit package classified as `H', `I', or `J' 
                        under the standards established by such 
                        subsection (p)(2), and the benefit package 
                        classified as `J' with a high deductible 
                        feature described in subsection (p)(11)) 
                        includes prescription drug coverage other than 
                        the basic coverage required under clause (i) 
                        (if applicable), or the stop-loss coverage 
                        required under clause (ii); and
                            ``(iv) except as revised under the 
                        preceding clauses or pursuant to subsection 
                        (p)(1)(E), the benefit packages are identical 
                        to the benefit packages that were available on 
                        the date of enactment of the Seniors 
                        Prescription Insurance Coverage Equity (SPICE) 
                        Act of 2001.
                    ``(B) Administration of benefits.--Pursuant to 
                section 1860A(a)(3), an issuer of a medicare 
                supplemental policy revised under such subparagraph may 
                directly administer the prescription drug benefits 
                required under the policy or may contract with an 
                entity that meets the applicable requirements under 
                part D to administer such benefits.
                    ``(C) 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, 
                2003.
            ``(2) Guaranteed issuance and renewal of new policies.--The 
        provisions of subsections (q) and (s) 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).
            ``(3) 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 under section 1860C(c), to each 
                        policyholder or certificate holder of a 
                        medicare supplemental policy issued by that 
                        issuer (at the most recent available address) 
                        of the offer described in clause (ii) and of 
                        the fact that, so long as they retain coverage 
                        under such policy, they are unable to obtain 
                        SPICE prescription drug coverage (as defined in 
                        section 1860B(a)) 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 subsection (c) of section 
                        1860C, institution of coverage effective for 
                        the period described in subsection (d) of such 
                        section, a medicare supplemental policy with 
                        the benefit package that has been revised under 
                        paragraph (1) of this subsection that the 
                        Secretary determines is most comparable to the 
                        policy in which the individual is enrolled.
                    ``(B) Terms of offer described.--The terms 
                described under 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.
            ``(4) Opportunity of other eligible individuals to purchase 
        revised policies.--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, 
        during at least the period established under section 1860C(c), 
        the issuer permits each eligible medicare beneficiary (as 
        defined in section 1860A(d), but who is not described in 
        paragraph (3)) to purchase any medicare supplemental policy 
        that has been revised under paragraph (1) with institution of 
        coverage effective for the period described in section 1860C(d) 
        under the terms of the offer described in paragraph (3)(B).
            ``(5) Grandfathering of current policyholders.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), no person may sell, issue, or renew a 
                medicare supplemental policy with a benefit package 
                that has not been revised under this subsection on or 
                after January 1, 2003.
                    ``(B) Grandfathering.--Each policyholder or 
                certificate holder of a medicare supplemental policy as 
                of December 31, 2002, may continue to receive benefits 
                under such policy and may renew such policy as if this 
                subsection had not been enacted, except that such 
                beneficiary shall not be eligible to enroll for SPICE 
                prescription drug coverage (as defined in section 
                1860B(a)) under part D during the period in which such 
                policy is in effect.
            ``(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).''.
    (b) NAIC Study and Report.--
            (1) Study.--The Secretary of Health and Human Services (in 
        this subsection referred to as the ``Secretary'') shall 
        contract with the National Association of Insurance 
        Commissioners (in this subsection referred to as the ``NAIC'') 
        to conduct a study--
                    (A) to determine whether the portion of the benefit 
                packages revised under section 1882(v) of the Social 
                Security Act (as added by subsection (a)) relating to 
                parts A and B of the medicare program should be revised 
                as a result of the establishment of SPICE prescription 
                drug coverage (as defined in section 1860B(a) of such 
                Act, as added by section 2) and whether the total 
                number of such benefit packages should be reduced;
                    (B) to identify methods to ensure that any 
                financial assistance paid to issuers of medicare 
                supplemental policies on behalf of enrollees for 
                providing stop-loss coverage (as defined in section 
                1860B(c) of the Social Security Act, as added by 
                section 2) made available under the benefit packages 
                revised under section 1882(v) of such Act (as so added) 
                is not used to subsidize any other benefits, including 
                the benefits relating to parts A and B of the medicare 
                program; and
                    (C) to assess the practicality and viability of 
                establishing a medicare supplemental policy that only 
                provides SPICE prescription drug coverage (as so 
                defined).
            (2) Report.--Not later than 6 months after the date of 
        enactment of this Act, the NAIC shall submit to Congress and 
        the Secretary a report on the study conducted under paragraph 
        (1) together with such recommendations as the NAIC determines 
        appropriate.

