[Congressional Record Volume 145, Number 139 (Thursday, October 14, 1999)]
[Senate]
[Pages S12634-S12638]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS:
  S. 1725. A bill to amend title XVIII of the Social Security Act to 
modernize Medicare supplemental policies so that outpatient 
prescription drugs are affordable and accessible for medicare 
beneficiaries; to the Committee on Finance.


             the druggap insurance for seniors act of 1999

  Mr. JEFFORDS. Mr. President, I come to the floor today to introduce 
the DrugGap Insurance for Seniors Act of 1999, which will provide much-
needed insurance coverage for medicines for low-income seniors, and 
will allow all other seniors, for the first time, to purchase an 
affordable, drug-only insurance policy to protect them against the 
runaway cost of drugs.
  Mr. President, we are all aware that prescription drug costs continue 
to grow at an alarming rate. Seniors are being forced to spend greater 
and greater portions of their fixed incomes on prescription drugs that 
they need to live. Research and development of prescription drugs have 
come a long way since Medicare was originally enacted in 1965. Today, 
drugs are just as important, and in many cases more important, than 
hospital visits. It does not make sense for Medicare to reimburse 
hospitals for surgery, but not provide coverage for the drugs that 
might prevent surgery. That is why I am committed to modernizing the 
Medicare program so that it does not go bankrupt in the next 10 to 15 
years. In addition, we must ensure that any Medicare reform proposal we 
consider includes a prescription drug benefit that helps all seniors.
  This is a basic coverage problem that we must address as we modernize 
the Medicare program, and it is one of my top priorities. Ideally, it 
should be part of broad Medicare reform. Even if we are not able to 
achieve broad reform in the Medicare program this year, we must at 
least do something to address this basic need for seniors.
  Today, I am introducing a bill that will target the most needy 
seniors. Currently, Medicare beneficiaries can purchase private 
insurance plans, called Medigap plans, to pay certain health care 
expenses that are not covered by Medicare. The law allows Medigap 
insurers to offer ten standardized plans to beneficiaries. However, 
only the three most expensive Medigap plans cover prescription drugs.
  My plan calls for three new Medigap insurance plans to be developed 
that will cover only prescription drugs. The federal government will 
use a small portion of the budget surplus to purchase these new 
``DrugGap'' policies for low-income Medicare beneficiaries who do not 
already have prescription drug coverage under Medicaid or through an 
employer sponsored plan. This bill provides all seniors the option of 
purchasing affordable, comprehensive coverage for prescription drugs 
even if they do not qualify for the federal government purchase plan. 
The bill also includes reforms to the Medigap system to give seniors 
more choice, and to keep Medigap premiums affordable.
  Mr. President, this bill offers several significant advantages to 
Medicare beneficiaries who need coverage for prescription drugs. First, 
nothing will change for those Medicare beneficiaries who like their 
current Medigap plans. This bill will offer more choices for Medicare 
beneficiaries, but will not make seniors change coverage that they 
like.
  Second, this plan does not mandate prescription drug benefits on the 
current standardized plans, which some critics have argued will raise 
premiums. Indeed, one of the goals of this legislation is to make 
Medigap more affordable, and to seek solutions to the problem of the 
spiraling cost of Medigap premiums. This bill offers a way to 
accomplish this goal.
  This bill also gives DrugGap policy holders access to the deep 
discounts on drugs that HMOs get, even if the beneficiary has not met 
the policy's deductible, and makes it clear that insurance companies 
can issue drug discount cares to Medigap policy holders even if the 
policy doesn't cover prescription drugs.
  Finally, this bill will provide federal grants to the states for 
counseling for seniors regarding this new benefit.
  Mr. President, this bill is not a substitute for the much-needed 
Medicare reform and Medicare drug benefit, but it is a positive step 
that we can take right now to protect Medicare beneficiaries until 
Medicare reform can be achieved, and a broad drug benefit is 
implemented. I hope my colleagues will support this moderate approach 
to helping Medicare beneficiaries deal with the runaway costs of 
prescription drugs.
  Mr. President, I ask unanimous consent that the text of the bill and 
a brief summary of the bill be printed in the Record.
  There being no objection, the items were ordered to be printed in the 
Record, as follows:

                                S. 1725

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``DrugGap 
     Insurance for Seniors Act of 1999''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Modernization of medicare supplemental benefit packages.
Sec. 4. Assistance to qualified low-income medicare beneficiaries.
Sec. 5. Grandfathering of current Medigap enrollees.
Sec. 6. Health insurance information, counseling, and assistance 
              grants.
Sec. 7. NAIC study and report.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds the following:

[[Page S12635]]

