[Congressional Record Volume 146, Number 103 (Thursday, September 7, 2000)]
[Senate]
[Pages S8197-S8209]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROTH (for himself, Mr. Jeffords, Mr. Murkowski, Mr. 
        Campbell, Mr. Stevens, and Mr. Frist):
  S. 3017. A bill to amend the Social Security Act to establish an 
outpatient prescription drug assistance program for low-income Medicare 
beneficiaries and Medicare beneficiaries with high drug costs; to the 
Committee on Finance.


                 Medicare Temporary Drug Assistance Act

  Mr. ROTH. Mr. President, I ask unanimous consent that the text of the 
bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 3017

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicare Temporary Drug 
     Assistance Act''.

     SEC. 2. OUTPATIENT PRESCRIPTION DRUG ASSISTANCE PROGRAM.

       (a) Establishment.--The Social Security Act (42 U.S.C. 301 
     et seq.) is amended by adding at the end the following new 
     title:

     ``TITLE XXII--OUTPATIENT PRESCRIPTION DRUG ASSISTANCE PROGRAM

     ``SEC. 2201. PURPOSE; OUTPATIENT PRESCRIPTION DRUG ASSISTANCE 
                   PLANS.

       ``(a) Purpose.--The purpose of this title is to provide 
     funds to States to enable States, individually or in a group, 
     to establish a program, separate from the medicaid program 
     under title XIX, to provide assistance to low-income medicare 
     beneficiaries (as defined in section 2202(b)) and, at State 
     option, medicare beneficiaries with high drug costs (as 
     defined in section 2202(c)) to obtain coverage for outpatient 
     prescription drugs.
       ``(b) Outpatient Prescription Drug Assistance Plan 
     Required.--A State may not receive payments under section 
     2205 unless the State, individually or as part of a group of 
     States, submits in writing to the Secretary an outpatient 
     prescription drug assistance plan under section 2206(a)(1) 
     that--
       ``(1) describes how the State or group of States intends to 
     use the funds provided under this title to provide outpatient 
     prescription drug assistance to low-income medicare 
     beneficiaries and, if applicable, medicare beneficiaries with 
     high drug costs consistent with the provisions of this title;
       ``(2) includes a description of the budget for the plan 
     (updated periodically as necessary) and details on the 
     planned use of funds, the sources of the non-Federal share of 
     plan expenditures, and any requirements for cost-sharing by 
     beneficiaries;
       ``(3) describes the procedures to be used to ensure that 
     the outpatient prescription drug assistance provided to low-
     income medicare beneficiaries and, if applicable, medicare 
     beneficiaries with high drug costs under the plan does not 
     supplant coverage for outpatient prescription drugs available 
     to such beneficiaries under group health plans; and
       ``(4) has been approved by the Secretary under section 
     2206(a)(2).
       ``(c) Entitlement.--Subject to subsection (d)(2), this 
     title constitutes budget authority in advance of 
     appropriations Acts and represents the obligation of the 
     Federal Government to provide for the payment to States, 
     groups of States, and contractors described in section 
     2209(a)(2)(A), of amounts provided under section 2204.
       ``(d) Period of Applicability.--
       ``(1) In general.--No State, group of States, or contractor 
     described in section 2209(a)(2)(A), may receive payments 
     under section 2205 for outpatient prescription drug 
     assistance provided for periods beginning before October 1, 
     2000, or after September 30, 2004.

[[Page S8205]]

       ``(2) Medicare reform.--If medicare reform legislation that 
     includes coverage for outpatient prescription drugs is 
     enacted during the period that begins on October 1, 2000, and 
     ends on September 30, 2004, this title shall be repealed upon 
     the effective date of such legislation, and no State, group 
     of States, or contractor described in section 2209(a)(2)(A) 
     shall be entitled to receive payments for any outpatient 
     prescription drug assistance provided on or after such date.

     ``SEC. 2202. BENEFICIARY ELIGIBILITY.

