[Congressional Record Volume 149, Number 54 (Thursday, April 3, 2003)]
[Senate]
[Pages S4828-S4834]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HAGEL (for himself, Mr. Ensign, Mr. Lugar, and Mr. 
        Inhofe):
  S. 778. A bill to amend title XVII of the Social Security Act to 
provide medicare beneficiaries with a drug discount card that ensure 
access to affordable prescription drugs; to the Committee on Finance.
  Mr. HAGEL. 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. 778

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Medicare 
     Rx Drug Discount and Security Act of 2003''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Voluntary Medicare Prescription Drug Discount and Security 
              Program.

 ``Part D--Voluntary Medicare Prescription Drug Discount and Security 
                                Program

``Sec. 1860. Definitions.
``Sec. 1860A. Establishment of program.
``Sec. 1860B. Enrollment.
``Sec. 1860C. Providing enrollment and coverage information to 
              beneficiaries.
``Sec. 1860D. Enrollee protections.
``Sec. 1860E. Annual enrollment fee.
``Sec. 1860F. Benefits under the program.
``Sec. 1860G. Requirements for entities to provide prescription drug 
              coverage.
``Sec. 1860H. Payments to eligible entities for administering the 
              catastrophic benefit.
``Sec. 1860I. Determination of income levels.
``Sec. 1860J. Appropriations.
``Sec. 1860K. Medicare Competition and Prescription Drug Advisory 
              Board.''.
Sec. 3. Administration of Voluntary Medicare Prescription Drug Discount 
              and Security Program.
Sec. 4. Exclusion of part D costs from determination of part B monthly 
              premium.
Sec. 5. Medigap revisions.

     SEC. 2. VOLUNTARY MEDICARE PRESCRIPTION DRUG DISCOUNT AND 
                   SECURITY PROGRAM.

       (a) Establishment of Program.--Title XVIII of the Social 
     Security Act (42 U.S.C. 1395 et seq.) is amended--
       (1) by redesignating part D as part E; and
       (2) by inserting after part C the following new part:

 ``Part D--Voluntary Medicare Prescription Drug Discount and Security 
                                Program


                             ``definitions

       ``Sec. 1860. In this part:
       ``(1) Covered drug.--
       ``(A) In general.--Except as provided in this paragraph, 
     the term `covered drug' means--
       ``(i) a drug that may be dispensed only upon a prescription 
     and that is described in subparagraph (A)(i) or (A)(ii) of 
     section 1927(k)(2); or
       ``(ii) a biological product described in clauses (i) 
     through (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section,

     and such term includes a vaccine licensed under section 351 
     of the Public Health Service Act and any use of a covered 
     drug for a medically accepted indication (as defined in 
     section 1927(k)(6)).
       ``(B) Exclusions.--
       ``(i) In general.--Such term does not include drugs or 
     classes of drugs, or their medical uses, which may be 
     excluded from coverage or otherwise restricted under section 
     1927(d)(2), other than subparagraph (E) thereof (relating to 
     smoking cessation agents), or under section 1927(d)(3).
       ``(ii) Avoidance of duplicate coverage.--A drug prescribed 
     for an individual that would otherwise be a covered drug 
     under this part shall not be so considered if payment for 
     such drug is available under part A or B for an individual 
     entitled to benefits under part A and enrolled under part B.
       ``(C) Application of formulary restrictions.--A drug 
     prescribed for an individual that would otherwise be a 
     covered drug under this part shall not be so considered under 
     a plan if the plan excludes the drug under a formulary and 
     such exclusion is not successfully appealed under section 
     1860D(a)(4)(B).
       ``(D) Application of general exclusion provisions.--A 
     prescription drug discount card plan or Medicare+Choice plan 
     may exclude from qualified prescription drug coverage any 
     covered drug--
       ``(i) for which payment would not be made if section 
     1862(a) applied to part D; or
       ``(ii) which are not prescribed in accordance with the plan 
     or this part.

     Such exclusions are determinations subject to reconsideration 
     and appeal pursuant to section 1860D(a)(4).
       ``(2) Eligible beneficiary.--The term `eligible 
     beneficiary' means an individual who is--
       ``(A) eligible for benefits under part A or enrolled under 
     part B; and
       ``(B) not eligible for prescription drug coverage under a 
     State plan under the medicaid program under title XIX.
       ``(3) Eligible entity.--The term `eligible entity' means 
     any--
       ``(A) pharmaceutical benefit management company;
       ``(B) wholesale pharmacy delivery system;
       ``(C) retail pharmacy delivery system;
       ``(D) insurer (including any issuer of a medicare 
     supplemental policy under section 1882);
       ``(E) Medicare+Choice organization;
       ``(F) State (in conjunction with a pharmaceutical benefit 
     management company);
       ``(G) employer-sponsored plan;
       ``(H) other entity that the Secretary determines to be 
     appropriate to provide benefits under this part; or
       ``(I) combination of the entities described in 
     subparagraphs (A) through (H).
       ``(4) Poverty line.--The term `poverty line' means the 
     income official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) applicable to a family of the size involved.
       ``(5) Secretary.--The term `Secretary' means the Secretary 
     of Health and Human Services, acting through the 
     Administrator of the Centers for Medicare & Medicaid 
     Services.


                       ``establishment of program

       ``Sec. 1860A. (a) Provision of Benefit.--The Secretary 
     shall establish a Medicare Prescription Drug Discount and 
     Security Program under which the Secretary endorses 
     prescription drug card plans offered by eligible entities in 
     which eligible beneficiaries

[[Page S4829]]

     may voluntarily enroll and receive benefits under this part.
       ``(b) Endorsement of Prescription Drug Discount Card 
     Plans.--
       ``(1) In general.--The Secretary shall endorse a 
     prescription drug card plan offered by an eligible entity 
     with a contract under this part if the eligible entity meets 
     the requirements of this part with respect to that plan.
       ``(2) National plans.--In addition to other types of plans, 
     the Secretary may endorse national prescription drug plans 
     under paragraph (1).
       ``(c) Voluntary Nature of Program.--Nothing in this part 
     shall be construed as requiring an eligible beneficiary to 
     enroll in the program under this part.
       ``(d) Financing.--The costs of providing benefits under 
     this part shall be payable from the Federal Supplementary 
     Medical Insurance Trust Fund established under section 1841.