       (1) Coverage of outpatient prescription drugs is the most 
     important aspect of medical care not currently provided under 
     the medicare program under title XVIII of the Social Security 
     Act.
       (2) The medicare program needs to be reformed, and should 
     include provisions that provide access to outpatient 
     prescription drugs for all medicare beneficiaries.
       (3) Comprehensive medicare reform will require extensive 
     time and effort, but Congress must act now to provide 
     outpatient prescription drug coverage to the most vulnerable 
     medicare beneficiaries until such time as the medicare 
     program is reformed.
       (4) Low-income medicare beneficiaries are the most 
     vulnerable to the high cost of outpatient prescription drugs, 
     since they are often not eligible to receive benefits under 
     medicaid, yet have incomes too low to afford medicare 
     supplemental policies that include coverage for outpatient 
     prescription drugs.
       (5) Medicare beneficiaries deserve meaningful choices among 
     medicare supplemental policies, including the option of 
     purchasing affordable outpatient prescription drug-only 
     medicare supplemental policies.
       (6) Premiums for medicare supplemental policies have risen 
     dramatically in recent years, and steps must be taken to keep 
     premiums from rising out of the reach of medicare 
     beneficiaries.
       (7) Increased use of medicare supplemental policies does 
     not represent sufficient structural medicare reform.
       (b) Purposes.--The purposes of this Act are as follows:
       (1) To provide medicare supplemental policies covering 
     outpatient prescription drugs to low-income medicare 
     beneficiaries at no cost.
       (2) To provide expanded choice to all medicare 
     beneficiaries by creating affordable drug-only medicare 
     supplemental policies.
       (3) To ensure that medicare supplemental policies are 
     modernized in a manner that promotes competition and 
     preserves affordability for all medicare beneficiaries.

     SEC. 3. MODERNIZATION OF MEDICARE SUPPLEMENTAL BENEFIT 
                   PACKAGES.

       (a) Addition of DrugGap Policies and Modification of 
     Existing Medigap Policies.--Section 1882 of the Social 
     Security Act (42 U.S.C. 1395ss) is amended by adding at the 
     end the following:
       ``(v) Modernized Benefit Packages for Medicare Supplemental 
     Policies.--
       ``(1) Promulgation of model regulation.--
       ``(A) NAIC model regulation.--If, within 9 months after the 
     date of enactment of the DrugGap Insurance for Seniors Act of 
     1999, the National Association of Insurance Commissioners (in 
     this subsection referred to as the ``NAIC'') changes the 1991 
     NAIC Model Regulation (described in subsection (p)) to 
     incorporate--
       ``(i) limitations on the benefit packages that may be 
     offered under a medicare supplemental policy consistent with 
     paragraphs (2) and (3) of this subsection;
       ``(ii) an appropriate range of coverage options for 
     outpatient prescription drugs, including at least a minimal 
     level of coverage under each benefit package;
       ``(iii) a deductible for outpatient prescription drugs that 
     is uniform across each benefit package;
       ``(iv) uniform language and definitions to be used with 
     respect to such benefits;
       ``(v) uniform format to be used in the policy with respect 
     to such benefits; and
       ``(vi) other standards to meet the additional requirements 
     imposed by the amendments made by the DrugGap Insurance for 
     Seniors Act of 1999;

     subsection (g)(2)(A) shall be applied in each State, 
     effective for policies issued to policy holders on and after 
     the date specified in subparagraph (C), as if the reference 
     to the Model Regulation adopted on June 6, 1979, were a 
     reference to the 1991 NAIC Model Regulation as changed under 
     this subparagraph (such changed regulation referred to in 
     this section as the `2000 NAIC Model Regulation').
       ``(B) Regulation by the secretary.--If the NAIC does not 
     make the changes in the 1991 NAIC Model Regulation within the 
     9-month period specified in subparagraph (A), the Secretary 
     shall promulgate, not later than 9 months after the end of 
     such period, a regulation and subsection (g)(2)(A) shall be 
     applied in each State, effective for policies issued to 
     policy holders on and after the date specified in 
     subparagraph (C), as if the reference to the Model Regulation 
     adopted on June 6, 1979, were a reference to the 1991 NAIC 
     Model Regulation as changed by the Secretary under this 
     subparagraph (such changed regulation referred to in this 
     section as the `2000 Federal Regulation').
       ``(C) Date specified.--
       ``(i) In general.--Subject to clause (ii), the date 
     specified in this subparagraph for a State is the date the 
     State adopts the 2000 NAIC Model Regulation or 2000 Federal 
     Regulation or 1 year after the date the NAIC or the Secretary 
     first adopts such standards, whichever is earlier.
       ``(ii) States requiring revisions to state law.--In the 
     case of a State which the Secretary identifies, in 
     consultation with the NAIC, as--