       ``(a) Eligibility.--
       ``(1) In general.--In order for a State (individually or as 
     part of a group of States) to receive payments under section 
     2205 with respect to an outpatient prescription drug 
     assistance program, the program must provide, subject to the 
     availability of funds, outpatient prescription drug 
     assistance to each individual who--
       ``(A) resides in the State;
       ``(B) applies for such assistance; and
       ``(C) establishes that the individual is--
       ``(i) a low-income medicare beneficiary (as defined in 
     subsection (b)); or
       ``(ii) at the option of the State, a medicare beneficiary 
     with high drug costs (as defined in subsection (c)).
       ``(2) Residency rules.--In applying paragraph (1), 
     residency rules similar to the residency rules applicable to 
     the State plan under title XIX shall apply.
       ``(b) Low-Income Medicare Beneficiary Defined.--
       ``(1) In general.--In this title, except as provided in 
     section 2209(a)(2)(B), the term `low-income medicare 
     beneficiary' means an individual who--
       ``(A) is entitled to benefits under part A of title XVIII 
     or enrolled under part B of such title, including an 
     individual enrolled in a Medicare+Choice plan under part C of 
     such title;
       ``(B) subject to subsection (d), is not entitled to medical 
     assistance with respect to prescribed drugs under title XIX 
     or under a waiver under section 1115 of the requirements of 
     such title;
       ``(C) is determined to have family income that does not 
     exceed a percentage of the poverty line for a family of the 
     size involved specified by the State that, subject to 
     paragraph (2), may not exceed 175 percent; and
       ``(D) at the option of the State, is determined to have 
     resources that do not exceed a level specified by the State.
       ``(2) State-only drug assistance programs.--In the case of 
     a State that has a State-based drug assistance program 
     described in section 2203(e) that provides outpatient 
     prescription drug coverage for individuals described in 
     paragraph (1)(A) who have family income up to or exceeding 
     175 percent of the poverty line, the State may specify a 
     percentage of the poverty line under paragraph (1)(C) that 
     exceeds the income eligibility level specified by the State 
     for such program but does not exceed 50 percentage points 
     above such income eligibility level.
       ``(c) Medicare Beneficiary With High Drug Costs Defined.--
       ``(1) In general.--In this title, except as provided in 
     section 2209(a)(2)(C), the term `medicare beneficiary with 
     high drug costs' means an individual--
       ``(A) who satisfies the requirements of subparagraphs (A) 
     and (B) of subsection (b)(1);
       ``(B) whose family income exceeds the percentage of the 
     poverty line specified by the State in accordance with 
     subsection (b)(1)(C);
       ``(C) at the option of the State, whose resources exceed a 
     level (if any) specified by the State in accordance with 
     subsection (b)(1)(D); and
       ``(D) who has out-of-pocket expenses for outpatient 
     prescription drugs and biologicals (including insulin and 
     insulin supplies) for which outpatient prescription drug 
     assistance is available under this title that exceed such 
     amount as the State specifies in accordance with paragraph 
     (2).
       ``(2) Determination of out-of-pocket expenses.--A State 
     that elects to provide outpatient prescription drug 
     assistance to an individual described in paragraph (1) shall 
     provide the Secretary with the methodology and standards used 
     to determine the individual's eligibility under subparagraph 
     (D) of such paragraph.
       ``(d) Access for Medicaid Expansion States.--
       ``(1) In general.--Notwithstanding any other provision of 
     this title, with respect to any State that, as of the date of 
     enactment of this title, has made outpatient prescription 
     drug coverage for individuals described in paragraph (2) 
     available through the State medicaid program under title XIX 
     under a section 1115 waiver, the Secretary, in consultation 
     with such State, shall establish procedures under which the 
     State shall be able to receive payments from the allotment 
     made available under section 2204 for such State for a fiscal 
     year for purposes of offsetting the costs of making such 
     coverage available to such individuals.
       ``(2) Individuals described.--Individuals described in this 
     paragraph are individuals who are--
       ``(A) entitled to benefits under part A of title XVIII or 
     enrolled under part B of such title, including an individual 
     enrolled in a Medicare+Choice plan under part C of such 
     title; and
       ``(B) eligible for outpatient prescription drug coverage 
     only, under a State medicaid program under title XIX as a 
     result of a section 1115 waiver.
       ``(e) Individual Nonentitlement.--Nothing in this title 
     shall be construed as providing an individual with an 
     entitlement to outpatient prescription drug assistance 
     provided under this title.

     ``SEC. 2203. COVERAGE REQUIREMENTS.

       ``(a) Required Scope of Coverage.--
       ``(1) In general.--The outpatient prescription drug 
     assistance provided under the plan may consist of any of the 
     following:
       ``(A) Benchmark coverage.--Outpatient prescription drug 
     coverage that is equivalent to the outpatient prescription 
     drug coverage in a benchmark benefit package described in 
     subsection (b).
       ``(B) Aggregate actuarial value equivalent to benchmark 
     package.--Outpatient prescription drug coverage that has an 
     aggregate actuarial value that is at least equivalent to one 
     of the benchmark benefit packages.
       ``(C) Existing comprehensive state-based coverage.--
     Outpatient prescription drug coverage under an existing 
     State-based program, described in subsection (e).
       ``(D) Secretary-approved coverage.--Any other outpatient 
     prescription drug coverage that the Secretary determines, 
     upon application by a State or group of States, provides 
     appropriate outpatient prescription drug coverage for the 
     population of medicare beneficiaries proposed to be provided 
     such coverage.
       ``(2) Consistent design.--A State or group of States may 
     only select one of the options described in paragraph (1) 
     (and, if the State or group chooses to provide outpatient 
     prescription drug coverage that is equivalent to the 
     outpatient prescription drug coverage in a benchmark benefit 
     package, only one of the benchmark benefit package options 
     described in subsection (b)) in order to provide outpatient 
     prescription drug assistance in a uniform manner for the 
     population of medicare beneficiaries provided such coverage.
       ``(b) Benchmark Benefit Packages.--The benchmark benefit 
     packages are as follows:
       ``(1) Medicaid outpatient prescription drug coverage.--In 
     the case of--
       ``(A) a State, the outpatient prescription drug coverage 
     provided under the State medicaid plan under title XIX; or
       ``(B) a group of States, the outpatient prescription drug 
     coverage provided under the State medicaid plan under such 
     title of one of the States in the group, as identified in the 
     outpatient prescription drug assistance plan.
       ``(2) FEHBP-equivalent outpatient prescription drug 
     coverage.--The outpatient prescription drug coverage provided 
     under the Standard Option Blue Cross and Blue Shield Service 
     Benefit Plan described in and offered under section 8903(1) 
     of title 5, United States Code.
       ``(3) State employee outpatient prescription drug 
     coverage.--In the case of--
       ``(A) a State, the outpatient prescription drug coverage 
     provided under a health benefits coverage plan that is 
     offered and generally available to State employees in the 
     State involved; or
       ``(B) a group of States, the outpatient prescription drug 
     coverage provided under a health benefits coverage plan that 
     is offered and generally available to State employees in one 
     of the States in the group, as identified in the outpatient 
     prescription drug assistance plan.
       ``(4) Outpatient prescription drug coverage offered through 
     largest hmo.--In the case of--
       ``(A) a State, the outpatient prescription drug coverage 
     provided under a health insurance coverage plan that is 
     offered by a health maintenance organization (as defined in 
     section 2791(b)(3) of the Public Health Service Act) and has 
     the largest insured commercial, nonmedicaid enrollment of 
     covered lives of such coverage plans offered by such a health 
     maintenance organization in the State involved; or
       ``(B) a group of States, the outpatient prescription drug 
     coverage provided under a health insurance coverage plan that 
     is offered by a health maintenance organization (as defined 
     in section 2791(b)(3) of the Public Health Service Act) and 
     has the largest insured commercial, nonmedicaid enrollment of 
     covered lives of such coverage plans offered by such a health 
     maintenance organization in one of the States involved.
       ``(c) Determination of Actuarial Value of Coverage.--
       ``(1) In general.--The actuarial value of outpatient 
     prescription drug coverage offered under benchmark benefit 
     packages and the outpatient prescription drug assistance plan 
     shall be set forth in an opinion in a report that has been 
     prepared--
       ``(A) by an individual who is a member of the American 
     Academy of Actuaries;
       ``(B) using generally accepted actuarial principles and 
     methodologies;
       ``(C) using a standardized set of utilization and price 
     factors;
       ``(D) using a standardized population that is 
     representative of the population to be covered under the 
     outpatient prescription drug assistance plan;
       ``(E) applying the same principles and factors in comparing 
     the value of different coverage;
       ``(F) without taking into account any differences in 
     coverage based on the method of delivery or means of cost 
     control or utilization used; and
       ``(G) taking into account the ability of a State or group 
     of States to reduce benefits by taking into account the 
     increase in actuarial value of benefits coverage offered 
     under

