[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 357 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                 S. 357

 To amend the Social Security Act to preserve and improve the medicare 
                                program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 15, 2001

 Mr. Breaux (for himself and Mr. Frist) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Social Security Act to preserve and improve the medicare 
                                program.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Preservation and Improvement 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. Findings and purposes.
     TITLE I--ESTABLISHMENT OF MEDICARE COMPETITIVE PREMIUM SYSTEM

Sec. 101. Establishment of Medicare competitive premium system.
   ``TITLE XXII--ESTABLISHMENT OF MEDICARE COMPETITIVE PREMIUM SYSTEM

        ``Sec. 2200. Construction; references; definitions.
           ``Part A--Medicare Plans; Combining Parts A and B

        ``Sec. 2201. Election of coverage through a Medicare plan and 
                            consolidated Medicare eligibility.
        ``Sec. 2202. Health benefits coverage.
        ``Sec. 2203. Continuation of beneficiary protections and other 
                            qualifications for Medicare plans.
        ``Sec. 2204. Exclusive payment methodology.
                  ``Part B--Competitive Premium System

        ``Sec. 2221. Publication of geographic and risk adjusters.
        ``Sec. 2222. Submission of proposed Medicare plans.
        ``Sec. 2223. Board approval of proposed Medicare plans.
        ``Sec. 2224. Computation of core benefit premiums.
        ``Sec. 2225. Computation of national average premium.
        ``Sec. 2226. Payment of full amount of Medicare plan premiums.
        ``Sec. 2227. Computation of beneficiary obligation and drug 
                            discounts for beneficiaries enrolled in 
                            high option Medicare plans.
        ``Sec. 2228. Collection of beneficiary obligation.
        ``Sec. 2229. Relation to certain provisions.
                    ``Part C--Medicare Board Charter

        ``Sec. 2241. Medicare Board.
        ``Sec. 2242. Duties of the Board.
        ``Sec. 2243. Powers of the Board.
        ``Sec. 2244. Board personnel matters.
        ``Sec. 2245. Reports; communications with Congress.
        ``Sec. 2246. Funding of the Board.
                 ``Part D--Unified Medicare Trust Fund

        ``Sec. 2261. Unified Medicare Trust Fund.
        ``Sec. 2262. Programmatic insolvency and limitation on general 
                            revenue financing.
               ``Part E--HCFA Duties and Responsibilities

        ``Sec. 2281. Reorganization of HCFA.
        ``Sec. 2282. Establishment of HCFA-sponsored plans.
        ``Sec. 2283. Partnerships with private entities to offer HCFA-
                            sponsored high option plans.
        ``Sec. 2284. HCFA business planning and administrative 
                            flexibility.''.
                     TITLE II--SPECIAL PROTECTIONS

            Subtitle A--Protection Package for Certain Areas

Sec. 201. Limitation on beneficiary obligations in certain areas.
Sec. 202. Guarantee of outpatient prescription drugs under HCFA-
                            sponsored high option plans.
     Subtitle B--Low-Income Medicare Beneficiary Protection Package

Sec. 251. Medicare plans for low-income Medicare beneficiaries.
        ``Sec. 2229. Medicare plans for low-income Medicare 
                            beneficiaries.''.
         TITLE III--MEDICARE BENEFICIARY OUTREACH AND EDUCATION

Sec. 301. Medicare Consumer Coalitions.
                        TITLE IV--MISCELLANEOUS

Sec. 401. Conforming amendments.
Sec. 402. Medicare supplemental policies.
Sec. 403. Effective date.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--
            (1) Based on the deliberations of the National Bipartisan 
        Commission on the Future of Medicare, the medicare program 
        under title XVIII of the Social Security Act in its current 
        form is unsustainable and is scheduled to become insolvent in 
        2025.
            (2) Medicare's spending, left unchecked, will continue to 
        consume an increasing share of the Federal budget, leaving 
        little room for other priorities, such as defense, education, 
        debt reduction, tax cuts, and domestic spending.
            (3) Medicare's current benefit package is outdated in that 
        it does not provide a prescription drug benefit and limits 
        beneficiary access to new technologies.
            (4) Medicare only covers 53 percent of a beneficiary's 
        average health care costs and exposes beneficiaries to large 
        out-of-pocket liabilities.
            (5) The number of beneficiaries in the medicare program is 
        estimated to more than double by the end of 2030, due to the 
        influx of 77,000,000 baby boomers beginning in 2010.
            (6) Each year there are fewer workers paying payroll taxes 
        to fund current Medicare obligations, evidenced by a decrease 
        in the number of workers per retiree from 4.5 in 1960 to 3.9 in 
        2000. This number is expected to decline further to 2.8 in 
        2020.
            (7) The Balanced Budget Act of 1997, the Medicare, 
        Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, and 
        Medicare, Medicaid, and SCHIP Benefits Improvement and 
        Protection Act of 2000 underscore the need to fundamentally 
        restructure the medicare program and reduce Government 
        micromanagement of that program.
    (b) Purposes.--The purposes of this Act are--
            (1) to promote high quality, comprehensive, integrated 
        health care to meet the individual needs of each medicare 
        beneficiary;
            (2) to assist all medicare beneficiaries, especially those 
        with low incomes, in obtaining comprehensive benefits, 
        including prescription drugs through a health plan;
            (3) to increase the flexibility of the medicare program and 
        provide medicare beneficiaries timely access to the latest 
        advances in the practice of medicine and delivery of care;
            (4) to end the congressional micromanagement over prices 
        and delivery of benefits currently administered through 
        approximately 130,000 pages of regulations established under 
        the medicare program; and
            (5) to improve the existing medicare program by adopting a 
        stable, competitive system based on the proven model of the 
        Federal Employees Health Benefits Plan, thereby providing 
        medicare beneficiaries with better and broader health coverage 
        and a greater variety of reasonably priced health care options 
        from which to choose.

     TITLE I--ESTABLISHMENT OF MEDICARE COMPETITIVE PREMIUM SYSTEM

SEC. 101. ESTABLISHMENT OF MEDICARE COMPETITIVE PREMIUM SYSTEM.

    The Social Security Act is amended by adding at the end the 
following:

   ``TITLE XXII--ESTABLISHMENT OF MEDICARE COMPETITIVE PREMIUM SYSTEM

``SEC. 2200. CONSTRUCTION; REFERENCES; DEFINITIONS.

    ``(a) Construction of Title.--The provisions of this title shall be 
construed to modify and supersede the provisions and operation of title 
XVIII to the extent such provisions are inconsistent with the 
provisions of this title.
    ``(b) References to Medicare Provisions.--Any reference in any law 
or regulation to any provision of title XVIII is deemed a reference to 
such provision as modified through the operation of this title.
    ``(c) Definitions Relating to Medicare Plans.--As used in this 
title:
            ``(1) Medicare plan.--The term `Medicare plan' means a 
        health benefits plan which the Medicare Board has approved 
        under section 2223, and includes each HCFA-sponsored plan.
            ``(2) Standard medicare plan.--The term `standard Medicare 
        plan' means a Medicare plan that includes the core benefits 
        under section 2202(a), but is not a high option Medicare plan.
            ``(3) High option medicare plan.--The term `high option 
        Medicare plan' means a Medicare plan that, in addition to 
        providing coverage for the core benefits under section 2202(a), 
        includes coverage for outpatient prescription drugs under 
        section 2202(b), and stop-loss coverage under section 2202(c).
            ``(4) HCFA-sponsored plan.--The term `HCFA-sponsored plan' 
        means a standard or high option Medicare plan established under 
        section 2282.
    ``(d) Other Definitions.--As used in this title:
            ``(1) Core benefits.--The term `core benefits' means the 
        items and services described in section 2202(a).
            ``(2) HCFA.--The term `HCFA' means the Health Care 
        Financing Administration, acting through the Administrator of 
        such Administration.
            ``(3) Medicare beneficiary.--The term `Medicare 
        beneficiary' means an individual entitled to benefits under 
        title XVIII.
            ``(4) Medicare board; board.--The terms `Medicare Board' 
        and `Board' mean the Board established under section 2241.
            ``(5) Medicare+choice organization; medicare+choice plan.--
        The terms `Medicare+Choice organization' and `Medicare+Choice 
        plan' have the meanings given such terms in subsections (a)(1) 
        and (b)(1), respectively, of section 1859 (relating to 
        definitions relating to Medicare+Choice organizations).
            ``(6) Medicare trust fund.--The term `Medicare Trust Fund' 
        means the Trust Fund established under section 2261.

              ``Part A--Medicare Plans; Combining Parts A

                                 and B

``SEC. 2201. ELECTION OF COVERAGE THROUGH A MEDICARE PLAN AND 
              CONSOLIDATED MEDICARE ELIGIBILITY.

    ``(a) Continued Entitlement to Medicare Benefits.--Beginning on 
January 1, 2004, Medicare beneficiaries shall continue to be entitled 
to receive benefits under title XVIII and shall receive such benefits 
through enrollment in a Medicare plan.
    ``(b) Consolidated Medicare Eligibility.--Beginning January 1, 
2004, an individual may receive benefits under title XVIII only if such 
individual is entitled under part A (or enrolled under such part) and 
enrolled under part B of such title.
    ``(c) Enrollment Process.--
            ``(1) In general.--The Medicare Board shall establish a 
        process for the enrollment of Medicare beneficiaries under 
        Medicare plans that is based, except as the Board may provide, 
        upon the process for enrollment with Medicare+Choice plans 
        under part C of title XVIII, including the provision of 
        information and open enrollment and disenrollment 
        opportunities.
            ``(2) Transitional enrollment.--The Medicare Board shall 
        provide for such general enrollment period before January 1, 
        2004, as may be appropriate to permit all individuals who are 
        eligible to receive benefits under part A or part B of title 
        XVIII, but not both, to become eligible to receive benefits 
        under such other part.
            ``(3) Study and report to congress regarding transition 
        period.--
                    ``(A) Study.--The Medicare Board shall conduct a 
                study on the need for--
                            ``(i) establishing a period after January 
                        1, 2004, in which an individual, 
                        notwithstanding subsection (a), may receive 
                        benefits under part A of title XVIII without 
                        being enrolled under part B of such title or 
                        may receive benefits under part B of such title 
                        without being entitled under part A of such 
                        title; and
                            ``(ii) adjusting the amount of the 
                        beneficiary obligation and drug discount 
                        computed under section 2227 during the period 
                        described in subparagraph (A).
                    ``(B) Report.--Not later than January 1, 2003, the 
                Medicare Board shall submit a report to Congress on the 
                study conducted under subparagraph (A), together with 
                any recommendations for legislation that the Board 
                determines to be appropriate as a result of such study.
            ``(4) Study and report to congress regarding special rules 
        for end-stage renal disease.--
                    ``(A) Study.--The Medicare Board shall conduct a 
                study on the need for a special rule for individuals 
                medically determined to have end-stage renal disease, 
                similar to the special rule established under section 
                1851(a)(3)(B) (relating to Medicare+Choice eligible 
                individuals).
                    ``(B) Report.--Not later than January 1, 2003, the 
                Medicare Board shall submit a report to Congress on the 
                study conducted under subparagraph (A), together with 
                any recommendations for legislation that the Board 
                determines to be appropriate as a result of such study.
            ``(5) Study and report on one-time enrollment.--
                    ``(A) Study.--The Medicare Board shall conduct a 
                study on the need for rules relating to a one-time 
                enrollment of Medicare beneficiaries in high option 
                Medicare plans, including HCFA-sponsored high option 
                plans, similar to the rules established under section 
                1882(s) (relating to guaranteed issuance of Medicare 
                supplemental policies).
                    ``(B) Report.--Not later than January 1, 2003, the 
                Medicare Board shall submit a report to Congress on the 
                study conducted under subparagraph (A), together with 
                any recommendations for legislation that the Board 
                determines to be appropriate as a result of such study.