       ``(I) requiring State legislation (other than legislation 
     appropriating funds) in order for medicare supplemental 
     policies to meet the 2000 NAIC Model Regulation or 2000 
     Federal Regulation; but
       ``(II) having a legislature which is not scheduled to meet 
     in 2001 in a legislative session in which such legislation 
     may be considered;

     the date specified in this subparagraph is the first day of 
     the first calendar quarter beginning after the close of the 
     first legislative session of the State legislature that 
     begins on or after January 1, 2000. For purposes of the 
     previous sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
       ``(D) Consultation with working group.--In promulgating 
     standards under this paragraph, the NAIC or Secretary shall 
     consult with a working group composed of representatives of 
     issuers of medicare supplemental policies, consumer groups, 
     medicare beneficiaries, and other qualified individuals. Such 
     representatives shall be selected in a manner so as to assure 
     balanced representation among the interested groups.
       ``(E) Modification of standards if medicare benefits 
     change.--If benefits (including deductibles and coinsurance) 
     under this title are changed and the Secretary determines, in 
     consultation with the NAIC, that changes in the 2000 NAIC 
     Model Regulation or 2000 Federal Regulation are needed to 
     reflect such changes, the preceding provisions of this 
     paragraph shall apply to the modification of standards 
     previously established in the same manner as they applied to 
     the original establishment of such standards.
       ``(2) Core group of benefits and number of benefit 
     packages.--The benefits under the 2000 NAIC Model Regulation 
     or 2000 Federal Regulation shall provide--
       ``(A) for such groups or packages of benefits as may be 
     appropriate taking into account the considerations specified 
     in paragraph (3) and the requirements of the succeeding 
     subparagraphs;
       ``(B) for identification of a core group of basic benefits 
     common to all policies other than the medicare supplemental 
     policies described in paragraph (12)(B); and
       ``(C) that, subject to paragraph (4)(B), the total number 
     of different benefit packages (counting the core group of 
     basic benefits described in subparagraph (B) and each other 
     combination of benefits that may be offered as a separate 
     benefit package) that may be established in all the States 
     and by all issuers shall not exceed 10 plus the 2 benefit 
     packages described in paragraph (11) and the 3 policies 
     described in paragraph (12)(B).
       ``(3) Balance of objectives.--The benefits under paragraph 
     (2) shall, to the extent possible, balance the objectives 
     of--
       ``(A) ensuring that medicare supplemental policies are 
     affordable for beneficiaries under this title, and that the 
     policies modernized under this subsection do not have 
     premiums higher than the medicare supplemental policies 
     available on the date of enactment of the DrugGap Insurance 
     for Seniors Act of 1999;
       ``(B) facilitating comparisons among policies;
       ``(C) avoiding adverse selection;
       ``(D) providing consumer choice;
       ``(E) providing market stability;
       ``(F) promoting competition;
       ``(G) including some drug coverage, however limited, in 
     each of the 10 benefit packages described in paragraph 
     (2)(C); and
       ``(H) ensuring that beneficiaries under this title receive 
     the benefit of prices for outpatient prescription drugs 
     negotiated by issuers of medicare supplemental policies under 
     this section.
       ``(4) States may offer new or innovative supplemental 
     benefits.--
       ``(A) Compliance with applicable 2000 naic model regulation 
     or 2000 federal regulation required.--
       ``(i) States.--Except as provided in subparagraph (B) or 
     paragraph (6), no State with a regulatory program approved 
     under subsection (b)(1) may provide for or permit the 
     grouping of benefits (or language or format with respect to 
     such benefits) under a medicare supplemental policy unless 
     such grouping meets the applicable 2000 NAIC Model Regulation 
     or 2000 Federal Regulation.
       ``(ii) Federal government.--Except as provided in 
     subparagraph (B), the Secretary may not provide for or permit 
     the grouping of benefits (or language or format with respect 
     to such benefits) under a medicare supplemental policy 
     seeking approval by the Secretary unless such grouping meets 
     the applicable 2000 NAIC Model Regulation or 2000 Federal 
     Regulation.
       ``(B) Additional benefits.--The issuer of a medicare 
     supplemental policy may offer the benefits described in 
     subsection (p)(3)(B) under the circumstances described in 
     such subsection as if each reference to `1991' were a 
     reference to `2000'.
       ``(5) States may not restrict core benefits.--
       ``(A) Medicare supplemental policies subject to state 
     regulation.--Except as provided in subparagraph (B), this 
     subsection shall not be construed as preventing a State from 
     restricting the groups of benefits that may be offered in 
     medicare supplemental policies in the State.
       ``(B) Must make core benefits available.--A State with a 
     regulatory program approved under subsection (b)(1) may not 
     restrict under subparagraph (A) the offering of a medicare 
     supplemental policy consisting only of the core group of 
     benefits described in paragraph (2)(B).
       ``(6) State alternative simplification programs.--The 
     Secretary may waive the application of standards described in 
     clauses (i) through (vi) of paragraph (1)(A) in those States 
     that on the date of enactment of the DrugGap Insurance for 
     Seniors Act of 1999