[[Page S8206]]

     the outpatient prescription drug assistance plan that results 
     from the limitations on cost-sharing under such coverage.
       ``(2) Requirement.--The actuary preparing the opinion shall 
     select and specify in the report the standardized set and 
     population to be used under subparagraphs (C) and (D) of 
     paragraph (1).
       ``(d) Prohibited Coverage.--Nothing in this section shall 
     be construed as requiring any outpatient prescription drug 
     coverage offered under the plan to provide coverage for an 
     outpatient prescription drug for which payment is prohibited 
     under this title, notwithstanding that any benchmark benefit 
     package includes coverage for such an outpatient prescription 
     drug.
       ``(e) Description of Existing Comprehensive State-Based 
     Coverage.--
       ``(1) In general.--A program described in this paragraph is 
     an outpatient prescription drug coverage program for 
     individuals who are entitled to benefits under part A of 
     title XVIII or enrolled under part B of such title, including 
     an individual enrolled in a Medicare+Choice plan under part C 
     of such title, that--
       ``(A) is administered or overseen by the State and receives 
     funds from the State;
       ``(B) was offered as of the date of the enactment of this 
     title;
       ``(C) does not receive or use any Federal funds; and
       ``(D) is certified by the Secretary as providing outpatient 
     prescription drug coverage that satisfies the scope of 
     coverage required under subparagraph (A), (B), or (D) of 
     subsection (a)(1).
       ``(2) Modifications.--A State may modify a program 
     described in paragraph (1) from time to time so long as it 
     does not reduce the actuarial value (evaluated as of the time 
     of the modification) of the outpatient prescription drug 
     coverage under the program below the lower of--
       ``(A) the actuarial value of the coverage under the program 
     as of the date of enactment of this title; or
       ``(B) the actuarial value described in subsection 
     (a)(1)(B).
       ``(f) Beneficiary Premiums and Cost-Sharing.--
       ``(1) Description; general conditions.--
       ``(A) Description.--
       ``(i) In general.--An outpatient prescription drug 
     assistance plan shall include a description, consistent with 
     this subsection, of the amount of any premiums or cost-
     sharing imposed under the plan.
       ``(ii) Public schedule of charges.--Any premium or cost-
     sharing described under clause (i) shall be imposed under the 
     plan pursuant to a public schedule.
       ``(B) Protection for beneficiaries.--The outpatient 
     prescription drug assistance plan may only vary premiums and 
     cost-sharing based on the family income of low-income 
     medicare beneficiaries and, if applicable, medicare 
     beneficiaries with high drug costs, in a manner that does not 
     favor such beneficiaries with higher income over 
     beneficiaries with low-income.
       ``(2) Limitations on premiums and cost-sharing.--
       ``(A) No premiums or cost-sharing for beneficiaries with 
     income below 100 percent of poverty line.--In the case of a 
     low-income medicare beneficiary whose family income does not 
     exceed 100 percent of the poverty line, the outpatient 
     prescription drug assistance plan may not impose any premium 
     or cost-sharing.
       ``(B) Other beneficiaries.--For low-income medicare 
     beneficiaries not described in subparagraph (A) and, if 
     applicable, medicare beneficiaries with high drug costs, any 
     premiums or cost-sharing imposed under the outpatient 
     prescription drug assistance plan may be imposed, subject to 
     paragraph (1)(B), on a sliding scale related to income, 
     except that the total annual aggregate of such premiums and 
     cost-sharing with respect to all such beneficiaries in a 
     family under this title may not exceed 5 percent of such 
     family's income for the year involved.
       ``(g) Restriction on Application of Preexisting Condition 
     Exclusions.--The outpatient prescription drug assistance plan 
     shall not permit the imposition of any preexisting condition 
     exclusion for covered benefits under the plan and may not 
     discriminate in the pricing of premiums under such plan 
     because of health status, claims experience, receipt of 
     health care, or medical condition.