SEC. 5. PROVISION OF INFORMATION ON SPICE DRUG BENEFIT PROGRAM UNDER 
              HEALTH INSURANCE INFORMATION, COUNSELING, AND ASSISTANCE 
              GRANTS.

    Section 4360(b)(2)(A)(ii) of the Omnibus Budget Reconciliation Act 
of 1990 (42 U.S.C. 1395b-4(b)(2)(A)(ii)) is amended by striking ``and 
information'' and inserting ``, information regarding the SPICE drug 
benefit program under part D of title XVIII of the Social Security Act, 
and information''.

SEC. 6. PERSONAL DIGITAL ACCESS TECHNOLOGY DEMONSTRATION PROJECT.

    (a) Demonstration Project.--
            (1) In general.--The SPICE Board (established under section 
        1860M of the Social Security Act (as added by section 2)) shall 
        conduct a demonstration project for the purpose of increasing 
        the use of Personal Digital Access Technology in prescribing 
        covered outpatient drugs (as defined in section 1860B(e) (as so 
        added)) for eligible medicare beneficiaries receiving SPICE 
        prescription drug coverage under part D of title XVIII of such 
        Act (as so added).
            (2) Aspects of project.--The demonstration project shall 
        address ways in which the use of Personal Digital Access 
        Technology can be used to--
                    (A) avoid 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;
                    (B) transmit information about the coverage of 
                covered outpatient drugs under the policy or plan in 
                which such a beneficiary is receiving SPICE 
                prescription drug coverage to prescribing physicians;
                    (C) increase the use of generic drugs by such 
                beneficiaries; and
                    (D) increase the compliance of entities offering 
                policies or plans that provide SPICE prescription drug 
                coverage with the requirements under part D of title 
                XVIII of the Social Security Act (as added by section 
                2).
            (3) Inclusion of providers.--In conducting the 
        demonstration project, the SPICE Board shall include--
                    (A) physicians;
                    (B) pharmacists;
                    (C) entities that offer policies or plans that 
                provide SPICE prescription drug coverage; and
                    (D) any entity (including a pharmacy benefits 
                management company) that contracts with an entity 
                described in subparagraph (C) to provide benefits under 
                such policies or plans.
            (4) Duration of projects.--The demonstration project shall 
        be conducted over a 3-year period.
    (b) Reports to Congress.--
            (1) In general.--
                    (A) Initial report.--Not later than 18 months after 
                the SPICE Board implements the demonstration project, 
                the SPICE Board shall submit to Congress an initial 
                report on the demonstration project.
                    (B) Final report.--Not later that 6 months after 
                the conclusion of the project, the SPICE Board shall 
                submit to Congress a final report on the demonstration 
                project.
            (2) Contents of reports.--The reports described in 
        paragraph (1) shall include the following:
                    (A) A detailed description of the demonstration 
                project.
                    (B) An evaluation of the demonstration project.
                    (C) Recommendations for legislation that the SPICE 
                Board determines to be appropriate as a result of the 
                demonstration project.
                    (D) Any other information regarding the 
                demonstration project that the SPICE Board determines 
                to be appropriate.
    (c) Funding.--Expenditures made for carrying out the demonstration 
project shall be made from funds otherwise appropriated to the 
Secretary of Health and Human Services.
                                 <all>