                              ``enrollment

       ``Sec. 1860B. (a) Enrollment Under Part D.--
       ``(1) Establishment of process.--
       ``(A) In general.--The Secretary shall establish a process 
     through which an eligible beneficiary (including an eligible 
     beneficiary enrolled in a Medicare+Choice plan offered by a 
     Medicare+Choice organization) may make an election to enroll 
     under this part. Except as otherwise provided in this 
     subsection, such process shall be similar to the process for 
     enrollment under part B under section 1837.
       ``(B) Requirement of enrollment.--An eligible beneficiary 
     must enroll under this part in order to be eligible to 
     receive the benefits under this part.
       ``(2) Enrollment periods.--
       ``(A) In general.--Except as provided in this paragraph, an 
     eligible beneficiary may not enroll in the program under this 
     part during any period after the beneficiary's initial 
     enrollment period under part B (as determined under section 
     1837).
       ``(B) Special enrollment period.--In the case of eligible 
     beneficiaries that have recently lost eligibility for 
     prescription drug coverage under a State plan under the 
     medicaid program under title XIX, the Secretary shall 
     establish a special enrollment period in which such 
     beneficiaries may enroll under this part.
       ``(C) Open enrollment period in 2004 for current 
     beneficiaries.--The Secretary shall establish a period, which 
     shall begin on the date on which the Secretary first begins 
     to accept elections for enrollment under this part, during 
     which any eligible beneficiary may--
       ``(i) enroll under this part; or
       ``(ii) enroll or reenroll under this part after having 
     previously declined or terminated such enrollment.
       ``(3) Period of coverage.--
       ``(A) In general.--Except as provided in subparagraph (B) 
     and subject to subparagraph (C), an eligible beneficiary's 
     coverage under the program under this part shall be effective 
     for the period provided under section 1838, as if that 
     section applied to the program under this part.
       ``(B) Enrollment during open and special enrollment.--
     Subject to subparagraph (C), an eligible beneficiary who 
     enrolls under the program under this part under subparagraph 
     (B) or (C) of paragraph (2) shall be entitled to the benefits 
     under this part beginning on the first day of the month 
     following the month in which such enrollment occurs.
       ``(4) Part d coverage terminated by termination of coverage 
     under parts a and b or eligibility for medical assistance.--
       ``(A) In general.--In addition to the causes of termination 
     specified in section 1838, the Secretary shall terminate an 
     individual's coverage under this part if the individual is--
       ``(i) no longer enrolled in part A or B; or
       ``(ii) eligible for prescription drug coverage under a 
     State plan under the medicaid program under title XIX.
       ``(B) Effective date.--The termination described in 
     subparagraph (A) shall be effective on the effective date 
     of--
       ``(i) the termination of coverage under part A or (if 
     later) under part B; or
       ``(ii) the coverage under title XIX.
       ``(b) Enrollment With Eligible Entity.--
       ``(1) Process.--The Secretary shall establish a process 
     through which an eligible beneficiary who is enrolled under 
     this part shall make an annual election to enroll in a 
     prescription drug card plan offered by an eligible entity 
     that has been awarded a contract under this part and serves 
     the geographic area in which the beneficiary resides.
       ``(2) Election periods.--
       ``(A) In general.--Except as provided in this paragraph, 
     the election periods under this subsection shall be the same 
     as the coverage election periods under the Medicare+Choice 
     program under section 1851(e), including--
       ``(i) annual coordinated election periods; and
       ``(ii) special election periods.

     In applying the last sentence of section 1851(e)(4) (relating 
     to discontinuance of a Medicare+Choice election during the 
     first year of eligibility) under this subparagraph, in the 
     case of an election described in such section in which the 
     individual had elected or is provided qualified prescription 
     drug coverage at the time of such first enrollment, the 
     individual shall be permitted to enroll in a prescription 
     drug card plan under this part at the time of the election of 
     coverage under the original fee-for-service plan.
       ``(B) Initial election periods.--
       ``(i) Individuals currently covered.--In the case of an 
     individual who is entitled to benefits under part A or 
     enrolled under part B as of November 1, 2004, there shall be 
     an initial election period of 6 months beginning on that 
     date.
       ``(ii) Individual covered in future.--In the case of an 
     individual who is first entitled to benefits under part A or 
     enrolled under part B after such date, there shall be an 
     initial election period which is the same as the initial 
     enrollment period under section 1837(d).
       ``(C) Additional special election periods.--The 
     Administrator shall establish special election periods--
       ``(i) in cases of individuals who have and involuntarily 
     lose prescription drug coverage described in paragraph (3);
       ``(ii) in cases described in section 1837(h) (relating to 
     errors in enrollment), in the same manner as such section 
     applies to part B; and
       ``(iii) in the case of an individual who meets such 
     exceptional conditions (including conditions provided under 
     section 1851(e)(4)(D)) as the Secretary may provide.
       ``(D) Enrollment with one plan only.--The rules established 
     under subparagraph (B) shall ensure that an eligible 
     beneficiary may only enroll in 1 prescription drug card plan 
     offered by an eligible entity per year.
       ``(3) Medicare+choice enrollees.--An eligible beneficiary 
     who is enrolled under this part and enrolled in a 
     Medicare+Choice plan offered by a Medicare+Choice 
     organization must enroll in a prescription drug discount card 
     plan offered by an eligible entity in order to receive 
     benefits under this part. The beneficiary may elect to 
     receive such benefits through the Medicare+Choice 
     organization in which the beneficiary is enrolled if the 
     organization has been awarded a contract under this part.
       ``(4) Continuous prescription drug coverage.--An individual 
     is considered for purposes of this part to be maintaining 
     continuous prescription drug coverage on and after the date 
     the individual first qualifies to elect prescription drug 
     coverage under this part if the individual establishes that 
     as of such date the individual is covered under any of the 
     following prescription drug coverage and before the date that 
     is the last day of the 63-day period that begins on the date 
     of termination of the particular prescription drug coverage 
     involved (regardless of whether the individual subsequently 
     obtains any of the following prescription drug coverage):
       ``(A) Coverage under prescription drug card plan or 
     medicare+choice plan.--Prescription drug coverage under a 
     prescription drug card plan under this part or under a 
     Medicare+Choice plan.
       ``(B) Medicaid prescription drug coverage.--Prescription 
     drug coverage under a medicaid plan under title XIX, 
     including through the Program of All-inclusive Care for the 
     Elderly (PACE) under section 1934, through a social health 
     maintenance organization (referred to in section 4104(c) of 
     the Balanced Budget Act of 1997), or through a 
     Medicare+Choice project that demonstrates the application of 
     capitation payment rates for frail elderly medicare 
     beneficiaries through the use of a interdisciplinary team and 
     through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved.
       ``(C) Prescription drug coverage under group health plan.--
     Any prescription drug coverage under a group health plan, 
     including a health benefits plan under the Federal Employees 
     Health Benefit Plan under chapter 89 of title 5, United 
     States Code, and a qualified retiree prescription drug plan 
     (as defined by the Secretary), but only if (subject to 
     subparagraph (E)(ii)) the coverage provides benefits at least 
     equivalent to the benefits under a prescription drug card 
     plan under this part.
       ``(D) Prescription drug coverage under certain medigap 
     policies.--Coverage under a medicare supplemental policy 
     under section 1882 that provides benefits for prescription 
     drugs (whether or not such coverage conforms to the standards 
     for packages of benefits under section 1882(p)(1)) and if 
     (subject to subparagraph (E)(ii)) the coverage provides 
     benefits at least equivalent to the benefits under a 
     prescription drug card plan under this part.
       ``(E) State pharmaceutical assistance program.--Coverage of 
     prescription drugs under a State pharmaceutical assistance 
     program, but only if (subject to subparagraph (E)(ii)) the 
     coverage provides benefits at least equivalent to the 
     benefits under a prescription drug card plan under this part.
       ``(F) Veterans' coverage of prescription drugs.--Coverage 
     of prescription drugs for veterans under chapter 17 of title 
     38, United States Code, but only if (subject to subparagraph 
     (E)(ii)) the coverage provides benefits at least equivalent 
     to the benefits under a prescription drug card plan under 
     this part.