     ``SEC. 2204. ALLOTMENTS.

       ``(a) Appropriation.--
       ``(1) In general.--For the purpose of providing allotments 
     under this section to States, there is appropriated, out of 
     any money in the Treasury not otherwise appropriated--
       ``(A) for fiscal year 2001, $1,300,000,000;
       ``(B) for fiscal year 2002, $4,600,000,000;
       ``(C) for fiscal year 2003, $9,700,000,000; and
       ``(D) for fiscal year 2004, $13,000,000,000.
       ``(2) Availability.--Amounts appropriated under paragraph 
     (1) shall only be available for providing the allotments 
     described in such paragraph during the fiscal year for which 
     such amounts are appropriated. Any amounts that have not been 
     obligated by the Secretary for the purposes of making 
     payments from such allotments under section 2205, or under 
     contracts entered into under section 2209(b)(2)(B), on or 
     before September 30 of fiscal year 2001, 2002, 2003, or 2004 
     (as applicable), shall be returned to the Treasury.
       ``(b) Allotments to 50 States and District of Columbia.--
       ``(1) In general.--Subject to paragraph (3), of the amount 
     available for allotment under subsection (a) for a fiscal 
     year, reduced by the amount of allotments made under 
     subsection (c) for the fiscal year, the Secretary shall allot 
     to each State (other than a State described in such 
     subsection) with an outpatient prescription drug assistance 
     plan approved under this title the same proportion as the 
     ratio of--
       ``(A) the number of medicare beneficiaries with family 
     income that does not exceed 175 percent of the poverty line 
     residing in the State for the fiscal year; to
       ``(B) the total number of such beneficiaries residing in 
     all such States.
       ``(2) Determination of number of medicare beneficiaries 
     with income that does not exceed 175 percent of poverty.--For 
     purposes of paragraph (1), a determination of the number of 
     medicare beneficiaries with family income that does not 
     exceed 175 percent of the poverty line residing in a State 
     for the calendar year in which such fiscal year begins shall 
     be made on the basis of the arithmetic average of the number 
     of such medicare beneficiaries, as reported and defined in 
     the 5 most recent March supplements to the Current Population 
     Survey of the Bureau of the Census before the beginning of 
     the fiscal year.
       ``(3) Minimum allotment.--In no case shall the amount of 
     the allotment under this subsection for one of the 50 States 
     or the District of Columbia for a fiscal year be less than an 
     amount equal to 0.5 percent of the amount provided for 
     allotments under subsection (a) for that fiscal year (reduced 
     by the amount of allotments made under subsection (c) for the 
     fiscal year). To the extent that the application of the 
     previous sentence results in an increase in the allotment to 
     a State or the District of Columbia above the amount 
     otherwise provided, the allotments for the other States and 
     the District of Columbia under this subsection shall be 
     reduced in a pro rata manner (but not below the minimum 
     allotment described in such preceding sentence) so that the 
     total of such allotments in a fiscal year does not exceed the 
     amount otherwise provided for allotment under subsection (a) 
     for that fiscal year (as so reduced).
       ``(c) Allotments to Territories.--
       ``(1) In general.--Of the amount available for allotment 
     under subsection (a) for a fiscal year, the Secretary shall 
     allot 0.25 percent among each of the commonwealths and 
     territories described in paragraph (3) in the same proportion 
     as the percentage specified in paragraph (2) for such 
     commonwealth or territory bears to the sum of such 
     percentages for all such commonwealths or territories so 
     described.
       ``(2) Percentage.--The percentage specified in this 
     paragraph for--
       ``(A) Puerto Rico is 91.6 percent;
       ``(B) Guam is 3.5 percent;
       ``(C) the United States Virgin Islands is 2.6 percent;
       ``(D) American Samoa is 1.2 percent; and
       ``(E) the Northern Mariana Islands is 1.1 percent.
       ``(3) Commonwealths and territories.--A commonwealth or 
     territory described in this paragraph is any of the following 
     if it has an outpatient prescription drug assistance plan 
     approved under this title:
       ``(A) Puerto Rico.
       ``(B) Guam.
       ``(C) The United States Virgin Islands.
       ``(D) American Samoa.
       ``(E) The Northern Mariana Islands.
       ``(d) Transfer of Certain Allotments and Portions of 
     Allotments.--
       ``(1) Transfer and redistribution.--
       ``(A) In general.--Subject to subparagraph (B), not later 
     than 30 days after the date described in paragraph (2)--
       ``(i) 90 percent of the allotment determined for a fiscal 
     year under subsection (b) or (c) for a State shall be 
     transferred and made available in such fiscal year to the 
     Secretary, acting through the Administrator of the Health 
     Care Financing Administration, for purposes of carrying out 
     the default program established under section 2209; and
       ``(ii) 10 percent of such allotment shall be redistributed 
     in accordance with subsection (e).
       ``(B) Applicability.--Subparagraph (A) shall not apply if, 
     not later than the date described in paragraph (2) for such 
     fiscal year, a State submits a plan or is part of a group of 
     States that submits a plan to the Secretary that the 
     Secretary finds meets the requirements of section 2201(b).
       ``(2) Date described.--The date described in this paragraph 
     is--
       ``(A) in the case of fiscal year 2001, December 31, 2000; 
     and
       ``(B) in the case of fiscal year 2002, 2003, or 2004, 
     September 1 of the fiscal year preceding such fiscal year.
       ``(e) Redistribution of Portion of Allotments.--With 
     respect to a fiscal year, not later than 30 days after the 
     date described in subsection (d)(2) for such fiscal year, the 
     Secretary shall redistribute the total amount made available 
     for redistribution for such fiscal year under subsection 
     (d)(1)(A)(ii) to each State that submits a plan or is part of 
     a group of States that submits a plan to the Secretary that 
     the Secretary finds meets the requirements of this title. 
     Such amount shall be redistributed in the same manner as 
     allotments are determined under subsections (b) and (c) and 
     shall be available only to the extent consistent with 
     subsection (a)(2).

