[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1 Enrolled Bill (ENR)]
H.R.1
One Hundred Eighth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday,
the seventh day of January, two thousand and three
An Act
To amend title XVIII of the Social Security Act to provide for a
voluntary program for prescription drug coverage under the Medicare
Program, to modernize the Medicare Program, to amend the Internal
Revenue Code of 1986 to allow a deduction to individuals for amounts
contributed to health savings security accounts and health savings
accounts, to provide for the disposition of unused health benefits in
cafeteria plans and flexible spending arrangements, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; REFERENCES
TO BIPA AND SECRETARY; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Medicare
Prescription Drug, Improvement, and Modernization Act of 2003''.
(b) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in division A of this Act an amendment
is expressed in terms of an amendment to or repeal of a section or
other provision, the reference shall be considered to be made to that
section or other provision of the Social Security Act.
(c) BIPA; Secretary.--In this Act:
(1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000, as enacted
into law by section 1(a)(6) of Public Law 106-554.
(2) Secretary.--The term ``Secretary'' means the Secretary of
Health and Human Services.
(d) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; amendments to Social Security Act; references to
BIPA and Secretary; table of contents.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
Sec. 101. Medicare prescription drug benefit.
Sec. 102. Medicare Advantage conforming amendments.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap amendments.
Sec. 105. Additional provisions relating to medicare prescription drug
discount card and transitional assistance program.
Sec. 106. State Pharmaceutical Assistance Transition Commission.
Sec. 107. Studies and reports.
Sec. 108. Grants to physicians to implement electronic prescription drug
programs.
Sec. 109. Expanding the work of medicare Quality Improvement
Organizations to include parts C and D.
Sec. 110. Conflict of interest study.
Sec. 111. Study on employment-based retiree health coverage.
TITLE II--MEDICARE ADVANTAGE
Subtitle A--Implementation of Medicare Advantage Program
Sec. 201. Implementation of Medicare Advantage program.
Subtitle B--Immediate Improvements
Sec. 211. Immediate improvements.
Subtitle C--Offering of Medicare Advantage (MA) Regional Plans; Medicare
Advantage Competition
Sec. 221. Establishment of MA regional plans.
Sec. 222. Competition program beginning in 2006.
Sec. 223. Effective date.
Subtitle D--Additional Reforms
Sec. 231. Specialized MA plans for special needs individuals.
Sec. 232. Avoiding duplicative State regulation.
Sec. 233. Medicare MSAs.
Sec. 234. Extension of reasonable cost contracts.
Sec. 235. Two-year extension of municipal health service demonstration
projects.
Sec. 236. Payment by PACE providers for medicare and medicaid services
furnished by noncontract providers.
Sec. 237. Reimbursement for federally qualified health centers providing
services under MA plans.
Sec. 238. Institute of Medicine evaluation and report on health care
performance measures.
Subtitle E--Comparative Cost Adjustment (CCA) Program
Sec. 241. Comparative Cost Adjustment (CCA) program.
TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE
Sec. 301. Medicare secondary payor (MSP) provisions.
Sec. 302. Payment for durable medical equipment; competitive acquisition
of certain items and services.
Sec. 303. Payment reform for covered outpatient drugs and biologicals.
Sec. 304. Extension of application of payment reform for covered
outpatient drugs and biologicals to other physician
specialties.
Sec. 305. Payment for inhalation drugs.
Sec. 306. Demonstration project for use of recovery audit contractors.
Sec. 307. Pilot program for national and State background checks on
direct patient access employees of long-term care facilities
or providers.
TITLE IV--RURAL PROVISIONS
Subtitle A--Provisions Relating to Part A Only
Sec. 401. Equalizing urban and rural standardized payment amounts under
the medicare inpatient hospital prospective payment system.
Sec. 402. Enhanced disproportionate share hospital (DSH) treatment for
rural hospitals and urban hospitals with fewer than 100 beds.
Sec. 403. Adjustment to the medicare inpatient hospital prospective
payment system wage index to revise the labor-related share of
such index.
Sec. 404. More frequent update in weights used in hospital market
basket.
Sec. 405. Improvements to critical access hospital program.
Sec. 406. Medicare inpatient hospital payment adjustment for low-volume
hospitals.
Sec. 407. Treatment of missing cost reporting periods for sole community
hospitals.
Sec. 408. Recognition of attending nurse practitioners as attending
physicians to serve hospice patients.
Sec. 409. Rural hospice demonstration project.
Sec. 410. Exclusion of certain rural health clinic and federally
qualified health center services from the prospective payment
system for skilled nursing facilities.
Sec. 410A. Rural community hospital demonstration program.
Subtitle B--Provisions Relating to Part B Only
Sec. 411. Two-year extension of hold harmless provisions for small rural
hospitals and sole community hospitals under the prospective
payment system for hospital outpatient department services.
Sec. 412. Establishment of floor on work geographic adjustment.
Sec. 413. Medicare incentive payment program improvements for physician
scarcity.
Sec. 414. Payment for rural and urban ambulance services.
Sec. 415. Providing appropriate coverage of rural air ambulance
services.
Sec. 416. Treatment of certain clinical diagnostic laboratory tests
furnished to hospital outpatients in certain rural areas.
Sec. 417. Extension of telemedicine demonstration project.
Sec. 418. Report on demonstration project permitting skilled nursing
facilities to be originating telehealth sites; authority to
implement.
Subtitle C--Provisions Relating to Parts A and B
Sec. 421. One-year increase for home health services furnished in a
rural area.
Sec. 422. Redistribution of unused resident positions.
Subtitle D--Other Provisions
Sec. 431. Providing safe harbor for certain collaborative efforts that
benefit medically underserved populations.
Sec. 432. Office of Rural Health Policy improvements.
Sec. 433. MedPAC study on rural hospital payment adjustments.
Sec. 434. Frontier extended stay clinic demonstration project.
TITLE V--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
Sec. 501. Revision of acute care hospital payment updates.
Sec. 502. Revision of the indirect medical education (IME) adjustment
percentage.
Sec. 503. Recognition of new medical technologies under inpatient
hospital prospective payment system.
Sec. 504. Increase in Federal rate for hospitals in Puerto Rico.
Sec. 505. Wage index adjustment reclassification reform.
Sec. 506. Limitation on charges for inpatient hospital contract health
services provided to Indians by medicare participating
hospitals.
Sec. 507. Clarifications to certain exceptions to medicare limits on
physician referrals.
Sec. 508. One-time appeals process for hospital wage index
classification.
Subtitle B--Other Provisions
Sec. 511. Payment for covered skilled nursing facility services.
Sec. 512. Coverage of hospice consultation services.
Sec. 513. Study on portable diagnostic ultrasound services for
beneficiaries in skilled nursing facilities.
TITLE VI--PROVISIONS RELATING TO PART B
Subtitle A--Provisions Relating to Physicians' Services
Sec. 601. Revision of updates for physicians' services.
Sec. 602. Treatment of physicians' services furnished in Alaska.
Sec. 603. Inclusion of podiatrists, dentists, and optometrists under
private contracting authority.
Sec. 604. GAO study on access to physicians' services.
Sec. 605. Collaborative demonstration-based review of physician practice
expense geographic adjustment data.
Sec. 606. MedPAC report on payment for physicians' services.
Subtitle B--Preventive Services
Sec. 611. Coverage of an initial preventive physical examination.
Sec. 612. Coverage of cardiovascular screening blood tests.
Sec. 613. Coverage of diabetes screening tests.
Sec. 614. Improved payment for certain mammography services.
Subtitle C--Other Provisions
Sec. 621. Hospital outpatient department (HOPD) payment reform.
Sec. 622. Limitation of application of functional equivalence standard.
Sec. 623. Payment for renal dialysis services.
Sec. 624. Two-year moratorium on therapy caps; provisions relating to
reports.
Sec. 625. Waiver of part B late enrollment penalty for certain military
retirees; special enrollment period.
Sec. 626. Payment for services furnished in ambulatory surgical centers.
Sec. 627. Payment for certain shoes and inserts under the fee schedule
for orthotics and prosthetics.
Sec. 628. Payment for clinical diagnostic laboratory tests.
Sec. 629. Indexing part B deductible to inflation.
Sec. 630. Five-year authorization of reimbursement for all medicare part
B services furnished by certain Indian hospitals and clinics.
Subtitle D--Additional Demonstrations, Studies, and Other Provisions
Sec. 641. Demonstration project for coverage of certain prescription
drugs and biologicals.
Sec. 642. Extension of coverage of Intravenous Immune Globulin (IVIG)
for the treatment of primary immune deficiency diseases in the
home.
Sec. 643. MedPAC study of coverage of surgical first assisting services
of certified registered nurse first assistants.
Sec. 644. MedPAC study of payment for cardio-thoracic surgeons.
Sec. 645. Studies relating to vision impairments.
Sec. 646. Medicare health care quality demonstration programs.
Sec. 647. MedPAC study on direct access to physical therapy services.
Sec. 648. Demonstration project for consumer-directed chronic outpatient
services.
Sec. 649. Medicare care management performance demonstration.
Sec. 650. GAO study and report on the propagation of concierge care.
Sec. 651. Demonstration of coverage of chiropractic services under
medicare.
TITLE VII--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
Sec. 701. Update in home health services.
Sec. 702. Demonstration project to clarify the definition of homebound.
Sec. 703. Demonstration project for medical adult day care services.
Sec. 704. Temporary suspension of OASIS requirement for collection of
data on non-medicare and non-medicaid patients.
Sec. 705. MedPAC study on medicare margins of home health agencies.
Sec. 706. Coverage of religious nonmedical health care institution
services furnished in the home.
Subtitle B--Graduate Medical Education
Sec. 711. Extension of update limitation on high cost programs.
Sec. 712. Exception to initial residency period for geriatric residency
or fellowship programs.
Sec. 713. Treatment of volunteer supervision.
Subtitle C--Chronic Care Improvement
Sec. 721. Voluntary chronic care improvement under traditional fee-for-
service.
Sec. 722. Medicare Advantage quality improvement programs.
Sec. 723. Chronically ill medicare beneficiary research, data,
demonstration strategy.
Subtitle D--Other Provisions
Sec. 731. Improvements in national and local coverage determination
process to respond to changes in technology.
Sec. 732. Extension of treatment of certain physician pathology services
under medicare.
Sec. 733. Payment for pancreatic islet cell investigational transplants
for medicare beneficiaries in clinical trials.
Sec. 734. Restoration of medicare trust funds.
Sec. 735. Modifications to Medicare Payment Advisory Commission
(MedPAC).
Sec. 736. Technical amendments.
TITLE VIII--COST CONTAINMENT
Subtitle A--Cost Containment
Sec. 801. Inclusion in annual report of medicare trustees of information
on status of medicare trust funds.
Sec. 802. Presidential submission of legislation.
Sec. 803. Procedures in the House of Representatives.
Sec. 804. Procedures in the Senate.
Subtitle B--Income-Related Reduction in Part B Premium Subsidy
Sec. 811. Income-related reduction in part B premium subsidy.
TITLE IX--ADMINISTRATIVE IMPROVEMENTS, REGULATORY REDUCTION, AND
CONTRACTING REFORM
Sec. 900. Administrative improvements within the Centers for Medicare &
Medicaid Services (CMS).
Subtitle A--Regulatory Reform
Sec. 901. Construction; definition of supplier.
Sec. 902. Issuance of regulations.
Sec. 903. Compliance with changes in regulations and policies.
Sec. 904. Reports and studies relating to regulatory reform.
Subtitle B--Contracting Reform
Sec. 911. Increased flexibility in medicare administration.
Sec. 912. Requirements for information security for medicare
administrative contractors.
Subtitle C--Education and Outreach
Sec. 921. Provider education and technical assistance.
Sec. 922. Small provider technical assistance demonstration program.
Sec. 923. Medicare Beneficiary Ombudsman.
Sec. 924. Beneficiary outreach demonstration program.
Sec. 925. Inclusion of additional information in notices to
beneficiaries about skilled nursing facility benefits.
Sec. 926. Information on medicare-certified skilled nursing facilities
in hospital discharge plans.
Subtitle D--Appeals and Recovery
Sec. 931. Transfer of responsibility for medicare appeals.
Sec. 932. Process for expedited access to review.
Sec. 933. Revisions to medicare appeals process.
Sec. 934. Prepayment review.
Sec. 935. Recovery of overpayments.
Sec. 936. Provider enrollment process; right of appeal.
Sec. 937. Process for correction of minor errors and omissions without
pursuing appeals process.
Sec. 938. Prior determination process for certain items and services;
advance beneficiary notices.
Sec. 939. Appeals by providers when there is no other party available.
Sec. 940. Revisions to appeals timeframes and amounts.
Sec. 940A. Mediation process for local coverage determinations.
Subtitle E--Miscellaneous Provisions
Sec. 941. Policy development regarding evaluation and management (E & M)
documentation guidelines.
Sec. 942. Improvement in oversight of technology and coverage.
Sec. 943. Treatment of hospitals for certain services under medicare
secondary payor (MSP) provisions.
Sec. 944. EMTALA improvements.
Sec. 945. Emergency Medical Treatment and Labor Act (EMTALA) Technical
Advisory Group.
Sec. 946. Authorizing use of arrangements to provide core hospice
services in certain circumstances.
Sec. 947. Application of OSHA bloodborne pathogens standard to certain
hospitals.
Sec. 948. BIPA-related technical amendments and corrections.
Sec. 949. Conforming authority to waive a program exclusion.
Sec. 950. Treatment of certain dental claims.
Sec. 951. Furnishing hospitals with information to compute DSH formula.
Sec. 952. Revisions to reassignment provisions.
Sec. 953. Other provisions.
TITLE X--MEDICAID AND MISCELLANEOUS PROVISIONS
Subtitle A--Medicaid Provisions
Sec. 1001. Medicaid disproportionate share hospital (DSH) payments.
Sec. 1002. Clarification of inclusion of inpatient drug prices charged
to certain public hospitals in the best price exemptions for
the medicaid drug rebate program.
Sec. 1003. Extension of moratorium.
Subtitle B--Miscellaneous Provisions
Sec. 1011. Federal reimbursement of emergency health services furnished
to undocumented aliens.
Sec. 1012. Commission on Systemic Interoperability.
Sec. 1013. Research on outcomes of health care items and services.
Sec. 1014. Health care that works for all Americans: Citizens Health
Care Working Group.
Sec. 1015. Funding start-up administrative costs for medicare reform.
Sec. 1016. Health care infrastructure improvement program.
TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS
Subtitle A--Access to Affordable Pharmaceuticals
Sec. 1101. Thirty-month stay-of-effectiveness period.
Sec. 1102. Forfeiture of 180-day exclusivity period.
Sec. 1103. Bioavailability and bioequivalence.
Sec. 1104. Conforming amendments.
Subtitle B--Federal Trade Commission Review
Sec. 1111. Definitions.
Sec. 1112. Notification of agreements.
Sec. 1113. Filing deadlines.
Sec. 1114. Disclosure exemption.
Sec. 1115. Enforcement.
Sec. 1116. Rulemaking.
Sec. 1117. Savings clause.
Sec. 1118. Effective date.
Subtitle C--Importation of Prescription Drugs
Sec. 1121. Importation of prescription drugs.
Sec. 1122. Study and report on importation of drugs.
Sec. 1123. Study and report on trade in pharmaceuticals.
TITLE XII--TAX INCENTIVES FOR HEALTH AND RETIREMENT SECURITY
Sec. 1201. Health savings accounts.
Sec. 1202. Exclusion from gross income of certain Federal subsidies for
prescription drug plans.
Sec. 1203. Exception to information reporting requirements related to
certain health arrangements.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
SEC. 101. MEDICARE PRESCRIPTION DRUG BENEFIT.
(a) In General.--Title XVIII is amended--
(1) by redesignating part D as part E; and
(2) by inserting after part C the following new part:
``Part D--Voluntary Prescription Drug Benefit Program
``Subpart 1--Part D Eligible Individuals and Prescription Drug Benefits
``eligibility, enrollment, and information
``Sec. 1860D-1. (a) Provision of Qualified Prescription Drug
Coverage Through Enrollment in Plans.--
``(1) In general.--Subject to the succeeding provisions of this
part, each part D eligible individual (as defined in paragraph
(3)(A)) is entitled to obtain qualified prescription drug coverage
(described in section 1860D-2(a)) as follows:
``(A) Fee-for-service enrollees may receive coverage
through a prescription drug plan.--A part D eligible individual
who is not enrolled in an MA plan may obtain qualified
prescription drug coverage through enrollment in a prescription
drug plan (as defined in section 1860D-41(a)(14)).
``(B) Medicare advantage enrollees.--
``(i) Enrollees in a plan providing qualified
prescription drug coverage receive coverage through the
plan.--A part D eligible individual who is enrolled in an
MA-PD plan obtains such coverage through such plan.
``(ii) Limitation on enrollment of ma plan enrollees in
prescription drug plans.--Except as provided in clauses
(iii) and (iv), a part D eligible individual who is
enrolled in an MA plan may not enroll in a prescription
drug plan under this part.
``(iii) Private fee-for-service enrollees in ma plans
not providing qualified prescription drug coverage
permitted to enroll in a prescription drug plan.--A part D
eligible individual who is enrolled in an MA private fee-
for-service plan (as defined in section 1859(b)(2)) that
does not provide qualified prescription drug coverage may
obtain qualified prescription drug coverage through
enrollment in a prescription drug plan.
``(iv) Enrollees in msa plans permitted to enroll in a
prescription drug plan.--A part D eligible individual who
is enrolled in an MSA plan (as defined in section
1859(b)(3)) may obtain qualified prescription drug coverage
through enrollment in a prescription drug plan.
``(2) Coverage first effective january 1, 2006.--Coverage under
prescription drug plans and MA-PD plans shall first be effective on
January 1, 2006.
``(3) Definitions.--For purposes of this part:
``(A) Part d eligible individual.--The term `part D
eligible individual' means an individual who is entitled to
benefits under part A or enrolled under part B.
``(B) MA plan.--The term `MA plan' has the meaning given
such term in section 1859(b)(1).
``(C) MA-PD plan.--The term `MA-PD plan' means an MA plan
that provides qualified prescription drug coverage.
``(b) Enrollment Process for Prescription Drug Plans.--
``(1) Establishment of process.--
``(A) In general.--The Secretary shall establish a process
for the enrollment, disenrollment, termination, and change of
enrollment of part D eligible individuals in prescription drug
plans consistent with this subsection.
``(B) Application of ma rules.--In establishing such
process, the Secretary shall use rules similar to (and
coordinated with) the rules for enrollment, disenrollment,
termination, and change of enrollment with an MA-PD plan under
the following provisions of section 1851:
``(i) Residence requirements.--Section 1851(b)(1)(A),
relating to residence requirements.
``(ii) Exercise of choice.--Section 1851(c) (other than
paragraph (3)(A) of such section), relating to exercise of
choice.
``(iii) Coverage election periods.--Subject to
paragraphs (2) and (3) of this subsection, section 1851(e)
(other than subparagraphs (B) and (C) of paragraph (2) and
the second sentence of paragraph (4) of such section),
relating to coverage election periods, including initial
periods, annual coordinated election periods, special
election periods, and election periods for exceptional
circumstances.
``(iv) Coverage periods.--Section 1851(f), relating to
effectiveness of elections and changes of elections.
``(v) Guaranteed issue and renewal.--Section 1851(g)
(other than paragraph (2) of such section and clause (i)
and the second sentence of clause (ii) of paragraph (3)(C)
of such section), relating to guaranteed issue and renewal.
``(vi) Marketing material and application forms.--
Section 1851(h), relating to approval of marketing material
and application forms.
In applying clauses (ii), (iv), and (v) of this subparagraph,
any reference to section 1851(e) shall be treated as a
reference to such section as applied pursuant to clause (iii)
of this subparagraph.
``(C) Special rule.--The process established under
subparagraph (A) shall include, in the case of a part D
eligible individual who is a full-benefit dual eligible
individual (as defined in section 1935(c)(6)) who has failed to
enroll in a prescription drug plan or an MA-PD plan, for the
enrollment in a prescription drug plan that has a monthly
beneficiary premium that does not exceed the premium assistance
available under section 1860D-14(a)(1)(A)). If there is more
than one such plan available, the Secretary shall enroll such
an individual on a random basis among all such plans in the PDP
region. Nothing in the previous sentence shall prevent such an
individual from declining or changing such enrollment.
``(2) Initial enrollment period.--
``(A) Program initiation.--In the case of an individual who
is a part D eligible individual as of November 15, 2005, there
shall be an initial enrollment period that shall be the same as
the annual, coordinated open election period described in
section 1851(e)(3)(B)(iii), as applied under paragraph
(1)(B)(iii).
``(B) Continuing periods.--In the case of an individual who
becomes a part D eligible individual after November 15, 2005,
there shall be an initial enrollment period which is the period
under section 1851(e)(1), as applied under paragraph
(1)(B)(iii) of this section, as if `entitled to benefits under
part A or enrolled under part B' were substituted for `entitled
to benefits under part A and enrolled under part B', but in no
case shall such period end before the period described in
subparagraph (A).
``(3) Additional special enrollment periods.--The Secretary
shall establish special enrollment periods, including the
following:
``(A) Involuntary loss of creditable prescription drug
coverage.--
``(i) In general.--In the case of a part D eligible
individual who involuntarily loses creditable prescription
drug coverage (as defined in section 1860D-13(b)(4)).
``(ii) Notice.--In establishing special enrollment
periods under clause (i), the Secretary shall take into
account when the part D eligible individuals are provided
notice of the loss of creditable prescription drug
coverage.
``(iii) Failure to pay premium.--For purposes of clause
(i), a loss of coverage shall be treated as voluntary if
the coverage is terminated because of failure to pay a
required beneficiary premium.
``(iv) Reduction in coverage.--For purposes of clause
(i), a reduction in coverage so that the coverage no longer
meets the requirements under section 1860D-13(b)(5)
(relating to actuarial equivalence) shall be treated as an
involuntary loss of coverage.
``(B) Errors in enrollment.--In the case described in
section 1837(h) (relating to errors in enrollment), in the same
manner as such section applies to part B.
``(C) Exceptional circumstances.--In the case of part D
eligible individuals who meet such exceptional conditions (in
addition to those conditions applied under paragraph
(1)(B)(iii)) as the Secretary may provide.
``(D) Medicaid coverage.--In the case of an individual (as
determined by the Secretary) who is a full-benefit dual
eligible individual (as defined in section 1935(c)(6)).
``(E) Discontinuance of ma-pd election during first year of
eligibility.--In the case of a part D eligible individual who
discontinues enrollment in an MA-PD plan under the second
sentence of section 1851(e)(4) at the time of the election of
coverage under such sentence under the original medicare fee-
for-service program.
``(4) Information to facilitate enrollment.--
``(A) In general.--Notwithstanding any other provision of
law but subject to subparagraph (B), the Secretary may provide
to each PDP sponsor and MA organization such identifying
information about part D eligible individuals as the Secretary
determines to be necessary to facilitate efficient marketing of
prescription drug plans and MA-PD plans to such individuals and
enrollment of such individuals in such plans.
``(B) Limitation.--
``(i) Provision of information.--The Secretary may
provide the information under subparagraph (A) only to the
extent necessary to carry out such subparagraph.
``(ii) Use of information.--Such information provided
by the Secretary to a PDP sponsor or an MA organization may
be used by such sponsor or organization only to facilitate
marketing of, and enrollment of part D eligible individuals
in, prescription drug plans and MA-PD plans.
``(5) Reference to enrollment procedures for ma-pd plans.--For
rules applicable to enrollment, disenrollment, termination, and
change of enrollment of part D eligible individuals in MA-PD plans,
see section 1851.
``(6) Reference to penalties for late enrollment.--Section
1860D-13(b) imposes a late enrollment penalty for part D eligible
individuals who--
``(A) enroll in a prescription drug plan or an MA-PD plan
after the initial enrollment period described in paragraph (2);
and
``(B) fail to maintain continuous creditable prescription
drug coverage during the period of non-enrollment.
``(c) Providing Information to Beneficiaries.--
``(1) Activities.--The Secretary shall conduct activities that
are designed to broadly disseminate information to part D eligible
individuals (and prospective part D eligible individuals) regarding
the coverage provided under this part. Such activities shall ensure
that such information is first made available at least 30 days
prior to the initial enrollment period described in subsection
(b)(2)(A).
``(2) Requirements.--The activities described in paragraph (1)
shall--
``(A) be similar to the activities performed by the
Secretary under section 1851(d), including dissemination
(including through the toll-free telephone number 1-800-
MEDICARE) of comparative information for prescription drug
plans and MA-PD plans; and
``(B) be coordinated with the activities performed by the
Secretary under such section and under section 1804.
``(3) Comparative information.--
``(A) In general.--Subject to subparagraph (B), the
comparative information referred to in paragraph (2)(A) shall
include a comparison of the following with respect to qualified
prescription drug coverage:
``(i) Benefits.--The benefits provided under the plan.
``(ii) Monthly beneficiary premium.--The monthly
beneficiary premium under the plan.
``(iii) Quality and performance.--The quality and
performance under the plan.
``(iv) Beneficiary cost-sharing.--The cost-sharing
required of part D eligible individuals under the plan.
``(v) Consumer satisfaction surveys.--The results of
consumer satisfaction surveys regarding the plan conducted
pursuant to section 1860D-4(d).
``(B) Exception for unavailability of information.--The
Secretary is not required to provide comparative information
under clauses (iii) and (v) of subparagraph (A) with respect to
a plan--
``(i) for the first plan year in which it is offered;
and
``(ii) for the next plan year if it is impracticable or
the information is otherwise unavailable.
``(4) Information on late enrollment penalty.--The information
disseminated under paragraph (1) shall include information
concerning the methodology for determining the late enrollment
penalty under section 1860D-13(b).
``prescription drug benefits
``Sec. 1860D-2. (a) Requirements.--
``(1) In general.--For purposes of this part and part C, the
term `qualified prescription drug coverage' means either of the
following:
``(A) Standard prescription drug coverage with access to
negotiated prices.--Standard prescription drug coverage (as
defined in subsection (b)) and access to negotiated prices
under subsection (d).
``(B) Alternative prescription drug coverage with at least
actuarially equivalent benefits and access to negotiated
prices.--Coverage of covered part D drugs which meets the
alternative prescription drug coverage requirements of
subsection (c) and access to negotiated prices under subsection
(d), but only if the benefit design of such coverage is
approved by the Secretary, as provided under subsection (c).
``(2) Permitting supplemental prescription drug coverage.--
``(A) In general.--Subject to subparagraph (B), qualified
prescription drug coverage may include supplemental
prescription drug coverage consisting of either or both of the
following:
``(i) Certain reductions in cost-sharing.--
``(I) In general.--A reduction in the annual
deductible, a reduction in the coinsurance percentage,
or an increase in the initial coverage limit with
respect to covered part D drugs, or any combination
thereof, insofar as such a reduction or increase
increases the actuarial value of benefits above the
actuarial value of basic prescription drug coverage.
``(II) Construction.--Nothing in this paragraph
shall be construed as affecting the application of
subsection (c)(3).
``(ii) Optional drugs.--Coverage of any product that
would be a covered part D drug but for the application of
subsection (e)(2)(A).
``(B) Requirement.--A PDP sponsor may not offer a
prescription drug plan that provides supplemental prescription
drug coverage pursuant to subparagraph (A) in an area unless
the sponsor also offers a prescription drug plan in the area
that only provides basic prescription drug coverage.
``(3) Basic prescription drug coverage.--For purposes of this
part and part C, the term `basic prescription drug coverage' means
either of the following:
``(A) Coverage that meets the requirements of paragraph
(1)(A).
``(B) Coverage that meets the requirements of paragraph
(1)(B) but does not have any supplemental prescription drug
coverage described in paragraph (2)(A).
``(4) Application of secondary payor provisions.--The
provisions of section 1852(a)(4) shall apply under this part in the
same manner as they apply under part C.
``(5) Construction.--Nothing in this subsection shall be
construed as changing the computation of incurred costs under
subsection (b)(4).
``(b) Standard Prescription Drug Coverage.--For purposes of this
part and part C, the term `standard prescription drug coverage' means
coverage of covered part D drugs that meets the following requirements:
``(1) Deductible.--
``(A) In general.--The coverage has an annual deductible--
``(i) for 2006, that is equal to $250; or
``(ii) for a subsequent year, that is equal to the
amount specified under this paragraph for the previous year
increased by the percentage specified in paragraph (6) for
the year involved.
``(B) Rounding.--Any amount determined under subparagraph
(A)(ii) that is not a multiple of $5 shall be rounded to the
nearest multiple of $5.
``(2) Benefit structure.--
``(A) 25 percent coinsurance.--The coverage has coinsurance
(for costs above the annual deductible specified in paragraph
(1) and up to the initial coverage limit under paragraph (3))
that is--
``(i) equal to 25 percent; or
``(ii) actuarially equivalent (using processes and
methods established under section 1860D-11(c)) to an
average expected payment of 25 percent of such costs.
``(B) Use of tiers.--Nothing in this part shall be
construed as preventing a PDP sponsor or an MA organization
from applying tiered copayments under a plan, so long as such
tiered copayments are consistent with subparagraph (A)(ii).
``(3) Initial coverage limit.--
``(A) In general.--Except as provided in paragraph (4), the
coverage has an initial coverage limit on the maximum costs
that may be recognized for payment purposes (including the
annual deductible)--
``(i) for 2006, that is equal to $2,250; or
``(ii) for a subsequent year, that is equal to the
amount specified in this paragraph for the previous year,
increased by the annual percentage increase described in
paragraph (6) for the year involved.
``(B) Rounding.--Any amount determined under subparagraph
(A)(ii) that is not a multiple of $10 shall be rounded to the
nearest multiple of $10.
``(4) Protection against high out-of-pocket expenditures.--
``(A) In general.--
``(i) In general.--The coverage provides benefits,
after the part D eligible individual has incurred costs (as
described in subparagraph (C)) for covered part D drugs in
a year equal to the annual out-of-pocket threshold
specified in subparagraph (B), with cost-sharing that is
equal to the greater of--
``(I) a copayment of $2 for a generic drug or a
preferred drug that is a multiple source drug (as
defined in section 1927(k)(7)(A)(i)) and $5 for any
other drug; or
``(II) coinsurance that is equal to 5 percent.
``(ii) Adjustment of amount.--For a year after 2006,
the dollar amounts specified in clause (i)(I) shall be
equal to the dollar amounts specified in this subparagraph
for the previous year, increased by the annual percentage
increase described in paragraph (6) for the year involved.
Any amount established under this clause that is not a
multiple of a 5 cents shall be rounded to the nearest
multiple of 5 cents.
``(B) Annual out-of-pocket threshold.--
``(i) In general.--For purposes of this part, the
`annual out-of-pocket threshold' specified in this
subparagraph--
``(I) for 2006, is equal to $3,600; or
``(II) for a subsequent year, is equal to the
amount specified in this subparagraph for the previous
year, increased by the annual percentage increase
described in paragraph (6) for the year involved.
``(ii) Rounding.--Any amount determined under clause
(i)(II) that is not a multiple of $50 shall be rounded to
the nearest multiple of $50.
``(C) Application.--In applying subparagraph (A)--
``(i) incurred costs shall only include costs incurred
with respect to covered part D drugs for the annual
deductible described in paragraph (1), for cost-sharing
described in paragraph (2), and for amounts for which
benefits are not provided because of the application of the
initial coverage limit described in paragraph (3), but does
not include any costs incurred for covered part D drugs
which are not included (or treated as being included) in
the plan's formulary; and
``(ii) such costs shall be treated as incurred only if
they are paid by the part D eligible individual (or by
another person, such as a family member, on behalf of the
individual), under section 1860D-14, or under a State
Pharmaceutical Assistance Program and the part D eligible
individual (or other person) is not reimbursed through
insurance or otherwise, a group health plan, or other
third-party payment arrangement (other than under such
section or such a Program) for such costs.
``(D) Information regarding third-party reimbursement.--
``(i) Procedures for exchanging information.--In order
to accurately apply the requirements of subparagraph
(C)(ii), the Secretary is authorized to establish
procedures, in coordination with the Secretary of the
Treasury and the Secretary of Labor--
``(I) for determining whether costs for part D
eligible individuals are being reimbursed through
insurance or otherwise, a group health plan, or other
third-party payment arrangement; and
``(II) for alerting the PDP sponsors and MA
organizations that offer the prescription drug plans
and MA-PD plans in which such individuals are enrolled
about such reimbursement arrangements.
``(ii) Authority to request information from
enrollees.--A PDP sponsor or an MA organization may
periodically ask part D eligible individuals enrolled in a
prescription drug plan or an MA-PD plan offered by the
sponsor or organization whether such individuals have or
expect to receive such third-party reimbursement. A
material misrepresentation of the information described in
the preceding sentence by an individual (as defined in
standards set by the Secretary and determined through a
process established by the Secretary) shall constitute
grounds for termination of enrollment in any plan under
section 1851(g)(3)(B) (and as applied under this part under
section 1860D-1(b)(1)(B)(v)) for a period specified by the
Secretary.
``(5) Construction.--Nothing in this part shall be construed as
preventing a PDP sponsor or an MA organization offering an MA-PD
plan from reducing to zero the cost-sharing otherwise applicable to
preferred or generic drugs.
``(6) Annual percentage increase.--The annual percentage
increase specified in this paragraph for a year is equal to the
annual percentage increase in average per capita aggregate
expenditures for covered part D drugs in the United States for part
D eligible individuals, as determined by the Secretary for the 12-
month period ending in July of the previous year using such methods
as the Secretary shall specify.
``(c) Alternative Prescription Drug Coverage Requirements.--A
prescription drug plan or an MA-PD plan may provide a different
prescription drug benefit design from standard prescription drug
coverage so long as the Secretary determines (consistent with section
1860D-11(c)) that the following requirements are met and the plan
applies for, and receives, the approval of the Secretary for such
benefit design:
``(1) Assuring at least actuarially equivalent coverage.--
``(A) Assuring equivalent value of total coverage.--The
actuarial value of the total coverage is at least equal to the
actuarial value of standard prescription drug coverage.
``(B) Assuring equivalent unsubsidized value of coverage.--
The unsubsidized value of the coverage is at least equal to the
unsubsidized value of standard prescription drug coverage. For
purposes of this subparagraph, the unsubsidized value of
coverage is the amount by which the actuarial value of the
coverage exceeds the actuarial value of the subsidy payments
under section 1860D-15 with respect to such coverage.
``(C) Assuring standard payment for costs at initial
coverage limit.--The coverage is designed, based upon an
actuarially representative pattern of utilization, to provide
for the payment, with respect to costs incurred that are equal
to the initial coverage limit under subsection (b)(3) for the
year, of an amount equal to at least the product of--
``(i) the amount by which the initial coverage limit
described in subsection (b)(3) for the year exceeds the
deductible described in subsection (b)(1) for the year; and
``(ii) 100 percent minus the coinsurance percentage
specified in subsection (b)(2)(A)(i).
``(2) Maximum required deductible.--The deductible under the
coverage shall not exceed the deductible amount specified under
subsection (b)(1) for the year.
``(3) Same protection against high out-of-pocket
expenditures.--The coverage provides the coverage required under
subsection (b)(4).
``(d) Access to Negotiated Prices.--
``(1) Access.--
``(A) In general.--Under qualified prescription drug
coverage offered by a PDP sponsor offering a prescription drug
plan or an MA organization offering an MA-PD plan, the sponsor
or organization shall provide enrollees with access to
negotiated prices used for payment for covered part D drugs,
regardless of the fact that no benefits may be payable under
the coverage with respect to such drugs because of the
application of a deductible or other cost-sharing or an initial
coverage limit (described in subsection (b)(3)).
``(B) Negotiated prices.--For purposes of this part,
negotiated prices shall take into account negotiated price
concessions, such as discounts, direct or indirect subsidies,
rebates, and direct or indirect remunerations, for covered part
D drugs, and include any dispensing fees for such drugs.
``(C) Medicaid-related provisions.--The prices negotiated
by a prescription drug plan, by an MA-PD plan with respect to
covered part D drugs, or by a qualified retiree prescription
drug plan (as defined in section 1860D-22(a)(2)) with respect
to such drugs on behalf of part D eligible individuals, shall
(notwithstanding any other provision of law) not be taken into
account for the purposes of establishing the best price under
section 1927(c)(1)(C).
``(2) Disclosure.--A PDP sponsor offering a prescription drug
plan or an MA organization offering an MA-PD plan shall disclose to
the Secretary (in a manner specified by the Secretary) the
aggregate negotiated price concessions described in paragraph
(1)(B) made available to the sponsor or organization by a
manufacturer which are passed through in the form of lower
subsidies, lower monthly beneficiary prescription drug premiums,
and lower prices through pharmacies and other dispensers. The
provisions of section 1927(b)(3)(D) apply to information disclosed
to the Secretary under this paragraph.
``(3) Audits.--To protect against fraud and abuse and to ensure
proper disclosures and accounting under this part and in accordance
with section 1857(d)(2)(B) (as applied under section 1860D-
12(b)(3)(C)), the Secretary may conduct periodic audits, directly
or through contracts, of the financial statements and records of
PDP sponsors with respect to prescription drug plans and MA
organizations with respect to MA-PD plans.
``(e) Covered Part D Drug Defined.--
``(1) In general.--Except as provided in this subsection, for
purposes of this part, the term `covered part D drug' means--
``(A) a drug that may be dispensed only upon a prescription
and that is described in subparagraph (A)(i), (A)(ii), or
(A)(iii) of section 1927(k)(2); or
``(B) a biological product described in clauses (i) through
(iii) of subparagraph (B) of such section or insulin described
in subparagraph (C) of such section and medical supplies
associated with the injection of insulin (as defined in
regulations of the Secretary),
and such term includes a vaccine licensed under section 351 of the
Public Health Service Act and any use of a covered part D drug for
a medically accepted indication (as defined in section 1927(k)(6)).
``(2) Exclusions.--
``(A) In general.--Such term does not include drugs or
classes of drugs, or their medical uses, which may be excluded
from coverage or otherwise restricted under section 1927(d)(2),
other than subparagraph (E) of such section (relating to
smoking cessation agents), or under section 1927(d)(3).
``(B) Medicare covered drugs.--A drug prescribed for a part
D eligible individual that would otherwise be a covered part D
drug under this part shall not be so considered if payment for
such drug as so prescribed and dispensed or administered with
respect to that individual is available (or would be available
but for the application of a deductible) under part A or B for
that individual.
``(3) Application of general exclusion provisions.--A
prescription drug plan or an MA-PD plan may exclude from qualified
prescription drug coverage any covered part D drug--
``(A) for which payment would not be made if section
1862(a) applied to this part; or
``(B) which is not prescribed in accordance with the plan
or this part.
Such exclusions are determinations subject to reconsideration and
appeal pursuant to subsections (g) and (h), respectively, of
section 1860D-4.
``access to a choice of qualified prescription drug coverage
``Sec. 1860D-3. (a) Assuring Access to a Choice of Coverage.--
``(1) Choice of at least two plans in each area.--The Secretary
shall ensure that each part D eligible individual has available,
consistent with paragraph (2), a choice of enrollment in at least 2
qualifying plans (as defined in paragraph (3)) in the area in which
the individual resides, at least one of which is a prescription
drug plan. In any such case in which such plans are not available,
the part D eligible individual shall be given the opportunity to
enroll in a fallback prescription drug plan.
``(2) Requirement for different plan sponsors.--The requirement
in paragraph (1) is not satisfied with respect to an area if only
one entity offers all the qualifying plans in the area.
``(3) Qualifying plan defined.--For purposes of this section,
the term `qualifying plan' means--
``(A) a prescription drug plan; or
``(B) an MA-PD plan described in section 1851(a)(2)(A)(i)
that provides--
``(i) basic prescription drug coverage; or
``(ii) qualified prescription drug coverage that
provides supplemental prescription drug coverage so long as
there is no MA monthly supplemental beneficiary premium
applied under the plan, due to the application of a credit
against such premium of a rebate under section
1854(b)(1)(C).
``(b) Flexibility in Risk Assumed and Application of Fallback
Plan.--In order to ensure access pursuant to subsection (a) in an
area--
``(1) the Secretary may approve limited risk plans under
section 1860D-11(f) for the area; and
``(2) only if such access is still not provided in the area
after applying paragraph (1), the Secretary shall provide for the
offering of a fallback prescription drug plan for that area under
section 1860D-11(g).
``beneficiary protections for qualified prescription drug coverage
``Sec. 1860D-4. (a) Dissemination of Information.--
``(1) General information.--
``(A) Application of ma information.--A PDP sponsor shall
disclose, in a clear, accurate, and standardized form to each
enrollee with a prescription drug plan offered by the sponsor
under this part at the time of enrollment and at least annually
thereafter, the information described in section 1852(c)(1)
relating to such plan, insofar as the Secretary determines
appropriate with respect to benefits provided under this part,
and including the information described in subparagraph (B).
``(B) Drug specific information.--The information described
in this subparagraph is information concerning the following:
``(i) Access to specific covered part D drugs,
including access through pharmacy networks.
``(ii) How any formulary (including any tiered
formulary structure) used by the sponsor functions,
including a description of how a part D eligible individual
may obtain information on the formulary consistent with
paragraph (3).
``(iii) Beneficiary cost-sharing requirements and how a
part D eligible individual may obtain information on such
requirements, including tiered or other copayment level
applicable to each drug (or class of drugs), consistent
with paragraph (3).
``(iv) The medication therapy management program
required under subsection (c).
``(2) Disclosure upon request of general coverage, utilization,
and grievance information.--Upon request of a part D eligible
individual who is eligible to enroll in a prescription drug plan,
the PDP sponsor offering such plan shall provide information
similar (as determined by the Secretary) to the information
described in subparagraphs (A), (B), and (C) of section 1852(c)(2)
to such individual.
``(3) Provision of specific information.--
``(A) Response to beneficiary questions.--Each PDP sponsor
offering a prescription drug plan shall have a mechanism for
providing specific information on a timely basis to enrollees
upon request. Such mechanism shall include access to
information through the use of a toll-free telephone number
and, upon request, the provision of such information in
writing.
``(B) Availability of information on changes in formulary
through the internet.--A PDP sponsor offering a prescription
drug plan shall make available on a timely basis through an
Internet website information on specific changes in the
formulary under the plan (including changes to tiered or
preferred status of covered part D drugs).
``(4) Claims information.--A PDP sponsor offering a
prescription drug plan must furnish to each enrollee in a form
easily understandable to such enrollees--
``(A) an explanation of benefits (in accordance with
section 1806(a) or in a comparable manner); and
``(B) when prescription drug benefits are provided under
this part, a notice of the benefits in relation to--
``(i) the initial coverage limit for the current year;
and
``(ii) the annual out-of-pocket threshold for the
current year.
Notices under subparagraph (B) need not be provided more often
than as specified by the Secretary and notices under
subparagraph (B)(ii) shall take into account the application of
section 1860D-2(b)(4)(C) to the extent practicable, as
specified by the Secretary.
``(b) Access to Covered Part D Drugs.--
``(1) Assuring pharmacy access.--
``(A) Participation of any willing pharmacy.--A
prescription drug plan shall permit the participation of any
pharmacy that meets the terms and conditions under the plan.
``(B) Discounts allowed for network pharmacies.--For
covered part D drugs dispensed through in-network pharmacies, a
prescription drug plan may, notwithstanding subparagraph (A),
reduce coinsurance or copayments for part D eligible
individuals enrolled in the plan below the level otherwise
required. In no case shall such a reduction result in an
increase in payments made by the Secretary under section 1860D-
15 to a plan.
``(C) Convenient access for network pharmacies.--
``(i) In general.--The PDP sponsor of the prescription
drug plan shall secure the participation in its network of
a sufficient number of pharmacies that dispense (other than
by mail order) drugs directly to patients to ensure
convenient access (consistent with rules established by the
Secretary).
``(ii) Application of tricare standards.--The Secretary
shall establish rules for convenient access to in-network
pharmacies under this subparagraph that are no less
favorable to enrollees than the rules for convenient access
to pharmacies included in the statement of work of
solicitation (#MDA906-03-R-0002) of the Department of
Defense under the TRICARE Retail Pharmacy (TRRx) as of
March 13, 2003.
``(iii) Adequate emergency access.--Such rules shall
include adequate emergency access for enrollees.
``(iv) Convenient access in long-term care
facilities.--Such rules may include standards with respect
to access for enrollees who are residing in long-term care
facilities and for pharmacies operated by the Indian Health
Service, Indian tribes and tribal organizations, and urban
Indian organizations (as defined in section 4 of the Indian
Health Care Improvement Act).
``(D) Level playing field.--Such a sponsor shall permit
enrollees to receive benefits (which may include a 90-day
supply of drugs or biologicals) through a pharmacy (other than
a mail order pharmacy), with any differential in charge paid by
such enrollees.
``(E) Not required to accept insurance risk.--The terms
and conditions under subparagraph (A) may not require
participating pharmacies to accept insurance risk as a
condition of participation.
``(2) Use of standardized technology.--
``(A) In general.--The PDP sponsor of a prescription drug
plan shall issue (and reissue, as appropriate) such a card (or
other technology) that may be used by an enrollee to assure
access to negotiated prices under section 1860D-2(d).
``(B) Standards.--
``(i) In general.--The Secretary shall provide for the
development, adoption, or recognition of standards relating
to a standardized format for the card or other technology
required under subparagraph (A). Such standards shall be
compatible with part C of title XI and may be based on
standards developed by an appropriate standard setting
organization.
``(ii) Consultation.--In developing the standards under
clause (i), the Secretary shall consult with the National
Council for Prescription Drug Programs and other standard
setting organizations determined appropriate by the
Secretary.
``(iii) Implementation.--The Secretary shall develop,
adopt, or recognize the standards under clause (i) by such
date as the Secretary determines shall be sufficient to
ensure that PDP sponsors utilize such standards beginning
January 1, 2006.
``(3) Requirements on development and application of
formularies.--If a PDP sponsor of a prescription drug plan uses a
formulary (including the use of tiered cost-sharing), the following
requirements must be met:
``(A) Development and revision by a pharmacy and
therapeutic (p&t) committee.--
``(i) In general.--The formulary must be developed and
reviewed by a pharmacy and therapeutic committee. A
majority of the members of such committee shall consist of
individuals who are practicing physicians or practicing
pharmacists (or both).
``(ii) Inclusion of independent experts.--Such
committee shall include at least one practicing physician
and at least one practicing pharmacist, each of whom--
``(I) is independent and free of conflict with
respect to the sponsor and plan; and
``(II) has expertise in the care of elderly or
disabled persons.
``(B) Formulary development.--In developing and reviewing
the formulary, the committee shall--
``(i) base clinical decisions on the strength of
scientific evidence and standards of practice, including
assessing peer-reviewed medical literature, such as
randomized clinical trials, pharmacoeconomic studies,
outcomes research data, and on such other information as
the committee determines to be appropriate; and
``(ii) take into account whether including in the
formulary (or in a tier in such formulary) particular
covered part D drugs has therapeutic advantages in terms of
safety and efficacy.
``(C) Inclusion of drugs in all therapeutic categories and
classes.--
``(i) In general.--The formulary must include drugs
within each therapeutic category and class of covered part
D drugs, although not necessarily all drugs within such
categories and classes.
``(ii) Model guidelines.--The Secretary shall request
the United States Pharmacopeia to develop, in consultation
with pharmaceutical benefit managers and other interested
parties, a list of categories and classes that may be used
by prescription drug plans under this paragraph and to
revise such classification from time to time to reflect
changes in therapeutic uses of covered part D drugs and the
additions of new covered part D drugs.
``(iii) Limitation on changes in therapeutic
classification.--The PDP sponsor of a prescription drug
plan may not change the therapeutic categories and classes
in a formulary other than at the beginning of each plan
year except as the Secretary may permit to take into
account new therapeutic uses and newly approved covered
part D drugs.
``(D) Provider and patient education.--The PDP sponsor
shall establish policies and procedures to educate and inform
health care providers and enrollees concerning the formulary.
``(E) Notice before removing drug from formulary or
changing preferred or tier status of drug.--Any removal of a
covered part D drug from a formulary and any change in the
preferred or tiered cost-sharing status of such a drug shall
take effect only after appropriate notice is made available
(such as under subsection (a)(3)) to the Secretary, affected
enrollees, physicians, pharmacies, and pharmacists.
``(F) Periodic evaluation of protocols.--In connection with
the formulary, the sponsor of a prescription drug plan shall
provide for the periodic evaluation and analysis of treatment
protocols and procedures.
The requirements of this paragraph may be met by a PDP sponsor
directly or through arrangements with another entity.
``(c) Cost and Utilization Management; Quality Assurance;
Medication Therapy Management Program.--
``(1) In general.--The PDP sponsor shall have in place,
directly or through appropriate arrangements, with respect to
covered part D drugs, the following:
``(A) A cost-effective drug utilization management program,
including incentives to reduce costs when medically
appropriate, such as through the use of multiple source drugs
(as defined in section 1927(k)(7)(A)(i)).
``(B) Quality assurance measures and systems to reduce
medication errors and adverse drug interactions and improve
medication use.
``(C) A medication therapy management program described in
paragraph (2).
``(D) A program to control fraud, abuse, and waste.
Nothing in this section shall be construed as impairing a PDP
sponsor from utilizing cost management tools (including
differential payments) under all methods of operation.
``(2) Medication therapy management program.--
``(A) Description.--
``(i) In general.--A medication therapy management
program described in this paragraph is a program of drug
therapy management that may be furnished by a pharmacist
and that is designed to assure, with respect to targeted
beneficiaries described in clause (ii), that covered part D
drugs under the prescription drug plan are appropriately
used to optimize therapeutic outcomes through improved
medication use, and to reduce the risk of adverse events,
including adverse drug interactions. Such a program may
distinguish between services in ambulatory and
institutional settings.
``(ii) Targeted beneficiaries described.--Targeted
beneficiaries described in this clause are part D eligible
individuals who--
``(I) have multiple chronic diseases (such as
diabetes, asthma, hypertension, hyperlipidemia, and
congestive heart failure);
``(II) are taking multiple covered part D drugs;
and
``(III) are identified as likely to incur annual
costs for covered part D drugs that exceed a level
specified by the Secretary.
``(B) Elements.--Such program may include elements that
promote--
``(i) enhanced enrollee understanding to promote the
appropriate use of medications by enrollees and to reduce
the risk of potential adverse events associated with
medications, through beneficiary education, counseling, and
other appropriate means;
``(ii) increased enrollee adherence with prescription
medication regimens through medication refill reminders,
special packaging, and other compliance programs and other
appropriate means; and
``(iii) detection of adverse drug events and patterns
of overuse and underuse of prescription drugs.
``(C) Development of program in cooperation with licensed
pharmacists.--Such program shall be developed in cooperation
with licensed and practicing pharmacists and physicians.
``(D) Coordination with care management plans.--The
Secretary shall establish guidelines for the coordination of
any medication therapy management program under this paragraph
with respect to a targeted beneficiary with any care management
plan established with respect to such beneficiary under a
chronic care improvement program under section 1807.
``(E) Considerations in pharmacy fees.--The PDP sponsor of
a prescription drug plan shall take into account, in
establishing fees for pharmacists and others providing services
under such plan, the resources used, and time required to,
implement the medication therapy management program under this
paragraph. Each such sponsor shall disclose to the Secretary
upon request the amount of any such management or dispensing
fees. The provisions of section 1927(b)(3)(D) apply to
information disclosed under this subparagraph.
``(d) Consumer Satisfaction Surveys.--In order to provide for
comparative information under section 1860D-1(c)(3)(A)(v), the
Secretary shall conduct consumer satisfaction surveys with respect to
PDP sponsors and prescription drug plans in a manner similar to the
manner such surveys are conducted for MA organizations and MA plans
under part C.
``(e) Electronic Prescription Program.--
``(1) Application of standards.--As of such date as the
Secretary may specify, but not later than 1 year after the date of
promulgation of final standards under paragraph (4)(D),
prescriptions and other information described in paragraph (2)(A)
for covered part D drugs prescribed for part D eligible individuals
that are transmitted electronically shall be transmitted only in
accordance with such standards under an electronic prescription
drug program that meets the requirements of paragraph (2).
``(2) Program requirements.--Consistent with uniform standards
established under paragraph (3)--
``(A) Provision of information to prescribing health care
professional and dispensing pharmacies and pharmacists.--An
electronic prescription drug program shall provide for the
electronic transmittal to the prescribing health care
professional and to the dispensing pharmacy and pharmacist of
the prescription and information on eligibility and benefits
(including the drugs included in the applicable formulary, any
tiered formulary structure, and any requirements for prior
authorization) and of the following information with respect to
the prescribing and dispensing of a covered part D drug:
``(i) Information on the drug being prescribed or
dispensed and other drugs listed on the medication history,
including information on drug-drug interactions, warnings
or cautions, and, when indicated, dosage adjustments.
``(ii) Information on the availability of lower cost,
therapeutically appropriate alternatives (if any) for the
drug prescribed.
``(B) Application to medical history information.--
Effective on and after such date as the Secretary specifies and
after the establishment of appropriate standards to carry out
this subparagraph, the program shall provide for the electronic
transmittal in a manner similar to the manner under
subparagraph (A) of information that relates to the medical
history concerning the individual and related to a covered part
D drug being prescribed or dispensed, upon request of the
professional or pharmacist involved.
``(C) Limitations.--Information shall only be disclosed
under subparagraph (A) or (B) if the disclosure of such
information is permitted under the Federal regulations
(concerning the privacy of individually identifiable health
information) promulgated under section 264(c) of the Health
Insurance Portability and Accountability Act of 1996.
``(D) Timing.--To the extent feasible, the information
exchanged under this paragraph shall be on an interactive,
real-time basis.
``(3) Standards.--
``(A) In general.--The Secretary shall provide consistent
with this subsection for the promulgation of uniform standards
relating to the requirements for electronic prescription drug
programs under paragraph (2).
``(B) Objectives.--Such standards shall be consistent with
the objectives of improving--
``(i) patient safety;
``(ii) the quality of care provided to patients; and
``(iii) efficiencies, including cost savings, in the
delivery of care.
``(C) Design criteria.--Such standards shall--
``(i) be designed so that, to the extent practicable,
the standards do not impose an undue administrative burden
on prescribing health care professionals and dispensing
pharmacies and pharmacists;
``(ii) be compatible with standards established under
part C of title XI, standards established under subsection
(b)(2)(B)(i), and with general health information
technology standards; and
``(iii) be designed so that they permit electronic
exchange of drug labeling and drug listing information
maintained by the Food and Drug Administration and the
National Library of Medicine.
``(D) Permitting use of appropriate messaging.--Such
standards shall allow for the messaging of information only if
it relates to the appropriate prescribing of drugs, including
quality assurance measures and systems referred to in
subsection (c)(1)(B).
``(E) Permitting patient designation of dispensing
pharmacy.--
``(i) In general.--Consistent with clause (ii), such
standards shall permit a part D eligible individual to
designate a particular pharmacy to dispense a prescribed
drug.
``(ii) No change in benefits.--Clause (i) shall not be
construed as affecting--
``(I) the access required to be provided to
pharmacies by a prescription drug plan; or
``(II) the application of any differences in
benefits or payments under such a plan based on the
pharmacy dispensing a covered part D drug.
``(4) Development, promulgation, and modification of
standards.--
``(A) Initial standards.--Not later than September 1, 2005,
the Secretary shall develop, adopt, recognize, or modify
initial uniform standards relating to the requirements for
electronic prescription drug programs described in paragraph
(2) taking into consideration the recommendations (if any) from
the National Committee on Vital and Health Statistics (as
established under section 306(k) of the Public Health Service
Act (42 U.S.C. 242k(k))) under subparagraph (B).
``(B) Role of ncvhs.--The National Committee on Vital and
Health Statistics shall develop recommendations for uniform
standards relating to such requirements in consultation with
the following:
``(i) Standard setting organizations (as defined in
section 1171(8))
``(ii) Practicing physicians.
``(iii) Hospitals.
``(iv) Pharmacies.
``(v) Practicing pharmacists.
``(vi) Pharmacy benefit managers.
``(vii) State boards of pharmacy.
``(viii) State boards of medicine.
``(ix) Experts on electronic prescribing.
``(x) Other appropriate Federal agencies.
``(C) Pilot project to test initial standards.--
``(i) In general.--During the 1-year period that begins
on January 1, 2006, the Secretary shall conduct a pilot
project to test the initial standards developed under
subparagraph (A) prior to the promulgation of the final
uniform standards under subparagraph (D) in order to
provide for the efficient implementation of the
requirements described in paragraph (2).
``(ii) Exception.--Pilot testing of standards is not
required under clause (i) where there already is adequate
industry experience with such standards, as determined by
the Secretary after consultation with effected standard
setting organizations and industry users.
``(iii) Voluntary participation of physicians and
pharmacies.--In order to conduct the pilot project under
clause (i), the Secretary shall enter into agreements with
physicians, physician groups, pharmacies, hospitals, PDP
sponsors, MA organizations, and other appropriate entities
under which health care professionals electronically
transmit prescriptions to dispensing pharmacies and
pharmacists in accordance with such standards.
``(iv) Evaluation and report.--
``(I) Evaluation.--The Secretary shall conduct an
evaluation of the pilot project conducted under clause
(i).
``(II) Report to congress.--Not later than April 1,
2007, the Secretary shall submit to Congress a report
on the evaluation conducted under subclause (I).
``(D) Final standards.--Based upon the evaluation of the
pilot project under subparagraph (C)(iv)(I) and not later than
April 1, 2008, the Secretary shall promulgate uniform standards
relating to the requirements described in paragraph (2).
``(5) Relation to state laws.--The standards promulgated under
this subsection shall supersede any State law or regulation that--
``(A) is contrary to the standards or restricts the ability
to carry out this part; and
``(B) pertains to the electronic transmission of medication
history and of information on eligibility, benefits, and
prescriptions with respect to covered part D drugs under this
part.
``(6) Establishment of safe harbor.--The Secretary, in
consultation with the Attorney General, shall promulgate
regulations that provide for a safe harbor from sanctions under
paragraphs (1) and (2) of section 1128B(b) and an exception to the
prohibition under subsection (a)(1) of section 1877 with respect to
the provision of nonmonetary remuneration (in the form of hardware,
software, or information technology and training services)
necessary and used solely to receive and transmit electronic
prescription information in accordance with the standards
promulgated under this subsection--
``(A) in the case of a hospital, by the hospital to members
of its medical staff;
``(B) in the case of a group practice (as defined in
section 1877(h)(4)), by the practice to prescribing health care
professionals who are members of such practice; and
``(C) in the case of a PDP sponsor or MA organization, by
the sponsor or organization to pharmacists and pharmacies
participating in the network of such sponsor or organization,
and to prescribing health care professionals.
``(f) Grievance Mechanism.--Each PDP sponsor shall provide
meaningful procedures for hearing and resolving grievances between the
sponsor (including any entity or individual through which the sponsor
provides covered benefits) and enrollees with prescription drug plans
of the sponsor under this part in accordance with section 1852(f).
``(g) Coverage Determinations and Reconsiderations.--
``(1) Application of coverage determination and reconsideration
provisions.--A PDP sponsor shall meet the requirements of
paragraphs (1) through (3) of section 1852(g) with respect to
covered benefits under the prescription drug plan it offers under
this part in the same manner as such requirements apply to an MA
organization with respect to benefits it offers under an MA plan
under part C.
``(2) Request for a determination for the treatment of tiered
formulary drug.--In the case of a prescription drug plan offered by
a PDP sponsor that provides for tiered cost-sharing for drugs
included within a formulary and provides lower cost-sharing for
preferred drugs included within the formulary, a part D eligible
individual who is enrolled in the plan may request an exception to
the tiered cost-sharing structure. Under such an exception, a
nonpreferred drug could be covered under the terms applicable for
preferred drugs if the prescribing physician determines that the
preferred drug for treatment of the same condition either would not
be as effective for the individual or would have adverse effects
for the individual or both. A PDP sponsor shall have an exceptions
process under this paragraph consistent with guidelines established
by the Secretary for making a determination with respect to such a
request. Denial of such an exception shall be treated as a coverage
denial for purposes of applying subsection (h).
``(h) Appeals.--
``(1) In general.--Subject to paragraph (2), a PDP sponsor
shall meet the requirements of paragraphs (4) and (5) of section
1852(g) with respect to benefits (including a determination related
to the application of tiered cost-sharing described in subsection
(g)(2)) in a manner similar (as determined by the Secretary) to the
manner such requirements apply to an MA organization with respect
to benefits under the original medicare fee-for-service program
option it offers under an MA plan under part C. In applying this
paragraph only the part D eligible individual shall be entitled to
bring such an appeal.
``(2) Limitation in cases on nonformulary determinations.--A
part D eligible individual who is enrolled in a prescription drug
plan offered by a PDP sponsor may appeal under paragraph (1) a
determination not to provide for coverage of a covered part D drug
that is not on the formulary under the plan only if the prescribing
physician determines that all covered part D drugs on any tier of
the formulary for treatment of the same condition would not be as
effective for the individual as the nonformulary drug, would have
adverse effects for the individual, or both.
``(3) Treatment of nonformulary determinations.--If a PDP
sponsor determines that a plan provides coverage for a covered part
D drug that is not on the formulary of the plan, the drug shall be
treated as being included on the formulary for purposes of section
1860D-2(b)(4)(C)(i).
``(i) Privacy, Confidentiality, and Accuracy of Enrollee Records.--
The provisions of section 1852(h) shall apply to a PDP sponsor and
prescription drug plan in the same manner as it applies to an MA
organization and an MA plan.
``(j) Treatment of Accreditation.--Subparagraph (A) of section
1852(e)(4) (relating to treatment of accreditation) shall apply to a
PDP sponsor under this part with respect to the following requirements,
in the same manner as it applies to an MA organization with respect to
the requirements in subparagraph (B) (other than clause (vii) thereof)
of such section:
``(1) Subsection (b) of this section (relating to access to
covered part D drugs).
``(2) Subsection (c) of this section (including quality
assurance and medication therapy management).
``(3) Subsection (i) of this section (relating to
confidentiality and accuracy of enrollee records).
``(k) Public Disclosure of Pharmaceutical Prices for Equivalent
Drugs.--
``(1) In general.--A PDP sponsor offering a prescription drug
plan shall provide that each pharmacy that dispenses a covered part
D drug shall inform an enrollee of any differential between the
price of the drug to the enrollee and the price of the lowest
priced generic covered part D drug under the plan that is
therapeutically equivalent and bioequivalent and available at such
pharmacy.
``(2) Timing of notice.--
``(A) In general.--Subject to subparagraph (B), the
information under paragraph (1) shall be provided at the time
of purchase of the drug involved, or, in the case of dispensing
by mail order, at the time of delivery of such drug.
``(B) Waiver.--The Secretary may waive subparagraph (A) in
such circumstances as the Secretary may specify.
``Subpart 2--Prescription Drug Plans; PDP Sponsors; Financing
``pdp regions; submission of bids; plan approval
``Sec. 1860D-11. (a) Establishment of PDP Regions; Service Areas.--
``(1) Coverage of entire pdp region.--The service area for a
prescription drug plan shall consist of an entire PDP region
established under paragraph (2).
``(2) Establishment of pdp regions.--
``(A) In general.--The Secretary shall establish, and may
revise, PDP regions in a manner that is consistent with the
requirements for the establishment and revision of MA regions
under subparagraphs (B) and (C) of section 1858(a)(2).
``(B) Relation to ma regions.--To the extent practicable,
PDP regions shall be the same as MA regions under section
1858(a)(2). The Secretary may establish PDP regions which are
not the same as MA regions if the Secretary determines that the
establishment of different regions under this part would
improve access to benefits under this part.
``(C) Authority for territories.--The Secretary shall
establish, and may revise, PDP regions for areas in States that
are not within the 50 States or the District of Columbia.
``(3) National plan.--Nothing in this subsection shall be
construed as preventing a prescription drug plan from being offered
in more than one PDP region (including all PDP regions).
``(b) Submission of Bids, Premiums, and Related Information.--
``(1) In general.--A PDP sponsor shall submit to the Secretary
information described in paragraph (2) with respect to each
prescription drug plan it offers. Such information shall be
submitted at the same time and in a similar manner to the manner in
which information described in paragraph (6) of section 1854(a) is
submitted by an MA organization under paragraph (1) of such
section.
``(2) Information described.--The information described in this
paragraph is information on the following:
``(A) Coverage provided.--The prescription drug coverage
provided under the plan, including the deductible and other
cost-sharing.
``(B) Actuarial value.--The actuarial value of the
qualified prescription drug coverage in the region for a part D
eligible individual with a national average risk profile for
the factors described in section 1860D-15(c)(1)(A) (as
specified by the Secretary).
``(C) Bid.--Information on the bid, including an actuarial
certification of--
``(i) the basis for the actuarial value described in
subparagraph (B) assumed in such bid;
``(ii) the portion of such bid attributable to basic
prescription drug coverage and, if applicable, the portion
of such bid attributable to supplemental benefits;
``(iii) assumptions regarding the reinsurance subsidy
payments provided under section 1860D-15(b) subtracted from
the actuarial value to produce such bid; and
``(iv) administrative expenses assumed in the bid.
``(D) Service area.--The service area for the plan.
``(E) Level of risk assumed.--
``(i) In general.--Whether the PDP sponsor requires a
modification of risk level under clause (ii) and, if so,
the extent of such modification. Any such modification
shall apply with respect to all prescription drug plans
offered by a PDP sponsor in a PDP region. This subparagraph
shall not apply to an MA-PD plan.
``(ii) Risk levels described.--A modification of risk
level under this clause may consist of one or more of the
following:
``(I) Increase in federal percentage assumed in
initial risk corridor.--An equal percentage point
increase in the percents applied under subparagraphs
(B)(i), (B)(ii)(I), (C)(i), and (C)(ii)(I) of section
1860D-15(e)(2). In no case shall the application of
previous sentence prevent the application of a higher
percentage under section 1869D-15(e)(2)(B)(iii).
``(II) Increase in federal percentage assumed in
second risk corridor.--An equal percentage point
increase in the percents applied under subparagraphs
(B)(ii)(II) and (C)(ii)(II) of section 1860D-15(e)(2).
``(III) Decrease in size of risk corridors.--A
decrease in the threshold risk percentages specified in
section 1860D-15(e)(3)(C).
``(F) Additional information.--Such other information as
the Secretary may require to carry out this part.
``(3) Paperwork reduction for offering of prescription drug
plans nationally or in multi-region areas.--The Secretary shall
establish requirements for information submission under this
subsection in a manner that promotes the offering of such plans in
more than one PDP region (including all regions) through the filing
of consolidated information.
``(c) Actuarial Valuation.--
``(1) Processes.--For purposes of this part, the Secretary
shall establish processes and methods for determining the actuarial
valuation of prescription drug coverage, including--
``(A) an actuarial valuation of standard prescription drug
coverage under section 1860D-2(b);
``(B) actuarial valuations relating to alternative
prescription drug coverage under section 1860D-2(c)(1);
``(C) an actuarial valuation of the reinsurance subsidy
payments under section 1860D-15(b);
``(D) the use of generally accepted actuarial principles
and methodologies; and
``(E) applying the same methodology for determinations of
actuarial valuations under subparagraphs (A) and (B).
``(2) Accounting for drug utilization.--Such processes and
methods for determining actuarial valuation shall take into account
the effect that providing alternative prescription drug coverage
(rather than standard prescription drug coverage) has on drug
utilization.
``(3) Responsibilities.--
``(A) Plan responsibilities.--PDP sponsors and MA
organizations are responsible for the preparation and
submission of actuarial valuations required under this part for
prescription drug plans and MA-PD plans they offer.
``(B) Use of outside actuaries.--Under the processes and
methods established under paragraph (1), PDP sponsors offering
prescription drug plans and MA organizations offering MA-PD
plans may use actuarial opinions certified by independent,
qualified actuaries to establish actuarial values.
``(d) Review of Information and Negotiation.--
``(1) Review of information.--The Secretary shall review the
information filed under subsection (b) for the purpose of
conducting negotiations under paragraph (2).
``(2) Negotiation regarding terms and conditions.--Subject to
subsection (i), in exercising the authority under paragraph (1),
the Secretary--
``(A) has the authority to negotiate the terms and
conditions of the proposed bid submitted and other terms and
conditions of a proposed plan; and
``(B) has authority similar to the authority of the
Director of the Office of Personnel Management with respect to
health benefits plans under chapter 89 of title 5, United
States Code.
``(e) Approval of Proposed Plans.--
``(1) In general.--After review and negotiation under
subsection (d), the Secretary shall approve or disapprove the
prescription drug plan.
``(2) Requirements for approval.--The Secretary may approve a
prescription drug plan only if the following requirements are met:
``(A) Compliance with requirements.--The plan and the PDP
sponsor offering the plan comply with the requirements under
this part, including the provision of qualified prescription
drug coverage.
``(B) Actuarial determinations.--The Secretary determines
that the plan and PDP sponsor meet the requirements under this
part relating to actuarial determinations, including such
requirements under section 1860D-2(c).
``(C) Application of fehbp standard.--
``(i) In general.--The Secretary determines that the
portion of the bid submitted under subsection (b) that is
attributable to basic prescription drug coverage is
supported by the actuarial bases provided under such
subsection and reasonably and equitably reflects the
revenue requirements (as used for purposes of section
1302(8)(C) of the Public Health Service Act) for benefits
provided under that plan, less the sum (determined on a
monthly per capita basis) of the actuarial value of the
reinsurance payments under section 1860D-15(b).
``(ii) Supplemental coverage.--The Secretary determines
that the portion of the bid submitted under subsection (b)
that is attributable to supplemental prescription drug
coverage pursuant to section 1860D-2(a)(2) is supported by
the actuarial bases provided under such subsection and
reasonably and equitably reflects the revenue requirements
(as used for purposes of section 1302(8)(C) of the Public
Health Service Act) for such coverage under the plan.
``(D) Plan design.--
``(i) In general.--The Secretary does not find that the
design of the plan and its benefits (including any
formulary and tiered formulary structure) are likely to
substantially discourage enrollment by certain part D
eligible individuals under the plan.
``(ii) Use of categories and classes in formularies.--
The Secretary may not find that the design of categories
and classes within a formulary violates clause (i) if such
categories and classes are consistent with guidelines (if
any) for such categories and classes established by the
United States Pharmacopeia.
``(f) Application of Limited Risk Plans.--
``(1) Conditions for approval of limited risk plans.--The
Secretary may only approve a limited risk plan (as defined in
paragraph (4)(A)) for a PDP region if the access requirements under
section 1860D-3(a) would not be met for the region but for the
approval of such a plan (or a fallback prescription drug plan under
subsection (g)).
``(2) Rules.--The following rules shall apply with respect to
the approval of a limited risk plan in a PDP region:
``(A) Limited exercise of authority.--Only the minimum
number of such plans may be approved in order to meet the
access requirements under section 1860D-3(a).
``(B) Maximizing assumption of risk.--The Secretary shall
provide priority in approval for those plans bearing the
highest level of risk (as computed by the Secretary), but the
Secretary may take into account the level of the bids submitted
by such plans.
``(C) No full underwriting for limited risk plans.--In no
case may the Secretary approve a limited risk plan under which
the modification of risk level provides for no (or a de
minimis) level of financial risk.
``(3) Acceptance of all full risk contracts.--There shall be no
limit on the number of full risk plans that are approved under
subsection (e).
``(4) Risk-plans defined.--For purposes of this subsection:
``(A) Limited risk plan.--The term `limited risk plan'
means a prescription drug plan that provides basic prescription
drug coverage and for which the PDP sponsor includes a
modification of risk level described in subparagraph (E) of
subsection (b)(2) in its bid submitted for the plan under such
subsection. Such term does not include a fallback prescription
drug plan.
``(B) Full risk plan.--The term `full risk plan' means a
prescription drug plan that is not a limited risk plan or a
fallback prescription drug plan.
``(g) Guaranteeing Access to Coverage.--
``(1) Solicitation of bids.--
``(A) In general.--Separate from the bidding process under
subsection (b), the Secretary shall provide for a process for
the solicitation of bids from eligible fallback entities (as
defined in paragraph (2)) for the offering in all fallback
service areas (as defined in paragraph (3)) in one or more PDP
regions of a fallback prescription drug plan (as defined in
paragraph (4)) during the contract period specified in
paragraph (5).
``(B) Acceptance of bids.--
``(i) In general.--Except as provided in this
subparagraph, the provisions of subsection (e) shall apply
with respect to the approval or disapproval of fallback
prescription drug plans. The Secretary shall enter into
contracts under this subsection with eligible fallback
entities for the offering of fallback prescription drug
plans so approved in fallback service areas.
``(ii) Limitation of 1 plan for all fallback service
areas in a pdp region.--With respect to all fallback
service areas in any PDP region for a contract period, the
Secretary shall approve the offering of only 1 fallback
prescription drug plan.
``(iii) Competitive procedures.--Competitive procedures
(as defined in section 4(5) of the Office of Federal
Procurement Policy Act (41 U.S.C. 403(5))) shall be used to
enter into a contract under this subsection. The provisions
of subsection (d) of section 1874A shall apply to a
contract under this section in the same manner as they
apply to a contract under such section.
``(iv) Timing.--The Secretary shall approve a fallback
prescription drug plan for a PDP region in a manner so
that, if there are any fallback service areas in the region
for a year, the fallback prescription drug plan is offered
at the same time as prescription drug plans would otherwise
be offered.
``(V) No national fallback plan.--The Secretary shall
not enter into a contract with a single fallback entity for
the offering of fallback plans throughout the United
States.
``(2) Eligible fallback entity.--For purposes of this section,
the term `eligible fallback entity' means, with respect to all
fallback service areas in a PDP region for a contract period, an
entity that--
``(A) meets the requirements to be a PDP sponsor (or would
meet such requirements but for the fact that the entity is not
a risk-bearing entity); and
``(B) does not submit a bid under section 1860D-11(b) for
any prescription drug plan for any PDP region for the first
year of such contract period.
For purposes of subparagraph (B), an entity shall be treated as
submitting a bid with respect to a prescription drug plan if the
entity is acting as a subcontractor of a PDP sponsor that is
offering such a plan. The previous sentence shall not apply to
entities that are subcontractors of an MA organization except
insofar as such organization is acting as a PDP sponsor with
respect to a prescription drug plan.
``(3) Fallback service area.--For purposes of this subsection,
the term `fallback service area' means, for a PDP region with
respect to a year, any area within such region for which the
Secretary determines before the beginning of the year that the
access requirements of the first sentence of section 1860D-3(a)
will not be met for part D eligible individuals residing in the
area for the year.
``(4) Fallback prescription drug plan.--For purposes of this
part, the term `fallback prescription drug plan' means a
prescription drug plan that--
``(A) only offers the standard prescription drug coverage
and access to negotiated prices described in section 1860D-
2(a)(1)(A) and does not include any supplemental prescription
drug coverage; and
``(B) meets such other requirements as the Secretary may
specify.
``(5) Payments under the contract.--
``(A) In general.--A contract entered into under this
subsection shall provide for--
``(i) payment for the actual costs (taking into account
negotiated price concessions described in section 1860D-
2(d)(1)(B)) of covered part D drugs provided to part D
eligible individuals enrolled in a fallback prescription
drug plan offered by the entity; and
``(ii) payment of management fees that are tied to
performance measures established by the Secretary for the
management, administration, and delivery of the benefits
under the contract.
``(B) Performance measures.--The performance measures
established by the Secretary pursuant to subparagraph (A)(ii)
shall include at least measures for each of the following:
``(i) Costs.--The entity contains costs to the Medicare
Prescription Drug Account and to part D eligible
individuals enrolled in a fallback prescription drug plan
offered by the entity through mechanisms such as generic
substitution and price discounts.
``(ii) Quality programs.--The entity provides such
enrollees with quality programs that avoid adverse drug
reactions and overutilization and reduce medical errors.
``(iii) Customer service.--The entity provides timely
and accurate delivery of services and pharmacy and
beneficiary support services.
``(iv) Benefit administration and claims
adjudication.--The entity provides efficient and effective
benefit administration and claims adjudication.
``(6) Monthly beneficiary premium.--Except as provided in
section 1860D-13(b) (relating to late enrollment penalty) and
subject to section 1860D-14 (relating to low-income assistance),
the monthly beneficiary premium to be charged under a fallback
prescription drug plan offered in all fallback service areas in a
PDP region shall be uniform and shall be equal to 25.5 percent of
an amount equal to the Secretary's estimate of the average monthly
per capita actuarial cost, including administrative expenses, under
the fallback prescription drug plan of providing coverage in the
region, as calculated by the Chief Actuary of the Centers for
Medicare & Medicaid Services. In calculating such administrative
expenses, the Chief Actuary shall use a factor that is based on
similar expenses of prescription drug plans that are not fallback
prescription drug plans.
``(7) General contract terms and conditions.--
``(A) In general.--Except as may be appropriate to carry
out this section, the terms and conditions of contracts with
eligible fallback entities offering fallback prescription drug
plans under this subsection shall be the same as the terms and
conditions of contracts under this part for prescription drug
plans.
``(B) Period of contract.--
``(i) In general.--Subject to clause (ii), a contract
approved for a fallback prescription drug plan for fallback
service areas for a PDP region under this section shall be
for a period of 3 years (except as may be renewed after a
subsequent bidding process).
``(ii) Limitation.--A fallback prescription drug plan
may be offered under a contract in an area for a year only
if that area is a fallback service area for that year.
``(C) Entity not permitted to market or brand fallback
prescription drug plans.--An eligible fallback entity with a
contract under this subsection may not engage in any marketing
or branding of a fallback prescription drug plan.
``(h) Annual Report on Use of Limited Risk Plans and Fallback
Plans.--The Secretary shall submit to Congress an annual report that
describes instances in which limited risk plans and fallback
prescription drug plans were offered under subsections (f) and (g). The
Secretary shall include in such report such recommendations as may be
appropriate to limit the need for the provision of such plans and to
maximize the assumption of financial risk under section subsection (f).
``(i) Noninterference.--In order to promote competition under this
part and in carrying out this part, the Secretary--
``(1) may not interfere with the negotiations between drug
manufacturers and pharmacies and PDP sponsors; and
``(2) may not require a particular formulary or institute a
price structure for the reimbursement of covered part D drugs.
``(j) Coordination of Benefits.--A PDP sponsor offering a
prescription drug plan shall permit State Pharmaceutical Assistance
Programs and Rx plans under sections 1860D-23 and 1860D-24 to
coordinate benefits with the plan and, in connection with such
coordination with such a Program, not to impose fees that are unrelated
to the cost of coordination.
``requirements for and contracts with prescription drug plan (pdp)
sponsors
``Sec. 1860D-12. (a) General Requirements.--Each PDP sponsor of a
prescription drug plan shall meet the following requirements:
``(1) Licensure.--Subject to subsection (c), the sponsor is
organized and licensed under State law as a risk-bearing entity
eligible to offer health insurance or health benefits coverage in
each State in which it offers a prescription drug plan.
``(2) Assumption of financial risk for unsubsidized coverage.--
``(A) In general.--Subject to subparagraph (B), to the
extent that the entity is at risk the entity assumes financial
risk on a prospective basis for benefits that it offers under a
prescription drug plan and that is not covered under section
1860D-15(b).
``(B) Reinsurance permitted.--The plan sponsor may obtain
insurance or make other arrangements for the cost of coverage
provided to any enrollee to the extent that the sponsor is at
risk for providing such coverage.
``(3) Solvency for unlicensed sponsors.--In the case of a PDP
sponsor that is not described in paragraph (1) and for which a
waiver has been approved under subsection (c), such sponsor shall
meet solvency standards established by the Secretary under
subsection (d).
``(b) Contract Requirements.--
``(1) In general.--The Secretary shall not permit the
enrollment under section 1860D-1 in a prescription drug plan
offered by a PDP sponsor under this part, and the sponsor shall not
be eligible for payments under section 1860D-14 or 1860D-15, unless
the Secretary has entered into a contract under this subsection
with the sponsor with respect to the offering of such plan. Such a
contract with a sponsor may cover more than one prescription drug
plan. Such contract shall provide that the sponsor agrees to comply
with the applicable requirements and standards of this part and the
terms and conditions of payment as provided for in this part.
``(2) Limitation on entities offering fallback prescription
drug plans.--The Secretary shall not enter into a contract with a
PDP sponsor for the offering of a prescription drug plan (other
than a fallback prescription drug plan) in a PDP region for a year
if the sponsor--
``(A) submitted a bid under section 1860D-11(g) for such
year (as the first year of a contract period under such
section) to offer a fallback prescription drug plan in any PDP
region;
``(B) offers a fallback prescription drug plan in any PDP
region during the year; or
``(C) offered a fallback prescription drug plan in that PDP
region during the previous year.
For purposes of this paragraph, an entity shall be treated as
submitting a bid with respect to a prescription drug plan or
offering a fallback prescription drug plan if the entity is acting
as a subcontractor of a PDP sponsor that is offering such a plan.
The previous sentence shall not apply to entities that are
subcontractors of an MA organization except insofar as such
organization is acting as a PDP sponsor with respect to a
prescription drug plan.
``(3) Incorporation of certain medicare advantage contract
requirements.--Except as otherwise provided, the following
provisions of section 1857 shall apply to contracts under this
section in the same manner as they apply to contracts under section
1857(a):
``(A) Minimum enrollment.--Paragraphs (1) and (3) of
section 1857(b), except that--
``(i) the Secretary may increase the minimum number of
enrollees required under such paragraph (1) as the
Secretary determines appropriate; and
``(ii) the requirement of such paragraph (1) shall be
waived during the first contract year with respect to an
organization in a region.
``(B) Contract period and effectiveness.--Section 1857(c),
except that in applying paragraph (4)(B) of such section any
reference to payment amounts under section 1853 shall be deemed
payment amounts under section 1860D-15.
``(C) Protections against fraud and beneficiary
protections.--Section 1857(d).
``(D) Additional contract terms.--Section 1857(e); except
that section 1857(e)(2) shall apply as specified to PDP
sponsors and payments under this part to an MA-PD plan shall be
treated as expenditures made under part D.
``(E) Intermediate sanctions.--Section 1857(g) (other than
paragraph (1)(F) of such section), except that in applying such
section the reference in section 1857(g)(1)(B) to section 1854
is deemed a reference to this part.
``(F) Procedures for termination.--Section 1857(h).
``(c) Waiver of Certain Requirements To Expand Choice.--
``(1) Authorizing waiver.--
``(A) In general.--In the case of an entity that seeks to
offer a prescription drug plan in a State, the Secretary shall
waive the requirement of subsection (a)(1) that the entity be
licensed in that State if the Secretary determines, based on
the application and other evidence presented to the Secretary,
that any of the grounds for approval of the application
described in paragraph (2) have been met.
``(B) Application of regional plan waiver rule.--In
addition to the waiver available under subparagraph (A), the
provisions of section 1858(d) shall apply to PDP sponsors under
this part in a manner similar to the manner in which such
provisions apply to MA organizations under part C, except that
no application shall be required under paragraph (1)(B) of such
section in the case of a State that does not provide a
licensing process for such a sponsor.
``(2) Grounds for approval.--
``(A) In general.--The grounds for approval under this
paragraph are--
``(i) subject to subparagraph (B), the grounds for
approval described in subparagraphs (B), (C), and (D) of
section 1855(a)(2); and
``(ii) the application by a State of any grounds other
than those required under Federal law.
``(B) Special rules.--In applying subparagraph (A)(i)--
``(i) the ground of approval described in section
1855(a)(2)(B) is deemed to have been met if the State does
not have a licensing process in effect with respect to the
PDP sponsor; and
``(ii) for plan years beginning before January 1, 2008,
if the State does have such a licensing process in effect,
such ground for approval described in such section is
deemed to have been met upon submission of an application
described in such section.
``(3) Application of waiver procedures.--With respect to an
application for a waiver (or a waiver granted) under paragraph
(1)(A) of this subsection, the provisions of subparagraphs (E),
(F), and (G) of section 1855(a)(2) shall apply, except that clauses
(i) and (ii) of such subparagraph (E) shall not apply in the case
of a State that does not have a licensing process described in
paragraph (2)(B)(i) in effect.
``(4) References to certain provisions.--In applying provisions
of section 1855(a)(2) under paragraphs (2) and (3) of this
subsection to prescription drug plans and PDP sponsors--
``(A) any reference to a waiver application under section
1855 shall be treated as a reference to a waiver application
under paragraph (1)(A) of this subsection; and
``(B) any reference to solvency standards shall be treated
as a reference to solvency standards established under
subsection (d) of this section.
``(d) Solvency Standards for Non-Licensed Entities.--
``(1) Establishment and publication.--The Secretary, in
consultation with the National Association of Insurance
Commissioners, shall establish and publish, by not later than
January 1, 2005, financial solvency and capital adequacy standards
for entities described in paragraph (2).
``(2) Compliance with standards.--A PDP sponsor that is not
licensed by a State under subsection (a)(1) and for which a waiver
application has been approved under subsection (c) shall meet
solvency and capital adequacy standards established under paragraph
(1). The Secretary shall establish certification procedures for
such sponsors with respect to such solvency standards in the manner
described in section 1855(c)(2).
``(e) Licensure Does Not Substitute for or Constitute
Certification.--The fact that a PDP sponsor is licensed in accordance
with subsection (a)(1) or has a waiver application approved under
subsection (c) does not deem the sponsor to meet other requirements
imposed under this part for a sponsor.
``(f) Periodic Review and Revision of Standards.--
``(1) In general.--Subject to paragraph (2), the Secretary may
periodically review the standards established under this section
and, based on such review, may revise such standards if the
Secretary determines such revision to be appropriate.
``(2) Prohibition of midyear implementation of significant new
regulatory requirements.--The Secretary may not implement, other
than at the beginning of a calendar year, regulations under this
section that impose new, significant regulatory requirements on a
PDP sponsor or a prescription drug plan.
``(g) Prohibition of State Imposition of Premium Taxes; Relation to
State Laws.--The provisions of sections 1854(g) and 1856(b)(3) shall
apply with respect to PDP sponsors and prescription drug plans under
this part in the same manner as such sections apply to MA organizations
and MA plans under part C.
``premiums; late enrollment penalty
``Sec. 1860D-13. (a) Monthly Beneficiary Premium.--
``(1) Computation.--
``(A) In general.--The monthly beneficiary premium for a
prescription drug plan is the base beneficiary premium computed
under paragraph (2) as adjusted under this paragraph.
``(B) Adjustment to reflect difference between bid and
national average bid.--
``(i) Above average bid.--If for a month the amount of
the standardized bid amount (as defined in paragraph (5))
exceeds the amount of the adjusted national average monthly
bid amount (as defined in clause (iii)), the base
beneficiary premium for the month shall be increased by the
amount of such excess.
``(ii) Below average bid.--If for a month the amount of
the adjusted national average monthly bid amount for the
month exceeds the standardized bid amount, the base
beneficiary premium for the month shall be decreased by the
amount of such excess.
``(iii) Adjusted national average monthly bid amount
defined.--For purposes of this subparagraph, the term
`adjusted national average monthly bid amount' means the
national average monthly bid amount computed under
paragraph (4), as adjusted under section 1860D-15(c)(2).
``(C) Increase for supplemental prescription drug
benefits.--The base beneficiary premium shall be increased by
the portion of the PDP approved bid that is attributable to
supplemental prescription drug benefits.
``(D) Increase for late enrollment penalty.--The base
beneficiary premium shall be increased by the amount of any
late enrollment penalty under subsection (b).
``(E) Decrease for low-income assistance.--The monthly
beneficiary premium is subject to decrease in the case of a
subsidy eligible individual under section 1860D-14.
``(F) Uniform premium.--Except as provided in subparagraphs
(D) and (E), the monthly beneficiary premium for a prescription
drug plan in a PDP region is the same for all part D eligible
individuals enrolled in the plan.
``(2) Base beneficiary premium.--The base beneficiary premium
under this paragraph for a prescription drug plan for a month is
equal to the product--
``(A) the beneficiary premium percentage (as specified in
paragraph (3)); and
``(B) the national average monthly bid amount (computed
under paragraph (4)) for the month.
``(3) Beneficiary premium percentage.--For purposes of this
subsection, the beneficiary premium percentage for any year is the
percentage equal to a fraction--
``(A) the numerator of which is 25.5 percent; and
``(B) the denominator of which is 100 percent minus a
percentage equal to--
``(i) the total reinsurance payments which the
Secretary estimates are payable under section 1860D-15(b)
with respect to the coverage year; divided by
``(ii) the sum of--
``(I) the amount estimated under clause (i) for the
year; and
``(II) the total payments which the Secretary
estimates will be paid to prescription drug plans and
MA-PD plans that are attributable to the standardized
bid amount during the year, taking into account amounts
paid by the Secretary and enrollees.
``(4) Computation of national average monthly bid amount.--
``(A) In general.--For each year (beginning with 2006) the
Secretary shall compute a national average monthly bid amount
equal to the average of the standardized bid amounts (as
defined in paragraph (5)) for each prescription drug plan and
for each MA-PD plan described in section 1851(a)(2)(A)(i). Such
average does not take into account the bids submitted for MSA
plans, MA private fee-for-service plan, and specialized MA
plans for special needs individuals, PACE programs under
section 1894 (pursuant to section 1860D-21(f)), and under
reasonable cost reimbursement contracts under section 1876(h)
(pursuant to section 1860D-21(e)).
``(B) Weighted average.--
``(i) In general.--The monthly national average monthly
bid amount computed under subparagraph (A) for a year shall
be a weighted average, with the weight for each plan being
equal to the average number of part D eligible individuals
enrolled in such plan in the reference month (as defined in
section 1858(f)(4)).
``(ii) Special rule for 2006.--For purposes of applying
this paragraph for 2006, the Secretary shall establish
procedures for determining the weighted average under
clause (i) for 2005.
``(5) Standardized bid amount defined.--For purposes of this
subsection, the term `standardized bid amount' means the following:
``(A) Prescription drug plans.--
``(i) Basic coverage.--In the case of a prescription
drug plan that provides basic prescription drug coverage,
the PDP approved bid (as defined in paragraph (6)).
``(ii) Supplemental coverage.--In the case of a
prescription drug plan that provides supplemental
prescription drug coverage, the portion of the PDP approved
bid that is attributable to basic prescription drug
coverage.
``(B) MA-PD plans.--In the case of an MA-PD plan, the
portion of the accepted bid amount that is attributable to
basic prescription drug coverage.
``(6) PDP approved bid defined.--For purposes of this part, the
term `PDP approved bid' means, with respect to a prescription drug
plan, the bid amount approved for the plan under this part.
``(b) Late Enrollment Penalty.--
``(1) In general.--Subject to the succeeding provisions of this
subsection, in the case of a part D eligible individual described
in paragraph (2) with respect to a continuous period of
eligibility, there shall be an increase in the monthly beneficiary
premium established under subsection (a) in an amount determined
under paragraph (3).
``(2) Individuals subject to penalty.--A part D eligible
individual described in this paragraph is, with respect to a
continuous period of eligibility, an individual for whom there is a
continuous period of 63 days or longer (all of which in such
continuous period of eligibility) beginning on the day after the
last date of the individual's initial enrollment period under
section 1860D-1(b)(2) and ending on the date of enrollment under a
prescription drug plan or MA-PD plan during all of which the
individual was not covered under any creditable prescription drug
coverage.
``(3) Amount of penalty.--
``(A) In general.--The amount determined under this
paragraph for a part D eligible individual for a continuous
period of eligibility is the greater of--
``(i) an amount that the Secretary determines is
actuarially sound for each uncovered month (as defined in
subparagraph (B)) in the same continuous period of
eligibility; or
``(ii) 1 percent of the base beneficiary premium
(computed under subsection (a)(2)) for each such uncovered
month in such period.
``(B) Uncovered month defined.--For purposes of this
subsection, the term `uncovered month' means, with respect to a
part D eligible individual, any month beginning after the end
of the initial enrollment period under section 1860D-1(b)(2)
unless the individual can demonstrate that the individual had
creditable prescription drug coverage (as defined in paragraph
(4)) for any portion of such month.
``(4) Creditable prescription drug coverage defined.--For
purposes of this part, the term `creditable prescription drug
coverage' means any of the following coverage, but only if the
coverage meets the requirement of paragraph (5):
``(A) Coverage under prescription drug plan or ma-pd
plan.--Coverage under a prescription drug plan or under an MA-
PD plan.
``(B) Medicaid.--Coverage under a medicaid plan under title
XIX or under a waiver under section 1115.
``(C) Group health plan.--Coverage under a group health
plan, including a health benefits plan under chapter 89 of
title 5, United States Code (commonly known as the Federal
employees health benefits program), and a qualified retiree
prescription drug plan (as defined in section 1860D-22(a)(2)).
``(D) State pharmaceutical assistance program.--Coverage
under a State pharmaceutical assistance program described in
section 1860D-23(b)(1).
``(E) Veterans' coverage of prescription drugs.--Coverage
for veterans, and survivors and dependents of veterans, under
chapter 17 of title 38, United States Code.
``(F) Prescription drug coverage under medigap policies.--
Coverage under a medicare supplemental policy under section
1882 that provides benefits for prescription drugs (whether or
not such coverage conforms to the standards for packages of
benefits under section 1882(p)(1)).
``(G) Military coverage (including tricare).--Coverage
under chapter 55 of title 10, United States Code.
``(H) Other coverage.--Such other coverage as the Secretary
determines appropriate.
``(5) Actuarial equivalence requirement.--Coverage meets the
requirement of this paragraph only if the coverage is determined
(in a manner specified by the Secretary) to provide coverage of the
cost of prescription drugs the actuarial value of which (as defined
by the Secretary) to the individual equals or exceeds the actuarial
value of standard prescription drug coverage (as determined under
section 1860D-11(c)).
``(6) Procedures to document creditable prescription drug
coverage.--
``(A) In general.--The Secretary shall establish procedures
(including the form, manner, and time) for the documentation of
creditable prescription drug coverage, including procedures to
assist in determining whether coverage meets the requirement of
paragraph (5).
``(B) Disclosure by entities offering creditable
prescription drug coverage.--
``(i) In general.--Each entity that offers prescription
drug coverage of the type described in subparagraphs (B)
through (H) of paragraph (4) shall provide for disclosure,
in a form, manner, and time consistent with standards
established by the Secretary, to the Secretary and part D
eligible individuals of whether the coverage meets the
requirement of paragraph (5) or whether such coverage is
changed so it no longer meets such requirement.
``(ii) Disclosure of non-creditable coverage.--In the
case of such coverage that does not meet such requirement,
the disclosure to part D eligible individuals under this
subparagraph shall include information regarding the fact
that because such coverage does not meet such requirement
there are limitations on the periods in a year in which the
individuals may enroll under a prescription drug plan or an
MA-PD plan and that any such enrollment is subject to a
late enrollment penalty under this subsection.
``(C) Waiver of requirement.--In the case of a part D
eligible individual who was enrolled in prescription drug
coverage of the type described in subparagraphs (B) through (H)
of paragraph (4) which is not creditable prescription drug
coverage because it does not meet the requirement of paragraph
(5), the individual may apply to the Secretary to have such
coverage treated as creditable prescription drug coverage if
the individual establishes that the individual was not
adequately informed that such coverage did not meet such
requirement.
``(7) Continuous period of eligibility.--
``(A) In general.--Subject to subparagraph (B), for
purposes of this subsection, the term `continuous period of
eligibility' means, with respect to a part D eligible
individual, the period that begins with the first day on which
the individual is eligible to enroll in a prescription drug
plan under this part and ends with the individual's death.
``(B) Separate period.--Any period during all of which a
part D eligible individual is entitled to hospital insurance
benefits under part A and--
``(i) which terminated in or before the month preceding
the month in which the individual attained age 65; or
``(ii) for which the basis for eligibility for such
entitlement changed between section 226(b) and section
226(a), between 226(b) and section 226A, or between section
226A and section 226(a),
shall be a separate continuous period of eligibility with
respect to the individual (and each such period which
terminates shall be deemed not to have existed for purposes of
subsequently applying this paragraph).
``(c) Collection of Monthly Beneficiary Premiums.--
``(1) In general.--Subject to paragraphs (2) and (3), the
provisions of section 1854(d) shall apply to PDP sponsors and
premiums (and any late enrollment penalty) under this part in the
same manner as they apply to MA organizations and beneficiary
premiums under part C, except that any reference to a Trust Fund is
deemed for this purpose a reference to the Medicare Prescription
Drug Account.
``(2) Crediting of late enrollment penalty.--
``(A) Portion attributable to increased actuarial costs.--
With respect to late enrollment penalties imposed under
subsection (b), the Secretary shall specify the portion of such
a penalty that the Secretary estimates is attributable to
increased actuarial costs assumed by the PDP sponsor or MA
organization (and not taken into account through risk
adjustment provided under section 1860D-15(c)(1) or through
reinsurance payments under section 1860D-15(b)) as a result of
such late enrollment.
``(B) Collection through withholding.--In the case of a
late enrollment penalty that is collected from a part D
eligible individual in the manner described in section
1854(d)(2)(A), the Secretary shall provide that only the
portion of such penalty estimated under subparagraph (A) shall
be paid to the PDP sponsor or MA organization offering the part
D plan in which the individual is enrolled.
``(C) Collection by plan.--In the case of a late enrollment
penalty that is collected from a part D eligible individual in
a manner other than the manner described in section
1854(d)(2)(A), the Secretary shall establish procedures for
reducing payments otherwise made to the PDP sponsor or MA
organization by an amount equal to the amount of such penalty
less the portion of such penalty estimated under subparagraph
(A).
``(3) Fallback plans.--In applying this subsection in the case
of a fallback prescription drug plan, paragraph (2) shall not apply
and the monthly beneficiary premium shall be collected in the
manner specified in section 1854(d)(2)(A) (or such other manner as
may be provided under section 1840 in the case of monthly premiums
under section 1839).
``premium and cost-sharing subsidies for low-income individuals
``Sec. 1860D-14. (a) Income-Related Subsidies for Individuals With
Income Up to 150 Percent of Poverty Line.--
``(1) Individuals with income below 135 percent of poverty
line.--In the case of a subsidy eligible individual (as defined in
paragraph (3)) who is determined to have income that is below 135
percent of the poverty line applicable to a family of the size
involved and who meets the resources requirement described in
paragraph (3)(D) or who is covered under this paragraph under
paragraph (3)(B)(i), the individual is entitled under this section
to the following:
``(A) Full premium subsidy.--An income-related premium
subsidy equal to--
``(i) 100 percent of the amount described in subsection
(b)(1), but not to exceed the premium amount specified in
subsection (b)(2)(B); plus
``(ii) 80 percent of any late enrollment penalties
imposed under section 1860D-13(b) for the first 60 months
in which such penalties are imposed for that individual,
and 100 percent of any such penalties for any subsequent
month.
``(B) Elimination of deductible.--A reduction in the annual
deductible applicable under section 1860D-2(b)(1) to $0.
``(C) Continuation of coverage above the initial coverage
limit.--The continuation of coverage from the initial coverage
limit (under paragraph (3) of section 1860D-2(b)) for
expenditures incurred through the total amount of expenditures
at which benefits are available under paragraph (4) of such
section, subject to the reduced cost-sharing described in
subparagraph (D).
``(D) Reduction in cost-sharing below out-of-pocket
threshold.--
``(i) Institutionalized individuals.--In the case of an
individual who is a full-benefit dual eligible individual
and who is an institutionalized individual or couple (as
defined in section 1902(q)(1)(B)), the elimination of any
beneficiary coinsurance described in section 1860D-2(b)(2)
(for all amounts through the total amount of expenditures
at which benefits are available under section 1860D-
2(b)(4)).
``(ii) Lowest income dual eligible individuals.--In the
case of an individual not described in clause (i) who is a
full-benefit dual eligible individual and whose income does
not exceed 100 percent of the poverty line applicable to a
family of the size involved, the substitution for the
beneficiary coinsurance described in section 1860D-2(b)(2)
(for all amounts through the total amount of expenditures
at which benefits are available under section 1860D-
2(b)(4)) of a copayment amount that does not exceed $1 for
a generic drug or a preferred drug that is a multiple
source drug (as defined in section 1927(k)(7)(A)(i)) and $3
for any other drug, or, if less, the copayment amount
applicable to an individual under clause (iii).
``(iii) Other individuals.--In the case of an
individual not described in clause (i) or (ii), the
substitution for the beneficiary coinsurance described in
section 1860D-2(b)(2) (for all amounts through the total
amount of expenditures at which benefits are available
under section 1860D-2(b)(4)) of a copayment amount that
does not exceed the copayment amount specified under
section 1860D-2(b)(4)(A)(i)(I) for the drug and year
involved.
``(E) Elimination of cost-sharing above annual out-of-
pocket threshold.--The elimination of any cost-sharing imposed
under section 1860D-2(b)(4)(A).
``(2) Other individuals with income below 150 percent of
poverty line.--In the case of a subsidy eligible individual who is
not described in paragraph (1), the individual is entitled under
this section to the following:
``(A) Sliding scale premium subsidy.--An income-related
premium subsidy determined on a linear sliding scale ranging
from 100 percent of the amount described in paragraph (1)(A)
for individuals with incomes at or below 135 percent of such
level to 0 percent of such amount for individuals with incomes
at 150 percent of such level.
``(B) Reduction of deductible.--A reduction in the annual
deductible applicable under section 1860D-2(b)(1) to $50.
``(C) Continuation of coverage above the initial coverage
limit.--The continuation of coverage from the initial coverage
limit (under paragraph (3) of section 1860D-2(b)) for
expenditures incurred through the total amount of expenditures
at which benefits are available under paragraph (4) of such
section, subject to the reduced coinsurance described in
subparagraph (D).
``(D) Reduction in cost-sharing below out-of-pocket
threshold.--The substitution for the beneficiary coinsurance
described in section 1860D-2(b)(2) (for all amounts above the
deductible under subparagraph (B) through the total amount of
expenditures at which benefits are available under section
1860D-2(b)(4)) of coinsurance of `15 percent' instead of
coinsurance of `25 percent' in section 1860D-2(b)(2).
``(E) Reduction of cost-sharing above annual out-of-pocket
threshold.--Subject to subsection (c), the substitution for the
cost-sharing imposed under section 1860D-2(b)(4)(A) of a
copayment or coinsurance not to exceed the copayment or
coinsurance amount specified under section 1860D-
2(b)(4)(A)(i)(I) for the drug and year involved.
``(3) Determination of eligibility.--
``(A) Subsidy eligible individual defined.--For purposes of
this part, subject to subparagraph (F), the term `subsidy
eligible individual' means a part D eligible individual who--
``(i) is enrolled in a prescription drug plan or MA-PD
plan;
``(ii) has income below 150 percent of the poverty line
applicable to a family of the size involved; and
``(iii) meets the resources requirement described in
subparagraph (D) or (E).
``(B) Determinations.--
``(i) In general.--The determination of whether a part
D eligible individual residing in a State is a subsidy
eligible individual and whether the individual is described
in paragraph (1) shall be determined under the State plan
under title XIX for the State under section 1935(a) or by
the Commissioner of Social Security. There are authorized
to be appropriated to the Social Security Administration
such sums as may be necessary for the determination of
eligibility under this subparagraph.
``(ii) Effective period.--Determinations under this
subparagraph shall be effective beginning with the month in
which the individual applies for a determination that the
individual is a subsidy eligible individual and shall
remain in effect for a period specified by the Secretary,
but not to exceed 1 year.
``(iii) Redeterminations and appeals through
medicaid.--Redeterminations and appeals, with respect to
eligibility determinations under clause (i) made under a
State plan under title XIX, shall be made in accordance
with the frequency of, and manner in which,
redeterminations and appeals of eligibility are made under
such plan for purposes of medical assistance under such
title.
``(iv) Redeterminations and appeals through
commissioner.--With respect to eligibility determinations
under clause (i) made by the Commissioner of Social
Security--
``(I) redeterminations shall be made at such time
or times as may be provided by the Commissioner; and
``(II) the Commissioner shall establish procedures
for appeals of such determinations that are similar to
the procedures described in the third sentence of
section 1631(c)(1)(A).
``(v) Treatment of medicaid beneficiaries.--Subject to
subparagraph (F), the Secretary--
``(I) shall provide that part D eligible
individuals who are full-benefit dual eligible
individuals (as defined in section 1935(c)(6)) or who
are recipients of supplemental security income benefits
under title XVI shall be treated as subsidy eligible
individuals described in paragraph (1); and
``(II) may provide that part D eligible individuals
not described in subclause (I) who are determined for
purposes of the State plan under title XIX to be
eligible for medical assistance under clause (i),
(iii), or (iv) of section 1902(a)(10)(E) are treated as
being determined to be subsidy eligible individuals
described in paragraph (1).
Insofar as the Secretary determines that the eligibility
requirements under the State plan for medical assistance
referred to in subclause (II) are substantially the same as
the requirements for being treated as a subsidy eligible
individual described in paragraph (1), the Secretary shall
provide for the treatment described in such subclause.
``(C) Income determinations.--For purposes of applying this
section--
``(i) in the case of a part D eligible individual who
is not treated as a subsidy eligible individual under
subparagraph (B)(v), income shall be determined in the
manner described in section 1905(p)(1)(B), without regard
to the application of section 1902(r)(2); and
``(ii) the term `poverty line' has the meaning given
such term in section 673(2) of the Community Services Block
Grant Act (42 U.S.C. 9902(2)), including any revision
required by such section.
Nothing in clause (i) shall be construed to affect the
application of section 1902(r)(2) for the determination of
eligibility for medical assistance under title XIX.
``(D) Resource standard applied to full low-income subsidy
to be based on three times ssi resource standard.--The
resources requirement of this subparagraph is that an
individual's resources (as determined under section 1613 for
purposes of the supplemental security income program) do not
exceed--
``(i) for 2006 three times the maximum amount of
resources that an individual may have and obtain benefits
under that program; and
``(ii) for a subsequent year the resource limitation
established under this clause for the previous year
increased by the annual percentage increase in the consumer
price index (all items; U.S. city average) as of September
of such previous year.
Any resource limitation established under clause (ii) that is
not a multiple of $10 shall be rounded to the nearest multiple
of $10.
``(E) Alternative resource standard.--
``(i) In general.--The resources requirement of this
subparagraph is that an individual's resources (as
determined under section 1613 for purposes of the
supplemental security income program) do not exceed--
``(I) for 2006, $10,000 (or $20,000 in the case of
the combined value of the individual's assets or
resources and the assets or resources of the
individual's spouse); and
``(II) for a subsequent year the dollar amounts
specified in this subclause (or subclause (I)) for the
previous year increased by the annual percentage
increase in the consumer price index (all items; U.S.
city average) as of September of such previous year.
Any dollar amount established under subclause (II) that is
not a multiple of $10 shall be rounded to the nearest
multiple of $10.
``(ii) Use of simplified application form and
process.--The Secretary, jointly with the Commissioner of
Social Security, shall--
``(I) develop a model, simplified application form
and process consistent with clause (iii) for the
determination and verification of a part D eligible
individual's assets or resources under this
subparagraph; and
``(II) provide such form to States.
``(iii) Documentation and safeguards.--Under such
process--
``(I) the application form shall consist of an
attestation under penalty of perjury regarding the
level of assets or resources (or combined assets and
resources in the case of a married part D eligible
individual) and valuations of general classes of assets
or resources;
``(II) such form shall be accompanied by copies of
recent statements (if any) from financial institutions
in support of the application; and
``(III) matters attested to in the application
shall be subject to appropriate methods of
verification.
``(iv) Methodology flexibility.--The Secretary may
permit a State in making eligibility determinations for
premium and cost-sharing subsidies under this section to
use the same asset or resource methodologies that are used
with respect to eligibility for medical assistance for
medicare cost-sharing described in section 1905(p) so long
as the Secretary determines that the use of such
methodologies will not result in any significant
differences in the number of individuals determined to be
subsidy eligible individuals.
``(F) Treatment of territorial residents.--In the case of a
part D eligible individual who is not a resident of the 50
States or the District of Columbia, the individual is not
eligible to be a subsidy eligible individual under this section
but may be eligible for financial assistance with prescription
drug expenses under section 1935(e).
``(4) Indexing dollar amounts.--
``(A) Copayment for lowest income dual eligible
individuals.--The dollar amounts applied under paragraph
(1)(D)(ii)--
``(i) for 2007 shall be the dollar amounts specified in
such paragraph increased by the annual percentage increase
in the consumer price index (all items; U.S. city average)
as of September of such previous year; or
``(ii) for a subsequent year shall be the dollar
amounts specified in this clause (or clause (i)) for the
previous year increased by the annual percentage increase
in the consumer price index (all items; U.S. city average)
as of September of such previous year.
Any amount established under clause (i) or (ii), that is based
on an increase of $1 or $3, that is not a multiple of 5 cents
or 10 cents, respectively, shall be rounded to the nearest
multiple of 5 cents or 10 cents, respectively.
``(B) Reduced deductible.--The dollar amount applied under
paragraph (2)(B)--
``(i) for 2007 shall be the dollar amount specified in
such paragraph increased by the annual percentage increase
described in section 1860D-2(b)(6) for 2007; or
``(ii) for a subsequent year shall be the dollar amount
specified in this clause (or clause (i)) for the previous
year increased by the annual percentage increase described
in section 1860D-2(b)(6) for the year involved.
Any amount established under clause (i) or (ii) that is not a
multiple of $1 shall be rounded to the nearest multiple of $1.
``(b) Premium Subsidy Amount.--
``(1) In general.--The premium subsidy amount described in this
subsection for a subsidy eligible individual residing in a PDP
region and enrolled in a prescription drug plan or MA-PD plan is
the low-income benchmark premium amount (as defined in paragraph
(2)) for the PDP region in which the individual resides or, if
greater, the amount specified in paragraph (3).
``(2) Low-income benchmark premium amount defined.--
``(A) In general.--For purposes of this subsection, the
term `low-income benchmark premium amount' means, with respect
to a PDP region in which--
``(i) all prescription drug plans are offered by the
same PDP sponsor, the weighted average of the amounts
described in subparagraph (B)(i) for such plans; or
``(ii) there are prescription drug plans offered by
more than one PDP sponsor, the weighted average of amounts
described in subparagraph (B) for prescription drug plans
and MA-PD plans described in section 1851(a)(2)(A)(i)
offered in such region.
``(B) Premium amounts described.--The premium amounts
described in this subparagraph are, in the case of--
``(i) a prescription drug plan that is a basic
prescription drug plan, the monthly beneficiary premium for
such plan;
``(ii) a prescription drug plan that provides
alternative prescription drug coverage the actuarial value
of which is greater than that of standard prescription drug
coverage, the portion of the monthly beneficiary premium
that is attributable to basic prescription drug coverage;
and
``(iii) an MA-PD plan, the portion of the MA monthly
prescription drug beneficiary premium that is attributable
to basic prescription drug benefits (described in section
1852(a)(6)(B)(ii)).
The premium amounts described in this subparagraph do not
include any amounts attributable to late enrollment penalties
under section 1860D-13(b).
``(3) Access to 0 premium plan.--In no case shall the premium
subsidy amount under this subsection for a PDP region be less than
the lowest monthly beneficiary premium for a prescription drug plan
that offers basic prescription drug coverage in the region.
``(c) Administration of Subsidy Program.--
``(1) In general.--The Secretary shall provide a process
whereby, in the case of a part D eligible individual who is
determined to be a subsidy eligible individual and who is enrolled
in a prescription drug plan or is enrolled in an MA-PD plan--
``(A) the Secretary provides for a notification of the PDP
sponsor or the MA organization offering the plan involved that
the individual is eligible for a subsidy and the amount of the
subsidy under subsection (a);
``(B) the sponsor or organization involved reduces the
premiums or cost-sharing otherwise imposed by the amount of the
applicable subsidy and submits to the Secretary information on
the amount of such reduction;
``(C) the Secretary periodically and on a timely basis
reimburses the sponsor or organization for the amount of such
reductions; and
``(D) the Secretary ensures the confidentiality of
individually identifiable information.
In applying subparagraph (C), the Secretary shall compute
reductions based upon imposition under subsections (a)(1)(D) and
(a)(2)(E) of unreduced copayment amounts applied under such
subsections.
``(2) Use of capitated form of payment.--The reimbursement
under this section with respect to cost-sharing subsidies may be
computed on a capitated basis, taking into account the actuarial
value of the subsidies and with appropriate adjustments to reflect
differences in the risks actually involved.
``(d) Relation to Medicaid Program.--For special provisions under
the medicaid program relating to medicare prescription drug benefits,
see section 1935.
``subsidies for part d eligible individuals for qualified
prescription drug coverage
``Sec. 1860D-15. (a) Subsidy Payment.--In order to reduce premium
levels applicable to qualified prescription drug coverage for part D
eligible individuals consistent with an overall subsidy level of 74.5
percent for basic prescription drug coverage, to reduce adverse
selection among prescription drug plans and MA-PD plans, and to promote
the participation of PDP sponsors under this part and MA organizations
under part C, the Secretary shall provide for payment to a PDP sponsor
that offers a prescription drug plan and an MA organization that offers
an MA-PD plan of the following subsidies in accordance with this
section:
``(1) Direct subsidy.--A direct subsidy for each part D
eligible individual enrolled in a prescription drug plan or MA-PD
plan for a month equal to--
``(A) the amount of the plan's standardized bid amount (as
defined in section 1860D-13(a)(5)), adjusted under subsection
(c)(1), reduced by
``(B) the base beneficiary premium (as computed under
paragraph (2) of section 1860D-13(a) and as adjusted under
paragraph (1)(B) of such section).
``(2) Subsidy through reinsurance.--The reinsurance payment
amount (as defined in subsection (b)).
This section constitutes budget authority in advance of appropriations
Acts and represents the obligation of the Secretary to provide for the
payment of amounts provided under this section.
``(b) Reinsurance Payment Amount.--
``(1) In general.--The reinsurance payment amount under this
subsection for a part D eligible individual enrolled in a
prescription drug plan or MA-PD plan for a coverage year is an
amount equal to 80 percent of the allowable reinsurance costs (as
specified in paragraph (2)) attributable to that portion of gross
covered prescription drug costs as specified in paragraph (3)
incurred in the coverage year after such individual has incurred
costs that exceed the annual out-of-pocket threshold specified in
section 1860D-2(b)(4)(B).
``(2) Allowable reinsurance costs.--For purposes of this
section, the term `allowable reinsurance costs' means, with respect
to gross covered prescription drug costs under a prescription drug
plan offered by a PDP sponsor or an MA-PD plan offered by an MA
organization, the part of such costs that are actually paid (net of
discounts, chargebacks, and average percentage rebates) by the
sponsor or organization or by (or on behalf of) an enrollee under
the plan, but in no case more than the part of such costs that
would have been paid under the plan if the prescription drug
coverage under the plan were basic prescription drug coverage, or,
in the case of a plan providing supplemental prescription drug
coverage, if such coverage were standard prescription drug
coverage.
``(3) Gross covered prescription drug costs.--For purposes of
this section, the term `gross covered prescription drug costs'
means, with respect to a part D eligible individual enrolled in a
prescription drug plan or MA-PD plan during a coverage year, the
costs incurred under the plan, not including administrative costs,
but including costs directly related to the dispensing of covered
part D drugs during the year and costs relating to the deductible.
Such costs shall be determined whether they are paid by the
individual or under the plan, regardless of whether the coverage
under the plan exceeds basic prescription drug coverage.
``(4) Coverage year defined.--For purposes of this section, the
term `coverage year' means a calendar year in which covered part D
drugs are dispensed if the claim for such drugs (and payment on
such claim) is made not later than such period after the end of
such year as the Secretary specifies.
``(c) Adjustments Relating to Bids.--
``(1) Health status risk adjustment.--
``(A) Establishment of risk adjustors.--The Secretary shall
establish an appropriate methodology for adjusting the
standardized bid amount under subsection (a)(1)(A) to take into
account variation in costs for basic prescription drug coverage
among prescription drug plans and MA-PD plans based on the
differences in actuarial risk of different enrollees being
served. Any such risk adjustment shall be designed in a manner
so as not to result in a change in the aggregate amounts
payable to such plans under subsection (a)(1) and through that
portion of the monthly beneficiary prescription drug premiums
described in subsection (a)(1)(B) and MA monthly prescription
drug beneficiary premiums.
``(B) Considerations.--In establishing the methodology
under subparagraph (A), the Secretary may take into account the
similar methodologies used under section 1853(a)(3) to adjust
payments to MA organizations for benefits under the original
medicare fee-for-service program option.
``(C) Data collection.--In order to carry out this
paragraph, the Secretary shall require--
``(i) PDP sponsors to submit data regarding drug claims
that can be linked at the individual level to part A and
part B data and such other information as the Secretary
determines necessary; and
``(ii) MA organizations that offer MA-PD plans to
submit data regarding drug claims that can be linked at the
individual level to other data that such organizations are
required to submit to the Secretary and such other
information as the Secretary determines necessary.
``(D) Publication.--At the time of publication of risk
adjustment factors under section 1853(b)(1)(B)(i)(II), the
Secretary shall publish the risk adjusters established under
this paragraph for the succeeding year.
``(2) Geographic adjustment.--
``(A) In general.--Subject to subparagraph (B), for
purposes of section 1860D-13(a)(1)(B)(iii), the Secretary shall
establish an appropriate methodology for adjusting the national
average monthly bid amount (computed under section 1860D-
13(a)(4)) to take into account differences in prices for
covered part D drugs among PDP regions.
``(B) De minimis rule.--If the Secretary determines that
the price variations described in subparagraph (A) among PDP
regions are de minimis, the Secretary shall not provide for
adjustment under this paragraph.
``(C) Budget neutral adjustment.--Any adjustment under this
paragraph shall be applied in a manner so as to not result in a
change in the aggregate payments made under this part that
would have been made if the Secretary had not applied such
adjustment.
``(d) Payment Methods.--
``(1) In general.--Payments under this section shall be based
on such a method as the Secretary determines. The Secretary may
establish a payment method by which interim payments of amounts
under this section are made during a year based on the Secretary's
best estimate of amounts that will be payable after obtaining all
of the information.
``(2) Requirement for provision of information.--
``(A) Requirement.--Payments under this section to a PDP
sponsor or MA organization are conditioned upon the furnishing
to the Secretary, in a form and manner specified by the
Secretary, of such information as may be required to carry out
this section.
``(B) Restriction on use of information.--Information
disclosed or obtained pursuant to subparagraph (A) may be used
by officers, employees, and contractors of the Department of
Health and Human Services only for the purposes of, and to the
extent necessary in, carrying out this section.
``(3) Source of payments.--Payments under this section shall be
made from the Medicare Prescription Drug Account.
``(4) Application of enrollee adjustment.--The provisions of
section 1853(a)(2) shall apply to payments to PDP sponsors under
this section in the same manner as they apply to payments to MA
organizations under section 1853(a).