``SEC. 2202. HEALTH BENEFITS COVERAGE.

    ``(a) Core Benefits.--Each Medicare plan shall provide those items 
and services for which benefits are available under parts A and B of 
title XVIII to Medicare beneficiaries enrolled in the plan.
    ``(b) Outpatient Prescription Drug Benefit.--
            ``(1) In general.--Each high option Medicare plan shall 
        provide a benefit for outpatient prescription drugs--
                    ``(A) during 2004, that is actuarially equivalent 
                to an amount equal to $850 on January 1, 2004; and
                    ``(B) during a subsequent year, that is actuarially 
                equivalent to the amount for each Medicare beneficiary 
                during the previous year, adjusted for any increase in 
                the reasonable cost of outpatient prescription drugs 
                during such previous year.
            ``(2) Cost control mechanisms.--In providing the outpatient 
        prescription drug benefit under paragraph (1), the entity 
        offering each Medicare plan (including a private entity with a 
        contract under section 2283) may use cost control mechanisms 
        that are customarily used in employer sponsored plans, 
        including the use of formularies, tiered copayments, selective 
        contracting with providers of outpatient prescription drugs, 
        and mail order pharmacies.
    ``(c) Stop-Loss Coverage.--Each high option Medicare plan shall 
provide a benefit for stop-loss coverage that is designed to limit 
Medicare beneficiary cost-sharing for core benefits during a year after 
the Medicare beneficiary incurs out-of-pocket expenditures in excess 
of--
            ``(1) during 2004, $2,000 for the core benefits; and
            ``(2) for any subsequent calendar year, the amount for the 
        previous year for the core benefits increased by the average 
        annual percentage increase in expenditures per beneficiary 
        under title XVIII during the previous year, as estimated by the 
        Medicare Board.

``SEC. 2203. CONTINUATION OF BENEFICIARY PROTECTIONS AND OTHER 
              QUALIFICATIONS FOR MEDICARE PLANS.

    ``In order to be offered as a Medicare plan under this part, except 
as otherwise provided in this title, the plan and the entity offering 
the plan shall meet the requirements applicable to Medicare+Choice 
plans and Medicare+Choice organizations under part C of title XVIII, 
including--
            ``(1) the offering of Medicare benefits; and
            ``(2) protections for Medicare beneficiaries enrolled in 
        the plans.

``SEC. 2204. EXCLUSIVE PAYMENT METHODOLOGY.

    ``(a) In General.--Except as provided in this title, for items and 
services furnished on or after January 1, 2004--
            ``(1) payment to an entity offering a Medicare plan in the 
        amounts provided under this part shall be instead of any 
        amounts that may be otherwise payable under title XVIII; and
            ``(2) only the entity offering the Medicare plan is 
        eligible to receive payment for items and services under such 
        title.
    ``(b) Exceptions.--Under rules established by the Medicare Board, 
the Board may provide for exceptions to subsection (a) under 
circumstances that are similar to the circumstances provided for under 
section 1851(i) (relating to effect of election of Medicare+Choice plan 
option).

                  ``Part B--Competitive Premium System

``SEC. 2221. PUBLICATION OF GEOGRAPHIC AND RISK ADJUSTERS.

    ``(a) Publication.--Not later than April 15 of each year (beginning 
in 2003), the Medicare Board shall publish the geographic and risk 
adjusters established under subsection (b) to be used in determining 
the amount of payment to Medicare plans computed under section 2226.
    ``(b) Establishment of Geographic and Risk Adjusters.--
            ``(1) In general.--Subject to paragraph (2), the Medicare 
        Board shall establish an appropriate methodology for adjusting 
        the amount of payment to Medicare plans computed under section 
        2226 to take into account, in a budget neutral manner, 
        appropriate variation in costs for core benefits--
                    ``(A) based on the provision of items and services 
                in different geographic areas; and
                    ``(B) based on the differences in actuarial risk of 
                different enrollees being served.
            ``(2) Considerations.--In establishing an appropriate 
        methodology under this subsection, the Medicare Board--
                    ``(A)(i) subject to clause (ii), may take into 
                account the similar methodologies used under section 
                1853 (relating to payments to Medicare+Choice 
                organizations); and
                    ``(ii) shall limit the geographic adjustment to 
                variations based on input costs of providing covered 
                items and services in different areas;
                    ``(B) may provide for the risk adjustment to be 
                effected through a pooling arrangement in which 
                unfavorable risks are shared among the entities 
                offering Medicare plans in an area, rather than through 
                risk adjustment of payment made with respect to 
                Medicare beneficiaries;
                    ``(C) may establish other risk adjusters, such as 
                those based on the length of time a Medicare 
                beneficiary has been continuously enrolled in a 
                Medicare plan;
                    ``(D) may phase-in geographic and risk adjusters 
                established under this section during the transition 
                from the medicare program under title XVIII of the 
                Social Security Act in effect on the date of enactment 
                of this title as necessary to prevent large changes in 
                the obligation of Medicare beneficiaries during a year; 
                and
                    ``(E) shall consider the interrelationship of all 
                adjustments to the amount paid to Medicare plans and 
                obligations of Medicare beneficiaries under this 
                section, to ensure that all Medicare plans have an 
                incentive to provide efficient care.

``SEC. 2222. SUBMISSION OF PROPOSED MEDICARE PLANS.

    ``(a) In General.--Each entity that intends to offer a Medicare 
plan in a year (beginning with 2004) shall submit to the Medicare 
Board, at such time and in such manner as the Board may specify, such 
information as the Board may require to carry out title XVIII, 
including the information described in subsection (b) and taking into 
account the geographic and risk adjusters published under section 2221.
    ``(b) Information Described.--The information described in this 
paragraph includes information on each of the following:
            ``(1) Benefits.--A description of the benefits under the 
        plan.
            ``(2) Premium bid.--The premium proposed to be charged for 
        enrollment under the plan.
            ``(3) Service area.--The service area for the plan.

``SEC. 2223. BOARD APPROVAL OF PROPOSED MEDICARE PLANS.

    ``(a) Approval of Medicare Plans by Medicare Board.--
            ``(1) In general.--Subject to paragraph (2), the Medicare 
        Board shall approve Medicare plans--
                    ``(A) in accordance with the requirements 
                established under subsection (b) and, in the case of a 
                high option Medicare plan, subsection (c); and
                    ``(B) subject to the terms and conditions 
                established under subsection (d).
            ``(2) High option medicare plan required.--The Medicare 
        Board may approve the offering of a standard Medicare plan by 
        an entity under this title in a service area only if the entity 
        also offers a Medicare plan that has been approved as a high 
        option Medicare plan in accordance with the requirements 
        established under subsection (c) in that service area.
    ``(b) Requirements for All Medicare Plans.--The Medicare Board may 
approve a Medicare plan only if such plan meets the following 
requirements:
            ``(1) Benefits.--
                    ``(A) In general.--The Board may approve a Medicare 
                plan submitted under section 2222 only if the benefits 
                under such plan--
                            ``(i) include the core benefits under 
                        section 2202(a); and
                            ``(ii) are not designed in such a manner 
                        that the Board finds that it is likely to 
                        result in favorable selection of Medicare 
                        beneficiaries.
                    ``(B) Variation in cost-sharing.--
                            ``(i) In general.--Except for the HCFA-
                        sponsored plans established under section 2202, 
                        for purposes of approving a Medicare plan, the 
                        Medicare Board may permit reasonable variation 
                        in cost-sharing so long as the actuarial 
                        equivalence of total cost-sharing for the core 
                        benefits is maintained.
                            ``(ii) Rule of construction.--Nothing in 
                        this subparagraph shall be construed as 
                        preventing a Medicare plan from providing, as 
                        an additional benefit, a lower level of cost-
                        sharing from that otherwise described in title 
                        XVIII.
            ``(2) Premium bid.--The Board may approve a premium bid 
        submitted under section 2222 only if the Board finds that the 
        premium rates are adequate in terms of actuarial soundness to 
        assure the financial solvency of the entity offering the plan.
            ``(3) Service area.--The Board may approve a service area 
        submitted under section 2222 only if the Board finds that--
                    ``(A) the use of such an area is consistent with 
                the purposes of this title; and
                    ``(B) the service area for the plan is not designed 
                so as to discriminate based on the health status, 
                economic status, or prior receipt of health care of 
                Medicare beneficiaries.
    ``(c) Special Requirements for High Option Medicare Plans.--The 
Medicare Board may approve a Medicare plan as a high option Medicare 
plan only if such plan includes, in addition to the core benefits under 
section 2202(a), coverage for outpatient prescription drugs under 
section 2202(b), and stop-loss coverage under 2202(c).
    ``(d) Terms and Conditions.--
            ``(1) In general.--Medicare plans approved under this 
        section shall be subject to such additional terms and 
        conditions as the Board may specify.
            ``(2) Negotiation.--
                    ``(A) In general.--Subject to subparagraph (B), for 
                purposes of specifying the terms and conditions under 
                paragraph (1), the Board may negotiate with any entity 
                offering a Medicare plan regarding the terms and 
                conditions of such plan.
                    ``(B) Limitation.--The Medicare Board may approve a 
                Medicare plan only if the Board finds that the 
                negotiated terms and conditions are consistent with the 
                requirements of this title.