     For purposes of carrying out this paragraph, the 
     certifications of the type described in sections 2701(e) of 
     the Public Health Service Act and in section 9801(e) of the 
     Internal Revenue Code of 1986 shall also include a statement 
     for the period of coverage of whether the individual involved 
     had prescription drug coverage described in this paragraph.
       ``(5) Competition.--Each eligible entity with a contract 
     under this part shall compete for the enrollment of 
     beneficiaries in a prescription drug card plan offered by the 
     entity on the basis of discounts, formularies,

[[Page S4830]]

     pharmacy networks, and other services provided for under the 
     contract.


    ``providing enrollment and coverage information to beneficiaries

       ``Sec. 1860C. (a) Activities.--The Secretary shall provide 
     for activities under this part to broadly disseminate 
     information to eligible beneficiaries (and prospective 
     eligible beneficiaries) regarding enrollment under this part 
     and the prescription drug card plans offered by eligible 
     entities with a contract under this part.
       ``(b) Special Rule for First Enrollment Under the 
     Program.--To the extent practicable, the activities described 
     in subsection (a) shall ensure that eligible beneficiaries 
     are provided with such information at least 60 days prior to 
     the first enrollment period described in section 1860B(c).


                         ``enrollee protections

       ``Sec. 1860D. (a) Requirements for All Eligible Entities.--
     Each eligible entity shall meet the following requirements:
       ``(1) Guaranteed issuance and nondiscrimination.--
       ``(A) Guaranteed issuance.--
       ``(i) In general.--An eligible beneficiary who is eligible 
     to enroll in a prescription drug card plan offered by an 
     eligible entity under section 1860B(b) for prescription drug 
     coverage under this part at a time during which elections are 
     accepted under this part with respect to the coverage shall 
     not be denied enrollment based on any health status-related 
     factor (described in section 2702(a)(1) of the Public Health 
     Service Act) or any other factor.
       ``(ii) Medicare+choice limitations permitted.--The 
     provisions of paragraphs (2) and (3) (other than subparagraph 
     (C)(i), relating to default enrollment) of section 1851(g) 
     (relating to priority and limitation on termination of 
     election) shall apply to eligible entities under this 
     subsection.
       ``(B) Nondiscrimination.--An eligible entity offering 
     prescription drug coverage under this part shall not 
     establish a service area in a manner that would discriminate 
     based on health or economic status of potential enrollees.
       ``(2) Disclosure of information.--
       ``(A) Information.--
       ``(i) General information.--Each eligible entity with a 
     contract under this part to provide a prescription drug card 
     plan shall disclose, in a clear, accurate, and standardized 
     form to each eligible beneficiary enrolled in a prescription 
     drug discount card program offered by such entity under this 
     part at the time of enrollment and at least annually 
     thereafter, the information described in section 1852(c)(1) 
     relating to such prescription drug coverage.
       ``(ii) Specific information.--In addition to the 
     information described in clause (i), each eligible entity 
     with a contract under this part shall disclose the following:

       ``(I) How enrollees will have access to covered drugs, 
     including access to such drugs through pharmacy networks.
       ``(II) How any formulary used by the eligible entity 
     functions.
       ``(III) Information on grievance and appeals procedures.
       ``(IV) Information on enrollment fees and prices charged to 
     the enrollee for covered drugs.
       ``(V) Any other information that the Secretary determines 
     is necessary to promote informed choices by eligible 
     beneficiaries among eligible entities.

       ``(B) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     eligible beneficiary, the eligible entity shall provide the 
     information described in paragraph (3) to such beneficiary.
       ``(C) Response to beneficiary questions.--Each eligible 
     entity offering a prescription drug discount card plan under 
     this part shall have a mechanism for providing specific 
     information to enrollees upon request. The entity shall make 
     available, through an Internet website and, upon request, in 
     writing, information on specific changes in its formulary.
       ``(3) Grievance mechanism, coverage determinations, and 
     reconsiderations.--
       ``(A) In general.--With respect to the benefit under this 
     part, each eligible entity offering a prescription drug 
     discount card plan shall provide meaningful procedures for 
     hearing and resolving grievances between the organization 
     (including any entity or individual through which the 
     eligible entity provides covered benefits) and enrollees with 
     prescription drug card plans of the eligible entity under 
     this part in accordance with section 1852(f).
       ``(B) Application of coverage determination and 
     reconsideration provisions.--Each eligible entity shall meet 
     the requirements of paragraphs (1) through (3) of section 
     1852(g) with respect to covered benefits under the 
     prescription drug card plan it offers under this part in the 
     same manner as such requirements apply to a Medicare+Choice 
     organization with respect to benefits it offers under a 
     Medicare+Choice plan under part C.
       ``(C) Request for review of tiered formulary 
     determinations.--In the case of a prescription drug card plan 
     offered by an eligible entity that provides for tiered cost-
     sharing for drugs included within a formulary and provides 
     lower cost-sharing for preferred drugs included within the 
     formulary, an individual who is enrolled in the plan may 
     request coverage of a nonpreferred drug under the terms 
     applicable for preferred drugs if the prescribing physician 
     determines that the preferred drug for treatment of the same 
     condition is not as effective for the individual or has 
     adverse effects for the individual.
       ``(4) Appeals.--
       ``(A) In general.--Subject to subparagraph (B), each 
     eligible entity offering a prescription drug card plan shall 
     meet the requirements of paragraphs (4) and (5) of section 
     1852(g) with respect to drugs not included on any formulary 
     in the same manner as such requirements apply to a 
     Medicare+Choice organization with respect to benefits it 
     offers under a Medicare+Choice plan under part C.
       ``(B) Formulary determinations.--An individual who is 
     enrolled in a prescription drug card plan offered by an 
     eligible entity may appeal to obtain coverage under this part 
     for a covered drug that is not on a formulary of the eligible 
     entity if the prescribing physician determines that the 
     formulary drug for treatment of the same condition is not as 
     effective for the individual or has adverse effects for the 
     individual.
       ``(5) Confidentiality and accuracy of enrollee records.--
     Each eligible entity offering a prescription drug discount 
     card plan shall meet the requirements of the Health Insurance 
     Portability and Accountability Act of 1996.
       ``(b) Eligible Entities Offering a Discount Card Program.--
     If an eligible entity offers a discount card program under 
     this part, in addition to the requirements under subsection 
     (a), the entity shall meet the following requirements:
       ``(1) Access to covered benefits.--
       ``(A) Assuring pharmacy access.--
       ``(i) In general.--The eligible entity offering the 
     prescription drug discount card plan shall secure the 
     participation in its network of a sufficient number of 
     pharmacies that dispense (other than by mail order) drugs 
     directly to patients to ensure convenient access (as 
     determined by the Secretary and including adequate emergency 
     access) for enrolled beneficiaries, in accordance with 
     standards established under section 1860D(a)(3) that ensure 
     such convenient access.
       ``(ii) Use of point-of-service system.--Each eligible 
     entity offering a prescription drug discount card plan shall 
     establish an optional point-of-service method of operation 
     under which--

       ``(I) the plan provides access to any or all pharmacies 
     that are not participating pharmacies in its network; and
       ``(II) discounts under the plan may not be available.