``(e) Portion of Total Payments to a Sponsor or Organization
Subject to Risk (Application of Risk Corridors).--
``(1) Computation of adjusted allowable risk corridor costs.--
``(A) In general.--For purposes of this subsection, the
term `adjusted allowable risk corridor costs' means, for a plan
for a coverage year (as defined in subsection (b)(4))--
``(i) the allowable risk corridor costs (as defined in
subparagraph (B)) for the plan for the year, reduced by
``(ii) the sum of (I) the total reinsurance payments
made under subsection (b) to the sponsor of the plan for
the year, and (II) the total subsidy payments made under
section 1860D-14 to the sponsor of the plan for the year.
``(B) Allowable risk corridor costs.--For purposes of this
subsection, the term `allowable risk corridor costs' means,
with respect to a prescription drug plan offered by a PDP
sponsor or an MA-PD plan offered by an MA organization, the
part of costs (not including administrative costs, but
including costs directly related to the dispensing of covered
part D drugs during the year) incurred by the sponsor or
organization under the plan that are actually paid (net of
discounts, chargebacks, and average percentage rebates) by the
sponsor or organization under the plan, but in no case more
than the part of such costs that would have been paid under the
plan if the prescription drug coverage under the plan were
basic prescription drug coverage, or, in the case of a plan
providing supplemental prescription drug coverage, if such
coverage were basic prescription drug coverage taking into
account the adjustment under section 1860D-11(c)(2). In
computing allowable costs under this paragraph, the Secretary
shall compute such costs based upon imposition under paragraphs
(1)(D) and (2)(E) of section 1860D-14(a) of the maximum amount
of copayments permitted under such paragraphs.
``(2) Adjustment of payment.--
``(A) No adjustment if adjusted allowable risk corridor
costs within risk corridor.--If the adjusted allowable risk
corridor costs (as defined in paragraph (1)) for the plan for
the year are at least equal to the first threshold lower limit
of the risk corridor (specified in paragraph (3)(A)(i)), but
not greater than the first threshold upper limit of the risk
corridor (specified in paragraph (3)(A)(iii)) for the plan for
the year, then no payment adjustment shall be made under this
subsection.
``(B) Increase in payment if adjusted allowable risk
corridor costs above upper limit of risk corridor.--
``(i) Costs between first and second threshold upper
limits.--If the adjusted allowable risk corridor costs for
the plan for the year are greater than the first threshold
upper limit, but not greater than the second threshold
upper limit, of the risk corridor for the plan for the
year, the Secretary shall increase the total of the
payments made to the sponsor or organization offering the
plan for the year under this section by an amount equal to
50 percent (or, for 2006 and 2007, 75 percent or 90 percent
if the conditions described in clause (iii) are met for the
year) of the difference between such adjusted allowable
risk corridor costs and the first threshold upper limit of
the risk corridor.
``(ii) Costs above second threshold upper limits.--If
the adjusted allowable risk corridor costs for the plan for
the year are greater than the second threshold upper limit
of the risk corridor for the plan for the year, the
Secretary shall increase the total of the payments made to
the sponsor or organization offering the plan for the year
under this section by an amount equal to the sum of--
``(I) 50 percent (or, for 2006 and 2007, 75 percent
or 90 percent if the conditions described in clause
(iii) are met for the year) of the difference between
the second threshold upper limit and the first
threshold upper limit; and
``(II) 80 percent of the difference between such
adjusted allowable risk corridor costs and the second
threshold upper limit of the risk corridor.
``(iii) Conditions for application of higher percentage
for 2006 and 2007.--The conditions described in this clause
are met for 2006 or 2007 if the Secretary determines with
respect to such year that--
``(I) at least 60 percent of prescription drug
plans and MA-PD plans to which this subsection applies
have adjusted allowable risk corridor costs for the
plan for the year that are more than the first
threshold upper limit of the risk corridor for the plan
for the year; and
``(II) such plans represent at least 60 percent of
part D eligible individuals enrolled in any
prescription drug plan or MA-PD plan.
``(C) Reduction in payment if adjusted allowable risk
corridor costs below lower limit of risk corridor.--
``(i) Costs between first and second threshold lower
limits.--If the adjusted allowable risk corridor costs for
the plan for the year are less than the first threshold
lower limit, but not less than the second threshold lower
limit, of the risk corridor for the plan for the year, the
Secretary shall reduce the total of the payments made to
the sponsor or organization offering the plan for the year
under this section by an amount (or otherwise recover from
the sponsor or organization an amount) equal to 50 percent
(or, for 2006 and 2007, 75 percent) of the difference
between the first threshold lower limit of the risk
corridor and such adjusted allowable risk corridor costs.
``(ii) Costs below second threshold lower limit.--If
the adjusted allowable risk corridor costs for the plan for
the year are less the second threshold lower limit of the
risk corridor for the plan for the year, the Secretary
shall reduce the total of the payments made to the sponsor
or organization offering the plan for the year under this
section by an amount (or otherwise recover from the sponsor
or organization an amount) equal to the sum of--
``(I) 50 percent (or, for 2006 and 2007, 75
percent) of the difference between the first threshold
lower limit and the second threshold lower limit; and
``(II) 80 percent of the difference between the
second threshold upper limit of the risk corridor and
such adjusted allowable risk corridor costs.
``(3) Establishment of risk corridors.--
``(A) In general.--For each plan year the Secretary shall
establish a risk corridor for each prescription drug plan and
each MA-PD plan. The risk corridor for a plan for a year shall
be equal to a range as follows:
``(i) First threshold lower limit.--The first threshold
lower limit of such corridor shall be equal to--
``(I) the target amount described in subparagraph
(B) for the plan; minus
``(II) an amount equal to the first threshold risk
percentage for the plan (as determined under
subparagraph (C)(i)) of such target amount.
``(ii) Second threshold lower limit.--The second
threshold lower limit of such corridor shall be equal to--
``(I) the target amount described in subparagraph
(B) for the plan; minus
``(II) an amount equal to the second threshold risk
percentage for the plan (as determined under
subparagraph (C)(ii)) of such target amount.
``(iii) First threshold upper limit.--The first
threshold upper limit of such corridor shall be equal to
the sum of--
``(I) such target amount; and
``(II) the amount described in clause (i)(II).
``(iv) Second threshold upper limit.--The second
threshold upper limit of such corridor shall be equal to
the sum of--
``(I) such target amount; and
``(II) the amount described in clause (ii)(II).
``(B) Target amount described.--The target amount described
in this paragraph is, with respect to a prescription drug plan
or an MA-PD plan in a year, the total amount of payments paid
to the PDP sponsor or MA-PD organization for the plan for the
year, taking into account amounts paid by the Secretary and
enrollees, based upon the standardized bid amount (as defined
in section 1860D-13(a)(5) and as risk adjusted under subsection
(c)(1)), reduced by the total amount of administrative expenses
for the year assumed in such standardized bid.
``(C) First and second threshold risk percentage defined.--
``(i) First threshold risk percentage.--Subject to
clause (iii), for purposes of this section, the first
threshold risk percentage is--
``(I) for 2006 and 2007, and 2.5 percent;
``(II) for 2008 through 2011, 5 percent; and
``(III) for 2012 and subsequent years, a percentage
established by the Secretary, but in no case less than
5 percent.
``(ii) Second threshold risk percentage.--Subject to
clause (iii), for purposes of this section, the second
threshold risk percentage is--
``(I) for 2006 and 2007, 5 percent;
``(II) for 2008 through 2011, 10 percent; and
``(III) for 2012 and subsequent years, a percentage
established by the Secretary that is greater than the
percent established for the year under clause (i)(III),
but in no case less than 10 percent.
``(iii) Reduction of risk percentage to ensure 2 plans
in an area.--Pursuant to section 1860D-11(b)(2)(E)(ii), a
PDP sponsor may submit a bid that requests a decrease in
the applicable first or second threshold risk percentages
or an increase in the percents applied under paragraph (2).
``(4) Plans at risk for entire amount of supplemental
prescription drug coverage.--A PDP sponsor and MA organization that
offers a plan that provides supplemental prescription drug benefits
shall be at full financial risk for the provision of such
supplemental benefits.
``(5) No effect on monthly premium.--No adjustment in payments
made by reason of this subsection shall affect the monthly
beneficiary premium or the MA monthly prescription drug beneficiary
premium.
``(f) Disclosure of Information.--
``(1) In general.--Each contract under this part and under part
C shall provide that--
``(A) the PDP sponsor offering a prescription drug plan or
an MA organization offering an MA-PD plan shall provide the
Secretary with such information as the Secretary determines is
necessary to carry out this section; and
``(B) the Secretary shall have the right in accordance with
section 1857(d)(2)(B) (as applied under section 1860D-
12(b)(3)(C)) to inspect and audit any books and records of a
PDP sponsor or MA organization that pertain to the information
regarding costs provided to the Secretary under subparagraph
(A).
``(2) Restriction on use of information.--Information disclosed
or obtained pursuant to the provisions of this section may be used
by officers, employees, and contractors of the Department of Health
and Human Services only for the purposes of, and to the extent
necessary in, carrying out this section.
``(g) Payment for Fallback Prescription Drug Plans.--In lieu of the
amounts otherwise payable under this section to a PDP sponsor offering
a fallback prescription drug plan (as defined in section 1860D-
3(c)(4)), the amount payable shall be the amounts determined under the
contract for such plan pursuant to section 1860D-11(g)(5).
``medicare prescription drug account in the federal supplementary
medical insurance trust fund
``Sec. 1860D-16. (a) Establishment and Operation of Account.--
``(1) Establishment.--There is created within the Federal
Supplementary Medical Insurance Trust Fund established by section
1841 an account to be known as the `Medicare Prescription Drug
Account' (in this section referred to as the `Account').
``(2) Funding.--The Account shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1), accrued
interest on balances in the Account, and such amounts as may be
deposited in, or appropriated to, such Account as provided in this
part.
``(3) Separate from rest of trust fund.--Funds provided under
this part to the Account shall be kept separate from all other
funds within the Federal Supplementary Medical Insurance Trust
Fund, but shall be invested, and such investments redeemed, in the
same manner as all other funds and investments within such Trust
Fund.
``(b) Payments From Account.--
``(1) In general.--The Managing Trustee shall pay from time to
time from the Account such amounts as the Secretary certifies are
necessary to make payments to operate the program under this part,
including--
``(A) payments under section 1860D-14 (relating to low-
income subsidy payments);
``(B) payments under section 1860D-15 (relating to subsidy
payments and payments for fallback plans);
``(C) payments to sponsors of qualified retiree
prescription drug plans under section 1860D-22(a); and
``(D) payments with respect to administrative expenses
under this part in accordance with section 201(g).
``(2) Transfers to medicaid account for increased
administrative costs.--The Managing Trustee shall transfer from
time to time from the Account to the Grants to States for Medicaid
account amounts the Secretary certifies are attributable to
increases in payment resulting from the application of section
1935(b).
``(3) Payments of premiums withheld.--The Managing Trustee
shall make payment to the PDP sponsor or MA organization involved
of the premiums (and the portion of late enrollment penalties) that
are collected in the manner described in section 1854(d)(2)(A) and
that are payable under a prescription drug plan or MA-PD plan
offered by such sponsor or organization.
``(4) Treatment in relation to part b premium.--Amounts payable
from the Account shall not be taken into account in computing
actuarial rates or premium amounts under section 1839.
``(c) Deposits Into Account.--
``(1) Low-income transfer.--Amounts paid under section 1935(c)
(and any amounts collected or offset under paragraph (1)(C) of such
section) are deposited into the Account.
``(2) Amounts withheld.--Pursuant to sections 1860D-13(c) and
1854(d) (as applied under this part), amounts that are withheld
(and allocated) to the Account are deposited into the Account.
``(3) Appropriations to cover government contributions.--There
are authorized to be appropriated from time to time, out of any
moneys in the Treasury not otherwise appropriated, to the Account,
an amount equivalent to the amount of payments made from the
Account under subsection (b) plus such amounts as the Managing
Trustee certifies is necessary to maintain an appropriate
contingency margin, reduced by the amounts deposited under
paragraph (1) or subsection (a)(2).
``(4) Initial funding and reserve.--In order to assure prompt
payment of benefits provided under this part and the administrative
expenses thereunder during the early months of the program
established by this part and to provide an initial contingency
reserve, there are authorized to be appropriated to the Account,
out of any moneys in the Treasury not otherwise appropriated, such
amount as the Secretary certifies are required, but not to exceed
10 percent of the estimated total expenditures from such Account in
2006.
``(5) Transfer of any remaining balance from transitional
assistance account.--Any balance in the Transitional Assistance
Account that is transferred under section 1860D-31(k)(5) shall be
deposited into the Account.
``Subpart 3--Application to Medicare Advantage Program and Treatment of
Employer-Sponsored Programs and Other Prescription Drug Plans
``application to medicare advantage program and related managed care
programs
``Sec. 1860D-21. (a) Special Rules Relating to Offering of
Qualified Prescription Drug Coverage.--
``(1) In general.--An MA organization on and after January 1,
2006--
``(A) may not offer an MA plan described in section
1851(a)(2)(A) in an area unless either that plan (or another MA
plan offered by the organization in that same service area)
includes required prescription drug coverage (as defined in
paragraph (2)); and
``(B) may not offer prescription drug coverage (other than
that required under parts A and B) to an enrollee--
``(i) under an MSA plan; or
``(ii) under another MA plan unless such drug coverage
under such other plan provides qualified prescription drug
coverage and unless the requirements of this section with
respect to such coverage are met.
``(2) Qualifying coverage.--For purposes of paragraph (1)(A),
the term `required coverage' means with respect to an MA-PD plan--
``(A) basic prescription drug coverage; or
``(B) qualified prescription drug coverage that provides
supplemental prescription drug coverage, so long as there is no
MA monthly supplemental beneficiary premium applied under the
plan (due to the application of a credit against such premium
of a rebate under section 1854(b)(1)(C)).
``(b) Application of Default Enrollment Rules.--
``(1) Seamless continuation.--In applying section
1851(c)(3)(A)(ii), an individual who is enrolled in a health
benefits plan shall not be considered to have been deemed to make
an election into an MA-PD plan unless such health benefits plan
provides any prescription drug coverage.
``(2) MA continuation.--In applying section 1851(c)(3)(B), an
individual who is enrolled in an MA plan shall not be considered to
have been deemed to make an election into an MA-PD plan unless--
``(A) for purposes of the election as of January 1, 2006,
the MA plan provided as of December 31, 2005, any prescription
drug coverage; or
``(B) for periods after January 1, 2006, such MA plan is an
MA-PD plan.
``(3) Discontinuance of ma-pd election during first year of
eligibility.--In applying the second sentence of section 1851(e)(4)
in the case of an individual who is electing to discontinue
enrollment in an MA-PD plan, the individual shall be permitted to
enroll in a prescription drug plan under part D at the time of the
election of coverage under the original medicare fee-for-service
program.
``(4) Rules regarding enrollees in ma plans not providing
qualified prescription drug coverage.--In the case of an individual
who is enrolled in an MA plan (other than an MSA plan) that does
not provide qualified prescription drug coverage, if the
organization offering such coverage discontinues the offering with
respect to the individual of all MA plans that do not provide such
coverage--
``(i) the individual is deemed to have elected the
original medicare fee-for-service program option, unless
the individual affirmatively elects to enroll in an MA-PD
plan; and
``(ii) in the case of such a deemed election, the
disenrollment shall be treated as an involuntary
termination of the MA plan described in subparagraph
(B)(ii) of section 1882(s)(3) for purposes of applying such
section.
The information disclosed under section 1852(c)(1) for individuals
who are enrolled in such an MA plan shall include information
regarding such rules.
``(c) Application of Part D Rules for Prescription Drug Coverage.--
With respect to the offering of qualified prescription drug coverage by
an MA organization under this part on and after January 1, 2006--
``(1) In general.--Except as otherwise provided, the provisions
of this part shall apply under part C with respect to prescription
drug coverage provided under MA-PD plans in lieu of the other
provisions of part C that would apply to such coverage under such
plans.
``(2) Waiver.--The Secretary shall waive the provisions
referred to in paragraph (1) to the extent the Secretary determines
that such provisions duplicate, or are in conflict with, provisions
otherwise applicable to the organization or plan under part C or as
may be necessary in order to improve coordination of this part with
the benefits under this part.
``(3) Treatment of ma owned and operated pharmacies.--The
Secretary may waive the requirement of section 1860D-4(b)(1)(C) in
the case of an MA-PD plan that provides access (other than mail
order) to qualified prescription drug coverage through pharmacies
owned and operated by the MA organization, if the Secretary
determines that the organization's pharmacy network is sufficient
to provide comparable access for enrollees under the plan.
``(d) Special Rules for Private Fee-for-Service Plans That Offer
Prescription Drug Coverage.--With respect to an MA plan described in
section 1851(a)(2)(C) that offers qualified prescription drug coverage,
on and after January 1, 2006, the following rules apply:
``(1) Requirements regarding negotiated prices.--Subsections
(a)(1) and (d)(1) of section 1860D-2 and section 1860D-4(b)(2)(A)
shall not be construed to require the plan to provide negotiated
prices (described in subsection (d)(1)(B) of such section), but
shall apply to the extent the plan does so.
``(2) Modification of pharmacy access standard and disclosure
requirement.--If the plan provides coverage for drugs purchased
from all pharmacies, without charging additional cost-sharing, and
without regard to whether they are participating pharmacies in a
network or have entered into contracts or agreements with
pharmacies to provide drugs to enrollees covered by the plan,
subsections (b)(1)(C) and (k) of section 1860D-4 shall not apply to
the plan.
``(3) Drug utilization management program and medication
therapy management program not required.--The requirements of
subparagraphs (A) and (C) of section 1860D-4(c)(1) shall not apply
to the plan.
``(4) Application of reinsurance.--The Secretary shall
determine the amount of reinsurance payments under section 1860D-
15(b) using a methodology that--
``(A) bases such amount on the Secretary's estimate of the
amount of such payments that would be payable if the plan were
an MA-PD plan described in section 1851(a)(2)(A)(i) and the
previous provisions of this subsection did not apply; and
``(B) takes into account the average reinsurance payments
made under section 1860D-15(b) for populations of similar risk
under MA-PD plans described in such section.
``(5) Exemption from risk corridor provisions.--The provisions
of section 1860D-15(e) shall not apply.
``(6) Exemption from negotiations.--Subsections (d) and
(e)(2)(C) of section 1860D-11 shall not apply and the provisions of
section 1854(a)(5)(B) prohibiting the review, approval, or
disapproval of amounts described in such section shall apply to the
proposed bid and terms and conditions described in section 1860D-
11(d).
``(7) Treatment of incurred costs without regard to
formulary.--The exclusion of costs incurred for covered part D
drugs which are not included (or treated as being included) in a
plan's formulary under section 1860D-2(b)(4)(B)(i) shall not apply
insofar as the plan does not utilize a formulary.
``(e) Application to Reasonable Cost Reimbursement Contractors.--
``(1) In general.--Subject to paragraphs (2) and (3) and rules
established by the Secretary, in the case of an organization that
is providing benefits under a reasonable cost reimbursement
contract under section 1876(h) and that elects to provide qualified
prescription drug coverage to a part D eligible individual who is
enrolled under such a contract, the provisions of this part (and
related provisions of part C) shall apply to the provision of such
coverage to such enrollee in the same manner as such provisions
apply to the provision of such coverage under an MA-PD local plan
described in section 1851(a)(2)(A)(i) and coverage under such a
contract that so provides qualified prescription drug coverage
shall be deemed to be an MA-PD local plan.
``(2) Limitation on enrollment.--In applying paragraph (1), the
organization may not enroll part D eligible individuals who are not
enrolled under the reasonable cost reimbursement contract involved.
``(3) Bids not included in determining national average monthly
bid amount.--The bid of an organization offering prescription drug
coverage under this subsection shall not be taken into account in
computing the national average monthly bid amount and low-income
benchmark premium amount under this part.
``(f) Application to PACE.--
``(1) In general.--Subject to paragraphs (2) and (3) and rules
established by the Secretary, in the case of a PACE program under
section 1894 that elects to provide qualified prescription drug
coverage to a part D eligible individual who is enrolled under such
program, the provisions of this part (and related provisions of
part C) shall apply to the provision of such coverage to such
enrollee in a manner that is similar to the manner in which such
provisions apply to the provision of such coverage under an MA-PD
local plan described in section 1851(a)(2)(A)(ii) and a PACE
program that so provides such coverage may be deemed to be an MA-PD
local plan.
``(2) Limitation on enrollment.--In applying paragraph (1), the
organization may not enroll part D eligible individuals who are not
enrolled under the PACE program involved.
``(3) Bids not included in determining standardized bid
amount.--The bid of an organization offering prescription drug
coverage under this subsection is not be taken into account in
computing any average benchmark bid amount and low-income benchmark
premium amount under this part.
``special rules for employer-sponsored programs
``Sec. 1860D-22. (a) Subsidy Payment.--
``(1) In general.--The Secretary shall provide in accordance
with this subsection for payment to the sponsor of a qualified
retiree prescription drug plan (as defined in paragraph (2)) of a
special subsidy payment equal to the amount specified in paragraph
(3) for each qualified covered retiree under the plan (as defined
in paragraph (4)). This subsection constitutes budget authority in
advance of appropriations Acts and represents the obligation of the
Secretary to provide for the payment of amounts provided under this
section.
``(2) Qualified retiree prescription drug plan defined.--For
purposes of this subsection, the term `qualified retiree
prescription drug plan' means employment-based retiree health
coverage (as defined in subsection (c)(1)) if, with respect to a
part D eligible individual who is a participant or beneficiary
under such coverage, the following requirements are met:
``(A) Attestation of actuarial equivalence to standard
coverage.--The sponsor of the plan provides the Secretary,
annually or at such other time as the Secretary may require,
with an attestation that the actuarial value of prescription
drug coverage under the plan (as determined using the processes
and methods described in section 1860D-11(c)) is at least equal
to the actuarial value of standard prescription drug coverage.
``(B) Audits.--The sponsor of the plan, or an administrator
of the plan designated by the sponsor, shall maintain (and
afford the Secretary access to) such records as the Secretary
may require for purposes of audits and other oversight
activities necessary to ensure the adequacy of prescription
drug coverage and the accuracy of payments made under this
section. The provisions of section 1860D-2(d)(3) shall apply to
such information under this section (including such actuarial
value and attestation) in a manner similar to the manner in
which they apply to financial records of PDP sponsors and MA
organizations.
``(C) Provision of disclosure regarding prescription drug
coverage.--The sponsor of the plan shall provide for disclosure
of information regarding prescription drug coverage in
accordance with section 1860D-13(b)(6)(B).
``(3) Employer and union special subsidy amounts.--
``(A) In general.--For purposes of this subsection, the
special subsidy payment amount under this paragraph for a
qualifying covered retiree for a coverage year enrolled with
the sponsor of a qualified retiree prescription drug plan is,
for the portion of the retiree's gross covered retiree plan-
related prescription drug costs (as defined in subparagraph
(C)(ii)) for such year that exceeds the cost threshold amount
specified in subparagraph (B) and does not exceed the cost
limit under such subparagraph, an amount equal to 28 percent of
the allowable retiree costs (as defined in subparagraph (C)(i))
attributable to such gross covered prescription drug costs.
``(B) Cost threshold and cost limit applicable.--
``(i) In general.--Subject to clause (ii)--
``(I) the cost threshold under this subparagraph is
equal to $250 for plan years that end in 2006; and
``(II) the cost limit under this subparagraph is
equal to $5,000 for plan years that end in 2006.
``(ii) Indexing.--The cost threshold and cost limit
amounts specified in subclauses (I) and (II) of clause (i)
for a plan year that ends after 2006 shall be adjusted in
the same manner as the annual deductible and the annual
out-of-pocket threshold, respectively, are annually
adjusted under paragraphs (1) and (4)(B) of section 1860D-
2(b).
``(C) Definitions.--For purposes of this paragraph:
``(i) Allowable retiree costs.--The term `allowable
retiree costs' means, with respect to gross covered
prescription drug costs under a qualified retiree
prescription drug plan by a plan sponsor, the part of such
costs that are actually paid (net of discounts,
chargebacks, and average percentage rebates) by the sponsor
or by or on behalf of a qualifying covered retiree under
the plan.
``(ii) Gross covered retiree plan-related prescription
drug costs.--For purposes of this section, the term `gross
covered retiree plan-related prescription drug costs'
means, with respect to a qualifying covered retiree
enrolled in a qualified retiree prescription drug plan
during a coverage year, the costs incurred under the plan,
not including administrative costs, but including costs
directly related to the dispensing of covered part D drugs
during the year. Such costs shall be determined whether
they are paid by the retiree or under the plan.
``(iii) Coverage year.--The term `coverage year' has the
meaning given such term in section 1860D-15(b)(4).
``(4) Qualifying covered retiree defined.--For purposes of this
subsection, the term `qualifying covered retiree' means a part D
eligible individual who is not enrolled in a prescription drug plan
or an MA-PD plan but is covered under a qualified retiree
prescription drug plan.
``(5) Payment methods, including provision of necessary
information.--The provisions of section 1860D-15(d) (including
paragraph (2), relating to requirement for provision of
information) shall apply to payments under this subsection in a
manner similar to the manner in which they apply to payment under
section 1860D-15(b).
``(6) Construction.--Nothing in this subsection shall be
construed as--
``(A) precluding a part D eligible individual who is
covered under employment-based retiree health coverage from
enrolling in a prescription drug plan or in an MA-PD plan;
``(B) precluding such employment-based retiree health
coverage or an employer or other person from paying all or any
portion of any premium required for coverage under a
prescription drug plan or MA-PD plan on behalf of such an
individual;
``(C) preventing such employment-based retiree health
coverage from providing coverage--
``(i) that is better than standard prescription drug
coverage to retirees who are covered under a qualified
retiree prescription drug plan; or
``(ii) that is supplemental to the benefits provided
under a prescription drug plan or an MA-PD plan, including
benefits to retirees who are not covered under a qualified
retiree prescription drug plan but who are enrolled in such
a prescription drug plan or MA-PD plan; or
``(D) preventing employers to provide for flexibility in
benefit design and pharmacy access provisions, without regard
to the requirements for basic prescription drug coverage, so
long as the actuarial equivalence requirement of paragraph
(2)(A) is met.
``(b) Application of MA Waiver Authority.--The provisions of
section 1857(i) shall apply with respect to prescription drug plans in
relation to employment-based retiree health coverage in a manner
similar to the manner in which they apply to an MA plan in relation to
employers, including authorizing the establishment of separate premium
amounts for enrollees in a prescription drug plan by reason of such
coverage and limitations on enrollment to part D eligible individuals
enrolled under such coverage.
``(c) Definitions.--For purposes of this section:
``(1) Employment-based retiree health coverage.--The term
`employment-based retiree health coverage' means health insurance
or other coverage of health care costs (whether provided by
voluntary insurance coverage or pursuant to statutory or
contractual obligation) for part D eligible individuals (or for
such individuals and their spouses and dependents) under a group
health plan based on their status as retired participants in such
plan.
``(2) Sponsor.--The term `sponsor' means a plan sponsor, as
defined in section 3(16)(B) of the Employee Retirement Income
Security Act of 1974, in relation to a group health plan, except
that, in the case of a plan maintained jointly by one employer and
an employee organization and with respect to which the employer is
the primary source of financing, such term means such employer.
``(3) Group health plan.--The term `group health plan' includes
such a plan as defined in section 607(1) of the Employee Retirement
Income Security Act of 1974 and also includes the following:
``(A) Federal and state governmental plans.--Such a plan
established or maintained for its employees by the Government
of the United States, by the government of any State or
political subdivision thereof, or by any agency or
instrumentality of any of the foregoing, including a health
benefits plan offered under chapter 89 of title 5, United
States Code.
``(B) Collectively bargained plans.--Such a plan
established or maintained under or pursuant to one or more
collective bargaining agreements.
``(C) Church plans.--Such a plan established and maintained
for its employees (or their beneficiaries) by a church or by a
convention or association of churches which is exempt from tax
under section 501 of the Internal Revenue Code of 1986.
``state pharmaceutical assistance programs
``Sec. 1860D-23. (a) Requirements for Benefit Coordination.--
``(1) In general.--Before July 1, 2005, the Secretary shall
establish consistent with this section requirements for
prescription drug plans to ensure the effective coordination
between a part D plan (as defined in paragraph (5)) and a State
Pharmaceutical Assistance Program (as defined in subsection (b))
with respect to--
``(A) payment of premiums and coverage; and
``(B) payment for supplemental prescription drug benefits,
for part D eligible individuals enrolled under both types of plans.
``(2) Coordination elements.--The requirements under paragraph
(1) shall include requirements relating to coordination of each of
the following:
``(A) Enrollment file sharing.
``(B) The processing of claims, including electronic
processing.
``(C) Claims payment.
``(D) Claims reconciliation reports.
``(E) Application of the protection against high out-of-
pocket expenditures under section 1860D-2(b)(4).
``(F) Other administrative processes specified by the
Secretary.
Such requirements shall be consistent with applicable law to
safeguard the privacy of any individually identifiable beneficiary
information.
``(3) Use of lump sum per capita method.--Such requirements
shall include a method for the application by a part D plan of
specified funding amounts from a State Pharmaceutical Assistance
Program for enrolled individuals for supplemental prescription drug
benefits.
``(4) Consultation.--In establishing requirements under this
subsection, the Secretary shall consult with State Pharmaceutical
Assistance Programs, MA organizations, States, pharmaceutical
benefit managers, employers, representatives of part D eligible
individuals, the data processing experts, pharmacists,
pharmaceutical manufacturers, and other experts.
``(5) Part d plan defined.--For purposes of this section and
section 1860D-24, the term `part D plan' means a prescription drug
plan and an MA-PD plan.
``(b) State Pharmaceutical Assistance Program.--For purposes of
this part, the term `State Pharmaceutical Assistance Program' means a
State program--
``(1) which provides financial assistance for the purchase or
provision of supplemental prescription drug coverage or benefits on
behalf of part D eligible individuals;
``(2) which, in determining eligibility and the amount of
assistance to part D eligible individuals under the Program,
provides assistance to such individuals in all part D plans and
does not discriminate based upon the part D plan in which the
individual is enrolled; and
``(3) which satisfies the requirements of subsections (a) and
(c).
``(c) Relation to Other Provisions.--
``(1) Medicare as primary payor.--The requirements of this
section shall not change or affect the primary payor status of a
part D plan.
``(2) Use of a single card.--A card that is issued under
section 1860D-4(b)(2)(A) for use under a part D plan may also be
used in connection with coverage of benefits provided under a State
Pharmaceutical Assistance Program and, in such case, may contain an
emblem or symbol indicating such connection.
``(3) Other provisions.--The provisions of section 1860D-24(c)
shall apply to the requirements under this section.
``(4) Special treatment under out-of-pocket rule.--In applying
section 1860D-2(b)(4)(C)(ii), expenses incurred under a State
Pharmaceutical Assistance Program may be counted toward the annual
out-of-pocket threshold.
``(5) Construction.--Nothing in this section shall be construed
as requiring a State Pharmaceutical Assistance Program to
coordinate or provide financial assistance with respect to any part
D plan.
``(d) Facilitation of Transition and Coordination With State
Pharmaceutical Assistance Programs.--
``(1) Transitional grant program.--The Secretary shall provide
payments to State Pharmaceutical Assistance Programs with an
application approved under this subsection.
``(2) Use of funds.--Payments under this section may be used by
a Program for any of the following:
``(A) Educating part D eligible individuals enrolled in the
Program about the prescription drug coverage available through
part D plans under this part.
``(B) Providing technical assistance, phone support, and
counseling for such enrollees to facilitate selection and
enrollment in such plans.
``(C) Other activities designed to promote the effective
coordination of enrollment, coverage, and payment between such
Program and such plans.
``(3) Allocation of funds.--Of the amount appropriated to carry
out this subsection for a fiscal year, the Secretary shall allocate
payments among Programs that have applications approved under
paragraph (4) for such fiscal year in proportion to the number of
enrollees enrolled in each such Program as of October 1, 2003.
``(4) Application.--No payments may be made under this
subsection except pursuant to an application that is submitted and
approved in a time, manner, and form specified by the Secretary.
``(5) Funding.--Out of any funds in the Treasury not otherwise
appropriated, there are appropriated for each of fiscal years 2005
and 2006, $62,500,000 to carry out this subsection.
``coordination requirements for plans providing prescription drug
coverage
``Sec. 1860D-24. (a) Application of Benefit Coordination
Requirements to Additional Plans.--
``(1) In general.--The Secretary shall apply the coordination
requirements established under section 1860D-23(a) to Rx plans
described in subsection (b) in the same manner as such requirements
apply to a State Pharmaceutical Assistance Program.
``(2) Application to treatment of certain out-of-pocket
expenditures.--To the extent specified by the Secretary, the
requirements referred to in paragraph (1) shall apply to procedures
established under section 1860D-2(b)(4)(D).
``(3) User fees.--
``(A) In general.--The Secretary may impose user fees for
the transmittal of information necessary for benefit
coordination under section 1860D-2(b)(4)(D) in a manner similar
to the manner in which user fees are imposed under section
1842(h)(3)(B), except that the Secretary may retain a portion
of such fees to defray the Secretary's costs in carrying out
procedures under section 1860D-2(b)(4)(D).
``(B) Application.--A user fee may not be imposed under
subparagraph (A) with respect to a State Pharmaceutical
Assistance Program.
``(b) Rx Plan.--An Rx plan described in this subsection is any of
the following:
``(1) Medicaid programs.--A State plan under title XIX,
including such a plan operating under a waiver under section 1115,
if it meets the requirements of section 1860D-23(b)(2).
``(2) Group health plans.--An employer group health plan.
``(3) FEHBP.--The Federal employees health benefits plan under
chapter 89 of title 5, United States Code.
``(4) Military coverage (including tricare).--Coverage under
chapter 55 of title 10, United States Code.
``(5) Other prescription drug coverage.--Such other health
benefit plans or programs that provide coverage or financial
assistance for the purchase or provision of prescription drug
coverage on behalf of part D eligible individuals as the Secretary
may specify.
``(c) Relation to Other Provisions.--
``(1) Use of cost management tools.--The requirements of this
section shall not impair or prevent a PDP sponsor or MA
organization from applying cost management tools (including
differential payments) under all methods of operation.
``(2) No affect on treatment of certain out-of-pocket
expenditures.--The requirements of this section shall not affect
the application of the procedures established under section 1860D-
2(b)(4)(D).
``Subpart 4--Medicare Prescription Drug Discount Card and Transitional
Assistance Program
``medicare prescription drug discount card and transitional
assistance program
``Sec. 1860D-31. (a) Establishment of Program.--
``(1) In general.--The Secretary shall establish a program
under this section--
``(A) to endorse prescription drug discount card programs
that meet the requirements of this section in order to provide
access to prescription drug discounts through prescription drug
card sponsors for discount card eligible individuals throughout
the United States; and
``(B) to provide for transitional assistance for
transitional assistance eligible individuals enrolled in such
endorsed programs.
``(2) Period of operation.--
``(A) Implementation deadline.--The Secretary shall
implement the program under this section so that discount cards
and transitional assistance are first available by not later
than 6 months after the date of the enactment of this section.
``(B) Expediting implementation.--The Secretary shall
promulgate regulations to carry out the program under this
section which may be effective and final immediately on an
interim basis as of the date of publication of the interim
final regulation. If the Secretary provides for an interim
final regulation, the Secretary shall provide for a period of
public comments on such regulation after the date of
publication. The Secretary may change or revise such regulation
after completion of the period of public comment.
``(C) Termination and transition.--
``(i) In general.--Subject to clause (ii)--
``(I) the program under this section shall not
apply to covered discount card drugs dispensed after
December 31, 2005; and
``(II) transitional assistance shall be available
after such date to the extent the assistance relates to
drugs dispensed on or before such date.
``(ii) Transition.--In the case of an individual who is
enrolled in an endorsed discount card program as of
December 31, 2005, during the individual's transition
period (if any) under clause (iii), in accordance with
transition rules specified by the Secretary--
``(I) such endorsed program may continue to apply
to covered discount card drugs dispensed to the
individual under the program during such transition
period;
``(II) no annual enrollment fee shall be applicable
during the transition period;
``(III) during such period the individual may not
change the endorsed program plan in which the
individual is enrolled; and
``(IV) the balance of any transitional assistance
remaining on January 1, 2006, shall remain available
for drugs dispensed during the individual's transition
period.
``(iii) Transition period.--The transition period under
this clause for an individual is the period beginning on
January 1, 2006, and ending in the case of an individual
who--
``(I) is enrolled in a prescription drug plan or an
MA-PD plan before the last date of the initial
enrollment period under section 1860D-1(b)(2)(A), on
the effective date of the individual's coverage under
such part; or
``(II) is not so enrolled, on the last day of such
initial period.
``(3) Voluntary nature of program.--Nothing in this section
shall be construed as requiring a discount card eligible individual
to enroll in an endorsed discount card program under this section.
``(4) Glossary and definitions of terms.--For purposes of this
section:
``(A) Covered discount card drug.--The term `covered
discount card drug' has the meaning given the term `covered
part D drug' in section 1860D-2(e).
``(B) Discount card eligible individual.--The term
`discount card eligible individual' is defined in subsection
(b)(1)(A).
``(C) Endorsed discount card program; endorsed program.--
The terms `endorsed discount card program' and `endorsed
program' mean a prescription drug discount card program that is
endorsed (and for which the sponsor has a contract with the
Secretary) under this section.
``(D) Negotiated price.--Negotiated prices are described in
subsection (e)(1)(A)(ii).
``(E) Prescription drug card sponsor; sponsor.--The terms
`prescription drug card sponsor' and `sponsor' are defined in
subsection (h)(1)(A).
``(F) State.--The term `State' has the meaning given such
term for purposes of title XIX.
``(G) Transitional assistance eligible individual.--The
term `transitional assistance eligible individual' is defined
in subsection (b)(2).
``(b) Eligibility for Discount Card and for Transitional
Assistance.--For purposes of this section:
``(1) Discount card eligible individual.--
``(A) In general.--The term `discount card eligible
individual' means an individual who--
``(i) is entitled to benefits, or enrolled, under part
A or enrolled under part B; and
``(ii) subject to paragraph (4), is not an individual
described in subparagraph (B).
``(B) Individual described.--An individual described in
this subparagraph is an individual described in subparagraph
(A)(i) who is enrolled under title XIX (or under a waiver under
section 1115 of the requirements of such title) and is entitled
to any medical assistance for outpatient prescribed drugs
described in section 1905(a)(12).
``(2) Transitional assistance eligible individual.--
``(A) In general.--Subject to subparagraph (B), the term
`transitional assistance eligible individual' means a discount
card eligible individual who resides in one of the 50 States or
the District of Columbia and whose income (as determined under
subsection (f)(1)(B)) is not more than 135 percent of the
poverty line (as defined in section 673(2) of the Community
Services Block Grant Act, 42 U.S.C. 9902(2), including any
revision required by such section) applicable to the family
size involved (as determined under subsection (f)(1)(B)).
``(B) Exclusion of individuals with certain prescription
drug coverage.--Such term does not include an individual who
has coverage of, or assistance for, covered discount card drugs
under any of the following:
``(i) A group health plan or health insurance coverage
(as such terms are defined in section 2791 of the Public
Health Service Act), other than coverage under a plan under
part C and other than coverage consisting only of excepted
benefits (as defined in such section).
``(ii) Chapter 55 of title 10, United States Code
(relating to medical and dental care for members of the
uniformed services).
``(iii) A plan under chapter 89 of title 5, United
States Code (relating to the Federal employees' health
benefits program).
``(3) Special transitional assistance eligible individual.--The
term `special transitional assistance eligible individual' means a
transitional assistance eligible individual whose income (as
determined under subsection (f)(1)(B)) is not more than 100 percent
of the poverty line (as defined in section 673(2) of the Community
Services Block Grant Act, 42 U.S.C. 9902(2), including any revision
required by such section) applicable to the family size involved
(as determined under subsection (f)(1)(B)).
``(4) Treatment of medicaid medically needy.--For purposes of
this section, the Secretary shall provide for appropriate rules for
the treatment of medically needy individuals described in section
1902(a)(10)(C) as discount card eligible individuals and as
transitional assistance eligible individuals.
``(c) Enrollment and Enrollment Fees.--
``(1) Enrollment process.--The Secretary shall establish a
process through which a discount card eligible individual is
enrolled and disenrolled in an endorsed discount card program under
this section consistent with the following:
``(A) Continuous open enrollment.--Subject to the
succeeding provisions of this paragraph and subsection (h)(9),
a discount card eligible individual who is not enrolled in an
endorsed discount card program and is residing in a State may
enroll in any such endorsed program--
``(i) that serves residents of the State; and
``(ii) at any time beginning on the initial enrollment
date, specified by the Secretary, and before January 1,
2006.
``(B) Use of standard enrollment form.--An enrollment in an
endorsed program shall only be effected through completion of a
standard enrollment form specified by the Secretary. Each
sponsor of an endorsed program shall transmit to the Secretary
(in a form and manner specified by the Secretary) information
on individuals who complete such enrollment forms and, to the
extent provided under subsection (f), information regarding
certification as a transitional assistance eligible individual.
``(C) Enrollment only in one program.--
``(i) In general.--Subject to clauses (ii) and (iii), a
discount card eligible individual may be enrolled in only
one endorsed discount card program under this section.
``(ii) Change in endorsed program permitted for 2005.--
The Secretary shall establish a process, similar to (and
coordinated with) the process for annual, coordinated
elections under section 1851(e)(3) during 2004, under which
an individual enrolled in an endorsed discount card program
may change the endorsed program in which the individual is
enrolled for 2005.
``(iii) Additional exceptions.--The Secretary shall
permit an individual to change the endorsed discount card
program in which the individual is enrolled in the case of
an individual who changes residence to be outside the
service area of such program and in such other exceptional
cases as the Secretary may provide (taking into account the
circumstances for special election periods under section
1851(e)(4)). Under the previous sentence, the Secretary may
consider a change in residential setting (such as placement
in a nursing facility) or enrollment in or disenrollment
from a plan under part C through which the individual was
enrolled in an endorsed program to be an exceptional
circumstance.
``(D) Disenrollment.--
``(i) Voluntary.--An individual may voluntarily
disenroll from an endorsed discount card program at any
time. In the case of such a voluntary disenrollment, the
individual may not enroll in another endorsed program,
except under such exceptional circumstances as the
Secretary may recognize under subparagraph (C)(iii) or
during the annual coordinated enrollment period provided
under subparagraph (C)(ii).
``(ii) Involuntary.--An individual who is enrolled in
an endorsed discount card program and not a transitional
assistance eligible individual may be disenrolled by the
sponsor of the program if the individual fails to pay any
annual enrollment fee required under the program.
``(E) Application to certain enrollees.--In the case of a
discount card eligible individual who is enrolled in a plan
described in section 1851(a)(2)(A) or under a reasonable cost
reimbursement contract under section 1876(h) that is offered by
an organization that also is a prescription discount card
sponsor that offers an endorsed discount card program under
which the individual may be enrolled and that has made an
election to apply the special rules under subsection (h)(9)(B)
for such an endorsed program, the individual may only enroll in
such an endorsed discount card program offered by that sponsor.
``(2) Enrollment fees.--
``(A) In general.--Subject to the succeeding provisions of
this paragraph, a prescription drug card sponsor may charge an
annual enrollment fee for each discount card eligible
individual enrolled in an endorsed discount card program
offered by such sponsor. The annual enrollment fee for either
2004 or 2005 shall not be prorated for portions of a year.
There shall be no annual enrollment fee for a year after 2005.
``(B) Amount.--No annual enrollment fee charged under
subparagraph (A) may exceed $30.
``(C) Uniform enrollment fee.--A prescription drug card
sponsor shall ensure that the annual enrollment fee (if any)
for an endorsed discount card program is the same for all
discount card eligible individuals enrolled in the program and
residing in the State.
``(D) Collection.--The annual enrollment fee (if any)
charged for enrollment in an endorsed program shall be
collected by the sponsor of the program.
``(E) Payment of fee for transitional assistance eligible
individuals.--Under subsection (g)(1)(A), the annual enrollment
fee (if any) otherwise charged under this paragraph with
respect to a transitional assistance eligible individual shall
be paid by the Secretary on behalf of such individual.
``(F) Optional payment of fee by state.--
``(i) In general.--The Secretary shall establish an
arrangement under which a State may provide for payment of
some or all of the enrollment fee for some or all enrollees
who are not transitional assistance eligible individuals in
the State, as specified by the State under the arrangement.
Insofar as such a payment arrangement is made with respect
to an enrollee, the amount of the enrollment fee shall be
paid directly by the State to the sponsor.
``(ii) No federal matching available under medicaid or
schip.--Expenditures made by a State for enrollment fees
described in clause (i) shall not be treated as State
expenditures for purposes of Federal matching payments
under title XIX or XXI.
``(G) Rules in case of changes in program enrollment during
a year.--The Secretary shall provide special rules in the case
of payment of an annual enrollment fee for a discount card
eligible individual who changes the endorsed program in which
the individual is enrolled during a year.
``(3) Issuance of discount card.--Each prescription drug card
sponsor of an endorsed discount card program shall issue, in a
standard format specified by the Secretary, to each discount card
eligible individual enrolled in such program a card that
establishes proof of enrollment and that can be used in a
coordinated manner to identify the sponsor, program, and individual
for purposes of the program under this section.
``(4) Period of access.--In the case of a discount card
eligible individual who enrolls in an endorsed program, access to
negotiated prices and transitional assistance, if any, under such
endorsed program shall take effect on such date as the Secretary
shall specify.
``(d) Provision of Information on Enrollment and Program
Features.--
``(1) Secretarial responsibilities.--
``(A) In general.--The Secretary shall provide for
activities under this subsection to broadly disseminate
information to discount card eligible individuals (and
prospective eligible individuals) regarding--
``(i) enrollment in endorsed discount card programs;
and
``(ii) the features of the program under this section,
including the availability of transitional assistance.
``(B) Promotion of informed choice.--In order to promote
informed choice among endorsed prescription drug discount card
programs, the Secretary shall provide for the dissemination of
information which--
``(i) compares the annual enrollment fee and other
features of such programs, which may include comparative
prices for covered discount card drugs; and
``(ii) includes educational materials on the
variability of discounts on prices of covered discount card
drugs under an endorsed program.
The dissemination of information under clause (i) shall, to the
extent practicable, be coordinated with the dissemination of
educational information on other medicare options.
``(C) Special rule for initial enrollment date under the
program.--To the extent practicable, the Secretary shall
ensure, through the activities described in subparagraphs (A)
and (B), that discount card eligible individuals are provided
with such information at least 30 days prior to the initial
enrollment date specified under subsection (c)(1)(A)(ii).
``(D) Use of medicare toll-free number.--The Secretary
shall provide through the toll-free telephone number 1-800-
MEDICARE for the receipt and response to inquiries and
complaints concerning the program under this section and
endorsed programs.
``(2) Prescription drug card sponsor responsibilities.--
``(A) In general.--Each prescription drug card sponsor that
offers an endorsed discount card program shall make available
to discount card eligible individuals (through the Internet and
otherwise) information that the Secretary identifies as being
necessary to promote informed choice among endorsed discount
card programs by such individuals, including information on
enrollment fees and negotiated prices for covered discount card
drugs charged to such individuals.
``(B) Response to enrollee questions.--Each sponsor
offering an endorsed discount card program shall have a
mechanism (including a toll-free telephone number) for
providing upon request specific information (such as negotiated
prices and the amount of transitional assistance remaining
available through the program) to discount card eligible
individuals enrolled in the program. The sponsor shall inform
transitional assistance eligible individuals enrolled in the
program of the availability of such toll-free telephone number
to provide information on the amount of available transitional
assistance.
``(C) Information on balance of transitional assistance
available at point-of-sale.--Each sponsor offering an endorsed
discount card program shall have a mechanism so that
information on the amount of transitional assistance remaining
under subsection (g)(1)(B) is available (electronically or by
telephone) at the point-of-sale of covered discount card drugs.
``(3) Public disclosure of pharmaceutical prices for equivalent
drugs.--
``(A) In general.--A prescription drug card sponsor
offering an endorsed discount card program shall provide that
each pharmacy that dispenses a covered discount card drug shall
inform a discount card eligible individual enrolled in the
program of any differential between the price of the drug to
the enrollee and the price of the lowest priced generic covered
discount card drug under the program that is therapeutically
equivalent and bioequivalent and available at such pharmacy.
``(B) Timing of notice.--
``(i) In general.--Subject to clause (ii), the
information under subparagraph (A) shall be provided at the
time of purchase of the drug involved, or, in the case of
dispensing by mail order, at the time of delivery of such
drug.
``(ii) Waiver.--The Secretary may waive clause (i) in
such circumstances as the Secretary may specify.
``(e) Discount Card Features.--
``(1) Savings to enrollees through negotiated prices.--
``(A) Access to negotiated prices.--
``(i) In general.--Each prescription drug card sponsor
that offers an endorsed discount card program shall provide
each discount card eligible individual enrolled in the
program with access to negotiated prices.
``(ii) Negotiated prices.--For purposes of this
section, negotiated prices shall take into account
negotiated price concessions, such as discounts, direct or
indirect subsidies, rebates, and direct or indirect
remunerations, for covered discount card drugs, and include
any dispensing fees for such drugs.
``(B) Ensuring pharmacy access.--Each prescription drug
card sponsor offering an endorsed discount card program shall
secure the participation in its network of a sufficient number
of pharmacies that dispense (other than solely by mail order)
drugs directly to enrollees to ensure convenient access to
covered discount card drugs at negotiated prices (consistent
with rules established by the Secretary). The Secretary shall
establish convenient access rules under this clause that are no
less favorable to enrollees than the standards for convenient
access to pharmacies included in the statement of work of
solicitation (#MDA906-03-R-0002) of the Department of Defense
under the TRICARE Retail Pharmacy (TRRx) as of March 13, 2003.
``(C) Prohibition on charges for required services.--
``(i) In general.--Subject to clause (ii), a
prescription drug card sponsor (and any pharmacy
contracting with such sponsor for the provision of covered
discount card drugs to individuals enrolled in such
sponsor's endorsed discount card program) may not charge an
enrollee any amount for any items and services required to
be provided by the sponsor under this section.
``(ii) Construction.--Nothing in clause (i) shall be
construed to prevent--
``(I) the sponsor from charging the annual
enrollment fee (except in the case of a transitional
assistance eligible individual); and
``(II) the pharmacy dispensing the covered discount
card drug, from imposing a charge (consistent with the
negotiated price) for the covered discount card drug
dispensed, reduced by the amount of any transitional
assistance made available.
``(D) Inapplicability of medicaid best price rules.--The
prices negotiated from drug manufacturers for covered discount
card drugs under an endorsed discount card program under this
section shall (notwithstanding any other provision of law) not
be taken into account for the purposes of establishing the best
price under section 1927(c)(1)(C).
``(2) Reduction of medication errors and adverse drug
interactions.--Each endorsed discount card program shall implement
a system to reduce the likelihood of medication errors and adverse
drug interactions and to improve medication use.
``(f) Eligibility Procedures for Endorsed Programs and Transitional
Assistance.--
``(1) Determinations.--
``(A) Procedures.--The determination of whether an
individual is a discount card eligible individual or a
transitional assistance eligible individual or a special
transitional assistance eligible individual (as defined in
subsection (b)) shall be determined under procedures specified
by the Secretary consistent with this subsection.
``(B) Income and family size determinations.--For purposes
of this section, the Secretary shall define the terms `income'
and `family size' and shall specify the methods and period for
which they are determined. If under such methods income or
family size is determined based on the income or family size
for prior periods of time, the Secretary shall permit (whether
through a process of reconsideration or otherwise) an
individual whose income or family size has changed to elect to
have eligibility for transitional assistance determined based
on income or family size for a more recent period.
``(2) Use of self-certification for transitional assistance.--
``(A) In general.--Under the procedures specified under
paragraph (1)(A) an individual who wishes to be treated as a
transitional assistance eligible individual or a special
transitional assistance eligible individual under this section
(or another qualified person on such individual's behalf) shall
certify on the enrollment form under subsection (c)(1)(B) (or
similar form specified by the Secretary), through a simplified
means specified by the Secretary and under penalty of perjury
or similar sanction for false statements, as to the amount of
the individual's income, family size, and individual's
prescription drug coverage (if any) insofar as they relate to
eligibility to be a transitional assistance eligible individual
or a special transitional assistance eligible individual. Such
certification shall be deemed as consent to verification of
respective eligibility under paragraph (3). A certification
under this paragraph may be provided before, on, or after the
time of enrollment under an endorsed program.
``(B) Treatment of self-certification.--The Secretary shall
treat a certification under subparagraph (A) that is verified
under paragraph (3) as a determination that the individual
involved is a transitional assistance eligible individual or
special transitional assistance eligible individual (as the
case may be) for the entire period of the enrollment of the
individual in any endorsed program.
``(3) Verification.--
``(A) In general.--The Secretary shall establish methods
(which may include the use of sampling and the use of
information described in subparagraph (B)) to verify
eligibility for individuals who seek to enroll in an endorsed
program and for individuals who provide a certification under
paragraph (2).
``(B) Information described.--The information described in
this subparagraph is as follows:
``(i) Medicaid-related information.--Information on
eligibility under title XIX and provided to the Secretary
under arrangements between the Secretary and States in
order to verify the eligibility of individuals who seek to
enroll in an endorsed program and of individuals who
provide certification under paragraph (2).
``(ii) Social security information.--Financial
information made available to the Secretary under
arrangements between the Secretary and the Commissioner of
Social Security in order to verify the eligibility of
individuals who provide such certification.
``(iii) Information from secretary of the treasury.--
Financial information made available to the Secretary under
section 6103(l)(19) of the Internal Revenue Code of 1986 in
order to verify the eligibility of individuals who provide
such certification.
``(C) Verification in cases of medicaid enrollees.--
``(i) In general.--Nothing in this section shall be
construed as preventing the Secretary from finding that a
discount card eligible individual meets the income
requirements under subsection (b)(2)(A) if the individual
is within a category of discount card eligible individuals
who are enrolled under title XIX (such as qualified
medicare beneficiaries (QMBs), specified low-income
medicare beneficiaries (SLMBs), and certain qualified
individuals (QI-1s)).
``(ii) Availability of information for verification
purposes.--As a condition of provision of Federal financial
participation to a State that is one of the 50 States or
the District of Columbia under title XIX, for purposes of
carrying out this section, the State shall provide the
information it submits to the Secretary relating to such
title in a manner specified by the Secretary that permits
the Secretary to identify individuals who are described in
subsection (b)(1)(B) or are transitional assistance
eligible individuals or special transitional assistance
eligible individuals.
``(4) Reconsideration.--
``(A) In general.--The Secretary shall establish a process
under which a discount card eligible individual, who is
determined through the certification and verification methods
under paragraphs (2) and (3) not to be a transitional
assistance eligible individual or a special transitional
assistance eligible individual, may request a reconsideration
of the determination.
``(B) Contract authority.--The Secretary may enter into a
contract to perform the reconsiderations requested under
subparagraph (A).
``(C) Communication of results.--Under the process under
subparagraph (A) the results of such reconsideration shall be
communicated to the individual and the prescription drug card
sponsor involved.
``(g) Transitional Assistance.--
``(1) Provision of transitional assistance.--An individual who
is a transitional assistance eligible individual (as determined
under this section) and who is enrolled with an endorsed program is
entitled--
``(A) to have payment made of any annual enrollment fee
charged under subsection (c)(2) for enrollment under the
program; and
``(B) to have payment made, up to the amount specified in
paragraph (2), under such endorsed program of 90 percent (or 95
percent in the case of a special transitional assistance
eligible individual) of the costs incurred for covered discount
card drugs obtained through the program taking into account the
negotiated price (if any) for the drug under the program.
``(2) Limitation on dollar amount.--
``(A) In general.--Subject to subparagraph (B), the amount
specified in this paragraph for a transitional assistance
eligible individual--
``(i) for costs incurred during 2004, is $600; or
``(ii) for costs incurred during 2005, is--
``(I) $600, plus
``(II) except as provided in subparagraph (E), the
amount by which the amount available under this
paragraph for 2004 for that individual exceeds the
amount of payment made under paragraph (1)(B) for that
individual for costs incurred during 2004.
``(B) Proration.--
``(i) In general.--In the case of an individual not
described in clause (ii) with respect to a year, the
Secretary may prorate the amount specified in subparagraph
(A) for the balance of the year involved in a manner
specified by the Secretary.
``(ii) Individual described.--An individual described
in this clause is a transitional assistance eligible
individual who--
``(I) with respect to 2004, enrolls in an endorsed
program, and provides a certification under subsection
(f)(2), before the initial implementation date of the
program under this section; and
``(II) with respect to 2005, is enrolled in an
endorsed program, and has provided such a
certification, before February 1, 2005.
``(C) Accounting for available balances in cases of changes
in program enrollment.--In the case of a transitional
assistance eligible individual who changes the endorsed
discount card program in which the individual is enrolled under
this section, the Secretary shall provide a process under which
the Secretary provides to the sponsor of the endorsed program
in which the individual enrolls information concerning the
balance of amounts available on behalf of the individual under
this paragraph.
``(D) Limitation on use of funds.--Pursuant to subsection
(a)(2)(C), no assistance shall be provided under paragraph
(1)(B) with respect to covered discount card drugs dispensed
after December 31, 2005.
``(E) No rollover permitted in case of voluntary
disenrollment.--Except in such exceptional cases as the
Secretary may provide, in the case of a transitional assistance
eligible individual who voluntarily disenrolls from an endorsed
plan, the provisions of subclause (II) of subparagraph (A)(ii)
shall not apply.
``(3) Payment.--The Secretary shall provide a method for the
reimbursement of prescription drug card sponsors for assistance
provided under this subsection.
``(4) Coverage of coinsurance.--
``(A) Waiver permitted by pharmacy.--Nothing in this
section shall be construed as precluding a pharmacy from
reducing or waiving the application of coinsurance imposed
under paragraph (1)(B) in accordance with section
1128B(b)(3)(G).
``(B) Optional payment of coinsurance by state.--
``(i) In general.--The Secretary shall establish an
arrangement under which a State may provide for payment of
some or all of the coinsurance under paragraph (1)(B) for
some or all enrollees in the State, as specified by the
State under the arrangement. Insofar as such a payment
arrangement is made with respect to an enrollee, the amount
of the coinsurance shall be paid directly by the State to
the pharmacy involved.
``(ii) No federal matching available under medicaid or
schip.--Expenditures made by a State for coinsurance
described in clause (i) shall not be treated as State
expenditures for purposes of Federal matching payments
under title XIX or XXI.
``(iii) Not treated as medicare cost-sharing.--
Coinsurance described in paragraph (1)(B) shall not be
treated as coinsurance under this title for purposes of
section 1905(p)(3)(B).
``(C) Treatment of coinsurance.--The amount of any
coinsurance imposed under paragraph (1)(B), whether paid or
waived under this paragraph, shall not be taken into account in
applying the limitation in dollar amount under paragraph (2).
``(5) Ensuring access to transitional assistance for qualified
residents of long-term care facilities and american indians.--
``(A) Residents of long-term care facilities.--The
Secretary shall establish procedures and may waive requirements
of this section as necessary to negotiate arrangements with
sponsors to provide arrangements with pharmacies that support
long-term care facilities in order to ensure access to
transitional assistance for transitional assistance eligible
individuals who reside in long-term care facilities.
``(B) American indians.--The Secretary shall establish
procedures and may waive requirements of this section to ensure
that, for purposes of providing transitional assistance,
pharmacies operated by the Indian Health Service, Indian tribes
and tribal organizations, and urban Indian organizations (as
defined in section 4 of the Indian Health Care Improvement Act)
have the opportunity to participate in the pharmacy networks of
at least two endorsed programs in each of the 50 States and the
District of Columbia where such a pharmacy operates.
``(6) No impact on benefits under other programs.--The
availability of negotiated prices or transitional assistance under
this section shall not be treated as benefits or otherwise taken
into account in determining an individual's eligibility for, or the
amount of benefits under, any other Federal program.
``(7) Disregard for purposes of part c.--Nonuniformity of
benefits resulting from the implementation of this section
(including the provision or nonprovision of transitional assistance
and the payment or waiver of any enrollment fee under this section)
shall not be taken into account in applying section 1854(f).
``(h) Qualification of Prescription Drug Card Sponsors and
Endorsement of Discount Card Programs; Beneficiary Protections.--
``(1) Prescription drug card sponsor and qualifications.--
``(A) Prescription drug card sponsor and sponsor defined.--
For purposes of this section, the terms `prescription drug card
sponsor' and `sponsor' mean any nongovernmental entity that the
Secretary determines to be appropriate to offer an endorsed
discount card program under this section, which may include--
``(i) a pharmaceutical benefit management company;
``(ii) a wholesale or retail pharmacy delivery system;
``(iii) an insurer (including an insurer that offers
medicare supplemental policies under section 1882);
``(iv) an organization offering a plan under part C; or
``(v) any combination of the entities described in
clauses (i) through (iv).
``(B) Administrative qualifications.--Each endorsed
discount card program shall be operated directly, or through
arrangements with an affiliated organization (or
organizations), by one or more entities that have demonstrated
experience and expertise in operating such a program or a
similar program and that meets such business stability and
integrity requirements as the Secretary may specify.
``(C) Accounting for transitional assistance.--The sponsor
of an endorsed discount card program shall have arrangements
satisfactory to the Secretary to account for the assistance
provided under subsection (g) on behalf of transitional
assistance eligible individuals.
``(2) Applications for program endorsement.--
``(A) Submission.--Each prescription drug card sponsor that
seeks endorsement of a prescription drug discount card program
under this section shall submit to the Secretary, at such time
and in such manner as the Secretary may specify, an application
containing such information as the Secretary may require.
``(B) Approval; compliance with applicable requirements.--
The Secretary shall review the application submitted under
subparagraph (A) and shall determine whether to endorse the
prescription drug discount card program. The Secretary may not
endorse such a program unless--
``(i) the program and prescription drug card sponsor
offering the program comply with the applicable
requirements under this section; and
``(ii) the sponsor has entered into a contract with the
Secretary to carry out such requirements.
``(C) Termination of endorsement and contracts.--An
endorsement of an endorsed program and a contract under
subparagraph (B) shall be for the duration of the program under
this section (including any transition applicable under
subsection (a)(2)(C)(ii)), except that the Secretary may, with
notice and for cause (as defined by the Secretary), terminate
such endorsement and contract.
``(D) Ensuring choice of programs.--
``(i) In general.--The Secretary shall ensure that
there is available to each discount card eligible
individual a choice of at least 2 endorsed programs (each
offered by a different sponsor).
``(ii) Limitation on number.--The Secretary may limit
(but not below 2) the number of sponsors in a State that
are awarded contracts under this paragraph.
``(3) Service area encompassing entire states.--Except as
provided in paragraph (9), if a prescription drug card sponsor that
offers an endorsed program enrolls in the program individuals
residing in any part of a State, the sponsor must permit any
discount card eligible individual residing in any portion of the
State to enroll in the program.
``(4) Savings to medicare beneficiaries.--Each prescription
drug card sponsor that offers an endorsed discount card program
shall pass on to discount card eligible individuals enrolled in the
program negotiated prices on covered discount card drugs, including
discounts negotiated with pharmacies and manufacturers, to the
extent disclosed under subsection (i)(1).
``(5) Grievance mechanism.--Each prescription drug card sponsor
shall provide meaningful procedures for hearing and resolving
grievances between the sponsor (including any entity or individual
through which the sponsor carries out the endorsed discount card
program) and enrollees in endorsed discount card programs of the
sponsor under this section in a manner similar to that required
under section 1852(f).
``(6) Confidentiality of enrollee records.--
``(A) In general.--For purposes of the program under this
section, the operations of an endorsed program are covered
functions and a prescription drug card sponsor is a covered
entity for purposes of applying part C of title XI and all
regulatory provisions promulgated thereunder, including
regulations (relating to privacy) adopted pursuant to the
authority of the Secretary under section 264(c) of the Health
Insurance Portability and Accountability Act of 1996 (42 U.S.C.
1320d-2 note).
``(B) Waiver authority.--In order to promote participation
of sponsors in the program under this section, the Secretary
may waive such relevant portions of regulations relating to
privacy referred to in subparagraph (A), for such appropriate,
limited period of time, as the Secretary specifies.
``(7) Limitation on provision and marketing of products and
services.--The sponsor of an endorsed discount card program--
``(A) may provide under the program--
``(i) a product or service only if the product or
service is directly related to a covered discount card
drug; or
``(ii) a discount price for nonprescription drugs; and
``(B) may, to the extent otherwise permitted under
paragraph (6) (relating to application of HIPAA requirements),
market a product or service under the program only if the
product or service is directly related to--
``(i) a covered discount card drug; or
``(ii) a drug described in subparagraph (A)(ii) and the
marketing consists of information on the discounted price
made available for the drug involved.
``(8) Additional protections.--Each endorsed discount card
program shall meet such additional requirements as the Secretary
identifies to protect and promote the interest of discount card
eligible individuals, including requirements that ensure that
discount card eligible individuals enrolled in endorsed discount
card programs are not charged more than the lower of the price
based on negotiated prices or the usual and customary price.
``(9) Special rules for certain organizations.--
``(A) In general.--In the case of an organization that is
offering a plan under part C or enrollment under a reasonable
cost reimbursement contract under section 1876(h) that is
seeking to be a prescription drug card sponsor under this
section, the organization may elect to apply the special rules
under subparagraph (B) with respect to enrollees in any plan
described in section 1851(a)(2)(A) that it offers or under such
contract and an endorsed discount card program it offers, but
only if it limits enrollment under such program to individuals
enrolled in such plan or under such contract.
``(B) Special rules.--The special rules under this
subparagraph are as follows:
``(i) Limitation on enrollment.--The sponsor limits
enrollment under this section under the endorsed discount
card program to discount card eligible individuals who are
enrolled in the part C plan involved or under the
reasonable cost reimbursement contract involved and is not
required nor permitted to enroll other individuals under
such program.
``(ii) Pharmacy access.--Pharmacy access requirements
under subsection (e)(1)(B) are deemed to be met if the
access is made available through a pharmacy network (and
not only through mail order) and the network used by the
sponsor is approved by the Secretary.
``(iii) Sponsor requirements.--The Secretary may waive
the application of such requirements for a sponsor as the
Secretary determines to be duplicative or to conflict with
a requirement of the organization under part C or section
1876 (as the case may be) or to be necessary in order to
improve coordination of this section with the benefits
under such part or section.
``(i) Disclosure and Oversight.--
``(1) Disclosure.--Each prescription drug card sponsor offering
an endorsed discount card program shall disclose to the Secretary
(in a manner specified by the Secretary) information relating to
program performance, use of prescription drugs by discount card
eligible individuals enrolled in the program, the extent to which
negotiated price concessions described in subsection (e)(1)(A)(ii)
made available to the entity by a manufacturer are passed through
to enrollees through pharmacies or otherwise, and such other
information as the Secretary may specify. The provisions of section
1927(b)(3)(D) shall apply to drug pricing data reported under the
previous sentence (other than data in aggregate form).
``(2) Oversight; audit and inspection authority.--The Secretary
shall provide appropriate oversight to ensure compliance of
endorsed discount card programs and their sponsors with the
requirements of this section. The Secretary shall have the right to
audit and inspect any books and records of a prescription discount
card sponsor (and of any affiliated organization referred to in
subsection (h)(1)(B)) that pertain to the endorsed discount card
program under this section, including amounts payable to the
sponsor under this section.
``(3) Sanctions for abusive practices.--The Secretary may
implement intermediate sanctions or may revoke the endorsement of a
program offered by a sponsor under this section if the Secretary
determines that the sponsor or the program no longer meets the
applicable requirements of this section or that the sponsor has
engaged in false or misleading marketing practices. The Secretary
may impose a civil money penalty in an amount not to exceed $10,000
for conduct that a party knows or should know is a violation of
this section. The provisions of section 1128A (other than
subsections (a) and (b) and the second sentence of subsection (f))
shall apply to a civil money penalty under the previous sentence in
the same manner as such provisions apply to a penalty or proceeding
under section 1128A(a).
``(j) Treatment of Territories.--
``(1) In general.--The Secretary may waive any provision of
this section (including subsection (h)(2)(D)) in the case of a
resident of a State (other than the 50 States and the District of
Columbia) insofar as the Secretary determines it is necessary to
secure access to negotiated prices for discount card eligible
individuals (or, at the option of the Secretary, individuals
described in subsection (b)(1)(A)(i)).
``(2) Transitional assistance.--
``(A) In general.--In the case of a State, other than the
50 States and the District of Columbia, if the State
establishes a plan described in subparagraph (B) (for providing
transitional assistance with respect to the provision of
prescription drugs to some or all individuals residing in the
State who are described in subparagraph (B)(i)), the Secretary
shall pay to the State for the entire period of the operation
of this section an amount equal to the amount allotted to the
State under subparagraph (C).
``(B) Plan.--The plan described in this subparagraph is a
plan that--
``(i) provides transitional assistance with respect to
the provision of covered discount card drugs to some or all
individuals who are entitled to benefits under part A or
enrolled under part B, who reside in the State, and who
have income below 135 percent of the poverty line; and
``(ii) assures that amounts received by the State under
this paragraph are used only for such assistance.
``(C) Allotment limit.--The amount described in this
subparagraph for a State is equal to $35,000,000 multiplied by
the ratio (as estimated by the Secretary) of--
``(i) the number of individuals who are entitled to
benefits under part A or enrolled under part B and who
reside in the State (as determined by the Secretary as of
July 1, 2003), to
``(ii) the sum of such numbers for all States to which
this paragraph applies.
``(D) Continued availability of funds.--Amounts made
available to a State under this paragraph which are not used
under this paragraph shall be added to the amount available to
that State for purposes of carrying out section 1935(e).
``(k) Funding.--
``(1) Establishment of transitional assistance account.--
``(A) In general.--There is created within the Federal
Supplementary Medical Insurance Trust Fund established by
section 1841 an account to be known as the `Transitional
Assistance Account' (in this subsection referred to as the
`Account').
``(B) Funds.--The Account shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1),
accrued interest on balances in the Account, and such amounts
as may be deposited in, or appropriated to, the Account as
provided in this subsection.
``(C) Separate from rest of trust fund.--Funds provided
under this subsection to the Account shall be kept separate
from all other funds within the Federal Supplementary Medical
Insurance Trust Fund, but shall be invested, and such
investments redeemed, in the same manner as all other funds and
investments within such Trust Fund.
``(2) Payments from account.--
``(A) In general.--The Managing Trustee shall pay from time
to time from the Account such amounts as the Secretary
certifies are necessary to make payments for transitional
assistance provided under subsections (g) and (j)(2).
``(B) Treatment in relation to part b premium.--Amounts
payable from the Account shall not be taken into account in
computing actuarial rates or premium amounts under section
1839.
``(3) Appropriations to cover benefits.--There are appropriated
to the Account in a fiscal year, out of any moneys in the Treasury
not otherwise appropriated, an amount equal to the payments made
from the Account in the year.
``(4) For administrative expenses.--There are authorized to be
appropriated to the Secretary such sums as may be necessary to
carry out the Secretary's responsibilities under this section.
``(5) Transfer of any remaining balance to medicare
prescription drug account.--Any balance remaining in the Account
after the Secretary determines that funds in the Account are no
longer necessary to carry out the program under this section shall
be transferred and deposited into the Medicare Prescription Drug
Account under section 1860D-16.
``(6) Construction.--Nothing in this section shall be construed
as authorizing the Secretary to provide for payment (other than
payment of an enrollment fee on behalf of a transitional assistance
eligible individual under subsection (g)(1)(A)) to a sponsor for
administrative expenses incurred by the sponsor in carrying out
this section (including in administering the transitional
assistance provisions of subsections (f) and (g)).
``Subpart 5--Definitions and Miscellaneous Provisions
``definitions; treatment of references to provisions in part c
``Sec. 1860D-41. (a) Definitions.--For purposes of this part:
``(1) Basic prescription drug coverage.--The term `basic
prescription drug coverage' is defined in section 1860D-2(a)(3).
``(2) Covered part d drug.--The term `covered part D drug' is
defined in section 1860D-2(e).
``(3) Creditable prescription drug coverage.--The term
`creditable prescription drug coverage' has the meaning given such
term in section 1860D-13(b)(4).
``(4) Part d eligible individual.--The term `part D eligible
individual' has the meaning given such term in section 1860D-
1(a)(4)(A).
``(5) Fallback prescription drug plan.--The term `fallback
prescription drug plan' has the meaning given such term in section
1860D-11(g)(4).
``(6) Initial coverage limit.--The term `initial coverage
limit' means such limit as established under section 1860D-2(b)(3),
or, in the case of coverage that is not standard prescription drug
coverage, the comparable limit (if any) established under the
coverage.
``(7) Insurance risk.--The term `insurance risk' means, with
respect to a participating pharmacy, risk of the type commonly
assumed only by insurers licensed by a State and does not include
payment variations designed to reflect performance-based measures
of activities within the control of the pharmacy, such as formulary
compliance and generic drug substitution.
``(8) MA plan.--The term `MA plan' has the meaning given such
term in section 1860D-1(a)(4)(B).
``(9) MA-PD plan.--The term `MA-PD plan' has the meaning given
such term in section 1860D-1(a)(4)(C).
``(10) Medicare prescription drug account.--The term `Medicare
Prescription Drug Account' means the Account created under section
1860D-16(a).
``(11) PDP approved bid.--The term `PDP approved bid' has the
meaning given such term in section 1860D-13(a)(6).
``(12) PDP region.--The term `PDP region' means such a region
as provided under section 1860D-11(a)(2).
``(13) PDP sponsor.--The term `PDP sponsor' means a
nongovernmental entity that is certified under this part as meeting
the requirements and standards of this part for such a sponsor.
``(14) Prescription drug plan.--The term `prescription drug
plan' means prescription drug coverage that is offered--
``(A) under a policy, contract, or plan that has been
approved under section 1860D-11(e); and
``(B) by a PDP sponsor pursuant to, and in accordance with,
a contract between the Secretary and the sponsor under section
1860D-12(b).
``(15) Qualified prescription drug coverage.--The term
`qualified prescription drug coverage' is defined in section 1860D-
2(a)(1).
``(16) Standard prescription drug coverage.--The term `standard
prescription drug coverage' is defined in section 1860D-2(b).
``(17) State pharmaceutical assistance program.--The term
`State Pharmaceutical Assistance Program' has the meaning given
such term in section 1860D-23(b).
``(18) Subsidy eligible individual.--The term `subsidy eligible
individual' has the meaning given such term in section 1860D-
14(a)(3)(A).
``(b) Application of Part C Provisions Under This Part.--For
purposes of applying provisions of part C under this part with respect
to a prescription drug plan and a PDP sponsor, unless otherwise
provided in this part such provisions shall be applied as if--
``(1) any reference to an MA plan included a reference to a
prescription drug plan;
``(2) any reference to an MA organization or a provider-
sponsored organization included a reference to a PDP sponsor;
``(3) any reference to a contract under section 1857 included a
reference to a contract under section 1860D-12(b);
``(4) any reference to part C included a reference to this
part; and
``(5) any reference to an election period under section 1851
were a reference to an enrollment period under section 1860D-1.
``miscellaneous provisions
``Sec. 1860D-42. (a) Access to Coverage in Territories.--The
Secretary may waive such requirements of this part, including section
1860D-3(a)(1), insofar as the Secretary determines it is necessary to
secure access to qualified prescription drug coverage for part D
eligible individuals residing in a State (other than the 50 States and
the District of Columbia).
``(b) Application of Demonstration Authority.--The provisions of
section 402 of the Social Security Amendments of 1967 (Public Law 90-
248) shall apply with respect to this part and part C in the same
manner it applies with respect to parts A and B, except that any
reference with respect to a Trust Fund in relation to an experiment or
demonstration project relating to prescription drug coverage under this
part shall be deemed a reference to the Medicare Prescription Drug
Account within the Federal Supplementary Medical Insurance Trust
Fund.''.
(b) Submission of Legislative Proposal.--Not later than 6 months
after the date of the enactment of this Act, the Secretary shall submit
to the appropriate committees of Congress a legislative proposal
providing for such technical and conforming amendments in the law as
are required by the provisions of this title and title II.
(c) Study on Transitioning Part B Prescription Drug Coverage.--Not
later than January 1, 2005, the Secretary shall submit a report to
Congress that makes recommendations regarding methods for providing
benefits under subpart 1 of part D of title XVIII of the Social
Security Act for outpatient prescription drugs for which benefits are
provided under part B of such title.
(d) Report on Progress in Implementation of Prescription Drug
Benefit.--Not later than March 1, 2005, the Secretary shall submit a
report to Congress on the progress that has been made in implementing
the prescription drug benefit under this title. The Secretary shall
include in the report specific steps that have been taken, and that
need to be taken, to ensure a timely start of the program on January 1,
2006. The report shall include recommendations regarding an appropriate
transition from the program under section 1860D-31 of the Social
Security Act to prescription drug benefits under subpart 1 of part D of
title XVIII of such Act.
(e) Additional Conforming Changes.--
(1) Conforming references to previous part d.--Any reference in
law (in effect before the date of the enactment of this Act) to
part D of title XVIII of the Social Security Act is deemed a
reference to part E of such title (as in effect after such date).
(2) Conforming amendment permitting waiver of cost-sharing.--
Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is amended--
(A) by striking ``and'' at the end of subparagraph (E);
(B) by striking the period at the end of subparagraph (F)
and inserting ``; and''; and
(C) by adding at the end the following new subparagraph:
``(G) the waiver or reduction by pharmacies (including
pharmacies of the Indian Health Service, Indian tribes, tribal
organizations, and urban Indian organizations) of any cost-sharing
imposed under part D of title XVIII, if the conditions described in
clauses (i) through (iii) of section 1128A(i)(6)(A) are met with
respect to the waiver or reduction (except that, in the case of
such a waiver or reduction on behalf of a subsidy eligible
individual (as defined in section 1860D-14(a)(3)), section
1128A(i)(6)(A) shall be applied without regard to clauses (ii) and
(iii) of that section).''.
(3) Medicare prescription drug account.--
(A) Section 201(g) (42 U.S.C. 401(g)) is amended--
(i) in paragraph (1)(B)(i)(V), by inserting ``(and, of
such portion, the portion of such costs which should have
been borne by the Medicare Prescription Drug Account in
such Trust Fund)'' after ``Trust Fund''; and
(ii) in paragraph (1)(B)(ii)(III), by inserting ``(and,
of such portion, the portion of such costs which should
have been borne by the Medicare Prescription Drug Account
in such Trust Fund)'' after ``Trust Fund''.
(B) Section 201(i)(1) (42 U.S.C. 401(i)(1)) is amended by
inserting ``(and for the Medicare Prescription Drug Account and
the Transitional Assistance Account in such Trust Fund)'' after
``Federal Supplementary Medical Insurance Trust Fund''.
(C) Section 1841 (42 U.S.C. 1395t) is amended--
(i) in the last sentence of subsection (a)--
(I) by striking ``and'' before ``such amounts'';
and
(II) by inserting before the period the following:
``, and such amounts as may be deposited in, or
appropriated to, the Medicare Prescription Drug Account
established by section 1860D-16'';
(ii) in subsection (g), by adding at the end the
following: ``The payments provided for under part D, other
than under section 1860D-31(k)(2), shall be made from the
Medicare Prescription Drug Account in the Trust Fund.'';
(iii) in subsection (h), by inserting ``or pursuant to
section 1860D-13(c)(1) or 1854(d)(2)(A) (in which case
payments shall be made in appropriate part from the
Medicare Prescription Drug Account in the Trust Fund)''
after ``1840(d)''; and
(iv) in subsection (i), by inserting after ``and
section 1842(g)'' the following: ``and pursuant to sections
1860D-13(c)(1) and 1854(d)(2)(A) (in which case payments
shall be made in appropriate part from the Medicare
Prescription Drug Account in the Trust Fund)''.
(D) Section 1853(f) (42 U.S.C. 1395w-23(f)) is amended--
(i) in the heading by striking ``Trust Fund'' and
inserting ``Trust Funds''; and
(ii) by inserting after the first sentence the
following: ``Payments to MA organizations for statutory
drug benefits provided under this title are made from the
Medicare Prescription Drug Account in the Federal
Supplementary Medical Insurance Trust Fund.''.
(4) Application of confidentiality for drug pricing data.--
Section 1927(b)(3)(D) (42 U.S.C. 1396r-8(b)(3)(D)) is amended by
adding after and below clause (iii) the following:
``The previous sentence shall also apply to information
disclosed under section 1860D-2(d)(2) or 1860D-4(c)(2)(E).''.
(5) Clarification of treatment of part a enrollees.--Section
1818(a) (42 U.S.C. 1395i-2(a)) is amended by adding at the end the
following: ``Except as otherwise provided, any reference to an
individual entitled to benefits under this part includes an
individual entitled to benefits under this part pursuant to an
enrollment under this section or section 1818A.''.
(6) Disclosure.--Section 6103(l)(7)(D)(ii) of the Internal
Revenue Code of 1986 is amended by inserting ``or subsidies
provided under section 1860D-14 of such Act'' after ``Social
Security Act''.
(7) Extension of study authority.--Section 1875(b) (42 U.S.C.
1395ll(b)) is amended by striking ``the insurance programs under
parts A and B'' and inserting ``this title''.
(8) Conforming amendments relating to facilitation of
electronic prescribing.--
(A) Section 1128B(b)(3)(C) (42 U.S.C. 1320a-7b(b)(3)(C)) is
amended by inserting ``or in regulations under section 1860D-
3(e)(6)'' after ``1987''.
(B) Section 1877(b) (42 U.S.C. 1395nn(b)) is amended by
adding at the end the following new paragraph:
``(5) Electronic prescribing.--An exception established by
regulation under section 1860D-3(e)(6).''.
(9) Other changes.--Section 1927(g)(1)(B)(i) (42 U.S.C. 1396r-
8(g)(1)(B)(i)) is amended--
(A) by adding ``and'' at the end of subclause (II); and
(B) by striking subclause (IV).
SEC. 102. MEDICARE ADVANTAGE CONFORMING AMENDMENTS.
(a) Conforming Amendments to Enrollment Process.--
(1) Extending open enrollment periods.--Section 1851(e) (42
U.S.C. 1395w-21(e)) is amended--
(A) in paragraph (2), by striking ``2004'' and ``2005'' and
inserting ``2005'' and ``2006'' each place it appears; and
(B) in paragraph (4), by striking ``2005'' and inserting
``2006'' each place it appears.
(2) Establishment of special annual, coordinated election
period for 6 months beginning november 15, 2005.--Section
1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)) is amended to read as
follows:
``(B) Annual, coordinated election period.--For purposes of
this section, the term `annual, coordinated election period'
means--
``(i) with respect to a year before 2002, the month of
November before such year;
``(ii) with respect to 2002, 2003, 2004, and 2005, the
period beginning on November 15 and ending on December 31
of the year before such year;
``(iii) with respect to 2006, the period beginning on
November 15, 2005, and ending on May 15, 2006; and
``(iv) with respect to 2007 and succeeding years, the
period beginning on November 15 and ending on December 31
of the year before such year.''.
(3) Special information campaign.--Section 1851(e)(3) (42
U.S.C. 1395w-21(e)(3)) is amended--
(A) in subparagraph (C), by inserting ``and during the
period described in subparagraph (B)(iii)'' after ``(beginning
with 1999)''; and
(B) in subparagraph (D)--
(i) in the heading by striking ``campaign in 1998'' and
inserting ``campaigns''; and
(ii) by adding at the end the following: ``During the
period described in subparagraph (B)(iii), the Secretary
shall provide for an educational and publicity campaign to
inform MA eligible individuals about the availability of MA
plans (including MA-PD plans) offered in different areas
and the election process provided under this section.''.
(4) Coordinating initial enrollment periods.--Section
1851(e)(1) (42 U.S.C. 1395w-21(e)(1)) is amended by adding at the
end the following new sentence: ``If any portion of an individual's
initial enrollment period under part B occurs after the end of the
annual, coordinated election period described in paragraph
(3)(B)(iii), the initial enrollment period under this part shall
further extend through the end of the individual's initial
enrollment period under part B.''.
(5) Coordination of effectiveness of elections during annual
coordinated election period for 2006.--Section 1851(f)(3) (42
U.S.C. 1395w-21(f)(3)) is amended by inserting ``, other than the
period described in clause (iii) of such subsection'' after
``subsection (e)(3)(B)''.
(6) Limitation on one-change rule to same type of plan.--
Section 1851(e)(2) (42 U.S.C. 1395w-21(e)(2)) is amended--
(A) in subparagraph (B)(i), by inserting ``, subparagraph
(C)(iii),'' after ``clause (ii)'';
(B) in subparagraph (C)(i), by striking ``clause (ii)'' and
inserting ``clauses (ii) and (iii)''; and
(C) by adding at the end of subparagraph (C) the following
new clause:
``(iii) Limitation on exercise of right with respect to
prescription drug coverage.--Effective for plan years
beginning on or after January 1, 2006, in applying clause
(i) (and clause (i) of subparagraph (B)) in the case of an
individual who--
``(I) is enrolled in an MA plan that does provide
qualified prescription drug coverage, the individual
may exercise the right under such clause only with
respect to coverage under the original fee-for-service
plan or coverage under another MA plan that does not
provide such coverage and may not exercise such right
to obtain coverage under an MA-PD plan or under a
prescription drug plan under part D; or
``(II) is enrolled in an MA-PD plan, the individual
may exercise the right under such clause only with
respect to coverage under another MA-PD plan (and not
an MA plan that does not provide qualified prescription
drug coverage) or under the original fee-for-service
plan and coverage under a prescription drug plan under
part D.''.
(b) Promotion of E-Prescribing by MA Plans.--Section 1852(j) (42
U.S.C. 1395w-22(j)) is amended by adding at the end the following new
paragraph:
``(7) Promotion of E-Prescribing by MA Plans.--
``(A) In general.--An MA-PD plan may provide for a separate
payment or otherwise provide for a differential payment for a
participating physician that prescribes covered part D drugs in
accordance with an electronic prescription drug program that
meets standards established under section 1860D-4(e).
``(B) Considerations.--Such payment may take into
consideration the costs of the physician in implementing such a
program and may also be increased for those participating
physicians who significantly increase--
``(i) formulary compliance;
``(ii) lower cost, therapeutically equivalent
alternatives;
``(iii) reductions in adverse drug interactions; and
``(iv) efficiencies in filing prescriptions through
reduced administrative costs.
``(C) Structure.--Additional or increased payments under
this subsection may be structured in the same manner as
medication therapy management fees are structured under section
1860D-4(c)(2)(E).''.
(c) Other Conforming Amendments.--
(1) Section 1851(a)(1) (42 U.S.C. 1395w-21(a)(1)) is amended--
(A) by inserting ``(other than qualified prescription drug
benefits)'' after ``benefits'';
(B) by striking the period at the end of subparagraph (B)
and inserting a comma; and
(C) by adding after and below subparagraph (B) the
following:
``and may elect qualified prescription drug coverage in accordance
with section 1860D-1.''.
(2) Effective date.--The amendments made by this subsection
shall apply on and after January 1, 2006.
SEC. 103. MEDICAID AMENDMENTS.
(a) Determinations of Eligibility for Low-Income Subsidies.--
(1) Requirement.--Section 1902(a) (42 U.S.C. 1396a(a)) is
amended--
(A) by striking ``and'' at the end of paragraph (64);
(B) by striking the period at the end of paragraph (65) and
inserting ``; and''; and
(C) by inserting after paragraph (65) the following new
paragraph:
``(66) provide for making eligibility determinations under
section 1935(a).''.
(2) New section.--Title XIX is further amended--
(A) by redesignating section 1935 as section 1936; and
(B) by inserting after section 1934 the following new
section:
``special provisions relating to medicare prescription drug benefit
``Sec. 1935. (a) Requirements Relating to Medicare Prescription
Drug Low-Income Subsidies and Medicare Transitional Prescription Drug
Assistance.--As a condition of its State plan under this title under
section 1902(a)(66) and receipt of any Federal financial assistance
under section 1903(a), a State shall do the following:
``(1) Information for transitional prescription drug assistance
verification.--The State shall provide the Secretary with
information to carry out section 1860D-31(f)(3)(B)(i).
``(2) Eligibility determinations for low-income subsidies.--The
State shall--
``(A) make determinations of eligibility for premium and
cost-sharing subsidies under and in accordance with section
1860D-14;
``(B) inform the Secretary of such determinations in cases
in which such eligibility is established; and
``(C) otherwise provide the Secretary with such information
as may be required to carry out part D, other than subpart 4,
of title XVIII (including section 1860D-14).
``(3) Screening for eligibility, and enrollment of,
beneficiaries for medicare cost-sharing.--As part of making an
eligibility determination required under paragraph (2) for an
individual, the State shall make a determination of the
individual's eligibility for medical assistance for any medicare
cost-sharing described in section 1905(p)(3) and, if the individual
is eligible for any such medicare cost-sharing, offer enrollment to
the individual under the State plan (or under a waiver of such
plan).
``(b) Regular Federal Subsidy of Administrative Costs.--The amounts
expended by a State in carrying out subsection (a) are expenditures
reimbursable under the appropriate paragraph of section 1903(a).''.
(b) Phased-In Federal Assumption of Medicaid Responsibility for
Premium and Cost-Sharing Subsidies for Dually Eligible Individuals.--
Section 1935, as inserted by subsection (a)(2), is amended by adding at
the end the following new subsection:
``(c) Federal Assumption of Medicaid Prescription Drug Costs for
Dually Eligible Individuals.--
``(1) Phased-down state contribution.--
``(A) In general.--Each of the 50 States and the District
of Columbia for each month beginning with January 2006 shall
provide for payment under this subsection to the Secretary of
the product of--
``(i) the amount computed under paragraph (2)(A) for
the State and month;
``(ii) the total number of full-benefit dual eligible
individuals (as defined in paragraph (6)) for such State
and month; and
``(iii) the factor for the month specified in paragraph
(5).
``(B) Form and manner of payment.--Payment under
subparagraph (A) shall be made in a manner specified by the
Secretary that is similar to the manner in which State payments
are made under an agreement entered into under section 1843,
except that all such payments shall be deposited into the
Medicare Prescription Drug Account in the Federal Supplementary
Medical Insurance Trust Fund.
``(C) Compliance.--If a State fails to pay to the Secretary
an amount required under subparagraph (A), interest shall
accrue on such amount at the rate provided under section
1903(d)(5). The amount so owed and applicable interest shall be
immediately offset against amounts otherwise payable to the
State under section 1903(a), in accordance with the Federal
Claims Collection Act of 1996 and applicable regulations.
``(D) Data match.--The Secretary shall perform such
periodic data matches as may be necessary to identify and
compute the number of full-benefit dual eligible individuals
for purposes of computing the amount under subparagraph (A).
``(2) Amount.--
``(A) In general.--The amount computed under this paragraph
for a State described in paragraph (1) and for a month in a
year is equal to--
``(i) \1/12\ of the product of--
``(I) the base year State medicaid per capita
expenditures for covered part D drugs for full-benefit
dual eligible individuals (as computed under paragraph
(3)); and
``(II) a proportion equal to 100 percent minus the
Federal medical assistance percentage (as defined in
section 1905(b)) applicable to the State for the fiscal
year in which the month occurs; and
``(ii) increased for each year (beginning with 2004 up
to and including the year involved) by the applicable
growth factor specified in paragraph (4) for that year.
``(B) Notice.--The Secretary shall notify each State
described in paragraph (1) not later than October 15 before the
beginning of each year (beginning with 2006) of the amount
computed under subparagraph (A) for the State for that year.
``(3) Base year state medicaid per capita expenditures for
covered part D drugs for full-benefit dual eligible individuals.--
``(A) In general.--For purposes of paragraph (2)(A), the
`base year State medicaid per capita expenditures for covered
part D drugs for full-benefit dual eligible individuals' for a
State is equal to the weighted average (as weighted under
subparagraph (C)) of--
``(i) the gross per capita medicaid expenditures for
prescription drugs for 2003, determined under subparagraph
(B); and
``(ii) the estimated actuarial value of prescription
drug benefits provided under a capitated managed care plan
per full-benefit dual eligible individual for 2003, as
determined using such data as the Secretary determines
appropriate.
``(B) Gross per capita medicaid expenditures for
prescription drugs.--
``(i) In general.--The gross per capita medicaid
expenditures for prescription drugs for 2003 under this
subparagraph is equal to the expenditures, including
dispensing fees, for the State under this title during 2003
for covered outpatient drugs, determined per full-benefit-
dual-eligible-individual for such individuals not receiving
medical assistance for such drugs through a medicaid
managed care plan.
``(ii) Determination.--In determining the amount under
clause (i), the Secretary shall--
``(I) use data from the Medicaid Statistical
Information System (MSIS) and other available data;
``(II) exclude expenditures attributable to covered
outpatient prescription drugs that are not covered part
D drugs (as defined in section 1860D-2(e)); and
``(III) reduce such expenditures by the product of
such portion and the adjustment factor (described in
clause (iii)).
``(iii) Adjustment factor.--The adjustment factor
described in this clause for a State is equal to the ratio
for the State for 2003 of--
``(I) aggregate payments under agreements under
section 1927; to
``(II) the gross expenditures under this title for
covered outpatient drugs referred to in clause (i).
Such factor shall be determined based on information
reported by the State in the medicaid financial management
reports (form CMS-64) for the 4 quarters of calendar year
2003 and such other data as the Secretary may require.
``(C) Weighted average.--The weighted average under
subparagraph (A) shall be determined taking into account--
``(i) with respect to subparagraph (A)(i), the average
number of full-benefit dual eligible individuals in 2003
who are not described in clause (ii); and
``(ii) with respect to subparagraph (A)(ii), the
average number of full-benefit dual eligible individuals in
such year who received in 2003 medical assistance for
covered outpatient drugs through a medicaid managed care
plan.
``(4) Applicable growth factor.--The applicable growth factor
under this paragraph for--
``(A) each of 2004, 2005, and 2006, is the average annual
percent change (to that year from the previous year) of the per
capita amount of prescription drug expenditures (as determined
based on the most recent National Health Expenditure
projections for the years involved); and
``(B) a succeeding year, is the annual percentage increase
specified in section 1860D-2(b)(6) for the year.
``(5) Factor.--The factor under this paragraph for a month--
``(A) in 2006 is 90 percent;
``(B) in 2007 is 88\1/3\ percent;
``(C) in 2008 is 86\2/3\ percent;
``(D) in 2009 is 85 percent;
``(E) in 2010 is 83\1/3\ percent;
``(F) in 2011 is 81\2/3\ percent;
``(G) in 2012 is 80 percent;
``(H) in 2013 is 78\1/3\ percent;
``(I) in 2014 is 76\2/3\ percent; or
``(J) after December 2014, is 75 percent.
``(6) Full-benefit dual eligible individual defined.--
``(A) In general.--For purposes of this section, the term
`full-benefit dual eligible individual' means for a State for a
month an individual who--
``(i) has coverage for the month for covered part D
drugs under a prescription drug plan under part D of title
XVIII, or under an MA-PD plan under part C of such title;
and
``(ii) is determined eligible by the State for medical
assistance for full benefits under this title for such
month under section 1902(a)(10)(A) or 1902(a)(10)(C), by
reason of section 1902(f), or under any other category of
eligibility for medical assistance for full benefits under
this title, as determined by the Secretary.
``(B) Treatment of medically needy and other individuals
required to spend down.--In applying subparagraph (A) in the
case of an individual determined to be eligible by the State
for medical assistance under section 1902(a)(10)(C) or by
reason of section 1902(f), the individual shall be treated as
meeting the requirement of subparagraph (A)(ii) for any month
if such medical assistance is provided for in any part of the
month.''.
(c) Medicaid Coordination With Medicare Prescription Drug
Benefits.--Section 1935, as so inserted and amended, is further amended
by adding at the end the following new subsection:
``(d) Coordination of Prescription Drug Benefits.--
``(1) Medicare as primary payor.--In the case of a part D
eligible individual (as defined in section 1860D-1(a)(3)(A)) who is
described in subsection (c)(6)(A)(ii), notwithstanding any other
provision of this title, medical assistance is not available under
this title for such drugs (or for any cost-sharing respecting such
drugs), and the rules under this title relating to the provision of
medical assistance for such drugs shall not apply. The provision of
benefits with respect to such drugs shall not be considered as the
provision of care or services under the plan under this title. No
payment may be made under section 1903(a) for prescribed drugs for
which medical assistance is not available pursuant to this
paragraph.
``(2) Coverage of certain excludable drugs.--In the case of
medical assistance under this title with respect to a covered
outpatient drug (other than a covered part D drug) furnished to an
individual who is enrolled in a prescription drug plan under part D
of title XVIII or an MA-PD plan under part C of such title, the
State may elect to provide such medical assistance in the manner
otherwise provided in the case of individuals who are not full-
benefit dual eligible individuals or through an arrangement with
such plan.''.
(d) Treatment of Territories.--
(1) In general.--Section 1935, as so inserted and amended, is
further amended--
(A) in subsection (a) in the matter preceding paragraph
(1), by inserting ``subject to subsection (e)'' after ``section
1903(a)'';
(B) in subsection (c)(1), by inserting ``subject to
subsection (e)'' after ``1903(a)(1)''; and
(C) by adding at the end the following new subsection:
``(e) Treatment of Territories.--
``(1) In general.--In the case of a State, other than the 50
States and the District of Columbia--
``(A) the previous provisions of this section shall not
apply to residents of such State; and
``(B) if the State establishes and submits to the Secretary
a plan described in paragraph (2) (for providing medical
assistance with respect to the provision of prescription drugs
to part D eligible individuals), the amount otherwise
determined under section 1108(f) (as increased under section
1108(g)) for the State shall be increased by the amount for the
fiscal period specified in paragraph (3).
``(2) Plan.--The Secretary shall determine that a plan is
described in this paragraph if the plan--
``(A) provides medical assistance with respect to the
provision of covered part D drugs (as defined in section 1860D-
2(e)) to low-income part D eligible individuals;
``(B) provides assurances that additional amounts received
by the State that are attributable to the operation of this
subsection shall be used only for such assistance and related
administrative expenses and that no more than 10 percent of the
amount specified in paragraph (3)(A) for the State for any
fiscal period shall be used for such administrative expenses;
and
``(C) meets such other criteria as the Secretary may
establish.
``(3) Increased amount.--
``(A) In general.--The amount specified in this paragraph
for a State for a year is equal to the product of--
``(i) the aggregate amount specified in subparagraph
(B); and
``(ii) the ratio (as estimated by the Secretary) of--
``(I) the number of individuals who are entitled to
benefits under part A or enrolled under part B and who
reside in the State (as determined by the Secretary
based on the most recent available data before the
beginning of the year); to
``(II) the sum of such numbers for all States that
submit a plan described in paragraph (2).
``(B) Aggregate amount.--The aggregate amount specified in
this subparagraph for--
``(i) the last 3 quarters of fiscal year 2006, is equal
to $28,125,000;
``(ii) fiscal year 2007, is equal to $37,500,000; or
``(iii) a subsequent year, is equal to the aggregate
amount specified in this subparagraph for the previous year
increased by annual percentage increase specified in
section 1860D-2(b)(6) for the year involved.
``(4) Report.--The Secretary shall submit to Congress a report
on the application of this subsection and may include in the report
such recommendations as the Secretary deems appropriate.''.
(2) Conforming amendment.--Section 1108(f) (42 U.S.C. 1308(f))
is amended by inserting ``and section 1935(e)(1)(B)'' after
``Subject to subsection (g)''.
(e) Amendment to Best Price.--
(1) In general.--Section 1927(c)(1)(C)(i) (42 U.S.C. 1396r-
8(c)(1)(C)(i)) is amended--
(A) by striking ``and'' at the end of subclause (III);
(B) by striking the period at the end of subclause (IV) and
inserting a semicolon; and
(C) by adding at the end the following new subclauses:
``(V) the prices negotiated from drug manufacturers
for covered discount card drugs under an endorsed
discount card program under section 1860D-31; and
``(VI) any prices charged which are negotiated by a
prescription drug plan under part D of title XVIII, by
an MA-PD plan under part C of such title with respect
to covered part D drugs or by a qualified retiree
prescription drug plan (as defined in section 1860D-
22(a)(2)) with respect to such drugs on behalf of
individuals entitled to benefits under part A or
enrolled under part B of such title.''.
(2) In general.--Section 1927(c)(1)(C)(i)(VI) of the Social
Security Act, as added by paragraph (1), shall apply to prices
charged for drugs dispensed on or after January 1, 2006.
(f) Extension of Medicare Cost-Sharing for Part B Premium for
Qualifying Individuals Through September 2004.--
(1) In general.--Section 1902(a)(10)(E)(iv) (42 U.S.C.
1396a(a)(10)(E)(iv)), as amended by section 401(a) of Public Law
108-89, is amended by striking ``ending with March 2004'' and
inserting ``ending with September 2004''.
(2) Total amount available for allocation.--Section 1933(g) (42
U.S.C. 1396u-3(g)), as added by section 401(c) of Public Law 108-
89, is amended--
(A) in the matter preceding paragraph (1), by striking
``March 31, 2004'' and inserting ``September 30, 2004''; and
(B) in paragraph (2), by striking ``$100,000,000'' and
inserting ``$300,000,000''.
(3) Effective date.--The amendments made by this subsection
shall apply to calendar quarters beginning on or after April 1,
2004.
(g) Outreach by the Commissioner of Social Security.--Section 1144
(42 U.S.C. 1320b-14) is amended--
(1) in the section heading, by inserting ``and subsidies for
low-income individuals under title xviii'' after ``cost-sharing'';
(2) in subsection (a)--
(A) in paragraph (1)--
(i) in subparagraph (A), by inserting ``for the
transitional assistance under section 1860D-31(f), or for
premium and cost-sharing subsidies under section 1860D-14''
before the semicolon; and
(ii) in subparagraph (B), by inserting ``, program, and
subsidies'' after ``medical assistance''; and
(B) in paragraph (2)--
(i) in the matter preceding subparagraph (A), by
inserting ``, the transitional assistance under section
1860D-31(f), or premium and cost-sharing subsidies under
section 1860D-14'' after ``assistance''; and
(ii) in subparagraph (A), by striking ``such
eligibility'' and inserting ``eligibility for medicare
cost-sharing under the medicaid program''; and
(3) in subsection (b)--
(A) in paragraph (1)(A), by inserting ``, for transitional
assistance under section 1860D-31(f), or for premium and cost-
sharing subsidies for low-income individuals under section
1860D-14'' after ``1933''; and
(B) in paragraph (2), by inserting ``, program, and
subsidies'' after ``medical assistance''.
SEC. 104. MEDIGAP AMENDMENTS.
(a) Rules Relating to Medigap Policies That Provide Prescription
Drug Coverage.--
(1) In general.--Section 1882 (42 U.S.C. 1395ss) is amended by
adding at the end the following new subsection:
``(v) Rules Relating to Medigap Policies That Provide Prescription
Drug Coverage.--
``(1) Prohibition on sale, issuance, and renewal of new
policies that provide prescription drug coverage.--
``(A) In general.--Notwithstanding any other provision of
law, on or after January 1, 2006, a medigap Rx policy (as
defined in paragraph (6)(A)) may not be sold, issued, or
renewed under this section--
``(i) to an individual who is a part D enrollee (as
defined in paragraph (6)(B)); or
``(ii) except as provided in subparagraph (B), to an
individual who is not a part D enrollee.
``(B) Continuation permitted for non-part d enrollees.--
Subparagraph (A)(ii) shall not apply to the renewal of a
medigap Rx policy that was issued before January 1, 2006.
``(C) Construction.--Nothing in this subsection shall be
construed as preventing the offering on and after January 1,
2006, of `H', `I', and `J' policies described in paragraph
(2)(D)(i) if the benefit packages are modified in accordance
with paragraph (2)(C).
``(2) Elimination of duplicative coverage upon part d
enrollment.--
``(A) In general.--In the case of an individual who is
covered under a medigap Rx policy and enrolls under a part D
plan--
``(i) before the end of the initial part D enrollment
period, the individual may--
``(I) enroll in a medicare supplemental policy
without prescription drug coverage under paragraph (3);
or
``(II) continue the policy in effect subject to the
modification described in subparagraph (C)(i); or
``(ii) after the end of such period, the individual may
continue the policy in effect subject to such modification.
``(B) Notice required to be provided to current
policyholders with medigap rx policy.--No medicare supplemental
policy of an issuer shall be deemed to meet the standards in
subsection (c) unless the issuer provides written notice (in
accordance with standards of the Secretary established in
consultation with the National Association of Insurance
Commissioners) during the 60-day period immediately preceding
the initial part D enrollment period, to each individual who is
a policyholder or certificate holder of a medigap Rx policy (at
the most recent available address of that individual) of the
following:
``(i) If the individual enrolls in a plan under part D
during the initial enrollment period under section 1860D-
1(b)(2)(A), the individual has the option of--
``(I) continuing enrollment in the individual's
current plan, but the plan's coverage of prescription
drugs will be modified under subparagraph (C)(i); or
``(II) enrolling in another medicare supplemental
policy pursuant to paragraph (3).
``(ii) If the individual does not enroll in a plan
under part D during such period, the individual may
continue enrollment in the individual's current plan
without change, but--
``(I) the individual will not be guaranteed the
option of enrollment in another medicare supplemental
policy pursuant to paragraph (3); and
``(II) if the current plan does not provide
creditable prescription drug coverage (as defined in
section 1860D-13(b)(4)), notice of such fact and that
there are limitations on the periods in a year in which
the individual may enroll under a part D plan and any
such enrollment is subject to a late enrollment
penalty.
``(iii) Such other information as the Secretary may
specify (in consultation with the National Association of
Insurance Commissioners), including the potential impact of
such election on premiums for medicare supplemental
policies.
``(C) Modification.--
``(i) In general.--The policy modification described in
this subparagraph is the elimination of prescription
coverage for expenses of prescription drugs incurred after
the effective date of the individual's coverage under a
part D plan and the appropriate adjustment of premiums to
reflect such elimination of coverage.
``(ii) Continuation of renewability and application of
modification.--No medicare supplemental policy of an issuer
shall be deemed to meet the standards in subsection (c)
unless the issuer--
``(I) continues renewability of medigap Rx policies
that it has issued, subject to subclause (II); and
``(II) applies the policy modification described in
clause (i) in the cases described in clauses (i)(II)
and (ii) of subparagraph (A).
``(D) References to rx policies.--
``(i) H, i, and j policies.--Any reference to a benefit
package classified as `H', `I', or `J' (including the
benefit package classified as `J' with a high deductible
feature, as described in subsection (p)(11)) under the
standards established under subsection (p)(2) shall be
construed as including a reference to such a package as
modified under subparagraph (C) and such packages as
modified shall not be counted as a separate benefit package
under such subsection.
``(ii) Application in waivered states.--Except for the
modification provided under subparagraph (C), the waivers
previously in effect under subsection (p)(2) shall continue
in effect.
``(3) Availability of substitute policies with guaranteed
issue.--
``(A) In general.--The issuer of a medicare supplemental
policy--
``(i) may not deny or condition the issuance or
effectiveness of a medicare supplemental policy that has a
benefit package classified as `A', `B', `C', or `F'
(including the benefit package classified as `F' with a
high deductible feature, as described in subsection
(p)(11)), under the standards established under subsection
(p)(2), or a benefit package described in subparagraph (A)
or (B) of subsection (w)(2) and that is offered and is
available for issuance to new enrollees by such issuer;
``(ii) may not discriminate in the pricing of such
policy, because of health status, claims experience,
receipt of health care, or medical condition; and
``(iii) may not impose an exclusion of benefits based
on a pre-existing condition under such policy,
in the case of an individual described in subparagraph (B) who
seeks to enroll under the policy not later than 63 days after
the effective date of the individual's coverage under a part D
plan.
``(B) Individual covered.--An individual described in this
subparagraph with respect to the issuer of a medicare
supplemental policy is an individual who--
``(i) enrolls in a part D plan during the initial part
D enrollment period;
``(ii) at the time of such enrollment was enrolled in a
medigap Rx policy issued by such issuer; and
``(iii) terminates enrollment in such policy and
submits evidence of such termination along with the
application for the policy under subparagraph (A).
``(C) Special rule for waivered states.--For purposes of
applying this paragraph in the case of a State that provides
for offering of benefit packages other than under the
classification referred to in subparagraph (A)(i), the
references to benefit packages in such subparagraph are deemed
references to comparable benefit packages offered in such
State.
``(4) Enforcement.--
``(A) Penalties for duplication.--The penalties described
in subsection (d)(3)(A)(ii) shall apply with respect to a
violation of paragraph (1)(A).
``(B) Guaranteed issue.--The provisions of paragraph (4) of
subsection (s) shall apply with respect to the requirements of
paragraph (3) in the same manner as they apply to the
requirements of such subsection.
``(5) Construction.--Any provision in this section or in a
medicare supplemental policy relating to guaranteed renewability of
coverage shall be deemed to have been met with respect to a part D
enrollee through the continuation of the policy subject to
modification under paragraph (2)(C) or the offering of a substitute
policy under paragraph (3). The previous sentence shall not be
construed to affect the guaranteed renewability of such a modified
or substitute policy.
``(6) Definitions.--For purposes of this subsection:
``(A) Medigap rx policy.--The term `medigap Rx policy'
means a medicare supplemental policy--
``(i) which has a benefit package classified as `H',
`I', or `J' (including the benefit package classified as
`J' with a high deductible feature, as described in
subsection (p)(11)) under the standards established under
subsection (p)(2), without regard to this subsection; and
``(ii) to which such standards do not apply (or to
which such standards have been waived under subsection
(p)(6)) but which provides benefits for prescription drugs.
Such term does not include a policy with a benefit package as
classified under clause (i) which has been modified under
paragraph (2)(C)(i).
``(B) Part d enrollee.--The term `part D enrollee' means an
individual who is enrolled in a part D plan.
``(C) Part d plan.--The term `part D plan' means a
prescription drug plan or an MA-PD plan (as defined for
purposes of part D).
``(D) Initial part d enrollment period.--The term `initial
part D enrollment period' means the initial enrollment period
described in section 1860D-1(b)(2)(A).''.
(2) Conforming current guaranteed issue provisions.--
(A) Extending guaranteed issue policy for individuals
enrolled in medigap rx policies who try medicare advantage.--
Subsection (s)(3)(C)(ii) of such section is amended--
(i) by striking ``(ii) Only'' and inserting ``(ii)(I)
Subject to subclause (II), only''; and
(ii) by adding at the end the following new subclause:
``(II) If the medicare supplemental policy referred to in
subparagraph (B)(v) was a medigap Rx policy (as defined in subsection
(v)(6)(A)), a medicare supplemental policy described in this
subparagraph is such policy in which the individual was most recently
enrolled as modified under subsection (v)(2)(C)(i) or, at the election
of the individual, a policy referred to in subsection (v)(3)(A)(i).''.
(B) Conforming amendment.--Section 1882(s)(3)(C)(iii) is
amended by inserting ``and subject to subsection (v)(1)'' after
``subparagraph (B)(vi)''.
(b) Development of New Standards for Medigap Policies.--
(1) In general.--Section 1882 (42 U.S.C. 1395ss) is further
amended by adding at the end the following new subsection:
``(w) Development of New Standards for Medicare Supplemental
Policies.--
``(1) In general.--The Secretary shall request the National
Association of Insurance Commissioners to review and revise the
standards for benefit packages under subsection (p)(1), taking into
account the changes in benefits resulting from enactment of the
Medicare Prescription Drug, Improvement, and Modernization Act of
2003 and to otherwise update standards to reflect other changes in
law included in such Act. Such revision shall incorporate the
inclusion of the 2 benefit packages described in paragraph (2).
Such revisions shall be made consistent with the rules applicable
under subsection (p)(1)(E) with the reference to the `1991 NAIC
Model Regulation' deemed a reference to the NAIC Model Regulation
as published in the Federal Register on December 4, 1998, and as
subsequently updated by the National Association of Insurance
Commissioners to reflect previous changes in law (and subsection
(v)) and the reference to `date of enactment of this subsection'
deemed a reference to the date of enactment of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003. To
the extent practicable, such revision shall provide for the
implementation of revised standards for benefit packages as of
January 1, 2006.
``(2) New benefit packages.--The benefit packages described in
this paragraph are the following (notwithstanding any other
provision of this section relating to a core benefit package):
``(A) First new benefit package.--A benefit package
consisting of the following:
``(i) Subject to clause (ii), coverage of 50 percent of
the cost-sharing otherwise applicable under parts A and B,
except there shall be no coverage of the part B deductible
and coverage of 100 percent of any cost-sharing otherwise
applicable for preventive benefits.
``(ii) Coverage for all hospital inpatient coinsurance
and 365 extra lifetime days of coverage of inpatient
hospital services (as in the current core benefit package).
``(iii) A limitation on annual out-of-pocket
expenditures under parts A and B to $4,000 in 2006 (or, in
a subsequent year, to such limitation for the previous year
increased by an appropriate inflation adjustment specified
by the Secretary).
``(B) Second new benefit package.--A benefit package
consisting of the benefit package described in subparagraph
(A), except as follows:
``(i) Substitute `75 percent' for `50 percent' in
clause (i) of such subparagraph.
``(ii) Substitute `$2,000' for `$4,000' in clause (iii)
of such subparagraph.''.
(2) Conforming amendments.--Section 1882 (42 U.S.C. 1395ss) is
amended--
(A) in subsection (g)(1), by inserting ``a prescription
drug plan under part D or'' after ``but does not include''; and
(B) in subsection (o)(1), by striking ``subsection (p)''
and inserting ``subsections (p), (v), and (w)''.
(c) Rule of Construction.--
(1) In general.--Nothing in this Act shall be construed to
require an issuer of a medicare supplemental policy under section
1882 of the Social Security Act (42 U.S.C. 1395rr) to participate
as a PDP sponsor under part D of title XVIII of such Act, as added
by section 101, as a condition for issuing such policy.
(2) Prohibition on state requirement.--A State may not require
an issuer of a medicare supplemental policy under section 1882 of
the Social Security Act (42 U.S.C. 1395rr) to participate as a PDP
sponsor under such part D as a condition for issuing such policy.
SEC. 105. ADDITIONAL PROVISIONS RELATING TO MEDICARE PRESCRIPTION DRUG
DISCOUNT CARD AND TRANSITIONAL ASSISTANCE PROGRAM.
(a) Exclusion of Costs From Determination of Part B Monthly
Premium.--Section 1839(g) (42 U.S.C. 1395r(g)) is amended--
(1) by striking ``attributable to the application of section''
and inserting ``attributable to--
``(1) the application of section'';
(2) by striking the period and inserting ``; and''; and
(3) by adding at the end the following new paragraph:
``(2) the medicare prescription drug discount card and
transitional assistance program under section 1860D-31.''.
(b) Application of Confidentiality for Drug Pricing Data.--The last
sentence of section 1927(b)(3)(D) (42 U.S.C. 1396r-8(b)(3)(D)), as
added by section 101(e)(4), is amended by inserting ``and drug pricing
data reported under the first sentence of section 1860D-31(i)(1)''
after ``section 1860D-4(c)(2)(E)''.
(c) Rules for Implementation.--The following rules shall apply to
the medicare prescription drug discount card and transitional
assistance program under section 1860D-31 of the Social Security Act,
as added by section 101(a):
(1) In promulgating regulations pursuant to subsection
(a)(2)(B) of such section 1860D-31--
(A) section 1871(a)(3) of the Social Security Act (42
U.S.C. 1395hh(a)(3)), as added by section 902(a)(1), shall not
apply;
(B) chapter 35 of title 44, United States Code, shall not
apply; and
(C) sections 553(d) and 801(a)(3)(A) of title 5, United
States Code, shall not apply.
(2) Section 1857(c)(5) of the Social Security Act (42 U.S.C.
1395w-27(c)(5)) shall apply with respect to section 1860D-31 of
such Act, as added by section 101(a), in the same manner as it
applies to part C of title XVIII of such Act.
(3) The administration of such program shall be made without
regard to chapter 35 of title 44, United States Code.
(4)(A) There shall be no judicial review of a determination not
to endorse, or enter into a contract, with a prescription drug card
sponsor under section 1860D-31 of the Social Security Act.
(B) In the case of any order issued to enjoin any provision of
section 1860D-31 of the Social Security Act (or of any provision of
this section), such order shall not affect any other provision of
such section (or of this section) and all such provisions shall be
treated as severable.
(d) Conforming Amendments to Federal SMI Trust Fund for
Transitional Assistance Account.--Section 1841 (42 U.S.C. 1395t), as
amended by section 101(e)(3)(C), is amended--
(1) in the last sentence of subsection (a), by inserting after
``section 1860D-16'' the following: ``or the Transitional
Assistance Account established by section 1860D-31(k)(1)''; and
(2) in subsection (g), by adding at the end the following:
``The payments provided for under section 1860D-31(k)(2) shall be
made from the Transitional Assistance Account in the Trust Fund.''.
(e) Disclosure of Return Information for Purposes of Providing
Transitional Assistance Under Medicare Discount Card Program.--
(1) In general.--Subsection (l) of section 6103 of the Internal
Revenue Code of 1986 (relating to disclosure of returns and return
information for purposes other than tax administration) is amended
by adding at the end the following new paragraph:
``(19) Disclosure of return information for purposes of
providing transitional assistance under medicare discount card
program.--
``(A) In general.--The Secretary, upon written request from
the Secretary of Health and Human Services pursuant to carrying
out section 1860D-31 of the Social Security Act, shall disclose
to officers, employees, and contractors of the Department of
Health and Human Services with respect to a taxpayer for the
applicable year--
``(i)(I) whether the adjusted gross income, as modified
in accordance with specifications of the Secretary of
Health and Human Services for purposes of carrying out such
section, of such taxpayer and, if applicable, such
taxpayer's spouse, for the applicable year, exceeds the
amounts specified by the Secretary of Health and Human
Services in order to apply the 100 and 135 percent of the
poverty lines under such section, (II) whether the return
was a joint return, and (III) the applicable year, or
``(ii) if applicable, the fact that there is no return
filed for such taxpayer for the applicable year.
``(B) Definition of applicable year.--For the purposes of
this subsection, the term `applicable year' means the most
recent taxable year for which information is available in the
Internal Revenue Service's taxpayer data information systems,
or, if there is no return filed for such taxpayer for such
year, the prior taxable year.
``(C) Restriction on use of disclosed information.--Return
information disclosed under this paragraph may be used only for
the purposes of determining eligibility for and administering
transitional assistance under section 1860D-31 of the Social
Security Act.''.