``SEC. 2224. COMPUTATION OF CORE BENEFIT PREMIUMS.

    ``(a) In General.--For each year (beginning with 2004), the 
Medicare Board shall compute a core benefit premium for each Medicare 
plan approved under section 2223 that reflects only the actuarial value 
of the core benefits offered under the Medicare plan.
    ``(b) De Minimis Benefits Included.--For purposes of computing the 
core-benefit premium under subsection (a), the Board may include de 
minimis benefits that are not core benefits.

``SEC. 2225. COMPUTATION OF NATIONAL AVERAGE PREMIUM.

    ``(a) Computation.--
            ``(1) In general.--For each year (beginning with 2004) the 
        Medicare Board shall compute a national average premium equal 
        to the average of the core benefit premium for each Medicare 
        plan (as computed under section 2224).
            ``(2) Weighted average.--The national average premium 
        computed under paragraph (1) shall be a weighted average, with 
        the weight for each plan being equal to the average number of 
        beneficiaries enrolled under such plan in the previous year.
    ``(b) Special Rule for 2004.--For purposes of applying subsection 
(a) in 2004, Medicare beneficiaries who obtained benefits--
            ``(1) under the original fee-for-service program under 
        parts A and B of title XVIII as in effect on the date of 
        enactment of this title are deemed to have been enrolled in the 
HCFA-sponsored standard plan; and
            ``(2) through enrollment in a Medicare+Choice plan (or 
        similar plan) are deemed to have been enrolled in the Medicare 
        plan the Board determines is most comparable to the 
        Medicare+Choice plan (or similar plan) in which the individual 
        was enrolled on such date.

``SEC. 2226. PAYMENT OF FULL AMOUNT OF MEDICARE PLAN PREMIUMS.

    ``(a) In General.--Subject to subsection (b), for each year 
(beginning with 2004), the Board shall pay to each Medicare plan in 
which a Medicare beneficiary is enrolled an amount equal to--
            ``(1) the full amount of the premium approved under section 
        2223(b)(2) on behalf of each Medicare beneficiary enrolled in 
        such plan for the year, as adjusted using the geographic and 
        risk adjusters that apply to the core benefits published under 
        section 2221; minus
            ``(2) the amount of any fees (as computed under section 
        2246(b)).
    ``(b) Payment Terms.--Payment under this section to an entity 
offering a Medicare plan shall be made in a manner determined by the 
Medicare Board and based upon the manner in which payments are under 
section 1853(a) (relating to payments to Medicare+Choice 
organizations).

``SEC. 2227. COMPUTATION OF BENEFICIARY OBLIGATION AND DRUG DISCOUNTS 
              FOR BENEFICIARIES ENROLLED IN HIGH OPTION MEDICARE PLANS.

    ``(a) Computation of Beneficiary Obligation.--Subject to subsection 
(b), the annual beneficiary obligation for enrollment in a Medicare 
plan for a year shall be determined as follows:
            ``(1) Medicare plan premiums of less than 85 percent of the 
        national average.--If the amount of the premium approved by the 
        Board under section 2223 for the Medicare plan does not exceed 
        85 percent of the national average premium (as computed under 
        section 2225) the obligation of the Medicare beneficiary shall 
        be zero.
            ``(2) Medicare plan premiums between 85 and 100 percent of 
        the national average.--If the amount of the premium approved by 
        the Board under section 2223 for a Medicare plan exceeds 85 
        percent of the national average premium, but does not exceed 
        100 percent of the national average premium, the obligation of 
        the Medicare beneficiary shall be equal to 80 percent of the 
        amount by which the premium for the plan exceeds 85 percent of 
        the national average premium.
            ``(3) Medicare plan premiums equal to or greater than the 
        national average.--If the amount of the premium approved by the 
        Board under section 2223 for a Medicare plan equals or exceeds 
        100 percent of the national average premium the obligation of 
        the Medicare beneficiary shall be equal to the sum of--
                    ``(A) the applicable percent for the year of the 
                national average premium; and
                    ``(B) the amount by which the premium approved by 
                the Board under section 2223 for the Medicare plan 
                exceeds the amount of the national average premium.
        In the preceding sentence, the term `applicable percent' means 
        an amount, (expressed as a percent) as estimated by the Board, 
        determined by dividing the amount of the part B premium for a 
        year (as determined under section 1839 as if the Medicare 
        Preservation and Improvement Act of 2001 had not been enacted) 
        by the total per capita amount of expenditures under the 
        Medicare Trust Fund (under section 2261) for the year.
    ``(b) Discounts for Beneficiaries Enrolled in High Option Medicare 
Plans.--
            ``(1) In general.--The beneficiary obligation determined 
        under this section for any Medicare beneficiary enrolled in a 
        high option Medicare plan shall be reduced by the discount 
        determined under paragraph (2).
            ``(2) Determination of discount.--The discount determined 
        under this paragraph is the amount equal to the applicable 
        percentage (as determined under paragraph (3)) of the benefit 
        amount for outpatient prescription drugs determined under 
        section 2202(b) for the year.
            ``(3) Applicable percentage.--
                    ``(A) Individuals with income that exceeds 150 
                percent of poverty.--In the case of a Medicare 
                beneficiary whose income (as determined for purposes of 
                section 1905(p) and without regard to paragraph (4)) 
                exceeds 150 percent of the official poverty line 
                (referred to in paragraph (2)(A) of such section) 
                applicable to a family of the size involved, the 
                applicable percentage shall be 25 percent.
                    ``(B) Individuals with income between 135 and 150 
                percent of poverty.--In the case of a Medicare 
                beneficiary whose income (as so determined) exceeds 135 
                percent but does not exceed 150 percent of such poverty 
                line, the applicable percentage shall be a percent, 
                equal to 50 percent reduced (but not below 25 percent) 
                by 1.67 percentage points for each percentage point by 
                which such income exceeds 135 percent of such poverty 
                line.
            ``(4) Tax treatment of discount.--
                    ``(A) In general.--For purposes of the Internal 
                Revenue Code of 1986, the discount determined under 
                paragraph (2) for a Medicare beneficiary for a year 
                shall be included in the gross income of the 
                beneficiary for the year.
                    ``(B) Statement of taxable amount.--Not later than 
                January 31 of each year (beginning with 2005), the 
                Medicare Board shall provide--
                            ``(i) each Medicare beneficiary with a 
                        statement that describes the amount of the 
                        discount that is required to be included in the 
                        gross income of the beneficiary for the 
                        previous year pursuant to subparagraph (A); and
                            ``(ii) the Secretary of the Treasury with 
                        the information described in clause (i).
            ``(5) Publication of discounted premiums.--For each year 
        (beginning with 2004), the Medicare Board shall publish in the 
        Board's announcement of the premiums for Medicare plans each 
        year the amount of the beneficiary obligation after applying 
        the discount determined under paragraph (2) for each high 
        option Medicare plan.

``SEC. 2228. COLLECTION OF BENEFICIARY OBLIGATION.

    ``(a) Collection of Amount in Same Manner as Part B Premium.--The 
amount of the annual beneficiary obligation determined under section 
2227 shall be paid to the Medicare Trust Fund in the same manner as 
monthly premiums under part B of title XVIII were payable to the credit 
of the Federal Supplementary Medical Insurance Trust Fund under section 
1840 (relating to payment of premiums) as in effect as of the date of 
enactment of this title.
    ``(b) Information Necessary for Collection.--In order to carry out 
paragraph (1), the Medicare Board shall transmit to the Commissioner of 
Social Security--
            ``(1) at the beginning of each year, the name, social 
        security account number, and annual beneficiary obligation owed 
        by each individual enrolled in a Medicare plan for each month 
        during the year; and
            ``(2) periodically throughout the year, information to 
        update the information previously transmitted under this 
        paragraph for the year.

``SEC. 2229. RELATION TO CERTAIN PROVISIONS.

    ``(a) Relation to Certain Provisions.--Beginning on January 1, 
2004, the following provisions of law are modified as follows, in order 
to reflect the policies specified in this part:
            ``(1) Change in payment rules.--Subject to subsection (b), 
        in applying section 1853 (relating to payments to 
        Medicare+Choice organizations), payment rates established under 
        section 2226 shall supersede the annual Medicare+Choice 
        capitation rate calculated under section 1853(c) (relating to 
        calculation of annual Medicare+Choice capitation rates).
            ``(2) Part b premium.--No separate premium is payable under 
        section 1839 (relating to amount of premiums).
    ``(b) Relation to Other Provisions.--The fact that a provision is 
not cited in this subsection does not indicate that the provision is 
not modified under this title in some manner consistent with section 
2200(a).

                    ``Part C--Medicare Board Charter

``SEC. 2241. MEDICARE BOARD.

    ``(a) Establishment.--There is established, as an independent 
agency in the executive branch of the Government, a Medicare Board (in 
this part referred to as the `Board').
    ``(b) Membership.--
            ``(1) Number and appointment.--The Board shall be composed 
        of 7 members appointed by the President, by and with the advice 
        and consent of the Senate.
            ``(2) Deadline for initial appointment.--The initial 
        members of the Board shall be nominated for appointment by not 
        later than 6 months after the date of enactment of this title.
            ``(3) Terms.--
                    ``(A) In general.--The terms of members of the 
                Board shall be for 7 years, except that of the members 
                first appointed--
                            ``(i) 3 shall be appointed for terms of 3 
                        years;
                            ``(ii) 2 shall be appointed for terms of 5 
                        years; and
                            ``(iii) 2 shall be appointed for terms of 7 
                        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.
                    ``(C) Limitation on number of terms.--Any person 
                appointed as a member of the Board shall not be 
                eligible for reappointment to the Board after having 
                served 2 terms.
            ``(4) Chairperson and other officers.--The Board shall 
        elect a chairperson and such officers as the Board determines 
        appropriate.
    ``(c) Operation of the Board.--
            ``(1) Meetings.--The Board shall meet at the call of its 
        chairperson or a majority of its members.
            ``(2) Quorum.--A quorum shall consist of 4 members of the 
        Board, except that the Board may establish a lesser quorum to 
        conduct a hearing under section 2243(a).