     ``SEC. 2205. PAYMENTS TO STATES.

       ``(a) In General.--Subject to the succeeding provisions of 
     this section, the Secretary shall pay to each State with a 
     plan

[[Page S8207]]

     approved under section 2206(a)(2) (individually or as part of 
     a group of States) from the State's allotment under section 
     2204, an amount for each quarter equal to the applicable 
     percentage of expenditures in the quarter--
       ``(1) for outpatient prescription drug assistance under the 
     plan for low-income medicare beneficiaries and, if 
     applicable, medicare beneficiaries with high drug costs in 
     the form of providing coverage for outpatient prescription 
     drugs that meets the requirements of section 2203; and
       ``(2) only to the extent permitted consistent with 
     subsection (c), for reasonable costs incurred to administer 
     the plan.
       ``(b) Applicable Percentage.--For purposes of subsection 
     (a), the applicable percentage is--
       ``(1) for low-income medicare beneficiaries with family 
     incomes that do not exceed 135 percent of the poverty line, 
     100 percent; and
       ``(2) for all other low-income medicare beneficiaries and 
     for medicare beneficiaries with high drug costs, the enhanced 
     FMAP (as defined in section 2105(b)).
       ``(c) Limitation on Payments for Certain Expenditures.--
       ``(1) General limitations.--Funds provided to a State or 
     group of States under this title shall only be used to carry 
     out the purposes of this title.
       ``(2) Administrative expenditures.--
       ``(A) In general.--Subject to subparagraph (B), payment 
     shall not be made under subsection (a) for expenditures 
     described in subsection (a)(2) for a fiscal year to the 
     extent the total of such expenditures (for which payment is 
     made under such subsection) exceeds 10 percent of the total 
     expenditures described in subsection (a)(1) made by--
       ``(i) in the case of a State that is not part of a group of 
     States, the State for such fiscal year; and
       ``(ii) in the case of a group of States, the group for such 
     fiscal year.
       ``(B) Special rule.--With respect to the first fiscal year 
     that a State or group of States provides outpatient 
     prescription drug assistance under a plan approved under this 
     title, the 10 percent limitation described in subparagraph 
     (A) shall be applied--
       ``(i) in the case of a State that is not part of a group of 
     States, to the allotment available for such State for such 
     fiscal year; and
       ``(ii) in the case of a group of States, to the aggregate 
     of the State allotments available for all the States in such 
     group for such fiscal year.
       ``(3) Use of non-federal funds for state matching 
     requirement.--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 the non-Federal share of plan expenditures 
     required under the plan.
       ``(4) Offset of receipts attributable to premiums or cost-
     sharing.--For purposes of subsection (a), the amount of the 
     expenditures under the plan shall be reduced by the amount of 
     any premiums or cost-sharing received by a State.
       ``(5) Prevention of duplicative payments.--
       ``(A) Other health plans.--No payment shall be made under 
     this section for expenditures for outpatient prescription 
     drug assistance provided under an outpatient prescription 
     drug assistance plan to the extent that a private insurer (as 
     defined by the Secretary by regulation and including a group 
     health plan, a service benefit plan, and a health maintenance 
     organization) would have been obligated to provide such 
     assistance but for a provision of its insurance contract 
     which has the effect of limiting or excluding such obligation 
     because the beneficiary is eligible for or is provided 
     outpatient prescription drug assistance under the plan.
       ``(B) Other federal governmental programs.--Except as 
     otherwise provided by law, no payment shall be made under 
     this section for expenditures for outpatient prescription 
     drug assistance provided under an outpatient prescription 
     drug assistance plan to the extent that payment has been made 
     or can reasonably be expected to be made promptly (as 
     determined in accordance with regulations) under any other 
     federally operated or financed health care insurance program 
     identified by the Secretary. For purposes of this paragraph, 
     rules similar to the rules for overpayments under section 
     1903(d)(2) shall apply.
       ``(d) Advance Payment; Retrospective Adjustment.--The 
     Secretary may make payments under this section for each 
     quarter on the basis of advance estimates of expenditures 
     submitted by a State or group of States and such other 
     investigation as the Secretary may find necessary, and may 
     reduce or increase the payments as necessary to adjust for 
     any overpayment or underpayment for prior quarters.
       ``(e) Flexibility in Submittal of Claims.--Nothing in this 
     section shall be construed as preventing a State or group of 
     States from claiming as expenditures in any quarter of a 
     fiscal year expenditures that were incurred in a previous 
     quarter of such fiscal year.