(2) Confidentiality.--Paragraph (3) of section 6103(a) of such
Code is amended by striking ``or (16)'' and inserting ``(16), or
(19)''.
(3) Procedures and recordkeeping related to disclosures.--
Subsection (p)(4) of section 6103 of such Code is amended by
striking ``(l)(16) or (17)'' each place it appears and inserting
``(l)(16), (17), or (19)''.
(4) Unauthorized disclosure or inspection.--Paragraph (2) of
section 7213(a) of such Code is amended by striking ``or (16)'' and
inserting ``(16), or (19)''.
SEC. 106. STATE PHARMACEUTICAL ASSISTANCE TRANSITION COMMISSION.
(a) Establishment.--
(1) In general.--There is established, as of the first day of
the third month beginning after the date of the enactment of this
Act, a State Pharmaceutical Assistance Transition Commission (in
this section referred to as the ``Commission'') to develop a
proposal for addressing the unique transitional issues facing State
pharmaceutical assistance programs, and program participants, due
to the implementation of the voluntary prescription drug benefit
program under part D of title XVIII of the Social Security Act, as
added by section 101.
(2) Definitions.--For purposes of this section:
(A) State pharmaceutical assistance program defined.--The
term ``State pharmaceutical assistance program'' means a
program (other than the medicaid program) operated by a State
(or under contract with a State) that provides as of the date
of the enactment of this Act financial assistance to medicare
beneficiaries for the purchase of prescription drugs.
(B) Program participant.--The term ``program participant''
means a low-income medicare beneficiary who is a participant in
a State pharmaceutical assistance program.
(b) Composition.--The Commission shall include the following:
(1) A representative of each Governor of each State that the
Secretary identifies as operating on a statewide basis a State
pharmaceutical assistance program that provides for eligibility and
benefits that are comparable or more generous than the low-income
assistance eligibility and benefits offered under section 1860D-14
of the Social Security Act.
(2) Representatives from other States that the Secretary
identifies have in operation other State pharmaceutical assistance
programs, as appointed by the Secretary.
(3) Representatives of organizations that have an inherent
interest in program participants or the program itself, as
appointed by the Secretary but not to exceed the number of
representatives under paragraphs (1) and (2).
(4) Representatives of Medicare Advantage organizations,
pharmaceutical benefit managers, and other private health insurance
plans, as appointed by the Secretary.
(5) The Secretary (or the Secretary's designee) and such other
members as the Secretary may specify.
The Secretary shall designate a member to serve as Chair of the
Commission and the Commission shall meet at the call of the Chair.
(c) Development of Proposal.--The Commission shall develop the
proposal described in subsection (a) in a manner consistent with the
following principles:
(1) Protection of the interests of program participants in a
manner that is the least disruptive to such participants and that
includes a single point of contact for enrollment and processing of
benefits.
(2) Protection of the financial and flexibility interests of
States so that States are not financially worse off as a result of
the enactment of this title.
(3) Principles of medicare modernization under this Act.
(d) Report.--By not later than January 1, 2005, the Commission
shall submit to the President and Congress a report that contains a
detailed proposal (including specific legislative or administrative
recommendations, if any) and such other recommendations as the
Commission deems appropriate.
(e) Support.--The Secretary shall provide the Commission with the
administrative support services necessary for the Commission to carry
out its responsibilities under this section.
(f) Termination.--The Commission shall terminate 30 days after the
date of submission of the report under subsection (d).
SEC. 107. STUDIES AND REPORTS.
(a) Study Regarding Regional Variations in Prescription Drug
Spending.--
(1) In general.--The Secretary shall conduct a study that
examines variations in per capita spending for covered part D drugs
under part D of title XVIII of the Social Security Act among PDP
regions and, with respect to such spending, the amount of such
variation that is attributable to--
(A) price variations (described in section 1860D-15(c)(2)
of such Act); and
(B) differences in per capita utilization that is not taken
into account in the health status risk adjustment provided
under section 1860D-15(c)(1) of such Act.
(2) Report and recommendations.--Not later than January 1,
2009, the Secretary shall submit to Congress a report on the study
conducted under paragraph (1). Such report shall include--
(A) information regarding the extent of geographic
variation described in paragraph (1)(B);
(B) an analysis of the impact on direct subsidies under
section 1860D-15(a)(1) of the Social Security Act in different
PDP regions if such subsidies were adjusted to take into
account the variation described in subparagraph (A); and
(C) recommendations regarding the appropriateness of
applying an additional geographic adjustment factor under
section 1860D-15(c)(2) that reflects some or all of the
variation described in subparagraph (A).
(b) Review and Report on Current Standards of Practice for Pharmacy
Services Provided to Patients in Nursing Facilities.--
(1) Review.--
(A) In general.--Not later than 12 months after the date of
the enactment of this Act, the Secretary shall conduct a
thorough review of the current standards of practice for
pharmacy services provided to patients in nursing facilities.
(B) Specific matters reviewed.--In conducting the review
under subparagraph (A), the Secretary shall--
(i) assess the current standards of practice, clinical
services, and other service requirements generally used for
pharmacy services in long-term care settings; and
(ii) evaluate the impact of those standards with
respect to patient safety, reduction of medication errors
and quality of care.
(2) Report.--
(A) In general.--Not later than the date that is 18 months
after the date of the enactment of this Act, the Secretary
shall submit a report to Congress on the study conducted under
paragraph (1)(A).
(B) Contents.--The report submitted under subparagraph (A)
shall contain--
(i) a description of the plans of the Secretary to
implement the provisions of this Act in a manner consistent
with applicable State and Federal laws designed to protect
the safety and quality of care of nursing facility
patients; and
(ii) recommendations regarding necessary actions and
appropriate reimbursement to ensure the provision of
prescription drugs to medicare beneficiaries residing in
nursing facilities in a manner consistent with existing
patient safety and quality of care standards under
applicable State and Federal laws.
(c) IOM Study on Drug Safety and Quality.--
(1) In general.--The Secretary shall enter into a contract with
the Institutes of Medicine of the National Academies of Science
(such Institutes referred to in this subsection as the ``IOM'') to
carry out a comprehensive study (in this subsection referred to as
the ``study'') of drug safety and quality issues in order to
provide a blueprint for system-wide change.
(2) Objectives.--
(A) The study shall develop a full understanding of drug
safety and quality issues through an evidence-based review of
literature, case studies, and analysis. This review will
consider the nature and causes of medication errors, their
impact on patients, the differences in causation, impact, and
prevention across multiple dimensions of health care delivery-
including patient populations, care settings, clinicians, and
institutional cultures.
(B) The study shall attempt to develop credible estimates
of the incidence, severity, costs of medication errors that can
be useful in prioritizing resources for national quality
improvement efforts and influencing national health care
policy.
(C) The study shall evaluate alternative approaches to
reducing medication errors in terms of their efficacy, cost-
effectiveness, appropriateness in different settings and
circumstances, feasibility, institutional barriers to
implementation, associated risks, and the quality of evidence
supporting the approach.
(D) The study shall provide guidance to consumers,
providers, payers, and other key stakeholders on high-priority
strategies to achieve both short-term and long-term drug safety
goals, to elucidate the goals and expected results of such
initiatives and support the business case for them, and to
identify critical success factors and key levers for achieving
success.
(E) The study shall assess the opportunities and key
impediments to broad nationwide implementation of medication
error reductions, and to provide guidance to policy-makers and
government agencies (including the Food and Drug
Administration, the Centers for Medicare & Medicaid Services,
and the National Institutes of Health) in promoting a national
agenda for medication error reduction.
(F) The study shall develop an applied research agenda to
evaluate the health and cost impacts of alternative
interventions, and to assess collaborative public and private
strategies for implementing the research agenda through AHRQ
and other government agencies.
(3) Conduct of study.--
(A) Expert committee.--In conducting the study, the IOM
shall convene a committee of leading experts and key
stakeholders in pharmaceutical management and drug safety,
including clinicians, health services researchers, pharmacists,
system administrators, payer representatives, and others.
(B) Completion.--The study shall be completed within an 18-
month period.
(4) Report.--A report on the study shall be submitted to
Congress upon the completion of the study.
(5) Authorization of appropriations.--There are authorized to
be appropriated to carry out this section such sums as may be
necessary.
(d) Study of Multi-year Contracts.--
(1) In general.--The Secretary shall provide for a study on the
feasibility and advisability of providing for contracting with PDP
sponsors and MA organizations under parts C and D of title XVIII on
a multi-year basis.
(2) Report.--Not later than January 1, 2007, the Secretary
shall submit to Congress a report on the study under paragraph (1).
The report shall include such recommendations as the Secretary
deems appropriate.
(e) GAO Study Regarding Impact of Assets Test for Subsidy Eligible
Individuals.--
(1) Study.--The Comptroller General of the United States shall
conduct a study to determine the extent to which drug utilization
and access to covered part D drugs under part D of title XVIII of
the Social Security Act by subsidy eligible individuals differs
from such utilization and access for individuals who would qualify
as such subsidy eligible individuals but for the application of
section 1860D-14(a)(3)(A)(iii) of such Act.
(2) Report.--Not later than September 30, 2007, the Comptroller
General shall submit a report to Congress on the study conducted
under paragraph (1) that includes such recommendations for
legislation as the Comptroller General determines are appropriate.
(f) Study on Making Prescription Pharmaceutical Information
Accessible for Blind and Visually-Impaired Individuals.--
(1) Study.--
(A) In general.--The Secretary shall undertake a study of
how to make prescription pharmaceutical information, including
drug labels and usage instructions, accessible to blind and
visually-impaired individuals.
(B) Study to include existing and emerging technologies.--
The study under subparagraph (A) shall include a review of
existing and emerging technologies, including assistive
technology, that makes essential information on the content and
prescribed use of pharmaceutical medicines available in a
usable format for blind and visually-impaired individuals.
(2) Report.--
(A) In general.--Not later than 18 months after the date of
the enactment of this Act, the Secretary shall submit a report
to Congress on the study required under paragraph (1).
(B) Contents of report.--The report required under
paragraph (1) shall include recommendations for the
implementation of usable formats for making prescription
pharmaceutical information available to blind and visually-
impaired individuals and an estimate of the costs associated
with the implementation of each format.
SEC. 108. GRANTS TO PHYSICIANS TO IMPLEMENT ELECTRONIC PRESCRIPTION
DRUG PROGRAMS.
(a) In General.--The Secretary is authorized to make grants to
physicians for the purpose of assisting such physicians to implement
electronic prescription drug programs that comply with the standards
promulgated or modified under section 1860D-4(e) of the Social Security
Act, as inserted by section 101(a).
(b) Awarding of Grants.--
(1) Application.--No grant may be made under this section
except pursuant to a grant application that is submitted and
approved in a time, manner, and form specified by the Secretary.
(2) Considerations and preferences.--In awarding grants under
this section, the Secretary shall--
(A) give special consideration to physicians who serve a
disproportionate number of medicare patients; and
(B) give preference to physicians who serve a rural or
underserved area.
(3) Limitation on grants.--Only 1 grant may be awarded under
this section with respect to any physician or group practice of
physicians.
(c) Terms and Conditions.--
(1) In general.--Grants under this section shall be made under
such terms and conditions as the Secretary specifies consistent
with this section.
(2) Use of grant funds.--Funds provided under grants under this
section may be used for any of the following:
(A) For purchasing, leasing, and installing computer
software and hardware, including handheld computer
technologies.
(B) Making upgrades and other improvements to existing
computer software and hardware to enable e-prescribing.
(C) Providing education and training to eligible physician
staff on the use of technology to implement the electronic
transmission of prescription and patient information.
(3) Provision of information.--As a condition for the awarding
of a grant under this section, an applicant shall provide to the
Secretary such information as the Secretary may require in order
to--
(A) evaluate the project for which the grant is made; and
(B) ensure that funding provided under the grant is
expended only for the purposes for which it is made.
(4) Audit.--The Secretary shall conduct appropriate audits of
grants under this section.
(5) Matching requirement.--The applicant for a grant under this
section shall agree, with respect to the costs to be incurred by
the applicant in implementing an electronic prescription drug
program, to make available (directly or through donations from
public or private entities) non-Federal contributions toward such
costs in an amount that is not less than 50 percent of such costs.
Non-Federal contributions under the previous sentence may be in
cash or in kind, fairly evaluated, including plant, equipment, or
services. Amounts provided by the Federal Government, or services
assisted or subsidized to any significant extent by the Federal
Government, may not be included in determining the amount of such
contributions.
(d) Authorization of Appropriations.--There are authorized to be
appropriated to carry out this section $50,000,000 for fiscal year 2007
and such sums as may be necessary for each of fiscal years 2008 and
2009.
SEC. 109. EXPANDING THE WORK OF MEDICARE QUALITY IMPROVEMENT
ORGANIZATIONS TO INCLUDE PARTS C AND D.
(a) Application to Medicare Managed Care and Prescription Drug
Coverage.--Section 1154(a)(1) (42 U.S.C. 1320c-3(a)(1)) is amended by
inserting ``, to Medicare Advantage organizations pursuant to contracts
under part C, and to prescription drug sponsors pursuant to contracts
under part D'' after ``under section 1876''.
(b) Prescription Drug Therapy Quality Improvement.--Section 1154(a)
(42 U.S.C. 1320c-3(a)) is amended by adding at the end the following
new paragraph:
``(17) The organization shall execute its responsibilities
under subparagraphs (A) and (B) of paragraph (1) by offering to
providers, practitioners, Medicare Advantage organizations offering
Medicare Advantage plans under part C, and prescription drug
sponsors offering prescription drug plans under part D quality
improvement assistance pertaining to prescription drug therapy. For
purposes of this part and title XVIII, the functions described in
this paragraph shall be treated as a review function.''.
(c) Effective Date.--The amendments made by this section shall
apply on and after January 1, 2004.
(d) IOM Study of QIOs.--
(1) In general.--The Secretary shall request the Institute of
Medicine of the National Academy of Sciences to conduct an
evaluation of the program under part B of title XI of the Social
Security Act. The study shall include a review of the following:
(A) An overview of the program under such part.
(B) The duties of organizations with contracts with the
Secretary under such part.
(C) The extent to which quality improvement organizations
improve the quality of care for medicare beneficiaries.
(D) The extent to which other entities could perform such
quality improvement functions as well as, or better than,
quality improvement organizations.
(E) The effectiveness of reviews and other actions
conducted by such organizations in carrying out those duties.
(F) The source and amount of funding for such
organizations.
(G) The conduct of oversight of such organizations.
(2) Report to congress.--Not later than June 1, 2006, the
Secretary shall submit to Congress a report on the results of the
study described in paragraph (1), including any recommendations for
legislation.
(3) Increased competition.--If the Secretary finds based on the
study conducted under paragraph (1) that other entities could
improve quality in the medicare program as well as, or better than,
the current quality improvement organizations, then the Secretary
shall provide for such increased competition through the addition
of new types of entities which may perform quality improvement
functions.
SEC. 110. CONFLICT OF INTEREST STUDY.
(a) Study.--The Federal Trade Commission shall conduct a study of
differences in payment amounts for pharmacy services provided to
enrollees in group health plans that utilize pharmacy benefit managers.
Such study shall include the following:
(1) An assessment of the differences in costs incurred by such
enrollees and plans for prescription drugs dispensed by mail-order
pharmacies owned by pharmaceutical benefit managers compared to
mail-order pharmacies not owned by pharmaceutical benefit managers,
and community pharmacies.
(2) Whether such plans are acting in a manner that maximizes
competition and results in lower prescription drug prices for
enrollees.
(b) Report.--Not later than 18 months after the date of the
enactment of this Act, the Commission shall submit to Congress a report
on the study conducted under subsection (a). Such report shall include
recommendations regarding any need for legislation to ensure the fiscal
integrity of the voluntary prescription drug benefit program under part
D of title XVIII, as added by section 101, that may be appropriated as
the result of such study.
(c) Exemption From Paperwork Reduction Act.--Chapter 35 of title
44, United States Code, shall not apply to the collection of
information under subsection (a).
SEC. 111. STUDY ON EMPLOYMENT-BASED RETIREE HEALTH COVERAGE.
(a) Study.--The Comptroller General of the United States shall
conduct an initial and final study under this subsection to examine
trends in employment-based retiree health coverage (as defined in
1860D-22(c)(1) of the Social Security Act, as added by section 101),
including coverage under the Federal Employees Health Benefits Program
(FEHBP), and the options and incentives available under this Act which
may have an effect on the voluntary provision of such coverage.
(b) Content of Initial Study.--The initial study under this section
shall consider the following:
(1) Trends in employment-based retiree health coverage prior to
the date of the enactment of this Act.
(2) The opinions of sponsors of employment-based retiree health
coverage concerning which of the options available under this Act
they are most likely to utilize for the provision of health
coverage to their medicare-eligible retirees, including an
assessment of the administrative burdens associated with the
available options.
(3) The likelihood of sponsors of employment-based retiree
health coverage to maintain or adjust their levels of retiree
health benefits beyond coordination with medicare, including for
prescription drug coverage, provided to medicare-eligible retirees
after the date of the enactment of this Act.
(4) The factors that sponsors of employment-based retiree
health coverage expect to consider in making decisions about any
changes they may make in the health coverage provided to medicare-
eligible retirees.
(5) Whether the prescription drug plan options available, or
the health plan options available under the Medicare Advantage
program, are likely to cause employers and other entities that did
not provide health coverage to retirees prior to the date of the
enactment of this Act to provide supplemental coverage or
contributions toward premium expenses for medicare-eligible
retirees who may enroll in such options in the future.
(c) Contents of Final Study.--The final study under this section
shall consider the following:
(1) Changes in the trends in employment-based retiree health
coverage since the completion of the initial study by the
Comptroller General.
(2) Factors contributing to any changes in coverage levels.
(3) The number and characteristics of sponsors of employment-
based retiree health coverage who receive the special subsidy
payments under section 1860D-22 of the Social Security Act, as
added by section 101, for the provision of prescription drug
coverage to their medicare-eligible retirees that is the same or
greater actuarial value as the prescription drug coverage available
to other medicare beneficiaries without employment-based retiree
health coverage.
(4) The extent to which sponsors of employment-based retiree
health coverage provide supplemental health coverage or contribute
to the premiums for medicare-eligible retirees who enroll in a
prescription drug plan or an MA-PD plan.
(5) Other coverage options, including tax-preferred retirement
or health savings accounts, consumer-directed health plans, or
other vehicles that sponsors of employment-based retiree health
coverage believe would assist retirees with their future health
care needs and their willingness to sponsor such alternative plan
designs.
(6) The extent to which employers or other entities that did
not provide employment-based retiree health coverage prior to the
date of the enactment of this Act provided some form of coverage or
financial assistance for retiree health care needs after the date
of the enactment of this Act.
(7) Recommendations by employers, benefits experts, academics,
and others on ways that the voluntary provision of employment-based
retiree health coverage may be improved and expanded.
(d) Reports.--The Comptroller General shall submit a report to
Congress on--
(1) the initial study under subsection (b) not later than 1
year after the date of the enactment of this Act; and
(2) the final study under subsection (c) not later than January
1, 2007.
(e) Consultation.--The Comptroller General shall consult with
sponsors of employment-based retiree health coverage, benefits experts,
human resources professionals, employee benefits consultants, and
academics with experience in health benefits and survey research in the
development and design of the initial and final studies under this
section.
TITLE II--MEDICARE ADVANTAGE
Subtitle A--Implementation of Medicare Advantage Program
SEC. 201. IMPLEMENTATION OF MEDICARE ADVANTAGE PROGRAM.
(a) In General.--There is hereby established the Medicare Advantage
program. The Medicare Advantage program shall consist of the program
under part C of title XVIII of the Social Security Act (as amended by
this Act).
(b) References.--Subject to subsection (c), any reference to the
program under part C of title XVIII of the Social Security Act shall be
deemed a reference to the Medicare Advantage program and, with respect
to such part, any reference to ``Medicare+Choice'' is deemed a
reference to ``Medicare Advantage'' and ``MA''.
(c) Transition.--In order to provide for an orderly transition and
avoid beneficiary and provider confusion, the Secretary shall provide
for an appropriate transition in the use of the terms
``Medicare+Choice'' and ``Medicare Advantage'' (or ``MA'') in reference
to the program under part C of title XVIII of the Social Security Act.
Such transition shall be fully completed for all materials for plan
years beginning not later than January 1, 2006. Before the completion
of such transition, any reference to ``Medicare Advantage'' or ``MA''
shall be deemed to include a reference to ``Medicare+Choice''.
Subtitle B--Immediate Improvements
SEC. 211. IMMEDIATE IMPROVEMENTS.
(a) Equalizing Payments With Fee-for-Service.--
(1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1))
is amended by adding at the end the following:
``(D) 100 percent of fee-for-service costs.--
``(i) In general.--For each year specified in clause
(ii), the adjusted average per capita cost for the year
involved, determined under section 1876(a)(4) and adjusted
as appropriate for the purpose of risk adjustment, for the
MA payment area for individuals who are not enrolled in an
MA plan under this part for the year, but adjusted to
exclude costs attributable to payments under section
1886(h).
``(ii) Periodic rebasing.--The provisions of clause (i)
shall apply for 2004 and for subsequent years as the
Secretary shall specify (but not less than once every 3
years).
``(iii) Inclusion of costs of va and dod military
facility services to medicare-eligible beneficiaries.--In
determining the adjusted average per capita cost under
clause (i) for a year, such cost shall be adjusted to
include the Secretary's estimate, on a per capita basis, of
the amount of additional payments that would have been made
in the area involved under this title if individuals
entitled to benefits under this title had not received
services from facilities of the Department of Defense or
the Department of Veterans Affairs.''.
(2) Conforming amendment.--Such section is further amended, in
the matter before subparagraph (A), by striking ``or (C)'' and
inserting ``(C), or (D)''.
(b) Change in Budget Neutrality for Blend.--Section 1853(c) (42
U.S.C. 1395w-23(c)) is amended--
(1) in paragraph (1)(A), by inserting ``(for a year other than
2004)'' after ``multiplied''; and
(2) in paragraph (5), by inserting ``(other than 2004)'' after
``for each year''.
(c) Increasing Minimum Percentage Increase to National Growth
Rate.--
(1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1))
is amended--
(A) in subparagraph (A), by striking ``The sum'' and
inserting ``For a year before 2005, the sum'';
(B) in subparagraph (B)(iv), by striking ``and each
succeeding year'' and inserting ``, 2003, and 2004'';
(C) in subparagraph (C)(iv), by striking ``and each
succeeding year'' and inserting ``and 2003''; and
(D) by adding at the end of subparagraph (C) the following
new clause:
``(v) For 2004 and each succeeding year, the greater
of--
``(I) 102 percent of the annual MA capitation rate
under this paragraph for the area for the previous
year; or
``(II) the annual MA capitation rate under this
paragraph for the area for the previous year increased
by the national per capita MA growth percentage,
described in paragraph (6) for that succeeding year,
but not taking into account any adjustment under
paragraph (6)(C) for a year before 2004.''.
(2) Conforming amendment.--Section 1853(c)(6)(C) (42 U.S.C.
1395w-23(c)(6)(C)) is amended by inserting before the period at the
end the following: ``, except that for purposes of paragraph
(1)(C)(v)(II), no such adjustment shall be made for a year before
2004''.
(d) Inclusion of Costs of DOD and VA Military Facility Services to
Medicare-Eligible Beneficiaries in Calculation of Payment Rates.--
Section 1853(c)(3) (42 U.S.C. 1395w-23(c)(3)) is amended--
(1) in subparagraph (A), by striking ``subparagraph (B)'' and
inserting ``subparagraphs (B) and (E)''; and
(2) by adding at the end the following new subparagraph:
``(E) Inclusion of costs of dod and va military facility
services to medicare-eligible beneficiaries.--In determining
the area-specific MA capitation rate under subparagraph (A) for
a year (beginning with 2004), the annual per capita rate of
payment for 1997 determined under section 1876(a)(1)(C) shall
be adjusted to include in the rate the Secretary's estimate, on
a per capita basis, of the amount of additional payments that
would have been made in the area involved under this title if
individuals entitled to benefits under this title had not
received services from facilities of the Department of Defense
or the Department of Veterans Affairs.''.
(e) Extending Special Rule for Certain Inpatient Hospital Stays to
Rehabilitation Hospitals and Long-Term Care Hospitals.--
(1) In general.--Section 1853(g) (42 U.S.C. 1395w-23(g)) is
amended--
(A) in the matter preceding paragraph (1), by inserting ``,
a rehabilitation hospital described in section
1886(d)(1)(B)(ii) or a distinct part rehabilitation unit
described in the matter following clause (v) of section
1886(d)(1)(B), or a long-term care hospital (described in
section 1886(d)(1)(B)(iv))'' after ``1886(d)(1)(B))''; and
(B) in paragraph (2)(B), by inserting ``or other payment
provision under this title for inpatient services for the type
of facility, hospital, or unit involved, described in the
matter preceding paragraph (1), as the case may be,'' after
``1886(d)''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to contract years beginning on or after January 1, 2004.
(f) MedPAC Study of AAPCC.--
(1) Study.--The Medicare Payment Advisory Commission shall
conduct a study that assesses the method used for determining the
adjusted average per capita cost (AAPCC) under section 1876(a)(4)
of the Social Security Act (42 U.S.C. 1395mm(a)(4)) as applied
under section 1853(c)(1)(A) of such Act (as amended by subsection
(a)). Such study shall include an examination of--
(A) the bases for variation in such costs between different
areas, including differences in input prices, utilization, and
practice patterns;
(B) the appropriate geographic area for payment of MA local
plans under the Medicare Advantage program under part C of
title XVIII of such Act; and
(C) the accuracy of risk adjustment methods in reflecting
differences in costs of providing care to different groups of
beneficiaries served under such program.
(2) Report.--Not later than 18 months after the date of the
enactment of this Act, the Commission shall submit to Congress a
report on the study conducted under paragraph (1).
(g) Report on Impact of Increased Financial Assistance to Medicare
Advantage Plans.--Not later than July 1, 2006, the Secretary shall
submit to Congress a report that describes the impact of additional
financing provided under this Act and other Acts (including the
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999
and BIPA) on the availability of Medicare Advantage plans in different
areas and its impact on lowering premiums and increasing benefits under
such plans.
(h) MedPAC Study and Report on Clarification of Authority Regarding
Disapproval of Unreasonable Beneficiary Cost-Sharing.--
(1) Study.--The Medicare Payment Advisory Commission, in
consultation with beneficiaries, consumer groups, employers, and
organizations offering plans under part C of title XVIII of the
Social Security Act, shall conduct a study to determine the extent
to which the cost-sharing structures under such plans affect access
to covered services or select enrollees based on the health status
of eligible individuals described in section 1851(a)(3) of the
Social Security Act (42 U.S.C. 1395w-21(a)(3)).
(2) Report.--Not later than December 31, 2004, the Commission
shall submit a report to Congress on the study conducted under
paragraph (1) together with recommendations for such legislation
and administrative actions as the Commission considers appropriate.
(i) Implementation of Provisions.--
(1) Announcement of revised medicare advantage payment rates.--
Within 6 weeks after the date of the enactment of this Act, the
Secretary shall determine, and shall announce (in a manner intended
to provide notice to interested parties) MA capitation rates under
section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for
2004, revised in accordance with the provisions of this section.
(2) Transition to revised payment rates.--The provisions of
section 604 of BIPA (114 Stat. 2763A-555) (other than subsection
(a)) shall apply to the provisions of subsections (a) through (d)
of this section for 2004 in the same manner as the provisions of
such section 604 applied to the provisions of BIPA for 2001.
(3) Special rule for payment rates in 2004.--
(A) January and february.--Notwithstanding the amendments
made by subsections (a) through (d), for purposes of making
payments under section 1853 of the Social Security Act (42
U.S.C. 1395w-23) for January and February 2004, the annual
capitation rate for a payment area shall be calculated and the
excess amount under section 1854(f)(1)(B) of such Act (42
U.S.C. 1395w-24(f)(1)(B)) shall be determined as if such
amendments had not been enacted.
(B) March through december.--Notwithstanding the amendments
made by subsections (a) through (d), for purposes of making
payments under section 1853 of the Social Security Act (42
U.S.C. 1395w-23) for March through December 2004, the annual
capitation rate for a payment area shall be calculated and the
excess amount under section 1854(f)(1)(B) of such Act (42
U.S.C. 1395w-24(f)(1)(B)) shall be determined, in such manner
as the Secretary estimates will ensure that the total of such
payments with respect to 2004 is the same as the amounts that
would have been if subparagraph (A) had not been enacted.
(C) Construction.--Subparagraphs (A) and (B) shall not be
taken into account in computing such capitation rate for 2005
and subsequent years.
(4) Plans required to provide notice of changes in plan
benefits.--In the case of an organization offering a plan under
part C of title XVIII of the Social Security Act that revises its
submission of the information described in section 1854(a)(1) of
such Act (42 U.S.C. 1395w-23(a)(1)) for a plan pursuant to the
application of paragraph (2), if such revision results in changes
in beneficiary premiums, beneficiary cost-sharing, or benefits
under the plan, then by not later than 3 weeks after the date the
Secretary approves such submission, the organization offering the
plan shall provide each beneficiary enrolled in the plan with
written notice of such changes.
(5) Limitation on review.--There shall be no administrative or
judicial review under section 1869 or section 1878 of the Social
Security Act (42 U.S.C. 1395ff and 1395oo), or otherwise of any
determination made by the Secretary under this subsection or the
application of the payment rates determined pursuant to this
subsection.
(j) Additional Amendments.--Section 1852(d)(4) (42 U.S.C. 1395w-
22(d)(4)) is amended--
(1) in subparagraph (B), by inserting ``(other than deemed
contracts or agreements under subsection (j)(6))'' after ``the plan
has contracts or agreements''; and
(2) in the last sentence, by inserting before the period at the
end the following: ``, except that, if a plan entirely meets such
requirement with respect to a category of health care professional
or provider on the basis of subparagraph (B), it may provide for a
higher beneficiary copayment in the case of health care
professionals and providers of that category who do not have
contracts or agreements (other than deemed contracts or agreements
under subsection (j)(6)) to provide covered services under the
terms of the plan''.
Subtitle C--Offering of Medicare Advantage (MA) Regional Plans;
Medicare Advantage Competition
SEC. 221. ESTABLISHMENT OF MA REGIONAL PLANS.
(a) Offering of MA Regional Plans.--
(1) In general.--Section 1851(a)(2)(A) is amended--
(A) by striking ``Coordinated care plans.--Coordinated''
and inserting the following: ``Coordinated care plans
(including regional plans).--
``(i) In general.--Coordinated'';
(B) by inserting ``regional or local'' before ``preferred
provider organization plans''; and
(C) by inserting `` (including MA regional plans)'' after
``preferred provider organization plans''.
(2) Moratorium on new local preferred provider organization
plans.--The Secretary shall not permit the offering of a local
preferred provider organization plan under part C of title XVIII of
the Social Security Act during 2006 or 2007 in a service area
unless such plan was offered under such part (including under a
demonstration project under such part) in such area as of December
31, 2005.
(b) Definition of MA Regional Plan; MA Local Plan.--
(1) In general.--Section 1859(b) (42 U.S.C. 1395w-29(b)) is
amended by adding at the end the following new paragraphs:
``(4) MA regional plan.--The term `MA regional plan' means an
MA plan described in section 1851(a)(2)(A)(i)--
``(A) that has a network of providers that have agreed to a
contractually specified reimbursement for covered benefits with
the organization offering the plan;
``(B) that provides for reimbursement for all covered
benefits regardless of whether such benefits are provided
within such network of providers; and
``(C) the service area of which is one or more entire MA
regions.
``(5) MA local plan.--The term `MA local plan' means an MA plan
that is not an MA regional plan.''.
(2) Construction.--Nothing in part C of title XVIII of the
Social Security Act shall be construed as preventing an MSA plan or
MA private fee-for-service plan from having a service area that
covers one or more MA regions or the entire nation.
(c) Rules for MA Regional Plans.--Part C of title XVIII (42 U.S.C.
1395w-21 et seq.) is amended by inserting after section 1857 the
following new section:
``special rules for ma regional plans
``Sec. 1858. (a) Regional Service Area; Establishment of MA
Regions.--
``(1) Coverage of entire ma region.--The service area for an MA
regional plan shall consist of an entire MA region established
under paragraph (2) and the provisions of section 1854(h) shall not
apply to such a plan.
``(2) Establishment of ma regions.--
``(A) MA region.--For purposes of this title, the term `MA
region' means such a region within the 50 States and the
District of Columbia as established by the Secretary under this
paragraph.
``(B) Establishment.--
``(i) Initial establishment.--Not later than January 1,
2005, the Secretary shall first establish and publish MA
regions.
``(ii) Periodic review and revision of service areas.--
The Secretary may periodically review MA regions under this
paragraph and, based on such review, may revise such
regions if the Secretary determines such revision to be
appropriate.
``(C) Requirements for ma regions.--The Secretary shall
establish, and may revise, MA regions under this paragraph in a
manner consistent with the following:
``(i) Number of regions.--There shall be no fewer than
10 regions, and no more than 50 regions.
``(ii) Maximizing availability of plans.--The regions
shall maximize the availability of MA regional plans to all
MA eligible individuals without regard to health status,
especially those residing in rural areas.
``(D) Market survey and analysis.--Before establishing MA
regions, the Secretary shall conduct a market survey and
analysis, including an examination of current insurance
markets, to determine how the regions should be established.
``(3) National plan.--Nothing in this subsection shall be
construed as preventing an MA regional plan from being offered in
more than one MA region (including all regions).
``(b) Application of Single Deductible and Catastrophic Limit on
Out-of-Pocket Expenses.--An MA regional plan shall include the
following:
``(1) Single deductible.--Any deductible for benefits under the
original medicare fee-for-service program option shall be a single
deductible (instead of a separate inpatient hospital deductible and
a part B deductible) and may be applied differentially for in-
network services and may be waived for preventive or other items
and services.
``(2) Catastrophic limit.--
``(A) In-network.--A catastrophic limit on out-of-pocket
expenditures for in-network benefits under the original
medicare fee-for-service program option.
``(B) Total.--A catastrophic limit on out-of-pocket
expenditures for all benefits under the original medicare fee-
for-service program option.
``(c) Portion of Total Payments to an Organization Subject to Risk
for 2006 and 2007.--
``(1) Application of risk corridors.--
``(A) In general.--This subsection shall only apply to MA
regional plans offered during 2006 or 2007.
``(B) Notification of allowable costs under the plan.--In
the case of an MA organization that offers an MA regional plan
in an MA region in 2006 or 2007, the organization shall notify
the Secretary, before such date in the succeeding year as the
Secretary specifies, of--
``(i) its total amount of costs that the organization
incurred in providing benefits covered under the original
medicare fee-for-service program option for all enrollees
under the plan in the region in the year and the portion of
such costs that is attributable to administrative expenses
described in subparagraph (C); and
``(ii) its total amount of costs that the organization
incurred in providing rebatable integrated benefits (as
defined in subparagraph (D)) and with respect to such
benefits the portion of such costs that is attributable to
administrative expenses described in subparagraph (C) and
not described in clause (i) of this subparagraph.
``(C) Allowable costs defined.--For purposes of this
subsection, the term `allowable costs' means, with respect to
an MA regional plan for a year, the total amount of costs
described in subparagraph (B) for the plan and year, reduced by
the portion of such costs attributable to administrative
expenses incurred in providing the benefits described in such
subparagraph.
``(D) Rebatable integrated benefits.--For purposes of this
subsection, the term `rebatable integrated benefits' means such
non-drug supplemental benefits under subclause (I) of section
1854(b)(1)(C)(ii) pursuant to a rebate under such section that
the Secretary determines are integrated with the benefits
described in subparagraph (B)(i).
``(2) Adjustment of payment.--
``(A) No adjustment if allowable costs within 3 percent of
target amount.--If the allowable costs for the plan for the
year are at least 97 percent, but do not exceed 103 percent, of
the target amount for the plan and year, there shall be no
payment adjustment under this subsection for the plan and year.
``(B) Increase in payment if allowable costs above 103
percent of target amount.--
``(i) Costs between 103 and 108 percent of target
amount.--If the allowable costs for the plan for the year
are greater than 103 percent, but not greater than 108
percent, of the target amount for the plan and year, the
Secretary shall increase the total of the monthly payments
made to the organization offering the plan for the year
under section 1853(a) by an amount equal to 50 percent of
the difference between such allowable costs and 103 percent
of such target amount.
``(ii) Costs above 108 percent of target amount.--If
the allowable costs for the plan for the year are greater
than 108 percent of the target amount for the plan and
year, the Secretary shall increase the total of the monthly
payments made to the organization offering the plan for the
year under section 1853(a) by an amount equal to the sum
of--
``(I) 2.5 percent of such target amount; and
``(II) 80 percent of the difference between such
allowable costs and 108 percent of such target amount.
``(C) Reduction in payment if allowable costs below 97
percent of target amount.--
``(i) Costs between 92 and 97 percent of target
amount.--If the allowable costs for the plan for the year
are less than 97 percent, but greater than or equal to 92
percent, of the target amount for the plan and year, the
Secretary shall reduce the total of the monthly payments
made to the organization offering the plan for the year
under section 1853(a) by an amount (or otherwise recover
from the plan an amount) equal to 50 percent of the
difference between 97 percent of the target amount and such
allowable costs.
``(ii) Costs below 92 percent of target amount.--If the
allowable costs for the plan for the year are less than 92
percent of the target amount for the plan and year, the
Secretary shall reduce the total of the monthly payments
made to the organization offering the plan for the year
under section 1853(a) by an amount (or otherwise recover
from the plan an amount) equal to the sum of--
``(I) 2.5 percent of such target amount; and
``(II) 80 percent of the difference between 92
percent of such target amount and such allowable costs.
``(D) Target amount described.--For purposes of this
paragraph, the term `target amount' means, with respect to an
MA regional plan offered by an organization in a year, an
amount equal to--
``(i) the sum of--
``(I) the total monthly payments made to the
organization for enrollees in the plan for the year
that are attributable to benefits under the original
medicare fee-for-service program option (as defined in
section 1852(a)(1)(B));
``(II) the total of the MA monthly basic
beneficiary premium collectable for such enrollees for
the year; and
``(III) the total amount of the rebates under
section 1854(b)(1)(C)(ii) that are attributable to
rebatable integrated benefits; reduced by
``(ii) the amount of administrative expenses assumed in
the bid insofar as the bid is attributable to benefits
described in clause (i)(I) or (i)(III).
``(3) Disclosure of information.--
``(A) In general.--Each contract under this part shall
provide--
``(i) that an MA organization offering an MA regional
plan shall provide the Secretary with such information as
the Secretary determines is necessary to carry out this
subsection; and
``(ii) that, pursuant to section 1857(d)(2)(B), the
Secretary has the right to inspect and audit any books and
records of the organization that pertain to the information
regarding costs provided to the Secretary under paragraph
(1)(B).
``(B) Restriction on use of information.--Information
disclosed or obtained pursuant to the provisions of this
subsection may be used by officers, employees, and contractors
of the Department of Health and Human Services only for the
purposes of, and to the extent necessary in, carrying out this
subsection.
``(d) Organizational and Financial Requirements.--
``(1) In general.--In the case of an MA organization that is
offering an MA regional plan in an MA region and--
``(A) meets the requirements of section 1855(a)(1) with
respect to at least one such State in such region; and
``(B) with respect to each other State in such region in
which it does not meet requirements, it demonstrates to the
satisfaction of the Secretary that it has filed the necessary
application to meet such requirements,
the Secretary may waive such requirement with respect to each State
described in subparagraph (B) for such period of time as the
Secretary determines appropriate for the timely processing of such
an application by the State (and, if such application is denied,
through the end of such plan year as the Secretary determines
appropriate to provide for a transition).
``(2) Selection of appropriate state.--In applying paragraph
(1) in the case of an MA organization that meets the requirements
of section 1855(a)(1) with respect to more than one State in a
region, the organization shall select, in a manner specified by the
Secretary among such States, one State the rules of which shall
apply in the case of the States described in paragraph (1)(B).
``(e) Stabilization Fund.--
``(1) Establishment.--The Secretary shall establish under this
subsection an MA Regional Plan Stabilization Fund (in this
subsection referred to as the `Fund') which shall be available for
two purposes:
``(A) Plan entry.--To provide incentives to have MA
regional plans offered in each MA region under paragraph (3).
``(B) Plan retention.--To provide incentives to retain MA
regional plans in certain MA regions with below-national-
average MA market penetration under paragraph (4).
``(2) Funding.--
``(A) Initial funding.--
``(i) In general.--There shall be available to the
Fund, for expenditures from the Fund during the period
beginning on January 1, 2007, and ending on December 31,
2013, a total of $10,000,000,000.
``(ii) Payment from trust funds.--Such amount shall be
available to the Fund, as expenditures are made from the
Fund, from the Federal Hospital Insurance Trust Fund and
the Federal Supplementary Medical Insurance Trust Fund in
the proportion specified in section 1853(f).
``(B) Additional funding from savings.--
``(i) In general.--There shall also be made available
to the Fund, 50 percent of savings described in clause
(ii).
``(ii) Savings.--The savings described in this clause
are 25 percent of the average per capita savings described
in section 1854(b)(4)(C) for which monthly rebates are
provided under section 1854(b)(1)(C) in the fiscal year
involved that are attributable to MA regional plans.
``(iii) Availability.--Funds made available under this
subparagraph shall be transferred into a special account in
the Treasury from the Federal Hospital Insurance Trust Fund
and the Federal Supplementary Medical Insurance Trust Fund
in the proportion specified in section 1853(f) on a monthly
basis.
``(C) Obligations.--Amounts in the Fund shall be available
in advance of appropriations to MA regional plans in qualifying
MA regions only in accordance with paragraph (5).
``(D) Ordering.--Expenditures from the Fund shall first be
made from amounts made available under subparagraph (A).
``(3) Plan entry funding.--
``(A) In general.--Funding is available under this
paragraph for a year only as follows:
``(i) National plan.--For a national bonus payment
described in subparagraph (B) for the offering by a single
MA organization of an MA regional plan in each MA region in
the year, but only if there was not such a plan offered in
each such region in the previous year. Funding under this
clause is only available with respect to any individual MA
organization for a single year, but may be made available
to more than one such organization in the same year.
``(ii) Regional plans.--Subject to clause (iii), for an
increased amount under subparagraph (C) for an MA regional
plan offered in an MA region which did not have any MA
regional plan offered in the prior year.
``(iii) Limitation on regional plan funding in case of
national plan.--In no case shall there be any payment
adjustment under subparagraph (C) for a year for which a
national payment adjustment is made under subparagraph (B).
``(B) National bonus payment.--The national bonus payment
under this subparagraph shall--
``(i) be available to an MA organization only if the
organization offers MA regional plans in every MA region;
``(ii) be available with respect to all MA regional
plans of the organization regardless of whether any other
MA regional plan is offered in any region; and
``(iii) subject to amounts available under paragraph
(5) for a year, be equal to 3 percent of the benchmark
amount otherwise applicable for each MA regional plan
offered by the organization.
``(C) Regional payment adjustment.--
``(i) In general.--The increased amount under this
subparagraph for an MA regional plan in an MA region for a
year shall be an amount, determined by the Secretary, based
on the bid submitted for such plan (or plans) and shall be
available to all MA regional plans offered in such region
and year. Such amount may be based on the mean, mode, or
median, or other measure of such bids and may vary from
region to region. The Secretary may not limit the number of
plans or bids in a region.
``(ii) Multi-year funding.--
``(I) In general.--Subject to amounts available
under paragraph (5), funding under this subparagraph
shall be available for a period determined by the
Secretary.
``(II) Report.--If the Secretary determines that
funding will be provided for a second consecutive year
with respect to an MA region, the Secretary shall
submit to the Congress a report that describes the
underlying market dynamics in the region and that
includes recommendations concerning changes in the
payment methodology otherwise provided for MA regional
plans under this part.
``(iii) Application to all plans in a region.--Funding
under this subparagraph with respect to an MA region shall
be made available with respect to all MA regional plans
offered in the region.
``(iv) Limitation on availability of plan retention
funding in next year.--If an increased amount is made
available under this subparagraph with respect to an MA
region for a period determined by the Secretary under
clause (ii)(I), in no case shall funding be available under
paragraph (4) with respect to MA regional plans offered in
the region in the year following such period.
``(D) Application.--Any additional payment under this
paragraph provided for an MA regional plan for a year shall be
treated as if it were an addition to the benchmark amount
otherwise applicable to such plan and year, but shall not be
taken into account in the computation of any benchmark amount
for any subsequent year.
``(4) Plan retention funding.--
``(A) In general.--Funding is available under this
paragraph for a year with respect to MA regional plans offered
in an MA region for the increased amount specified in
subparagraph (B) but only if the region meets the requirements
of subparagraphs (C) and (E).
``(B) Payment increase.--The increased amount under this
subparagraph for an MA regional plan in an MA region for a year
shall be an amount, determined by the Secretary, that does not
exceed the greater of--
``(i) 3 percent of the benchmark amount applicable in
the region; or
``(ii) such amount as (when added to the benchmark
amount applicable to the region) will result in the ratio
of--
``(I) such additional amount plus the benchmark
amount computed under section 1854(b)(4)(B)(i) for the
region and year, to the adjusted average per capita
cost for the region and year, as estimated by the
Secretary under section 1876(a)(4) and adjusted as
appropriate for the purpose of risk adjustment; being
equal to
``(II) the weighted average of such benchmark
amounts for all the regions and such year, to the
average per capita cost for the United States and such
year, as estimated by the Secretary under section
1876(a)(4) and adjusted as appropriate for the purpose
of risk adjustment.
``(C) Regional requirements.--The requirements of this
subparagraph for an MA region for a year are as follows:
``(i) Notification of plan exit.--The Secretary has
received notice (in such form and manner as the Secretary
specifies) before a year that one or more MA regional plans
that were offered in the region in the previous year will
not be offered in the succeeding year.
``(ii) Regional plans available from fewer than 2 ma
organizations in the region.--The Secretary determines that
if the plans referred to in clause (i) are not offered in
the year, fewer than 2 MA organizations will be offering MA
regional plans in the region in the year involved.
``(iii) Percentage enrollment in ma regional plans
below national average.--For the previous year, the
Secretary determines that the average percentage of MA
eligible individuals residing in the region who are
enrolled in MA regional plans is less than the average
percentage of such individuals in the United States
enrolled in such plans.
``(D) Application.--Any additional payment under this
paragraph provided for an MA regional plan for a year shall be
treated as if it were an addition to the benchmark amount
otherwise applicable to such plan and year, but shall not be
taken into account in the computation of any benchmark amount
for any subsequent year.
``(E) 2-consecutive-year limitation.--
``(i) In general.--In no case shall any funding be
available under this paragraph in an MA region in a period
of consecutive years that exceeds 2 years.
``(ii) Report.--If the Secretary determines that
funding will be provided under this paragraph for a second
consecutive year with respect to an MA region, the
Secretary shall submit to the Congress a report that
describes the underlying market dynamics in the region and
that includes recommendations concerning changes in the
payment methodology otherwise provided for MA regional
plans under this part.
``(5) Funding limitation.--
``(A) In general.--The total amount expended from the Fund
as a result of the application of this subsection through the
end of a calendar year may not exceed the amount available to
the Fund as of the first day of such year. For purposes of this
subsection, amounts that are expended under this title insofar
as such amounts would not have been expended but for the
application of this subsection shall be counted as amounts
expended as a result of such application.
``(B) Application of limitation.--The Secretary may
obligate funds from the Fund for a year only if the Secretary
determines (and the Chief Actuary of the Centers for Medicare &
Medicaid Services and the appropriate budget officer certify)
that there are available in the Fund at the beginning of the
year sufficient amounts to cover all such obligations incurred
during the year consistent with subparagraph (A). The Secretary
shall take such steps, in connection with computing additional
payment amounts under paragraphs (3) and (4) and including
limitations on enrollment in MA regional plans receiving such
payments, as will ensure that sufficient funds are available to
make such payments for the entire year. Funds shall only be
made available from the Fund pursuant to an apportionment made
in accordance with applicable procedures.
``(6) Secretary reports.--Not later than April 1 of each year
(beginning in 2008), the Secretary shall submit a report to
Congress and the Comptroller General of the United States that
includes--
``(A) a detailed description of--
``(i) the total amount expended as a result of the
application of this subsection in the previous year
compared to the total amount that would have been expended
under this title in the year if this subsection had not
been enacted;
``(ii) the projections of the total amount that will be
expended as a result of the application of this subsection
in the year in which the report is submitted compared to
the total amount that would have been expended under this
title in the year if this subsection had not been enacted;
``(iii) amounts remaining within the funding limitation
specified in paragraph (5); and
``(iv) the steps that the Secretary will take under
paragraph (5)(B) to ensure that the application of this
subsection will not cause expenditures to exceed the amount
available in the Fund; and
``(B) a certification from the Chief Actuary of the Centers
for Medicare & Medicaid Services that the description provided
under subparagraph (A) is reasonable, accurate, and based on
generally accepted actuarial principles and methodologies.
``(7) Biennial gao reports.--Not later than January 1 of 2009,
2011, 2013, and 2015, the Comptroller General of the United States
shall submit to the Secretary and Congress a report on the
application of additional payments under this subsection. Each
report shall include--
``(A) an evaluation of--
``(i) the quality of care provided to individuals
enrolled in MA regional plans for which additional payments
were made under this subsection;
``(ii) the satisfaction of such individuals with
benefits under such a plan;
``(iii) the costs to the medicare program for payments
made to such plans; and
``(iv) any improvements in the delivery of health care
services under such a plan;
``(B) a comparative analysis of the performance of MA
regional plans receiving payments under this subsection with MA
regional plans not receiving such payments; and
``(C) recommendations for such legislation or
administrative action as the Comptroller General determines to
be appropriate.
``(f) Computation of Applicable MA Region-Specific Non-Drug Monthly
Benchmark Amounts.--
``(1) Computation for regions.--For purposes of section
1853(j)(2) and this section, subject to subsection (e), the term
`MA region-specific non-drug monthly benchmark amount' means, with
respect to an MA region for a month in a year, the sum of the 2
components described in paragraph (2) for the region and year. The
Secretary shall compute such benchmark amount for each MA region
before the beginning of each annual, coordinated election period
under section 1851(e)(3)(B) for each year (beginning with 2006).
``(2) 2 components.--For purposes of paragraph (1), the 2
components described in this paragraph for an MA region and a year
are the following:
``(A) Statutory component.--The product of the following:
``(i) Statutory region-specific non-drug amount.--The
statutory region-specific non-drug amount (as defined in
paragraph (3)) for the region and year.
``(ii) Statutory national market share.--The statutory
national market share percentage, determined under
paragraph (4) for the year.
``(B) Plan-bid component.--The product of the following:
``(i) Weighted average of ma plan bids in region.--The
weighted average of the plan bids for the region and year
(as determined under paragraph (5)(A)).
``(ii) Non-statutory market share.--1 minus the
statutory national market share percentage, determined
under paragraph (4) for the year.
``(3) Statutory region-specific non-drug amount.--For purposes
of paragraph (2)(A)(i), the term `statutory region-specific non-
drug amount' means, for an MA region and year, an amount equal the
sum (for each MA local area within the region) of the product of--
``(A) MA area-specific non-drug monthly benchmark amount
under section 1853(j)(1)(A) for that area and year; and
``(B) the number of MA eligible individuals residing in the
local area, divided by the total number of MA eligible
individuals residing in the region.
``(4) Computation of statutory market share percentage.--
``(A) In general.--The Secretary shall determine for each
year a statutory national market share percentage that is equal
to the proportion of MA eligible individuals nationally who
were not enrolled in an MA plan during the reference month.
``(B) Reference month defined.--For purposes of this part,
the term `reference month' means, with respect to a year, the
most recent month during the previous year for which the
Secretary determines that data are available to compute the
percentage specified in subparagraph (A) and other relevant
percentages under this part.
``(5) Determination of weighted average ma bids for a region.--
``(A) In general.--For purposes of paragraph (2)(B)(i), the
weighted average of plan bids for an MA region and a year is
the sum, for MA regional plans described in subparagraph (D) in
the region and year, of the products (for each such plan) of
the following:
``(i) Monthly ma statutory non-drug bid amount.--The
unadjusted MA statutory non-drug monthly bid amount for the
plan.
``(ii) Plan's share of ma enrollment in region.--The
factor described in subparagraph (B) for the plan.
``(B) Plan's share of ma enrollment in region.--
``(i) In general.--Subject to the succeeding provisions
of this subparagraph, the factor described in this
subparagraph for a plan is equal to the number of
individuals described in subparagraph (C) for such plan,
divided by the total number of such individuals for all MA
regional plans described in subparagraph (D) for that
region and year.
``(ii) Single plan rule.--In the case of an MA region
in which only a single MA regional plan is being offered,
the factor described in this subparagraph shall be equal to
1.
``(iii) Equal division among multiple plans in year in
which plans are first available.--In the case of an MA
region in the first year in which any MA regional plan is
offered, if more than one MA regional plan is offered in
such year, the factor described in this subparagraph for a
plan shall (as specified by the Secretary) be equal to--
``(I) 1 divided by the number of such plans offered
in such year; or
``(II) a factor for such plan that is based upon
the organization's estimate of projected enrollment, as
reviewed and adjusted by the Secretary to ensure
reasonableness and as is certified by the Chief Actuary
of the Centers for Medicare & Medicaid Services.
``(C) Counting of individuals.--For purposes of
subparagraph (B)(i), the Secretary shall count for each MA
regional plan described in subparagraph (D) for an MA region
and year, the number of individuals who reside in the region
and who were enrolled under such plan under this part during
the reference month.
``(D) Plans covered.--For an MA region and year, an MA
regional plan described in this subparagraph is an MA regional
plan that is offered in the region and year and was offered in
the region in the reference month.
``(g) Election of Uniform Coverage Determination.--Instead of
applying section 1852(a)(2)(C) with respect to an MA regional plan, the
organization offering the plan may elect to have a local coverage
determination for the entire MA region be the local coverage
determination applied for any part of such region (as selected by the
organization).
``(h) Assuring Network Adequacy.--
``(1) In general.--For purposes of enabling MA organizations
that offer MA regional plans to meet applicable provider access
requirements under section 1852 with respect to such plans, the
Secretary may provide for payment under this section to an
essential hospital that provides inpatient hospital services to
enrollees in such a plan where the MA organization offering the
plan certifies to the Secretary that the organization was unable to
reach an agreement between the hospital and the organization
regarding provision of such services under the plan. Such payment
shall be available only if--
``(A) the organization provides assurances satisfactory to
the Secretary that the organization will make payment to the
hospital for inpatient hospital services of an amount that is
not less than the amount that would be payable to the hospital
under section 1886 with respect to such services; and
``(B) with respect to specific inpatient hospital services
provided to an enrollee, the hospital demonstrates to the
satisfaction of the Secretary that the hospital's costs of such
services exceed the payment amount described in subparagraph
(A).
``(2) Payment amounts.--The payment amount under this
subsection for inpatient hospital services provided by a subsection
(d) hospital to an enrollee in an MA regional plan shall be,
subject to the limitation of funds under paragraph (3), the amount
(if any) by which--
``(A) the amount of payment that would have been paid for
such services under this title if the enrollees were covered
under the original medicare fee-for-service program option and
the hospital were a critical access hospital; exceeds
``(B) the amount of payment made for such services under
paragraph (1)(A).
``(3) Available amounts.--There shall be available for payments
under this subsection--
``(A) in 2006, $25,000,000; and
``(B) in each succeeding year the amount specified in this
paragraph for the preceding year increased by the market basket
percentage increase (as defined in section 1886(b)(3)(B)(iii))
for the fiscal year ending in such succeeding year.
Payments under this subsection shall be made from the Federal
Hospital Insurance Trust Fund.
``(4) Essential hospital.--In this subsection, the term
`essential hospital' means, with respect to an MA regional plan
offered by an MA organization, a subsection (d) hospital (as
defined in section 1886(d)) that the Secretary determines, based
upon an application filed by the organization with the Secretary,
is necessary to meet the requirements referred to in paragraph (1)
for such plan.''.
(d) Conforming Amendments.--
(1) Relating to ma regions.--Section 1853(d) (42 U.S.C. 1395w-
23(d)) is amended--
(A) by amending the heading to read as follows: ``MA
Payment Area; MA Local Area; MA Region Defined'';
(B) by redesignating paragraphs (2) and (3) as paragraphs
(3) and (4), respectively;
(C) by amending paragraph (1) to read as follows:
``(1) MA payment area.--In this part, except as provided in
this subsection, the term `MA payment area' means--
``(A) with respect to an MA local plan, an MA local area
(as defined in paragraph (2)); and
``(B) with respect to an MA regional plan, an MA region (as
established under section 1858(a)(2)).'';
(D) by inserting after paragraph (1) the following new
paragraph:
``(2) MA local area.--The term `MA local area' means a county
or equivalent area specified by the Secretary.''; and
(E) in paragraph (4), as so redesignated--
(i) in subparagraph (A), by inserting ``for MA local
plans'' after ``paragraph (1)'';
(ii) in subparagraph (A)(iii), by striking ``paragraph
(1)'' and inserting ``paragraph (1)(A)''; and
(iii) in subparagraph (B)--
(I) by inserting ``with respect to MA local plans''
after ``established under this section'';
(II) by inserting ``for such plans'' after
``payments under this section''; and
(III) by inserting ``for such plans'' after ``made
under this section''.
(2) MA local area defined.--Section 1859(c) (42 U.S.C. 1395w-
29(c)) is amended by adding at the end the following:
``(5) MA local area.--The term `MA local area' is defined in
section 1853(d)(2).''.
(3) Application of special benefit rules to ppos and regional
plans.--Section 1852(a) (42 U.S.C. 1395w-22(a)) is amended--
(A) in paragraph (1), by inserting ``and except as provided
in paragraph (6) for MA regional plans'' after ``MSA plans'';
and
(B) by adding at the end the following new paragraph:
``(6) Special benefit rules for regional plans.--In the case of
an MA plan that is an MA regional plan, benefits under the plan
shall include the benefits described in paragraphs (1) and (2) of
section 1858(b).''.
(4) Application of capitation rates to local areas.--Section
1853(c)(1) (42 U.S.C. 1395w-23(c)(1)) is amended by inserting
``that is an MA local area'' after ``for a Medicare+Choice payment
area''.
(5) Network adequacy hospital payments.--Section 1851(i)(2) (42
U.S.C. 1395w-21(i)(2)) is amended by inserting ``1858(h),'' after
``1857(f)(2),''.
SEC. 222. COMPETITION PROGRAM BEGINNING IN 2006.
(a) Submission of Bidding and Rebate Information Beginning in
2006.--
(1) In general.--Section 1854 (42 U.S.C. 1395w-24) is amended--
(A) by amending paragraph (1) of subsection (a) to read as
follows:
``(1) In general.--
``(A) Initial submission.--Not later than the second Monday
in September of 2002, 2003, and 2004 (or the first Monday in
June of each subsequent year), each MA organization shall
submit to the Secretary, in a form and manner specified by the
Secretary and for each MA plan for the service area (or segment
of such an area if permitted under subsection (h)) in which it
intends to be offered in the following year the following:
``(i) The information described in paragraph (2), (3),
(4), or (6)(A) for the type of plan and year involved.
``(ii) The plan type for each plan.
``(iii) The enrollment capacity (if any) in relation to
the plan and area.
``(B) Beneficiary rebate information.--In the case of a
plan required to provide a monthly rebate under subsection
(b)(1)(C) for a year, the MA organization offering the plan
shall submit to the Secretary, in such form and manner and at
such time as the Secretary specifies, information on--
``(i) the manner in which such rebate will be provided
under clause (ii) of such subsection; and
``(ii) the MA monthly prescription drug beneficiary
premium (if any) and the MA monthly supplemental
beneficiary premium (if any).
``(C) Paperwork reduction for offering of ma regional plans
nationally or in multi-region areas.--The Secretary shall
establish requirements for information submission under this
subsection in a manner that promotes the offering of MA
regional plans in more than one region (including all regions)
through the filing of consolidated information.''; and
(B) by adding at the end of subsection (a) the following:
``(6) Submission of bid amounts by ma organizations beginning
in 2006.--
``(A) Information to be submitted.--For an MA plan (other
than an MSA plan) for a plan year beginning on or after January
1, 2006, the information described in this subparagraph is as
follows:
``(i) The monthly aggregate bid amount for the
provision of all items and services under the plan, which
amount shall be based on average revenue requirements (as
used for purposes of section 1302(8) of the Public Health
Service Act) in the payment area for an enrollee with a
national average risk profile for the factors described in
section 1853(a)(1)(C) (as specified by the Secretary).
``(ii) The proportions of such bid amount that are
attributable to--
``(I) the provision of benefits under the original
medicare fee-for-service program option (as defined in
section 1852(a)(1)(B));
``(II) the provision of basic prescription drug
coverage; and
``(III) the provision of supplemental health care
benefits.
``(iii) The actuarial basis for determining the amount
under clause (i) and the proportions described in clause
(ii) and such additional information as the Secretary may
require to verify such actuarial bases and the projected
number of enrollees in each MA local area.
``(iv) A description of deductibles, coinsurance, and
copayments applicable under the plan and the actuarial
value of such deductibles, coinsurance, and copayments,
described in subsection (e)(4)(A).
``(v) With respect to qualified prescription drug
coverage, the information required under section 1860D-4,
as incorporated under section 1860D-11(b)(2), with respect
to such coverage.
In the case of a specialized MA plan for special needs
individuals, the information described in this subparagraph is
such information as the Secretary shall specify.
``(B) Acceptance and negotiation of bid amounts.--
``(i) Authority.--Subject to clauses (iii) and (iv),
the Secretary has the authority to negotiate regarding
monthly bid amounts submitted under subparagraph (A) (and
the proportions described in subparagraph (A)(ii)),
including supplemental benefits provided under subsection
(b)(1)(C)(ii)(I) and in exercising such authority the
Secretary shall have authority similar to the authority of
the Director of the Office of Personnel Management with
respect to health benefits plans under chapter 89 of title
5, United States Code.
``(ii) Application of fehbp standard.--Subject to
clause (iv), the Secretary may only accept such a bid
amount or proportion if the Secretary determines that such
amount and proportions are supported by the actuarial bases
provided under subparagraph (A) and reasonably and
equitably reflects the revenue requirements (as used for
purposes of section 1302(8) of the Public Health Service
Act) of benefits provided under that plan.
``(iii) Noninterference.--In order to promote
competition under this part and part D and in carrying out
such parts, the Secretary may not require any MA
organization to contract with a particular hospital,
physician, or other entity or individual to furnish items
and services under this title or require a particular price
structure for payment under such a contract to the extent
consistent with the Secretary's authority under this part.
``(iv) Exception.--In the case of a plan described in
section 1851(a)(2)(C), the provisions of clauses (i) and
(ii) shall not apply and the provisions of paragraph
(5)(B), prohibiting the review, approval, or disapproval of
amounts described in such paragraph, shall apply to the
negotiation and rejection of the monthly bid amounts and
the proportions referred to in subparagraph (A).''.
(2) Definition of benefits under the original medicare fee-for-
service program option.--Section 1852(a)(1) (42 U.S.C. 1395w-
22(a)(1)) is amended--
(A) by striking ``In general.--Except'' and inserting
``Requirement.--
``(A) In general.--Except''; and
(B) by striking ``title XI'' and all that follows and
inserting the following: ``title XI, benefits under the
original medicare fee-for-service program option (and, for plan
years before 2006, additional benefits required under section
1854(f)(1)(A)).
``(B) Benefits under the original medicare fee-for-service
program option defined.--
``(i) In general.--For purposes of this part, the term
`benefits under the original medicare fee-for-service
program option' means those items and services (other than
hospice care) for which benefits are available under parts
A and B to individuals entitled to benefits under part A
and enrolled under part B, with cost-sharing for those
services as required under parts A and B or an actuarially
equivalent level of cost-sharing as determined in this
part.
``(ii) Special rule for regional plans.--In the case of
an MA regional plan in determining an actuarially
equivalent level of cost-sharing with respect to benefits
under the original medicare fee-for-service program option,
there shall only be taken into account, with respect to the
application of section 1858(b)(2), such expenses only with
respect to subparagraph (A) of such section.''.
(3) Conforming amendment relating to supplemental health
benefits.--Section 1852(a)(3) (42 U.S.C. 1395w-22(a)(3)) is amended
by adding at the end the following: ``Such benefits may include
reductions in cost-sharing below the actuarial value specified in
section 1854(e)(4)(B).''.
(b) Providing for Beneficiary Savings for Certain Plans.--
(1) Beneficiary rebates.--Section 1854(b)(1) (42 U.S.C. 1395w-
24(b)(1)) is amended--
(A) in subparagraph (A), by striking ``The monthly amount''
and inserting ``Subject to the rebate under subparagraph (C),
the monthly amount (if any)''; and
(B) by adding at the end the following new subparagraph:
``(C) Beneficiary rebate rule.--
``(i) Requirement.--The MA plan shall provide to the
enrollee a monthly rebate equal to 75 percent of the
average per capita savings (if any) described in paragraph
(3)(C) or (4)(C), as applicable to the plan and year
involved.
``(ii) Form of rebate.--A rebate required under this
subparagraph shall be provided through the application of
the amount of the rebate toward one or more of the
following:
``(I) Provision of supplemental health care
benefits and payment for premium for supplemental
benefits.--The provision of supplemental health care
benefits described in section 1852(a)(3) in a manner
specified under the plan, which may include the
reduction of cost-sharing otherwise applicable as well
as additional health care benefits which are not
benefits under the original medicare fee-for-service
program option, or crediting toward an MA monthly
supplemental beneficiary premium (if any).
``(II) Payment for premium for prescription drug
coverage.--Crediting toward the MA monthly prescription
drug beneficiary premium.
``(III) Payment toward part b premium.--Crediting
toward the premium imposed under part B (determined
without regard to the application of subsections (b),
(h), and (i) of section 1839).
``(iii) Disclosure relating to rebates.--The plan shall
disclose to the Secretary information on the form and
amount of the rebate provided under this subparagraph or
the actuarial value in the case of supplemental health care
benefits.
``(iv) Application of part b premium reduction.--
Insofar as an MA organization elects to provide a rebate
under this subparagraph under a plan as a credit toward the
part B premium under clause (ii)(III), the Secretary shall
apply such credit to reduce the premium under section 1839
of each enrollee in such plan as provided in section
1840(i).''.
(2) Revision of premium terminology.--Section 1854(b)(2) (42
U.S.C. 1395w-24(b)(2)) is amended--
(A) in the heading, by inserting ``and bid'' after
``Premium'';
(B) by redesignating subparagraph (C) as subparagraph (D);
(C) by striking subparagraphs (A) and (B) and inserting the
following:
``(A) MA monthly basic beneficiary premium.--The term `MA
monthly basic beneficiary premium' means, with respect to an MA
plan--
``(i) described in section 1853(a)(1)(B)(i) (relating
to plans providing rebates), zero; or
``(ii) described in section 1853(a)(1)(B)(ii), the
amount (if any) by which the unadjusted MA statutory non-
drug monthly bid amount (as defined in subparagraph (E))
exceeds the applicable unadjusted MA area-specific non-drug
monthly benchmark amount (as defined in section 1853(j)).
``(B) MA monthly prescription drug beneficiary premium.--
The term `MA monthly prescription drug beneficiary premium'
means, with respect to an MA plan, the base beneficiary premium
(as determined under section 1860D-13(a)(2) and as adjusted
under section 1860D-13(a)(1)(B)), less the amount of rebate
credited toward such amount under section
1854(b)(1)(C)(ii)(II).
``(C) MA monthly supplemental beneficiary premium.--The
term `MA monthly supplemental beneficiary premium' means, with
respect to an MA plan, the portion of the aggregate monthly bid
amount submitted under clause (i) of subsection (a)(6)(A) for
the year that is attributable under clause (ii)(III) of such
subsection to the provision of supplemental health care
benefits, less the amount of rebate credited toward such
portion under section 1854(b)(1)(C)(ii)(I).''; and
(D) by adding at the end the following:
``(E) Unadjusted ma statutory non-drug monthly bid
amount.--The term `unadjusted MA statutory non-drug monthly bid
amount' means the portion of the bid amount submitted under
clause (i) of subsection (a)(6)(A) for the year that is
attributable under clause (ii)(I) of such subsection to the
provision of benefits under the original medicare fee-for-
service program option (as defined in section
1852(a)(1)(B)).''.
(3) Computation of savings.--Section 1854(b) (42 U.S.C. 1395w-
24(b)) is further amended by adding at the end the following new
paragraphs:
``(3) Computation of average per capita monthly savings for
local plans.--For purposes of paragraph (1)(C)(i), the average per
capita monthly savings referred to in such paragraph for an MA
local plan and year is computed as follows:
``(A) Determination of statewide average risk adjustment
for local plans.--
``(i) In general.--Subject to clause (iii), the
Secretary shall determine, at the same time rates are
promulgated under section 1853(b)(1) (beginning with 2006)
for each State, the average of the risk adjustment factors
to be applied under section 1853(a)(1)(C) to payment for
enrollees in that State for MA local plans.
``(ii) Treatment of states for first year in which
local plan offered.--In the case of a State in which no MA
local plan was offered in the previous year, the Secretary
shall estimate such average. In making such estimate, the
Secretary may use average risk adjustment factors applied
to comparable States or applied on a national basis.
``(iii) Authority to determine risk adjustment for
areas other than states.--The Secretary may provide for the
determination and application of risk adjustment factors
under this subparagraph on the basis of areas other than
States or on a plan-specific basis.
``(B) Determination of risk adjusted benchmark and risk-
adjusted bid for local plans.--For each MA plan offered in a
local area in a State, the Secretary shall--
``(i) adjust the applicable MA area-specific non-drug
monthly benchmark amount (as defined in section 1853(j)(1))
for the area by the average risk adjustment factor computed
under subparagraph (A); and
``(ii) adjust the unadjusted MA statutory non-drug
monthly bid amount by such applicable average risk
adjustment factor.
``(C) Determination of average per capita monthly
savings.--The average per capita monthly savings described in
this subparagraph for an MA local plan is equal to the amount
(if any) by which--
``(i) the risk-adjusted benchmark amount computed under
subparagraph (B)(i); exceeds
``(ii) the risk-adjusted bid computed under
subparagraph (B)(ii).
``(4) Computation of average per capita monthly savings for
regional plans.--For purposes of paragraph (1)(C)(i), the average
per capita monthly savings referred to in such paragraph for an MA
regional plan and year is computed as follows:
``(A) Determination of regionwide average risk adjustment
for regional plans.--
``(i) In general.--The Secretary shall determine, at
the same time rates are promulgated under section
1853(b)(1) (beginning with 2006) for each MA region the
average of the risk adjustment factors to be applied under
section 1853(a)(1)(C) to payment for enrollees in that
region for MA regional plans.
``(ii) Treatment of regions for first year in which
regional plan offered.--In the case of an MA region in
which no MA regional plan was offered in the previous year,
the Secretary shall estimate such average. In making such
estimate, the Secretary may use average risk adjustment
factors applied to comparable regions or applied on a
national basis.
``(iii) Authority to determine risk adjustment for
areas other than regions.--The Secretary may provide for
the determination and application of risk adjustment
factors under this subparagraph on the basis of areas other
than MA regions or on a plan-specific basis.
``(B) Determination of risk-adjusted benchmark and risk-
adjusted bid for regional plans.--For each MA regional plan
offered in a region, the Secretary shall--
``(i) adjust the applicable MA area-specific non-drug
monthly benchmark amount (as defined in section 1853(j)(2))
for the region by the average risk adjustment factor
computed under subparagraph (A); and
``(ii) adjust the unadjusted MA statutory non-drug
monthly bid amount by such applicable average risk
adjustment factor.
``(C) Determination of average per capita monthly
savings.--The average per capita monthly savings described in
this subparagraph for an MA regional plan is equal to the
amount (if any) by which--
``(i) the risk-adjusted benchmark amount computed under
subparagraph (B)(i); exceeds
``(ii) the risk-adjusted bid computed under
subparagraph (B)(ii).''.
(c) Collection of Premiums.--Section 1854(d) (42 U.S.C. 1395w-
24(d)) is amended--
(1) by striking ``Premiums.--Each'' and inserting ``Premiums.--
``(1) In general.--Each''; and
(2) by adding at the end the following new paragraphs:
``(2) Beneficiary's option of payment through withholding from
social security payment or use of electronic funds transfer
mechanism.--In accordance with regulations, an MA organization
shall permit each enrollee, at the enrollee's option, to make
payment of premiums (if any) under this part to the organization
through--
``(A) withholding from benefit payments in the manner
provided under section 1840 with respect to monthly premiums
under section 1839;
``(B) an electronic funds transfer mechanism (such as
automatic charges of an account at a financial institution or a
credit or debit card account); or
``(C) such other means as the Secretary may specify,
including payment by an employer or under employment-based
retiree health coverage (as defined in section 1860D-22(c)(1))
on behalf of an employee or former employee (or dependent).
All premium payments that are withheld under subparagraph (A) shall
be credited to the appropriate Trust Fund (or Account thereof), as
specified by the Secretary, under this title and shall be paid to
the MA organization involved. No charge may be imposed under an MA
plan with respect to the election of the payment option described
in subparagraph (A). The Secretary shall consult with the
Commissioner of Social Security and the Secretary of the Treasury
regarding methods for allocating premiums withheld under
subparagraph (A) among the appropriate Trust Funds and Account.
``(3) Information necessary for collection.--In order to carry
out paragraph (2)(A) with respect to an enrollee who has elected
such paragraph to apply, the Secretary shall transmit to the
Commissioner of Social Security--
``(A) by the beginning of each year, the name, social
security account number, consolidated monthly beneficiary
premium described in paragraph (4) owed by such enrollee for
each month during the year, and other information determined
appropriate by the Secretary, in consultation with the
Commissioner of Social Security; and
``(B) periodically throughout the year, information to
update the information previously transmitted under this
paragraph for the year.
``(4) Consolidated monthly beneficiary premium.--In the case of
an enrollee in an MA plan, the Secretary shall provide a mechanism
for the consolidation of--
``(A) the MA monthly basic beneficiary premium (if any);
``(B) the MA monthly supplemental beneficiary premium (if
any); and
``(C) the MA monthly prescription drug beneficiary premium
(if any).''.
(d) Computation of MA Area-Specific Non-Drug Benchmark.--Section
1853 (42 U.S.C. 1395w-23) is amended by adding at the end the following
new subsection:
``(j) Computation of Benchmark Amounts.--For purposes of this part,
the term `MA area-specific non-drug monthly benchmark amount' means for
a month in a year--
``(1) with respect to--
``(A) a service area that is entirely within an MA local
area, an amount equal to \1/12\ of the annual MA capitation
rate under section 1853(c)(1) for the area for the year,
adjusted as appropriate for the purpose of risk adjustment; or
``(B) a service area that includes more than one MA local
area, an amount equal to the average of the amounts described
in subparagraph (A) for each such local MA area, weighted by
the projected number of enrollees in the plan residing in the
respective local MA areas (as used by the plan for purposes of
the bid and disclosed to the Secretary under section
1854(a)(6)(A)(iii)), adjusted as appropriate for the purpose of
risk adjustment; or
``(2) with respect to an MA region for a month in a year, the
MA region-specific non-drug monthly benchmark amount, as defined in
section 1858(f) for the region for the year.''.
(e) Payment of Plans Based on Bid Amounts.--
(1) In general.--Section 1853(a)(1) (42 U.S.C. 1395w-23(a)(1))
(42 U.S.C. 1395w-23) is amended--
(A) by redesignating subparagraph (B) as subparagraph (H);
and
(B) in subparagraph (A), by striking ``in an amount'' and
all that follows and inserting the following: ``in an amount
determined as follows:
``(i) Payment before 2006.--For years before 2006, the
payment amount shall be equal to \1/12\ of the annual MA
capitation rate (as calculated under subsection (c)(1))
with respect to that individual for that area, adjusted
under subparagraph (C) and reduced by the amount of any
reduction elected under section 1854(f)(1)(E).
``(ii) Payment for original fee-for-service benefits
beginning with 2006.--For years beginning with 2006, the
amount specified in subparagraph (B).
``(B) Payment amount for original fee-for-service benefits
beginning with 2006.--
``(i) Payment of bid for plans with bids below
benchmark.--In the case of a plan for which there are
average per capita monthly savings described in section
1854(b)(3)(C) or 1854(b)(4)(C), as the case may be, the
amount specified in this subparagraph is equal to the
unadjusted MA statutory non-drug monthly bid amount,
adjusted under subparagraph (C) and (if applicable) under
subparagraphs (F) and (G), plus the amount (if any) of any
rebate under subparagraph (E).
``(ii) Payment of benchmark for plans with bids at or
above benchmark.--In the case of a plan for which there are
no average per capita monthly savings described in section
1854(b)(3)(C) or 1854(b)(4)(C), as the case may be, the
amount specified in this subparagraph is equal to the MA
area-specific non-drug monthly benchmark amount, adjusted
under subparagraph (C) and (if applicable) under
subparagraphs (F) and (G).
``(iii) Payment of benchmark for msa plans.--
Notwithstanding clauses (i) and (ii), in the case of an MSA
plan, the amount specified in this subparagraph is equal to
the MA area-specific non-drug monthly benchmark amount,
adjusted under subparagraph (C).
``(C) Demographic adjustment, including adjustment for
health status.--The Secretary shall adjust the payment amount
under subparagraph (A)(i) and the amount specified under
subparagraph (B)(i), (B)(ii), and (B)(iii) for such risk
factors as age, disability status, gender, institutional
status, and such other factors as the Secretary determines to
be appropriate, including adjustment for health status under
paragraph (3), so as to ensure actuarial equivalence. The
Secretary may add to, modify, or substitute for such adjustment
factors if such changes will improve the determination of
actuarial equivalence.
``(D) Separate payment for federal drug subsidies.--In the
case of an enrollee in an MA-PD plan, the MA organization
offering such plan also receives--
``(i) subsidies under section 1860D-15 (other than
under subsection (g)); and
``(ii) reimbursement for premium and cost-sharing
reductions for low-income individuals under section 1860D-
14(c)(1)(C).
``(E) Payment of rebate for plans with bids below
benchmark.--In the case of a plan for which there are average
per capita monthly savings described in section 1854(b)(3)(C)
or 1854(b)(4)(C), as the case may be, the amount specified in
this subparagraph is the amount of the monthly rebate computed
under section 1854(b)(1)(C)(i) for that plan and year (as
reduced by the amount of any credit provided under section
1854(b)(1)(C)(iv)).
``(F) Adjustment for intra-area variations.--
``(i) Intra-regional variations.--In the case of
payment with respect to an MA regional plan for an MA
region, the Secretary shall also adjust the amounts
specified under subparagraphs (B)(i) and (B)(ii) in a
manner to take into account variations in MA local payment
rates under this part among the different MA local areas
included in such region.
``(ii) Intra-service area variations.--In the case of
payment with respect to an MA local plan for a service area
that covers more than one MA local area, the Secretary
shall also adjust the amounts specified under subparagraphs
(B)(i) and (B)(ii) in a manner to take into account
variations in MA local payment rates under this part among
the different MA local areas included in such service area.
``(G) Adjustment relating to risk adjustment.--The
Secretary shall adjust payments with respect to MA plans as
necessary to ensure that--
``(i) the sum of--
``(I) the monthly payment made under subparagraph
(A)(ii); and
``(II) the MA monthly basic beneficiary premium
under section 1854(b)(2)(A); equals
``(ii) the unadjusted MA statutory non-drug monthly bid
amount, adjusted in the manner described in subparagraph
(C) and, for an MA regional plan, subparagraph (F).''.
(f) Conforming Changes to Annual Announcement Process.--Section
1853(b) (42 U.S.C. 1395w-23(b)(1)) is amended--
(1) by amending paragraph (1) to read as follows:
``(1) Annual announcements.--
``(A) For 2005.--The Secretary shall determine, and shall
announce (in a manner intended to provide notice to interested
parties), not later than the second Monday in May of 2004, with
respect to each MA payment area, the following:
``(i) MA capitation rates.--The annual MA capitation
rate for each MA payment area for 2005.
``(ii) Adjustment factors.--The risk and other factors
to be used in adjusting such rates under subsection
(a)(1)(C) for payments for months in 2005.
``(B) For 2006 and subsequent years.--For a year after
2005--
``(i) Initial announcement.--The Secretary shall
determine, and shall announce (in a manner intended to
provide notice to interested parties), not later than the
first Monday in April before the calendar year concerned,
with respect to each MA payment area, the following:
``(I) MA capitation rates; ma local area
benchmark.--The annual MA capitation rate for each MA
payment area for the year.
``(II) Adjustment factors.--The risk and other
factors to be used in adjusting such rates under
subsection (a)(1)(C) for payments for months in such
year.
``(ii) Regional benchmark announcement.--The Secretary
shall determine, and shall announce (in a manner intended
to provide notice to interested parties), on a timely basis
before the calendar year concerned, with respect to each MA
region and each MA regional plan for which a bid was
submitted under section 1854, the MA region-specific non-
drug monthly benchmark amount for that region for the year
involved.''; and
(2) in paragraph (3), by striking ``in the announcement'' and
all that follows and inserting ``in such announcement.''.
(g) Other Amendments Relating to Premiums and Bid Amounts.--
(1) In general.--Section 1854 (42 U.S.C. 1395w-24) is amended--
(A) by amending the section heading to read as follows:
``premiums and bid amounts'';
(B) in the heading of subsection (a), by inserting ``, Bid
Amounts,'' after ``Premiums'';
(C) in subsection (a)(2)--
(i) by inserting ``before 2006'' after ``for
coordinated care plans''; and
(ii) by inserting ``for a year before 2006'' after
``section 1851(a)(2)(A)'';
(D) in subsection (a)(3), by striking ``described'' and
inserting ``for any year'';
(E) in subsection (a)(4)--
(i) by inserting ``before 2006'' after ``for private
fee-for-service plans''; and
(ii) by inserting ``for a year before 2006'' after
``section 1852(a)(1)(A)'';
(F) in subsection (a)(5)(A), by inserting ``paragraphs (2)
and (4) of'' after ``filed under'';
(G) in subsection (a)(5)(B), by inserting after ``paragraph
(3) or'' the following: ``, in the case of an MA private fee-
for-service plan,''; and
(H) in subsection (b)(1)(A) by striking ``and'' and
inserting a comma and by inserting before the period at the end
the following: ``, and, if the plan provides qualified
prescription drug coverage, the MA monthly prescription drug
beneficiary premium''.
(2) Uniformity.--Section 1854(c) (42 U.S.C. 1395w-24(c)) is
amended to read as follows:
``(c) Uniform Premium and Bid Amounts.--Except as permitted under
section 1857(i), the MA monthly bid amount submitted under subsection
(a)(6), the amounts of the MA monthly basic, prescription drug, and
supplemental beneficiary premiums, and the MA monthly MSA premium
charged under subsection (b) of an MA organization under this part may
not vary among individuals enrolled in the plan.''.
(3) Premiums.--Section 1854(d)(1) (42 U.S.C. 1395w-24(d)(1)),
as amended by subsection (c)(1), is amended by inserting ``,
prescription drug,'' after ``basic''.
(4) Limitation on enrollee liability.--Section 1854(e) (42
U.S.C. 1395w-24(e)) is amended--
(A) in paragraph (1), by striking ``.--In'' and inserting
``before 2006.--For periods before 2006, in'';
(B) in paragraph (2), by striking ``.--If'' and insert
``before 2006.--For periods before 2006, if'';
(C) in paragraph (3), by striking ``or (2)'' and inserting
``, (2), or (4)''; and
(D) in paragraph (4)--
(i) by inserting ``and for basic benefits beginning in
2006'' after ``plans'';
(ii) in the matter before subparagraph (A), by
inserting ``and for periods beginning with 2006, with
respect to an MA plan described in section 1851(a)(2)(A)''
after ``MSA plan)'';
(iii) in subparagraph (A), by striking ``required
benefits described in section 1852(a)(1)'' and inserting
``benefits under the original medicare fee-for-service
program option''; and
(iv) in subparagraph (B), by inserting ``with respect
to such benefits'' after ``would be applicable''.
(5) Modification of acr process.--Section 1854(f) (42 U.S.C.
1395w-24(f)) is amended--
(A) in the heading, by inserting ``Before 2006'' after
``Additional Benefits''; and
(B) in paragraph (1)(A), by striking ``Each'' and inserting
``For years before 2006, each''.
(h) Plan Incentives.--Section 1852(j)(4) (42 U.S.C. 1395w-22(j)(4))
is amended--
(1) by inserting ``the organization provides assurances
satisfactory to the Secretary that'' after ``unless'';
(2) in clause (ii)--
(A) by striking ``the organization--'' and all that follows
through ``(I) provides'' and inserting ``the organization
provides'';
(B) by striking ``, and'' and inserting a period; and
(C) by striking subclause (II); and
(3) by striking clause (iii).
(i) Continuation of Treatment of Enrollees With End-Stage Renal
Disease.--Section 1853(a)(1)(H), as redesignated under subsection
(d)(1)(A), is amended--
(1) by amending the second sentence to read as follows: ``Such
rates of payment shall be actuarially equivalent to rates that
would have been paid with respect to other enrollees in the MA
payment area (or such other area as specified by the Secretary)
under the provisions of this section as in effect before the date
of the enactment of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003.''; and
(2) by adding at the end the following new sentence: ``The
Secretary may apply the competitive bidding methodology provided
for in this section, with appropriate adjustments to account for
the risk adjustment methodology applied to end stage renal disease
payments.''.
(j) Facilitation of Employer Sponsorship of MA Plans.--Section
1857(i) (42 U.S.C. 1395w-27(i)) is amended--
(1) by designating the matter following the heading as a
paragraph (1) with the heading ``Contracts with ma organizations.--
'' and appropriate indentation; and
(2) by adding at the end the following new paragraph:
``(2) Employer sponsored ma plans.--To facilitate the offering
of MA plans by employers, labor organizations, or the trustees of a
fund established by one or more employers or labor organizations
(or combination thereof) to furnish benefits to the entity's
employees, former employees (or combination thereof) or members or
former members (or combination thereof) of the labor organizations,
the Secretary may waive or modify requirements that hinder the
design of, the offering of, or the enrollment in such MA plans.
Notwithstanding section 1851(g), an MA plan described in the
previous sentence may restrict the enrollment of individuals under
this part to individuals who are beneficiaries and participants in
such plan.''.
(k) Expansion of Medicare Beneficiary Education and Information
Campaign.--Section 1857(e)(2) (42 U.S.C. 1395w-27(e)(2)) is amended--
(1) in subparagraph (A) by inserting ``and a PDP sponsor under
part D'' after ``organization'';
(2) in subparagraph (B)--
(A) by inserting ``and each PDP sponsor with a contract
under part D'' after ``contract under this part'';
(B) by inserting ``or sponsor's'' after ``organization's'';
and
(C) by inserting ``, section 1860D-1(c),'' after
``information)'';
(3) in subparagraph (C)--
(A) by inserting ``and ending with fiscal year 2005'' after
``beginning with fiscal year 2001'';
(B) by inserting ``and for each fiscal year beginning with
fiscal year 2006 an amount equal to $200,000,000,'' after
``$100,000,000,''; and
(C) by inserting ``and section 1860D-12(b)(3)(D)'' after
``under this paragraph'';
(4) in subparagraph (D)--
(A) in clause (i) by inserting ``and section 1860D-1(c)''
after ``section 1851'';
(B) in clause (ii)(III), by striking ``and'' at the end of
subclause (III);
(C) in clause (ii)(IV), by striking ``each succeeding
fiscal year.'' and inserting ``each succeeding fiscal year
before fiscal year 2006; and''; and
(D) in clause (ii), by adding at the end the following new
subclause:
``(V) the applicable portion (as defined in
subparagraph (F)) of $200,000,000 in fiscal year 2006 and
each succeeding fiscal year.''; and
(5) by adding at the end the following new subparagraph:
``(F) Applicable portion defined.--In this paragraph, the
term `applicable portion' means, for a fiscal year--
``(i) with respect to MA organizations, the Secretary's
estimate of the total proportion of expenditures under this
title that are attributable to expenditures made under this
part (including payments under part D that are made to such
organizations); or
``(ii) with respect to PDP sponsors, the Secretary's
estimate of the total proportion of expenditures under this
title that are attributable to expenditures made to such
sponsors under part D.''.
(l) Conforming Amendments.--
(1) Protection against beneficiary selection.--Section
1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by adding at
the end the following: ``The Secretary shall not approve a plan of
an organization if the Secretary determines that the design of the
plan and its benefits are likely to substantially discourage
enrollment by certain MA eligible individuals with the
organization.''.
(2) Relating to rebates.--
(A) Section 1839(a)(2) (42 U.S.C. 1395r(a)(2)) is amended
by striking ``80 percent of any reduction elected under section
1854(f)(1)(E)'' and inserting ``any credit provided under
section 1854(b)(1)(C)(ii)(III)''.
(B) The first sentence of section 1840(i) (42 U.S.C.
1395s(i)) is amended by inserting ``and to reflect any credit
provided under section 1854(b)(1)(C)(iv)'' after ``section
1854(f)(1)(E)''.
(C) Section 1844(c) (42 U.S.C. 1395w(c)) is amended by
inserting ``or any credits provided under section
1854(b)(1)(C)(iv)'' after ``section 1854(f)(1)(E)''.
(3) Other conforming and technical amendments.--
(A) Section 1851(b)(1) (42 U.S.C. 1395w-21(b)(1)) is
amended--
(i) in subparagraph (B), by striking ``a plan'' and
inserting ``an MA local plan'';
(ii) in subparagraph (B), by striking ``basic benefits
described in section 1852(a)(1)(A)'' and inserting
``benefits under the original medicare fee-for-service
program option''; and
(iii) in subparagraph (C), by striking ``in a
Medicare+Choice plan'' and inserting ``in an MA local
plan''.
(B) Section 1851(d) (42 U.S.C. 1395w-21(d)) is amended--
(i) in paragraph (3), by adding at the end the
following new subparagraph:
``(F) Catastrophic coverage and single deductible.--In the
case of an MA regional plan, a description of the catastrophic
coverage and single deductible applicable under the plan.'';
(ii) in paragraph (4)(A)(ii), by inserting ``,
including information on the single deductible (if
applicable) under section 1858(b)(1)'' after ``cost
sharing'';
(iii) in paragraph (4)(B)(i), by striking
``Medicare+Choice monthly basic'' and all that follows and
inserting ``monthly amount of the premium charged to an
individual.''; and
(iv) by amending subparagraph (E) of subsection (d)(4)
to read as follows:
``(E) Supplemental benefits.--Supplemental health care
benefits, including any reductions in cost-sharing under
section 1852(a)(3) and the terms and conditions (including
premiums) for such benefits.''.
(C) Section 1857(d)(1) (42 U.S.C. 1395w-27(d)(1)) is
amended by striking ``, costs, and computation of the adjusted
community rate'' and inserting ``and costs, including allowable
costs under section 1858(c)''.
(D) Section 1851(a)(3)(B)(ii) (42 U.S.C. 1395w-
21(a)(3)(B)(ii)) is amended by striking ``section
1851(e)(4)(A)'' and inserting ``subsection (e)(4)(A)''.
(E) Section 1851(f)(1) (42 U.S.C. 1395w-21(f)(1)) is
amended by striking ``subsection (e)(1)(A)'' and inserting
``subsection (e)(1)''.
SEC. 223. EFFECTIVE DATE.
(a) Effective Date.--The amendments made by this subtitle shall
apply with respect to plan years beginning on or after January 1, 2006.
(b) Issuance of Regulations.--The Secretary shall revise the
regulations previously promulgated to carry out part C of title XVIII
of the Social Security Act to carry out the provisions of this Act.
Subtitle D--Additional Reforms
SEC. 231. SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS.
(a) Treatment as Coordinated Care Plan.--Section 1851(a)(2)(A) (42
U.S.C. 1395w-21(a)(2)(A)), as amended by section 221(a), is amended by
adding at the end the following new clause:
``(ii) Specialized ma plans for special needs
individuals.--Specialized MA plans for special needs
individuals (as defined in section 1859(b)(6)) may be any
type of coordinated care plan.''.
(b) Specialized MA Plan for Special Needs Individuals Defined.--
Section 1859(b) (42 U.S.C. 1395w-29(b)), as amended by section 221(b),
is amended by adding at the end the following new paragraph:
``(6) Specialized ma plans for special needs individuals.--
``(A) In general.--The term `specialized MA plan for
special needs individuals' means an MA plan that exclusively
serves special needs individuals (as defined in subparagraph
(B)).
``(B) Special needs individual.--The term `special needs
individual' means an MA eligible individual who--
``(i) is institutionalized (as defined by the
Secretary);
``(ii) is entitled to medical assistance under a State
plan under title XIX; or
``(iii) meets such requirements as the Secretary may
determine would benefit from enrollment in such a
specialized MA plan described in subparagraph (A) for
individuals with severe or disabling chronic conditions.
The Secretary may waive application of section 1851(a)(3)(B) in
the case of an individual described in clause (i), (ii), or
(iii) of this subparagraph and may apply rules similar to the
rules of section 1894(c)(4) for continued eligibility of
special needs individuals.''.
(c) Restriction on Enrollment Permitted.--Section 1859 (42 U.S.C.
1395w-29) is amended by adding at the end the following new subsection:
``(f) Restriction on Enrollment for Specialized MA Plans for
Special Needs Individuals.--In the case of a specialized MA plan for
special needs individuals (as defined in subsection (b)(6)),
notwithstanding any other provision of this part and in accordance with
regulations of the Secretary and for periods before January 1, 2009,
the plan may restrict the enrollment of individuals under the plan to
individuals who are within one or more classes of special needs
individuals.''.
(d) Authority To Designate Other Plans as Specialized MA Plans.--In
promulgating regulations to carry out section 1851(a)(2)(A)(ii) of the
Social Security Act (as added by subsection (a)) and section 1859(b)(6)
of such Act (as added by subsection (b)), the Secretary may provide
(notwithstanding section 1859(b)(6)(A) of such Act) for the offering of
specialized MA plans for special needs individuals by MA plans that
disproportionately serve special needs individuals.
(e) Report to Congress.--Not later than December 31, 2007, the
Secretary shall submit to Congress a report that assesses the impact of
specialized MA plans for special needs individuals on the cost and
quality of services provided to enrollees. Such report shall include an
assessment of the costs and savings to the medicare program as a result
of amendments made by subsections (a), (b), and (c).
(f) Effective Dates.--
(1) In general.--The amendments made by subsections (a), (b),
and (c) shall take effect upon the date of the enactment of this
Act.
(2) Deadline for issuance of requirements for special needs
individuals; transition.--No later than 1 year after the date of
the enactment of this Act, the Secretary shall issue final
regulations to establish requirements for special needs individuals
under section 1859(b)(6)(B)(iii) of the Social Security Act, as
added by subsection (b).
SEC. 232. AVOIDING DUPLICATIVE STATE REGULATION.
(a) In General.--Section 1856(b)(3) (42 U.S.C. 1395w-26(b)(3)) is
amended to read as follows:
``(3) Relation to state laws.--The standards established under
this part shall supersede any State law or regulation (other than
State licensing laws or State laws relating to plan solvency) with
respect to MA plans which are offered by MA organizations under
this part.''.
(b) Conforming Amendment.--Section 1854(g) (42 U.S.C. 1395w-24(g))
is amended by inserting ``or premiums paid to such organizations under
this part'' after ``section 1853''.
(c) Effective Date.--The amendments made by this subsection shall
take effect on the date of the enactment of this Act.
SEC. 233. MEDICARE MSAS.
(a) Exemption From Reporting Requirement.--
(1) In general.--Section 1852(e)(1) (42 U.S.C. 1395w-22(e)(1))
is amended by inserting ``(other than MSA plans)'' after ``plans''.
(2) Conforming amendments.--Section 1852 (42 U.S.C. 1395w-22)
is amended--
(A) in subsection (c)(1)(I), by inserting before the period
at the end the following: ``, if required under such section'';
(B) in subsection (e)(2)(A), by striking ``, a non-network
MSA plan,''; and
(C) in subsection (e)(2)(B), by striking ``, non-network
msa plans,'' and ``, a non-network MSA plan,''.
(3) Effective date.--The amendments made by this subsection
shall apply on and after the date of the enactment of this Act but
shall not apply to contract years beginning on or after January 1,
2006.
(b) Making Program Permanent and Eliminating Cap.--Section
1851(b)(4) (42 U.S.C. 1395w-21(b)(4)) is amended--
(1) in the heading, by striking ``on a demonstration basis'';
(2) by striking the first sentence of subparagraph (A); and
(3) by striking the second sentence of subparagraph (C).
(c) Applying Limitations on Balance Billing.--Section 1852(k)(1)
(42 U.S.C. 1395w-22(k)(1)) is amended by inserting ``or with an
organization offering an MSA plan'' after ``section 1851(a)(2)(A)''.
(d) Additional Amendment.--Section 1851(e)(5)(A) (42 U.S.C. 1395w-
21(e)(5)(A)) is amended--
(1) by adding ``or'' at the end of clause (i);
(2) by striking ``, or'' at the end of clause (ii) and
inserting a semicolon; and
(3) by striking clause (iii).
SEC. 234. EXTENSION OF REASONABLE COST CONTRACTS.
Subparagraph (C) of section 1876(h)(5) (42 U.S.C. 1395mm(h)(5)) is
amended to read as follows:
``(C)(i) Subject to clause (ii), a reasonable cost reimbursement
contract under this subsection may be extended or renewed indefinitely.
``(ii) For any period beginning on or after January 1, 2008, a
reasonable cost reimbursement contract under this subsection may not be
extended or renewed for a service area insofar as such area during the
entire previous year was within the service area of--
``(I) 2 or more MA regional plans described in clause (iii); or
``(II) 2 or more MA local plans described in clause (iii).
``(iii) A plan described in this clause for a year for a service
area is a plan described in section 1851(a)(2)(A)(i) if the service
area for the year meets the following minimum enrollment requirements:
``(I) With respect to any portion of the area involved that is
within a Metropolitan Statistical Area with a population of more
than 250,000 and counties contiguous to such Metropolitan
Statistical Area, 5,000 individuals.
``(II) With respect to any other portion of such area, 1,500
individuals.''.
SEC. 235. TWO-YEAR EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION
PROJECTS.
The last sentence of section 9215(a) of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (42 U.S.C. 1395b-1 note), as amended
by section 6135 of the Omnibus Budget Reconciliation Act of 1989,
section 13557 of the Omnibus Budget Reconciliation Act of 1993, section
4017 of BBA, section 534 of BBRA (113 Stat. 1501A-390), and section 633
of BIPA, is amended by striking ``December 31, 2004'' and inserting
``December 31, 2006''.
SEC. 236. PAYMENT BY PACE PROVIDERS FOR MEDICARE AND MEDICAID SERVICES
FURNISHED BY NONCONTRACT PROVIDERS.
(a) Medicare Services.--
(1) Medicare services furnished by providers of services.--
Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended--
(A) by striking ``part C or'' and inserting ``part C, with
a PACE provider under section 1894 or 1934, or'';
(B) by striking ``(i)'';
(C) by striking ``and (ii)'';
(D) by inserting ``(or, in the case of a PACE provider,
contract or other agreement)'' after ``have a contract''; and
(E) by striking ``members of the organization'' and
inserting ``members of the organization or PACE program
eligible individuals enrolled with the PACE provider,''.
(2) Medicare services furnished by physicians and other
entities.--Section 1894(b) (42 U.S.C. 1395eee(b)) is amended by
adding at the end the following new paragraphs:
``(3) Treatment of medicare services furnished by noncontract
physicians and other entities.--
``(A) Application of medicare advantage requirement with
respect to medicare services furnished by noncontract
physicians and other entities.--Section 1852(k)(1) (relating to
limitations on balance billing against MA organizations for
noncontract physicians and other entities with respect to
services covered under this title) shall apply to PACE
providers, PACE program eligible individuals enrolled with such
PACE providers, and physicians and other entities that do not
have a contract or other agreement establishing payment amounts
for services furnished to such an individual in the same manner
as such section applies to MA organizations, individuals
enrolled with such organizations, and physicians and other
entities referred to in such section.
``(B) Reference to related provision for noncontract
providers of services.--For the provision relating to
limitations on balance billing against PACE providers for
services covered under this title furnished by noncontract
providers of services, see section 1866(a)(1)(O).
``(4) Reference to related provision for services covered under
title xix but not under this title.--For provisions relating to
limitations on payments to providers participating under the State
plan under title XIX that do not have a contract or other agreement
with a PACE provider establishing payment amounts for services
covered under such plan (but not under this title) when such
services are furnished to enrollees of that PACE provider, see
section 1902(a)(66).''.
(b) Medicaid Services.--
(1) Requirement under state plan.--Section 1902(a) (42 U.S.C.
1396a(a)), as amended by section 103(a), is amended--
(A) in paragraph (65), by striking ``and'' at the end;
(B) in paragraph (66), by striking the period at the end
and inserting ``; and''; and
(C) by inserting after paragraph (66) the following new
paragraph:
``(67) provide, with respect to services covered under the
State plan (but not under title XVIII) that are furnished to a PACE
program eligible individual enrolled with a PACE provider by a
provider participating under the State plan that does not have a
contract or other agreement with the PACE provider that establishes
payment amounts for such services, that such participating provider
may not require the PACE provider to pay the participating provider
an amount greater than the amount that would otherwise be payable
for the service to the participating provider under the State plan
for the State where the PACE provider is located (in accordance
with regulations issued by the Secretary).''.
(2) Application under medicaid.--Section 1934(b) (42 U.S.C.
1396u-4(b)) is amended by adding at the end the following new
paragraphs:
``(3) Treatment of medicare services furnished by noncontract
physicians and other entities.--
``(A) Application of medicare advantage requirement with
respect to medicare services furnished by noncontract
physicians and other entities.--Section 1852(k)(1) (relating to
limitations on balance billing against MA organizations for
noncontract physicians and other entities with respect to
services covered under title XVIII) shall apply to PACE
providers, PACE program eligible individuals enrolled with such
PACE providers, and physicians and other entities that do not
have a contract or other agreement establishing payment amounts
for services furnished to such an individual in the same manner
as such section applies to MA organizations, individuals
enrolled with such organizations, and physicians and other
entities referred to in such section.
``(B) Reference to related provision for noncontract
providers of services.--For the provision relating to
limitations on balance billing against PACE providers for
services covered under title XVIII furnished by noncontract
providers of services, see section 1866(a)(1)(O).
``(4) Reference to related provision for services covered under
this title but not under title xviii.--For provisions relating to
limitations on payments to providers participating under the State
plan under this title that do not have a contract or other
agreement with a PACE provider establishing payment amounts for
services covered under such plan (but not under title XVIII) when
such services are furnished to enrollees of that PACE provider, see
section 1902(a)(67).''.
(c) Effective Date.--The amendments made by this section shall
apply to services furnished on or after January 1, 2004.
SEC. 237. REIMBURSEMENT FOR FEDERALLY QUALIFIED HEALTH CENTERS
PROVIDING SERVICES UNDER MA PLANS.
(a) Reimbursement.--Section 1833(a)(3) (42 U.S.C. 1395l(a)(3)) is
amended to read as follows:
``(3) in the case of services described in section
1832(a)(2)(D)--
``(A) except as provided in subparagraph (B), the costs
which are reasonable and related to the cost of furnishing such
services or which are based on such other tests of
reasonableness as the Secretary may prescribe in regulations,
including those authorized under section 1861(v)(1)(A), less
the amount a provider may charge as described in clause (ii) of
section 1866(a)(2)(A), but in no case may the payment for such
services (other than for items and services described in
section 1861(s)(10)(A)) exceed 80 percent of such costs; or
``(B) with respect to the services described in clause (ii)
of section 1832(a)(2)(D) that are furnished to an individual
enrolled with a MA plan under part C pursuant to a written
agreement described in section 1853(a)(4), the amount (if any)
by which--
``(i) the amount of payment that would have otherwise
been provided under subparagraph (A) (calculated as if `100
percent' were substituted for `80 percent' in such
subparagraph) for such services if the individual had not
been so enrolled; exceeds
``(ii) the amount of the payments received under such
written agreement for such services (not including any
financial incentives provided for in such agreement such as
risk pool payments, bonuses, or withholds),
less the amount the federally qualified health center may
charge as described in section 1857(e)(3)(B);''.
(b) Continuation of Monthly Payments.--
(1) In general.--Section 1853(a) (42 U.S.C. 1395w-23(a)) is
amended by adding at the end the following new paragraph:
``(4) Payment rule for federally qualified health center
services.--If an individual who is enrolled with an MA plan under
this part receives a service from a federally qualified health
center that has a written agreement with the MA organization that
offers such plan for providing such a service (including any
agreement required under section 1857(e)(3))--
``(A) the Secretary shall pay the amount determined under
section 1833(a)(3)(B) directly to the federally qualified
health center not less frequently than quarterly; and
``(B) the Secretary shall not reduce the amount of the
monthly payments under this subsection as a result of the
application of subparagraph (A).''.
(2) Conforming amendments.--
(A) Section 1851(i) (42 U.S.C. 1395w-21(i)) is amended--
(i) in paragraph (1), by inserting ``1853(a)(4),''
after ``Subject to sections 1852(a)(5),''; and
(ii) in paragraph (2), by inserting ``1853(a)(4),''
after ``Subject to sections''.
(B) Section 1853(c)(5) is amended by striking ``subsections
(a)(3)(C)(iii) and (i)'' and inserting ``subsections
(a)(3)(C)(iii), (a)(4), and (i)''.
(c) Additional Contract Requirements.--Section 1857(e) (42 U.S.C.
1395w-27(e)) is amended by adding at the end the following new
paragraph:
``(3) Agreements with federally qualified health centers.--
``(A) Payment levels and amounts.--A contract under this
section with an MA organization shall require the organization
to provide, in any written agreement described in section
1853(a)(4) between the organization and a federally qualified
health center, for a level and amount of payment to the
federally qualified health center for services provided by such
health center that is not less than the level and amount of
payment that the plan would make for such services if the
services had been furnished by a entity providing similar
services that was not a federally qualified health center.
``(B) Cost-sharing.--Under the written agreement referred
to in subparagraph (A), a federally qualified health center
must accept the payment amount referred to in such subparagraph
plus the Federal payment provided for in section 1833(a)(3)(B)
as payment in full for services covered by the agreement,
except that such a health center may collect any amount of
cost-sharing permitted under the contract under this section,
so long as the amounts of any deductible, coinsurance, or
copayment comply with the requirements under section
1854(e).''.
(d) Safe Harbor.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)),
as amended by section 101(f)(2), is amended--
(1) in subparagraph (F), by striking ``and'' after the
semicolon at the end;
(2) in subparagraph (G), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(H) any remuneration between a federally qualified health
center (or an entity controlled by such a health center) and an
MA organization pursuant to a written agreement described in
section 1853(a)(4).''.
(e) Effective Date.--The amendments made by this section shall
apply to services provided on or after January 1, 2006, and contract
years beginning on or after such date.
SEC. 238. INSTITUTE OF MEDICINE EVALUATION AND REPORT ON HEALTH CARE
PERFORMANCE MEASURES.
(a) Evaluation.--
(1) In general.--Not later than the date that is 2 months after
the date of the enactment of this Act, the Secretary shall enter
into an arrangement under which the Institute of Medicine of the
National Academy of Sciences (in this section referred to as the
``Institute'') shall conduct an evaluation of leading health care
performance measures in the public and private sectors and options
to implement policies that align performance with payment under the
medicare program under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.).
(2) Specific matters evaluated.--In conducting the evaluation
under paragraph (1), the Institute shall--
(A) catalogue, review, and evaluate the validity of leading
health care performance measures;
(B) catalogue and evaluate the success and utility of
alternative performance incentive programs in public or private
sector settings; and
(C) identify and prioritize options to implement policies
that align performance with payment under the medicare program
that indicate--
(i) the performance measurement set to be used and how
that measurement set will be updated;
(ii) the payment policy that will reward performance;
and
(iii) the key implementation issues (such as data and
information technology requirements) that must be
addressed.
(3) Scope of health care performance measures.--The health care
performance measures described in paragraph (2)(A) shall encompass
a variety of perspectives, including physicians, hospitals, other
health care providers, health plans, purchasers, and patients.
(4) Consultation with medpac.--In evaluating the matters
described in paragraph (2)(C), the Institute shall consult with the
Medicare Payment Advisory Commission established under section 1805
of the Social Security Act (42 U.S.C. 1395b-6).
(b) Report.--Not later than the date that is 18 months after the
date of enactment of this Act, the Institute shall submit to the
Secretary and appropriate committees of jurisdiction of the Senate and
House of Representatives a report on the evaluation conducted under
subsection (a)(1) describing the findings of such evaluation and
recommendations for an overall strategy and approach for aligning
payment with performance, including options for updating performance
measures, in the original medicare fee-for-service program under parts
A and B of title XVIII of the Social Security Act, the Medicare
Advantage program under part C of such title, and any other programs
under such title XVIII.
(c) Authorization of Appropriations.--There are authorized to be
appropriated such sums as may be necessary for purposes of conducting
the evaluation and preparing the report required by this section.
Subtitle E--Comparative Cost Adjustment (CCA) Program
SEC. 241. COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM.
(a) In General.--Part C of title XVIII is amended by adding at the
end the following new section:
``comparative cost adjustment (cca) program
``Sec. 1860C-1. (a) Establishment of Program.--
``(1) In general.--The Secretary shall establish a program
under this section (in this section referred to as the `CCA
program') for the application of comparative cost adjustment in CCA
areas selected under this section.
``(2) Duration.--The CCA program shall begin January 1, 2010,
and shall extend over a period of 6 years, and end on December 31,
2015.
``(3) Report.--Upon the completion of the CCA program, the
Secretary shall submit a report to Congress. Such report shall
include the following, with respect to both this part and the
original medicare fee-for-service program:
``(A) An evaluation of the financial impact of the CCA
program.
``(B) An evaluation of changes in access to physicians and
other health care providers.
``(C) Beneficiary satisfaction.
``(D) Recommendations regarding any extension or expansion
of the CCA program.
``(b) Requirements for Selection of CCA Areas.--
``(1) CCA area defined.--
``(A) In general.--For purposes of this section, the term
`CCA area' means an MSA that meets the requirements of
paragraph (2) and is selected by the Secretary under subsection
(c).
``(B) MSA defined.--For purposes of this section, the term
`MSA' means a Metropolitan Statistical Area (or such similar
area as the Secretary recognizes).
``(2) Requirements for cca areas.--The requirements of this
paragraph for an MSA to be a CCA area are as follows:
``(A) MA enrollment requirement.--For the reference month
(as defined under section 1858(f)(4)(B)) with respect to 2010,
at least 25 percent of the total number of MA eligible
individuals who reside in the MSA were enrolled in an MA local
plan described in section 1851(a)(2)(A)(i).
``(B) 2 plan requirement.--There will be offered in the MSA
during the annual, coordinated election period under section
1851(e)(3)(B) before the beginning of 2010 at least 2 MA local
plans described in section 1851(a)(2)(A)(i) (in addition to the
fee-for-service program under parts A and B), each offered by a
different MA organization and each of which met the minimum
enrollment requirements of paragraph (1) of section 1857(b) (as
applied without regard to paragraph (3) thereof) as of the
reference month.
``(c) Selection of CCA Areas.--
``(1) General selection criteria.--The Secretary shall select
CCA areas from among those MSAs qualifying under subsection (b) in
a manner that--
``(A) seeks to maximize the opportunity to test the
application of comparative cost adjustment under this title;
``(B) does not seek to maximize the number of MA eligible
individuals who reside in such areas; and
``(C) provides for geographic diversity consistent with the
criteria specified in paragraph (2).
``(2) Selection criteria.--With respect to the selection of
MSAs that qualify to be CCA areas under subsection (b), the
following rules apply, to the maximum extent feasible:
``(A) Maximum number.--The number of such MSAs selected may
not exceed the lesser of (i) 6, or (ii) 25 percent of the
number of MSAs that meet the requirement of subsection
(b)(2)(A).
``(B) One of 4 largest areas by population.--At least one
such qualifying MSA shall be selected from among the 4 such
qualifying MSAs with the largest total population of MA
eligible individuals.
``(C) One of 4 areas with lowest population density.--At
least one such qualifying MSA shall be selected from among the
4 such qualifying MSAs with the lowest population density (as
measured by residents per square mile or similar measure of
density).
``(D) Multistate area.--At least one such qualifying MSA
shall be selected that includes a multi-State area. Such an MSA
may be an MSA described in subparagraph (B) or (C).
``(E) Limitation within same geographic region.--No more
than 2 such MSAs shall be selected that are, in whole or in
part, within the same geographic region (as specified by the
Secretary) of the United States.
``(F) Priority to areas not within certain demonstration
projects.--Priority shall be provided for those qualifying MSAs
that do not have a demonstration project in effect as of the
date of the enactment of this section for medicare preferred
provider organization plans under this part.
``(d) Application of Comparative Cost Adjustment.--
``(1) In general.--In the case of a CCA area for a year--
``(A) for purposes of applying this part with respect to
payment for MA local plans, any reference to an MA area-
specific non-drug monthly benchmark amount shall be treated as
a reference to such benchmark computed as if the CCA area-
specific non-drug monthly benchmark amount (as defined in
subsection (e)(1)) were substituted for the amount described in
section 1853(j)(1)(A) for the CCA area and year involved, as
phased in under paragraph (3); and
``(B) with respect to months in the year for individuals
residing in the CCA area who are not enrolled in an MA plan,
the amount of the monthly premium under section 1839 is subject
to adjustment under subsection (f).
``(2) Exclusion of ma local areas with fewer than 2
organizations offering ma plans.--
``(A) In general.--In no case shall an MA local area that
is within an MSA be included as part of a CCA area unless for
2010 (and, except as provided in subparagraph (B), for a
subsequent year) there is offered in each part of such MA local
area at least 2 MA local plans described in section
1851(a)(2)(A)(i) each of which is offered by a different MA
organization.
``(B) Continuation.--If an MA local area meets the
requirement of subparagraph (A) and is included in a CCA area
for 2010, such local area shall continue to be included in such
CCA area for a subsequent year notwithstanding that it no
longer meets such requirement so long as there is at least one
MA local plan described in section 1851(a)(2)(A)(i) that is
offered in such local area.
``(3) Phase-in of cca benchmark.--
``(A) In general.--In applying this section for a year
before 2013, paragraph (1)(A) shall be applied as if the phase-
in fraction under subparagraph (B) of the CCA non-drug monthly
benchmark amount for the year were substituted for such
fraction of the MA area-specific non-drug monthly benchmark
amount.
``(B) Phase-in fraction.--The phase-in fraction under this
subparagraph is--
``(i) for 2010 \1/4\; and
``(ii) for a subsequent year is the phase-in fraction
under this subparagraph for the previous year increased by
\1/4\, but in no case more than 1.
``(e) Computation of CCA Benchmark Amount.--
``(1) CCA non-drug monthly benchmark amount.--For purposes of
this section, the term `CCA non-drug monthly benchmark amount'
means, with respect to a CCA area for a month in a year, the sum of
the 2 components described in paragraph (2) for the area and year.
The Secretary shall compute such benchmark amount for each such CCA
area before the beginning of each annual, coordinated election
period under section 1851(e)(3)(B) for each year (beginning with
2010) in which the CCA area is so selected.
``(2) 2 components.--For purposes of paragraph (1), the 2
components described in this paragraph for a CCA area and a year
are the following:
``(A) MA local component.--The product of the following:
``(i) Weighted average of medicare advantage plan bids
in area.--The weighted average of the plan bids for the
area and year (as determined under paragraph (3)(A)).
``(ii) Non-ffs market share.--One minus the fee-for-
service market share percentage, determined under paragraph
(4) for the area and year.
``(B) Fee-for-service component.--The product of the
following:
``(i) Fee-for-service area-specific non-drug amount.--
The fee-for-service area-specific non-drug amount (as
defined in paragraph (5)) for the area and year.
``(ii) Fee-for-service market share.--The fee-for-
service market share percentage, determined under paragraph
(4) for the area and year.
``(3) Determination of weighted average ma bids for a cca
area.--
``(A) In general.--For purposes of paragraph (2)(A)(i), the
weighted average of plan bids for a CCA area and a year is,
subject to subparagraph (D), the sum of the following products
for MA local plans described in subparagraph (C) in the area
and year:
``(i) Monthly medicare advantage statutory non-drug bid
amount.--The accepted unadjusted MA statutory non-drug
monthly bid amount.
``(ii) Plan's share of medicare advantage enrollment in
area.--The number of individuals described in subparagraph
(B), divided by the total number of such individuals for
all MA plans described in subparagraph (C) for that area
and year.
``(B) Counting of individuals.--The Secretary shall count,
for each MA local plan described in subparagraph (C) for an
area and year, the number of individuals who reside in the area
and who were enrolled under such plan under this part during
the reference month for that year.
``(C) Exclusion of plans not offered in previous year.--For
an area and year, the MA local plans described in this
subparagraph are MA local plans described in section
1851(a)(2)(A)(i) that are offered in the area and year and were
offered in the CCA area in the reference month.
``(D) Computation of weighted average of plan bids.--In
calculating the weighted average of plan bids for a CCA area
under subparagraph (A)--
``(i) in the case of an MA local plan that has a
service area only part of which is within such CCA area,
the MA organization offering such plan shall submit a
separate bid for such plan for the portion within such CCA
area; and
``(ii) the Secretary shall adjust such separate bid
(or, in the case of an MA local plan that has a service
area entirely within such CCA area, the plan bid) as may be
necessary to take into account differences between the
service area of such plan within the CCA area and the
entire CCA area and the distribution of plan enrollees of
all MA local plans offered within the CCA area.
``(4) Computation of fee-for-service market share percentage.--
The Secretary shall determine, for a year and a CCA area, the
proportion (in this subsection referred to as the `fee-for-service
market share percentage') equal to--
``(A) the total number of MA eligible individuals residing
in such area who during the reference month for the year were
not enrolled in any MA plan; divided by
``(B) the sum of such number and the total number of MA
eligible individuals residing in such area who during such
reference month were enrolled in an MA local plan described in
section 1851(a)(2)(A)(i),
or, if greater, such proportion determined for individuals
nationally.
``(5) Fee-for-service area-specific non-drug amount.--
``(A) In general.--For purposes of paragraph (2)(B)(i) and
subsection (f)(2)(A), subject to subparagraph (C), the term
`fee-for-service area-specific non-drug amount' means, for a
CCA area and a year, the adjusted average per capita cost for
such area and year involved, determined under section
1876(a)(4) and adjusted as appropriate for the purpose of risk
adjustment for benefits under the original medicare fee-for-
service program option for individuals entitled to benefits
under part A and enrolled under part B who are not enrolled in
an MA plan for the year, but adjusted to exclude costs
attributable to payments under section 1886(h).