     The additional copayments so charged shall not be counted as 
     out-of-pocket expenses for purposes of section 1860F(b).
       ``(B) Use of standardized technology.--
       ``(i) In general.--Each eligible entity offering a 
     prescription drug discount card plan shall issue (and 
     reissue, as appropriate) such a card (or other technology) 
     that may be used by an enrolled beneficiary to assure access 
     to negotiated prices under section 1860F(a) for the purchase 
     of prescription drugs for which coverage is not otherwise 
     provided under the prescription drug discount card plan.
       ``(ii) Standards.--The Secretary shall provide for the 
     development of national standards relating to a standardized 
     format for the card or other technology referred to in clause 
     (i). Such standards shall be compatible with standards 
     established under part C of title XI.
       ``(C) Requirements on development and application of 
     formularies.--If an eligible entity that offers a 
     prescription drug discount card plan uses a formulary, the 
     following requirements must be met:
       ``(i) Pharmacy and therapeutic (p&t) committee.--The 
     eligible entity must establish a pharmacy and therapeutic 
     committee that develops and reviews the formulary. Such 
     committee shall include at least 1 physician and at least 1 
     pharmacist both with expertise in the care of elderly or 
     disabled persons and a majority of its members shall consist 
     of individuals who are a physician or a practicing pharmacist 
     (or both).
       ``(ii) Formulary development.--In developing and reviewing 
     the formulary, the committee shall base clinical decisions on 
     the strength of scientific evidence and standards of 
     practice, including assessing peer-reviewed medical 
     literature, such as randomized clinical trials, 
     pharmacoeconomic studies, outcomes research data, and such 
     other information as the committee determines to be 
     appropriate.
       ``(iii) Inclusion of drugs in all therapeutic categories.--
     The formulary must include drugs within each therapeutic 
     category and class of covered drugs (although not necessarily 
     for all drugs within such categories and classes).
       ``(iv) Provider education.--The committee shall establish 
     policies and procedures to educate and inform health care 
     providers concerning the formulary.
       ``(v) Notice before removing drugs from formulary.--Any 
     removal of a drug from a formulary shall take effect only 
     after appropriate notice is made available to beneficiaries 
     and physicians.
       ``(vi) Grievances and appeals relating to application of 
     formularies.--For provisions relating to grievances and 
     appeals of coverage, see paragraphs (3) and (4) of section 
     1860D(a).
       ``(2) Cost and utilization management; quality assurance; 
     medication therapy management program.--
       ``(A) In general.--Each eligible entity offering a 
     prescription drug discount card plan shall have in place with 
     respect to covered drugs--

[[Page S4831]]

       ``(i) an effective cost and drug utilization management 
     program, including medically appropriate incentives to use 
     generic drugs and therapeutic interchange, when appropriate;
       ``(ii) quality assurance measures and systems to reduce 
     medical errors and adverse drug interactions, including a 
     medication therapy management program described in 
     subparagraph (B); and
       ``(iii) a program to control fraud, abuse, and waste.

     Nothing in this section shall be construed as impairing an 
     eligible entity from applying cost management tools 
     (including differential payments) under all methods of 
     operation.
       ``(B) Medication therapy management program.--
       ``(i) In general.--A medication therapy management program 
     described in this paragraph is a program of drug therapy 
     management and medication administration that is designed to 
     ensure, with respect to beneficiaries with chronic diseases 
     (such as diabetes, asthma, hypertension, and congestive heart 
     failure) or multiple prescriptions, that covered drugs under 
     the prescription drug discount card plan are appropriately 
     used to achieve therapeutic goals and reduce the risk of 
     adverse events, including adverse drug interactions.
       ``(ii) Elements.--Such program may include--

       ``(I) enhanced beneficiary understanding of such 
     appropriate use through beneficiary education, counseling, 
     and other appropriate means;
       ``(II) increased beneficiary adherence with prescription 
     medication regimens through medication refill reminders, 
     special packaging, and other appropriate means; and
       ``(III) detection of patterns of overuse and underuse of 
     prescription drugs.

       ``(iii) Development of program in cooperation with licensed 
     pharmacists.--The program shall be developed in cooperation 
     with licensed pharmacists and physicians.
       ``(iv) Considerations in pharmacy fees.--Each eligible 
     entity offering a prescription drug discount card plan shall 
     take into account, in establishing fees for pharmacists and 
     others providing services under the medication therapy 
     management program, the resources and time used in 
     implementing the program.
       ``(C) Treatment of accreditation.--Section 1852(e)(4) 
     (relating to treatment of accreditation) shall apply to 
     prescription drug discount card plans under this part with 
     respect to the following requirements, in the same manner as 
     they apply to Medicare+Choice plans under part C with respect 
     to the requirements described in a clause of section 
     1852(e)(4)(B):
       ``(i) Paragraph (1) (including quality assurance), 
     including any medication therapy management program under 
     paragraph (2).
       ``(ii) Subsection (c)(1) (relating to access to covered 
     benefits).
       ``(iii) Subsection (g) (relating to confidentiality and 
     accuracy of enrollee records).
       ``(D) Public disclosure of pharmaceutical prices for 
     equivalent drugs.--Each eligible entity offering a 
     prescription drug discount card plan shall provide that each 
     pharmacy or other dispenser that arranges for the dispensing 
     of a covered drug shall inform the beneficiary at the time of 
     purchase of the drug of any differential between the price of 
     the prescribed drug to the enrollee and the price of the 
     lowest cost drug covered under the plan that is 
     therapeutically equivalent and bioequivalent.


                        ``annual enrollment fee

       ``Sec. 1860E. (a) Amount.--
       ``(1) In general.--Except as provided in subsection (c), 
     enrollment under the program under this part is conditioned 
     upon payment of an annual enrollment fee of $25.
       ``(2) Annual percentage increase.--
       ``(A) In general.--In the case of any calendar year 
     beginning after 2005, the dollar amount in paragraph (1) 
     shall be increased by an amount equal to--
       ``(i) such dollar amount; multiplied by
       ``(ii) the inflation adjustment.
       ``(B) Inflation adjustment.--For purposes of subparagraph 
     (A)(ii), the inflation adjustment for any calendar year is 
     the percentage (if any) by which--
       ``(i) the average per capita aggregate expenditures for 
     covered drugs in the United States for medicare 
     beneficiaries, as determined by the Secretary for the 12-
     month period ending in July of the previous year; exceeds
       ``(ii) such aggregate expenditures for the 12-month period 
     ending with July 2004.
       ``(C) Rounding.--If any increase determined under clause 
     (ii) is not a multiple of $1, such increase shall be rounded 
     to the nearest multiple of $1.
       ``(b) Collection of Annual Enrollment Fee.--
       ``(1) In general.--Unless the eligible beneficiary makes an 
     election under paragraph (2), the annual enrollment fee 
     described in subsection (a) shall be collected and credited 
     to the Federal Supplementary Medical Insurance Trust Fund in 
     the same manner as the monthly premium determined under 
     section 1839 is collected and credited to such Trust Fund 
     under section 1840.
       ``(2) Direct payment.--An eligible beneficiary may elect to 
     pay the annual enrollment fee directly or in any other manner 
     approved by the Secretary. The Secretary shall establish 
     procedures for making such an election.
       ``(c) Waiver.--The Secretary shall waive the enrollment fee 
     described in subsection (a) in the case of an eligible 
     beneficiary whose income is below 200 percent of the poverty 
     line.