[[Page S12636]]

     had in place an alternative simplification program.
       ``(7) Discounts for items and services not covered under 
     medicare supplemental policies.--This subsection shall not be 
     construed as preventing an issuer of a medicare supplemental 
     policy who otherwise meets the requirements of this section 
     from providing, through an arrangement with a vendor, for 
     discounts from that vendor to policy holders or certificate 
     holders for the purchase of items or services not covered 
     under its medicare supplemental policies or under this title, 
     including the issuance of drug discount cards.
       ``(8) Civil penalty for violation of the model 
     regulation.--Except as provided in paragraph (10), any person 
     who sells or issues a medicare supplemental policy, on and 
     after the effective date specified in paragraph (1)(C), in 
     violation of the applicable 2000 NAIC Model Regulation or 
     2000 Federal Regulation insofar as such regulation relates to 
     the requirements of subsection (o) or (q) or clauses (i) 
     through (vi) of paragraph (1)(A) is subject to a civil money 
     penalty of not to exceed $25,000 (or $15,000 in the case of a 
     seller who is not an issuer of a policy) for each such 
     violation. The provisions of section 1128A (other than the 
     first sentence of subsection (a) and other than subsection 
     (b)) 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).
       ``(9) Requirements of sellers.--
       ``(A) Core benefit package.--Anyone who sells a medicare 
     supplemental policy to an individual shall make available for 
     sale to the individual a medicare supplemental policy with 
     only the core group of basic benefits (described in paragraph 
     (2)(B)).
       ``(B) Outline of coverage.--Anyone who sells a medicare 
     supplemental policy to an individual shall provide the 
     individual, before the sale of the policy, an outline of 
     coverage which describes the benefits under the policy. Such 
     outline shall be on a standard form approved by the State 
     regulatory program or the Secretary (as the case may be) 
     consistent with the 2000 NAIC Model Regulation or 2000 
     Federal Regulation under this subsection.
       ``(C) Penalties.--Whoever sells a medicare supplemental 
     policy in violation of this paragraph is subject to a civil 
     money penalty of not to exceed $25,000 (or $15,000 in the 
     case of a seller who is not the issuer of the policy) for 
     each such violation. The provisions of section 1128A (other 
     than the first sentence of subsection (a) and other than 
     subsection (b)) 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).
       ``(D) Effective date.--Subject to paragraph (10), this 
     paragraph shall apply to sales of policies occurring on or 
     after the effective date specified in paragraph (1)(C).
       ``(10) Safe harbor for sellers.--No penalty may be imposed 
     under paragraph (8) or (9) in the case of a seller who is not 
     the issuer of a policy until the Secretary has published a 
     list of the groups of benefit packages that may be sold or 
     issued consistent with paragraph (1)(A)(i).
       ``(11) Addition of high deductible medicare supplemental 
     policies.--For purposes of paragraph (2), the benefit 
     packages described in this paragraph are the benefit packages 
     modernized under this subsection that the Secretary 
     determines are most comparable to the benefit packages 
     described in subsection (p)(11).
       ``(12) Druggap medicare supplemental policies.--
       ``(A) Establishment of drug-only medicare supplemental 
     policies.--
       ``(i) In general.--There are established 3 benefit 
     packages, consistent with the benefit packages described in 
     subparagraph (B), that--

       ``(I) consist of only outpatient prescription drug 
     benefits;
       ``(II) may be designed to incorporate the utilization 
     management techniques described in subparagraph (C);
       ``(III) do not include benefits for prescription drugs 
     otherwise available under part A or B; and
       ``(IV) do not include benefits for any prescription drug 
     excluded by the State in which the medicare supplemental 
     policy is issued or sold under section 1927(d).

       ``(ii) Definition.--In this section, the term `DrugGap 
     medicare supplemental policy' means a medicare supplemental 
     policy (as defined in subsection (g)(1)) that has 1 of the 
     benefit packages described in subparagraph (B).
       ``(B) Benefit packages described.--The benefit packages for 
     DrugGap medicare supplemental policies described in this 
     paragraph are as follows:
       ``(i) Standard druggap benefit packages.--

       ``(I) Standard druggap.--A Standard DrugGap medicare 
     supplemental policy that provides a deductible not to exceed 
     $250, coinsurance not to exceed 20 percent, and a $5,000 
     maximum benefit.
       ``(II) Low-cost standard druggap.--A Low-Cost Standard 
     DrugGap medicare supplemental policy that provides a 
     deductible not to exceed $750, coinsurance not to exceed 30 
     percent, and a $5,000 maximum benefit.

       ``(ii) Stop-loss druggap benefit package.--A Stop-Loss 
     DrugGap medicare supplemental policy that provides a stop-
     loss coverage benefit that limits the application of any 
     beneficiary cost-sharing during a year after the beneficiary 
     incurs out-of-pocket covered expenditures in excess of 
     $5,000, or, in the case that the beneficiary owns a DrugGap 
     medicare supplemental policy described in clause (i), such 
     beneficiary reaches the maximum benefit under such policy.
       ``(iii) Maximum benefit defined.--In this paragraph, the 
     term `maximum benefit' means the total amount paid for 
     covered outpatient prescription drugs, including any amounts 
     paid by the issuer of the DrugGap medicare supplemental 
     policy and any cost-sharing paid by the policyholder.
       ``(C) Use of utilization management techniques.--
       ``(i) Formularies.--An issuer may use a formulary to 
     contain costs under any benefit package established under 
     subparagraph (A)(i) only if the issuer--

       ``(I) includes in the formulary at least 1 drug from each 
     therapeutic class and provides at least 1 generic equivalent, 
     if available; and
       ``(II) provides for coverage of otherwise covered 
     nonformulary drugs when a nonformulary alternative is 
     medically necessary and appropriate.