``(B) Use of full risk adjustment to standardize fee-for-
service costs to typical beneficiary.--In determining the
adjusted average per capita cost for an area and year under
subparagraph (A), such costs shall be adjusted to fully take
into account the demographic and health status risk factors
established under section 1853(a)(1)(A)(iv) so that such per
capita costs reflect the average costs for a typical
beneficiary residing in the CCA area.
``(C) Inclusion of costs of va and dod military facility
services to medicare-eligible beneficiaries.--In determining
the adjusted average per capita cost under subparagraph (A) for
a year, such cost shall be adjusted to include the Secretary's
estimate, on a per capita basis, of the amount of additional
payments that would have been made in the area involved under
this title if individuals entitled to benefits under this title
had not received services from facilities of the Department of
Veterans Affairs or the Department of Defense.
``(f) Premium Adjustment.--
``(1) Application.--
``(A) In general.--Except as provided in subparagraph (B),
in the case of an individual who is enrolled under part B, who
resides in a CCA area, and who is not enrolled in an MA plan
under this part, the monthly premium otherwise applied under
part B (determined without regard to subsections (b), (f), and
(i) of section 1839 or any adjustment under this subsection)
shall be adjusted in accordance with paragraph (2), but only in
the case of premiums for months during the period in which the
CCA program under this section for such area is in effect.
``(B) No premium adjustment for subsidy eligible
beneficiaries.--No premium adjustment shall be made under this
subsection for a premium for a month if the individual is
determined to be a subsidy eligible individual (as defined in
section 1860D-14(a)(3)(A)) for the month.
``(2) Amount of adjustment.--
``(A) In general.--Under this paragraph, subject to the
exemption under paragraph (1)(B) and the limitation under
subparagraph (B), if the fee-for-service area-specific non-drug
amount (as defined in section (e)(5)) for a CCA area in which
an individual resides for a month--
``(i) does not exceed the CCA non-drug monthly
benchmark amount (as determined under subsection (e)(1))
for such area and month, the amount of the premium for the
individual for the month shall be reduced, by an amount
equal to 75 percent of the amount by which such CCA
benchmark exceeds such fee-for-service area-specific non-
drug amount; or
``(ii) exceeds such CCA non-drug benchmark, the amount
of the premium for the individual for the month shall be
adjusted to ensure, that--
``(I) the sum of the amount of the adjusted premium
and the CCA non-drug benchmark for the area; is equal
to
``(II) the sum of the unadjusted premium plus the
amount of such fee-for-service area-specific non-drug
amount for the area.
``(B) Limitation.--In no case shall the actual amount of an
adjustment under subparagraph (A) for an area and month in a
year result in an adjustment that exceeds the maximum
adjustment permitted under subparagraph (C) for the area and
year, or, if less, the maximum annual adjustment permitted
under subparagraph (D) for the area and year.
``(C) Phase-in of adjustment.--The amount of an adjustment
under subparagraph (A) for a CCA area and year may not exceed
the product of the phase-in fraction for the year under
subsection (d)(3)(B) multiplied by the amount of the adjustment
otherwise computed under subparagraph (A) for the area and
year, determined without regard to this subparagraph and
subparagraph (D).
``(D) 5-percent limitation on adjustment.--The amount of
the adjustment under this subsection for months in a year shall
not exceed 5 percent of the amount of the monthly premium
amount determined for months in the year under section 1839
without regard to subsections (b), (f), and (i) of such section
and this subsection.''.
(b) Conforming Amendments.--
(1) MA local plans.--
(A) Section 1853(j)(1)(A) (42 U.S.C. 1395w-23(j)(1)(A)), as
added by section 222(d), is amended by inserting ``subject to
section 1860C-1(d)(2)(A),'' after ``within an MA local area,''.
(B) Section 1853(b)(1)(B), as amended by section 222(f)(1),
is amended by adding at the end the following new clause:
``(iii) Benchmark announcement for cca local areas.--
The Secretary shall determine, and shall announce (in a
manner intended to provide notice to interested parties),
on a timely basis before the calendar year concerned, with
respect to each CCA area (as defined in section 1860C-
1(b)(1)(A)), the CCA non-drug monthly benchmark amount
under section 1860C-1(e)(1) for that area for the year
involved.''.
(2) Premium adjustment.--
(A) Section 1839 (42 U.S.C. 1395r) is amended by adding at
the end the following new subsection:
``(h) Potential Application of Comparative Cost Adjustment in CCA
Areas.--
``(1) In general.--Certain individuals who are residing in a
CCA area under section 1860C-1 who are not enrolled in an MA plan
under part C may be subject to a premium adjustment under
subsection (f) of such section for months in which the CCA program
under such section is in effect in such area.
``(2) No effect on late enrollment penalty or income-related
adjustment in subsidies.--Nothing in this subsection or section
1860C-1(f) shall be construed as affecting the amount of any
premium adjustment under subsection (b) or (i). Subsection (f)
shall be applied without regard to any premium adjustment referred
to in paragraph (1).
``(3) Implementation.--In order to carry out a premium
adjustment under this subsection and section 1860C-1(f) (insofar as
it is effected through the manner of collection of premiums under
section 1840(a)), the Secretary shall transmit to the Commissioner
of Social Security--
``(A) at the beginning of each year, the name, social
security account number, and the amount of the premium
adjustment (if any) for each individual enrolled under this
part for each month during the year; and
``(B) periodically throughout the year, information to
update the information previously transmitted under this
paragraph for the year.''.
(B) Section 1844(c) (42 U.S.C. 1395w(c)) is amended by
inserting ``and without regard to any premium adjustment
effected under sections 1839(h) and 1860C-1(f)'' before the
period at the end.
(c) No Change in Medicare's Defined Benefit Package.--Nothing in
this part (or the amendments made by this part) shall be construed as
changing the entitlement to defined benefits under parts A and B of
title XVIII of the Social Security Act.
TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE
SEC. 301. MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.
(a) Technical Amendment Concerning Secretary's Authority To Make
Conditional Payment When Certain Primary Plans Do Not Pay Promptly.--
Section 1862(b)(2) (42 U.S.C. 1395y(b)(2)) is amended--
(1) in subparagraph (A)(ii), by striking ``promptly (as
determined in accordance with regulations)''; and
(2) in subparagraph (B)--
(A) by redesignating clauses (i) through (v) as clauses
(ii) through (vi), respectively; and
(B) by inserting before clause (ii), as so redesignated,
the following new clause:
``(i) Authority to make conditional payment.--The
Secretary may make payment under this title with respect to
an item or service if a primary plan described in
subparagraph (A)(ii) has not made or cannot reasonably be
expected to make payment with respect to such item or
service promptly (as determined in accordance with
regulations). Any such payment by the Secretary shall be
conditioned on reimbursement to the appropriate Trust Fund
in accordance with the succeeding provisions of this
subsection.''.
(b) Clarifying Amendments to Conditional Payment Provisions.--
Section 1862(b)(2) (42 U.S.C. 1395y(b)(2)), as amended by subsection
(a), is amended--
(1) in subparagraph (A), in the matter following clause (ii),
by inserting the following sentence at the end: ``An entity that
engages in a business, trade, or profession shall be deemed to have
a self-insured plan if it carries its own risk (whether by a
failure to obtain insurance, or otherwise) in whole or in part.'';
(2) in subparagraph (B)(ii), as redesignated by subsection
(a)(2)(A)--
(A) by striking the first sentence and inserting the
following: ``A primary plan, and an entity that receives
payment from a primary plan, shall reimburse the appropriate
Trust Fund for any payment made by the Secretary under this
title with respect to an item or service if it is demonstrated
that such primary plan has or had a responsibility to make
payment with respect to such item or service. A primary plan's
responsibility for such payment may be demonstrated by a
judgment, a payment conditioned upon the recipient's
compromise, waiver, or release (whether or not there is a
determination or admission of liability) of payment for items
or services included in a claim against the primary plan or the
primary plan's insured, or by other means.''; and
(B) in the final sentence, by striking ``on the date such
notice or other information is received'' and inserting ``on
the date notice of, or information related to, a primary plan's
responsibility for such payment or other information is
received''; and
(3) in subparagraph (B)(iii), as redesignated by subsection
(a)(2)(A), by striking the first sentence and inserting the
following: ``In order to recover payment made under this title for
an item or service, the United States may bring an action against
any or all entities that are or were required or responsible
(directly, as an insurer or self-insurer, as a third-party
administrator, as an employer that sponsors or contributes to a
group health plan, or large group health plan, or otherwise) to
make payment with respect to the same item or service (or any
portion thereof) under a primary plan. The United States may, in
accordance with paragraph (3)(A) collect double damages against any
such entity. In addition, the United States may recover under this
clause from any entity that has received payment from a primary
plan or from the proceeds of a primary plan's payment to any
entity.''.
(c) Clerical Amendments.--Section 1862(b) (42 U.S.C. 1395y(b)) is
amended--
(1) in paragraph (1)(A), by moving the indentation of clauses
(ii) through (v) 2 ems to the left; and
(2) in paragraph (3)(A), by striking ``such'' before
``paragraphs''.
(d) Effective Dates.--The amendments made by this section shall be
effective--
(1) in the case of subsection (a), as if included in the
enactment of title III of the Medicare and Medicaid Budget
Reconciliation Amendments of 1984 (Public Law 98-369); and
(2) in the case of subsections (b) and (c), as if included in
the enactment of section 953 of the Omnibus Reconciliation Act of
1980 (Public Law 96-499; 94 Stat. 2647).
SEC. 302. PAYMENT FOR DURABLE MEDICAL EQUIPMENT; COMPETITIVE
ACQUISITION OF CERTAIN ITEMS AND SERVICES.
(a) Quality Enhancement and Fraud Reduction.--
(1) Establishment of quality standards and accreditation
requirements for durable medical equipment suppliers.--Section
1834(a) (42 U.S.C. 1395m(a)) is amended--
(A) by transferring paragraph (17), as added by section
4551(c)(1) of the Balanced Budget Act of 1997 (111 Stat. 458),
to the end of such section and redesignating such paragraph as
paragraph (19); and
(B) by adding at the end the following new paragraph:
``(20) Identification of quality standards.--
``(A) In general.--Subject to subparagraph (C), the
Secretary shall establish and implement quality standards for
suppliers of items and services described in subparagraph (D)
to be applied by recognized independent accreditation
organizations (as designated under subparagraph (B)) and with
which such suppliers shall be required to comply in order to--
``(i) furnish any such item or service for which
payment is made under this part; and
``(ii) receive or retain a provider or supplier number
used to submit claims for reimbursement for any such item
or service for which payment may be made under this title.
``(B) Designation of independent accreditation
organizations.--Not later than the date that is 1 year after
the date on which the Secretary implements the quality
standards under subparagraph (A), notwithstanding section
1865(b), the Secretary shall designate and approve one or more
independent accreditation organizations for purposes of such
subparagraph.
``(C) Quality standards.--The quality standards described
in subparagraph (A) may not be less stringent than the quality
standards that would otherwise apply if this paragraph did not
apply and shall include consumer services standards.
``(D) Items and services described.--The items and services
described in this subparagraph are the following items and
services, as the Secretary determines appropriate:
``(i) Covered items (as defined in paragraph (13)) for
which payment may otherwise be made under this subsection.
``(ii) Prosthetic devices and orthotics and prosthetics
described in section 1834(h)(4).
``(iii) Items and services described in section
1842(s)(2).
``(E) Implementation.--The Secretary may establish by
program instruction or otherwise the quality standards under
this paragraph, after consultation with representatives of
relevant parties. Such standards shall be applied prospectively
and shall be published on the Internet website of the Centers
for Medicare & Medicaid Services.''.
(2) Establishment of clinical conditions of coverage standards
for items of durable medical equipment.--Section 1834(a)(1) (42
U.S.C. 1395m(a)(1)) is amended by adding at the end the following
new subparagraph:
``(E) Clinical conditions for coverage.--
``(i) In general.--The Secretary shall establish
standards for clinical conditions for payment for covered
items under this subsection.
``(ii) Requirements.--The standards established under
clause (i) shall include the specification of types or
classes of covered items that require, as a condition of
payment under this subsection, a face-to-face examination
of the individual by a physician (as defined in section
1861(r)(1)), a physician assistant, nurse practitioner, or
a clinical nurse specialist (as those terms are defined in
section 1861(aa)(5)) and a prescription for the item.
``(iii) Priority of establishment of standards.--In
establishing the standards under this subparagraph, the
Secretary shall first establish standards for those covered
items for which the Secretary determines there has been a
proliferation of use, consistent findings of charges for
covered items that are not delivered, or consistent
findings of falsification of documentation to provide for
payment of such covered items under this part.
``(iv) Standards for power wheelchairs.--Effective on
the date of the enactment of this subparagraph, in the case
of a covered item consisting of a motorized or power
wheelchair for an individual, payment may not be made for
such covered item unless a physician (as defined in section
1861(r)(1)), a physician assistant, nurse practitioner, or
a clinical nurse specialist (as those terms are defined in
section 1861(aa)(5)) has conducted a face-to-face
examination of the individual and written a prescription
for the item.
``(v) Limitation on payment for covered items.--Payment
may not be made for a covered item under this subsection
unless the item meets any standards established under this
subparagraph for clinical condition of coverage.''.
(b) Competitive Acquisition.--
(1) In general.--Section 1847 (42 U.S.C. 1395w-3) is amended to
read as follows:
``competitive acquisition of certain items and services
``Sec. 1847. (a) Establishment of Competitive Acquisition
Programs.--
``(1) Implementation of programs.--
``(A) In general.--The Secretary shall establish and
implement programs under which competitive acquisition areas
are established throughout the United States for contract award
purposes for the furnishing under this part of competitively
priced items and services (described in paragraph (2)) for
which payment is made under this part. Such areas may differ
for different items and services.
``(B) Phased-in implementation.--The programs--
``(i) shall be phased in among competitive acquisition
areas in a manner so that the competition under the
programs occurs in--
``(I) 10 of the largest metropolitan statistical
areas in 2007;
``(II) 80 of the largest metropolitan statistical
areas in 2009; and
``(III) additional areas after 2009; and
``(ii) may be phased in first among the highest cost
and highest volume items and services or those items and
services that the Secretary determines have the largest
savings potential.
``(C) Waiver of certain provisions.--In carrying out the
programs, the Secretary may waive such provisions of the
Federal Acquisition Regulation as are necessary for the
efficient implementation of this section, other than provisions
relating to confidentiality of information and such other
provisions as the Secretary determines appropriate.
``(2) Items and services described.--The items and services
referred to in paragraph (1) are the following:
``(A) Durable medical equipment and medical supplies.--
Covered items (as defined in section 1834(a)(13)) for which
payment would otherwise be made under section 1834(a),
including items used in infusion and drugs (other than
inhalation drugs) and supplies used in conjunction with durable
medical equipment, but excluding class III devices under the
Federal Food, Drug, and Cosmetic Act.
``(B) Other equipment and supplies.--Items and services
described in section 1842(s)(2)(D), other than parenteral
nutrients, equipment, and supplies.
``(C) Off-the-shelf orthotics.--Orthotics described in
section 1861(s)(9) for which payment would otherwise be made
under section 1834(h) which require minimal self-adjustment for
appropriate use and do not require expertise in trimming,
bending, molding, assembling, or customizing to fit to the
individual.
``(3) Exception authority.--In carrying out the programs under
this section, the Secretary may exempt--
``(A) rural areas and areas with low population density
within urban areas that are not competitive, unless there is a
significant national market through mail order for a particular
item or service; and
``(B) items and services for which the application of
competitive acquisition is not likely to result in significant
savings.
``(4) Special rule for certain rented items of durable medical
equipment and oxygen.--In the case of a covered item for which
payment is made on a rental basis under section 1834(a) and in the
case of payment for oxygen under section 1834(a)(5), the Secretary
shall establish a process by which rental agreements for the
covered items and supply arrangements with oxygen suppliers entered
into before the application of the competitive acquisition program
under this section for the item may be continued notwithstanding
this section. In the case of any such continuation, the supplier
involved shall provide for appropriate servicing and replacement,
as required under section 1834(a).
``(5) Physician authorization.--
``(A) In general.--With respect to items or services
included within a particular HCPCS code, the Secretary may
establish a process for certain items and services under which
a physician may prescribe a particular brand or mode of
delivery of an item or service within such code if the
physician determines that use of the particular item or service
would avoid an adverse medical outcome on the individual, as
determined by the Secretary.
``(B) No effect on payment amount.--A prescription under
subparagraph (A) shall not affect the amount of payment
otherwise applicable for the item or service under the code
involved.
``(6) Application.--For each competitive acquisition area in
which the program is implemented under this subsection with respect
to items and services, the payment basis determined under the
competition conducted under subsection (b) shall be substituted for
the payment basis otherwise applied under section 1834(a), section
1834(h), or section 1842(s), as appropriate.
``(b) Program Requirements.--
``(1) In general.--The Secretary shall conduct a competition
among entities supplying items and services described in subsection
(a)(2) for each competitive acquisition area in which the program
is implemented under subsection (a) with respect to such items and
services.
``(2) Conditions for awarding contract.--
``(A) In general.--The Secretary may not award a contract
to any entity under the competition conducted in an competitive
acquisition area pursuant to paragraph (1) to furnish such
items or services unless the Secretary finds all of the
following:
``(i) The entity meets applicable quality standards
specified by the Secretary under section 1834(a)(20).
``(ii) The entity meets applicable financial standards
specified by the Secretary, taking into account the needs
of small providers.
``(iii) The total amounts to be paid to contractors in
a competitive acquisition area are expected to be less than
the total amounts that would otherwise be paid.
``(iv) Access of individuals to a choice of multiple
suppliers in the area is maintained.
``(B) Timely implementation of program.--Any delay in the
implementation of quality standards under section 1834(a)(20)
or delay in the receipt of advice from the program oversight
committee established under subsection (c) shall not delay the
implementation of the competitive acquisition program under
this section.
``(3) Contents of contract.--
``(A) In general.--A contract entered into with an entity
under the competition conducted pursuant to paragraph (1) is
subject to terms and conditions that the Secretary may specify.
``(B) Term of contracts.--The Secretary shall recompete
contracts under this section not less often than once every 3
years.
``(4) Limit on number of contractors.--
``(A) In general.--The Secretary may limit the number of
contractors in a competitive acquisition area to the number
needed to meet projected demand for items and services covered
under the contracts. In awarding contracts, the Secretary shall
take into account the ability of bidding entities to furnish
items or services in sufficient quantities to meet the
anticipated needs of individuals for such items or services in
the geographic area covered under the contract on a timely
basis.
``(B) Multiple winners.--The Secretary shall award
contracts to multiple entities submitting bids in each area for
an item or service.
``(5) Payment.--
``(A) In general.--Payment under this part for
competitively priced items and services described in subsection
(a)(2) shall be based on bids submitted and accepted under this
section for such items and services. Based on such bids the
Secretary shall determine a single payment amount for each item
or service in each competitive acquisition area.
``(B) Reduced beneficiary cost-sharing.--
``(i) Application of coinsurance.--Payment under this
section for items and services shall be in an amount equal
to 80 percent of the payment basis described in
subparagraph (A).
``(ii) Application of deductible.--Before applying
clause (i), the individual shall be required to meet the
deductible described in section 1833(b).
``(C) Payment on assignment-related basis.--Payment for any
item or service furnished by the entity may only be made under
this section on an assignment-related basis.
``(D) Construction.--Nothing in this section shall be
construed as precluding the use of an advanced beneficiary
notice with respect to a competitively priced item and service.
``(6) Participating contractors.--
``(A) In general.--Except as provided in subsection (a)(4),
payment shall not be made for items and services described in
subsection (a)(2) furnished by a contractor and for which
competition is conducted under this section unless--
``(i) the contractor has submitted a bid for such items
and services under this section; and
``(ii) the Secretary has awarded a contract to the
contractor for such items and services under this section.
``(B) Bid defined.--In this section, the term `bid' means
an offer to furnish an item or service for a particular price
and time period that includes, where appropriate, any services
that are attendant to the furnishing of the item or service.
``(C) Rules for mergers and acquisitions.--In applying
subparagraph (A) to a contractor, the contractor shall include
a successor entity in the case of a merger or acquisition, if
the successor entity assumes such contract along with any
liabilities that may have occurred thereunder.
``(D) Protection of small suppliers.--In developing
procedures relating to bids and the awarding of contracts under
this section, the Secretary shall take appropriate steps to
ensure that small suppliers of items and services have an
opportunity to be considered for participation in the program
under this section.
``(7) Consideration in determining categories for bids.--The
Secretary may consider the clinical efficiency and value of
specific items within codes, including whether some items have a
greater therapeutic advantage to individuals.
``(8) Authority to contract for education, monitoring,
outreach, and complaint services.--The Secretary may enter into
contracts with appropriate entities to address complaints from
individuals who receive items and services from an entity with a
contract under this section and to conduct appropriate education of
and outreach to such individuals and monitoring quality of services
with respect to the program.
``(9) Authority to contract for implementation.--The Secretary
may contract with appropriate entities to implement the competitive
bidding program under this section.
``(10) No administrative or judicial review.--There shall be no
administrative or judicial review under section 1869, section 1878,
or otherwise, of--
``(A) the establishment of payment amounts under paragraph
(5);
``(B) the awarding of contracts under this section;
``(C) the designation of competitive acquisition areas
under subsection (a)(1)(A);
``(D) the phased-in implementation under subsection
(a)(1)(B);
``(E) the selection of items and services for competitive
acquisition under subsection (a)(2); or
``(F) the bidding structure and number of contractors
selected under this section.
``(c) Program Advisory and Oversight Committee.--
``(1) Establishment.--The Secretary shall establish a Program
Advisory and Oversight Committee (hereinafter in this section
referred to as the `Committee').
``(2) Membership; terms.--The Committee shall consist of such
members as the Secretary may appoint who shall serve for such term
as the Secretary may specify.
``(3) Duties.--
``(A) Advice.--The Committee shall provide advice to the
Secretary with respect to the following functions:
``(i) The implementation of the program under this
section.
``(ii) The establishment of financial standards for
purposes of subsection (b)(2)(A)(ii).
``(iii) The establishment of requirements for
collection of data for the efficient management of the
program.
``(iv) The development of proposals for efficient
interaction among manufacturers, providers of services,
suppliers (as defined in section 1861(d)), and individuals.
``(v) The establishment of quality standards under
section 1834(a)(20).
``(B) Additional duties.--The Committee shall perform such
additional functions to assist the Secretary in carrying out
this section as the Secretary may specify.
``(4) Inapplicability of faca.--The provisions of the Federal
Advisory Committee Act (5 U.S.C. App.) shall not apply.
``(5) Termination.--The Committee shall terminate on December
31, 2009.
``(d) Report.--Not later than July 1, 2009, the Secretary shall
submit to Congress a report on the programs under this section. The
report shall include information on savings, reductions in cost-
sharing, access to and quality of items and services, and satisfaction
of individuals.
``(e) Demonstration Project for Clinical Laboratory Services.--
``(1) In general.--The Secretary shall conduct a demonstration
project on the application of competitive acquisition under this
section to clinical diagnostic laboratory tests--
``(A) for which payment would otherwise be made under
section 1833(h) (other than for pap smear laboratory tests
under paragraph (7) of such section) or section 1834(d)(1)
(relating to colorectal cancer screening tests); and
``(B) which are furnished by entities that did not have a
face-to-face encounter with the individual.
``(2) Terms and conditions.--
``(A) In general.--Except as provided in subparagraph (B),
such project shall be under the same conditions as are
applicable to items and services described in subsection
(a)(2), excluding subsection (b)(5)(B) and other conditions as
the Secretary determines to be appropriate.
``(B) Application of clia quality standards.--The quality
standards established by the Secretary under section 353 of the
Public Health Service Act for clinical diagnostic laboratory
tests shall apply to such tests under the demonstration project
under this section in lieu of quality standards described in
subsection (b)(2)(A)(i).
``(3) Report.--The Secretary shall submit to Congress--
``(A) an initial report on the project not later than
December 31, 2005; and
``(B) such progress and final reports on the project after
such date as the Secretary determines appropriate.''.
(2) Conforming amendments.--Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)) is amended--
(A) by striking ``and (U)'' and inserting ``(U)'';
(B) by inserting before the semicolon at the end the
following: ``, and (V) notwithstanding subparagraphs (I)
(relating to durable medical equipment), (M) (relating to
prosthetic devices and orthotics and prosthetics), and (Q)
(relating to 1842(s) items), with respect to competitively
priced items and services (described in section 1847(a)(2))
that are furnished in a competitive area, the amounts paid
shall be the amounts described in section 1847(b)(5)''; and
(C) in clause (D)--
(i) by striking ``or (ii)'' and inserting ``(ii)''; and
(ii) by adding at the end the following: ``or (iii) on
the basis of a rate established under a demonstration
project under section 1847(e), the amount paid shall be
equal to 100 percent of such rate,''.
(3) GAO report on impact of competitive acquisition on
suppliers.--
(A) Study.--The Comptroller General of the United States
shall conduct a study on the impact of competitive acquisition
of durable medical equipment under section 1847 of the Social
Security Act, as amended by paragraph (1), on suppliers and
manufacturers of such equipment and on patients. Such study
shall specifically examine the impact of such competitive
acquisition on access to, and quality of, such equipment and
service related to such equipment.
(B) Report.--Not later than January 1, 2009, the
Comptroller General shall submit to Congress a report on the
study conducted under subparagraph (A) and shall include in the
report such recommendations as the Comptroller General
determines appropriate.
(c) Transitional Freeze.--
(1) DME.--
(A) In general.--Section 1834(a)(14) (42 U.S.C.
1395m(a)(14)) is amended--
(i) in subparagraph (E), by striking ``and'' at the
end;
(ii) in subparagraph (F)--
(I) by striking ``a subsequent year'' and inserting
``2003''; and
(II) by striking ``the previous year.'' and
inserting ``2002;''; and
(iii) by adding at the end the following new
subparagraphs:
``(G) for 2004 through 2006--
``(i) subject to clause (ii), in the case of class III
medical devices described in section 513(a)(1)(C) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
360(c)(1)(C)), the percentage increase described in
subparagraph (B) for the year involved; and
``(ii) in the case of covered items not described in
clause (i), 0 percentage points;
``(H) for 2007--
``(i) subject to clause (ii), in the case of class III
medical devices described in section 513(a)(1)(C) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
360(c)(1)(C)), the percentage change determined by the
Secretary to be appropriate taking into account
recommendations contained in the report of the Comptroller
General of the United States under section 302(c)(1)(B) of
the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003; and
``(ii) in the case of covered items not described in
clause (i), 0 percentage points; and
``(I) for 2008--
``(i) subject to clause (ii), in the case of class III
medical devices described in section 513(a)(1)(C) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
360(c)(1)(C)), the percentage increase described in
subparagraph (B) (as applied to the payment amount for 2007
determined after the application of the percentage change
under subparagraph (H)(i)); and
``(ii) in the case of covered items not described in
clause (i), 0 percentage points; and
``(J) for a subsequent year, the percentage increase in the
consumer price index for all urban consumers (U.S. urban
average) for the 12-month period ending with June of the
previous year.''.
(B) GAO report on class iii medical devices.--Not later
than March 1, 2006, the Comptroller General of the United
States shall submit to Congress, and transmit to the Secretary,
a report containing recommendations on the appropriate update
percentage under section 1834(a)(14) of the Social Security Act
(42 U.S.C. 1395m(a)(14)) for class III medical devices
described in section 513(a)(1)(C) of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 360(a)(1)(C)) furnished to medicare
beneficiaries during 2007 and 2008.
(2) Payment rule for specified items.--Section 1834(a) (42
U.S.C. 1395m(a)), as amended by subsection (a), is further amended
by adding at the end the following new paragraph:
``(21) Special payment rule for specified items and supplies.--
``(A) In general.--Notwithstanding the preceding provisions
of this subsection, for specified items and supplies (described
in subparagraph (B)) furnished during 2005, the payment amount
otherwise determined under this subsection for such specified
items and supplies shall be reduced by the percentage
difference between--
``(i) the amount of payment otherwise determined for
the specified item or supply under this subsection for
2002, and
``(ii) the amount of payment for the specified item or
supply under chapter 89 of title 5, United States Code, as
identified in the column entitled `Median FEHP Price' in
the table entitled `SUMMARY OF MEDICARE PRICES COMPARED TO
VA, MEDICAID, RETAIL, AND FEHP PRICES FOR 16 ITEMS'
included in the Testimony of the Inspector General before
the Senate Committee on Appropriations, June 12, 2002, or
any subsequent report by the Inspector General.
``(B) Specified item or supply described.--For purposes of
subparagraph (A), a specified item or supply means oxygen and
oxygen equipment, standard wheelchairs (including standard
power wheelchairs), nebulizers, diabetic supplies consisting of
lancets and testing strips, hospital beds, and air mattresses,
but only if the HCPCS code for the item or supply is identified
in a table referred to in subparagraph (A)(ii).
``(C) Application of update to special payment amount.--The
covered item update under paragraph (14) for specified items
and supplies for 2006 and each subsequent year shall be applied
to the payment amount under subparagraph (A) unless payment is
made for such items and supplies under section 1847.''.
(3) Prosthetic devices and orthotics and prosthetics.--Section
1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
(A) in clause (vii), by striking ``and'' at the end;
(B) in clause (viii), by striking ``a subsequent year'' and
inserting ``2003''; and
(C) by adding at the end the following new clauses:
``(ix) for 2004, 2005, and 2006, 0 percent; and
``(x) for a subsequent year, the percentage increase in
the consumer price index for all urban consumers (United
States city average) for the 12-month period ending with
June of the previous year;''.
(d) Conforming Amendments.--
(1) Durable medical equipment; limitation of inherent
reasonableness authority.--Section 1834(a) (42 U.S.C. 1395m(a)) is
amended--
(A) in paragraph (1)(B), by striking ``The payment basis''
and inserting ``Subject to subparagraph (F)(i), the payment
basis'';
(B) in paragraph (1)(C), by striking ``This subsection''
and inserting ``Subject to subparagraph (F)(ii), this
subsection'';
(C) by adding at the end of paragraph (1) the following new
subparagraph:
``(F) Application of competitive acquisition; limitation of
inherent reasonableness authority.--In the case of covered
items furnished on or after January 1, 2009, that are included
in a competitive acquisition program in a competitive
acquisition area under section 1847(a)--
``(i) the payment basis under this subsection for such
items and services furnished in such area shall be the
payment basis determined under such competitive acquisition
program; and
``(ii) the Secretary may use information on the payment
determined under such competitive acquisition programs to
adjust the payment amount otherwise recognized under
subparagraph (B)(ii) for an area that is not a competitive
acquisition area under section 1847 and in the case of such
adjustment, paragraph (10)(B) shall not be applied.''; and
(D) in paragraph (10)(B), by inserting ``in an area and
with respect to covered items and services for which the
Secretary does not make a payment amount adjustment under
paragraph (1)(F)'' after ``under this subsection''.
(2) Off-the-shelf orthotics; limitation of inherent
reasonableness authority.--Section 1834(h) (42 U.S.C. 1395m(h)) is
amended--
(A) in paragraph (1)(B), by striking ``and (E)'' and
inserting ``, (E), and (H)(i)'';
(B) in paragraph (1)(D), by striking ``This subsection''
and inserting ``Subject to subparagraph (H)(ii), this
subsection''; and
(C) by adding at the end of paragraph (1) the following new
subparagraph:
``(H) Application of competitive acquisition to orthotics;
limitation of inherent reasonableness authority.--In the case
of orthotics described in paragraph (2)(C) of section 1847(a)
furnished on or after January 1, 2009, that are included in a
competitive acquisition program in a competitive acquisition
area under such section--
``(i) the payment basis under this subsection for such
orthotics furnished in such area shall be the payment basis
determined under such competitive acquisition program; and
``(ii) the Secretary may use information on the payment
determined under such competitive acquisition programs to
adjust the payment amount otherwise recognized under
subparagraph (B)(ii) for an area that is not a competitive
acquisition area under section 1847, and in the case of
such adjustment, paragraphs (8) and (9) of section 1842(b)
shall not be applied.''.
(3) Other items and services; limitation of inherent
reasonableness authority.--Section 1842(s) (42 U.S.C. 1395u(s)) is
amended--
(A) in the first sentence of paragraph (1), by striking
``The Secretary'' and inserting ``Subject to paragraph (3), the
Secretary''; and
(B) by adding at the end the following new paragraph:
``(3) In the case of items and services described in paragraph
(2)(D) that are included in a competitive acquisition program in a
competitive acquisition area under section 1847(a)--
``(A) the payment basis under this subsection for such items
and services furnished in such area shall be the payment basis
determined under such competitive acquisition program; and
``(B) the Secretary may use information on the payment
determined under such competitive acquisition programs to adjust
the payment amount otherwise applicable under paragraph (1) for an
area that is not a competitive acquisition area under section 1847,
and in the case of such adjustment, paragraphs (8) and (9) of
section 1842(b) shall not be applied.''.
(e) Report on Activities of Suppliers.--The Inspector General of
the Department of Health and Human Services shall conduct a study to
determine the extent to which (if any) suppliers of covered items of
durable medical equipment that are subject to the competitive
acquisition program under section 1847 of the Social Security Act, as
amended by subsection (a), are soliciting physicians to prescribe
certain brands or modes of delivery of covered items based on
profitability. Not later than July 1, 2009, the Inspector General shall
submit to Congress a report on such study.
SEC. 303. PAYMENT REFORM FOR COVERED OUTPATIENT DRUGS AND BIOLOGICALS.
(a) Adjustment to Physician Fee Schedule.--
(1) Adjustment in practice expense relative value units.--
Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is amended--
(A) in subparagraph (B)--
(i) in clause (ii)(II), by striking ``The adjustments''
and inserting ``Subject to clause (iv), the adjustments'';
and
(ii) by adding at the end of subparagraph (B), the
following new clause:
``(iv) Exemption from budget neutrality.--The
additional expenditures attributable to--
``(I) subparagraph (H) shall not be taken into
account in applying clause (ii)(II) for 2004;
``(II) subparagraph (I) insofar as it relates to a
physician fee schedule for 2005 or 2006 shall not be
taken into account in applying clause (ii)(II) for drug
administration services under the fee schedule for such
year for a specialty described in subparagraph
(I)(ii)(II); and
``(III) subparagraph (J) insofar as it relates to a
physician fee schedule for 2005 or 2006 shall not be
taken into account in applying clause (ii)(II) for drug
administration services under the fee schedule for such
year.''; and
(B) by adding at the end the following new subparagraphs:
``(H) Adjustments in practice expense relative value units
for certain drug administration services beginning in 2004.--
``(i) Use of survey data.--In establishing the
physician fee schedule under subsection (b) with respect to
payments for services furnished on or after January 1,
2004, the Secretary shall, in determining practice expense
relative value units under this subsection, utilize a
survey submitted to the Secretary as of January 1, 2003, by
a physician specialty organization pursuant to section 212
of the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 if the survey--
``(I) covers practice expenses for oncology drug
administration services; and
``(II) meets criteria established by the Secretary
for acceptance of such surveys.
``(ii) Pricing of clinical oncology nurses in practice
expense methodology.--If the survey described in clause (i)
includes data on wages, salaries, and compensation of
clinical oncology nurses, the Secretary shall utilize such
data in the methodology for determining practice expense
relative value units under subsection (c).
``(iii) Work relative value units for certain drug
administration services.--In establishing the relative
value units under this paragraph for drug administration
services described in clause (iv) furnished on or after
January 1, 2004, the Secretary shall establish work
relative value units equal to the work relative value units
for a level 1 office medical visit for an established
patient.
``(iv) Drug administration services described.--The
drug administration services described in this clause are
physicians' services--
``(I) which are classified as of October 1, 2003,
within any of the following groups of procedures:
therapeutic or diagnostic infusions (excluding
chemotherapy); chemotherapy administration services;
and therapeutic, prophylactic, or diagnostic
injections;
``(II) for which there are no work relative value
units assigned under this subsection as of such date;
and
``(III) for which national relative value units
have been assigned under this subsection as of such
date.
``(I) Adjustments in practice expense relative value units
for certain drug administration services beginning with 2005.--
``(i) In general.--In establishing the physician fee
schedule under subsection (b) with respect to payments for
services furnished on or after January 1, 2005 or 2006, the
Secretary shall adjust the practice expense relative value
units for such year consistent with clause (ii).
``(ii) Use of supplemental survey data.--
``(I) In general.--Subject to subclause (II), if a
specialty submits to the Secretary by not later than
March 1, 2004, for 2005, or March 1, 2005, for 2006,
data that includes expenses for the administration of
drugs and biologicals for which the payment amount is
determined pursuant to section 1842(o), the Secretary
shall use such supplemental survey data in carrying out
this subparagraph for the years involved insofar as
they are collected and provided by entities and
organizations consistent with the criteria established
by the Secretary pursuant to section 212(a) of the
Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999.
``(II) Limitation on specialty.--Subclause (I)
shall apply to a specialty only insofar as not less
than 40 percent of payments for the specialty under
this title in 2002 are attributable to the
administration of drugs and biologicals, as determined
by the Secretary.
``(III) Application.--This clause shall not apply
with respect to a survey to which subparagraph (H)(i)
applies.
``(J) Provisions for appropriate reporting and billing for
physicians' services associated with the administration of
covered outpatient drugs and biologicals.--
``(i) Evaluation of codes.--The Secretary shall
promptly evaluate existing drug administration codes for
physicians' services to ensure accurate reporting and
billing for such services, taking into account levels of
complexity of the administration and resource consumption.
``(ii) Use of existing processes.--In carrying out
clause (i), the Secretary shall use existing processes for
the consideration of coding changes and, to the extent
coding changes are made, shall use such processes in
establishing relative values for such services.
``(iii) Implementation.--In carrying out clause (i),
the Secretary shall consult with representatives of
physician specialties affected by the implementation of
section 1847A or section 1847B, and shall take such steps
within the Secretary's authority to expedite such
considerations under clause (ii).
``(iv) Subsequent, budget neutral adjustments
permitted.--Nothing in subparagraph (H) or (I) or this
subparagraph shall be construed as preventing the Secretary
from providing for adjustments in practice expense relative
value units under (and consistent with) subparagraph (B)
for years after 2004, 2005, or 2006, respectively.''.
(2) Treatment of other services currently in the nonphysician
work pool.--The Secretary shall make adjustments to the
nonphysician work pool methodology (as such term is used in the
final rule promulgated by the Secretary in the Federal Register on
December 31, 2002 (67 Fed. Reg. 251)), for the determination of
practice expense relative value units under the physician fee
schedule under section 1848(c)(2)(C)(ii) of the Social Security Act
(42 U.S.C. 1395w-4(c)(2)(C)(ii)), so that the practice expense
relative value units for services determined under such methodology
are not affected relative to the practice expense relative value
units of services not determined under such methodology, as a
result of the amendments made by paragraph (1).
(3) Payment for multiple chemotherapy agents furnished on a
single day through the push technique.--
(A) Review of policy.--The Secretary shall review the
policy, as in effect on October 1, 2003, with respect to
payment under section 1848 of the Social Security Act (42
U.S.C. 1395w-4) for the administration of more than 1 drug or
biological to an individual on a single day through the push
technique.
(B) Modification of policy.--After conducting the review
under subparagraph (A), the Secretary shall modify such payment
policy as the Secretary determines to be appropriate.
(C) Exemption from budget neutrality under physician fee
schedule.--If the Secretary modifies such payment policy
pursuant to subparagraph (B), any increased expenditures under
title XVIII of the Social Security Act resulting from such
modification shall be treated as additional expenditures
attributable to subparagraph (H) of section 1848(c)(2) of the
Social Security Act (42 U.S.C. 1395w-4(c)(2)), as added by
paragraph (1)(B), for purposes of applying the exemption to
budget neutrality under subparagraph (B)(iv) of such section,
as added by paragraph (1)(A).
(4) Transitional adjustment.--
(A) In general.--In order to provide for a transition
during 2004 and 2005 to the payment system established under
the amendments made by this section, in the case of physicians'
services consisting of drug administration services described
in subparagraph (H)(iv) of section 1848(c)(2) of the Social
Security Act (42 U.S.C. 1395w-4(c)(2)), as added by paragraph
(1)(B), furnished on or after January 1, 2004, and before
January 1, 2006, in addition to the amount determined under the
fee schedule under section 1848(b) of such Act (42 U.S.C.
1395w-4(b)) there also shall be paid to the physician from the
Federal Supplementary Medical Insurance Trust Fund an amount
equal to the applicable percentage specified in subparagraph
(B) of such fee schedule amount for the services so determined.
(B) Applicable percentage.--The applicable percentage
specified in this subparagraph for services furnished--
(i) during 2004, is 32 percent; and
(ii) during 2005, is 3 percent.
(5) Medpac review and reports; secretarial response.--
(A) Review.--The Medicare Payment Advisory Commission shall
review the payment changes made under this section insofar as
they affect payment under part B of title XVIII of the Social
Security Act--
(i) for items and services furnished by oncologists;
and
(ii) for drug administration services furnished by
other specialists.
(B) Other matters studied.--In conducting the review under
subparagraph (A), the Commission shall also review such changes
as they affect--
(i) the quality of care furnished to individuals
enrolled under part B and the satisfaction of such
individuals with that care;
(ii) the adequacy of reimbursement as applied in, and
the availability in, different geographic areas and to
different physician practice sizes; and
(iii) the impact on physician practices.
(C) Reports.--The Commission shall submit to the Secretary
and Congress--
(i) not later than January 1, 2006, a report on the
review conducted under subparagraph (A)(i); and
(ii) not later than January 1, 2007, a report on the
review conducted under subparagraph (A)(ii).
Each such report may include such recommendations regarding
further adjustments in such payments as the Commission deems
appropriate.
(D) Secretarial response.--As part of the rulemaking with
respect to payment for physicians services under section 1848
of the Social Security Act (42 U.S.C. 1395w-4) for 2007, the
Secretary may make appropriate adjustments to payment for items
and services described in subparagraph (A)(i), taking into
account the report submitted under such subparagraph (C)(i).
(b) Application of Market-Based Payment Systems.--Section 1842(o)
(42 U.S.C. 1395u(o)) is amended--
(1) in paragraph (1), by striking ``equal to 95 percent of the
average wholesale price.'' and inserting ``equal to the following:
``(A) In the case of any of the following drugs or biologicals,
95 percent of the average wholesale price:
``(i) A drug or biological furnished before January 1,
2004.
``(ii) Blood clotting factors furnished during 2004.
``(iii) A drug or biological furnished during 2004 that was
not available for payment under this part as of April 1, 2003.
``(iv) A vaccine described in subparagraph (A) or (B) of
section 1861(s)(10) furnished on or after January 1, 2004.
``(v) A drug or biological furnished during 2004 in
connection with the furnishing of renal dialysis services if
separately billed by renal dialysis facilities.
``(B) In the case of a drug or biological furnished during 2004
that is not described in--
``(i) clause (ii), (iii), (iv), or (v) of subparagraph (A),
``(ii) subparagraph (D)(i), or
``(iii) subparagraph (F),
the amount determined under paragraph (4).
``(C) In the case of a drug or biological that is not described
in subparagraph (A)(iv), (D)(i), or (F) furnished on or after
January 1, 2005, the amount provided under section 1847, section
1847A, section 1847B, or section 1881(b)(13), as the case may be
for the drug or biological.
``(D)(i) Except as provided in clause (ii), in the case of
infusion drugs furnished through an item of durable medical
equipment covered under section 1861(n) on or after January 1,
2004, 95 percent of the average wholesale price for such drug in
effect on October 1, 2003.
``(ii) In the case of such infusion drugs furnished in a
competitive acquisition area under section 1847 on or after January
1, 2007, the amount provided under section 1847.
``(E) In the case of a drug or biological, consisting of
intravenous immune globulin, furnished--
``(i) in 2004, the amount of payment provided under
paragraph (4); and
``(ii) in 2005 and subsequent years, the amount of payment
provided under section 1847A.
``(F) In the case of blood and blood products (other than blood
clotting factors), the amount of payment shall be determined in the
same manner as such amount of payment was determined on October 1,
2003.
``(G) The provisions of subparagraphs (A) through (F) of this
paragraph shall not apply to an inhalation drug or biological
furnished through durable medical equipment covered under section
1861(n).''; and
(2) by adding at the end the following new paragraph:
``(4)(A) Subject to the succeeding provisions of this paragraph,
the amount of payment for a drug or biological under this paragraph
furnished in 2004 is equal to 85 percent of the average wholesale price
(determined as of April 1, 2003) for the drug or biological.
``(B) The Secretary shall substitute for the percentage under
subparagraph (A) for a drug or biological the percentage that would
apply to the drug or biological under the column entitled `Average of
GAO and OIG data (percent)' in the table entitled `Table 3.--Medicare
Part B Drugs in the Most Recent GAO and OIG Studies' published on
August 20, 2003, in the Federal Register (68 Fed. Reg. 50445).
``(C)(i) The Secretary may substitute for the percentage under
subparagraph (A) a percentage that is based on data and information
submitted by the manufacturer of the drug or biological by October 15,
2003.
``(ii) The Secretary may substitute for the percentage under
subparagraph (A) with respect to drugs and biologicals furnished during
2004 on or after April 1, 2004, a percentage that is based on data and
information submitted by the manufacturer of the drug or biological
after October 15, 2003, and before January 1, 2004.
``(D) In no case may the percentage substituted under subparagraph
(B) or (C) be less than 80 percent.''.
(c) Application of Average Sales Price Methods Beginning in 2005.--
(1) In general.--Title XVIII is amended by inserting after
section 1847 (42 U.S.C. 1395w-3), as amended by section 302(b), the
following new section:
``use of average sales price payment methodology
``Sec. 1847A. (a) Application.--
``(1) In general.--Except as provided in paragraph (2), this
section shall apply to payment for drugs and biologicals that are
described in section 1842(o)(1)(C) and that are furnished on or
after January 1, 2005.
``(2) Election.--This section shall not apply in the case of a
physician who elects under subsection (a)(1)(A)(ii) of section
1847B for that section to apply instead of this section for the
payment for drugs and biologicals.
``(b) Payment Amount.--
``(1) In general.--Subject to subsections (d)(3)(C) and (e),
the amount of payment determined under this section for the billing
and payment code for a drug or biological (based on a minimum
dosage unit) is, subject to applicable deductible and coinsurance--
``(A) in the case of a multiple source drug (as defined in
subsection (c)(6)(C)), 106 percent of the amount determined
under paragraph (3); or
``(B) in the case of a single source drug or biological (as
defined in subsection (c)(6)(D)), 106 percent of the amount
determined under paragraph (4).
``(2) Specification of unit.--
``(A) Specification by manufacturer.--The manufacturer of a
drug or biological shall specify the unit associated with each
National Drug Code (including package size) as part of the
submission of data under section 1927(b)(3)(A)(iii).
``(B) Unit defined.--In this section, the term `unit'
means, with respect to each National Drug Code (including
package size) associated with a drug or biological, the lowest
identifiable quantity (such as a capsule or tablet, milligram
of molecules, or grams) of the drug or biological that is
dispensed, exclusive of any diluent without reference to volume
measures pertaining to liquids. For years after 2004, the
Secretary may establish the unit for a manufacturer to report
and methods for counting units as the Secretary determines
appropriate to implement this section.
``(3) Multiple source drug.--For all drug products included
within the same multiple source drug billing and payment code, the
amount specified in this paragraph is the volume-weighted average
of the average sales prices reported under section
1927(b)(3)(A)(iii) determined by--
``(A) computing the sum of the products (for each National
Drug Code assigned to such drug products) of--
``(i) the manufacturer's average sales price (as
defined in subsection (c)); and
``(ii) the total number of units specified under
paragraph (2) sold; and
``(B) dividing the sum determined under subparagraph (A) by
the sum of the total number of units under subparagraph (A)(ii)
for all National Drug Codes assigned to such drug products.
``(4) Single source drug or biological.--The amount specified
in this paragraph for a single source drug or biological is the
lesser of the following:
``(A) Average sales price.--The average sales price as
determined using the methodology applied under paragraph (3)
for all National Drug Codes assigned to such drug or biological
product.
``(B) Wholesale acquisition cost (wac).--The wholesale
acquisition cost (as defined in subsection (c)(6)(B)) using the
methodology applied under paragraph (3) for all National Drug
Codes assigned to such drug or biological product.
``(5) Basis for payment amount.--The payment amount shall be
determined under this subsection based on information reported
under subsection (f) and without regard to any special packaging,
labeling, or identifiers on the dosage form or product or package.
``(c) Manufacturer's Average Sales Price.--
``(1) In general.--For purposes of this section, subject to
paragraphs (2) and (3), the manufacturer's `average sales price'
means, of a drug or biological for a National Drug Code for a
calendar quarter for a manufacturer for a unit--
``(A) the manufacturer's sales to all purchasers (excluding
sales exempted in paragraph (2)) in the United States for such
drug or biological in the calendar quarter; divided by
``(B) the total number of such units of such drug or
biological sold by the manufacturer in such quarter.
``(2) Certain sales exempted from computation.--In calculating
the manufacturer's average sales price under this subsection, the
following sales shall be excluded:
``(A) Sales exempt from best price.--Sales exempt from the
inclusion in the determination of `best price' under section
1927(c)(1)(C)(i).
``(B) Sales at nominal charge.--Such other sales as the
Secretary identifies as sales to an entity that are merely
nominal in amount (as applied for purposes of section
1927(c)(1)(C)(ii)(III), except as the Secretary may otherwise
provide).
``(3) Sale price net of discounts.--In calculating the
manufacturer's average sales price under this subsection, such
price shall include volume discounts, prompt pay discounts, cash
discounts, free goods that are contingent on any purchase
requirement, chargebacks, and rebates (other than rebates under
section 1927). For years after 2004, the Secretary may include in
such price other price concessions, which may be based on
recommendations of the Inspector General, that would result in a
reduction of the cost to the purchaser.
``(4) Payment methodology in cases where average sales price
during first quarter of sales is unavailable.--In the case of a
drug or biological during an initial period (not to exceed a full
calendar quarter) in which data on the prices for sales for the
drug or biological is not sufficiently available from the
manufacturer to compute an average sales price for the drug or
biological, the Secretary may determine the amount payable under
this section for the drug or biological based on--
``(A) the wholesale acquisition cost; or
``(B) the methodologies in effect under this part on
November 1, 2003, to determine payment amounts for drugs or
biologicals.
``(5) Frequency of determinations.--
``(A) In general on a quarterly basis.--The manufacturer's
average sales price, for a drug or biological of a
manufacturer, shall be calculated by such manufacturer under
this subsection on a quarterly basis. In making such
calculation insofar as there is a lag in the reporting of the
information on rebates and chargebacks under paragraph (3) so
that adequate data are not available on a timely basis, the
manufacturer shall apply a methodology based on a 12-month
rolling average for the manufacturer to estimate costs
attributable to rebates and chargebacks. For years after 2004,
the Secretary may establish a uniform methodology under this
subparagraph to estimate and apply such costs.
``(B) Updates in payment amounts.--The payment amounts
under subsection (b) shall be updated by the Secretary on a
quarterly basis and shall be applied based upon the
manufacturer's average sales price calculated for the most
recent calendar quarter for which data is available.
``(C) Use of contractors; implementation.--The Secretary
may contract with appropriate entities to calculate the payment
amount under subsection (b). Notwithstanding any other
provision of law, the Secretary may implement, by program
instruction or otherwise, any of the provisions of this
section.
``(6) Definitions and other rules.--In this section:
``(A) Manufacturer.--The term `manufacturer' means, with
respect to a drug or biological, the manufacturer (as defined
in section 1927(k)(5)).
``(B) Wholesale acquisition cost.--The term `wholesale
acquisition cost' means, with respect to a drug or biological,
the manufacturer's list price for the drug or biological to
wholesalers or direct purchasers in the United States, not
including prompt pay or other discounts, rebates or reductions
in price, for the most recent month for which the information
is available, as reported in wholesale price guides or other
publications of drug or biological pricing data.
``(C) Multiple source drug.--
``(i) In general.--The term `multiple source drug'
means, for a calendar quarter, a drug for which there are 2
or more drug products which--
``(I) are rated as therapeutically equivalent
(under the Food and Drug Administration's most recent
publication of `Approved Drug Products with Therapeutic
Equivalence Evaluations'),
``(II) except as provided in subparagraph (E), are
pharmaceutically equivalent and bioequivalent, as
determined under subparagraph (F) and as determined by
the Food and Drug Administration, and
``(III) are sold or marketed in the United States
during the quarter.
``(ii) Exception.--With respect to single source drugs
or biologicals that are within the same billing and payment
code as of October 1, 2003, the Secretary shall treat such
single source drugs or biologicals as if the single source
drugs or biologicals were multiple source drugs.
``(D) Single source drug or biological.--The term `single
source drug or biological' means--
``(i) a biological; or
``(ii) a drug which is not a multiple source drug and
which is produced or distributed under a new drug
application approved by the Food and Drug Administration,
including a drug product marketed by any cross-licensed
producers or distributors operating under the new drug
application.
``(E) Exception from pharmaceutical equivalence and
bioequivalence requirement.--Subparagraph (C)(ii) shall not
apply if the Food and Drug Administration changes by regulation
the requirement that, for purposes of the publication described
in subparagraph (C)(i), in order for drug products to be rated
as therapeutically equivalent, they must be pharmaceutically
equivalent and bioequivalent, as defined in subparagraph (F).
``(F) Determination of pharmaceutical equivalence and
bioequivalence.--For purposes of this paragraph--
``(i) drug products are pharmaceutically equivalent if
the products contain identical amounts of the same active
drug ingredient in the same dosage form and meet compendial
or other applicable standards of strength, quality, purity,
and identity; and
``(ii) drugs are bioequivalent if they do not present a
known or potential bioequivalence problem, or, if they do
present such a problem, they are shown to meet an
appropriate standard of bioequivalence.
``(G) Inclusion of vaccines.--In applying provisions of
section 1927 under this section, `other than a vaccine' is
deemed deleted from section 1927(k)(2)(B).
``(d) Monitoring of Market Prices.--
``(1) In general.--The Inspector General of the Department of
Health and Human Services shall conduct studies, which may include
surveys, to determine the widely available market prices of drugs
and biologicals to which this section applies, as the Inspector
General, in consultation with the Secretary, determines to be
appropriate.
``(2) Comparison of prices.--Based upon such studies and other
data for drugs and biologicals, the Inspector General shall compare
the average sales price under this section for drugs and
biologicals with--
``(A) the widely available market price for such drugs and
biologicals (if any); and
``(B) the average manufacturer price (as determined under
section 1927(k)(1)) for such drugs and biologicals.
``(3) Limitation on average sales price.--
``(A) In general.--The Secretary may disregard the average
sales price for a drug or biological that exceeds the widely
available market price or the average manufacturer price for
such drug or biological by the applicable threshold percentage
(as defined in subparagraph (B)).
``(B) Applicable threshold percentage defined.--In this
paragraph, the term `applicable threshold percentage' means--
``(i) in 2005, in the case of an average sales price
for a drug or biological that exceeds widely available
market price or the average manufacturer price, 5 percent;
and
``(ii) in 2006 and subsequent years, the percentage
applied under this subparagraph subject to such adjustment
as the Secretary may specify for the widely available
market price or the average manufacturer price, or both.
``(C) Authority to adjust average sales price.--If the
Inspector General finds that the average sales price for a drug
or biological exceeds such widely available market price or
average manufacturer price for such drug or biological by the
applicable threshold percentage, the Inspector General shall
inform the Secretary (at such times as the Secretary may
specify to carry out this subparagraph) and the Secretary
shall, effective as of the next quarter, substitute for the
amount of payment otherwise determined under this section for
such drug or biological the lesser of--
``(i) the widely available market price for the drug or
biological (if any); or
``(ii) 103 percent of the average manufacturer price
(as determined under section 1927(k)(1)) for the drug or
biological.
``(4) Civil money penalty.--
``(A) In general.--If the Secretary determines that a
manufacturer has made a misrepresentation in the reporting of
the manufacturer's average sales price for a drug or
biological, the Secretary may apply a civil money penalty in an
amount of up to $10,000 for each such price misrepresentation
and for each day in which such price misrepresentation was
applied.
``(B) Procedures.--The provisions of section 1128A (other
than subsections (a) and (b)) shall apply to civil money
penalties under subparagraph (B) in the same manner as they
apply to a penalty or proceeding under section 1128A(a).
``(5) Widely available market price.--
``(A) In general.--In this subsection, the term `widely
available market price' means the price that a prudent
physician or supplier would pay for the drug or biological. In
determining such price, the Inspector General shall take into
account the discounts, rebates, and other price concessions
routinely made available to such prudent physicians or
suppliers for such drugs or biologicals.
``(B) Considerations.--In determining the price under
subparagraph (A), the Inspector General shall consider
information from one or more of the following sources:
``(i) Manufacturers.
``(ii) Wholesalers.
``(iii) Distributors.
``(iv) Physician supply houses.
``(v) Specialty pharmacies.
``(vi) Group purchasing arrangements.
``(vii) Surveys of physicians.
``(viii) Surveys of suppliers.
``(ix) Information on such market prices from insurers.
``(x) Information on such market prices from private
health plans.
``(e) Authority To Use Alternative Payment in Response to Public
Health Emergency.--In the case of a public health emergency under
section 319 of the Public Health Service Act in which there is a
documented inability to access drugs and biologicals, and a concomitant
increase in the price, of a drug or biological which is not reflected
in the manufacturer's average sales price for one or more quarters, the
Secretary may use the wholesale acquisition cost (or other reasonable
measure of drug or biological price) instead of the manufacturer's
average sales price for such quarters and for subsequent quarters until
the price and availability of the drug or biological has stabilized and
is substantially reflected in the applicable manufacturer's average
sales price.
``(f) Quarterly Report on Average Sales Price.--For requirements
for reporting the manufacturer's average sales price (and, if required
to make payment, the manufacturer's wholesale acquisition cost) for the
drug or biological under this section, see section 1927(b)(3).
``(g) Judicial Review.--There shall be no administrative or
judicial review under section 1869, section 1878, or otherwise, of--
``(1) determinations of payment amounts under this section,
including the assignment of National Drug Codes to billing and
payment codes;
``(2) the identification of units (and package size) under
subsection (b)(2);
``(3) the method to allocate rebates, chargebacks, and other
price concessions to a quarter if specified by the Secretary;
``(4) the manufacturer's average sales price when it is used
for the determination of a payment amount under this section; and
``(5) the disclosure of the average manufacturer price by
reason of an adjustment under subsection (d)(3)(C) or (e).''.
(2) Report on sales to pharmacy benefit managers.--
(A) Study.--The Secretary shall conduct a study on sales of
drugs and biologicals to large volume purchasers, such as
pharmacy benefit managers and health maintenance organizations,
for purposes of determining whether the price at which such
drugs and biologicals are sold to such purchasers does not
represent the price such drugs and biologicals are made
available for purchase to prudent physicians.
(B) Report.--Not later than January 1, 2006, the Secretary
shall submit to Congress a report on the study conducted under
paragraph (1), and shall include recommendations on whether
such sales to large volume purchasers should be excluded from
the computation of a manufacturer's average sales price under
section 1847A of the Social Security Act, as added by paragraph
(1).
(3) Inspector general report on adequacy of reimbursement rate
under average sales price methodology.--
(A) Study.--The Inspector General of the Department of
Health and Human Services shall conduct a study on the ability
of physician practices in the specialties of hematology,
hematology/oncology, and medical oncology of different sizes,
especially particularly large practices, to obtain drugs and
biologicals for the treatment of cancer patients at 106 percent
of the average sales price for the drugs and biologicals. In
conducting the study, the Inspector General shall conduct an
audit of a representative sample of such practices to determine
the adequacy of reimbursement under section 1847A of the Social
Security Act, as added by paragraph (1).
(B) Report.--Not later October 1, 2005, the Inspector
General shall submit to Congress a report on the study
conducted under subparagraph (A), and shall include
recommendations on the adequacy of reimbursement for such drugs
and biologicals under such section 1847A.
(d) Payment Based on Competition.--
(1) In general.--Title XVIII is amended by inserting after
section 1847A, as added by subsection (c), the following new
section:
``competitive acquisition of outpatient drugs and biologicals
``Sec. 1847B. (a) Implementation of Competitive Acquisition.--
``(1) Implementation of program.--
``(A) In general.--The Secretary shall establish and
implement a competitive acquisition program under which--
``(i) competitive acquisition areas are established for
contract award purposes for acquisition of and payment for
categories of competitively biddable drugs and biologicals
(as defined in paragraph (2)) under this part;
``(ii) each physician is given the opportunity annually
to elect to obtain drugs and biologicals under the program,
rather than under section 1847A; and
``(iii) each physician who elects to obtain drugs and
biologicals under the program makes an annual selection
under paragraph (5) of the contractor through which drugs
and biologicals within a category of drugs and biologicals
will be acquired and delivered to the physician under this
part.
This section shall not apply in the case of a physician who
elects section 1847A to apply.
``(B) Implementation.--For purposes of implementing the
program, the Secretary shall establish categories of
competitively biddable drugs and biologicals. The Secretary
shall phase in the program with respect to those categories
beginning in 2006 in such manner as the Secretary determines to
be appropriate.
``(C) Waiver of certain provisions.--In order to promote
competition, in carrying out the program the Secretary may
waive such provisions of the Federal Acquisition Regulation as
are necessary for the efficient implementation of this section,
other than provisions relating to confidentiality of
information and such other provisions as the Secretary
determines appropriate.
``(D) Exclusion authority.--The Secretary may exclude
competitively biddable drugs and biologicals (including a class
of such drugs and biologicals) from the competitive bidding
system under this section if the application of competitive
bidding to such drugs or biologicals--
``(i) is not likely to result in significant savings;
or
``(ii) is likely to have an adverse impact on access to
such drugs or biologicals.
``(2) Competitively biddable drugs and biologicals and program
defined.--For purposes of this section--
``(A) Competitively biddable drugs and biologicals
defined.--The term `competitively biddable drugs and
biologicals' means a drug or biological described in section
1842(o)(1)(C) and furnished on or after January 1, 2006.
``(B) Program.--The term `program' means the competitive
acquisition program under this section.
``(C) Competitive acquisition area; area.--The terms
`competitive acquisition area' and `area' mean an appropriate
geographic region established by the Secretary under the
program.
``(D) Contractor.--The term `contractor' means an entity
that has entered into a contract with the Secretary under this
section.
``(3) Application of program payment methodology.--
``(A) In general.--With respect to competitively biddable
drugs and biologicals which are supplied under the program in
an area and which are prescribed by a physician who has elected
this section to apply--
``(i) the claim for such drugs and biologicals shall be
submitted by the contractor that supplied the drugs and
biologicals;
``(ii) collection of amounts of any deductible and
coinsurance applicable with respect to such drugs and
biologicals shall be the responsibility of such contractor
and shall not be collected unless the drug or biological is
administered to the individual involved; and
``(iii) the payment under this section (and related
amounts of any applicable deductible and coinsurance) for
such drugs and biologicals--
``(I) shall be made only to such contractor; and
``(II) shall be conditioned upon the administration
of such drugs and biologicals.
``(B) Process for adjustments.--The Secretary shall provide
a process for adjustments to payments in the case in which
payment is made for drugs and biologicals which were billed at
the time of dispensing but which were not actually
administered.
``(C) Information for purposes of cost-sharing.--The
Secretary shall provide a process by which physicians submit
information to contractors for purposes of the collection of
any applicable deductible or coinsurance amounts under
subparagraph (A)(ii).
``(4) Contract required.--Payment may not be made under this
part for competitively biddable drugs and biologicals prescribed by
a physician who has elected this section to apply within a category
and a competitive acquisition area with respect to which the
program applies unless--
``(A) the drugs or biologicals are supplied by a contractor
with a contract under this section for such category of drugs
and biologicals and area; and
``(B) the physician has elected such contractor under
paragraph (5) for such category and area.
``(5) Contractor selection process.--
``(A) Annual selection.--
``(i) In general.--The Secretary shall provide a
process for the selection of a contractor, on an annual
basis and in such exigent circumstances as the Secretary
may provide and with respect to each category of
competitively biddable drugs and biologicals for an area by
selecting physicians.
``(ii) Timing of selection.--The selection of a
contractor under clause (i) shall be made at the time of
the election described in section 1847A(a) for this section
to apply and shall be coordinated with agreements entered
into under section 1842(h).
``(B) Information on contractors.--The Secretary shall make
available to physicians on an ongoing basis, through a
directory posted on the Internet website of the Centers for
Medicare & Medicaid Services or otherwise and upon request, a
list of the contractors under this section in the different
competitive acquisition areas.
``(C) Selecting physician defined.--For purposes of this
section, the term `selecting physician' means, with respect to
a contractor and category and competitive acquisition area, a
physician who has elected this section to apply and has
selected to apply under this section such contractor for such
category and area.
``(b) Program Requirements.--
``(1) Contract for competitively biddable drugs and
biologicals.--The Secretary shall conduct a competition among
entities for the acquisition of competitively biddable drugs and
biologicals. Notwithstanding any other provision of this title, in
the case of a multiple source drug, the Secretary shall conduct
such competition among entities for the acquisition of at least one
competitively biddable drug and biological within each billing and
payment code within each category for each competitive acquisition
area.
``(2) Conditions for awarding contract.--
``(A) In general.--The Secretary may not award a contract
to any entity under the competition conducted in a competitive
acquisition area pursuant to paragraph (1) with respect to the
acquisition of competitively biddable drugs and biologicals
within a category unless the Secretary finds that the entity
meets all of the following with respect to the contract period
involved:
``(i) Capacity to supply competitively biddable drug or
biological within category.--
``(I) In general.--The entity has sufficient
arrangements to acquire and to deliver competitively
biddable drugs and biologicals within such category in
the area specified in the contract.
``(II) Shipment methodology.--The entity has
arrangements in effect for the shipment at least 5 days
each week of competitively biddable drugs and
biologicals under the contract and for the timely
delivery (including for emergency situations) of such
drugs and biologicals in the area under the contract.
``(ii) Quality, service, financial performance and
solvency standards.--The entity meets quality, service,
financial performance, and solvency standards specified by
the Secretary, including--
``(I) the establishment of procedures for the
prompt response and resolution of complaints of
physicians and individuals and of inquiries regarding
the shipment of competitively biddable drugs and
biologicals; and
``(II) a grievance and appeals process for the
resolution of disputes.
``(B) Additional considerations.--The Secretary may refuse
to award a contract under this section, and may terminate such
a contract, with an entity based upon--
``(i) the suspension or revocation, by the Federal
Government or a State government, of the entity's license
for the distribution of drugs or biologicals (including
controlled substances); or
``(ii) the exclusion of the entity under section 1128
from participation under this title.
``(C) Application of medicare provider ombudsman.--For
provision providing for a program-wide Medicare Provider
Ombudsman to review complaints, see section 1868(b), as added
by section 923 of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003.
``(3) Awarding multiple contracts for a category and area.--The
Secretary may limit (but not below 2) the number of qualified
entities that are awarded such contracts for any category and area.
The Secretary shall select among qualified entities based on the
following:
``(A) The bid prices for competitively biddable drugs and
biologicals within the category and area.
``(B) Bid price for distribution of such drugs and
biologicals.
``(C) Ability to ensure product integrity.
``(D) Customer service.
``(E) Past experience in the distribution of drugs and
biologicals, including controlled substances.
``(F) Such other factors as the Secretary may specify.
``(4) Terms of contracts.--
``(A) In general.--A contract entered into with an entity
under the competition conducted pursuant to paragraph (1) is
subject to terms and conditions that the Secretary may specify
consistent with this section.
``(B) Period of contracts.--A contract under this section
shall be for a term of 3 years, but may be terminated by the
Secretary or the entity with appropriate, advance notice.
``(C) Integrity of drug and biological distribution
system.--A contractor (as defined in subsection (a)(2)(D))
shall--
``(i) acquire all drug and biological products it
distributes directly from the manufacturer or from a
distributor that has acquired the products directly from
the manufacturer; and
``(ii) comply with any product integrity safeguards as
may be determined to be appropriate by the Secretary.
Nothing in this subparagraph shall be construed to relieve or
exempt any contractor from the provisions of the Federal Food,
Drug, and Cosmetic Act that relate to the wholesale
distribution of prescription drugs or biologicals.
``(D) Compliance with code of conduct and fraud and abuse
rules.--Under the contract--
``(i) the contractor shall comply with a code of
conduct, specified or recognized by the Secretary, that
includes standards relating to conflicts of interest; and
``(ii) the contractor shall comply with all applicable
provisions relating to prevention of fraud and abuse,
including compliance with applicable guidelines of the
Department of Justice and the Inspector General of the
Department of Health and Human Services.
``(E) Direct delivery of drugs and biologicals to
physicians.--Under the contract the contractor shall only
supply competitively biddable drugs and biologicals directly to
the selecting physicians and not directly to individuals,
except under circumstances and settings where an individual
currently receives a drug or biological in the individual's
home or other non-physician office setting as the Secretary may
provide. The contractor shall not deliver drugs and biologicals
to a selecting physician except upon receipt of a prescription
for such drugs and biologicals, and such necessary data as may
be required by the Secretary to carry out this section. This
section does not--
``(i) require a physician to submit a prescription for
each individual treatment; or
``(ii) change a physician's flexibility in terms of
writing a prescription for drugs or biologicals for a
single treatment or a course of treatment.
``(5) Permitting access to drugs and biologicals.--The
Secretary shall establish rules under this section under which
drugs and biologicals which are acquired through a contractor under
this section may be used to resupply inventories of such drugs and
biologicals which are administered consistent with safe drug
practices and with adequate safeguards against fraud and abuse. The
previous sentence shall apply if the physicians can demonstrate to
the Secretary all of the following:
``(A) The drugs or biologicals are required immediately.
``(B) The physician could not have reasonably anticipated
the immediate requirement for the drugs or biologicals.
``(C) The contractor could not deliver to the physician the
drugs or biologicals in a timely manner.
``(D) The drugs or biologicals were administered in an
emergency situation.
``(6) Construction.--Nothing in this section shall be construed
as waiving applicable State requirements relating to licensing of
pharmacies.
``(c) Bidding Process.--
``(1) In general.--In awarding a contract for a category of
drugs and biologicals in an area under the program, the Secretary
shall consider with respect to each entity seeking to be awarded a
contract the bid price and the other factors referred to in
subsection (b)(3).
``(2) Bid defined.--In this section, the term `bid' means an
offer to furnish a competitively biddable drug or biological for a
particular price and time period.
``(3) Bidding on a national or regional basis.--Nothing in this
section shall be construed as precluding a bidder from bidding for
contracts in all areas of the United States or as requiring a
bidder to submit a bid for all areas of the United States.
``(4) Uniformity of bids within area.--The amount of the bid
submitted under a contract offer for any competitively biddable
drug or biological for an area shall be the same for that drug or
biological for all portions of that area.
``(5) Confidentiality of bids.--The provisions of subparagraph
(D) of section 1927(b)(3) shall apply to periods during which a bid
is submitted with respect to a competitively biddable drug or
biological under this section in the same manner as it applies to
information disclosed under such section, except that any
reference--
``(A) in that subparagraph to a `manufacturer or
wholesaler' is deemed a reference to a `bidder' under this
section;
``(B) in that section to `prices charged for drugs' is
deemed a reference to a `bid' submitted under this section; and
``(C) in clause (i) of that section to `this section', is
deemed a reference to `part B of title XVIII'.
``(6) Inclusion of costs.--The bid price submitted in a
contract offer for a competitively biddable drug or biological
shall--
``(A) include all costs related to the delivery of the drug
or biological to the selecting physician (or other point of
delivery); and
``(B) include the costs of dispensing (including shipping)
of such drug or biological and management fees, but shall not
include any costs related to the administration of the drug or
biological, or wastage, spillage, or spoilage.
``(7) Price adjustments during contract period; disclosure of
costs.--Each contract awarded shall provide for--
``(A) disclosure to the Secretary the contractor's
reasonable, net acquisition costs for periods specified by the
Secretary, not more often than quarterly, of the contract; and
``(B) appropriate price adjustments over the period of the
contract to reflect significant increases or decreases in a
contractor's reasonable, net acquisition costs, as so
disclosed.
``(d) Computation of Payment Amounts.--
``(1) In general.--Payment under this section for competitively
biddable drugs or biologicals shall be based on bids submitted and
accepted under this section for such drugs or biologicals in an
area. Based on such bids the Secretary shall determine a single
payment amount for each competitively biddable drug or biological
in the area.
``(2) Special rules.--The Secretary shall establish rules
regarding the use under this section of the alternative payment
amount provided under section 1847A to the use of a price for
specific competitively biddable drugs and biologicals in the
following cases:
``(A) New drugs and biologicals.--A competitively biddable
drug or biological for which a payment and billing code has not
been established.
``(B) Other cases.--Such other exceptional cases as the
Secretary may specify in regulations.
``(e) Cost-sharing.--
``(1) Application of coinsurance.--Payment under this section
for competitively biddable drugs and biologicals shall be in an
amount equal to 80 percent of the payment basis described in
subsection (d)(1).
``(2) Deductible.--Before applying paragraph (1), the
individual shall be required to meet the deductible described in
section 1833(b).
``(3) Collection.--Such coinsurance and deductible shall be
collected by the contractor that supplies the drug or biological
involved. Subject to subsection (a)(3)(B), such coinsurance and
deductible may be collected in a manner similar to the manner in
which the coinsurance and deductible are collected for durable
medical equipment under this part.
``(f) Special Payment Rules.--
``(1) Use in exclusion cases.--If the Secretary excludes a drug
or biological (or class of drugs or biologicals) under subsection
(a)(1)(D), the Secretary may provide for payment to be made under
this part for such drugs and biologicals (or class) using the
payment methodology under section 1847A.
``(2) Application of requirement for assignment.--For provision
requiring assignment of claims for competitively biddable drugs and
biologicals, see section 1842(o)(3).
``(3) Protection for beneficiary in case of medical necessity
denial.--For protection of individuals against liability in the
case of medical necessity determinations, see section
1842(b)(3)(B)(ii)(III).
``(g) Judicial Review.--There shall be no administrative or
judicial review under section 1869, section 1878, or otherwise, of--
``(1) the establishment of payment amounts under subsection
(d)(1);
``(2) the awarding of contracts under this section;
``(3) the establishment of competitive acquisition areas under
subsection (a)(2)(C);
``(4) the phased-in implementation under subsection (a)(1)(B);
``(5) the selection of categories of competitively biddable
drugs and biologicals for competitive acquisition under such
subsection or the selection of a drug in the case of multiple
source drugs; or
``(6) the bidding structure and number of contractors selected
under this section.''.
(2) Report.--Not later than July 1, 2008, the Secretary shall
submit to Congress a report on the program conducted under section
1847B of the Social Security Act, as added by paragraph (1). Such
report shall include information on savings, reductions in cost-
sharing, access to competitively biddable drugs and biologicals,
the range of choices of contractors available to physicians, the
satisfaction of physicians and of individuals enrolled under this
part, and information comparing prices for drugs and biologicals
under such section and section 1847A of such Act, as added by
subsection (c).
(e) Adjustments to Payment Amounts for Administration of Drugs and
Biologicals.--
(1) Items and services relating to furnishing of blood clotting
factors.--Section 1842(o) (42 U.S.C. 1395u(o)), as amended by
subsection (b)(2), is amended by adding at the end the following
new paragraph:
``(5)(A) Subject to subparagraph (B), in the case of clotting
factors furnished on or after January 1, 2005, the Secretary shall,
after reviewing the January 2003 report to Congress by the Comptroller
General of the United States entitled `Payment for Blood Clotting
Factor Exceeds Providers Acquisition Cost', provide for a separate
payment, to the entity which furnishes to the patient blood clotting
factors, for items and services related to the furnishing of such
factors in an amount that the Secretary determines to be appropriate.
Such payment amount may take into account any or all of the following:
``(i) The mixing (if appropriate) and delivery of factors to an
individual, including special inventory management and storage
requirements.
``(ii) Ancillary supplies and patient training necessary for
the self-administration of such factors.
``(B) In determining the separate payment amount under subparagraph
(A) for blood clotting factors furnished in 2005, the Secretary shall
ensure that the total amount of payments under this part (as estimated
by the Secretary) for such factors under paragraph (1)(C) and such
separate payments for such factors does not exceed the total amount of
payments that would have been made for such factors under this part (as
estimated by the Secretary) if the amendments made by section 303 of
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 had not been enacted.
``(C) The separate payment amount under this subparagraph for blood
clotting factors furnished in 2006 or a subsequent year shall be equal
to the separate payment amount determined under this paragraph for the
previous year increased by the percentage increase in the consumer
price index for medical care for the 12-month period ending with June
of the previous year.''.
(2) Pharmacy supplying fee for certain drugs and biologicals.--
Section 1842(o) (42 U.S.C. 1395u(o)), as previously amended, is
amended by adding at the end the following new paragraph:
``(6) In the case of an immunosuppressive drug described in
subparagraph (J) of section 1861(s)(2) and an oral drug described in
subparagraph (Q) or (T) of such section, the Secretary shall pay to the
pharmacy a supplying fee for such a drug determined appropriate by the
Secretary (less the applicable deductible and coinsurance amounts).''.
(f) Linkage of Revised Drug Payments and Increases for Drug
Administration.--The Secretary shall not implement the revisions in
payment amounts for drugs and biologicals administered by physicians as
a result of the amendments made by subsection (b) with respect to 2004
unless the Secretary concurrently makes adjustments to the practice
expense payment adjustment under the amendments made by subsection (a).
(g) Prohibition of Administrative and Judicial Review.--
(1) Drugs.--Section 1842(o) (42 U.S.C. 1395u(o)), as previously
amended, is amended by adding at the end the following new
paragraph:
``(7) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, of determinations of payment
amounts, methods, or adjustments under paragraphs (4) through (6).''.
(2) Physician fee schedule.--Section 1848(i)(1)(B) (42 U.S.C.
1395w-4(i)(1)(B)) is amended by striking ``subsection (c)(2)(F)''
and inserting ``subsections (c)(2)(F), (c)(2)(H), and (c)(2)(I)''.
(3) Multiple chemotherapy agents, other services currently on
the non-physician work pool, and transitional adjustment.--There
shall be no administrative or judicial review under section 1869,
section 1878, or otherwise, of determinations of payment amounts,
methods, or adjustments under paragraphs (2) through (4) of
subsection (a).
(h) Continuation of Payment Methodology for Radiopharmaceuticals.--
Nothing in the amendments made by this section shall be construed as
changing the payment methodology under part B of title XVIII of the
Social Security Act for radiopharmaceuticals, including the use by
carriers of invoice pricing methodology.
(i) Conforming Amendments.--
(1) Application of asp and competitive bidding.--Section
1842(o)(2) (42 U.S.C. 1395u(o)(2)) is amended by adding at the end
the following: ``This paragraph shall not apply in the case of
payment under paragraph (1)(C).''.
(2) No change in coverage basis.--Section 1861(s)(2)(A) (42
U.S.C. 1395x(s)(2)(A)) is amended by inserting ``(or would have
been so included but for the application of section 1847B)'' after
``included in the physicians' bills''.
(3) Payment.--(A) Section 1833(a)(1)(S) (42 U.S.C.
1395l(a)(1)(S)) is amended by inserting ``(or, if applicable, under
section 1847, 1847A, or 1847B)'' after ``1842(o)''.
(B) Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)) is amended--
(i) by striking ``and'' at the end of subparagraph (H);
(ii) by striking the semicolon at the end of subparagraph
(I) and inserting ``, and''; and
(iii) by adding at the end the following new subparagraph:
``(J) in the case of a drug or biological specified in section
1847A(c)(6)(C) for which payment is made under part B that is
furnished in a competitive area under section 1847B, that is not
furnished by an entity under a contract under such section;''.
(4) Consolidated reporting of pricing information.--Section
1927 (42 U.S.C. 1396r-8) is amended--
(A) in subsection (a)(1), by inserting ``or under part B of
title XVIII'' after ``section 1903(a)'';
(B) in subsection (b)(3)(A)--
(i) in clause (i), by striking ``and'' at the end and
inserting a semicolon;
(ii) in clause (ii), by striking the period and
inserting ``; and''; and
(iii) by adding at the end the following:
``(iii) for calendar quarters beginning on or after
January 1, 2004, in conjunction with reporting required
under clause (i) and by National Drug Code (including
package size)--
``(I) the manufacturer's average sales price (as
defined in section 1847A(c)) and the total number of
units specified under section 1847A(b)(2)(A);
``(II) if required to make payment under section
1847A, the manufacturer's wholesale acquisition cost,
as defined in subsection (c)(6) of such section; and
``(III) information on those sales that were made
at a nominal price or otherwise described in section
1847A(c)(2)(B);
for a drug or biological described in subparagraph (C),
(D), (E), or (G) of section 1842(o)(1) or section
1881(b)(13)(A)(ii).
Information reported under this subparagraph is subject to
audit by the Inspector General of the Department of Health and
Human Services.'';
(C) in subsection (b)(3)(B)--
(i) in the heading, by inserting ``and manufacturer's
average sales price'' after ``price''; and
(ii) by inserting ``and manufacturer's average sales
prices (including wholesale acquisition cost) if required
to make payment'' after ``manufacturer prices''; and
(D) in subsection (b)(3)(D)--
(i) in the matter preceding clause (i), by inserting
``(other than the wholesale acquisition cost for purposes
of carrying out section 1847A)'' after ``subsection
(a)(6)(A)(ii)''; and
(ii) in clause (i), by inserting ``, to carry out
section 1847A (including the determination and
implementation of the payment amount), or to carry out
section 1847B'' after ``this section''.
(5) Implementation.--The provisions of chapter 8 of title 5,
United States Code, shall not apply with respect to regulations
implementing the amendments made by subsections (a), (b), and
(e)(3), to regulations implementing section 304, and to regulations
implementing the amendment made by section 305(a), insofar as such
regulations apply in 2004.
(6) Repeal of study.--Section 4556 of the Balanced Budget Act
of 1997 (42 U.S.C. 1395u note) is amended by striking subsection
(c).
(j) Application to Certain Physician Specialties.--Insofar as the
amendments made by this section apply to payments for drugs or
biologicals and drug administration services furnished by physicians,
such amendments shall only apply to physicians in the specialties of
hematology, hematology/oncology, and medical oncology under title XVIII
of the Social Security Act.
SEC. 304. EXTENSION OF APPLICATION OF PAYMENT REFORM FOR COVERED
OUTPATIENT DRUGS AND BIOLOGICALS TO OTHER PHYSICIAN
SPECIALTIES.
Notwithstanding section 303(j), the amendments made by section 303
shall also apply to payments for drugs or biologicals and drug
administration services furnished by physicians in specialties other
than the specialties of hematology, hematology/oncology, and medical
oncology.
SEC. 305. PAYMENT FOR INHALATION DRUGS.
(a) In General.--Section 1842(o)(1)(G) (42 U.S.C. 1395u(o)(1)(G)),
as added by section 303(b), is amended to read as follows:
``(G) In the case of inhalation drugs or biologicals furnished
through durable medical equipment covered under section 1861(n)
that are furnished--
``(i) in 2004, the amount provided under paragraph (4) for
the drug or biological; and
``(ii) in 2005 and subsequent years, the amount provided
under section 1847A for the drug or biological.''.
(b) GAO Study of Medicare Payment for Inhalation Therapy.--
(1) Study.--The Comptroller General of the United States shall
conduct a study to examine the adequacy of current reimbursements
for inhalation therapy under the medicare program.
(2) Report.--Not later than 1 year after the date of the
enactment of this Act, the Comptroller General shall submit to
Congress a report on the study conducted under paragraph (1).
SEC. 306. DEMONSTRATION PROJECT FOR USE OF RECOVERY AUDIT CONTRACTORS.
(a) In General.--The Secretary shall conduct a demonstration
project under this section (in this section referred to as the
``project'') to demonstrate the use of recovery audit contractors under
the Medicare Integrity Program in identifying underpayments and
overpayments and recouping overpayments under the medicare program for
services for which payment is made under part A or B of title XVIII of
the Social Security Act. Under the project--
(1) payment may be made to such a contractor on a contingent
basis;
(2) such percentage as the Secretary may specify of the amount
recovered shall be retained by the Secretary and shall be available
to the program management account of the Centers for Medicare &
Medicaid Services; and
(3) the Secretary shall examine the efficacy of such use with
respect to duplicative payments, accuracy of coding, and other
payment policies in which inaccurate payments arise.
(b) Scope and Duration.--
(1) Scope.--The project shall cover at least 2 States that are
among the States with--
(A) the highest per capita utilization rates of medicare
services, and
(B) at least 3 contractors.
(2) Duration.--The project shall last for not longer than 3
years.
(c) Waiver.--The Secretary shall waive such provisions of title
XVIII of the Social Security Act as may be necessary to provide for
payment for services under the project in accordance with subsection
(a).
(d) Qualifications of Contractors.--
(1) In general.--The Secretary shall enter into a recovery
audit contract under this section with an entity only if the entity
has staff that has the appropriate clinical knowledge of and
experience with the payment rules and regulations under the
medicare program or the entity has or will contract with another
entity that has such knowledgeable and experienced staff.
(2) Ineligibility of certain contractors.--The Secretary may
not enter into a recovery audit contract under this section with an
entity to the extent that the entity is a fiscal intermediary under
section 1816 of the Social Security Act (42 U.S.C. 1395h), a
carrier under section 1842 of such Act (42 U.S.C. 1395u), or a
Medicare Administrative Contractor under section 1874A of such Act.
(3) Preference for entities with demonstrated proficiency.--In
awarding contracts to recovery audit contractors under this
section, the Secretary shall give preference to those risk entities
that the Secretary determines have demonstrated more than 3 years
direct management experience and a proficiency for cost control or
recovery audits with private insurers, health care providers,
health plans, or under the medicaid program under title XIX of the
Social Security Act.
(e) Construction Relating to Conduct of Investigation of Fraud.--A
recovery of an overpayment to a provider by a recovery audit contractor
shall not be construed to prohibit the Secretary or the Attorney
General from investigating and prosecuting, if appropriate, allegations
of fraud or abuse arising from such overpayment.
(f) Report.--The Secretary shall submit to Congress a report on the
project not later than 6 months after the date of its completion. Such
reports shall include information on the impact of the project on
savings to the medicare program and recommendations on the cost-
effectiveness of extending or expanding the project.information' means
information about a conviction for a relevant crime or a finding of
patient or resident abuse.
SEC. 307. PILOT PROGRAM FOR NATIONAL AND STATE BACKGROUND CHECKS ON
DIRECT PATIENT ACCESS EMPLOYEES OF LONG-TERM CARE
FACILITIES OR PROVIDERS.
(a) Authority To Conduct Program.--The Secretary, in consultation
with the Attorney General, shall establish a pilot program to identify
efficient, effective, and economical procedures for long term care
facilities or providers to conduct background checks on prospective
direct patient access employees.
(b) Requirements.--
(1) In general.--Under the pilot program, a long-term care
facility or provider in a participating State, prior to employing a
direct patient access employee that is first hired on or after the
commencement date of the pilot program in the State, shall conduct
a background check on the employee in accordance with such
procedures as the participating State shall establish.
(2) Procedures.--
(A) In general.--The procedures established by a
participating State under paragraph (1) should be designed to--
(i) give a prospective direct access patient employee
notice that the long-term care facility or provider is
required to perform background checks with respect to new
employees;
(ii) require, as a condition of employment, that the
employee--
(I) provide a written statement disclosing any
disqualifying information;
(II) provide a statement signed by the employee
authorizing the facility to request national and State
criminal history background checks;
(III) provide the facility with a rolled set of the
employee's fingerprints; and
(IV) provide any other identification information
the participating State may require;
(iii) require the facility or provider to check any
available registries that would be likely to contain
disqualifying information about a prospective employee of a
long-term care facility or provider; and
(iv) permit the facility or provider to obtain State
and national criminal history background checks on the
prospective employee through a 10-fingerprint check that
utilizes State criminal records and the Integrated
Automated Fingerprint Identification System of the Federal
Bureau of Investigation.
(B) Elimination of unnecessary checks.--The procedures
established by a participating State under paragraph (1) shall
permit a long-term care facility or provider to terminate the
background check at any stage at which the facility or provider
obtains disqualifying information regarding a prospective
direct patient access employee.
(3) Prohibition on hiring of abusive workers.--
(A) In general.--A long-term care facility or provider may
not knowingly employ any direct patient access employee who has
any disqualifying information.
(B) Provisional employment.--
(i) In general.--Under the pilot program, a
participating State may permit a long-term care facility or
provider to provide for a provisional period of employment
for a direct patient access employee pending completion of
a background check, subject to such supervision during the
employee's provisional period of employment as the
participating State determines appropriate.
(ii) Special consideration for certain facilities and
providers.--In determining what constitutes appropriate
supervision of a provisional employee, a participating
State shall take into account cost or other burdens that
would be imposed on small rural long-term care facilities
or providers, as well as the nature of care delivered by
such facilities or providers that are home health agencies
or providers of hospice care.
(4) Use of information; immunity from liability.--
(A) Use of information.--A participating State shall ensure
that a long-term care facility or provider that obtains
information about a direct patient access employee pursuant to
a background check uses such information only for the purpose
of determining the suitability of the employee for employment.
(B) Immunity from liability.--A participating State shall
ensure that a long-term care facility or provider that, in
denying employment for an individual selected for hire as a
direct patient access employee (including during any period of
provisional employment), reasonably relies upon information
obtained through a background check of the individual, shall
not be liable in any action brought by the individual based on
the employment determination resulting from the information.
(5) Agreements with employment agencies.--A participating State
may establish procedures for facilitating the conduct of background
checks on prospective direct patient access employees that are
hired by a long-term care facility or provider through an
employment agency (including a temporary employment agency).
(6) Penalties.--A participating State may impose such penalties
as the State determines appropriate to enforce the requirements of
the pilot program conducted in that State.
(c) Participating States.--
(1) In general.--The Secretary shall enter into agreements with
not more than 10 States to conduct the pilot program under this
section in such States.
(2) Requirements for states.--An agreement entered into under
paragraph (1) shall require that a participating State--
(A) be responsible for monitoring compliance with the
requirements of the pilot program;
(B) have procedures by which a provisional employee or an
employee may appeal or dispute the accuracy of the information
obtained in a background check performed under the pilot
program; and
(C) agree to--
(i) review the results of any State or national
criminal history background checks conducted regarding a
prospective direct patient access employee to determine
whether the employee has any conviction for a relevant
crime;
(ii) immediately report to the entity that requested
the criminal history background checks the results of such
review; and
(iii) in the case of an employee with a conviction for
a relevant crime that is subject to reporting under section
1128E of the Social Security Act (42 U.S.C. 1320a-7e),
report the existence of such conviction to the database
established under that section.
(3) Application and selection criteria.--
(A) Application.--A State seeking to participate in the
pilot program established under this section, shall submit an
application to the Secretary containing such information and at
such time as the Secretary may specify.
(B) Selection criteria.--
(i) In general.--In selecting States to participate in
the pilot program, the Secretary shall establish criteria
to ensure--
(I) geographic diversity;
(II) the inclusion of a variety of long-term care
facilities or providers;
(III) the evaluation of a variety of payment
mechanisms for covering the costs of conducting the
background checks required under the pilot program; and
(IV) the evaluation of a variety of penalties
(monetary and otherwise) used by participating States
to enforce the requirements of the pilot program in
such States.
(ii) Additional criteria.--The Secretary shall, to the
greatest extent practicable, select States to participate
in the pilot program in accordance with the following:
(I) At least one participating State should permit
long-term care facilities or providers to provide for a
provisional period of employment pending completion of
a background check and at least one such State should
not permit such a period of employment.
(II) At least one participating State should
establish procedures under which employment agencies
(including temporary employment agencies) may contact
the State directly to conduct background checks on
prospective direct patient access employees.
(III) At least one participating State should
include patient abuse prevention training (including
behavior training and interventions) for managers and
employees of long-term care facilities and providers as
part of the pilot program conducted in that State.
(iii) Inclusion of states with existing programs.--
Nothing in this section shall be construed as prohibiting
any State which, as of the date of the enactment of this
Act, has procedures for conducting background checks on
behalf of any entity described in subsection (g)(5) from
being selected to participate in the pilot program
conducted under this section.
(d) Payments.--Of the amounts made available under subsection (f)
to conduct the pilot program under this section, the Secretary shall--
(1) make payments to participating States for the costs of
conducting the pilot program in such States; and
(2) reserve up to 4 percent of such amounts to conduct the
evaluation required under subsection (e).
(e) Evaluation.--The Secretary, in consultation with the Attorney
General, shall conduct by grant, contract, or interagency agreement an
evaluation of the pilot program conducted under this section. Such
evaluation shall--
(1) review the various procedures implemented by participating
States for long-term care facilities or providers to conduct
background checks of direct patient access employees and identify
the most efficient, effective, and economical procedures for
conducting such background checks;
(2) assess the costs of conducting such background checks
(including start-up and administrative costs);
(3) consider the benefits and problems associated with
requiring employees or facilities or providers to pay the costs of
conducting such background checks;
(4) consider whether the costs of conducting such background
checks should be allocated between the medicare and medicaid
programs and if so, identify an equitable methodology for doing so;
(5) determine the extent to which conducting such background
checks leads to any unintended consequences, including a reduction
in the available workforce for such facilities or providers;
(6) review forms used by participating States in order to
develop, in consultation with the Attorney General, a model form
for such background checks;
(7) determine the effectiveness of background checks conducted
by employment agencies; and
(8) recommend appropriate procedures and payment mechanisms for
implementing a national criminal background check program for such
facilities and providers.
(f) Funding.--Out of any funds in the Treasury not otherwise
appropriated, there are appropriated to the Secretary to carry out the
pilot program under this section for the period of fiscal years 2004
through 2007, $25,000,000.
(g) Definitions.--In this section:
(1) Conviction for a relevant crime.--The term ``conviction for
a relevant crime'' means any Federal or State criminal conviction
for--
(A) any offense described in section 1128(a) of the Social
Security Act (42 U.S.C. 1320a-7); and
(B) such other types of offenses as a participating State
may specify for purposes of conducting the pilot program in
such State.
(2) Disqualifying information.--The term ``disqualifying
information'' means a conviction for a relevant crime or a finding
of patient or resident abuse.
(3) Finding of patient or resident abuse.--The term ``finding
of patient or resident abuse'' means any substantiated finding by a
State agency under section 1819(g)(1)(C) or 1919(g)(1)(C) of the
Social Security Act (42 U.S.C. 1395i-3(g)(1)(C), 1396r(g)(1)(C)) or
a Federal agency that a direct patient access employee has
committed--
(A) an act of patient or resident abuse or neglect or a
misappropriation of patient or resident property; or
(B) such other types of acts as a participating State may
specify for purposes of conducting the pilot program in such
State.
(4) Direct patient access employee.--The term ``direct patient
access employee'' means any individual (other than a volunteer)
that has access to a patient or resident of a long-term care
facility or provider through employment or through a contract with
such facility or provider, as determined by a participating State
for purposes of conducting the pilot program in such State.
(5) Long-term care facility or provider.--
(A) In general.--The term ``long-term care facility or
provider'' means the following facilities or providers which
receive payment for services under title XVIII or XIX of the
Social Security Act:
(i) A skilled nursing facility (as defined in section
1819(a) of the Social Security Act) (42 U.S.C. 1395i-3(a)).
(ii) A nursing facility (as defined in section 1919(a)
in such Act) (42 U.S.C. 1396r(a)).
(iii) A home health agency.
(iv) A provider of hospice care (as defined in section
1861(dd)(1) of such Act) (42 U.S.C. 1395x(dd)(1)).
(v) A long-term care hospital (as described in section
1886(d)(1)(B)(iv) of such Act) (42 U.S.C.
1395ww(d)(1)(B)(iv)).
(vi) A provider of personal care services.
(vii) A residential care provider that arranges for, or
directly provides, long-term care services.
(viii) An intermediate care facility for the mentally
retarded (as defined in section 1905(d) of such Act) 42
U.S.C. 1396d(d)).
(B) Additional facilities or providers.--During the first
year in which a pilot program under this section is conducted
in a participating State, the State may expand the list of
facilities or providers under subparagraph (A) (on a phased-in
basis or otherwise) to include such other facilities or
providers of long-term care services under such titles as the
participating State determines appropriate.
(C) Exceptions.--Such term does not include--
(i) any facility or entity that provides, or is a
provider of, services described in subparagraph (A) that
are exclusively provided to an individual pursuant to a
self-directed arrangement that meets such requirements as
the participating State may establish in accordance with
guidance from the Secretary; or
(ii) any such arrangement that is obtained by a patient
or resident functioning as an employer.
(6) Participating state.--The term ``participating State''
means a State with an agreement under subsection (c)(1).
TITLE IV--RURAL PROVISIONS
Subtitle A--Provisions Relating to Part A Only
SEC. 401. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT AMOUNTS UNDER
THE MEDICARE INPATIENT HOSPITAL PROSPECTIVE PAYMENT
SYSTEM.
(a) In General.--Section 1886(d)(3)(A)(iv) (42 U.S.C.
1395ww(d)(3)(A)(iv)) is amended--
(1) by striking ``(iv) For discharges'' and inserting ``(iv)(I)
Subject to subclause (II), for discharges''; and
(2) by adding at the end the following new subclause:
``(II) For discharges occurring in a fiscal year (beginning
with fiscal year 2004), the Secretary shall compute a standardized
amount for hospitals located in any area within the United States
and within each region equal to the standardized amount computed
for the previous fiscal year under this subparagraph for hospitals
located in a large urban area (or, beginning with fiscal year 2005,
for all hospitals in the previous fiscal year) increased by the
applicable percentage increase under subsection (b)(3)(B)(i) for
the fiscal year involved.''.
(b) Conforming Amendments.--
(1) Computing drg-specific rates.--Section 1886(d)(3)(D) (42
U.S.C. 1395ww(d)(3)(D)) is amended--
(A) in the heading, by striking ``in different areas'';
(B) in the matter preceding clause (i), by striking ``,
each of'';
(C) in clause (i)--
(i) in the matter preceding subclause (I), by inserting
``for fiscal years before fiscal year 2004,'' before ``for
hospitals''; and
(ii) in subclause (II), by striking ``and'' after the
semicolon at the end;
(D) in clause (ii)--
(i) in the matter preceding subclause (I), by inserting
``for fiscal years before fiscal year 2004,'' before ``for
hospitals''; and
(ii) in subclause (II), by striking the period at the
end and inserting ``; and''; and
(E) by adding at the end the following new clause:
``(iii) for a fiscal year beginning after fiscal year 2003,
for hospitals located in all areas, to the product of--
``(I) the applicable standardized amount (computed
under subparagraph (A)), reduced under subparagraph (B),
and adjusted or reduced under subparagraph (C) for the
fiscal year; and
``(II) the weighting factor (determined under paragraph
(4)(B)) for that diagnosis-related group.''.
(2) Technical conforming sunset.--Section 1886(d)(3) (42 U.S.C.
1395ww(d)(3)) is amended--
(A) in the matter preceding subparagraph (A), by inserting
``, for fiscal years before fiscal year 1997,'' before ``a
regional adjusted DRG prospective payment rate''; and
(B) in subparagraph (D), in the matter preceding clause
(i), by inserting ``, for fiscal years before fiscal year
1997,'' before ``a regional DRG prospective payment rate for
each region,''.
(3) Additional technical amendment.--Section 1886(d)(3)(A)(iii)
(42 U.S.C. 1395ww(d)(3)(A)(iii)) is amended by striking ``in an
other urban area'' and inserting ``in an urban area''.
(c) Equalizing Urban and Rural Standardized Payment Amounts Under
the Medicare Inpatient Hospital Prospective Payment System for
Hospitals in Puerto Rico.--
(1) In general.--Section 1886(d)(9)(A) (42 U.S.C.
1395ww(d)(9)(A)), as amended by section 504, is amended--
(A) in clause (i), by striking ``and'' after the comma at
the end; and
(B) by striking clause (ii) and inserting the following new
clause:
``(ii) the applicable Federal percentage (specified in
subparagraph (E)) of--
``(I) for discharges beginning in a fiscal year beginning
on or after October 1, 1997, and before October 1, 2003, the
discharge-weighted average of--
``(aa) the national adjusted DRG prospective payment
rate (determined under paragraph (3)(D)) for hospitals
located in a large urban area,
``(bb) such rate for hospitals located in other urban
areas, and
``(cc) such rate for hospitals located in a rural area,
for such discharges, adjusted in the manner provided in
paragraph (3)(E) for different area wage levels; and
``(II) for discharges in a fiscal year beginning on or
after October 1, 2003, the national DRG prospective payment
rate determined under paragraph (3)(D)(iii) for hospitals
located in any area for such discharges, adjusted in the manner
provided in paragraph (3)(E) for different area wage levels.
As used in this section, the term `subsection (d) Puerto Rico hospital'
means a hospital that is located in Puerto Rico and that would be a
subsection (d) hospital (as defined in paragraph (1)(B)) if it were
located in one of the 50 States.''.
(2) Application of puerto rico standardized amount based on
large urban areas.--Section 1886(d)(9)(C) (42 U.S.C.
1395ww(d)(9)(C)) is amended--
(A) in clause (i)--
(i) by striking ``(i) The Secretary'' and inserting
``(i)(I) For discharges in a fiscal year after fiscal year
1988 and before fiscal year 2004, the Secretary''; and
(ii) by adding at the end the following new subclause:
``(II) For discharges occurring in a fiscal year (beginning
with fiscal year 2004), the Secretary shall compute an average
standardized amount for hospitals located in any area of Puerto
Rico that is equal to the average standardized amount computed
under subclause (I) for fiscal year 2003 for hospitals in a large
urban area (or, beginning with fiscal year 2005, for all hospitals
in the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year
involved.'';
(B) in clause (ii), by inserting ``(or for fiscal year 2004
and thereafter, the average standardized amount)'' after ``each
of the average standardized amounts''; and
(C) in clause (iii)(I), by striking ``for hospitals located
in an urban or rural area, respectively''.
(d) Implementation.--
(1) In general.--The amendments made by subsections (a), (b),
and (c)(1) of this section shall have no effect on the authority of
the Secretary, under subsection (b)(2) of section 402 of Public Law
108-89, to delay implementation of the extension of provisions
equalizing urban and rural standardized inpatient hospital payments
under subsection (a) of such section 402.
(2) Application of puerto rico standardized amount based on
large urban areas.--The authority of the Secretary referred to in
paragraph (1) shall apply with respect to the amendments made by
subsection (c)(2) of this section in the same manner as that
authority applies with respect to the extension of provisions
equalizing urban and rural standardized inpatient hospital payments
under subsection (a) of such section 402, except that any reference
in subsection (b)(2)(A) of such section 402 is deemed to be a
reference to April 1, 2004.
SEC. 402. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) TREATMENT FOR
RURAL HOSPITALS AND URBAN HOSPITALS WITH FEWER THAN 100
BEDS.
(a) Doubling the Cap.--Section 1886(d)(5)(F) (42 U.S.C.
1395ww(d)(5)(F)) is amended by adding at the end the following new
clause:
``(xiv)(I) In the case of discharges occurring on or after April 1,
2004, subject to subclause (II), there shall be substituted for the
disproportionate share adjustment percentage otherwise determined under
clause (iv) (other than subclause (I)) or under clause (viii), (x),
(xi), (xii), or (xiii), the disproportionate share adjustment
percentage determined under clause (vii) (relating to large, urban
hospitals).
``(II) Under subclause (I), the disproportionate share adjustment
percentage shall not exceed 12 percent for a hospital that is not
classified as a rural referral center under subparagraph (C).''.
(b) Conforming Amendments.--Section 1886(d) (42 U.S.C. 1395ww(d))
is amended--
(1) in paragraph (5)(F)--
(A) in each of subclauses (II), (III), (IV), (V), and (VI)
of clause (iv), by inserting ``subject to clause (xiv) and''
before ``for discharges occurring'';
(B) in clause (viii), by striking ``The formula'' and
inserting ``Subject to clause (xiv), the formula''; and
(C) in each of clauses (x), (xi), (xii), and (xiii), by
striking ``For purposes'' and inserting ``Subject to clause
(xiv), for purposes''; and
(2) in paragraph (2)(C)(iv)--
(A) by striking ``or'' before ``the enactment of section
303''; and
(B) by inserting before the period at the end the
following: ``, or the enactment of section 402(a)(1) of the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003''.
SEC. 403. ADJUSTMENT TO THE MEDICARE INPATIENT HOSPITAL PROSPECTIVE
PAYMENT SYSTEM WAGE INDEX TO REVISE THE LABOR-RELATED
SHARE OF SUCH INDEX.
(a) Adjustment.--
(1) In general.--Section 1886(d)(3)(E) (42 U.S.C.
1395ww(d)(3)(E)) is amended--
(A) by striking ``wage levels.--The Secretary'' and
inserting ``wage levels.--
``(i) In general.--Except as provided in clause (ii), the
Secretary''; and
(B) by adding at the end the following new clause:
``(ii) Alternative proportion to be adjusted beginning in
fiscal year 2005.--For discharges occurring on or after October
1, 2004, the Secretary shall substitute `62 percent' for the
proportion described in the first sentence of clause (i),
unless the application of this clause would result in lower
payments to a hospital than would otherwise be made.''.
(2) Waiving budget neutrality.--Section 1886(d)(3)(E) (42
U.S.C. 1395ww(d)(3)(E)), as amended by subsection (a), is amended
by adding at the end of clause (i) the following new sentence:
``The Secretary shall apply the previous sentence for any period as
if the amendments made by section 403(a)(1) of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 had
not been enacted.''.
(b) Application to Puerto Rico Hospitals.--Section
1886(d)(9)(C)(iv) (42 U.S.C. 1395ww(d)(9)(C)(iv)) is amended--
(1) by inserting ``(I)'' after ``(iv)'';
(2) by striking ``paragraph (3)(E)'' and inserting ``paragraph
(3)(E)(i)''; and
(3) by adding at the end the following new subclause:
``(II) For discharges occurring on or after October 1, 2004,
the Secretary shall substitute `62 percent' for the proportion
described in the first sentence of clause (i), unless the
application of this subclause would result in lower payments to a
hospital than would otherwise be made.''.
SEC. 404. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL MARKET
BASKET.
(a) More Frequent Updates in Weights.--After revising the weights
used in the hospital market basket under section 1886(b)(3)(B)(iii) of
the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(iii)) to reflect the
most current data available, the Secretary shall establish a frequency
for revising such weights, including the labor share, in such market
basket to reflect the most current data available more frequently than
once every 5 years.
(b) Incorporation of Explanation in Rulemaking.--The Secretary
shall include in the publication of the final rule for payment for
inpatient hospital services under section 1886(d) of the Social
Security Act (42 U.S.C. 1395ww(d)) for fiscal year 2006, an explanation
of the reasons for, and options considered, in determining frequency
established under subsection (a).
SEC. 405. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.
(a) Increase in Payment Amounts.--
(1) In general.--Sections 1814(l), 1834(g)(1), and 1883(a)(3)
(42 U.S.C. 1395f(l), 1395m(g)(1), and 1395tt(a)(3)) are each
amended by inserting ``equal to 101 percent of'' before ``the
reasonable costs''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to payments for services furnished during cost reporting
periods beginning on or after January 1, 2004.
(b) Coverage of Costs for Certain Emergency Room On-Call
Providers.--
(1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5)) is
amended--
(A) in the heading--
(i) by inserting ``certain'' before ``emergency''; and
(ii) by striking ``physicians'' and inserting
``providers'';
(B) by striking ``emergency room physicians who are on-call
(as defined by the Secretary)'' and inserting ``physicians,
physician assistants, nurse practitioners, and clinical nurse
specialists who are on-call (as defined by the Secretary) to
provide emergency services''; and
(C) by striking ``physicians' services'' and inserting
``services covered under this title''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply with respect to costs incurred for services furnished on or
after January 1, 2005.
(c) Authorization of Periodic Interim Payment (PIP).--
(1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is
amended--
(A) in the matter before subparagraph (A), by inserting ``,
in the cases described in subparagraphs (A) through (D)'' after
``1986'';
(B) by striking ``and'' at the end of subparagraph (C);
(C) by adding ``and'' at the end of subparagraph (D); and
(D) by inserting after subparagraph (D) the following new
subparagraph:
``(E) inpatient critical access hospital services;''.
(2) Development of alternative timing methods of periodic
interim payments.--With respect to periodic interim payments to
critical access hospitals for inpatient critical access hospital
services under section 1815(e)(2)(E) of the Social Security Act, as
added by paragraph (1), the Secretary shall develop alternative
methods for the timing of such payments.
(3) Authorization of pip.--The amendments made by paragraph (1)
shall apply to payments made on or after July 1, 2004.
(d) Condition for Application of Special Professional Service
Payment Adjustment.--
(1) In general.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is
amended by adding after and below subparagraph (B) the following:
``The Secretary may not require, as a condition for applying
subparagraph (B) with respect to a critical access hospital, that
each physician or other practitioner providing professional
services in the hospital must assign billing rights with respect to
such services, except that such subparagraph shall not apply to
those physicians and practitioners who have not assigned such
billing rights.''.
(2) Effective date.--
(A) In general.--Except as provided in subparagraph (B),
the amendment made by paragraph (1) shall apply to cost
reporting periods beginning on or after July 1, 2004.
(B) Rule of application.--In the case of a critical access
hospital that made an election under section 1834(g)(2) of the
Social Security Act (42 U.S.C. 1395m(g)(2)) before November 1,
2003, the amendment made by paragraph (1) shall apply to cost
reporting periods beginning on or after July 1, 2001.
(e) Revision of Bed Limitation for Hospitals.--
(1) In general.--Section 1820(c)(2)(B)(iii) (42 U.S.C. 1395i-
4(c)(2)(B)(iii)) is amended by striking ``15 (or, in the case of a
facility under an agreement described in subsection (f), 25)'' and
inserting ``25''.
(2) Conforming amendment.--Section 1820(f) (42 U.S.C. 1395i-
4(f)) is amended by striking ``and the number of beds used at any
time for acute care inpatient services does not exceed 15 beds''.
(3) Effective date.--The amendments made by this subsection
shall apply to designations made before, on, or after January 1,
2004, but any election made pursuant to regulations promulgated to
carry out such amendments shall only apply prospectively.
(f) Provisions Relating to FLEX Grants.--
(1) Additional 4-year period of funding.--Section 1820(j) (42
U.S.C. 1395i-4(j)) is amended by inserting before the period at the
end the following: ``, and for making grants to all States under
paragraphs (1) and (2) of subsection (g), $35,000,000 in each of
fiscal years 2005 through 2008''.
(2) Additional requirements and administration.--Section
1820(g) (42 U.S.C. 1395i-4(g)) is amended by adding at the end the
following new paragraphs:
``(4) Additional requirements with respect to flex grants.--
With respect to grants awarded under paragraph (1) or (2) from
funds appropriated for fiscal year 2005 and subsequent fiscal
years--
``(A) Consultation with the state hospital association and
rural hospitals on the most appropriate ways to use grants.--A
State shall consult with the hospital association of such State
and rural hospitals located in such State on the most
appropriate ways to use the funds under such grant.
``(B) Limitation on use of grant funds for administrative
expenses.--A State may not expend more than the lesser of--
``(i) 15 percent of the amount of the grant for
administrative expenses; or
``(ii) the State's federally negotiated indirect rate
for administering the grant.
``(5) Use of funds for federal administrative expenses.--Of the
total amount appropriated for grants under paragraphs (1) and (2)
for a fiscal year (beginning with fiscal year 2005), up to 5
percent of such amount shall be available to the Health Resources
and Services Administration for purposes of administering such
grants.''.
(g) Authority To Establish Psychiatric and Rehabilitation Distinct
Part Units.--
(1) In general.--Section 1820(c)(2) (42 U.S.C. 1395i-4(c)(2))
is amended by adding at the end the following:
``(E) Authority to establish psychiatric and rehabilitation
distinct part units.--
``(i) In general.--Subject to the succeeding provisions
of this subparagraph, a critical access hospital may
establish--
``(I) a psychiatric unit of the hospital that is a
distinct part of the hospital; and
``(II) a rehabilitation unit of the hospital that
is a distinct part of the hospital,
if the distinct part meets the requirements (including
conditions of participation) that would otherwise apply to
the distinct part if the distinct part were established by
a subsection (d) hospital in accordance with the matter
following clause (v) of section 1886(d)(1)(B), including
any regulations adopted by the Secretary under such
section.
``(ii) Limitation on number of beds.--The total number
of beds that may be established under clause (i) for a
distinct part unit may not exceed 10.
``(iii) Exclusion of beds from bed count.--In
determining the number of beds of a critical access
hospital for purposes of applying the bed limitations
referred to in subparagraph (B)(iii) and subsection (f),
the Secretary shall not take into account any bed
established under clause (i).
``(iv) Effect of failure to meet requirements.--If a
psychiatric or rehabilitation unit established under clause
(i) does not meet the requirements described in such clause
with respect to a cost reporting period, no payment may be
made under this title to the hospital for services
furnished in such unit during such period. Payment to the
hospital for services furnished in the unit may resume only
after the hospital has demonstrated to the Secretary that
the unit meets such requirements.''.
(2) Payment on a prospective payment basis.--Section 1814(l)
(42 U.S.C. 1395f(l)) is amended--
(A) by striking ``(l) The amount'' and inserting ``(l)(1)
Except as provided in paragraph (2), the amount''; and
(B) by adding at the end the following new paragraph:
``(2) In the case of a distinct part psychiatric or rehabilitation
unit of a critical access hospital described in section 1820(c)(2)(E),
the amount of payment for inpatient critical access hospital services
of such unit shall be equal to the amount of the payment that would
otherwise be made if such services were inpatient hospital services of
a distinct part psychiatric or rehabilitation unit, respectively,
described in the matter following clause (v) of section
1886(d)(1)(B).''.
(3) Effective date.--The amendments made by this subsection
shall apply to cost reporting periods beginning on or after October
1, 2004.
(h) Waiver Authority.--
(1) In general.--Section 1820(c)(2)(B)(i)(II) (42 U.S.C. 1395i-
4(c)(2)(B)(i)(II)) is amended by inserting ``before January 1,
2006,'' after ``is certified''.
(2) Grandfathering waiver authority for certain facilities.--
Section 1820(h) (42 U.S.C. 1395i-4(h)) is amended--
(A) in the heading preceding paragraph (1), by striking
``of Certain Facilities'' and inserting ``Provisions''; and
(B) by adding at the end the following new paragraph:
``(3) State authority to waive 35-mile rule.--In the case of a
facility that was designated as a critical access hospital before
January 1, 2006, and was certified by the State as being a
necessary provider of health care services to residents in the area
under subsection (c)(2)(B)(i)(II), as in effect before such date,
the authority under such subsection with respect to any
redesignation of such facility shall continue to apply
notwithstanding the amendment made by section 405(h)(1) of the
Medicare Prescription Drug, Improvement, and Modernization Act of
2003.''.
SEC. 406. MEDICARE INPATIENT HOSPITAL PAYMENT ADJUSTMENT FOR LOW-VOLUME
HOSPITALS.
(a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)) is amended
by adding at the end the following new paragraph:
``(12) Payment adjustment for low-volume hospitals.--
``(A) In general.--In addition to any payments calculated
under this section for a subsection (d) hospital, for
discharges occurring during a fiscal year (beginning with
fiscal year 2005), the Secretary shall provide for an
additional payment amount to each low-volume hospital (as
defined in subparagraph (C)(i)) for discharges occurring during
that fiscal year that is equal to the applicable percentage
increase (determined under subparagraph (B) for the hospital
involved) in the amount paid to such hospital under this
section for such discharges (determined without regard to this
paragraph).
``(B) Applicable percentage increase.--The Secretary shall
determine an applicable percentage increase for purposes of
subparagraph (A) as follows:
``(i) The Secretary shall determine the empirical
relationship for subsection (d) hospitals between the
standardized cost-per-case for such hospitals and the total
number of discharges of such hospitals and the amount of
the additional incremental costs (if any) that are
associated with such number of discharges.
``(ii) The applicable percentage increase shall be
determined based upon such relationship in a manner that
reflects, based upon the number of such discharges for a
subsection (d) hospital, such additional incremental costs.
``(iii) In no case shall the applicable percentage
increase exceed 25 percent.
``(C) Definitions.--
``(i) Low-volume hospital.--For purposes of this
paragraph, the term `low-volume hospital' means, for a
fiscal year, a subsection (d) hospital (as defined in
paragraph (1)(B)) that the Secretary determines is located
more than 25 road miles from another subsection (d)
hospital and has less than 800 discharges during the fiscal
year.
``(ii) Discharge.--For purposes of subparagraph (B) and
clause (i), the term `discharge' means an inpatient acute
care discharge of an individual regardless of whether the
individual is entitled to benefits under part A.''.
(b) Judicial Review.--Section 1886(d)(7)(A) (42 U.S.C.
1395ww(d)(7)(A)) is amended by inserting after ``to subsection (e)(1)''
the following: ``or the determination of the applicable percentage
increase under paragraph (12)(A)(ii)''.
SEC. 407. TREATMENT OF MISSING COST REPORTING PERIODS FOR SOLE
COMMUNITY HOSPITALS.
(a) In General.--Section 1886(b)(3)(I) (42 U.S.C. 1395ww(b)(3)(I))
is amended by adding at the end the following new clause:
``(iii) In no case shall a hospital be denied treatment as a sole
community hospital or payment (on the basis of a target rate as such as
a hospital) because data are unavailable for any cost reporting period
due to changes in ownership, changes in fiscal intermediaries, or other
extraordinary circumstances, so long as data for at least one
applicable base cost reporting period is available.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to cost reporting periods beginning on or after January 1, 2004.
SEC. 408. RECOGNITION OF ATTENDING NURSE PRACTITIONERS AS ATTENDING
PHYSICIANS TO SERVE HOSPICE PATIENTS.
(a) In General.--Section 1861(dd)(3)(B) (42 U.S.C. 1395x(dd)(3)(B))
is amended by inserting ``or nurse practitioner (as defined in
subsection (aa)(5))'' after ``the physician (as defined in subsection
(r)(1))''.
(b) Clarification of Hospice Role of Nurse Practitioners.--Section
1814(a)(7)(A)(i)(I) (42 U.S.C. 1395f(a)(7)(A)(i)(I)) is amended by
inserting ``(which for purposes of this subparagraph does not include a
nurse practitioner)'' after ``attending physician (as defined in
section 1861(dd)(3)(B))''.
SEC. 409. RURAL HOSPICE DEMONSTRATION PROJECT.