``SEC. 2242. DUTIES OF THE BOARD.

    ``(a) Administration of Competitive Premium System.--Except as 
otherwise provided in this title and effective with respect to benefits 
furnished on or after January 1, 2004, the Board shall--
            ``(1) coordinate determinations of beneficiary eligibility 
        and enrollment under title XVIII with the Commissioner of 
        Social Security;
            ``(2) enter into, and enforce, contracts with entities for 
        the offering of Medicare plans under part A of this title, 
        including contracting with the Division of HCFA-Sponsored Plans 
        of HCFA (as established under section 2281(a)(1)) for the 
        offering of the HCFA-sponsored plans;
            ``(3) disseminate to Medicare beneficiaries information 
        with respect to benefits, limitations on payment, under 
        Medicare plans, including a comparative analysis of Medicare 
        plans and the quality of such plans in the area in which the 
        Medicare beneficiary resides; and
            ``(4) establish a Medicare beneficiary education program to 
        provide timely, readable, accurate, and understandable 
        information to Medicare beneficiaries regarding Medicare plan 
        options.
    ``(b) Relation to HCFA-Sponsored Plans.--The Board shall not be 
responsible for the establishment and operation of HCFA-sponsored plans 
(provided for under section 2282), but shall have oversight authority 
over such plans in a similar manner to that provided with respect to 
other Medicare plans.
    ``(c) Transition Provisions.--The Secretary and the Board shall 
cooperate to establish an appropriate transition of responsibility for 
the administration of title XVIII and other related laws, from the 
Secretary to the Board as is appropriate to carry out the purposes of 
this title and as is consistent with the responsibilities of the 
Division of Health Programs of HCFA (established under section 
2281(a)(2)). Insofar as a responsibility is transferred to the Board 
under this subsection, any reference to the Secretary in title XVIII or 
other provision of law with respect to such responsibility is deemed to 
be a reference to the Board.

``SEC. 2243. POWERS OF THE BOARD.

    ``(a) In General.--The Board may, for the purpose of carrying out 
its duties, promulgate regulations, hold hearings, sit and act at times 
and places, take testimony, and receive evidence as the Board considers 
appropriate.
    ``(b) Contract Authority.--The Board may contract with, and 
compensate, government and private agencies or persons for items and 
services, without regard to section 3709 of the Revised Statutes (41 
U.S.C. 5).
    ``(c) Board Authority To Permit Flexibility in Requirements.--In 
promulgating regulations under subsection (a) to carry out the 
requirements of part C of title XVIII, the Board may modify the 
regulations previously promulgated by the Secretary to carry out such 
requirements (other than those relating to benefits or beneficiary 
protections) as may be appropriate to better meet the needs of Medicare 
beneficiaries and promote fair and open competition among Medicare 
plans.
    ``(d) Overseeing Solvency of HCFA-Sponsored Plans.--The Board shall 
monitor and oversee the financial solvency of the HCFA-sponsored plans 
in a manner similar to the manner in which State insurance 
commissioners monitor and oversee the solvency of health insurance 
issuers in the States. The Board shall include in its periodic reports 
to Congress an analysis of the solvency of such plans.

``SEC. 2244. BOARD PERSONNEL MATTERS.

    ``(a) Members.--
            ``(1) Compensation.--Members of the Board shall be 
        compensated at the rate provided for level II of the Executive 
        Schedule under section 5315 of title 5, United States Code.
            ``(2) Removal.--The President may remove a member of the 
        Board only for neglect of duty or malfeasance in office.
    ``(b) Staff and Support Services.--
            ``(1) Executive director.--The chairperson shall appoint an 
        executive director of the Board who shall be paid at a rate 
        specified by the Board.
            ``(2) Staff.--With the approval of the Board, the executive 
        director may appoint such personnel as the executive director 
        considers appropriate.
            ``(3) Inapplicability of civil service laws.--The staff of 
        the Board shall be appointed without regard to the provisions 
        of title 5, United States Code, governing appointments in the 
        competitive service, and shall be paid without regard to the 
        provisions of chapter 51 and subchapter III of chapter 53 of 
        such title (relating to classification and General Schedule pay 
        rates).
            ``(4) Experts and consultants.--With the approval of the 
        Board, the executive director may procure temporary and 
        intermittent services under section 3109(b) of title 5, United 
        States Code.
    ``(c) Transfer of Personnel, Assets, Etc.--For purposes of the 
Board carrying out its duties, the Secretary and the Board may provide 
for the transfer to the Board of such civil service personnel employed 
by the Department of Health and Human Services, and such resources and 
assets of the Department used in carrying out title XVIII, as the Board 
requires.

``SEC. 2245. REPORTS; COMMUNICATIONS WITH CONGRESS.

    ``(a) Report on Medicare Program.--Not less frequently than 
annually, the Board shall submit to Congress such reports describing 
the medicare program under title XVIII as the Board determines 
appropriate.
    ``(b) Maintaining Independence of Board in Communications With 
Congress.--The Board may directly submit to Congress reports, 
legislative recommendations, testimony, or comments on legislation. No 
officer or agency of the United States may require the Board to submit 
to any officer or agency of the United States for approval, comments, 
or review, prior to the submission to Congress of such reports, 
recommendations, testimony, or comments.

``SEC. 2246. FUNDING OF THE BOARD.

    ``(a) Initial Years.--There is authorized to be appropriated to the 
Board for each of fiscal years 2002 and 2003, in appropriate part from 
the Federal Hospital Insurance Trust Fund and from the Federal 
Supplementary Medical Insurance Trust Fund, such sums as are necessary 
for the Board to carry out its duties.
    ``(b) Fees.--For purposes of the Board carrying out its duties for 
fiscal years beginning after fiscal year 2003, the Board may levy on 
Medicare plans an assessment sufficient to pay its estimated expenses 
and the salaries of its members and employees for a fiscal year. Such 
assessments shall be deposited into the Medicare Trust Fund 
(established under section 2221) and shall be available for such 
purpose without regard to amounts provided for in advance by 
appropriations Acts.

                 ``Part D--Unified Medicare Trust Fund

``SEC. 2261. UNIFIED MEDICARE TRUST FUND.

    ``(a) Establishment.--Beginning on January 1, 2004, there is 
created on the books of the Treasury of the United States a trust fund 
to be known as the Medicare Trust Fund.
    ``(b) Amounts in Medicare Trust Fund.--
            ``(1) In general.--The Medicare Trust Fund shall consist of 
        the following amounts:
                    ``(A) Amounts deposited in, or appropriated to, the 
                Medicare Trust Fund as provided in this title.
                    ``(B) Any gifts and bequests made to the Medicare 
                Trust Fund as provided in section 201(i)(1).
            ``(2) Appropriation of hospital insurance taxes.--
                    ``(A) In general.--Beginning January 1, 2004, and 
                for each subsequent year, there is appropriated to the 
                Medicare Trust Fund, out of moneys in the Treasury not 
                otherwise appropriated, an amount equal to 100 percent 
                of the taxes described in paragraphs (1) and (2) of 
                section 1817(a).
                    ``(B) Transfer.--The amounts appropriated pursuant 
                to subparagraph (A) shall be transferred from time to 
                time from the general fund in the Treasury to the 
                Medicare Trust Fund. The amount to be transferred under 
                this paragraph shall be determined on the basis of 
                estimates by the Secretary of the Treasury of the 
                taxes, described in such paragraph, paid to or 
                deposited into the Treasury. The Secretary of the 
                Treasury shall make adjustments in amounts subsequently 
                transferred to the extent that prior estimates were in 
                excess of, or were less than, such taxes.
            ``(3) General revenue contribution.--Beginning January 1, 
        2004, and for each subsequent year, there is appropriated to 
        the Medicare Trust Fund, out of moneys in the Treasury not 
        otherwise appropriated, from time to time, subject to the 
        limitation described in section 2262(c), an amount equal to the 
        amount by which the aggregate expenditures under this title 
        (including payments made to Medicare plans under section 2226) 
        exceed the sum of--
                    ``(A) the amount appropriated under paragraph (2) 
                for the period involved;
                    ``(B) the beneficiary obligations collected under 
                section 2227 for such period; and
                    ``(C) the fees collected under section 2246 for 
                such period.
            ``(4) Transfer of balances in hi and smi trust funds.--On 
        January 1, 2004, the Secretary of the Treasury shall transfer 
        to the Medicare Trust Fund any balances in the Federal Hospital 
        Insurance Trust Fund or the Federal Supplementary Medical 
        Insurance Trust Fund.
            ``(5) Application to obligations of, and amounts owed to, 
        the part a and b trust funds.--
                    ``(A) Certification.--Beginning January 1, 2004, 
                the Director of the Division of HCFA-Sponsored Plans of 
                HCFA shall periodically certify to the Board of 
                Trustees of the Medicare Trust Fund any amounts that 
                would otherwise be--
                            ``(i) payable from the Federal Hospital 
                        Insurance Trust Fund or the Federal 
                        Supplementary Medical Insurance Trust Fund for 
                        items and services provided prior to such date; 
                        or
                            ``(ii) due to such Trust Funds for items 
                        and services provided prior to such date.
                    ``(B) Transfers and deposits.--
                            ``(i) Transfers.--If the Director of the 
                        Division of HCFA-Sponsored Plans of HCFA 
                        certifies an amount pursuant to subparagraph 
                        (A)(i), the Board of Trustees of the Medicare 
                        Trust Fund shall transfer to the Director of 
                        the Division of HCFA-Sponsored Plans of HCFA 
                        from such Trust Fund an amount equal to the 
                        amount certified.
                            ``(ii) Deposits.--If the Director of the 
                        Division of HCFA-Sponsored Plans of HCFA 
                        certifies an amount pursuant to subparagraph 
                        (A)(ii), the Director of the Division of HCFA-
                        Sponsored Plans shall deposit in the Medicare 
                        Trust Fund an amount equal to the amount 
                        certified.
    ``(c) Application of HI Trust Fund Provisions.--Subject to other 
provisions of this title, the provisions of subsections (b) through (k) 
of section 1817 shall apply to title XVIII and the Medicare Trust Fund 
in the same manner as they apply to part A of title XVIII and the 
Federal Hospital Insurance Trust Fund, respectively.
    ``(d) Conforming Provisions.--Beginning on January 1, 2004--
            ``(1) no additional amounts are authorized to be 
        appropriated under section 1844(a); and
            ``(2) no amounts shall be deposited in, or appropriated to, 
        the Federal Hospital Insurance Trust Fund or the Federal 
        Supplementary Medical Insurance Trust Fund.
    ``(e) Conforming References.--Beginning on January 1, 2004, any 
reference in law or regulation (in effect before such date) to the 
Federal Hospital Insurance Trust Fund or the Federal Supplementary 
Medical Insurance Trust Fund is deemed a reference to the Medicare 
Trust Fund.