       ``(ii) Other utilization management techniques.--Nothing in 
     this part shall be construed as preventing an issuer offering 
     DrugGap medicare supplemental policies from using reasonable 
     utilization management techniques, including generic drug 
     substitution, consistent with applicable law.''.
       (b) DrugGap Medigap Policies Do Not Duplicate Other Medigap 
     Policies.--Section 1882(d)(3) of the Social Security Act (42 
     U.S.C. 1395ss(d)(3)) is amended--
       (1) in subparagraph (A), by adding at the end the 
     following:
       ``(ix) Nothing in this subparagraph shall be construed as 
     preventing the sale of a DrugGap policy to an individual, 
     provided that the sale is of a DrugGap policy that does not 
     duplicate any health benefits under a medicare supplemental 
     policy owned by the individual.'';
       (2) in subparagraph (B)(ii)(I), by inserting ``and one 
     DrugGap medicare supplemental policy'' before the comma; and
       (3) in subparagraph (B)(iii)--
       (A) in subclause (I), by striking ``(II) and (III)'' and 
     inserting ``(II), (III), and (IV)'';
       (B) by redesignating subclause (III) as subclause (IV); and
       (C) by inserting after subclause (II) the following:
       ``(III) If the statement required by clause (i) is obtained 
     and indicates that the individual is enrolled in 1 or more 
     medicare supplemental policies, the sale of a DrugGap policy 
     is not in violation of clause (i) if such DrugGap policy does 
     not duplicate health benefits under any policy in which the 
     individual is enrolled.''.
       (c) Enrollment in Case of Involuntary Terminations of 
     Coverage.--Section 1882(s)(3)(C)(i) of the Social Security 
     Act (42 U.S.C. 1395ss(s)(3)(C)(i)) is amended by striking 
     ``under subsection (p)(2)'' and inserting ``under subsection 
     (v)(2), a Standard DrugGap medicare supplemental policy under 
     the standards established under subsection (v)(12)(B)(i), and 
     a Stop-Loss DrugGap medicare supplemental policy under the 
     standards established under subsection (v)(12)(B)(ii)''.
       (d) Special Enrollment Period.--Section 1882(n) of the 
     Social Security Act (42 U.S.C. 1395ss(n)) is amended by 
     adding at the end the following:
       ``(7)(A) No medicare supplemental policy of the issuer 
     shall be deemed to meet the standards in subsection (c) 
     unless the issuer--
       ``(i) provides written notice, within a 60-day period 
     specified in the modernization of the medicare supplemental 
     policies under subsection (v), to the policyholder or 
     certificate holder (at the most recent available address) of 
     the offer described in clause (ii); and
       ``(ii) offers the individual under the terms described in 
     subparagraph (B), during a period of 180 days beginning on 
     the date specified in subparagraph (C), institution of 
     coverage effective as of the date specified in the 
     modernization described in clause (i) for such purpose, for 
     any policy described under subsection (v).
       ``(B) The terms described under this subparagraph are terms 
     which do not--
       ``(i) deny or condition the issuance or effectiveness of a 
     medicare supplemental policy described in subparagraph 
     (A)(ii) that is offered and is available for issuance to new 
     enrollees by such issuer;
       ``(ii) discriminate in the pricing of such policy, because 
     of health status, claims experience, receipt of health care, 
     or medical condition; or
       ``(iii) impose an exclusion of benefits based on a 
     preexisting condition under such policy.
       ``(C) The date specified in this subparagraph for a policy 
     issued in a State is such date as the Secretary, in 
     consultation with the NAIC, specifies (taking into account 
     the method used under paragraph (4) for establishing a date 
     under this subsection).''.
       (e) Conforming Amendments.--Section 1882 of the Social 
     Security Act (42 U.S.C. 1395ss) is amended--
       (1) in subsection (a)(2)--
       (A) in the matter preceding subparagraph (A), by striking 
     ``(p)'' and inserting ``(v)'';
       (B) in subparagraph (A)--
       (i) by striking ``1991'' each place it appears and 
     inserting ``2000''; and
       (ii) by striking ``(p)'' and inserting ``(v)''; and
       (C) in the matter following subparagraph (B), by striking 
     ``(p)'' and inserting ``(v)'';
       (2) in subsection (o)--
       (A) in paragraph (1), by striking ``(p)'' and inserting 
     ``(v)''; and

[[Page S12637]]

       (B) in paragraph (2), by striking ``(p)'' and inserting 
     ``(v)''; and
       (3) in subsection (r)--
       (A) in paragraph (1)--
       (i) in the matter preceding subparagraph (A), by striking 
     ``(p)'' and inserting ``(v)''; and
       (ii) in the matter following subparagraph (B), by striking 
     ``(p)'' and inserting ``(v)''; and
       (B) in paragraph (2)(A)--
       (i) by striking ``(p)'' and inserting ``(v)''; and
       (ii) by striking ``the date specified in section 171(m)(4) 
     of the Social Security Act Amendments of 1994'' and inserting 
     ``the date of enactment of the DrugGap Insurance for Seniors 
     Act of 1999''.