(a) In General.--The Secretary shall conduct a demonstration
project for the delivery of hospice care to medicare beneficiaries in
rural areas. Under the project medicare beneficiaries who are unable to
receive hospice care in the facility for lack of an appropriate
caregiver are provided such care in a facility of 20 or fewer beds
which offers, within its walls, the full range of services provided by
hospice programs under section 1861(dd) of the Social Security Act (42
U.S.C. 1395x(dd)).
(b) Scope of Project.--The Secretary shall conduct the project
under this section with respect to no more than 3 hospice programs over
a period of not longer than 5 years each.
(c) Compliance With Conditions.--Under the demonstration project--
(1) the hospice program shall comply with otherwise applicable
requirements, except that it shall not be required to offer
services outside of the home or to meet the requirements of section
1861(dd)(2)(A)(iii) of the Social Security Act; and
(2) payments for hospice care shall be made at the rates
otherwise applicable to such care under title XVIII of such Act.
The Secretary may require the program to comply with such additional
quality assurance standards for its provision of services in its
facility as the Secretary deems appropriate.
(d) Report.--Upon completion of the project, the Secretary shall
submit a report to Congress on the project and shall include in the
report recommendations regarding extension of such project to hospice
programs serving rural areas.
SEC. 410. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC AND FEDERALLY
QUALIFIED HEALTH CENTER SERVICES FROM THE PROSPECTIVE
PAYMENT SYSTEM FOR SKILLED NURSING FACILITIES.
(a) In General.--Section 1888(e)(2)(A) (42 U.S.C. 1395yy(e)(2)(A))
is amended--
(1) in clause (i)(II), by striking ``clauses (ii) and (iii)''
and inserting ``clauses (ii), (iii), and (iv)''; and
(2) by adding at the end the following new clause:
``(iv) Exclusion of certain rural health clinic and
federally qualified health center services.--Services
described in this clause are--
``(I) rural health clinic services (as defined in
paragraph (1) of section 1861(aa)); and
``(II) federally qualified health center services
(as defined in paragraph (3) of such section);
that would be described in clause (ii) if such services
were furnished by an individual not affiliated with a rural
health clinic or a federally qualified health center.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply to services furnished on or after January 1, 2005.
SEC. 410A. RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.
(a) Establishment of Rural Community Hospital (RCH) Demonstration
Program.--
(1) In general.--The Secretary shall establish a demonstration
program to test the feasibility and advisability of the
establishment of rural community hospitals (as defined in
subsection (f)(1)) to furnish covered inpatient hospital services
(as defined in subsection (f)(2)) to medicare beneficiaries.
(2) Demonstration areas.--The program shall be conducted in
rural areas selected by the Secretary in States with low population
densities, as determined by the Secretary.
(3) Application.--Each rural community hospital that is located
in a demonstration area selected under paragraph (2) that desires
to participate in the demonstration program under this section
shall submit an application to the Secretary at such time, in such
manner, and containing such information as the Secretary may
require.
(4) Selection of hospitals.--The Secretary shall select from
among rural community hospitals submitting applications under
paragraph (3) not more than 15 of such hospitals to participate in
the demonstration program under this section.
(5) Duration.--The Secretary shall conduct the demonstration
program under this section for a 5-year period.
(6) Implementation.--The Secretary shall implement the
demonstration program not later than January 1, 2005, but may not
implement the program before October 1, 2004.
(b) Payment.--
(1) In general.--The amount of payment under the demonstration
program for covered inpatient hospital services furnished in a
rural community hospital, other than such services furnished in a
psychiatric or rehabilitation unit of the hospital which is a
distinct part, is--
(A) for discharges occurring in the first cost reporting
period beginning on or after the implementation of the
demonstration program, the reasonable costs of providing such
services; and
(B) for discharges occurring in a subsequent cost reporting
period under the demonstration program, the lesser of--
(i) the reasonable costs of providing such services in
the cost reporting period involved; or
(ii) the target amount (as defined in paragraph (2),
applicable to the cost reporting period involved.
(2) Target amount.--For purposes of paragraph (1)(B)(ii), the
term ``target amount'' means, with respect to a rural community
hospital for a particular 12-month cost reporting period--
(A) in the case of the second such reporting period for
which this subsection is in effect, the reasonable costs of
providing such covered inpatient hospital services as
determined under paragraph (1)(A), and
(B) in the case of a later reporting period, the target
amount for the preceding 12-month cost reporting period,
increased by the applicable percentage increase (under clause (i)
of section 1886(b)(3)(B) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B))) in the market basket percentage increase (as
defined in clause (iii) of such section) for that particular cost
reporting period.
(c) Funding.--
(1) In general.--The Secretary shall provide for the transfer
from the Federal Hospital Insurance Trust Fund under section 1817
of the Social Security Act (42 U.S.C. 1395i) of such funds as are
necessary for the costs of carrying out the demonstration program
under this section.
(2) Budget neutrality.--In conducting the demonstration program
under this section, the Secretary shall ensure that the aggregate
payments made by the Secretary do not exceed the amount which the
Secretary would have paid if the demonstration program under this
section was not implemented.
(d) Waiver Authority.--The Secretary may waive such requirements of
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as may
be necessary for the purpose of carrying out the demonstration program
under this section.
(e) Report.--Not later than 6 months after the completion of the
demonstration program under this section, the Secretary shall submit to
Congress a report on such program, together with recommendations for
such legislation and administrative action as the Secretary determines
to be appropriate.
(f) Definitions.--In this section:
(1) Rural community hospital defined.--
(A) In general.--The term ``rural community hospital''
means a hospital (as defined in section 1861(e) of the Social
Security Act (42 U.S.C. 1395x(e))) that--
(i) is located in a rural area (as defined in section
1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))) or
treated as being so located pursuant to section
1886(d)(8)(E) of such Act (42 U.S.C. 1395ww(d)(8)(E));
(ii) subject to paragraph (2), has fewer than 51 acute
care inpatient beds, as reported in its most recent cost
report;
(iii) makes available 24-hour emergency care services;
and
(iv) is not eligible for designation, or has not been
designated, as a critical access hospital under section
1820.
(B) Treatment of psychiatric and rehabilitation units.--For
purposes of paragraph (1)(B), beds in a psychiatric or
rehabilitation unit of the hospital which is a distinct part of
the hospital shall not be counted.
(2) Covered inpatient hospital services.--The term ``covered
inpatient hospital services'' means inpatient hospital services,
and includes extended care services furnished under an agreement
under section 1883 of the Social Security Act (42 U.S.C. 1395tt).
Subtitle B--Provisions Relating to Part B Only
SEC. 411. TWO-YEAR EXTENSION OF HOLD HARMLESS PROVISIONS FOR SMALL
RURAL HOSPITALS AND SOLE COMMUNITY HOSPITALS UNDER THE
PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.
(a) Hold Harmless Provisions.--
(1) In general.--Section 1833(t)(7)(D)(i) (42 U.S.C.
1395l(t)(7)(D)(i)) is amended--
(A) in the heading, by striking ``small'' and inserting
``certain'';
(B) by inserting ``or a sole community hospital (as defined
in section 1886(d)(5)(D)(iii)) located in a rural area'' after
``100 beds''; and
(C) by striking ``2004'' and inserting ``2006''.
(2) Effective date.--The amendment made by paragraph (1)(B)
shall apply with respect to cost reporting periods beginning on and
after January 1, 2004.
(b) Study; Authorization of Adjustment.--Section 1833(t) (42 U.S.C.
1395l(t)) is amended--
(1) by redesignating paragraph (13) as paragraph (16); and
(2) by inserting after paragraph (12) the following new
paragraph:
``(13) Authorization of adjustment for rural hospitals.--
``(A) Study.--The Secretary shall conduct a study to
determine if, under the system under this subsection, costs
incurred by hospitals located in rural areas by ambulatory
payment classification groups (APCs) exceed those costs
incurred by hospitals located in urban areas.
``(B) Authorization of adjustment.--Insofar as the
Secretary determines under subparagraph (A) that costs incurred
by hospitals located in rural areas exceed those costs incurred
by hospitals located in urban areas, the Secretary shall
provide for an appropriate adjustment under paragraph (2)(E) to
reflect those higher costs by January 1, 2006.''.
SEC. 412. ESTABLISHMENT OF FLOOR ON WORK GEOGRAPHIC ADJUSTMENT.
Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)) is amended--
(1) in subparagraph (A), by striking ``subparagraphs (B) and
(C)'' and inserting ``subparagraphs (B), (C), and (E)''; and
(2) by adding at the end the following new subparagraph:
``(E) Floor at 1.0 on work geographic index.--After
calculating the work geographic index in subparagraph (A)(iii),
for purposes of payment for services furnished on or after
January 1, 2004, and before January 1, 2007, the Secretary
shall increase the work geographic index to 1.00 for any
locality for which such work geographic index is less than
1.00.''.
SEC. 413. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS FOR PHYSICIAN
SCARCITY.
(a) Additional Incentive Payment for Certain Physician Scarcity
Areas.--Section 1833 (42 U.S.C. 1395l) is amended by adding at the end
the following new subsection:
``(u) Incentive Payments for Physician Scarcity Areas.--
``(1) In general.--In the case of physicians' services
furnished on or after January 1, 2005, and before January 1, 2008--
``(A) by a primary care physician in a primary care
scarcity county (identified under paragraph (4)); or
``(B) by a physician who is not a primary care physician in
a specialist care scarcity county (as so identified),
in addition to the amount of payment that would otherwise be made
for such services under this part, there also shall be paid an
amount equal to 5 percent of the payment amount for the service
under this part.
``(2) Determination of ratios of physicians to medicare
beneficiaries in area.--Based upon available data, the Secretary
shall establish for each county or equivalent area in the United
States, the following:
``(A) Number of physicians practicing in the area.--The
number of physicians who furnish physicians' services in the
active practice of medicine or osteopathy in that county or
area, other than physicians whose practice is exclusively for
the Federal Government, physicians who are retired, or
physicians who only provide administrative services. Of such
number, the number of such physicians who are--
``(i) primary care physicians; or
``(ii) physicians who are not primary care physicians.
``(B) Number of medicare beneficiaries residing in the
area.--The number of individuals who are residing in the county
and are entitled to benefits under part A or enrolled under
this part, or both (in this subsection referred to as
`individuals').
``(C) Determination of ratios.--
``(i) Primary care ratio.--The ratio (in this paragraph
referred to as the `primary care ratio') of the number of
primary care physicians (determined under subparagraph
(A)(i)), to the number of individuals determined under
subparagraph (B).
``(ii) Specialist care ratio.--The ratio (in this
paragraph referred to as the `specialist care ratio') of
the number of other physicians (determined under
subparagraph (A)(ii)), to the number of individuals
determined under subparagraph (B).
``(3) Ranking of counties.--The Secretary shall rank each such
county or area based separately on its primary care ratio and its
specialist care ratio.
``(4) Identification of counties.--
``(A) In general.--The Secretary shall identify--
``(i) those counties and areas (in this paragraph
referred to as `primary care scarcity counties') with the
lowest primary care ratios that represent, if each such
county or area were weighted by the number of individuals
determined under paragraph (2)(B), an aggregate total of 20
percent of the total of the individuals determined under
such paragraph; and
``(ii) those counties and areas (in this subsection
referred to as `specialist care scarcity counties') with
the lowest specialist care ratios that represent, if each
such county or area were weighted by the number of
individuals determined under paragraph (2)(B), an aggregate
total of 20 percent of the total of the individuals
determined under such paragraph.
``(B) Periodic revisions.--The Secretary shall periodically
revise the counties or areas identified in subparagraph (A)
(but not less often than once every three years) unless the
Secretary determines that there is no new data available on the
number of physicians practicing in the county or area or the
number of individuals residing in the county or area, as
identified in paragraph (2).
``(C) Identification of counties where service is
furnished.--For purposes of paying the additional amount
specified in paragraph (1), if the Secretary uses the 5-digit
postal ZIP Code where the service is furnished, the dominant
county of the postal ZIP Code (as determined by the United
States Postal Service, or otherwise) shall be used to determine
whether the postal ZIP Code is in a scarcity county identified
in subparagraph (A) or revised in subparagraph (B).
``(D) Judicial review.--There shall be no administrative or
judicial review under section 1869, 1878, or otherwise,
respecting--
``(i) the identification of a county or area;
``(ii) the assignment of a specialty of any physician
under this paragraph;
``(iii) the assignment of a physician to a county under
paragraph (2); or
``(iv) the assignment of a postal ZIP Code to a county
or other area under this subsection.
``(5) Rural census tracts.--To the extent feasible, the
Secretary shall treat a rural census tract of a metropolitan
statistical area (as determined under the most recent modification
of the Goldsmith Modification, originally published in the Federal
Register on February 27, 1992 (57 Fed. Reg. 6725)), as an
equivalent area for purposes of qualifying as a primary care
scarcity county or specialist care scarcity county under this
subsection.
``(6) Physician Defined.--For purposes of this paragraph, the
term `physician' means a physician described in section 1861(r)(1)
and the term `primary care physician' means a physician who is
identified in the available data as a general practitioner, family
practice practitioner, general internist, or obstetrician or
gynecologist.
``(7) Publication of list of counties; posting on website.--
With respect to a year for which a county or area is identified or
revised under paragraph (4), the Secretary shall identify such
counties or areas as part of the proposed and final rule to
implement the physician fee schedule under section 1848 for the
applicable year. The Secretary shall post the list of counties
identified or revised under paragraph (4) on the Internet website
of the Centers for Medicare & Medicaid Services.''.
(b) Improvement to Medicare Incentive Payment Program.--
(1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is
amended--
(A) by inserting ``(1)'' after ``(m)'';
(B) in paragraph (1), as designated by subparagraph (A)--
(i) by inserting ``in a year'' after ``In the case of
physicians' services furnished''; and
(ii) by inserting ``as identified by the Secretary
prior to the beginning of such year'' after ``as a health
professional shortage area''; and
(C) by adding at the end the following new paragraphs:
``(2) For each health professional shortage area identified in
paragraph (1) that consists of an entire county, the Secretary shall
provide for the additional payment under paragraph (1) without any
requirement on the physician to identify the health professional
shortage area involved. The Secretary may implement the previous
sentence using the method specified in subsection (u)(4)(C).
``(3) The Secretary shall post on the Internet website of the
Centers for Medicare & Medicaid Services a list of the health
professional shortage areas identified in paragraph (1) that consist of
a partial county to facilitate the additional payment under paragraph
(1) in such areas.
``(4) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, respecting--
``(A) the identification of a county or area;
``(B) the assignment of a specialty of any physician under this
paragraph;
``(C) the assignment of a physician to a county under this
subsection; or
``(D) the assignment of a postal ZIP Code to a county or other
area under this subsection.''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to physicians' services furnished on or after January 1,
2005.
(c) GAO Study of Geographic Differences in Payments for Physicians'
Services.--
(1) Study.--The Comptroller General of the United States shall
conduct a study of differences in payment amounts under the
physician fee schedule under section 1848 of the Social Security
Act (42 U.S.C. 1395w-4) for physicians' services in different
geographic areas. Such study shall include--
(A) an assessment of the validity of the geographic
adjustment factors used for each component of the fee schedule;
(B) an evaluation of the measures used for such adjustment,
including the frequency of revisions;
(C) an evaluation of the methods used to determine
professional liability insurance costs used in computing the
malpractice component, including a review of increases in
professional liability insurance premiums and variation in such
increases by State and physician specialty and methods used to
update the geographic cost of practice index and relative
weights for the malpractice component; and
(D) an evaluation of the effect of the adjustment to the
physician work geographic index under section 1848(e)(1)(E) of
the Social Security Act, as added by section 412, on physician
location and retention in areas affected by such adjustment,
taking into account--
(i) differences in recruitment costs and retention
rates for physicians, including specialists, between large
urban areas and other areas; and
(ii) the mobility of physicians, including specialists,
over the last decade.
(2) Report.--Not later than 1 year after the date of the
enactment of this Act, the Comptroller General shall submit to
Congress a report on the study conducted under paragraph (1). The
report shall include recommendations regarding the use of more
current data in computing geographic cost of practice indices as
well as the use of data directly representative of physicians'
costs (rather than proxy measures of such costs).
SEC. 414. PAYMENT FOR RURAL AND URBAN AMBULANCE SERVICES.
(a) Phase-In Providing Floor Using Blend of Fee Schedule and
Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 1395m(l)) is
amended--
(1) in paragraph (2)(E), by inserting ``consistent with
paragraph (11)'' after ``in an efficient and fair manner''; and
(2) by redesignating paragraph (8), as added by section 221(a)
of BIPA (114 Stat. 2763A-486), as paragraph (9); and
(3) by adding at the end the following new paragraph:
``(10) Phase-in providing floor using blend of fee schedule and
regional fee schedules.--In carrying out the phase-in under
paragraph (2)(E) for each level of ground service furnished in a
year, the portion of the payment amount that is based on the fee
schedule shall be the greater of the amount determined under such
fee schedule (without regard to this paragraph) or the following
blended rate of the fee schedule under paragraph (1) and of a
regional fee schedule for the region involved:
``(A) For 2004 (for services furnished on or after July 1,
2004), the blended rate shall be based 20 percent on the fee
schedule under paragraph (1) and 80 percent on the regional fee
schedule.
``(B) For 2005, the blended rate shall be based 40 percent
on the fee schedule under paragraph (1) and 60 percent on the
regional fee schedule.
``(C) For 2006, the blended rate shall be based 60 percent
on the fee schedule under paragraph (1) and 40 percent on the
regional fee schedule.
``(D) For 2007, 2008, and 2009, the blended rate shall be
based 80 percent on the fee schedule under paragraph (1) and 20
percent on the regional fee schedule.
``(E) For 2010 and each succeeding year, the blended rate
shall be based 100 percent on the fee schedule under paragraph
(1).
For purposes of this paragraph, the Secretary shall establish a
regional fee schedule for each of the nine census divisions
(referred to in section 1886(d)(2)) using the methodology (used in
establishing the fee schedule under paragraph (1)) to calculate a
regional conversion factor and a regional mileage payment rate and
using the same payment adjustments and the same relative value
units as used in the fee schedule under such paragraph.''.
(b) Adjustment in Payment for Certain Long Trips.--Section 1834(l),
as amended by subsection (a), is amended by adding at the end the
following new paragraph:
``(11) Adjustment in payment for certain long trips.--In the
case of ground ambulance services furnished on or after July 1,
2004, and before January 1, 2009, regardless of where the
transportation originates, the fee schedule established under this
subsection shall provide that, with respect to the payment rate for
mileage for a trip above 50 miles the per mile rate otherwise
established shall be increased by \1/4\ of the payment per mile
otherwise applicable to miles in excess of 50 miles in such
trip.''.
(c) Improvement in Payments To Retain Emergency Capacity for
Ambulance Services in Rural Areas.--
(1) In general.--Section 1834(l) (42 U.S.C. 1395m(l)), as
amended by subsections (a) and (b), is amended by adding at the end
the following new paragraph:
``(12) Assistance for rural providers furnishing services in
low population density areas.--
``(A) In general.--In the case of ground ambulance services
furnished on or after July 1, 2004, and before January 1, 2010,
for which the transportation originates in a qualified rural
area (identified under subparagraph (B)(iii)), the Secretary
shall provide for a percent increase in the base rate of the
fee schedule for a trip established under this subsection. In
establishing such percent increase, the Secretary shall
estimate the average cost per trip for such services (not
taking into account mileage) in the lowest quartile as compared
to the average cost per trip for such services (not taking into
account mileage) in the highest quartile of all rural county
populations.
``(B) Identification of qualified rural areas.--
``(i) Determination of population density in area.--
Based upon data from the United States decennial census for
the year 2000, the Secretary shall determine, for each
rural area, the population density for that area.
``(ii) Ranking of areas.--The Secretary shall rank each
such area based on such population density.
``(iii) Identification of qualified rural areas.--The
Secretary shall identify those areas (in subparagraph (A)
referred to as `qualified rural areas') with the lowest
population densities that represent, if each such area were
weighted by the population of such area (as used in
computing such population densities), an aggregate total of
25 percent of the total of the population of all such
areas.
``(iv) Rural area.--For purposes of this paragraph, the
term `rural area' has the meaning given such term in
section 1886(d)(2)(D). If feasible, the Secretary shall
treat a rural census tract of a metropolitan statistical
area (as determined under the most recent modification of
the Goldsmith Modification, originally published in the
Federal Register on February 27, 1992 (57 Fed. Reg. 6725)
as a rural area for purposes of this paragraph.
``(v) Judicial review.--There shall be no
administrative or judicial review under section 1869, 1878,
or otherwise, respecting the identification of an area
under this subparagraph.''.
(2) Use of data.--In order to promptly implement section
1834(l)(12) of the Social Security Act, as added by paragraph (1),
the Secretary may use data furnished by the Comptroller General of
the United States.
(d) Temporary Increase for Ground Ambulance Services.--Section
1834(l) (42 U.S.C. 1395m(l)), as amended by subsections (a), (b), and
(c), is amended by adding at the end the following new paragraph:
``(13) Temporary increase for ground ambulance services.--
``(A) In general.--After computing the rates with respect
to ground ambulance services under the other applicable
provisions of this subsection, in the case of such services
furnished on or after July 1, 2004, and before January 1, 2007,
for which the transportation originates in--
``(i) a rural area described in paragraph (9) or in a
rural census tract described in such paragraph, the fee
schedule established under this section shall provide that
the rate for the service otherwise established, after the
application of any increase under paragraphs (11) and (12),
shall be increased by 2 percent; and
``(ii) an area not described in clause (i), the fee
schedule established under this subsection shall provide
that the rate for the service otherwise established, after
the application of any increase under paragraph (11), shall
be increased by 1 percent.
``(B) Application of increased payments after 2006.--The
increased payments under subparagraph (A) shall not be taken
into account in calculating payments for services furnished
after the period specified in such subparagraph.''.
(e) Implementation.--The Secretary may implement the amendments
made by this section, and revise the conversion factor applicable under
section 1834(l) of the Social Security Act (42 U.S.C. 1395m(l)) for
purposes of implementing such amendments, on an interim final basis, or
by program instruction.
(f) GAO Report on Costs and Access.--Not later than December 31,
2005, the Comptroller General of the United States shall submit to
Congress an initial report on how costs differ among the types of
ambulance providers and on access, supply, and quality of ambulance
services in those regions and States that have a reduction in payment
under the medicare ambulance fee schedule (under section 1834(l) of the
Social Security Act, as amended by this Act). Not later than December
31, 2007, the Comptroller General shall submit to Congress a final
report on such access and supply.
(g) Technical Amendments.--(1) Section 221(c) of BIPA (114 Stat.
2763A-487) is amended by striking ``subsection (b)(2)'' and inserting
``subsection (b)(3)''.
(2) Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by moving
subparagraph (U) 4 ems to the left.
SEC. 415. PROVIDING APPROPRIATE COVERAGE OF RURAL AIR AMBULANCE
SERVICES.
(a) Coverage.--Section 1834(l) (42 U.S.C. 1395m(l)), as amended by
subsections (a), (b), (c), and (d) of section 414, is amended by adding
at the end the following new paragraph:
``(14) Providing appropriate coverage of rural air ambulance
services.--
``(A) In general.--The regulations described in section
1861(s)(7) shall provide, to the extent that any ambulance
services (whether ground or air) may be covered under such
section, that a rural air ambulance service (as defined in
subparagraph (C)) is reimbursed under this subsection at the
air ambulance rate if the air ambulance service--
``(i) is reasonable and necessary based on the health
condition of the individual being transported at or
immediately prior to the time of the transport; and
``(ii) complies with equipment and crew requirements
established by the Secretary.
``(B) Satisfaction of requirement of medically necessary.--
The requirement of subparagraph (A)(i) is deemed to be met for
a rural air ambulance service if--
``(i) subject to subparagraph (D), such service is
requested by a physician or other qualified medical
personnel (as specified by the Secretary) who reasonably
determines or certifies that the individual's condition is
such that the time needed to transport the individual by
land or the instability of transportation by land poses a
threat to the individual's survival or seriously endangers
the individual's health; or
``(ii) such service is furnished pursuant to a protocol
that is established by a State or regional emergency
medical service (EMS) agency and recognized or approved by
the Secretary under which the use of an air ambulance is
recommended, if such agency does not have an ownership
interest in the entity furnishing such service.
``(C) Rural air ambulance service defined.--For purposes of
this paragraph, the term `rural air ambulance service' means
fixed wing and rotary wing air ambulance service in which the
point of pick up of the individual occurs in a rural area (as
defined in section 1886(d)(2)(D)) or in a rural census tract of
a metropolitan statistical area (as determined under the most
recent modification of the Goldsmith Modification, originally
published in the Federal Register on February 27, 1992 (57 Fed.
Reg. 6725)).
``(D) Limitation.--
``(i) In general.--Subparagraph (B)(i) shall not apply
if there is a financial or employment relationship between
the person requesting the rural air ambulance service and
the entity furnishing the ambulance service, or an entity
under common ownership with the entity furnishing the air
ambulance service, or a financial relationship between an
immediate family member of such requester and such an
entity.
``(ii) Exception.--Where a hospital and the entity
furnishing rural air ambulance services are under common
ownership, clause (i) shall not apply to remuneration
(through employment or other relationship) by the hospital
of the requester or immediate family member if the
remuneration is for provider-based physician services
furnished in a hospital (as described in section 1887)
which are reimbursed under part A and the amount of the
remuneration is unrelated directly or indirectly to the
provision of rural air ambulance services.''.
(b) Conforming Amendment.--Section 1861(s)(7) (42 U.S.C.
1395x(s)(7)) is amended by inserting ``, subject to section
1834(l)(14),'' after ``but''.
(c) Effective Date.--The amendments made by this subsection shall
apply to services furnished on or after January 1, 2005.
SEC. 416. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC LABORATORY TESTS
FURNISHED TO HOSPITAL OUTPATIENTS IN CERTAIN RURAL AREAS.
(a) In General.--Notwithstanding subsections (a), (b), and (h) of
section 1833 of the Social Security Act (42 U.S.C. 1395l) and section
1834(d)(1) of such Act (42 U.S.C. 1395m(d)(1)), in the case of a
clinical diagnostic laboratory test covered under part B of title XVIII
of such Act that is furnished during a cost reporting period described
in subsection (b) by a hospital with fewer than 50 beds that is located
in a qualified rural area (identified under paragraph (12)(B)(iii) of
section 1834(l) of the Social Security Act (42 U.S.C. 1395m(l)), as
added by section 414(c)) as part of outpatient services of the
hospital, the amount of payment for such test shall be 100 percent of
the reasonable costs of the hospital in furnishing such test.
(b) Application.--A cost reporting period described in this
subsection is a cost reporting period beginning during the 2-year
period beginning on July 1, 2004.
(c) Provision as Part of Outpatient Hospital Services.--For
purposes of subsection (a), in determining whether clinical diagnostic
laboratory services are furnished as part of outpatient services of a
hospital, the Secretary shall apply the same rules that are used to
determine whether clinical diagnostic laboratory services are furnished
as an outpatient critical access hospital service under section
1834(g)(4) of the Social Security Act (42 U.S.C. 1395m(g)(4)).
SEC. 417. EXTENSION OF TELEMEDICINE DEMONSTRATION PROJECT.
Section 4207 of the Balanced Budget Act of 1997 (Public Law 105-33)
is amended--
(1) in subsection (a)(4), by striking ``4-year'' and inserting
``8-year''; and
(2) in subsection (d)(3), by striking ``$30,000,000'' and
inserting ``$60,000,000''.
SEC. 418. REPORT ON DEMONSTRATION PROJECT PERMITTING SKILLED NURSING
FACILITIES TO BE ORIGINATING TELEHEALTH SITES; AUTHORITY
TO IMPLEMENT.
(a) Evaluation.--The Secretary, acting through the Administrator of
the Health Resources and Services Administration in consultation with
the Administrator of the Centers for Medicare & Medicaid Services,
shall evaluate demonstration projects conducted by the Secretary under
which skilled nursing facilities (as defined in section 1819(a) of the
Social Security Act (42 U.S.C. 1395i-3(a)) are treated as originating
sites for telehealth services.
(b) Report.--Not later than January 1, 2005, the Secretary shall
submit to Congress a report on the evaluation conducted under
subsection (a). Such report shall include recommendations on mechanisms
to ensure that permitting a skilled nursing facility to serve as an
originating site for the use of telehealth services or any other
service delivered via a telecommunications system does not serve as a
substitute for in-person visits furnished by a physician, or for in-
person visits furnished by a physician assistant, nurse practitioner or
clinical nurse specialist, as is otherwise required by the Secretary.
(c) Authority To Expand Originating Telehealth Sites to Include
Skilled Nursing Facilities.--Insofar as the Secretary concludes in the
report required under subsection (b) that it is advisable to permit a
skilled nursing facility to be an originating site for telehealth
services under section 1834(m) of the Social Security Act (42 U.S.C.
1395m(m)), and that the Secretary can establish the mechanisms to
ensure such permission does not serve as a substitute for in-person
visits furnished by a physician, or for in-person visits furnished by a
physician assistant, nurse practitioner or clinical nurse specialist,
the Secretary may deem a skilled nursing facility to be an originating
site under paragraph (4)(C)(ii) of such section beginning on January 1,
2006.
Subtitle C--Provisions Relating to Parts A and B
SEC. 421. ONE-YEAR INCREASE FOR HOME HEALTH SERVICES FURNISHED IN A
RURAL AREA.
(a) In General.--With respect to episodes and visits ending on or
after April 1, 2004, and before April 1, 2005, in the case of home
health services furnished in a rural area (as defined in section
1886(d)(2)(D) of the Social Security Act (42 U.S.C. 1395ww(d)(2)(D))),
the Secretary shall increase the payment amount otherwise made under
section 1895 of such Act (42 U.S.C. 1395fff) for such services by 5
percent.
(b) Waiving Budget Neutrality.--The Secretary shall not reduce the
standard prospective payment amount (or amounts) under section 1895 of
the Social Security Act (42 U.S.C. 1395fff) applicable to home health
services furnished during a period to offset the increase in payments
resulting from the application of subsection (a).
(c) No Effect on Subsequent Periods.--The payment increase provided
under subsection (a) for a period under such subsection--
(1) shall not apply to episodes and visits ending after such
period; and
(2) shall not be taken into account in calculating the payment
amounts applicable for episodes and visits occurring after such
period.
SEC. 422. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.
(a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)(4)) is
amended--
(1) in paragraph (4)(F)(i), by inserting ``subject to paragraph
(7),'' after ``October 1, 1997,'';
(2) in paragraph (4)(H)(i), by inserting ``and subject to
paragraph (7)'' after ``subparagraphs (F) and (G)''; and
(3) by adding at the end the following new paragraph:
``(7) Redistribution of unused resident positions.--
``(A) Reduction in limit based on unused positions.--
``(i) Programs subject to reduction.--
``(I) In general.--Except as provided in subclause
(II), if a hospital's reference resident level
(specified in clause (ii)) is less than the otherwise
applicable resident limit (as defined in subparagraph
(C)(ii)), effective for portions of cost reporting
periods occurring on or after July 1, 2005, the
otherwise applicable resident limit shall be reduced by
75 percent of the difference between such otherwise
applicable resident limit and such reference resident
level.
``(II) Exception for small rural hospitals.--This
subparagraph shall not apply to a hospital located in a
rural area (as defined in subsection (d)(2)(D)(ii))
with fewer than 250 acute care inpatient beds.
``(ii) Reference resident level.--
``(I) In general.--Except as otherwise provided in
subclauses (II) and (III), the reference resident level
specified in this clause for a hospital is the resident
level for the most recent cost reporting period of the
hospital ending on or before September 30, 2002, for
which a cost report has been settled (or, if not,
submitted (subject to audit)), as determined by the
Secretary.
``(II) Use of most recent accounting period to
recognize expansion of existing programs.--If a
hospital submits a timely request to increase its
resident level due to an expansion of an existing
residency training program that is not reflected on the
most recent settled cost report, after audit and
subject to the discretion of the Secretary, the
reference resident level for such hospital is the
resident level for the cost reporting period that
includes July 1, 2003, as determined by the Secretary.
``(III) Expansions under newly approved programs.--
Upon the timely request of a hospital, the Secretary
shall adjust the reference resident level specified
under subclause (I) or (II) to include the number of
medical residents that were approved in an application
for a medical residency training program that was
approved by an appropriate accrediting organization (as
determined by the Secretary) before January 1, 2002,
but which was not in operation during the cost
reporting period used under subclause (I) or (II), as
the case may be, as determined by the Secretary.
``(iii) Affiliation.--The provisions of clause (i)
shall be applied to hospitals which are members of the same
affiliated group (as defined by the Secretary under
paragraph (4)(H)(ii)) as of July 1, 2003.
``(B) Redistribution.--
``(i) In general.--The Secretary is authorized to
increase the otherwise applicable resident limit for each
qualifying hospital that submits a timely application under
this subparagraph by such number as the Secretary may
approve for portions of cost reporting periods occurring on
or after July 1, 2005. The aggregate number of increases in
the otherwise applicable resident limits under this
subparagraph may not exceed the Secretary's estimate of the
aggregate reduction in such limits attributable to
subparagraph (A).
``(ii) Considerations in redistribution.--In
determining for which hospitals the increase in the
otherwise applicable resident limit is provided under
clause (i), the Secretary shall take into account the
demonstrated likelihood of the hospital filling the
positions within the first 3 cost reporting periods
beginning on or after July 1, 2005, made available under
this subparagraph, as determined by the Secretary.
``(iii) Priority for rural and small urban areas.--In
determining for which hospitals and residency training
programs an increase in the otherwise applicable resident
limit is provided under clause (i), the Secretary shall
distribute the increase to programs of hospitals located in
the following priority order:
``(I) First, to hospitals located in rural areas
(as defined in subsection (d)(2)(D)(ii)).
``(II) Second, to hospitals located in urban areas
that are not large urban areas (as defined for purposes
of subsection (d)).
``(III) Third, to other hospitals in a State if the
residency training program involved is in a specialty
for which there are not other residency training
programs in the State.
Increases of residency limits within the same priority
category under this clause shall be determined by the
Secretary.
``(iv) Limitation.--In no case shall more than 25 full-
time equivalent additional residency positions be made
available under this subparagraph with respect to any
hospital.
``(v) Application of locality adjusted national average
per resident amount.--With respect to additional residency
positions in a hospital attributable to the increase
provided under this subparagraph, notwithstanding any other
provision of this subsection, the approved FTE resident
amount is deemed to be equal to the locality adjusted
national average per resident amount computed under
paragraph (4)(E) for that hospital.
``(vi) Construction.--Nothing in this subparagraph
shall be construed as permitting the redistribution of
reductions in residency positions attributable to voluntary
reduction programs under paragraph (6), under a
demonstration project approved as of October 31, 2003,
under the authority of section 402 of Public Law 90-248, or
as affecting the ability of a hospital to establish new
medical residency training programs under paragraph (4)(H).
``(C) Resident level and limit defined.--In this paragraph:
``(i) Resident level.--The term `resident level' means,
with respect to a hospital, the total number of full-time
equivalent residents, before the application of weighting
factors (as determined under paragraph (4)), in the fields
of allopathic and osteopathic medicine for the hospital.
``(ii) Otherwise applicable resident limit.--The term
`otherwise applicable resident limit' means, with respect
to a hospital, the limit otherwise applicable under
subparagraphs (F)(i) and (H) of paragraph (4) on the
resident level for the hospital determined without regard
to this paragraph.
``(D) Judicial review.--There shall be no administrative or
judicial review under section 1869, 1878, or otherwise, with
respect to determinations made under this paragraph.''.
(b) Conforming Provisions.--(1) Section 1886(d)(5)(B) (42 U.S.C.
1395ww(d)(5)(B)) is amended--
(A) in the second sentence of clause (ii), by striking ``For
discharges'' and inserting ``Subject to clause (ix), for
discharges'';
(B) in clause (v), by adding at the end the following: ``The
provisions of subsection (h)(7) shall apply with respect to the
first sentence of this clause in the same manner as it applies with
respect to subsection (h)(4)(F)(i).''; and
(C) by adding at the end the following new clause:
``(ix) For discharges occurring on or after July 1, 2005,
insofar as an additional payment amount under this subparagraph is
attributable to resident positions redistributed to a hospital
under subsection (h)(7)(B), in computing the indirect teaching
adjustment factor under clause (ii) the adjustment shall be
computed in a manner as if `c' were equal to 0.66 with respect to
such resident positions.''.
(2) Chapter 35 of title 44, United States Code, shall not apply
with respect to applications under section 1886(h)(7) of the Social
Security Act, as added by subsection (a)(3).
(c) Report on Extension of Applications Under Redistribution
Program.--Not later than July 1, 2005, the Secretary shall submit to
Congress a report containing recommendations regarding whether to
extend the deadline for applications for an increase in resident limits
under section 1886(h)(4)(I)(ii)(II) of the Social Security Act (as
added by subsection (a)).
Subtitle D--Other Provisions
SEC. 431. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE EFFORTS THAT
BENEFIT MEDICALLY UNDERSERVED POPULATIONS.
(a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7(b)(3)), as
amended by section 101(e)(2), is amended--
(1) in subparagraph (F), by striking ``and'' after the
semicolon at the end;
(2) in subparagraph (G), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(H) any remuneration between a health center entity
described under clause (i) or (ii) of section 1905(l)(2)(B) and
any individual or entity providing goods, items, services,
donations, loans, or a combination thereof, to such health
center entity pursuant to a contract, lease, grant, loan, or
other agreement, if such agreement contributes to the ability
of the health center entity to maintain or increase the
availability, or enhance the quality, of services provided to a
medically underserved population served by the health center
entity.''.
(b) Rulemaking for Exception for Health Center Entity
Arrangements.--
(1) Establishment.--
(A) In general.--The Secretary shall establish, on an
expedited basis, standards relating to the exception described
in section 1128B(b)(3)(H) of the Social Security Act, as added
by subsection (a), for health center entity arrangements to the
antikickback penalties.
(B) Factors to consider.--The Secretary shall consider the
following factors, among others, in establishing standards
relating to the exception for health center entity arrangements
under subparagraph (A):
(i) Whether the arrangement between the health center
entity and the other party results in savings of Federal
grant funds or increased revenues to the health center
entity.
(ii) Whether the arrangement between the health center
entity and the other party restricts or limits an
individual's freedom of choice.
(iii) Whether the arrangement between the health center
entity and the other party protects a health care
professional's independent medical judgment regarding
medically appropriate treatment.
The Secretary may also include other standards and criteria
that are consistent with the intent of Congress in enacting the
exception established under this section.
(2) Deadline.--Not later than 1 year after the date of the
enactment of this Act the Secretary shall publish final regulations
establishing the standards described in paragraph (1).
SEC. 432. OFFICE OF RURAL HEALTH POLICY IMPROVEMENTS.
Section 711(b) (42 U.S.C. 912(b)) is amended--
(1) in paragraph (3), by striking ``and'' after the comma at
the end;
(2) in paragraph (4), by striking the period at the end and
inserting ``, and''; and
(3) by inserting after paragraph (4) the following new
paragraph:
``(5) administer grants, cooperative agreements, and contracts
to provide technical assistance and other activities as necessary
to support activities related to improving health care in rural
areas.''.
SEC. 433. MEDPAC STUDY ON RURAL HOSPITAL PAYMENT ADJUSTMENTS.
(a) In General.--The Medicare Payment Advisory Commission shall
conduct a study of the impact of sections 401 through 406, 411, 416,
and 505. The Commission shall analyze the effect on total payments,
growth in costs, capital spending, and such other payment effects under
those sections.
(b) Reports.--
(1) Interim report.--Not later than 18 months after the date of
the enactment of this Act, the Commission shall submit to Congress
an interim report on the matters studied under subsection (a) with
respect only to changes to the critical access hospital provisions
under section 405.
(2) Final report.--Not later than 3 years after the date of the
enactment of this Act, the Commission shall submit to Congress a
final report on all matters studied under subsection (a).
SEC. 434. FRONTIER EXTENDED STAY CLINIC DEMONSTRATION PROJECT.
(a) Authority To Conduct Demonstration Project.--The Secretary
shall waive such provisions of the medicare program established under
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) as are
necessary to conduct a demonstration project under which frontier
extended stay clinics described in subsection (b) in isolated rural
areas are treated as providers of items and services under the medicare
program.
(b) Clinics Described.--A frontier extended stay clinic is
described in this subsection if the clinic--
(1) is located in a community where the closest short-term
acute care hospital or critical access hospital is at least 75
miles away from the community or is inaccessible by public road;
and
(2) is designed to address the needs of--
(A) seriously or critically ill or injured patients who,
due to adverse weather conditions or other reasons, cannot be
transferred quickly to acute care referral centers; or
(B) patients who need monitoring and observation for a
limited period of time.
(c) Specification of Codes.--The Secretary shall determine the
appropriate life-safety codes for such clinics that treat patients for
needs referred to in subsection (b)(2).
(d) Funding.--
(1) In general.--Subject to paragraph (2), there are authorized
to be appropriated, in appropriate part from the Federal Hospital
Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund, such sums as are necessary to conduct the
demonstration project under this section.
(2) Budget neutral implementation.--In conducting the
demonstration project under this section, the Secretary shall
ensure that the aggregate payments made by the Secretary under the
medicare program do not exceed the amount which the Secretary would
have paid under the medicare program if the demonstration project
under this section was not implemented.
(e) Three-Year Period.--The Secretary shall conduct the
demonstration under this section for a 3-year period.
(f) Report.--Not later than the date that is 1 year after the date
on which the demonstration project concludes, the Secretary shall
submit to Congress a report on the demonstration project, together with
such recommendations for legislation or administrative action as the
Secretary determines appropriate.
(g) Definitions.--In this section, the terms ``hospital'' and
``critical access hospital'' have the meanings given such terms in
subsections (e) and (mm), respectively, of section 1861 of the Social
Security Act (42 U.S.C. 1395x).
TITLE V--PROVISIONS RELATING TO PART A
Subtitle A--Inpatient Hospital Services
SEC. 501. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.
(a) In General.--Section 1886(b)(3)(B)(i) (42 U.S.C.
1395ww(b)(3)(B)(i)) is amended--
(1) by striking ``and'' at the end of subclause (XVIII);
(2) by striking subclause (XIX); and
(3) by inserting after subclause (XVIII) the following new
subclauses:
``(XIX) for each of fiscal years 2004 through 2007, subject to
clause (vii), the market basket percentage increase for hospitals
in all areas; and
``(XX) for fiscal year 2008 and each subsequent fiscal year,
the market basket percentage increase for hospitals in all
areas.''.
(b) Submission of Hospital Quality Data.--Section 1886(b)(3)(B) (42
U.S.C. 1395ww(b)(3)(B)) is amended by adding at the end the following
new clause:
``(vii)(I) For purposes of clause (i)(XIX) for each of fiscal years
2005 through 2007, in a case of a subsection (d) hospital that does not
submit data to the Secretary in accordance with subclause (II) with
respect to such a fiscal year, the applicable percentage increase under
such clause for such fiscal year shall be reduced by 0.4 percentage
points. Such reduction shall apply only with respect to the fiscal year
involved, and the Secretary shall not take into account such reduction
in computing the applicable percentage increase under clause (i)(XIX)
for a subsequent fiscal year.
``(II) Each subsection (d) hospital shall submit to the Secretary
quality data (for a set of 10 indicators established by the Secretary
as of November 1, 2003) that relate to the quality of care furnished by
the hospital in inpatient settings in a form and manner, and at a time,
specified by the Secretary for purposes of this clause, but with
respect to fiscal year 2005, the Secretary shall provide for a 30-day
grace period for the submission of data by a hospital.''.
(c) GAO Study and Report on Appropriateness of Payments Under the
Prospective Payment System for Inpatient Hospital Services.--
(1) Study.--The Comptroller General of the United States, using
the most current data available, shall conduct a study to
determine--
(A) the appropriate level and distribution of payments in
relation to costs under the prospective payment system under
section 1886 of the Social Security Act (42 U.S.C. 1395ww) for
inpatient hospital services furnished by subsection (d)
hospitals (as defined in subsection (d)(1)(B) of such section);
and
(B) whether there is a need to adjust such payments under
such system to reflect legitimate differences in costs across
different geographic areas, kinds of hospitals, and types of
cases.
(2) Report.--Not later than 24 months after the date of the
enactment of this Act, the Comptroller General of the United States
shall submit to Congress a report on the study conducted under
paragraph (1) together with such recommendations for legislative
and administrative action as the Comptroller General determines
appropriate.
SEC. 502. REVISION OF THE INDIRECT MEDICAL EDUCATION (IME) ADJUSTMENT
PERCENTAGE.
(a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C.
1395ww(d)(5)(B)(ii)) is amended--
(1) in subclause (VI), by striking ``and'' after the semicolon
at the end;
(2) in subclause (VII)--
(A) by inserting ``and before April 1, 2004,'' after ``on
or after October 1, 2002,''; and
(B) by striking the period at the end and inserting a
semicolon; and
(3) by adding at the end the following new subclauses:
``(VIII) on or after April 1, 2004, and before October 1,
2004, `c' is equal to 1.47;
``(IX) during fiscal year 2005, `c' is equal to 1.42;
``(X) during fiscal year 2006, `c' is equal to 1.37;
``(XI) during fiscal year 2007, `c' is equal to 1.32; and
``(XII) on or after October 1, 2007, `c' is equal to
1.35.''.
(b) Conforming Amendment Relating to Determination of Standardized
Amount.--Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is
amended--
(1) by striking ``1999 or'' and inserting ``1999,''; and
(2) by inserting ``, or the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003'' after ``2000''.
(c) Effective Date.--The amendments made by this section shall
apply to discharges occurring on or after April 1, 2004.
SEC. 503. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER INPATIENT
HOSPITAL PROSPECTIVE PAYMENT SYSTEM.
(a) Improving Timeliness of Data Collection.--Section 1886(d)(5)(K)
(42 U.S.C. 1395ww(d)(5)(K)) is amended by adding at the end the
following new clause:
``(vii) Under the mechanism under this subparagraph, the Secretary
shall provide for the addition of new diagnosis and procedure codes in
April 1 of each year, but the addition of such codes shall not require
the Secretary to adjust the payment (or diagnosis-related group
classification) under this subsection until the fiscal year that begins
after such date.''.
(b) Eligibility Standard for Technology Outliers.--
(1) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) (42
U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting ``(applying
a threshold specified by the Secretary that is the lesser of 75
percent of the standardized amount (increased to reflect the
difference between cost and charges) or 75 percent of one standard
deviation for the diagnosis-related group involved)'' after ``is
inadequate''.
(2) Process for public input.--Section 1886(d)(5)(K) (42 U.S.C.
1395ww(d)(5)(K)), as amended by subsection (a), is amended--
(A) in clause (i), by adding at the end the following:
``Such mechanism shall be modified to meet the requirements of
clause (viii).''; and
(B) by adding at the end the following new clause:
``(viii) The mechanism established pursuant to clause (i) shall be
adjusted to provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of individuals entitled to benefits under part A as
follows:
``(I) The Secretary shall make public and periodically update a
list of all the services and technologies for which an application
for additional payment under this subparagraph is pending.
``(II) The Secretary shall accept comments, recommendations,
and data from the public regarding whether the service or
technology represents a substantial improvement.
``(III) The Secretary shall provide for a meeting at which
organizations representing hospitals, physicians, such individuals,
manufacturers, and any other interested party may present comments,
recommendations, and data to the clinical staff of the Centers for
Medicare & Medicaid Services before publication of a notice of
proposed rulemaking regarding whether service or technology
represents a substantial improvement.''.
(c) Preference for Use of DRG Adjustment.--Section 1886(d)(5)(K)
(42 U.S.C. 1395ww(d)(5)(K)), as amended by subsections (a) and (b), is
amended by adding at the end the following new clause:
``(ix) Before establishing any add-on payment under this
subparagraph with respect to a new technology, the Secretary shall seek
to identify one or more diagnosis-related groups associated with such
technology, based on similar clinical or anatomical characteristics and
the cost of the technology. Within such groups the Secretary shall
assign an eligible new technology into a diagnosis-related group where
the average costs of care most closely approximate the costs of care of
using the new technology. No add-on payment under this subparagraph
shall be made with respect to such new technology and this clause shall
not affect the application of paragraph (4)(C)(iii).''.
(d) Establishment of New Funding for Hospital Inpatient
Technology.--
(1) In general.--Section 1886(d)(5)(K)(ii)(III) (42 U.S.C.
1395ww(d)(5)(K)(ii)(III)) is amended by striking ``subject to
paragraph (4)(C)(iii),''.
(2) Not budget neutral.--There shall be no reduction or other
adjustment in payments under section 1886 of the Social Security
Act because an additional payment is provided under subsection
(d)(5)(K)(ii)(III) of such section.
(e) Effective Date.--
(1) In general.--The Secretary shall implement the amendments
made by this section so that they apply to classification for
fiscal years beginning with fiscal year 2005.
(2) Reconsiderations of applications for fiscal year 2004 that
are denied.--In the case of an application for a classification of
a medical service or technology as a new medical service or
technology under section 1886(d)(5)(K) of the Social Security Act
(42 U.S.C. 1395ww(d)(5)(K)) that was filed for fiscal year 2004 and
that is denied--
(A) the Secretary shall automatically reconsider the
application as an application for fiscal year 2005 under the
amendments made by this section; and
(B) the maximum time period otherwise permitted for such
classification of the service or technology shall be extended
by 12 months.
SEC. 504. INCREASE IN FEDERAL RATE FOR HOSPITALS IN PUERTO RICO.
Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``for discharges beginning
on or after October 1, 1997, 50 percent (and for discharges
between October 1, 1987, and September 30, 1997, 75 percent)''
and inserting ``the applicable Puerto Rico percentage
(specified in subparagraph (E))''; and
(B) in clause (ii), by striking ``for discharges beginning
in a fiscal year beginning on or after October 1, 1997, 50
percent (and for discharges between October 1, 1987, and
September 30, 1997, 25 percent)'' and inserting ``the
applicable Federal percentage (specified in subparagraph
(E))''; and
(2) by adding at the end the following new subparagraph:
``(E) For purposes of subparagraph (A), for discharges occurring--
``(i) on or after October 1, 1987, and before October 1, 1997,
the applicable Puerto Rico percentage is 75 percent and the
applicable Federal percentage is 25 percent;
``(ii) on or after October 1, 1997, and before April 1, 2004,
the applicable Puerto Rico percentage is 50 percent and the
applicable Federal percentage is 50 percent;
``(iii) on or after April 1, 2004, and before October 1, 2004,
the applicable Puerto Rico percentage is 37.5 percent and the
applicable Federal percentage is 62.5 percent; and
``(iv) on or after October 1, 2004, the applicable Puerto Rico
percentage is 25 percent and the applicable Federal percentage is
75 percent.''.
SEC. 505. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM.
(a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)), as amended
by section 406, is amended by adding at the end the following new
paragraph:
``(13)(A) In order to recognize commuting patterns among geographic
areas, the Secretary shall establish a process through application or
otherwise for an increase of the wage index applied under paragraph
(3)(E) for subsection (d) hospitals located in a qualifying county
described in subparagraph (B) in the amount computed under subparagraph
(D) based on out-migration of hospital employees who reside in that
county to any higher wage index area.
``(B) The Secretary shall establish criteria for a qualifying
county under this subparagraph based on the out-migration referred to
in subparagraph (A) and differences in the area wage indices. Under
such criteria the Secretary shall, utilizing such data as the Secretary
determines to be appropriate, establish--
``(i) a threshold percentage, established by the Secretary, of
the weighted average of the area wage index or indices for the
higher wage index areas involved;
``(ii) a threshold (of not less than 10 percent) for minimum
out-migration to a higher wage index area or areas; and
``(iii) a requirement that the average hourly wage of the
hospitals in the qualifying county equals or exceeds the average
hourly wage of all the hospitals in the area in which the
qualifying county is located.
``(C) For purposes of this paragraph, the term `higher wage index
area' means, with respect to a county, an area with a wage index that
exceeds that of the county.
``(D) The increase in the wage index under subparagraph (A) for a
qualifying county shall be equal to the percentage of the hospital
employees residing in the qualifying county who are employed in any
higher wage index area multiplied by the sum of the products, for each
higher wage index area of--
``(i) the difference between--
``(I) the wage index for such higher wage index area, and
``(II) the wage index of the qualifying county; and
``(ii) the number of hospital employees residing in the
qualifying county who are employed in such higher wage index area
divided by the total number of hospital employees residing in the
qualifying county who are employed in any higher wage index area.
``(E) The process under this paragraph may be based upon the
process used by the Medicare Geographic Classification Review Board
under paragraph (10). As the Secretary determines to be appropriate to
carry out such process, the Secretary may require hospitals (including
subsection (d) hospitals and other hospitals) and critical access
hospitals, as required under section 1866(a)(1)(T), to submit data
regarding the location of residence, or the Secretary may use data from
other sources.
``(F) A wage index increase under this paragraph shall be effective
for a period of 3 fiscal years, except that the Secretary shall
establish procedures under which a subsection (d) hospital may elect to
waive the application of such wage index increase.
``(G) A hospital in a county that has a wage index increase under
this paragraph for a period and that has not waived the application of
such an increase under subparagraph (F) is not eligible for
reclassification under paragraph (8) or (10) during that period.
``(H) Any increase in a wage index under this paragraph for a
county shall not be taken into account for purposes of--
``(i) computing the wage index for portions of the wage index
area (not including the county) in which the county is located; or
``(ii) applying any budget neutrality adjustment with respect
to such index under paragraph (8)(D).
``(I) The thresholds described in subparagraph (B), data on
hospital employees used under this paragraph, and any determination of
the Secretary under the process described in subparagraph (E) shall be
final and shall not be subject to judicial review.''.
(b) Conforming Amendments.--Section 1866(a)(1) (42 U.S.C.
1395cc(a)(1)) is amended--
(1) in subparagraph (R), by striking ``and'' at the end;
(2) in subparagraph (S), by striking the period at the end and
inserting ``, and''; and
(3) by inserting after subparagraph (S) the following new
subparagraph:
``(T) in the case of hospitals and critical access hospitals,
to furnish to the Secretary such data as the Secretary determines
appropriate pursuant to subparagraph (E) of section 1886(d)(12) to
carry out such section.''.
(c) Effective Date.--The amendments made by this section shall
first apply to the wage index for discharges occurring on or after
October 1, 2004. In initially implementing such amendments, the
Secretary may modify the deadlines otherwise applicable under clauses
(ii) and (iii)(I) of section 1886(d)(10)(C) of the Social Security Act
(42 U.S.C. 1395ww(d)(10)(C)), for submission of, and actions on,
applications relating to changes in hospital geographic
reclassification.
SEC. 506. LIMITATION ON CHARGES FOR INPATIENT HOSPITAL CONTRACT HEALTH
SERVICES PROVIDED TO INDIANS BY MEDICARE PARTICIPATING
HOSPITALS.
(a) In General.--Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1)), as
amended by section 505(b), is amended--
(1) in subparagraph (S), by striking ``and'' at the end;
(2) in subparagraph (T), by striking the period and inserting
``, and''; and
(3) by inserting after subparagraph (T) the following new
subparagraph:
``(U) in the case of hospitals which furnish inpatient hospital
services for which payment may be made under this title, to be a
participating provider of medical care both--
``(i) under the contract health services program funded by
the Indian Health Service and operated by the Indian Health
Service, an Indian tribe, or tribal organization (as those
terms are defined in section 4 of the Indian Health Care
Improvement Act), with respect to items and services that are
covered under such program and furnished to an individual
eligible for such items and services under such program; and
``(ii) under any program funded by the Indian Health
Service and operated by an urban Indian organization with
respect to the purchase of items and services for an eligible
urban Indian (as those terms are defined in such section 4),
in accordance with regulations promulgated by the Secretary
regarding admission practices, payment methodology, and rates of
payment (including the acceptance of no more than such payment rate
as payment in full for such items and services.''.
(b) Effective Date.--The amendments made by this section shall
apply as of a date specified by the Secretary of Health and Human
Services (but in no case later than 1 year after the date of enactment
of this Act) to medicare participation agreements in effect (or entered
into) on or after such date.
(c) Promulgation of Regulations.--The Secretary shall promulgate
regulations to carry out the amendments made by subsection (a).
SEC. 507. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE LIMITS ON
PHYSICIAN REFERRALS.
(a) Limits on Physician Referrals.--
(1) Ownership and investment interests in whole hospitals.--
(A) In general.--Section 1877(d)(3) (42 U.S.C.
1395nn(d)(3)) is amended--
(i) by striking ``, and'' at the end of subparagraph
(A) and inserting a semicolon; and
(ii) by redesignating subparagraph (B) as subparagraph
(C) and inserting after subparagraph (A) the following new
subparagraph:
``(B) effective for the 18-month period beginning on the
date of the enactment of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, the hospital is not
a specialty hospital (as defined in subsection (h)(7)); and''.
(B) Definition.--Section 1877(h) (42 U.S.C. 1395nn(h)) is
amended by adding at the end the following:
``(7) Specialty hospital.--
``(A) In general.--For purposes of this section, except as
provided in subparagraph (B), the term `specialty hospital'
means a subsection (d) hospital (as defined in section
1886(d)(1)(B)) that is primarily or exclusively engaged in the
care and treatment of one of the following categories:
``(i) Patients with a cardiac condition.
``(ii) Patients with an orthopedic condition.
``(iii) Patients receiving a surgical procedure.
``(iv) Any other specialized category of services that
the Secretary designates as inconsistent with the purpose
of permitting physician ownership and investment interests
in a hospital under this section.
``(B) Exception.--For purposes of this section, the term
`specialty hospital' does not include any hospital--
``(i) determined by the Secretary--
``(I) to be in operation before November 18, 2003;
or
``(II) under development as of such date;
``(ii) for which the number of physician investors at
any time on or after such date is no greater than the
number of such investors as of such date;
``(iii) for which the type of categories described in
subparagraph (A) at any time on or after such date is no
different than the type of such categories as of such date;
``(iv) for which any increase in the number of beds
occurs only in the facilities on the main campus of the
hospital and does not exceed 50 percent of the number of
beds in the hospital as of November 18, 2003, or 5 beds,
whichever is greater; and
``(v) that meets such other requirements as the
Secretary may specify.''.
(2) Ownership and investment interests in a rural provider.--
Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is amended to read as
follows:
``(2) Rural providers.--In the case of designated health
services furnished in a rural area (as defined in section
1886(d)(2)(D)) by an entity, if--
``(A) substantially all of the designated health services
furnished by the entity are furnished to individuals residing
in such a rural area; and
``(B) effective for the 18-month period beginning on the
date of the enactment of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, the entity is not a
specialty hospital (as defined in subsection (h)(7)).''.
(b) Application of Exception for Hospitals Under Development.--For
purposes of section 1877(h)(7)(B)(i)(II) of the Social Security Act, as
added by subsection (a)(1)(B), in determining whether a hospital is
under development as of November 18, 2003, the Secretary shall
consider--
(1) whether architectural plans have been completed, funding
has been received, zoning requirements have been met, and necessary
approvals from appropriate State agencies have been received; and
(2) any other evidence the Secretary determines would indicate
whether a hospital is under development as of such date.
(c) Studies.--
(1) MedPAC study.--The Medicare Payment Advisory Commission, in
consultation with the Comptroller General of the United States,
shall conduct a study to determine--
(A) any differences in the costs of health care services
furnished to patients by physician-owned specialty hospitals
and the costs of such services furnished by local full-service
community hospitals within specific diagnosis-related groups;
(B) the extent to which specialty hospitals, relative to
local full-service community hospitals, treat patients in
certain diagnosis-related groups within a category, such as
cardiology, and an analysis of the selection;
(C) the financial impact of physician-owned specialty
hospitals on local full-service community hospitals;
(D) how the current diagnosis-related group system should
be updated to better reflect the cost of delivering care in a
hospital setting; and
(E) the proportions of payments received, by type of payer,
between the specialty hospitals and local full-service
community hospitals.
(2) HHS study.--The Secretary shall conduct a study of a
representative sample of specialty hospitals--
(A) to determine the percentage of patients admitted to
physician-owned specialty hospitals who are referred by
physicians with an ownership interest;
(B) to determine the referral patterns of physician owners,
including the percentage of patients they referred to
physician-owned specialty hospitals and the percentage of
patients they referred to local full-service community
hospitals for the same condition;
(C) to compare the quality of care furnished in physician-
owned specialty hospitals and in local full-service community
hospitals for similar conditions and patient satisfaction with
such care; and
(D) to assess the differences in uncompensated care, as
defined by the Secretary, between the specialty hospital and
local full-service community hospitals, and the relative value
of any tax exemption available to such hospitals.
(3) Reports.--Not later than 15 months after the date of the
enactment of this Act, the Commission and the Secretary,
respectively, shall each submit to Congress a report on the studies
conducted under paragraphs (1) and (2), respectively, and shall
include any recommendations for legislation or administrative
changes.
SEC. 508. ONE-TIME APPEALS PROCESS FOR HOSPITAL WAGE INDEX
CLASSIFICATION.
(a) Establishment of Process.--
(1) In general.--The Secretary shall establish not later than
January 1, 2004, by instruction or otherwise a process under which
a hospital may appeal the wage index classification otherwise
applicable to the hospital and select another area within the State
(or, at the discretion of the Secretary, within a contiguous State)
to which to be reclassified.
(2) Process requirements.--The process established under
paragraph (1) shall be consistent with the following:
(A) Such an appeal may be filed as soon as possible after
the date of the enactment of this Act but shall be filed by not
later than February 15, 2004.
(B) Such an appeal shall be heard by the Medicare
Geographic Reclassification Review Board.
(C) There shall be no further administrative or judicial
review of a decision of such Board.
(3) Reclassification upon successful appeal.--If the Medicare
Geographic Reclassification Review Board determines that the
hospital is a qualifying hospital (as defined in subsection (c)),
the hospital shall be reclassified to the area selected under
paragraph (1). Such reclassification shall apply with respect to
discharges occurring during the 3-year period beginning with April
1, 2004.
(4) Inapplicability of certain provisions.--Except as the
Secretary may provide, the provisions of paragraphs (8) and (10) of
section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d))
shall not apply to an appeal under this section.
(b) Application of Reclassification.--In the case of an appeal
decided in favor of a qualifying hospital under subsection (a), the
wage index reclassification shall not affect the wage index computation
for any area or for any other hospital and shall not be effected in a
budget neutral manner. The provisions of this section shall not affect
payment for discharges occurring after the end of the 3-year-period
referred to in subsection (a).
(c) Qualifying Hospital Defined.--For purposes of this section, the
term ``qualifying hospital'' means a subsection (d) hospital (as
defined in section 1886(d)(1)(B) of the Social Security Act, 42 U.S.C.
1395ww(d)(1)(B)) that--
(1) does not qualify for a change in wage index classification
under paragraph (8) or (10) of section 1886(d) of the Social
Security Act (42 U.S.C. 1395ww(d)) on the basis of requirements
relating to distance or commuting; and
(2) meets such other criteria, such as quality, as the
Secretary may specify by instruction or otherwise.
The Secretary may modify the wage comparison guidelines promulgated
under section 1886(d)(10)(D) of such Act (42 U.S.C. 1395ww(d)(10)(D))
in carrying out this section.
(d) Wage Index Classification.--For purposes of this section, the
term ``wage index classification'' means the geographic area in which
it is classified for purposes of determining for a fiscal year the
factor used to adjust the DRG prospective payment rate under section
1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) for area
differences in hospital wage levels that applies to such hospital under
paragraph (3)(E) of such section.
(e) Limitation on Expenditures.--The aggregate amount of additional
expenditures resulting from the application of this section shall not
exceed $900,000,000.
(f) Transitional Extension.--Any reclassification of a county or
other area made by Act of Congress for purposes of making payments
under section 1886(d) of the Social Security Act (42 U.S.C. 1395ww(d))
that expired on September 30, 2003, shall be deemed to be in effect
during the period beginning on January 1, 2004, and ending on September
30, 2004.
Subtitle B--Other Provisions
SEC. 511. PAYMENT FOR COVERED SKILLED NURSING FACILITY SERVICES.
(a) Adjustment to RUGs for AIDS Residents.--Paragraph (12) of
section 1888(e) (42 U.S.C. 1395yy(e)) is amended to read as follows:
``(12) Adjustment for residents with aids.--
``(A) In general.--Subject to subparagraph (B), in the case
of a resident of a skilled nursing facility who is afflicted
with acquired immune deficiency syndrome (AIDS), the per diem
amount of payment otherwise applicable (determined without
regard to any increase under section 101 of the Medicare,
Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, or
under section 314(a) of Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000), shall be increased by
128 percent to reflect increased costs associated with such
residents.
``(B) Sunset.--Subparagraph (A) shall not apply on and
after such date as the Secretary certifies that there is an
appropriate adjustment in the case mix under paragraph
(4)(G)(i) to compensate for the increased costs associated with
residents described in such subparagraph.''.
(b) Effective Date.--The amendment made by paragraph (1) shall
apply to services furnished on or after October 1, 2004.
SEC. 512. COVERAGE OF HOSPICE CONSULTATION SERVICES.
(a) Coverage of Hospice Consultation Services.--Section 1812(a) (42
U.S.C. 1395d(a)) is amended--
(1) by striking ``and'' at the end of paragraph (3);
(2) by striking the period at the end of paragraph (4) and
inserting ``; and''; and
(3) by inserting after paragraph (4) the following new
paragraph:
``(5) for individuals who are terminally ill, have not made an
election under subsection (d)(1), and have not previously received
services under this paragraph, services that are furnished by a
physician (as defined in section 1861(r)(1)) who is either the
medical director or an employee of a hospice program and that--
``(A) consist of--
``(i) an evaluation of the individual's need for pain
and symptom management, including the individual's need for
hospice care; and
``(ii) counseling the individual with respect to
hospice care and other care options; and
``(B) may include advising the individual regarding
advanced care planning.''.
(b) Payment.--Section 1814(i) (42 U.S.C. 1395f(i)) is amended by
adding at the end the following new paragraph:
``(4) The amount paid to a hospice program with respect to the
services under section 1812(a)(5) for which payment may be made under
this part shall be equal to an amount established for an office or
other outpatient visit for evaluation and management associated with
presenting problems of moderate severity and requiring medical
decisionmaking of low complexity under the fee schedule established
under section 1848(b), other than the portion of such amount
attributable to the practice expense component.''.
(c) Conforming Amendment.--Section 1861(dd)(2)(A)(i) (42 U.S.C.
1395x(dd)(2)(A)(i)) is amended by inserting before the comma at the end
the following: ``and services described in section 1812(a)(5)''.
(d) Effective Date.--The amendments made by this section shall
apply to services provided by a hospice program on or after January 1,
2005.
SEC. 513. STUDY ON PORTABLE DIAGNOSTIC ULTRASOUND SERVICES FOR
BENEFICIARIES IN SKILLED NURSING FACILITIES.
(a) Study.--The Comptroller General of the United States shall
conduct a study of portable diagnostic ultrasound services furnished to
medicare beneficiaries in skilled nursing facilities. Such study shall
consider the following:
(1) Types of equipment; training.--The types of portable
diagnostic ultrasound services furnished to such beneficiaries, the
types of portable ultrasound equipment used to furnish such
services, and the technical skills, or training, or both, required
for technicians to furnish such services.
(2) Clinical appropriateness.--The clinical appropriateness of
transporting portable diagnostic ultrasound diagnostic and
technicians to patients in skilled nursing facilities as opposed to
transporting such patients to a hospital or other facility that
furnishes diagnostic ultrasound services.
(3) Financial impact.--The financial impact if Medicare were
make a separate payment for portable ultrasound diagnostic
services, including the impact of separate payments--
(A) for transportation and technician services for
residents during a resident in a part A stay, that would
otherwise be paid for under the prospective payment system for
covered skilled nursing facility services (under section
1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)); and
(B) for such services for residents in a skilled nursing
facility after a part A stay.
(4) Credentialing requirements.--Whether the Secretary should
establish credentialing or other requirements for technicians that
furnish diagnostic ultrasound services to medicare beneficiaries.
(b) Report.--Not later than 2 years after the date of the enactment
of this Act, the Comptroller General shall submit to Congress a report
on the study conducted under subsection (a), and shall include any
recommendations for legislation or administrative change as the
Comptroller General determines appropriate.
TITLE VI--PROVISIONS RELATING TO PART B
Subtitle A--Provisions Relating to Physicians' Services
SEC. 601. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.
(a) Update for 2004 and 2005.--
(1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is
amended by adding at the end the following new paragraph:
``(5) Update for 2004 and 2005.--The update to the single
conversion factor established in paragraph (1)(C) for each of 2004
and 2005 shall be not less than 1.5 percent.''.
(2) Conforming amendment.--Paragraph (4)(B) of such section is
amended, in the matter before clause (i), by inserting ``and
paragraph (5)'' after ``subparagraph (D)''.
(3) Not treated as change in law and regulation in sustainable
growth rate determination.--The amendments made by this subsection
shall not be treated as a change in law for purposes of applying
section 1848(f)(2)(D) of the Social Security Act (42 U.S.C. 1395w-
4(f)(2)(D)).
(b) Use of 10-Year Rolling Average in Computing Gross Domestic
Product.--
(1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
4(f)(2)(C)) is amended--
(A) by striking ``projected'' and inserting ``annual
average''; and
(B) by striking ``from the previous applicable period to
the applicable period involved'' and inserting ``during the 10-
year period ending with the applicable period involved''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to computations of the sustainable growth rate for years
beginning with 2003.
SEC. 602. TREATMENT OF PHYSICIANS' SERVICES FURNISHED IN ALASKA.
Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)), as amended by section
421, is amended--
(1) in subparagraph (A), by striking ``subparagraphs (B), (C),
(E), and (F)'' and inserting ``subparagraphs (B), (C), (E), (F) and
(G)''; and
(2) by adding at the end the following new subparagraph:
``(G) Floor for practice expense, malpractice, and work
geographic indices for services furnished in alaska.--For
purposes of payment for services furnished in Alaska on or
after January 1, 2004, and before January 1, 2006, after
calculating the practice expense, malpractice, and work
geographic indices in clauses (i), (ii), and (iii) of
subparagraph (A) and in subparagraph (B), the Secretary shall
increase any such index to 1.67 if such index would otherwise
be less than 1.67.''.
SEC. 603. INCLUSION OF PODIATRISTS, DENTISTS, AND OPTOMETRISTS UNDER
PRIVATE CONTRACTING AUTHORITY.
Section 1802(b)(5)(B) (42 U.S.C. 1395a(b)(5)(B)) is amended by
striking ``section 1861(r)(1)'' and inserting ``paragraphs (1), (2),
(3), and (4) of section 1861(r)''.
SEC. 604. GAO STUDY ON ACCESS TO PHYSICIANS' SERVICES.
(a) Study.--The Comptroller General of the United States shall
conduct a study on access of medicare beneficiaries to physicians'
services under the medicare program. The study shall include--
(1) an assessment of the use by beneficiaries of such services
through an analysis of claims submitted by physicians for such
services under part B of the medicare program;
(2) an examination of changes in the use by beneficiaries of
physicians' services over time; and
(3) an examination of the extent to which physicians are not
accepting new medicare beneficiaries as patients.
(b) Report.--Not later than 18 months after the date of the
enactment of this Act, the Comptroller General shall submit to Congress
a report on the study conducted under subsection (a). The report shall
include a determination whether--
(1) data from claims submitted by physicians under part B of
the medicare program indicate potential access problems for
medicare beneficiaries in certain geographic areas; and
(2) access by medicare beneficiaries to physicians' services
may have improved, remained constant, or deteriorated over time.
SEC. 605. COLLABORATIVE DEMONSTRATION-BASED REVIEW OF PHYSICIAN
PRACTICE EXPENSE GEOGRAPHIC ADJUSTMENT DATA.
(a) In General.--Not later than January 1, 2005, the Secretary
shall, in collaboration with State and other appropriate organizations
representing physicians, and other appropriate persons, review and
consider alternative data sources than those currently used in
establishing the geographic index for the practice expense component
under the medicare physician fee schedule under section
1848(e)(1)(A)(i) of the Social Security Act (42 U.S.C. 1395w-
4(e)(1)(A)(i)).
(b) Sites.--The Secretary shall select two physician payment
localities in which to carry out subsection (a). One locality shall
include rural areas and at least one locality shall be a statewide
locality that includes both urban and rural areas.
(c) Report and Recommendations.--
(1) Report.--Not later than January 1, 2006, the Secretary
shall submit to Congress a report on the review and consideration
conducted under subsection (a). Such report shall include
information on the alternative developed data sources considered by
the Secretary under subsection (a), including the accuracy and
validity of the data as measures of the elements of the geographic
index for practice expenses under the medicare physician fee
schedule as well as the feasibility of using such alternative data
nationwide in lieu of current proxy data used in such index, and
the estimated impacts of using such alternative data.
(2) Recommendations.--The report submitted under paragraph (1)
shall contain recommendations on which data sources reviewed and
considered under subsection (a) are appropriate for use in
calculating the geographic index for practice expenses under the
medicare physician fee schedule.
SEC. 606. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.
(a) Practice Expense Component.--Not later than 1 year after the
date of the enactment of this Act, the Medicare Payment Advisory
Commission shall submit to Congress a report on the effect of
refinements to the practice expense component of payments for
physicians' services, after the transition to a full resource-based
payment system in 2002, under section 1848 of the Social Security Act
(42 U.S.C. 1395w-4). Such report shall examine the following matters by
physician specialty:
(1) The effect of such refinements on payment for physicians'
services.
(2) The interaction of the practice expense component with
other components of and adjustments to payment for physicians'
services under such section.
(3) The appropriateness of the amount of compensation by reason
of such refinements.
(4) The effect of such refinements on access to care by
medicare beneficiaries to physicians' services.
(5) The effect of such refinements on physician participation
under the medicare program.
(b) Volume of Physicians' Services.--Not later than 1 year after
the date of the enactment of this Act, the Medicare Payment Advisory
Commission shall submit to Congress a report on the extent to which
increases in the volume of physicians' services under part B of the
medicare program are a result of care that improves the health and
well-being of medicare beneficiaries. The study shall include the
following:
(1) An analysis of recent and historic growth in the components
that the Secretary includes under the sustainable growth rate
(under section 1848(f) of the Social Security Act (42 U.S.C. 1395w-
4(f))).
(2) An examination of the relative growth of volume in
physicians' services between medicare beneficiaries and other
populations.
(3) An analysis of the degree to which new technology,
including coverage determinations of the Centers for Medicare &
Medicaid Services, has affected the volume of physicians' services.
(4) An examination of the impact on volume of demographic
changes.
(5) An examination of shifts in the site of service or services
that influence the number and intensity of services furnished in
physicians' offices and the extent to which changes in
reimbursement rates to other providers have effected these changes.
(6) An evaluation of the extent to which the Centers for
Medicare & Medicaid Services takes into account the impact of law
and regulations on the sustainable growth rate.
Subtitle B--Preventive Services
SEC. 611. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL EXAMINATION.
(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is
amended--
(1) in subparagraph (U), by striking ``and'' at the end;
(2) in subparagraph (V)(iii), by inserting ``and'' at the end;
and
(3) by adding at the end the following new subparagraph:
``(W) an initial preventive physical examination (as defined in
subsection (ww));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x) is amended
by adding at the end the following new subsection:
``Initial Preventive Physical Examination
``(ww)(1) The term `initial preventive physical examination' means
physicians' services consisting of a physical examination (including
measurement of height, weight, and blood pressure, and an
electrocardiogram) with the goal of health promotion and disease
detection and includes education, counseling, and referral with respect
to screening and other preventive services described in paragraph (2),
but does not include clinical laboratory tests.
``(2) The screening and other preventive services described in this
paragraph include the following:
``(A) Pneumococcal, influenza, and hepatitis B vaccine and
administration under subsection (s)(10).
``(B) Screening mammography as defined in subsection (jj).
``(C) Screening pap smear and screening pelvic exam as defined
in subsection (nn).
``(D) Prostate cancer screening tests as defined in subsection
(oo).
``(E) Colorectal cancer screening tests as defined in
subsection (pp).
``(F) Diabetes outpatient self-management training services as
defined in subsection (qq)(1).
``(G) Bone mass measurement as defined in subsection (rr).
``(H) Screening for glaucoma as defined in subsection (uu).
``(I) Medical nutrition therapy services as defined in
subsection (vv).
``(J) Cardiovascular screening blood tests as defined in
subsection (xx)(1).
``(K) Diabetes screening tests as defined in subsection
(yy).''.
(c) Payment as Physicians' Services.--Section 1848(j)(3) (42 U.S.C.
1395w-4(j)(3)) is amended by inserting ``(2)(W),'' after ``(2)(S),''.
(d) Other Conforming Amendments.--(1) Section 1862(a) (42 U.S.C.
1395y(a)), as amended by section 303(i)(3)(B), is amended--
(A) in paragraph (1)--
(i) by striking ``and'' at the end of subparagraph (I);
(ii) by striking the semicolon at the end of subparagraph
(J) and inserting ``, and''; and
(iii) by adding at the end the following new subparagraph:
``(K) in the case of an initial preventive physical
examination, which is performed not later than 6 months after the
date the individual's first coverage period begins under part B;'';
and
(B) in paragraph (7), by striking ``or (H)'' and inserting
``(H), or (K)''.
(2) Clauses (i) and (ii) of section 1861(s)(2)(K) (42 U.S.C.
1395x(s)(2)(K)) are each amended by inserting ``and services described
in subsection (ww)(1)'' after ``services which would be physicians'
services''.
(e) Effective Date.--The amendments made by this section shall
apply to services furnished on or after January 1, 2005, but only for
individuals whose coverage period under part B begins on or after such
date.
SEC. 612. COVERAGE OF CARDIOVASCULAR SCREENING BLOOD TESTS.
(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as
amended by section 611(a), is amended--
(1) in subparagraph (V)(iii), by striking ``and'' at the end;
(2) in subparagraph (W), by inserting ``and'' at the end; and
(3) by adding at the end the following new subparagraph:
``(X) cardiovascular screening blood tests (as defined in
subsection (xx)(1));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x) is amended
by adding at the end the following new subsection:
``Cardiovascular Screening Blood Test
``(xx)(1) The term `cardiovascular screening blood test' means a
blood test for the early detection of cardiovascular disease (or
abnormalities associated with an elevated risk of cardiovascular
disease) that tests for the following:
``(A) Cholesterol levels and other lipid or triglyceride
levels.
``(B) Such other indications associated with the presence of,
or an elevated risk for, cardiovascular disease as the Secretary
may approve for all individuals (or for some individuals determined
by the Secretary to be at risk for cardiovascular disease),
including indications measured by noninvasive testing.
The Secretary may not approve an indication under subparagraph (B) for
any individual unless a blood test for such is recommended by the
United States Preventive Services Task Force.
``(2) The Secretary shall establish standards, in consultation with
appropriate organizations, regarding the frequency for each type of
cardiovascular screening blood tests, except that such frequency may
not be more often than once every 2 years.''.
(c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), as
amended by section 611(d), is amended--
(1) by striking ``and'' at the end of subparagraph (J);
(2) by striking the semicolon at the end of subparagraph (K)
and inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(L) in the case of cardiovascular screening blood tests (as
defined in section 1861(xx)(1)), which are performed more
frequently than is covered under section 1861(xx)(2);''.
(d) Effective Date.--The amendments made by this section shall
apply to tests furnished on or after January 1, 2005.
SEC. 613. COVERAGE OF DIABETES SCREENING TESTS.
(a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as
amended by section 612(a), is amended--
(1) in subparagraph (W), by striking ``and'' at the end;
(2) in subparagraph (X), by adding ``and'' at the end; and
(3) by adding at the end the following new subparagraph:
``(Y) diabetes screening tests (as defined in subsection
(yy));''.
(b) Services Described.--Section 1861 (42 U.S.C. 1395x), as amended
by section 612(b), is amended by adding at the end the following new
subsection:
``Diabetes Screening Tests
``(yy)(1) The term `diabetes screening tests' means testing
furnished to an individual at risk for diabetes (as defined in
paragraph (2)) for the purpose of early detection of diabetes,
including--
``(A) a fasting plasma glucose test; and
``(B) such other tests, and modifications to tests, as the
Secretary determines appropriate, in consultation with appropriate
organizations.
``(2) For purposes of paragraph (1), the term `individual at risk
for diabetes' means an individual who has any of the following risk
factors for diabetes:
``(A) Hypertension.
``(B) Dyslipidemia.
``(C) Obesity, defined as a body mass index greater than or
equal to 30 kg/m<SUP>2</SUP>.
``(D) Previous identification of an elevated impaired fasting
glucose.
``(E) Previous identification of impaired glucose tolerance.
``(F) A risk factor consisting of at least 2 of the following
characteristics:
``(i) Overweight, defined as a body mass index greater than
25, but less than 30, kg/m<SUP>2</SUP>.
``(ii) A family history of diabetes.
``(iii) A history of gestational diabetes mellitus or
delivery of a baby weighing greater than 9 pounds.
``(iv) 65 years of age or older.
``(3) The Secretary shall establish standards, in consultation with
appropriate organizations, regarding the frequency of diabetes
screening tests, except that such frequency may not be more often than
twice within the 12-month period following the date of the most recent
diabetes screening test of that individual.''.
(c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), as
amended by section 612(c), is amended--
(1) by striking ``and'' at the end of subparagraph (K);
(2) by striking the semicolon at the end of subparagraph (L)
and inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(M) in the case of a diabetes screening test (as defined in
section 1861(yy)(1)), which is performed more frequently than is
covered under section 1861(yy)(3);''.
(d) Effective Date.--The amendments made by this section shall
apply to tests furnished on or after January 1, 2005.
SEC. 614. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.
(a) Exclusion From OPD Fee Schedule.--Section 1833(t)(1)(B)(iv) (42
U.S.C. 1395l(t)(1)(B)(iv)) is amended by inserting before the period at
the end the following: ``and does not include screening mammography (as
defined in section 1861(jj)) and diagnostic mammography''.
(b) Conforming Amendment.--Section 1833(a)(2)(E)(i) (42 U.S.C.
1395l(a)(2)(E)(i)) is amended by inserting ``and, for services
furnished on or after January 1, 2005, diagnostic mammography'' after
``screening mammography''.
(c) Effective Date.--The amendments made by this section shall
apply--
(1) in the case of screening mammography, to services furnished
on or after the date of the enactment of this Act; and
(2) in the case of diagnostic mammography, to services
furnished on or after January 1, 2005.
Subtitle C--Other Provisions
SEC. 621. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) PAYMENT REFORM.
(a) Payment for Drugs.--
(1) Special rules for certain drugs and biologicals.--Section
1833(t) (42 U.S.C. 1395l(t)), as amended by section 411(b), is
amended by inserting after paragraph (13) the following new
paragraphs:
``(14) Drug apc payment rates.--
``(A) In general.--The amount of payment under this
subsection for a specified covered outpatient drug (defined in
subparagraph (B)) that is furnished as part of a covered OPD
service (or group of services)--
``(i) in 2004, in the case of--
``(I) a sole source drug shall in no case be less
than 88 percent, or exceed 95 percent, of the reference
average wholesale price for the drug;
``(II) an innovator multiple source drug shall in
no case exceed 68 percent of the reference average
wholesale price for the drug; or
``(III) a noninnovator multiple source drug shall
in no case exceed 46 percent of the reference average
wholesale price for the drug;
``(ii) in 2005, in the case of--
``(I) a sole source drug shall in no case be less
than 83 percent, or exceed 95 percent, of the reference
average wholesale price for the drug;
``(II) an innovator multiple source drug shall in
no case exceed 68 percent of the reference average
wholesale price for the drug; or
``(III) a noninnovator multiple source drug shall
in no case exceed 46 percent of the reference average
wholesale price for the drug; or
``(iii) in a subsequent year, shall be equal, subject
to subparagraph (E)--
``(I) to the average acquisition cost for the drug
for that year (which, at the option of the Secretary,
may vary by hospital group (as defined by the Secretary
based on volume of covered OPD services or other
relevant characteristics)), as determined by the
Secretary taking into account the hospital acquisition
cost survey data under subparagraph (D); or
``(II) if hospital acquisition cost data are not
available, the average price for the drug in the year
established under section 1842(o), section 1847A, or
section 1847B, as the case may be, as calculated and
adjusted by the Secretary as necessary for purposes of
this paragraph.
``(B) Specified covered outpatient drug defined.--
``(i) In general.--In this paragraph, the term
`specified covered outpatient drug' means, subject to
clause (ii), a covered outpatient drug (as defined in
section 1927(k)(2)) for which a separate ambulatory payment
classification group (APC) has been established and that
is--
``(I) a radiopharmaceutical; or
``(II) a drug or biological for which payment was
made under paragraph (6) (relating to pass-through
payments) on or before December 31, 2002.
``(ii) Exception.--Such term does not include--
``(I) a drug or biological for which payment is
first made on or after January 1, 2003, under paragraph
(6);
``(II) a drug or biological for which a temporary
HCPCS code has not been assigned; or
``(III) during 2004 and 2005, an orphan drug (as
designated by the Secretary).
``(C) Payment for designated orphan drugs during 2004 and
2005.--The amount of payment under this subsection for an
orphan drug designated by the Secretary under subparagraph
(B)(ii)(III) that is furnished as part of a covered OPD service
(or group of services) during 2004 and 2005 shall equal such
amount as the Secretary may specify.
``(D) Acquisition cost survey for hospital outpatient
drugs.--
``(i) Annual gao surveys in 2004 and 2005.--
``(I) In general.--The Comptroller General of the
United States shall conduct a survey in each of 2004
and 2005 to determine the hospital acquisition cost for
each specified covered outpatient drug. Not later than
April 1, 2005, the Comptroller General shall furnish
data from such surveys to the Secretary for use in
setting the payment rates under subparagraph (A) for
2006.
``(II) Recommendations.--Upon the completion of
such surveys, the Comptroller General shall recommend
to the Secretary the frequency and methodology of
subsequent surveys to be conducted by the Secretary
under clause (ii).
``(ii) Subsequent secretarial surveys.--The Secretary,
taking into account such recommendations, shall conduct
periodic subsequent surveys to determine the hospital
acquisition cost for each specified covered outpatient drug
for use in setting the payment rates under subparagraph
(A).
``(iii) Survey requirements.--The surveys conducted
under clauses (i) and (ii) shall have a large sample of
hospitals that is sufficient to generate a statistically
significant estimate of the average hospital acquisition
cost for each specified covered outpatient drug. With
respect to the surveys conducted under clause (i), the
Comptroller General shall report to Congress on the
justification for the size of the sample used in order to
assure the validity of such estimates.
``(iv) Differentiation in cost.--In conducting surveys
under clause (i), the Comptroller General shall determine
and report to Congress if there is (and the extent of any)
variation in hospital acquisition costs for drugs among
hospitals based on the volume of covered OPD services
performed by such hospitals or other relevant
characteristics of such hospitals (as defined by the
Comptroller General).
``(v) Comment on proposed rates.--Not later than 30
days after the date the Secretary promulgated proposed
rules setting forth the payment rates under subparagraph
(A) for 2006, the Comptroller General shall evaluate such
proposed rates and submit to Congress a report regarding
the appropriateness of such rates based on the surveys the
Comptroller General has conducted under clause (i).
``(E) Adjustment in payment rates for overhead costs.--
``(i) Medpac report on drug apc design.--The Medicare
Payment Advisory Commission shall submit to the Secretary,
not later than July 1, 2005, a report on adjustment of
payment for ambulatory payment classifications for
specified covered outpatient drugs to take into account
overhead and related expenses, such as pharmacy services
and handling costs. Such report shall include--
``(I) a description and analysis of the data
available with regard to such expenses;
``(II) a recommendation as to whether such a
payment adjustment should be made; and
``(III) if such adjustment should be made, a
recommendation regarding the methodology for making
such an adjustment.
``(ii) Adjustment authorized.--The Secretary may adjust
the weights for ambulatory payment classifications for
specified covered outpatient drugs to take into account the
recommendations contained in the report submitted under
clause (i).
``(F) Classes of drugs.--For purposes of this paragraph:
``(i) Sole source drugs.--The term `sole source drug'
means--
``(I) a biological product (as defined under
section 1861(t)(1)); or
``(II) a single source drug (as defined in section
1927(k)(7)(A)(iv)).
``(ii) Innovator multiple source drugs.--The term
`innovator multiple source drug' has the meaning given such
term in section 1927(k)(7)(A)(ii).
``(iii) Noninnovator multiple source drugs.--The term
`noninnovator multiple source drug' has the meaning given
such term in section 1927(k)(7)(A)(iii).
``(G) Reference average wholesale price.--The term
`reference average wholesale price' means, with respect to a
specified covered outpatient drug, the average wholesale price
for the drug as determined under section 1842(o) as of May 1,
2003.
``(H) Inapplicability of expenditures in determining
conversion, weighting, and other adjustment factors.--
Additional expenditures resulting from this paragraph shall not
be taken into account in establishing the conversion,
weighting, and other adjustment factors for 2004 and 2005 under
paragraph (9), but shall be taken into account for subsequent
years.
``(15) Payment for new drugs and biologicals until hcpcs code
assigned.--With respect to payment under this part for an
outpatient drug or biological that is covered under this part and
is furnished as part of covered OPD services for which a HCPCS code
has not been assigned, the amount provided for payment for such
drug or biological under this part shall be equal to 95 percent of
the average wholesale price for the drug or biological.''.
(2) Reduction in threshold for separate apcs for drugs.--
Section 1833(t)(16), as redesignated section 411(b), is amended by
adding at the end the following new subparagraph:
``(B) Threshold for establishment of separate apcs for
drugs.--The Secretary shall reduce the threshold for the
establishment of separate ambulatory payment classification
groups (APCs) with respect to drugs or biologicals to $50 per
administration for drugs and biologicals furnished in 2005 and
2006.''.
(3) Exclusion of separate drug apcs from outlier payments.--
Section 1833(t)(5) is amended by adding at the end the following
new subparagraph:
``(E) Exclusion of separate drug and biological apcs from
outlier payments.--No additional payment shall be made under
subparagraph (A) in the case of ambulatory payment
classification groups established separately for drugs or
biologicals.''.
(4) Payment for pass through drugs.--Section 1833(t)(6)(D)(i)
(42 U.S.C. 1395l(t)(6)(D)(i)) is amended by inserting after ``under
section 1842(o)'' the following: ``(or if the drug or biological is
covered under a competitive acquisition contract under section
1847B, an amount determined by the Secretary equal to the average
price for the drug or biological for all competitive acquisition
areas and year established under such section as calculated and
adjusted by the Secretary for purposes of this paragraph)''.
(5) Conforming amendment to budget neutrality requirement.--
Section 1833(t)(9)(B) (42 U.S.C. 1395l(t)(9)(B)) is amended by
adding at the end the following: ``In determining adjustments under
the preceding sentence for 2004 and 2005, the Secretary shall not
take into account under this subparagraph or paragraph (2)(E) any
expenditures that would not have been made but for the application
of paragraph (14).''.
(6) Effective date.--The amendments made by this subsection
shall apply to items and services furnished on or after January 1,
2004.
(b) Special Payment for Brachytherapy.--
(1) In general.--Section 1833(t)(16), as redesignated by
section 411(b) and as amended by subsection (a)(2), is amended by
adding at the end the following new subparagraph:
``(C) Payment for devices of brachytherapy at charges
adjusted to cost.--Notwithstanding the preceding provisions of
this subsection, for a device of brachytherapy consisting of a
seed or seeds (or radioactive source) furnished on or after
January 1, 2004, and before January 1, 2007, the payment basis
for the device under this subsection shall be equal to the
hospital's charges for each device furnished, adjusted to cost.
Charges for such devices shall not be included in determining
any outlier payment under this subsection.''.
(2) Specification of groups for brachytherapy devices.--Section
1833(t)(2) (42 U.S.C. 1395l(t)(2)) is amended--
(A) in subparagraph (F), by striking ``and'' at the end;
(B) in subparagraph (G), by striking the period at the end
and inserting ``; and''; and
(C) by adding at the end the following new subparagraph:
``(H) with respect to devices of brachytherapy consisting
of a seed or seeds (or radioactive source), the Secretary shall
create additional groups of covered OPD services that classify
such devices separately from the other services (or group of
services) paid for under this subsection in a manner reflecting
the number, isotope, and radioactive intensity of such devices
furnished, including separate groups for palladium-103 and
iodine-125 devices.''.
(3) GAO report.--The Comptroller General of the United States
shall conduct a study to determine appropriate payment amounts
under section 1833(t)(16)(C) of the Social Security Act, as added
by paragraph (1), for devices of brachytherapy. Not later than
January 1, 2005, the Comptroller General shall submit to Congress
and the Secretary a report on the study conducted under this
paragraph, and shall include specific recommendations for
appropriate payments for such devices.
SEC. 622. LIMITATION OF APPLICATION OF FUNCTIONAL EQUIVALENCE STANDARD.
Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amended by adding at
the end the following new subparagraph:
``(F) Limitation of application of functional equivalence
standard.--
``(i) In general.--The Secretary may not publish
regulations that apply a functional equivalence standard to
a drug or biological under this paragraph.
``(ii) Application.--Clause (i) shall apply to the
application of a functional equivalence standard to a drug
or biological on or after the date of enactment of the
Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 unless--
``(I) such application was being made to such drug
or biological prior to such date of enactment; and
``(II) the Secretary applies such standard to such
drug or biological only for the purpose of determining
eligibility of such drug or biological for additional
payments under this paragraph and not for the purpose
of any other payments under this title.
``(iii) Rule of construction.--Nothing in this
subparagraph shall be construed to effect the Secretary's
authority to deem a particular drug to be identical to
another drug if the 2 products are pharmaceutically
equivalent and bioequivalent, as determined by the
Commissioner of Food and Drugs.''.
SEC. 623. PAYMENT FOR RENAL DIALYSIS SERVICES.
(a) Increase in Renal Dialysis Composite Rate for Services
Furnished.--The last sentence of section 1881(b)(7) (42 U.S.C.
1395rr(b)(7)) is amended--
(1) by striking ``and'' before ``for such services'' the second
place it appears;
(2) by inserting ``and before January 1, 2005,'' after
``January 1, 2001,''; and
(3) by inserting before the period at the end the following:
``, and for such services furnished on or after January 1, 2005, by
1.6 percent above such composite rate payment amounts for such
services furnished on December 31, 2004''.
(b) Restoring Composite Rate Exceptions for Pediatric Facilities.--
(1) In general.--Section 422(a)(2) of BIPA is amended--
(A) in subparagraph (A), by striking ``and (C)'' and
inserting ``, (C), and (D)'';
(B) in subparagraph (B), by striking ``In the case'' and
inserting ``Subject to subparagraph (D), in the case''; and
(C) by adding at the end the following new subparagraph:
``(D) Inapplicability to pediatric facilities.--
Subparagraphs (A) and (B) shall not apply, as of October 1,
2002, to pediatric facilities that do not have an exception
rate described in subparagraph (C) in effect on such date. For
purposes of this subparagraph, the term `pediatric facility'
means a renal facility at least 50 percent of whose patients
are individuals under 18 years of age.''.
(2) Conforming amendment.--The fourth sentence of section
1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking ``The
Secretary'' and inserting ``Subject to section 422(a)(2) of the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000, the Secretary''.
(c) Inspector General Studies on ESRD Drugs.--
(1) In general.--The Inspector General of the Department of
Health and Human Services shall conduct two studies with respect to
drugs and biologicals (including erythropoietin) furnished to end-
stage renal disease patients under the medicare program which are
separately billed by end stage renal disease facilities.
(2) Studies on esrd drugs.--
(A) Existing drugs.--The first study under paragraph (1)
shall be conducted with respect to such drugs and biologicals
for which a billing code exists prior to January 1, 2004.
(B) New drugs.--The second study under paragraph (1) shall
be conducted with respect to such drugs and biologicals for
which a billing code does not exist prior to January 1, 2004.
(3) Matters studied.--Under each study conducted under
paragraph (1), the Inspector General shall--
(A) determine the difference between the amount of payment
made to end stage renal disease facilities under title XVIII of
the Social Security Act for such drugs and biologicals and the
acquisition costs of such facilities for such drugs and
biologicals and which are separately billed by end stage renal
disease facilities, and
(B) estimate the rates of growth of expenditures for such
drugs and biologicals billed by such facilities.
(4) Reports.--
(A) Existing esrd drugs.--Not later than April 1, 2004, the
Inspector General shall report to the Secretary on the study
described in paragraph (2)(A).
(B) New esrd drugs.--Not later than April 1, 2006, the
Inspector General shall report to the Secretary on the study
described in paragraph (2)(B).
(d) Basic Case-Mix Adjusted Composite Rate for Renal Dialysis
Facility Services.--(1) Section 1881(b) (42 U.S.C. 1395rr(b)) is
amended by adding at the end the following new paragraphs:
``(12)(A) In lieu of payment under paragraph (7) beginning with
services furnished on January 1, 2005, the Secretary shall establish a
basic case-mix adjusted prospective payment system for dialysis
services furnished by providers of services and renal dialysis
facilities in a year to individuals in a facility and to such
individuals at home. The case-mix under such system shall be for a
limited number of patient characteristics.
``(B) The system described in subparagraph (A) shall include--
``(i) the services comprising the composite rate established
under paragraph (7); and
``(ii) the difference between payment amounts under this title
for separately billed drugs and biologicals (including
erythropoietin) and acquisition costs of such drugs and
biologicals, as determined by the Inspector General reports to the
Secretary as required by section 623(c) of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003--
``(I) beginning with 2005, for such drugs and biologicals
for which a billing code exists prior to January 1, 2004; and
``(II) beginning with 2007, for such drugs and biologicals
for which a billing code does not exist prior to January 1,
2004,
adjusted to 2005, or 2007, respectively, as determined to be
appropriate by the Secretary.
``(C)(i) In applying subparagraph (B)(ii) for 2005, such payment
amounts under this title shall be determined using the methodology
specified in paragraph (13)(A)(i).
``(ii) For 2006, the Secretary shall provide for an adjustment to
the payments under clause (i) to reflect the difference between the
payment amounts using the methodology under paragraph (13)(A)(i) and
the payment amount determined using the methodology applied by the
Secretary under paragraph (13)(A)(iii) of such paragraph, as estimated
by the Secretary.
``(D) The Secretary shall adjust the payment rates under such
system by a geographic index as the Secretary determines to be
appropriate. If the Secretary applies a geographic index under this
paragraph that differs from the index applied under paragraph (7) the
Secretary shall phase-in the application of the index under this
paragraph over a multiyear period.
``(E)(i) Such system shall be designed to result in the same
aggregate amount of expenditures for such services, as estimated by the
Secretary, as would have been made for 2005 if this paragraph did not
apply.
``(ii) The adjustment made under subparagraph (B)(ii)(II) shall be
done in a manner to result in the same aggregate amount of expenditures
after such adjustment as would otherwise have been made for such
services for 2006 or 2007, respectively, as estimated by the Secretary,
if this paragraph did not apply.
``(F) Beginning with 2006, the Secretary shall annually increase
the basic case-mix adjusted payment amounts established under this
paragraph, by an amount determined by--
``(i) applying the estimated growth in expenditures for drugs
and biologicals (including erythropoietin) that are separately
billable to the component of the basic case-mix adjusted system
described in subparagraph (B)(ii); and
``(ii) converting the amount determined in clause (i) to an
increase applicable to the basic case-mix adjusted payment amounts
established under subparagraph (B).
Nothing in this paragraph shall be construed as providing for an update
to the composite rate component of the basic case-mix adjusted system
under subparagraph (B).
``(G) There shall be no administrative or judicial review under
section 1869, section 1878, or otherwise, of the case-mix system,
relative weights, payment amounts, the geographic adjustment factor, or
the update for the system established under this paragraph, or the
determination of the difference between medicare payment amounts and
acquisition costs for separately billed drugs and biologicals
(including erythropoietin) under this paragraph and paragraph (13).
``(13)(A) The payment amounts under this title for separately
billed drugs and biologicals furnished in a year, beginning with 2004,
are as follows:
``(i) For such drugs and biologicals (other than
erythropoietin) furnished in 2004, the amount determined under
section 1842(o)(1)(A)(v) for the drug or biological.
``(ii) For such drugs and biologicals (including
erythropoietin) furnished in 2005, the acquisition cost of the drug
or biological, as determined by the Inspector General reports to
the Secretary as required by section 623(c) of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003.
Insofar as the Inspector General has not determined the acquisition
cost with respect to a drug or biological, the Secretary shall
determine the payment amount for such drug or biological.
``(iii) For such drugs and biologicals (including
erythropoietin) furnished in 2006 and subsequent years, such
acquisition cost or the amount determined under section 1847A for
the drug or biological, as the Secretary may specify.
``(B)(i) Drugs and biologicals (including erythropoietin) which
were separately billed under this subsection on the day before the date
of the enactment of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 shall continue to be separately billed on and
after such date.
``(ii) Nothing in this paragraph, section 1842(o), section 1847A,
or section 1847B shall be construed as requiring or authorizing the
bundling of payment for drugs and biologicals into the basic case-mix
adjusted payment system under this paragraph.''.
(2) Paragraph (7) of such section is amended in the first sentence
by striking ``The Secretary'' and inserting ``Subject to paragraph
(12), the Secretary''.
(3) Paragraph (11)(B) of such section is amended by inserting
``subject to paragraphs (12) and (13)'' before ``payment for such
item''.
(e) Demonstration of Bundled Case-Mix Adjusted Payment System for
ESRD Services.--
(1) In general.--The Secretary shall establish a demonstration
project of the use of a fully case-mix adjusted payment system for
end stage renal disease services under section 1881 of the Social
Security Act (42 U.S.C. 1395rr) for patient characteristics
identified in the report under subsection (f) that bundles into
such payment rates amounts for--
(A) drugs and biologicals (including erythropoietin)
furnished to end stage renal disease patients under the
medicare program which are separately billed by end stage renal
disease facilities (as of the date of the enactment of this
Act); and
(B) clinical laboratory tests related to such drugs and
biologicals.
(2) Facilities included in the demonstration.--In conducting
the demonstration under this subsection, the Secretary shall ensure
the participation of a sufficient number of providers of dialysis
services and renal dialysis facilities, but in no case to exceed
500. In selecting such providers and facilities, the Secretary
shall ensure that the following types of providers are included in
the demonstration:
(A) Urban providers and facilities.
(B) Rural providers and facilities.
(C) Not-for-profit providers and facilities.
(D) For-profit providers and facilities.
(E) Independent providers and facilities.
(F) Specialty providers and facilities, including pediatric
providers and facilities and small providers and facilities.
(3) Temporary add-on payment for dialysis services furnished
under the demonstration.--
(A) In general.--During the period of the demonstration
project, the Secretary shall increase payment rates that would
otherwise apply under section 1881(b) of such Act (42 U.S.C.
1395rr(b)) by 1.6 percent for dialysis services furnished in
facilities in the demonstration site.
(B) Rules of construction.--Nothing in this subsection
shall be construed as--
(i) as an annual update under section 1881(b) of the
Social Security Act (42 U.S.C. 1395rr(b));
(ii) as increasing the baseline for payments under such
section; or
(iii) requiring the budget neutral implementation of
the demonstration project under this subsection.
(4) 3-year period.--The Secretary shall conduct the
demonstration under this subsection for the 3-year period beginning
on January 1, 2006.
(5) Use of advisory board.--
(A) In general.--In carrying out the demonstration under
this subsection, the Secretary shall establish an advisory
board comprised of representatives described in subparagraph
(B) to provide advice and recommendations with respect to the
establishment and operation of such demonstration.
(B) Representatives.--Representatives referred to in
subparagraph (A) include representatives of the following:
(i) Patient organizations.
(ii) Individuals with expertise in end stage renal
dialysis services, such as clinicians, economists, and
researchers.
(iii) The Medicare Payment Advisory Commission,
established under section 1805 of the Social Security Act
(42 U.S.C. 1395b-6).
(iv) The National Institutes of Health.
(v) Network organizations under section 1881(c) of the
Social Security Act (42 U.S.C. 1395rr(c)).
(vi) Medicare contractors to monitor quality of care.
(vii) Providers of services and renal dialysis
facilities furnishing end stage renal disease services.
(C) Termination of advisory panel.--The advisory panel
shall terminate on December 31, 2008.
(6) Authorization of appropriations.--There are authorized to
be appropriated, in appropriate part from the Federal Hospital
Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund, $5,000,000 in fiscal year 2006 to conduct the
demonstration under this subsection.
(f) Report on a Bundled Prospective Payment System for End Stage
Renal Disease Services.--
(1) Report.--
(A) In general.--Not later than October 1, 2005, the
Secretary shall submit to Congress a report detailing the
elements and features for the design and implementation of a
bundled prospective payment system for services furnished by
end stage renal disease facilities including, to the maximum
extent feasible, bundling of drugs, clinical laboratory tests,
and other items that are separately billed by such facilities.
The report shall include a description of the methodology to be
used for the establishment of payment rates, including
components of the new system described in paragraph (2).
(B) Recommendations.--The Secretary shall include in such
report recommendations on elements, features, and methodology
for a bundled prospective payment system or other issues
related to such system as the Secretary determines to be
appropriate.
(2) Elements and features of a bundled prospective payment
system.--The report required under paragraph (1) shall include the
following elements and features of a bundled prospective payment
system:
(A) Bundle of items and services.--A description of the
bundle of items and services to be included under the
prospective payment system.
(B) Case mix.--A description of the case-mix adjustment to
account for the relative resource use of different types of
patients.
(C) Wage index.--A description of an adjustment to account
for geographic differences in wages.
(D) Rural areas.--The appropriateness of establishing a
specific payment adjustment to account for additional costs
incurred by rural facilities.
(E) Other adjustments.--Such other adjustments as may be
necessary to reflect the variation in costs incurred by
facilities in caring for patients with end stage renal disease.
(F) Update framework.--A methodology for appropriate
updates under the prospective payment system.
(G) Additional recommendations.--Such other matters as the
Secretary determines to be appropriate.
SEC. 624. TWO-YEAR MORATORIUM ON THERAPY CAPS; PROVISIONS RELATING TO
REPORTS.
(a) Additional Moratorium on Therapy Caps.--
(1) 2004 and 2005.--Section 1833(g)(4) (42 U.S.C. 1395l(g)(4))
is amended by striking ``and 2002'' and inserting ``2002, 2004, and
2005''.
(2) Remainder of 2003.--For the period beginning on the date of
the enactment of this Act and ending of December 31, 2003, the
Secretary shall not apply the provisions of paragraphs (1), (2),
and (3) of section 1833(g) to expenses incurred with respect to
services described in such paragraphs during such period. Nothing
in the preceding sentence shall be construed as affecting the
application of such paragraphs by the Secretary before the date of
the enactment of this Act.
(b) Prompt Submission of Overdue Reports on Payment and Utilization
of Outpatient Therapy Services.--Not later than March 31, 2004, the
Secretary shall submit to Congress the reports required under section
4541(d)(2) of the Balanced Budget Act of 1997 (Public Law 105-33; 111
Stat. 457) (relating to alternatives to a single annual dollar cap on
outpatient therapy) and under section 221(d) of the Medicare, Medicaid,
and SCHIP Balanced Budget Refinement Act of 1999 (Appendix F, 113 Stat.
1501A-352), as enacted into law by section 1000(a)(6) of Public Law
106-113 (relating to utilization patterns for outpatient therapy).
(c) GAO Report Identifying Conditions and Diseases Justifying
Waiver of Therapy Cap.--
(1) Study.--The Comptroller General of the United States shall
identify conditions or diseases that may justify waiving the
application of the therapy caps under section 1833(g) of the Social
Security Act (42 U.S.C. 1395l(g)) with respect to such conditions
or diseases.
(2) Report to congress.--Not later than October 1, 2004, the
Comptroller General shall submit to Congress a report on the
conditions and diseases identified under paragraph (1), and shall
include a recommendation of criteria, with respect to such
conditions and disease, under which a waiver of the therapy caps
would apply.
SEC. 625. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN MILITARY
RETIREES; SPECIAL ENROLLMENT PERIOD.
(a) Waiver of Penalty.--
(1) In general.--Section 1839(b) (42 U.S.C. 1395r(b)) is
amended by adding at the end the following new sentence: ``No
increase in the premium shall be effected for a month in the case
of an individual who enrolls under this part during 2001, 2002,
2003, or 2004 and who demonstrates to the Secretary before December
31, 2004, that the individual is a covered beneficiary (as defined
in section 1072(5) of title 10, United States Code). The Secretary
of Health and Human Services shall consult with the Secretary of
Defense in identifying individuals described in the previous
sentence.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to premiums for months beginning with January 2004. The
Secretary shall establish a method for providing rebates of premium
penalties paid for months on or after January 2004 for which a
penalty does not apply under such amendment but for which a penalty
was previously collected.
(b) Medicare Part B Special Enrollment Period.--
(1) In general.--In the case of any individual who, as of the
date of the enactment of this Act, is eligible to enroll but is not
enrolled under part B of title XVIII of the Social Security Act and
is a covered beneficiary (as defined in section 1072(5) of title
10, United States Code), the Secretary of Health and Human Services
shall provide for a special enrollment period during which the
individual may enroll under such part. Such period shall begin as
soon as possible after the date of the enactment of this Act and
shall end on December 31, 2004.
(2) Coverage period.--In the case of an individual who enrolls
during the special enrollment period provided under paragraph (1),
the coverage period under part B of title XVIII of the Social
Security Act shall begin on the first day of the month following
the month in which the individual enrolls.
SEC. 626. PAYMENT FOR SERVICES FURNISHED IN AMBULATORY SURGICAL
CENTERS.
(a) Reductions in Payment Updates.--Section 1833(i)(2)(C) (42
U.S.C. 1395l(i)(2)(C)) is amended to read as follows:
``(C)(i) Notwithstanding the second sentence of each of
subparagraphs (A) and (B), except as otherwise specified in clauses
(ii), (iii), and (iv), if the Secretary has not updated amounts
established under such subparagraphs or under subparagraph (D), with
respect to facility services furnished during a fiscal year (beginning
with fiscal year 1986 or a calendar year (beginning with 2006)), such
amounts shall be increased by the percentage increase in the Consumer
Price Index for all urban consumers (U.S. city average) as estimated by
the Secretary for the 12-month period ending with the midpoint of the
year involved.
``(ii) In each of the fiscal years 1998 through 2002, the increase
under this subparagraph shall be reduced (but not below zero) by 2.0
percentage points.
``(iii) In fiscal year 2004, beginning with April 1, 2004, the
increase under this subparagraph shall be the Consumer Price Index for
all urban consumers (U.S. city average) as estimated by the Secretary
for the 12-month period ending with March 31, 2003, minus 3.0
percentage points.
``(iv) In fiscal year 2005, the last quarter of calendar year 2005,
and each of calendar years 2006 through 2009, the increase under this
subparagraph shall be 0 percent.''.
(b) Repeal of Survey Requirement and Implementation of New
System.--Section 1833(i)(2) (42 U.S.C. 1395l(i)(2)) is amended--
(1) in subparagraph (A)--
(A) in the matter preceding clause (i), by striking ``The''
and inserting ``For services furnished prior to the
implementation of the system described in subparagraph (D),
the''; and
(B) in clause (i), by striking ``taken not later than
January 1, 1995, and every 5 years thereafter,''; and
(2) by adding at the end the following new subparagraph:
``(D)(i) Taking into account the recommendations in the report
under section 626(d) of Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, the Secretary shall implement a revised
payment system for payment of surgical services furnished in ambulatory
surgical centers.
``(ii) In the year the system described in clause (i) is
implemented, such system shall be designed to result in the same
aggregate amount of expenditures for such services as would be made if
this subparagraph did not apply, as estimated by the Secretary.
``(iii) The Secretary shall implement the system described in
clause (i) for periods in a manner so that it is first effective
beginning on or after January 1, 2006, and not later than January 1,
2008.
``(iv) There shall be no administrative or judicial review under
section 1869, 1878, or otherwise, of the classification system, the
relative weights, payment amounts, and the geographic adjustment
factor, if any, under this subparagraph.''.
(c) Conforming Amendment.--Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)) is amended by adding the following new subparagraph:
``(G) with respect to facility services furnished in
connection with a surgical procedure specified pursuant to
subsection (i)(1)(A) and furnished to an individual in an
ambulatory surgical center described in such subsection, for
services furnished beginning with the implementation date of a
revised payment system for such services in such facilities
specified in subsection (i)(2)(D), the amounts paid shall be 80
percent of the lesser of the actual charge for the services or
the amount determined by the Secretary under such revised
payment system,''.
(d) GAO Study of Ambulatory Surgical Center Payments.--
(1) Study.--
(A) In general.--The Comptroller General of the United
States shall conduct a study that compares the relative costs
of procedures furnished in ambulatory surgical centers to the
relative costs of procedures furnished in hospital outpatient
departments under section 1833(t) of the Social Security Act
(42 U.S.C. 1395l(t)). The study shall also examine how
accurately ambulatory payment categories reflect procedures
furnished in ambulatory surgical centers.
(B) Consideration of asc data.--In conducting the study
under paragraph (1), the Comptroller General shall consider
data submitted by ambulatory surgical centers regarding the
matters described in clauses (i) through (iii) of paragraph
(2)(B).
(2) Report and recommendations.--
(A) Report.--Not later than January 1, 2005, the
Comptroller General shall submit to Congress a report on the
study conducted under paragraph (1).
(B) Recommendations.--The report submitted under
subparagraph (A) shall include recommendations on the following
matters:
(i) The appropriateness of using the groups of covered
services and relative weights established under the
outpatient prospective payment system as the basis of
payment for ambulatory surgical centers.
(ii) If the relative weights under such hospital
outpatient prospective payment system are appropriate for
such purpose--
(I) whether the payment rates for ambulatory
surgical centers should be based on a uniform
percentage of the payment rates or weights under such
outpatient system; or
(II) whether the payment rates for ambulatory
surgical centers should vary, or the weights should be
revised, based on specific procedures or types of
services (such as ophthalmology and pain management
services).
(iii) Whether a geographic adjustment should be used
for payment of services furnished in ambulatory surgical
centers, and if so, the labor and nonlabor shares of such
payment.
SEC. 627. PAYMENT FOR CERTAIN SHOES AND INSERTS UNDER THE FEE SCHEDULE
FOR ORTHOTICS AND PROSTHETICS.
(a) In General.--Section 1833(o) (42 U.S.C. 1395l(o)) is amended--
(1) in paragraph (1)(B), by striking ``no more than the limits
established under paragraph (2)'' and inserting ``no more than the
amount of payment applicable under paragraph (2)''; and
(2) in paragraph (2), to read as follows:
``(2)(A) Except as provided by the Secretary under subparagraphs
(B) and (C), the amount of payment under this paragraph for custom
molded shoes, extra-depth shoes, and inserts shall be the amount
determined for such items by the Secretary under section 1834(h).
``(B) The Secretary may establish payment amounts for shoes and
inserts that are lower than the amount established under section
1834(h) if the Secretary finds that shoes and inserts of an appropriate
quality are readily available at or below the amount established under
such section.
``(C) In accordance with procedures established by the Secretary,
an individual entitled to benefits with respect to shoes described in
section 1861(s)(12) may substitute modification of such shoes instead
of obtaining one (or more, as specified by the Secretary) pair of
inserts (other than the original pair of inserts with respect to such
shoes). In such case, the Secretary shall substitute, for the payment
amount established under section 1834(h), a payment amount that the
Secretary estimates will assure that there is no net increase in
expenditures under this subsection as a result of this subparagraph.''.
(b) Conforming Amendments.--(1) Section 1834(h)(4)(C) (42 U.S.C.
1395m(h)(4)(C)) is amended by inserting ``(and includes shoes described
in section 1861(s)(12))'' after ``in section 1861(s)(9)''.
(2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is amended by
striking subparagraph (C).
(c) Effective Date.--The amendments made by this section shall
apply to items furnished on or after January 1, 2005.
SEC. 628. PAYMENT FOR CLINICAL DIAGNOSTIC LABORATORY TESTS.
Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV)) is
amended by striking ``and 1998 through 2002'' and inserting ``, 1998
through 2002, and 2004 through 2008''.
SEC. 629. INDEXING PART B DEDUCTIBLE TO INFLATION.
The first sentence of section 1833(b) (42 U.S.C. 1395l(b)) is
amended by striking ``and $100 for 1991 and subsequent years'' and
inserting the following: ``, $100 for 1991 through 2004, $110 for 2005,
and for a subsequent year the amount of such deductible for the
previous year increased by the annual percentage increase in the
monthly actuarial rate under section 1839(a)(1) ending with such
subsequent year (rounded to the nearest $1)''.
SEC. 630. FIVE-YEAR AUTHORIZATION OF REIMBURSEMENT FOR ALL MEDICARE
PART B SERVICES FURNISHED BY CERTAIN INDIAN HOSPITALS AND
CLINICS.
Section 1880(e)(1)(A) (42 U.S.C. 1395qq(e)(1)(A)) is amended by
inserting ``(and for items and services furnished during the 5-year
period beginning on January 1, 2005, all items and services for which
payment may be made under part B)'' after ``for services described in
paragraph (2)''.
Subtitle D--Additional Demonstrations, Studies, and Other Provisions
SEC. 641. DEMONSTRATION PROJECT FOR COVERAGE OF CERTAIN PRESCRIPTION
DRUGS AND BIOLOGICALS.
(a) Demonstration Project.--The Secretary shall conduct a
demonstration project under part B of title XVIII of the Social
Security Act under which payment is made for drugs or biologicals that
are prescribed as replacements for drugs and biologicals described in
section 1861(s)(2)(A) or 1861(s)(2)(Q) of such Act (42 U.S.C.
1395x(s)(2)(A), 1395x(s)(2)(Q)), or both, for which payment is made
under such part. Such project shall provide for cost-sharing applicable
with respect to such drugs or biologicals in the same manner as cost-
sharing applies with respect to part D drugs under standard
prescription drug coverage (as defined in section 1860D-2(b) of the
Social Security Act, as added by section 101(a)).
(b) Demonstration Project Sites.--The project established under
this section shall be conducted in sites selected by the Secretary.
(c) Duration.--The Secretary shall conduct the demonstration
project for the 2-year period beginning on the date that is 90 days
after the date of the enactment of this Act, but in no case may the
project extend beyond December 31, 2005.
(d) Limitation.--Under the demonstration project over the duration
of the project, the Secretary may not provide--
(1) coverage for more than 50,000 patients; and
(2) more than $500,000,000 in funding.
(e) Report.--Not later than July 1, 2006, the Secretary shall
submit to Congress a report on the project. The report shall include an
evaluation of patient access to care and patient outcomes under the
project, as well as an analysis of the cost effectiveness of the
project, including an evaluation of the costs savings (if any) to the
medicare program attributable to reduced physicians' services and
hospital outpatient departments services for administration of the
biological.