                      ``benefits under the program

       ``Sec. 1860F. (a) Access to Negotiated Prices.--
       ``(1) Negotiated prices.--
       ``(A) In general.--Subject to subparagraph (B), each 
     prescription drug card plan offering a discount card program 
     by an eligible entity with a contract under this part shall 
     provide each eligible beneficiary enrolled in such plan with 
     access to negotiated prices (including applicable discounts) 
     for such prescription drugs as the eligible entity determines 
     appropriate. Such discounts may include discounts for 
     nonformulary drugs. If such a beneficiary becomes eligible 
     for the catastrophic benefit under subsection (b), the 
     negotiated prices (including applicable discounts) shall 
     continue to be available to the beneficiary for those 
     prescription drugs for which payment may not be made under 
     section 1860H(b). For purposes of this subparagraph, the term 
     `prescription drugs' is not limited to covered drugs, but 
     does not include any over-the-counter drug that is not a 
     covered drug.
       ``(B) Limitations.--
       ``(i) Formulary restrictions.--Insofar as an eligible 
     entity with a contract under this part uses a formulary, the 
     negotiated prices (including applicable discounts) for 
     nonformulary drugs may differ.
       ``(ii) Avoidance of duplicate coverage.--The negotiated 
     prices (including applicable discounts) for prescription 
     drugs shall not be available for any drug prescribed for an 
     eligible beneficiary if payment for the drug is available 
     under part A or B (but such negotiated prices shall be 
     available if payment under part A or B is not available 
     because the beneficiary has not met the deductible or has 
     exhausted benefits under part A or B).
       ``(2) Discount card.--The Secretary shall develop a uniform 
     standard card format to be issued by each eligible entity 
     offering a prescription drug discount card plan that shall be 
     used by an enrolled beneficiary to ensure the access of such 
     beneficiary to negotiated prices under paragraph (1).
       ``(3) Ensuring discounts in all areas.--The Secretary shall 
     develop procedures that ensure that each eligible beneficiary 
     that resides in an area where no prescription drug discount 
     card plans are available is provided with access to 
     negotiated prices for prescription drugs (including 
     applicable discounts).
       ``(b) Catastrophic Benefit.--
       ``(1) Ten percent cost-sharing.--Subject to any formulary 
     used by the prescription drug discount card program in which 
     the eligible beneficiary is enrolled, the catastrophic 
     benefit shall provide benefits with cost-sharing that is 
     equal to 10 percent of the negotiated price (taking into 
     account any applicable discounts) of each drug dispensed to 
     such beneficiary after the beneficiary has incurred costs (as 
     described in paragraph (3)) for covered drugs in a year equal 
     to the applicable annual out-of-pocket limit specified in 
     paragraph (2).
       ``(2) Annual out-of-pocket limits.--For purposes of this 
     part, the annual out-of-pocket limits specified in this 
     paragraph are as follows:
       ``(A) Beneficiaries with annual incomes below 200 percent 
     of the poverty line.--In the case of an eligible beneficiary 
     whose income (as determined under section 1860I) is below 200 
     percent of the poverty line, the annual out-of-pocket limit 
     is equal to $1,500.
       ``(B) Beneficiaries with annual incomes between 200 and 400 
     percent of the poverty line.--In the case of an eligible 
     beneficiary whose income (as so determined) equals or exceeds 
     200 percent, but does not exceed 400 percent, of the poverty 
     line, the annual out-of-pocket limit is equal to $3,500.
       ``(C) Beneficiaries with annual incomes between 400 and 600 
     percent of the poverty line.--In the case of an eligible 
     beneficiary whose income (as so determined) equals or exceeds 
     400 percent, but does not exceed 600 percent, of the poverty 
     line, the annual out-of-pocket limit is equal to $5,500.
       ``(D) Beneficiaries with annual incomes that exceed 600 
     percent of the poverty line.--In the case of an eligible 
     beneficiary whose income (as so determined) equals or exceeds 
     600 percent of the poverty line, the annual out-of-pocket 
     limit is an amount equal to 20 percent of that beneficiary's 
     income for that year (rounded to the nearest multiple of $1).
       ``(3) Application.--In applying paragraph (2), incurred 
     costs shall only include those expenses for covered drugs 
     that are incurred by the eligible beneficiary using a card 
     approved by the Secretary under this part that are paid by 
     that beneficiary and for which the beneficiary is not 
     reimbursed (through insurance or otherwise) by another 
     person.
       ``(4) Annual percentage increase.--
       ``(A) In general.--In the case of any calendar year after 
     2005, the dollar amounts in subparagraphs (A), (B), and (C) 
     of paragraph (2) shall be increased by an amount equal to--
       ``(i) such dollar amount; multiplied by
       ``(ii) the inflation adjustment determined under section 
     1860E(a)(2)(B) for such calendar year.
       ``(B) Rounding.--If any increase determined under 
     subparagraph (A) is not a multiple of $1, such increase shall 
     be rounded to the nearest multiple of $1.
       ``(5) Eligible entity not at financial risk for 
     catastrophic benefit.--

[[Page S4832]]

       ``(A) In general.--The Secretary, and not the eligible 
     entity, shall be at financial risk for the provision of the 
     catastrophic benefit under this subsection.
       ``(B) Provisions relating to payments to eligible 
     entities.--For provisions relating to payments to eligible 
     entities for administering the catastrophic benefit under 
     this subsection, see section 1860H.
       ``(6) Ensuring catastrophic benefit in all areas.--The 
     Secretary shall develop procedures for the provision of the 
     catastrophic benefit under this subsection to each eligible 
     beneficiary that resides in an area where there are no 
     prescription drug discount card plans offered that have been 
     awarded a contract under this part.