     ``SEC. 2206. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT 
                   OF OUTPATIENT PRESCRIPTION DRUG ASSISTANCE 
                   PLANS.

       ``(a) Initial Plan.--
       ``(1) Submission.--A State may receive payments under 
     section 2205 with respect to a fiscal year if the State, 
     individually or as part of a group of States, has submitted 
     to the Secretary, not later than the date described in 
     section 2204(d)(2), an outpatient prescription drug 
     assistance plan that the Secretary has found meets the 
     applicable requirements of this title.
       ``(2) Approval.--Except as the Secretary may provide under 
     subsection (e), a plan submitted under paragraph (1)--
       ``(A) shall be approved for purposes of this title; and
       ``(B) shall be effective beginning with a calendar quarter 
     that is specified in the plan, but in no case earlier than 
     October 1, 2000.
       ``(b) Plan Amendments.--Within 30 days after a State or 
     group of States amends an outpatient prescription drug 
     assistance plan submitted pursuant to subsection (a), the 
     State or group shall notify the Secretary of the amendment.
       ``(c) Disapproval of Plans and Plan Amendments.--
       ``(1) Prompt review of plan submittals.--The Secretary 
     shall promptly review plans and plan amendments submitted 
     under this section to determine if they substantially comply 
     with the requirements of this title.
       ``(2) 45-day approval deadlines.--A plan or plan amendment 
     is considered approved unless the Secretary notifies the 
     State or group of States in writing, within 45 days after 
     receipt of the plan or amendment, that the plan or amendment 
     is disapproved (and the reasons for the disapproval) or that 
     specified additional information is needed.
       ``(3) Correction.--In the case of a disapproval of a plan 
     or plan amendment, the Secretary shall provide a State or 
     group of States with a reasonable opportunity for correction 
     before taking financial sanctions against the State or group 
     on the basis of such disapproval.
       ``(d) Program Operation.--
       ``(1) In general.--A State or group of States shall conduct 
     the program in accordance with the plan (and any amendments) 
     approved under this section and with the requirements of this 
     title.
       ``(2) Violations.--The Secretary shall establish a process 
     for enforcing requirements under this title. Such process 
     shall provide for the withholding of funds in the case of 
     substantial noncompliance with such requirements. In the case 
     of an enforcement action against a State or group of States 
     under this paragraph, the Secretary shall provide a State or 
     group of States with a reasonable opportunity for correction 
     and for administrative and judicial appeal of the Secretary's 
     action before taking financial sanctions against the State or 
     group of States on the basis of such an action.
       ``(e) Continued Approval.--Subject to section 2201(d), an 
     approved outpatient prescription drug assistance plan shall 
     continue in effect unless and until the State or group of 
     States amends the plan under subsection (b) or the Secretary 
     finds, under subsection (d), substantial noncompliance of the 
     plan with the requirements of this title.

     ``SEC. 2207. PLAN ADMINISTRATION; APPLICATION OF CERTAIN 
                   GENERAL PROVISIONS.

       ``(a) Plan Administration.--An outpatient prescription drug 
     assistance plan shall include an assurance that the State or 
     group of States administering the plan will collect the data, 
     maintain the records, afford the Secretary access to any 
     records or information relating to the plan for the purposes 
     of review or audit, and furnish reports to the Secretary, at 
     the times and in the standardized format the Secretary may 
     require in order to enable the Secretary to monitor program 
     administration and compliance and to evaluate and compare the 
     effectiveness of plans under this title.
       ``(b) Application of Certain General Provisions.--The 
     following sections of this Act shall apply to the program 
     established under this title in the same manner as they apply 
     to a State under title XIX:
       ``(1) Title xix provisions.--
       ``(A) Section 1902(a)(4)(C) (relating to conflict of 
     interest standards).
       ``(B) Paragraphs (2), (16), and (17) of section 1903(i) 
     (relating to limitations on payment).
       ``(C) Section 1903(w) (relating to limitations on provider 
     taxes and donations).
       ``(2) Title xi provisions.--
       ``(A) Section 1115 (relating to waiver authority).
       ``(B) Section 1116 (relating to administrative and judicial 
     review), but only insofar as consistent with this title.
       ``(C) Section 1124 (relating to disclosure of ownership and 
     related information).
       ``(D) Section 1126 (relating to disclosure of information 
     about certain convicted individuals).
       ``(E) Section 1128A (relating to civil monetary penalties).
       ``(F) Section 1128B(d) (relating to criminal penalties for 
     certain additional charges).

     ``SEC. 2208. REPORTS.

       ``(a) In General.--Each State or group of States 
     administering a plan under this title shall annually--
       ``(1) assess the operation of the outpatient prescription 
     drug assistance plan under this title in each fiscal year; 
     and
       ``(2) report to the Secretary on the result of the 
     assessment.
       ``(b) Required Information.--The annual report required 
     under subsection (a) shall include the following:
       ``(1) An assessment of the effectiveness of the plan in 
     providing outpatient prescription drug assistance to low-
     income medicare beneficiaries and, if applicable, medicare 
     beneficiaries with high drug costs.
       ``(2) A description and analysis of the effectiveness of 
     elements of the plan, including--

[[Page S8208]]

       ``(A) the characteristics of the low-income medicare 
     beneficiaries and, if applicable, medicare beneficiaries with 
     high drug costs assisted under the plan, including family 
     income and access to, or coverage by, other health insurance 
     prior to the plan and after eligibility for the plan ends;
       ``(B) the amount and level of assistance provided under the 
     plan; and
       ``(C) the sources of the non-Federal share of plan 
     expenditures.
       ``(c) Annual Report of the Secretary.--The Secretary shall 
     submit to Congress and make available to the public an annual 
     report based on the reports required under subsection (a) and 
     section 2209(b)(5), containing any conclusions and 
     recommendations the Secretary considers appropriate.