SEC. 642. EXTENSION OF COVERAGE OF INTRAVENOUS IMMUNE GLOBULIN (IVIG)
FOR THE TREATMENT OF PRIMARY IMMUNE DEFICIENCY DISEASES
IN THE HOME.
(a) In General.--Section 1861 (42 U.S.C. 1395x), as amended by
sections 611(a) and 612(a) is amended--
(1) in subsection (s)(2)--
(A) by striking ``and'' at the end of subparagraph (X);
(B) by adding ``and'' at the end of subparagraph (Y); and
(C) by adding at the end the following new subparagraph:
``(Z) intravenous immune globulin for the treatment of
primary immune deficiency diseases in the home (as defined in
subsection (zz));''; and
(2) by adding at the end the following new subsection:
``Intravenous Immune Globulin
``(zz) The term `intravenous immune globulin' means an approved
pooled plasma derivative for the treatment in the patient's home of a
patient with a diagnosed primary immune deficiency disease, but not
including items or services related to the administration of the
derivative, if a physician determines administration of the derivative
in the patient's home is medically appropriate.''.
(b) Payment as a Drug or Biological.--Section 1833(a)(1)(S) (42
U.S.C. 1395l(a)(1)(S)) is amended by inserting ``(including intravenous
immune globulin (as defined in section 1861(zz)))'' after ``with
respect to drugs and biologicals''.
(c) Effective Date.--The amendments made by this section shall
apply to items furnished administered on or after January 1, 2004.
SEC. 643. MEDPAC STUDY OF COVERAGE OF SURGICAL FIRST ASSISTING SERVICES
OF CERTIFIED REGISTERED NURSE FIRST ASSISTANTS.
(a) Study.--The Medicare Payment Advisory Commission (in this
section referred to as the ``Commission'') shall conduct a study on the
feasibility and advisability of providing for payment under part B of
title XVIII of the Social Security Act for surgical first assisting
services furnished by a certified registered nurse first assistant to
medicare beneficiaries.
(b) Report.--Not later than January 1, 2005, the Commission shall
submit to Congress a report on the study conducted under subsection (a)
together with recommendations for such legislation or administrative
action as the Commission determines to be appropriate.
(c) Definitions.--In this section:
(1) Surgical first assisting services.--The term ``surgical
first assisting services'' means services consisting of first
assisting a physician with surgery and related preoperative,
intraoperative, and postoperative care (as determined by the
Secretary) furnished by a certified registered nurse first
assistant (as defined in paragraph (2)) which the certified
registered nurse first assistant is legally authorized to perform
by the State in which the services are performed.
(2) Certified registered nurse first assistant.--The term
``certified registered nurse first assistant'' means an individual
who--
(A) is a registered nurse and is licensed to practice
nursing in the State in which the surgical first assisting
services are performed;
(B) has completed a minimum of 2,000 hours of first
assisting a physician with surgery and related preoperative,
intraoperative, and postoperative care; and
(C) is certified as a registered nurse first assistant by
an organization recognized by the Secretary.
SEC. 644. MEDPAC STUDY OF PAYMENT FOR CARDIO-THORACIC SURGEONS.
(a) Study.--The Medicare Payment Advisory Commission (in this
section referred to as the ``Commission'') shall conduct a study on the
practice expense relative values established by the Secretary of Health
and Human Services under the medicare physician fee schedule under
section 1848 of the Social Security Act (42 U.S.C. 1395w-4) for
physicians in the specialties of thoracic and cardiac surgery to
determine whether such values adequately take into account the
attendant costs that such physicians incur in providing clinical staff
for patient care in hospitals.
(b) Report.--Not later than January 1, 2005, the Commission shall
submit to Congress a report on the study conducted under subsection (a)
together with recommendations for such legislation or administrative
action as the Commission determines to be appropriate.
SEC. 645. STUDIES RELATING TO VISION IMPAIRMENTS.
(a) Coverage of Outpatient Vision Services Furnished by Vision
Rehabilitation Professionals Under Part B.--
(1) Study.--The Secretary shall conduct a study to determine
the feasibility and advisability of providing for payment for
vision rehabilitation services furnished by vision rehabilitation
professionals.
(2) Report.--Not later than January 1, 2005, the Secretary
shall submit to Congress a report on the study conducted under
paragraph (1) together with recommendations for such legislation or
administrative action as the Secretary determines to be
appropriate.
(3) Vision rehabilitation professional defined.--In this
subsection, the term ``vision rehabilitation professional'' means
an orientation and mobility specialist, a rehabilitation teacher,
or a low vision therapist.
(b) Report on Appropriateness of a Demonstration Project To Test
Feasibility of Using PPO Networks To Reduce Costs of Acquiring
Eyeglasses for Medicare Beneficiaries After Cataract Surgery.--Not
later than 1 year after the date of the enactment of this Act, the
Secretary shall submit to Congress a report on the feasibility of
establishing a two-year demonstration project under which the Secretary
enters into arrangements with vision care preferred provider
organization networks to furnish and pay for conventional eyeglasses
subsequent to each cataract surgery with insertion of an intraocular
lens on behalf of Medicare beneficiaries. In such report, the Secretary
shall include an estimate of potential cost savings to the Medicare
program through the use of such networks, taking into consideration
quality of service and beneficiary access to services offered by vision
care preferred provider organization networks.
SEC. 646. MEDICARE HEALTH CARE QUALITY DEMONSTRATION PROGRAMS.
Title XVIII (42 U.S.C. 1395 et seq.) is amended by inserting after
section 1866B the following new section:
``health care quality demonstration program
``Sec. 1866C. (a) Definitions.--In this section:
``(1) Beneficiary.--The term `beneficiary' means an individual
who is entitled to benefits under part A and enrolled under part B,
including any individual who is enrolled in a Medicare Advantage
plan under part C.
``(2) Health care group.--
``(A) In general.--The term `health care group' means--
``(i) a group of physicians that is organized at least
in part for the purpose of providing physician's services
under this title;
``(ii) an integrated health care delivery system that
delivers care through coordinated hospitals, clinics, home
health agencies, ambulatory surgery centers, skilled
nursing facilities, rehabilitation facilities and clinics,
and employed, independent, or contracted physicians; or
``(iii) an organization representing regional
coalitions of groups or systems described in clause (i) or
(ii).
``(B) Inclusion.--As the Secretary determines appropriate,
a health care group may include a hospital or any other
individual or entity furnishing items or services for which
payment may be made under this title that is affiliated with
the health care group under an arrangement structured so that
such hospital, individual, or entity participates in a
demonstration project under this section.
``(3) Physician.--Except as otherwise provided for by the
Secretary, the term `physician' means any individual who furnishes
services that may be paid for as physicians' services under this
title.
``(b) Demonstration Projects.--The Secretary shall establish a 5-
year demonstration program under which the Secretary shall approve
demonstration projects that examine health delivery factors that
encourage the delivery of improved quality in patient care, including--
``(1) the provision of incentives to improve the safety of care
provided to beneficiaries;
``(2) the appropriate use of best practice guidelines by
providers and services by beneficiaries;
``(3) reduced scientific uncertainty in the delivery of care
through the examination of variations in the utilization and
allocation of services, and outcomes measurement and research;
``(4) encourage shared decision making between providers and
patients;
``(5) the provision of incentives for improving the quality and
safety of care and achieving the efficient allocation of resources;
``(6) the appropriate use of culturally and ethnically
sensitive health care delivery; and
``(7) the financial effects on the health care marketplace of
altering the incentives for care delivery and changing the
allocation of resources.
``(c) Administration by Contract.--
``(1) In general.--Except as otherwise provided in this
section, the Secretary may administer the demonstration program
established under this section in a manner that is similar to the
manner in which the demonstration program established under section
1866A is administered in accordance with section 1866B.
``(2) Alternative payment systems.--A health care group that
receives assistance under this section may, with respect to the
demonstration project to be carried out with such assistance,
include proposals for the use of alternative payment systems for
items and services provided to beneficiaries by the group that are
designed to--
``(A) encourage the delivery of high quality care while
accomplishing the objectives described in subsection (b); and
``(B) streamline documentation and reporting requirements
otherwise required under this title.
``(3) Benefits.--A health care group that receives assistance
under this section may, with respect to the demonstration project
to be carried out with such assistance, include modifications to
the package of benefits available under the original medicare fee-
for-service program under parts A and B or the package of benefits
available through a Medicare Advantage plan under part C. The
criteria employed under the demonstration program under this
section to evaluate outcomes and determine best practice guidelines
and incentives shall not be used as a basis for the denial of
medicare benefits under the demonstration program to patients
against their wishes (or if the patient is incompetent, against the
wishes of the patient's surrogate) on the basis of the patient's
age or expected length of life or of the patient's present or
predicted disability, degree of medical dependency, or quality of
life.
``(d) Eligibility Criteria.--To be eligible to receive assistance
under this section, an entity shall--
``(1) be a health care group;
``(2) meet quality standards established by the Secretary,
including--
``(A) the implementation of continuous quality improvement
mechanisms that are aimed at integrating community-based
support services, primary care, and referral care;
``(B) the implementation of activities to increase the
delivery of effective care to beneficiaries;
``(C) encouraging patient participation in preference-based
decisions;
``(D) the implementation of activities to encourage the
coordination and integration of medical service delivery; and
``(E) the implementation of activities to measure and
document the financial impact on the health care marketplace of
altering the incentives of health care delivery and changing
the allocation of resources; and
``(3) meet such other requirements as the Secretary may
establish.
``(e) Waiver Authority.--The Secretary may waive such requirements
of titles XI and XVIII as may be necessary to carry out the purposes of
the demonstration program established under this section.
``(f) Budget Neutrality.--With respect to the 5-year period of the
demonstration program under subsection (b), the aggregate expenditures
under this title for such period shall not exceed the aggregate
expenditures that would have been expended under this title if the
program established under this section had not been implemented.
``(g) Notice Requirements.--In the case of an individual that
receives health care items or services under a demonstration program
carried out under this section, the Secretary shall ensure that such
individual is notified of any waivers of coverage or payment rules that
are applicable to such individual under this title as a result of the
participation of the individual in such program.
``(h) Participation and Support by Federal Agencies.--In carrying
out the demonstration program under this section, the Secretary may
direct--
``(1) the Director of the National Institutes of Health to
expand the efforts of the Institutes to evaluate current medical
technologies and improve the foundation for evidence-based
practice;
``(2) the Administrator of the Agency for Healthcare Research
and Quality to, where possible and appropriate, use the program
under this section as a laboratory for the study of quality
improvement strategies and to evaluate, monitor, and disseminate
information relevant to such program; and
``(3) the Administrator of the Centers for Medicare & Medicaid
Services and the Administrator of the Center for Medicare Choices
to support linkages of relevant medicare data to registry
information from participating health care groups for the
beneficiary populations served by the participating groups, for
analysis supporting the purposes of the demonstration program,
consistent with the applicable provisions of the Health Insurance
Portability and Accountability Act of 1996.''.
SEC. 647. MEDPAC STUDY ON DIRECT ACCESS TO PHYSICAL THERAPY SERVICES.
(a) Study.--The Medicare Payment Advisory Commission (in this
section referred to as the ``Commission'') shall conduct a study on the
feasibility and advisability of allowing medicare fee-for-service
beneficiaries direct access to outpatient physical therapy services and
physical therapy services furnished as comprehensive rehabilitation
facility services.
(b) Report.--Not later than January 1, 2005, the Commission shall
submit to Congress a report on the study conducted under subsection (a)
together with recommendations for such legislation or administrative
action as the Commission determines to be appropriate.
(c) Direct Access Defined.--The term ``direct access'' means, with
respect to outpatient physical therapy services and physical therapy
services furnished as comprehensive outpatient rehabilitation facility
services, coverage of and payment for such services in accordance with
the provisions of title XVIII of the Social Security Act, except that
sections 1835(a)(2), 1861(p), and 1861(cc) of such Act (42 U.S.C.
1395n(a)(2), 1395x(p), and 1395x(cc), respectively) shall be applied--
(1) without regard to any requirement that--
(A) an individual be under the care of (or referred by) a
physician; or
(B) services be provided under the supervision of a
physician; and
(2) by allowing a physician or a qualified physical therapist
to satisfy any requirement for--
(A) certification and recertification; and
(B) establishment and periodic review of a plan of care.
SEC. 648. DEMONSTRATION PROJECT FOR CONSUMER-DIRECTED CHRONIC
OUTPATIENT SERVICES.
(a) Establishment.--
(1) In general.--Subject to the succeeding provisions of this
section, the Secretary shall establish demonstration projects (in
this section referred to as ``demonstration projects'') under which
the Secretary shall evaluate methods that improve the quality of
care provided to individuals with chronic conditions and that
reduce expenditures that would otherwise be made under the medicare
program on behalf of such individuals for such chronic conditions,
such methods to include permitting those beneficiaries to direct
their own health care needs and services.
(2) Individuals with chronic conditions defined.--In this
section, the term ``individuals with chronic conditions'' means an
individual entitled to benefits under part A of title XVIII of the
Social Security Act, and enrolled under part B of such title, but
who is not enrolled under part C of such title who is diagnosed as
having one or more chronic conditions (as defined by the
Secretary), such as diabetes.
(b) Design of Projects.--
(1) Evaluation before implementation of project.--
(A) In general.--In establishing the demonstration projects
under this section, the Secretary shall evaluate best practices
employed by group health plans and practices under State plans
for medical assistance under the medicaid program under title
XIX of the Social Security Act, as well as best practices in
the private sector or other areas, of methods that permit
patients to self-direct the provision of personal care
services. The Secretary shall evaluate such practices for a 1-
year period and, based on such evaluation, shall design the
demonstration project.
(B) Requirement for estimate of budget neutral costs.--As
part of the evaluation under subparagraph (A), the Secretary
shall evaluate the costs of furnishing care under the projects.
The Secretary may not implement the demonstration projects
under this section unless the Secretary determines that the
costs of providing care to individuals with chronic conditions
under the project will not exceed the costs, in the aggregate,
of furnishing care to such individuals under title XVIII of the
Social Security Act, that would otherwise be paid without
regard to the demonstration projects for the period of the
project.
(2) Scope of services.--The Secretary shall determine the
appropriate scope of personal care services that would apply under
the demonstration projects.
(c) Voluntary Participation.--Participation of providers of
services and suppliers, and of individuals with chronic conditions, in
the demonstration projects shall be voluntary.
(d) Demonstration Projects Sites.--Not later than 2 years after the
date of the enactment of this Act, the Secretary shall conduct a
demonstration project in at least one area that the Secretary
determines has a population of individuals entitled to benefits under
part A of title XVIII of the Social Security Act, and enrolled under
part B of such title, with a rate of incidence of diabetes that
significantly exceeds the national average rate of all areas.
(e) Evaluation and Report.--
(1) Evaluations.--The Secretary shall conduct evaluations of
the clinical and cost effectiveness of the demonstration projects.
(2) Reports.--Not later than 2 years after the commencement of
the demonstration projects, and biannually thereafter, the
Secretary shall submit to Congress a report on the evaluation, and
shall include in the report the following:
(A) An analysis of the patient outcomes and costs of
furnishing care to the individuals with chronic conditions
participating in the projects as compared to such outcomes and
costs to other individuals for the same health conditions.
(B) Evaluation of patient satisfaction under the
demonstration projects.
(C) Such recommendations regarding the extension,
expansion, or termination of the projects as the Secretary
determines appropriate.
(f) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) to such extent and for such period as the Secretary
determines is necessary to conduct demonstration projects.
(g) Authorization of Appropriations.--(1) Payments for the costs of
carrying out the demonstration project under this section shall be made
from the Federal Supplementary Medical Insurance Trust Fund under
section 1841 of such Act (42 U.S.C. 1395t).
(2) There are authorized to be appropriated from such Trust Fund
such sums as may be necessary for the Secretary to enter into contracts
with appropriate organizations for the deign, implementation, and
evaluation of the demonstration project.
(3) In no case may expenditures under this section exceed the
aggregate expenditures that would otherwise have been made for the
provision of personal care services.
SEC. 649. MEDICARE CARE MANAGEMENT PERFORMANCE DEMONSTRATION.
(a) Establishment.--
(1) In general.--The Secretary shall establish a pay-for-
performance demonstration program with physicians to meet the needs
of eligible beneficiaries through the adoption and use of health
information technology and evidence-based outcomes measures for--
(A) promoting continuity of care;
(B) helping stabilize medical conditions;
(C) preventing or minimizing acute exacerbations of chronic
conditions; and
(D) reducing adverse health outcomes, such as adverse drug
interactions related to polypharmacy.
(2) Sites.--The Secretary shall designate no more than 4 sites
at which to conduct the demonstration program under this section,
of which--
(A) two shall be in an urban area;
(B) one shall be in a rural area; and
(C) one shall be in a State with a medical school with a
Department of Geriatrics that manages rural outreach sites and
is capable of managing patients with multiple chronic
conditions, one of which is dementia.
(3) Duration.--The Secretary shall conduct the demonstration
program under this section for a 3-year period.
(4) Consultation.--In carrying out the demonstration program
under this section, the Secretary shall consult with private sector
and non-profit groups that are undertaking similar efforts to
improve quality and reduce avoidable hospitalizations for
chronically ill patients.
(b) Participation.--
(1) In general.--A physician who provides care for a minimum
number of eligible beneficiaries (as specified by the Secretary)
may participate in the demonstration program under this section if
such physician agrees, to phase-in over the course of the 3-year
demonstration period and with the assistance provided under
subsection (d)(2)--
(A) the use of health information technology to manage the
clinical care of eligible beneficiaries consistent with
paragraph (3); and
(B) the electronic reporting of clinical quality and
outcomes measures in accordance with requirements established
by the Secretary under the demonstration program.
(2) Special rule.--In the case of the sites referred to in
subparagraphs (B) and (C) of subsection (a)(2), a physician who
provides care for a minimum number of beneficiaries with two or
more chronic conditions, including dementia (as specified by the
Secretary), may participate in the program under this section if
such physician agrees to the requirements in subparagraphs (A) and
(B) of paragraph (1).
(3) Practice standards.--Each physician participating in the
demonstration program under this section must demonstrate the
ability--
(A) to assess each eligible beneficiary for conditions
other than chronic conditions, such as impaired cognitive
ability and co-morbidities, for the purposes of developing care
management requirements;
(B) to serve as the primary contact of eligible
beneficiaries in accessing items and services for which payment
may be made under the medicare program;
(C) to establish and maintain health care information
system for such beneficiaries;
(D) to promote continuity of care across providers and
settings;
(E) to use evidence-based guidelines and meet such clinical
quality and outcome measures as the Secretary shall require;
(F) to promote self-care through the provision of patient
education and support for patients or, where appropriate,
family caregivers;
(G) when appropriate, to refer such beneficiaries to
community service organizations; and
(H) to meet such other complex care management requirements
as the Secretary may specify.
The guidelines and measures required under subparagraph (E) shall
be designed to take into account beneficiaries with multiple
chronic conditions.
(c) Payment Methodology.--Under the demonstration program under
this section the Secretary shall pay a per beneficiary amount to each
participating physician who meets or exceeds specific performance
standards established by the Secretary with respect to the clinical
quality and outcome measures reported under subsection (b)(1)(B). Such
amount may vary based on different levels of performance or
improvement.
(d) Administration.--
(1) Use of quality improvement organizations.--The Secretary
shall contract with quality improvement organizations or such other
entities as the Secretary deems appropriate to enroll physicians
and evaluate their performance under the demonstration program
under this section.
(2) Technical assistance.--The Secretary shall require in such
contracts that the contractor be responsible for technical
assistance and education as needed to physicians enrolled in the
demonstration program under this section for the purpose of aiding
their adoption of health information technology, meeting practice
standards, and implementing required clinical and outcomes
measures.
(e) Funding.--
(1) In general.--The Secretary shall provide for the transfer
from the Federal Supplementary Medical Insurance Trust Fund
established under section 1841 of the Social Security Act (42
U.S.C. 1395t) of such funds as are necessary for the costs of
carrying out the demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration program
under this section, the Secretary shall ensure that the aggregate
payments made by the Secretary do not exceed the amount which the
Secretary estimates would have been paid if the demonstration
program under this section was not implemented.
(f) Waiver Authority.--The Secretary may waive such requirements of
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.
and 1395 et seq.) as may be necessary for the purpose of carrying out
the demonstration program under this section.
(g) Report.--Not later than 12 months after the date of completion
of the demonstration program under this section, the Secretary shall
submit to Congress a report on such program, together with
recommendations for such legislation and administrative action as the
Secretary determines to be appropriate.
(h) Definitions.--In this section:
(1) Eligible beneficiary.--The term ``eligible beneficiary''
means any individual who--
(A) is entitled to benefits under part A and enrolled for
benefits under part B of title XVIII of the Social Security Act
and is not enrolled in a plan under part C of such title; and
(B) has one or more chronic medical conditions specified by
the Secretary (one of which may be cognitive impairment).
(2) Health information technology.--The term ``health
information technology'' means email communication, clinical alerts
and reminders, and other information technology that meets such
functionality, interoperability, and other standards as prescribed
by the Secretary.
SEC. 650. GAO STUDY AND REPORT ON THE PROPAGATION OF CONCIERGE CARE.
(a) Study.--
(1) In general.--The Comptroller General of the United States
shall conduct a study on concierge care (as defined in paragraph
(2)) to determine the extent to which such care--
(A) is used by medicare beneficiaries (as defined in
section 1802(b)(5)(A) of the Social Security Act (42 U.S.C.
1395a(b)(5)(A))); and
(B) has impacted upon the access of medicare beneficiaries
(as so defined) to items and services for which reimbursement
is provided under the medicare program under title XVIII of the
Social Security Act (42 U.S.C. 1395 et seq.).
(2) Concierge care.--In this section, the term ``concierge
care'' means an arrangement under which, as a prerequisite for the
provision of a health care item or service to an individual, a
physician, practitioner (as described in section 1842(b)(18)(C) of
the Social Security Act (42 U.S.C. 1395u(b)(18)(C))), or other
individual--
(A) charges a membership fee or another incidental fee to
an individual desiring to receive the health care item or
service from such physician, practitioner, or other individual;
or
(B) requires the individual desiring to receive the health
care item or service from such physician, practitioner, or
other individual to purchase an item or service.
(b) Report.--Not later than the date that is 12 months after the
date of enactment of this Act, the Comptroller General of the United
States shall submit to Congress a report on the study conducted under
subsection (a)(1) together with such recommendations for legislative or
administrative action as the Comptroller General determines to be
appropriate.
SEC. 651. DEMONSTRATION OF COVERAGE OF CHIROPRACTIC SERVICES UNDER
MEDICARE.
(a) Definitions.--In this section:
(1) Chiropractic services.--The term ``chiropractic services''
has the meaning given that term by the Secretary for purposes of
the demonstration projects, but shall include, at a minimum--
(A) care for neuromusculoskeletal conditions typical among
eligible beneficiaries; and
(B) diagnostic and other services that a chiropractor is
legally authorized to perform by the State or jurisdiction in
which such treatment is provided.
(2) Demonstration project.--The term ``demonstration project''
means a demonstration project established by the Secretary under
subsection (b)(1).
(3) Eligible beneficiary.--The term ``eligible beneficiary''
means an individual who is enrolled under part B of the medicare
program.
(4) Medicare program.--The term ``medicare program'' means the
health benefits program under title XVIII of the Social Security
Act (42 U.S.C. 1395 et seq.).
(b) Demonstration of Coverage of Chiropractic Services Under
Medicare.--
(1) Establishment.--The Secretary shall establish demonstration
projects in accordance with the provisions of this section for the
purpose of evaluating the feasibility and advisability of covering
chiropractic services under the medicare program (in addition to
the coverage provided for services consisting of treatment by means
of manual manipulation of the spine to correct a subluxation
described in section 1861(r)(5) of the Social Security Act (42
U.S.C. 1395x(r)(5))).
(2) No physician approval required.--In establishing the
demonstration projects, the Secretary shall ensure that an eligible
beneficiary who participates in a demonstration project, including
an eligible beneficiary who is enrolled for coverage under a
Medicare+Choice plan (or, on and after January 1, 2006, under a
Medicare Advantage plan), is not required to receive approval from
a physician or other health care provider in order to receive a
chiropractic service under a demonstration project.
(3) Consultation.--In establishing the demonstration projects,
the Secretary shall consult with chiropractors, organizations
representing chiropractors, eligible beneficiaries, and
organizations representing eligible beneficiaries.
(4) Participation.--Any eligible beneficiary may participate in
the demonstration projects on a voluntary basis.
(c) Conduct of Demonstration Projects.--
(1) Demonstration sites.--
(A) Selection of demonstration sites.--The Secretary shall
conduct demonstration projects at 4 demonstration sites.
(B) Geographic diversity.--Of the sites described in
subparagraph (A)--
(i) two shall be in rural areas; and
(ii) two shall be in urban areas.
(C) Sites located in hpsas.--At least 1 site described in
clause (i) of subparagraph (B) and at least 1 site described in
clause (ii) of such subparagraph shall be located in an area
that is designated under section 332(a)(1)(A) of the Public
Health Service Act (42 U.S.C. 254e(a)(1)(A)) as a health
professional shortage area.
(2) Implementation; duration.--
(A) Implementation.--The Secretary shall not implement the
demonstration projects before October 1, 2004.
(B) Duration.--The Secretary shall complete the
demonstration projects by the date that is 2 years after the
date on which the first demonstration project is implemented.
(d) Evaluation and Report.--
(1) Evaluation.--The Secretary shall conduct an evaluation of
the demonstration projects--
(A) to determine whether eligible beneficiaries who use
chiropractic services use a lesser overall amount of items and
services for which payment is made under the medicare program
than eligible beneficiaries who do not use such services;
(B) to determine the cost of providing payment for
chiropractic services under the medicare program;
(C) to determine the satisfaction of eligible beneficiaries
participating in the demonstration projects and the quality of
care received by such beneficiaries; and
(D) to evaluate such other matters as the Secretary
determines is appropriate.
(2) Report.--Not later than the date that is 1 year after the
date on which the demonstration projects conclude, the Secretary
shall submit to Congress a report on the evaluation conducted under
paragraph (1) together with such recommendations for legislation or
administrative action as the Secretary determines is appropriate.
(e) Waiver of Medicare Requirements.--The Secretary shall waive
compliance with such requirements of the medicare program to the extent
and for the period the Secretary finds necessary to conduct the
demonstration projects.
(f) Funding.--
(1) Demonstration projects.--
(A) In general.--Subject to subparagraph (B) and paragraph
(2), the Secretary shall provide for the transfer from the
Federal Supplementary Insurance Trust Fund under section 1841
of the Social Security Act (42 U.S.C. 1395t) of such funds as
are necessary for the costs of carrying out the demonstration
projects under this section.
(B) Limitation.--In conducting the demonstration projects
under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary under the medicare
program do not exceed the amount which the Secretary would have
paid under the medicare program if the demonstration projects
under this section were not implemented.
(2) Evaluation and report.--There are authorized to be
appropriated such sums as are necessary for the purpose of
developing and submitting the report to Congress under subsection
(d).
TITLE VII--PROVISIONS RELATING TO PARTS A AND B
Subtitle A--Home Health Services
SEC. 701. UPDATE IN HOME HEALTH SERVICES.
(a) Change to Calendar Year Update.--Section 1895(b) (42 U.S.C.
1395fff(b)(3)) is amended--
(1) in paragraph (3)(B)(i)--
(A) by striking ``each fiscal year (beginning with fiscal
year 2002)'' and inserting ``fiscal year 2002 and for fiscal
year 2003 and for each subsequent year (beginning with 2004)'';
and
(B) by inserting ``or year'' after ``the fiscal year'';
(2) in paragraph (3)(B)(ii)--
(A) in subclause (I), by striking ``or'' at the end;
(B) by redesignating subclause (II) as subclause (III);
(C) in subclause (III), as so redesignated, by striking
``any subsequent fiscal year'' and inserting ``2004 and any
subsequent year''; and
(D) by inserting after subclause (I) the following new
subclause:
``(II) for the last calendar quarter of 2003 and
the first calendar quarter of 2004, the home health
market basket percentage increase; or'';
(3) in paragraph (3)(B)(iii), by inserting ``or year'' after
``fiscal year'' each place it appears; and
(4) in paragraph (3)(B)(iv)--
(A) by inserting ``or year'' after ``fiscal year'' each
place it appears; and
(B) by inserting ``or years'' after ``fiscal years''; and
(5) in paragraph (5), by inserting ``or year'' after ``fiscal
year''.
(b) Adjustment to Updates for 2004, 2005, and 2006.--Section
1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as amended by
subsection (a)(2), is amended--
(1) by striking ``or'' at the end of subclause (II);
(2) by redesignating subclause (III) as subclause (IV);
(3) in subclause (IV), as so redesignated, by striking ``2004''
and inserting ``2007''; and
(4) by inserting after subclause (II) the following new
subclause:
``(III) the last 3 calendar quarters of 2004, and
each of 2005 and 2006 the home health market basket
percentage increase minus 0.8 percentage points; or''.
SEC. 702. DEMONSTRATION PROJECT TO CLARIFY THE DEFINITION OF HOMEBOUND.
(a) Demonstration Project.--Not later than 180 days after the date
of the enactment of this Act, the Secretary shall conduct a 2-year
demonstration project under part B of title XVIII of the Social
Security Act under which medicare beneficiaries with chronic conditions
described in subsection (b) are deemed to be homebound for purposes of
receiving home health services under the medicare program.
(b) Medicare Beneficiary Described.--For purposes of subsection
(a), a medicare beneficiary is eligible to be deemed to be homebound,
without regard to the purpose, frequency, or duration of absences from
the home, if--
(1) the beneficiary has been certified by one physician as an
individual who has a permanent and severe, disabling condition that
is not expected to improve;
(2) the beneficiary is dependent upon assistance from another
individual with at least 3 out of the 5 activities of daily living
for the rest of the beneficiary's life;
(3) the beneficiary requires skilled nursing services for the
rest of the beneficiary's life and the skilled nursing is more than
medication management;
(4) an attendant is required to visit the beneficiary on a
daily basis to monitor and treat the beneficiary's medical
condition or to assist the beneficiary with activities of daily
living;
(5) the beneficiary requires technological assistance or the
assistance of another person to leave the home; and
(6) the beneficiary does not regularly work in a paid position
full-time or part-time outside the home.
(c) Demonstration Project Sites.--The demonstration project
established under this section shall be conducted in 3 States selected
by the Secretary to represent the Northeast, Midwest, and Western
regions of the United States.
(d) Limitation on Number of Participants.--The aggregate number of
such beneficiaries that may participate in the project may not exceed
15,000.
(e) Data.--The Secretary shall collect such data on the
demonstration project with respect to the provision of home health
services to medicare beneficiaries that relates to quality of care,
patient outcomes, and additional costs, if any, to the medicare
program.
(f) Report to Congress.--Not later than 1 year after the date of
the completion of the demonstration project under this section, the
Secretary shall submit to Congress a report on the project using the
data collected under subsection (e). The report shall include the
following:
(1) An examination of whether the provision of home health
services to medicare beneficiaries under the project has had any of
the following effects:
(A) Has adversely affected the provision of home health
services under the medicare program.
(B) Has directly caused an increase of expenditures under
the medicare program for the provision of such services that is
directly attributable to such clarification.
(2) The specific data evidencing the amount of any increase in
expenditures that is directly attributable to the demonstration
project (expressed both in absolute dollar terms and as a
percentage) above expenditures that would otherwise have been
incurred for home health services under the medicare program.
(3) Specific recommendations to exempt permanently and severely
disabled homebound beneficiaries from restrictions on the length,
frequency, and purpose of their absences from the home to qualify
for home health services without incurring additional costs to the
medicare program.
(g) Waiver Authority.--The Secretary shall waive compliance with
the requirements of title XVIII of the Social Security Act (42 U.S.C.
1395 et seq.) to such extent and for such period as the Secretary
determines is necessary to conduct demonstration projects.
(h) Construction.--Nothing in this section shall be construed as
waiving any applicable civil monetary penalty, criminal penalty, or
other remedy available to the Secretary under title XI or title XVIII
of the Social Security Act for acts prohibited under such titles,
including penalties for false certifications for purposes of receipt of
items or services under the medicare program.
(i) Authorization of Appropriations.--Payments for the costs of
carrying out the demonstration project under this section shall be made
from the Federal Supplementary Medical Insurance Trust Fund under
section 1841 of such Act (42 U.S.C. 1395t).
(j) Definitions.--In this section:
(1) Medicare beneficiary.--The term ``medicare beneficiary''
means an individual who is enrolled under part B of title XVIII of
the Social Security Act.
(2) Home health services.--The term ``home health services''
has the meaning given such term in section 1861(m) of the Social
Security Act (42 U.S.C. 1395x(m)).
(3) Activities of daily living defined.--The term ``activities
of daily living'' means eating, toileting, transferring, bathing,
and dressing.
SEC. 703. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY-CARE SERVICES.
(a) Establishment.--Subject to the succeeding provisions of this
section, the Secretary shall establish a demonstration project (in this
section referred to as the ``demonstration project'') under which the
Secretary shall, as part of a plan of an episode of care for home
health services established for a medicare beneficiary, permit a home
health agency, directly or under arrangements with a medical adult day-
care facility, to provide medical adult day-care services as a
substitute for a portion of home health services that would otherwise
be provided in the beneficiary's home.
(b) Payment.--
(1) In general.--Subject to paragraph (2), the amount of
payment for an episode of care for home health services, a portion
of which consists of substitute medical adult day-care services,
under the demonstration project shall be made at a rate equal to 95
percent of the amount that would otherwise apply for such home
health services under section 1895 of the Social Security Act (42
U.S.C. 1395fff). In no case may a home health agency, or a medical
adult day-care facility under arrangements with a home health
agency, separately charge a beneficiary for medical adult day-care
services furnished under the plan of care.
(2) Adjustment in case of overutilization of substitute adult
day-care services to ensure budget neutrality.--The Secretary shall
monitor the expenditures under the demonstration project and under
title XVIII of the Social Security Act for home health services. If
the Secretary estimates that the total expenditures under the
demonstration project and under such title XVIII for home health
services for a period determined by the Secretary exceed
expenditures that would have been made under such title XVIII for
home health services for such period if the demonstration project
had not been conducted, the Secretary shall adjust the rate of
payment to medical adult day-care facilities under paragraph (1) in
order to eliminate such excess.
(c) Demonstration Project Sites.--The demonstration project
established under this section shall be conducted in not more than 5
sites in States selected by the Secretary that license or certify
providers of services that furnish medical adult day-care services.
(d) Duration.--The Secretary shall conduct the demonstration
project for a period of 3 years.
(e) Voluntary Participation.--Participation of medicare
beneficiaries in the demonstration project shall be voluntary. The
total number of such beneficiaries that may participate in the project
at any given time may not exceed 15,000.
(f) Preference in Selecting Agencies.--In selecting home health
agencies to participate under the demonstration project, the Secretary
shall give preference to those agencies that are currently licensed or
certified through common ownership and control to furnish medical adult
day-care services.
(g) Waiver Authority.--The Secretary may waive such requirements of
title XVIII of the Social Security Act as may be necessary for the
purposes of carrying out the demonstration project, other than waiving
the requirement that an individual be homebound in order to be eligible
for benefits for home health services.
(h) Evaluation and Report.--The Secretary shall conduct an
evaluation of the clinical and cost-effectiveness of the demonstration
project. Not later than 6 months after the completion of the project,
the Secretary shall submit to Congress a report on the evaluation, and
shall include in the report the following:
(1) An analysis of the patient outcomes and costs of furnishing
care to the medicare beneficiaries participating in the project as
compared to such outcomes and costs to beneficiaries receiving only
home health services for the same health conditions.
(2) Such recommendations regarding the extension, expansion, or
termination of the project as the Secretary determines appropriate.
(i) Definitions.--In this section:
(1) Home health agency.--The term ``home health agency'' has
the meaning given such term in section 1861(o) of the Social
Security Act (42 U.S.C. 1395x(o)).
(2) Medical adult day-care facility.--The term ``medical adult
day-care facility'' means a facility that--
(A) has been licensed or certified by a State to furnish
medical adult day-care services in the State for a continuous
2-year period;
(B) is engaged in providing skilled nursing services and
other therapeutic services directly or under arrangement with a
home health agency;
(C) is licensed and certified by the State in which it
operates or meets such standards established by the Secretary
to assure quality of care and such other requirements as the
Secretary finds necessary in the interest of the health and
safety of individuals who are furnished services in the
facility; and
(D) provides medical adult day-care services.
(3) Medical adult day-care services.--The term ``medical adult
day-care services'' means--
(A) home health service items and services described in
paragraphs (1) through (7) of section 1861(m) furnished in a
medical adult day-care facility;
(B) a program of supervised activities furnished in a group
setting in the facility that--
(i) meet such criteria as the Secretary determines
appropriate; and
(ii) is designed to promote physical and mental health
of the individuals; and
(C) such other services as the Secretary may specify.
(4) Medicare beneficiary.--The term ``medicare beneficiary''
means an individual entitled to benefits under part A of this
title, enrolled under part B of this title, or both.
SEC. 704. TEMPORARY SUSPENSION OF OASIS REQUIREMENT FOR COLLECTION OF
DATA ON NON-MEDICARE AND NON-MEDICAID PATIENTS.
(a) In General.--During the period described in subsection (b), the
Secretary may not require, under section 4602(e) of the Balanced Budget
Act of 1997 (Public Law 105-33; 111 Stat. 467) or otherwise under
OASIS, a home health agency to gather or submit information that
relates to an individual who is not eligible for benefits under either
title XVIII or title XIX of the Social Security Act (such information
in this section referred to as ``non-medicare/medicaid OASIS
information'').
(b) Period of Suspension.--The period described in this
subsection--
(1) begins on the date of the enactment of this Act; and
(2) ends on the last day of the second month beginning after
the date as of which the Secretary has published final regulations
regarding the collection and use by the Centers for Medicare &
Medicaid Services of non-medicare/medicaid OASIS information
following the submission of the report required under subsection
(c).
(c) Report.--
(1) Study.--The Secretary shall conduct a study on how non-
medicare/medicaid OASIS information is and can be used by large
home health agencies. Such study shall examine--
(A) whether there are unique benefits from the analysis of
such information that cannot be derived from other information
available to, or collected by, such agencies; and
(B) the value of collecting such information by small home
health agencies compared to the administrative burden related
to such collection.
In conducting the study the Secretary shall obtain recommendations
from quality assessment experts in the use of such information and
the necessity of small, as well as large, home health agencies
collecting such information.
(2) Report.--The Secretary shall submit to Congress a report on
the study conducted under paragraph (1) by not later than 18 months
after the date of the enactment of this Act.
(d) Construction.--Nothing in this section shall be construed as
preventing home health agencies from collecting non-medicare/medicaid
OASIS information for their own use.
SEC. 705. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH AGENCIES.
(a) Study.--The Medicare Payment Advisory Commission shall conduct
a study of payment margins of home health agencies under the home
health prospective payment system under section 1895 of the Social
Security Act (42 U.S.C. 1395fff). Such study shall examine whether
systematic differences in payment margins are related to differences in
case mix (as measured by home health resource groups (HHRGs)) among
such agencies. The study shall use the partial or full-year cost
reports filed by home health agencies.
(b) Report.--Not later than 2 years after the date of the enactment
of this Act, the Commission shall submit to Congress a report on the
study under subsection (a).
SEC. 706. COVERAGE OF RELIGIOUS NONMEDICAL HEALTH CARE INSTITUTION
SERVICES FURNISHED IN THE HOME.
(a) In General.--Section 1821(a) (42 U.S.C. 1395i-5(a)) is
amended--
(1) in the matter preceding paragraph (1), by inserting ``and
for home health services furnished an individual by a religious
nonmedical health care institution'' after ``religious nonmedical
health care institution''; and
(2) in paragraph (2)--
(A) by striking ``or extended care services'' and inserting
``, extended care services, or home health services''; and
(B) by inserting ``, or receiving services from a home
health agency,'' after ``skilled nursing facility''.
(b) Definition.--Section 1861 (42 U.S.C. 1395x), as amended by
section 642, is amended by adding at the end the following new section:
``Extended Care in Religious Nonmedical Health Care Institutions
``(aaa)(1) The term `home health agency' also includes a religious
nonmedical health care institution (as defined in subsection (ss)(1)),
but only with respect to items and services ordinarily furnished by
such an institution to individuals in their homes, and that are
comparable to items and services furnished to individuals by a home
health agency that is not religious nonmedical health care institution.
``(2)(A) Subject to subparagraphs (B), payment may be made with
respect to services provided by such an institution only to such extent
and under such conditions, limitations, and requirements (in addition
to or in lieu of the conditions, limitations, and requirements
otherwise applicable) as may be provided in regulations consistent with
section 1821.
``(B) Notwithstanding any other provision of this title, payment
may not be made under subparagraph (A)--
``(i) in a year insofar as such payments exceed $700,000; and
``(ii) after December 31, 2006.''.
Subtitle B--Graduate Medical Education
SEC. 711. EXTENSION OF UPDATE LIMITATION ON HIGH COST PROGRAMS.
Section 1886(h)(2)(D)(iv) (42 U.S.C. 1395ww(h)(2)(D)(iv)) is
amended--
(1) in subclause (I)--
(A) by inserting ``and 2004 through 2013'' after ``and
2002''; and
(B) by inserting ``or during the period beginning with
fiscal year 2004 and ending with fiscal year 2013'' after
``during fiscal year 2001 or fiscal year 2002''; and
(2) in subclause (II)--
(A) by striking ``fiscal year 2004, or fiscal year 2005,''
and
(B) by striking ``For a'' and inserting ``For the''.
SEC. 712. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR GERIATRIC RESIDENCY
OR FELLOWSHIP PROGRAMS.
(a) Clarification of Congressional Intent.--Congress intended
section 1886(h)(5)(F)(ii) of the Social Security Act (42 U.S.C.
1395ww(h)(5)(F)(ii)), as added by section 9202 of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272), to
provide an exception to the initial residency period for geriatric
residency or fellowship programs such that, where a particular approved
geriatric training program requires a resident to complete 2 years of
training to initially become board eligible in the geriatric specialty,
the 2 years spent in the geriatric training program are treated as part
of the resident's initial residency period, but are not counted against
any limitation on the initial residency period.
(b) Interim Final Regulatory Authority and Effective Date.--The
Secretary shall promulgate interim final regulations consistent with
the congressional intent expressed in this section after notice and
pending opportunity for public comment to be effective for cost
reporting periods beginning on or after October 1, 2003.
SEC. 713. TREATMENT OF VOLUNTEER SUPERVISION.
(a) Moratorium on Changes in Treatment.--During the 1-year period
beginning on January 1, 2004, for purposes of applying subsections
(d)(5)(B) and (h) of section 1886 of the Social Security Act (42 U.S.C.
1395ww), the Secretary shall allow all hospitals to count residents in
osteopathic and allopathic family practice programs in existence as of
January 1, 2002, who are training at non-hospital sites, without regard
to the financial arrangement between the hospital and the teaching
physician practicing in the non-hospital site to which the resident has
been assigned.
(b) Study and Report.--
(1) Study.--The Inspector General of the Department of Health
and Human Services shall conduct a study of the appropriateness of
alternative payment methodologies under such sections for the costs
of training residents in non-hospital settings.
(2) Report.--Not later than 1 year after the date of the
enactment of this Act, the Inspector General shall submit to
Congress a report on the study conducted under paragraph (1),
together with such recommendations as the Inspector General
determines appropriate.
Subtitle C--Chronic Care Improvement
SEC. 721. VOLUNTARY CHRONIC CARE IMPROVEMENT UNDER TRADITIONAL FEE-FOR-
SERVICE.
(a) In General.--Title XVIII is amended by inserting after section
1806 the following new section:
``chronic care improvement
``Sec. 1807. (a) Implementation of Chronic Care Improvement
Programs.--
``(1) In general.--The Secretary shall provide for the phased-
in development, testing, evaluation, and implementation of chronic
care improvement programs in accordance with this section. Each
such program shall be designed to improve clinical quality and
beneficiary satisfaction and achieve spending targets with respect
to expenditures under this title for targeted beneficiaries with
one or more threshold conditions.
``(2) Definitions.--For purposes of this section:
``(A) Chronic care improvement program.--The term `chronic
care improvement program' means a program described in
paragraph (1) that is offered under an agreement under
subsection (b) or (c).
``(B) Chronic care improvement organization.--The term
`chronic care improvement organization' means an entity that
has entered into an agreement under subsection (b) or (c) to
provide, directly or through contracts with subcontractors, a
chronic care improvement program under this section. Such an
entity may be a disease management organization, health
insurer, integrated delivery system, physician group practice,
a consortium of such entities, or any other legal entity that
the Secretary determines appropriate to carry out a chronic
care improvement program under this section.
``(C) Care management plan.--The term `care management
plan' means a plan established under subsection (d) for a
participant in a chronic care improvement program.
``(D) Threshold condition.--The term `threshold condition'
means a chronic condition, such as congestive heart failure,
diabetes, chronic obstructive pulmonary disease (COPD), or
other diseases or conditions, as selected by the Secretary as
appropriate for the establishment of a chronic care improvement
program.
``(E) Targeted beneficiary.--The term `targeted
beneficiary' means, with respect to a chronic care improvement
program, an individual who--
``(i) is entitled to benefits under part A and enrolled
under part B, but not enrolled in a plan under part C;
``(ii) has one or more threshold conditions covered
under such program; and
``(iii) has been identified under subsection (d)(1) as
a potential participant in such program.
``(3) Construction.--Nothing in this section shall be construed
as--
``(A) expanding the amount, duration, or scope of benefits
under this title;
``(B) providing an entitlement to participate in a chronic
care improvement program under this section;
``(C) providing for any hearing or appeal rights under
section 1869, 1878, or otherwise, with respect to a chronic
care improvement program under this section; or
``(D) providing benefits under a chronic care improvement
program for which a claim may be submitted to the Secretary by
any provider of services or supplier (as defined in section
1861(d)).
``(b) Developmental Phase (Phase I).--
``(1) In general.--In carrying out this section, the Secretary
shall enter into agreements consistent with subsection (f) with
chronic care improvement organizations for the development,
testing, and evaluation of chronic care improvement programs using
randomized controlled trials. The first such agreement shall be
entered into not later than 12 months after the date of the
enactment of this section.
``(2) Agreement period.--The period of an agreement under this
subsection shall be for 3 years.
``(3) Minimum participation.--
``(A) In general.--The Secretary shall enter into
agreements under this subsection in a manner so that chronic
care improvement programs offered under this section are
offered in geographic areas that, in the aggregate, consist of
areas in which at least 10 percent of the aggregate number of
medicare beneficiaries reside.
``(B) Medicare beneficiary defined.--In this paragraph, the
term `medicare beneficiary' means an individual who is entitled
to benefits under part A, enrolled under part B, or both, and
who resides in the United States.
``(4) Site selection.--In selecting geographic areas in which
agreements are entered into under this subsection, the Secretary
shall ensure that each chronic care improvement program is
conducted in a geographic area in which at least 10,000 targeted
beneficiaries reside among other individuals entitled to benefits
under part A, enrolled under part B, or both to serve as a control
population.
``(5) Independent evaluations of phase i programs.--The
Secretary shall contract for an independent evaluation of the
programs conducted under this subsection. Such evaluation shall be
done by a contractor with knowledge of chronic care management
programs and demonstrated experience in the evaluation of such
programs. Each evaluation shall include an assessment of the
following factors of the programs:
``(A) Quality improvement measures, such as adherence to
evidence-based guidelines and rehospitalization rates.
``(B) Beneficiary and provider satisfaction.
``(C) Health outcomes.
``(D) Financial outcomes, including any cost savings to the
program under this title.
``(c) Expanded Implementation Phase (Phase II).--
``(1) In general.--With respect to chronic care improvement
programs conducted under subsection (b), if the Secretary finds
that the results of the independent evaluation conducted under
subsection (b)(6) indicate that the conditions specified in
paragraph (2) have been met by a program (or components of such
program), the Secretary shall enter into agreements consistent with
subsection (f) to expand the implementation of the program (or
components) to additional geographic areas not covered under the
program as conducted under subsection (b), which may include the
implementation of the program on a national basis. Such expansion
shall begin not earlier than 2 years after the program is
implemented under subsection (b) and not later than 6 months after
the date of completion of such program.
``(2) Conditions for expansion of programs.--The conditions
specified in this paragraph are, with respect to a chronic care
improvement program conducted under subsection (b) for a threshold
condition, that the program is expected to--
``(A) improve the clinical quality of care;
``(B) improve beneficiary satisfaction; and
``(C) achieve targets for savings to the program under this
title specified by the Secretary in the agreement within a
range determined to be appropriate by the Secretary, subject to
the application of budget neutrality with respect to the
program and not taking into account any payments by the
organization under the agreement under the program for risk
under subsection (f)(3)(B).
``(3) Independent evaluations of phase ii programs.--The
Secretary shall carry out evaluations of programs expanded under
this subsection as the Secretary determines appropriate. Such
evaluations shall be carried out in the similar manner as is
provided under subsection (b)(5).
``(d) Identification and Enrollment of Prospective Program
Participants.--
``(1) Identification of prospective program participants.--The
Secretary shall establish a method for identifying targeted
beneficiaries who may benefit from participation in a chronic care
improvement program.
``(2) Initial contact by secretary.--The Secretary shall
communicate with each targeted beneficiary concerning participation
in a chronic care improvement program. Such communication may be
made by the Secretary and shall include information on the
following:
``(A) A description of the advantages to the beneficiary in
participating in a program.
``(B) Notification that the organization offering a program
may contact the beneficiary directly concerning such
participation.
``(C) Notification that participation in a program is
voluntary.
``(D) A description of the method for the beneficiary to
participate or for declining to participate and the method for
obtaining additional information concerning such participation.
``(3) Voluntary participation.--A targeted beneficiary may
participate in a chronic care improvement program on a voluntary
basis and may terminate participation at any time.
``(e) Chronic Care Improvement Programs.--
``(1) In general.--Each chronic care improvement program
shall--
``(A) have a process to screen each targeted beneficiary
for conditions other than threshold conditions, such as
impaired cognitive ability and co-morbidities, for the purposes
of developing an individualized, goal-oriented care management
plan under paragraph (2);
``(B) provide each targeted beneficiary participating in
the program with such plan; and
``(C) carry out such plan and other chronic care
improvement activities in accordance with paragraph (3).
``(2) Elements of care management plans.--A care management
plan for a targeted beneficiary shall be developed with the
beneficiary and shall, to the extent appropriate, include the
following:
``(A) A designated point of contact responsible for
communications with the beneficiary and for facilitating
communications with other health care providers under the plan.
``(B) Self-care education for the beneficiary (through
approaches such as disease management or medical nutrition
therapy) and education for primary caregivers and family
members.
``(C) Education for physicians and other providers and
collaboration to enhance communication of relevant clinical
information.
``(D) The use of monitoring technologies that enable
patient guidance through the exchange of pertinent clinical
information, such as vital signs, symptomatic information, and
health self-assessment.
``(E) The provision of information about hospice care, pain
and palliative care, and end-of-life care.
``(3) Conduct of programs.--In carrying out paragraph (1)(C)
with respect to a participant, the chronic care improvement
organization shall--
``(A) guide the participant in managing the participant's
health (including all co-morbidities, relevant health care
services, and pharmaceutical needs) and in performing
activities as specified under the elements of the care
management plan of the participant;
``(B) use decision-support tools such as evidence-based
practice guidelines or other criteria as determined by the
Secretary; and
``(C) develop a clinical information database to track and
monitor each participant across settings and to evaluate
outcomes.
``(4) Additional responsibilities.--
``(A) Outcomes report.--Each chronic care improvement
organization offering a chronic care improvement program shall
monitor and report to the Secretary, in a manner specified by
the Secretary, on health care quality, cost, and outcomes.
``(B) Additional requirements.--Each such organization and
program shall comply with such additional requirements as the
Secretary may specify.
``(5) Accreditation.--The Secretary may provide that chronic
care improvement programs and chronic care improvement
organizations that are accredited by qualified organizations (as
defined by the Secretary) may be deemed to meet such requirements
under this section as the Secretary may specify.
``(f) Terms of Agreements.--
``(1) Terms and conditions.--
``(A) In general.--An agreement under this section with a
chronic care improvement organization shall contain such terms
and conditions as the Secretary may specify consistent with
this section.
``(B) Clinical, quality improvement, and financial
requirements.--The Secretary may not enter into an agreement
with such an organization under this section for the operation
of a chronic care improvement program unless--
``(i) the program and organization meet the
requirements of subsection (e) and such clinical, quality
improvement, financial, and other requirements as the
Secretary deems to be appropriate for the targeted
beneficiaries to be served; and
``(ii) the organization demonstrates to the
satisfaction of the Secretary that the organization is able
to assume financial risk for performance under the
agreement (as applied under paragraph (3)(B)) with respect
to payments made to the organization under such agreement
through available reserves, reinsurance, withholds, or such
other means as the Secretary determines appropriate.
``(2) Manner of payment.--Subject to paragraph (3)(B), the
payment under an agreement under--
``(A) subsection (b) shall be computed on a per-member per-
month basis; or
``(B) subsection (c) may be on a per-member per-month basis
or such other basis as the Secretary and organization may
agree.
``(3) Application of performance standards.--
``(A) Specification of performance standards.--Each
agreement under this section with a chronic care improvement
organization shall specify performance standards for each of
the factors specified in subsection (c)(2), including clinical
quality and spending targets under this title, against which
the performance of the chronic care improvement organization
under the agreement is measured.
``(B) Adjustment of payment based on performance.--
``(i) In general.--Each such agreement shall provide
for adjustments in payment rates to an organization under
the agreement insofar as the Secretary determines that the
organization failed to meet the performance standards
specified in the agreement under subparagraph (A).
``(ii) Financial risk for performance.--In the case of
an agreement under subsection (b) or (c), the agreement
shall provide for a full recovery for any amount by which
the fees paid to the organization under the agreement
exceed the estimated savings to the programs under this
title attributable to implementation of such agreement.
``(4) Budget neutral payment condition.--Under this section,
the Secretary shall ensure that the aggregate sum of medicare
program benefit expenditures for beneficiaries participating in
chronic care improvement programs and funds paid to chronic care
improvement organizations under this section, shall not exceed the
medicare program benefit expenditures that the Secretary estimates
would have been made for such targeted beneficiaries in the absence
of such programs.
``(g) Funding.--(1) Subject to paragraph (2), there are
appropriated to the Secretary, in appropriate part from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund, such sums as may be necessary to provide for
agreements with chronic care improvement programs under this section.
``(2) In no case shall the funding under this section exceed
$100,000,000 in aggregate increased expenditures under this title
(after taking into account any savings attributable to the operation of
this section) over the 3-fiscal-year period beginning on October 1,
2003.''.
(b) Reports.--The Secretary shall submit to Congress reports on the
operation of section 1807 of the Social Security Act, as added by
subsection (a), as follows:
(1) Not later than 2 years after the date of the implementation
of such section, the Secretary shall submit to Congress an interim
report on the scope of implementation of the programs under
subsection (b) of such section, the design of the programs, and
preliminary cost and quality findings with respect to those
programs based on the following measures of the programs:
(A) Quality improvement measures, such as adherence to
evidence-based guidelines and rehospitalization rates.
(B) Beneficiary and provider satisfaction.
(C) Health outcomes.
(D) Financial outcomes.
(2) Not later than 3 years and 6 months after the date of the
implementation of such section the Secretary shall submit to
Congress an update to the report required under paragraph (1) on
the results of such programs.
(3) The Secretary shall submit to Congress 2 additional
biennial reports on the chronic care improvement programs conducted
under such section. The first such report shall be submitted not
later than 2 years after the report is submitted under paragraph
(2). Each such report shall include information on--
(A) the scope of implementation (in terms of both regions
and chronic conditions) of the chronic care improvement
programs;
(B) the design of the programs; and
(C) the improvements in health outcomes and financial
efficiencies that result from such implementation.
SEC. 722. MEDICARE ADVANTAGE QUALITY IMPROVEMENT PROGRAMS.
(a) In General.--Section 1852(e) (42 U.S.C. 1395w-22(e)) is
amended--
(1) in the heading, by striking ``Assurance'' and inserting
``Improvement'';
(2) by amending paragraphs (1) through (3) to read as follows:
``(1) In general.--Each MA organization shall have an ongoing
quality improvement program for the purpose of improving the
quality of care provided to enrollees in each MA plan offered by
such organization (other than an MA private fee-for-service plan or
an MSA plan).
``(2) Chronic care improvement programs.--As part of the
quality improvement program under paragraph (1), each MA
organization shall have a chronic care improvement program. Each
chronic care improvement program shall have a method for monitoring
and identifying enrollees with multiple or sufficiently severe
chronic conditions that meet criteria established by the
organization for participation under the program.
``(3) Data.--
``(A) Collection, analysis, and reporting.--
``(i) In general.--Except as provided in clauses (ii)
and (iii) with respect to plans described in such clauses
and subject to subparagraph (B), as part of the quality
improvement program under paragraph (1), each MA
organization shall provide for the collection, analysis,
and reporting of data that permits the measurement of
health outcomes and other indices of quality.
``(ii) Application to ma regional plans.--The Secretary
shall establish as appropriate by regulation requirements
for the collection, analysis, and reporting of data that
permits the measurement of health outcomes and other
indices of quality for MA organizations with respect to MA
regional plans. Such requirements may not exceed the
requirements under this subparagraph with respect to MA
local plans that are preferred provider organization plans.
``(iii) Application to preferred provider
organizations.--Clause (i) shall apply to MA organizations
with respect to MA local plans that are preferred provider
organization plans only insofar as services are furnished
by providers or services, physicians, and other health care
practitioners and suppliers that have contracts with such
organization to furnish services under such plans.
``(iv) Definition of preferred provider organization
plan.--In this subparagraph, the term `preferred provider
organization plan' means an MA plan that--
``(I) has a network of providers that have agreed
to a contractually specified reimbursement for covered
benefits with the organization offering the plan;
``(II) provides for reimbursement for all covered
benefits regardless of whether such benefits are
provided within such network of providers; and
``(III) is offered by an organization that is not
licensed or organized under State law as a health
maintenance organization.
``(B) Limitations.--
``(i) Types of data.--The Secretary shall not collect
under subparagraph (A) data on quality, outcomes, and
beneficiary satisfaction to facilitate consumer choice and
program administration other than the types of data that
were collected by the Secretary as of November 1, 2003.
``(ii) Changes in types of data.--Subject to subclause
(iii), the Secretary may only change the types of data that
are required to be submitted under subparagraph (A) after
submitting to Congress a report on the reasons for such
changes that was prepared in consultation with MA
organizations and private accrediting bodies.
``(iii) Construction.--Nothing in the subsection shall
be construed as restricting the ability of the Secretary to
carry out the duties under section 1851(d)(4)(D).'';
(3) in paragraph (4)(B)--
(A) by amending clause (i) to read as follows:
``(i) Paragraphs (1) through (3) of this subsection
(relating to quality improvement programs).''; and
(B) by adding at the end the following new clause:
``(vii) The requirements described in section 1860D-
4(j), to the extent such requirements apply under section
1860D-21(c).''; and
(4) by striking paragraph (5).
(b) Conforming Amendment.--Section 1852(c)(1)(I) (42 U.S.C. 1395w-
22(c)(1)(I)) is amended to read as follows:
``(I) Quality improvement program.--A description of the
organization's quality improvement program under subsection
(e).''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to contract years beginning on and after January 1,
2006.
SEC. 723. CHRONICALLY ILL MEDICARE BENEFICIARY RESEARCH, DATA,
DEMONSTRATION STRATEGY.
(a) Development of Plan.--Not later than 6 months after the date of
the enactment of this Act, the Secretary shall develop a plan to
improve quality of care and reduce the cost of care for chronically ill
medicare beneficiaries.
(b) Plan Requirements.--The plan will utilize existing data and
identify data gaps, develop research initiatives, and propose
intervention demonstration programs to provide better health care for
chronically ill medicare beneficiaries. The plan shall--
(1) integrate existing data sets including, the Medicare
Current Beneficiary Survey (MCBS), Minimum Data Set (MDS), Outcome
and Assessment Information Set (OASIS), data from Quality
Improvement Organizations (QIO), and claims data;
(2) identify any new data needs and a methodology to address
new data needs;
(3) plan for the collection of such data in a data warehouse;
and
(4) develop a research agenda using such data.
(c) Consultation.--In developing the plan under this section, the
Secretary shall consult with experts in the fields of care for the
chronically ill (including clinicians).
(d) Implementation.--Not later than 2 years after the date of the
enactment of this Act, the Secretary shall implement the plan developed
under this section. The Secretary may contract with appropriate
entities to implement such plan.
(e) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary such sums as may be necessary in fiscal
years 2004 and 2005 to carry out this section.
Subtitle D--Other Provisions
SEC. 731. IMPROVEMENTS IN NATIONAL AND LOCAL COVERAGE DETERMINATION
PROCESS TO RESPOND TO CHANGES IN TECHNOLOGY.
(a) National and Local Coverage Determination Process.--
(1) In general.--Section 1862 (42 U.S.C. 1395y), as amended by
sections 948 and 950, is amended--
(A) in the third sentence of subsection (a), by inserting
``consistent with subsection (l)'' after ``the Secretary shall
ensure''; and
(B) by adding at the end the following new subsection:
``(l) National and Local Coverage Determination Process.--
``(1) Factors and evidence used in making national coverage
determinations.--The Secretary shall make available to the public
the factors considered in making national coverage determinations
of whether an item or service is reasonable and necessary. The
Secretary shall develop guidance documents to carry out this
paragraph in a manner similar to the development of guidance
documents under section 701(h) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 371(h)).
``(2) Timeframe for decisions on requests for national coverage
determinations.--In the case of a request for a national coverage
determination that--
``(A) does not require a technology assessment from an
outside entity or deliberation from the Medicare Coverage
Advisory Committee, the decision on the request shall be made
not later than 6 months after the date of the request; or
``(B) requires such an assessment or deliberation and in
which a clinical trial is not requested, the decision on the
request shall be made not later than 9 months after the date of
the request.
``(3) Process for public comment in national coverage
determinations.--
``(A) Period for proposed decision.--Not later than the end
of the 6-month period (or 9-month period for requests described
in paragraph (2)(B)) that begins on the date a request for a
national coverage determination is made, the Secretary shall
make a draft of proposed decision on the request available to
the public through the Internet website of the Centers for
Medicare & Medicaid Services or other appropriate means.
``(B) 30-day period for public comment.--Beginning on the
date the Secretary makes a draft of the proposed decision
available under subparagraph (A), the Secretary shall provide a
30-day period for public comment on such draft.
``(C) 60-day period for final decision.--Not later than 60
days after the conclusion of the 30-day period referred to
under subparagraph (B), the Secretary shall--
``(i) make a final decision on the request;
``(ii) include in such final decision summaries of the
public comments received and responses to such comments;
``(iii) make available to the public the clinical
evidence and other data used in making such a decision when
the decision differs from the recommendations of the
Medicare Coverage Advisory Committee; and
``(iv) in the case of a final decision under clause (i)
to grant the request for the national coverage
determination, the Secretary shall assign a temporary or
permanent code (whether existing or unclassified) and
implement the coding change.
``(4) Consultation with outside experts in certain national
coverage determinations.--With respect to a request for a national
coverage determination for which there is not a review by the
Medicare Coverage Advisory Committee, the Secretary shall consult
with appropriate outside clinical experts.
``(5) Local coverage determination process.--
``(A) Plan to promote consistency of coverage
determinations.--The Secretary shall develop a plan to evaluate
new local coverage determinations to determine which
determinations should be adopted nationally and to what extent
greater consistency can be achieved among local coverage
determinations.
``(B) Consultation.--The Secretary shall require the fiscal
intermediaries or carriers providing services within the same
area to consult on all new local coverage determinations within
the area.
``(C) Dissemination of information.--The Secretary should
serve as a center to disseminate information on local coverage
determinations among fiscal intermediaries and carriers to
reduce duplication of effort.
``(6) National and local coverage determination defined.--For
purposes of this subsection--
``(A) National coverage determination.--The term `national
coverage determination' means a determination by the Secretary
with respect to whether or not a particular item or service is
covered nationally under this title.
``(B) Local coverage determination.--The term `local
coverage determination' has the meaning given that in section
1869(f)(2)(B).''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to national coverage determinations as of January 1, 2004,
and section 1862(l)(5) of the Social Security Act, as added by such
paragraph, shall apply to local coverage determinations made on or
after July 1, 2004.
(b) Medicare Coverage of Routine Costs Associated With Certain
Clinical Trials of Category A Devices.--
(1) In general.--Section 1862 (42 U.S.C. 1395y), as amended by
subsection (a), is amended by adding at the end the following new
subsection:
``(m) Coverage of Routine Costs Associated With Certain Clinical
Trials of Category A Devices.--
``(1) In general.--In the case of an individual entitled to
benefits under part A, or enrolled under part B, or both who
participates in a category A clinical trial, the Secretary shall
not exclude under subsection (a)(1) payment for coverage of routine
costs of care (as defined by the Secretary) furnished to such
individual in the trial.
``(2) Category a clinical trial.--For purposes of paragraph
(1), a `category A clinical trial' means a trial of a medical
device if--
``(A) the trial is of an experimental/investigational
(category A) medical device (as defined in regulations under
section 405.201(b) of title 42, Code of Federal Regulations (as
in effect as of September 1, 2003));
``(B) the trial meets criteria established by the Secretary
to ensure that the trial conforms to appropriate scientific and
ethical standards; and
``(C) in the case of a trial initiated before January 1,
2010, the device involved in the trial has been determined by
the Secretary to be intended for use in the diagnosis,
monitoring, or treatment of an immediately life-threatening
disease or condition.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to routine costs incurred on and after January 1, 2005, and,
as of such date, section 411.15(o) of title 42, Code of Federal
Regulations, is superseded to the extent inconsistent with section
1862(m) of the Social Security Act, as added by such paragraph.
(3) Rule of construction.--Nothing in the amendment made by
paragraph (1) shall be construed as applying to, or affecting,
coverage or payment for a nonexperimental/investigational (category
B) device.
(c) Issuance of Temporary National Codes.--Not later than July 1,
2004, the Secretary shall implement revised procedures for the issuance
of temporary national HCPCS codes under part B of title XVIII of the
Social Security Act.
SEC. 732. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY
SERVICES UNDER MEDICARE.
Section 542(c) of BIPA (114 Stat. 2763A-551) is amended by
inserting ``, and for services furnished during 2005 and 2006'' before
the period at the end.
SEC. 733. PAYMENT FOR PANCREATIC ISLET CELL INVESTIGATIONAL TRANSPLANTS
FOR MEDICARE BENEFICIARIES IN CLINICAL TRIALS.
(a) Clinical Trial.--
(1) In general.--The Secretary, acting through the National
Institute of Diabetes and Digestive and Kidney Disorders, shall
conduct a clinical investigation of pancreatic islet cell
transplantation which includes medicare beneficiaries.
(2) Authorization of appropriations.--There are authorized to
be appropriated to the Secretary such sums as may be necessary to
conduct the clinical investigation under paragraph (1).
(b) Medicare Payment.--Not earlier than October 1, 2004, the
Secretary shall pay for the routine costs as well as transplantation
and appropriate related items and services (as described in subsection
(c)) in the case of medicare beneficiaries who are participating in a
clinical trial described in subsection (a) as if such transplantation
were covered under title XVIII of such Act and as would be paid under
part A or part B of such title for such beneficiary.
(c) Scope of Payment.--For purposes of subsection (b):
(1) The term ``routine costs'' means reasonable and necessary
routine patient care costs (as defined in the Centers for Medicare
& Medicaid Services Coverage Issues Manual, section 30-1),
including immunosuppressive drugs and other followup care.
(2) The term ``transplantation and appropriate related items
and services'' means items and services related to the acquisition
and delivery of the pancreatic islet cell transplantation,
notwithstanding any national noncoverage determination contained in
the Centers for Medicare & Medicaid Services Coverage Issues
Manual.
(3) The term ``medicare beneficiary'' means an individual who
is entitled to benefits under part A of title XVIII of the Social
Security Act, or enrolled under part B of such title, or both.
(d) Construction.--The provisions of this section shall not be
construed--
(1) to permit payment for partial pancreatic tissue or islet
cell transplantation under title XVIII of the Social Security Act
other than payment as described in subsection (b); or
(2) as authorizing or requiring coverage or payment conveying--
(A) benefits under part A of such title to a beneficiary
not entitled to such part A; or
(B) benefits under part B of such title to a beneficiary
not enrolled in such part B.
SEC. 734. RESTORATION OF MEDICARE TRUST FUNDS.
(a) Definitions.--In this section:
(1) Clerical error.--The term ``clerical error'' means a
failure that occurs on or after April 15, 2001, to have transferred
the correct amount from the general fund of the Treasury to a Trust
Fund.
(2) Trust fund.--The term ``Trust Fund'' means the Federal
Hospital Insurance Trust Fund established under section 1817 of the
Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary
Medical Insurance Trust Fund established under section 1841 of such
Act (42 U.S.C. 1395t).
(b) Correction of Trust Fund Holdings.--
(1) In general.--The Secretary of the Treasury shall take the
actions described in paragraph (2) with respect to the Trust Fund
with the goal being that, after such actions are taken, the
holdings of the Trust Fund will replicate, to the extent
practicable in the judgment of the Secretary of the Treasury, in
consultation with the Secretary, the holdings that would have been
held by the Trust Fund if the clerical error involved had not
occurred.
(2) Obligations issued and redeemed.--The Secretary of the
Treasury shall--
(A) issue to the Trust Fund obligations under chapter 31 of
title 31, United States Code, that bear issue dates, interest
rates, and maturity dates that are the same as those for the
obligations that--
(i) would have been issued to the Trust Fund if the
clerical error involved had not occurred; or
(ii) were issued to the Trust Fund and were redeemed by
reason of the clerical error involved; and
(B) redeem from the Trust Fund obligations that would have
been redeemed from the Trust Fund if the clerical error
involved had not occurred.
(c) Appropriation.--There is appropriated to the Trust Fund, out of
any money in the Treasury not otherwise appropriated, an amount
determined by the Secretary of the Treasury, in consultation with the
Secretary, to be equal to the interest income lost by the Trust Fund
through the date on which the appropriation is being made as a result
of the clerical error involved.
(d) Congressional Notice.--In the case of a clerical error that
occurs after April 15, 2001, the Secretary of the Treasury, before
taking action to correct the error under this section, shall notify the
appropriate committees of Congress concerning such error and the
actions to be taken under this section in response to such error.
(e) Deadline.--With respect to the clerical error that occurred on
April 15, 2001, not later than 120 days after the date of the enactment
of this Act--
(1) the Secretary of the Treasury shall take the actions under
subsection (b)(1); and
(2) the appropriation under subsection (c) shall be made.
SEC. 735. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY COMMISSION
(MEDPAC).
(a) Examination of Budget Consequences.--Section 1805(b) (42 U.S.C.
1395b-6(b)) is amended by adding at the end the following new
paragraph:
``(8) Examination of budget consequences.--Before making any
recommendations, the Commission shall examine the budget
consequences of such recommendations, directly or through
consultation with appropriate expert entities.''.
(b) Consideration of Efficient Provision of Services.--Section
1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is amended by
inserting ``the efficient provision of'' after ``expenditures for''.
(c) Application of Disclosure Requirements.--
(1) In general.--Section 1805(c)(2)(D) (42 U.S.C. 1395b-
6(c)(2)(D)) is amended by adding at the end the following:
``Members of the Commission shall be treated as employees of
Congress for purposes of applying title I of the Ethics in
Government Act of 1978 (Public Law 95-521).''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on January 1, 2004.
(d) Additional Reports.--
(1) Data needs and sources.--The Medicare Payment Advisory
Commission shall conduct a study, and submit a report to Congress
by not later than June 1, 2004, on the need for current data, and
sources of current data available, to determine the solvency and
financial circumstances of hospitals and other medicare providers
of services.
(2) Use of tax-related returns.--Using return information
provided under Form 990 of the Internal Revenue Service, the
Commission shall submit to Congress, by not later than June 1,
2004, a report on the following:
(A) Investments, endowments, and fundraising of hospitals
participating under the medicare program and related
foundations.
(B) Access to capital financing for private and for not-
for-profit hospitals.
(e) Representation of Experts in Prescription Drugs.--
(1) In general.--Section 1805(c)(2)(B) (42 U.S.C. 1395b-
6(c)(2)(B)) is amended by inserting ``experts in the area of
pharmaco-economics or prescription drug benefit programs,'' after
``other health professionals,''.
(2) Appointment.--The Comptroller General of the United States
shall ensure that the membership of the Commission complies with
the amendment made by paragraph (1) with respect to appointments
made on or after the date of the enactment of this Act.
SEC. 736. TECHNICAL AMENDMENTS.
(a) Part A.--(1) Section 1814(a) (42 U.S.C. 1395f(a)) is amended--
(A) by striking the seventh sentence, as added by section
322(a)(1) of BIPA (114 Stat. 2763A-501); and
(B) in paragraph (7)(A)--
(i) in clause (i), by inserting before the comma at the end
the following: ``based on the physician's or medical director's
clinical judgment regarding the normal course of the
individual's illness''; and
(ii) in clause (ii), by inserting before the semicolon at
the end the following: ``based on such clinical judgment''.
(2) Section 1814(b) (42 U.S.C. 1395f(b)), in the matter preceding
paragraph (1), is amended by inserting a comma after ``1813''.
(3) Section 1815(e)(1)(B) (42 U.S.C. 1395g(e)(1)(B)), in the matter
preceding clause (i), is amended by striking ``of hospital'' and
inserting ``of a hospital''.
(4) Section 1816(c)(2)(B)(ii) (42 U.S.C. 1395h(c)(2)(B)(ii)) is
amended--
(A) by striking ``and'' at the end of subclause (III); and
(B) by striking the period at the end of subclause (IV) and
inserting ``, and''.
(5) Section 1817(k)(3)(A) (42 U.S.C. 1395i(k)(3)(A)) is amended--
(A) in clause (i)(I), by striking the comma at the end and
inserting a semicolon; and
(B) in clause (ii), by striking ``the Medicare and medicaid
programs'' and inserting ``the programs under this title and title
XIX''.
(6) Section 1817(k)(6)(B) (42 U.S.C. 1395i(k)(6)(B)) is amended by
striking ``Medicare program under title XVIII'' and inserting ``program
under this title''.
(7) Section 1818 (42 U.S.C. 1395i-2) is amended--
(A) in subsection (d)(6)(A) is amended by inserting ``of such
Code'' after ``3111(b)''; and
(B) in subsection (g)(2)(B) is amended by striking ``subsection
(b).'' and inserting ``subsection (b)''.
(8) Section 1819 (42 U.S.C. 1395i-3) is amended--
(A) in subsection (b)(4)(C)(i), by striking ``at least at
least'' and inserting ``at least'';
(B) in subsection (d)(1)(A), by striking ``physical mental''
and inserting ``physical, mental''; and
(C) in subsection (f)(2)(B)(iii), by moving the last sentence 2
ems to the left.
(9) Section 1886(b)(3)(I)(i)(I) (42 U.S.C. 1395ww(b)(3)(I)(i)(I))
is amended by striking ``the the'' and inserting ``the''.
(10) The heading of subsection (mm) of section 1861 (42 U.S.C.
1395x) is amended to read as follows:
``Critical Access Hospital; Critical Access Hospital Services''.
(11) Paragraphs (1) and (2) of section 1861(tt) (42 U.S.C.
1395x(tt)) are each amended by striking ``rural primary care'' and
inserting ``critical access''.
(12) Section 1865(b)(3)(B) (42 U.S.C. 1395bb(b)(3)(B)) is amended
by striking ``section 1819 and 1861(j)'' and inserting ``sections 1819
and 1861(j)''.
(13) Section 1866(b)(2) (42 U.S.C. 1395cc(b)(2)) is amended by
moving subparagraph (D) 2 ems to the left.
(14) Section 1867 (42 U.S.C. 1395dd) is amended--
(A) in the matter following clause (ii) of subsection
(d)(1)(B), by striking ``is is'' and inserting ``is'';
(B) in subsection (e)(1)(B), by striking ``a pregnant women''
and inserting ``a pregnant woman''; and
(C) in subsection (e)(2), by striking ``means hospital'' and
inserting ``means a hospital''.
(15) Section 1886(g)(3)(B) (42 U.S.C. 1395ww(g)(3)(B)) is amended
by striking ``(as defined in subsection (d)(5)(D)(iii)'' and inserting
``(as defined in subsection (d)(5)(D)(iii))''.
(b) Part B.--(1) Section 1833(h)(5)(D) (42 U.S.C. 1395l(h)(5)(D))
is amended by striking ``clinic,,'' and inserting ``clinic,''.
(2) Section 1833(t)(3)(C)(ii) (42 U.S.C. 1395l(t)(3)(C)(ii)) is
amended by striking ``clause (iii)'' and inserting ``clause (iv)''.
(3) Section 1861(v)(1)(S)(ii)(III) (42 U.S.C.
1395x(v)(1)(S)(ii)(III)) is amended by striking ``(as defined in
section 1886(d)(5)(D)(iii)'' and inserting ``(as defined in section
1886(d)(5)(D)(iii))''.
(4) Section 1834(b)(4)(D)(iv) (42 U.S.C. 1395m(b)(4)(D)(iv)) is
amended by striking ``clauses (vi)'' and inserting ``clause (vi)''.
(5) Section 1834(m)(4)(C)(ii)(III) (42 U.S.C.
1395m(m)(4)(C)(ii)(III)) is amended by striking ``1861(aa)(s)'' and
inserting ``1861(aa)(2)''.
(6) Section 1838(a)(1) (42 U.S.C. 1395q(a)(1)) is amended by
inserting a comma after ``1966''.
(7) The second sentence of section 1839(a)(4) (42 U.S.C.
1395r(a)(4)) is amended by striking ``which will'' and inserting
``will''.
(8) Section 1842(c)(2)(B)(ii) (42 U.S.C. 1395u(c)(2)(B)(ii)) is
amended--
(A) by striking ``and'' at the end of subclause (III); and
(B) by striking the period at the end of subclause (IV) and
inserting ``, and''.
(9) Section 1842(i)(2) (42 U.S.C. 1395u(i)(2)) is amended by
striking ``services, a physician'' and inserting ``services, to a
physician''.
(10) Section 1848(i)(3)(A) (42 U.S.C. 1395w-4(i)(3)(A)) is amended
by striking ``a comparable services'' and inserting ``comparable
services''.
(11) Section 1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is
amended by striking ``; and but'' and inserting ``, but''.
(12) Section 1861(aa)(1)(B) (42 U.S.C. 1395x(aa)(1)(B)) is amended
by striking ``,,'' and inserting a comma.
(13) Section 128(b)(2) of BIPA (114 Stat. 2763A-480) is amended by
striking ``Not later that'' and inserting ``Not later than'' each place
it appears.
(c) Parts A and B.--(1) Section 1812(a)(3) (42 U.S.C. 1395d(a)(3))
is amended--
(A) by striking ``for individuals not'' and inserting ``in the
case of individuals not''; and
(B) by striking ``for individuals so'' and inserting ``in the
case of individuals so''.
(2)(A) Section 1814(a) (42 U.S.C. 1395f(a)) is amended in the sixth
sentence by striking ``leave home,'' and inserting ``leave home and''.
(B) Section 1835(a) (42 U.S.C. 1395n(a)) is amended in the seventh
sentence by striking ``leave home,'' and inserting ``leave home and''.
(3) Section 1891(d)(1) (42 U.S.C. 1395bbb(d)(1)) is amended by
striking ``subsection (c)(2)(C)(I)'' and inserting ``subsection
(c)(2)(C)(i)(I)''.
(4) Section 1861(v) (42 U.S.C. 1395x(v)) is amended by moving
paragraph (8) (including clauses (i) through (v) of such paragraph) 2
ems to the left.
(5) Section 1866B(b)(7)(D) (42 U.S.C. 1395cc-2(b)(7)(D)) is amended
by striking ``(c)(2)(A)(ii)'' and inserting ``(c)(2)(B)''.
(6) Section 1886(h)(3)(D)(ii)(III) (42 U.S.C.
1395ww(h)(3)(D)(ii)(III)) is amended by striking ``and'' after the
comma at the end.
(7) Section 1893(a) (42 U.S.C. 1395ddd(a)) is amended by striking
``Medicare program'' and inserting ``medicare program''.
(8) Section 1896(b)(4) (42 U.S.C. 1395ggg(b)(4)) is amended by
striking ``701(f)'' and inserting ``712(f)''.
(d) Part C.--(1) Section 1853 (42 U.S.C. 1395w-23), as amended by
section 607 of BIPA (114 Stat. 2763A-558), is amended--
(A) in subsection (a)(3)(C)(ii), by striking ``clause (iii)''
and inserting ``clause (iv)'';
(B) in subsection (a)(3)(C), by redesignating the clause (iii)
added by such section 607 as clause (iv); and
(C) in subsection (c)(5), by striking ``(a)(3)(C)(iii)'' and
inserting ``(a)(3)(C)(iv)''.
(2) Section 1876 (42 U.S.C. 1395mm) is amended--
(A) in subsection (c)(2)(B), by striking ``signifcant'' and
inserting ``significant''; and
(B) in subsection (j)(2), by striking ``this setion'' and
inserting ``this section''.
(e) Medigap.--Section 1882 (42 U.S.C. 1395ss) is amended--
(1) in subsection (d)(3)(A)(i)(II), by striking ``plan a
medicare supplemental policy'' and inserting ``plan, a medicare
supplemental policy'';
(2) in subsection (d)(3)(B)(iii)(II), by striking ``to the best
of the issuer or seller's knowledge'' and inserting ``to the best
of the issuer's or seller's knowledge'';
(3) in subsection (g)(2)(A), by striking ``medicare supplement
policies'' and inserting ``medicare supplemental policies'';
(4) in subsection (p)(2)(B), by striking ``, and'' and
inserting ``; and''; and
(5) in subsection (s)(3)(A)(iii), by striking ``pre-existing''
and inserting ``preexisting''.
TITLE VIII--COST CONTAINMENT
Subtitle A--Cost Containment
SEC. 801. INCLUSION IN ANNUAL REPORT OF MEDICARE TRUSTEES OF
INFORMATION ON STATUS OF MEDICARE TRUST FUNDS.
(a) Determinations of Excess General Revenue Medicare Funding.--
(1) In general.--The Board of Trustees of each medicare trust
fund shall include in the annual reports submitted under subsection
(b)(2) of sections 1817 and 1841 of the Social Security Act (42
U.S.C. 1395i and 1395t)--
(A) the information described in subsection (b); and
(B) a determination as to whether there is projected to be
excess general revenue medicare funding (as defined in
subsection (c)) for the fiscal year in which the report is
submitted or for any of the succeeding 6 fiscal years.
(2) Medicare funding warning.--For purposes of section 1105(h)
of title 31, United States Code, and this subtitle, an affirmative
determination under paragraph (1)(B) in 2 consecutive annual
reports shall be treated as a medicare funding warning in the year
in which the second such report is made.
(3) 7-fiscal-year reporting period.--For purposes of this
subtitle, the term ``7-fiscal-year reporting period'' means, with
respect to a year in which an annual report described in paragraph
(1) is made, the period of 7 consecutive fiscal years beginning
with the fiscal year in which the report is submitted.
(b) Information.--The information described in this subsection for
an annual report in a year is as follows:
(1) Projections of growth of general revenue spending.--A
statement of the general revenue medicare funding as a percentage
of the total medicare outlays for each of the following:
(A) Each fiscal year within the 7-fiscal-year reporting
period.
(B) Previous fiscal years and as of 10, 50, and 75 years
after such year.
(2) Comparison with other growth trends.--A comparison of the
trend of such percentages with the annual growth rate in the
following:
(A) The gross domestic product.
(B) Private health costs.
(C) National health expenditures.
(D) Other appropriate measures.
(3) Part d spending.--Expenditures, including trends in
expenditures, under part D of title XVIII of the Social Security
Act, as added by section 101.
(4) Combined medicare trust fund analysis.--A financial
analysis of the combined medicare trust funds if general revenue
medicare funding were limited to the percentage specified in
subsection (c)(1)(B) of total medicare outlays.
(c) Definitions.--For purposes of this section:
(1) Excess general revenue medicare funding.--The term ``excess
general revenue medicare funding'' means, with respect to a fiscal
year, that--
(A) general revenue medicare funding (as defined in
paragraph (2)), expressed as a percentage of total medicare
outlays (as defined in paragraph (4)) for the fiscal year;
exceeds
(B) 45 percent.
(2) General revenue medicare funding.--The term ``general
revenue medicare funding'' means for a year--
(A) the total medicare outlays (as defined in paragraph
(4)) for the year; minus
(B) the dedicated medicare financing sources (as defined in
paragraph (3)) for the year.
(3) Dedicated medicare financing sources.--The term ``dedicated
medicare financing sources'' means the following:
(A) Hospital insurance tax.--Amounts appropriated to the
Hospital Insurance Trust Fund under the third sentence of
section 1817(a) of the Social Security Act (42 U.S.C. 1395i(a))
and amounts transferred to such Trust Fund under section
7(c)(2) of the Railroad Retirement Act of 1974 (45 U.S.C.
231f(c)(2)).
(B) Taxation of certain oasdi benefits.--Amounts
appropriated to the Hospital Insurance Trust Fund under section
121(e)(1)(B) of the Social Security Amendments of 1983 (Public
Law 98-21), as inserted by section 13215(c) of the Omnibus
Budget Reconciliation Act of 1993 (Public Law 103-66).
(C) State transfers.--The State share of amounts paid to
the Federal Government by a State under section 1843 of the
Social Security Act (42 U.S.C. 1395v) or pursuant to section
1935(c) of such Act.
(D) Premiums.--The following premiums:
(i) Part a.--Premiums paid by non-Federal sources under
sections 1818 and section 1818A (42 U.S.C. 1395i-2 and
1395i-2a) of such Act.
(ii) Part b.--Premiums paid by non-Federal sources
under section 1839 of such Act (42 U.S.C. 1395r), including
any adjustments in premiums under such section.
(iii) Part d.--Monthly beneficiary premiums paid under
part D of title XVIII of such Act, as added by section 101,
and MA monthly prescription drug beneficiary premiums paid
under part C of such title insofar as they are attributable
to basic prescription drug coverage.
Premiums under clauses (ii) and (iii) shall be determined without
regard to any reduction in such premiums attributable to a
beneficiary rebate under section 1854(b)(1)(C) of such title, as
amended by section 222(b)(1), and premiums under clause (iii) are
deemed to include any amounts paid under section 1860D-13(b) of
such title, as added by section 101.
(E) Gifts.--Amounts received by the medicare trust funds
under section 201(i) of the Social Security Act (42 U.S.C.
401(i)).
(4) Total medicare outlays.--The term ``total medicare
outlays'' means total outlays from the medicare trust funds and
shall--
(A) include payments made to plans under part C of title
XVIII of the Social Security Act that are attributable to any
rebates under section 1854(b)(1)(C) of such Act (42 U.S.C.
1395w-24(b)(1)(C)), as amended by section 222(b)(1);
(B) include administrative expenditures made in carrying
out title XVIII of such Act and Federal outlays under section
1935(b) of such Act, as added by section 103(a)(2); and
(C) offset outlays by the amount of fraud and abuse
collections insofar as they are applied or deposited into a
medicare trust fund.
(5) Medicare trust fund.--The term ``medicare trust fund''
means--
(A) the Federal Hospital Insurance Trust Fund established
under section 1817 of the Social Security Act (42 U.S.C.
1395i); and
(B) the Federal Supplementary Medical Insurance Trust Fund
established under section 1841 of such Act (42 U.S.C. 1395t),
including the Medicare Prescription Drug Account under such
Trust Fund.
(d) Conforming Amendments.--
(1) Federal hospital insurance trust fund.--Section 1817(b)(2)
(42 U.S.C. 1395i(b)(2)) is amended by adding at the end the
following: ``Each report provided under paragraph (2) beginning
with the report in 2005 shall include the information specified in
section 801(a) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003.''.
(2) Federal supplementary medical insurance trust fund.--
Section 1841(b)(2) (42 U.S.C. 1395t(b)(2)) is amended by adding at
the end the following: ``Each report provided under paragraph (2)
beginning with the report in 2005 shall include the information
specified in section 801(a) of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003.''.
(e) Notice of Medicare Funding Warning.--Whenever any report
described in subsection (a) contains a determination that for any
fiscal year within the 7-fiscal-year reporting period there will be
excess general revenue medicare funding, Congress and the President
should address the matter under existing rules and procedures.
SEC. 802. PRESIDENTIAL SUBMISSION OF LEGISLATION.
(a) In General.--Section 1105 of title 31, United States Code, is
amended by adding at the end the following new subsection:
``(h)(1) If there is a medicare funding warning under section
801(a)(2) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 made in a year, the President shall submit to
Congress, within the 15-day period beginning on the date of the budget
submission to Congress under subsection (a) for the succeeding year,
proposed legislation to respond to such warning.
``(2) Paragraph (1) does not apply if, during the year in which the
warning is made, legislation is enacted which eliminates excess general
revenue medicare funding (as defined in section 801(c) of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003) for the
7-fiscal-year reporting period, as certified by the Board of Trustees
of each medicare trust fund (as defined in section 801(c)(5) of such
Act) not later than 30 days after the date of the enactment of such
legislation.''.
(b) Sense of Congress.--It is the sense of Congress that
legislation submitted pursuant to section 1105(h) of title 31, United
States Code, in a year should be designed to eliminate excess general
revenue medicare funding (as defined in section 801(c)) for the 7-
fiscal-year period that begins in such year.
SEC. 803. PROCEDURES IN THE HOUSE OF REPRESENTATIVES.
(a) Introduction and Referral of President's Legislative
Proposal.--
(1) Introduction.--In the case of a legislative proposal
submitted by the President pursuant to section 1105(h) of title 31,
United States Code, within the 15-day period specified in paragraph
(1) of such section, the Majority Leader of the House of
Representatives (or his designee) and the Minority Leader of the
House of Representatives (or his designee) shall introduce such
proposal (by request), the title of which is as follows: ``A bill
to respond to a medicare funding warning.'' Such bill shall be
introduced within 3 legislative days after Congress receives such
proposal.
(2) Referral.--Any legislation introduced pursuant to paragraph
(1) shall be referred to the appropriate committees of the House of
Representatives.
(b) Direction to the Appropriate House Committees.--
(1) In general.--In the House, in any year during which the
President is required to submit proposed legislation to Congress
under section 1105(h) of title 31, United States Code, the
appropriate committees shall report medicare funding legislation by
not later than June 30 of such year.
(2) Medicare funding legislation.--For purposes of this
section, the term ``medicare funding legislation'' means--
(A) legislation introduced pursuant to subsection (a)(1),
but only if the legislative proposal upon which the legislation
is based was submitted within the 15-day period referred to in
such subsection; or
(B) any bill the title of which is as follows: ``A bill to
respond to a medicare funding warning.''.
(3) Certification.--With respect to any medicare funding
legislation or any amendment to such legislation to respond to a
medicare funding warning, the chairman of the Committee on the
Budget of the House shall certify--
(A) whether or not such legislation eliminates excess
general revenue medicare funding (as defined in section 801(c))
for each fiscal year in the 7-fiscal-year reporting period; and
(B) with respect to such an amendment, whether the
legislation, as amended, would eliminate excess general revenue
medicare funding (as defined in section 801(c)) for each fiscal
year in such 7-fiscal-year reporting period.
(c) Fallback Procedure for Floor Consideration if the House Fails
to Vote on Final Passage by July 30.--
(1) After July 30 of any year during which the President is
required to submit proposed legislation to Congress under section
1105(h) of title 31, United States Code, unless the House of
Representatives has voted on final passage of any medicare funding
legislation for which there is an affirmative certification under
subsection (b)(3)(A), then, after the expiration of not less than
30 calendar days (and concurrently 5 legislative days), it is in
order to move to discharge any committee to which medicare funding
legislation which has such a certification and which has been
referred to such committee for 30 calendar days from further
consideration of the legislation.
(2) A motion to discharge may be made only by an individual
favoring the legislation, may be made only if supported by one-
fifth of the total membership of the House (a quorum being
present), and is highly privileged in the House. Debate thereon
shall be limited to not more than one hour, the time to be divided
in the House equally between those favoring and those opposing the
motion. An amendment to the motion is not in order, and it is not
in order to move to reconsider the vote by which the motion is
agreed to or disagreed to.
(3) Only one motion to discharge a particular committee may be
adopted under this subsection in any session of a Congress.
(4) Notwithstanding paragraph (1), it shall not be in order to
move to discharge a committee from further consideration of
medicare funding legislation pursuant to this subsection during a
session of a Congress if, during the previous session of the
Congress, the House passed medicare funding legislation for which
there is an affirmative certification under subsection (b)(3)(A).
(d) Floor Consideration in the House of Discharged Legislation.--
(1) In the House, not later than 3 legislative days after any
committee has been discharged from further consideration of
legislation under subsection (c), the Speaker shall resolve the
House into the Committee of the Whole for consideration of the
legislation.
(2) The first reading of the legislation shall be dispensed
with. All points of order against consideration of the legislation
are waived. General debate shall be confined to the legislation and
shall not exceed five hours, which shall be divided equally between
those favoring and those opposing the legislation. After general
debate the legislation shall be considered for amendment under the
five-minute rule. During consideration of the legislation, no
amendments shall be in order in the House or in the Committee of
the Whole except those for which there has been an affirmative
certification under subsection (b)(3)(B). All points of order
against consideration of any such amendment in the Committee of the
Whole are waived. The legislation, together with any amendments
which shall be in order, shall be considered as read. During the
consideration of the bill for amendment, the Chairman of the
Committee of the Whole may accord priority in recognition on the
basis of whether the Member offering an amendment has caused it to
be printed in the portion of the Congressional Record designated
for that purpose in clause 8 of Rule XVIII of the Rules of the
House of Representatives. Debate on any amendment shall not exceed
one hour, which shall be divided equally between those favoring and
those opposing the amendment, and no pro forma amendments shall be
offered during the debate. The total time for debate on all
amendments shall not exceed 10 hours. At the conclusion of
consideration of the legislation for amendment, the Committee shall
rise and report the legislation to the House with such amendments
as may have been adopted. The previous question shall be considered
as ordered on the legislation and amendments thereto to final
passage without intervening motion except one motion to recommit
with or without instructions. If the Committee of the Whole rises
and reports that it has come to no resolution on the bill, then on
the next legislative day the House shall, immediately after the
third daily order of business under clause 1 of Rule XIV of the
Rules of the House of Representatives, resolve into the Committee
of the Whole for further consideration of the bill.
(3) All appeals from the decisions of the Chair relating to the
application of the Rules of the House of Representatives to the
procedure relating to any such legislation shall be decided without
debate.
(4) Except to the extent specifically provided in the preceding
provisions of this subsection, consideration of any such
legislation and amendments thereto (or any conference report
thereon) shall be governed by the Rules of the House of
Representatives applicable to other bills and resolutions,
amendments, and conference reports in similar circumstances.
(e) Legislative Day Defined.--As used in this section, the term
``legislative day'' means a day on which the House of Representatives
is in session.
(f) Restriction on Waiver.--In the House, the provisions of this
section may be waived only by a rule or order proposing only to waive
such provisions.
(g) Rulemaking Power.--The provisions of this section are enacted
by the Congress--
(1) as an exercise of the rulemaking power of the House of
Representatives and, as such, shall be considered as part of the
rules of that House and shall supersede other rules only to the
extent that they are inconsistent therewith; and
(2) with full recognition of the constitutional right of that
House to change the rules (so far as they relate to the procedures
of that House) at any time, in the same manner, and to the same
extent as in the case of any other rule of that House.
SEC. 804. PROCEDURES IN THE SENATE.
(a) Introduction and Referral of President's Legislative
Proposal.--
(1) Introduction.--In the case of a legislative proposal
submitted by the President pursuant to section 1105(h) of title 31,
United States Code, within the 15-day period specified in paragraph
(1) of such section, the Majority Leader and Minority Leader of the
Senate (or their designees) shall introduce such proposal (by
request), the title of which is as follows: ``A bill to respond to
a medicare funding warning.'' Such bill shall be introduced within
3 days of session after Congress receives such proposal.
(2) Referral.--Any legislation introduced pursuant to paragraph
(1) shall be referred to the Committee on Finance.
(b) Medicare Funding Legislation.--For purposes of this section,
the term ``medicare funding legislation'' means--
(1) legislation introduced pursuant to subsection (a)(1), but
only if the legislative proposal upon which the legislation is
based was submitted within the 15-day period referred to in such
subsection; or
(2) any bill the title of which is as follows: ``A bill to
respond to a medicare funding warning.''.
(c) Qualification for Special Procedures.--
(1) In general.--The special procedures set forth in
subsections (d) and (e) shall apply to medicare funding
legislation, as described in subsection (b), only if the
legislation--
(A) is medicare funding legislation that is passed by the
House of Representatives; or
(B) contains matter within the jurisdiction of the
Committee on Finance in the Senate.
(2) Failure to qualify for special procedures.--If the medicare
funding legislation does not satisfy paragraph (1), then the
legislation shall be considered under the ordinary procedures of
the Standing Rules of the Senate.
(d) Discharge.--
(1) In general.--If the Committee on Finance has not reported
medicare funding legislation described in subsection (c)(1) by June
30 of a year in which the President is required to submit medicare
funding legislation to Congress under section 1105(h) of title 31,
United States Code, then any Senator may move to discharge the
Committee of any single medicare funding legislation measure. Only
one such motion shall be in order in any session of Congress.
(2) Debate limits.--Debate in the Senate on any such motion to
discharge, and all appeals in connection therewith, shall be
limited to not more than 2 hours. The time shall be equally divided
between, and controlled by, the maker of the motion and the
Majority Leader, or their designees, except that in the event the
Majority Leader is in favor of such motion, the time in opposition
thereto shall be controlled by the Minority Leader or the Minority
Leader's designee. A point of order under this subsection may be
made at any time. It is not in order to move to proceed to another
measure or matter while such motion (or the motion to reconsider
such motion) is pending.
(3) Amendments.--No amendment to the motion to discharge shall
be in order.
(4) Exception if certified legislation enacted.--
Notwithstanding paragraph (1), it shall not be in order to
discharge the Committee from further consideration of medicare
funding legislation pursuant to this subsection during a session of
a Congress if the chairman of the Committee on the Budget of the
Senate certifies that medicare funding legislation has been enacted
that eliminates excess general revenue medicare funding (as defined
in section 801(c)) for each fiscal year in the 7-fiscal-year
reporting period.
(e) Consideration.--After the date on which the Committee on
Finance has reported medicare funding legislation described in
subsection (c)(1), or has been discharged (under subsection (d)) from
further consideration of, such legislation, it is in order (even though
a previous motion to the same effect has been disagreed to) for any
Member of the Senate to move to proceed to the consideration of such
legislation.
(f) Rules of the Senate.--This section is enacted by the Senate--
(1) as an exercise of the rulemaking power of the Senate and as
such it is deemed a part of the rules of the Senate, but applicable
only with respect to the procedure to be followed in the Senate in
the case of a bill described in this paragraph, and it supersedes
other rules only to the extent that it is inconsistent with such
rules; and
(2) with full recognition of the constitutional right of the
Senate to change the rules (so far as relating to the procedure of
the Senate) at any time, in the same manner, and to the same extent
as in the case of any other rule of the Senate.
Subtitle B--Income-Related Reduction in Part B Premium Subsidy
SEC. 811. INCOME-RELATED REDUCTION IN PART B PREMIUM SUBSIDY.
(a) In General.--Section 1839 (42 U.S.C. 1395r), as amended by
section 241(c), is amended by adding at the end the following:
``(i) Reduction in Premium Subsidy Based on Income.--
``(1) In general.--In the case of an individual whose modified
adjusted gross income exceeds the threshold amount under paragraph
(2), the monthly amount of the premium subsidy applicable to the
premium under this section for a month after December 2006 shall be
reduced (and the monthly premium shall be increased) by the monthly
adjustment amount specified in paragraph (3).
``(2) Threshold amount.--For purposes of this subsection, the
threshold amount is--
``(A) except as provided in subparagraph (B), $80,000, and
``(B) in the case of a joint return, twice the amount
applicable under subparagraph (A) for the calendar year.
``(3) Monthly adjustment amount.--
``(A) In general.--Subject to subparagraph (B), the monthly
adjustment amount specified in this paragraph for an individual
for a month in a year is equal to the product of the following:
``(i) Sliding scale percentage.--The applicable
percentage specified in the table in subparagraph (C) for
the individual minus 25 percentage points.
``(ii) Unsubsidized part b premium amount.--200 percent
of the monthly actuarial rate for enrollees age 65 and over
(as determined under subsection (a)(1) for the year).
``(B) 5-year phase in.--The monthly adjustment amount
specified in this paragraph for an individual for a month in a
year before 2011 is equal to the following percentage of the
monthly adjustment amount specified in subparagraph (A):
``(i) For 2007, 20 percent.
``(ii) For 2008, 40 percent.
``(iii) For 2009, 60 percent.
``(iv) for 2010, 80 percent.
``(C) Applicable percentage.--
``(i) In general.--
``If the modified adjusted gross income is:
The applicable
percentage is:
More than $80,000 but not more than $100,000..............
35 percent
More than $100,000 but not more than $150,000.............
50 percent
More than $150,000 but not more than $200,000.............
65 percent
More than $200,000........................................
80 percent.
``(ii) Joint returns.--In the case of a joint return,
clause (i) shall be applied by substituting dollar amounts
which are twice the dollar amounts otherwise applicable
under clause (i) for the calendar year.
``(iii) Married individuals filing separate returns.--
In the case of an individual who--
``(I) is married as of the close of the taxable
year (within the meaning of section 7703 of the
Internal Revenue Code of 1986) but does not file a
joint return for such year, and
``(II) does not live apart from such individual's
spouse at all times during the taxable year,
clause (i) shall be applied by reducing each of the dollar
amounts otherwise applicable under such clause for the
calendar year by the threshold amount for such year
applicable to an unmarried individual.
``(4) Modified adjusted gross income.--
``(A) In general.--For purposes of this subsection, the
term `modified adjusted gross income' means adjusted gross
income (as defined in section 62 of the Internal Revenue Code
of 1986)--
``(i) determined without regard to sections 135, 911,
931, and 933 of such Code; and
``(ii) increased by the amount of interest received or
accrued during the taxable year which is exempt from tax
under such Code.
In the case of an individual filing a joint return, any
reference in this subsection to the modified adjusted gross
income of such individual shall be to such return's modified
adjusted gross income.
``(B) Taxable year to be used in determining modified
adjusted gross income.--
``(i) In general.--In applying this subsection for an
individual's premiums in a month in a year, subject to
clause (ii) and subparagraph (C), the individual's modified
adjusted gross income shall be such income determined for
the individual's last taxable year beginning in the second
calendar year preceding the year involved.
``(ii) Temporary use of other data.--If, as of October
15 before a calendar year, the Secretary of the Treasury
does not have adequate data for an individual in
appropriate electronic form for the taxable year referred
to in clause (i), the individual's modified adjusted gross
income shall be determined using the data in such form from
the previous taxable year. Except as provided in
regulations prescribed by the Commissioner of Social
Security in consultation with the Secretary, the preceding
sentence shall cease to apply when adequate data in
appropriate electronic form are available for the
individual for the taxable year referred to in clause (i),
and proper adjustments shall be made to the extent that the
premium adjustments determined under the preceding sentence
were inconsistent with those determined using such taxable
year.
``(iii) Non-filers.--In the case of individuals with
respect to whom the Secretary of the Treasury does not have
adequate data in appropriate electronic form for either
taxable year referred to in clause (i) or clause (ii), the
Commissioner of Social Security, in consultation with the
Secretary, shall prescribe regulations which provide for
the treatment of the premium adjustment with respect to
such individual under this subsection, including
regulations which provide for--
``(I) the application of the highest applicable
percentage under paragraph (3)(C) to such individual if
the Commissioner has information which indicates that
such individual's modified adjusted gross income might
exceed the threshold amount for the taxable year
referred to in clause (i), and
``(II) proper adjustments in the case of the
application of an applicable percentage under subclause
(I) to such individual which is inconsistent with such
individual's modified adjusted gross income for such
taxable year.
``(C) Use of more recent taxable year.--
``(i) In general.--The Commissioner of Social Security
in consultation with the Secretary of the Treasury shall
establish a procedures under which an individual's modified
adjusted gross income shall, at the request of such
individual, be determined under this subsection--
``(I) for a more recent taxable year than the
taxable year otherwise used under subparagraph (B), or
``(II) by such methodology as the Commissioner, in
consultation with such Secretary, determines to be
appropriate, which may include a methodology for
aggregating or disaggregating information from tax
returns in the case of marriage or divorce.
``(ii) Standard for granting requests.--A request under
clause (i)(I) to use a more recent taxable year may be
granted only if--
``(I) the individual furnishes to such Commissioner
with respect to such year such documentation, such as a
copy of a filed Federal income tax return or an
equivalent document, as the Commissioner specifies for
purposes of determining the premium adjustment (if any)
under this subsection; and
``(II) the individual's modified adjusted gross
income for such year is significantly less than such
income for the taxable year determined under
subparagraph (B) by reason of the death of such
individual's spouse, the marriage or divorce of such
individual, or other major life changing events
specified in regulations prescribed by the Commissioner
in consultation with the Secretary.
``(5) Inflation adjustment.--
``(A) In general.--In the case of any calendar year
beginning after 2007, each dollar amount in paragraph (2) or
(3) shall be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the percentage (if any) by which the average of
the Consumer Price Index for all urban consumers (United
States city average) for the 12-month period ending with
August of the preceding calendar year exceeds such average
for the 12-month period ending with August 2006.
``(B) Rounding.--If any dollar amount after being increased
under subparagraph (A) is not a multiple of $1,000, such dollar
amount shall be rounded to the nearest multiple of $1,000.
``(6) Joint return defined.--For purposes of this subsection,
the term `joint return' has the meaning given to such term by
section 7701(a)(38) of the Internal Revenue Code of 1986.''.
(b) Conforming Amendments.--
(1) Section 1839 (42 U.S.C. 1395r) is amended--
(A) in subsection (a)(2), by striking ``and (f)'' and
inserting ``(f), and (i)'';
(B) in subsection (b), inserting ``(without regard to any
adjustment under subsection (i))'' after ``subsection (a)'';
and
(C) in subsection (f)--
(i) by striking ``and if'' and inserting ``if''; and
(ii) by inserting ``and if the amount of the
individual's premium is not adjusted for such January under
subsection (i),'' after ``section 1840(b)(1),''.
(2) Section 1844 (42 U.S.C. 1395w) is amended--
(A) in subsection (a)(1)--
(i) in subparagraph (B), by striking ``plus'' at the
end and inserting ``minus''; and
(ii) by adding at the end the following new
subparagraph:
``(C) the aggregate amount of additional premium payments
attributable to the application of section 1839(i); plus''; and
(B) in subsection (c), by inserting before the period at
the end the following: ``and without regard to any premium
adjustment under section 1839(i)''.
(c) Reporting Requirements for Secretary of the Treasury.--
(1) In general.--Subsection (l) of section 6103 of the Internal
Revenue Code of 1986 (relating to disclosure of returns and return
information for purposes other than tax administration), as amended
by section 105(e), is amended by adding at the end the following
new paragraph:
``(20) Disclosure of return information to carry out medicare
part b premium subsidy adjustment.--
``(A) In general.--The Secretary shall, upon written
request from the Commissioner of Social Security, disclose to
officers, employees, and contractors of the Social Security
Administration return information of a taxpayer whose premium
(according to the records of the Secretary) may be subject to
adjustment under section 1839(i) of the Social Security Act.
Such return information shall be limited to--
``(i) taxpayer identity information with respect to
such taxpayer,
``(ii) the filing status of such taxpayer,
``(iii) the adjusted gross income of such taxpayer,
``(iv) the amounts excluded from such taxpayer's gross
income under sections 135 and 911 to the extent such
information is available,
``(v) the interest received or accrued during the
taxable year which is exempt from the tax imposed by
chapter 1 to the extent such information is available,
``(vi) the amounts excluded from such taxpayer's gross
income by sections 931 and 933 to the extent such
information is available,
``(vii) such other information relating to the
liability of the taxpayer as is prescribed by the Secretary
by regulation as might indicate in the case of a taxpayer
who is an individual described in subsection (i)(4)(B)(iii)
of section 1839 of the Social Security Act that the amount
of the premium of the taxpayer under such section may be
subject to adjustment under subsection (i) of such section
and the amount of such adjustment, and
``(viii) the taxable year with respect to which the
preceding information relates.
``(B) Restriction on use of disclosed information.--Return
information disclosed under subparagraph (A) may be used by
officers, employees, and contractors of the Social Security
Administration only for the purposes of, and to the extent
necessary in, establishing the appropriate amount of any
premium adjustment under such section 1839(i).''
(2) Conforming amendments.--
(A) Paragraph (3) of section 6103(a) of such Code, as
amended by section 105(e)(1), is amended by striking ``or
(19)'' and inserting ``(19), or (20)''.
(B) Paragraph (4) of section 6103(p) of such Code, as
amended by section 105(e)(3), is amended by striking ``(l)(16),
(17), or (19)'' each place it appears and inserting ``(l)(16),
(17), (19), or (20)''.
(C) Paragraph (2) of section 7213(a) of such Code, as
amended by section 105(e)(4), is amended by striking ``or
(19)'' and inserting ``(19), or (20)''.
TITLE IX--ADMINISTRATIVE IMPROVEMENTS, REGULATORY REDUCTION, AND
CONTRACTING REFORM
SEC. 900. ADMINISTRATIVE IMPROVEMENTS WITHIN THE CENTERS FOR MEDICARE &
MEDICAID SERVICES (CMS).
(a) Coordinated Administration of Medicare Prescription Drug and
Medicare Advantage Programs.--Title XVIII (42 U.S.C. 1395 et seq.), as
amended by section 721, is amended by inserting after 1807 the
following new section:
``provisions relating to administration
``Sec. 1808. (a) Coordinated Administration of Medicare
Prescription Drug and Medicare Advantage Programs.--
``(1) In general.--There is within the Centers for Medicare &
Medicaid Services a center to carry out the duties described in
paragraph (3).
``(2) Director.--Such center shall be headed by a director who
shall report directly to the Administrator of the Centers for
Medicare & Medicaid Services.
``(3) Duties.--The duties described in this paragraph are the
following:
``(A) The administration of parts C and D.
``(B) The provision of notice and information under section
1804.
``(C) Such other duties as the Secretary may specify.
``(4) Deadline.--The Secretary shall ensure that the center is
carrying out the duties described in paragraph (3) by not later
than January 1, 2008.''.
(b) Management Staff for the Centers for Medicare & Medicaid
Services.--Such section is further amended by adding at the end the
following new subsection:
``(b) Employment of Management Staff.--
``(1) In general.--The Secretary may employ, within the Centers
for Medicare & Medicaid Services, such individuals as management
staff as the Secretary determines to be appropriate. With respect
to the administration of parts C and D, such individuals shall
include individuals with private sector expertise in negotiations
with health benefits plans.
``(2) Eligibility.--To be eligible for employment under
paragraph (1) an individual shall be required to have demonstrated,
by their education and experience (either in the public or private
sector), superior expertise in at least one of the following areas:
``(A) The review, negotiation, and administration of health
care contracts.
``(B) The design of health care benefit plans.
``(C) Actuarial sciences.
``(D) Compliance with health plan contracts.
``(E) Consumer education and decision making.
``(F) Any other area specified by the Secretary that requires
specialized management or other expertise.
``(3) Rates of payment.--
``(A) Performance-related pay.--Subject to subparagraph
(B), the Secretary shall establish the rate of pay for an
individual employed under paragraph (1). Such rate shall take
into account expertise, experience, and performance.
``(B) Limitation.--In no case may the rate of compensation
determined under subparagraph (A) exceed the highest rate of
basic pay for the Senior Executive Service under section
5382(b) of title 5, United States Code.''.
(c) Requirement for Dedicated Actuary for Private Health Plans.--
Section 1117(b) (42 U.S.C. 1317(b)) is amended by adding at the end the
following new paragraph:
``(3) In the office of the Chief Actuary there shall be an actuary
whose duties relate exclusively to the programs under parts C and D of
title XVIII and related provisions of such title.''.
(d) Increase in Grade to Executive Level III for the Administrator
of the Centers for Medicare & Medicaid Services.--
(1) In general.--Section 5314 of title 5, United States Code,
is amended by adding at the end the following:
``Administrator of the Centers for Medicare & Medicaid
Services.''.
(2) Conforming amendment.--Section 5315 of such title is
amended by striking ``Administrator of the Health Care Financing
Administration.''.
(3) Effective date.--The amendments made by this subsection
take effect on January 1, 2004.
(e) Conforming Amendments Relating to Health Care Financing
Administration.--
(1) Amendments to the social security act.--The Social Security
Act is amended--
(A) in section 1117 (42 U.S.C. 1317)--
(i) in the heading to read as follows:
``appointment of the administrator and chief actuary of the centers
for medicare & medicaid services'';
(ii) in subsection (a), by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services''; and
(iii) in subsection (b)(1)--
(I) by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services''; and
(II) by striking ``Administration'' and inserting
``Centers'';
(B) in section 1140(a) (42 U.S.C. 1320b-10(a))--
(i) in paragraph (1), by striking ``Health Care
Financing Administration'' both places it appears in the
matter following subparagraph (B) and inserting ``Centers
for Medicare & Medicaid Services'';
(ii) in paragraph (1)(A)--
(I) by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services''; and
(II) by striking ``HCFA'' and inserting ``CMS'';
and
(iii) in paragraph (1)(B), by striking ``Health Care
Financing Administration'' both places it appears and
inserting ``Centers for Medicare & Medicaid Services'';
(C) in section 1142(b)(3) (42 U.S.C. 1320b-12(b)(3)), by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services'';
(D) in section 1817(b) (42 U.S.C. 1395i(b))--
(i) by striking ``Health Care Financing
Administration'', both in the fifth sentence of the matter
preceding paragraph (1) and in the second sentence of the
matter following paragraph (4), and inserting ``Centers for
Medicare & Medicaid Services''; and
(ii) by striking ``Chief Actuarial Officer'' in the
second sentence of the matter following paragraph (4) and
inserting ``Chief Actuary'';
(E) in section 1841(b) (42 U.S.C. 1395t(b))--
(i) by striking ``Health Care Financing
Administration'', both in the fifth sentence of the matter
preceding paragraph (1) and in the second sentence of the
matter following paragraph (4), and inserting ``Centers for
Medicare & Medicaid Services''; and
(ii) by striking ``Chief Actuarial Officer'' in the
second sentence of the matter following paragraph (4) and
inserting ``Chief Actuary'';
(F) in section 1852(a)(5) (42 U.S.C. 1395w-22(a)(5)), by
striking ``Health Care Financing Administration'' in the matter
following subparagraph (B) and inserting ``Centers for Medicare
& Medicaid Services'';
(G) in section 1853 (42 U.S.C. 1395w-23)--
(i) in subsection (b)(4), by striking ``Health Care
Financing Administration'' in the first sentence and
inserting ``Centers for Medicare & Medicaid Services''; and
(ii) in subsection (c)(7), by striking ``Health Care
Financing Administration'' in the last sentence and
inserting ``Centers for Medicare & Medicaid Services'';
(H) in section 1854(a)(5)(A) (42 U.S.C. 1395w-24(a)(5)(A)),
by striking ``Health Care Financing Administration''and
inserting ``Centers for Medicare & Medicaid Services'';
(I) in section 1857(d)(4)(A)(ii) (42 U.S.C. 1395w-
27(d)(4)(A)(ii)), by striking ``Health Care Financing
Administration'' and inserting ``Secretary'';
(J) in section 1862(b)(5)(A)(ii) (42 U.S.C.
1395y(b)(5)(A)(ii)), by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare &
Medicaid Services'';
(K) in section 1927(e)(4) (42 U.S.C. 1396r-8(e)(4)), by
striking ``HCFA'' and inserting ``The Secretary'';
(L) in section 1927(f)(2) (42 U.S.C. 1396r-8(f)(2)), by
striking ``HCFA'' and inserting ``The Secretary''; and
(M) in section 2104(g)(3) (42 U.S.C. 1397dd(g)(3)) by
inserting ``or CMS Form 64 or CMS Form 21, as the case may
be,'' after ``HCFA Form 64 or HCFA Form 21''.
(2) Amendments to the public health service act.--The Public
Health Service Act is amended--
(A) in section 501(d)(18) (42 U.S.C. 290aa(d)(18)), by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services'';
(B) in section 507(b)(6) (42 U.S.C. 290bb(b)(6)), by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services'';
(C) in section 916 (42 U.S.C. 299b-5)--
(i) in subsection (b)(2), by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services''; and
(ii) in subsection (c)(2), by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services'';
(D) in section 921(c)(3)(A) (42 U.S.C. 299c(c)(3)(A)), by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services'';
(E) in section 1318(a)(2) (42 U.S.C. 300e-17(a)(2)), by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services'';
(F) in section 2102(a)(7) (42 U.S.C. 300aa-2(a)(7)), by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services''; and
(G) in section 2675(a) (42 U.S.C. 300ff-75(a)), by striking
``Health Care Financing Administration'' in the first sentence
and inserting ``Centers for Medicare & Medicaid Services''.
(3) Amendments to the internal revenue code of 1986.--Section
6103(l)(12) of the Internal Revenue Code of 1986 is amended--
(A) in subparagraph (B), by striking ``Health Care
Financing Administration'' in the matter preceding clause (i)
and inserting ``Centers for Medicare & Medicaid Services''; and
(B) in subparagraph (C)--
(i) by striking ``health care financing
administration'' in the heading and inserting ``centers for
medicare & medicaid services''; and
(ii) by striking ``Health Care Financing
Administration'' in the matter preceding clause (i) and
inserting ``Centers for Medicare & Medicaid Services''.
(4) Amendments to title 10, united states code.--Title 10,
United States Code, is amended--
(A) in section 1086(d)(4), by striking ``administrator of
the Health Care Financing Administration'' in the last sentence
and inserting ``Administrator of the Centers for Medicare &
Medicaid Services''; and
(B) in section 1095(k)(2), by striking ``Health Care
Financing Administration'' in the second sentence and inserting
``Centers for Medicare & Medicaid Services''.