   ``requirements for entities to provide prescription drug coverage

       ``Sec. 1860G. (a) Establishment of Bidding Process.--The 
     Secretary shall establish a process under which the Secretary 
     accepts bids from eligible entities and awards contracts to 
     the entities to provide the benefits under this part to 
     eligible beneficiaries in an area.
       ``(b) Submission of Bids.--Each eligible entity desiring to 
     enter into a contract under this part shall submit a bid to 
     the Secretary at such time, in such manner, and accompanied 
     by such information as the Secretary may require.
       ``(c) Administrative Fee Bid.--
       ``(1) Submission.--For the bid described in subsection (b), 
     each entity shall submit to the Secretary information 
     regarding administration of the discount card and 
     catastrophic benefit under this part.
       ``(2) Bid submission requirements.--
       ``(A) Administrative fee bid submission.--In submitting 
     bids, the entities shall include separate costs for 
     administering the discount card component, if applicable, and 
     the catastrophic benefit. The entity shall submit the 
     administrative fee bid in a form and manner specified by the 
     Secretary, and shall include a statement of projected 
     enrollment and a separate statement of the projected 
     administrative costs for at least the following functions:
       ``(i) Enrollment, including income eligibility 
     determination.
       ``(ii) Claims processing.
       ``(iii) Quality assurance, including drug utilization 
     review.
       ``(iv) Beneficiary and pharmacy customer service.
       ``(v) Coordination of benefits.
       ``(vi) Fraud and abuse prevention.
       ``(B) Negotiated administrative fee bid amounts.--The 
     Secretary has the authority to negotiate regarding the bid 
     amounts submitted. The Secretary may reject a bid if the 
     Secretary determines it is not supported by the 
     administrative cost information provided in the bid as 
     specified in subparagraph (A).
       ``(C) Payment to plans based on administrative fee bid 
     amounts.--The Secretary shall use the bid amounts to 
     calculate a benchmark amount consisting of the enrollment-
     weighted average of all bids for each function and each class 
     of entity. The class of entity is either a regional or 
     national entity, or such other classes as the Secretary may 
     determine to be appropriate. The functions are the discount 
     card and catastrophic components. If an eligible entity's 
     combined bid for both functions is above the combined 
     benchmark within the entity's class for the functions, the 
     eligible entity shall collect additional necessary revenue 
     through 1 or both of the following:
       ``(i) Additional fees charged to the beneficiary, not to 
     exceed $25 annually.
       ``(ii) Use of rebate amounts from drug manufacturers to 
     defray administrative costs.
       ``(d) Awarding of Contracts.--
       ``(1) In general.--The Secretary shall, consistent with the 
     requirements of this part and the goal of containing medicare 
     program costs, award at least 2 contracts in each area, 
     unless only 1 bidding entity meets the terms and conditions 
     specified by the Secretary under paragraph (2).
       ``(2) Terms and conditions.--The Secretary shall not award 
     a contract to an eligible entity under this section unless 
     the Secretary finds that the eligible entity is in compliance 
     with such terms and conditions as the Secretary shall 
     specify.
       ``(3) Requirements for eligible entities providing discount 
     card program.--Except as provided in subsection (e), in 
     determining which of the eligible entities that submitted 
     bids that meet the terms and conditions specified by the 
     Secretary under paragraph (2) to award a contract, the 
     Secretary shall consider whether the bid submitted by the 
     entity meets at least the following requirements:
       ``(A) Level of savings to medicare beneficiaries.--The 
     program passes on to medicare beneficiaries who enroll in the 
     program discounts on prescription drugs, including discounts 
     negotiated with manufacturers.
       ``(B) Prohibition on application only to mail order.--The 
     program applies to drugs that are available other than solely 
     through mail order and provides convenient access to retail 
     pharmacies.
       ``(C) Level of beneficiary services.--The program provides 
     pharmaceutical support services, such as education and 
     services to prevent adverse drug interactions.
       ``(D) Adequacy of information.--The program makes available 
     to medicare beneficiaries through the Internet and otherwise 
     information, including information on enrollment fees, prices 
     charged to beneficiaries, and services offered under the 
     program, that the Secretary identifies as being necessary to 
     provide for informed choice by beneficiaries among endorsed 
     programs.
       ``(E) Extent of demonstrated experience.--The entity 
     operating the program has demonstrated experience and 
     expertise in operating such a program or a similar program.
       ``(F) Extent of quality assurance.--The entity has in place 
     adequate procedures for assuring quality service under the 
     program.
       ``(G) Operation of assistance program.--The entity meets 
     such requirements relating to solvency, compliance with 
     financial reporting requirements, audit compliance, and 
     contractual guarantees as specified by the Secretary.
       ``(H) Privacy compliance.--The entity implements policies 
     and procedures to safeguard the use and disclosure of program 
     beneficiaries' individually identifiable health information 
     in a manner consistent with the Federal regulations 
     (concerning the privacy of individually identifiable health 
     information) promulgated under section 264(c) of the Health 
     Insurance Portability and Accountability Act of 1996.
       ``(I) Additional beneficiary protections.--The program 
     meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of medicare 
     beneficiaries, including requirements that ensure that 
     beneficiaries are not charged more than the lower of the 
     negotiated retail price or the usual and customary price.
     The prices negotiated by a prescription drug discount card 
     program endorsed under this section shall (notwithstanding 
     any other provision of law) not be taken into account for the 
     purposes of establishing the best price under section 
     1927(c)(1)(C).
       ``(4) Beneficiary access to savings and rebates.--The 
     Secretary shall require eligible entities offering a discount 
     card program to pass on savings and rebates negotiated with 
     manufacturers to eligible beneficiaries enrolled with the 
     entity.
       ``(5) Negotiated agreements with employer-sponsored 
     plans.--Notwithstanding any other provision of this part, the 
     Secretary may negotiate agreements with employer-sponsored 
     plans under which eligible beneficiaries are provided with a 
     benefit for prescription drug coverage that is more generous 
     than the benefit that would otherwise have been available 
     under this part if such an agreement results in cost savings 
     to the Federal Government.
       ``(e) Requirements for Other Eligible Entities.--An 
     eligible entity that is licensed under State law to provide 
     the health insurance benefits under this section shall be 
     required to meet the requirements of subsection (d)(3). If an 
     eligible entity offers a national plan, such entity shall not 
     be required to meet the requirements of subsection (d)(3), 
     but shall meet the requirements of Employee Retirement Income 
     Security Act of 1974 that apply with respect to such plan.


  ``payments to eligible entities for administering the catastrophic 
                                benefit

       ``Sec. 1860H. (a) In General.--The Secretary may establish 
     procedures for making payments to an eligible entity under a 
     contract entered into under this part for--
       ``(1) the costs of providing covered drugs to beneficiaries 
     eligible for the benefit under this part in accordance with 
     subsection (b) minus the amount of any cost-sharing collected 
     by the eligible entity under section 1860F(b); and
       ``(2) costs incurred by the entity in administering the 
     catastrophic benefit in accordance with section 1860G.
       ``(b) Payment for Covered Drugs.--
       ``(1) In general.--Except as provided in subsection (c) and 
     subject to paragraph (2), the Secretary may only pay an 
     eligible entity for covered drugs furnished by the eligible 
     entity to an eligible beneficiary enrolled with such entity 
     under this part that is eligible for the catastrophic benefit 
     under section 1860F(b).
       ``(2) Limitations.--
       ``(A) Formulary restrictions.--Insofar as an eligible 
     entity with a contract under this part uses a formulary, the 
     Secretary may not make any payment for a covered drug that is 
     not included in such formulary, except to the extent provided 
     under section 1860D(a)(4)(B).
       ``(B) Negotiated prices.--The Secretary may not pay an 
     amount for a covered drug furnished to an eligible 
     beneficiary that exceeds the negotiated price (including 
     applicable discounts) that the beneficiary would have been 
     responsible for under section 1860F(a) or the price 
     negotiated for insurance coverage under the Medicare+Choice 
     program under part C, a medicare supplemental policy, 
     employer-sponsored coverage, or a State plan.
       ``(C) Cost-sharing limitations.--An eligible entity may not 
     charge an individual enrolled with such entity who is 
     eligible for the catastrophic benefit under this part any 
     copayment, tiered copayment, coinsurance, or other cost-
     sharing that exceeds 10 percent of the cost of the drug that 
     is dispensed to the individual.
       ``(3) Payment in competitive areas.--In a geographic area 
     in which 2 or more eligible entities offer a plan under this 
     part, the Secretary may negotiate an agreement with the 
     entity to reimburse the entity for costs incurred in 
     providing the benefit under this part on a capitated basis.
       ``(c) Secondary Payer Provisions.--The provisions of 
     section 1862(b) shall apply to the benefits provided under 
     this part.