``SEC. 2262. PROGRAMMATIC INSOLVENCY AND LIMITATION ON GENERAL REVENUE 
              FINANCING.

    ``(a) Annual Determinations.--In addition to any other duties, the 
Board of Trustees of the Medicare Trust Fund (in this section referred 
to as the `Board of Trustees') shall determine and report to Congress 
as part of its annual report each year the following:
            ``(1) The percentage of total expenditures from the 
        Medicare Trust Fund that is financed by the general revenue 
        contributions described in section 2261(b)(3).
            ``(2) The first fiscal year (if any) that the Medicare 
        Trust Fund is projected to become programmatically insolvent 
        (as defined in subsection (b)).
            ``(3) After taking into account the limitation described in 
        subsection (c), the first fiscal year (if any) in which the 
        amounts in the Medicare Trust Fund will be insufficient to pay 
        for the total expenses incurred under title XVIII (as revised 
        by this title).
    ``(b) Programmatic Insolvency Defined.--
            ``(1) In general.--For purposes of this part, the Medicare 
        Trust Fund shall be deemed to be `programmatically insolvent' 
        for a fiscal year if the amount appropriated to the Medicare 
        Trust Fund under section 2261(b)(3) would, but for subsection 
        (c), exceed 40 percent of the amount described in paragraph 
        (2).
            ``(2) Net expenditures on basic benefits.--The amount 
        described in this paragraph is, as estimated by the Board of 
        Trustees in consultation with the Medicare Board and the 
        Secretary of the Treasury, the total expenditures from the 
        Medicare Trust Fund in the fiscal year involved, reduced by an 
        amount equal to the administrative expenses of the Medicare 
        Board for that fiscal year.
    ``(c) Limitation on General Revenue Financing.--The amount of the 
appropriation provided in section 2261(b)(3) in a fiscal year may not 
exceed 40 percent of the amount described in subsection (b)(2).

               ``Part E--HCFA Duties and Responsibilities

``SEC. 2281. REORGANIZATION OF HCFA.

    ``(a) Establishment of Divisions.--
            ``(1) Division of hcfa-sponsored plans.--There is 
        established within HCFA the Division of HCFA-Sponsored Plans.
            ``(2) Division of health programs.--There is established 
        within HCFA the Division of Health Programs.
    ``(b) Administration.--
            ``(1) In general.--Each Division established under 
        subsection (a) shall be administered by a Director appointed by 
        the President with the advice and consent of the Senate. Level 
        V of the Executive Schedule Pay Rates shall apply to each 
        Director.
            ``(2) Appointment.--The President shall nominate a Director 
        for each Division established under subsection (a) by not later 
        than 6 months after the date of enactment of this Act.
    ``(c) Transfer of Functions.--
            ``(1) Division of hcfa-sponsored plans.--There are 
        transferred to the Division of HCFA-Sponsored Plans all 
        functions relating to health care benefits that are made 
        available under title XVIII through the original fee-for-
        service program (referred to in section 1851(a)(1)(A)) which 
        HCFA exercised on the day before the date of enactment of this 
        title (including all related functions of any officer or 
        employee of HCFA).
            ``(2) Division of health programs.--There are transferred 
        to the Division of Health Programs all functions which HCFA 
        exercised on the day before the date of enactment of this title 
        which are not transferred under paragraph (1) to the Division 
        of HCFA-Sponsored Plans, including functions relating to the 
        following:
                    ``(A) The administration of the Medicaid Program 
                under title XIX.
                    ``(B) The administration of the State children's 
                health insurance program under title XXI.
                    ``(C) Federal support of graduate medical 
                education.
                    ``(D) Federal support of hospitals that serve a 
                significantly disproportionate number of patients who 
                have low income.
            ``(3) Determination of certain functions.--If necessary, 
        the Office of Management and Budget shall make any 
        determination of the functions that are transferred under 
        paragraphs (1) and (2).
            ``(4) Definition of function.--In this section, the term 
        `function' means any duty, obligation, power, authority, 
        responsibility, right, privilege, activity, or program.
            ``(5) Office.--The term `office' includes any office, 
        administration, agency, institute, unit, organizational entity, 
        or component thereof.
    ``(d) Personnel.--
            ``(1) Appointments.--Each Director appointed in accordance 
        with subsection (b) may appoint and fix the compensation of 
        such officers and employees, including investigators, 
        attorneys, and administrative law judges, as may be necessary 
        to carry out the respective functions transferred under 
        subsection (c). Except as otherwise provided by law, such 
        officers and employees shall be appointed in accordance with 
        the civil service laws and their compensation fixed in 
        accordance with title 5, United States Code.
            ``(2) Experts and consultants.--Each such Director may--
                    ``(A) obtain the services of experts and 
                consultants in accordance with section 3109 of title 5, 
                United States Code, and compensate such experts and 
                consultants for each day (including travel time) at 
                rates not in excess of the rate of pay for level IV of 
                the Executive Schedule under section 5315 of such 
                title; and
                    ``(B) pay experts and consultants who are serving 
                away from their homes or regular place of business 
                travel expenses and per diem in lieu of subsistence at 
                rates authorized by sections 5702 and 5703 of such 
                title for persons in Government service employed 
                intermittently.
    ``(e) Delegation and Assignment.--Except where otherwise expressly 
prohibited by law or otherwise provided by this section, each Director 
appointed in accordance with subsection (b) may delegate any of the 
functions transferred to the Director under subsection (c) and any 
function transferred or granted to such Director after the effective 
date of this title to such officers and employees of the Division 
headed by such Director as the Director may designate, and may 
authorize successive redelegations of such functions as may be 
necessary or appropriate. No delegation of functions by the Director of 
the Division of HCFA-Sponsored Plans or the Division of Health Programs 
under this paragraph or under any other provision of law shall relieve 
such Director of responsibility for the administration of such 
functions.
    ``(f) Reorganization.--Each Director appointed in accordance with 
subsection (b) may allocate or reallocate any function transferred 
under subsection (c) among the officers of the Division headed by the 
Director, and to establish, consolidate, alter, or discontinue such 
organizational entities in the Division as may be necessary or 
appropriate.
    ``(g) Rules.--Each Director appointed in accordance with subsection 
(b) may prescribe, in accordance with the provisions of chapters 5 and 
6 of title 5, United States Code, such rules and regulations as such 
Director determines are necessary or appropriate to administer and 
manage the functions of the Division headed by the Director.
    ``(h) Transfer and Allocations of Appropriations and Personnel.--
Except as otherwise provided in this section, the personnel employed in 
connection with, and the assets, liabilities, contracts, property, 
records, and unexpended balances of appropriations, authorizations, 
allocations, and other funds employed, used, held, arising from, 
available to, or to be made available in connection with the functions 
transferred under subsection (c), subject to section 1531 of title 31, 
United States Code, shall be transferred to the Division of HCFA-
Sponsored Plans or the Division of Health Programs, as appropriate. 
Unexpended funds transferred pursuant to this subsection shall be used 
only for the purposes for which the funds were originally authorized 
and appropriated.
    ``(i) Incidental Transfers.--The Director of the Office of 
Management and Budget, at such time or times as the Director shall 
provide, is authorized to make such determinations as may be necessary 
with regard to the functions transferred by subsection (c), and to make 
such additional incidental dispositions of personnel, assets, 
liabilities, grants, contracts, property, records, and unexpended 
balances of appropriations, authorizations, allocations, and other 
funds held, used, arising from, available to, or to be made available 
in connection with such functions, as may be necessary to carry out the 
provisions of this section. The Director of the Office of Management 
and Budget shall provide for the termination of the affairs of all 
entities terminated by this section and for such further measures and 
dispositions as may be necessary to effectuate the purposes of this 
section.
    ``(j) Effect on Personnel.--
            ``(1) In general.--Except as otherwise provided by this 
        section, the transfer pursuant to this section of full-time 
        personnel (except special Government employees) and part-time 
        personnel holding permanent positions shall not cause any such 
        personnel to be separated or reduced in grade or compensation 
        for 1 year after the date of transfer of such personnel under 
        this section.
            ``(2) Executive schedule positions.--Except as otherwise 
        provided in this section, any person who, on the day preceding 
        the effective date of this title, held a position compensated 
        in accordance with the Executive Schedule prescribed in chapter 
        53 of title 5, United States Code, and who, without a break in 
        service, is appointed in the Division of HCFA-Sponsored Plans 
        or the Division of Health Programs to a position having duties 
        comparable to the duties performed immediately preceding such 
        appointment shall continue to be compensated in such new 
        position at not less than the rate provided for such previous 
        position, for the duration of the service of such person in 
        such new position.
    ``(k) Savings Provisions.--
            ``(1) Continuing effect of legal documents.--All orders, 
        determinations, rules, regulations, permits, agreements, 
        grants, contracts, certificates, licenses, registrations, 
        privileges, and other administrative actions--
                    ``(A) which have been issued, made, granted, or 
                allowed to become effective by the President, any 
                Federal agency or official thereof, or by a court of 
                competent jurisdiction, in the performance of functions 
                which are transferred under subsection (c); and
                    ``(B) which are in effect at the time this title 
                takes effect, or were final before the effective date 
                of this title and are to become effective on or after 
                the effective date of this title,
        shall continue in effect according to their terms until 
        modified, terminated, superseded, set aside, or revoked in 
        accordance with law by the President, the Director of the 
        Division of HCFA-Sponsored Plans or the Director of the 
        Division of Health Programs (as appropriate) or other 
        authorized official, a court of competent jurisdiction, or by 
        operation of law.
            ``(2) Proceedings not affected.--The provisions of this 
        section shall not affect any proceedings, including notices of 
        proposed rulemaking, or any application for any license, 
        permit, certificate, or financial assistance pending before 
        HCFA at the time this title takes effect, with respect to 
        functions transferred by subsection (c), and such proceedings 
        and applications shall be continued. Orders shall be issued in 
        such proceedings, appeals shall be taken therefrom, and 
        payments shall be made pursuant to such orders, as if this 
        section had not been enacted, and orders issued in any such 
        proceedings shall continue in effect until modified, 
        terminated, superseded, or revoked by a duly authorized 
        official, by a court of competent jurisdiction, or by operation 
        of law. Nothing in this paragraph shall be deemed to prohibit 
        the discontinuance or modification of any such proceeding under 
        the same terms and conditions and to the same extent that such 
        proceeding could have been discontinued or modified if this 
        section had not been enacted.
            ``(3) Suits not affected.--The provisions of this section 
        shall not affect suits commenced before the effective date of 
        this title, and in all such suits, proceedings shall be had, 
        appeals taken, and judgments rendered in the same manner and 
        with the same effect as if this section had not been enacted.
            ``(4) Nonabatement of actions.--No suit, action, or other 
        proceeding commenced by or against HCFA or by or against any 
        individual in the official capacity of such individual as an 
        officer of HCFA, shall abate by reason of enactment of this 
        section.
            ``(5) Administrative actions relating to promulgation of 
        regulations.--Any administrative action relating to the 
        preparation or promulgation of a regulation by HCFA relating to 
        a function transferred under this section may be continued by 
        the Division of HCFA-Sponsored Plans or the Division of Health 
        Programs (as appropriate) with the same effect as if this 
        section had not been enacted.
    ``(l) Separability.--If a provision of this section or its 
application to any person or circumstance is held invalid, neither the 
remainder of this section nor the application of the provision to other 
persons or circumstances shall be affected.
    ``(m) Transition.--Each Director appointed in accordance with 
subsection (b) may utilize--
            ``(1) the services of such officers, employees, and other 
        personnel of the Department of Health and Human Services with 
        respect to functions transferred to the Division of HCFA-
        Sponsored Plans or the Division of Health Programs under 
        subsection (c); and
            ``(2) funds appropriated to such functions for such period 
        of time as may reasonably be needed to facilitate the orderly 
        implementation of this section.
    ``(n) References.--Reference in any other Federal law, Executive 
order, rule, regulation, or delegation of authority, or any document of 
or relating to HCFA with regard to functions transferred under 
subsection (c), shall be deemed to refer to the Division of HCFA-
Sponsored Plans, the Director of the Division of HCFA-Sponsored Plans, 
the Division of Health Programs, or the Director of the Division of 
Health Programs, as appropriate.