(5) Amendments to the alzheimer's disease and related dementias
services research act of 1992.--The Alzheimer's Disease and Related
Dementias Research Act of 1992 (42 U.S.C. 11271 et seq.) is
amended--
(A) in the heading of subpart 3 of part D to read as
follows:
``Subpart 3--Responsibilities of the Centers for Medicare & Medicaid
Services'';
(B) in section 937 (42 U.S.C. 11271)--
(i) in subsection (a), by striking ``National Health
Care Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services'';
(ii) in subsection (b)(1), by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services'';
(iii) in subsection (b)(2), by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services''; and
(iv) in subsection (c), by striking ``Health Care
Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services''; and
(C) in section 938 (42 U.S.C. 11272), by striking ``Health
Care Financing Administration'' and inserting ``Centers for
Medicare & Medicaid Services''.
(6) Miscellaneous amendments.--
(A) Rehabilitation act of 1973.--Section 202(b)(8) of the
Rehabilitation Act of 1973 (29 U.S.C. 762(b)(8)) is amended by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services''.
(B) Indian health care improvement act.--Section 405(d)(1)
of the Indian Health Care Improvement Act (25 U.S.C.
1645(d)(1)) is amended by striking ``Health Care Financing
Administration'' in the matter preceding subparagraph (A) and
inserting ``Centers for Medicare & Medicaid Services''.
(C) Individuals with disabilities education act.--Section
644(b)(5) of the Individuals with Disabilities Education Act
(20 U.S.C. 1444(b)(5)) is amended by striking ``Health Care
Financing Administration'' and inserting ``Centers for Medicare
& Medicaid Services''.
(D) The home health care and alzheimer's disease amendments
of 1990.--Section 302(a)(9) of the Home Health Care and
Alzheimer's Disease Amendments of 1990 (42 U.S.C. 242q-1(a)(9))
is amended by striking ``Health Care Financing Administration''
and inserting ``Centers for Medicare & Medicaid Services''.
(E) The children's health act of 2000.--Section 2503(a) of
the Children's Health Act of 2000 (42 U.S.C. 247b-3a(a)) is
amended by striking ``Health Care Financing Administration''
and inserting ``Centers for Medicare & Medicaid Services''.
(F) The national institutes of health revitalization act of
1993.--Section 1909 of the National Institutes of Health
Revitalization Act of 1993 (42 U.S.C. 299a note) is amended by
striking ``Health Care Financing Administration'' and inserting
``Centers for Medicare & Medicaid Services''.
(G) The omnibus budget reconciliation act of 1990.--Section
4359(d) of the Omnibus Budget Reconciliation Act of 1990 (42
U.S.C. 1395b-3(d)) is amended by striking ``Health Care
Financing Administration'' and inserting ``Centers for Medicare
& Medicaid Services''.
(H) The medicare, medicaid, and schip benefits improvement
and protection act of 2000.--Section 104(d)(4) of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of
2000 (42 U.S.C. 1395m note) is amended by striking ``Health
Care Financing Administration'' and inserting ``Health Care''.
(7) Additional amendment.--Section 403 of the Act entitled,
``An Act to authorize certain appropriations for the territories of
the United States, to amend certain Acts relating thereto, and for
other purposes'', enacted October 15, 1977 (48 U.S.C. 1574-1; 48
U.S.C. 1421q-1), is amended by striking ``Health Care Financing
Administration'' and inserting ``Centers for Medicare & Medicaid
Services''.
Subtitle A--Regulatory Reform
SEC. 901. CONSTRUCTION; DEFINITION OF SUPPLIER.
(a) Construction.--Nothing in this title shall be construed--
(1) to compromise or affect existing legal remedies for
addressing fraud or abuse, whether it be criminal prosecution,
civil enforcement, or administrative remedies, including under
sections 3729 through 3733 of title 31, United States Code
(commonly known as the ``False Claims Act''); or
(2) to prevent or impede the Department of Health and Human
Services in any way from its ongoing efforts to eliminate waste,
fraud, and abuse in the medicare program.
Furthermore, the consolidation of medicare administrative contracting
set forth in this division does not constitute consolidation of the
Federal Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund or reflect any position on that issue.
(b) Definition of Supplier.--Section 1861 (42 U.S.C. 1395x) is
amended by inserting after subsection (c) the following new subsection:
``Supplier
``(d) The term `supplier' means, unless the context otherwise
requires, a physician or other practitioner, a facility, or other
entity (other than a provider of services) that furnishes items or
services under this title.''.
SEC. 902. ISSUANCE OF REGULATIONS.
(a) Regular Timeline for Publication of Final Rules.--
(1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is
amended by adding at the end the following new paragraph:
``(3)(A) The Secretary, in consultation with the Director of the
Office of Management and Budget, shall establish and publish a regular
timeline for the publication of final regulations based on the previous
publication of a proposed regulation or an interim final regulation.
``(B) Such timeline may vary among different regulations based on
differences in the complexity of the regulation, the number and scope
of comments received, and other relevant factors, but shall not be
longer than 3 years except under exceptional circumstances. If the
Secretary intends to vary such timeline with respect to the publication
of a final regulation, the Secretary shall cause to have published in
the Federal Register notice of the different timeline by not later than
the timeline previously established with respect to such regulation.
Such notice shall include a brief explanation of the justification for
such variation.
``(C) In the case of interim final regulations, upon the expiration
of the regular timeline established under this paragraph for the
publication of a final regulation after opportunity for public comment,
the interim final regulation shall not continue in effect unless the
Secretary publishes (at the end of the regular timeline and, if
applicable, at the end of each succeeding 1-year period) a notice of
continuation of the regulation that includes an explanation of why the
regular timeline (and any subsequent 1-year extension) was not complied
with. If such a notice is published, the regular timeline (or such
timeline as previously extended under this paragraph) for publication
of the final regulation shall be treated as having been extended for 1
additional year.
``(D) The Secretary shall annually submit to Congress a report that
describes the instances in which the Secretary failed to publish a
final regulation within the applicable regular timeline under this
paragraph and that provides an explanation for such failures.''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on the date of the enactment of this Act. The Secretary
shall provide for an appropriate transition to take into account
the backlog of previously published interim final regulations.
(b) Limitations on New Matter in Final Regulations.--
(1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as
amended by subsection (a), is amended by adding at the end the
following new paragraph:
``(4) If the Secretary publishes a final regulation that includes a
provision that is not a logical outgrowth of a previously published
notice of proposed rulemaking or interim final rule, such provision
shall be treated as a proposed regulation and shall not take effect
until there is the further opportunity for public comment and a
publication of the provision again as a final regulation.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to final regulations published on or after the date of the
enactment of this Act.
SEC. 903. COMPLIANCE WITH CHANGES IN REGULATIONS AND POLICIES.
(a) No Retroactive Application of Substantive Changes.--
(1) In general.--Section 1871 (42 U.S.C. 1395hh), as amended by
section 902(a), is amended by adding at the end the following new
subsection:
``(e)(1)(A) A substantive change in regulations, manual
instructions, interpretative rules, statements of policy, or guidelines
of general applicability under this title shall not be applied (by
extrapolation or otherwise) retroactively to items and services
furnished before the effective date of the change, unless the Secretary
determines that--
``(i) such retroactive application is necessary to comply with
statutory requirements; or
``(ii) failure to apply the change retroactively would be
contrary to the public interest.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to substantive changes issued on or after the date of the
enactment of this Act.
(b) Timeline for Compliance With Substantive Changes After
Notice.--
(1) In general.--Section 1871(e)(1), as added by subsection
(a), is amended by adding at the end the following:
``(B)(i) Except as provided in clause (ii), a substantive change
referred to in subparagraph (A) shall not become effective before the
end of the 30-day period that begins on the date that the Secretary has
issued or published, as the case may be, the substantive change.
``(ii) The Secretary may provide for such a substantive change to
take effect on a date that precedes the end of the 30-day period under
clause (i) if the Secretary finds that waiver of such 30-day period is
necessary to comply with statutory requirements or that the application
of such 30-day period is contrary to the public interest. If the
Secretary provides for an earlier effective date pursuant to this
clause, the Secretary shall include in the issuance or publication of
the substantive change a finding described in the first sentence, and a
brief statement of the reasons for such finding.
``(C) No action shall be taken against a provider of services or
supplier with respect to noncompliance with such a substantive change
for items and services furnished before the effective date of such a
change.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to compliance actions undertaken on or after the date of the
enactment of this Act.
(c) Reliance on Guidance.--
(1) In general.--Section 1871(e), as added by subsection (a),
is further amended by adding at the end the following new
paragraph:
``(2)(A) If--
``(i) a provider of services or supplier follows the written
guidance (which may be transmitted electronically) provided by the
Secretary or by a medicare contractor (as defined in section
1889(g)) acting within the scope of the contractor's contract
authority, with respect to the furnishing of items or services and
submission of a claim for benefits for such items or services with
respect to such provider or supplier;
``(ii) the Secretary determines that the provider of services
or supplier has accurately presented the circumstances relating to
such items, services, and claim to the contractor in writing; and
``(iii) the guidance was in error;
the provider of services or supplier shall not be subject to any
penalty or interest under this title or the provisions of title XI
insofar as they relate to this title (including interest under a
repayment plan under section 1893 or otherwise) relating to the
provision of such items or service or such claim if the provider of
services or supplier reasonably relied on such guidance.
``(B) Subparagraph (A) shall not be construed as preventing the
recoupment or repayment (without any additional penalty) relating to an
overpayment insofar as the overpayment was solely the result of a
clerical or technical operational error.''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on the date of the enactment of this Act and shall only
apply to a penalty or interest imposed with respect to guidance
provided on or after July 24, 2003.
SEC. 904. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.
(a) GAO Study on Advisory Opinion Authority.--
(1) Study.--The Comptroller General of the United States shall
conduct a study to determine the feasibility and appropriateness of
establishing in the Secretary authority to provide legally binding
advisory opinions on appropriate interpretation and application of
regulations to carry out the medicare program under title XVIII of
the Social Security Act. Such study shall examine the appropriate
timeframe for issuing such advisory opinions, as well as the need
for additional staff and funding to provide such opinions.
(2) Report.--The Comptroller General shall submit to Congress a
report on the study conducted under paragraph (1) by not later than
1 year after the date of the enactment of this Act.
(b) Report on Legal and Regulatory Inconsistencies.--Section 1871
(42 U.S.C. 1395hh), as amended by section 903(a)(1), is amended by
adding at the end the following new subsection:
``(f)(1) Not later than 2 years after the date of the enactment of
this subsection, and every 3 years thereafter, the Secretary shall
submit to Congress a report with respect to the administration of this
title and areas of inconsistency or conflict among the various
provisions under law and regulation.
``(2) In preparing a report under paragraph (1), the Secretary
shall collect--
``(A) information from individuals entitled to benefits under
part A or enrolled under part B, or both, providers of services,
and suppliers and from the Medicare Beneficiary Ombudsman with
respect to such areas of inconsistency and conflict; and
``(B) information from medicare contractors that tracks the
nature of written and telephone inquiries.
``(3) A report under paragraph (1) shall include a description of
efforts by the Secretary to reduce such inconsistency or conflicts, and
recommendations for legislation or administrative action that the
Secretary determines appropriate to further reduce such inconsistency
or conflicts.''.
Subtitle B--Contracting Reform
SEC. 911. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.
(a) Consolidation and Flexibility in Medicare Administration.--
(1) In general.--Title XVIII is amended by inserting after
section 1874 the following new section:
``contracts with medicare administrative contractors
``Sec. 1874A. (a) Authority.--
``(1) Authority to enter into contracts.--The Secretary may
enter into contracts with any eligible entity to serve as a
medicare administrative contractor with respect to the performance
of any or all of the functions described in paragraph (4) or parts
of those functions (or, to the extent provided in a contract, to
secure performance thereof by other entities).
``(2) Eligibility of entities.--An entity is eligible to enter
into a contract with respect to the performance of a particular
function described in paragraph (4) only if--
``(A) the entity has demonstrated capability to carry out
such function;
``(B) the entity complies with such conflict of interest
standards as are generally applicable to Federal acquisition
and procurement;
``(C) the entity has sufficient assets to financially
support the performance of such function; and
``(D) the entity meets such other requirements as the
Secretary may impose.
``(3) Medicare administrative contractor defined.--For purposes
of this title and title XI--
``(A) In general.--The term `medicare administrative
contractor' means an agency, organization, or other person with
a contract under this section.
``(B) Appropriate medicare administrative contractor.--With
respect to the performance of a particular function in relation
to an individual entitled to benefits under part A or enrolled
under part B, or both, a specific provider of services or
supplier (or class of such providers of services or suppliers),
the `appropriate' medicare administrative contractor is the
medicare administrative contractor that has a contract under
this section with respect to the performance of that function
in relation to that individual, provider of services or
supplier or class of provider of services or supplier.
``(4) Functions described.--The functions referred to in
paragraphs (1) and (2) are payment functions (including the
function of developing local coverage determinations, as defined in
section 1869(f)(2)(B)), provider services functions, and functions
relating to services furnished to individuals entitled to benefits
under part A or enrolled under part B, or both, as follows:
``(A) Determination of payment amounts.--Determining
(subject to the provisions of section 1878 and to such review
by the Secretary as may be provided for by the contracts) the
amount of the payments required pursuant to this title to be
made to providers of services, suppliers and individuals.
``(B) Making payments.--Making payments described in
subparagraph (A) (including receipt, disbursement, and
accounting for funds in making such payments).
``(C) Beneficiary education and assistance.--Providing
education and outreach to individuals entitled to benefits
under part A or enrolled under part B, or both, and providing
assistance to those individuals with specific issues, concerns,
or problems.
``(D) Provider consultative services.--Providing
consultative services to institutions, agencies, and other
persons to enable them to establish and maintain fiscal records
necessary for purposes of this title and otherwise to qualify
as providers of services or suppliers.
``(E) Communication with providers.--Communicating to
providers of services and suppliers any information or
instructions furnished to the medicare administrative
contractor by the Secretary, and facilitating communication
between such providers and suppliers and the Secretary.
``(F) Provider education and technical assistance.--
Performing the functions relating to provider education,
training, and technical assistance.
``(G) Additional functions.--Performing such other
functions, including (subject to paragraph (5)) functions under
the Medicare Integrity Program under section 1893, as are
necessary to carry out the purposes of this title.
``(5) Relationship to mip contracts.--
``(A) Nonduplication of duties.--In entering into contracts
under this section, the Secretary shall assure that functions
of medicare administrative contractors in carrying out
activities under parts A and B do not duplicate activities
carried out under a contract entered into under the Medicare
Integrity Program under section 1893. The previous sentence
shall not apply with respect to the activity described in
section 1893(b)(5) (relating to prior authorization of certain
items of durable medical equipment under section 1834(a)(15)).
``(B) Construction.--An entity shall not be treated as a
medicare administrative contractor merely by reason of having
entered into a contract with the Secretary under section 1893.
``(6) Application of federal acquisition regulation.--Except to
the extent inconsistent with a specific requirement of this
section, the Federal Acquisition Regulation applies to contracts
under this section.
``(b) Contracting Requirements.--
``(1) Use of competitive procedures.--
``(A) In general.--Except as provided in laws with general
applicability to Federal acquisition and procurement or in
subparagraph (B), the Secretary shall use competitive
procedures when entering into contracts with medicare
administrative contractors under this section, taking into
account performance quality as well as price and other factors.
``(B) Renewal of contracts.--The Secretary may renew a
contract with a medicare administrative contractor under this
section from term to term without regard to section 5 of title
41, United States Code, or any other provision of law requiring
competition, if the medicare administrative contractor has met
or exceeded the performance requirements applicable with
respect to the contract and contractor, except that the
Secretary shall provide for the application of competitive
procedures under such a contract not less frequently than once
every 5 years.
``(C) Transfer of functions.--The Secretary may transfer
functions among medicare administrative contractors consistent
with the provisions of this paragraph. The Secretary shall
ensure that performance quality is considered in such
transfers. The Secretary shall provide public notice (whether
in the Federal Register or otherwise) of any such transfer
(including a description of the functions so transferred, a
description of the providers of services and suppliers affected
by such transfer, and contact information for the contractors
involved).
``(D) Incentives for quality.--The Secretary shall provide
incentives for medicare administrative contractors to provide
quality service and to promote efficiency.
``(2) Compliance with requirements.--No contract under this
section shall be entered into with any medicare administrative
contractor unless the Secretary finds that such medicare
administrative contractor will perform its obligations under the
contract efficiently and effectively and will meet such
requirements as to financial responsibility, legal authority,
quality of services provided, and other matters as the Secretary
finds pertinent.
``(3) Performance requirements.--
``(A) Development of specific performance requirements.--
``(i) In general.--The Secretary shall develop contract
performance requirements to carry out the specific
requirements applicable under this title to a function
described in subsection (a)(4) and shall develop standards
for measuring the extent to which a contractor has met such
requirements.
``(ii) Consultation.--In developing such performance
requirements and standards for measurement, the Secretary
shall consult with providers of services, organizations
representative of beneficiaries under this title, and
organizations and agencies performing functions necessary
to carry out the purposes of this section with respect to
such performance requirements.
``(iii) Publication of standards.--The Secretary shall
make such performance requirements and measurement
standards available to the public.
``(B) Considerations.--The Secretary shall include, as one
of the standards developed under subparagraph (A), provider and
beneficiary satisfaction levels.
``(C) Inclusion in contracts.--All contractor performance
requirements shall be set forth in the contract between the
Secretary and the appropriate medicare administrative
contractor. Such performance requirements--
``(i) shall reflect the performance requirements
published under subparagraph (A), but may include
additional performance requirements;
``(ii) shall be used for evaluating contractor
performance under the contract; and
``(iii) shall be consistent with the written statement
of work provided under the contract.
``(4) Information requirements.--The Secretary shall not enter
into a contract with a medicare administrative contractor under
this section unless the contractor agrees--
``(A) to furnish to the Secretary such timely information
and reports as the Secretary may find necessary in performing
his functions under this title; and
``(B) to maintain such records and afford such access
thereto as the Secretary finds necessary to assure the
correctness and verification of the information and reports
under subparagraph (A) and otherwise to carry out the purposes
of this title.
``(5) Surety bond.--A contract with a medicare administrative
contractor under this section may require the medicare
administrative contractor, and any of its officers or employees
certifying payments or disbursing funds pursuant to the contract,
or otherwise participating in carrying out the contract, to give
surety bond to the United States in such amount as the Secretary
may deem appropriate.
``(c) Terms and Conditions.--
``(1) In general.--A contract with any medicare administrative
contractor under this section may contain such terms and conditions
as the Secretary finds necessary or appropriate and may provide for
advances of funds to the medicare administrative contractor for the
making of payments by it under subsection (a)(4)(B).
``(2) Prohibition on mandates for certain data collection.--The
Secretary may not require, as a condition of entering into, or
renewing, a contract under this section, that the medicare
administrative contractor match data obtained other than in its
activities under this title with data used in the administration of
this title for purposes of identifying situations in which the
provisions of section 1862(b) may apply.
``(d) Limitation on Liability of Medicare Administrative
Contractors and Certain Officers.--
``(1) Certifying officer.--No individual designated pursuant to
a contract under this section as a certifying officer shall, in the
absence of the reckless disregard of the individual's obligations
or the intent by that individual to defraud the United States, be
liable with respect to any payments certified by the individual
under this section.
``(2) Disbursing officer.--No disbursing officer shall, in the
absence of the reckless disregard of the officer's obligations or
the intent by that officer to defraud the United States, be liable
with respect to any payment by such officer under this section if
it was based upon an authorization (which meets the applicable
requirements for such internal controls established by the
Comptroller General of the United States) of a certifying officer
designated as provided in paragraph (1) of this subsection.
``(3) Liability of medicare administrative contractor.--
``(A) In general.--No medicare administrative contractor
shall be liable to the United States for a payment by a
certifying or disbursing officer unless, in connection with
such payment, the medicare administrative contractor acted with
reckless disregard of its obligations under its medicare
administrative contract or with intent to defraud the United
States.
``(B) Relationship to false claims act.--Nothing in this
subsection shall be construed to limit liability for conduct
that would constitute a violation of sections 3729 through 3731
of title 31, United States Code.
``(4) Indemnification by secretary.--
``(A) In general.--Subject to subparagraphs (B) and (D), in
the case of a medicare administrative contractor (or a person
who is a director, officer, or employee of such a contractor or
who is engaged by the contractor to participate directly in the
claims administration process) who is made a party to any
judicial or administrative proceeding arising from or relating
directly to the claims administration process under this title,
the Secretary may, to the extent the Secretary determines to be
appropriate and as specified in the contract with the
contractor, indemnify the contractor and such persons.
``(B) Conditions.--The Secretary may not provide
indemnification under subparagraph (A) insofar as the liability
for such costs arises directly from conduct that is determined
by the judicial proceeding or by the Secretary to be criminal
in nature, fraudulent, or grossly negligent. If indemnification
is provided by the Secretary with respect to a contractor
before a determination that such costs arose directly from such
conduct, the contractor shall reimburse the Secretary for costs
of indemnification.
``(C) Scope of indemnification.--Indemnification by the
Secretary under subparagraph (A) may include payment of
judgments, settlements (subject to subparagraph (D)), awards,
and costs (including reasonable legal expenses).
``(D) Written approval for settlements or compromises.--A
contractor or other person described in subparagraph (A) may
not propose to negotiate a settlement or compromise of a
proceeding described in such subparagraph without the prior
written approval of the Secretary to negotiate such settlement
or compromise. Any indemnification under subparagraph (A) with
respect to amounts paid under a settlement or compromise of a
proceeding described in such subparagraph are conditioned upon
prior written approval by the Secretary of the final settlement
or compromise.
``(E) Construction.--Nothing in this paragraph shall be
construed--
``(i) to change any common law immunity that may be
available to a medicare administrative contractor or person
described in subparagraph (A); or
``(ii) to permit the payment of costs not otherwise
allowable, reasonable, or allocable under the Federal
Acquisition Regulation.''.
(2) Consideration of incorporation of current law standards.--
In developing contract performance requirements under section
1874A(b) of the Social Security Act, as inserted by paragraph (1),
the Secretary shall consider inclusion of the performance standards
described in sections 1816(f)(2) of such Act (relating to timely
processing of reconsiderations and applications for exemptions) and
section 1842(b)(2)(B) of such Act (relating to timely review of
determinations and fair hearing requests), as such sections were in
effect before the date of the enactment of this Act.
(b) Conforming Amendments to Section 1816 (Relating to Fiscal
Intermediaries).--Section 1816 (42 U.S.C. 1395h) is amended as follows:
(1) The heading is amended to read as follows:
``provisions relating to the administration of part a''.
(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended--
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and (3)(A), by striking
``agreement under this section'' and inserting ``contract under
section 1874A that provides for making payments under this
part''.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended--
(A) by striking ``An agreement with an agency or
organization under this section'' and inserting ``A contract
with a medicare administrative contractor under section 1874A
with respect to the administration of this part''; and
(B) by striking ``such agency or organization'' and
inserting ``such medicare administrative contractor'' each
place it appears.
(7) Subsection (l) is repealed.
(c) Conforming Amendments to Section 1842 (Relating to Carriers).--
Section 1842 (42 U.S.C. 1395u) is amended as follows:
(1) The heading is amended to read as follows:
``provisions relating to the administration of part b''.
(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted through
contracts with medicare administrative contractors under section
1874A.''.
(3) Subsection (b) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)--
(i) by striking subparagraphs (A) and (B);
(ii) in subparagraph (C), by striking ``carriers'' and
inserting ``medicare administrative contractors''; and
(iii) by striking subparagraphs (D) and (E);
(C) in paragraph (3)--
(i) in the matter before subparagraph (A), by striking
``Each such contract shall provide that the carrier'' and
inserting ``The Secretary'';
(ii) by striking ``will'' the first place it appears in
each of subparagraphs (A), (B), (F), (G), (H), and (L) and
inserting ``shall'';
(iii) in subparagraph (B), in the matter before clause
(i), by striking ``to the policyholders and subscribers of
the carrier'' and inserting ``to the policyholders and
subscribers of the medicare administrative contractor'';
(iv) by striking subparagraphs (C), (D), and (E);
(v) in subparagraph (H)--
(I) by striking ``if it makes determinations or
payments with respect to physicians' services,'' in the
matter preceding clause (i); and
(II) by striking ``carrier'' and inserting
``medicare administrative contractor'' in clause (i);
(vi) by striking subparagraph (I);
(vii) in subparagraph (L), by striking the semicolon
and inserting a period;
(viii) in the first sentence, after subparagraph (L),
by striking ``and shall contain'' and all that follows
through the period; and
(ix) in the seventh sentence, by inserting ``medicare
administrative contractor,'' after ``carrier,'';
(D) by striking paragraph (5);
(E) in paragraph (6)(D)(iv), by striking ``carrier'' and
inserting ``medicare administrative contractor''; and
(F) in paragraph (7), by striking ``the carrier'' and
inserting ``the Secretary'' each place it appears.
(4) Subsection (c) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)(A), by striking ``contract under this
section which provides for the disbursement of funds, as
described in subsection (a)(1)(B),'' and inserting ``contract
under section 1874A that provides for making payments under
this part'';
(C) in paragraph (3)(A), by striking ``subsection
(a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
(D) in paragraph (4), in the matter preceding subparagraph
(A), by striking ``carrier'' and inserting ``medicare
administrative contractor''; and
(E) by striking paragraphs (5) and (6).
(5) Subsections (d), (e), and (f) are repealed.
(6) Subsection (g) is amended by striking ``carrier or
carriers'' and inserting ``medicare administrative contractor or
contractors''.
(7) Subsection (h) is amended--
(A) in paragraph (2)--
(i) by striking ``Each carrier having an agreement with
the Secretary under subsection (a)'' and inserting ``The
Secretary''; and
(ii) by striking ``Each such carrier'' and inserting
``The Secretary'';
(B) in paragraph (3)(A)--
(i) by striking ``a carrier having an agreement with
the Secretary under subsection (a)'' and inserting
``medicare administrative contractor having a contract
under section 1874A that provides for making payments under
this part''; and
(ii) by striking ``such carrier'' and inserting ``such
contractor'';
(C) in paragraph (3)(B)--
(i) by striking ``a carrier'' and inserting ``a
medicare administrative contractor'' each place it appears;
and
(ii) by striking ``the carrier'' and inserting ``the
contractor'' each place it appears; and
(D) in paragraphs (5)(A) and (5)(B)(iii), by striking
``carriers'' and inserting ``medicare administrative
contractors'' each place it appears.
(8) Subsection (l) is amended--
(A) in paragraph (1)(A)(iii), by striking ``carrier'' and
inserting ``medicare administrative contractor''; and
(B) in paragraph (2), by striking ``carrier'' and inserting
``medicare administrative contractor''.
(9) Subsection (p)(3)(A) is amended by striking ``carrier'' and
inserting ``medicare administrative contractor''.
(10) Subsection (q)(1)(A) is amended by striking ``carrier''.
(d) Effective Date; Transition Rule.--
(1) Effective date.--
(A) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall take
effect on October 1, 2005, and the Secretary is authorized to
take such steps before such date as may be necessary to
implement such amendments on a timely basis.
(B) Construction for current contracts.--Such amendments
shall not apply to contracts in effect before the date
specified under subparagraph (A) that continue to retain the
terms and conditions in effect on such date (except as
otherwise provided under this Act, other than under this
section) until such date as the contract is let out for
competitive bidding under such amendments.
(C) Deadline for competitive bidding.--The Secretary shall
provide for the letting by competitive bidding of all contracts
for functions of medicare administrative contractors for annual
contract periods that begin on or after October 1, 2011.
(2) General transition rules.--
(A) Authority to continue to enter into new agreements and
contracts and waiver of provider nomination provisions during
transition.--Prior to October 1, 2005, the Secretary may,
consistent with subparagraph (B), continue to enter into
agreements under section 1816 and contracts under section 1842
of the Social Security Act (42 U.S.C. 1395h, 1395u). The
Secretary may enter into new agreements under section 1816
prior to October 1, 2005, without regard to any of the provider
nomination provisions of such section.
(B) Appropriate transition.--The Secretary shall take such
steps as are necessary to provide for an appropriate transition
from agreements under section 1816 and contracts under section
1842 of the Social Security Act (42 U.S.C. 1395h, 1395u) to
contracts under section 1874A, as added by subsection (a)(1).
(3) Authorizing continuation of mip functions under current
contracts and agreements and under transition contracts.--
Notwithstanding the amendments made by this section, the provisions
contained in the exception in section 1893(d)(2) of the Social
Security Act (42 U.S.C. 1395ddd(d)(2)) shall continue to apply
during the period that begins on the date of the enactment of this
Act and ends on October 1, 2011, and any reference in such
provisions to an agreement or contract shall be deemed to include a
contract under section 1874A of such Act, as inserted by subsection
(a)(1), that continues the activities referred to in such
provisions.
(e) References.--On and after the effective date provided under
subsection (d)(1), any reference to a fiscal intermediary or carrier
under title XI or XVIII of the Social Security Act (or any regulation,
manual instruction, interpretative rule, statement of policy, or
guideline issued to carry out such titles) shall be deemed a reference
to a medicare administrative contractor (as provided under section
1874A of the Social Security Act).
(f) Secretarial Submission of Legislative Proposal.--Not later than
6 months after the date of the enactment of this Act, the Secretary
shall submit to the appropriate committees of Congress a legislative
proposal providing for such technical and conforming amendments in the
law as are required by the provisions of this section.
(g) Reports on Implementation.--
(1) Plan for implementation.--By not later than October 1,
2004, the Secretary shall submit a report to Congress and the
Comptroller General of the United States that describes the plan
for implementation of the amendments made by this section. The
Comptroller General shall conduct an evaluation of such plan and
shall submit to Congress, not later than 6 months after the date
the report is received, a report on such evaluation and shall
include in such report such recommendations as the Comptroller
General deems appropriate.
(2) Status of implementation.--The Secretary shall submit a
report to Congress not later than October 1, 2008, that describes
the status of implementation of such amendments and that includes a
description of the following:
(A) The number of contracts that have been competitively
bid as of such date.
(B) The distribution of functions among contracts and
contractors.
(C) A timeline for complete transition to full competition.
(D) A detailed description of how the Secretary has
modified oversight and management of medicare contractors to
adapt to full competition.
SEC. 912. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE
ADMINISTRATIVE CONTRACTORS.
(a) In General.--Section 1874A, as added by section 911(a)(1), is
amended by adding at the end the following new subsection:
``(e) Requirements for Information Security.--
``(1) Development of information security program.--A medicare
administrative contractor that performs the functions referred to
in subparagraphs (A) and (B) of subsection (a)(4) (relating to
determining and making payments) shall implement a contractor-wide
information security program to provide information security for
the operation and assets of the contractor with respect to such
functions under this title. An information security program under
this paragraph shall meet the requirements for information security
programs imposed on Federal agencies under paragraphs (1) through
(8) of section 3544(b) of title 44, United States Code (other than
the requirements under paragraphs (2)(D)(i), (5)(A), and (5)(B) of
such section).
``(2) Independent audits.--
``(A) Performance of annual evaluations.--Each year a
medicare administrative contractor that performs the functions
referred to in subparagraphs (A) and (B) of subsection (a)(4)
(relating to determining and making payments) shall undergo an
evaluation of the information security of the contractor with
respect to such functions under this title. The evaluation
shall--
``(i) be performed by an entity that meets such
requirements for independence as the Inspector General of
the Department of Health and Human Services may establish;
and
``(ii) test the effectiveness of information security
control techniques of an appropriate subset of the
contractor's information systems (as defined in section
3502(8) of title 44, United States Code) relating to such
functions under this title and an assessment of compliance
with the requirements of this subsection and related
information security policies, procedures, standards and
guidelines, including policies and procedures as may be
prescribed by the Director of the Office of Management and
Budget and applicable information security standards
promulgated under section 11331 of title 40, United States
Code.
``(B) Deadline for initial evaluation.--
``(i) New contractors.--In the case of a medicare
administrative contractor covered by this subsection that
has not previously performed the functions referred to in
subparagraphs (A) and (B) of subsection (a)(4) (relating to
determining and making payments) as a fiscal intermediary
or carrier under section 1816 or 1842, the first
independent evaluation conducted pursuant to subparagraph
(A) shall be completed prior to commencing such functions.
``(ii) Other contractors.--In the case of a medicare
administrative contractor covered by this subsection that
is not described in clause (i), the first independent
evaluation conducted pursuant to subparagraph (A) shall be
completed within 1 year after the date the contractor
commences functions referred to in clause (i) under this
section.
``(C) Reports on evaluations.--
``(i) To the department of health and human services.--
The results of independent evaluations under subparagraph
(A) shall be submitted promptly to the Inspector General of
the Department of Health and Human Services and to the
Secretary.
``(ii) To congress.--The Inspector General of the
Department of Health and Human Services shall submit to
Congress annual reports on the results of such evaluations,
including assessments of the scope and sufficiency of such
evaluations.
``(iii) Agency reporting.--The Secretary shall address
the results of such evaluations in reports required under
section 3544(c) of title 44, United States Code.''.
(b) Application of Requirements to Fiscal Intermediaries and
Carriers.--
(1) In general.--The provisions of section 1874A(e)(2) of the
Social Security Act (other than subparagraph (B)), as added by
subsection (a), shall apply to each fiscal intermediary under
section 1816 of the Social Security Act (42 U.S.C. 1395h) and each
carrier under section 1842 of such Act (42 U.S.C. 1395u) in the
same manner as they apply to medicare administrative contractors
under such provisions.
(2) Deadline for initial evaluation.--In the case of such a
fiscal intermediary or carrier with an agreement or contract under
such respective section in effect as of the date of the enactment
of this Act, the first evaluation under section 1874A(e)(2)(A) of
the Social Security Act (as added by subsection (a)), pursuant to
paragraph (1), shall be completed (and a report on the evaluation
submitted to the Secretary) by not later than 1 year after such
date.
Subtitle C--Education and Outreach
SEC. 921. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.
(a) Coordination of Education Funding.--
(1) In general.--Title XVIII is amended by inserting after
section 1888 the following new section:
``provider education and technical assistance
``Sec. 1889. (a) Coordination of Education Funding.--The Secretary
shall coordinate the educational activities provided through medicare
contractors (as defined in subsection (g), including under section
1893) in order to maximize the effectiveness of Federal education
efforts for providers of services and suppliers.''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on the date of the enactment of this Act.
(3) Report.--Not later than October 1, 2004, the Secretary
shall submit to Congress a report that includes a description and
evaluation of the steps taken to coordinate the funding of provider
education under section 1889(a) of the Social Security Act, as
added by paragraph (1).
(b) Incentives To Improve Contractor Performance.--
(1) In general.--Section 1874A, as added by section 911(a)(1)
and as amended by section 912(a), is amended by adding at the end
the following new subsection:
``(f) Incentives To Improve Contractor Performance in Provider
Education and Outreach.--The Secretary shall use specific claims
payment error rates or similar methodology of medicare administrative
contractors in the processing or reviewing of medicare claims in order
to give such contractors an incentive to implement effective education
and outreach programs for providers of services and suppliers.''.
(2) Application to fiscal intermediaries and carriers.--The
provisions of section 1874A(f) of the Social Security Act, as added
by paragraph (1), shall apply to each fiscal intermediary under
section 1816 of the Social Security Act (42 U.S.C. 1395h) and each
carrier under section 1842 of such Act (42 U.S.C. 1395u) in the
same manner as they apply to medicare administrative contractors
under such provisions.
(3) GAO report on adequacy of methodology.--Not later than
October 1, 2004, the Comptroller General of the United States shall
submit to Congress and to the Secretary a report on the adequacy of
the methodology under section 1874A(f) of the Social Security Act,
as added by paragraph (1), and shall include in the report such
recommendations as the Comptroller General determines appropriate
with respect to the methodology.
(4) Report on use of methodology in assessing contractor
performance.--Not later than October 1, 2004, the Secretary shall
submit to Congress a report that describes how the Secretary
intends to use such methodology in assessing medicare contractor
performance in implementing effective education and outreach
programs, including whether to use such methodology as a basis for
performance bonuses. The report shall include an analysis of the
sources of identified errors and potential changes in systems of
contractors and rules of the Secretary that could reduce claims
error rates.
(c) Provision of Access to and Prompt Responses From Medicare
Administrative Contractors.--
(1) In general.--Section 1874A, as added by section 911(a)(1)
and as amended by section 912(a) and subsection (b), is further
amended by adding at the end the following new subsection:
``(g) Communications With Beneficiaries, Providers of Services and
Suppliers.--
``(1) Communication strategy.--The Secretary shall develop a
strategy for communications with individuals entitled to benefits
under part A or enrolled under part B, or both, and with providers
of services and suppliers under this title.
``(2) Response to written inquiries.--Each medicare
administrative contractor shall, for those providers of services
and suppliers which submit claims to the contractor for claims
processing and for those individuals entitled to benefits under
part A or enrolled under part B, or both, with respect to whom
claims are submitted for claims processing, provide general written
responses (which may be through electronic transmission) in a
clear, concise, and accurate manner to inquiries of providers of
services, suppliers, and individuals entitled to benefits under
part A or enrolled under part B, or both, concerning the programs
under this title within 45 business days of the date of receipt of
such inquiries.
``(3) Response to toll-free lines.--The Secretary shall ensure
that each medicare administrative contractor shall provide, for
those providers of services and suppliers which submit claims to
the contractor for claims processing and for those individuals
entitled to benefits under part A or enrolled under part B, or
both, with respect to whom claims are submitted for claims
processing, a toll-free telephone number at which such individuals,
providers of services, and suppliers may obtain information
regarding billing, coding, claims, coverage, and other appropriate
information under this title.
``(4) Monitoring of contractor responses.--
``(A) In general.--Each medicare administrative contractor
shall, consistent with standards developed by the Secretary
under subparagraph (B)--
``(i) maintain a system for identifying who provides
the information referred to in paragraphs (2) and (3); and
``(ii) monitor the accuracy, consistency, and
timeliness of the information so provided.
``(B) Development of standards.--
``(i) In general.--The Secretary shall establish and
make public standards to monitor the accuracy, consistency,
and timeliness of the information provided in response to
written and telephone inquiries under this subsection. Such
standards shall be consistent with the performance
requirements established under subsection (b)(3).
``(ii) Evaluation.--In conducting evaluations of
individual medicare administrative contractors, the
Secretary shall take into account the results of the
monitoring conducted under subparagraph (A) taking into
account as performance requirements the standards
established under clause (i). The Secretary shall, in
consultation with organizations representing providers of
services, suppliers, and individuals entitled to benefits
under part A or enrolled under part B, or both, establish
standards relating to the accuracy, consistency, and
timeliness of the information so provided.
``(C) Direct monitoring.--Nothing in this paragraph shall
be construed as preventing the Secretary from directly
monitoring the accuracy, consistency, and timeliness of the
information so provided.
``(5) Authorization of appropriations.--There are authorized to
be appropriated such sums as are necessary to carry out this
subsection.''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect October 1, 2004.
(3) Application to fiscal intermediaries and carriers.--The
provisions of section 1874A(g) of the Social Security Act, as added
by paragraph (1), shall apply to each fiscal intermediary under
section 1816 of the Social Security Act (42 U.S.C. 1395h) and each
carrier under section 1842 of such Act (42 U.S.C. 1395u) in the
same manner as they apply to medicare administrative contractors
under such provisions.
(d) Improved Provider Education and Training.--
(1) In general.--Section 1889, as added by subsection (a), is
amended by adding at the end the following new subsections:
``(b) Enhanced Education and Training.--
``(1) Additional resources.--There are authorized to be
appropriated to the Secretary (in appropriate part from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund) such sums as may be necessary for fiscal
years beginning with fiscal year 2005.
``(2) Use.--The funds made available under paragraph (1) shall
be used to increase the conduct by medicare contractors of
education and training of providers of services and suppliers
regarding billing, coding, and other appropriate items and may also
be used to improve the accuracy, consistency, and timeliness of
contractor responses.
``(c) Tailoring Education and Training Activities for Small
Providers or Suppliers.--
``(1) In general.--Insofar as a medicare contractor conducts
education and training activities, it shall tailor such activities
to meet the special needs of small providers of services or
suppliers (as defined in paragraph (2)). Such education and
training activities for small providers of services and suppliers
may include the provision of technical assistance (such as review
of billing systems and internal controls to determine program
compliance and to suggest more efficient and effective means of
achieving such compliance).
``(2) Small provider of services or supplier.--In this
subsection, the term `small provider of services or supplier'
means--
``(A) a provider of services with fewer than 25 full-time-
equivalent employees; or
``(B) a supplier with fewer than 10 full-time-equivalent
employees.''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on October 1, 2004.
(e) Requirement To Maintain Internet Websites.--
(1) In general.--Section 1889, as added by subsection (a) and
as amended by subsection (d), is further amended by adding at the
end the following new subsection:
``(d) Internet Websites; FAQs.--The Secretary, and each medicare
contractor insofar as it provides services (including claims
processing) for providers of services or suppliers, shall maintain an
Internet website which--
``(1) provides answers in an easily accessible format to
frequently asked questions, and
``(2) includes other published materials of the contractor,
that relate to providers of services and suppliers under the programs
under this title (and title XI insofar as it relates to such
programs).''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on October 1, 2004.
(f) Additional Provider Education Provisions.--
(1) In general.--Section 1889, as added by subsection (a) and
as amended by subsections (d) and (e), is further amended by adding
at the end the following new subsections:
``(e) Encouragement of Participation in Education Program
Activities.--A medicare contractor may not use a record of attendance
at (or failure to attend) educational activities or other information
gathered during an educational program conducted under this section or
otherwise by the Secretary to select or track providers of services or
suppliers for the purpose of conducting any type of audit or prepayment
review.
``(f) Construction.--Nothing in this section or section 1893(g)
shall be construed as providing for disclosure by a medicare
contractor--
``(1) of the screens used for identifying claims that will be
subject to medical review; or
``(2) of information that would compromise pending law
enforcement activities or reveal findings of law enforcement-
related audits.
``(g) Definitions.--For purposes of this section, the term
`medicare contractor' includes the following:
``(1) A medicare administrative contractor with a contract
under section 1874A, including a fiscal intermediary with a
contract under section 1816 and a carrier with a contract under
section 1842.
``(2) An eligible entity with a contract under section 1893.
Such term does not include, with respect to activities of a specific
provider of services or supplier an entity that has no authority under
this title or title IX with respect to such activities and such
provider of services or supplier.''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on the date of the enactment of this Act.
SEC. 922. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION PROGRAM.
(a) Establishment.--
(1) In general.--The Secretary shall establish a demonstration
program (in this section referred to as the ``demonstration
program'') under which technical assistance described in paragraph
(2) is made available, upon request and on a voluntary basis, to
small providers of services or suppliers in order to improve
compliance with the applicable requirements of the programs under
medicare program under title XVIII of the Social Security Act
(including provisions of title XI of such Act insofar as they
relate to such title and are not administered by the Office of the
Inspector General of the Department of Health and Human Services).
(2) Forms of technical assistance.--The technical assistance
described in this paragraph is--
(A) evaluation and recommendations regarding billing and
related systems; and
(B) information and assistance regarding policies and
procedures under the medicare program, including coding and
reimbursement.
(3) Small providers of services or suppliers.--In this section,
the term ``small providers of services or suppliers'' means--
(A) a provider of services with fewer than 25 full-time-
equivalent employees; or
(B) a supplier with fewer than 10 full-time-equivalent
employees.
(b) Qualification of Contractors.--In conducting the demonstration
program, the Secretary shall enter into contracts with qualified
organizations (such as peer review organizations or entities described
in section 1889(g)(2) of the Social Security Act, as inserted by
section 921(f)(1)) with appropriate expertise with billing systems of
the full range of providers of services and suppliers to provide the
technical assistance. In awarding such contracts, the Secretary shall
consider any prior investigations of the entity's work by the Inspector
General of Department of Health and Human Services or the Comptroller
General of the United States.
(c) Description of Technical Assistance.--The technical assistance
provided under the demonstration program shall include a direct and in-
person examination of billing systems and internal controls of small
providers of services or suppliers to determine program compliance and
to suggest more efficient or effective means of achieving such
compliance.
(d) GAO Evaluation.--Not later than 2 years after the date the
demonstration program is first implemented, the Comptroller General, in
consultation with the Inspector General of the Department of Health and
Human Services, shall conduct an evaluation of the demonstration
program. The evaluation shall include a determination of whether claims
error rates are reduced for small providers of services or suppliers
who participated in the program and the extent of improper payments
made as a result of the demonstration program. The Comptroller General
shall submit a report to the Secretary and the Congress on such
evaluation and shall include in such report recommendations regarding
the continuation or extension of the demonstration program.
(e) Financial Participation by Providers.--The provision of
technical assistance to a small provider of services or supplier under
the demonstration program is conditioned upon the small provider of
services or supplier paying an amount estimated (and disclosed in
advance of a provider's or supplier's participation in the program) to
be equal to 25 percent of the cost of the technical assistance.
(f) Authorization of Appropriations.--There are authorized to be
appropriated, from amounts not otherwise appropriated in the Treasury,
such sums as may be necessary to carry out this section.
SEC. 923. MEDICARE BENEFICIARY OMBUDSMAN.
(a) In General.--Section 1808, as added and amended by section 900,
is amended by adding at the end the following new subsection:
``(c) Medicare Beneficiary Ombudsman.--
``(1) In general.--The Secretary shall appoint within the
Department of Health and Human Services a Medicare Beneficiary
Ombudsman who shall have expertise and experience in the fields of
health care and education of (and assistance to) individuals
entitled to benefits under this title.
``(2) Duties.--The Medicare Beneficiary Ombudsman shall--
``(A) receive complaints, grievances, and requests for
information submitted by individuals entitled to benefits under
part A or enrolled under part B, or both, with respect to any
aspect of the medicare program;
``(B) provide assistance with respect to complaints,
grievances, and requests referred to in subparagraph (A),
including--
``(i) assistance in collecting relevant information for
such individuals, to seek an appeal of a decision or
determination made by a fiscal intermediary, carrier, MA
organization, or the Secretary;
``(ii) assistance to such individuals with any problems
arising from disenrollment from an MA plan under part C;
and
``(iii) assistance to such individuals in presenting
information under section 1839(i)(4)(C) (relating to
income-related premium adjustment; and
``(C) submit annual reports to Congress and the Secretary
that describe the activities of the Office and that include
such recommendations for improvement in the administration of
this title as the Ombudsman determines appropriate.
The Ombudsman shall not serve as an advocate for any increases in
payments or new coverage of services, but may identify issues and
problems in payment or coverage policies.
``(3) Working with health insurance counseling programs.--To
the extent possible, the Ombudsman shall work with health insurance
counseling programs (receiving funding under section 4360 of
Omnibus Budget Reconciliation Act of 1990) to facilitate the
provision of information to individuals entitled to benefits under
part A or enrolled under part B, or both regarding MA plans and
changes to those plans. Nothing in this paragraph shall preclude
further collaboration between the Ombudsman and such programs.''.
(b) Deadline for Appointment.--By not later than 1 year after the
date of the enactment of this Act, the Secretary shall appoint the
Medicare Beneficiary Ombudsman under section 1808(c) of the Social
Security Act, as added by subsection (a).
(c) Funding.--There are authorized to be appropriated to the
Secretary (in appropriate part from the Federal Hospital Insurance
Trust Fund, established under section 1817 of the Social Security Act
(42 U.S.C. 1395i), and the Federal Supplementary Medical Insurance
Trust Fund, established under section 1841 of such Act (42 U.S.C.
1395t)) to carry out section 1808(c) of such Act (relating to the
Medicare Beneficiary Ombudsman), as added by subsection (a), such sums
as are necessary for fiscal year 2004 and each succeeding fiscal year.
(d) Use of Central, Toll-Free Number (1-800-MEDICARE).--
(1) Phone triage system; listing in medicare handbook instead
of other toll-free numbers.--Section 1804(b) (42 U.S.C. 1395b-2(b))
is amended by adding at the end the following: ``The Secretary
shall provide, through the toll-free telephone number 1-800-
MEDICARE, for a means by which individuals seeking information
about, or assistance with, such programs who phone such toll-free
number are transferred (without charge) to appropriate entities for
the provision of such information or assistance. Such toll-free
number shall be the toll-free number listed for general information
and assistance in the annual notice under subsection (a) instead of
the listing of numbers of individual contractors.''.
(2) Monitoring accuracy.--
(A) Study.--The Comptroller General of the United States
shall conduct a study to monitor the accuracy and consistency
of information provided to individuals entitled to benefits
under part A or enrolled under part B, or both, through the
toll-free telephone number 1-800-MEDICARE, including an
assessment of whether the information provided is sufficient to
answer questions of such individuals. In conducting the study,
the Comptroller General shall examine the education and
training of the individuals providing information through such
number.
(B) Report.--Not later than 1 year after the date of the
enactment of this Act, the Comptroller General shall submit to
Congress a report on the study conducted under subparagraph
(A).
SEC. 924. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.
(a) In General.--The Secretary shall establish a demonstration
program (in this section referred to as the ``demonstration program'')
under which medicare specialists employed by the Department of Health
and Human Services provide advice and assistance to individuals
entitled to benefits under part A of title XVIII of the Social Security
Act, or enrolled under part B of such title, or both, regarding the
medicare program at the location of existing local offices of the
Social Security Administration.
(b) Locations.--
(1) In general.--The demonstration program shall be conducted
in at least 6 offices or areas. Subject to paragraph (2), in
selecting such offices and areas, the Secretary shall provide
preference for offices with a high volume of visits by individuals
referred to in subsection (a).
(2) Assistance for rural beneficiaries.--The Secretary shall
provide for the selection of at least 2 rural areas to participate
in the demonstration program. In conducting the demonstration
program in such rural areas, the Secretary shall provide for
medicare specialists to travel among local offices in a rural area
on a scheduled basis.
(c) Duration.--The demonstration program shall be conducted over a
3-year period.
(d) Evaluation and Report.--
(1) Evaluation.--The Secretary shall provide for an evaluation
of the demonstration program. Such evaluation shall include an
analysis of--
(A) utilization of, and satisfaction of those individuals
referred to in subsection (a) with, the assistance provided
under the program; and
(B) the cost-effectiveness of providing beneficiary
assistance through out-stationing medicare specialists at local
offices of the Social Security Administration.
(2) Report.--The Secretary shall submit to Congress a report on
such evaluation and shall include in such report recommendations
regarding the feasibility of permanently out-stationing medicare
specialists at local offices of the Social Security Administration.
SEC. 925. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO
BENEFICIARIES ABOUT SKILLED NURSING FACILITY BENEFITS.
(a) In General.--The Secretary shall provide that in medicare
beneficiary notices provided (under section 1806(a) of the Social
Security Act, 42 U.S.C. 1395b-7(a)) with respect to the provision of
post-hospital extended care services under part A of title XVIII of the
Social Security Act, there shall be included information on the number
of days of coverage of such services remaining under such part for the
medicare beneficiary and spell of illness involved.
(b) Effective Date.--Subsection (a) shall apply to notices provided
during calendar quarters beginning more than 6 months after the date of
the enactment of this Act.
SEC. 926. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING FACILITIES
IN HOSPITAL DISCHARGE PLANS.
(a) Availability of Data.--The Secretary shall publicly provide
information that enables hospital discharge planners, medicare
beneficiaries, and the public to identify skilled nursing facilities
that are participating in the medicare program.
(b) Inclusion of Information in Certain Hospital Discharge Plans.--
(1) In general.--Section 1861(ee)(2)(D) (42 U.S.C.
1395x(ee)(2)(D)) is amended--
(A) by striking ``hospice services'' and inserting
``hospice care and post-hospital extended care services''; and
(B) by inserting before the period at the end the
following: ``and, in the case of individuals who are likely to
need post-hospital extended care services, the availability of
such services through facilities that participate in the
program under this title and that serve the area in which the
patient resides''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to discharge plans made on or after such date as the
Secretary shall specify, but not later than 6 months after the date
the Secretary provides for availability of information under
subsection (a).
Subtitle D--Appeals and Recovery
SEC. 931. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.
(a) Transition Plan.--
(1) In general.--Not later than April 1, 2004, the Commissioner
of Social Security and the Secretary shall develop and transmit to
Congress and the Comptroller General of the United States a plan
under which the functions of administrative law judges responsible
for hearing cases under title XVIII of the Social Security Act (and
related provisions in title XI of such Act) are transferred from
the responsibility of the Commissioner and the Social Security
Administration to the Secretary and the Department of Health and
Human Services.
(2) Contents.--The plan shall include information on the
following:
(A) Workload.--The number of such administrative law judges
and support staff required now and in the future to hear and
decide such cases in a timely manner, taking into account the
current and anticipated claims volume, appeals, number of
beneficiaries, and statutory changes.
(B) Cost projections and financing.--Funding levels
required for fiscal year 2005 and subsequent fiscal years to
carry out the functions transferred under the plan.
(C) Transition timetable.--A timetable for the transition.
(D) Regulations.--The establishment of specific regulations
to govern the appeals process.
(E) Case tracking.--The development of a unified case
tracking system that will facilitate the maintenance and
transfer of case specific data across both the fee-for-service
and managed care components of the medicare program.
(F) Feasibility of precedential authority.--The feasibility
of developing a process to give decisions of the Departmental
Appeals Board in the Department of Health and Human Services
addressing broad legal issues binding, precedential authority.
(G) Access to administrative law judges.--The feasibility
of--
(i) filing appeals with administrative law judges
electronically; and
(ii) conducting hearings using tele- or video-
conference technologies.
(H) Independence of administrative law judges.--The steps
that should be taken to ensure the independence of
administrative law judges consistent with the requirements of
subsection (b)(2).
(I) Geographic distribution.--The steps that should be
taken to provide for an appropriate geographic distribution of
administrative law judges throughout the United States to carry
out subsection (b)(3).
(J) Hiring.--The steps that should be taken to hire
administrative law judges (and support staff) to carry out
subsection (b)(4).
(K) Performance standards.--The appropriateness of
establishing performance standards for administrative law
judges with respect to timelines for decisions in cases under
title XVIII of the Social Security Act taking into account
requirements under subsection (b)(2) for the independence of
such judges and consistent with the applicable provisions of
title 5, United States Code relating to impartiality.
(L) Shared resources.--The steps that should be taken to
carry out subsection (b)(6) (relating to the arrangements with
the Commissioner of Social Security to share office space,
support staff, and other resources, with appropriate
reimbursement).
(M) Training.--The training that should be provided to
administrative law judges with respect to laws and regulations
under title XVIII of the Social Security Act.
(3) Additional information.--The plan may also include
recommendations for further congressional action, including
modifications to the requirements and deadlines established under
section 1869 of the Social Security Act (42 U.S.C. 1395ff) (as
amended by this Act).
(4) GAO evaluation.--The Comptroller General of the United
States shall evaluate the plan and, not later than the date that is
6 months after the date on which the plan is received by the
Comptroller General, shall submit to Congress a report on such
evaluation.
(b) Transfer of Adjudication Authority.--
(1) In general.--Not earlier than July 1, 2005, and not later
than October 1, 2005, the Commissioner of Social Security and the
Secretary shall implement the transition plan under subsection (a)
and transfer the administrative law judge functions described in
such subsection from the Social Security Administration to the
Secretary.
(2) Assuring independence of judges.--The Secretary shall
assure the independence of administrative law judges performing the
administrative law judge functions transferred under paragraph (1)
from the Centers for Medicare & Medicaid Services and its
contractors. In order to assure such independence, the Secretary
shall place such judges in an administrative office that is
organizationally and functionally separate from such Centers. Such
judges shall report to, and be under the general supervision of,
the Secretary, but shall not report to, or be subject to
supervision by, another officer of the Department of Health and
Human Services.
(3) Geographic distribution.--The Secretary shall provide for
an appropriate geographic distribution of administrative law judges
performing the administrative law judge functions transferred under
paragraph (1) throughout the United States to ensure timely access
to such judges.
(4) Hiring authority.--Subject to the amounts provided in
advance in appropriations Acts, the Secretary shall have authority
to hire administrative law judges to hear such cases, taking into
consideration those judges with expertise in handling medicare
appeals and in a manner consistent with paragraph (3), and to hire
support staff for such judges.
(5) Financing.--Amounts payable under law to the Commissioner
for administrative law judges performing the administrative law
judge functions transferred under paragraph (1) from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund shall become payable to the Secretary for the
functions so transferred.
(6) Shared resources.--The Secretary shall enter into such
arrangements with the Commissioner as may be appropriate with
respect to transferred functions of administrative law judges to
share office space, support staff, and other resources, with
appropriate reimbursement from the Trust Funds described in
paragraph (5).
(c) Increased Financial Support.--In addition to any amounts
otherwise appropriated, to ensure timely action on appeals before
administrative law judges and the Departmental Appeals Board consistent
with section 1869 of the Social Security Act (42 U.S.C. 1395ff) (as
amended by this Act), there are authorized to be appropriated (in
appropriate part from the Federal Hospital Insurance Trust Fund,
established under section 1817 of the Social Security Act (42 U.S.C.
1395i), and the Federal Supplementary Medical Insurance Trust Fund,
established under section 1841 of such Act (42 U.S.C. 1395t)) to the
Secretary such sums as are necessary for fiscal year 2005 and each
subsequent fiscal year to--
(1) increase the number of administrative law judges (and their
staffs) under subsection (b)(4);
(2) improve education and training opportunities for
administrative law judges (and their staffs); and
(3) increase the staff of the Departmental Appeals Board.
(d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 U.S.C.
1395ff(f)(2)(A)(i)) is amended by striking ``of the Social Security
Administration''.
SEC. 932. PROCESS FOR EXPEDITED ACCESS TO REVIEW.
(a) Expedited Access to Judicial Review.--
(1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)) is
amended--
(A) in paragraph (1)(A), by inserting ``, subject to
paragraph (2),'' before ``to judicial review of the Secretary's
final decision''; and
(B) by adding at the end the following new paragraph:
``(2) Expedited access to judicial review.--
``(A) In general.--The Secretary shall establish a process
under which a provider of services or supplier that furnishes
an item or service or an individual entitled to benefits under
part A or enrolled under part B, or both, who has filed an
appeal under paragraph (1) (other than an appeal filed under
paragraph (1)(F)(i)) may obtain access to judicial review when
a review entity (described in subparagraph (D)), on its own
motion or at the request of the appellant, determines that the
Departmental Appeals Board does not have the authority to
decide the question of law or regulation relevant to the
matters in controversy and that there is no material issue of
fact in dispute. The appellant may make such request only once
with respect to a question of law or regulation for a specific
matter in dispute in a case of an appeal.
``(B) Prompt determinations.--If, after or coincident with
appropriately filing a request for an administrative hearing,
the appellant requests a determination by the appropriate
review entity that the Departmental Appeals Board does not have
the authority to decide the question of law or regulations
relevant to the matters in controversy and that there is no
material issue of fact in dispute, and if such request is
accompanied by the documents and materials as the appropriate
review entity shall require for purposes of making such
determination, such review entity shall make a determination on
the request in writing within 60 days after the date such
review entity receives the request and such accompanying
documents and materials. Such a determination by such review
entity shall be considered a final decision and not subject to
review by the Secretary.
``(C) Access to judicial review.--
``(i) In general.--If the appropriate review entity--
``(I) determines that there are no material issues
of fact in dispute and that the only issues to be
adjudicated are ones of law or regulation that the
Departmental Appeals Board does not have authority to
decide; or
``(II) fails to make such determination within the
period provided under subparagraph (B),
then the appellant may bring a civil action as described in
this subparagraph.
``(ii) Deadline for filing.--Such action shall be
filed, in the case described in--
``(I) clause (i)(I), within 60 days of the date of
the determination described in such clause; or
``(II) clause (i)(II), within 60 days of the end of
the period provided under subparagraph (B) for the
determination.
``(iii) Venue.--Such action shall be brought in the
district court of the United States for the judicial
district in which the appellant is located (or, in the case
of an action brought jointly by more than one applicant,
the judicial district in which the greatest number of
applicants are located) or in the District Court for the
District of Columbia.
``(iv) Interest on any amounts in controversy.--Where a
provider of services or supplier is granted judicial review
pursuant to this paragraph, the amount in controversy (if
any) shall be subject to annual interest beginning on the
first day of the first month beginning after the 60-day
period as determined pursuant to clause (ii) and equal to
the rate of interest on obligations issued for purchase by
the Federal Supplementary Medical Insurance Trust Fund for
the month in which the civil action authorized under this
paragraph is commenced, to be awarded by the reviewing
court in favor of the prevailing party. No interest awarded
pursuant to the preceding sentence shall be deemed income
or cost for the purposes of determining reimbursement due
providers of services or suppliers under this title.
``(D) Review entity defined.--For purposes of this
subsection, the term `review entity' means an entity of up to
three reviewers who are administrative law judges or members of
the Departmental Appeals Board selected for purposes of making
determinations under this paragraph.''.
(2) Conforming amendment.--Section 1869(b)(1)(F)(ii) (42 U.S.C.
1395ff(b)(1)(F)(ii)) is amended to read as follows:
``(ii) Reference to expedited access to judicial
review.--For the provision relating to expedited access to
judicial review, see paragraph (2).''.
(b) Application to Provider Agreement Determinations.--Section
1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
(1) by inserting ``(A)'' after ``(h)(1)''; and
(2) by adding at the end the following new subparagraph:
``(B) An institution or agency described in subparagraph (A) that
has filed for a hearing under subparagraph (A) shall have expedited
access to judicial review under this subparagraph in the same manner as
providers of services, suppliers, and individuals entitled to benefits
under part A or enrolled under part B, or both, may obtain expedited
access to judicial review under the process established under section
1869(b)(2). Nothing in this subparagraph shall be construed to affect
the application of any remedy imposed under section 1819 during the
pendency of an appeal under this subparagraph.''.
(c) Expedited Review of Certain Provider Agreement
Determinations.--
(1) Termination and certain other immediate remedies.--Section
1866(h)(1) (42 U.S.C. 1395cc(h)(1)), as amended by subsection (b),
is amended by adding at the end the following new subparagraph:
``(C)(i) The Secretary shall develop and implement a process to
expedite proceedings under this subsection in which--
``(I) the remedy of termination of participation has been
imposed;
``(II) a remedy described in clause (i) or (iii) of section
1819(h)(2)(B) has been imposed, but only if such remedy has been
imposed on an immediate basis; or
``(III) a determination has been made as to a finding of
substandard quality of care that results in the loss of approval of
a skilled nursing facility's nurse aide training program.
``(ii) Under such process under clause (i), priority shall be
provided in cases of termination described in clause (i)(I).
``(iii) Nothing in this subparagraph shall be construed to affect
the application of any remedy imposed under section 1819 during the
pendency of an appeal under this subparagraph.''.
(2) Waiver of disapproval of nurse-aide training programs.--
Sections 1819(f)(2) and section 1919(f)(2) (42 U.S.C. 1395i-3(f)(2)
and 1396r(f)(2)) are each amended--
(A) in subparagraph (B)(iii), by striking ``subparagraph
(C)'' and inserting ``subparagraphs (C) and (D)''; and
(B) by adding at the end the following new subparagraph:
``(D) Waiver of disapproval of nurse-aide training
programs.--Upon application of a nursing facility, the
Secretary may waive the application of subparagraph
(B)(iii)(I)(c) if the imposition of the civil monetary penalty
was not related to the quality of care provided to residents of
the facility. Nothing in this subparagraph shall be construed
as eliminating any requirement upon a facility to pay a civil
monetary penalty described in the preceding sentence.''.
(3) Increased financial support.--In addition to any amounts
otherwise appropriated, to reduce by 50 percent the average time
for administrative determinations on appeals under section 1866(h)
of the Social Security Act (42 U.S.C. 1395cc(h)), there are
authorized to be appropriated (in appropriate part from the Federal
Hospital Insurance Trust Fund, established under section 1817 of
the Social Security Act (42 U.S.C. 1395i), and the Federal
Supplementary Medical Insurance Trust Fund, established under
section 1841 of such Act (42 U.S.C. 1395t)) to the Secretary such
additional sums for fiscal year 2004 and each subsequent fiscal
year as may be necessary. The purposes for which such amounts are
available include increasing the number of administrative law
judges (and their staffs) and the appellate level staff at the
Departmental Appeals Board of the Department of Health and Human
Services and educating such judges and staffs on long-term care
issues.
(d) Effective Date.--The amendments made by this section shall
apply to appeals filed on or after October 1, 2004.
SEC. 933. REVISIONS TO MEDICARE APPEALS PROCESS.
(a) Requiring Full and Early Presentation of Evidence.--
(1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as
amended by section 932(a), is further amended by adding at the end
the following new paragraph:
``(3) Requiring full and early presentation of evidence by
providers.--A provider of services or supplier may not introduce
evidence in any appeal under this section that was not presented at
the reconsideration conducted by the qualified independent
contractor under subsection (c), unless there is good cause which
precluded the introduction of such evidence at or before that
reconsideration.''.
(2) Effective date.--The amendment made by paragraph (1) shall
take effect on October 1, 2004.
(b) Use of Patients' Medical Records.--Section 1869(c)(3)(B)(i) (42
U.S.C. 1395ff(c)(3)(B)(i)) is amended by inserting ``(including the
medical records of the individual involved)'' after ``clinical
experience''.
(c) Notice Requirements for Medicare Appeals.--
(1) Initial determinations and redeterminations.--Section
1869(a) (42 U.S.C. 1395ff(a)) is amended by adding at the end the
following new paragraphs:
``(4) Requirements of notice of determinations.--With respect
to an initial determination insofar as it results in a denial of a
claim for benefits--
``(A) the written notice on the determination shall
include--
``(i) the reasons for the determination, including
whether a local medical review policy or a local coverage
determination was used;
``(ii) the procedures for obtaining additional
information concerning the determination, including the
information described in subparagraph (B); and
``(iii) notification of the right to seek a
redetermination or otherwise appeal the determination and
instructions on how to initiate such a redetermination
under this section;
``(B) such written notice shall be provided in printed form
and written in a manner calculated to be understood by the
individual entitled to benefits under part A or enrolled under
part B, or both; and
``(C) the individual provided such written notice may
obtain, upon request, information on the specific provision of
the policy, manual, or regulation used in making the
redetermination.
``(5) Requirements of notice of redeterminations.--With respect
to a redetermination insofar as it results in a denial of a claim
for benefits--
``(A) the written notice on the redetermination shall
include--
``(i) the specific reasons for the redetermination;
``(ii) as appropriate, a summary of the clinical or
scientific evidence used in making the redetermination;
``(iii) a description of the procedures for obtaining
additional information concerning the redetermination; and
``(iv) notification of the right to appeal the
redetermination and instructions on how to initiate such an
appeal under this section;
``(B) such written notice shall be provided in printed form
and written in a manner calculated to be understood by the
individual entitled to benefits under part A or enrolled under
part B, or both; and
``(C) the individual provided such written notice may
obtain, upon request, information on the specific provision of
the policy, manual, or regulation used in making the
redetermination.''.
(2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C.
1395ff(c)(3)(E)) is amended--
(A) by inserting ``be written in a manner calculated to be
understood by the individual entitled to benefits under part A
or enrolled under part B, or both, and shall include (to the
extent appropriate)'' after ``in writing,''; and
(B) by inserting ``and a notification of the right to
appeal such determination and instructions on how to initiate
such appeal under this section'' after ``such decision,''.
(3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)) is
amended--
(A) in the heading, by inserting ``; Notice'' after
``Secretary''; and
(B) by adding at the end the following new paragraph:
``(4) Notice.--Notice of the decision of an administrative law
judge shall be in writing in a manner calculated to be understood
by the individual entitled to benefits under part A or enrolled
under part B, or both, and shall include--
``(A) the specific reasons for the determination
(including, to the extent appropriate, a summary of the
clinical or scientific evidence used in making the
determination);
``(B) the procedures for obtaining additional information
concerning the decision; and
``(C) notification of the right to appeal the decision and
instructions on how to initiate such an appeal under this
section.''.
(4) Submission of record for appeal.--Section 1869(c)(3)(J)(i)
(42 U.S.C. 1395ff(c)(3)(J)(i)) is amended by striking ``prepare''
and inserting ``submit'' and by striking ``with respect to'' and
all that follows through ``and relevant policies''.
(d) Qualified Independent Contractors.--
(1) Eligibility requirements of qualified independent
contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)) is
amended--
(A) in subparagraph (A), by striking ``sufficient training
and expertise in medical science and legal matters'' and
inserting ``sufficient medical, legal, and other expertise
(including knowledge of the program under this title) and
sufficient staffing''; and
(B) by adding at the end the following new subparagraph:
``(K) Independence requirements.--
``(i) In general.--Subject to clause (ii), a qualified
independent contractor shall not conduct any activities in
a case unless the entity--
``(I) is not a related party (as defined in
subsection (g)(5));
``(II) does not have a material familial,
financial, or professional relationship with such a
party in relation to such case; and
``(III) does not otherwise have a conflict of
interest with such a party.
``(ii) Exception for reasonable compensation.--Nothing
in clause (i) shall be construed to prohibit receipt by a
qualified independent contractor of compensation from the
Secretary for the conduct of activities under this section
if the compensation is provided consistent with clause
(iii).
``(iii) Limitations on entity compensation.--
Compensation provided by the Secretary to a qualified
independent contractor in connection with reviews under
this section shall not be contingent on any decision
rendered by the contractor or by any reviewing
professional.''.
(2) Eligibility requirements for reviewers.--Section 1869 (42
U.S.C. 1395ff) is amended--
(A) by amending subsection (c)(3)(D) to read as follows:
``(D) Qualifications for reviewers.--The requirements of
subsection (g) shall be met (relating to qualifications of
reviewing professionals).''; and
(B) by adding at the end the following new subsection:
``(g) Qualifications of Reviewers.--
``(1) In general.--In reviewing determinations under this
section, a qualified independent contractor shall assure that--
``(A) each individual conducting a review shall meet the
qualifications of paragraph (2);
``(B) compensation provided by the contractor to each such
reviewer is consistent with paragraph (3); and
``(C) in the case of a review by a panel described in
subsection (c)(3)(B) composed of physicians or other health
care professionals (each in this subsection referred to as a
`reviewing professional'), a reviewing professional meets the
qualifications described in paragraph (4) and, where a claim is
regarding the furnishing of treatment by a physician
(allopathic or osteopathic) or the provision of items or
services by a physician (allopathic or osteopathic), a
reviewing professional shall be a physician (allopathic or
osteopathic).
``(2) Independence.--
``(A) In general.--Subject to subparagraph (B), each
individual conducting a review in a case shall--
``(i) not be a related party (as defined in paragraph
(5));
``(ii) not have a material familial, financial, or
professional relationship with such a party in the case
under review; and
``(iii) not otherwise have a conflict of interest with
such a party.
``(B) Exception.--Nothing in subparagraph (A) shall be
construed to--
``(i) prohibit an individual, solely on the basis of a
participation agreement with a fiscal intermediary,
carrier, or other contractor, from serving as a reviewing
professional if--
``(I) the individual is not involved in the
provision of items or services in the case under
review;
``(II) the fact of such an agreement is disclosed
to the Secretary and the individual entitled to
benefits under part A or enrolled under part B, or
both, or such individual's authorized representative,
and neither party objects; and
``(III) the individual is not an employee of the
intermediary, carrier, or contractor and does not
provide services exclusively or primarily to or on
behalf of such intermediary, carrier, or contractor;
``(ii) prohibit an individual who has staff privileges
at the institution where the treatment involved takes place
from serving as a reviewer merely on the basis of having
such staff privileges if the existence of such privileges
is disclosed to the Secretary and such individual (or
authorized representative), and neither party objects; or
``(iii) prohibit receipt of compensation by a reviewing
professional from a contractor if the compensation is
provided consistent with paragraph (3).
For purposes of this paragraph, the term `participation
agreement' means an agreement relating to the provision of
health care services by the individual and does not include the
provision of services as a reviewer under this subsection.
``(3) Limitations on reviewer compensation.--Compensation
provided by a qualified independent contractor to a reviewer in
connection with a review under this section shall not be contingent
on the decision rendered by the reviewer.
``(4) Licensure and expertise.--Each reviewing professional
shall be--
``(A) a physician (allopathic or osteopathic) who is
appropriately credentialed or licensed in one or more States to
deliver health care services and has medical expertise in the
field of practice that is appropriate for the items or services
at issue; or
``(B) a health care professional who is legally authorized
in one or more States (in accordance with State law or the
State regulatory mechanism provided by State law) to furnish
the health care items or services at issue and has medical
expertise in the field of practice that is appropriate for such
items or services.
``(5) Related party defined.--For purposes of this section, the
term `related party' means, with respect to a case under this title
involving a specific individual entitled to benefits under part A
or enrolled under part B, or both, any of the following:
``(A) The Secretary, the medicare administrative contractor
involved, or any fiduciary, officer, director, or employee of
the Department of Health and Human Services, or of such
contractor.
``(B) The individual (or authorized representative).
``(C) The health care professional that provides the items
or services involved in the case.
``(D) The institution at which the items or services (or
treatment) involved in the case are provided.
``(E) The manufacturer of any drug or other item that is
included in the items or services involved in the case.
``(F) Any other party determined under any regulations to
have a substantial interest in the case involved.''.
(3) Reducing minimum number of qualified independent
contractors.--Section 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is
amended by striking ``not fewer than 12 qualified independent
contractors under this subsection'' and inserting ``a sufficient
number of qualified independent contractors (but not fewer than 4
such contractors) to conduct reconsiderations consistent with the
timeframes applicable under this subsection''.
(4) Effective date.--The amendments made by paragraphs (1) and
(2) shall be effective as if included in the enactment of the
respective provisions of subtitle C of title V of BIPA (114 Stat.
2763A-534).
(5) Transition.--In applying section 1869(g) of the Social
Security Act (as added by paragraph (2)), any reference to a
medicare administrative contractor shall be deemed to include a
reference to a fiscal intermediary under section 1816 of the Social
Security Act (42 U.S.C. 1395h) and a carrier under section 1842 of
such Act (42 U.S.C. 1395u).
SEC. 934. PREPAYMENT REVIEW.
(a) In General.--Section 1874A, as added by section 911(a)(1) and
as amended by sections 912(b), 921(b)(1), and 921(c)(1), is further
amended by adding at the end the following new subsection:
``(h) Conduct of Prepayment Review.--
``(1) Conduct of random prepayment review.--
``(A) In general.--A medicare administrative contractor may
conduct random prepayment review only to develop a contractor-
wide or program-wide claims payment error rates or under such
additional circumstances as may be provided under regulations,
developed in consultation with providers of services and
suppliers.
``(B) Use of standard protocols when conducting prepayment
reviews.--When a medicare administrative contractor conducts a
random prepayment review, the contractor may conduct such
review only in accordance with a standard protocol for random
prepayment audits developed by the Secretary.
``(C) Construction.--Nothing in this paragraph shall be
construed as preventing the denial of payments for claims
actually reviewed under a random prepayment review.
``(D) Random prepayment review.--For purposes of this
subsection, the term `random prepayment review' means a demand
for the production of records or documentation absent cause
with respect to a claim.
``(2) Limitations on non-random prepayment review.--
``(A) Limitations on initiation of non-random prepayment
review.--A medicare administrative contractor may not initiate
non-random prepayment review of a provider of services or
supplier based on the initial identification by that provider
of services or supplier of an improper billing practice unless
there is a likelihood of sustained or high level of payment
error under section 1893(f)(3)(A).
``(B) Termination of non-random prepayment review.--The
Secretary shall issue regulations relating to the termination,
including termination dates, of non-random prepayment review.
Such regulations may vary such a termination date based upon
the differences in the circumstances triggering prepayment
review.''.
(b) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendment made by subsection (a) shall take effect 1 year after the
date of the enactment of this Act.
(2) Deadline for promulgation of certain regulations.--The
Secretary shall first issue regulations under section 1874A(h) of
the Social Security Act, as added by subsection (a), by not later
than 1 year after the date of the enactment of this Act.
(3) Application of standard protocols for random prepayment
review.--Section 1874A(h)(1)(B) of the Social Security Act, as
added by subsection (a), shall apply to random prepayment reviews
conducted on or after such date (not later than 1 year after the
date of the enactment of this Act) as the Secretary shall specify.
(c) Application to Fiscal Intermediaries and Carriers.--The
provisions of section 1874A(h) of the Social Security Act, as added by
subsection (a), shall apply to each fiscal intermediary under section
1816 of the Social Security Act (42 U.S.C. 1395h) and each carrier
under section 1842 of such Act (42 U.S.C. 1395u) in the same manner as
they apply to medicare administrative contractors under such
provisions.
SEC. 935. RECOVERY OF OVERPAYMENTS.
(a) In General.--Section 1893 (42 U.S.C. 1395ddd) is amended by
adding at the end the following new subsection:
``(f) Recovery of Overpayments.--
``(1) Use of repayment plans.--
``(A) In general.--If the repayment, within 30 days by a
provider of services or supplier, of an overpayment under this
title would constitute a hardship (as described in subparagraph
(B)), subject to subparagraph (C), upon request of the provider
of services or supplier the Secretary shall enter into a plan
with the provider of services or supplier for the repayment
(through offset or otherwise) of such overpayment over a period
of at least 6 months but not longer than 3 years (or not longer
than 5 years in the case of extreme hardship, as determined by
the Secretary). Interest shall accrue on the balance through
the period of repayment. Such plan shall meet terms and
conditions determined to be appropriate by the Secretary.
``(B) Hardship.--
``(i) In general.--For purposes of subparagraph (A),
the repayment of an overpayment (or overpayments) within 30
days is deemed to constitute a hardship if--
``(I) in the case of a provider of services that
files cost reports, the aggregate amount of the
overpayments exceeds 10 percent of the amount paid
under this title to the provider of services for the
cost reporting period covered by the most recently
submitted cost report; or
``(II) in the case of another provider of services
or supplier, the aggregate amount of the overpayments
exceeds 10 percent of the amount paid under this title
to the provider of services or supplier for the
previous calendar year.
``(ii) Rule of application.--The Secretary shall
establish rules for the application of this subparagraph in
the case of a provider of services or supplier that was not
paid under this title during the previous year or was paid
under this title only during a portion of that year.
``(iii) Treatment of previous overpayments.--If a
provider of services or supplier has entered into a
repayment plan under subparagraph (A) with respect to a
specific overpayment amount, such payment amount under the
repayment plan shall not be taken into account under clause
(i) with respect to subsequent overpayment amounts.
``(C) Exceptions.--Subparagraph (A) shall not apply if--
``(i) the Secretary has reason to suspect that the
provider of services or supplier may file for bankruptcy or
otherwise cease to do business or discontinue participation
in the program under this title; or
``(ii) there is an indication of fraud or abuse
committed against the program.
``(D) Immediate collection if violation of repayment
plan.--If a provider of services or supplier fails to make a
payment in accordance with a repayment plan under this
paragraph, the Secretary may immediately seek to offset or
otherwise recover the total balance outstanding (including
applicable interest) under the repayment plan.
``(E) Relation to no fault provision.--Nothing in this
paragraph shall be construed as affecting the application of
section 1870(c) (relating to no adjustment in the cases of
certain overpayments).
``(2) Limitation on recoupment.--
``(A) In general.--In the case of a provider of services or
supplier that is determined to have received an overpayment
under this title and that seeks a reconsideration by a
qualified independent contractor on such determination under
section 1869(b)(1), the Secretary may not take any action (or
authorize any other person, including any medicare contractor,
as defined in subparagraph (C)) to recoup the overpayment until
the date the decision on the reconsideration has been rendered.
If the provisions of section 1869(b)(1) (providing for such a
reconsideration by a qualified independent contractor) are not
in effect, in applying the previous sentence any reference to
such a reconsideration shall be treated as a reference to a
redetermination by the fiscal intermediary or carrier involved.
``(B) Collection with interest.--Insofar as the
determination on such appeal is against the provider of
services or supplier, interest on the overpayment shall accrue
on and after the date of the original notice of overpayment.
Insofar as such determination against the provider of services
or supplier is later reversed, the Secretary shall provide for
repayment of the amount recouped plus interest at the same rate
as would apply under the previous sentence for the period in
which the amount was recouped.
``(C) Medicare contractor defined.--For purposes of this
subsection, the term `medicare contractor' has the meaning
given such term in section 1889(g).
``(3) Limitation on use of extrapolation.--A medicare
contractor may not use extrapolation to determine overpayment
amounts to be recovered by recoupment, offset, or otherwise unless
the Secretary determines that--
``(A) there is a sustained or high level of payment error;
or
``(B) documented educational intervention has failed to
correct the payment error.
There shall be no administrative or judicial review under section 1869,
section 1878, or otherwise, of determinations by the Secretary of
sustained or high levels of payment errors under this paragraph.
``(4) Provision of supporting documentation.--In the case of a
provider of services or supplier with respect to which amounts were
previously overpaid, a medicare contractor may request the periodic
production of records or supporting documentation for a limited
sample of submitted claims to ensure that the previous practice is
not continuing.
``(5) Consent settlement reforms.--
``(A) In general.--The Secretary may use a consent
settlement (as defined in subparagraph (D)) to settle a
projected overpayment.
``(B) Opportunity to submit additional information before
consent settlement offer.--Before offering a provider of
services or supplier a consent settlement, the Secretary
shall--
``(i) communicate to the provider of services or
supplier--
``(I) that, based on a review of the medical
records requested by the Secretary, a preliminary
evaluation of those records indicates that there would
be an overpayment;
``(II) the nature of the problems identified in
such evaluation; and
``(III) the steps that the provider of services or
supplier should take to address the problems; and
``(ii) provide for a 45-day period during which the
provider of services or supplier may furnish additional
information concerning the medical records for the claims
that had been reviewed.
``(C) Consent settlement offer.--The Secretary shall review
any additional information furnished by the provider of
services or supplier under subparagraph (B)(ii). Taking into
consideration such information, the Secretary shall determine
if there still appears to be an overpayment. If so, the
Secretary--
``(i) shall provide notice of such determination to the
provider of services or supplier, including an explanation
of the reason for such determination; and
``(ii) in order to resolve the overpayment, may offer
the provider of services or supplier--
``(I) the opportunity for a statistically valid
random sample; or
``(II) a consent settlement.
The opportunity provided under clause (ii)(I) does not waive
any appeal rights with respect to the alleged overpayment
involved.
``(D) Consent settlement defined.--For purposes of this
paragraph, the term `consent settlement' means an agreement
between the Secretary and a provider of services or supplier
whereby both parties agree to settle a projected overpayment
based on less than a statistically valid sample of claims and
the provider of services or supplier agrees not to appeal the
claims involved.
``(6) Notice of over-utilization of codes.--The Secretary shall
establish, in consultation with organizations representing the
classes of providers of services and suppliers, a process under
which the Secretary provides for notice to classes of providers of
services and suppliers served by the contractor in cases in which
the contractor has identified that particular billing codes may be
overutilized by that class of providers of services or suppliers
under the programs under this title (or provisions of title XI
insofar as they relate to such programs).
``(7) Payment audits.--
``(A) Written notice for post-payment audits.--Subject to
subparagraph (C), if a medicare contractor decides to conduct a
post-payment audit of a provider of services or supplier under
this title, the contractor shall provide the provider of
services or supplier with written notice (which may be in
electronic form) of the intent to conduct such an audit.
``(B) Explanation of findings for all audits.--Subject to
subparagraph (C), if a medicare contractor audits a provider of
services or supplier under this title, the contractor shall--
``(i) give the provider of services or supplier a full
review and explanation of the findings of the audit in a
manner that is understandable to the provider of services
or supplier and permits the development of an appropriate
corrective action plan;
``(ii) inform the provider of services or supplier of
the appeal rights under this title as well as consent
settlement options (which are at the discretion of the
Secretary);
``(iii) give the provider of services or supplier an
opportunity to provide additional information to the
contractor; and
``(iv) take into account information provided, on a
timely basis, by the provider of services or supplier under
clause (iii).
``(C) Exception.--Subparagraphs (A) and (B) shall not apply
if the provision of notice or findings would compromise pending
law enforcement activities, whether civil or criminal, or
reveal findings of law enforcement-related audits.
``(8) Standard methodology for probe sampling.--The Secretary
shall establish a standard methodology for medicare contractors to
use in selecting a sample of claims for review in the case of an
abnormal billing pattern.''.
(b) Effective Dates and Deadlines.--
(1) Use of repayment plans.--Section 1893(f)(1) of the Social
Security Act, as added by subsection (a), shall apply to requests
for repayment plans made after the date of the enactment of this
Act.
(2) Limitation on recoupment.--Section 1893(f)(2) of the Social
Security Act, as added by subsection (a), shall apply to actions
taken after the date of the enactment of this Act.
(3) Use of extrapolation.--Section 1893(f)(3) of the Social
Security Act, as added by subsection (a), shall apply to
statistically valid random samples initiated after the date that is
1 year after the date of the enactment of this Act.
(4) Provision of supporting documentation.--Section 1893(f)(4)
of the Social Security Act, as added by subsection (a), shall take
effect on the date of the enactment of this Act.
(5) Consent settlement.--Section 1893(f)(5) of the Social
Security Act, as added by subsection (a), shall apply to consent
settlements entered into after the date of the enactment of this
Act.
(6) Notice of overutilization.--Not later than 1 year after the
date of the enactment of this Act, the Secretary shall first
establish the process for notice of overutilization of billing
codes under section 1893A(f)(6) of the Social Security Act, as
added by subsection (a).
(7) Payment audits.--Section 1893A(f)(7) of the Social Security
Act, as added by subsection (a), shall apply to audits initiated
after the date of the enactment of this Act.
(8) Standard for abnormal billing patterns.--Not later than 1
year after the date of the enactment of this Act, the Secretary
shall first establish a standard methodology for selection of
sample claims for abnormal billing patterns under section
1893(f)(8) of the Social Security Act, as added by subsection (a).
SEC. 936. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.
(a) In General.--Section 1866 (42 U.S.C. 1395cc) is amended--
(1) by adding at the end of the heading the following: ``;
enrollment processes''; and
(2) by adding at the end the following new subsection:
``(j) Enrollment Process for Providers of Services and Suppliers.--
``(1) Enrollment process.--
``(A) In general.--The Secretary shall establish by
regulation a process for the enrollment of providers of
services and suppliers under this title.
``(B) Deadlines.--The Secretary shall establish by
regulation procedures under which there are deadlines for
actions on applications for enrollment (and, if applicable,
renewal of enrollment). The Secretary shall monitor the
performance of medicare administrative contractors in meeting
the deadlines established under this subparagraph.
``(C) Consultation before changing provider enrollment
forms.--The Secretary shall consult with providers of services
and suppliers before making changes in the provider enrollment
forms required of such providers and suppliers to be eligible
to submit claims for which payment may be made under this
title.
``(2) Hearing rights in cases of denial or non-renewal.--A
provider of services or supplier whose application to enroll (or,
if applicable, to renew enrollment) under this title is denied may
have a hearing and judicial review of such denial under the
procedures that apply under subsection (h)(1)(A) to a provider of
services that is dissatisfied with a determination by the
Secretary.''.
(b) Effective Dates.--
(1) Enrollment process.--The Secretary shall provide for the
establishment of the enrollment process under section 1866(j)(1) of
the Social Security Act, as added by subsection (a)(2), within 6
months after the date of the enactment of this Act.
(2) Consultation.--Section 1866(j)(1)(C) of the Social Security
Act, as added by subsection (a)(2), shall apply with respect to
changes in provider enrollment forms made on or after January 1,
2004.
(3) Hearing rights.--Section 1866(j)(2) of the Social Security
Act, as added by subsection (a)(2), shall apply to denials
occurring on or after such date (not later than 1 year after the
date of the enactment of this Act) as the Secretary specifies.
SEC. 937. PROCESS FOR CORRECTION OF MINOR ERRORS AND OMISSIONS WITHOUT
PURSUING APPEALS PROCESS.
(a) Claims.--The Secretary shall develop, in consultation with
appropriate medicare contractors (as defined in section 1889(g) of the
Social Security Act, as inserted by section 301(a)(1)) and
representatives of providers of services and suppliers, a process
whereby, in the case of minor errors or omissions (as defined by the
Secretary) that are detected in the submission of claims under the
programs under title XVIII of such Act, a provider of services or
supplier is given an opportunity to correct such an error or omission
without the need to initiate an appeal. Such process shall include the
ability to resubmit corrected claims.
(b) Deadline.--Not later than 1 year after the date of the
enactment of this Act, the Secretary shall first develop the process
under subsection (a).
SEC. 938. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND SERVICES;
ADVANCE BENEFICIARY NOTICES.
(a) In General.--Section 1869 (42 U.S.C. 1395ff(b)), as amended by
section 933(d)(2)(B), is further amended by adding at the end the
following new subsection:
``(h) Prior Determination Process for Certain Items and Services.--
``(1) Establishment of process.--
``(A) In general.--With respect to a medicare
administrative contractor that has a contract under section
1874A that provides for making payments under this title with
respect to physicians' services (as defined in section
1848(j)(3)), the Secretary shall establish a prior
determination process that meets the requirements of this
subsection and that shall be applied by such contractor in the
case of eligible requesters.
``(B) Eligible requester.--For purposes of this subsection,
each of the following shall be an eligible requester:
``(i) A participating physician, but only with respect
to physicians' services to be furnished to an individual
who is entitled to benefits under this title and who has
consented to the physician making the request under this
subsection for those physicians' services.
``(ii) An individual entitled to benefits under this
title, but only with respect to a physicians' service for
which the individual receives, from a physician, an advance
beneficiary notice under section 1879(a).
``(2) Secretarial flexibility.--The Secretary shall establish
by regulation reasonable limits on the physicians' services for
which a prior determination of coverage may be requested under this
subsection. In establishing such limits, the Secretary may consider
the dollar amount involved with respect to the physicians' service,
administrative costs and burdens, and other relevant factors.
``(3) Request for prior determination.--
``(A) In general.--Subject to paragraph (2), under the
process established under this subsection an eligible requester
may submit to the contractor a request for a determination,
before the furnishing of a physicians' service, as to whether
the physicians' service is covered under this title consistent
with the applicable requirements of section 1862(a)(1)(A)
(relating to medical necessity).
``(B) Accompanying documentation.--The Secretary may
require that the request be accompanied by a description of the
physicians' service, supporting documentation relating to the
medical necessity for the physicians' service, and any other
appropriate documentation. In the case of a request submitted
by an eligible requester who is described in paragraph
(1)(B)(ii), the Secretary may require that the request also be
accompanied by a copy of the advance beneficiary notice
involved.
``(4) Response to request.--
``(A) In general.--Under such process, the contractor shall
provide the eligible requester with written notice of a
determination as to whether--
``(i) the physicians' service is so covered;
``(ii) the physicians' service is not so covered; or
``(iii) the contractor lacks sufficient information to
make a coverage determination with respect to the
physicians' service.
``(B) Contents of notice for certain determinations.--
``(i) Noncoverage.--If the contractor makes the
determination described in subparagraph (A)(ii), the
contractor shall include in the notice a brief explanation
of the basis for the determination, including on what
national or local coverage or noncoverage determination (if
any) the determination is based, and a description of any
applicable rights under subsection (a).
``(ii) Insufficient information.--If the contractor
makes the determination described in subparagraph (A)(iii),
the contractor shall include in the notice a description of
the additional information required to make the coverage
determination.
``(C) Deadline to respond.--Such notice shall be provided
within the same time period as the time period applicable to
the contractor providing notice of initial determinations on a
claim for benefits under subsection (a)(2)(A).
``(D) Informing beneficiary in case of physician request.--
In the case of a request by a participating physician under
paragraph (1)(B)(i), the process shall provide that the
individual to whom the physicians' service is proposed to be
furnished shall be informed of any determination described in
subparagraph (A)(ii) (relating to a determination of non-
coverage) and the right (referred to in paragraph (6)(B)) to
obtain the physicians' service and have a claim submitted for
the physicians' service.
``(5) Binding nature of positive determination.--If the
contractor makes the determination described in paragraph
(4)(A)(i), such determination shall be binding on the contractor in
the absence of fraud or evidence of misrepresentation of facts
presented to the contractor.
``(6) Limitation on further review.--
``(A) In general.--Contractor determinations described in
paragraph (4)(A)(ii) or (4)(A)(iii) (relating to pre-service
claims) are not subject to further administrative appeal or
judicial review under this section or otherwise.
``(B) Decision not to seek prior determination or negative
determination does not impact right to obtain services, seek
reimbursement, or appeal rights.--Nothing in this subsection
shall be construed as affecting the right of an individual
who--
``(i) decides not to seek a prior determination under
this subsection with respect to physicians' services; or
``(ii) seeks such a determination and has received a
determination described in paragraph (4)(A)(ii),
from receiving (and submitting a claim for) such physicians'
services and from obtaining administrative or judicial review
respecting such claim under the other applicable provisions of
this section. Failure to seek a prior determination under this
subsection with respect to physicians' service shall not be
taken into account in such administrative or judicial review.
``(C) No prior determination after receipt of services.--
Once an individual is provided physicians' services, there
shall be no prior determination under this subsection with
respect to such physicians' services.''.
(b) Effective Date; Sunset; Transition.--
(1) Effective date.--The Secretary shall establish the prior
determination process under the amendment made by subsection (a) in
such a manner as to provide for the acceptance of requests for
determinations under such process filed not later than 18 months
after the date of the enactment of this Act.
(2) Sunset.--Such prior determination process shall not apply
to requests filed after the end of the 5-year period beginning on
the first date on which requests for determinations under such
process are accepted.
(3) Transition.--During the period in which the amendment made
by subsection (a) has become effective but contracts are not
provided under section 1874A of the Social Security Act with
medicare administrative contractors, any reference in section
1869(g) of such Act (as added by such amendment) to such a
contractor is deemed a reference to a fiscal intermediary or
carrier with an agreement under section 1816, or contract under
section 1842, respectively, of such Act.
(4) Limitation on application to sgr.--For purposes of applying
section 1848(f)(2)(D) of the Social Security Act (42 U.S.C. 1395w-
4(f)(2)(D)), the amendment made by subsection (a) shall not be
considered to be a change in law or regulation.
(c) Provisions Relating to Advance Beneficiary Notices; Report on
Prior Determination Process.--
(1) Data collection.--The Secretary shall establish a process
for the collection of information on the instances in which an
advance beneficiary notice (as defined in paragraph (5)) has been
provided and on instances in which a beneficiary indicates on such
a notice that the beneficiary does not intend to seek to have the
item or service that is the subject of the notice furnished.
(2) Outreach and education.--The Secretary shall establish a
program of outreach and education for beneficiaries and providers
of services and other persons on the appropriate use of advance
beneficiary notices and coverage policies under the medicare
program.
(3) GAO report on use of advance beneficiary notices.--Not
later than 18 months after the date on which section 1869(h) of the
Social Security Act (as added by subsection (a)) takes effect, the
Comptroller General of the United States shall submit to Congress a
report on the use of advance beneficiary notices under title XVIII
of such Act. Such report shall include information concerning the
providers of services and other persons that have provided such
notices and the response of beneficiaries to such notices.
(4) GAO report on use of prior determination process.--Not
later than 36 months after the date on which section 1869(h) of the
Social Security Act (as added by subsection (a)) takes effect, the
Comptroller General of the United States shall submit to Congress a
report on the use of the prior determination process under such
section. Such report shall include--
(A) information concerning--
(i) the number and types of procedures for which a
prior determination has been sought;
(ii) determinations made under the process;
(iii) the percentage of beneficiaries prevailing;
(iv) in those cases in which the beneficiaries do not
prevail, the reasons why such beneficiaries did not
prevail; and
(v) changes in receipt of services resulting from the
application of such process;
(B) an evaluation of whether the process was useful for
physicians (and other suppliers) and beneficiaries, whether it
was timely, and whether the amount of information required was
burdensome to physicians and beneficiaries; and
(C) recommendations for improvements or continuation of
such process.
(5) Advance beneficiary notice defined.--In this subsection,
the term ``advance beneficiary notice'' means a written notice
provided under section 1879(a) of the Social Security Act (42
U.S.C. 1395pp(a)) to an individual entitled to benefits under part
A or enrolled under part B of title XVIII of such Act before items
or services are furnished under such part in cases where a provider
of services or other person that would furnish the item or service
believes that payment will not be made for some or all of such
items or services under such title.
SEC. 939. APPEALS BY PROVIDERS WHEN THERE IS NO OTHER PARTY AVAILABLE.
(a) In General.--Section 1870 (42 U.S.C. 1395gg) is amended by
adding at the end the following new subsection:
``(h) Notwithstanding subsection (f) or any other provision of law,
the Secretary shall permit a provider of services or supplier to appeal
any determination of the Secretary under this title relating to
services rendered under this title to an individual who subsequently
dies if there is no other party available to appeal such
determination.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act and shall apply to
items and services furnished on or after such date.
SEC. 940. REVISIONS TO APPEALS TIMEFRAMES AND AMOUNTS.
(a) Timeframes.--Section 1869 (42 U.S.C. 1395ff) is amended--
(1) in subsection (a)(3)(C)(ii), by striking ``30-day period''
each place it appears and inserting ``60-day period''; and
(2) in subsection (c)(3)(C)(i), by striking ``30-day period''
and inserting ``60-day period''.
(b) Amounts.--
(1) In general.--Section 1869(b)(1)(E) (42 U.S.C.
1395ff(b)(1)(E)) is amended by adding at the end the following new
clause:
``(iii) Adjustment of dollar amounts.--For requests for
hearings or judicial review made in a year after 2004, the
dollar amounts specified in clause (i) shall be equal to
such dollar amounts increased by the percentage increase in
the medical care component of the consumer price index for
all urban consumers (U.S. city average) for July 2003 to
the July preceding the year involved. Any amount determined
under the previous sentence that is not a multiple of $10
shall be rounded to the nearest multiple of $10.''.
(2) Conforming amendments.--(A) Section 1852(g)(5) (42 U.S.C.
1395w-22(g)(5)) is amended by adding at the end the following:
``The provisions of section 1869(b)(1)(E)(iii) shall apply with
respect to dollar amounts specified in the first 2 sentences of
this paragraph in the same manner as they apply to the dollar
amounts specified in section 1869(b)(1)(E)(i).''.
(B) Section 1876(b)(5)(B) (42 U.S.C. 1395mm(b)(5)(B)) is amended by
adding at the end the following: ``The provisions of section
1869(b)(1)(E)(iii) shall apply with respect to dollar amounts specified
in the first 2 sentences of this subparagraph in the same manner as
they apply to the dollar amounts specified in section
1869(b)(1)(E)(i).''.
SEC. 940A. MEDIATION PROCESS FOR LOCAL COVERAGE DETERMINATIONS.
(a) In General.--Section 1869 (42 U.S.C. 1395ff), as amended by
section 938(a), is amended by adding at the end the following new
subsection:
``(i) Mediation Process for Local Coverage Determinations.--
``(1) Establishment of process.--The Secretary shall establish
a mediation process under this subsection through the use of a
physician trained in mediation and employed by the Centers for
Medicare & Medicaid Services.
``(2) Responsibility of mediator.--Under the process
established in paragraph (1), such a mediator shall mediate in
disputes between groups representing providers of services,
suppliers (as defined in section 1861(d)), and the medical director
for a medicare administrative contractor whenever the regional
administrator (as defined by the Secretary) involved determines
that there was a systematic pattern and a large volume of
complaints from such groups regarding decisions of such director or
there is a complaint from the co-chair of the advisory committee
for that contractor to such regional administrator regarding such
dispute.''.
(b) Inclusion in mac contracts.--Section 1874A(b)(3)(A)(i), as
added by section 911(a)(1), is amended by adding at the end the
following: ``Such requirements shall include specific performance
duties expected of a medical director of a medicare administrative
contractor, including requirements relating to professional relations
and the availability of such director to conduct medical determination
activities within the jurisdiction of such a contractor.''.
Subtitle E--Miscellaneous Provisions
SEC. 941. POLICY DEVELOPMENT REGARDING EVALUATION AND MANAGEMENT (E &
M) DOCUMENTATION GUIDELINES.
(a) In General.--The Secretary may not implement any new or
modified documentation guidelines (which for purposes of this section
includes clinical examples) for evaluation and management physician
services under the title XVIII of the Social Security Act on or after
the date of the enactment of this Act unless the Secretary--
(1) has developed the guidelines in collaboration with
practicing physicians (including both generalists and specialists)
and provided for an assessment of the proposed guidelines by the
physician community;
(2) has established a plan that contains specific goals,
including a schedule, for improving the use of such guidelines;
(3) has conducted appropriate and representative pilot projects
under subsection (b) to test such guidelines;
(4) finds, based on reports submitted under subsection (b)(5)
with respect to pilot projects conducted for such or related
guidelines, that the objectives described in subsection (c) will be
met in the implementation of such guidelines; and
(5) has established, and is implementing, a program to educate
physicians on the use of such guidelines and that includes
appropriate outreach.
The Secretary shall make changes to the manner in which existing
evaluation and management documentation guidelines are implemented to
reduce paperwork burdens on physicians.
(b) Pilot Projects to Test Modified or New Evaluation and
Management Documentation Guidelines.--
(1) In general.--With respect to proposed new or modified
documentation guidelines referred to in subsection (a), the
Secretary shall conduct under this subsection appropriate and
representative pilot projects to test the proposed guidelines.
(2) Length and consultation.--Each pilot project under this
subsection shall--
(A) be voluntary;
(B) be of sufficient length as determined by the Secretary
(but in no case to exceed 1 year) to allow for preparatory
physician and medicare contractor education, analysis, and use
and assessment of potential evaluation and management
guidelines; and
(C) be conducted, in development and throughout the
planning and operational stages of the project, in consultation
with practicing physicians (including both generalists and
specialists).
(3) Range of pilot projects.--Of the pilot projects conducted
under this subsection with respect to proposed new or modified
documentation guidelines--
(A) at least one shall focus on a peer review method by
physicians (not employed by a medicare contractor) which
evaluates medical record information for claims submitted by
physicians identified as statistical outliers relative to codes
used for billing purposes for such services;
(B) at least one shall focus on an alternative method to
detailed guidelines based on physician documentation of face to
face encounter time with a patient;
(C) at least one shall be conducted for services furnished
in a rural area and at least one for services furnished outside
such an area; and
(D) at least one shall be conducted in a setting where
physicians bill under physicians' services in teaching settings
and at least one shall be conducted in a setting other than a
teaching setting.
(4) Study of impact.--Each pilot project shall examine the
effect of the proposed guidelines on--
(A) different types of physician practices, including those
with fewer than 10 full-time-equivalent employees (including
physicians); and
(B) the costs of physician compliance, including education,
implementation, auditing, and monitoring.
(5) Report on pilot projects.--Not later than 6 months after
the date of completion of pilot projects carried out under this
subsection with respect to a proposed guideline described in
paragraph (1), the Secretary shall submit to Congress a report on
the pilot projects. Each such report shall include a finding by the
Secretary of whether the objectives described in subsection (c)
will be met in the implementation of such proposed guideline.
(c) Objectives for Evaluation and Management Guidelines.--The
objectives for modified evaluation and management documentation
guidelines developed by the Secretary shall be to--
(1) identify clinically relevant documentation needed to code
accurately and assess coding levels accurately;
(2) decrease the level of non-clinically pertinent and
burdensome documentation time and content in the physician's
medical record;
(3) increase accuracy by reviewers; and
(4) educate both physicians and reviewers.
(d) Study of Simpler, Alternative Systems of Documentation for
Physician Claims.--
(1) Study.--The Secretary shall carry out a study of the
matters described in paragraph (2).
(2) Matters described.--The matters referred to in paragraph
(1) are--
(A) the development of a simpler, alternative system of
requirements for documentation accompanying claims for
evaluation and management physician services for which payment
is made under title XVIII of the Social Security Act; and
(B) consideration of systems other than current coding and
documentation requirements for payment for such physician
services.
(3) Consultation with practicing physicians.--In designing and
carrying out the study under paragraph (1), the Secretary shall
consult with practicing physicians, including physicians who are
part of group practices and including both generalists and
specialists.
(4) Application of hipaa uniform coding requirements.--In
developing an alternative system under paragraph (2), the Secretary
shall consider requirements of administrative simplification under
part C of title XI of the Social Security Act.
(5) Report to congress.--(A) Not later than October 1, 2005,
the Secretary shall submit to Congress a report on the results of
the study conducted under paragraph (1).
(B) The Medicare Payment Advisory Commission shall conduct an
analysis of the results of the study included in the report under
subparagraph (A) and shall submit a report on such analysis to
Congress.
(e) Study on Appropriate Coding of Certain Extended Office
Visits.--The Secretary shall conduct a study of the appropriateness of
coding in cases of extended office visits in which there is no
diagnosis made. Not later than October 1, 2005, the Secretary shall
submit a report to Congress on such study and shall include
recommendations on how to code appropriately for such visits in a
manner that takes into account the amount of time the physician spent
with the patient.
(f) Definitions.--In this section--
(1) the term ``rural area'' has the meaning given that term in
section 1886(d)(2)(D) of the Social Security Act (42 U.S.C.
1395ww(d)(2)(D)); and
(2) the term ``teaching settings'' are those settings described
in section 415.150 of title 42, Code of Federal Regulations.
SEC. 942. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND COVERAGE.
(a) Council for Technology and Innovation.--Section 1868 (42 U.S.C.
1395ee) is amended--
(1) by adding at the end of the heading the following: ``;
council for technology and innovation'';
(2) by inserting ``Practicing Physicians Advisory Council.--
(1)'' after ``(a)'';
(3) in paragraph (1), as so redesignated under paragraph (2),
by striking ``in this section'' and inserting ``in this
subsection'';
(4) by redesignating subsections (b) and (c) as paragraphs (2)
and (3), respectively; and
(5) by adding at the end the following new subsection:
``(b) Council for Technology and Innovation.--
``(1) Establishment.--The Secretary shall establish a Council
for Technology and Innovation within the Centers for Medicare &
Medicaid Services (in this section referred to as `CMS').
``(2) Composition.--The Council shall be composed of senior CMS
staff and clinicians and shall be chaired by the Executive
Coordinator for Technology and Innovation (appointed or designated
under paragraph (4)).
``(3) Duties.--The Council shall coordinate the activities of
coverage, coding, and payment processes under this title with
respect to new technologies and procedures, including new drug
therapies, and shall coordinate the exchange of information on new
technologies between CMS and other entities that make similar
decisions.
``(4) Executive coordinator for technology and innovation.--The
Secretary shall appoint (or designate) a noncareer appointee (as
defined in section 3132(a)(7) of title 5, United States Code) who
shall serve as the Executive Coordinator for Technology and
Innovation. Such executive coordinator shall report to the
Administrator of CMS, shall chair the Council, shall oversee the
execution of its duties, and shall serve as a single point of
contact for outside groups and entities regarding the coverage,
coding, and payment processes under this title.''.
(b) Methods for Determining Payment Basis for New Lab Tests.--
Section 1833(h) (42 U.S.C. 1395l(h)) is amended by adding at the end
the following:
``(8)(A) The Secretary shall establish by regulation procedures for
determining the basis for, and amount of, payment under this subsection
for any clinical diagnostic laboratory test with respect to which a new
or substantially revised HCPCS code is assigned on or after January 1,
2005 (in this paragraph referred to as `new tests').
``(B) Determinations under subparagraph (A) shall be made only
after the Secretary--
``(i) makes available to the public (through an Internet
website and other appropriate mechanisms) a list that includes any
such test for which establishment of a payment amount under this
subsection is being considered for a year;
``(ii) on the same day such list is made available, causes to
have published in the Federal Register notice of a meeting to
receive comments and recommendations (and data on which
recommendations are based) from the public on the appropriate basis
under this subsection for establishing payment amounts for the
tests on such list;
``(iii) not less than 30 days after publication of such notice
convenes a meeting, that includes representatives of officials of
the Centers for Medicare & Medicaid Services involved in
determining payment amounts, to receive such comments and
recommendations (and data on which the recommendations are based);
``(iv) taking into account the comments and recommendations
(and accompanying data) received at such meeting, develops and
makes available to the public (through an Internet website and
other appropriate mechanisms) a list of proposed determinations
with respect to the appropriate basis for establishing a payment
amount under this subsection for each such code, together with an
explanation of the reasons for each such determination, the data on
which the determinations are based, and a request for public
written comments on the proposed determination; and
``(v) taking into account the comments received during the
public comment period, develops and makes available to the public
(through an Internet website and other appropriate mechanisms) a
list of final determinations of the payment amounts for such tests
under this subsection, together with the rationale for each such
determination, the data on which the determinations are based, and
responses to comments and suggestions received from the public.
``(C) Under the procedures established pursuant to subparagraph
(A), the Secretary shall--
``(i) set forth the criteria for making determinations under
subparagraph (A); and
``(ii) make available to the public the data (other than
proprietary data) considered in making such determinations.
``(D) The Secretary may convene such further public meetings to
receive public comments on payment amounts for new tests under this
subsection as the Secretary deems appropriate.
``(E) For purposes of this paragraph:
``(i) The term `HCPCS' refers to the Health Care Procedure
Coding System.
``(ii) A code shall be considered to be `substantially revised'
if there is a substantive change to the definition of the test or
procedure to which the code applies (such as a new analyte or a new
methodology for measuring an existing analyte-specific test).''.
(c) GAO Study on Improvements in External Data Collection for Use
in the Medicare Inpatient Payment System.--
(1) Study.--The Comptroller General of the United States shall
conduct a study that analyzes which external data can be collected
in a shorter timeframe by the Centers for Medicare & Medicaid
Services for use in computing payments for inpatient hospital
services. The study may include an evaluation of the feasibility
and appropriateness of using quarterly samples or special surveys
or any other methods. The study shall include an analysis of
whether other executive agencies, such as the Bureau of Labor
Statistics in the Department of Commerce, are best suited to
collect this information.
(2) Report.--By not later than October 1, 2004, the Comptroller
General shall submit a report to Congress on the study under
paragraph (1).
SEC. 943. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER MEDICARE
SECONDARY PAYOR (MSP) PROVISIONS.
(a) In General.--The Secretary shall not require a hospital
(including a critical access hospital) to ask questions (or obtain
information) relating to the application of section 1862(b) of the
Social Security Act (relating to medicare secondary payor provisions)
in the case of reference laboratory services described in subsection
(b), if the Secretary does not impose such requirement in the case of
such services furnished by an independent laboratory.
(b) Reference Laboratory Services Described.--Reference laboratory
services described in this subsection are clinical laboratory
diagnostic tests (or the interpretation of such tests, or both)
furnished without a face-to-face encounter between the individual
entitled to benefits under part A or enrolled under part B, or both,
and the hospital involved and in which the hospital submits a claim
only for such test or interpretation.
SEC. 944. EMTALA IMPROVEMENTS.
(a) Payment for EMTALA-Mandated Screening and Stabilization
Services.--
(1) In general.--Section 1862 (42 U.S.C. 1395y) is amended by
inserting after subsection (c) the following new subsection:
``(d) For purposes of subsection (a)(1)(A), in the case of any item
or service that is required to be provided pursuant to section 1867 to
an individual who is entitled to benefits under this title,
determinations as to whether the item or service is reasonable and
necessary shall be made on the basis of the information available to
the treating physician or practitioner (including the patient's
presenting symptoms or complaint) at the time the item or service was
ordered or furnished by the physician or practitioner (and not on the
patient's principal diagnosis). When making such determinations with
respect to such an item or service, the Secretary shall not consider
the frequency with which the item or service was provided to the
patient before or after the time of the admission or visit.''.
(2) Effective date.--The amendment made by paragraph (1) shall
apply to items and services furnished on or after January 1, 2004.
(b) Notification of Providers When EMTALA Investigation Closed.--
Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is amended by adding at
the end the following new paragraph:
``(4) Notice upon closing an investigation.--The Secretary
shall establish a procedure to notify hospitals and physicians when
an investigation under this section is closed.''.
(c) Prior Review by Peer Review Organizations in EMTALA Cases
Involving Termination of Participation.--
(1) In general.--Section 1867(d)(3) (42 U.S.C. 1395dd(d)(3)) is
amended--
(A) in the first sentence, by inserting ``or in terminating
a hospital's participation under this title'' after ``in
imposing sanctions under paragraph (1)''; and
(B) by adding at the end the following new sentences:
``Except in the case in which a delay would jeopardize the
health or safety of individuals, the Secretary shall also
request such a review before making a compliance determination
as part of the process of terminating a hospital's
participation under this title for violations related to the
appropriateness of a medical screening examination, stabilizing
treatment, or an appropriate transfer as required by this
section, and shall provide a period of 5 days for such review.
The Secretary shall provide a copy of the organization's report
to the hospital or physician consistent with confidentiality
requirements imposed on the organization under such part B.''.
(2) Effective date.--The amendments made by paragraph (1) shall
apply to terminations of participation initiated on or after the
date of the enactment of this Act.
SEC. 945. EMERGENCY MEDICAL TREATMENT AND LABOR ACT (EMTALA) TECHNICAL
ADVISORY GROUP.
(a) Establishment.--The Secretary shall establish a Technical
Advisory Group (in this section referred to as the ``Advisory Group'')
to review issues related to the Emergency Medical Treatment and Labor
Act (EMTALA) and its implementation. In this section, the term
``EMTALA'' refers to the provisions of section 1867 of the Social
Security Act (42 U.S.C. 1395dd).
(b) Membership.--The Advisory Group shall be composed of 19
members, including the Administrator of the Centers for Medicare &
Medicaid Services and the Inspector General of the Department of Health
and Human Services and of which--
(1) 4 shall be representatives of hospitals, including at least
one public hospital, that have experience with the application of
EMTALA and at least 2 of which have not been cited for EMTALA
violations;
(2) 7 shall be practicing physicians drawn from the fields of
emergency medicine, cardiology or cardiothoracic surgery,
orthopedic surgery, neurosurgery, pediatrics or a pediatric
subspecialty, obstetrics-gynecology, and psychiatry, with not more
than one physician from any particular field;
(3) 2 shall represent patients;
(4) 2 shall be staff involved in EMTALA investigations from
different regional offices of the Centers for Medicare & Medicaid
Services; and
(5) 1 shall be from a State survey office involved in EMTALA
investigations and 1 shall be from a peer review organization, both
of whom shall be from areas other than the regions represented
under paragraph (4).
In selecting members described in paragraphs (1) through (3), the
Secretary shall consider qualified individuals nominated by
organizations representing providers and patients.
(c) General Responsibilities.--The Advisory Group--
(1) shall review EMTALA regulations;
(2) may provide advice and recommendations to the Secretary
with respect to those regulations and their application to
hospitals and physicians;
(3) shall solicit comments and recommendations from hospitals,
physicians, and the public regarding the implementation of such
regulations; and
(4) may disseminate information on the application of such
regulations to hospitals, physicians, and the public.
(d) Administrative Matters.--
(1) Chairperson.--The members of the Advisory Group shall elect
a member to serve as chairperson of the Advisory Group for the life
of the Advisory Group.
(2) Meetings.--The Advisory Group shall first meet at the
direction of the Secretary. The Advisory Group shall then meet
twice per year and at such other times as the Advisory Group may
provide.
(e) Termination.--The Advisory Group shall terminate 30 months
after the date of its first meeting.
(f) Waiver of Administrative Limitation.--The Secretary shall
establish the Advisory Group notwithstanding any limitation that may
apply to the number of advisory committees that may be established
(within the Department of Health and Human Services or otherwise).
SEC. 946. AUTHORIZING USE OF ARRANGEMENTS TO PROVIDE CORE HOSPICE
SERVICES IN CERTAIN CIRCUMSTANCES.
(a) In General.--Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is
amended by adding at the end the following:
``(D) In extraordinary, exigent, or other non-routine
circumstances, such as unanticipated periods of high patient loads,
staffing shortages due to illness or other events, or temporary travel
of a patient outside a hospice program's service area, a hospice
program may enter into arrangements with another hospice program for
the provision by that other program of services described in paragraph
(2)(A)(ii)(I). The provisions of paragraph (2)(A)(ii)(II) shall apply
with respect to the services provided under such arrangements.
``(E) A hospice program may provide services described in paragraph
(1)(A) other than directly by the program if the services are highly
specialized services of a registered professional nurse and are
provided non-routinely and so infrequently so that the provision of
such services directly would be impracticable and prohibitively
expensive.''.
(b) Conforming Payment Provision.--Section 1814(i) (42 U.S.C.
1395f(i)), as amended by section 512(b), is amended by adding at the
end the following new paragraph:
``(5) In the case of hospice care provided by a hospice program
under arrangements under section 1861(dd)(5)(D) made by another hospice
program, the hospice program that made the arrangements shall bill and
be paid for the hospice care.''.
(c) Effective Date.--The amendments made by this section shall
apply to hospice care provided on or after the date of the enactment of
this Act.
SEC. 947. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD TO CERTAIN
HOSPITALS.
(a) In General.--Section 1866 (42 U.S.C. 1395cc), as amended by
section 506, is amended--
(1) in subsection (a)(1)--
(A) in subparagraph (T), by striking ``and'' at the end;
(B) in subparagraph (U), by striking the period at the end
and inserting ``, and''; and
(C) by inserting after subparagraph (U) the following new
subparagraph:
``(V) in the case of hospitals that are not otherwise subject
to the Occupational Safety and Health Act of 1970 (or a State
occupational safety and health plan that is approved under 18(b) of
such Act), to comply with the Bloodborne Pathogens standard under
section 1910.1030 of title 29 of the Code of Federal Regulations
(or as subsequently redesignated).''; and
(2) by adding at the end of subsection (b) the following new
paragraph:
``(4)(A) A hospital that fails to comply with the requirement of
subsection (a)(1)(V) (relating to the Bloodborne Pathogens standard) is
subject to a civil money penalty in an amount described in subparagraph
(B), but is not subject to termination of an agreement under this
section.
``(B) The amount referred to in subparagraph (A) is an amount that
is similar to the amount of civil penalties that may be imposed under
section 17 of the Occupational Safety and Health Act of 1970 for a
violation of the Bloodborne Pathogens standard referred to in
subsection (a)(1)(U) by a hospital that is subject to the provisions of
such Act.
``(C) A civil money penalty under this paragraph shall be imposed
and collected in the same manner as civil money penalties under
subsection (a) of section 1128A are imposed and collected under that
section.''.
(b) Effective Date.--The amendments made by this subsection (a)
shall apply to hospitals as of July 1, 2004.
SEC. 948. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.
(a) Technical Amendments Relating to Advisory Committee Under BIPA
Section 522.--(1) Subsection (i) of section 1114 (42 U.S.C. 1314)--
(A) is transferred to section 1862 and added at the end of such
section; and
(B) is redesignated as subsection (j).
(2) Section 1862 (42 U.S.C. 1395y) is amended--
(A) in the last sentence of subsection (a), by striking
``established under section 1114(f)''; and
(B) in subsection (j), as so transferred and redesignated--
(i) by striking ``under subsection (f)''; and
(ii) by striking ``section 1862(a)(1)'' and inserting
``subsection (a)(1)''.