     ``SEC. 2209. ESTABLISHMENT OF DEFAULT PROGRAM.

       ``(a) Program Authority.--
       ``(1) In general.--With respect to a fiscal year, in the 
     case of a State that fails to submit (individually or as part 
     of a group of States) an approved outpatient prescription 
     drug assistance plan to the Secretary by the date described 
     in section 2204(d)(2) for such fiscal year, outpatient 
     prescription drug assistance to low-income medicare 
     beneficiaries and, subject to the availability of funds, 
     medicare beneficiaries with high drug costs, who reside in 
     such State shall be provided during such fiscal year by the 
     Secretary, through the Administrator of the Health Care 
     Financing Administration, in accordance with this section.
       ``(2) Definitions.--In this section:
       ``(A) Contractor.--The term `contractor' means a 
     pharmaceutical benefit manager or other entity that meets 
     standards established by the Administrator of the Health Care 
     Financing Administration for the provision of outpatient 
     prescription drug assistance under a contract entered into 
     under this section.
       ``(B) Low-income medicare beneficiary.--The term `low-
     income medicare beneficiary' means an individual who--
       ``(i) satisfies the requirements of subparagraphs (A) and 
     (B) of section 2202(b)(1);
       ``(ii) is determined to have family income that does not 
     exceed a percentage of the poverty line for a family of the 
     size involved specified by the Administrator of the Health 
     Care Financing Administration that may not exceed 135 
     percent; and
       ``(iii) at the option of the Administrator of the Health 
     Care Financing Administration, is determined to have 
     resources that do not exceed a level specified by such 
     Administrator.
       ``(C) Medicare beneficiary with high drug costs.--The term 
     `medicare beneficiary with high drug costs' means an 
     individual--
       ``(i) who satisfies the requirements of subparagraphs (A) 
     and (B) of section 2202(b)(1);
       ``(ii) whose family income exceeds the percentage of the 
     poverty line specified by the Administrator of the Health 
     Care Financing Administration under subparagraph (B)(ii) for 
     a low-income medicare beneficiary residing in the same State;
       ``(iii) whose resources exceed a level (if any) specified 
     by the Administrator of the Health Care Financing 
     Administration under subparagraph (B)(iii) for a low-income 
     medicare beneficiary residing in the same State; and
       ``(iv) with respect to any 3-month period, who has out-of-
     pocket expenses for outpatient prescription drugs and 
     biologicals (including insulin and insulin supplies) for 
     which outpatient prescription drug assistance is available 
     under this title that exceed a level specified by such 
     Administrator (consistent with the availability of funds for 
     the operation of the program established under this section 
     in the State where the beneficiary resides).
       ``(b) Administration.--In administering the default program 
     established under this section, the Administrator of the 
     Health Care Financing Administration shall--
       ``(1) establish procedures to determine the eligibility of 
     the low-income medicare beneficiaries and medicare 
     beneficiaries with high drug costs described in subsection 
     (a) for outpatient prescription drug assistance;
       ``(2) establish a process for accepting bids to provide 
     outpatient prescription drug assistance to such 
     beneficiaries, awarding contracts under such bids, and making 
     payments under such contracts;
       ``(3) establish policies and procedures for overseeing the 
     provision of outpatient prescription drug assistance under 
     such contracts;
       ``(4) develop and implement quality and service assessment 
     measures that include beneficiary quality surveys and annual 
     quality and service rankings for contractors awarded a 
     contract under this section;
       ``(5) annually assess the program established under this 
     section and submit a report to the Secretary containing the 
     information required under section 2208(b); and
       ``(6) carry out such other responsibilities as are 
     necessary for the administration of the provision of 
     outpatient prescription drug assistance under this section.
       ``(c) Contract Requirements.--
       ``(1) Authority; term.--
       ``(A) Use of competitive procedures.--
       ``(i) Fiscal year 2001.--With respect to fiscal year 2001, 
     the Administrator of the Health Care Financing Administration 
     may enter into contracts under this section without using 
     competitive procedures, as defined in section 4(5) of the 
     Office of Federal Procurement Policy Act (41 U.S.C. 403(5)), 
     or any other provision of law requiring competitive bidding.
       ``(ii) Fiscal years 2002, 2003, and 2004.--With respect to 
     fiscal years 2002, 2003, and 2004, the Administrator of the 
     Health Care Financing Administration shall award contracts 
     under this section using competitive procedures (as so 
     defined).
       ``(B) Term.--Each contract shall be for a uniform term of 
     at least 1 year, but may be made automatically renewable from 
     term to term in the absence of notice of termination by 
     either party.
       ``(2) Benefit.--The contract shall require the contractor 
     to provide a low-income medicare beneficiary and, if 
     applicable, a medicare beneficiary with high drug costs, 
     outpatient prescription drug assistance that is equivalent to 
     the FEHBP-equivalent benchmark benefit package described in 
     section 2203(b)(2) in a manner that is consistent with the 
     provisions of this title as such provisions apply to a State 
     that provides such assistance.
       ``(3) Quality and service assessment.--The contract shall 
     require the contractor to cooperate with the quality and 
     service assessment measures implemented in accordance with 
     subsection (b)(4).
       ``(4) Payments.--The contract shall specify the amount and 
     manner by which payments (including any administrative fees) 
     shall be made to the contractor for the provision of 
     outpatient prescription drug assistance to low-income 
     medicare beneficiaries and, if applicable, medicare 
     beneficiaries with high drug costs.
       ``(d) Funding.--
       ``(1) Aggregate of transferred amounts.--The Secretary, 
     through the Administrator of the Health Care Financing 
     Administration, shall use the aggregate of the amounts 
     transferred and made available under section 2204(d)(1)(A)(i) 
     for purposes of carrying out the default program established 
     under this section. Such aggregate may be used to provide 
     outpatient prescription drug assistance to any low-income 
     medicare beneficiary, and, subject to the availability of 
     funds, medicare beneficiary with high drug costs, who resides 
     in a State described in subsection (a)(1).
       ``(2) Limitation on administrative costs.--Administrative 
     expenditures incurred by the Secretary or the Administrator 
     of the Health Care Financing Administration for a fiscal year 
     to carry out this section (other than administrative fees 
     paid to a contractor under a contract meeting the 
     requirements of subsection (c))--
       ``(A) shall be paid out of the aggregate amounts described 
     in paragraph (1); and
       ``(B) may not exceed an amount equal to 1 percent of all 
     premiums imposed for such fiscal year to provide outpatient 
     prescription drug assistance to low-income medicare 
     beneficiaries and medicare beneficiaries with high drug costs 
     under this section.
       ``(e) Termination.--Except as provided in section 
     2201(d)(2), the program established under this section shall 
     terminate on September 30, 2004.