     SEC. 4. ASSISTANCE TO QUALIFIED LOW-INCOME MEDICARE 
                   BENEFICIARIES.

       (a) In General.--Part B of title XVIII of the Social 
     Security Act (42 U.S.C. 1395j et seq.) is amended by adding 
     at the end the following:

     ``SEC. 1849. ASSISTANCE TO QUALIFIED LOW-INCOME MEDICARE 
                   BENEFICIARIES.

       ``(a) Qualified Low-Income Medicare Beneficiary Defined.--
     For purposes of this part, the term `qualified low-income 
     medicare beneficiary' means an individual--
       ``(1) who is--
       ``(A) entitled to benefits under part A;
       ``(B) enrolled under this part; and
       ``(C) who does not have coverage for outpatient 
     prescription drugs through enrollment in a Medicare+Choice 
     plan offered by a Medicare+Choice organization under part C 
     or in a group health plan;
       ``(2) who would be eligible for medical assistance under 
     title XIX but for the fact that the individual's income 
     exceeds the income level (expressed as a percentage of the 
     poverty line) established by the State for eligibility for 
     medical assistance under such title, including at least the 
     care and services listed in paragraphs (1) through (5), (17), 
     and (21) of section 1905(a), but does not exceed the lesser 
     of--
       ``(A) 50 percentage points above such income level; or
       ``(B) 200 percent of the poverty line; and
       ``(3) who is enrolled in--
       ``(A) a Standard DrugGap medicare supplemental policy and a 
     Stop-Loss DrugGap medicare supplemental policy as such 
     policies are described in clauses (i)(I) and (ii) of section 
     1882(v)(12)(B), respectively; or
       ``(B) a Low-Cost Standard DrugGap medicare supplemental 
     policy and a Stop-Loss DrugGap medicare supplemental policy 
     as such policies are described in clauses (i)(II) and (ii) of 
     section 1882(v)(12)(B), respectively.
       ``(b) Program Administered by the States.--
       ``(1) In general.--The Secretary shall establish an 
     arrangement with each State (as defined under section 
     1861(x)) under which the State performs the functions 
     described in paragraphs (2) through (4).
       ``(2) Annual eligibility.--The State shall determine 
     whether a beneficiary under this title in the State is a 
     qualified low-income medicare beneficiary. A determination 
     that such an individual is a qualified low-income medicare 
     beneficiary shall remain valid for a period of 12 months but 
     is conditioned upon continuing enrollment in medicare 
     supplemental policies described in subsection (a)(4).
       ``(3) Computation of state weighted average premium for 
     standard druggap and stop-loss druggap medicare supplemental 
     policies.--For each year, the State shall compute a State 
     weighted average premium equal to the weighted average of the 
     premiums for medicare supplemental policies described in 
     clause (i)(I) of section 1882(v)(12)(B) and the medicare 
     supplemental policies described in clause (ii) of such 
     section for the State, with the weight for each medicare 
     supplemental policy being equal to the average number of 
     beneficiaries under this title enrolled under such policy in 
     the previous year. In the initial year that such medicare 
     supplemental policies are available, the State shall estimate 
     the State weighted average premium for each type of policy.
       ``(4) Payment by states on behalf of qualified low-income 
     medicare beneficiaries.--The State shall provide for payment 
     to the appropriate entity on behalf of a qualified low-income 
     medicare beneficiary for a year in an amount equal to--
       ``(A) for the medicare supplemental policy described under 
     clause (i) of section 1882(v)(12)(B) in which such 
     beneficiary is enrolled, the lesser of--
       ``(i) the amount of the State weighted average premium (as 
     computed under paragraph (3)) for the policies described 
     under subclause (I) of such clause; or
       ``(ii) the full quoted premium for the policy;
       ``(B) for the medicare supplemental policy described under 
     clause (ii) of section 1882(v)(12)(B) in which such 
     beneficiary is enrolled, the lesser of--
       ``(i) the amount of the State weighted average premium (as 
     computed under paragraph (3)) for the policies described 
     under such clause; or
       ``(ii) the full quoted premium for the policy; and
       ``(C) such beneficiary out-of-pocket expenses related to 
     the supplemental benefits provided under the policies 
     described in subparagraphs (A) and (B) as the State 
     determines is appropriate.
       ``(c) Payments to States.--
       ``(1) Reimbursement from federal supplementary medical 
     insurance trust fund.--Each calendar quarter in a fiscal 
     year, the Secretary shall pay to each State from the Federal 
     Supplementary Medical Insurance Trust Fund under section 1841 
     an amount equal to the amount paid by the State under 
     subsection (b)(4).
       ``(2) Exclusion of additional part b costs from 
     determination of part b premium.--In estimating the benefits 
     and administrative costs that will be payable from the 
     Federal Supplementary Medical Insurance Trust Fund for a year 
     for purposes of determining the monthly premium rate under 
     section 1839(a)(3), the Secretary shall exclude an estimate 
     of any benefits and administrative costs attributable to the 
     application of this section.
       ``(3) Construction relative to other benefits.--Nothing in 
     this section shall be construed as requiring a State, under 
     its plan under title XIX, to be responsible for any portion 
     of the subsidy or beneficiary cost-sharing provided under 
     this section to qualified low-income medicare beneficiaries.
       ``(d) Maintenance of State Effort Requirement.--In the case 
     of any State in which the income level (expressed as a 
     percentage of the poverty line) established by the State for 
     eligibility for medical assistance under title XIX (that 
     includes at least the care and services listed in paragraphs 
     (1) through (5), (17), and (21) of section 1905(a)) is less 
     than 150 percent of the poverty line applicable to a family 
     of the size involved in a calendar quarter in a fiscal year--
       ``(1) no payment may be made to such State under section 
     1849(c) for a calendar quarter in a fiscal year unless the 
     State demonstrates to the satisfaction of the Secretary that 
     the expenditures of the State for any State-funded 
     prescription drug program for which individuals entitled to 
     benefits under this section are eligible during the fiscal 
     year is not less than the level of such expenditures for 
     fiscal year 1999; and
       ``(2) payments shall not be made under this section for 
     coverage of prescription drugs to the extent that--
       ``(A) payment is made under such a program; or
       ``(B) the Secretary determines payment would be made under 
     such a program as in effect on the date of enactment of the 
     DrugGap Insurance for Seniors Act of 1999.
       ``(e) Poverty Line Defined.--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.''.
       (b) Conforming Amendment.--Section 1839(a)(3) of the Social 
     Security Act (42 U.S.C. 1395r(a)(3)), as amended by section 
     5101(e) of the Tax and Trade Relief Extension Act of 1998 
     (contained in division J of Public Law 105-277), is amended 
     by striking ``except as provided in subsection (g)'' and 
     inserting ``except as provided in subsection (g) or section 
     1849(d)''.