``SEC. 2282. ESTABLISHMENT OF HCFA-SPONSORED PLANS.

    ``(a) Establishment.--
            ``(1) In general.--Beginning on January 1, 2004, the 
        Director of the Division of HCFA-Sponsored Plans of HCFA (in 
        this section referred to as the ``Director'') shall offer the 
        Medicare plans described in paragraph (2).
            ``(2) HCFA-sponsored plans.--
                    ``(A) HCFA-sponsored standard plans.--The Director 
                shall offer 1 standard Medicare plan throughout the 
                United States, which shall include only the core 
                benefits under section 2202(a).
                    ``(B) HCFA-sponsored high option plans.--The 
                Director shall offer at least 1 high option Medicare 
                plan in each area within the United States, which shall 
                include only--
                            ``(i) the core benefits under section 
                        2202(a);
                            ``(ii) the outpatient prescription drug 
                        benefit under section 2202(b), which shall be 
                        provided in accordance with section 2283; and
                            ``(iii) stop-loss coverage under section 
                        2202(c).
            ``(3) Approval of hcfa-sponsored plans.--
                    ``(A) In general.--Except as otherwise provided in 
                this title, the HCFA-sponsored plans shall be subject 
                to the provisions of this title in the same manner as 
                other Medicare plans, including the requirement that 
                the Director submit information regarding each HCFA-
                sponsored plan to be offered pursuant to section 2222 
                and the required Board approval of such plans pursuant 
                to section 2223.
                    ``(B) Premium bid approval.--The premiums submitted 
                under section 2222 for the HCFA-sponsored standard plan 
                and each HCFA-sponsored high option plan shall be 
                computed separately to ensure that the HCFA-sponsored 
                standard plan and each HCFA-sponsored high option plan 
                is separately self-sustaining, without cross subsidies 
                between the plans.
    ``(b) Financial Provisions.--
            ``(1) Assumption of financial risk.--Except as provided in 
        section 2283(c), the Division of HCFA-Sponsored Plans of HCFA 
        shall bear full financial risk for the provision of services 
        under the HCFA-sponsored plans in the same manner as a 
        Medicare+Choice organization bears full financial risk for a 
        Medicare+Choice plan that it offers under section 1855(b). In 
        assuming such risk, the Division of HCFA-Sponsored Plans may 
        ensure continued solvency of such plans through improvements in 
        the efficiency and economy of the HCFA-sponsored plans.
            ``(2) Funding.--
                    ``(A) In general.--In order to provide for capital 
                for the HCFA-sponsored plans prior to January 1, 2004, 
                the Board of Trustees of the Federal Hospital Insurance 
                Trust Fund, at the direction of the Medicare Board, 
                shall transfer from such Trust Fund to the Division of 
                HCFA-Sponsored Plans of HCFA such amounts as may be 
                necessary to provide for the following:
                            ``(i) Initial capitalization account.--
                        Amounts that may be required for the initial 
                        organization of HCFA-sponsored plans.
                            ``(ii) Working capital (cash flow) 
                        account.--Amounts that may be required as 
                        working capital in order to assure timely 
                        payment of obligations by such plans.
                            ``(iii) Contingency reserve.--Reasonable 
                        amounts that should be held in reserve to cover 
                        actuarial contingencies.
                    ``(B) Establishment of amounts.--The amounts 
                described in subparagraph (A) shall be established by 
                the Director and are subject to review and approval by 
                the Medicare Board.
                    ``(C) Amount of contingency reserve.--In reviewing 
                and approving the amount of the contingency reserve 
                described in subparagraph (A)(iii), the Medicare Board 
                shall consider similar amounts required for health 
                insurance coverage offered under State law, taking into 
                account differences between the different actuarial 
                risks and demographic characteristics of the 
                populations being served.
            ``(3) Separate account.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Division of HCFA-Sponsored Plans of HCFA shall maintain 
                the amounts transferred under this paragraph in a 
                separate account, which shall only be available for 
                expenses associated with the establishment and 
                operation of the HCFA-sponsored plans.
                    ``(B) Limitation.--Except as provided in section 
                2281(h) (relating to transfer of appropriations in 
                connection with functions transferred to the Division 
                of HCFA-Sponsored Plans under such section), and 
                section 2261(b)(4) (relating to obligations of the part 
                A and part B trust funds), no funds from the Medicare 
                Trust Fund may be appropriated to the Division of HCFA-
                Sponsored Plans of HCFA.

``SEC. 2283. PARTNERSHIPS WITH PRIVATE ENTITIES TO OFFER HCFA-SPONSORED 
              HIGH OPTION PLANS.

    ``(a) Partnerships.--
            ``(1) In general.--The Director of the Division of HCFA-
        Sponsored Plans of HCFA (in this section referred to as the 
        `Director') shall contract with private entities for the 
        provision of outpatient prescription drug benefits under a 
        HCFA-sponsored high option plan.
            ``(2) Private entities.--The private entities described in 
        paragraph (1) shall include insurers (including issuers of 
        Medicare supplemental policies under section 1882), 
        pharmaceutical benefit managers, chain pharmacies, groups of 
        independent pharmacies, and other private entities that the 
        Medicare Board determines are appropriate.
            ``(3) Areas.--The Director may award a contract to a 
        private entity under this section on a local, regional, or 
        national basis.
            ``(4) Drug benefits only through private entities.--Drug 
        benefits under a HCFA-sponsored high option plan shall only be 
        offered through a contract with a private entity under this 
        section.
    ``(b) Director Required To Contract With Any Willing Qualified 
Private Entity.--The Director may not exclude a private entity from 
receiving a contract to provide outpatient prescription drug benefits 
under a HCFA-sponsored high option plan if--
            ``(1) the private entity meets all of the requirements 
        established by the Medicare Board for providing such benefits; 
        and
            ``(2) the Medicare Board approves the partnership.
    ``(c) Private Entity at Financial Risk.--A private entity with a 
contract under this section shall bear full financial risk for the 
provision of outpatient prescription drug benefits under a HCFA-
sponsored high option plan. The Division of HCFA-Sponsored Plans of 
HCFA shall bear no financial risk for the provision of such benefits.

``SEC. 2284. HCFA BUSINESS PLANNING AND ADMINISTRATIVE FLEXIBILITY.