(b) Terminology Corrections.--(1) Section 1869(c)(3)(I)(ii) (42
U.S.C. 1395ff(c)(3)(I)(ii)) is amended--
(A) in subclause (III), by striking ``policy'' and inserting
``determination''; and
(B) in subclause (IV), by striking ``medical review policies''
and inserting ``coverage determinations''.
(2) Section 1852(a)(2)(C) (42 U.S.C. 1395w-22(a)(2)(C)) is amended
by striking ``policy'' and ``policy'' and inserting ``determination''
each place it appears and ``determination'', respectively.
(c) Reference Corrections.--Section 1869(f)(4) (42 U.S.C.
1395ff(f)(4)) is amended--
(1) in subparagraph (A)(iv), by striking ``subclause (I), (II),
or (III)'' and inserting ``clause (i), (ii), or (iii)'';
(2) in subparagraph (B), by striking ``clause (i)(IV)'' and
``clause (i)(III)'' and inserting ``subparagraph (A)(iv)'' and
``subparagraph (A)(iii)'', respectively; and
(3) in subparagraph (C), by striking ``clause (i)'',
``subclause (IV)'' and ``subparagraph (A)'' and inserting
``subparagraph (A)'', ``clause (iv)'' and ``paragraph (1)(A)'',
respectively each place it appears.
(d) Other Corrections.--Effective as if included in the enactment
of section 521(c) of BIPA, section 1154(e) (42 U.S.C. 1320c-3(e)) is
amended by striking paragraph (5).
(e) Effective Date.--Except as otherwise provided, the amendments
made by this section shall be effective as if included in the enactment
of BIPA.
SEC. 949. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.
The first sentence of section 1128(c)(3)(B) (42 U.S.C. 1320a-
7(c)(3)(B)) is amended to read as follows: ``Subject to subparagraph
(G), in the case of an exclusion under subsection (a), the minimum
period of exclusion shall be not less than five years, except that,
upon the request of the administrator of a Federal health care program
(as defined in section 1128B(f)) who determines that the exclusion
would impose a hardship on individuals entitled to benefits under part
A of title XVIII or enrolled under part B of such title, or both, the
Secretary may, after consulting with the Inspector General of the
Department of Health and Human Services, waive the exclusion under
subsection (a)(1), (a)(3), or (a)(4) with respect to that program in
the case of an individual or entity that is the sole community
physician or sole source of essential specialized services in a
community.''.
SEC. 950. TREATMENT OF CERTAIN DENTAL CLAIMS.
(a) In General.--Section 1862 (42 U.S.C. 1395y) is amended by
adding at the end, after the subsection transferred and redesignated by
section 948(a), the following new subsection:
``(k)(1) Subject to paragraph (2), a group health plan (as defined
in subsection (a)(1)(A)(v)) providing supplemental or secondary
coverage to individuals also entitled to services under this title
shall not require a medicare claims determination under this title for
dental benefits specifically excluded under subsection (a)(12) as a
condition of making a claims determination for such benefits under the
group health plan.
``(2) A group health plan may require a claims determination under
this title in cases involving or appearing to involve inpatient dental
hospital services or dental services expressly covered under this title
pursuant to actions taken by the Secretary.''.
(b) Effective Date.--The amendment made by subsection (a) shall
take effect on the date that is 60 days after the date of the enactment
of this Act.
SEC. 951. FURNISHING HOSPITALS WITH INFORMATION TO COMPUTE DSH FORMULA.
Beginning not later than 1 year after the date of the enactment of
this Act, the Secretary shall arrange to furnish to subsection (d)
hospitals (as defined in section 1886(d)(1)(B) of the Social Security
Act, 42 U.S.C. 1395ww(d)(1)(B)) the data necessary for such hospitals
to compute the number of patient days used in computing the
disproportionate patient percentage under such section for that
hospital for the current cost reporting year. Such data shall also be
furnished to other hospitals which would qualify for additional
payments under part A of title XVIII of the Social Security Act on the
basis of such data.
SEC. 952. REVISIONS TO REASSIGNMENT PROVISIONS.
(a) In General.--Section 1842(b)(6)(A) (42 U.S.C. 1395u(b)(6)(A))
is amended by striking ``or (ii) (where the service was provided in a
hospital, critical access hospital, clinic, or other facility) to the
facility in which the service was provided if there is a contractual
arrangement between such physician or other person and such facility
under which such facility submits the bill for such service,'' and
inserting ``or (ii) where the service was provided under a contractual
arrangement between such physician or other person and an entity, to
the entity if, under the contractual arrangement, the entity submits
the bill for the service and the contractual arrangement meets such
program integrity and other safeguards as the Secretary may determine
to be appropriate,''.
(b) Conforming Amendment.--The second sentence of section
1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by striking ``except to
an employer or facility as described in clause (A)'' and inserting
``except to an employer or entity as described in subparagraph (A)''.
(c) Effective Date.--The amendments made by this section shall
apply to payments made on or after the date of the enactment of this
Act.
SEC. 953. OTHER PROVISIONS.
(a) GAO Reports on the Physician Compensation.--
(1) Sustainable growth rate and updates.--Not later than 6
months after the date of the enactment of this Act, the Comptroller
General of the United States shall submit to Congress a report on
the appropriateness of the updates in the conversion factor under
subsection (d)(3) of section 1848 of the Social Security Act (42
U.S.C. 1395w-4), including the appropriateness of the sustainable
growth rate formula under subsection (f) of such section for 2002
and succeeding years. Such report shall examine the stability and
predictability of such updates and rate and alternatives for the
use of such rate in the updates.
(2) Physician compensation generally.--Not later than 12 months
after the date of the enactment of this Act, the Comptroller
General shall submit to Congress a report on all aspects of
physician compensation for services furnished under title XVIII of
the Social Security Act, and how those aspects interact and the
effect on appropriate compensation for physician services. Such
report shall review alternatives for the physician fee schedule
under section 1848 of such title (42 U.S.C. 1395w-4).
(b) Annual Publication of List of National Coverage
Determinations.--The Secretary shall provide, in an appropriate annual
publication available to the public, a list of national coverage
determinations made under title XVIII of the Social Security Act in the
previous year and information on how to get more information with
respect to such determinations.
(c) GAO Report on Flexibility in Applying Home Health Conditions of
Participation to Patients Who Are Not Medicare Beneficiaries.--Not
later than 6 months after the date of the enactment of this Act, the
Comptroller General of the United States shall submit to Congress a
report on the implications if there were flexibility in the application
of the medicare conditions of participation for home health agencies
with respect to groups or types of patients who are not medicare
beneficiaries. The report shall include an analysis of the potential
impact of such flexible application on clinical operations and the
recipients of such services and an analysis of methods for monitoring
the quality of care provided to such recipients.
(d) OIG Report on Notices Relating to Use of Hospital Lifetime
Reserve Days.--Not later than 1 year after the date of the enactment of
this Act, the Inspector General of the Department of Health and Human
Services shall submit a report to Congress on--
(1) the extent to which hospitals provide notice to medicare
beneficiaries in accordance with applicable requirements before
they use the 60 lifetime reserve days described in section
1812(a)(1) of the Social Security Act (42 U.S.C. 1395d(a)(1)); and
(2) the appropriateness and feasibility of hospitals providing
a notice to such beneficiaries before they completely exhaust such
lifetime reserve days.
TITLE X--MEDICAID AND MISCELLANEOUS PROVISIONS
Subtitle A--Medicaid Provisions
SEC. 1001. MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS.
(a) Temporary Increase.--Section 1923(f)(3) (42 U.S.C. 1396r-
4(f)(3)) is amended--
(1) in subparagraph (A), by striking ``subparagraph (B)'' and
inserting ``subparagraphs (B) and (C)''; and
(2) by adding at the end the following new subparagraphs:
``(C) Special, temporary increase in allotments on a one-
time, non-cumulative basis.--The DSH allotment for any State
(other than a State with a DSH allotment determined under
paragraph (5))--
``(i) for fiscal year 2004 is equal to 116 percent of
the DSH allotment for the State for fiscal year 2003 under
this paragraph, notwithstanding subparagraph (B); and
``(ii) for each succeeding fiscal year is equal to the
DSH allotment for the State for fiscal year 2004 or, in the
case of fiscal years beginning with the fiscal year
specified in subparagraph (D) for that State, the DSH
allotment for the State for the previous fiscal year
increased by the percentage change in the consumer price
index for all urban consumers (all items; U.S. city
average), for the previous fiscal year.
``(D) Fiscal year specified.--For purposes of subparagraph
(C)(ii), the fiscal year specified in this subparagraph for a
State is the first fiscal year for which the Secretary
estimates that the DSH allotment for that State will equal (or
no longer exceed) the DSH allotment for that State under the
law as in effect before the date of the enactment of this
subparagraph.''.
(b) Increase in Floor for Treatment as a Low DSH State.--Section
1923(f)(5) (42 U.S.C. 1396r-4(f)(5)) is amended--
(1) in the paragraph heading, by striking ``extremely'';
(2) by striking ``In the case of'' and inserting the following:
``(A) For fiscal years 2001 through 2003 for extremely low
dsh states.--In the case of'';
(3) by inserting ``before fiscal year 2004'' after ``In
subsequent years''; and
(4) by adding at the end the following:
``(B) For fiscal year 2004 and subsequent fiscal years.--In
the case of a State in which the total expenditures under the
State plan (including Federal and State shares) for
disproportionate share hospital adjustments under this section
for fiscal year 2000, as reported to the Administrator of the
Centers for Medicare & Medicaid Services as of August 31, 2003,
is greater than 0 but less than 3 percent of the State's total
amount of expenditures under the State plan for medical
assistance during the fiscal year, the DSH allotment for the
State with respect to--
``(i) fiscal year 2004 shall be the DSH allotment for
the State for fiscal year 2003 increased by 16 percent;
``(ii) each succeeding fiscal year before fiscal year
2009 shall be the DSH allotment for the State for the
previous fiscal year increased by 16 percent; and
``(iii) fiscal year 2009 and any subsequent fiscal
year, shall be the DSH allotment for the State for the
previous year subject to an increase for inflation as
provided in paragraph (3)(A).''.
(c) Allotment Adjustment.--Section 1923(f) (42 U.S.C. 1396r-4(f))
is amended--
(1) in paragraph (3)(A), by striking ``The DSH'' and inserting
``Except as provided in paragraph (6), the DSH'';
(2) by redesignating paragraph (6) as paragraph (7); and
(3) by inserting after paragraph (5) the following:
``(6) Allotment adjustment.--Only with respect to fiscal year
2004 or 2005, if a statewide waiver under section 1115 is revoked
or terminated before the end of either such fiscal year and there
is no DSH allotment for the State, the Secretary shall--
``(A) permit the State whose waiver was revoked or
terminated to submit an amendment to its State plan that would
describe the methodology to be used by the State (after the
effective date of such revocation or termination) to identify
and make payments to disproportionate share hospitals,
including children's hospitals and institutions for mental
diseases or other mental health facilities (other than State-
owned institutions or facilities), on the basis of the
proportion of patients served by such hospitals that are low-
income patients with special needs; and
``(B) provide for purposes of this subsection for
computation of an appropriate DSH allotment for the State for
fiscal year 2004 or 2005 (or both) that would not exceed the
amount allowed under paragraph (3)(B)(ii) and that does not
result in greater expenditures under this title than would have
been made if such waiver had not been revoked or terminated.
In determining the amount of an appropriate DSH allotment under
subparagraph (B) for a State, the Secretary shall take into account
the level of DSH expenditures for the State for the fiscal year
preceding the fiscal year in which the waiver commenced.''.
(d) Increased Reporting and Other Requirements To Ensure the
Appropriate Use of Medicaid DSH Payment Adjustments.--Section 1923 (42
U.S.C. 1396r-4) is amended by adding at the end the following new
subsection:
``(j) Annual Reports and Other Requirements Regarding Payment
Adjustments.--With respect to fiscal year 2004 and each fiscal year
thereafter, the Secretary shall require a State, as a condition of
receiving a payment under section 1903(a)(1) with respect to a payment
adjustment made under this section, to do the following:
``(1) Report.--The State shall submit an annual report that
includes the following:
``(A) An identification of each disproportionate share
hospital that received a payment adjustment under this section
for the preceding fiscal year and the amount of the payment
adjustment made to such hospital for the preceding fiscal year.
``(B) Such other information as the Secretary determines
necessary to ensure the appropriateness of the payment
adjustments made under this section for the preceding fiscal
year.
``(2) Independent certified audit.--The State shall annually
submit to the Secretary an independent certified audit that
verifies each of the following:
``(A) The extent to which hospitals in the State have
reduced their uncompensated care costs to reflect the total
amount of claimed expenditures made under this section.
``(B) Payments under this section to hospitals that comply
with the requirements of subsection (g).
``(C) Only the uncompensated care costs of providing
inpatient hospital and outpatient hospital services to
individuals described in paragraph (1)(A) of such subsection
are included in the calculation of the hospital-specific limits
under such subsection.
``(D) The State included all payments under this title,
including supplemental payments, in the calculation of such
hospital-specific limits.
``(E) The State has separately documented and retained a
record of all of its costs under this title, claimed
expenditures under this title, uninsured costs in determining
payment adjustments under this section, and any payments made
on behalf of the uninsured from payment adjustments under this
section.''.
(e) Clarification Regarding Non-Regulation of Transfers.--
(1) In general.--Nothing in section 1903(w) of the Social
Security Act (42 U.S.C. 1396b(w)) shall be construed by the
Secretary as prohibiting a State's use of funds as the non-Federal
share of expenditures under title XIX of such Act where such funds
are transferred from or certified by a publicly-owned regional
medical center located in another State and described in paragraph
(2), so long as the Secretary determines that such use of funds is
proper and in the interest of the program under title XIX.
(2) Center described.--A center described in this paragraph is
a publicly-owned regional medical center that--
(A) provides level 1 trauma and burn care services;
(B) provides level 3 neonatal care services;
(C) is obligated to serve all patients, regardless of State
of origin;
(D) is located within a Standard Metropolitan Statistical
Area (SMSA) that includes at least 3 States, including the
States described in paragraph (1);
(E) serves as a tertiary care provider for patients
residing within a 125 mile radius; and
(F) meets the criteria for a disproportionate share
hospital under section 1923 of such Act in at least one State
other than the one in which the center is located.
(3) Effective period.--This subsection shall apply through
December 31, 2005.
SEC. 1002. CLARIFICATION OF INCLUSION OF INPATIENT DRUG PRICES CHARGED
TO CERTAIN PUBLIC HOSPITALS IN THE BEST PRICE EXEMPTIONS
FOR THE MEDICAID DRUG REBATE PROGRAM.
(a) In General.--Section 1927(c)(1)(C)(i)(I) (42 U.S.C. 1396r-
8(c)(1)(C)(i)(I)) is amended by inserting before the semicolon the
following: ``(including inpatient prices charged to hospitals described
in section 340B(a)(4)(L) of the Public Health Service Act)''.
(b) Anti-Diversion Protection.--Section 1927(c)(1)(C) (42 U.S.C.
1396r-8(c)(1)(C)) is amended by adding at the end the following:
``(iii) Application of auditing and recordkeeping
requirements.--With respect to a covered entity described
in section 340B(a)(4)(L) of the Public Health Service Act,
any drug purchased for inpatient use shall be subject to
the auditing and recordkeeping requirements described in
section 340B(a)(5)(C) of the Public Health Service Act.''.
SEC. 1003. EXTENSION OF MORATORIUM.
(a) In General.--Section 6408(a)(3) of the Omnibus Budget
Reconciliation Act of 1989, as amended by section 13642 of the Omnibus
Budget Reconciliation Act of 1993 and section 4758 of the Balanced
Budget Act of 1997, is amended--
(1) by striking ``until December 31, 2002'', and
(2) by striking ``Kent Community Hospital Complex in Michigan
or.''
(b) Effective Dates.--
(1) Permanent extension.--The amendment made by subsection
(a)(1) shall take effect as if included in the amendment made by
section 4758 of the Balanced Budget Act of 1997.
(2) Modification.--The amendment made by subsection (a)(2)
shall take effect on the date of enactment of this Act.
Subtitle B--Miscellaneous Provisions
SEC. 1011. FEDERAL REIMBURSEMENT OF EMERGENCY HEALTH SERVICES FURNISHED
TO UNDOCUMENTED ALIENS.
(a) Total Amount Available for Allotment.--
(1) In general.--Out of any funds in the Treasury not otherwise
appropriated, there are appropriated to the Secretary $250,000,000
for each of fiscal years 2005 through 2008 for the purpose of
making allotments under this section for payments to eligible
providers in States described in paragraph (1) or (2) of subsection
(b).
(2) Availability.--Funds appropriated under paragraph (1) shall
remain available until expended.
(b) State Allotments.--
(1) Based on percentage of undocumented aliens.--
(A) In general.--Out of the amount appropriated under
subsection (a) for a fiscal year, the Secretary shall use
$167,000,000 of such amount to make allotments for such fiscal
year in accordance with subparagraph (B).
(B) Formula.--The amount of the allotment for payments to
eligible providers in each State for a fiscal year shall be
equal to the product of--
(i) the total amount available for allotments under
this paragraph for the fiscal year; and
(ii) the percentage of undocumented aliens residing in
the State as compared to the total number of such aliens
residing in all States, as determined by the Statistics
Division of the Immigration and Naturalization Service, as
of January 2003, based on the 2000 decennial census.
(2) Based on number of undocumented alien apprehension
states.--
(A) In general.--Out of the amount appropriated under
subsection (a) for a fiscal year, the Secretary shall use
$83,000,000 of such amount to make allotments, in addition to
amounts allotted under paragraph (1), for such fiscal year for
each of the 6 States with the highest number of undocumented
alien apprehensions for such fiscal year.
(B) Determination of allotments.--The amount of the
allotment for each State described in subparagraph (A) for a
fiscal year shall be equal to the product of--
(i) the total amount available for allotments under
this paragraph for the fiscal year; and
(ii) the percentage of undocumented alien apprehensions
in the State in that fiscal year as compared to the total
of such apprehensions for all such States for the preceding
fiscal year.
(C) Data.--For purposes of this paragraph, the highest
number of undocumented alien apprehensions for a fiscal year
shall be based on the apprehension rates for the 4-consecutive-
quarter period ending before the beginning of the fiscal year
for which information is available for undocumented aliens in
such States, as reported by the Department of Homeland
Security.
(c) Use of Funds.--
(1) Authority to make payments.--From the allotments made for a
State under subsection (b) for a fiscal year, the Secretary shall
pay the amount (subject to the total amount available from such
allotments) determined under paragraph (2) directly to eligible
providers located in the State for the provision of eligible
services to aliens described in paragraph (5) to the extent that
the eligible provider was not otherwise reimbursed (through
insurance or otherwise) for such services during that fiscal year.
(2) Determination of payment amounts.--
(A) In general.--Subject to subparagraph (B), the payment
amount determined under this paragraph shall be an amount
determined by the Secretary that is equal to the lesser of--
(i) the amount that the provider demonstrates was
incurred for the provision of such services; or
(ii) amounts determined under a methodology established
by the Secretary for purposes of this subsection.
(B) Pro-rata reduction.--If the amount of funds allotted to
a State under subsection (b) for a fiscal year is insufficient
to ensure that each eligible provider in that State receives
the amount of payment calculated under subparagraph (A), the
Secretary shall reduce that amount of payment with respect to
each eligible provider to ensure that the entire amount
allotted to the State for that fiscal year is paid to such
eligible providers.
(3) Methodology.--In establishing a methodology under paragraph
(2)(A)(ii), the Secretary--
(A) may establish different methodologies for types of
eligible providers;
(B) may base payments for hospital services on estimated
hospital charges, adjusted to estimated cost, through the
application of hospital-specific cost-to-charge ratios;
(C) shall provide for the election by a hospital to receive
either payments to the hospital for--
(i) hospital and physician services; or
(ii) hospital services and for a portion of the on-call
payments made by the hospital to physicians; and
(D) shall make quarterly payments under this section to
eligible providers.
If a hospital makes the election under subparagraph (C)(i), the
hospital shall pass on payments for services of a physician to the
physician and may not charge any administrative or other fee with
respect to such payments.
(4) Limitation on use of funds.--Payments made to eligible
providers in a State from allotments made under subsection (b) for
a fiscal year may only be used for costs incurred in providing
eligible services to aliens described in paragraph (5).
(5) Aliens described.--For purposes of paragraphs (1) and (2),
aliens described in this paragraph are any of the following:
(A) Undocumented aliens.
(B) Aliens who have been paroled into the United States at
a United States port of entry for the purpose of receiving
eligible services.
(C) Mexican citizens permitted to enter the United States
for not more than 72 hours under the authority of a biometric
machine readable border crossing identification card (also
referred to as a ``laser visa'') issued in accordance with the
requirements of regulations prescribed under section 101(a)(6)
of the Immigration and Nationality Act (8 U.S.C. 1101(a)(6)).
(d) Applications; Advance Payments.--
(1) Deadline for establishment of application process.--
(A) In general.--Not later than September 1, 2004, the
Secretary shall establish a process under which eligible
providers located in a State may request payments under
subsection (c).
(B) Inclusion of measures to combat fraud and abuse.--The
Secretary shall include in the process established under
subparagraph (A) measures to ensure that inappropriate,
excessive, or fraudulent payments are not made from the
allotments determined under subsection (b), including
certification by the eligible provider of the veracity of the
payment request.
(2) Advance payment; retrospective adjustment.--The process
established under paragraph (1) may provide for making payments
under this section for each quarter of a fiscal year on the basis
of advance estimates of expenditures submitted by applicants for
such payments and such other investigation as the Secretary may
find necessary, and for making reductions or increases in the
payments as necessary to adjust for any overpayment or underpayment
for prior quarters of such fiscal year.
(e) Definitions.--In this section:
(1) Eligible provider.--The term ``eligible provider'' means a
hospital, physician, or provider of ambulance services (including
an Indian Health Service facility whether operated by the Indian
Health Service or by an Indian tribe or tribal organization).
(2) Eligible services.--The term ``eligible services'' means
health care services required by the application of section 1867 of
the Social Security Act (42 U.S.C. 1395dd), and related hospital
inpatient and outpatient services and ambulance services (as
defined by the Secretary).
(3) Hospital.--The term ``hospital'' has the meaning given such
term in section 1861(e) of the Social Security Act (42 U.S.C.
1395x(e)), except that such term shall include a critical access
hospital (as defined in section 1861(mm)(1) of such Act (42 U.S.C.
1395x(mm)(1)).
(4) Physician.--The term ``physician'' has the meaning given
that term in section 1861(r) of the Social Security Act (42 U.S.C.
1395x(r)).
(5) Indian tribe; tribal organization.--The terms ``Indian
tribe'' and ``tribal organization'' have the meanings given such
terms in section 4 of the Indian Health Care Improvement Act (25
U.S.C. 1603).
(6) State.--The term ``State'' means the 50 States and the
District of Columbia.
SEC. 1012. COMMISSION ON SYSTEMIC INTEROPERABILITY.
(a) Establishment.--The Secretary shall establish a commission to
be known as the ``Commission on Systemic Interoperability'' (in this
section referred to as the ``Commission'').
(b) Duties.--
(1) In general.--The Commission shall develop a comprehensive
strategy for the adoption and implementation of health care
information technology standards, that includes a timeline and
prioritization for such adoption and implementation.
(2) Considerations.--In developing the comprehensive health
care information technology strategy under paragraph (1), the
Commission shall consider--
(A) the costs and benefits of the standards, both financial
impact and quality improvement;
(B) the current demand on industry resources to implement
this Act and other electronic standards, including HIPAA
standards; and
(C) the most cost-effective and efficient means for
industry to implement the standards.
(3) Noninterference.--In carrying out this section, the
Commission shall not interfere with any standards development of
adoption processes underway in the private or public sector and
shall not replicate activities related to such standards or the
national health information infrastructure underway within the
Department of Health and Human Services.
(4) Report.--Not later than October 31, 2005, the Commission
shall submit to the Secretary and to Congress a report describing
the strategy developed under paragraph (1), including an analysis
of the matters considered under paragraph (2).
(c) Membership.--
(1) Number and appointment.--The Commission shall be composed
of 11 members appointed as follows:
(A) The President shall appoint three members, one of whom
the President shall designate as Chairperson.
(B) The Majority Leader of the Senate shall appoint two
members.
(C) The Minority Leader of the Senate shall appoint two
members.
(D) The Speaker of the House of Representatives shall
appoint two members.
(E) The Minority Leader of the House of Representatives
shall appoint two members.
(2) Qualifications.--The membership of the Commission shall
include individuals with national recognition for their expertise
in health finance and economics, health plans and integrated
delivery systems, reimbursement of health facilities, practicing
physicians, practicing pharmacists, and other providers of health
services, health care technology and information systems, and other
related fields, who provide a mix of different professionals, broad
geographic representation, and a balance between urban and rural
representatives.
(d) Terms.--Each member shall be appointed for the life of the
Commission.
(e) Compensation.--
(1) Rates of pay.--Members shall each be paid at a rate not to
exceed the daily equivalent of the rate of basic pay for level IV
of the Executive Schedule for each day (including travel time)
during which they are engaged in the actual performance of duties
vested in the Commission.
(2) Prohibition of compensation of federal employees.--Members
of the Commission who are full-time officers or employees of the
United States or Members of Congress may not receive additional
pay, allowances, or benefits by reason of their service on the
Commission.
(3) Travel expenses.--Each member shall receive travel
expenses, including per diem in lieu of subsistence, in accordance
with applicable provisions under subchapter I of chapter 57 of
title 5, United States Code.
(f) Quorum.--A majority of the members of the Commission shall
constitute a quorum but a lesser number may hold hearings.
(g) Director and Staff of Commission; Experts and Consultants.--
(1) Director.--The Commission shall have a Director who shall
be appointed by the Chairperson. The Director shall be paid at a
rate not to exceed the rate of basic pay for level IV of the
Executive Schedule.
(2) Staff.--With the approval of the Commission, the Director
may appoint and fix the pay of such additional personnel as the
Director considers appropriate.
(3) Applicability of certain civil service laws.--The Director
and staff of the Commission may be appointed without regard to the
provisions of title 5, United States Code, governing appointments
in the competitive service, and may be paid without regard to the
provisions of chapter 51 and subchapter III of chapter 53 of that
title relating to classification and General Schedule pay rates,
except that an individual so appointed may not receive pay in
excess of level IV of the Executive Schedule.
(4) Experts and consultants.--With the approval of the
Commission, the Director may procure temporary and intermittent
services under section 3109(b) of title 5, United States Code.
(5) Staff of federal agencies.--Upon request of the
Chairperson, the head of any Federal department or agency may
detail, on a reimbursable basis, any of the personnel of that
department or agency to the Commission to assist it in carrying out
its duties under this Act.
(h) Powers of Commission.--
(1) Hearings and sessions.--The Commission may, for the purpose
of carrying out this Act, hold hearings, sit and act at times and
places, take testimony, and receive evidence as the Commission
considers appropriate.
(2) Powers of members and agents.--Any member or agent of the
Commission may, if authorized by the Commission, take any action
which the Commission is authorized to take by this section.
(3) Obtaining official data.--The Commission may secure
directly from any department or agency of the United States
information necessary to enable it to carry out this Act. Upon
request of the Chairperson of the Commission, the head of that
department or agency shall furnish that information to the
Commission.
(4) Gifts, bequests, and devises.--The Commission may accept,
use, and dispose of gifts, bequests, or devises of services or
property, both real and personal, for the purpose of aiding or
facilitating the work of the Commission. Gifts, bequests, or
devises of money and proceeds from sales of other property received
as gifts, bequests, or devises shall be deposited in the Treasury
and shall be available for disbursement upon order of the
Commission. For purposes of Federal income, estate, and gift taxes,
property accepted under this subsection shall be considered as a
gift, bequest, or devise to the United States.
(5) Mails.--The Commission may use the United States mails in
the same manner and under the same conditions as other departments
and agencies of the United States.
(6) Administrative support services.--Upon the request of the
Commission, the Administrator of General Services shall provide to
the Commission, on a reimbursable basis, the administrative support
services necessary for the Commission to carry out its
responsibilities under this Act.
(7) Contract authority.--The Commission may enter into
contracts or make other arrangements, as may be necessary for the
conduct of the work of the Commission (without regard to section
3709 of the Revised Statutes (41 U.S.C. 5)).
(i) Termination.--The Commission shall terminate on 30 days after
submitting its report pursuant to subsection (b)(3).
(j) Authorization of Appropriations.--There is authorized to be
appropriated such sums as may be necessary to carry out this section.
SEC. 1013. RESEARCH ON OUTCOMES OF HEALTH CARE ITEMS AND SERVICES.
(a) Research, Demonstrations, and Evaluations.--
(1) Improvement of effectiveness and efficiency.--
(A) In general.--To improve the quality, effectiveness, and
efficiency of health care delivered pursuant to the programs
established under titles XVIII, XIX, and XXI of the Social
Security Act, the Secretary acting through the Director of the
Agency for Healthcare Research and Quality (in this section
referred to as the ``Director''), shall conduct and support
research to meet the priorities and requests for scientific
evidence and information identified by such programs with
respect to--
(i) the outcomes, comparative clinical effectiveness,
and appropriateness of health care items and services
(including prescription drugs); and
(ii) strategies for improving the efficiency and
effectiveness of such programs, including the ways in which
such items and services are organized, managed, and
delivered under such programs.
(B) Specification.--To respond to priorities and
information requests in subparagraph (A), the Secretary may
conduct or support, by grant, contract, or interagency
agreement, research, demonstrations, evaluations, technology
assessments, or other activities, including the provision of
technical assistance, scientific expertise, or methodological
assistance.
(2) Priorities.--
(A) In general.--The Secretary shall establish a process to
develop priorities that will guide the research,
demonstrations, and evaluation activities undertaken pursuant
to this section.
(B) Initial list.--Not later than 6 months after the date
of the enactment of this Act, the Secretary shall establish an
initial list of priorities for research related to health care
items and services (including prescription drugs).
(C) Process.--In carrying out subparagraph (A), the
Secretary--
(i) shall ensure that there is broad and ongoing
consultation with relevant stakeholders in identifying the
highest priorities for research, demonstrations, and
evaluations to support and improve the programs established
under titles XVIII, XIX, and XXI of the Social Security
Act;
(ii) may include health care items and services which
impose a high cost on such programs, as well as those which
may be underutilized or overutilized and which may
significantly improve the prevention, treatment, or cure of
diseases and conditions (including chronic conditions)
which impose high direct or indirect costs on patients or
society; and
(iii) shall ensure that the research and activities
undertaken pursuant to this section are responsive to the
specified priorities and are conducted in a timely manner.
(3) Evaluation and synthesis of scientific evidence.--
(A) In general.--The Secretary shall--
(i) evaluate and synthesize available scientific
evidence related to health care items and services
(including prescription drugs) identified as priorities in
accordance with paragraph (2) with respect to the
comparative clinical effectiveness, outcomes,
appropriateness, and provision of such items and services
(including prescription drugs);
(ii) identify issues for which existing scientific
evidence is insufficient with respect to such health care
items and services (including prescription drugs);
(iii) disseminate to prescription drug plans and MA-PD
plans under part D of title XVIII of the Social Security
Act, other health plans, and the public the findings made
under clauses (i) and (ii); and
(iv) work in voluntary collaboration with public and
private sector entities to facilitate the development of
new scientific knowledge regarding health care items and
services (including prescription drugs).
(B) Initial research.--The Secretary shall complete the
evaluation and synthesis of the initial research required by
the priority list developed under paragraph (2)(B) not later
than 18 months after the development of such list.
(C) Dissemination.--
(i) In general.--To enhance patient safety and the
quality of health care, the Secretary shall make available
and disseminate in appropriate formats to prescription
drugs plans under part D, and MA-PD plans under part C, of
title XVIII of the Social Security Act, other health plans,
and the public the evaluations and syntheses prepared
pursuant to subparagraph (A) and the findings of research
conducted pursuant to paragraph (1). In carrying out this
clause the Secretary, in order to facilitate the
availability of such evaluations and syntheses or findings
at every decision point in the health care system, shall--
(I) present such evaluations and syntheses or
findings in a form that is easily understood by the
individuals receiving health care items and services
(including prescription drugs) under such plans and
periodically assess that the requirements of this
subclause have been met; and
(II) provide such evaluations and syntheses or
findings and other relevant information through easily
accessible and searchable electronic mechanisms, and in
hard copy formats as appropriate.
(ii) Rule of construction.--Nothing in this section
shall be construed as--
(I) affecting the authority of the Secretary or the
Commissioner of Food and Drugs under the Federal Food,
Drug, and Cosmetic Act or the Public Health Service
Act; or
(II) conferring any authority referred to in
subclause (I) to the Director.
(D) Accountability.--In carrying out this paragraph, the
Secretary shall implement activities in a manner that--
(i) makes publicly available all scientific evidence
relied upon and the methodologies employed, provided such
evidence and method are not protected from public
disclosure by section 1905 of title 18, United States Code,
or other applicable law so that the results of the
research, analyses, or syntheses can be evaluated or
replicated; and
(ii) ensures that any information needs and unresolved
issues identified in subparagraph (A)(ii) are taken into
account in priority-setting for future research conducted
by the Secretary.
(4) Confidentiality.--
(A) In general.--In making use of administrative, clinical,
and program data and information developed or collected with
respect to the programs established under titles XVIII, XIX,
and XXI of the Social Security Act, for purposes of carrying
out the requirements of this section or the activities
authorized under title IX of the Public Health Service Act (42
U.S.C. 299 et seq.), such data and information shall be
protected in accordance with the confidentiality requirements
of title IX of the Public Health Service Act.
(B) Rule of construction.--Nothing in this section shall be
construed to require or permit the disclosure of data provided
to the Secretary that is otherwise protected from disclosure
under the Federal Food, Drug, and Cosmetic Act, section 1905 of
title 18, United States Code, or other applicable law.
(5) Evaluations.--The Secretary shall conduct and support
evaluations of the activities carried out under this section to
determine the extent to which such activities have had an effect on
outcomes and utilization of health care items and services.
(6) Improving information available to health care providers,
patients, and policymakers.--Not later than 18 months after the
date of enactment of this Act, the Secretary shall identify options
that could be undertaken in voluntary collaboration with private
and public entities (as appropriate) for the--
(A) provision of more timely information through the
programs established under titles XVIII, XIX, and XXI of the
Social Security Act, regarding the outcomes and quality of
patient care, including clinical and patient-reported outcomes,
especially with respect to interventions and conditions for
which clinical trials would not be feasible or raise ethical
concerns that are difficult to address;
(B) acceleration of the adoption of innovation and quality
improvement under such programs; and
(C) development of management tools for the programs
established under titles XIX and XXI of the Social Security
Act, and with respect to the programs established under such
titles, assess the feasibility of using administrative or
claims data, to--
(i) improve oversight by State officials;
(ii) support Federal and State initiatives to improve
the quality, safety, and efficiency of services provided
under such programs; and
(iii) provide a basis for estimating the fiscal and
coverage impact of Federal or State program and policy
changes.
(b) Recommendations.--
(1) Disclaimer.--In carrying out this section, the Director
shall--
(A) not mandate national standards of clinical practice or
quality health care standards; and
(B) include in any recommendations resulting from projects
funded and published by the Director, a corresponding reference
to the prohibition described in subparagraph (A).
(2) Requirement for implementation.--Research, evaluation, and
communication activities performed pursuant to this section shall
reflect the principle that clinicians and patients should have the
best available evidence upon which to make choices in health care
items and services, in providers, and in health care delivery
systems, recognizing that patient subpopulations and patient and
physician preferences may vary.
(3) Rule of construction.--Nothing in this section shall be
construed to provide the Director with authority to mandate a
national standard or require a specific approach to quality
measurement and reporting.
(c) Research With Respect to Dissemination.--The Secretary, acting
through the Director, may conduct or support research with respect to
improving methods of disseminating information in accordance with
subsection (a)(3)(C).
(d) Limitation on CMS.--The Administrator of the Centers for
Medicare & Medicaid Services may not use data obtained in accordance
with this section to withhold coverage of a prescription drug.
(e) Authorization of Appropriations.--There is authorized to be
appropriated to carry out this section, $50,000,000 for fiscal year
2004, and such sums as may be necessary for each fiscal year
thereafter.
SEC. 1014. HEALTH CARE THAT WORKS FOR ALL AMERICANS: CITIZENS HEALTH
CARE WORKING GROUP.
(a) Findings.--Congress finds the following:
(1) In order to improve the health care system, the American
public must engage in an informed national public debate to make
choices about the services they want covered, what health care
coverage they want, and how they are willing to pay for coverage.
(2) More than a trillion dollars annually is spent on the
health care system, yet--
(A) 41,000,000 Americans are uninsured;
(B) insured individuals do not always have access to
essential, effective services to improve and maintain their
health; and
(C) employers, who cover over 170,000,000 Americans, find
providing coverage increasingly difficult because of rising
costs and double digit premium increases.
(3) Despite increases in medical care spending that are greater
than the rate of inflation, population growth, and Gross Domestic
Product growth, there has not been a commensurate improvement in
our health status as a nation.
(4) Health care costs for even just 1 member of a family can be
catastrophic, resulting in medical bills potentially harming the
economic stability of the entire family.
(5) Common life occurrences can jeopardize the ability of a
family to retain private coverage or jeopardize access to public
coverage.
(6) Innovations in health care access, coverage, and quality of
care, including the use of technology, have often come from States,
local communities, and private sector organizations, but more
creative policies could tap this potential.
(7) Despite our Nation's wealth, the health care system does
not provide coverage to all Americans who want it.
(b) Purposes.--The purposes of this section are--
(1) to provide for a nationwide public debate about improving
the health care system to provide every American with the ability
to obtain quality, affordable health care coverage; and
(2) to provide for a vote by Congress on the recommendations
that result from the debate.
(c) Establishment.--The Secretary, acting through the Agency for
Healthcare Research and Quality, shall establish an entity to be known
as the Citizens' Health Care Working Group (referred to in this section
as the ``Working Group'').
(d) Membership.--
(1) Number and appointment.--The Working Group shall be
composed of 15 members. One member shall be the Secretary. The
Comptroller General of the United States shall appoint 14 members.
(2) Qualifications.--
(A) In general.--The membership of the Working Group shall
include--
(i) consumers of health services that represent those
individuals who have not had insurance within 2 years of
appointment, that have had chronic illnesses, including
mental illness, are disabled, and those who receive
insurance coverage through medicare and medicaid; and
(ii) individuals with expertise in financing and paying
for benefits and access to care, business and labor
perspectives, and providers of health care.
The membership shall reflect a broad geographic representation
and a balance between urban and rural representatives.
(B) Prohibited appointments.--Members of the Working Group
shall not include Members of Congress or other elected
government officials (Federal, State, or local). Individuals
appointed to the Working Group shall not be paid employees or
representatives of associations or advocacy organizations
involved in the health care system.
(e) Period of Appointment.--Members of the Working Group shall be
appointed for a life of the Working Group. Any vacancies shall not
affect the power and duties of the Working Group but shall be filled in
the same manner as the original appointment.
(f) Designation of the Chairperson.--Not later than 15 days after
the date on which all members of the Working Group have been appointed
under subsection (d)(1), the Comptroller General shall designate the
chairperson of the Working Group.
(g) Subcommittees.--The Working Group may establish subcommittees
if doing so increases the efficiency of the Working Group in completing
its tasks.
(h) Duties.--
(1) Hearings.--Not later than 90 days after the date of the
designation of the chairperson under subsection (f), the Working
Group shall hold hearings to examine--
(A) the capacity of the public and private health care
systems to expand coverage options;
(B) the cost of health care and the effectiveness of care
provided at all stages of disease;
(C) innovative State strategies used to expand health care
coverage and lower health care costs;
(D) local community solutions to accessing health care
coverage;
(E) efforts to enroll individuals currently eligible for
public or private health care coverage;
(F) the role of evidence-based medical practices that can
be documented as restoring, maintaining, or improving a
patient's health, and the use of technology in supporting
providers in improving quality of care and lowering costs; and
(G) strategies to assist purchasers of health care,
including consumers, to become more aware of the impact of
costs, and to lower the costs of health care.
(2) Additional hearings.--The Working Group may hold additional
hearings on subjects other than those listed in paragraph (1) so
long as such hearings are determined to be necessary by the Working
Group in carrying out the purposes of this section. Such additional
hearings do not have to be completed within the time period
specified in paragraph (1) but shall not delay the other activities
of the Working Group under this section.
(3) The health report to the american people.--Not later than
90 days after the hearings described in paragraphs (1) and (2) are
completed, the Working Group shall prepare and make available to
health care consumers through the Internet and other appropriate
public channels, a report to be entitled, ``The Health Report to
the American People''. Such report shall be understandable to the
general public and include--
(A) a summary of--
(i) health care and related services that may be used
by individuals throughout their life span;
(ii) the cost of health care services and their medical
effectiveness in providing better quality of care for
different age groups;
(iii) the source of coverage and payment, including
reimbursement, for health care services;
(iv) the reasons people are uninsured or underinsured
and the cost to taxpayers, purchasers of health services,
and communities when Americans are uninsured or
underinsured;
(v) the impact on health care outcomes and costs when
individuals are treated in all stages of disease;
(vi) health care cost containment strategies; and
(vii) information on health care needs that need to be
addressed;
(B) examples of community strategies to provide health care
coverage or access;
(C) information on geographic-specific issues relating to
health care;
(D) information concerning the cost of care in different
settings, including institutional-based care and home and
community-based care;
(E) a summary of ways to finance health care coverage; and
(F) the role of technology in providing future health care
including ways to support the information needs of patients and
providers.
(4) Community meetings.--
(A) In general.--Not later than 1 year after the date on
which all the members of the Working Group have been appointed
under subsection (d)(1) and appropriations are first made
available to carry out this section, the Working Group shall
initiate health care community meetings throughout the United
States (in this paragraph referred to as ``community
meetings''). Such community meetings may be geographically or
regionally based and shall be completed within 180 days after
the initiation of the first meeting.
(B) Number of meetings.--The Working Group shall hold a
sufficient number of community meetings in order to receive
information that reflects--
(i) the geographic differences throughout the United
States;
(ii) diverse populations; and
(iii) a balance among urban and rural populations.
(C) Meeting requirements.--
(i) Facilitator.--A State health officer may be the
facilitator at the community meetings.
(ii) Attendance.--At least 1 member of the Working
Group shall attend and serve as chair of each community
meeting. Other members may participate through interactive
technology.
(iii) Topics.--The community meetings shall, at a
minimum, address the following questions:
(I) What health care benefits and services should
be provided?
(II) How does the American public want health care
delivered?
(III) How should health care coverage be financed?
(IV) What trade-offs are the American public
willing to make in either benefits or financing to
ensure access to affordable, high quality health care
coverage and services?
(iv) Interactive technology.--The Working Group may
encourage public participation in community meetings
through interactive technology and other means as
determined appropriate by the Working Group.
(D) Interim requirements.--Not later than 180 days after
the date of completion of the community meetings, the Working
Group shall prepare and make available to the public through
the Internet and other appropriate public channels, an interim
set of recommendations on health care coverage and ways to
improve and strengthen the health care system based on the
information and preferences expressed at the community
meetings. There shall be a 90-day public comment period on such
recommendations.
(i) Recommendations.--Not later than 120 days after the expiration
of the public comment period described in subsection (h)(4)(D), the
Working Group shall submit to Congress and the President a final set of
recommendations.
(j) Administration.--
(1) Executive director.--There shall be an Executive Director
of the Working Group who shall be appointed by the chairperson of
the Working Group in consultation with the members of the Working
Group.
(2) Compensation.--While serving on the business of the Working
Group (including travel time), a member of the Working Group shall
be entitled to compensation at the per diem equivalent of the rate
provided for level IV of the Executive Schedule under section 5315
of title 5, United States Code, and while so serving away from home
and the member's regular place of business, a member may be allowed
travel expenses, as authorized by the chairperson of the Working
Group. For purposes of pay and employment benefits, rights, and
privileges, all personnel of the Working Group shall be treated as
if they were employees of the Senate.
(3) Information from federal agencies.--The Working Group may
secure directly from any Federal department or agency such
information as the Working Group considers necessary to carry out
this section. Upon request of the Working Group, the head of such
department or agency shall furnish such information.
(4) Postal services.--The Working Group may use the United
States mails in the same manner and under the same conditions as
other departments and agencies of the Federal Government.
(k) Detail.--Not more than 10 Federal Government employees employed
by the Department of Labor and 10 Federal Government employees employed
by the Department of Health and Human Services may be detailed to the
Working Group under this section without further reimbursement. Any
detail of an employee shall be without interruption or loss of civil
service status or privilege.
(l) Temporary and Intermittent Services.--The chairperson of the
Working Group may procure temporary and intermittent services under
section 3109(b) of title 5, United States Code, at rates for
individuals which do not exceed the daily equivalent of the annual rate
of basic pay prescribed for level V of the Executive Schedule under
section 5316 of such title.
(m) Annual Report.--Not later than 1 year after the date of
enactment of this Act, and annually thereafter during the existence of
the Working Group, the Working Group shall report to Congress and make
public a detailed description of the expenditures of the Working Group
used to carry out its duties under this section.
(n) Sunset of Working Group.--The Working Group shall terminate on
the date that is 2 years after the date on which all the members of the
Working Group have been appointed under subsection (d)(1) and
appropriations are first made available to carry out this section.
(o) Administration Review and Comments.--Not later than 45 days
after receiving the final recommendations of the Working Group under
subsection (i), the President shall submit a report to Congress which
shall contain--
(1) additional views and comments on such recommendations; and
(2) recommendations for such legislation and administrative
actions as the President considers appropriate.
(p) Required Congressional Action.--Not later than 45 days after
receiving the report submitted by the President under subsection (o),
each committee of jurisdiction of Congress, the Committee on Finance of
the Senate, the Committee on Health, Education, Labor, and Pensions of
the Senate, the Committee on Ways and Means of the House of
Representatives, the Committee on Energy and Commerce of the House of
Representatives, Committee on Education and the Workforce of the House
of Representatives, shall hold at least 1 hearing on such report and on
the final recommendations of the Working Group submitted under
subsection (i).
(q) Authorization of Appropriations.--
(1) In general.--There are authorized to be appropriated to
carry out this section, other than subsection (h)(3), $3,000,000
for each of fiscal years 2005 and 2006.
(2) Health report to the american people.--There are authorized
to be appropriated for the preparation and dissemination of the
Health Report to the American People described in subsection
(h)(3), such sums as may be necessary for the fiscal year in which
the report is required to be submitted.
SEC. 1015. FUNDING START-UP ADMINISTRATIVE COSTS FOR MEDICARE REFORM.
(a) In General.--There are appropriated to carry out this Act
(including the amendments made by this Act), to be transferred from the
Federal Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund--
(1) not to exceed $1,000,000,000 for the Centers for Medicare &
Medicaid Services; and
(2) not to exceed $500,000,000 for the Social Security
Administration.
(b) Availability.--Amounts provided under subsection (a) shall
remain available until September 30, 2005.
(c) Application.--From amounts provided under subsection (a)(2),
the Social Security Administration may reimburse the Internal Revenue
Service for expenses in carrying out this Act (and the amendments made
by this Act).
(d) Transfer.--The President may transfer amounts provided under
subsection (a) between the Centers for Medicare & Medicaid Services and
the Social Security Administration. Notice of such transfers shall be
transmitted within 15 days to the authorizing committees of the House
of Representatives and of the Senate.
SEC. 1016. HEALTH CARE INFRASTRUCTURE IMPROVEMENT PROGRAM.
Title XVIII is amended by adding at the end the following new
section:
``health care infrastructure improvement program
``Sec. 1897. (a) Establishment.--The Secretary shall establish a
loan program that provides loans to qualifying hospitals for payment of
the capital costs of projects described in subsection (d).
``(b) Application.--No loan may be provided under this section to a
qualifying hospital except pursuant to an application that is submitted
and approved in a time, manner, and form specified by the Secretary. A
loan under this section shall be on such terms and conditions and meet
such requirements as the Secretary determines appropriate.
``(c) Selection Criteria.--
``(1) In general.--The Secretary shall establish criteria for
selecting among qualifying hospitals that apply for a loan under
this section. Such criteria shall consider the extent to which the
project for which loan is sought is nationally or regionally
significant, in terms of expanding or improving the health care
infrastructure of the United States or the region or in terms of
the medical benefit that the project will have.
``(2) Qualifying hospital defined.--For purposes of this
section, the term `qualifying hospital' means a hospital that--
``(A) is engaged in research in the causes, prevention, and
treatment of cancer; and
``(B) is designated as a cancer center for the National
Cancer Institute or is designated by the State as the official
cancer institute of the State.
``(d) Projects.--A project described in this subsection is a
project of a qualifying hospital that is designed to improve the health
care infrastructure of the hospital, including construction,
renovation, or other capital improvements.
``(e) State and Local Permits.--The provision of a loan under this
section with respect to a project shall not--
``(1) relieve any recipient of the loan of any obligation to
obtain any required State or local permit or approval with respect
to the project;
``(2) limit the right of any unit of State or local government
to approve or regulate any rate of return on private equity
invested in the project; or
``(3) otherwise supersede any State or local law (including any
regulation) applicable to the construction or operation of the
project.
``(f) Forgiveness of Indebtedness.--The Secretary may forgive a
loan provided to a qualifying hospital under this section under terms
and conditions that are analogous to the loan forgiveness provision for
student loans under part D of title IV of the Higher Education Act of
1965 (20 U.S.C. 1087a et seq.), except that the Secretary shall
condition such forgiveness on the establishment by the hospital of--
``(A) an outreach program for cancer prevention, early
diagnosis, and treatment that provides services to a
substantial majority of the residents of a State or region,
including residents of rural areas;
``(B) an outreach program for cancer prevention, early
diagnosis, and treatment that provides services to multiple
Indian tribes; and
``(C)(i) unique research resources (such as population
databases); or
``(ii) an affiliation with an entity that has unique
research resources.
``(g) Funding.--
``(1) In general.--There are appropriated, out of amounts in
the Treasury not otherwise appropriated, to carry out this section,
$200,000,000, to remain available during the period beginning on
July 1, 2004, and ending on September 30, 2008.
``(2) Administrative costs.--From funds made available under
paragraph (1), the Secretary may use, for the administration of
this section, not more than $2,000,000 for each of fiscal years
2004 through 2008.
``(3) Availability.--Amounts appropriated under this section
shall be available for obligation on July 1, 2004.
``(h) Report to Congress.--Not later than 4 years after the date of
the enactment of this section, the Secretary shall submit to Congress a
report on the projects for which loans are provided under this section
and a recommendation as to whether the Congress should authorize the
Secretary to continue loans under this section beyond fiscal year
2008.''.
TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS
Subtitle A--Access to Affordable Pharmaceuticals
SEC. 1101. THIRTY-MONTH STAY-OF-EFFECTIVENESS PERIOD.
(a) Abbreviated New Drug Applications.--Section 505(j) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is amended--
(1) in paragraph (2)--
(A) by striking subparagraph (B) and inserting the
following:
``(B) Notice of opinion that patent is invalid or will not be
infringed.--
``(i) Agreement to give notice.--An applicant that makes a
certification described in subparagraph (A)(vii)(IV) shall include
in the application a statement that the applicant will give notice
as required by this subparagraph.
``(ii) Timing of notice.--An applicant that makes a
certification described in subparagraph (A)(vii)(IV) shall give
notice as required under this subparagraph--
``(I) if the certification is in the application, not later
than 20 days after the date of the postmark on the notice with
which the Secretary informs the applicant that the application
has been filed; or
``(II) if the certification is in an amendment or
supplement to the application, at the time at which the
applicant submits the amendment or supplement, regardless of
whether the applicant has already given notice with respect to
another such certification contained in the application or in
an amendment or supplement to the application.
``(iii) Recipients of notice.--An applicant required under this
subparagraph to give notice shall give notice to--
``(I) each owner of the patent that is the subject of the
certification (or a representative of the owner designated to
receive such a notice); and
``(II) the holder of the approved application under
subsection (b) for the drug that is claimed by the patent or a
use of which is claimed by the patent (or a representative of
the holder designated to receive such a notice).
``(iv) Contents of notice.--A notice required under this
subparagraph shall--
``(I) state that an application that contains data from
bioavailability or bioequivalence studies has been submitted
under this subsection for the drug with respect to which the
certification is made to obtain approval to engage in the
commercial manufacture, use, or sale of the drug before the
expiration of the patent referred to in the certification; and
``(II) include a detailed statement of the factual and
legal basis of the opinion of the applicant that the patent is
invalid or will not be infringed.''; and
(B) by adding at the end the following subparagraph:
``(D)(i) An applicant may not amend or supplement an application to
seek approval of a drug referring to a different listed drug from the
listed drug identified in the application as submitted to the
Secretary.
``(ii) With respect to the drug for which an application is
submitted, nothing in this subsection prohibits an applicant from
amending or supplementing the application to seek approval of a
different strength.
``(iii) Within 60 days after the date of the enactment of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003,
the Secretary shall issue guidance defining the term `listed drug' for
purposes of this subparagraph.''; and
(2) in paragraph (5)--
(A) in subparagraph (B)--
(i) by striking ``under the following'' and inserting
``by applying the following to each certification made
under paragraph (2)(A)(vii)''; and
(ii) in clause (iii)--
(I) in the first sentence, by striking ``unless''
and all that follows and inserting ``unless, before the
expiration of 45 days after the date on which the
notice described in paragraph (2)(B) is received, an
action is brought for infringement of the patent that
is the subject of the certification and for which
information was submitted to the Secretary under
subsection (b)(1) or (c)(2) before the date on which
the application (excluding an amendment or supplement
to the application), which the Secretary later
determines to be substantially complete, was
submitted.''; and
(II) in the second sentence--
(aa) by striking subclause (I) and inserting
the following:
``(I) if before the expiration of such period the district
court decides that the patent is invalid or not infringed
(including any substantive determination that there is no cause
of action for patent infringement or invalidity), the approval
shall be made effective on--
``(aa) the date on which the court enters judgment
reflecting the decision; or
``(bb) the date of a settlement order or consent decree
signed and entered by the court stating that the patent
that is the subject of the certification is invalid or not
infringed;'';
(bb) by striking subclause (II) and inserting
the following:
``(II) if before the expiration of such period the district
court decides that the patent has been infringed--
``(aa) if the judgment of the district court is
appealed, the approval shall be made effective on--
``(AA) the date on which the court of appeals
decides that the patent is invalid or not infringed
(including any substantive determination that there is
no cause of action for patent infringement or
invalidity); or
``(BB) the date of a settlement order or consent
decree signed and entered by the court of appeals
stating that the patent that is the subject of the
certification is invalid or not infringed; or
``(bb) if the judgment of the district court is not
appealed or is affirmed, the approval shall be made
effective on the date specified by the district court in a
court order under section 271(e)(4)(A) of title 35, United
States Code;'';
(cc) in subclause (III), by striking ``on the
date of such court decision.'' and inserting ``as
provided in subclause (I); or'';
(dd) by inserting after subclause (III) the
following:
``(IV) if before the expiration of such period the court
grants a preliminary injunction prohibiting the applicant from
engaging in the commercial manufacture or sale of the drug
until the court decides the issues of patent validity and
infringement and if the court decides that such patent has been
infringed, the approval shall be made effective as provided in
subclause (II).''; and
(ee) in the matter after and below subclause
(IV) (as added by item (dd)), by striking ``Until
the expiration'' and all that follows;
(B) by redesignating subparagraphs (C) and (D) as
subparagraphs (E) and (F), respectively; and
(C) by inserting after subparagraph (B) the following:
``(C) Civil action to obtain patent certainty.--
``(i) Declaratory judgment absent infringement
action.--
``(I) In general.--No action may be brought under
section 2201 of title 28, United States Code, by an
applicant under paragraph (2) for a declaratory
judgment with respect to a patent which is the subject
of the certification referred to in subparagraph
(B)(iii) unless--
``(aa) the 45-day period referred to in such
subparagraph has expired;
``(bb) neither the owner of such patent nor the
holder of the approved application under subsection
(b) for the drug that is claimed by the patent or a
use of which is claimed by the patent brought a
civil action against the applicant for infringement
of the patent before the expiration of such period;
and
``(cc) in any case in which the notice provided
under paragraph (2)(B) relates to noninfringement,
the notice was accompanied by a document described
in subclause (III).
``(II) Filing of civil action.--If the conditions
described in items (aa), (bb), and as applicable, (cc)
of subclause (I) have been met, the applicant referred
to in such subclause may, in accordance with section
2201 of title 28, United States Code, bring a civil
action under such section against the owner or holder
referred to in such subclause (but not against any
owner or holder that has brought such a civil action
against the applicant, unless that civil action was
dismissed without prejudice) for a declaratory judgment
that the patent is invalid or will not be infringed by
the drug for which the applicant seeks approval, except
that such civil action may be brought for a declaratory
judgment that the patent will not be infringed only in
a case in which the condition described in subclause
(I)(cc) is applicable. A civil action referred to in
this subclause shall be brought in the judicial
district where the defendant has its principal place of
business or a regular and established place of
business.
``(III) Offer of confidential access to
application.--For purposes of subclause (I)(cc), the
document described in this subclause is a document
providing an offer of confidential access to the
application that is in the custody of the applicant
under paragraph (2) for the purpose of determining
whether an action referred to in subparagraph (B)(iii)
should be brought. The document providing the offer of
confidential access shall contain such restrictions as
to persons entitled to access, and on the use and
disposition of any information accessed, as would apply
had a protective order been entered for the purpose of
protecting trade secrets and other confidential
business information. A request for access to an
application under an offer of confidential access shall
be considered acceptance of the offer of confidential
access with the restrictions as to persons entitled to
access, and on the use and disposition of any
information accessed, contained in the offer of
confidential access, and those restrictions and other
terms of the offer of confidential access shall be
considered terms of an enforceable contract. Any person
provided an offer of confidential access shall review
the application for the sole and limited purpose of
evaluating possible infringement of the patent that is
the subject of the certification under paragraph
(2)(A)(vii)(IV) and for no other purpose, and may not
disclose information of no relevance to any issue of
patent infringement to any person other than a person
provided an offer of confidential access. Further, the
application may be redacted by the applicant to remove
any information of no relevance to any issue of patent
infringement.
``(ii) Counterclaim to infringement action.--
``(I) In general.--If an owner of the patent or the
holder of the approved application under subsection (b)
for the drug that is claimed by the patent or a use of
which is claimed by the patent brings a patent
infringement action against the applicant, the
applicant may assert a counterclaim seeking an order
requiring the holder to correct or delete the patent
information submitted by the holder under subsection
(b) or (c) on the ground that the patent does not claim
either--
``(aa) the drug for which the application was
approved; or
``(bb) an approved method of using the drug.
``(II) No independent cause of action.--Subclause
(I) does not authorize the assertion of a claim
described in subclause (I) in any civil action or
proceeding other than a counterclaim described in
subclause (I).
``(iii) No damages.--An applicant shall not be entitled
to damages in a civil action under clause (i) or a
counterclaim under clause (ii).''.
(b) Applications Generally.--Section 505 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355) is amended--
(1) in subsection (b)--
(A) by striking paragraph (3) and inserting the following:
``(3) Notice of opinion that patent is invalid or will not be
infringed.--
``(A) Agreement to give notice.--An applicant that makes a
certification described in paragraph (2)(A)(iv) shall include in
the application a statement that the applicant will give notice as
required by this paragraph.
``(B) Timing of notice.--An applicant that makes a
certification described in paragraph (2)(A)(iv) shall give notice
as required under this paragraph--
``(i) if the certification is in the application, not later
than 20 days after the date of the postmark on the notice with
which the Secretary informs the applicant that the application
has been filed; or
``(ii) if the certification is in an amendment or
supplement to the application, at the time at which the
applicant submits the amendment or supplement, regardless of
whether the applicant has already given notice with respect to
another such certification contained in the application or in
an amendment or supplement to the application.
``(C) Recipients of notice.--An applicant required under this
paragraph to give notice shall give notice to--
``(i) each owner of the patent that is the subject of the
certification (or a representative of the owner designated to
receive such a notice); and
``(ii) the holder of the approved application under this
subsection for the drug that is claimed by the patent or a use
of which is claimed by the patent (or a representative of the
holder designated to receive such a notice).
``(D) Contents of notice.--A notice required under this
paragraph shall--
``(i) state that an application that contains data from
bioavailability or bioequivalence studies has been submitted
under this subsection for the drug with respect to which the
certification is made to obtain approval to engage in the
commercial manufacture, use, or sale of the drug before the
expiration of the patent referred to in the certification; and
``(ii) include a detailed statement of the factual and
legal basis of the opinion of the applicant that the patent is
invalid or will not be infringed.''; and
(B)(i) by redesignating paragraph (4) as paragraph (5); and
(ii) by inserting after paragraph (3) the following
paragraph:
``(4)(A) An applicant may not amend or supplement an application
referred to in paragraph (2) to seek approval of a drug that is a
different drug than the drug identified in the application as submitted
to the Secretary.
``(B) With respect to the drug for which such an application is
submitted, nothing in this subsection or subsection (c)(3) prohibits an
applicant from amending or supplementing the application to seek
approval of a different strength.''; and
(2) in subsection (c)(3)--
(A) in the first sentence, by striking ``under the
following'' and inserting ``by applying the following to each
certification made under subsection (b)(2)(A)'';
(B) in subparagraph (C)--
(i) in the first sentence, by striking ``unless'' and
all that follows and inserting ``unless, before the
expiration of 45 days after the date on which the notice
described in subsection (b)(3) is received, an action is
brought for infringement of the patent that is the subject
of the certification and for which information was
submitted to the Secretary under paragraph (2) or
subsection (b)(1) before the date on which the application
(excluding an amendment or supplement to the application)
was submitted.'';
(ii) in the second sentence--
(I) by striking ``paragraph (3)(B)'' and inserting
``subsection (b)(3)'';
(II) by striking clause (i) and inserting the
following:
``(i) if before the expiration of such period the district
court decides that the patent is invalid or not infringed
(including any substantive determination that there is no cause
of action for patent infringement or invalidity), the approval
shall be made effective on--
``(I) the date on which the court enters judgment
reflecting the decision; or
``(II) the date of a settlement order or consent decree
signed and entered by the court stating that the patent
that is the subject of the certification is invalid or not
infringed;'';
(III) by striking clause (ii) and inserting the
following:
``(ii) if before the expiration of such period the district
court decides that the patent has been infringed--
``(I) if the judgment of the district court is
appealed, the approval shall be made effective on--
``(aa) the date on which the court of appeals
decides that the patent is invalid or not infringed
(including any substantive determination that there is
no cause of action for patent infringement or
invalidity); or
``(bb) the date of a settlement order or consent
decree signed and entered by the court of appeals
stating that the patent that is the subject of the
certification is invalid or not infringed; or
``(II) if the judgment of the district court is not
appealed or is affirmed, the approval shall be made
effective on the date specified by the district court in a
court order under section 271(e)(4)(A) of title 35, United
States Code;'';
(IV) in clause (iii), by striking ``on the date of
such court decision.'' and inserting ``as provided in
clause (i); or'';
(V) by inserting after clause (iii), the following:
``(iv) if before the expiration of such period the court
grants a preliminary injunction prohibiting the applicant from
engaging in the commercial manufacture or sale of the drug
until the court decides the issues of patent validity and
infringement and if the court decides that such patent has been
infringed, the approval shall be made effective as provided in
clause (ii).''; and
(VI) in the matter after and below clause (iv) (as
added by subclause (V)), by striking ``Until the
expiration'' and all that follows; and
(iii) in the third sentence, by striking ``paragraph
(3)(B)'' and inserting ``subsection (b)(3)'';
(C) by redesignating subparagraph (D) as subparagraph (E);
and
(D) by inserting after subparagraph (C) the following:
``(D) Civil action to obtain patent certainty.--
``(i) Declaratory judgment absent infringement
action.--
``(I) In general.--No action may be brought under
section 2201 of title 28, United States Code, by an
applicant referred to in subsection (b)(2) for a
declaratory judgment with respect to a patent which is
the subject of the certification referred to in
subparagraph (C) unless--
``(aa) the 45-day period referred to in such
subparagraph has expired;
``(bb) neither the owner of such patent nor the
holder of the approved application under subsection
(b) for the drug that is claimed by the patent or a
use of which is claimed by the patent brought a
civil action against the applicant for infringement
of the patent before the expiration of such period;
and
``(cc) in any case in which the notice provided
under paragraph (2)(B) relates to noninfringement,
the notice was accompanied by a document described
in subclause (III).
``(II) Filing of civil action.--If the conditions
described in items (aa), (bb), and as applicable, (cc)
of subclause (I) have been met, the applicant referred
to in such subclause may, in accordance with section
2201 of title 28, United States Code, bring a civil
action under such section against the owner or holder
referred to in such subclause (but not against any
owner or holder that has brought such a civil action
against the applicant, unless that civil action was
dismissed without prejudice) for a declaratory judgment
that the patent is invalid or will not be infringed by
the drug for which the applicant seeks approval, except
that such civil action may be brought for a declaratory
judgment that the patent will not be infringed only in
a case in which the condition described in subclause
(I)(cc) is applicable. A civil action referred to in
this subclause shall be brought in the judicial
district where the defendant has its principal place of
business or a regular and established place of
business.
``(III) Offer of confidential access to
application.--For purposes of subclause (I)(cc), the
document described in this subclause is a document
providing an offer of confidential access to the
application that is in the custody of the applicant
referred to in subsection (b)(2) for the purpose of
determining whether an action referred to in
subparagraph (C) should be brought. The document
providing the offer of confidential access shall
contain such restrictions as to persons entitled to
access, and on the use and disposition of any
information accessed, as would apply had a protective
order been entered for the purpose of protecting trade
secrets and other confidential business information. A
request for access to an application under an offer of
confidential access shall be considered acceptance of
the offer of confidential access with the restrictions
as to persons entitled to access, and on the use and
disposition of any information accessed, contained in
the offer of confidential access, and those
restrictions and other terms of the offer of
confidential access shall be considered terms of an
enforceable contract. Any person provided an offer of
confidential access shall review the application for
the sole and limited purpose of evaluating possible
infringement of the patent that is the subject of the
certification under subsection (b)(2)(A)(iv) and for no
other purpose, and may not disclose information of no
relevance to any issue of patent infringement to any
person other than a person provided an offer of
confidential access. Further, the application may be
redacted by the applicant to remove any information of
no relevance to any issue of patent infringement.
``(ii) Counterclaim to infringement action.--
``(I) In general.--If an owner of the patent or the
holder of the approved application under subsection (b)
for the drug that is claimed by the patent or a use of
which is claimed by the patent brings a patent
infringement action against the applicant, the
applicant may assert a counterclaim seeking an order
requiring the holder to correct or delete the patent
information submitted by the holder under subsection
(b) or this subsection on the ground that the patent
does not claim either--
``(aa) the drug for which the application was
approved; or
``(bb) an approved method of using the drug.
``(II) No independent cause of action.--Subclause
(I) does not authorize the assertion of a claim
described in subclause (I) in any civil action or
proceeding other than a counterclaim described in
subclause (I).
``(iii) No damages.--An applicant shall not be entitled
to damages in a civil action under clause (i) or a
counterclaim under clause (ii).''.
(c) Applicability.--
(1) In general.--Except as provided in paragraphs (2) and (3),
the amendments made by subsections (a) and (b) apply to any
proceeding under section 505 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355) that is pending on or after the date
of the enactment of this Act regardless of the date on which the
proceeding was commenced or is commenced.
(2) Notice of opinion that patent is invalid or will not be
infringed.--The amendments made by subsections (a)(1) and (b)(1)
apply with respect to any certification under subsection
(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 355) submitted on or after
August 18, 2003, in an application filed under subsection (b) or
(j) of that section or in an amendment or supplement to an
application filed under subsection (b) or (j) of that section.
(3) Effective date of approval.--The amendments made by
subsections (a)(2)(A)(ii)(I) and (b)(2)(B)(i) apply with respect to
any patent information submitted under subsection (b)(1) or (c)(2)
of section 505 of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 355) on or after August 18, 2003.
(d) Infringement Actions.--Section 271(e) of title 35, United
States Code, is amended by adding at the end the following:
``(5) Where a person has filed an application described in
paragraph (2) that includes a certification under subsection
(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 355), and neither the owner of the
patent that is the subject of the certification nor the holder of the
approved application under subsection (b) of such section for the drug
that is claimed by the patent or a use of which is claimed by the
patent brought an action for infringement of such patent before the
expiration of 45 days after the date on which the notice given under
subsection (b)(3) or (j)(2)(B) of such section was received, the courts
of the United States shall, to the extent consistent with the
Constitution, have subject matter jurisdiction in any action brought by
such person under section 2201 of title 28 for a declaratory judgment
that such patent is invalid or not infringed.''.
SEC. 1102. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.
(a) In General.--Section 505(j)(5) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(j)(5)) (as amended by section 1101) is
amended--
(1) in subparagraph (B), by striking clause (iv) and inserting
the following:
``(iv) 180-day exclusivity period.--
``(I) Effectiveness of application.--Subject to
subparagraph (D), if the application contains a certification
described in paragraph (2)(A)(vii)(IV) and is for a drug for
which a first applicant has submitted an application containing
such a certification, the application shall be made effective
on the date that is 180 days after the date of the first
commercial marketing of the drug (including the commercial
marketing of the listed drug) by any first applicant.
``(II) Definitions.--In this paragraph:
``(aa) 180-day exclusivity period.--The term `180-day
exclusivity period' means the 180-day period ending on the
day before the date on which an application submitted by an
applicant other than a first applicant could become
effective under this clause.
``(bb) First applicant.--As used in this subsection,
the term `first applicant' means an applicant that, on the
first day on which a substantially complete application
containing a certification described in paragraph
(2)(A)(vii)(IV) is submitted for approval of a drug,
submits a substantially complete application that contains
and lawfully maintains a certification described in
paragraph (2)(A)(vii)(IV) for the drug.
``(cc) Substantially complete application.--As used in
this subsection, the term `substantially complete
application' means an application under this subsection
that on its face is sufficiently complete to permit a
substantive review and contains all the information
required by paragraph (2)(A).
``(dd) Tentative approval.--
``(AA) In general.--The term `tentative approval'
means notification to an applicant by the Secretary
that an application under this subsection meets the
requirements of paragraph (2)(A), but cannot receive
effective approval because the application does not
meet the requirements of this subparagraph, there is a
period of exclusivity for the listed drug under
subparagraph (F) or section 505A, or there is a 7-year
period of exclusivity for the listed drug under section
527.
``(BB) Limitation.--A drug that is granted
tentative approval by the Secretary is not an approved
drug and shall not have an effective approval until the
Secretary issues an approval after any necessary
additional review of the application.''; and
(2) by inserting after subparagraph (C) the following:
``(D) Forfeiture of 180-day exclusivity period.--
``(i) Definition of forfeiture event.--In this
subparagraph, the term `forfeiture event', with respect to
an application under this subsection, means the occurrence
of any of the following:
``(I) Failure to market.--The first applicant fails
to market the drug by the later of--
``(aa) the earlier of the date that is--
``(AA) 75 days after the date on which the
approval of the application of the first
applicant is made effective under subparagraph
(B)(iii); or
``(BB) 30 months after the date of
submission of the application of the first
applicant; or
``(bb) with respect to the first applicant or
any other applicant (which other applicant has
received tentative approval), the date that is 75
days after the date as of which, as to each of the
patents with respect to which the first applicant
submitted and lawfully maintained a certification
qualifying the first applicant for the 180-day
exclusivity period under subparagraph (B)(iv), at
least 1 of the following has occurred:
``(AA) In an infringement action brought
against that applicant with respect to the
patent or in a declaratory judgment action
brought by that applicant with respect to the
patent, a court enters a final decision from
which no appeal (other than a petition to the
Supreme Court for a writ of certiorari) has
been or can be taken that the patent is invalid
or not infringed.
``(BB) In an infringement action or a
declaratory judgment action described in
subitem (AA), a court signs a settlement order
or consent decree that enters a final judgment
that includes a finding that the patent is
invalid or not infringed.
``(CC) The patent information submitted
under subsection (b) or (c) is withdrawn by the
holder of the application approved under
subsection (b).
``(II) Withdrawal of application.--The first
applicant withdraws the application or the Secretary
considers the application to have been withdrawn as a
result of a determination by the Secretary that the
application does not meet the requirements for approval
under paragraph (4).
``(III) Amendment of certification.--The first
applicant amends or withdraws the certification for all
of the patents with respect to which that applicant
submitted a certification qualifying the applicant for
the 180-day exclusivity period.
``(IV) Failure to obtain tentative approval.--The
first applicant fails to obtain tentative approval of
the application within 30 months after the date on
which the application is filed, unless the failure is
caused by a change in or a review of the requirements
for approval of the application imposed after the date
on which the application is filed.
``(V) Agreement with another applicant, the listed
drug application holder, or a patent owner.--The first
applicant enters into an agreement with another
applicant under this subsection for the drug, the
holder of the application for the listed drug, or an
owner of the patent that is the subject of the
certification under paragraph (2)(A)(vii)(IV), the
Federal Trade Commission or the Attorney General files
a complaint, and there is a final decision of the
Federal Trade Commission or the court with regard to
the complaint from which no appeal (other than a
petition to the Supreme Court for a writ of certiorari)
has been or can be taken that the agreement has
violated the antitrust laws (as defined in section 1 of
the Clayton Act (15 U.S.C. 12), except that the term
includes section 5 of the Federal Trade Commission Act
(15 U.S.C. 45) to the extent that that section applies
to unfair methods of competition).
``(VI) Expiration of all patents.--All of the
patents as to which the applicant submitted a
certification qualifying it for the 180-day exclusivity
period have expired.
``(ii) Forfeiture.--The 180-day exclusivity period
described in subparagraph (B)(iv) shall be forfeited by a
first applicant if a forfeiture event occurs with respect
to that first applicant.
``(iii) Subsequent applicant.--If all first applicants
forfeit the 180-day exclusivity period under clause (ii)--
``(I) approval of any application containing a
certification described in paragraph (2)(A)(vii)(IV)
shall be made effective in accordance with subparagraph
(B)(iii); and
``(II) no applicant shall be eligible for a 180-day
exclusivity period.''.
(b) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendment made by subsection (a) shall be effective only with
respect to an application filed under section 505(j) of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) after the date of
the enactment of this Act for a listed drug for which no
certification under section 505(j)(2)(A)(vii)(IV) of that Act was
made before the date of the enactment of this Act.
(2) Collusive agreements.--If a forfeiture event described in
section 505(j)(5)(D)(i)(V) of that Act occurs in the case of an
applicant, the applicant shall forfeit the 180-day period under
section 505(j)(5)(B)(iv) of that Act without regard to when the
first certification under section 505(j)(2)(A)(vii)(IV) of that Act
for the listed drug was made.
(3) Decision of a court when the 180-day exclusivity period has
not been triggered.--With respect to an application filed before,
on, or after the date of the enactment of this Act for a listed
drug for which a certification under section 505(j)(2)(A)(vii)(IV)
of that Act was made before the date of the enactment of this Act
and for which neither of the events described in subclause (I) or
(II) of section 505(j)(5)(B)(iv) of that Act (as in effect on the
day before the date of the enactment of this Act) has occurred on
or before the date of the enactment of this Act, the term
``decision of a court'' as used in clause (iv) of section
505(j)(5)(B) of that Act means a final decision of a court from
which no appeal (other than a petition to the Supreme Court for a
writ of certiorari) has been or can be taken.
SEC. 1103. BIOAVAILABILITY AND BIOEQUIVALENCE.
(a) In General.--Section 505(j)(8) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(j)(8)) is amended--
(1) by striking subparagraph (A) and inserting the following:
``(A)(i) The term `bioavailability' means the rate and extent
to which the active ingredient or therapeutic ingredient is
absorbed from a drug and becomes available at the site of drug
action.
``(ii) For a drug that is not intended to be absorbed into the
bloodstream, the Secretary may assess bioavailability by
scientifically valid measurements intended to reflect the rate and
extent to which the active ingredient or therapeutic ingredient
becomes available at the site of drug action.''; and
(2) by adding at the end the following:
``(C) For a drug that is not intended to be absorbed into the
bloodstream, the Secretary may establish alternative,
scientifically valid methods to show bioequivalence if the
alternative methods are expected to detect a significant difference
between the drug and the listed drug in safety and therapeutic
effect.''.
(b) Effect of Amendment.--The amendment made by subsection (a) does
not alter the standards for approval of drugs under section 505(j) of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)).
SEC. 1104. CONFORMING AMENDMENTS.
Section 505A of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
355a) is amended--
(1) in subsections (b)(1)(A)(i) and (c)(1)(A)(i), by striking
``(j)(5)(D)(ii)'' each place it appears and inserting
``(j)(5)(F)(ii)'';
(2) in subsections (b)(1)(A)(ii) and (c)(1)(A)(ii), by striking
``(j)(5)(D)'' each place it appears and inserting ``(j)(5)(F)'';
and
(3) in subsections (e) and (l), by striking ``505(j)(5)(D)''
each place it appears and inserting ``505(j)(5)(F)''.
Subtitle B--Federal Trade Commission Review
SEC. 1111. DEFINITIONS.
In this subtitle:
(1) ANDA.--The term ``ANDA'' means an abbreviated drug
application, as defined under section 201(aa) of the Federal Food,
Drug, and Cosmetic Act.
(2) Assistant attorney general.--The term ``Assistant Attorney
General'' means the Assistant Attorney General in charge of the
Antitrust Division of the Department of Justice.
(3) Brand name drug.--The term ``brand name drug'' means a drug
for which an application is approved under section 505(c) of the
Federal Food, Drug, and Cosmetic Act, including an application
referred to in section 505(b)(2) of such Act.
(4) Brand name drug company.--The term ``brand name drug
company'' means the party that holds the approved application
referred to in paragraph (3) for a brand name drug that is a listed
drug in an ANDA, or a party that is the owner of a patent for which
information is submitted for such drug under subsection (b) or (c)
of section 505 of the Federal Food, Drug, and Cosmetic Act.
(5) Commission.--The term ``Commission'' means the Federal
Trade Commission.
(6) Generic drug.--The term ``generic drug'' means a drug for
which an application under section 505(j) of the Federal Food,
Drug, and Cosmetic Act is approved.
(7) Generic drug applicant.--The term ``generic drug
applicant'' means a person who has filed or received approval for
an ANDA under section 505(j) of the Federal Food, Drug, and
Cosmetic Act.
(8) Listed drug.--The term ``listed drug'' means a brand name
drug that is listed under section 505(j)(7) of the Federal Food,
Drug, and Cosmetic Act.
SEC. 1112. NOTIFICATION OF AGREEMENTS.
(a) Agreement With Brand Name Drug Company.--
(1) Requirement.--A generic drug applicant that has submitted
an ANDA containing a certification under section
505(j)(2)(A)(vii)(IV) of the Federal Food, Drug, and Cosmetic Act
and a brand name drug company that enter into an agreement
described in paragraph (2) shall each file the agreement in
accordance with subsection (c). The agreement shall be filed prior
to the date of the first commercial marketing of the generic drug
that is the subject of the ANDA.
(2) Subject matter of agreement.--An agreement described in
this paragraph between a generic drug applicant and a brand name
drug company is an agreement regarding--
(A) the manufacture, marketing or sale of the brand name
drug that is the listed drug in the ANDA involved;
(B) the manufacture, marketing, or sale of the generic drug
for which the ANDA was submitted; or
(C) the 180-day period referred to in section
505(j)(5)(B)(iv) of the Federal Food, Drug, and Cosmetic Act as
it applies to such ANDA or to any other ANDA based on the same
brand name drug.
(b) Agreement With Another Generic Drug Applicant.--
(1) Requirement.--A generic drug applicant that has submitted
an ANDA containing a certification under section
505(j)(2)(A)(vii)(IV) of the Federal Food, Drug, and Cosmetic Act
with respect to a listed drug and another generic drug applicant
that has submitted an ANDA containing such a certification for the
same listed drug shall each file the agreement in accordance with
subsection (c). The agreement shall be filed prior to the date of
the first commercial marketing of either of the generic drugs for
which such ANDAs were submitted.
(2) Subject matter of agreement.--An agreement described in
this paragraph between two generic drug applicants is an agreement
regarding the 180-day period referred to in section
505(j)(5)(B)(iv) of the Federal Food, Drug, and Cosmetic Act as it
applies to the ANDAs with which the agreement is concerned.
(c) Filing.--
(1) Agreement.--The parties that are required in subsection (a)
or (b) to file an agreement in accordance with this subsection
shall file with the Assistant Attorney General and the Commission
the text of any such agreement, except that such parties are not
required to file an agreement that solely concerns--
(A) purchase orders for raw material supplies;
(B) equipment and facility contracts;
(C) employment or consulting contracts; or
(D) packaging and labeling contracts.
(2) Other agreements.--The parties that are required in
subsection (a) or (b) to file an agreement in accordance with this
subsection shall file with the Assistant Attorney General and the
Commission the text of any agreements between the parties that are
not described in such subsections and are contingent upon, provide
a contingent condition for, or are otherwise related to an
agreement that is required in subsection (a) or (b) to be filed in
accordance with this subsection.
(3) Description.--In the event that any agreement required in
subsection (a) or (b) to be filed in accordance with this
subsection has not been reduced to text, each of the parties
involved shall file written descriptions of such agreement that are
sufficient to disclose all the terms and conditions of the
agreement.
SEC. 1113. FILING DEADLINES.
Any filing required under section 1112 shall be filed with the
Assistant Attorney General and the Commission not later than 10
business days after the date the agreements are executed.
SEC. 1114. DISCLOSURE EXEMPTION.
Any information or documentary material filed with the Assistant
Attorney General or the Commission pursuant to this subtitle shall be
exempt from disclosure under section 552 of title 5, United States
Code, and no such information or documentary material may be made
public, except as may be relevant to any administrative or judicial
action or proceeding. Nothing in this section is intended to prevent
disclosure to either body of the Congress or to any duly authorized
committee or subcommittee of the Congress.
SEC. 1115. ENFORCEMENT.
(a) Civil Penalty.--Any brand name drug company or generic drug
applicant which fails to comply with any provision of this subtitle
shall be liable for a civil penalty of not more than $11,000, for each
day during which such entity is in violation of this subtitle. Such
penalty may be recovered in a civil action brought by the United
States, or brought by the Commission in accordance with the procedures
established in section 16(a)(1) of the Federal Trade Commission Act (15
U.S.C. 56(a)).
(b) Compliance and Equitable Relief.--If any brand name drug
company or generic drug applicant fails to comply with any provision of
this subtitle, the United States district court may order compliance,
and may grant such other equitable relief as the court in its
discretion determines necessary or appropriate, upon application of the
Assistant Attorney General or the Commission.
SEC. 1116. RULEMAKING.
The Commission, with the concurrence of the Assistant Attorney
General and by rule in accordance with section 553 of title 5, United
States Code, consistent with the purposes of this subtitle--
(1) may define the terms used in this subtitle;
(2) may exempt classes of persons or agreements from the
requirements of this subtitle; and
(3) may prescribe such other rules as may be necessary and
appropriate to carry out the purposes of this subtitle.
SEC. 1117. SAVINGS CLAUSE.
Any action taken by the Assistant Attorney General or the
Commission, or any failure of the Assistant Attorney General or the
Commission to take action, under this subtitle shall not at any time
bar any proceeding or any action with respect to any agreement between
a brand name drug company and a generic drug applicant, or any
agreement between generic drug applicants, under any other provision of
law, nor shall any filing under this subtitle constitute or create a
presumption of any violation of any competition laws.
SEC. 1118. EFFECTIVE DATE.
This subtitle shall--
(1) take effect 30 days after the date of the enactment of this
Act; and
(2) shall apply to agreements described in section 1112 that
are entered into 30 days after the date of the enactment of this
Act.
Subtitle C--Importation of Prescription Drugs
SEC. 1121. IMPORTATION OF PRESCRIPTION DRUGS.
(a) In General.--Chapter VIII of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 381 et seq.) is amended by striking section 804
and inserting the following:
``SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.
``(a) Definitions.--In this section:
``(1) Importer.--The term `importer' means a pharmacist or
wholesaler.
``(2) Pharmacist.--The term `pharmacist' means a person
licensed by a State to practice pharmacy, including the dispensing
and selling of prescription drugs.
``(3) Prescription drug.--The term `prescription drug' means a
drug subject to section 503(b), other than--
``(A) a controlled substance (as defined in section 102 of
the Controlled Substances Act (21 U.S.C. 802));
``(B) a biological product (as defined in section 351 of
the Public Health Service Act (42 U.S.C. 262));
``(C) an infused drug (including a peritoneal dialysis
solution);
``(D) an intravenously injected drug;
``(E) a drug that is inhaled during surgery; or
``(F) a drug which is a parenteral drug, the importation of
which pursuant to subsection (b) is determined by the Secretary
to pose a threat to the public health, in which case section
801(d)(1) shall continue to apply.
``(4) Qualifying laboratory.--The term `qualifying laboratory'
means a laboratory in the United States that has been approved by
the Secretary for the purposes of this section.
``(5) Wholesaler.--
``(A) In general.--The term `wholesaler' means a person
licensed as a wholesaler or distributor of prescription drugs
in the United States under section 503(e)(2)(A).
``(B) Exclusion.--The term `wholesaler' does not include a
person authorized to import drugs under section 801(d)(1).
``(b) Regulations.--The Secretary, after consultation with the
United States Trade Representative and the Commissioner of Customs,
shall promulgate regulations permitting pharmacists and wholesalers to
import prescription drugs from Canada into the United States.
``(c) Limitation.--The regulations under subsection (b) shall--
``(1) require that safeguards be in place to ensure that each
prescription drug imported under the regulations complies with
section 505 (including with respect to being safe and effective for
the intended use of the prescription drug), with sections 501 and
502, and with other applicable requirements of this Act;
``(2) require that an importer of a prescription drug under the
regulations comply with subsections (d)(1) and (e); and
``(3) contain any additional provisions determined by the
Secretary to be appropriate as a safeguard to protect the public
health or as a means to facilitate the importation of prescription
drugs.
``(d) Information and Records.--
``(1) In general.--The regulations under subsection (b) shall
require an importer of a prescription drug under subsection (b) to
submit to the Secretary the following information and
documentation:
``(A) The name and quantity of the active ingredient of the
prescription drug.
``(B) A description of the dosage form of the prescription
drug.
``(C) The date on which the prescription drug is shipped.
``(D) The quantity of the prescription drug that is
shipped.
``(E) The point of origin and destination of the
prescription drug.
``(F) The price paid by the importer for the prescription
drug.
``(G) Documentation from the foreign seller specifying--
``(i) the original source of the prescription drug; and
``(ii) the quantity of each lot of the prescription
drug originally received by the seller from that source.
``(H) The lot or control number assigned to the
prescription drug by the manufacturer of the prescription drug.
``(I) The name, address, telephone number, and professional
license number (if any) of the importer.
``(J)(i) In the case of a prescription drug that is shipped
directly from the first foreign recipient of the prescription
drug from the manufacturer:
``(I) Documentation demonstrating that the prescription
drug was received by the recipient from the manufacturer
and subsequently shipped by the first foreign recipient to
the importer.
``(II) Documentation of the quantity of each lot of the
prescription drug received by the first foreign recipient
demonstrating that the quantity being imported into the
United States is not more than the quantity that was
received by the first foreign recipient.
``(III)(aa) In the case of an initial imported
shipment, documentation demonstrating that each batch of
the prescription drug in the shipment was statistically
sampled and tested for authenticity and degradation.
``(bb) In the case of any subsequent shipment,
documentation demonstrating that a statistically valid
sample of the shipment was tested for authenticity and
degradation.
``(ii) In the case of a prescription drug that is not
shipped directly from the first foreign recipient of the
prescription drug from the manufacturer, documentation
demonstrating that each batch in each shipment offered for
importation into the United States was statistically sampled
and tested for authenticity and degradation.
``(K) Certification from the importer or manufacturer of
the prescription drug that the prescription drug--
``(i) is approved for marketing in the United States
and is not adulterated or misbranded; and
``(ii) meets all labeling requirements under this Act.
``(L) Laboratory records, including complete data derived
from all tests necessary to ensure that the prescription drug
is in compliance with established specifications and standards.
``(M) Documentation demonstrating that the testing required
by subparagraphs (J) and (L) was conducted at a qualifying
laboratory.
``(N) Any other information that the Secretary determines
is necessary to ensure the protection of the public health.
``(2) Maintenance by the secretary.--The Secretary shall
maintain information and documentation submitted under paragraph
(1) for such period of time as the Secretary determines to be
necessary.
``(e) Testing.--The regulations under subsection (b) shall
require--
``(1) that testing described in subparagraphs (J) and (L) of
subsection (d)(1) be conducted by the importer or by the
manufacturer of the prescription drug at a qualified laboratory;
``(2) if the tests are conducted by the importer--
``(A) that information needed to--
``(i) authenticate the prescription drug being tested;
and
``(ii) confirm that the labeling of the prescription
drug complies with labeling requirements under this Act;
be supplied by the manufacturer of the prescription drug to the
pharmacist or wholesaler; and
``(B) that the information supplied under subparagraph (A)
be kept in strict confidence and used only for purposes of
testing or otherwise complying with this Act; and
``(3) may include such additional provisions as the Secretary
determines to be appropriate to provide for the protection of trade
secrets and commercial or financial information that is privileged
or confidential.
``(f) Registration of Foreign Sellers.--Any establishment within
Canada engaged in the distribution of a prescription drug that is
imported or offered for importation into the United States shall
register with the Secretary the name and place of business of the
establishment and the name of the United States agent for the
establishment.
``(g) Suspension of Importation.--The Secretary shall require that
importations of a specific prescription drug or importations by a
specific importer under subsection (b) be immediately suspended on
discovery of a pattern of importation of that specific prescription
drug or by that specific importer of drugs that are counterfeit or in
violation of any requirement under this section, until an investigation
is completed and the Secretary determines that the public is adequately
protected from counterfeit and violative prescription drugs being
imported under subsection (b).
``(h) Approved Labeling.--The manufacturer of a prescription drug
shall provide an importer written authorization for the importer to
use, at no cost, the approved labeling for the prescription drug.
``(i) Charitable Contributions.--Notwithstanding any other
provision of this section, section 801(d)(1) continues to apply to a
prescription drug that is donated or otherwise supplied at no charge by
the manufacturer of the drug to a charitable or humanitarian
organization (including the United Nations and affiliates) or to a
government of a foreign country.
``(j) Waiver Authority for Importation by Individuals.--
``(1) Declarations.--Congress declares that in the enforcement
against individuals of the prohibition of importation of
prescription drugs and devices, the Secretary should--
``(A) focus enforcement on cases in which the importation
by an individual poses a significant threat to public health;
and
``(B) exercise discretion to permit individuals to make
such importations in circumstances in which--
``(i) the importation is clearly for personal use; and
``(ii) the prescription drug or device imported does
not appear to present an unreasonable risk to the
individual.
``(2) Waiver authority.--
``(A) In general.--The Secretary may grant to individuals,
by regulation or on a case-by-case basis, a waiver of the
prohibition of importation of a prescription drug or device or
class of prescription drugs or devices, under such conditions
as the Secretary determines to be appropriate.
``(B) Guidance on case-by-case waivers.--The Secretary
shall publish, and update as necessary, guidance that
accurately describes circumstances in which the Secretary will
consistently grant waivers on a case-by-case basis under
subparagraph (A), so that individuals may know with the
greatest practicable degree of certainty whether a particular
importation for personal use will be permitted.
``(3) Drugs imported from canada.--In particular, the Secretary
shall by regulation grant individuals a waiver to permit
individuals to import into the United States a prescription drug
that--
``(A) is imported from a licensed pharmacy for personal use
by an individual, not for resale, in quantities that do not
exceed a 90-day supply;
``(B) is accompanied by a copy of a valid prescription;
``(C) is imported from Canada, from a seller registered
with the Secretary;
``(D) is a prescription drug approved by the Secretary
under chapter V;
``(E) is in the form of a final finished dosage that was
manufactured in an establishment registered under section 510;
and
``(F) is imported under such other conditions as the
Secretary determines to be necessary to ensure public safety.
``(k) Construction.--Nothing in this section limits the authority
of the Secretary relating to the importation of prescription drugs,
other than with respect to section 801(d)(1) as provided in this
section.
``(l) Effectiveness of Section.--
``(1) Commencement of program.--This section shall become
effective only if the Secretary certifies to the Congress that the
implementation of this section will--
(A) pose no additional risk to the public's health and
safety; and
(B) result in a significant reduction in the cost of
covered products to the American consumer.
``(2) Termination of program.--
``(A) In general.--If, after the date that is 1 year after
the effective date of the regulations under subsection (b) and
before the date that is 18 months after the effective date, the
Secretary submits to Congress a certification that, in the
opinion of the Secretary, based on substantial evidence
obtained after the effective date, the benefits of
implementation of this section do not outweigh any detriment of
implementation of this section, this section shall cease to be
effective as of the date that is 30 days after the date on
which the Secretary submits the certification.
``(B) Procedure.--The Secretary shall not submit a
certification under subparagraph (A) unless, after a hearing on
the record under sections 556 and 557 of title 5, United States
Code, the Secretary--
``(i)(I) determines that it is more likely than not
that implementation of this section would result in an
increase in the risk to the public health and safety;
``(II) identifies specifically, in qualitative and
quantitative terms, the nature of the increased risk;
``(III) identifies specifically the causes of the
increased risk; and
``(IV)(aa) considers whether any measures can be taken
to avoid, reduce, or mitigate the increased risk; and
``(bb) if the Secretary determines that any measures
described in item (aa) would require additional statutory
authority, submits to Congress a report describing the
legislation that would be required;
``(ii) identifies specifically, in qualitative and
quantitative terms, the benefits that would result from
implementation of this section (including the benefit of
reductions in the cost of covered products to consumers in
the United States, allowing consumers to procure needed
medication that consumers might not otherwise be able to
procure without foregoing other necessities of life); and
``(iii)(I) compares in specific terms the detriment
identified under clause (i) with the benefits identified
under clause (ii); and
``(II) determines that the benefits do not outweigh the
detriment.
``(m) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out this section.''.
(b) Conforming Amendments.--The Federal Food, Drug, and Cosmetic
Act is amended--
(1) in section 301(aa) (21 U.S.C. 331(aa)), by striking
``covered product in violation of section 804'' and inserting
``prescription drug in violation of section 804''; and
(2) in section 303(a)(6) (21 U.S.C. 333(a)(6), by striking
``covered product pursuant to section 804(a)'' and inserting
``prescription drug under section 804(b)''.
SEC. 1122. STUDY AND REPORT ON IMPORTATION OF DRUGS.
The Secretary, in consultation with appropriate government
agencies, shall conduct a study on the importation of drugs into the
United States pursuant to section 804 of the Federal Food, Drug, and
Cosmetic Act (as added by section 1121 of this Act). Not later than 12
months after the date of the enactment of this Act, the Secretary shall
submit to the appropriate committees of the Congress a report providing
the findings of such study.
SEC. 1123. STUDY AND REPORT ON TRADE IN PHARMACEUTICALS.
The President's designees shall conduct a study and report on
issues related to trade and pharmaceuticals.
TITLE XII--TAX INCENTIVES FOR HEALTH AND RETIREMENT SECURITY
SEC. 1201. HEALTH SAVINGS ACCOUNTS.
(a) In General.--Part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to additional itemized
deductions for individuals) is amended by redesignating section 223 as
section 224 and by inserting after section 222 the following new
section:
``SEC. 223. HEALTH SAVINGS ACCOUNTS.
``(a) Deduction Allowed.--In the case of an individual who is an
eligible individual for any month during the taxable year, there shall
be allowed as a deduction for the taxable year an amount equal to the
aggregate amount paid in cash during such taxable year by or on behalf
of such individual to a health savings account of such individual.
``(b) Limitations.--
``(1) In general.--The amount allowable as a deduction under
subsection (a) to an individual for the taxable year shall not
exceed the sum of the monthly limitations for months during such
taxable year that the individual is an eligible individual.
``(2) Monthly limitation.--The monthly limitation for any month
is \1/12\ of--
``(A) in the case of an eligible individual who has self-
only coverage under a high deductible health plan as of the
first day of such month, the lesser of--
``(i) the annual deductible under such coverage, or
``(ii) $2,250, or
``(B) in the case of an eligible individual who has family
coverage under a high deductible health plan as of the first
day of such month, the lesser of--
``(i) the annual deductible under such coverage, or
``(ii) $4,500.
``(3) Additional contributions for individuals 55 or older.--
``(A) In general.--In the case of an individual who has
attained age 55 before the close of the taxable year, the
applicable limitation under subparagraphs (A) and (B) of
paragraph (2) shall be increased by the additional contribution
amount.
``(B) Additional contribution amount.--For purposes of this
section, the additional contribution amount is the amount
determined in accordance with the following table:
``For taxable years beginning in:
The additional
contribution amount is:
2004......................................................
$500
2005......................................................
$600
2006......................................................
$700
2007......................................................
$800
2008......................................................
$900
2009 and thereafter.......................................
$1,000.
``(4) Coordination with other contributions.--The limitation
which would (but for this paragraph) apply under this subsection to
an individual for any taxable year shall be reduced (but not below
zero) by the sum of--
``(A) the aggregate amount paid for such taxable year to
Archer MSAs of such individual, and
``(B) the aggregate amount contributed to health savings
accounts of such individual which is excludable from the
taxpayer's gross income for such taxable year under section
106(d) (and such amount shall not be allowed as a deduction
under subsection (a)).
Subparagraph (A) shall not apply with respect to any individual to
whom paragraph (5) applies.
``(5) Special rule for married individuals.--In the case of
individuals who are married to each other, if either spouse has
family coverage--
``(A) both spouses shall be treated as having only such
family coverage (and if such spouses each have family coverage
under different plans, as having the family coverage with the
lowest annual deductible), and
``(B) the limitation under paragraph (1) (after the
application of subparagraph (A) and without regard to any
additional contribution amount under paragraph (3))--
``(i) shall be reduced by the aggregate amount paid to
Archer MSAs of such spouses for the taxable year, and
``(ii) after such reduction, shall be divided equally
between them unless they agree on a different division.
``(6) Denial of deduction to dependents.--No deduction shall be
allowed under this section to any individual with respect to whom a
deduction under section 151 is allowable to another taxpayer for a
taxable year beginning in the calendar year in which such
individual's taxable year begins.
``(7) Medicare eligible individuals.--The limitation under this
subsection for any month with respect to an individual shall be
zero for the first month such individual is entitled to benefits
under title XVIII of the Social Security Act and for each month
thereafter.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Eligible individual.--
``(A) In general.--The term `eligible individual' means,
with respect to any month, any individual if--
``(i) such individual is covered under a high
deductible health plan as of the 1st day of such month, and
``(ii) such individual is not, while covered under a
high deductible health plan, covered under any health
plan--
``(I) which is not a high deductible health plan,
and
``(II) which provides coverage for any benefit
which is covered under the high deductible health plan.
``(B) Certain coverage disregarded.--Subparagraph (A)(ii)
shall be applied without regard to--
``(i) coverage for any benefit provided by permitted
insurance, and
``(ii) coverage (whether through insurance or
otherwise) for accidents, disability, dental care, vision
care, or long-term care.
``(2) High deductible health plan.--
``(A) In general.--The term `high deductible health plan'
means a health plan--
``(i) which has an annual deductible which is not less
than--
``(I) $1,000 for self-only coverage, and
``(II) twice the dollar amount in subclause (I) for
family coverage, and
``(ii) the sum of the annual deductible and the other
annual out-of-pocket expenses required to be paid under the
plan (other than for premiums) for covered benefits does
not exceed--
``(I) $5,000 for self-only coverage, and
``(II) twice the dollar amount in subclause (I) for
family coverage.
``(B) Exclusion of certain plans.--Such term does not
include a health plan if substantially all of its coverage is
coverage described in paragraph (1)(B).
``(C) Safe harbor for absence of preventive care
deductible.--A plan shall not fail to be treated as a high
deductible health plan by reason of failing to have a
deductible for preventive care (within the meaning of section
1871 of the Social Security Act, except as otherwise provided
by the Secretary).
``(D) Special rules for network plans.--In the case of a
plan using a network of providers--
``(i) Annual out-of-pocket limitation.--Such plan shall
not fail to be treated as a high deductible health plan by
reason of having an out-of-pocket limitation for services
provided outside of such network which exceeds the
applicable limitation under subparagraph (A)(ii).
``(ii) Annual deductible.--Such plan's annual
deductible for services provided outside of such network
shall not be taken into account for purposes of subsection
(b)(2).
``(3) Permitted insurance.--The term `permitted insurance'
means--
``(A) insurance if substantially all of the coverage
provided under such insurance relates to--
``(i) liabilities incurred under workers' compensation
laws,
``(ii) tort liabilities,
``(iii) liabilities relating to ownership or use of
property, or
``(iv) such other similar liabilities as the Secretary
may specify by regulations,
``(B) insurance for a specified disease or illness, and
``(C) insurance paying a fixed amount per day (or other
period) of hospitalization.
``(4) Family coverage.--The term `family coverage' means any
coverage other than self-only coverage.
``(5) Archer msa.--The term `Archer MSA' has the meaning given
such term in section 220(d).
``(d) Health Savings Account.--For purposes of this section--
``(1) In general.--The term `health savings account' means a
trust created or organized in the United States as a health savings
account exclusively for the purpose of paying the qualified medical
expenses of the account beneficiary, but only if the written
governing instrument creating the trust meets the following
requirements:
``(A) Except in the case of a rollover contribution
described in subsection (f)(5) or section 220(f)(5), no
contribution will be accepted--
``(i) unless it is in cash, or
``(ii) to the extent such contribution, when added to
previous contributions to the trust for the calendar year,
exceeds the sum of--
``(I) the dollar amount in effect under subsection
(b)(2)(B)(ii), and
``(II) the dollar amount in effect under subsection
(b)(3)(B).
``(B) The trustee is a bank (as defined in section 408(n)),
an insurance company (as defined in section 816), or another
person who demonstrates to the satisfaction of the Secretary
that the manner in which such person will administer the trust
will be consistent with the requirements of this section.
``(C) No part of the trust assets will be invested in life
insurance contracts.
``(D) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund.
``(E) The interest of an individual in the balance in his
account is nonforfeitable.
``(2) Qualified medical expenses.--
``(A) In general.--The term `qualified medical expenses'
means, with respect to an account beneficiary, amounts paid by
such beneficiary for medical care (as defined in section 213(d)
for such individual, the spouse of such individual, and any
dependent (as defined in section 152) of such individual, but
only to the extent such amounts are not compensated for by
insurance or otherwise.
``(B) Health insurance may not be purchased from account.--
Subparagraph (A) shall not apply to any payment for insurance.
``(C) Exceptions.--Subparagraph (B) shall not apply to any
expense for coverage under--
``(i) a health plan during any period of continuation
coverage required under any Federal law,
``(ii) a qualified long-term care insurance contract
(as defined in section 7702B(b)),
``(iii) a health plan during a period in which the
individual is receiving unemployment compensation under any
Federal or State law, or
``(iv) in the case of an account beneficiary who has
attained the age specified in section 1811 of the Social
Security Act, any health insurance other than a medicare
supplemental policy (as defined in section 1882 of the
Social Security Act).
``(3) Account beneficiary.--The term `account beneficiary'
means the individual on whose behalf the health savings account was
established.
``(4) Certain rules to apply.--Rules similar to the following
rules shall apply for purposes of this section:
``(A) Section 219(d)(2) (relating to no deduction for
rollovers).
``(B) Section 219(f)(3) (relating to time when
contributions deemed made).
``(C) Except as provided in section 106(d), section
219(f)(5) (relating to employer payments).
``(D) Section 408(g) (relating to community property laws).
``(E) Section 408(h) (relating to custodial accounts).
``(e) Tax Treatment of Accounts.--
``(1) In general.--A health savings account is exempt from
taxation under this subtitle unless such account has ceased to be a
health savings account. Notwithstanding the preceding sentence, any
such account is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business income of
charitable, etc. organizations).
``(2) Account terminations.--Rules similar to the rules of
paragraphs (2) and (4) of section 408(e) shall apply to health
savings accounts, and any amount treated as distributed under such
rules shall be treated as not used to pay qualified medical
expenses.
``(f) Tax Treatment of Distributions.--
``(1) Amounts used for qualified medical expenses.--Any amount
paid or distributed out of a health savings account which is used
exclusively to pay qualified medical expenses of any account
beneficiary shall not be includible in gross income.
``(2) Inclusion of amounts not used for qualified medical
expenses.--Any amount paid or distributed out of a health savings
account which is not used exclusively to pay the qualified medical
expenses of the account beneficiary shall be included in the gross
income of such beneficiary.
``(3) Excess contributions returned before due date of
return.--
``(A) In general.--If any excess contribution is
contributed for a taxable year to any health savings account of
an individual, paragraph (2) shall not apply to distributions
from the health savings accounts of such individual (to the
extent such distributions do not exceed the aggregate excess
contributions to all such accounts of such individual for such
year) if--
``(i) such distribution is received by the individual
on or before the last day prescribed by law (including
extensions of time) for filing such individual's return for
such taxable year, and
``(ii) such distribution is accompanied by the amount
of net income attributable to such excess contribution.
Any net income described in clause (ii) shall be included in
the gross income of the individual for the taxable year in
which it is received.
``(B) Excess contribution.--For purposes of subparagraph
(A), the term `excess contribution' means any contribution
(other than a rollover contribution described in paragraph (5)
or section 220(f)(5)) which is neither excludable from gross
income under section 106(d) nor deductible under this section.
``(4) Additional tax on distributions not used for qualified
medical expenses.--
``(A) In general.--The tax imposed by this chapter on the
account beneficiary for any taxable year in which there is a
payment or distribution from a health savings account of such
beneficiary which is includible in gross income under paragraph
(2) shall be increased by 10 percent of the amount which is so
includible.
``(B) Exception for disability or death.--Subparagraph (A)
shall not apply if the payment or distribution is made after
the account beneficiary becomes disabled within the meaning of
section 72(m)(7) or dies.
``(C) Exception for distributions after medicare
eligibility.--Subparagraph (A) shall not apply to any payment
or distribution after the date on which the account beneficiary
attains the age specified in section 1811 of the Social
Security Act.
``(5) Rollover contribution.--An amount is described in this
paragraph as a rollover contribution if it meets the requirements
of subparagraphs (A) and (B).
``(A) In general.--Paragraph (2) shall not apply to any
amount paid or distributed from a health savings account to the
account beneficiary to the extent the amount received is paid
into a health savings account for the benefit of such
beneficiary not later than the 60th day after the day on which
the beneficiary receives the payment or distribution.
``(B) Limitation.--This paragraph shall not apply to any
amount described in subparagraph (A) received by an individual
from a health savings account if, at any time during the 1-year
period ending on the day of such receipt, such individual
received any other amount described in subparagraph (A) from a
health savings account which was not includible in the
individual's gross income because of the application of this
paragraph.
``(6) Coordination with medical expense deduction.--For
purposes of determining the amount of the deduction under section
213, any payment or distribution out of a health savings account
for qualified medical expenses shall not be treated as an expense
paid for medical care.
``(7) Transfer of account incident to divorce.--The transfer of
an individual's interest in a health savings account to an
individual's spouse or former spouse under a divorce or separation
instrument described in subparagraph (A) of section 71(b)(2) shall
not be considered a taxable transfer made by such individual
notwithstanding any other provision of this subtitle, and such
interest shall, after such transfer, be treated as a health savings
account with respect to which such spouse is the account
beneficiary.
``(8) Treatment after death of account beneficiary.--
``(A) Treatment if designated beneficiary is spouse.--If
the account beneficiary's surviving spouse acquires such
beneficiary's interest in a health savings account by reason of
being the designated beneficiary of such account at the death
of the account beneficiary, such health savings account shall
be treated as if the spouse were the account beneficiary.
``(B) Other cases.--
``(i) In general.--If, by reason of the death of the
account beneficiary, any person acquires the account
beneficiary's interest in a health savings account in a
case to which subparagraph (A) does not apply--
``(I) such account shall cease to be a health
savings account as of the date of death, and
``(II) an amount equal to the fair market value of
the assets in such account on such date shall be
includible if such person is not the estate of such
beneficiary, in such person's gross income for the
taxable year which includes such date, or if such
person is the estate of such beneficiary, in such
beneficiary's gross income for the last taxable year of
such beneficiary.
``(ii) Special rules.--
``(I) Reduction of inclusion for predeath
expenses.--The amount includible in gross income under
clause (i) by any person (other than the estate) shall
be reduced by the amount of qualified medical expenses
which were incurred by the decedent before the date of
the decedent's death and paid by such person within 1
year after such date.
``(II) Deduction for estate taxes.--An appropriate
deduction shall be allowed under section 691(c) to any
person (other than the decedent or the decedent's
spouse) with respect to amounts included in gross
income under clause (i) by such person.
``(g) Cost-of-Living Adjustment.--
``(1) In general.--Each dollar amount in subsections (b)(2) and
(c)(2)(A) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which such taxable
year begins determined by substituting for `calendar year 1992'
in subparagraph (B) thereof--
``(i) except as provided in clause (ii), `calendar year
1997', and
``(ii) in the case of each dollar amount in subsection
(c)(2)(A), `calendar year 2003'.
``(2) Rounding.--If any increase under paragraph (1) is not a
multiple of $50, such increase shall be rounded to the nearest
multiple of $50.
``(h) Reports.--The Secretary may require--
``(1) the trustee of a health savings account to make such
reports regarding such account to the Secretary and to the account
beneficiary with respect to contributions, distributions, the
return of excess contributions, and such other matters as the
Secretary determines appropriate, and
``(2) any person who provides an individual with a high
deductible health plan to make such reports to the Secretary and to
the account beneficiary with respect to such plan as the Secretary
determines appropriate.
The reports required by this subsection shall be filed at such time and
in such manner and furnished to such individuals at such time and in
such manner as may be required by the Secretary.''.
(b) Deduction Allowed Whether or Not Individual Itemizes Other
Deductions.--Subsection (a) of section 62 of such Code is amended by
inserting after paragraph (18) the following new paragraph:
``(19) Health savings accounts.--The deduction allowed by
section 223.''.
(c) Rollovers from Archer MSAs Permitted.--Subparagraph (A) of
section 220(f)(5) of such Code (relating to rollover contribution) is
amended by inserting ``or a health savings account (as defined in
section 223(d))'' after ``paid into an Archer MSA''.
(d) Exclusions for Employer Contributions to Health Savings
Accounts.--
(1) Exclusion from income tax.--Section 106 of such Code
(relating to contributions by employer to accident and health
plans) is amended by adding at the end the following new
subsection:
``(d) Contributions to Health Savings Accounts.--
``(1) In general.--In the case of an employee who is an
eligible individual (as defined in section 223(c)(1)), amounts
contributed by such employee's employer to any health savings
account (as defined in section 223(d)) of such employee shall be
treated as employer-provided coverage for medical expenses under an
accident or health plan to the extent such amounts do not exceed
the limitation under section 223(b) (determined without regard to
this subsection) which is applicable to such employee for such
taxable year.
``(2) Special rules.--Rules similar to the rules of paragraphs
(2), (3), (4), and (5) of subsection (b) shall apply for purposes
of this subsection.
``(3) Cross reference.--
``For penalty on failure by employer to make comparable
contributions to the health savings accounts of comparable
employees, see section 4980G.''.
(2) Exclusion from employment taxes.--
(A) Railroad retirement tax.--Subsection (e) of section
3231 of such Code is amended by adding at the end the following
new paragraph:
``(11) Health savings account contributions.--The term
`compensation' shall not include any payment made to or for the
benefit of an employee if at the time of such payment it is
reasonable to believe that the employee will be able to exclude
such payment from income under section 106(d).''.
(B) Unemployment tax.--Subsection (b) of section 3306 of
such Code is amended by striking ``or'' at the end of paragraph
(16), by striking the period at the end of paragraph (17) and
inserting ``; or'', and by inserting after paragraph (17) the
following new paragraph:
``(18) any payment made to or for the benefit of an employee if
at the time of such payment it is reasonable to believe that the
employee will be able to exclude such payment from income under
section 106(d).''.
(C) Withholding tax.--Subsection (a) of section 3401 of
such Code is amended by striking ``or'' at the end of paragraph
(20), by striking the period at the end of paragraph (21) and
inserting ``; or'', and by inserting after paragraph (21) the
following new paragraph:
``(22) any payment made to or for the benefit of an employee if
at the time of such payment it is reasonable to believe that the
employee will be able to exclude such payment from income under
section 106(d).''.
(3) Employer contributions required to be shown on w-2.--
Subsection (a) of section 6051 of such Code is amended by striking
``and'' at the end of paragraph (10), by striking the period at the
end of paragraph (11) and inserting ``, and'', and by inserting
after paragraph (11) the following new paragraph:
``(12) the amount contributed to any health savings account (as
defined in section 223(d)) of such employee or such employee's
spouse.''.
(4) Penalty for failure of employer to make comparable health
savings account contributions.--
(A) In general.--Chapter 43 of such Code is amended by
adding after section 4980F the following new section:
``SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COMPARABLE HEALTH SAVINGS
ACCOUNT CONTRIBUTIONS.
``(a) General Rule.--In the case of an employer who makes a
contribution to the health savings account of any employee during a
calendar year, there is hereby imposed a tax on the failure of such
employer to meet the requirements of subsection (b) for such calendar
year.
``(b) Rules and Requirements.--Rules and requirements similar to
the rules and requirements of section 4980E shall apply for purposes of
this section.
``(c) Regulations.--The Secretary shall issue regulations to carry
out the purposes of this section, including regulations providing
special rules for employers who make contributions to Archer MSAs and
health savings accounts during the calendar year.''.
(B) Clerical amendment.--The table of sections for chapter
43 of such Code is amended by adding after the item relating to
section 4980F the following new item:
``Sec. 4980G. Failure of employer to make comparable health savings
account contributions.''.
(e) Tax on Excess Contributions.--Section 4973 of such Code
(relating to tax on excess contributions to certain tax-favored
accounts and annuities) is amended--
(1) by striking ``or'' at the end of subsection (a)(3), by
inserting ``or'' at the end of subsection (a)(4), and by inserting
after subsection (a)(4) the following new paragraph:
``(5) a health savings account (within the meaning of section
223(d)),'', and
(2) by adding at the end the following new subsection:
``(g) Excess Contributions to Health Savings Accounts.--For
purposes of this section, in the case of health savings accounts
(within the meaning of section 223(d)), the term `excess contributions'
means the sum of--
``(1) the aggregate amount contributed for the taxable year to
the accounts (other than a rollover contribution described in
section 220(f)(5) or 223(f)(5)) which is neither excludable from
gross income under section 106(d) nor allowable as a deduction
under section 223 for such year, and
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distributions out of the accounts which were
included in gross income under section 223(f)(2), and
``(B) the excess (if any) of--
``(i) the maximum amount allowable as a deduction under
section 223(b) (determined without regard to section
106(d)) for the taxable year, over
``(ii) the amount contributed to the accounts for the
taxable year.
For purposes of this subsection, any contribution which is distributed
out of the health savings account in a distribution to which section
223(f)(3) applies shall be treated as an amount not contributed.''.
(f) Tax on Prohibited Transactions.--
(1) Section 4975 of such Code (relating to tax on prohibited
transactions) is amended by adding at the end of subsection (c) the
following new paragraph:
``(6) Special rule for health savings accounts.--An individual
for whose benefit a health savings account (within the meaning of
section 223(d)) is established shall be exempt from the tax imposed
by this section with respect to any transaction concerning such
account (which would otherwise be taxable under this section) if,
with respect to such transaction, the account ceases to be a health
savings account by reason of the application of section 223(e)(2)
to such account.''.
(2) Paragraph (1) of section 4975(e) of such Code is amended by
redesignating subparagraphs (E) and (F) as subparagraphs (F) and
(G), respectively, and by inserting after subparagraph (D) the
following new subparagraph:
``(E) a health savings account described in section
223(d),''.
(g) Failure To Provide Reports on Health Savings Accounts.--
Paragraph (2) of section 6693(a) of such Code (relating to reports) is
amended by redesignating subparagraphs (C) and (D) as subparagraphs (D)
and (E), respectively, and by inserting after subparagraph (B) the
following new subparagraph:
``(C) section 223(h) (relating to health savings
accounts),''.
(h) Exception From Capitalization of Policy Acquisition Expenses.--
Subparagraph (B) of section 848(e)(1) of such Code (defining specified
insurance contract) is amended by striking ``and'' at the end of clause
(iii), by striking the period at the end of clause (iv) and inserting
``, and'', and by adding at the end the following new clause:
``(v) any contract which is a health savings account
(as defined in section 223(d)).''.
(i) Health Savings Accounts May Be Offered Under Cafeteria Plans.--
Paragraph (2) of section 125(d) (relating to cafeteria plan defined) is
amended by adding at the end the following new subparagraph:
``(D) Exception for health savings accounts.--Subparagraph
(A) shall not apply to a plan to the extent of amounts which a
covered employee may elect to have the employer pay as
contributions to a health savings account established on behalf
of the employee.''.
(j) Clerical Amendment.--The table of sections for part VII of
subchapter B of chapter 1 of such Code is amended by striking the last
item and inserting the following:
``Sec. 223. Health savings accounts.
``Sec. 224. Cross reference.''.
(k) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2003.
SEC. 1202. EXCLUSION FROM GROSS INCOME OF CERTAIN FEDERAL SUBSIDIES FOR
PRESCRIPTION DRUG PLANS.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section 139
the following new section:
``SEC. 139A. FEDERAL SUBSIDIES FOR PRESCRIPTION DRUG PLANS.
``Gross income shall not include any special subsidy payment
received under section 1860D-22 of the Social Security Act. This
section shall not be taken into account for purposes of determining
whether any deduction is allowable with respect to any cost taken into
account in determining such payment.''.
(b) Alternative Minimum Tax Relief.--Section 56(g)(4)(B) of such
Code is amended by inserting ``or 139A'' after ``section 114''.
(c) Conforming Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139 the following new item:
``Sec. 139A. Federal subsidies for prescription drug plans.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
SEC. 1203. EXCEPTION TO INFORMATION REPORTING REQUIREMENTS RELATED TO
CERTAIN HEALTH ARRANGEMENTS.
(a) In General.--Section 6041 of the Internal Revenue Code of 1986
(relating to information at source) is amended by adding at the end the
following new subsection:
``(f) Section Does Not Apply to Certain Health Arrangements.--This
section shall not apply to any payment for medical care (as defined in
section 213(d)) made under--
``(1) a flexible spending arrangement (as defined in section
106(c)(2)), or
``(2) a health reimbursement arrangement which is treated as
employer-provided coverage under an accident or health plan for
purposes of section 106.''.
(b) Effective Date.--The amendment made by this section shall apply
to payments made after December 31, 2002.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.