     SEC. 5. GRANDFATHERING OF CURRENT MEDIGAP ENROLLEES.

       (a) In General.--The amendments made by this Act shall take 
     effect on the date of enactment of this Act, and shall apply 
     to medicare supplemental policies issued or sold after the 
     date specified in subsection (b), but shall not apply to the 
     renewal of medicare supplemental policies that are in 
     existence on such date.
       (b) Date Specified.--The date specified in this subsection 
     for each State is the date specified under section 
     1882(n)(7)(C) of the Social Security Act (42 U.S.C. 
     1395ss(n)(7)(C)) (as added by section 3(d) of this Act).

     SEC. 6. HEALTH INSURANCE INFORMATION, COUNSELING, AND 
                   ASSISTANCE GRANTS.

       (a) In General.--Section 4360(b)(2)(A)(ii) of the Omnibus 
     Budget Reconciliation Act of 1990 (42 U.S.C. 1395b-
     4(b)(2)(A)(ii)) is amended by striking ``and information'' 
     and inserting ``, providing specific information regarding 
     any DrugGap benefit medicare supplemental policy described 
     under section 1882(v) of the Social Security Act (42 U.S.C. 
     1395ss(v)), and information''.
       (b) Authorization of Appropriations.--In addition to any 
     amounts otherwise appropriated, there are authorized to be 
     appropriated $50,000,000 for each fiscal year, beginning with 
     the first year in which a DrugGap medicare supplemental 
     policy described in section 1882(v)(12) is available, for the 
     purpose of carrying out the provisions of section 4360 of the 
     Omnibus Budget Reconciliation Act of 1990 (as amended by 
     subsection (a)).

     SEC. 7. NAIC STUDY AND REPORT.

       (a) Study.--The Secretary of Health and Human Services 
     shall contract with the National Association of Insurance 
     Commissioners (referred to in this section as the ``NAIC'') 
     to conduct a study of medicare supplemental policies offered 
     under section 1882 of the Social Security Act (42 U.S.C. 
     1395ss) in order to identify--
       (1) areas that are the cause of increasing medicare 
     supplemental insurance claims costs (such as outpatient 
     expenses) that affect the affordability of medicare 
     supplemental policies;
       (2) changes to Federal law (if any) required to address the 
     issues identified under paragraph (1) to make medicare 
     supplemental policies more affordable for beneficiaries under 
     the medicare program under title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.); and
       (3) methods of encouraging additional issuers to offer such 
     policies and to reduce the cost of premiums for such 
     policies.