    ``(a) Submission of Business Plan.--
            ``(1) In general.--On January 1 of each year (but not later 
        than January 1, 2003), the Director of the Division of HCFA-
        Sponsored Plans of HCFA (in this section referred to as the 
        `Director') shall submit a business plan on the operation of 
        the HCFA-sponsored standard and high-option plans to--
                    ``(A) both Houses of Congress;
                    ``(B) the Director of the Congressional Budget 
                Office;
                    ``(C) the Comptroller General of the United States; 
                and
                    ``(D) the Chairman of the Medicare Payment Advisory 
                Commission.
            ``(2) Business plan.--The business plan on the operation of 
        the HCFA-sponsored standard and high-option plans described in 
        paragraph (1) shall include--
                    ``(A) a comprehensive payment and management plan 
                for all aspects of offering the core benefits under 
                such plans;
                    ``(B) information regarding contracts with private 
                entities under section 2283 for the provision of 
                outpatient prescription drug benefits under HCFA-
                sponsored high option plans;
                    ``(C) recommendations for the coordination of, and 
                improvements to, benefits provided under the HCFA-
                sponsored standard and high-option plans; and
                    ``(D) a legislative proposal that implements the 
                business plan.
    ``(b) Maintaining Independence.--
            ``(1) Exemption from omb oversight.--The Director may 
        directly submit the business plan under subsection (a) to 
        Congress and the individuals described in subparagraphs (B) 
        through (D) of subsection (a)(1). No officer or agency of the 
        United States may require the Director to submit such plan to 
        any officer or agency of the United States for approval, 
        comments, or review, prior to the submission of the plan to 
        Congress and such individuals.
            ``(2) Exemption from apa requirements.--Any action of the 
        Director in preparing or submitting the business plan under 
        subsection (a) to Congress and the individuals described in 
        subparagraphs (B) through (D) of subsection (a)(1) shall be 
        exempt from the requirements of subchapter 2 of chapter 5 of 
        title 5, United States Code (commonly known as the 
        `Administrative Procedure Act').
    ``(c) Comments.--
            ``(1) In general.--Not later than 60 days after the date on 
        which the Director submits the business plan under subsection 
        (a) to the individuals described in subparagraphs (B) through 
        (D) of subsection (a)(1), such individuals shall independently 
        submit comments on such plan to Congress. Such comments should 
        address the impact that the plan would have on costs, 
        providers, and beneficiary access to care under the medicare 
        program.
            ``(2) Opportunity for public comment.--The Director shall 
        establish a procedure that allows for public comment on the 
        business plan and shall submit to Congress a summary of such 
        comments not later than the date described in paragraph (1).
    ``(d) Congressional Hearings.--Each year that the business plan is 
submitted to Congress pursuant to subsection (a)(1), the appropriate 
committees of Congress shall hold hearings on such plan.
    ``(e) Fast-Track Consideration of Business Plan Legislation.--
            ``(1) Rules of house of representatives and senate.--This 
        subsection is enacted by Congress--
                    ``(A) as an exercise of the rulemaking power of the 
                House of Representatives and the Senate, respectively, 
                and is deemed a part of the rules of each House of 
                Congress, but--
                            ``(i) is applicable only with respect to 
                        the procedure to be followed in that House of 
                        Congress in the case of an implementing bill 
                        (as defined in paragraph (4)); and
                            ``(ii) supersedes other rules only to the 
                        extent that such rules are inconsistent with 
                        this section; and
                    ``(B) with full recognition of the constitutional 
                right of either House of Congress to change the rules 
                (so far as relating to the procedure of that House of 
                Congress) at any time, in the same manner and to the 
                same extent as in the case of any other rule of that 
                House of Congress.
            ``(2) Introduction and referral.--
                    ``(A) Introduction.--
                            ``(i) In general.--Subject to subparagraph 
                        (B), on the day on which the Director submits 
                        the business plan required to be submitted on 
                        January 1, 2006, pursuant to subsection (a)(1) 
                        to the House of Representatives and the Senate, 
                        the legislative proposal contained in such plan 
                        shall be introduced as a bill (by request) in 
                        the following manner:
                                    ``(I) House of representatives.--In 
                                the House of Representatives, by the 
                                Majority Leader, for himself and the 
                                Minority Leader, or by Members of the 
                                House of Representatives designated by 
                                the Majority Leader and Minority 
                                Leader.
                                    ``(II) Senate.--In the Senate, by 
                                the Majority Leader, for himself and 
                                the Minority Leader, or by Members of 
                                the Senate designated by the Majority 
                                Leader and Minority Leader.
                            ``(ii) Special rule.--If either House of 
                        Congress is not in session on the day on which 
                        the business plan is submitted, the legislative 
                        proposal contained in such plan shall be 
                        introduced as a bill in that House of Congress, 
                        as provided in subparagraph (A), on the first 
                        day thereafter on which that House of Congress 
                        is in session.
                    ``(B) Referral.--Such bills shall be referred by 
                the presiding officers of the respective Houses to the 
                appropriate committee, or, in the case of a bill 
                containing provisions within the jurisdiction of 2 or 
                more committees, jointly to such committees for 
                consideration of those provisions within their 
                respective jurisdictions.
            ``(3) Consideration.--After the legislative proposal has 
        been introduced as a bill and referred under paragraph (2), 
        such implementing bill shall be considered in the same manner 
        as an implementing bill is considered under subsections (d), 
        (e), (f), and (g) of section 151 of the Trade Act of 1974 (19 
        U.S.C. 2191).
            ``(4) Implementing bill defined.--In this section, the term 
        `implementing bill' means only the legislative proposal 
        contained in the business plan required to be submitted on 
        January 1, 2006, by the Director to the House of 
        Representatives and the Senate under subsection (a)(1), and 
        introduced and referred as provided in paragraph (2) as a bill 
        of either House of Congress.
            ``(5) Counting of days.--For purposes of this section, any 
        period of days referred to in section 151 of the Trade Act of 
        1974 shall be computed by excluding--
                    ``(A) the days on which either House of Congress is 
                not in session because of an adjournment of more than 3 
                days to a day certain or an adjournment of Congress 
                sine die; and
                    ``(B) any Saturday and Sunday, not excluded under 
                subparagraph (A), when either House is not in session.
    ``(f) Implementation of Business Plans Submitted After 2008.--
Beginning with the business plan required to be submitted on January 1, 
2009, under subsection (a)(1), the Director may implement the 
provisions of such plan without further legislative action.''.

                     TITLE II--SPECIAL PROTECTIONS

            Subtitle A--Protection Package for Certain Areas

SEC. 201. LIMITATION ON BENEFICIARY OBLIGATIONS IN CERTAIN AREAS.

    Section 2227(a) of the Social Security Act, as added by section 
101, is amended--
            (1) in paragraph (3), by redesignating subparagraphs (A) 
        and (B) as clauses (i) and (ii), respectively;
            (2) by redesignating paragraphs (1) through (3) as 
        subparagraphs (A) through (C), respectively;
            (3) by striking ``(a) Computation of Beneficiary 
        Obligation.--Subject to subsection (b),'' and inserting the 
        following:
    ``(a) Computation of Beneficiary Obligation.--
            ``(1) In general.--Subject to subsection (b),''; and
            (4) by adding at the end the following:
            ``(2) Limitation on beneficiary obligations in certain 
        areas.--Notwithstanding paragraph (1), if the only Medicare 
        plans offered in a service area are the HCFA-sponsored plans--
                    ``(A) the beneficiary obligation for the HCFA-
                sponsored standard plan shall not exceed the applicable 
                percent for the year (as determined under paragraph 
                (1)(C)) of the national average premium; and
                    ``(B) the beneficiary obligation for any HCFA-
                sponsored high option plan shall not exceed the sum 
                of--
                            ``(i) the applicable percent for the year 
                        (as so determined) of the national average 
                        premium; and
                            ``(ii) the amount by which the beneficiary 
                        obligation for the HCFA-sponsored high option 
                        plan exceeds the beneficiary obligation for the 
                        HCFA-sponsored standard plan.''.

 SEC. 202. GUARANTEE OF OUTPATIENT PRESCRIPTION DRUGS UNDER HCFA-
              SPONSORED HIGH OPTION PLANS.

    Section 2283 of the Social Security Act, as added by section 101, 
is amended--
            (1) in subsection (a)(4), by striking ``Drug benefits'' and 
        inserting ``Except as provided in subsection (d), drug 
        benefits''; and
            (2) by adding at the end the following:
    ``(d) Protection for Areas With No Contract With a Private Entity 
in Effect.--In the case of an area where no private entity has entered 
into a contract with the Director for the provision of outpatient 
prescription drug benefits under a HCFA-sponsored high option plan, the 
Medicare Board shall establish an arrangement through which the Board 
guarantees to Medicare beneficiaries enrolled in such plan the coverage 
for outpatient prescription drugs required under section 2282.''.

     Subtitle B--Low-Income Medicare Beneficiary Protection Package

SEC. 251. MEDICARE PLANS FOR LOW-INCOME MEDICARE BENEFICIARIES.

    (a) In General.--Title XXII of the Social Security Act, as added by 
section 101, is amended--
            (1) by redesignating section 2229 as 2230; and
            (2) by inserting after section 2228 the following:

``SEC. 2229. MEDICARE PLANS FOR LOW-INCOME MEDICARE BENEFICIARIES.