     ``SEC. 2210. DEFINITIONS.

       ``In this title:
       ``(1) Cost-sharing.--The term `cost-sharing' means a 
     deductible, coinsurance, copayment, or similar charge, and 
     includes an enrollment fee.
       ``(2) Outpatient prescription drug assistance.--
       ``(A) In general.--The term `outpatient prescription drug 
     assistance' means, subject to subparagraph (B), payment for 
     part or all of the cost of coverage of self-administered 
     outpatient prescription drugs and biologicals (including 
     insulin and insulin supplies) for low-income medicare 
     beneficiaries and, if applicable, medicare beneficiaries with 
     high drug costs.
       ``(B) Exclusions.--Such term does not include payment or 
     coverage with respect to--
       ``(i) items covered under title XVIII; or
       ``(ii) items for which coverage is not available under a 
     State plan under title XIX.
       ``(3) Outpatient prescription drug assistance plan; plan.--
     Unless the context otherwise requires, the terms `outpatient 
     prescription drug assistance plan' and `plan' mean an 
     outpatient prescription drug assistance plan approved under 
     section 2206.
       ``(4) Group health plan; group health insurance coverage; 
     etc.--The terms `group health plan', `group health insurance 
     coverage', and `health insurance coverage' have the meanings 
     given such terms in section 2791 of the Public Health Service 
     Act (42 U.S.C. 300gg-91).
       ``(5) Poverty line.--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.
       ``(6) Preexisting condition exclusion.--The term 
     `preexisting condition exclusion' has the meaning given such 
     term in section 2701(b)(1)(A) of the Public Health Service 
     Act (42 U.S.C. 300gg(b)(1)(A)).
       ``(7) State.--The term `State' has the meaning given such 
     term for purposes of title XIX.''.
       (b) Conforming Amendments.--
       (1) Definition of state.--Section 1101(a)(1) of the Social 
     Security Act (42 U.S.C. 1301(a)(1)) is amended in the first 
     and fourth sentences, by striking ``and XXI'' each place it 
     appears and inserting ``XXI, and XXII''.
       (2) Treatment as state health care program.--Section 
     1128(h) of such Act (42 U.S.C. 1320a-7(h)) is amended--
       (A) in paragraph (3), by striking ``or'' at the end;
       (B) in paragraph (4), by striking the period at the end and 
     inserting ``, or''; and

[[Page S8209]]

       (C) by adding at the end the following new paragraph:
       ``(5) an outpatient prescription drug assistance plan 
     approved under title XXII.''.

     SEC. 3. ELECTION BY LOW-INCOME MEDICARE BENEFICIARIES AND 
                   MEDICARE BENEFICIARIES WITH HIGH DRUG COSTS TO 
                   SUSPEND MEDIGAP INSURANCE.

       Section 1882(q) of the Social Security Act (42 U.S.C. 
     1395ss(q)) is amended--
       (1) in paragraph (5)(C), by striking ``this paragraph or 
     paragraph (6)'' and inserting ``this paragraph, or paragraph 
     (6) or (7)''; and
       (2) by adding at the end the following new paragraph:
       ``(7) Each medicare supplemental policy shall provide that 
     benefits and premiums under the policy shall be suspended at 
     the request of the policyholder if the policyholder is 
     entitled to benefits under section 226 and is covered under 
     an outpatient prescription drug assistance plan (as defined 
     in section 2210(3)) or provided outpatient prescription drug 
     assistance under the program established under section 2209. 
     If such suspension occurs and if the policyholder or 
     certificate holder loses coverage under such plan or program, 
     such policy shall be automatically reinstituted (effective as 
     of the date of such loss of coverage) under terms described 
     in subsection (n)(6)(A)(ii) as of the loss of such coverage 
     if the policyholder provides notice of loss of such coverage 
     within 90 days after the date of such loss.''.
                                 ______