[[Page S12638]]

       (b) Report.--Not later than November 1, 2001, the NAIC 
     shall submit a report to the Secretary of Health and Human 
     Services on the study conducted under subsection (a) that 
     contains a detailed statement of the findings and conclusions 
     of the NAIC together with recommendations for such 
     legislation and administrative actions as the NAIC considers 
     appropriate.
       (c) Transmission to Congress.--Not later than January 1, 
     2002, the Secretary of Health and Human Services shall 
     transmit the report submitted under subsection (b) to 
     Congress together with recommendations for such legislation 
     and administrative actions as the Secretary considers 
     appropriate.
                                  ____


                   DrugGap Insurance for Seniors Act


                                proposal

       The Federal government will purchase Medicare supplemental 
     (``Medigap'') insurance policies covering prescription drugs 
     (called ``DrugGap'' plans) for low-income seniors, which 
     provides greater access to affordable medicines, and 
     affordable insurance policies for all Medicare beneficiaries 
     through modernized Medigap plans.


                              how it works

       Current Coverage Continues: All beneficiaries currently 
     enrolled in Medigap who are satisfied with their plans will 
     keep their current policies, but those who want to take 
     advantage of a new drug-only plan may do so.
       Medigap Modernization: Under this proposal, the ten Medigap 
     standardized plans will be reconsidered by the National 
     Association of Insurance Commissioners (NAIC) in order to 
     develop more efficient standardized policies that more 
     appropriately represent today's dynamic health care system. 
     The NAIC will use the same collaborative process outlined in 
     OBRA '90 to modernize the ten standardized Medigap plans and 
     determine the appropriate level of prescription drug coverage 
     in each of the ten modernized plans. This process requires 
     the participation of consumer groups, Medicare beneficiaries, 
     and other representatives selected in a manner to assure 
     balanced representation among the interested groups.
       New Drug-Only ``DrugGap'' Plans: In addition to modernizing 
     the existing ten standardized plans, NAIC would be required 
     to develop three new standardized DrugGap plans, within the 
     following structure:
       (1) ``Standard DrugGap'' plan will have low deductible 
     (maximum $250) and cost-sharing levels (maximum 20% copay), 
     and a $5000 maximum benefit;
       (2) ``Low-Cost Standard DrugGap'' will have somewhat higher 
     deductible (maximum $750) and cost-sharing levels (maximum 
     30% copay), and $5000 maximum benefit;
       (3) ``Stop-Loss DrugGap'' plan will cover any out-of-pocket 
     prescription medicine costs after total prescription medicine 
     costs reach $5000.
       Affordability: Issuers of the new DrugGap plans will be 
     given flexibility to employ a variety utilization management 
     techniques to ensure affordability in these plans, including 
     incentives to encourage appropriate generic substitution. The 
     NAIC standards will include standards by which formularies 
     could be developed, including requirements that all 
     therapeutic classes of drugs will be covered, and 
     beneficiaries will be guaranteed access to off-formulary 
     drugs when they are necessary and appropriate. The standards 
     will also include a mechanism to ensure appropriate 
     utilization and to minimize incidents of adverse drug 
     interactions, as well as mechanisms to ensure reasonable 
     accessibility. Competition between plans will push actual 
     deductible and coinsurance levels lower than the maximum 
     allowable deductible and cost-sharing amounts.
       Eligibility for Assistance: Any Medicare beneficiary who: 
     (1) has income of less than 150% of the federal poverty level 
     (in states where Medicaid eligibility is currently above 100% 
     of poverty, the eligibility level will be 50 percentage 
     points above the states' current Medicaid eligibility, up to 
     200% of the federal poverty level); (2) does not currently 
     have employer-sponsored coverage for prescription drugs; and 
     (3) who is not eligible to receive prescription drugs through 
     Medicaid, is eligible to receive federal assistance. Each 
     eligible beneficiary will receive federal assistance in 
     purchasing a Standard DrugGap and Stop-Loss DrugGap plan.
       Beneficiary Access: Any DrugGap plan may be purchased by 
     any Medicare beneficiary regardless of whether the 
     beneficiary is eligible for federal government assistance 
     under this proposal.
       Access to Discounts: Before the deductible has been 
     satisfied, and after the maximum coverage amount of the 
     DrugGap plan has been reached, plans are required to make 
     drugs available to covered beneficiaries at the same price 
     that is referenced by the plan in determining the plan 
     coverage--i.e., beneficiaries purchase medications at the 
     plan's discounted price. When providing drugs in these 
     situations, plans may assess nominal administration/
     dispensing fees. This allows seniors to access the heavily 
     discounted plan prices, which may be 20% to 25% lower than 
     the market price for important prescription medicines.
       Grants to States: This proposal will include grants to the 
     states ($50 million) for counseling of seniors regarding this 
     new benefit, and to help them access the new DrugGap 
     policies.
       Affordable Premiums: As a part of this Act, Congress would 
     also instruct the NAIC to make recommendations regarding 
     other regulatory and statutory changes which, if enacted, 
     would reduce the cost of Medigap premiums, and would 
     encourage more issuers to offer Medigap policies. These 
     changes would address issues such as balance-billing and 
     outpatient expenses.
                                 ______