    ``(a) Enrollment in a Medicare Plan.--
            ``(1) Low-income medicare beneficiary defined.--For 
        purposes of this part, the term `low-income Medicare 
        beneficiary' means a Medicare beneficiary whose income (as 
        determined for purposes of section 1905(p)) does not exceed 135 
        percent of the official poverty line (referred to in paragraph 
        (2)(A) of such section) applicable to a family of the size 
        involved.
            ``(2) Zero beneficiary premium obligation for the lowest 
        cost high option medicare plan.--A low-income Medicare 
        beneficiary shall have no obligation to pay any amount for 
        enrollment in the lowest cost (for such year) high option 
        Medicare plan that is available (including on the basis of 
        capacity to deliver services to enrollees) for the service area 
        in which such beneficiary resides.
            ``(3) Beneficiary obligation in case of enrollment in a 
        medicare plan that is not the lowest cost high option medicare 
        plan.--If a low-income Medicare beneficiary enrolls in a 
        Medicare plan other than the lowest cost high option Medicare 
        plan available to the beneficiary (including a standard 
        Medicare plan), the amount of the beneficiary obligation shall 
        be the lesser of--
                    ``(A) the amount of the beneficiary obligation 
                computed under section 2227; or
                    ``(B) the amount by which--
                            ``(i) the amount of the premium approved by 
                        the Board under section 2223 for the Medicare 
                        plan in which the beneficiary is enrolled; 
                        exceeds
                            ``(ii) the amount of the premium approved 
                        by the Board under such section for the lowest 
                        cost high option Medicare plan available to the 
                        beneficiary.
            ``(4) Board payments to plans.--Payments to Medicare plans 
        in which low-income Medicare beneficiaries are enrolled shall 
        be made in the same manner as payments are made to Medicare 
        plans under section 2226.
            ``(5) Collection of beneficiary obligation.--The Medicare 
        Board shall collect any beneficiary obligation determined under 
        paragraph (3) in the same manner as the Board collects such 
        obligations under section 2228.
    ``(b) Annual Eligibility and Enrollment Determination by States.--
            ``(1) In general.--The Medicare Board shall establish an 
        arrangement with each State (as defined for purposes of title 
        XIX) under which the State shall--
                    ``(A) determine whether a Medicare beneficiary in 
                the State is a low-income Medicare beneficiary; and
                    ``(B) notify the Board of such determination and of 
                the Medicare plan in which the beneficiary chooses to 
                enroll for such year.
            ``(2) Duration.--A determination that a Medicare 
        beneficiary is a low-income Medicare beneficiary shall remain 
        valid for a period of 12 months so long as the beneficiary 
        remains enrolled in a Medicare plan.
            ``(3) Federal financial assistance for administrative 
        costs.--For provisions relating to Federal financial assistance 
        for the administrative costs incurred by a State in conducting 
        the activities described in paragraph (1) of this section, see 
        section 1903(a)(7)(B).
    ``(c) Continuation of State Contribution Requirements.--With 
respect to each low-income Medicare beneficiary enrolled in a Medicare 
plan for a year, each State shall pay (to the Medicare Board, Medicare 
plan, or a provider, as appropriate) the following:
            ``(1) Dual eligibles.--In the case of such a beneficiary 
        who is eligible for medical assistance under title XIX--
                    ``(A) the lesser of--
                            ``(i) the applicable percent for the year 
                        (as determined under section 2227(a)(1)(C)) of 
                        the national average premium determined under 
                        section 2225(a) for such year; or
                            ``(ii) the amount of the beneficiary 
                        obligation computed under section 2227 for the 
                        HCFA-sponsored standard plan for the service 
                        area in which the beneficiary resides for such 
                        year;
                    ``(B) all coinsurance, deductibles, and cost-
                sharing imposed under the Medicare plan in which the 
                beneficiary is enrolled;
                    ``(C) any additional costs incurred by the 
                beneficiary in excess of the stop-loss coverage for the 
                core benefits provided under the Medicare plan in which 
                the beneficiary is enrolled; and
                    ``(D) to the extent consistent with the State plan 
                under title XIX, any additional costs incurred by the 
                beneficiary for outpatient prescription drugs in excess 
                of the limit (if any) imposed for coverage of such 
                drugs under the Medicare plan in which the beneficiary 
                is enrolled.
            ``(2) QMBs, slmbs, qi-is.--
                    ``(A) QMBs.--In the case of such a beneficiary who 
                is described in section 1905(p)(1)--
                            ``(i) the amount determined under paragraph 
                        (1)(A) of this section for such beneficiary; 
                        and
                            ``(ii) all coinsurance, deductibles, and 
                        cost-sharing imposed under the Medicare plan in 
                        which the beneficiary is enrolled other than 
                        with respect to coverage of outpatient 
                        prescription drugs.
                    ``(B) SLMBs, qi-is.--In the case of such a 
                beneficiary who is described in clause (iii) or clause 
                (iv)(I) of section 1902(a)(10)(E), the amount 
                determined under paragraph (1)(A) of this section for 
                such beneficiary.
            ``(3) Federal financial assistance for state 
        contributions.--For payment of the Federal medical assistance 
        percentage (as defined in section 1905(b)) of the payments made 
        by a State under this subsection, see section 1903(a)(1)(B).
            ``(4) Nonapplication of other state contribution 
        requirements under medicaid.--Insofar as this subsection 
        applies to a low-income Medicare beneficiary, notwithstanding 
        any other provision of law--
                    ``(A) a State is not required to provide such 
                beneficiary under a State plan under title XIX medical 
                assistance with respect to Medicare cost-sharing 
                described in section 1905(p)(3) that would otherwise be 
                required to be provided under such plan to the 
                beneficiary; and
                    ``(B) except as provided in paragraphs (1)(B) and 
                (7)(B) of section 1903(a), Federal financial assistance 
                shall not be available under section 1903 with respect 
                to any Medicare cost-sharing provided for such 
                beneficiary.
            ``(5) No effect on other fmap.--Nothing in this section 
        shall be construed as limiting the ability of a State to 
        receive Federal financial assistance under section 1903 for 
        medical assistance (other than Medicare cost-sharing, insofar 
        as the State's requirement to provide Medicare cost-sharing to 
        a low-income Medicare beneficiary is modified by this section) 
        provided to a low-income Medicare beneficiary who is eligible 
        for medical assistance under the State plan under title XIX.''.
    (b) Conforming Amendments.--
            (1) Federal financial assistance.--Section 1903(a) of the 
        Social Security Act (42 U.S.C. 1396b(a)) is amended--
                    (A) in paragraph (1), by striking ``quarter as 
                medical assistance under the State plan; plus'' and 
                inserting ``quarter--
                    ``(A) as medical assistance under the State plan; 
                and
                    ``(B) under section 2229(c); plus''; and
                    (B) in paragraph (7)--
                            (i) by striking ``of the remainder'' and 
                        inserting ``of--
                    ``(A) the remainder'';
                            (ii) by striking the period and inserting 
                        ``; and''
                            (iii) by adding at the end the following:
                    ``(B) the amounts expended during such quarter to 
                conduct the activities described in section 
                2229(b)(1).''.
            (2) Study and report to congress regarding transition 
        period.--Section 2201(c)(3)(A)(ii) of the Social Security Act, 
        as added by section 101, is amended by inserting ``(and, if 
        applicable, under section 2229)'' after ``under section 2227''.
            (3) Amounts in medicare trust fund.--Section 2261(b)(3)(B) 
        of such Act, as so added, is amended by striking ``section 
        2227'' and inserting ``sections 2227 and 2229''.

         TITLE III--MEDICARE BENEFICIARY OUTREACH AND EDUCATION

SEC. 301. MEDICARE CONSUMER COALITIONS.

    (a) Establishment of Medicare Consumer Coalitions.--The Medicare 
Board (as defined in section 2200(d)(4) of the Social Security Act) 
shall establish Medicare Consumer Coalitions (as defined in subsection 
(b)) to conduct information programs in accordance with subsection (e) 
that--
            (1) prepare comprehensive, accurate, and understandable 
        information for Medicare beneficiaries (as defined in section 
        2200(d)(3) of such Act) on enrollment in Medicare plans (as 
        defined in section 2200(c)(1) of such Act); and
            (2) disseminate such information to Medicare beneficiaries 
        in a timely fashion.
    (b) Medicare Consumer Coalition Defined.--In this section, the term 
``Medicare Consumer Coalition'' means an entity that is a nonprofit 
organization operated under the direction of a board of directors that 
is primarily composed of Medicare beneficiaries.
    (c) Establishment of Medicare Consumer Coalitions.--The Board 
shall--
            (1) develop and disseminate a request for proposals to 
        establish Medicare Consumer Coalitions in such areas as the 
        Board determines appropriate to conduct the information 
        programs described in subsection (a); and
            (2) select a proposal to establish a Medicare Consumer 
        Coalition to conduct the information programs in each such 
        area, with a preference for broad participation by 
        organizations with experience in providing information to 
        Medicare beneficiaries.
    (d) Payment to Medicare Consumer Coalitions.--The Board shall pay 
to each Medicare Consumer Coalition established under subsection (c) an 
amount equal to the sum of any costs incurred--
            (1) in conducting the information programs under subsection 
        (a); and
            (2) in the hiring of staff to conduct the information 
        programs under such subsection.
    (e) Information Programs.--
            (1) Contents.--The information programs under subsection 
        (a) shall include a comparison among available Medicare plans 
        as follows:
                    (A) Benefits.--A comparison of the benefits 
                provided under each Medicare plan.
                    (B) Quality and performance.--The quality and 
                performance of each Medicare plan.
                    (C) Beneficiary costs.--The costs to Medicare 
                beneficiaries enrolled under each Medicare plan.
                    (D) Consumer satisfaction surveys.--The results of 
                consumer satisfaction surveys regarding each Medicare 
                plan.
                    (E) Additional information.--Such additional 
                information as the Board may prescribe.
            (2) Information standards.--The Board shall develop 
        standards to ensure that the information provided to Medicare 
        beneficiaries under the information programs is complete, 
        accurate, and uniform.
            (3) Review of information.--
                    (A) In general.--Subject to subparagraph (B), the 
                Board may prescribe the procedures and conditions under 
                which a Medicare Consumer Coalition may disseminate 
                information to Medicare beneficiaries to ensure the 
                coordination of Federal, State, and local outreach 
                efforts to Medicare beneficiaries.
                    (B) Deadline.--Any information proposed to be 
                furnished to Medicare beneficiaries under this section 
                shall be submitted to the Board not later than 45 days 
                before the date on which the information is to be 
                disseminated to such beneficiaries.
            (4) Consultation.--In order to conduct the information 
        programs under subsection (a), Medicare Consumer Coalitions 
        shall consult with entities that offer Medicare plans, and 
        public and private purchasers of health care benefits.
    (f) Monitoring and Report.--
            (1) Monitoring.--The Board shall closely monitor and 
        measure the impact of Medicare Consumer Coalitions on--
                    (A) the premiums of Medicare plans in such area;
                    (B) the quality of items and services covered under 
                any such Medicare plan;
                    (C) the access of Medicare beneficiaries to items 
                and services covered under the Medicare plan in such 
                area;
                    (D) the choice of Medicare plans in such area;
                    (E) changes in enrollment in Medicare plans in such 
                area; and
                    (F) such other factors as the Board determines 
                appropriate.
            (2) Report.--Not later than December 31, 2004, the Board 
        shall submit to the appropriate committees of Congress a report 
        on the aspects of Medicare Consumer Coalitions monitored under 
        paragraph (1), together with an assessment of the outreach 
        efforts conducted under this section.
    (g) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated to 
        carry out this section such sums as may be necessary.
            (2) Deposit into medicare trust fund.--Sums appropriated 
        under paragraph (1) shall be transferred to the Medicare Trust 
        Fund.
    (h) Effective Date.--The Board shall establish the Medicare 
Consumer Coalitions under this section in a timely manner that ensures 
the information programs conducted by Medicare Consumer Coalitions 
begin not later than January 1, 2004.

                        TITLE IV--MISCELLANEOUS

SEC. 401. CONFORMING AMENDMENTS.

    (a) Executive Schedule Pay Rates.--Section 5316 of title 5, United 
States Code, is amended by adding at the end the following:
            ``Director, Division of HCFA-Sponsored Plans, Health Care 
        Financing Administration.
            ``Director, Division of Health Programs, Health Care 
        Financing Administration.''.
    (b) Submission of Additional Conforming Amendments.--Not later than 
6 months after the date of enactment of this Act, the Secretary of 
Health and Human Services shall submit a legislative proposal to 
Congress containing technical and conforming amendments to reflect the 
changes made by this Act.

SEC. 402. MEDICARE SUPPLEMENTAL POLICIES.

    Notwithstanding section 1882 of the Social Security Act (42 U.S.C. 
1395ss), beginning on January 1, 2004, only Medicare beneficiaries 
enrolled in the HCFA-sponsored standard plan established under section 
2282(a)(2)(A) may purchase or renew Medicare supplemental insurance 
policies.

SEC. 403. EFFECTIVE DATE.

    Unless otherwise specified in this Act, this Act and the amendments 
made by this Act shall take effect on the date of enactment of this 
Act.
                                 <all>