[[Page S4833]]

                    ``determination of income levels

       ``Sec. 1860I. (a) Determination of Income Levels.--
       ``(1) In general.--The Secretary shall establish procedures 
     under which each eligible entity awarded a contract under 
     this part determines the income levels of eligible 
     beneficiaries enrolled in a prescription drug card plan 
     offered by that entity at least annually for purposes of 
     sections 1860E(c) and 1860F(b).
       ``(2) Procedures.--The procedures established under 
     paragraph (1) shall require each eligible beneficiary to 
     submit such information as the eligible entity requires to 
     make the determination described in paragraph (1).
       ``(b) Enforcement of Income Determinations.--The Secretary 
     shall--
       ``(1) establish procedures that ensure that eligible 
     beneficiaries comply with sections 1860E(c) and 1860F(b); and
       ``(2) require, if the Secretary determines that payments 
     were made under this part to which an eligible beneficiary 
     was not entitled, the repayment of any excess payments with 
     interest and a penalty.
       ``(c) Quality Control System.--
       ``(1) Establishment.--The Secretary shall establish a 
     quality control system to monitor income determinations made 
     by eligible entities under this section and to produce 
     appropriate and comprehensive measures of error rates.
       ``(2) Periodic audits.--The Inspector General of the 
     Department of Health and Human Services shall conduct 
     periodic audits to ensure that the system established under 
     paragraph (1) is functioning appropriately.


                            ``appropriations

       ``Sec. 1860J. There are authorized to be appropriated from 
     time to time, out of any moneys in the Treasury not otherwise 
     appropriated, to the Federal Supplementary Medical Insurance 
     Trust Fund established under section 1841, an amount equal to 
     the amount by which the benefits and administrative costs of 
     providing the benefits under this part exceed the enrollment 
     fees collected under section 1860E.


      ``medicare competition and prescription drug advisory board

       ``Sec. 1860K. (a) Establishment of Board.--There is 
     established a Medicare Prescription Drug Advisory Board (in 
     this section referred to as the `Board').
       ``(b) Advice on Policies; Reports.--
       ``(1) Advice on policies.--The Board shall advise the 
     Secretary on policies relating to the Voluntary Medicare 
     Prescription Drug Discount and Security Program under this 
     part.
       ``(2) Reports.--
       ``(A) In general.--With respect to matters of the 
     administration of the program under this part, the Board 
     shall submit to Congress and to the Secretary such reports as 
     the Board determines appropriate. Each such report may 
     contain such recommendations as the Board determines 
     appropriate for legislative or administrative changes to 
     improve the administration of the program under this part. 
     Each such report shall be published in the Federal Register.
       ``(B) Maintaining independence of board.--The Board shall 
     directly submit to Congress reports required under 
     subparagraph (A). No officer or agency of the United States 
     may require the Board to submit to any officer or agency of 
     the United States for approval, comments, or review, prior to 
     the submission to Congress of such reports.
       ``(c) Structure and Membership of the Board.--
       ``(1) Membership.--The Board shall be composed of 7 members 
     who shall be appointed as follows:
       ``(A) Presidential appointments.--
       ``(i) In general.--Three members shall be appointed by the 
     President, by and with the advice and consent of the Senate.
       ``(ii) Limitation.--Not more than 2 such members may be 
     from the same political party.
       ``(B) Senatorial appointments.--Two members (each member 
     from a different political party) shall be appointed by the 
     President pro tempore of the Senate with the advice of the 
     Chairman and the Ranking Minority Member of the Committee on 
     Finance of the Senate.
       ``(C) Congressional appointments.--Two members (each member 
     from a different political party) shall be appointed by the 
     Speaker of the House of Representatives, with the advice of 
     the Chairman and the Ranking Minority Member of the Committee 
     on Ways and Means of the House of Representatives.
       ``(2) Qualifications.--The members shall be chosen on the 
     basis of their integrity, impartiality, and good judgment, 
     and shall be individuals who are, by reason of their 
     education, experience, and attainments, exceptionally 
     qualified to perform the duties of members of the Board.
       ``(3) Composition.--Of the members appointed under 
     paragraph (1)--
       ``(A) at least 1 shall represent the pharmaceutical 
     industry;
       ``(B) at least 1 shall represent physicians;
       ``(C) at least 1 shall represent medicare beneficiaries;
       ``(D) at least 1 shall represent practicing pharmacists; 
     and
       ``(E) at least 1 shall represent eligible entities.
       ``(d) Terms of Appointment.--
       ``(1) In general.--Subject to paragraph (2), each member of 
     the Board shall serve for a term of 6 years.
       ``(2) Continuance in office and staggered terms.--
       ``(A) Continuance in office.--A member appointed to a term 
     of office after the commencement of such term may serve under 
     such appointment only for the remainder of such term.
       ``(B) Staggered terms.--The terms of service of the members 
     initially appointed under this section shall begin on January 
     1, 2005, and expire as follows:
       ``(i) Presidential appointments.--The terms of service of 
     the members initially appointed by the President shall expire 
     as designated by the President at the time of nomination, 1 
     each at the end of--

       ``(I) 2 years;
       ``(II) 4 years; and
       ``(III) 6 years.

       ``(ii) Senatorial appointments.--The terms of service of 
     members initially appointed by the President pro tempore of 
     the Senate shall expire as designated by the President pro 
     tempore of the Senate at the time of nomination, 1 each at 
     the end of--

       ``(I) 3 years; and
       ``(II) 6 years.

       ``(iii) Congressional appointments.--The terms of service 
     of members initially appointed by the Speaker of the House of 
     Representatives shall expire as designated by the Speaker of 
     the House of Representatives at the time of nomination, 1 
     each at the end of--

       ``(I) 4 years; and
       ``(II) 5 years.

       ``(C) Reappointments.--Any person appointed as a member of 
     the Board may not serve for more than 8 years.
       ``(D) Vacancies.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Board shall be filled in the manner 
     in which the original appointment was made.
       ``(e) Chairperson.--A member of the Board shall be 
     designated by the President to serve as Chairperson for a 
     term of 4 years or, if the remainder of such member's term is 
     less than 4 years, for such remainder.
       ``(f) Expenses and Per Diem.--Members of the Board shall 
     serve without compensation, except that, while serving on 
     business of the Board away from their homes or regular places 
     of business, members may be allowed travel expenses, 
     including per diem in lieu of subsistence, as authorized by 
     section 5703 of title 5, United States Code, for persons in 
     the Government employed intermittently.
       ``(g) Meetings.--
       ``(1) In general.--The Board shall meet at the call of the 
     Chairperson (in consultation with the other members of the 
     Board) not less than 4 times each year to consider a specific 
     agenda of issues, as determined by the Chairperson in 
     consultation with the other members of the Board.
       ``(2) Quorum.--Four members of the Board (not more than 3 
     of whom may be of the same political party) shall constitute 
     a quorum for purposes of conducting business.
       ``(h) Federal Advisory Committee Act.--The Board shall be 
     exempt from the provisions of the Federal Advisory Committee 
     Act (5 U.S.C. App.).
       ``(i) Personnel.--
       ``(1) Staff director.--The Board shall, without regard to 
     the provisions of title 5, United States Code, relating to 
     the competitive service, appoint a Staff Director who shall 
     be paid at a rate equivalent to a rate established for the 
     Senior Executive Service under section 5382 of title 5, 
     United States Code.
       ``(2) Staff.--
       ``(A) In general.--The Board may employ, without regard to 
     chapter 31 of title 5, United States Code, such officers and 
     employees as are necessary to administer the activities to be 
     carried out by the Board.
       ``(B) Flexibility with respect to civil service laws.--
       ``(i) In general.--The staff of the Board shall be 
     appointed without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service, and, subject to clause (ii), shall be paid without 
     regard to the provisions of chapters 51 and 53 of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(j) Authorization of Appropriations.--There are 
     authorized to be appropriated, out of the Federal 
     Supplemental Medical Insurance Trust Fund established under 
     section 1841, and the general fund of the Treasury, such sums 
     as are necessary to carry out the purposes of this 
     section.''.
       (b) Conforming References to Previous Part D.--
       (1) In general.--Any reference in law (in effect before the 
     date of enactment of this Act) to part D of title XVIII of 
     the Social Security Act is deemed a reference to part E of 
     such title (as in effect after such date).
       (2) Secretarial submission of legislative proposal.--Not 
     later than 6 months after the date of enactment of this 
     section, the Secretary of Health and Human Services shall 
     submit to the appropriate committees of Congress a 
     legislative proposal providing for such technical and 
     conforming amendments in the law as are required by the 
     provisions of this section.

[[Page S4834]]

       (c) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     take effect on the date of enactment of this Act.
       (2) Implementation.--Notwithstanding any provision of part 
     D of title XVIII of the Social Security Act (as added by 
     subsection (a)), the Secretary of Health and Human Services 
     shall implement the Voluntary Medicare Prescription Drug 
     Discount and Security Program established under such part in 
     a manner such that--
       (A) benefits under such part for eligible beneficiaries (as 
     defined in section 1860 of such Act, as added by such 
     subsection) with annual incomes below 200 percent of the 
     poverty line (as defined in such section) are available to 
     such beneficiaries not later than the date that is 6 months 
     after the date of enactment of this Act; and
       (B) benefits under such part for other eligible 
     beneficiaries are available to such beneficiaries not later 
     than the date that is 1 year after the date of enactment of 
     this Act.

     SEC. 3. ADMINISTRATION OF VOLUNTARY MEDICARE PRESCRIPTION 
                   DRUG DISCOUNT AND SECURITY PROGRAM.

       (a) Establishment of Center for Medicare Prescription 
     Drugs.--There is established, within the Centers for Medicare 
     & Medicaid Services of the Department of Health and Human 
     Services, a Center for Medicare Prescription Drugs. Such 
     Center shall be separate from the Center for Beneficiary 
     Choices, the Center for Medicare Management, and the Center 
     for Medicaid and State Operations.
       (b) Duties.--It shall be the duty of the Center for 
     Medicare Prescription Drugs to administer the Voluntary 
     Medicare Prescription Drug Discount and Security Program 
     established under part D of title XVIII of the Social 
     Security Act (as added by section 2).
       (c) Director.--
       (1) Appointment.--There shall be in the Center for Medicare 
     Prescription Drugs a Director of Medicare Prescription Drugs, 
     who shall be appointed by the President, by and with the 
     advice and consent of the Senate.
       (2) Responsibilities.--The Director shall be responsible 
     for the exercise of all powers and the discharge of all 
     duties of the Center for Medicare Prescription Drugs and 
     shall have authority and control over all personnel and 
     activities thereof.
       (d) Personnel.--The Director of the Center for Medicare 
     Prescription Drugs may appoint and terminate such personnel 
     as may be necessary to enable the Center for Medicare 
     Prescription Drugs to perform its duties.

     SEC. 4. EXCLUSION OF PART D COSTS FROM DETERMINATION OF PART 
                   B MONTHLY PREMIUM.

       Section 1839(g) of the Social Security Act (42 U.S.C. 
     1395r(g)) is amended--
       (1) by striking ``attributable to the application of 
     section'' and inserting ``attributable to--
       ``(1) the application of section'';
       (2) by striking the period and inserting ``; and''; and
       (3) by adding at the end the following new paragraph:
       ``(2) the Voluntary Medicare Prescription Drug Discount and 
     Security Program under part D.''.

     SEC. 5. MEDIGAP REVISIONS.

       Section 1882 of the Social Security Act (42 U.S.C. 1395ss) 
     is amended by adding at the end the following new subsection:
       ``(v) Modernization of Medicare Supplemental Policies.--
       ``(1) Promulgation of model regulation.--
       ``(A) NAIC model regulation.--If, within 9 months after the 
     date of enactment of the Medicare Rx Drug Discount and 
     Security Act of 2003, 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 revise the benefit package classified as 
     `J' under the standards established by subsection (p)(2) 
     (including the benefit package classified as `J' with a high 
     deductible feature, as described in subsection (p)(11)) so 
     that--
       ``(i) the coverage for prescription drugs available under 
     such benefit package is replaced with coverage for 
     prescription drugs that complements but does not duplicate 
     the benefits for prescription drugs that beneficiaries are 
     otherwise entitled to under this title;
       ``(ii) a uniform format is used in the policy with respect 
     to such revised benefits; and
       ``(iii) such revised standards meet any additional 
     requirements imposed by the Medicare Rx Drug Discount and 
     Security Act of 2003;

     subsection (g)(2)(A) shall be applied in each State, 
     effective for policies issued to policy holders on and after 
     January 1, 2005, 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 `2005 
     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 January 1, 2005, 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 `2005 Federal 
     Regulation').
       ``(C) Consultation with working group.--In promulgating 
     standards under this paragraph, the NAIC or Secretary shall 
     consult with a working group similar to the working group 
     described in subsection (p)(1)(D).
       ``(D) Modification of standards if medicare benefits 
     change.--If benefits under part D of this title are changed 
     and the Secretary determines, in consultation with the NAIC, 
     that changes in the 2005 NAIC Model Regulation or 2005 
     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) Construction of benefits in other medicare 
     supplemental policies.--Nothing in the benefit packages 
     classified as `A' through `I' under the standards established 
     by subsection (p)(2) (including the benefit package 
     classified as `F' with a high deductible feature, as 
     described in subsection (p)(11)) shall be construed as 
     providing coverage for benefits for which payment may be made 
     under part D.
       ``(3) Application of provisions and conforming 
     references.--
       ``(A) Application of provisions.--The provisions of 
     paragraphs (4) through (10) of subsection (p) shall apply 
     under this section, except that--
       ``(i) any reference to the model regulation applicable 
     under that subsection shall be deemed to be a reference to 
     the applicable 2005 NAIC Model Regulation or 2005 Federal 
     Regulation; and
       ``(ii) any reference to a date under such paragraphs of 
     subsection (p) shall be deemed to be a reference to the 
     appropriate date under this subsection.
       ``(B) Other references.--Any reference to a provision of 
     subsection (p) or a date applicable under such subsection 
     shall also be considered to be a reference to the appropriate 
     provision or date under this subsection.''.
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